DEF 14A 1 cobz-20180309xdef14a.htm DEF 14A cobz_Current folio_Def14A

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

 

 

 

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))

 

 

 

 

 

Definitive Proxy Statement

 

 

 

 

 

Definitive Additional Materials

 

 

 

 

 

Soliciting Material Pursuant to §240.14a-12

 

 

 

 

 

 

CoBiz 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):

 



 


No fee required.

 

 

 



 


Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

(1)

 

Title of each class of securities to which transaction applies:       

 

 

(2)

 

Aggregate number of securities to which transaction applies:         

 

 

(3)

 

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):         

 

 

(4)

 

Proposed maximum aggregate value of transaction:         

 

 

(5)

 

Total fee paid:         


 

Fee paid previously with preliminary materials.


 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

 

 

(1)

 

Amount Previously Paid:         

 

 

(2)

 

Form, Schedule or Registration Statement No.:         

 

 

(3)

 

Filing Party:         

 

 

(4)

 

Date Filed:         

 

 


 

Picture 2

 

March 9, 2018

 

Dear Fellow Shareholder:

 

This year's Annual Meeting of Shareholders of CoBiz Financial Inc., a Colorado corporation (the Company), will be held at the Company’s office at 1401 Lawrence Street, Suite 1200, Denver, Colorado 80202 on April 26, 2018 at 8:00 a.m., M.D.T.  You are cordially invited to attend. 

 

We are using the Securities and Exchange Commission (SEC) rule that allows us to furnish our proxy materials to shareholders over the Internet. This means our shareholders will receive only a notice containing instructions on how to access the proxy materials over the Internet and vote online. If you receive this notice but would still like to request paper copies of the proxy materials, please follow the instructions on the notice or on the website referred to on the notice. By delivering proxy materials electronically to our shareholders, we can reduce the costs of printing and mailing our proxy materials. Please visit www.edocumentview.com/COBZ for more information about the electronic delivery of proxy materials.

 

The Company’s Board of Directors recommends that you vote:

 

(i)

FOR the election of twelve nominees to serve as directors of the Company;

 

(ii)

FOR an advisory (nonbinding) shareholder approval of executive compensation;

 

(iii)

FOR the ratification (nonbinding) of the selection of Crowe Horwath LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2018; and

 

(iv)

FOR the option of an annual nonbinding advisory vote as the frequency with which shareholders are provided a future advisory vote regarding executive compensation. 

 

To be certain that your shares are voted at the Annual Meeting, whether or not you plan to attend in person, you should vote via telephone, via Internet, or by following the instructions on the enclosed notice as soon as possible.  Your vote is important.

 

At the Annual Meeting, I will review the Company’s activities during the past year and its plans for the future.  Shareholders will be given the opportunity to address questions to the Company’s management.  I hope you will be able to join us.

 

 

 

 

Sincerely,

 

 

 

Picture 4

 

 

 

Steven Bangert

 

Chairman of the Board and Chief Executive Officer


 

COBIZ FINANCIAL INC.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

 

 

 

 

 

Date and Time:

 

Thursday, April 26, 2018, at 8:00 a.m., M.D.T

Location:

 

CoBiz Financial Inc., 1401 Lawrence Street, Suite 1200
Denver, Colorado 80202

Items of Business:

 

(i)

The election of the Board of Director's twelve nominees to serve as directors of the Company;

 

 

(ii)

An advisory (nonbinding) shareholder approval of executive compensation;

 

 

(iii)

The ratification (nonbinding) of the selection of Crowe Horwath LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2018; and

 

 

(iv)

An advisory (nonbinding) vote to determine whether the shareholder vote on the compensation of the Company’s executives will occur every 1, 2, or 3 years.

Record Date:

 

You may vote at the meeting if you were a shareholder of record at the close of business on February 21, 2018.

Voting by Proxy:

 

If you cannot attend the Annual Meeting in person, you may vote your shares by telephone or by Internet no later than 1:00 a.m. Central Time on April 26, 2018 (or as directed on the enclosed notice card). We encourage you to vote by telephone or Internet in order to reduce our mailing and handling expenses.

Internet Availability of Proxy Materials:

 

Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to be Held on April 26, 2018: CoBiz Financial’s 2017 Proxy Statement and Annual Report to Shareholders for the year ended December 31, 2017 are available at: www.edocumentview.com/COBZ

 

 

 

 

 

 

By Order of the Board of Directors

 

 

 

Picture 8

 

 

Richard J. Dalton

 

 

Corporate Secretary

 

 

Dated:  March 9, 2018

 

REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT.  WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE VIA TELEPHONE, INTERNET OR BY FOLLOWING THE INSTRUCTIONS ON THE NOTICE AND REQUESTING PAPER COPIES OF THE PROXY MATERIALS AT YOUR EARLIEST CONVENIENCE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE ANNUAL MEETING, AND IF YOU ARE PRESENT AT THE ANNUAL MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.

 


 

TABLE OF CONTENTS

 

 

 

SUMMARY OF ACCOMPLISHMENTS IN 2017 

1

SOLICITATION OF PROXY, REVOCABILITY AND VOTING OF PROXIES 

2

General 

2

Voting 

2

Solicitation and Revocability of Proxies 

3

PROPOSAL 1.  ELECTION OF DIRECTORS 

4

Nominees for Election as Directors 

5

Board of Directors and Corporate Governance 

8

Board Structure and Lead Independent Director 

8

Experience, Qualifications, Attributes and Skills of Directors and Nominees 

9

Board’s Role in the Risk Oversight Process 

11

Director Training 

11

Compensation of Directors 

12

Executive Committee 

13

Capital Formation Committee 

13

Audit Committee 

13

Governance and Nominating Committee 

14

Compensation Committee 

15

Compensation Committee Interlocks and Insider Participation 

16

MANAGEMENT 

16

Executive Officers 

16

PROPOSAL 2.  ADVISORY (NONBINDING) SHAREHOLDER APPROVAL OF EXECUTIVE COMPENSATION 

17

EXECUTIVE COMPENSATION 

18

COMPENSATION DISCUSSION and ANALYSIS 

19

Executive Summary – 2017 Accomplishments and Executive Pay 

19

2017 Say-On-Pay Results 

19

Components of Our 2017 Compensation Program 

19

Pay-For-Performance 

24

How Compensation Decisions are Made 

24

Governance 

26

Tax Considerations 

27

Excessive Risk 

27

COMPENSATION COMMITTEE REPORT 

28

Summary Compensation Table 

29

Grants of Plan-Based Awards 

30

Outstanding Equity Awards at Fiscal Year-End 

31

Options Exercised and Stock Vested 

31

Potential Payments Upon Termination or Change in Control 

31

Pay Ratio 

33

PROPOSAL 3.  RATIFICATION (NONBINDING) OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

34

 

 

Independent Registered Public Accounting Firm Fees and Services 

34

AUDIT COMMITTEE REPORT 

36

 

 

PRINCIPAL SHAREHOLDERS 

37

Stock Ownership of Directors and Management 

37

Stock Ownership of Certain Beneficial Owners 

38

CERTAIN RELATIONSHIPS AND TRANSACTIONS 

38

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE 

39

2017 ANNUAL REPORT TO SHAREHOLDERS 

39

SHAREHOLDER COMMUNICATIONS WITH THE BOARD 

40

SHAREHOLDER RECOMMENDATIONS OF DIRECTOR NOMINEES 

40

PROPOSAL 4.  ADVISORY (NONBINDING) VOTE ON THE FREQUENCY OF VOTES ON EXECUTIVE COMPENSATION 

40

SUBMISSION OF SHAREHOLDER PROPOSAL FOR 2019 ANNUAL MEETING 

41

OTHER MATTERS 

41

APPENDIX A 

42

 

 


 

SUMMARY OF ACCOMPLISHMENTS IN 2017

 

2017 was a year of continued profitable growth, along with the completion of initiatives designed to help ensure that profitable growth continues.

 

2017 PERFORMANCE

 

·

We achieved total shareholder return (“TSR”) of 19.71% for the one-year period ending December 31, 2017;

·

Common shareholder dividends increased 11% in 2017, the sixth consecutive year the dividend has been increased;

·

Net income decreased 5.7%, from $34.9 million in 2016 to $32.9 million in 2017.  The Tax Cuts and Jobs Act (TCJA)  signed into legislation by President Trump on December 22, 2017 reduced the corporate federal tax rate from 35% to 21%.  The reduction in the federal tax rate required a remeasurement of the Company’s deferred tax assets and liabilities that increased tax expense by $7.2 million.  Excluding this increase to tax expense, net income increased $5.2 million, or 15%;

·

Growth in our interest-earning assets, coupled with an expanded net interest margin, increased net interest income by $14.5 million, from $116.1 million in 2016 to $130.6 million in 2017.    Continued growth in the loan portfolio led to a provision for loan losses of $3.3 million in 2017, compared to a $2.1 million negative provision for loan losses in 2016 from the reversal of a specific reserve on a large impaired credit.  While noninterest income was relatively flat in 2017 compared to 2016, revenue from our core business lines increased 7% and noninterest expense increased 2.5%, an improvement over the Company’s goal of maintaining expense growth below 4%; and

·

The average loan and deposit portfolios both increased 9.0% in 2017.

 

NAMED EXECUTIVE OFFICER COMPENSATION

 

Our executive compensation plans continue to help drive positive performance.  In 2017 the plans rewarded executives for core earnings per share growth, noninterest income as a percentage of operating revenue, return on average tangible equity, return on assets and TSR.  The plans also rewarded executives for the achievement of other strategic goals, set forth in the Compensation Discussion & Analysis.  We believe that our incentive programs played a significant role in the achievement of the financial and TSR milestones listed above.

 

99.41% of the shareholders represented in person or by proxy voted in favor of the Say-on-Pay Advisory Resolution at the April 21, 2017 Annual Meeting.

 

SHAREHOLDER OUTREACH

 

The Company maintains  an active dialogue with its largest institutional shareholders.  During this process, we discuss matters ranging from financial results, executive compensation and corporate governance.

 

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COBIZ FINANCIAL INC.

PROXY STATEMENT

 

SOLICITATION OF PROXY, REVOCABILITY AND VOTING OF PROXIES

 

GENERAL

 

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of CoBiz Financial Inc. (the “Board” or “Board of Directors”), a Colorado corporation (the “Company” or “CoBiz”), for use at the Annual Meeting of Shareholders of the Company to be held on April 26, 2018, at 8:00 a.m., M.D.T., at the Company’s principal office at 1401 Lawrence Street, Suite 1200, Denver, Colorado 80202 and at any adjournment or postponement of the Annual Meeting.

 

This Proxy Statement and the accompanying form of proxy are first being transmitted or delivered to holders of the Company’s common stock beginning on or about March 9, 2018, together with the Company’s 2017 Annual Report to Shareholders.

 

The Company’s principal executive offices are located at 1401 Lawrence Street, Suite 1200, Denver, Colorado 80202.

 

VOTING

 

Who Can Vote. Only shareholders of record at the close of business on February 21, 2018 are entitled to notice of and to vote at the Annual Meeting or at any adjournment or postponement thereof. As of that date, there were 42,237,335 shares of common stock outstanding.  Each share is entitled to one vote.  Cumulative voting is not permitted.  Shares as to which the shareholder instructs the proxy to abstain from voting on any matter or withholds authority to vote for a director will be counted as shares that are present and entitled to vote for purposes of determining the presence of a quorum at the Annual Meeting but as not voted for purposes of determining the election of directors or other matters.  If a broker submits a proxy that indicates the broker does not have discretionary authority as to certain shares to vote on one or more matters (a “broker non-vote”), those shares will be treated in the same manner as abstentions. 

