The board of ECB Bancorp has rejected a demand from a large shareholder group to remove the Engelhard, N.C., company's chief executive.
ECB's directors said in a regulatory filing Tuesday that they were in "unanimous support" and had "confidence in" the company's management team, including Dwight Utz, ECB's president and CEO.
They were responding to demands from the Gibbs family, which owns more than 13% of ECB's common stock and includes a former ECB director, to make changes to improve the company's financial performance. "We believe a leadership change is needed," the family said in a letter attached to a regulatory filing Friday.
"Management seems to have totally forgotten the shareholders of this company, and the company is being driven in a disastrous direction," the letter added. The family, which consists of three siblings and their mother's estate, also spoke out against management at ECB's annual meeting last Thursday. Greg Gibbs was an ECB director for 17 years; he resigned last September.
A call to the company was not immediately returned. In its response, however, ECB's board claimed that, while a director, Gibbs supported several of the decisions that the family is now criticizing.
In their letter, the Gibbs family complained that ECB's stock price had fallen more than 50% since July 1, 2009, when Utz was hired. The family also expressed discontent with salary increases for senior executives over the last three years, even though the company lost money last year.
The family also claimed that, should Utz depart, that Art Keeney, a former ECB chief executive, would be willing to take over on an interim basis.
Utz has put a positive spin on ECB's performance in recent months. "We believe, compared to other community banks in North Carolina, ECB is positioned to capitalize upon opportunities that become available" in an improving economy, he said in a April 30 press release, when the company announced quarterly earnings of $377,000. We "look forward to returning to a more-normalized earnings environment in 2012."
While profitable in the first quarter, ECB's capital ratios tapered off slightly. At March 31, its total risk-based capital ratio was 13.7%, compared to 13.9% a quarter earlier.
The $917 million-asset company reached an agreement last June with several private equity firms to raise nearly $80 million but the deal fell through in February following regulatory delays. ECB said at that time that it would continue looking for an alternative funding, but no new agreement has been announced. The company also had to call off plans to buy a number of branches from a Virginia bank.
The Gibbs family cited this flopped raise as an example of the "disastrous direction" of ECB's management, claiming that the company spent nearly $2 million in the "aborted" raise. The family also complained that the placement, had it gone through, would have been dilutive to existing shareholders.
ECB also has $18 million in capital from the treasury Department's Troubled Asset Relief Program. Greg Gibbs said in the family's filing that he opposed the decision to take Tarp while he was on the board. While he said that Tarp has helped boost ECB's capital levels, Gibbs expressed concern that the funds had hindered the potential for acquisitions, or the company's own sale.
"In other words, our executives may not get their 'pay day' if the company is acquired," the family's filing said. "Are certain transactions being avoided even though they may be in the best interest of all our shareholders?"