UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. ____)
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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to §240.14a-12
LAKELAND FINANCIAL CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
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P.O. Box 1387 • Warsaw, Indiana 46581 • (574) 267-6144
March 5, 20204, 2021
Dear Shareholder:
On behalf of the Board of Directors and management of Lakeland Financial Corporation, we cordially invite you to attend the annual meeting of shareholders of Lakeland Financial Corporation to be held by live webcast at 4:30 p.m. (local time)(Eastern Time) on April 14, 2020, at the Embassy Theatre, located at 125 West Jefferson Blvd., Fort Wayne, Indiana 46802.13, 2021.
This year we are again using the Securities and Exchange Commission rule that allows us to furnish over the Internet our proxy statement, our 20192020 annual report to shareholders, a copy of our annual report on Form 10-K and voting instructions to shareholders over the Internet.shareholders. This means that, unless you have previously requested to receive only printed materials, you will receive only a notice containing instructions on how to access the proxy materials over the Internet and vote online. If you receive this notice but would still like to request paper copies of the proxy materials, please follow the instructions on the notice or on the website referred to on the notice. By delivering proxy materials electronically to our shareholders, we can reduce the costs and environmental impact of printing and mailing our proxy materials. Please visit www.proxyvote.com for more information about the electronic delivery of proxy materials.
There are a number of proposals to be considered at the meeting. Our Nominating and Corporate Governance Committee has nominated thirteentwelve persons to serve as directors, each of whom is an incumbent director. If elected, each director would serve a one-year term. Our Board of Directors also voted in favor of an amendment to our Amended and Restated Articles of Incorporation, which, if approved by the shareholders at the meeting, will grant our shareholders the right to amend our Bylaws. Additionally, we have included a non-binding advisory proposal on the compensation of certain executive officers. Finally, our Audit Committee has selected, and shareholders will be asked to ratify the selection of, Crowe LLP to continue as our independent registered public accounting firm for the year ending December 31, 2020.2021.
We recommend you vote your shares “FOR” each of the director nominees, “FOR” the amendment to our Amended and Restated Articles of Incorporation, “FOR” the approval of the compensation of our executive management as described in the proxy statement, and “FOR” the ratification of our accountants.
We will also review our performance in 2019 and update you on our strategic plan as we move forward. You are welcome to attend a reception immediately following the annual meeting.
We look forward with pleasure to seeing and visiting with you at the meeting.
| Very truly yours, |
  |
| David M. Findlay President and Chief Executive Officer |
P.O. Box 1387 • Warsaw, Indiana 46581 • (574) 267-6144
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 14, 202013, 2021
To the Shareholders:
The annual meeting of the shareholders of Lakeland Financial Corporation will be held by live webcast on Tuesday, April 14, 2020,13, 2021, at 4:30 p.m. (local time) at the Embassy Theatre, located at 125 West Jefferson Blvd., Fort Wayne, Indiana 46802(Eastern Time) for the following purposes:
| 1. | to elect the |
| 2. |
| to approve a non-binding advisory proposal on the compensation of certain executive officers, otherwise known as a “say-on-pay” proposal; |
| to ratify the appointment of Crowe LLP as our independent registered public accounting firm for the fiscal year ending December 31, |
| to transact such other business as may properly be brought before the meeting and any adjournments or postponements of the meeting. |
Shareholders will be able to attend the meeting online, vote their shares electronically and submit their questions during the meeting by visiting: www.virtualshareholdermeeting.com/LKFN2021. Only shareholders of record on our books at the close of business on February 24, 2020,22, 2021, the record date for the annual meeting, will be entitled to vote at the annual meeting. In the event there is an insufficient number of votes for a quorum, the meeting may be adjourned or postponed in order to permit us to further solicit proxies.
| By order of the Board of Directors, |
 |
| J. Rickard Donovan |
| Secretary |
Warsaw, Indiana
March 5, 20204, 2021
2
Page Number | |
LAKELAND FINANCIAL CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
April 14, 202013, 2021
This proxy statement is being furnished to our shareholders in connection with the solicitation by our Board of Directors (the “Board”) of proxies to be used at the annual meeting of shareholders to be held at the Embassy Theatre, located at 125 West Jefferson Blvd., Fort Wayne, Indiana by live webcast on Tuesday, April 14, 202013, 2021 at 4:30 p.m. (local time)(Eastern Time), or at any adjournments or postponements of the meeting. Our summary annual report to shareholders, including consolidated financial statements for the fiscal year ended December 31, 2019,2020, and a copy of our annual report on Form 10-K, which we have filed with the Securities and Exchange Commission (the “SEC”), are also available. These proxy materials are first being made available or distributed to shareholders on or prior to March 5, 2020.4, 2021.
The following is information regarding the meeting and the voting process, presented in a question and answer format. As used in this proxy statement, unless the context otherwise requires, the terms “Lakeland Financial,” “the Company,” “we,” “our” and “us” all refer to Lakeland Financial Corporation and its direct and indirect subsidiaries.
How can I attend the annual meeting?
In order to make the meeting available for more people to attend, and to support the health and well-being of our shareholders and employees during the ongoing COVID-19 pandemic, our annual meeting will be held solely by means of a live webcast this year. If you were a shareholder of record as of February 22, 2021, the record date for the annual meeting, you will be able to attend the meeting online, vote your shares electronically and submit questions during the meeting by:
| 1. | visiting: www.virtualshareholdermeeting.com/LKFN2021 at the date and time of the meeting, and |
| 2. | entering the control number found on your proxy card, voting instruction form, or notice you previously received. |
If you are not eligible to participate in the meeting, you may listen to a webcast of the meeting by visiting www.virtualshareholdermeeting.com/LKFN2021 and logging on as guest. Guests will not be able to ask questions or vote at the meeting.
Whether or not you plan to attend the meeting, please take the time to vote by following the instructions provided on the notice as soon as possible. This will ensure that your shares are represented at the meeting.
Why did I receive access to the proxy materials?
We have made the proxy materials available to you over the Internet because according to our records, on February 24, 2020,22, 2021, the record date for the annual meeting, you owned shares of our common stock. This proxy statement describes the matters that will be presented for consideration by the shareholders at the annual meeting. It also gives you information concerning those matters to assist you in making an informed decision.
When you vote pursuant to one of the methods set forth herein, you appoint the proxy holder as your representative at the meeting. The proxy holder will vote your shares as you instruct, thereby ensuring that your shares will be voted whether or not you attend the meeting. Even if you plan to attend the meeting, we ask that you instruct the proxies how to vote your shares in advance of the meeting just in case your plans change.
If you appointed the proxies to vote your shares and an issue comes up for a vote at the meeting that is not identified in the proxy materials, the proxy holder will vote your shares, pursuant to your proxy, in accordance with his or her judgment.
Why did I receive a notice regarding the Internet availability of proxy materials instead of paper copies of the proxy materials?
We are using the SEC notice and access rule that allows us to furnish our proxy materials over the Internet to our shareholders instead of mailing paper copies of those materials to each shareholder. As a result, beginning on or prior to March 5, 2020,4, 2021, we sent our shareholders (other than those who had previously requested to receive only printed copies of our proxy materials) by mail a notice containing instructions on how to access our proxy materials over the Internet and vote online. This notice is not a proxy card and cannot be used to vote your shares. If you received a notice this year, you will not receive paper copies of the proxy materials unless you request the materials by following the instructions on the notice or on the website referred to in the notice.
What matters will be voted on at the meeting?
You are being asked to vote on:
the election of the 1312 director nominees named in this proxy statement for a one-year term expiring at our annual meeting of shareholders in 2021;
a non-binding advisory proposal to approve the compensation of certain executive officers, which we refer to as the “say-on-pay proposal;” and
the ratification of the appointment of Crowe LLP as our independent registered public accounting firm for the 20202021 fiscal year.
year.These matters are more fully described in this proxy statement.
If I am the record holder of my shares, how do I vote?
You may vote by:
• telephone;
• Internet;
• completing, signing, dating and mailing the proxy card you received in the mail if you received or requested paper copies of the proxy materials; or
• in person at the meeting.meeting, through the webcast interface.
If you vote using one of the methods described above, your shares will be voted as you instruct.
If you sign and return your proxy card or vote over the Internet or by telephone without giving specific voting instructions, the shares represented by your proxy card will be voted:
• “FOR” all nominees named in this proxy statement; and
• “FOR” each of the other proposals described in this proxy statement.
Although you may vote by mail, we ask that you vote instead by Internet or telephone, which saves us postage and processing costs.
You may vote by telephone by calling the toll-free number specified on your notice card or by accessing the Internet website referred to on your notice card, in each case by following the preprinted instructions on the notice card. Votes submitted by telephone or Internet must be received by 11:59 p.m. on Monday, April 13, 2020.12, 2021. The giving of a proxy by either of these means will not affect your right to vote in personat the meeting if you decide to attend the meeting.
If you want to vote in person,at the meeting, please come toattend the webcast at the date and time of the meeting. We will distribute written ballots to anyoneAnyone who wants to vote at the meeting.meeting will have the opportunity to do so. Please note, however, that if your
shares are held in the name of a broker or other nominee (or what is usually referred to as “street name”), you will need to arrange to obtain a proxy from the record holder in order to vote in person at the meeting. Even if you plan to attend the annual meeting, we ask that you complete and return your proxy card in advance of the annual meeting in case your plans change.
If I hold shares in the name of a broker or other nominee, who votes my shares?
If you are a beneficial owner and a broker or other nominee is the record holder, then you received access to these proxy materials from the record holder. The record holder should have given you instructions for directing how the record holder should vote your shares. It will then be the record holder’s responsibility to vote your shares for you in the manner you direct.
Under applicable stock exchange rules, brokers and other nominees may generally vote on routine matters, such as the ratification of an independent registered public accounting firm, without your direction,
but cannot vote on non-routine matters unless they have received voting instructions from the person for whom they are holding shares. The election of directors, the charter amendment proposal and the say-on-pay proposal are considered non-routine matters. If your broker or other nominee does not receive instructions from you on how to vote your shares on these matters, your broker or other nominee will return the proxy card to us indicating that he or she does not have authority to vote. This is generally referred to as a “broker non-vote.”
We therefore encourage you to provide directions to your broker as to how you want your shares voted on all matters to be brought before the meeting. You should do this by carefully following the instructions your broker gives you concerning its procedures.
What does it mean if I receive more than one notice or proxy card?
