Executive Compensation
This section provides details of compensation during 2022
for our NEOs:
Name |
Position |
H. Lynn Harton |
Chairman, President and Chief Executive Officer |
Jefferson L. Harralson |
Executive Vice President, Chief Financial Officer |
Richard W. Bradshaw |
Executive Vice President, Chief Banking Officer |
Robert A. Edwards |
Executive Vice President, Chief Risk Officer |
Melinda
Davis Lux |
Executive Vice President, General Counsel and Corporate
Secretary |
Compensation Discussion and
Analysis
Overview of Compensation Program
Our Talent and Compensation Committee is responsible for
determining the compensation that is paid to our Company’s executive officers. For purposes of this Proxy Statement, the term “executive officer” means the executive leadership of the Company, including the NEOs. Our Talent and Compensation
Committee strives to design our executive compensation programs to serve the long-term interests of our shareholders. To deliver superior shareholder returns, we believe that it is critical to provide competitive compensation packages that will
attract, retain and motivate talented and experienced executives with the requisite expertise. Our program is designed to balance short-term and long-term components of compensation and, consequently, incent achievement of our annual business plan
and long-term business strategies.
2022 Select Business Highlights
Short-Term Highlights
|
For the Years Ended
December 31, |
|
2022 |
2021 |
Change % / bp |
Diluted net income per common share (GAAP) |
$2.52 |
$2.97 |
(15.2%) |
Diluted net income per common share
(operating) |
$2.66 |
$3.09 |
(13.9%) |
Net income (GAAP) ($000) |
$277,472 |
$269,801 |
2.8% |
Net income (operating) ($000) |
$292,601 |
$280,597 |
4.3% |
Return on assets (GAAP) |
1.13% |
1.37% |
(0.24) |
Return on assets (operating) |
1.19% |
1.42% |
(0.23) |
Return on common equity (GAAP) |
9.54% |
13.14% |
(3.60) |
Return on common equity (operating) |
10.07% |
13.68% |
(3.61) |
Return on tangible common equity (operating) |
14.04% |
17.33% |
(3.29) |
Net charge-offs to average loans |
0.07% |
0.00% |
0.07 |
See reconciliation of non-GAAP measures related to GAAP
financial measures in United’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 24, 2023.
In addition to the financial highlights above, during
2022, the Company:
|
● |
Reported a provision for credit losses of $63.9 million compared to a release of provision of $37.6 million in 2021, with $18.3 million attributable to establishing
an initial allowance for loans acquired in the first quarter in the Reliant acquisition.
|
|
● |
Experienced strong loan growth of $3.6 billion or $1.3 billion excluding loans acquired from Reliant and PPP loans.
|
|
● |
Grew core transaction deposits $1.3 billion compared to 2021; excluding the impact of the Reliant acquisition, 2022 core transaction deposits were down $819 million,
or 5.7%, reflecting runoff following 2021’s pandemic-related deposit surge.
|
|
● |
Reported an improved efficiency ratio of 52.3%, or 50.2% on an operating basis, both record low
levels. This was the result of the combination of higher rates and the achievement of merger-related efficiencies.
|
|
● |
Completed the acquisition of Reliant in the high-growth Nashville, Tennessee MSA, which was a
strategic priority.
|
|
● |
Agreed to acquire Progress Financial Corporation and its banking subsidiary Progress Bank and Trust headquartered in
Huntsville, Alabama with 14 branches in some of the Southeast’s fastest growing markets in Alabama and the Florida panhandle (and completed that acquisition immediately after the end of 2022). |
|
● |
Awarded $547 thousand in charitable contributions to 197 organizations to improve the economic vitality and quality of life in the communities we serve through the
United Community Bank Foundation.
|
|
● |
Appointed George B. Bell to serve on our Board of Directors, effective August 17, 2022. Mr. Bell most recently served as
an Executive Vice President (Software Engineering Group Head II, Business Management) with Truist Financial Corporation from 2019 to 2021. Mr. Bell brings a depth of information technology experience as he has over 40 years of experience as
an information technology executive in the financial services industry.
|
|
● |
Was recognized by Forbes as one of the “100 Best Banks in America” for the ninth consecutive year.
|
|
● |
Was recognized by J.D. Power as Highest in Customer Satisfaction with Consumer Banking in the Southeast, eight of the last nine years.
|
|
● |
Was recognized as one of the Best Banks to Work For by American Banker for the sixth consecutive
year. |
Long-Term Highlights
We have generated strong financial results over the past 5+
years, more than doubling net income while also adding substantial capital, both organically and through M&A. Since the end of 2016, we increased our already strong common equity tier-1 risk-based capital ratio by 123 basis points to 12.46% and
our tier-1 risk-based capital ratio by 194 basis points to 13.17%, providing greater flexibility for strategic company growth and capital actions while maintaining a strong balance sheet. In spite of the volatile operating environment created by
the COVID-19 pandemic, we have continued to outperform our peers with respect to both return on average assets (“ROA”) and return on average tangible common equity (“ROTCE”).
Total Shareholder Return (“TSR”)
The graph below shows our TSR1 expressed as the cumulative return to shareholders over the past decade. As illustrated, a $100 investment in United Community Banks, Inc. common stock on December 31, 2012 would be valued at
$422 as of December 31, 2022, significantly outperforming the financial services industry over the period, as measured by the KBW NASDAQ Regional Bank Index (KRX).
Performance for the
period ended
December 31, 2022 |
United Community
Banks, Inc. |
KBW Nasdaq Regional
Bank Index (KRX) |
1-Year |
88% |
43% |
3-Year |
110% |
52% |
5-Year |
212% |
110% |
10-Year |
327% |
143% |
1 TSR shows
the actual return on an initial investment with dividends reinvested.
Key Aspects of the 2022 Executive Compensation
Program
Overview
Our
executive compensation program is comprised of three main components:
Base Salary |
● Primarily reflects scope of responsibilities, individual skills and capabilities and individual performance in light of competitiveness in
the markets in which we retain executive talent
|
Annual Nonequity Incentive Awards |
● Provides short-term variable pay for performance based on key operating goals |
Long-Term Equity Incentive Awards |
● Consists
of grants of performance-based and time-based restricted stock units |
● Aligns the long-term interests of our executive officers with those of our shareholders to support long-term value creation |
Annual Nonequity Incentive Awards Earned in 2022
During 2022, each NEO earned a payout under our annual
nonequity incentive award program of 145.05% of his or her target payout level.
