The Case of One Highly Incentivized Exiting Executive
Wondering if BXS Chairman and CEO Aubrey Patterson will retire on schedule in May 2013 as announced and bequeath bank leadership to a successor? Personally, having read the April 2012 Proxy and considered his incentives to sell, I don't think he will. At least not if he had any of the same business school professors at Michigan State that I had.
Disclosure: As of this posting, I own shares of BXS and may subsequently either dispose of them or purchase more.
Prospective Buyers
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BancorpSouth enjoys an unusually low cost of deposits and an unusually high percentage of steady, fee-based revenues, making it a highly coveted franchise. If any of the following banks were to purchase it at a 20% premium to today's trading price of $15, the buyer's earnings would immediately go up.
BB&T Corp, Winston-Salem, NC (BBT)
Capital One Financial, McLean, VA (COF)
IBERIA Bank, Lafayette, LA (IBKC)
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Financial Snapshot
(as of 06/30/2012)
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Total assets:
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$13.148B
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Tangible book value per share:
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$12
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NPAs to assets:
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3.11%
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Price to book:
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103%
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Market cap:
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$1.45B
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Dividend yield:
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0.26%
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Trailing 12-month return on assets:
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0.53%
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Trailing 12-month return on equity:
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5.2%
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The Crew
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Aubrey Patterson, Jr, Chairman and CEO
James Kelley, President and COO
William Prater, Treasurer and CFO
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The Skinny
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What would you do if you were Aubrey?
According to the Proxy Statement:
If Aubrey simply retires...
- He receives a cash payout of $952,000.
- His executive team keeps running the bank at current compensation levels.
- Shareholders experience no material benefit and stock price may decline.
If Aubrey retires by selling...
- He receives compensation of over $11M.
- His executive team collectively makes nearly $10M over and above normal compensation.
- After putting in 38 years of service to the bank, 77-year older Director Hassell H. Franklin could cash in his 1,247,000 shares.
- Shareholders enjoy benefit of increased share price.
The 2000% Difference Between Aubrey's Choices
Executive
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Compensation
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If Aubrey “retires”…
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If Aubrey sells…
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Aubrey Patterson
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$952,000
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$11,608,000
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James Kelley
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$213,000
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$5,712,000
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Gordon Lewis
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$105,000
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$1,440,000
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William Prater
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$10,000
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$995,000
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W. James Threadgill, Jr.
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$107,000
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$1,474,000
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Total compensation
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$1,387,000.00
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$21,229,000.00
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Sources
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Just to clarify: I'm not suggesting that Aubrey should sell his bank. He's done a fabulous job over the years and in my opinion has earned the right to pass it on of if that's the route he chooses.
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