Cardinal Bankshares to Face Proxy Fight with Activist Investor

Schaller Equity Partners has escalated its battle with a small-town Virginia bank, announcing plans to nominate a slate of directors to the board of Cardinal Bankshares Corp.

The Winston-Salem, N.C., investment company said in a press release Friday that it plans to nominate five individuals to join the board: Carol Jarratt, T. Mauyer Gallimore, Bobby Gardner Sr., John Paul Houston and James Shortt.

Cardinal, based in Floyd, Va., typically holds its annual meeting in late April.

"We selected these people as our potential nominees because they are proven business and community leaders from the Floyd area," said Douglas Schaller, the president of Schaller Equity Partners, in the release. Schaller said the nominees "would bring much-needed insight, accountability and fresh and relevant perspectives to the board."

Schaller Equity Partners, which owns about 9.8% of Cardinal's common stock, intends to conduct a proxy solicitation to back its nominees.

Leon Moore, Cardinal's chairman, president and chief executive, could not be immediately reached for comment.

Schaller and the $254 million-asset Cardinal have been at odds for almost a year. The battle began last summer, soon after Henry Logue resigned as Cardinal's executive vice president. Moore brought in Michael Larrowe, intending to tap the newcomer as his successor. That led Schaller to file his first open letter in September, questioning Larrowe's banking expertise.

Schaller has also questioned the delayed time it took for Cardinal to disclose its loan classifications despite having a new accountant. Cardinal's board, convinced that Schaller's only goal is to get the company to sell itself, has fought back, eventually rallying its employees to its defense.