 

Quorum Requirement. The Company’s bylaws provide that the holders of not less than a majority of the shares entitled to vote at any meeting of shareholders, present in person or represented by proxy, will constitute a quorum. 

 

Information about Votes Necessary for Action to be Taken.  Directors are elected by majority vote; provided that if the number of nominees for director exceeds the number of directors to be elected, directors shall be elected by a plurality of the votes of the shares entitled to vote. The remaining matters to be considered at the meeting will also be adopted if a majority of the votes are cast in favor.  Abstentions and broker non-votes  (assuming a quorum is present) will have no effect on the election of directors or on the remaining matters to be considered at the meeting. 

 

Internet availability of proxy materials.    We are using the SEC notice and access rule that allows us to furnish our proxy materials over the Internet to our shareholders instead of mailing paper copies of those materials to each shareholder. As a result, beginning on or about March 9, 2018, we sent our shareholders by mail a notice containing instructions on how to access our proxy materials over the Internet and vote online. This notice is not a proxy card and cannot be used to vote your shares. If you received a notice this year, you will not receive paper copies of the proxy materials unless you request the materials by following the instructions on the notice or on the website referred to on the notice.

 

If you own shares of common stock in more than one account—for example, in a joint account with your spouse and in your individual brokerage account—you may have received more than one notice. To vote all of your shares by proxy, please follow each of the separate proxy voting instructions that you received for your shares of common stock held in each of your different accounts.

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Voting.  If your shares of our common stock are held by a broker, bank or other nominee (i.e., in “street name”), you should receive instructions from that person or entity that you must follow in order to have such shares voted. If you hold shares of our common stock in your own name and not through a broker or another nominee, you may vote such shares:  

 

·

By using the toll-free telephone number listed on the notice,

·

By using the Internet website listed on the notice,

·

By following the instructions on the notice requesting paper copies of the proxy materials and then signing, dating and mailing the proxy card in the postage-paid envelope provided, or

·

By attending the Annual Meeting and voting in person.

 

Whichever of these methods you select to transmit your instructions, the proxy holders will vote your shares of our common stock in accordance with your instructions. Executed but unmarked proxies will be voted:

 

(i)

FOR the election of the Board’s nominees as directors; 

 

(ii)

FOR the advisory (nonbinding) shareholder approval of executive compensation;

 

(iii)

FOR the ratification (nonbinding) of the appointment of CoBiz’s independent registered public accounting firm;  and

 

(iv)

FOR the option (nonbinding) of an annual advisory vote for the approval of executive compensation. 

 

Vote by Telephone.  If you hold shares of our common stock in your own name and not through your broker or another nominee, you can vote such shares by telephone by dialing the toll-free telephone number printed on your notice card. Telephone voting is available 24 hours a day until 1:00 a.m., Central Time, on April 26, 2018. Easy-to-follow voice prompts allow you to vote your shares of our common stock and confirm that your instructions have been properly recorded.

 

Vote by Internet.  If you hold shares of our common stock in your own name and not through your broker or another nominee, you can choose to vote via the Internet. The website for Internet voting is printed on your notice card. Internet voting is available 24 hours a day until 1:00 a.m., Central Time, on April 26, 2018. As with telephone voting, you will be given the opportunity to confirm that your instructions have been properly recorded.

 

Vote by Mail.  You can vote by mail by following the instructions on the attached notice and requesting paper copies of the proxy materials and then signing, dating and returning the proxy card in the postage-paid envelope to be provided.

SOLICITATION AND REVOCABILITY OF PROXIES

 

The Company will pay all expenses in connection with the solicitation of proxies.  In addition to solicitation by mail, officers, directors and regular employees of the Company who will receive no extra compensation for their services may solicit proxies telephonically, electronically or by other means of communication.  

 

A shareholder submitting the enclosed proxy may revoke it at any time before his or her vote is cast at the Annual Meeting by delivering to the Secretary of the Company a written notice of termination of the proxy's authority or of a duly executed proxy bearing a later date or by voting in person at the Annual Meeting.  Shares entitled to vote and represented by properly completed proxies received prior to the Annual Meeting and not revoked will be voted in the manner directed by the shareholder granting such proxy.  If no direction is made in the proxy, the shares represented by the proxy will be voted as recommended by the Board of Directors.   If your common stock is held through a broker, bank or other nominee, you must follow their instructions to revoke your voting elections.

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PROPOSAL 1.  ELECTION OF DIRECTORS

 

The business and affairs of the Company are managed under the direction of its Board of Directors (Board).   Historically, the Company has also had a board of directors of its wholly-owned subsidiary, CoBiz Bank (Bank).  The board of directors of the Bank (Bank Board) was comprised of separate individuals and there was no overlap in membership between the Board and Bank Board.  On January 18, 2018, the Board elected to restructure and combine the Board and Bank Board.  The efficiencies gained from the combined membership will allow the Company to eliminate redundant meetings and allow the combined board to focus on issues affecting the holding company and its subsidiaries.  The proposed changes to the Board have been unanimously approved by the existing Board.  Pursuant to regulatory requirements, the Board has named a Bank Board, composed of executive management team members, for oversight of the Bank.  This structure is common among most mid-sized peer community financial holding companies. 

 

Candidates for nomination to the Board are selected by the Nominating Subcommittee of the Governance and Nominating Committee (Nominating Subcommittee), and recommended to the Board of Directors for approval, in accordance with the guidelines established by such subcommittee, taking into consideration the overall composition and diversity of the Board, the needs of the Board and the Company based on our strategy and areas of expertise that new Board members might be able to offer.  Directors are elected by the shareholders at each Annual Meeting, to serve for a one-year term, which expires on the date of the next Annual Meeting.    The Board has the authority under the Company’s bylaws to set the number of directors.

 

With the support of the Board, Bank Board and the Nominating Subcommittee, the Company engaged a third-party advisor to assist the Company in evaluating the incumbent directors and the members of the Bank Board.  The advisor conducted interviews with each person, conducted additional assessments and surveys,  and reviewed each person individually and collectively based on the skills, expertise, culture, diversity and alignment with the strategy of the Company.  The advisor made a recommendation of the individuals to serve as directors of the Board to the Nominating Subcommittee. 

 

After consideration of the advisor’s recommendation and its own review, the Nominating Subcommittee has nominated twelve individuals for election to the Board.  As a result, there will not be any vacancies on the Board after our shareholders meeting on April 26, 2018 (assuming that all nominated directors are elected at the Annual Meeting).  In determining the slate of directors, the Nominating Subcommittee considered Mr. Terrance Scanlan’s partial ownership of an entity that receives payments, in an amount that is significantly below the SEC’s disclosure threshold, on a location leased by the Company.  The Nominating Subcommittee concluded based on this review, that Mr. Scanlan is an independent director.  The Company’s independence requirements are based on the Nasdaq listing standards.  Messrs. Michael B. Burgamy, Evan Makovsky,  Richard L. Monfort, Douglas L. Polson, and Timothy J. Travis are incumbent directors who were not nominated for reelection. 

 

Summary Information on Director Nominees

 

 

 

 

 

 

 

Name

Age 

Director Since

Occupation

Independent

Incumbent (I) 

New (N)

Steven Bangert

61

1994

Chairman and CEO, CoBiz Financial Inc.

 

I

Michael G. Hutchinson

62

2017

Retired Audit Partner, Deloitte and Touche

X

I

Angela M. MacPhee

42

N/A

CEO, RGL Forensics

X

N

Joel  R. Montbriand

62

N/A

President, Gastroenterology of the Rockies

X

N

Jonathan P. Pinkus

47

N/A

Co-Founder, Arizona Nutritional Supplements

X

N

Mary K. Rhinehart

59

2008

Chairman, President and CEO, Johns Manville

X

I

Noel N. Rothman

88

1994

President, Namtor, Inc.

X

I

Terrance M. Scanlan

68

N/A

Chairman, Four Seasons Resort Estates

X

N

Bruce H. Schroffel

67

2011

Healthcare Consultant

X

I

Mary Beth Vitale

63

2005

Retired Technology CEO and Board Consultant

X

I

Marc S. Wallace

71

N/A

Strategic Advisor, Executive Coach and Vistage Chair

X

N

Willis T. Wiedel

65

N/A

President, Encore Electric, Inc.

X

N

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Directors are encouraged but are not required to attend the Annual Meeting.  Last year, all incumbent directors attended the Annual Meeting with the exception of the members of the Bank Board who were not yet directors.

 

Each of the twelve nominees standing for election has indicated a willingness to serve, but in case any of them are not a candidate at the Annual Meeting, which is not presently anticipated, the persons named as proxies in the enclosed form of proxy may vote for a substitute nominee at their discretion.    

 

The Board of Directors recommends a vote “FOR” the election of these directors.

 

Information regarding director nominees is set forth below:

 

Nominees for Election as Directors

 

Steven Bangert - Mr. Bangert has served as Chairman of the Board of Directors and Chief Executive Officer (CEO) of the Company since September 1994.  From August 1992 to March 1999, Mr. Bangert served as President and a director of Western Capital Holdings, Inc. (Western Capital), formerly the bank holding company for River Valley Bank - Texas, located in McAllen, Texas.  From March 1992 to July 1998, Mr. Bangert also served as Chairman of the Board of River Valley Bank - Texas, and, from April 1988 to July 1994, he served as Vice Chairman of the Board and CEO of River Valley Savings Bank - Illinois, a financial institution with locations in Chicago and Peoria, Illinois.  From February 1994 to July 1998, Mr. Bangert served as a director and member of the Executive Committee of Lafayette American Bank.  He holds a bachelor’s degree in Business Administration from the University of Nebraska - Lincoln. 

 

Mr. Bangert has more than thirty years of experience in the financial services industry, with many of those years in executive level and board leadership positions.  The Company believes Mr. Bangert’s qualifications to serve as a director include his financial services industry experience, his Merger and Acquisition (M&A) experience, his extensive board experience in the for-profit and not-for-profit world and his years of experience as a director of the Company.

 

Michael G.  Hutchinson  – Mr. Hutchinson began his career with Deloitte and Touche in 1978 where he served as a Partner from 1989 to 2002.  From 2002 until his retirement in 2012, he was the Partner-in-Charge of the Colorado Audit and Enterprise Risk practice where he directly led the daily operations of 150 professionals.  Mr. Hutchinson also led the Energy and Financial Services Practices for Deloitte and Touche in Colorado.  He holds a bachelor’s degree in Accounting from the University of Northern Colorado.

As a lead partner in one of the largest public accounting firms in the world, Mr. Hutchinson has extensive experience as a financial expert, including experience in M&A transactions, internal controls, valuation issues and stock-based compensation considerations.  He also facilitated numerous initial public offerings and secondary stock and debt issuances.

 

Mr. Hutchinson serves on the board of directors of: Westmoreland Coal Company since 2012 and has been Chairman of its Audit Committee and a member of the Executive Committee; One Gas Inc. since 2014 and is Chairman of its Audit Committee and a member of the Executive, Compensation and Nominating Committees; and ONEOK Partners from 2015 until June 2017 when it was merged into its parent company and ceased to exist as a public company, and was a member of its Audit, Nominating and Executive Committees.    In November 2017, Mr. Hutchinson assumed the responsibilities of Interim CEO at Westmoreland Coal Company.

 

Angela M. MacPhee – Ms. MacPhee is the Chief Executive Officer at RGL Forensics. Ms. MacPhee joined RGL Forensics, a multidisciplinary forensic accounting and consulting services firm, in 2010.  During her career with RGL Forensics, she has served in numerous leadership roles including CEO, COO, CFO and CAO. She holds a Masters of Business Administration, as well as a Bachelor of Science in Accounting from the University of Colorado. She is a Certified Public Accountant in the State of Colorado.

