UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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Home BancShares, Inc.
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HOME BANCSHARES, INC. 719 Harkrider Street, Suite 100 Conway, Arkansas 72032 (501)339-2929 Internet Site:www.homebancshares.com
To Be Held on April
The Annual Meeting of Shareholders of Home BancShares, Inc. (the “Company”) will be held on April
Only shareholders of record on February The
Conway, Arkansas
YOUR VOTE IS IMPORTANT PLEASE COMPLETE, DATE AND SIGN YOUR PROXY AND RETURN IT WITHOUT DELAY
Your vote is important. You can save the Company the expense of a second mailing by voting promptly. Shareholders of record can vote by telephone, on the Internet, by mail or by attending the Annual Meeting and voting by ballot as described below. (Please note: if you are a beneficial owner of shares held in the name of a bank, broker or other holder, please refer to your proxy card or the information forwarded by your bank, broker or other holder of record to see which options are available to you.) The Internet and telephone voting procedures are designed to authenticate shareholders by use of a control number and to allow you to confirm that your instructions have been properly recorded.If you vote by telephone or on the Internet, you do not need to return your proxy card. Telephone and Internet voting facilities for shareholders of record will be available 24 hours a day and will close at 1:00 a.m. Central time on April
All shares that have been properly voted and not revoked will be voted at the Annual Meeting. If you sign and return your proxy card but do not give voting instructions, the shares represented by that proxy will be voted as recommended by the Board of Directors.
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on April 15, 2021: The Notice and Proxy Statement and the Annual Report on Form 10-K are available at www.envisionreports.com/HOMB.
HOME BANCSHARES, INC. 719 Harkrider Street, Suite 100 Conway, Arkansas 72032 (501)339-2929 Internet Site:www.homebancshares.com This summary highlights selected information contained elsewhere in this Proxy Statement. This summary does not contain all of the information you should consider, and you should read the entire Proxy Statement carefully before voting. For more complete information regarding our 2020 performance, please review our 2020 Annual Report on Form 10-K, which accompanies this document. The Annual Meeting
Voting Matters and Board Recommendations
Shareholder Engagement and Enhancements to our Compensation and Governance Programs At our 2020 Annual Meeting, our proposal to approve, on an advisory (non-binding) basis, the compensation of our named executive officers, commonly known as “say-on-pay,” received a “For” vote of 45.9% of the shares voted. Although this vote is advisory and non-binding, the Compensation Committee of our Board of Directors and our entire Board of Directors took these results very seriously. The Company’s previous say-on-pay votes have generally shown strong support for the Company’s executive compensation programs, with our 2019 say-on-pay vote, for example, receiving the support of 92.4% of our shareholders. In response to the 2020 say-on-pay vote, we reached out to our shareholders and listened to their concerns regarding our executive compensation and governance practices. After hearing from shareholders and proxy advisors and reviewing recent corporate governance developments, the Company has implemented a number of enhancements to its executive compensation and governance programs. In addition, we have enhanced our
disclosure regarding the transition of our Chairman back into the Chief Executive Officer role in late 2019 and the factors considered by the Compensation Committee in establishing our executive compensation programs. The table below highlights key outcomes of these processes, all of which are discussed in more detail below. 2020 Shareholder Engagement Expanded individual shareholder outreach During 2020 we reached out to the holders of over 45 million of our outstanding common shares to hear their concerns and learn how we could better address them. Senior level management and Board involvement Individual discussions with shareholders included participation from Chairman John Allison, Compensation Committee Chair Mike Beebe and Director of Investor Relations Donna Townsell. Ms. Townsell also spoke with representatives of Institutional Shareholder Services (ISS) regarding the Company’s 2019 compensation practices and disclosures. New “fireside chats” with investors Because in-person conferences were cancelled due to COVID-19, we implemented a series of “fireside chat” conference calls for shareholders, analysts and other members of the investment community focused on the Company’s business with specific industry sectors in the wake of the pandemic. We believe we were the first in our industry to implement these types of calls in which we discussed certain loan types and customer status during the pandemic. We knew our investors would want to hear how these asset classes were performing during the pandemic, and we received positive feedback for continuing to “tell it like it is” with respect to our business during these chats. Virtual investor conferences While we regretted not being able to shake hands and talk face-to-face with our investors for most of 2020, our senior management team continued to engage with our shareholders and investors through numerous virtual conferences and one-on-one discussions to keep the investment community in tune with how things were going at HOMB during these unprecedented times.
Continued strong customer outreach Staying in touch with our customers and communities has always been a high priority for our Company. Our management and regional leadership teams regularly talk with customers in our markets to keep our thumb on the pulse of business for the customers and communities we serve. These one-on-one customer interactions became even more important during the uncertainty of 2020. Our customer outreach during 2020 included everything from general conversations to check on business to more in-depth discussions regarding PPP loans, future business plans and other uncertainties. We believe these interactions are essential to our business and will remain a priority as we move forward into 2021 and beyond. Future shareholder outreach Interaction with our shareholders and investors is important to our Board and our executive leadership, and we intend to continue regular and active shareholder outreach efforts in the future.
Home BancShares Performance Highlights Home BancShares, Inc. is one of the top-performing bank holding companies in the country, according to Forbes, having been listed on the Forbes “Best Banks in America” list for seven consecutive years, 2015-2021, including being ranked by Forbes as the #1 Best Bank in America in 2018 and 2019. Our bank subsidiary, Centennial Bank, provides a broad range of commercial and retail banking plus related financial services to businesses, real estate developers, investors, individuals and municipalities. Centennial Bank has branch locations in Arkansas, Florida, South Alabama and New York City. Through our community banking philosophy, we are dedicated to consistently exceeding the expectations of our customers, shareholders and bankers while enriching the communities we serve.
COVID-19 Response Like many other businesses, the COVID-19 pandemic had a significant impact on our business and operations during 2020. As the pandemic took hold across the United States and around the globe in March 2020, Home BancShares quickly went to work to transition the way we work, learn and do business to the “new normal.” Our highest priority during these uncertain times has been and remains the health and safety of our employees, our customers and their families. However, with challenges come opportunities. By reimagining how we interact with our customers, our staff and our shareholders, and staying focused on taking care of our customers, we managed to close out 2020 with record setting results. We implemented and continue to hold daily management calls among our senior management to discuss our response to COVID-19 and other operational and strategic decisions. We closed bank lobbies and transitioned to drive-thru only and deployed more than 140 additional ID scanners to perform new account openings via the drive-thru so customers could still get the services they need from the safety of their car. Our Customer Care Center fielded 1.3 million calls, 260,000 more than the previous year. Departments were spread out to adhere to social distancing guidelines and personal protection equipment in the form of gloves, masks and hand sanitizer were routinely delivered to all of our banking facilities. Voice meetings as opposed to in-person meetings rose 237%. Over 100 webcams were deployed to personnel. Webex participation rose 276% during the year. We deployed over 100 Chromebooks and laptops to equip employees to work remotely. We increased our number of users for electronic document signature by over 900%, which greatly facilitated our successful participation in the CARES Act Paycheck Protection Program (PPP) for our business customers. Since beginning our participation in the PPP, we have closed over 8,500 PPP loans totaling approximately $850.0 million, likely helping to save thousands of jobs. Over 400 of our employees have been involved in the PPP lending process. We worked with our customers to initiate consumer and commercial loan deferrals to help our customers deal with the challenges of the pandemic; we temporarily suspended residential property foreclosure sales, evictions, and involuntary automobile repossessions, and we offered fee waivers, payment deferrals, and other expanded assistance for automobile, mortgage, small business and personal lending customers.
As of December 31, 2020, our loan deferrals decreased to $330.7 million on 56 loans, with approximately 82% of the initially deferred loan balances returning to paying interest monthly, the majority of which were modified to 18- to 24-month interest only payments with a return to full principal and interest payments at the end of the modification term. We recorded $102.1 million provision for credit losses on loans, $842,000 provision for credit losses on investment securities and a $17.0 million reserve for unfunded commitments as a result of the on-going uncertainties related to the COVID-19 pandemic during 2020. Economic Value Added by HOMB in 2020 At Home BancShares and Centennial Bank, we believe we have a responsibility to give back to the communities we serve and do our part to help strengthen local economies, while providing value to our shareholders. Below are some of the ways in which we added value to our communities, our customers, our employees and our shareholders during 2020.
Executive Compensation Highlights Our compensation policies and practices are designed to align the interests of our employees with the interests of our shareholders. We seek to attract, retain, incent, and reward individuals who contribute to our long-term success. We strive to link pay to Company performance for all executive officers, including our Chairman and CEO.
Environmental, Social and Governance Highlights As a customer- and community-focused bank, Home BancShares and Centennial Bank are committed to delivering on each of our core values while balancing the interests of our shareholders, our communities and, of course, our customers. Community involvement is a core focus for our Company. In the communities we serve, we support our schools, neighborhoods, cities and towns by volunteering for local boards and committees, grilling thousands of hamburgers and hot dogs, donating millions of dollars and investing in financial education opportunities that will affect those we serve. In our Company, we strive to build a talent-focused culture, one which is inclusive and provides opportunities for employees from all backgrounds to grow internally and succeed. Throughout our daily operations we seek ways to reduce our impact on the environment by eliminating or reducing the use of paper statements and documents where possible and utilizing energy-saving features in many of our offices and bank branches. We are also committed to maintaining high standards of corporate governance. Strong corporate governance practices help us achieve our performance goals and maintain the trust and confidence of our shareholders, employees and other constituents. As we move forward, we will continue to focus on our core values and incorporate innovative methods to reach our environmental, social responsibility and governance goals and continue to earn the trust of our shareholders. Highlights of our commitments in these areas are provided below. Please visit https://www.my100bank.com/community-involvement/ to learn more about how our values come to life in our Corporate Social Responsibility Report.
Environmental
Corporate Social Responsibility
Corporate Governance
* Persons of color
The questions and answers below contain summary information and may not contain all of the information that is important to you. To better understand the nominees being solicited for directors and the proposals that are submitted for a vote, you should carefully read this entire document and other documents to which we refer. What is the Purpose of this Proxy Statement? This Proxy Statement and the accompanying proxy card are being mailed in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Home BancShares, Inc. (the “Company”) for use at the Annual Meeting of Shareholders to be held on April The proxies being solicited by this Proxy Statement are being solicited by the Company. The expense of soliciting proxies, including the cost of preparing, assembling and mailing the material submitted with this Proxy Statement, will be paid by the Company. The Company will also reimburse brokerage firms, banks, trustees, nominees and other persons for the expense of forwarding proxy material to beneficial owners of shares held by them of record. Solicitations of proxies may be made personally or by telephone, electronic communication or facsimile, by directors, officers and regular employees, who will not receive any additional compensation in respect of such solicitations.
When and Where Is the Annual Meeting?
What Matters Will Be Voted Upon at the Annual Meeting? At our Annual Meeting, shareholders will be asked to: consider and vote on a proposal to elect the nominees listed in this proxy statement as directors for a term of one year; consider and vote on a proposal to approve, on an advisory(non-binding) basis, the Company’s compensation of its named executive officers;
consider and vote on a proposal to ratify the appointment of BKD, LLP as the Company’s independent registered public accounting firm for the next fiscal year; and transact such other business as may properly come before the meeting or any adjournments thereof. Who Is Entitled to Vote? Only shareholders of record at the close of business on the record date, February Who Can Attend the Meeting?
To protect the health and safety of those attending the Annual Meeting in person, only shareholders as of the record date, or their duly appointed proxies, may attend the The Company asks that any shareholders who plan to attend the meeting please contact our Director of Investor Relations, Donna Townsell, at (501) 328-4625 at least 24 hours prior to the meeting to register your attendance. Attendees will be required to wear protective face coverings and adhere to social distancing guidelines at all times and may be subject to health screening procedures, including a temperature check, upon entering the building. Seating may be limited to comply with applicable directives and guidelines from the Arkansas Department of Health and the Centers for Disease Control and Prevention and will be on a first-come, first-served basis. The use of cameras, videotaping equipment and recording devices will not be permitted at the Meeting. Attendees may not bring large bags, briefcases or packages into the Meeting. Please note that if you hold your shares in “street name” (that is, through a broker or other nominee), you will need to bring a copy of a brokerage statement reflecting your stock ownership as of the record date and check in at the registration desk at the Meeting.
What Constitutes a Quorum? The presence at the Meeting, in person or by proxy, of the holders of a majority of the shares of common stock outstanding on the record date will constitute a quorum, permitting the Company to conduct its business. As of the record date,
Can a Shareholder Nominate a Director? The Nominating and Corporate Governance Committee (“Nominating Committee”) of the Board of Directors will consider a candidate properly and timely recommended for directorship by a shareholder or group of shareholders of the Company. The recommendation must be submitted by one or more shareholders that have beneficially owned, individually or as a group, 2% or more of the outstanding common stock for at least one year as of the date the recommendation is submitted. Shareholder recommendations must be submitted to the Secretary of the Company in writing via certified U.S. mail not less than 120 days prior to the first anniversary of the date of the Proxy Statement relating to the Company’s previous Annual Meeting. Shareholder recommendations for the Annual Meeting of Shareholders in Home BancShares, Inc. Attn: Corporate Secretary P.O. Box 966 Conway, Arkansas 72033 DIRECTOR CANDIDATE RECOMMENDATION Generally, candidates for a director position should possess: relevant business and financial expertise and experience, including an understanding of fundamental financial statements; the highest character and integrity and a reputation for working constructively with others; sufficient time to devote to meetings and consultation on Board matters; and freedom from conflicts of interest that would interfere with their performance as a director. The full text of our “Policy Regarding Director Recommendations by Stockholders” and “Nominating and Corporate Governance Committee Directorship Guidelines and Selection Policy” are published on our website atwww.homebancshares.com and can be found under the caption “Investor Relations”/“ A shareholder intending to nominate a director at the Annual Meeting but not intending the nomination to be included in the Company’s proxy materials for the Annual Meeting must comply with the procedural and informational requirements described in Article II, Section 9 of the Company’s Bylaws, a copy of which may be obtained upon written request to the Secretary of the Company. How Can I Communicate Directly with the Board? Shareholder communications to the Board of Directors, any committee of the Board of Directors, or any individual director must be sent in writing via certified U.S. mail to the Corporate Secretary at the following address: Home BancShares, Inc. Attn: Corporate Secretary P.O. Box 966 Conway, Arkansas 72033 Our “Stockholder Communications Policy” is published on the Company’s website atwww.homebancshares.comand can be found under the caption “Investor Relations”/“
How Do I Vote? The enclosed proxy card indicates the number of shares you own. There are four ways to vote:
By Internet at the website shown on your proxy card; we encourage you to vote this way. By toll-free telephone at the number shown on your proxy card. By completing and mailing your proxy card. By written ballot at the Meeting. If you vote by Internet or telephone, your vote must be received by 1:00 a.m. Central time on April
If You Vote by Telephone or on the Internet, You DoNOT Need to Return Your Proxy Card. If you plan to attend the Meeting, you may deliver your completed proxy card in person. However,please see Who Can Attend the Meeting? above for instructions on registering your attendance prior to the Meeting and for important information regarding certain health and safety protocols and seating limitations that may be place due to the ongoing COVID-19 pandemic. Additionally, if your shares are held in “street name” and you wish to vote your shares by written ballot at the Meeting, you will need to request and obtain a legal proxy from your broker, bank or other nominee (the stockholder of record) giving you the right to vote the shares at the Annual Meeting, complete such legal proxy and present it to the Company at the Meeting. Even if you plan to attend the Meeting, we recommend that you submit your proxy card or voting instructions in advance so that your vote will be counted if you later decide not to attend the Meeting. A proxy duly executed and returned by a shareholder, and not revoked prior to or at the Meeting, will be voted in accordance with the shareholder’s instructions on such proxy. If My Shares Are Held By a Broker or Nominee, Do I Need to Instruct the Broker or Nominee How to Vote My Shares? Yes. If you hold shares in “street name” through a broker or other nominee, your broker or nominee may not be permitted to exercise voting discretion with respect to some of the matters to be acted upon. Under current stock exchange rules, brokers who do not have instructions from their customers may not use their discretion in voting their customers’ shares on certain specific matters which are not considered to be “routine” matters, including the election of directors, executive compensation and other significant matters. The proposals in this Proxy Statement to elect directors and to approve on an advisory basis the Company’s executive compensation are not considered to be routine matters.Thus, if you do not give your broker or nominee specific instructions with respect to each of these matters, your shares may not be voted on those matters and will not be counted in determining the number of shares necessary for approval. Shares represented by such “brokernon-votes” will, however, be counted in determining whether there is a quorum. The What Are the Board’s Recommendations? Unless you give other instructions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of the Board of Directors. The Board’s recommendation is set forth together with each proposal in this Proxy Statement. In summary, the Board recommends a vote: FOR the election of the nominated slate of directors (see pages 14-60). FOR the approval, on an advisory (non-binding) basis, of the Company’s compensation of its named executive officers (see page 61). FOR the ratification of the appointment of BKD, LLP as the Company’s independent registered public accounting firm (see pages 62-64).
SKILLS & EXPERTISE Mr. Adams is an experienced business person, managing and operating several businesses in the central Arkansas area and has substantial knowledge of the banking business through his over 15 years of service on the board of our bank subsidiary.
Robert H. Adcock, Jr. has been a director since July 2007. Mr. Adcock served as Vice Chairman of Home BancShares from 2007 to 2019. He also serves on the Asset/Liability Committee of Home BancShares. Mr. Adcock is a co-founder of Home BancShares with Mr. Allison. He previously served as a director and Vice Chairman of Home BancShares from 1998 to 2003. In June 2003, Mr. Adcock stepped down from the Board of Directors of Home BancShares to become the Arkansas State Bank Commissioner. He was reappointed as Vice Chairman of Home BancShares in July 2007 upon completion of his four-year term as Arkansas State Bank Commissioner. Mr. Adcock retired from the First National Bank of Conway, Arkansas, in 1996 after more than 20 years of service. He presently operates a farming operation in Gould (Lincoln County), Arkansas, and has many real estate holdings in the Conway, Arkansas, area. SKILLS & EXPERTISE Mr. Adcock has an extensive background in banking, and as a
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17 | www.homebancshares.com |
Proposal One – Election of Directors |
RICHARD H. ASHLEY AGE: 65 DIRECTOR SINCE: 2004 COMMITTEES: Asset/Liability Committee and Compensation Committee | EXPERIENCE Richard H. Ashley has been a director of Home BancShares since 2004 and served as Vice Chairman from 2006 to July 2007. He also serves on the Asset/Liability Committee and the Compensation Committee of Home BancShares. He has served as a director of Centennial Bank since February 2009. He served as a director of the former Twin City Bank from 2000 until its charter was merged into Centennial Bank in 2009, and as Chairman of Twin City Bank from 2002 to 2009. From 2007 to 2009, he was a director of Entergy Arkansas, Inc., an electric public utility company. |
Richard H. Ashley has been a director of Home BancShares since 2004 and served as Vice Chairman from 2006 to July 2007. He also serves on the Asset/Liability Committee and the Compensation Committee of Home BancShares. He has served as a director of Centennial Bank since February 2009. He served as a director of the former Twin City Bank from 2000 until its charter was merged into Centennial Bank in 2009, and as Chairman of Twin City Bank from 2002 to 2009. From 2007 to 2009, he was a director of Entergy Arkansas, Inc., an electric public utility company. Mr. Ashley is President and owner of the Ashley Company, a privately held company involved in land development and investment in seven states throughout the United States since 1978. Mr. Ashley has extensive experience and knowledge with respect to real estate and real estate financing, which is a significant part of our lending. He has substantial banking experience through his over 18
SKILLS & EXPERTISE
Mr. Ashley is President and owner of the Ashley Company, a privately held company involved in land development and investment in seven states throughout the United States since 1978. Mr. Ashley has extensive experience and knowledge with respect to real estate and real estate financing, which is a significant part of our lending. He has substantial banking experience through his over 20 years of service on the boards of Centennial Bank and our former subsidiary bank, Twin City Bank. In addition, his service on the Compensation Committee of Home BancShares has enhanced his knowledge of public company executive compensation matters.
MIKE D. BEEBE
AGE: 74
DIRECTOR SINCE: 2016
COMMITTEES: Compensation Committee (Chair) and Asset/Liability Committee
EXPERIENCE
8
Mike D. Beebe has served as a director of Home BancShares since 2016. He is currently the Chairman of the Compensation Committee and a member of the Asset/Liability Committee of Home BancShares. Mr. Beebe serves as a director of Tyson Foods, Inc. and a member of the Governors’ Council of the Bipartisan Policy Center in Washington, D.C. He is also Of Counsel for the Roberts Law Firm, P.A. in Little Rock, Arkansas. Mr. Beebe was the Governor of the State of Arkansas from 2007 to 2015 and the state’s Attorney General from 2003 to 2007, prior to which he served as a state senator for 20 years. Beebe began his law career in 1972, practicing law until 2002 at Lightle, Beebe, Raney, Bell and Simpson in Searcy, Arkansas. From 1974 to 1979, he was a member of the Board of Trustees at Arkansas State University. After receiving a Bachelor of Arts degree in political science from Arkansas State University in 1968, Mr. Beebe completed law school at the University of Arkansas while serving in the U.S. Army Reserve from 1968 to 1974. |
Mike D. Beebe was appointed to serve as a director of Home BancShares in April 2016. He is currently the Chairman of the Compensation Committee and a member of the Asset/Liability Committee of Home BancShares. Mr. Beebe serves as a director of Tyson Foods, Inc. and a member of the Governors’ Council of the Bipartisan Policy Center in Washington, D.C. He is also Of Counsel for the Roberts Law Firm, P.A. in Little Rock, Arkansas. Mr. Beebe was the Governor of the State of Arkansas from 2007 to 2015 and the state’s Attorney General from 2003 to 2007, prior to which he served as a state senator for 20 years. Beebe began his law career in 1972, practicing law until 2002 at Lightle, Beebe, Raney, Bell and Simpson in Searcy, Arkansas. From 1974 to 1979, he was a member of the Board of Trustees at Arkansas State University. After receiving a Bachelor of Arts degree in political science from Arkansas State University in 1968, Mr. Beebe completed law school at the University of Arkansas while serving in the U.S. Army Reserve from 1968 to 1974. His
SKILLS & EXPERTISE
Mr. Beebe’s extensive leadership experience, ability to collaborate and his long-time support and understanding of business bring an important perspective to the Board.
www.homebancshares.com | 18 |
Proposal One – Election of Directors |
JACK E. ENGELKES AGE: 71 DIRECTOR SINCE: 2004 COMMITTEES: Audit and Risk Committee (Chair) and Compensation Committee | EXPERIENCE Jack E. Engelkes was appointed Vice Chairman of Home BancShares during 2019 and has been a director of Home BancShares since 2004 and a director of Centennial Bank (formerly First State Bank) since 1998. He serves as Chairman of the Audit and Risk Committee and a member of the Compensation Committee of Home BancShares. He also serves as Chairman of the Audit and Risk Committee of Centennial Bank. From 1995 to 1998, he served as a director of First National Bank of Conway. Mr. Engelkes served as managing partner in the accounting firm of Engelkes and Felts, Ltd. from 1990 through 2015. He was a director of the Conway Regional Medical Center from 2005 through 2016, and served as Chairman of the Conway Regional Medical Center Board during 2011 and 2012. He also served as Chairman of the Board of Conway Regional Health Foundation in 2006. Mr. Engelkes holds a bachelor’s degree in Business and Economics from Hendrix College in Conway. |
Jack E. Engelkes has been a director of Home BancShares since 2004 and a director of Centennial Bank (formerly First State Bank) since 1998. He serves as Chairman of the Audit Committee and a member of the Compensation Committee of Home BancShares. He also serves as Chairman of the Audit Committee of Centennial Bank. From 1995 to 1998, he served as a director of First National Bank of Conway. Mr. Engelkes served as managing partner in the accounting firm of Engelkes and Felts, Ltd. from 1990 through 2015. He was a director of the Conway Regional Medical Center from 2005 through 2016, and served as Chairman of the Conway Regional Medical Center Board during 2011 and 2012. He also served as Chairman of the Board of Conway Regional Health Foundation in 2006. Mr. Engelkes holds a bachelor’s degree in Business and Economics from Hendrix College in Conway. Mr. Engelkes is a Certified Public Accountant and has extensive knowledge and experience in accounting, auditing and financial reporting. He has a strong understanding of the banking business, and particularly the Company, through his combined service over the past 23
SKILLS & EXPERTISE
Mr. Engelkes is a Certified Public Accountant and has extensive knowledge and experience in accounting, auditing and financial reporting. He has a strong understanding of the banking business, and particularly the Company, through his combined service over the past 25 years as a director of Home BancShares, our subsidiary bank and First National Bank of Conway. Based on that service and his other directorships, he offers valuable experience with respect to corporate governance and compensation matters.
TRACY M. FRENCH AGE: 59 DIRECTOR SINCE: 2015 COMMITTEES: Asset/Liability Committee | EXPERIENCE Tracy M. French has served as a director of Home BancShares and as Chief Executive Officer and President of Centennial Bank since January 2015. In 2019, Mr. French was appointed as Chairman of Centennial Bank. He also serves on the Asset/Liability Committee of Home BancShares. From 2009 to January 2015, Mr. French served as a Regional President for Centennial Bank. He was the President and Chief Executive Officer and a director of our former bank subsidiary, Community Bank, from 2002 to 2009. |
Tracy M. French has served as a director of Home BancShares and as Chief Executive Officer and President of Centennial Bank since January 2015. He also serves on the Asset/Liability Committee of Home BancShares. From 2009 to January 2015, Mr. French served as a Regional President for Centennial Bank. He was the President and Chief Executive Officer and a director of our former bank subsidiary, Community Bank, from 2002 to 2009. Mr. French has over 34
SKILLS & EXPERTISE
Mr. French has over 35 years of banking experience. He is a graduate of the University of Arkansas at Fayetteville and the Southwestern Graduate School of Banking at Southern Methodist University. Based on his extensive banking and management experience, Mr. French provides significant strategic and operational insights into the management of the Company and our bank subsidiary.
