Brian J. Fisher
| | Peter R. Knitzer President and Chief Executive Officer John D. Schachtel Executive Vice President and Chief Operating Officer Donald E. Thomas Executive Vice President and Chief Financial Officer Daniel J. Taggart Executive Vice President and Chief Credit Risk Officer Brian J. Fisher Senior Vice President, General Counsel, and Secretary | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 25 | | |
Compensation Determination Process The Compensation Committee reviews and approves the compensation determinations for all of our executive officers. In setting an executive officer’s compensation package and the relative allocation among different types of compensation, we consider the nature of the position, the scope of associated responsibilities, the individual’s prior experience and skills, and the individual’s compensation expectations, as well as the compensation of our existing executive officers and our general impressions of prevailing conditions in the market for executive talent. Engagement and Use of an Independent Compensation Consultant The Compensation Committee has the authority to hire outside advisors and experts, including compensation consultants, to assist it with director and executive officer compensation determinations. TheSince 2014, the Compensation Committee has retained the services of Veritas Executive Compensation Consultants, an independent compensation consultant, since 2014 to ensure that our compensation practices are appropriate for our industry, to review and to make recommendations with respect to executive officer and director cash and equity compensation, and to update our peer group, in each case for the Compensation Committee’s use in setting compensation. Veritas’ recommendations to the Compensation Committee were generally in the form of suggested ranges of compensation or descriptions of policies that Veritas currently considers “best practice” in our industry and for publicly-traded companies. The Compensation Committee used Veritas’ reports to further its understanding of executive officer cash and equity compensation practices in the market. During 2017,2018, Veritas worked only for the Compensation Committee and performed no additional services for usthe Company or any of our executive officers. The Compensation Committee Chair approved all work performed by Veritas. During 2017,2018, the Compensation Committee and the Company did not use the services of any other compensation consultant. The Compensation Committee has also engaged Veritas in 20182019 to provide similar services. Our Compensation Committee has assessed the independence of Veritas, taking into account, among other things, the factors set forth in NYSE rules, and has concluded that no conflict of interest exists with respect to the work Veritas performed or performs for our Compensation Committee and that Veritas is independent under NYSE rules. Establishment and Use of a Peer Group We generally monitor compensation practices in the marketmarkets where we compete for executive talent to obtain an overview of market practices and to ensure that we make informed decisions on executive pay packages. For 20172018 compensation decisions, to obtain a sense of the market and a general understanding of current compensation practices, we reviewed the compensation awarded by a peer group of publicly-traded companies. In addition, as described in greater detail below, the vesting of certain of our executives’ long-term incentive awards is determined based upon our financial performance compared to the financial performance of our peer group over a three-year performance period. At the outset of 2017,2018, based upon prior peer group reviews conducted with the assistance of Veritas, our peer group consisted of the following companies: | | | | | • Aaron’s, Inc.
• America’sCar-Mart, Inc.
• Asta Funding, Inc.
• Atlanticus Holdings Corp.
• Consumer Portfolio Services, Inc.
• Credit Acceptance Corp.
• Encore Capital Group, Inc.
| | • EZCORP, Inc.
• FBR & Co.
• FirstCash, Inc.
• Green Dot Corporation
• JMP Group LLC
• Marlin Business Services Corp.
• NewStar Financial, Inc.
| | • Nicholas Financial, Inc.
• OneMain Holdings, Inc.
• PRA Group, Inc.
• Rent-A-Center, Inc.
• The J.G. Wentworth Company
• World Acceptance Corporation
|
In the third and fourth quarters of 2017, with assistance from Veritas, we reviewed our peer group using a scorecard-based approach that involved applying several filters (e.g., strong financial health, positive shareholder standing, similar in size, similar in industry classification, presence of overlapping peers, identification as a peer by a proxy advisory firm) and selecting the most qualified peer companies from a broader list of candidates. Based on the evaluation, our Compensation Committee determined to remove Aaron’s, Inc., FBR & Co.,Rent-A-Center, Inc., and The J.G. Wentworth Company from our peer group and to add Enova International, Inc., Capstead Mortgage Corporation, CYS Investments, Inc., On Deck Capital, Inc., and B. Riley Financial, Inc. to our peer group. As a result, our new peer group for 2018 consists of the following companies. As of the time that the Compensation Committee approved our new peer group, we were in the 47th percentile of the peer group based on revenue.
| | | | | • America’sCar-Mart, Inc. • Asta Funding, Inc. • Atlanticus Holdings Corp. • B. Riley Financial, Inc. • Capstead Mortgage Corporation • Consumer Portfolio Services, Inc. • Credit Acceptance Corp. | | • CYS Investments, Inc. • Encore Capital Group, Inc. • Enova International, Inc. • EZCORP, Inc. • FirstCash, Inc. • Green Dot Corporation • JMP Group LLC | | • Marlin Business Services Corp. • NewStar Financial, Inc. • Nicholas Financial, Inc. • On Deck Capital, Inc. • OneMain Holdings, Inc. • PRA Group, Inc. • World Acceptance Corporation |
In the third quarter of 2018, with assistance from Veritas, we reviewed our peer group using a scorecard-based approach that involved applying several filters (e.g., strong financial health, positive shareholder standing, similar in size, similar in industry classification, presence of overlapping peers, identification as a peer by a proxy advisory firm) and selecting the most qualified peer companies from a broader list of candidates. Based on the evaluation, our Compensation Committee determined to remove Asta Funding, Inc., Capstead Mortgage Corporation, and NewStar Financial, Inc. from our peer group and to add Elevate Credit, Inc. and LendingClub Corporation to our peer group. | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 26 | | |
As a result, our new peer group for 2019 consists of the following companies. As of the time that the Compensation Committee approved our new peer group, we were in the 2nd quartile of the peer group based on revenue, market capitalization, and enterprise value. | | | | | • America’sCar-Mart, Inc. • Atlanticus Holdings Corp. • B. Riley Financial, Inc. • Consumer Portfolio Services, Inc. • Credit Acceptance Corp. • CYS Investments, Inc. • Elevate Credit, Inc. | | • Encore Capital Group, Inc. • Enova International, Inc. • EZCORP, Inc. • FirstCash, Inc. • Green Dot Corporation • JMP Group LLC • LendingClub Corporation | | • Marlin Business Services Corp. • Nicholas Financial, Inc. • On Deck Capital, Inc. • OneMain Holdings, Inc. • PRA Group, Inc. • World Acceptance Corporation |
Proxy advisory firms Institutional Shareholder Services, Inc. and/or Glass, Lewis & Co. have identified 1817 of these companies (or 85% of our total peer group) as peers of Regional. These companies are largely within the consumer finance or specialty finance industries, are similar in size and/or scope to Regional, and/or are companies that Regional competes against for products, services, and human capital. Some companies included in our peer group will meet some, but not all, of these criteria. For example, OneMain Holdings, Inc. (doing business as OneMain Financial) is larger than us, but it competes directly with us in the consumer finance industry both for customers and for human capital. In fact, two of our executive officers were previously employed by OneMain. As a result, despite being a larger company, we believe it is important to include OneMain in our peer group to ensure that we maintain awareness of our direct competition, which will assist in our efforts to retain talented executives and other employees. However, in setting compensation levels for our executive officers, as noted below, our Compensation Committee remains cognizant that OneMain and certain other of our peer companies are larger than us. Consistent with our compensation objectives of attracting and retaining top executive talent, we believe that the base salaries and performance-based short- and long-term incentive compensation of our executive officers should be set at levels which are competitive with our peer group companies of comparable size, although we do not target any specific pay percentile for our executive officers. The peer group is used more as a general guide, being mindful of the following: Appropriate base salaries for our executive officers should generally be in line with those paid by peer group companies of comparable size. Performance-based short- and long-term incentive awards should reward exceptional performance, which can result in overall compensation that can exceed those of peer group companies of comparable size. Total compensation for executive officers may approach the higher end of the compensation at such peer group companies of comparable size, but only if high levels of short- and long-term performance are reached. | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 27 | | |
Elements of Compensation Each executive officer is eligible to receive a balance of variable and fixed compensation. The following table describes the various forms of compensation:compensation used in 2018: | | | | | Pay Elements
| | Component(s)
| | Pay Elements Component(s) Rationale for Form of Compensation Base Salary Cash To attract and retain executive talent To provide a fixed base of compensation generally aligned to peer group levels Short-Term Incentive Performance-based annual cash bonus To drive the achievement of key business results on an annual basis To recognize individual executives based on their specific and measurable contributions To structure a meaningful amount of at-risk, performance-based annual compensation Long-Term Incentive Performance-based long-term incentives: Performance-contingent RSUs Cash-settled performance units Service-based long-term incentives: Non-qualified stock options To drive the sustainable achievement of key long-term business results To align the interests of executives with stockholders To structure a meaningful amount of Compensation
| | | | Base Salary
| | • Cash
| | • To attract and retain executive talent
• To provide a fixed base of compensation generally aligned to peer group levels
| | | | Short-Term Incentive
| | • Performance-based annual cash bonus
| | • To drive the achievement of key business results on an annual basis
• To recognize individual executives based on their specific and measurable contributions
• To structure a meaningful amount ofat-risk, performance-based annual compensation
| | | | Long-Term Incentive
| | • Performance-based long-term incentives:
◇ Performance-contingent RSUs
◇ Cash-settled performance units
• Service-based long-term incentives:
◇Non-qualified stock options
| | • To drive the sustainable achievement of key long-term business results
• To align the interests of executives with stockholders
• To structure a meaningful amount ofat-risk, performance-based long-term compensation
• To attract, retain, and motivate executive talent
|
Base Salary Annual base salaries are established on the basis of market conditions at the time we hire an executive, as well as by taking into account the particular executive’s level of qualifications and experience. The Compensation Committee reviews the base salaries of our executive officers annually, and any subsequent modifications to annual base salaries are made in consideration of the appropriateness of each executive officer’s compensation, both individually and relative to the other executive officers, the individual performance of each executive officer, and any significant changes in market conditions. We do not apply specific formulas to determine increases. The Compensation Committee approved executive officer annual base salaries for 2017, 2018, and 20182019 as described in the following table. | | | | | | | | | | | | | | Name | | 2017 Base Salary | | 2018 Base Salary | Peter R. Knitzer, President and Chief Executive Officer | | $530,000 | | $550,000 | John D. Schachtel, Executive Vice President and Chief Operating Officer | | $350,000 | | $360,000 | Jody L. Anderson Former President and Chief Operating Officer | | $345,000 | | N/A | Donald E. Thomas, Executive Vice President and Chief Financial Officer | | $342,000 | | $355,000 | Daniel J. Taggart, Senior Vice President and Chief Risk Officer | | $318,000 | | $330,000 | Brian J. Fisher, Senior Vice President, General Counsel, and Secretary | | $240,000 | | $300,000 |
Annual base salaries arepro-rated for any partial year. Name 2017 Base Salary 2018 Base Salary 2019 Base Salary 2019 Base Salary Percentile Rank Relative to Peer Companies Peter R. Knitzer $530,000 $550,000 $600,000 43rd John D. Schachtel $350,000 $360,000 $400,000 39th Donald E. Thomas $342,000 $355,000 $400,000 28th Daniel J. Taggart $318,000 $330,000 $375,000 34th Brian J. Fisher $240,000 $300,000 $335,000 15th In February 2018, in recognition of his performance and service to our company, the Board promoted Mr. Fisher from Vice President to Senior Vice President and increased his base salary accordingly. FollowingAt the time of the increase in 2018, Mr. Fisher’s base salary remainsremained below the 25th percentile relative to 5th-ranked NEOs in our | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 28 | | |
In February 2019, following a total compensation analysis conducted by Veritas in late 2018, the Compensation Committee elected to increase each executive officer’s base salary in order to better align their base salaries with those paid by peer companies. Following these increases in 2019, as noted above, our executive officers’ base salaries ranged between the 15th and 43rd percentile relative to comparable executive officers at peer companies.Our Compensation Committee believes that it has set base salaries at appropriate levels to attract and retain effective executives and that base salaries, when combined with short- and long-term incentives, are an important component of a holistic compensation approach. Performance-Based Annual Cash Awards Our annual incentive program is designed to drive achievement of annual corporate goals, including key financial and operating results and strategic goals that create long-term stockholder value. Our executive officers are eligible for performance-based annual cash awards linked to performance targets set by our Compensation Committee. Components of Annual Incentive Program The awards for 20172018 were based primarily (85%) on our performance with respect to the metrics in the following table. The metrics in the table below drive the overall performance of our business from year to year and are elements of our historical financial success. | | | | | | | | Performance Metric
| | What it Measures
| | Rationale for Metric
| | | | Net Income from
Operations
| | Profitability | | • Measures the effectiveness of our management team’s execution of our strategic and operational plans
• Reflects business variables and factors that are within management’s control or influenced by decisions made by executives
| | | | Average Net Finance
Receivables
| | Loan growth
| | • We seek to continually grow our business on a consistent and sound basis
• We establish annual growth objectives for our management team for loans that we originate and service
| | | | Net Credit Losses as a
Performance Metric What it Measures Rationale for Metric Net Income from Operations Profitability Measures the effectiveness of our management team's execution of our strategic and operational plans Reflects business variables and factors that are within management's control or are influenced by decisions made by executives Average Finance Receivables Loan growth Measures our ability to grow our business We establish annual growth objectives for our management team for loans that we originate and service Net Credit Losses as a Percentage of Average Finance Receivables Loan portfolio control Measures the control our management team exerts on our loan portfolio It is ultimately a measure of the quality of underwriting policies and decisions and the effectiveness of collection efforts We guide our management team to specific aggregate net credit loss goals each year that, combined with our average finance receivables measure, attempt to balance attractive growth with effective portfolio control Total Net Debt / EBITDA Leverage ratio Measures reliance on our credit facilities to produce cash flow Holds management accountable for the responsible use of credit to fund our business Total General and Administrative Expense Percentage of Average Net Finance Receivables
| | Loan portfolio control
| | • Measures the control our management team exerts on our loan portfolio
• It is ultimately a measure of the quality of underwriting policies and decisions and the effectiveness of collection efforts
• We guide our management team to specific aggregate net credit loss goals each year that, combined with our average finance receivables measure, attempt to balance attractive growth with effective portfolio control
| | | | Total Net Debt /
EBITDA
| | Leverage ratio | | • Measures reliance on our credit facilities to produce cash flow
• Holds management accountable for the responsible use of credit to fund our business
| | | | Total General and
Administrative Expense
Percentage
| | Expense control | | • Measures the effectiveness with which our management team utilizes our corporate resources and minimizes our corporate expenses
|
Note: We calculate EBITDA as consolidated net income from operations before interest expense, income taxes, depreciation, and amortization, each as calculated in accordance with GAAP and as set forth in our audited financial statements. Our 20172018 annual incentive awards were based to a lesser extent (15%) on our Compensation Committee’s assessment of our executive team’s achievement of its short-term strategic objectives. In light of ongoing, significant strategic projects and initiatives, our Compensation Committee believes that it is important to | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 29 | | |
appropriately incentivize the achievement of strategic objectives (which often cannot be measured quantitatively) by linking their achievement (and the quality thereof) to our executives’ compensation. For 2017, the Compensation Committee identified the successful implementation of and transition to a new loan origination and servicing platform as our executive team’s primary short-term strategic objective. Annual Incentive Program Performance Targets, Results, and Payouts The following table provides for 20172018 detail regarding the threshold and target levels of performance set by the Compensation Committee for each performance metric, the weighting applied to each metric, our actual annual performance pursuant to each metric, and the percentage payout for each metric and in total. A threshold level of performance must be exceeded in order to earn any award, and each executive is eligible to earn up to 150% of his target award based upon the achievement of the performance goals established by the Compensation Committee. | | | | | | | | | | | | | | | | | Performance Metric | | Threshold Performance | | Target Performance | | Actual Performance | | Percentage Weight | | Percentage Payout | Net Income from Operations | | $19,866,782 | | $28,381,117 | | $29,963,525 | | 30.0% | | 29.6% | Average Net Finance Receivables | | $682,053,188 | | $757,836,875 | | $744,200,456 | | 20.0% | | 18.2% | Net Credit Losses Percentage | | 10.30% | | 8.96% | | 9.36% | | 15.0% | | 12.7% | Total Debt / EBITDA | | 8.10x | | 6.75x | | 7.24x | | 10.0% | | 9.7% | Total G&A Expense Percentage | | 51.76% | | 48.15% | | 48.06% | | 10.0% | | 10.4% | Achievement of Strategic Objectives | | N/A | | N/A | | N/A | | 15.0% | | 18.0% | | | | | | | | | | | | 100.0% | | 98.6% | | | | | | | | | |
Note:
Performance Metric Threshold Performance Target Performance Maximum Performance Actual Performance Percentage Weight Percentage Payout Net Income from Operations $27,335,077 $39,050,110 $46,860,132 $35,344,473 30.0% 29.0% Average Finance Receivables $769,489,639 $854,988,487 $940,487,336 $857,906,704 20.0% 20.3% Net Credit Losses Percentage 9.99% 8.69% 7.39% 9.05% 15.0% 12.8% Total Debt / EBITDA 7.60x 6.34x 5.07x 6.99x 10.0% 8.6% Total G&A Expense Percentage 49.88% 46.40% 42.92% 45.74% 10.0% 11.0% Achievement of Strategic Objectives N/A N/A N/A N/A 15.0% 18.0% 100.0% 99.7% In calculating the percentage payout above, the Compensation Committee adjusted actual results to account for certain unbudgeted tax benefits and the impact of Hurricane Florence, which was beyond the 2017 hurricane events.reasonable control of management. Had the Compensation Committee not made such adjustments,an adjustment, the total percentage payout would have instead been higher (101.4%94.9% of target).target. The Compensation Committee believes that its decision to adjust actual results in 2018 is appropriately balanced against its decision in the prior year to adjust actual results in a manner that caused the percentage payout under the 2017 annual incentive program to be less than it otherwise would have been in the absence of such adjustments. Additional information regarding the estimated impact of Hurricane Florence on our results of operations, including our net income and net credit losses, may be found in our filings with the SEC, including our Annual Report on Form10-K for the fiscal year ended December 31, 2018. As described above, 15% of the total annual incentive program award opportunity is linked to our Compensation Committee’s assessment of our executive team’s achievement of its short-term strategic objectives. For 2016, our Compensation Committee elected not to pay any portion of this award opportunity to our executive officers primarily due to the status as of the end of 2016 of our company’s efforts to implement and transition to a new loan origination and servicing platform. By contrast, for 2017,2018, our Compensation Committee elected to pay 120% of this award opportunity in recognition of our company’s outstanding execution of its short-term strategic objectives, including the development of custom credit scorecards, the closing of our first two ABS transactions in June 2018 and December 2018, the expansion of our branch footprint to two new states, the completion of the implementation of theour new loan origination and servicing platform in each of our branches, the diversification of our funding sources, and the continued improvements toin our compliance management system andof enterprise risk management efforts.risks. Target annual incentive levels and actual performance-based annual cash awards for each of our NEOs for fiscal 20172018 are detailed below, based upon the 98.6%99.7% performance achievement detailed above. | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | 2017 Eligible Base Salary | | 2017 Target Incentive as Percentage of Salary | | Target Award | | Actual Award | Peter R. Knitzer | | $530,000 | | 100% | | $530,000 | | $522,580 | John D. Schachtel | | $207,123 | | 100% | | $207,123 | | $204,224 | Jody L. Anderson | | $127,603 | | 100% | | $127,603 | | $125,816 | Donald E. Thomas | | $342,000 | | 100% | | $342,000 | | $337,212 | Daniel J. Taggart | | $318,000 | | 100% | | $318,000 | | $313,548 | Brian J. Fisher | | $240,000 | | 100% | | $240,000 | | $236,640 |
Note: Mr. Anderson’s employment terminated on May 15, 2017, and Mr. Schachtel’s employment commenced on May 30, 2017. Therefore, their base salaries and target award opportunities werepro-rated.
