Riddick resigns from Farmers Bank board

Published 5:43 pm Tuesday, July 26, 2022

Smithfield attorney William H. Riddick III has resigned from Farmers Bank’s Board of Directors in the wake of the bank’s feud with ousted Chairman Richard “Dick” Holland Jr.

Riddick confirmed his departure to The Smithfield Times on July 19, clarifying the next day that he had left both the bank-level board and the board for its publicly-traded holding company, Farmers Bankshares Inc.

Riddick was vague on his reasons for leaving, stating only that he “didn’t want to be on the board anymore.” His departure comes on the heels of the company’s May 12 shareholders meeting, which saw roughly 60% of voting shareholders back Holland over the bank’s current management.

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Holland, whose family founded the Windsor-based bank, was ousted as chairman of Farmers Bankshares’ board and removed entirely from the bank-level board in February over a disagreement as to how aggressively to pursue a sale or merger of the company. In the months preceding the May 12 vote, Holland and the bank had sent shareholders a series of dueling letters – the bank’s urging support for a slate of nine board members up for reelection and Holland’s urging shareholders to “withhold” their votes.

According to a May 24 company press release, all nine were reelected – albeit with just 37%-40% of the vote. The remaining 59%-62” of votes “were withheld.” All in-person and proxy card votes cast represented roughly 76% of the company’s outstanding shares.

Riddick was not among the directors up for reelection at the May meeting. The slate included five “Class I” nominees up for three-year terms: G. Thomas Alphin Jr., John T. Orlando, David T. Owen, Gregory P. Marshall and Vernon Towler, who also serves as the bank’s president and chief executive officer. Two “Class II” directors – O.A. Spady and William L. “Billy” Chorey – were up for one-year terms. The remaining two – J. Clifton Harrell Jr. and Tiffany McMillan-McWaters – are “Class III” directors and were up for two-year terms.

Farmers Bankshares’ board had elected William A. Gwaltney Jr. in Holland’s place as chairman in February. Gwaltney declined to comment, speaking to the Times by phone on July 22, on Riddick’s resignation nor whether any other board members had left in the wake of the shareholders’ vote. The Times was unable to reach Towler and Chief Financial Officer Kristy DeJarnette via email or phone by press deadline.

Holland also declined to comment on the matter.

The nine directors up for reelection needed only a “plurality” of votes to keep their seats. Plurality voting, according to Old Dominion University finance professor Dr. Thomas Schneider, means the director candidate with the most votes wins the seat, even if they don’t receive a majority of the votes. The nearly two-thirds of votes withheld “sends a strong message” to management that shareholders support Holland’s plan to solicit potential acquirers, Schneider had told the Times in May following the vote.

Holland had contended in a March 8 letter to shareholders that he’d “lost all confidence” in the current board and believed his investment as one of the bank’s largest shareholders “would be best protected by a sale or merger of the company.”

In February, Farmers Bankshares reported record earnings of $8.5 million, or $2.72 per share, in 2021. Holland, however, contended in his letter that this was “significantly driven” by Farmers’ purchase of a majority interest in the Franklin-based Manry Rawls insurance agency during his 1994-2019 tenure as the bank’s CEO, and by a $3.1 million one-time gain from the sale of bank-owned property he’d “shepherded to conclusion in 2021” as chairman, which would “not be repeated in the coming years.” Excluding the Manry Rawls income and the one-time sale revenue, “the picture is bleak,” Holland told shareholders.

In April, Gwaltney and Towler had sent their own letter to shareholders contending the bank’s 2021 return on assets was 1.44%, not the 0.5% Holland had claimed. Holland’s numbers, they argued, “leave out important parts of our revenue mix, such as the Manry Rawls insurance business and the Tidewater Home Funding mortgage business,” and were “not calculated in accordance with generally accepted accounting principles.”

Farmers Bankshares’ stock price has fluctuated throughout the year from a low of $16.12 per share on Jan. 4 to a high of $22 per share on April 4 and 19, according to The Wall Street Journal. As of the May 12 shareholders meeting, it was trading at $19.50 per share. From May 25-31 it was trading at $20.50 per share, but has since fallen to $17.50 per share as of July 21.