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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant x Filed by a Party other than the Registrant ¨
Check the appropriate box:
| ¨ | Preliminary Proxy Statement | |
| ¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| x | Definitive Proxy Statement | |
| ¨ | Definitive Additional Materials | |
| ¨ | Soliciting Material under §240.14a-12 | |
CU BANCORP
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| x | No fee required. | |||
| ¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
| (1) | Title of each class of securities to which transaction applies:
| |||
| (2) | Aggregate number of securities to which transaction applies:
| |||
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
| |||
| (4) | Proposed maximum aggregate value of transaction:
| |||
| (5) | Total fee paid:
| |||
| ¨ | Fee paid previously with preliminary materials. | |||
| ¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
| (1) | Amount Previously Paid:
| |||
| (2) | Form, Schedule or Registration Statement No.:
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| (3) | Filing Party:
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| (4) | Date Filed:
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August 11, 2016
Dear Shareholder:
It is my pleasure to invite you to CU Bancorp’s 2016 Annual Meeting of Shareholders. We will hold the meeting on Thursday, September 15, 2016, at 8:30 a.m., at the Jonathan Club, 545 South Figueroa Street, Los Angeles, California, 90071.
This booklet includes the Notice of Annual Meeting and the Proxy Statement. The Proxy Statement describes the business that we will conduct at the meeting and provides information about CU Bancorp. This year the shareholders are being asked to elect the Company’s Board of Directors and ratify the selection of independent registered public accountants.
Your vote is important. Whether or not you plan to attend the meeting, please complete, date, sign and return the enclosed proxy card promptly in the envelope provided. You may also vote electronically over the Internet or by telephone, by following the instructions on the reverse of the proxy card. If you attend the meeting and prefer to vote in person, you may do so. IT IS VERY IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING.
We thank you for your continued support of CU Bancorp and look forward to seeing you at the meeting.
| Sincerely, | ||
 | ||
| David I. Rainer | ||
| Chairman and Chief Executive Officer | ||
818 W. 7th Street, Suite 220. Los Angeles, California 90017. Telephone: (213) 430-7000
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IMPORTANT NOTICE REGARDINGTHE INTERNET AVAILABILITYOF PROXY MATERIALSFOR
THE ANNUAL MEETINGOF SHAREHOLDERSTOBEHELDON SEPTEMBER 15, 2016
The Proxy Statement to Shareholders is available at:
http://www.viewproxy.com/cubancorp2016
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CU BANCORP
818 W. 7th Street, Suite 220
Los Angeles, California 90017
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, SEPTEMBER 15, 2016 - 8:30 a.m.
NOTICE IS HEREBY GIVEN that, pursuant to the Bylaws of CU Bancorp and the call of its Board of Directors, the Annual Meeting of Shareholders of CU Bancorp (the “Company”) will be held at the Jonathan Club, 545 South Figueroa Street, Los Angeles, California, 90071, on Thursday, September 15, 2016 at 8:30 a.m., for the purpose of considering and voting upon the following matters:
| 1. | Electing the following twelve (12) persons to the Board of Directors to serve until the 2017 Annual Meeting of Shareholders and until their successors are elected and have qualified: |
| Roberto E. Barragan | Jeffrey J. Leitzinger | |
| Charles R. Beauregard | David I. Rainer | |
| Kenneth J. Cosgrove | Roy A. Salter | |
| David C. Holman | Daniel F. Selleck | |
| K. Brian Horton | Charles H. Sweetman | |
| Eric S. Kentor | Kaveh Varjavand |
| 2. | Ratification of the selection of RSM US LLP, to serve as the independent registered public accounting firm for the Company for the year ending 2016. |
| 3. | Such other business as may properly come before the Meeting and any adjournment or adjournments thereof. |
If you were a shareholder of record at the close of business on July 18, 2016, you may vote at the Annual Meeting.
Article II, Section 13 of our Bylaws provides for the nomination of directors in the following manner:
Section 13.NOMINATION OF DIRECTORS.Nominations for election of members of the board of directors may be made by the board of directors or by any shareholder of any outstanding class of capital stock of the corporation entitled to vote for the election of directors. Notice of intention to make any nominations (other than for persons named in the notice of the meeting at which such nomination is to be made) shall be made in writing and shall be delivered or mailed to the President or to the Chief Executive Officer of the corporation no more than sixty (60) days prior to any meeting of shareholders called for the election of directors and no more than ten (10) days after the date the notice of such meeting is sent to shareholders pursuant to Section 4 of Article II of these Bylaws; provided, however, that if ten (10) days’ notice of such meeting is sent to shareholders, such notice of intention to nominate must be received by the President or by the Chief Executive Officer of the corporation not later than time fixed in the notice of the meeting for the opening of the meeting. Such notification shall contain the following information to the extent known to the notifying shareholder: (a) the name and address of each proposed nominee; (b) the principal occupation of each proposed nominee; (c) the number of shares of capital stock of the corporation owned by each proposed nominee; (d) the name and residence address of the notifying shareholder; (e) the number of shares of capital stock of the corporation owned by the notifying shareholder; (f) with the written consent of the proposed nominee, a copy of which shall be furnished with the notification, whether the proposed nominee has ever been convicted of or pleadednolo contendere to any criminal offense involving dishonesty or
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breach of trust, filed a petition in bankruptcy, or been adjudged a bankrupt. The notice shall be signed by the nominating shareholder and by the nominee. Nominations not made in accordance herewith shall be disregarded by the Chairman of the meeting and, upon his instructions, the inspectors of election shall disregard all votes cast for each such nominee. The restrictions set forth in this paragraph shall not apply to nomination of a person to replace a proposed nominee who has died or otherwise become incapacitated to serve as a director between the last day for giving notice hereunder and the date of election of directors if the procedure called for in this paragraph was followed with respect to the nomination of the proposed nominee.
We urge you to sign and return the enclosed proxy as promptly as possible whether or not you plan to attend the meeting in person. If you do attend the meeting, you may then withdraw your proxy. The proxy may be revoked at any time prior to its exercise.
| Dated: August 11, 2016 | By Order of the Board of Directors | |||
 | ||||
| Anita Y. Wolman, Executive Vice President, General Counsel and Corporate Secretary | ||||
ANNUAL REPORT ON FORM 10-K
THE COMPANY’S 2015 ANNUAL REPORT TO SHAREHOLDERS ON FORM 10-K (THE “ANNUAL REPORT”) WAS PREVIOUSLY MAILED TO ALL SHAREHOLDERS. IN ADDITION, THE ANNUAL REPORT IS AVAILABLE ATwww.cunb.com UNDER THE “INVESTOR RELATIONS” TAB. IF YOU WISH TO RECEIVE ADDITIONAL COPIES OF THE ANNUAL REPORT ON FORM 10-K, AS FILED WITH SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE EXHIBITS THERETO, PLEASE CONTACT MARY BECKNER, AT CU BANCORP, 15821 VENTURA BOULEVARD, SUITE 100, ENCINO, CALIFORNIA 91436, TELEPHONE (818) 257-7791. YOU MAY ALSO SEND YOUR REQUEST BY FACSIMILE TO (818) 257-7703 OR BY E-MAIL TO MBECKNER@CUNB.COM.
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818 W. 7th Street, Suite 220
Los Angeles, California 90017
Phone: (213) 430-7000
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, SEPTEMBER 15, 2016
8:30 a.m.
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of Proxies for use at the Annual Meeting of Shareholders (the “Meeting”) of CU Bancorp (the “Company”), to be held at the Jonathan Club, 545 South Figueroa Street, Los Angeles, California, 90071, on Thursday, September 15, 2016, at 8:30 a.m., and at any and all postponements or adjournments thereof. It is anticipated that this Proxy Statement will be mailed to shareholders on or about August 11, 2016.
The matters to be considered and voted upon at the Meeting will be:
| 1. | Election of Directors. Electing twelve (12) directors who will serve until the 2017 Annual Meeting of Shareholders and until their successors are elected and have qualified. The names of the persons to be placed in nomination for a seat on the Board of Directors are: |
| Roberto E. Barragan | Jeffrey J. Leitzinger | |
| Charles R. Beauregard | David I. Rainer | |
| Kenneth J. Cosgrove | Roy A. Salter | |
| David C. Holman | Daniel F. Selleck | |
| K. Brian Horton | Charles H. Sweetman | |
| Eric S. Kentor | Kaveh Varjavand |
| 2. | Ratification of Selection of Accountants. Ratifying the selection of RSM US LLP, to serve as the independent registered public accounting firm for the Company for the year ending 2016. |
| 3. | Other Business. Transacting such other business as may properly come before the Meeting and any adjournment or adjournments thereof. |
If you were a shareholder of record at the close of business on July 18, 2016, you may vote at the Annual Meeting.
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| 57 | ||||
PROPOSAL 2: RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 58 | |||
| 58 | ||||
| 58 | ||||
| 60 | ||||
| 61 | ||||
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INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Why Did You Send Me this Proxy Statement?
We sent you this Proxy Statement and the enclosed proxy card because our Board of Directors is soliciting your proxy to vote at the 2016 Annual Meeting of Shareholders. This Proxy Statement summarizes the information you need to know to cast an informed vote at the Annual Meeting. However, you do not need to attend the Annual Meeting to vote your shares. Instead, you may simply complete, sign and return the enclosed proxy card. You may also vote electronically by telephone or the Internet by following the instructions on the proxy card.
We have previously sent you the CU Bancorp 2015 Annual Report to Shareholders, which includes our Annual Report on Form 10-K. The 2015 Annual Report to Shareholders is also available on our website atwww.cubancorp.com. CU Bancorp is also referred to in this Proxy Statement as “the Company”. The Company, together with its subsidiary, California United Bank is referred to herein as “CUB”.
We will begin sending this Proxy Statement, the attached Notice of Annual Meeting and the enclosed proxy card on or about August 11, 2016 to all shareholders entitled to vote. Shareholders who were the record owners of CU Bancorp Common Stock at the close of business on July 18, 2016 are entitled to vote. On this record date, there were 17,669,381 shares issued and outstanding of CU Bancorp Common Stock (the “Common Stock”). Our Common Stock is our only class of outstanding stock entitled to vote at the Annual Meeting.
What is the difference between a Shareholder of Record and a “Street Name” holder?
If your shares are registered directly in your name, you are considered the shareholder of record with respect to those shares.
If your shares are held in a stock brokerage account or by a company, trust or other nominee, then the broker, company, trust or other nominee is considered to be the shareholder of record with respect to those shares. However you are still considered the beneficial owner of those shares and your shares are said to be held in “street name”. Street name holders generally cannot vote their shares directly and must instead instruct the broker, company, trust or other nominee how to vote their shares using the voting instruction form provided by it. If you hold your shares in street name and do not provide voting instructions, your broker, company, trust or other nominee has discretionary authority to vote your shares on the ratification of the selection of RSM US LLP as our independent auditor, even in the absence of your specific voting instruction. Those shares will also be counted as present at the meeting for purpose of determining a quorum. However, in the absence of your specific instructions as to how to vote, your broker, company, trust or other nominee does not have discretionary authority to vote on the election of directors or any other proposals.
A quorum of shareholders is necessary to hold a valid meeting. The presence at the annual meeting in person or by proxy of the holders of a majority of the outstanding shares of common stock entitled to vote shall constitute a quorum for the transaction of business. Proxies marked as abstaining (including proxies containing broker non-votes) on any matter to be acted upon by shareholders will be treated as present at the meeting for purposes of determining a quorum but will not be counted as votes cast on such matters. If there is no quorum, a majority of the votes present at the meeting may adjourn the meeting to another date.
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Holders of common stock are entitled to one vote, in person or by proxy, for each share of common stock held in his or her name on the books of the Company as of the Record Date for the Meeting on any matter submitted to the vote of the shareholders, except that in connection with the election of directors, the shares are entitled to be voted cumulatively. Cumulative voting entitles a shareholder to give one nominee as many votes as is equal to the number of directors to be elected multiplied by the number of shares owned by such shareholder, or to distribute his or her votes on the same principle between two or more nominees as he or she deems appropriate. The twelve (12) candidates receiving the highest number of votes will be elected.
Pursuant to California law, no shareholder may cumulate votes for a candidate unless such candidate(s) name has been placed in nomination prior to the voting and the shareholder has given notice at the Meeting prior to the voting of the shareholder’s intention to cumulate. If any shareholder gives notice, all shareholders may cumulate their votes.
The proxy holder does not, at this time, intend to cumulate votes pursuant to the proxies solicited in this Proxy Statement unless another shareholder gives notice to cumulate, in which case the proxy holder may cumulate votes in accordance with the recommendations of the Board of Directors. Therefore, discretionary authority to cumulate votes in such event is solicited in this Proxy Statement.
Whether or not you plan to attend the Annual Meeting, we urge you to complete, sign and date the enclosed proxy card and to return it promptly in the envelope provided. Returning the proxy card will not affect your right to attend the Annual Meeting and vote. You may also vote over the Internet or by telephone. Instructions for all voting can be found on the back of the Proxy Card included with this Proxy Statement.
If you properly fill in your proxy card and send it to us in time to vote, or vote by Internet or telephone, your “proxy” (the individual named on your proxy card) will vote your shares as you have directed. If you sign the proxy card but do not make specific choices, your proxy will vote your shares as recommended by the Board of Directors as follows:
| • | “FOR” the election of all twelve (12) nominees for director; and |
| • | “FOR” the ratification of the selection of RSM US LLP as the Company’s independent registered public accounting firm for 2016. |
For the election of directors (Proposal 1), a shareholder may withhold authority for the proxy holders to vote for any one or more of the nominees by marking the enclosed proxy card in the manner instructed on the proxy card. Unless authority to vote for the nominees is so withheld, the proxy holders will vote the proxies received by them for the election of the nominees listed on the proxy card as directors of the Company. Your proxy does not have an obligation to vote for nominees not identified on the preprinted proxy card (that is, write-in candidates). Should any shareholder attempt to “write in” a vote for a nominee not identified on the preprinted card (and described in these proxy materials), your proxy will NOT vote the shares represented by your proxy card for any such write-in candidate, but will instead vote the shares for any and all other indicated candidates. If any of the nominees should be unable or decline to serve, which is not now anticipated, your proxy will have discretionary authority to vote for a substitute who shall be designated by the present Board of Directors to fill the vacancy. In the event that additional persons are nominated for election as directors, your
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proxy intends to vote all of the proxies in such a manner, in accordance with the cumulative voting, as will assure the election of as many of the nominees identified on the proxy card as possible. In such event, the specific nominees to be voted for will be determined by the proxy holders, in their sole discretion.
If any other matter is presented (including but not limited to a motion for adjournment or postponement of the meeting), your proxy will vote in accordance with the recommendation of the Board of Directors, or, if no recommendation is given, in accordance with his or her best judgment. At the time this Proxy Statement went to press, we knew of no matters which needed to be acted on at the Annual Meeting, other than those discussed in this Proxy Statement.
What is the Effect of Withholding Authority to Vote, Broker Non-Votes and Abstentions?
The twelve (12) nominees for director who receive the most votes will be elected. So, if you do not vote for a particular nominee, or you indicate “WITHHOLD AUTHORITY TO VOTE” for a particular nominee on your proxy card, your vote will not count either “FOR” or “AGAINST” the nominee. Ratification of the appointment of our auditors requires the approval of a majority of the votes represented and voting at the meeting.
If you hold your shares of Common Stock in “street name” (that is, through a broker or other nominee) you must vote your shares through your broker. You should receive a form from your broker asking how you want to vote your shares. Follow the instructions on that form to give voting instructions to your broker. Under the rules that govern brokers who are voting with respect to shares held in street name, brokers have the discretion to vote such shares on routine, but not on non-routine matters. If you fail to instruct your broker or nominee as to how to vote your shares of Common Stock, your broker or nominee may, in its discretion, vote your shares “FOR” ratification of the appointment of RSM US LLP as our independent registered public accounting firm for the year ending December 31, 2016, which is considered a routine matter. HOWEVER, YOUR BROKER MAY NOT VOTE YOUR SHARES “FOR” the election of the nominees for director, without your specific direction. A “broker non-vote” occurs when your broker does not vote on a particular proposal because the broker does not receive instructions from the beneficial owner and does not have discretionary authority. It is VERY IMPORTANT that you return the instructions to your broker or nominee. Therefore if you wish to be represented you must vote by completing the information which is sent to you by your broker or nominee.
California law requires the following two votes to adopt any proposal (other than the election of directors): (1) the affirmative vote of a majority of the shares represented and voting at the Annual Meeting, unless the vote of a greater number is required by law or by our Articles of Incorporation and (2) the affirmative vote of at least a majority of the shares required to constitute a quorum. In determining whether the first vote under (1) has been obtained, abstentions and broker non-votes are not treated as shares voting and therefore will not affect the vote on any proposal. In determining whether the second vote under (2) has been obtained, abstentions and broker non-votes will have the effect of votes cast AGAINST the proposal to ratify our independent registered public accounting firm. That is, abstentions and broker non-votes will reduce the number of affirmative votes and therefore reduce the total percentage of votes the proposal might otherwise have received.
May I Vote Telephonically or Electronically over the Internet?
Shareholders whose shares are registered in their own names may vote either by mail, telephone or over the Internet. Special instructions to be followed by any registered shareholder interested in voting via the Internet or telephone are set forth on the reverse of your proxy card. The Internet and telephone voting procedures are designed to authenticate the shareholder’s identity and to allow shareholders to vote their shares and confirm that their voting instructions have been properly recorded.
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If your shares are registered in street name, you may also be eligible to vote your shares electronically over the Internet or by telephone. A large number of companies and brokerage firms are participating in the Broadridge Financial Solutions, Inc. online program. This program provides eligible shareholders who receive a paper copy of this Proxy Statement the opportunity to vote via the Internet or by telephone. If your company or brokerage firm is participating in Broadridge’s program, your proxy card will provide the instructions. If your proxy card does not reference Internet or telephone information, please complete and return the proxy card in the self-addressed, postage paid envelope provided.
May I Change my Vote After I Return My Proxy?
A form of Proxy for use at the Meeting is enclosed. If it is executed and returned it may nevertheless be revoked at any time before it is exercised by: (i) filing with the Corporate Secretary of the Company, Anita Y. Wolman, an instrument revoking it or a duly executed Proxy bearing a later date; (ii) appearing and voting in person at the Meeting; or (iii) if you have voted your shares by Internet or telephone, recording a different vote, or by signing and returning a Proxy card dated as of a date that is later than your last Internet or telephone vote. Subject to such revocation, shares represented by a properly executed Proxy received in time for the Meeting will be voted by the Proxy Holder thereof in accordance with the instructions on the Proxy. IF NO INSTRUCTION IS SPECIFIED WITH RESPECT TO A MATTER TO BE ACTED UPON, THE SHARES REPRESENTED BY THE PROXY WILL BE VOTED IN FAVOR OF THE PROPOSAL LISTED ON THE PROXY. IF ANY OTHER BUSINESS IS PROPERLY PRESENTED AT THE MEETING, THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE COMPANY’S BOARD OF DIRECTORS.
If you plan to attend the Annual Meeting and vote in person, we will give you a ballot form when you arrive. However, we strongly recommend that you return the proxy card rather than vote in person as this will expedite the vote counting process at the meeting.PLEASE NOTE THAT IF YOUR SHARES ARE HELD IN THE NAME OF YOUR BROKER, COMPANY OR OTHER NOMINEE, YOU MUST BRING A POWER OF ATTORNEY FROM YOUR NOMINEE IN ORDER TO VOTE AT THE ANNUAL MEETING. IF YOUR SHARES ARE HELD IN STREET NAME YOU WILLNOT BE ABLE TO VOTE AT THE MEETING WITHOUT THE POWER OF ATTORNEY FORM.
How may I obtain a separate set of proxy materials or request a single set for my household?
If you share an address with another shareholder, you may receive only one set of proxy materials unless you have provided contrary instructions. If you wish to receive a separate set of proxy materials now or in the future, please request the additional copies by e-mail toawolman@cunb.com, by facsimile to (818) 257-7703 or by calling (818) 257-7779. The Proxy Statement is also available on the internet athttp://www.viewproxy.com/cubancorp2016.
What should I do if I receive more than one set of voting materials?
Similarly, if you share an address with another shareholder and have received multiple copies of our proxy materials, you may contact us in the same manner or write us at the address set forth below in the last question to request delivery of a single copy of these materials.
Why may I receive multiple voting instruction forms and/or proxy cards?