 

Ms. MacPhee has extensive business knowledge and extensive leadership experience through her position as the CEO where she oversees firm-wide operations of 25 offices on 5 continents and a global executive team. The

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Company believes Ms. MacPhees’s qualifications to serve as a director include her varied positions on not-for-profit and for-profit boards, serving as CFO of two companies, and service on several audit and finance committees.

 

Joel R. Montbriand, M.D. – Dr. Montbriand is a founding partner of Gastroenterology of the Rockies, a gastroenterology practice in Boulder County and Greater Denver Metro area with 18 physicians, six mid-level providers, 150 employees, 10 clinical offices and five Medicare licensed surgery centers.  He received his bachelor’s degree from the Hamline University, and M.D. Medicine from the University of Minnesota.

 

The Company specializes in loans to medical practices and the physicians involved in those groups.  Dr. Montbriand has experience interacting with these groups and physicians.  He has served as the Chair of Gastrointestinal Cancer Subcommittee for Oncology Task Force since 2016, Co-Chair Gastrointestinal Service Line, as well as served on variety of Boards, presently including SCLH-GI Endoscopy Holdings, LLC and Endoscopy Centers of the Rockies.  The Company believes Dr. Montbriand’s qualifications to serve as a director include his extensive executive level experience in the healthcare industry and his extensive board experience.

 

Jonathan P. Pinkus – Mr. Pinkus co-founded Arizona Nutritional Supplements, (ANS) and currently serves as a strategic advisor and board member for ANS. ANS is one of the nation’s largest contract and private label manufacturers of vitamins, minerals, dietary supplements and meal replacements.  

 

Mr. Pinkus has significant experience in the manufacturing realm and as CEO of ANS was instrumental in leading the company to become one of the largest contract dietary supplement manufacturers.  In 2012, he led ANS to a successful recapitalization with a private equity firm.  

 

Many of the Company’s customers are involved in manufacturing.  The Company believes Mr. Pinkus’ qualifications to serve as a director include his manufacturing experience, as well as his experience serving as a member on both for-profit and not-for-profit boards. He holds a bachelor’s degree in Accounting/Finance from Arizona State University.

 

Mary K. Rhinehart – Ms. Rhinehart is Chairman, President and Chief Executive Officer of Johns Manville. Ms. Rhinehart joined Johns Manville, a leading manufacturer and marketer of premium-quality building and specialty products and a Berkshire Hathaway company, in 1979. During her career with Johns Manville, she has served in numerous leadership roles including CEO, CFO, Corporate Treasurer, Vice President of Human Resources, and Vice President and General Manager of a business unit. She received her bachelor’s degree in Finance Cum Laude from the University of Colorado at Boulder and her Master of Business Administration from the University of Denver. 

 

Ms. Rhinehart has extensive business knowledge and experience through her position as the CEO of a global company with 7,000 employees and manufacturing facilities in North America, Europe, and China.  The Company believes Ms. Rhinehart’s qualifications to serve as a director include her varied positions in the building and specialty products industry, her education and experience in multiple business disciplines – including her strong financial background and global M&A experience, her extensive board experience in the for-profit and not-for-profit worlds, and her years of experience as a director of the Company.

 

Ms. Rhinehart has served on the Board of Ply Gem Holdings Inc., a publicly traded building products company since 2014.

 

Noel N. Rothman – Mr. Rothman is a private investor and has served as President of Namtor, Inc., a closely held business and financial services company in which he is a principal shareholder, since September 1985.  Mr. Rothman is also the Company’s largest individual shareholder.  Mr. Rothman attended Wayne State University. 

 

The Company has a large base of high-net-worth and private banking clients.  Mr. Rothman has extensive experience dealing with banks as a client utilizing these services.  The Company believes Mr. Rothman’s qualifications to serve as a director include his financial and investing experience, his M&A experience and his years of experience as a director of the Company.

 

6


 

Terrance M. Scanlan – Mr. Scanlan is the Chairman and CEO of Four Seasons Resort Estates in Nevis, West Indies.  During his career, he has served in numerous leadership roles and was responsible for development and management of a 5-star luxury golf course community.   Mr. Scanlan has also founded Resort Consulting Group, Ltd and Alpine Mountain Builders, Inc., a builder of luxury homes in Colorado’s Vail Valley.  He holds a bachelor’s of Business Administration from the University of Notre Dame and a Master of Business Administration in Finance from Southern Methodist University.  

   

The Company has a significant real estate portfolio in both the Colorado and Arizona markets.  Mr. Scanlans’s experience in real estate development and construction is valuable to the board.  In addition, his qualifications to serve as a director include his management and leadership experience, as well as start-up experience. Mr. Scanlan has been involved in various community boards in the Vail Valley.

 

Bruce H. Schroffel – Mr. Schroffel is a consultant to the healthcare industry and a community leader.  From 2006 until 2013, Mr. Schroffel served as President and CEO of the University of Colorado Health Hospital. He has worked in healthcare administration for more than 35 years including leadership positions at Stony Brook University Hospital on Long Island, NY, and the Medical Center at the University of California, San Francisco.  He received his bachelor’s degree from the University of California, Berkeley, and a  Master degrees in Science and Public Health from Columbia University. 

 

The Company specializes in loans to medical practices and the physicians involved in those groups.  Mr. Schroffel has experience interacting with these groups and physicians.  The Company believes Mr. Schroffel’s qualifications to serve as a director include his extensive executive level experience in the healthcare industry, his M&A experience and his extensive board experience in the not-for-profit arena.

 

Mary Beth Vitale – Ms. Vitale co-founded Pellera, LLC., a consulting firm specializing in cybersecurity and board governance to boards of directors, in 2001. Previously, she had served as President, CEO and Chairman of the Board of WestwindMedia.com, President and Chief Operating Officer of RMI.NET, and President-Western States for AT&T. She received her bachelor's degree from Hillsdale College; a Master's degree from the University of Colorado; and an Advanced Management degree from the Wharton School. She was also a Commissioner on former Colorado Governor Bill Owens’ Commission for Science and Technology.  In addition, she is past Chairman of the Board of Directors of the National Association of Corporate Directors (NACD) local chapter. Ms. Vitale has also been recognized as an NACD Board Leadership Fellow and SEC financial expert.  She currently is a faculty member for the NACD in board governance and cyber security training.  She is also a Co-Chair of the Women Corporate Directors, Colorado Chapter.  Ms. Vitale also recently earned the CERT Certificate in Cybersecurity Oversight from the Software Engineering Institute, which demonstrates her commitment to advanced cybersecurity literacy to the Company, investors and regulators.

 

The Company has a sophisticated approach to utilizing technology to meet the needs of its customers.  In addition, the Company is publicly traded and values the importance of strong corporate governance.  The Company believes Ms. Vitale’s qualifications to serve as a director include her varied positions in the technology and telecommunications industries; her experience and leadership in the corporate governance arena; her board experience in technology, cyber and medical technology companies; and her years of experience as a director of the Company.

 

Ms. Vitale served on the Board of Zynex, Inc., a publicly traded medical technology company from 2008 to 2014.

 

Marc Wallace - Mr. Wallace serves as a Chair and Executive Coach of Vistage International, Inc.  Vistage is the industry leader for private advisory boards for CEOs, executives and business owners.  As an executive consultant, coach and human resource strategist, Mr. Wallace has served as a subject matter expert on culture, vision, and strategy within firms. He holds a Bachelor of Arts in Math from Adams State University and an MBA in Finance from Central Michigan University.

 

Mr. Wallace spent 14 years with Dow Chemical advising on long-term investment options and market strategies, is a former President and CEO of a Human Resource Management Consulting Company and led a public

7


 

offering of the company after 15 years of consecutive growth. The Company believes his qualifications and strong knowledge and experience in organizational change, leadership development, and personal effectiveness, will be valuable to the Board.

 

Willis T. Wiedel – Mr. Wiedel is the President and Chairman of the Board of Encore Electric, Inc.  Mr. Wiedel is one of the founding partners of Encore Electric, Inc. which is one of the leading brands in specialty electrical contracting in the Rocky Mountain West.  He holds a bachelor’s degree in Chemistry from the University of Nebraska at Kearny and attended graduate school at the University of Nebraska at Lincoln and Mount St. Mary’s University and Seminary in Emmetsburg, Maryland. 

 

The Company services numerous construction-related industries within its banking and insurance portfolios.  Mr. Wiedel’s experience in this area through his leadership of Encore Electric, Inc. will be valuable to the Board.  Mr. Wiedel has been active in several organizations and associations that represent the electrical contracting industry.  Since 2009, he has served as a member of the Metro Denver Economic Development Executive Council as part of the Denver Metro Chamber of Commerce.  The Company believes Mr. Wiedel’s qualifications to serve as a director include his extensive executive level experience in a construction-related industry, his entrepreneurial background in founding and operating a successful company, and his involvement with the not-for-profit sector.   

 

BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

 

The Board of Directors conducts its business through meetings of the Board and the following standing committees: Executive, Audit, Governance and Nominating, and Compensation. The standing committees regularly report on their activities and actions to the full Board.  Each of the standing committees have the authority to engage outside experts, advisors and counsel to the extent the committee considers appropriate to assist the committee in its work. With the exception of the Executive and Capital Formation Committees, each of the standing committees has adopted and operates under a written charter.

 

The Board of Directors held five regular meetings during fiscal year 2017. Each incumbent director attended at least 75% of the total meetings of the Board and Board committees on which the director served during the fiscal year.

 

The Company maintains an Internet website located at www.cobizfinancial.com on which, among other things, the Company makes available, free of charge, various reports that it files with or furnishes to the SEC, including its Annual Report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. These reports are made available as soon as reasonably practicable after they are filed with or furnished to the SEC. The public may read and copy any materials we file or furnish with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549.  Additional information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.  The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.  The Company has also made available on its website its Corporate Governance Guidelines, its Excessive and Luxury Expenditures Policy and its Code of Conduct and Ethics, as well as the charters for its Audit Committee, Governance and Nominating Committee, and Compensation Committee.  To access these materials, visit the Company’s website at www.cobizfinancial.com and select “Investor Relations,” and “Corporate Overview,” then select “Committee Charters,” and then select the name of the document you wish to view. The content on any website referred to in this filing is not incorporated by reference into this filing unless expressly noted otherwise.

 

Board Structure and Lead Independent Director 

 

Mr. Bangert serves as the Chairman of the Board, in addition to his duties as CEO of the Company.  He is currently the only director who is also an employee of the Company.  The Board has determined that the current structure of the combined Chairmanship and CEO position is in the best interest of the Company.  The Board believes that the experience of Mr. Bangert is invaluable to the leadership and the direction of the Company as provided by the Board.  The combined position promotes both guidance and clarity of the Company’s mission statement.  The Board believes that the potential appearance of a conflict of interest that may arise when the positions are combined has been mitigated by steps taken by the Board.  Specifically, the Board has elected a lead independent director as discussed

8


 

below, conducts executive sessions without the presence of management, is authorized to engage the services of independent consultants (including executive compensation consultants) and has aligned incentive compensation with corporate-wide performance goals that do not encourage unnecessary and excessive risks.  Further, the Board has demonstrated their commitment and ability to provide independent oversight of management. A majority of the members of the board are independent, and 100% of the members of the Audit, Compensation, and Nominating Subcommittee of the Governance and Nominating Committee (G&N Committee) are independent.