19 | www.homebancshares.com |
Proposal One – Election of Directors |
KAREN E. GARRETT AGE: 48 DIRECTOR SINCE: 2017 COMMITTEES: Audit and Risk Committee and Asset/Liability Committee | EXPERIENCE Karen E. Garrett has served as a director of Home BancShares since 2017. She serves on the Audit and Risk Committee and the Asset/Liability Committee of Home BancShares. Ms. Garrett currently serves as the Managing Partner of HCJ CPA’s & Advisors, PLLC (“HCJ”) (formerly known as Hudson, Cisne & Co., LLP), a certified public accounting firm in Little Rock, Arkansas. Ms. Garrett has been a Certified Public Accountant with HCJ since 1996 and previously served as the firm’s personnel and recruiting coordinator for ten years. She has been a member of the Accounting Advisory Board for both the University of Central Arkansas and the University of Arkansas at Little Rock, and she served a five-year term on the Arkansas State Board of Accountancy from 2010 to 2015. She currently serves on the Advisory Board for the Arkansas Shakespeare Theatre. |
Karen E. Garrett was appointed as a director of Home BancShares in April 2017. She serves on the Audit Committee and the Asset/Liability Committee of Home BancShares. Mrs. Garrett currently serves as the Managing Partner of Hudson, Cisne & Co., LLP, a certified public accounting firm in Little Rock, Arkansas. Mrs. Garrett has been a Certified Public Accountant with Hudson, Cisne & Co. since 1996 and previously served as the firm’s personnel and recruiting coordinator for ten years. She has been a member of the Accounting Advisory Board for both the University of Central Arkansas and the University of Arkansas at Little Rock, and she served a five-year term on the Arkansas State Board of Accountancy from 2010 to 2015. She currently serves on the Advisory Board for the Arkansas Shakespeare Theatre. Mrs. Garrett was the first female recipient of the Associated General Contractors of Arkansas annual Distinguished Service Award for 20 years of service to the construction industry in 2015. She is a graduate of the University of Central Arkansas in Conway, Arkansas. Mrs.
SKILLS & EXPERTISE
Ms. Garrett was the first female recipient of the Associated General Contractors of Arkansas annual Distinguished Service Award for 20 years of service to the construction industry in 2015. She is a graduate of the University of Central Arkansas in Conway, Arkansas. Ms. Garrett provides valuable leadership experience and expertise in tax accounting, auditing, financial statement analysis, leadership succession planning, business consulting and personnel management and recruiting.
JAMES G. HINKLE
AGE: 72
DIRECTOR SINCE: 2005
COMMITTEES: Nominating and Corporate Governance Committee and Audit and Risk Committee
EXPERIENCE
9
James G. Hinkle has been a director of Home BancShares since 2005. Mr. Hinkle currently serves as a member of the Nominating and Corporate Governance Committee and the Audit and Risk Committee of Home BancShares and has previously served on our Asset/Liability Committee. He has over 38 years of banking experience. Mr. Hinkle currently serves on the Arkansas State Police Commission. He served as Chairman of the former Bank of Mountain View from 2005 until its charter was merged into Centennial Bank in 2009. From 1995 to 2005, he served as President of Mountain View BancShares, Inc., until the company’s merger into Home BancShares. He served as President of the Bank of Mountain View from 1981 to 2005. From 1996 to 2003, Mr. Hinkle served on the Arkansas Game and Fish Commission. From 2003-2018, Mr. Hinkle was a director of the National Wild Turkey Federation, a national nonprofit conservation and hunting organization. |
SKILLS & EXPERTISE
James G. Hinkle has been a director of Home BancShares since 2005. Mr. Hinkle currently serves as a member of the Audit Committee of Home BancShares and has previously served on our Asset/Liability Committee. He has over 36 years of banking experience. He served as Chairman of the former Bank of Mountain View from 2005 until its charter was merged into Centennial Bank in 2009. From 1995 to 2005, he served as President of Mountain View BancShares, Inc., until the company’s merger into Home BancShares. He served as President of the Bank of Mountain View from 1981 to 2005. From 1996 to 2003, Mr. Hinkle served on the Arkansas Game and Fish Commission. Since 2003, Mr. Hinkle has been a director of the National Wild Turkey Federation, a national nonprofit conservation and hunting organization. Mr. Hinkle has a lengthy background in banking and executive management through his long-time service as an officer and director of the former Bank of Mountain View and Mountain View Bancshares. In addition, he has particular knowledge of the Company’s customer base in North Central Arkansas.
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Proposal One – Election of Directors |
ALEX R. LIEBLONG AGE: 70 DIRECTOR SINCE: 2003 COMMITTEES: Nominating and Corporate Governance Committee and Audit and Risk Committee | EXPERIENCE Alex R. Lieblong |
SKILLS & EXPERTISE
Alex R. Lieblong has been a director of Home BancShares since 2003. He has served as an advisory director of Centennial Bank (formerly First State Bank) since 2002, and he served as a director of First State Bank from 1998 to 2002. He also serves as Chairman of the Nominating and Corporate Governance Committee and a member of the Audit Committee of Home BancShares. Mr. Lieblong currently serves on the board of directors of Ballard Petroleum, a privately held energy company. Since 1997, Mr. Lieblong has been an owner and general principal in the brokerage firm of Lieblong & Associates, Inc. Prior to Lieblong & Associates, Inc., he held management positions with Paine Webber, Merrill Lynch, and E.F. Hutton. Mr. Lieblong was a founder and has been managing partner of Key Colony Fund, L.P., a hedge fund, since 1998. He served as a director of Deltic Timber from 1997 to February 2007. He also served as a director of Lodgian, Inc., a publicly traded owner and operator of hotels, from 2006 to 2010. Mr. Lieblong has extensive experience in the financial services industry and over a decade of experience as a director of other publicly traded and privately held companies. He has substantial knowledge of financial, regulatory, corporate governance and other matters affecting public companies which the Board of Directors believes is valuable to the Company.
THOMAS J. LONGE AGE: 58 DIRECTOR SINCE: 2014 COMMITTEES: Audit and Risk Committee and Nominating and Corporate Governance Committee | EXPERIENCE Thomas J. Longe has served as a director of Home BancShares since 2014. He currently serves on the Audit and Risk Committee and the Nominating and Corporate Governance Committee. Mr. Longe is the President and Chief Executive Officer of The Trianon Companies and for over 35 years he has been involved in the acquisition, development, management and financing of commercial and residential real estate developments. He is the former Chairman, CEO and President of TIB Financial Corporation (“TIB Financial”), which was a publicly traded bank holding company in Florida with $1.8 billion in assets. Mr. Longe directed the successful acquisition of a $500 million asset failed bank from the Federal Deposit Insurance Corporation and negotiated the recapitalization/sale of TIB Financial to North American Financial Holdings. |
SKILLS & EXPERTISE
Thomas J. Longe was appointed to serve as a director of Home BancShares in October 2014 and named to the Audit Committee and the Nominating and Corporate Governance Committee in January 2015. Mr. Longe is the President and Chief Executive Officer of The Trianon Companies. For over 32 years he has been involved in the acquisition, development, management and financing of commercial and residential real estate developments. He is the former Chairman, CEO and President of TIB Financial Corporation (“TIB Financial”), which was a publicly traded bank holding company in Florida with $1.8 billion in assets. Mr. Longe directed the successful acquisition of a $500 million asset failed bank from the Federal Deposit Insurance Corporation and negotiated the recapitalization/sale of TIB Financial to North American Financial Holdings. Mr. Longe began his career as a loan officer and credit analyst at Bank One, Columbus, N.A. and Comerica Bank. He graduated from Albion College with a Bachelor of Arts in Economics and from the University of Detroit with a Masters of Business Administration. Mr. Longe brings a wealth of knowledge and experience in banking and real estate development, as well as experience managing a publicly held bank holding company and particular familiarity with our South Florida markets in Southwest and Southeast Florida and the Florida Keys.
21 | www.homebancshares.com |
Proposal One – Election of Directors |
JIM RANKIN, JR. AGE: 53 DIRECTOR SINCE: 2017 COMMITTEES: Nominating and Corporate Governance Committee (Chair), Compensation Committee and Asset/Liability Committee | EXPERIENCE Jim Rankin, Jr. has served as a director of Home BancShares since 2017. He serves as Chairman of the Nominating and Corporate Governance Committee, and a member of the Compensation Committee and the Asset/Liability Committee of Home BancShares. Mr. Rankin has served as President of Trinity Development Company and Four Winds, Inc., two family-owned real estate development and management companies with primary business interests in Faulkner County, Arkansas, since 1999. Mr. Rankin is also an attorney serving in private practice since 1993. Mr. Rankin has been a director of our bank subsidiary, Centennial Bank, since 2001. He is a director and Chairman of the Conway Regional Heath System and a director of the Conway Development Corporation and a former chair of the board of directors of the Conway Regional Health System Foundation. He is a graduate of the University of Arkansas at Fayetteville and received his Juris Doctor from the University of Arkansas at Little Rock School of Law. SKILLS & EXPERTISE Mr. Rankin brings substantial experience and expertise in residential and commercial real estate, law and banking, and health services in addition to his knowledge and understanding of our business as a current director of Centennial Bank. | |
LARRY W. ROSS AGE: 73 DIRECTOR SINCE: 2021 COMMITTEES: Holding company committees not yet determined | Larry W. Ross was appointed as a director of Home BancShares, Inc. in January 2021. Mr. Ross also serves as a member of the Centennial Bank Little Rock regional advisory board of directors where he has served since 2005. Mr. Ross is the President of Ross Consulting Service, LLC and is a retired executive from AT&T/Southwestern Bell with more than 30 years of service. He is also a retired Presiding Elder with the Christian Methodist Church, where he presided over 75 pastors and congregations in Arkansas. Mr. Ross is also a member of the Pulaski County Bridge and Facilities Board; Arkansas PBS Foundation; and the North Little Rock Rotary Club, where he served as Past President and received the distinction of International Paul Harris Fellow. Mr. Ross is also the former Chair of the Arkansas Independent Citizens Commission, Arkansas State Board of Pharmacy, Arkansas Educational Television Network Commission (AETN) and the State of Arkansas Ethics Commission. He is a graduate of Philander Smith College in Little Rock, Arkansas with a Masters of Science in Education from State College of Arkansas, now the University of Central Arkansas in Conway, with additional graduate studies at the University of Indiana-Bloomington and Arkansas State University in Jonesboro. SKILLS & EXPERTISE Mr. Ross’ extensive business and leadership experience, his extensive community involvement and his knowledge of our Little Rock market through his membership on our Little Rock Region Advisory Board bring valuable insight to the Board. |
Jim Rankin, Jr. was appointed as a director of Home BancShares in April 2017. He serves on the Compensation Committee, the Nominating and Corporate Governance Committee and the Asset/Liability Committee of Home BancShares. Mr. Rankin has served as President of Trinity Development Company and Four Winds, Inc., two family-owned real estate development and management companies with primary business interests in Faulkner County, Arkansas, since 1999. Mr. Rankin is also an attorney serving in private practice since 1993. Mr. Rankin has been a director of our bank subsidiary, Centennial Bank, since 2001. He is a director of the Conway Regional Heath System and the Conway Development Corporation and a former chair of the board of directors of the Conway Regional Health System Foundation. He is a graduate of the University of Arkansas at Fayetteville and received his Juris Doctor from the University of Arkansas at Little Rock School of Law. Mr. Rankin brings substantial experience and expertise in residential and commercial real estate, law and banking, in addition to his knowledge and understanding of our business as a current director of Centennial Bank.
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10
Proposal One – Election of Directors |
DONNA J. TOWNSELL AGE: 50 DIRECTOR SINCE: 2019 COMMITTEES: Asset/Liability Committee | EXPERIENCE Donna J. Townsell | was appointed as a director of Home BancShares, Inc. and Centennial Bank in February 2019. She serves on the Asset/Liability Committee of Home BancShares. Ms. Townsell has served as the Senior Executive Vice President of Home BancShares and Centennial Bank since October 2015. Since May 2018, she has served as Director |
Donna J. Townsell was appointed as a director of Home BancShares, Inc. and Centennial Bank in February 2019. Ms. Townsell hasof Investor Relations for Home BancShares, and from August 2016 to May 2018, she served as Director of Marketing for Centennial Bank. Prior to becoming Senior Executive Vice President, Ms. Townsell served as Project Manager for Centennial Bank and led the bank’s Build-A-Better-Bank (“B3”) campaign, which included the successful effort to improve the Company’s efficiency ratio, a long-term corporate goal of the Company.
SKILLS & EXPERTISE
Ms. Townsell joined the Company in 2007. She is a graduate of the University of Central Arkansas in Conway, Arkansas, and is the Senior Executive Vice President of Home BancShares and Centennial Bank since October 2015. Since May 2018, she has served as Director of Investor Relations for Home BancShares, and from August 2016 to May 2018, she served as Director of Marketing for Centennial Bank. Prior to becoming Senior Executive Vice President, Ms. Townsell served as Project Manager for Centennial Bank and led the bank’sBuild-A-Better-Bank (“B3”) campaign, which included the successful effort to improve the Company’s efficiency ratio, a long-term corporate goal of the Company. Ms. Townsell joined the Company in 2007. She is a graduate of the University of Central Arkansas in Conway, Arkansas, and is thesister-in-law of the Company’s Chairman, John W. Allison. Ms. Townsell provides significant knowledge of the Company and its operations, along with experience and understanding of shareholder and investor relations, which the Board believes are valuable to the Company.
23 | www.homebancshares.com |
Proposal One – Election of Directors |
Being Responsive to Shareholder Feedback
During our shareholder outreach in 2020, some shareholders expressed concerns with two of the Company’s directors, Robert H. Adcock, Jr. and Alex R. Lieblong, as reflected in the number of votes cast in favor of their election in 2020, with Messrs. Adcock and Lieblong each receiving less than 72% of the votes cast or withheld for their election. Below is a discussion of the Company’s response to these concerns and why the Board believes Messrs. Adcock and Lieblong remain important contributors to our Board and that their continued service on the Board is valuable to and in the best interests of the Company and its operations, along with experience and understanding of shareholder and investor relations, which the Board believes are valuable to the Company.our shareholders.
EXECUTIVE OFFICERS
Shareholder Feedback |
Shareholders expressed concern over Mr. Adcock’s independence from management as a co-founder of the Company and with his service on independent committees of the Board. |
Company Response |
ln response to shareholder concerns, on April 22, 2020, Mr. Adcock resigned from his positions as a member of the Nominating and Corporate Governance Committee (the “Nominating Committee”) and the Audit and Risk Committee (“Audit Committee”) of the Board. Notwithstanding Mr. Adcock’s status as a co-founder, the Board believes Mr. Adcock has and continues to qualify as an “independent director” as defined in the NASDAQ listing standards and provides a perspective that is independent from management. While Mr. Adcock helped to organize and was a co-founding shareholder of the Company and formerly served as our Vice Chairman, he has never been employed by the Company or any of its subsidiaries. His extensive experience in the banking industry, which includes service as Arkansas State Bank Commissioner, provides an important oversight perspective as an outside director of the Company that the Board believes is valuable to the Company and our shareholders. In addition, his beneficial ownership of over 1.4 million shares of our common stock strongly aligns his interests with those of our shareholders. |
Shareholder Feedback |
The Board should disclose its rationale for its nomination of Mr. Lieblong for reelection to the Board and his continued service as chairman of the Nominating and Corporate Governance Committee (the “Nominating Committee”) after he received fewer votes in favor of his reelection at the 2019 Annual Meeting than votes withheld. |
Company Response |
In light of the shareholder feedback we received, Mr. Lieblong resigned as chairman of the Nominating Committee on April 22, 2020, and the Board appointed Jim Rankin, Jr. as the new chairman of the committee effective immediately. The Board believes that Mr. Lieblong remains a strong Board member and a leader whose extensive experience in the financial services industry and service on other private and public company boards of directors brings important insight and perspective to our Board and the Board committees on which he serves. Therefore, the Board asked Mr. Lieblong to continue serving as a member of the Nominating Committee and Audit Committee and has nominated him for reelection to the Board at the 2021 Annual Meeting. The Company believes the voting results for Mr. Lieblong in 2019 and 2020 were primarily due to concerns over the Company’s disclosure in the 2019 Proxy Statement that he attended fewer than 75% of the aggregate of the meetings of the Board and Board committees on which he served during 2018, as the 2019 results for Mr. Lieblong were in stark contrast to his reelection votes in prior years. Mr. Lieblong’s reduced meeting attendance in 2018, however, was an anomaly during his tenure on the Board. During 2019 and 2020, he attended all meetings of the Board and the Board committees on which he served. The Board believes his attendance record indicates Mr. Lieblong’s commitment and track record of active and valuable service to the Company. |
www.homebancshares.com | 24 |
The biography below of each of our executive officers who is not a member of our Board of Directors contains information regarding the person’s business experience, including but not limited to positions held currently or at any time during the last five years.
Russell D. Carter, III
Russell D. Carter, III was named Executive Officer of Home BancShares in January 2018 and has served as a Regional President for Centennial Bank since 2013. He currently serves on the bank’s Executive Loan Committee and Executive Risk Committee and is Chairman of the bank’s regional board of directors for North Arkansas. Mr. Carter was appointed to the board of directors of the Federal Reserve Bank Memphis Branch in 2019. Mr. Carter has over 1920 years of banking experience and is a licensed attorney. He holds a Juris Doctor degree with honors from the University of Arkansas at Little Rock’s William H. Bowen School of Law and a bachelor’s degree in finance from Arkansas State University in Jonesboro, Arkansas. He is an alumnus of the Graduate School of Banking at Louisiana State University in Baton Rouge. Mr. Carter served as a state representative in the Arkansas House of Representatives from January 2009 to January 2015 and served as the Speaker of the House from January 2013 to January 2015.
Jennifer C. Floyd
Jennifer C. Floyd has served as the Chief Accounting Officer of Home BancShares and Centennial Bank since July 2015. From July 2015 to May 2018, she also served as Investor Relations Officer for Home BancShares. Ms. Floyd joined the Company in June 2015 as Director of Financial Reporting. She began her career with Deloitte & Touche, LLP in 1997, primarily auditing public and private financial institutions, and served as Senior Manager until joining the Company. Ms. Floyd is a Certified Public Accountant and a graduate of Harding University in Searcy, Arkansas, where she received a bachelor’s degree in accounting and marketing.
Kevin D. Hester
Kevin D. Hester joined Centennial Bank (formerly First State Bank) in 1998 as Executive Vice President of Lending and became Chief Lending Officer of Home BancShares in 2010. He has more than 3335 years of banking experience. From 1985 to 1998, Mr. Hester held various positions at First Commercial Corporation, including Executive Vice President of Lending at First Commercial’s Kilgore, Texas, affiliate. Mr. Hester is a graduate of the University of Central Arkansas with a bachelor’s degree in accounting and is an honor graduate of the National Commercial Lending School in Norman, Oklahoma. He is a former board member of the National Association of Government Guaranteed Lenders (NAGGL) and is still active within the organization.
J. Stephen Tipton
J. Stephen Tipton was appointed to serve as the Chief Operating Officer of Home BancShares and Centennial Bank in August 2015. Mr. Tipton most recentlypreviously served as a Regional Vice President of Centennial Bank. He began his banking career in 2005 and joined Centennial Bank in 2006. Prior to becoming Regional Vice President, Mr. Tipton served as Director of Credit Risk Management during 2013 and as a Commercial Lender from 2009 to 2012. Mr. Tipton has a vast array of experience in retail, business development, lending and acquisitions. He is a graduate of the University of Arkansas at Fayetteville.
11
25 | www.homebancshares.com |
Corporate Governance |
CORPORATE GOVERNANCECorporate Governance
The Board of Directors has the responsibility to serve as the trustee for the shareholders. It also has the responsibility for establishing broad corporate policies and for the overall performance of the Company. The Board, however, is not involved inday-to-day operating details. Members of the Board are kept informed of the Company’s business through discussion with the Chief Executive Officer, Chief Financial Officer and other officers, by reviewing analyses and reports sent to them quarterly, and by participating in Board and Committee meetings.
Corporate Governance Guidelines and Policies
We believe that good corporate governance helps ensure that the Company is managed for the long-term benefit of its shareholders. We continue to review our corporate governance policies and practices, corporate governance rules and regulations of the Securities and Exchange Commission (the “SEC”), and the listing standards of the NASDAQ Global Select Market on which our common stock is traded. The Board has adopted various corporate governance guidelines and policies to assist the Board in the exercise of its responsibilities to the Company and its shareholders. The guidelines and policies address, among other items, director independence and director qualifications. You can access and print our corporate governance guidelines and policies, including the charters of our Audit and Risk Committee, Compensation Committee, Nominating and Corporate Governance Committee, our Corporate Code of Ethics for Directors, Executive Officers and Employees and other Company policies and procedures required by applicable law or regulation on our website atwww.homebancshares.com under the caption “Investor Relations”/“Corporate Profile”Overview”/“Governance Documents.”
NASDAQ rules require that a majority of the directors of NASDAQ-listed companies be “independent.” An “independent director” generally means a person other than an officer or employee of the listed company or its subsidiaries, or any other individual having a relationship, which, in the opinion of the listed company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Certain categories of persons are deemed not to be independent under the NASDAQ rules, such as persons employed by the listed company within the last three years, and persons who have received (or whose immediate family members have received) payments exceeding a specified amount from the listed company within the last three years, excluding payments that are not of a disqualifying nature (such as compensation for board service, payments arising solely from investments in the listed company’s securities, and benefits under atax-qualified retirement plan). NASDAQ rules impose somewhat more stringent independence requirements on persons who serve as members of the audit committee or the compensation committee of a listed company.
Of the fifteen persons who currently serve on our Board of Directors, we believe that Messrs. Adams, Adcock, Ashley, Beebe, Engelkes, Hinkle, Lieblong, Longe, Rankin, Ross and Mrs.Ms. Garrett are “independent” for purposes of NASDAQ rules. Messrs. Allison, Davis, French and Sims and Ms. Townsell are not considered independent because they are officers of Home BancShares. The Board has also determined that no member of the Audit and Risk Committee, Compensation Committee or Nominating and Corporate Governance Committee has any material relationship with the Company (either directly or indirectly as a partner, shareholder or officer of an organization that has a relationship with the Company) and that all members of these committees meet the criteria for independence under the NASDAQ listing standards.
Board Structure and Role in Risk Oversight
The Board of Directors believes that it should maintain the flexibility to select its leadership structure from time to time based on the criteria that it deems to be in the best interests of the Company and its shareholders. At this time, the offices of the Chairman of the Board and the Chief Executive Officer are combined, with Mr. Allison serving as Chairman and CEO. The Board believes that combining the Chairman and CEO positions is the right corporate governance structure for the Company at this time because it most effectively utilizes Mr. Allison’s extensive experience and knowledge of the Company and the industry and provides for the most efficient leadership of our Board and Company. However, while the Board has since 2009 separatedrecently combined the positions of Chairman and Chief Executive Officer (“CEO”). The primary purposeCEO of installingour holding company, the Company maintains a separate CEO in addition to the Chairman wasand President of our bank subsidiary. The Board believes that having a separate CEO of our bank subsidiary serves to facilitate and strengthen the succession of management of the Company. This separation of ChairmanCompany and CEO also allows for greater oversight by the Board of the Company by the Board. Company’s operations.
The Board is actively involved in oversight of risks that could affect the Company. This oversight is conducted primarily through committees of the Board, as disclosed in the description of each of the committees below and in the charters of each of the committees, but the full Board has retained responsibility for general oversight of risks. The Board satisfies this responsibility through full reports by each committee chair regarding the committee’s considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular risks within the Company.
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Corporate Governance |
12
Code of Ethics
We have adopted a Code of Ethics that applies to all of our directors, officers, and employees. We believe our Code of Ethics is reasonably designed to deter wrongdoing and to promote honest and ethical conduct, including the ethical handling of conflicts of interest, full, fair and accurate disclosure in filings and other public communications made by us, compliance with applicable laws, prompt internal reporting of ethics violations, and accountability for adherence to the Code of Ethics. This Code of Ethics is published in its entirety on our website atwww.homebancshares.com under the caption “Investor Relations”/“Corporate Profile”Overview”/“Governance Documents.” We will post on our website any amendment to this code and any waivers of any provision of this code made for the benefit of any of our senior executive officers or directors.
BOARD MEETINGS AND COMMITTEES OF THE BOARD
Derivative Trading and Hedging
We have a policy that all Company directors, officers and other employees who possess material nonpublic information regarding the Company should refrain from trading in put and call options on the Company’s securities. We believe these types of hedging instruments create an enticement for abusive trading and can give the unwelcome appearance of betting against the Company.
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Board Meetings and Committees of the Board |
Board Meetings and Committees of the Board
The business of the Company is managed under the direction of the Board of Directors, who meet on a regularly scheduled basis during the calendar year to review significant developments affecting the Company and to act on matters that require Board approval. Special meetings are also held when Board action is required on matters arising between regularly scheduled meetings. Written consents to action without a meeting may be obtained if the Company deems it more appropriate.
All members of the Board are strongly encouraged to attend each meeting of the Board and meetings of the Board committees on which they serve, as well as the Annual Meeting. The Board of Directors held four regularly scheduled meetings and onetwo special meetingmeetings during calendar year 2018.2020. During this period each of our current Board members participated in at least 75% of the aggregate of the meetings of the Board and the Board committees on which the director served during the period in which the member served as a director, with the exception of Mr. Lieblong.director. In addition, all of the current Board members attended the Company’s Annual Meeting in 2018.2020. As a safety precaution due to the COVID-19 pandemic, our non-employee Board members attended the 2020 Annual Meeting by teleconference. Our “Director Attendance Policy” is published on our website atwww.homebancshares.com under the caption “Investor Relations”/“Corporate Profile”Overview”/“Governance Documents.”
Our Board of Directors has four standing committees: the Audit and Risk Committee, the Compensation Committee, the Nominating and Corporate Governance Committee and the Asset/Liability Committee. Committee members are elected annually by the Board and serve until their successors are elected and qualified or until their earlier resignation or removal.
