DEF 14A of RBB Bancorp
Filed Apr 8, 2024 · FY20230001437749-24-011379
PROPOSAL 1: ELECTION OF DIRECTORS
PROPOSAL 1: ELECTION OF DIRECTORS
Nominees for Election as Directors
Nominees for Election as Directors Our Board currently is comprised of ten (10) directors. The persons named in the table below have been nominated by our Board for election as directors to serve until the 2025 annual meeting of shareholders and until their successors are elected or have been duly qualified. Each nominee has indicated that he or she is willing and able to serve as a director. If any nominee should become unable or unwilling to serve as a director, the proxies will be voted for such substitute nominee as shall be designated by the Board of Directors. Except for Dr. James W. Kao and Ms. Christina Kao, there are no family relationships between the directors and executive officers. Except for Geraldine Pannu, director for Processa Pharmaceuticals (NASDAQ: PCSA), there are no other directors or executive officers of the Company who serve as directors of any company that has a class of securities registered under the Securities Act of 1933, as amended (the “Securities Act”), or which is subject to the periodic reporting requirements of, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any investment company registered under the Investment Company Act of 1940.
Board of Directors
Board of Directors The following table sets forth certain information about our current directors, including their names, ages, year in which they began serving as a director of the Company or the Bank prior to the Company’s formation in 2011.
Board of Directors
| Name | Age | Current Committees | Director Since | | Dr. James W. Kao | 78 | Chairman of the Board; Directors Loan | 2015 | | William Bennett (2) | 61 | Asset/Liability; Community Reinvestment Act; Directors Loan; Information Technology and Security | 2023 | | Robert M. Franko (1) | 76 | Asset/Liability Chair; Compensation; Nominating and Corporate Governance; Directors Loan | 2023 | | Christina Kao | 38 | Compensation Chair; Nominating and Corporate Governance Chair; Audit; Information Technology and Security | 2019 | | Joyce Wong Lee | 69 | Community Reinvestment Act Chair; Audit; Directors Loan; Information Technology and Security | 2022 | | Chuang-I (Christopher) Lin | 82 | Directors Loan Chair; Community Reinvestment Act; Compensation; Nominating Corporate Governance | 2010 | | David R. Morris | 63 | Directors Loan; Asset/Liability; Information Technology and Security; Community Reinvestment Act | 2022 | | Geraldine Pannu | 54 | Audit; Compensation; Nominating and Corporate Governance; Directors Loan | 2022 | | Scott Polakoff (1) | 63 | Audit Chair; Asset/Liability; Compensation; Nominating; Corporate Governance | 2023 | | Frank Wong (2) | 54 | Information Technology and Security Chair; Asset/Liability; Audit; Community Reinvestment Act | 2023 |
Board of Directors
| (1) Mr. Franko and Mr. Polakoff were appointed directors in April 2023. | | (2) Mr. Bennett and Mr. Wong were appointed directors in June 2023. |
Board of Directors
Pursuant to our Articles of Incorporation (“Articles”) and Bylaws, our Board of Directors is authorized to have not less than eight (8) members nor more than fifteen (15) members, and is currently comprised of ten (10) members. Each of our directors serves for a one year term. The number of directors may be changed only by resolution of our Board within the range set forth in our Articles. As discussed in greater detail below, our Board of Directors has affirmatively determined that, with the exception of David R. Morris, our Chief Executive Officer ("CEO"), our other nine (9) current directors qualify as independent directors based upon the rules of the Nasdaq Stock Market and the SEC. There are no arrangements or understandings between any of the directors and any other person pursuant to which he or she was selected as a director. Other than as described herein, no current director has any family relationship, as defined in Item 401 of Regulation S-K, promulgated pursuant to the Securities Act with any other director or with any of our executive officers. The business experience of each of the current directors is set forth below. Dr. James W. Kao. Dr. Kao has served as Chairman of the Board since May 2021 and as a member since 2015. Dr. Kao had a long and distinguished career at Philip Morris, USA in the research and development department. Since his early retirement in 1998, Dr. Kao has been a successful investor in many companies. His experience includes Board Chairman and Board Member of various non-profit organizations. Dr. Kao holds a B.A. from National Taiwan University, an M.B.A. from Virginia Commonwealth University and his Ph.D. from Miami University. Our Board considered Dr. Kao’s various corporate positions, experiences as an investor and his educational background in determining that he should be a member of our Board. William Bennett. Mr. Bennett served over 26 years with the 12th District of the Federal Reserve Bank of San Francisco at its Portland and Seattle Branches, as Senior Regional Account Officer in its Financial Services Division from 1996 to 2022. He was responsible for long-term consultative correspondent banking relationships with financial institutions, vendors, service bureaus, and payment associations throughout the Pacific Northwest and Mountain states, providing retail banking payment product solutions, risk and cash management services, and merger/acquisition/regulation/de novo guidance. Previously Mr. Bennett was with Figgie International Inc., Cleveland, Ohio and held various industrial engineering project management assignments for its corporate divisions of Rawlings Sporting Goods, Scott Aviation, American LaFrance, Kline Foundries, and Greer Hydraulics. Mr. Bennett holds a B.S. in Business Administration in Economics and Finance from Miami University, an M.B.A concentration in Accounting from the University of Oregon and held the Certified Cash Manager (CCM) and Accredited ACH Professional (AAP) designations from the Association for Financial Professionals and NACHA. Our Board considered Mr. Bennett’s experience as a financial product manager and his management of diverse banking portfolios in determining that he should be a member of our Board. Robert M. Franko. Mr. Franko has more than 35 years of commercial banking experience, most recently serving eight years as the President & CEO of First Choice Bancorp (NASDAQ: FCBP), which was sold to Enterprise Financial Services Corp (NASDAQ: EFSC) in July 2021. During his tenure as CEO of First Choice Bancorp, the company achieved a consistent track record of growth and exceptional earnings, combined with high returns on assets and tangible equity. Mr. Franko led the effort to take the company public and to have it included in the Russell 2000® Index. Earlier in his career, he headed the $10 billion trust department for City National Bank and prior to that, he was the Chief Financial Officer of Imperial Bancorp (IMP-NYSE) before it was sold to Comerica (CMA-NYSE). Prior to joining First Choice, Mr. Franko was the founder and CEO of four different banks, including one commercial bank, one international bank, one trust bank and one industrial loan company. Mr. Franko has a long history with M&A transactions, both on the buy-side and the sell-side. He also has experience as the CFO of Canary Wharf Development Co., one of the largest real estate developments in the world. Mr. Franko has been a long-time director of the largest bankers’ bank in the US, TIB, N.A. and its holding company TIB, Inc. At TIB, he served as the Chairman of the Board from 2019 to 2021. He holds a B.S. degree from the University of Notre Dame and an MBA from the Thunderbird School of International Management at Arizona State University. Our Board considered Mr. Franko’s 35 years of commercial banking experience in determining that he should be a member of our Board. Christina Kao. Ms. Kao has been a local business owner in Las Vegas, Nevada since 2017. From 2009 to 2017, Ms. Kao worked in purchasing, marketing, and new business development for leading chemical and material science corporations, such as Solvay, Dow Chemical, and DuPont. Prior to 2009, she was a consultant and CFO for a non-profit engineering consulting firm. Having also consulted for a biotech start-up specializing in diagnostics and a food start-up, her extensive marketing portfolio includes strategies to support products at the beginning of their life cycle to the end, with sales channels to both businesses (B2B) and consumers (B2C), in addition to grass roots marketing and search engine optimization ("SEO"). Ms. Kao holds a B.S. in Chemical Engineering from Virginia Commonwealth University and an M.B.A. from Harvard Business School. She is passionate about mentoring youth and is trained in Cuisine at Le Cordon Bleu in Paris, France. Our Board considered Ms. Kao’s diverse industry experience in marketing and her leadership as a small business owner in determining that she should be a member of our Board. Joyce Wong Lee, ERPA. Ms. Lee is founder and president of California Benefit Planners ("CBP"), a retirement plan consulting and design firm based in Pasadena, CA and providing services nationally to all range of business entities to sponsor qualified retirement plans under ERISA law since 1994. Mrs. Lee holds a B.S. and M.Ed. from Texas A&M University at Kingsville, Texas. Mrs. Lee is passionate about providing consultation services to her clientele for planning towards retirement through pension programs. As an Enrolled Retirement Plan Agent ("ERPA"), Mrs. Lee has successfully practiced and represented her clientele’s pension programs before the Internal Revenue Service ("IRS"). Our Board considered Ms. Wong's knowledge of investment products, particularly for financial planning and retirement, and her strong ties to the Asian-American small business community in determining that she should be a member of our Board. Christopher Lin, Ph.D. Dr. Lin has served as a Board member since 2010. Dr. Lin is the President and Chairman of three separate specialty real estate firms: Forte Resources, Inc., which specializes in senior and affordable housing management and development, Sonnycal Development Company, which specializes in real estate development in market-rate residential houses and industrial warehouses, and Linkage Financial Group Inc., which specializes in real estate development in China. Dr. Lin previously served as a director of General Bank from 1981 to 2003. Dr. Lin holds a B.S. from Cheng Kung University, a M.S. from National Tsing Hua University and a Ph.D. from Duquesne University. Our Board considered Dr. Lin’s real estate background, specifically in affordable housing, and his prior experience as a bank director in determining that he should be a Board member.
