WMPN with another 10% buyback, just 4 months after the last one!
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Can we interpret this to mean a buyout is imminent or is it just a company deploying their capital?
They have another 6.5 months before they’re able to go on the auction block. It’s reasonable to expect them to finish this authorization by then – and who knows, maybe announce and complete another. But the signs look promising that they’re going to angle for a buyout when they’re able. Check management’s incentives here – change of control, etc.
Jim
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Seems like 3 people get pretty generously compensated, and thus they will sign off in a heartbeat.
https://www.sec.gov/Archives/edgar/data/1828376/000182837622000033/tmb-20221007xdef14a.htm
Employment Agreement
The Company and the Bank maintain an amended and restated employment agreement (the “Agreement”) with Kenneth J. Stephon that became effective July 1, 2022 and provides for a term of thirty-six months. On each anniversary of the effective date, the term of the Agreement will automatically extend for an additional twelve months, unless one party gives the other party notice of intent not to renew the Agreement, in which case the Agreement will terminate upon completion of the then-current thirty-six-month term. However, if the Company enters into an agreement to effect a transaction that would be considered a Change in Control as defined in the Agreement, then the Agreement will remain in effect while that transaction agreement is in effect and (a) if the Change in Control is consummated, the term of the Agreement will extend for twenty-four months following the date of consummation and then terminate, or (b) if the transaction agreement is terminated, the term of the Agreement will extend to the first anniversary of its effective date that is more than twelve months following the date on which the transaction agreement is terminated and then the renewal provisions described above will continue to apply as if the Company had not entered into the transaction agreement.
The Agreement provides for, among other things, a minimum annual base salary of $509,000, eligibility to participate in employee benefit plans and programs maintained by the Company and the Bank for the benefit of their employees, including the annual incentive, medical, dental, retirement and stock-based compensation plans and certain fringe benefits applicable to executive personnel. Under the Agreement, the Bank will also provide Mr. Stephon with an automobile owned or leased by the Bank and will pay, or reimburse Mr. Stephon for, all expenses associated with Mr. Stephon’s use of such automobile.
The Agreement provides for certain payments to Mr. Stephon following the termination of his employment by the Company and Bank without Cause (as defined in the Agreement) or by Mr. Stephon for Good Reason (as defined in the Agreement), in either case prior to a Change in Control (as defined in the Agreement). Generally, in exchange for signing an effective release of claims against the Company and the Bank, Mr. Stephon will be entitled to receive a lump sum severance payment equal to the sum of his then current annual base salary due for the remaining term of the Agreement and two times the highest annual bonus paid to him during the term of the Agreement; a lump sum cash payment equal to eighteen times the Bank’s monthly COBRA charge in effect on his termination date for the type of Bank-provided group health plan coverage in effect for Mr. Stephon on his termination date; any unpaid annual bonus for the completed fiscal year preceding the fiscal year in which his termination occurs (the “Prior Year Bonus”); if, under the applicable annual bonus plan, Mr. Stephon would otherwise forfeit his right to earn an annual bonus for the year in which his termination occurs, a lump sum cash payment equal to a pro rata portion of his target annual incentive award for such year (the “Pro Rata Bonus”); and accelerated vesting of his outstanding equity awards.
The Agreement also provides for certain payments to Mr. Stephon following the termination of his employment by the Company and Bank without Cause (as defined in the Agreement) or by Mr. Stephon for Good Reason (as defined in the Agreement), in either case concurrent with or within twenty-four months following the occurrence of a Change in Control (as defined in the Agreement). Generally, Mr. Stephon will be entitled to receive a lump sum severance payment equal to three times the sum of his annual base salary (at the greater of the base salary in effect on the date of the employment termination or the date of the Change in Control) and the highest annual bonus paid to him during the three-year period prior to the year in which his employment termination occurs; a lump sum cash payment equal to thirty-
six times the Bank’s monthly COBRA charge in effect on his termination date for the type of Bank-provided group health plan coverage in effect for Mr. Stephon on his termination date; any Prior Year Bonus; any Pro Rata Bonus; and accelerated vesting of his outstanding equity awards.
The Agreement provides for a “best net benefits” approach in the event that severance benefits under the Agreement or otherwise result in “excess parachute payments” under Section 280G of the Code. The best net benefits approach reduces Mr. Stephon’s payments and benefits to avoid triggering the excise tax if the reduction would result in a greater after-tax amount to him compared to the amount he would receive net of the excise tax if no reduction were made.
