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
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SEACOAST BANKING CORPORATION OF FLORIDA
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
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Proxy Statement
2018
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815 Colorado Avenue Stuart, Florida 34994 |
NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS
Thursday, May 24, 2018
3:00 p.m. Eastern Time
Seacoast Banking Corporation of Florida (“Seacoast”) will hold its 2018 Annual Meeting of Shareholders at the Hutchinson Shores Resort, 3793 NE Ocean Blvd, Jensen Beach, FL 34957, on Thursday, May 24, 2018 at 3:00 p.m. Eastern Time.
ITEMS OF BUSINESS
The purpose of the Annual Meeting is to vote on the following proposals:
| 1. | Election of Directors. To re-elect five Class I directors (“Proposal 1”); | |
| 2. | Amend the Company’s Amended and Restated Articles of Incorporation to Increase Authorized Capital Stock. To approve the proposed amendment to the Company’s Articles of Incorporation to increase the number of authorized shares of the Company’s common stock from 60,000,000 to 200,000,000 shares (“Proposal 2”); | |
| 3. | Amend the Company’s 2013 Incentive Plan to Increase Authorized Shares. To approve the proposed amendment to the 2013 Incentive Plan to increase the number of shares authorized to be issued under the Plan (“Proposal 3); | |
| 4. | Ratification of Appointment of Independent Auditor. To ratify the appointment of Crowe Horwath LLP as independent auditors for Seacoast for the fiscal year ending December 31, 2018 (“Proposal 4”); | |
| 5. | Advisory (Non-binding) Vote to Approve Compensation of Named Executive Officers. To hold an advisory vote to approve the compensation of the Company’s named executive officers as disclosed in this Proxy Statement (“Proposal 5”); | |
| 6. | Other Business. To transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof. |
RECORD DATE
You are eligible to vote if you were a shareholder of record on the close of business on March 26, 2018, which is the record date for the Annual Meeting. This Notice of the 2018 Annual Meeting of Shareholders and the accompanying proxy statement are sent by order of the Company’s Board of Directors.
 | |
| Dennis S. Hudson, III | |
| Chairman & Chief Executive Officer |
April 6, 2018
Table of Contents
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Date, Time and Place: Thursday, May 24, 2018, at 3:00 P.M. Eastern Time at the, Hutchinson Shores Resort, 3793 NE Ocean Blvd, Jensen Beach, FL 34957. The Annual Meeting shall be referred to herein as the “Meeting” or the “Annual Meeting”.
Street Name Holders: If your shares of Seacoast common stock are held in a bank, brokerage or other institutional account (which is commonly referred to as holding shares in “street name”), you are a beneficial owner of these shares, but you are not the record holder. If your shares are held in street name, you are invited to attend the Annual Meeting; however, to vote your shares in person at the meeting, you must request and obtain a power of attorney or other authority from the bank, broker or other nominee who holds your shares and bring it with you to submit with your ballot at the meeting. In addition, you may vote your shares before the meeting by phone or over the Internet by following the instructions set forth below or, if you received a voting instruction form from your brokerage firm, by mail by completing, signing and returning the form you received. Your voting instruction form will set forth whether Internet or telephone voting is available to you. Although most brokers and nominees offer telephone and Internet voting, availability and specific processes will depend on their voting arrangements. We encourage you to record your vote through the Internet if such process is available to you.
How to View Proxy Materials Online
Important Notice Regarding the Availability of Proxy Materials for the 2018 Shareholder Meeting
Our 2018 Proxy Statement and the Annual Report on Form 10-K for the year ended December 31, 2017 (referred to collectively herein as the “proxy materials”) are available online at: www.proxyvote.com or at www.SeacoastBanking.com/GenPage.aspx?IID=100425&GKP=393970.
We have mailed to certain shareholders a notice of internet availability of proxy materials on or about April 6, 2018. This notice contains instructions on how to access and review the proxy materials on the internet. The notice also contains instructions on how to submit your proxy on the internet or by phone, or, if you prefer, to obtain a paper or email copy of the proxy materials.
You may vote common shares that you owned as of the close of business on March 26, 2018, which is the record date for the Meeting.
Your vote is important. Please review the voting instructions described in this proxy statement, as well as in the notice you received in the mail. By voting prior to the Meeting, you will help ensure that we have a quorum and that your preferences will be expressed on the matters that are being considered. If you are able to attend the Meeting, you may vote your shares in person, even if you have previously voted by another means by revoking your proxy vote at any time prior to the meeting, pursuant to the procedures specified in “Revocation of Proxies”.
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You may vote by any of the following methods:
BY TELEPHONE:
You can vote by calling the number on your proxy card or voting instruction form, or provided on the website listed on your notice.
BY INTERNET:
You can vote online at www.proxyvote.com.
BY MAIL:
You also may vote your shares by requesting a paper proxy card and completing, signing and returning it by mail in the envelope provided.
IN PERSON:
You can vote in person at the Annual Meeting. If you hold your shares in street name, you must obtain a proxy from the record holder in order to vote in person.
For telephone and internet voting, you will need the 16-digit control number included in your notice, on your proxy card or in the voting instructions that accompanied your proxy materials.
For shares held in employee plans, we must receive your voting instructions no later than 11:59 p.m. Eastern Time on May 17, 2018 (the “cut-off date”) to be counted. Otherwise, you may vote up until 11:59 P.M. Eastern Time the day before the meeting date.
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Our balanced growth strategy, which is focused on organic growth and acquisitions in growing markets, is delivering value for our shareholders.
In this section, we summarize 2017 performance highlights and other information contained elsewhere in this proxy statement. Please carefully review the information included throughout this proxy statement and as provided in the 2017 Annual Report on Form 10-K before you vote.
Value Creation for our Shareholders
Seacoast continued to drive positive momentum in performance metrics, leading to sustained outperformance in total shareholder returns.
* Total return combines share price appreciation and dividends paid to show the total return to the shareholder expressed as an annualized percentage.
Execution of our strategy in 2017 produced outstanding results:
| · | Adjusted net revenues1 increased 32% year over year to $234.8 million and adjusted revenue1 increased 24% year over year to $219.5 million. |
| · | Net income improved 47% year over year to $42.9 million and adjusted net income1 improved 42% year over year to $55.3 million. |
| · | We reported $0.99 in earnings per diluted share and $1.28 in adjusted earnings per share1, meeting our target range despite the impacts of Hurricane Irma. |
| · | Households we serve have grown to 104,303 from 66,826 in 2013. Across Central Florida, we served over 23,000 households in 2017 compared to 2,600 in 2013. In Tampa, households represent 3% of total households, serving over 3,300 households in 2017. |
| · | Loans climbed $938 million, or 33%, to $3.8 billion compared to prior year. Looking forward, we expect loan production will continue to reflect the underpinnings of a strong Florida economy, and continued customer receptivity to our relationship and convenience-based approach to helping meet their needs. Also, we continue to maintain a very granular loan portfolio with modest commercial real estate exposure. |
| · | For the 4th quarter 2017, return on average tangible assets was 0.97%,return on average tangible shareholders’ equity was 10.7% and the efficiency ratio was 64.0% compared to 1.12%, 12.5% and 58.9% respectively in the prior quarter and 1.00%, 12.5%, and 62.4% in the fourth quarter of 2016. The adjusted return on average tangible assets1 was 1.23%, adjusted return on average shareholders’ equity1 was 13.5%, and the adjusted efficiency ratio1 was 52.6% compared to 1.16%, 12.8%, and 57.7%, respectively, in the prior quarter, and 1.05%, 13.1%, and 60.8%, respectively, in the fourth quarter of 2016. |
1 Non-GAAP measure; refer to Appendix A – Information Regarding Non-GAAP Financial Measures.
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Our balanced growth strategy combines organic growth and select strategic M&A along with prudent risk management, leading to strong results since January 2014.
| · | Deposit growth increased 4% organically, 30% including acquisitions. |
| · | Loan growth increased 10% organically, 33% including acquisitions. |
| · | Our focus on deepening relationships with current customers has led to organic growth as well. Since the beginning of 2014: |
| § | 159% increase in loan sales to current customers |
| § | 29% increase in deposit accounts sold to current customers |
| § | 33% increase in debit cards sold to current customers |
Our performance and future growth are driven by a differentiated strategy consisting of 6 key themes:
| · | Comprehensive Customer Servicing Model |
| § | We focus on meeting customer needs profitably through an evolving distribution network consisting of branches, mobile apps, online banking, ATMs, our Florida based call center, and commercial banking offices. This multi-channel distribution system is strategically important, as it allows us to attract customers from much larger competitors who want modern convenience and community bank service. |
| § | Our distribution system has allowed us to innovate our business model as more transactions migrate outside the traditional branch network. Specifically, we now process more routine transactions through our mobile app and ATMs than we do through our branches, indicating a tipping point in customer behavior and expectations. |
| § | The movement of routine transactions to digital channels has enabled us to rationalize our branches. As of YE 2017, deposits increased 160% while branches increased only 45% since YE 2012. |
| § | As customers continue to visit traditional branches less and less, Seacoast has a proven ability to deepen relationships with clients via its distribution system. Since launching automated marketing programs in 2014, Consumer and Business Loan unit sales have increased incrementally by 168%, deposit accounts by 53%, and debit cards by 58%. |
| § | Focus on business banking, in particular, is driving significant growth in business loans outstanding, increasing 296% since year end 2013. |
| · | Focused on Controls |
| § | We have a number of advantages related to our approach to credit risk management. In particular, we have: |
| o | Strong, skilled, independent underwriting teams that confirm solid, multiple repayment sources. |
| o | Well-defined portfolio limits and elevated credit portfolio management/monitoring. |
| o | Digestible loan sizes and no syndications. |
| o | CRE concentrations below 220%. |
| o | Credit culture is documented and reinforced throughout the organization. |
| · | Track Record of Value Creating Acquisitions |
| § | Our acquisition strategy has enable us to expand in to some of Florida’s most attractive markets |
| § | We have successfully completed 7 acquisitions since 2014, with an average IRR of 20%. |
| § | We are the number one Florida headquartered bank in the Orlando MSA and the 4th largest Florida bank, up from 6th in 2014. |
| · | Well-Positioned to Benefit From Florida Market |
| § | Projected to be the 16th largest economy in the world in 2019 based on World Bank rankings. |
| § | Florida’s economy is accelerating at a faster pace than the nation for the next four years and is positioned to become a $1 trillion economy in 2018. |
| § | Florida’s economy is diversified, with growth in education, health services, leisure and hospitality, trade, transportation, utilities, construction and manufacturing. |
| § | Yet amidst the growth across the state, the number of Florida headquartered banks continues to decline, with a 54.5% reduction since 2008. This increases Seacoast’s scarcity value. |
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| · | Expanding Analytical and Digital Capabilities |
| § | Seacoast has become a recognized leader amongst community banks for its use of analytics and digital capabilities to create value for our customers and shareholders. |
| · | Experienced Board and Management Team |
| § | Seacoast has revitalized its board of directors which continues to be aligned with its balanced growth strategy. Eight key members have been added to their board of directors since 2012. |
| § | With regard to executive management, strong talent has been added in key areas. |
Our Vision 2020 Innovation Plan Will Drive Shareholder Returns Above an Already Strong Outlook
| · | Vision 2020 connects current and planned innovations over the next three years to necessary changes in our business model. |
| · | Unveiled at our first ever investor day in February 2017, Vision 2020 is a three pronged plan to drive compelling results for shareholders. |
| § | How we sell |
| o | Continue to develop direct sales channels and offerings based on customer needs and preferences. |
| o | Simplify processes for our customers and bankers. |
| o | Reduce our cost to acquire. |
| § | How we service |
| o | We are outpacing our peers in engaging our customers with self-serve options for routine banking needs. |
| o | This is creating the ability to reduce cost in the traditional model, and invest in personalized service for more complex transactions. |
| § | How we operate |
| o | Data analytics is driving top line revenue, enhanced management decision making and deeper customer penetration. |
| o | We are making investments to reduce product delivery times by streamlining internal processes through technology and reengineering. |
Vision 2020 Objectives
| · | Specific objectives include: |
| § | Return on tangible assets target of 1.30%+ |
| § | Return on tangible common equity target of 16%+ |
| § | Efficiency ratio target below 50% |
| · | Seacoast is on track to achieve our ambitious Vision 2020 objectives. |
| · | The enactment of the Tax Cuts and Jobs Act of 2017 further enhances Seacoast’s ability to achieve these objectives. |
Executive Compensation Program Highlights
The Compensation and Governance Committee (“CGC”) is committed to aligning our compensation strategies with our evolving business strategy, good governance and effective risk management practices, and our efforts to generate superior long-term returns for our shareholders. To this end, we emphasize pay-for-performance in our executive compensation programs.
Our executive compensation strategy strongly aligns our CEO and other executives with long-term shareholder interests.
| · | A significant portion of executive pay is variable or at risk. |
| · | We use a blend of equity awards, including some that are performance-based with multi-year vesting. |
| · | The CGC determines the number of equity awards and value of annual incentive awards after assessing each executive’s performance against his or her performance scorecard for the year. 2017 scorecards included individual performance objectives and an adjusted EPS goal. |
| · | Instead of paying cash bonuses, short-term incentive compensation for FY17 performance was paid in the form of restricted stock units granted in April 2018. The CGC took this action in response to guidance we received from our shareholders that indicated that they would like management to increase their direct ownership in the Company and to enhance the holding power (retention) and risk sensitivity of our incentive strategies. |
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The following table summarizes the primary elements of our executive compensation program for 2017.
| Base Salary | Recognize performance of job responsibilities and attract and retain individuals with superior talent. | Reflects the CGC’s assessment of the executive’s experience, skills and value to Seacoast. | Our CEO’s base salary increased by 9% in 2017. Base salaries for our named executive officers increased an average of 6% in 2017. |
| Performance Share Units (PSUs) | Provide a strong retention element and align compensation with our business strategy and long-term shareholder value. | The number of PSUs granted is determined by the CGC after consideration of each executive’s performance scorecard. The number of PSUs that may be earned is based on the level of achievement of goals established by the CGC for a three-year performance period. Value realized also varies based on stock price performance over the vesting period. | PSUs granted in 2017 vest based on the level of achievement of goals relating to growth in adjusted EPS and average adjusted return on average tangible common equity over a three-year period. |
| Stock Options | Directly link executive and shareholder interests by tying long-term incentive to stock price appreciation. | The number of options granted is determined by the CGC after consideration of each executive’s performance scorecard. The realized value of options is based on stock price performance. | Stock options granted in 2017 vest in equal installments over three years. The exercise price of the stock options was set at 120% of the grant date value of the shares. |
| Restricted Stock Units (RSUs) granted in lieu of cash bonuses | Provide a strong retention element and align executive and shareholder interests. | The amount of short-term incentive is determined by the CGC after consideration of each executive’s performance scorecard. The realized value of RSUs is based on stock price performance over the vesting period. | Similar to 2016, the CGC decided to pay out the annual incentive award for 2017 in the form of RSUs that vest in equal installments over three years. |
Please refer to the Compensation Discussion and Analysis and The Executive Compensation Tables in this proxy statement for additional details about our compensation programs.
Summary of Proposals and Board Recommendations
| Item | Proposal | Board Voting Recommendation |
Vote Required |
| 1 | Re-election of Five Class I Directors | FOR ALL | Plurality vote* |
| 2 | Amend Articles of Incorporation to Increase Authorized Shares of Common Stock | FOR | Affirmative vote of a majority of votes cast |
| 3 | Amend the 2013 Incentive Plan to Increase Authorized Shares | FOR | Affirmative vote of a majority of votes cast |
| 4 | Ratification of Appointment of Crowe Horwath LLP as Independent Auditor for 2018 | FOR | Affirmative vote of a majority of votes cast |
| 5 | Advisory (Non-binding) Vote to Approve Executive Compensation (Say on Pay) | FOR | Affirmative vote of a majority of votes cast |
* More fully described in Proposal 1 - Election of Directors, Manner of Voting Proxies
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You are being asked to, among other proposals, re-elect five Class I directors of Seacoast. All of the nominees are presently directors of Seacoast. All of the nominees also serve as members of the board of directors of Seacoast’s principal banking subsidiary, Seacoast National Bank (the “Bank”). If elected, each director nominee will serve a three year term expiring at the 2021 Annual Meeting and until their successors have been elected and qualified. Detailed information about each nominee’s background, skills and expertise can be found in Proposal I – Election of Directors.
| Name | Age | Director Since |
Current Occupation | Independent | No. of Other Public Boards |
| Jacqueline L. Bradley | 60 | 2014 | Management and Financial Services | ✔ | 0 |
| H. Gilbert Culbreth, Jr. | 72 | 2008 | CEO and President of Auto and other sales companies | ✔ | 0 |
| Christopher E. Fogal | 66 | 1997 | Certified Public Accountant and Partner of Firm | ✔ | 0 |
| Timothy S. Huval | 51 | 2016 | CHRO of Humana, Inc. | ✔ | 0 |
| Herbert A. Lurie | 57 | 2016 | Senior Advisor of Guggenheim Securities | 0 |
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Board and Governance Highlights
Board Committee Membership and 2017 Committee Meetings
| Director Name | Audit | Compensation & Governance |
Enterprise Risk Management |
Strategy & Innovation | ||||
| Dennis J. Arczynski (1) | ✔ | ✔ | (2) | ✔ | ||||
| Stephen E. Bohner (1) | ✔ | |||||||
| Jacqueline L. Bradley (1) | ✔ | |||||||
| H. Gilbert Culbreth, Jr. (1) | ✔ | (2) | ||||||
| Julie H. Daum (1) | ✔ | |||||||
| Christopher E. Fogal (1) | ✔ | (2) | ||||||
| Maryann Goebel (1) | ✔ | ✔ | ✔ | |||||
| Roger O. Goldman (1) (3) | ||||||||
| Dennis S. Hudson, Jr. | ✔ | |||||||
| Dennis S. Hudson, III (4) | ✔ | |||||||
| Timothy S. Huval (1) | ✔ | ✔ | ||||||
| Herbert A. Lurie | ✔ | |||||||
| Alvaro J. Monserrat (1) | ✔ | ✔ | ||||||
| Thomas E. Rossin (1) | ✔ | ✔ | (2) | |||||
| TOTAL MEETINGS HELD | 8 | 5 | 6 | 9 | ||||
| (1) | Independent Director |
| (2) | Committee Chair |
| (3) | Independent Lead Director who serves as an ex-officio (non-voting) member of all committees |
| (4) | Chairman of the Board |
Director Attendance: All directors attended over 75% or more of the meetings of the Board and Board committees on which they served in 2017.
Over the past five years, we have continually recruited new talent to our Board to increase diversity of thought and experience and to better align overall Board capability with our strategic focus. During this time, our Chairman/CEO and our Lead Independent Director have focused considerable attention on Board refreshment and we have added seven new directors with skill sets needed to help navigate the fast-changing environment impacting our business. As a result, our overall Board composition has been significantly altered across a number of important aspects creating a vibrant Board culture and unrelenting focus on creating shareholder value over the long term.
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Below is a graphic illustration of the changes in our Board over the past five years:
Currently, our board has the following characteristics:
 |
 |
| Seacoast Policy: Ensure a balanced mix of directors with a deep knowledge of Seacoast and its markets, as well as new members with fresh perspectives. | Seacoast Policy: Build a diverse board with experience aligned with our strategic mission. |
Since 2013, we have made the following changes to the Board:
| · | added three women to our Board; |
| · | added expertise in the areas of regulatory matters, risk management, talent acquisition, corporate governance, credit management, strategic planning, investment banking and technology; |
| · | transitioned four retiring long-tenured directors; and |
| · | reduced the average tenure of our non-executive directors from 13.7 years to 9.4 years and decreased the average age by nearly 5.8 years. |
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Our Corporate Governance Framework
| Board Independence |
· A total of 11 of our 14 directors, or over 75% are considered independent. · Our CEO is the only member of management who serves as a director. |
| Board Refreshment & Diversity |
· We seek a board that, considered as a group, will possess a diversity of experience and differences with respect to personal, educational or professional experience, gender, ethnicity, national origin, geographic representation, community involvement and age. · We have a mix of new and longer tenured directors to help ensure fresh perspectives as well as continuity and experience. The average tenure of our non-management directors is 9.4 years. |
| Board Committees |
· We have four standing Board committees—Audit; Compensation and Governance (“CGC”); Enterprise Risk Management (“ERMC”); and Strategy and Innovation (“S&I”). · The Audit Committee and CGC consist entirely of independent, non-management directors. · Chairs of the committees shape the agenda and information presented to their committees. |
| Strong Independent Lead Director |
· Our independent directors elect an independent lead director. · Our independent lead director chairs regularly scheduled executive sessions, without management present, at which directors can discuss management performance, succession planning, board informational needs, board effectiveness or any other matter. · Our lead independent director strongly influences our strategy and direction, and facilitates our annual strategic planning sessions. |
| Board Oversight of Strategy & Risk |
· Our Board has ultimate oversight responsibility for strategy and risk management. · Our Board directly advises management on development and execution of the Company’s strategy and provides oversight through regular updates. · The S&I Committee helps ensure that the strategic vision for the Company is fulfilled by challenging, proposing, reviewing, and monitoring strategic initiatives of the Company relating to M&A activity, capital allocation and planning, business model transformation, innovation, and shareholder relations. · Through an integrated enterprise risk management process, key risks are reviewed and evaluated by the ERMC before they are reviewed by the Board. · The ERMC oversees the integration of risk management at Seacoast, monitors the risk framework and makes recommendations to the Board regarding the Company’s risk appetite. · The Audit Committee oversees the Company’s financial risk management process. · The CGC oversees risks and exposures related to the Company’s corporate governance, director succession planning, and compensation practices to ensure that they do not encourage imprudent or excessive risk-taking, and assists with its leadership assessment and CEO succession planning. |
| Accountability |
· We have a plurality vote standard for the election of directors, with a director resignation policy for uncontested elections. · Each common share is entitled to one vote. · We have a process by which all shareholders may communicate with our Board, a Board committee or non-management directors as a group, or other individual directors. |
| Director Stock Ownership | · A minimum stock holding of three times the annual base retainer is required for each director, to be acquired within four years of joining the Board. |
| Succession Planning | · CEO and management succession planning is one of the Board’s highest priorities. Our Board ensures that appropriate attention is given to identifying and developing talented leaders. |
| Board Effectiveness |
· The Board meets in a director-only session prior to each regular meeting to discuss the Company’s business condition. Each regular meeting is followed by an executive session of non-management directors led by the lead independent director. · The Board and its independent committees annually evaluate their performance. |
| Open Communication |
· Our Board receives regular updates from business leaders regarding their area of expertise. · Our directors have access to all management and employees on a confidential basis. · Our Board and its committees are authorized to hire outside consultants at their discretion and at the Company’s expense. |
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CORPORATE GOVERNANCE AT SEACOAST
Our goal is to maintain a corporate governance framework that supports an engaged, independent board with diverse perspectives and judgment that is committed to representing the long-term interests of our shareholders. We believe our directors should possess the highest personal and professional standards for ethics, integrity and values, as well as practical wisdom and mature judgment. Therefore, our Board, with the assistance of management and the CGC, regularly reviews our corporate governance principles and practices.