The following table discloses the Board members who serve on each of the Board’s committees and the number of meetings held by each committee during calendar year 2018.2020.
Audit | Compensation | Nominating and Corporate Governance | Asset/Liability | |||||
Milburn Adams | X | X | ||||||
Robert H. Adcock, Jr. | X | X | X | |||||
John W. Allison | X | |||||||
Richard H. Ashley | X | X | ||||||
Mike D. Beebe | Chair | X | ||||||
Brian S. Davis | Chair | |||||||
Jack E. Engelkes | Chair | X | ||||||
Tracy M. French | X | |||||||
Karen E. Garrett | X | X | ||||||
James G. Hinkle | X | |||||||
Alex R. Lieblong | X | Chair | ||||||
Thomas J. Longe | X | X | ||||||
C. Randall Sims | X | |||||||
Jim Rankin, Jr. | X | X | X | |||||
Number of Meetings | 8 | 5 | 2 | 4 |
|
| Audit |
| Compensation |
| Nominating and Corporate Governance |
| Asset/Liability |
Milburn Adams |
| X |
| X |
|
|
|
|
Robert H. Adcock, Jr. |
|
|
|
|
|
|
| X |
John W. Allison |
|
|
|
|
|
|
| X |
Richard H. Ashley |
|
|
| X |
|
|
| X |
Mike D. Beebe |
|
|
| Chair |
|
|
| X |
Brian S. Davis |
|
|
|
|
|
|
| Chair |
Jack E. Engelkes |
| Chair |
| X |
|
|
|
|
Tracy M. French |
|
|
|
|
|
|
| X |
Karen E. Garrett |
| X |
|
|
|
|
| X |
James G. Hinkle |
| X |
|
|
| X |
|
|
Alex R. Lieblong |
| X |
|
|
| X |
|
|
Thomas J. Longe |
| X |
|
|
| X |
|
|
Jim Rankin, Jr. |
|
|
| X |
| Chair |
| X |
Donna J. Townsell |
|
|
|
|
|
|
| X |
Number of Meetings |
| 5 |
| 6 |
| 1 |
| 4 |
Audit Committee
The Audit and Risk Committee assists the Board in fulfilling its oversight responsibility relating to the integrity of our accounting and financial reporting processes and our financial statements, our compliance with legal and regulatory requirements, the independent auditor’s qualifications and independence, and the performance of our internal audit function and our independent auditors.auditors and our system of risk management. In fulfilling its duties, the Audit and Risk Committee, among other things:
prepares the Audit Committee report for inclusion in the annual proxy statement;
appoints, compensates, retains and oversees the independent auditors;
pre-approves all auditing and appropriatenon-auditing services performed by the independent auditor;
discusses with the internal and independent auditors the scope and plans for their respective audits;
reviews the results of each quarterly review and annual audit by the independent auditors;
reviews the Company’s financial statements and related disclosures in the Company’s quarterly and annual reports prior to filing with the SEC;
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Board Meetings and Committees of the Board |
reviews the Company’s policies with respect to risk assessment and risk management;
reviews the effectiveness of the Company’s internal controls, the results of thecontrol over financial reporting and its internal audit program, and the Company’s disclosure controls and procedures and quarterly assessment of such controls and procedures;function;
establishes procedures for handling complaints regarding accounting, internal accounting controls, and auditing matters, including procedures for confidential, anonymous submission of concerns by employees regarding such matters; and
reviews the Company’s legal and regulatory compliance programs.
The Board of Directors has adopted a written charter for the Audit and Risk Committee that meets the applicable standards of the SEC and NASDAQ. A copy of the Audit and Risk Committee Charter is published on our website atwww.homebancshares.com under the caption “Investor Relations”/“Corporate Profile”Overview”/“Governance Documents.”
The Audit and Risk Committee is comprised of Jack E. Engelkes, Chairman, Milburn Adams, Robert H. Adcock, Jr.,Karen E. Garrett, James G. Hinkle, Karen E. Garrett,Alex R. Lieblong and Thomas J. Longe and Alex R. Lieblong.Longe. The Board has determined that each member of the Committee satisfies the independence requirements of the NASDAQ listing standards and applicable SEC regulations, that each member of the Committee is financially literate, knowledgeable and qualified to review financial statements, and that Mr. Engelkes and Mrs.Ms. Garrett each has the attributes of an “audit committee financial expert” as defined by the regulations of the SEC.
The Compensation Committee aids the Board in discharging its responsibility with respect to the compensation of our executive officers and directors. The Compensation Committee is responsible for evaluating and approving the Company’s compensation plans and policies and for communicating the Company’s compensation policies to shareholders in our annual proxy statement. In fulfilling its duties, the Compensation Committee, among other things:
reviews and approves corporate goals and objectives relevant to the compensation of our Chairman and our CEO;
evaluates the performance and determines the annual compensation of the Chairman and the CEO in accordance with these goals and objectives;
reviews and approves the amounts and terms of the annual compensation for our other executive officers;
reviews and approves employment agreements, severance agreements or arrangements, retirement arrangements, change in controlchange-in-control agreements/provisions and special supplemental benefits for the executive officers;
reviews and makes recommendations to the Board with respect to incentive based compensation plans and equity based plans, and establishes criteria for and grants awards to participants under such plans;
reviews and recommends to the Board the compensation for our directors; and
reviews and recommends to the Board that the Compensation Discussion and Analysis be included in the annual proxy statement and Form10-K annual report.
14
The Board of Directors has adopted a written charter for the Compensation Committee that meets the applicable standards of the SEC and NASDAQ. The Compensation Committee Charter is published on our website atwww.homebancshares.comunder the caption “Investor Relations”/“Corporate Profile”Overview”/“Governance Documents.”
The Compensation Committee is comprised of Mike D. Beebe, Chairman, Milburn Adams, Richard H. Ashley, Jack E. Engelkes and Jim Rankin, Jr. The Board has determined that each member of the Committee satisfies the independence requirements of the NASDAQ listing standards and qualifies and as an “outside director” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended, and as a “nonemployee director” for purposes of Rule16b-3 under the Securities Exchange Act of 1934, as amended.
The Compensation Committee charter authorizes the Committee to delegate to subcommittees of the Committee any responsibility the Committee deems necessary or appropriate. The Committee shall not, however, delegate to a subcommittee any power or authority required by any law, regulation or listing standard to be exercised by the Committee as a whole.
29 | www.homebancshares.com |
Board Meetings and Committees of the Board |
The Chairman and CEO, after consulting with executive officers and others, makes recommendations to the Committee regarding the form and amount of compensation paid to each executive officer. Additionally, the Chairman and CEO, our Chief Operating Officer (“COO”) and the CEO of our bank subsidiary attend the Committee meetings and answer questions and provide information to the Committee as requested. This normally includes a history of the primary compensation components for each executive officer, including an internal pay equity analysis. The Committee then considers the recommendations of the Chairman and CEO, the information provided by the COO and the CEO of our bank subsidiary, historical compensation of each executive, and other factors. Based on this information, the Committee sets the compensation for the executive officers and reports its decisions to the Board of Directors. The executive officers do not make any recommendations with regard to director compensation. Although the executive officers are involved in the process of evaluating compensation, including their own, the final decision is made by the Committee or the Board. The Committee understands the inherent conflict in obtaining information from the Chairman and CEO and other executive officers, but believes that this information is valuable in determining the appropriate compensation. The Chairman and CEO is not present during the Committee’s deliberations or voting regarding his compensation.
Historically, the Committee meets subsequent to year end to finalize discussion regarding the Company’s performance goals for the previous and current year with respect to performance-based compensation to be paid to executive officers and to approve its report for the annual proxy statement. These goals are approved within 90 days of the beginning of the year. Eacheach year in December and/or January the Committee generally discussesto discuss any new compensation issues, the compensation, bonus and incentive plan award analyses and, if applicable, the engagement of a compensation consultant for annual executive and director compensation. The Committee also meets in December and/or January to:
to, among other things:
review and discuss the recommendations made by the Chairman;Chairman and CEO;
review the performance of the Company and the individual officers;
review the level to which the Company’s performance goals, as applicable, were attained and approve short-term cash bonus and long-term incentive awards; and
determine the executive officers’ base salaries for the following year.
Management also advises the full Board, including the Committee members, throughout the year of new issues and developments regarding executive compensation.
Compensation Committee Interlocks Andand Insider Participation
During 2018,2020, Messrs. Adams, Ashley, Beebe, Engelkes and Rankin served as members of the Compensation Committee. None of these five directors during 20182020 or at any previous time served as an officer or employee of Home BancShares or our bank subsidiary. During 2018,2020, none of our executive officers served as a director or member of the compensation committee (or group performing equivalent functions) of any other entity for which any of our independent directors served as an executive officer.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee develops and maintains the corporate governance policies of the Company. The Committee’s responsibilities include, among other things:
15
developing and maintaining the Company’s corporate governance policies;
identifying, screening and recruiting qualified individuals to become Board members;
making recommendations regarding the composition of the Board and its committees;
assisting the Board in assessing the Board’s effectiveness;
assisting management in preparing the disclosures regarding the Committee’s operations to be included in the Company’s annual proxy statement; and
reviewing and approving all related party transactions required to be disclosed in our annual proxy statement.
The Board of Directors has adopted a written charter for the Nominating and Corporate Governance Committee that meets the applicable standards of the SEC and NASDAQ. The Nominating and Corporate Governance Committee Charter is published on our website atwww.homebancshares.com under the caption “Investor Relations”/“Corporate Profile”Overview”/“Governance Documents.”
The Nominating and Corporate Governance Committee is comprised of Jim Rankin, Jr., Chairman, James G. Hinkle, Alex R. Lieblong Chairman, Robert H. Adcock, Jr.,and Thomas J. Longe and Jim Rankin, Jr.Longe. The Board has determined that all members of the Committee satisfy independence requirements of the NASDAQ listing standards. The Nominating and Corporate Governance Committee met on January 18, 2019,21, 2021, to select director nominees (except Ms. Townsell, who was subsequently nominated by the Board) to be voted on at the Annual Meeting.
www.homebancshares.com | 30 |
Board Meetings and Committees of the Board |
Director Candidate Qualifications
The Nominating and Corporate Governance Committee Directorship Guidelines and Selection Policy outlines the qualifications the Committee looks for in a director nominee. Generally, the candidate should possess:
relevant business and financial expertise and experience, including an understanding of fundamental financial statements;
the highest character and integrity and a reputation for working constructively with others;
sufficient time to devote to meetings and consultation on Board matters; and
freedom from conflicts of interest that would interfere with performance as a director.
More specifically, the Nominating Committee seeks candidates who possess various qualifications, skills, or other factors it deems appropriate. These factors may include leadership experience in business or other relevant fields, knowledge of the Company and the financial services industry, experience in serving as a director of another financial institution or public company generally, education, wisdom, integrity, analytical ability, familiarity with and participation in the communities served by the Company and its subsidiaries, commitment to and availability for services as a director, and any other factors the Committee deems relevant.
In addition, the Board of Directors has adopted a policy under which a director will not be eligible to stand forre-election once he or she has reached 75 years of age or if he or she will reach the age of 75 during the first six months of the calendar year in which he or she is to stand forre-election. However, our Board of Directors has granted a waiver of this mandatory retirement age to Milburn Adams and John W. Allison until the Company’s 20202022 Annual Meeting of Shareholders.
Director Nominations Process
After assessing and considering prevailing business conditions of the Company, legal and listing standard requirements for Board composition, the size and composition of the current Board, and the skills and experience of current Board members, any of the Chairman, the Nominating Committee or any Board member may identify the need to add a Board member or to fill a vacancy on the Board. The Committee identifies qualified director nominees from among persons known to the members of the Committee, by reputation or otherwise, and through referrals from trusted sources, including senior management, existing Board members, shareholders and independent consultants hired for such purpose. The Committee may request that senior officers of the Company assist the Committee in identifying and assessing prospective candidates who meet the criteria established by the Board. The Committee will consider director candidates recommended by shareholders in accordance with the procedures set forth in the Company’s policy regarding director recommendations by shareholders. This policy is described above under the caption “Can a Shareholder Nominate a Director?” and is published on our website atwww.homebancshares.com under the caption “Investor Relations”/“Corporate Profile”Overview”/“Governance Documents.” The Committee intends to evaluate any candidate recommended by a shareholder in the same manner in which it evaluates candidates recommended by other sources, according to the criteria described below.
16
The Nominating Committee evaluates candidates based upon the candidate’s qualifications, recommendations, or other relevant information, which may include a personal interview. The Nominating Committee has determined that the Board as a whole must have the right diversity, mix of characteristics and skills for the optimal functioning of the Board in its oversight of the Company. The Board believes it should be comprised of persons with skills in areas such as banking, finance, accounting, sales and marketing, law, strategic planning and leadership of large, complex organizations. The Nominating Committee prefers a mix of background and experience among the Board’s members but does not follow any ratio or formula to determine the appropriate mix. Rather, it uses its judgment to identify nominees whose backgrounds, attributes and experiences, taken as a whole, will contribute to the high standards of Board service to the Company. Since 2017, the Board has elected Karen E. Garrett and Larry W. Ross, who are both considered independent directors, and Donna J. Townsell to the Board, resulting in increased gender and racial diversity of our Board members and broadening the Board’s expertise and imparting fresh new perspectives.
In addition to the targeted skill areas, the Nominating Committee looks for a strong record of achievement in key knowledge areas that it believes are critical for directors to add value to a Board including:
Strategy – knowledge of the Company’s business model, the formulation of corporate strategies, knowledge of key competitors and banking markets;
Leadership – skills in coaching senior executives and the ability to assist in their development;
Organizational issues – understanding of strategy implementation, management processes, group effectiveness and organizational design;
Relationships – understanding how to interact with investors, regulatory bodies, and communities in which the Company operates;
31 | www.homebancshares.com |
Board Meetings and Committees of the Board |
Functional – understanding of finance matters, financial statements and auditing procedures, technical expertise, legal issues, information technology and marketing; and
Ethics – the ability to identify and raise key ethical issues concerning the activities of the Company and senior management as they affect the business community and society.
The Committee meets to consider and approve the candidates to be presented to the Board. The Committee then presents its proposed nominees to the full Board. The Board considers the recommendations of the Committee and approves candidates for nomination.
The Nominating and Corporate Governance Committee Directorship Guidelines and Selection Policy is published on our website atwww.homebancshares.comunder the caption “Investor Relations”/“Corporate Profile”Overview”/“Governance Documents.”
Our Asset/Liability Committee consists of Brian S. Davis, Chairman, Robert H. Adcock, Jr., John W. Allison, Richard H. Ashley, Mike D. Beebe, Tracy M. French, Karen E. Garrett, C. Randall Sims and Jim Rankin, Jr.Jr and Donna Townsell. The Asset/Liability Committee meets quarterly and is primarily responsible for:
development and control over the implementation of liquidity, interest rate and market risk management policies;
review of interest rate movements, forecasts, and the development of the Company’s strategy under specific market conditions; and
continued monitoring of the overall asset/liability structure of our bank subsidiary to minimize interest rate sensitivity and liquidity risk.
www.homebancshares.com | 32 |
Director Compensation |
17
DIRECTOR COMPENSATIONDirector Compensation
The following table sets forth elements of compensation awarded to or paid by us to our directors, other than our directors who are named executive officers, during the fiscal year ended December 31, 2018:2020:
Name | Fees earned or paid in cash(1) | Stock awards(2)(3) | Option awards(2)(3) | Non-equity incentive plan compensation | Change in pension value and nonqualified compensation earnings | All other compensation(4) | Total | |||||||||||||||||||||
Milburn Adams | $ | 39,075 | $ | 37,155 | — | — | — | $ | 5,510 | $ | 81,740 | |||||||||||||||||
Robert H. Adcock, Jr. | 35,725 | 37,155 | — | — | — | 6,818 | 79,698 | |||||||||||||||||||||
Richard H. Ashley | 126,050 | 37,155 | — | — | — | 16,818 | 180,023 | |||||||||||||||||||||
Mike D. Beebe | 27,100 | 37,155 | — | — | — | 6,278 | 70,533 | |||||||||||||||||||||
Jack E. Engelkes | 133,575 | 37,155 | — | — | — | 16,818 | 187,548 | |||||||||||||||||||||
Karen E. Garrett | 35,100 | 37,155 | — | — | — | 5,208 | 77,463 | |||||||||||||||||||||
James G. Hinkle | 25,550 | 37,155 | — | — | — | 6,818 | 69,523 | |||||||||||||||||||||
Alex R. Lieblong | 13,500 | 37,155 | — | — | — | 6,818 | 57,473 | |||||||||||||||||||||
Thomas J. Longe | 118,850 | 37,155 | — | — | — | 6,818 | 162,823 | |||||||||||||||||||||
Jim Rankin, Jr. | 112,150 | 37,155 | — | — | — | 15,208 | 164,513 | |||||||||||||||||||||
Donna J. Townsell(5) | — | 583,000 | 336,500 | — | — | 180,124 | (6) | 1,099,624 |
Name |
| Fees earned or paid in cash(1) |
|
| Stock awards(2)(3) |
|
| Option awards(2)(3) |
|
| Non-equity incentive plan compensation |
| Change in pension value and nonqualified compensation earnings |
| All other compensation(4) |
| Total |
| ||||||||||||||||
Milburn Adams |
| $ | 68,100 |
|
| $ | 57,750 |
|
| $ | — |
|
|
| $ | — |
|
|
|
| $ | — |
|
|
|
| $ | 4,449 |
|
|
| $ | 130,299 |
|
Robert H. Adcock, Jr. |
|
| 56,850 |
|
|
| 57,750 |
|
|
| — |
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 7,860 |
|
|
|
| 122,460 |
|
Richard H. Ashley |
|
| 181,200 |
|
|
| 57,750 |
|
|
| — |
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 5,449 |
|
|
|
| 244,399 |
|
Mike D. Beebe |
|
| 54,000 |
|
|
| 57,750 |
|
|
| — |
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 5,449 |
|
|
|
| 117,199 |
|
Jack E. Engelkes |
|
| 199,850 |
|
|
| 57,750 |
|
|
| — |
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 5,449 |
|
|
|
| 263,049 |
|
Karen E. Garrett |
|
| 51,000 |
|
|
| 57,750 |
|
|
| — |
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 5,449 |
|
|
|
| 114,199 |
|
James G. Hinkle |
|
| 39,850 |
|
|
| 57,750 |
|
|
| — |
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 5,449 |
|
|
|
| 103,049 |
|
Alex R. Lieblong |
|
| 34,250 |
|
|
| 57,750 |
|
|
| — |
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 5,449 |
|
|
|
| 97,449 |
|
Thomas J. Longe |
|
| 157,775 |
|
|
| 57,750 |
|
|
| — |
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 5,449 |
|
|
|
| 220,974 |
|
Jim Rankin, Jr. |
|
| 171,575 |
|
|
| 57,750 |
|
|
| — |
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 5,449 |
|
|
|
| 234,774 |
|
Donna J. Townsell (5) |
|
| — |
|
|
| 57,750 |
|
|
| — |
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 417,450 |
| (6) |
|
| 475,200 |
|
(1) | Includes Company Board of Directors and committee retainers and fees, subsidiary bank director fees, subsidiary bank advisory board fees and subsidiary bank committee fees. |
(2) | Restricted stock awards and stock options are based on the grant date fair value and are calculated pursuant to the provisions of FASB ASC Topic 718 “Compensation – Stock Compensation.” On January |
(3) | As of December 31, |
(4) | Includes |
(5) |
|
(6) | Includes salary, |
18
During 2018,2020, we paid the following compensation to each of ournon-employee directors and our Chairman for their service on the holding company Board and Board committees:
an annual cash retainer of $8,000.$10,000.
an additional annual cash retainer of $2,500 to the chairmen of the Audit and Compensation Committees.
$2,0003,000 ($4,0006,000 for our Chairman of the Board) for each Board meeting attended.
$1,0001,500 ($2,0003,000 for the chairman) for the January Compensation Committee meeting.
$5001,000 ($1,0002,000 for the chairman) for each other Compensation Committee meeting attended.
$500750 ($1,0001,500 for the chairman) for each Audit and Risk Committee meeting attended.
$500750 for each Asset/Liability Committee meeting attended.
$250500 ($5001,000 for the chairman) for each Nominating and Corporate Governance Committee meeting attended.
Only ournon-employee directors and our Chairman of the Board received committee attendance fees during 2018.2020. In addition, on January 19, 2018,27, 2020, we granted each of our then-servingnon-employee directors, 1,500other than our Chairman of the Board, 3,000 restricted shares of our common stock which will vest annually in three equal installments beginning on January 19, 2019.27, 2021. The compensation paid to our Chairman of the Board and our other employee directors who are named executive officers of the Company is included in the Compensation Discussion and Analysis and the related executive compensation tables in this Proxy Statement.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
33 | www.homebancshares.com |
Certain Relationships and Related Transactions |
Certain Relationships and Related Transactions
Banking Transactions.Most of our directors and officers, as well as the firms and businesses with which they or members of their immediate families are associated, are customers of our bank subsidiary. Our bank subsidiary has engaged in a variety of loan transactions in the ordinary course of business with individuals and their families and businesses, and it is anticipated that such transactions will occur in the future. In the case of all such related party transactions in 2018,2020, each transaction was approved by either the Audit and Risk Committee, the Nominating and Corporate Governance Committee, the Board of Directors or the bank subsidiary’s board of directors. These loans were made in the ordinary course of business on substantially the same terms, including interest rates and collateral requirements, as those prevailing at the time for comparable loans with persons not related to us. In the opinion of our management, those loan transactions do not involve more than a normal risk of collectability or present other unfavorable features.
We believe that all extensions of credit by our bank subsidiary to its directors and officers and to directors and officers of the Company, either directly or as guarantors, were made in conformity with the requirements of Federal Reserve Board Regulation O. As of December 31, 2018,2020, the aggregate amount outstanding on these loans, including available borrowings, was approximately $56.6$68.8 million, of which approximately $39.4$38.7 million was attributable to the largest borrowing relationship. None of these loans arenon-accrual, past due 90 days or more, restructured or potential problems.
Other Transactions. We lease certain properties from persons who are members of our Board. During 2018,2020, the aggregate payments we made, directly or indirectly, to each of these directors for the various leases were less than $120,000. We believe the terms of each of these transactions are no less favorable to us than we could have obtained from an unaffiliated third party.
We expect we will continue to engage in similar banking and business transactions in the ordinary course of business with our directors, executive officers, principal shareholders and their associates. All proposed related party transactions are presented to the Nominating and Corporate Governance Committee of our Board of Directors for consideration and approval. The Committee does not currently have any formal policies or procedures with respect to its review, approval, or ratification of related party transactions, but considers each related party transaction or proposed related party transaction on acase-by-case basis. According to its charter, the Committee follows the definition of “related party transaction” provided in the SEC’s regulations under the Securities Act of 1933.
SECTION
www.homebancshares.com | 34 |
Delinquent Section 16(a) Reports |
Delinquent Section 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEReports
Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires each director, officer, and any individual beneficially owning more than 10 percent of the Company’s common stock to file reports on Forms 3, 4, and 5 disclosing beneficial ownership and changes in beneficial ownership of the common stock of the Company with the SEC within specified time frames. These specified time frames require Form 3 filings to be made within 10 days after the person becomes a reporting person. Changes in ownership generally must be filed on Form 4 within two business days of the transaction. Based solely on information provided toa review of such reports filed electronically with the Company bySEC and written representations from the individual directors and officers that no other reports were required, we believe that all our Section 16 filers complied with the filing requirements during the fiscal year, except that one Form 4 to report the purchase of shares of common stock by Milburn Adams and two Form 4 filings to report a sale and two purchases, respectively, of shares of common stock by Jim Rankin, Jr. were not filed timely.
35 | www.homebancshares.com |
19
Principal Shareholders of the Company |
PRINCIPAL SHAREHOLDERS OF THE COMPANYPrincipal Shareholders of the Company
The following table sets forth certain information as of January 31, 2019,2021, concerning the number and percentage of shares of our common stock beneficially owned by our directors, our named executive officers, and all of our directors and executive officers as a group, and by each person known to us who beneficially owned more than 5% of the outstanding shares of our common stock.
Information in this table is based upon “beneficial ownership” concepts described in the rules issued under the Exchange Act. Under these rules, a person is deemed to be a beneficial owner of any shares of our common stock if that person has or shares “voting power,” which includes the power to vote or direct the voting of the shares, or “investment power,” which includes the right to dispose or direct the disposition of the shares. Thus, under the rules, more than one person may be deemed to be a beneficial owner of the same shares. A person is also deemed to be a beneficial owner of any shares as to which that person has the right to acquire beneficial ownership within 60 days from January 31, 2019.2021.