 

Mr. Rothman has served as the lead independent director of the Board of Directors since October 22, 2016.   Mr. Rothman was elected to such position by the independent members (excluding Messrs. Bangert and Makovsky) of the Board of Directors.  The lead independent director position is reviewed annually. The responsibilities of the lead independent director are as follows:

 

Coordinating the activities of the independent directors;

Advise the Chairman as to an appropriate schedule of Board meetings, seeking to ensure that the independent directors can perform their duties responsibly while not interfering with the flow of Company operations;

Advise the Chairman as to the quality, quantity, and timeliness of the flow of information from Company management that is necessary for the independent directors to effectively and responsibly perform their duties and may specifically request the inclusion of certain material;

Recommend to the Chairman the retention of consultants who report directly to the Board;

Interview, along with the Chair of the G&N Committee, all Board candidates and make recommendations to the Nominating Subcommittee of the Board;

Assist the Board and Company officers in assuring compliance with and implementation of the Company’s governance guidelines;

Coordinate and develop the agenda for, call and preside over executive sessions of the Board’s independent directors and act as principal liaison between the independent directors and the Chairman on sensitive issues;

Evaluates, along with the Compensation Committee and the Board, the CEO’s performance and meets with the CEO to discuss the Board’s evaluation;

In conjunction with input from the Nominating Subcommittee, recommends to the Chairman the membership of the various Board committees, as well as the selection of the committee chairs;

Approves meeting agendas and schedules for the Board in advance of the meetings and assures there is sufficient time at each meeting for discussion of all agenda items;

Is an ex-officio member of Nominating Subcommittee of the G&N Committee to review director nominations and is eligible to vote in the event a tie-breaking vote is necessary;

Presides over all Board meetings at which the Chairman is not present; and

Is available for consultation and communication upon reasonable request of a shareholder.

 

Experience, Qualifications, Attributes and Skills of Directors and Nominees

 

In considering each director and director nominee and the composition of the Board as a whole, the Nominating Subcommittee searches for candidates that promote diversity of views, experiences, characteristics, attributes and skills, including diversity in gender and ethnic background, that the Nominating Subcommittee believes enables a director to make a significant contribution to the Board and its oversight of the Company. These experiences, characteristics, attributes and skills include management experience, independence, financial expertise, education, community involvement and diversity in gender and ethnic background. The Nominating Subcommittee may also consider other experiences, characteristics, attributes and skills, as it deems appropriate, given the needs of the Board and the Company. 

 

The Nominating Subcommittee believes that directors who possess these experiences, characteristics, attributes and skills are better able to provide oversight of management and our long-term and strategic objectives. On an annual basis, the Nominating Subcommittee reviews the nominees selected to serve as directors and considers the diverse backgrounds, education, experiences, and skills of the nominees.  While there is no formal diversity policy, the Nominating Subcommittee also considers in this review, its desire for diversity in gender, race, age, geography and background when recommending committee memberships and nominees.  In addition, the Nominating Subcommittee

9


 

conducts an annual self-assessment of the Board’s effectiveness that includes consideration of the appropriate mix of the board members. The following table sets forth the experience, qualifications, attributes and skills of each director nominee that led the Board to conclude that such persons should serve as directors. The Board also considered the specific experience described in each nominee’s biographical information, as disclosed above.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Summary of Director Qualifications and Experience

Steven Bangert

Michael G. Hutchinson

Angela M. MacPhee

Joel R. Montbriand

Jonathan P. Pinkus

Mary K. Rhinehart

Noel N. Rothman

Terrance M. Scanlan

Bruce H. Schroffel

Mary Beth Vitale

Marc S. Wallace

Willis T. Wiedel

Management Experience

 

 

 

 

 

 

 

 

 

 

 

 

Experience as a CEO, COO, President or Senior Vice President of a company or a significant subsidiary, operating division or business unit.

Independence

 

 

 

 

 

 

 

 

 

 

 

 

Satisfies the independence requirements of the Nasdaq listing standards and SEC regulations.

 

Financial Expertise

 

 

 

 

 

 

 

 

 

 

 

 

Possesses the knowledge and experience to be qualified as an “audit committee financial expert” as that term is defined by SEC regulations.

 

 

 

 

 

 

 

Education

 

 

 

 

 

 

 

 

 

 

 

 

Possesses an advanced educational degree.

 

 

 

 

 

Community Involvement

 

 

 

 

 

 

 

 

 

 

 

 

Is actively involved in the communities in which we operate and will promote a positive image of the Company.

Tenure

 

 

 

 

 

 

 

 

 

 

 

 

Contributes new perspectives and experience to the board as a member with less than five years on the board.

 

 

 

 

 

Diversity

 

 

 

 

 

 

 

 

 

 

 

 

Contributes to the board in a way that enhances perspectives through diversity in gender and/or ethnic background.

 

 

 

 

 

 

 

 

Board Governance Knowledge

 

 

 

 

 

 

 

 

 

 

 

 

Possesses a background that contributes to an understanding of key business and industry trends and the Board’s role in overseeing the Company’s culture and risk oversight.

 

10


 

Board’s Role in the Risk Oversight Process

 

The Board’s role in risk oversight is to oversee and monitor the Company’s risk management processes and to ensure that management has the skills and resources in place to address areas of risk within the organization.  To facilitate that goal, the Company has implemented an enterprise-wide risk analysis and oversight program.  This program is designed to: (a) identify the various risks faced by the organization, including credit risk, market risk (including liquidity risk) and operating risk (including technology, cybersecurity, operational, compliance and fiduciary risk); (b) identify appropriate mitigation measures for such risks, including assigning responsibility for managing those risks to individual executives within the management team; and (c) align these management assignments with appropriate Board−level oversight.

 

Responsibility for the oversight of the program itself has been delegated to the G&N Committee.  Under the program, a risk matrix has been developed and the organization’s most prominent risks have been identified, responsibility for such risks has been assigned to appropriate executives, and assignments have been aligned for appropriate Board oversight.  Responsibility for managing these risks includes strategies related to both mitigation (acceptance and management) and transfer (insurance).  The G&N Committee reviews and updates the matrix annually or as necessary if there are new products, significant changes to existing products, services or risks.  Such reviews are performed with input from individuals tasked with risk oversight, including our Chief Credit Officer, Loan Review Director,  Internal Audit Director, Treasurer, Chief Information Officer, Director of Compliance and a senior executive who oversees most operational areas.  After input is received from these officers, the G&N Committee submits the risk matrix to the full Board for review.

 

The Board also regularly reviews the organizational structure of the Board, its committees and the management structure of the Company to ensure that risk oversight is appropriately addressed.  The Board or a Board committee also meets in executive sessions without management, including executive sessions with our independent registered public accountants, to discuss items that include risk.  On an annual basis, the Board also meets and reviews the Company’s renewal of its insurance package, including the coverages provided, premiums assessed, deductibles, limits of liability and the underwriting carriers.  The G&N Committee meets regularly with our Chief Information Officer, a senior executive who oversees most operational areas and other members of management to review the risk profile of the Company and risks related to the introduction of new and/or changed products.   

 

As part of its oversight of the Company’s executive compensation program, the Compensation Committee and the Company’s management team are responsible for evaluating the risks presented by the Company’s compensation programs and confirming that such programs: (i) do not encourage risk taking to a degree that is reasonably likely to have a materially adverse impact on the Company; (ii) do not encourage the management team to take unnecessary and excessive risks that threaten the value of the Company; and (iii) do not encourage the manipulation of reported earnings of the Company.   

 

Director Training

 

We are committed to the continuing education of the Board.  The Company provides an orientation program for new directors and a continuing education program for all members of the Board.  These programs include presentations from senior management on the Company’s strategic plans, significant financial, accounting and risk management issues, compliance programs, and management structure, as well as presentations from external experts on economic and industry topics. The Company also provides ongoing funding for director training provided outside of the Company.

 

11


 

Compensation of Directors

 

Each director who is not an employee, but serves in the roles described below, received the following fees in 2017:

 

 

 

 

Retainers

 

 

Annual cash retainer

$

12,000

Annual equity retainer

$

5,000

Committee chair retainer (except for Audit Committee Chair)

$

5,000

Audit Committee Chair retainer

$

10,000

Audit Committee member retainer

$

5,000

Lead director retainer

$

15,000

 

 

 

Fees

 

 

Board meeting fee

$

1,250

Committee meeting fee (except for Chair and Audit Committee)

$

1,250

Committee chairman fee (except for Audit Committee Chair)

$

1,500

Audit committee meeting fee (Except for Chair)

$

1,500

Audit Committee Chair fee

$

1,750

Director education and health reimbursement up to $3,000 annually

 

 

 

Directors of the Company who are employees do not receive additional compensation for their services as directors.  

 

The following table shows the compensation of the members of our Board of Directors during fiscal year 2017.   No director received perquisites or personal benefits in excess of $10,000 during 2017.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fees earned

 

 

 

 

 

 

 

 

 

 

 

or paid in

 

Stock

 

All other

 

 

 

 

 

cash

 

awards

 

compensation

 

Total

Name (1)

    

($)

    

($) (2)

    

($) (3)

    

($)

 

 

 

 

 

 

 

 

 

 

 

 

 

Michael B. Burgamy (4)

 

$

27,000

 

$

5,011

 

$

3,000

 

$

35,011

Michael G. Hutchinson

 

$

29,500

 

$

5,011

 

$

 -

 

$

34,511

Angela MacPhee (5)

 

$

27,000

 

$

5,011

 

$

 -

 

$

32,011

Evan Makovsky (4)

 

$

23,250

 

$

5,011

 

$

 -

 

$

28,261

Richard L. Monfort (4)

 

$

23,250

 

$

5,011

 

$

 -

 

$

28,261

Joel  R. Montbriand (5)

 

$

27,000

 

$

5,011

 

$

 -

 

$

32,011

Jonathan Pinkus (5)

 

$

27,000

 

$

5,011

 

$

3,000

 

$

35,011

Douglas L. Polson (4)

 

$

36,750

 

$

5,011

 

$

 -

 

$

41,761

Mary K. Rhinehart

 

$

44,000

 

$

5,011

 

$

2,662

 

$

51,673

Noel N. Rothman

 

$

21,250

 

$

5,011

 

$

 -

 

$

26,261

Terrance M. Scanlan (5)

 

$

27,000

 

$

5,011

 

$

 -

 

$

32,011

Bruce H. Schroffel

 

$

36,250

 

$

5,011

 

$

 -

 

$

41,261

Timothy J. Travis (4)

 

$

22,000

 

$

5,011

 

$

 -

 

$

27,011

Mary Beth Vitale

 

$

29,250

 

$

5,011

 

$

1,909

 

$

36,170

Marc S. Wallace (5)

 

$

27,100

 

$

5,011

 

$

 -

 

$

32,111

Willis T. Wiedel (5)

 

$

27,000

 

$

5,011

 

$

 -

 

$

32,011

 


(1)

Steven Bangert, our CEO, is not included in this table because he is an employee of CoBiz and thus received no additional compensation for his service as director. The compensation he received as an employee is shown in the Summary Compensation Table.

 

12


 

(2)

The amounts in this column are calculated based on Accounting Standards Codification Topic 718, Compensation – Stock Compensation (ASC 718), and represent the grant date fair value of the award. The grant date fair value of stock awards granted in 2017 was $16.76, the closing market price on June 15,  2017.  The stock awards were immediately vested.

 

(3)

All other compensation represents the cost of Company provided physicals and education.    

 

(4)

Not standing for re-election.

 

(5)

Compensation was earned as a member of the Bank Board during 2017 and not as an incumbent director.