It means that you have multiple holdings reflected in our stock transfer records and/or in accounts with brokers or other nominees. To vote all of your shares by proxy, please follow the separate voting instructions that you received for your shares of common stock held in each of your different accounts.
What if I change my mind after I returnsubmit my proxy card?voting instructions?
If you hold your shares in your own name, you may revoke your proxy and change your vote at any time before the polls close at the meeting. You may do this by:
• timely submitting another proxy via the telephone or Internet;
• signing another proxy card with a later date and returning that proxy card to us;
• sending notice to us that you are revoking your proxy; or
• voting in person at the meeting.meeting through the webcast interface.
If you hold your shares in the name of your broker or other nominee and desire to change your instructions on how to vote your shares, you will need to contact that party.
How many shares must be represented in order to hold the annual meeting?
A majority of the shares that are outstanding and entitled to vote as of the record date must be present in personat the meeting or by proxy at the meeting in order to hold the meeting and conduct business.
Shares are counted as present at the meeting if the shareholder either:
• is present and votes in person at the meeting; or
• has properly submitted a signed proxy card or other form of proxy (through the telephone or Internet). |
On February 24, 2020,22, 2021, the record date, there were 25,701,115were 25,761,099 shares of common stock issued and outstanding. Therefore, at least 12,850,558 12,880,550shares need to be present at the annual meeting for a quorum to be present.
What happens if a director nominee is unable to stand for re-election?
The Board may, by resolution, provide for a lesser number of directors or designate a substitute nominee. In the latter case, shares represented by proxies may be voted for a substitute nominee. Proxies cannot be voted for more than 1312 nominees. As of the date of this proxy statement, we have no reason to believe any nominee will be unable to stand for re-election.
What options do I have in voting on each of the proposals?
You may vote “FOR,” “AGAINST,”“FOR” or “ABSTAIN”“WITHHOLD” with respect to each director nominee, and “FOR,” “AGAINST” or “ABSTAIN” on each of the proposals described in this proxy statement, and on any other proposal properly brought before the meeting.
How many votes may I cast?
You are entitled to cast one vote for each share of stock you owned on the record date.
How many votes are needed for each proposal?
Each director nominee will be elected and eachby a plurality of the votes cast by the shares entitled to vote at the meeting. Each of the say-on-pay proposal and the auditor ratification proposal will be approved, by a majority of the votes cast with respect to such nominee or such proposal. The charter amendment proposal will be approved by a majority of the total number of shares outstanding as of the record date.
Please note that the election of directors, the charter amendment proposal and the say-on-pay proposal are each considered non-routine matters.“non-routine matters” under applicable law and stock exchange rules. Consequently, if your shares are held by a broker or other nominee, it cannot vote your shares on these matters unless it has received voting instructions from you. In addition, please note that because the say-on-pay proposal is an advisory vote, it will not be binding upon the Board or the Compensation Committee.
Abstentions, withheld votes and broker non-votes, if any, will not be counted as votes cast, but will count for purposes of determining whether or not a quorum is present. Accordingly, so long as a quorum is present, abstentions(i) withheld votes and broker non-votes will have no effect on the election of any director nominee, orand (ii) abstentions and broker non-votes will have no effect on the approval of the say-on-pay proposal or auditor ratification proposal. However, abstentions and broker non-votes, if any, will have the effect of a vote against the charter amendment proposal.
Where do I find the voting results of the meeting?
If available, we will announce voting results at the meeting. The voting results will also be disclosed on a Form 8-K that we will file with the SEC within four business days after the meeting.
Who bears the cost of soliciting proxies?
We will bear the cost of soliciting proxies. In addition to solicitations by mail, officers, directors or employees of Lakeland Financial may solicit proxies in person or by telephone. These persons will not receive any special or additional compensation for soliciting proxies. We may reimburse brokerage houses and other nominees for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to shareholders.
General
The Board has adopted guidelines on significant corporate governance matters that, together with our Code of Conduct and other policies, create our corporate governance standards. You may view the Corporate Governance Guidelines and our committee charters and other policies in the Investor Relations section of our website at www.lakecitybank.com.
Generally, the Board oversees our business and monitors the performance of our management. In accordance with our corporate governance procedures, the Board does not involve itself in the day-to-day operations of Lakeland Financial, which is monitored by our executive officers and management. Our directors fulfill their duties and responsibilities by attending regular meetings of the Board, which convenes at least
six times a year, and through committee membership, which is discussed below. Our directors also discuss business and other matters with Mr. Findlay, our President and Chief Executive Officer, Ms. O’Neill, our Chief Financial Officer, other key executives and our principal external advisers (legal counsel, auditors and other consultants). All members of our Board also serve as members of the Board of Directors of Lake City Bank, our wholly owned bank subsidiary.
With the exception of Mr. Findlay, who is an executive officer, our Board has determined that all of our current directors are “independent,” as defined by the listing rules of the Nasdaq Stock Market, or Nasdaq, and we have determined that the independent directors do not have other relationships with us that prevent them from making objective, independent decisions. The Board has established an Audit Committee, a Nominating and Corporate Governance Committee, and a Compensation Committee, among other committees.
Our Board held nineseven meetings during 2019.2020. All of the incumbent directors attended at least 75% of the Board meetings and meetings of committees of which they were members. While we do not have a specific policy regarding attendance at the annual shareholder meeting, all directors are encouraged and expected to attend the meeting. All of our current directors attended last year’s annual meeting.
BOARD COMMITTEES AND MEMBER COMPOSITION DURING 20192020
| Director | Independent | Audit | Compensation | Corporate Risk(4) | Nominating and Corporate Governance | Independent | Audit | Compensation | Corporate Risk(3) | Nominating and Corporate Governance |
| Blake W. Augsburger | Yes | X | Vice Chair | Yes | Vice Chair | Chair | ||||
| Robert E. Bartels, Jr. | Yes | X | X | Yes | X | Vice Chair | ||||
| Darrianne P. Christian | Yes | X | Yes | Vice Chair | ||||||
| Daniel F. Evans, Jr. | Yes | X | Chair | Yes | X | X | ||||
| David M. Findlay | No | X | No | X | ||||||
| Thomas A. Hiatt | Yes | Chair | X | Yes | X | X | ||||
Michael L. Kubacki(1) | Yes | X | Yes | X | ||||||
| Emily E. Pichon | Yes | X | Vice Chair | Yes | X | Chair | ||||
| Steven D. Ross | Yes | X | Chair | Yes | X | X | ||||
Brian J. Smith(2) | Yes | Chair | X | Yes | X | X | ||||
| Bradley J. Toothaker | Yes | X | Vice Chair | Yes | Vice Chair | Chair | ||||
| Ronald D. Truex | Yes | Vice Chair | X | Yes | Chair | X | ||||
M. Scott Welch | Yes | X | X | Yes | X | X | ||||
| Total committee meetings in 2019 | 4 | 2 | 4 | 2 | ||||||
| Total committee meetings in 2020 | 4 | 3 | 4 | 2 | ||||||
(1) Chairman of the Board
(2) Audit Committee Financial Expert
(3) Lead Independent Director
Audit Committee
Each current member of the Audit Committee is expected to serve on the committee until our annual meeting of shareholders in 2021,2022, if re-elected to the Board. The Board has determined that Mr. Smith is an audit committee financial expert on the basis of his education, his certified public accounting certificate, his professional experience in public accounting at the firm of EY (formerly known as Ernst & Young LLP) from
1986-1990 and his strong financial background managing Heritage Financial Group. Each member of the Audit Committee is considered “independent” accordingmeets the additional independence criteria applicable to theaudit committee members under applicable Nasdaq listing requirements.rules.
The Audit Committee is appointed by the Board to assist the Board in monitoring (1) the integrity of the financial statements of the Company, (2) the independent auditor’s qualifications and independence, (3) the Company’s system of internal controls, (4) the performance of the Company’s internal audit function and independent auditors, and (5) the compliance by the Company with ethics policies and legal and regulatory requirements. The functions performed by the Audit Committee include, among other things, the following:
overseeing our accounting and financial reporting;
selecting, appointing and overseeing our independent registered public accounting firm;
reviewing actions by management on recommendations of our independent registered public accounting firm and internal auditors;
meeting with management, the internal auditors and the independent registered public accounting firm to review the effectiveness of our system of internal controls and internal audit procedures; and
reviewing reports of bank regulatory agencies and monitoring management’s compliance with recommendations contained in those reports.
To promote independence of the audit function, the committee consults separately with our independent registered public accounting firm, the internal auditors and management. We have adopted a written charter for the committee, which sets forth the committee’s duties and responsibilities. The committee’s current charter is available in the Investor Relations section of our website at www.lakecitybank.com.
Compensation Committee
The Compensation Committee is appointed by the Board to (1) discharge the Board’s responsibilities relating to the compensation of the Company’s directors, its Chief Executive Officer, and its other executive officers, (2) approve and evaluate all compensation of directors, the Chief Executive Officer, and other executive officers, and (3) produce an annual report and review all other disclosures regarding executive compensation required to be included in the Company’s proxy statement and other filings with the Securities and Exchange Commission in accordance with applicable rules and regulations.
The functions performed by the Compensation Committee include, among other things, the following:
review and approve the performance goals and objectives relevant to the compensation of our Chief Executive Officer and the other executive officers;
evaluate the performance of our Chief Executive Officer and the other executive officers and set the compensation level of our Chief Executive Officer and the other executive officers based upon such evaluation, including the long-term incentive component of such compensation;
review and approve all employment agreements, severance arrangements and change in control agreements or provisions, if any, for our Chief Executive Officer and the other executive officers and determine our policy with respect to the application of Code Section 162(m);
make recommendations to the Board regarding the annual compensation of the directors, including incentive plans and equity-based compensation;
make recommendations to the Board regarding incentive compensation plans and equity-based plans and administer our equity incentive plans; and
evaluate the risks posed by the design and implementation of the compensation plans and evaluate the implementation of appropriate risk management and controls to avoid or mitigate any excessive risk.
The Compensation Committee may engage advisers to assist it in performing theirits duties only after evaluating their independence.the independence of any such advisers.
We have adopted a written charter for the committee, which sets forth the committee’s duties and responsibilities. The committee’s current charter is available in the Investor Relations section of our website at www.lakecitybank.com.
