CAPITOL FEDERAL FINANCIAL, INC.
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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
CAPITOL FEDERAL FINANCIAL, INC.
(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):
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[X]
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No fee required.
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[ ]
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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1)
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Title of each class of securities to which transaction applies:
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2)
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Aggregate number of securities to which transaction applies:
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3)
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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):
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4)
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Proposed maximum aggregate value of transaction:
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5)
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Total fee paid:
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[ ]
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Fee paid previously with preliminary materials.
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[ ]
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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.
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1)
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Amount Previously Paid:
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2)
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Form, Schedule or Registration Statement No.:
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3)
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Filing Party:
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4)
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Date Filed:
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December 18, 2019
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of Capitol Federal® Financial, Inc. we cordially invite you to attend our annual meeting
of stockholders. The meeting will be held at 10:00 a.m. local time on Tuesday, January 28, 2020, at the Bradbury Thompson Center, 1700 S.W. Jewell, located on the Washburn University Campus, in Topeka, Kansas.
We encourage you to attend the meeting in person. Regardless of whether you plan to attend the meeting,
please
read the enclosed proxy statement and then vote by the Internet, telephone or mail as promptly as possible.
Your prompt response will save us additional expense in soliciting proxies and will ensure that your shares are represented at the
meeting.
This year we are using a Securities and Exchange Commission rule to furnish our proxy statement, Annual Report and proxy card over the
Internet to stockholders. This means that stockholders will not receive paper copies of these documents. Instead, stockholders will receive only a notice containing instructions on how to access the proxy materials over the Internet. This rule
enables us to lower the costs of delivering the annual meeting materials and reduce the environmental impact of the meeting. If you would like to receive a copy of the printed materials, the notice contains instructions on how you can request copies
of these documents.
Your Board of Directors and management are committed to the success of Capitol Federal Financial, Inc. and the enhancement of your
investment. As Chairman of the Board, I want to express my appreciation for your confidence and support.
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Very truly yours,
/s/ John B. Dicus
JOHN B. DICUS
Chairman of the Board, President and Chief Executive Officer
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 28, 2020
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of Capitol Federal® Financial, Inc. will be held as follows:
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TIME
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10:00 a.m. local time
Tuesday, January 28, 2020
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PLACE
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Bradbury Thompson Center
Washburn University Campus
1700 S.W. Jewell
Topeka, Kansas
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ITEMS OF BUSINESS
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(1)
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The election of three directors.
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(2)
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An advisory (non-binding) vote on executive compensation as disclosed in the accompanying proxy statement.
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(3)
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The ratification of the appointment of Deloitte & Touche LLP as Capitol Federal Financial, Inc.’s independent auditors for the fiscal year ending September 30, 2020.
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RECORD DATE
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Holders of record of Capitol Federal Financial, Inc. common stock at the close of business on December 6, 2019 are entitled to vote at the annual meeting or any
adjournment or postponement thereof.
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PROXY VOTING
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It is important that your shares be represented and voted at the annual meeting.
Regardless of whether you plan to attend the annual
meeting in person, please read the accompanying proxy statement and then vote by the Internet, telephone or mail as promptly as possible.
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BY ORDER OF THE BOARD OF DIRECTORS
/s/ John B. Dicus
JOHN B. DICUS
Chairman of the Board, President and Chief Executive Officer
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Topeka, Kansas
December 18, 2019
CAPITOL FEDERAL® FINANCIAL, INC.
700 S. Kansas Avenue
Topeka, Kansas 66603
(785) 235-1341
_______________________________
PROXY STATEMENT
_______________________________
INTRODUCTION
The Capitol Federal Financial, Inc. Board of Directors is using this proxy statement to solicit proxies from the holders of the Company’s
common stock for use at the Company’s upcoming annual meeting of stockholders. The annual meeting of stockholders will be held at 10:00 a.m. local time on Tuesday, January 28, 2020 at the Bradbury Thompson Center, 1700 S.W. Jewell, located on the
Washburn University Campus, in Topeka, Kansas. At the meeting, stockholders will be asked to vote on three proposals. The proposals are set forth in the accompanying Notice of Annual Meeting of Stockholders and are described in more detail below.
Stockholders also will consider any other matters that may properly come before the meeting, although the Board of Directors knows of no other business to be presented. Capitol Federal Financial, Inc. is referred to in this proxy statement from time
to time as the “Company,” “we,” “us” or “our.” Certain of the information in this proxy statement relates to Capitol Federal Savings Bank (“Capitol Federal Savings” or the “Bank”), a wholly owned subsidiary of the Company.
On December 21, 2010, the Company completed its conversion (the “Conversion”) from the mutual holding company structure and related public
stock offering and became a stock form holding company that is 100% owned by public stockholders. As a result of the Conversion, the Company, a newly formed Maryland corporation, became the holding company for Capitol Federal Savings, and Capitol
Federal Financial (formerly the mid-tier holding company of Capitol Federal Savings) and Capitol Federal Savings Bank MHC (a mutual holding company that owned a majority of the stock of Capitol Federal Financial) have ceased to exist. All outstanding
shares of Capitol Federal Financial common stock (other than those owned by Capitol Federal Savings Bank MHC, which have been cancelled) were converted into the right to receive 2.2637 shares of Company common stock (the “Conversion Exchange
Ratio”). References in this proxy statement to the Company prior to the date of the Conversion refer to Capitol Federal Financial, and all information in this proxy statement with respect to stock options granted prior to the Conversion have been
adjusted for the Conversion Exchange Ratio.
We have decided to use the “Notice and Access” rule adopted by the Securities and Exchange Commission (the “SEC”) to provide access to our
proxy materials over the Internet instead of mailing a printed copy of the proxy materials to each stockholder. As a result, on or about December 18, 2019, we mailed to all stockholders only a “Notice of Internet Availability of Proxy Materials” that
tells them how to access and review the information contained in the proxy materials and how to vote their proxies over the Internet. You will not receive a printed copy of the proxy materials in the mail unless you request the materials by
following the instructions included in the Notice of Internet Availability of Proxy Materials.
By submitting your proxy, either by executing and returning the proxy card or by voting electronically via the Internet or by telephone,
you authorize the Company’s Board of Directors to represent you and vote your shares at the meeting in accordance with your instructions. The Board of Directors also may vote your shares to adjourn the meeting from time to time and will be
authorized to vote your shares at any adjournments or postponements of the meeting.
This proxy statement and the accompanying materials are first being made available to stockholders on or about December 18, 2019.
Your proxy vote is important. Whether or not you plan to attend the meeting, please submit your proxy by the
Internet, telephone or mail as promptly as possible
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INFORMATION ABOUT THE ANNUAL MEETING
What is the purpose of the annual meeting?
At the annual meeting, stockholders will be asked to vote on the following proposals:
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Proposal 1.
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The election of three directors of the Company.
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Proposal 2.
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An advisory (non-binding) vote on executive compensation as disclosed in this proxy statement.
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Proposal 3.
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The ratification of the appointment of Deloitte & Touche LLP as the Company’s independent auditors for the fiscal year ending September 30, 2020.
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Stockholders also will transact any other business that may properly come before the meeting or any adjournment or postponement of the
meeting. Members of our management team will be present at the meeting to respond to appropriate questions from stockholders.
How does the Board of Directors recommend that I vote?
The Board of Directors recommends that you vote “FOR” the election of the director nominees named in this proxy statement, “FOR” the
advisory vote on executive compensation, and “FOR” the ratification of the appointment of Deloitte & Touche LLP.
Who is entitled to vote?
The record date for the meeting is December 6, 2019. Only stockholders of record at the close of business on that date are entitled to
notice of and to vote at the meeting. The only class of stock entitled to be voted at the meeting is the Company’s common stock. Each outstanding share of common stock is entitled to one vote for all matters before the meeting; provided, however,
that pursuant to Section D of Article 5 of the Company’s charter, no person who beneficially owns more than 10% of the shares of the Company’s common stock outstanding as of that date may vote shares in excess of this amount. At the close of
business on the record date there were 141,503,865 shares of common stock outstanding.
What if my shares are held in “street name” by a broker?
If you are the beneficial owner of shares held in “street name” by a broker, your broker, as the record holder of the shares, is required
to vote those shares in accordance with your instructions. If you do not give instructions to your broker, your broker nevertheless will be entitled to vote the shares with respect to “discretionary” items, but will not be permitted to vote your
shares with respect to any “non‑discretionary” items. In the case of non-discretionary items, the shares will be treated as “broker non-votes.” Whether an item is discretionary is determined by the exchange rules governing your broker. It is
expected that the ratification of the appointment of Deloitte & Touche LLP will be considered a discretionary item and that all other matters being voted upon will be considered non-discretionary items.
What if my shares are held in the Company’s employee stock ownership plan?
We maintain an employee stock ownership plan, which beneficially owned approximately 5.4% of the outstanding shares of the Company’s common
stock as of the record date. Employees of the Company and Capitol Federal Savings participate in the employee stock ownership plan. Each participant may instruct the trustee of the plan how to vote the shares of common stock allocated to his or her
account under the employee stock ownership plan. If a participant properly executes the voting instruction card distributed by the trustee, the trustee will vote the participant’s shares in accordance with the instructions. Where properly executed
voting instruction cards are returned to the trustee with no specific instruction as to how to vote at the annual meeting, the trustee will vote the shares “FOR” the election of the director nominees named in this proxy statement, “FOR” the advisory
vote on executive compensation, and “FOR” the ratification of the appointment of Deloitte & Touche LLP. In the event the participant fails to give timely voting instructions to the trustee with respect to the voting of the common stock that
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is allocated to his or her employee stock ownership plan account, and in the case of shares held in the employee stock ownership plan but not allocated to any
participant’s account, the trustee will vote such shares in the same proportion as directed by the participants who directed the trustee as to the manner of voting their allocated shares in the employee stock ownership plan with respect to each
proposal.
How many shares must be present to hold the meeting?
A quorum must be present at the meeting for any business to be conducted. The presence at the meeting, in person or by proxy, of the
holders of at least one-third of the shares of the Company’s common stock outstanding on the record date will constitute a quorum. Proxies received but marked as abstentions or broker non‑votes will be included in the calculation of the number of
shares considered to be present at the meeting.
What if a quorum is not present at the meeting?
If a quorum is not present at the scheduled time of the meeting, the stockholders who are represented may adjourn the meeting until a
quorum is present. The time and place of the adjourned meeting will be announced at the time the adjournment is taken, and no other notice will be given. An adjournment will have no effect on the business that may be conducted at the meeting.
How do I vote?
1.
You may vote by mail.
If you properly complete,
sign and return the proxy card, it will be voted in accordance with your instructions.
2.
You may vote by telephone.
If you are a registered stockholder, that is, if you hold your stock in your own name, you may vote by telephone by following the instructions included on the proxy card. If you vote by telephone, you do
not have to mail in your proxy card.
3.
You may vote on the internet.
If you are a
registered stockholder, that is, if you hold your stock in your own name, you may vote on the Internet by following the instructions included on the proxy card. If you vote on the Internet, you do not have to mail in your proxy card.
4.
You may vote in person at the meeting
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If you plan to attend the annual meeting and wish to vote in person, we will give you a ballot at the annual meeting. However, if your shares are held in the name of your broker, bank or other nominee, you
will need to obtain a proxy form from the institution that holds your shares indicating that you were the beneficial owner of the Company’s common stock on December 6, 2019, the record date for voting at the annual meeting.
Can I vote by telephone or on the Internet if I am not a registered stockholder?
If your shares are held in “street name” by a broker or other nominee, you should check the voting form used by that firm to determine
whether you will be able to vote by telephone or on the Internet.
Can I change my vote after I submit my proxy?
If you are a registered stockholder, you may revoke your proxy and change your vote at any time before the polls close at the meeting by:
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signing another proxy with a later date;
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voting by telephone or on the Internet -- your latest telephone or Internet vote will be counted;
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giving written notice of the revocation of your proxy to the Secretary of the Company prior to the annual meeting; or
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voting in person at the annual meeting.
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If you have instructed a broker, bank or other nominee to vote your shares, you must follow directions received from your nominee to change
those instructions.
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What if I do not specify how my shares are to be voted?
If you are a registered stockholder and you submit an executed proxy but do not indicate any voting instructions, your shares will be
voted:
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FOR the election of the director nominees named in this proxy statement;
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FOR the advisory vote on executive compensation; and
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FOR the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent auditors for the fiscal year ending September 30, 2020.
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Will any other business be conducted at the annual meeting?
The Board of Directors knows of no other business that will be conducted at the meeting. If any other proposal properly comes before the
stockholders for a vote at the meeting, however, the proxy holders will vote your shares in accordance with their best judgment.
How many votes are required to approve the proposals?
The Company’s bylaws provide that in all elections of directors at meetings of stockholders, other than contested elections, each director
is elected by a majority of the votes cast with respect to such director. This means that in order to be elected, the number of votes cast FOR a director nominee’s election must exceed the number of votes cast AGAINST such director nominee’s
election. In a contested election, which is one where the number of nominees exceeds the number of directors to be elected, directors are elected by a plurality of the votes cast. The election of directors at the annual meeting will not be a
contested election. Therefore, directors will be elected at the annual meeting under the majority voting standard described above.
The advisory vote on executive compensation and the ratification of the appointment of Deloitte & Touche LLP as the Company’s
independent auditors each requires the affirmative vote of the majority of votes cast on the matter.
How will abstentions be treated?
If you abstain from voting for the election of any director nominee or from voting on any other proposal, your shares will not be counted
as votes cast with respect to the election of that nominee or that proposal and will have no effect on the election of that nominee or on that proposal. Abstentions will be included for purposes of determining whether a quorum is present.
How will broker non‑votes be treated?
Broker non-votes will have no effect on the election of directors or on any other proposal. Shares treated as broker non‑votes on one or
more proposals will be included for purposes of calculating the presence of a quorum.
STOCK OWNERSHIP
The following table presents information regarding the beneficial ownership of the Company’s common stock, as of December 6, 2019, by:
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each beneficial owner of more than 5% of the outstanding shares of the Company’s common stock known to the Company;
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each director of the Company and nominee for election;
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each executive officer of the Company named in the “Summary Compensation Table” appearing below; and
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Except as indicated below, the address of each of the beneficial owners is the same address as that of the Company. An asterisk (*) in the
table indicates that the individual beneficially owns less than one percent of the outstanding common stock of the Company. Beneficial ownership is determined in accordance with the SEC’s rules. As of December 6, 2019, there were 141,503,865 shares
of the Company’s common stock outstanding.
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Name of Beneficial Owner
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Beneficial
Ownership (1) (13) |
Percent of
Common Stock Outstanding |
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Greater than Five Percent Beneficial Owners
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American Century Companies, Inc. et al.