 

The director nominees held options at December 31, 2017, as follows:

 

 

 

 

 

 

Aggregate

 

 

number of

 

 

option awards

 

 

outstanding at

Name

    

December 31, 2017

Michael G. Hutchinson

 

 -

Angela M. MacPhee

 

3,000

Joel  R. Montbriand

 

5,000

Jonathan P. Pinkus

 

2,833

Mary K. Rhinehart

 

5,000

Noel N. Rothman

 

4,000

Terrance M. Scanlan

 

833

Bruce H. Schroffel

 

4,600

Mary Beth Vitale

 

5,000

Marc S. Wallace

 

1,917

Willis T. Wiedel

 

4,000

 

 

 

Executive Committee

 

Number of Meetings in 2017:  None

Committee Members: Bangert (Chair), Burgamy, Rothman, Travis

 

The Executive Committee is authorized to exercise certain of the powers of the Board of Directors, subject to ratification by the full Board of Directors, and meets as needed, usually in situations where it is not feasible to take action by the full Board of Directors. 

 

 

 

Capital Formation Committee

Number of Meetings in 2017:  None

Committee Members: Bangert, Rhinehart, Rothman

 

The Capital Formation Committee is authorized to exercise certain of the powers of the Board of Directors, subject to ratification by the full Board of Directors, related to the issuance of new securities. 

 

 

Audit Committee

Number of Meetings in 2017:  9

Committee Members: Rhinehart (Chair), Hutchinson, Polson

 

The Audit Committee operates pursuant to a written charter adopted by the Company’s Board of Directors. The Audit Committee responsibilities include, but are not limited to:

 

·

Oversee the accounting and financial reporting processes of the Company and the internal and external audit of the Company’s financial statements;

·

Oversee the implementation of the system of internal control over financial reporting that management has established;

13


 

·

Appoint, compensate, retain and oversee the work of any independent registered public accounting firm engaged by the Company for the purpose of preparing or issuing an audit report or performing other audit, review or attest services and resolve any disagreement between management and the auditor regarding financial reporting. The Audit Committee reviews and evaluates the selection of the lead engagement partner, who, along with the concurring review partner, rotates every five years in accordance with SEC requirements;

·

Provide an avenue for communication between internal audit, the independent registered public accounting firm, financial management and the Board;

·

Provide regular reports to the Board concerning its activities;

·

Consider and preapprove any audit and non-audit services proposed to be provided by the independent registered public accounting firm;

·

Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by Company employees of concerns regarding questionable accounting or auditing matters; and

·

Review and approve related party transactions in accordance with SEC rules.

 

All members of the Audit Committee are independent under the Nasdaq listing standards currently in effect. The Board of Directors has designated Messrs.  Hutchinson and Polson and Ms. Rhinehart each as an "audit committee financial expert" within the meaning of Item 407(d)(5) of Regulation S-K.   The Board of Directors has determined that the Audit Committee members do not have any relationship with the Company that may interfere with the exercise of independent judgment in carrying out their responsibilities.  None of the Audit Committee members are current officers or employees of the Company or its affiliates.  At least quarterly, the Audit Committee met in private session with our independent registered public accounting firm and alone in executive sessions without members of management present. Annually, the Audit Committee has met privately with the Chief Financial Officer  (CFO) and the Director of Internal Audit of the Company.

 

 

 

Governance and Nominating Committee

Number of Meetings in 2017:  4

Committee Members: Vitale (Chair), Makovsky (Governance Committee member only),  Travis,  Rothman (has tie-breaking authority as an ex-officio member)

 

The G&N Committee operates pursuant to a written charter adopted by the Company’s Board of Directors. The G&N Committee has the responsibility to:

 

·

Annually review the size and overall composition of the Board, taking into consideration such factors as the business experience and specific areas of expertise of each Board member;

·

In consultation with the independent Lead Director, identify individuals qualified to become Board members and recommend to the Board the director nominees for the next Annual Meeting of shareholders;

·

Ensure that the Board comprises at least a majority of independent directors;

·

Develop and recommend to the Board qualifications for the selection of individuals to be considered as candidates for election to the Board;

·

Review and approve outside directorships in other publicly held companies by executive officers and independent directors;

·

Recommend to the Board director candidates for each committee for appointment by the Board;

·

Lead the Board in its annual evaluation of the Board's size, overall composition and performance;

·

Oversee the development and implementation of orientation and continuing education programs for directors;

·

Affirmatively determine whether each director and nominee is independent as defined under the Nasdaq listing standards;

·

Receive and consider all shareholder proposals submitted to the Company;

·

Review and assess, at least annually, the effectiveness of the Board in meeting its responsibilities and representing the long-term interests of shareholders;

14


 

·

Monitor governance rating agencies and their assessments of the Company’s governance and proxy advisory services policies, and make recommendations as appropriate to the Board;

·

Provide oversight of the Company’s enterprise-wide risk structure, including cyber risk and information technology; and

·

Lead the Company in shaping its corporate governance policies and practices and code of conduct and ethics and monitor compliance with those policies and practices.

 

The G&N Committee has created the Nominating Subcommittee for purposes of handling all matters related to the nomination of directors.  Each member of such subcommittee must meet the independence requirements of the Nasdaq listing standards and any other applicable laws, rules and regulations governing independence, as determined by the Board. The director nomination subcommittee of the G&N Committee currently consists of Ms. Vitale and Mr. Travis, each of whom is independent under the Nasdaq listing standards currently in effect.  Mr. Makovsky also serves on the G&N Committee, but does not serve on the director nomination subcommittee or have any role in the director nomination function of the G&N Committee.  Mr. Rothman, who is also independent under Nasdaq listing standards, is an ex-officio member of the G&N Committee and director nomination subcommittee and is eligible to vote in the event a tie-breaking vote is necessary.

 

When evaluating whether an incumbent director should be nominated for reelection, the Nominating Subcommittee reviews the director’s overall service to the Company during his or her term, including the number of meetings attended, level of participation and quality of performance.  When searching for new director candidates, the Board canvasses its network of professional contacts to compile a list of potential candidates based on needed skills and may also engage a professional search firm if it deems appropriate.  The Nominating Subcommittee then meets to discuss and consider each candidate’s qualifications and selects by majority vote a nominee to recommend to the full Board. The Nominating Subcommittee will consider individuals recommended by a shareholder of the Company to serve on the Board.  For a description of the procedures for nominating a candidate to the Board and the minimum qualifications for Board membership, please see “Shareholder Recommendations of Director Nominees” below.    

 

Each director shall, at the time of such director’s election to the board of directors or as promptly as practicable thereafter, tender his or her conditional resignation.  Such conditional resignation shall become effective only if such director fails to receive the majority vote of shareholders as required by the bylaws.

 

 

 

Compensation Committee

Number of Meetings in 2017:  4

Committee Members: Schroffel (Chair), Burgamy, Monfort,

 

The Compensation Committee operates pursuant to a written charter adopted by the Company’s Board of Directors. The Compensation Committee assists the Board in the discharge of its responsibilities relating to compensation of the board, executives and other key employees of the Company, and in connection with administering the Company’s employee benefit plans.  The Compensation Committee responsibilities include, but are not limited to: 

 

·

Review and approve the Company’s executive compensation philosophy;

·

Review market data to assess the Company’s competitive position for the components of executive compensation (base-salary, annual incentives and long-term incentives);

·

Periodically recommend to the Board a policy regarding non-employee director compensation;

·

Administer the Company’s bonus, stock-based and other incentive plans;

·

Evaluate the performance of the CEO and other key executives and recommend appropriate compensation levels;

·

Periodically engage independent, third-party consultants to review executive and board compensation;

·

Establish and periodically review a succession plan for the CEO;

·

Review with management the Compensation Discussion & Analysis (or “CD&A”) and Compensation Committee Report to be included in the Company’s proxy statement and recommend to the Board that the CD&A be included in the proxy statement; and

·

Evaluate whether the risks arising from the Company’s compensation policies would be reasonably likely to have a material adverse effect on the Company.

15


 

The members of the Compensation Committee are not employees of the Company, are independent under the Nasdaq listing standards currently in effect and are “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code (Code).

 

Compensation Committee Interlocks and Insider Participation 

 

No member of the Compensation Committee was at any time during 2017, or at any other time, an officer or employee of the Company or any of its subsidiaries.  Furthermore, no executive officer of the Company served on the Compensation Committee (or other Board committee performing equivalent functions) or as a director of any other entity that had an executive officer who served as a director or on the Compensation Committee of the Company.

 

MANAGEMENT

 

EXECUTIVE OFFICERS

 

Information regarding executive officers of the Company is set forth below.  Biographical information for Mr. Bangert is set forth above under "Election of Directors."

 

 

 

 

 

Name

Age

Officer Since

Officer Title

Lyne B. Andrich

51

1997

Executive Vice President,  Chief Operating Officer and Chief Financial Officer

Richard J. Dalton

61

1997

Executive Vice President and Corporate Secretary

Troy R. Dumlao

45

2002

Senior Vice President and Chief Accounting Officer

Susan L. Hermann

51

2000

Senior Vice President and Director of Communications

Christopher S. Huss

49

2003

Senior Vice President and Capital Markets Director

Robert B. Ostertag

57

1996

Executive Vice President and Chief Credit Officer through January 31, 2018

Scott E. Page

59

2009

Chief Executive Officer, CoBiz Bank through December 31, 2017

David E. Pass, Jr.

49

2002

Executive Vice President and Chief Information Officer

 

Lyne B. Andrich –  Ms. Andrich has served as Executive Vice President and Chief Operating Officer since December 2017 and as CFO of the Company since May 2003. Ms. Andrich served as Controller of the Company from May 1997 until May 2003. From November 1995 to May 1997, Ms. Andrich was a regional reporting manager for Key Bank of the Rocky Mountains. From June 1989 to November 1995, Ms. Andrich held several positions with Bank One, Colorado, including Assistant Controller, Financial Reporting Manager and internal auditor. She holds a B.S. degree in accounting from the University of Florida and is a Certified Public Accountant. 

 

Richard J. Dalton –  Mr. Dalton has served as the Executive Vice President and Corporate Secretary since December 2017.  He previously served as Chief Operations Officer of the Company from May 2009 to December 2017. From May 2003 to May 2009, Mr. Dalton served as the President of the Company.  From January 1997 to May 2003, Mr. Dalton served as Executive Vice President and CFO of the Company. From August 1992 to January 1998, Mr. Dalton was the Vice President of Western Capital.  From August 1992 to June 1996, Mr. Dalton served as the President and CEO of River Valley Bank - Texas.  He holds a B.S. degree in Business Administration from Colorado State University – Pueblo and an M.B.A. from the University of Colorado.

 

Troy R. Dumlao –  Mr. Dumlao has served as the Senior Vice President and Chief Accounting Officer of the Company since October 2007.  Mr. Dumlao served as Controller of the Company from May 2003 to October 2007 and as Assistant Controller from May 2002 to May 2003.  Mr. Dumlao previously held various financial management positions in both corporate and public accounting, with companies such as Qwest Communications, Atlas Air Worldwide Holdings and Deloitte & Touche LLP.  He holds a B.S.B.A degree in accounting from Colorado State University – Pueblo, an M.B.A. in Corporate Financial Management from the University of Colorado and is a Certified Public Accountant. 

16


 

Susan L. Hermann –  Ms. Hermann has served as Senior Vice President and Director of Communications of the Company since July 2007. She joined the company in June 2000. From October 1999-June 2000, she served as Director of Communications for the Denver Metro Chamber of Commerce. She previously held positions with The Reynolds and Reynolds Company, the Downtown Dayton Partnership and Boatmen’s Bancshares. She holds a B.J. degree in Magazine Journalism from the University of Missouri – Columbia and an M.E. in Educational Leadership from Wright State University.

 

Christopher S. Huss –  Mr. Huss has served as Senior Vice President and Capital Markets Director of the Company since January 2005. He served as Vice President of the Company from June 2003-January 2005. Mr. Huss previously served as Senior Vice President for Remount Capital, LLC and Hawthorne Colorado, Inc. and held various positions at River Valley Savings Bank. He holds a B.S.B.A. degree in Finance from the University of Denver,  an M.B.A. degree in Corporate Strategy from the University of Michigan and is a Chartered Financial Analyst.