Corporate Governance Principles and Practices
Important elements of our corporate governance framework are our governance policies, which include:
| · | our Corporate Governance Guidelines |
| · | our Code of Conduct (applicable to all directors, officers and employees) |
| · | our Code of Ethics for Financial Professionals (applicable to, among others, our chief executive officer and chief financial officer); and |
| · | charters for each of our Board Committees |
You may view these and other corporate governance documents at our investor relations website located at www.SeacoastBanking.com, or request a copy, without charge, upon written request to Seacoast Banking Corporation of Florida, c/o Corporate Secretary, 815 Colorado Avenue, P. O. Box 9012, Stuart, Florida 34995.
The Company’s common stock is listed on the Nasdaq Global Select Market (“Nasdaq”). Nasdaq requires that a majority of the Company’s directors be “independent,” as defined by the Nasdaq rules. Generally, a director does not qualify as an independent director if the director (or, in some cases, a member of the director’s immediate family) has, or in the past three years had, certain relationships or affiliations with the Company, its external or internal auditors, or other companies that do business with the Company. The Board of Directors has determined that a majority of the Company’s directors are independent directors under the Nasdaq rules. The Company’s current independent directors are: Dennis J. Arczynski, Stephen E. Bohner, Jacqueline L. Bradley, H. Gilbert Culbreth, Jr., Julie H. Daum, Christopher E. Fogal, Maryann Goebel, Roger O. Goldman, Timothy S. Huval, Alvaro J. Monserrat and Thomas E. Rossin. Our governance principles provide that a substantial majority of our directors will meet the criteria for independence required by Nasdaq. Over 78% of our Board meets our criteria for independence.
Board leadership is provided through: 1) a combined Chairman and CEO role, 2) a clearly defined and substantial lead independent director role, 3) active committees and committee chairs, and 4) talented directors who are committed and independent-minded. At this time, the Board believes this governance structure is appropriate and best serves the interests of our shareholders.
The Board of Directors periodically assesses who should serve as Chairman and as Chief Executive Officer, and whether the offices should be combined or separate, with appropriate consideration of current facts and circumstances.
The Company’s current Chief Executive Officer, Dennis S. Hudson, III, also serves as the Chairman of the Board of Directors. He has held the post of Chief Executive Officer for the past 20 years, Chairman for the past 13 years, President for the 10 years prior to being named Chairman, and has also served as Chief Executive Officer of the Bank for the past 25 years. During this time, Mr. Hudson has led the Company through its growth from a local community bank to the fourth largest Florida bank with $5.8 billion in assets and 51 full-service branches and five commercial banking centers in 15 counties as of year-end 2017. In light of Mr. Hudson’s significant leadership tenure with the organization, his breadth of knowledge of the Company and his relationship with the institutional investor community, as well as the efficiencies, accountability, unified leadership and cohesive corporate culture that this structure provides, the Board of Directors believes it is appropriate that he serve as both Chief Executive Officer and Chairman.
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To further strengthen our corporate governance, our independent directors select a lead director from the independent directors if the positions of Chairman and Chief Executive Officer are held by the same person or if the Chairman of the Board is not an independent director. The role of our Lead Independent Director is described in our Corporate Governance Guidelines and in the table at the end of this section.
Our current Lead Independent Director is Mr. Roger Goldman. He has served in this capacity since 2012. Mr. Goldman’s experience includes a number of high profile leadership assignments at or on behalf of shareholders or other constituent groups at organizations significantly larger than Seacoast. The depth and breadth of his experience and his willingness and capacity to dedicate a significant portion of his time on behalf of the Board and our shareholders are key inputs in our transformative efforts.
Mr. Goldman’s affiliation with Seacoast enhances our reputation within the industry, improves the performance and effectiveness of the Board, and enhances our exposure with the investment community. He is uniquely suited to lead the Board during the normal course of business and in its day-to-day interactions with and oversight of management.
In addition to Mr. Goldman’s efforts to ensure an effective and results-oriented Board, he engages on the Board’s behalf with management and employees across the Company. Frequent active, independent, and effective engagement by Mr. Goldman aids our Board of Directors in making informed decisions on our business and risk strategies. He also is well-positioned to assess our executive and managerial talent, succession readiness plans, and leadership development efforts, which are key to our success. Finally, his accessibility and high level of visibility within the Company provides employees with ongoing opportunities to raise issues or concerns free from management’s direct influence. Mr. Goldman provides a wide array of highly valuable services to the Board and our Shareholders.
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BOARD LEADERSHIP STRUCTURE - DEFINITION OF ROLES
| Lead Independent Director Role | Chair/CEO Role |
| Full Board Meetings | |
|
· Participates in Board meetings · Acts as Chairperson of the Board in situations where the Chairperson/ CEO is unable to serve in that capacity, including chairing meetings of the Board in the absence of the Chairperson/CEO |
· Has the authority to request meetings of the Board of Directors and drafts the agenda for each meeting · Chairs board meetings and meetings of shareholders |
| Executive Session Responsibilities | |
|
· Has the authority to call meetings of the Independent Directors · Chairs executive sessions of the non-management directors · Sets the agenda for executive sessions · Meets separately with the Chair/CEO after executive sessions to review the matters discussed during the executive sessions |
· Receives full feedback from Lead Independent Director on the matters discussed in executive sessions and required follow-up |
| Board Communications Responsibilities | |
|
· Facilitates communication among the non-management Directors on key issues and concerns outside of Board meetings · Serves as the principal, but non-exclusive, liaison and intermediary between the CEO and the Independent Directors regarding views, concerns, and issues of the Independent Directors · Functions as a resource to the CEO on Board issues and other matters affecting the Company |
· Communicates with all Directors on key issues and concerns outside of Board meetings · Expected to inform the Lead Independent Director of all significant issues facing the Company |
| Board Agenda and Information Responsibilities | |
|
· Collaborates with the Chair/CEO to set the Board meeting agendas and communicates Board information · Seeks Board meeting agenda input from other Directors |
· Drafts the Board meeting agendas and works with Lead Independent Director to ensure that the requisite agendas and information are provided to the Board for it to fulfill its duties |
| External Stakeholder Responsibilities | |
|
· Reviews responses to direct shareholder communications with the Board · If requested by major shareholder or the CEO, is available for consultation and direct communication |
· Represents the Company and interacts with external stakeholders and employees |
| Strategy and Execution Responsibilities | |
| · Collaborates with the Board and the CEO to establish and support appropriate short term and long term strategies, objectives, goals, and programs that support sustainable growth and profitability. |
· Leads the management team to establish and support the development of appropriate short term and long term strategies · Leads the development of overall corporate and business unit objectives and goals · Develops and implements programs, and drives overall execution to achieve desired objectives and goals |
| Company Operations Responsibilities | |
|
· Has no role in managing Company operations · Officers and employees report to the CEO, not to the Lead Independent Director |
· Leads Company operations · Officers and employees report to the CEO |
| 13 |
Non-Management Executive Sessions
In order to give a significant voice to our non-management directors, our Corporate Governance Guidelines provide for executive sessions of our non-management and independent directors. Our Board believes this is an important governance practice that enables the Board to discuss matters (such as strategy, CEO and management performance, succession planning, and board effectiveness) without management present.
Our non-management directors generally meet in executive session following each regularly scheduled Board meeting. Our independent directors meet separately from the other directors in regularly scheduled executive sessions at least twice annually, and at such other times as may be deemed appropriate by the Company’s independent directors. Our Lead Independent Director presides at all executive sessions of the independent directors and non-management directors, and sets the agenda for such executive sessions. Any independent director may call an executive session of independent directors at any time. The independent directors met four times in executive session in 2017.
Committee Structure & Other Matters
Oversight is also provided through the extensive work of the Board’s committees – Audit Committee; Compensation and Governance Committee (“CGC”); Enterprise Risk Management Committee (“ERMC”); and Strategy and Innovation (S&I) Committee – in key areas such as financial reporting, internal controls, compliance, corporate governance, succession planning, compensation programs, strategic planning and risk management. The Audit Committee and the CGC consist entirely of independent, non-management directors.
In addition, at the end of each year, the Board and each of its committees review a schedule of agenda topics to be considered in the coming year. Each Board and committee member may raise subjects that are not on the agenda at any meeting and suggest items for inclusion in future agendas.
The Company believes that the foregoing structure, policies, and practices, when combined with the Company’s other governance policies and procedures, provide appropriate opportunities for oversight, discussion, evaluation of decisions and direction from the Board of Directors.
Shareholder Engagement and Board Responsiveness
The Company engages with our shareholders to ensure that the Board and management are aware of and address issues of importance to our investors. We regularly meet with various institutional shareholders and welcome feedback from other shareholders, which is considered by the Board or appropriate Board committee.
The Company’s Corporate Governance Guidelines provide for a process by which shareholders may communicate with the Board, a Board committee or the non-management directors as a group, or other individual directors. Shareholders who wish to communicate with the Board of Directors, a Board committee, the Lead Independent Director, other directors or an individual director may do so by sending written communications addressed to the Board of Directors, a Board committee or such group of directors or individual director, c/o Corporate Secretary, Seacoast Banking Corporation of Florida, 815 Colorado Avenue, P.O. Box, 9012, Stuart, Florida 34995. All communications will be compiled by the Company’s Secretary and submitted to the Board of Directors, a committee of the Board of Directors or the appropriate group of directors or individual director, as appropriate, at the next regular meeting of the Board.
Since 2009 the Company has annually included in its proxy statement a separate advisory vote on the compensation paid to its executives, as disclosed in the Compensation Discussion and Analysis, the compensation tables and related proxy disclosure, commonly known as a “say-on-pay” proposal. Independent surveys have shown that an annual vote is the preferred frequency of most institutional investors. Our Board also endorses an annual vote as we believe it gives shareholders an opportunity to voice their concerns with respect to executive compensation. Shareholder support of our say-on-pay proposal at our 2017 annual meeting increased compared to the prior year. (See “Outcome of our 2017 Say-On-Pay vote” in the table below.) Shareholder support of directors standing for re-election at the 2017 annual meeting also increased compared to the prior year.
| 14 |
Below are highlights of the feedback we have received from shareholders and our Board’s response:
| What We Heard | Our Board’s Response |
| Improve financial performance to deliver results expected from acquisitions | Delivered Promised Results. Achieved our 2017 earnings target of $1.28 fully diluted adjusted earnings per share1 (“EPS”). Improved adjusted efficiency ratio1 from 64.6% in fourth quarter of 2016 to 57.0% in the fourth quarter of 2017. |
| Greater stock ownership by management and directors | Replacing Cash Bonuses with Equity. Replaced 2016 and 2017 cash bonuses paid to executive officers for achievement of performance objectives with performance based and performance-contingent stock awards. All of our directors are paid a stock retainer; several participated in our capital raise in 2017. |
| Reduce Board tenure and the risk of entrenchment | Three New Directors. In 2016, our Board appointed two new directors, Timothy S. Huval and Herbert Lurie, further enforcing its commitment to a balanced mix of new directors with fresh perspectives and, for continuity, seasoned, experienced directors with deep knowledge of the Company and its markets. In 2017, our Board appointed another new Board member, Alvaro Monserrat, to replace a longer-tenured director. In addition, two long-tenured directors rotated off the CGC in 2016 and one short-tenured director was added, resulting in the majority of the CGC now comprised of short-tenured directors. |
| Outcome of our 2017 Say-On-Pay vote | At our 2017 annual meeting of shareholders, our say-on-pay proposal received the support of 94% of the votes cast. Our CGC considered the vote in relation to: 1) the alignment of our compensation program with the long-term interests of our shareholders, 2) the evolution of our business strategy with emerging opportunities and in fulfilling customer demand for innovative products and services, and 3) the relationship between risk-taking and the incentive compensation provided to our executives. The CGC will continue to evaluate and refine our executive compensation programs and welcomes input from our shareholders. |
Management Succession Planning and Development
Our Board understands that a strong succession framework reduces Company risk and therefore ensures that appropriate attention is given to identifying and developing talented leaders. Consequently, we have a robust management succession and development plan which is reviewed and updated annually.
The Board maintains oversight responsibility for succession planning with respect to the position of CEO and monitors and advises management regarding succession planning for other executive officers. The Board’s goal is to have a long-term and continuing program for effective senior leadership development and succession. The Board also has short-term contingency plans in place for emergency and unexpected occurrences, such as the sudden departure, death, or disability of our CEO or other executive officers.
The CGC, working with the CEO, annually evaluates succession planning at the senior levels of management and reports the results of such evaluation to the Board, along with recommendations on management development and succession planning. The updated succession plan is reviewed and approved by the Board to ensure that competencies are in alignment with our strategic plan. The annual review of the CEO succession planning includes a review of specific individuals identified as active CEO succession candidates, and each of those individuals is reviewed with respect to progress in his or her current job position and progress toward meeting his or her defined leadership development plan. The Company’s CEO and senior management are similarly responsible for supporting “next generation” leadership development by: identifying core talent, skills and capabilities of future leaders within the Company; assessing the individuals against leadership capabilities; identifying talent and skill gaps and development needs; assisting with internal candidate development; and identifying significant external hiring needs.
1 Non-GAAP measure; refer to Appendix A – Information Regarding Non-GAAP Financial Measures.
| 15 |
The Board and individual Board members may advise, meet with and assist CEO succession candidates and become familiar with other senior and future leaders within the Company. Directors are encouraged to become sufficiently familiar with the Company’s executive officers to be able to provide perspective on the experience, capabilities and performance of potential CEO candidates. The Board urges senior management, as well as other members of management who have future leadership potential within the Company, to attend and present at Board meetings so that each can be given appropriate exposure to the Board. The Board may contact and meet with any employee of the Company at any time, and are encouraged to make site visits, to meet with management, and to attend Company, industry and other events.
Executive officers are appointed annually at the organizational meeting of the respective Boards of Directors of Seacoast and the Bank, to serve until the next annual meeting and until successors are chosen and qualified.
Dennis S. Hudson, III
 |
Chairman and CEO
| |
SELECT PRIOR EXPERIENCE:
| ||
| · Chairman of Seacoast since July 2005 | ||
| · CEO of Seacoast since June 1998 | ||
| · Chairman and CEO of the Bank since 1992 | ||
| · Director of Seacoast since 1984 | ||
· Over 40 years of banking experience with Seacoast
| ||
|
Age: 62 Education: MBA, Tenure: 41 years |
OTHER AFFILIATIONS/CERTIFICATIONS:
| |
| · Chesapeake Utilities Corporation, member of board, audit and compensation committees | ||
| · Miami Branch of Federal Reserve Bank of Atlanta Board from 2005 to 2010 | ||
| · PENN Capital Funds, a mutual fund group managed by PENN Capital Management, independent director | ||
| · Serves on boards of Martin Health System and Community Foundation for Palm Beach and Martin counties |
Charles M. Shaffer
 |
EVP, CFO and Head of Strategy
| |
SELECT PRIOR EXPERIENCE:
| ||
| · EVP and Community Banking Executive from October 2013 to March 2017 | ||
| · SVP and Controller of Bank from 2005 to 2013 | ||
· Diverse experience from multiple roles including strategy, corporate finance, traditional sales, and alternative sales platforms
| ||
| Age: 44 Education: MBA, University of Central Florida Tenure: 20 years |
OTHER AFFILIATIONS/CERTIFICATIONS:
| |
| · CPA licensed in Florida | ||
| · Chartered Global Management Accountant | ||
| · United Way of Martin County, Board member | ||
| · Girl Scouts of Southeast Florida, Board member | ||
| · Florida Bankers Association, Government Relations Committee Member | ||
| · Armellini Logistics Corporation, Board Member |
| 16 |
Charles K. Cross, Jr.
 |
EVP of Commercial Banking
| |
|
SELECT PRIOR EXPERIENCE:
| ||
| · Seacoast’s SVP & Commercial Market Executive for Palm Beach County from March 2012 to July 2013 | ||
| · Over 30 years of banking experience in Palm Beach and Broward County markets | ||
|
· Market leader for EverBank in Palm Beach County, FL from August 2010 to March 2012
| ||
| Age:
60 Education: BSBA, University of Florida Tenure: 6 years |
OTHER AFFILIATIONS/CERTIFICATIONS:
| |
| · Chairman, District Board of Trustees of Palm Beach State College | ||
| · Past board member of Florida Atlantic University College of Business Dean’s Council, Economic Council of Palm Beach County, West Palm Beach Chamber of Commerce, Business Development Board of Palm Beach County and Black Business Investment Corporation. |
David D. Houdeshell
 |
EVP and Chief Risk Officer
| |
SELECT PRIOR EXPERIENCE:
| ||
| · EVP and Chief Credit Officer of Seacoast and Bank since June 2010 | ||
| · EVP and Credit Administrative Executive for The South Financial Group in Greenville, SC for 3 years | ||
| · Chief Credit Officer of Bombardier Capital, a financial services entity of a global transportation manufacturer, for 4 years | ||
| Age: 57 Education: MBA, The Stonier Graduate School of Banking Tenure: 8 years |
||
|
OTHER AFFILIATIONS/CERTIFICATIONS:
· Member of audit & compliance committee of Martin Health System, Stuart, FL |
Juliette P. Kleffel
 |
EVP and Community Banking Executive
| |
|
SELECT PRIOR EXPERIENCE:
| ||
| · EVP and Community Banking Executive since January 2017 | ||
| · EVP and Commercial Sales Leader for BankFIRST prior to acquisition by Seacoast in October 2014 | ||
| · Held various positions managing Government Lending/SBA, Treasury Sales, Marketing, as well as Commercial Lending with BankFIRST since November 2000 | ||
| · Over 20 years of retail banking experience in the Orlando Market | ||
| Age: 47 Education: The Stonier Graduate School of Banking Tenure: 3 years |
OTHER AFFILIATIONS/CERTIFICATIONS:
| |
| · Executive Director for the National Entrepreneur Center | ||
| · Director for the West Orange County Chamber of Commerce | ||
| · Board Member for the Central Florida YMCA Finance Committee, Garden Theatre, The Gardens of DePugh Nursing Home, and Edgewood Children’s Ranch | ||
| · Certified Lender Business Banker |
| 17 |
As of the Record Date, based on available information, all directors, director nominees and executive officers of Seacoast as a group (18 persons) beneficially owned approximately [●] outstanding shares of common stock, constituting [●]% of the total number of shares of common stock outstanding at that date. In addition, as of the Record Date, various subsidiaries of Seacoast, as fiduciaries, custodians, and agents, had sole or shared voting power over [●] outstanding shares, or [●]% of the outstanding shares, of Seacoast common stock, including shares held as trustee or agent of various Seacoast employee benefit and stock purchase plans.
The CGC serves as the nominating committee of the Company. The committee annually reviews and makes recommendations to the full Board of Directors regarding the composition and size of the Board of Directors and its committees, and if determined necessary, recommends potential candidates to the Board for nomination for election to the Board by the Company’s shareholders. The CGC’s goal is to ensure that the Board of Directors consists of a diverse group of members with the proper expertise, skills, personal attributes and professional backgrounds who, individually and collectively, are appropriate to achieve the Company’s strategic vision and business objectives, and best serve the Company’s and shareholders’ long-term interests.
