UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ☒
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☐ | | Preliminary Proxy Statement |
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☒ | | Definitive Proxy Statement |
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☐ | | Definitive Additional Materials |
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☐ | | Soliciting Material Under Rule 14a-12 |
☒ Preliminary Proxy Statement
☐ Confidential, for Use of the Commission Only (as Permitted by Rule 14a-6(e)(2))
☐ Definitive Proxy Statement
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☐ Soliciting Material Under Rule 14a-12
TEXAS CAPITAL BANCSHARES, INC.
(Name of Registrant as Specified In Its Charter)
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March 9, 2017
September 10, 2020
I am pleased to present the 2016 Annual Report of Texas Capital Bancshares, Inc., the holding company for Texas Capital Bank, N.A. Earnings releases, performance information and corporate governance documents may be found in the Investors section of our website atwww.texascapitalbank.com.I would also like to invite youYou are cordially invited to attend our Annual Meeting of Stockholders, which will be held on Tuesday, April 18, 2017,October 20, 2020, at 9:00 a.m. at 2000 McKinney Avenue, 7th Floor, Dallas, Texas 75201.
We intend to hold the Annual Meeting in person. However, we are actively monitoring the coronavirus (COVID-19) outbreak; we are sensitive to the public health and travel concerns our stockholders may have and the protocols and restrictions that federal, state and local governments have imposed. If it is not possible or advisable to hold the Annual Meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication. Please monitor our annual meeting website at www.proxydocs.com/tcbi for updated information. If you are planning to attend our meeting, please check the website two weeks prior to the meeting date. As always, we encourage you to vote your shares prior to the Annual Meeting.
The attached Notice of Annual
Stockholders’ Meeting
of Stockholders describes the formal business to be transacted at the Annual Meeting. Members of our board of directors and executive officer team will be present at the meeting and will be available to answer questions regarding the Company.
The Annual Report on Form 10-K for the year ending December 31, 2019 of Texas Capital Bancshares, Inc., the holding company for Texas Capital Bank, N.A., as well as earnings releases, performance information and corporate governance documents may be found in the Investors section of our website at www.texascapitalbank.com.
Your vote is very important. Whether or not you plan to attend the Annual Meeting, we urge you to vote and submit your proxy by the Internet, telephone or mail. The board of directors and our employees thank you for your continued support.
Sincerely,
C. Keith Cargill
President and
Larry L. Helm
Executive Chairman of the Board, Chief Executive Officer
and President
TEXAS CAPITAL BANCSHARES, INC.
2000 McKinney Avenue,7th Floor
NOTICE OF ANNUAL
STOCKHOLDERS’ MEETING
OF STOCKHOLDERS
To be held on
April 18, 2017October 20, 2020
NOTICE IS HEREBY GIVEN that the annual stockholders’ meeting of stockholders (the “Annual Meeting”) of Texas Capital Bancshares, Inc. (the “Company”), a Delaware corporation, and the holding company for Texas Capital Bank, N.A., will be held on Tuesday, April 18, 2017,October 20, 2020, at 9:00 a.m.at the offices of the Company located at 2000 McKinney Avenue, 7th Floor, Dallas, Texas 75201. We intend to hold the Annual Meeting in person. However, we are actively monitoring the coronavirus (COVID-19) outbreak; we are sensitive to the public health and travel concerns our stockholders may have and the protocols and restrictions that federal, state and local governments have imposed. If it is not possible or advisable to hold the Annual Meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication. Please monitor our annual meeting website at www.proxydocs.com/tcbi for updated information. If you are planning to attend our meeting, please check the website two weeks prior to the meeting date. As always, we encourage you to vote your shares prior to the Annual Meeting.
The Annual Meeting is for the purpose of considering and voting upon the following matters:
| Proposal One: Election of twelve (12) directors for terms of one year each or until their successors are elected and qualified; |
| Proposal Two: Approval, on an advisory basis, of the 2016 compensation of the Company’s named executive officers as described in the Proxy Statement; |
| Proposal Three: Approval, on an advisory basis, of the frequency of stockholder advisory voting on executive compensation; and |
| Proposal Four: Ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2017. |
Proposal One: Election of nine (9) directors, each to serve until the next annual meeting of stockholders or until their successors are elected and qualified;
Proposal Two: Approval, on an advisory basis, of the 2019 compensation of the Company’s named executive officers as described in the Proxy Statement;
Proposal Three: Ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2020; and
Proposal Four: Ratification of the provisions of Section 2.3 of the Company's Amended and Restated Bylaws allowing the holders of 20% or more of the Company's outstanding common stock to call a special meeting of stockholders.
In addition, we will transact such other business as may properly come before the Annual Meeting or any postponements or adjournments thereof.
We are furnishing our
2016 Annual Report and proxy materials to our stockholders primarily through the Internet in accordance with rules adopted by the Securities and Exchange Commission. Stockholders have been mailed a Notice of Internet Availability of Proxy Materials on or around
March 9, 2017,September 10, 2020, which provides them with instructions on how to vote and how to access the
2016 Annual Report and proxy materials on the Internet. It also provides instructions on how to request paper copies of these materials. Stockholders who previously enrolled in a program to receive electronic versions of the
2016 Annual Report and proxy materials will receive an email notice with details on how to access those materials and how to vote.
Stockholders of record may vote:
By Internet: go to www.proxypush.com/tcbi
By phone: call866-390-5385 (toll-free) or
By mail: complete and return the enclosed proxy card in the postage prepaid envelope provided.
If your shares are held in the name of a broker, bank or other nominee, please follow the voting instructions that you receive from the broker, bank or other nominee entitled to vote your shares.
Stockholders of record at the close of business on
February 22, 2017August 28, 2020 are the only stockholders entitled to notice of and to vote at the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in person. Whether you expect to attend the Annual Meeting or not, please vote your shares. If you are a stockholder of record and attend the Annual Meeting, you may vote your shares in person even though you have previously voted your proxy.
By order of the board of directors,
C. Keith Cargill
President and
Larry L. Helm
Executive Chairman of the Board, Chief Executive Officer
March 9, 2017
and President
September 10, 2020
Important Notice Regarding the Availability of Proxy Materials for the Annual
Stockholders’Meeting of Stockholders
to be Held on
April 18, 2017:October 20, 2020:
The Proxy Statement for the 20172020 Annual Meeting of Stockholders, the Notice of the 20172020 Annual Meeting of Stockholders, the Company's Annual Report on Form 10-K for the year ended December 31, 2019, and the form of proxy and the Company’s 2016 Annual Report are available at www.proxydocs.com/tcbi.tcbi
.
TEXAS CAPITAL BANCSHARES, INC.
FOR THE ANNUAL
STOCKHOLDERS’ MEETING
OF STOCKHOLDERS
TO BE HELD ON APRIL 18, 2017OCTOBER 20, 2020 AT 9:00 A.M.
This Proxy Statement is being furnished to the stockholders of Texas Capital Bancshares, Inc. (the “Company”) on or about
March 9, 2017,September 10, 2020, in connection with the solicitation of proxies by the board of directors to be voted at the annual
stockholders’ meeting
of stockholders (the “Annual Meeting”). The Annual Meeting will be held on
April 18, 2017,October 20, 2020, at 9:00 a.m. at the offices of the Company located at 2000 McKinney Avenue, 7th Floor, Dallas, Texas 75201. The Company is the parent corporation of Texas Capital Bank, N.A. (“Texas Capital Bank” or the “Bank”).
In accordance with rules and regulations adopted by the Securities and Exchange Commission (“SEC”), instead of mailing a printed copy of our proxy materials to each stockholder, we are furnishing proxy materials to our stockholders on the Internet. You will not receive a printed copy of the proxy materials, unless specifically requested. The Notice of Internet Availability of Proxy Materials will instruct you as to how you may access and review all of the important information contained in the proxy materials. The Notice of Internet Availability of Proxy Materials also instructs you as to how you may submit your proxy on the Internet.
The purpose of the Annual Meeting is to consider and vote upon the following matters:
| Proposal One: Election of twelve (12) directors for terms of one year each or until their successors are elected and qualified; |
| Proposal Two: Approval, on an advisory basis, of the 2016 compensation of the Company’s named executive officers as described in this Proxy Statement; |
| Proposal Three: Approval, on an advisory basis, of the frequency of stockholder advisory voting on executive compensation; and |
| Proposal Four: Ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2017. |
Proposal One: Election of nine (9) directors, each to serve until the next annual meeting of stockholders or until their successors are elected and qualified;
Proposal Two: Approval, on an advisory basis, of the 2019 compensation of the Company’s named executive officers as described in this Proxy Statement;
Proposal Three: Ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2020; and
Proposal Four: Ratification of the provisions of Section 2.3 of the Company's Amended and Restated Bylaws (the "Bylaws") allowing the holders of 20% or more of the Company's outstanding common stock to call a special meeting of stockholders.
In addition, we will transact such other business as may properly come before the Annual Meeting or any postponements or adjournments thereof.
RECORD DATE AND VOTING SECURITIES
You are entitled to one vote for each share of common stock you own.
Only those stockholders that owned shares of the Company’s common stock on February 22, 2017,August 28, 2020, the record date established by the board of directors, will be entitled to vote at the Annual Meeting. At the close of business on the record date, there were 49,557,57250,447,825 shares of common stock outstanding held by 195180 identified holders.
At least a majority of the total number of issued and outstanding shares of common stock as of the record date must be present at the Annual Meeting in person or by proxy and entitled to vote in order to have a quorum to transact business. If there are not sufficient shares present and entitled to vote at the Annual Meeting for a quorum or to approve any proposal, the board of directors may postpone or adjourn the Annual Meeting in order to permit the further solicitation of proxies.
Directors are elected by a plurality of the votes cast at the Annual Meeting. The twelve (12)nine (9) nominees receiving the highest number of votes “for” will be elected. Votes may be cast “for” or may be “withheld” with respect to any or all nominees. For purposes of the election of directors, votes that are “withheld” and brokernon-votes (described below) will be counted as “present” for purposes of establishing a quorum but will not be counted as votes cast and will have no effect on the result of the vote. Stockholders may not cumulate votes in the election of directors. In accordance with our Majority Voting Policy, any nominee for election as a director who receives a greater number of “withhold” votes than votes “for” election in an uncontested election must deliver his or her resignation to the board of directors. The board of directors will determine whether to accept the resignation based upon the recommendation of the Governance and Nominating Committee and consideration of the circumstances. See “Board and Committee Matters —– Corporate Governance” for more information on the Majority Voting Policy. The affirmative vote of a majority of the shares of the Company’s common stock present in person or by proxy at the Annual Meeting is required to approve Proposal Two (advisory vote on
20162019 executive compensation)
and, Proposal
FourThree (ratification of Ernst & Young LLP as the Company’s independent registered public accounting firm)
and Proposal Four (ratification of the special meeting 20% ownership requirement in the Company's Bylaws). Votes on these proposals may be cast “for,” “against” or “abstain.” An abstention will have the effect of a vote against
ProposalProposals Two,
Three and
Proposal Four.
With respect to Proposal Three (advisory vote on the frequency of stockholder advisory voting on executive compensation), stockholders will choose among holding advisory votes every year, every two years or every three years, or may abstain from voting. The frequency choice receiving the most stockholder votes will be deemed to be the choice of the stockholders. Broker
non-votes will have no effect on the outcome of
ProposalsProposal Two or
Three.Four. Abstentions, votes against and broker
non-votes will be counted as “present” for purposes of establishing a quorum. The results of voting on Proposals Two
Three and
FourThree are advisory only and will not be binding upon the Company or its board of directors.
A brokernon-vote occurs when a bank, broker or other nominee holding shares for a beneficial owner submits an executed proxy to the Company but does not vote on a particular proposal because it does not have discretionary voting power with respect to that item and has not received voting instructions from the beneficial owner. If your shares are held in the name of a bank, broker or other nominee, they are not permitted to vote on your behalf on Proposals One, Two or ThreeFour at the Annual Meeting unless you provide specific instructions by following the instructions they provide to you.such bank, broker, or other nominee in accordance with their procedures. For your vote to be counted on Proposal One (election of directors), Proposal Two (advisory vote on 20162019 executive compensation) orand Proposal Three (advisory vote onFour (ratification of the frequency of stockholder advisory voting on executive compensation)special meeting 20% ownership requirement in the Company's Bylaws), you must communicate your voting decisions to your bank, broker or other nominee within the time period stated in their instructions to you. Your bank, broker or other nominee will be permitted to vote on Proposal FourThree (ratification of Ernst & Young LLP as the Company’s independent registered public accounting firm) without instructions from you. The individuals named as
your proxies will vote properly completed proxies received prior to the Annual Meeting in the way you direct. If you
do send in a properly completed proxy but do not specify how the proxy is to be voted, the shares represented by your proxy will be voted to elect the
twelve (12)nine (9) director nominees, to approve, on an advisory basis, the
20162019 compensation of our named executive officers,
to select the frequency of every year for stockholder advisory voting on executive compensation and to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting
firm.firm for 2020 and to ratify the special meeting 20% ownership requirement in the Company's Bylaws. If your shares are held by a bank, broker or other nominee and you want to vote in person at the Annual Meeting, you must obtain a legal proxy from the record holder and present it at the Annual Meeting.
If you are a stockholder of record you may revoke a proxy at any time before the proxy is exercised by:
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| 1. | delivering written notice of revocation to Texas Capital Bancshares, Inc., Attn: Corporate Secretary —– Annual Meeting, 2000 McKinney Avenue, 7th Floor, Dallas, Texas 75201; |
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| 2. | submitting another properly completed proxy card that is later dated; |
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| 3. | voting by telephone at a subsequent time; |
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| 4. | voting through the Internet at a subsequent time; or |
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| 5. | voting in person at the Annual Meeting. |
If your shares are held in the name of a broker, bank or other nominee, please follow the instructions that you receive from them in order to instruct them to revoke the voting of your shares.
Please review the proxy materials and follow the relevant instructions to vote your shares. We hope you will exercise your rights and fully participate as a stockholder.
It is important that you are represented by proxy or are present in person at the Annual Meeting. The Company requests that you vote your shares by following the instructions as set forth in the Notice of Internet Availability of Proxy Materials. Your proxy will be voted in accordance with the directions you provide.
Other than the election of
twelve (12)nine (9) directors, approval, on an advisory basis, of
20162019 executive compensation,
approval, on an advisory basis, of the frequency of stockholder voting on executive compensation and ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm
for fiscal 2020 and ratification of the special meeting 20% ownership requirement in the Company's Bylaws, the Company is not aware of any additional matters that will be presented for consideration at the Annual Meeting. However, if any additional matters are properly brought before the Annual Meeting, your proxy will be voted in the discretion of the persons designated as proxies on the proxy card.
The Company’s board of directors is making this solicitation and the Company will pay the costs of this proxy solicitation. The directors, officers and employees of the Company and the Bank may also solicit proxies by telephone or in person but will not be paid additional compensation to do so.
We are permitted to send a single Notice of Annual Stockholders’ Meeting of Stockholders (“Notice”) and any other proxy materials we choose to mail to stockholders who share the same last name and address. This procedure is called “householding” and is intended to reduce our printing and postage costs. If you would like to receive a separate copy of a proxy statement or annual report, either now or in the future, please contact us in writing at the following address: Texas Capital Bancshares, Inc., Attn: Investor Relations, 2000 McKinney Avenue, Suite 700,7th Floor, Dallas, Texas 75201. If you hold your shares through a bank, broker or other nominee and would like to receive additional copies of the Notice and any other proxy materials, or if multiple copies of the Notice or other proxy materials are being delivered to your address and you would like to request householding, please contact your broker.bank, broker or nominee.
PROPOSALS FOR STOCKHOLDER ACTION
Proposal
1 —One - Election of Directors
Twelve (12)
Nine (9) currently serving members of the board of directors have been nominated for
re-election. re-election at the Annual Meeting. Directors serve for a
one-year term
ending on the date of the following year’s annual meeting of stockholders or until their successors are elected and qualified. All of the nominees below have indicated their willingness to continue to serve as a director if elected. However, if any of the nominees is unable or declines to serve for any reason, your proxy will be voted for the election of a substitute nominee selected by the board of directors.
At the Annual Meeting, the stockholders will
elect twelve (12)vote on the election of nine (9) directors. The board of directors recommends a vote FOR each of the director nominees set forth below:
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| Name | | Age | | Position |
Larry L. Helm | 73 | 69 | | Director; Chairman of the board |
C. Keith Cargill
| | 64 | | Director; President andExecutive Chairman; Chief Executive Officer and President |
Peter B. Bartholow
| | 68 | | Director; Chief Financial Officer and Chief Operating Officer |
James H. Browning | 71 | 67Lead Director |
| Jonathan E. Baliff | 56 | Director |
Preston M. Geren III
David S. Huntley | | 65 | 62 | Director |
Charles S. Hyle | | 66 | 69 | Director |
Elysia Holt Ragusa | | 65 | 69 | Director |
Steven P. Rosenberg | | 58 | 61 | Director |
Robert W. Stallings | | 67 | 71 | Director |
Dale W. Tremblay | | 58 | | Director |
Ian J. Turpin
| | 72 | | Director |
Patricia A. Watson
| | 51 | 61 | Director |
Larry L. Helmhas served as Chief Executive Officer ("CEO") and President of the Company since May 2020. He has served as a director since January 2006 and was elected Chairmanas chairman of the board insince May 2012. He previously served as a senior advisor for Accelerate Resources, LLC, a company engaged in the acquisition of non-operated oil and natural gas
properties and mineral interests located in the Permian Basin and other areas, a position he held from August 2017 until May 2020. Prior to joining Accelerate Resources, he served as Executive Vice President of Corporate Affairs at Halcón Resources
Corporation, a company engaged in the acquisition, exploration, development and production of oil and natural gas properties located in North America, a position he held from January 2013
until his retirement into March 2016.
He has been engaged as an independent investor since March 2016. Previously,Before Halcón Resources, he served as Executive Vice
President-FinancePresident, Finance and Administration,
offor Petrohawk Energy
Corporation.Corporation from June 2004 until its sale to BHP Billiton in July 2011. He served as Vice President-Transition with BHP Billiton prior to joining Halcón Resources in 2012. Prior to joining Petrohawk,
in 2004, Mr. Helm spent 14 years with Bank One, most notably as Chairman and
Chief Executive OfficerCEO of Bank One
Dallas. Halcón Resources Corporation filed for reorganization under Chapter 11Dallas and head of
the United States Bankruptcy Code in July 2016 and emerged from the proceeding pursuant to a“pre-packaged” plan of reorganization in September 2016.U.S. Middle Market Banking.
As a
current and former banking executive, Mr. Helm has extensive knowledge about our industry. His executive roles in energy companies and experience managing energy and commercial lending groups give him important insights into the Company’s lending activities and make him well qualified to serve as
Chairmanexecutive chairman of our board of directors and a member of the
Credit Risk Committee.
C. Keith Cargill has served as President and Chief Executive Officer (“CEO”) of the Company and as a member of the board of directors since January 1, 2014. He has served as CEO of the Bank since June 2013, after becoming President of the Bank in October 2008. He served as Chief Lending Officer and as a director of the Bank since its inception in December 1998 through July 2013. Mr. Cargill has more than 25 years of banking experience in the North Texas area.Mr. Cargill has extensive knowledge of all aspects of our business and particularly its lending operations. His many years of experience as a banker and his leadership in building our Company make him well qualified to serve as a director.
Peter B. Bartholow has served as Chief Financial Officer (“CFO”) and as a director since October 2003 and as Chief Operating Officer (“COO”) since January 2014. Prior to joining us in 2003, he was managing director of a private equity firm, served as a financial executive with Electronic Data Systems Corp., and spent many years in the banking industry as an executive officer and member of the boards of both public and private companies.
As our CFO and COO, Mr. Bartholow has extensive knowledge of all aspects of our business. His previous business and financial experience as an executive officer and director of other public companies and banking organizations make him well qualified to serve as a director.
James H. Browninghas served as a director since October 2009.2009 and as lead director since May 2020. He retired in 2009 as a partner at KPMG LLP, an international accounting firm, in Houston, Texas, where he served companies in the energy, construction, manufacturing, distribution and commercial industries and has been engaged as a private investor since that time.industries. He began his career at KPMG in 1971, becoming a partner in 1980. He most recently served as KPMG’s Southwest Area Professional Practice Partner, and also served as an SEC Reviewing Partner and as Partner in Charge of the New Orleans, Louisiana, audit practice. He currently serves as a directorchairman of the board and member of the Audit Committee, Governance and Nominating Committee, and Compensation Committee of RigNet Inc., a global provider of digital technology company providing customized communications services, applications, real-time machine learning and cybersecurity solutions serving remote locations.to enhance customer decision-making and business performance. He also currently serves as a director of Herc Holdings, Inc., a NYSENew York Stock Exchange listed full servicefull-service equipment rental company, where he chairs the AuditFinance Committee and is a member of the FinancingAudit Committee. Previously, he served as a director for Endeavour International Corporation, a NYSE listed international oil and gas exploration and production company.
As a former partner with KPMG with more than 38 years in public accounting, Mr. Browning has demonstrated leadership capability. His public accounting experience with various industries gives him a wealth of knowledge in dealing with financial and accounting matters, as well as extensive knowledge of the responsibilities of public company boards. Mr. Browning is highly qualified to serve as
athe lead director,
and the chairman of our Audit
and Risk Committee, where he has been designated a financial
expert. He also servesexpert, and as a member of the Governance and Nominating Committee.
Preston M. Geren IIIJonathan E. Baliff has served as a director since July 2012.2017. Mr. Geren is currentlyBaliff served as an advisor to the Office of the Chairman of Bristow Group, Inc., an industrial aviation solutions provider offering helicopter transportation, search and rescue and aircraft support services to government and civil organizations worldwide, a position he held following his retirement from Bristow Group, Inc. in February 2019 until June 2019. Prior to his retirement, he served as President and CEOChief Executive Officer and as a director of Bristow Group, Inc., from July 2014 until February 2019 and served as Bristow Group’s Senior Vice President and Chief Financial Officer from October 2010 to June 2014. Prior to joining Bristow, he served as Executive Vice President-Strategy at NRG Energy, where he led the development and implementation of NRG’s corporate strategy, as well as acquisitions and business alliances. Prior to joining NRG, he was in Credit Suisse’s Global Energy Group, where he advised energy companies on merger and acquisition assignments and project and corporate financings, most recently as Managing Director. Mr. Baliff started his career at Standard and Poor’s and then worked in JP Morgan’s natural resources group. He served on active duty in the U.S. Air Force from 1985 until his retirement in 1993 with the rank of Captain.
Mr. Baliff has extensive financial and leadership experience serving in executive roles with other public companies. His focus on corporate strategy, coupled with banking experience earlier in his career, makes him highly qualified to serve as a director and member of the Sid W. Richardson Foundation,Risk Committee.
David S. Huntley has served as a director since January 2018. Mr. Huntley currently serves as Senior Executive Vice President and Chief Compliance Officer of AT&T, Inc., a position he has held since July 2011,December 2014. AT&T Inc. is a global leader in telecommunications, media and previouslytechnology. Mr. Huntley served as its Senior AdvisorVice President and Assistant General Counsel for AT&T Services, Inc. from AprilMay 2012 to December 2014 and as Senior Vice President, General Counsel and Secretary for AT&T Advertising Solutions and AT&T Interactive from September 2010 to July 2011. HeMay 2012. From June 2009 to September 2010, Mr. Huntley served as an executiveSenior Vice President of AT&T’s Mobility Customer Service Centers. He held positions of increasing responsibility in external affairs, wireless operations, mergers and acquisitions, data operations and other areas within AT&T since joining the Department of Defense from 2001 to 2009, completing his service as Secretary of the Army under Presidents Bushcompany in 1994.
Mr. Huntley’s compliance and
Obama. He served as a member of Congress representing the 12th Congressional District of Texas for four terms. Mr. Geren previously served as a director of Anadarko Petroleum Corp. Before entering public service Mr. Geren was an attorney and businessman in Fort Worth and served as a director of both privately and publicly held banking organizations.Mr. Geren’s experience and leadership in high government positions,legal expertise, as well as his banking experience positiondeveloping and implementing policies to safeguard the privacy of customer and employee information, make him to provide us with a valuable perspective on a broad range of business and governmental issues affecting our Company and the businesses and entrepreneurs we serve. He is well suitedhighly qualified to serve as a director and member of the Credit Risk Committee and the Bank’s TrustAudit Committee.
Charles S. Hylehas served as a director since October 2013. He served as Senior Executive Vice President and Chief Risk Officer of Key Corp., the holding company for KeyBank, a regional bank headquartered in Cleveland, Ohio, from June 2004 to his retirement in December 2012. He has been engaged as an independent investor since December 2012. He served as an executive with Barclays working in the U.S. and in London from 1980 to 2003, rising to serve as Managing Director and Global Head of Credit Portfolio Management–Management - Barclays Capital–Capital - London. Mr. Hyle began his banking career in 1972 at JP Morgan. Mr. Hyle has many years of experience in managing credit and operational risk for large banking and financial services organizations as a senior executive. This experience provides him with an understanding
of the risks facing the Company and the Bank and the challenges we will face as we continue to grow and are required to comply with enhanced regulatory risk management requirements, which make him well qualified to serve as a director and the chairman of our Credit Risk Committee. He also serves as a member of the Audit and Risk Committee and has been designated as a financial expert.
Elysia Holt Ragusa has served as a director since January 2010. She currently serves as Principal of RCubetti, LLC, a business operations, investment and sales advisory firm, a position she has held since February of 2018. She served as an International Director of Jones Lang LaSalle, a position she has held sincecommercial real estate services company, from July 2008 and currently provides team leadership for the Central Texas market while also serving clientsuntil her retirement in Austin, San Antonio and Dallas/Fort Worth.December 2017. From 1989 until 2008, she served as President and Chief Operating Officer of The Staubach Company, chaired Staubach’s Executive and Operating Committees and was a member of its board of directors. Jones Lang LaSalle and The Staubach Company merged in 2008. She also servespreviously served as a director of Fossil Group, Inc., a maker of watches and other apparel and accessories, where she servesserved as a member of the Compensation Committee and chairschaired the Nominating and Corporate Governance Committee. As an executive with extensive experience in all aspects of the commercial real estate business in Texas, Ms. Ragusa provides valuable insight for this important aspect of our business. This expertise, her demonstrated leadership capabilities and her public company board experience are valuable to the Company and make her well qualified to serve as a director,
andas chairman of our Governance and Nominating
Committee. She also servesCommittee and as a member of the
Bank’s TrustHuman Resources Committee.
Steven P. Rosenberghas served as a director since September 2001. He is President of SPR Ventures, Inc., a private investment company, a position he has held since June 1997, and1997. He served as President of SPR Packaging LLC, a manufacturer of flexible packaging for the food industry, a position he has held sincefrom May 2007.2007 until his retirement in January 2018. He currently serves on the board of directors of Cinemark Holdings, a leader in the motion picture exhibition industry, where he serves as chair of the GovernanceNominating and NominatingCorporate Governance Committee and is an Audit Committee member. He previously served as a board member of PRGX Global, a business analytics and information services firm, where he also served on the Human Resources Committee. Mr. Rosenberg offers valuable experience and insight to the board of directors deriving from his background as an entrepreneur,
in a manufacturing business in Texas, as well as a director of other public companies. Mr. Rosenberg is a member of the Human Resources Committee and serves as the chairman of the Bank’s Trust Committee.
Robert W. Stallingshas served as a director since August 2001. He has served as Chairman of the board of directors and CEO of Stallings Capital Group, an investment company, since March 2001. He is currently Executive Chairman of the board of Gainsco, Inc., a property and casualty insurance company, a position he has held since August 2001. Prior to joining Gainsco, he served as Chairman and CEO of an asset management company as well as a savings bank. Mr. Stallings’ experience in the banking and financial services industries provides extensive knowledge about our industry, which makes him highly qualified to serve as a director and member of the
Credit Risk
Committee and the Bank’s Trust Committee.
Mr. Stallings was appointed as a member of the Governance and Nominating Committee in July 2020.
Dale W. Tremblay has served as a director since May 2011. He is the President and CEO of C.H. Guenther and Son, Inc.LLC (dba Pioneer Flour Mills), one of the oldest privately held corporations in the U.S., and serves as a member of its board of directors. He joined Guenther in 1998 as Executive Vice President and COO,Chief Operating Officer, and became President and CEO in April 2001. He hascurrently serves as a director of Nature Sweet Ltd. He previously served as President for The Quaker Oats Company’s worldwide foodservice division and formerly served onwas a member of the Michigan
State University School of Finance Advisory Board and the Business and Community Advisory Council of the Federal Reserve Bank of Dallas. He
servesalso served as a director of Clear Channel Outdoor Holdings Inc., one of the world’s largest outdoor advertising companies, where he
servesserved as a member of the Audit
Committee and
Intercompany Note Committee,Special Committees and
servesserved as chairman of the Compensation Committee.
He also serves as a director of Nature Sweet Ltd.Mr. Tremblay’s leadership experience in both private and public companies brings valuable knowledge and insight to our board of directors and his service as chairman of our Human Resources Committee.