The Committee selected the following six performance
objectives and assigned weights for 2022 nonequity incentive awards:
|
|
|
2022 Corporate Performance Levels |
|
|
|
|
|
|
50% |
100% |
150% |
|
|
|
Performance Objective |
Overall Weight |
|
Threshold |
Target |
Maximum |
2022 Actual |
2022 Result |
|
Pre-Tax Pre-Provision Earnings per Share |
20.0 |
% |
$ 3.49
|
|
$ 3.59
|
|
$ 3.65
|
|
$ 3.91 |
|
30.00 |
% |
Operating Earnings per Share |
15.0 |
|
$ 2.49
|
|
$ 2.59
|
|
$ 2.69
|
|
$ 2.66 |
|
20.25 |
|
Net Charge-Offs / Total Loans |
15.0 |
|
0.35 |
%
|
0.27
|
%
|
0.20 |
%
|
0.07 |
%
|
22.50
|
|
NPAs / Total Assets1 |
15.0 |
|
25th Percentile
|
|
50th Percentile
|
|
75th Percentile
|
|
66th Percentile
|
|
19.80 |
|
Operating Efficiency Ratio |
20.0 |
|
56.50 |
%
|
53.50 |
%
|
51.50 |
%
|
50.16 |
% |
30.00 |
|
Customer Satisfaction Rating |
15.0 |
|
95.50 |
%
|
96.50 |
%
|
97.50 |
%
|
98.29 |
% |
22.50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
145.05% |
|
1 |
NPAs / Total Assets metric excludes restructured loans. |
See 2022 Executive Compensation
Components: Annual Nonequity Incentive Awards for additional information regarding annual nonequity incentive awards earned by NEOs in 2022.
Long-Term Equity Incentive Awards Granted in 2022
Historically during the fourth quarter, the independent
members of our Board of Directors provide input with respect to our CEO’s compensation and ratify the Talent and Compensation Committee’s determinations with respect to our CEO’s compensation. In an effort to better align the timing of the granting
of annual long-term equity incentive awards to our executive officers with these annual compensation discussions, we changed the timing of granting of annual long-term equity incentive awards to our executive officers from September (as had
generally been the case historically) to January. As such, no equity awards were made to executive officers in calendar year 2022. Granting of equity awards to executive officers resumed in January 2023.
Our long-term equity incentive award grants are generally
made in restricted stock units that consist of 70% performance-based restricted stock units (“PRSUs”) and 30% time-based restricted stock units (“TRSUs”).
Performance-Based Restricted Stock Units
Annual PRSU award grants vest, if at all, in equal
installments with 25% vesting on February 15 following the performance period. Vesting of the PRSUs on each vesting date is based on our performance in the immediate calendar year before vesting (e.g., the number of awards that vest on February 15,
2023 will be determined by our performance for the 2022 calendar year).
Annual PRSU awards granted in September 2021 covered the
2022, 2023, 2024 and 2025 performance years and vest on February 15, 2023, 2024, 2025 and 2026, respectively. No PRSU awards were granted in 2022. PRSU awards granted in January 2023 covered the 2023, 2024, 2025 and 2026 performance years and vest
on February 15, 2024, 2025, 2026 and 2027, respectively. There were no changes to the design of the annual performance-based long-term equity incentive awards.
For awards granted since 2018, the performance measure
selected by the Talent and Compensation Committee for the PRSUs is our return on average assets for the applicable calendar year performance period relative to the designated peer group as adjusted by the TSR modifier relative to the same
designated peer group. Specifically, the number of PRSUs subject to vesting on each applicable vesting date equals (a) a percentage between 0% and 150% determined based on our return on average assets relative to designated peer companies for the
applicable performance period, multiplied by the number of target PRSUs, adjusted by (b) the TSR modifier percentage relative to designated peer companies for the applicable performance period.
Time-Based Restricted Stock Units
Prior to the 2023 grant of TRSU awards, annual TRSUs grants
vested in equal installments with 25% vesting on November 15 following the year of grant and then on August 15 in years two, three and four post grant assuming the executives remain employed with us, subject to certain exceptions. Effective with
the 2023 grant of TRSU awards, annual TRSUs grants will vest in equal installments with 25% vesting on February 15 following each of the four years following grant.
Annual TRSU awards granted in September 2021 vest(ed)
equally on November 15, 2022, August 15, 2023, August 15, 2024 and August 15, 2025. No TRSU awards were granted in 2022. TRSU awards granted in January 2023 will vest on February 15, 2024, February 15, 2025, February 15, 2026 and February 15, 2027.
There were no changes to the design of the annual time-based long-term equity incentive awards.
See 2022 Executive Compensation Components: Long-Term
Equity Incentive Awards for additional information regarding the granting of long-term equity incentive awards.
Shareholder Response
The most recent shareholder advisory vote on our NEO
compensation was held at our 2022 Annual Meeting of Shareholders. Excluding abstentions and broker nonvotes, over 98% of the votes cast were in support of our executive compensation program. Because we view this outcome as continuing to be
overwhelmingly supportive of our compensation policies and practices, we do not believe that changes to the program are needed at this time. Nonetheless, because market practices and our business needs continue to evolve, we intend to continually
evaluate our program and make changes when warranted.
Pay for Performance
Our compensation philosophy is to provide a significant
portion of our compensation for NEOs in at-risk, performance-based vehicles. The following charts show the mix of our CEO’s 2023 target direct compensation package, as well as the mix of the target direct compensation package for the average NEO.
At Risk/Performance-Based |
CEO
|
60% |
All Other NEOs
|
50% |
Legend:
TRSU — Long-Term Equity Incentive Awards (Time-Based)
PRSU — Long-Term Equity Incentive Awards
(Performance-Based)
Compensation Philosophy and Objectives
Our overall compensation philosophy seeks to achieve the
following objectives with respect to our employees:
Competitive |
We offer competitive compensation to our executives
and employees based on comparable external market information. |
Fair and Equitable |
We are committed to the fair and equitable administration of our compensation and incentive
plans. |
Performance-Based |
We strive to reward our employees on the basis of individual and company-wide,
risk-adjusted performance. |
Long-Term Soundness |
We attempt to appropriately balance risks and rewards in a manner that does not encourage
excessive or imprudent risk-taking by our executives and employees. We take into account a number of performance metrics when determining whether to award incentive compensation to promote long-term financial success. |
Communication |
We make every effort to communicate each individual’s compensation package clearly. |
Peer Positioning |
We use peer compensation levels to help guide our decisions. Our targets for total direct
compensation (base salary, annual incentives and long-term incentives) are: |
|
a. New to Position:
b. Experienced:
c. Proven High Performer:
|
Between the 1st and 40th percentile
40th - 60th percentile
60th - 75th percentile
|
The material compensation principles applicable to the
compensation of our NEOs are outlined below:
|
● |
In determining total compensation, we consider the reasonable range of the median of total compensation of comparable positions at companies within our market
comparator group, while accounting for distinct circumstances not reflected in the market data such as unique job descriptions as well as the impact that a particular officer may have on our ability to meet business objectives. For
competitive or other reasons, our levels of total compensation or any component of compensation may exceed or be below the median range of our market comparator group.
|
|
● |
We set base salaries to reflect the responsibilities, experience, performance and contributions of the NEOs and the salaries for comparable benchmarked positions
while maintaining an appropriate balance between base salary and incentive compensation.
|
|
● |
We reward NEOs who enhance our performance by linking nonequity and equity incentive awards to the achievement of our financial goals.
|
|
● |
We promote share ownership to align the interests of our NEOs with those of our shareholders.
|
|
● |
In approving compensation arrangements, we consider recent compensation history including special or
unusual compensation payments. |
We have change-in-control severance agreements with our
NEOs to promote executive continuity, aid in retention and secure valuable protections for United, such as restrictive covenants, as well as to facilitate implementation of our clawback policy.