4500 Main Street, 9
th
Floor
Kansas City, Missouri 64111
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20,740,773
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(2)
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14.7%
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T. Rowe Price Associates, Inc.
100 E. Pratt Street
Baltimore, Maryland 21202
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14,366,230
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(3)
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10.2%
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The Vanguard Group, Inc.
100 Vanguard Boulevard
Malvern, Pennsylvania 19355
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12,758,324
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(4)
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9.0%
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BlackRock, Inc.
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10,368,431
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(5)
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7.3%
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40 East 52
nd
Street
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New York, New York 10022
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Dimensional Fund Advisors LP
Building One
6300 Bee Cave Road
Austin, Texas 78746
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10,150,468
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(6)
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7.2%
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Renaissance Technologies LLC
800 Third Avenue
New York, New York 10022
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8,824,297
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(7)
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6.2%
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Capitol Federal Financial, Inc. Employee Stock Ownership Plan
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7,707,269
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(8)
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5.4%
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Directors, Director Nominees and Executive Officers
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and Director
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1,520,251
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(9)
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1.1%
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Michel’ Philipp Cole, Director
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12,371
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*
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Morris J. Huey, II, Director
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265,655
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*
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Jeffrey M. Johnson, Director
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178,085
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(10)
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*
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James G. Morris, Director
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36,995
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*
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Michael T. McCoy, M.D., Director
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157,294
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*
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Reginald L. Robinson, Director
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20,000
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*
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Jeffrey R. Thompson, Director
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173,538
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*
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Rick C. Jackson, Executive Vice President and Chief Lending
Officer
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229,722
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(11)
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*
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Robert D. Kobbeman, Executive Vice President and Chief Commercial
Lending Officer
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38,885
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*
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Kent G. Townsend, Executive Vice President,
Chief Financial Officer and Treasurer
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210,750
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*
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Natalie G. Haag, Executive Vice President, General Counsel and
Corporate Secretary
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75,619
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(12)
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*
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Directors, director nominees and executive officers of
the Company as a group (14 persons)
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3,009,879
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2.1%
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___________________
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Included in the shares beneficially owned by the directors and executive officers named in the table are options to purchase shares of the Company’s
common stock which are currently exercisable or which will become exercisable within 60 days after December 6, 2019, as follows: Mr. Dicus – 125,304 shares; Mr. Huey – 10,000 shares; Mr. Johnson – 128,185 shares; Dr. McCoy – 128,185 shares;
Mr. Robinson – 15,000 shares; Mr. Thompson – 128,185 shares; and Mr. Jackson – 90,540 shares.
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(2)
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As reported in a Schedule 13G amendment filed with the SEC on February 11, 2019 by American Century Companies, Inc., American Century Investment
Management, Inc., American Century Capital Portfolios, Inc. and Stowers Institute for Medical Research. With respect to the shares listed in the table, American Century Companies, Inc., American Century Investment Management, Inc. and
Stowers Institute for Medical Research each reported having sole voting power as to 19,867,206 shares and sole dispositive power as to 20,740,773 shares while American Century Capital Portfolios, Inc. reported having sole voting power and
sole dispositive power as to 15,651,565 shares.
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(3)
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As reported in a Schedule 13G amendment filed with the SEC on February 14, 2019 by T. Rowe Price Associates, Inc. (“Price Associates”). With respect to
the shares listed in the table, Price Associates reported having sole voting power as to 3,626,683 shares and sole dispositive power as to 14,366,230 shares. According to Price Associates, these securities are owned by various individual and
institutional investors for which Price Associates serves as an investment advisor with the power to direct investments and/or sole power to vote the securities. For purposes of the reporting requirements of the Securities Exchange Act of
1934, Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims beneficial ownership of such securities.
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(4)
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As reported in a Schedule 13G amendment filed with the SEC on February 11, 2019 by The Vanguard Group, Inc. (“Vanguard”). With respect to the shares
listed in the table, Vanguard reported having sole voting power as to 133,914 shares, shared voting power as to 18,660 shares, sole dispositive power as to 12,624,206 shares and shared dispositive power as to 134,118 shares.
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(5)
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As reported in a Schedule 13G amendment filed with the SEC on February 4, 2019 by BlackRock, Inc. (“BlackRock”). With respect to the shares listed in the
table, BlackRock reported having sole voting power as to 10,057,092 shares and sole dispositive power as to 10,368,431shares.
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(6)
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As reported in a Schedule 13G amendment filed with the SEC on February 8, 2019 by Dimensional Fund Advisors LP (“Dimensional”). With respect to the
shares listed in the table, Dimensional reported having sole voting power as to 9,890,815 shares and sole dispositive power as to 10,150,468 shares.
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(7)
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As reported in a Schedule 13G amendment filed with the SEC on February 13, 2019 by Renaissance Technologies LLC (“Renaissance”). With respect to the
shares listed in the table, Renaissance reported having sole voting and dispositive powers as to 8,745,345 shares and shared dispositive power as to 78,952 shares.
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(8)
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Of the 7,707,269 shares held by the employee stock ownership plan as of December 6, 2019, 4,238,111 were allocated to participant accounts. Each
participant may instruct the trustee of the plan how to vote the shares of common stock allocated to his or her account. In the event the participant fails to give timely voting instructions to the trustee with respect to the voting of the
common stock that is allocated to his or her employee stock ownership plan account, and in the case of shares held in the employee stock ownership plan but not allocated to any participant’s account, the trustee will vote such shares in the
same proportion as directed by the participants who directed the trustee as to the manner of voting their allocated shares in the employee stock ownership plan with respect to each proposal.
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(9)
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Mr. Dicus has pledged 90,500 of his shares for a line of credit with a third-party financial institution unaffiliated with the Company.
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(10)
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Of the shares beneficially owned by Mr. Johnson, 49,900 are held in brokerage accounts pursuant to which they may serve as security for margin loans.
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Of the shares beneficially owned by Mr. Jackson, 51,698 are held in a brokerage account pursuant to which they may serve as security for a margin loan.
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(12)
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Of the shares beneficially owned by Ms. Haag, 12,204 are held in a brokerage account pursuant to which they may serve as security for a margin loan.
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(13)
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In the case of directors, director nominees and executive officers, both individually and as a group, includes shares held directly, as well as shares
held by and jointly with certain family members, shares held in retirement accounts, shares held by trusts of which the individual or group member is a trustee or substantial beneficiary or shares held in another fiduciary capacity with
respect to which shares the individual or group member may be deemed to have sole or shared voting and/or investment powers. The shares beneficially owned by directors, director nominees and executive officers as a group also include an
aggregate of 640,399 shares of common stock issuable upon exercise of stock options that are currently exercisable or that will become exercisable within 60 days after December 6, 2019.
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6
PROPOSAL I
ELECTION OF DIRECTORS
The Company’s Board of Directors is currently composed of eight members, each of whom is also a director of Capitol Federal Savings.
Approximately one-third of the directors are elected annually. Directors of the Company are elected to serve for a three-year term or until their respective successors are elected and qualified. The Company’s bylaws provide that no person who has
reached age 75 may be elected or re-elected to the Board of Directors.
The following table sets forth certain information regarding the composition of the Company’s Board of Directors, including each
director’s term of office. The Board of Directors, acting on the recommendation of the Nominating Committee, has recommended and approved the nominations of Michel’ Philipp Cole, Jeffrey M. Johnson and Michael T. McCoy, M.D. to serve as directors,
each for a term of three years to expire at the annual meeting of stockholders to be held in 2023. It is intended that the proxies solicited on behalf of the Board of Directors will be voted at the annual meeting “FOR” the election of these director
nominees. If any nominee is unable to serve, the shares represented by all valid proxies will be voted for the election of such substitute nominee as the Board of Directors, acting on the recommendations of the Nominating Committee, may recommend.
At this time, the Board of Directors knows of no reason why any nominee might be unable to serve if elected. Except as disclosed in this proxy statement, there are no arrangements or understandings between any nominee and any other person pursuant
to which the nominee was selected.
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Name
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Age
(1)
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Position(s) Held in the
Company
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Director
Since
(2)
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Term of
Office
Expires
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NOMINEES
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Michel’ Philipp Cole
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56
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Director
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2017
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2023
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Jeffrey M. Johnson
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53
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Director
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2005
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2023
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Michael T. McCoy, M.D.
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70
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Director
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2005
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2023
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DIRECTORS REMAINING IN OFFICE
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||||||||
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Morris J. Huey, II
|
70
|
Director
|
2009
|
2021
|
||||
|
Reginald L. Robinson
|
62
|
Director
|
2012
|
2021
|
||||
|
John B. Dicus
|
58
|
Chairman of the Board, President and Chief Executive Officer
|
1989
|
2022
|
||||
|
James G. Morris
|
65
|
Director
|
2013
|
2022
|
||||
|
Jeffrey R. Thompson
|
58
|
Director
|
2004
|
2022
|
||||
_________________________
| (1) |
As of September 30, 2019.
|
| (2) |
Includes service as a director of Capitol Federal Savings.
|
Business Experience and Qualifications of Our Directors
The Board believes that the many years of service our directors collectively have at the Company and Capitol Federal Savings is one of
their most important qualifications for service on our Board. This service has given them extensive knowledge of the banking business and of the Company. Furthermore, their service on our Board committees, especially in the areas of audit,
compensation and stock benefits, is critical to their ability to oversee the management of Capitol Federal Savings by our executive officers. Service on the Board by our Chief Executive Officer is critical to aiding the outside directors’
understanding of the issues that are common in the banking business. Each outside director brings special skills, experience and expertise to the Board as a result of their other business activities and associations. The business experience of each
of our directors and nominees for at least the past five years and the experience, qualifications, attributes, skills and areas of expertise of each director and nominee that further supports his or her service as a director are set forth below.
7
Michel’ Philipp Cole, ABC.
Ms. Cole retired in June 2018 as Vice President,
Corporate Communications and Public Affairs of Westar Energy, a position she held since 2014. From 1990 to 2000, she served as Director, Corporate Communications for Westar Energy. Before rejoining Westar Energy, Ms. Cole was Vice President,
Corporate Communications and Brand Strategy, Security Benefit Corporation, from 2003-2014. From 2000 to 2003, she was Senior Vice President, Corporate Practice Group, Fleishman-Hillard, Kansas City. Ms. Cole was the Manager, Corporate Communications,
Goodyear Tire & Rubber Co., Topeka, from 1989-1990. She began her communications career as Vice President, Member Services, Kansas Press Association, from 1986-1989. Ms. Cole has held board positions for the Greater Topeka Chamber of Commerce,
Topeka Collegiate, the Kansas Book Festival, KTWU Public Television and the Washburn University Leadership Institute. She is a graduate of Leadership Greater Topeka and Leadership Kansas City and is an Accredited Business Communicator, IABC. Ms.
Cole’s extensive background in all aspects of corporate communications brings to the Board knowledge and experience that enhances the Board’s oversight of those aspects of the Company’s operations that work to maintain and enhance value and ensure
appropriate communications both inside and outside of the Company.
Jeffrey M. Johnson.
Mr. Johnson is President of Flint Hills National Golf
Club, Andover, Kansas, a position he has held since March 2003. From March 1997 until joining Flint Hills, Mr. Johnson was an investment advisor with Raymond James Financial Services in Wichita, Kansas. Mr. Johnson’s extensive knowledge of
investments and the regulated financial services industry supports the Board’s and the Audit Committee’s knowledge in those areas. Before 1997, he served in a variety of restaurant management positions with Lone Star Steakhouse & Saloon, Inc.
and Coulter Enterprises, Inc. Mr. Johnson is also part-owner of several restaurants in Lawrence, Manhattan and Wichita, Kansas and parts of Texas. He brings general business, financial and risk management skills to Capitol Federal Savings,
including knowledge of compensation matters, which is important to his service on our Compensation Committee. His participation in the Wichita, Kansas business community and his service on local non-profit boards for over 15 years bring knowledge of
the local economy and business opportunities for Capitol Federal Savings.
Michael T. McCoy, M.D.
Dr. McCoy has been an orthopedic surgeon in private
practice for over 30 years. In his private practice, he has employed up to 15 employees and gained the accounting, financial and risk management skill necessary to operate a small business. He served as Chief of Orthopedic Surgery at Stormont Vail
Regional Medical Center in Topeka, Kansas from October 2004 to October 2005 and as Chief of Surgery at Stormont Vail from January 1987 to January 1988. His management and business experience in his private practice and these hospital positions bring
knowledge and experience to his service on the Board and the Compensation and Audit Committees. Dr. McCoy is a member of the Kansas Medical Society, the Shawnee County Medical Society, the American Academy of Orthopedic Surgeons and the American
Orthopedic Society for Sports Medicine.
Morris J. Huey, II.
Mr. Huey retired from Capitol Federal Savings in January
2010. From June 2002 until his retirement, Mr. Huey served as Executive Vice President and Chief Lending Officer of Capitol Federal Savings and President of Capitol Funds, Inc., a wholly owned subsidiary of Capitol Federal Savings. From August 2002
until his retirement, he also served as President of Capitol Federal Mortgage Reinsurance Company, a wholly owned subsidiary of Capitol Funds, Inc. Prior to that, he served as the Central Region Lending Officer since joining Capitol Federal Savings
in 1991. Mr. Huey’s many years of service in various areas of Capitol Federal Savings’ operations and his duties as Executive Vice President and Chief Lending Officer of Capitol Federal Savings bring a special knowledge of the financial, economic
and regulatory challenges the Company faces and he is well suited to educating the Board on these matters.
Reginald L. Robinson.
Effective December 1, 2019, Mr. Robinson became
President and Chief Executive Officer of the Kansas Health Foundation (the “KHF”),
a statewide philanthropic organization based in Wichita, Kansas. In that role, Mr. Robinson provides administrative and
strategic leadership for the KHF, which has as its mission the improvement of the health of all Kansans through strategic grantmaking, partnerships and policy work focused on four areas: access to affordable health care, healthy behaviors, civic and
community engagement and educational attainment. Prior to joining KHF, Mr. Robinson served as Vice Chancellor for Public Affairs at the University of Kansas, a position he commenced on an interim basis in August 2017 and assumed on a permanent basis
in January 2018. In that role, Mr. Robinson was responsible for the university’s government relations, strategic communications, news and information, and marketing communications activities. From 2014-2017, Mr. Robinson served as the director of
the University of Kansas’s top-ranked School of Public Affairs and Administration. From 2010 until that appointment, Mr. Robinson served as a Professor of Law at the Washburn
8
University School of Law and as the Inaugural Director of the school’s Center for Law and Government. Between 2002 and 2010, Mr. Robinson served as President
and Chief Executive Officer of the Kansas Board of Regents, which governs the state’s six universities, and provides state-level coordination for the other 27 public institutions of higher education in Kansas. From 1998 to 2002, Mr. Robinson held
dual positions at the University of Kansas, serving as Chief of Staff to the Chancellor and as a Visiting Associate Professor of Law. From 1993 to 1998, Mr. Robinson held several senior positions with the United States Department of Justice. From
1988 to 1993, Mr. Robinson served as an Associate Professor of Law at the University of Kansas. Mr. Robinson’s strong legal background and executive experience make him a valuable member of the Board.