Ian J. Turpin has served as a director since May 2001. Since 1992, he has served as President and director of LBJ Family Wealth Advisors, Ltd. (formerly LBJ Asset Management Partners, Ltd. and The LBJ Holding Company, LP) and has managed various companies affiliated with the family of the late President of the United States, Lyndon B. Johnson, which have included radio, real estate and private equity investments and diversified investment portfolios.
Mr. Turpin’s business experience in international banking and wealth management and in a variety of industries offers valuable insights to the board of directors. Mr. Turpin’s background in public accounting also qualifies him as an Audit and Risk Committee financial expert, supporting his service as a member of the Audit and Risk Committee. Mr. Turpin has reached the retirement age of 72 established in the Company’s Corporate Governance Guidelines; his nomination forre-election in 2017 was approved by the unanimous vote of the other members of the board as contemplated by the Guidelines.
Patricia A. Watson has served as a director since February 2016. She serves as the Senior Executive Vice President and Chief Information Officer of TSYS, a global payment solutions provider for financial andnon-financial institutions. Prior to joining TSYS in September 2016 she served as Vice President and Global Chief Information Officer for The Brinks Company. Prior to joining Brinks she worked with Bank of America for more than 14 years in technology positions of increasing responsibility. She spent 10 years in the United States Air Force as executive staff officer, flight commander and director of operations.
Ms. Watson’s expertise in information technology and security in the financial services and payments industries, as well as her strategic leadership skills, make her highly qualified to serve as a director and member of the Audit and Risk Committee.
Directors are elected by a plurality of the votes cast at the Annual Meeting. The
twelve (12)nine (9) nominees receiving the highest number of votes
“for” will be elected.
The board of directors unanimously recommends that you vote “FOR” the election of each of the nominees.
Proposal
2 —Two - Approval of Executive Compensation on an Advisory Basis
In accordance with the requirements of Rule
14a-21(a) under the Securities Exchange Act of 1934 (the “Exchange Act”), we are providing our stockholders with an advisory vote to approve executive compensation on an annual basis, commonly referred to as a
“say-on-pay” “say-on-pay” vote. We have held a
say-on-pay vote annually since the Company’s 2011 Annual Meeting of Stockholders.
We believe that our executive compensation programs effectively align the interests of our named executive officers, or NEOs, with those of our stockholders by creating a combination of incentive compensation arrangements, in both cash and
equity-linkedequity-based programs, which are directly tied to performance and creation of stockholder value, coupled with a competitive level of base compensation.
TheOur objective
foris that the NEOs
is toshould have a substantial portion of total compensation derived from performance-based incentives. At our
20162019 Annual Meeting of Stockholders, we received the affirmative support of
97.2%98% of votes cast in favor of our
2018 executive compensation.
The board values stockholders’ opinions, and, as in prior years, the board intends to evaluate the results of the 20172020 vote when making future decisions regarding compensation of the NEOs. We encourage you to carefully review the “Executive Compensation” section of this Proxy Statement and particularly the “Compensation Discussion and Analysis” for a detailed discussion of the Company’s executive compensation programs. This annual advisory vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the policies and practices with respect to their compensation described in this Proxy Statement. Your vote on Proposal Two is advisory and, therefore, not binding on the Company, the board of directors or the Human Resources Committee. This advisory vote may not be construed as overruling a decision by the board, nor create or imply any additional fiduciary duty of the board.
We are asking our stockholders to indicate their approval, on an advisory basis, for the 20162019 compensation paid to our NEOs by voting FOR the following resolution: RESOLVED, that the stockholders approve, on an advisory basis, the
20162019 compensation of the Company’s named executive officers, as disclosed in this Proxy Statement pursuant to SEC Regulation
S-K, Item 402, including the Compensation Discussion and Analysis, the compensation tables and
otherthe narrative executive compensation disclosures
to the compensation tables included in this Proxy Statement.
Proposal Two requires the affirmative vote of the holders of a majority of the outstanding shares of common stock present, in person or represented by proxy, and entitled to vote on the proposal at the Annual Meeting.
The board of directors unanimously recommends that you vote “FOR” approval of this resolution.
Proposal 3 — Approval of Frequency of Voting on Executive Compensation on an Advisory BasisAs described with regard to Proposal Two above, we have since 2011 provided our stockholders with an annual opportunity to vote, on an advisory basis, on the compensation of our named executive officers. This year, in accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, our stockholders also have the opportunity to cast an advisory vote on how often we should include asay-on-pay proposal in our proxy materials at future stockholder meetings. Our stockholders may vote, on an advisory basis, to hold an advisorysay-on-pay vote every year, every two years, or every three years, or they may abstain.
Our stockholders voted on a similar proposal in 2011, and the overwhelming majority voted to hold the advisory vote on executive compensation every year. We continue to believe thatsay-on-pay votes should be conducted every year so that our stockholders may annually express their views on our executive compensation program.
Your vote on
Proposal Three
is advisory and, therefore, not binding on the Company, the board of directors or the Human Resources Committee. This advisory vote may not be construed as overruling a decision by the board, nor create or imply any additional fiduciary duty of the board. However, the Human Resources Committee and the board value the opinions expressed by stockholders in their votes on this proposal and will consider the outcome of the vote when making future decisions regarding the frequency of conducting asay-on-pay vote.Stockholders may cast an advisory vote to conduct advisory voting on executive compensation every year, every two years or every three years, or may abstain from voting on the matter. The frequency choice receiving the most stockholder votes will be deemed to be the choice of the stockholders.
The board of directors unanimously recommends that you vote for a frequency of “EVERY YEAR” fornon-binding, advisory stockholder votes on the compensation of our named executive officers.
Proposal 4 —- Ratification of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm
The Audit
and Risk Committee
of the Company’s board of directors has appointed Ernst & Young LLP as the independent registered public accounting firm of the Company for the year ending December 31,
2017.2020. The Company is seeking
stockholder ratification of the appointment of Ernst & Young LLP for fiscal 2017.year 2020. Stockholder ratification of the
appointment of the Company’s independent registered public accounting firm is not required by the Company’s bylaws, state law or otherwise. However, the board of directors is submitting the appointment of Ernst & Young LLP to the Company’s stockholders for ratification as a matter of good corporate governance. If the stockholders fail to ratify the appointment of Ernst & Young LLP, the Audit and Risk Committee will consider this information when determining whether to retain Ernst & Young LLP for future services. See the discussion at “Auditor Fees and Services” for information regarding the services provided to the Company by Ernst & Young LLP.The ratification of Ernst & Young LLP’s appointment will require
Proposal Three requires the affirmative vote of the holders of a majority of the outstanding shares of common stock present, in person or represented by proxy, and entitled to vote on the proposal at the Annual Meeting.
The board of directors unanimously recommends that you vote “FOR” the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal
2017.2020.
Proposal Four - Ratification of the provisions of Section 2.3 of the Company's Bylaws allowing the holders of 20% or more of the Company's outstanding common stock to call a special meeting of stockholders
Proposal Four requests that stockholders ratify the provisions of Section 2.3 of the Company’s Bylaws (attached to this Proxy Statement as “Annex A”) that allow stockholders owning 20% or more of the Company’s outstanding common stock (the “Special Meeting 20% Ownership Requirement”) and who satisfy the other requirements set forth in the Bylaws to call a special meeting of stockholders.
Factors considered by the board of directors in adopting the Special Meeting 20% Ownership Requirement and recommending its ratification. The board of directors amended the Bylaws in November 2018 to include the Special Meeting 20% Ownership Requirement. Prior to that time, the Bylaws allowed stockholders owning 10% or more of the Company’s outstanding common stock to call special meetings of stockholders (the “Prior 10% Ownership Requirement”).
The board of directors believes that stockholders should have the ability to call special meetings of stockholders as a matter of good corporate governance. However, there are significant costs associated with convening special meetings, including the preparation, printing and distribution of disclosure documents, soliciting proxies, holding the meeting and tabulating votes. Organizing and preparing for a special meeting requires significant management attention, diverting their focus from managing the Company’s day-to-day business operations. The board of directors believes that a small minority of stockholders should not be able to call a special meeting for their own interests, which may not be widely shared by the Company’s other stockholders. Requiring a reasonably high percentage of stock ownership to support the calling of a special meeting balances the interests of all stockholders with the associated significant disruption and costs.
There have been many times over the past five years when one or two stockholders have owned 10% to 20% of the Company’s outstanding shares (18.1% in the 2019 Proxy Statement, 21.2% in this Proxy Statement), allowing them the unilateral power to call a special meeting of stockholders under the Prior 10% Ownership Requirement. Given the Company’s ownership profile in recent years, the board of directors believes the 20% ownership requirement to call a special meeting is reasonable and unlikely to impede stockholders seeking to call a special meeting to address an issue of broad stockholder interest.
The perspective of the board of directors relative to an appropriate ownership threshold to call a special meeting is acknowledged by institutional investors. For example, the published voting policies of each of the Company’s two largest stockholders indicate acceptance of an ownership threshold to call a special meeting of greater than 10%, provided the requirement is not greater than 25%.
The perspective of the board of directors relative to an appropriate ownership threshold to call a special meeting is also recognized by, and in alignment with, a substantial majority of the Company’s compensation peer group. The board of directors when it initially approved the Special Meeting 20% Ownership Requirement in 2018 considered that the bylaws of a majority of its 2018 compensation peer group required a 20% or greater percentage ownership of common stock to call a special meeting or did not allow stockholders the right to call a special meeting. A current survey of the bylaws of the 14 issuers included in the Company’s 2019 executive compensation peer group discloses a similar substantial majority requiring a 20% or greater percentage ownership of common stock in order to call a special meeting
(or denying that right), ranging from 10% at the low end (3 of 14 issuers) to no provision for stockholders to call a special meeting (3 of 14 issuers). Other reported ownership requirements were 20% (1 issuer), 25% (4 issuers), 40% (1 issuer), 50% (1 issuer) and 50.1% (1 issuer). Accordingly, within this population of issuers, the Special Meeting 20% Ownership Requirement appears reasonable.
Why the board of directors is seeking stockholder ratification. The board of directors is seeking stockholder ratification of the Special Meeting 20% Ownership Requirement in response to stockholder opinion that the matter should be submitted to a binding vote of stockholders expressed during the Company’s engagement with its stockholders following the Company’s Annual Meeting of Stockholders held on April 16, 2019. The background of that outreach is described in greater detail below at “Board and Committee Matters - Stockholder Engagement - Response to Withhold Voting at 2019 Annual Meeting.”
What will happen if Proposal Four is not approved? If the Special Meeting 20% Ownership Requirement is not ratified, the board of directors will amend Section 2.3 of the Bylaws to decrease the level of common stock ownership required to call a special meeting from 20% to 10%.
Board recommendation. Proposal Four, ratification of the Special Meeting 20% Ownership Requirement, requires the affirmative vote of the holders of a majority of the outstanding shares of common stock present, in person or represented by proxy, and entitled to vote on the proposal at the Annual Meeting.
The board of directors unanimously recommends that you vote “FOR” the ratification of the provisions of Section 2.3 of the Company's Bylaws allowing the holders of 20% or more of the Company's outstanding common stock to call a special meeting of stockholders.
The Company does not currently know of any other matters that may come before the Annual Meeting. However, if any other matters are properly presented at the Annual Meeting, the persons designated in the enclosed proxy will vote your proxy in their discretion on such matters.
BOARD AND COMMITTEE MATTERS
The business affairs of the Company are managed under the direction of the board of directors. The board of directors meets on a regularly scheduled basis to review significant developments affecting the Company and to act on matters requiring approval by the board of directors. Special meetings of the board of directors are held as required from time to time when important matters arise that require action between scheduled meetings. The board of directors held six regularly scheduled meetings
and three special meetings during
2016.2019. Each of the Company’s directors participated in at least 75% of the meetings of the board of directors and the committees of the board of directors on which the director served during
2016.2019.
The board of directors is committed to providing sound governance for the Company. The board of directors has adopted Corporate Governance Guidelines (the “Guidelines”) and charters for each committee of the board of directors to provide a flexible framework of policies relating to the governance of the Company. These documents are available in the “Governance Documents” section of the Company’s website at: http://investors.texascapitalbank.com/govdocs.govdocs
. Among the policies addressed in the Guidelines are the following:
| • | | Majority voting policyMajority Voting Policy. Any nominee for election as a director who receives a greater number of “withhold” votes than votes “for” election in an uncontested election must deliver his or her resignation to the board of directors. The board of directors will determine whether to accept the resignation based upon the recommendation of the Governance and Nominating Committee and consideration of the circumstances. The Company will disclose the board’s decision and the process by which it was reached. |
| • | | Retirement policy. A director who reaches the age of 72 at or before the time of his or herre-election will not be eligible for election to the board of directors, subject to waiver of this requirement by unanimous vote of the remaining members of the board.
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| • | | Separation of Chairman and CEO duties. The position of Chairman of the board is to be held by an independent director.
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| • | | Limits on other board service. No director may serve on more than four public company boards (including the Company’s board of directors). The CEO and any other management director may serve on no more than one other public company board, and the Chairman of the board may serve on no more than two other public company boards (one if serving as chairman).
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| • | | Board composition and independence. No more than two members of management may be invited to serve on the board. A substantial majority of the board must qualify as independent under the relevant listing standards of the Nasdaq Stock Market and applicable rules of the SEC. All members of the board of directors other than Mr. Cargill and Mr. Bartholow qualify as independent under these standards.
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| • | | Term limits. The board of directors does not believe it advisable to establish fixed term limits for directors. As an alternative to term limits, the board of directors seeks to assure that its members remain active, effective and independent contributors through ongoing performance evaluations, suitability reviews and continuing education as contemplated by the Guidelines.
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| • | | Review of significant responsibility changes. Any director who retires from his or her principal employment, or who materially changes the responsibilities of his or her principal employment, must tender a letter of resignation to the board of directors. The board of directors will determine whether to accept the resignation based on the recommendation of the Governance and Nominating Committee after its review of the circumstances.
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| • | | Director compensation. Director compensation includes a substantial equity component representing approximately half of each director’s annual compensation in order to align director interests with the long-term interests of stockholders.
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| • | | Director stock ownership. The board of directors has established stock ownership guidelines for directors in order to further align their interests with the long-term interests of stockholders. Directors are expected to own common stock having a value of at least three times the cash portion of the annual retainer paid to outside directors, and may not dispose of any shares of the Company’s common stock unless they own, and will continue to own, common stock with a value at or above that level.
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| • | | Executive pay governance and stock ownership. As discussed in more detail below at“Executive Compensation — Compensation Discussion and Analysis”, the Guidelines include policies addressing:
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Executive stock ownership;
Elimination of excise taxgross-ups with respect to executive compensation received upon a change in control;
No “single trigger” payment or acceleration of benefits upon a change in control; and
“Clawback” of incentive compensation upon a restatement of the Company’s financial statements.
| • | | Access to independent advisors. The board of directors and each committee may, as it deems necessary or appropriate, obtain advice and assistance from independent, outside financial, legal, accounting, human resources or other advisors, at the expense of the Company.
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| • | | Annual evaluation. The board of directors and each committee conduct annual evaluations of their performance. The Governance and Nominating Committee assists the evaluation process and annually evaluates and recommends each candidate for election orre-election as a director in view of the needs and then-currentmake-up of the board of directors.
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| • | | Executive sessions of the board of directors and committees. Thenon-management directors meet in regularly scheduled executive sessions of the board of directors and its committees without any management directors or other management present.
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| • | | Prohibition of poison pill. Subject to the exercise of its fiduciary duties to the Company and its stockholders, the board of directors will not authorize the issuance of any of the Company’s preferred stock for defensive or anti-takeover purposes without the prior approval of stockholders.
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Hedging of Company securities prohibited. All Company directors, officers and employees are prohibited from purchasing any financial instrument that is designed to hedge or offset any decrease in market value of Company securities, and from participating in derivative or speculative transactions with respect to Company securities, including but not limited to prepaid variable forward contracts, collars, equity swaps, exchange funds, puts, calls and other derivative instruments. All directors, officers and employees are also prohibited from participating in short sales of the Company’s securities.
Pledging of Company securities prohibited. Directors, officers who are reporting persons under Section 16 of the Exchange Act and such additional employees as may be designated by the Governance and Nominating Committee are prohibited from holdingand consideration of the circumstances. The Company securities in a margin accountwill disclose the board’s decision and the process by which it was reached.
Retirement policy. A director who reaches the age of 75 at or otherwise pledging Company securities as collateralbefore the time of his or her re-election will not be eligible for a loan.Risk Management
Our board of directors oversees an enterprise-wide approachelection to risk management, intended to support the achievement of strategic objectives to optimize our organizational performance and enhance stockholder
value while operating within the guidelines of our risk appetite statement. While the board of directors, has subject to waiver of this requirement by unanimous vote of
the ultimate oversight responsibility forremaining members of the risk management process,board.
Separation of Chairman and CEO duties. The position of chairman of the board has authorized various committeesis to provide primary oversightbe held by an independent director.
On May 25, 2020, Larry L. Helm, chairman of the Company’s risk enterprise management program. In addition, management has appointedboard, succeeded C. Keith Cargill as CEO and president of the Company to serve while the board of directors conducts a Risk Management Committee (“RMC”) comprised of executives responsible for all major categories of risksearch to provide management oversightidentify a permanent CEO. Prior to this date, the CEO and guidance related tochairman positions were separated under the Company’s enterprise risk management. Annually,board leadership structure, with Mr. Helm acting as the RMC updatesnon-executive chairman and Mr. Cargill serving as the Risk Appetite Statement and establishes various risk tolerances, which are ultimately approved by the board. Specific responsibilities for the committees are discussed in more detail below.Director Independence
CEO. The board of directors has determined that each director other than Mr. Cargill and Mr. Bartholow qualifies as an “independent director” as defined inseparating the Nasdaq Stock Market Listing Rules and as further defined by applicable statutes and regulations.
Board Leadership Structure and Risk Oversight
The CEO and Chairmanchairman positions are separated under the Company’s board leadership structure. Larry L. Helm acts as thenon-executive Chairman and C. Keith Cargill serves as the CEO. The board of directors determined that this is the most effective way for its leadership to be structured and believes this is a best practice for governance, but has amended the Guidelines to allow for the present structure and the designation of an independent lead director on an interim basis during a CEO succession process. During the interim period in its industry. The members ofwhich Mr. Helm is serving as both CEO and chairman, James H. Browning has been appointed to serve as lead director having the duties described below at "Board Leadership Structure".
Limits on other board service. No director may serve on more than four public company boards (including the Company’s board of directors alsodirectors). The CEO and any other management director may serve as directors of the Bank in order to provide effective oversight of the Bank.Theon no more than one other public company board, of directors is responsible for oversight of management and the business and affairs of the Company, including those relating to management of risk. The board of directors has delegated various aspects of its risk oversight responsibilities to the board’s committees. The Audit and Risk Committee during 2016 assisted the board of directors in monitoring the effectiveness of the Company’s identification and management of compliance risk, interest rate risk, liquidity risk, price risk, operational risk and financial reporting risk. The Credit Risk Committee was charged with oversight of the Company’s processes related to identification, management and reporting of credit risk exposures, the determination and adequacy of the allowance for loan and lease losses and the establishment and administration of the Company’s credit policies. The Human Resources Committee, in conjunction with its annual review and approval of the compensation of the Company’s CEO and senior management, considers whether the Company’s incentive plans encourage participants to take risks that would be reasonably likely to have a material adverse impact on the Company, and to the extent necessary, reviews and discusses with management any related risk mitigation features and disclosures determined to be advisable.
In April 2017, following the Annual Meeting, a Risk Committeechairman of the board may serve on no more than two other public company boards (one if serving as chairman).
Board composition and independence. No more than two members of directors willmanagement may be establishedinvited to alignserve on the Company’s governance structure to provide a more specific focus on risk oversight. The Audit and Risk Committee will be renamed the Audit Committee and its enterprise risk oversight responsibilities will be transferred to the Risk Committee. The Risk Committee will replace the Credit Risk Committee, and assume its responsibilities with regard to credit risk oversight. The Risk Committee will oversee the Company’s policies and processes related to risk identification, assessment, monitoring and management. The scope of its responsibilities will include market risk, interest rate risk, credit risk, liquidity risk, price risk, operational risk, regulatory compliance risk, strategic risk, legal risk, reputational risk and other material business risks.The Risk Committee will also be charged with overseeing the Company’s comprehensive risk framework and setting and monitoring the risk appetite of the Company. The Risk Committee will provide oversight to the RMC, which currently operates under the oversight of the Audit and Risk Committee. The RMC will report to the Risk Committee at least quarterly with respect to its risk-related activities. The Chief Risk Officer (“CRO”) will have a direct reporting relationship to the Risk Committee. The Audit
Committee will continue to receive reports from the CRO and the Internal Audit Department regarding management’s compliance with the Company’s risk appetite statement and applicable risk-related policies, procedures and tolerances that impact the Company’s financial reporting and related internal controls and regulatory compliance.
Committees of the Board of Directors and Meeting Attendance
The board of directors had four standing committees during 2016.board. A general description of the functions performed by each committee and committee membership as of the date of this Proxy Statement is set forth below.
| • | | Governance and Nominating Committee. The Governance and Nominating Committee oversees the corporate governance policies for the Company and identifies, screens, recruits and recommends to the board of directors candidates to serve as directors. The Committee makes recommendations concerning the size and composition of the board of directors, considers any corporate governance issues that arise and develops appropriate recommendations, develops specific criteria for director independence and assesses the effectiveness of the board of directors. Governance and Nominating Committee members are Elysia Holt Ragusa (Chairman), James H. Browning and Ian Turpin. Each member of the Committee is an independent director. The board of directors has adopted a charter for the Governance and Nominating Committee, which is available on the Company’s website atwww.texascapitalbank.com. The Governance and Nominating Committee met eleven times during 2016.
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The Governance and Nominating Committee considers industry knowledge and other business expertise, personal traits such as character, integrity and wisdom, and the candidate’s understanding of business operations, marketing, finance or other aspects relevant to the success of a large publicly traded corporation in today’s business environment, among other factors, when evaluating candidates for the Company’s board of directors. The Committee considers diversity when identifying nominees for director, looking primarily for diversity in professional experiences and skills, but also considering other dimensions of diversity, including gender and cultural background. These considerations ensure the board of directors is comprised of individuals who are able to contribute a variety of viewpoints, which the Committee believes is an important component in ensuring that the board exercises good judgment and diligence. The Committee regularly assesses the sizesubstantial majority of the board of directors, whether any vacancies are expected due to retirement or otherwise, andmust qualify as independent under the need for particular expertise on the board of directors. Candidates may come to the attention of the Committee from current directors, stockholders, professional search firms, officers or other persons. The Committee reviews all candidates in the same manner regardless of the source of the recommendation.
| • | | Audit and Risk Committee. The Audit and Risk Committee oversees the Company’s and the Bank’s processes related to financial and regulatory reporting, risk identification and management, control and compliance. The Audit and Risk Committee also oversees the Company’s internal control over financial reporting, management’s preparation of the financial statements of the Company, and reviews and assesses the independence and qualifications of the Company’s independent registered public accounting firm. The board of directors has adopted a written charter for the Audit and Risk Committee which is available on the Company’s website atwww.texascapitalbank.com. The Audit and Risk Committee appoints the firm selected to be the Company’s independent registered public accounting firm and monitors the performance of such firm, reviews and approves the scope of the annual audit and quarterly reviews and evaluates with the independent registered public accounting firm the Company’s annual audit and annual consolidated financial statements. The Committee also oversees the Company’s internal audit staff, which includes reviewing with management the status of internal accounting controls and evaluating problem areas having a potential financial impact on the Company that may be brought
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| to its attention by management, the independent registered public accounting firm or the board of directors. The Committee also oversees the activities of the Company’s Risk Management Committee, which is chaired by the Company’s CRO and includes the Company’s CEO, CFO, Chief Accounting Officer and the Bank’s director of technology and operations. The Audit and Risk Committee is comprised of four directors, each of whom is independent in accordance with applicable SEC rules and the Nasdaq Stock Market Listing Rules: James H. Browning (Chairman), Charles S. Hyle, Ian J. Turpin, and Patricia A. Watson. The Audit and Risk Committee met five times during 2016.
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The board of directors has determined that all of the committee’s members are able to read and understand fundamental financial statements as contemplated by the currentrelevant listing standards of the Nasdaq Stock Market. The board of directors also determined that three members qualify as “audit committee financial experts” as defined by the SECMarket and therefore satisfy the Nasdaq Stock Market’s financial sophistication requirements as well.
| • | | Human Resources Committee. The Human Resources Committee (“HR Committee”) advises management and makes recommendations to the board of directors with respect to the compensation and other employment benefits of executive officers and key employees of the Company. The HR Committee also administers the Company’s long-term incentive and incentive bonus programs for executive officers and employees. The HR Committee’s Charter is available on the Company’s website atwww.texascapitalbank.com. Each member of the HR Committee is independent in accordance with applicable SEC rules and the Nasdaq Stock Market Listing Rules. The HR Committee members are Dale W. Tremblay (Chairman), Elysia Holt Ragusa and Steven P. Rosenberg. The HR Committee met eight times during 2016. For more information regarding the HR Committee’s processes and procedures for the consideration and determination of executive compensation, see the “Compensation Discussion and Analysis” later in this Proxy Statement.
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| • | | Credit Risk Committee. The Credit Risk Committee oversees the Company’s processes related to identification, management and reporting of credit risk exposures, the determination and adequacy of the allowance for loan and lease losses, and the establishment and administration of the Company’s credit policies consistent with the risk oversight framework established by the board of directors. The Credit Risk Committee’s Charter is available on the Company’s website atwww.texascapitalbank.com. The Credit Risk Committee members are Charles S. Hyle (Chairman), Preston M. Geren III, Larry L. Helm and Robert W. Stallings. Each member of the Committee is an independent director. The Credit Risk Committee met five times during 2016.
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Communications with the Board
Stockholders may communicate with the board of directors, including thenon-management directors, by sending ane-mail tobod@texascapitalbank.com or by sending a letter to the board of directors, c/o Corporate Secretary, 2000 McKinney Avenue, 7th Floor, Dallas, Texas 75201. The Corporate Secretary has the authority to disregard any inappropriate communications or to take other appropriate actions with respect to any such inappropriate communications. If deemed an appropriate communication, the Corporate Secretary will submit your correspondence to the Chairman of the board or to any specific director to whom the correspondence is directed.
Report of the Audit and Risk Committee
The Audit and Risk Committee’s general role is to assist the board of directors in overseeing the Company’s financial reporting process and related matters. The Audit and Risk Committee has reviewed and discussed with the Company’s management and the Company’s independent registered public accounting firm the audited financial statements of the Company for the year ended December 31, 2016.
The Audit and Risk Committee has also discussed with the Company’s independent registered public accounting firm the matters required to be discussed pursuant to the Public Company Accounting Oversight Board Auditing Standard,Communications with Audit Committees. The Audit and Risk Committee has received and reviewed the written disclosures and the letter from the Company’s independent registered public accounting firm pursuant to applicable requirements of the Public Company Accounting Oversight Board regarding communication with audit committees concerning independence, and has discussed with the independent registered public accounting firm the firm’s independence. The Audit and Risk Committee has also considered whether the provision ofnon-audit services to the Company by Ernst & Young LLP is compatible with maintaining their independence, and has determined that such independence has been maintained.
Based on the review and discussion referred to above, the Audit and Risk Committee recommended to the board of directors that the audited financial statements be included in the Company’s Annual Report on Form10-K for the fiscal year ended December 31, 2016, filed with the SEC on February 17, 2017.
This report is submitted on behalf of the Audit and Risk CommitteeSEC. All members of the board of directors other than Mr. Helm qualify as independent under these standards.
Term limits. The board of Texas Capital Bancshares, Inc.James H. Browning, Chairman
Charles S. Hyle
Ian J. Turpin
Patricia A. Watson
Codedirectors does not believe it advisable to establish fixed term limits for directors. As an alternative to term limits, the board of Business Conductdirectors seeks to assure that its members remain active, effective and Ethicsindependent contributors through ongoing performance evaluations and continuing education as contemplated by the Guidelines.
The Company has adopted a CodeReview of Business Conduct and Ethics (“Code of Conduct”) that applies to all its employees, including its CEO, CFO and controller. The Company has made the Code of Conduct available on its website atwww.texascapitalbank.comsignificant responsibility changes. Any amendmentsdirector who retires from his or her principal employment, or who materially changes the responsibilities of his or her principal employment, must tender a letter of resignation to or waivers from, our Codethe board of Conduct applicabledirectors. The board of directors will determine whether to our executive officers will be postedaccept the resignation based on our website within four daysthe recommendation of such amendment or waiver.the Governance and Nominating Committee after its review of the circumstances.COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTDirector compensation. Director compensation includes a substantial equity component representing approximately half of each director’s annual compensation in order to align director interests with the long-term interests of stockholders.
Director stock ownership. The following tables set forth information asboard of February 22, 2017 concerningdirectors has established stock ownership guidelines for directors in order to further align their interests with the beneficial ownershiplong-term interests of stockholders. Directors are expected to own common stock having a value of at least three times the cash portion of the annual retainer paid to outside directors, and may not dispose of any shares of the Company’s common stock by: (a) each person the Company knowsunless they own, and will continue to beneficially own, more than 5% of the issued and outstanding shares of a class of common stock (b) each director, director nomineewith a value at or above that level.