 

Robert B. Ostertag –  Mr. Ostertag served as Executive Vice President and Chief Credit Officer of the Bank from May 2003 until January 31, 2018, at which time he became Vice-Chairman of the Bank. From June 2001 to May 2003, he held the position of Senior Vice President and Senior Credit Officer. Prior to June 2001, Mr. Ostertag was the Senior Vice President and Commercial Lending Manager of the downtown bank. Before joining the Company, Mr. Ostertag worked for Bank One, Denver for twelve years as Vice President and Commercial Relationship Manager, and last served as Vice President and Business Banking Group Manager for the northern half of the Denver-Metro area.  Mr. Ostertag graduated with a double major in Finance and General Business from Colorado State University, and is a graduate of the Graduate School of Banking, University of Wisconsin-Madison.

 

Scott E. Page –  Mr. Page served as CEO of the Bank from January of 2014 until his retirement on December 31, 2017.  Mr. Page will continue to be employed as an advisor through March 31, 2018.   Previously he served as Colorado Market President of the Bank from 2009 until the end of 2013.  Prior to joining the Company, he was Executive Vice President and Director of Community Banking for Vectra Bank Colorado, and Senior Vice President of US Bank’s large commercial banking and financial institutions group. Mr. Page holds a B.S. and an M.B.A. from University of New Mexico, and is a graduate of the University of Colorado, School of Banking.

 

David E. Pass, Jr. –  Mr. Pass has served as Executive Vice President and Chief Information Officer of the Company since 2002. From January 1997-April 2002, Mr. Pass served as Senior Vice President and Technical Services Manager for Southwest Bank of Texas (now Amegy Bank).  From August 1992-January 1997, Mr. Pass held several management positions with Universal Computer Systems, Texas, including Telecommunications, Network and Data Center operations.  He holds a B.S. degree in Finance from the University of Northern Colorado and numerous technical and security certifications.

 

PROPOSAL 2. ADVISORY (NONBINDING) SHAREHOLDER APPROVAL OF EXECUTIVE COMPENSATION

 

The Board of Directors has adopted a policy that provides Company shareholders the opportunity to vote on an advisory (nonbinding) resolution at each Annual Meeting to approve the compensation of the Company's executives named in the annual proxy statement, including the Compensation Discussion and Analysis and related disclosure contained in such proxy statement. 

 

This proposal gives you as a shareholder the opportunity to vote for or against the following resolution:

 

“RESOLVED, that the shareholders of CoBiz Financial Inc. (the “Company”) approve the compensation of the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the Executive Compensation tables and the related narrative discussion contained in the Proxy Statement.”

 

17


 

Because your vote is advisory, it will not be binding upon the Board and may not be construed as overruling any decision by the Board. However, the Compensation Committee may, in its sole discretion, take into account the outcome of the vote when considering future executive compensation arrangements.

 

Shareholders are encouraged to carefully review the “Compensation Discussion and Analysis” section of this proxy statement for a detailed discussion of the Company’s executive compensation program.

 

Our overall executive compensation policies and procedures are described in the “Compensation Discussion and Analysis” section and the tabular disclosure regarding named executive officer compensation (together with the accompanying narrative disclosure) in this proxy statement. Our compensation policies and procedures are centered on a pay-for-performance culture and are strongly aligned with the long-term interests of our shareholders, as described in the “Compensation Discussion and Analysis” section. The Compensation Committee, which is comprised entirely of independent directors, oversees our executive compensation program and monitors our policies to ensure they continue to emphasize programs that reward executives for results that are consistent with shareholder interests.  Advisory votes on executive compensation in prior periods resulted in affirmative votes of:

 

 

 

Annual Meeting

Affirmative Votes of Shareholders represented in person or by proxy

2017

99.41%

2016

96.5%

2015

97.8%

2014

92.8%

2013

98.7%

 

Our Board and our Compensation Committee believe that our commitment to these responsible compensation practices justifies a vote by shareholders FOR the resolution approving the compensation of our executives as disclosed in this proxy statement.

 

The Board of Directors recommends a vote “FOR” the resolution approving the compensation of executives.

 

EXECUTIVE COMPENSATION

 

This section describes the Company’s compensation philosophy, policies and programs and the compensation paid during 2017 to the Company’s principal executive officer (i.e., our CEO), principal financial officer (i.e., our CFO) and the three other executive officers of the Company having the highest total compensation for executive officers serving in that capacity at the end of 2017.   We refer to these five individuals, identified in the following table, throughout the proxy statement as the “Named Executive Officers” or “NEOs.”

 

 

 

 

 

NEO

  

Officer Title

Steven Bangert

 

Chairman of the Board and Chief Executive Officer of CoBiz Financial Inc.

Lyne B. Andrich

 

Executive Vice President, Chief Operating Officer and Chief Financial Officer of CoBiz Financial Inc.

Richard J. Dalton

 

Executive Vice President and Corporate Secretary of CoBiz Financial Inc.

Robert B. Ostertag

 

Chief Credit Officer of CoBiz Bank

Scott E. Page

 

Chief Executive Officer of CoBiz Bank

 

In 2017, Messrs. Dalton, Ostertag and Page announced their intention to retire from their current positions.  Mr. Page will retire from the Company on March 31, 2018 and Mr. Bangert will assume the role of Chief Executive Officer of the Bank.  Mr. Dalton will step down from his position as Chief Operations Officer, but will remain with the Company as an Executive Vice President and Corporate Secretary.  Ms. Andrich will assume the role of Chief Operating Officer in addition to her role as Chief Financial Officer.  Mr. Ostertag will step down from his position as Chief Credit Officer, but will remain with the Company as the Vice-Chairman of the Bank.  The Company promoted Jeremy Lindner as the new Chief Credit Officer on February 1, 2018.  Mr. Lindner previously served as a Senior Credit Officer with the Company.

18


 

COMPENSATION DISCUSSION AND ANALYSIS

 

EXECUTIVE SUMMARY – 2017 ACCOMPLISHMENTS AND EXECUTIVE PAY

 

Our philosophy continues to be to utilize executive compensation to retain and reward executive leadership for purposes of creating sustainable long-term value for our shareholders. In 2017 the Company had strong performance, including the following key accomplishments:

 

·

We achieved TSR of 19.71% for the one-year period ending December 31, 2017;

·

Common shareholder dividends increased 11% in 2017, the sixth consecutive year the dividend has been increased;

·

Net income decreased 5.7%, from $34.9 million in 2016 to $32.9 million in 2017.  The Tax Cuts and Jobs Act (TCJA) signed into legislation by President Trump on December 22, 2017 reduced the corporate federal tax rate from 35% to 21%.  The reduction in the federal tax rate required a remeasurement of the Company’s deferred tax assets and liabilities that increased tax expense by $7.2 million.  Excluding this increase to tax expense, net income increased $5.2 million, or 15%;

·

Growth in our interest-earning assets, coupled with an expanded net interest margin, increased net interest income by $14.5 million, from $116.1 million in 2016 to $130.6 million in 2017.  Continued growth in the loan portfolio led to a provision for loan losses of $3.3 million in 2017, compared to a $2.1 million negative provision for loan losses in 2016 from the reversal of a specific reserve on a large impaired credit.  While noninterest income was relatively flat in 2017 compared to 2016, revenue from our core business lines increased 7% and noninterest expense increased 2.5%, an improvement over the Company’s goal of maintaining expense growth below 4%; and

·

The average loan and deposit portfolios both increased 9.0% in 2017.

 

We believe that the Company’s executive compensation program is an important tool in achieving results like those detailed above. Specifically, in 2017 the Company’s executive compensation plan rewarded our leadership team for achieving targeted goals in the following key areas:

 

·

Core Earnings per Share Growth;

·

Noninterest Income as a percentage of Operating Revenue;

·

Return on Average Tangible Equity;

·

TSR; and

·

Individual goals related to financial performance and the achievement of strategic initiatives.

 

It has been the strong performance in these areas that has helped drive shareholder return.

 

2017 SAY-ON-PAY RESULTS

 

99.4% of shareholders, represented in person or by proxy, voted in favor of the Say-on-Pay Advisory Resolution at the April 27,  2017 Annual Meeting.  The Committee believes the results of the vote indicate strong support of the Company’s NEO compensation structure. 

 

COMPONENTS OF OUR 2017 COMPENSATION PROGRAM

 

Base Salary 

 

Base salary is evaluated each year after reviewing each NEO’s performance, peer group compensation data, and other sources of market data.  If determined that changes are necessary or desirable, base salaries are adjusted once each year and are typically effective on April  1st

 

19


 

The Committee considers base salary adjustments when (i) base salary is out of line with market or (ii) an adjustment is appropriate for reasons of good performance or significant changes in the scope of responsibility.

 

The CEO conducts annual performance reviews for all NEOs, excluding himself, which take into account individual performance, experience, unique contributions to the Company and the Company’s need for certain types of expertise. With respect to the base salary of the Company’s CEO, all of the members of the Compensation Committee discuss the CEO’s performance based on both objective and subjective criteria.

 

The NEOs’ base salaries for 2017 were reviewed by the Compensation Committee at the beginning of 2017.   As part of the Company’s initiative to limit expense growth to less than 4%, the Compensation Committee elected to maintain NEO base salaries at the same level as 2016 and no increases were made for 2017.

 

Incentive Compensation Plan - Overview

 

The Company’s incentive plan is an important component of the Company’s total compensation program for executive officers and other employees.  The Company’s philosophy is that incentive pay should generally constitute a meaningful component of total direct compensation, and should reward for both short-term and longer-term performance.

 

The annual and long-term incentives are structured as follows:

 

·

Annual performance goals are set at the beginning of each year;

·

The amount of cash incentive payment and the size of the long-term equity grant for that year is determined according to progress against those goals;

·

The annual cash incentive payment is intended to reward short-term performance in an amount consistent with competitive norms;

·

The long-term equity component of the incentive compensation plan includes time-vested restricted stock that vests over three years. The long-term component is intended as a retention tool and also to advance the interests of the Company and its shareholders by encouraging and enabling executive officers and other employees to acquire and retain a proprietary interest in the Company;

·

The incentive compensation plan provides for (i) a portion of total bonus to be calculated objectively on the financial performance and TSR performance of the Company in relation to the financial performance  and TSR performance of a peer group of companies and (ii) a portion of total bonus to be paid based on an analysis of the individual employee’s performance against predetermined strategic goals;

·

The maximum amount which may be earned by an employee is established as a percentage of an individual employee’s base salary; and

·

For the NEOs, no portion of the Company performance component is payable unless the Company achieves a minimum level of profitability for the year, as measured by Return on Assets (ROA). 

 

The range of potential incentive awards under the incentive compensation plan and the weighting of individual versus Company performance in calculating those awards for the NEOs are set forth below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maximum

 

Range of Cash

 

Range of Long - Term

 

% of Overall Award Based

 

% of Overall Award Based

 

 

 

Incentive

 

Award

 

Stock Award

 

on Individual

 

on Company

 

Name

    

(% of Base Salary)

    

(% of Incentive)

    

(% of Incentive)

    

Performance

    

Performance

 

Steven Bangert

 

0 - 150%

 

0 - 40%

 

0 - 60%

 

60

%  

40

Lyne B. Andrich

 

0 - 125%

 

0 - 50%

 

0 - 50%

 

60

%  

40

Richard J. Dalton

 

0 - 100%

 

0 - 100%

 

0%

 

60

%  

40

Robert B. Ostertag

 

0 - 100%

 

0 - 50%

 

0 - 50%

 

60

%  

40

Scott E. Page

 

0 - 125%

 

0 - 100%

 

0%

 

60

%  

40

 

In 2017, the annual incentive for Messrs. Dalton and Page was changed to an all cash incentive due to their retirement decisions.