The Talent and Compensation Committee believes that:
|
● |
The compensation of our executive officers should reflect their individual performance and their performance as an executive management team in attaining key
operating metrics.
|
|
● |
Performance objectives should be motivating and challenging but also achievable and consistent with our safe and sound operation.
|
|
● |
Compensation should not be based on the short-term performance of our stock, whether favorable or unfavorable, and should not encourage unnecessary or excessive
risks.
|
Compensation Best Practices
We strive to align our executives’ interests with those
of our shareholders. We further strive to follow sound governance practices over our executive compensation program and to ensure that our compensation programs and practices are consistent with safe and sound banking practices. Below are key
features of our executive compensation program that we believe encourage executive performance consistent with responsible compensation practices.
What We Do
Pay for Performance
|
|
A significant portion of executive
compensation is linked to key metrics of financial performance. |
Multi-Year Vesting
Period for Long-Term Incentive
Awards
|
|
Time-based restricted stock unit and
performance-based restricted stock unit awards generally vest, subject to performance achievement, ratably over a four-year period.
|
Double Trigger
Change-in-Control
Provisions
|
|
Our change-in-control continuity agreements require
both a change in control and termination of employment without “cause” or for “good reason” for an executive to be entitled to severance payments. In addition, our long-term equity incentive awards for executive officers include similar
double-trigger vesting provisions. |
United Share Ownership Guidelines
|
|
We have robust share ownership guidelines for
our executive officers to align the interests of our executive officers with those of our shareholders. |
Clawback Policy
|
|
Our Board has adopted a policy relating to the
clawback of incentive compensation paid to our executive officers in the event of certain restatements of our financial statements. |
Annual
Compensation
Risk Assessment
|
|
Our Talent and Compensation Committee assesses
the risk of all compensation programs at least annually. |
What We Don’t Do
No Tax Gross-Ups |
|
We do not provide any tax gross-ups. |
No Hedging or
Pledging of
United Stock
|
|
We have a policy that prohibits our directors,
officers and employees from engaging in short sales, trading in puts, calls and other options or derivatives with respect to our stock and hedging our stock. |
No Repricing of
Stock Options
Without Shareholder
Approval
|
|
Our Key Employee Stock Option Plan prohibits
repricing without shareholder approval. |
Role of the Talent and Compensation Committee
Oversight
Our Talent and Compensation Committee is comprised entirely
of independent directors. The Committee determines and approves the compensation of our executive officers. The independent members of our Board of Directors provide input with respect to our CEO’s compensation and ratify the Talent and
Compensation Committee’s determinations with respect to our CEO’s compensation.
Approach to Total Compensation and its Components
In establishing the total compensation of each of our
executive officers, the Talent and Compensation Committee considers the following factors:
|
● |
Scope of responsibilities
|
|
● |
Value of his or her unique skills and capabilities to support our long-term performance
|
|
● |
Contribution as a member of the executive management team
|
|
● |
Performance as compared to individual objectives
|
|
● |
Performance of the Company as compared to the Company’s three-year strategic plan and annual business plan
|
|
● |
Performance of the Company as compared to a peer group
|
|
● |
Peer group compensation information |
In determining total compensation of our executive
officers, the Talent and Compensation Committee considers the reasonable range of the median of total compensation of comparable positions at companies within our peer group. The Committee also considers the balance of nonequity and equity
compensation and short-term and long-term compensation of comparable positions at companies within our peer group. The Committee does not have a policy or target for the allocation of compensation between nonequity and equity compensation or
short-term and long-term compensation.
Our Talent and Compensation Committee believes that a
significant portion of executive compensation should be based on Company performance. Our annual nonequity incentive awards are granted based 100% on the performance of the Company as compared to pre-established goals. In addition, generally 70% of
our long-term equity incentive awards vest based on the performance of the Company as compared to pre-established goals.
Our Talent and Compensation Committee believes that
granting long-term equity incentive awards to our executive officers provides a competitive incentive opportunity, links executive compensation with long-term performance and strengthens the alignment of executive compensation with shareholder
value creation.
We utilize our equity-based awards:
|
● |
As a retention tool to encourage the long-term service of our executives
|
|
● |
To provide our executive management team a direct interest in our future success
|
|
● |
To directly align the interests of our executives with shareholder value creation |
Role of Outside Advisors
In 2022, the Talent and Compensation Committee retained
Aon’s Human Capital Solutions practice, a division of Aon plc (“Aon”), otherwise known as McLagan, to provide independent compensation consulting services. Aon has provided compensation consulting services to the Talent and Compensation Committee
since 2015.
The Talent and Compensation Committee determines the scope
of Aon’s services and has approved a written agreement pursuant to which Aon provides independent advice to the Committee. The approved scope of Aon’s work generally includes performing analyses and providing independent advice related to our
executive and nonemployee director compensation programs and providing competitive market studies and other services that support the Talent and Compensation Committee’s decisions, such as providing advice in areas such as compensation
philosophy, compensation risk assessment, market comparator group, incentive plan design, executive compensation disclosure, emerging best practices and changes in the regulatory environment.
Aon, along with management, also prepares
benchmarking data for consideration by the Talent and Compensation Committee in making decisions with respect to base salary, the annual nonequity incentive award program and the long-term equity incentive award program.
The Talent and Compensation Committee annually reviews the
independence and performance of its compensation consultant and the consulting services provided. In evaluating the independence and performance and considering the retention of its compensation consultant, the Talent and Compensation Committee
also assesses the consultant’s independence in accordance with Nasdaq listing standards, taking into account whether:
|
● |
The consultant provides other services to United; |
|
● |
The fees paid by United to the compensation consultant represent an insignificant portion of the
consultant’s total revenues; |
|
● |
The consultant maintains policies and procedures designed to prevent conflicts of interest between the
consultant and the companies to which it provides services, as well as between its individual employees and such companies; |
|
● |
United or any member of the Talent and Compensation Committee have any other business or personal
relationship with the consultant or its employees who provide services to the Committee; |
|
● |
The consultant, or its employees who provide services to the Talent and Compensation Committee, own any
United securities; and |
|
● |
Any executive officer of United has any business or personal relationship with the consultant or its
employees who provide services to the Talent and Compensation Committee. |
In 2022, Aon’s compensation advisory role included
providing market information on executive and director compensation levels and practices, assisting in the design of executive and director compensation programs and providing input on related technical and regulatory matters. The total fees paid
to Aon in 2022 were comprised of $113,122 for services for executive compensation consulting, $48,925 for additional services for surveys, incentive plan designs and compensation benchmarking and $193,435 for other services.