Executive pay governance and namedstock ownership. As discussed in more detail below at “Executive Compensation – Compensation Discussion and Analysis”, the Guidelines include policies addressing:
Executive stock ownership;
Elimination of excise tax gross-ups with respect to executive officer (“NEO”),compensation received upon a change in control;
No “single trigger” payment or acceleration of benefits upon a change in control; and (c) all
“Clawback” of incentive compensation upon a restatement of the Company’s NEOsfinancial statements, as further described below.
Access to independent advisors. The board of directors and each committee may, as it deems necessary or
appropriate, obtain advice and assistance from independent, outside financial, legal, accounting, human resources or other advisors, at the expense of the Company.
Annual evaluation. The board of directors and each committee conduct annual evaluations of their performance. The Governance and Nominating Committee assists the evaluation process and annually evaluates and recommends each candidate for election or re-election as a group. The persons nameddirector in the table have sole voting and investment power with respect to all shares they owned, unless otherwise noted. In computing the number of shares beneficially owned by a person and the percentage of ownership held by that person, shares of common stock subject to options, restricted stock units (“RSUs”) or stock appreciation rights (“SARs”) held by that person that are currently exercisable or will become exercisable within 60 days of February 22, 2017 are deemed exercised and outstanding. | | | | | | | | |
Persons Known to Company Who Own More Than 5% of Outstanding Shares of Company Common Stock | | Number of Shares of
Common Stock
Beneficially Owned | | | Percent of Shares
of Common Stock
Outstanding* | |
BlackRock, Inc. and certain affiliates | | | 5,968,334 | (1) | | | 12.04 | % |
T. Rowe Price Associates, Inc. | | | 4,396,725 | (2) | | | 8.87 | % |
The Vanguard Group, Inc. and certain affiliates | | | 4,085,411 | (3) | | | 8.24 | % |
* | Percentage is calculated on the basis of 49,557,572 shares, the total number of shares of common stock outstanding on February 22, 2017. |
(1) | As reported by BlackRock, Inc. on a Schedule 13G/A filed with the SEC on January 17, 2017, as of December 31, 2016, reporting sole voting power with respect to 5,850,400 shares and sole dispositive power with respect to 5,968,334 shares. Its address is 55 East 52nd St., New York NY 10055.
|
(2) | As reported by T. Rowe Price Associates, Inc. on a Schedule 13G/A filed with the SEC on February 7, 2017, as of December 31, 2016, reporting sole voting power with respect to 777,103 shares and sole dispositive power with respect to 4,396,725 shares. Its address is 100 East Pratt St., Baltimore MD 21202. |
(3) | As reported by Vanguard Group, Inc. on a Schedule 13G/A filed with the SEC on February 10, 2017, as of December 31, 2016, reporting sole voting power with respect to 62,200 shares, shared voting power with respect to 5,041 shares, sole dispositive power with respect to 4,020,852 shares and shared dispositive power with respect to 64,559 shares. Its address is 100 Vanguard Blvd., Malvern PA 19355. |
| | | | | | | | |
| Name(1) | | Number of Shares
of Common Stock
Beneficially Owned | | | Percent of Shares of
Common Stock
Outstanding | |
Vince A. Ackerson | | | 13,634 | (2) | | | * | |
Julie L. Anderson | | | 23,757 | | | | * | |
Peter B. Bartholow | | | 25,000 | | | | * | |
James H. Browning | | | 9,747 | (3) | | | * | |
C. Keith Cargill | | | 38,981 | | | | * | |
Preston M. Geren III | | | 3,772 | | | | * | |
Larry L. Helm | | | 20,691 | (4) | | | * | |
John D. Hudgens | | | 2,983 | | | | * | |
Charles S. Hyle | | | 1,272 | | | | * | |
Elysia Holt Ragusa | | | 6,547 | (5) | | | * | |
Steven P. Rosenberg | | | 35,747 | (6) | | | * | |
Robert W. Stallings | | | 6,347 | (7) | | | * | |
Dale W. Tremblay | | | 4,747 | | | | * | |
Ian J. Turpin | | | 36,822 | (8) | | | * | |
Patricia A. Watson | | | 1,623 | (9) | | | * | |
All executive officers and directors as a group | | | 231,670 | | | | 0.47 | %** |
* | Less than 1% of the issued and outstanding shares of the class. |
** | Percentage is calculated on the basis of 49,557,572 shares, the total number of shares of common stock outstanding on February 22, 2017. |
(1) | Unless otherwise stated, the address for each person in this table is 2000 McKinney Avenue, 7th Floor, Dallas, Texas 75201.
|
(2) | Includes 11,945 shares held by Mr. Ackerson and 1,689 shares held by JAKS Partners, LTD. Mr. Ackerson is the general partner of JAKS Partners. |
(3) | Includes 6,747 shares held by Mr. Browning. Also includes 3,000 vested SARs. |
(4) | Includes 9,691 shares held by Mr. Helm. Also includes 11,000 vested SARs. |
(5) | Includes 3,547 shares held by Ms. Ragusa. Also includes 3,000 vested SARs. |
(6) | Includes 26,747 shares held by Mr. Rosenberg. Also includes 9,000 vested SARs. |
(7) | Includes 5,747 shares held by Mr. Stallings. Also includes 600 vested SARs. |
(8) | Includes 5,726 shares held by Mr. Turpin. Also includes 5,951 shares held by Johnson Management Trust, 14,641 shares held by The Nini Gift Trust and 1,904 shares held in the Rebekah Johnson Nugent 1976 Trust, each of which Mr. Turpin’s spouse serves as the trustee. Also includes 8,600 vested SARs. |
(9) | Includes 642 shares held by Ms. Watson. Also includes 981 shares of restricted common stock as to which restrictions will lapse as to one-half of the shares on each of February 16, 2018, and 2019, but for which she has voting power. |
EXECUTIVE COMPENSATION
Executive Officers
Our named executive officers (“NEOs”) for 2016, and the positions held by them on December 31, 2016 are:
C. Keith Cargill,President and CEOview of the Companyneeds and President and CEO of Texas Capital Bank.Mr. Cargill, age 64, has served as President and Chief Executive Officer (“CEO”)then-current make-up of the Company and as a memberboard of directors.
Executive sessions of the board of directors since January 1, 2014. He has served as CEOand committees. The non-management directors meet in regularly scheduled executive sessions of the Bank since June 2013, after becoming President of the Bank in October 2008. He served as Chief Lending Officer of the Bank since its inception in December 1998 through July 2013. Mr. Cargill has more than 25 years of banking experience in the North Texas area.Peter B. Bartholow,CFO and COO of the Company and COO of Texas Capital Bank.Mr. Bartholow, age 68, has served as Chief Financial Officer (“CFO”) and as a director since October 2003 and as Chief Operating Officer (“COO”) since January 2014. Prior to joining us in 2003, he was managing director of a private equity firm, served as a financial executive with Electronic Data Systems Corp., and spent many years in the banking industry as an executive officer and member of the boards of both public and private companies.
John D. Hudgens,Chief Risk Officer of the Company and Chief Risk Officer of Texas Capital Bank.Mr. Hudgens, age 61, assumed the role of Chairman of the Company’s Risk Management Committee in 2009, and in that role became the Chief Risk Officer of Texas Capital Bank. Additionally, he has served as the Company’s Chief Risk Officer since May 2014. He also served as Chief Credit Officer of Texas Capital Bank from January 1999 to August 2016.
Vince A. Ackerson,Texas President and Chief Lending Officer of Texas Capital Bank.Mr. Ackerson, age 60, has served as Texas President and Chief Lending Officer of Texas Capital Bank since July 2013. Prior to holding this position, he served as Dallas Regional President since October 2008 and was previously Executive Vice President of Dallas Corporate Banking since the Bank’s inception in December 1998.
Julie L. Anderson,Controller, Chief Accounting Officer, and Secretary of the Company and CFO of Texas Capital Bank.Ms. Anderson, age 48, has served as the Company’s Controller since February 1999 and Chief Accounting Officer since December 2003. In July 2013, she assumed the role of CFO of Texas Capital Bank and in May 2014, she assumed the role of Secretary of the Company.
Compensation Discussion and Analysis
This Compensation Discussion and Analysis describes our compensation programs and explains our compensation philosophy, policies and practices with respect to the NEOs identified above.
In view of the Company’s competitive performance, historical earnings levels and growth in earnings, the HR Committee believes that the Company’s current executive compensation philosophy and practices are successful in providing stockholders with talented, dedicated executive officers at competitive compensation levels.
2016 Financial Highlights
Net income of $155.1 million, increasing 7% from 2015 and 14% from 2014;
Net interest income of $639.8 million compared to $556.5 million in 2015;
Earnings per share of $3.11 compared to $2.91 in 2015 and $2.88 in 2014;
11% increase in traditional loans held for investment;
8% increase in total mortgage finance loans, including Mortgage Correspondent Aggregation (“MCA”) loans;
13% increase in deposits and 25% increase innon-interest bearing deposits compared to prior year; and
Efficiency ratio of 54.6%.
The Company performed well in 2016, reporting record net income of $155.1 million. We benefitted from continued growth in both traditional loans held for investment, which increased 11%, and total mortgage finance loans, including MCA loans, which increased 8%, in 2016 compared to 2015. At the same time we maintained strong credit discipline despite increases in net charge-offs, which were primarily related to energy, achieved significant growth in deposits, particularlynon-interest bearing deposits, and controlled expenses despite increases in costs due to the continued build out of our operations to support our growth and regulatory compliance. Our net interest income reached a record of $639.8 million, primarily due to an increase of $2.6 billion in average earning assets. These results were accomplished organically without dilutive acquisitions and are consistent with the Company’s high level of performance over the past five years. At $3.11 per share, including the dilutive effects of our common stock offering of 3.5 million shares in the fourth quarter, 2016 was the best earnings per share (“EPS”) year for our stockholders in our history.
While our 2016 results were positive, we responded to a number of challenges in 2016, primarily related to a 44.6% increase in the provision for credit losses, from $53.2 million in 2015 to $77.0 million in 2016, as a result of continued volatility in the energy sector and general loan growth. Our energy lending portfolio produced strong headwinds in terms of continued higher levels of criticized andnon-performing loans. The continued low interest rate environment and the substantial growth in liquidity assets kept our 2016 net interest margin flat at 3.14% for the year compared to the 3.14% reported in 2015 and 3.78% reported in 2014.
The Company has added to its capital through common stock offerings three times in the past three years, once in 2016 and twice in 2014, increasing the number of outstanding shares significantly, which has made achieving EPS growth in 2014, 2015 and 2016 more difficult. We increased liquidity assets from $1.2 billion at the end of 2014 to $2.7 billion at the end of 2016, funded primarily throughlow-cost deposits. The increase in liquidity assets, which earned just 0.52% in 2016 as Federal Reserve Bank deposits, has reduced our return on assets (“ROA”) although we continued to earn a small positive spread against our funding cost. These challenges and their effect on our 2016 results impacted the 2016 incentive compensation of our executives.
Executive Summary
Our compensation philosophy demands that executive compensation track appropriately to the Company’s economic performance, not just management’s performance. The HR Committee and the board of directors believe that our management’s overall performance in 2016 was outstanding, particularly in view of the $23.8 million increase in the provision for credit losses and increased regulatory costs. Notably, the Company outperformed other banks in our peer group, a majority of which were not similarly affected by the volatility in the energy industry and its actual and projected impact on the Texas economy.
committees without any management directors or other management present.
The HR Committee believes that executive pay and performanceProhibition of the Company continue to be strongly aligned. We increased the base compensation of our NEOs in 2016 to address specific instances of increased responsibilities and performance expectations as well as to maintain reasonable parity with the 50thpoison pill. percentile of our compensation peer group. NEO base compensation was adjusted in 2016 in responseSubject to the resultsexercise of the biennial peer compensation analysis overseen by the HR Committee.Average payouts of annual cash incentiveits fiduciary duties to the NEOs for 2016 ranged between 55% and 84% of the executive’s base salary, with an average payout of 70%. This compares to a 2015 payout range of 47% to 57%, with an average 2015 payout of 48%, and a 2014 payout range of 72% to 100%, with an average 2014 payout of 83%. In each of 2014, 2015 and 2016 the HR Committee set the aggregate incentive amount, or pool, at 7%, 7%, and 8%, respectively, ofpre-tax,pre-annual incentive income based on the committee’s consideration of the profitability of the Company, performance of individual business units, number of participants, amounts guaranteed to new officers and other factors. For 2016, the HR Committee used EPS, ROA and tangible book value (“TBV”) to determine incentive compensation payouts, as further described underAnnual Incentive Compensation below. The financial parameters set for each year’s short-term incentive compensation place an effective cap on the amounts that may be awarded and limit the HR Committee’s discretion in determining the payout.
Long-term incentive compensation payouts in 2016 were adversely impacted by a number of factors. The performance vesting portions of the long-term grants of cash-settled performance units (“Performance Units”) made to the NEOs in 2014 (50%) were based on EPS and ROA targets set in 2014 and did not anticipate, and were not adjusted for, the increase in the provision for credit losses in 2016 resulting from the decline in energy prices or the large increase in liquidity assets in 2015 and 2016 that significantly lowered ROA results. As a consequence, the NEOs received no payout related to the performance-based portion of the cash-settled Performance Units in 2016. The remainder of the 2016 long-term compensation was attributable to the time-vested portions of the 2014 awards (50%). The 2016 vested long-term incentive payouts for the four NEOs who received these grants in 2014 represented an average decrease of 19% when compared to 2015 and an average decrease of 60% when compared to 2014. Partial adjustments to 2014 and 2015 vestings were made for the EPS impact of the 2014 common stock offerings described above, which further impacted the comparison.
As described in more detail below under “Equity Incentive Philosophy”, the HR Committee determined that long-term incentives granted in 2015 and subsequent years to the NEOs will be settled in shares of common stock rather than cash in order to support the accumulation of larger amounts of common stock directly owned by the NEOs. The grants of these stock-settled awards in 2015 and 2016 are reflected in the Summary Compensation Table under the column labeled “Stock Awards.” The accounting for and proxy statement presentation of stock-settled awards is different from cash-settled Performance Units. Stock-settled awards are required to be recognized as compensation expense in the year they are granted based upon an analysis of the probable outcome of the award to the NEO over the ensuing three years, without regard to whether the awards actually vest in future years.Cash-settled awards, on the other hand, are only recognized when they vest, in the amount paid to the NEO. These awards, when vested, appear in the Summary Compensation Table as“Non-Equity Incentive Plan Compensation” under the column labeled “Long-Term Incentive Plan Compensation.”
As a result of the disparity in accounting treatment and proxy statement disclosure between cash-settled and stock-settled units, the Summary Compensation Table for 2015 and 2016 effectively double-counts the long-term incentive awards to the NEOs (only 2016 for Ms. Anderson, who did not receive a stock-settled long-term incentive award in 2015), making their 2015 and 2016 total compensation amounts appear larger than were actually realized.
Objectives of Executive Compensation
We seek to provide a compensation package for our NEOs that is driven primarily by the overall financial performance of the Company. We believe that the performance of each of the executives impacts our overall long-term profitability and, therefore, have the following objectives for our executive compensation programs:
to provide motivation for the NEOs and to enhance stockholder value by linking their compensation to the value of our common stock;
to allow the Company and the Bank to attract and retain highly qualified executive officers by providing total compensation opportunities consistent with those provided in the industry and commensurate with the Company’s business strategy and performance objectives;
to maintain reasonable “fixed” compensation costs by targeting base salaries at competitive levels; and
to assure that the NEO’s objectives have been achieved without imposing excessive risk toits stockholders, and that appropriate standards related to asset quality, capital management, expense management relative to revenue and the funding composition and level to support loan growth have been maintained.
Oversight of Executive Compensation Program
The HR Committee of our board of directors oversees our executive compensation programs. Each member of the HR Committee is an “independent director” as defined by the Nasdaq Stock Market Listing Rules. With approval by the board, the HR Committee has developed and applied a compensation philosophy that focuses on a combination of competitive base salary and incentive compensation, including cash and equity-linked programs, which are directly tied to performance and creation of stockholder value. The objective for the executive officers and key employees is to have a substantial portion of total compensation derived from performance-based incentives.
The HR Committee meets throughout the year, including conferences, formal meetings and discussions with consultants and management and review of compensation-related materials. The HR Committee works with executive management, primarily our CEO, in assessing the compensation approach and levels for our executive officers and key employees, other than his own compensation. The HR Committee is empowered to advise management and make recommendations to the board of directors with respect towill not authorize the overall executive compensation and employment benefits, philosophy and objectivesissuance of any of the Company. The HR Committee establishes objectivesCompany’s preferred stock for defensive or anti-takeover purposes without the Company’s CEO and sets the CEO’s compensation based, in part, on the evaluationprior approval of peer group data. The HR Committee also reviews and recommends to the board the Company’s annual and long-term incentive plans for executive officers and key employees.
stockholders.
The HR Committee regularly reviews the Company’s compensation programs to ensure that remuneration levels and incentive opportunities are competitive and reflect performance. Factors taken into account in assessing the compensation of individual officers may include the Company’s overall performance, the officer’s experience, performance and contribution to the Company, the achievement of strategic goals, external equity and market value, internal equity, fairness and retention priority. The various components of the compensation programs for the NEOs are discussed below in the “Executive Compensation Program Overview”. There are no material differences in compensation policies for each of the five NEOs, as all relate primarily to performance and contribution in achieving consolidated results. In the case of the four NEOs other than the CEO, the CEO makes recommendations to the HR Committee about each of their individual total compensation levels. The HR Committee may delegate to the CEO the allocation of certain salary increases or annual incentive amounts for the other four NEOs.Compensation Risk Oversight
The HR Committee regularly reviews all compensation plans to identify whether any the Company’s or the Bank’s compensatory policies or practices incentivize behavior that creates excessive or unnecessary risk to the Company. In 2016, the HR Committee conducted its annual compensation risk assessment with the assistance of Frederic W. Cook & Co, Inc., its independent compensation advisor. The HR Committee also undertook a targeted risk review of the Bank’s incentive programs at all levels in response to recent widely publicized disclosures of control failures in retail bank incentive programs. Based upon the results of
these assessments, the HR Committee determined that our compensation program does not create risks that are reasonably likely to have a material adverse effect on the Company.
Communication with Stockholders
The HR Committee monitors the results of our annual advisory vote on executive compensation each year. Our advisorysay-on-pay proposal at the 2016 annual meeting of stockholders received an affirmative vote of 97.2% in favor of our 2015 executive compensation. The Company maintains active engagement with our stockholders, communicating directly with the holders of more than 80% of our outstanding common stock each year regarding the Company’s performance and responding to any questions or issues they may raise. We encourage stockholders to communicate with us regarding our corporate governance and executive compensation. Communications from stockholders on these subjects are reported to the HR Committee or the Governance and Nominating Committee, as appropriate.
Clawback of Incentive Compensationincentive compensation.
Our Corporate GovernanceThe Guidelines include a policy providing that incentive compensation payable to our NEOsexecutive officers under certain of the Company’s incentive compensation arrangements will be subject to recovery by the Company if, in the year such compensation is paid, or within three years thereafter, the Company is required to prepare an accounting restatement due to the Company's material noncompliance of the Company with any financial reporting requirement under applicable securities laws. The repayment obligation applies to the extent repayment is required by applicable law, or to the extent the executive’s compensation is determined to be in excess of the amount that would have been payable taking into account any restatement or correction. The board of directors, considering the best interests of the Company and its stockholders and the recommendation of the HRHuman Resources Committee, has the sole discretion to determine whether an executive’s actions have or have not met any particular standard of conduct under law or Company policy, and whether recovery of incentive compensation should be pursued.
Equity Incentive PhilosophyIn 2014 the Company issued cash-settled Performance Units to its NEOs as their primary long-term equity incentive, a portion of which vest based on the attainment of certain performance metrics developed by the HR Committee and the balance of which vest on the third anniversary of the date of grant if the NEO is employed by the Company or is eligible for approved retirement. The HR Committee determined that 2015 and 2016 equity incentives would be settled in shares of common stock rather than cash in order to support the accumulation of larger amounts of directly- owned shares of common stock by the NEOs. It is expected that grants in future years will similarly emphasize the accumulation of direct ownership of common stock.
The cash-settled awards in 2014 were intended to balance the interest of the Company in providing an incentive to its executives that would vary based upon the performance of the Company’s common stock with the interest of stockholders in experiencing less dilution of their ownership of the Company resulting from the Company’s employee compensation program. The Company performed at or near the top of its peer group over this time period while having less dilution to its stockholders resulting from its employee compensation programs. The HR Committee believes that the direct ownership of substantial amounts of common stock combined with the cash-settled and stock-settled incentives issued over the past three years combine to strongly align the interests of the Company’s senior executive officers with the interests of stockholders.
The following table is provided to indicate the substantial value at risk (VAR) for each of the NEOs resulting from their directly owned common stock, unvested RSUs and unvested cash-settled Performance Units.
| | | | | | | | | | | | | | | | | | | | |
| Name | | Shares
Owned(A) | | | Unvested
Stock-Settled
RSUs(B) | | | Unvested Cash-Settled Units(C) | | | Value at
Risk(D) | | | VAR as % of
2016 Base Salary | |
C. Keith Cargill | | | 38,981 | | | | 34,192 | | | | 9,911 | | | $ | 6,148,216 | | | | 683 | % |
Peter B. Bartholow | | | 25,000 | | | | 19,396 | | | | 7,177 | | | | 3,816,402 | | | | 763 | % |
John D. Hudgens | | | 2,983 | | | | 17,370 | | | | 6,408 | | | | 1,980,314 | | | | 417 | % |
Vince A. Ackerson | | | 13,634 | | | | 16,978 | | | | 5,639 | | | | 2,682,574 | | | | 559 | % |
Julie L. Anderson | | | 23,757 | | | | 6,306 | | | | 5,526 | | | | 2,633,586 | | | | 684 | % |
(A) | Shares owned are as of December 31, 2016. |
(B) | Represents RSUs subject to vesting in 2018 and 2019 based upon award grants made in 2015 and 2016 to then-serving NEOs based upon the Company’s achievement of certain performance measures and the executive’s continued employment by the Company. See “Executive Compensation — Compensation Discussion and Analysis — Long-Term Incentives.” |
(C) | Represents cash-settled Performance Units subject to vesting in 2017 based upon award grants made in 2014 to then-serving NEO’s based upon the Company’s achievement of certain performance measures and the executive’s continued employment by the Company. See “Executive Compensation — Compensation Discussion and Analysis — Long-Term Incentives.” Ms. Anderson received only time-vested cash units during 2014. |
(D) | Based on December 1, 2016 stock price of $74.00, as contemplated by the executive stock ownership guidelines. |
The HR Committee considers the returns realized by stockholders through increases or decreases in the price of the Company’s common stock in the course of establishing NEO equity incentive compensation performance targets, but has determined that it would be inappropriate to base specific incentive compensation award amounts on stockholder return measures such as total stockholder return (“TSR”). This is primarily based upon concern that the Company’s NEO compensation measures not incent excessive risk-taking behavior in times such as 2015 and 2016 when market perceptions of matters outside of our executives’ control, such as future commodity price risk, interest rate changes or the expectation of future easing of regulatory compliance costs, introduce significant volatility into our stock price.
The HR Committee does not believe that strict benchmarking of the Company’s stock price performance against other banking organizations having substantially different business models, funding sources and growth and earnings trajectories will produce an appropriate correlation between the Company’s economic achievements and its executive compensation. The HR Committee believes that basing vesting of incentive compensation on TSR or similar measures can produce unfairness to our executives or to our stockholders due to unforeseeable changes in economic conditions, short-term volatility in our stock price and lack of comparability to the business models of other banks.
The Company’s NEO compensation arrangements place a large amount of each individual’s future compensation “at risk” relative to the performance of the Company’s common stock. Our NEOs’ significant investments in our common stock, as required by our executive stock ownership guidelines also make our executives sensitive to declines in our stock price. Our performance measures such as EPS, ROA and increases in tangible book value that are based on the Company’s financial performance take into account the importance of balancing the risk appetite and risk management framework established by the board of directors, regulatory expectations for safe and sound operation of a federally insured bank and the desire and ability of our executive leadership and employees to achieve long-term, sustainable growth in stockholder value.
Executive Stock Ownership Guidelines
Our Corporate Governance. The Guidelines include stock ownership guidelines for the NEOs in order to further align their interests with the long-term interests of stockholders. NEOs are expected to own common stock having a value of at least three times their base compensation (five times for the CEO), and may not dispose of any shares of the Company’s common stock unless they own, and will continue to own, common stock at that level. Unvested restricted stock, restricted stock units, stock options and stock appreciation rights are not included in an executive’s stock ownership for purposes of this policy. All of the currently serving NEOs are in compliance with the Company’s stock ownership policy, and as of the date of this Proxy Statement Mr. Bartholow andCargill, Ms. Anderson haveand Mr. Ackerson had each reached the target levelslevel of share ownership.
ownership specified by the Guidelines.
Hedging of Company securities prohibited. All Company directors, officers and employees are prohibited from purchasing any financial instrument that is designed to hedge or offset any decrease in the market value of Company securities, and from participating in derivative or speculative transactions with respect to Company securities, including but not limited to prepaid variable forward contracts, collars, equity swaps, exchange funds, puts, calls and other derivative instruments. All directors, officers and employees are also prohibited from participating in short sales of the Company’s securities.
Pledging of Company securities prohibited. Directors and officers who are reporting persons under Section 16 of the Exchange Act and such additional employees as may be designated by the Governance and Nominating Committee are prohibited from holding Company securities in a margin account or otherwise pledging Company securities as collateral for a loan.
Stockholder Engagement - Response to Withhold Voting at 2019 Annual Meeting
At the Company’s Annual Meeting of Stockholders held on April 16, 2019 (the “2019 Annual Meeting”), Ms. Ragusa, chair of the Governance and Nominating Committee (the “GNC”), received more “withhold” votes than “for” votes, and Messrs. Browning and Turpin, also members of the GNC, while receiving a majority of “for” votes, also received significant numbers of “withhold” votes. As required by the Guidelines, Ms. Ragusa tendered her offer of resignation to the board of directors. Based upon the considerations discussed below, and particularly the commitment of the board of directors to fully respond to the issues that were identified as the cause of the significant “withhold” voting, the GNC (with Ms. Ragusa recused) recommended that the board of directors reject Ms. Ragusa’s resignation. The board of directors (with Ms. Ragusa recused) concurred with such recommendation and voted unanimously to decline Ms.
Ragusa’s resignation. These actions were reported in the Company’s Current Report on Form 8-K filed with the SEC on July 11, 2019 (the “July 2019 Form 8-K”).
As contemplated by the Guidelines, the GNC considered Ms. Ragusa’s offered resignation in view of factors that it deemed relevant, including without limitation:
the apparent reason why stockholders withheld their votes;
available alternatives to cure the underlying cause of the “withhold” voting;
Ms. Ragusa’s length of service and qualifications;
Ms. Ragusa’s past and expected future contributions to the Company;
the composition of the Board, including the mix of skills, attributes and diversity of experience and viewpoints provided to the Company; and
other relevant matters, all as further described in the July 2019 Form 8-K.
Based upon the considerations discussed herein, and specifically the actions of the board of directors to fully respond to the issues that led to the significant “withhold” voting at the 2019 Annual Meeting, including the binding stockholder vote on Proposal Four as described above in this Proxy Statement, the board of directors respectfully requests that the Company’s stockholders vote “FOR” all director nominees.
In its evaluation of the majority “withhold” vote, the GNC and the board of directors concluded that the principal reason for the significant number of “withhold” votes at the 2019 Annual Meeting was the recommendation of proxy advisory firms that stockholders withhold their votes in response to the board of directors’ approval of certain amendments to the Company’s Bylaws that became effective in November 2018 (the “November 2018 Bylaw Amendments”) without submitting such amendments to a stockholder vote. The specific objectionable provisions of the November 2018 Bylaw Amendments cited by the proxy advisory firms prior to the 2019 Annual Meeting were those that (i) increased the stock ownership requirement for stockholders to call a special meeting of stockholders from 10% to 20% (the “Special Meeting 20% Ownership Requirement”) and (ii) required that such requesting stockholders have held their shares for a period of at least one year (the “1 Year Holding Period Requirement”). These actions were characterized by the proxy advisory firms as a material diminution in stockholder rights, with the absence of disclosure of stockholder engagement relating to the November 2018 Bylaw Amendments also cited as a concern. Management confirmed these conclusions through informal discussions with a few of the Company’s larger stockholders that cast “withhold” votes at the 2019 Annual Meeting independently of the proxy advisory firm recommendations.
The board of directors acted promptly in response to the 2019 “withhold” voting. At its meeting following the 2019 Annual Meeting, the board of directors directed management to undertake immediate outreach to a number of the Company’s largest stockholders to assess their perspectives related to the November 2018 Bylaw Amendments and the “withhold” voting at the 2019 Annual Meeting and identify actions that would be responsive to their specific concerns. The conclusions resulting from those initial conversations were that:
Several of the stockholders contacted opposed the 1 Year Holding Period Requirement; and
Several of the stockholders contacted indicated that they were not opposed to the Special Meeting 20% Ownership Requirement, but had a strong preference that it be submitted to a stockholder vote.