Name 2018 Eligible Base Salary 2018 Target Award as % of Salary Target Award Actual Award Peter R. Knitzer $550,000 100% $550,000 $548,350 John D. Schachtel $360,000 100% $360,000 $358,920 Donald E. Thomas $355,000 100% $355,000 $353,935 Daniel J. Taggart $330,000 100% $330,000 $329,010 Brian J. Fisher $300,000 100% $300,000 $299,100 | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 30 | | |
The target award percentages described above were determined by the Compensation Committee and are calibrated so that the total compensation opportunity for each executive officer is commensurate with that executive’s role and responsibilities with us. IfExcept in the case of Mr. Thomas, if an executive voluntarily terminates his employment during the performance year, he becomes ineligible to receive payment of a performance-based annual cash award. Pursuant to his retirement agreement, Mr. Thomas will be eligible to receive apro-rated, performance-based annual cash award based upon the number of days of service in 2019, subject to our achievement of the performance goals established by the Compensation Committee for 2019. See “Summary of Employment Arrangements with Executive Officers – Retirement Agreement with Chief Financial Officer.” Annual Incentive Program Opportunities in 20182019 Our Compensation Committee has not yet acted to establish the parameters of our annual incentive program in 2018for 2019. However, we currently expect that it will be structured in a manner similar to the 2017 program. Target 2018 program, provided that our Compensation Committee is considering there-allocation of the weighting of certain of the metrics and the replacement of the “Total Debt / EBITDA” performance metric with a metric that instead measures our return on assets. We further expect that the target 2019 incentive levels for each of our executive officers as established by our Compensation Committee, are describedwill be set at 150% of base salary in the table below.case of Mr. Knitzer and 100% of base salary in the case of each other executive officer. | | | | | | | | | | | | | | | | Name | | 2018 Base Salary | | 2018 Target Incentive as Percentage of Salary | | Target Award | Peter R. Knitzer | | $550,000 | | 100% | | $550,000 | John D. Schachtel | | $360,000 | | 100% | | $360,000 | Donald E. Thomas | | $355,000 | | 100% | | $355,000 | Daniel J. Taggart | | $330,000 | | 100% | | $330,000 | Brian J. Fisher | | $300,000 | | 100% | | $300,000 |
Our Compensation Committee believes that our short-term incentive program is effective in motivating our executives to achieve short-term financial and operational objectives, in furtherance of ourpay-for-performance compensation strategy. Long-Term Incentive Awards Our long-term incentive award grants are intended to directly align the interests of our executive officers with those of our stockholders, to give our executive officers a strong incentive to maximize stockholder returns on a long-term basis, and to aid in our recruitment and retention of key executive talent necessary to ensure our continued success. Components of Long-Term Incentive Program; Participation by NEOsProgram In 2014, we developed and implemented a “refreshed”2016 through 2018, our long-term incentive program with assistance from Veritas. Our current long-term incentive program providesprovided for the delivery of long-term incentive awards through a combination of three award vehicles:(i) non-qualified stock options, (ii) performance-contingent RSUs, and (iii) cash-settled performance units. Vesting of each of the performance-contingent awards is subject to, among other things, the achievement of performance objectives over a three-year performance period that begins on January 1st of the grant year. Long-term incentive awards are scheduled to occur in the first quarter of each year. In 2017,2018, as part of the long-term incentive program, we granted the following awards in the first quarter of 20172018 to Messrs. Knitzer, Anderson,Schachtel, Thomas, Taggart, Fisher, and other key employees: LTI Vehicle Principal Performance Metric Performance Period Weighting Recipients Non-Qualified Stock Options Built-in metric of stock price growth N/A – Options vest in equal installments on December 31, 2018, 2019, and 2020, subject to continued employment One-third of total target award Executive officers and several other key C-suite employees Performance-Contingent Restricted Stock Units CAGR of net income compared to a peer group Three years, from January 1, 2018 through December 31, 2020 One-third of total target award Executive officers and several other key C-suite employees Cash-Settled Performance Units CAGR of basic earnings per share compared to a peer group Three years, from January 1, 2018 through December 31, 2020 One-third of total target award Executive officers and several other key C-suite employees | | | | | | | | | LTI Vehicle
| | Principal
Performance Metric
| | Performance Period
| | Weighting
| | Recipients
| Non-Qualified
Stock Options
| | Built-in metric of
stock price growth | | N/A – Options vest in equal
installments on December 31,
2017, 2018, andRegional Management Corp. | Proxy Statement for 2019 subject
to continued employment
| | One-third of total target
award | | Executive officers and
several other keyC-suite
employees | Annual Meeting | | | 31 | | | Performance-Contingent Restricted Stock
Units
| | Compound annual
growth rate of net
income compared to
a peer group | | Three years, from January 1,
2017 through December 31,
2019 | | One-third of total target
award | | Executive officers and
several other keyC-suite
employees | Cash-Settled Performance Units
| | Compound annual
growth rate of basic
earnings per share
compared to a peer
group
| | Three years, from January 1,
2017 through December 31,
2019 | | One-third of total target
award | | Executive officers and
several other key C-suite
employees |
Vesting of the performance-contingent RSUs and cash-settled performance units is based primarily (90%) upon our performance over the three-year performance period compared to our peer group, as described in the table below. Failure to meet the threshold level of performance results in the forfeiture of the associated award. | | | | | | | | | LTI Vehicle
LTI Vehicle Principal Performance Metric Performance Level Required Performance % of Target Award Earned and Vested Performance-Contingent Restricted Stock Units CAGR of net income compared to our peer group for the period from January 1, 2018 through December 31, 2020 Threshold Performance Meets or Exceeds Peer Group Performance at the 50th Percentile 50% Target Performance Meets or Exceeds Peer Group Performance at the 60th Percentile 100% Maximum Performance Meets or Exceeds Peer Group Performance at the 75th Percentile 150% Cash-Settled Performance Units CAGR of basic earnings per share compared to our peer group for the period from January 1, 2018 through December 31, 2020 Threshold Performance Meets or Exceeds Peer Group Performance at the 50th Percentile 50% Target Performance Meets or Exceeds Peer Group Performance at the 60th Percentile 100% Maximum Performance Meets or Exceeds Peer Group Performance at the 75th Percentile 150% | | Principal
Performance Metric
| | Performance Level
| | Required Performance
| | Percentage of Target
Award Earned and Vested
| Performance-
Contingent
Restricted Stock
Units
| | Compound annual
growth rate of net
income compared to our
peer group for the period
from January 1, 2017
through December 31,
2019
| | Threshold Performance | | Meets or Exceeds Peer
Group Performance at the
50th Percentile
| | 50% | | | Target Performance | | Meets or Exceeds Peer
Group Performance at the
60th Percentile
| | 100% | | | Maximum Performance | | Meets or Exceeds Peer
Group Performance at the
75th Percentile
| | 150% | Cash-Settled
Performance
Units
| | Compound annual
growth rate of basic
earnings per share
compared to our peer
group for the period
from January 1, 2017
through December 31,
2019
| | Threshold Performance | | Meets or Exceeds Peer
Group Performance at the
50th Percentile
| | 50% | | | Target Performance | | Meets or Exceeds Peer
Group Performance at the
60th Percentile
| | 100% | | | Maximum Performance | | Meets or Exceeds Peer
Group Performance at the
75th Percentile
| | 150% |
To a lesser extent (10%), vesting of the performance-contingent RSUs and cash-settled performance units is based on our Compensation Committee’s assessment of our executive team’s achievement of its long-term strategic objectives over the same performance period. In light of ongoing, significant strategic projects and initiatives, our Compensation Committee believes it is important to appropriately incentivize the achievement of strategic objectives (which often cannot be measured quantitatively) by linking their achievement (and the quality thereof) to our executives’ compensation. Our long-term incentive program in 2018 is structured in a manner similar to the 2017 program described above. Mr. Schachtel became our Executive Vice President and Chief Operating Officer effective as of May 30, 2017. Mr. Schachtel’s employment agreement establishes his aggregate long-term incentive compensation opportunity level for 2017 and 2018, and provides that he will be granted long-term incentive award opportunities through a combination of the three award vehicles describedabove—non-qualified stock options, performance-contingent RSUs, and cash-settled performance units. The aggregate grant date target value of Mr. Schachtel’s 2017 and 2018 long-term incentive compensation opportunities is $850,000 (calculated as approximately $525,000 per year on an annualized basis for the period commencing on Mr. Schachtel’s first day of employment, May 30, 2017, through the end of 2018). Mr. Schachtel’s long-term incentive compensation for 2017 and 2018 is split amongnon-qualified stock options, performance-contingent RSUs, and cash-settled performance units having a grant date target value of $300,000, $275,000, and $275,000, respectively. Because Mr. Schachtel’s employment commenced more than 90 days after the beginning of the performance period associated with the performance-contingent RSUs and cash-settled performance units that we granted under our 2017 long-term incentive program, Mr. Schachtel’s participation in the 2017 program with respect to performance-contingent RSUs and cash-settled performance units would have resulted in the payment of compensation (if any) that would not have qualified for the performance-based compensation exemption available pursuant to Code Section 162(m). Therefore, in an effort to preserve, to the extent practicable, the future tax deductibility of Mr. Schachtel’s compensation, the Compensation Committee approved Mr. Schachtel’snon-qualified stock option award with a grant date of May 30, 2017, the date he commenced employment, and determined that the award of Mr. Schachtel’s performance-contingent RSUs and cash-settled performance units should occur as part of the 2018 long-term incentive program. | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 32 | | |
Long-Term Incentive Award LevelsAwards in 20172018 and 20182019 For 2017 and 2018, theThe grant date target values for awards granted to our NEOs in 2018 are detailed in the following tables.table. For the performance-contingent RSUs and cash-settled performance units, a threshold level of performance must be exceeded for the awards to have any value, and participants are eligible to earn up to 150% of their target award based upon the achievement of the performance goals established by the Compensation Committee. For thenon-qualified stock options, our stock price must exceed the exercise price (which is set at our closing stock price on the grant date) for the options to have any value.
| | | | | | | | | Name | | 2017 Target Grant Date Value | | Total | | Performance- Contingent RSUs | | Cash-Settled Performance Units | | Non-Qualified Stock Options | Peter R. Knitzer | | $1,900,000 | | $950,000 | | $950,000 | | N/A | John D. Schachtel | | $300,000 | | N/A | | N/A | | $300,000 | Jody L. Anderson | | $517,500 | | $172,500 | | $172,500 | | $172,500 | Donald E. Thomas | | $513,000 | | $171,000 | | $171,000 | | $171,000 | Daniel J. Taggart | | $318,000 | | $106,000 | | $106,000 | | $106,000 | Brian J. Fisher | | $240,000 | | $80,000 | | $80,000 | | $80,000 | | | | | | | | | | Name | | 2018 Target Grant Date Value | | Total | | Performance- Contingent RSUs | | Cash-Settled Performance Units | | Non-Qualified Stock Options | Peter R. Knitzer | | $2,200,000 | | $733,333 | | $733,333 | | $733,334 | John D. Schachtel | | $550,000 | | $275,000 | | $275,000 | | N/A | Donald E. Thomas | | $532,500 | | $177,500 | | $177,500 | | $177,500 | Daniel J. Taggart | | $330,000 | | $110,000 | | $110,000 | | $110,000 | Brian J. Fisher | | $300,000 | | $100,000 | | $100,000 | | $100,000 |
Name 2018 Target Grant Date Value Total Performance-Contingent RSUs Cash-Settled Performance Units Non-Qualified Stock Options Peter R. Knitzer $2,200,000 $733,333 $733,333 $733,334 John D. Schachtel $550,000 $275,000 $275,000 N/A Donald E. Thomas $532,500 $177,500 $177,500 $177,500 Daniel J. Taggart $330,000 $110,000 $110,000 $110,000 Brian J. Fisher $300,000 $100,000 $100,000 $100,000 Our long-term incentive program in 2019 is structured in a manner similar to the 2018 program described above, subject to certain exceptions. For 2019, in consultation with Veritas and following a review of peer company practices, our Compensation Committee elected to add a service-based RSA as a fourth component of the program in order to strengthen the retentive nature of the program and to more appropriately balance the allocation of long-term incentive award opportunities between performance-based and service-based awards. The service-based RSA will vest in three equal annual tranches over a three-year period, subject to continued employment through the respective vesting dates. In addition, for 2019, the Compensation Committee did not grant any long-term incentive awards to Mr. Thomas in light of his pending retirement, consistent with the terms of his retirement agreement. Finally, in October 2018, in recognition of his performance and service to our company, the Board promoted Mr. Taggart from Senior Vice President to Executive Vice President and increased his long-term incentive award opportunity accordingly. Name 2019 Target Grant Date Value Total Performance-Contingent RSUs Cash-Settled Performance Units Non-Qualified Stock Options Restricted Stock Peter R. Knitzer $2,100,000 $525,000 $525,000 $525,000 $525,000 John D. Schachtel $600,000 $150,000 $150,000 $150,000 $150,000 Donald E. Thomas N/A N/A N/A N/A N/A Daniel J. Taggart $662,500 $140,625 $140,625 $190,625 $190,625 Brian J. Fisher $435,000 $83,750 $83,750 $133,750 $133,750 Note: The number of shares subject to the performance-contingent RSU awards and the RSAs is determined by dividing the value of the award by the closing price per share of common stock on the grant date (rounded down to the nearest whole share). The number of shares subject to thenon-qualified stock option awards is determined by dividing the value of the award by the fair value per share of common stock on the grant date calculated using the Black-Scholes valuation model (rounded down to the nearest whole share). Mr. Anderson’s employment terminated on May 15, 2017. As a result, in accordance with the award agreements associated with Mr. Anderson’s 2017 long-term incentive awards, he remains eligible to vest in only apro-rata portion of the performance-contingent RSUs and cash-settled performance units, subject to our performance over the three-year performance period. In addition, effective as of his termination date, Mr. Anderson vested in apro-rata portion of the shares subject to thenon-qualified stock option award and forfeited the balance of the unvested shares.
Our Compensation Committee believes that our long-term incentive program furthers ourpay-for-performance objectives, creates a compelling recruitment and retention tool, appropriately focuses our executives on the achievement of long-term financial and business goals, and strengthens the alignment of our executives’ interests with those of our stockholders. | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 33 | | |
20152016 Long-Term Incentive Program Performance Targets, Results, and Payouts
In 2015,2016, we made awards togranted our then-current executive officers ofnon-qualified stock options, performance-contingent RSUs, and cash-settled performance units. Messrs. Anderson, Thomas, Taggart, and Fisher were employed by us in 20152016 and participated in the 20152016 long-term incentive program. The three-year performance period established under the 20152016 long-term incentive program ended on December 31, 2017.2018. Vesting of the performance-contingent RSUs and cash-settled performance units granted in 2016 was based primarily (90%) on our CAGRs of net income (in the case of the performance-contingent RSUs) and basic earnings per share (in the case of the cash-settled performance units) compared to our 2016 peer group over the three-year performance period. We refer to this portion of the performance-contingent RSU and cash-settled performance unit award opportunities as the “Objective Criteria Units.” The Objective Criteria Units were eligible to vest based on our performance metricsrelative to our peer group as follows: Performance Relative to Peer Group % of Objective Criteria Units Vested < 50th Percentile 0% 50th Percentile 50% 60th Percentile 100% ³ 75th Percentile 150% The percentage of the Objective Criteria Units vested for results between the performance levels stated above is calculated using linear interpolation. Our CAGRs of net income and earnings per share compared to our peer group over the performance period were as follows: Performance Measure Performance at 25th Percentile of Peer Group Performance at 50th Percentile of Peer Group Performance at 75th Percentile of Peer Group Performance of Regional CAGR of Net Income (50.7%) 12.9% 31.8% 17.8% CAGR of Basic EPS (49.4%) 12.2% 35.3% 21.7% In calculating the performance of peer companies, the Compensation Committee excluded discontinued operations, adjusted for the impact of goodwill impairments, and utilizedpro-forma financial statements filed by any peer company having made a significant acquisition, in each case as disclosed by the peer companies in their SEC filings. Where a peer company was delisted following poor financial performance, the peer company was ranked at the bottom of the peer group. Where a peer company was acquired by another peer company, the acquired company was removed from the peer group, and where a peer company was acquired by a company outside of the peer group, the acquired company’s CAGRs of net income and basic earnings per share were calculated using available information. Our Compensation Committee also elected to remove one peer company from the peer group analysis due to its significant governance failures and financial statement restatements during the performance period, as well as its ongoing material weaknesses in internal control over financial reporting as of the end of the performance period, all of which called into question the quality and accuracy of the company’s reported earnings. Finally, in calculating peer company performance and our performance, the Compensation Committee adjusted actual results to account for the impact of hurricane events. Our performance at the above levels resulted in the vesting of 116.7% of the Objective Criteria Units associated with each of the performance-contingent RSU awards and the cash-settled performance unit awards. Our Compensation Committee believes that vesting at these levels appropriately reflects ourpay-for-performance strategy and is supported by our total shareholder return. Over the three-year performance period, we finished in the same position within our peer group in each of total shareholder return, CAGR of net income, and CAGR of basic earnings per share. Vesting of the performance-contingent RSUs and cash-settled performance units granted in 2016 was also based in small part (10%) on our Compensation Committee’s qualitative assessment of our executive team’s achievement of its long-term strategic objectives between 2016 and 2018. We refer to this portion of the performance-contingent RSU and cash-settled performance unit award opportunities as the “Qualitative Criteria | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 34 | | |
Units.” Our Compensation Committee elected to pay 115% of the Qualitative Criteria Units in recognition of, among other achievements, the implementation of our new loan origination and servicing platform in each of our branches; the development of custom credit scorecards; material improvements in our liquidity profile, including through a $100 million increase in capacity under our senior revolving credit facility, the closing of a $125 million revolving warehouse credit facility, and the closing of our first two ABS transactions; the expansion of our branch footprint to two new states; improvements to our compliance management system and enterprise risk management; and the full dismissal in 2018 of the securities class action lawsuit filed against us in 2014. Based upon the above results, in March 2019, our Compensation Committee determined that Messrs. Thomas, Taggart, and Fisher vested in and earned 116.5% of their total target performance-contingent RSUs and cash-settled performance units under the 2015 long-term incentive program were cumulative EBITDA and cumulative basic net income per share over the performance period, respectively, with threshold and target performance goals established at the following levels: | | | | | | | EBITDA (in thousands) | | Basic Net Income Per Share | Threshold Performance Goal | | $199,698 | | $6.46 | Target Performance Goal | | $249,623 | | $8.07 | | | | | | 2015 Actual Results | | $57,791 | | $1.82 | 2016 Actual Results | | $63,814 | | $2.03 | 2017 Actual Results | | $69,722 | | $2.59 | Cumulative Results | | $191,327 | | $6.44 | | | | | | Amount Short of Threshold Goal | | $8,371 | | $0.02 | Payout | | 0.00% | | 0.00% |
Note: We calculate cumulative EBITDA as consolidated net income from operations before interest expense, income taxes, depreciation, and amortization during the three-year performance period, each as calculated in accordance with GAAP and as set forth in our audited financial statements.
In February 2018, the Compensation Committee determined that we failed to meet the threshold performance goals set under the 20152016 long-term incentive program. Actual results are set forth inThe following table provides information regarding the table above. As a result, no compensation was earned or paid pursuant topercentage of the 2015target performance-contingent RSUs orand cash-settled performance units vested under our 2014, 2015, and all shares associated with the performance-contingent2016 long-term incentive programs, which were eligible to vest on December 31st of 2016, 2017, and 2018, respectively:
Long-Term Incentive Program Award Component 2014 Grant Year 2015 Grant Year 2016 Grant Year Performance-Contingent RSUs were forfeited.0% 0% 116.5% Cash-Settled Performance Units 0% 0% 116.5% Key Employee Retention Program In 2014, even when including the increased target value of the short- and long-term incentive awards, total compensation levels for our executive officers were below the median of our peer group. Further, the difficulties we faced in 2014 resulted in a significant deficit in terms of realized compensation. As a result, in 2015, our Compensation Committee, in consultation with Veritas, determined to implement a key employee retention program as an incentive and retention vehicle for certain critical executives. Pursuant to the key employee retention program, the Compensation Committee granted the following awards to certain executive officers in 2015:(i) non-qualified stock options, which are subject to the terms of the Regional Management Corp. 2011 Stock Incentive Plan (as amended, the “2011 Plan”), and (ii) a cash retention award. The Compensation Committee granted Messrs. Anderson, Thomas, and Fishernon-qualified stock options to purchase 8,700 shares, 32,500 shares, and 11,500 shares, respectively, of our common stock. The options vested in three equal installments on each of December 31, 2015, 2016, and 2017 (subject to proration, in the case of Mr. Anderson). In addition, the Compensation Committee granted Mr. Fisher a cash retention award of $25,000, which was paid as follows: 25% on or about 180 days following the date of the retention award; 25% on or about 360 days following the date of the retention award; and 50% on or about 540 days following the date of the retention award. In March 2016, the Compensation Committee elected to continue the key employee retention program with grants of the following awards to certain executive officers: (i) RSAs, which are subject to the terms of the 2015 Plan, and (ii) cash retention awards. The Compensation Committee granted Messrs. Thomas and Fisher 5,854 shares and 4,391 shares, respectively, of restricted common stock. The restricted stock vested on September 29, 2017. In addition, the Compensation Committee granted Messrs. Thomas and Fisher cash retention awards of $100,000 and $75,000, respectively,one-third of which was paid on each of thesix-month,12-month, and18-month anniversaries of the grant date. We did not grant any retention awards to our executive officers in 2017.2017 or 2018. Perquisites We also provide various other limited perquisites and other personal benefits to our executive officers that are intended to be part of a competitive compensation program. For 2017,2018, these benefits included: The ability to participate in a comprehensive voluntary annual health screening; Monthly automobile allowancesallowance of $1,150 to Messrs. Anderson andMr. Thomas; Payment of Mr. Knitzer’s and Mr. Schachtel’s travel expenses to and from theirout-of-state personal residences; Mobile phone allowance payments to Messrs. Knitzer, Schachtel, Thomas, and Taggart; and ReimbursementPayment of attorney feessupplemental long-term disability premiums and associated taxes, which is intended, in part, to Messrs. Schachtel and Taggartinsure against our severance obligations in connection with the negotiationevent of theira disability termination event under an executive’s employment agreements.agreement. The Compensation Committee believes that these benefits are comparable to those offered by other companies that compete with us for executive talent and are consistent with our overall compensation program. Perquisites are not a material part of our compensation program.
We also offer our executive officers benefits that are generally available to all of our employees, including 401(k) plan matching contributions, health insurance, disability insurance, dental insurance, vision insurance, life insurance, paid time off, and the reimbursement of qualified business expenses. In 2018, we will also provideThe Compensation Committee believes that these benefits are comparable to those offered by other companies that compete with us for executive talent and are consistent with our executives with supplemental disability insurance that is intended, inoverall compensation program. Perquisites are not a material part to insure againstof our severance obligations in the event of a disability termination under an executive’s employment agreement.compensation program. | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 35 | | |
Other Compensation Policies, Practices, and Matters Stock Ownership and Retention Policy In 2014, Regional adopted a Stock Ownership and Retention Policy. The Compensation Committee believes that significant ownership of common stock by our executives and directors directly aligns their interests with those of our stockholders and also helps to balance the incentives for risk-taking inherent in equity-based awards made to executives. Under the policy,our Stock Ownership and Retention Policy, executives and directors are subject to the following ownership guidelines:
| | | Covered Person
| | Ownership Guideline
| Chief Executive Officer
| | 5x annual base salary
| Other covered employees (including NEOs)
| | 2x annual base salary
| Directors
| | Covered Person Ownership Guideline Chief Executive Officer 5x annual base salary Other covered employees (including NEOs) 2x annual base salary Directors 5x annual cash retainer |
In February 2018, our Compensation Committee increased our director stock ownership requirement from 3x to 5x the annual cash retainer, placing the dollar value of the ownership requirement in the 90th percentile of our peer group. Persons covered by the policy are expected to utilize grants under equity compensation plans to reach the levels of ownership expected by the policy. The policy also incorporates a retention element requiring such persons to retain 50% of the net shares resulting from the vesting or exercise of equity awards to obtain the required ownership under the policy. Clawback Policy In 2014, RegionalWe have also adopted a Compensation Recoupment Policy, or “clawback policy.“clawback policy.” Under the clawback policy, the Chief Executive Officer, the Chief Financial Officer, any other person who is an executive officer, the Chief Accounting Officer, and such other persons (each, a “Covered Person”) as may be determined by the Board or the Compensation Committee, (the “Administrator”), may be required to return to us and/or forfeit all or a portion of any cash-based incentive compensation and/or equity-based incentive compensation received by such Covered Person.covered person.
