UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary
Proxy Statement
[ ] Confidential,
for use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive
Additional Materials
[ ] Soliciting
Materials Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
The Bancorp, Inc.
______________________________
(Exact Name of Registrant as Specified in
its Charter)
N/A
______________________________
(Name of Person(s) Filing
Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box)
[X] No fee required.
[ ] Fee
computed on table below per Exchange Act Rules 14a-6(i)(l) and 0-11.1
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applies:
________________________________________________________________________________
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applies:
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underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated
and state how it was determined):
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box if any part of the fee is offset as provided by Exchange Act Tule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of
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The Bancorp,
Inc.
409 Silverside
Road, Suite 105
Wilmington,
DE 19809
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To Be
Held May 19, 2021
To the Stockholders of THE BANCORP, INC.:
Notice is hereby given that
the 2021 annual meeting (the “Annual Meeting”) of stockholders of THE BANCORP, INC., a Delaware corporation (the
“Company”), will be held virtually on Wednesday, May 19, 2021 at 10:00 A.M.,
Delaware time, for the following purposes:
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1.
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To elect the thirteen directors named in the enclosed Proxy Statement to serve until the next annual
meeting of stockholders.
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2.
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To approve, in an advisory (non-binding) vote, the Company’s compensation program for its named
executive officers.
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3.
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To approve the selection of Grant Thornton LLP as the independent registered public accounting
firm for the Company for the fiscal year ending December 31, 2021.
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4.
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To transact such other business as may properly be brought before the Annual Meeting and any adjournment,
postponement or continuation thereof.
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Only stockholders of record
on the books of the Company at the close of business on March 23, 2021 will be entitled to notice of and to vote at the
Annual Meeting or any adjournments thereof. The Annual Meeting will be held virtually and there will be no physical
Annual Meeting location. Please see Appendix A of this Notice for information on attending the Annual Meeting virtually
and related matters.
STOCKHOLDERS CAN HELP AVOID
THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP LETTERS TO ASSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY. THE ENCLOSED
ADDRESSED ENVELOPE REQUIRES NO POSTAGE AND YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE ITS USE.
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By order of the Board of Directors
Paul Frenkiel
Secretary
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Wilmington, Delaware
April 9, 2021
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Appendix A
Participating in the Annual Meeting
The Annual Meeting will be
online and a completely virtual meeting of stockholders due to the ongoing public health impact of the coronavirus (COVID-19)
pandemic. This decision was made in light of the protocols that federal, state, and local governments have imposed or may impose in
the near future and taking into account the health and safety of our stockholders, directors and members of management. Conducting a
virtual meeting will also allow stockholders whose travel may be restricted due to COVID-19 to partake in the meeting.
We cordially invite
all stockholders to participate in the Annual Meeting. This year’s Annual Meeting will be held virtually via a live
webcast. To attend and participate in the virtual Annual Meeting, please visit https://web.lumiagm.com/239103630.
Click on “I have a control number” and enter the control number found on your “Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held on May 19, 2021” or Proxy
Card you previously received and enter the password “bancorp2021” (the
password is case sensitive).
If your shares are held
in “street name” through a broker, bank or other nominee, in order to participate in the live webcast of the Annual
Meeting you must first obtain a legal proxy from your bank, broker or other nominee reflecting the number of shares you
held as of the record date for the Annual Meeting, your name and email address. You must then submit a request for registration
to American Stock Transfer & Trust Company, LLC: (1) by email to proxy@astfinancial.com; (2) by facsimile to 718-765-8730;
or (3) by mail to American Stock Transfer & Trust Company, LLC, Attn: Proxy Tabulation
Department, 6201 15th Avenue, Brooklyn,
NY 11219. Requests for registration must be labeled as “Legal Proxy” and be received by American Stock Transfer
& Trust Company, LLC by no later than 5:00 p.m. Eastern Standard Time on May 10, 2021. If your shares are
held in “street name” and you do not register for the Annual Meeting, you may attend the meeting as a guest.
Guest attendees will not be able to vote or submit questions during the Annual Meeting.
Online access to the webcast
will open 60 minutes prior to the start of the Annual Meeting to allow time for you to log-in and test your device. We encourage
you to access the website in advance of the designated start time. Please note that our virtual meeting platform supports access
via current browser versions of Chrome, Firefox, or Microsoft Edge. Connecting via Internet Explorer or via mobile devices or tablets
is not supported. Participants should ensure that they have a strong Wi-Fi connection wherever they intend to participate in the
meeting. Participants should also give themselves plenty of time to log in and ensure that they can hear streaming audio prior
to the start of the meeting. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time,
please call technical support at 1-800-937-5449.