Board of Directors
David R. Morris. Mr. Morris currently serves as the CEO of the Company and the Bank. From March 2023 through June 2023, he served as President and CEO of the Company and the Bank. From February 2022 to February 2023 he served as President, CEO and Chief Financial Officer of the Company and the Bank. Mr. Morris served as Executive Vice President and Chief Financial Officer of the Bank from February 2010 and of the Company from 2011 until March 2023. He was a consultant with the Company from November 2009 through January 2010. Prior to joining the Company, Mr. Morris was the President and CEO of MetroPacific Bank from August 2007 to June 2009, and its Executive Vice President and Chief Financial Officer/Chief Operations Officer from October 2006 to July 2007. He was the Executive Vice President and Chief Financial Officer/Chief Operations Officer of San Diego Community Bank from June 2003 to September 2006, the Vice President and Controller of Community National Bank from 1999 to 2003, the Vice President and Manager of participant accounting at City National Bank (formerly North American Trust Company) in 1999, its Executive Vice President, Chief Financial Officer, Risk Management Officer and Director from 1997 to 1998, and its Executive Vice President, Chief Operations Officer and Chief Financial Officer from 1991 to 1996. Mr. Morris started his career with First Interstate Bank, Ltd. in 1986 followed with being controller for Banker’s Trust Company of California, a subsidiary of Banker’s Trust Company. Mr. Morris holds a B.S. from University of Maryland and an M.B.A. from University of Southern California. Mr. Morris is on the Economic Development Commission for the City of Oceanside, and sits on a variety of non-profit boards. Our Board considered Mr. Morris' experience as an executive officer at the Bank and his over 35 years of experience in banking in determining that Mr. Morris should be a member of our Board. Geraldine Pannu. Ms. Pannu has over 25 years’ experience in investment and financial management, fund operations, consulting and marketing. She is the Managing Partner of GLTJ Pioneer Capital, a real estate firm specializing in development and fixed income investments. Ms. Pannu is an Independent Board of Director for Processa Pharmaceuticals (NASDAQ: PCSA). She also mentors several startup companies and assists them as Interim CFO. Previously, she was the managing Director of Golden Gate Global, one of the largest EB5 regional centers in Northern California. She was the Chief Operations Officer and Managing Partner for ChinaRock Capital Management, a leading hedge and venture capital fund company in San Francisco for nearly 10 years. She worked for McKinsey & Co, Monitor Company as a management consultant before and after business school. She had successfully raised capital for several hedge, venture capital and real estate funds. Ms. Pannu was born in Shanghai and grew up in Hong Kong. She received her Bachelor of Business Administration from Chinese University of Hong Kong and M.B.A. from Harvard Business School. She is fluent in English, Mandarin, Cantonese and Shanghainese. Our Board considered Ms. Pannu's investment and financial expertise as well as her involvement in the Asian-American business community in determining that she should be a member of our Board. Scott Polakoff. Mr. Polakoff has served more than 25 years as a federal banking regulator, including eight years as the Chicago Regional Director of the Federal Deposit Insurance Corporation ("FDIC") and three years as the Chief Operating Officer of the Office of Thrift Supervision. Upon retiring from government service in 2009, he joined Booz Allen Hamilton as a Principal in its regulatory practice. In 2011 he joined FinPro, Inc., to lead its consulting regulatory team. He retired from FinPro on December 31, 2023, and joined its Board of Directors in February 2024. Mr. Polakoff earned his B.S. (accounting) from West Chester University, is a 1992 graduate of the Southwestern Graduate School of Banking at Southern Methodist University, a 1998 graduate of the Federal Executive Institute’s “Leadership for a Democratic Society” and a 2002 graduate of the Management Certification Program at Loyola University, Chicago, IL. He obtained his Series 24, 79, and 63 FINRA licenses in 2012. He achieved his CAMS certificate in 2018. Mr. Polakoff also teaches at the Colorado Graduate School of Banking. Our Board considered Mr. Polakoff’s 25 years of experience as a federal banking regulator and financial business experience in determining that he should be a member of our Board. Frank Wong. Mr. Wong brings more than 25 years of experience in banking and financial services. Over his career, he has been responsible for leading and directing asset liability and interest rate risk, growth strategies, cost reduction and process improvement initiatives, technology implementations, capital management, and external regulatory reporting to the FDIC and Securities and Exchange Commission for institutions ranging in size from $150 million to $10 billion in assets. Mr. Wong served as Controller at Mission Valley Bank (2010 – 2020); Director of Financial Reporting at Douglas Emmett (2008 – 2010); VP Controller at Kaiser Federal Bank (2005 – 2008); and Financial Reporting Officer at First Federal Bank (2003 – 2005). Mr. Wong holds his B.S. degree in Finance from the California State University of Los Angeles. Mr. Wong is a graduate of Pacific Coast Banking School. Pacific Coast Banking School, in partnership with the Foster Graduate School of Business at the University of Washington, is a three-year, master’s-level management and executive leadership extension program for senior and executive officers in the banking industry. Mr. Wong currently serves as CEO of Energy Trinity, an energy analytics and consulting firm focused on long term financial and environmental gains achieved through electric vehicles, solar, and battery energy storage adoption. He is credited with authoring, developing, and bringing to the U.S. market the world’s only multidimensional data model that encompasses financial elements and energy dynamics of gasoline vehicles and household/business electricity consumption, usage, and related historical and projected future energy costs, fully offset by electric vehicle energy consumption paired with solar energy generation and battery energy storage. Our Board considered Mr. Wong’s experience in banking and his financial controls expertise in determining that he should be a member of our Board.
Director Compensation
Director Compensation The following table sets forth compensation paid or awarded to, or earned by, each of our non-employee directors during 2023.
Director Compensation
| Name | Fees Earned or Paid in Cash | Stock Awards (1) | All Other Compensation (2) | Total | | Dr. James W. Kao | $99,400 | $28,644 | $— | $128,044 | | William Bennett (3) | 18,300 | — | — | 18,300 | | Robert M. Franko (4) | 20,600 | — | — | 20,600 | | Christina Kao | 91,900 | 28,644 | 137 | 120,681 | | Joyce Wong Lee | 89,050 | 24,552 | — | 113,602 | | Chuang-I (Christopher) Lin | 88,000 | 28,644 | — | 116,644 | | Geraldine Pannu | 90,100 | 28,644 | — | 118,744 | | Scott Polakoff (4) | 20,000 | — | — | 20,000 | | Frank Wong (3) | 19,300 | — | — | 19,300 | | Former Directors | | | | | | Wendell Chen (5) | 72,400 | 26,598 | 25 | 99,023 | | Chie-Min (Christopher) Koo (6) | 71,700 | 24,552 | 99 | 96,351 | | Feng (Richard) Lin (5) | 70,800 | 26,598 | 23 | 97,421 | | Ko-Yen Lin (7) | 80,500 | 24,552 | 404 | 105,456 | | Paul Lin (8) | 67,300 | 28,644 | 24 | 95,968 | | Fui Ming (Catherine) Thian (9) | 65,500 | 28,644 | 351 | 94,495 |
Director Compensation
| (1) On January 18, 2023, the Company granted 1,200 restricted stock units ("RSUs") to each director and an additional 200 RSUs to the Chairman of the Board and all Committee Chairs, except for the CRA Committee Chair and Corporate Secretary who received 100 RSUs. The grant date fair value is based on the number of shares granted and the closing price of the Company's common stock on the grant date of $20.46. | | (2) All Other Compensation reflects bank owned life insurance benefits. | | (3) Mr. Bennett and Mr. Wong were appointed directors in June 2023. They did not receive any stock awards in 2023. | | (4) Mr. Franko and Mr. Polakoff were appointed directors in April 2023. They did not receive any stock awards in 2023. | | (5) Mr. Chen and Mr. Lin did not stand for re-election at the 2023 annual meeting of shareholders. | | (6) Mr. Koo was not re-nominated for election in 2023 in support of the reconstitution of the Board of Directors. | | (7) Mr. Ko-Yen Lin resigned from the Board of Directors effective March 1, 2023. | | (8) Mr. Paul Lin resigned from the Board of Directors effective May 8, 2023. | | (9) Ms. Thian resigned from the Board of Directors effective March 13, 2023. |
Director Compensation
As of December 31, 2023, Mr. Kao, Ms. Kao, Mr. Lin, Ms. Pannu and Ms. Wong each held 600 unvested RSUs of our common stock and in addition Mr. Lin held 30,250 vested stock options. Non-employee directors receive an annual cash retainer paid in January of $60,000 plus 1,200 RSUs paid at the end of the service period, of which 50% vest on the date of grant and 50% vest one year after the date of grant. Non-employee directors who join the Board during the year receive the annual cash retainer pro-rated for the portion of the year that they serve. Further, non-employee directors who serve as a Committee Chair receive an additional 200 RSUs, except for CRA Committee Chair and the Corporate Secretary who receive an additional 100 RSUs, all of which immediately vest on the date of grant. In addition, as compensation for attending the Company’s Board meetings, each non-employee director received attendance fees. Each non-employee director received $1,500 per Board meeting attended and the Chairman of the Board received $2,500 per Board meeting attended. Each non-employee director also received $300 per Board committee meeting attended and the Chairs of any of the Board Committees received an additional fee of $200 per meeting attended for their respective meetings. For any mandatory in-person meetings that were attended telephonically, the compensation was reduced to the following: a non-employee director received $750 per Board meeting, the Chairman of the Board received $1,250 per Board meeting and each non-employee director received $200 per Board committee meeting attended. Over 75% of the Board meetings during 2023 were scheduled as in-person meetings.