Nominating and Corporate Governance Committee
We also have a Nominating and Corporate Governance Committee. EachWith the exception of Mr. Hiatt, who is not standing for re-election, each current member is expected to serve on the committee until our annual meeting of shareholders in 2021,2022, if re-elected to the Board. EachOur Board has determined that each member of the Nominating and Corporate Governance Committee is considered “independent” according to theunder applicable Nasdaq listing requirements.rules. The primary purposes of the committee are to identify and recommend individuals to be presented to our shareholders for election or re-election to the Board and to review and monitor our policies, procedures and structure as they relate to corporate governance. We have adopted a written charter for the committee, which sets forth the committee’s duties and responsibilities. The committee’s current charter is available in the Investor Relations section of our website at www.lakecitybank.com.
Director Nominations and Qualifications
For the 20202021 annual meeting, the Nominating and Corporate Governance Committee nominated for re-election to the Board thirteentwelve of the incumbent directors whose terms are set to expire at the annual meeting. These nominations were further approved by the full Board. We did not receive any shareholder nominations for director for the 20202021 annual meeting.
The Nominating and Corporate Governance Committee evaluates all potential nominees for election, including incumbent directors, Board nominees and shareholder nominees, in the same manner. As described in our Corporate Governance Guidelines, the committee believes that, at a minimum, directors should possess certain qualities, including the highest personal and professional ethics and integrity, a sufficient educational and professional background, demonstrated leadership skills, sound judgment, a strong sense of service to the communities that we serve and an ability to meet the standards and duties set forth in our code of conduct. Additionally, all directors must be age 72 or under, which is the mandatory retirement age established by the Board. While we do not have a separate diversity policy, the committee does consider the diversity of its directors and nominees in terms of knowledge, experience, skills, expertise, and other demographics that may contribute to the Board. The committee also evaluates potential nominees to determine if they have any conflicts of interest that may interfere with their ability to serve as effective Board members and to determine whether they are “independent” in accordance with Nasdaq requirements (to ensure that at least a majority of the directors will, at all times, be independent). The committee has not, in the past, retained any third party to assist it in identifying candidates.
We value the benefits that diversity brings to the Board. A diverse board reflects a variety of perspectives and experiences, and that diversity leads to better informed decision-making. The committee ensures that women and minority candidates are included in the candidate pool from which director nominees are selected. On an ongoing basis, the committee assesses the board composition to ensure that it reflects a broad diversity of experience, professions and perspectives, including diversity in race, gender, geography and expertise. Currently, two of our twelve director nominees are women, and one of our director nominees is a person of color. The committee, with the guidance and full support of the Board, is committed to further diversification of the Board.
The committee generally identifies nominees by first evaluating the current members of the Board who are willing to continue in service. Current members of the Board with skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination. If any member of the Board does not wish to continue in service or if the committee or the Board decides not to re-nominate a member for re-election, the committee would evaluate the skills and experience of a potential nominee in light of the criteria above.
Shareholder Communication with the Board, Nomination and Proposal Procedures
General Communications with the Board. Shareholders may contact Lakeland Financial’s Board by contacting J. Rickard Donovan, Corporate Secretary, at Lakeland Financial Corporation, P.O. Box 1387, Warsaw, Indiana, 46581-1387 or (574) 267-6144. Mr. Donovan will generally not forward communications to the Board that are primarily commercial in nature or related to an improper or irrelevant topic.
Nominations of Directors. In accordance with our Amended and Restated Articles of Incorporation, a shareholder may nominate a director for election to the Board at an annual meeting of shareholders by delivering written notice of the nomination to the Company’s chairman of the Board. To be timely, the notice must be delivered or mailed not less than 150 days nor more than 180 days prior to the date of the annual meeting. The shareholder’s notice of intention to nominate a director must include the name and address of the proposed nominee, the principal occupation of the proposed
nominee, the total number of shares of capital stock of Lakeland Financial that will be voted for each proposed nominee, the name and address of the shareholder making the nomination and the number of shares of capital stock of Lakeland Financial owned by the notifying shareholder. We may request additional information after receiving the notification.
Other Shareholder Proposals. For all other shareholder proposals to be considered for inclusion in our proxy statement and form of proxy relating to our annual meeting of shareholders to be held in 2021,2022, shareholder proposals must be received by J. Rickard Donovan, our Corporate Secretary, at the above address, no later than November 5, 2020,4, 2021, and must otherwise comply with the rules and regulations set forth by the SEC.
Board Leadership Structure
The positions of Chairman of the Board and Chief Executive Officer of Lakeland Financial had historically been combined until April of 2014 when Mr. Kubacki, who had previously held both positions, stepped down as Chief Executive Officer. At that time, Mr. Findlay was appointed President and Chief Executive Officer of Lakeland Financial Corporation. Mr. Kubacki has continued to serve as Chairman of the Board. Consistent with Nasdaq listing requirements, the independent directors have regularly had the opportunity to meet without Mr. Kubacki and/or Mr. Findlay in attendance. In 2019,2020, there were two such executive sessions.
Code of Conduct
We have a code of conduct in place that applies to all of our directors and employees. The code sets forth the standard of ethics that we expect all of our directors and employees to follow, including our President and Chief Executive Officer and our Chief Financial Officer. The code of conduct is posted in the Investor Relations section of our website at www.lakecitybank.com. We intend to satisfy the disclosure requirements under Item 10 of Form 8-K regarding any amendment to or waiver of the code with respect to our President and Chief Executive Officer and Chief Financial Officer, and persons performing similar functions, by posting such information on our website.
Board’s Role in Risk Oversight
Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including general economic risks, credit risks, regulatory risks, audit risks, reputational risks, cybersecurity risks and other risks, such as the impact of competition or the risk that our compensation plan may have unintentional effects on employee decision-making. Management is
responsible for the day-to-day management of risks the Company faces, while the Board, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the Board has the responsibility to satisfy itselffor ensuring that the risk management processes designed and implemented by management are adequate and functioning as designed.
While the full Board is charged with ultimate oversight responsibility for risk management, various committees of the Board and members of management also have responsibilities with respect to our risk oversight. In particular, the Audit Committee plays a large role in monitoring and assessing our financial, legal, and operational risks, and receives regular reports from the management team’s senior risk officer regarding comprehensive organizational risk as well as particular areas of concern. The Board’s Compensation Committee monitors and assesses the various risks associated with
compensation policies and oversees incentive plans to ensure a reasonable and manageable level of risk-taking consistent with our overall strategy. In 2013, Lake City Bank established a Corporate Risk Committee of its Board to oversee the risk management practices of Lake City Bank, including management’s ability to assess and manage the Company’s credit, market, interest rate, liquidity, legal and compliance, reputational, technology, operational trust and fiduciary wealth advisory risks. In addition, the Corporate Risk Committee provides a forum for open and regular communication between senior management and the Board in order to effectively manage risks. The Corporate Risk Committee meets quarterly.
In addition, the Company has designated Ms. Kristin L. Pruitt, Executive Vice President, Chief Administrative Officer, as its senior risk officer. Ms. Pruitt generally oversees management’s role in its risk management practices, and she is invited to and generally attends all Board and committee meetings. Additionally, Michael E. Gavin, Executive Vice President and Chief Credit Officer, is directly responsible for overseeing credit risk.
We believe that establishing the right “tone at the top” and providing for full and open communication between management and the Board is essential for effective risk management and oversight. Our executive management meets regularly with our other senior officers to discuss strategy and risks facing the Company. Senior officers attend many of the Board meetings, or, if not in attendance, are available to address any questions or concerns raised by the Board on risk management-related issues and any other matters. The Board has an annual offsite meeting with senior management to discuss strategies, key challenges, and risks and opportunities for the Company. Additionally, each of our Board-level committees provides regular reports to the full Board and apprises the Board of our comprehensive risk profile and any areas of concern.
We are dedicated to bringing value to all our stakeholders—our employees, our customers, our communities and our shareholders, and we believe that Environmental, Social and Governance ("ESG") considerations are important to delivering that value. We have programs and initiatives in place that direct our ESG efforts, including community development initiatives that provide services and support to the families and small-medium size businesses in our communities and a diversity and inclusion initiative.
For information regarding our ESG efforts, please go to "Corporate Social Responsibility" on our website at www.lakecitybank.com/esginfo.
The contents of our website are not filed or furnished with this proxy statement nor are they incorporated by reference into this or any of our other filings with the SEC. The information contained in this section of this proxy statement shall not be considered "filed" with the SEC, and such information shall not be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates this section of this proxy statement by reference in such filing.
During 2019,2020, directors who were not employees of Lakeland Financial or Lake City Bank were paid the following retainer fees:
| Component | Amount | Amount | ||||||
| Annual Director Retainer | $ | 35,000 | $ | 35,000 | ||||
| Annual Audit Committee Chairman Additional Retainer | 15,000 | 15,000 | ||||||
| Annual Lead Independent Director Additional Retainer | 10,000 | |||||||
| Annual Governance Committee Chairman Additional Retainer | 10,000 | 10,000 | ||||||
| Annual Compensation Committee Chairman Additional Retainer | 10,000 | 10,000 | ||||||
| Annual Corporate Risk Committee Chairman Additional Retainer | 10,000 | 10,000 | ||||||
| Annual Chairman of the Board Additional Retainer | 40,000 | 40,000 | ||||||
| Annual Stock Grant (number of shares) | 1,300 | 1,300 | ||||||
Each director of Lakeland Financial is also a director of Lake City Bank and is not compensated separately for service on Lake City Bank’s Board.
Mr. Findlay, who is a director and also serves as our President and Chief Executive Officer, is not paid any fees for his service as a director. The directors’ fees are reviewed annually by the Compensation Committee.
Under the 2017 Equity Incentive Plan, directors may be awarded non-qualified stock options or stock grants at the discretion of the Compensation Committee, subject to an annual limitation for each director of 10,000 shares subject to stock options or stock appreciation rights and 10,000 shares subject to stock awards. In 2020,2021, each non-employee director will receive 1,300 shares of Lakeland Financial stock upon approval by the Board.Board in January and July.
Since 2011, the Board has maintained a stock ownership policy that currently requires directors hold a minimum of 5,000 shares of Lakeland Financial within five years from either the adoption of
the stock ownership policy or first becoming a director. At the time the ownership requirement was set at its current level, 5,000 shares represented approximately the same value as five times the annual retainer for directors. This requirement will be reviewed each year by the Nominating and Corporate Governance Committee and may be adjusted to maintain a similar ratio. As of December 31, 2019,2020, all of our non-employee directors met the requirements of our stock ownership policy.
