The showdown at Cape Fear Bank Corp. has ended in a compromise.
On the eve of a highly anticipated shareholder vote, the two sides dueling over the Wilmington, N.C., company struck a deal Monday to share control of the board.
The number of seats is to rise to nine, with four going to current directors and four going to members of a dissident slate supported by one of the company's largest shareholders. An independent director also would be chosen. The board previously had six members.
The deal removes the company's president and chief executive officer, Cameron Coburn, from the board. He had been its chairman.
Observers said the shakeup is unlikely to be the last change at the $496 million-asset company.
Mr. Coburn had been a lightning rod for criticism from the activist shareholder Maurice J. Koury, who fielded a slate of six candidates to replace the entire board. (Mr. Koury was not one of the six.)
In an interview Monday, Mr. Koury said he was "elated" at the outcome. "It's not a victory for Maurice Koury," he said. "It's a victory for the Cape Fear shareholders."
Mr. Koury said he insisted that the agreement to reconfigure the board unseat Mr. Coburn, whom he holds responsible for Cape Fear's being a chronic underperformer. "I think it's time for a change in leadership," he said.
Mr. Coburn remains the company's president and CEO — "for the time being," Mr. Koury said. He would not say whether the new board members would seek to change the management team.
Mr. Coburn did not return calls. Two Cape Fear directors who remain on the board, Walter Lee Crouch and Walter O. Winter, declined to comment on the agreement or the possibility of future changes.
But Mr. Crouch said in a press release that the agreement is the "best outcome" for Cape Fear and that he looks forward to working on the new board. "I ask all parties involved, including the shareholders, to put aside any preconceived notions or bruised feelings they may have and instead focus on the positive potential of this company," he said.
Ken Thomas, the president of the Miami consulting firm K.H. Thomas Associates, said that with four of Mr. Koury's nominees on the board he would not be surprised to see some management changes.
The company postponed the annual meeting it had planned for Tuesday, saying it would reschedule soon. It intends to put the new slate of nine members up for a shareholder vote.
Christopher W. Marinac, an analyst at FIG Partners LLC, said that the dissident slate had a "good chance" of winning and the compromise decision to "split the baby" helped the company avoid a potentially embarrassing defeat.
However, "there is still heavy lifting ahead," he said, as the company struggles with a lack of core deposits and asset-quality issues. "It's a long-term fix."
Cape Fear had a $599,000 second-quarter loss and a $441,000 first-quarter loss as it fattened its provision. About one-quarter of its deposits are brokered, a significantly bigger share than the national average.
Mr. Koury, who owns 8.82% of Cape Fear's shares, started calling last fall for the company to find a buyer. He even volunteered to buy the company himself for $12 a share, an offer the board rejected in January.
The stock has suffered along with its earnings since then. It was trading at $5.95 late Tuesday, down about 48% for the year.
The board previously had kept Mr. Koury at arm's length, refusing to meet with him. Instead, for nearly a year, the two sides exchanged heated press releases, letters, and Securities and Exchange Commission filings.
Mr. Marinac said that Cape Fear miscalculated with its "horrific" lack of communication with Mr. Koury. "Companies forget that people want to have their voice heard," Mr. Marinac said. "You can cut some of these issues off at the pass by dealing with people straight up. You have a position with our stock. We owe you the courtesy of a dialogue. When that doesn't happen and people don't return phone calls, you're asking for trouble."
