Sunday, September 23, 2012

BancorpSouth, Tupelo, MS (BXS)

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
    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)
    Financial Snapshot
    (as of 06/30/2012)

    Total assets:
    $13.148B
    Tangible book value per share:
    $12
    NPAs to assets:
    3.11%
    Price to book:
    103%
    Market cap:
    $1.45B
    Dividend yield:
    0.26%
    Trailing 12-month return on assets:
    0.53%
    Trailing 12-month return on equity:
    5.2%
    The Crew
    Aubrey Patterson, Jr, Chairman and CEO
    James Kelley, President and COO
    William Prater, Treasurer and CFO
    The Skinny
    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
    Compensation
    If Aubrey “retires”…
    If Aubrey sells…
    Aubrey Patterson
    $952,000
    $11,608,000
    James Kelley
    $213,000
    $5,712,000
    Gordon Lewis
    $105,000
    $1,440,000
    William Prater
    $10,000
    $995,000
    W. James Threadgill, Jr.
    $107,000
    $1,474,000
    Total compensation
    $1,387,000.00
    $21,229,000.00
    Sources

    1 comment:

    1. 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.

      ReplyDelete