In 2008, two century-old publicly traded community banks, Virginia Financial Group and First National Bank, merged to form StellarOne, which overnight became the largest independent commercial bank headquartered in Virginia, with total assets exceeding $3 billion and more than 60 branches statewide.
Billed as a “merger of equals,” the negotiations, which began in late-2006, were far from peaceful. Three minority board directors at First National Bank (FNB) tenaciously opposed the deal, elongating the timeline for closing by nearly two years.
“The dissident directors tried to divide the loyalties of constituencies like shareholders and employees, offering positions on the board to large shareholders and positions in management to certain key employees if they prevailed,” says Greg Feldmann, president and CEO at FNB at the time and a board member today at publicly traded bank holding company Carter Bankshares ($4.6 billion in assets).
The offers were just the beginning of a “win at all costs” mentality pursued by the opposing directors, Feldmann says, pointing to emails and other communications containing false information designed to sway the court of public opinion to their cause. Virginia Financial Group’s board unanimously supported the merger.
“They would find an accountant or an academic and get them to write a negative opinion of the merger and then send it out to employees, shareholders and the SEC,” he says. “Since the bank had an ESOP, some employees were significant shareholders.”
The opposing board members didn’t stop there. “Just to stir things up, they erroneously claimed that FNB had bought property in another market and were planning to move all our operations to it, impacting a couple hundred employees in the western part of Virginia,” he says. “The irony is that both parties had already agreed that FNB’s operations and core system would be the merged entity’s operations and core system and would remain where they were. Obviously, the employees would not lose their jobs.” (Feldmann declined to comment on the motivations of the dissident board members.)
The low point, he says, was when he opened his mailbox and found a cartoon of himself and another top FNB executive. “The dissidents commissioned the cartoon, which showed the two of us standing in a graveyard next to a gravestone that read ‘RIP FNP,’” he says. “I wasn’t the only person receiving a copy.”
Asked how FNB challenged the opposing board members’ tactics, he says, “We took the high road, pursuing one-on-one direct and transparent communications to the highest degree possible with employees and shareholders to set the record straight, within the SEC’s constraints on what could and could not be shared.”
In January 2008, FNB’s board members strongly favoring the transaction penned a letter to the SEC, apologizing for exposing the commissioners “to a barrage of negative campaign tactics and the false portrayals of the facts surrounding our proposed merger, which you received from the opposition. [We] want to make sure that each shareholder knows the TRUTH.”
The letter cited the merits of the merger, including a 20 percent increase in shareholder dividends, the market clout from being the largest independent commercial bank in the state, the decision to close no FNB branch offices and another decision to appoint an equal number of board directors from each of the merged banks. “[This] is a merger of equals that we believe is one of the most ‘equal’ transactions that we could have negotiated,” the letter reads.
The following month, on February 28, the merger was approved, and the new name of the combined bank was announced. In 2014, StellarOne was acquired by Atlantic Union Bank, which subsequently merged with American National Bankshares in April 2024.
Looking back, Feldmann says the opposing directors “slowed down the train, adding complexity to it. We weren’t just managing shareholders and regulatory approvals; we were in the trenches trying to tactfully and honestly address the misinformation being spewed.”
“You have to remember these were two community banks with legacy roots dating back 100 years, with branches in small rural markets where the local bank is the centerpiece of local businesses,” he says. “The opposition played on the emotions of people. The only way to calm such fears is to tell the absolute truth, whatever it takes.”