As part of the assessment process, the CGC evaluates whether the addition of a director or directors with particular attributes, experience, or skill sets could enhance the Board’s effectiveness. The CGC identifies director candidates through business, civic and legal contacts, and may consult with other directors and senior officers of the Company. The CGC may also hire a search firm to help it identify, evaluate and conduct due diligence on potential director candidates. Once a candidate has been identified, the CGC confirms that the candidate meets the minimum qualifications for director nominees, and gathers information about the candidate through interviews, questionnaires, background checks, or any other means that the CGC deems to be helpful in the evaluation process. Director candidates are interviewed by the Chairman of the CGC and at least one other member of the committee. Each member of the committee participates in the review and discussion of director candidates. Where appropriate, directors who are not on the CGC are encouraged to meet with and evaluate the suitability of potential candidates. The CGC then evaluates the qualities and skills of each candidate, both on an individual basis and taking into account the overall composition and needs of the Board in relation to the Company’s strategic goals, and recommends nominees to the Board. The full Board formally nominates candidates to be included in the slate of directors presented for shareholder vote based upon the recommendations of the CGC following this process.
Given the evolving needs and business strategy of the Company, the CGC believes that the Board of Directors as a whole should have diversity of thought and experience, which may, at any one or more times, include differences with respect to personal, educational or professional experience, gender, ethnicity, national origin, geographic representation, community involvement and age. However, the CGC does not assign specific weights to any particular criteria. Its goal is to identify nominees that, considered as a group, will possess the talents and characteristics necessary for the Board of Directors to fulfill its responsibilities and advance our strategic mission. In addition, each director must have the qualifications set forth in the Company’s Bylaws, as well as the personal characteristics and core competencies described below as our Director Eligibility Guidelines:
| Director Eligibility Guidelines | |
| Personal Characteristics | Core Competencies |
|
· the highest ethical character
· a personal and professional reputation consistent with Seacoast’s values as reflected in its Code of Conduct
· the ability to exercise sound business judgment
· a willingness to listen to differing points of view and work in a mutually respectful manner
· the absence of any real or perceived conflict of interest that would impair the director’s ability to act in the interest of shareholders |
· substantial business or professional experience and be able to offer meaningful advice and guidance to the Company’s management based on that experience
· professional achievement through service as a principal executive of a major company, partner in a law or accounting firm, successful entrepreneur, a prominent academic or similar position of significant responsibility |
| 18 |
The CGC also considers numerous other qualities, skills and characteristics when evaluating director nominees, such as a candidate’s:
| · | understanding of and experience in the financial services industry, as well as accounting, finance, legal, real estate, corporate governance and technology expertise; |
| · | leadership experience with public companies or other major organizations, as well as civic and community relationships; |
| · | availability and commitment to carry out the responsibilities as a director; |
| · | knowledge, experience and skills that enhance the mix of the Board’s core competencies and provide a different perspective; and |
| · | qualification as an independent director. |
In addition to nominations by the CGC, any Company shareholder entitled to vote generally on the election of directors may recommend a candidate for nomination as a director by providing advance notice of such proposed nomination to the Corporate Secretary at the Company’s principal offices. The written submission must comply with the applicable provision in the Company’s Articles of Incorporation. To be considered, recommendations with respect to an election of directors to be held at an annual meeting must be received not less than 60 days nor more than 90 days prior to the anniversary of the Company’s last annual meeting of shareholders (or, if the date of the annual meeting is changed by more than 20 days from such anniversary date, within 10 days after the date that the Company mails or otherwise gives notice of the date of the annual meeting to shareholders), and recommendations with respect to an election of directors to be held at a special meeting called for that purpose must be received by the 10th day following the date on which notice of the special meeting was first mailed to shareholders. Recommendations meeting these requirements will be brought to the attention of the Company’s CGC. Candidates for director recommended by shareholders in compliance with these provisions and who satisfy the Director Eligibility Guidelines will be afforded the same consideration as candidates for director identified by Company directors, executive officers or search firms, if any, employed by the Company. In 2017, no shareholder nominee recommendations were received.
Periodically, our Board and each Board committee evaluate their performance and effectiveness, along with processes and structure, to identify areas for enhancement. The process is described below.
| Element | Description |
| Corporate Governance Review and Investor Feedback | The CGC reviews corporate governance principles with consideration given to generally accepted practices and feedback from investors and advocacy groups and makes recommendations for Board changes. This committee also oversees the process for annual board evaluations. |
| Annual Board & Committee Self-Evaluations | The Board and committee evaluations for 2016 were conducted through a questionnaire completed by each director or committee member and reviewed as described below. |
| Summary and Review | For the 2016 Board evaluation, an independent consultant to the CGC compiled and summarized the Board evaluation responses, including comments, which were then reviewed by Lead Independent Director Goldman and Chairman Hudson. Committee evaluations were reviewed by the respective committee chairs. Chairman Hudson discussed the individual results of the Board evaluation with each director, and together with Lead Independent Director Goldman, presented summary results to the Board. The committee chairs discussed the results with their respective committees and the full Board. |
| Actions | As a result of the Board evaluation process, the Board conducted a rigorous search and assessment of experienced potential new director candidates. |
| 19 |
The Board of Directors held four regular meetings and six special meetings during 2017. Each of the directors attended at least 75% of the total number of meetings of the Board of Directors and committees on which they served.
Six of the 14 then-incumbent Directors attended the Company’s 2017 annual shareholders’ meeting. The Company encourages all of its directors to attend its shareholders’ meetings but understands that situations may arise that prevent such attendance.
The Company’s Board of Directors has four standing permanent committees: the Audit Committee, the Compensation and Governance Committee, the Enterprise Risk Management Committee, and the Strategy and Innovation Committee. These committees serve the same functions for the Company and the Bank. The current composition of each Company committee is set forth in the table under Proxy Summary - Board and Governance Highlights.
Each committee has a charter specifying such committee’s responsibilities and duties. The Audit Committee and CGC charters are reviewed annually. These charters are available on the Company’s website at www.SeacoastBanking.com or upon written request.
Audit Committee
| Membership: | Christopher E. Fogal (Chair), Dennis J. Arczynski, Maryann Goebel, Alvaro J. Monserrat | |
| Responsibilities: |
· reviews Seacoast’s and its subsidiaries’ financial statements and internal accounting controls, and reviews reports of regulatory authorities and determines that all audits and examinations required by law are performed;
· appoints the independent auditors, reviews their audit plan, and reviews with the independent auditors the results of the audit and management’s response thereto;
· reviews the adequacy of the internal audit budget and personnel, the internal audit plan and schedule, and results of audits performed by the internal audit staff and those outsourced to a third party; |
· oversees the audit function and appraises the effectiveness of internal and external audit efforts;
· reviews the procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and changes to the Company’s Code of Conduct, and approves related party transactions; and
· periodically reports its findings to the Board of Directors. |
| # of Meetings: | This committee held eight meetings in 2017. Following these meetings, the Audit Committee met one time in private session with our independent auditor, and one time in private session without members of management present, but with a third party accounting firm who co-sources a portion of the Company’s internal audit function. | |
| Independence: | Our Board has determined that each member of the committee is independent under Nasdaq and SEC rules. Our Board has also determined that Mr. Fogal is an “audit committee financial expert” as defined by Item 407 of Regulation S-K. | |
| 20 |
Compensation and Governance Committee (“CGC”)
| Membership: | H. Gilbert Culbreth, Jr. (Chair), Julie H. Daum, Maryann Goebel and Timothy S. Huval | |
| Responsibilities: |
· determines the compensation of the Company’s and the Bank’s key executive officers;
· oversees the preparation of the “compensation discussion and analysis” portion of the proxy statement and the “Compensation and Governance Committee Report”;
· administers the Company’s incentive compensation plans and other employee benefits plans;
· identifies and recommends to the Board qualified individuals to serve as members of the boards of directors of the Company and/or the Bank; |
· oversees efforts to create a diverse workforce that fosters and supports an inclusive culture;
· takes a leadership role in shaping corporate governance policies and practices, including recommending to the Board of Directors the corporate governance guidelines applicable to Seacoast and monitoring Seacoast’s compliance with these policies and guidelines; and
· makes recommendations to the Board of Directors concerning management development and succession planning activities at the senior levels of management, including an appropriate successor in the event of the unexpected death, incapacity or resignation of the CEO. |
| The CGC has the resources and authority to discharge its responsibilities, including authority to retain and terminate any compensation consulting firms, director search firms, independent legal counsel and other compensation advisers used to assist in carrying out its responsibilities. The CGC may delegate to a subcommittee consisting of two or more members, to the extent permitted by applicable law, such of its duties and responsibilities as it deems appropriate and advisable. | ||
| # of Meetings: | This committee held five meetings in 2017. | |
| Independence: | Our Board of Directors has determined that each member of the committee is independent under Nasdaq and SEC rules. | |
|
CGC Interlocks and Insider Participation: |
None of the members of the committee is a former or current officer or employee of the company or any of its subsidiaries. None of them has any relationship with the Company requiring disclosure interlocks under the rules of the SEC. | |
| 21 |
Enterprise Risk Management Committee (“ERMC”)
| Membership: | Dennis J. Arczynski (Chair), Stephen E. Bohner, Maryann Goebel, Dennis S. Hudson, Jr. and Thomas E. Rossin | |
| Responsibilities: |
· monitors the risk framework to assist the Board in identifying, considering, and overseeing critical issues and opportunities;
· evaluates strategic opportunities from a risk perspective, highlights key risk considerations embedded in such strategic opportunities, and makes recommendations on courses of action to the Board based on such evaluation;
· provides oversight of the risk management monitoring and reporting functions to help ensure these functions are independent of business line or risk-taking processes; |
· reviews key management, systems, processes and decisions, and assesses the integrity and adequacy of the risk management function to help build risk assessment data into critical business systems, and reports significant issues to the Board;
· makes recommendations to the Board regarding the Company’s risk appetite, limits and policies and reviewing the strategic plan to help ensure it aligns with the Board-approved risk appetite; and
· recommends to the Board the capital policy consistent with the Company’s risk appetite and reviews capital adequacy and its allocation to each line of business. |
| # of Meetings: | This committee held six meetings in 2017. | |
Strategy and Innovation (“S&I”) Committee
| Membership: | Thomas E. Rossin (Chair), Dennis J. Arczynski, Jacqueline L. Bradley, Dennis S. Hudson, III, Timothy S. Huval, Herbert A. Lurie, and Alvaro J. Monserrat | |
| Responsibilities: |
· supports, sources and/or challenges M&A activities related to banks and non-bank entities as pertinent to the Company’s stated strategic objectives;
· supports, sources and/or challenges business model transformation activities including investments in technology and/or partners;
· reviews capital allocations and planning to ensure an acceptable return on capital while ensuring timely exits from businesses that do not provide an acceptable return or have limited growth prospects; |
· ensures that the Company actively promotes and rewards a culture of innovation in a manner that benefits customers and shareholders;
· ensures that appropriate strategic metrics and modeling capabilities are used in order to assess the strength of existing strategies and potential investments, aligned with the Company’s stated strategic objectives; and
· ensures that management is effectively and consistently communicating with shareholders in a manner that is consistent with the Company’s broader strategic vision. |
| # of Meetings: | This committee held nine meetings in 2017. | |
| 22 |
The Board’s Role in Strategy and Risk Oversight
The Board of Directors actively reviews our long term strategy and the plans and programs that management develops to implement our strategy. While the Board meets formally at least once every year to consider overall long term strategy, it generally reviews various elements of strategy, and our progress towards implementation, at every regular meeting. Under the leadership of Lead Independent Director Goldman, our directors are active in our strategic planning process and exercise robust oversight of and challenges to both our strategies and our implementation of such strategies.
The Board believes that strategic risk is an exceptionally important risk element among a number of risks that the Company faces and works to ensure that this risk is appropriately managed in the context of the rapidly changing environment in which the Company and its customers operate. The Board does not believe this risk can be delegated and the Board as a whole regularly spends a significant amount of its time engaged with management and in executive session discussing our long term strategy, the effectiveness of our plans to implement such strategy, and our progress against those plans.
The Board believes that an integral part of managing strategic risk is the appointment of a strong lead director to: i) regularly engage with the CEO on an ongoing basis, ii) interact from time to time with other key members of management and other leaders throughout the Company to examine alignment around our chosen long-term strategy, and iii) ensure that the Board’s views are considered as our strategy evolves. The Board strongly believes that having an active and engaged lead director better ensures that the Board as a whole can serve as a credible challenge to management’s plans and programs and increases transparency into the fast-paced changes management is implementing.
The Board’s committees also work to ensure that we have the right alignment to support our long-term strategic direction including: (i) an active Board recruitment process focused on developing or acquiring the skill, experience and attributes of both individuals and the Board as a whole needed to support our strategy, (ii) ensuring an appropriate link is established between our compensation design and our long-term strategy to encourage and reward the achievement of our long-term goals and protect shareholder value by discouraging excessive risk, and (iii) ensuring that our risk management structure can effectively manage the inherent risks that underlie our strategy.
Other types of risks that the Company faces include:
| · | macro-economic risks, such as inflation, reductions in economic growth, or recession; |
| · | political or regulatory risks, such as restriction on access to markets; |
| · | event risks, such as natural disasters or cybersecurity breaches; and |
| · | business-specific risks related to financial reporting, credit, asset/liability management, market, operational execution (corporate governance, legal and regulatory compliance), and reputation. |
Our ERMC regularly assesses our overall risk profile and oversees our risk management programs which are implemented by our chief risk officer.
| 23 |
The Audit Committee is currently comprised of four directors, Christopher E. Fogal (Chair), Dennis J. Arczynski Maryann Goebel, and Alvaro J. Monserrat.
The purpose of the Audit Committee (the “Committee”) is to assist the Board of Directors (the “Board”) of Seacoast Banking Corporation of Florida (the “Company”) in its general oversight of the Company’s accounting, auditing and financial reporting practices. Management is primarily responsible for the Company’s financial statements, systems of internal controls and compliance with applicable legal and regulatory requirements. The Company’s independent registered public accounting firm, Crowe Horwath LLP, for the year ended December 31, 2017 is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States, as well as expressing an opinion (pursuant to Section 404 of the Sarbanes-Oxley Act of 2002) on the effectiveness of internal control over financial reporting.
The members of the Committee are not professional auditors, and their functions are not intended to duplicate or to certify the activities of management and the independent registered public accounting firm, nor can the Committee certify that the Company’s registered public accounting firm is “independent” under applicable rules. The Committee serves a board-level oversight role, in which it provides advice, counsel and direction to management and the independent registered public accounting firm on the basis of the information it receives, discussions with management and the independent registered public accounting firm, and the experience of the Committee’s members in business, financial and accounting matters. To carry out its responsibilities, the Committee held eight meetings in 2017.
In the performance of its oversight responsibilities, the Committee has reviewed and discussed with management and Crowe Horwath LLP the audited financial statements of the Company for the year ended December 31, 2017. Management represented to the Committee that all financial statements were prepared in accordance with accounting principles generally accepted in the United States and that these statements fairly present the financial condition and results of operations of the Company at the dates and for the periods described. The Committee has relied upon this representation without any independent verification, except for the work of Crowe Horwath LLP. The Committee also discussed these statements with Crowe Horwath LLP, both with and without management present, and has relied upon their reported opinion on these financial statements. The Committee’s review included discussion with Crowe Horwath LLP of the matters required to be discussed under Public Company Accounting Oversight Board standards.
With respect to the Company’s independent registered public accounting firm, the Committee, among other things, discussed with Crowe Horwath LLP matters relating to its independence and received from Crowe Horwath LLP the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Committee concerning independence.
On the basis of these reviews and discussions, and subject to the limitations of its role, the Committee recommended that the Board approve the inclusion of the Company’s audited financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, for filing with the Securities and Exchange Commission.
The Audit Committee:
Christopher E. Fogal, Chairman
Dennis J. Arczynski
Maryann Goebel
Alvaro J. Monserrat
February 28, 2018
| 24 |
The tables below provide information regarding the beneficial ownership of our common stock as of the Record Date by:
| · | each of the Company’s directors; |
| · | each of the executive officers named in the Summary Compensation Table; |
| · | all current directors and executive officers as a group; and |
| · | each beneficial owner of more than 5%. |
As of the Record Date, [●] shares of common stock were outstanding. Beneficial ownership is determined in accordance with SEC rules and regulations. Unless otherwise indicated, and subject to community property laws where applicable, the Company believes that each of the shareholders named in the tables below has sole voting and investment power with respect to the shares indicated as beneficially owned. Some of the information in the tables is based on information included in filings made by the beneficial owners with the SEC.
Principal Shareholders (5% Owners Exclusive of Directors and Officers)
The following table sets forth information regarding the number and percentage of shares of common stock held by all persons and entities known by the Company to beneficially own 5% or more of the Company’s outstanding common stock. The information regarding beneficial ownership of common stock by the entities identified below are included in reliance on reports filed by the entities with the SEC, except that the ownership percentage is based on the Company’s calculations.
| Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percentage of Outstanding Shares | ||
BlackRock, Inc. 55 East 52nd Street | 6,156,934 (2) | 13.1% | ||
T. Rowe Price Associates, Inc. 100 E. Pratt Street | 4,313,495 (1) | 9.1% |
(1) According to a Schedule 13G/A filed by BlackRock, Inc. (“BlackRock”) on March 8, 2018 with the SEC with respect to Seacoast common stock beneficially owned as of February 28, 2018, BlackRock, Inc. has sole voting power with respect to 6,073,777 shares of Seacoast common stock and sole dispositive power with respect to 6,156,934 shares of Seacoast common stock. The Schedule 13G/A provides that BlackRock is a parent holding company and that the shares of common stock listed on the Schedule 13G/A are owned by various subsidiaries of BlackRock. In addition, BlackRock reported that various persons have the right to receive, or the power to direct the receipt of, dividends from, or the proceeds from the sale of, these shares of common stock, and that no one person is known to have more than 5% of Seacoast common stock.
(2) According to a Schedule 13G filed jointly by T. Rowe Price Associates, Inc., (“Price Associates”) and T. Rowe Price Funds on February 14, 2018 with the SEC with respect to Seacoast common stock beneficially owned as of December 31, 2017, T. Rowe Price Associates, Inc. has sole voting power with respect to 664,396 shares of Seacoast common stock and sole dispositive power with respect to 4,313,495 shares of Seacoast common stock. The Schedule 13G provides that Price Associates is an Investment Advisor and that the shares of common stock listed on the Schedule 13G are owned by various subsidiaries of Price Associates. In addition, Price Associates reported that in respect to securities owned by any one of the T. Rowe Funds, only the custodian has the right to receive, or the power to direct the receipt of, dividends from, or the proceeds from the sale of, these shares of common stock, and that no one person person has shared voting and dispositive powers with respect to the following number of shares of Seacoast common stock.