In response to these initial findings, on July 8, 2019, the board of directors unanimously approved an amendment to the Company’s Bylaws to delete the 1 Year Holding Period Requirement and directed management to engage in further outreach to stockholders to determine their interest in seeing the Special Meeting 20% Ownership Requirement submitted to a vote of stockholders at the 2020 Annual Meeting. That further stockholder outreach occurred in September and October 2019 and included the Company’s 20 largest stockholders. In response to stockholder communications during that outreach and those occurring earlier in 2019, the board of directors has directed that Proposal Four be submitted to a binding vote of the Company’s stockholders at the Annual Meeting, as described elsewhere herein.
The actions of management and the board of directors in adopting the November 2018 Bylaw Amendments showed appropriate regard for stockholder interests. Commencing in June 2018, the GNC undertook an evaluation of the Company’s Bylaws as then in effect, which were substantially unchanged from the time of the Company’s initial public offering in 2003. The objective of this review was to update the Bylaws to reflect terms and policies appropriate for
the Company and comparable to similarly situated issuers. The information considered in this process included Delaware law and judicial decisions, SEC rules relating to the stockholder meeting and proxy process, Bylaws adopted by peer bank holding company issuers, published proxy voting policies of the Company’s largest stockholders, the published proxy voting policies of proxy advisory firms and the results of recent public company stockholder meeting activity that focused on certain key Bylaw provisions. The revised Bylaws, including a redline showing changes made and a description of the material changes, along with an invitation to stockholders to communicate with the board of directors, were filed with the SEC as an exhibit to a Current Report on Form 8-K on November 5, 2018 (the “November 2018 Form 8-K”).
The publicly available policy statements of the proxy advisory firms and large institutional investors available to support the review of the Bylaws in 2018 were not understood by the Company to require that the adoption of Bylaw provisions such as the Special Meeting 20% Ownership Requirement and the 1 Year Holding Period Requirement be subjected to stockholder vote. The Company believed that the disclosures in the November 2018 Form 8-K, supported by the Company’s regular annual stockholder engagement, would provide stockholders the opportunity to comment on the Bylaw changes and would allow the board of directors to address any stockholder concerns in an appropriately deliberate manner. During the period leading up to the mailing of the proxy statement for the 2019 Annual Meeting in early March 2019, only one stockholder, owning significantly less than 1% of the Company’s outstanding shares, communicated to management its objection to the Special Meeting 20% Ownership Requirement and 1 Year Holding Period Requirement.
The absence of expressed concerns regarding the November 2018 Bylaw Amendments in the months following their adoption was viewed as confirming the board of directors’ belief that the revised Bylaws were reasonable and in line with the expectations of stockholders generally. As a result, the Company did not provide an expanded disclosure of the rationale for the Bylaw amendments in the proxy statement for the 2019 Annual Meeting or pursue focused stockholder engagement at that time, nor did it undertake active engagement with the proxy advisory firms. When the negative recommendations of the proxy advisory firms and extent of the resulting “withhold” voting became apparent shortly before the 2019 Annual Meeting, the Company determined that further stockholder engagement as described above would be preferable to soliciting stockholders providing “withhold” votes to change their votes or engaging with the proxy advisory firms regarding their recommendations during the short time available before the 2019 Annual Meeting.
Corporate Social Responsibility
Our purpose is to power prosperity in business and in life. Acting responsibly in all that we do is central to that mission and to creating sustainable value for all of our stakeholders. We take a comprehensive approach to corporate social responsibility that includes investing in our communities, creating a culture of strong corporate governance, and continuing our focus on sustainable business practices. We believe that this approach enables us to more effectively serve our stockholders, clients, communities, and colleagues.
Community Investment
We have established ourselves as a leader in the community by making strategic financial investments and by promoting a strong corporate culture of volunteerism. Throughout 2019 we were able to provide a wide range of support to our communities, including:
$3.4 billion in investments to help stabilize low- to moderate-income communities. Through these investments, 1,091 multifamily and 967 single-family affordable housing units and 150 permanent jobs were created in the communities that we serve.
$2.6 million in corporate donations made to non-profits with a focus on education, health & wellness, and community relations. Through these corporate donations, 170,931 families received food assistance, 61,152 underserved families received health services, and 1,333 children received tutoring.
11,128 hours spent by our colleagues on volunteer opportunities to serve our communities. These opportunities ranged from community projects to tutoring to board service.
1,233 individuals enrolled in financial literacy training via our Mobile Banking Center, an increase of 36% from the prior year. Our Mobile Banking Center travels throughout the communities that we serve to offer financial literacy services to underserved communities.
Sustainable Business Practices
We are focused on operating our business in a sustainable manner, as we believe it better serves our communities and also has a positive effect on operating expenses.
Our corporate headquarters is located in a leased building that has been designated as a U.S. Green Building Council Leaders in Energy and Environmental Design (LEED) Gold level building. Additionally, our branch-light operating philosophy has allowed us to avoid the impact on the environment of operating a large number of facilities.
Our lending agreements require that energy industry and real estate construction clients comply with all applicable federal, state and local environmental regulatory requirements. The Company is proud to support clients who excel in sustainable business practices, including the following:
An energy client that is a leading residential solar and energy storage provider, delivering clean, affordable, and reliable energy to customers across the U.S. and its territories.
A client that is creates products from recycled plastic, agricultural waste and natural resources, while at the same time aiding in the fight against deforestation in the United States.
Actions in Response to the COVID-19 Pandemic
In March 2020, the outbreak of COVID-19 was recognized as a pandemic by the World Health Organization. The spread of COVID-19 has created a global public health crisis that has resulted in unprecedented uncertainty, volatility, and disruption in financial markets and in governmental, commercial and consumer activity in the United States and globally, including the markets that we serve. Our top priority during this time has been the health and welfare of our clients, colleagues, and communities. A number of initiatives have been implemented in response to COVID-19 as detailed below:
90% of our employees have been working virtually since March 2020, with limited impact on the execution of our business and client experience.
$717.5 million in Paycheck Protection Program loans were funded through June 30, 2020 to provide liquidity to borrowers impacted by the COVID-19 pandemic.
We implemented a short-term loan modification program to provide temporary relief to clients.
We deployed our Mobile Banking Center to a local hospital in Dallas, Texas where a mobile COVID-19 testing center had been set up. The Mobile Banking Center has served as a space of refuge for medical staff to rest in a private area with fully equipped facilities and, when needed, as an additional testing site.
Risk Oversight
Our board of directors is responsible for oversight of management and the business and affairs if the Company, including the management of risk. The board of directors oversees an enterprise-wide approach to risk management, intended to support the achievement of strategic objectives to optimize our organizational performance and enhance stockholder value while operating within the guidelines of our risk appetite statement. While the board of directors has the ultimate oversight responsibility for the risk management process, the board has authorized various committees to provide primary oversight of the Company’s enterprise risk management program. In addition, management has established an Executive Risk Committee (“ERC”) comprised of executives responsible for all major categories of risk to provide management oversight and guidance related to the Company’s enterprise risk management, including the CEO, the CFO, and the Chief Lending Officer. The ERC updates the Company's risk appetite statement and enterprise risk management policy on an annual basis and establishes various risk tolerances focused on quantitative and qualitative key risk indicators, which are ultimately approved by the board of directors.
The Risk Committee is charged with oversight of the Company’s management of credit, liquidity, strategic, market, operational (which includes information technology and cybersecurity), compliance, financial, and capital adequacy risk, including the annual review and approval of the Company's risk management framework and review and recommendation to the board of directors of the Company's risk appetite statement. The Risk Committee oversees the activities of the ERC, which is chaired by the Company's Chief Risk Officer ("CRO"), who has a direct reporting relationship to the Risk Committee. The Audit Committee assists the board of directors in monitoring the Company’s
financial reporting risk, which includes the appropriateness of the allowance for credit losses, and regulatory compliance risk. The Human Resources Committee, in conjunction with its annual review and approval of the compensation of the Company’s CEO and senior management, considers whether the Company’s incentive plans encourage participants to take risks that would be reasonably likely to have a material adverse impact on the Company, and to the extent necessary, reviews and discusses with management any related risk mitigation features determined to be advisable.
Director Independence
The board of directors has determined that each director other than Mr. Helm qualifies as an “independent director” as defined in the Nasdaq Stock Market Listing Rules and as further defined by applicable statutes and regulations.
Board Leadership Structure
On May 25, 2020, Larry L. Helm, chairman of the board, succeeded C. Keith Cargill as CEO and president of the Company while the board of directors conducts a search to identify a permanent CEO. Prior to this date, the CEO and chairman positions were separated under the Company’s board leadership structure, with Mr. Helm acting as the non-executive chairman and Mr. Cargill serving as the CEO. The board of directors has determined that separating the CEO and chairman positions is the most effective way for its leadership to be structured and believes this is a best practice for governance, but has amended the Guidelines to allow for the present structure and the designation of an independent lead director on an interim basis during a CEO succession process. During the interim period in which Mr. Helm is serving as both CEO and chairman, James H. Browning has been appointed to serve as lead director. The members of the Company’s board of directors also serve as directors of the Bank in order to provide effective oversight of the Bank.
Mr. Browning brings a breadth of experience to his service as lead director, having served as a director of the Company and the Bank since 2009 and as chair of the Audit Committee and as a member of the Governance and Nominating Committee since 2012, while also serving as an independent director, chairman of the board and committee chair for other public companies. In his role as lead director, Mr. Browning’s duties include, but are not limited to, the following:
Serving as liaison between the chairman and the independent directors;
approving and supporting the creation of forward-looking agendas for meetings of the board;
coordinating the activities of the independent directors;
authorizing the retention of outside advisors and consultants by the board;
coordinating the evaluation of the chairman by the independent directors;
approving information delivered and communicated to the board, including the quality, quantity and timeliness of such information;
facilitating the board’s approval of the number and frequency of its meetings;
presiding over all board meetings at which the chairman is not present, including executive sessions of the independent directors;
calling meetings of the independent directors; and
serving as an ex-officio member of each board committee attending meetings of such committees.
Committees of the Board of Directors and Meeting Attendance
The board of directors had four standing committees during 2019. A general description of the functions performed by each committee and committee membership as of the date of this Proxy Statement is set forth below.
Governance and Nominating Committee. The Governance and Nominating Committee oversees the corporate governance policies for the Company and identifies, screens, recruits and recommends to the board of directors candidates to serve as directors. The Committee makes recommendations concerning the size and composition of the board of directors, considers any corporate governance issues that arise and develops appropriate recommendations, develops specific criteria for director independence and assesses the effectiveness of the board of directors. Governance and Nominating Committee members are Elysia Holt Ragusa (chair), James H. Browning, Robert W. Stallings, and Ian Turpin. Mr. Stallings joined the Committee in July 2020. Mr. Turpin is not standing for re-election at the Annual Meeting. The board of directors has
adopted a charter for the Governance and Nominating Committee, which is available on the Company’s website at https://investors.texascapitalbank.com/govdocs. The Governance and Nominating Committee met eight times during 2019.
The Governance and Nominating Committee considers industry knowledge and other business expertise, personal traits such as character, integrity and wisdom, and the candidate’s understanding of business operations, marketing, finance or other aspects relevant to the success of a large publicly traded corporation in today’s business environment, among other factors, when evaluating candidates for the Company’s board of directors.
The Committee considers diversity when identifying nominees for director, looking primarily for diversity in professional experiences and skills, but also considering other dimensions of diversity, including gender and cultural background. Director searches in recent years have specified that candidates should provide diversity to the board in addition to specific experience and skill sets being sought; the individuals considered by the Governance and Nominating Committee in these searches have included diverse candidates and it is expected that future director searches will continue this practice. Two of the three most recent additions to the board of directors enhanced its gender and racial diversity.
These considerations ensure the board of directors is comprised of individuals who are able to contribute a variety of viewpoints, which the Committee believes is an important component in ensuring that the board exercises good judgment and diligence.
The Committee regularly assesses the size of the board of directors, whether any vacancies are expected due to retirement or otherwise, and the need for particular expertise on the board of directors. Candidates may come to the attention of the Committee from current directors, stockholders, professional search firms, officers or other persons. The Committee reviews all candidates in the same manner regardless of the source of the recommendation.
Audit Committee. The Audit Committee oversees the Company’s and the Bank’s processes related to financial and regulatory reporting, internal control and regulatory and legal compliance. The Audit Committee also oversees the Company’s internal control over financial reporting, management’s preparation of the financial statements of the Company, the Company’s methodology for establishing the allowance for credit losses and the sufficiency of quarterly provisions for credit losses, and reviews and assesses the independence and qualifications of the Company’s independent registered public accounting firm. The board of directors has adopted a written charter for the Audit Committee, which is available on the Company’s website at https://investors.texascapitalbank.com/govdocs. The Audit Committee appoints the firm selected to be the Company’s independent registered public accounting firm and monitors the performance of such firm, reviews and approves the scope of the annual audit and quarterly reviews and reviews with the independent registered public accounting firm the Company’s annual audit and annual consolidated financial statements. The Committee also oversees the Company’s internal audit staff, which includes reviewing with management the status of internal accounting controls, and evaluates areas having a potential financial or regulatory impact on the Company that may be brought to the Committee’s attention by management, the independent registered public accounting firm, the board of directors or by employees or other sources, including the Company’s confidential “hotline” maintained to allow employees to make confidential reports of matters requiring attention. The Audit Committee members are James H. Browning (chair), David S. Huntley, Charles S. Hyle and Patricia A. Watson. Ms. Watson is not standing for re-election at the Annual Meeting. The Audit Committee met five times during 2019.
The board of directors has determined that all of the Audit Committee’s members are able to read and understand fundamental financial statements as contemplated by the current listing standards of the Nasdaq Stock Market. The board of directors also determined that two members, Messrs. Browning and Hyle, qualify as “audit committee financial experts” as defined by the SEC and also satisfy the Nasdaq Stock Market’s financial sophistication requirements.
Human Resources Committee. The Human Resources Committee (“HR Committee”) advises management and makes recommendations to the board of directors with respect to the compensation and other employment benefits of executive officers and key employees of the Company. The HR Committee also administers the
Company's long-term incentive and annual incentive programs for executive officers and employees. The HR Committee’s Charter is available on the Company’s website at https://investors.texascapitalbank.com/govdocs. The HR Committee members are Dale W. Tremblay (chair), Elysia Holt Ragusa and Steven P. Rosenberg. The HR Committee met six times during 2019. For more information regarding the HR Committee’s processes and procedures for the consideration and determination of executive compensation, see the “Compensation Discussion and Analysis” later in this Proxy Statement.
Risk Committee. The Risk Committee oversees the Company’s policies and processes related to risk identification, assessment, monitoring and management, including the establishment of a comprehensive risk framework for the Company and setting and monitoring the risk appetite of the Company as described in more detail above at "Risk Oversight". The Risk Committee’s Charter is available on the Company’s website at https://investors.texascapitalbank.com/govdocs. The Risk Committee members are Charles S. Hyle (chair), Jonathan E. Baliff, Larry L. Helm and Robert W. Stallings. The Risk Committee met four times during 2019.
Communications with the Board
Stockholders may communicate with the board of directors, including the non-management directors, by sending an e-mail to bod@texascapitalbank.com or by sending a letter to the board of directors, c/o Corporate Secretary, 2000 McKinney Avenue, 7th Floor, Dallas, Texas 75201. The Corporate Secretary has the authority to disregard any inappropriate communications or to take other appropriate actions with respect to any such inappropriate communications. If deemed an appropriate communication, the Corporate Secretary will submit stockholder correspondence to the chairman of the board or to any specific director to whom the correspondence is directed.
Report of the Audit Committee
The Audit Committee's general role is to assist the board of directors in overseeing the Company's financial reporting process and related matters. The Audit Committee has reviewedand discussed with the Company's management and the Company'sindependent registered public accounting firm the audited financial statements of the Company for the year ended December 31, 2019.
The Audit Committee has also discussed with the Company's independent registered public accounting firm the matters required to be discussed pursuant to the Public Company Accounting Oversight Board Auditing Standard, Communications with Audit Committees. The Audit Committee has received and reviewed the written disclosures and the letter from the Company’s independent registered public accounting firm pursuant to applicable requirements of the Public Company Accounting Oversight Board regarding communication with audit committees concerning independence, and has discussed with the independent registered public accounting firm the firm’s independence. The Audit Committee has also considered whether the provision of non-audit services to the Company by Ernst & Young LLP is compatible with maintaining their independence, and has determined that such independence has been maintained.
Based on the review and discussion referred to above, the Audit Committee recommended to the board of directors that the audited financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on February 12, 2020.
This report is submitted on behalf of the Audit Committee of the board of directors of Texas Capital Bancshares, Inc.
James H. Browning, Chair
David S. Huntley
Charles S. Hyle
Patricia A. Watson
Code of Business Conduct and Ethics
The Company has adopted a Code of Business Conduct and Ethics ("Code of Conduct") that applies to all of its employees, including its CEO, CFO and Chief Accounting Officer. The Company has made the Code of Conduct available on its website at https://investors.texascapitalbank.com/govdocs. Any amendments to, or waivers from, our Code of Conduct applicable to our executive officers will be posted on our website within four days of such amendment or waiver.
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth information as of August 28, 2020 concerning the beneficial ownership of the Company’s common stock by: (a) each person the Company knows to beneficially own more than 5% of the issued and outstanding shares of a class of common stock, (b) each director, director nominee and NEO, and (c) all of the Company’s executive officers and directors as a group. The persons named in the table have sole voting and investment power with respect to all shares they owned, unless otherwise noted.In computing the number of shares beneficially owned by a person and the percentage of ownership held by that person, shares of common stock subject to options, restricted stock units ("RSUs") or stock appreciation rights ("SARs") held by that person that are currently exercisable or will become exercisable or vest within 60 days of August 28, 2020 are deemed exercised and outstanding.
|
| | | |
Persons Known to Company Who Own More Than 5% of Outstanding Shares of Company Common Stock | Number of Shares of Common Stock Beneficially Owned | | Percent of Shares of Common Stock Outstanding* |
| BlackRock, Inc. and certain affiliates | 5,833,155 | (1) | 11.56% |
| The Vanguard Group and certain affiliates | 4,876,485 | (2) | 9.67% |
| |
| * | Percentage is calculated on the basis of 50,447,825 shares, the total number of shares of common stock outstanding on August 28, 2020. |
| |
| (1) | As reported by BlackRock, Inc. on a Schedule 13G/A filed with the SEC on July 10, 2020, as of June 30, 2020 reporting sole voting power with respect to 5,730,807 shares and sole dispositive power with respect to 5,833,155 shares. Its address is 55 East 52nd St., New York, NY 10055. |
| |
| (2) | As reported by The Vanguard Group on a Form 13F-HR filed with the SEC on August 14, 2020, as of June 30, 2020, reporting shared voting power with respect to 53,681 shares, sole dispositive power with respect to 4,786,716 shares and shared dispositive power with respect to 89,769 shares. Its address is 100 Vanguard Blvd., Malvern, PA 19355. |
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| | | |
| Name (1) | Number of Shares of Common Stock Beneficially Owned | | Percent of Shares of Common Stock Outstanding |
| Vince A. Ackerson | 31,071 | (2) | * |
| Julie L. Anderson | 32,777 | | * |
| Jonathan E. Baliff | 2,976 | | * |
| James H. Browning | 12,709 | | * |
| C. Keith Cargill | 94,159 | | * |
| Larry L. Helm | 51,834 | | * |
| David S. Huntley | 2,332 | (3) | * |
| Charles S. Hyle | 5,255 | | * |
| Elysia Holt Ragusa | 7,530 | | * |
| Steven P. Rosenberg | 33,115 | | * |
| Robert W. Stallings | 9,730 | | * |
| Dale W. Tremblay | 8,730 | | * |
| John G. Turpen | 3,864 | (4) | * |
| Ian J. Turpin | 25,227 | (5) | * |
| Patricia A. Watson | 5,282 | | * |
| All executive officers and directors as a group | 326,591 | | 0.65% |
| |
| * | Less than 1% of the issued and outstanding shares of the class. |
| |
| ** | Percentage is calculated on the basis of 50,447,825 shares, the total number of shares of common stock outstanding on August 28, 2020. |
| |
| (1) | Unless otherwise stated, the address for each person in this table is 2000 McKinney Avenue, 7th Floor, Dallas, Texas 75201. |
| |
| (2) | Includes 29,382 shares held by Mr. Ackerson. Also includes 1,689 shares held by JAKS Partners, LTD. Mr. Ackerson is the general partner of JAKS Partners. |
| |
| (3) | Includes 2.165 shares held by Mr. Huntley, as well as 167 shares of restricted common stock as to which restrictions lapse on January 23, 2021, but for which he has voting power. |
| |
| (4) | Includes 1,664 shares held by Mr. Turpen, as well as 2,200 shares that will vest within 60 days. |
| |
| (5) | Includes 5,809 shares held by Mr. Turpin, as well as 2,242 RSUs that will vest within 60 days. Also includes 5,951 shares held by Johnson Management Trust, 9,321 shares held by The Nini Gift Trust and 1,904 shares held in the Rebekah Johnson Nugent 1976 Trust, each of which Mr. Turpin’s spouse serves as the trustee. |
EXECUTIVE COMPENSATION
Executive Officers
Our currently serving executive officers, and the positions held by them as of the date of this proxy statement, are:
Larry L. Helm, Executive Chairman,Chief Executive Officer and President of the Company and Texas Capital Bank. Mr. Helm has served as an executive officer since May 2020 after having served as a director since January 2006 and as chairman of the board since May 2012. He was employed as a senior advisor for Accelerate Resources, LLC, a company engaged in the acquisition of non-operated oil and natural gas properties and mineral interests located in the Permian Basin and other areas, from August 2017 until May 2020. He served as Executive Vice President of Corporate Affairs at Halcón Resources from January 2013 to March 2016 and as Executive Vice President, Finance and Administration, for Petrohawk Energy Corporation from June 2004 until July 2011. He served as Vice President-Transition with BHP Billiton prior to joining Halcón Resources in 2012. Prior to joining Petrohawk, Mr. Helm spent 14 years with Bank One, most notably as Chairman and CEO of Bank One Dallas and head of U.S. Middle Market Banking.
C. Keith Cargill, Vice Chairman of the Company. Mr. Cargill, age 67, has served as Vice Chairman of the Company since May 2020 after having served as President and CEO of the Company and as a member of the board of directors from January 2014 to May 2020 and as CEO of the Bank from June 2013 to May 2020. He served as President of the Bank from October 2008 to May 2020 and as Chief Lending Officer of the Bank since its inception in December 1998 through July 2013. Mr. Cargill has more than 30 years of banking experience in the North Texas area.
Julie L. Anderson, CFO and Secretary of the Company and CFO of Texas Capital Bank. Ms. Anderson, age 52, has served as the Company’s CFO since July 2017, and served as Chief Accounting Officer from December 2003 through August 2018. She assumed the role of CFO of Texas Capital Bank in July 2013 and the role of Corporate Secretary in May 2014. She served as the Company’s Controller from February 1999 to June 2017.
Vince A. Ackerson, Vice Chairman of Texas Capital Bank. Mr. Ackerson, age 63, has served as Vice Chairman of Texas Capital Bank since August 2019. Prior to holding this position, he served as Texas President and Chief Lending Officer of Texas Capital Bank from July 2013 to August 2019. He served as Dallas Regional President from October 2008 to July 2013 and as Executive Vice President of Dallas Corporate Banking since the Bank’s inception in December 1998 through July 2013.
John G. Turpen, CRO of the Company andCRO of Texas Capital Bank. Mr. Turpen, age 51, assumed the role of CRO of Texas Capital Bank in September 2018 and assumed the role of CRO of the Company on January 1, 2019. From April 2016 to September 2018, Mr. Turpen served as chief risk officer for corporate and commercial banking at U.S. Bancorp. Mr. Turpen joined U.S. Bancorp in 2009 after holding increasingly senior positions in credit, risk and strategic planning at HSBC and Wells Fargo. Mr. Turpen’s banking career spans more than 20 years.
Our named executive officers ("NEOs") for 2019 include Mr. Cargill, Ms. Anderson, Mr. Ackerson, and Mr. Turpen. Mr. Helm succeeded C. Keith Cargill as CEO and President of the Company on May 25, 2020, and so did not serve as an NEO in 2019.
Compensation Discussion and Analysis
This Compensation Discussion and Analysis provides an overview of our compensation programs, explains our compensation philosophy, policies and practices, and describes the material compensation decisions we have made under such programs to our NEOs for 2019, which include Mr. Cargill, Ms. Anderson, Mr. Ackerson, and Mr. Turpen.
In view of the Company’s competitive performance, historical earnings levels and growth in earnings, the HR Committee believes that the Company’s executive compensation philosophy and practices have been successful in attracting and retaining talented, dedicated executive officers and providing them with competitive compensation levels that are properly aligned with shareholder interests.
2019 Financial and Business Highlights
Net income of $322.9 million, increasing 7% from 2018 and 64% from 2017;
Net interest income of $979.7 million compared to $914.9 million in 2018 and $761.3 million in 2017;
Earnings per share of $6.21 compared to $5.79 in 2018 and $3.73 in 2017;
11% increase in total loans, primarily due to growth in total mortgage finance loans; and
28% increase in total deposits compared to prior year.
The Company performed well in 2019, reporting record net income of $322.9 million. We benefited from continued growth in total mortgage finance loans, including mortgage correspondent aggregation loans, and total deposits. Our net interest income reached a record of $979.7 million, primarily due to an increase in average earning assets of $5.7 billion, offset by the effect of decreases in interest rates on loan yields, an increase in average interest-bearing liabilities of $4.3 billion and the effect of increasing funding costs. These results were accomplished organically without dilutive acquisitions and are consistent with the Company’s high level of performance over the past five years. At $6.21 per share, 2019 was the best earnings per share ("EPS") year in our history.
Executive Summary
Our compensation philosophy demands that executive compensation track appropriately to the Company’s economic performance, as well as management’s performance. The HR Committee and the board of directors believe that the Company’s financial performance and our management’s overall performance in 2019 were outstanding.
The HR Committee believes that executive pay and performance of the Company continue to be appropriately aligned. The key NEO pay decisions during 2019 were as follows:
NEOs received salary increases ranging from 3% to 6% in 2019. Salary increases were determined by the HR Committee, as described in more detail under "Base Salary."
For 2019, annual incentive payouts for NEOs were at 132.5% of target. As described in more detail under "Annual Incentive Plan"the annual incentive plan was based on achievement of performance goals related to net income and credit quality, as well as individual management strategic objectives ("MSOs").
Long-term incentive awards in the form of time-based restricted stock units ("RSUs") and performance-based RSUs were granted to NEOs in March 2019, as described in more detail under "Long-Term Incentive Compensation."
Objectives of Executive Compensation
We provide a compensation package for our NEOs that is primarily driven by the overall economic performance of the Company, together with a focus on the performance of each executive, which we believe impacts our overall long-term profitability. The objectives of our executive compensation programs are:
to attract and retain highly qualified executive officers by providing total compensation opportunities that are competitive with those provided in the industry and commensurate with the Company’s business strategy and performance objectives;
to provide incentive and motivation for our executive officers to enhance stockholder value by linking their compensation to the value of our common stock;
to provide an appropriate mix of fixed and variable pay components to establish a "pay-for-performance" oriented compensation program; and
to provide competitive compensation opportunities and financial incentives without imposing excessive risk to the Company, and to ensure that appropriate standards related to asset quality, capital management and expense management are maintained.
Oversight of Executive Compensation Program
The HR Committee of our board of directors oversees our executive compensation programs. Each member of the HR Committee is an "independent director" as defined by the Nasdaq Stock Market Listing Rules. With approval by the board, the HR Committee has developed and applied a compensation philosophy that focuses on a combination of competitive base salary and incentive compensation, including cash and equity-based programs, which are directly tied to performance and creation of stockholder value.
The HR Committee meets throughout the year, including formal meetings, informal conferences and discussions with management and consultants. The HR Committee works with executive management, primarily our CEO, to assess the compensation approach and compensation levels for our executive officers and key employees other than the CEO. The HR Committee makes recommendations to the board of directors with respect to the overall executive compensation and employment benefits, philosophy and objectives of the Company. The HR Committee establishes objectives for the Company’s CEO and sets the CEO’s compensation based, in part, on the evaluation of market data provided by its independent consultant. The HR Committee also reviews and recommends to the board the Company's annual and long-term incentive plans for executive officers and key employees.
The HR Committee regularly reviews the Company’s compensation programs to ensure that compensation levels and incentive opportunities are competitive and reflect performance. Factors considered in assessing the compensation of individual officers may include the Company’s overall performance, the officer’s experience, performance and contribution to the Company, the achievement of strategic goals, external equity and market value, internal equity, fairness and retention. There are no material differences in compensation policies and approach among the NEOs, as all relate primarily to performance and contribution in achieving consolidated results. In the case of the NEOs other than the CEO, the CEO makes recommendations to the HR Committee regarding salary increases, annual incentive amounts and total compensation levels.