The following table provides information on 20192020 compensation for non-employee directors who served during 2019.2020.
| Fees Earned or | Stock | Fees Earned or | Stock | |||||||||||||||||||||
| Name | Paid in Cash(1) | Awards(2)(3) | Total | Paid in Cash(1) | Awards(2)(3) | Total | ||||||||||||||||||
| (a) | (b) | (c) | (d) | (b) | (c) | (d) | ||||||||||||||||||
| Blake W. Augsburger | $ | 35,000 | $ | 57,636 | $ | 92,636 | $ | 45,000 | $ | 60,216 | $ | 105,216 | ||||||||||||
| Robert E. Bartels, Jr. | 35,000 | 57,636 | 92,636 | 35,000 | 60,216 | 95,216 | ||||||||||||||||||
| Darrianne P. Christian | 35,000 | 57,636 | 92,636 | 35,000 | 60,216 | 95,216 | ||||||||||||||||||
| Daniel F. Evans, Jr. | 45,000 | 57,636 | 102,636 | 35,000 | 60,216 | 95,216 | ||||||||||||||||||
| Thomas A. Hiatt | 45,000 | 57,636 | 102,636 | 35,000 | 60,216 | 95,216 | ||||||||||||||||||
| Michael L. Kubacki | 75,000 | 57,636 | 132,636 | 75,000 | 60,216 | 135,216 | ||||||||||||||||||
| Emily E. Pichon | 35,000 | 57,636 | 92,636 | 45,000 | 60,216 | 105,216 | ||||||||||||||||||
| Steven D. Ross | 45,000 | 57,636 | 102,636 | 35,000 | 60,216 | 95,216 | ||||||||||||||||||
| Brian J. Smith | 50,000 | 57,636 | 107,636 | 35,000 | 60,216 | 95,216 | ||||||||||||||||||
| Bradley J. Toothaker | 35,000 | 57,636 | 92,636 | 45,000 | 60,216 | 105,216 | ||||||||||||||||||
| Ronald D. Truex | 35,000 | 57,636 | 92,636 | 50,000 | 60,216 | 110,216 | ||||||||||||||||||
| M. Scott Welch | 45,000 | 57,636 | 102,636 | 35,000 | 60,216 | 95,216 | ||||||||||||||||||
| (1) | We maintain the Lakeland Financial Corporation Directors Fee Deferral Plan under which non-employee directors are permitted to defer receipt of their directors’ fees and earn a rate of return based upon the performance of our stock. The amounts shown in this column include amounts that may have been deferred by the directors. We may, but are not required to, fund the deferred fees into a trust which may hold our stock. The plan is unqualified and the directors have no interest in the trust. The deferred fees and any earnings thereon are unsecured obligations of Lakeland Financial. No director received preferential or above-market earnings on deferred compensation. Any shares held in the trust are treated as treasury shares and may not be voted on any matter presented to shareholders. The number of shares attributable to each director under the plan is set forth in the footnotes to the Beneficial Ownership Table below. |
| (2) | Represents the grant date fair value for |
| (3) | As of December 31, |
The following table sets forth certain information with respect to the beneficial ownership of our common stock at February 24, 2020,22, 2021, the record date for the annual meeting, by each person known by us to be the beneficial owner of more than 5% of the outstanding common stock, by each director or nominee for the Board, by each executive officer named in the Summary Compensation Table, which can be found later in this proxy statement, and by all directors and executive officers of Lakeland Financial Corporation as a group. Beneficial ownership has been determined for this purpose in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended, under which a person is deemed to be the beneficial owner of securities if he, she or it has or shares voting power or investment power in respect of such securities or has the right to acquire beneficial ownership of securities within 60 days of March 5, 2020February 22, 2021.
| Amount and Nature of | Percent | ||||
| Name of Beneficial Owner | Beneficial Ownership(1)(2) | of Class | |||
| 5% Shareholders | |||||
BlackRock, Inc.(3) | 1,838,844 | 7.1% | |||
Victory Capital Management, Inc.(4) | 1,323,548 | 5.1% | |||
| Directors and Nominees | |||||
| Blake W. Augsburger | 29,419 | (5) | * | ||
| Robert E. Bartels, Jr. | 27,988 | (6) | * | ||
| Darrianne P. Christian | 5,853 | (7) | * | ||
| Daniel F. Evans, Jr. | 39,928 | (8) | * | ||
| David M. Findlay | 198,577 | (9) | 0.8% | ||
| Thomas A. Hiatt | 47,007 | (10) | * | ||
| Michael L. Kubacki | 182,417 | (11) | 0.7% | ||
| Emily E. Pichon | 13,432 | (12) | * | ||
| Steven D. Ross | 30,901 | * | |||
| Brian J. Smith | 67,743 | (13) | * | ||
| Bradley J. Toothaker | 32,331 | (14) | * | ||
| Ronald D. Truex | 71,205 | (15) | * | ||
| M. Scott Welch | 272,694 | (16) | 1.1% | ||
| Other Named Executive Officers | |||||
| Lisa M. O’Neill | 25,846 | (17) | * | ||
| Eric H. Ottinger | 29,261 | * | |||
| Kristin L. Pruitt | 18,144 | * | |||
| Michael E. Gavin | 15,990 | * | |||
| All directors and executive officers as a group | 1,129,793 | (18) | 4.4% | ||
| (23 persons) | |||||
| Amount and Nature of | Percent | ||||
| Name of Beneficial Owner | Beneficial Ownership(1)(2) | of Class | |||
| 5% Shareholders | |||||
BlackRock, Inc.(3) | 1,904,896 | 7.4% | |||
Franklin Mutual Advisers, LLC(4) | 1,823,330 | 7.1% | |||
| Directors and Nominees | |||||
| Blake W. Augsburger | 26,926 | (5) | * | ||
| Robert E. Bartels, Jr. | 23,613 | * | |||
| Darrianne P. Christian | 3,840 | (6) | * | ||
| Daniel F. Evans, Jr. | 35,124 | (7) | * | ||
| David M. Findlay | 190,911 | (8) | * | ||
| Thomas A. Hiatt | 48,349 | (9) | * | ||
| Michael L. Kubacki | 248,186 | * | |||
| Emily E. Pichon | 12,112 | (10) | * | ||
| Steven D. Ross | 29,601 | * | |||
| Brian J. Smith | 64,734 | (11) | * | ||
| Bradley J. Toothaker | 29,841 | (12) | * | ||
| Ronald D. Truex | 68,535 | (13) | * | ||
| M. Scott Welch | 266,456 | (14) | 1.0% | ||
| Other Named Executive Officers | |||||
| Lisa M. O’Neill | 28,818 | (15) | * | ||
| Eric H. Ottinger | 31,716 | * | |||
| Kristin L. Pruitt | 19,242 | * | |||
| Kevin L. Deardorff | 49,635 | * | |||
| All directors and executive officers as a group | 1,219,678 | (16) | 4.8% | ||
| (24 persons) | |||||
*Indicates that the individual or entity owns less than half of one percent of Lakeland Financial’s common stock.
| (1) | The total number of shares of common stock issued and outstanding on February |
| (2) | The information contained in this column is based upon information furnished to us by the persons named above and as shown on our transfer records. The nature of beneficial ownership for shares shown in this column, unless otherwise noted, represents sole voting and investment power. |
| (3) | Includes entities related to reporting entity. Based upon a schedule 13G filed with the SEC on |
| (4) | Includes entities related to reporting entity. Based upon a schedule 13G filed with the SEC on February |
| (5) | Includes |
| (6) | Includes |
| (7) | Includes 1,603 shares credited to Ms. Christian’s account as of February 5, |
Includes |
Includes 3,750 shares held by Mr. Findlay’s individual retirement account; 3,000 shares held by Mr. Findlay’s wife, as to which shares he has no voting or investment power; and |
Includes |
Includes |
| (12) | Includes 819 shares credited to Ms. Pichon’s account as of February 5, |
Includes 26,668 shares held in a trust in which Mr. Smith serves as trustee and |
Includes 3,000 shares held jointly, as to which shares Mr. Toothaker shares voting and investment power and |
Includes 7,774 shares held by Mr. Truex’s wife, as to which shares he has no voting or investment power; 30,000 shares held by CB Financial, LLC, as to which shares he shares voting and investment power; and |
Includes 1,257 shares held by Mr. Welch’s individual retirement account; 2,895 shares held by Mr. Welch’s wife’s individual retirement account, as to which shares he shares voting and investment power; |
Includes 6,750 shares held by Ms. O’Neill’s individual retirement account and |
This includes shares which have been allocated to executive officers under the 401(k) plan through December 31, |
During 2019,2020, Lake City Bank had extended, and expects to continue to extend, loans to its directors and officers and to their related interests. Such loans were, and will continue to be, made only upon the same terms, conditions, interest rates, and collateral requirements as those prevailing at the same time for comparable loans extended from time to time to other, unrelated borrowers. Loans to directors and officers do not and will not involve greater risks of collectability, or present other unfavorable features, than loans to other borrowers. All such loans are approved by the Lake City Bank Board of Directors in accordance with applicable bank regulatory requirements.
Lake City Bank entered into a Lease Agreement with Michigan Street, LLC for retail branch and office space in South Bend, Indiana, in June 2011. In October 2011, Bradley Toothaker, a one-third owner of Michigan Street, LLC, joined the Boards of Directors of Lakeland Financial Corporation and Lake City Bank. The initial term of the lease is for a period of 20 years, with two consecutive five-year renewal terms. Pursuant to the lease, monthly rent for 4,450 square feet of leased space was $6,304.16 for the first five years, and will increase by 7.5% every five years. In addition, Lake City Bank is required to pay its proportionate share of common area maintenance fees for the building, presently expected to be approximately $3,184 per month. Mr. Toothaker had not yet become a director at
the time of the lease signing and the Lease Agreement was negotiated by Lake City Bank’s management on an arms-length basis. Effective January 1, 2012, the parties amended the terms of the lease to reflect additional square footage to be used by Lake City Bank in the building. Based on the addition of approximately 550 square feet, the monthly rent for the leased space increased to $7,001.87. This amendment was ratified by Lake City Bank’s Board in February 2012. Management and the Board believe that the terms of the lease are reasonable and consistent with the customary terms of the local market. As part of its annual review of director independence, the Board considered and re-evaluated this lease arrangement when considering Mr. Toothaker’s independence and determined that it did not prevent Mr. Toothaker from being able to serve as an independent director.