If you hold your shares in more than one brokerage account, you may receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a shareholder of record and your shares are registered in more than one name, you will receive more than one proxy card. In each case, please complete, sign, date and return each proxy card and voting instruction form that you receive.
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Who is Making the Solicitation?
This solicitation of Proxies is being made by the Board of Directors of the Company. The expense of preparing, assembling, printing and mailing this Proxy Statement and the materials used in the solicitation of Proxies for the Meeting will be borne by the Company. It is contemplated that Proxies will be solicited principally through the use of the mail, but officers, directors and employees of the Company may solicit Proxies personally or by telephone, without receiving special compensation for such activities. Although there is no formal agreement to do so, the Company may reimburse companies, brokerage houses and other custodians, nominees and fiduciaries for their reasonable expenses in forwarding these Proxy Materials to shareholders whose stock in the Company is held of record by such entities. We have hired Alliance Advisors, LLC to seek the proxies of custodians, such as brokers, who hold shares which belong to other people as well as our individual shareholders. This service will cost the Company approximately $6,500. It is possible that Alliance Advisors, at the direction of the Company, may solicit proxies by telephone and will receive additional compensation for such activities.
Important Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting
of Shareholders to be held on September 15, 2016
The Proxy Statement is available on the internet at
http://www.viewproxy.com/cubancorp2016
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There were 17,669,381 shares issued and outstanding of the Company’s common stock (the “Common Stock”) on July 18, 2016, which has been fixed as the record date for the purpose of determining the shareholders entitled to notice of and to vote at the Meeting. Each holder of Common Stock will be entitled to one vote, in person or by Proxy, for each share of Common Stock held of record on the books of the Company as of the record date for the Meeting on any matter submitted to the vote of the shareholders, except that in connection with the election of directors, the shares may be voted cumulatively if a shareholder present at the Meeting has given notice at the Meeting, prior to the voting, of his or her intention to vote cumulatively. If any shareholder has given such notice, then all shareholders entitled to vote for the election of directors may cumulate their votes. Cumulative voting means that a shareholder has the right to vote the number of shares he or she owns as of the record date, multiplied by the number of directors to be elected. This total number of votes may be cast for one nominee or it may be distributed on the same principle among as many nominees as the shareholder sees fit. If cumulative voting is declared at the Meeting, votes represented by Proxies delivered pursuant to this Proxy Statement may be cumulated in the discretion of the Proxy Holders, in accordance with the recommendations of the Company’s Board of Directors.
A majority of the outstanding shares, represented in person or by Proxy, is required for a quorum. Nominees receiving the most votes, up to the number of directors to be elected, are elected as directors for the ensuing year. A majority of the shares represented and voting at the Meeting is required to ratify the selection of RSM US LLP (“RSM”) as the Company’s independent registered public accounting firm for 2016.
If you hold Common Stock in “street name” and you fail to instruct your broker or nominee as to how to vote such Common Stock, your broker or nominee may, in its discretion, vote such Common Stock “FOR” ratification of the selection of RSM as the independent registered public accounting firm and auditors of the Company for 2016, but CANNOT vote FOR election of directors, unless you instruct them as to your vote. IT IS EXTREMELY IMPORTANT THAT YOU VOTE BY RETURNING YOUR PROXY CARD OR BY INTERNET OR TELEPHONE.
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PROPOSAL 1 – ELECTION OF DIRECTORS
The Bylaws of the Company provide that the number of directors shall not be less than nine nor more than seventeen until changed by an amendment to the Articles of Incorporation or the Bylaws, leaving the Board of Directors with the authority to fix the exact number of directors within that range. As of the date of this Proxy Statement the exact number of CUB directors determined by the Board of Directors is 12 (and there are no vacancies), and with regard to the business to be conducted at the Annual Meeting, the Board of Directors has fixed the exact number of Company directors at twelve.
Directors are elected annually for a term ending on the next annual shareholders’ meeting date and when their successors are duly elected and qualified.
The persons named below are currently members of the Board of Directors. All of the listed persons will be nominated for election to serve until the 2017 Annual Meeting of Shareholders and until their successors are elected and have qualified, pursuant to the recommendation of the Compensation, Nominating and Corporate Governance Committee of the Board of Directors and concurrence of the Board of Directors.
Roberto E. Barragan | Jeffrey J. Leitzinger | |
Charles R. Beauregard | David I. Rainer | |
Kenneth J. Cosgrove | Roy A. Salter | |
David C. Holman | Daniel F. Selleck | |
K. Brian Horton | Charles H. Sweetman | |
Eric S. Kentor | Kaveh Varjavand |
Votes will be cast in such a way as to effect the election of all twelve nominees, or as many thereof as possible under the rules of cumulative voting. In the event that any of the nominees should be unable to serve as a director, it is intended that the Proxy will be voted for the election of such substitute nominees, if any, as shall be designated by the Board of Directors. Management has no reason to believe that any of the nominees will be unavailable to serve. Additional nominations can only be made by complying with the notice provision set forth in the Bylaws of the Company, an extract of which is included in the Notice of Annual Meeting of Shareholders accompanying this Proxy Statement. This Bylaw provision is designed to give the Board of Directors advance notice of competing nominations, if any, and the qualifications of nominees, and may have the effect of precluding third-party nominations if the notice provisions are not followed.
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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The Board of Directors has determined that all of the current directors on the Board, except for Mr. Rainer and Mr. Horton, are “independent,” as that term is defined by the rules and regulations of The NASDAQ Stock Market. These ten independent directors comprise a majority of the Board of Directors.
The following table lists the names and certain information as of July 18, 2016 regarding the Company’s directors. All the named individuals serve as directors of CU Bancorp and its subsidiary California United Bank (the “Bank”).
Name | Age | Position with CUB | Year First Appointed or Elected | |||
Roberto E. Barragan | 56 | Director, Nominee | 2004 | |||
Charles R. Beauregard* | 68 | Director, Nominee | 2014 | |||
Kenneth J. Cosgrove | 69 | Vice Chairman California United Bank, Nominee | 2012 | |||
David C. Holman* | 67 | Director (Lead), Nominee | 2014 | |||
K. Brian Horton* | 56 | Director and President, Nominee | 2014 | |||
Eric S. Kentor | 57 | Director, Nominee | 2014 | |||
Jeffrey Leitzinger, Ph.D.* | 62 | Director, Nominee | 2014 | |||
David I. Rainer | 59 | Chairman and Chief Executive Officer, Nominee | 2004 | |||
Roy A. Salter | 59 | Director, Nominee | 2004 | |||
Daniel F. Selleck | 60 | Director, Nominee | 2004 | |||
Charles H. Sweetman | 74 | Director, Nominee | 2004 | |||
Kaveh Varjavand** | 53 | Director, Nominee | 2015 | |||
| * | Appointed November 30, 2014 following acquisition of 1st Enterprise Bank |
| ** | Appointed September 1, 2015 |
The Company’s directors serve one-year terms. None of the directors or executive officers was selected pursuant to any arrangement or understanding, other than with the directors and executive officers of the Company acting within their capacities as such. There are no family relationships between the directors and executive officers of CU Bancorp. None of the directors or executive officers of CU Bancorp serve as directors of any other company which has a class of securities registered under, or which are subject to the periodic reporting requirements of, the Securities Exchange Act of 1934, as amended, or any investment company registered under the Investment Company Act of 1940. None of the directors or executive officers of CUB have been involved in any legal proceedings during the past ten years that are material to an evaluation of the ability or integrity of any director or executive officer of CU Bancorp.
CU Bancorp believes that all of its directors’ and nominees’ respective educational background and business experience give them the qualifications and skills necessary to serve as directors of CUNB. The following is a description of the business experience during at least the past five years of each director nominee as well as their specific experience, qualifications, attributes or skills which led to the conclusion that each of the director nominees listed above should serve as a member of CU Bancorp’s Board of Directors:
Roberto E. Barragan. Mr. Barragan currently is President of the Valley Economic Development Center, Inc. (“VEDC”). He has served in various capacities with the VEDC since 1995. The VEDC is a 501(c)3 community based private non-profit corporation which offers training, consulting, technical assistance and financing to small- and medium-sized businesses. He was a founder of the Pacoima Development Federal Credit Union. Mr. Barragan is an expert on the needs of small businesses within CUB’s communities and assists significantly in the Community Reinvestment Act efforts of CUB. Mr. Barragan serves as the Community Reinvestment Act “CRA” Board Liaison, between CUB’s CRA Committee and the Board of Directors.
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CU Bancorp has nominated Mr. Barragan because he is an expert on the needs of small businesses within California United Bank’s communities, as well as lending, community development and government programs designed to assist in small business lending. He is also extremely experienced and knowledgeable about the Southern California small business lending climate and opportunities. His experience and community contacts provide him with the knowledge to assist significantly in the Community Reinvestment Act and small business lending efforts of California United Bank.
Charles R. Beauregard. Mr. Beauregard has served as a director of the Company since November 30, 2014, following the merger of 1st Enterprise Bank with and into California United Bank. He was a director of 1st Enterprise Bank since its incorporation in 2006 and served as Chairman of the Director’s Loan Committee at 1st Enterprise as well as a member of the Compensation Committee, the Strategic and Capital Planning Committee, and the Governance Committee. Mr. Beauregard is a retired bank executive with over 30 years of commercial banking experience. Mr. Beauregard was formerly chief credit officer for Wells Fargo Bank’s Trust and Private Bank Group.
CU Bancorp has nominated Mr. Beauregard because of his experience as a bank executive with a specialty in commercial banking as well as his experience as a community bank director, which provides additional expertise to the CU Bancorp Board of Directors, and in particular to the California United Bank Loan Committee.
Kenneth J. Cosgrove. Mr. Cosgrove was previously the Chairman and Chief Executive Officer of Premier Commercial Bancorp and Premier Commercial Bank, N.A. and had served in that position since its formation. He has over 40 years of banking experience. He is currently also a member of the Board of Directors of the holding company for Pacific Coast Bankers Bank as well as Pacific Coast Bankers Bank, a bankers’ bank in San Francisco, CA and serves as the Chairman of the Board.
CU Bancorp has nominated Mr. Cosgrove based on his extensive knowledge of banking, the banking industry, the Southern California (particularly Orange County) banking market and SBA lending. Mr. Cosgrove is a member of the California United Bank Directors’ Loan Committee and provides expertise to that Committee.
David C. Holman. Mr. Holman is the Lead Director for CU Bancorp. He was previously the Chairman of the board of directors of 1st Enterprise Bank, serving since incorporation of 1st Enterprise in February 2006 and was also a private investor throughout that period. He was Chairman of both the Strategic and Capital Planning Committee and the Nominating and Governance Committee, and a member of the Compliance and Compensation Committees of 1st Enterprise. Mr. Holman was formerly a senior executive at First Interstate Bank in Los Angeles and has been actively involved in the commercial banking industry for 40 years in California as a banker or investor.
CU Bancorp has nominated Mr. Holman because of his experience as a senior executive of a southern California based bank and knowledge of that market, as well as his experience as the Chairman of the board of directors of an independent bank, particularly with regard to the compensation and corporate governance areas.
K. Brian Horton. Mr. Horton is President and a director of CU Bancorp and California United Bank. He previously served as the President and a director of 1st Enterprise since February 2006. Previously, he served as Division President of Mellon 1st Business Bank, from September 2004 to June 2005, and in various management positions at Mellon 1st Business Bank (and its predecessor, 1st Business Bank) from 1988 through June 2005, including Executive Vice President from 2003 to 2004, and Regional Vice President for the Orange County Regional Office from 1997 to 2003.
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CU Bancorp has nominated Mr. Horton because of his executive management position and his experience as a commercial banker in the market served by California United Bank and his experience as a director of an independent bank. He currently serves on the California United Bank Loan Committee.
Eric S. Kentor. Mr. Kentor is an attorney, independent business consultant and private investor working primarily with companies in the medical technology and clean tech, or “green” sectors. From 1995, until its purchase by Medtronic in 2001, Mr. Kentor served as Senior Vice President, General Counsel, and Corporate Secretary and as a permanent member of the Executive Management Committee at MiniMed Inc. The company was a world leader in the design, development, manufacture and marketing of advanced systems for the treatment of diabetes. Prior to MiniMed, Mr. Kentor served as Vice President of Legal Services for Health Net and as Executive Counsel for its parent corporation. Previously, Mr. Kentor was a partner at the law firm of McDermott, Will & Emery. Mr. Kentor has also served as a director of both private and public companies, including Endocare, Inc., a publicly traded medical device company where he served as a director until the company was acquired in 2009. As an attorney experienced in corporate governance, Mr. Kentor provides legal and corporate governance expertise as well as experience as an executive officer and director of public companies.
CU Bancorp has nominated Mr. Kentor because of his significant experience in corporate and securities law as well as corporate governance. His experience as an executive officer and director of public companies has provided him with substantial experience in the sophisticated areas of public company corporate governance, securities law and management. He currently serves as Chairman of the Compensation, Nominating and Corporate Governance Committee and as a Committee Member of the Audit and Risk Committee of the CU Bancorp Board of Directors.
Jeffrey J. Leitzinger, Ph.D. Dr. Leitzinger previously served as a director of 1st Enterprise since its incorporation in 2006. He was a member of the ALCO Committee, the Nominating and Governance Committee, and the Strategic and Capital Planning Committee. Dr. Leitzinger has been President and Chief Executive Officer of EconOne Research, Inc. in Los Angeles since 1997, and has been an economic consultant for over 30 years.
CU Bancorp has nominated Mr. Leitzinger because his talents and experience as an economist assist the Company in its strategic planning and its analysis of the impact of economic factors on its business. Additionally, as a small business owner Dr. Leitzinger provides insight into this part of California United Bank’s target market. Dr. Leitzinger serves as the board liaison to the California United Bank Asset and Liability Committee (ALCO).
David I. Rainer. Mr. Rainer is Chairman of the Board of Directors and the Chief Executive Officer of CU Bancorp and California United Bank. He was previously California State President for US Bank and Executive Vice President of Commercial Banking for US Bank, in which capacity he led the commercial banking operations for US Bank in the Western United States, from Colorado to California. In February 1999, Mr. Rainer became President and Chief Executive Officer of Santa Monica Bank which was acquired by US Bank in November 1999. From 1992 to 1999, Mr. Rainer was an executive officer of California United Bank (not related to the current California United Bank), and its successor Pacific Century Bank, N.A., and served as Executive Vice President and then director, President and Chief Executive Officer. Mr. Rainer is a member of the Board of Directors of the Federal Reserve Bank of San Francisco, Los Angeles Branch.
CU Bancorp has nominated Mr. Rainer because the Company believes that including the chief executive officer on the Board of Directors is essential to providing appropriate information to the Board about the Company and management, on improvements in California United Bank’s value and on corporate initiatives. As a banker with over 25 years of experience in super-regional banks as well as community banks, strong leadership and executive experience, Mr. Rainer can provide valuable knowledge and insight as to all aspects of the Company’s operations.
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Roy A. Salter. Mr. Salter is a senior advisor of FTI Consulting, and global leader of the firm’s Valuation and Financial Advisory Services (VFAS) group and Media and Entertainment group based in Los Angeles. FTI Consulting is a global business advisory firm that employs top-tier professionals from every major financial center and every corner of the globe dedicated to helping organizations protect and enhance enterprise value in an increasingly complex legal, regulatory and economic environment. As global leader of the firm’s VFAS practice, Mr. Salter and his colleagues oversee FTI’s provision of business and intangible asset valuations, financial opinions (fairness and solvency opinions; purchase price allocation, goodwill impairment, portfolio valuation and other accounting opinions); forecasting, financial and strategic analysis; and transaction support covering a broad spectrum of industries and situations to both middle market and Fortune 500 companies and capital market constituents.
CU Bancorp has nominated Mr. Salter primarily based upon his financial analysis and valuation expertise as well as background in bank marketing. His analytical experience can be of assistance in financial analysis and strategic initiatives, in particular. In addition, as the founder and an executive officer of a successful small business, he can provide expertise and insight into a large portion of CU Bancorp’s target market.
Daniel F. Selleck. Mr. Selleck is President of the Westlake Village-based Selleck Development Group, Inc. which specializes in the development and acquisition of commercial properties. That company has completed the development of more than 3.5 million square feet of property, with a value approximating $1 billion, including the development of the former General Motors Assembly Plant in Van Nuys, California and the Shoppes at Westlake Village shopping center. As a real estate expert, Mr. Selleck provides his expertise to CUB’s Directors’ Loan Committee and provides expertise in real estate lending and structure.
CU Bancorp has nominated Mr. Selleck because of his expertise as a leading developer in California United Bank’s target markets. He has experience in real estate lending, borrowing, and construction which can be of assistance to California United Bank’s real estate and construction lending efforts. Additionally, as an established resident and business figure of California United Bank’s target market area, he is in a position to provide business and community knowledge and insight.
Charles H. Sweetman. Mr. Sweetman is a managing partner of Sweetman Properties, LLC, a commercial income property company located in Palm Desert, California and also is the President and Chief Executive Officer of Sweetman Group, Inc. a property management and consulting firm. Mr. Sweetman provides strong entrepreneurial experience to the Board as well as significant business development skills. He is a member of the Compensation, Nominating and Corporate Governance Committee.
CU Bancorp has nominated Mr. Sweetman because of his leadership experience and community involvement as well as his entrepreneurial experience in founding and managing a small- to medium-size business, managing and successfully selling that business as well as executive experience with a large national company. His experience provides him with insight into California United Bank’s target market and particularly his management experience provides him with knowledge of compensation and employment matters. He has also been a successful real estate investor with the ability to provide market information as well as real estate expertise.
Kaveh Varjavand. Mr. Varjavand is an accounting and financial professional with 29 years of experience in the financial services industry, including 18 years in public accounting, during 14 of which he was a managing partner. Mr. Varjavand is the founder and president of AARCS (Accounting, Audit, and Reporting Consulting Services), established in 2013, which provides consulting services to community banks in the areas of financial reporting, risk assessment, regulatory compliance, governance and credit risk management, among others. From
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2006 to 2013, he was the Partner-in-Charge of the Southern California Financial Services Group at Moss Adams LLP, where he was responsible for all aspects of practice development related to financial services clients in Southern California. In 1990 Mr. Varjavand joined the audit staff at KPMG LLP, and served there as an audit partner from 1999 to 2006. He left KPMG for four years from 1994 to 1998 to work in the banking industry: from 1994 to 1997 he served as Vice President, Corporate Planning & Internal Asset Review, at Coast Federal Bank, an $8 billion savings bank; from 1997 to 1998, he served as First Vice President, Planning & Analysis at California Federal Bank, a $60 billion savings bank. He is a member of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants. Mr. Varjavand earned a bachelor’s degree in accounting with a minor in economics from the University of Kentucky. He has been a licensed certified public accountant since 1992.
CU Bancorp has nominated Mr. Varjavand because his education, knowledge and experience allow him to provide the board of directors with insight regarding financial and accounting matters and to serve on the CU Bancorp’s Audit and Risk Committee and as an audit committee financial expert. In particular, Mr. Varjavand’s financial institutions accounting expertise and corporate governance experience contributes a valuable source of expertise to CU Bancorp in these areas. Mr. Varjavand is an Audit and Risk Committee designated financial expert and serves as Chairman of the Audit and Risk Committee of the CU Bancorp Board of Directors.
The following sets forth the names and certain information as of July 18, 2016 with respect to the Company’s executive officers (except for Mr. Rainer and Mr. Horton whose information is included above):
Name | Age | Position with Company | Year First Appointed | |||||
Anne A. Williams | 58 | Executive Vice President, Chief Operating Officer / Chief Credit Officer CU Bancorp and California United Bank and Director – California United Bank | 2005 | |||||
Karen A. Schoenbaum | 54 | Executive Vice President and Chief Financial Officer CU Bancorp and California United Bank | 2009 | |||||
Robert E. Sjogren | 50 | Executive Vice President and Chief Risk Officer1CU Bancorp and California United Bank | 2016 | |||||
Anita Y. Wolman | 64 | Executive Vice President, Chief Administrative Officer, General Counsel & Corporate Secretary2CU Bancorp and California United Bank | 2009 | |||||
| 1. | Mr. Sjogren joined the Company in July 2016 |
Anne A. Williams, Executive Vice President, Chief Operating Officer and Chief Credit Officer. Ms. Williams is a Director of California United Bank and Executive Vice President and Chief Operating Officer / Chief Credit Officer of CUB. Prior to joining us, Ms. Williams served as Senior Vice President and Credit Risk Manager for US Bank’s Commercial Banking Market for the State of California. Ms. Williams was previously the Executive Vice President and Chief Credit Officer of Santa Monica Bank, which was acquired by US Bank in November 1999. Prior to joining Santa Monica Bank, Ms. Williams was the Executive Vice President and Chief Credit Officer at California United Bank (and its successor, Pacific Century Bank, N.A.) from 1992 to 1999.