Compensation Risk Oversight
The HR Committee regularly reviews all compensation plans to identify whether any of the Company’s or the Bank’s compensatory policies or practices incent behavior that creates excessive or unnecessary risk to the Company. In 2018, the HR Committee conducted a risk assessment with the assistance of Pearl Meyer & Partners, LLC ("Pearl Meyer"), its independent compensation advisor. In 2019, the HR Committee reviewed the 2018 risk assessment in light of the current status of the Company and its compensation policies and practices. Based on the results of this review, the HR Committee determined that our compensation program does not create risks that are reasonably likely to have a material adverse effect on the Company.
Equity Incentive Philosophy
The HR Committee believes that the direct ownership of substantial amounts of common stock combined with stock-settled incentives combine to strongly align the interests of the Company’s senior executive officers with the interests of stockholders. The Company’s NEO compensation arrangements place a large amount of each individual’s future compensation “at risk” relative to the performance of the Company’s common stock. Our NEOs’ significant investments in our common stock, as required by our executive stock ownership guidelines, also make our executives sensitive to declines in our stock price.
The HR Committee generally considers the returns realized by stockholders through increases or decreases in the price of the Company’s common stock in the course of establishing NEO equity incentive compensation performance targets and in determining annual incentive compensation and vesting of long-term performance-based incentives, but has determined that it would be inappropriate to base specific incentive compensation award amounts or vesting determinations on stockholder return measures such as total stockholder return. This is primarily based upon concern that the Company’s NEO compensation measures not incent excessive risk-taking behavior in times when market perceptions of matters outside of our executives’ control, such as future commodity price risk, interest rate changes, earnings multiples applied to financial services companies generally, tax law changes or the expectation of future easing of regulatory compliance costs, introduce significant volatility into our stock price.
Our long-term performance-based incentives are earned based on achievement of performance measures such as EPS
and return on equity ("ROE"). These performance measures are based on the Company’s financial performance and take into account the importance of balancing the risk appetite and risk management framework established by the board of directors, regulatory expectations for safe and sound operation of a federally insured bank and the desire and ability of our executive leadership and employees to achieve long-term, sustainable growth in stockholder value.
Consideration of Most Recent Advisory Stockholder Vote on Executive Compensation
At our 2019 Annual Meeting of Stockholders, we received the affirmative support of 98% of votes cast in favor of our 2018 executive compensation, as disclosed in the 2019 Proxy Statement. The board and the HR Committee value the perspectives of our stockholders on executive compensation. In considering the results of this advisory vote, the HR Committee concluded that the compensation paid to our NEOs and the Company’s overall pay practices enjoy strong stockholder support.
The Company maintains active engagement with our stockholders, communicating directly with the holders of more than 50% of our outstanding common stock each year regarding the Company’s performance and responding to any questions or issues they may raise. Future advisory votes on executive compensation will continue to serve as an additional tool to guide the board and the HR Committee in evaluating the alignment of the Company’s executive compensation program with the interests of the Company and its stockholders.
An advisory vote at the Company’s 2017 Annual Meeting of Stockholders confirmed that stockholders overwhelmingly favored an annual advisory vote on executive compensation. Consistent with this preference, the board implemented an annual advisory vote on executive compensation until the next required vote on the frequency of stockholder votes on executive compensation, which is scheduled to occur at the 2023 Annual Meeting of Stockholders.
Role of the Compensation Consultant
The HR Committee
has engaged
the services ofPearl Meyer as its independent executive compensation consulting firm
Frederic W. Cook & Co, Inc. (“Cook”). Cook reportsfor 2019 to
and acts at the direction of the HR Committee. The HR Committee looks to its compensation consultant to provide:
expertise on compensation strategy and program design;
information relating to the selection of the Company’s peer group and compensation practices employed by the peer group;
group and overall market;advice regarding the establishmentstructuring and administration ofestablishing executive compensation plans or arrangements that provide benefits to executive officers of the Company in alignmentare aligned with the objectives of the Company and the interests of stockholders; and
recommendations to the HR Committee concerning the existing executive compensation programs and changes to such programs.
The HR Committee has determined that a formal executive compensation market/peer review will be performed every other year and engaged
CookPearl Meyer to perform
thatsuch review most recently in
2016,2018, which we refer to as the
Cook 2016Pearl Meyer 2018 Review. The
HR Committee has used the Cook 2016Pearl Meyer 2018 Review
to inform its 2016 compensation decisions. Cook provided the HR Committee with a market competitive executive compensation analysis for the NEOs, including base salary, annual incentives, long-term incentives and
non-qualified nonqualified deferred compensation plans, including retirement benefits.
Cook assisted the HR Committee in its review of total direct compensation for the NEOs, including a review of 2016 incentive compensation and 2017 base salaries for the NEOs, as discussed under “Base Salary” below. To assist in determining
2016 and 20172019 base salaries and
2016 incentive compensation, the HR Committee used the
Cook 2016Pearl Meyer 2018 Review and market data regarding performance of comparable financial services companies,
as well as consideration ofand considered the Company’s financial performance and each NEO’s individual performance. The next executive compensation market/peer review will be performed in
2018.Cook2020.
Pearl Meyer provided its executive compensation consulting services under the direction of the HR Committee and did not provide any additional services to the Company. Our management provides input to the compensation consultant but does not direct or oversee its activities with respect to our executive compensation programs. In order not to impair the independence of the compensation consultant, or create the appearance of an impairment, the Committee follows a policy that the compensation consulting firm may not provide other services to the Company. The HR Committee has evaluated
Cook’sPearl Meyer’s independence, including the factors relating to independence specified in Nasdaq Stock Market Listing Rules, and determined
that Cook isPearl Meyer to be independent.
Peer Company Compensation Data The HR Committee
works with the independent consultant to collect and
Cook, with input fromreview competitive market compensation practices. As one point of reference, the
Company’s management, established the Company’sHR Committee reviews compensation
practices for a peer group
in connection with the Cook 2016 Reviewof publicly traded banks and
will reevaluate the peer group in2018. The peer group consists of fifteen bank holding companies and one bank that file public reports and have business operations in commercial banking and financial services. The peer institutions were identified as having assets, long-term performance and market capitalizationof comparable to the Company. Peer company data is used by the HR Committee as a reference and not an absolute target for compensation approaches and levels. Two institutions included in the peer group for 2015 were removed for 2016, one because it was acquired and the other because its size fell below the lower threshold for inclusion.
size. The peer group used in 2016 includesevaluating and setting 2019 NEO compensation included the following companies:
BOK Financial Corporation
Cullen/Frost Bankers, Inc.
FirstMerit Corporation
First Midwest Bancorp, Inc.
IberiaBank Corporation
following:
|
| |
| Associated Banc-Corp | PacWest Bancorp |
| BankUnited, Inc. | Pinnacle Financial Partners, Inc. |
| BOK Financial Corporation | Prosperity Bancshares Inc. |
| Cullen/Frost Bankers, Inc. | Signature Bank |
| First Midwest Bancorp, Inc. | SVB Financial Group |
| F.N.B. Corporation | Western Alliance Bancorporation |
| IberiaBank Corporation | Wintrust Financial Corporation |
For 2019 the 2018 peer group was adjusted by removing MB Financial, Inc.
PacWest Bancorp
Pinnacle Financial Partners, Inc.
PrivateBancorp, Inc.
Prosperity Bancshares Inc.
Signature Bank
SVB Financial Group
, which was acquired by another financial institution in April 2019, TCF Financial Corporation,
which merged with another financial institution in August 2019, and TrustMark Corporation,
Western Alliance Bancorporation
Wintrust Financial Corporation
whose asset size was determined to fall below an appropriate minimum for the 2019 peer group. BankUnited, Inc was added to the peer group for 2019 due to its comparable asset size and other characteristics, including its focus on organic growth of its regional banking franchise augmented by select national product lines.
The HR Committee targets total compensation paid to the Company’s executive officers to be aligned betweenwith the 50th percentile of the Company’s peer group and given commensurate performance, 75market. Some executive officers may be below the 50th percentilespercentile, while some may be above, depending on the facts and circumstances of each executive including experience, time in position and performance.
Elements of our Compensation Program
Our compensation program for executive officers consists of the
Company’s peer group.Executive Compensation Program Overview
The executive compensation package available to our NEOs is comprised of:
following elements: annual incentive compensation;
long-term incentive compensation, consisting of RSUs;compensation; and
other standard retirement and health benefits.
Base
salary issalaries are designed
to compensate executive officers for their roles and responsibilities and to provide competitive levels of fixed compensation
to our executives and to reflectthat reflects their experience, duties and scope of responsibilities. We pay competitive base salaries
requiredin order to recruit and retain executives of the quality
that we must employnecessary to ensure the success of our Company. Base salaries for the NEOs are subject to annual review,
under the terms of the contracts discussed below, but are not always adjusted on an annual basis. The HR Committee determines the appropriate level and timing of changes in base compensation for the
CEO and forNEOs (other than the
other NEOs upon consideration ofCEO) based on the recommendation of the CEO. In making determinations of salary levels for the
named executives,NEOs, the HR Committee considers the entire compensation package for
executive officers,each NEO, including
the equity-linkedannual incentive compensation and equity-based compensation provided under
our long-term compensation
plans. The Company intends for total compensation levels to be consistent with competitive practices of our peer group companies and each executive’s level of responsibility.plan.
The HR Committee determines the level of
periodic salary increases after reviewing:
the qualifications, experience and performance of each executive officer;
the compensation paid to persons having similar duties and responsibilities in our peer group companies; and
the nature of the Bank’s business, the complexity of its activities and the importance of the executive’s experience to the success of the business.
After considering these factors, reviewing results of the
Cook 2016Pearl Meyer 2018 Review and discussing proposed salaries for the other NEOs with
Mr. Cargill,the CEO, the HR Committee recommended, and the board approved,
salaryannual salaries with the indicated percentage increases,
effective March 1, 2019, as follows: Mr. Cargill
$900,000 (13%$1,000,000 (4%),
Mr. BartholowMs. Anderson $500,000
(6%), Mr. Hudgens $475,000 (6%(4%), Mr. Ackerson
$480,000 (8%$540,500 (6%), and
Ms. Anderson $385,000 (10%Mr. Turpen $455,000 (3%).
These salary increases were implemented in October 2016 following receipt of the 2016 Cook Review and completion of the HR Committee’s review in order to be consistent with competitive practices of our peer group companies. In February 2017, as part of the annual review of executive compensation, the HR Committee further recommended and the board approved annual salary increases, effective March 1, 2017, as follows: Mr. Cargill $912,000 (1%), Mr. Bartholow $506,000 (1%), Mr. Hudgens $481,000 (1%), Mr. Ackerson $486,000 (1%), and Ms. Anderson $392,000 (2%).
Annual Incentive Compensation
Annual
We provide annual cash incentive
compensation is designed to provide competitive levels of compensation based on experience, duties and scope of responsibilities. In addition, our annual incentive program is designed to ensure that variable compensation based on the Company’s profitability is a significant component of total cash compensation for the named executives. The HR Committee compares our performance to peers with an emphasis on performance metrics that drive business success. For 2016, the HR Committee focused on growth in EPS, ROA, and TBV, as well as other business and individual objectives. The HR Committee uses the annual incentive compensationopportunities to motivate and reward the NEOs for achievement of
financial results as well as strategic
and business
and financial objectives.
Pursuant to the annual incentive program approved by the HR Committee, an aggregate incentive pool A target bonus opportunity is establishedset for each year. The size of the incentive pool is derivedNEO as a percentage of base salary, with the Company’spre-tax,pre-annualpercentage varying depending on their position. For 2019, the annual incentive income. Thetarget amounts for the NEOs were as follows:
|
| | |
| Executive Officer | Target Incentive (% of Base Salary) | Target Incentive ($) |
| C. Keith Cargill | 115% | $1,150,000 |
| Julie L. Anderson | 80% | $400,000 |
| Vince A. Ackerson | 85% | $459,425 |
| John G. Turpen | 75% | $341,250 |
Actual incentive pool has varied from 5%amounts that could be earned by the NEOs for 2019 were based on the level of achievement of performance goals relating to 15%the following key metrics: net income (65%), credit quality (25%) and MSOs (10%).
For the net income metric, NEOs could earn between 25% (for performance at threshold levels) and 150% (for performance above target levels) of their respective weighted target bonus amounts. With respect to the net income metric, the target performance goal was $327.0 million, which would result in a payout of 100% of the Company’spre-tax,pre-annual incentive income dependingweighted target incentive; the threshold performance goal was $280.0 million, resulting in a payout of 25% of the weighted target incentive; and the maximum threshold performance goal was $360.0 million, resulting in a payout of 150% of the weighted target incentive.
For the credit quality metric, NEOs could earn between 0% and 100% of the weighted target amount based on performance measured against board-approved guidelines and tolerances reviewed by the Risk Committee throughout the year.
For the MSO metric, NEOs could earn between 0% and 100% of the weighted target amount based on the
profitabilityHR Committee’s qualitative assessment of the
Company, performanceNEO’s successful completion of
individual business units, number of participants, amounts guaranteed to new officers and other factors. Due to our continued profitability, the HR Committee approved an incentive pool for 2016 set at 8% ofpre-tax,pre-annual incentive income. The amount of the incentive pool is incorporated in the annualspecific business and financial
plan approved by the board of directorsobjectives and
is adjusted during the year based on actual results compared to the approved financial plan. After verification of final results, the total annual incentive pool and allocation of dollars in the incentive pool among the participants are approved by the HR Committee. This approach provides an effective cap on the size of awards that may be made to the NEOs.The HR Committee can exercise positive or negative discretion over the incentive pool based on their evaluation of the Company in comparison to peer companies in our industry as well as evaluation of overall economic conditions and individual performance. The incentive pool is allocated among three distinct groups: the NEOs, relationship managers generally responsible for lending and other service offerings and other key managers, which includes persons who oversee and provide critical support in such areas as finance, human resources, operations, technology, funding, investments and credit policy. Executive management determines allocations within production and key management groups pursuant to the approved program.
The portion of the total incentive pool allocated to the NEOs is based on the performance of the Company compared to plan and other measures of performance. For 2016, it was specifically based on the Company’s
EPS, ROA and TBV compared to targets established by the HRC. In addition, the HRC assessed completion of individual NEO objectives.
The range of specific targets and relative weights for each performance metric were as follows:
| | | | | | | | | | |
EPS 30% of Annual
Incentive | | Payout | | ROA 30% of Annual Incentive | | Payout | | TBV Growth 20% of Annual Incentive | | Payout |
| $3.05 | | 25% | | 0.76% | | 25% | | $32.96 | | 25% |
| 3.10 | | 50% | | 0.78% | | 50% | | 33.27 | | 50% |
| 3.21 | | 75% | | 0.80% | | 75% | | 33.59 | | 75% |
| 3.33 | | 100% | | 0.83% | | 100% | | 33.97 | | 100% |
| 3.45 | | 125% | | 0.87% | | 125% | | 34.38 | | 125% |
| 3.56 | | 150% | | 0.91% | | 150% | | 34.86 | | 150% |
Results falling between the specified values reflected above result in proportional adjustment of the payout amounts.
The remaining 20% of each NEO’s annual incentive compensation target for 2016 consisted of individual objectives submitted to the HR Committee for approval at the beginning of 2016. Performance and achievement of the individual objectives was measured by assessing each NEO’s individual leadership and execution of strategic and organizational objectivesinitiatives related to the NEO’s areas of responsibility in the business. For 2016, the individual objectives included the following:
Successful completion of major initiatives to achieve strategic business objectives;
Completion of thorough talent reviews and assessment of future staffing needs for the NEO’s particular business unit;
Implementation of organizational changes to deliver superior results while also addressing the changing business climate and regulatory requirements;
Personal leadership development planning to ensure each NEO’s own continual learning and skill enhancement; and
Building strong and trusted partnerships with the community, the industry, key stakeholders, the board, stockholders and regulatory agencies, as appropriate.
The NEOs achieved varying percentages of their approved objectives during 2016: Mr. Cargill–80%, Mr. Bartholow–100%, Mr. Hudgens–65%, Mr. Ackerson–100%, and Ms. Anderson 100%.
The HR Committee may give additional discretion and consideration to an NEO who effectively navigates unforeseen industry or economic conditions that may not have been included in their previously approved management objectives for the year. Due to the challenging environment in 2016 arising largely from sustained low oil and gas prices and the resulting impact on the Company’s profitability from increases in the provision for credit losses, primarily related to energy,by the HR Committee determined additional performance-based incentive compensation was appropriate based on the overall performance achieved by the Company to recognize each NEO’s individual contribution under challenging conditions that were not anticipated at the beginning of 2016. The additional performance-based compensation is detailedthe year.
In addition, in
determining the
table below.In determiningamount of annual cash incentives earned, the HR Committee considers the performance of the Company relative to its peer group, and also considers the entire compensation package of each of the NEOs and the performance of that individual. The incentive award potential is intended to be consistent with each NEO’s level of responsibility, position and performance. A percentage of each NEO’s base salary in effect at the end of the prior fiscal year is generally targeted, ranging from 70% to 100%. The
Cook 2016 Review confirmed these amounts are consistent withmid-range opportunities among our peer group companies. Individual incentives can be above or below these targets based on the Company’s and NEO’s performance in any given year.
The HR Committee approves the allocation of the remainder of the incentive pool with input from the CEO. The CEO submits recommendations for incentive compensation for the NEOs other than himself. The HR Committee determines the incentive payment for the CEO and considers the recommendation of the CEO in its final determinations of awards to be paid to the other NEOs.The Committee met with the CEO and considered the individual contributions and responsibilities of the other NEOs in determining their incentive payments.
The HR Committee met in February 20172020 to consider the Company’s performance against incentive goals and to determine the annual incentive pool compensationincentives to be paid to the NEOsNEOs. For 2019, the following results were achieved and considered in determining NEO incentive compensation:
Adjusted net income of $373.2 million, which exceeded 150% of target for this metric, resulting in a maximum payout of 97.5% of each NEO’s aggregate target amount. Net income for the Company’s 2016 performance. In determiningperiod was adjusted upward for the 2016 incentive compensation,net impact of unanticipated declines in interest rates experienced in 2019 and was adjusted downward for gains related to the HR Committee considered the Company’s overall performance and growthsettlement of certain legal claims in EPS, ROA and TBV compared to targets established2019, both of which were determined by the HR Committee as well as individual performance by each NEO. The followingnot to be attributable to management’s performance.
Credit quality results were
achieved in 2016:EPS of $3.11 = 52.3%measured against board-approved guidelines and tolerances reviewed by the Risk Committee throughout the year and were determined to equal 100% of target met
ROA, adjusted for liquiditythis metric, resulting in excessa payout of plan, of 0.77% = 37.5% of target met
TBV of $37.17 = 150.0% of target met
ROA results for 2016 were adjusted from the reported level of 0.74% to 0.77% to recognize 2016 liquidity levels in excess of plan, resulting primarily from higher than planned generation oflow-cost deposits that had a positive effect on the Company’s economic performance and its safety and soundness, but an adverse effect on ROA. The excess liquidity amount was deducted from total assets, which was used to calculate adjusted ROA.
Based on these performance measures, annual incentive compensation payouts of between 55% and 84%25.0% of each NEO’s base salary in effect at December 31, 2016aggregate target amount.
Achievement of individual MSOs were awarded, with an average payoutreviewed and determined by the HR Committee to equal 100% of 70%target for each of the NEOs. The annual incentive paymentsthis metric for each NEO, are detailed belowresulting in a payout of 10.0% of each NEO’s aggregate target amount.
Based on the achievement of the financial, business and are set forth inindividual performance goals described above, the SummaryHR Committee awarded the following annual incentives to the NEOs for fiscal year 2019:
|
| | | |
| Executive Officer | Target Incentive ($) | Incentive Earned (% of Target) | Incentive Earned ($) |
| C. Keith Cargill | $1,150,000 | 132.5% | $1,523,750 |
| Julie L. Anderson | $400,000 | 132.5% | $530,000 |
| Vince A. Ackerson | $459,425 | 132.5% | $608,738 |
| John G. Turpen | $341,250 | 132.5% | $452,156 |
Long-Term Incentive Compensation
Table: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Target
% of
Base | | | Target
Annual
Incentive | | | EPS–30% | | | ROA–30% | | | TBV– 20% | | | Management
Objectives –20% | | | Additional
Performance
Amount | | | Total
Annual
Incentive | |
C. Keith Cargill | | | 100 | % | | $ | 900,000 | | | $ | 141,210 | | | $ | 101,250 | | | $ | 270,000 | | | $ | 144,000 | | | $ | 100,000 | | | $ | 756,460 | |
Peter B. Bartholow | | | 80 | % | | | 400,000 | | | | 62,760 | | | | 45,000 | | | | 120,000 | | | | 80,000 | | | | 40,000 | | | | 347,760 | |
John D. Hudgens | | | 70 | % | | | 332,500 | | | | 52,169 | | | | 37,406 | | | | 99,750 | | | | 43,225 | | | | 30,000 | | | | 262,551 | |
Vince A. Ackerson | | | 70 | % | | | 336,000 | | | | 52,718 | | | | 37,800 | | | | 100,800 | | | | 67,200 | | | | 40,000 | | | | 298,518 | |
Julie L. Anderson | | | 70 | % | | | 269,500 | | | | 42,285 | | | | 30,319 | | | | 80,850 | | | | 53,900 | | | | 50,000 | | | | 257,353 | |
Long-Term Incentives
Long-term incentive awards for our NEOs include equity-based awards issued pursuant to our Amended and Restated 2015 Long-Term Incentive Plan (the "2015 Plan") that are designed to directly align more directly the interests of the NEOs with those of our stockholders and to motivate the NEOs to increase the stockholder value of the Company to stockholders over the long term. Executive management and
2019 Grant of Equity Awards
In February 2019, the
HR Committee believe that equity-linked incentives are most effective in aligning the interestsCompany made an annual grant of
employees and stockholders, building stockholder value and retaining the Company’s key employees.In 2014, long-term incentive grants were madeequity awards to the NEOs under the Texas Capital Bancshares, Inc. 2010 Long-Term Incentive Plan, or the 2010 Plan, in the formNEOs. The 2019 equity awards consisted of cash-settled Performance Units. In 2015RSUs, 50% of which were time-based awards and 2016 long-term incentive grants50% of which were made to the NEOs under the Texas Capital Bancshares, Inc. 2015
Long-Term Incentive Plan, or the 2015 Plan, in the form of stock-settled RSUs. A percentage of the Performance Units and RSUs vest based on the attainment of certain performance metrics developed by the HR Committee as outlined below, referred to as the performance portion of theperformance-based awards. The vesting of the remaining percentages, referred to as the time-based portion, occursRSUs vest on the third anniversary of the grant date, of grant ifsubject to the named executive is employed byexecutive’s continued employment with the Company or is eligible for approved retirement.
VestingCompany. The performance-based RSUs may be earned in amounts ranging from 0% to 150% of the target award, based on the Company’s level of achievement of performance portions of the Performance Units and RSUs is subjectgoals relating to determinations by the HR Committee that the(i) average EPS ROA and, for 2015 and 2016, TBV objectives have been achieved without imposing excessive risk to stockholders and that the Company has maintained appropriate standards related to asset quality, capital management, regulatory compliance, expense managementgrowth (25% weighting), (ii) average EPS growth relative to revenuethe peer group (25% weighting), (iii) average ROE relative to the Company’s three-year plan (25% weighting), and (iv) average ROE relative to the funding composition and level to support loan growth. For each vesting period, the Committee makes a threshold determination of whether: the Bank’s asset quality and credit controls were at a level of comparable high performing banks’ asset quality and credit controls; the Bank maintained a tangible capital ratio comparable to that of solidly capitalized banks; the Bank was run efficiently, with a guideline efficiency ratio of 60% or better, while appropriately addressing regulatory requirements; and that at least 100% of traditional loans held for investment were supported by core deposits.
The Company made an annual grant of cash-settled Performance Units in May 2014, of which 50% of the grant was tied to performance measures and 50% of the grant was time-based. The performance measures for the 2014 grant were tied to EPS and ROA objectivespeer group (25% weighting) for the three-year period ending December 31, 2016,2021.
When considering the 2019 awards, the HR Committee started with 50% of the performance portion of the grant based upon the EPS objective and 50% based upon the ROA objective. Ms. Anderson was awarded an annual grant of cash-settled Performance Units that are 100% service-based and provideintended target value for annual vesting over the three-year period.The number of cash-settled Performance Units awarded in 2014each NEO, which was based on a targeted percentage of his or her base compensationsalary. For 2019, the target values for each of the named executives and recognition that the award would effectively cover a three-year period. Based on the defined objectives for the 50% performance portion of the Performance Units, the NEOs had the opportunity to vest between 0% and 150% of the performance portion of the Performance Units. The value of the Performance Units was determined at December 31, 2016, the end of the three-year period covered by the grants. At December 31, 2016 EPS was $ 3.11 and three-year average ROA was 0.86%.
The HR Committee and the board of directors determined that these results were achieved without imposing excessive risk to stockholders and that the Company maintained appropriate standards related to asset quality, capital management, expense management relative to revenue and the funding composition and level to support loan growth. However, EPS of $3.11 and three-year average ROA of 0.86% were below the minimum performance targets set in 2014, resulting in no payout for either performance target. The remaining 50% time-based portion was paidequity awards to the NEOs, and is included in the compensation tables below.
In June 2015, the HR Committee moved away from the cash-settled Performance Units and made annual grantsas a percentage of RSUs. The grantstheir respective base salaries, were structured in a manner consistent with the 2014 grants described above; however the 50% performance portion of the grant is 40% based upon the EPS objective, 40% based upon the ROA objective and 20% based upon a newly defined growth in TBV objective. The NEOs have the opportunity to vest between 0% and 150% of the performance portion of the RSUs under this grant, which covers the three-year period ending December 31, 2017. Unlike the 2014 grants, settlement of these awards will be made in shares of the Company’s common stock.as follow: Mr. Cargill, 230%; Ms. Anderson, was awarded annual grants of cash-settled Performance Units that are115%; Mr. Ackerson, 120%; and Mr. Turpen, 100% service-based and provide for annual vesting over the applicable three-year period.
On May 17, 2016, the HR Committee approved the grant of a service-based special retention award to Ms. Anderson consisting of cash-settled Performance Units valued at $100,000 vesting 25% over the next
four anniversaries of the grant date.. The award has no performance components and was granted pursuant to the Company’s 2015 Long-Term Incentive Plan.
The Company made an annual grant of RSUs in September 2016 following completion of the Cook 2016 Review. The grants were structured in a manner consistent with the 2015 grants described above; however the 50% time-based portion of the grant vests 66% on March 15, 2019 and 34% on September 28, 2019 so that 66% of the award will vest in accord with the Company’s ordinary effective dates for such grants and 34% of the award will vest on September 28, 2019 in accord with the three-year vesting fromdate-of-grant requirement for time-based awards under the 2015 Plan. Similar to the 2015 grants described above, the NEOs will have the opportunity to vest between 0% and 150% of the performance portion of the RSUs under this grant, which covers the three-year period ending December 31, 2018.
Allamounts of the grants were based on a variety of factors deemed relevant by the HR Committee, including the Company’s performance, the NEO’s level of responsibility, an assessment of individual performance made by the Committee, including discussion of the performance of the other NEOs with the CEO, and competitive market data. Because grants are expressed in specific share numbersThe number of time-based RSUs and the performance criteria specify minimumtarget number of performance-based RSUs (including the threshold and maximum qualifying performance levels,number of performance-based RSUs that could be earned) granted to each NEO are set forth below in the amounts that an NEO may receive from vesting
2019 Grants of long-term equity incentives is effectively capped.Plan-Based Awards Table
. The
following summarizes the range of performance targets for the performance portions of the, 2014, 2015, and 2016 grants of Performance Units and RSUs discussed above:2014 Grant:
EPS targets ranging from $3.33 to $4.33 for the year ended December 31, 2016 with payouts ranging from 12.5% to 37.5% of total vested value.
Average ROA over a three-year period ending December 31, 2016 ranging from 1.07% to 1.15%, with payouts ranging from 12.5% to 37.5% of total vested value.
2015 Grant:
EPS targets ranging from $3.70 to $4.50 for the year ended December 31, 2017 with payouts ranging from 10.0% to 30.0% of total vested value.
Average ROA over a three-year period ending December 31, 2017 ranging from 0.98% to 1.11%, with payouts ranging from 10.0% to 30.0% of total vested value.
Average growth in TBV over a three-year period ending December 31, 2017 ranging from 9.00% to 16.00%, with payouts ranging from 5.0% to 15.0% of total vested value.
2016 Grant:
EPS targets ranging from $3.90 to $4.90 for the year ended December 31, 2018 with payouts ranging from 10.0% to 30.0% of total vested value.
Average ROA over a three-year period ending December 31, 2018 ranging from 0.80% to 1.00%, with payouts ranging from 10.0% to 30.0% of total vested value.
Average growth in TBV over a three-year period ending December 31, 2018 ranging from 9.00% to 16.00%, with payouts ranging from 5.0% to 15.0% of total vested value.