Lake City Bank entered into a Lease Agreement with EOZ Business, LLC for retail branch and office space in Elkhart, Indiana, in September 2020. EOZ Business, LLC is a related interest of Lakeland Financial Corporation and Lake City Bank director, Brian Smith. The initial term of the lease is for a period of 15 years, with two consecutive five-year renewal terms. The lease term is expected to commence on December 31, 2021. Pursuant to the lease, monthly rent for 4,553 square feet of leased space will be $8,157.46 for the first year, increasing annually to $10,210.10 by the fifteenth year. In addition, Lake City Bank will be required to pay its proportionate share of common area maintenance fees for the building. The Lease Agreement was negotiated by Lake City Bank’s management on an arms-length basis. Management and the Board believe that the terms of the lease are reasonable and consistent with the customary terms of the local market. As part of its annual review of director independence, the Board considered and re-evaluated this lease arrangement when considering Mr. Smith’s independence and determined that it did not prevent Mr. Smith from being able to serve as an independent director.
Additionally, pursuant to the Corporate Governance Committee Charter, the Nominating and Corporate Governance Committee evaluates and pre-approves any non-lending, material transaction between Lakeland Financial and any director or officer. The charter does not provide any thresholds as to when a proposed transaction needs to be pre-approved, but the committee evaluates those proposed transactions that may affect a director’s independence or create a perception that the transaction was not fair to Lakeland Financial or not done at arm’s length.arms-length. Generally, transactions which would not require disclosure in our proxy statement under SEC rules (without regard to the amount involved) do not require the Nominating and Corporate Governance Committee’s pre-approval. A director may not participate in any discussion or approval by the Nominating and Corporate Governance Committee of any related party transaction with respect to which he or she is a related party, but must provide to the Nominating and Corporate Governance Committee all material information reasonably requested concerning the transaction.
Section 16(a) of the Securities Exchange Act of 1934, as amended requires that our executive officers, directors and persons who own more than 10% of our common stock file reports of ownership and changes in ownership with the SEC. Based solely on our review of reports filed on EDGAR, and, if appropriate, representations made to us by any reporting person concerning whether a Form 5 was required to be filed for 2019,2020, we are aware that one filing with respect to the sale of sharestwo purchase transactions by Mr. Kevin L. Deardorff and one filing with respect to the awards of restricted stock to Mr.Brian J. Rickard DonovanSmith were made late.not timely disclosed on Form 4. Other than those two filings, we are not aware that any of our directors, executive officers or 10% shareholders failed to comply with the filing requirements of Section 16(a) during 2019.2020.
The Company’s Board is currently comprised of 13 Directors, each serving a term that will expire at this year’s Annual Meeting. Thomas A. Hiatt will not stand for re-election. Mr. Hiatt has been a valued member of the Board since 2007. We thank him for his service to the Company. The size of the Board will be reduced to 12 Directors following the Annual Meeting. Shareholders will be entitled to elect 1312 directors for a term expiring in 20212022 at the annual meeting.
We have no knowledge that any nominee will refuse or be unable to serve, but if any of the nominees is unavailable for election, the holders of the proxies reserve the right to substitute another person of their choice as a nominee when voting at the meeting.
Set forth below is information concerning the nominees for election, including the age, the year first appointed or elected as a director and the other positions held by the person at Lakeland Financial and Lake City Bank. The nominees, if elected at the annual meeting, will serve as directors for a one-year term expiring in 2021.2022. Each of the nominees is an incumbent director and has served as a director of Lakeland Financial for at least one term.
The directors will be elected by a majorityplurality voting standard. Each vote is required to be counted “FOR,” “AGAINST”“FOR” or “ABSTAIN””WITHHOLD” with respect to the director’s election. Consequently, tothe twelve director nominees receiving the most votes “FOR” election will be elected as a director, the votes cast “FOR” a nominee’s election must exceed the number of votes cast “AGAINST” such nominee’s election. Votes cast as “ABSTAIN” with respect to the election of a director will have no effect in determining whether the required affirmative majority vote has been obtained.director. We recommend that shareholders vote “FOR” each of the nominees for director.
NOMINEES
| Director Since | Positions with Lakeland Financial and Lake City Bank | |
| Current Term Expires | ||
| Blake W. Augsburger (age | 2011 | Director of Lakeland Financial and Lake City Bank |
| Robert E. Bartels, Jr. (age | 2002 | Director of Lakeland Financial and Lake City Bank |
| Darrianne P. Christian (age | 2018 | Director of Lakeland Financial and Lake City Bank |
| Daniel F. Evans, Jr. (age | 2010 | Director of Lakeland Financial and Lake City Bank |
| David M. Findlay (age | 2010 | President and Chief Executive Officer and Director of Lakeland Financial and Lake City Bank |
| Michael L. Kubacki (age | 1998 | Chairman of Lakeland Financial and Lake City Bank |
| Emily E. Pichon (age | 2002 | Director of Lakeland Financial and Lake City Bank |
| Steven D. Ross (age | 2000 | Director of Lakeland Financial and Lake City Bank |
| Brian J. Smith (age | 2011 | Director of Lakeland Financial and Lake City Bank |
| Bradley J. Toothaker (age | 2011 | Director of Lakeland Financial and Lake City Bank |
| Ronald D. Truex (age | 2010 | Director of Lakeland Financial and Lake City Bank |
| M. Scott Welch (age | 1998 | Director of Lakeland Financial and Lake City Bank |
All directors will hold office for the terms indicated, or until their earlier death, resignation, removal or disqualification, and until their respective successors are duly elected and qualified. There are no arrangements or understandings between any of the nominees, directors or executive officers and any other person pursuant to which any of our nominees, directors or executive officers have been selected for their
respective positions. No nominee, member of the Board or executive officer is related to any other nominee, member of the Board or executive officer. No nominee or director has been a director of another “public corporation” (i.e. subject to the reporting requirements of the Securities Exchange Act of 1934, as amended) or of any investment company within the past five years except for Mr. Welch.
The business experience of each of the nominees and continuing directors for the past five years, as well as their qualifications to serve on the Board, is as follows:
Mr. Augsburger is the founder and Chief Executive Officer of LEA Professional, which designs and manufactures audio amplifiers for the professional audio markets. He is the former Executive Vice President and America’s Country Manager for Harman International Industries, Incorporated, a Fortune 500 company that designs and manufactures audio and infotainment products and systems. He also served for ten years as the President of the Harman Professional Division, which is based in Northridge, California. We consider Mr. Augsburger to be a qualified candidate for service on the Board, as well as both the Nominating and Corporate Governance and Compensation Committee, due to his leadership skills and expertise developed as a former executive of a large, complex public company.
Mr. Bartels is the formera partner in Incedo LLC, a family office and real estate management company. Previously, he was President and Chief Executive Officer of Martin’s Supermarkets, Inc., a regional supermarket chain headquartered in South Bend, Indiana. We consider Mr. Bartels to be a qualified candidate for service on the Board, as well as the Audit Committee and the Nominating and Corporate Governance Committee, due to his skills and expertise acquired as the former leader of a successful business that is prominent in many of our markets. Mr. Bartels was a third-generation family business owner with approximately 37 years of supermarket and retail experience, including 21 years of executive practice.
Ms. Christian is currently involved with leading strategic initiatives for BCforward, a global information technology consulting and workforce fulfillment firm founded by Ms. Christian and her husband, Justin Christian, in 1998. Previously, Ms. Christian was a program manager and an IT consultant from 1995-2003, and was an officer with the Central Intelligence Agency from 1990-1995. In addition, Ms. Christian is a board member of Newfields (formerly the Indianapolis Museum of Art), the Central Indiana Community Foundation, IMPACT Central Indiana, and the Eskenazi Foundation. Ms. Christian also works closely with the Justin and Darrianne Christian Center for Diversity and Inclusion at DePauw University. We consider Ms. Christian to be qualified to serve on the Board due to her personal and professional engagement with several prominent nonprofits located in Indianapolis and her professional experience in the technology sector, which we believe will be valuable as we work to ensure that we remain innovative in providing technology-driven solutions to our clients.
Mr. Evans served as the Chief Executive Officer of Indiana University Health, a large, statewide health care and hospital system headquartered in Indianapolis until May 1, 2016 and is currently President Emeritus. Mr. Evans is Executive Chair of the Indiana Biosciences Research Institute, Inc. Mr. Evans is on the faculty of the IU Medical School and the IU McKinney Law School. Mr. Evans also has strong banking experience, having served as the Chairman of the Federal Home Loan Bank of Indianapolis from 1987-1990 and as the chairman of the Federal Housing Finance Board, the regulator of the Federal Home Loan Banks, from 1990-1993. We consider Mr. Evans to be qualified to serve on the Board, as well as the Nominating and Corporate Governance Committee, due to his experience managing a large organization, his experience in the banking industry and his knowledge of the Indianapolis market as we look to continue to expand our presence in Indianapolis.
Mr. Findlay presently serves as the President and Chief Executive Officer of Lakeland Financial and Lake City Bank. Mr. Findlay also served as President and Chief Financial Officer from 2010-2014 and Chief Financial Officer from 2000-2010. Prior to joining Lakeland Financial in September of 2000, Mr. Findlay served as the Chief Financial Officer of Quality Dining, Inc., then a publicly traded company with its
headquarters in South Bend, Indiana. Prior to that, he served in various capacities with The Northern Trust Company in Chicago. We consider Mr. Findlay to be qualified to serve on the Board due to his familiarity with Lakeland Financial’s operations he has acquired as its President and Chief Financial Officer, his experience in the financial services industry and his prior experience as the chief financial officer of a publicly traded company.
Mr. Kubacki presently serves as Chairman of the Board of Directors of Lakeland Financial and Lake City Bank. In April 2016, Mr. Kubacki retired from his full-time executive officer position as Executive Chairman of Lakeland Financial and Lake City Bank. If re-elected, he will remain Chairman of the Board. Mr. Kubacki also served as Chief Executive Officer of Lakeland Financial and Lake City Bank from 1998 to 2014 and as President from 1998 to 2010. Prior to joining Lakeland Financial in 1998, Mr. Kubacki served as Executive Vice President of The Northern Trust Bank of California, N.A. We consider Mr. Kubacki to be a qualified candidate for service on the Board due to his intimate familiarity with Lakeland Financial’s operations that he acquired as its Chairman and Chief Executive Officer and his skills and experience in the financial services industry.