Karen A. Schoenbaum, Executive Vice President and Chief Financial Officer.Ms. Schoenbaum has served as CU Bancorp and California United’s Executive Vice President and Chief Financial Officer since October 2009. Prior to joining CUB, Ms. Schoenbaum was Executive Vice President and Interim Chief Financial
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Officer of Premier Business Bank in Los Angeles. She previously served as Executive Vice President and Chief Financial Officer of California National Bank from 2001 to 2008, where she was responsible for the financial and regulatory reporting, accounting, treasury, asset and liability management, general services and corporate real estate departments. From 1997 to 2001, Ms. Schoenbaum was Executive Vice President, Chief Financial Officer and Chief Information Officer of Pacific Century Bank, N.A. a subsidiary of Bank of Hawaii Corporation.
Robert E. Sjogren, Executive Vice President and Chief Risk Officer.Mr. Sjogren was appointed Executive Vice President and Chief Risk Officer of CU Bancorp and California United Bank in July 2016. He previously was Chief Operating Officer of Pacific Mercantile Bancorp beginning in 2013, and was its General Counsel prior to that. Mr. Sjogren began his banking career in 1988 as a regulatory examiner for the Federal Deposit Insurance Corporation, where he worked for ten years and became a Senior Examiner and Team Leader while attending Loyola Law School. Upon graduating law school and passing the Bar Exam, Mr. Sjogren worked for Nixon Peabody LLP in their financial institutions practice from 1998 to 2004.
Anita Y. Wolman, Executive Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary. Ms. Wolman was appointed Chief Administrative Officer in 2013 and Executive Vice President & General Counsel in January 2009. She previously was Senior Vice President Legal/Compliance beginning in 2005. Prior to joining CUB, Ms. Wolman was Senior Vice President, General Counsel & Corporate Secretary of California Commerce Bank (Citibank/Banamex USA). Earlier Ms. Wolman was Executive Vice President, General Counsel & Corporate Secretary of Pacific Century Bank, N.A. a subsidiary of Bank of Hawaii Corporation and its predecessor California United Bank. Ms. Wolman was previously Senior Vice President Legal/Compliance and had served in that capacity since 2005.
There are no family relationships between any Director and an Executive Officer or among any Directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) requires the Company’s directors and executive officers, and persons who own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership of, and transactions in, the Company’s equity securities with the SEC. Such directors, executive officers and 10% stockholders are also required to furnish the Company with copies of all Section 16(a) reports that they file. Based solely on a review of the copies of such reports received by the Company, and on written representations from certain reporting persons, the Company believes that all Section 16(a) filing requirements applicable to its directors, executive officers and 10% stockholders were complied with during 2015 with the exception of a total of three (3) filings for Mr. Rainer and Mses. Williams and Wolman, respectively, which, due to administrative error, were 4 days delinquent and related to the number of shares of restricted stock not delivered to the recipient upon vesting, in order for the recipient to satisfy his or her tax withholding obligations in connection with the vesting.
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CORPORATE GOVERNANCE PRINCIPLES AND CODE OF ETHICS
The Board of Directors is committed to good business practices, transparency in financial reporting and the highest level of corporate governance. In response to this, the Board has adopted formally the following Corporate Governance Guidelines:
Corporate Governance Guidelines
Our corporate governance guidelines provide for, among other things:
| • | A Board consisting of a majority of independent directors; |
| • | A lead independent director; |
| • | Periodic executive sessions of non-management directors; |
| • | An Audit and Risk Committee and a Compensation, Nominating and Corporate Governance Committee consisting entirely of independent directors; |
| • | Annual Performance Evaluation of the Board; |
| • | Director education and orientation; and |
| • | Ethical conduct of directors and adherence to a duty of loyalty to the Bank. |
In connection with our ongoing review of corporate governance and best practices, in March 2015, the Board appointed David Holman to the newly created position of Lead Independent Director. Mr. Holman was previously the Chairman of the Board of 1st Enterprise Bank and additionally brings many years of banking experience to this position. As Lead Director he calls and chairs meetings of the independent and non-management directors, acts as a liaison between the independent directors, other members of the Board and management, and assists as necessary on Board agendas to assure that all stakeholders’ interests are represented appropriately. In the absence of the Chairman, the Lead Director will chair meetings of the Board of Directors.
The Board has adopted a Code of Ethics that applies to the Company’s principal executive officer, principal financial officer, controller and principal accounting officer, or persons performing similar functions, as well as Principles of Business Conduct & Ethics that apply to its directors, officers and employees as well as those of its subsidiary. A copy is available on the Company’s website atwww.cubancorp.com or by contacting Anita Wolman, Corporate Secretary, at 15821 Ventura Boulevard, Suite 100, Encino, CA 91436. A copy will be provided without charge.
We also have an Insider Trading Policy which prohibits Directors and Senior Officers from the purchase or sale of puts, calls, options or other derivative securities based on the Company’s securities. Corporate Governance Guidelines also prohibit Directors and Named Executive Officers from pledging their Company securities in connection with margin accounts or other borrowing arrangements.
The Board and the CNCG Committee has determined that given the quality of leadership, shareholder relationships and other mitigating matters peculiar to Mr. Rainer and the Company at this stage of its growth, it is appropriate for Mr. Rainer to serve as both Chief Executive Officer and Chairman of the Board. In 2014, Mr. Horton was named to serve as President of the Company, thereby separating the jobs of CEO and President. In further recognition of the combined Chairman/CEO structure, in 2015 the Board of Directors named Mr. Holman to a newly created position of Lead Independent Director to call and chair meetings of the independent and non-management directors, act as a liaison between the independent directors, other members of the Board and management and assist on Board agendas and in other matters to assure that all stakeholder’s interests are represented appropriately. Through the Lead Independent Director, the Company aims to foster an appropriate
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level of separation between the levels of leadership in the Company. Leadership is also provided through the respective chairs of the Board’s various committees. The Board believes it is critical for both the CEO and the President to serve of the Board of Directors.
As part of its Corporate Governance Guidelines, the CU Bancorp Board of Directors has adopted a “Director Resignation Policy.” This policy provides that at any shareholder meeting at which directors are subject to an uncontested election, any nominee for director who receives a greater number of votes “withheld” from his or her election than votes “for” such election will then be required to tender a letter of resignation to the Chairman of the Board for consideration by the Board’s Compensation, Nominating and Corporate Governance Committee which will thereafter recommend to the CU Bancorp Board of Directors the action to be taken with respect to such offer of resignation. The CU Bancorp Board of Directors will act no later than 90 days following the date of the shareholder meeting with respect to each such letter of resignation and will notify the director concerned of its decision and promptly publicly disclose such decision. Any director who tenders his or her resignation pursuant to this provision will not participate in any Board or committee action regarding whether to accept his or her resignation offer.
The Board has always taken the position that all Directors and Named Executive Officers should own a meaningful amount of Company common stock to foster alignment with the interests of the shareholders. In August 2015, the Compensation, Nominating and Corporate Governance Committee recommended and the Board of Directors approved, a Stock Ownership Policy setting forth requirements for stock ownership by directors and Named Executive Officers (“Participants”). The policy requires that these individuals own common shares of CU Bancorp as follows:
Participant | Value of Shares Owned | |
Chief Executive Officer | 3x Base Salary | |
President | 2x Base Salary | |
Other Named Executive Officers | 1x Base Salary | |
Non-Employee Directors | 3x Annual Cash Retainer |
Participants may satisfy the ownership guidelines with: i) shares owned directly; ii) shares owned indirectly; iii) vested restricted stock of iv) unvested restricted stock/units subject only to time based requirements. Unexercised options and unvested performance-contingent shares/units are not counted toward meeting the ownership guidelines. These requirements are reviewed annually as of December 31. If a Participant is not in compliance with the Stock Ownership Policy at any such determination date, the participant must retain 100% of all shares of CU Bancorp common stock held as of such date and no less than 50% of the net shares received as a result of the exercise, vesting or payment of any Company equity awards granted to the Participant. Participants not in compliance with the minimum ownership guidelines will receive written notification that the Retention Ratio described above will apply until the Participant provides written notification and documentation indicating that he or she has come into compliance with the Stock Ownership Policy. Because a Participant must retain a percentage of net shares acquired from CU Bancorp equity awards until the Participant satisfies the specified guideline level of ownership, there is no minimum time period required to achieve the guideline level of ownership, and the Board recognizes that a newly-elected or appointted Director or Executive Officer may require a period of time to accumulate a sufficient number of shares to attain the designated minimum ownership level.
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At December 31, 2015 all directors and executive officers were in compliance with this policy with the exception of Kaveh Varjavand, who joined the Board effective September 1, 2015. As a recently-appointed Board member, Mr. Varjavand is working toward ownership of the requisite number of shares in accordance with the Company’s ownership policy.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE COMPANY
The Board of Directors of the Company oversees its business and monitors the performance of management. In accordance with corporate governance principles, our Board of Directors does not involve itself in day-to-day operations. The directors keep themselves informed through, among other things, discussions with the Chief Executive Officer, other key executives and our principal outside advisors (legal counsel, outside auditors, and other consultants), by reading reports and other materials that the Company sends them and by participating in Board and committee meetings.
During 2015, the Board of Directors of CU Bancorp held twelve meetings. During 2015, no director of the Company attended less than 75% of all Board meetings and the meetings of any committee of the Boards on which he or she served.
In 2015, the Board of Directors had the following committees: Audit and Risk Committee; Compensation, Nominating and Corporate Governance Committee; and Executive Committee. In addition, the Bank maintained a Board of Directors Loan Committee. The Audit and Risk Committee and the Compensation, Nominating and Corporate Governance Committee both consisted solely of independent directors.
Executive sessions of non-management directors are held by the Board on an “as needed” basis and at least four times annually. Prior to March 2015, the executive sessions of non-management directors were chaired by the Vice Chairman of the Board, when there was one, or in his or her absence, a director chosen by the non-management directors. In March 2015 the Board appointed David Holman as the Lead Independent Director. In that role he or in his absence, a director chosen by the independent directors chairs meetings of the independent directors. In 2015, the non-management directors met four times.
It is the policy of the Board that directors are expected to attend each Annual Meeting of Shareholders. Such attendance allows for direct interaction with shareholders. All of the Company’s directors attended the Company’s 2015 Meeting of Shareholders.
Reporting of Complaints/Concerns Regarding Accounting or Auditing Matters
The Company’s Board of Directors has adopted procedures for receiving and responding to complaints or concerns regarding accounting and auditing matters. These procedures were designed to provide a channel of communication for employees and others who have complaints or concerns regarding accounting or auditing matters involving the Company. Employee concerns may be communicated in a confidential or anonymous manner to the Audit and Risk Committee of the Board. The Audit and Risk Committee Chairman will make a determination on the appropriate level of inquiry, investigation or disposal of the complaint. All complaints are discussed with the Company’s senior management, as appropriate, and are monitored by the Audit and Risk Committee for handling, investigation and final disposition. The Chairman of the Audit and Risk Committee will report the status and disposition of all complaints to the Board of Directors. No complaints were received during 2015.
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Shareholder Communications with the Board
Shareholders wishing to communicate with the Board of Directors as a whole, or with an individual director, may do so by writing to the following address:
CU Bancorp
15821 Ventura Boulevard, Suite 110
Encino, California 91436
Attention: Corporate Secretary
Any communications directed to the Corporate Secretary will be forwarded to the entire Board of Directors, unless the Chairman of the Board reasonably believes communication with the entire Board of Directors is not appropriate or necessary or unless the communication is addressed solely to a specific committee or to an individual director.
Audit and Risk Committee and Board of Directors Risk Management
Board Authority for Risk Oversight
The Board has active involvement and responsibility for overseeing risk management of the Company arising out of its operations and business strategy and understanding of what level of risk is appropriate for the Company. The Board monitors, reviews and reacts to material enterprise risks identified by management. The Board receives specific oral and written reports from officers with oversight responsibility for particular risks within the Company. Executive management reports include reporting on financial, credit, liquidity, interest rate, capital, operational, legal and regulatory compliance and reputation risks and the Company’s degree of exposure to those risks. The Board helps ensure that management is properly focused on risk by, among other things, reviewing and discussing the performance of senior management and business line leaders. While the Board of Directors has the ultimate oversight responsibility for the risk management process, various committees of the Board also have responsibility for risk management. The Company has adopted, and the Board has approved, a comprehensive set of policies designed to address areas of risk in the Company which management has implemented and disseminated throughout the Company and which are reviewed regularly.
Audit and Risk Management Committee Oversight
The Company has a separately designated standing Audit and Risk Committee established in accordance with applicable regulatory and NASDAQ requirements. The Audit and Risk Committee also serves as the Audit and Risk Committee of California United Bank. The Audit and Risk Committee Charter adopted by the Board sets out the responsibilities, authority and specific duties of the Audit and Risk Committee. The Audit and Risk Committee must consist of at least three members, each of whom are non-management (independent) directors and each of whom must meet the independence and expertise requirements of the NASDAQ, the Sarbanes-Oxley Act of 2002 and rules promulgated thereunder, and other applicable rules and regulations. At least one member must have accounting or related financial management expertise and qualify as a “financial expert”, as defined under the regulations of the SEC. Pursuant to the Audit and Risk Committee Charter, the Audit and Risk Committee has the following primary duties and responsibilities:
| • | oversight of the quality and integrity of regulatory and financial accounting, financial statements, financial reporting processes and systems of internal accounting and financial controls; |
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| • | oversight of the quality of compliance risk management and enterprise risk management; |
| • | oversight of the Company’s compliance with legal and regulatory requirements; |
| • | oversight of the annual independent audit of the Company’s financial statements and internal controls over financial, accounting, regulatory and legal compliance and conformity with the Company’s Principles of Business Conduct and Ethics; |
| • | engagement of the independent registered public accounting firm and evaluation of the qualifications, independence and performance of the independent registered public accounting firm; |
| • | approval of all audit and non-audit services permitted to be provided by the independent registered public accountants (other than those services that meet the requirements of any de minimus exception established by law or regulation); |
| • | oversight and retention of internal audit and/or outsourced internal audit services, as well as review of the internal auditors and review of all internal audit reports and follow up on citations, comments and recommendations; and |
| • | preparation of an annual report substantially in compliance with the rules of the SEC with regard to companies subject to the Sarbanes-Oxley Act, to be included in the Company’s annual proxy statement, if applicable. |
The Audit & Risk Committee Charter is available on the Company’s website atwww.cubancorp.com.
The Audit and Risk Committee is primarily responsible for overseeing the risk management function at the Company, on behalf of the Board. The Company’s Chief Risk Officer reports directly to the Audit and Risk Committee. The Bank’s Chief Risk Manager and Bank Secrecy Act and Compliance Officers also have direct reporting lines to the Audit and Risk Committee. The Audit and Risk Committee directs and employs third parties to conduct periodic reviews and monitoring of compliance efforts with a special focus on those areas that expose the Company to compliance risk. Among the purposes of the periodic monitoring is to ensure adherence to established policy and procedures. All reviews are reported to the Audit and Risk Committee, which regularly reports to the Board of Directors. The Audit and Risk Committee regularly meets with various members of management and receives reports on risk management and the processes in place to monitor and control such risk.
The Audit and Risk Committee has the authority to conduct any investigation appropriate to fulfilling its responsibilities and has direct access to the independent auditors, as well as to anyone in our organization. The Audit and Risk Committee has the ability to retain special legal or accounting experts, or such other consultants, advisors or experts it deems necessary in the performance of its duties and shall receive appropriate funding from the Company for payment of compensation to any such persons. The Audit and Risk Committee works closely with management and the Company’s independent registered public accounting firm. At December 31, 2015, the Audit and Risk Committee consisted of Messrs. Varjavand (Chairman), Beauregard, Kentor, Leitzinger and Salter, each of whom was “independent” as defined by the rules and regulations of the NASDAQ Stock Market. For additional information regarding the background and relevant experience of Messrs. Varjavand, Beauregard, Kentor, Leitzinger and Salter, please see the biographies of directors under the section entitled “Directors”, above.
For 2015 and through the date of this Proxy Statement, the Board of Directors has also determined that Mr. Varjavand, who serves as the Chairman of the Audit and Risk Committee, has: (i) an understanding of generally accepted accounting principles and financial statements; (ii) an ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves; (iii) an experience
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preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by our financial statements, or experience actively supervising one or more persons engaged in such activities; (iv) an understanding of internal control over financial reporting; and (v) an understanding of audit committee functions and is therefore qualifies as an “audit committee financial expert”, is “financially sophisticated” and is “independent” as those terms are defined by the applicable rules and regulations of the Securities and Exchange Commission and the NASDAQ Stock Market. The designation of a person as an audit committee financial expert does not result in the person being deemed an expert for any purpose, including under Section 11 of the Securities Act of 1933. The designation does not impose on the person any duties, obligations or liability greater than those imposed on any other audit committee member or any other director and does not affect the duties, obligations or liability of any other member of the Audit and Risk Committee or Board of Directors.
The Audit and Risk Committee held eight (8) regular and two (2) special meetings during 2015. The Audit and Risk Committee regularly meets without members of management present.
Compensation, Nominating and Corporate Governance Committee and Bank Loan Committee Oversight
In addition to the Audit and Risk Committee, other committees of the Board of Directors of the Company and California United Bank consider the risks within their area of responsibility. For example, the Compensation, Nominating and Corporate Governance Committee reviews the risks that may be implicated by the Company’s executive and other compensation programs. For a discussion of that Committee’s review of executive officer compensation plans and employee incentive plans and the risks associated with these plans, see “Executive Compensation – Risk of Compensation Programs,” herein. The Bank’s Loan Committee reviews credit risk, portfolio quality and trends, as well as the results of external credit reviews. The Compensation, Nominating and Corporate Governance Committee recommends director candidates with appropriate experience and skills who will set the proper tone for the Company’s risk profile and provide competent oversight over our material risks.
Audit and Risk Committee Report
The following report of the Audit and Risk Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any of CU Bancorp’s other filings under the Securities Act or under the Exchange Act, except to the extent CU Bancorp specifically incorporates this report by reference.
The Audit and Risk Committee oversees CU Bancorp’s financial reporting process on behalf of the board of directors. The Audit and Risk Committee consists of five (5) members of the Board of Directors, each of whom is independent under the NASDAQ listing standards, SEC Rules and other regulations applicable to audit committees. In fulfilling its oversight responsibilities, the Audit and Risk Committee approved the engagement and retention of RSM US LLP as CU Bancorp’s independent registered public accountants, reviewed and discussed with management and the external auditors the audited financial statements included in CU Bancorp’s Annual Report on Form 10-K filed with the Securities and Exchange Commission and the unaudited financial statements included in CU Bancorp’s Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission. RSM US LLP has served as the Company’s (or prior to that California United Bank’s) independent registered accounting firm since 2005 and reports directly to the Audit and Risk Committee. In selecting RSM US LLP as the Company’s independent registered accounting firm for 2015, the Audit and Risk Committee considered a number of factors including:
| • | The professional qualifications of RSM US LLP’s lead audit partner and other members of the audit team participating in the engagement; |
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| • | RSM US LLP’s independence; |
| • | RSM US LLP’s depth of understanding of the Company’s business, accounting policies and practices and internal control over financial reporting; |
| • | The appropriateness of RSM US LLP’s fees for audit services (on both an absolute basis and as compared to peer companies/firms; and |
| • | The results of management’s and the Audit and Risk Committee’s annual evaluations of the qualifications, performance and independence of RSM US LLP. |
In accordance with SEC rules and RSM US LLP’s policies, audit partners are subject to rotation requirements to limit the number of consecutive years an individual partner may provide service to us. For lead and concurring audit partners, the maximum number of consecutive years of service in that capacity is five (5) years. We select the Company’s lead audit partner pursuant to this rotation policy following meetings between the Chairman of the Audit and Risk Committee and the candidate or candidates for that role, as well as discussion by the full Committee and with management.
The Audit and Risk Committee operates pursuant to a written charter that was most recently ratified in September 2015. A copy of the Audit and Risk Committee’s Charter may be obtained on CU Bancorp’s website at www.cubancorp.com under the section entitled “Corporate Governance.” The Audit and Risk Committee also oversees the performance of CU Bancorp’s internal audit function, including outsourcing of that function and review of reports.