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Ownership of Directors and Executive Officers
| Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percentage | ||||||
| Dennis J. Arczynski | 46,332 (1) | * | ||||||
| Stephen E. Bohner | 55,965 (2) | * | ||||||
| Jacqueline L. Bradley | 18,467 (3) | * | ||||||
| H. Gilbert Culbreth, Jr. | 71,292 (4) | * | ||||||
| Julie H. Daum | 48,422 (5) | * | ||||||
| Christopher E. Fogal | 32,588 (6) | * | ||||||
| Maryann Goebel | 21,076 (7) | * | ||||||
| Roger O. Goldman | 250,430 (8) | * | ||||||
| Dennis S. Hudson, Jr. | 325,068 (9) | * | ||||||
| Dennis S. Hudson, III | 479,276 (10) | 1.0% | ||||||
| Timothy S. Huval | 2,768 (11) | * | ||||||
| Herbert A. Lurie | 30,226 (12) | * | ||||||
| Alvaro J. Monserrat | 6,902 (13) | * | ||||||
| Thomas E. Rossin | 19,750 (14) | * | ||||||
| Charles K. Cross, Jr. | 70,015 (15) | * | ||||||
| David D. Houdeshell | 61,419 (16) | * | ||||||
| Juliette P. Kleffel | 14,179 (17) | * | ||||||
| Charles M. Shaffer | 60,089 (18) | * | ||||||
| All directors and executive officers as a group (18 persons) | 1,424,700 | [●]% | ||||||
* Less than 1%
| (1) | Includes 1,672 shares held in a limited liability company, as to which shares Mr. Arczynski has sole voting and investment power. Also includes 9,110 shares held jointly with his wife, as to which shares Mr. Arczynski may be deemed to share both voting and investment power. Also includes 25,988 shares held in the Bank’s Directors’ Deferred Compensation Plan for which receipt of such shares has been deferred, and as to which shares Mr. Arczynski has no voting or dispositive power. Also includes 5,561 shares that Mr. Arczynski has the right to acquire by exercising options that are exercisable within 60 days after the Record Date. |
| (2) | Includes 17,215 shares held in the Bank’s Directors’ Deferred Compensation Plan for which receipt of such shares has been deferred, and as to which shares Mr. Bohner has no voting or dispositive power. Also includes 9,800 shares held in IRA and 5,561 shares that Mr. Bohner has the right to acquire by exercising options that are exercisable within 60 days after the Record Date. |
| (3) | Includes 7,046 shares held in the Bank’s Directors’ Deferred Compensation Plan for which receipt of such shares has been deferred, and as to which shares Ms. Bradley has no voting or dispositive power. Also includes 4,421 shares that Ms. Bradley has the right to acquire by exercising options that are exercisable within 60 days after the Record Date. |
| (4) | Includes 10,000 shares held in an IRA, 26,000 shares held in a family limited liability company, and 8,200 shares held in a family sub-S corporation, as to which shares Mr. Culbreth has sole voting and investment power. Also includes 1,000 shares held jointly with Mr. Culbreth’s children and 10,328 shares held jointly with his wife, as to which shares Mr. Culbreth may be deemed to share both voting and investment power. Also includes 11,950 shares held in the Bank’s Directors’ Deferred Compensation Plan for which receipt of such shares has been deferred, and as to which shares Mr. Culbreth has no voting or dispositive power. Also includes 2,142 shares that Mr. Culbreth has the right to acquire by exercising options that are exercisable within 60 days after the Record Date. |
| (5) | Includes 15,442 shares held in the Bank’s Directors’ Deferred Compensation Plan for which receipt of such shares has been deferred, and as to which shares Ms. Daum has no voting or dispositive power. Also includes 5,561 shares that Ms. Daum has the right to acquire by exercising options that are exercisable within 60 days after the Record Date. |
| (6) | Includes 4,490 shares held jointly with Mr. Fogal’s wife and 738 shares held by Mr. Fogal’s wife, as to which shares Mr. Fogal may be deemed to share both voting and investment power. Also includes 10,438 shares held in the Bank’s Directors’ Deferred Compensation Plan for which receipt of such shares has been deferred, and as to which shares Mr. Fogal has no voting or dispositive power. Also includes 5,561 shares that Mr. Fogal has the right to acquire by exercising options that are exercisable within 60 days after the Record Date. |
| (7) | Includes 9,515 shares held in the Bank’s Directors’ Deferred Compensation Plan for which receipt of such shares has been deferred, and as to which shares Ms. Goebel has no voting or dispositive power. Also includes 5,561 shares that Ms. Goebel has the right to acquire by exercising options that are exercisable within 60 days after the Record Date. |
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| (8) | Includes 7,660 shares held in IRAs, as to which shares Mr. Goldman shares both voting and investment power with his wife. Also includes 42,344 shares held in the Bank’s Directors’ Deferred Compensation Plan for which receipt of such shares has been deferred, and as to which shares Mr. Goldman has no voting or dispositive power. Also includes 175,561 shares that Mr. Goldman has the right to acquire by exercising options that are exercisable within 60 days after the Record Date. |
| (9) | Includes 224,356 shares held by Sherwood Partners, Ltd., a family limited partnership (“Sherwood Partners”), of which Mr. Hudson and his son, Dennis S. Hudson, III, are general partners, and Mr. Hudson and his children are limited partners. Mr. Hudson may be deemed to share voting and investment power with respect to such shares, but disclaims beneficial ownership, except to the extent of his 1.0% interest in Sherwood Partners. Also includes 9,811 shares held in the Bank’s Directors’ Deferred Compensation Plan for which receipt of such shares has been deferred, and as to which shares Mr. Hudson has no voting or dispositive power. |
| (10) | Includes 224,356 shares held by Sherwood Partners, of which Mr. Hudson and his father, Dennis S. Hudson, Jr., are general partners. Mr. Hudson may be deemed to share voting and investment power with respect to such shares with the other general partners, but disclaims beneficial ownership, except to the extent of his 35.0% interest in Sherwood Partners and his beneficial interest in trusts having a 53.2% interest in Sherwood Partners. Also includes 49,386 shares held jointly with Mr. Hudson’s wife, of which 49,060 were pledged as security for a margin loan, as to which shares Mr. Hudson may be deemed to share voting and investment power. Also includes 30,453 shares held in the Company’s Retirement Savings Plan, and 121,201 shares that Mr. Hudson has the right to acquire by exercising options that are exercisable within 60 days after the Record Date. Also includes 280 shares held by Mr. Hudson’s wife as custodian and 20 shares held by his son, as to which shares Mr. Hudson may be deemed to share both voting and investment power and as to which Mr. Hudson disclaims beneficial ownership. |
| (11) | Includes 2,688 shares held in the Bank’s Directors’ Deferred Compensation Plan for which receipt of such shares has been deferred, and as to which shares Mr. Huval has no voting or dispositive power. |
| (12) | Includes 5,840 shares held in the Bank’s Directors’ Deferred Compensation Plan for which receipt of such shares has been deferred, and as to which shares Mr. Lurie has no voting or dispositive power and 4,386 shares that Mr. Lurie has the right to acquire by exercising options that are exercisable within 60 days after the Record Date. |
| (13) | Includes 1,760 shares held in the Bank’s Directors’ Deferred Compensation Plan for which receipt of such shares has been deferred, and as to which shares Mr. Monserrat has no voting or dispositive power and 2,142 shares that Mr. Monserrat has the right to acquire by exercising options that are exercisable within 60 days after the Record Date. |
| (14) | Includes 200 shares held by Mr. Rossin’s wife, as to which shares Mr. Rossin may be deemed to share both voting and investment power and as to which Mr. Rossin disclaims beneficial ownership. Also includes 9,811 shares held in the Bank’s Directors’ Deferred Compensation Plan for which receipt of such shares has been deferred, and as to which shares Mr. Rossin has no voting or dispositive power. |
| (15) | Includes 50,140 shares that Mr. Cross has the right to acquire by exercising options that are exercisable within 60 days after the Record Date. |
| (16) | Includes 42,757 shares that Mr. Houdeshell has the right to acquire by exercising options that are exercisable within 60 days after the Record Date. |
| (17) | Includes 7,791 shares that Ms. Kleffel has the right to acquire by exercising options that are exercisable within 60 days after the Record Date. |
| (18) | Includes 1,571 shares held jointly with Mr. Shaffer’s wife, as to which shares Mr. Shaffer may be deemed to share both voting and investment power. Includes 844 shares held in the Company’s Retirement Savings Plan and 2,257 shares held in the Company’s Employee Stock Purchase Plan. Also includes 39,575 shares that Mr. Shaffer has the right to acquire by exercising options that are exercisable within 60 days after the Record Date. |
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COMPENSATION DISCUSSION & ANALYSIS
2017 Performance Considerations
Our strategic plan for 2017 focused on shareholder value creation, and the CGC once again used adjusted EPS1 as an indicator that management is on the right path. The CGC determined the amount of annual and long-term incentives to award to our named executive officers (“NEOs”) for 2017 performance using a qualitative assessment of management’s performance. The assessment process included scorecards that identified shared and individual goals for the year, with our adjusted EPS target of $1.28 serving as the primary consideration. Based on the CGC’s assessment of our adjusted EPS performance and in the areas of operations, technology, innovation, risk, talent, and business transformation, our NEO’s received a rating of “exceeds” expectations. The incentive awards issued based on 2017 performance were granted in 2018. Grants made in 2017 were based on the scorecard assessment of performance in the prior year.
Our Executive Compensation Design Priorities and Prohibitions
| Design Priorities (what we do) | Design Prohibitions (what we don’t do) |
|
ü Manage our executive compensation programs to have a strong pay-for-performance orientation ü Link performance-based incentive awards to enterprise-wide and individual performance goals. ü Grant our NEOs equity-based awards based on Company and individual performance rather than paying annual cash bonuses. ü Emphasize long-term stock-based awards in our executive compensation and total incentive strategies. ü Set meaningful performance goals that align management with shareholder interests. ü Ensure that incentives are sensitive to risk considerations. ü Provide minimal executive benefits and perquisites. ü Maintain executive stock ownership requirements, and require post-settlement holding periods or mandatory deferral of certain performance-based awards. ü Provide reasonable executive post-employment and change-in-control protections. ü Require “clawback” provisions for certain incentive-based compensation to ensure accountability. ü Engage with shareholders on their concerns or priorities for our director and executive compensation programs. |
û No repricing of stock options without shareholder approval. û No incentives that encourage improper risk taking. û No excise tax gross-ups upon a change in control. û No single trigger vesting acceleration on unvested equity in connection with a change-in-control for awards granted since 2014. û No hedging, and limited pledging, of our common shares by our directors and executive officers.
|
1 Non-GAAP measure; refer to Appendix A – Information Regarding Non-GAAP Financial Measures.
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| · | Cumulative base salaries for our NEOs increased year-over-year by 6%. |
| · | In 2017, our NEOs received awards of Performance Share Units (“PSUs”) that vest based on the level of achievement of goals relating to growth in adjusted EPS and average adjusted return on average tangible common equity over a three-year period. |
| · | In 2017, our NEOs received stock options that vest over a three-year period. The exercise price of the options was set at 120% of the grant date value of the shares. |
| · | In lieu of cash bonuses, our CEO was granted additional PSUs, and our other NEOs received awards of time-based Restricted Stock Units (“RSUs”) that vest over a three-year period. |
| · | The number of PSUs, stock options, and RSUs granted in 2017 was determined by the CGC based upon the scorecard assessment of 2016 performance. Awards granted based upon 2017 scorecard performance were granted in 2018. The CGC will use the grant date value of the PSUs or RSUs issued in lieu of cash bonuses for purposes of calculating any potential severance benefits that are based upon prior year bonuses. |
Summary of Compensation Decisions in 2017
For planning purposes, the CGC focuses on the sum of annual base salary and the values it considers and approves for cash bonuses and equity awards based on annual scorecard performance but granted in the subsequent year. We refer to this planning value as Total Direct Compensation or “TDC”. The CGC considered TDC in its decision process when determining the value of the total incentive award value to approve in 2018 for 2017 performance.
The following chart illustrates the relative emphasis of each pay element in relation to TDC, as disclosed in our 2017 Summary Compensation Table (“SCT”). Base salary represents the sole component of TDC that is not “at risk” for performance.
In general, the CGC typically structures NEO pay so that at least one-half of TDC is structured as “at risk” incentive pay. The CGC relies on this structure to ensure that both short-term and long-term incentive awards are fully reflective of performance for the year in which cash bonuses are earned and new target award values are determined and that performance-based equity serves as our primary form of incentive compensation.
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Base Salary
All of our named-executive officers receive a base salary that reflects the CGC’s assessment of the NEO’s skills and value to Seacoast. It is the CGC’s philosophy to keep salaries within a competitive market range and increase base salaries in response to increases in the size, scope or complexity of an executive’s job, in connection with a promotion or other forms of recognition that appropriately reflect value considerations, or to maintain the desired level of internal relative value. The 2017 annualized base salary actions for our named executive officers are summarized in the following table.
2017 Annualized Base Salary Actions
| Named Executive Officer | 2016 | 2017 | % Change | |||||||||
| Dennis S. Hudson, III | $ | 550,000 | $ | 600,000 | 9 | % | ||||||
| Charles K. Cross, Jr. | $ | 300,000 | $ | 300,000 | 0 | % | ||||||
| David D. Houdeshell | $ | 265,000 | $ | 280,000 | 6 | % | ||||||
| Charles M. Shaffer | $ | 300,000 | $ | 320,000 | 7 | % | ||||||
| Juliette P. Kleffel | — | $ | 280,000 | — | ||||||||
| NEOs as a Group | 6 | % | ||||||||||
Seacoast’s equity strategy has evolve in order to increase the alignment of equity recipients with shareholder interests, revitalize our retention strategies, and elevate our visibility and appeal as an employer of choice for highly skilled talent. The following tables summarize the evolution and emphasis of our equity strategies since 2013.
Evolution of Seacoast’s Performance-based Equity Strategies, 2013-2017
| Grant Cycle |
Type of Equity |
Performance Period / Payout Range / Option Vesting Period |
Performance Objective(s) |
| 2013 (Jun) | PSUs |
· 3-year Performance Period · Payout as % of Target: 0-150%
|
· Cumulative Earnings |
| Options |
· 3-year ratable vesting
|
· Stock Price Appreciation | |
|
2015 (Jan.) |
PSUs |
· 4-year Performance Period with catch-up · Payout as % of Target: 0-150% |
· Cumulative Earnings · Return on Average Tangible Common Equity · Tier 1 Capital Compliance |
| Options | · 4-year monthly vesting, starting when stock price closes above exercise price by 120% |
· Stock Price Appreciation · Tier 1 Capital Compliance | |
|
2016 (Feb.) |
PSUs |
· 4-year Performance Period with catch-up · Payout as % of Target 0-175% |
· Cumulative Earnings · Return on Average Tangible Common Equity · Tier 1 Capital Compliance |
| Options | · 4-year monthly vesting, starting when stock price closes above exercise price of 120% |
· Stock Price Appreciation · Tier 1 Capital Compliance | |
| 2017 (Apr.) | PSUs |
· 3-year Performance Period · Payout as a % of Target 0-200% |
· Adjusted EPS · Return on Average Tangible Common Equity · Tier 1 Capital Compliance |
| Options |
· 3-year ratable vesting · Exercise price set at 120% of grant date fair market value of the underlying shares
|
· Stock Price Appreciation above 120% of exercise price |
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2017 Performance Stock Unit (“PSU”) Awards
2017 PSUs represent stock-settled incentive awards where payout can vary from 0% to 200% of the target number of shares granted. One-half of the target number of shares will be earned for Seacoast’s three-year growth in adjusted EPS. The remaining one-half of the target number of shares will be earned for Seacoast’s three-year average adjusted return on average tangible common equity. In each case, the earn-out of the PSUs will be determined by our performance as compared to financial goals that were approved by the CGC at the time of grant. PSUs that will be earned for adjusted EPS require escalating levels of double digit growth, starting at threshold. PSUs that will be earned for adjusted return on tangible common equity require that we exceed our cost of capital. The CGC selected EPS and return on average tangible common equity given their importance in our strategic plan and influence on our stock price performance over sustained periods of time. The PSUs also include a risked-based condition (Tier 1 Regulatory Capital) that must be met in order for the awards to vest.
2017 Performance Stock Options (“Options”)
Options allow recipients to purchase shares of our common stock in the future at a predetermined price. In order to ensure that shareholders benefit before management realizes any value from their stock option awards, 2017 options were issued with an exercise price set at 120% of the grant date fair market value of the underlying shares. Restrictions on the 2017 options lapse in equal installments on the first, second and third anniversaries of the grant date. The CGC relies on Options to reward management for value creation, which is of paramount importance to our shareholders. The target value of the options represents significantly less potential value than the PSU awards.
Time-Based Restricted Stock Units (“RSU”)
Given our strong pay-for-performance orientation, we typically limit the use of time-based RSUs for our top executives to offers of employment, to enhance holding power (retention) of our stock incentive strategy, or in special situations that are evaluated on a case-by-case basis at the discretion of the CGC. The CGC granted RSUs to the NEOs, other than the CEO, in lieu of annual cash bonuses. The RSUs granted in 2017 were issued in relation to 2016 performance. The RSUs relating to 2017 performance were granted in early 2018.
Other Considerations Involving 2017 Equity Awards
Our NEOs are also subject to stock ownership requirements and holding periods in connection with stock-settled incentive awards. In addition, we introduced a mandatory deferral on PSUs starting with the 2017 grant cycle.
Overview of Executive Compensation
Determining Executive Compensation
Role of the CGC
The CGC is responsible for establishing our compensation philosophy and for overseeing our executive compensation policies and programs generally. As part of this responsibility, the CGC:
| · | regularly interacts with our executives in order to make informed decisions on performance, potential, developmental needs and their value to Seacoast; |
| · | approves our executive compensation programs, including construction of our peer group, issuance of equity awards, and certification of results; |
| · | evaluates the performance of the CEO and determines the CEO’s compensation; |
| · | reviews the performance of other members of executive management and approves their compensation based on recommendations made by the CEO; and |
| · | assesses our incentive strategies from a risk perspective, ensuring that earnings opportunities strike the right balance between risk and reward and that our executives are not motivated to take excessive risks. |
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Role and Independence of the Compensation Consultant
The CGC is comprised solely of independent directors and met six times in 2017. The Committee selected Compensation & Benefit Solutions, LLC, which was acquired by Alvarez and Marsal on November 1, 2017, to advise the CGC in 2017. Starting in March 2017, Compensation & Benefit Solutions, LLC attended CGC meetings, including executive sessions, and provided information and advice independent of management and, at the direction of CGC Chairperson, assisted management with various activities that support Seacoast’s executive compensation program. The CGC discussed these considerations pursuant to SEC and NASDAQ rules and concluded that the engagement of Compensation & Benefit Solutions, LLC, and subsequently Alvarez and Marsal, and the services it provided did not raise any conflict of interest.
Benchmarking and Comparator Group
The CGC relies on market pay data and related research to inform its decision on the construction and expected outcomes of our director and executive compensation programs. In considering peer group construction, the CGC recognizes that Seacoast competes for executive talent against a wide variety of financial services organizations and companies in other industries that rely on or want to acquire the skill sets that our executives offer. As a result, the CGC relies substantially on information developed from a size-appropriate, high-performing core bank industry compensation peer group in its decision process. It also considers, to a lesser extent, the pay strategies employed by large, most admired or innovative financial services companies, and high-performing customer service and technology companies. In terms of assessing the effect of the CGC’s decisions on how we position pay vis-à-vis market, we rely exclusively on pay and performance data developed using our core bank industry compensation peer group or, as needed, from the McLagan Regional Bank Survey.
The CGC added five banks to the Core Bank Peer Group (“Peer Group”) in 2017. The addition of Flagstar Bancorp, Inc., First Midwest Bancorp, Inc., Trustmark Corporation, Northwest Bancshares, Inc., and S&T Bancorp, Inc. was necessitated by continuing consolidation in the industry, and by our growth that positioned Seacoast above the Peer Group’s median level of assets. The five banks were selected from the JD Powers’ List of Highest Rated Customer Service Banks, which reflected the CGC’s desire to incorporate an important performance dimension that is critical to our efforts to continue to growth the value of Seacoast. Other selection criteria that the CGC considered included type of ownership, focused solely on publicly traded company status, and size considerations, as defined by assets and the market value of equity. Seacoast was positioned at the median of asset size and market value of the 2017 Peer Group. The CGC sees this approach as appropriate given its expectations for performance and growth. Our 2017 Core Bank Peer Group was comprised of:
| Ameris Bancorp (ABCB) | First Long Island Corp. (FLIC) | Pacific Premier Bancorp (PPBI) |
| BNC Bancorp (BNCN) | First Midwest Bankcorp, Inc. (FMBI | Renasant Corp. (RNST) |
| Cardinal Financial (CFNL) | German American Bancorp (GABC) | S&T Bancorp, Inc. (STBA) |
| City Holdings (CHCO) | Great Southern Bancorp (GSBC) | Sterling Bancorp (STL) |
| Eagle Bancorp (EGBN) | Horizon Bancorp (HBNC) | Stock Yards Bancorp (SYBT) |
| Enterprise Financial (EFSC) | Lakeland Financial (LKFN) | Tompkins Financial (TMP) |
| Fidelity Southern (LION) | Mainsource Financial (MSFG) | Trustmark Corporation (TRMK) |
| Flagstar Bancorp, Inc. (FBC) | Northwest Bancshares, Inc. (NWBI) | Washington TR Bancorp (WASH) |
The CGC does not identify a specific target level or percentile of base salary, incentive cash, or stock-based awards for our NEOs. Instead, pay outcomes, which include the target value of stock awards to be earned for future performance, initially are determined by internal performance and talent considerations. The CGC then compares its initial thinking on NEO pay actions against market pay levels. Market assessments serve as key points of reference and validation in the CGC’s process.
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Executive Compensation Framework Highlights
| Structure | Reasoning |
| PEER GROUP: | |
| A core peer group of banks of similar size, business model and financial performance, and, for a secondary reference, select companies beyond the banking industry. | Our business model requires us to compete with these groups for executive talent in order to achieve our business objectives related to growth, innovation and profitability. |
| BASE SALARY, total incentive & TDC: | |
|
· No specific target level or percentile of pay relative to comparable positions · Pay decisions reflect the performance of the Company and each executive in relation to prior year pay and performance, planning considerations, and pay relationship to market pay levels and pay practices of peer group · Competitiveness will vary based on performance in terms of the calibration of total incentive awards and amounts ultimately earned from our long-term stock incentive program |
· Improve pay for performance linkage · Align pay with overall value of each individual to Seacoast
|
| CASH BONUS: | |
| Performance scorecards serve as the basis for cash bonuses and the target value of performance-based long-term incentive/equity awards |
Establish clear expectations for individual goals as well as link with enterprise-wide growth, return and risk management objectives RSUs were issued in lieu of cash bonuses for fiscal years 2016 and 2017 |
| EQUITY: | |
|
· Performance-based,structure with 2 components, PSUs and stock options, both with a long-term emphasis, but weighted more heavily with PSUs · Meaningful stock-based award opportunities "right-sized" for company and individual performance considerations and needs · Approximately 50% or more of TDC for our named executive officers delivered as performance-based pay · Annual award cycles · 3-year PSU performance period aligning program design with typical industry practices. A mandatory 12-month deferral requirement ensures sensitivity to risk considerations and additional holding power. · Risk considerations serve as an additional vesting requirement on PSUs |
· PSUs allow for upside in underlying shares, providing direct linkage between potential award payouts and management's success at driving earnings growth and improving returns without inappropriate risk taking · Performance Options first require that shareholders receive a meaningful return before management · Provide more compensation contingent upon achievement of performance goals or our stock’s performance · Aligns more closely with the shareholder interests · Continuously recalibrate performance expectations and promote consistent improvement · Enhance retention of management team · Enhance long-term performance accountability · Improves retention · Augment alignment with shareholder interests · Provide executives with an economic incentive to deliver sustainable results within a risk appropriate framework |
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2017 Executive Compensation Actions
Each year the CEO makes a qualitative assessment of NEO performance and the CGC makes a qualitative assessment of CEO performance. The assessment process relies on scorecards that are approved at the start of each year, establishing performance guidelines against which results are compared at the end of the year. Performance ratings are then developed for each NEO, which are used to inform the CGC’s decision regarding pay actions. Despite refinements to various aspects of our executive compensation philosophy and the underlying strategies for 2017, the performance assessment process did not change.