John B. Dicus.
Mr. Dicus became Chief Executive Officer of Capitol Federal
Savings and the Company effective January 1, 2003 and became Chairman of the Board of Directors of Capitol Federal Savings and the Company in January 2009. Prior to his appointment as Chief Executive Officer, he served as President and Chief
Operating Officer for Capitol Federal Savings from 1996 and for the Company from its inception in March 1999. Before that, he served as Executive Vice President of Corporate Services for Capitol Federal Savings for four years. He has been with
Capitol Federal Savings in various other positions since 1985. Mr. Dicus’s many years of service in all areas of the operations of Capitol Federal Savings and his duties as President and Chief Executive Officer of the Company and Capitol Federal
Savings bring a special knowledge of the financial, economic and regulatory challenges the Company faces and he is well suited to educating the Board on these matters.
James G. Morris.
Mr. Morris retired from KPMG LLP in September 2012 after
having served as partner-in-charge of the financial services practice of the firm’s Kansas City office. Mr. Morris joined the firm in 1976 (when it was known as Peat Marwick Mitchell & Co.) as an auditor and was promoted to partner in 1988. At
KPMG, Mr. Morris served a wide range of financial services clients, including banks, thrifts, mortgage companies, investment advisors and real estate companies. Mr. Morris’s accounting and auditing background and extensive experience working with
companies in the financial services industry make him a valuable member of the Board.
Jeffrey R. Thompson
. In 2007, Mr. Thompson became Chief Executive Officer of
Salina Vortex Corp., a Salina, Kansas-based manufacturing company, after having served as Chief Financial Officer of that company since 2002. From 2001 to 2002, he served as Vice President, Supply Chain, for The Coleman Company, Wichita, Kansas, a
manufacturer and marketer of consumer products. From 1992 to 2001, he served in a variety of capacities for Koch Industries, Inc., Wichita, Kansas, including President of Koch Financial Services, Inc. from 1998 to 2001. From 1986 to 1992, he worked
in several positions for Chrysler Capital Public Finance, Kansas City, Missouri, primarily in the areas of originating, underwriting and servicing tax-exempt municipal leases. Mr. Thompson has approximately 35 years of business experience, including
20 years in the financial services business and 15 years with profit and loss responsibility in manufacturing companies. He brings general business, financial and risk management skills to Capitol Federal Savings, including knowledge of compensation
matters, which is important to his service on our Compensation Committee. Mr. Thompson is a certified public accountant and his accounting knowledge and experience is important to his service on our Audit Committee. His participation in the
Wichita, Kansas business community for over 20 years brings knowledge of the local economy and business opportunities for Capitol Federal Savings.
Director Independence
The Company’s Board of Directors has determined that the following directors, constituting a majority of the Board, are “independent
directors,” as that term is defined in Rule 5605 of the Marketplace Rules of the NASDAQ Stock Market (“NASDAQ”): Directors Cole, Huey, Johnson, McCoy, Morris, Robinson and Thompson.
Board Leadership Structure and Role in Risk Oversight
The Company currently combines the positions of Chief Executive Officer and Chairman into one position. The Company does not have a lead
outside director. The Company believes that this structure is appropriate because of the primarily singular operating environment of the Company, with the Company’s focus on being a provider of retail financial services. Having the Chief Executive
Officer and Chairman involved in the daily operations of this focused line of operations improves the communication between management and the Board and ensures that the Board’s interest is represented in the daily operations of the Company,
particularly with regard to risk management.
9
Risk is inherent with the operation of every financial institution, and how well an institution manages risk can ultimately determine its
success. The Company faces a number of risks, including but not limited to credit risk, interest rate risk, liquidity risk, operational risk, strategic risk, compliance risk, cybersecurity risk and reputation risk. The Company’s risk areas
primarily involve the retail component of the Bank through its retail financial services and focus on single-family lending, including originated and purchased loans. With its acquisition of Capital City Bancshares, Inc. (“CCB”) and CCB’s subsidiary
bank, Capital City Bank, in August 2018, the Company has increasing risk exposure as it transitions into more commercial banking operations. Cybersecurity risk is a key consideration in the Company’s operational risk management capabilities. Given
the nature of the Company’s operations and business, including the Bank’s reliance on relationships with various third-party providers in the delivery of financial services, cybersecurity risk may manifest itself through various business activities
and channels, and it is thus considered an enterprise-wide risk that is subject to control and monitoring at various levels of management and oversight by the Board and the Audit Committee. The Board receives updates on the status of the
cybersecurity controls, reports of significant cybersecurity incidents and annual education in this area.
Management is responsible for the day-to-day management of the risks the Company faces, while the Board has ultimate responsibility for the
oversight of risk management. The Board oversees risk through the annual review of key policies of the Bank and the Company. In addition, monthly, quarterly and annual reports are prepared for, presented to and reviewed with the Board addressing
all major risk and compliance areas. For the policies of the Board that require risk assessments to be completed, the results are generally summarized and presented to the Board or a committee of the Board. The executive officers responsible for
managing the various risks in the Bank and Company present reports to the Board as required by policy or as needed.
The Board has integrated the oversight of certain risk areas with the responsibilities of the Audit Committee and the Compensation
Committee. The Audit Committee works with the independent Director of Internal Audit to structure risk-based audits, the reports of which are presented to the Audit Committee, and progress toward the approved audit plan is reviewed and the committee
is updated at least quarterly. In attempting to determine the appropriate levels and forms of compensation provided to the Bank’s and the Company’s officers and employees, the Compensation Committee considers whether compensation or incentive plans
encourage excessive risk taking.
Board Meetings and Committees
The members of the Boards of Directors of the Company and Capitol Federal Savings are identical. During the fiscal year ended September
30, 2019, the Board of Directors of the Company held six meetings and the Board of Directors of Capitol Federal Savings held 11 meetings. During fiscal year 2019, no incumbent director attended fewer than 75% of the aggregate of the total number of
meetings of each Board during the period he or she was a director and the total number of meetings held by the committees of each Board on which committees he or she served during the period in which he or she served except for Director Robinson, who
was unable to attend at least 75% of the aggregate of such meetings due to additional responsibilities he was required to assume for his role as Vice Chancellor for Public Affairs at the University of Kansas. As noted under “Board Experience and
Qualifications of Our Directors,” Director Robinson changed jobs effective December 1, 2019. It is expected that Director Robinson’s new position will better enable him to attend Board and committee meetings.
The Company’s Board of Directors has standing Executive, Compensation, Stock Benefit, Audit and Nominating Committees. The following is a
summary of these committees.
The Executive Committee is currently comprised of Directors Dicus (Chairman), Huey, Robinson and Thompson. The Executive Committee meets
on an as needed basis and exercises the power of the Board of Directors between Board meetings, to the extent permitted by applicable law. This committee is responsible for formulating and implementing policy decisions, subject to review by the
entire Board of Directors. The Executive Committee did not meet during fiscal year 2019.
The Compensation Committee is currently comprised of Directors Johnson (Chairman), Cole, Huey, McCoy, Morris, Robinson and Thompson, each
of whom is an “independent director,” as that term is defined in the NASDAQ Marketplace Rules. The Compensation Committee is responsible for reviewing and evaluating executive
10
compensation and administering the Company’s compensation and benefit programs. The Compensation Committee also is responsible for:
|
|
• |
reviewing from time to time the Company’s compensation plans and, if the Committee believes it to be appropriate, recommending that the Board amend these plans or adopt new plans;
|
|
|
• |
annually reviewing and approving corporate goals and objectives relevant to the Chief Executive Officer’s compensation, evaluating the Chief Executive Officer’s performance in light of
these goals and objectives and recommending to the Board the Chief Executive Officer’s compensation level based on this evaluation;
|
|
|
• |
overseeing the evaluation of management, and recommending to the Board the compensation for executive officers and other key members of management. This includes evaluating performance
following the end of incentive periods and recommending to the Board specific awards for executive officers;
|
|
|
• |
recommending to the Board the appropriate level of compensation for directors;
|
|
|
• |
administering any benefit plan which the Board has determined should be administered by the Committee; and
|
|
|
• |
reviewing, monitoring and reporting to the Board, at least annually, on management development efforts to ensure a pool of candidates for adequate and orderly management succession.
|
The Compensation Committee operates under a written charter adopted by the Board of Directors of the Company, a copy of which is available
on the Company’s website, at www.capfed.com, by clicking “Investor Relations” and then (under the “Corporate Overview” tab) “Corporate Governance.” In fiscal year 2019, this committee met four times at the holding company level; the Compensation
Committee for Capitol Federal Savings, which serves the same function and has the identical makeup, also met four times during fiscal year 2019.
The Stock Benefit Committee operates under a written charter adopted by the Board of Directors of the Company. The Stock Benefit Committee
is currently comprised of Directors McCoy (Chairman), Cole, Johnson, Morris, Robinson and Thompson. The Stock Benefit Committee is principally responsible for administering the Company’s 2012 Equity Incentive Plan, 2000 Stock Option and Incentive
Plan and 2000 Recognition and Retention Plan. Although, by their terms, the 2000 Stock Option and Incentive Plan and 2000 Recognition and Retention Plan expired as to new awards in April 2015, the Company ceased granting new awards under those plans
following the approval of the 2012 Equity Incentive Plan at the Company’s annual meeting of stockholders held in January 2012. The Stock Benefit Committee awards stock-based benefits to officers and employees of the Company and the Bank. This
committee met four times during fiscal year 2019.
The Audit Committee is currently comprised of Directors Thompson (Chairman), Cole, Huey, Johnson, McCoy, Morris and Robinson, each of whom
is “independent,” as independence for audit committee members is defined in the NASDAQ Marketplace Rules. The Company’s Board of Directors has determined that each of Messrs. Morris and Thompson is an “audit committee financial expert,” as defined
in the SEC’s rules.
The Audit Committee operates under a written charter adopted by the Board of Directors of the Company, a copy of which is available on the
Company’s website, www.capfed.com, by clicking “Investor Relations” and then (under the “Corporate Overview” tab) “Corporate Governance.” The Audit Committee is appointed by the Company’s Board of Directors to represent and assist the Board in
fulfilling its oversight responsibility relating to the integrity of the Company’s consolidated financial statements and the financial reporting processes, the systems of internal accounting and financial controls, the systems of disclosure controls
and procedures, compliance with ethical standards adopted by the Company, compliance with legal and regulatory requirements, the annual independent audit of the Company’s consolidated financial statements, the independent auditors’ qualifications and
independence, the performance of the Company’s internal audit function and the independent (external) auditors and any other areas of potential financial risk to the Company specified by its Board of Directors. The Audit Committee
11
also is responsible for hiring, retaining and terminating the Company’s independent auditors. The Audit Committee met 11 times in fiscal year 2019.
The Nominating Committee is comprised of Directors Huey (Chairman), Cole, Johnson, McCoy, Morris, Robinson and Thompson, each of whom is an
“independent director,” as that term is defined in the NASDAQ Marketplace Rules. The Nominating Committee is responsible for identifying and recommending director candidates to serve on the Board of Directors. Final approval of director nominees is
determined by the full Board, based on the recommendations of the Nominating Committee. The nominees for election at the meeting identified in this proxy statement were recommended to the Board by the Nominating Committee. The Nominating Committee
met two times during fiscal year 2019.
The Nominating Committee operates under a formal written charter adopted by the Board, a copy of which is available on the Company’s
website, www.capfed.com, by clicking “Investor Relations” and then (under the “Corporate Overview” tab) “Corporate Governance.” The Nominating Committee has the following responsibilities under its charter:
|
|
• |
recommend to the Board the appropriate size of the Board and assist in identifying, interviewing and recruiting candidates for the Board;
|
|
|
• |
recommend candidates (including incumbents) for election and appointment to the Board of Directors, subject to the provisions set forth in the Company’s charter and bylaws relating to the
nomination or appointment of directors, based on the following criteria: business experience, education, integrity and reputation, independence, conflicts of interest, diversity, age, number of other directorships and commitments
(including charitable organizations), tenure on the Board, attendance at Board and committee meetings, stock ownership, specialized knowledge (such as an understanding of banking, accounting, marketing, finance, regulation and public
policy) and a commitment to the Company’s communities and shared values, as well as overall experience in the context of the needs of the Board as a whole. The Company’s Board of Directors looks for diversity among its members by
ensuring directors have backgrounds with diverse business experience, living in our different local geographic markets with sound business experience in many areas of operations of business. The Board looks for experience from
individuals with business experience from the top levels of a business, understanding of financial concepts, human resource, marketing and communications and customer service common among all businesses;
|
|
|
• |
review nominations submitted by stockholders, which have been addressed to the Company’s Secretary, and which comply with the requirements of the Company’s charter and bylaws. Nominations
from stockholders will be considered and evaluated using the same criteria as all other nominations;
|
|
|
• |
annually recommend to the Board committee assignments and committee chairs on all committees of the Board, and recommend committee members to fill vacancies on committees as necessary; and
|
|
|
• |
perform any other duties or responsibilities expressly delegated to the Committee by the Board.
|
Nominations of persons for election to the Board of Directors may be made only by or at the direction of the Board of Directors or by any
stockholder entitled to vote for the election of directors who complies with the notice procedures. Pursuant to the Company’s bylaws, nominations for directors by stockholders must be made in writing and received by the Secretary of the Company at
the Company’s principal executive offices no earlier than 120 days prior to the meeting date and no later than 90 days prior to the meeting date. If, however, less than 100 days’ notice or public announcement of the date of the meeting is given or
made to stockholders, nominations must be received by the Company not later than the close of business on the tenth day following the earlier of the day on which notice of the date of the meeting was mailed or otherwise transmitted or the day on
which public announcement of the date of the meeting was first made. In addition to meeting the applicable deadline, nominations must be accompanied by certain information specified in the Company’s bylaws.
12
Stockholder Communications with Directors
Stockholders may communicate with the Board of Directors by writing to: Natalie G. Haag, Executive Vice President, General Counsel and
Corporate Secretary, Capitol Federal Financial, Inc., 700 S. Kansas Avenue, Topeka, Kansas 66603.
Board Member Attendance at Annual Stockholder Meetings
Although the Company does not have a formal policy regarding director attendance at annual stockholder meetings, directors are expected to
attend these meetings absent extenuating circumstances. All directors of the Company attended last year’s annual meeting of stockholders.