Management is responsible for CU Bancorp’s financial reporting process including its system of internal controls, and for the preparation of financial statements in accordance with generally accepted accounting principles. CU Bancorp’s independent registered public accountants are responsible for auditing those financial statements.
The Audit and Risk Committee’s responsibility is to monitor and review these processes and procedures. The members of the Audit and Risk Committee are not professionally engaged in the practice of accounting or auditing. The Audit and Risk Committee has relied on the information provided and on the representations made by management regarding the effectiveness of internal controls over financial reporting, that the financial statements have been prepared with integrity and objectivity and that these financial statements have been prepared in conformity with generally accepted accounting principles. The Audit and Risk Committee also relies on the opinions of the independent registered public accountants on the financial statements and the effectiveness of internal controls over financial reporting. The Audit and Risk Committee’s oversight does not provide it with an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or policies, or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, its consultations and discussions with management and the independent public accountants do not assure that CU Bancorp’s financial statements are presented in accordance with generally accepted accounting principles, that the audit of CU Bancorp’s financial statements has been carried out in accordance with generally accepted auditing standards or that CU Bancorp’s independent registered public accountants are in fact “independent.”
In addition to approving the engagement and retention of the independent registered public accountants, the Audit and Risk Committee reviewed, met and discussed with the independent registered public accountants the matters required to be discussed by the statements on Auditing Standards (SAS) No. 16, as amended (Communications with Audit Committees) as adopted by the Public Company Accounting Oversight Board in Rule 3200T. These discussions included the clarity of the disclosures made therein, the underlying estimates and assumptions used in the financial reporting, and the reasonableness of the significant judgments and management
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decisions made in developing the financial statements. In addition, the Audit and Risk Committee received the written disclosures and the letter from the independent registered public accountants required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accountants’ communications with the Audit and Risk Committee concerning independence, and has discussed with the independent registered public accountants their independence.
The Audit and Risk Committee has reviewed management’s report on its assessment of the effectiveness of internal control over financial reporting as of December 31, 2015 and the independent registered public accounting firm’s opinion on the effectiveness of CU Bancorp’s internal control over financial reporting prepared in accordance with the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) and discussed these reports and opinions with management and the independent registered public accounting firm prior to CU Bancorp’s filing of its Annual Report on Form 10-K for the year ended December 31, 2015. As an “emerging growth company”, CU Bancorp is not required to obtain an assessment of the effectiveness of CU Bancorp’s internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002.
The Audit and Risk Committee also met and discussed with the independent registered public accountants issues related to the overall scope and objectives of the audit, CU Bancorp’s internal controls and critical accounting policies, and the specific results of the audit. Management was present at all or some part of each of these meetings. The Audit and Risk Committee also met with the independent registered public accountants without management. Lastly, the Audit and Risk Committee met with management and discussed the engagement of RSM US LLP as CU Bancorp’s independent registered public accountants.
During 2015, the Audit and Risk Committee met in open session and executive session with appropriate internal auditors or entities providing similar services, and RSM US LLP to discuss the results of their examinations, observations and recommendations regarding financial reporting practices, the effectiveness of CU Bancorp’s internal controls and significant risks affecting CU Bancorp.
The Audit and Risk Committee also monitors and retains the Company’s outsourced internal audit program which is intended to objectively review and evaluate the adequacy, effectiveness and quality of the Company’s system of internal controls related to the reliability and integrity of its financial information and the safeguarding of its assets. The Chief Risk Officer reports directly to the Audit and Risk Committee with regard to the internal audit function.
Pursuant to the reports and discussions described above, and subject to the limitations on the role and responsibility of the Audit and Risk Committee referred to above and in the Audit and Risk Committee’s charter, the Audit and Risk Committee recommended to the Board of Directors that the audited consolidated financial statements of CU Bancorp for 2015 be included in the Annual Report on Form 10-K for the fiscal year 2015 for filing with the SEC.
Respectfully submitted by the members of the Audit and Risk Committee:
Kaveh Varjavand, Chairman
Charles Beauregard
Eric Kentor
Jeffrey Leitzinger, Ph.D.
Roy Salter
April 5, 2016
The Audit and Risk Committee 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 or the Exchange Act, and shall not otherwise be deemed filed under these Acts.
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Compensation, Nominating and Corporate Governance Committee
The Company has a separately designated Compensation, Nominating and Corporate Governance Committee (the “CNCG Committee”), which consists entirely of independent directors as defined by the rules and regulations of the SEC and the NASDAQ Stock Market. The CNCG Committee acts for both CU Bancorp and California United Bank. The members of the Compensation, Nominating and Corporate Governance Committee as of December 31, 2015 were Directors Kentor (Chairman), Barragan, Holman, Selleck, and Sweetman. Each member of the CNCG Committee is an independent director as defined by the requirements of the SEC and NASDAQ Stock Market.
The CNCG Committee has three areas of responsibility. The CNCG Committee is responsible for: (i) ensuring that compensation and benefits policies and programs for executive management and the Board of Directors of the Company comply with applicable law and stock exchange listing requirements, and are devised and maintained to provide and retain for the Company a high executive level of management and corporate governance competence; (ii) determining the nominees to the Board of Directors and their qualifications and reviewing performance of directors and committees of the Board of Directors annually; and (iii) ensuring compliance with the Sarbanes Oxley Act of 2002 relative to corporate governance and such other laws and regulations as may be applicable with regard thereto.
Specifically with regard to compensation, the CNCG Committee is charged with overview of the Company’s compensation matters. The CNCG Committee reviews and approves our compensation philosophy and evaluates and determines CEO and executive officer compensation. It also reviews and approves compensation programs, plans and awards, and is responsible for administration of short-term and long-term incentive plans and other stock or stock based plans. The CNCG Committee is responsible for oversight of regulatory compliance with respect to compensation matters. In order to carry out its duties, the CNCG Committee has the ability to retain advisors to be used to assist the CNCG Committee in its duties.
With regard to nomination and governance functions the CNCG Committee recommends director nominees and appropriate policies and procedures for governance matters. The CNCG Committee has the following specific responsibilities: (i) to make recommendations as to size of the board of directors or any committee; (ii) identify potential board members; (iii) review the performance of the board and its members and committees at least annually; (iv) review the Corporate Governance Guidelines at least annually; (v) review compliance with corporate governance requirements under applicable law and regulations of stock exchanges; (vi) review the Code of Ethical Conduct and Business Practices annually; and (vii) review all related party transactions, other than those which are directly reviewed by the Board of Directors.
Shareholders can obtain the CNCG Committee Charter upon request to: CU Bancorp, Corporate Secretary, 15821 Ventura Boulevard, Suite 100, Encino CA 91436. The CNCG Committee met eleven (11) times during 2015.
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Compensation, Nominating and Corporate Governance Committee Interlocks and Insider Participation
None of the Company’s executive officers served on the CNCG Committee, or equivalent, of another entity, one of whose executive officers or board members served on our Board of Directors, and none of the members of the CNCG Committee serves or has served as an officer or employee of the Company.
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion & Analysis (“CD&A”) describes our compensation practices for both CU Bancorp and California United Bank, and the executive compensation policies, decisions and actions of our CNCG Committee. We explain how the CNCG Committee determines compensation for our senior executives and its rationale for specific 2015 decisions. We also discuss numerous changes the CNCG Committee has made to our program in 2015 to further advance its fundamental objective of aligning our executive compensation with the long-term interests of CU Bancorp shareholders. The CD&A focuses specifically on compensation for our named executive officers (“NEOs”) which in 2015 included the following executives:
Name | Position | |
David I. Rainer | Chairman, Chief Executive Officer | |
Brian Horton | President | |
Anne Williams | Executive Vice President, Chief Credit Officer, Chief Operating Officer | |
Karen Schoenbaum | Executive Vice President, Chief Financial Officer | |
Anita Wolman | Executive Vice President, Chief Administrative Officer, General Counsel |
Summary and Corporate Governance
The CNCG Committee is composed entirely of independent directors and is responsible for reviewing and approving CU Bancorp’s overall compensation programs, plans and awards, including approving salaries, awarding bonuses and granting stock based compensation to the CU Bancorp NEOs and for formulating, implementing and administering CU Bancorp’s short-term and long-term incentive plans and other stock or stock-based plans. The CNCG Committee establishes the factors and criteria upon which the CU Bancorp NEOs’ compensation is based and how such compensation relates to CU Bancorp’s performance, general compensation policies, competitive realities and regulatory requirements. The CNCG Committee also provides recommendations regarding director compensation programs. The CNCG Committee also reviews CU Bancorp’s compensation plans for risk.
2015 Business Highlights
Following the merger of 1st Enterprise Bank with and into California United Bank effective November 30, 2014, the integration of the two banks and synergies of the merger were realized during 2015, as seen in both the improvement in California United Bank’s efficiency ratio and double-digit loan growth in every quarter of
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2015. The execution by the management team of this strategic initiative resulted in a bank with an efficient low-cost funding platform with an average cost of deposits of 0.10% and an average deposit balance of $254 million per branch at year end 2015. Total assets at December 31, 2015 were $2.6 billion, a year-over-year increase of $370 million from December 31, 2014.
In late 2014, K. Brian Horton, former President of 1st Enterprise, joined CU Bancorp as a director and as President of CU Bancorp and California United Bank. Four members of the 1st Enterprise board of directors, David Holman, Brian Horton, Charles Beauregard, and Jeffrey Leitzinger, Ph.D., joined the CU Bancorp and California United Bank Boards of Directors, replacing retiring CU Bancorp Directors, Kenneth Bernstein and Robert Matranga. On September 1, 2015, Kaveh Varjavand joined CU Bancorp as a director of CU Bancorp and California United Bank and Chair and designated financial expert of the Audit & Risk Committee, replacing resigning CU Bancorp Director Lester Sussman.
For the year ended December 31, 2015, core net income (net income available to common shareholders adding back net merger expenses and net severance and retention expenses) was $20.6 million, representing an increase of $9.2 million or 80.7% from 2014. Net charge-offs for 2015 were $2 million resulting in a nonperforming asset ratio at December 31, 2015 of 0.09%, one of the lowest of publicly-held West Coast banks. The Company’s 2015 efficiency ratio was 61% with core operating efficiency ratio (core non-interest expense as a percent of net interest income plus non-interest income) of 60% down from 65% for 2014. Non-interest bearing demand deposits were 56% of total deposits once again representing over one-half of all deposits and resulting in a cost of funds of 0.12% in the 4th Quarter of 2015, down from 0.13% in the 4th Quarter of 2014. Total Loans were $1.8 billion, an increase of $208 million or 13% from 2014. Moreover, at year end 2015 the Company maintained its status as being well-capitalized, the highest regulatory category available.
It should be noted that the comparability of financial information for 2015 to 2014 is affected by the Company’s acquisition of 1st Enterprise effective November 30, 2014. Operating results for 2014 include the combined operations from December 1, 2014.
In 2015, CUNB stock price per share appreciated from $21.69 at January 1 to $25.36 at December 31, representing a 17% annualized increase in price per share. An initial investment in CUNB stock of $100 on December 31, 2010 would have been worth $205.34 at December 31, 2015.
2015 Compensation Program Highlights
As part of our commitment to continuously evaluate and improve the design of our executive compensation program with a view toward further aligning compensation with performance, in the first quarter of 2015, the CNCG Committee made fundamental modifications to the compensation structure for our NEOs with the following primary objectives:
| 2. | Strengthen the alignment of executive pay with our business and leadership strategies |
| 3. | Retain the key executive talent necessary to build on our past success and execute on our strategic objectives for the future, particularly in the period immediately following the transition with 1st Enterprise |
| 4. | Emphasize accountability through prospective, measurable performance goals |
| 5. | Balance the need to encourage short-term profitability with the imperative to deliver long-term, sustainable results |
| 6. | Remain appropriately competitive as the Company continues to increase shareholder value through organic growth and execution of other selective growth opportunities |
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These modifications were effective for the 2015 year and resulted in all incentive compensation for that year being performance based. Specific actions and changes are discussed below. As an “emerging growth company” under the “Jumpstart Our Business Startups Act” (“JOBS Act”), the Company is not subject to laws/regulations requiring an advisory vote to approve executive compensation at this time.
Revised Compensation Peer Group: In light of the scale and complexity of the Company following the 1st Enterprise acquisition and recent organic growth, and to better inform the CNCG Committee’s deliberations and decisions regarding our executive compensation program for 2015, the CNCG Committee worked with its independent consultant to develop a new compensation peer group.
Adoption of Management Incentive Plan: In July 2014 the Company amended and restated its 2007 Equity and Incentive Plan (the “Equity and Incentive Plan”) to, among other items, provide for both performance-based cash and equity incentives which are intended to qualify for exceptions to the tax deductibility limitations of Internal Revenue Code Section 162(m). These amendments were approved by the Company’s shareholders in October 2014. For 2015 the Equity and Incentive Plan, as amended, was the vehicle for providing cash and equity incentives to the Company’s NEO’s and the Committee anticipates that the Equity and Incentive Plan will be the principal vehicle for providing performance-based cash and equity incentives to NEO’s going forward. In March 2015 the CNCG Committee adopted an annual management incentive plan (the “MIP”) under and pursuant to the Equity and Incentive Plan, as the centerpiece of our performance-based executive compensation program for 2015. The MIP is designed to deliver both cash and equity based incentives contingent on the achievement of pre-established performance goals which the CNCG Committee believed would drive superior long-term performance for the Company and improve the alignment of executive pay with performance. Under the MIP, more than 50% of Mr. Rainer’s target total direct compensation for 2015 was performance based, as compared to 24% in 2014. For the other NEOs, more than 40% of target total direct compensation was directly tied to the achievement of pre-established goals, compared to roughly 23% in 2014.
Special One-Time Restricted Stock Awards: The CNCG Committee believes that retention of the current NEOs is critical to the future success of the Company. In order to better assure their retention, the CNCG Committee granted one-time special awards of restricted stock to Mr. Rainer, Ms. Williams, Ms. Schoenbaum, and Ms. Wolman in March 2015, similar in nature to the grant of restricted stock awarded to Mr. Horton upon his hire upon the close of the 1st Enterprise acquisition in 2014. These awards were structured with a vesting schedule designed to encourage retention over a particularly critical period for the Company following the 1st Enterprise acquisition and during which the Committee expects the Company may be well-positioned for continued growth. Accordingly, no portion of the grant vests until the 2-year anniversary date of the grant, and will fully vest over a four-year period. In considering these awards, the Committee noted that none of the NEO’s has an employment contract with the Company.
Further discussion about each of the above changes to the NEO compensation program in 2015 is set out in the section below titled“Our Executive Compensation Program in Detail.”
Our Compensation Governance Practices & Policies
Our pay practices emphasize good governance and market practice.
We do | We do not | |
ü Place an emphasis on variable compensation, which includes annual cash incentive awards dependent on the achievement of short-term financial goals | û Offer compensation-related tax gross ups | |
ü Grant performance contingent equity awards | û Provide significant perquisites | |
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ü Have stock ownership requirements for NEOs; all NEOs are expected and do hold a significant position in Company common stock | û Allow hedging, and trading in derivatives of Company securities | |
ü Have an executive compensation clawback policy to ensure accountability | û Guarantee bonuses | |
ü Have an independent compensation consultant advising the CNCG Committee | û Offer employment agreements | |
What Guides Our Executive Compensation Program
Our Compensation Philosophy
CU Bancorp’s compensation programs are designed, among other things, to emphasize the link between compensation and performance, taking into account competitive compensation levels in similar banks and in the markets where CU Bancorp competes for talent, as well as performance by the executive, their particular skills, background and expertise. The policies and underlying philosophy governing CU Bancorp’s compensation programs include the following:
| • | Aligning pay with performance. CU Bancorp provides a competitive salary to NEO’s based, in part, on median salary levels of similar positions at peer banks, combined with incentive opportunities that create “leveraged” compensation, providing the opportunity for market to above-market total compensation for outstanding company and individual performance. A meaningful portion of annual executive compensation is related to factors that can affect the financial performance of CU Bancorp, and is designed to incentivize and reward performance that is expected to drive shareholder value. |
| • | Creating shareholder value through incentive opportunities. The CNCG Committee believes that the long-term success of CU Bancorp and its ability to consistently increase shareholder value is dependent on its ability to attract and retain skilled executives, particularly retaining and incentivizing those currently in place who have proved their value. CU Bancorp’s compensation strategy encourages equity-based compensation to align the interests of our shareholders and our executives, as well as performance incentive awards that are designed to reward performance that we expect will result in increased shareholder value. |
| • | Attracting and retaining highly-experienced executives. We strive to employ exceptional performers with experience not typically found in peer community banks. Executives are generally expected to have backgrounds and experience in larger regional or national banks or other similar levels of experience for their particular area of emphasis. We expect our executives to be responsible for the development and success of the organization, client development and shareholder relationships. CU Bancorp executives may also hold multiple positions and responsibilities, which increases their value to the Company and may make comparisons to peers less meaningful. |
| • | Mitigating risk. CU Bancorp uses a combination of short-term and long-term compensation. The latter is impacted by CU Bancorp’s performance and mitigates the benefit to executives from exposing CU Bancorp to short-term risks, as the value of the long-term compensation, particularly equity grants, is substantially impacted by CU Bancorp’s long-term performance. |
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Our philosophy is supported by the following principle elements of pay in our executive compensation program:
Pay Element | Form | Purpose | ||
Base Salary | Cash (Fixed) | Provide a competitive level of pay that reflects the executive’s experience, role and responsibilities | ||
Annual Incentives | Cash and Equity (Variable) | Reward achievement of corporate performance goals for the most recently-completed fiscal year; equity has vesting period beyond recently-completed fiscal year | ||
Long-Term Incentives | Equity (Variable) | Drive financial performance that links to shareholder value creation and longer-term business strategies | ||
NEOs are also eligible for other benefits, including salary continuation benefits and a qualified 401(k) Plan that provides participants with the opportunity to defer a portion of their compensation, up to tax code limitations, and may entitle NEOs to receive a company matching contribution. Modest ancillary benefits are also provided to executives by the Company. See below for more information.
Pay Mix
While the Summary Compensation Table sets forth annual compensation data in accordance with SEC requirements, the CNCG Committee considers additional perspectives beyond this format when evaluating our compensation program. This allows us to better understand how our annual pay opportunities and mix of pay elements compare to our competitors, as well as how compensation actually earned (rather than theoretically achievable) aligns with our performance.
The charts below show that most of our NEOs’ target total direct compensation for 2015 (with the exception of one-time special restricted stock or restricted stock units discussed herein) was variable (53% for our CEO and an average of 43% for our other NEOs). These charts exclude the value of other benefits and perquisites.
The Role of the CEO and Management
The CEO does not participate in the CNCG Committee’s determination of his own compensation. However, he makes recommendations to the CNCG Committee for each of the other NEOs. The CEO bases his recommendation on his assessment of each executive’s performance, as well as achievement of overall Company goals for the year. The CNCG Committee reviews the CEO’s recommendations, makes adjustments as it determines appropriate, and approves compensation at its sole discretion.
The Role of Consultants
In both 2014 and 2015, the CNCG Committee retained Pearl Meyer and Partners (“Pearl Meyer”), a national compensation consulting firm, as its executive compensation consultant. In this role, Pearl Meyer provided advice regarding:
| • | Long-term incentive considerations to help assure retention of key executives; |
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| • | Creation of 162m qualified performance based executive incentives through amendments to the Equity and Incentive Plan; |
| • | 2015 cash and equity incentive plan performance goals; |
| • | The selection of the revised peer group used to assess the executive compensation program; |
| • | The compensation of the CEO and other NEOs; |
| • | General compensation program design; |
| • | The design of a special, one-time equity grant for long-term NEOs designed to help assure retention of key executives; |
| • | The impact of regulatory, tax, and legislative changes on CU Bancorp’s executive compensation program; |
| • | Executive compensation trends and best practices; and |
| • | The compensation practices of competitors. |
During its engagement, Pearl Meyer met regularly with the CNCG Committee in executive session without management and has provided no other services to CU Bancorp. Pearl Meyer may work directly with management on behalf of the CNCG Committee, but this work is always under the control and supervision of the CNCG Committee. After the CNCG Committee’s review of applicable rules for independence, the CNCG Committee concluded that the advice it receives from Pearl Meyer is objective and does not raise any conflict of interest.