The Agreement also provides more limited severance benefits in the event Mr. Stephon’s employment terminates due to his death or his disability. In the event of Mr. Stephon’s death, he will remain entitled to life insurance benefits pursuant to the Bank’s arrangements; his beneficiary will be entitled to receive his current base salary through the end of the month in which his death occurs and any Pro Rata Bonus; his surviving spouse will be entitled to a lump sum cash payment equal to twelve times the Bank’s monthly COBRA charge in effect on his termination date for the type of Bank-provided group health plan coverage in effect for Mr. Stephon on his termination date; and all of Mr. Stephon’s outstanding equity awards shall become fully vested. In the event the Bank terminates Mr. Stephon’s employment due to his Disability (as defined in the Agreement), Mr. Stephon will be entitled to long-term disability benefits pursuant to the Bank’s arrangements; any Pro Rata Bonus; and accelerated vesting of his outstanding equity awards.
The Agreement provides that, except in the event of a Change in Control, Mr. Stephon is subject to a one-year non-compete in the event his employment is terminated. The Agreement further requires that Mr. Stephon not solicit business, customers or employees of the Company and the Bank for one year following termination of employment, except in connection with a Change in Control. The Agreement also provides that the Company and the Bank will indemnify Mr. Stephon to the fullest extent legally allowable.
To the extent that a payment is made or a benefit is received from the Bank under the Agreement, the same payment or benefit will not be paid or received from the Company.
Change in Control Agreements
The Company and the Bank maintain Change in Control agreements with Jonathan T. Logan and Jeannine Cimino that became effective on July 1, 2022 and provide for two-year terms. Beginning on the first anniversary of each agreement’s effective date, the term of the agreement will be extended by an additional year, unless the Bank or the applicable Executive provides the other party with written notice of non-renewal in accordance with the terms of the agreement, so that the term of the agreement remains at two years.
Under the tems of each Change in Control agreement, if within twenty-four months of a Change in Control of the Company (as defined in the agreement), the Executive’s employment is terminated by the Company and Bank without Cause (as defined in the agreement) or by the Executive for Good Reason (as defined in the agreement) he or she will be entitled to receive a lump sum severance payment equal to two times the sum of his or her: (1) base salary, and (2) the highest annual bonus paid to the Executive during the two-year period preceding his or her termination of employment, a lump sum cash payment equal to twenty-four times the Bank’s monthly COBRA charge in effect on his or her termination date for the type of Bank-provided group health plan coverage in effect for the Executive on his or her termination date, any unpaid annual bonus for the completed fiscal year preceding the fiscal year in which his or her
termination occurs, a lump sum cash payment equal to a pro rata portion of the annual incentive award the Executive would have earned under the Bank’s annual incentive plan for the fiscal year in which his or her termination occurs. The agreements each provide for a “best net benefits” approach in the event that severance benefits under the agreement or otherwise result in “excess parachute payments” under Section 280G of the Internal Revenue Code of 1986, as amended.
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And that’s on top of the ~1.9% in stock that the CEO owns currently. Plus any future grants.
Jim
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Last week, FFBW re-upped the buyback program. Just a 2% buyback, though.
@kingran, I note the deposit base at FFBW went up during Q2:
| Balance Sheet Liabilities | June 30, 2023 | Dec. 31, 2022 |
|---|---|---|
| Deposits and escrow | $248,953 | $234,658 |
Clearly, something to watch for in the Q3 ER.
I wonder, though, if the nature of the deposit base at really small banks is as motivated by interest payments, as is larger more sophisticated and business oriented bank customers. Not making excuses, not saying these banks are different, just wondering how almost a trillion dollars moves out of the banks’ deposit bases and who “loses” proportionally more…
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Nice find, Rob. Did they complete the 3% authorization, or perhaps are about to, and therefore announced another authorization? Either way, I like it.
Jim
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WMPN reported, and the results were very mixed.
- They bought back aggressively, as we were expecting.
- Their HFS loans fell in value a lot.
- Their Tangible BV is now right about where share price is, which should mean “No more buybacks.”
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Yes, WMPN is still pedal to the metal of buybacks during the quarter, including buying maybe half or so of its August 10% repurchase authorization. So they are being really aggressive here.
Yes, buybacks above TBV decrease per-share TBV, but they can still make sense if, say, they’re buying at $12 and management thinks a reasonable buyout price is $15. And if there’s a credible belief that losses on the securities portfolio will reverse – views differ right now! – then it makes sense to buy now as well.
Regardless, it should be obvious that they intend to sell the company, and so mopping up all these shares makes it more valuable for everyone else who sticks around.
Jim
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