Director Compensation
The members of the Boards of Directors of Capitol Federal Savings and the Company are identical. Each non-employee director receives an
annual retainer, paid monthly, one-half of which is for his or her service on Capitol Federal Savings’ Board of Directors and one-half of which is for his or her service on the Company’s Board of Directors. During fiscal year 2019, the combined
annual retainer was $66,000 ($33,000 for service on Capitol Federal Savings’ Board of Directors and $33,000 for service on the Company’s Board of Directors). No additional fees are paid for attending Board or Board committee meetings. During fiscal
year 2019, Mr. Thompson received $5,000 for serving as the Audit Committee chair. Each outside director receives $1,000 per day for each meeting attended concerning Capitol Federal Savings and/or Company business that is outside of board meetings.
During fiscal year 2019, Ms. Cole, Mr. Huey and Mr. Thompson received compensation of $2,000, $2,000 and $1,000, respectively, for attending meetings outside of board meetings. During fiscal year 2019, John B. Dicus, Chairman, President and Chief
Executive Officer, was paid $12,000 by Capitol Federal Savings and $12,000 by the Company ($24,000 in total) for his service as a director of Capitol Federal Savings and the Company.
The following table sets forth certain information regarding the compensation earned by or awarded to each director, other than Mr. Dicus,
who served on the Board of Directors of the Company in fiscal year 2019. Compensation payable to Mr. Dicus for his service as a director is included in the “Salary” column of the Summary Compensation Table, under “Executive Compensation.”
|
Name
|
Fees Earned
or Paid in
Cash
($)
(1)
|
Stock Awards
($)
(2)
|
Option
Awards
($)
(3)
|
All Other
Compensation
($)
(4)
|
Total
($)
|
|||||||||||||||
|
Michel’ Philipp Cole
|
$
|
66,000
|
---
|
---
|
$
|
7,292
|
$
|
73,292
|
||||||||||||
|
Morris J. Huey II
|
66,000
|
---
|
---
|
2,000
|
68,000
|
|||||||||||||||
|
Jeffrey M. Johnson
|
66,000
|
---
|
---
|
---
|
66,000
|
|||||||||||||||
|
Michael T. McCoy, M.D.
|
66,000
|
---
|
---
|
---
|
66,000
|
|||||||||||||||
|
James G. Morris
|
66,000
|
---
|
---
|
---
|
66,000
|
|||||||||||||||
|
Reginald L. Robinson
|
66,000
|
---
|
---
|
---
|
66,000
|
|||||||||||||||
|
Jeffrey R. Thompson
|
71,000
|
---
|
---
|
1,000
|
72,000
|
|||||||||||||||
_______________
|
(1)
|
|
|
(2)
|
As of September 30, 2019, Ms. Cole was the only director listed in the table who held any unvested shares of restricted stock. Ms. Cole held 5,400 unvested
shares of restricted stock as of that date.
|
|
(3)
|
As of September 30, 2019, the total number of shares underlying the stock options held by each director listed in the table was as follows: Mr. Huey –
15,000 shares; Mr. Johnson – 128,185 shares; Dr. McCoy – 128,185 shares; Mr. Robinson – 15,000 shares; and Mr. Thompson – 128,185 shares.
|
|
(4)
|
For Ms. Cole, Mr. Huey and Mr. Thompson, includes $2,000, $2,000 and $1,000, respectively, for attending meetings outside of board meetings. For Ms. Cole,
also includes dividends paid on unvested shares of restricted stock of $5,292.
|
13
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This section discusses the Company’s compensation program, including how it relates to the executive officers named in the compensation
tables which follow this section (who we sometimes refer to below and elsewhere in this proxy statement as the “named executive officers,” or “NEOs”), consisting of:
|
|
• |
John B. Dicus, our Chairman, President and Chief Executive Officer,
|
|
|
• |
Kent G. Townsend, our Executive Vice President, Chief Financial Officer and Treasurer,
|
|
|
• |
Rick C. Jackson, our Executive Vice President and Chief Lending Officer,
|
|
|
• |
Robert D. Kobbeman, our Executive Vice President and Chief Commercial Lending Officer and
|
|
|
• |
Natalie G. Haag, our Executive Vice President, General Counsel and Corporate Secretary.
|
Set forth below is an analysis of the objectives of our compensation program, the material compensation policy decisions we have made under
this program and the material factors we considered in making those decisions.
Overview of Compensation Program
The Compensation Committee of our Board of Directors (the “Committee”), which consists solely of independent directors, has responsibility
for developing, implementing and monitoring adherence to the Company’s compensation philosophies and program. The Stock Benefit Committee, also comprised entirely of independent directors, administers and grants stock-based compensation awards from
time to time. Grants currently are made under our 2012 Equity Incentive Plan, which was approved by our stockholders in January 2012. One NEO has outstanding option awards granted under our 2000 Stock Option and Incentive Plan, which was approved
by our stockholders in 2000 and expired as to new awards in April 2015. See “Stock Incentive Plans” below. The Committee is mindful of the compensation offered in the banking industry, both regionally and nationally, and the Company’s business
strategies. The Committee strives to provide a complete compensation program that incentives executive officers to maximize the Company’s performance with the goal of enhancing stockholder value. The Company’s compensation program is based upon the
following philosophies:
|
|
• |
preserve the financial strength, safety and soundness of the Company and the Bank;
|
|
|
• |
reward and retain key personnel by compensating them in the range of salaries at comparable financial institutions and making them eligible for annual cash bonuses based primarily on the
Company’s performance;
|
|
|
• |
focus management on maximizing earnings while managing risk by maintaining high asset quality, managing interest rate risk within Board guidelines, emphasizing cost control, establishing
adequate compliance programs and maintaining appropriate levels of capital; and
|
|
|
• |
provide an opportunity to earn additional compensation if the Company’s stockholders experience increases in returns through stock price appreciation and/or dividends.
|
The Company’s primary forms of current compensation for executive officers include base salary, short-term incentive compensation and
long-term incentive compensation. The Company has provided long-term compensation in the form of stock option and restricted stock awards and an employee stock ownership plan (“ESOP”). The Company also has a tax-qualified defined contribution
retirement plan, health and life insurance benefits and paid time off benefits. The Company offers insurance benefits, including flexible spending accounts for unreimbursed medical expenses and child care expenses, on a pre-tax basis, in which
executive officers may participate with the same eligibility requirements as all other employees.
14
As a general matter, we have not offered employment agreements to any of our officers or employees. In conjunction with our 2018
acquisition of CCB and Capital City Bank, we offered two-year employment agreements to specific key employees, including Mr. Kobbeman, who served as President and Chief Executive Officer of CCB and Capital City Bank prior to the acquisition. We
currently believe our named executive officers other than Mr. Kobbeman receive sufficient incentives from the existing compensation program that employment agreements are not necessary to induce them to remain with the Company. The Company has
entered into change in control severance agreements with each of the NEOs, including Mr. Kobbeman. Each agreement entitles the executive to a severance payment if the executive’s employment is terminated under certain circumstances within six months
before or within 24 months after a change in control of the Company. The Company believes these agreements will help incentivize the executives to continue their employment with the Company amid the uncertainty that may arise in the event of a
change in control. See “Employment and Change in Control Severance Agreements” and “Payments upon Termination or Change in Control.”
The Committee meets as needed during the year to consider all aspects of the Company’s compensation program, including a review at least
once per year of a tally sheet for each NEO quantifying every component of the NEO’s compensation package, in order to satisfy itself that the total compensation paid to the NEO is reasonable and appropriate. As discussed in greater detail below
under “Role of Management,” the Committee meets with management to receive their analyses and recommendations, as requested by the Committee, considers the information provided to the Committee and makes decisions accordingly.
Base Salary
The Committee sets the base salaries for all executive officers of the Company. The Committee sets policy directing fair and reasonable
compensation levels throughout the Company by taking into account the influences of market conditions on each operational area of the Company and the relative compensation at different management levels within each operational area. The Committee
recognizes that base salary is the primary compensation package component that is fixed in amount before the fiscal year begins and is paid during the year without regard to the Company’s performance. The base salary for each NEO reflects the
Committee’s consideration of a combination of factors, including: competitive market salary, the comparability of responsibilities of similarly situated NEOs at other institutions, the officer’s experience and tenure, overall operational and
managerial effectiveness and breadth of responsibility for each officer. Each NEO’s base salary and performance is reviewed annually. Base salary is not targeted to be a percentage of total compensation, although the Committee does consider the
total amount of each NEO’s compensation when setting NEO base salaries.
The Committee has not used third party consultants or other service providers to present compensation plan suggestions or market
compensation data. Instead, the Committee has directed the President and CEO to provide comparable market salary data for executive officers based upon a selected population of comparable financial institutions.
The most recent comparison information was compiled from information reported in the most recent proxy statements of the financial
institutions listed below. The financial institutions selected for comparison purposes were based upon the President and CEO’s knowledge of the selected financial institutions, the comparability of their operations, corporate structure and/or size
as appropriate comparisons to the Company. Financial institutions selected for comparison purposes may be added or removed from the list each year as a result of acquisitions, closings, operating in a distressed mode or because another financial
institution compares more appropriately to the operations of the Company than a previously listed financial institution.
The financial institutions in the most recent comparison included the following publicly held financial institutions with total assets
between $5.2 billion and $26.2 billion: Commerce Bancshares, UMB Financial, TFS Financial (organized in a mutual holding company, or MHC, structure), Washington Federal, Northwest Bancshares, Community Bank System, BancFirst, Investors Bancorp,
HomeStreet, Provident Financial Services, Park National Corporation, National Bank Holdings, Chemical Financial and Republic Bancorp.
The comparison shows how our executive officer salaries and annual cash compensation
compare on a
national and local scale with other financial institutions, reflecting institutions among which we would most likely compete for executive talent, with a slightly greater weighting to regional institutions. The Committee received
15
information showing the base compensation of the CEO, CFO and the next three NEOs in each company’s proxy statement. The level of compensation paid to our
CEO and CFO are compared directly to the equivalent titles in the listed companies. The compensation paid the first highest NEO within each of the listed companies above, not including the CEO or CFO, is compared to compensation paid to our first
most highly compensated NEO, not including the CEO or CFO. The compensation paid to the second highest NEO within each of the listed companies above, not including the CEO or CFO, is compared to compensation paid to our second most highly
compensated NEO, not including the CEO or CFO. The compensation paid to the third highest NEO within each of the listed companies above, not including the CEO or CFO, is compared to compensation paid to our third most highly compensated NEO, not
including the CEO or CFO.
The Committee reviews the comparison data provided and does not attempt to set the base salaries of our NEOs at specific target percentiles
of the comparison data provided. The Committee uses this data in conjunction with setting the base salary of each NEO, whose salary is discussed below, in light of the range of base salaries paid among the comparable financial institutions. Because
the positions other than the CEO and CFO may not be directly comparable between financial institutions, the Committee exercises its judgment in determining where in the salary ranges of the comparison financial institutions the compensation for our
other NEOs should fall. The salaries for the CEO and CFO, in general, fall in the middle of the range of comparable salaries based upon a review of the comparison companies. In general, the range of salaries for the NEOs other than the CEO and CFO
is narrow because the comparison in range of salaries among the other NEO executive officer positions in the various market comparisons reviewed is not considered sufficiently different by the Committee to warrant a wider spread in base salary. The
salary of the CEO is established to reflect his hands-on approach to leadership and the involvement he provides the Company on a daily basis, the leadership roles he fills in local, regional and national industry-related activities and his direct
involvement in addressing stockholder value and stockholder relations. The salaries of the CFO and each of the other NEOs are established to also reflect their respective roles in the management structure of the Company.
The Committee does not put as much emphasis on the market comparison information when considering bonus or other incentive compensation as
it does on base salary for the Company’s executive officers. This is primarily because of the divergence in practice regarding the structure of bonus plans and the types of incentives offered executive officers at other financial institutions.
Compensation and Incentive Plan Risk Assessment
At the direction of the Compensation Committee, our Internal Audit Director, our Compliance and Risk Management Director, our Human
Resources Director and our General Counsel reviewed all compensation and incentive programs within the Company to ensure the programs were working as designed and intended. The results of this review indicated that all plans were working as designed
and intended and did not allow for compensation benefits beyond those intended by the programs.
Bonus Incentive Plans
All officers of the Company are eligible to receive cash bonuses on an annual basis under the Short Term Performance Plan (“STPP”) based
upon the Company’s financial performance and the individual officer’s performance during the fiscal year. The cash awards are made in January of the year following the fiscal year end of September 30 (i.e., in January 2020, in the case of the STPP
award for the fiscal year ended September 30, 2019). A participant’s STPP award may not exceed the percentage of salary specified in the plan for his or her position level. For the Chairman, President and CEO, the maximum percentage is 60%, and for
each of the other NEOs, the maximum percentage is 40%. The STPP is intended to:
|
|
• |
promote stability of operations and the achievement of earnings targets and business goals;
|
|
|
• |
link executive compensation to specific corporate objectives and individual results; and
|
|
|
• |
provide a competitive reward structure for officers.
|
16
Generally, in November of each fiscal year, after considering management’s company performance recommendations (see “Role of Management”
below), the Committee sets target, maximum and minimum performance levels for that year. The targeted performance level is the most likely performance level forecasted for the Company in the ensuing fiscal year given the operational considerations
described below. As discussed below, the Committee considers three targets in order to focus management on the performance of the Company as a whole: efficiency ratio; basic earnings per share and return on average equity. By focusing on the
overall performance of the Company, over time the Committee believes the value to the stockholder from management’s performance will be maximized. In seeking to maximize the performance of the Company, management focuses on all critical risks and
objectives of the Company. By not taking excessive credit risk and keeping interest rate risk at or below levels established by the Board, it is believed that the Company’s earnings likely will remain strong over time. By managing the amount of
capital of the Bank, the Company benefits by having a proper amount of leverage which improves the opportunities to enhance earnings. Focusing on cost control helps to mitigate risks that operating expenses will rise beyond the level at which they
are supportable by the Bank’s operating income.
As indicated above, the areas of Company performance targeted consist of the efficiency ratio, basic earnings per share and return on
average equity. The efficiency ratio is computed by dividing total non-interest expense by the sum of net interest and dividend income and total other income. Basic earnings per share is calculated by dividing net income for the fiscal year by the
average basic shares outstanding for the fiscal year. Return on average equity is computed by dividing net income for the fiscal year by the average month end balance of total stockholders’ equity for the thirteen monthly time periods from the prior
fiscal year end through the current fiscal year end, ending September 30th. The efficiency ratio, basic earnings per share and return on average equity are equally weighted.
