Shareholders of Charlotte-based NewDominion Bank on Tuesday approved a plan for the community lender to issue more preferred shares to fund growth and rid itself of a restrictive regulatory order.
The bank adjourned its shareholders annual meeting last week over the proposal, which some investors had opposed. NewDominion said a vote was not officially taken last week on the item because the lender miscalculated the minimum number of votes required for it to pass.
The proposal had kicked off an unusually public dust-up for a community bank.
One prominent critic of the proposal is shareholder Mark Erwin, who contends issuing more preferred shares would put the investment of common shareholders like him at greater risk. Preferred shareholders typically enjoy certain protections, such as being paid before common shareholders if a company is liquidated.
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Erwin, one of NewDominion’s founding directors and a former U.S. ambassador, said he resigned from the bank’s board in March to protest the move. NewDominion CEO Blaine Jackson said Erwin resigned after not being renominated. Erwin said he told the board last year he did not want to be re-nominated.
NewDominion is planning to use a mix of common and preferred shares to raise about $20 million to fund its growth and break free from the regulatory order, which requires it to have more capital. The lender said that if it were to raise the capital only through common shares, it would forfeit about $7 million in additional capital it expects to access through a tax maneuver once it has a enough consecutive profitable quarters.
With Tuesday’s vote, NewDominion now has approval to issue up to 30 million in preferred shares, up from a prior cap of 5 million.
NewDominion is eager to shed the regulatory order, which the Federal Deposit Insurance Corp. and the N.C. Commissioner of Banks placed it under in 2010 as the lender was reeling from real estate loan losses. In addition to limiting its asset growth, the order also prevents the lender from awarding executive bonuses without getting prior regulatory approval.
Heading into last week’s meeting, the bank said it needed approval of two-thirds of common shareholders for its proposal to pass.
But that meeting was adjourned when the bank said it discovered that under state law, only a simple majority was required. The bank also said the adjournment was needed to re-issue a corrected proxy statement to investors.
On Tuesday, the bank said the proposal received support from 66.9 percent of outstanding shareholders.
Erwin, who attended Tuesday’s meeting, had tried unsuccessfully to get the bank to wait 45 days before reconvening the meeting so shareholders could have more time to consider the corrected proxy statement.