Except as otherwise indicated, all shares are owned directly, and the named person possesses sole voting and investment power with respect to his or her shares. The address for each of our directors and named executive officers is c/o Home BancShares, Inc., 719 Harkrider Street, Suite 100, Conway, Arkansas 72032.
| Name of Beneficial Owner |
| Amount and Nature of Beneficial Ownership |
| Percent of Shares Outstanding (1) | ||||||||||||||||
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Shares Outstanding(1) | |||||||||||||||||||
5% or greater holders: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
BlackRock, Inc.(2) | 19,800,521 | 11.40 | % |
|
|
|
|
| 17,702,274 |
|
|
|
| 10.71 | % |
| |||||
T. Rowe Price Associates, Inc.(3) |
|
|
|
|
| 16,128,352 |
|
|
|
| 9.76 | % |
| ||||||||
The Vanguard Group | 14,464,710 | 8.36 | % |
|
|
|
|
| 13,861,867 |
|
|
|
| 8.39 | % |
| |||||
T. Rowe Price Associates, Inc.(4) | 14,777,857 | 8.50 | % | ||||||||||||||||||
Directors and named executive officers: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Milburn Adams(5) | 133,500 | * |
|
|
|
|
| 139,500 |
|
|
| * |
|
| |||||||
Robert H. Adcock, Jr.(6) | 1,481,382 | * |
|
|
|
|
| 1,469,126 |
|
|
| * |
|
| |||||||
John W. Allison(7)(8) | 6,731,541 | 3.92 | % |
|
|
|
|
| 6,703,614 |
|
|
|
| 4.06 | % |
| |||||
Richard H. Ashley(8)(9) | 2,717,314 | 1.58 | % | ||||||||||||||||||
Richard H. Ashley(8)(9) |
|
|
|
|
| 2,728,757 |
|
|
|
| 1.65 | % |
| ||||||||
Mike D. Beebe(10) | 7,000 | * |
|
|
|
|
| 13,000 |
|
|
| * |
|
| |||||||
Brian S. Davis(8)(11) | 187,007 | * |
|
|
|
|
| 245,739 |
|
|
| * |
|
| |||||||
Jack E. Engelkes(8)(12) | 383,894 | * |
|
|
|
|
| 392,692 |
|
|
| * |
|
| |||||||
Tracy M. French(8)(13) | 526,287 | * |
|
|
|
|
| 605,801 |
|
|
| * |
|
| |||||||
Karen E. Garrett(14) | 10,000 | * |
|
|
|
|
| 16,000 |
|
|
| * |
|
| |||||||
Kevin D. Hester(8)(15) | 198,295 | * |
|
|
|
|
| 235,116 |
|
|
| * |
|
| |||||||
James G. Hinkle(16) | 591,752 | * |
|
|
|
|
| 617,752 |
|
|
| * |
|
| |||||||
Alex R. Lieblong(8)(17) | 1,014,314 | * |
|
|
|
|
| 598,263 |
|
|
| * |
|
| |||||||
Thomas J. Longe(18) | 18,500 | * |
|
|
|
|
| 26,500 |
|
|
| * |
|
| |||||||
Jim Rankin, Jr.(19) | 240,338 | * |
|
|
|
|
| 217,277 |
|
|
| * |
|
| |||||||
C. Randall Sims(20) | 342,747 | * | |||||||||||||||||||
Donna J. Townsell(8)(21) | 176,407 | * | |||||||||||||||||||
Larry W. Ross(20) |
|
|
|
|
| 49,832 |
|
|
| * |
|
| |||||||||
J. Stephen Tipton(21) |
|
|
|
|
| 103,509 |
|
|
| * |
|
| |||||||||
Donna J. Townsell(8)(22) |
|
|
|
|
| 262,945 |
|
|
| * |
|
| |||||||||
All directors and executive officers as a group (19 persons)(8) | 14,961,475 | 8.70 | % |
|
|
|
|
| 14,522,612 |
|
|
|
| 8.79 | % |
|
* | Less than 1%. |
(1) | The percentage of our common stock beneficially owned was calculated based on |
(2) | Based on information as of December 31, |
20
(3) | Based on information as of December 31, |
|
(4) | Based on information as of December 31, 2020, obtained from a Schedule 13G/A filed with the SEC on or about February 10, 2021, by Vanguard Group, Inc., located at 100 Vanguard Boulevard, Malvern, Pennsylvania 19355 (“Vanguard”). Vanguard reported in its Schedule 13G/A that it has sole voting power over zero shares, shared voting power over 157,975 shares, sole dispositive power over 13,578,332 shares and shared dispositive power over 283,535 shares. The foregoing information has been included solely in reliance upon, and without independent investigation of, the disclosures contained in Vanguard’s Schedule 13G/A. |
www.homebancshares.com | 36 |
Principal Shareholders of the Company |
(5) | Includes |
(6) | Includes 79,426 shares held in Mr. Adcock’s IRA account, |
(7) | Includes |
(8) | Includes shares that may be issued upon the exercise of vested common stock options, as follows: Mr. Allison, |
(9) | Includes |
(10) | Includes |
(11) | Includes |
(12) | Includes 400 shares owned by the IRA of Mr. Engelkes’ spouse, |
(13) | Includes |
(14) | Includes |
(15) | Includes |
(16) | Includes |
(17) | Includes |
(18) | Includes 9,500 shares owned by Mr. Longe’s IRA and |
(19) | Includes |
(20) | Includes 500 shares of restricted stock. |
(21) | Includes 18,625 shares owned by Mr. Tipton’s 401(k) plan and 33,334 shares of restricted stock. |
(22) | Includes 36,666 shares of restricted stock and |
|
|
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Compensation Discussion and Analysis |
21Compensation Discussion and Analysis
COMPENSATION DISCUSSION AND ANALYSISNamed Executive Officers for 2020
Executive Summary
The following Compensation Discussion and Analysis provides information regarding the Company’s compensation program for our “named executive officers.” Our “named executive officers” for 2018 are C. Randall Sims, CEO and President, Brian S. Davis, CFO and Treasurer, 2020 are:
John W. Allison, Chairman of the Board, CEO and President
Brian S. Davis, CFO and Treasurer,
Tracy M. French, CEO and President of our bank subsidiary and
Kevin D. Hester, Chief Lending Officer (“CLO”).
J. Stephen Tipton, Chief Operating Officer
Specific information regarding the compensation paid to each named executive officer is disclosed in the Summary Compensation Table and the other compensation tables that follow beginning on page 3152 of this proxy statement. All references to shares of our common stock and to our diluted earnings per share in this Compensation Discussion and Analysis and in the tables and narrative that follow under “Executive Compensation” have been adjusted to reflect the2-for-1 split of our common stock paid to our shareholders on June 8, 2016. The discussion below includes an overview
Responding to 2020 Say-on-Pay Vote
After many years of consistently strong (from 89% to 99%) shareholder support of the Company’s executive compensation program, our “say-on-pay” resolution received only 45.9% support at our 2020 Annual Meeting.
Although this vote is advisory and non-binding, the Compensation Committee of our Board of Directors and our entire Board of Directors took these results very seriously. As a consequence of this result, the Company reached out to shareholders representing over 45 million of our outstanding common shares to obtain specific feedback regarding executive compensation-related concerns. This outreach effort involved our Chairman John Allison, Compensation Committee Chair Mike Beebe and Director of Investor Relations Donna Townsell.
In response to this feedback, the Compensation Committee has implemented a number of enhancements to our executive compensation philosophyprograms, and guiding principles,we have enhanced our disclosure regarding the factors considered by the Committee in establishing our executive compensation programs, our CEO transition in late 2019 and the history of the compensation paid to our Chairman and CEO.
A summary of the key areas of feedback we received and how we responded is provided in the chart below.
What We Heard | How We Responded |
Pay-for-Performance | |
Develop incentive plans that are performance-based utilizing selected pre-determined performance metrics, goals, or payouts formulas. Shareholders and ISS expressed concern that the Company’s annual cash program was entirely discretionary, and that equity awards to the Chairman and CEO were composed solely of time-vesting shares. | ✓ Adopted a performance-based annual cash Executive Incentive Plan for our NEOs for the 2021 performance year utilizing pre-determined performance metrics, goals and payout formulas. ✓ Utilized these metrics in evaluating 2020 performance and setting 2020 cash bonuses. ✓ Implemented a performance-based equity program for our Chairman and CEO under which two-thirds of his 2021 long-term equity incentive award is subject to pre-determined performance goals measured over a 3-year performance period relative to peer performance. One-third consists of time-based restricted shares with 3-year cliff vesting. |
Explain the Board’s rationale for selecting specific metrics or goals or its reasoning for using a different approach to executive compensation. | ✓ The Compensation Committee believes the metrics and goals utilized in its new incentive programs reflect key performance indicators that the Company has long emphasized internally in driving earnings performance and ultimately shareholder return. ✓ Further discussion of these metrics selected and the rationale for selecting such metrics is included in this Compensation Discussion and Analysis. |
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Compensation Discussion and Analysis |
Compensation Program for Chairman and CEO | |
Discuss the Board’s decision to reappoint the Chairman as the CEO in November 2019 and its view regarding the resulting CEO pay misalignment in 2019. | ✓ The Board renamed our Chairman John Allison to the CEO role upon the retirement of our former holding company CEO in November 2019, while long-term management succession plans remain under consideration. ✓ As co-founder, former CEO until 2009 and strategic leader and visionary for the Company, Mr. Allison’s total compensation is commensurate with his role as executive Chairman after not receiving a salary for the first 10 years of the Company’s history. ✓ Mr. Allison did not receive any new compensation upon reassuming the CEO role. ✓ As a result of this title change, the Board believes the 5-year historical pay-for-performance analysis for the CEO role presents a distorted view and is not reflective of the Company’s executive pay program. ✓ Further discussion is provided below in this Compensation Discussion and Analysis. |
Describe the Compensation Committee’s rationale in determining the size of the equity grant to the Chairman and CEO. | ✓ As discussed in this Compensation Discussion and Analysis, the Compensation Committee believes the Chairman’s compensation should be most heavily weighted toward equity (approximately 62.2% of total pay for 2020). ✓ The Committee believes this mix of pay best aligns his interests with those of our shareholders, while appropriately rewarding him for his strategic leadership in the Company’s growth and success, and providing him with total compensation at a level that is generally comparable to the Company’s peers. ✓ Our Chairman and CEO remains the Company’s largest individual shareholder, and thus the Committee believes his interests and perspective remain inherently aligned with our shareholders. |
Peer Group | |
Consider designating a peer group for measuring the Company’s executive compensation and financial performance and describe the Compensation Committee’s methodology for selecting those peers. | ✓ For purposes of the relative performance metrics in the Company’s new cash and equity incentive programs, the Compensation Committee has designated a peer group consisting of all U.S. bank holding companies with total assets of ranging from $10 billion to $50 billion, with certain exceptions discussed below (65 companies). ✓ For purposes of evaluating our Chairman and CEO’s compensation, the Compensation Committee utilized a smaller peer group consisting of six comparable banking organizations selected based on a combination of size, geographic location and certain performance factors. ✓ Further discussion regarding these peer groups and the Committee’s methodology for selecting the peer companies is included in this Compensation Discussion and Analysis. |
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Compensation Discussion and Analysis |
Forbes’ Best Banks in America (7 straight years | Metric | 12/31/2020 | |
Total Assets | $16.40 billion | ||
Net Income | $214.5 million | ||
Net Income, as adjusted (non-GAAP)(1) | $305.9 million | ||
Forbes’ World’s Best Banks 2020 (1st ever listing) | Total Revenue (net) | $694.4 million | |
Return on Average Assets (ROA) | 1.33% | ||
ROA, as adjusted (non-GAAP)(1) | 1.90% | ||
Net Interest Margin | 4.02% | ||
Record Quarterly Metrics in 2020 Q2 Net Interest Income Q3 Total Revenue (net) Q4 Net Income and EPS | Return on Average Common Equity | 8.57% | |
Return on Average Tangible Common Equity Excluding Intangible Amortization (non-GAAP)(1) | 14.59% | ||
Diluted Earnings Per Share | $1.30 | ||
Efficiency Ratio | 42.63% | ||
Total Risk-Based Capital Ratio | 17.80% | ||
(1) Non-GAAP financial measure. See Appendix A to this Proxy Statement for further information and a reconciliation to the most directly comparable GAAP financial measure. |
2019 CEO Transition and Pay-for-Performance Alignment
Our Chairman of the Board, CEO and President, John W. Allison, co-founded the Company in 1998 and has served as executive Chairman of the Board throughout the Company’s history. Mr. Allison has provided invaluable strategic direction and management of a talented team of bankers leading the Company to exponential growth since its founding, the successful completion of over 20bank and loan portfolio acquisitions, and sustained strong financial performance that included a period of over 30 consecutive quarters of record quarterly earnings and resulted in Centennial Bank’s recognition in the Forbes’ “Best Banks in America” rankings for 7 years in a row, including the #1 Best Bank in America for 2018 and 2019. In addition to his role as Chairman of the Board, Mr. Allison served as the Company’s Chief Executive Officer from 1998 to 2009.
During the first 10 years of the Company’s history, Mr. Allison declined to receive a salary or bonus as Chairman and CEO and instead relied on dividends and appreciation in the value of his existing stock holdings and stock option awards in an effort to best align his interests with those of our shareholders. Based on a recommendation by the Compensation Committee, the Company began paying Mr. Allison an annual base salary beginning on November 1, 2008, and made him eligible for an annual discretionary cash bonus in light of the Company’s performance under his leadership over those first 10 years. Since 2014, following the Company’s 2013 acquisition of Liberty Bancshares, which represented the then largest ever merger of two Arkansas-based banks, the Compensation Committee has awarded a majority of Mr. Allison’s compensation in the form of equity awards of restricted stock. The purposes of these equity awards have been to maintain alignment of the Chairman’s interests with those of our shareholders, appropriately reward him for his strategic leadership in the Company’s growth and performance, and provide total compensation at a level that is generally comparable to the Company’s peers.
In 2009, Mr. Allison decided to step down from his role in the day-to-day management of the Company, and the Board of Directors promoted C. Randall Sims, then CEO and President of the Company’s bank subsidiary, Centennial Bank, to be the Company’s Chief Executive Officer, while Mr. Allison remained in the executive Chairman’s role. Mr. Sims served as Chief Executive Officer of both the Company and Centennial Bank until January 2015, when Tracy M. French was promoted to President and CEO of Centennial Bank. Mr. Sims remained Chief Executive Officer of the Company until his retirement in November 2019.
Upon Mr. Sims’ retirement, the Board of Directors determined it was in the best interests of the Company and its shareholders to reappoint Mr. Allison as the Company’s CEO and President while the Board continues to evaluate the Company’s long-term management succession plans. Mr. Allison did not receive any additional compensation in connection with his re-assumption of the CEO role. Therefore, while Mr. Allison’s total compensation in 2019 was higher than Mr. Sims’ 2018 total compensation, reflecting Mr. Allison’s strategic vision and leadership as the Company’s executive Chairman, the Company believes that certain pay-for-performance analytical models utilized by Institutional Shareholder Services (ISS) comparing the Company’s CEO compensation over a specified
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Compensation Discussion and Analysis |
time period to the Company’s total shareholder return (TSR) over the same period present an inaccurate and distorted picture of the Company’s executive compensation practices. The Company also believes that TSR does not always accurately reflect the performance of the Company or our management team nor appropriately take into account macroeconomic factors that are beyond the Company’s control.
The Compensation Committee believes Mr. Allison’s compensation appropriately reflects his contributions and responsibilities to the Company’s growth and performance and incentivizes strong future performance in a manner that aligns with shareholder interests. The Committee also noted that Mr. Allison’s total compensation in 2019 and 2020 was below the median of 2019 total CEO compensation among the Company’s peer group discussed below.
Aligning Executive Compensation with Metrics that Drive Shareholder Value
Following the 2020 say-on-pay vote results, the Compensation Committee has reexamined its efforts to align our executive compensation, particularly for our CEO, with the interests of our shareholders by using a compensation mix of both fixed and variable components, and by delivering value to executives that reward performance. In addition to a fixed base salary with benefits, limited executive perquisites and certain pension benefits and other compensation, the Committee has enhanced the variable components of our executive pay program by:
Formally adopting an annual cash bonus plan for all NEOs for 2021 with predetermined performance goals and payout formulas,
Utilizing those metrics for evaluating 2020 performance and setting 2020 annual cash bonuses, and
Issuing two-thirds of the CEO’s long-term equity incentive compensation for 2021 in the form of performance-based restricted shares which vest at the end of a three-year performance period based on the Company’s performance relative to its peers in certain key financial metrics that the Committee believes drive strong earnings and shareholder value.
As a significant portion of the CEO’s total compensation consists of long-term equity awards (approximately 62% in 2020), these changes will significantly increase the portion of the CEO’s compensation that is variable and at-risk beginning in 2021.
2020 CEO Compensation Elements | 2021 CEO Compensation Elements |
Salary and Other | Salary and Other |
Annual Discretionary Bonus (based on performance metrics) | Annual Incentive Bonus (subject to pre-established performance metrics) |
Time-vested Restricted Stock | Performance-based Restricted Stock (67%) |
Time-vested Restricted Stock (33%) |
The Compensation Committee recognizes the importance of compensation and a summaryperformance and seeks to reward performance with cost-effective compensation that aligns employee efforts with the business strategy of our executivethe Company and with the interest of the shareholders. The Committee also recognizes that the compensation awards for 2018.should assist the Company in attracting and retaining key executives critical to its long-term success.
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Compensation Discussion and Analysis |
Our compensation program is designedThe following principles guide the Committee:
Compensation levels should be sufficiently competitive to attract and retain key management for the bank and holding company. The Company hires experienced bank executives that have a track record in the market. Competition is strong for these talented and our bank subsidiary,experienced people. The compensation package must be strong and competitive in that market.
Compensation should relate directly to performance and responsibility. Compensation should vary with the performance and responsibility of the individual. It should always be proportional to the executive’s contribution to the Company’s success.
Non-equity incentive compensation should motivate high performance. The Company uses annual cash bonuses to motivate individuals with roles and responsibilities that give them the ability to directly impact the Company’s performance and strategic direction. Annual incentive compensation should not cause the individual to take excessive and unnecessary risks that would threaten the institution.
The Company’s Stock Option and Performance Incentive Plan should align management with a view towardshareholders’ interests. Awards of restricted stock, stock options or other forms of long-term compensation should encourage management to focus on the long-term growth and success of the Company. It should provide management with a meaningful stake in the Company and align management with the interestsprospects of our shareholders. Our executive compensation consists of base salary, short-term cash bonus incentive awards,a long-term equity incentive awards, retirement and insurance benefit plans and certain perquisites. The short-term incentive awards are based on the Company’s or our bank subsidiary’s financial performance compared with the Company’s or the bank’s strategic goals for each year or on the executive’s contributions to other operational achievements during the year. Our long-term incentive awards, which may be granted on a fixed basis or a performance basis tied to annual and/or multi-year cumulative performance goals of the Company or our bank subsidiary, encourage the alignment of senior management’s goals with those of our shareholders, with the ultimate goal of increasing overall shareholder value. The opportunity to earn annual cash bonus awards and long-term equity awards provides a mix of variable compensation that integrates the Company’s short-term and long-term goals, as well as helps to attract and retain executive officers.career.
Salary payments to our named executive officers during 2018 ranged from $310,000 to $450,000, which compares to a range of $295,000 to $410,000 in 2017. For 2018, we paid annual cash bonuses to each of the named executive officers in amounts ranging from 8.1% to 111.5% of the executive’s 2018 base salary. These cash bonus awards were based primarily on the officers’ contributions to the Company’s substantial net income growth in 2018 of $165.3 million, or 122.4%, the completion of the acquisition of Shore Premier Finance and being named the top bank on Forbes’ 2018 “Best Banks in America” list.
The Compensation Committee utilizes the Company’s AmendedRole and Restated 2006 Stock Option and Performance Incentive Plan for issuing long-term equity incentive awards to our executive officers as a means to reward past performance, provide a long-term incentive for future performance and align management with the interests of our shareholders. The Committee uses long-term equity incentive awards most frequently in the compensation of our Chairman, Mr. Allison, to maintain close alignment between his interests and those of our shareholders and to reward his leadership in the growth and success of the Company. Mr. Allison remains the Company’s largest individual shareholder, owning 3.92% of our outstanding common stock. The Compensation Committee has historically issued annual awards of restricted shares of our common stock to our Chairman, including in each of the past three years. These awards have primarily reflected and provided incentive for Mr. Allison’s continued leadership in connection with the Company’s successful bank acquisitions and strong financial performance during this period and the preceding years. In 2018, the Committee awarded Mr. Allison 125,000 restricted shares to vest in two installments over a three-year period. In January 2019, the Committee granted Mr. Allison 150,000 restricted shares to vest in three annual installments over a three-year period.
22
The Compensation Committee also periodically issues long-term equity incentive awards to our other named executive officers, with its recent practice being to issue such awards approximately every three years. The Committee utilizes both stock options and restricted shares subject to either time-based vesting or performance goals, or a combination of performance-based and time-based vesting. In July 2018, the Committee granted equity incentive awards to Messrs. Sims, Davis, French and Hester and other key Company and bank employees. The awards to our named executive officers represent an aggregate of 375,000 shares of our common stock consisting of 125,000 performance-based restricted shares and 250,000 performance-based stock options. Vesting of these awards is subject to the Company’s achievement of average adjusted diluted earnings per share of $0.50 per share for four consecutive quarters or $2.00 total adjusted diluted earnings per share over four consecutive quarters, with vesting to occur over a five-year period following attainment of the performance goal. The Committee issued similar equity awards to Messrs. Davis, French and Hester in August 2015 representing an aggregate of 480,000 shares of our common stock consisting of restricted shares, performance-based restricted shares and performance-based stock options. Vesting of these awards was subject to a specified diluted earnings per share goal, which was met on December 31, 2016, and additional fixed vesting over a five-year period following the achievement of the performance goal. From time to time, the Committee grants additional restricted stock and stock option awards to our named executive officers, other than our Chairman, in certain circumstances. No such awards were granted in 2018.
The Committee believes its practices with respect to the issuance of equity awards to our named executive officers provide appropriate long-term performance incentives and further align the interests of our executive officers with those of our shareholders.
Overview of Compensation Philosophy and Program
The Compensation Committee, composed entirely of independent directors, administers the Company’s executive compensation program. The role of the Committee is to oversee the Company’s compensation and benefit plans and policies, administer its stock plans, and review and approve annually all compensation decisions related to the named executive officers and our Board members. The Committee reports its compensation decisions to the Board for their review or recommends such decisions for approval by the Board.
The Committee recognizes the importance of compensation and performance and seeks to reward performance with cost-effective compensation that aligns employee efforts with the business strategy of the Company and with the interest of the shareholders. The Committee also recognizes that the compensation should assist the Company in attracting and retaining key executives critical to its long-term success.
The following principles guide the Committee:
Compensation levels should be sufficiently competitive to attract and retain key management for the bank and holding company. The Company hires experienced bank executives that have a track record in the market. Competition is strong for these talented and experienced people. The compensation package must be strong and competitive in that market.
Compensation should relate directly to performance and responsibility.Compensation should vary with the performance and responsibility of the individual. It should always be proportional to the contribution to the Company’s success.
Short-term incentive compensation should motivate high performance.The Company uses the cash bonus plan to motivate individuals with roles and responsibilities that give them the ability to directly impact the Company’s performance and strategic direction. The incentive compensation should not cause the individual to take excessive and unnecessary risks that would threaten the institution.
The Company’s Stock Option and Performance Incentive Plan should align management with shareholders’ interests.Awards of stock options, restricted stock or other forms of long-term compensation should encourage management to focus on the long-term growth and success of the Company. It should provide management with a meaningful stake in the Company and the prospects of a long-term career.
23
The Committee receives updates on our business results from management and reviews historical and projected financial information as necessary to assess whether executive compensation continues to be properly balanced with and supportive of our business objectives. The Committee may also review various financial and operating data, compensation information, including reported revenue, profit levels, market capitalization and disclosed governance practices regardingcomparably-sized bank holding companies in a peer group to assess our comparative performance and organizationalcompensation structure. The Committee uses management updates and peer information as tools to evaluate the connection between executive compensation and our performance as a business. ThisThe Committee has historically reviewed this information is reviewed in a subjective manner. There ismanner with no implied direct or formulaic linkage between peer information and our compensation decisions.
The Committee takesmay evaluate various financial performance criteria such as net income, earnings per share, return on assets, growth in assets (including through acquisitions), asset quality, return on equity, net interest margin, efficiency ratio, net cash flow and other metrics, as well as regulatory capital ratios and examination results. The Committee believes that the view that appropriate connections betweenfollowing metrics in particular are key indicators of the Company’s financial performance and has most closely evaluated these measures, in addition to the overall earnings results and asset growth of the Company, in establishing incentive compensation decisions:
Return on assets,
Return on tangible common equity,
Efficiency ratio,
Net interest margin, and performance objectives can encourage our executives to make decisions that will result in significant positive short-term and long-term returns for our business and our shareholders without providing an incentive either to take unnecessary risks or to avoid opportunities to achieve long-term benefits even though they may reduce short-term benefits for the named executive officers, the business or our shareholders.
Net charge-off ratio (i.e., asset quality).
Based on these reports and assessments, the Committee annually evaluates both the short-term and long-term performance compensation for the named executive officers to ensure alignment with our business objectives. The Committee also works closely with management regarding long-term equity incentives, including performance-based equity awards, which emphasize shareholder returns while providing enhanced retention value for key executives.
Because the Compensation Committee believes the metrics listed above are key drivers of the Company’s earnings results and value for the Company’s shareholders, the Committee utilized these measures specifically in evaluating our named executive officers’ performance for 2020 and in designing the Company’s 2021 performance-based incentive programs. While total shareholder return (TSR) can be a useful measure in aligning compensation with shareholder value, the Committee believes that macroeconomic factors, overall market volatility and other external forces which can affect a company’s stock price from period to period substantially limit the effectiveness of TSR in evaluating whether the Company’s performance is in line with its strategic goals.
In comparing the Company’s performance to its peers, the Compensation Committee has designated a broad-based peer group of 65 companies consisting of all U.S. banks and bank holding companies with $10 billion to $50 billion in total assets, excluding banks and bank holding companies in Puerto Rico as well as companies and institutions that are not traditional banks primarily offering both depository and lending services. The Committee believes evaluating performance against a larger peer group of comparably-sized institutions aligns with the Company’s expectations of being a strong performing bank nationally, including among institutions with considerably greater assets or market capitalization.
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Compensation Discussion and Analysis |
Benchmarking Against A Peer Group
The Committee in the past has compared total compensation levels for the executive officers to the compensation paid to executives in a peer group. The Committee annually considers the need for a peer analysis and reviews peer compensation as the Committee deems necessary. In 2019, the Committee informally reviewed and considered certain internally-compiled peer company compensation data in determining the base salary increases for 2020. The Committee did not perform a peer compensation review or engage a compensation consultant during 2018 to advise the Committee on setting the compensation of our executive officers. For 2018, the Committeealso evaluated and considered the overall performance and achievements of the Company and our bank subsidiary, as well as each executive’s individual performance and the Chairman’s recommendation for such executive (other than himself). The Committee did not target 2020 salaries or total compensation to any particular benchmark based on a peer group.