The Role of Benchmarking
When reviewing compensation components for the CU Bancorp NEOs and directors, the CNCG Committee considers as one element of analysis, the compensation practices of specific peer companies whose asset size, business type and geography are comparable to CU Bancorp and California United Bank.
In September 2014, Pearl Meyer assisted the CNCG Committee in revising CU Bancorp and CUB’s the peer group of financial institutions for purposes of benchmarking NEO compensation and informing compensation decisions that would be made in 2015. The revised peer group more accurately reflects the size of the Company following the acquisition of 1st Enterprise and the growth trajectory of the Company. In selecting the peer group, the CNCG Committee considered public banking organizations with total assets from $1.4 billion to $5 billion headquartered in the western U.S. The CNCG Committee approved the following peer group of 17 publicly-traded financial institutions for purposes of benchmarking NEO compensation and informing compensation decisions for 2015:
| Banc of California, Inc. | Heritage Commerce Corp | |
| Bank of Marin Bancorp | Heritage Financial Corporation | |
| Banner Corporation | HomeStreet, Inc. | |
| Bridge Capital Holdings | National Bank Holdings Corporation | |
| Cascade Bancorp | Pacific Continental Corporation | |
| Central Pacific Financial Corp. | Pacific Premier Bancorp, Inc. | |
| CoBiz Financial Inc. | TriCo Bancshares | |
| Farmers & Merchants Bancorp | Westamerica Bancorporation | |
| Guaranty Bancorp | ||
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Our Executive Compensation Program in Detail
2015 Base Salary
Base salary is the fixed annual compensation we pay to each NEO for performing specific job responsibilities and is based on their experience and requisite skills. Base salaries are determined for each NEO based on the executive’s position and responsibility. We review the base salaries for each NEO annually, as well as at the time of any promotion or significant change in job responsibilities, and in connection with each review, we consider individual and Company performance over the course of that year. In 2015, the CNCG Committee adjusted the base salaries for all NEOs except Mr. Horton. Mr. Horton’s salary was adjusted on December 1, 2014, immediately following the 1st Enterprise Bank merger.
2015 Salary Adjustments
On March 19, 2015, the CNCG Committee approved increases in the annual base salary for the NEOs as follows:
NEO | 2014 Base Salary ($) | 2015 Base Salary ($) | Approximate Percent Change (%) | |||||||||
David I. Rainer | $ | 450,000 | $ | 465,000 | 3.3 | % | ||||||
Brian Horton1 | $ | 340,000 | $ | 340,000 | 0 | % | ||||||
Anne Williams | $ | 301,000 | $ | 310,000 | 3.0 | % | ||||||
Karen Schoenbaum | $ | 251,000 | $ | 260,000 | 3.6 | % | ||||||
Anita Wolman | $ | 251,000 | $ | 260,000 | 3.6 | % | ||||||
| 1. | Mr. Horton received an increase immediately following the 1st Enterprise Bank merger on December 1, 2014 from a base salary of $282,000 to $340,000. |
In determining salary adjustments for 2015, the CNCG Committee took into consideration that NEOs, other than Mr. Horton, did not receive salary increases in 2014, in addition to competitive considerations and other market data.
The 2015 Management Incentive Plan
In early 2015, the CNCG Committee approved a new Management Incentive Plan (“2015 MIP”), which replaced the 2014 Executive Incentive Plan, and which was designed to strengthen the Company’s pay-for-performance culture, drive growth and profitability, and support our principles of safety and soundness.
2015 Target Opportunities
Under the 2015 MIP, NEOs had opportunities to earn both Cash Incentive and Equity Incentive Awards based on the achievement of established performance goals determined by the CNCG Committee. Each NEO was assigned a target award level (expressed as a percentage of base salary) and range that defines their incentive opportunity (see tables below). Actual award payouts were determined based on specific performance goals and ranged from 0% to 150% of the target award level. Target incentive opportunities for 2015 were as follows:
2015 Target Incentive Opportunities (% of Salary*) | ||||||||
NEO | Cash | Equity | ||||||
David I. Rainer | 50 | % | 60 | % | ||||
Brian Horton | 40 | % | 39 | % | ||||
Karen Schoenbaum | 40 | % | 30 | % | ||||
Anne Williams | 40 | % | 39 | % | ||||
Anita Wolman | 40 | % | 30 | % | ||||
| * | Award opportunities were based on the annual base salary as of August 31, 2015. |
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2015 Performance Goal Selection Process
The Cash Incentive and Equity Incentive payouts were based on corporate performance and goals, with specific requirements for each goal as established by the CNCG Committee. The 2015 performance goals for cash incentives approved by the CNCG Committee included: core return on average assets, efficiency ratio, average total deposits and net charge offs as a percentage of average loans. Included in the performance goals for 2015 equity incentives were diluted core earnings per share, tangible book value per share and Texas Ratio. Achievement of goals was determined by the CNCG Committee based upon 2015 Company (consolidated) financial results. The following charts illustrate the Threshold, Target and Stretch inventive award levels for each metric, as well as the weightings assigned to each metric used to determine the weighted percent of the overall 2015 Target Incentive Opportunities achieved by that metric.
| 2015 Cash Incentive Performance Goals | Weight | |||||||||||||||
| Threshold | Target | Stretch | ||||||||||||||
“Core” Return on Average Assets(a) | 0.75 | % | 0.95 | % | 1.15 | % | 30 | % | ||||||||
Efficiency Ratio(b) | 66.0 | % | 62.0 | % | 58.0 | % | 30 | % | ||||||||
Average Total Deposits (Billions)(c) | $ | 1.995 | b | $ | 2.015 | b | $ | 2.045 | b | 25 | % | |||||
Net Charge-Offs as % of Average Loans(d) | 0.15 | % | 0.10 | % | 0.05 | % | 15 | % | ||||||||
| (a) | Defined as net income, adjusted to exclude nonrecurring items related to merger/acquisition activities after taxes, divided by average total assets. |
| (b) | Defined as non-interest expense as a percent of net interest income plus non-interest income, excluding gain on sale of securities, net. |
| (c) | Defined as the average of total deposits for 2015 per the General Ledger. |
| (d) | Defined as Net Charge-offs (Recoveries) to Average Loans. |
| 2015 Equity Incentive Performance Goals | Weight | |||||||||||||||
| Threshold | Target | Stretch | ||||||||||||||
Diluted “Core” Earnings Per Share(a) | $ | 1.07 | $ | 1.25 | $ | 1.47 | 40 | % | ||||||||
Tangible Book Value per Share(b) | $ | 11.76 | $ | 12.21 | $ | 12.67 | 40 | % | ||||||||
Texas Ratio(c) | 7.0 | % | 5.0 | % | 2.0 | % | 20 | % | ||||||||
| (a) | For this purpose, “Core” Earnings is defined as net income, adjusted to exclude nonrecurring items related to merger/acquisition activities after taxes. |
| (b) | Defined as book value per share, excluding intangible assets. Tangible book value per common share is calculated by dividing tangible shareholders’ equity (shareholders’ equity less preferred stock, goodwill and core deposit and leasehold right intangibles) by the total number of shares outstanding. |
| (c) | Defined as nonperforming assets plus loans 90 days or more past due and still accruing divided by tangible common equity and reserves. |
2015 Performance Goal Results
On February 2, 2016, the CNCG Committee met to determine whether Cash Incentive and Equity Incentive performance goals were met for 2015. The CNCG Committee reviewed each performance metric to determine what percent of the Target award level for each individual metric was achieved. The CNCG Committee then applied the weight which was assigned to each respective metric, as set out in the above charts and the 2015 MIP, in order to determine the weighted percent of the overall 2015 Target Incentive Opportunities that had been achieved. Performance between threshold – target – stretch, and corresponding payout opportunities, were determined using straight line interpolation (for example, performance exactly midway between threshold and target would result in payout equal to 75% of target).
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The CNCG Committee made the following findings with respect to 2015 performance and the weighted percent of the overall 2015 Target Incentive Opportunities that had been achieved for each metric.
2015 Cash Incentive Performance Goal Results | ||||||||||||
Metric | 2015 Performance | % of Target Goal | Weighted % of Overall Cash Target | |||||||||
Core ROAA | 0.83 | % | 68.89 | % | 20.67 | % | ||||||
Efficiency Ratio | 60.48 | % | 119.00 | % | 35.70 | % | ||||||
Average Total Deposits (billions) | $ | 2.16 | 150.00 | % | 37.50 | % | ||||||
Net Charge-Offs as % of Avg. Loans | 0.12 | % | 82.38 | % | 12.36 | % | ||||||
|
| |||||||||||
Total Weighted % of Target Cash Incentive Goals | 106.23 | % | ||||||||||
|
| |||||||||||
2015 Equity Incentive Performance Goal Results | ||||||||||||
Metric | 2015 Performance | % of Target Goal | Weighted % of Overall Equity Target | |||||||||
Diluted “Core” EPS | $ | 1.21 | 89.71 | % | 35.88 | % | ||||||
Tangible Book Value per Share | $ | 12.67 | 150.00 | % | 60.00 | % | ||||||
Texas Ratio | 1.02 | % | 150.00 | % | 30.00 | % | ||||||
|
| |||||||||||
Total Weighted % of Target Equity Incentive Goals | 125.88 | % | ||||||||||
|
| |||||||||||
A reconciliation of the Company’s Net Income Available to Common Shareholders to Core Net Income Available to Common Shareholders, which is where the Core Return on Average Assets and Diluted Core Earnings Per Share metric ratios from the 2015 MIP derive from, is presented in the tables below for the twelve months ended December 31, 2015 and 2014.
| (Dollars in thousands, except share data) | ||||||||
| Twelve Months Ended | ||||||||
| December 31, 2015 | December 31, 2014 | |||||||
Net Income Available to Common Shareholders | $ | 20,062 | $ | 8,784 | ||||
Add back: Merger expenses, net | 293 | 1,952 | ||||||
Add back: Severance and retention, net | 245 | 693 | ||||||
|
|
|
| |||||
Core Net Income Available to Common Shareholders | $ | 20,600 | $ | 11,429 | ||||
|
|
|
| |||||
Average Assets | $ | 2,495,190 | $ | 1,500,765 | ||||
ROAA | 0.80 | % | 0.59 | % | ||||
Core ROAA* | 0.83 | % | 0.76 | % | ||||
Diluted Average Shares Outstanding | 16,983,000 | 11,668,000 | ||||||
Diluted Earnings Per Share | $ | 1.18 | $ | 0.75 | ||||
Diluted Core Earnings Per Share** | $ | 1.21 | $ | 0.98 | ||||
| * | Core ROAA: Year-to-date core net income available to common shareholders /average assets |
| ** | Diluted Core Earnings Per Share: Year-to-date core net income available to common shareholders/diluted average shares outstanding |
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Cash Incentive Performance Goal Results
The following graphs illustrate the 2015 Cash Incentive performance goal results for each of the four performance goal metrics used to determine the 2015 Cash Incentive awards:
For 2015, performance for “Core” Return on Average Assets was 0.83%, or, after applying linear interpolation, 68.89% of the Target goal for that metric, resulting in a weighted percentage of the overall Cash Target incentive of 20.67%. The Company achieved a full year 2015 efficiency ratio of 60.48%, or 119.00% of the Target goal for that metric, resulting in a weighted percentage of the overall Cash Target incentive of 35.70%. In 2015, the Company had record average total deposits of $2.16 billion, resulting in the achievement of the Stretch award level, or 150% of the Target goal for that metric and a weighted percentage of the overall Cash Target incentive of 37.50%. The Company’s net charge-offs as a percentage of average loans for 2015 was 0.12%, or 82.38% of the Target goal for that metric, resulting in a weighted percentage of the overall Cash Target incentive of 12.36%.
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Equity Incentive Performance Goal Results
The following graphs illustrate the 2015 Equity Incentive performance goal results for each of the four performance goal metrics used to determine the 2015 Equity Incentive awards:
Performance for diluted “core” earnings per share was $1.21 per share, or, after applying linear interpolation, 89.71% of the Target goal for that metric, resulting in a weighted percentage of the overall Equity Target incentive of 35.88%. For 2015, the Company’s tangible book value was $12.67 per share, resulting in the achievement of the Stretch award level, or 150% of the Target goal for that metric and a weighted percentage of the overall Equity Target incentive of 60.00%. The Company’s Texas ratio for 2015 was 1.02%, also resulting in the achievement of the Stretch award level, or 150% of the Target goal for that metric and a weighted average percentage of the overall Equity Target incentive of 30.00%.
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The CNCG Committee approved the following performance based incentive payments under the MIP without adjustment for 2015:
| 2015 Performance Based Incentive Payments | ||||||||||||
Executive | Cash | Equity1 | Total | |||||||||
David I. Rainer | $ | 246,977 | $ | 351,214 | $ | 598,190 | ||||||
K. Brian Horton | $ | 135,545 | $ | 156,611 | $ | 292,156 | ||||||
Karen Schoenbaum | $ | 110,476 | $ | 98,189 | $ | 208,664 | ||||||
Anne Williams | $ | 131,721 | $ | 152,193 | $ | 283,914 | ||||||
Anita Wolman | $ | 110,476 | $ | 98,189 | $ | 208,664 | ||||||
| 1 | Equity is calculated as a dollar amount and shares actually granted are based on the closing price on February 2, 2016 (“grant date”) and consisted of 15,506, 6,914, 4,335, 6,719, and 4,335 shares for Messrs. Rainer and Horton and Mses. Schoenbaum, Williams and Wolman, respectively. Payouts of Equity Incentives were made in the form of a restricted stock award that vests 50% on the second Tuesday in December, 2016 (if the recipient remains continuously employed to that date), and the remaining 50% on the second Tuesday in December, 2017 (if continuously employed to that date). |
2015 One-Time, Special Equity Awards
The CNCG Committee believes that the tenure and stability of our executive leadership team is critical to our momentum for the future. To this end, on March 19, 2015, the CNCG Committee approved one-time, special retention equity grants of restricted stock and restricted stock units to each of the NEOs other than Mr. Horton (who was granted a similar award immediately following the acquisition of 1st Enterprise and his joining the Company). As part of the design elements of these awards to foster the retention aspect, no portion of the award will vest until the second anniversary of the grant (at which time 50% of the award will vest) with 25% vesting on the third anniversary of the grant and the remaining 25% on the fourth anniversary of the grant. Grants were as follows:
NEO | Type of Equity | Grant Date Fair Value ($) | ||||
David I. Rainer | Restricted Stock Units* | $ | 840,000 | |||
Karen Schoenbaum | Restricted Stock | $ | 168,000 | |||
Anne Williams | Restricted Stock | $ | 378,000 | |||
Anita Wolman | Restricted Stock | $ | 252,000 | |||
| * | The Restricted Stock Units contain provisions potentially delaying payment and delivery of the restricted stock based upon the Company’s determination that the delivery will otherwise cause the recipient’s compensation to exceed limits imposed by Internal Revenue Code Section 162(m). The award agreement provides that the payment and delivery of such shares will be deferred to the earliest date where the Company reasonably anticipates that such deduction will not be subject to Code Section 162(m). |
Other Practices, Policies & Guidelines
Clawbacks
The 2015 MIP contains clawback provisions which are effective in the event that the Company is required to prepare an accounting restatement due to error, omission or fraud (as determined by the members of the Board of Directors who are considered “independent” for purposes of the listing standards of the NASDAQ). In such an event each “executive officer” shall reimburse the Company for part or the entire “incentive award” made to such executive officer on the basis of having met or exceeded specific targets for performance periods. The Company may seek to reclaim incentives within a three-year period of the incentive payout. In addition, any award which is subject to recovery under any law, government regulation or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement).
The 2014 Executive Incentive Plan included a provision providing that the CNCG Committee may retroactively adjust or recoup payments to reflect the impact of any event that requires a restatement of the Company’s audited financial statements as well as other events as to which such adjustments are required by applicable statutes, rules or regulatory guidelines or actions. Such adjustment or recoupment may require participants to repay amounts previously received or the cancellation of unvested restricted stock grants or some other repayment to the Company.
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401(K) Plan
CU Bancorp has established a contributory 401(k) defined contribution plan covering substantially all employees. The plan allows eligible employees to contribute a portion of their income to a trust on a tax-favored basis and to invest their deferred income tax free until retirement. Participants are 100% vested in their own deferrals. In 2013, CU Bancorp decided to make a matching contribution of $0.50 for each dollar a participant elected to defer up to a maximum contribution of 4% of Compensation. In both 2014 and 2015, CU Bancorp decided to make a matching contribution of $0.50 for each dollar a participant elects to defer up to a maximum contribution of 3% of Compensation. The decision to make a contribution is made on an annual basis. CU Bancorp may also make discretionary “Profit Sharing Contributions.” Discretionary contributions will vest 20% each year of employment, beginning on the first anniversary of employment.
Participants are able to direct investment of their deferrals and any Rollover Contributions. CU Bancorp has provided a broad range of diversified investment options or mutual funds with different risk and return characteristics for participants, through the John Hancock Life Insurance Company (USA). Participants are not able, at this time, to invest 401(k) savings in CU Bancorp’s common stock. Four employees of CU Bancorp serve as Trustees of the 401(k) Trust. They are: David I. Rainer, Chief Executive Officer; Anne A. Williams, Executive Vice President, Chief Credit Officer and Chief Operating Officer; Karen Schoenbaum, Executive Vice President and Chief Financial Officer; and Anita Y. Wolman, Executive Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary.
Salary Continuation Benefit (Supplemental Executive Retirement Plan)
Retention is an important element in the consistency and continuity of the execution of the Company’s strategy. Unexpected turnover in key executive positions can be disruptive and is a potential threat to the Company’s progress. Each of Messrs. Rainer and Horton, and Mses. Williams, Schoenbaum and Wolman is eligible to participate in a supplemental executive retirement program (“SERP”) designed to reward long-term contribution to the Company and have entered into salary continuation agreement to implement this program. The SERP benefit consists of payments for fifteen years (eight in the case of Ms. Wolman) following retirement and is earned and vested over time as a key element of the Company’s retention strategy. For additional information on salary continuation benefits, see “— Pension Benefits Table” below.
Other Perquisites and Benefits
Certain CU Bancorp NEOs were provided with memberships in various clubs and organizations, primarily for business development purposes. The CNCG Committee believes memberships in these clubs and organizations are in the best interest of the Company in that it allows our executives to foster business relationships within the communities we serve. For additional information on benefits and perquisites, see “— Summary Compensation Table” below.
Impact of Accounting and Tax Treatments of Executive Compensation
Tax Considerations
Section 162(m) of the Internal Revenue Code limits the allowable deduction for compensation paid or accrued with respect to the Chief Executive Officer and each of the three other most highly compensated executive officers (excluding the chief financial officer) of a publicly held corporation to no more than $1 million per year. Compensation may be exempt from this deduction limitation, including certain performance-based compensation paid under a plan administered by a committee of outside directors, which has been approved by shareholders. The CU Bancorp 2007 Equity and Incentive Plan, as amended and restated in 2014, provides CU Bancorp the authorization to issue performance-based compensation awards which are exempt from the limits of 162(m), although no awards not subject to the deduction limits of 162(m) were granted during 2015.
In light of Section 162(m), and the authorization for performance-based compensation which is not subject to the deduction limits of 162(m) contained in the Equity and Incentive Plan, it is Committee’s intent going forward to maximize the tax deductibility of compensation paid to our executive officers when the $1 million threshold becomes an issue. However, the CNCG Committee retains the discretion to award compensation that may not fall within the performance-based compensation exemption where doing so is in the best interests of the Company and its shareholders.
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Section 409A of the Internal Revenue Code, among other things, limits flexibility with respect to the time and form of payment of deferred compensation. If a payment or award is subject to Section 409A, but does not meet the requirements that exempt such amounts from taxation under Section 409A, the recipient is subject to: (i) income tax at the time the payment or award is not subject to a substantial risk of forfeiture; (ii) an additional 20% tax at that time; and (iii) an additional tax equal to the amount of interest (at the underpayment rate under the Internal Revenue Code plus one percentage point) on the underpayment that would have occurred had the award been includable in the recipient’s income when first deferred or, if later, when not subject to a substantial risk of forfeiture. Our plans and arrangements which constitute plans or arrangements subject to Section 409A are intended to comply with Section 409A’s statutory provisions and final regulations.
Accounting Considerations
Accounting considerations play an important role in the design of CU Bancorp’s executive compensation programs. Accounting rules require CU Bancorp to expense the fair value of restricted stock awards and the estimated fair value of stock option grants which reduces the amount of its reported profits. The CNCG Committee considers the amount of this expense in determining the amount of equity compensation awards.