Such a return or forfeit is required, unless the AdministratorCompensation Committee determines otherwise, if (i) compensation is received based on financial statements that are subsequently restated in a way that would decrease the amount of the award to which such person was entitled and the restatement is based in whole or in part on the misconduct of the Covered Person,covered person, (ii) such compensation was received by the Covered Personcovered person and the AdministratorCompensation Committee determines that such person has violated anon-competition,non-solicitation, confidentiality, or other restrictive covenant applicable to such person, or (iii) recoupment is otherwise required under applicable law. Prohibition Against Hedging and Pledging As stated in our Code of Conduct, directors, officers, employees, and employeestheir designees may not engage in activities that are designed to profit from trading activity or hedge against decreases in the value of our securities. This includes purchasing any financial instrument or contract, including prepaid variable forward contracts, equity swaps, collars, and exchange traded funds, which is designed to hedge or offset any risk of decrease in the market value of our common stock. These prohibitions apply regardless of whether the equity securities have been granted to the directors, executive officers, or other employees as part of their compensation or are held, directly or indirectly, by such persons.persons or their designees. In addition, pursuant to our Stock Ownership and Retention Policy, shares subject to the retention requirements of the policy may not be pledged, hypothecated, or made subject to execution, attachment, or similar process. No Excise TaxGross-Ups We did not provide any of our executive officers with a“gross-up” or other reimbursement payment for any tax liability that he might owe as a result of the application of Code Sections 280G, 4999, or 409A during 2017,2018, and we have not agreed and are not otherwise obligated to provide any NEO with such a“gross-up” or other reimbursement. | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 36 | | |
Deductibility of Executive Compensation Code Section 162(m) generally limits our ability to deduct for tax purposes compensation over $1,000,000 to our principal executive officer, principal financial officer, or any one of our other three highest paid executive officers. However, in the case of tax years commencing before 2018, Code Section 162(m) exempted qualifying performance-based compensation from the deduction limit if certain requirements were met. Code Section 162(m) was amended in December 2017 by the Tax Cuts and Jobs Act to eliminate the exemption for performance-based compensation (other than with respect to payments made pursuant to certain “grandfathered” arrangements entered into prior to November 2, 2017, that are not materially modified after that date and that would otherwise have been deductible under Code Section 162(m) prior to the changes made by the Tax Cuts and Jobs Act) and to expand the group of current and former executive officers other than our principal executive officer or principal financial officer, who are employedmay be covered by us on the last daydeduction limit under Code Section 162(m). As a result, compensation paid to certain of our taxable year, unless,executive officers in generalexcess of $1,000,000 will no longer be deductible (other than with respect to certain “grandfathered” arrangements, as noted above). Notwithstanding the elimination of the exemption for performance-based compensation, because of the importance of linking pay and under certain circumstances, theperformance, our 2018 and 2019 executive compensation is paid pursuantprograms continue to impose performance conditions on a plan that is performance related,non-discretionary, and has been approved bysignificant portion of awards to our stockholders. executive officers. The Compensation Committee will review and consider the deductibility of executive compensation under Code Section 162(m) and may authorize certain payments that will be in excess of the $1,000,000 limitation. The Compensation Committee believes that it needs to balance the benefits of designing awards that aretax-deductible with the need to design awards that attract, retain, and reward executives responsible for our success. While mindful of the benefit to us of the full deductibility of compensation, the Compensation Committee believes that it should not be constrained by the requirements of Code Section 162(m) where those requirements would impair flexibility in compensating our executive officers in a manner that can best promote our corporate objectives, which the Compensation Committee believes aligns our executive officers’ interests with our stockholders’ interests, and thus is in the best interests of our stockholders. As part of the United States tax reform legislation enacted on December 22, 2017, the exemption from Code Section 162(m)’s deduction limitation for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017. As a result, compensation paid to certain of our executive officers in excess of $1,000,000 will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. Despite the Compensation Committee’s efforts to preserve the deductibility of compensation under Code Section 162(m), because of ambiguities and uncertainties as to the application and interpretation of Code Section 162(m) and related Treasury regulations under the tax reform legislation, including the uncertain scope of the transition relief, no assurance can be given that any compensation will satisfy the requirements for deductibility under Code Section 162(m). The Compensation Committee reserves the right to modify compensation that was initially intended to be deductible under Code Section 162(m) if it determines that such modifications are consistent with our business needs.
Payments Upon Termination andChange-in-Control As described above, Mr. Anderson’s employment terminated effective May 15, 2017. We subsequently entered into a separation agreement with Mr. Anderson, the terms of which are described below under “Summary of Employment Arrangements with Executive Officers – Agreements with Former Executive Officer.” Pursuant to the terms of each of their employment agreements and certain long-term incentive award agreements, our other NEOs are entitled to certain benefits upon the termination of their employment with us, the terms of which are described below under “Summary of Employment Arrangements with Executive Officers – Employment Agreements with Current Executive Officers” and “Summary of Employment Arrangements with Executive Officers – Potential Payments Upon Termination orChange-in-Control.Officers.”
CEO Pay Ratio
We are not required to disclose the ratio of the annual total compensation of our CEO and the median of the annual total compensation of all of our employees (commonly known as “pay ratio disclosure”) under applicable SEC rules because we only ceased to be an emerging growth company under the Jumpstart Our Business Startups Act at the outset of our fiscal year beginning on January 1, 2018. We will provide the pay ratio disclosure when first required in our proxy statement for our 2019 Annual Meeting.
Risk Assessment of Compensation Policies and Practices We have assessed our compensation programs for all employees and have concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on our company. We believe that our compensation programs reflect an appropriate mix of compensation elements and balance current and long-term performance objectives, cash and equity compensation, and risks and rewards. During 2017,2018, the Compensation Committee reviewed our compensation policies and practices for all employees, including our NEOs, particularly as they relate to risk management practices and risk-taking incentives. As part of its review, the Compensation Committee discussed with management the ways in which risk is effectively managed or mitigated as it relates to our compensation programs and policies. Based on this review, the Compensation Committee believes that our compensation programs do not encourage excessive risk but instead encourage behaviors that support sustainable value creation. The following features of our executive compensation program illustrate this point. | • | | Review by Independent Compensation Consultant. Our executive compensation programs have been designed and reviewed by an independent compensation consultant. |
| • | | Compensation Committee Oversight. Our executive compensation programs are regularly reviewed and overseen by an independent Compensation Committee that retains the discretion to reduce compensation based on corporate and individual performance and other factors. |
| • | | Mix of Incentives. Our compensation programs provide an appropriate mix of short-term and long-term incentives, as well as cash and equity opportunities. |
| • | | Mix of Performance Metrics. The performance metrics associated with our incentive programs incorporate a variety of drivers of the business over both annual and three-year time horizons. |
| | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 37 | | |
| • | | Strong Link to Stockholder Interests. Equity components and long-term performance metrics create a strong alignment between our executives’ interests and our stockholders’ interests. Because long-term incentives typically vest over a three-year period, our executives will always have unvested awards that could decrease in value if our business is not well-managed for the long term. |
| • | | Alignment with Annual PlanBudget and Long-Term Strategic Plan. Performance metrics in our short- and long-term incentive programs are aligned with both our annual budget and our long-term strategic plan. |
| • | | Appropriate Policies. We have adopted a “clawback” policy, a stock ownership and retention policy, and prohibitions against hedging and pledging, thereby creating additional protections for the Companyour company and encouraging an alignment of our executives’ and stockholders’ interests. |
| • | | Field Incentive Plan. Our operations field incentive plan is focused on growth, control, and profit—the three primary drivers of success in our branches. This creates appropriate alignment of employee incentive opportunities with company goals. |
| • | | Administration and Disclosure. Administrative procedures, communication, and disclosure processes closely align with “best practices.” |
| • | | Securities Trading Policy. Officers must obtain permission from the General Counsel before the purchase or sale of any shares, even during an open trading period. |
Based on the factors above, we believe that our NEOs and other employees are encouraged to manage our company in a prudent manner and that our incentive programs are not designed to encourage our NEOs or other employees to take excessive risks or risks that are inconsistent with the Company’s and our stockholders’ best interests. In addition, we have in place various controls and management processes that help mitigate the potential for incentive compensation plans to materially and adversely affect the Company. | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 38 | | |
COMPENSATION COMMITTEE REPORT The Compensation Committee has reviewed and discussed the foregoing “Compensation Discussion and Analysis” with management. Based upon such review, the related discussions, and such other matters deemed relevant and appropriate to the Compensation Committee, the Compensation Committee has recommended to the Board of Directors that the “Compensation Discussion and Analysis” be included in this Proxy Statement and in our Annual Report on Form10-K for the fiscal year ended December 31, 20172018 through incorporation by reference to this Proxy Statement. Members of the Compensation Committee: Steven J. Freiberg (Chair) Roel C. Campos Maria Contreras-Sweet Carlos Palomares The Compensation Committee report does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference into any other filing under the Securities Act of 1933, as amended, (the “Securities Act”), or the Exchange Act, except to the extent that we specifically incorporate the Compensation Committee report by reference therein. | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 39 | | |
EXECUTIVE COMPENSATION TABLES Summary Compensation Table The following table sets forth the cash and other compensation that we paid to our named executive officers or that was otherwise earned by our named executive officers for their services in all employment capacities during the fiscal years ended December 31, 2018, 2017, 2016, and 2015.2016. | Name and Principal Position(1) | | Year | | Salary ($)(3) | | Bonus ($)(4) | | Stock Awards ($)(5) | | Option Awards ($)(6) | | Non-Equity Incentive Plan Compensation ($)(7) | | All Other Compensation ($)(8) | | Total ($) | | Year | | Salary ($)(3) | | Bonus ($)(4) | | Stock Awards ($)(5) | | Option Awards ($)(6) | | Non-Equity Incentive Plan Compensation ($)(7) | | All Other Compensation ($)(8) | | Total ($) | Peter R. Knitzer,(2) | | 2017 | | 530,000 | | — | | 949,985 | | — | | 522,580 | | 42,552 | | 2,045,117 | | President and Chief Executive Officer | | 2016 | | 221,557 | | — | | — | | 949,997 | | 221,557 | | 30,114 | | 1,423,225 | | Peter R. Knitzer,(2) President and Chief Executive Officer | | | 2018 | | 550,000 | | — | | 733,314 | | 733,327 | | 548,350 | | 83,701 | | 2,648,692 | | | 2017 | | 530,000 | | — | | 949,985 | | — | | 522,580 | | 42,552 | | 2,045,117 | | | 2015 | | — | | — | | — | | — | | — | | — | | — | | 2016 | | 221,557 | | — | | — | | 949,997 | | 221,557 | | 30,114 | | 1,423,225 | John D. Schachtel, | | 2017 | | 207,123 | | — | | — | | 299,994 | | 204,224 | | 21,239 | | 732,580 | | 2018 | | 360,000 | | — | | 274,986 | | — | | 358,920 | | 72,659 | | 1,066,565 | Executive Vice President and Chief Operating Officer | | 2016 | | — | | — | | — | | — | | — | | — | | — | | 2017 | | 207,123 | | — | | — | | 299,994 | | 204,224 | | 21,239 | | 732,580 | | 2015 | | — | | — | | — | | — | | — | | — | | — | | 2016 | | — | | — | | — | | — | | — | | — | | — | Jody L. Anderson, | | 2017 | | 127,603 | | — | | 172,494 | | 172,493 | | 125,816 | | 178,350 | | 776,756 | | Former President and Chief Operating Officer | | 2016 | | 335,000 | | — | | 167,486 | | 167,500 | | 252,528 | | 27,140 | | 949,654 | | | 2015 | | 325,000 | | — | | 199,995 | | 63,473 | | 291,635 | | 76,017 | | 956,120 | | Donald E. Thomas, | | 2017 | | 342,000 | | 66,667 | | 170,994 | | 170,995 | | 337,212 | | 24,900 | | 1,112,768 | | 2018 | | 355,000 | | — | | 177,495 | | 177,499 | | 547,375 | | 45,246 | | 1,302,615 | Executive Vice President and Chief Financial Officer | | 2016 | | 332,000 | | 33,333 | | 265,970 | | 165,998 | | 250,267 | | 27,250 | | 1,074,818 | | 2017 | | 342,000 | | 66,667 | | 170,994 | | 170,995 | | 337,212 | | 24,900 | | 1,112,768 | | 2015 | | 321,391 | | — | | 160,687 | | 397,810 | | 288,396 | | 24,400 | | 1,192,684 | | 2016 | | 332,000 | | 33,333 | | 265,970 | | 165,998 | | 250,267 | | 27,250 | | 1,074,818 | Daniel J. Taggart, | | 2017 | | 318,000 | | — | | 105,987 | | 105,998 | | 313,548 | | 8,810 | | 852,343 | | 2018 | | 330,000 | | — | | 109,977 | | 109,998 | | 448,648 | | 25,993 | | 1,024,616 | Senior Vice President and Chief Risk Officer | | 2016 | | 308,000 | | — | | 102,651 | | 102,661 | | 232,175 | | 900 | | 746,387 | | | | 2015 | | 296,712 | | — | | 99,990 | | 99,993 | | 266,251 | | 900 | | 763,846 | | Executive Vice President and Chief Credit Risk Officer | | | 2017 | | 318,000 | | — | | 105,987 | | 105,998 | | 313,548 | | 8,810 | | 852,343 | | | 2016 | | 308,000 | | — | | 102,651 | | 102,661 | | 232,175 | | 900 | | 746,387 | Brian J. Fisher, | | 2017 | | 240,000 | | 50,000 | | 80,000 | | 79,994 | | 236,640 | | 10,800 | | 697,434 | | 2018 | | 300,000 | | — | | 99,977 | | 100,000 | | 410,774 | | 16,963 | | 927,714 | Senior Vice President, General Counsel, and Secretary | | 2016 | | 230,000 | | 43,750 | | 170,817 | | 95,826 | | 104,026 | | 12,390 | | 656,809 | | 2017 | | 240,000 | | 50,000 | | 80,000 | | 79,994 | | 236,640 | | 10,800 | | 697,434 | | 2015 | | 220,000 | | 6,250 | | 91,657 | | 175,563 | | 118,449 | | 9,999 | | 621,918 | | 2016 | | 230,000 | | 43,750 | | 170,817 | | 95,826 | | 104,026 | | 12,390 | | 656,809 |
(1) | Messrs. Knitzer, Schachtel, Anderson, Thomas, Taggart, and Fisher commenced employment effective as of August 1, 2016, May 30, 2017, October 1, 2014, January 2, 2013, January 5, 2015, and January 14, 2013, respectively. Mr. Anderson’s employment terminated on May 15, 2017. |
(2) | Immediately prior to his appointment as our Chief Executive Officer, Mr. Knitzer served as anon-employee director on our Board, a role in which he had served since his initial appointment in July 2015. The table above reflects the compensation paid to Mr. Knitzer in his capacity as our Chief Executive Officer. Following the effectiveness of his appointment as our Chief Executive Officer, Mr. Knitzer was no longer entitled to receive separate compensation for his service on the Board. |
(3) | The amounts represent annual base salaries,pro-rated for any partial year. For additional information, see “Compensation Discussion and Analysis – Elements of Compensation – Base Salary.” |
(4) | For 2017, the amounts represent installment payments totalingtwo-thirds of cash retention awards granted to Mr. Thomas and Mr. Fisher in 2016 pursuant to our key employee retention program. |
| For 2016, the amounts representone-third installment payments of cash retention awards granted to Mr. Thomas and Mr. Fisher in 2016 pursuant to our key employee retention program, and installment payments totaling three-quarters of a cash retention award granted to Mr. Fisher in 2015 pursuant to our key employee retention program. |
| For 2015, the amount represents aone-quarter installment payment of a cash retention award granted to Mr. Fisher in 2015 pursuant to our key employee retention program. |
| For additional information, see “Compensation Discussion and Analysis – Elements of Compensation – Key Employee Retention Program.” |
(5) | Amounts shown are the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. For a discussion of the assumptions made in such valuation, see note 15 of the notes to our audited consolidated financial statements included in our Annual Report on Form10-K for the fiscal year ended December 31, 2017.2018. |
In 2018, Messrs. Knitzer, Schachtel, Thomas, Taggart, and Fisher were granted performance-contingent RSUs having the following grant date fair values: Mr. Knitzer, $733,314; Mr. Schachtel, $274,986; Mr. Thomas, $177,495; Mr. Taggart, $109,977; and Mr. Fisher, $99,977 (and a maximum potential value of $1,099,970; $412,478; $266,228; $164,952; and $149,951, respectively). The actual number of RSUs, if any, that may be earned may range from 0% to 150% of the target number of units, based primarily (90%) on our CAGR of net income compared to our peer group over the performance period, January 1, 2018 through December 31, | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 40 | | |
2020, and to a lesser extent (10%) on our Compensation Committee’s assessment of our executive team’s achievement of its long-term strategic objectives over the same time period. In 2017, Messrs. Knitzer, Anderson, Thomas, Taggart, and Fisher were granted performance-contingent RSUs having the following grant date fair values: Mr. Knitzer, $949,985; Mr. Anderson, $172,494; Mr. Thomas, $170,994; Mr. Taggart, $105,987; and Mr. Fisher, $80,000 (and a maximum potential value of $1,424,967; $258,731; $256,492; $158,980; and $120,000, respectively). The actual number of RSUs, if any, that may be earned may range from 0% to 150% of the target number of units, based primarily (90%) on our compound annual growth rateCAGR of net income compared to our peer group over the performance period, January 1, 2017 through December 31, 2019, and to a lesser extent (10%) on our Compensation Committee’s assessment of our executive team’s achievement of its long-term strategic objectives over the same time period. In 2016, pursuant to our key employee retention program, Mr. Thomas and Mr. Fisher each were granted a service-based RSA with grant date fair values of $99,986 and $74,998, respectively. The RSAs vested on September 29, 2017. In addition, in 2016, Messrs. Anderson, Thomas, Taggart, and Fisher were granted performance-contingent RSUs having the following grant date fair values: Mr. Anderson, $167,486; Mr. Thomas, $165,983; Mr. Taggart, $102,651; and Mr. Fisher, $95,819 (and a maximum potential value of $251,230; $248,975; $153,976; and $143,728, respectively). The actual number of RSUs, if any, that may behave been earned may rangeranged from 0% to 150% of the target number of units, based primarily (90%) on our compound annual growth rateCAGR of net income compared to our peer group over the performance period, January 1, 2016 through December 31, 2018, and to a lesser extent (10%) on our Compensation Committee’s assessment of our executive team’s achievement of its long-term strategic objectives over the same time period. In addition, Mr. Thomas and Mr. Fisher each were granted a service-based RSA with grant date fair values of $99,986 and $74,998, respectively. The RSAs vested on September 29, 2017. In 2015, Messrs. Anderson, Thomas, Taggart, and Fisher were granted performance-contingent RSUs having the following grant date fair values: Mr. Anderson, $199,995; Mr. Thomas, $160,687; Mr. Taggart, $99,990; and Mr. Fisher, $91,657 (and a maximum potential value of $299,986; $241,030; $149,978; and $137,485, respectively). The actual number of RSUs, if any, that may have been earned ranged from 0% to 150% of the target number of units,March 2019, based on achievement of cumulative EBITDA overupon results achieved during the performance period, January 1, 2015 through December 31, 2017. In February 2018, our Compensation Committee determined that we did not achieveMessrs. Thomas, Taggart, and Fisher earned 116.5% of their 2016 target RSUs.
The performance-contingent RSUs and the three-year cumulative EBITDA performance thresholds, resulting in the forfeiture of the associated 2015 performance-contingent RSUs. In each case, the performance-contingent RSUsservice-based RSAs are subject to further terms and conditions, including as to vesting, as set forth in an award agreement. As a result of his termination, Mr. Anderson remains eligible to vest in only apro-rata portion of each of his performance-contingent RSUs, subject to our performance over the three-year performance period. For additional information, see “Compensation Discussion and Analysis – Elements of Compensation – Long-Term Incentive Awards,”Awards” and “Compensation Discussion and Analysis – Elements of Compensation – Key Employee Retention Program,Program.” and “Summary of Employment Arrangements with Executive Officers – Potential Payments Upon Termination orChange-in-Control.”
(6) | Amounts shown are the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. For a discussion of the assumptions made in such valuation, see note 15 of the notes to our audited consolidated financial statements included in our Annual Report on Form10-K for the fiscal year ended December 31, 2017.2018. |
For 2018, the option awards granted to Messrs. Knitzer, Thomas, Taggart, and Fisher vest in three equal installments on each of December 31, 2018, 2019, and 2020. For 2017, the option awards granted pursuant to our long-term incentive program on March 15, 2017 to Messrs. Anderson, Thomas, Taggart, and Fisher vest in three equal installments on each of December 31, 2017, 2018, and 2019. The option award granted pursuant to our long-term incentive program on May 30, 2017 to Mr. Schachtel vests on December 31, 2017 (20%), December 31, 2018 (40%), and December 31, 2019 (40%). For 2016, the option awards granted pursuant to our long-term incentive program on March 29, 2016 to Messrs. Anderson, Thomas, Taggart, and Fisher vest in three equal installments on each of December 31, 2016, 2017, and 2018. The option award granted pursuant to our long-term incentive program on August 1, 2016 to Mr. Knitzer vests on December 31, 2016 (20%), December 31, 2017 (40%), and December 31, 2018 (40%). For 2015, the option awards granted pursuant to our long-term incentive program on January 5, 2015 to Mr. Taggart and on April 22, 2015 to Messrs. Thomas and Fisher vested on December 31, 2017. The option awards granted pursuant to our key employee retention program on March 11, 2015 to Messrs. Anderson, Thomas, and Fisher vested in three equal installments on each of December 31, 2015, 2016, and 2017.
In each case, the option awards are subject to further terms and conditions, including as to vesting, as set forth in an award agreement. Effective as of his termination date, Mr. Anderson vested in apro-rata amount of the unvested portion of each of hisnon-qualified stock option awards and forfeited the balance of the unvested awards. For additional information, see “Compensation Discussion and Analysis – Elements of Compensation – Long-Term Incentive Awards,Awards.”