ConsiderationFor 2021, the Committee utilized a peer group of Shareholder Advisory“Say-on-Pay” Votesix comparable banks and bank holding companies to review and analyze our Chairman and CEO’s compensation as compared to market practices. This group of banking organizations was compiled by considering banks with total assets within a range of approximately $10 billion to $50 billion and selecting a subset based on regional geographic proximity, including two Arkansas-based peers, and 2019 financial performance in certain key metrics.
AtThe Company believes this peer group is representative of those companies that are regional leaders in their markets and with which the Company competes for executive talent. The members of this peer group are:
• | Bank OZK | • | Renasant Corporation |
• | Independent Bank Group | • | Simmons First National Corporation |
• | PacWest Bancorp | • | Western Alliance Bancorporation |
The Compensation Committee did not target 2021 salaries or total compensation to any particular benchmark based on this peer group. However, the Committee believes that the Chairman and CEO’s total compensation should be generally comparable and competitive with other similarly situated banking companies who the Company competes with for customers and executive talent and with whom the Company performs on a comparable level. The Committee analyzed the 2019 compensation amounts and practices of the peer group CEOs and observed that Mr. Allison’s annual total compensation in 2019 and 2020 was below the median of the 2019 annual total compensation of the peer group CEOs. For more accurate comparability, Western Alliance’s Executive Chairman and former CEO, whose 2019 total compensation was less than that of their the current CEO, was substituted in place of Western Alliance’s current CEO. Based on this analysis, the Committee determined not to make any significant changes in the potential compensation amounts for our Annual MeetingChairman and CEO for 2021.
For our other named executive officers, the Committee informally reviewed and considered internally-compiled compensation data, the overall performance and achievements of the Company and our bank subsidiary, each executive’s individual performance, experience level and contributions to the Company’s performance, as well as the Chairman’s recommendation for such executive in 2018,determining the shareholders approved,base salary increases for 2021.
The Compensation Committee did not engage a compensation consultant during 2020 to advise the Committee on an advisory basis,setting the compensation of our named executive officersofficers.
Employment Agreements
On March 1, 2021, we entered into an employment agreement with our Chairman and CEO, John W. Allison, providing for 2017,his continued service as disclosed in last year’s proxy statement (91.4% of votes cast). We value this endorsement by our shareholders of our executive compensation policies.Chairman or Chairman Emeritus over the next 10 years. The Compensation Committee has consideredbelieves that this agreement is necessary to set forth the resultsterms of this advisory vote onMr. Allison’s continued service as executive compensation, and we have followed the same philosophy in determining our current executive compensation of maintaining competitive executive pay that rewards performance and encourages management to focus on the long-term growth and success of the Company by providing themin light of all relevant factors, which include his leadership experience and history as the Company’s founding Chairman and CEO and largest individual shareholder, desired terms and conditions of his continued employment, and the strategic importance of his position with the Company. See Executive Compensation – Employment Agreements for a discussion of the terms of this agreement. We do not currently have an equity stake in the Company that aligns their interestsemployment agreement with our shareholders. The Company has included in this Proxy Statement a similar proposal providing for an advisory vote to approve the compensationany of our executives in accordance with the shareholders’ recommendation.See “PROPOSAL TWO – ADVISORY(NON-BINDING) VOTE APPROVING EXECUTIVE COMPENSATION.”other named executive officers.
The key elements of the Company’s executive compensation program are:
Base salary
Short-termAnnual cash incentives (bonuses)
Long-termEquity incentive compensation (options/restricted stock)(restricted stock and stock options)
Retirement and insurance benefit plans
Certain defined perquisites
The Company tries to determine the proper mix of base, short-term and long-term incentive compensation. In our markets there are a number of national, regional and community banks. The competition for experienced executives in banking is strong. The Committee understands that being a public company that can offer equity incentives and a community banking philosophy puts the Company in a competitive position for strong management. The public market for the stock and its easily accessible value is a positive factor in aligning management’s interest with that of the shareholders and making them meaningful stakeholders.
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Compensation Discussion and Analysis |
24
Base Salary
Base salaries historically have been targeted at comparable levels for peer companies and adjusted to recognize varying levels of responsibility, individual performance, individual banking regionCompany performance if appropriate and internal equity issues. The Committee reviews the base salaries of the executive officers annually. This base salary provides the foundation for a total compensation package that is required to attract, retain and motivate the officers. Generally, base salaries are not directly related to specific measures of performance, but are determined by experience, the scope and complexity of the position, current job responsibilities, and salaries of competing banks. The Committee did not use specific benchmarking but did informally review peer compensation data in 2018. Basedetermining annual base salaries for our named executive officers in 2018 ranged from $310,0002020 and 2021.
In January 2020, the Committee approved a 21.8% annual base salary increase for Mr. Sims as CEO of the holding company to $450,000 for Mr. French as CEO of our bank subsidiary, which reflectMr. French, following his election as Chairman of our bank subsidiary in November 2019. The Committee approved base salary increases of approximately 5%2.4% to 10% over our named executive officers’ base salaries in 2017. Base salaries for our named executive officers for 2019, approved by the Committee in January 2019, reflect an increase of 12.5% for our Chairman and increases of approximately 2.0%11.1% for each other named executive officer.
Short-termIn May 2020, our Chairman and CEO, Mr. Allison, voluntarily reduced his annual base salary by $100,000, or 20%, to $400,000 following the results of our 2020 say-on-pay vote. On March 1, 2021, the Company entered into an employment agreement with Mr. Allison for his continued service as our executive Chairman under which he will receive an annual base salary of $500,000 beginning in 2021 or such greater amount as the Committee may determine from time to time. The terms of the Chairman’s employment agreement (the “Chairman’s Agreement”) are discussed in more detail under Executive Compensation – Employment Agreements below. In approving the Chairman’s Agreement, the Committee decided to restore Mr. Allison’s annual base salary to his initial 2020 base salary level based on his leadership, experience and direction, while maintaining a salary level that is generally below comparable peer group salaries in light of other elements of his total compensation.
|
| 2020 Base Salary ($) |
| Increase (%) |
| 2021 Base Salary ($) | ||||||||||||
John W. Allison (1) |
|
|
| 500,000 |
|
|
|
|
| — |
|
|
|
|
| 500,000 |
|
|
Brian S. Davis |
|
|
| 340,000 |
|
|
|
|
| 2.9 |
|
|
|
|
| 350,000 |
|
|
Tracy M. French |
|
|
| 559,000 |
|
|
|
|
| 7.3 |
|
|
|
|
| 600,000 |
|
|
Kevin D. Hester |
|
|
| 393,000 |
|
|
|
|
| 4.3 |
|
|
|
|
| 410,000 |
|
|
J. Stephen Tipton |
|
|
| 375,000 |
|
|
|
|
| 6.7 |
|
|
|
|
| 400,000 |
|
|
(1) Mr. Allison voluntarily reduced his 2020 base salary to $400,000 effective May 8, 2020.
Annual Cash Incentives
An annual cash bonus plan is intended to reward individual performance for that year. The Compensation Committee evaluates a number of performance criteria for the Company or the bank and considers the overall profitability of the Company and our bank subsidiary before determining the awards. Specifically, the Committee reviews the individual performance of the officer, along with the goals and performance of the Company and the bank relative to the officer’s role and responsibilities. ForIn evaluating our named executives, who are officers of our bank subsidiary, the Committee reviewshistorically has reviewed criteria such as net income, earnings per share, return on assets, growth in assets (including through acquisitions), asset quality, return on equity, grossnet interest margin, net income, operating income,efficiency ratio, net cash flow and other metrics, as well as regulatory capital ratios and examination results. In evaluating an executive officer of the parent, the Committee reviews the goals of the parent company including shareholder return, earnings per share, and the other criteria noted above. The final consideration is the overall profitability of the Company. The Committee then determines the amount of the awards. In each case, the Committee makeshistorically has made the determination at their discretion as to the issuance and amount of any award.
Based on shareholder feedback following our 2020 Annual Meeting, the Compensation Committee reevaluated its approach to annual cash bonus awards and has established an annual cash incentive program based on specific performance criteria and payout formulas utilizing certain performance measures which the Committee and the Company have long viewed as key indicators of the Company’s overall financial strength and performance.
2020 Annual Bonus Determination
In determining the 2020 annual cash bonus awards, the Compensation Committee considered a combination of absolute and relative performance measures focused on certain Company financial metrics as well as an individual performance component. These measures focused on the Company’s 2020 financial results for return on average assets, return on tangible common equity (a non-GAAP measure), efficiency ratio, net charge-off ratio and net interest margin. While specific performance targets were not pre-established at the beginning of the 2020 performance year, the Committee evaluated the Company’s 2020 year-end performance for each metric compared to certain absolute and relative performance levels compared to a peer group that the Committee considered to be sufficiently rigorous and consistent with the Company’s high financial performance expectations. Relative performance criteria were measured against a peer group consisting of 65 banking organizations comprising all U.S. banks and bank holding companies with $10 billion to $50 billion in total assets, excluding banks and bank holding companies in Puerto Rico as well as companies and institutions that are not traditional banks primarily offering both depository and lending services.
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Compensation Discussion and Analysis |
The Committee determined that the Chairman and CEO should be eligible to receive an annual cash bonus representing up to 100% of his original 2020 annual base salary and our other named executive officers should be eligible to receive an annual cash bonus representing up to 50% of their 2020 annual base salaries, subject to the applicable performance criteria. In addition, the Committee determined that, if all the performance criteria were met, each named executive officer other than the Chairman and CEO would receive an additional cash bonus representing 10% of such executive’s 2020 base salary to be paid in January 2023 subject to continued employment as an additional long-term incentive for the executive’s continued service to the Company.
The various performance measures for 2020, including the targeted and actual performance level for each component, are provided in the table below.
|
|
| Relative Weighting |
|
|
| Target Performance (Absolute or peer |
| Actual Performance (Absolute or peer | |||||||||||||||
Performance Measure |
| CEO | Other NEOs |
| group percentile) |
| group percentile) | |||||||||||||||||
Absolute Performance Measures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on Average Assets, as adjusted (1) |
|
|
| 20 | % |
|
|
|
| 10 | % |
|
|
| ≥ 1.20% |
|
|
|
|
| 1.90 | % |
| |
Return on Tangible Common Equity, as adjusted (2) |
|
|
| 20 | % |
|
|
|
| 10 | % |
|
|
| ≥ 10% |
|
|
|
|
| 20.41 | % |
| |
Efficiency Ratio, as adjusted (3) |
|
|
| 20 | % |
|
|
|
| 10 | % |
|
| Under 47% |
|
|
| 40.36 | % |
| ||||
Net Charge-off Ratio (4) |
|
|
| 20 | % |
|
|
|
| 10 | % |
|
|
| ≤ 1% |
|
|
|
|
| 0.10 | % |
| |
Individual Performance Component (5) |
|
|
| 20 | % |
|
|
|
| 10 | % |
|
|
|
| — |
|
|
|
|
| — |
|
|
Peer Comparison Performance Measures (6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on Average Assets, as adjusted (1) |
|
|
| — |
|
|
|
|
| 12.5 | % |
|
| 50th or above |
|
| 96th |
|
| |||||
Return on Tangible Common Equity, as adjusted (2) |
|
|
| — |
|
|
|
|
| 12.5 | % |
|
| 50th or above |
|
| 95th |
|
| |||||
Efficiency Ratio, as adjusted (3) |
|
|
| — |
|
|
|
|
| 12.5 | % |
|
| 50th or above |
|
| 95th |
|
| |||||
Net Interest Margin (7) |
|
|
| — |
|
|
|
|
| 12.5 | % |
|
| 50th or above |
|
| 91st |
|
|
(1) Return on average assets is calculated by dividing the Company’s net income by average total assets for the year. Return on average assets, as adjusted, is a non-GAAP measure which excludes fair value adjustment for marketable securities, special dividend from equity investment, provision for credit losses, branch write-off expense, unfunded commitment expense, outsourced special project expense and merger and acquisition expenses.
(2) Return on tangible common equity is a non-GAAP measure which is calculated by dividing the Company’s net income by the result of average equity minus average goodwill, core deposits and other intangible assets. Return on tangible common equity, as adjusted, excludes fair value adjustment for marketable securities, special dividend from equity investment, provision for credit losses, branch write-off expense, unfunded commitment expense, outsourced special project expense and merger and acquisition expenses.
(3) Efficiency ratio is calculated by dividing non-interest expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis and non-interest income. Efficiency ratio, as adjusted, is a non-GAAP measure which is calculated by dividing non-interest expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis and non-interest income, excluding fair value adjustment for marketable securities; gain (loss) on OREO; gain (loss) on branches, equipment and other assets, net; special dividend from equity investment; branch write-off expense; unfunded commitment expense; merger and acquisition expenses; and outsourced special project expense.
(4) Net charge-off ratio equals the percentage of the Company’s net charge-offs (recoveries) to average loans outstanding and is calculated by dividing net charge-offs to average loans outstanding.
(5) The individual performance component is evaluated at the Committee discretion based on the individual’s performance and contributions to the Company during the performance year.
(6) Because the peer group financial results as of December 31, 2020 were not yet available when the Committee met to determine 2020 bonus amounts, the Committee applied these performance measures based on the Company’s and the peer group’s performance as of and for the nine-month period ended September 30, 2020 to determine whether each applicable performance target was met. The bonus amounts awarded based on such performance measures are subject to clawback if the Committee determines that the performance measure was not satisfied once the peer companies’ fourth quarter financial results are received. Actual performance for the peer comparison performance measures is based on peer group data provided by S&P Global Market Intelligence. Peer company financial data does not include certain adjustments included in the Company’s calculation of its performance as described above.
(7) Net interest margin means the Company’s annualized net interest margin on a fully taxable equivalent, or FTE, basis.
45 | www.homebancshares.com |
Compensation Discussion and Analysis |
The following table shows the eligible bonus award for each named executive officer, expressed as a percentage of annual base salary, and actual bonus award earned by each named executive officer based on the level of achievement of the Company’s performance metrics during 2020, in dollar amount and as a percentage of the executive’s base salary.
|
|
|
|
|
| 2020 Bonus Earned (1) | ||||||||||||
Name |
| Target (1) (% of Base Salary) |
| 2020 Bonus Earned(1) ($) |
| (as % of Base Salary) | ||||||||||||
John W. Allison |
|
|
| 100 | % |
|
|
|
| 500,000 |
| (2) |
|
|
| 100 | % |
|
Brian S. Davis |
|
|
| 60 | % |
|
|
|
| 204,000 |
|
|
|
|
| 60 | % |
|
Tracy M. French |
|
|
| 60 | % |
|
|
|
| 335,400 |
|
|
|
|
| 60 | % |
|
Kevin D. Hester |
|
|
| 60 | % |
|
|
|
| 235,800 |
|
|
|
|
| 60 | % |
|
J. Stephen Tipton |
|
|
| 60 | % |
|
|
|
| 225,000 |
|
|
|
|
| 60 | % |
|
(1) For each named executive officer, other than Mr. Allison, subject to all performance criteria being met, the executive was eligible to receive an annual cash bonus representing 50% of the executive’s 2020 base salary payable immediately plus an additional cash bonus representing 10% of the executive’s 2020 base salary payable in January 2023.
(2) Based on Mr. Allison’s original 2020 base salary of $500,000. Mr. Allison voluntarily reduced his annual base salary by $100,000, or 20%, to $400,000 effective May 8, 2020.
2021 Executive Incentive Plan
On March 1. 2021, the Compensation Committee adopted the Company’s 2021 Performance-Based Executive Incentive Plan (the “Executive Incentive Plan’) which formalizes the annual cash incentive program utilized by the Committee in determining the 2020 annual cash bonus awards and establishes pre-determined performance goals for the 2021 performance year. The Executive Incentive Plan utilizes the same performance measures, weighting and payout amounts and structure as described above in connection with the 2020 annual cash bonuses, based on 2021 annual base salaries for 2018each executive. The performance measures may be adjusted to exclude unusual or infrequently occurring items and the effects of changes in applicable laws or accounting principles as the Committee deems appropriate.
The Executive Incentive Plan provides for potential incentive cash bonuses of up to 100% of 2021 annual base salary for the Chairman and CEO and up to 50% of 2021 annual base salary for each other named executive officer, plus an additional cash bonus amount equal to 10% of ourbase salary for the named executive officers in amounts rangingother than the Chairman and CEO if all performance criteria are met, which is payable three years from 8.1% to 111.5%the beginning of the performance period. The additional bonus is designed to serve as an additional long-term incentive for each executive’s 2018 base salary. Thesecontinued service with the Company.
As with the 2020 bonuses, if the Committee has received the 2021 year-end financial results for the Company but year-end financial results for the peer group are not yet available, the Committee may apply the peer comparison performance measures based on the Company’s and the peer group’s performance as of and for the nine-month period ended September 30, 2021 to determine whether each applicable performance target was met. If any bonus amounts are awarded based on September 30th peer performance comparisons, any such bonus amounts will be subject to clawback if the Committee determines that the performance measure was not satisfied once the peer companies’ fourth quarter financial results are received. Certain performance measures may be adjusted to exclude unusual or infrequently occurring items and the effects of changes in applicable tax laws or accounting principles as the Committee deems appropriate.
Under the clawback provision of the Executive Incentive Plan, all bonus amounts paid will also be subject to clawback in the event the Company restates its financial statements and the Committee determines that the cash bonus awards werepaid to the executive officer would not have been paid had it been based primarily on the officers’ contributionsrestated results, in the Committee’s discretion if the cash bonus award would not have been made had the Committee known of an action or omission by the executive, or otherwise if required under any Company clawback policy in effect from time to the Company’s substantial net income growth in 2018 of $165.3 million, or 122.4%, the completion of the acquisition of Shore Premier Finance and being named the top bank on Forbes’ 2018 “Best Banks in America” list.time.
Long-term IncentivesEquity Incentive Compensation
Consistent with the Company’s philosophy that favors compensation based upon performance, long-term incentives comprise a significantthe Compensation Committee believes equity incentive awards are an important component of total compensation. In 2012,The Committee utilizes the Board of Directors adopted and the shareholders approved theCompany’s Amended and Restated 2006 Stock Option and Performance Incentive Plan (the “Plan”). In 2016 to grant shares of restricted stock and 2018, the shareholders approved amendmentsnonqualified stock options to our directors, executive officers and other key employees in an effort to link future compensation to the Plan to increase the number of shares authorized for issuance under the Plan, and in 2017, the shareholders reapproved the material termslong-term financial success of the performance goals under the Plan. The purpose of the Plan isCompany. Equity-based awards granted to our executive officers and other key employees and are intended to attract and retain highly qualified officers directors, and key employees, to provide incentives to enhance job performance and to encourage those employeespersons to improve our business results. The Plan is administered by our Compensation Committee. Subjectresults, and to enable them to participate in the termslong-term growth and success of the Plan,Company through an equity interest in the Committee may select participants to receive awards, determine the types, terms and conditions of awards and interpret provisions of the Plan.Company.
www.homebancshares.com | 46 |
Compensation Discussion and Analysis |
It is the policy of the Committee to award grants with an exercise price set at the fair market value on the date of the grant. The Company does not have a formal policy, but has an established practice described below, with respect to the granting of equity compensation. The Company does not have a policy or practice of timing option or restricted stock grants to coordinate with the release of materialnon-public information. information or timing the release of such information to affect the value of executive compensation. The Committee evaluates opportunities under the Plan along with the annual setting of salaries and awarding bonuses.bonuses and from time to time considers and grants awards to executive officers and key employees at other times during the calendar year in conjunction with the establishment of new Company-wide strategic goals or other circumstances. The Committee will also consider awards under the Plan if appropriate in recruiting a new employee.
TheHistorically, the Committee has historically usedgranted both regular (time-based) and performance-based restricted shares and nonqualified stock options. Awards granted on a regular (or fixed) basis carry a set vesting schedule based on a certain time period as determined by the Committee. Performance-based awards are payable in recognition of achievement of certain annual and/or cumulative performance goals of the Company or our bank subsidiary based on one or more designated performance criteria over a period of time of at least one year.
Performance-based equity awards granted by the following business criteria,Committee have historically been based on a consolidated basisquarterly, annual and/or with respect to specified banking regions (except with respect to the total shareholder return andcumulative diluted earnings per share criteria),or asset growth targets designed to align with corporate strategic goals and incentivize record-setting earnings performance or the successful completion of strategic acquisitions. The Committee may, however, consider various financial performance measures similar to the criteria evaluated in connection with the Company’s annual cash bonus program in establishing performance targets or in determining the size of equity compensation awards. The equity awards (both fixed and performance-based) typically have been based on a vesting period of three to seven years. Under the Plan, the Committee must certify in writing that all performance goals and other material terms of a performance-based award have been met before the named executive officer may receive payment for performance-based awards:such award.
Deductibility of Equity Compensation
shareholder return;
return on assets;
growth in assets;
25
asset quality;
return on equity;
earnings per share;
net income; and
operating income.
Prior to 2018, the Company’s stock option grants and certain restricted stock awards to covered employees were generally intended to comply with Section 162(m) of the Internal Revenue Code. Section 162(m) places a limit of $1,000,000 on the compensation that a publicly held corporation may deduct in any one year with respect to its principal executive officer, principal financial officer and the next three most highly compensated executive officers whose compensation is required to be disclosed in the company’s annual proxy statement (referred to as covered employees). Historically, there was an exception to this $1,000,000 limitation for performance-based compensation that meets certain requirements, and the principal financial officer was excluded from the definition of a covered employee. Effective January 1, 2018, the Tax Cuts and Jobs Act amended Section 162(m) to eliminate the exception for performance-based compensation and to make compensation paid to the principal financial officer now subject to the $1,000,000 deduction limitation. The amendments to Section 162(m) include a grandfather clause applicable to compensation paid pursuant to a written binding contract in effect on November 2, 2017 that is not materially modified after such date. The Compensation Committee does not have a specific policy with regard to Section 162(m). However, the Amended and Restated 2006 Stock Option and Performance Incentive Plan contains certain provisions designed to facilitate the deductibility of performance-based compensation in accordance with Section 162(m). The Company generally believes its stock option and performance-based restricted stock awards granted before November 2, 2017 have met those requirements and, as such, are deductible.
Historically, the Committee has granted both regular and performance-based nonqualified stock options.Equity Awards granted on a regular (or fixed) basis carry a set vesting schedule based on a certain time period as determined by the Committee. Performance-based awards are payable in recognition of achievement of certain annual and/or cumulative performance goals of the Company or our bank subsidiary based on one or more of the criteria described above over a period of time longer than one year. The Committee may also grant restricted stock under the Plan based on the criteria described above. The restricted period for such shares may be subject to the satisfaction of Company or individual performance objectives but may not be less than one year. If the restricted shares are not subject to any such performance objectives, the restricted period may not be less than three years.
Under the Plan, the Committee must certify in writing that all of the performance goalsChairman and other material terms of a performance-based award have been met before the named executive officer may receive payment for such award. The performance-based awards have historically been based on quarterly, annual and/or cumulative diluted earnings per share or asset growth targets. The Committee may confer with the Audit Committee as necessary when confirming achievement of performance goals. The equity awards (both fixed and performance-based) typically have been based on a vesting period of three to five years.CEO
Generally, the Committee utilizes annualgrants awards of restricted stock awards in the compensation ofshares to our Chairman and CEO, Mr. Allison, who remainson an annual basis in January of each year. As the Company’s founding Chairman and CEO and largest individual shareholder, owning 3.92%approximately 4.1% of our outstanding common stock, the Committee believes that Mr. Allison’s total compensation should be comprised largely of equity-based compensation.
During the first 10 years of the Company’s history, Mr. Allison declined to receive a salary or bonus as Chairman and CEO of the Company and instead relied on dividends and appreciation in the value of his existing stock holdings and stock option awards in an effort to best align his interests with those of our shareholders. Since 2014, following the Company’s 2013 acquisition of Liberty Bancshares, which represented the then largest ever merger of two Arkansas-based banks, the Compensation Committee has awarded a majority of Mr. Allison’s compensation in the form of equity awards of restricted stock. The Committee believespurposes of these equity awards helphave been to maintain close alignment of ourthe Chairman’s interests with those of our shareholders, and appropriately reward him for his strategic leadership in the Company’s growth and successperformance, and provide total compensation at a level that is generally comparable to the Company’s peers.
The Committee has historically evaluated the Company’s performance and Mr. Allison’s individual performance for the prior fiscal year in determining the size of the Company.annual restricted stock grant for Mr. Allison. The Committee also considers shareholder return during the past year and Mr. Allison’s overall compensation as part of its analysis. The Committee believes Mr. Allison’s total compensation should be generally comparable to total compensation of other CEOs and Executive Chairmen in the Company’s peer group and that a significant portion of his total pay should consist of stock-based compensation.
The Committee has not significantly increased the size of the annual equity awards to Mr. Allison in the past three years. Mr. Allison received 150,000 restricted shares of our common stock in each of 2020 and 2019 and 125,000 shares in 2018. The Committee also awarded Mr. Allison 150,000 restricted shares on February 8, 2021, two-thirds of which are subject to performance conditions described below and one-third of which is subject to time-based vesting. The Committee believes the size of these awards appropriately reflects Mr. Allison’s continued strong leadership and the Company’s continued high performance levels, as indicated in
47 | www.homebancshares.com |
Compensation Discussion and Analysis |
the annual cash bonus plan metrics described above, while maintaining his total compensation at a level generally comparable to his peers and taking into account the Company’s stock price and total shareholder return during this period.
The annual restricted stock awards to Mr. Allison have historically been granted on a fixed-basis with vesting to occur on a “cliff” basis or in annual installments over a three-year period. In response to shareholder feedback following the 2020 Annual Meeting, the Committee has adopted a new performance-based equity compensation program set forth in an Executive Chairman Agreement entered into with Mr. Allison on March 1, 2020 (the “Chairman’s Agreement”). The terms of the Chairman’s Agreement provide that Mr. Allison is eligible to receive annual equity incentive awards beginning in 2021 of up to 150,000 shares of restricted stock. Two-thirds of Mr. Allison’s eligible annual award, or up to 100,000 shares, is subject to the satisfaction of the performance conditions over a three-year performance period with vesting to occur at the end of the performance period. The remaining one-third of the eligible award, or up to 50,000 shares, is time-based with vesting to occur on the third anniversary of the grant date. See Executive Compensation – Employment Agreements for more information regarding the terms of the Chairman’s Agreement.
