Board couldn't bank on its shareholders.

• Author: Maley, Frank
• Position: Tar Heel Tattler

Leon Moore would be the first to admit that folks in and around Floyd, Va., are independent. But shareholders usually rubber-stamp bank buyout bids that directors endorse. So what happens when they're Floyd County residents?

The chairman and CEO of Floyd-based Cardinal Bankshares Corp., which owns The Bank of Floyd, found out. Directors unanimously approved a $37 million offer from Hendersonvile-based Mountain-Bank Financial Corp. in May 2002. But shareholders rejected it by a ratio of 3 to 2. "It really is kind of unusual," Moore says. "Some of my friends across the state of Virginia said, 'Only in Floyd."'

Shareholders, he says, were concerned that MountainBank, one of North Carolina's fastest-growing banks since it was chartered in 1997, hasn't paid a cash dividend on its common stock. Though MountainBank agreed to increase the annual dividend to preferred shareholders from 45 to 60 cents a share, they worried it wouldn't be paid, Moore says.

MountainBank CEO J.W. Davis thinks it's about more than that. The preferred dividend wasn't going away. Plus, shareholders were getting a 38% premium. His bank bid $24 per common share. The stock closed at $17.40 the day the deal was announced. By late...