Our Corporate Governance Guidelines and the listing standards of the Nasdaq require that a majority of our directors be independent. Our Board of Directors has adopted the categorical standards prescribed by the Nasdaq to assist our Board of Directors in evaluating the independence of each of theour directors. The categorical standards describe various types of relationships that could potentially exist between a board member and the Company and sets thresholds at which such relationships would be deemed to be material. Provided that no relationship or transaction exists that would disqualify a director under the categorical standards and our Board of Directors affirmatively determines that the director has no material relationship with the Company that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, including certain business relationships for which disclosure may be required in this proxy statement, our Board of Directors will deem such person to be independent. A director shall not be independent if he or she satisfies any one or more of the following criteria:
A director who is, or who has been within the last three years, an employee of the Company, or whose immediate family member is, or has been within the last three years, employed as an executive officer of the Company;
A director who has accepted or who has an immediate family member, serving as an executive officer, who has accepted, during any twelve-month period within the last three years, more than $120,000 in direct compensation from the Company (excluding compensation for board or board committee service, compensation paid to an immediate family member who is an employee of the Company (but not an executive officer of the Company), and benefits under a tax-qualified retirement plan, or non-discretionary compensation);
A director who is, or whose immediate family member is, a current partner of a firm that is the Company’s internal or external auditor, or was a partner or employee of the Company’s outside auditor who worked on our Company’s audit at any time during any of the past three years;
A director who is, or whose immediate family member is, employed as an executive officer of another entity where at any time during the past three years any of the executive officers of the Company served on the compensation committee of such other entity; or
A director who is, or whose immediate family member is, a partner in, or a controlling shareholder or an executive officer of, any organization to which the Company made, or from which the Company received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of that organization’s consolidated gross revenues for that year, or $200,000, whichever is greater, other than (i) payments arising solely from investments in that organization’s securities, and (ii) payments under non-discretionary charitable contribution matching programs.
Our Board of Directors will also consider a director’s charitable relationships when assessing director independence.
Under these criteria, our Board of Directors has determined that the following members of our Board of Directors are independent: David R. Bock, Michael B. Clement, Alan L. Hainey, Steven G. Norcutt, and David R. Bock.Lisa A. Pendergast. We presently have fiveseven directors, including these threefive independent directors.
The Audit Committee operates under a written charter adopted by our Board of Directors. The primary purpose and responsibilities of the Audit Committee include, among other things:
overseeing the audit and other services of our independent registered public accounting firm, including the selection of the lead audit engagement partner, and being directly responsible for the appointment, replacement, evaluation, independence, qualifications, compensation and oversight of our independent registered public accounting firm, who will reportreports directly to the Audit Committee;
fostering open communication, including meeting periodically with management, the internal auditor and the independent registered public accounting firm in separate executive sessions to discuss any matters that the Audit Committee or any of these groups believe should be discussed privately;
reviewing and discussing with management and the auditors our quarterly and annual financial statements and report on internal control and the independent registered public accounting firm’s assessment thereof; and
reviewing and approving related party and conflict of interest transactions and preparing the audit committee report for inclusion in our annual proxy statements for our annual stockholder meeting.meetings.
The Compensation Committee of our Board of Directors is comprised of Messrs. Norcutt (Chairman), Bock, Clement and Hainey and Bock.Ms. Pendergast. Our Board of Directors has determined that each of the Compensation Committee members is independent in accordance with the Company’s independence criteria discussed under “—Independence of Our Board of Directors” and the independence standards of the Nasdaq that apply to Compensation Committee members. The Compensation Committee operates under a written charter adopted by our Board of Directors. In addition, the Compensation Committee administers our incentive compensation plans and equity-based compensation plans and programs, including our 2010 Stock Incentive Plan (the “2010 Stock Plan”) and the Incentive Plan.programs. The Compensation Committee’s basic responsibility is to ensure that our Chief Executive Officer and President andother key members of management are compensated fairly and effectively in a manner consistent with the Company’s stated compensation strategy, competitive practice, applicable regulatory requirements and performance results.
The Nominating & Corporate Governance Committee of our Board of Directors is comprised of Messrs. Hainey (Chairman), Bock, Clement and Norcutt and Bock.Ms. Pendergast. Our Board of Directors has determined that each of the Nominating & Corporate Governance Committee members is independent in accordance with the independence criteria discussed under “—Independence of Our Board of Directors.” The Nominating & Corporate Governance Committee operates under a written charter adopted by our Board of Directors. Among other duties, this committee:
identifies, selects, evaluates and recommends to our Board of Directors candidates for service on our Board; andBoard of Directors;
From time to time, our Board of Directors may establish other committees as circumstances warrant. Those committees will have the authority and responsibility as delegated to them by our Board of Directors.
Pursuant to our Corporate Governance Guidelines, our Board of Directors has not established a fixed policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board.Board of Directors. Instead, the Board of Directors believes this determination is part of the succession planning process and should be considered upon the appointment or re-appointment of a chief executive officer.
Our Board of Directors is currently led by its Chairman, Steven R. Mumma, who also serves as our Chief Executive Officer and President.Officer. Mr. Mumma was appointed as the Chairman of our Board of Directors, effective March 30, 2015. In connection with Mr. Mumma’s appointment as Chairman, our Board of Directors has adopted a policy that provides that in the event our Chairman is also an executive officer of the Company, our independent directors will select a Lead Director from among themselves. Mr. Alan Hainey, an independent director of the Company since 2004, serves as our Lead Director, a role he was initially appointed to on March 30, 2015. Our Lead Director's role exists, according to our Board’sBoard of Director’s policy, (i) to provide leadership to our Board of Directors when the joint roles of Chairman and Chief Executive Officer could potentially be in conflict; (ii) to ensure that our Board of Directors operates independently of management; and (iii) to provide our directors with an independent leadership contact.
Our Lead Director's responsibilities, as set forth in our Board of Directors’ policy, include:
chairing an executive session during each Board of Directors meeting without management (including without our Chairman and Chief Executive Officer) present in order to give independent directors an opportunity to fully and frankly discuss issues, and to provide feedback and counsel to our Chairman and Chief Executive Officer concerning the issues considered;
reviewing and discussing with our Chairman and Chief Executive Officer the matters to be included in the agenda for meetings of our Board of Directors;
acting as liaison between our Board of Directors and the Chief Executive Officer;
establishing, in consultation with our Chairman and Chief Executive Officer, and with the Nominating & Corporate Governance Committee, procedures to govern and evaluate our Board of Directors'Directors’ work, to ensure, on behalf of stockholders, that our Board of Directors is (i) appropriately approving our corporate strategy;strategy and (ii) supervising management's progress against achieving that strategy; and
ensuring the appropriate flow of information to our Board of Directors and reviewing the adequacy and timing of documentary materials in support of management's proposals.
Our Board of Directors has vested the offices of Chairman President and Chief Executive Officer in Mr. Mumma because it believes that combining the roles of Chairman President and Chief Executive Officer facilitates the flow of information between management and our Board of Directors, while providing the appropriate balance between independent oversight of management and efficiency of the operation of our Board of Directors. Furthermore, our Board of Directors believes that having our Board of Directors'Directors’ deliberation of strategic alternatives framed by the person who (i) is the most knowledgeable about the Company and its industry, (ii) has been most instrumental in transforming the Company from a vertically integrated residential mortgage origination and portfolio investment manager into a diversified investment portfolio manager, and (iii) is responsible for executing our strategy is the optimal means for our Board of Directors to discharge its responsibility of establishing strategy. For these reasons, we believe our Board of Directors leadership structure is appropriate for the Company and does not affect our Board of Directors’ approach to risk oversight.
Our Board’sBoard of Directors’ Role in Risk Oversight
We face a variety of risks, including interest rate risk, credit risk, and liquidity risk, many of which are discussed under “Item 1A. Risk Factors,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 7A. Quantitative and Qualitative Disclosures About Market Risk,” each included in our Annual Report on Form 10-K for the year ended December 31, 2015.2018. Our Board of Directors has oversight responsibility with regard to assessment of the major risks inherent in our business and the measures we use to address and mitigate such risks, while our Chairman and Chief Executive Officer and other members of our senior management team having responsibility for continually assessing and managing those risks. In performing its oversight role, our Board of Directors believes that an overall review of risk is inherent in its consideration of our long-term strategies and in the transactions and other matters presented to it and that an effective risk management system will (1) timely identify the material risks that we face, (2) communicate necessary information with respect to material risks to our Chairman and Chief Executive Officer and President or other officers of the Company and, as appropriate, to our Board of Directors or relevant committee thereof, (3) implement appropriate and responsive risk management strategies consistent with our risk profile, and (4) integrate risk management into management and our Board’sBoard of Directors’ decision-making.
Our Board of Directors has designated the Audit Committee to take the lead in overseeing risk management, and the Board of Directors and the Audit Committee receive joint briefings provided by management and advisors regarding the adequacy of our risk management processes. Our Board of Directors believes that an overall review of risk is inherent in its consideration of our long-term strategies and in the transactions and other matters presented to it. The Board of Director’s role in risk oversight of the Company is consistent with our leadership structure, with the Chief Executive Officer and President and other members of senior management having responsibility for assessing and managing our risk exposure, andWhile our Board of Directors andis ultimately responsible for our risk oversight, the committees of our Board of Directors assist our Board of Directors in fulfilling its oversight responsibilities by considering the risks within their respective areas of expertise. For example, the Audit Committee assists our Board of Directors in fulfilling its oversight responsibilities relating to our financial and accounting risk management policies and procedures. As part of this process, the Audit Committee meets periodically with management to review, discuss and provide oversight with respect to our processes and controls to assess, monitor, manage and mitigate potential significant risk exposures. In providing such oversight, the Audit Committee may also discuss such processes and controls with our internal and independent auditors. The Compensation Committee likewise assists our Board of Directors in fulfilling its risk oversight responsibilities with respect to the management of risks associated with compensation program design by reviewing whether there are risks arising from our compensation programs and practices that are reasonably likely to have a material adverse effect on us. The Nominating and Governance Committee assists our Board of Directors with oversight of those efforts.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics that applies to our executive officers, including our principal executive officer and principal financial officer, and to our other employees. We have also adopted a Code of Ethics for senior financial officers, including the principal financial officer. We intend to satisfyThe Code of Business Conduct and Ethics and the disclosure requirement under Item 5.05 of Form 8-K relating to amendments to or waivers from any provision of either of these Code of Ethics applicable to our chief executive officer and chieffor senior financial officer by posting such informationofficers are both available on our website at www.nymtrust.com, Corporate Governance.“Corporate Governance”.
Availability of Corporate Governance Materials
Stockholders may view our corporate governance materials, including the written charters of the Audit Committee, the Compensation Committee and the Nominating & Corporate Governance Committee, our Corporate Governance Guidelines, our Code of Business Conduct and Ethics and our Code of Ethics for senior financial officers, on our website at www.nymtrust.com under the “Corporate Governance” section of the website. A copy of any of these documents will be provided free of charge to any stockholder upon request by writing to New York Mortgage Trust, Inc., 275 Madison90 Park Avenue, New York, New York 10016, Attention: Investor Relations. Information at or connected to our website is not and should not be considered a part of this proxy statement.
Director Nominations
The Nominating & Corporate Governance Committee of our Board of Directors performs the functions of a nominating committee, including identifying, evaluating and recommending to our Board of Directors candidates for service on our Board of Directors who satisfy the qualification requirements described in our Corporate Governance Guidelines.
The Nominating & Corporate Governance Committee’s charter provides that the committee will consider candidates recommended by stockholders for service on our Board of Directors. Stockholders should submit any such recommendations for the consideration of the Nominating & Corporate Governance Committee through the method described under “Communications“—Communications with Our Board of Directors” below. In addition, any stockholder of record entitled to vote for the election of directors at the 20172020 Annual Meeting of Stockholders may nominate persons for election to our Board of Directors if that stockholder complies with the notice procedures summarized in “Stockholder“—Stockholder Proposals for Our 20172020 Annual Meeting” below.
The Nominating & Corporate Governance Committee evaluates all director candidates in accordance with the director qualification standards described in our Corporate Governance Guidelines. The committee evaluates any candidate’s qualifications to serve as a member of our Board of Directors based on various criteria, including a nominee's experience, skills, accomplishments, background, age and diversity, and then reviews those qualifications in the context of the current composition of our Board of Directors and the evolving needs of our business. In addition, the Nominating & Corporate Governance Committee will evaluate a candidate’s independence, diversity, skills and experience in the context of our Board of Directors’ needs.
We do not have a formal policy with regard to the consideration of diversity in identifying director nominees, but our Board of Directors and the Nominating & Corporate Governance Committee strive to nominate directors with a variety of complementary skills so that, as a group, our Board of Directors will possess the appropriate talent, skills and expertise to oversee our business. Although we have no policy regarding diversity, both our Board of Directors and the Nominating & Corporate Governance Committee seek a broad range of perspectives and consider many factors, including the personal characteristics (gender, ethnicity, age and background) and experience (industry, professional and public service) of directors and prospective nominees to our Board of Directors.
Communications with Our Board of Directors
We provide a process for stockholders to send communications to our Board of Directors. Stockholders can send communications to our Board of Directors and, if applicable, to any committee or to specified individual directors in writing to such committee or individual director, c/o New York Mortgage Trust, Inc., 275 Madison90 Park Avenue, New York, New York 10016, Attention: Secretary. We do not screen mail, except when warranted for security purposes, and all such letters will be forwarded to our Board of Directors and any such specified committee or individual directors.
Stockholder Proposals for Our 20172020 Annual Meeting
Our Board of Directors will provide for presentation of proposals by our stockholders at the 20172020 Annual Meeting of Stockholders, provided that these proposals are submitted by eligible stockholders who have complied with the relevant regulations of the SEC regarding stockholder proposals.
Stockholders intending to submit proposals for presentation at our 20172020 Annual Meeting of Stockholders, tentatively scheduled to be held in May 2017,June 2020, must submit their proposals in writing, and we must receive these proposals at our executive offices on or before December 2, 201631, 2019 for inclusion in our proxy statement and the form of proxy relating to our 20172020 Annual Meeting of Stockholders. We will determine whether or not to include any proposal in our proxy statement and form of proxy on a case-by-case basis in accordance with our judgment and the regulations governing the solicitations of proxies and other relevant regulations of the SEC. We will not consider proposals received after December 2, 201631, 2019 for inclusion in our proxy materials for our 20172020 Annual Meeting of Stockholders.