Questions relevant to
meeting matters will be taken live via webcast and answered during the meeting as time allows, to emulate an in-person question
and answer session. Only shareholders with a valid control number will be allowed to ask questions. We will endeavor
to answer as many shareholder-submitted questions as time permits that comply with the meeting rules of conduct. We reserve
the right to edit any inappropriate language and to exclude questions regarding topics that are not pertinent to meeting matters
or our business. If we receive substantially similar questions, we may group such questions together and provide a single
response to avoid repetition in the interest of time and fairness to all shareholders.
A list of stockholders
of record entitled to vote will be located at our executive offices and available during normal business hours to any stockholder
for any purpose relevant to the Annual Meeting for ten days before the Annual Meeting from our Secretary. A list of stockholders
as of the close of business on the record date will also be available for examination by the stockholders during the whole time
of the meeting and can be requested after stockholders login to the virtual Annual Meeting.
Whether or not you expect
to attend the Annual Meeting virtually, please vote your shares in one of the ways described on the Proxy Card for the Annual Meeting
as promptly as possible.
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held on May 19, 2021:
The
Company’s Notice of Annual Meeting, Proxy Statement, Annual Report for the year ended December 31, 2020 and Proxy Card are
available at
https://investors.thebancorp.com/financial-information/proxy-materials/default.aspx
The
Bancorp, Inc.
Proxy Statement
2021 Annual Meeting of Stockholders
Table of Contents
GENERAL
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1
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PROPOSAL 1. ELECTION OF DIRECTORS
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5
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STOCK OWNERSHIP, SECTION 16 COMPLIANCE AND HEDGING POLICY
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11
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NAMED EXECUTIVE OFFICERS
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14
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CORPORATE GOVERNANCE
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15
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
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20
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PROPOSAL 2. ADVISORY (NON-BINDING) VOTE ON EXECUTIVE COMPENSATION
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21
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COMPENSATION DISCUSSION AND ANALYSIS
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22
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COMPENSATION COMMITTEE REPORT
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37
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EXECUTIVE COMPENSATION
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38
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AUDIT COMMITTEE REPORT
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47
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PROPOSAL 3. APPROVAL OF ACCOUNTANTS
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48
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OTHER MATTERS
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49
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STOCKHOLDER PROPOSALS AND NOMINATIONS
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49
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STOCKHOLDER OUTREACH
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50
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The
Bancorp, Inc.
409 Silverside Road, Suite 105
Wilmington, DE 19809
PROXY
STATEMENT
2021 ANNUAL MEETING OF STOCKHOLDERS
GENERAL
Introduction
The 2021 annual
meeting (the “Annual Meeting”) of stockholders of The Bancorp, Inc. (the “Company”) will be held
virtually on Wednesday, May 19, 2021 at 10:00 A.M. for the purposes set forth in the accompanying notice. See
“Participating in the Annual Meeting” below for instructions on how to attend the virtual Annual Meeting. Only
stockholders of record at the close of business on March 23, 2021 will be entitled to notice of and to vote at the
Annual Meeting.
This statement is
furnished in connection with the solicitation by the Board of Directors of the Company (the “Board of Directors”)
of proxies from holders of the Company’s common stock, par value $1.00 per share (the “Common Shares”), to be used
at the Annual Meeting, and at all adjournments thereof. Properly executed proxies duly returned to the Company, and not
revoked, will be voted at the Annual Meeting and any and all adjournments thereof.
This Proxy Statement and
the accompanying form of proxy will be sent on or about April 9, 2021 to stockholders of record as of March 23, 2021.
Participating in the Annual Meeting
The Annual Meeting will
be online and a completely virtual meeting of stockholders due to the ongoing public health impact of the coronavirus (COVID-19)
pandemic. This decision was made in light of the protocols that federal, state, and local governments have imposed or may impose
in the near future and taking into account the health and safety of our stockholders, directors and members of management. Conducting
a virtual meeting will also allow stockholders whose travel may be restricted due to COVID-19 to partake in the meeting.
We cordially invite
all stockholders to participate in the Annual Meeting. This year’s Annual Meeting will be held virtually via a live
webcast. To attend and participate in the virtual Annual Meeting, please visit
https://web.lumiagm.com/239103630. Click on “I have a control number” and
enter the control number found on your “Important Notice Regarding the Availability
of Proxy Materials for the Annual Meeting to be held on May 19, 2021” or Proxy Card you previously received and
enter the password “bancorp2021” (the password is case
sensitive).