Based upon these and other factors, the Talent and
Compensation Committee concluded that the retention of Aon did not present any conflicts of interest, that Aon was independent and that such retention was appropriate.
When requested by the Talent and Compensation Committee, an
Aon representative attends Committee meetings and participates in private sessions with the Committee. Talent and Compensation Committee members may consult directly with Aon from time to time as desired, and the chair of our Talent and
Compensation Committee regularly consults with Aon with respect to Committee responsibilities and compensation matters.
Management’s Role in Determining Executive Compensation
Our executive management team develops a rolling three-year
strategic plan and annual business plan. The three-year strategic plan and annual business plan are reviewed and approved by our Board. Financial performance targets used in our incentive compensation programs typically are derived from those
plans.
Our CEO develops compensation recommendations for our
executive officers based on each executive’s scope of responsibilities, individual performance and contributions to the executive management team, as well as market data provided by Aon. The CEO evaluates and reports to the Talent and Compensation
Committee on the performance of each of the other NEOs, in each case, versus previously established goals. The Talent and Compensation Committee also has input into each NEO’s performance evaluation. No objective criteria or relative weighting is
assigned to any individual goal or factor. In making compensation recommendations, the CEO also takes into account United’s performance as compared to our Board-approved plans and peer group performance. Our Talent and Compensation Committee
reviews and considers the recommendations of the CEO and his evaluation of the performance of our executive officers.
Our Talent and Compensation Committee determines the
compensation of our CEO after assessing the performance of the CEO and the performance of the Company as compared to the Board-approved plans and peer group performance. Our Lead Director, who consults regularly with the CEO and other directors,
provides input to the Committee with respect to the CEO’s performance. The Committee also consults with Aon as to the appropriateness of our CEO’s compensation and each component of compensation in light of market practices, sound governance
practices and trends in compensation practices in the banking industry.
Although the Committee values and solicits management’s
input, it retains and exercises sole authority to make decisions regarding executive officer compensation.
Market Benchmarking
On an annual basis, the Talent and Compensation Committee
selects a benchmark group of publicly-traded financial institutions to use in assessing the compensation of United’s executive officers. The peer group is used by our Talent and Compensation Committee to ensure that United’s compensation programs
offer competitive compensation opportunities and reflect best practices in compensation plan design.
Aon assists the Committee in selecting the appropriate peer
group companies. The Company determined a new peer group in 2021 for the purposes of setting 2022 compensation, based on comparable assets, commercial loan concentrations, number of branches and states of operation. The 2021 benchmark group of
publicly-traded financial institutions used to set 2022 compensation (the “2022 Compensation Peer Group”) included:
Company Name |
Ticker |
City |
State |
Total Assets 2020Y ($000) |
Ameris Bancorp |
ABCB |
Atlanta |
GA |
20,438,638 |
Atlantic Union Bkshs Corp. |
AUB |
Richmond |
VA |
19,628,449 |
BancorpSouth |
BXS |
Tupelo |
MS |
24,081,194 |
Commerce Bancshares Inc. |
CBSH |
Kansas City |
MO |
33,269,786 |
First Busey Corp. |
BUSE |
Champaign |
IL |
10,544,047 |
First Financial Bancorp. |
FFBC |
Cincinnati |
OH |
15,973,134 |
First Financial Bankshares |
FFIN |
Abilene |
TX |
10,904,500 |
First Merchants Corp. |
FRME |
Muncie |
IN |
14,067,210 |
Fulton Financial Corp. |
FULT |
Lancaster |
PA |
25,892,990 |
Hancock Whitney Corp |
HWC |
Gulfport |
MS |
35,072,643 |
Heartland Financial USA Inc. |
HTLF |
Dubuque |
IA |
17,908,339 |
Independent Bk Group Inc. |
IBTX |
McKinney |
TX |
17,753,476 |
Old National Bancorp |
ONB |
Evansville |
IN |
23,744,451 |
Pinnacle Financial Partners |
PNFP |
Nashville |
TN |
35,299,705 |
Prosperity Bancshares Inc. |
PB |
Houston |
TX |
35,059,275 |
Renasant Corp. |
RNST |
Tupelo |
MS |
14,929,612 |
Sandy Spring Bancorp Inc. |
SASR |
Olney |
MD |
12,798,429 |
Simmons First National Corp. |
SFNC |
Pine Bluff |
AR |
23,348,117 |
SouthState Corp. |
SSB |
Winter Haven |
FL |
37,789,873 |
TowneBank |
TOWN |
Portsmouth |
VA |
14,626,444 |
Trustmark Corp. |
TRMK |
Jackson |
MS |
16,551,840 |
UMB Financial Corp. |
UMBF |
Kansas City |
MO |
33,127,504 |
United Bankshares Inc. |
UBSI |
Charleston |
WV |
26,184,247 |
WesBanco Inc. |
WSBC |
Wheeling |
WV |
16,425,610 |
The following publicly-traded financial institutions were
removed from the 2022 Compensation Peer Group: Cadence Bancorp. and CenterState Bank Corp. – as a result of completed or expected acquisitions at the time the compensation peer group was being developed; Park National Corp. – as a result of not
meeting the new asset size criteria or commercial loan criteria; First Commonwealth Financial and S&T Bancorp Inc. – as a result of not meeting the new asset size criteria. The following publicly-traded financial institutions were added to the
2022 Compensation Peer Group as a result of meeting the peer criteria primarily due to United’s asset growth: Commerce Bancshares Inc., Hancock Whitney Corp., Independence Bk Group Inc. and Prosperity Bancshares Inc.
The Talent and Compensation Committee believes that this
group was representative of the markets in which we compete for executive talent. The Talent and Compensation Committee uses the peer group to obtain a general understanding of the current compensation practices for our industry as compared to
United including a review of base salaries, annual nonequity incentive awards and long-term equity incentive awards.
When determining compensation for our executive officers
for 2022, the Talent and Compensation Committee considered the median range of total compensation and components of compensation for the comparable roles within the 2022 Compensation Peer Group companies. Although the Committee did not seek to set
compensation at a specific target level as compared to the 2022 Compensation Peer Group, the Committee considered whether total compensation and its components for each of our executive officers was within a reasonable range of the median
compensation for comparable positions at the 2022 Compensation Peer Group companies.
