HopFed Bancorp in Hopkinsville, Ky., has formed a truce with its harshest critic.
The $916 million-asset company said in a regulatory filing Wednesday that it will add a representative of activist investor Joseph Stilwell to its board. HopFed expanded its board by one seat to make room for Mark Alcott, who will become a director by the end of this month.
While Alcott's initial term will expire at next year's annual meeting, HopFed agreed to nominate him for a second term that would last until 2022. Alcott will also be elected to the board of HopFed's bank.
In exchange, Stilwell's investment firm will support recommendations from the board and will not seek additional board seats, among other things. The firm also agreed to stop buying HopFed stock.
Earlier this week, HopFed announced that its board had revised its compensation policies for executives. The compensation committee will annually review the return on average equity for a selected peer group. Executives will only be eligible for a salary increase if HopFed’s return for the year meets or exceeds the peer group’s average. The threshold also applies to bonuses, restricted stock and incentive awards.
If the target isn't met, the committee also will no longer extend or renew employment agreements with provisions that provide special benefits to executives that are unavailable to nonexecutive employees, such as paying for a company car or reimbursing country club dues.
Stilwell and HopFed have engaged in a long-running feud. Stilwell has repeatedly complained about President and CEO John Peck’s salary and a bank acquisition that was eventually called off. The investment firm previously successfully nominated a representative to the board in 2013, though the individual eventually stepped down.
Stilwell filed a lawsuit against HopFed after the company changed its bylaws to bar anyone with a consent order with the Securities and Exchange Commission from pursuing a board seat. Though HopFed later backed off, it was ordered to pay more than $600,000 in Stilwell’s legal fees.