Leadership Transitions
Leadership Transitions On December 11, 2023, the Company announced the appointment of Lynn Hopkins as Interim Executive Vice President and Chief Financial Officer of the Company and the Bank effective December 7, 2023. Ms. Hopkins entered into an employment agreement with the Company and the Bank, effective as of December 7, 2023, with a term of six (6) months, with an automatic renewal for successive six (6) month periods unless either party provides written notice of nonrenewal at least one (1) month prior to the extension date. The employment agreement provides for an annual salary of $400,000, subject to periodic adjustment by our Board, discretionary bonus, automobile allowance, expense reimbursement and medical insurance coverage, salary continuation and other benefit plans. The employment agreement provides that if Ms. Hopkins is terminated without cause, Ms. Hopkins will be entitled to receive a severance payment in the amount equal to the amount due for the remaining term of her employment agreement at her then current salary. Following a change of control, if Ms. Hopkins' employment is terminated by us or our successor, without cause, or Ms. Hopkins' employment is materially adversely altered, Ms. Hopkins will not be entitled to receive any severance payment.
Board Responsiveness to 2023 Say-on-Pay and Shareholder Feedback
| What We Heard | What We Did | | Shareholders would like clearer parameters around annual incentives | In 2022, we implemented a new, formulaic annual incentive plan that includes target award opportunities for each NEO, and actual award payouts (75% in cash, 25% in RSUs) based on the achievement of pre-determined performance metrics and goals (scorecards). In 2023, we modified the payout structure to provide 65% of the calculated incentive in cash and 35% in RSUs. See “Annual Incentives” under “2023 Executive Compensation Decisions in Detail” in this CD&A for details. |
Board Responsiveness to 2023 Say-on-Pay and Shareholder Feedback
| Shareholders would like to see performance-based long-term incentive awards | In 2024, we implemented a new long-term incentive structure which provides for 50% of the equity awards to be granted in performance-contingent equity (PSUs) and 50% based on service vesting RSUs. |
Compensation Philosophy
| Pay Element | How It Is Paid | Purpose | | Base Salary (Fixed) | Cash | Reflects each NEO’s position, experience, individual performance, and expertise. Salary levels are set with the intention to attract, retain, motivate, and reward quality executives in the competitive banking marketplace. | | Performance-Based Incentives (Variable) | Cash and Equity | Value of incentives is based on achievement of annual performance goals and is therefore variable compensation, a portion of such earned incentive is to be paid in the form of an equity award that vests over a three-year period. Focuses NEOs on achieving short-term financial and strategic goals that drive long-term shareholder value, and also support our leadership talent retention goals. To accomplish these goals, the Executive and Employee Bonus and Incentive Plan ("Incentive Plan") provides for performance-based incentives to be paid using a mix of cash and equity compensation: 65% of the award earned is paid in cash and 35% of the award earned is delivered in time-based RSUs, which vest in three equal installments from the anniversary of the date of the grant. |
Decision-Making Process
Decision-Making Process Role of the Compensation Committee. Our Compensation Committee is a standing committee appointed by our Board of Directors to oversee our compensation and employee benefit plans and practices, including our executive compensation plans and our incentive-compensation and equity-based plans. The Compensation Committee is comprised of independent, non-employee members of the Board. The Compensation Committee collaborates closely with an independent consultant and management to examine the effectiveness of the Company’s executive compensation program throughout the year. Details of the Compensation Committee’s authority and responsibilities are specified in the Compensation Committee’s charter, which is available on our website at www.royalbusinessbankusa.com under the “Investor Relations” tab. The Compensation Committee makes all final compensation and equity award decisions regarding our NEOs and the independent members of the full Board ratify the recommendation of the Compensation Committee. Please also see additional discussion on our Compensation Committee set forth above under "Corporate Governance and Other Board Matters – Compensation Committee." Role of Management. The CEO attends regular meetings where executive compensation, Company and individual performance, and competitive compensation levels and practices are discussed and evaluated. The CEO recommends adjustments to base salaries, annual cash incentives and equity award amounts for the other NEOs. The Compensation Committee takes the CEO’s reviews and recommendations under advisement and may exercise discretion to modify any recommended adjustments or awards to executives. Only the Compensation Committee members can vote on decisions regarding NEO compensation. Decisions on non-NEO pay are made by the CEO. The CEO does not participate in the deliberations of the Compensation Committee regarding his own compensation. Independent members of the Board make all final determinations regarding CEO compensation. Role of the Compensation Consultant. From time to time, our Compensation Committee seeks advice from outside experts in the executive compensation field to provide input on both director compensation and executive compensation issues. In 2023, the Compensation Committee engaged Pearl Meyer for general assistance in executive compensation matters. In accordance with the rules of the Nasdaq Stock Market, the Compensation Committee took appropriate actions to consider the independence of Pearl Meyer and determined there was no conflict of interest. The Role of Benchmarking and Peer Groups. For 2023, the Compensation Committee compared our executive compensation program to the executive compensation programs of a group of companies that are comparable in terms of industry, size and geography. The overall purpose of this peer group is to provide a market frame of reference for evaluating our compensation arrangements (current or proposed) and performance results, understanding compensation trends among comparable companies, and reviewing other compensation and governance-related topics that may arise during the year to ensure that the features of the Company’s executive compensation program are appropriately aligned with market-best practices. The 2023 peer group was as follows:
Decision-Making Process
In developing the peer group, the Compensation Committee selected companies that were, on balance, of similar size and scope as the Company (assets between $2 billion and $8 billion, and market capitalization between $200 million and $1.1 billion as compared to the Company’s then current assets and market capitalization of $3.7 billion and $474 million, respectively), operate in similar geographic areas, and compete with the Company for business and talent. It is important to note that the Compensation Committee does not rely exclusively on comparative data from the peer group when setting compensation for our NEOs. While peer group information can help identify general trends in executive compensation practices and overall executive compensation, the Compensation Committee recognizes there can be meaningful differences between the Company and its peer group members. In addition to peer group data, the Compensation Committee also reviews compensation information from direct market share competitors and considers many other factors such as individual and company performance, position and associated responsibilities, retention and stability of the executive management team, tenure, and succession considerations. The Compensation Committee subsequently retained Pearl Meyer in 2023 to review 2023 and proposed 2024 compensation of the Company’s current NEOs against the peer group and survey information of similarly sized financial institutions. In developing the peer group, the Compensation Committee selected companies that were, on balance, of similar size and scope as the Company (assets between $2 billion and $10 billion, and market capitalization between $200 million and $1.1 billion as compared to the Company’s then current assets and market capitalization of $4.0 billion and $258 million, respectively), operate in similar geographic areas, and compete with the Company for business and talent. The current peer group is as follows:
Annual Incentives
Annual Incentives The Incentive Plan provides our NEOs the opportunity to earn a performance-based annual incentive, 65% of which is paid in cash and 35% of which is paid in RSUs that vest in three equal installments on each anniversary of the grant date. Actual payouts depend on the achievement of pre-determined financial performance objectives. For the CEO and Mr. Lee, payouts can range from 0% to 150% of target award amounts and for the other NEOs payouts can range from 0% to 154% of target award amounts, with the exception of Ms. Hopkins who joined the Company in December 2023 and was not eligible for incentive compensation in 2023. Annual incentives reward both the achievement of short-term financial goals as well as the execution of activities to advance our strategic priorities. Target annual incentive opportunities are expressed as a percentage of base salary and were established by the NEO’s level of responsibility and their ability to impact overall results. The Compensation Committee also considers market data in setting target award amounts. Target award opportunities for 2023 were as follows:
Annual Incentives
| NEO | 2023 Salary | 2023 Annual Incentive Target (as a % of Salary) | 2023 Annual Incentive Target ($) | | David R. Morris | $626,200 | 100% | $626,200 | | Johnny Lee (1) | $575,000 | 100% | $287,500 | | Lynn Hopkins | $400,000 | n/a | n/a | | Gary Fan | $325,000 | 65% | $211,250 | | Vincent (I-Ming) Liu | $379,400 | 65% | $246,610 | | Alex Ko (2) | $367,200 | 65% | $238,680 |
Annual Incentives
| (1) Mr. Lee was eligible for 50% of his annual target incentive in his initial year of hire. | | (2) Mr. Ko transitioned from the Company and stepped down from his role as Executive Vice President and Chief Financial Officer effective December 8, 2023. |
Annual Incentives
Performance Goals, Measures, and Scorecard Results. Annual incentive awards are based on financial metrics with respect to 80% of the overall annual incentive award and individual performance with respect to 20% of such annual incentive award. The financial metrics of an NEO’s annual incentive award are tied to the achievement of certain pre-established financial and/or operational metrics and goals. Individual performance is assessed in consultation with the CEO and reviewed with the Compensation Committee. Actual awards earned are determined using individual scorecards, of which an overall score is calculated by summing the weighted scores achieved for each of the performance measures. The actual award earned is determined by multiplying the overall score times the executive’s annual incentive target percentage, which we also refer to as the target incentive amount. Amounts paid are subject to our Clawback Policy (see page 29 of this Proxy Statement). The Compensation Committee also reserves the right to adjust individual performance downward on any award payments proposed for a NEO. The individual performance goals for 2023 were determined in April 2023 to address certain areas that the Board of Directors felt needed improvement or for substantial projects that the NEO may manage. For the NEO's receiving over 100%, the Compensation Committee determined the executive's individual contribution exceeded expectations. For the determination of the individual performance awards, the Compensation Committee took into consideration leadership related to the Bank's BSA Consent Order remediation efforts in coordination with other members of management, the Bank's overall compliance program achievements and talent recruitment efforts during the year, among other factors. The following chart is a list of the criteria used to determine the achievement of individual goals for the NEOs:
Annual Incentives
| Performance Objective | David Morris | Johnny Lee | Gary Fan | Vincent Liu | | Retain Core Officers | X | X | X | | | Retain Core Deposit Relationships | X | X | X | X | | Risk Management Leadership | | | | X | | Maintain Employee Morale | X | X | X | X | | Shareholder Engagement | X | | | |
Annual Incentives
Financial goals, detailed below, were selected for each NEO based on the individual’s role, and targets were set based on the Company’s business plan. Goals, weights, and results for each financial goal, and payout of the performance-based annual incentive, are set forth below. Ms. Hopkins joined the Company in December 2023 and was not eligible for incentive compensation in 2023 and Mr. Ko left the Company in December 2023 and accordingly, a payout ratio is not presented.
Annual Incentives
| David R. Morris, Chief Executive Officer | | | | | | | | | ($ in millions, except per share data) | | Performance Range | | | Results | | | | Performance Metrics | Weight | Threshold | Target | Maximum | Actual Achieved | Percentage Achieved | Payout (as a % of Target) | | Financial Objectives | 80% | | | | | | | | Diluted EPS | 20% | $2.28 | $2.85 | $3.85 | $2.24 | —% | —% | | Return on Average Assets | 20% | 1.12% | 1.40% | 1.89% | 1.06% | —% | —% | | Audit Results | 10% | 2 | 4 | 5 | 3 | 75% | 7.5% | | Loan to Deposit Ratio (1) | 20% | 114% | 95% | 62% | 93% | 103% | 20.5% | | Deposit Growth | 10% | $173.6 | $217.0 | $293.0 | $211.6 | 94% | 9.4% | | Individual Performance | 20% | Assessed by the Compensation Committee | | | | 80% | 16.0% | | (1) The Threshold and Maximum Loan to Deposit Ratios were used only for interpolation purposes, provided the Loan To Deposit Ratio fell within the range of plus or minus 5% of the Target Loan To Deposit Ratio, with Board discretion to be applied outside of that range. | | | | | Overall Score: | | 53.4% |
Annual Incentives
| Johnny Lee, President and Chief Banking Officer | | | | | | | | | ($ in millions, except per share data) | | Performance Range | | | Results | | | | Performance Metrics | Weight | Threshold | Target | Maximum | Actual Achieved | Percentage Achieved | Payout (as a % of Target) | | Financial Objectives | 80% | | | | | | | | Diluted EPS | 20% | $2.28 | $2.85 | $3.85 | $2.24 | —% | —% | | Return on Average Assets | 20% | 1.12% | 1.40% | 1.89% | 1.06% | —% | —% | | Audit Results | 10% | 2 | 4 | 5 | 3 | 75% | 7.5% | | Loan to Deposit Ratio (1) | 20% | 114% | 95% | 62% | 93% | 103% | 20.5% | | Deposit Growth | 10% | $173.6 | $217.0 | $293.0 | $211.6 | 94% | 9.4% | | Individual Performance | 20% | Assessed by the Compensation Committee | | | | 100% | 20.0% | | (1) The Threshold and Maximum Loan to Deposit Ratios were used only for interpolation purposes, provided the Loan To Deposit Ratio fell within the range of plus or minus 5% of the Target Loan To Deposit Ratio, with Board discretion to be applied outside of that range. | | | | | Overall Score: | | 57.4% |
Annual Incentives
| Gary Fan, Executive Vice President and Chief Administrative Officer | | | | | | | | | ($ in millions, except per share data) | | Performance Range | | | Results | | | | Performance Metrics | Weight | Threshold | Target | Maximum | Actual Achieved | Percentage Achieved | Payout (as a % of Target) | | Financial Objectives | 80% | | | | | | | | Diluted EPS | 20% | $2.28 | $2.85 | $3.85 | $2.24 | —% | —% | | Return on Average Assets | 10% | 1.12% | 1.40% | 1.89% | 1.06% | —% | —% | | Audit Results | 10% | 2 | 4 | 5 | 3 | 75% | 7.5% | | Loan to Deposit Ratio (1) | 20% | 114% | 95% | 62% | 93% | 103% | 20.5% | | Deposit Growth | 20% | $173.6 | $217.0 | $293.0 | $211.6 | 94% | 18.8% | | Individual Performance | 20% | Assessed by the Compensation Committee | | | | 127% | 25.4% | | (1) The Threshold and Maximum Loan to Deposit Ratios were used only for interpolation purposes, provided the Loan To Deposit Ratio fell within the range of plus or minus 5% of the Target Loan To Deposit Ratio, with Board discretion to be applied outside of that range. | | | | | Overall Score: | | 72.2% |
Annual Incentives
| Vincent (I-Ming) Liu, Executive Vice President and Chief Risk Officer | | | | | | | | | ($ in millions, except per share data) | | Performance Range | | | Results | | | | Performance Metrics | Weight | Threshold | Target | Maximum | Actual Achieved | Percentage Achieved | Payout (as a % of Target) | | Financial Objectives | 80% | | | | | | | | Diluted EPS | 20% | $2.28 | $2.85 | $3.85 | $2.24 | —% | —% | | Return on Average Assets | 20% | 1.12% | 1.40% | 1.89% | 1.06% | —% | —% | | Compliance Audit Results | 30% | 2 | 4 | 5 | 4 | 100% | 30.0% | | NPA/Total Assets | 10% | 0.73% | 0.61% | 0.40% | 0.79% | —% | —% | | Individual Performance | 20% | Assessed by the Compensation Committee | | | | 134% | 26.8% | | | | Overall Score: | | | | | 56.8% |
Annual Incentives
Payouts under Incentive Plan. Based on the above performance results, the following table lists the actual awards earned by the NEOs for 2023 performance results and paid in 2024:
Annual Incentives
| NEO | 2023 Annual Incentive Target (as a % of Salary) | 2023 Annual Incentive Target ($) | Overall Score | Total Award Earned ($) | Cash Payout (65%) | RSU Payout Value (35%)* | | David R. Morris | 100% | $626,200 | 53.4% | $334,546 | $217,455 | $117,080 | | Johnny Lee (1) | 100% | $287,500 | 57.4% | $165,097 | $107,319 | $57,778 | | Lynn Hopkins (2) | —% | $— | —% | $— | $— | $— | | Gary Fan (3) | 65% | $211,250 | 72.2% | $152,003 | $98,804 | $53,199 | | Vincent (I-Ming) Liu | 65% | $246,610 | 56.8% | $140,073 | $91,050 | $49,024 | | Alex Ko (4) | 65% | $238,680 | —% | $— | $— | $— |
Annual Incentives
| (1) Mr. Lee was eligible for 50% of his normal annual target incentive in his initial year of hire. He also received a signing bonus of $100,000 under his employment agreement requiring repayment if he voluntarily terminated within six months of the employment start date. | | (2) Ms. Hopkins was not subject to the 2023 annual incentive targets. | | (3) Mr. Fan also received a $25,000 project based cash incentive under his employment agreement. | | (4) Mr. Ko transitioned from the Company and stepped down from his role as Executive Vice President and Chief Financial Officer effective December 8, 2023 and did not receive any payment of an annual incentive award. |
Annual Incentives
* The number of RSUs awarded was equal to the RSU Payout Value noted above divided by the price of a share of common stock on the date of grant. RSUs for 2023 performance were issued on February 21, 2024 and, in accordance with reporting rules, are not included in the 2023 Summary Compensation Table.