(7) | For 2018, the amounts for Messrs. Knitzer and Schachtel represent performance-based annual cash awards earned in 2018. For Messrs. Thomas, Taggart, and Fisher, the amounts represent performance-based annual cash awards earned in 2018, and cash-settled performance units that were granted in 2016 and earned over a performance period of January 1, 2016 through December 31, 2018. In the case of the performance-based annual cash awards, Messrs. Thomas, Taggart, and Fisher earned the following amounts: Mr. Thomas, $353,935; Mr. Taggart, $329,010; and Mr. Fisher, $299,100. In the case of the cash-settled performance units, Messrs. Thomas, Taggart, and Fisher earned the following amounts: Mr. Thomas, $193,440; Mr. Taggart, $119,638; and Mr. Fisher, $111,674. We paid all such earned amounts in 2019. |
For 2016 and 2017, the amounts represent performance-based annual cash awards earned in each such year and paid in the following year. | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 41 | | |
For additional information, see “Compensation Discussion and Analysis – Elements of Compensation – Key Employee Retention Program,”Performance-Based Annual Cash Awards” and “Summary“Compensation Discussion and Analysis – Elements of Employment Arrangements with Executive OfficersCompensation – Potential Payments Upon Termination orChange-in-Control.Long-Term Incentive Awards.” (7) | Represents performance-based annual cash awards earned in 2015, 2016, and 2017 and paid in 2016, 2017, and 2018, respectively. For additional information, see “Compensation Discussion and Analysis – Elements of Compensation – Performance-Based Annual Cash Awards.” |
(8) | The following table provides detail regarding the amounts in the “All Other Compensation” column. Mr. Anderson’s severance benefits reflected below included 30 days’ base salary in lieu of notice ($28,356), salary continuation ($126,027), executive outplacement services ($10,000), and reimbursement of attorney fees ($2,402). For additional information, see “Compensation Discussion and Analysis – Elements of Compensation – Perquisites” and “Summary of Employment Arrangements with Executive Officers – Agreements with Former Executive Officer.Perquisites.” |
| | | | | | | | | | | | | | | | | | | | | | | Name | | Year | | 401(k) Plan Match ($) | | Travel Expense to/
to/from Personal Residence ($) | | Optional Annual Health Screening ($) | | Automobile Allowance ($) | | Mobile Phone Allowance ($) | | Legal Expenses ($) | | Spousal Travel ($) | | Relocation Benefits ($) | | Severance Long-Term
BenefitsDisability Insurance & Associated Taxes ($) | | Total ($) | Peter R. Knitzer | | 2018 2017
2016 2015
| | 11,000 8,969
— | | 39,551 32,683 18,566 | | 3,546 — — | | 32,683
18,566
— | | —
— — | | 900 900 375 | | —
— 10,000 | | — — — | | 900
375
— — 1,173 | | —
10,000
—28,704
| | —
— — | | —
1,173
—
| | —
—83,701
—42,552
30,114 | John D. Schachtel | | 2018 2017
2016 2015
| | —
11,000 — — | | 33,088 18,327
— | | 3,966 — — | | —
— — | | 900 525 —
| | — 2,387 — | | 3,271 — — | | 525
— — — | | 2,387
20,434 — — | | —
—
—
| | —
—72,659
—
| | —
—21,239
— | Jody L. Anderson
| | 2017
2016
2015
| | 3,475
10,600
3,638
| | —
—
—
| | —
2,740
—
| | 5,750
13,800
13,800
| | —
—
—
| | —
—
—
| | 2,340
—
—
| | —
—
58,579
| | 166,785
—
—
| Donald E. Thomas | | 2018 2017
2016 2015
| | 11,000 10,800
10,600
10,600 | | —
— — | | —
2,850
— — 2,850 | | 13,800
13,800 13,800 | | 900 300
— | | — — — | | —
— — | | —
— — | | —
19,546 — — | | —
—
—45,246
24,900 27,250 | Daniel J. Taggart | | 2018 2017
2016 2015
| | 11,000 6,605
— | | — — — | | —
4,563 — — | | —
— — | | 900 900 900 | | —
1,305 — | | — — — | | 900
900
900—
| | 1,305
— — | | —
9,530 — — | | —
—
—
| | —
—25,993
—8,810
900 | Brian J. Fisher | | 2018 2017
2016 2015
| | 11,000 10,800
10,600 9,999
| | —
— — | | —
1,790
— — 1,790 | | —
— — | | —
— — | | —
— — | | —
— — | | —
— — | | —
5,963 — — | | 16,963 10,800 12,390 |
| | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 42 | | |
Grants of Plan-Based Awards The following table provides information concerning annual and long-term incentive awards granted in 20172018 to each of our named executive officers pursuant to our Annual Incentive Plan and our 2015 Plan. | Name | | Award Type(1) | | Grant Date | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards | | All Other Option Awards: Number of Securities Underlying Options (#) | | Exercise or Base Price of Option Awards ($/Sh) | | Grant Date Fair Value of Stock and Option Awards ($)(3) | | Award Type(1) | | Grant Date | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards | | All Other Option Awards: Number of Securities Underlying Options (#) | | Exercise or Base Price of Option Awards ($/Sh) | | Grant Date Fair Value of Stock and Option Awards ($)(3) | | | Approval Date | | Threshold ($)(2) | | Target ($) | | Maximum ($) | | Threshold (#)(2) | | Target (#) | | Maximum (#) | | | Threshold ($)(2) | | Target ($) | | Maximum ($) | | Threshold (#)(2) | | Target (#) | | Maximum (#) | Peter R. Knitzer | | Annual | | 03/14/17 | | 03/14/17 | | — | | 530,000 | | 795,000 | | | | | | | | | | | | | | Annual | | 02/07/18 | | — | | 550,000 | | 825,000 | | | | | | | | | | | | | | | RSU | | 03/14/17 | | 03/15/17 | | | | | | | | 21,385 | | 47,523 | | 71,284 | | | | | | 949,985 | | NQSO | | 02/07/18 | | | | | | | | | | | | | | 59,187 | | 28.25 | | 733,327 | | | CSPU | | 03/14/17 | | 03/15/17 | | 427,500 | | 950,000 | | 1,425,000 | | | | | | | | | | | | | | RSU | | 02/07/18 | | | | | | | | 11,681 | | 25,958 | | 38,937 | | | | | | 733,314 | | | | CSPU | | 02/07/18 | | 330,000 | | 733,333 | | 1,100,000 | | | | | | | | | | | | | John D. Schachtel | | Annual | | 05/12/17 | | 05/30/17 | | — | | 207,123 | | 310,685 | | | | | | | | | | | | | | Annual | | 02/07/18 | | — | | 360,000 | | 540,000 | | | | | | | | | | | | | | | NQSO | | 05/12/17 | | 05/30/17 | | | | | | | | | | | | | | 34,403 | | 20.00 | | 299,994 | | Jody L. Anderson(4) | | Annual | | 03/14/17 | | 03/14/17 | | — | | 345,000 | | 517,500 | | | | | | | | | | | | | | | | NQSO | | 03/14/17 | | 03/15/17 | | | | | | | | | | | | | | 19,230 | | 19.99 | | 172,493 | | | | RSU | | 03/14/17 | | 03/15/17 | | | | | | | | 3,883 | | 8,629 | | 12,943 | | | | | | 172,494 | | RSU | | 02/07/18 | | | | | | | | 4,380 | | 9,734 | | 14,601 | | | | | | 274,986 | | | CSPU | | 03/14/17 | | 03/15/17 | | 77,625 | | 172,500 | | 258,750 | | | | | | | | | | | | | | CSPU | | 02/07/18 | | 123,750 | | 275,000 | | 412,500 | | | | | | | | | | | | | Donald E. Thomas | | Annual | | 03/14/17 | | 03/14/17 | | — | | 342,000 | | 513,000 | | | | | | | | | | | | | | Annual | | 02/07/18 | | — | | 355,000 | | 532,500 | | | | | | | | | | | | | | | NQSO | | 03/14/17 | | 03/15/17 | | | | | | | | | | | | | | 19,063 | | 19.99 | | 170,995 | | NQSO | | 02/07/18 | | | | | | | | | | | | | | 14,326 | | 28.25 | | 177,499 | | | RSU | | 03/14/17 | | 03/15/17 | | | | | | | | 3,849 | | 8,554 | | 12,831 | | | | | | 170,994 | | RSU | | 02/07/18 | | | | | | | | 2,827 | | 6,283 | | 9,424 | | | | | | 177,495 | | | CSPU | | 03/14/17 | | 03/15/17 | | 76,950 | | 171,000 | | 256,500 | | | | | | | | | | | | | | CSPU | | 02/07/18 | | 79,875 | | 177,500 | | 266,250 | | | | | | | | | | | | | Daniel J. Taggart | | Annual | | 03/14/17 | | 03/14/17 | | — | | 318,000 | | 477,000 | | | | | | | | | | | | | | Annual | | 02/07/18 | | — | | 330,000 | | 495,000 | | | | | | | | | | | | | | | NQSO | | 03/14/17 | | 03/15/17 | | | | | | | | | | | | | | 11,817 | | 19.99 | | 105,998 | | NQSO | | 02/07/18 | | | | | | | | | | | | | | 8,878 | | 28.25 | | 109,998 | | | RSU | | 03/14/17 | | 03/15/17 | | | | | | | | 2,385 | | 5,302 | | 7,953 | | | | | | 105,987 | | RSU | | 02/07/18 | | | | | | | | 1,751 | | 3,893 | | 5,839 | | | | | | 109,977 | | | CSPU | | 03/14/17 | | 03/15/17 | | 47,700 | | 106,000 | | 159,000 | | | | | | | | | | | | | | CSPU | | 02/07/18 | | 49,500 | | 110,000 | | 165,000 | | | | | | | | | | | | | Brian J. Fisher | | Annual | | 03/14/17 | | 03/14/17 | | — | | 240,000 | | 360,000 | | | | | | | | | | | | | | Annual | | 02/07/18 | | — | | 300,000 | | 450,000 | | | | | | | | | | | | | | | NQSO | | 03/14/17 | | 03/15/17 | | | | | | | | | | | | | | 8,918 | | 19.99 | | 79,994 | | NQSO | | 02/07/18 | | | | | | | | | | | | | | 8,071 | | 28.25 | | 100,000 | | | RSU | | 03/14/17 | | 03/15/17 | | | | | | | | 1,800 | | 4,002 | | 6,003 | | | | | | 80,000 | | RSU | | 02/07/18 | | | | | | | | 1,592 | | 3,539 | | 5,308 | | | | | | 99,977 | | | CSPU | | 03/14/17 | | 03/15/17 | | 36,000 | | 80,000 | | 120,000 | | | | | | | | | | | | | | CSPU | | 02/07/18 | | 45,000 | | 100,000 | | 150,000 | | | | | | | | | | | | |
(1) | “Annual” refers to performance-based annual cash incentive award opportunities granted under our Annual Incentive Plan. “NQSO” refers tonon-qualified stock options, “RSU” refers to performance-contingent restricted stock units, and “CSPU” refers to cash-settled performance units (with each unitunit’s target value denominated as $1.00), each granted under our 2015 Plan. For additional information, see “Compensation Discussion and Analysis – Elements of Compensation – Performance-Based Annual Cash Awards” and “Compensation Discussion and Analysis – Elements of Compensation – Long-Term Incentive Awards.” |
(2) | The threshold number of sharesunits indicated will be earned only if a threshold level of performance is achieved. |
(3) | Amounts shown are the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. For a discussion of the assumptions made in such valuation, see note 15 of the notes to our audited consolidated financial statements included in our Annual Report on Form10-K for the fiscal year ended December 31, 2017.2018. For performance-contingent RSUs, the grant date fair value is calculated using the target number of shares. |
(4) | Mr. Anderson’s employment terminated on May 15, 2017. As a result, he remains eligible to vest in only a pro-rata portion of the performance-based awards, subject to our performance over the applicable performance periods. In addition, effective as of his termination date, Mr. Anderson vested in a pro-rata portion of the shares subject to the non-qualified stock option award and forfeited the balance of the unvested shares. | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 43 | | |
Outstanding Equity Awards at FiscalYear-End The following table provides information concerning equity awards that were outstanding as of December 31, 2017,2018, for each of our named executive officers. | | | Option Awards | | Stock Awards | | Option Awards | | Stock Awards | Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock that Have Not Vested (#) | | Market Value of Shares or Units of Stock that Have Not Vested ($) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested ($)(1) | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock that Have Not Vested (#) | | Market Value of Shares or Units of Stock that Have Not Vested ($) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested ($)(1) | Peter R. Knitzer | | 5,111 | | — | | 19.42 | | 07/28/25 | | — | | — | | 47,523(10) | | 1,250,330 | | 5,111 | | — | | 19.42 | | 07/28/25 | | — | | — | | 47,523(6) | | 1,142,928 | | | 8,422 | | — | | 15.89 | | 05/04/26 | | | | | | | | | | 8,422 | | — | | 15.89 | | 05/04/26 | | | | | | 25,958(7) | | 624,290 | | | 68,181 | | 45,455(2) | | 18.90 | | 08/01/26 | | | | | | | | | | 113,636 | | — | | 18.90 | | 08/01/26 | | | | | | | | | | | | 19,729 | | 39,458(2) | | 28.25 | | 02/07/28 | | | | | | | | | John D. Schachtel | | 6,880 | | 27,523(3) | | 20.00 | | 05/30/27 | | | | | | | | | | 20,641 | | 13,762(3) | | 20.00 | | 05/30/27 | | — | | — | | 9,734(7) | | 234,103 | Jody L. Anderson | | 19,809 | | — | | 17.76 | | 05/15/22 | | — | | — | | 10,713(8) | | 281,859 | | Donald E. Thomas | | | 100,000 | | — | | 16.73 | | 01/02/23 | | — | | — | | 11,323(5) | | 272,318 | | | 8,050 | | — | | 15.06 | | 05/15/22 | | | | | | 4,482(9) | | 117,921 | | 26,500 | | — | | 33.93 | | 12/31/23 | | | | | | 8,554(6) | | 205,724 | | | 14,799 | | — | | 17.08 | | 05/15/22 | | | | | | 1,063(10) | | 27,968 | | | | 2,353 | | — | | 19.99 | | 05/15/22 | | | | | | | | | | Donald E. Thomas | | 80,000 | | 20,000(4) | | 16.73 | | 01/02/23 | | — | | — | | 10,894(8) | | 286,621 | | | | 21,200 | | 5,300(5) | | 33.93 | | 12/31/23 | | | | | | 9,718(9) | | 255,681 | | 19,867 | | — | | 17.76 | | 10/01/24 | | | | | | 6,283(7) | | 151,106 | | | 19,867 | | — | | 17.76 | | 10/01/24 | | | | | | 8,554(10) | | 225,056 | | 32,500 | | — | | 15.06 | | 03/11/25 | | | | | | | | | | | 32,500 | | — | | 15.06 | | 03/11/25 | | | | | | | | | | 23,042 | | — | | 14.75 | | 04/22/25 | | | | | | | | | | | 23,042 | | — | | 14.75 | | 04/22/25 | | | | | | | | | | 21,444 | | — | | 17.08 | | 03/29/26 | | | | | | | | | | | 14,296 | | 7,148(6) | | 17.08 | | 03/29/26 | | | | | | | | | | 12,708 | | 6,355(4) | | 19.99 | | 03/15/27 | | | | | | | | | | | 6,354 | | 12,709(7) | | 19.99 | | 03/15/27 | | | | | | | | | | 4,775 | | 9,551(2) | | 28.25 | | 02/07/28 | | | | | | | | | Daniel J. Taggart | | 13,194 | | — | | 15.24 | | 01/05/25 | | — | | — | | 6,779(8) | | 178,355 | | 13,194 | | — | | 15.24 | | 01/05/25 | | — | | — | | 7,003(5) | | 168,422 | | | 8,840 | | 4,422(6) | | 17.08 | | 03/29/26 | | | | | | 6,010(9) | | 158,123 | | 13,262 | | — | | 17.08 | | 03/29/26 | | | | | | 5,302(6) | | 127,513 | | | 3,939 | | 7,878(7) | | 19.99 | | 03/15/27 | | | | | | 5,302(10) | | 139,496 | | 7,878 | | 3,939(4) | | 19.99 | | 03/15/27 | | | | | | 3,893(7) | | 93,627 | | | | 2,959 | | 5,919(2) | | 28.25 | | 02/07/28 | | | | | | | | | Brian J. Fisher | | 9,644 | | — | | 17.76 | | 10/01/24 | | — | | — | | 6,214(8) | | 163,490 | | 9,644 | | — | | 17.76 | | 10/01/24 | | — | | — | | 6,537(5) | | 157,215 | | | 11,500 | | — | | 15.06 | | 03/11/25 | | | | | | 5,610(9) | | 147,599 | | 11,500 | | — | | 15.06 | | 03/11/25 | | | | | | 4,002(6) | | 96,248 | | | 13,143 | | — | | 14.75 | | 04/22/25 | | | | | | 4,002(10) | | 105,293 | | 13,143 | | — | | 14.75 | | 04/22/25 | | | | | | 3,539(7) | | 85,113 | | | 8,252 | | 4,127(6) | | 17.08 | | 03/29/26 | | | | | | | | | | 12,379 | | — | | 17.08 | �� | 03/29/26 | | | | | | | | | | | 2,972 | | 5,946(7) | | 19.99 | | 03/15/27 | | | | | | | | | | 5,944 | | 2,974(4) | | 19.99 | | 03/15/27 | | | | | | | | | | | | 2,690 | | 5,381(2) | | 28.25 | | 02/07/28 | | | | | | | | |
(1) | CalculatedAmounts are calculated based on the closing price ($24.05) of our common stock of $26.31 on December 29, 2017,31, 2018, the last trading day of 2017.2018. |
(2) | This option vests in three equal annual installments on December 31, 2016 (20%), December 31, 2017 (40%), andeach of December 31, 2018, (40%).2019, and 2020. |
(3) | This option vests on December 31, 2017 (20%), December 31, 2018 (40%), and December 31, 2019 (40%). |
(4) | This option vests in five equal annual installments on each of January 2, 2014, 2015, 2016, 2017, and 2018. |
(5) | This option vests in five equal annual installments on each of December 31, 2014, 2015, 2016, 2017, and 2018. |
(6) | This option vests in three equal annual installments on each of December 31, 2016, 2017, and 2018. |
(7) | This option vests in three equal annual installments on each of December 31, 2017, 2018, and 2019. |
(8)(5) | This amount represents the earned portion of a performance-contingent RSU award, assuming anthat became eligible to vest on December 31, 2018, subject to our Compensation Committee’s certification as to the achievement level at target.of certain performance goals. The actual number of RSUs, if any, that may have been earned ranged from 0% to 150% of the target number of units, set forth in the table above, based primarily (90%) on achievementour CAGR of cumulative EBITDAnet income compared to our peer group over the performance period, January 1, 20152016 through December 31, 2017,2018, and to a lesser extent (10%) on our Compensation Committee’s assessment of our executive team’s achievement of its long-term strategic objectives over the same time period. The number of target RSUs granted to Messrs. Thomas, Taggart, and Fisher were as follows: Mr. Thomas, 9,718 units; Mr. Taggart, 6,010 units; and Mr. Fisher, 5,610 units. Vesting was also contingent upon the continued employment of the executive through December 31, 2017, or as otherwise provided in2018. In March 2019, based upon results achieved during the applicable award agreement. In February 2018,performance period, our Compensation Committee determined that we did not achieve the three-year cumulative EBITDA performance thresholds, resulting in the forfeitureMessrs. Thomas, Taggart, and Fisher earned 116.5% of the associated performance-contingent RSUs set forth in the table above.their target RSUs. For additional information, see “Compensation Discussion and Analysis – Elements of Compensation – Long-Term Incentive Awards.” |
(9) | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 44 | | |
(6) | This amount represents a performance-contingent RSU, assuming an achievement level at target. The actual number of RSUs, if any, that may be earned may range from 0% to 150% of the target number of units set forth in the table above, based primarily (90%) on our compound annual growth rate of net income compared to our peer group over the performance period, January 1, 2016 through December 31, 2018, and to a lesser extent (10%) on our Compensation Committee’s assessment of our executive team’s achievement of its long-term strategic objectives over the same time period. Vesting is also contingent upon the |
| continued employment of the executive through December 31, 2018, or as otherwise provided in the applicable award agreement.
