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Former Farmers Bank Chairman Richard J. “Dick” Holland Jr. appears to have been successful in turning a majority of voting shareholders to his cause, even as a slate of incumbent board members was reelected.

Holland, whose family founded the Windsor-based bank, was ousted in February as chairman of the Board of Directors for the bank’s publicly traded holding company, Farmers Bankshares Inc., over a disagreement as to how aggressively to pursue a sale or merger of the company. The feud has played out over the past several months in a series of dueling letters from Holland and the bank board and management, each side urging shareholders to back one side over the other at the company’s May 12 shareholders meeting.

Nine of Farmers Bankshares’ 14 board members were up for reelection at the meeting, with most votes cast by proxy in advance. According to a May 24 company press release, all nine were reelected — albeit with just 37%-40% of the vote. The remaining 59%-62% of votes, according to the press release, “were withheld.”

Approximately 76% of all outstanding shares were represented either by proxy or in person at the meeting. The incumbent directors required only a “plurality” of all shareholders to be reelected.

“Plurality voting means that the director candidate with the most votes wins the seat, even if they do not receive a majority of the votes,” explained Dr. Thomas Schneider, a finance professor at Old Dominion University. “Thus, the bank’s director nominees have enough support to win with (less than) 40% of votes cast. In the short term, it is likely business as usual at the bank.”

But the nearly two-thirds of votes withheld “sends a strong message to management that shareholders support the Hollands and their plan to solicit potential acquirers,” Schneider said. “Other banks may see this vote as a ripe opportunity to launch a takeover bid.”

Holland, who contended in a March 8 letter that he’d “lost all confidence” in the current board and believed his investment as one of the bank’s largest shareholders “would be best protected by a sale or merger of the company,” specifically asked shareholders in a follow-up April letter to vote by mail-in proxy card to “withhold approval from the company’s director nominees” and to vote “against ratifying the company’s auditor.”

Five “Class I” nominees — G. Thomas Alphin Jr., John T. Orlando, David T. Owen, Gregory P. Marshall and Vernon Towler — were reelected to three-year terms through 2025. Two “Class II” directors— O.A. Spady and William L. “Billy” Chorey — were up for one-year terms until 2023. Another two — J. Clifton Harrell Jr. and Tiffany McMillan-McWaters — are “Class III” directors and were up for two-year terms until 2024.

Schneider outlined a possible scenario for a takeover.

“If the bank’s current management is reluctant to endorse a merger, this could come in the form of a ‘tender offer,’ in which the acquiring bank offers FBVA’s current shareholders cash at a premium to share price or in an ‘exchange offer’ where investors would receive stock in the new, combined bank,” Schneider said, using Farmers Bankshares’ over-the-counter stock abbreviation.

According to the press release, approximately 38% of shareholders also voted in favor of ratifying the company’s independent auditor, and 61% voted in opposition.

“We will continue to have open dialogue with our shareholders as we work to drive value and strong results,” said William A. Gwaltney, whom the board had chosen to succeed Holland as chairman in February, in the press release. “Our Board is proud of Farmers Bankshares’ operating results, and we are confident that the management team has the right strategy going forward. We are well-positioned to drive shareholder value as we serve customers and our community.”

“We appreciate hearing directly from shareholders at our annual meeting,” added Vernon Towler, the bank’s president and chief executive officer. “Our Board, management team and employees will continue to serve customers and drive strong performance.”

In February, Farmers Bankshares reported record earnings of $8.5 million, or $2.72 per share, in 2021. Holland, however, contended in his March 8 letter that this was “significantly driven” by Farmers’ purchase of a majority interest in the Franklin-based Manry Rawls insurance agency during his 1994-2019 tenure as the bank’s CEO, and by a $3.1 million one-time gain from the sale of bank-owned property he “shepherded to conclusion in 2021” as chairman, which would “not be repeated in the coming years.” Excluding the Manry Rawls income and the one-time sale revenue, “the picture is bleak,” Holland told shareholders.

In April, Gwaltney and Towler sent their own letter to shareholders urging them to discard Holland’s blue proxy card and instead vote a white card to stand with the bank’s board management. In it, they contended the bank’s 2021 return on assets was 1.44%, not the 0.5% Holland had claimed. They further argued that Holland’s numbers “leave out important parts of our revenue mix, such as the Manry Rawls insurance business and the Tidewater Home Funding mortgage business,” and were “not calculated in accordance with generally accepted accounting principles.”

Holland declined to comment on the results of the May 12 vote, stating that the “press release speaks for itself.”