The CGC and our CEO rely on qualitative assessments of the performance of our NEOs and other members of senior management team given our accelerated growth, the rapid evolution of business, and the changing demands on our executives. The CGC believes that qualitative assessments of NEO performance for the purpose of compensation, development and advancement continue to serve the best interests of our shareholders.
Our CEO works closely with the Compensation Committee in establishing executive compensation and overall bonus and incentive payments. The CEO evaluates the performance of the other senior executives, and, based on these performance evaluations, market compensation surveys, and other data, he will then make recommendations to the Compensation Committee and shares with its members the basis for his recommendations. The CEO also presents incentive compensation payment recommendations for the Committee’s consideration. The Committee evaluates the CEO’s performance and determines his compensation without the CEO present.
The culmination of the CGC’s activities in regards to CEO and NEO performance and pay are reflected in the following tables.
Compensation Paid to Chief Executive Officer in 2017
Dennis. S. Hudson, III, Chairman of the Board and Chief Executive Officer
| Key Influences in the CGC’s Decision Process | 2017 Pay Outcomes |
|
· Achievement of adjusted EPS1 goal of $1.28 for FY17; leading contributor to our efforts to attain this goal to the benefit of our shareholders · Adjusted net income of $55.3 million compared to $39.1 million in 2016 · Adjusted return on tangible common equity1 for 4Q17 of 13.5%, compared to 13.1% in 2016 · Strengthening of the executive team and other improvements in key operating areas · Strong credit quality and appropriate risk management · No major operational risk failures and significant upgrades and oversight in our risk management capabilities, across the Company in general and in regards to compensation and retail sales related risks in particular · Successful integration of Gulfshore, Northstar, and Palm Beach Community franchises · Attainment of growth and strategic initiatives measured by household growth, accretive acquisitions, increased percentages of new accounts and loans originated through alternative channels, and a lower fixed cost structure · Implementation of plan to improve operating leverage and customer experience via channel optimization · Associate engagement and enterprise-wide alignment with the business strategy |
· Annualized Base Salary increase to $600,000 effective April 1, 2017 compared to an annualized 2016 Base Salary of $550,000 · Performance-based equity (PSU granted in 2017) valued at $533,000 compared to $357,500 in 2016 · Performance Option valued at $287,000 compared to $192,500 in 2016 · All Other Compensation of $32,685 · Bonus equivalent cash value of $[●] to be used as an input in our CIC severance calculations.
|
1 Non-GAAP measure; refer to Appendix A – Information Regarding Non-GAAP Financial Measures.
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Compensation Paid to Other Named Executive Officers in 2017
Charles M. Shaffer, Executive Vice President, Chief Financial Officer
| Key Influences in the CGC’s Decision Process | 2017 Pay Outcomes |
|
· Achievement of adjusted EPS1 goal of $1.28 for FY17 · Adjusted net income of $55.3 million compared to $39.1 million in 2016 · Adjusted return on tangible common equity1 for 4Q17 of 13.5%, compared to 13.1% in 2016 · Ongoing leadership of and contributions to our business transformation and strategy efforts · Substantial talent upgrading across entire function |
· Annualized Base Salary increase to $320,000 effective April 1, 2017 compared to an annualized 2016 Base Salary of $300,000 · RSUs with a target award value of $280,000 granted in lieu of a cash bonus compared to $259,000 in 2016 · Performance-based equity (PSU granted in 2017) valued at $195,000 compared to $146,250 in 2016 · Performance Option valued at $105,000 compared to $78,750 in 2016 · All Other Compensation of $20,107 · Bonus Equivalent Cash Value of $200,000 to be used as an input in our CIC severance calculations |
1 Non-GAAP measure; refer to Appendix A – Information Regarding Non-GAAP Financial Measures.
Charles K. Cross, Jr., Executive Vice President, Commercial Banking
| Key Influences in the CGC’s Decision Process | 2017 Pay Outcomes |
|
· Achievement of adjusted EPS1 goal of $1.28 for FY17 · Adjusted net income of $55.3 million compared to $39.1 million in 2016 · Adjusted return on tangible common equity1 for 4Q17 of 13.5%, compared to 13.1% in 2016 · No major operational risk failures · Contributions to enterprise-wide business transformation efforts · Collaboration and leadership across the organization leading to substantial improvements in business unit performance. improvements regarding sales function · Development and successful implementation of talent and staffing initiatives · Successful integration of three acquisition targets.
|
· No Base Salary increase. · RSUs with a target award value of $210,000 granted in lieu of a cash bonus was unchanged compared to 2016 · Performance-based equity (PSU granted in 2017) valued at $169,000 was unchanged compared to 2016 · Performance Option valued at $91,000 was unchanged compared to 2016 · All Other Compensation of $22,064 · Bonus Equivalent Cash Value of $150,000 to be used as an input in our CIC severance calculations
|
1 Non-GAAP measure; refer to Appendix A – Information Regarding Non-GAAP Financial Measures.
| 35 |
David D. Houdeshell, Executive Vice President, Chief Risk Officer
| Key Influences in the CGC’s Decision Process | 2017 Pay Outcomes |
|
· Achievement of adjusted EPS1 goal of $1.28 for FY17 · Adjusted net income of $55.3 million compared to $39.1 million in 2016 · Adjusted return on tangible common equity1 for 4Q17 of 13.5%, compared to 13.1% in 2016 · No major operational risk failures · Contributions to enterprise-wide business transformation efforts · Effective partnering with other functions in the development and launch of new products and services · Substantial focus and improvement in unit associate engagement scores · Talent build out and oversight in governance areas · Continues to maintain credit quality metrics in a rapid growth environment, |
· Annualized Base Salary increase to $280,000 effective April 1, 2017 compared to an annualized 2016 Base Salary of $265,000 · RSUs with a target award value of $168,000 granted in lieu of a cash bonus compared to $140,000 in 2016 · Performance-based equity (PSU granted in 2017) valued at $113,750 compared to $91,000 in 2016 · Performance Option valued at $61,250 compared to $49,000 in 2016 · All Other Compensation of $11,070 · Bonus Equivalent Cash Value of $120,000 to be used as an input in our CIC severance calculations |
1 Non-GAAP measure; refer to Appendix A – Information Regarding Non-GAAP Financial Measures.
Juliette P. Kleffel, Executive Vice President, Community Banking
| Key Influences in the CGC’s Decision Process | 2017 Pay Outcomes |
|
· Achievement of adjusted EPS1 goal of $1.28 for FY17 · Adjusted net income of $55.3 million compared to $39.1 million in 2016 · Adjusted return on tangible common equity1 for 4Q17 of 13.5%, compared to 13.1% in 2016 · No major operational risk failures · Contributions to enterprise-wide business transformation efforts · Organizational realignment achieved while achieving substantial gains in new organizational units. · Executive role model and champion of the customer experience. · Successful integration of three acquisitions |
· Annualized Base Salary increase to $280,000 effective April 1, 2017 compared to an annualized 2016 Base Salary of $197,000 · RSUs with a target award value of $196,000 granted in lieu of a cash bonus compared to $119,000 in 2016 · Performance-based equity (PSU granted in 2017) valued at $172,200 compared to $39,000 in 2016 · Performance Option valued at $83,340 compared to $18,858 in 2016 · All Other Compensation of $16,195 · Bonus Equivalent Cash Value of $140,000 to be used as an input in our CIC severance calculations |
1 Non-GAAP measure; refer to Appendix A – Information Regarding Non-GAAP Financial Measures.
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Other Elements of the 2017 Compensation Program for Executive Officers
Change in Control Severance Benefits
We provide change in control severance benefits to the named executive officers to encourage them to consider the best interests of shareholders by stabilizing any concerns about their own personal financial well-being in the face of a potential change in control of the Company. These agreements are described under “Employment and Change in Control Agreements”, and detailed information is provided under “2017 Other Potential Post-Employment Payments.”
In the event that our NEOs qualify for change-in-control severance benefits, a portion of the payments they might receive are a function of highest paid bonus or average bonus paid for the three-year period preceding the year in which a change-in-control occurs.
In response to the unintended negative consequence created by granting equity awards in lieu of cash bonuses for 2016 and 2017 performance, the CGC determined that the severance would be calculated using the same bonus cash equivalent values that it relied on in determining the value of RSU awards.
Change-in-control severance benefits attributable to cash bonuses for Mr. Hudson reflect the highest value payment he receives during the three-years prior to a transaction. Change-in-control severance benefits attributable to cash bonuses for our other continuing NEOs reflect the value of average cash bonus they receive during the three-years prior to a transaction. A change-in-control and job loss must occur within a stated period of time before our executives will be eligible to receive change-in-control severance benefits.
Retirement and Employee Welfare Benefits
We sponsor a retirement savings plan for employees of the Company and its affiliates (the “Retirement Savings Plan”) and a nonqualified deferred compensation plan for certain executive officers (the “Executive Deferred Compensation Plan”). We offer these plans, and make contributions to them, to provide employees with tax-advantaged savings vehicles and to encourage them to save money for their retirement. The Executive Deferred Compensation Plan is described under “Executive Compensation–Nonqualified Deferred Compensation.”
In addition to our retirement programs, we provide employees with welfare benefits, including hospitalization, major medical, disability and group life insurance plans and paid vacation. We also maintain a Section 125 cafeteria plan that allows our employees to set aside pre-tax dollars to pay for certain benefits. All of the full-time employees of the Company and the Bank, including the named executive officers, are eligible to participate in the Retirement Savings Plan and our welfare plans, subject to the terms of those plans.
The Bank provides supplemental disability insurance to certain members of executive management, including the named executive officers, in excess of the maximum benefit of $10,000 per month provided under the group plan for all employees. The supplemental insurance provides a benefit up to 70% of the executive’s monthly pre-disability income based on the executive’s base salary and annual incentive compensation. Coverage can be converted and maintained by the individual participant after employment ends. The benefit may be reduced by income from other sources, and a partial benefit is paid if a disabled participant is able to work on a part-time basis. In 2017, the Company paid a total of $5,080 for supplemental disability insurance for the named executive officers.
The retirement and employee welfare benefits paid by the Company for the named executive officers that are required to be disclosed in this proxy statement are included below in the “Summary Compensation Table,” the “Components of All Other Compensation,” and the “Nonqualified Deferred Compensation Table,” and are described in the footnotes thereto.
Executive Perquisites
We do not consider perquisites to be a significant element of our compensation program. However, we believe they are important and effective for attracting and retaining certain executive talent. We do not provide tax reimbursements, or “gross-ups,” on perquisites. For additional details regarding the executive perquisites, see below the “Summary Compensation Table” and the “Components of All Other Compensation.”
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Risk Analysis of Incentive Compensation Plans
The CGC reviews the sensitivity of our performance and incentives to risk considerations for our executives throughout the year. It also periodically reviews our cash and equity incentive strategies for other key contributors. In 2017, the CGC with the assistance of our Chief Human Resources Officer completed a review of our incentive strategies for our incentive eligible non-executive employees. The CGC concluded that our incentive compensation programs are designed with the appropriate balance of risk and reward in relation to our overall business strategy and will not motivate people to take excessive or imprudent risks.
Risk Analysis of Retail Sales Incentive Plans
During 2016, Seacoast launched a proactive review program of our retail sales incentive plans; this program includes ongoing monitoring for anomalies, review of complaints, and interviews with associates. Independent assessment is completed by the Bank’s Operational Risk Officer and results are reported to the Bank’s Operational Risk & Compliance Committee. Based on data gathered throughout the year, we believe Seacoast is acting in customers’ best interests and that Seacoast’s customer-first culture is sound. Seacoast empowers associates to do the right thing and to deliver our promise to customers to “get you comfortable with the right products and the right team to serve you.” At the same time, quality control and risk management are constant priorities. We have ongoing review processes to promptly identify areas that may be potentially inconsistent with our customer-first posture.
We have adopted a Compensation Recoupment Policy to recover, to the extent practicable and appropriate, incentive compensation from any executive officer when:
| · | the incentive compensation payment or award (or the vesting of such award) was based upon the achievement of financial results that were subsequently the subject of a restatement, regardless of whether the executive engaged in misconduct or otherwise contributed to the requirement for the restatement; and |
| · | a lower payment or award would have been made to the executive officer based upon the restated financial results. |
The policy is available on our website at www.SeacoastBanking.com. The policy anticipates the final rules implementing the clawback provision of the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010, but will be amended, if necessary, when final regulations are issued by the SEC.
The Company has adopted a hedging and pledging policy. The policy prohibits our employees, including our executive officers and directors, from purchasing any financial instrument or entering into any transaction that is designed to hedge or offset any decrease in the market value of our stock, including exchange funds, prepaid variable forward contracts, equity swaps, puts, calls, collars, forwards or short sales.
In addition, directors and executive officers are required to obtain advance approval of any pledging of Company shares as collateral for loans, including holding Company shares in margin accounts. The policy also limits pledging to reasonable purposes (as defined in the policy) and limits the value of the securities pledged in connection with a loan or other indebtedness to $250,000.
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The Board has established stock ownership guidelines for its officers and directors, as described below:
| Individual/Group | Stock Ownership Target | Holding Requirement | |
| Before Ownership Target Met | After Ownership Target Met | ||
| Chief Executive Officer | 5 times annual base salary | 75% of net shares until target number of shares is met | 50% of net shares held for one year after vesting/ exercise |
| Other Senior Executive Officers | 3 times annual base salary | ||
| Non-Employee Directors | 3 times annual retainer | ||
Our executive compensation program is designed to allow a participant to earn targeted ownership over a reasonable period, usually within five years, provided individual and Company targets are achieved and provided the participant fully participates in the program. “Net Shares” means shares of stock in excess of those sold or withheld to satisfy the minimum tax liability upon vesting or conversion.
Code Section 162(m) generally establishes, with certain exceptions, a $1 million deduction limit for all publicly held companies on compensation paid to an executive officer in any year. Prior to enactment of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), this limitation did not generally apply to compensation paid to the chief financial officer or to compensation paid based on achievement of pre-established performance goals if certain requirements were met. The exemption from Section 162(m)’s deduction limit for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to all of our named executive officers in excess of $1 million in 2018 and future years will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. The CGC reserves the right to pay executives’ compensation that is not deductible under Section 162(m).
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Strategies to ensure that Incentive Compensation is Sensitive to Risk Considerations
Seacoast implemented a number of changes to our incentive strategies, starting with the 2015 equity award cycle. These strategies have been updated in response to shareholder feedback and governance considerations. The CGC and our Chief Risk Officer share the view that our incentive strategies strike the right balance between risk and reward, motivating and retaining our executives in ways that align with shareholder interests but do not motivate inappropriate or excessive risk taking. The evolution of our incentive strategies reflect our commitment to listen to our shareholders and continuously refine our programs to align with our governance and risk management efforts given the growth of Seacoast and changes within the industry and what is deemed as best practice. Specifically:
| Impetus for Change | Design Changes |
| Shareholder feedback that our executives needs to own more shares of Seacoast stock |
RSUs were granted in lieu of cash bonuses for 2016 and 2017 performance
Performance period for new PSU awards starting in 2016 reduced from four years to three years, accelerating the rate at which our executives accumulate shares of Seacoast stock if we perform
Vesting period for new Option awards starting in April 2017 reduced from four years to three years, accelerating the rate at which our executives have the right to exercise their options and receive shares of our common stock |
| Shareholder feedback that Seacoast needs to perform at levels that equal or exceed the industry |
PSU metrics changed starting in April 2017 from cumulative earnings with a modifier based on Return on Tangible Common Equity (“ROTCE”) to three-year compound annualized growth in adjusted EPS and average return on tangible common equity, which our shareholders views as key indicators of our performance
Option performance feature modified starting in April 2017 so that the stock price vesting hurdle used for prior awards is replaced by a premium option feature for new awards whereby the exercise price of the option is set above the face value of the closing stock price on the date of grant, placing shareholders in front of management for value realized through stock price appreciation |
| Governance Considerations |
Reduced PSU performance period, allowing for direct and relevant pay and performance comparisons with industry competitors and alternative investments that share our risk profile
Increased the transparency of our PSU program and performance goals by replacing a single type of PSU award with two types of PSU awards. Starting with PSUs granted in April 2017, one type of PSU will be earned for compound annualized growth in EPS and one type of PSU will be earned for average return on equity. |
| Risk-Considerations |
Implemented a mandatory deferral feature on new PSU awards so that settlement of 50% of any shares earned for performance will be delayed for an additional 12 months
Maintained the 12-month stock holding requirement on 50% of the net shares received upon the exercise of options
Maintained service and risk-based vesting requirements on all new performance-contingent and performance-based equity awards and options
Continue to grant options with a target value significantly less than the target value of PSU awards and, in most years, and total incentive award values |
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COMPENSATION AND GOVERNANCE COMMITTEE REPORT
The Compensation and Governance Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on such review and discussions, the Compensation and Governance Committee recommended to the board of directors, and the board of directors approved, that the Compensation Discussion and Analysis be included in this proxy statement.
This report shall not be deemed to be “soliciting material” or to be “filed” with the Securities Exchange Commission, nor shall this report be incorporated by reference by any general statement incorporating by reference this 2018 Proxy Statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, and shall not otherwise be deemed filed under such Acts.
| Compensation and Governance Committee: | |
| H. Gilbert Culbreth, Jr., Chair | |
| Julie H. Daum | |
| Maryann Goebel | |
| Timothy S. Huval |
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2017 SUMMARY COMPENSATION TABLE
The table below sets forth the elements that comprise total compensation for the named executive officers of the Company for the periods indicated.
| Name and Principal Position | Year | Salary ($) (1) | Bonus ($)(2) | Stock ($) (3) | Option Awards ($) (3) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) (4) | Total ($) | ||||||||||||||||||||||||
| Dennis S. Hudson, III Chairman & CEO of Seacoast and Bank | 2017 2016 2015 | 587,500 550,000 537,852 | — — 100,000 | 532,954 357,489 454,049 | 359,677 175,881 39,773 | — — — | 32,685 33,530 42,434 | 1,512,816 1,116,900 1,174,108 | ||||||||||||||||||||||||
| Charles M. Shaffer EVP, CFO of Seacoast and Bank | 2017 2016 2015 | 315,000 287,499 248,333 | — — 100,000 | 453,955 146,244 204,606 | 131,588 71,952 17,923 | — — — | 20,107 19,901 22,218 | 920,650 525,596 593,080 | ||||||||||||||||||||||||
| Charles K. Cross, Jr. EVP, Commercial Banking of Bank | 2017 2016 2015 | 300,000 293,750 273,333 | — — 125,000 | 378,974 168,992 249,443 | 114,042 83,144 21,850 | — — — | 22,064 23,165 29,285 | 815,080 569,051 698,911 | ||||||||||||||||||||||||
| David D. Houdeshell EVP & Chief Risk Officer of Seacoast and Bank | 2017 2016 2015 | 276,250 265,000 262,500 | — — 75,000 | 253,709 90,995 163,559 | 76,757 44,769 14,327 | — — — | 11,070 11,141 17,911 | 617,786 411,905 533,297 | ||||||||||||||||||||||||
| Juliette P. Kleffel EVP, Community Banking of Bank | 2017 | 259,250 | — | 255,335 | 83,340 | — | 16,195 | 614,120 | ||||||||||||||||||||||||
| (1) | A portion of executive’s base salary included in this number may have been deferred into the Company’s Executive Deferred Compensation Plan (“EDCP”), the amounts of which are disclosed in the Nonqualified Deferred Compensation Table for the applicable year. Executive officers who are also directors do not receive any additional compensation for services provided as a director. |
| (2) | Cash bonuses earned for FY17 performance were replaced with performance-based stock awards for our CEO and with restricted stock units for our other executive officers, each of which were granted in 2018 and, pursuant to proxy rules, are not reported in 2017 compensation. |
| (3) | Represents the aggregate grant date fair value as of the respective grant date for each award calculated in accordance with FASB ASC Topic 718. The assumptions made in valuing stock awards reported in this column are discussed in Note J to the Company’s audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2017. Generally, the aggregate grant date fair value is the amount that the company expects to expense for accounting purposes and does not correspond to the actual value that the named executives will realize from the award. For additional information regarding such grants, see “Compensation Discussion and Analysis –Elements of the 2017 Compensation Program for Executive Officers – Equity Awards.” See also “2017 Grants of Plan-Based Awards” below. |
Each of our executive officers received PSUs. They also each received RSUs, with the exception of the CEO. With respect to the PSU awards, the grant date fair value included in the table assumes that target performance is achieved. The maximum value for each executive as of the grant date, assuming the highest level of performance will be achieved, is:
| Name | Target Value | Maximum Value | ||||||
| Dennis S. Hudson, III | $ | 532,954 | $ | 1,065,907 | ||||
| Charles M. Shaffer | 194,962 | 389,924 | ||||||
| Charles K. Cross, Jr. | 168,995 | 337,992 | ||||||
| David D. Houdeshell | 113,715 | 227,432 | ||||||
| Juliette Kleffel | 172,200 | 332,229 | ||||||
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2017 componEnts of all other compEnsation
Name | Company Paid Contributions to Retirement Savings Plan | Company Paid Contributions to EDCP (1) | Car Allowance | Cell Phone Allowance | Other Perquisites | Total | ||||||||||||||||||
| Dennis. S. Hudson, III | $ | 10,800 | $ | 12,885 | $ | 9,000 | — | — | $ | 32,685 | ||||||||||||||
| Charles M. Shaffer | $ | 9,107 | $ | 2,000 | $ | 9,000 | — | $ | 20,107 | |||||||||||||||
| Charles K. Cross, Jr. | $ | 10,800 | — | $ | 9,000 | $ | 180 | $ | 2,084 | (2) | $ | 22,064 | ||||||||||||
| David D. Houdeshell | $ | 10,800 | — | — | $ | 270 | — | $ | 11,070 | |||||||||||||||
| Juliette P. Kleffel | $ | 9,175 | — | $ | 6,750 | $ | 270 | — | $ | 16,195 | ||||||||||||||
| (1) | Earned in reporting year, but contributed in following year. Also reported in the “Nonqualified Deferred Compensation Table.” |
| (2) | Includes $2,074 for personal use of club membership and $10 for gym membership. |
2017 GRANTS OF PLAN-BASED AWARDS
The following table sets forth certain information concerning plan-based awards granted during 2017 to the named executive officers.