|
(10) | This amount represents a performance-contingent RSU, assuming an achievement level at target. The actual number of RSUs, if any, that may be earned may range from 0% to 150% of the target number of units set forth in the table above, based primarily (90%) on our compound annual growth rateCAGR of net income compared to our peer group over the performance period, January 1, 2017 through December 31, 2019, and to a lesser extent (10%) on our Compensation Committee’s assessment of our executive team’s achievement of its long-term strategic objectives over the same time period. Vesting is also contingent upon the continued employment of the executive through December 31, 2019, or as otherwise provided in the applicable award agreement. For additional information, see “Compensation Discussion and Analysis – Elements of Compensation – Long-Term Incentive Awards.” |
(7) | This amount represents a performance-contingent RSU, assuming an achievement level at target. The actual number of RSUs, if any, that may be earned may range from 0% to 150% of the target number of units set forth in the table above, based primarily (90%) on our CAGR of net income compared to our peer group over the performance period, January 1, 2018 through December 31, 2020, and to a lesser extent (10%) on our Compensation Committee’s assessment of our executive team’s achievement of its long-term strategic objectives over the same time period. Vesting is also contingent upon the continued employment of the executive through December 31, 2020, or as otherwise provided in the applicable award agreement. For additional information, see “Compensation Discussion and Analysis – Elements of Compensation – Long-Term Incentive Awards.” |
| | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 45 | | |
Option Exercises and Stock Vested The following table summarizes the exercise of options and the vesting of stock awards by each of our named executive officers during the fiscal year ended December 31, 2017.2018. | | | | | | | | | | | Option Awards | | Stock Awards | Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($) | | Number of Shares Acquired on Vesting(1) (#) | | Value Realized on Vesting(2) ($) | Peter R. Knitzer | | — | | — | | — | | — | John D. Schachtel | | — | | — | | — | | — | Donald E. Thomas | | — | | — | | 11,323 | | 272,318 | Daniel J. Taggart | | — | | — | | 7,003 | | 168,422 | Brian J. Fisher | | — | | — | | 6,537 | | 157,215 |
(1) | The amounts represent the number of shares delivered following the vesting of performance-contingent RSUs on December 31, 2018, based upon results achieved during a performance period that began on January 1, 2016 and ended on December 31, 2018, as determined by our Compensation Committee in March 2019. For additional information, see “Compensation Discussion and Analysis – Elements of Compensation – Long-Term Incentive Awards.” |
(2) | Amounts are calculated based on the closing price ($24.05) of our common stock on December 31, 2018, the last trading day of 2018. |
| | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | | Option Awards46 | | Stock Awards | Name
| | Number of
Shares
Acquired on
Exercise
(#) | | Value Realized
on Exercise
($) | | Number of
Shares
Acquired on
Vesting
(#) | | Value Realized
on Vesting
($) | Peter R. Knitzer
| | —
| | —
| | 3,461(1)
| | 69,947
| John D. Schachtel
| | —
| | —
| | —
| | —
| Jody L. Anderson
| | —
| | —
| | —
| | —
| Donald E. Thomas
| | —
| | —
| | 5,854(2)
| | 141,725
| Daniel J. Taggart
| | —
| | —
| | —
| | —
| Brian J. Fisher
| | —
| | —
| | 2,517(3)
4,391(2)
| | 53,939
106,306
|
(1) | This RSA vested on April 27, 2017. The closing price of our common stock on the vesting date was $20.21. |
(2) | This RSA vested on September 29, 2017. The closing price of our common stock on the vesting date was $24.21. |
(3) | This RSA vested on February 15, 2017. The closing price of our common stock on the vesting date was $21.43. |
Equity Compensation Plan Information The following table provides information concerning the common stock that may be issued upon the exercise of options, warrants, and rights under all of our existing equity compensation plans as of December 31, 2017.2018. At that date, there were a total of 11,659,23811,776,692 shares of our common stock outstanding. | Plan Category | | (a) Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants, and Rights | | (b) Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights ($) | | (c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) | | | (a) Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants, and Rights | | (b) Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights ($) | | (c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) | | Equity Compensation Plans Approved by Security Holders | | | | | | | | | | | | | 2011 Stock Incentive Plan(1) | | | 349,332(3) | | | 17.68 | | | | — | | | 299,962(3) | | | 17.85 | | | | — | | 2015 Long-Term Incentive Plan(2) | | | 996,406(4) | | | | 17.22(5) | | | 1,274,593 | | | 1,031,564(4) | | | 19.07(5) | | | 1,099,349 | | Equity Compensation Plans Not Approved by Security Holders | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | Total: | | 1,345,738 | | | 17.39 | | | 1,274,593 | | | 1,331,526 | | | 18.69 | | | 1,099,349 | | | | | | | | | | | | | | | | | | | | |
(1) | Regional Management Corp. 2011 Stock Incentive Plan. In 2015, our stockholders approved the 2015 Plan, at which time all shares then available for issuance under the 2011 Plan rolled over to the 2015 Plan. Awards may no longer be granted under the 2011 Plan. However, awards that are outstanding under the 2011 Plan will continue in accordance with their respective terms. |
(2) | Regional Management Corp. 2015 Long-Term Incentive Plan. As of March 16, 2018,22, 2019, there were 1,211,822926,643 shares that remained available for issuance under the 2015 Plan, which allows for grants of incentive stock options,non-qualified stock options, stock appreciation rights (“SARs”), unrestricted shares, restricted shares, RSUs, phantom stock awards, and awards that are valued in whole or in part by reference to, or otherwise based on, the fair market value of shares, including performance-based awards. |
(3) | This amount represents 349,332 shares of common stock underlyingnon-qualified stock option awards. |
(4) | This amount represents 608,287680,545 shares of common stock underlyingnon-qualified stock option awards, 301,537272,779 shares of common stock underlying performance-contingent RSU awards, and 86,58278,240 restricted shares of common stock underlying and issuable pursuant to key team member incentive program award agreements. Share amounts are determined based upon the maximum number of shares that may be delivered pursuant to the performance-based awards. Under the key team member incentive program, each participant is eligible to earn an RSA, subject to the achievement of performance goals over aone-year period. If earned, the RSA is issued following theone-year performance period and vests ratably over a subsequenttwo-year period (subject to continued employment or as otherwise provided in the underlying award agreement). No executive officer participates in our key team member incentive program. There is no exercise price associated with the RSU awards or restricted shares. |
(5) | Calculation excludes shares subject to RSU awards and shares underlying and issuable pursuant to key team member incentive program award agreements. |
| | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 47 | | |
CEO Pay Ratio The following table provides our calculation under applicable SEC regulations of the ratio of the annual total compensation of our Chief Executive Officer to the median of the annual total compensation of our other employees. | | | | | | | | | | | | | Compensation Component | | CEO ($) | | | | | | Median Employee ($) | | Salary | | | 550,000 | | | | | | | | 32,229 | | Stock Awards | | | 733,314 | | | | | | | | — | | Option Awards | | | 733,327 | | | | | | | | — | | Non-Equity Incentive Plan Compensation | | | 548,350 | | | | | | | | 4,665 | | All Other Compensation | | | 83,701 | | | | | | | | 5,887 | | | | | | | | | | | | | | | Total Compensation: | | | 2,648,692 | | | | | | | | 42,781 | | | | | | | | | | | | | | | CEO to Median Employee Pay Ratio: | | | 62 | | | | : | | | | 1 | |
We took the following steps in identifying the median of the annual total compensation of all of our employees: (1) | We determined that, as of December 31, 2018, our employee population was equal to 1,535 individuals, all located in the United States. This number includes all the individuals determined to be employees for federal tax purposes, whether full-time, part-time, or temporary, as of that date. We chose December 31, 2018, which is within the last three months of our fiscal year as required by applicable SEC regulations, because it aligned with our calendar year payroll procedures. |
(2) | We next identified the employee receiving the median amount of compensation in our employee population. To do this, we compared the amount of wages and other compensation received by each employee, other than Mr. Knitzer, as reflected in our payroll records and reported to the Internal Revenue Service in Box 5 of FormW-2 for the calendar year ended December 31, 2018. This compensation measure was annualized for permanent employees who were employed on the measurement date but who did not work for the full calendar year. The compensation measure was consistently applied to all of our employees. |
(3) | Once we identified our median employee, we measured that employee’s annual total compensation for the 2018 fiscal year by adding together (a) the same elements of compensation that are included in Mr. Knitzer’s total fiscal 2018 compensation, as reported in our Summary Compensation Table above, and(b) non-discriminatory health and welfare benefits paid by Regional, which we have included as “All Other Compensation” in the table above. |
(4) | For Mr. Knitzer, we used the amount reported in the “Total” column of our Summary Compensation Table above. Mr. Knitzer was eligible for but did not elect to participate innon-discretionary health and welfare benefits offered by Regional. |
The resulting pay ratio was calculated in a manner consistent with SEC regulations, and we believe that it constitutes a reasonable estimate. However, as contemplated by SEC regulations, we relied on methods and assumptions that we determined to be appropriate for calculating the Chief Executive Officer pay ratio at Regional. Other public companies will use methods and assumptions that differ from the ones we chose but are appropriate for their circumstances. It may therefore be difficult, for this and other reasons, to compare our reported pay ratio to pay ratios reported by other companies, including companies in our industry. | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 48 | | |
SUMMARY OF EMPLOYMENT ARRANGEMENTS WITH EXECUTIVE OFFICERS In 2017,2018, the following individuals served as our executive officers: Peter R. Knitzer, our current President and Chief Executive Officer; John D. Schachtel, our current Executive Vice President and Chief Operating Officer; Jody L. Anderson, our former President and Chief Operating Officer;
Donald E. Thomas, our Executive Vice President and Chief Financial Officer; Daniel J. Taggart, our SeniorExecutive Vice President and Chief Credit Risk Officer; and Brian J. Fisher, our Senior Vice President, General Counsel, and Secretary. Messrs. Knitzer, Anderson, Thomas, Taggart, and FisherEach of these individuals served as our executive officers at the beginning of 2017.2018. Mr. Anderson’s employment terminated on May 15, 2017, Mr. KnitzerTaggart assumed the title of Executive Vice President and Chief Credit Risk Officer on May 15, 2017, and Mr. Schachtel’s employment commenced on May 30, 2017.October 24, 2018.
We entered into employment agreements with Messrs. Knitzer and Schachtel shortly before each commenced employment with us in August 2016 and May 2017, respectively. Similarly, we entered into employment letter agreements with Messrs. Thomas, Taggart, and Fisher shortly before each commenced employment with us in January 2013, January 2015, and January 2013, respectively. In August 2017, we entered into employment agreements with Messrs. Thomas, Taggart, and Fisher that superseded each executive’s prior employment letter agreement. In addition, we amended the employment agreements of Messrs. Knitzer and Schachtel in August 2017. In February 2019, we entered into a retirement agreement with Mr. Thomas that amended his employment agreement. We describe below the material terms of our executives’ current employment agreements and prior employmentthat were in effect for the entirety of 2018, as well as Mr. Thomas’ retirement letter agreements. We also describe the material terms of Mr. Anderson’s separation agreement. Additional information regarding the compensation that our executive officers are eligible for, earned, and were paid is set forth elsewhere in this Proxy Statement, including in the Compensation Discussion and Analysis and the Executive Compensation Tables set forth above. Employment Agreements with Current Executive Officers The employment agreements of Messrs. Knitzer, Schachtel, Thomas, Taggart, and Fisher provide for a three-year term. The three-year term ends on August 1, 2019 and May 30, 2020 in the case of Messrs. Knitzer and Schachtel, respectively, and on August 30, 2020 in the case of Messrs. Thomas, Taggart, and Fisher. The employment agreements generally provide for compensation to our executives in the form of annual base salaries, annual cash incentive opportunities, long-term incentive opportunities, and various other limited perquisites and personal benefits. Our executives have also agreed to certain restrictive covenants set forth in the employment agreements, including a covenant not to compete. Pursuant to their employment agreements, Messrs. Knitzer, Schachtel, Thomas, Taggart, and Fisher are entitled to an annual base salary of no less than $530,000; $350,000; $342,000; $318,000; and $240,000, respectively,pro-rated for any partial year. For each calendar year during the employment term, each executive is also eligible to earn an annual bonus award under our Annual Incentive Plan based upon the achievement of performance targets established by our Compensation Committee, with a target bonus equal to no less than 100% of the executive’s base salary(pro-rated for any partial year). The employment agreements of Messrs. Knitzer and Schachtel provide that each such executive is entitled to receive anon-qualified stock option award, a performance-contingent RSU award, and a cash-settled performance unit award within his first year of employment, with the vesting of each such award subject to continued employment through the vesting date and, in the case of the performance-contingent RSU award and the cash-settled performance unit award, the achievement of performance objectives established by our Compensation Committee. Each executive is otherwise eligible to participate in our long-term incentive program at the sole discretion of our Compensation Committee and our Board. Commencing in 2018 (or 2019, in the case of Mr. Schachtel), Messrs. Knitzer, Schachtel, Thomas, Taggart, and Fisher will be eligible to receive an annual base salary, annual cash incentive opportunity, and long-term incentive opportunity totaling in the aggregate at least $3,000,000; $1,225,000; $1,197,000; $954,000; and $720,000, respectively. Each executive’s annual total compensation opportunity is subject to our Compensation Committee’s discretion to adjust base salary, determine allocations between cash and equity compensation opportunities, establish performance and/or multi-year service criteria, and determine if and to the extent any incentive compensation is earned and payable based on the attainment of performance criteria and other terms and | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 49 | | |
conditions established by our Compensation Committee, and further subject to the terms and conditions of the applicable incentive plan and related award agreements (including, if applicable under any such plan or award agreement, multi-year vesting). Long-term incentive awards are subject to the terms of the 2015 Plan and the related award agreements. We also provide our executives with benefits generally available to our other employees, including medical and retirement plans. In addition, we provide our executives with the use of a mobile phone (or the provision of a stipend for a mobile phone), disability insurance policies, (beginning in 2018), and reasonable travel expenses. In the case of Messrs. Knitzer and Schachtel, we pay for reasonable expenses associated with their travel to and from their personal residences to our headquarters in South Carolina. In the case of Mr. Thomas, we provide a car allowance of $1,150 per month. Our executive employment agreements and long-term incentive award agreements also provide for certain severance benefits following an executive’s termination by us without cause, by the executive as a result of good reason, due to the executive’s disability, due to the executive’s death, or following a “double-trigger”change-in-control event. A “double trigger”change-in-control event requires both (1) achange-in-control and (2) an executive’s termination by us without cause or by the executive as a result of good reason within certain timeframes. The terms “cause,” “good reason,” “disability,” and“change-in-control” are defined in the 2011 Plan, the 2015 Plan, and/or each executive’s employment agreement and/or long-term incentive award agreements, as applicable. The severance benefits are described in “Summary of Employment Arrangements with Executive Officers – Potential Payments Upon Termination orChange-in-Control,” below. An executive’s receipt of severance benefits will be subject to the executive’s execution of a release of claims within the time period specified in the employment agreement and the continued compliance with the restrictive covenants described below. Each executive is also subject to various restrictive covenants, and his entitlement to certain benefits is contingent upon his compliance with such covenants. Specifically, each executive is subject to a covenant not to disclose our confidential information during his employment and at all times thereafter, a covenant not to compete during his employment and for a period of one year (or two years, in the case of Mr. Knitzer) following his termination of employment, a covenant not to solicit competitive “business services” through or from “loan sources” (each as defined in the employment agreements) during his employment and for a period of one year (or two years, in the case of Mr. Knitzer) following his termination of employment, a covenant not to solicit or hire our employees during his employment and for a period of one year (or two years, in the case of Mr. Knitzer) following his termination of employment, and anon-disparagement covenant effective during the employment term and at all times thereafter. Each executive’s covenant not to compete is limited to an area within 25 miles of any of our branches or other offices. In addition, each executive must abide by any equity retention policy, compensation recovery policy, stock ownership guidelines, or other similar policies that we maintain. Prior AgreementsRetirement Agreement with Current Executive OfficersChief Financial Officer
On February 12, 2019, Mr. Thomas notified the Company of his intent to retire from the Company following the completion of an orderly transition of duties and responsibilities from Mr. Thomas to a new Chief Financial Officer to be identified by the Company. Mr. Thomas’ retirement will be treated as a voluntary termination of employment pursuant to the terms of Mr. Thomas’ employment agreement (described in detail above). The date of the completion of the Chief Financial Officer transition will be determined in the discretion of the Compensation Committee. The following employment letter agreements of Messrs. Thomas, Taggart, and Fisher were in effect at the beginning of 2017. They were superseded by and of no force or effect following the execution of employment agreements, effective August 2017. Prior Employment Letter Agreement with Mr. Thomas
We entered intoCompensation Committee approved a letter agreement with(the “Retirement Agreement”), dated February 12, 2019, setting forth the terms of Mr. Thomas, dated December 12, 2012 and amended on October 1, 2014.Thomas’ retirement. Pursuant to the letterRetirement Agreement, Mr. Thomas’ employment agreement was amended, among other items, to provide that the compensation terms found in the Retirement Agreement generally supersede those found in his employment agreement. The Retirement Agreement provides that Mr. Thomas was entitledwill continue to serve as the Company’s Executive Vice President and Chief Financial Officer until his termination date, which will follow an orderly transition of duties and responsibilities from Mr. Thomas to a new Chief Financial Officer; however, the Company may modify his title, duties, and/or responsibilities to facilitate the hiring of and transition to a new Chief Financial Officer.
During the transition period, Mr. Thomas will be paid an annualized base salary of $400,000(pro-rated for any partial year), which is subject to increase (but not decrease) by the Company. He will also generally continue to participate in those Company benefit plans and arrangements in which he is currently eligible to participate. Mr. | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 50 | | |
Thomas is eligible to receive apro-rated annual cash incentive bonus for 2019 if and to the extent that the applicable performance goals are met and the 2019 annual cash incentive bonus is deemed earned in accordance with the terms of the Company’s Annual Incentive Plan and as determined by the Compensation Committee. He also will remain eligible to receive an annual base salary, subject to annual review (set at $342,000 in 2017). In addition, Mr. Thomas was eligible to earn an annual bonus awardfor 2018 under ourthe Annual Incentive Plan based uponif and to the achievement of performance targets establishedextent earned, as determined by ourthe Compensation Committee, with a target bonus equal to no less than 100% of his base salary. The letter agreement entitledCommittee. Mr. Thomas to receive certainnon-qualified stock option awards in 2013. On October 1, 2014, the letter agreement was amended in an effort to more effectively link Mr. Thomas’s compensation to the successful achievement of our strategic business objectives. The amendment provided that Mr. Thomas would forego certain rights to additional annual stock option grants provided under the original letter agreement and would instead, consistent with the incentive compensation structure applicable to other executives, in 2014 be granted a combination of stock options, performance-contingent RSUs, and cash-settled performance units with an aggregate target value of 1.5 times his base salary. Commencing in 2015, Mr. Thomas was eligible to participate in our long-term incentive program at the sole discretion of our Compensation Committee and our Board. The letter agreement also provided Mr. Thomas with benefits generally available to our other employees, including medical and retirement plans, in addition to the use of a mobile phone and a car allowance of $1,150 per month. Prior Employment Letter Agreement with Mr. Taggart
We entered into a letter agreement with Mr. Taggart, effective January 5, 2015. Pursuant to the letter agreement, Mr. Taggart was entitled to receive an annual base salary, subject to annual review (set at $318,000 in 2017). In addition, Mr. Taggart was eligible to earn an annual bonus award under our Annual Incentive Plan based upon the achievement of performance targets established by our Compensation Committee, with a target bonus equal to no less than 100% of his base salary. Mr. Taggart’s letter agreement entitled him to receive certain equity compensation opportunities in the form of anon-qualified stock option award, a performance-contingent RSU award, and a cash-settled performance unit award, all of which were awarded in 2015. Commencing in 2016, Mr. Taggart was eligible to participate in our long-term incentive program at the sole discretion of our Compensation Committee and our Board. The letter agreement also provided Mr. Taggart with benefits generally available to our other employees, including medical and retirement plans, in addition to the use of a mobile phone.
Prior Employment Letter Agreement with Mr. Fisher
We entered into a letter agreement with Mr. Fisher, dated December 12, 2012. Pursuant to the letter agreement, Mr. Fisher was entitled to receive an annual base salary, subject to annual review (set at $240,000 in 2017). In addition, Mr. Fisher was eligible to
earn an annual bonus award under our Annual Incentive Plan based upon the achievement of performance targets established by our Compensation Committee, with a target bonus equal to no less than 25% of his base salary. Mr. Fisher was also eligible to participate in our long-term incentive program at the sole discretion of our Compensation Committee and our Board. The letter agreement also provided Mr. Fisher with benefits generally available to our other employees, including medical and retirement plans, in addition to the use of a mobile phone.
Agreements with Former Executive Officer
Prior to the termination of Mr. Anderson’s employment as our President and Chief Operating Officer on May 15, 2017, we were party to a three-year employment agreement with Mr. Anderson, dated September 19, 2014. Immediately prior to the termination of Mr. Anderson’s employment, he was entitled to receive an annual base salary of $345,000, subject to annual review. For each calendar year during the employment term, Mr. Anderson wasis also eligible to earn a completion bonus of $200,000 following the completion of an annualorderly transition of duties and responsibilities to a new Chief Financial Officer. No completion bonus award under our Annual Incentive Plan based uponwill be paid if Mr. Thomas voluntarily terminates his employment prior to the achievement of performance targets establishedcompletion date, as determined by ourthe Compensation Committee, with a targetor if the Company terminates his employment for cause. If the Company terminates Mr. Thomas’ employment without cause, the completion bonus equal to no less than 100%will be considered earned as of his base salary. The employment agreementtermination date. Mr. Thomas’ outstanding long-term incentive awards granted under the 2011 Plan and the 2015 Plan will continue to be governed by the terms of the applicable stock plan and related award agreement(s). Mr. Thomas is also entitled Mr. Andersoneligible to receive certain equity compensation opportunities in the form of anon-qualified stock option award (awarded in 2014), a performance-contingent RSU award (awarded in 2015), and a cash-settled performance unit award (awarded in 2015). Commencing in 2016, Mr. Anderson was eligible to participate in our long-term incentive program at the sole discretion of the Compensation Committee and the Board. Mr. Anderson also receivedseverance benefits generally available to our other employees, including medical and retirement plans, in addition to a car allowance of $1,150 per month and the use of a mobile phone.
Underprovided under his employment agreement to the extent his employment is terminated by the Company without cause, by him for good reason, or due to disability prior to March 31, 2019. Mr. Anderson wasThomas will not be entitled to severance benefits upon a termination for any other reason or for any termination occurring after March 31, 2019.
As a condition to receipt of the $200,000 completion bonus and the 2019 annual cash incentive bonus, Mr. Thomas has agreed to execute a general waiver and release of claims in favor of the Company and its affiliates. Mr. Thomas also remains subject to a covenant not to disclose our confidential information duringthe restrictive covenants described in his employment term and at all times thereafter, a covenant not to compete during his employmentagreement, including covenants concerning confidentiality,non-disparagement, and, for a period of two yearsone year following his termination of employment, a covenant not to solicit competitive consumer finance loans through “loan sources” (as defined in the employment agreement) during his employmentnon-competition and for a period of two years following his termination of employment, a covenant not to solicit or hire our employees during his employment and for a period of two years following his termination of employment, and anon-disparagement covenant effective during the employment term and at all times thereafter. Mr. Anderson’snon-compete was limited to an area within 25 miles of any of our branches or other offices. In connection with the termination of Mr. Anderson’s employment, we entered into a separation agreement with Mr. Anderson, effective June 14, 2017. The separation agreement provides for benefits to, and imposes certain obligations upon, Mr. Anderson in accordance with his employment agreement. Specifically, subject to his execution andnon-revocationnon-solicitation of a release of claimscustomers and his compliance with his employment agreement and separation agreement (including, but not limited to, the restrictive covenants contained therein), Mr. Anderson is entitled to receive the following payments and benefits under the separation agreement: (1) a payment equal to 30 days of his base salary in effect on the date of termination (in lieu of the requirement in his employment agreement that we provide Mr. Anderson with 30 days’ notice of our decision to terminate his employment without cause); (2) payment of an amount equal to 12 months of his base salary in effect on the date of termination, paid in equal installments over a period of 18 months (modified from 12 months in the employment agreement) in accordance with our ordinary payroll practices; (3) payment of apro-rated portion of his annual short-term incentive program target bonus for 2017, but only to the extent such bonus is earned based on performance goals established for 2017 under our Annual Incentive Plan; (4) reimbursement of reasonable attorneys’ fees incurred in connection with the negotiation and preparation of the separation agreement, not to exceed $5,000; (5) reimbursement of the cost of COBRA continuation premiums for continued health insurance coverage for Mr. Anderson for a period of 12 months following the date of termination (or until Mr. Anderson becomes eligible for coverage from a subsequent employer); and (6) executive outplacement services in an aggregate amount not to exceed $10,000 for a period of 6 months following the date of termination, through a provider to be designated by us. Mr. Anderson also reaffirmed his obligations under the restrictive covenants set forth in his employment agreement, with the exception that the duration of his covenant not to compete was reduced from two years to one year.employees.