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Company Performance Component

Company performance for the NEOs, with the exception of Mr. Ostertag, is determined based on the Company’s actual performance in certain key areas compared to peers.    For 2017, performance measures used for comparison purposes included:

·

Core Earnings per Share Growth — This metric measures improvement in the Company’s earnings and rewards the NEOs for continued earnings growth. To eliminate the distortion from the one-time charge upon the enactment of the TCJA, this measurement was calculated using trailing twelve month results through September 2017;

·

Noninterest Income/Operating Revenue —  This metric reflects the Company’s commitment to providing a broad range of financial service products to its customers, while also providing a diversified revenue stream that is not directly impacted by changes in interest rates;

·

Return on Average Tangible Equity — This metric maintains a focus on overall profitability and the Company’s use of shareholder investments; and

·

TSR (stock price growth plus dividends) — This metric measures shareholder return from improvement in the common equity value and dividends. 

 

At the end of the fiscal year, each of these financial metrics is compared against the same metrics of other banking and financial services organizations in the Western and Southwestern region with assets of $1 billion to $10 billion, as reported by S&P Global Market Intelligence.  The percentage of the Company performance portion of the award that is earned is based on a sliding scale depending on the quartile achieved by the Company with respect to each of the relevant performance metrics as noted below:

 

 

 

 

 

 

Quartile Achieved

    

Company Performance Incentive % Earned

 

1st

 

25

% 

2nd

 

15

% 

3rd

 

5

% 

4th

 

0

% 

 

There is a further sliding scale adjustment to the Company performance portion of the award based on the profitability of the Company, as measured by ROA.  With respect to Mr. Ostertag, the following ROA adjustment is the only deciding factor on the Company performance portion of his annual incentive pay.  The ROA scale is as follows:

 

 

 

 

 

Return on Assets

    

Company Performance Incentive % Earned

 

1.00% and above

 

100

% 

0.51% to 0.99%

 

Linear relationship

 

0.50% and below

 

0

% 

 

In evaluating the appropriate ROA adjustment for 2017, the Compensation Committee elected to normalize 2017 financial results for the $7.2 million non-cash, increase to tax expense from the enactment of the TCJA on December 22, 2017.  Excluding this discrete tax expense, the Company’s ROA for 2017 exceeded 1.0%.

21


 

Results for 2017

 

The following quantitative performance measures and the associated earned bonus percentages for 2017 were as follows:

 

 

 

 

 

 

Metric

    

Quartile Achieved

    

Company Performance Incentive % Earned

Core EPS growth

 

1st

 

25%

Return on average tangible equity

 

3rd

 

5%

Noninterest income / Operating revenue

 

2nd

 

15%

TSR

 

1st

 

25%

Peer quartile performance %

 

 

 

70%

Return on assets multiple

 

 

 

100%

2017 Company performance award

 

 

 

70%

 

Individual Performance Component

 

The individual performance awards of our NEOs for 2017 are based on the financial performance of the Company and the attainment of certain goals.  In general, both quantitative financial goals as well as qualitative goals are assigned to each NEO at the beginning of the year.  The Compensation Committee (with input from the CEO regarding the performance of his direct reports) determines the performance of each NEO against those goals at the end of the year, and grants the individual performance component of the annual incentive accordingly. 

 

Results for 2017 

 

In 2017, the Compensation Committee considered the following factors in determining the individual performance percentage for the NEOs (which include the Board approved 2017 strategic initiatives, among others):

 

·

End-of-period loan growth of 7.2% and average loan growth of 9.0%, compared to the strategic goal of 8-12%;

·

End-of-period deposit growth of 6.5% and average deposit growth of 9.0%, compared to the strategic goal of 8-12%;

·

Containing noninterest expense growth to  2.5% that exceeded the 4.0% or less target;

·

The improvement in ROA to 1.06% in 2017 (excluding the $7.2 million increase to tax expense from the TCJA), from 1.02% in 20171;

·

The results of the Company’s regulatory examination; and

·

The successful reassignment of responsibilities with the announced retirement of several executive officers.

Summary of Total Results for 2017 

 

The incentive awards, based on 2017 individual and Company performance, for the NEOs was as follows:

 

 

 

 

 

 

 

 

 

 

 

$ Based

 

$ Based

 

 

Name

    

on Company

 

on Individual

 

Total (1)

Steven Bangert

$

232,814

$

414,077

$

646,891

Lyne B. Andrich

$

117,163

$

208,382

$

325,545

Richard J. Dalton

$

81,689

$

145,290

$

226,979

Robert B. Ostertag

$

106,502

$

135,790

$

242,292

Scott E. Page

$

120,678

$

173,259

$

293,937

 


1 See Appendix A for additional information regarding non-GAAP financial measures and reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measure.

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(1)

The cash portion of the incentive award, 40% for Mr. Bangert,  50% for Ms. Andrich and Mr. Ostertag and 100% for Messrs. Dalton and Page,  is reported in the “Summary Compensation Table” as 2017 non-equity incentive plan compensation.  The stock portion of the incentive award, 60% for Mr. Bangert and 50% for Ms. Andrich and Mr. Ostertag, will be reported as a 2018 stock award in next year’s “Summary Compensation Table.”    

 

The Compensation Committee may at any time amend or rescind the incentive compensation plan or modify or amend its goals.  These decisions are subjective and based generally on a review of the circumstances affecting results to determine if any events were unusual or unforeseen.  

 

Retirement and Other Benefits

 

Split-Dollar Endorsed Life Insurance. Management of the Company, including the NEOs, have a split-dollar life insurance agreement that provides a death benefit to designated beneficiaries. Beneficiaries designated by an executive are entitled to a split-dollar share of the death proceeds from life insurance policies on such executive, which vary depending on the executive’s employment status with the Company at the time of death and the cash surrender value of the policies held by the Company.  

 

Defined Contribution Plan. The Company maintains a 401(k) retirement savings plan available to all eligible employees, including the NEOs. Under the plan, the Company typically matches a portion of employee contributions. For 2017, employee contributions were matched up to a maximum of 4.5% of compensation subject in the case of the named executives to certain limitations in the Code.  At December 31, 2017, all employer contributions made on behalf of the NEOS were 100% vested in accordance with the vesting schedule of the plan.

Employment Agreements. An additional component of the executive relationship with the Company intended to attract and retain key executive officers is an employment agreement. In addition to being market competitive, a comprehensive employment agreement supports a long-term commitment to each other between the Company and the executive, as well as a long-term perspective in the executive’s leadership of the Company. It also provides the Company with valuable non-solicitation restrictions on the executive should his or her employment terminate. For the CEO, as well as other NEOs, a change in control benefit supports retention of key executives during potential merger and acquisition discussions and permits such discussions to take place with limited distraction arising from personal concerns.

 

Employee Stock Purchase Plan (ESPP). The ESPP is a form of equity-based compensation that is available to all employees of the Company who own less than 5% of the Company’s outstanding common stock.  Under the ESPP, employees may elect, prior to the beginning of each calendar quarter, to purchase shares of the Company’s common stock through payroll deduction at a price equal to 90% of the market price of the stock at the end of the calendar quarter. The ESPP provides an attractive vehicle for employees to acquire the Company’s stock, which further aligns their financial interests with those of other shareholders.

 

Perquisites and Other Benefits. Perquisites and other benefits represent a small part of the Company’s overall compensation package, and are offered only after consideration of business need. The Company believes that perquisites are generally a part of executive officers’ market-competitive total compensation packages. We annually review the perquisites and other personal benefits that we provide to executive management. The primary perquisites are the use of a Company auto or auto allowance, club memberships, parking, and reimbursement for certain spousal travel.

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PAY-FOR-PERFORMANCE

 

2017 compensation for the NEOs was allocated between base salary, annual incentive compensation and longer-term awards as follows:

 

Picture 17                                   Picture 16

 


(1)Base salary and annual incentive percentages are based on the amounts disclosed in the “Summary Compensation Table” for NEOs.

 

(2)The long-term equity-based percentages are calculated utilizing amounts disclosed in the “Grants of Plan-Based Awards” table under the “Grant date fair value of stock and option awards” column.

 

HOW COMPENSATION DECISIONS ARE MADE

 

Compensation Philosophy

 

The general compensation philosophy of the Company is to provide executive compensation that allows the Company to recruit, retain and motivate a highly qualified management team that formulates and implements the Company’s business strategies that ultimately lead to enhancing long-term shareholder value. To achieve this objective, the Company’s compensation plan includes a combination of base salary and annual cash incentive compensation to reward short-term performance, and the grant of equity based long-term incentives to encourage retention and long-term performance.  All incentive compensation arrangements are crafted and monitored to ensure that they do not promote excessive risk-taking.

 

Independent Consultant and Peer Group Analysis

 

Annually, the Compensation Committee reviews the total compensation structure for the CEO and other NEOs. The Compensation Committee has the authority to retain outside consultants or advisors to assist in their analysis.  The Compensation Committee did not engage an outside consultant that influenced 2017 compensation practices.

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Annually, the Compensation Committee considers the market competitiveness of NEO compensation.  As part of this consideration, the Compensation Committee reviews a group of peer companies who have similar attributes of size, product offerings and geographical location to obtain a general understanding of current compensation practices.  In 2017, the Compensation Committee considered the compensation of the CEO and CFO for the following publicly traded, regional banks with assets between $1 billion -10 billion:

 

 

 

 

Allegiance Bancshares Inc.

First NBC Bank Holding Co.

Opus Bank

Banc of California Inc.

Glacier Bancorp Inc.

Pacific Continental Corp.

BancFirst Corp.

Green Bancorp Inc.

Pacific Mercantile Bancorp

Bank of Marin Bancorp

Guaranty Bancorp

Pacific Premier Bancorp

Banner Corp.

Hanmi Financial Corp.

Preferred Bank

BBCN Bancorp Inc.

Heritage Commerce Corp

Sierra Bancorp

Central Pacific Financial Corp

Heritage Financial Corp.

Southside Bancshares Inc.

Central Valley Community Bncp

Heritage Oaks Bancorp

Southwest Bancorp Inc.

Columbia Banking System Inc.

Home Bancorp Inc.

TriCo Bancshares

CVB Financial Corp.

Independent Bk Group Inc.

Triumph Bancorp Inc.

First Financial Bankshares

LegacyTexas Finl Group Inc

Veritex Holdings Inc.

First Foundation Inc.

MidSouth Bancorp Inc.

Westamerica Bancorp.

First Guaranty Bancshares Inc.

National Bank Holdings Corp.

 

First Interstate BancSystem

Northrim BanCorp Inc

 

 

The Compensation Committee considered the differences, as well as similarities, in business models of these specific peers in its evaluation of the appropriateness and adequacy of the Company’s compensation structure for its top executive officers. 

 

The information reviewed by the Compensation Committee included reported average compensation levels, as reported by S&P Global Market Intelligence.  The Compensation Committee does not benchmark executive compensation at a certain level or percentile based on the data.  The data is only one of the components considered when setting executive compensation.  Other factors include, but are not necessarily limited to, level of responsibility, results of regulatory examinations, individual performance, operating unit performance, overall Company performance and achievement of specific goals.