Although stockholder proposals received by us after December 2, 201631, 2019 will not be included in our proxy materials for the 20172020 Annual Meeting of Stockholders, stockholder proposals may be included in the agenda for the 20172020 Annual Meeting of Stockholders if properly submitted in accordance with our bylaws. Our bylaws provide that in order for a stockholder to nominate a candidate for election as a director at an annual meeting of stockholders or propose business for consideration at such meeting, notice must be given in writing to our Secretary not later than the close of business5:00 p.m., Eastern Time, on the 90th day prior to the first anniversary of the date of mailing of the notice for the preceding year’s annual meeting nor earlier than the close of business5:00 p.m., Eastern Time, on the 120th day prior to the first anniversary of the date of mailing of the notice for the preceding year’s annual meeting. As a result, any notice given by or on behalf of a stockholder pursuant to the provisions of our bylaws must be delivered in writing via personal delivery or United States certified mail, postage prepaid to our Secretary c/o New York Mortgage Trust, Inc., 275 Madison90 Park Avenue, New York, New York 10016, not earlier than December 2, 2016,31, 2019, and not later than January 1, 2017.30, 2020. The stockholder filing the notice of nomination must include:
As to the stockholder giving the notice:
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▪ | the name and address of such stockholder and/or stockholder associated person, as they appear on our stock ledger, and current name and address, if different; |
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▪ | the class, series and number of shares of stock of the Company beneficially owned by that stockholder and/or stockholder associated person; and |
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▪ | to the extent known, the name and address of any other stockholder supporting the nominee for election or re-election as a director, or the proposal of other business known on the date of such stockholder’s notice. |
As to each person whom the stockholder proposes to nominate for election as a director:
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▪ | the name, age, business address and residence address of the person; |
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▪ | the class, series and number of shares of stock of the Company that are beneficially owned by the person; |
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▪ | the date such shares were acquired and the investment intent of such acquisition; |
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▪ | all other information relating to the person that is required to be disclosed in solicitations of proxies for election of directors or is otherwise required by the rules and regulations of the SEC; and |
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▪ | the written consent of the person to be named in the proxy statement as a nominee and to serve as a director if elected. |
In order for a stockholder to bring other business before a stockholder meeting, timely notice must be received by us within the time limits described above. That notice must include:
the information described above with respect to the stockholder proposing such business;
a description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; and
any material interest of the stockholder in such business.
Directors Attendance at Meetings of our Board of Directors and Annual Meeting
Our Board of Directors held 1617 meetings, including four regularly scheduled quarterly meetings, during 2015.2018. All directors who were members of our Board of Directors for the year ended December 31, 20152018 attended 75% or more of the aggregate number of meetings of the Board of Directors and its committees on which they served during 2015.2018.
We have a policy that directors attend the Annual Meeting of Stockholders. Each member of our Board of Directors who was a director of the Company at the time of our 20152018 Annual Meeting of Stockholders attended the 20152018 Annual Meeting of Stockholders.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RiverBanc Management Agreement
On April 5, 2011, RB Commercial Mortgage LLC (“RBCM”), one of our wholly-owned subsidiaries, entered into a management agreement with RiverBanc, as amended by an amended and restated management agreement between RiverBanc, RBCM and us, pursuant to which RiverBanc provides investment management services to us. Douglas E. Neal, one of our non-independent directors is the President of RiverBanc. To address any potential conflicts of interest that may result from Mr. Neal's employment with RiverBanc, transactions between RiverBanc and the Company will require review and approval or ratification of our Audit Committee pursuant to our Related Person Transaction Policy. See “—Related Person Transaction Policy” below.
Our management agreement with Riverbanc had an initial term that expired on December 31, 2015 and is now subject to automatic annual one-year renewals (subject to any notice of termination). Pursuant to the terms of our management agreement with RiverBanc, RiverBanc receives a monthly base management fee paid in cash in arrears and an incentive fee that is calculated quarterly and paid in cash in arrears. A description of the material terms of our management agreement with RiverBanc is included in "Item 1. Business—Our External Managers—RiverBanc Management Agreement" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
For the years ended December 31, 2015 and 2014, we expensed approximately $8.1 million and $14.8 million, in fees to RiverBanc, respectively. As of December 31, 2015 and December 31, 2014, we had management fees payable to RiverBanc of $1.7 million and $6.3 million, respectively. In addition, as of December 31, 2015, we owned a 20.0% common equity interest in RiverBanc. For the year ended December 31, 2015 and 2014, we recognized $0.8 million and $2.6 million in income related to our investment in RiverBanc.
RiverBanc also manages an entity, RB Multifamily Investors LLC ("RBMI"), in which we own, as of December 31, 2015, approximately 67% of the outstanding common equity interests and certain preferred equity interests. Our total investment in RBMI amounts to approximately $56.9 million and $36.6 million as of December 31, 2015 and 2014, respectively. Pursuant to a management agreement between RiverBanc and this entity, RiverBanc is entitled to receive base management and incentive fees for its management of assets owned by RBMI. For the years ended December 31, 2015 and 2014, RBMI expensed $0.3 million and $0.1 million in fees to RiverBanc, respectively.
In July 2015, we entered into a contribution agreement with RBMI and certain other third parties pursuant to which we agreed to contribute 100% of our equity interests in RBMI to RiverBanc Multifamily Investors, Inc. (“RMI”) in exchange for shares of RMI’s common stock. RBMI would become a subsidiary of RMI upon completion of the transaction. The transaction contemplated by the contribution agreement was approved by our independent directors and remains subject to certain closing conditions, including the completion of RMI’s initial public offering of RMI common stock, which, as of the date of this proxy statement, has not been completed.There were no material related party transactions during 2018.
Related Person Transaction Policy
Our Board of Directors has adopted a policy regarding the approval of any “related person transaction,” which is any transaction or series of transactions in which we or any of our subsidiaries is or are to be a participant, the amount involved exceeds $120,000 and a “related person” (as defined under SEC rules) has a direct or indirect material interest. Under the policy, a related person would need to promptly disclose to our Secretary any related person transaction and (i) all material facts about the transaction, (ii) the benefits to us of the related party transaction, (iii) if applicable, the availability of other sources of comparable products and services and (iv) an assessment of whether the proposed transaction is on terms that are comparable to the terms available to an unrelated third party or to employees generally. Our Secretary, together with outside legal counsel, would then assess whether the proposed transaction is a “related person transaction” and, if so, communicate that information to the Audit Committee. Based on its consideration of all of the relevant facts and circumstances, the Audit Committee will decide whether or not to approve such transaction. If we become aware of an existing related person transaction that has not been pre-approved under this policy, the transaction will be referred to the Audit Committee, which will evaluate all options available, including ratification, amendment or termination of such transaction. Our policy requires any member of the Audit Committee who may be interested in a related person transaction to recuse himself or herself from any consideration of such related person transaction.
COMPENSATION OF DIRECTORS
As compensation for serving on our Board of Directors in 2015, each of2018, our non-employee directors received a combination of cash retainer of $120,000 and stock having a value of $70,001, representing 8,906 shares of common stock.approximately $90,000. Our Chairman only receives compensation for his services as ourand Chief Executive Officer and our President only receive compensation for their services as our officers and receivesreceive no additional compensation for histheir service on our Board.Board of Directors. Our directors have been, and will continue to be, reimbursed by us for reasonable out-of-pocket expenses incurred in connection with their service on our Board of Directors and any and all committees.committees thereof.
The following table presents information relating to the total compensation of our directors for the fiscal year ended December 31, 2015.2018.
| | Name | | Fees Earned or Paid in Cash | | Stock Awards and Fees Earned or Paid in Common Stock (1) | | Total | | Fees Earned or Paid in Cash | | Stock Awards and Fees Earned or Paid in Common Stock (1) | | Total |
Douglas E. Neal | | $ | 120,000 |
| | $ | 70,001 |
| | $ | 190,001 |
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David R. Bock | | $ | 120,000 |
| | $ | 70,001 |
| | $ | 190,001 |
| | $ | 120,000 |
| | $ | 90,004 |
| | $ | 210,004 |
|
Michael B. Clement | | | $ | 120,000 |
| | $ | 90,004 |
| | $ | 210,004 |
|
Alan L. Hainey | | $ | 120,000 |
| | $ | 70,001 |
| | $ | 190,001 |
| | $ | 120,000 |
| | $ | 90,004 |
| | $ | 210,004 |
|
Steven G. Norcutt | | $ | 120,000 |
| | $ | 70,001 |
| | $ | 190,001 |
| | $ | 120,000 |
| | $ | 90,004 |
| | $ | 210,004 |
|
Lisa A. Pendergast (2) | | | $ | 90,000 |
| | $ | 90,004 |
| | $ | 180,004 |
|
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(1) | Represents the May 2015June 2018 stock awardawards of 8,90614,611 shares of common stock. All of the shares issued to our non-management directors in 2015 as part of the 2015 director compensation program were non-forfeitable as of the date of grant and were issued under the 20102017 Stock Plan.Plan (as defined in “Executive Compensation—Certain Defined Terms”). The amounts shown in this column represent the grant date fair value of the stock computed in accordance with FASB ASCAccounting Standards Codification ("ASC") Topic 718. |
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(2) | Ms. Pendergast became a director in March 2018 and was paid cash fees for the final three quarters of 2018. |
Non-Employee Director Stock Ownership Guidelines
Our Board of Directors believes that significant ownership of our common stock by our directors helps to align the interests of our directors with those of our stockholders and is consistent with our commitment to sound corporate governance. Pursuant to our Director Stock Ownership Guidelines approved by our Board of Directors, non-employee directors are required to hold our common stock with a value equivalent to three times their annual cash retainer, or $360,000, and have from the later of five years from the adoption of the Director Stock Ownership Guidelines or the fifth anniversary of the date of the director’s commencement of service on our Board of Directors to comply. At any time that a director is not in compliance with these guidelines, such director will not be permitted to sell or dispose of any shares of our common stock except to the extent that such sale or disposal relates to payment of taxes associated with the vesting of restricted shares, or an award, of common stock. As of the date of this proxy statement, all non-employee directors have either exceeded their ownership requirement or remain within the five-year compliance period. For more information on the share ownership of our non-employee directors, see “Share Ownership of Certain Beneficial Owners and Our Directors and Executive Officers” herein.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under federal securities laws, our executive officers, directors and any persons beneficially owning more than ten percent (10%) of a registered class of our equity securities are required to report their ownership and any changes in that ownership to the SEC. These persons are also required by SEC rules and regulations to furnish us with copies of these reports. Precise due dates for these reports have been established, and we are required to report in this proxy statement any failure to timely file these reports by those due dates by our directors and executive officers during 2015.2018.
Based on our review of the reports and amendments to those reports furnished to us or written representations from our directors and executive officers that these reports were not required from those persons, we believe that all of these filing requirements were satisfied by our directors and executive officers during 2015.
Table2018, with the exception of Contentsone delinquent Form 4 filing for each of Steven R. Mumma, Nathan R. Reese and Kristine R. Nario-Eng each relating to one transaction occurring on February 13, 2018 that was originally filed on February 16, 2018 and subsequently amended on February 20, 2018. To our knowledge, all transactions have been reported.
EXECUTIVE OFFICERS
The following table and biographies contain information regarding our executive officers. These officers are appointed annually by our Board of Directors and serve at the Board’sBoard of Directors’ discretion.
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Name | | Age | | Position |
Steven R. Mumma | | 5760 | | Chairman and Chief Executive Officer and |
Jason T. Serrano | | 44 | | President |
Nathan R. Reese | | 3740 | | Vice PresidentChief Operating Officer and Secretary |
Kristine R. NarioNario-Eng | | 3639 | | Chief Financial Officer |
For information on Mr.Messrs. Mumma and Serrano, please see histheir biographical descriptiondescriptions provided above under the caption “Proposal One:No. 1: Election of Directors — Directors—Nominees for Election as Directors.”
Nathan R. Reese is our Vice PresidentChief Operating Officer and Secretary. Mr. Reese was named Vice PresidentChief Operating Officer of the Company in March 2007effective September 19, 2018. Mr. Reese previously served as a Managing Director and has served as Secretary effectiveof the Company since January 1, 2008. On March 25, 2009, our Board of Directors designated Mr. Reese an executive officer of the Company. In his capacity as Vice President,Chief Operating Officer, Mr. Reese manages company operations including portfolio activity, treasury, servicing, and is responsible for overseeing cash flow managementthe Company’s operations, including certain portfolio activity, loan servicing, treasury functions, and foreclosure and delinquency monitoring.information technology. Prior to his current position, Mr. Reese was employed by the Company as a Senior Securitization Analyst from October 2005 to October 2007 and as a Portfolio Operations Manager from April 2004 to October 2005. Before joining the Company in April 2004, Mr. Reese was a Financial Associate with The Vanguard Group based in Malvern, Pennsylvania. He holds a B.A. in Finance from La Salle University.
Kristine R. NarioNario-Eng is our Chief Financial Officer. Ms. NarioNario-Eng was named Chief Financial Officer of the Company effective May 14, 2014. Ms. NarioNario-Eng previously served as the Company’s Controller, a position she held since joining the Company in November 2012. Prior to joining the Company, Ms. NarioNario-Eng was an Assistant Vice President at Deutsche Bank AG (and certain of its affiliates) from August 2010 to November 2012, where she held positions in financial control and accounting services. Prior to joining Deutsche Bank AG, Ms. NarioNario-Eng was employed at Grant Thornton LLP from October 2005 to August 2010, where she gained experience in managing and supervising financial statement audits of privately- and publicly-held companies in various industries, including hedge funds, broker-dealers, private equity companies and REITs. Ms. NarioNario-Eng is a Certified Public Accountant (inactive) and graduated Cum Laude from the University of Santo Thomas, Manila, Philippines.