Potential Payments Upon Termination orChange-in-Control Under their employment agreements and long-term incentive award agreements, our executive officers are entitled to certain severance benefits following termination by us without cause, by the executive as a result of good reason, due to the executive’s disability, due to the executive’s death, and following a “double-trigger”change-in-control. These benefits ensure that our executives are motivated primarily by the needs of our business, rather than circumstances that are outside of the ordinary course of business (such as circumstances that might lead to the termination of an executive’s employment or that might lead to achange-in-control). Severance benefits provide for a level of continued compensation if an executive’s employment is adversely affected in these circumstances, subject to certain conditions. We believe that these benefits enable executives to focus fully on their duties while employed by us, ensure that our executives act in the best interests of our stockholders, even if such actions are otherwise contrary to our executives’ personal interests, and alleviate concerns that may arise in the event of an executive’s separation from service with us. We believe that these severance benefits are in line with current market practices. | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 51 | | |
The rights to and level of benefits are determined by the type of termination event. Our executive employment agreements provide for the following cash and other benefits: | | | Termination Event | | Severance Benefits | By the Company Without Cause or by the Executive for Good Reason | | (1) Payment in Lieu of 30 Days’ Notice. At our election, 30 days’ base salary in lieu of allowing the executive to work through any required30-day termination notice period. (2) Base Salary Continuation.In the case of Mr. Knitzer, an amount equal to two times his salary in effect on the termination date, payable over a period of 24 months following his termination date, and in the case of each other executive, an amount equal to his salary in effect on the termination date, payable over a period of 12 months following his termination date. (3) Average Bonus. In the case of Mr. Knitzer, an amount equal to two times his average bonus determined as of the termination date, payable over a period of 24 months following his termination date, and in the case of each other executive, an amount equal to his average bonus determined as of the termination date, payable over a period of 12 months following his termination date. An executive’s “average bonus” is defined in his employment agreement, generally as the average annual bonus paid for the three fiscal years prior to the year of termination or such lesser number of full fiscal years that the executive has been employed. If employment is terminated before the last day of the executive’s first full fiscal year, the average bonus is calculated as the executive’s target bonus. (4) Annual Incentive Compensation. Thepro-rata portion of any bonus for the year in which termination occurs, to the extent earned, plus, if termination occurs afteryear-end but before the bonus for the preceding year is paid, the bonus for the preceding year. (5) Health Benefits Continuation Coverage. Reimbursement of COBRA premiums for continuation coverage under our group medical plan for 24 months (in the case of Mr. Knitzer) or 12 months (in the case of each other executive) following his termination date, so long as he is not entitled to obtain insurance from a subsequent employer. (6) Outplacement Services. Reasonable outplacement service expenses for 24 months (in the case of Mr. Knitzer) or 12 months (in the case of each other executive) following the termination date, not exceeding $25,000 per year. | “Double-Trigger” Change-in-Control | | For each executive other than Mr. Knitzer, if employment is terminated by us without cause or by the executive as a result of good reason, and such termination occurs within six months before or one year after the effective date of achange-in-control, then the executive is entitled to the benefits described immediately above, plus the additional benefit that the amounts described in items (2) and (3) will be increased by a factor of 100% (for a total of two times salary and average bonus). | Disability | | If employment is terminated due to the executive’s disability, he will be entitled to the same benefits as if employment were terminated by us without cause or by the executive as a result of good reason, except that he is not entitled to 30 days’ notice of termination (or payment in lieu thereof). The disability severance benefits will be reduced by the amount of any disability benefits paid to the executive pursuant to any disability insurance, plan, or policy provided by us to or for the benefit of the executive. If any disability benefits paid to an executive pursuant to any disability insurance, plan, or policy provided by us are not subject to local, state, or federal taxation, then our severance obligations in the event of termination due to the executive’s disability will be reduced by an amount equal to the gross taxable amount that we would have been required to pay in order to yield the net,after-tax benefit that the executive actually received pursuant to such disability insurance, plan, or policy. | Death | | Annual Incentive Compensation. Thepro-rata portion of any bonus for the year in which death occurs, to the extent earned, plus, if death occurs afteryear-end but before the bonus for the preceding year is paid, the bonus for the preceding year (paid to the executive’s designated beneficiary or estate, as applicable). | Voluntary Termination | | Annual Incentive Compensation. If termination occurs afteryear-end but before the bonus for the preceding year is paid, the bonus for the preceding year (the executive is not entitled to any bonus for the year during which voluntary termination occurs). | Cause | | None. |
| | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 52 | | |
In addition to the benefits provided for under our executive employment agreements, our long-term incentive award agreements provide for the following treatment of awards following termination: | | | Termination Event | | Award Treatment | By the Company Without Cause, by the Executive for Good Reason, Due to Disability, or Due to Death | | • Non-Qualified Stock Option Awards: For options awarded in 2013, forfeiturePro-rata accelerated vesting of any unvested shares. For options awarded since 2014, • Restricted Stock Awards:pro-rataPro-rata accelerated vesting of any unvested shares. • Performance-Contingent RSUs: Eligibility to vest in apro-rata portion of the award, subject to actual performance over the full performance period. • Cash-Settled Performance Units: Eligibility to vest in apro-rata portion of the award, subject to actual performance over the full performance period. | “Double-Trigger” Change-in-Control | | • Non-Qualified Stock Option Awards: For options awarded in 2013, fullFull accelerated vesting in the event of a termination of employment by us without cause or by the executive as a result of good reason duringwithin six months before or one year after thesix-month period following effective date of achange-in-control. For options awarded since 2014, full • Restricted Stock Awards: Full accelerated vesting in the event of a termination of employment by us without cause or by the executive as a result of good reason within six months before or one year after the effective date of achange-in-control. • Performance-Contingent RSUs: Full accelerated vesting at target in the event of a termination of employment by us without cause or by the executive as a result of good reason within six months before or one year after the effective date of achange-in-control. • Cash-Settled Performance Units: Full accelerated vesting at target in the event of a termination of employment by us without cause or by the executive as a result of good reason within six months before or one year after the effective date of achange-in-control. | Retirement | | • Non-Qualified Stock Option Awards: For options awarded since 2014, continuedContinued vesting as if the executive remained employed. • Restricted Stock Awards: Unvested shares are forfeited as of the termination date. • Performance-Contingent RSUs: Eligibility to vest in apro-rata portion of the award, subject to actual performance over the full performance period. • Cash-Settled Performance Units: Eligibility to vest in apro-rata portion of the award, subject to actual performance over the full performance period. An executive is eligible for “Retirement” when he (i) is 65 or older at the time of termination, or (ii) is 55 or older at the time of termination and has completed ten (10) years of service to Regional. |
The following table provides information concerning the payments and the value of other benefits that Mr. Anderson has received or will receive as a result of his termination in 2017 and that our other NEOs would have been eligible to receive if their employment had been terminated under the described circumstances. Our obligation to provide the payments and other benefits described in the table are found in each NEO’s employment agreement and in long-term incentive award agreements, and in a separation agreement (in the case of Mr. Anderson), in each case as described above. In calculating the amounts included in the table, for Mr. Anderson, we have used our closing share price of $21.00 on May 15, 2017, the date of his termination. In calculating the amounts in the table for our other NEOs, we have assumed (i) that the termination event and/orchange-in-control occurred on December 31, 2017,2018, (ii) a share price of $26.31$24.05 (our closing share price on December 29, 2017, the last trading day of 2017)31, 2018), and (iii) the following: “Payment in Lieu of 30 Days’ Notice”: We have assumed that we will elect to pay 30 days’ base salary in lieu of allowing the NEO to work through any required30-day termination notice period. “Severance Payment”: The amount represents a combination of the “Base Salary Continuation” and “Average Bonus” payments described above. | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 53 | | |
“Annual Incentive Compensation”: The amount is based upon the level of performance and percentage payout actually achieved, as determined by the Compensation Committee in February 2018.2019. “Long-Term Incentive Award Vesting”: The value associated with acceleratednon-qualified stock option awards has been calculated by multiplying the number of accelerated shares by the amount by which our stock price as of December 31, 20172018 exceeded (if at all) the exercise price of the option. For any performance-contingent long-term incentive award where vesting remains subject to actual performance over a performance period, (1) we have calculated the value (if any) of awards associated with performance periods ending in 20172018 based on actual performance, and (2) we have ascribed no value to awards associated with performance periods ending after 2018 because there is no guarantee that we will meet the threshold performance criteria required for these awards to vest and be paid. | to awards associated with performance periods ending after 2017 because there is no guarantee that we will meet the threshold performance criteria required for these awards to vest and be paid.
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“Other Benefits”: The amount includes reimbursement of COBRA premiums for continuation coverage and the value of outplacement services. We have assumed (1) that the NEO will not become entitled to obtain insurance from a subsequent employer, and (2) that the NEO will receive the maximum value of outplacement services. | | | Termination Event | | Termination Event | Name | | Type of Payment or Benefit | | Termination by the Company Without Cause or by the Executive for Good Reason | | Termination by the Company Without Cause or by the Executive for Good Reason in Connection with a Change in Control | | Termination Due to the Executive’s Disability | | Termination Due to Death | | Voluntary Termination by the Executive(1) | | Type of Payment or Benefit | | Termination by the Company Without Cause or by the Executive for Good Reason ($) | | Termination by the Company Without Cause or by the Executive for Good Reason in Connection with a Change in Control ($) | | Termination Due to Disability ($) | | Termination Due to Death ($) | | Voluntary Termination by the Executive(1) ($) | Peter R. Knitzer | | Payment in Lieu of 30 Days’ Notice | | 43,562 | | 43,562 | | — | | — | | — | | Payment in Lieu of 30 Days’ Notice | | 45,205 | | 45,205 | | �� | | — | | — | | | Severance Payment | | 2,105,160 | | 2,105,160 | | 2,105,160 | | — | | — | | | | Annual Incentive Compensation | | 522,580 | | 522,580 | | 522,580 | | 522,580 | | — | | | | Long-Term Incentive Award Vesting(2) | | 197,588 | | 2,537,152 | | 197,588 | | 197,588 | | — | | | | Other Benefits | | 50,000 | | 50,000 | | 50,000 | | — | | — | | | | Total | | 2,918,890 | | 5,258,454 | | 2,875,328 | | 720,168 | | — | | Jody L. Anderson | | Payment in Lieu of 30 Days’ Notice | | 28,356 | | — | | — | | — | | — | | | | Severance Payment | | 345,000 | | — | | — | | — | | — | | Severance Payment | | 2,170,930 | | 2,170,930 | | 2,170,930 | | — | | — | | | Annual Incentive Compensation | | 125,816 | | — | | — | | — | | — | | Annual Incentive Compensation | | 548,350 | | 548,350 | | 548,350 | | 548,350 | | — | | | Long-Term Incentive Award Vesting | | 109,664 | | — | | — | | — | | — | | Long-Term Incentive Award Vesting(2) | | — | | 3,450,551 | | — | | — | | — | | | Other Benefits | | 12,402 | | — | | — | | — | | — | | Other Benefits | | 50,000 | | 50,000 | | 50,000 | | — | | — | | | Total | | 621,238 | | — | | — | | — | | — | | Total | | 2,814,485 | | 6,265,036 | | 2,769,280 | | 548,350 | | — | John D. Schachtel | | Payment in Lieu of 30 Days’ Notice | | 28,767 | | 28,767 | | — | | — | | — | | Payment in Lieu of 30 Days’ Notice | | 29,589 | | 29,589 | | — | | — | | — | | | Severance Payment | | 700,000 | | 1,400,000 | | 700,000 | | — | | — | | Severance Payment | | 718,920 | | 1,437,840 | | 718,920 | | — | | — | | | Annual Incentive Compensation | | 204,224 | | 204,224 | | 204,224 | | 204,224 | | — | | Annual Incentive Compensation | | 358,920 | | 358,920 | | 358,920 | | 358,920 | | — | | | Long-Term Incentive Award Vesting(2) | | 52,102 | | 173,670 | | 52,102 | | 52,102 | | — | | Long-Term Incentive Award Vesting(2) | | 34,231 | | 564,839 | | 34,231 | | 34,231 | | — | | | Other Benefits | | 44,940 | | 44,940 | | 44,940 | | — | | — | | Other Benefits | | 40,679 | | 40,679 | | 40,679 | | — | | — | | | Total | | 1,030,033 | | 1,851,601 | | 1,001,266 | | 256,326 | | — | | Total | | 1,182,339 | | 2,431,867 | | 1,152,750 | | 393,151 | | — | Donald E. Thomas | | Payment in Lieu of 30 Days’ Notice | | 28,110 | | 28,110 | | — | | — | | — | | Payment in Lieu of 30 Days’ Notice | | 29,178 | | 29,178 | | — | | — | | — | | | Severance Payment | | 544,616 | | 1,089,232 | | 544,616 | | — | | — | | Severance Payment | | 668,805 | | 1,337,610 | | 668,805 | | — | | — | | | Annual Incentive Compensation | | 337,212 | | 337,212 | | 337,212 | | 337,212 | | — | | Annual Incentive Compensation | | 353,935 | | 353,935 | | 353,935 | | 353,935 | | — | | | Long-Term Incentive Award Vesting(2) | | 71,399 | | 1,602,955 | | 71,399 | | 71,399 | | — | | Long-Term Incentive Award Vesting(2) | | 482,343 | | 1,130,849 | | 482,343 | | 482,343 | | — | | | Other Benefits | | 38,915 | | 38,915 | | 38,915 | | — | | — | | Other Benefits | | 37,469 | | 37,469 | | 37,469 | | — | | — | | | Total | | 1,020,252 | | 3,096,424 | | 992,142 | | 408,611 | | — | | Total | | 1,571,730 | | 2,889,041 | | 1,542,552 | | 836,278 | | — | Daniel J. Taggart | | Payment in Lieu of 30 Days’ Notice | | 26,137 | | 26,137 | | — | | — | | — | | Payment in Lieu of 30 Days’ Notice | | 27,123 | | 27,123 | | — | | — | | — | | | Severance Payment | | 550,175 | | 1,100,350 | | 550,175 | | — | | — | | Severance Payment | | 621,578 | | 1,243,156 | | 621,578 | | — | | — | | | Annual Incentive Compensation | | 313,548 | | 313,548 | | 313,548 | | 313,548 | | — | | Annual Incentive Compensation | | 329,010 | | 329,010 | | 329,010 | | 329,010 | | — | | | Long-Term Incentive Award Vesting(2) | | 44,199 | | 875,245 | | 44,199 | | 44,199 | | — | | Long-Term Incentive Award Vesting(2) | | 298,340 | | 700,340 | | 298,340 | | 298,340 | | — | | | Other Benefits | | 44,940 | | 44,940 | | 44,940 | | — | | — | | Other Benefits | | 43,453 | | 43,453 | | 43,453 | | — | | — | | | Total | | 978,999 | | 2,360,220 | | 952,862 | | 357,747 | | — | | Total | | 1,319,504 | | 2,343,082 | | 1,292,381 | | 627,350 | | — | Brian J. Fisher | | Payment in Lieu of 30 Days’ Notice | | 19,726 | | 19,726 | | — | | — | | — | | Payment in Lieu of 30 Days’ Notice | | 24,658 | | 24,658 | | — | | — | | — | | | Severance Payment | | 322,219 | | 644,438 | | 322,219 | | — | | — | | Severance Payment | | 513,255 | | 1,026,510 | | 513,255 | | — | | — | | | Annual Incentive Compensation | | 236,640 | | 236,640 | | 236,640 | | 236,640 | | — | | Annual Incentive Compensation | | 299,100 | | 299,100 | | 299,100 | | 299,100 | | — | | | Long-Term Incentive Award Vesting(2) | | 38,001 | | 759,552 | | 38,001 | | 38,001 | | — | | Long-Term Incentive Award Vesting(2) | | 276,648 | | 604,189 | | 276,648 | | 276,648 | | — | | | Other Benefits | | 31,822 | | 31,822 | | 31,822 | | — | | — | | Other Benefits | | 33,634 | | 33,634 | | 33,634 | | — | | — | | | Total | | 648,408 | | 1,692,178 | | 628,682 | | 274,641 | | — | | Total | | 1,147,295 | | 1,988,091 | | 1,122,637 | | 575,748 | | — |
(1) | A voluntary termination that is treated as a “retirement” may result inpro-rata or continued vesting of certain long-term incentive awards. None of our NEOs were eligible for “retirement” as of December 31, 2017.2018. |
(2) | See “Executive Compensation Tables – Outstanding Equity Awards at FiscalYear-End” for a summary of equity-based long-term incentive awards outstanding as of December 31, 2017.2018. As of December 31, 2017,2018, in addition to equity-based long-term incentive awards, Messrs. Knitzer, Schachtel, Thomas, Taggart, and Fisher held one or more |
| | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 54 | | |
| cash-settled performance unit awards having an aggregate target value of $950,000, $497,700, $308,667,$1,683,333; $275,000; $514,500; $318,667; and $267,499,$275,833, respectively. |
The amounts shown in the table do not include payments and benefits to the extent they are provided generally to all salaried employees upon termination of employment and do not discriminate in scope, terms, or operation in favor of our NEOs. Because the amounts in the table are calculated subject to the assumptions provided and on the basis of the occurrence of a termination as of a particular date and under a particular set of circumstances, the actual amount to be paid to each of our NEOs (other than Mr. Anderson) upon a termination or change in control may vary significantly from the amounts included in the table. Factors that could affect these amounts include the timing during the year of the termination event and the type of termination event that occurs. | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 55 | | |
SUMMARY OF COMPANY INCENTIVE PLANS The discussion that follows describes certain material terms of our principal long-term incentive plans and our principal cash incentive plan. Long-Term Incentive Plans 2015 Long-Term Incentive Plan The 2015 Plan became effective April 22, 2015, and was amended and restated effective April 27, 2017. The purposes of the 2015 Plan are (i) to encourage and enable selected employees, directors, and consultants to acquire or increase their holdings of our common stock and other equity-based interests and/or to provide other incentive awards in order to promote a closer identification of their interests with our interests and those of our stockholders, and (ii) to provide us with flexibility to motivate, attract, and retain the services of participants upon whose judgment, interest, and special effort the successful conduct of our operation largely depends. Awards granted under the 2015 Plan may be in the form of incentive ornon-qualified stock options, SARs (including related or freestanding SARs), RSAs, RSU awards, performance share awards, performance unit awards, phantom stock awards, other stock-based awards, and/or dividend equivalent awards. Awards may be granted under the 2015 Plan until April 21, 2025 or the plan’s earlier termination by the Board. The 2015 Plan is administered by the Compensation Committee, subject to Board oversight. The maximum aggregate number of shares of common stock that we may issue pursuant to awards granted under the 2015 Plan may not exceed the sum of (i) 1,550,000 shares, plus (ii) any shares (A) remaining available for grant as of the effective date of the 2015 Plan under any prior plan and/or (B) subject to an award granted under a prior plan, which award is forfeited, canceled, terminated, expires, or lapses for any reason without the issuance of shares or pursuant to which such shares are forfeited. In addition, shares subject to certain awards will again be available for issuance (or otherwise not counted against the maximum number of available shares) under the 2015 Plan, including unissued or forfeited shares subject to awards that are canceled, terminate, expire, are forfeited, or lapse for any reason; awards settled in cash; dividends (including dividends paid in shares) or dividend equivalents paid in cash in connection with outstanding awards; and shares subject to an award other than an option or SAR that are not issued for any reason (including failure to achieve maximum performance criteria). Further, the following will not reduce the maximum number of shares available under the 2015 Plan: (i) shares issued under the 2015 Plan through the settlement, assumption, or substitution of outstanding awards granted by another entity or obligations to grant future awards in connection with a merger or similar transaction that involves our acquisition of another entity, and (ii) available shares under a shareholder approved plan of an acquired company (as adjusted to reflect the transaction) that are used for awards under the 2015 Plan, in each case, subject to NYSE listing requirements. The maximum aggregate number of shares of common stock that may be issued under the 2015 Plan pursuant to the grant of incentive options may not exceed 1,550,000 shares. Further, under the 2015 Plan, in any12-month period, (i) no participant may be granted options and SARs that are not related to an option for more than 450,000 shares of common stock (or the equivalent value thereof based on the fair market value per share of the common stock on the date of grant of an award); (ii) no participant may be granted awards other than options or SARs that are settled in shares of common stock for more than 450,000 shares of common stock; and (iii) the maximum amount of awards that are settled in cash that can be granted to any one participant is $2,500,000. Notwithstanding the foregoing, the maximum number of shares of common stock subject to awards granted during any12-month period to anon-employee director, taken together with any cash fees paid during such12-month period to suchnon-employee director in respect of Board service, may not exceed $600,000 in total value (calculating the value of any such awards based on the fair market value per share of common stock on the grant date of such award). The number of shares reserved for issuance under the 2015 Plan, the participant award limitations, and the terms of awards may be adjusted in the event of an adjustment in our capital structure (due to a merger, recapitalization, stock split, stock dividend, or similar event). 2011 Stock Incentive Plan The 2011 Plan provides for the issuance of a maximum of 950,000 shares of common stock pursuant to awards granted under the plan. Awards may include incentive ornon-qualified stock options, SARs (including related or freestanding SARs), other stock-based awards (including shares of common stock, restricted shares, RSUs, and awards that are valued in whole or in part by reference to, or are otherwise based on, the fair market | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 56 | | |
value of our common stock), and/or performance-based awards to our and our subsidiaries’ key employees, directors, or other service providers. The number of shares reserved for issuance under the plan and the terms of awards may be adjusted upon certain events affecting our capitalization. The 2011 Plan is administered by the Compensation Committee and was replaced by the 2015 Plan. Awards may no longer be granted under the 2011 Plan, and any shares that remained available for grant have been rolled over to the 2015 Plan. However, awards that remain outstanding under the 2011 Plan will continue in accordance with their respective terms. 2007 Management Incentive Plan
The 2007 Plan provides for the issuance of a maximum of 1,037,412 shares of common stock pursuant to awards granted under the plan. Awards may include incentive ornon-qualified stock options granted to our and our subsidiaries’ key employees, executive officers,non-employee directors, consultants, or other independent advisors. The number of shares reserved for issuance under the plan and the terms of awards may be adjusted upon certain events affecting our capitalization. The 2007 Plan is administered by the Compensation Committee and was replaced by the 2015 Plan. Awards may no longer be granted under the 2007 Plan, and any shares that remained available for grant have been rolled over to the 2015 Plan. The last remaining options outstanding under the 2007 Plan were exercised in January 2017.