The Performance Units and RSUs will be forfeited upon an NEO’s termination of employment, except as otherwise provided below. The Performance UnitsRSUs provide for accelerated vesting upon a change in control, as defined under the 2010 Plan, with 50% to vest upon the effective date of the change in control and 50% to vest upon the original vesting date of the Performance Unit, or two years following the effective
date of the change in control, whichever occurs earlier. If theif an NEO is terminated without cause or terminates his employment for good reason (each as defined in the NEO’s employment agreement) within 90 days immediately preceding or following the effective date of the change in control, the unvested Performance Units will become vested on the later of the effective date of the change in control or the NEO’s termination date. In addition, the Performance Units become immediately vested upon the NEO’s death or total and permanent disability. If an NEO retires upon reaching the age of 65 with 12 years of service, the Performance Units become fully vested with the payout to occur at the end of the three-year performance period, subject to board approval and the execution ofnon-competition andnon-solicitation agreements by the executive.
The RSUs provide for accelerated vesting of 100% of the unvested units upon a change in control, as defined under the 2015 Plan, if the NEO is terminated without cause or terminates hisher employment for good reason (each as defined in the NEO’s employment agreement) following thea change in control effective upon such termination, andof the Company, regardless of whether the performance criteria have been achieved. If an NEO retires upon reaching the age of 65 with 12 years of service, a prorated portion of the time-based RSUs will vest based on the number of full years the NEO has been employed since the date of grant, and the performance-based RSUs will continue to vest based on the achievement of the performance goals within the time periods established for such grant. If an NEO violates the provisions of any agreement with the Company that contains confidentiality,non-solicitation or other protective or restrictive covenant provisions, any unvested awards will cease to vest, any undelivered shares will be forfeited and any net shares delivered to the NEO with respect to the awards must be immediately returned to the Company.
Other Benefits
2006 Employee Stock Purchase Plan. In 2006,
2017 Grants of Performance-Based RSUs - Performance Results and Payouts
The Company made an annual grant of RSUs in March 2017. The grants were structured in a manner consistent with the board2019 grants described above, with awards consisting of directors adopted50% time-based RSUs and our stockholders approved50% performance-based RSUs. The 2017 performance-based RSUs could be earned in amounts ranging from 0% to 150% of the target award, based on the Company’s 2006 Employee Stock Purchase Plan (the “2006 ESPP”level of achievement of performance goals relating to EPS compound annual growth rate ("CAGR"). and average ROE over a three-year performance period.
The 2006 ESPP provides eligible employeesfollowing table sets forth the range of specific targets, relative weights and resulting payouts for the 2017 performance-based RSUs for the three-year period ending December 31, 2019, as established at the time the awards were granted:
|
| | | | | | | | | | |
Target EPS CAGR (25% weight) | Payout (as a % of weighted Target Award) | | Target EPS CAGR Peer Rank (25% weight) | Payout (as a % of weighted Target Award) | | Target Average ROE (25% weight) | Payout (as a % of weighted Target Award) | | Target Average ROE Peer Rank (25% weight) | Payout (as a % of weighted Target Award) |
| 5% | 50% | | Bottom quartile | 0% | | 9.6% | 50% | | Bottom quartile | 0% |
| 10% | 75% | | 25th to 39.9th% | 50% | | 9.8% | 75% | | 25th to 39.9th% | 50% |
| 15% | 100% | | 40th to 59.9th% | 100% | | 10.0% | 100% | | 40th to 59.9th% | 100% |
| 18% | 125% | | 60th to74.9th% | 125% | | 10.2% | 125% | | 60th to74.9th% | 125% |
| 20% | 150% | | Top Quartile | 150% | | 10.4% | 150% | | Top Quartile | 150% |
Payouts for results falling between the specified values reflected above are determined based on straight-line interpolation.
The three-year performance period with respect to the 2017 performance-based RSUs concluded on December 31, 2019. The following table sets forth the Company’s actual achievement of performance goals for the 2017 performance-based RSUs and the resulting payout percentages. Actual EPS was adjusted downward for the impact of a reduction in the Company’s income tax rate as a result of the Company (and its participating subsidiaries) with an incentive to advance the best interests of the CompanyTax Cuts and its subsidiaries by providing them a means of voluntarily purchasing common stock at 95% of the market price and upon favorable terms. We believeJobs Act enacted in December 2017 that the participants in the 2006 ESPP have an additional incentive to promote the success ofHR Committee determined did not result from management’s performance.
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| | | | | | | | | | |
Adjusted EPS CAGR (25% weight) | Payout (as a % of weighted Target Award) | | Adjusted EPS CAGR Peer Rank (25% weight) | Payout (as a % of weighted Target Award) | | Actual Average ROE (25% weight) | Payout (as a % of weighted Target Award) | | Actual Average ROE Peer Rank (25% weight) | Payout (as a % of weighted Target Award) |
| 17.8% | 123% | | 60th% | 125% | | 11.68% | 150% | | 60th% | 125% |
Based on the Company’s
business by increasing their economic interest inactual achievement of performance goals for the
Company. Participation in the 2006 ESPP is voluntary and dependent upon each eligible employee’s election to participate and determination of the level of participation. We believe that the 2006 ESPP is an important part of our compensation program that helps us compete effectively for talent. It has been and remains the policy of the Company thatthree-year period ending December 31, 2019, the NEOs
are not eligible to participate inwho received 2017 performance-based RSUs earned the
2006 ESPP.following payouts:
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| | | |
| Executive Officer | Target Award of 2017 Performance-Based RSUs | Aggregate Payout Factor (% of Target Award) | Shares Earned and Paid Out |
| C. Keith Cargill | 10,008 | 130.8% | 13,086 |
| Julie L. Anderson | 2,032 | 130.8% | 2,657 |
| Vince A. Ackerson | 2,519 | 130.8% | 3,294 |
Other Benefits
Retirement Savings Opportunity. All employees may participate in our 401(k) Retirement Savings Plan or 401(k) Plan.(the "401(k) Plan"). Each employee may makebefore-tax contributions of up to 85% of their eligible compensation, upsubject to current Internal Revenue Service limits. We provide the 401(k) Plan to help our employees save some amount of their cash compensation for retirement in a tax efficient manner. Since 2006, we have matched contributions made by our employees to the 401(k) Plan based upon a formula that considers the amount contributed by the respective employee, with a vesting scheduled based upon suchthe employee’s tenure with the Company. The matching contributions for each NEO are set forth in the below2019 All Other Compensation Table.Table. We do not provide an option for our employees to invest in our common stock through the 401(k) Plan. We have not historically provided in 2016 or in prior years any retirement plans, such as defined benefit, defined contribution, supplemental executive retirement benefits, retiree medical or deferred compensation plans requiring mandatory Company contributions, to our employees or the NEOs, other than the 401(k) Plan and the Nonqualified Deferred Compensation Plan described below. Nonqualified Deferred Compensation Plan.Effective for fiscal 2016, we implemented The Company offers a nonqualified deferred compensation plan for our executives and key members of management in order to assist us in attracting and retaining these individuals. Participants in the plan may elect to defer up to 75% of theirannual salary and/or short-term incentive payout into deferral accounts that mirror the gains or losses of specified investment funds or market indexes approved by the HR Committee and
selected by the participants. These investment alternatives are similar to the choices under the 401(k)
plan.Plan. The gains and losses credited to each participant’s deferral account are subject to the same investment risk as an actual investment in the specified investment funds or market indexes. The Company
does not currentlyrestores any lost company match
deferralsin the 401(k) Plan due to legal limits on qualified plans. In 2019, we matched contributions made
pursuant toby participants into the
plan.nonqualified deferred compensation plan based upon a formula that considers the amount contributed by the respective employee with a vesting scheduled based upon the employee’s tenure with the Company. All participant contributions to the plan and any related earnings are immediately vested and may be withdrawn upon the participant’s separation from service, death or disability or upon a date specified by the participant.
The plan allows the Company to make discretionary contributions on behalf of a participant. On February 14, 2017, the HR Committee recommended and the board approved discretionary contributions to be made by the Company on behalf of the NEOs as follows: Mr. Cargill $100,000, Mr. Bartholow $40,000, Mr. Hudgens $40,000, Mr. Ackerson $40,000, and Ms. Anderson $40,000. The discretionary contributions may be allocated among the approved investment alternatives as selected by each NEO. As established by the Company on the date of approval and in the award agreement, the discretionary contributions and any related earnings vest 50% on the second anniversary of the date of approval, with the remainder vesting on the third anniversary. Discretionary contributions become immediately vested upon the participant’s death or disability, or termination without cause or with good reason within 18 months of a change in control. Company contributions and any related earnings, once vested, may only be withdrawn upon the participant’s separation from service, death or disability, or on apre-determined date specified by the participant or by the Company in an award agreement. The discretionary contributions for each NEO are set forth in the All Other Compensation and Nonqualified Deferred Compensation tables below.Health and Welfare Benefits.All full-time employees, including our NEOs, may participate in our health and welfare benefit programs, including medical, dental and vision care coverage, disability insurance and life insurance. We provide these benefits to meet the health and welfare needs of employees and their families.
The Company maintains employment agreements with each of its
NEOs.NEOs other than Mr. Helm. The material terms of each NEO’s employment agreement are described below.
Transition Letter Agreement and Amended and Restated Employment Agreement between Mr. Cargill and the Company
On May 29, 2020, the Company entered into a transition letter agreement with Mr. Cargill (the “Transition Agreement”) establishing his compensation as Vice Chairman of the Company through January 1, 2021 (the "Transition Period") and amending certain terms of the Amended and Restated Executive Employment Agreement between Mr. Cargill and the Company that became effective on December 18, 2014 (the "Cargill Agreement"). During the Transition Period, Mr. Cargill’s amendedcompensation as Vice Chairman will include continuation of his current rate of annual base salary, a cash bonus payment of $589,375 paid at commencement of the Transition Period (the “Commencement Bonus”), eligibility for an annual incentive bonus for fiscal year 2020 of at least $1,000,000 (payment of which will be reduced by the amount of the Commencement Bonus), and restateda 2020 grant of time-based RSUs with a grant date fair value of $2,300,000. The Transition Agreement also provides that in lieu of the severance benefits that Mr. Cargill would otherwise be entitled to receive under his current employment agreement which we referwith the Company, upon his separation from the Company at the conclusion of the Transition Period on January 1, 2021 (the “Separation Date”), Mr. Cargill will be entitled to the following benefits:
| |
| (1) | A cash payment equal to eighteen months of Mr. Cargill’s base salary as in effect on the Separation Date, plus a cash payment equal to 1.5 times the average of the annual cash bonuses paid by the Company for the 2018 and 2019 bonus plan years, one-third of such amounts to be payable in a lump sum on the first payroll date in February 2021 and two-thirds of such amounts to be payable in equal monthly installments over a period of twelve months in accordance with the Company's regular payroll practices beginning on the first payroll date coinciding with or next following the date that is sixty days after the Separation Date (the "Cash Severance Payments"). |
| |
| (2) | Continued vesting of the performance portion of outstanding RSUs and any other performance-based awards granted to Mr. Cargill pursuant to the 2015 Plan, in accordance with their terms and subject to the achievement of the applicable performance conditions that remain outstanding as of the Separation Date. |
| |
| (3) | Continued vesting of the time-based portion of outstanding RSUs that did not otherwise vest on or before the Separation Date, in accordance with their terms. |
| |
| (4) | A one-time lump sum payment of $20,000 as reimbursement for Mr. Cargill’s out-of-pocket legal expenses and reasonable expenses incurred in connection with the Transition Agreement and other office and administrative expenses. |
The Transition Agreement provides that if Mr. Cargill’s employment is terminated without cause (as is defined in the Cargill Agreement) or due to death or disability prior to the Separation Date, Mr. Cargill or his estate will be entitled to receive all remaining compensation due to him during the transition period (including any remaining 2020 annual base salary payments) and the Cash Severance Payments.
Subject to the arrangements set forth in the Transition Agreement as described above, Mr. Cargill’s employment
continues to be subject to the “Cargillrestrictive covenants set forth in the Cargill Agreement,” has except that he will be subject to non-competition and non-solicitation restrictive covenants for a period of eighteen months, instead of one year, following his termination of employment with the Company. The Transition Agreement provides that if Mr. Cargill's employment is terminated by the Company for "Cause", as defined in the Cargill Agreement, or by Mr. Cargill for any reason during the Transition Period, he will not be entitled to receive the benefits provided in the Transition Agreement other than certain non-contingent benefits specified therein.
The Cargill Agreement as in effect prior to May 25, 2020 had an initial term of one year
and will be automatically renewedwith automatic renewal for successive
one-year terms unless notice of
non-renewal is was given by either party.
The Cargill Agreement will terminate upon Mr. Cargill’s death or disability, upon his voluntary termination of employment or upon his termination for cause. “Cause”"Cause" as defined in the
agreementCargill Agreement includes: (1) fraud, misappropriation or embezzlement; (2) the material breach of
executivethe executive's responsibilities, restrictive covenants or fiduciary duties; (3) conviction of a felony or crime of moral turpitude; (4) illegal use of drugs interfering with the performance of his duties; or (5) acceptance of other employment without permission.
Upon any such termination Mr. Cargill would be entitled to receive his base salary,pro-rated through the termination date, any unpaid but accrued vacation benefits and any unreimbursed business expenses. If terminated by the Company without cause or by
non-renewal, or by Mr. Cargill for “good reason,”
the Cargill Agreement provided that Mr. Cargill would receive a cash payment equal to twelve months’ base salary, a cash payment equal to
thehis average annual incentive payment for the two prior years and continued medical insurance benefits for twelve months following termination.
“Good reason”"Good reason" is defined as (1) an assignment of duties that are functionally inferior to the duties set forth in the Cargill Agreement; (2) a change of employment location which is more than 50 miles from the Company’s current executive offices; or (3) a reduction in salary, other than as part of a proportionate reduction affecting all other senior officers.
If, in connection with a
change"change in
control,control", as defined in the Cargill Agreement, Mr. Cargill’s employment
iswas terminated either (1) by the Company or the successor entity without cause, or (2) by Mr. Cargill for good reason,
the Cargill Agreement provided that Mr. Cargill
willwould receive a lump sum payment equal to 2.5 times his average base salary and the average
of any annual incentive
amounts paidpayment to him
duringfor the two years preceding the change in control. This change in control payment is in lieu of any other amounts to which he would
behave been entitled under the Cargill Agreement.
As a means of providing protection to the Company’s stockholders, under certain adverse conditions such as dissolution, bankruptcy or a distressed sale of the Company’s assets or stock for the purpose of avoiding a bankruptcy proceeding or at the recommendation of regulatory authorities, the Cargill Agreement and the Transition Agreement provide that the above described payments will not occur, except for the cash payments described above that would be owing upon Mr. Cargill’s voluntary termination of employment.
The Cargill Agreement contains other terms and conditions, including non-competition and non-solicitation provisions, confidentiality obligations and restrictions on Mr. Cargill’s ability to be involved with a competing bank or company with a place of business in Texas.
Amended and Restated Executive Employment Agreement between Ms. Anderson and the Company
The Company entered into an Amended and Restated Executive Employment Agreement with Ms. Anderson effective July 1, 2017, which we refer to as the "Anderson Agreement". The Anderson Agreement had an 18-month initial term and automatically renews for successive one-year terms unless earlier terminated.
The Anderson Agreement terminates upon Ms. Anderson’s death or disability, upon her voluntary termination of employment or upon her termination for cause. Upon any such termination, Ms. Anderson would be entitled to receive her base salary, pro-rated through the termination date, any unpaid but accrued vacation benefits and any unreimbursed business expenses.
Termination for "cause" means the Company’s termination of Ms. Anderson’s employment for any of the following reasons: (1) fraud, misappropriation or embezzlement; (2) the material breach of Ms. Anderson’s executive responsibilities or of the protective covenants in the Anderson Agreement; (3) conviction of a felony or crime of moral turpitude; (4) intentional breach of any non-disclosure or non-competition/non-solicitation agreement with the Company or the Bank; (5) intentional failure to perform her duties and responsibilities; (6) illegal use of drugs interfering with Ms. Anderson’s performance of her duties; (7) acceptance of other employment without permission; or (8) her material breach of fiduciary duties owed to the Company.
If Ms. Anderson's employment is terminated by the Company without cause or upon notice, or Ms. Anderson terminates her employment for good reason, Ms. Anderson would be entitled to a cash payment equal to twelve months' base salary, a cash payment equal to her average annual incentive payment for the two preceding bonus plan years and continued medical insurance benefits for twelve months following termination. If Ms. Anderson's employment is terminated without cause or for good reason within the period beginning 90 days before and ending 18 months following a "change in control" of the Company as defined in the Anderson Agreement, Ms. Anderson would be entitled to a cash payment equal to 2.5 times her average base salary and cash bonus in effect for the two preceding bonus plan years and continued health and welfare benefits that are no less favorable than the benefits to which Ms. Anderson was entitled prior to the change-in-control for a period of 18 months following termination. "Good reason" is defined as: (1) an assignment of duties that are functionally inferior to her duties set forth in the Anderson Agreement; (2) a change of employment location which is more than 50 miles from the Company’s current executive offices; (3) a reduction in salary, other than as part of a proportionate reduction affecting all other senior officers; or (4) the delivery by the Company of a notice of non-renewal of the Anderson Agreement in connection with certain change in control events.
As a means of providing protection to the Company’s stockholders, under certain adverse conditions such as dissolution, bankruptcy or a distressed sale of the Company’s assets or stock for the purpose of avoiding a bankruptcy proceeding or at the recommendation of regulatory authorities, the above described payments would not occur except for the cash payments
described above that would be owing upon
Mr. Cargill’sMs. Anderson’s termination of employment due to death or disability, voluntary termination of
employment.employment or termination for cause. If the described adverse conditions occur and Ms. Anderson’s termination of employment is without cause or for good reason, she would also be entitled to a cash payment equal to six months base salary.
The
CargillAnderson Agreement contains other terms and conditions, including
non-competition and
non-solicitation provisions, confidentiality obligations and restrictions on
Mr. Cargill’sMs. Anderson’s ability to be involved with a competing
state or national bank or company
providing similar services with a place of business in
Texas.Employment AgreementsTexas during her employment and for Mr. Bartholow, Mr. Hudgens, Mr. Ackersonthe one-year period following her termination or resignation.
Retirement Transition Agreement and
Ms. AndersonIn order to retain the Company’s senior executive officers, the HR Committee and board of directors of the Company determined it was in the best interests of the Company to enter into employment agreements with Messrs. Bartholow, Hudgens and Ackerson and Ms. Anderson. We entered into these agreements to ensure that the executives perform their respective roles for an extended period of time in view of the critical nature of each of their positions. The Company entered into Amended and Restated Executive Employment AgreementsAgreement between Mr. Ackerson and the Company
On July 29, 2019, the Company announced Mr. Ackerson’s planned retirement from the Company, which is expected to become effective August 31, 2021 (the “2014 Agreements”"Separation Date"). In connection with his retirement, Mr. Ackerson entered into a Retirement Transition Agreement (the "Retirement Agreement") with the Company and the Bank that provides for Mr. Bartholow, Mr. HudgensAckerson’s compensation in connection with his retirement and which amends certain provisions of the Amended and Restated Executive Employment Agreement between the Company and Mr. Ackerson that became effective on December 18, 2014.2014 (the "Ackerson Agreement"). The Company’s EmploymentRetirement Agreement with Ms. Andersonprovides that in lieu of the severance benefits that Mr. Ackerson would otherwise be entitled to receive under the Ackerson Agreement, upon his separation from the Company on the Separation Date, Mr. Ackerson will be entitled to the following benefits:
| |
| (1) | A cash payment equal to eighteen months of Mr. Ackerson’s base salary as in effect on the Separation Date, plus a cash payment equal to the average of the annual cash bonuses paid by the Company for the two full bonus plan years prior to the Separation Date, each of such amounts to be payable in equal semi-monthly installments, over a period of eighteen months in accordance with the Company's regular payroll practices (the "Cash Severance Payments"). |
| |
| (2) | Continued vesting of the performance portion of outstanding RSUs and any other performance-based awards granted to Mr. Ackerson pursuant to the 2015 Plan, in accordance with their terms and subject to the achievement of the applicable performance conditions that remain outstanding as of the Separation Date. |
| |
| (3) | Continued vesting of the time-based portion of outstanding RSUs that did not otherwise vest on or before the Separation Date, in accordance with their terms. |
| |
| (4) | A one-time lump sum payment of $20,000 as reimbursement for Mr. Ackerson’s out-of-pocket legal expenses and reasonable expenses incurred in connection with the Retirement Agreement and other office and administrative expenses. |
Mr. Ackerson will also receive certain health benefits for a period of 18 months following his retirement.
The Retirement Agreement provides that if Mr. Ackerson’s employment is dated May 5, 2006 (the “2006 Agreement”, which togetherterminated without cause or due to disability prior to the Separation Date, or upon death prior to the date that all Cash Severance Payments have been paid, Mr. Ackerson or his estate will be entitled to receive the Cash Severance Payments. "Cause" is defined substantially identical to the Cargill Agreement. If a "change in control" (as defined in the 2015 Plan) should occur prior to the Separation Date, in lieu of the amounts described above, Mr. Ackerson will be entitled to receive a cash payment equal to 2.5 times his average annual base salary and bonus in effect for the two years immediately preceding the change in control.
Subject to the arrangements set forth in the Retirement Agreement as described above, Mr. Ackerson’s employment continues to be subject to the terms and conditions, including the restrictive covenants, set forth in the Ackerson Agreement. Prior to the Separation Date, Mr. Ackerson will continue to receive his base salary and other benefits in accordance with the
2014 Agreements is referred to as an “NEO Agreement”).Eachterms of the NEO Agreements has aAckerson Agreement.
The Ackerson Agreement, as in effect prior to July 29, 2019, had an initial term of one year and will be automatically renewedprovided for automatic renewals for successiveone-year terms unless notice ofnon-renewal is was given by either party or unless earlier terminated in accordance with the terms of the agreement.
The Ackerson Agreement continues to provide for its termination upon the executive’s voluntary termination of employment or upon the executive’s termination for cause. Upon any such termination the executive would be entitled to his base salary, pro-rated through the termination date, any unpaid but accrued vacation benefits and any unreimbursed business expenses.
The Ackerson Agreement provided for severance payments to the executive upon termination of the executive’s employment without cause or by the executive for good reason, at which time the executive would be entitled to receive: (1) a cash payment equal to 12 months’ base salary as then in effect; (2) a cash payment equal to the average annual incentive paid to the executive for the two years preceding his termination; and (3) continued medical insurance benefits, at the Company’s expense, for a period of twelve months following termination. “Good reason” is defined substantially identical to the Cargill Agreement.
The Ackerson Agreement includes protective provisions triggered under adverse conditions affecting the Company that limit the payments due to Mr. Ackerson that are identical to the Cargill Agreement. The Ackerson Agreement includes non-competition and non-solicitation provisions, confidentiality obligations and restrictions on the executive’s ability to be involved with a competing state or national bank that will continue in effect following any termination of Mr. Ackerson's employment for a period of one year, and which were reaffirmed in the Retirement Agreement.
Executive Employment Agreement between Mr. Turpen and the Company
The Company entered into an Executive Employment Agreement with Mr. Turpen effective September 4, 2018 (the "Turpen Agreement"). The Turpen Agreement has an initial term of three years and thereafter automatically renews for successive one-year terms, unless notice of non-renewal is given by either party or earlier terminated in accordance with the agreement, and
each provides for compensation including base salary and participation in the annual incentive plan for key executives.
Each of the executives is also eligible to receive grants of equity-based incentive compensation under our long-term incentive plans.Each NEO
The Turpen Agreement terminates upon the executive’s death or disability, upon the executive’s voluntary termination of employment or upon the executive’s termination for cause. Upon any such termination the executive would be entitled to his or her base salary,pro-rated through the termination date, any unpaid but accrued vacation benefits and any unreimbursed business expenses. “Cause”"Cause" is defined substantially identically to the Cargill Agreement. Upon termination of the 2006
The Turpen Agreement
for death or disability, Ms. Anderson would receive the lesser of (i) the balance of her base salary remaining in the term of her Agreement or (ii) twelve months’ base salary.The NEO Agreements provideprovides for severance payments to the executive upon termination of the executive’s employment by us without cause or by the executive for good reason, at which time the executive is entitled to receive: (1) a cash payment equal to 12 months’ base salary as then in effect; (2) an amounta cash payment equal to the average annual incentive paid to the executive for the two years preceding his or her termination; and (3) continued medical insurance benefits, at the Company’s expense, for a period of twelve months following termination. “Good reason”"Good reason" is defined substantially identically to the Cargill Agreement.
The NEO Agreements includeTurpen Agreement includes provisions relating to payments upon a change in control that are substantially identical
to the terms of the Cargill Agreement, as well as protective provisions triggered
under adverse conditions that limit the payments due to the NEOsMr. Turpen andnon-competition andnon-solicitation provisions, confidentiality obligations and restrictions on the executive’s ability to be involved with a competing state or national bank.
Indemnification Arrangements
Our certificate of incorporation, bylaws and applicable Delaware law provide indemnification rights to our directors and officers. Our board of directors has granted broader rights to indemnity pursuant to Indemnification Agreements between the Company and each of its directors and NEOs. These indemnification arrangements may require us to, among other things, indemnify our officers and directors against liabilities that may arise by reason of their status or service as directors or officers. These indemnification arrangements may also require us to advance any expenses incurred by our directors or officers as a result of any proceeding against them as to which they could be indemnified. As of the date of this filing, there is no pending litigation or proceeding involving any of our directors, officers, employees or agents in which indemnification by us is sought, nor are we aware of any threatened litigation or proceeding that may result in a claim for indemnification. We have purchased a policy of directors’ and officers’ liability insurance that insures our directors and officers against the cost of defense, settlement or payment of a judgment in certain circumstances.
Tax Implications of Executive Compensation
Although deductibility of compensation is preferred, tax deductibility is not a primary objective of our compensation programs. We believe that achieving our compensation objectives set forth above is more important than the benefit of tax deductibility and we reserve the right to maintain flexibility in how we compensate our executive officers, even if it may result in limiting the deductibility of amounts of compensation from time to time.
Report of the Human Resources Committee on the Compensation Discussion and Analysis
The Human Resources Committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this Proxy Statement. Based on such review and discussion, the Human Resources Committee recommended to the board of directors that this Compensation Discussion and Analysis be included in this Proxy Statement for filing with the SEC.
The Report
This report is submitted by the Human Resources Committee of the board of directors of Texas Capital Bancshares, Inc.
Dale W. Tremblay,
ChairmanChair
2019 Summary Compensation Table*
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Non-Equity
Incentive Plan Compensation | | | | | | | |
Name and Principal Position | | Year | | | Salary | | | Stock
Awards (A) | | | Annual Incentive
Plan Compensation (B) | | | Long-Term Incentive
Plan Compensation (C) | | | All Other Compensation (D) | | | Total | |
C. Keith Cargill President and CEO of the Company; President and CEO of Texas Capital Bank | | | 2016 | | | $ | 825,000 | | | $ | 887,915 | | | $ | 756,460 | | | $ | 384,943 | | | $ | 131,398 | | | $ | 2,985,716 | |
| | | 2015 | | | | 729,167 | | | | 471,291 | | | | 425,000 | | | | 393,563 | | | | 31,894 | | | | 2,050,915 | |
| | | 2014 | | | | 625,000 | | | | — | | | | 625,000 | | | | 754,291 | | | | 35,171 | | | | 2,039,462 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Peter B. Bartholow CFO and COO of the Company; COO of Texas Capital Bank | | | 2016 | | | | 478,000 | | | | 460,936 | | | | 347,760 | | | | 278,755 | | | | 75,262 | | | | 1,640,713 | |
| | | 2015 | | | | 455,333 | | | | 307,227 | | | | 208,200 | | | | 393,563 | | | | 34,526 | | | | 1,398,849 | |
| | | 2014 | | | | 439,167 | | | | — | | | | 330,000 | | | | 788,598 | | | | 50,586 | | | | 1,608,351 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
John D. Hudgens Chief Risk Officer of the Company; Chief Risk Officer of Texas Capital Bank | | | 2016 | | | | 455,833 | | | | 412,039 | | | | 262,551 | | | | 248,887 | | | | 65,051 | | | | 1,444,361 | |
| | | 2015 | | | | 431,833 | | | | 275,847 | | | | 182,250 | | | | 324,896 | | | | 26,426 | | | | 1,241,252 | |
| | | 2014 | | | | 413,333 | | | | — | | | | 300,000 | | | | 657,139 | | | | 40,731 | | | | 1,411,203 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Vince A. Ackerson Texas President and Chief Lending Officer of Texas Capital Bank | | | 2016 | | | | 454,166 | | | | 407,312 | | | | 298,518 | | | | 219,019 | | | | 69,263 | | | | 1,448,278 | |
| | | 2015 | | | | 425,000 | | | | 265,315 | | | | 180,500 | | | | 289,401 | | | | 34,876 | | | | 1,195,092 | |
| | | 2014 | | | | 395,833 | | | | — | | | | 300,000 | | | | 597,154 | | | | 46,760 | | | | 1,339,747 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Julie L. Anderson Controller, Chief Accounting Officer and Secretary of the Company; CFO of Texas Capital Bank | | | 2016 | | | | 355,000 | | | | 256,981 | | | | 257,353 | | | | 122,483 | | | | 64,810 | | | | 1,056,627 | |
| | | 2015 | | | | 306,667 | | | | — | | | | 158,500 | | | | 133,163 | | | | 24,903 | | | | 623,233 | |
| | | 2014 | | | | 288,333 | | | | — | | | | 235,000 | | | | 106,547 | | | | 30,369 | | | | 660,249 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| | | | | Non-Equity Incentive Plan Compensation | | |
| Name and Principal Position | Year | Salary | Stock Awards (A) | Annual Incentive Plan Compensation (B) | Long-Term Incentive Plan Compensation (C) | All Other Compensation (D) | Total |
| | | | | | | | |
| C. Keith Cargill | 2019 | $ | 994,167 |
| $ | 2,299,990 |
| $ | 1,523,750 |
| $ | — |
| $ | 90,907 |
| $ | 4,908,814 |
|
| Vice Chairman of the Company | 2018 | 956,167 |
| 2,020,454 |
| 1,059,256 |
| — |
| 108,342 |
| 4,144,219 |
|
| | 2017 | 910,000 |
| 1,589,270 |
| 1,083,912 |
| — |
| 29,462 |
| 3,612,644 |
|
| | | | | | | | |
| Julie L. Anderson | 2019 | 496,667 |
| 575,058 |
| 530,000 |
| 72,801 |
| 24,685 |
| 1,699,211 |
|
| CFO and Secretary of the Company; | 2018 | 472,500 |
| 440,932 |
| 366,528 |
| 159,491 |
| 25,385 |
| 1,464,836 |
|
| CFO of Texas Capital Bank | 2017 | 412,333 |
| 572,672 |
| 361,898 |
| 173,047 |
| 24,192 |
| 1,544,142 |
|
| | | | | | | | |
| Vince A. Ackerson | 2019 | 535,417 |
| 660,008 |
| 608,738 |
| — |
| 73,791 |
| 1,877,954 |
|
| Vice Chairman of Texas Capital Bank | 2018 | 506,000 |
| 505,202 |
| 389,436 |
| — |
| 71,067 |
| 1,471,705 |
|
| | 2017 | 485,000 |
| 400,017 |
| 433,208 |
| — |
| 42,913 |
| 1,361,138 |
|
| | | | | | | | |
| John G. Turpen | 2019 | 452,500 |
| 454,980 |
| 452,156 |
| — |
| 53,075 |
| 1,412,711 |
|
| CRO of the Company; | 2018 | 144,833 |
| 949,850 |
| 350,000 |
| — |
| 152,772 |
| 1,597,455 |
|
| CRO of Texas Capital Bank | 2017 | — |
| — |
| — |
| — |
| — |
| — |
|
For a description of the employment agreements applicable to the NEOs, refer to the “"Employment Agreements”Agreements" section of the “"Compensation Discussion and Analysis”.Analysis." *Columns for which no amounts are reported have been deleted.
