David Baumgarten, president and chief executive officer of Brown Deer-based Bank Mutual Corp., said he is working to resolve the issue of an activist investment firm attempting to appoint its own directors to the board.
“We’re giving that a lot of thoughtful consideration,” Baumgarten said. “We have been talking to this firm off and on for the last couple of years.”
Baumgarten said he was a bit surprised when Dallas-based Clover Partners LP filed a document with the SEC indicating it plans to send a definitive proxy statement and related materials to shareholders seeking support for its board nominees, since the bank had been in ongoing conversations with Clover. The investment management firm and its associates hold about 4.1 percent of the bank’s stock.
“The conversations have always been very thoughtful conversations,” Baumgarten said. “No confrontation was ever detected.”
But Johnny Guerry, managing partner of Clover Partners, says Baumgarten has not returned several communications since December asking to talk about the company’s performance.
“We have been investors in the bank for a while and we were having an active dialogue and talks with management,” Guerry said. “They basically kind of shut us down. Wouldn’t set up any calls, wouldn’t take calls. That dialogue deteriorated. We felt that we had limited other means of recourse.”
Guerry feels Bank Mutual has failed to improve its operations from a profitability standpoint.
“They’re just so far below the industry averages for banks of their asset size,” Guerry said. “We’re a long ways from an acceptable level of profitability.”
Guerry would not say who his potential board nominees would be.
“We happen to feel very strongly that we have made great strides in the last four or five years in turning this bank around and turning the business plan from a thrift to a commercial bank,” said Baumgarten, who was appointed CEO in 2013.
Both Guerry and Baumgarten said they would like to meet and amicably resolve the issue before the bank’s annual shareholder meeting in May.
“Unfortunately, when you’re a public company and you have major investors, you’re accountable to them,” Guerry said. “The first step is obviously having a conversation with management or with representatives from the board.”
“If he’s got some ideas that I haven’t thought of that he wants to share with me and they make sense to follow up on, I’m more than happy to do that,” Baumgarten said. “At the end of the day, we’re going to make a decision that we think is best for our shareholders in the long run.”
Bank Mutual, which reported profits fell to $3.7 million in the fourth quarter, has made several recent changes to cut costs and drive operational efficiency. The bank named a new chief operating officer in July and is in the process of closing 11 branches. It also recently froze its benefit pension plan.
At the same time, the bank has been investing in talented employees. It recently hired Russ Plewa as regional commercial banking manager. Plewa was previously senior vice president and director of commercial banking at BMO Harris Bank in Milwaukee.
“Anytime we can hire what we think are going to be real strong players for us, we’ll hire,” Baumgarten said. “Russ is part of that.”
Guerry said those moves are steps in the right direction, but they’re not enough.
Bank Mutual, the largest bank headquartered in the Milwaukee area, has about 700 employees. It has 64 Wisconsin branches and one Minnesota branch.