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
OUR DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information, as of March 17, 2016,April 24, 2019, regarding our common stock owned of record or known by us to be owned beneficially by each person owning more than five percent of our common stock, each director and nominee for director, each named executive officer and all directors, nominees and executive officers as a group. As of March 17, 2016,April 24, 2019, we had 109,409,236 shareshad 190,091,655 shares of common stock outstanding. EachExcept as noted below, each of the stockholders identified in the table below has sole voting and investment power over the common stock beneficially owned by that person. Theperson and the address for each individual listed below is: c/o New York Mortgage Trust, Inc., 275 Madison90 Park Avenue, New York, New York 10016.
| | Name of Beneficial Owner | | Number of Shares of Common Stock Beneficially Owned | | Percent of Class | | Number of Shares of Common Stock Beneficially Owned | | Percent of Class |
BlackRock, Inc. (1) | | 8,484,367 |
| | 7.8 | % | | 26,784,393 |
| | 14.1 | % |
Steven R. Mumma | | 399,958 |
| | * |
| | 709,592 |
| | * |
|
Jason T. Serrano | | | 161,812 |
| | * |
|
Nathan R. Reese | | 46,784 |
| | * |
| | 93,773 |
| | * |
|
Kristine R. Nario | | 23,321 |
| | * |
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Kristine R. Nario-Eng | | | 61,600 |
| | * |
|
Alan L. Hainey | | 75,276 |
| | * |
| | 154,296 |
| | * |
|
Steven G. Norcutt | | 46,724 |
| | * |
| | 88,346 |
| | * |
|
David R. Bock | | 34,656 |
| | * |
| | 76,278 |
| | * |
|
Douglas E. Neal | | 42,546 |
| | * |
| |
All directors and executive officers as a group (7 persons) | | 669,265 |
| | * |
| |
Michael B. Clement | | | 40,296 |
| | * |
|
Lisa A. Pendergast | | | 14,611 |
| | * |
|
All directors and executive officers as a group (9 persons) | | | 1,400,604 |
| | 0.7 | % |
|
| |
* | Represents less than one percent of our issued and outstanding shares. |
(1) | Information based on a Schedule 13G/A filed with the SEC on January 27, 201631, 2019 by BlackRock, Inc., 55 East 52nd Street, New York, NY 10055. The reporting person has sole voting power over 8,222,29326,406,015 shares of common stock and sole dispositive power over 8,484,36726,784,393 shares of common stock. |
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
ThisExecutive Summary
We are a real estate investment trust, or REIT, for U.S. federal income tax purposes, in the business of acquiring, investing in, financing and managing mortgage-related and residential housing-related assets. Our investment portfolio includes (i) structured multi-family property investments such as multi-family CMBS and preferred equity in, and mezzanine loans to, owners of multi-family properties, (ii) residential mortgage loans, including distressed residential mortgage loans, non-QM loans, second mortgages, and other residential mortgage loans, (iii) non-Agency RMBS, (iv) Agency RMBS and (v) certain other mortgage-related and residential housing-related assets. Our hybrid investment strategy and the industry in which we operate (mortgage REIT) require that we maintain a highly qualified executive management team with strong operational skills.
The information set forth under this Compensation Discussion and Analysis (“CD&A”) section describes the executive compensation program that was in place for 20152018 for our Chief Executive Officer and President (Steven R. Mumma), our Chief Operating Officer and Secretary (Nathan R. Reese) and our Chief Financial Officer (Kristine R. Nario) and our Vice President and Secretary (Nathan R. Reese)Nario-Eng) (collectively, our “Named Executive Officers” or “NEOs”). We had no other named executive officers in 2015.2018.
This CD&A explains the overall objectives, elements and policies underlying our named executive officer compensation program for 2015.2018. This discussion contains forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Future compensation programs that we adopt may differ materially from current programs.
Executive Summary
We are an internally managed REIT, for federal income tax purposes, in the business of acquiring, investing in, financing and managing primarily mortgage-related assets and financial assets, such as residential mortgage loans, including second mortgages and loans sourced from distressed markets, multi-family CMBS, mezzanine loans to and preferred equity investments in owners of multi-family properties, equity and debt securities in entities that invest in residential and commercial real estate and commercial real estate-related debt investments, Agency RMBS consisting of fixed-rate, adjustable-rate and hybrid adjustable-rate RMBS and Agency IOs consisting of interest only and inverse interest-only RMBS that represent the right to the interest component of the cash flow from a pool of mortgage loans. Our hybrid investment strategy and the industry in which we operate (mortgage REIT) require that we maintain a highly qualified executive management team with strong operational skills.
NEO Compensation Program Objectives for 2018
The Compensation Committee of our Board of Directors is responsible for establishing and administering policy, on an annual basis, with respect to the compensation of our NEOs. We are committed to providing an executive compensation program that supports the following goals and philosophies:
aligning our management team’s interests with stockholders’ expectations of return on investment;
motivating and rewarding our management team to grow long-term earnings and book value in a manner that is consistent with prudent risk-taking and based on sound corporate governance practices; and
attracting and retaining an experienced and effective management team while also maintaining an appropriate expense structure.
Structure of Our 20152018 NEO Compensation Program
As discussed in more detail herein, our 20152018 NEO compensation program is comprised of the following primary compensation elements:
base salary, which is fixed annually and compensates individuals for daily performance;
annual incentive compensation that is payable in cash and is based on achievement of certain corporate and individual performance objectives under the 2018 Annual Incentive Plan;
incentive compensation that isPlan (defined below) and payable in cash and/or shares of restricted stock that vest ratably over the course of three years from the date of grant and is also based on achievement of certain corporate and individual performance objectives under the Incentive Plan;grant; and
with respect to our President and Chief Executive Officer only, a performance-based equity award under which the number of underlyinglong-term incentive awards that are payable in shares of our common stock that can bemay become earned isand non-forfeitable based on commonthe attainment of relative total stockholder return over a three-year period.
On May 28, 2015, our Board of Directors, upon the recommendation of the Compensation Committee, reviewed the Company’s Incentive Plan, a performance-based incentive compensation plan that was originally established in 2013 that serves as a means of linking annual incentive compensation both to the Company’s overall performance and to objective and subjective performance criteria that are within the control of the Company’s NEOs, and approved changes to the performance measures and hurdle requirements under the quantitative component of the Incentive Plan, as well as a changes to the incentive bonus payout structure under the Incentive Plan, all of which was effective under the Incentive Plan for the 2015 fiscal year. For more information regarding this plan, see “—Executive Compensation Program Components—Incentive Plan.”
Also, on May 28, 2015, the Compensation Committee approved a performance share award (“PSA”) pursuant to the Company’s 2010 Stock Plan to Steven R. Mumma, our Chairman, Chief Executive Officer and President. The PSA is a performance-based equity award under which the number of underlying shares of our common stock that can be earned by Mr. Mumma will generally range from 0% to 200% of the target number of PSA granted that generally will be earnedhurdles at the end of three years (on April 30, 2018) based ona three-year total common stockholder return. For more information regarding the PSA, see “Executive Compensation Information—Other Compensation—Performance Share Award Agreement.”performance period.
Management’s Assessment of 2015our Performance in 2018
The following is a summary of our key results and achievements in 2015:2018:
produced 10.5% return on common stockholders' equity for 2015;
earned net income attributable to common stockholders of $67.0$79.2 million, or $0.62 per share, for the year ended December 31, 2015;2018, an increase of 3.8% over the prior year;
declared annual dividends in 2015produced return on common stockholders' equity of $1.02 per common share;10.6%;
expanded stockholders’ equity to $880.5 million at December 31, 2015 from $817.9 million at December 31, 2014;
completed 2015 with amaintained relatively stable book value per common share of $6.54 as of December 31, 2015; andranging from $6.00 to $5.65;
produced economictotal stockholders' return (book value(common stock price change plus dividends) of 6.9% on8.4%;
produced total economic return (change in book value per common share plus common share dividends) of 7.5%;
issued approximately 43.3 million shares of our common stock.stock through public offerings at an average public offering price of $6.16 per share, all of which was issued at levels that were accretive to our book value per share at the time of issuance; and
grew our total assets by 22.2%, primarily through the acquisition of credit assets totaling $1.2 billion.
Highlights of Our NEO Compensation Program in 20152018
In making its compensation decisions for the 2015 fiscal year, the Compensation Committee recognized our 2015 results and achievements noted above, the performance of the Company and the NEOs, the performance of the Company as compared to other hybrid mortgage REITs and the contributions and accomplishments of our NEOs to our continuing growth . The following is a summary of the highlights of our 20152018 NEO compensation program:
total compensation for our NEOs in 20152018 was $2.4$5.4 million, or $0.02$0.04 per weighted average share of common stock outstanding in 2015, down 34% from2018, including 2018 Long-Term EIP (defined below) awards that cannot generally be earned and paid until December 31, 2020;
base salary represented 30% of total compensation for our NEOs in 2014.2018, including 2018 Long-Term EIP awards that cannot generally be earned and paid until December 31, 2020, and just 24% of our Chief Executive Officer's total compensation; and
base salary represented 51%approximately 66% of the total compensation for our NEOs in 2018, including 2018 Long-Term EIP awards that cannot generally be earned and paid until December 31, 2020, was subject to a performance-based incentive plan, while 70% of our Chief Executive Officer's total compensation in 2018 was subject to a performance-based incentive plan.
Certain Defined Terms
The following defines certain of the commonly used terms in this “Executive Compensation” section:
“2010 Stock Plan” refers to the equity incentive plan approved by our stockholders at the 2010 Annual Meeting of Stockholders of the Company pursuant to which we granted equity awards to our NEOs prior to the approval of the 2017 Stock Plan;
“2017 Stock Plan” refers to the equity incentive plan approved by our stockholders at the 2017 Annual Meeting of Stockholders of the Company pursuant to which we may grant equity compensation awards;
“2018 Long-Term EIP” refers to our long-term equity incentive program that provides for the grant to our NEOs and certain other key employees in 2018 of performance stock units ("PSUs") that will become earned and non-forfeitable based on the attainment of relative total stockholder return hurdles over a three-year performance period that commenced on January 1, 2018 and ends on December 31, 2020;
“2019 Long-Term EIP” refers to our long-term equity incentive program that provides for the grant to our NEOs and certain other key employees in 2019 of PSUs that will become earned and non-forfeitable based on the attainment of relative total stockholder return hurdles over a three-year performance period that commenced on January 1, 2019 and ends on December 31, 2021;
“Incentive Compensation Plan” or “ICP” refers to the framework, initially adopted by our Board of Directors in 2013 and as amended in 2015, that served as a basis for determining annual performance-based incentive compensation payable to our NEOs in 2016 and 2017;
“2017 Annual Incentive Plan” refers to the ICP for determining incentive compensation payable to our NEOs for performance in 2017;
“2018 Annual Incentive Plan” refers to the annual incentive plan approved by our Board of Directors and the Compensation Committee for performance in 2018; and;
“2019 Annual Incentive Plan” refers to the annual incentive plan approved by our Board of Directors and the Compensation Committee for performance in 2019.
Chief Executive Officer and President in 2015;Stock Ownership Guidelines
approximately 31%Our Board of the total compensation paid toDirectors believes that significant ownership of our common stock by our Chief Executive Officer helps to align the interests of our Chief Executive Officer with those of our stockholders and Presidentis consistent with our commitment to sound corporate governance. Pursuant to our Executive Stock Ownership Guidelines approved by our Board of Directors, our Chief Executive Officer is required to own shares of our common stock having a value equal to at least five times his base salary, and has from the later of five years from the adoption of the Executive Stock Ownership Guidelines or the fifth anniversary of the Chief Executive Officer’s promotion to such position to comply. At any time that our Chief Executive Officer is not in 2015compliance with these guidelines, he will not be permitted to sell or dispose of any shares of our common stock except to the extent that such sale or disposal relates to payment of taxes associated with the vesting of restricted shares of common stock or other equity awards. As of the date of this proxy statement, Mr. Mumma’s stock ownership complies with our Executive Stock Ownership Guidelines.
Our other executive officers are not currently required to achieve or maintain any particular level of stock ownership in us, although we encourage stock ownership through the structure of our executive compensation programs. For more information on the share ownership of our executive officers, see “Share Ownership of Certain Beneficial Owners and Our Directors and Executive Officers” herein.
Scope of Authority of Compensation Committee
The Compensation Committee has overall responsibility for approving, evaluating and, in some cases, recommending to our Board of Directors, on an annual basis, director and officer compensation plans, policies and programs, including determining salaries, annual cash incentive awards, long-term equity awards, restricted stock awards, change in control and termination arrangements and director fees. Pursuant to its charter, the Compensation Committee has the sole authority to retain, terminate and pay any compensation consultant to be used to assist in the evaluation of director and senior executive compensation, as well as the authority to retain special legal, accounting or other consultants to advise the committee and may form subcommittees and delegate its authority to such subcommittees.
Role of Our Independent Compensation Consultant
In June 2017, the Compensation Committee engaged an independent compensation consultant, FPL Associates, L.P. ("FPL"), to serve as its independent compensation consultant on executive and director compensation matters. FPL was engaged to perform a review of, and make recommendations with respect to, the design of our 2018 compensation programs for both our executives and our independent directors. The engagement included assisting the Compensation Committee in reviewing (i) our overall executive compensation program to ensure that it is (A) market competitive and supports our stated compensation philosophy and (B) aligned with our business strategy and objectives and (ii) our independent director compensation program to provide detailed benchmark analysis of independent director compensation paid at appropriate benchmark companies and information on the compensation components paid by the benchmark companies to independent directors. Pursuant to its engagement, FPL provided advice and analysis to the Compensation Committee on the design, structure and level of executive and director compensation for our 2018 compensation programs, and attended meetings of the Compensation Committee and participated in executive sessions without members of management present. FPL reported directly to the Compensation Committee. In 2018, the Compensation Committee again engaged FPL as its independent compensation consultant on executive and director compensation matters for 2019. The Compensation Committee has reviewed, and to the extent it continues to engage FPL in the future will review, on at least an annual basis, FPL’s performance and provides FPL with direct feedback.
The Compensation Committee recognizes that it is essential to receive objective advice from its compensation advisers. To that end, the Compensation Committee assessed the independence of FPL pursuant to a performance bonus plan;the Compensation Committee’s Charter and SEC rules and concluded that FPL was and continues to be independent. In addition, the Compensation Committee concluded that FPL's work for the Compensation Committee has not raised any conflicts of interest.