Risk of Compensation Programs
The CNCG Committee periodically reviews our compensation programs to ensure that they are not encouraging unnecessary or excessive risk taking. Over time, adjustments have been made to our incentive arrangements to incorporate elements that help to mitigate risk. For example, both the 2014 Incentive Plan and the 2015 MIP included balanced performance goals (including asset/credit quality), caps on maximum incentive payout and clawback provisions. The 2015 MIP further provided the CNCG Committee the ability to exercise discretion to adjust the payments as needed to reflect the business environment and market conditions that may affect the Company’s performance and incentive plan funding. The CNCG Committee will continue to monitor our compensation programs and make adjustments as it sees appropriate, but the CNCG Committee does not believe that our compensation programs promote significant risk taking or that CU Bancorp’s policies and practices create risks that are reasonably likely to have a material adverse effect on CU Bancorp.
This report of the CNCG Committee shall not be deemed to be incorporated by reference into any previous filing by us under either the Securities Act or the Exchange Act that incorporates future Securities Act or Exchange Act filings in whole or in part by reference.
The CNCG Committee has reviewed and discussed with management the “Compensation Discussion and Analysis” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. Based on our review and discussions, we have recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 and the Proxy Statement for the 2016 Annual Meeting of CU Bancorp Shareholders.
Compensation, Nominating and Corporate Governance Committee of the Board of Directors of CU Bancorp:
Eric Kentor, Chairman
Roberto Barragan
David Holman
Daniel Selleck
Charles Sweetman
April 21, 2016
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Executive Compensation of CU Bancorp
Summary Compensation Table
The following table sets forth, for the fiscal years ended December 31, 2015, 2014, and 2013, compensation information for services in all capacities to the Company for (i) the Chief Executive Officer, (ii) the Chief Financial Officer, and (iii) the other most highly compensated executive officers who were serving as executive officers at the end of 2015 and whose total compensation in 2015 exceeded $100,000 (collectively, the “Named Executive Officers”). At December 31, 2015, there were no other executive officers of the Company.
Name and Principal Position | Year | Salary | Bonus1 | Stock Awards2 | Non-Equity Incentive Plan Compensation3 | Change to Pension Value and Nonqualified Deferred Compensation Earnings4 | All Other Compensation5 | Total | ||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
David Rainer, | | 2015 2014 2013 | | | 461,250 450,000 393,750 | | | — — | | | 1,191,214 271,586 269,760 | | | 246,977 225,000 224,510 | | | 258,785 179,242 166,277 | | | 54,810 52,052 49,307 | | | 2,213,036 1,177,880 1,291,104 | | ||||||||
K. Brian Horton | | 2015 2014 2013 | | | 340,000 28,333 — | |
| — — — |
| | 156,611 390,400 — | |
| 135,545 — — |
|
| 119,888 621 — |
| | 23,863 1,159 — | | | 775,907 420,513 — | | ||||||||
Anne A. Williams, | | 2015 2014 2013 | | | 307,750 301,000 281,500 | | | — — | | | 530,193 118,436 118,020 | | | 131,721 120,000 120,000 | | | 123,073 113,900 105,693 | | | 22,511 22,168 19,968 | | | 1,115,248 675,504 755,181 | | ||||||||
Anita Wolman, | | 2015 2014 2013 | | | 257,750 251,000 231,500 | | | — — | | | 350,189 75,554 75,870 | | | 110,476 100,000 100,000 | | | 174,856 157,918 145,401 | | | 37,415 13,427 11,490 | | | 930,686 597,899 654,261 | | ||||||||
Karen Schoenbaum, | | 2015 2014 2013 | | | 257,750 251,000 231,500 | | | — — | | | 266,189 75,554 75,870 | | | 110,476 100,000 92,000 | | | 56,395 52,312 48,596 | | | 27,206 35,433 29,290 | | | 718,016 514,299 567,256 | | ||||||||
| 1 | The bonus payments reflected in the above table for 2013 were discretionary bonuses paid to the executives in September 2013 related to the success of the integration of the acquisition of Premier Commercial Bancorp and Premier Commercial Bank, N.A. and the positive impact of the acquisition on CU Bancorp’s interim results at that time. . |
| 2 | The amounts in this column represent the grant date fair value of restricted stock awards issued to the CU Bancorp named executive officers in the year of grant as calculated in accordance with ASC Topic 718. Fair value is calculated by multiplying the number of shares subject to the award by the NASDAQ closing price per share on the date the award was granted. Included in this column for 2015 are restricted stock units and awards granted under CU Bancorp’s Equity and Incentive Plan in March 2015. Mr. Rainer received grants of restricted stock units of 40,000 shares with the grant date fair value of $840,000 and Mses. Williams, Wolman and Schoenbaum received grants of restricted common stock awards of 18,000, 12,000 and 8,000 shares, respectively. The grant date fair value of the shares granted to Mses. Williams, Wolman and Schoenbaum is $378,000, $252,000, and $168,000, respectively. These stock awards are designed as special retention grants and vest over a period of four years, the first portion of which vests two years after the grant date. Also included in this column for 2015 are restricted stock awards issued under CU Bancorp’s 2015 Management Incentive Plan which represent performance-based awards as discussed above. In February 2016, each of Mr. Rainer, Mr. Horton, Ms. Williams, Ms. Wolman, and Ms. Schoenbaum was granted restricted common stock awards of 15,506, 6,914, 6,719, 4,335, and 4,335 shares, respectively. The grant date fair value of such shares is $351,214, $156,611. $152,193, $98,189, and $98,189, respectively for the services performed in 2015. |
| 3 | Non-Equity Incentive Plan Compensation reported in this column for 2015 was paid in the first quarter of 2016 and includes cash compensation under CU Bancorp’s 2015 Management Incentive Plan, a performance-based plan, as discussed previously in “The 2015 Management Incentive Plan”. Non-Equity Incentive Plan Compensation reported in this column for 2014 was paid in the first quarter of 2015 and includes cash compensation to Ms. Williams, Ms. Wolman and Ms. Schoenbaum under CU Bancorp’s Executive Incentive Plan, and a combination of both cash and restricted common stock compensation to Mr. Rainer under the Executive Incentive Plan. Mr. Rainer received total payment of $225,000, consisting of a cash payment of $124,920 and 4,800 |
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| shares of restricted common stock having a market value of $100,080 based upon the market value of such shares as of the grant date. Non-Equity Incentive Plan Compensation reported in this column for 2013 was paid in the first quarter of 2014 and includes cash compensation to Ms. Williams, Ms. Wolman and Ms. Schoenbaum under CU Bancorp’s Executive Incentive Plan and compensation to Mr. Rainer under the Executive Incentive Plan in the form of 13,000 shares of restricted common stock having a market value of $224,510 based upon the market value of such shares as of the grant date. |
| 4 | The amounts in this column represent the salary continuation plan accruals, i.e., the total change for each year in the accrued liability balance established with respect to the benefit obligation associated with the post-retirement salary continuation agreement of each CU Bancorp named executive officer. The salary continuation plan was established in October 2012 and is evidenced by individual salary continuation agreements entered into with each CU Bancorp named executive officer. See “- Pension Benefits” and “-Potential Payments Upon Termination or Change in Control” for more information about the salary continuation agreements. There were no above-market or preferential earnings on non-qualified deferred compensation accounts. CU Bancorp maintains an account for each deferred compensation plan participant that includes deferred compensation and any earnings thereon. |
| 5 | See “-All Other Compensation” table that follows for details of these amounts. |
| 6 | Mr. Horton became the President of the Company on December 31, 2014 following the acquisition of 1st Enterprise Bank. He served previously as President of 1st Enterprise Bank. |
All Other Compensation
The amounts disclosed in the “All Other Compensation Column” of the Summary Compensation Table above consist of:
Name | Year | Automobile Allowance | Long-term Disability & Executive Medical Premiums1 | Country Club Dues and Membership Fees2 | 401(k) Employer Contributions3 | Other4 | Total | |||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
David I. Rainer | 2015 | 9,000 | 5,690 | 32,170 | 7,950 | — | 54,810 | |||||||||||||||||||||
| 2014 | 9,000 | 5,497 | 29,755 | 7,800 | — | 52,052 | ||||||||||||||||||||||
| 2013 | 9,000 | 2,286 | 29,271 | 8,750 | — | 49,307 | ||||||||||||||||||||||
K. Brian Horton5 | 2015 | — | 3,253 | 12,660 | 7,950 | — | 23,863 | |||||||||||||||||||||
| 2014 | — | 104 | 1,055 | — | — | 1,159 | ||||||||||||||||||||||
| 2013 | — | — | — | — | — | — | ||||||||||||||||||||||
Anne A. Williams | 2015 | 9,000 | 5,561 | — | 7,950 | — | 22,511 | |||||||||||||||||||||
| 2014 | 9,000 | 5,368 | — | 7,800 | — | 22,168 | ||||||||||||||||||||||
| 2013 | 9,000 | 2,218 | — | 8,750 | — | 19,968 | ||||||||||||||||||||||
Anita Y. Wolman | 2015 | — | 5,330 | — | 7,950 | 24,135 | 37,415 | |||||||||||||||||||||
| 2014 | — | 5,627 | — | 7,800 | — | 13,427 | ||||||||||||||||||||||
| 2013 | — | 2,740 | — | 8,750 | — | 11,490 | ||||||||||||||||||||||
Karen A. Schoenbaum | 2015 | 9,000 | 4,256 | — | 7,950 | 6,000 | 27,206 | |||||||||||||||||||||
| 2014 | 9,000 | 4,152 | — | �� | 7,800 | 14,481 | 35,433 | |||||||||||||||||||||
| 2013 | 9,000 | 1,886 | — | 8,750 | 9,654 | 29,290 | ||||||||||||||||||||||
| 1. | The premiums paid for health care benefits, dental care benefits, vision care benefits, short-term disability benefits, and long-term disability benefits are available to all employees of CU Bancorp and California United Bank and do not discriminate in favor of executives and are therefore not included in the above table. Included in this amount in the table above are: (a) the premiums related to supplemental long-term disability coverage for named executive officers that is not available to all CU Bancorp and California United Bank employees. (b) CU Bancorp and California United Bank pay the premiums for a base amount for the eligible employee’s long-term care benefits, but any additional coverage elected by the employee above the base amount is paid by the employee; (c) All Senior Vice Presidents and above, including the CU Bancorp named executive officers, receive identical life insurance benefits providing life insurance coverage in the amount of three times of their salaries, up to a maximum of $300,000. Annual premium expense in excess of the base amount of $50,000 of insurance coverage is treated as imputed income to the employee; (d) Executive medical examinations are offered only to executive officers of CU Bancorp and California United Bank and the associated cost is included as additional compensation in the table above. |
| 2. | The amounts in this column reflect country club dues and membership fees, a significant portion of which relates to business-related entertainment and business development. |
| 3. | In 2014 and 2015, 401 (k) employer contributions were fifty cents ($.50) for each dollar an employee has elected to defer up to a maximum matching contribution of 3% of compensation, subject to IRS regulatory ceiling. In 2013, employer contributions were fifty cents ($.50) for each dollar an employee has elected to defer up to a maximum matching contribution of 4% of compensation, subject to IRS regulatory ceiling. |
| 4. | The amounts in this column represent the cash value of vacation accruals which were paid out to Ms. Wolman and Ms. Schoenbaum. |
| 5. | Mr. Horton became the President of the Company on December 31, 2014 following the acquisition of 1st Enterprise Bank. He served previously as President of 1st Enterprise Bank. |
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Other Perquisites and Benefits
In addition, the Company provided certain of its executive officers with memberships in various clubs and organizations, primarily for business development purposes. For additional information on benefits and perquisites, see the Summary Compensation Table included in the section above entitled “—Summary Compensation.”
Grants of Plan-Based Awards in 2015
The following table sets forth certain information regarding restricted stock awards granted under the Equity and Incentive Plan to the CU Bancorp named executive officers during 2015. There were no stock option awards granted to the CU Bancorp named executive officers during 2015.
Name | Grant Date | Estimated Future Non- Equity Incentive Payment, Threshold1 | Estimated Future Non- Equity Incentive Payment, Target1 | Estimated Future Non- Equity Incentive Payment, Stretch1 | Estimated Future Equity Incentive Payment, Threshold2 | Estimated Future Equity Incentive Payment, Target2 | Estimated Future Equity Incentive Payment, Stretch2 | All Other Stock Awards: Number of Shares of Stock | Grant Date Fair Value of Stock and Option Awards | |||||||||||||||||||||||||||
| ($) | ($) | ($) | ($) | ($) | ($) | (#) | ($) | |||||||||||||||||||||||||||||
David Rainer | 3/3/15 | — | — | — | — | — | — | 4,800 | 100,080 | |||||||||||||||||||||||||||
| 3/19/15 | — | — | — | — | — | — | 40,000 | 840,000 | ||||||||||||||||||||||||||||
| — | 116,250 | 232,500 | 348,750 | 139,500 | 279,000 | 418,500 | — | — | ||||||||||||||||||||||||||||
K. Brian Horton | — | 68,000 | 136,000 | 204,000 | 66,300 | 132,600 | 198,900 | — | — | |||||||||||||||||||||||||||
Anne Williams | 3/19/15 | — | — | — | — | — | — | 18,000 | 378,000 | |||||||||||||||||||||||||||
| — | 62,000 | 124,000 | 186,000 | 60,450 | 120,900 | 181,350 | — | — | ||||||||||||||||||||||||||||
Anita Wolman | 3/19/15 | — | — | — | — | — | — | 12,000 | 252,000 | |||||||||||||||||||||||||||
| — | 52,000 | 104,000 | 156,000 | 39,000 | 78,000 | 117,000 | — | — | ||||||||||||||||||||||||||||
Karen Schoenbaum | 3/19/15 | — | — | — | — | — | — | 8,000 | 168,000 | |||||||||||||||||||||||||||
| — | 52,000 | 104,000 | 156,000 | 39,000 | 78,000 | 117,000 | — | — | ||||||||||||||||||||||||||||
| 1. | Please refer to the “2015 Performance Goal Selection Process” subsection above for a discussion of the 2015 Management Incentive Plan and the performance measures on which awards granted pursuant to it are based. The Stretch amount represents the full incentive potential. Refer to the Compensation Discussion and Analysis for additional information. The actual amount awarded in 2015 is reported in the Summary Compensation Table in the column “Non-equity Incentive Plan Compensation.” |
| 2. | The “Estimated Future Equity” incentive payouts columns represent the threshold, target and stretch fair market value of the number of shares of voting common stock which the recipient could be entitled for satisfaction of the respective performance measures to which each award is subject. |
Outstanding Equity Awards at 2015 Fiscal Year-End
The following table sets forth certain information regarding the holdings of stock options and restricted stock by the CU Bancorp Named Executive Officers at December 31, 2015. The options were granted pursuant to the California United Bank 2005 Stock Option Plan and the Equity and Incentive Plan.
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | Option Exercise Price | Option Expiration Date | Number of Shares of Stock That Have Not Vested | Market Value of Shares of Stock That Have Not Vested | Equity Incentive Plan Awards: Number of Unearned Shares That Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares That Have Not Vested | |||||||||||||||||||||||||||
| (#) | (#) | (#) | ($) | (#) | ($) | (#) | ($) | |||||||||||||||||||||||||||||
David Rainer | 60,000 | — | — | 17.50 | 2/26/17 | 5,000 | 1 | 126,800 | — | — | ||||||||||||||||||||||||||
| 23,333 | — | — | 16.00 | 9/24/17 | 8,867 | 4 | 224,867 | — | — | |||||||||||||||||||||||||||
| — | — | — | — | — | 4,800 | 5 | 121,728 | — | — | |||||||||||||||||||||||||||
| — | — | — | — | — | 40,000 | 6 | 1,014,400 | — | — | |||||||||||||||||||||||||||
K. Brian Horton | 49,768 | — | — | 7.59 | 6/21/16 | 20,000 | 8 | 507,200 | — | — | ||||||||||||||||||||||||||
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| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | Option Exercise Price | Option Expiration Date | Number of Shares of Stock That Have Not Vested | Market Value of Shares of Stock That Have Not Vested | Equity Incentive Plan Awards: Number of Unearned Shares That Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares That Have Not Vested | |||||||||||||||||||||||||||
| (#) | (#) | (#) | ($) | (#) | ($) | (#) | ($) | |||||||||||||||||||||||||||||
Anne Williams | 8,500 | — | — | 12.20 | 4/27/17 | 3,250 | 1 | 82,420 | — | — | ||||||||||||||||||||||||||
| — | — | — | — | — | 3,867 | 4 | 98,067 | — | — | |||||||||||||||||||||||||||
| — | — | — | — | — | 18,000 | 7 | 456,480 | — | — | |||||||||||||||||||||||||||
Anita Wolman | — | — | — | — | — | 1,250 | 1 | 31,700 | — | — | ||||||||||||||||||||||||||
| — | — | — | — | — | 1,500 | 2 | 38,040 | — | — | |||||||||||||||||||||||||||
| — | — | — | — | — | 2,467 | 4 | 62,563 | — | — | |||||||||||||||||||||||||||
| — | — | — | — | — | 12,000 | 7 | 304,320 | — | — | |||||||||||||||||||||||||||
Karen Schoenbaum | — | — | — | — | — | 1,250 | 1 | 31,700 | — | — | ||||||||||||||||||||||||||
| — | — | — | — | — | 1,500 | 2 | 38,040 | — | — | |||||||||||||||||||||||||||
| — | — | — | — | — | 2,467 | 4 | 62,563 | — | — | |||||||||||||||||||||||||||
| — | — | — | — | — | 8,000 | 7 | 202,880 | — | — | |||||||||||||||||||||||||||
| 1. | Restricted Stock granted on August 14, 2012 vests at a rate of 25% annually, commencing on the first anniversary of grant. |
| 2. | Restricted Stock granted on September 12, 2013 vests at a rate of 33.33% annually, commencing on the first anniversary of grant. |
| 3. | Restricted Stock granted on December 1, 2014 vests at a rate of 50% on the second anniversary of the grant and 25% annually thereafter. |
| 4. | Restricted Stock granted on December 18, 2014 vests at a rate of 33.33% annually, commencing on the first anniversary of grant. |
| 5. | Restricted Stock granted on March 3, 2015 vests fully on the first anniversary of grant. |
| 6. | Restricted Stock Units granted on March 19, 2015 vest at a rate of 50% on the second anniversary of grant and 50% on the fourth anniversary of grant. The payment and delivery of such shares will be deferred to the earliest date where the Company reasonably anticipates that such deduction will not be subject to Internal Revenue Code Section 162(m). |
| 7. | Restricted Stock granted on March 19, 2015 vests at a rate of 50% on the second anniversary of grant and 25% annually thereafter. |
In March of 2015, David I. Rainer, the Chief Executive Officer, received a grant of restricted stock units of 40,000 shares. In March of 2015, Anne A. Williams, the Executive Vice President, Chief Credit Officer and Chief Operating Officer, Karen Schoenbaum, the Executive Vice President and Chief Financial Officer, and Anita Y. Wolman, the Executive Vice President, General Counsel and Corporate Secretary, received grants of restricted stock of 18,000 shares, 8,000 shares, and 12,000 shares, respectively.
Option Exercises and Stock Vested in 2015
The following table sets forth certain information regarding stock options and restricted stock granted under the 2005 Stock Option Plan and the Equity and Incentive Plan to the CU Bancorp named executive officers. The dollar figures in the table below reflect the value on the exercise date for option awards and the value on the vesting date of the restricted stock award.
| Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise | Value Realized on Exercise | Number of Shares Acquired on Vesting | Value Realized on Vesting | ||||||||||||
| # | $ | # | $ | |||||||||||||
David I. Rainer | 20,000 | 125,287 | 33,433 | 732,760 | ||||||||||||
K. Brian Horton1 | 42,419 | 632,523 | — | — | ||||||||||||
Anne A. Williams | 5,000 | 11,944 | 18,933 | 411,553 | ||||||||||||
Anita Y. Wolman | 25,000 | 223,544 | 7,233 | 160,530 | ||||||||||||
Karen A. Schoenbaum | 6,900 | 59,998 | 6,033 | 135,270 | ||||||||||||
| 1. | Mr. Horton received options to purchase Company stock as a result of the acquisition of 1st Enterprise. The stock options were granted initially under the 1st Enterprise Bank 2006 Stock Incentive Plan which was adopted by the Company in connection with the acquisition for the sole purpose of providing replacement stock options to 1st Enterprise officers and directors. The stock options exercised by Mr. Horton were granted in June 2006 and would be expiring in June 2016. |
Supplemental Executive Retirement Plan
Each of Mr. Rainer and Mses. Williams, Schoenbaum and Wolman is eligible to participate in a supplemental executive retirement program (“SERP”) designed to reward long-term contribution to the Company. In February 2015, the Committee approved a similar program for Mr. Horton and an increase in Mr. Rainer’s benefit under the program. The SERP benefit consists of payment for fifteen years (eight in the case of Ms. Wolman) following retirement and is earned and vested over time as a key element of the Company’s retention strategy.