Long-Term Equity Incentives
Long-Term Equity Incentives The Compensation Committee has the ability to grant periodic equity awards, such as new-hire and promotional grants issued pursuant to the 2017 Plan. These awards are typically designed to support the Company’s shareholder value creation and leadership talent retention goals. These periodic awards may be special inducement equity awards upon hire or upon renegotiation of an employee’s contract, or as retention awards after review of an executive’s outstanding and unvested equity. The Compensation Committee granted awards to the NEOs pursuant to the Incentive Plan but did not grant any additional equity incentive awards to any of the NEOs in 2023 other than certain new hire awards. The Compensation Committee granted options to Mr. Ko in connection with his appointment as an executive officer in March 2023 and time-based RSUs to Mr. Lee with his appointment as President and Chief Banking Officer in July 2023.
2024 EXECUTIVE COMPENSATION CHANGES
2024 EXECUTIVE COMPENSATION CHANGES After review of market levels of pay and overall peer compensation plan practices, and taking into consideration shareholder perspectives, the Compensation Committee determined that a portion of the equity awards granted to NEOs should be in the form of contingent Performance Stock Units (“PSUs”) to enhance the pay-for-performance aspect of the compensation program and to further align the interests of executive management with the Company’s shareholders. Accordingly, the Compensation Committee approved equity awards for each NEO consisting of 50% of the award value in contingent PSUs and 50% of the award value in time-based RSUs, except for the Chief Risk Officer who received 100% of the award value in time-based RSUs. The PSUs allow each NEO to earn 50, 100, or 150 percent of the target award based upon attainment of specified performance goals over a three-year performance period and are based on three performance criteria including relative Total Shareholder Return ("TSR"), Return on Average Tangible Common Equity ("ROTCE") and Return on Average Assets ("ROAA"). The table below outlines the total equity awards and the individual award values.
2024 EXECUTIVE COMPENSATION CHANGES
| NEO | Grant Date | Time-Based RSUs | PSUs ROAA (at Target) | PSUs ROATCE (at Target) | PSUs TSR (at Target) | TOTAL | | David Morris | 3/20/2024 | 9,493 | 4,747 | 2,373 | 2,373 | 18,986 | | Johnny Lee | 3/20/2024 | 8,221 | 4,110 | 2,055 | 2,055 | 16,441 | | Lynn Hopkins | 3/20/2024 | 5,634 | 2,816 | 1,409 | 1,409 | 11,268 | | Gary Fan | 3/20/2024 | 3,944 | 1,972 | 986 | 986 | 7,888 | | I-Ming Liu | 3/20/2024 | 5,504 | — | — | — | 5,504 |
Employment Agreements
Employment Agreements We have entered into employment agreements with Ms. Hopkins and Messrs. Morris, Lee, Fan and Liu, which generally describe the position and duties of each of these NEOs, provide for a specified term of employment, describe base salary, bonus opportunity and other benefits and perquisites to which such NEO is entitled, if any, set forth the duties and obligations of each party in the event of a termination of employment prior to expiration of the employment term and provide us with a measure of protection by obligating these NEO to abide by the terms of restrictive covenants during the terms of their employment and thereafter for a specified period of time. Mr. Morris. Our employment agreement with Mr. David R. Morris, dated as of April 12, 2017, as amended, provides for a term of three years, with an automatic renewal for successive one-year periods unless either party provides written notice of nonrenewal at least three months prior to the extension date. The agreement provides for an annual salary, subject to periodic adjustment by our Board, stock options, discretionary bonus, reimbursement of automobile expenses, expense reimbursement and medical insurance coverage, salary continuation and other benefit plans. If Mr. Morris is terminated without cause, Mr. Morris would receive a severance payment in the amount of twelve (12) months of his then current salary. Following a change of control, if Mr. Morris’ employment is terminated by us or our successor, without cause, or Mr. Morris’ employment is materially adversely altered, Mr. Morris would receive a severance payment in the amount of eighteen (18) months of his then current salary. Such agreement was amended on March 25, 2024, and the amendment filed on Form 8-K dated March 29, 2024, to clarify that a change-in-control severance payment shall terminate the employment agreement and the executive's employment with the Company and the Bank in all respects. Ms. Hopkins. Our employment agreement with Ms. Lynn Hopkins, dated as of December 7, 2023, provides for a term of six (6) months, with an automatic renewal for successive six (6) month periods unless either party provides written notice of nonrenewal at least one month prior to the extension date. The agreement provides for an annual salary, subject to periodic adjustment by our Board, discretionary bonus, reimbursement of automobile expenses, expense reimbursement and medical insurance coverage, salary continuation and other benefit plans. If Ms. Hopkins is terminated without cause, Ms. Hopkins would receive a severance payment in the amount equal to the amount due for the remaining term of the employment agreement at her then current salary. In the event such termination occurs other than for cause, after the occurrence of a change of control where Ms. Hopkins’ employment is terminated without cause or materially adversely altered, or as a result of disability or death, Ms. Hopkins will not be entitled to receive any severance payment. Mr. Fan. Our employment agreement with Mr. Gary Fan, dated as of March 22, 2023, provides for a term of three years, with an automatic renewal for successive one-year periods unless either party provides written notice of nonrenewal at least three months prior to the extension date. The agreement provides for an annual salary, subject to periodic adjustment by our Board, stock options, discretionary bonus, reimbursement of automobile expenses, expense reimbursement and medical insurance coverage, salary continuation and other benefit plans. If Mr. Fan is terminated without cause, Mr. Fan would receive a severance payment in the amount of six (6) months of his then current salary. Following a change of control, if Mr. Fan’s employment is terminated by us or our successor, without cause, or Mr. Fan’s employment is materially adversely altered, Mr. Fan would receive a severance payment in the amount of twelve (12) months of his then current salary. Such agreement was amended on March 25, 2024, and the amendment filed on Form 8-K dated March 29, 2024, to clarify that a change-in-control severance payment shall terminate the employment agreement and the executive's employment with the Company and the Bank in all respects. Mr. Lee. Our employment agreement with Mr. Johnny Lee, dated as of July 20, 2023, provides for a term of three years, with an automatic renewal for successive one-year periods unless either party provides written notice of nonrenewal at least three months prior to the extension date. The agreement provides for an annual salary, subject to periodic adjustment by our Board, stock options, discretionary bonus, reimbursement of automobile expenses, expense reimbursement and medical insurance coverage, salary continuation and other benefit plans. If Mr. Lee is terminated without cause, Mr. Lee would receive a severance payment in the amount of six (6) months of his then current salary. Following a change of control, if Mr. Lee's employment is terminated by us or our successor, without cause, or Mr. Lee's employment is materially adversely altered, Mr. Lee would receive a severance payment in the amount of twelve (12) months of his then current salary. Mr. Liu. Our employment agreement with Mr. Vincent Liu, dated as of April 12, 2017, as amended, provides for a term of three years, with an automatic renewal for successive one-year periods unless either party provides written notice of nonrenewal at least three months prior to the extension date. The agreement provides for an annual salary, subject to periodic adjustment by our Board, stock options, discretionary bonus, reimbursement of automobile expenses, expense reimbursement and medical insurance coverage, salary continuation and other benefit plans. If Mr. Liu is terminated without cause, Mr. Liu would receive a severance payment in the amount of twelve (12) months of his then current salary. Following a change of control, if Mr. Liu’s employment is terminated by us or our successor, without cause, or Mr. Liu's employment is materially adversely altered, Mr. Liu would receive a severance payment in the amount of twelve (12) months of his then current salary. Such agreement was amended on March 25, 2024, and the amendment filed on Form 8-K dated March 29, 2024, to clarify that a change-in-control severance payment shall terminate the employment agreement and the executive's employment with the Company and the Bank in all respects.