Overview of Certain FPL Recommendations for 2018
The Compensation Committee adopted substantially all of FPL’s recommendations with respect to changes from our 2017 executive compensation program, including increased base salaries for Mr. Reese and Ms. Nario-Eng, changes to the annual incentive plan such as the use of total economic return ("TER") as a single performance measure, a reduction of the minimum and increase in the maximum hurdles for quantitative performance, minor adjustments to the weighting of quantitative and qualitative measures for Mr. Reese and Ms. Nario-Eng as well as the formula for allocating cash and restricted stock under the annual incentive plan. In addition, the Compensation Committee accepted the recommendation of FPL with respect to the establishment and design of a long-term equity incentive program put in place beginning in 2018.
Process for Setting Executive Compensation
Overview
The Compensation Committee has primary responsibility for reviewing, setting and approving the compensation of our Chief Executive Officer and President and reviewing, approving and recommending to our Board of Directors, compensation for our other NEOs in a manner that is effective and consistent with our overall executive compensation strategy. As part of that responsibility, theThe Compensation Committee reviews on an individual basis the performance of our NEOs. As part of its process for reviewing the performance of our NEOs for 2015, the Compensation Committee considered the recommendations of our Chairman, Chief Executive Officer and, President, with respect to the compensation of Mr. Reese and Ms. Nario. Moreover, atNario-Eng, it also considers the 2015 Annual Meetingrecommendations of Stockholders, the advisory vote on executive compensation was approved by approximately 92% of shares voted. our Chairman and Chief Executive Officer.
The level of support on the advisory vote was considered by the Compensation Committee and supported its decision to not make any significant changes to the structure of our compensation program during 2015.
Historically, the Compensation Committee has reviewedgenerally reviews compensation levels for our NEOs near the beginning of each calendar year in determining base salaries and budgeted amounts for total compensation for the new fiscal year, and then meets again following the end of such fiscal year to review the Company’s and the NEOs’ actual performance, at which time it typically makes determinations with respect to annual cash incentive and equity incentive compensation. With respect to long-term equity incentive awards, the Compensation Committee intends to make award determinations close to the beginning of the performance period of the applicable award. In situations where we hire or promote a new NEO during the fiscal year, the Compensation Committee may make base salary and incentive compensation determinations in close proximity to the NEO's hiring or promotion date. The Compensation Committee may also adjust or modify awards subsequent to the initial grant date to give effect to changes to base salary that may occur during any given year.
The Compensation Committee reviews all elements of compensation and total compensation payable to each of our NEOs. As part of its annual review of the compensation paid toof our NEOs, the Compensation Committee typically considers a number of factors in determining or structuring compensation, including the nature of the executive’s job and the responsibilities related thereto, the executive’s job performance compared to goals and objectives established for the Company and the executive at the beginning of the year, the experience level of the executive in his or her current position, the compensation levels of competitive jobs within oura peer group (defined below),of companies selected by the Compensation Committee with the assistance of our independent compensation consultant, our financial performance and financial condition, the execution of our investment and financing strategy, the impact of compensation determinations on our budgeted operating expense ratios and certain other factors. These factors described above may vary from year to year in importance to, and usage by, the Compensation Committee, depending upon market conditions, corporate priorities and individual circumstances.
The As discussed below in “—Compensation Committee reviews all elementsBenchmarking and Use of compensation and total compensation payable to each of our NEOs. As part of this review, the Compensation Committee typically considersPeer Groups,” we do not directly link the compensation practices and levels at other companies that it deems generally comparable in structure and strategy, which includes other internally managed mortgage REITs or specialty-finance companies, such as MFA Financial, Inc., CYS Investments, Inc., Capstead Mortgage Corporation, Dynex Capital, Inc., Arlington Asset Investment Corp. and RAIT Financial Trust. We sometimes refer to this group as our “peer group” for purposes of determining compensation. Relative to our peer group, we are, in many cases, significantly smaller in terms of total assets, stockholders’ equity and staffing. In terms of compensation paid to our NEOs, we have generally provided total compensation at or near the low end of the range of total compensation provided by our peer group, with total compensation in 2014 for (i) the Chief Executive Officers of our peer group ranging from approximately $2.2 million to approximately $5.7 million, and (ii) the other named executive officers of our peer group ranging from approximately $0.8 million to approximately $4.3 million. We do not, however, have a policy of targeting compensation for our NEOs to any specific level within the range of total compensation paid by our peer group (i.e., median, upper or lower); rather, we have attempted to structure the Company’s Incentive Plan and to compensate our NEOs in a manner that is both competitive enough to retain their services and rewards their performance, hard work and dedication, but is also consistent with our needs to maintain an appropriate expense structure. The Compensation Committee expects that as we grow the Company and our profitability in future years, our total NEO compensation will become more competitive with the total compensation paid by our peer group.
In 2013,target market percentile. However, the Compensation Committee worked jointly with management to designrecognizes that because a portion of our NEO's total compensation is driven by a formulaic and implement a performance-based,objective process under both our annual incentive compensation plan that combines the elements of current cashplans and long-term equity incentive compensation in one plan, which we referprograms, there may be instances when these performance-based plans fail to asachieve the Incentive Plan. On March 21, 2013,plan's objective. In these cases, the Compensation Committee and our Boardmay utilize the discretion, if any, afforded to it under these plans to adjust, by means of Directors approved the Incentive Plan for the purpose of (i) attracting and retaining top performing employees, (ii) motivating employees by tying compensation directly to our financial performance, and (iii) rewarding exceptional individual performance that supports our overall objectives. While many of our peer group companies view annualan equity grant, discretionary cash incentive compensation and equity incentive compensation as separate components of their overall compensation program and may have separate criteria for each component, the Incentive Plan ties the payment of both cash incentive and equity compensation with time-based vesting conditions to the achievement of quantitative and qualitative performance goals set forth in the Incentive Plan. The Compensation Committee believes that by issuing both cash and equity incentive awards based on an individual’s achievement of the performance criteria, the Incentive Plan allows us to better monitor the effects of our compensation program.
On May 28, 2015, our Board of Directors, upon the recommendation of the Compensation Committee, completed its annual review of the Company’s Incentive Plan, and adopted changes that expanded the performance measures from one single performance measure comprised of adjusted return on equity, to three equally-rated performance measures comprised of adjusted return on equity, total economic return and total common stockholder return, as well as changes to the hurdle requirements under the quantitative component of the Incentive Plan which took into account a significantly more challenging current return environment for 2015. Our Board of Directors also approved changes to the incentive bonus payout structure under the Incentive Plan to better provide current cash compensation to our NEOs other than our Chief Executive Officer. All of the changes to the Incentive Plan adopted by our Board of Directors in May 2015 were effective under the Incentive Plan for the 2015 fiscal year and determinedor combination thereof, the incentive compensation paid to our NEOs for 2015.outcomes predicated by the formulaic approach provided by these plans.
In May 2015, the Compensation Committee approved a PSA pursuant to the Company’s 2010 Stock Plan to Steven R. Mumma, our Chairman, Chief Executive Officer and President. The PSA was adopted by the Compensation Committee and awarded to Mr. Mumma for the purpose of further aligning our principal executive officer’s interests with those of our common stockholders, providing our principal executive officer with a performance-based incentive equity award based on Company performance over a multi-year period and rewarding our principal executive officer for his strong leadership and the Company’s strong financial performance in 2013 and 2014.
The Compensation Committee also reviews and makes recommendations to our Board of Directors annually with respect to the compensation of our non-management directors. In setting director compensation, our Board of Directors generally considers the compensation practices and levels for directors paid by oura peer group selected by the Compensation Committee and by other mortgage REITs, as well as the expected time commitment from the non-management directors in such year.
ScopeCompensation Benchmarking and Use of Authority of Compensation CommitteePeer Groups
ThePrior to September 2017, the Compensation Committee has overall responsibilityreviewed the compensation levels and practices of a small group of internally-managed mortgage REITs and specialty-finance companies (“former peer group”), generally for approving, evaluatingpurposes of understanding the range of total compensation paid to similarly situated executives to our NEOs. Generally, this analysis excluded externally-advised mortgage REITs because these REITs tend to have few, if any, employees that are compensated directly and/or fully by the REIT. Instead, such persons’ compensation tends to be paid by the external manager (or its affiliates) of the REIT, and as a result, the REIT itself is required to disclose publicly little to no compensation information regarding its NEOs.
Beginning in some cases, recommending2017, the Compensation Committee engaged FPL, in part to benchmark the compensation levels and practices relating to our NEOs and other executive officers against a larger sample size of industry-based compensation levels and practices. With the assistance of FPL, the Compensation Committee conducted a benchmarking analysis for 2018 with respect to the Boardcompensation levels and practices of Directors, on an annual basis, directorour NEOs. While it is the Compensation Committee’s goal to provide compensation opportunities that are responsive to both individual and officer compensation plans, policiescorporate-level performance and programs of the Company, including determining salaries, annual cash bonuses, restricted stock, change in control and termination arrangements and director fees. Pursuant to its charter,that are competitive within industry standards, the Compensation Committee has not established, nor does it seek to establish, a policy of directly linking compensation for our NEOs to any specific target market percentile for NEO pay levels. The Compensation Committee believes that because pay practices and compensation levels among participants in our industry can vary significantly from one year to the sole authority to retain, terminate and pay any compensation consultant to be used to assist innext, the evaluationuse of director and senior executive compensation, as wella specific target market position may not necessarily reflect the Compensation Committee’s assessment of performance as the authority to retain special legal, accounting or other consultants to advise the committee and may form subcommittees and delegate its authority to such subcommittees. Neitherprimary driver of pay levels. Instead, the Compensation Committee nor managementattempts to structure our executive compensation program for our NEOs in a manner that is both competitive enough to retain their services and rewards their performance, but is also consistent with our needs to maintain an appropriate expense structure.
At the outset of the benchmarking process, the Compensation Committee reviewed, with the assistance of FPL, the possible composition of our peer group, including the size of the peer group and the rationale for including certain companies, each of which have similarity to us based on one or more factors, including business focus, size and/or geography. Because of the limited compensation information available for mortgage REITs, the Compensation Committee has, engagedwith input from FPL, developed a peer group that extends beyond mortgage REITs. This peer group also includes other real estate-focused finance companies and certain equity REITs, each of which have similarity to us based on business focus, size and/or geography and the executives of which are required to have similar skills and experience as our executives. In addition, this peer group may include companies that have, in prior years, been identified by proxy advisory firms as comparable to us in their evaluation of us in connection with developing their annual Say-on-Pay vote recommendation, or that we may compete with in recruiting talent.
In considering the peer group analysis provided by FPL, the Compensation Committee focused on developing a peer group comprised of between 8 and 20 companies that are between 0.5 times and 2.0 times our size and are either direct competitors to us or who otherwise are industry-relevant. The Compensation Committee determined to exclude externally-managed mortgage REIT’s from our peer group due to the limited publicly available comparative compensation consultant since 2005 and no subcommittees were formeddata for their executives.
In light of this approach, the Compensation Committee, in the fall of 2017, identified the following 14 companies against which our compensation practices would be reviewed for purposes of designing our 2018 executive compensation program. We sometimes refer to these 14 companies as our “peer group”:
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Arbor Realty Trust, Inc. | iStar, Inc. |
Capstead Mortgage Corporation | Ladder Capital Corp. |
CYS Investments, Inc. | Lexington Realty Trust |
Dynex Capital, Inc. | MFA Financial, Inc. |
Gramercy Property Trust, Inc. | PennyMac Financial Services, Inc. |
Hannon Armstrong Sustainable Infrastructure Capital, Inc. | RAIT Financial Trust |
Institutional Financial Markets, Inc. | Redwood Trust, Inc. |
Consideration of Prior "Say-on-Pay" Votes
At the 2018 Annual Meeting of Stockholders, the advisory vote on executive compensation was approved by approximately 91% of shares voted. The level of support on the advisory vote was considered by the Compensation Committee in 2015.its decision making with respect to the structure of our compensation program for 2018.
Executive Compensation Program Components for 2018
Our 2018 executive compensation program was comprised of three separate and primary elements, including base salary, annual incentive compensation and long-term equity awards (in the form of the 2018 Long-Term EIP). In developing our executive compensation program for 2018, the Compensation Committee considered (i) market practices among our peer group, (ii) our existing compensation structure and its effectiveness, (iii) internal pay equity, (iv) the retention of key employees of our Company and (v) the recommendations of FPL. The following provides an overview of our approach to each primary element of our NEO compensation program and an analysis of the compensation paid under each of these elements.
Base Salary
Base salary, which represents the fixed element of our executive compensation program, provides for basic economic security at a level that allows us to retain the executive’s services. The Compensation Committee generally establishes annual base salaries for our NEOs commensurate with the level of experience that the executive brings to the position, the nature of the responsibilities required of the executive, such as whether the executive is performing in multiple roles, how successful the executive is in achieving goals established by the Compensation Committee and the executive’s contributions to the Company and internal pay equity considerations, but does not assign any specific weights to these factors. As discussed in other parts of this CD&A, the Compensation Committee also gives significant consideration to the size of the Company and our budgeted operating expenses in setting annual base salaries and has not historically targeted base salaries for our NEOs to any specific level within the range of base salaries paid by our peer group. Base salaries are reviewed annually and may be adjusted to better match competitive market levels or to recognize an executive’s professional growth and development, increased responsibility or other discretionary factors.
In February 2015,2018, the Compensation Committee elected to increase base salaries from 20142017 levels for each of Mr. Reese and Ms. NarioNario-Eng for fiscal year 2015,2018, with each of Mr. Reese’s and Ms. Nario-Eng’s set at $325,000 and Ms. Nario’s at $275,000.$400,000. The determination to increase base salaries in 20152018 for ourthese NEOs was driven in partprimarily by the growth of the Company in 2014, the performance of our NEOs in 2014internal management reorganization and pay equity considerations and by our desire to establish a base salary that isdrives total compensation towards levels that are more competitive with the base salaries and total compensation paid by our peer group.group for these roles. Mr. Mumma'sMumma’s annual base salary was unchanged at $700,000 as provided in the Second Amended and Restated Employment Agreement between us and Mr. Mumma. The base salaries paid to our NEOs in 2015 continue to be below or near the low end of the range of base salaries provided to similarly situated executives in 2014 by members of our peer group.$800,000.