| Grant | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units | All Other Option Awards: Number of Securities Underlying Options | Exercise or Base Price of Option Awards | Grant Date Fair Value of Stock and Option Awards (1) | |||||||||||||||||||||||||
| Name | Date | Threshold | Target | Maximum | (#) | (#) | ($/Sh) | ($) | ||||||||||||||||||||||
| Dennis S. Hudson, III | 4/3/2017 | 5,572 | 22,290 | 44,580 | — | $ | 532,954 | |||||||||||||||||||||||
| 4/3/2017 | 78,021 | (2) | 28.69 | |||||||||||||||||||||||||||
| Charles M. Shaffer | 4/3/2017 | 2,038 | 8,154 | 16,308 | 10,832 | 453,955 | ||||||||||||||||||||||||
| 4/3/2017 | 28,544 | (2) | 28.69 | |||||||||||||||||||||||||||
| Charles K. Cross, Jr. | 4/3/2017 | 1,762 | 7,068 | 14,136 | 8,782 | 378,973 | ||||||||||||||||||||||||
| 4/3/2017 | 24,738 | (2) | 28.69 | |||||||||||||||||||||||||||
| David D. Houdeshell | 4/3/2017 | 1,189 | 4,756 | 9,512 | 5,855 | 253,709 | ||||||||||||||||||||||||
| 4/3/2017 | 16,650 | (2) | 28.69 | |||||||||||||||||||||||||||
| Juliette P. Kleffel | 4/3/2017 | 1,291 | 7,202 | 13,895 | 5,515 | 255,334 | ||||||||||||||||||||||||
| 4/3/2017 | 18,078 | (2) | 28.69 | |||||||||||||||||||||||||||
| (1) | Represents the aggregate grant date fair value as of the respective grant date for each award, calculated in accordance with FASB ASC Topic 718. The assumptions made in valuing stock awards reported in this column are discussed in Note J to the Company’s audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2017. |
| (2) | Option with two-tiered vesting as described under “Design Highlights of Equity Awards Issued in FY17 – Performance Stock Options”. The performance criteria were met and option began vesting in 1/3rd share annual increments on December 31, 2017, subject to continuing service requirements. |
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Employment and Change in Control Agreements
The Company and the Bank currently maintain employment and change in control agreements with certain of the Company’s executive officers, the terms of which are described in more detail below.
Employment Agreement with CEO Hudson
On June 27, 2017, the Company and the Bank entered into an amendment to an employment agreement between Dennis S. Hudson, III and Seacoast and the Bank dated December 18, 2014. The employment agreement dated December 18, 2014 replaced the previous employment agreement between Mr. Hudson and Seacoast and the Bank dated January 18, 1994, as amended December 31, 2008, and the change of control agreement between these parties dated December 24, 2003.
The amended agreement extends Mr. Hudson’s employment under the agreement terms for a term of three years. Under the agreement, Mr. Hudson receives a minimum base salary of $500,000 per year, medical, long-term disability and life insurance in accordance with the Bank’s insurance plans for senior management, as well as a car allowance and any other perquisites that are approved by the Board. Mr. Hudson may also receive other compensation including bonuses, and he will be entitled to participate in all current and future employee benefit plans and arrangements in which senior management of the Bank may participate. In addition, the agreement contains certain non-competition, non-disclosure and non-solicitation covenants.
Under the agreement, if Mr. Hudson is terminated for “cause”, or resigns without “good reason,” as defined in the agreement, he will receive payment of his base salary and unused vacation through the date of termination, and any unreimbursed expenses (collectively, the “Accumulated Obligations”). The employment agreement also contains provisions for termination upon Mr. Hudson’s death or permanent disability.
The agreement also provides for termination upon the occurrence of a change in control. If Mr. Hudson resigns for “good reason” or is terminated “without cause” prior to a change in control, he will receive: 1) the Accumulated Obligations; and 2) upon execution of a release of all claims against the Company, severance of: a) two times his base salary in effect on the date of separation, b) two times a bonus equal to the highest bonus earned by the Executive for the previous three full fiscal years (“Cash Bonus”), and c) continuing group medical, dental, vision and prescription drug plan benefits (“Continuing Benefits”) for two years. If Mr. Hudson resigns for “good reason” or is terminated “without cause”, within twelve months following a change in control (as defined in the agreement), he will receive: 1) the Accumulated Obligations; and 2) upon execution of a release of all claims against the Company, severance of: a) three times his base salary in effect on the date of separation, b) three times the Cash Bonus; and c) Continuing Benefits for 36 months.
In addition, under the agreement, Mr. Hudson is subject to the Company’s policies applicable to executives generally, including its policies relating to claw-back of compensation. For a further discussion of the payments and benefits to which Mr. Hudson would be entitled upon termination of his employment see “2017 Other Potential Post-Employment Payments.”
Change in Control Agreements with Other Named Executive Officers
The Company entered into a change in control employment agreement with Ms. Kleffel on April 6, 2017. The CIC agreement with the Executive has an initial term of one year and provides for automatic one-year extension unless expressly not renewed. A change in control, as defined in the agreement, must occur during the period (the “Change in Control Period”) to trigger the agreement. The agreement provides that, once a change in control has occurred, the Company agrees to continue the employment of the Executive subject to the contract for a one-year period, in a comparable position as the Executive held in the 120-day period prior to the change in control, and with the same annual base pay and target bonus opportunity. If the Executive is terminated “without cause” or resigns for “good reason,” as defined in the agreement, during the one-year period following a change in control, the Executive will receive:
| o | cash severance equal to a one times multiple of the sum of (i) Executive’s Annual Base Salary at the rate in effect on the date of termination, and (ii) the Executive’s average annual performance bonus for the last three full fiscal years prior to the date of termination (“Executive’s Average Annual Performance Bonus”); |
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| o | a prorated final year bonus, based on the Executive’s Average Annual Performance Bonus; and |
| o | health and other welfare benefits, as defined in the agreement, for a period of time following termination of 12 months. |
The Executive is required to execute a release of claims as a condition to receipt of severance under the CIC Agreement and is subject to protective covenants prohibiting the disclosure and use of the Company’s confidential information and, during the one-year period following a termination by the company any reason other than for death or disability, or by the Executive for Good Reason, protective covenants regarding non-competition, non-solicitation of protected customers; non-solicitation of employees, and non-disparagement of the Company or its directors, officers, employees or affiliates.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2017
The following table sets forth certain information concerning outstanding equity awards as of December 31, 2017 granted to the named executive officers. This table includes the number of shares of common stock covered by both exercisable options, non-exercisable options or stock appreciation rights (“SARs”), and unexercised unearned options or SARs awarded under an equity incentive plan that were outstanding as of December 31, 2017. Also reported are restricted stock units and restricted stock awards, and their market value, that had not vested as of December 31, 2017.
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||
| Name | Number
of Securities Underlying Unexercised Option (#) Exercisable | Number
of Securities Underlying Unexercised Option (#) Unexercisable | Option
Exercise Price ($) | Option
Expiration Date | Number
of (#) | Market
Value of Shares or Units of Stock That Have Not Vested (2) ($) | Equity
incentive plan awards: number of unearned shares, units or other rights that have not vested (#) | Equity
incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested (2) ($) | ||||||||||||||||||||||
| D. Hudson, III | 15,520 | 3,880 | (3) | 11.00 | 06/28/2023 | |||||||||||||||||||||||||
| 50,000 | (4) | — | 10.54 | 04/29/2024 | ||||||||||||||||||||||||||
| 11,220 | 6,755 | (5) | 12.63 | 01/29/2023 | ||||||||||||||||||||||||||
| 14,086 | 37,870 | (6) | 14.82 | 02/29/2024 | ||||||||||||||||||||||||||
| — | 78,021 | (7) | 23.91 | 04/03/2027 | ||||||||||||||||||||||||||
| 21,394 | (8) | $ | 539,318 | |||||||||||||||||||||||||||
| 35,950 | (9) | $ | 906,300 | |||||||||||||||||||||||||||
| 24,122 | (10) | 608,116 | ||||||||||||||||||||||||||||
| 11,145 | (11) | 280,965 | ||||||||||||||||||||||||||||
| 11,145 | (12) | 280,965 | ||||||||||||||||||||||||||||
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| Option Awards | Stock Awards | |||||||||||||||||||||||||||||
| Name | Number
of Securities Underlying Unexercised Option (#) Exercisable |
Number
of Securities Underlying Unexercised Option (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number
of (#) | Market ($) | Equity
incentive (#) | Equity
incentive vested
(2) ($) | ||||||||||||||||||||||
| C. Shaffer | 1,920 | 480 | (3) | 11.00 | 06/28/2023 | |||||||||||||||||||||||||
| 25,000 | (4) | — | 10.54 | 04/29/2024 | ||||||||||||||||||||||||||
| 5,040 | 3,060 | (5) | 12.63 | 01/29/2023 | ||||||||||||||||||||||||||
| 5,785 | 15,470 | (6) | 14.82 | 02/29/2024 | ||||||||||||||||||||||||||
| — | 28,544 | (7) | 28.69 | 04/03/2027 | ||||||||||||||||||||||||||
| 8,170 | (8) | 205,966 | ||||||||||||||||||||||||||||
| 16,200 | (9) | 408,402 | ||||||||||||||||||||||||||||
| 9,868 | (10) | 248,772 | ||||||||||||||||||||||||||||
| 10,832 | (13) | 273,075 | 4,077 | (11) | 102,781 | |||||||||||||||||||||||||
| 4,077 | (12) | 102,781 | ||||||||||||||||||||||||||||
| C. Cross, Jr. | 1,920 | 480 | (3) | 11.00 | 06/28/2023 | |||||||||||||||||||||||||
| 25,000 | (4) | — | 10.54 | 04/29/2024 | ||||||||||||||||||||||||||
| 6,150 | 3,725 | (5) | 12.63 | 01/29/2023 | ||||||||||||||||||||||||||
| 6,676 | 17,885 | (6) | 14.82 | 02/29/2024 | ||||||||||||||||||||||||||
| — | 24,738 | (7) | 28.69 | 04/03/2027 | ||||||||||||||||||||||||||
| 488 | (14) | 12,302 | ||||||||||||||||||||||||||||
| 8,935 | (8) | 225,251 | ||||||||||||||||||||||||||||
| 19,750 | (9) | 497,898 | ||||||||||||||||||||||||||||
| 11,403 | (10) | 287,470 | ||||||||||||||||||||||||||||
| 8,782 | (13) | 221,394 | 3,534 | (11) | 89,092 | |||||||||||||||||||||||||
| 3,534 | (12) | 89,092 | ||||||||||||||||||||||||||||
| D. Houdeshell | 3,360 | 840 | (3) | 11.00 | 06/28/2023 | |||||||||||||||||||||||||
| 25,000 | (4) | — | 10.54 | 04/29/2024 | ||||||||||||||||||||||||||
| 4,020 | 2,455 | (5) | 12.63 | 01/29/2023 | ||||||||||||||||||||||||||
| 3,600 | 9,625 | (6) | 14.82 | 02/29/2024 | ||||||||||||||||||||||||||
| — | 16,650 | (7) | 28.69 | 04/03/2027 | ||||||||||||||||||||||||||
| 8,916 | (8) | 224,772 | ||||||||||||||||||||||||||||
| 12,950 | (9) | 326,470 | ||||||||||||||||||||||||||||
| 6,140 | (10) | 154,789 | ||||||||||||||||||||||||||||
| 5,855 | (13) | 147,605 | 2,378 | (11) | 59,949 | |||||||||||||||||||||||||
| 2,378 | (12) | 59,949 | ||||||||||||||||||||||||||||
| J. Kleffel | 1,438 | 3,815 | (6) | 15.99 | 3/31/2024 | |||||||||||||||||||||||||
| — | 18,078 | (7) | 28.69 | 04/03/2027 | ||||||||||||||||||||||||||
| 2,439 | (15) | 61,487 | ||||||||||||||||||||||||||||
| 1,250 | (16) | 31,513 | ||||||||||||||||||||||||||||
| 995 | (17) | 25,084 | 2,038 | (18) | 51,378 | |||||||||||||||||||||||||
| 2,482 | (13) | 62,571 | 2,582 | (11) | 65,092 | |||||||||||||||||||||||||
| 2,582 | (12) | 65,092 | ||||||||||||||||||||||||||||
| 46 |
| (1) | During the vesting period, the named executive officer has full voting and dividend rights with respect to the restricted stock, but does not have dividend rights with respect to the units until the performance criteria has been met. |
| (2) | For the purposes of this table, the market value is determined using the closing price of the Company’s common stock on December 31, 2016 ($22.06). |
| (3) | Represents option to purchase common stock, of which the remaining shares will, as long as named executive officer remains employed by the Company, vest on June 28, 2018. |
| (4) | Represents option to purchase fully vested common stock, as long as named executive officer remains employed by the Company. |
| (5) | Represents option to purchase common stock; the shares covered by this award began vesting in 1/48th share increments on August 1, 2015, and the remaining shares will, as long as named executive officer remains employed by the Company, vest in 1/48th increments each month thereafter. |
| (6) | Represents option to purchase common stock; the shares covered by this award began vesting in 1/48th share increments on December 1, 2016, and the remaining shares will, as long as named executive officer remains employed by the Company, vest in 1/48th increments each month thereafter. |
| (7) | Represents option to purchase common stock, of which one-third of the unexercisable shares covered by this award will vest on April 3, 2018, and the remaining unexercisable shares will, as long as named executive officer remains employed by the Company, vest one-half on April 3, 2019 and April 3, 2020. |
| (8) | Restricted stock units granted on June 28, 2013 and August 1, 2014 which were subject to performance requirements over a period ending December 31, 2015. The performance requirements were met and the remaining shares will vest on December 31, 2018. |
| (9) | Represents performance-vesting restricted stock units granted on January 29, 2015, representing the named executive officer’s right to earn, on a one-for-one basis, shares of common stock, subject to performance requirements over a period ending December 31, 2018. |
| (10) | Represents performance-vesting restricted stock units granted on February 29, 2016, representing the named executive officer’s right to earn, on a one-for-one basis, shares of common stock, subject to performance requirements over a period ending December 31, 2019. |
| (11) | Represents performance-vesting restricted stock units granted on April 3, 2017, representing the named executive officer’s right to earn, on a one-for-one basis, shares of common stock, subject to performance requirements over a period ending December 31, 2019. The awards are more fully described above under “2017 Equity Awards–Performance Share Unit (“PSU”) Awards”. |
| (12) | Represents performance-vesting restricted stock units granted on April 3, 2017, representing the named executive officer’s right to earn, on a one-for-one basis, shares of common stock, subject to performance requirements over a period ending December 31, 2020. The awards are more fully described above under “2017 Equity Awards–Performance Share Unit (“PSU”) Awards”. |
| (13) | Represents time-vested restricted stock units granted on April 3, 2017, of which one-third of the shares will vest on April 3, 2018, and the remaining shares will, as long as names executive officer remains employed by the Company, vest one-third on April 3, 2019 and April 3, 2020. |
| (14) | Represents time-vested restricted stock award of common stock granted to Mr. Cross on April 1, 2013. The remaining shares will, as long as Mr. Cross remains employed by the Company, vest on April 1, 2018. |
| (15) | Represents performance-vesting restricted stock units granted on April 1, 2016, representing the named executive officer’s right to earn, on a one-for-one basis, shares of common stock, subject to performance requirements over a period ending December 31, 2019. |
| (16) | Represents time-vested restricted stock units granted on October 1, 2016, of which one-half of the shares will vest on October 1, 2018 and the remaining shares will, as long as Ms. Juliette Kleffel remains employed by the Company, vest one-half on October 1, 2019. |
| (17) | Represents time-vested restricted stock units granted on April 1, 2017, of which one-third of the shares will vest on April 1, 2018, and the remaining shares will, as long as Ms. Juliette Kleffel remains employed by the Company, vest one-third on April 1, 2019 and April 1, 2020. |
| (18) | Represents performance-vesting restricted stock units granted on April 1, 2017, representing the named executive officer’s right to earn, on a one-for-one basis, shares of common stock, subject to performance requirements over a period ending December 31, 2020. |
2017 OPTION EXERCISES AND STOCK VESTED
The following table reports the exercise of stock options, and vesting of stock awards or similar instruments during 2017, granted to the named executive officers and the value of the gains realized on vesting. No stock options were exercised in 2017.
Name | Number of Shares Acquired on Vesting | Value Realized on Vesting | ||||||
| Dennis S. Hudson, III | 21,394 | $ | 539,318 | |||||
| Charles M. Shaffer | 8,166 | $ | 205,865 | |||||
| Charles K. Cross, Jr. | 9,420 | $ | 236,878 | |||||
| David Houdeshell | 8,913 | $ | 224,697 | |||||
| Juliette P. Kleffel | 2,825 | $ | 67,489 | |||||
| 47 |
2017 NONQUALIFIED DEFERRED COMPENSATION
The following table discloses, for each of the named executive officers, contributions, earnings and balances during 2017 under the Executive Deferred Compensation Plan, described below.
Name | Executive ($) | Registrant ($) (1) | Aggregate ($) (2) | Aggregate ($) | Aggregate ($) | |||||||||||||||
| Dennis S. Hudson, III | 16,106 | 12,885 | 160,582 | — | 1,021,710 | (3) | ||||||||||||||
| Charles M. Shaffer | 9,720 | 2,000 | 2,888 | — | 23,855 | (4) | ||||||||||||||
| Charles K. Cross, Jr. | — | — | — | — | — | |||||||||||||||
| David Houdeshell | — | — | — | — | — | |||||||||||||||
| Juliette P. Kleffel | — | — | — | — | — | |||||||||||||||
| (1) | Total amount included in the All Other Compensation column of the Summary Compensation Table. This amount was contributable in 2017, but was credited to the account of the named executive officer in 2018. |
| (2) | None of the earnings or dividends paid under the Executive Deferred Compensation Plan are above-market or preferential. |
| (3) | Includes $265,181 contributed by the Company, as well as executive contributions, which were included in the Summary Compensation Table for previous years. |
| (4) | Includes $3,750 contributed by the Company, as well as executive contributions, which were included in the Summary Compensation Table for previous years. |
Executive Deferred Compensation Plan
The Bank’s Executive Deferred Compensation Plan is designed to permit a select group of management and highly compensated employees, including two of the current named executive officers (Messrs. Hudson and Shaffer), to elect to defer a portion of their compensation until their separation from service with the Company, and to receive matching and other Company contributions that are precluded under the Company’s Retirement Savings Plan as a result of limitations imposed under ERISA.
The Executive Deferred Compensation Plan was amended and restated in 2007 to reflect changes arising from requirements under Code Section 409A and the underlying final regulations. As a result, each participant account is separated into sub-accounts to reflect:
| · | contributions and investment gains or losses that were earned and vested on or before December 31, 2004, and any subsequent investment gains or losses thereon (the “Grandfathered Benefits”); and |
| · | contributions and earnings that were earned and vested after December 31, 2004 (the “Non-Grandfathered Benefits”). |
A participant’s elective deferrals to the Executive Deferred Compensation Plan are immediately vested. The Company contributions to the Executive Deferred Compensation Plan vest at the rate of 25 percent for each year of service the participant has accrued under the Retirement Savings Plan, with full vesting after four years of service. If a participant would become immediately vested in his Company contributions under the Retirement Savings Plan for any reason (such as death, disability, or retirement on or after age 55), then he would also become immediately vested in his account balance held in the Executive Deferred Compensation Plan.
Each participant directs how his account in the Executive Deferred Compensation Plan is invested among the available investment vehicle options. The plan’s investment options are reviewed and selected annually by a committee appointed by the Board of Directors of the Company to administer the plan. The plan committee may appoint other persons or entities to assist it in its functions. No earnings or dividends paid under the Executive Deferred Compensation Plan are above-market or preferential.
All amounts paid under the plan are paid in cash from the general assets of the Company, either directly by the Company or via a “rabbi trust” the Company has established in connection with the plan. Nothing contained in the plan creates a trust or fiduciary relationship of any kind between the Company and a participant, beneficiary or other person having a claim to payments under the plan. A participant or beneficiary does not have an interest in his plan account that is greater than that of an unsecured creditor.
| 48 |
Upon a participant’s separation from service with the Company, he will receive the balance of his account in cash in one of the following three forms specified by the participant at the time of initial deferral election, or a subsequent permitted amendment:
| · | a lump sum; |
| · | monthly installments over a period not to exceed five years; or |
| · | a combination of an initial lump sum of a specified dollar amount and the remainder in monthly installments over a period not to exceed five (5) years. |
A participant may change his existing distribution election relating to Non-Grandfathered Benefits only in very limited circumstances. Upon death of the participant, any balance in his account will be paid in a lump sum to his designated beneficiary or to his estate.