* | Columns for which no amounts are reported have been deleted. |
| (A) | Amounts represent the aggregate grant date fair value of RSUs, determined in accordance with Accounting Standard Codification (ASC) Topic 718. With respect to the 20162019 awards granted on September 28, 2016,February 12, 2019, 50% of the award is time-based with cliff vesting occurring at the end of 66%three years, on 3/15/2019 and 34% on 9/28/2019,February 12, 2022, and 50% of the award is performance-based with vesting occurring uponon the Company’s achievement offirst administratively practicable day following determination by the HR Committee that certain performance targets were achieved and subject to the NEOsNEO’s continued employment over a three-year period ending 12/31/2018.December 31, 2021. The amounts presented for the 50% performance-based portion of the 20162019 awards reflect the value of the award at target based on the probable outcome of the performance targets determined as of the grant date. The value of the 50% performance-based portion of the 20162019 awards for each NEO at the grant date assuming that the highest levellevels of performance targets are achieved is as follows: Mr. Cargill $887,888, Mr. Bartholow $460,936, Mr. Hudgens $412,039,$1,724,993, Ms. Anderson $431,323, Mr. Ackerson $407,312$495,006 and Ms. Anderson $256,954. Annual LTI grants for 2014 were in the form of cash-settled Performance Units which are reported as Long-Term Incentive Plan Compensation in the table above when vested and paid, and not at grant date. See note 1 and note 12 to the Consolidated Financial Statements in the Company’s Annual Report on Form10-K for the year ended December 31, 2016 for a discussion of the associated assumptions used in the valuation of stock-settled compensation awards.Mr. Turpen $341,235. |
| |
| (B) | Amounts represent payouts under our annual incentive program. For further details of the targets and performance related to the payout of these amounts, refer to the “"Annual Incentive Compensation”Compensation" section of the “Compensation"Compensation Discussion and Analysis”.Analysis." |
| |
| (C) | Amounts represent payouts related to cash-settled Performance Units. For further detailsunits. In 2014, 2015 and 2016, Ms. Anderson was awarded an annual grant of the targets and performance related to the payout of thesecash-settled units that provide for annual vesting in equal amounts refer to the “Long-Term Incentives”section of the “Compensation Discussion and Analysis”.over a four-year period. |
| |
| (D) | See additional description in “20162019 All Other Compensation Table” below.. In 2018, amounts paid to Mr. Turpen included a one-time signing bonus of $150,000, car allowance of $2,400, and insurance premium of $372. |
2019 All Other Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Year | | | Perquisites and Other Personal
Benefits(A) | | | Insurance Premiums | | | Company
Contributions to 401(k) Plans | | | Company
Contributions to
Nonqualified Deferred
Compensation Plans | | | Total | |
C. Keith Cargill | | | 2016 | | | $ | 12,362 | | | $ | 2,698 | | | $ | 16,338 | | | $ | 100,000 | | | $ | 131,398 | |
Peter B. Bartholow | | | 2016 | | | | 16,400 | | | | 2,033 | | | | 16,829 | | | | 40,000 | | | | 75,262 | |
John D. Hudgens | | | 2016 | | | | 7,200 | | | | 2,446 | | | | 15,405 | | | | 40,000 | | | | 65,051 | |
Vince A. Ackerson | | | 2016 | | | | 10,655 | | | | 2,371 | | | | 16,237 | | | | 40,000 | | | | 69,263 | |
Julie L. Anderson | | | 2016 | | | | 7,200 | | | | 1,603 | | | | 16,007 | | | | 40,000 | | | | 64,810 | |
|
| | | | | | | | | | | | | | | | |
| Name | Year | Perquisites and Other Personal Benefits (A) | Insurance Premiums | Company Contributions to 401(k) Plans | Company Contributions to Nonqualified Deferred Compensation Plans | Total |
| | | | | | | |
| C. Keith Cargill | 2019 | $ | 11,249 |
| $ | 2,033 |
| $ | 17,975 |
| $ | 59,650 |
| $ | 90,907 |
|
| Julie L. Anderson | 2019 | 7,200 |
| 1,603 |
| 15,882 |
| — |
| 24,685 |
|
| Vince A. Ackerson | 2019 | 21,186 |
| 2,371 |
| 18,109 |
| 32,125 |
| 73,791 |
|
| John G. Turpen | 2019 | 8,613 |
| 2,231 |
| 15,081 |
| 27,150 |
| 53,075 |
|
| |
| (A) | Perquisites include a car allowance of $7,200 for each of the executivesNEOs as well as the following club dues: Mr. Cargill $5,162,$4,049, Mr. Bartholow $9,200Ackerson $13,986 and Mr. Ackerson $3,455.Turpen $1,413. |
2019 Grants of Plan Based Awards Table*
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Estimated Future
Payouts Under
Non-Equity Incentive
Plan Awards | | | Estimated Future
Payouts Under
Equity Incentive
Plan Awards | | | All Other
Stock Awards:
Number of
Shares of
Stock or Units | | | Grant Date
Fair Value
of Stock
and Option
Awards | |
| Name | | Grant Date | | | Threshold | | | Target | | | Maximum | | | Threshold | | | Target | | | Maximum | | | |
C. Keith Cargill | | | 9/28/2016 | (A) | | $ | — | | | $ | — | | | $ | — | | | | 5,448 | | | | 10,895 | | | | 16,343 | | | | — | | | $ | 295,990 | |
| | | 9/28/2016 | (B) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 10,895 | | | | 591,925 | |
Peter B. Bartholow | | | 9/28/2016 | (A) | | | — | | | | — | | | | — | | | | 2,828 | | | | 5,656 | | | | 8,484 | | | | — | | | | 153,645 | |
| | | 9/28/2016 | (B) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5,656 | | | | 307,290 | |
John D. Hudgens | | | 9/28/2016 | (A) | | | — | | | | — | | | | — | | | | 2,528 | | | | 5,056 | | | | 7,584 | | | | — | | | | 137,346 | |
| | | 9/28/2016 | (B) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5,056 | | | | 274,692 | |
Vince A. Ackerson | | | 9/28/2016 | (A) | | | — | | | | — | | | | — | | | | 2,499 | | | | 4,998 | | | | 7,497 | | | | — | | | | 135,771 | |
| | | 9/28/2016 | (B) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 4,998 | | | | 271,541 | |
Julie L. Anderson | | | 5/17/2016 | (C) | | | N/A | | | | 178,282 | | | | N/A | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | 9/28/2016 | (A) | | | — | | | | — | | | | — | | | | 1,577 | | | | 3,153 | | | | 4,730 | | | | — | | | | 85,678 | |
| | | | 9/28/2016 | (B) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 3,153 | | | | 171,302 | |
|
| | | | | | | | | | | | | | | | | | | | | | |
| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (A) | | Estimated Future Payouts Under Equity Incentive Plan Awards (B) | | |
| Name | Grant Date | Threshold | Target | Maximum | | Threshold | Target | Maximum | All Other Stock Awards: Number of Shares of Stock or Units (C) | Grant Date Fair Value of Stock and Option Awards |
| | | | | | | | | | |
| C. Keith Cargill | 2/12/2019 (A) | $ | — |
| $ | — |
| $ | — |
| | 9,625 |
| 19,250 |
| 28,875 |
| — |
| $ | 1,149,995 |
|
| | 2/12/2019 (B) | — |
| — |
| — |
| | — |
| — |
| — |
| 19,250 |
| 1,149,995 |
|
| | N/A | 287,500 |
| 1,150,000 |
| 1,523,750 |
| | — |
| — |
| — |
| — |
| — |
|
| Julie L. Anderson | 2/12/2019 (A) | — |
| — |
| — |
| | 2,407 |
| 4,813 |
| 7,220 |
| — |
| 287,529 |
|
| | 2/12/2019 (B) | — |
| — |
| — |
| | — |
| — |
| — |
| 4,813 |
| 287,529 |
|
| | N/A | 100,000 |
| 400,000 |
| 530,000 |
| | — |
| — |
| — |
| — |
| — |
|
| Vince A. Ackerson | 2/12/2019 (A) | — |
| — |
| — |
| | 2,762 |
| 5,524 |
| 8,286 |
| — |
| 330,004 |
|
| | 2/12/2019 (B) | — |
| — |
| — |
| | — |
| | — |
| 5,524 |
| 330,004 |
|
| | N/A | 114,856 |
| 459,425 |
| 608,738 |
| | — |
| | — |
| — |
| — |
|
| John G. Turpen | 2/12/2019 (A) | — |
| — |
| — |
| | 1,904 |
| 3,808 |
| 5,712 |
| — |
| 227,490 |
|
| | 2/12/2019 (B) | — |
| — |
| — |
| | — |
| | — |
| 3,808 |
| 227,490 |
|
| | N/A | 85,313 |
| 341,250 |
| 452,156 |
| | — |
| | — |
| — |
| — |
|
*Columns for which no amounts are reported have been deleted.
* | Columns for which no amounts are reported have been deleted. |
| (A) | Amount representsAmounts represent potential payments under our annual incentive program. The actual amount earned in 2019 was paid in February 2020 and is shown in the “Non-Equity Incentive Plan Compensation” column of the 2019 Summary Compensation Table. See "Compensation Discussion and Analysis - Annual Incentive Compensation," for more information regarding our 2019 annual incentive program.
|
| |
| (B) | Amounts represent awards of RSUs made under the 2015 Plan that will vest based upon the Company’s achievement of certain performance targets andmeasures, subject to the NEO’s continued employment by the Company over a three-year period ending 12/31/2018.December 31, 2021. Based on the defined objectives of the awards the NEO has the opportunity to vest between 0% and 150% of the RSUs. The grant date fair value of the award is based on the closing price of our common stock on the date of grant, or $54.33,$59.74, and reflects the value of the award at target based on the probable outcome of the performance targetsmeasures determined as of the grant date in accordance with ASC 718 and pursuant to the 2015 Plan. See “Executive Compensation — "Compensation Discussion and Analysis —- Long-Term Incentives,”Incentive Compensation" for more information on the RSU grants. |
(B) | Amount represents |
| (C) | Amounts represent awards of RSUs made under the 2015 Plan that will cliff vest 66%at the end of three years on 3/15/2019 and 34% on 9/28/2019.February 12, 2022. The grant date fair value is based on the closing price of our common stock on the date of grant, or $54.33.$59.74. |
(C) | Amount representsnon-equity incentive plan special retention award of 2,274 units granted to Ms. Anderson pursuant to the 2015 Plan that is 100% service-based. The award vests 25% on each of the first four anniversaries of the grant date. As the award provides only for a single estimated payout, the amount is reported in target column only and is based on the 12/30/2016 closing market price of our common stock of $78.40. |
2019 Outstanding Equity Awards at Fiscal
Year-end Table*
| | | | | | | | | | | | | | | | | | | | |
| | | | | | Stock Awards | |
| Name | | Grant Date | | | Number of
Shares or
Units of
Stock That
Have Not
Vested(B) | | | Market Value
of Shares or
Units of Stock
That Have Not
Vested(A)(B) | | | Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights That Have
Not Vested(C) | | | Equity Incentive Plan
Awards: Market or
Payout Value of
Unearned Shares,
Units or Other Rights
That Have Not
Vested(A)(C) | |
C. Keith Cargill | | | 9/28/2016 | | | | 10,895 | | | $ | 854,168 | | | | 10,895 | | | $ | 854,168 | |
| | | 6/1/2015 | | | | 6,201 | | | | 486,158 | | | | 6,201 | | | | 486,158 | |
Peter B. Bartholow | | | 9/28/2016 | | | | 5,656 | | | | 443,430 | | | | 5,656 | | | | 443,430 | |
| | | 6/1/2015 | | | | 4,042 | | | | 316,893 | | | | 4,042 | | | | 316,893 | |
John D. Hudgens | | | 9/28/2016 | | | | 5,056 | | | | 396,390 | | | | 5,056 | | | | 396,390 | |
| | | 6/1/2015 | | | | 3,629 | | | | 284,514 | | | | 3,629 | | | | 284,514 | |
Vince A. Ackerson | | | 9/28/2016 | | | | 4,998 | | | | 391,843 | | | | 4,998 | | | | 391,843 | |
| | | 6/1/2015 | | | | 3,491 | | | | 273,694 | | | | 3,491 | | | | 273,694 | |
Julie L. Anderson | | | 9/28/2016 | | | | 3,153 | | | | 247,195 | | | | 3,153 | | | | 247,195 | |
|
| | | | | | | | | | | |
| | | Stock Awards |
| Name | Grant Date | Number of Shares or Units of Stock That Have Not Vested (A) | Market Value of Shares or Units of Stock That Have Not Vested (A)(B) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (C) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (B)(C) |
| | | | | | |
| C. Keith Cargill | 2/12/2019 | 19,250 |
| $ | 1,092,823 |
| 19,250 |
| $ | 1,092,823 |
|
| | 3/27/2018 | 11,506 |
| 653,196 |
| 11,506 |
| 653,196 |
|
| | 3/22/2017 | 10,008 |
| 568,154 |
| — |
| — |
|
| Julie L. Anderson | 2/12/2019 | 4,813 |
| 273,234 |
| 4,813 |
| 273,234 |
|
| | 3/27/2018 | 2,511 |
| 142,549 |
| 2,511 |
| 142,549 |
|
| | 7/18/2017 | 1,923 |
| 109,169 |
| — |
| — |
|
| | 3/22/2017 | 2,032 |
| 115,357 |
| — |
| — |
|
| Vince A. Ackerson | 2/12/2019 | 5,524 |
| 313,597 |
| 5,524 |
| 313,597 |
|
| | 3/27/2018 | 2,877 |
| 163,327 |
| 2,877 |
| 163,327 |
|
| | 3/22/2017 | 2,519 |
| 143,004 |
| — |
| — |
|
| John G. Turpen | 2/12/2019 | 3,808 |
| 216,180 |
| 3,808 |
| 216,180 |
|
| | 9/17/2018 | 8,800 |
| 499,576 |
| — |
| — |
|
*Columns for which no amounts are reported have been deleted.
* | Columns for which no amounts are reported have been deleted. |
| (A) | Based on 12/30/2016 closing market price of our common stock of $78.40. |
(B) | Awards granted 9/28/2016 cliff vest 66% on 3/15/2/12/2019 and 34% on 9/28/2019. Awards granted 6/1/2015 cliff vest at the end of three years on 6/1/2018.2/12/2022. Awards granted 3/27/2018 cliff vest at the end of three years on 3/27/2021. Awards granted 3/22/2017 cliff vest at the end of three years on 3/22/2020. Award granted 7/18/2017 to Ms. Anderson cliff vests 20% on each of the first five anniversaries of the grant date. Award granted 9/17/2018 to Mr. Turpen cliff vests 20% on each of the first five anniversaries of the grant date. |
| |
| (B) | Based on the December 31, 2019 closing market price of our common stock of $56.77. |
| |
| (C) | Awards granted 9/28/20162/12/2019 and 6/1/20153/27/2018 will vest based upon the Company’s achievement of certain performance targets and the executive’s continued employment by the Company over the three-year periods ending 12/31/2018December 31, 2021 and 12/31/2017,December 31, 2020, respectively. Awards are shown at target. |
2019 Option Exercises and Stock Vested Table*
| | | | | | | | |
| | | Option Awards | |
| Name | | Number of Shares Acquired on Vesting(A) | | | Value Realized on Vesting(B) | |
C. Keith Cargill | | | — | | | $ | — | |
Peter B. Bartholow | | | 4,388 | | | | 42,608 | |
John D. Hudgens | | | — | | | | — | |
Vince A. Ackerson | | | — | | | | — | |
Julie L. Anderson | | | — | | | | — | |
|
| | |
| | Stock Awards |
| Name | Number of Shares Acquired on Vesting (A) | Value Realized on Vesting (B) |
| | | |
| C. Keith Cargill | 23,981 | $1,360,261 |
| Julie L. Anderson | 6,451 | 366,453 |
| Vince A. Ackerson | 8,292 | 471,650 |
| John G. Turpen | 2,200 | 123,574 |
*Columns for which no amounts are reported have been deleted.
* | Columns for which no amounts are reported have been deleted. |
| (A) | The shares included in the table represent gross shares exercised or vested. Actual shares issued, net of taxes, were 88616,073 to Mr. Bartholow with respectCargill, 4,062 to the SAR exercise. Ms. Anderson, 5,317 to Mr. Ackerson, and 1,664 to Mr. Turpen. |
| |
| (B) | The value realized by the NEO upon the vesting of SARsRSUs is calculated by multiplying the number of shares of stock vested by the difference between the exercise price of the SAR and the market value of the underlying shares on the vesting date, which is the amount that is taxable to the executive. |
2019 Pension Benefits Table
The table disclosing the actuarial present value of each executive’s accumulated benefit under defined benefit plans, the number of years of credited service under each plan and the amount of pension benefits paid to each NEO during the year is omitted because the Company does not have a defined benefit plan for NEOs.
2019 Nonqualified Deferred Compensation Table*
|
| | | | | | | | | | | | |
| Name | NEO Contributions in Last Fiscal Year (A) | Company Contributions in Last Fiscal Year (B) | Aggregate Earnings/(Loss) in Last Fiscal Year (C) | Aggregate Balance at Last Fiscal Year End (D) |
| | | | | |
| C. Keith Cargill | $ | 619,282 |
| $ | 59,650 |
| $ | 332,001 |
| $ | 2,144,073 |
|
| Julie L. Anderson | — |
| — |
| 847 |
| 41,581 |
|
| Vince A. Ackerson | 301,801 |
| 32,125 |
| 255,405 |
| 1,673,385 |
|
| John G. Turpen | 27,150 |
| 27,150 |
| 2,457 |
| 56,757 |
|
See " | | | | | | | | | | | | | | | | |
| Name | | NEO Contributions in Last
Fiscal Year(A) | | | Company Contributions in Last
Fiscal Year(B) | | | Aggregate Earnings/(Loss) in Last Fiscal Year(C) | | | Aggregate Balance at Last Fiscal Year End(D) | |
C. Keith Cargill | | $ | 75,000 | | | $ | 100,000 | | | $ | 6,561 | | | $ | 181,561 | |
Peter B. Bartholow | | | 4,580 | | | | 40,000 | | | | 367 | | | | 44,947 | |
John D. Hudgens | | | — | | | | 40,000 | | | | — | | | | 40,000 | |
Vince A. Ackerson | | | 215,000 | | | | 40,000 | | | | 25,983 | | | | 280,983 | |
Julie L. Anderson | | | — | | | | 40,000 | | | | — | | | | 40,000 | |
ForCompensation Discussion and Analysis - Other Benefits - Nonqualified Deferred Compensation Plan" for a description of thenon-qualified nonqualified deferred compensation plan, refer to the “Other Benefits–Nonqualified Deferred Compensation Plan” section of the “Compensation Discussion and Analysis”.plan.
*Columns for which no amounts are reported have been deleted.
* | Columns for which no amounts are reported have been deleted. |
| (A) | Contribution amounts in this table are included in the “2016 Summary Compensation Table” above. Participants in the plan may elect to defer up to 75% of their annual salary and/or short-term incentive payout. All participant contributions to the plan and any related earnings are immediately vested and may be withdrawn upon the participant’s separation from service, death or disability, or upon a date specified by the participant. Amounts are included in the Salary or Annual Incentive Plan Compensation columns of the 2019 Summary Compensation Table.
|
| |
| (B) | Company contributions are detailed in the “20162019 All Other Compensation Table” and included in the “20162019 Summary Compensation Table” above.. The discretionary company contributions and any related earnings vest 50% onbased upon the second anniversary of the date of approval,employee’s tenure with the remainder vesting onCompany. As of December 31, 2019, all NEOs had met the third anniversary. Discretionary contributions become immediately vested upon the participant’s death or disability, or termination without cause or with good reason within 18 months of a change in control, and may be withdrawn upon the participant’s separation of service, death or disability, or on apre-determinedrequirements for immediate vesting. date specified by the participant or by the Company in an award agreement. |
(C) |
|
| (C) | Aggregate earnings do not reflect “above"above market or preferential earnings”earnings" and are not included in the “20162019 Summary Compensation Table” above.Table. |
| |
| (D) | Amounts represent the total compensation deferred by each NEO and discretionary contributions made to each NEO by the Company, together with any related earnings or losses attributed to either in accordance with each NEOs deferral account investment selections. Deferral amountsAll participant and Company contributions were included in these amounts have been reported as compensation in the “20162019 Summary Compensation Table” or in 2016.Summary Compensation Tables for previous years. |
2019 Potential Payments Upon Termination or Change in Control Table
The following table summarizes the estimated payments
that would be payable to
be made under each
executive’s contractNEO upon a termination of service for each of the reasons stated
below, described more completely in the “Employment Agreements” section of the “Compensation Discussion and Analysis”.below. For the purposes of the quantitative disclosure in the following table, and in accordance with SEC regulations, we have assumed that the termination took place on December
30, 201631, 2019 and that the price per share of our common stock was the closing market price as of that date,
$78.40. | | | | | | | | | | | | | | | | | | | | |
| Name | | Termination
Without Cause
or For Good
Reason | | | Change in Control:
Termination Without
Cause or For Good
Reason | | | Death | | | Disability | | | Retirement | |
C. Keith Cargill | | | | | | | | | | | | | | | | | | | | |
Severance(A) | | $ | 1,490,730 | | | $ | 3,419,535 | | | $ | — | | | $ | — | | | $ | — | |
Death/disability(B) | | | — | | | | — | | | | — | | | | — | | | | — | |
Accelerated vesting of long-term incentives and nonqualified deferred compensation plan discretionary contributions(C) | | | — | | | | 2,780,653 | | | | 2,780,653 | | | | 2,780,653 | | | | — | |
Other benefits(D) | | | 26,301 | | | | 52,602 | | | | — | | | | — | | | | — | |
Peter B. Bartholow | | | | | | | | | | | | | | | | | | | | |
Severance(A) | | | 777,980 | | | | 1,861,618 | | | | — | | | | — | | | | — | |
Death/disability(B) | | | — | | | | — | | | | — | | | | — | | | | — | |
Accelerated vesting of long-term incentives and nonqualified deferred compensation plan discretionary contributions(C) | | | — | | | | 1,560,646 | | | | 1,560,646 | | | | 1,560,646 | | | | 1,520,646 | |
Other benefits(D) | | | 31,069 | | | | 46,604 | | | | — | | | | — | | | | — | |
John D. Hudgens | | | | | | | | | | | | | | | | | | | | |
Severance(A) | | | 697,400 | | | | 1,665,583 | | | | — | | | | — | | | | — | |
Death/disability(B) | | | — | | | | — | | | | — | | | | — | | | | — | |
Accelerated vesting of long-term incentives and nonqualified deferred compensation plan discretionary contributions(C) | | | — | | | | 1,401,808 | | | | 1,401,808 | | | | 1,401,808 | | | | — | |
Other benefits(D) | | | 29,970 | | | | 44,955 | | | | — | | | | — | | | | — | |
Vince A. Ackerson | | | | | | | | | | | | | | | | | | | | |
Severance(A) | | | 719,509 | | | | 1,697,730 | | | | — | | | | — | | | | — | |
Death/disability(B) | | | — | | | | — | | | | — | | | | — | | | | — | |
Accelerated vesting of long-term incentives and nonqualified deferred compensation plan discretionary contributions(C) | | | — | | | | 1,371,075 | | | | 1,371,075 | | | | 1,371,075 | | | | — | |
Other benefits(D) | | | 29,922 | | | | 44,883 | | | | — | | | | — | | | | — | |
Julie L. Anderson | | | | | | | | | | | | | | | | | | | | |
Severance(A) | | | 592,927 | | | | 1,125,854 | | | | — | | | | — | | | | — | |
Death/disability(B) | | | — | | | | — | | | | 355,000 | | | | 355,000 | | | | — | |
Accelerated vesting of long-term incentives and nonqualified deferred compensation plan discretionary contributions(C) | | | — | | | | 967,629 | | | | 967,629 | | | | 967,629 | | | | — | |
Other benefits(D) | | | 25,946 | | | | 51,892 | | | | — | | | | 25,946 | | | | — | |
|
| | | | | | | | | | | | | | | |
| Name | Termination Without Cause or For Good Reason | Change in Control: Termination Without Cause or For Good Reason | Death | Disability | Retirement |
| | | | | | |
| C. Keith Cargill (A) | | | | | |
| Severance (B) | $ | 2,291,503 |
| $ | 5,666,675 |
| $ | — |
| $ | — |
| $ | — |
|
| Death/disability (C) | — |
| — |
| — |
| — |
| — |
|
| Accelerated vesting of long-term incentives (D) | — |
| 4,060,190 |
| 4,060,190 |
| 4,060,190 |
| 4,060,190 |
|
| Other benefits (E) | 35,755 |
| 71,510 |
| — |
| — |
| — |
|
| | | | | | |
| Julie L. Anderson | | | | | |
| Severance (B) | 948,264 |
| 2,332,120 |
| — |
| — |
| — |
|
| Death/disability (C) | — |
| — |
| — |
| — |
| — |
|
| Accelerated vesting of long-term incentives (D) | — |
| 1,088,394 |
| 1,088,394 |
| 1,088,394 |
| — |
|
| Other benefits (E) | 25,365 |
| 38,048 |
| — |
| — |
| — |
|
| | | | | | |
| Vince A. Ackerson | | | | | |
| Severance (F) | 1,329,837 |
| 2,549,490 |
| — |
| — |
| 1,329,837 |
|
| Death/disability (F) | — |
| — |
| 1,329,837 |
| 1,329,837 |
| — |
|
| Accelerated vesting of long-term incentives (D) | — |
| 1,096,853 |
| 1,096,853 |
| 1,096,853 |
| 1,096,853 |
|
| Other benefits (E) | 52,883 |
| 52,883 |
| — |
| 52,883 |
| 52,883 |
|
| | | | | | |
| John G. Turpen | | | | | |
| Severance (B) | 856,078 |
| 2,118,320 |
| — |
| — |
| — |
|
| Death/disability (C) | — |
| — |
| — |
| — |
| — |
|
| Accelerated vesting of long-term incentives (D) | — |
| 931,936 |
| 931,936 |
| 931,936 |
| — |
|
| Other benefits (E) | 39,162 |
| 58,743 |
| — |
| — |
| — |
|
| |
| (A) | IfAs described above at Employment Agreements - Transition Letter Agreement and Amended and Restated Employment Agreement between Mr. Cargill and the Company, on May 29, 2020, the Company and Mr. Cargill entered into a transition letter agreement providing, among other things, for his retirement effective January 1, 2021, and which revised the payments due to Mr. Cargill in connection with his retirement from those described in the above table.