The performance criteria for each portion of Mr. Allison’s 2021 performance-based shares as provided in the Chairman’s Agreement are similar to the peer comparison performance measures included in the 2021 Executive Incentive Plan, measured over the three-year performance period, with payouts to be determined based on the actual performance level for each metric relative to the peer group. The peer group under the Chairman’s Agreement is the same performance peer group as defined in the Executive Incentive Plan. The Committee believes these metrics closely align with the financial measures the Company emphasizes in driving robust earnings results which bring value to our shareholders. The Committee views these measures as more effective indicators of the Company’s and our Chairman’s performance than total shareholder return (TSR) given the impact that macroeconomic factors, overall market volatility and other external forces beyond the Company’s control can have on TSR. The Committee may, however, in its discretion designate different or additional performance conditions for future annual performance-based restricted stock awards granted to the Chairman after 2021.
Under the performance criteria set forth in the Chairman’s Agreement, the Committee set maximum performance goals at levels more rigorous than the Executive Incentive Plan to further incentivize superior financial performance consistent with the Company’s expectations and set differing vesting periods to provide optimal incentives for both annual and long-term performance. Depending on the extent to which the Company’s percentile rank against the peer group exceeds the minimum threshold for each applicable measure for the performance period, the numbers of shares vesting will be 50%, 75% or 100% of the original shares granted weighted according to each performance measure. The various performance measures and weighting for each component are provided in the table below.
|
|
|
|
|
|
|
|
|
| Performance Goal (Peer Group Percentile) (and Payout %) | |||||||||||
|
| Relative |
| Eligible |
| Threshold |
| Target | Maximum | ||||||||||||
Performance Measure (1) |
| Weighting |
| Shares |
| (50%) |
|
| (75%) | (100%) | |||||||||||
Net Interest Margin (2)(3) |
|
|
| 25 | % |
|
|
|
| 25,000 |
|
|
|
| 25th |
|
|
| 50th |
| 75th |
Return on Tangible Common Equity (2)(4) |
|
|
| 25 | % |
|
|
|
| 25,000 |
|
|
|
| 25th |
|
|
| 50th |
| 75th |
Efficiency Ratio (2)(5) |
|
|
| 25 | % |
|
|
|
| 25,000 |
|
|
|
| 25th |
|
|
| 50th |
| 75th |
Return on Average Assets (2)(6) |
|
|
| 25 | % |
|
|
|
| 25,000 |
|
|
|
| 25th |
|
|
| 50th |
| 75th |
(1) If the Committee has received the year-end financial results for the Company but year-end financial results for the peer group are not yet available, the Committee may apply the peer comparison performance measures based on the Company’s and the peer group’s performance as of and for the nine-month period ended September 30 of final year of the performance period to determine the level at which each applicable performance goal was met, if at all. If all or any portion of the award vests based on September 30th peer performance comparisons, any such shares will be subject to clawback if the Committee determines that the performance measure was not satisfied once the peer companies’ fourth quarter financial results are received.
(2) May be adjusted to exclude unusual or infrequently occurring items and the effects of changes in applicable tax laws or accounting principles as the Committee deems appropriate.
(3) Net interest margin means the Company’s annualized net interest margin on a fully taxable equivalent, or FTE, basis.
(4) Return on tangible common equity is a non-GAAP measure which is calculated by dividing the Company’s net income by the result of average equity minus average goodwill, core deposits and other intangible assets.
(5) Efficiency ratio is calculated by dividing non-interest expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis and non-interest income.
(6) Return on average assets is calculated by dividing the Company’s net income by average total assets for the year.
The Chairman’s Agreement also provides that all equity awards granted to Mr. Allison under the agreement are subject to clawback in the event the Company restates its financial statements and the Committee determines that the shares vested to the executive officer would not have vested had the vesting been based on the restated results, if in the Committee’s discretion the stock award would not have been granted or vested had the Committee known of an action or omission of the executive, or otherwise if required under any Company clawback policy in effect from time to time.
www.homebancshares.com | 48 |
Compensation Discussion and Analysis |
Equity Awards to Other NEOs
The Compensation Committee does not have a practice of annual granting equity incentive awards to our named executive officers, other than our Chairman. The Committee issues long-term equity incentive awards to our other named executive officers on a less frequent basis, with its recent practice being to issue substantial equity awards to the executive group approximately every three years and selected awards from time to timetime-to-time to individual executives. These awards may be in the form of restricted shares or nonqualified stock options and may be granted on a regular (fixed) basis with time-based vesting or as performance-based awards subject to vesting upon the satisfaction of performance conditions.
DuringWhile equity incentive compensation represents an important component of the past three years,Company’s overall executive compensation program and promotes alignment of our executives’ interests with our shareholders, the Committee has grantedbelieves that less frequent, more targeted equity grants to our other executives and key employees, which may be coordinated with specific Company-wide strategic performance initiatives, serve as an effective mechanism to incentivize superior long-term individual and Company performance. The Committee may also issue restricted shares or stock options in connection with an executive’s promotion or to reward or incentive other special performance, such as efforts in connection with a strategic acquisition or other operational initiatives. The Committee also considers recommendations from our Chairman as to awards for our other executive officers.
The last two significant series of equity grants to our common stock to Mr. Allison innamed executive officers, other than the amountsChairman, consisted primarily of 125,000 shares in January 2018, 112,500 shares in February 2017 and 140,000 shares in January 2016. In addition, the Committee awarded Mr. Allison 10,000 unrestricted bonus shares of our common stock in 2016 in lieu of a cash bonus for 2015. Theperformance-based restricted shares granted in 2018 vest over three years in two equal installments beginning on the second anniversary of the grant date. This award wasand stock options subject to “stretch” performance goals based primarily on the Company’s completion of three acquisitions, including the largest in the Company’s history, and strong adjusted earnings in 2017. The 2017 award is subject to both performance and time-based conditions under which the shares will “cliff” vest on the third anniversary of the grant date if either the Company’s total assets equalaverage or exceed $12.5 billion at any fiscal quarter end within the three-year period or the Company has averaged $0.315cumulative diluted earnings per share, for four consecutive quarters or $1.26 total diluted earnings per share over a periodwith additional time vesting requirements upon achievement of four consecutive quarters within the three-year period. The alternative total asset growth and diluted earnings per shareperformance goal. These goals were designedtargeted to promote specific performance initiatives to achieve new levels of record Company earnings over at least a four-quarter period and intended to both provide an additional retention and performance incentive towardfor these executives and further align their interests with the successful completion of the Company’s two then-pending acquisitions and the successful negotiation and completion of the Stonegate acquisition, along with maintaining strong quarterly
26
earnings. The total asset growth performance goal was met on September 30, 2017, and therefore, these shares will vest on February 22, 2020. The restricted shares granted to Mr. Allison in 2016 “cliff” vested on January 25, 2019. This award was based on his leadership in connection with our 2015 acquisitions, the formation of Centennial Commercial Finance Group, and the Company’s overall financial performance in 2015.
On January 18, 2019, the Committee awarded to Mr. Allison 150,000 restricted sharesinterests of our common stock to vest in three equal annual installments beginning on January 18, 2020.shareholders.
In July 2018, the Committee granted long-term equity incentive awardsperformance-based restricted shares and stock options to Messrs. Sims, Davis, French and Hesterour named executive officers, other than the Chairman, and other key Company and bank employees. The awards to our named executive officers consist of an aggregate of 125,000 restricted shares of our common stock subject to performance conditions and an aggregate of 250,000 performance-based stock options. Theemployees with a performance goal for these awards will be met as of the end of the calendar quarter when the Company has achieved average adjusted diluted earnings per share of $0.50 per share for four consecutive quarters or $2.00 total adjusted diluted earnings per share over a period of four consecutive quarters. In determining whether the performance goal has been met, the calculation of adjusted diluted earnings per share will excludeone-time ornon-reoccurring gains or losses. Once the performance goal has been met, the restricted shares will vest over five years in three equal annual installments beginning on the third anniversary of the date that the performance goal is met, and the stock options will vest in five equal annual installments beginning on the first anniversary of the date that the performance goal is met. These awards currently remain outstanding.
The purposes of these awards were to provide an additional retention and performance incentive for these executives and to further align their interests with the interests of our shareholders. TheCommittee granted similar performance-based restricted shares had a fair market value on the date of grant of $23.32 per share, and the stock options had a fair market value on the date of grant of $5.56 per share based on the Black-Scholes valuation method for stock options.
Prior to the July 2018 awards, the Committee most recently granted performance-based awards to our named executive officers, other than ourthe Chairman, and key Company and bank employees in August 2015, when the Committee awarded an aggregate of 65,000 performance-based restricted shares and 350,000 performance-based stock options to Messrs. Davis, French and Hester.2015. The performance goal for these awards consisted of average diluted earnings per share of $0.3125 per share for four consecutive quarters or $1.25 total diluted earnings per share over a period of four consecutive quarters. This performance goal was met as of December 31, 2016. As a result, the restricted shares will vest over five years in three equal annual installments beginning on December 31, 2019, and the stock options will vest in seven equal annual installments on each anniversary of the grant date, with the first installment vesting on December 31, 2016, the date the performance goal was met. Additionally, on August 24, 2015, theThe Committee also granted the same executives an aggregate of 65,000 restricted shares subject to time (or fixed) vesting which vestin connection with these performance-based awards. These shares vested over five years in three equal annual installments, with the first installment vesting on August 24, 2018.2018 and the final installment vesting on August 24, 2020.
In April 2016, Mr. Hester was also grantedAdditionally, in January 2020, the Board of Directors expanded the annual stock options representing 20,000award for non-employee directors to include all directors other than the Chairman. Brian S. Davis and Tracy M. French each received 3,000 shares of our commonrestricted stock in January 2020 in connection with their service as partdirectors of a Chairman’s Award presented to him and other selected employees at the Company’s 2016 Annual Meeting of shareholders. The Chairman’s award also included a cash award of $10,000. The Committee did not issue any additional equity awards to our named executive officers during 2016, 2017 or 2018.Company. These shares vest in three equal annual installments beginning on January 27, 2021.
Retirement and Insurance Benefits
Post-Termination Benefits. We do not have any employment, salary continuation, or severance agreements currently in effect for any of our executive officers.
Chairman’s Retirement Plan. In 2007, our Board of Directors, based on a recommendation by the Compensation Committee, approved a Chairman’s Retirement Plan for our Chairman, John W. Allison. The Chairman’s Retirement Plan provides a supplemental retirement benefit to Mr. Allison of $250,000 per year for 10 consecutive years or until Mr. Allison’s death, whichever occurs later.
The benefits under the plan became 100% vested and commenced on Mr. Allison reaching age 65 in 2011. The vested benefits are payable over 10 years or Mr. Allison’s life, whichever is greater. If Mr. Allison dies during the 10 year guaranteed benefit period, his beneficiary will receive the remaining payments due during the guaranteed period. If he dies after the guaranteed benefit period, no further benefits will be paid. The annual benefit is paid in monthly installments.
27
Supplemental Executive Retirement Plan.Prior to our acquisition of Community Bank in 2003, Community Bank purchased life insurance policies on its President and Chief Executive Officer, Tracy M. French. The policies offset benefit expenses associated with a supplemental annual retirement benefit that grows on atax-deferred basis. A portion of the benefit is determined by an indexed formula. The balance of the benefit is determined by crediting interest on the accrued balances. The calculation for the benefit expense accrual is: insurance policy income minus opportunity cost plus interest. The opportunity cost is determined by the bank and is equal to the five
49 | www.homebancshares.com |
Compensation Discussion and Analysis |
year average of the one year Treasury Bill rate. The bank (now Centennial Bank) retains the opportunity cost. Prior to Mr. French’s retirement, any earnings in excess of the opportunity costs are accrued to a liability reserve account for his benefit. At retirement, this liability reserve account is amortized with interest and paid out over a period of 15 years. If Mr. French dies while there is a balance in his account, this balance will be paid in a lump sum to Mr. French’s beneficiaries.
The life insurance benefit for Mr. French is being provided by an endorsement split dollar life plan. Upon the death of the executive, the death benefit payable is equal to 70% of the netat-risk life insurance portion (total benefit less cash value) of the policies insuring the life of Mr. French. The bank has all ownership rights in the death benefits and surrender values of the insurance policy on Mr. French. Its obligations under the retirement benefit portion of this policy are unfunded; however, the bank has purchased life insurance policies on Mr. French that are actuarially designed to offset the annual expenses associated with the benefit portion of the policy and will, given reasonable actuarial assumptions, offset all of the cost during Mr. French’s lifetime and provide a complete recovery of costs at death.
401(k) Plan.All our full- and part-time employees over the age of 21 are eligible to participate in our 401(k) Plan immediately. We contribute a matching contribution equal to 50% of the participants’ first 6% of deferred compensation contribution. In addition, we may make a discretionary contribution. No discretionary contributions were made during 2018.2020.
Health and Insurance Benefits.Our full-time officers and employees are provided hospitalization and major medical insurance. We pay a substantial part of the premiums for these coverages. All insurance coverage under these plans is provided under group plans on generally the same basis to all of our full-time employees. Also, we provide other basic insurance coverage including dental, life, and long-term disability insurance.
In 2004, First State Bank (now Centennial Bank) adopted an endorsement split-dollar life insurance plan which provides for the purchase of life insurance policies insuring the life of Mr. Allison. Both the bank and Mr. Allison have an interest in each of the policies, and therefore, this is classified as an endorsement split-dollar plan. Mr. Allison’s beneficiaries will be entitled to an amount equal to 50% of the netat-risk insurance portion of the total proceeds. The netat-risk portion is the total proceeds less the cash value of the policy. Mr. Allison recognizes the economic value of this death benefit each year on his individual income tax return. The beneficiaries of the policies are named by Mr. Allison and the bank will receive the remainder of the death benefit. The bank has all ownership rights in the death benefits and surrender values of the policies. The premium paid on June 4, 2004, for the policies was $4.8 million. Effective December 22, 2006, the death benefits payable under these policies split between the bank and Mr. Allison’s beneficiaries. If the death benefits were paid in 2018,2020, approximately $7.4$9.2 million would behave been paid to the bank and approximately $1.7$1.5 million would behave been paid to Mr. Allison’s beneficiaries.
Perquisites
The Company provided certain perquisites to executive management in 2018.2020. These perquisites included:
401(k) contributions
Country club dues
Gasoline for personal car
Car allowance
Use of company owned car
28
The Company owns a used airplane which it purchased in 2017 from Mr. Allison’s company, Capital Buyers. The Company also fromtime-to-time uses an additional airplane owned by Capital Buyers. An employeeTwo employees of the Company is a pilotare pilots and fliesfly the airplanes. Mr. Allison fromtime-to-time uses the airplanes and the pilotpilots for personal travel, which may or may not occur during working hours. When the Company uses the Capital Buyers plane, Capital Buyers charges the Company for out of pocket expenses and other expenses attributable to use and maintenance of the aircraft.
Mr. Allison receives additional fees for his service as Chairman of the Board of Directors of the Company, which for 20182020 included an annual retainer of $8,000 and$10,000, a fee of $4,000$6,000 for each holding company Board meeting attended and fees of $750 for each meeting of the Asset/Liability Committee attended. The fees for his service as Chairman of the Board are set by the Board of Directors. In addition, Mr. Allison is Chairman ofserves on the board of directors of the Company’s bank subsidiary and serves on each regional board of directors of the bank. He receives fees for his service on the board of directors and each regional board of the bank.bank and certain bank committees. The fees for his service on each board are set by the respective boards of the bank. Mr. Allison earned a total of $105,875$164,625 in fees for his service on the Board of Directors of the Company and the board of directors and regional boards of the bank during 2018,2020, including fees for his service on committees of the Company and bank boards.
Because Mr. Allison isretained these board and committee responsibilities in addition to resuming the only named executive officer who receivedCEO role in November 2019 without any salary increase or additional compensation, the Board of Directors believes these director fees appropriately compensate Mr. Allison for servinghis services on the Company’s or ourvarious Company and bank subsidiary’s boards of directors orand committees on any committees of such boards during 2018.
www.homebancshares.com | 50 |
29
Report of the Compensation Committee of the Board of Directors |
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORSReport of the Compensation Committee of the Board of Directors
The following Compensation Committee Report should not be deemed filed or incorporated by reference into any other document, including the Company’s filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report into any such filing by reference.
In accordance with its written charter, which wasre-adopted in its current form by the Board of Directors on January 19, 2018,the Compensation Committee evaluates and approves the plans and policies related to the compensation of the Company’s executive officers and directors. A copy of the Compensation Committee charter is published on the Company’s website atwww.homebancshares.com under the caption “Investor Relations”/“Corporate Profile”Overview”/“Governance Documents.”
The Committee met fivesix times in 20182020 to discuss, among other items, the salaries, bonuses and other compensation of the senior executive officers and other key employees of the Company.
In determining the compensation of the executive officers for 2018,2020, the Committee, among other things, evaluated the performance of the Chairman and Chief Executive Officer and the other executive officers in light of corporate goals and objectives and reviewed the Chairman’sChairman and Chief Executive Officer’s compensation recommendations.recommendations for the other executive officers. The Committee also set the bonuses to our named executive officers for theirbased on the Company’s and each executive’s individual performance in 2018.2020.
The Compensation Committee reviewed and discussed with management the information provided in the preceding Compensation Discussion and Analysis section of this Proxy Statement. Based on its review and discussions with management, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and our Annual Report on Form10-K for the calendar year ended December 31, 2018,2020, for filing with the SEC.
Home BancShares, Inc.
Compensation Committee Members
Mike D. Beebe, Chairman
Milburn Adams
Richard H. Ashley
Jack E. Engelkes
Jim Rankin, Jr.
51 | www.homebancshares.com |
Executive Compensation |
30
EXECUTIVE COMPENSATIONExecutive Compensation
The following table sets forth various elements of compensation earned by, awarded or paid to the individuals who served as our CEO, our CFO, and our three other most highly-compensated executive officers during the fiscal year ended December 31, 20182020 (collectively, our “named executive officers”), for services rendered in each of the last three years.
Name and principal position | Year | Salary | Bonus | Stock awards(1) | Option awards(1) | Non-equity incentive plan compensation | Change in pension value and non- qualified deferred compensation earnings | All other compensation | Total | |||||||||||||||||||||||||||
C. Randall Sims, | 2018 | $ | 309,423 | $ | 25,000 | $ | 233,200 | $ | 111,200 | $ | — | $ | — | $ | 25,118 | (2) | $ | 703,941 | ||||||||||||||||||
Chief Executive | 2017 | 294,618 | 25,000 | — | — | — | — | 19,547 | 339,165 | |||||||||||||||||||||||||||
Officer and President | 2016 | 285,000 | 10,000 | — | — | — | — | 22,539 | 317,539 | |||||||||||||||||||||||||||
Brian S. Davis, Chief | 2018 | 324,990 | 135,000 | 233,200 | 111,200 | — | — | 32,768 | (3) | 837,158 | ||||||||||||||||||||||||||
Financial Officer and | 2017 | 324,030 | 125,000 | — | — | — | — | 26,761 | 475,791 | |||||||||||||||||||||||||||
Treasurer | 2016 | 300,000 | 150,000 | — | — | — | — | 27,092 | 477,092 | |||||||||||||||||||||||||||
John W. Allison, | 2018 | 399,039 | 445,000 | 3,096,250 | — | — | 139,107 | 589,173 | (4) | 4,668,570 | ||||||||||||||||||||||||||
Chairman of the | 2017 | 373,280 | 500,000 | 3,179,250 | — | — | 147,606 | 571,350 | 4,771,486 | |||||||||||||||||||||||||||
Board | 2016 | 330,000 | — | 2,559,750 | — | — | 155,453 | 520,386 | 3,565,589 | |||||||||||||||||||||||||||
Tracy M. French, | 2018 | 448,461 | 205,000 | 1,749,000 | 834,000 | 44,676 | 62,816 | (5) | 3,343,953 | |||||||||||||||||||||||||||
CEO & President of | 2017 | 409,027 | 255,000 | — | — | — | 42,492 | 40,576 | 747,095 | |||||||||||||||||||||||||||
Centennial Bank | 2016 | 385,000 | 192,000 | — | — | — | 39,372 | 42,689 | 659,061 | |||||||||||||||||||||||||||
Kevin D. Hester, | 2018 | 374,038 | 185,000 | 669,600 | 333,600 | — | — | 32,774 | (6) | 1,625,012 | ||||||||||||||||||||||||||
Chief Lending | 2017 | 349,032 | 225,000 | — | — | — | — | 21,699 | 595,731 | |||||||||||||||||||||||||||
Officer | 2016 | 325,000 | 162,500 | — | 101,600 | — | — | 31,347 | 620,447 |
Name and principal position |
| Year |
| Salary(1) |
|
| Bonus(2) |
|
| Stock awards(3) |
|
| Option awards(3) |
|
| Non-equity incentive plan compensation |
| Change in pension value and non- qualified deferred compensation earnings |
| All other compensation |
| Total |
| |||||||||||||||||
John W. Allison, |
| 2020 |
| $ | 461,506 |
|
| $ | 500,000 |
|
| $ | 2,887,500 |
|
| $ | — |
|
|
| $ | — |
|
|
|
| $ | 119,935 |
|
|
|
| $ | 670,315 |
| (4) |
| $ | 4,639,256 |
|
Chairman of the |
| 2019 |
|
| 447,885 |
|
|
| 500,000 |
|
|
| 2,707,500 |
|
|
| — |
|
|
|
| — |
|
|
|
|
| 129,903 |
|
|
|
|
| 660,144 |
|
|
|
| 4,445,432 |
|
Board, CEO & President |
| 2018 |
|
| 399,039 |
|
|
| 445,000 |
|
|
| 3,096,250 |
|
|
| — |
|
|
|
| — |
|
|
|
|
| 139,107 |
|
|
|
|
| 589,173 |
|
|
|
| 4,668,569 |
|
Brian S. Davis, Chief |
| 2020 |
|
| 353,184 |
|
|
| 204,000 |
|
|
| 57,750 |
|
|
| — |
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 28,103 |
| (5) |
|
| 643,037 |
|
Financial Officer and |
| 2019 |
|
| 331,214 |
|
|
| 165,000 |
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 35,794 |
|
|
|
| 532,008 |
|
Treasurer |
| 2018 |
|
| 324,990 |
|
|
| 135,000 |
|
|
| 233,200 |
|
|
| 111,200 |
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 32,768 |
|
|
|
| 837,158 |
|
Tracy M. French, |
| 2020 |
|
| 580,615 |
|
|
| 335,400 |
|
|
| 57,750 |
|
|
| — |
|
|
|
| — |
|
|
|
|
| 46,764 |
|
|
|
|
| 76,476 |
| (6) |
|
| 1,097,005 |
|
CEO & President of |
| 2019 |
|
| 458,619 |
|
|
| 205,000 |
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
|
| 46,764 |
|
|
|
|
| 86,201 |
|
|
|
| 796,584 |
|
Centennial Bank |
| 2018 |
|
| 448,461 |
|
|
| 205,000 |
|
|
| 1,749,000 |
|
|
| 834,000 |
|
|
|
| — |
|
|
|
|
| 44,676 |
|
|
|
|
| 62,816 |
|
|
|
| 3,343,953 |
|
Kevin D. Hester, |
| 2020 |
|
| 408,183 |
|
|
| 235,800 |
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 33,009 |
| (7) |
|
| 676,991 |
|
Chief Lending |
| 2019 |
|
| 383,260 |
|
|
| 185,000 |
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 41,170 |
|
|
|
| 609,430 |
|
Officer |
| 2018 |
|
| 374,038 |
|
|
| 185,000 |
|
|
| 669,600 |
|
|
| 333,600 |
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 32,774 |
|
|
|
| 1,595,012 |
|
J. Stephen Tipton, |
| 2020 |
|
| 388,196 |
|
|
| 225,000 |
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 50,707 |
| (8) |
|
| 663,903 |
|
Chief Operating Officer |
| 2019 |
|
| 337,267 |
|
|
| 175,000 |
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 39,773 |
|
|
|
| 552,040 |
|
(1) | The 2020 salary amounts earned are higher than the base amount because an extra pay period occurred (27 pay periods versus 26) during fiscal year 2020. |
(2) | For each named executive officer other than the Chairman and CEO, a portion of the cash bonus earned in 2020 representing 10% of the executive’s 2020 base salary will be paid in January 2023, subject to the executive’s continued employment. All other bonus amounts earned in 2020 were paid in January 2021. |
(3) | Restricted stock and stock option awards are based on the grant date fair values and are calculated pursuant to the provisions of FASB ASC Topic 718 “Compensation – Stock Compensation.”See Note |
|
|
Mr. Allison used |
(5) | Includes |
(6) | Includes personal use of Company car, $9,770; 401(k) contribution, $8,550; income realized from restricted stock dividends, $53,424; Company-owned life insurance ownership, |
(7) | Includes country club dues |
(8) | Includes 401(k) contribution, $8,550; country club dues, $2,192; auto allowance, $16,200; executive gifts, $2,887; income realized from restricted stock dividends, $20,734; and miscellaneous income, $144. |
On March 1, 2021, we entered into an employment agreement with our Chairman and CEO in connection with his service as our executive Chairman (the “Chairman’s Agreement”). Under the terms of the Chairman’s Agreement, Mr. Allison will continue to serve as “Executive Chairman” of the Company until such time as either he or the Board determines that the he shall no longer serve as Executive Chairman at which time he will be appointed Chairman Emeritus. The Chairman’s Agreement terminates on December 31, 2030, unless earlier terminated under the terms of the agreement.
www.homebancshares.com | 52 |
Executive Compensation |
Executive Chairman. In connection with Mr. Allison’s service as our Executive Chairman, Mr. Allison will receive an annual base salary of $500,000, or such increased amount as may be determined by the Compensation Committee, and will be eligible to receive an annual cash incentive bonus in an amount up to 100% of his base salary, subject to the terms of the Company’s Executive Incentive Plan or any similar annual cash incentive program as may be adopted by the Company from time to time.