Ms. Pichon is the Chairman of ExTech Plastics, Inc., an extruder of plastic sheet, and an officer and director of the Olive B. Cole Foundation, the M E Raker Foundation, the Questa Educational Foundation, Inc. and the Howard P. Arnold Foundation, Inc., each a private charitable foundation focused on northeast Indiana education, economic development and conservation based in Fort Wayne, Indiana. We consider Ms. Pichon to be qualified to serve on the Board, as well as the Audit Committee and the Compensation Committee, due to her experience with several prominent charitable foundations located in Fort Wayne and her education and training as an attorney.
Mr. Ross is the formerowner of Ross and Associates, a real estate management company. Previously, he was President of Heartland Coffee Company, a regional coffee and beverage service company, based in Warsaw, Indiana. Mr. Ross is also the former President of Bertsch Services, Inc., a regional food service and vending company, thatwhich was based in Warsaw, Indiana prior to its sale. We consider Mr. Ross to be a qualified candidate for service on the Board, as well as the Audit Committee, due to his skills and expertise acquired as president of a successful business in Kosciusko County and his knowledge of the business community in this region.
Mr. Smith is co-Chief Executive Officer of Heritage Financial Group, Inc., a real estate investment and management and consumer finance company, based in Elkhart, Indiana. We consider Mr. Smith to be a qualified candidate for service on the Board due to his expertise in the manufactured housing and consumer finance industries, which is a significant industry in northern Indiana, and his knowledge of, and prominence in, the Elkhart market. Additionally, Mr. Smith has a strong financial background as a certified public accountant, which adds meaningful expertise to the Audit Committee.
Mr. Toothaker is the President and Chief Executive Officer of Bradley Company, a large Midwest-based, full-service real estate company. We consider Mr. Toothaker to be a qualified candidate for service on the Board due to his extensive knowledge of the real estate sector in our region and his knowledge of the Northern Indiana market.
Mr. Truex is the Chairman of the Board of Creighton Brothers, LLC, a diversified agribusiness company focused on egg and grain production, headquartered in Warsaw, Indiana. We consider Mr. Truex to be a qualified candidate for service on the Board due to his skills and expertise in the agricultural industry and his knowledge of the agricultural communities in many of our markets.
Mr. Welch is the Chief Executive Officer of Welch Packaging Group, Inc., which is primarily engaged in producing industrial and point of purchase packaging and is headquartered in Elkhart, Indiana. In addition, Mr. Welch is a member of the board of Patrick Industries, Inc. We consider Mr. Welch to be a qualified candidate for service on the Board, as well as the Nominating and Corporate Governance Committee, due to his skills and expertise in the manufacturing industry and his past experience with growing and leading organizations.
In addition to Mr. Findlay, the following individuals served as the named executive officers of Lakeland Financial in 20192020 and are named in the compensation tables included in this proxy statement:
Lisa M. O’Neill, age 52,53, presently serves as an Executive Vice President, and Chief Financial Officer of Lakeland Financial and Lake City Bank, a position she has held since April 2014. Prior to that, Ms. O’Neill served as Chief Financial Officer of Bank First National Corporation in Manitowoc, Wisconsin, from 2007-2014. From 1999-2006, Ms. O’Neill was the Controller of Private Bancorp, Inc. Prior to 1999, Ms. O’Neill was with Arthur Andersen in its financial institutions group audit practice since 1989.
Eric H. Ottinger, age 49,50, presently serves as an Executive Vice President, Chief Commercial Banking Officer of Lakeland Financial and as head of our Commercial Banking Department,Lake City Bank, a position he has held since August 2011. He joined Lake City Bank in April 1999 as Vice President, Commercial Loan Officer. In April 2002, he was promoted to Commercial East Regional Manager. In April 2009, he was promoted to head of our Wealth Advisory Group. Prior to joining Lake City Bank, Mr. Ottinger was a commercial lending officer at another bank since 1993.
Kristin L. Pruitt, age 48,49, presently serves as an Executive Vice President, Chief Administrative Officer of Lakeland Financial and Lake City Bank, a position she has held since 2017. Until November 2019, Ms. Pruitt served also as General Counsel since 2014. She joined Lakeland Financial in 2008 as Senior Vice President and General Counsel. Before joining Lake City Bank, she served as Assistant General Counsel at 1st Source Bank in South Bend, Indiana since 2004. Prior to 2004, Ms. Pruitt was associated with Skadden, Arps, Slate, Meagher & Flom, LLP’s Washington DC office as an attorney since 1999.
Introduction
This Compensation Discussion and Analysis (“CD&A”) describes Lakeland Financial’s compensation philosophy and policies for 20192020 as applicable to the named executive officers identified above. This CD&A explains the structure and rationale associated with each material element of the executives’ compensation, and it provides important context for the more detailed disclosure tables and specific compensation amounts in the following compensation tables.
The Compensation Committee has overall responsibility for evaluating the compensation plans, policies and programs relating to the named executive officers of Lakeland Financial. The Compensation Committee relies upon Mr. Findlay’s assessment of each executive officer’s individual performance, which considers the executive’s efforts in achieving his or her individual goals each year, managing and developing employees and the enhancement of long-term relationships with customers, if applicable to his or her position. Individual goals for executive officers are established by Mr. Findlay in consultation with each executive officer. The Committeecommittee establishes Mr. Findlay’s goals and reviews his performance. Mr. Findlay is not involved in discussions and determinations pertaining to his own performance.
The Compensation Committee’s charter gives it the authority to hire outside consultants to further its objectives and responsibilities. The Compensation Committee retaineddid not retain an outside consultant to assess executive compensation in 2020. Instead, the Compensation Committee relied on the 2019 report from Pearl Meyer & Partners, a compensation consulting firm, to assesswhich assessed the effectiveness of the Company’s executive compensation programs. Pearl Meyer & Partners areis independent, reportreports directly to the committee chair, and performperforms no other work for the Company other than assisting the committee in its review of the
total compensation program. In its 2019 report, Pearl Meyer & Partners also provided input on marketplace trends
and best practices relating to competitive pay levels, as well as developments in regulatory and technical matters. The Compensation Committee also reviewed compensation survey data in 2019 from industry sources such as the American Bankers Association, Pearl Meyer & Partners and Bank Director Magazine.
Regulatory Impact on Compensation
As a publicly-tradedpublicly traded financial institution, we must contendcomply with several often overlappingmultiple layers of regulations when considering and implementing compensation-related decisions. TheseAlthough these regulations do not set specific parameters within which compensation decisions must be made, butthey do require that Lakeland Financial and the Compensation Committee to be mindful of the risks that often go hand-in-handassociated with compensation programs designed to incentivize the achievement of better than average performance. While the regulatory focus on risk assessment has been heightened over the last several years, the incorporation of general concepts of risk assessment into compensation decisions is not a recent development.
Under itsthe FDIC’s 2015 Interagency Guidelines Establishing Standards for Safety and Soundness, the Federal Deposit Insurance Corporation (the “FDIC”) has long held that excessive compensation is prohibited as an unsafe and unsound practice. In describing a framework to determineWhen determining whether compensation is considered excessive, the FDIC has indicated thatdirected financial institutions shouldto consider whether aggregate cash amounts paid, or noncash benefits provided, to employees arean employee is unreasonable or disproportionate to the services performed by an employee.the employee performs. The FDIC encouragesSafety and Soundness standards set forth a framework within which financial institutions to reviewshould evalute an employee’s compensation, with factors including compensation history, and to consider internal pay equity, and, asif appropriate, comparable compensation practices at peer institutions. This framework also requires Lakeland Financial to consider benchmarking compensation to peer groups. Finally, the FDIC provides that such an assessment must be made in light of the institution’sits overall financial condition.
In addition to the foregoing, we anticipate that currently proposed rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act intendedof 2010 (the “Dodd Frank Act”) that intend to implement further risk assessment guidelines and procedures may eventually be finalized by the financial institution regulatory agencies and the SEC. We expectIt is likely that we would be subject to those further guidelines and procedures shouldif and when they bebecome finalized and become effective. InitialDuring 2011, the regulatory agencies issued initial proposed guidance with respect to the Dodd-Frank Act risk assessment guidelines and procedures, was issued in 2011 and they revised and re-proposed this guidance in 2016. Depending on whether and when the proposed rules are finalized, the earliest they couldwould likely apply to Lakeland Financial is for performance periods beginning on or after January 1, 2021.2022. In large part, thatany guidance restatesunder the Dodd-Frank Act would likely restate and codify the frameworks presently set forth in the Safety and Soundness standards and joint agency guidance described above.the Joint Guidance.
The Compensation Committee believes that a sensible approach to balancing risk-taking and rewarding reasonable, but not necessarily easily attainable, goals has always been a component of its regular, overall assessment of the compensation plans, programs and arrangements it has established for Lakeland Financial’s named executive officers. In this regard, theofficers includes a sensible, responsible approach toward balancing risks and rewarding reasonable, but not necessarily easily attainable goals. The committee has revisited the components ofannually revisits the frameworks set forth in the Safety and Soundness standards and the joint agency guidanceJoint Guidance, as anboth are effective tool for conducting its ownparts of the committee’s overall assessment of the balance between risk and reward built into
Lakeland Financial’s compensation programs for named executive officers. In addition, the committee continues to monitor the status of the proposed guidance under the Dodd-Frank Act, and isremains prepared to incorporate into its risk assessment procedures any new guidelines and procedures as may be necessary or appropriate.
Compensation-Related Governance Policies
Share Ownership Guidelines. The guidelines, adopted in 2015, require the Chief Executive Officer to hold a minimum number of shares of Company common stock with a value equal to three times his annual base salary, and the other executive officers, including each of the named executive officers, to hold a minimum number of shares of Company common stock with a value equal to two times his or her respective annual base salary. Unvested options or restricted stock units issued under the Company’s LTI Plan are not included when considering ownership totals for this requirement. In the event that an executive officer does not hold the required number of shares, a minimum of one-half of shares issued under the LTI Plan must be retained until the guidelines are met. As of the most recent measurement date, February 24, 2020,22, 2021, all of our named executive officers were in compliance with the share ownership guidelines.
Insider Trading Policy. The Company has an insider trading policy that permits open market transactions in Company stock in the period that begins two trading days after quarterly earnings have been made public and concludes two weeks before the last day of the quarter end.
