A federal filing by a member of a small group of Virginia National Bank shareholders says the Charlottesville-based bank should informally explore the option of a sale or merger.
In the March 14 Schedule 13D filing with the U.S. Securities and Exchange Commission, SRCM Holdings LLC and Swift Run Capital Management wrote that Virginia National Bankshares Corp. is “an attractive banking franchise located in a stable, growing marketplace, one that is potentially desirable to many bank merger partners or acquirers.”
Led by local investor Tim Mullen, the companies control about 9 percent of the bank’s shares, according to the filing. The shares acquired and held by Mullen and his companies “represent an attractive investment opportunity,” the filing states.
The investment companies say earnings derived from Virginia National’s commercial bank operations could support a dividend of 80 cents to $1 annually. At the end of 2013, Virginia National had $513 million in total assets and $296.7 million in net loans outstanding, according to a February earnings statement.
Options the filing identifies include a sale or merger, or Virginia National remaining a “stand-alone entity.” The document says a single “interested party” has contacted SCRM and the shareholders “believe there are many others who may have interest.”
Virginia National President and CEO Glenn Rust said no one has contacted the bank. He said he understands the outside interest and it bodes well.
“We have built a very attractive banking enterprise,” Rust said, but “we haven’t been contacted. We have a large amount of earnings and we’ve chosen to look at wealth management
Michael Ho, a finance professor at the Darden Graduate School of Business Administration at the University of Virginia, agreed with Rust’s assessment of the bank. He added that Virginia National is not obligated to take action in response to the investor group’s interest.
“What could happen here is, if you shake the trees and the stock gets attention maybe other people will come in and they’ll want to buy,” Ho said.
In detailing the interest in a possible sale, the investors wrote that current trading levels “do not appropriately value the benefits of recent actions by the [bank’s] management, including permanent operating expense reductions at the commercial bank, a liquid and clean balance sheet and a new wealth management business model which is likely to produce a more consistent revenue stream.”
If a sale eventually were to come to fruition, “whoever is going to buy them wouldn’t shut down the branches,” Ho said. “Somebody is going to want them for their local touch and feel for the customer, even more so than the wealth management business.”
And with the bank’s focus on consumer products and services, and its recent entrance into wealth management, “it’s probably an attractive target if somebody were to buy them,” Ho said.