Mr. Allison is also eligible to receive equity incentive plan awards on an annual basis representing up to an aggregate of 150,000 shares of restricted stock beginning in 2021. Two-thirds of Mr. Allison’s eligible annual restricted stock award, or up to 100,000 shares, are subject to the satisfaction of performance conditions over a three-year performance period with vesting to occur at the end of the performance period. The remaining one-third of the eligible award, or up to 50,000 shares, is time-based with vesting to occur on the third anniversary of the grant date. The performance measures and goals for Mr. Allison’s 2021 equity incentive award are set forth in the agreement and are similar to the peer comparison performance measures included in the 2021 Executive Incentive Plan. See Compensation Discussion and Analysis – Equity Incentive Compensation above for a description of these performance measures and the applicable payout formula for each measure. The Chairman’s Agreement gives the Compensation Committee discretion to designate different or additional performance conditions for future annual performance-based restricted stock awards granted to Mr. Allison after 2021.
As Executive Chairman, Mr. Allison is also entitled to four weeks of paid vacation and has the right to participate in the Company’s medical and life insurance programs and other customary employee benefit plans.
The compensation and benefits to which Mr. Allison is entitled as Executive Chairman under the Chairman’s Agreement are based solely on his service in such capacity. Mr. Allison’s service as the Company’s CEO or in any other capacity will not entitle him to any additional compensation or benefits, nor will termination of his service in such additional capacity or capacities result in any decrease of his compensation and benefits as Executive Chairman.
Chairman Emeritus. Upon becoming Chairman Emeritus, Mr. Allison will continue to consult with and advise the Board and perform such other tasks and duties as requested by the Board and will be expected, to the extent reasonably practicable, to attend and participate in an advisory capacity in all Board meetings and those committee meetings for which his attendance is requested by the Board. As Chairman Emeritus, he will receive an annual base salary of $400,000 but will no longer be eligible to participate in any annual cash incentive bonus program or receive any new equity incentive awards. Any previously-issued equity incentive awards will continue to vest under the original terms of the awards. As Chairman Emeritus, Mr. Allison will continue to be employed by the Company and participate in the Company’s employee benefit plans and will continue to receive certain perquisites and benefits he received as Executive Chairman, including reimbursement of club dues. He will also continue to have access to his office and an administrative assistant at no cost and have access to the pilots retained by Company at his cost for any personal travel.
Death or Disability. In the event Mr. Allison’s employment is terminated due to his death or disability, Mr. Allison or his estate will be entitled to receive a lump sum payment in an amount equal to two times the Chairman Emeritus annual salary within 90 days after his death or disability. He or his estate will also be entitled to receive any annual cash bonus awards earned but not yet paid, any vested equity incentive awards granted pursuant to the Chairman’s Agreement, and continued group insurance coverage for Mr. Allison’s spouse until she reaches the age of 65. In addition, all unvested shares of restricted stock not subject to performance conditions will automatically vest upon Mr. Allison’s termination due to death or disability unless otherwise determined by the Compensation Committee.
For Mr. Allison’s outstanding performance-based equity incentive awards, a portion of such unvested shares will vest upon his death or disability based on and subject to satisfaction of the applicable performance measures for the completed years in the performance period prior to Mr. Allison’s death or disability as follows, unless otherwise determined by the Compensation Committee. If Mr. Allison’s death or disability occurs after the end of the second year of the performance period but before the end of the third year of the performance period for such award, two-thirds of any unvested shares under such award will automatically vest to the extent that the shares would have vested based on satisfaction of the applicable performance measures for the completed two-year period. If Mr. Allison’s death or disability occurs after the end of the first year of the performance period but before the end of the second year of the performance period for such award, one-third of any unvested shares under such award will automatically vest to the extent that the shares would have vested based on satisfaction of the applicable performance measures for the completed one-year period. If Mr. Allison’s death or disability occurs during the first year of the performance period, all shares under such award will be forfeited in their entirety.
Voluntary Resignation or Termination for Cause. Mr. Allison may voluntarily terminate his employment upon 30 days’ notice to the Board, provided that his resignation as Executive Chairman to become Chairman Emeritus will not be deemed a termination of employment under the Chairman’s Agreement. The Company may also terminate Mr. Allison’s employment at any time for “cause,” as defined in the agreement, by written notice of termination to Mr. Allison. In the event of a termination of Mr. Allison’s employment due to his voluntary resignation or the Company’s termination of his employment for cause, the Chairman’s Agreement will terminate, all unvested equity incentive awards granted under the agreement and unpaid annual cash bonus amounts will be forfeited, and the Company will have no obligation to pay any continued salary (after death or otherwise) or provide continued group insurance for Mr. Allison’s spouse. The agreement includes customary mutual non-disparagement provisions.
53 | www.homebancshares.com |
Employment Agreements
Executive Compensation |
Clawback. The Chairman’s Agreement contains a clawback provision under which all performance-based cash bonuses and equity incentive awards issued under the Chairman’s Agreement will be subject to clawback (i) in the event the Company restates its financial statements and the Compensation Committee determines that the award paid or issued to Mr. Allison would not have been paid or vested had actual performance been based on the restated results; (ii) if the Committee determines that a performance measure was satisfied based on peer comparison data that does not include fourth quarter data and ultimately it is determined that the such measure was not satisfied once fourth quarter data is received; (iii) if the Committee determines in its reasonable discretion that an award would not have been made or vested had the Committee known of an action or omission of Mr. Allison; and (iv) under any Company clawback policy as may be in effect from time to time which may require the awards to be repaid or forfeited to the Company after they have been paid or issued.
We currently do not have any other employment, salary continuation or severance agreements in effect with any of our named executive officers.officers, other than certain change-in-control agreements entered into with our named executive officers, other than the Chairman, on August 6, 2020, which are described below under Payments Upon Termination or Change-In-Control.
Stock Awards and Stock Option Grants
The number of shares authorized for issuance under the Home BancShares Amended and Restated 2006 Stock Option and Performance Incentive Plan, as amended (the “Plan”), is 13,288,000. In 2018,2020, there were 1,581,000no options granted pursuant to the Plan, and options to purchase 201,37780,864 shares were exercised. The Company granted restricted stock awards representing a total of 1,010,050263,890 shares of our common stock during 2018.2020. See “COMPENSATION DISCUSSION AND ANALYSIS Compensation Discussion and Analysis – Components of Compensation”Compensation for more information on the Plan and the awards granted under the Plan.
The following table contains information about awards granted pursuant to the Plan to each of our named executive officers during the fiscal year ended December 31, 2018:2020:
Grants of Plan-Based Awards Table
Name | Grant Date | Estimated future payouts undernon-equity incentive plan awards | Estimated future payouts under equity incentive plan awards | All other stock awards: number of shares of stock or units | All other option awards: number of securities under- lying options | Exercise or base price of option awards (per share) | Grant date fair value of stock and option awards(2) | |||||||||||||||||||||||||||||||||||||
Threshold | Target | Maximum | Threshold (1) | Target (1) | Maximum (1) | |||||||||||||||||||||||||||||||||||||||
C. Randall Sims | 7/19/18 | — | — | — | 3,333 | 10,000 | 10,000 | — | — | — | $ | 233,200 | ||||||||||||||||||||||||||||||||
7/19/18 | — | — | — | 4,000 | 20,000 | 20,000 | — | — | $ | 23.32 | 111,200 | |||||||||||||||||||||||||||||||||
Brian S. Davis | 7/19/18 | — | — | — | 3,333 | 10,000 | 10,000 | — | — | — | 233,200 | |||||||||||||||||||||||||||||||||
7/19/18 | — | — | — | 4,000 | 20,000 | 20,000 | — | — | 23.32 | 111,200 | ||||||||||||||||||||||||||||||||||
John W. Allison | 1/19/18 | — | — | — | — | — | — | 125,000 | — | — | 3,096,250 | |||||||||||||||||||||||||||||||||
Tracy M. French | 7/19/18 | — | — | — | 25,000 | 75,000 | 75,000 | — | — | — | 1,749,000 | |||||||||||||||||||||||||||||||||
7/19/18 | — | — | — | 30,000 | 150,000 | 150,000 | — | — | 23.32 | 834,000 | ||||||||||||||||||||||||||||||||||
Kevin D. Hester | 7/19/18 | — | — | — | 10,000 | 30,000 | 30,000 | — | — | — | 699,600 | |||||||||||||||||||||||||||||||||
7/19/18 | — | — | — | 12,000 | 60,000 | 60,000 | — | — | 23.32 | 333,600 |
|
| Grant |
| Estimated future payouts under non-equity incentive plan awards |
|
| Estimated future payouts under equity incentive plan awards |
|
| All other stock awards: number of shares of stock |
| All other option awards: number of securities under- lying |
|
| Exercise or base price of option awards |
|
| Grant date fair value of stock and option | ||||||||||||||||||||||||||||
Name |
| Date |
| Threshold |
|
| Target |
|
| Maximum |
|
| Threshold |
|
| Target |
|
| Maximum |
|
| or units |
| options |
|
| (per share) |
|
| awards(1) | ||||||||||||||||
John W. Allison |
| 1/27/2020 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 150,000 |
|
|
|
| — |
|
|
| — |
|
|
| $ | 2,887,500 |
|
|
Brian S. Davis |
| 1/27/2020 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,000 |
|
|
|
| — |
|
|
| — |
|
|
|
| 57,750 |
|
|
Tracy M. French |
| 1/27/2020 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,000 |
|
|
|
| — |
|
|
| — |
|
|
|
| 57,750 |
|
|
Kevin D. Hester |
| N/A |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
J. Stephen Tipton |
| N/A |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
|
| — |
|
|
(1) |
|
Grant date fair value is calculated pursuant to the provisions of FASB ASC Topic 718 “Compensation – Stock Compensation.”See Note |
The restricted shares granted to Mr. Allisonthe named executive officers on January 19, 2018,27, 2020 will vest over three years in 50%33.3% installments beginning January 19, 2020. The equity awards granted27, 2021, and include dividend and voting rights prior to Messrs. Sims, Davis, French and Hester on July 19, 2018, consistvesting. Information regarding the vesting of restrictedthese shares subject to performance conditions (“Performance Shares”) and performance-based stock options (“Performance Options”). The Performance Shares will vest over five yearsupon death, disability, termination of employment or a change in three equal annual installments beginning on the third anniversarycontrol of the date that the performance goalCompany is met, and the Performance Options will vest in five equal annual installments beginning on the first anniversary of the date that the performance goal is met. The performance goal for these awards will be met as of the end of the calendar quarter when the Company has achieved average adjusted diluted earnings per share of $0.50 per share for four consecutive quartersdescribed below under Payments Upon Termination or $2.00 total adjusted diluted earnings per share over a period of four consecutive quarters. In determining whether the performance goal has been met, the calculation of adjusted diluted earnings per share will excludeone-timeChange-In-Control ornon-reoccurring gains or losses.
32
As of February 8, 2019,22, 2021, options to purchase 3,621,2033,193,925 shares remain outstanding under the Plan, and 1,650,4431,515,831 shares of common stock remain available for future awards under the Plan. The Company does not currently have a policy regarding repricing of stock options.
www.homebancshares.com | 54 |
Executive Compensation |
The following table contains information, on a stock dividend and stock split adjusted basis, about unexercised stock options previously granted to each of our named executive officers that are outstanding as of December 31, 2018:2020:
Outstanding Equity Awards at FiscalYear-End Table No. 1
Name | Option Awards | |||||||||||||||||||
Number of securities underlying unexercised options exercisable | Number of securities underlying unexercised options unexercisable | Equity incentive plan awards: Number of securities underlying unexercised unearned options | Option exercise price | Option expiration date | ||||||||||||||||
C. Randall Sims | — | — | 20,000 | (1) | $ | 23.32 | 7/19/2028 | |||||||||||||
Brian S. Davis | 16,000 | 4,000 | (2) | — | 16.77 | 4/16/2024 | ||||||||||||||
30,000 | 20,000 | (3) | — | 16.86 | 3/11/2025 | |||||||||||||||
42,870 | 57,130 | (4) | — | 18.46 | 8/23/2025 | |||||||||||||||
— | — | 20,000 | (1) | 23.32 | 7/19/2028 | |||||||||||||||
John W. Allison | 1,425 | — | — | 2.66 | 12/31/2019 | |||||||||||||||
100,000 | — | — | 8.62 | 1/17/2023 | ||||||||||||||||
Tracy M. French | 40,000 | — | — | 8.62 | 1/17/2023 | |||||||||||||||
40,000 | — | — | 9.54 | 4/17/2023 | ||||||||||||||||
60,000 | 40,000 | (5) | — | 14.71 | 1/15/2025 | |||||||||||||||
64,305 | 85,695 | (4) | — | 18.46 | 8/23/2025 | |||||||||||||||
— | — | 150,000 | (1) | 23.32 | 7/19/2028 | |||||||||||||||
Kevin D. Hester | 42,870 | 57,130 | (4) | — | 18.46 | 8/23/2025 | ||||||||||||||
8,000 | 12,000 | (6) | — | 21.25 | 4/20/2026 | |||||||||||||||
— | — | 60,000 | (1) | 23.32 | 7/19/2028 |
|
| Option Awards | ||||||||||||||||||||||||||
Name |
| Number of securities underlying unexercised options exercisable |
| Number of securities underlying unexercised options unexercisable |
| Equity incentive plan awards: Number of securities underlying unexercised unearned options |
| Option exercise price |
| Option expiration date | ||||||||||||||||||
John W. Allison |
|
|
| 100,000 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
| $ | 8.62 |
|
|
|
| 1/17/2023 |
|
Brian S. Davis |
|
|
| 20,000 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 16.77 |
|
|
|
| 4/16/2024 |
|
|
|
|
| 50,000 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 16.86 |
|
|
|
| 3/11/2025 |
|
|
|
|
| 71,440 |
|
|
|
|
| 28,560 |
| (1) |
|
|
| — |
|
|
|
|
| 18.46 |
|
|
|
| 8/23/2025 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 20,000 |
| (2) |
|
|
| 23.32 |
|
|
|
| 7/19/2028 |
|
Tracy M. French |
|
|
| 40,000 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 8.62 |
|
|
|
| 1/17/2023 |
|
|
|
|
| 40,000 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 9.54 |
|
|
|
| 4/17/2023 |
|
|
|
|
| 100,000 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 14.71 |
|
|
|
| 1/15/2025 |
|
|
|
|
| 107,160 |
|
|
|
|
| 42,840 |
| (1) |
|
|
| — |
|
|
|
|
| 18.46 |
|
|
|
| 8/23/2025 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 150,000 |
| (2) |
|
|
| 23.32 |
|
|
|
| 7/19/2028 |
|
Kevin D. Hester |
|
|
| 71,440 |
|
|
|
|
| 28,560 |
| (1) |
|
|
| — |
|
|
|
|
| 18.46 |
|
|
|
| 8/23/2025 |
|
|
|
|
| 16,000 |
|
|
|
|
| 4,000 |
| (3) |
|
|
| — |
|
|
|
|
| 21.25 |
|
|
|
| 4/20/2026 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 60,000 |
| (2) |
|
|
| 23.32 |
|
|
|
| 7/19/2028 |
|
J. Stephen Tipton |
|
|
| 28,576 |
|
|
|
|
| 11,424 |
| (1) |
|
|
| — |
|
|
|
|
| 18.46 |
|
|
|
| 8/23/2025 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 60,000 |
| (2) |
|
|
| 23.32 |
|
|
|
| 7/19/2028 |
|
(1) | These options will vest in two equal annual installments beginning on August 24, 2021. |
(2) | These performance-based options will vest in five equal annual installments beginning on the first anniversary of the date that the performance goal is met. The performance goal will be met as of the end of the calendar quarter when the Company has achieved average adjusted diluted earnings per share of $0.50 per share for four consecutive quarters or $2.00 total adjusted diluted earnings per share over a period of four consecutive quarters. |
(3) | These options will vest on April |
| ||
55 | www.homebancshares.com |
|
|
|
33
The following table contains information, on a stock split adjusted basis, about the restricted stock awards previously granted to each of our named executive officers that are outstanding as of December 31, 2018:2020:
Outstanding Equity Awards at FiscalYear-End Table No. 2
Name | Stock Awards | |||||||||||||||
Number of shares or units of stock that have not vested | Market value of shares or units of stock that have not vested(1) | 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) | |||||||||||||
C. Randall Sims | — | $ | — | 10,000 | (2) | $ | 163,400 | |||||||||
Brian S. Davis | 13,333 | (3) | 217,861 | — | — | |||||||||||
20,000 | (4) | 326,800 | — | — | ||||||||||||
— | — | 10,000 | (2) | 163,400 | ||||||||||||
John W. Allison | 140,000 | (5) | 2,287,600 | — | — | |||||||||||
112,500 | (6) | 1,838,250 | — | — | ||||||||||||
| 125,000 | (7) | 2,042,500 | — | — | |||||||||||
Tracy M. French | 16,667 | (3) | 272,339 | — | — | |||||||||||
25,000 | (4) | 408,500 | — | — | ||||||||||||
— | — | 75,000 | (2) | 1,225,500 | ||||||||||||
Kevin D. Hester | 13,333 | (3) | 217,861 | — | — | |||||||||||
20,000 | (4) | 326,800 | — | — | ||||||||||||
— | — | 30,000 | (2) | 490,200 |
|
| Stock Awards | ||||||||||||||||||||||
Name |
| Number of shares or units of stock that have not vested |
| Market value of shares or units of stock that have not vested(1) |
| 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) | ||||||||||||||||
John W. Allison |
|
|
| 62,500 |
| (2) |
|
| $ | 1,217,500 |
|
|
|
|
| — |
|
|
|
| $ | — |
|
|
|
|
|
| 100,000 |
| (3) |
|
|
| 1,948,000 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
|
| 150,000 |
| (4) |
|
|
| 2,922,000 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
Brian S. Davis |
|
|
| 6,666 |
| (5) |
|
|
| 129,854 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 10,000 |
| (6) |
|
|
| 194,800 |
|
|
|
|
|
| 3,000 |
| (4) |
|
|
| 58,440 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
Tracy M. French |
|
|
| 8,334 |
| (5) |
|
|
| 162,346 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 75,000 |
| (6) |
|
|
| 1,461,000 |
|
|
|
|
|
| 3,000 |
| (4) |
|
|
| 58,440 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
Kevin D. Hester |
|
|
| 6,666 |
| (5) |
|
|
| 129,854 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 30,000 |
| (6) |
|
|
| 584,400 |
|
|
J. Stephen Tipton |
|
|
| 3,334 |
| (5) |
|
|
| 64,946 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 30,000 |
| (6) |
|
|
| 584,400 |
|
|
(1) | The market value applied to the unvested shares of the named executive officer’s restricted common stock was |
(2) | These shares vested on January 19, 2021. |
(3) | These shares will vest in two equal annual installments beginning January 18, 2021. |
(4) | These shares will vest in three equal annual installments beginning on January 27, 2021. |
(5) | These shares will vest on December 31, 2021. |
(6) | These performance-based shares will vest over five years in three equal annual installments beginning on the third annual anniversary of the date that the performance goal is met. The performance goal will be met as of the end of the calendar quarter when the Company has achieved average adjusted diluted earnings per share of $0.50 per share for four consecutive quarters or $2.00 total adjusted diluted earnings per share over a period of four consecutive quarters. |
|
|
|
|
|
34
Option Exercises and Stock Awards Vested in 20182020
The following table contains information about stock options exercised and restricted stock awards vested by each of our named executive officers during 2018.2020.
Option Exercises and Stock Awards Vested Table
Name | Option Awards | Stock Awards | ||||||||||||||
Number of shares acquired on exercise | Value realized on exercise | Number of shares acquired on vesting | Value realized on vesting | |||||||||||||
C. Randall Sims | — | $ | — | — | $ | — | ||||||||||
Brian S. Davis | 13,200 | 239,198 | 6,667 | 158,275 | ||||||||||||
John W. Allison | 83,634 | 1,571,078 | 120,000 | 2,954,400 | ||||||||||||
Tracy M. French | — | — | 8,333 | 197,825 | ||||||||||||
Kevin D. Hester | — | — | 6,667 | 158,275 |
|
| Option Awards |
| Stock Awards | ||||||||||||||||||||
Name |
| Number of shares acquired on exercise |
| Value realized on exercise |
| Number of shares acquired on vesting |
| Value realized on vesting | ||||||||||||||||
John W. Allison |
|
|
| — |
|
|
|
| $ | — |
|
|
|
|
| 225,000 |
|
|
|
| $ | 4,498,875 |
|
|
Brian S. Davis |
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 13,333 |
|
|
|
|
| 242,795 |
|
|
Tracy M. French |
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 16,667 |
|
|
|
|
| 303,505 |
|
|
Kevin D. Hester |
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 13,333 |
|
|
|
|
| 242,795 |
|
|
J. Stephen Tipton |
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 6,667 |
|
|
|
|
| 121,405 |
|
|
www.homebancshares.com | 56 |
Executive Compensation |
The following table contains information about the actuarial present value, computed as of December 31, 2018,2020, of the accumulated benefit to each of our named executive officers under each plan in which the named executive officer participates that provides for the payment of specified retirement benefits or benefits that will be paid primarily following retirement:
Pension and Other Benefits Table
Name | Plan Name | Number of years credited service | Present value of accumulated benefit | Payments during last fiscal year | ||||||||||
C. Randall Sims | N/A | — | $ | — | $ | — | ||||||||
Brian S. Davis | N/A | — | — | — | ||||||||||
John W. Allison | Chairman’s Retirement Plan | (1 | ) | 1,678,044 | 250,000 | |||||||||
Tracy M. French | Supplemental Executive Retirement Plan | (1 | ) | 394,727 | — | |||||||||
Kevin D. Hester | N/A | — | — | — |
Name |
| Plan Name |
|
| Number of years credited service |
| Present value of accumulated benefit |
| Payments during last fiscal year | ||||||||||||
John W. Allison |
| Chairman’s Retirement Plan |
|
|
|
| (1 | ) |
|
|
| $ | 1,427,883 |
|
|
|
| $ | 250,000 |
|
|
Brian S. Davis |
| N/A |
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
Tracy M. French |
| Supplemental Executive Retirement Plan |
|
|
|
| (1 | ) |
|
|
|
| 491,845 |
|
|
|
|
| — |
|
|
Kevin D. Hester |
| N/A |
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
J. Stephen Tipton |
| N/A |
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
(1) | The benefits under the Chairman’s Retirement Plan and the Supplemental Executive Retirement Plan are not dependent on credited years of service. The benefits under the Chairman’s Retirement Plan became fully vested in 2011 when Mr. Allison reached age 65. Mr. French is fully vested in the balance accrued to the liability reserve account for his benefit in connection with the Supplemental Executive Retirement Plan. |
The present value of Mr. Allison’s accumulated benefit is calculated based on an 8.00% rate of return over 17.2 years and a $250,000 annual payment. The present value of Mr. French’s accumulated benefit is calculated based on 180 monthly payments to be made once Mr. French retires, and the monthly payment amount will be determined based upon the amount that has been accrued in the corresponding reserve liability account on the bank’s books. Prior to Mr. French’s retirement, this liability account will be increased or decreased based upon the performance of the two life insurance policies, in addition to 8% interest credited to this account. After the liability account has been paid out in full, Mr. French will begin receiving the indexed retirement benefit payable for lifetime.See “COMPENSATION DISCUSSION AND ANALYSIS Compensation Discussion and Analysis – Components of Compensation”Compensation for more information regarding these retirement plans.
Nonqualified Deferred Compensation
We do not currently have in effect any defined contribution or other plan that provides for the deferral of compensation to any of our named executive officers on a basis that is nottax-qualified.
35
Payments Upon Termination orChange-In-Control
We do not currently have
Change in effect any compensatory plan or other arrangement that provides for payments or the provision of benefits to anyControl Agreements
On August 6, 2020, we and our bank subsidiary, Centennial Bank, entered into individual change-in-control agreements (each an “Agreement���) with each of our named executive officers upon their termination(“NEOs”), other than our Chairman and CEO. Because change-in-control agreements have become common among public companies across many industries, including banks and bank holding companies, the Compensation Committee believes the adoption of employmentthese Agreement is important component of the Company’s strategic planning process and provides a strong retention incentive for certain key executives that aligns with shareholder interests. The payments to the NEOs set forth in the Agreements are designed to be consistent with the CompanyCompany’s peers and represent an aggregate value as of December 31, 2020 of less than $9 million, or uponless than one-half of 1% of the Company’s market capitalization at December 31, 2020.
Under the terms of each Agreement, in the event of a change in control of the Company or Centennial Bank, the NEO will be entitled to a lump sum cash payment payable within 30 days following the date of the change-in-control event. The payment amount each NEO is entitled to receive is equal to 2.99 times the average annual compensation paid to such NEO by the Company and Centennial Bank that was includible in the NEO’s gross income for the most recent five taxable years ending before the date on which the change-in-control event occurs. The Agreements contain a cutback provision that reduces the compensation payable under the Agreement to the extent necessary to not cause the Company or Centennial Bank to have paid an “excess parachute payment” (as defined in Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended). In addition, the cash payment will be further reduced if total compensation and benefits payable to the NEO upon a change-in-control event exceeds $7,000,000 (in the case of Tracy French) and $6,000,000 (in the case of Brian Davis, Kevin Hester and Stephen Tipton), even if such cash amount or benefit would not be deemed an excess parachute payment.
The Agreements define “change-in-control” as the first occurrence of any of the following:
one person (or more than one person acting as a group) acquires the beneficial ownership of stock of Centennial Bank or the Company that, together with the stock held by such person or group, constitutes more than 40% of the total fair market value or total voting power of the stock of Centennial Bank or the Company;
57 | www.homebancshares.com |
Executive Compensation |
a majority of the members of the board of directors of the Company are replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the board of directors of the Company before the date of appointment or election; or
one person (or more than one person acting as a group) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition) assets from Centennial Bank or the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of Centennial Bank or the Company immediately before such acquisition(s).