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Pension Benefits
Name | Plan Name | Number of Years Credited Service1 | Present Value of Accumulated Benefit2 | Payments During Last Fiscal Year | ||||||||||
David I. Rainer | Salary Continuation Agreement | n/a | $ | 643,876 | — | |||||||||
K. Brian Horton | Salary Continuation Agreement | n/a | $ | 112,243 | — | |||||||||
Anne A. Williams | Salary Continuation Agreement | n/a | $ | 367,835 | — | |||||||||
Anita Wolman | Salary Continuation Agreement | n/a | $ | 512,973 | — | |||||||||
Karen Schoenbaum | Salary Continuation Agreement | n/a | $ | 168,943 | — | |||||||||
| 1. | Benefits due under the salary continuation agreements are set forth in each agreement and are not determined by a formula based on years of service. |
| 2. | Represents the cumulative amount accrued with respect to the salary continuation agreements for each of the Named Executive Officers as of December 31, 2015. Monthly charges are made to accrue for these post-retirement benefit obligations in a systematic and orderly way using an appropriate discount rate, such that the accrued liability balance at the participant’s retirement date will be equal to the then present value of the benefits promised under the salary continuation agreement. During 2015, we used a 4.75% discount rate. |
Premier Commercial Bank, National Association Salary Continuation Agreement
As a condition of the merger with Premier Commercial Bank, the Company agreed to continue to provide specified benefits following the merger to Kenneth Cosgrove under a Salary Continuation Agreement. Mr. Cosgrove had been the Chief Executive Officer of Premier Commercial Bank, National Association prior to its merger with the Company, and had entered into a Salary Continuation Agreement on April 1, 2004. Under the Salary Continuation Agreement, Mr. Cosgrove was entitled to receive a $75,000 annual benefit (in twelve monthly installments) beginning on the first day of the month following Mr. Cosgrove’s sixty-fifth birthday. The annual benefit will be paid to Mr. Cosgrove for fifteen years. Mr. Cosgrove achieved the age of 65 on June 11, 2012 and began receiving his annual benefit (in monthly installments) on July 1, 2012. Mr. Cosgrove will continue to receive his annual benefit through June 2027. On December 31, 2014 and 2015, Mr. Cosgrove’s Salary Continuation Agreement had a net present value of $803,069 and $749,339, respectively, resulting in a $53,730 net decrease to the value of his Salary Continuation Agreement. The decrease is comprised of $21,270 in accruals, minus Mr. Cosgrove’s $75,000 annual benefit. Changes to the value of Mr. Cosgrove’s Salary Continuation Agreement are not reported on the below Director Compensation Table because Mr. Cosgrove’s annual benefit is not associated with his service to the Company as a Director.
Potential Payments upon Termination or Change-In-Control
Employment Agreements
The Company does not currently have any employment agreements with its named executive officers. As of December 31, 2015, there were no contractual or other payments due or payable upon termination except as set forth under the Change in Control Severance Plan.
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Treatment of Outstanding Stock Options upon Termination or Change-In-Control
The following discussion addresses the effect upon stock options issued under the Employee Plan and the Equity and Incentive Plan in the event of a termination or change in control of the Company:
Termination of Employment or Affiliation
In the event an optionee ceases to be affiliated with the Company for any reason other than death, disability or termination for cause, the stock options granted to such optionee will expire at the earlier of the expiration dates specified for the options, or ninety (90) days following the employee’s termination of employment with the Company. If the Company terminates someone for cause, such option shall immediately terminate unless the Board of Directors provides that the option may be exercisable after the date of termination, but in no case may the option be exercisable more than thirty (30) days after such termination. If someone dies or becomes disabled while holding a stock option, the stock option may be exercised by the legal representative of the optionee, or the optionee himself, as the case may be for a period of one year from the date of death, but no later than the expiration of the option. There are no special benefits related to stock options which apply only to the Named Executive Officers. The provisions described above apply to all employee stock options.
Liquidation or Change-In-Control
Options granted under the Employee Plan and the Equity and Incentive Plan are subject to a provision that takes effect upon a plan of dissolution, liquidation, reorganization, merger, consolidation or sale of substantially all of the assets of the Company to another corporation. Under the agreements in connection with grants under the Employee Plan and the 2007 Plan, prior to the occurrence of any such change in control, all options granted under both plans will become immediately exercisable. There are no special benefits related to stock options which apply only to the Named Executive Officers. The provisions described above apply to all employee stock options.
Treatment of Outstanding Restricted Stock Upon Termination or Change-In-Control
In the event the holder of restricted stock or restricted stock units ceases to be affiliated with the Company for any reason the Participant forfeits to the Company any shares which remain subject to vesting conditions as of the date of service. Upon a change of control, pursuant to the restricted stock agreements, the exercisability and vesting shall accelerate immediately prior to the consummation of the Change in Control. There are no special benefits related to restricted stock which apply only to the Named Executive Officers.
Change in Control Severance Plan
To ensure the continuity of management in the event of a change in control, the Company has adopted a Change in Control Plan, or CIC Plan, which provides severance compensation within 24 months following a change in control of the Company to executive officers. The purpose of the CIC Plan is to assist in recruiting, encourage retention and minimize the uncertainty and distraction caused by the potential for acquisitions and to allow our executive officers to focus on performance by providing transition assistance if there is a change in control. In addition, the program is intended to align executive and shareholder interests by enabling the executive officers to consider corporate transactions that are in the best interests of the shareholders and other constituents of the Company without undue concern over whether the transactions may jeopardize the executive’s own employment. The CIC Plan requires that there be a change in control and a termination of employment (voluntary or involuntary) thereafter for benefits to be available. Additionally, under the Company’s existing equity plans and agreements, as well as the CIC Plan, all outstanding unvested stock options or restricted stock held by participants would vest upon a change in control. Payments under these change in control plans did not influence the CNCG Committee decisions with respect to other aspects of the Named Executive Officers’ compensation since the CNGC Committee believes that payments following termination of service may never occur, while payment for services rendered provide an immediate benefit which enhances shareholder value.
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Under the CIC Plan, Change in Control is defined as: (i) Any “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of CU Bancorp, or any company owned, directly or indirectly, by the shareholders of CU Bancorp in substantially the same proportions as their ownership of stock of CU Bancorp) becomes, after the Effective Date, the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of CU Bancorp (not including in the securities beneficially owned by such person any securities acquired directly from CU Bancorp or its affiliates) representing 50% or more of the combined voting power of CU Bancorp’s then outstanding securities, other than (A) CU Bancorp or any successor to CU Bancorp by means of a transaction that is not a Change in Control, or (B) a group of two or more persons not acting in concert for the purpose of acquiring, holding or disposing of such stock. The acquisition of additional stock by any person who immediately prior to such acquisition already is the beneficial owner of more than fifty percent (50%) of the capital stock of CU Bancorp entitled to vote in the election of directors is not a Change in Control; (ii) During any period of 12 months, individuals who at the beginning of such period constitute the Board of Directors, and any new director whose election by the Board of Directors or nomination for election by CU Bancorp’s shareholders was approved by a vote of a majority of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; (iii) The merger or consolidation of CU Bancorp with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of CU Bancorp outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of CU Bancorp, more than 50% of the combined voting power of the voting securities of CU Bancorp or such surviving entity outstanding immediately after such merger or consolidation, (B) a merger or consolidation effected to implement a recapitalization of CU Bancorp (or similar transaction) in which no person acquires more than 50% of the combined voting power of CUB’s then outstanding securities or (C) a merger or consolidation of CU Bancorp with one or more other persons that are related to CU Bancorp immediately prior to the merger or consolidation. For purposes of this provision, persons are “related” if one of them owns, directly or indirectly, at least fifty percent (50%) of the voting capital stock of the other or a third person owns, directly or indirectly, at least fifty percent (50%) of the voting capital stock of each of them’ or (iv) The sale or disposition by CU Bancorp of all or substantially all of its assets to one or more persons that are not related to CU Bancorp immediately prior to the sale or transfer.
Under the CIC Plan, “Compensation” is defined as the base salary in effect on the date of any employee’s termination of employment plus the average of the annual bonus paid to such person in each of the previous two completed fiscal years. In addition the employee is entitled to 24 months of reimbursement for any COBRA premiums paid for 24 months following termination. CEO Rainer is entitled to 3 times Compensation and the other Named Executive Officers are entitled to 2 times Compensation.
Severance Benefits under the CIC Plan which constitute “Parachute Payments” within the Internal Revenue Code (“IRC”) Section 409A will be reduced in order to result in no portion of such payments being subject to the excise tax imposed by IRC Section 4999. In addition, pursuant to IRC Section 409A in certain circumstances payments will be delayed for a period of six months following a participant’s termination of employment. In such event, the Severance Benefits will be contributed to a trust for the benefit of the participant and paid at the expiration of the six month period.
Supplemental Executive Retirement Plan and Employment Termination
In the event a participating executive dies while employed by the Company and prior to receiving payments under the plan, the executive’s beneficiaries will be entitled to the greater of: i) the Accrual Balance in the plan at the date of death or ii) the net death benefit the Company receives on life insurance policies owned on the executive which are specifically listed in the agreement relative to the plan. “Net Death Benefit” is the total death proceeds of the life insurance policy, less the cash surrender value of the policies on the date of the
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executive’s death. If a participating executive’s termination of employment occurs prior to normal retirement age, other than by reason of death or a Change of Control, the executive is entitled to 100% of the Accrual Balance shown in the section above entitled “Supplemental Executive Retirement Plan”. In the event a participating executive’s employment is terminated within 24 months of a Change of Control the executive will be entitled to the normal retirement benefit under the plan upon attaining the specified retirement age.
Termination Payments and Benefits for CU Bancorp Named Executive Officers
The following calculations are based on a hypothetical triggering event occurring on December 31, 2015 at the actual closing market price of the Company’s Common stock as of such date. The amounts set forth under Change in Control include payments under the CIC Plan, as well as accelerated vesting of restricted stock and stock options to the extent set forth in such plans and agreements. Also included are benefits under the Supplemental Executive Retirement Plan. See footnotes for additional information.
David I. Rainer | Employment Agreement1 ($) | Change in Control Agreements ($) | Supplemental Executive Retirement Plan ($) | Total ($) | ||||||||||||
Termination by CU Bancorp without “Cause” | 0 | 0 | 596,010 | 596,010 | ||||||||||||
Termination by CU Bancorp for “Cause” | 0 | 0 | 0 | 0 | ||||||||||||
Termination by Executive on “Other Event” | 0 | 0 | 596,010 | 596,010 | ||||||||||||
Change in Control2,3 | 0 | 3,222,195 | 1,713,604 | 4,935,800 | ||||||||||||
Death | 0 | 0 | 0 | 0 | ||||||||||||
| 1. | None of the CU Bancorp named executive officers currently has an employment agreement with CU Bancorp. |
| 2. | The total amount payable following a Change in Control under all Agreements is limited to three times the average compensation paid to the Named Executive Officer during the five years (or shorter period) prior to the Change in Control. As a result of such limit, the total Change in Control benefits payable to Mr. Rainer were reduced by $150,812. |
K. Brian Horton | Employment Agreement1 ($) | Change in Control Agreements ($) | Supplemental Executive Retirement Plan3 ($) | Total ($) | ||||||||||||
Termination by CU Bancorp without “Cause” | 0 | 0 | 102,044 | 102,044 | ||||||||||||
Termination by CU Bancorp for “Cause” | 0 | 0 | 0 | 0 | ||||||||||||
Termination by Executive on “Other Event” | 0 | 0 | 102,044 | 102,044 | ||||||||||||
Change in Control2 | 0 | 0 | 1,264,101 | 1,264,101 | ||||||||||||
Death | 0 | 0 | 0 | 0 | ||||||||||||
| 1. | None of the CU Bancorp named executive officers currently has an employment agreement with CU Bancorp. |
| 2. | The total amount payable following a Change in Control under all Agreements is limited to three times the average compensation paid to the Named Executive Officer during the five years (or shorter period) prior to the Change in Control. As a result of such limit, the total Change in Control benefits payable to Mr. Horton were reduced by $1,228,825. |
| 3. | As a result of the Change in Control payment limit, the benefits payable under the Salary Continuation Agreement were reduced by $36,267. |
Anne A. Williams | Employment Agreement1 ($) | Change in Control Agreements ($) | Supplemental Executive Retirement Plan ($) | Total ($) | ||||||||||||
Termination by CU Bancorp without “Cause” | 0 | 0 | 384,085 | 384,085 | ||||||||||||
Termination by CU Bancorp for “Cause” | 0 | 0 | 0 | 0 | ||||||||||||
Termination by Executive on “Other Event” | 0 | 0 | 384,085 | 384,085 | ||||||||||||
Change in Control2,3 | 0 | 1,514,050 | 757,088 | 2,271,138 | ||||||||||||
Death | 0 | 0 | 0 | 0 | ||||||||||||
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| 1. | None of the CU Bancorp named executive officers currently has an employment agreement with CU Bancorp. |
| 2. | The total amount payable following a Change in Control under all Agreements is limited to three times the average compensation paid to the Named Executive Officer during the five years (or shorter period) prior to the Change in Control. |
Karen A. Schoenbaum | Employment Agreement1 ($) | Change in Control Agreements ($) | Supplemental Executive Retirement Plan ($) | Total ($) | ||||||||||||
Termination by CU Bancorp without “Cause” | 0 | 0 | 182,710 | 182,710 | ||||||||||||
Termination by CU Bancorp for “Cause” | 0 | 0 | 0 | 0 | ||||||||||||
Termination by Executive on “Other Event” | 0 | 0 | 182,710 | 182,710 | ||||||||||||
Change in Control2,3 | 0 | 371,742 | 606,646 | 978,389 | ||||||||||||
Death | 0 | 0 | 0 | 0 | ||||||||||||
| 1. | None of the CU Bancorp named executive officers currently has an employment agreement with CU Bancorp. |
| 2. | The total amount payable following a Change in Control under all Agreements is limited to three times the average compensation paid to the Named Executive Officer during the five years (or shorter period) prior to the Change in Control. As a result of such limit, the total Change in Control benefits payable to Ms. Schoenbaum were reduced by $659,488. |
Anita Y. Wolman | Employment Agreement1 ($) | Change in Control Agreements ($) | Supplemental Executive Retirement Plan ($) | Total ($) | ||||||||||||
Termination by CU Bancorp without “Cause” | 0 | 0 | 500,633 | 500,633 | ||||||||||||
Termination by CU Bancorp for “Cause” | 0 | 0 | 0 | 0 | ||||||||||||
Termination by Executive on “Other Event” | 0 | 0 | 500,633 | 500,633 | ||||||||||||
Change in Control2,3 | 0 | 1,127,719 | 118,044 | 1,245,763 | ||||||||||||
Death | 0 | 0 | 0 | 0 | ||||||||||||
| 1. | None of the CU Bancorp named executive officers currently has an employment agreement with CU Bancorp. |
| 2. | The total amount payable following a Change in Control under all Agreements is limited to three times the average compensation paid to the Named Executive Officer during the five years (or shorter period) prior to the Change in Control. |
Director Compensation of CU Bancorp
During 2015, all non-employee Directors received an annual retainer of $30,000 (paid quarterly) with the Bank’s Vice Chairman receiving an additional $5,000 annually. Chairs of the Audit & Risk and CNCG Committees received an additional retainer of $12,000 annually and the Chair of the Loan Committee received an additional retainer of $10,000 annually. Members of the Audit & Risk and CNCG Committees received an additional retainer of $3,000 annually, and members of the Loan Committee received an additional retainer of $2,400 annually. The liaison to the management CRA Committee and the ALCO Committee received an additional retainer of $7,500 annually. All retainers are paid quarterly. The newly created position of Lead Director receives an additional cash retainer of $12,000.
Non-Employee directors also receive an annual equity grant equal to $30,000 based on closing price on the NASDAQ of the Company’s common stock on date of grant. The director equity is granted at the first Board meeting following the Company’s Annual Meeting of Shareholders. Each equity grant vests on the earlier of i) one year from the date of grant; or ii) the next Annual Meeting of Shareholders.
Directors are expected to attend at least 75% of all applicable meetings. Compensation paid to David I. Rainer, K. Brian Horton and Anne A. Williams is not included in this table because they were all employees during 2015 and therefore received no additional compensation for services as directors.
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Director Compensation Table
Name | Fees Earned or Paid in Cash ($) | Stock Awards1 ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
Roberto E. Barragan | $ | 42,000 | $ | 29,975 | — | — | — | — | $ | 71,975 | ||||||||||||||||||
Charles Beauregard3 | $ | 44,500 | $ | 29,975 | — | — | — | — | $ | 74,475 | ||||||||||||||||||
Kenneth Cosgrove2 | $ | 39,050 | $ | 29,975 | — | — | — | — | $ | 69,025 | ||||||||||||||||||
David C. Holman3 | $ | 43,500 | $ | 29,975 | — | — | — | — | $ | 73,475 | ||||||||||||||||||
Eric Kentor | $ | 38,750 | $ | 29,975 | — | — | — | — | $ | 68,725 | ||||||||||||||||||
Jeffrey Leitzinger3 | $ | 42,000 | $ | 29,975 | — | — | — | — | $ | 71,975 | ||||||||||||||||||
Roy A. Salter | $ | 36,300 | $ | 29,975 | — | — | — | — | $ | 66,275 | ||||||||||||||||||
Daniel F. Selleck | $ | 36,300 | $ | 29,975 | — | — | — | — | $ | 66,275 | ||||||||||||||||||
Lester M. Sussman4 | $ | 38,500 | — | — | — | — | — | $ | 38,500 | |||||||||||||||||||
Charles H. Sweetman | $ | 44,000 | $ | 29,975 | — | — | — | — | $ | 73,975 | ||||||||||||||||||
Kaveh Varjavand5 | $ | 13,000 | $ | 29,975 | — | — | — | — | $ | 42,975 | ||||||||||||||||||
| 1. | The amounts in this column represent the grant date fair value of restricted stock awards issued to the directors by CU Bancorp with respect to 2015, as calculated in accordance with ACS Topic 718. The amounts reported in the above table do not include any estimates of forfeitures. Each Director was granted 1,170 shares of restricted stock on October 29, 2015. These shares of restricted stock vest on September 15, 2016 |
| 2. | These individuals became Directors of CU Bancorp effective August 1, 2012 upon finalization of the merger with Premier Commercial Bancorp. |
| 3. | These individuals became Directors of CU Bancorp effective December 1, 2014 upon finalization of the merger with 1st Enterprise Bank. |
| 4. | Mr. Sussman resigned from the board of directors effective October 29, 2015. |
| 5. | Mr. Varjavand became a Director of CU Bancorp effective September 1, 2015. |
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Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information as of December 31, 2015 with respect to the shares of our common stock that may be issued under existing equity compensation plans. This table does not reflect the number of restricted shares of stock that have been issued under the Company’s equity compensation plans. The number of shares of common stock remaining available for future issuance under the equity compensation plans has been reduced by both stock option grants and restricted stock issued under the plans.