Annual Incentive Compensation
IncentiveAnnual incentive compensation, in the form of annual cash incentive compensation and equity incentiverestricted stock awards, subject to time-based vesting conditions (payable in the form of restricted stock), is available to each of the NEOs under the 2018 Annual Incentive Plan. See “— Incentive Plan” below. IncentiveAnnual incentive compensation serves as a means of linking annual compensation both to our overall performance and to objective and subjective performance criteria that are within the control of the NEOs.
In part, to better align our NEOs interests with those of our stockholders and to cause them to increase their ownership of common stock, the Compensation Committee has structured the Incentive Plan to require the NEOs to receive, subject to the amount of incentive compensation earned, a portion of their incentive compensation as equity incentive awards subject to time-based vesting conditions. The Compensation Committee believes that equity incentiverestricted stock awards subject to time-based vesting conditions are important to motivate and reward the NEOs for maximizing stockholder value, and also help create an incentive for talented employees to remain with the Companyus on a longer-term basis, while the cash incentive compensation payable under the 2018 Annual Incentive Plan provides NEOs with current income for achieving performance criteria during 2015. Equity incentive awards under the Incentive Plan are provided primarily by grants of restricted stock issued under our 2010 Stock Plan which vest ratably on the first, second and third anniversaries of the grant date.2018.
Incentive Plan
Pursuant to the 2018 Annual Incentive Plan, we provide our NEOs withhad the opportunity to earn annual incentive compensation forupon achieving certain corporate financial and non-financial goals. The 2018 Annual Incentive Plan, which providesprovided for no minimum award or guaranteed payment, iswas comprised of two parts: a quantitative component and a qualitative component. Pursuant to the 2018 Annual Incentive Plan, as effective for fiscal year 2015, Mr. Mumma’s incentive compensation was weighted such that 80% was based on performance under the quantitative component and 20% under the qualitative component, while Mr. Reese’s incentive compensation was weighted such that 65%60% was based on performance under the quantitative component and 35%40% under the qualitative component. The Compensation Committee set Ms. Nario’sNario-Eng’s incentive compensation under the 2018 Annual Incentive Plan to be weighted such that 25%50% was based on performance under the quantitative component and 75%50% was based on performance under the qualitative component. Because Mr. Mumma is our Chief Executive Officer and Presidentmost senior executive and has ultimate responsibility over our investment portfolio and other business decisions, our success or failure is highly dependent on his ability to manage our portfolio and operate our business.him. As a result, the Compensation Committee concluded that Mr. Mumma’s incentive compensation should be weighted more heavily on our achievement of the performance criteria under the quantitative component as compared to the weighting of components for Mr. Reese and Ms. Nario.Nario-Eng. In addition, because Ms. NarioNario-Eng does not have management responsibility for investment strategy, asset selection or portfolio management, unlike Mr. Reese, the Compensation Committee concluded that Ms. Nario’sNario-Eng’s performance under the quantitative component should be weighted at 50%. Prior to 2018, Mr. Reese's incentive compensation had been weighted 65%/35% and Ms. Nario-Eng's 25%/75%. The change in weighting for these executives in 2018 was primarily a function of internal management reorganization and pay equity considerations, and solely in Ms. Nario-Eng's case, to make a greater percentage of her annual incentive compensation subject to quantitative criteria.
Quantitative Component. The amount of
For the incentive compensation payable under2018 Annual Incentive Plan, the Compensation Committee determined that the quantitative component waswould be based on a single performance measure, TER. The Compensation Committee reached this determination after assessing, with the averageassistance of FPL, (i) the effectiveness of the 2017 Annual Incentive Plan and the ICPs utilized in prior years and their three quantitative performance measures of adjusted return on equity, (“AROE”), total economic return (“TER”)TER and total common stockholder return (“TSR”) in rewarding management for absolute performance on an annual basis and together with AROE(ii) management's ability to effectively influence the outcomes under such criteria on an annual basis. In selecting TER as the sole performance measure under the quantitative component for 2018, the Compensation Committee concluded that TER is the most optimal method for measuring management's absolute performance on an annual basis and that management is better able to influence TER on an annual basis as compared to TSR, which the “Quantitative Company Performance Measure”).Compensation Committee believes is better suited to awards based on a multi-year performance period. The ultimate amount of the payout under the quantitative component of the 2018 Annual Incentive Plan was contingent on the Company exceeding a specified return hurdles under the hurdle ("Quantitative Company PerformanceComponent Measure Hurdle") for the 20152018 fiscal year. Previously, the quantitative component had been based solely on AROE.
For purposes of the 2018 Annual Incentive Plan:
AROE is defined as (A) GAAP net income, as reported in the Company’s annual financial statements for the 2015 fiscal year, excluding unrealized gains and losses related to the consolidated multi-family loans held in securitization trusts, divided by (B) the Company’s annual average GAAP common stockholders’ equity for the 2015 fiscal year, as adjusted to exclude the impact of unrealized gains and losses reported in other comprehensive income on GAAP common stockholders’ equity and cumulative unrealized gains and losses from acquisition date related to the consolidated multi-family loans held in securitization trusts (“Adjusted Stockholders’ Equity”). The Company’s annual average Adjusted Stockholders’ Equity is calculated by averaging our Adjusted Stockholders’ Equity for each of the four quarters in the year, with the respective quarterly amounts calculated by averaging (1) Adjusted Stockholders’ Equity for the previous quarter end and (2) Adjusted Stockholders’ Equity for the current quarter end. In its discretion, the Compensation Committee may elect to adjust the average Adjusted Stockholders’ Equity for capital raises that occurred during the measurement period to properly reflect the weighted average amount outstanding during the period.
Plan, TER iswas defined as (A) the sum of (i) the Company’s book value per common share at December 31, 20152018 minus the Company's book value per common share at December 31, 2017 and (ii) the aggregate dividends per common share declared by the Company during 2015,2018, divided by (B) the Company’s book value per common share at December 31, 2014.2017.
TSR is definedIn addition, as (A)part of the sumCompensation Committee’s goal to create and maintain a market competitive executive compensation program, the Compensation Committee, with the assistance of FPL, also examined the Quantitative Component Measure Hurdles under the 2018 Annual Incentive Plan to ensure these hurdles were at appropriate levels to award management's absolute performance. This examination included a review of the actual performance level achieved by the Company, changing market conditions and the hurdle levels utilized by other internally-managed mortgage REITs.
Based on this review, the Compensation Committee modified the range of Quantitative Component Measure Hurdles under the 2018 Annual Incentive Plan for minimum and maximum performance relative to prior years by (i) reducing the minimum hurdle from 8% to 6% and (ii) increasing the maximum performance hurdle from 14% to 16%. In making this change, the Compensation Committee concluded that (i) the closing per share sales priceQuantitative Component Measure Hurdle for minimum performance was too high in light of current market conditions and market practices and the Company’s common stock on December 31, 2015current return environment for new investments and (ii) the aggregate dividends per common share declared byQuantitative Component Measure Hurdle for maximum performance should be pushed higher to require significant outperformance for maximum compensation levels under the Company during 2015, divided by (B) the closing per share sales price of the Company’s common stock on December 31, 2014.2018 Annual Incentive Plan.
The Compensation Committee did not make any adjustments to the average Adjusted Stockholders’ Equity for capital raises by the Company during fiscal 2015.
The following table sets forth the Quantitative Company PerformanceComponent Measure hurdlesHurdle and corresponding incentive compensation payouts for each of the NEOs under the quantitative component of the 2018 Annual Incentive Plan:
| | Named Executive Officer | | Quantitative Company Performance Hurdle(1) (2) | | Payout as a % of Base Salary Upon Achievement of Hurdle (1) | | | Quantitative Component Measure Hurdle(1) | | Payout as a % of Base Salary Upon Achievement of Hurdle (2) | |
Steven R. Mumma | | Less than 8% | | — | | | Less than 6% | | — | |
| | 8% | | 100% | | | 6% | | 100% | |
| | 11% | | 200% | | | 11% | | 200% | |
| | 14% | | 300% | | | 16% | | 300% | |
| | Greater than 14% | | 300% | (3) | |
Nathan R. Reese | | Less than 8% | | — | | | Less than 6% | | — | |
| | 8% | | 50% | | | 6% | | 50% | |
| | 11% | | 100% | | | 11% | | 100% | |
| | 14% | | 150% | | | 16% | | 150% | |
| | Greater than 14% | | 150% | (3) | |
Kristine R. Nario | | Less than 8% | | — | | |
Kristine R. Nario-Eng | | | Less than 6% | | — | |
| | 8% | | 50% | | | 6% | | 50% | |
| | 11% | | 75% | | | 11% | | 100% | |
| | 14% | | 125% | | | 16% | | 150% | |
| | Greater than 14% | | 125% | (3) | |
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(1) | PayoutAt the discretion of the Compensation Committee, payout percentages are pro-rated based onmay exceed the stated payout percentage for achievement of the Quantitative Company PerformanceComponent Measure Hurdle in excess of 16%. |
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(2) | For fiscal year 2018, if performance was between specified hurdles.the threshold (6%) and target (11%) or between the target (11%) and maximum (16%), the performance level achieved was determined by applying linear interpolation to the performance interval. For example, attainment of a Quantitative Company PerformanceComponent Measure Hurdle of 9.5%8.5% for the 20152018 fiscal year would entitle Mr. Mumma to a percentage payout under the quantitative component equal to 150% of his base salary.. Actual incentive compensation earned under the quantitative component iswas calculated by multiplying, (i) in the case of of Mr. Mumma, 80% by the product of the applicable payout percentage and Mr. Mumma’s base salary, (ii) in the case of Mr. Reese, 65%60% by the product of the applicable payout percentage and Mr. Reese’s base salary, and (iii) in the case of Ms. Nario, 25%Nario-Eng, 50% by the product of the applicable payout percentage and Ms. Nario’sNario-Eng’s base salary. |
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(2) | For fiscal year 2013 and 2014, the amount of incentive compensation payable under the quantitative component was contingent on our exceeding specified AROE hurdles, 10% (minimum), 14% (target) and 18% (maximum). |
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(3) | At the discretion of the Compensation Committee, payout percentages may exceed the stated payout percentage for achievement of Quantitative Company Performance Measure in excess of 14%. |
For 2015,2018, the Compensation Committee concluded that the Quantitative Company PerformanceComponent Measure Hurdle achieved was less than 8%7.5% under the 2018 Annual Incentive Plan. Therefore,Set forth in the table below is the payout calculation for each of our NEOs did not earn any incentive compensation underbased on achievement of the quantitative component.Quantitative Component Measure Hurdle at 7.5%.
The |
| | | | | | | | | | | | | |
Named Executive Officer | | Base Salary | | Payout as a % of Base Salary | | Weighted Percentage | | Quantitative Incentive Payout Amount | |
Steven R. Mumma | | $ | 800,000 |
| | 130% | | 80% | | $ | 832,000 |
| |
Nathan R. Reese | | $ | 400,000 |
| | 65% | | 60% | | $ | 156,000 |
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Kristine R. Nario-Eng | | $ | 400,000 |
| | 65% | | 50% | | $ | 130,000 |
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Notwithstanding the tables above, the Compensation Committee iswas authorized under the 2018 Annual Incentive Plan to increase or decrease the percentage payout under the quantitative component based on our performance relative to our peer group. The Compensation Committee did not make any adjustments to the percentage payout under the quantitative component for any of our NEOs for fiscal 2015.year 2018.
Qualitative Component
Qualitative Component. Under the qualitative component, a NEO iswas eligible to receive annual incentive compensation equal to, in the case of Mr. Mumma, between zero and three times Mr. Mumma’s base salary multiplied by 20%, in the case of Mr. Reese, between zero and one and one-half times Mr. Reese’s base salary multiplied by 35%40%, and in the case of Ms. Nario,Nario-Eng, between zero and one and one-fourthone-half times Ms. Nario’sNario-Eng’s base salary multiplied by 75%50%. Under the qualitative component, the Compensation Committee considered the following performance factors, in addition to any other factors that the Compensation Committee deemed to be appropriate, when determining the payout amount under this component: (i) in the case of Mr. Mumma, (A) leadership of the Company, (B) investor relations, shareholder communications and capital raising, (C) our performance relative to budget and (D) risk management and capital preservation and (ii) in the case of our other NEOs, qualitative performance objectives determined annually by the Chief Executive Officer and President and our Board of Directors, which included criteria such as (A) business unit or functional area performance and (B) leadership and organizational development.
The following table sets forth the hurdles and corresponding annual incentive compensation payouts for each of the NEOs under the qualitative component of the 2018 Annual Incentive Plan:
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| | | | | |
Named Executive Officer | | Qualitative CompanyComponent Performance Hurdle | | Payout as a % of Base Salary Upon Achievement of Hurdle |
Steven R. Mumma | | Minimum | | 100 | % |
| | Target | | 200 | % |
| | Maximum | | 300 | % |
Nathan R. Reese | | Minimum | | 50 | % |
| | Target | | 100 | % |
| | Maximum | | 150 | % |
Kristine R. NarioNario-Eng | | Minimum | | 50 | % |
| | Target | | 75100 | % |
| | Maximum | | 125150 | % |
The Compensation Committee hashad the discretion to determine the qualitative component at levels between the performance levels identified in the table above. For 2015,Set forth in the table below is the payout calculation for each of our NEOs based on the Compensation Committee determined, in the caseCommittee's determination of Mr. Mumma, that his leadership of the Company through a very challenging market environment in 2015, which still resulted in a return on stockholders’ equity, was exemplary and that he continued to provide the Company with a strong culture of risk management and a disciplined approach to capital preservation. As a result, the Compensation Committee determined that Mr. Mumma achieved the maximum performance under the qualitative component (i.e., 300%) and thus earned $420,000 under this component. In the case of Mr. Reese, the Board, with the input of our Chief Executive Officer and President, determined that, among other things, Mr. Reese was (a) actively involved in the successful implementation of the investment and financing strategies of the Company and (b) instrumental in successfully establishing and executing our 2015 business plan. As a result, the Compensation Committee determined that Mr. Reese achieved the maximum performance under this component (i.e., 150%) and thus earned $170,625 under this component. In the case of Ms. Nario, the Board, with the input of our Chief Executive Officer and President, determined that, among other things, Ms. Nario was successful in directing the activities performed by our finance and accounting staff in support of our business activities. As a result, the Compensation Committee determined that Ms. Nario achieved her target objectives under this component (i.e., 75%) and thus earned $154,688 under this component.
2018 annual incentive compensation.