Termination Agreement
Termination Agreement As previously disclosed in a Current Report on Form 8-K filed with the SEC on December 11, 2023, Mr. Alex Ko informed the Board he voluntarily resigned from his position as Chief Financial Officer due to personal reasons and will be pursuing other opportunities and would be available as a consultant to assist in the transition to the new Interim Chief Financial Officer. Mr. Ko transitioned from the Company and stepped down from his role as Executive Vice President and Chief Financial Officer effective December 8, 2023. Mr. Ko received severance benefits consistent with his employment agreement under the termination without cause provisions equal to $183,500 on January 2, 2024, and an additional $20,000 on March 18, 2024 in consideration for making himself available to management during 2024, per the termination agreement dated December 8, 2023. Mr. Ko was not entitled to any annual incentive payments and all equity awards were forfeited.
Summary Compensation Table
Summary Compensation Table The following table sets forth information regarding the compensation paid, awarded to, or earned for the fiscal years ended December 31, 2023, 2022 and 2021, for each of the Company’s NEOs.
Summary Compensation Table
| Name | Year | Salary ($) | Bonus ($) | Non-Equity Incentive Compensation ($) (1) | Stock Awards ($) (2) | Option Awards ($) | All Other Compensation ($) (3) | Total ($) | | David R. Morris | 2023 | 619,026 | — | 217,465 | 159,731 | — | 73,756 | 1,069,978 | | Chief Executive Officer | 2022 | 594,580 | — | 479,244 | 62,495 | — | 47,235 | 1,183,555 | | | 2021 | 362,000 | — | 195,000 | — | — | 18,338 | 575,338 | | Johnny Lee | 2023 | 298,557 | 100,000(4) | 107,319 | 229,845 | — | 15,500 | 751,221 | | President and Chief Banking Officer | | | | | | | | | | Lynn Hopkins | 2023 | 22,820 | — | — | — | — | 1,500 | 24,320 | | Interim Executive Vice President and Chief Financial Officer | | | | | | | | | | Gary Fan | 2023 | 325,000 | 25,000(5) | 98,804 | — | — | 79,250 | 528,054 | | Executive Vice President and Chief Administrative Officer | 2022 | 24,791 | 100,000(5) | — | — | 46,186 | — | 170,977 | | Vincent (I-Ming) Liu | 2023 | 374,901 | — | 91,050 | 73,881 | — | 25,408 | 565,240 | | Executive Vice President and Chief Risk Officer | 2022 | 378,186 | 30,000 | 221,671 | 62,495 | — | 21,563 | 713,915 | | | 2021 | 320,400 | — | 195,000 | — | — | 22,078 | 537,478 | | Alex Ko (6) | 2023 | 283,873 | — | — | — | 164,790 | 205,348 | 654,011 | | Former Executive Vice President and Chief Financial Officer | | | | | | | | |
Summary Compensation Table
| (1) Amounts represent cash incentives earned in 2023, 2022 and 2021. which were paid in February 2024, January 2023 and January 2022, respectively, under our Incentive Plan. | | (2) Amounts for 2023 represent 2022 annual incentive, which was granted in January 2023 in RSUs with a three-year vesting schedule other than Mr. Lee who received time-based RSUs with his appointment as President and Chief Banking Officer in July 2023. Amounts for 2022 represent 2021 annual incentive which was granted in January 2022 in RSUs with a three-year vesting schedule. The awards shown are not cash compensation received by the NEO and may not correspond to the actual value that could be realized by the NEO. Instead, the amounts represent the fair value of stock awards computed for the corresponding fiscal year, in accordance with FASB ASC Topic 718, valued based on closing price of our common stock on the date of the grant. | | (3) "All Other Compensation" for the NEOs during fiscal year 2023 is summarized below. | | (4) Amount represents signing bonus of $100,000 under his employment agreement requiring repayment if he is voluntarily terminated within six months of the employment start date. | | (5) 2023 amount represents project based incentives under Mr. Fan's employment agreement. 2022 amount represents signing bonus of $100,000 under his employment agreement. | | (6) Mr. Ko transitioned from the Company and stepped down from his role as Executive Vice President and Chief Financial Officer effective December 8, 2023. |
Summary Compensation Table
| All Other Compensation 2023 | | | | | | | Name | Perquisites (1) | Company 401(k) Match (2) | BOLI Income (3) | Severance Pay | Total "All Other Compensation" | | David R. Morris (4) | $52,719 | $14,550 | $6,487 | $— | $73,756 | | Johnny Lee | $9,750 | $5,750 | $— | $— | $15,500 | | Lynn Hopkins | $1,500 | $— | $— | $— | $1,500 | | Gary Fan (5) | $68,000 | $11,250 | $— | $— | $79,250 | | Vincent (I-Ming) Liu | $3,122 | $15,000 | $7,286 | $— | $25,408 | | Alex Ko (6) | $14,250 | $7,598 | $— | $183,500 | $205,348 |
Summary Compensation Table
| (1) Amount reflects use of a Company-owned vehicle or car allowance/ fringe, housing allowance, club fees, and other personal benefits. | | (2) Amount reflects Company matching contribution under the 401(k) Plan. | | (3) Amount reflects BOLI reportable income. | | (4) Amount in Mr. Morris's perquisites reflects $40,394 in housing allowances. | | (5) Amount in Mr. Fan's perquisites reflects $50,000 in relocation expenses. | | (6) Mr. Ko received severance benefits consistent with his employment agreement under the termination without cause provisions equal to $183,500 on January 2, 2024, per the termination agreement dated December 8, 2023. |
Grants of Plan-Based Awards
Grants of Plan-Based Awards The following table shows for the fiscal year ended December 31, 2023 certain information regarding grants of plan-based awards for our NEOs.
Grants of Plan-Based Awards
| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | | | | | | | Name | Grant Date | Threshold ($) (1) | Target ($) (1) | Maximum ($) (1) | All Other Stock Awards: Number of Shares of Stock or Units (#) (2) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock Awards (2) | | David R. Morris | | $313,100 | $626,200 | $939,300 | — | — | — | — | | Chief Executive Officer | 1/18/2023 | — | — | — | 7,807 | — | — | $159,731 | | Johnny Lee (3) | | $143,750 | $287,500 | $431,250 | — | — | — | — | | President and Chief Banking Officer | 7/20/2023 | — | — | — | 16,500 | — | — | $229,845 | | Lynn Hopkins (4) | | $— | $— | $— | — | — | — | — | | Interim Executive Vice President and Chief Financial Officer | | | | | | | | | | Gary Fan | | $113,750 | $211,250 | $325,000 | — | — | — | — | | Executive Vice President and Chief Administrative Officer | | | | | | | | | | Vincent (I-Ming) Liu | | $132,790 | $246,610 | $379,400 | — | — | — | — | | Executive Vice President and Chief Risk Officer | 1/18/2023 | — | — | — | 3,611 | — | — | $73,881 | | Alex Ko (5) | | $128,520 | $238,680 | $367,200 | — | — | — | — | | Former Executive Vice President and Chief Financial Officer | 3/1/2023 | — | — | — | — | 30,000 | $5.49 | $164,790 |
Grants of Plan-Based Awards
| (1) Represents threshold, target and maximum opportunity under the Company's Incentive Plan. Our Incentive Plan is discussed under the caption "Annual Incentives" in this CD&A. The amounts of the estimated future payouts under the non-equity incentive plans column represent each executive's opportunities in the event the Company met certain targets in 2023 pursuant to the terms of the Incentive Plan. 65% of the award was paid in cash and the actual cash payouts for 2023 under the Incentive Plan were made on February 15, 2024, and are included in the 2023 Summary Compensation Table. The remaining 35% were issued as RSUs on February 21, 2024 and will be reflected in the 2024 Summary Compensation Table and 2024 Grants of Plan-Based Awards Table. | | (2) Amounts shown in this column reflect the number of time-vested RSUs granted under the 2017 Plan. Awards represent RSUs awarded on January 18, 2023 representing 25% of the Incentive Plan award with respect to the 2022 performance period, based upon a closing price of the Company's common stock of $20.46 at grant date except for Johnny Lee, who was granted RSUs on July 20, 2023 based upon a closing price of the Company's common stock of $13.93 at grant date. | | (3) Mr. Lee was eligible for 50% of the annual incentive in 2023. | | (4) Ms. Hopkins joined the Company on December 11, 2023, and did not participate in the 2023 annual incentive program. | | (5) Mr. Ko separated from the Company on December 8, 2023, at which time his 30,000 option awards were forfeited. |
Outstanding Equity Awards at Fiscal Year End
Outstanding Equity Awards at Fiscal Year End The following table provides information for each of our NEOs regarding outstanding stock options and stock awards held by the officers as of December 31, 2023. Market values are presented as of the end of 2023 (based on the assumed per share fair market value of our common stock on December 31, 2023) for outstanding stock awards, which include 2023 grants and prior-year grants.