Plan | Number of securities to be issued upon exercise of outstanding options (A) | Weighted-average exercise price of outstanding options | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in (A)) | |||||||||
Equity Compensation Plans Approved by Security Holders: | ||||||||||||
California United Bank 2005 Stock Option Plan (terminated) | 108,180 | $ | 18.63 | — | ||||||||
CU Bancorp 2007 Equity Incentive and Incentive Plan | 449,291 | $ | 8.62 | 576,505 | ||||||||
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Total | 557,471 | $ | 10.57 | 576,505 | ||||||||
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As part of the merger with 1st Enterprise, CU Bancorp adopted the 1st Enterprise Bank 2006 Stock Incentive Plan, as amended (“2006 Stock Incentive Plan”), as its own equity plan and all stock options granted by 1st Enterprise thereunder were fully vested and exercisable and were converted to CU Bancorp stock options on substantially the same terms but adjusted to reflect the exchange ratio set forth in the Merger Agreement. At December 31, 2015, there were 404,958 options outstanding under the 2006 Stock Incentive Plan with a weighted-average exercise price of $8.01 per share. No new equity awards will be granted under the 2006 Stock Incentive Plan.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
Shareholdings of Certain Beneficial Owners and Management
The following table sets forth certain information as of July 18, 2016, concerning the beneficial ownership of the Company’s outstanding common stock: (i) by each of the directors of the Company; (ii) by each of the Company’s named executive officers and (iii) by all directors and executive officers1 of the Company as a group. Management is not aware of any change in control of the Company that has occurred since January 1, 2015 or of any arrangement that may, at a subsequent date, result in a change in control of the Company. Other than Wellington Management Co. LLC, Basswood Capital Management, LLC, and Banc Funds Co. LLC, management of the Company does not know of any person who owns, beneficially or of record, more than 5% of the Company’s outstanding common stock.
Name and Position Held | Number of Shares of Common Stock Beneficially Owned¹ | Number of Shares Subject to Vested Stock Options² | Percent of Class Beneficially Owned | |||||||||
Roberto E. Barragan | 15,370 | 3 | — | 0.09 | % | |||||||
Charles R. Beauregard | 112,314 | 4 | — | 0.64 | % | |||||||
Kenneth J. Cosgrove | 319,543 | 5 | — | 1.81 | % | |||||||
David C. Holman | 170,897 | 6 | — | 0.97 | % | |||||||
Eric S. Kentor | 8,670 | 7 | — | 0.05 | % | |||||||
Jeffrey J. Leitzinger, Ph.D. | 83,654 | 8 | — | 0.47 | % | |||||||
Roy Salter | 66,825 | 9 | — | 0.38 | % | |||||||
Daniel Selleck | 42,920 | 10 | — | 0.24 | % | |||||||
Charles S. Sweetman | 63,170 | 11 | — | 0.36 | % | |||||||
Kaveh Varjavand | 1,170 | 12 | — | 0.01 | % | |||||||
David I. Rainer | 249,848 | 13 | 83,333 | 1.88 | % | |||||||
K. Brian Horton | 138,380 | 14 | — | 0.78 | % | |||||||
Anne A. Williams | 123,323 | 15 | 8,500 | 0.75 | % | |||||||
Anita Y. Wolman | 73,462 | 16 | — | 0.42 | % | |||||||
Karen A. Schoenbaum | 48,535 | 17 | — | 0.27 | % | |||||||
Robert E. Sjogren | — | — | 0.00 | % | ||||||||
All Directors, Nominees and Executive Officers as a Group (16 in number) | 1,518,081 | 91,833 | 9.06 | % | ||||||||
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| 1. | Includes share beneficially owned, directly and indirectly, together with associates. Also includes share held as trustee and held by or as custodian for minor children. Unless otherwise indicated, all shares are held as community property under California law or with sole voting and investment power. Does not include any shares that may be acquired upon exercise of stock options, which are identified separately in this table. |
| 2. | For All Directors and Executive Officers as a Group, all 91,833 vested stock options held by such persons are treated as issued and outstanding when computing the percent of class. |
| 3. | Includes 13,700 shares owned as Trustee of the Roberto and Silvia Barragan Living Trust and 1,670 shares of Restricted Stock with 500 shares vesting on December 18, 2016 and 1,170 shares vesting on September 15, 2016. Recipients of restricted stock have the ability to vote such shares, notwithstanding the restrictions applicable thereto. |
| 4. | Includes 110,644 shares directly owned by Mr. Beauregard and 1,670 shares of Restricted Stock with 500 shares vesting on December 18, 2016 and 1,170 shares vesting on September 15, 2016. Recipients of restricted stock have the ability to vote such shares, notwithstanding the restrictions applicable thereto. Mr. Beauregard has pledged 110,644 shares of his Company stock as security for margin accounts as to which there is currently no debt outstanding. |
| 5. | Includes 177,282 shares held jointly with his spouse as Trustees of the Kenneth Cosgrove & Carolyn Cosgrove Family Trust, includes 22,956 shares in Mr. Cosgrove’s 401K account, 15,098 shares in Mr. Cosgrove’s self-directed IRA account, 19,885 shares in Carolyn Cosgrove’s self-directed IRA account, 82,652 shares held directly by Mr. Cosgrove and 1,670 shares of Restricted Stock with 500 shares vesting on December 18, 2016 and 1,170 shares vesting on September 15, 2016. Recipients of restricted stock have the ability to vote such shares, notwithstanding the restrictions applicable thereto. |
| 6. | Includes 169,227 shares directly owned by Mr. Holman and 1,670 shares of Restricted Stock with 500 shares vesting on December 18, 2016 and 1,170 shares vesting on September 15, 2016. Recipients of restricted stock have the ability to vote such shares, notwithstanding the restrictions applicable thereto. |
| 7. | Includes 7,000 shares held jointly with his spouse as Trustees of the Kentor Trust U/A Dtd 9/18/2002 and 1,670 shares of Restricted Stock with 500 shares vesting on December 18, 2016 and 1,170 shares vesting on September 15, 2016. Recipients of restricted stock have the ability to vote such shares, notwithstanding the restrictions applicable thereto. |
| 8. | Includes 81,984 shares directly owned by Mr. Leitzinger and 1,670 shares of Restricted Stock with 500 shares vesting on December 18, 2016 and 1,170 shares vesting on September 15, 2016. Recipients of restricted stock have the ability to vote such shares, notwithstanding the restrictions applicable thereto. |
| 9. | Includes 63,590 shares held jointly with his spouse as Trustee of the Roy and Traci Salter Living Trust, 1,565 shares in Mr. Salter’s self-directed IRA, and 1,670 shares of Restricted Stock with 500 shares vesting on December 18, 2016 and 1,170 shares vesting on September 15, 2016. Recipients of restricted stock have the ability to vote such shares, notwithstanding the restrictions applicable thereto. |
| 10. | Includes 600 shares directly owned by Mr. Selleck, 40,650 shares owned as Trustee of the Daniel F. Selleck Family Trust and 1,670 shares of Restricted Stock with 500 shares vesting on December 18, 2016 and 1,170 shares vesting on September 15, 2016. Recipients of restricted stock have the ability to vote such shares, notwithstanding the restrictions applicable thereto. |
| 11. | Includes 21,000 shares owned as trustee of the Charles H. Sweetman 1996 Trust, 24,100 shares owned as trustee of the Charles and Judy Sweetman Family Trust U/A dtd 4/25/2011, 2,000 shares owned by Sweetman Properties, LLC, 1,000 shares owned by his spouse as Trustee of the Judith Sweetman Trust, 3,150 shares as custodian under CUTMA for Kaylee J. Sweetman, 2,650 shares as custodian under CUTMA for Patrick C. Roche, 2,650 shares as custodian under CUTMA for Sophia Rose Sweetman trust, 750 shares as custodian under CUTMA for Emily K. Roche, 850 shares held by his spouse as custodian under CUTMA for Zachary A. Kosma, 850 shares held by his spouse as custodian under CUTMA for Marcus Oliver Kosma, 1,250 shares held by his spouse as custodian under CUTMA for Drake W. Radmacher, 1,250 shares held by his spouse as custodian under CUTMA for Ivy K. Radmacher, and 1,670 shares of Restricted Stock with 500 shares vesting on December 18, 2016 and 1,170 shares vesting on September 15, 2016. Recipients of restricted stock have the ability to vote such shares, notwithstanding the restrictions applicable thereto. |
| 12. | Includes 1,170 shares of Restricted Stock with 1,170 shares vesting on September 15, 2016. |
| 13. | Includes 183,076 shares owned as Trustee of the David and Anne Rainer Trust, 31,634 shares owned by Mr. Rainer’s IRA, 5,765 shares directly owned by Mr. Rainer, and 29,373 shares of Restricted Stock with 5,000 shares vesting on August 14, 2016, 7,753 shares of Restricted Stock vesting on December 13, 2016, 4,433 shares of Restricted Stock vesting on December 18, 2016, 7,753 shares of Restricted Stock Vesting on December 12, 2017, and 4,434 shares or Restricted Stock vesting on December 18, 2017. Recipients of restricted stock have the ability to vote such shares, notwithstanding the restrictions applicable thereto. Mr. Rainer was granted 40,000 shares of Restricted Stock Unit (“RSU”) on March 19, 2015. Such grant is not included in this table. The shares of common stock underlying the 40,000 shares of RSU will not be issued until the RSUs vest (subject to certain conditions as stipulated in the RSU agreement with Mr. Rainer) with 20,000 shares vest on March 19, 2017, 10,000 shares on March 19, 2018 and 10,000 shares on March 19, 2019. |
| 14. | Includes 70,444 shares owned as Trustee of the K. Brian Horton Trust, 3,362 shares held by Chester E. Horton Jr. as Custodian for UTMA/CA for Christopher R. Horton, 44,574 shares owned directly by Mr. Horton and 26,914 shares of Restricted Stock with 10,000 shares of Restricted Stock vesting on December 1, 2016, 3,457 shares of Restricted Stock vesting on December 13, 2016, 5,000 shares of Restricted Stock vesting on December 1, 2017, 3,457 shares of Restricted Stock vesting on December 12, 2017, and 5,000 shares of Restricted Stock vesting on December 1, 2018. |
| 15. | Includes 91,487 shares directly owned by Ms. Williams and 31,836 shares of Restricted Stock with 3,250 shares of Restricted Stock vesting on August 14, 2016, 3,360 Restricted Stock vesting on December 13, 2016, 1,933 shares of Restricted Stock vesting on December 18, 2016, 9,000 shares of Restricted Stock vesting on March 19, 2017, 3,359 Restricted Stock vesting on December 12, 2017, 1,934 shares of Restricted Stock vesting on December 18, 2017, 4,500 shares of Restricted Stock vesting on March 19, 2018 and 4,500 shares of Restricted Stock vesting on March 19, 2019. Recipients of restricted stock have the ability to vote such shares, notwithstanding the restrictions applicable thereto. |
| 16. | Includes 5,200 shares owned by spouse’s IRA, 46,710 shares directly by Ms. Wolman and 21,552 shares of Restricted Stock with 1,250 shares of Restricted Stock vesting on August 14, 2016, 1,500 shares of Restricted Stock vesting on September 12, 2016, 2,168 shares of Restricted Stock vesting on December 13, 2016, 1,233 shares of Restricted Stock vesting on December 18, 2016, 6,000 shares of Restricted Stock vesting on March 19, 2017, 2,167 shares of Restricted Stock vesting on December 12, 2017, 1,234 shares of Restricted Stock vesting on December 18, 2017, 3,000 shares of Restricted Stock vesting on March 19, 2018 and 3,000 shares of Restricted Stock vesting on March 19, 2019. Recipients of restricted stock have the ability to vote such shares, notwithstanding the restrictions applicable thereto. |
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| 17. | Includes 30,983 shares owned directly by Ms. Schoenbaum and 17,552 shares of Restricted Stock with 1,250 shares of Restricted Stock vesting on August 14, 2016, 1,500 shares of Restricted Stock vesting on September 12, 2016, 2,168 shares of Restricted Stock vesting on December 13, 2016, 1,233 shares of Restricted Stock vesting on December 18, 2016, 4,000 shares of Restricted Stock vesting on March 19, 2017, 2,167 shares of Restricted Stock vesting on December 12, 2017, 1,234 shares of Restricted Stock vesting on December 18, 2017, 2,000 shares of Restricted Stock vesting on March 19, 2018 and 2,000 shares of Restricted Stock vesting on March 19, 2019. Recipients of restricted stock have the ability to vote such shares, notwithstanding the restrictions applicable thereto. |
Principal Shareholders and Change in Control
The following table sets forth information regarding the beneficial ownership of the Company’s common stock as of March 31, 2016 by those persons known by the Company to own more than 5% of the outstanding Common Stock of the Company. The shareholder’s ownership percentage is based on 17,389,383 shares of common stock outstanding as of March 31, 2016.
Name of Beneficial Owner | Number of Shares (1) | Percent of Class Owned | ||||||
Wellington Management Co. LLP | 1,636,976 | 9.41 | % | |||||
Basswood Capital Management LLC | 1,261,995 | 7.26 | % | |||||
Banc Funds Co. LLC | 1,125,614 | 6.47 | % | |||||
| (1) | Based on our records and information reported on a Schedule 13F as filed with the Securities and Exchange Commission as of March 31, 2016. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
Certain Relationships and Related Transactions
During 2015 there were no existing or proposed, material transactions between CU Bancorp and of its executive officers, directors, or principal shareholders (beneficial owners of 5% or more of our Common Stock), or the immediate family or associates of any of the foregoing persons, except as indicated below.
Some of CU Bancorp’s directors and executive officers, as well as the companies with which such directors and executive officers are associated, are customers of, and have had banking transactions with California United Bank in the ordinary course of its businesses, and California United Bank expects to have such ordinary banking transactions with such persons in the future. All such transactions are on substantially the same terms, including interest and collateral as those prevailing for comparable transactions with others, and comply with the provisions of applicable federal and state law. At the present time, California United Bank has only one lending relationship with our directors and officers or entities controlled by any of our directors or officers. We may also engage in banking (non-lending) transactions with corporations of which our directors or officers may own a controlling interest, or also serve as directors or officers. These transactions will also take place on substantially the same terms, including interest and collateral, as those prevailing for comparable transactions with others, and comply with the provisions of applicable federal and state law.
During 2015, and through the date of this Proxy Statement, each of CU Bancorp’s directors, except Mr. Rainer, CUB’s Chairman and Chief Executive Officer, Mr. Horton, CUB’s President since December 1, 2014, and Ms. Williams, CUB’s Executive Vice President, Chief Operating Officer and Chief Credit Officer (who as of December 1, 2014 served only on the California United Bank Board of Directors) was “independent,” as determined by the applicable listing requirements of the NASDAQ Stock Market. Mr. Cosgrove, the former
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Chairman and Chief Executive Officer of Premier Commercial Bancorp (which was merged into CU Bancorp in July of 2012) was deemed independent as of approximately May 1, 2016. Previously, under NASDAQ rules he was not considered independent due to a consulting arrangement entered into with the Company following the merger of Premier Commercial Bancorp into CU Bancorp in 2012 which expired in July 2014. The NASDAQ Stock Market’s listing requirements provide that: (i) the audit committee be composed of independent directors; (ii) the chief executive officer’s compensation be determined by a majority of the independent directors or a compensation committee comprised solely of independent directors; and (iii) nominations of directors be selected by a majority of independent directors or by a nominating committee comprised solely of independent directors. None of Messrs. Rainer, Horton or Cosgrove or Ms. Williams served on the Company’s Audit and Risk Committee or its Compensation, Nominating and Corporate Governance Committee.
PROPOSAL 2: RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Relationship with Independent Accountants
The firm of RSM US LLP (“RSM”) served as independent registered public accountants for the Bank and the Company from inception through December 31, 2015.
The Audit and Risk Committee has considered the provision of non-audit services provided by RSM to be compatible with maintaining the independence of RSM.
The following is a description of fees billed to the Company by RSM during the fiscal years ended December 31, 2015 and 2014.
Audit Fees
The aggregate fees billed for professional services rendered for the audit of the Company’s annual financial statements for the fiscal years ended December 31, 2015, and 2014, including reviews of the financial statements included in CU Bancorp’s Quarterly Reports on Form 10-Q and Annual Report on Form 10-K, were $369,150 and $377,000, respectively.
Audit-Related Fees
The aggregate fees billed for services related to professional assurance and related services other than those noted above, includes services rendered in connection with acquisitions or other accounting matters for the fiscal years ended December 31, 2015 and 2014 were $13,000 and $39,150, respectively. The audit-related fees in 2015 related to the Registration Statement on Form S-3 filed with the Securities and Exchange Commission in connection therewith.
All Other Fees
No other fees were billed by RSM in 2015 or 2014.
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The approval of a majority of the shares represented at the Annual Meeting is required to ratify the selection of RSM. The proxy holders intend to vote all proxies they hold in favor of the proposal. If no instruction is given, the proxy holders intend to vote FOR approval of the proposal.
THE AUDIT AND RISK COMMITTEE OF THE BOARD OF DIRECTORS AND THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF RSM US LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2016
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Proposals of shareholders intended to be presented at the 2017 Annual Meeting of Shareholders, must be received by the Company at its principal executive offices by April 1, 2017, for inclusion in the Proxy Statement and form of proxy relating to that meeting and must comply with the applicable requirements of federal securities laws, including Rule 14a-8 under the Exchange Act. As the rules of the SEC make clear, simply submitting a proposal does not guarantee its inclusion.
Proxies solicited by the Board of Directors for the 2017 Annual Meeting will confer discretionary authority to vote on any matter to come before the Annual Meeting with respect to which the Company does not receive notice prior to April 1, 2017.
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Management does not presently know of any matters to be presented at the Meeting other than those set forth above. If other matters come before the Meeting, it is the intention of the persons named in the accompanying Proxy to vote the Proxy in accordance with the recommendations of the Board of Directors on such matters.
| Dated: August 11, 2016 | CU BANCORP | |||
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| Anita Y. Wolman, Corporate Secretary | ||||
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CU BANCORP
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON SEPTEMBER 15, 2016
The undersigned hereby constitutes and appoints David Holman and Eric Kentor and each of them the proxy of the undersigned, with full powers of substitution, to vote all the common stock of CU Bancorp, that the undersigned may be entitled to vote at the Annual Meeting of Shareholders of CU Bancorp to be held on September 15, 2016, or any adjournment thereof.
THE PROXY WILL BE VOTED AS DIRECTED. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS. IF NO CHOICE IS SPECIFIED THE PROXY WILL BE VOTED FOR ALL NOMINEES AND PROPOSALS, AND ACCORDING TO THE DISCRETION OF THE PROXY HOLDERS ON ANY OTHER MATTERS THAT MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
*IF YOU WISH TO VOTE ELECTRONICALLY VIA THE INTERNET OR BY TELEPHONE, SEE THE REVERSE OF THIS PROXY CARD FOR INSTRUCTIONS.
(Continued and to be signed and dated on the reverse side)
PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED.
Important notice regarding the availability of proxy materials for the CU Bancorp Annual Meeting of Shareholders to be held on September 15, 2016: The Proxy Statement to Shareholders is available at http://www.viewproxy.com/cubancorp2016
Table of Contents
1. Election of Directors. To elect the following twelve (12) nominees to the CU Bancorp board of directors to serve until the 2017 annual meeting of shareholders and until their successors are elected and have qualified:
01 Roberto Barragan 05 K. Brian Horton 09 Roy Salter
02 Charles Beauregard 06 Eric Kentor 10 Daniel Selleck
03 Kenneth Cosgrove 07 Jeffrey Leitzinger 11 Charles Sweetman
04 David Holman 08 David Rainer 12 Kaveh Varjavand
FOR WITHHOLD AUTHORITY
(INSTRUCTION: To withhold authority to vote for any nominee, print that nominee’s name in the space below.)
Please mark your votes like this
2. Ratification of Accountants. To ratify the selection of RSM US LLP to serve as the independent registered public accounting firm for CU Bancorp for 2016.
FOR AGAINST ABSTAIN
3. Transaction of Other Business. To approve and ratify such other business as may properly come before the CU Bancorp annual meeting and any adjournment or adjournments thereof. The Board of Directors at present knows of no other business to be presented at the Annual Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO SIGN AND RETURN THIS PROXY, WHICH MAY BE REVOKED AT ANY TIME PRIOR TO ITS USE.
I plan to attend the Annual Meeting
Date: , 2016
Signature
Signature
NOTE: Please sign exactly as name(s) appear(s) hereon. All holders should sign. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. If a corporation, please sign in full corporate name by authorized officer. If a partnership, please sign in partnership name by authorized person.
CONTROL NUMBER
PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED.
CONTROL NUMBER
PROXY VOTING INSTRUCTIONS
Please have your 11 digit control number ready when voting by Internet or Telephone
INTERNET
Vote Your Proxy on the Internet: Go to www.cesvote.com
Have your proxy card available when you access the above website. Follow the prompts to vote your shares.
TELEPHONE
Vote Your Proxy by Phone: Call 1 (888) 693-8683
Use any touch-tone telephone to vote your proxy. Have your proxy card available when you call. Follow the voting instructions to vote your shares.
Vote Your Proxy by Mail:
Mark, sign, and date your proxy card, then detach it, and return it in the postage-paid envelope provided.