In general, the Company performance targets for the STPP are based upon the ensuing year’s forecast of business activity, interest rates,
pricing assumptions, operating assumptions and net income determined using market- based assumptions as of September 30
th
of the just completed fiscal year. Prior to fiscal year 2019, the Committee required that the target efficiency
ratio for each fiscal year be no worse than the actual efficiency ratio of the just completed fiscal year. Due to changes in our business model, including an increased focus on commercial banking, beginning with fiscal year 2019, the target
efficiency ratio is determined based upon the ensuing year’s forecast of business activity and no longer needs to be better than the prior fiscal year’s actual efficiency ratio. The purpose of the efficiency ratio performance target is to focus
management on keeping operating expenses under control and at the lowest level possible, regardless of the impact of interest rates on the operations of the Company. The targets for earnings per share and return on average equity are established
based upon the forecasted performance of the Company and anticipated capital management plans for the Company. Forecasted performance includes the Company’s internal forecasts and the forecasts of outside analysts. For fiscal year 2019, the targets
were established based upon internally generated (forecasted) performance results and externally generated performance results from independent analysts who cover the Company. The results were weighted 80% for the internally generated results and
20% for the external results.
There are two “scales” for each performance target: (i) a “target” scale, which includes increments between the target level of performance
and a maximum level of performance, and decrements between the target level of performance and a minimum level of performance; and (ii) an “award” scale, which proceeds at one percent increments beginning at 20% in correspondence to the minimum
performance level on the target scale, through 60% in correspondence to the target level of performance on the target scale, and up to 100% in correspondence to the maximum level of performance on the target scale. Plan participants will earn a
percentage on the award scale for a particular performance target of between 20% (if performance is at the minimum level of performance on the target scale) and 100% (if performance is at or above the maximum level of performance on the target
scale). The percentage earned on the award scale for a particular performance target will be zero if performance is below the minimum level of performance on the target scale. The average of the percentages earned on the award scales for the three
performance targets represents the total percentage of the maximum possible STPP award each participant has earned for the Company performance component of the STPP award. In order to pay the full amount of an award under the STPP based on
performance above the target level, the Committee must determine that the Company had actual net income for the fiscal year in excess of targeted net income for the fiscal year equal to at least five times the aggregate dollar amount of the portion
of the total STPP awards for that year that would be made above the target level.
17
Below is a table showing the targets established and the performance achieved for fiscal years 2019, 2018, and 2017. The “percent of
total” columns represent, for each performance target (efficiency ratio, basic earnings per share and return on average equity), the percentage earned on the award scale for that target, based on the level of achievement on the target scale. The
“total” column represents the average of the award scale percentages earned for the three performance targets, which, as noted above, represents the total percentage of the maximum possible STPP award that has been earned for the Company performance
component of the STPP award. For fiscal year 2019, the levels of achievement for the efficiency ratio, basic earnings per share and return on average equity were worse than the target but better than the minimum. For fiscal year 2018, the levels of
achievement for basic earnings per share and return on average equity were in excess of the maximum target. The level of achievement for the efficiency ratio for fiscal year 2018 was worse than the target but better than the minimum. For fiscal
year 2017, the levels of achievement for the efficiency ratio, basic earnings per share and return on average equity were better than the target but not the maximum. The Company’s actual net income for fiscal years 2018 and 2017 was in excess of
targeted net income for the fiscal year by more than five times the dollar amount of the portion of the total STPP awards earned for the fiscal year above the target level.
|
Target
|
Performance
|
Percent of total
|
||||||||||||||||||||||||||||||||||||||
|
Fiscal
Year |
Efficiency
Ratio |
Basic
EPS |
ROAE
|
Efficiency
Ratio |
Basic
EPS |
ROAE
|
Efficiency
Ratio |
Basic
EPS |
ROAE
|
Total
|
||||||||||||||||||||||||||||||
|
2019
|
45.85
|
%
|
$
|
0.71
|
7.04
|
%
|
46.83
|
%
|
$
|
0.68
|
6.97
|
%
|
48
|
%
|
40
|
%
|
53
|
%
|
47
|
%
|
||||||||||||||||||||
|
2018
|
41.21
|
%
|
$
|
0.63
|
6.17
|
%
|
43.89
|
%
|
$
|
0.73
|
7.28
|
%
|
26
|
%
|
100
|
%
|
100
|
%
|
75
|
%
|
||||||||||||||||||||
|
2017
|
41.97
|
%
|
$
|
0.62
|
5.96
|
%
|
41.21
|
%
|
$
|
0.63
|
6.10
|
%
|
71
|
%
|
71
|
%
|
73
|
%
|
71
|
%
|
||||||||||||||||||||
Each NEO receives 90% of their STPP award based upon the achievement of the three pre-established financial performance targets of the
Company discussed above. This is intended to focus each named executive officer on maximizing the overall performance of the Company and not on achievement of goals in a particular operational area. Because of the predominance of the focus of the
NEO bonuses on the overall performance of the Company, specific individual performance goals are not usually set for named executive officers. Instead, each NEO’s individual contribution to the Company’s performance is a subjective determination by
the Committee following discussion with the President and CEO, giving consideration to each NEO’s response to the Company’s changing operational needs during the year.
The STPP includes a clawback provision that is applicable to all participants in the plan. Under this provision, any payment made under
the STPP that was based upon materially inaccurate financial statements requiring a restatement or was a result of fraud in determining an individual or company performance metric must be paid back if discovered within 24 months of the filing of the
inaccurate financial statement(s) or the discovery of the fraud. The repayment, in whole or in part, is at the discretion of the Committee.
The Committee has the authority under the STPP to reduce bonus awards to executive officers that would otherwise be earned, for any reason
the Committee believes appropriate. This may be done for all executive officers or for individual executive officers. The Committee did not exercise any such negative discretion with respect to STPP awards for fiscal years 2019, 2018 or 2017.
The Company also maintains a deferred incentive bonus plan (“DIBP”) for executive officers in conjunction with the STPP. The DIBP is
administered as an unfunded plan of deferred compensation with all benefits expensed and recorded as liabilities as they are accrued. The purpose of the two plans working together is to provide incentives and awards to executive officers to enhance
the Company’s performance and stockholder value over a four-year time horizon. Each named executive officer has the opportunity to defer a minimum of $2,000 and up to 50% (up to a maximum of $100,000) of their cash award under the STPP. The amount
deferred receives a 50% match that is accrued by the Company for accounting purposes over a three year mandatory deferral period. The amount deferred plus the 50% match is deemed to have been invested in Company stock on the last business day of the
calendar year preceding the receipt of the STPP award at the closing price on that date (e.g., on December 31, 2019, in the case of the STPP award for fiscal year 2019 paid in January 2020), in the form of phantom stock. The number of shares of
phantom stock deemed purchased receives dividend equivalents as if the stock were owned by the named executive officer. At the end of the mandatory deferral period, the DIBP is paid out in cash and is comprised of the initial amount deferred, the
50% match, the amount of the dividend equivalents on the phantom shares over the deferral period and the increase in the market value of the Company’s stock over the deferral period, if any, on the phantom shares. There is no provision for the
reduction of the DIBP award at the end of the
18
mandatory deferral period if the market value of the Company’s stock at that time is lower than the market value at the time of the deemed investment.
For participants in the STPP, it is generally required that the recipient be employed by the Bank through the last day of the fiscal year
to receive an award. For participants in the DIBP, the recipient must remain continuously employed by the Bank during the mandatory deferral period and be so employed on the distribution date to receive the Company match, dividend equivalents on
the phantom shares over the deferral period and the increase in the market value of the Company’s stock over the deferral period, if any, on the phantom shares. In the event that an NEO leaves the company during the deferral period for reasons other
than a change in control, the NEO would be entitled to receive his deferred funds six months after his date of termination, but without the Company match or any earnings (including dividend equivalents) on the deferred funds or on the Company match.
The incentive bonus amounts awarded to the NEOs for fiscal year 2019 under the STPP are set forth in the “Non-Equity Incentive Plan
Compensation” column of the Summary Compensation Table. During fiscal year 2019, in addition to his incentive bonus award for that fiscal year, Mr. Kobbeman was paid a $60,000 stay bonus pursuant to his employment agreement with the Bank. See
“Employment and Change in Control Severance Agreements.”
Stock Incentive Plans
The Company’s Stock Incentive Plans are designed to provide incentives for long-term positive performance of the executive officers by
aligning their interests with those of our stockholders by providing the executive officer the opportunity to participate in the appreciation, if any, in the Company’s stock price which may occur after the date options are granted. Awards of
restricted stock are intended to further align executive officers interests with stockholders’ interest. Awards of stock options and restricted stock currently are made under our 2012 Equity Incentive Plan, which was approved by stockholders in
January 2012. The Stock Benefit Committee administers this plan, determines eligibility and grants awards. Since fiscal year 2017, awards have primarily been made in conjunction with the hiring of an eligible officer and promotions. Also, since
fiscal year 2017, new awards have primarily been in the form of restricted stock in order to provide award recipients with a direct and immediate sense of equity ownership. In addition, the 2012 Equity Incentive Plan allows stock awards for
exceptional performance. During fiscal year 2019, Mr. Kobbeman, who joined the Company on August 31, 2018 upon completion of the Company’s acquisition of CCB and Capital City Bank, was awarded 31,300 shares of restricted stock. No other named
executive officer received an award under the 2012 Equity Incentive Plan during fiscal year 2019.
As required by the 2012 Equity Incentive Plan, stock options have an exercise price that is equal to the closing price as of the date of
the grant. We do not coordinate the timing of options and stock awards with the release of material non-public information.
Role of Management
The Committee makes all decisions regarding the compensation of our executive officers. The Committee has asked the President and CEO to
provide, in addition to the comparable market salary data based upon a selected population of comparable financial institutions at both the regional and national levels, reviews of the performance of each NEO except for himself and recommendations
for the salaries of each NEO except for himself and any recommendations for stock awards. Management recommends the target, minimum and maximum performance goals for the Company and the related bonus targets under the STPP to be approved by the
Committee. In addition, management may from time to time recommend changes to the compensation program in response to changes in the marketplace in which the Company competes for executive talent and in light of the absolute performance level of the
Company. The compensation of the CEO is determined by the Committee without prior recommendations from him. The Committee makes all decisions in light of the information provided and the Committee members’ experience and expectations for all NEOs.
Stockholder “Say-on-Pay” Vote
Since our annual meeting of stockholders held in February 2011, we have been required under the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the “Dodd-Frank Act”) to include a non-binding, advisory
19
“say-on-pay” vote in our annual meeting proxy statement at least once every three years, and, at least once every six years, a non-binding, advisory vote on
the frequency of future say-on-pay votes (commonly referred to as a “say-on-pay frequency vote”), with stockholders having the choice of every year, every two years or every three years. We last included a “say-on-pay frequency vote” at our annual
meeting of stockholders held in January 2017 on which stockholders cast the most votes in favor of a frequency of every year for future say-on-pay votes. At our annual meeting of stockholders held in January 2019, stockholders approved the
compensation of the Company’s executives, as disclosed in the Company’s proxy statement for that meeting, with approximately 95% of the votes cast in favor. The Committee considered the results of this vote in setting the compensation of the NEOs
for fiscal year 2019.
Perquisites and Other Personal Benefits
For fiscal year 2019, no NEO received any perquisites or other personal benefits in excess of $10,000 in the aggregate.
Retirement and Other Benefits
The Company provides an ESOP and a defined contribution plan to all employees who qualify for participation under each plan. The ESOP
provides for the allocation of shares of the Company’s common stock annually among all participants based upon each employee’s qualifying compensation as a percentage of the total of all qualifying compensation for all participants. Each NEO
participates in the ESOP and the defined contribution plan.
The defined contribution plan is a 401(k) plan in which the eligibility and participation requirements, allocation calculations and
contribution limits apply to all employees, including NEOs. All employees have the opportunity to direct their investment in the plan. For fiscal year 2019, the Company matched 25% of the employee’s contribution, up to the first 3% of eligible
compensation contributed by the employee. The Company does not offer any defined benefit plan or post-retirement benefit plan that requires expense to the Company following the termination of employment of any NEO.
The Company provides a life insurance benefit for every employee who works on average more than 20 hours per week. During fiscal year
2017, the benefit was reduced from 1.5 times the employee’s base salary to 1.0 times the employee’s base salary, subject to a cap on the total death benefit of $500,000 in the case of Mr. Dicus, $368,000 in the case of Mr. Townsend and $300,000 in
the case of each of the other NEOs. Benefits for all employees in excess of $50,000 result in taxable income. Each of the NEOs participates in this benefit program.
The Company has purchased a life insurance annuity for the CEO, which includes a $5.0 million death benefit. The salary of the CEO has
been grossed up for the cost of the annuity and the income tax associated with the resulting imputed taxable income. The Company has provided this gross up because the Company wished to provide the life insurance annuity benefit to the CEO without
him having to bear the associated tax obligation. The gross up for this benefit is not included in the base salary of the CEO, but is included in the “All Other Compensation” column of the Summary Compensation Table.
In addition to the life insurance benefits discussed above, the Bank has purchased Bank Owned Life Insurance for eligible employees. Each
insured employee was provided the opportunity to designate a beneficiary to receive a death benefit equal to the insured employee’s base salary as of the Board approval date of the purchase if the insured dies while employed by the Bank. All NEOs
other than Mr. Kobbeman have designated beneficiaries. Once the NEO’s employment with the Bank terminates, the death benefit to the beneficiary of the NEO terminates as well. Mr. Kobbeman is covered under Bank Owned Life Insurance policies
originally purchased by Capital City Bank and assumed by the Bank in connection with the Company’s acquisition of CCB and Capital City Bank. Capital City Bank did not offer its employees the ability to designate a beneficiary for any death benefits
payable under its policies.
20
Termination or Change in Control Payments
As noted above under “Overview of Compensation Program,” we have an employment agreement with one of the NEOs, Mr. Kobbeman. This
agreement was entered into in connection with the Company’s acquisition of CCB and Capital City Bank. In addition, the Company has entered into agreements with each of the NEOs, including Mr. Kobbeman, to provide a severance payment if their
employment is terminated under specified circumstances within six months before or 24 months after a change in control of the Company. See “Employment and Change in Control Severance Agreements” and “Payments upon Termination or Change in Control.”
The terms of our stock options and restricted stock awards provide for accelerated vesting only in the case of a change in control. See
“Payments upon Termination or Change in Control.”