2017 other potential post-employment payments
The following table quantifies, for each of the named executive officers, the potential post-employment payments under the provisions and agreements described above under “Employment and Change in Control Agreements,” assuming that the triggering event occurred on December 31, 2017. The closing market price of the Company’s common stock on that date was $25.21 per share. None of the named executive officers would be eligible for any of these payments if they were terminated for cause.
| 49 |
Name | Term (in
years) |
Cash Severance ($) | Value
of Annual Benefits ($) | Total
Value of ($) | In-the-Money
Value ($) | Total
Value of ($) | ||||||||||||||||||
| Dennis S. Hudson, III | ||||||||||||||||||||||||
| Upon Termination without Cause or with Resignation for Good Reason (1) | 2 | (2) | 1,400,000 | 3,840 | — | — | 1,403,840 | |||||||||||||||||
| Upon Death or Disability (1) | 2 | (2) | 1,200,000 | 3,840 | 2,615,689 | (3) | $ | 533,582 | (3) | 4,353,111 | ||||||||||||||
| Upon Termination Following a Change-in-Control (1) | 3 | 2,100,000 | 5,760 | 2,615,689 | (3) | 533,582 | (3) | 5,255,031 | ||||||||||||||||
| Upon Change-in-Control without Termination | — | — | — | 2,615,689 | (3) | 533,582 | (3) | 3,149,271 | ||||||||||||||||
| Upon Change-in-Control where Award assumed by surviving entity | — | — | — | 539,343 | (3) | 55,135 | (3) | 594,478 | ||||||||||||||||
| Charles M. Shaffer | ||||||||||||||||||||||||
| Upon Death, Disability | — | — | — | 1,341,701 | (3) | 206,049 | (3) | 1,547,750 | ||||||||||||||||
| Upon Termination Following a Change-in-Control (4) | 2 | 740,000 | 3,480 | 1,341,701 | 206,049 | 2,291,230 | ||||||||||||||||||
| Upon Change-in-Control without Termination | — | — | — | 1,341,701 | (3) | 206,049 | (3) | 1,547,750 | ||||||||||||||||
| Upon Change-in-Control where Award assumed by surviving entity | — | — | — | 205,890 | (3) | 6,821 | (3) | 212,711 | ||||||||||||||||
| Charles K. Cross, Jr. | ||||||||||||||||||||||||
| Upon Death or Disability | — | — | — | 1,422,474 | (3) | 239,506 | (3) | 1,661,980 | ||||||||||||||||
| Upon Termination Following a Change-in-Control (4) | 2 | 725,000 | 3,149 | 1,422,474 | 239,506 | 2,390,129 | ||||||||||||||||||
| Upon Change-in-Control without Termination | — | — | — | 1,422,474 | (3) | 239,506 | (3) | 1,661,980 | ||||||||||||||||
| Upon Change-in-Control where Award assumed by surviving entity | — | — | — | 237,529 | (3) | 6,821 | (3) | 244,350 | ||||||||||||||||
| David D. Houdeshell | ||||||||||||||||||||||||
| Upon Death or Disability | — | — | — | 973,535 | (3) | 142,824 | (3) | 1,116,359 | ||||||||||||||||
| Upon Termination Following a Change-in-Control (4) | 1 | 330,000 | 2,095 | 973,535 | 142,824 | 1,448,454 | ||||||||||||||||||
| Upon Change-in-Control without Termination | — | — | — | 973,535 | (3) | 142,824 | (3) | 1,116,359 | ||||||||||||||||
| Upon Change-in-Control where Award assumed by surviving entity | — | — | — | 224,772 | (3) | 11,936 | (3) | 236,708 | ||||||||||||||||
| Juliette P. Kleffel | ||||||||||||||||||||||||
| Upon Death, Disability | — | — | — | 362,217 | (3) | 35,174 | (3) | 397,391 | ||||||||||||||||
| Upon Termination Following a Change-in-Control (4) | 1 | 280,000 | 1,782 | 362,217 | 35,174 | 679,173 | ||||||||||||||||||
| Upon Change-in-Control without Termination | — | — | — | 362,217 | (3) | 35,174 | (3) | 397,391 | ||||||||||||||||
| Upon Change-in-Control where Award assumed by surviving entity | — | — | — | — | — | — | ||||||||||||||||||
| 50 |
| (1) | As provided for in Mr. Hudson’s employment agreement, the Bank would continue to pay to Mr. Hudson or his estate or beneficiaries his annual base salary, including any other cash compensation to which he would be entitled at termination date, for the period indicated under Term. In addition, the Bank would continue to pay the insurance premium for Mr. Hudson, his spouse and eligible dependents for continued participation in any group medical, dental, vision and/or prescription drug plan benefits (including any excess COBRA cost of coverage) for the term indicated or until his earlier death. In the case of termination without cause or resignation for good reason, Mr. Hudson’s severance for the Term also would include an amount equal to his highest annual bonus for the previous three full fiscal years. In the case of termination without cause or resignation for good reason within twelve months following a change in control, severance payments would be made in a lump sum. |
| (2) | The initial term of agreement is three years, but benefits under the agreement are paid for the Term as indicated in the table. |
| (3) | As provided for in the award document. Starting with awards granted in January 2015, there is no vesting of equity in a change in control if the award is assumed by the surviving entity or otherwise equitably converted or substituted. |
| (4) | As provided for change in control agreement, the Company shall pay the executive officer in a lump sum in cash within thirty (30) days after the date of termination the aggregate of the: (i) base salary through the termination date to the extent not paid (assumed already paid in table above), (ii) annual bonus (prorated in the event that the executive was not employed by the Company for the whole of such fiscal year), and (iii) annual base salary and annual bonus, multiplied by the Term as indicated in the table. Annual base salary is equal to 12 times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the executive officer by the Company in the 12-month period immediately preceding the month in which the triggering event occurs. Annual bonus is equal to the executive officer’s average annual bonus for the last three full fiscal years prior to the triggering event. All unvested stock options and restricted stock of the Company held by the executive officer shall immediately and fully vest on termination. In addition, the Company will pay or provide to the executive officer or eligible dependents “Welfare Benefits”, for a period of 18 months for Messrs. Cross and Shaffer and 12 months for Mr. Houdeshell and Ms. Kleffel. “Welfare Benefits” include similar medical, prescription, dental, and vision insurance plans benefits paid by the Company prior to the change in control. If the executive officer’s employment is terminated by reason of death, disability, retirement or for cause within the term indicated following a change in control, no further payment is owed to the executive except for accrued obligations, such as earned but unpaid salary and bonus. |
In compliance with Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, the Company’s CEO pay ratio was calculated. At December 31, 2017, the median annual total compensation of our employees (other than Mr. Hudson, our CEO) was $59,455 and the annual total compensation for Mr. Hudson was $1,512,516. Based on this information, for 2017, the estimate of the ratio of compensation for our Chief Executive Officer to the median employee was 25.4. This ratio is specific to our Company and is not comparable to any ratio disclosed by another company.
To identify the median of the annual total compensation of all of our employees, we reviewed 2017 compensation reflected in our payroll records for our over 600 associates as of December 31, 2017, which includes all full-time employees throughout the year not including any acquired associates. Based on our payroll data, we determined the value of compensation earned by associates including regular pay, incentive, bonus, business continuity, and any other perquisites. No assumptions, adjustments, or estimates were made to our payroll data in our efforts to identify the median employee. The median employee’s annual total compensation for 2017 was calculated in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K for the Summary Compensation Table on page 45, consistent with the calculations we provide all of our Named Executive Officers. No adjustments were made to the annual total compensation of our Chief Executive Officer, as reported in the Summary Compensation Table, to calculate the reported ratio of the annual total compensation of our Chief Executive Officer to the median of the annual total compensation of all employees.
| 51 |
ELECTION OF DIRECTORS
Seacoast views talent as our primary competitive advantage. Our talent focus starts with our non-employee directors, the individuals appointed to act on behalf of shareholders by overseeing critical aspects of our business strategy, operations, risk management and governance efforts. Our belief is that superior talent in the board room will generate exceptional levels of customer service, financial performance and, ultimately, superior shareholder returns compared to alternative investments. To this end, the Board is committed to identifying the best available talent to make meaningful contributions to our business and fully execute its duties and responsibilities on behalf of shareholders. The profile of our Board continues to evolve in response to the needs of a dynamic and growing organization. Our Board of Directors plays a meaningful role in helping Seacoast develop, test and implement our business, risk management, talent and reward strategies. The Board’s activities are focused on representing our shareholders in ways that position Seacoast to create significant value for customers, employees and our shareholders within a risk appropriate framework.
As of the date of this proxy statement, Seacoast’s Board of Directors consists of fourteen members divided into three classes, serving staggered three year terms as provided in our Articles of Incorporation.
The Annual Meeting is being held to, among other things, elect five Class I directors of Seacoast, each of whom has been nominated by the CGC of the Board of Directors. All of the nominees are presently directors of Seacoast. All of the nominees also serve as members of the Board of Directors of Seacoast National Bank (the “Bank”). The members of the Boards of Directors of the Bank and the Company are the same except for Dale M. Hudson and T. Michael Crook, who are currently directors of the Bank only. If elected, each Class I director nominee will serve a three year term expiring at the 2021 Annual Meeting and until their successors have been elected and qualified.
Currently, the Board of Directors is classified as follows:
|
Class |
Term | Names of Directors |
| Class I | Term Expires at the 2018 Annual Meeting |
Jacqueline L. Bradley H. Gilbert Culbreth, Jr. Christopher E. Fogal Timothy S. Huval Herbert A. Lurie |
| Class II | Term Expires at the 2019 Annual Meeting |
Dennis J. Arczynski Maryann Goebel Roger O. Goldman |
| Class III | Term Expires at the 2020 Annual Meeting |
Stephen E. Bohner Alvaro J. Monserrat Julie H. Daum |
| 52 |
All shares represented by valid proxies, and not revoked before they are exercised, will be voted in the manner specified therein. If a valid proxy is submitted but no vote is specified, the proxy will be voted FOR the election of each of the five nominees for election as directors. Please note that banks and brokers that do not receive voting instructions from their clients are not able to vote their client’s shares in the election of directors. Although all nominees are expected to serve if elected, if any nominee is unable to serve, then the persons designated as proxies will vote for the remaining nominees and for such replacements, if any, as may be nominated by the CGC. Proxies cannot be voted for a greater number of persons than the number of nominees specified herein (five persons). Cumulative voting is not permitted.
The affirmative vote of the holders of shares of common stock representing a plurality of the votes cast at the Annual Meeting at which a quorum is present is required for the election of the directors listed below, which means that the director nominees who receive the highest voted “for” their election are elected. However, to provide shareholders with a meaningful role in uncontested director elections, which is the case for the election of the director nominees listed below, our Corporate Governance Guidelines provide that if any director nominee receives a greater number of votes “withheld” for his or her election than votes “for” such election, then the director will promptly tender his or her resignation to the Board following certification of the shareholder vote, with such resignation to be effective upon acceptance by the Board of Directors. The CGC would then review and make a recommendation to the Board of Directors as to whether the Board should accept the resignation, and the Board would ultimately decide whether to accept or reject the resignation. The Company will disclose its decision-making process regarding any resignation in a Form 8-K filed with the SEC. In contested elections, the required vote would be a plurality of votes cast and the resignation policy would not apply. Further details of this policy and the corresponding procedures are set forth in our Corporate Governance Guidelines, available on our website at www.SeacoastBanking.com.
The five nominees have been nominated by Seacoast's Compensation and Governance Committee, and the Board of Directors unanimously recommends a vote “FOR” the election of all five nominees listed below.
Nominees for Re-election at the Annual Meeting
|
Jacqueline L. Bradley Age: 60
Director Since: 2015 Bank Director Since: 2014
Committees: § Bank Trust (Chair) § Strategy & Innovation
|
Ms. Bradley served as a director of BankFIRST from 2005 until BANKshares was acquired by Seacoast in 2014. During her tenure at BankFIRST, she served on BankFIRST’s Special Assets Committee and Audit Committee and chairs the Bank’s Trust and Wealth Management Committee. Ms. Bradley serves on the Orange County Tourist Development Council and the board of directors of the Boys & Girls Club of Central Florida, serving as chairperson in 2002 and 2003. Additionally, Ms. Bradley is a board member of The Studio Museum in Harlem. She also served on the finance committee for the Central Florida Expressway Authority and the board of directors of the Greater Orlando Aviation Authority, Florida Arts Council, and Cornell Museum of Fine Arts.
Ms. Bradley has had a 20 year career in financial services, including seven years with SunTrust Bank in Central Florida, culminating in her last position as senior vice president leading its Private Client Group (1999-2002). Her previous experience also includes 8 years as vice president with Moody’s Investors Services and 3 years providing consulting services for McKinsey Management Consultants and Touché Ross. Ms. Bradley received her Bachelor of Arts degree in Economics and Political Science from Yale College, and her Master’s degree in Business Administration from Columbia University Graduate School of Business with a concentration in Finance and Marketing.
Key Qualifications & Experience:
§ diversity of management experience in the financial services industry; § knowledge of, and stature and philanthropic service to, the Central Florida market, which is valuable in understanding the customer segments in this market; and § ability to provide guidance regarding accounting and financial matters. |
| 53 |
|
H. Gilbert Culbreth, Jr. Age: 72
Director Since: 2008 Bank Director Since: 2006
Committees: § Compensation and Governance (Chair) § Bank’s Directors Credit Risk |
Mr. Culbreth has been chief executive officer and owner of Gilbert Chevrolet Company, Inc., a car dealership located in Okeechobee, Florida, for over 40 years. He also owns and manages Gilbert Ford car dealership in Okeechobee, Florida. Mr. Culbreth was previously a member of Big Lake Financial Corporation’s (“Big Lake”) board of directors for 10 years prior to the acquisition of Big Lake by Seacoast in 2006, and has served on the Bank’s board of directors since the acquisition. In addition, Mr. Culbreth is president of several other family businesses, including: Culbreth Realty, Inc. (a real estate brokerage company), Parrott Investments, Inc. (a holding company for two other businesses), Gilbert Cattle Co., LLC (a cattle operation), Grace Marine (a watercraft sales company), Gilbert Aviation Inc. (an aircraft sales and service company), Gilbert Oil Company, LLC and Gilbert Trucking, Inc. Mr. Culbreth is a former director of the Florida Council on Economic Education, the Okeechobee County Board of Realtors, the Okeechobee Economic Council, and the United Way of Okeechobee and is a member of the Masonic Lodge.
Key Qualifications & Experience:
§ diversity of business experience in the Okeechobee, Florida market, which is valuable in understanding the customer segments in this market; § entrepreneurial and management skills; and § stature and knowledge of the local community. |
|
Christopher E. Fogal Age: 66
Director Since: 1997 Bank Director Since: 1997
Committees: § Audit (Chair) § Bank Trust |
Mr. Fogal is a certified public accountant and a partner with the public accounting firm of Carr, Riggs & Ingram, LLC (“Carr Riggs”), a top 25 firm that is the second largest super-regional in the southeastern U.S. He was previously a principal with the public accounting firm of Proctor, Crook, Crowder & Fogal, P.A. (“Proctor Crook”), a BDO affiliate firm, located in Stuart, Florida, from 2009 to January 31, 2017 when the firm merged with Carr Riggs. Mr. Fogal was the managing partner of Fogal & Associates from 1979 until the firm merged with Proctor Crook in 2009. He also served on the board of directors of Port St. Lucie National Bank until it was acquired by Seacoast in 1996. Currently, Mr. Fogal is treasurer of the St. Lucie County Economic Development Council. He has also served as past chairman of the Treasure Coast Private Industry Council and past president of the St. Lucie County Chamber of Commerce, and is active in a number of professional organizations including the American Institute of Certified Public Accountants and the Florida Institute of Certified Public Accountants.
Key Qualifications & Experience:
§ accounting expertise as a Certified Public Accountant for over 40 years, including audits of public companies regulated by the SEC, which provides the Board of Directors with guidance related to internal controls and financial and accounting matters; § business, management and decision-making skills, including his experience as managing partner of an accounting firm for 30+ years; and § stature and knowledge of the local community. |
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Timothy S. Huval Age: 51
Director Since: 2016 Bank Director Since: 2016
Committees: § Bank’s Directors Credit Risk § Compensation and Governance § Strategy & Innovation |
Mr. Huval is the Chief Human Resources Officer of Humana Inc., a leading health and well-being company, where he is responsible for all aspects of human resources and business services. He also serves as a member of the management team steering a cultural transformation at Humana focused on integrating its core values enterprise-wide. Prior to joining Humana in January 2013, Mr. Huval served in multiple senior-level roles at Bank of America (BOA). Handpicked to solve critical business challenges at BOA, his roles included consumer service and operations executive, home loan servicing executive, chief operations officer and Delaware market president, human resources executive and chief information officer for Global Wealth & Investment Management. He also served as chair of BOA’s Consumer Banking, Business Banking and Enterprise Client Coverage Diversity & Inclusion Business Council. Mr. Huval has also been involved with various non-profit and community boards, including Family and Children’s Place, United Way, Peninsula Alliance for Economic Development, and Youth Homes. Mr. Huval earned a Master’s degree in public administration from Brigham Young University, a Bachelor’s degree in marketing from Weber State and an associate degree in business management from Salt Lake Community College. He was also awarded an honorary doctorate in Humane Letters from Salt Lake Community College.
Key Qualifications & Experience:
§ diverse background in human resources, information technology, consumer banking, operational management, and financial services industry, which provides a unique and holistic perspective; § experience in cultural transformation and integration of corporate values deep in the organization and business model, which is applicable to the Company’s rapidly changing business model; and § understanding of technology as a platform for creating efficiencies and optimizing resources. |
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Herbert A. Lurie Age: 57
Director Since: 2016 Bank Director Since: 2016
Committees: § Bank’s Directors Credit Risk § Strategy & Innovation |
Mr. Lurie was Senior Managing Director and Chairman of the Financial Institutions Group of Guggenheim Securities from 2011 to 2016, and is now a Senior Advisor at the firm. Previously, he led the Global Financial Institutions Group at Merrill Lynch, which he helped found, and was a member of Merrill Lynch's Global Investment Banking Management Committee. Mr. Lurie has advised on numerous financial institution transactions world-wide, including Bank One Corp.’s merger with First Chicago Corp., and NationsBank Corp.’s merger with BankAmerica Corp. to form Bank of America. He began his Wall Street career as an M&A and securities attorney at Simpson Thacher & Bartlett LLP. Mr. Lurie has also served on a number of philanthropic and corporate boards, including as Vice Chairman of the Board of the United States Equestrian Team, a Trustee of Princeton’s Eden Autism Institute, and The Seeing Eye. Mr. Lurie holds a JD from the University of California at Berkeley, an MA in Clinical Psychology from Columbia University, and a dual BS/BA in Finance and Economics from the University at Albany.
Key Qualifications & Experience:
§ expertise and seasoned insights in evaluating M&A and other financial and strategic opportunities, which is useful in promoting Seacoast’s growth strategy; § comprehensive knowledge of the financial services and commercial banking industries; § knowledge and perspective regarding the interests of various investor groups, which is valuable in considering the interests of all Seacoast shareholders; and § extensive experience and stature in the investment banking community. |
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Director Terms Extended Beyond the Annual Meeting
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Dennis J. Arczynski Age: 66
Director Since: 2013 Bank Director Since: 2007
Committees: § Risk (Chair) § Audit § Strategy & Innovation |
Mr. Arczynski has been a risk management, corporate governance, regulatory affairs and banking consultant since 2007. He previously served for 33 years in various managerial and examiner positions in the U.S. Office of the Comptroller of the Currency’s (the “OCC”) headquarters in Washington, D.C. and in several other OCC districts until 2007. As a National Bank Examiner with the OCC, Mr. Arczynski was responsible for the supervision and examination of the largest and most complex mid-size banks, community banks and trust companies; provided guidance to banks in all facets of commercial banking and fiduciary operations including international activities; performed risk assessment and conducted BSA/AML reviews and examinations of internationally active banks; and developed formal enforcement actions and corrective action plans for struggling and deficient institutions. Mr. Arczynski’s other positions of responsibility with the OCC were Assistant Director for Trust Operations, Special Assistant to the Senior Deputy Comptroller (FFIEC Liaison), Associate Director for Financial Management (Financial Systems and Review) and Field Office Manager (Miami Field Office). His duties included the formation of national policies and programs, development of OCC supervisory initiatives, establishment of interagency relations, drafting regulations and writing OCC examiner handbooks. Mr. Arczynski received his Bachelor’s degree from University of Maryland in Finance and his Master’s degree from Johns Hopkins University.