Annual Incentive Plan The Annual Incentive Plan is administered by the Compensation Committee and provides for the payment of incentive bonuses based on the attainment of performance objectives in the form of cash or, at the discretion of the Compensation Committee, in awards of shares under the 2015 Plan. The purpose of the Annual Incentive Plan is to enable us to attract, retain, motivate, and reward selected officers and other employees by providing them with the opportunity to earn annual incentive compensation awards based on the attainment of certain performance objectives. The Compensation Committee will establish the performance periods over which performance objectives will be measured. A performance period may be for a fiscal year or a shorter period, as determined by the Compensation Committee, and performance periods may overlap. For a given performance period, the Compensation Committee will establish (i) the performance objective or objectives that must be achieved for a participant to be eligible to receive a bonus for such performance period, and (ii) the target incentive bonus for each participant. The Compensation Committee may adjust awards as appropriate for partial achievement of goals or other factors, and may interpret and make necessary and appropriate adjustments to performance goals and the manner in which goals are evaluated, although generally no such adjustment may be made with respect to an award granted to a covered employee if the award would not comply with Code Section 162(m) except in the event of a change of control or as otherwise permitted under Code Section 162(m).evaluated.The Compensation Committee has absolute discretion to reduce or eliminate the amount of an award granted to a participant, including an award otherwise earned and payable under the Annual Incentive Plan, and to establish rules or procedures that have the effect of limiting the amount payable to each participant to an amount that is less than the maximum amount otherwise authorized as that participant’s target incentive bonus. No participant may receive a bonus under the Annual Incentive Plan, with respect to any fiscal year, in excess of $2,500,000. | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 57 | | |
STOCKHOLDER PROPOSALS We are seeking stockholder action on the following fourthree proposals, which are described in greater detail below: | 1. | The election of the eight nominees named in this Proxy Statement to serve as members of the Board until the next annual meeting of stockholders or until their successors are elected and qualified; |
| 2. | The ratification of the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018;2019; and |
| 3. | The approval, on an advisory basis, of our executive compensation; and |
compensation. | 4. | The approval, on an advisory basis, of the frequency of future advisory votes to approve executive compensation. |
Proposal No. 1: Election of Directors Our Bylaws currently provide that the number of directors of the Company shall be fixed from time to time by resolution adopted by the Board. There are presently eight directors. The Nominating Committee evaluates the size and composition of the Board on at least an annual basis. In connection therewith, the Nominating Committee has nominated and recommends for election as directors the following eight nominees: Jonathan D. Brown, Roel C. Campos, Maria Contreras-Sweet, Michael R. Dunn, Steven J. Freiberg, Peter R. Knitzer, Alvaro G. de Molina, and Carlos Palomares. Each nominee presently serves as a director. Directors shall be elected to serve until the next annual meeting of stockholders or until their successors are elected and qualified or until their earlier resignation, removal, or death. A candidate for election as a director is nominated to stand for election based on his or her professional experience, recognized achievements in his or her respective fields, an ability to contribute to some aspect of our business, and the willingness to make the commitment of time and effort required of a director. A description of the background, business experience, skills, qualifications, attributes, and certain other information with respect to each of the nominees for election to the Board can be found above in the “Board of Directors and Corporate Governance Matters” section of this Proxy Statement. Each of the above-listed nominees has been identified as possessing an appropriate diversity of background and experience, good judgment, deep knowledge of our industry, strength of character, and an independent mind, as well as a reputation for integrity and high personal and professional ethics. Each nominee also brings a strong and unique background and set of skills to the Board, giving the Board, as a whole, competence and experience in a wide variety of areas. In selecting this slate of nominees for 2018,2019, the Nominating Committee specifically considered the background and business experience of each of the nominees, along with the familiarity of the nominees with our business and prospects, which has been developed as a result of their service on our Board. The Nominating Committee believes that such familiarity will be helpful in addressing the opportunities and challenges that we face in the current business environment. Each of the eight nominees has consented to being named in this Proxy Statement and to serve as a director, if elected. In the event that any nominee withdraws, or for any reason is unable to serve as a director, the proxies will be voted for such other person as may be designated by the Nominating Committee as a substitute nominee, but in no event will proxies be voted for more than eight nominees. The Nominating Committee has no reason to believe that any nominee will not continue to be a candidate or will not serve if elected. The Board unanimously recommends a vote “FOR” the election of each of the nominees listed above. Proposal No. 2: Ratification of Appointment of Independent Registered Public Accounting Firm RSM US LLP has served as our independent registered public accounting firm since 2007. The Audit Committee has selected RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018,2019, and the Audit Committee and the Board recommend that the stockholders ratify the appointment of RSM US LLP as our independent registered public accounting firm for fiscal 2018.2019. A representative of RSM US LLP plans to be present at the Annual Meeting, will have the opportunity to make a statement, and will be available to respond to appropriate questions. Although ratification is not required, the Board is submitting the appointment of RSM US LLP to the stockholders for ratification as a matter of good corporate governance. In the event that the stockholders fail to ratify the appointment, the Audit Committee will consider whether to appoint another independent registered public accounting firm. | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 58 | | |
The following table sets forth the aggregate fees billed to us by our independent registered public accounting firm, RSM US LLP, during the fiscal years ended December 31, 20172018 and 2016.2017. | | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | | Year Ended December 31, 2018 | | Year Ended December 31, 2017 | | Audit Fees | | $ | 702,990 | | | $ | 457,416 | | | $ | 856,843 | | | $ | 702,990 | | Audit-Related Fees | | | — | | | 82,850 | | | | 8,400 | | | | — | | Tax Fees | | | 202,101 | | | 147,920 | | | | 170,114 | | | | 202,101 | | All Other Fees | | | — | | | | — | | | | �� | | | | — | | | | | | | | | | | | | | | Total | | $ | 905,091 | | | $ | 688,186 | | | $ | 1,035,357 | | | $ | 905,091 | | | | | | | | | | | | | | |
In the above table, in accordance with applicable SEC rules: “Audit Fees” are fees billed for professional services rendered by the independent registered public accounting firm for the audit of our annual consolidated financial statements, review of consolidated financial statements included in our Forms10-Q, and services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements. “Audit-Related Fees” are fees billed for assurance and related services performed by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements that are not reported above under “Audit Fees.” There were no such fees incurred in 2017. In 2016,2018, these fees included fees billedwere for services performed by the independent registered public accounting firm for accounting consultation services. There were no such fees incurred in relation to our loan system conversion and the review and assessment of our internal control environment.2017. “Tax Fees” are fees billed for professional services rendered by the independent registered public accounting firm for tax compliance, tax advice, and tax planning. In 2018, these fees were for services performed for the filing of our 2017 tax returns and estimated payments for 2018. In 2017, these fees were for services performed for the filing of our 2016 tax returns and estimated payments for 2017. In 2016, these fees were for services performed for the filing of our 2015 tax returns and estimated payments for 2016. “All Other Fees” represent fees billed for ancillary professional services that are not reported above under “Audit Fees”Fees,” “Audit Related Fees,” or “Audit Related“Tax Fees.” There were no such fees incurred in 20172018 or 2016.2017. It is the policy of the Audit Committee topre-approve all audit and permittednon-audit services proposed to be performed by our independent registered public accounting firm. The Audit Committee reviewed andpre-approved all of the services performed by RSM US LLP. The process for suchpre-approval is typically as follows: Audit Committeepre-approval is sought at one of the Audit Committee’s regularly scheduled meetings following the presentation of information at such meeting detailing the particular services proposed to be performed. The authority topre-approvenon-audit services may be delegated by the Audit Committee to the Chair of the Audit Committee, who shall present any decision topre-approve an activity to the full Audit Committee at the first regular meeting following such decision. None of the services described above were approved by the Audit Committee pursuant to the exception provided by Rule2-01(c)(7)(i)(C) under RegulationS-X. The Audit Committee has reviewed thenon-audit services provided by RSM US LLP and has determined that the provision of such services is compatible with maintaining RSM US LLP’s independence. The Board unanimously recommends a vote “FOR” the ratification of the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018.2019. | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 59 | | |
Proposal No. 3: Advisory Vote to Approve Executive Compensation In accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, our stockholders have the opportunity to cast an advisory vote to approve the compensation of our named executive officers as disclosed pursuant to the SEC’s compensation disclosure rules, including the Compensation Discussion and Analysis, the compensation tables, and the narrative disclosures that accompany the compensation tables in this Proxy Statement (a “Say-on-Pay Vote”). Taking into consideration the most recent voting results from our 2018 annual stockholders’ meeting concerning the frequency of theSay-on-Pay Vote, we determined that we will hold an annual advisory vote to approve the compensation of our named executive officers until the next required advisory vote on the frequency of such votes. The Compensation Committee oversees the development of a compensation program designed to attract, retain, and motivate executives who enable us to achieve our strategic and financial goals. The Compensation Discussion and Analysis, the compensation tables, and the accompanying narrative disclosure illustrate the trends in compensation and the application of our compensation philosophies and practices for the years presented. We encourage stockholders to read the Compensation Discussion and Analysis, beginning on page 19 of this Proxy Statement, which describes the details of our executive compensation program and the decisions made by the Compensation Committee in 2017.2018. The Compensation Committee believes that our executive compensation program achieves an appropriate balance between fixed compensation and variable incentive compensation, pays for performance, and promotes an alignment between the interests of our named executive officers and our stockholders. Accordingly, we are asking our stockholders to vote at the Annual Meeting to vote “FOR” the non-binding advisory resolution approving the compensation of our named executive officers, including as described in the Compensation Discussion and Analysis, compensation tables, and the accompanying narrative discussion. Because your vote is advisory, it will not be binding upon us, the Compensation Committee, or the Board. However, the Compensation Committee and the Board value the opinions of our stockholders and will take the outcome of the vote into account when considering future executive compensation arrangements. The Board unanimously recommends a vote “FOR” the advisory vote to approve the compensation of our named executive officers. Proposal No. 4: Advisory Vote on Frequency of Future Advisory Votes to Approve Executive Compensation
In accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, our stockholders have the opportunity to cast an advisory vote with respect to the frequency of theSay-on-Pay Vote. Specifically, stockholders may vote to have aSay-on-Pay Vote every year, every two years, or every three years (commonly known as the “Say-on-Pay Frequency Vote”). Stockholders may also abstain from making a choice. After such initial vote is held, Section 14A requires all public companies to submit theSay-on-Pay Frequency Vote to their stockholders no less often than every six years.
As discussed above, the Board believes that our executive compensation program is designed to secure and retain the services of high quality executives and to provide compensation to our executives that is aligned with our performance. The Board believes that our compensation philosophies and practices advance both the short-term and long-term interests of our company and our stockholders. The Board believes that theSay-on-Pay Frequency Vote should be conducted every year because it provides stockholders with the opportunity to provide regular direct input to the Board and its Compensation Committee regarding our executive compensation program.
TheSay-on-Pay Frequency Vote is an advisory vote and will not be binding on us, the Compensation Committee, or the Board. The Board may determine that it is in the best interests of our stockholders and the Company to hold aSay-on-Pay Vote more or less frequently than may be indicated by this advisory vote of our stockholders. Nonetheless, the Compensation Committee and the Board will take into account the outcome of this advisory vote when considering how frequently to hold aSay-on-Pay Vote in future years.
While the Board recommends that aSay-on-Pay Vote be held every year, you are not voting to approve or disapprove of the Board’s recommendation. Rather, you will be able to specify one of four choices for theSay-on-Pay Frequency Vote, as follows: (i) one year, (ii) two years, (iii) three years, or (iv) abstain.
The Board unanimously recommends a vote for “ONE YEAR” on the advisory vote on the frequency of future advisory votes to approve executive compensation.
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OTHER INFORMATION Audit Committee Report The Audit Committee oversees our financial reporting process on behalf of the Board of Directors. The Audit Committee operates under a written charter, a copy of which is available on our Investor Relations website,www.regionalmanagement.com, under the “Corporate Governance” tab.. This report reviews the actions taken by the Audit Committee with regard to our financial reporting process during the fiscal year ended December 31, 2017,2018, and particularly with regard to the audited consolidated financial statements as of December 31, 20172018 and 20162017 and for the years ended December 31, 2018, 2017, 2016, and 2015.2016. The Audit Committee is composed solely of independent directors under existing New York Stock ExchangeNYSE listing standards and Securities and Exchange CommissionSEC requirements. None of the committee members is or has been an officer or employee of the Company or any of our subsidiaries or has engaged in any business transaction or has any business or family relationship with the Company or any of our subsidiaries or affiliates. In addition, the Board of Directors has determined that Messrs. Steven J. Freiberg, Alvaro G. de Molina, and Carlos Palomares are “audit committee financial experts,” as defined by Securities and Exchange CommissionSEC rules. Our management has the primary responsibility for our financial statements and reporting process, including the systems of internal controls. The independent auditors are responsible for performing an independent audit of our consolidated financial statements in accordance with auditing standards generally accepted in the United States and issuing a report thereon. The Audit Committee’s responsibility is to monitor and oversee these processes and to select annually the accountants to serve as our independent auditors for the coming year. The Audit Committee has implemented procedures to ensure that during the course of each fiscal year it devotes the attention that it deems necessary or appropriate to fulfill its oversight responsibilities under the Audit Committee’s charter. To carry out its responsibilities, the Audit Committee met sixfive times during the fiscal year ended December 31, 2017.2018. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited consolidated financial statements in our Annual Report on Form10-K for the fiscal year ended December 31, 2017,2018, including a discussion of the quality, rather than just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The Audit Committee also discussed our audited consolidated financial statements in our Annual Report on Form10-K for the fiscal year ended December 31, 2017,2018, with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited consolidated financial statements with accounting principles generally accepted in the United States, their judgments as to the quality, rather than just the acceptability, of our accounting principles, and such other matters as are required to be discussed with the Audit Committee under the applicable Public Company Accounting Oversight Board (the “PCAOB”) Standards and SEC Rule2-07 of RegulationS-X. In addition, the Audit Committee discussed with the auditors their independence from management and the Company, including the matters in the written disclosures and the letter required by the PCAOB regarding the independent auditors’ communications with the Audit Committee regarding independence. The Audit Committee also considered whether the provision of services during the fiscal year ended December 31, 2017,2018, by the auditors that were unrelated to their audit of the consolidated financial statements referred to above and to their reviews of our interim consolidated financial statements during the fiscal year is compatible with maintaining their independence. Additionally, the Audit Committee discussed with the independent auditors the overall scope and plan for their audit. The Audit Committee met with the independent auditors, with and without management present, to discuss the results of their examination, their evaluation of our internal controls, and the overall quality of our financial reporting. In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in our Annual Report onForm 10-K for the fiscal year ended December 31, 2017,2018, for filing with the SEC. This report of the Audit Committee has been prepared by members of the Audit Committee. Members of the Audit Committee: Carlos Palomares (Chair) Steven J. Freiberg Alvaro G. de Molina | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 61 | | |
Security Ownership of Certain Beneficial Owners and Management The following table sets forth certain information regarding the beneficial ownership of our common stock as of the close of trading on March 16, 2018,21, 2019, of: (i) each person known by us to beneficially own more than five percent of our common stock; (ii) each of our directors; (iii) each of our named executive officers; and (iv) all of our directors and executive officers, as a group. | | | | | | | Shares Beneficially Owned(1) | Name | | Number | | Percentage | Basswood Capital Management, L.L.C.(2) | | 1,512,794 | | 12.9% | Wellington Management Group LLP and affiliates(3) | | 1,139,225 | | 9.7% | Second Curve Capital, LLC(4) | | 1,078,034 | | 9.2% | Dimensional Fund Advisors LP(5) | | 869,773 | | 7.4% | LSV Asset Management(6) | | 637,299 | | 5.4% | The Vanguard Group, Inc.(7) | | 627,662 | | 5.3% | BlackRock, Inc.(8) | | 618,346 | | 5.3% | Jonathan D. Brown(9) | | 799 | | * | Roel C. Campos(10) | | 59,924 | | * | Maria Contreras-Sweet | | 888 | | * | Michael R. Dunn(11) | | 236,003 | | 2.0% | Steven J. Freiberg(12) | | 156,104 | | 1.3% | Alvaro G. de Molina(13) | | 56,602 | | * | Carlos Palomares(14) | | 57,277 | | * | Peter R. Knitzer(15) | | 99,324 | | * | John D. Schachtel(16) | | 14,880 | | * | Donald E. Thomas(17) | | 229,102 | | 1.9% | Daniel J. Taggart(18) | | 29,324 | | * | Brian J. Fisher(19) | | 52,068 | | * | Jody L. Anderson | | — | | — | All directors and executive officers, as a group (12 persons) | | 992,295 | | 8.0% |
| | | | | | | | | | | Shares Beneficially Owned(1) | Name | | Number | | Percentage | Basswood Capital Management, L.L.C.(2) | | | | 1,529,713 | | 12.9% | Wellington Management Group LLP and affiliates(3) | | | | 1,167,332 | | 9.8% | Dimensional Fund Advisors LP(4) | | | | 991,497 | | 8.3% | BlackRock, Inc.(5) | | | | 945,960 | | 8.0% | Gregory L. Summe(6) | | | | 616,761 | | 5.2% | Jonathan D. Brown(7) | | | | 3,407 | | * | Roel C. Campos(8) | | | | 63,293 | | * | Maria Contreras-Sweet | | | | 3,750 | | * | Michael R. Dunn(9) | | | | 261,003 | | 2.2% | Steven J. Freiberg(10) | | | | 159,473 | | 1.3% | Alvaro G. de Molina(11) | | | | 60,297 | | * | Carlos Palomares(12) | | | | 60,646 | | * | Peter R. Knitzer(13) | | | | 183,331 | | 1.5% | John D. Schachtel(14) | | | | 34,019 | | * | Donald E. Thomas(15) | | | | 252,679 | | 2.1% | Daniel J. Taggart(16) | | | | 47,478 | | * | Brian J. Fisher(17) | | | | 66,652 | | * | All directors and executive officers, as a group (12 persons) | | 1,196,028 | | 9.5% |
* | Amount represents less than 1.0% |
(1) | Applicable percentage of ownership is based upon 11,746,48611,881,658 shares of our common stock outstanding on March 16, 2018.21, 2019. Beneficial ownership is determined in accordance with SEC rules and includes voting and investment power with respect to shares shown as beneficially owned. Shares of common stock subject to options currently exercisable or exercisable within 60 days are deemed outstanding for computing the shares and percentage ownership of the person holding such options, but are not deemed outstanding for computing the percentage ownership of any other person or entity. Except as otherwise indicated, the persons or entities listed in the table have sole voting and investment power with respect to all shares shown as beneficially owned by them. The address for all directors and officers listed in the table is c/o Regional Management Corp., 979 Batesville Road, Suite B, Greer, South Carolina 29651. |
(2) | The information reported is based on a Schedule 13D/A filed with the SEC on January 30, 2018 and a Form 4 filed with the SEC on February 6, 2018,January 3, 2019, reporting (i) shared power of Basswood Capital Management, L.L.C. (“Basswood”) to vote or direct the vote and to dispose or direct the disposition of 1,512,7941,529,713 shares; (ii) shared power of Basswood Opportunity Partners, L.L.C. (“BPBOP”) to vote or direct the vote and to dispose of or direct the disposition of 407,549236,899 shares; (iii) shared power of Basswood Opportunity Fund, Inc. (“BOF”) to vote or direct the vote and to dispose of or direct the disposition of 30,123 shares; (iv) shared power of Basswood Financial Fund, LP (“BFF”) to vote or direct the vote and to dispose of or direct the disposition of 124,93091,076 shares; (iv)(v) shared power of Basswood Financial Fund, Inc. (“BFF, Inc.”) to vote or direct the vote and to dispose of or direct the disposition of 78,54887,399 shares; (v)(vi) shared power of Basswood Financial Long Only Fund, LP (“BLOF”) to vote or direct the vote and to dispose of or direct the disposition of 25,984 shares; (vi) shared power of Basswood Enhanced Long Short GP, LLC (“BELSGP”) to vote or direct the vote and to dispose of or direct the disposition of 690,18024,548 shares; (vii) shared power of Basswood Enhanced Long Short Fund, LPL.P. (“BELS”) to vote or direct the vote and to dispose of or direct the disposition of 690,180567,680 shares; (viii) shared power of Basswood, Opportunity Partners, LP (“BOP”) to vote or direct the vote and to dispose of or direct the disposition of 256,635 shares; (ix) shared power of Basswood Opportunity Fund, Inc. (“BFF, BOF,” and, collectively with BP, BFF, BLOF, BFF, Inc., BLOF, BELSGP, BELS, and BOP (collectively, the “Funds and Managed Accounts”) to vote or direct the vote and to dispose of or direct the disposition of 27,525488,581 shares; (x)(ix) shared power of Matthew Lindenbaum to vote or direct the vote and to dispose of or direct the disposition of 1,512,7941,529,713 shares; and (xi)(x) shared power of Bennett Lindenbaum to vote or direct the vote and to dispose of or direct the disposition of 1,512,7941,529,713 shares. Matthew Lindenbaum and Bennett Lindenbaum are the Managing Members of Basswood and may be deemed to have a pecuniary interest in the shares held directly |
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| or indirectly by the Funds and Managed Accounts. The information also includes 7993,407 shares held by Mr. Brown, a senior analystpartner at Basswood, who serves on the Board pursuant to the Cooperation Agreement described in detail below in the section entitled “Other Information – Certain Relationships and Related Person Transactions.” As a result, Basswood is a“director-by-deputization” solely for the purposes of |
| Section 16 of the Exchange Act. Pursuant to Rule16a-1 of the Exchange Act, Basswood may be deemed to be a beneficial owner of the shares of common stock issued to Mr. Brown. The business address of Basswood is 645 Madison Avenue, 10th Floor, New York, NY 10022. |
(3) | The information reported is based on two ScheduleSchedules 13G/As,A, each filed with the SEC on February 8, 2018,12, 2019, reporting: (i) shared power of Wellington Management Group LLP (“WMG”) to vote or direct the vote of 825,861 shares and shared power of WMG to dispose or direct the disposition of 1,139,2251,167,332 shares; (ii) shared power of Wellington Group Holdings LLP (“WGH”) to vote or direct the vote of 825,861 shares and shared power of WGH to dispose or direct the disposition of 1,139,2251,167,332 shares; (iii) shared power of Wellington Investment Advisors Holdings LLP (“WIAH”) to vote or direct the vote of 825,861 shares and shared power of WIAH to dispose or direct the disposition of 1,139,2251,167,332 shares; (iv) shared power of Wellington Management Company LLP (“WMC”) to vote or direct the vote of 804,225 shares and shared power of WMC to dispose or direct the disposition of 1,042,8941,141,378 shares; and (v) shared power of Wellington Trust Company, NA (“WTC”) to vote or direct the vote and to dispose or direct the disposition of 709,2711,048,544 shares. The business address of WMG, WGH, WIAH, WMC, and WTC is 280 Congress Street, Boston, MA 02210. |
(4) | The information reported is based on a Schedule 13G/A filed with the SEC on February 5, 2018, reporting shared power of Second Curve Capital, LLC (“Second Curve”) and Thomas K. Brown, its Managing Member, to vote or direct the vote and to dispose or direct the disposition of 1,078,034 shares. The business address of Second Curve and Mr. Brown is 350 5th Avenue, Suite 4730, New York, New York 10018. |
(5) | The information reported is based on a Schedule 13G/A filed with the SEC on February 9, 2018,8, 2019, reporting the sole power of Dimensional Fund Advisors LP (“Dimensional”) to vote or direct the vote of 830,585947,030 shares and the sole power of Dimensional to dispose or direct the disposition of 869,773991,497 shares. The business address of Dimensional is Building One, 6300 Bee Cave Road, Austin, TX 78746. |
(6)(5) | The information reported is based on a Schedule 13G filed with the SEC on February 13, 2018, reporting the sole power of LSV Asset Management (“LSV”) to vote or direct the vote of 324,424 shares and the sole power of LSV to dispose or direct the disposition of 637,299 shares. The business address of LSV is 155 N. Wacker Drive, Suite 4600, Chicago, IL 60606. |
(7) | The information reported is based on a Schedule 13G filed with the SEC on February 9, 2018, reporting sole power of The Vanguard Group, Inc. (“Vanguard”) to vote or direct the vote of 11,072 shares, the sole power of Vanguard to dispose or direct the disposition of 616,590 shares, and the shared power of Vanguard to dispose or direct the disposition of 11,072 shares. The business address of Vanguard is 100 Vanguard Blvd., Malvern, PA 19355. |