2022 Executive Compensation Components
The Company’s executive compensation program has three
main components – base salary, annual nonequity incentive awards and long-term equity incentive awards. There are also limited perquisites.
Base salary and annual nonequity incentive awards are
primarily designed to reward current and past performance. Long-term equity incentive awards are primarily designed to promote long-term future growth. Our Talent and Compensation Committee has structured the Company’s annual nonequity incentive
award program and long-term equity incentive award program to motivate executives to achieve the business goals set by the Company and to reward the executives for achieving such goals.
Base Salary
To attract and retain qualified executives, base salary
is provided to our executive officers. The base salary is determined based on position, responsibility and skills and capabilities using competitive criteria as well as an assessment of the individual’s performance. Our Talent and Compensation
Committee also considers market data provided by our outside consultants when determining base salaries for executive officers.
Base salary levels are typically reviewed annually as
part of our annual performance review process as well as upon a promotion or other change in job responsibilities.
As previously disclosed, when determining compensation
for our executive officers for 2022, the Talent and Compensation Committee considered the median range of total compensation and components of compensation for the comparable roles within the 2022 Compensation Peer Group companies. Although it did
not seek to set compensation at a specific target level as compared to the 2022 Compensation Peer Group, the Talent and Compensation Committee considered whether total compensation and its components for each of our executive officers was within a
reasonable range of the median compensation for comparable positions at the institutions in the 2022 Compensation Peer Group. This market positioning analysis reflected that our NEO compensation was approximately 10% behind the peer market median
at a time when our performance was above the peer market median on various measures. As a result, the Talent and Compensation Committee approved the 2022 base salary increases summarized in the table below. Subsequent to these base salary
increases, our NEOs were approximately 7% above the peer market median, which is consistent with time and experience in each NEO’s role, the performance of United and United’s expected growth in 2022.
Name |
2021
Base Salary ($) |
2022
Base Salary ($) |
% Change |
|
H. Lynn Harton |
$ 795,000 |
$ 1,000,000 |
26 |
% |
Jefferson L. Harralson |
425,000 |
515,000 |
21 |
|
Richard W. Bradshaw |
425,000 |
525,000 |
24 |
|
Robert A. Edwards |
400,000 |
425,000 |
6 |
|
Melinda Davis
Lux |
350,000 |
400,000 |
14 |
|
Annual Nonequity Incentive Awards
The Talent and Compensation Committee believes that a
significant portion of executive compensation should be linked directly to the achievement of specified financial and nonfinancial objectives. Our Management Incentive Plan is a pay-for-performance plan that governs the amount of nonequity
incentive compensation we award annually to our executive officers. Under the Management Incentive Plan, the Talent and Compensation Committee determines who is eligible to participate in the plan, the threshold, target and maximum payout levels
that can be awarded under the plan and the corporate performance metrics and qualitative measures used to determine awards. Those measures are generally based on annual corporate and financial performance goals established at threshold, target and
maximum levels based on our strategic and operating objectives. At the end of each year, the actual performance for each of the chosen metrics is measured separately against target level. Corporate performance that meets the target level
results in a 100% payout. Awards are prorated for actual performance results between levels (e.g., between threshold, target and maximum). The Talent and Compensation Committee has discretion to modify awards under the Management Incentive Plan.
In order to qualify for an annual incentive award,
individual performance must also meet expectations of the CEO, the Talent and Compensation Committee and the Board. The CEO evaluates and reports to the Talent and Compensation Committee on the performance of each of the other NEOs, in each case
versus previously established goals. The Talent and Compensation Committee also has input into each NEO’s performance evaluation. The Talent and Compensation Committee evaluates the performance of the CEO primarily based on Company performance
relative to the strategic plan and annual business plan.
2022 Nonequity Incentive Award Performance Goals
The six performance objectives, the assigned weight for
each objective, the threshold, target and maximum performance level for each objective and our financial performance under each objective for 2022, were as follows:
|
|
|
2022 Corporate Performance Levels |
|
|
|
50% |
100% |
150% |
Performance Objective |
Overall Weight |
|
Threshold |
Target |
Maximum |
Pre-Tax Pre-Provision Earnings per Share |
20.0% |
|
$ 3.49
|
|
$ 3.59
|
|
$ 3.65
|
|
Operating Earnings per Share |
15.0 |
|
$ 2.49
|
|
$ 2.59
|
|
$ 2.69
|
|
Net Charge-Offs / Total Loans |
15.0 |
|
0.35 |
% |
0.27 |
% |
0.20 |
%
|
NPAs / Total Assets1 |
15.0 |
|
25th Percentile
|
|
50th Percentile
|
|
75th Percentile
|
|
Operating Efficiency Ratio |
20.0 |
|
56.50
|
% |
53.50 |
% |
51.50 |
%
|
Customer Satisfaction
Rating |
15.0 |
|
95.50
|
%
|
96.50 |
%
|
97.50 |
%
|
1 NPAs /Total Assets metric excludes restructured loans.
2022 Nonequity Incentive Award Opportunities
In 2022, the Talent and Compensation Committee
established the annual nonequity incentive award opportunities under the Management Incentive Plan as a percentage of base salary. Target award opportunities were designed to provide for total cash compensation that rewards executives for driving
our success and are competitive with general practices within our peer group. The 2022 potential nonequity incentive award payments, expressed as a percentage of base salary, were as follows:
Name |
Threshold |
|
Threshold Incentive
Payment ($) |
Target |
|
Target Incentive
Payment ($) |
Maximum |
|
Maximum Incentive
Payment ($) |
|
H. Lynn Harton |
50.0 |
% |
$ 500,000 |
100.0 |
% |
$ 1,000,000 |
150.0 |
% |
$ 1,500,000 |
|
Jefferson L. Harralson |
32.5 |
|
167,375 |
65.0 |
|
334,750 |
97.5 |
|
502,125 |
|
Richard W. Bradshaw |
32.5 |
|
170,625 |
65.0 |
|
341,250 |
97.5 |
|
511,875 |
|
Robert A. Edwards |
30.0 |
|
127,500 |
60.0 |
|
255,000 |
90.0 |
|
382,500 |
|
Melinda Davis Lux |
27.5 |
|
110,000 |
55.0 |
|
220,000 |
82.5 |
|
330,000 |
|
Threshold, target and maximum incentive payments in the
chart above are based on 2022 base salaries.