|
| |
| (B) | Pursuant to their employment agreements, if an NEO is terminated without cause or for good reason, severance is equal to twelve months of base salary plus the average incentive compensation paid during the priortwo-year period and will be paid over a period of twelve months. If the NEO’s termination occurs in connection with a change in control, severance is equal to 2.5 times average salary plus average incentive compensation paid during the priortwo-year period for Messrs. Cargill, Bartholow, Hudgens and Ackerson and 2 times twelve months base salary plus average incentive compensation paid during the priortwo-year period for Ms. Anderson, and will be paid in a lump sum within 30 days of the NEO’s termination. |
(B) | |
| (C) | Employment agreements for Messrs. Cargill, Bartholow, Hudgens and Ackerson provide for no payment upon their death or disability. Ms. Anderson’s employment agreement provides for a cash payment of the lesser of (i) the balance of her base salary remaining in the term of her employment agreement or (ii) twelve months base salary upon heran NEO’s death or disability. |
(C) | |
| (D) | Includes immediate vesting at target of any performance-based awards for which performance conditions have not yet been satisfied, based on the 12/30/2016December 31, 2019 closing price of our common stock of $78.40. Messrs.$56.77. As of December 31, 2019, Mr. Cargill Ackersonhad met the age and Hudgensservice conditions to be eligible for accelerated vesting of long-term incentives upon retirement and Mr. Ackerson's Retirement Agreement provides for accelerated vesting of long-term incentives upon retirement. Ms. Anderson and Mr. Turpen had not met the age and service conditions as of 12/31/2016December 31, 2019 to be eligible for the accelerated vesting of long-term incentives upon retirement. Also includes unvested discretionary Company contributions made under the nonqualified deferred compensation plan that immediately vest upon the participant’s death or disability, or termination without cause or with good reason within 18 months of a change in control. |
(D) | |
| (E) | Other benefits include the following insurance: medical, dental, vision, life, accidental death and disability, short-term disability, long-term disability and supplemental long-term disability. Each NEOMessrs. Cargill and Turpen and Ms. Anderson would receive one year of benefits in the event of termination without cause. In the event of a change in control, Mr. Cargill and Ms. Anderson would receive 24 months of benefits, and Messrs. Bartholow, HudgensMs. Anderson and AckersonMr. Turpen would each receive 18 months of benefits. Ms. AndersonPursuant to his Retirement Agreement, Mr. Ackerson would also receive 1218 months of benefits in the event of permanent disability.termination without cause or due to disability, as well as in the event of his retirement. Cost includes both employer and employee coverage. |
| |
| (F) | Mr. Ackerson’s Retirement Agreement provides for a severance payment equal to eighteen months base salary in effect as of his Separation Date and a cash payment equal to the average of the annual cash bonuses paid by the Company for the two full bonus plan years prior to the Separation Date, plus a lump sum payment of $20,000 as compensation for legal fees incurred by Mr. Ackerson in connection with the preparation and negotiation of the Retirement Agreement (the “Cash Severance Payments”). In the event of his termination without cause or disability occurring prior to the Separation Date, Mr. Ackerson will receive the Cash Severance Payments. In the event of his death, any unpaid Cash Severance Payments will be paid to Mr. Ackerson’s estate. If a change in control occurs prior to the Separation Date, severance is equal to 2.5 times his average salary plus average incentive compensation paid during the prior two-year period. If a change in control occurs subsequent to his Separation date, he will receive any unpaid Cash Severance Payments. See Employment Agreements - Retirement Transition Agreement between Mr. Ackerson and the Company and Employment Agreement for Mr. Ackerson for more information regarding the terms of Mr. Ackerson’s retirement. |
2019 Director Compensation Table*
For service on our board of directors in 2016,2019, ournon-employee directors were paid an annual retainer of $50,000$55,000 and a fee of $1,500$1,750 per meeting. Our Chairmanchairman received an additional $65,000$80,000 per year for serving in that role. In addition, each member of a committee was paid a fee of $1,500$1,750 per committee meeting attended. Directors serving as chairman of the Audit and Risk Committee and HRRisk Committee received an additional $20,000$30,000 per year for serving in those roles and the directors serving as chairman ofchairing the HR Committee and Governance and Nominating Committee and Credit Risk Committee received an additional $15,000$20,000 per year for serving in those roles. Members attending special meetings of the board and committees were paid $1,500$1,750 per meeting, or $750$1,250 for telephonic meetings. In addition to cash retainer fees, eachnon-employee director receives an annual grant of restricted stock unitsRSUs with an aggregate grant date fair value of approximately $45,000 ($55,000 beginning in 2017), granted$65,000 at the April board meeting, immediately following each year’s annual meeting of stockholders, thatwhich vest in full on the first anniversary of the date of grant and are distributed to the director in equal amounts on the first, second and third anniversaries of the date of grant in accordance with the 2015 Plan. New directors receive a grant of restricted common stock with an aggregate grant date fair value of $50,000 as to which restrictions lapse as to equal numbers of shares on the first, second and third anniversaries of the date of grant.
The following table contains information pertaining to the compensation of the Company’s board of directors for the
20162019 fiscal year.
| | | | | | | | | | | | | | | | |
| Name | | Fees Earned Or
Paid In Cash(A) | | | Stock
Awards(B) | | | All Other
Compensation | | | Total | |
James H. Browning(C) | | $ | 90,000 | | | $ | 44,981 | | | $ | — | | | $ | 134,981 | |
Preston M. Geren III(C) | | | 63,250 | | | | 44,981 | | | | — | | | | 108,231 | |
Fred Hegi(D) | | | 49,750 | | | | — | | | | — | | | | 49,750 | |
Larry L. Helm(C) | | | 122,250 | | | | 44,981 | | | | — | | | | 167,231 | |
Charles S. Hyle(C) | | | 72,500 | | | | 44,981 | | | | — | | | | 117,481 | |
William W. McAllister(D) | | | 37,000 | | | | — | | | | — | | | | 37,000 | |
Elysia Holt Ragusa(C) | | | 80,000 | | | | 44,981 | | | | — | | | | 124,981 | |
Steven P. Rosenberg(C) | | | 77,000 | | | | 44,981 | | | | — | | | | 121,981 | |
Robert W. Stallings(C) | | | 58,750 | | | | 44,981 | | | | — | | | | 103,731 | |
Dale W. Tremblay(C) | | | 81,000 | | | | 44,981 | | | | — | | | | 125,981 | |
Ian J. Turpin(C) | | | 58,750 | | | | 44,981 | | | | — | | | | 103,731 | |
Patricia A. Watson(E) | | | 32,850 | | | | 106,229 | | | | — | | | | 139,079 | |
|
| | | | | | | | | |
| Name | Fees Earned or Paid in Cash (A) | Stock Awards (B) | Total |
| | | | |
| Jonathan E. Baliff (D) | $ | 66,250 |
| $ | 64,992 |
| $ | 131,242 |
|
| James H. Browning (C) | 127,250 |
| 64,992 |
| 192,242 |
|
| Larry L. Helm (C) | 154,250 |
| 64,992 |
| 219,242 |
|
| David S Huntley (E) | 66,750 |
| 64,992 |
| 131,742 |
|
| Charles S. Hyle (C) | 111,500 |
| 64,992 |
| 176,492 |
|
| Elysia Holt Ragusa (C) | 102,250 |
| 64,992 |
| 167,242 |
|
| Steven P. Rosenberg (C) | 91,500 |
| 64,992 |
| 156,492 |
|
| Robert W. Stallings (C) | 74,250 |
| 64,992 |
| 139,242 |
|
| Dale W. Tremblay (C) | 90,000 |
| 64,992 |
| 154,992 |
|
| Ian J. Turpin (C) | 80,000 |
| 64,992 |
| 144,992 |
|
| Patricia A. Watson (C) | 75,000 |
| 64,992 |
| 139,992 |
|
*Columns for which no amounts are reported have been deleted.
* | Columns for which no amounts are reported have been deleted. |
| (A) | Amounts represent meeting fees paid upon attendance of board and committee meetings, annual retainer fees and fees for service as Chairmanchairman of the board or a committee. |
| |
| (B) | Amounts represent the aggregate grant date fair value determined in accordance with ASC 718 of all stock awards granted pursuant to the 2015 Plan. On 5/17/2016,April 16, 2019, all currently serving directors received 1,0231,107 RSUs with a grant date fair value of $43.97$58.71 per share which will vestone-third in full on eachthe first anniversary of the grant date. In connection with her election on 2/16/2016, Ms. Watson received grants of 331 RSUs, representing a partial grant for 2016 service, and 1,472 shares of restricted stock, representing an annual grant, both with grant date fair values of $33.97 per share. The RSUs will vest as to one-third of the shares on each anniversary of the grant date. The restrictions applicable to the shares of restricted stock will lapse as toone-third of the shares on each anniversary of the grant date. |
| |
| (C) | As of December 31, 2016,2019, Messrs. Browning, Geren, Helm, Hyle, Rosenberg, Stallings, Tremblay and Turpin and Ms.Mses. Ragusa and Watson held 1,5671,340 unvested RSUs, and the following directors held vested SARS: Mr. Browning, 3,000; Mr. Helm, 11,000; Ms. Ragusa, 3,000; Mr. Rosenberg, 9,000; Mr. Stallings, 600; and Mr. Turpin, 8,600.1,800. |
(D) | Mr. Hegi and Mr. McAllister retired from the board effective at the 2016 Annual Meeting held on May 17, 2016. As of December 31, 2016, Mr. Hegi and Mr. McAllister both held 544 unvested RSUs. |
(E)(D) | As of December 31, 2016, Ms. Watson2019, Mr. Baliff held 1,2431,304 unvested RSUs and 981214 shares of restricted stock subject to continuing restrictions. |
| |
| (E) | As of December 31, 2019, Mr. Huntley held 1,199 unvested RSUs and 167 shares of restricted stock subject to continuing restrictions. |
CEO PAY RATIO
Item 402(u) of Regulation S-K, implementing a requirement of the Dodd-Frank Wall Street Reform and Consumer Protection Act, requires that we disclose a ratio that compares the annual total compensation of our median employee to that of our CEO.
In order to determine the median employee, we prepared a list of all employees as of December 31, 2019, along with their gross income as reported on IRS form W-2 for 2019. Gross income as reported on IRS form W-2 for 2019 was annualized for those employees that were not employed for the full year.
After identifying the median employee, we calculated that employee’s annual total compensation using the same methodology we use for our NEOs as set forth in the 2019 Summary Compensation Table.
The annual total compensation for 2019 for the CEO was $4,908,814 and for the median employee was $93,586. The resulting ratio of our CEO’s pay to that of our median employee for 2019 was 52.5 to 1.
HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the HR Committee of the board of directors of the Company was an officer or employee of the Company during
20162019 or any other time. In addition, none of the executive officers of the Company served on the board of directors or on the compensation committee of any other entity, for which any executive officers of such other entity served either on our board of directors or on our HR Committee.
INDEBTEDNESS OF MANAGEMENT AND TRANSACTIONS WITH CERTAIN RELATED PERSONS
In the ordinary course of business, the Bank has made loans, and may continue to make loans in the future, to the
Bank’sBank's and the
Company’sCompany's officers, directors and employees. However, it is the Bank’s policy to not extend loans to executive officers of the Bank
andor the Company. The Bank makes loans to directors and their affiliates in the ordinary course of business on substantially the same terms as those with other customers. All loans to directors are reviewed and approved by our board of directors prior to making any such loans. The Bank also provides wealth management services for managed accounts to directors at discounted fees.
The Company
also has
other policies and procedures for reviewing related party transactions involving the Company’s and the Bank’s directors, executive officers and their affiliates. Each director and
named executive officerNEO of the Company and the Bank is required to complete a questionnaire annually, and each director who serves on the Audit
and Risk Committee must complete a certification of independence annually. Both of these documents are designed to disclose all related party transactions, including loans, and this information is reviewed by management, the Audit
and Risk Committee and the board of directors, as appropriate. Such transactions are subject to the standards set forth in the Company’s Code of Conduct
for executive officers and in applicable laws and regulations,
SEC rules, and the Nasdaq Stock Market Listing Rules for determining the independence of directors. The questionnaires, certifications and Code of Conduct are all in writing.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCESection 16(a) of the Exchange Act requires the Company’s officers and directors, and persons who own more than 10% of a registered class of its equity securities, to file initial reports of ownership and reports of changes in ownership with the SEC. The Company, based solely on a review of its Section 16(a) reports filed during 2016, believes that the required Section 16(a) reports were filed on a timely basis by its executive officers and directors, except that a Form 4 for Steven P. Rosenberg reflecting the sale of 15,000 shares of the Company’s stock on November 10, 2016, was filed on December 1, 2016.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31,
20162019 regarding common stock that may be issued under the Company’s existing equity compensation plans.
| | | | | | | | | | | | |
| Plan Category | | Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights | | | Weighted Average
Exercise Price of
Outstanding
Options,
Warrants and
Rights | | | Number of
Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans | |
Equity compensation plans approved by security holders(A) | | | 550,918 | | | $ | 31.68 | | | | 2,270,699 | (B) |
Equity compensation plans not approved by security holders | | | — | | | | — | | | | — | |
Total | | | 550,918 | | | $ | 31.68 | | | | 2,270,699 | |
| | |
|
| | | |
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans |
| Equity compensation plans approved by security holders | 579,512 (A) | $33.95 | 1,772,070 (B) |
| Equity compensation plans not approved by security holders | — | — | — |
| Total | 579,512 | $33.95 | 1,772,070 |
| |
| (A) | Includes 125,86321,200 shares issuable pursuant to outstanding SARs with a weighted average exercise price of $31.68$33.95 and 425,055558,312 shares issuable pursuant to outstanding RSUs. Since RSUs have no exercise price, they are not included in the weighted average exercise price calculation. |
| |
| (B) | All of these shares are available for issuance pursuant to grants of full-value awards. |
AUDITOR FEES AND SERVICES
The Audit
and Risk Committee has appointed Ernst & Young LLP to continue as our independent registered public accounting firm for the
20172020 fiscal year.
A representative of Ernst & Young LLP is expected to be present at the Annual Meeting and will be available to respond to appropriate questions.Fees for professional services provided by the Company’s independent registered public accounting firm in each of the last two fiscal years, in each of the following categories,
are (in thousands): | | | | | | | | |
| | | 2016 | | | 2015 | |
Audit fees | | $ | 1,675 | | | $ | 1,450 | |
Audit-related fees | | | — | | | | — | |
Tax fees | | | 330 | | | | 423 | |
Total | | $ | 2,005 | | | $ | 1,873 | |
| |
were:
|
| | | | | | |
| (in thousands) | 2019 | 2018 |
| Audit fees | $ | 1,877 |
| $ | 1,644 |
|
| Audit-related fees | — |
| — |
|
| Tax fees | 499 |
| 480 |
|
| Total | $ | 2,376 |
| $ | 2,124 |
|
Fees for audit services include fees associated with the audit of the Company’s annual consolidated financial statements, the
reviewsreview of the consolidated financial statements included in the Company’s
Forms10-Q,Form 10-Qs, accounting consultations and management’s assertions regarding effective internal controls in compliance with the requirements of Section 404 of the Sarbanes Oxley Act and Federal Deposit Insurance Corporation Improvement
Act, and comfort letter procedures.Act. Tax fees included various federal, state and local tax
services.services, as well as tax consultations.
Pre-approval Policies and Procedures
The Audit
and Risk Committee has adopted a policy that requires advance approval of all audit, audit-related and tax services performed by the independent registered public accounting firm. The policy provides for
pre-approval by the Audit
and Risk Committee of specifically defined audit and
non-audit services. Unless the specific service has been previously
pre-approved with respect to that year, the Audit
and Risk Committee must approve the permitted service before the independent registered public
accounting firm is engaged to perform it. The Audit and Risk Committee has delegated to the Chairmanchairman of the Audit and Risk Committee authority to approve permitted services provided that the Chairmanchairman reports any decisions to the Audit and Risk Committee at its next scheduled meeting.
Stockholder Nominees for Director
Stockholders may submit nominees for director in accordance with the Company’s bylaws.Bylaws. Under the Company’s bylaws,Bylaws, a stockholder’s notice to nominate a director must be in writing and set forth (1) as to each proposed nominee, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required pursuant to Regulation 14A under the Exchange Act, including, without limitation, such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected; and (2) as to such stockholder, the stockholder’s name and address, and the class and number of shares of stock of the Company that are beneficially owned by such stockholder. NominationsThe Bylaws provide that nominations for director for the 20182021 annual meeting of stockholders must generally be delivered noto the Company’s principal executive offices not later than 180100 days and no more than 270130 days prior to the 2018one-year anniversary of the preceding year’s annual meeting, provided such meeting is held within 30 days of such anniversary date. The Company typically holds its annual meeting in April and at this time anticipates holding its 2021 annual meeting of stockholders.stockholders on Tuesday, April 20, 2021, substantially earlier than a date within 30 days of the anniversary of the 2020 annual meeting. Consequently, stockholder notice of a nomination for director for the 2021 annual meeting must be delivered to the Company’s principal executive offices no earlier than December 11, 2020, 130 days before the anticipated 2021 annual meeting date, and no later than January 10, 2021, 100 days prior to the anticipated 2021 annual meeting date, or, if later, the tenth day following the day on which we first publicly announce the date of the 2021 annual meeting. The actual date for the 2021 annual meeting of stockholders has not been determined and it is within the discretion of the board of directors to choose the date of such meeting, which will be publicly announced when it has been determined. Nominations should be directed to:Texas Capital Bancshares, Inc., Attn: Secretary, 2000 McKinney Avenue, 7th Floor, Dallas, Texas 75201, Attn: Secretary.75201. Stockholder Proposals for
20182021
Stockholders interested in submitting a proposal for inclusion in the proxy materials for the Company’s annual meeting of stockholders in 20182021 may do so by following the procedures prescribed in Exchange Act Rule 14a-8. SEC rules establish the eligibility requirements and procedures that must be followed for a stockholder’s proposal to be included
in a public company’s proxy materials. Because the date of the 2021 annual meeting is expected to change by more than 30 days from the anniversary of the 2020 annual meeting, the deadline for submitting a stockholder proposal under Rule 14a-8 is a “reasonable time” before we begin to print and distribute our proxy materials for the 2021 annual meeting. As noted above, at this time we expect to hold our 2021 annual meeting on April 20, 2021, and expect to print and distribute the proxy materials for such meeting commencing on or about March 11, 2021. In that case, because we will have moved the 2021 annual meeting date by more than 30 days from the anniversary of the 2020 annual meeting, proposals submitted for inclusion in the Company’s 2021 proxy materials must be received a “reasonable time” before we print and send our proxy materials. The Company is requesting at this time that any stockholder proposals for inclusion in the 2021 proxy materials be submitted no later than November 9, 2020. The actual date for the 2021 annual meeting of stockholders has not been determined and it is within the discretion of the board of directors to choose the date of such meeting, which will be publicly announced when it has been determined.
14a-8.To be eligible for inclusion, stockholder proposals must be received by the Company at the following address: Texas Capital Bancshares, Inc.,
Attn: Secretary, 2000 McKinney Avenue, 7
th Floor, Dallas, Texas 75201, Attn: Secretary, no later than November 9, 2017.75201.Advance Notice Procedures
Under the Company’s bylaws,Bylaws, no business may be brought before an annual meeting unless it is brought before the meeting by or at the direction of the board of directors or by a stockholder who has delivered timely notice to the Company.Company and has otherwise satisfied the applicable requirements for such action set forth in the Bylaws. Such notice must contain certain information specified in the bylawsBylaws and generally must be delivered noreceived not later than 180100 days and no more than 270130 days prior to the one-year anniversary of the preceding year’s annual meeting, provided such meeting is held within 30 days of such anniversary date. The Company typically holds its annual meeting in April and at this time anticipates holding its 2021 annual meeting of stockholders on Tuesday, April 20, 2021, substantially earlier than a date within 30 days of the anniversary of the 2020 annual meeting. Consequently, stockholder notice of business to be brought before the 2021 annual meeting must be delivered to the Company’s principal executive offices no earlier than December 11, 2020, 130 days before the anticipated 2021 annual meeting date, and no later than January 10, 2021, 100 days prior to the anticipated 2021 annual meeting date, or, if later, the tenth day following address: the day on which we first publicly announce the date of the 2021 annual meeting. The actual date for the 2021 annual meeting of stockholders has not been determined and it is within the discretion of the board of directors to choose the date of such meeting, which will be publicly announced when it has been determined. The required notice and supporting information should be directed to:Texas Capital Bancshares, Inc., Attn: Secretary, 2000 McKinney Avenue, 7th Floor, Dallas, Texas 75201, Attn: Secretary. 75201.
These requirements are separate from the SEC’s requirements that a stockholder must meet in order to have a stockholder proposal included in the Company’s proxy statement pursuant to Rule
14a-8 under the Exchange Act.
A copy of the Company’s
2016 Annual Report
to Stockholderson Form 10-K for the year ended December 31, 2019 (the "2019 Form 10-K") is available on the Internet as set forth in the Notice of Internet Availability of Proxy Materials.
Upon written request, the Company will furnish to any stockholder without charge a copy of its
Annual Report on2019 Form
10-K for the year ended December 31, 2016 pursuant to the instructions set forth in the Notice of Internet Availability of Proxy Materials.
| | | | |
 | | TEXAS CAPITAL BANCSHARES, INC.® | | |
ANNUAL MEETING OF
ANNEX A
TEXAS CAPITAL BANCSHARES, INC.
AMENDED AND RESTATED BYLAWS
Section 2.3 Special Meetings.
(a) | | |
Date: | | Tuesday, April 18, 2017 |
Time: | | 9:00 A.M. (Central Daylight Time) |
Place: | | 2000 McKinney Avenue, 7th Floor, Dallas, Texas 75201 |
| | See Voting Instruction on Reverse Side. |
Please make your marks like this:Power to Call Special Meeting☒ Use dark black pencil or pen only
Board of Directors Recommends a VoteFORthe election. Special meetings of the director nomineesstockholders, for any purpose or purposes, unless otherwise prescribed by statute or the Certificate of Incorporation of the Corporation then in proposal 1,1 YEARon proposal 3 andFORproposals 2 and 4.
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1:
| | Election of Directors
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| | | | | | | | | | | | | | | | Directors
Recommend |
| | | | | | For | | | | | | Withhold | | | | Ô |
| | 01 C. Keith Cargill | | ☐ | | | | | | ☐ | | | | For |
| | 02 Peter B. Bartholow | | ☐ | | | | | | ☐ | | | | For |
| | 03 James H. Browning | | ☐ | | | | | | ☐ | | | | For |
| | 04 Preston M. Geren III | | ☐ | | | | | | ☐ | | | | For |
| | 05 Larry L. Helm | | ☐ | | | | | | ☐ | | | | For |
| | 06 Charles S. Hyle | | ☐ | | | | | | ☐ | | | | For |
| | 07 Elysia Holt Ragusa | | ☐ | | | | | | ☐ | | | | For |
| | 08 Steven P. Rosenberg | | ☐ | | | | | | ☐ | | | | For |
| | 09 Robert W. Stallings | | ☐ | | | | | | ☐ | | | | For |
| | 10 Dale W. Tremblay | | ☐ | | | | | | ☐ | | | | For |
| | 11 Ian J. Turpin | | ☐ | | | | | | ☐ | | | | For |
| | 12 Patricia A. Watson | | ☐ | | | | | | ☐ | | | | For |
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| | | | | | For | | Against | | Abstain | | | | |
2: | | Advisory vote on compensation of named executive officers. | | ☐ | | ☐ | | ☐ | | | | For |
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| | | | 1 year | | 2 years | | 3 years | | Abstain | | 1 |
3: | | Advisory vote on frequency of advisory vote on compensation of named executive officers. | | ☐ | | ☐ | | ☐ | | ☐ | | Year |
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| | | | For | | Against | | Abstain | | | | |
4: | | Ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm of the Company. | | ☐ | | ☐ | | ☐ | | | | For |
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| | To attend the meeting and vote your shares in person, please mark this box. | | | | ☐ | | | | | | |
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| | Authorized Signatures - This section must be completed for your Instructions to be executed. | | | | | | | | | | |
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| | Please Sign Here | | | | Please Date Above | | |
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| | Please Sign Here | | | | Please Date Above | | |
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| | Please sign exactly as your name(s) appears on your stock certificate. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the proxy. |
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| | TEXAS CAPITAL BANCSHARES, INC.® | | |
Annual Meetingeffect (the “Certificate of Texas Capital Bancshares, Inc.
toIncorporation”), may be held on Tuesday, April 18, 2017
for Holders as of February 22, 2017
This proxy is being solicited on behalfcalled by the Chairman of the Board or the Chief Executive Officer, and shall be called by the Chief Executive Officer, the President or the Secretary at the request in writing of Directorsa majority of the total number of authorized directors (without regard as to whether there exist any vacancies in previously authorized director positions at the time of such request), or at the request in writing of stockholders of record owning
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 | | VOTE BY:at least 20% of all shares issued and outstanding and entitled to vote at such meeting, based upon the Corporation’s most recent public report of the number of issued and outstanding shares. |
|  INTERNET | | | |  TELEPHONE |
| Go To | | | | | | 866-390-5385 |
| www.proxypush.com/tcbi
• Cast your vote online.
• View meeting documents.
| | OR
| | • Use any touch-tone telephone.
•Have your Proxy Card/Voting Instruction
Form ready.
• Follow the simple recorded instructions.
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| | |  MAIL | | |
| OR
| | • Mark, sign and date your Proxy Card/Voting Instruction
Form.
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| | | • Detach your Proxy Card/Voting Instruction Form. |
| | | • Return your Proxy Card/Voting Instruction Form in the
postage-paid envelope provided.
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| The undersigned hereby appoints C. Keith Cargill and Peter B. Bartholow, and each of them, as the true and lawful attorneys of the undersigned, with full power of substitution and revocation, and authorizes each of them to vote all the shares of capital stock of Texas Capital Bancshares, Inc. that the undersigned is entitled to vote at said meeting and any adjournment thereof upon the matters specified and upon such other matters as may be properly brought before the meeting or any adjournment thereof, conferring authority upon such true and lawful attorneys to vote in their discretion on such other matters as may properly come before the meeting and revoking any proxy heretofore given.
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| THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, SHARES WILL BE VOTED FOR THE ELECTION OF THE DIRECTOR NOMINEES IN PROPOSAL 1, 1 YEAR ON PROPOSAL 3 AND FOR PROPOSALS 2 AND 4.
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| All votes must be received by 5:00 P.M., Eastern Time, April 17, 2017.
All votes by ESPP participants must be received by 5:00 P.M., Eastern Time, April 13, 2017.
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| | | | | PROXY TABULATOR FOR
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| | | | | TEXAS CAPITAL BANCSHARES, INC.
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| | | | | P.O. BOX 8016 |
| | | | | CARY, NC 27512-9903 |
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(b) Date, Time and Place of Special Meeting. Any special meeting properly called shall be held at such place, if any, on such date, and at such time as designated by the Board of Directors; provided, however, that the special meeting shall not be held more than 120 days after receipt of a request for a special meeting of stockholders submitted by one or more stockholders (a "Special Meeting Request").
(c) Required Form of Special Meeting Request. To be in a proper form, a Special Meeting Request must: . . . (v) contain the following information:
. . .
d. documentary evidence that the Requesting Stockholders had ownership of at least 20% of all shares issued and outstanding and entitled to vote at such meeting, based upon the Corporation’s most recent public report of the number of issued and outstanding shares (the "Requisite Percentage"), as of the date of delivery of the Special Meeting Request to the Secretary; provided, however, that if any of the Requesting Stockholders are not the beneficial owners of the shares representing the Requisite Percentage, then to be valid, the Special Meeting Request must also include documentary evidence (or, if not simultaneously provided with the Special Meeting Request, such documentary evidence must be delivered to the Secretary within ten days after the date of delivery of the Special Meeting Request to the Secretary) that the beneficial owners on whose behalf the Special Meeting Request is made had, together with any Requesting Stockholders who are beneficial owners, stock ownership of the Requisite Percentage as of the date of delivery of such Special Meeting Request to the Secretary;
. . .
| | | | |
| | | | Revocable Proxy — Texas Capital Bancshares, Inc.
|
| | | | Annual Meeting of Stockholders |
| | | | April 18, 2017 9:00 a.m. (Central Daylight Time) |
| | | | This Proxy is Solicited on Behalf of the Board of Directors |
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| | 
| | The undersigned appoints C. Keith Cargill and Peter B. Bartholow, each with full power of substitution, to act as proxies for the undersigned, and to vote all shares of common stock of Texas Capital Bancshares, Inc. that the undersigned is entitled to vote at the Annual Meeting of Stockholders on Tuesday, April 18, 2017, at 9:00 a.m. at the offices of Texas Capital Bancshares, Inc. at 2000 McKinney Avenue, 7th Floor, Dallas, Texas 75201, and any and all adjournments thereof, as set forth below.
This proxy is revocable and will be voted as directed. However, if no instructions are specified, the proxy will be voted FOR the election of the director nominees specified in Proposal 1, 1 YEAR on Proposal 3 and FOR Proposals 2 and 4.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
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