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Named Executive Officer | | Base Salary | | Payout as a % of Base Salary | | Weighted Percentage | | Qualitative Incentive Payout Amount | |
Steven R. Mumma (1) | | $ | 800,000 |
| | 300% | | 20% | | $ | 480,000 |
| |
Nathan R. Reese (2) | | $ | 400,000 |
| | 125% | | 40% | | $ | 200,000 |
| |
Kristine R. Nario-Eng (3) | | $ | 400,000 |
| | 100% | | 50% | | $ | 200,000 |
| |
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(1) | In the case of Mr. Mumma, the Compensation Committee considered his navigation of a challenging interest rate environment in 2018, which helped produce a 7.5% total economic return for the Company, which the Compensation Committee considered to be a solid performance relative to other hybrid mortgage REITs (including internally- and externally-managed hybrid mortgage REITs), his leading role in the internalization of the Company's last remaining externally-managed business and the successful integration of a new team of investment professionals, the growth of our capital base primarily through successful public equity offerings all at accretive prices to our book value per share that generated gross proceeds of approximately $267 million, his leadership in growing our total assets by 22.2% in 2018, his role in maintaining a strong culture of risk management and a disciplined approach to capital preservation. As a result, the Compensation Committee determined that Mr. Mumma achieved the maximum performance under the qualitative component (i.e., 300%). |
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(2) | In the case of Mr. Reese, the Compensation Committee, with the input of our Chief Executive Officer, determined that, among other things, Mr. Reese was actively involved in the successful implementation of the investment and financing strategies of the Company, played a key role in the integration of a new team of investment professionals and was instrumental in successfully executing our 2018 business plan. As a result, the Compensation Committee determined that Mr. Reese achieved above target performance under this component (i.e., 125%). |
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(3) | In the case of Ms. Nario-Eng, the Compensation Committee, with the input of our Chief Executive Officer, determined that, among other things, Ms. Nario-Eng was successful in directing the activities performed by our finance and accounting staff in support of our business activities, specifically including her significant role in the internalization process and integration of a new team of investment professionals. As a result, the Compensation Committee determined that Ms. Nario-Eng achieved target performance under this component (i.e., 100%). |
Total Incentive Compensation Earned and Paid Under the Incentive Plan. In accordance with the2018 Annual Incentive Plan our
Our NEOs earned the following amounts of total incentive compensation in 2015:2018 under the 2018 Annual Incentive Plan:
| | Named Executive Officer | | Incentive Compensation Earned Under Quantitative Component | | Incentive Compensation Earned Under Qualitative Component | | Total Incentive Compensation Earned in 2014 | | % of Incentive Compensation Paid in Cash | | % of Incentive Compensation Paid in Restricted Stock | | Incentive Compensation Earned Under Quantitative Component | | Incentive Compensation Earned Under Qualitative Component | | Total Incentive Compensation Earned in 2018 | | % of Incentive Compensation Paid in Cash | | % of Incentive Compensation Paid in Restricted Stock |
Steven R. Mumma | | $ | — |
| | $ | 420,000 |
| | $ | 420,000 |
| | 75% | | 25% | | $ | 832,000 |
| | $ | 480,000 |
| | $ | 1,312,000 |
| | 55% | | 45% |
Nathan R. Reese | | $ | — |
| | $ | 170,625 |
| | $ | 170,625 |
| | 75% | | 25% | | $ | 156,000 |
| | $ | 200,000 |
| | $ | 356,000 |
| | 75% | | 25% |
Kristine R. Nario | | $ | — |
| | $ | 154,688 |
| | $ | 154,688 |
| | 75% | | 25% | |
Kristine R. Nario-Eng | | | $ | 130,000 |
| | $ | 200,000 |
| | $ | 330,000 |
| | 75% | | 25% |
Equity Incentive
Compensation Under the 2018 Annual Incentive Plan. Paid in Restricted Stock
As noted above, NEOs were eligible to earna portion of annual incentive compensation earned under the 2018 Annual Incentive Plan that is payable, in cash, or depending on the size of the total award earned under the 2018 Annual Incentive Plan, a combination of cash andin shares of restricted stock.stock, subject, in each case, to the discretion of the Compensation Committee and the terms of the 2017 Stock Plan (or successor plan). Shares of restricted stock issued as part of the compensation earned under the 2018 Annual Incentive Plan arewere issued from our 2010the 2017 Stock Plan and vest ratably on an annual basis over a three-year period.period from the date of grant. Pursuant to the 2018 Annual Incentive Plan, for incentive compensation earned up to 1.0 times the base salary of the NEO, 25% of that amount will be paid in shares of restricted stock, while 75% of any incentive compensation earned in excess of 1.0 times the NEOs base salary will be paid in shares of restricted stock. Prior to 2018, the ICPs for the applicable fiscal year provided that 25% of the NEOs total annual incentive compensation would be paid in shares of restricted stock at each of the minimum, target and maximum payout levels under the applicable ICP, except that Mr. Mumma would receive 38% and 50% of this total annual incentive compensation in the form of restricted stock at the target and maximum payout levels, respectively. The following table sets forth the percentage of aggregate compensation earned under the 2018 Annual Incentive Plan at various payout levels for fiscal year 20152018 that are required to be paid in restricted common stock:
| | Named Executive Officer | | Minimum | | Target | | Maximum | | Minimum | | Target | | Maximum |
Steven R. Mumma | | 25% | | 38% | | 50% | | 25% | | 50% | | 58% |
Nathan R. Reese | | 25% | | 25% | | 25% | | 25% | | 25% | | 42% |
Kristine R. Nario | | 25% | | 25% | | 25% | |
Kristine R. Nario-Eng | | | 25% | | 25% | | 42% |
For 2015,2018, the Compensation Committee awarded, in accordance with the terms of the 2018 Annual Incentive Plan, a total of 25,24091,969 shares of restricted stock to Mr. Mumma (having a grant date fair value of approximately $105,000,$584,000, which is based on the closing sale price of our common stock on February 25, 2016,5, 2019, the date the stock award was approved by our Compensation Committee), 10,25414,016 shares of restricted stock to Mr. Reese (having a grant date fair value of approximately $42,656, which is based on the closing sale price of our common stock on February 25, 2016, the date the stock award was approved by our Board)$89,000) and 9,29612,992 shares of restricted stock to Ms. NarioNario-Eng (having a grant date fair value of approximately $38,672, which is based on the closing sale price of our common stock on February 25, 2016, the date the stock award was approved by our Board)$82,500). The formulaic approach of having equity incentive awards subject to time-based vesting conditions tied directly to incentive compensation earned under the 2018 Annual Incentive Plan was influenced by (i) our desire to increase the executive’s ownership stake in the Company and better align the executive’s interests with those of our stockholders, (ii) our desire to tie total incentive compensation (including equity incentive awards) to a single incentive performance plan weighted, in the case of two of our NEOs, more heavily upon quantitative performance measures, (iii) our desire to increase the amount of non-cash, equity incentive compensation earned by our Chief Executive Officer and President as a percentage of his total compensation, (iv)(iii) our desire to provide our NEOs with a competitive balance of current cash compensation and equity compensation subject to time-based vesting conditions that rewards performance and increases the executive’s incentive to remain with the Company over the longer-term and (v)(iv) our desire to create an incentive compensation plan that spreads the expense of a portion of the incentive compensation program over a three-year period.
TheRestricted stock awards are frequently utilized by the Compensation Committee expects to continue to issueas a form of equity incentive awards subject to time-based vesting conditions to our NEOs during the first quarter of each fiscal year in the future, pursuant to an incentive compensation plan that is similar to the Incentive Plan or otherwise. Restricted stock is the preferred equity incentive award of the Compensation Committee due, in part, to the distribution policies and requirements of REITs and the effect that those distribution requirements tend to have on our common stock price, which tends to make stock options a less desirable form of equity incentive award.
Performance Share AwardLong-Term Equity Incentive Compensation
On May 28, 2015,Following a review of our compensation programs and upon FPL’s recommendation, the Compensation Committee approvedand our Board of Directors determined to add a PSAnew element to Mr. Mumma.our executive compensation program for 2018 in the form of a long-term equity incentive program (2018 Long-Term EIP). As part of its deliberations in determining whether to add a long-term equity incentive element, the Compensation Committee considered (i) market practices among our peer group, (ii) our existing compensation structure and its effectiveness, (iii) internal pay equity and (iv) the retention of key employees of our Company. The PSA isCompensation Committee ultimately concluded that the inclusion of a performance-basedlong-term equity award program in our overall compensation structure was necessary to help us create and maintain a market competitive executive compensation program that promotes the recruitment and retention of key employees and rewards employees for outperformance relative to a peer group over the longer-term.
During the first quarter of 2018, the Compensation Committee and our Board of Directors approved the grant of PSUs to the NEOs and certain other employees as part of our 2018 Long-Term EIP. The awards were issued pursuant to and are consistent with the terms and conditions of the 2017 Stock Plan.
The 2018 PSU awards are subject to performance-based vesting under which the 2017 Stock Plan pursuant to a form of PSU award agreement approved by the Compensation Committee and our Board of Directors (the “PSU Agreement”) in February 2018. The target number of underlying shares2018 PSUs subject to the awards granted to our NEOs is as follows:
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| | |
Named Executive Officer | | Target Number of 2018 PSUs |
Steven R. Mumma | | 259,320 |
Nathan R. Reese | | 64,830 |
Kristine R. Nario-Eng | | 64,830 |
The Compensation Committee, with the input of FPL, determined to set the payouts under the 2018 PSUs consistent with the minimum, target and maximum payouts under the 2018 Annual Incentive Plan, such that Mr. Mumma could earn between 0% and 300% of his base salary upon achievement of the respective performance hurdles in the PSU Agreement, with target set at 200% of base salary, while Mr. Reese and Ms. Nario-Eng could earn between 0% and 150% of their base salaries upon achievement of the respective performance hurdles in their PSU Agreements, with target set at 100% of base salary. In determining the target amounts for the 2018 PSUs, the Compensation Committee considered the value in providing generally equally-sized incentive payouts between both the Company's short-term and longer-term incentive programs, as well as the amount, assuming achievement of the target performance hurdles, that would bring the NEOs total annual compensation closer to the 50th percentile than the 25th percentile of total annual compensation of similarly situated executives of our common stock that can be earned will generally rangepeer group at target levels.
The named executive officer’s right to receive settlement of the 2018 PSUs in amounts ranging from 0% to 200%150% of the target number of PSA granted,2018 PSUs will vest and become earned and non-forfeitable based on the attainment of relative total shareholder return hurdles, which include both share price appreciation and reinvestment of common dividends paid during the performance period that commenced on January 1, 2018 and runs through December 31, 2020 as measured against an identified performance peer group of 23 mortgage REITs. The Compensation Committee determined that total shareholder return is the most appropriate method to measure management’s longer-term performance relative to our peers and helps to further align our management team's interests with those of our stockholders. Pursuant to the PSU Agreement, an awardee will be entitled to 50%, 100% and 150% of the target number2018 PSUs upon achievement of PSA granted increasedrelative total shareholder return at the 30th, 50th and 80th, respectively, percentile ranking among the identified performance peer group. Total shareholder return for the Company and each member of the identified performance peer group will be determined by dividing (i) the sum of the cumulative amount of such entity’s dividends per share for the performance period and the arithmetic average per share volume weighted average price (the “VWAP”) of such entity’s common stock for the last thirty (30) consecutive trading days of the performance period minus the arithmetic average per share VWAP of such entity’s common stock for the last thirty (30) consecutive trading days immediately prior to reflect the performance period by (ii) the arithmetic average per share VWAP of such entity’s common stock for the last thirty (30) consecutive trading days immediately prior to the performance period. Each 2018 PSU represents an unfunded promise to receive one share of our common stock once the performance condition has been satisfied.
The grant date fair value of the reinvestmentPSUs was determined, in accordance with FASB ASC Topic 718 at the time the grants were made, through a Monte-Carlo simulation of any dividends declared on our common stock duringtotal shareholder return and the measurementcommon stock total shareholder return of our identified performance peer companies to determine the relative total shareholder return our common stock over a future period (as further described below). The PSA generally will be earned atof three years. For the PSUs granted in 2018, the inputs used by the model to determine the fair value are (i) historical stock price volatilities of our and our identified performance peer companies over the most recent three year period and correlation between each company's stock and the identified performance peer group over the same time series and (ii) a risk free rate for the period interpolated from the U.S. Treasury yield curve on grant date.
Upon any termination of an awardee’s employment or service relationship with us or our affiliates for any reason prior to the end of three years (on April 30, 2018) based on three-year total TSR,the performance period, any unearned 2018 PSUs will terminate automatically without any further action by us, except as follows:otherwise provided in any employment agreement between the awardee and us or as otherwise determined by the Compensation Committee.
if three-year TSR is less than 33%, then 0%Upon the occurrence of a “Change in Control” (as defined in the 2017 Stock Plan) prior to the end of the targetperformance period, the performance period will end and the number of PSA2018 PSUs earned, if any, will vest;
if three-year TSR is greater than or equalbe determined based solely on the extent that the applicable performance goal has been achieved according to 33% and the TSR is not in the bottom quartileactual performance as of the identified peer group, then 100%date of the target number of PSA will vest;Change in Control.
if three-year TSR is greater than or equal to 33% and the TSR is in the top quartile of the identified peer group then 200% of the target number of PSA will vest; and
if three-year TSR is greater than or equal to 33% and the TSR is in the bottom quartile of an identified peer group then 50% of the target number of PSA will vest.
For purposes of the PSA,2018 PSUs , the “peer group”"identified performance peer group" means Arlington Asset Investment Corp., Apollo Residential Mortgage, Inc., Chimera Investment Corporation, Dynex Capital, Inc., Ellington Financial LLC, Invesco Mortgage Capital Inc., Javelin Mortgage Investment Corp., MFA Financial, Inc., AG Mortgage Investment Trust, Inc., AmericanAGNC Investment Corp, Annaly Capital Management Inc., Anworth Mortgage Asset Corporation, ARMOUR Residential REIT, Inc., Capstead Mortgage Corporation, Cherry Hill Mortgage Investment Corp.Corporation, Chimera Investment Corporation, CYS Investments, Inc., Dynex Capital, Inc., Ellington Residential Mortgage REIT, Five Oaks Investment Corp., Great Ajax Corp., Invesco Mortgage Capital Inc., MFA Financial, Inc., MTGE Investment Corp., New Residential Investment Corp., Orchid Island Capital, Inc., PennyMac Mortgage Investment Trust, Redwood Trust, Inc., Sutherland Asset Management Corporation, Two Harbors Investment Corp. and Western Asset Mortgage Capital Corporation. The
Other Executive Compensation Committee determined to use the above peer group to determine the PSA earned by Mr. Mumma because each of these companies have a comparable strategy and invest in similar types of assets as to those of the Company. In the event the common stock of any of these companies ceases to be publicly-traded before April 30,Program Features for 2018 such company shall be excluded from the calculation of the peer group's TSR.
