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Cardinal Bankshares' yearlong battle with an activist investor ended with a deadlocked board, an ousted chairman and a lot of uncertainty. The biggest challenge for all parties is determining who is in charge.
May 23
Cardinal Bankshares Corp. in Floyd, Va., has settled a dispute with a former executive it claims was conspiring with an investor to force its sale.
The parent company of the $265 million-asset Bank of Floyd had been seeking damages of $383,000, plus interest, from a former executive vice president, Henry Logue, who abruptly resigned in May 2011 at a time when he was being groomed to be the company's chief executive.
Logue's resignation triggered a year-long proxy battle with the banks' largest shareholder, Schaller Equity Partners, which resulted in the ousting of Cardinal's longtime chairman, president and chief executive, Leon Moore, in May of this year.
Cardinal filed its suit in April claiming Logue had conspired with Schaller's owner, Douglas Schaller, to force a sale of the company. In a letter released June 14, Schaller adamantly denied collaborating with Logue.
On Thursday, Cardinal said it reached a settlement with Logue though it did not disclose the terms of the agreement. All of the claims and counterclaims were dismissed.
"Both parties were able to resolve their differences amicably," said Cardinal's new President and CEO Mike Larrowe, in the release. "We're pleased with the outcome and wish Henry the best."
Cardinal has undergone a slew of changes in recent weeks. Schaller's allies won all three of the seats they were seeking on the six-member board at the annual meeting May 22. Immediately after, two of the three previous members resigned but the third agreed to stay on. In mid-June the company also raised its bi-annual dividend to 10 cents a share, up from 8 cents a share in the previous period - something Schaller advocated for in his proxy contest.
In the letter issued to shareholders about the dividend increase, the Larrowe thanked the former directors and Moore for their service. He also acknowledged that the company had much work ahead, including removing weaker credits off the books in the second quarter and updating its technology. He reiterated the new board and management were determined to stay independent. Schaller once advocated for the bank to sell while it was under Moore's leadership.
"Many of you have shared your concern regarding the future of the Bank of Floyd. Our commitment is to remain independent," Larrowe said in the shareholder letter June 14. "Our new board is energized and united with management in continuing the past successes of our bank."