2022 Nonequity Incentive Award Payouts
The payout percentage, based on our financial performance
for each objective in 2022, were as follows:
|
|
|
2022 Corporate
Performance Levels |
|
|
|
|
|
|
50% |
100% |
150% |
|
|
|
Performance Objective |
Overall Weight |
|
Threshold |
Target |
Maximum |
2022 Actual |
2022 Result |
|
Pre-Tax Pre-Provision Earnings per Share |
20.0 |
% |
$ 3.49 |
$ 3.59 |
$ 3.65 |
$ 3.91 |
30.00% |
Operating Earnings per Share |
15.0 |
|
$ 2.49 |
$ 2.59 |
$ 2.69 |
$ 2.662 |
20.25
|
Net Charge-Offs / Total Loans |
15.0 |
|
0.35 % |
0.27 % |
0.20 % |
0.07% |
22.50 |
NPAs / Total Assets1 |
15.0 |
|
25th Percentile |
50th Percentile |
75th Percentile |
66th Percentile |
19.80 |
Operating Efficiency Ratio |
20.0 |
|
56.50 % |
53.50 % |
51.50 % |
50.16%2 |
30.00 |
Customer Satisfaction Rating |
15.0 |
|
95.50 % |
96.50 % |
97.50 % |
98.29 % |
22.50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
145.05 % |
|
|
|
|
|
|
|
|
|
|
|
1 |
NPAs / Total Assets metric excludes restructured loans.
|
|
2 |
Both our operating earnings per share and operating efficiency ratio exclude merger-related and other
charges. See reconciliation of non-GAAP measures related to GAAP financial measures in United’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 24, 2023. |
The following graphs summarize our 2022 performance with
regard to select performance objectives compared with our peer group. The customer satisfaction rating operational measure is based on Customer Service Profiles for which peer comparison data is unavailable. See Role of the Talent and Compensation
Committee: Market Benchmarking for our 2022 Compensation Peer Group. The source data for the following graphs is S&P Capital IQ Pro, which standardizes financial data to assist with comparisons across multiple companies. Consequently, the
standardized data presented for us below may differ from our actual calculations, which do not take into account such standardizations.
|
1 |
NPAs / Total Assets metric excludes restructured loans.
|
|
2 |
Our operating efficiency ratio excludes merger-related and other charges. See reconciliation of
non-GAAP measures related to GAAP financial measures in United’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 24, 2023. |
Applying the payout level of 145.05% of target to base
salary resulted in our NEOs earning the following nonequity incentive awards in 2022:
Name |
2022 Award ($) |
Award as % of Target |
|
Award as % of Base Salary |
H. Lynn Harton |
$ 1,450,500 |
145.05 |
% |
145.05 |
% |
Jefferson L. Harralson |
485,555 |
145.05 |
|
94.28 |
|
Richard W. Bradshaw |
494,983 |
145.05 |
|
94.28 |
|
Robert A. Edwards |
369,878 |
145.05 |
|
87.03 |
|
Melinda Davis Lux |
319,110 |
145.05 |
|
79.78 |
|
Long-Term Equity Incentive Awards
We believe that long-term equity incentive awards provide
a competitive incentive opportunity for our NEOs, strengthens the alignment of executive pay with shareholder value creation and creates an additional link between pay and our performance (specifically, our return on average assets and total
shareholder return). Under our long-term equity incentive award program, we are permitted to grant stock options, restricted stock, restricted stock units and other forms of equity-based compensation.
Historically during the fourth quarter, the independent
members of our Board of Directors provide input with respect to our CEO’s compensation and ratify the Talent and Compensation Committee’s determinations with respect to our CEO’s compensation. In an effort to better align the timing of the granting
of annual long-term equity incentive awards to our executive officers with these annual compensation discussions, we changed the timing of granting of annual long-term equity incentive awards to our executive officers from September (as had
generally been the case historically) to January. As such, no equity awards were made to executive officers in calendar year 2022. Granting of equity awards to executive officers resumed in January 2023.
Our long-term equity incentive award grants are generally
made in restricted stock units that consist of 70% performance-based restricted stock units (“PRSUs”) and 30% time-based restricted stock units (“TRSUs”).
Performance-Based Restricted Stock Units
Annual PRSU award grants vest, if at all, in equal
installments with 25% vesting on February 15 following the performance period. Vesting of the PRSUs on each vesting date is based on our performance in the immediate calendar year before vesting (e.g., the number of awards that vest on February 15,
2023 will be determined by our performance for the 2022 calendar year).
Annual PRSU awards granted in September 2021 covered the
2022, 2023, 2024 and 2025 performance years and vest on February 15, 2023, 2024, 2025 and 2026, respectively. No PRSU awards were granted in 2022. PRSU awards granted in January 2023 covered the 2023, 2024, 2025 and 2026 performance years and vest
on February 15, 2024, 2025, 2026 and 2027, respectively. There were no changes to the design of the annual performance-based long-term equity incentive awards.
For awards granted since 2018, the performance measure
selected by the Talent and Compensation Committee for the PRSUs is our return on average assets for the applicable calendar year performance period relative to the designated peer group as adjusted by the TSR modifier relative to the same
designated peer group. Specifically, the number of PRSUs subject to vesting on each applicable vesting date equal (a) a percentage between 0% to 150% determined based on our return on average assets relative to designated peer companies for
the applicable performance period, multiplied by the number of target PRSUs, adjusted by (b) the TSR modifier percentage relative to designated peer companies for the applicable performance period.
The following table summarizes the return on average assets
and TSR modifier performance measures:
Return on Average Assets |
TSR Modifier |
Return on average assets performance relative to designated peer group of
companies for the performance period as a percentage of target PRSUs |
PRSUs determined based on return on average assets percentage for the performance
period is adjusted +/- 25% based on relative total shareholder return |
25th Percentile = Threshold (0% of Target)
50th Percentile = Target (100% of Target)
75th Percentile = Maximum (150% of Target)
|
25th Percentile = Threshold (-25%)
50th Percentile = Target (0%)
75th Percentile = Maximum (+25%)
|
The return on average assets percentage
shall be interpolated between payout levels for performance between performance levels. |
The TSR modifier percentage shall be interpolated
between payout levels for performance between performance levels. |
Time-Based Restricted Stock Units
Prior to the 2023 grant of TRSU awards, annual TRSUs grants
vested in equal installments with 25% vesting on November 15 following the year of grant and then on August 15 in years two, three and four post grant assuming the executives remain employed with us, subject to certain exceptions. Effective with
the 2023 grant of TRSU awards, annual TRSUs grants will vest in equal installments with 25% vesting on February 15 following each of the four years following grant.
Annual TRSU awards granted in September 2021 vest(ed)
equally on November 15, 2022, August 15, 2023, August 15, 2024 and August 15, 2025. No TRSU awards were granted in 2022. TRSU awards granted in January 2023 will vest on February 15, 2024, February 15, 2025, February 15, 2026 and February 15, 2027.
There were no changes to the design of the annual time-based long-term equity incentive awards.