Subject to vesting, shares of our common stock, equal in number to the product of the applicable percentage (0%, 50%, 100% or 200%) times the target number of PSA, will be distributed to Mr. Mumma not later than May 15, 2018 (or, if earlier, the date of a Change in Control (as defined in the 2010 Stock Plan)). The value of any dividends declared during the measurement period will be reflected in the target number of PSA by increasing the target number of PSA granted by an amount corresponding to the incremental number of shares of common stock that a stockholder would have acquired during the three-year TSR measurement period had all dividends during that period been reinvested in our common stock.
If a Change in Control occurs before April 30, 2018, Mr. Mumma will earn the PSA and be entitled to receive shares of our common stock based on achievement of the TSR objectives set forth above (measured from May 1, 2015 until the control change), pro-rated based on the period from May 1, 2015 until the Change in Control.
Mr. Mumma generally will vest in the earned PSA if employment continues until April 30, 2018 or, if earlier, the date of a Change of Control. In the event Mr. Mumma’s employment ends before April 30, 2018 and before a Change in Control, for a reason other than death, disability, a termination without cause or a resignation with good reason, Mr. Mumma will forfeit all of the PSA. If Mr. Mumma’s employment ends before April 30, 2018 and before a Change in Control, on account of death or disability, the PSA will remain outstanding and Mr. Mumma (or his beneficiary) will receive the number of shares of our common stock issuable on account of the TSR performance during the three-year measurement period or until a Change in Control, as applicable. If Mr. Mumma’s employment ends before April 30, 2018 and before a change in control, on account of a termination without cause or a resignation with good reason, the PSA will remain outstanding and Mr. Mumma will receive the number of shares of common stock issuable on account of the TSR performance during the three-year measurement period or a Change in Control, as applicable, but pro-rated for the period of employment on and after May 1, 2015 (or the date of the Change in Control).
The PSA granted to Mr. Mumma on May 28, 2015 consisted of 89,629 shares of common stock and had a grant date fair value of $372,000, which was determined in accordance with FASB Accounting Standards Codification Topic 718 at the time the grant was made and based on the closing sale price of the Company’s common stock on May 28, 2015. The terms of the PSA include, without limitation, provisions relating to a change-in-control and forfeiture and mandatory net settlement for income tax withholding purposes.
Benefits
Benefits are also established based upon a determination of what is needed to aid in attracting and retaining executive talent, as well as providing long-term financial security to our employees and their families. The NEOs are eligible to participate in our health, dental and vision plans, and various insurance plans, including disability and life insurance, and in our 401(k) plan. The primary benefits for the NEOs are as follows:
receipt of dividends on all unvested restricted stock awards; and
with respect to Mr. Mumma only, life insurance policies anda supplemental long-term disability insurance policiespolicy purchased by Mr. Mumma in his name and reimbursed by the Company.us.
Severance Benefits Payable Upon Termination of Employment or a Change in Control
In order to achieve our compensation objective of attracting, retaining and motivating qualified senior executives, we believe that we need to provide our Chief Executive Officer and President with severance protections that are consistent with the severance protections offered by companies similar to us. Consistent with this philosophy, we believe that severance should be payable to Mr. Mumma in the event his employment is terminated under certain circumstances. In November 2014, the Company entered intoAs such, we are a Second Amended and Restated Employment Agreementparty to an employment agreement with Mr. Mumma which amends, restates and supersedes the Amended and Restated Employment Agreement between the Company and Mr. Mumma dated November 22, 2011.Mumma. For more information regarding the terms of thisMr. Mumma’s employment agreement, see “—Other Compensation Arrangements—Employment Agreements.Agreement.” The terms of Mr. Mumma’s employment agreement is reviewedconsidered annually by the Compensation Committee. We have not entered into employment agreements with our other NEOs.
Overview of NEO Compensation Determinations for 20162019
The following provides an overview of each of the primary elements that comprise our 2019 NEO compensation program.
Base Salary
The Compensation Committee and our Board of Directors have approved the following 2019 base salaries for our executive officers:
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| | | | | |
Named Executive Officer | | Base Salary | |
Steven R. Mumma | | $ | 900,000 |
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Jason T. Serrano | | $ | 750,000 |
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Nathan R. Reese | | $ | 400,000 |
| |
Kristine R. Nario-Eng | | $ | 400,000 |
| |
2019 Annual Incentive Plan
Our Board of Directors, upon the recommendation of the Compensation Committee, has adopted and approved the 2019 Annual Incentive Plan for fiscal year 2019, which plan design and framework is in the form of the 2018 Annual Incentive Plan, except as follows: (i) the Quantitative Component Measure Hurdle (i.e. TER) under the 2019 Annual Incentive Plan will provide for a minimum hurdle of 5%, a target hurdle of 9% and a maximum hurdle of 14% (as compared to 6%, 11% and 16%, respectively, under the 2018 Annual Incentive Plan) and (ii) Mr. Mumma's annual incentive compensation will be weighted such that 75% will be based on performance under the quantitative component and 25% will be based on performance under the qualitative component. Except as described in the immediately preceding sentence, each of Messrs. Mumma and Reese and Ms. Nario-Eng will be positioned under the 2019 Annual Incentive Plan in a manner similar to each such executive's positioning for incentive compensation payouts under the 2018 Annual Incentive Plan. Mr. Serrano will be slotted into the 2019 Annual Incentive Plan in a manner similar to the positioning of Mr. Mumma.
2019 Long-Term EIP
In February 2016,December 2018 and subsequent to January 1, 2019, the Compensation Committee and our Board of Directors approved a 2016 base salarygrants of $350,000 for Mr. Reese and a base salary of $300,000 for Ms. Nario. Mr. Mumma’s 2015 base salary will remain at $700,000 in accordance with his employment agreement. The Compensation Committee has approved using the Incentive Plan for purposes of determining the compensation of our NEOs for performance in 2016 or as such plan may be amended from timePSUs to time in the future.
Share Ownership Guidelines
The NEOs are not formally required to achieve or maintain any particular level of stock ownership in us. For more information on the share ownership of our executive officers see “Share Ownershipand certain other employees as part of Certain Beneficial Ownersour 2019 Long-Term EIP (“2019 PSUs”). The awards were issued pursuant to and Our Directorsare consistent with the terms and Executive Officers” herein.conditions of the 2017 Stock Plan.
The 2019 PSU awards are subject to performance-based vesting under the 2017 Stock Plan pursuant to a PSU Agreement that, except for the target number of 2019 PSUs shown below and minimal changes to the identified performance peer group, is similar to the PSU Agreement related to the 2018 PSUs. The target number of 2019 PSUs subject to the awards granted to our executive officers is as follows:
|
| | |
Named Executive Officer | | Target Number of 2019 PSUs |
Steven R. Mumma | | 305,603 |
Jason T. Serrano | | 254,669 |
Nathan R. Reese | | 67,912 |
Kristine R. Nario-Eng | | 67,912 |
Other Matters
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code placesgenerally disallows a limit on the amount of compensation that may be deducted annually by the Company on our tax return with respect to each of our Chief Executive Officer, Chief Financial Officer and the two other most highly compensated executives. In general, compensation paid for achieving pre-established and objective performance goals pursuant to a plan that has been approved by our stockholders is not subject to this limit. Our 2010 Stock Plan is designed so that performance-based restricted stock awards granted to our NEOs under the plan can be exempt from the compensation deduction limitation described above. Time-based awards are subject to the compensation deduction limitation. Although the Compensation Committee generally seeks to preserve the federal income tax deductibilitydeduction to public companies for compensation in excess of compensation$1 million paid in orderany fiscal year to maintain flexibilitytheir “covered employees” (within the meaning of Section 162(m)). The exemption from Section 162(m)'s deduction limitation for certain qualified performance-based compensation was eliminated under the Tax Cuts and Jobs Act of 2017, effective for taxable years beginning after December 31, 2017, except for limited transition relief applicable to certain grandfathered arrangements that were in compensating executives, including our NEOs,place as of November 2, 2017. Although the potential effects of Section 162(m) are considered in a manner designed to promote our corporate goals, including retaining and incentivizing the NEOs,making compensation decisions, the Compensation Committee has not adopted a policy requiring that all compensation paid to our named executive officers must be deductible.
Adjustment or Recovery of Awards
Under Section 304 of the Sarbanes-Oxley Act, if we are required to restate our financial results due to material noncompliance with any financial reporting requirement as a result of misconduct, our Chief Executive Officer and Chief Financial Officer must reimburse us for (i) any bonus or other incentive-based or equity-based compensation received during the twelve months following the public issuance of the non-compliant document and (ii) any profits realized from the sale of our securities during those twelve months. Following the SEC’s adoption of final rules regarding executive compensation recoupment policies pursuant to the Dodd-Frank Act, we will consider and adopt a separate executive compensation recoupment policy in accordance with the final rules.
Relationship of Compensation Practices to Risk Management
When structuring our overall compensation practices for our employees generally, consideration is given as to whether the structure creates incentives for risk-taking behavior and therefore impacts our risk management practices. Attention is given to the elements and the mix of pay as well as ensuring that employees’ awards align with stockholders’ value.
The Compensation Committee has assessed the compensation policies and practices for our employees, including our NEOs, and concluded that they do not create risks that are reasonably likely to have a material adverse effect on the Company.us. The Compensation Committee generally considers whether our compensation programs encourage excessive risk taking during its annual review of such programs, which typically occurs during the first quarter of each year.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis section of this proxy statement with management and, based on such review and discussion, the Committee recommends that it be included in this proxy statement.
Compensation Committee
Steven G. Norcutt (Chairman)
David R. Bock
Alan L. Hainey
March 31, 2016
The foregoing report shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except to the extent we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.
Executive Compensation Information
Summary Compensation Table
The following tables should be read in conjunction with the related footnotes set forth below, the information under the caption “Compensation Discussion and Analysis” beginning on page 2133 and the information under the caption “—Other Compensation Arrangements.” We summarize below the compensation information for the fiscal years ended December 31, 2015, 20142018, 2017 and 20132016 for each of Messrs. Mumma and Reese and December 31, 2015 and 2014 for Ms. Nario. Ms. Nario first became an NEO during the 2014 fiscal year:Nario-Eng.