Stock Ownership Guidelines
In November 2011, the Company’s Board of Directors adopted stock ownership guidelines, effective January 1, 2012, which are applicable to
the Company’s directors and executive and senior officers. It is the Board’s intention to encourage recipients of future equity-based awards, if any, to retain ownership of the shares relating to those awards to further align their interests with
the interests of the Company’s stockholders. The guidelines provide as follows:
|
|
• |
The CEO shall own five times his salary, directors shall own four times their annual fee, executive vice presidents and senior vice presidents shall own three times their salaries and
first vice presidents shall own one times their salary, in each case in shares of the Company’s common stock. Each director and officer shall have five years to attain the ownership guidelines.
|
|
|
• |
Shares owned directly or by immediate family members of the director or officer shall be included in determining the amount of common stock owned for purposes of the guidelines.
|
|
|
• |
Shares acquired in the ESOP through the reinvestment of dividends shall also be included in determining the amount of common stock owned for purposes of the guidelines.
|
|
|
• |
If, at the end of five years, a director or an officer does not comply with the ownership guidelines, he or she shall not receive future awards under the Company’s stock benefit plans
until he or she complies with the guidelines.
|
Other Tax Considerations
As in effect during fiscal year 2018 and prior taxable years, Section 162(m) of the Internal Revenue Code generally eliminated the
deductibility of compensation over $1 million paid to the principal executive officer and certain highly compensated executive officers of publicly held corporations, excluding certain qualified performance-based compensation. Stock options
automatically constituted qualified performance-based compensation, provided that certain plan content and grant procedure requirements were met. Effective for fiscal 2019 and future taxable years, H.R. 1, originally known as the "Tax Cut and Jobs
Act," amended Section 162(m) to provide that qualified performance-based compensation will be subject to the $1 million deduction limit, subject to grandfathering of amounts payable under certain agreements in effect on November 2, 2017.
21
Summary Compensation Table
The following table sets forth information concerning the compensation paid to or earned by the named executive officers for fiscal years
2019, 2018 and 2017:
|
Name and
Principal Position
|
Year
|
Salary
($)
(1)
|
Bonus
($)
(2)
|
Stock
Awards
($)
(3)
|
Option
Awards ($) |
Non-Equity
Incentive Plan Compensation
($)
(4)
|
Change in
Pension Value and Nonqualified Deferred Compensation Earnings
($)
|
All
Other
Compensation
($)
(5)
|
Total
($) |
|||||||||||||||||||||||||
|
John B. Dicus, Chairman
|
2019
|
$
|
684,962
|
$
|
---
|
$
|
---
|
$
|
---
|
$
|
252,379
|
$
|
---
|
$
|
153,480
|
$
|
1,090,821
|
|||||||||||||||||
|
President and Chief Executive
|
2018
|
671,885
|
---
|
---
|
---
|
346,055
|
---
|
106,885
|
1,124,825
|
|||||||||||||||||||||||||
|
Officer
|
2017
|
653,615
|
---
|
---
|
---
|
321,500
|
---
|
179,129
|
1,154,244
|
|||||||||||||||||||||||||
|
Kent G. Townsend, Executive
|
2019
|
$
|
369,808
|
$
|
---
|
$
|
---
|
$
|
---
|
$
|
93,345
|
$
|
---
|
$
|
44,050
|
$
|
507,203
|
|||||||||||||||||
|
Vice President, Chief
|
2018
|
357,885
|
---
|
---
|
---
|
136,675
|
---
|
21,636
|
516,196
|
|||||||||||||||||||||||||
|
Financial Officer and Treasurer
|
2017
|
345,385
|
---
|
---
|
---
|
125,698
|
---
|
50,765
|
521,848
|
|||||||||||||||||||||||||
|
Rick C. Jackson, Executive
|
2019
|
$
|
265,308
|
$
|
---
|
$
|
---
|
$
|
---
|
$
|
68,117
|
$
|
---
|
$
|
37,135
|
$
|
370,560
|
|||||||||||||||||
|
Vice President and Chief
|
2018
|
255,308
|
---
|
---
|
---
|
96,773
|
---
|
21,518
|
373,599
|
|||||||||||||||||||||||||
|
Lending Officer
|
2017
|
246,077
|
---
|
---
|
---
|
88,938
|
---
|
43,696
|
378,711
|
|||||||||||||||||||||||||
|
Robert D. Kobbeman, Executive
|
2019
|
$
|
301,385
|
$
|
60,000
|
$
|
431,940
|
$
|
---
|
$
|
74,592
|
$
|
---
|
$
|
33,682
|
$
|
901,599
|
|||||||||||||||||
|
Vice President and Chief
|
||||||||||||||||||||||||||||||||||
|
Commercial Lending Officer
(6)
|
||||||||||||||||||||||||||||||||||
|
Natalie G. Haag, Executive
|
2019
|
$
|
249,231
|
$
|
---
|
$
|
---
|
$
|
---
|
$
|
63,714
|
$
|
---
|
$
|
36,005
|
$
|
348,950
|
|||||||||||||||||
|
Vice President, General Counsel
|
2018
|
238,308
|
---
|
---
|
---
|
91,450
|
---
|
21,497
|
351,255
|
|||||||||||||||||||||||||
|
and Corporate Secretary
|
2017
|
227,538
|
---
|
---
|
---
|
82,575
|
---
|
41,702
|
351,815
|
|||||||||||||||||||||||||
_____________________
|
(1)
|
For fiscal years 2019, 2018 and 2017, includes director fees of $24,000 for Mr. Dicus.
|
|
For Mr. Kobbeman, the amount in this column represents the $60,000 stay bonus he was entitled to receive pursuant to his employment
agreement. See “Employment and Change in Control Severance Agreements.” All other bonus amounts earned by the named executive officers are reported under the “Non-Equity Incentive Plan Compensation” column.
|
|
|
(3)
|
Represents the grant date fair value of the award under Accounting Standards Codification Topic No. 718, Compensation-Stock
Compensation (“ASC Topic 718”), based on the number of shares of restricted stock awarded and the fair market value of the Company’s common stock on the date the award was made. The assumptions used in the calculation of this amount are
included in Note 12 of the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019 filed with the SEC.
|
|
(4)
|
Represents incentive bonus amounts awarded for performance in fiscal years 2019, 2018 and 2017 under the STPP. The bonuses for fiscal
year 2019 have been approved by the Compensation Committee of the Company’s Board of Directors but will not be paid until January 2020. The bonus amounts include Capitol Federal Savings’ matching contributions under the Company’s DIBP to
those named executive officers who elected to defer receipt of a portion of their bonus for fiscal years 2019, 2018 and 2017, as follows:
|
|
2019
|
2018
|
2017
|
||||||||||
|
John B. Dicus
|
$
|
50,000
|
$
|
50,000
|
$
|
50,000
|
||||||
|
Kent G. Townsend
|
$
|
18,669
|
$
|
27,335
|
$
|
25,140
|
||||||
|
Rick C. Jackson
|
$
|
13,623
|
$
|
19,355
|
$
|
17,788
|
||||||
|
Robert D. Kobbeman
(6)
|
$
|
12,432
|
---
|
---
|
||||||||
|
Natalie G. Haag
|
$
|
12,743
|
$
|
18,290
|
$
|
16,515
|
||||||
|
The amount deferred, if any, plus the matching contribution on the deferred amount is deemed to be invested in the Company’s common
stock through the purchase of phantom stock units. There will not be any reduction to the payout amount of the phantom stock units if the stock price has depreciated from the beginning of the deemed investment period of the phantom stock
units to the end of such period. Receipt of the matching contribution is contingent on the executive officer remaining employed with the Company for a period of three years following the award of the phantom stock units. For additional
information regarding this plan, see “Non-Qualified Deferred Compensation” below.
|
|
|
(5)
|
Amounts include matching contributions under Capitol Federal Savings’ 401(k) plan, values (based on the closing price of the Company’s
common stock on the last trading day of the fiscal year) of allocations under the ESOP, term life insurance premiums and earnings (in the form of Company stock price appreciation (depreciation) and dividend equivalents during the fiscal year)
accrued by the Company on outstanding phantom stock units awarded under the DIBP. For fiscal year 2019, these include $2,063, $18,093, $630 and $47,596 for Mr. Dicus; $2,063, $18,093, $467 and $23,427 for Mr. Townsend; $2,063, $18,093, $335
and $16,644 for Mr. Jackson; $2,063, $18,093, $380 and $0 for Mr. Kobbeman; and $2,063, $18,093, $314 and $15,535 for Ms. Haag. For Mr. Dicus, the amount for fiscal year 2019 also includes premium on universal life insurance policy of
$66,376 and the amount reimbursed for all or part of the tax liability resulting from the payment of such premium of $18,722. For Mr. Kobbeman, the amount for fiscal year 2019 also includes dividends paid on unvested shares of restricted
stock totaling $13,146.
|
|
(6)
|
No compensation information is provided for Mr. Kobbeman for fiscal years 2018 and 2017 because he was not a named executive officer
for either of those fiscal years. Mr. Kobbeman joined the Company in August 2018 upon completion of the Company’s acquisition of CCB and Capital City Bank.
|
22
Grants of Plan-Based Awards
|
Estimated Possible Payouts Under Non-
Equity Incentive Plan Awards
(
1)
|
Estimated Future Payouts Under
Equity Incentive Plan Awards |
All
Other Stock Awards: Number of Shares |
All Other
Option Awards: Number of Securities |
Exercise
Price of |
Grant
Date Fair Value of Stock |
|||||||||||||||||||||||||||||||||||||||
|
Name
|
Grant
Date |
Threshold
($) |
Target
($) |
Maximum
($) |
Threshold
($) |
Target
($) |
Maximum
($) |
of Stock
or Units (#) |
Underlying
Options (#) |
Option
Awards ($/Sh) |
and
Option Awards |
|||||||||||||||||||||||||||||||||
|
John B. Dicus
|
n/a
|
$
|
78,900
|
$
|
236,700
|
$
|
394,500
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
||||||||||||||||||||||||||||||
|
Kent G. Townsend
|
n/a
|
$
|
29,400
|
$
|
88,200
|
$
|
147,000
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
||||||||||||||||||||||||||||||
|
Rick C. Jackson
|
n/a
|
$
|
21,040
|
$
|
63,120
|
$
|
105,200
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
||||||||||||||||||||||||||||||
|
Robert D. Kobbeman
|
n/a
|
$
|
24,000
|
$
|
72,000
|
$
|
120,000
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
||||||||||||||||||||||||||||||
|
4/30/2019
|
---
|
---
|
---
|
---
|
---
|
---
|
31,300
|
(2)
|
---
|
---
|
$
|
431,940
|
(3) | |||||||||||||||||||||||||||||||
|
Natalie G. Haag
|
n/a
|
$
|
19,680
|
$
|
59,040
|
$
|
98,400
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
||||||||||||||||||||||||||||||
______________
|
(1)
|
For each named executive officer, represents the threshold (i.e. lowest), target and maximum amounts that were potentially payable for fiscal year 2019
under the Company’s STPP. The actual amounts earned under these awards for fiscal year 2019 are reflected in the Summary Compensation Table under the “Non-Equity Incentive Plan Compensation” column. For additional information regarding the
STPP, see “Compensation Discussion and Analysis—Bonus Incentive Plans.”
|
|
(2)
|
Represents a restricted stock award to Mr. Kobbeman with the following vesting schedule: 25% increments on October 29, 2019, 2020, 2021 and 2022,
respectively.
|
|
(3)
|
Represents the grant date fair value of the award determined in accordance with ASC Topic 718. The assumptions used in calculating the grant date fair value
of the award are included in Note 12 of the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019 filed with the SEC.
|
Employment and Change in Control Severance Agreements
As noted under “Compensation Discussion and Analysis,” Mr. Kobbeman is the only named executive officer who has an employment agreement
with us. The Bank and Mr. Kobbeman entered into an employment agreement on April 30, 2018, concurrent with the execution of our definitive agreement to acquire CCB and Capital City Bank. Mr. Kobbeman served as President and Chief Executive Officer
of CCB and Capital City Bank prior to the acquisition.
Mr. Kobbeman’s employment agreement has a term of two years, which commenced on August 31, 2018 (the “Commencement Date”), the date we
completed our acquisition of CCB and Capital City Bank. The agreement entitles Mr. Kobbeman to receive a minimum annual base salary of $300,000 and to participate in the STPP, in all other discretionary bonuses paid to the Bank’s executive officers
and in all retirement, other employee benefit plans and fringe benefits maintained for the Bank’s executive officers. The agreement also entitles Mr. Kobbeman to receive a $60,000 stay bonus, one-half of which was paid on March 1, 2019 and one-half
of which was paid on September 1, 2019.
In the event Mr. Kobbeman’s employment is “involuntarily terminated” other than concurrently with or after a change in control, he will
receive, during the remaining term of the agreement, his then-current salary and substantially the same benefits as the Bank maintains for its executive officers, including Bank-paid dependent medical and dental coverage. If Mr. Kobbeman dies while
employed under the agreement, his estate or his designated beneficiary will receive his salary and benefits through the last day of the calendar month in which he died. Should Mr. Kobbeman become disabled or otherwise unable to serve in his current
capacity, the agreement will remain in effect but his salary will be reduced by any disability insurance payments he receives on policies maintained by the Bank at its expense and under any other Bank-sponsored program.
The term “involuntary termination” includes a material diminution in Mr. Kobbeman’s duties, responsibilities or benefits; it does not
include termination for cause or termination of employment due to retirement, death, disability or suspension or prohibition from participating in the Bank’s affairs under the federal banking laws.
23
The agreement contains a non-solicitation provision that applies for one year after Mr. Kobbeman’s employment with the Bank terminates.
The agreement also contains a non-compete provision that applies for two years after the Commencement Date, in the event Mr. Kobbeman’s employment with the Bank terminates less than two years after the Commencement Date.
As also noted under “Compensation Discussion and Analysis,” the Company has entered into change in control severance agreements with each
of the named executive officers, including Mr. Kobbeman. Each agreement entitles the executive to a severance payment if, within six months before or 24 months after a change in control of the Company, the executive’s employment is terminated by the
Company without cause, is terminated as a result of the executive’s death, disability or retirement or is terminated by the executive for “good reason.” The term “good reason” includes a material reassignment of the executive’s duties or a
significant reduction in the executive’s authority or responsibility, in each case without his express written consent, a reduction in the executive’s then-current base salary or a failure to provide the executive with substantially the same fringe
benefits that were provided to the executive immediately prior to entering into the agreement.
The amount of the severance payment under each change in control severance agreement is 2.99 times the executive’s average annual W-2
compensation during the five full calendar years prior to the date of termination of employment. The agreements provide that severance and other payments that are subject to a change in control will be reduced as much as necessary to ensure that no
amounts payable to the executive will be considered excess parachute payments under Section 280G of the Internal Revenue Code.
