NewDominion Bank adjourns shareholders meeting, cites error in proxy statement

NewDominion Bank on Tuesday adjourned a meeting at which shareholders were to vote on a plan to sell more preferred shares – a proposal that some longtime investors opposed.

In adjourning its annual shareholder meeting, the community bank cited an error that it said was discovered in its proxy statement during the gathering at its Charlotte headquarters.

The error, which the bank’s legal counsel brought to its attention, overstated the number of votes needed to pass the proposal, the bank said.

The decision postpones voting on the bank’s proposal to raise capital by selling more preferred shares. NewDominion said the vote will now be held next Tuesday.

According to the proxy statement the bank issued last month, two-thirds of the bank’s 26.1 million common shareholders were required to vote in favor of the measure for it to pass. On Tuesday, CEO Blaine Jackson said the bank only needs a simple majority under state law.

Jackson said the lender has enough current votes to “significantly” exceed a simple majority, but he did not elaborate. In a statement, NewDominion said an official vote was not taken in order to give the bank enough time to correct the error in the proxy statement.

“The overwhelming majority of shareholders support the proposal,” the bank said in the statement. “There was good discussion at the meeting and the majority of those shareholders in attendance support the bank’s plans to raise additional capital.”

Some shareholders who bought common shares when the lender was founded 10 years ago have expressed concerns over the plan, which they say could put their investment at greater risk. That’s because preferred shareholders typically have certain rights that common shareholders don’t, such as being paid first if a company files for bankruptcy protection.

The bank is seeking approval to issue more preferred shares as part of a strategy to raise $20 million in capital to fund its growth as well as free itself from a restrictive regulatory order.

State and federal regulators imposed the order on the bank in 2010 as it was staggering from soured real estate loans. The order places the bank under a wide range of limitations, including how much it can grow assets and whether it can award bonuses to its executives.

NewDominion said it plans to raise the $20 million through selling a mix of common and preferred shares.

One critic, former board member Mark Erwin, says common shareholders like him would be put at a greater disadvantage if the bank sells more preferred shares. He also says the bank has other options, such as reducing expenses and waiting to sell more shares after it’s profitable.

NewDominion has said issuing preferred shares is in the best interest of the lender and its shareholders. If the bank raised capital only through selling common shares, it would forfeit a tax maneuver that could give it an additional $15.1 million in capital after it becomes consistently profitable, the lender says.

Some shareholders support issuing more preferred shares.

“I don’t understand the concern about it,” Davidson resident Steve McLeod said. “We’ve got a great management team, and we’ve got an excellent board.”

NewDominion said shareholders passed the two other items they voted on: the re-election of directors and the ratification of the bank’s auditing firm. Reporters were not allowed to attend.

This story was originally published May 19, 2015 at 9:10 AM with the headline "NewDominion Bank adjourns shareholders meeting, cites error in proxy statement."