Outstanding Equity Awards at Fiscal Year End
| | Option Awards | | | | Stock Awards | | | Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares, or Units That Have Not Vested (#) (1) | Market Value of Shares, or Units That Have Not Vested ($) (2) | | David R. Morris | 9,000 | — | $20.55 | 1/21/2030 | 9,341 | $177,853 | | Johnny Lee | — | — | — | — | 16,500 | $314,160 | | Lynn Hopkins | — | — | — | — | — | — | | Gary Fan | 6,000 | 24,000 | $21.17 | 12/31/2032 | — | — | | Vincent (I-Ming) Liu | — | — | — | — | 5,145 | $97,961 | | Alex Ko | — | — | — | — | — | — |
Outstanding Equity Awards at Fiscal Year End
| (1) Represents RSUs granted to Mr. Morris and Mr. Liu on January 18, 2023 and to Mr. Lee on July 20, 2023, in connection with his employment agreement, which vest in 1/3 increments on the first, second and third anniversary of the date of grant. These equity awards are accelerated and vest in full upon a change in control of the Company. |
Outstanding Equity Awards at Fiscal Year End
| (2) Market value is determined using the December 31, 2023, closing price of the Company’s common stock of $19.04 per share. |
Option Exercises and Stock Vested Table
Option Exercises and Stock Vested Table The following table shows for the fiscal year ended December 31, 2023 certain information regarding option exercises and stock vested for our NEOs.
Option Exercises and Stock Vested Table
| 2023 | Option Awards | | Stock Awards | | | | Number of Shares Acquired on Exercise | Value Realized Upon Exercise | Number of Shares Acquired on Vesting | Value Realized on Vesting | | Name | (#) | ($)(1) | (#) | ($)(2) | | David R. Morris | — | — | 767 | $13,522 | | Chief Executive Officer | | | | | | Johnny Lee | — | — | — | — | | President and Chief Banking Officer | | | | | | Lynn Hopkins | — | — | — | — | | Interim Executive Vice President and Chief Financial Officer | | | | | | Gary Fan | — | — | — | — | | Executive Vice President and Chief Administrative Officer | | | | | | Vincent (I-Ming) Liu | — | — | 767 | $13,522 | | Executive Vice President and Chief Risk Officer | | | | | | Alex Ko | — | — | — | — | | Former Executive Vice President and Chief Financial Officer | | | | |
Option Exercises and Stock Vested Table
| (1) The value realized upon exercise of options is calculated by multiplying the number of options exercised by the difference between closing price of our common stock on the exercise date and the exercise price. |
Option Exercises and Stock Vested Table
| (2) The value realized upon vesting of restricted stock and RSUs is calculated by multiplying the number of shares of restricted stock and RSUs vested by the closing price of our common stock on the vesting date and does not necessarily reflect actual proceeds received. |
Pension Benefits and Non-Qualified Deferred Compensation
Pension Benefits and Non-Qualified Deferred Compensation As of December 31, 2023 and 2022, the Company did not offer pension benefits or nonqualified deferred compensation to our NEOs.
Potential Payments upon Termination or Change in Control
Potential Payments upon Termination or Change in Control The following presents information concerning estimated payments and benefits that would be provided in certain circumstances for each of the NEOs serving as of the end of the fiscal year ending December 31, 2023. Unless otherwise stated, the payments and benefits set forth below are estimated assuming that the termination of employment or change in control event occurred on the last business day of our fiscal year ending December 31, 2023 using the closing market price per share of our common stock on that date. Actual payments and benefits could be different if such events were to occur on any other date or at any other price or if any other assumptions are used to estimate potential payments and benefits. We have entered into certain agreements with each of our NEOs that provide our NEOs with severance protections. The employment agreements provide that the NEOs will be eligible for severance benefits in certain circumstances following a termination of employment without cause, whether or not in connection with a change in control. Under the employment agreements, if the executive’s employment is terminated upon the occurrence of a “change in control,” or by the executive for “good reason follow a change in control” (each, as defined in the employment agreement) then the executive will be entitled to receive the following severance payments and benefits:
Potential Payments upon Termination or Change in Control
| ● | in the case of executive vice presidents with employment agreements, payment in an amount equal to twelve (12) months of the executive's then current salary (eighteen (18) months in the case of CEO); |
Potential Payments upon Termination or Change in Control
| ● | in the case of executive vice presidents with employment agreements, continuation of the executive's medical and dental insurance coverage for one (1) year or until the executive has found employment, whichever occurs earlier (eighteen (18) months in the case of CEO); |
Potential Payments upon Termination or Change in Control
| ● | the executive's then vested awards (as defined in the employment agreement) will be exercisable over the remaining term of the awards, subject to acceleration in specified circumstances; and |
Potential Payments upon Termination or Change in Control
| ● | immediate vesting of all unvested options and RSUs pursuant to the terms of the 2017 Plan. |
Potential Payments upon Termination or Change in Control
In addition, if an executive with an employment agreement is terminated, regardless of a change in control, by the Company or Bank without “cause,” then the executive will be entitled to receive continued payment of base salary for one year, for Mr. Morris, or Mr. Liu, or six (6) months, for Mr. Fan or Mr. Lee. The severance payments and benefits described above are subject to the executive’s execution and non-revocation of a general release of claims in favor of the Company and the Bank and continued compliance with customary confidentiality and non-solicitation requirements. The following tables and discussion reflect the value of termination payments that each of Messrs. Morris, Lee, Fan, Liu and Ms. Hopkins who were the NEOs serving at December 31, 2023, would receive under their employment agreements or other employment arrangements, if they had terminated employment on December 31, 2023 under the circumstances shown. The tables do not include accrued salary and benefits, or certain amounts that the executive would be entitled to receive under plans or arrangements that do not discriminate in scope, terms, or operation, in favor of our executive officers and that are generally available to all salaried employees. For Ms. Hopkins, if she is terminated without cause, Ms. Hopkins would receive a severance payment in the amount equal to the amount due for the remaining term of the employment agreement at her then current salary, which in any event could not exceed $200,000. In the event such termination occurs other than for cause, after the occurrence of a change of control where Ms. Hopkins’ employment is terminated without cause or materially adversely altered, or as a result of disability or death, Ms. Hopkins will not be entitled to receive any severance payment. For additional information, please see the section above entitled “Employment Agreements.” With respect to Mr. Ko, whose employment terminated prior to December 31, 2023, details regarding his payments upon termination are detailed in the section above entitled “Termination Agreement.”