Key Qualifications & Experience:
§ knowledge of effective management practices of the largest and most complex mid-size banks; § expertise in all facets of commercial banking and fiduciary operations, including risk assessment and BSA/AML; and § risk management, corporate governance, and regulatory background specific to the financial services industry, and alternative perspective in the areas of government relations and regulatory matters that impact the Company. |
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Stephen E. Bohner Age: 65
Director Since: 2003 Bank Director Since: 2003
Committees: § Bank’s Directors Credit Risk (Chair) § Risk Management |
Mr. Bohner has been president and owner of Premier Realty Group, a real estate company located in Sewall’s Point, Florida, specializing in the sale of luxury homes, since 1987. In addition to his 39 years of experience in real estate, Mr. Bohner is actively involved in several professional and community organizations, having served as president of the Greater Martin County Association of Realtors and The Pine School. He was awarded the Realtor Association’s Distinguished Service Award in 2001, and has served on numerous professional standards’ panels in arbitration hearings and chaired the Realtors Association’s grievance committee. Mr. Bohner is a graduate of Vanderbilt University with dual degrees in Business and Economics.
Key Qualifications & Experience:
§ business leadership and expertise in real estate provides the Board of Directors with valuable insight related to local real estate markets in which the Bank’s customers are located and helps the Board make critical judgments regarding the Bank’s lending activities since such judgments rely upon the proper valuation of real estate; § business leadership and entrepreneurial and management skills developed over the past 39 years; and § stature in the local community garnered from his years of professional and community involvement. |
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Julie H. Daum Age: 63
Director Since: 2013 Bank Director Since: 2013
Committees: § Compensation and Governance § Bank Trust |
Ms. Daum has been a senior director of Spencer Stuart, a privately-held global executive search firm since 1993. As co-head of the North American Board and CEO Practice at Spencer Stuart, she has helped place over 1,000 directors on corporate boards, including the boards of Coach, Delta Air Lines, American Express, CVS Caremark, General Motors and Amazon. Prior to her work at Spencer Stuart, Ms. Daum was the executive director of the corporate board resource at Catalyst, where she managed all board of directors’ activities and worked with companies to identify qualified women for their boards. A widely renowned expert on corporate governance topics, Ms. Daum was recognized by the National Association of Corporate Directors (“NACD”) as one of the top 100 most influential leaders in corporate governance in 2013. Ms. Daum also advises corporate boards on succession planning for themselves and their CEOs, as well as best practices and governance issues. Each year, Ms. Daum develops the Spencer Stuart Board Index, a publication detailing trends at national boardrooms. She also co-founded and developed a program for board members entitled “Fresh Insights and Best Practices for Directors” at the Wharton School of the University of Pennsylvania, where she earned her MBA.
Key Qualifications & Experience:
§ expertise in recruiting, human resources and corporate governance, which provides valuable insights to help the Board make key decisions on director talent and governance matters; § associations in the Florida market and her understanding of public, private and not-for-profit boards, which is useful for the Board’s consideration of alternative practices; § stature in the corporate governance community garnered from her years of professional involvement; and § ability to serve as a mentor and catalyst to bring more women into senior leadership positions with the Company. |
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Maryann Goebel Age: 67
Director Since: 2014 Bank Director Since: 2014
Committees: § Audit § Compensation and Governance § Risk |
Ms. Goebel has been an independent IT management consultant since 2012. She was executive vice president and chief information officer of Fiserv, Inc. (NASDAQ: FISV) from 2009 to 2012. In this role, she was responsible for all internal Fiserv IT systems (infrastructure and applications), as well as IT infrastructure, operations, engineering and middleware services. In her 40+ year career, Ms. Goebel has shaped the strategic direction of information technology for major corporations around the world, serving in the critical role of chief information officer for: DHL Express from 2006 to 2009; General Motors North America from 2003 to 2006; Frito-Lay from 2001 to 2002; General Motors Europe from 1999 to 2001; General Motors Truck Group from 1997 to 1999; and Bell Atlantic NYNEX Mobile (now Verizon Mobile) from 1995 to 1997. She has also held senior IT leadership positions at Texas Instruments, Inc., Aérospatiale Helicopter Corporation, and the Southland Corporation, among others. Ms. Goebel received the “100 Leading Women in the North American Auto Industry” award in 2005. She also received an award for outstanding professional achievement from her alma mater, Worcester Polytechnic Institute, where she earned a Bachelor of Science degree in mathematics and currently serves on their Arts and Sciences Advisory Board. In 2017, Ms. Goebel was awarded the CERT Certificate in cybersecurity oversight by the NACD.
Key Qualifications & Experience:
§ knowledge of complex information technology environments and focus on innovation and aligning IT objectives with corporate priorities; § expertise in strategizing and implementing best-practice processes, tools and structure that are essential to supporting a superior customer experience; and § leadership and ability to help transform the company digitally to deliver state-of-the-art customer services. |
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Roger O. Goldman Lead Director Age: 73
Director Since: 2012 Bank Director Since: 2012
Committees: § ex-officio for all committees |
Mr. Goldman was appointed Chairman of American Express Bank FSB, a federally chartered savings bank located in Salt Lake City, Utah (“AEBFSB”) in September 2016. As of April 1, 2018, American Express Bank, FSB, for which Mr. Goldman serves as Chairman, merged with and into American Express National Bank (“AENB”). Mr. Goldman will serve as a director and member of the Executive, Audit, and Compliance and Risk Committees of AENB. Prior to this, he was Lead Independent Director since January 2015 and chairman of AEBFSB’s Audit and Risk Committee since September 2005. Mr. Goldman has been a director of AEBFSB since 2005.
In addition, Mr. Goldman is President and managing partner of Berkshire Opportunity Fund, which he founded in 2008 to provide financing and mentoring for small businesses in the Northeast. From 2009 to 2010, Mr. Goldman served as temporary volunteer CEO for 1Berkshire to create a powerful economic development engine for the Berkshires by integrating the work of four primary economic development agencies and raising larger and more sustainable funding. From 1997 to 2000, Mr. Goldman was president and chief executive officer of Global Sourcing Services, LLC, a start-up venture specializing in outsourced marketing services and account acquisition and customer retention programs, which he grew to a substantial size before it was sold.
Mr. Goldman’s extensive banking experience also includes management positions at Citicorp from 1969 to 1983; service as president and chief executive officer of Redwood Bank, a community bank in San Francisco, California, from 1983 to 1986; executive vice president and senior operating officer of Coreast Savings Bank from 1989 to 1991; and executive vice president in charge of the community banking group of NatWest Bancorp (with $31 billion in assets) from 1991 to 1996 where he was responsible for managing all consumer and small business activities. In addition, he previously served on the boards of several public and private corporations, including Minyanville (a new media company), Cyota (an Internet security company), and American Express Centurion Bank, where he also served as a member of the audit committee. He is Chairman Emeritus of the Lighthouse International, a charitable foundation for the visually impaired which is headquartered in New York, and is the former Chairman of the Juvenile Diabetes Research Foundation. Mr. Goldman received his Bachelor’s degree from New York University in Marketing and his Juris Doctorate from the Washington College of Law at American University. He is an emeritus member of the New Jersey bar and former member of the Washington D.C. bar.
Key Qualifications & Experience:
§ diversity of leadership experience in the financial services industry, particularly with respect to his retail banking and consumer and small business lending background; § marketing and risk management expertise; § legal background and knowledge of corporate governance matters; § considerable insights and perspectives garnered from years of service on public, private and not-for-profit boards; and § improved performance and effectiveness of the Board under his leadership as Lead Independent Director. |
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Dennis S. Hudson, III Chairman & CEO Age: 62
Director Since: 1984 Bank Director Since: 1984
Committees: § Bank’s Director Credit Risk § Strategy & Innovation |
Mr. Hudson was named Chairman of Seacoast in July 2005, and has served as Chief Executive Officer of the Company since June 1998. Mr. Hudson has also served as Chairman and Chief Executive Officer of the Bank since 1992. He was President of Seacoast from June 1998 to July 2005, after serving in various positions with the Company and the Bank since 1978.
Mr. Hudson also serves on the board of directors, the audit committee and the compensation committee of Chesapeake Utilities Corporation (ticker: CPK), a public gas and electric utilities company headquartered in Dover, Delaware. In November 2015, Mr. Hudson was appointed as an independent director to PENN Capital Funds, a mutual fund group managed by PENN Capital Management. Mr. Hudson also serves on the board of Martin Health System and the Community Foundation for Palm Beach and Martin counties. From 2005 through 2010, he also served as a member of the board of directors of the Miami Branch of the Federal Reserve Bank of Atlanta.
Mr. Hudson is actively involved in the community, having served on the boards of the Martin County YMCA Foundation, Council on Aging, The Pine School, the Job Training Center, American Heart Association, Martin County United Way, the Historical Society of Martin County and as chairman of the board of the Economic Council of Martin County. He has been recognized for his achievements with several awards including the Florida Senate Medallion of Excellence Award presented by Florida Senator Ken Pruitt in 2001. Mr. Hudson is a graduate of Florida State University with a Bachelor’s degree in Finance, and a Master’s degree in Business Administration.
Key Qualifications & Experience:
§ significant experience in the financial services industry and the organization, including his service as Chairman and Chief Executive Officer of the Company, which provides a unique understanding of our operations; § knowledge and relationships with the institutional investor community, including the Company’s past and present institutional investors legal background and knowledge of corporate governance matters; § service on other public company boards, which provides insight regarding general public company operations, policies, internal controls and corporate governance, which is useful and applicable to Seacoast; and § stature in the local community, including through service on the boards of the non-profit organizations discussed above. |
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Dennis S. Hudson, Jr. Age: 90
Director Since: 1983 Bank Director Since: 1983
Committees: § Bank’s Directors Credit Risk § Risk Management |
Mr. Hudson retired in June 1998 after a 48-year career with the Company and Bank. He served as Chairman of the Board of Seacoast from 1990 to June 1998. Prior thereto, he served as Chief Executive Officer of Seacoast from 1983 until 1992, President of Seacoast from 1983 until 1990 and Chairman of the Bank from 1969 until 1992. Mr. Hudson also served on the board of the Miami Branch of the Federal Reserve Bank of Atlanta from 1983 to 1985. Active in the community and with charitable organizations, he has served as chairman of the American Red Cross of Martin County, president of the Stuart Rotary, and as a director of Hospice of Martin County.
Key Qualifications & Experience:
§ significant experience in the financial services industry and the organization, including his prior service as Chief Executive Officer of the Company, which provides a unique understanding of our operations; § tenure as director that spans a full range of banking and economic cycles affecting the Company; and § stature in the local community including numerous leadership positions with community organizations. |
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Alvaro J. Monserrat Age: 49
Director Since: 2017 Bank Director Since: 2017
Committees: § Audit § Strategy & Innovation |
Mr. Monserrat has been the Executive Vice President and General Manager at Nuance Imaging, a subsidiary of Nuance Communications, Inc. (ticker: NUAN), a multinational computer software technology corporation since January 2018. Prior to Nuance, he was the former CEO of RES Software (acquired by Invanti in 2017), a leading digital workspace technology company from 2015 to 2017, and also served as Citrix Systems’ Senior Vice President of worldwide sales & service from 2008 to 2015. Mr. Monserrat’s career spans more than 25 years in large companies and entrepreneurial ventures within enterprise software, mobility, cloud, networking and business strategy. At Citrix, Monserrat was part of the executive leadership team that grew the company from hundreds of millions to more than $3 billion in revenue by 2014, and was instrumental in crafting the strategy that helped Citrix grow from a single-product company to a multi-product industry leader. Prior to joining Citrix, Mr. Monserrat was a principal in Innovex Group (acquired by Citrix) and received numerous awards including Microsoft’s Best E-Commerce Solution and Best Small Business Solution Awards. In addition, Mr. Monserrat has served on the board of advisors for Virsto and Whiptail, the national partner board of the Leukemia and Lymphoma Society and the board of the Children’s Harbor Society. Mr. Monserrat holds a Masters of Business Administration degree from the University of Texas at Austin and a Bachelor of Science degree in Computer Science from the University of Miami.
Key Qualifications & Experience:
§ entrepreneurial vision, innovation and resourcefulness in taking an initiative from concept to a successful money-making enterprise, which is applicable to our changing business model; § abilities as a leader in transforming and infusing existing business models with multi-directional and diversified routes to market, and delivering rapid growth, which provides insights for our effective management of Seacoast’s growth and transformation; § experience and acumen in building, restructuring and motivating teams to produce high-performance units; and § global view of markets and competitors combined with his knowledge of technology and go-to-market execution, which provides constructive oversight in these areas. |
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Thomas E Rossin Age: 84
Director Since: 2003 Bank Director Since: 2003
Committees: § Risk Management § Strategy & Innovation (Chair) |
Mr. Rossin is a retired attorney in West Palm Beach, Florida, previously serving as management chairman with the firm of St. John, Rossin & Burr, PLLC from 1993 to 2016. He served as a Florida State Senator from 1994 to 2002, the last two years as minority leader, and was a candidate for Florida Lt. Governor in 2002. Mr. Rossin founded Flagler National Bank in 1974, serving as president, chief executive officer and director and growing it to the largest independent bank in Palm Beach County with over $1 billion in assets. Forming The Flagler Bank Corporation, the holding company for Flagler National Bank, in 1983 and serving as president, chief executive officer and director, he took it public in 1984 and facilitated the acquisition of three financial institutions, until both Flagler National Bank and the holding company were sold in 1993 to SunTrust Bank. Prior thereto, Mr. Rossin was vice chairman and director of First Bancshares of Florida, Inc. after consolidating four banks under one charter, including First National Bank in Riviera Beach at which he served as president and chief executive officer. He has served as past president of the Community Bankers Association of Florida and Palm Beach County Bankers Association, and is currently a member of the Florida Bar Association. In March 2014, Mr. Rossin received the Exemplary Elected Official Award from the Forum Club of the Palm Beaches.
Key Qualifications & Experience:
§ legal background and, in particular, his knowledge of legal issues related to financial institutions and underlying corporate governance matters; § public service which, combined with his legal background, provides the Board of Directors with knowledge in the areas of government relations and regulatory matters that impact the Company; and § significant experience in the financial services industry. |
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Decisions regarding our non-employee director compensation program are approved by our full board of directors based on recommendations from the CGC. In making its recommendations, the CGC considers the director compensation practices of peer companies and whether such recommendations align with the interests of our shareholders with respect to total compensation and each element thereof. Our compensation program for non-employee directors is designed to:
| · | appropriately compensate directors for the work required at a company of Seacoast’s size, growth, and dynamic and evolving business model; |
| · | align directors’ interests with the long-term interests of Seacoast’s shareholders; and |
| · | make meaningful adjustments every few years, rather than small annual adjustments. |
Non-Employee Director Compensation Structure
| Annual Retainer paid to All Non-employee Directors of the Company or the Bank: | ||||
| Cash (1) | $ | 37,500 | ||
| Stock Award (2) | $ | 37,500 | ||
| Annual Committee Chair Retainer for CGC and Bank Committees | $ | 10,000 | ||
| Annual Committee Chair Retainer for Audit & ERMC Committees | $ | 15,000 | ||
| Annual Committee Chair Retainer for S&I Committee | $ | 25,000 | ||
| (1) | A number of directors have elected to receive all or a portion of their cash retainer in stock or stock options as described below. |
| (2) | Granted under the 2013 Incentive Plan following election or reelection at each annual meeting of shareholders. |
All cash retainers are paid in quarterly installments. To further align directors’ interests with long-term shareholder interests, directors may elect to receive: 1) all or a portion of their annual cash retainer in Company common stock, and 2) up to a maximum of 30% of their annual cash retainer in the form of non-qualified options to purchase shares of Company common stock. Retainers are pro-rated for directors who join or leave the Board or have a change in Board role during a quarterly period.
Non-employee directors are also reimbursed for their travel, lodging and related expenses incurred in connection with attending Board, committee and shareholders meetings and other designated Company events. Executive officers who are also directors do not receive any compensation for services provided as a director.
There were no changes to director compensation for fiscal year 2017 compared to 2016. However, beginning in 2018, the annual stock award payment will increase by $25,000 and all Annual Committee Chair Retainers will equal $25,000.
Lead Independent Director Compensation & Agreement
The Board appointed Roger Goldman as Lead Independent Director in November 2012. Mr. Goldman’s compensation reflects the additional time commitment for this role compared to other non-employee directors, the enhanced credibility with the investment community his affiliation with Seacoast provides the Company, and the improved performance and effectiveness of the Board under his leadership. His significant role is more fully described under the section entitled “Board Leadership Structure”.
On March 1, 2014, the Company entered into a three-year agreement with Lead Independent Director Goldman which automatically renews for successive three-year terms on the first day of each month following the effective date. Under the agreement, Lead Independent Director Goldman receives an additional annual retainer of $275,000 for his service as Lead Independent Director, paid in a combination of cash, restricted stock and other stock-based awards as mutually agreed by the Company and the Lead Independent Director. Upon signing of the agreement, he also received a stock option to purchase 200,000 shares of Seacoast common stock at an exercise price equal to the fair market value of the stock on the grant date ($10.78). The stock option vested on a pro rata monthly basis beginning on March 1, 2014 and became fully vested and exercisable on February 28, 2017. In addition, under the agreement, Lead Independent Director Goldman receives a $20,000 annual housing allowance, is provided with office space in a Company-owned facility, and is reimbursed for company-related travel expenses, reasonable customer or staff entertainment expenses and extraordinary use of his office staff.
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Director Stock Ownership Policy
To align the interests of our directors and shareholders, our Board of Directors believes that directors should hold a significant financial stake in Seacoast. Consequently, our Corporate Governance Guidelines require that directors own Seacoast stock equal in value to a minimum of three times their base annual retainer within four years of joining the Board. Each director must retain 75% of their shares until reaching the minimum share ownership requirement, and after the ownership target is met, must retain at least 50% of the shares for one year. All of our directors own more than the minimum stock requirement, except for two of our newest directors who have been on the Board for three years or less, and are on track to be compliant with our policy within the prescribed time frame.
The table below sets forth the total compensation paid to Board members who are not employees of the Company or the Bank for fiscal year 2017.
2017 DIRECTOR COMPENSATION TABLE
Director | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | All Other ($) | Total ($) | |||||||||||||||
| Dennis J. Arczynski | 52,500 | (3)(4) | 37,507 | — | — | 90,007 | ||||||||||||||
| Stephen E. Bohner | 47,500 | (3)(5) | 37,507 | — | — | 85,007 | ||||||||||||||
| Jacqueline L. Bradley | 47,500 | (3)(6) | 37,507 | — | — | 85,007 | ||||||||||||||
| H. Gilbert Culbreth, Jr. | 47,500 | (8) | 37,507 | — | — | 85,007 | ||||||||||||||
| Julie H. Daum | 37,500 | (3)(7) | 37,507 | — | — | 75,007 | ||||||||||||||
| Christopher E. Fogal | 52,500 | (3)(9) | 37,507 | — | — | 90,007 | ||||||||||||||
| Maryann Goebel | 37,500 | (3) | 37,507 | — | — | 75,007 | ||||||||||||||
| Roger O. Goldman | 312,500 | (3)(7)(10) | 37,507 | — | 20,000 | (11) | 370,007 | |||||||||||||
| Dennis S. Hudson, Jr. | 37,500 | 37,507 | — | — | 75,007 | |||||||||||||||
| Timothy S. Huval | 37,500 | (7) | 37,507 | — | — | 75,007 | ||||||||||||||
| Alvaro J. Monserrat | 37,500 | (3)(7) | 37,507 | — | — | 75,007 | ||||||||||||||
| Herbert Lurie | 37,500 | (3)(7) | 37,507 | — | — | 75,007 | ||||||||||||||
| Thomas E. Rossin | 62,500 | (12) | 37,507 | — | — | 100,007 | ||||||||||||||
| (1) | Certain directors elected to take a portion of their cash compensation in the form of non-qualified options to purchase shares of Company common stock. A breakdown of the option awards made to each director in 2017 is provided below in the table entitled “Stock Awards Granted to Directors in 2017”. |
| (2) | A breakdown of the stock awards made to each director in 2017 is provided below in the table entitled “Stock Awards Granted to Directors in 2017”. No stock awards held by directors were outstanding as of December 31, 2017. |
| (3) | Certain directors elected to take a portion of their 2017 cash compensation in the form of stock option awards. As of December 31, 2017, all of the stock option awards described below in the table entitled “Stock Awards Granted to Directors in 2017” were outstanding, as well as 170,000 shares of the stock option held by Mr. Goldman described under “Lead Independent Director Agreement” above. |
| (4) | Includes $15,000 for his service as Chair of the ERMC. |
| (5) | Includes $10,000 for his service as Chair of the Bank’s Credit Review Committee. |
| (6) | Includes $10,000 for her service as Chair of the Bank’s Wealth Committee. |
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| (7) | The table below shows the cash amounts that the directors deferred into the Directors’ Deferred Compensation Plan (“DDCP”) described below in 2017 and the total number of shares held in the DDCP Seacoast Stock Account and Equity Deferral Account for each director as of the Record Date: |
| (8) | Includes $10,000 for his service as Chair of the CGC. |
| (9) | Includes $15,000 for his service as Chair of the Audit Committee. |
| (10) | Includes $275,000 for his service as Lead Independent Director. |
| (11) | Housing allowance. |
| (12) | Includes $25,000 for his service as Chair of the Strategy and Innovation Committee. |
| Director | Cash Deferred into DDCP Stock Account in 2017 ($) | Shares held in DDCP Stock Account as of Record Date (#) | Shares held in DDCP Equity Deferral Account (#) | Total Shares (#) | ||||||||||||
| Dennis J. Arczynski | — | 16,178 | 9,811 | 25,989 | ||||||||||||
| Stephen E. Bohner | — | 11,483 | 9,811 | 21,294 | ||||||||||||