For information regarding the amounts that would have been payable to Mr. Kobbeman under his employment agreement and to the named
executive officers under their change in control severance agreements if their employment had been terminated as of September 30, 2019 under circumstances entitling them to such payments, see “Payments Upon Termination or Change in Control.”
24
Outstanding Equity Awards at September 30, 2019
The following table provides information regarding the unexercised stock options and stock awards held by each of the named executive
officers as of September 30, 2019.
|
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 or Units of Stock That Have Not Vested (#) |
Market
Value of Shares or Units of Stock That Have Not Vested ($) |
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
Equity Incentive
Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
|||||||||||||||||||||||||||
|
John B. Dicus
|
25,188
|
(1)
|
---
|
---
|
$
|
11.91
|
05/14/2022
|
---
|
---
|
9,113
|
(6) |
$
|
21,552
|
(6)
|
||||||||||||||||||||||
|
100,116
|
(2)
|
---
|
---
|
$
|
11.91
|
05/14/2027
|
---
|
---
|
11,185
|
(7)
|
20,748
|
(7)
|
||||||||||||||||||||||||
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
11,746
|
(8)
|
17,795
|
(8)
|
||||||||||||||||||||||||||
|
Total
|
125,304
|
32,044
|
$
|
60,095
|
||||||||||||||||||||||||||||||||
|
Kent G. Townsend
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
4,100
|
(6) |
$
|
9,697
|
(6)
|
||||||||||||||||||||||||
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
5,624
|
(7) |
10,433
|
(7)
|
||||||||||||||||||||||||||
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
6,421
|
(8) |
9,728
|
(8)
|
||||||||||||||||||||||||||
|
Total
|
16,145
|
$
|
29,858
|
|||||||||||||||||||||||||||||||||
|
Rick C. Jackson
|
34,630
|
(3)
|
---
|
---
|
$
|
14.43
|
01/26/2020
|
---
|
---
|
2,940
|
(6) |
$
|
6,953
|
(6)
|
||||||||||||||||||||||
|
55,910
|
(4)
|
---
|
---
|
$
|
14.43
|
01/26/2025
|
---
|
---
|
3,979
|
(7) |
7,381
|
(7)
|
||||||||||||||||||||||||
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
4,546
|
(8) |
6,887
|
(8)
|
||||||||||||||||||||||||||
|
Total
|
90,540
|
11,465
|
$
|
21,221
|
||||||||||||||||||||||||||||||||
|
Robert D. Kobbeman
|
---
|
---
|
---
|
---
|
---
|
31,300
|
(5)
|
$
|
431,314
|
---
|
---
|
|||||||||||||||||||||||||
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
||||||||||||||||||||||||||||
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
||||||||||||||||||||||||||||
|
Total
|
||||||||||||||||||||||||||||||||||||
|
Natalie G. Haag
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
2,690
|
(6) |
$
|
6,362
|
(6)
|
||||||||||||||||||||||||
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
3,694
|
(7) |
6,852
|
(7)
|
||||||||||||||||||||||||||
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
4,296
|
(8) |
6,508
|
(8)
|
||||||||||||||||||||||||||
|
Total
|
10,680
|
$
|
19,722
|
|||||||||||||||||||||||||||||||||
_______________
|
(1)
|
Represents unexercised portion of option having the following vesting schedule: 8,396 shares on each of January 10, 2013, 2014, 2015 and 2016.
|
|
(2)
|
Represents unexercised option having the following vesting schedule: 25,029 shares on each of January 10, 2013, 2014, 2015 and 2016.
|
|
(3)
|
Represents unexercised option having the following vesting schedule: approximately 6,926 shares on each of January 26, 2010, 2011, 2012, 2013 and 2014.
|
|
(4)
|
Represents unexercised option having the following vesting schedule: approximately 11,182 shares on each of January 26, 2010, 2011, 2012, 2013 and 2014.
|
|
(5)
|
Represents unvested portion of restricted stock award on April 30, 2019 having the following vesting schedule: 7,825 shares on each of October 29, 2019,
2020, 2021 and 2022.
|
|
(6)
|
Represents phantom stock award under Company’s DIBP as a result of deferring the named executive officer’s annual bonus for fiscal year 2016 under the
Company’s STPP. The number of phantom stock units was determined by the portion of the bonus deferred plus the Company’s 50% match thereon, divided by the Company’s stock price on December 31, 2016. The phantom stock award will be paid in
cash by the second business day following the regularly scheduled board meeting in January 2020, in an amount equal to the appreciation, if any, in the Company’s stock price from December 31, 2016 to December 31, 2019, plus the amount of
dividend equivalents credited during that period. The payout value shown in the far right column represents the stock price appreciation from December 31, 2016 through September 30, 2019, plus the amount of dividend equivalents credited
during that period. See “Non-Qualified Deferred Compensation” below.
|
|
(7)
|
Represents phantom stock award under Company’s DIBP as a result of deferring the named executive officer’s annual bonus for fiscal year 2017 under the
Company’s STPP. The number of phantom stock units was determined by the portion of the bonus deferred plus the Company’s 50% match thereon, divided by the Company’s stock price on December 31, 2017. The phantom stock award will be paid in
cash by the second business day following the regularly scheduled board meeting in January 2021, in an amount equal to the appreciation, if any, in the Company’s stock price from December 31, 2017 to December 31, 2020, plus the amount of
dividend equivalents credited during that period. The payout value shown in the far right column represents the stock price appreciation from December 31, 2017 through September 30, 2019, plus the amount of dividend equivalents credited
during that period. See “Non-Qualified Deferred Compensation” below.
|
|
(8)
|
Represents phantom stock award under Company’s DIBP as a result of deferring the named executive officer’s annual bonus for fiscal year 2018 under the
Company’s STPP. The number of phantom stock units was determined by the portion of the bonus deferred plus the Company’s 50% match thereon, divided by the Company’s stock price on December 31, 2018. The phantom stock award will be paid in
cash by the second business day following the regularly scheduled board meeting in January 2021, in an amount equal to the appreciation, if any, in the Company’s stock price from December 31, 2018 to December 31, 2021, plus the amount of
dividend equivalents credited during that period. The payout value shown in the far right column represents the stock price appreciation from December 31, 2018 through September 30, 2019, plus the amount of dividend equivalents credited
during that period. See “Non-Qualified Deferred Compensation” below.
|
25
Option Exercises and Stock Vested
The following table sets forth information about stock options exercised and shares of restricted stock that vested during the fiscal year
ended September 30, 2019 with respect to each named executive officer:
|
Option Awards
|
Stock Award
|
|||||||||||||||
|
Name
|
Number of
Shares Acquired on Exercise (#) |
Value
Realized on Exercise ($) (1) |
Number of
Shares Acquired on Vesting (#) |
Value
Realized on Vesting ($) |
||||||||||||
|
John B. Dicus
|
8,396
|
$
|
115,697
|
---
|
---
|
|||||||||||
|
Kent G. Townsend
|
---
|
---
|
---
|
---
|
||||||||||||
|
Rick C. Jackson
|
---
|
---
|
---
|
---
|
||||||||||||
|
Robert D. Kobbeman
|
---
|
---
|
---
|
---
|
||||||||||||
|
Natalie G. Haag
|
---
|
---
|
---
|
---
|
||||||||||||
|
__________________________
|
|
|
(1)
|
Represents amount realized upon exercise of stock options, based on the difference between the market value of the shares acquired at the time of exercise
and the exercise price.
|
Non-Qualified Deferred Compensation
The following table sets forth information about compensation payable to each named executive officer under the Company’s DIBP.
|
Executive
|
Registrant
|
Aggregate
|
Aggregate
|
Aggregate
|
||||||||||||||||
|
Contributions
|
Contributions
|
Earnings
|
Withdrawals/
|
Balance
|
||||||||||||||||
|
Name
|
in Last FY
(1)
|
in Last FY
(2)
|
in Last FY
(3)
|
Distributions
(4)
|
at Last FYE
|
|||||||||||||||
|
John B. Dicus
|
$
|
100,000
|
$
|
50,000
|
$
|
47,596
|
$
|
177,240
|
$
|
510,096
|
||||||||||
|
Kent G. Townsend
|
$
|
54,670
|
$
|
27,335
|
$
|
23,427
|
$
|
64,172
|
$
|
254,776
|
||||||||||
|
Rick C. Jackson
|
$
|
38,709
|
$
|
19,355
|
$
|
16,644
|
$
|
46,212
|
$
|
181,047
|
||||||||||
|
Robert D. Kobbeman
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
$0
|
$
|
0
|
||||||||||
|
Natalie G. Haag
|
$
|
36,580
|
$
|
18,290
|
$
|
15,535
|
$
|
43,129
|
$
|
168,418
|
||||||||||
_______________
|
(1)
|
Represents portion of bonus for fiscal year 2018 (otherwise payable in fiscal year 2019) under the STPP deferred by the named executive officer. This
amount was previously reported as compensation for fiscal year 2018 for the named executive officer.
|
|
(2)
|
Represents match by Capitol Federal Savings on portion of bonus for fiscal year 2018 (otherwise payable in fiscal year 2019) under the STPP deferred by the
named executive officer. The match by Capitol Federal Savings was 50% of the amount deferred, which was previously reported as compensation for fiscal year 2018 for the named executive officer. The named executive officer was awarded
phantom stock units under the DIBP in an amount equal to the bonus amount deferred plus the match, divided by the closing price of the Company’s common stock on December 31, 2018.
|
|
(3)
|
Represents stock price appreciation (depreciation) and dividend equivalents on phantom stock units from deferrals (and matches thereon) of STPP bonuses for
fiscal year 2018 and prior years. This amount is reported as compensation for fiscal year 2019 under the "All Other Compensation" column of the Summary Compensation Table. As noted below, there will not be any reduction to the payout amount
of the phantom stock units if the stock price has depreciated from the beginning of the deemed investment period of the phantom stock units to the end of such period.
|
|
(4)
|
Represents cash payout during fiscal year 2019 of phantom stock units for deferral (and 50% match thereon) of the STPP bonus for fiscal year 2015. The
payout was comprised of appreciation in the Company’s stock price from December 31, 2015 through December 31, 2018 plus dividend equivalents credited during that period.
|
Under the DIBP, a participating NEO may defer from $2,000 to as much as 50% (up to a maximum of $100,000) of their award under the STPP,
which is typically made in the January following the end of the fiscal year for which the STPP award is earned. The total amount deferred plus a 50% match by Capitol Federal Savings is deemed to be invested, in the form of phantom stock units, in
Company common stock as of December 31
st
in the year prior to the STPP award at the closing price on that date (e.g., December 31, 2019, in the case of the STPP award for fiscal year 2019 paid in January 2020). On the third anniversary
date (e.g., December 31, 2022, in the case of the award for fiscal year 2019), the phantom stock units are deemed sold and each participant will receive shortly thereafter a cash payment equal to the amount deferred, the company match, the dividend
equivalents paid on Company common stock during the three-year period, plus the appreciation, if any, of Company common stock. There will not be any reduction to the amount of the cash payment if the deemed investment in Company common stock has
depreciated in value from the beginning of the deemed investment period to the end of such period. The payment of these benefits (except for the amount deferred) is subject to the participant’s continued employment by the Bank during the mandatory
deferral period and on the distribution date.
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Payments upon Termination or Change in Control
As discussed under “Employment and Change in Control Severance Agreements,” the Bank and Mr. Kobbeman are party
to an employment agreement, the term of which commenced on August 31, 2018 and will end on August 31, 2020 if not terminated sooner in accordance with the agreement. The agreement provides that if Mr. Kobbeman’s employment is “involuntarily
terminated” other than concurrently with or after a change in control, he will receive, during the remaining term of the agreement, his then-current salary and substantially the same benefits as the Bank maintains for its executive officers,
including Bank-paid dependent medical and dental coverage. If Mr. Kobbeman’s employment had been “involuntarily terminated” under these circumstances as of September 30, 2019, the aggregate amounts of his salary payments and benefits for the
remaining term of the agreement would have been $282,462 and $6,585, respectively. Mr. Kobbeman also would have continued to vest in his unvested shares of restricted stock through the remaining term of the agreement, consisting of a tranche of
7,825 shares which had a value of $107,829 as of September 30, 2019 and vested on October 29, 2019.
If Mr. Kobbeman dies while employed under his employment agreement, his estate or his designated beneficiary will receive his salary and
benefits through the last day of the calendar month in which he died. Accordingly, had Mr. Kobbeman died on September 30, 2019, his death would not have resulted in additional payments or benefits for any post-termination period.
Should Mr. Kobbeman become disabled or otherwise unable to serve in his current capacity, his employment
agreement will remain in effect but his salary will be reduced by any disability insurance payments he receives on policies maintained by the Bank at its expense and under any other Bank-sponsored program. If, on September 30, 2019, Mr. Kobbeman had
become disabled or otherwise unable to serve in his current capacity, the aggregate amount of his salary payments for the remaining term of the agreement would have been $282,462, subject to reduction as described above.
As also discussed under “Employment and Change in Control Severance Agreements,” the Company has entered into change in control severance
agreements with each of the NEOs, including Mr. Kobbeman. Each agreement entitles the executive to a severance payment if, within six months before or 24 months after a change in control of the Company, the executive’s employment is terminated by
the Company without cause, is terminated as a result of the executive’s death, disability or retirement or is terminated by the executive for “good reason.”
The amount of the severance payment under each change in control severance agreement is 2.99 times the
executive’s average annual W-2 compensation during the five full calendar years prior to the date of termination of employment. If their employment had been terminated as of September 30, 2019 under circumstances entitling them to severance payments
under their change in control severance agreements, the amounts of the payments to Messrs. Dicus, Townsend, Jackson and Kobbeman and Ms. Haag would have been approximately $3.2 million, $1.6 million, $1.1 million, $838 thousand and $881 thousand,
respectively. The agreements provide that severance and other payments that are subject to a change in control will be reduced as much as necessary to ensure that no amounts payable to the executive will be considered excess parachute payments under
Section 280G of the Internal Revenue Code.
Under the general terms of stock options granted under the Company’s 2012 Equity Incentive Plan and 2000 Stock Option and Incentive Plan
and restricted stock granted under the Company’s 2012 Equity Incentive Plan, upon the occurrence of a change in control of the Company, all unvested stock options and unvested shares of restricted stock will vest. As of September 30, 2019, none of
the NEOs held unvested stock options and Mr. Kobbeman was the only NEO who held unvested shares of restricted stock, holding 31,300 unvested shares as of that date. If a change in control of the Company had occurred on September 30, 2019, the
aggregate value that would have been realized by Mr. Kobbeman as a result of the acceleration of the vesting of his unvested shares of restricted stock, based on the closing price of the Company's common stock on that date of $13.78, was $431,314.