Hedging and Pledging Policy. The Company’s insider trading policy includes provisions that specifically prohibit our insiders from entering into hedging transactions involving the Company’s stock. To our knowledge, none of our officers or directors has entered into a hedging transaction involving Company stock in violation of this prohibition. The Company’s insider trading policy also prohibits an insider from pledging Company stock as collateral for a lending relationship without the prior approval of the Nominating and Corporate Governance Committee. To our knowledge, none of our officers or directors has pledged his or her Company stock in violation of this policy.
Compensation Philosophy and Objectives
The overall objectivesobjective of Lakeland Financial’s compensation programs areis to align executive officer compensation with the success of meeting long-term strategic operating and financial goals. TheOur compensation programs are designed to create meaningful incentives to manage the business successfully, with a constant focus on short-term and long-term performance under the strategic plan and key operating and financial objectives. Our philosophy is intended to align the interests of executive officers with the long-term interests of our shareholders. The executive compensation program is structured to accomplish the following objectives:
encourage a consistent and competitive return to shareholders over the long term;long-term;
maintain a corporate environment which encourages stability and a long-term focus for the primary constituencies of Lakeland Financial, including shareholders, clients, employees, communities and government regulatory agencies;
maintain a program that:
clearly motivates personnel to perform and succeed according to our current goals;
provides management with appropriate empowerment to make decisions that benefit the primary constituents;
retains key personnel critical to our long-term success;
provides for management succession planning and related considerations;
emphasizes formula-based components, such as performance-based bonus plans and long-term incentive plans, in order to focus management efforts on execution of corporate goals;
encourages increased productivity; and
responsibly manages risks related to compensation programs;
provide for subjective consideration in determining incentive and compensation components; and
ensure that management:
fulfills its oversight responsibility to its primary constituents;
conforms its business conduct to the highest legal and ethical standards;
remains free from any influences that could impair or appear to impair the objectivity and impartiality of its judgments or treatment of our constituents; and
continues to avoid any conflict between its responsibilities to Lakeland Financial and each executive officer’s personal interests.
Consideration of 20192020 Say-on-Pay
At the Company’s 20192020 annual meeting of shareholders, more than 96%97% of the votes cast were in favor of the non-binding advisory proposal on the compensation of certain executive officers. The Company, the Board and the Compensation Committee pay careful attention to communications received from shareholders regarding executive compensation, including the non-binding advisory vote. The Company carefully considered the result of the 20192020 advisory vote on executive compensation but not for specific compensation decisions. Based on this consideration and the other factors described in this Compensation Discussion and Analysis, the committee did not materially alter the policies or structure for the named executive officers’ compensation for 20192020 or 2020.2021.
Compensation Factors
General. The Compensation Committee’s decisions regarding each named executive officer are based, in part, on the committee’s subjective judgment, and also take into account qualitative and quantitative factors, as set forth in the discussion below. In reviewing an executive officer’s compensation, the committee considers and evaluates all components of the officer’s total compensation package.
Corporate Performance. In establishing executive compensation, the Compensation Committee measures Lakeland Financial’s performance compared to management’s and the Board’s goals and objectives, and also compares our performance to that of our peer group of financial institutions. The committee believes that using Lakeland Financial’s performance as a factor when determining an executive officer’s
compensation is effective in aligning the executive’s interests with those of our shareholders. Therefore, the committee focuses on performance by evaluating key financial performance criteria, such as return on beginning equity, return on average assets, revenue growth, diluted earnings per share growth, capital adequacy, the efficiency ratio and asset quality. As part of the evaluation and
review of these criteria, the committee takes into account various subjective issues, such as general economic conditions, including the interest rate environment and its impact on performance, and how such issues may affect Lakeland Financial’s performance.
Our compensation decisions for 20192020 and for 20202021 factored in Lakeland Financial’s performance under key financial criteria set forth above. The committee believes that Lakeland Financial’s financial performance in 20192020 was very strong.strong, particularly in light of the global pandemic. When compared to its peer group, as discussed below, the Compensation Committee concluded that Lakeland Financial’s performance was good and, therefore, the committee weighed heavily Lakeland Financial’s relative performance when compared to its peers. Additionally, the Compensation Committee determined that the named executive officers performed well in satisfying their individual goals for 2019.2020.
Other Factors. Other factors of corporate performance that may affect an executive’s compensation include succession planning consideration, realization of economies of scale through cost-saving measures, Lakeland Financial’s market share reputation in the communities which it serves, level of employee turnovers,turnover, and other less subjective performance considerations. In addition, because the Compensation Committee believes strongly that our executives should be involved in the communities that we serve, the committee takes into consideration indirect and intangible business factors such as community involvement and leadership when reviewing executive compensation.
Comparison to Peer Group. In establishing the compensation of the named executive officers, the Compensation Committee utilizes market data regarding the compensation practices of other financial institutions of a similar asset size and complexity. Such institutions include, but are not limited to, the members of the peer group prepared by Pearl Meyer & Partners. For the 2019 compensation survey, the peer group generally included financial institutions with total assets of $3.5 billion to $12.6 billion, with a focus on institutions located in the central region of the United States. In some cases, however, the committee will consider data from additional financial institutions when warranted by relevant similarities, such as business-line focus and long-term operating and financial stability. For example, institutions with a similar focus on complex commercial lending may be considered by the committee even if they fall outside of the general asset size of our other peers. The committee believes this comprehensive practice is useful in creating an overall compensation program that staysis competitive in the marketplace and attracts and retains qualified, talented executives. While the committee believes that it is prudent to consider such comparative information in determining compensation practices, it does not set strict parameters for using this data. Rather, the committee uses comparative data to ensure that executive compensation is not inconsistent with appropriately defined peer organizations. Generally, the committee believes that the current executive officers of the Company have established a sound track record of long-term performance that warrants compensation at or around the median level of compensation among similarly situated financial institutions.
For purposes of peer analysis in assessing performance, Lakeland Financial generally considers a peer group that includes commercial banks of similar asset size, financial performance and organizational structure, as well as those that are key competitors for executive talent. Given the ever-changing landscape within the banking industry, the group of banks appropriate for comparative analysis is continually evolving. In connection with its 2019 analysis of the Company’s executive compensation programs, Pearl Meyer & Partners compiled a market reference group of 18 other publicly-traded bank holding companies headquartered in the central United States, with median assets of $6.1 billion and stable-to-strong performance history. Although the peer group is slightly smaller than in previous years, the Compensation Committee believes it is appropriate for comparative analysis. The committee determined that use of the peer group for 2020 compensation decisions was appropriate because the competitive market was generally unchanged. The companies included in this peer group are listed on the following page.
| Park National Corporation – Newark, Ohio | First Commonwealth Financial Corp. – Indiana, Pennsylvania |
| Heartland Financial – Dubuque, Iowa | 1st Source Corporation – South Bend, Indiana |
| Community Trust Bancorp – Pikeville, Kentucky | First Busey – Champaign, Illinois |
| First Merchants Corporation – Muncie, Indiana | Peoples Bancorp – Marietta, Ohio |
| Enterprise Financial Services – St. Louis, Missouri | Republic Bancorp – Louisville, Kentucky |
| Midland States Bancorp – Effingham, Illinois | Stock Yards Bancorp – Louisville, Kentucky |
| Tristate Capital Holdings, Inc – Pittsburgh, Pennsylvania | German American – Jasper, Indiana |
| Horizon Bancorp – Michigan City, Indiana | MidWestOne Financial – Iowa City, Iowa |
| QCR Holdings, Inc – Moline, Illinois | Mercantile Bank Corporation – Grand Rapids, Michigan |
In addition, the Compensation Committee reviewed compensation survey data that is readily available to Lakeland Financial from industry sources such as Bank Director Magazine and the American Bankers Association.
Individual Performance. When evaluating the individual performance of the non-CEO named executive officers, other than the CEO, the Compensation Committee takes into account Mr. Findlay’s assessment of individual performance, which assessment considers the executive’s efforts in achieving his or her individual goals each year, managing and developing employees and the enhancement of long-term relationships with customers, if applicable to the officer’s position. The measure of an executive officer’s individual performance and individual contribution to the overall Company performance depends, to a degree, on what steps are taken to increase revenues and implement cost-saving strategies and the outcome of such strategies. Each executive officer has different goals established that are intended to focus that executive’s contributions to the strategic goals of the Company. Individual goals for executive officers are developed by Mr. Findlay in consultation with each executive officer and recommended to the committee by Mr. Findlay for approval. The committee establishes Mr. Findlay’s goals after reviewing the Company’s annual strategic plan, annual budget plan and the goals of the other executive officers. Mr. Findlay is not present for the discussion or determination of his own compensation.
No Adjustments to Payouts for 2020 Performance. The Compensation Committee determined that it was in the best interest of the shareholders to allow the established performance thresholds and targets to stand in determining payouts under the EIB and LTI Plan for 2020. Although factors beyond the control of the management team resulted in lower-than-budgeted payouts under these plans, the Compensation Committee did not adjust performance criteria or make any adjustments to payouts based on the exceptional circumstances in 2020. The Compensation Committee continues to believe that the plans are well designed to fairly compensate employees and create appropriate alignment with shareholders. The Compensation Committee will engage Pearl Meyer & Partners to survey the executive compensation plans against peer banks and to assess overall executive compensation in 2021.
This section describes the decisions made by the Compensation Committee with respect to the compensation for the named executive officers for 20192020 and 2020.2021.