Perquisites and Other Compensation
We provide executive officers with perquisites and other
personal benefits that the Company and our Talent and Compensation Committee believe are reasonable and consistent with its overall compensation program. These perquisites include personal use of our corporate aircraft (though reimbursement is
required for certain costs related to such usage), car allowances and payment of club dues for certain of our executive officers. Our Talent and Compensation Committee periodically reviews the levels and appropriateness of perquisites and other
personal benefits provided to executive officers. The Committee believes that the perquisites and other personal benefits further the goals of the Company and are not material with respect to the overall compensation of our executive officers.
Retirement and Other Benefits
401(k) Plan
Our employees, including our executive officers, are
eligible to participate in our 401(k) Plan for which we provide matching contributions. Our matching contributions currently are 100% of employee deferrals up to 5% of eligible compensation.
Deferred Compensation Plan
Select members of senior management and certain other
highly compensated employees, including our executive officers, are eligible to participate in our nonqualified Deferred Compensation Plan (“DCP”). Pursuant to the DCP, eligible employees can defer certain compensation on a pre-tax basis. The DCP
provides for the deferral of up to 75% of annual base salary and up to 100% of annual cash bonus payments or nonequity incentive awards and other specified benefits to certain key employees. The DCP also allows for employer matching
contributions for employee contributions that would have been paid under our tax-qualified 401(k) plan if such matching contributions would otherwise exceed the maximum allowable amounts under the 401(k) Plan. Our matching contributions currently are
100% of employee deferrals up to 5% of eligible compensation. In addition, the DCP provides for the deferral of up to 100% of director fees for service by a nonemployee director on our Board and for service by select nonemployee directors on our
community bank boards.
Participants are 100% vested in their DCP contributions
including earnings or losses thereon. Company contributions, including earnings and losses thereon, vest based upon years of service (one-third for each year in excess of one year of service). Participants who have three or more years of service
are 100% vested in Company contributions unless the Talent and Compensation Committee, at the time such Company contribution is made, specifically provides that only years of service earned after that date are to be counted for vesting purposes
with respect to such Employer Contribution. See Nonqualified Deferred Compensation for additional information regarding the vesting of Company contributions.
When a participant retires or becomes disabled, we will pay
the participant his or her vested benefits as elected by the participant, generally in a lump sum or in annual installments over a period of up to ten years. A participant may also elect to receive scheduled in-service distributions of his or her
deferral account during employment in a lump sum or in annual installments over a period of up to five years. All payments are taxable to the participants. See Nonqualified Deferred Compensation for additional information about benefits provided to
the NEOs under the DCP.
Modified Retirement Plan
Our Modified Retirement Plan provides annual benefits (paid
monthly) that are generally paid at normal retirement in the form of a 100% survivor annuity are calculated based on a participant’s seniority and position and generally range from 20% to 30% of the participant’s base salary. Normal retirement is
defined under the Modified Retirement Plan as attainment of age 65 and completion of at least five years of service.
Beginning in 2020, the Board determined that it will not
offer participation in the Modified Retirement Plan to any employee of United who is not already a participant nor will it enhance existing benefits for any current participants.
See Pension Benefits for additional information about
benefits provided to the NEOs under the Modified Retirement Plan.
Employment and Related Agreements
In 2022, in anticipation of entering into new employment
and change-in- control agreements with our NEOs, we terminated their previous change-in-control agreements. On February 14, 2023, the Talent and Compensation Committee approved a form of change-in-control continuity agreement (the
“Change-in-Control Continuity Agreement”), which provides severance payments and benefits to key executives the Talent and Compensation Committee determined to be most likely to be affected by a change in control in the Company. We then entered
into a Change-in-Control Continuity Agreement with each of our NEOs. In addition, on February 14, 2023, to ensure the continued services and commitment of H. Lynn Harton, our Chief Executive Officer, the Talent and Compensation Committee approved,
and we entered into, an employment agreement with Mr. Harton (the “Harton Employment Agreement”). Upon a change in control of the Company, Mr. Harton’s Change-in-Control Continuity Agreement will supersede the Harton Employment Agreement.
These agreements promote executive continuity, aid in
retention, and, in return for granting the NEOs certain severance and other rights upon a termination of employment, secure valuable protections for the Company, including noncompete, nonsolicitation and confidentiality obligations. We believe that
reasonable severance benefits are appropriate to protect the NEOs against circumstances over which he or she does not have control and as consideration for the promises of nondisclosure, noncompetition, nonsolicitation and noninterference.
A change in control, by itself (“single trigger”), does not trigger any severance provision applicable to our NEOs under the agreements.
Change-in-Control Continuity Agreements
Each Change-in-Control Continuity Agreement provides for an
initial three-year term that will renew automatically for an additional year commencing on the first anniversary of the effective date and each annual anniversary thereafter unless notice of nonrenewal is provided. The payments and benefits
provided under the Change -in-Control Continuity Agreements are “double trigger” and are not payable upon a termination of a NEO’s employment for “cause” or a resignation by a NEO without “good reason” or any termination of a NEO’s employment prior
to a change in control of the Company. Defined terms referenced in this description of the Change-in-Control Continuity Agreements have the meanings given to them in those agreements.
The severance protections under the Change -in-Control
Continuity Agreements become effective on a change in control of the Company and remain in effect for a two-year period (the “Protected Period”) thereafter. During the Protected Period, the NEO generally would be entitled to compensation and
benefits consistent with those applicable during the twelve-month period before the change in control. If, during the Protected Period, the NEO’s employment is terminated by the Company without “cause” (other than by reason of his or her death or
disability) or the NEO terminates his or her employment with “good reason,” the NEO would be entitled to receive the following amounts and benefits, subject to the NEO’s execution and nonrevocation of a release of claims against the Company and its
affiliates:
|
● |
An amount equal to (a) the “severance multiple” (three (3) for Mr. Harton and two (2) for all other NEOs) (the “Severance Multiple”) multiplied by (b) the sum of the
NEO’s annual base salary and average annual bonus in respect of the three years before the change in control (or, if higher, the applicable target annual bonus opportunity);
|
|
● |
A pro rata bonus amount for the year in which the date of termination occurs based on the NEO’s target annual bonus opportunity, or if higher, the annual bonus earned
based on the level of performance determined in connection with the change in control or thereafter for such year (the “Prorated Bonus”);
|
|
● |
An amount equal to (a) the Severance Multiple, multiplied by (b) the employer contributions under our qualified and nonqualified defined contribution plans, assuming
the NEO is fully vested and his or her compensation is that applicable under the Change-in-Control Continuity Agreement;
|
|
● |
An amount equal to (a) the number of months corresponding to the Severance Multiple (36 for Mr. Harton and 24 for each other NEO) multiplied by (b) the sum of the
monthly Consolidated Omnibus Budget Reconciliation Act (“COBRA”) premium for our group health care plans and the monthly premium for life insurance coverage on a conversion basis, based on the plans and at the levels of coverage applicable
to the NEO before the date of termination, or if more favorable, the change in control;
|
|
● |
An amount equal to the Severance Multiple multiplied by the sum of annual club dues and car allowance, if any, provided to the NEO before the change in control or
thereafter; and
|
|
● |
Outplacement services at a cost of up to 10% of the NEO’s base salary. |
If the NEO’s employment is terminated during the Protected
Period due to death or disability, the NEO would not be entitled to the benefits described above but would instead be entitled to receive the Prorated Bonus and death or disability benefits, as applicable, equal to those provided before the change
in control (or, if more favorable, in effect on the date of death or disability). The payments and benefits under the Change-in-Control Continuity Agreements will be reduced to the extent that they would be subject to an excise tax under Sections
280G and 4999 of the Internal Revenue Code of 1986, as amended, unless the NEO would be better off on an after-tax basis receiving all such payments and benefits and paying his or her own excise tax. The Change-in-Control Continuity Agreements do
not provide for an excise tax gross up.