Potential Payments upon Termination or Change in Control
| Executive Benefits (1) | Termination for Cause | Voluntary Termination | Death | Disability | Retirement | Termination Without Cause | Change-in-Control (Single-Trigger) | Termination Without Cause or by Executive for Good Reason Following a Change-in-Control | | David R. Morris | | | | | | | | | | Chief Executive Officer | | | | | | | | | | Accelerated Stock Options (2) | $— | $— | $— | $— | $— | $— | $— | $— | | Severance (3) | $— | $— | $156,550 | $156,550 | $— | $626,200 | $— | $626,200 | | Benefit Continuation | $— | $— | $— | $— | $— | $— | $— | $17,988 | | Accelerated RSUs (2) | $— | $— | $192,456 | $192,456 | $192,456 | $— | $— | $192,456 | | Bank Owned Life Insurance, Split Dollar | $— | $— | $2,911,732 | $— | $— | $— | $— | $— | | Total | $— | $— | $3,260,738 | $349,006 | $192,456 | $626,200 | $— | $836,644 |
Potential Payments upon Termination or Change in Control
| Johnny Lee | | | | | | | | | | President and Chief Banking Officer | | | | | | | | | | Accelerated Stock Options (2) | $— | $— | $— | $— | $— | $— | $— | $— | | Severance (3) | $— | $— | $143,750 | $143,750 | $— | $287,500 | $— | $575,000 | | Benefit Continuation | $— | $— | $— | $— | $— | $— | $— | $8,590 | | Accelerated RSUs (2) | $— | $— | $314,160 | $314,160 | $314,160 | $— | $— | $314,160 | | Total | $— | $— | $457,910 | $457,910 | $314,160 | $287,500 | $— | $897,750 |
Potential Payments upon Termination or Change in Control
| Gary Fan | | | | | | | | | | Executive Vice President and Chief Administrative Officer | | | | | | | | | | Accelerated Stock Options (2) | $— | $— | $— | $— | $— | $— | $— | $— | | Severance (3) | $— | $— | $81,250 | $81,250 | $— | $162,500 | $— | $325,000 | | Benefit Continuation | $— | $— | $— | $— | $— | $— | $— | $24,845 | | Accelerated RSUs (2) | $— | $— | $— | $— | $— | $— | $— | $— | | Total | $— | $— | $81,250 | $81,250 | $— | $162,500 | $— | $349,845 |
Potential Payments upon Termination or Change in Control
| Vincent (I-Ming) Liu | | | | | | | | | | Executive Vice President and Chief Risk Officer | | | | | | | | | | Accelerated Stock Options (2) | $— | $— | $— | $— | $— | $— | $— | $— | | Severance (3) | $— | $— | $94,850 | $94,850 | $— | $379,400 | $— | $379,400 | | Benefit Continuation | $— | $— | $— | $— | $— | $— | $— | $20,246 | | Accelerated RSUs (2) | $— | $— | $112,564 | $112,564 | $112,564 | $— | $— | $112,564 | | Bank Owned Life Insurance, Split Dollar | $— | $— | $1,897,000 | $— | $— | $— | $— | $— | | Total | $— | $— | $2,104,414 | $207,414 | $112,564 | $379,400 | $— | $512,210 |
Potential Payments upon Termination or Change in Control
| (1) The above table does not include amounts for stock option awards or RSUs that are fully vested, earned salary, and accrued vacation as those items are earned and due to the employee regardless of such termination or change-in-control events. It also does not include amounts payable under life insurance coverage, our accidental death and dismemberment coverage or our business travel accident coverage, which are programs available to all employees. Each form of payment is mutually exclusive based on the individual circumstances or events and therefore represents a single payment and should not be added together. | | (2) Represents in-the-money value of accelerated stock options or RSUs based on the closing price of our common stock on December 31, 2023 of $19.04. Upon a termination due to death, disability, or retirement, RSUs will accelerate and vest. Upon a change-in-control, stock options or RSUs will accelerate only if they are not assumed or substituted, and otherwise provide for a double trigger vesting. | | (3) The NEO's employment agreements provide an executive officer, who is terminated involuntarily without cause, a severance payment equal to 1.0 times base salary. Except for our CEO, each NEO employment agreement provides in connection with a change-in-control a severance payment equal to 1 times the sum of base salary plus one year of continued health benefits. Our CEO's employment agreement provides for a severance payment equal to 1.5 times the sum of his base salary plus 18 months continued health care benefits under such circumstances. In the case of death, or disability, the NEO employment agreements provide for a severance payment equal to 3 months of the NEO's annual base salary. |
CEO Pay Ratio
CEO Pay Ratio As required by Section 953(b) of the Dodd-Frank Act Wall Street Reform and Consumer Protection Act (the "Dodd-Frank" Act) and the related SEC rule, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of our CEO. For fiscal year ended December 31, 2023:
CEO Pay Ratio
| ● | the median of the annual total compensation of all employees of the Company (other than our CEO) was $64,437; and |
CEO Pay Ratio
| ● | the annual total compensation of our CEO, as reported in the “Summary Compensation Table” included in this Proxy Statement, was $1,069,978. |
CEO Pay Ratio
| ● | Based on this information, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of our employees was 17:1. |
CEO Pay Ratio
To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee and our CEO, we took the following steps:
CEO Pay Ratio
| ● | Selection of Determination Date. We determined that, as of December 31, 2023, we had 380 employees. |
CEO Pay Ratio
| ● | Identification of Median Employee. To identify the “median employee” from our employee population, we reviewed the 2023 total compensation of our employees. Total compensation includes base salary, overtime pay, bonus, and 401(k) employer match as reflected in the 2023 annual compensation statements provided to each employee as part of the year-end compensation process. We identified our median employee, excluding the CEO, using this compensation measure, which was consistently applied to all our employees included in the calculation. We did not make any cost-of-living adjustments in identifying the “median employee.” |
CEO Pay Ratio
| ● | Calculation of Annual Total Compensation. Once we identified our median employee, we combined all the elements of such employee’s compensation for fiscal year ended December 31, 2023 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $64,437. |
CEO Pay Ratio
For our CEO’s annual total compensation, we used the amount reported in the “Total” column of the “Summary Compensation Table” included in this Proxy Statement.
Pay Versus Performance Disclosure
Pay Versus Performance Disclosure In accordance with rules adopted by the SEC pursuant to the Dodd-Frank Act, we provide the following disclosure regarding executive “Compensation Actually Paid” (“CAP”) (as calculated in accordance with SEC rules) and certain Company performance for the fiscal years listed below. You should refer to the CD&A in this Proxy Statement for a complete description of how executive compensation relates to Company performance and how the Compensation Committee makes its decisions. The Compensation Committee did not consider the pay-versus-performance disclosure below in making its pay decisions for any of the fiscal years shown.
Pay Versus Performance Disclosure
| | | | | | | | | Value of Initial Fixed $100 Investment Based On: | | | | Year | Summary Compensation Table Total for David R. Morris | Compensation Actually Paid to David R. Morris(1) | Summary Compensation Table Total for Alan Thian(2) | Compensation Actually Paid to Alan Thian (2) | Average Summary Compensation Table Total for Non-CEO NEOs(3) | Average Compensation Actually Paid to Non-CEO NEOs(1) | Total Shareholder Return | Peer Group Total Shareholder Return (4) | Net Income (in millions) | Diluted EPS (5) | | (a) | (b) | (c) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (h) | | 2023 | $1,069,978 | $1,054,900 | $— | $— | $504,569 | $478,144 | 100.94 | 115.64 | $42.47 | $2.24 | | 2022 | $1,183,555 | $1,159,843 | $1,444,211 | $(6,994) | $573,828 | $562,213 | 105.60 | 116.09 | $64.33 | $3.33 | | 2021 | $— | $— | $3,414,552 | $4,065,310 | $733,089 | $906,520 | 129.57 | 124.74 | $56.91 | $2.86 | | 2020 | $— | $— | $2,703,159 | $2,505,720 | $577,408 | $571,663 | 74.30 | 91.29 | $32.93 | $1.65 |
Pay Versus Performance Disclosure
| (1) Amounts represent compensation actually paid to the applicable CEO and the average CAP to our remaining NEOs for the relevant fiscal year, as determined under SEC rules. Compensation actually paid to our CEOs and NEOs represents the “Total” compensation reported in the Summary Compensation Table reduced by all equity incentive compensation for the applicable fiscal year and then adjusted for the value of certain items discussed below. Deductions from, and additions to, total compensation in the Summary Compensation Table by year to calculate CAP consist of: |
Pay Versus Performance Disclosure
| | 2023 | | | | David R. Morris | Average Non-CEO NEOs | | Total Compensation from Summary Compensation Table | $1,069,978 | $504,569 | | Adjustments for Pension | | | | Adjustment for Summary Compensation Table Pension | — | — | | Amount added for current year service cost | — | — | | Amount added for prior service cost impacting current year | — | — | | Total Adjustments for Pension | $— | $— | | Adjustments for Equity Awards | | | | Adjustment for grant date values in the Summary Compensation Table | (159,731) | (93,703) | | Year-end fair value of unvested awards granted in the current year | 148,645 | 76,583 | | Year-over-year difference of year-end fair values for unvested awards granted in prior years | (2,777) | (6,268) | | Fair values at vest date for awards granted and vested in current year | — | — | | Difference in fair values between prior year-end fair values and vest date fair values for awards granted in prior years | (1,215) | (3,037) | | Forfeitures during current year equal to prior year-end fair value | — | — | | Dividends or dividend equivalents not otherwise included in the total compensation | — | — | | Total Adjustments for Equity Awards | $(15,078) | $(26,425) | | Compensation Actually Paid (as calculated) | $1,054,900 | $478,144 |
Pay Versus Performance Disclosure
| (2) Effective April 8, 2022, Mr. Thian resigned from his positions as President and CEO of the Company and the Bank. | | (3) Non-CEO NEOs reflect the average Summary Compensation Table total compensation and average CAP for the following executives by year: | | 2023: Alex Ko, Lynn Hopkins, Gary Fan, Johnny Lee, Vincent Liu | | 2022: Vincent Liu, Jeffrey Yeh, Tsu Te Huang | | 2021: David R. Morris, Vincent Liu, Tammy Song | | 2020: David R. Morris, Larsen Lee | | (4) Based on an initial investment of $100. The Peer Group used is the KBW Nasdaq Regional Banking Index. | | (5) Diluted EPS is a GAAP measure. |