Earlier this year, on pg. 202 of the 10-K that Flagstar Bancorp filed on March 5, there was an interesting little disclosure about a retention agreement with executive Steven Issa. Didn’t catch it at the time? No sweat. We didn’t either. As much as we try to read every page of every filing, we don’t. There’s simply not enough hours in the day, especially during peak filing periods when it is often common to see more than 100 10-Ks filed in one day.
At the time, Issa was managing director for commercial banking at Flagstar and, as the filing implied, was likely to be out of a job soon due to the fact that CIT Corp. had agreed to purchase Flagstar’s commercial portfolio. But as the item on pg. 202 noted, Issa was getting a pretty nifty consolation prize: he would be paid approximately $900K and all he had to do was stay at the bank through April 30, once the sale to CIT was expected to be completed. Considering that Issa’s base salary in 2012 was a mere $475K for a whole year or work, making nearly twice as much for around 1/3 as much work seemed like a sweet deal indeed.
But as Flagstar disclosed in this agreement attached to an 8-K which it filed on Wednesday, this didn’t turn into such a happy ending for Issa. Here’s a snip from yesterday’s filing:
“By letter dated September 6, 2013, the Office of the Comptroller of the Currency (the “OCC”) informed the Bank that the OCC, after consultation with the Federal Deposit Insurance Corporation (the “FDIC”), had determined that (a) the Transition Agreement is an agreement to make a “golden parachute payment”…and the 2013 increases in your cash and share salary and the retention payments described in the Transition Agreement were golden parachute payments that would be in violation of Part 359 unless approved under 12 C.F.R. § 359.4(a)(1).”
As it turns out, banking regulators didn’t take kindly to the fact that Flagstar inexplicably decided to more than double Issa’s base salary to $1 million as part of the retention agreement that it disclosed back in March. So instead of $900K for four months of work, Issa will have to forgo $384.5K that he was set to receive, meaning he only made a mere $525K for those four months of hard labor! Of course, as the letter agreement helpfully points out, Issa still made $266.7K more in 2013 than he did in all of 2012, which means it’s not a total loss.
As the filing noted, Flagstar now has to seek approval for the big increase in Issa’s salary (read: attorney fees). If banking regulators don’t approve that, Issa may have to hand back even more money.
Meanwhile, Issa has already moved on to another bank: tiny Customers Bancorp based in Wyomissing, Pa. It’s not clear when Issa started there, but this slideshow that was attached to an 8-K that Customers filed last month listed Issa as an executive vice president.