 

Role of Executive Officers in Determining Executive Compensation 

 

The Compensation Committee oversees the administration of executive compensation plans, including the design, performance measures, and award opportunities for the executive incentive programs, equity plans, and certain employee benefits. The Compensation Committee has the authority to determine, review the performance and approve all compensation and awards, to the CEO and other NEOs. The CEO assists in such review as described above. The CEO determines the compensation of other senior officers based in part on market data provided by compensation consultants or generated by other sources, and the Compensation Committee may review the general elements of such compensation.  Although the Compensation Committee approves the annual grant of restricted stock awards to employees, including the NEOs, it delegates authority to executive officers to issue equity awards in order to address recruitment and retention of employees.  Executive officers do not otherwise determine or make recommendations regarding the amount or form of executive or director compensation.

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GOVERNANCE

 

The Company periodically updates its governance policies which relate to our compensation programs to conform with good governance best practices, including:

 

Recoupment and Clawbacks

 

The Company has adopted a formal clawback policy that applies to all current and former executive officers (Affected Individuals).  In the event that the financial results of the Company are restated as a result of material noncompliance with financial reporting requirements, the Company shall have the right to recoup certain incentive compensation paid to Affected Individuals.  Specifically, the Company shall have the right to recoup certain incentive compensation paid to such Affected Individuals for the three-year period preceding the restatement of the Company’s financial statements. In determining what remedies to pursue, the Board of Directors, or applicable committee, will take into account all relevant factors, including such factors as required or recommended by the SEC.  The Company is also subject to the Sarbanes-Oxley Act of 2002, as amended, that would require our CEO and CFO to reimburse the Company for certain incentive- or equity-based compensation and any profits from the sale of securities of the Company received during the 12-month period following the date the financial statements that were subject to restatement were issued. 

 

It is the intent of the Compensation Committee that this policy be construed and interpreted consistent with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and any other applicable banking laws or regulations. 

 

Stock Ownership Guidelines

 

The Compensation Committee has established stock ownership guidelines for executive officers and directors to align their decisions with creating shareholder value.  Under these guidelines, stock ownership is based on a multiple of base salary for the NEOs and a multiple of the annual retainer fee for the directors, as follows:

 

 

 

 

 

 

 

 

 

 

 

 

Minimum

 

 

 

 

 

Ownership

 

Position

    

Baseline

    

(as a multiple of the baseline)

 

Chief Executive Officer

 

Base salary

 

4

x 

Other Named Executive Officers

 

Base salary

 

2

x 

Nonemployee directors

 

Annual retainer

 

3

x 

 

A new CEO would have three years from the date of his or her engagement to attain this level of ownership.  All other NEOs and nonemployee directors shall each beneficially own shares of Company common stock as noted in the above table within three years of the date on which such officer is initially named by the Company as an NEO or such director is appointed to the Board (whichever date is later).  Shares that have been pledged as collateral for any type of loan will not be included for purposes of determining the amount of stock beneficially owned under these stock ownership guidelines.  All NEOs and incumbent directors owned common stock in excess of the minimum level described above as of December 31, 2017, with the exception of Mr. Hutchinson who is still within the three year compliance window.

 

Other Compensation Governance Practices

 

Prohibit tax gross-ups.  A policy was implemented that employment agreements entered into after 2009 will not include a tax gross-up provision upon a change in control.

 

Require a double-trigger on change in control agreements.  A guideline was implemented that employment agreements executed after 2009 require double-triggers upon a change in control.

 

26


 

No hedging. Employees are prohibited from any short sales of CoBiz stock and from engaging in option trading or hedging transactions on CoBiz stock.

 

Restrictions on pledging. Pledges of CoBiz stock must be approved by the Company. The Company also maintains a maximum pledge cap of 2.5% of outstanding stock.  The Company has an Insider Trading Policy that prohibits employees from holding CoBiz stock in a margin account or pledging CoBiz stock as collateral for a loan unless they have adequate financial resources to prevent a forced sale.  Under the Insider Trading Policy, any new pledges of CoBiz stock must be approved by the Company prior to the proposed execution of documents evidencing the proposed pledge.  The Company reserves the right to reject any requests for pledges to the extent that such request would cause the overall level of pledged CoBiz securities to be in excess of the Pledge Cap. 

 

Luxury expenditures policy. The Company maintains a policy that prohibits expenditures that are not reasonable for staff development, performance initiatives or other activities in the normal course of business.

 

Tax Considerations

 

It has been and continues to be the Company’s intent that compensation payments generally be deductible unless maintaining such deductibility would undermine our ability to meet our primary compensation objectives or is otherwise not in our best interest.

 

Section 162(m).  Under Section 162(m) of the Code, we cannot deduct annual compensation in excess of $1.0 million paid to our named executives unless the compensation was performance-based. Although the majority of the compensation paid during 2017 was deductible, some components of the Company’s compensation programs may result in payments from time to time that are subject to the restriction on deductibility. The Compensation Committee believes that it may be appropriate from time to time to exceed limitations on deductibility under Section 162(m) to ensure that executive officers are compensated in a manner that it believes to be consistent with the best interests of the Company and its shareholders, consistent with the Company’s executive compensation philosophy and objectives. In view of all of the circumstances, the Compensation Committee has concluded that no further action with respect to qualifying such compensation for deductibility is necessary at this time. The Compensation Committee, however, reserves the authority to continue to approve non-deductible compensation in appropriate circumstances.

 

Under the TCJA, a performance-based compensation exception under Section 162(m) has been repealed and the $1.0 million deduction limit now applies to anyone serving as the chief executive officer or the chief financial officer at any time during the taxable year and the top three other highest compensated executive officers serving at fiscal year-end. The new rules generally apply to taxable years beginning after December 31, 2017, but do not apply to remuneration provided pursuant to a written binding contract in effect on November 2, 2017 that is not modified in any material respect after that date.

 

Section 409A. Section 409A of the Code generally governs the form and timing of nonqualified deferred compensation payments. Section 409A imposes sanctions on participants in nonqualified deferred compensation plans that fail to comply with Section 409A rules, including accelerated income inclusion, an additional 20% income tax (in addition to ordinary income tax) and an interest penalty.

 

Excessive Risk

 

The Compensation Committee has reviewed all compensation programs relating to the NEOs in order to confirm that such programs: (1) do not encourage the NEOs to take unnecessary and excessive risks that threaten the value of the Company and (2) do not encourage the manipulation of reported earnings of the Company. 

 

2017 Compensation Program.  The Compensation Committee has discussed its compensation programs for its NEOs with the Company’s risk managers and has concluded that the Company’s 2017 compensation policies and

27


 

practices for its NEOs do not encourage unnecessary and excessive risk-taking and do not encourage the manipulation of reported earnings for the following reasons:

 

·

Base salaries were not adjusted for the NEOs in 2017;

·

Incentive compensation awards were based on an established plan that includes the following features:

Ø

The individual performance component of the plan allows the Compensation Committee to adjust or even eliminate the individual performance portion of the plan if it believes that excessive risks have been or are being taken;

Ø

With respect to the Company performance portion of the plan, the Compensation Committee established financial performance measurements that are not based on highly leveraged incentives that drive risky short-term behavior, but instead are based on the Company’s Core Earnings per Share Growth, Noninterest Income divided by Operating Revenue, Return on Average Tangible Equity, TSR and ROA, which the Compensation Committee believes will focus NEOs on the long-term creation of quality earnings;

Ø

The vesting elements of equity awards under the plan align the interests of the NEOs with the long-term health of the Company, the quality of earnings and the interests of shareholders;

Ø

The mix of cash and equity awards under the plan provide an appropriate balance between short-term and long-term risk and reward decisions; and

Ø

The incentive awards are capped based on predetermined levels.

·

Executive officers are subject to a clawback under our Corporate Governance Guidelines and the Sarbanes-Oxley Act of 2002, as amended, as described in “Recoupment and Clawbacks” above; and 

·

All of the NEOs own a significant amount of Company common stock, which the Compensation Committee believes will discourage unnecessary and excessive risk-taking and help align their interests with those of our shareholders.

 

COMPENSATION COMMITTEE REPORT

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management.

 

Based on the foregoing review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into the Company’s annual report on Form 10-K for the year ended December 31, 2017.  

 

Submitted by the Compensation Committee of the Board:

 

Bruce H. Schroffel, Chair

Michael B. Burgamy

Richard L. Monfort

 

28


 

SUMMARY COMPENSATION TABLE

 

The following table provides compensation information for the year ended December 31, 2017 for the NEOs. The “Executive Compensation – Compensation Discussion and Analysis” section of this proxy statement includes information regarding the material terms of plans and agreements pursuant to which certain items set forth below are paid.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-equity

Change in

 

 

 

 

 

 

 

 

 

 

Stock

Option

incentive plan

pension

All other

 

 

 

 

Salary

Bonus

awards

awards

compensation

value

compensation

Total

Name and principal position

Year

($)

($)

($)(1)

($)

($)(2)

($)

($)(3)

($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Steven Bangert (4)

2017

$

554,320

$

 -

$

346,069

$

 -

$

258,757

$

 -

$

81,078

$

1,240,224

Chairman and CEO of CoBiz Financial Inc.

2016

 

549,611

 

 -

 

231,450

 

 -

 

236,140

 

 -

 

79,001

 

1,096,202

 

2015

 

534,256

 

 -

 

298,448

 

 -

 

146,211

 

 -

 

67,471

 

1,046,386

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lyne B. Andrich (5)

2017

$

334,750

$

 -

$

145,129

$

 -

$

162,772

$

 -

$

38,078

$

680,729

EVP,CFO and COO of CoBiz Financial Inc.

2016

 

331,906

 

 -

 

97,062

 

 -

 

148,545

 

 -

 

39,284

 

616,797

 

2015

 

325,000

 

 -

 

128,915

 

 -

 

91,975

 

 -

 

31,483

 

577,373

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Richard Dalton (6)

2017

$

291,747

$

 -

$

101,192

$

 -

$

226,979

$

 -

$

54,010

$

673,928

EVP and Corporate Secretary of

2016

 

289,269

 

 -

 

67,681

 

 -

 

103,570

 

 -

 

51,344

 

511,864

CoBiz Financial Inc.

2015

 

281,187

 

 -

 

87,274

 

 -

 

64,128

 

 -

 

43,598

 

476,187

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert B. Ostertag (7)

2017

$

266,255

$

 -

$

109,008

$

 -

$

121,146

$

 -

$

42,682

$

539,091

 EVP and Chief Credit Officer of the Bank

2016

 

263,373

 

 -

 

99,707

 

 -

 

111,561

 

 -

 

36,153

 

510,794

 

2015

 

254,765

 

 -

 

105,214

 

 -

 

87,559

 

 -

 

33,182

 

480,720

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Scott E. Page (8)

2017

$

344,793

$

 -

$

149,495

$

 -

$

293,936

$

 -

$

36,645

$

824,869

EVP and CEO of the Bank

2016

 

341,864

 

 -

 

99,981

 

 -

 

153,002

 

 -

 

42,672

 

637,519

 

2015

 

332,313

 

 -

 

128,915

 

 -

 

94,734

 

 -

 

28,763

 

584,725


(1)

The amounts in this column are calculated based on ASC 718 and represent the grant date fair value of time-vested restricted stock.  Fair value is calculated by multiplying the number of shares subject to the award by the Nasdaq closing price per share on the date the award was granted. 

 

(2)

The amounts in this column relate to cash awards earned and accrued under the Annual Incentive Compensation Plan. That plan and these awards are discussed in the Compensation Discussion and Analysis section of this proxy statement.

 

(3)

The following table shows the components of "All other compensation" reported in the Summary Compensation Table above. The cost of each item noted is the actual incremental cost of providing such perquisite or benefit, with the exception of the company provided auto. The cost of the company provided auto was calculated based on the Annual Lease Value Tables published by the IRS multiplied by the estimated personal use of the vehicle or the cash value of an auto allowance.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

401(k) plan

 

Life