The Company’s STPP provides that if, within two years following a change in control of the Company, a participant’s employment is
terminated other than due to death, disability, retirement, cause or resignation by the participant (other than resignation due to reassignment to a job that is not reasonably equivalent in responsibility or compensation, or that is not in the same
geographic area, or resignation within 30 days following a reduction in base pay), then the participant will be paid a pro rata award for the performance year in which his or her termination of
27
employment occurs, with the award amount determined assuming all individual and corporate performance targets have been met. Had any of Messrs. Dicus,
Townsend, Jackson or Kobbeman or Ms. Haag experienced such a termination of employment on September 30, 2019, they would have been entitled to the regular bonus earned for the year, rather than a pro rata award with assumed maximum achievement of
performance targets, since the performance period for the year actually ended on that date. The bonus amounts for fiscal year 2019 are set forth in the Summary Compensation Table under the “Non-Equity Incentive Plan Compensation” column.
The Company’s DIBP provides that if, within two years following a change in control of the Company, a participant’s employment is
terminated other than due to death, disability, retirement, cause or resignation by the participant (other than resignation due to reassignment to a job that is not reasonably equivalent in responsibility or compensation, or that is not in the same
geographic area, or resignation within 30 days following a reduction in base pay), then the participant will become fully vested in his or her plan account, which shall be paid to him or her within 90 days after the termination date. If Messrs.
Dicus, Townsend, Jackson or Kobbeman or Ms. Haag had experienced such a termination of employment on September 30, 2019, the amounts of their DIBP accounts that would have vested and been payable within 90 days would have been $510,096, $254,776,
$181,047, $0 and $168,418 respectively.
As discussed under “Compensation Discussion and Analysis—Retirement and Other Benefits,” the Company provides a life insurance benefit for
every employee who works on average more than 20 hours per week equal to 1.0 times the employee’s base salary, subject to a cap on the total death benefit of $500,000 in the case of Mr. Dicus, $368,000 in the case of Mr. Townsend and $300,000 in the
case of each of the other NEOs. Each of the NEOs participates in this benefit program. Had Messrs. Dicus, Townsend, Jackson or Kobbeman or Ms. Haag died on September 30, 2019, the death benefit payable under this program would have been $500,000,
$368,000, $273,000, $300,000 and $260,000 respectively.
As also discussed under “Compensation Discussion and Analysis—Retirement and Other Benefits,” the Company has purchased a life insurance
annuity for Mr. Dicus, which includes a $5.0 million death benefit. Accordingly, had Mr. Dicus died on September 30, 2019, a death benefit would have been payable for him in this amount.
In addition, as discussed under “Compensation Discussion and Analysis—Retirement and Other Benefits,” the Bank has purchased Bank Owned
Life Insurance. Under the terms of the Bank Owned Life Insurance, each insured employee was provided the opportunity to designate a beneficiary to receive a death benefit equal to the insured employee’s base salary as of the date of Board approval
of the purchase if the insured dies while employed by the Bank. All NEOs other than Mr. Kobbeman have designated beneficiaries. Had Messrs. Dicus, Townsend, Jackson or Ms. Haag died on September 30, 2019, the death benefit payable under the Bank
Owned Life Insurance to their beneficiaries would have been $610,481, $330,000, $235,000 and $215,000 respectively.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained above with management and, based
on such review and discussion, the Compensation Committee recommended to the Company’s Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
The foregoing report is furnished by the Compensation Committee of the Company’s Board of Directors:
Jeffrey M. Johnson (Chairman)
Michel’ Philipp Cole
Morris J. Huey, II
Michael T. McCoy, M.D.
James G. Morris
Reginald L. Robinson
Jeffrey R. Thompson
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CEO Pay Ratio
For fiscal year 2019, the annual total compensation for our median employee was $39,022 and the annual total compensation for our CEO was
$1,097,900. The resulting ratio of our CEO’s pay to the pay of our median employee for fiscal year 2019 was 28.1 to 1.
We identified the median employee by examining total W-2, Box 1 compensation for all individuals, excluding our CEO, who were employed by
us on September 30, 2018. We included all employees, whether employed on a full-time, part-time or seasonal basis. We did not make any cost-of-living adjustments in identifying the median employee. We did not adjust employee compensation with respect
to total compensation by annualizing the compensation for any full-time or part-time employees that were not employed by us for all of fiscal year 2018. We did include all former Capital City Bank employees who were employed by the Bank on September
30, 2018 considering their W-2, Box 1 compensation for the fiscal year time period. We are using the same “median employee” for fiscal year 2019 as we used for fiscal year 2018 because there has been no change in our employee population or employee
compensation arrangements that we believe would significantly impact our pay ratio disclosure.
We calculated the median employee’s annual total compensation using the same methodology we use for our named executive officers as set
forth in the fiscal year 2019 Summary Compensation Table in this proxy statement. In our fiscal year 2019 Summary Compensation Table, we report annual cash incentive paid to our CEO for performance in fiscal year 2019. Our median employee did not
earn any cash incentives for fiscal year 2019.
DELINQUENT SECTION 16(a) REPORTS
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors, certain of its officers, and persons who
beneficially own more than 10% of the Company’s common stock to report their initial ownership of the Company’s common stock and any subsequent changes in that ownership to the SEC. Specific due dates for these reports have been established by the
SEC, and the Company is required to disclose in this proxy statement any late filings or failures to file.
The Company believes that, based solely on a review of such reports filed with the SEC and written representations that no other reports
were required during the fiscal year ended September 30, 2019, all Section 16(a) filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with during fiscal year 2019, other than the inadvertent
failure of officer Anthony S. Barry to timely file a Form 3 with respect to his initial beneficial ownership of the Company’s common stock and the inadvertent failure of each of the following officers to timely file a Form 4 to report a single
transaction (the settlement of phantom stock units): John B. Dicus, Kent G. Townsend, Rick C. Jackson, Natalie G. Haag, Daniel L. Lehman and Tara D. Van Houweling.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company’s compensation plans and matters are administered by the Stock Benefit Committee and the Compensation Committee. The Stock
Benefit Committee is currently comprised of Directors McCoy (Chairman), Cole, Johnson, Morris, Robinson and Thompson. The Compensation Committee is currently comprised of Directors Johnson (Chairman), Cole, Huey, McCoy, Morris, Robinson, and
Thompson. Director Huey is a former officer of the Company.
CERTAIN TRANSACTIONS
The charter of the Audit Committee of the Company’s Board of Directors provides that the Audit Committee is to review and approve all
related party transactions (defined as transactions requiring disclosure under Item 404 of SEC Regulation S-K) on a regular basis.
Capitol Federal Savings has followed a policy of granting loans to officers and directors. These loans are made in the ordinary course of
business and on the same terms and conditions as those of comparable transactions
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with the general public prevailing at the time, in accordance with our underwriting guidelines, and do not involve more than the normal risk of collectability
or present other unfavorable features.
All loans that Capitol Federal Savings makes to directors and executive officers are subject to regulations of the Office of the
Comptroller of the Currency restricting loans and other transactions with affiliated persons of Capitol Federal Savings. Loans to all directors and executive officers and their related persons totaled approximately $2.4 million at September 30,
2019, which was approximately 0.2% of our consolidated equity at that date. All loans to directors and executive officers were performing in accordance with their terms at September 30, 2019.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The information contained in this report shall not be deemed to be “soliciting material” or to be “filed” with the SEC,
nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by
reference in such filing.
The Audit Committee has reviewed and discussed the audited financial statements of the Company for the fiscal year ended September 30, 2019
with management. The Audit Committee has discussed with Deloitte & Touche LLP, the Company’s independent auditors, the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”)
and the SEC.
The Audit Committee has also received the written disclosures and the letter from Deloitte & Touche LLP required by applicable
requirements of the PCAOB regarding Deloitte & Touche LLP’s communications with the Audit Committee concerning independence, and discussed with Deloitte & Touche LLP their independence.
Based on the Audit Committee’s review and discussions noted above, the Audit Committee recommended to the Company’s Board of Directors that
the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019, for filing with the SEC.
The foregoing report is furnished by the Audit Committee of the Company’s Board of Directors.
Jeffrey R. Thompson (Chairman)
Michel’ Philipp Cole
Jeffrey M. Johnson
Morris J. Huey, II
Michael T. McCoy
James G. Morris
Reginald L. Robinson
PROPOSAL II
ADVISORY VOTE ON EXECUTIVE COMPENSATION
Under the Dodd-Frank Act, we are including in this proxy statement and will present at the annual meeting a non-binding stockholder vote to
approve the compensation of our executives, as described in the proxy statement pursuant to the compensation disclosure rules of the SEC. This proposal, commonly known as a “say-on-pay” vote, gives stockholders the opportunity to endorse or not
endorse the compensation of the Company’s executives as disclosed in this proxy statement. This proposal will be presented at the annual meeting as a resolution in substantially the following form:
RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed in the Company’s proxy statement for the annual meeting pursuant to
Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby approved.
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This vote will not be binding on the Company’s Board of Directors and may not be construed as overruling a decision by the Board or
creating or implying any change to the fiduciary duties of the Board. Nor will it affect any compensation previously paid or awarded to any executive. The Compensation Committee and the Board may, however, take into account the outcome of the vote
when considering future executive compensation arrangements.
The Dodd-Frank Act requires that we include a “say-on-pay” vote in our annual meeting proxy statement at least once every three years, and
that at least once every six years we hold a non-binding, advisory vote on the frequency of future say-on-pay votes (commonly referred to as a “say-on-pay frequency vote”), with stockholders having the choice of every year, every two years or every
three years. We last included a say-on-pay frequency vote at our annual meeting of stockholders held in January 2017, and the most votes were received for a frequency of every year. Our Board of Directors determined, in light of those results, that
we will include a say-on-pay vote in our annual meeting proxy materials every year until the next required say-on-pay frequency vote is held (in 2023).
The purpose of our compensation programs is to attract and retain experienced, highly qualified executives critical to our long-term
success and enhancement of stockholder value. The Board of Directors believes that our compensation programs achieve this objective, and therefore recommends that stockholders vote
“FOR”
this proposal.
PROPOSAL III
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee of the Company’s Board of Directors has renewed the Company’s arrangement for Deloitte & Touche LLP to be the
Company’s independent auditors for the fiscal year ending September 30, 2020, subject to the ratification of that appointment by the Company’s stockholders at the annual meeting. A representative of Deloitte & Touche LLP is expected to attend
the annual meeting to respond to appropriate questions and will have an opportunity to make a statement if he or she so desires.
Although not required by the Company’s bylaws or otherwise, the Audit Committee and the Board of Directors believe it appropriate, as a
matter of good corporate governance, to request that the Company’s stockholders ratify the appointment of Deloitte & Touche LLP as the Company’s independent auditors for the fiscal year ending September 30, 2020. If the stockholders do not so
ratify, the Audit Committee will reconsider the appointment and may retain Deloitte & Touche LLP or another firm without re-submitting the matter to the stockholders. Even if the stockholders ratify the appointment, the Audit Committee may, in
its discretion, direct the appointment of a different independent registered public accounting firm as the Company’s independent auditors at any time during the year.
For the fiscal years ended September 30, 2019 and 2018, Deloitte & Touche LLP provided various audit and non-audit services to the
Company. Set forth below are the aggregate fees billed for these services:
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(a) |
Audit Fees: Aggregate fees billed for professional services rendered for the audit of the Company’s annual financial statements, for the audit pursuant to Section 404 of the Sarbanes-Oxley
Act of 2002, for the review of financial statements included in the Company’s Quarterly Reports on Form 10-Q, for statutory and regulatory audits and for consents: $984,500 – 2019; $966,000 – 2018.
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(b) |
Audit-Related Fees: Aggregate fees billed for professional services rendered related to agreed-upon procedures engagements and acquisition-related audit services: $48,800 – 2019; $173,420
– 2018.
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(c) |
Tax Fees: Aggregate fees billed for professional services rendered related to tax return preparation and tax consultations: $136,430 – 2019; $127,593 – 2018;.
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(d) |
All other fees: Aggregate fees billed for all other professional services, consisting of an accounting research tool subscription: $1,895 – 2019; none – 2018.
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The Audit Committee generally pre-approves all audit and permissible non-audit services to be provided by the independent auditors. The
Audit Committee has, however, delegated authority to the chairperson of the Audit Committee to pre-approve services not pre-approved by the Audit Committee, provided such action is reported to the Audit Committee at its next meeting. None of the
services provided by Deloitte & Touche LLP described in items (a)-(d) above was approved by the Audit Committee pursuant to a waiver of the pre-approval requirements of the SEC’s rules and regulations.
The Board of Directors recommends that stockholders vote
“FOR”
the ratification of the appointment
of Deloitte & Touche LLP as the Company’s independent auditors for the fiscal year ending September 30, 2020.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the Company’s proxy materials for next year’s annual meeting of stockholders, any stockholder
proposal to take action at the meeting must be received at the Company’s executive office at 700 S. Kansas Avenue, Topeka, Kansas 66603 no later than August 20, 2020. All stockholder proposals submitted for inclusion in the Company’s proxy materials
will be subject to the requirements of the proxy rules adopted under the Securities Exchange Act of 1934, as amended, and, as with any stockholder proposal (regardless of whether included in the Company’s proxy materials), the Company’s charter and
bylaws.
In addition to the deadline and other requirements referred to above for submitting a stockholder proposal to be included in the Company’s
proxy materials for its next annual meeting of stockholders, the Company’s bylaws require a separate notification to be made in order for a stockholder proposal to be eligible for presentation at the meeting, regardless of whether the proposal is
included in the Company’s proxy materials for the meeting. In order to be eligible for presentation at the Company’s next annual meeting of stockholders, written notice of a stockholder proposal containing the information specified in Article I,
Section 6 of the Company’s bylaws must be received by the Secretary of the Company not earlier than the close of business on September 30, 2020 and not later than the close of business on October 30, 2020. If, however, the date of the next annual
meeting is before January 8, 2021 or after March 29, 2021, the notice of the stockholder proposal must instead be received by the Company’s Secretary not earlier than the close of business on the 120th day prior to the date of the next annual meeting
and not later than the close of business on the later of the 90th day before the date of the next annual meeting or the tenth day following the first to occur of the day on which notice of the date of the next annual meeting is mailed or otherwise
transmitted or the day on which public announcement of the date of the next annual meeting is first made by the Company.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the annual meeting other than the matters described above in this proxy
statement. However, if any other matters should properly come before the meeting, it is intended that holders of the proxies will act in accordance with their best judgment.
ADDITIONAL INFORMATION
The Company will pay the costs of soliciting proxies. The Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners of common stock. In addition to solicitation by mail, directors, officers and employees of the Company may solicit proxies personally or by
facsimile, telephone or other means, without additional compensation.
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TABLE OF CONTENTS