Executive Summary. In reviewing an executive officer’s compensation, the Compensation Committee considers and evaluates all components of the officer’s total compensation package through the use of tally sheets. The use of tally sheets allows the committee to assess the executive’s aggregate compensation, including cash payments and non-cash incentives and benefits, in one concise document. The chart on the next page summarizes the major elements of executive officer compensation.
| Element | Key Characteristics | Why We Pay this Element | How We Determine the Amount | |
| Base Salary | Fixed compensation component payable in cash. Reviewed annually and adjusted when appropriate. | Provide a base level of competitive cash compensation to attract and retain executive talent. | Experience, industry knowledge, peer data, company performance and individual performance. | Base salary increases ranged from |
| Annual Bonus | Variable compensation component payable in cash. Target bonuses are established as a percentage of annual salary, and payment is capped at 150% of target. | Motivate and reward executives for performance on key operational, financial and individual objectives met during the course of the year. | Market practices with payout based on level of achievement of company and individual performance goals. | Annual bonus paid out at |
| Long-Term Incentives | Variable compensation component payable in performance-based restricted stock units. Payments are capped at 150% of target. | Motivate executives to collectively produce outstanding results, encourage superior performance, increase productivity and aid in attracting and retaining key employees. | Market practices with payouts based on company performance. | |
Other Compensation and Perquisites | Compensation component to provide basic competitive benefits. | Provide a base level of competitive compensation to attract and retain executive talent. | Periodic assessment of competitive offerings. | No substantive change from prior years. |
Our compensation decisions for 20192020 and for 20202021 factored in Lakeland Financial’s performance under key financial criteria, including return on beginning equity, return on average assets, revenue growth, diluted earnings per share growth, capital adequacy, efficiency ratio and asset quality. The committee believes that Lakeland Financial’s financial performance in 20192020 was very strong.strong, particularly in light of the global pandemic that challenged bank personnel and clients in unforeseen ways. When compared to its peer group, the Compensation Committee believes Lakeland Financial’s performance was good and, therefore, the committee weighed heavily Lakeland Financial’s relative performance when compared to its peers. Additionally, the Compensation Committee determined that the named executive officers performed well in satisfying their individual goals for 2019.2020.
The following is a brief summary of additional compensation decisions of the Compensation Committee for 20192020 and 2020:2021:
bonus payments to named executive officers for 20192020 were lower than bonuses for 20182019 due to performance of Lakeland Financial in 20192020 against its target;target, as discussed above;
although the 20202021 LTI Plan target level grants were generally unchanged, for Ms. PruittO’Neill the committee will slightly increase her grants beginning in 20202021 to align with a percentage of her base salary consistent with the other executive officers and to reflect increased responsibilities;officers; and
the amount of total compensation paid to Mr. Findlay was slightly lower in 20192020 than 20182019 due to the grant date fair value oflower payouts under the LTI Plan shares granted in 2019, although the target number of shares remained identical.bonus program.
Base Salary. The salaries for 2019,2020, determined by the Compensation Committee at the end of 2018,2019, are set forth below in the 20192020 Summary Compensation Table. In determining these salary levels, we considered the following factors, with no specific weighting applied to any single factor:
the compensation philosophy and guiding principles described above;
the performance of Lakeland Financial under key financial objectives;
the base salary paid to the officers in comparable positions at companies in the peer groups, generally using the median of total compensation as our point of reference if the officer’s overall performance and experience warrants such consideration;
the overall professional experience and background and the industry knowledge of the named executive officers and the quality and effectiveness of their leadership at Lakeland Financial;
all other components of executive compensation, including bonus, stock awards, retirement and death benefits, as well as other benefits and perquisites;
the performance of Lakeland Financial’s stock price, although it is not a key factor in considering compensation as the committee believes that the performance of the stock price is subject to factors outside the control of executive management; and
internal pay equity among Lakeland Financial executives.
At the end of 2019,2020, the Compensation Committee determined the base salaries of the named executive officers for 2020.2021. The committee approved raises for all of the named executive officers for 20202021 based on the factors described above. The base salaries for 20192020 and 20202021 are set forth below.
| 2020 Base | 2019 Base | Percent | |||||||||||
| Name | Position | Salary | Salary | Change | |||||||||
| David M. Findlay | President and Chief Executive Officer | $ | 615,000 | $ | 595,500 | 3.3 | % | ||||||
| Lisa M. O’Neill | Executive Vice President and Chief Financial Officer | 268,000 | 248,000 | 8.1 | % | ||||||||
| Eric H. Ottinger | Executive Vice President - Commercial Banking | 318,000 | 312,000 | 1.9 | % | ||||||||
| Kristin L. Pruitt | Executive Vice President, Chief Administrative Officer | 304,000 | 280,000 | 8.6 | % | ||||||||
| Kevin L. Deardorff | Executive Vice President - Retail Banking | 253,000 | 253,000 | 0.0 | % | ||||||||
| 2021 Base | 2020 Base | Percent | |||||||||||
| Name | Position | Salary | Salary | Change | |||||||||
| David M. Findlay | President and Chief Executive Officer | $ | 640,000 | $ | 615,000 | 4.1 | % | ||||||
| Lisa M. O’Neill | Executive Vice President, Chief Financial Officer | 280,000 | 268,000 | 4.5 | % | ||||||||
| Eric H. Ottinger | Executive Vice President, Chief Commercial Banking Officer | 329,000 | 318,000 | 3.5 | % | ||||||||
| Kristin L. Pruitt | Executive Vice President, Chief Administrative Officer | 327,000 | 304,000 | 7.6 | % | ||||||||
| Michael E. Gavin | Executive Vice President, Chief Credit Officer | 255,000 | 247,500 | 3.0 | % | ||||||||
Annual Bonus. The Compensation Committee typically determines eligibility for annual bonus payments using the parameters defined in the Company’s Executive Incentive Bonus Plan (the EIB Plan)“EIB Plan”), which is a performance-based bonus plan for selected Lake City Bank corporate officers, including the named executive officers. The committee retains the right to modify the program or withhold payment at any time. Since the EIB Plan’s inception in 2002, Lakeland Financial’s performance has warranted annual payments.
Eligible participants in the EIB Plan, including the named executive officers, may earn an annual performance-based bonus based on Lakeland Financial’s overall performance (“Company performance”) as well as the individual participant’s performance (“individual performance”). The total target bonus opportunity is a percentage of average rate of salary during the year. As set forth in the EIB Plan, 50% of the bonus earned is determined by Company performance and 50% is determined by individual performance. Generally, a participant must be employed through the date of payment to earn a bonus, but participants may earn a pro rata bonus at the actual level of performance upon the date of a qualifying retirement or if terminated in connection with a change in control. No unearned bonuses are payable in the event of a participant’s death or disability.
The payout for Company performance is based on our actual net income for that year compared to the targeted net income. We calculate this by using our net income after the 401(k) match and incentive compensation costs. The Compensation Committee approves a targeted net income amount after reviewing the previous year’s actual net income in conjunction with the Board’s and management’s expectations for that particular year. The target net income amount is generally increased each year in order to provide a proper level of incentive to the officers and, in the committee’s view, is not at a level that makes it substantially certain that the target will be obtained. The Company performance payout percentage is determined based upon achieving certain performance levels of net income as defined in the table below. The Company employs linear interpolation to determine the payout percentage in the event that actual net income falls between 70% and 90% of target, while the payout percentage is the actual percentage of target net income attained when actual net income falls atequals or aboveexceeds 90% of target, up to the maximum of 150%.
| Company | ||||||||||||
| Target | Performance | |||||||||||
| Net Income | 2019 | Payout | ||||||||||
| Performance Level | Percentage | Net Income | Percentage | |||||||||
| Maximum Performance | 150 | % | $ | 131,456,760 | 150 | % | ||||||
| Target Performance | 100 | % | 87,637,840 | 100 | % | |||||||
| Threshold Performance | 70 | % | 61,346,488 | 50 | % | |||||||
| <Threshold Performance | <70% | <61,346,488 | 0 | % | ||||||||
| Company | ||||||||||||
| Target | Performance | |||||||||||
| Net Income | 2020 | Payout | ||||||||||
| Performance Level | Percentage | Net Income | Percentage | |||||||||
| Maximum Performance | 150 | % | $ | 136,378,866 | 150 | % | ||||||
| Target Performance | 100 | % | 90,919,244 | 100 | % | |||||||
| Threshold Performance | 70 | % | 63,643,471 | 50 | % | |||||||
| <Threshold Performance | <70 | % | <63,643,471 | 0 | % | |||||||
The actual net income used for bonus calculation 20192020 was $87,047,000,$84,337,000, or 99%93% of the targeted amount, and bonuses with respect tobonus payouts for Company performance were therefore, paid out at that same level. Individual bonus paymentsperformance payouts under this planthe EIB Plan are determined further by the formulas described below, although the Compensation Committee reserves the right to modify the payouts in its sole discretion.
The payout for individual performance is determined by the participant’s achievement of individual performance goals that are established for the year. The Compensation Committee also has the discretion to reward achievements that are not the subject of any pre-established goals.
In 2019,2020, the committee determined that the named executive officers performed well in achieving their respective individual performance goals. The percent of eligible salary and individual performance payout percentages for each named executive officer are listed in the table below. However, although each of the named executive officers met performance goals in 2019, the Compensation Committee determined that deductions were nevertheless appropriate due to a situation involving one client in 2019, other than for Mr. Deardorff, whose amount of bonus was agreed to pursuant to his transitional retirement agreement.
| Individual | Individual | |||
| Percent of | Performance | Percent of | Performance | |
| Eligible | Payout | Eligible | Payout | |
| Name | Salary | Percentage | Salary | Percentage |
| David M. Findlay | 50% | 95% | 50% | 100% |
| Lisa M. O’Neill | 40% | 95% | 40% | 100% |
| Eric H. Ottinger | 40% | 80% | 40% | 100% |
| Kristin L. Pruitt | 40% | 95% | 40% | 100% |
| Kevin L. Deardorff | 40% | 100% | ||
| Michael E. Gavin | 40% | 100% | ||
The 20192020 individual goals are set forth below:
David M. Findlay
Work with the Management Committee to implement the 20192020 Strategic Plan, complete the strategic initiatives in the 20192020 Strategic Plan and achieve financial performance targets contained in the 20192020 budget.
Provide effective leadership of the Company’s Management Team.
Effectively coordinate senior management’s involvement with the Board.
Represent Lakeland Financial and Lake City Bank in the community.
Lisa M. O’Neill
Oversee bankwide data gathering and analysis initiatives.strategies.
Expand partnership with retail banking leadership.
Eric H. Ottinger
Ensure completion of 2019 Commercial Strategic Initiatives.2020 strategic initiatives.
Develop more structured regional business development plans.
Kristin L. Pruitt
Oversee Corporate and Institutional Services leadership.
Coordinate People Development initiatives.
Transition legal and regulatory matters to new General Counsel.
Michael E. Gavin
Oversee enhanced appraisal process, including hiring of new Appraisal Manager.
Continue to implement leadership development of plan to prepare the Bank for higher levels of regulatory scrutiny as the Bank’s asset size increases.SVP – Credit Administration.
For 2019,2020, our overall performance and achievement of individual goals resulted in aggregate bonus payments of approximately $2.8$3.0 million paid to 253259 employees and ranged from 3% to 47% of base salary. The bonuses paid to our named executive officers in 20202021 and 20192020 are included in the table below.below.