(8) | The information reported is based on a Schedule 13G/A filed with the SEC on January 23, 2018,February 6, 2019, reporting the sole power of BlackRock, Inc. (“BlackRock”) to vote or direct the vote of 609,390854,991 shares and the sole power of BlackRock to dispose or direct the disposition of 618,346945,960 shares. The business address of BlackRock is 55 East 52nd Street, New York, NY 10055. |
(9)(6) | The information reported is based on a Schedule 13G/A filed with the SEC on February 11, 2019, reporting the shared power of Gregory L. Summe to vote or direct the vote and to dispose or direct the disposition of 616,761 shares. This number includes shares held by members of Mr. Summe’s family where he shares voting and investment control. Mr. Summe is the sole member of Glen Capital Partners LLC and Glen Capital Partners GP LLC, which is the general partner of Glen Capital Partners Focus Fund, L.P. These entities each report shared power to vote or direct the vote or dispose or direct the disposition of 552,400 shares. The business address of Mr. Summe is 75 Arlington St., Suite 500, Boston, MA 02116. |
(7) | Mr. Brown is a senior analystpartner at Basswood, serving on the Board pursuant to the Cooperation Agreement described in detail below in the section entitled “Other Information – Certain Relationships and Related Person Transactions.” As a result, Basswood is a“director-by-deputization” solely for the purposes of Section 16 of the Exchange Act. Pursuant to Rule16a-1 of the Exchange Act, Basswood may be deemed to be a beneficial owner of the shares of common stock issued to Mr. Brown. |
(10)(8) | The amount stated includes 28,670 shares subject to options either currently exercisable or exercisable within 60 days of March 16, 2018,21, 2019, over which Mr. Campos will not have voting or investment power until the options are exercised. The option shares described in this footnote are considered outstanding for the purpose of computing the percentage of outstanding stock owned by Mr. Campos and by directors and executive officers as a group, but not for the purpose of computing the percentage ownership of any other person. |
(11)(9) | The amount stated includes 126,474148,866 shares subject to options either currently exercisable or exercisable within 60 days of March 16, 2018,21, 2019, over which Mr. Dunn will not have voting or investment power until the options are exercised. The option shares described in this footnote are considered outstanding for the purpose of computing the percentage of outstanding stock owned by Mr. Dunn and by directors and executive officers as a group, but not for the purpose of computing the percentage ownership of any other person. |
(12)(10) | Mr. Freiberg holds 83,30986,678 shares directly. Additional shares stated are owned by (i) Neena Freiberg (Mr. Freiberg’s wife) (30,000 shares), and (ii) the Neena Freiberg Irrevocable Trust, of which Mr. Freiberg is trustee (24,854 shares). The amount stated also includes 17,941 shares subject to options either currently exercisable or exercisable within 60 days of March 16, 2018,21, 2019, over which Mr. Freiberg will not have voting or investment power until the options are exercised. The option shares described in this footnote are considered outstanding for the purpose of computing the percentage of outstanding stock owned by Mr. Freiberg and by |
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| directors and executive officers as a group, but not for the purpose of computing the percentage ownership of any other person. |
(13)(11) | The amount stated includes 30,166 shares subject to options either currently exercisable or exercisable within 60 days of March 16, 2018,21, 2019, over which Mr. de Molina will not have voting or investment power until the options are exercised. The option shares described in this footnote are considered outstanding for the purpose of computing the percentage of outstanding stock owned by Mr. de Molina and by directors and executive officers as a group, but not for the purpose of computing the percentage ownership of any other person. |
(14)(12) | The amount stated includes 28,670 shares subject to options either currently exercisable or exercisable within 60 days of March 16, 2018,21, 2019, over which Mr. Palomares will not have voting or investment power until the options are exercised. The option shares described in this footnote are considered outstanding for the purpose of computing the percentage of outstanding stock owned by Mr. Palomares and by directors and executive officers as a group, but not for the purpose of computing the percentage ownership of any other person. |
(15)(13) | The amount stated includes 81,714146,898 shares subject to options either currently exercisable or exercisable within 60 days of March 16, 2018,21, 2019, over which Mr. Knitzer will not have voting or investment power until the options are exercised. The option shares described in this footnote are considered outstanding for the purpose of computing the percentage of outstanding stock owned by Mr. Knitzer and by directors and executive officers as a group, but not for the purpose of computing the percentage ownership of any other person. |
(16)(14) | The amount stated includes 6,88020,641 shares subject to options either currently exercisable or exercisable within 60 days of March 16, 2018,21, 2019, over which Mr. Schachtel will not have voting or investment power until the options are exercised. The option shares described in this footnote are considered outstanding for the purpose of computing the percentage of outstanding stock owned by Mr. Schachtel and by directors and executive officers as a group, but not for the purpose of computing the percentage ownership of any other person. |
(17)(15) | Mr. Thomas holds 3,843The amount stated includes 11,843 shares directly. An additional 8,000 shares stated are owned by The Donald Eugene Thomas and Jeanine Leigh Thomas Joint Revocable Living Trust. Mr. Thomas and his wife, Jeanine Leigh Thomas, are the trustees of The Donald Eugene Thomas and Jeanine Leigh Thomas Joint Revocable Living Trust. The amount stated also includes 217,259240,836 shares subject to options either currently exercisable or exercisable within 60 days of March 16, 2018,21, 2019, over which Mr. Thomas will not have voting or investment power until the options are exercised. The option shares described in this footnote are considered outstanding for the purpose of computing the percentage of outstanding stock owned by Mr. Thomas and by directors and executive officers as a group, but not for the purpose of computing the percentage ownership of any other person. |
(18)(16) | The amount stated includes 25,97337,293 shares subject to options either currently exercisable or exercisable within 60 days of March 16, 2018,21, 2019, over which Mr. Taggart will not have voting or investment power until the options are exercised. The option shares described in this footnote are considered outstanding for the purpose of computing the percentage of outstanding stock owned by Mr. Taggart and by directors and executive officers as a group, but not for the purpose of computing the percentage ownership of any other person. |
(19)(17) | The amount stated includes 45,51155,300 shares subject to options either currently exercisable or exercisable within 60 days of March 16, 2018,21, 2019, over which Mr. Fisher will not have voting or investment power until the options are exercised. The option shares described in this footnote are considered outstanding for the purpose of computing the percentage of outstanding stock owned by Mr. Fisher and by directors and executive officers as a group, but not for the purpose of computing the percentage ownership of any other person. |
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Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires our directors and executive officers and persons who own more than ten percent of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and our other equity securities. Our directors, executive officers, and greater than ten percent stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended December 31, 2017,2018, all Section 16(a) filing requirements applicable to directors, executive officers, and greater than ten percent beneficial owners were timely complied with by such persons. Certain Relationships and Related Person Transactions Cooperation Agreement On January 26, 2018, we entered into a Cooperation Agreement (the “Cooperation Agreement”) with Basswood, pursuant to which we appointed Jonathan D. Brown to the Board, effective January 26, 2018. We also agreed that, subject to the conditions set forth in the Cooperation Agreement, the Board will nominate Mr. Brown for election to the Board at the Annual Meeting. Pursuant to the Cooperation Agreement, Mr. Brown is required to, at all times while serving as a member of the Board, comply with all policies, procedures, processes, codes, rules, standards, and guidelines applicable tonon-employee Board members. In addition, the Cooperation Agreement provides that Mr. Brown must offer to resign from the Board if (i) Basswood and its affiliates, collectively, no longer beneficially own an aggregate “net long position” of at least 874,705 shares of our common stock (subject to adjustment for stock splits, reverse stock splits, stock dividends, and similar adjustments), or (ii) Basswood fails to comply with or breaches any of the terms of the Cooperation Agreement in any material respect and, if capable of being cured, such material breach or failure has not been cured within 15 days after receipt by Basswood of written notice from us specifying such material breach or failure, provided that we are not in material breach of the Cooperation Agreement at such time (each, a “Resignation Trigger”).time. The Cooperation Agreement also provides that, if requested by Basswood, we are obligated to appoint Mr. Brown to any existing or newly created committee of the Board that may be designated to oversee or review strategic alternatives (including an extraordinary transaction). In the Cooperation Agreement, in addition to certain confidentiality andnon-disparagement provisions, Basswood has agreed to various customary standstill provisions for the duration of the Standstill Period (as defined below), which provide, among other things, that Basswood and its affiliates will not (i) acquire beneficial ownership of 19.9% or more of the outstanding shares of our common stock; (ii) participate in a proxy solicitation with respect to the voting of any shares of our common stock; (iii) submit a proposal for or offer of any extraordinary transaction or propose a change in the structure, size, or composition of the Board or executive officers of the Company; or (iv) subject to certain exceptions for open market and underwritten transactions, sell shares of our common stock to a third party or group that to Basswood’s knowledge would result in such third party or group owning 5% or more of the outstanding shares of our common stock. Basswood has also agreed that, during the Standstill Period, it shall cause the shares of our common stock beneficially owned by it and its affiliates to be voted (i) in favor of each director nominated by the Board for election, and (ii) in accordance with the Board’s recommendations on all other matters; provided that Basswood and its affiliates may vote their shares of our common stock in their sole discretion with respect to (a) a proposal to authorize or approve an extraordinary transaction, (b) matters related to the implementation of takeover defenses, (c) new or amended incentive compensation plans submitted for stockholder approval, or (d) any other proposal if either Institutional Shareholder Services Inc. or Glass Lewis & Co., LLC do not recommend voting in accordance with the Board’s recommendation with respect to such proposal (other than with respect to the election or removal of directors) at any annual or special meeting of stockholders. Pursuant to the Cooperation Agreement, the “Standstill Period” iswas initially defined to mean the period commencing on January 26, 2018 and ending on the earliest of (i) 12:01 a.m. (New York time) on the date that is 20 days prior to the nomination deadline for the 2019 Annual Meeting, (ii) if we fail to comply with or breach any of the terms of the Cooperation Agreement in any material respect and, if capable of being cured, such material breach or failure has not been cured within 15 days after receipt by us of written notice from Basswood specifying such material breach or failure, provided that Basswood is not in material breach of the Cooperation Agreement at such time, (iii) the consummation of an extraordinary transaction following which consummation the director designated by Basswood no longer serves on the Board, and (iv) a reorganization of the Company under any federal or state law relating to bankruptcy or insolvency. However, as permitted by the terms of the Cooperation Agreement, we | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 65 | | |
provided timely written notice to Basswood that we would nominate a director designated by Basswood for election to the Board at the 2019 Annual Meeting, which extended the Standstill Period until the date that is 20 days prior to the nomination deadline for the 2020 Annual Meeting. If we provide written notice to Basswood that we will nominate a director designated by Basswood for election to the Board at the 20192020 Annual Meeting or for any annual meeting of stockholders of the Company subsequent thereto (each, an “Applicable Meeting”) at least 20 days prior to the nomination deadline for such Applicable Meeting and Basswood has agreed in advance to such nomination, then the Standstill Period will be automatically extended further until the date that is 20 days prior to the nomination deadline for the annual stockholders meeting subsequent to such Applicable Meeting. The Cooperation Agreement terminates upon the expiration of the Standstill Period (subject to any extensions as provided in the Cooperation Agreement), provided that the confidentiality provisions of the Cooperation Agreement will survive for a period of eighteen18 months following the date upon which no director designated by Basswood serves as a director of the Company. Shareholders Agreement
In March 2007, we entered into a shareholders agreement, which was amended and restated on March 27, 2012, by that certain Amended and Restated Shareholders Agreement (the “Shareholders Agreement”), by and among the Company, Parallel 2005 Equity Fund, LP (“Parallel”), Palladium Equity Partners III, L.P. (“Palladium”), and certain other stockholders party thereto. In prior years, the stockholders party to the Shareholders Agreement were related persons due to their greater than five percent equity ownership in the Company, in the aggregate, and their participation in the Shareholders Agreement, which qualified them as a “group” under Section 13(d) of the Exchange Act.
In July 2017, former director Richard A. Godley provided notice to the Board of his decision to enter retirement. In connection with Mr. Godley’s retirement, we entered into an Amended and Restated Shareholders Agreement Termination (the “Termination Agreement”) with the remaining stockholders party to the Shareholders Agreement. Mr. Godley had been designated to the Board by certain stockholders in accordance with the Shareholders Agreement. The Termination Agreement terminated the Shareholders Agreement and any remaining obligations or liabilities of the parties thereto, and as a result, the stockholders party to the Shareholders Agreement no longer qualify as related persons under Section 13(d) of the Exchange Act.
Statement of Policy Regarding Transactions with Related Persons Our Board has adopted a written statement of policy regarding transactions with related persons, which we refer to as our “related person policy.” Our related person policy requires that a “related person” (as defined in paragraph (a) of Item 404 of RegulationS-K) must promptly disclose to our general counsel, or other person designated by our Board, any “related person transaction” (defined as any transaction that is anticipated and would be reportable by us under Item 404(a) of RegulationS-K, which includes transactions in which we were or are to be a participant and the amount involved exceeds $120,000 and in which any related person had or will have a direct or indirect material interest) and all material facts with respect thereto. The general counsel, or such other person, will then promptly communicate that information to our Board. No related person transaction will be executed without the approval or ratification of our Board or a committee of the Board. It is our policy that directors interested in a related person transaction will recuse themselves from any vote of a related person transaction in which they have an interest and provide all material information he or she has concerning the related person transaction to the Board. Our policy does not specify the standards to be applied by directors in determining whether or not to approve or ratify a related person transaction, and we accordingly anticipate that these determinations will be made in accordance with principles of Delaware law generally applicable to directors of a Delaware corporation. In determining whether to approve or ratify a related person transaction, the Board may consider such facts and circumstances as it deems appropriate, including (i)(1) the benefits to us; (2) the availability of other sources for comparable products or services; (3) the terms of the proposed related person transaction; and (4) the terms available to unrelated third parties or to employees generally in an arms-length negotiation. Indemnification of Directors, Officers, and Certain Current and Former Stockholders Our Bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by the Delaware General Corporation Law (the “DGCL”). In addition, our Amended and Restated Certificate of Incorporation provides that our directors will not be liable for monetary damages for breach of fiduciary duty to the fullest extent permitted by the DGCL. Further, in connection with the September 2013 and December 2013 secondary public offerings described above, we agreed to indemnify Palladium, Parallel, and certain other selling stockholders for certain losses, claims, damages, liabilities, and expenses arising out of such secondary public offerings. On May 30, 2014, a securities class action lawsuit was filed in the United States District Court for the Southern District of New York (the “District Court”) against us and certainThere is no pending litigation or proceeding naming any of our currentdirectors or officers to which indemnification is being sought, and former directors, executive officers, and stockholders (collectively, the “Defendants”). The complaint alleged violationswe are not aware of the Securities Act (the “1933 Act Claims”) and sought unspecified compensatory damages and other relief on behalf of a purported class of purchasers of our common stockany pending or threatened litigation that may result in the September 2013 and December 2013 secondary public offerings. On August 25, 2014, Waterford Township Police & Fire Retirement System and City of Roseville Employees’ Retirement System were appointed as lead plaintiffs (collectively, the “Plaintiffs”). An amended complaint was filed on November 24, 2014. In addition to the 1933 Act Claims, the amended complaint also added claims for violations of the Exchange Act (the “1934 Act Claims”) seeking unspecified compensatory damages on behalf of a purported class of purchasers of our common stock between May 2, 2013 and October 30, 2014, inclusive.
On January 26, 2015, the Defendants filed a motion to dismiss the amended complaint in its entirety. In response, the Plaintiffs sought and were granted leave to file an amended complaint. On February 27, 2015, the Plaintiffs filed a second amended complaint. Like the prior amended complaint, the second amended complaint asserts 1933 Act Claims and 1934 Act Claims and seeks unspecified compensatory damages. The Defendants filed a motion to dismiss the second amended complaint on April 28, 2015, and on March 30, 2016, the District Court granted the Defendants’ motion to dismiss the second amended complaint in its entirety. On May 23, 2016, the Plaintiffs moved for leave to file a third amended complaint. On January 27, 2017, the District Court denied the Plaintiffs’ motion for leave to file a third amended complaint and directed entry of final judgment in favor of the Defendants. On January 30, 2017, the District Court entered final judgment in favor of the Defendants.
On March 1, 2017, the Plaintiffs filed a notice of appeal to the United States Court of Appeals for the Second Circuit (the “Appellate Court”). After hearing oral arguments on November 17, 2017, the Appellate Court issued a summary order on January 26, 2018 affirming the District Court’s order denying Plaintiffs leave to file a third amended complaint. The deadline for Plaintiffs to file a petition for a writ of certiorari with the United States Supreme Court is April 26, 2018.
Pursuant to our indemnification obligations, we are bearing, and expect to continue to bear, the costs associated with defending the following current and former directors, executive officers, and stockholders against the claims asserted in the securities class action lawsuit: Palladium, Parallel, Thomas F. Fortin, C. Glynn Quattlebaum, Donald E. Thomas, David Perez, Roel C. Campos, Richard T. Dell’Aquila, Richard A. Godley, Jared L. Johnson, Alvaro G. de Molina, Carlos Palomares, and Erik Scott. As of the date of this Proxy Statement, our defense counsel also represents such current and former directors, executive officers, and stockholders, and as a result, we believe thatby any incremental cost that we have incurred in providing a defense to them has been immaterial.director, officer, or other party.
Proposals by Stockholders Under certain conditions, stockholders may request that we include a proposal at a forthcoming meeting of our stockholders in our proxy materials for such meeting. Under SEC Rule14a-8, any stockholdersstockholder desiring to present such a proposal to be acted upon at the 20192020 Annual Meeting and included in the proxy materials for such meeting must ensure that we receive the proposal at our principal executive office in Greer, South Carolina by November 23, 2018,28, 2019, in order for the proposal to be eligible for inclusion in our proxy statement and proxy card relating to such meeting. If a stockholder desires to propose any business at an annual meeting of stockholders, even if the proposal or proposed director candidate is not to be included in our proxy statement, our Bylaws provide that the stockholder | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 66 | | |
must deliver or mail timely advance written notice of such business to our principal executive office. Under our Bylaws, to be timely, a stockholder’s notice generally must be delivered to our Corporate Secretary at our principal executive offices not later than the 90th day before the first anniversary of the date of the preceding year’s annual meeting and nonot earlier than the 120th day prior to such date.anniversary. However, in the event that the date of the annual meeting is advanced by more than twenty (20)20 days or delayed by more than seventy (70)70 days from such anniversary date, notice by the stockholder to be timely must be delivered not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. Each item of business must be made in accordance with, and must include the information required by, our Bylaws, our Corporate Governance Guidelines, and any other applicable law, rule, or regulation. Assuming that the date of the 20192020 Annual Meeting is not advanced or delayed in the manner described above, the required notice for the 20192020 Annual Meeting would need to be provided to us not earlier than December 26, 201827, 2019 and not later than January 25, 2019.26, 2020. If, following the filing and delivery of these proxy materials, the date of the 20192020 Annual Meeting is advanced or delayed by more than twenty (20)20 calendar days from theone-year anniversary date of the 20182019 Annual Meeting, we will, in a timely manner, provide notice to our stockholders of the new date of the 20192020 Annual Meeting and the new dates by which stockholder proposals submitted both pursuant to and outside of SEC Rule14a-8 must be received by us. Such notice will be included in the earliest possible Quarterly Report on Form10-Q under Part II, Item 5. Householding of Annual Meeting Materials Some banks, brokers, and other nominee record holders may be participating in the practice of “householding” annual reports and proxy statements. This means that only one copy of our Annual Report on Form10-K and Proxy Statement, as applicable, may have been sent to multiple stockholders in the same household. We will promptly deliver a separate copy of our Annual Report on Form10-K and Proxy Statement, as applicable, to any stockholder upon request submitted in writing to us at the following address: Regional Management Corp., 979 Batesville Road, Suite B, Greer, South Carolina, 29651, Attention: Corporate Secretary, or by calling(864) 448-7000. Any stockholder who wants to receive separate copies of our Annual Report on Form10-K and Proxy Statement in the future, or who is currently receiving multiple copies and would like to receive only one copy for his or her household, should contact his or her bank, broker, or other nominee record holder, or contact us at the above address and telephone number. Other Business The Board is not aware of any matters, other than those specified above, to come before the Annual Meeting for action by the stockholders. However, if any matter requiring a vote of the stockholders should be duly presented for a vote at the Annual Meeting, then the persons named in the form of proxy intend to vote such proxy in accordance with their best judgment. | | | | | | | | | Regional Management Corp. | Proxy Statement for 2019 Annual Meeting | | | 67 | | |
REGIONAL MANAGEMENT CORP. 979 Batesville Road, Suite B Greer, SC 29651 VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the website, and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards, and annual reports electronically viae-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. | | | TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | | KEEP THIS PORTION FOR YOUR RECORDS |
| | | | | | | THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | | DETACH AND RETURN THIS PORTION ONLY |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For All | | Withhold All | | For All Except | | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | The Board of Directors recommends you vote FOR the election of the nominees for director named below. | | | | | | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | 1. Election of Directors | | | | | | | | | | | | | | | | | | | | | | | | | | | Nominees | | | | | | | | | | | | | | | | | | | | | | | | | | | 01 Jonathan D.Brown 02 Roel C. Campos 03 Maria Contreras-Sweet 04 Michael R. Dunn 05 Steven J. Freiberg 06 Peter R. Knitzer 07 Alvaro G. de Molina 08 Carlos Palomares | | | | | | | | | | | | | The Board of Directors recommends you vote FOR proposals 2 and 3: | | For | | Against | | Abstain | | | | | | For | | Against | | Abstain | | | | | | | 2. Ratification of the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018.2019. | | ☐ | | ☐ | | ☐ | | | | | | | 3. Advisory vote to approve executive compensation. | | | | | | | | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | NOTE:THE UNDERSIGNED HEREBY RATIFIES AND CONFIRMS ALL THAT SAID AGENTS, OR ANY OF THEM OR THEIR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF, AND ACKNOWLEDGES RECEIPT OF THE NOTICE OF THE ANNUAL MEETING, THE ACCOMPANYING PROXY STATEMENT, AND THE ANNUAL REPORT ON FORM10-K TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017.2018. | | | | | | | | | | | | | 3. Advisory vote to approve executive compensation.
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vote 1 YEAR on the following proposal:
| | | | | | 1 year | | 2 years | | 3 years | | Abstain | | | | | | | | | | | | | | 4. Advisory vote on the frequency of future advisory votes to approve executive compensation.
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | | | | | | | | | | |
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice of Annual Meeting of Stockholders, 20172018 Annual Report on Form10-K, and Proxy Statement are available atwww.proxyvote.com. www.proxyvote.com. | | | | | | |
| | | | REGIONAL MANAGEMENT CORP. Annual Meeting of Stockholders April 25, 20182019 at 8:00 AM EDT This proxy is solicited by the Board of Directors. The undersigned stockholder of Regional Management Corp. hereby appoints Peter R. Knitzer and Brian J. Fisher as Proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side, all of the shares of common stock, $0.10 par value per share, of the Company held of record by the undersigned on February 26, 2018,March 1, 2019, at the Annual Meeting of the Stockholders of the Company to be held on April 25, 2018,2019, or any adjournment thereof. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER SPECIFIED HEREIN BY THE UNDERSIGNED STOCKHOLDER. THIS PROXY, IF DULY EXECUTED AND RETURNED, WILL BE VOTED “FOR” THE NOMINEES FOR DIRECTOR AND “FOR” PROPOSALS 2 AND 3, AND “1 YEAR” FOR PROPOSAL 4, IF NO INSTRUCTION TO THE CONTRARY IS INDICATED. THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OF STOCKHOLDERS IN ACCORDANCE WITH THEIR JUDGMENT. Continued and to be signed on reverse side | | |
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