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| | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | Salary | | Cash Bonus | | Non-Equity Incentive Plan Compensation(1) | | Stock Awards(2) | | All Other Compensation(3) | | Total |
Steven R. Mumma | | 2015 | | $ | 700,000 |
| | $ | — |
| | $ | 315,000 |
| | $ | 105,000 |
| | $ | 256,719 |
| | $ | 1,376,719 |
|
President, and Chief | | 2014 | | $ | 533,333 |
| (4) | $ | — |
| | $ | 575,000 |
| | $ | 1,214,908 |
| | $ | 152,531 |
| | $ | 2,475,772 |
|
Executive Officer | | 2013 | | $ | 425,000 |
| | $ | — |
| | $ | 426,750 |
| | $ | 676,750 |
| | $ | 90,914 |
| | $ | 1,619,414 |
|
Nathan R. Reese | | 2015 | | $ | 325,000 |
| | $ | — |
| | $ | 127,969 |
| | $ | 42,656 |
| | $ | 35,517 |
| | $ | 531,142 |
|
Vice President and | | 2014 | | $ | 260,000 |
| | $ | — |
| | $ | 247,730 |
| | $ | 97,729 |
| | $ | 9,208 |
| | $ | 614,667 |
|
Secretary | | 2013 | | $ | 240,000 |
| | $ | — |
| | 189,446 |
| | $ | 39,446 |
| | $ | 5,384 |
| | $ | 474,276 |
|
Kristine R. Nario | | 2015 | | $ | 275,000 |
| | $ | — |
| | $ | 116,016 |
| | $ | 38,672 |
| | $ | 28,340 |
| | $ | 458,028 |
|
Chief Financial Officer | | 2014 | | $ | 225,000 |
| | $ | — |
| | $ | 209,244 |
| | $ | 59,245 |
| | $ | 3,418 |
| | $ | 496,907 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | Salary | | Cash Bonus | | Non-Equity Incentive Plan Compensation(1) | | Stock Awards(1)(2) (3) | | All Other Compensation(4) | | Total |
Steven R. Mumma | | 2018 | | $ | 800,000 |
| | $ | — |
| | $ | 728,000 |
| | $ | 1,618,687 |
| | $ | 199,041 |
| | $ | 3,345,728 |
|
Chief Executive Officer | | 2017 | | $ | 800,000 |
| | $ | — |
| | $ | 939,328 |
| | $ | 417,984 |
| | $ | 246,659 |
| | $ | 2,403,971 |
|
| | 2016 | | $ | 700,000 |
| | $ | — |
| | $ | 1,015,000 |
| | $ | 1,514,000 |
| | $ | 239,577 |
| | $ | 3,468,577 |
|
Nathan R. Reese | | 2018 | | $ | 400,000 |
| | $ | — |
| | $ | 267,000 |
| | $ | 347,672 |
| | $ | 24,038 |
| | $ | 1,038,710 |
|
Chief Operating Officer | | 2017 | | $ | 350,000 |
| | $ | — |
| | $ | 254,759 |
| | $ | 84,920 |
| | $ | 22,143 |
| | $ | 711,822 |
|
and Secretary | | 2016 | | $ | 350,000 |
| | $ | — |
| | $ | 347,812 |
| | $ | 115,938 |
| | $ | 26,922 |
| | $ | 840,672 |
|
Kristine R. Nario-Eng | | 2018 | | $ | 400,000 |
| | $ | — |
| | $ | 247,500 |
| | $ | 341,172 |
| | $ | 18,777 |
| | $ | 1,007,449 |
|
Chief Financial Officer | | 2017 | | $ | 325,000 |
| | $ | — |
| | $ | 218,930 |
| | $ | 72,977 |
| | $ | 16,335 |
| | $ | 633,242 |
|
| | 2016 | | $ | 300,000 |
| | $ | — |
| | $ | 239,062 |
| | $ | 79,688 |
| | $ | 21,806 |
| | $ | 640,556 |
|
| |
(1) | Amounts represent annual cash incentive compensation earned under the Incentive Plan. Seeannual incentive compensation plan for each applicable fiscal year. For a description of the formula used to calculate the amounts payable under the annual incentive compensation plan for each applicable fiscal year, see “—Compensation Discussion and Analysis—Executive Compensation Program Components—Components for 2018 — Annual Incentive Plan.Compensation.” The terms of the annual incentive compensation plan for 2017 and 2016 are substantially similar to the terms of the 2018 Annual Incentive Plan, except as described in “—Compensation Discussion and Analysis—Executive Compensation Program Components for 2018 — Annual Incentive Compensation.” In accordance with the 2018 Annual Incentive Plan, for fiscal year 2015,2018, Mr. Mumma received total incentive compensation of $420,000, $315,000$1,312,000, $728,000 of which was paid in cash and $105,000$584,000 of which was paid in shares of restricted stock (and thus reported in the “Stock Awards” column in the table above). Similarly, in accordance with the Incentive Plan, Mr. Reese received total annual incentive compensation of $170,625, $127,969$356,000, $267,000 of which was paid in cash and $42,656$89,000 of which was paid in shares of restricted stock (and thus reported in the “Stock Awards” column in the table above) for fiscal year 20152018 and Ms. NarioNario-Eng received total annual incentive compensation of $154,688, $116,016$330,000, $247,500 of which was paid in cash and $38,672$82,500 of which was paid in shares of restricted stock (and thus reported in the “Stock Awards” column in the table above) for fiscal year 2015.2018. The value of the shares of restricted stock referenced in this footnote reflect the grant date fair value of such shares computed in accordance with FASB ASC Topic 718. |
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(2) | The amounts in this column reflectincludes the grant date fair value of the restricted stock awards and PSU awards computed in accordance with FASB ASC Topic 718. On February 25, 2016, Mr. Mumma, Mr. Reese718, including 2018 PSUs having a grant date fair value of $1,034,687 (Mr. Mumma), $258,672 (Mr. Reese) and Ms. Nario received 25,240, 10,254$258,672 (Ms. Nario-Eng). The grant date fair value of the 2018 PSUs are based on a Monte Carlo simulation value as of the applicable grant date. See “—Compensation Discussion and 9,296 shares of restricted stock, respectively, in accordance withAnalysis—Executive Compensation Program Components for 2018—Long-Term Equity Incentive Compensation” for additional information about the awards payable to each officer under the Incentive Plan for their individual performance and our performance in 2015. Similarly, on February 18, 2015, Mr. Mumma, Mr. Reese and Ms. Nario received 155,957, 12,546 and 7,605 shares of restricted stock, respectively, in accordance with the awards payable to each officer under the Incentive Plan for their individual performance and our performance in 2014. On February 13, 2014, Mr. Mumma, Mr. Reese and Ms. Nario received 91,576, 5,338 and 4,220 shares of restricted stock, respectively, in accordance with the awards payable to each officer under the Incentive Plan for their individual performance and our performance in 2013. 2018 PSUs. |
See table below for shares of restricted stock granted to each NEO in accordance with the awards payable to each NEO based upon their individual performance and our performance in the years ended December 31, 2018 (February 5, 2019 grant date), 2017 (February 13, 2018 grant date) and 2016 (February 8, 2017 and May 22, 2017 grant dates) and in accordance with the annual incentive plans in effect for each of the respective years then ended.
|
| | | | | | | | | | | | |
| | Number of Shares of Restricted Stock on Grant Date (a) |
Named Executive Officer | | February 5, 2019 | | February 13, 2018 | | May 22, 2017 | | February 8, 2017 |
Steven R. Mumma | | 91,969 |
| | 75,042 |
| | 6,258 |
| (b) | 138,237 |
|
Nathan R. Reese | | 14,016 |
| | 15,246 |
| | — |
| | 17,727 |
|
Kristine R. Nario-Eng | | 12,992 |
| | 13,102 |
| | — |
| | 12,185 |
|
| |
(a) | For a description of the formula used to calculate the amounts payable under the Incentive Planannual incentive plan for each applicable fiscal year, in cash and restricted stock, see “—Compensation Discussion and Analysis — Analysis—Executive Compensation Program Components —for 2018—Annual Incentive Plan.Compensation.” Because, in eachthe case of the restricted stock issued pursuant to the annual incentive plan for the applicable year, the size of the awards were determined by the Compensation Committee as part of the NEOsNEOs' compensation for each person’s individual performance and our performance in the respective years set forth in the table above,ended December 31, 2018, 2017 and 2016, we have included these restricted stock awards in our NEOsNEOs' compensation for such year. Consistent with this approach, a restricted stock grantyear even though they were issued in February of 4,220 shares to Ms. Nario on February 13, 2014 has been excluded from Ms. Nario’s 2014 compensation because it was awarded by the Compensation Committee as part of Ms. Nario’s 2013 compensation package prior to Ms. Nario's appointment as Chief Financial Officer.subsequent year. Pursuant to the terms of the restricted stock award agreements, one-third of the shares awarded as part of the grants will vest and become non-forfeitable on each of the first three anniversaries of the date of grant. All shares issued to the NEOs have beenthrough February 2017 were issued under the 2010 Stock Plan. All shares issued to the NEOs subsequent to February 2017 were issued under the 2017 Stock Plan. |
(b) Mr. Mumma also received 6,258 shares of restricted stock in May 2017 as part of the remaining balance of restricted shares due to him under the 2016 Annual Incentive Plan for his performance and our performance in 2016.
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(3) | See table below for target number of PSUs granted to each NEO in the year ended December 31, 2018 pursuant to each NEO's PSU Agreement in accordance with the 2018 Long-Term EIP: |
|
| | |
Named Executive Officer | | Target Number of 2018 PSUs |
Steven R. Mumma | | 259,320 |
Nathan R. Reese | | 64,830 |
Kristine R. Nario-Eng | | 64,830 |
| |
(4) | Dividends paid on unvested restricted common stock, which are included in “All Other Compensation,” are based on the same dividend rate per share as the dividends on our common stock. For the 2015, 2014 and 2013 fiscal years, we have not included the health care benefits received by NEOs because such benefits are available generally to all employees on similar terms. We do not intend to include health care benefits as part of “All Other Compensation” in the future to the extent such benefits are available generally to all employees on similar terms. All other compensation includes: |
2015 for Mr. Mumma: Includes $226,720 in dividends on outstanding and unvested restricted stock, $2,415 in premiums paid for life insurance policies, $8,509 in premiums paid for supplemental disability insurance policies and $19,075 in 401k distributions. |
| | | | | | | | | | | | | | | | | | | | |
| | 2018 |
Named Executive Officer | | Dividends on Outstanding and Unvested Restricted Stock | | Life Insurance Policy Premium | | Supplemental Disability Insurance Policy Premium | | 401(k) Employer Contribution | | Total All Other Compensation |
Steven R. Mumma | | $ | 190,532 |
| | $ | — |
| | $ | 8,509 |
| | $ | — |
| | $ | 199,041 |
|
Nathan R. Reese | | $ | 24,038 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 24,038 |
|
Kristine R. Nario-Eng | | $ | 18,777 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 18,777 |
|
2014 for Mr. Mumma: Includes $141,607 in dividends on outstanding and unvested restricted stock, $2,415 in premiums paid for life insurance policies i and $8,509 in premiums paid for supplemental disability insurance policies.
|
| | | | | | | | | | | | | | | | | | | | |
| | 2017 |
Named Executive Officer | | Dividends on Outstanding and Unvested Restricted Stock | | Life Insurance Policy Premium | | Supplemental Disability Insurance Policy Premium | | 401(k) Employer Contribution | | Total All Other Compensation |
Steven R. Mumma | | $ | 235,735 |
| | $ | 2,415 |
| | $ | 8,509 |
| | $ | — |
| | $ | 246,659 |
|
Nathan R. Reese | | $ | 22,143 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 22,143 |
|
Kristine R. Nario-Eng | | $ | 16,335 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 16,335 |
|
2013 for Mr. Mumma: Includes $79,990 in dividends on outstanding and unvested restricted stock, $2,415 in premiums paid for life insurance policies and $8,509 in premiums paid for supplemental disability insurance policies. |
| | | | | | | | | | | | | | | | | | | | |
| | 2016 |
Named Executive Officer | | Dividends on Outstanding and Unvested Restricted Stock | | Life Insurance Policy Premium | | Supplemental Disability Insurance Policy Premium | | 401(k) Employer Contribution | | Total All Other Compensation |
Steven R. Mumma | | $ | 220,703 |
| | $ | 2,415 |
| | $ | 8,509 |
| | $ | 7,950 |
| | $ | 239,577 |
|
Nathan R. Reese | | $ | 18,972 |
| | $ | — |
| | $ | — |
| | $ | 7,950 |
| | $ | 26,922 |
|
Kristine R. Nario-Eng | | $ | 13,856 |
| | $ | — |
| | $ | — |
| | $ | 7,950 |
| | $ | 21,806 |
|
2015 for Mr. Reese: Includes $16,442 in dividends on outstanding and unvested restricted stock and $19,075 in 401k distributions.
2014 for Mr. Reese: Includes $9,208 in dividends on outstanding and unvested restricted stock.
2013 for Mr. Reese: Includes $5,384 in dividends on outstanding and unvested restricted stock.
2015 for Ms. Nario: Includes $9,265 in dividends on outstanding and unvested restricted stock and $19,075 in 401k distributions.
2014 for Ms. Nario: Includes $3,418 in dividends on outstanding and unvested restricted stock.
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(4) | Effective November 1, 2014, Mr. Mumma’s annual base salary increased from $500,000 to $700,000. |
Discussion of Summary Compensation Table
Cash Bonus. In connection with the adoption of the Incentive Plan,our annual incentive plans, cash incentive amounts grantedpaid under the Incentive Plan in 2015, 2014these plans for each of 2018, 2017 and 20132016, are deemed to be grants of non-equity incentive compensation. See “—Compensation Discussion and Analysis—Executive Compensation Program Components—Components for 2018— Annual Incentive Plan.Compensation.”
Stock Awards. As discussed in footnote 1(1) to the “Summary Compensation Table” above and except as set forth in the immediately following sentence, we include restricted stock awards granted each year as compensation in the prior year because the size of the annual restricted stock awards are determined and awarded by the Compensation Committee in consideration of the amount earned under our Incentive Plan during those respective yearsthe annual incentive compensation plan for each of 2018, 2017 and 2016 and each person’s individual performance and our performance during those years. In May 2016, we granted a separate restricted stock award to Mr. Mumma, which was comprised of 100,000 shares of restricted stock and which is included as 2016 compensation in the table above, since the award was granted, in part, based on certain achievements in 2016. Each restricted stock award granted to the NEOs vests ratably on each of the first, second and third anniversaries of the date of grant.
Grants of Plan-Based Awards
The following table presents information regarding plan-based awards to the NEOs during the fiscal year ended December 31, 2015.2018. See the information under the caption “—Other Compensation Arrangements” for information regarding the acceleration of vesting and payment of these awards in certain circumstances.
| | Name | | Type of Award (1) | | Grant Date | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards | | All Other Stock Awards: Number of Shares of Stock or Units (2) | | Grant Date Fair Value of Stock and Option Awards (3) | | | Type of Award (1) | | Grant Date | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards | | All Other Stock Awards: Number of Shares of Stock or Units (2) | | Grant Date Fair Value of Stock and Option Awards (3) | |
| | | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | (#) | | ($) | | | | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | (#) | | ($) | |
Steven R. Mumma | | RSA | | 2/18/2015 | | — | | — | | — | | — | | — | | — | | 155,957 | | $ | 1,214,908 |
| | | RSA | | 2/13/2018 | | — | | — | | — | | — | | — | | — | | 75,042 | | $ | 417,984 |
| |
| | RSA | | 5/28/2015(4) | | — | | — | | $ | 2,100,000 |
| (6) | — | | — | | — | | — | | — | | | RSA | | 2/13/2018 (4) | | — | | — | | $ | 2,400,000 |
| (5) | — | | — | | — | | — | | $ | — |
| |
| | PSA | | 5/28/2015(5) | | — | | — | | — |
| | — | | 100,944(9) | | 201,888 (10) | | — | | $ | 372,000 |
| (11) | | PSU | | 3/15/2018 | | — | | — | | — |
| | 129,660 | | 259,320 | | 388,979 | | — | | $ | 1,034,687 |
| (8) |
Nathan R. Reese | | RSA | | 2/18/2015 | | — | | — | | — |
| | — | | — | | — | | 12,546 | | $ | 97,729 |
| | | RSA | | 2/13/2018 | | — | | — | | — |
| | — | | — | | — | | 15,246 | | $ | 84,920 |
| |
| | RSA | | 5/28/2015(4) | | — | | — | | $ | 487,500 |
| (7) | — | | — | | — | | — | | — | | | RSA | | 2/13/2018 (4) | | — | | — | | $ | 600,000 |
| (6) | — | | — | | — | | — | | $ | — |
| |
Kristine R. Nario | | RSA | | 2/18/2015 | | — | | — | | — |
| | — | | — | | — | | 7,605 | | $ | 59,245 |
| | |
| | RSA | | 5/28/2015(4) | | — | | — | | $ | 343,750 |
| (8) | | | | | | | — | | — | | | PSU | | 3/15/2018 | | — | | — | | — |
| | 32,415 | | 64,830 | | 97,245 | | — | | $ | 258,672 |
| (8) |
Kristine R. Nario-Eng | | | RSA | | 2/13/2018 | | — | | — | | — |
| | — | | — | | — | | 13,102 | | $ | 72,977 |
| |
| | | RSA | | 2/13/2018 (4) | | — | | — | | $ | 600,000 |
| (7) | — | | — | | — | | — | | $ | — |
| |
| | | PSU | | 3/15/2018 | | — | | — | | — |
| | 32,415 | | 64,830 | | 97,245 | | — | | $ | 258,672 |
| (8) |