The Change-in-Control Continuity Agreements contain
restrictive covenants that provide for (a) perpetual confidentiality and (b) restrictions on interfering with our customers and employees and competing with our business, in each case while employed and for one year thereafter. Following a change
in control, the covenants in the Change-in-Control Continuity Agreements will be the sole covenants applicable to a NEO and, with respect to any equity award agreements between the Company and the NEO, the restrictive covenants provided under the
Change-in-Control Continuity Agreements will replace and supersede the restrictive covenants in any equity award agreements.
Harton Employment Agreement
Under the terms of the Harton Employment Agreement, Mr.
Harton will continue to serve as our Chief Executive Officer, President, and Chairman of the Board as well as Chief Executive Officer and Chairman of the Board of United Community Bank. The Harton Employment Agreement has a three-year term that
began February 14, 2023 and extends automatically for an additional year commencing on the first anniversary of the effective date and each annual anniversary thereafter so as to terminate three years from such extension date, unless notice of
nonrenewal is provided. As previously noted, Mr. Harton’s Change-in-Control Continuity Agreement will supersede the Harton Employment Agreement upon a change in control of the Company.
Under the terms of the Harton Employment Agreement, Mr.
Harton’s base salary is $1,050,000, his annual cash incentive opportunity at target is not less than 100% of base salary (the “Target Incentive Award Opportunity”), and his annual long-term incentive award opportunity will have a grant date fair
value of not less than 200% of base salary, with the annual incentive award and long-term incentive awards to be determined by the Talent and Compensation Committee pursuant to the terms of the applicable plans and on a basis and with terms
consistent with our other executive officers. Mr. Harton’s future long-term incentive awards will include vesting or continued vesting provisions that would apply upon his retirement on or after age 67.
Upon a termination of Mr. Harton’s employment without
“cause” (other than by reason of his death or disability) or by Mr. Harton for “good reason” (as such terms are defined in the Harton Employment Agreement), Mr. Harton would be entitled to receive the following amounts and benefits, subject to his
execution and nonrevocation of a release of claims against the Company and its affiliates:
|
● |
A pro rata annual cash incentive award for the year in which the termination occurs based on the level of achievement of the applicable performance goals (the “Pro
Rata Cash Incentive”);
|
|
● |
An amount equal to 2.5 multiplied by the sum of Mr. Harton’s base salary and Target Incentive Award
Opportunity; and
|
|
● |
An amount equal to 30 multiplied by the sum of the monthly COBRA premium for the group health care plans based on the coverage applicable to Mr. Harton before the
date of termination (the “Health Benefits”).
|
If Mr. Harton’s employment is terminated due to death or
disability, Mr. Harton (or his estate) would be entitled to receive the Pro Rata Cash Incentive, plus, in the case of disability only, the Health Benefits.
The Harton Employment Agreement contains restrictive
covenants, which provide for (a) perpetual confidentiality and mutual nondisparagement; (b) restrictions on interfering with our customers while employed and for one year thereafter; (c) restrictions on interfering with our employees while employed
and for two years thereafter and (d) restrictions on competing with our business while employed and for one year thereafter.
The Talent and Compensation Committee believes that the
terms of the Change-in-Control Continuity Agreements and the Harton Employment Agreement are standard for a financial institution in the markets in which we operate.
Clawback Policy
Our Board has adopted a policy that allows the Board to clawback compensation paid or awarded to an executive officer or employee in the event of a material restatement of our financial results, including the right to clawback cash incentives and
equity awards. Consideration will be given to the circumstances that caused the restatement, issues of accountability for those who bore responsibility for the events, and whether anyone responsible engaged in misconduct, which includes violation
of United’s Code of Conduct or policies or any act or failure to act that could reasonably be expected to cause financial or reputational harm to United.
Our Board plans to amend the clawback policy once the Nasdaq adopts listing standards requiring listed issuers to adopt and comply with clawback policies and to provide disclosure about their policies, consistent with a final SEC rule
adopted in November 2022 to implement Section 954 of the Dodd-Frank Act.
Stock Ownership Guidelines
To directly align the interests of
executive officers with the interests of our shareholders, our Board adopted a policy with guidance for each executive officer to acquire and maintain the following minimum ownership of United common stock within five years of becoming an executive
officer:
Executive |
Minimum Ownership Guidelines |
Chief Executive Officer |
Own Company stock with a value of at least 3 times his base annual salary |
Executive Officers (other than CEO) |
Own Company stock with a value of at least 2 times his or her base annual salary |
All of the NEOs and other executive officers have met or
are on track to meet these targets within the five-year period.
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as
amended (the “Code”), limits the U.S. federal income tax deduction for compensation paid to our Chief Executive Officer, Chief Financial Officer and certain other highly compensated executive officers (including, among others, our next three other
most highly compensated executive officers as of the end of the calendar year) to a maximum U.S. federal income tax deduction that we may receive for annual compensation paid to any officer covered by Code Section 162(m) of $1,000,000 per officer.
To the extent that the aggregate amount of any covered officer’s salary, bonus, amounts realized from option exercises and vesting of restricted stock units or other equity awards and certain other compensation amounts that are recognized as
taxable income by the officer exceeds $1,000,000 in any year, we are not entitled to a U.S. federal income tax deduction for the amount over $1,000,000 in that year. Although the Talent and Compensation Committee has not adopted a formal policy
regarding tax deductibility of compensation paid to our executive officers, it continues to view the tax deductibility of executive compensation as one of many factors to be considered in the context of its overall compensation philosophy.
Accordingly, the Talent and Compensation Committee reserves the right to approve compensation that may not be deductible in situations it deems appropriate.