Battle inside Summit State Bank boardroom triggered CEO's resignation
The pressure leading up to the sudden April 18 resignation of Summit State Bank CEO Tom Duryea had been building for months in a boardroom battle over the financial institution's direction and rate of growth.
Exasperated with lackluster growth at Summit State Bank, West Virginia businessman and Summit board member Marshall Reynolds, who owns nearly 15 percent of the bank's shares, orchestrated the resignation of Duryea and precipitated the exit of a retired Santa Rosa doctor and Summit director who owns $2.7 million worth of bank stock.
Reynolds, the bank's largest shareholder, in a May 2 interview with North Bay Business Journal, pointed to Summit State Bank's anemic growth as impetus for Duryea's departure.
'When you look around at other banks in the market — Santa Rosa,' Reynolds said, 'we were a little laggard in growth. Our bank had not grown as fast as some of the other banks in the market that we competed with,' Reynolds said.
'Growth certainly is one of the things you measure with,' Reynolds said. 'We've got excess capital, with the idea that we were going to acquire something, buy something (another bank). We were not successful. I know that Tom Duryea worked at that and did the best he could. But it didn't materialize. He gave it his best shot. Tom Duryea is a very capable young man,' he said.
'This bank, this investment, has appreciated very, very slowly,' Reynolds continued, 'certainly behind the bar curve of most banks. That's partially my fault. I could have shown some better leadership as the director. Would I sell my stock because Tom Duryea resigned? Of course not. I think Jim (Brush, appointed to replace Duryea) will do a great job as president and CEO.'
Mark DeMeo, a pathologist who practiced for four decades at Santa Rosa Memorial Hospital, resigned his board position after two years of service on April 19, a day after protesting the resignation of former Summit State Bank CEO Duryea, who led the bank for eight years.
DeMeo objected to control of the bank by East Coast directors, especially Reynolds. DeMeo believes that Reynolds seeks to take over Summit State Bank. 'I think he already is controlling it,' DeMeo said, identifying three other directors who fly in for board meetings from the East Coast and vote with Reynolds: Josh Cox, Todd Fry and John Wright.
DeMeo was the only director who voted against accepting Duryea's resignation; 10 other directors, including Reynolds, voted for Duryea's departure and replaced him with James Brush, a board member and CPA who became the bank's new CEO and president.
DeMeo acknowledged 'there were disagreements about the way the bank was running,' he said. 'They thought somebody else could do a good job,' he said, and 'Jim Brush moved in.' Duryea, he said, 'was more independent.'
'I was shocked that more of the local board members wouldn't support him,' DeMeo said of Duryea. 'I'm not privy to all that insider stuff that was going on, especially from the East Coast. This Reynolds guy is a big mover. '
The shakeup has not led DeMeo to sell his shares in the bank, which he began acquiring in 2006 during the public offering. His uncle Charles DeMeo helped start Summit Savings and Loan in 1984, which became Summit Savings then Summit State Bank in 1999.
'This Reynolds guy came in and bought the majority, the controlling number' of shares, DeMeo said. 'I think he has done good things. But when a director doesn't even know where Fourth Street is,' he said, chuckling, 'that's kind of the metaphor I use for not knowing the town. His interest is in making the bank run and making some money. Basically, his interest is not so much in the community. His interest is finding a good CEO that agrees with him.'
East-west conflict
Reynolds, 79, operates out of Huntington, W. Va., a town with 2010 population of about 50,000. He worked there for Chapman Printing in the 1950s as janitor then was promoted to deliveries and sales. In 1964, at age 27, he bought the company from his former boss and sought a $2,800 equipment loan from several banks.
They said no.
Stung by rejection, young Reynolds stormed out of First Huntington National Bank and vowed that he'd 'own this damn bank one day.' He gained controlling interest some 15 years later.
Chapman Printing is now a division of Champion Industries, which has annual revenue of about $65 million; Reynolds and other directors took the company private in January 2016 in a 1-for-200 reverse stock split.
Reynolds also is chairman of the board of Premier Financial Bancorp (NASDAQ: PFBI), a holding company based in Huntington, W. Va., with assets of $1.2 billion, and some 400 employees.