Stilwell Slams HopFed CEO's Pay Package

Activist investor Joseph Stilwell is pulling out his sharpest knives in his proxy fight with HopFed Bancorp (HFBC).

But HopFed has a powerful counter-attack of its own.

Stilwell, who controls about 7.6% of HopFed's common stock and has nominated a representative for the $981 million-asset company's board, expressed displeasure with the compensation package for Chief Executive John Peck in a May 2 letter to shareholders.

"It seems to me that our CEO is well taken care of irrespective of how shareholders fare," Stilwell wrote in the letter, which was included in a regulatory filing. "Considering Mr. Peck's contribution to shareholder value, we think his cost is dramatically out of line with the results produced."

In his letter, Stilwell included a chart to show that Peck's base salary had more than doubled since 2001, hitting $301,044 last year. Stilwell also took issue with contributions to the Peck's country club dues, stock awards, a cash bonus and more than $10,000 in car lease payments that Peck received in 2012. "He couldn't afford a car on his salary?" Stilwell panned.

Stilwell was particularly incensed that Peck accepted $7,825 in director fees last year. "On the boards that I've served as a director, no executive officer ever accepted director fees," he wrote.

Stilwell had already voiced his opposition to HopFed's plans to buy Sumner Bank & Trust in Gallatin, Tenn. His recent letter made his objections even more clear. "Under no circumstances should a bank trading under tangible book value buy another bank at a premium to book," he wrote.

HopFed has been fighting back. Earlier this week, HopFed touted an endorsement from Glass Lewis, a proxy advisory firm that has recommended that shareholders vote for the Hopkinsville, Ky., company's three board nominees. The firm also backed Sumner acquisition, saying it will give HopFed exposure to the "attractive demographic profiles" around Nashville, Tenn., and result in roughly $2.1 million in cost savings.

Glass Lewis also endorsed the company's long-term incentive plan and criticized Stilwell for not providing details of his plans, HopFed said. Glass Lewis also criticized Stilwell's nominee, Robert Bolton, president of Iron Bay Capital, because of a perceived lack of banking experience.

Another concern, Glass Lewis said, is that Stilwell "has granted its nominee an option to purchase shares of the company's common stock that will become exercisable only upon the occurrence of a change of control. We are concerned this arrangement provides Mr. Bolton with an incentive to pursue a sale of the company irrespective of whether it is in the best interests of other shareholders."

Peck did not immediately return phone calls seeking comment.

The matter will be decided at the company's annual meeting on May 15.