The Agreement terminates if the NEO resigns or if the NEO’s employment is terminated prior to a change in control event. However, if the officer’s responsibilities. However, ourNEO’s employment is terminated without cause, the NEO will be entitled to receive the change-in-control payment if a change-in-control occurs within 12 months after the NEO’s termination without cause.
Accelerated Vesting of Equity Awards
Our equity incentive plan awards to our named executive officers are subject to accelerated vesting of the awards upon a termination of employment in certain circumstances and upon a change in control of the Company.
Our Amended and Restated 2006 Stock Option and Performance Incentive Plan, as amended, generally provides that, unless the Compensation Committee provides otherwise in the applicable award agreement, upon an employee’s death, any unvested stock options and unvested shares of restricted stock held by the employee at the time of his or her death will vest immediately and any unvested shares of restricted stock subject to performance conditions will vest immediately to the extent the performance conditions have been met.
The award agreements for stock options granted to our named executive officers also generally provide that any unvested stock options will vest immediately upon the executive’s death or disability, except that the stock options granted in 2018 that are subject to performance conditions will vest only to the extent the performance goal has been met as of the date of the executive’s death or disability. For stock options granted before 2018, the stock option agreements also provide that any unvested options will vest immediately if the executive’s employment is terminated by the Company without cause. In addition, each of the Company’s outstanding stock option agreements also provides that any unvested options will vest immediately upon a change in control of the Company or a sale or merger of the Company in which the Company is not the surviving entity.
With respect to shares of restricted stock granted to our named executive officers, the Company’s outstanding award agreements similarly provide that any unvested restricted shares will vest immediately upon the executive’s termination due to death or disability, except that any restricted shares that are subject to performance conditions will only vest to the extent the performance goal has been met as of the date of death or disability. For Mr. Allison’s 2021 equity award, the unvested performance-based shares will vest based on the Company’s performance during the completed years in the performance period prior to Mr. Allison’s death or disability, unless otherwise determined by the Compensation Committee. If Mr. Allison’s death or disability occurs after the end of the second year of the performance period but before the end of the third year of the performance period, two-thirds of the unvested performance-based shares will automatically vest to the extent that the shares would have vested based on satisfaction of the applicable performance measures for the completed two-year period. If Mr. Allison’s death or disability occurs after the end of the first year of the performance period but before the end of the second year of the performance period, one-third of the unvested performance-based shares will automatically vest to the extent that the shares would have vested based on satisfaction of the applicable performance measures for the completed one-year period. If Mr. Allison’s death or disability occurs during the first year of the performance period, all performance-based shares under such award will be forfeited in their entirety.
If an executive’s employment is terminated for any other reason, the Company’s outstanding restricted stock award agreements generally provide that all unvested shares will be forfeited. For purposes of Mr. Allison’s outstanding awards, his transition to Chairman Emeritus will not result in a termination of employment and no shares will be forfeited. The award agreements also provide that any unvested shares will vest immediately upon a change in control of the Company, except that with respect to the performance-based restricted shares granted in 2018 and Mr. Allison’s performance-based restricted shares granted in 2021, the shares will vest only to the extent the performance goal has been met on the date of the change in control.
www.homebancshares.com | 58 |
Executive Compensation |
The following table summarizes, on a stock split adjusted basis, the estimated value for each named executive officer of the accelerated vesting of outstanding equity awards upon a termination of the named executive officer’s employment or upon a change in control of the Company. In accordance with SEC regulations, the table assumes that the termination or change in control occurred on December 31, 2018,2020, and the value applied to the shares of common stock is $16.34$19.48 per share based on the closing price as reported on that date on the NASDAQ Global Select Market.
Potential Accelerated Vesting of Equity AwardsPayments Upon Termination or Change-In-Control Table
Name | Type of Award | Death | Disability | Termination Without Cause | Other Termination(1) | Change in Control | ||||||||||||||||
C. Randall Sims | Stock options(2) | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||
Restricted shares | — | — | — | — | — | |||||||||||||||||
Brian S. Davis | Stock options(2) | — | — | — | — | — | ||||||||||||||||
Restricted shares | 544,661 | 544,661 | — | — | 544,661 | |||||||||||||||||
John W. Allison | Stock options(2) | — | — | — | — | — | ||||||||||||||||
Restricted shares | 6,168,350 | 6,168,350 | — | — | 6,168,350 | |||||||||||||||||
Tracy M. French | Stock options(2) | 65,200 | 65,200 | 65,200 | — | 65,200 | ||||||||||||||||
Restricted shares | 680,839 | 680,839 | — | — | 680,839 | |||||||||||||||||
Kevin D. Hester | Stock options(2) | — | — | — | — | — | ||||||||||||||||
Restricted shares | 544,661 | 544,661 | — | — | 544,661 |
Name |
| Type of Compensation |
| Death |
| Disability |
| Termination Without Cause |
| Other Termination(1) |
| Change in Control | ||||||||||||||||||||
John W. Allison |
| Stock options(2) |
|
| $ | — |
|
|
|
| $ | — |
|
|
|
| $ | — |
|
|
|
| $ | — |
|
|
|
| $ | — |
|
|
|
| Restricted shares |
|
|
| 6,087,500 |
|
|
|
|
| 6,087,500 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 6,087,500 |
|
|
|
| Total |
|
|
| 6,087,500 |
|
|
|
|
| 6,087,500 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 6,087,500 |
|
|
Brian S. Davis |
| Stock options(2) |
|
|
| 29,131 |
|
|
|
|
| 29,131 |
|
|
|
|
| 29,131 |
|
|
|
|
| — |
|
|
|
|
| 29,131 |
|
|
|
| Restricted shares |
|
|
| 188,294 |
|
|
|
|
| 188,294 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 188,294 |
|
|
|
| Cash |
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 1,854,852 |
|
|
|
| 280G Cutback(3) |
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| (20,585 | ) |
|
|
| Total |
|
|
| 217,425 |
|
|
|
|
| 217,425 |
|
|
|
|
| 29,131 |
|
|
|
|
| — |
|
|
|
|
| 2,051,692 |
|
|
Tracy M. French |
| Stock options(2) |
|
|
| 43,697 |
|
|
|
|
| 43,697 |
|
|
|
|
| 43,697 |
|
|
|
|
| — |
|
|
|
|
| 43,697 |
|
|
|
| Restricted shares |
|
|
| 220,786 |
|
|
|
|
| 220,786 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 220,786 |
|
|
|
| Cash |
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 3,221,947 |
|
|
|
| 280G Cutback(3) |
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| (21,894 | ) |
|
|
| Total |
|
|
| 264,483 |
|
|
|
|
| 264,483 |
|
|
|
|
| 43,697 |
|
|
|
|
| — |
|
|
|
|
| 3,464,536 |
|
|
Kevin D. Hester |
| Stock options(2) |
|
|
| 29,131 |
|
|
|
|
| 29,131 |
|
|
|
|
| 29,131 |
|
|
|
|
| — |
|
|
|
|
| 29,131 |
|
|
|
| Restricted shares |
|
|
| 129,854 |
|
|
|
|
| 129,854 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 129,854 |
|
|
|
| Cash |
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 2,054,755 |
|
|
|
| 280G Cutback(3) |
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| (12,791 | ) |
|
|
| Total |
|
|
| 158,985 |
|
|
|
|
| 158,985 |
|
|
|
|
| 29,131 |
|
|
|
|
| — |
|
|
|
|
| 2,200,949 |
|
|
J. Stephen Tipton |
| Stock options(2) |
|
|
| 11,652 |
|
|
|
|
| 11,652 |
|
|
|
|
| 11,652 |
|
|
|
|
| — |
|
|
|
|
| 11,652 |
|
|
|
| Restricted shares |
|
|
| 64,946 |
|
|
|
|
| 64,946 |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 64,946 |
|
|
|
| Cash |
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| 1,649,930 |
|
|
|
| 280G Cutback(3) |
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
| (3,931 | ) |
|
|
| Total |
|
|
| 76,599 |
|
|
|
|
| 76,599 |
|
|
|
|
| 11,652 |
|
|
|
|
| — |
|
|
|
|
| 1,722,598 |
|
|
(1) | Includes, without limitation, termination for cause, voluntary resignation or retirement. |
(2) | Assumes the immediate vesting of all unvested stock options, other than performance-based stock options granted in 2018 for which the performance goal has not been met, and the associated cash proceeds resulting from a same day exercise and sale of only those previously unvested stock options that arein-the-money using the fair market value of our common stock at December 31, |
(3) | Reflects a cutback of amounts that exceed the limits imposed by Section 280G of the Internal Revenue Code as described in the above narrative description of the change-in-control agreements with our named executive officers. |
59 | www.homebancshares.com |
Executive Compensation |
36
Compensation Risk AssessmentThe Committee takes the view that appropriate connections between compensation and performance objectives can encourage our executives to make decisions that will result in significant positive short-term and long-term returns for our business and our shareholders without providing an incentive either to take unnecessary risks or to avoid opportunities to achieve long-term benefits even though they may reduce short-term benefits for the named executive officers, the business or our shareholders.
The Compensation Committee and management conducted an assessment of the risks associated with our compensation policies and practices during 2018,2020, including our compensation arrangements for both executives andnon-executive employees. That assessment included a review of policies and procedures relating to the components of our compensation program, a review of incentive-based equity and cash compensation features, identification of any compensation design features that could potentially encourage excessive or imprudent risk taking, and consideration of the presence or absence of controls, oversight or other factors that mitigate potential risk.
During the review, the Committee and management concluded that several factors and controls relating to our compensation policies and practices mitigate against the potential for risks that could materially and adversely affect the Company. These factors and controls include:
the Company’s lack of involvement in activities regarded as having significant inherent risk, such as mortgage-backed securities and proprietary trading;
management’s review of compensation arrangements of employees of the Company or our bank subsidiary having compliance, risk, credit quality, quality assurance and finance roles;
oversight of incentive compensation by the Compensation Committee, which is made up of independent directors;
effective internal controls over financial reporting for the Company;
appropriate segregation of duties; and
restrictions on awards that align the interests of the employee with the interests of the shareholders.
Based upon this assessment, we do not believe that our employee compensation policies and practices create risks that are reasonably likely to have a material adverse effect on the Company.
As required by Section 953(b) of the Dodd-Frank Act, we are providing the following information about the relationship of the annual total compensation of our “median employee” and the annual total compensation of our CEO.
For 2018,2020, our last completed fiscal year, the median of the annual total compensation of all employees of the Company (other than our CEO) was $39,983,$46,133, and the annual total compensation of our CEO was $703,941.$4,639,256. Based on this information, for 20182020 the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was 17.6100.6 to 1.
Item 402 of RegulationS-K generally requires us to identify the “median employee” only once every three years. The Company last identified its median employee for fiscal year 2017. Accordingly, for the fiscal year 2020 pay ratio calculation, we have identified a new median employee for 2020. For the proxy statement for our Annual Meeting in 2018,fiscal year 2020, we determined the median of the annual total compensation of all employees of the Company (other than our CEO) by identifying our total employee population as of December 31, 2017,2020, which consisted of approximately 1,7862,031 individuals. Of these employees, approximately 1,7441,873 individuals were full-time equivalent employees, with the remainder employed on a part-time (less than 40 hours per week) basis.
To identify the “median employee” we conducted a full analysis of this employee population, without the use of statistical sampling. We determined our median employee using “total compensation” for the full year 2017.2020. “Total compensation” consisted of base pay, bonuses, commissions, fringe benefits, incentives, severance and vacation payout. Using this methodology, we determined that the median employee was a full-time customer service employee.
However, because our originally identified median employee was no longer employed by the Company at December 31, 2018, as permitted by Item 402 we selected another employee whose total compensation, as described above, is substantially similar to the original median employee’s total compensation. The median employee for 2018 was a member of the Company’s treasury management staff.branch manager.
With respect to the annual total compensation of the median employee, we identified and calculated the elements of such employee’s compensation for 20182020 in accordance with the requirements of Item 402(c)(2)(x) of RegulationS-K.
37
PROPOSAL TWO – ADVISORY(NON-BINDING) VOTE
APPROVING EXECUTIVE COMPENSATION
www.homebancshares.com | 60 |
Proposal Two – Advisory (Non-Binding) Vote Approving Executive Compensation |
Proposal Two – Advisory (Non-Binding) Vote Approving Executive Compensation
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) enables our shareholders to vote to approve, on an advisory(non-binding) basis, the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with SEC rules. This vote is commonly known as a“say-on-pay” “say-on-pay” vote. At our Annual Meeting in 2018, our shareholders voted to recommend that the Company hold future“say-on-pay” “say-on-pay” votes annually until the Company is next required to hold an advisory vote on the frequency with which the Company will hold future“say-on-pay” “say-on-pay” votes, which will be in 2024. Accordingly, the Company presents the resolution set forth below for approval by the shareholders in accordance with the Dodd-Frank Act and Section 14A of the Securities Exchange Act of 1934.
At our Annual Meeting in 2018,2020, our “say on pay” proposal received a “For” vote of 45.9% of the shares voted. Although this vote is advisory and non-binding, the Compensation Committee of our Board of Directors and our entire Board of Directors took these results very seriously. The Company’s previous “say-on-pay” votes have generally shown strong support for the Company’s executive compensation programs, with our 2019 say-on-pay vote, for example, receiving the support of 92.4% of our shareholders. In response to the 2020 say-on-pay vote, we reached out to our shareholders approved, on an advisory basis, the compensation of our named executive officers for 2017, as disclosed in last year’s proxy statement. We value the endorsement by our shareholders ofand listened to their concerns regarding our executive compensation policies. and governance practices.
After hearing from shareholders and proxy advisors and reviewing recent corporate governance developments, the Company has implemented a number of enhancements to its executive compensation and governance programs. In addition, we have enhanced our disclosure regarding the transition of our Chairman back into the Chief Executive Officer role in late 2019 and the factors considered by the Compensation Committee in establishing our executive compensation programs.
We believe that our compensation policies and procedures are competitive, are focusedand that the changes that we have made in response to the shareholder feedback we received following the 2020 Annual Meeting enhance the focus of our executive compensation program on pay for performance principles andthat are strongly aligned with the long-term interests of our shareholders. The Compensation Committee, which is comprised entirely of independent directors, oversees our executive compensation program and monitors our policies to ensure they continue to emphasize programs that reward executives for results that are consistent with shareholder interests.
We encourage you to closely review our Compensation Discussion and Analysis and the tabular disclosure which follows it in this Proxy Statement, including the footnotes and narratives which accompany each table, as they describe our compensation policies and procedures and the components and amounts comprising the compensation paid to our named executive officers.
The following resolution gives you as a shareholder the opportunity to endorse or not endorse the compensation we pay to our named executive officers by voting to approve or not approve such compensation as described in this Proxy Statement:
“RESOLVED, that the shareholders of Home BancShares, Inc. (the “Company”) approve the compensation of the Company’s executives named in the Summary Compensation Table of the Company’s Proxy Statement for the 20192020 Annual Meeting of Shareholders, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Executive Compensation tables and the related disclosure contained in the Proxy Statement.”
Because your vote is advisory, it will not be binding upon the Board of Directors and may not be construed as overruling any decision by the Board. However, the Compensation Committee may, in its sole discretion, take into account the outcome of the vote when considering future executive compensation arrangements.
Our Board of Directors and our Compensation Committee believe that our commitment to responsible compensation practices as described in this Proxy Statement justifies a vote by shareholders FOR the resolution approving the compensation of our executives as disclosed in this Proxy Statement.
The Board of Directors Recommends that Shareholders Vote
FOR
the Advisory(Non-binding) Resolution Approving
the Company’s Executive Compensation
61 | www.homebancshares.com |
Proposal Three – Ratification of Appointment of Independent Registered Public Accounting Firm |
38
PROPOSAL THREEProposal Three – APPROVAL OF AMENDMENT TO
THE COMPANY’S ARTICLES OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES
Our Restated ArticlesRatification of Incorporation, as amended, currently authorize the issuanceAppointment of up to 200,000,000 shares of common stock, $0.01 par value. As of the record date, 170,096,572 shares of common stock were issued and outstanding, 5,271,646 shares were reserved for issuance pursuant to currently outstanding stock options, and 3,621,206 shares were reserved for future awards under our Amended and Restated 2006 Performance Incentive Plan, as amended, leaving 1,650,443 shares available for other uses.Independent Registered Public Accounting Firm
The Board of Directors is proposing an amendment to the Restated Articles of Incorporation, as amended, to increase the number of authorized shares of common stock from 200,000,000 to 300,000,000. If the shareholders approve this proposal, the first sentence of Article THIRD in the Company’s Restated Articles of Incorporation, as amended, will be amended to read as follows:
The authorized capital stock (the “Capital Stock”) of this Corporation shall be 300,000,000 shares of voting common stock (the “Common Stock”) having a par value of $0.01 per share, and 5,500,000 shares of $0.01 par value preferred stock (the “Preferred Stock”).
Purpose and Effect of the Proposed Amendment
The Board believes that the current number of authorized shares does not provide the Company with adequate flexibility to issue stock in connection with any future acquisitions or for general corporate purposes. In particular, if the Board determines that it would be appropriate to effect a significant acquisition through the exchange of common stock, conduct a stock offering or declare a stock dividend, the current number of unissued authorized shares might not be enough to complete such transaction. Although we cannot guarantee that any future acquisitions, stock offerings or dividends will occur, the Board believes that the proposed increase in the number of authorized shares will provide the Company with the flexibility to issue future stock dividends or to issue shares in connection with an acquisition or for other corporate purposes, without incurring the expense of convening a special shareholder’s meeting or the delay of waiting until the next annual meeting.
If this proposal is approved, all authorized but unissued shares of common stock will be available from time to time for any proper purpose approved by the Board, including issuances in connection with stock-based benefit plans, future stock dividends and issuances to raise capital or effect acquisitions. Neither the Company nor the Board currently has any arrangements or understandings with respect to the issuance or use of the additional shares of authorized common stock sought to be approved (other than issuances permitted or required under the Company’s Amended and Restated 2006 Stock Option and Incentive Plan, as amended, or awards made pursuant to that plan). If this proposal is approved, all or any of the shares may be issued without further shareholder action, unless required by law or the rules of the NASDAQ Stock Market.
Existing shareholders do not have preemptive or similar rights to subscribe for or purchase any additional shares of common stock that the Company may issue in the future. Therefore, issuances of common stock other than issuances on a pro rata basis to all shareholders would reduce each shareholder’s proportionate interest in the Company.
An increase in the authorized number of shares of common stock could have an anti-takeover effect. If we issue additional shares in the future, such an issuance could dilute the voting power of a person seeking control of the Company, thereby making an attempt to acquire control of the Company more difficult or expensive. Neither the Board nor management is currently aware of any attempt, or contemplated attempt, to acquire control of the Company, and we are not presenting this proposal with the intent that it be used as an anti-takeover device.
39
Vote Required to Approve Proposal
Approval of the amendment to the Restated Articles of Incorporation, as amended, to increase the number of authorized shares requires the affirmative vote of a majority of the votes cast in person or by proxy at the Annual Meeting, assuming a quorum is present.
The Board of Directors Recommends that Shareholders Vote
FOR
the Approval of the Amendment to the Company’s
Restated Articles of Incorporation to Increase the Number of Authorized Shares
40
PROPOSAL FOUR – RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our consolidated financial statements as of and for the fiscal year ended December 31, 2018,2020, were audited by BKD, LLP, an independent registered public accounting firm. In 2018,2020, the Audit and Risk Committee of the Board of Directors and our shareholders approved the engagement of BKD, LLP to be our independent registered accounting firm for fiscal year 2018.2020. The Audit and Risk Committee intends to approve there-engagement of BKD, LLP to be our independent registered public accounting firm for the fiscal year ending December 31, 2019,2021, subject to the ratification of the appointment by our shareholders at the Annual Meeting and our formal acceptance of an engagement letter from BKD, LLP after the Annual Meeting.
Shareholders’ ratification of the selection of BKD, LLP to be our independent registered public accounting firm for fiscal year 20192021 is not required by our Bylaws or otherwise. However, the Board is submitting the selection of the independent registered public accounting firm to the shareholders for ratification as a matter of good corporate practice. If the shareholders fail to ratify the selection of BKD, LLP, the Audit and Risk Committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit and Risk Committee may, at its discretion, direct the appointment of a different independent registered accounting firm at any time during the year if it determines that such change is in the best interests of the Company and our shareholders.
Representatives of BKD, LLP are expected to attend the Annual Meeting, will have an opportunity to make a statement if they so desire, and will be available to respond to appropriate questions.
The Board of Directors Recommends that Shareholders Vote
FOR
the Ratification of the Appointment of BKD, LLP
as the Company’s Independent Registered Public Accounting Firm
for the 20192021 Calendar Year
www.homebancshares.com | 62 |
Report of the Audit Committee of the Board of Directors |
41
REPORT OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORSReport of the Audit Committee of the Board of Directors
In accordance with its written charter, the Audit and Risk Committee (the “Audit Committee”) assists the Board in, among other things, oversight of our accounting and financial reporting processes, our compliance with legal regulatory requirements, the qualifications and independence of the independent auditors and the performance of the internal and independent auditors. A copy of the Audit Committee charter is published on the Company’s website atwww.homebancshares.com under the caption “Investor Relations”/“Corporate Profile”Overview”/“Governance Documents.”
Our Board of Directors has determined that all sevensix members of the Committee are independent based upon the independence requirements of the SEC and NASDAQ, and that our Chairman, Mr. Engelkes, and Mrs.Ms. Garrett each satisfies the criteria of an “audit committee financial expert” as defined by the regulations of the SEC.
Management is responsible for the preparation, presentation, and integrity of our financial statements, for the appropriateness of our accounting principles and reporting policies and for implementing and maintaining internal control over financial reporting. Our independent auditors are responsible for auditing the financial statements and internal controls over financial reporting and for reviewing our unaudited interim financial statements. The Audit Committee’s responsibility is to monitor and review these processes and procedures. Except for Mr. Engelkes and Mrs.Ms. Garrett, the members of the Audit Committee have not been engaged in the practice of accounting or auditing and are not professionals in those fields. The Audit Committee relies, without independent verification, on the information provided to us and on the representations made by management that the financial statements have been prepared with integrity and objectivity and on the representations of management and the opinion of the independent auditors that such financial statements have been prepared in conformity with accounting principles generally accepted in the United States.
During 2018,2020, the Audit Committee held fivefour regularly scheduled meetings and threetwo special meetings. The Audit Committee’s regular meetings were conducted in order to encourage communication among the members of the Audit Committee, management, the internal auditors, and our independent auditors, BKD, LLP. Among other things, the Audit Committee discussed with our internal and independent auditors the overall scope and plans for their respective audits. The Audit Committee separately met with each of the internal and independent auditors, with and without management, to discuss the results of their examinations and their observations and recommendations regarding our internal controls. The Audit Committee also discussed with our independent auditors all matters required by auditing standards generally accepted in the United States of America, including those described in Public Company Accounting Oversight Board Auditing Standard 1301, “Communications with Audit Committees.”
The Audit Committee reviewed and discussed our audited consolidated financial statements as of and for the year ended December 31, 2018,2020, with management, the internal auditors, and our independent auditors. Management’s discussions with the Audit Committee included a review of critical accounting policies.
The Audit Committee obtained from the independent auditors a formal written statement describing all relationships between us and our auditors that might bear on the auditors’ independence consistent with Public Company Accounting Oversight Board Rule 3526, “Communication with Audit Committees Concerning Independence.” The Audit Committee discussed with the auditors any relationships that may have an impact on their objectivity and independence and satisfied itself as to the auditors’ independence. The Audit Committee has reviewed and approved the amount of fees paid to BKD, LLP for audit andnon-audit services. The Audit Committee concluded that the provision of services by BKD, LLP is compatible with the maintenance of BKD’s independence.
Based on the above-mentioned review and discussions with management, the internal auditors, and the independent auditors, and subject to the limitations on our role and responsibilities described above and in the Audit Committee Charter, the Audit Committee recommended to the Board of Directors that our audited consolidated financial statements be included in our Annual Report on Form10-K for the calendar year ended December 31, 2018,2020, for filing with the SEC.
Home BancShares, Inc.
Audit and Risk Committee Members
Jack E. Engelkes, Chairman
Milburn Adams
Robert H. Adcock, Jr.
Karen E. Garrett
James G. Hinkle
Alex R. Lieblong
Thomas J. Longe
63 | www.homebancshares.com |
Audit and Non-Audit Fees |
42
AUDIT ANDNON-AUDIT FEESAudit and Non-Audit Fees
The following table represents aggregate fees billed for professional audit services rendered by BKD, LLP to provide the audit of our annual consolidated financial statements for the years ended December 31, 2018,2020, and December 31, 2017,2019, respectively.
2018 | 2017 | |||||||
Audit fees(1) | $ | 910,513 | $ | 794,846 | ||||
Audit-related fees(2) | 17,556 | 177,682 | ||||||
Tax fees | — | — | ||||||
All other fees(3) | 55,347 | 28,672 |
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| 2020 | 2019 | ||||||||
Audit fees (1) |
|
| $ | 984,500 |
|
|
| $ | 960,366 |
|
|
Audit-related fees (2) |
|
|
| 73,325 |
|
|
|
| 76,650 |
|
|
Tax fees |
|
|
| — |
|
|
|
| — |
|
|
All other fees (3) |
|
|
| 31,951 |
|
|
|
| 33,259 |
|
|
(1) | Audit fees consisted of the annual audit and quarterly review services and consent for and review of a registration statement filed by the Company with the SEC. |
(2) |
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(3) | Other fees related to fees paid by the Company on behalf of the Company’s retirement plan for third-party administration of the Company’s defined contribution plan. |
Policy on Audit CommitteePre-Approval of Audit and PermissibleNon-Audit Services of Independent Auditor
The Audit Committee has the responsibility of appointing, setting compensation for and overseeing the work of the independent auditor, and has established a policy topre-approve all audit and permissiblenon-audit services provided by the independent auditor.
Prior to engagement of the independent auditor for next year’s audit, management will submit an aggregate of services expected to be rendered during that year for each of four categories of services to the Audit Committee for approval.
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