If your shares are held
in “street name” through a broker, bank or other nominee, in order to participate in the live webcast of the Annual
Meeting you must first obtain a legal proxy from your bank, broker or other nominee reflecting the number of shares you
held as of the record date for the Annual Meeting, your name and email address. You must then submit a request for registration
to American Stock Transfer & Trust Company, LLC: (1) by email to proxy@astfinancial.com; (2) by facsimile to 718-765-8730;
or (3) by mail to American Stock Transfer & Trust Company, LLC, Attn: Proxy Tabulation
Department, 6201 15th Avenue, Brooklyn,
NY 11219. Requests for registration must be labeled as “Legal Proxy” and be received by American Stock Transfer
& Trust Company, LLC by no later than 5:00 p.m. Eastern Standard Time on May 10, 2021.
If your
shares are held in “street name” and you do not register for the Annual Meeting, you may attend the meeting
as a guest. Guest attendees will not be able to vote or submit questions during the Annual Meeting.
Online access to the webcast
will open 60 minutes prior to the start of the Annual Meeting to allow time for you to log-in and test your device. We encourage
you to access the website in advance of the designated start time. Please note that our virtual meeting platform supports access
via current browser versions of Chrome, Firefox, or Microsoft Edge. Connecting via Internet Explorer or via mobile devices or tablets
is not supported. Participants should ensure that they have a strong Wi-Fi connection wherever they intend to participate in the
meeting. Participants should also give themselves plenty of time to log in and ensure that they can hear streaming audio prior
to the start of the meeting. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time,
please call technical support at 1-800-937-5449.
Questions relevant to
meeting matters will be taken live via webcast and answered during the meeting as time allows, to emulate an in-person question
and answer session. Only shareholders with a valid control number will be allowed to ask questions. We will endeavor
to answer as many shareholder-submitted questions as time permits that comply with the meeting rules of conduct. We reserve
the right to edit any inappropriate language and to exclude questions regarding topics that are not pertinent to meeting matters
or our business. If we receive substantially similar questions, we may group such questions together and provide a single
response to avoid repetition in the interest of time and fairness to all shareholders.
A list of stockholders
of record entitled to vote will be located at our executive offices and available during normal business hours to any stockholder
for any purpose relevant to the Annual Meeting for ten days before the Annual Meeting from our Secretary. A list of stockholders
as of the close of business on the record date will also be available for examination by the stockholders during the whole time
of the meeting and can be requested after stockholders login to the virtual Annual Meeting.
Whether or not you expect
to attend the Annual Meeting virtually, please vote your shares in one of the ways described on the Proxy Card for the Annual Meeting
as promptly as possible.
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held on May 19, 2021:
The
Company’s Notice of Annual Meeting, Proxy Statement, Annual Report for the year ended December 31, 2020 and Proxy Card are
available at
https://investors.thebancorp.com/financial-information/proxy-materials/default.aspx
Revocation of Proxy
If a proxy in the accompanying
form is executed and returned, it may nevertheless be revoked at any time before its exercise by giving written notice of revocation
to the Secretary of the Company at its Wilmington address stated herein, by submitting a later dated proxy or by attending the
Annual Meeting and voting in person.
Expenses and Manner of Solicitation
The cost of soliciting
proxies will be borne by the Company. Directors, officers and regular employees of the Company may solicit proxies either
personally, by letter or by telephone, but will not be specifically compensated for soliciting such proxies. The Company will reimburse
banks, brokerage firms, other custodians, nominees and fiduciaries for reasonable expenses incurred in sending proxy materials
to beneficial owners of the Common Shares.
Annual Report and Report on Form 10-K
The Company’s Annual
Report to Stockholders, including the financial statements and management’s discussion and analysis of financial condition and
results of operations for the year ended December 31, 2020, is being sent to stockholders of record as of March 23, 2021.
Stockholders of record as of March 23, 2021, and beneficial owners of the Company’s Common Shares on that date, may obtain from
the Company, without charge, a copy of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with
the Securities and Exchange Commission, or the SEC, by a request therefor in writing. Any such request from a beneficial owner
of the Common Shares must set forth a good faith representation that, as of the March 23, 2021 record date for this solicitation,
the person making the request was the beneficial owner of the Common Shares. Such written requests should be directed to The Bancorp,
Inc., Attention: Paul Frenkiel, Secretary, 409 Silverside Road, Suite 105, Wilmington, Delaware 19809.
Stockholders Sharing an Address
Stockholders sharing
an address with another stockholder may receive only one annual report or one set of proxy materials at that address unless
they have provided contrary instructions. Any such stockholder who wishes to receive a separate copy of the annual report or
a separate set of proxy materials now or in the future may write or call the Company to request a separate copy of these
materials from the Company at The Bancorp, Inc., Attention: Andres Viroslav, 409 Silverside Road, Suite 105, Wilmington,
Delaware 19809, telephone number (215) 861-7990. The Company will promptly deliver a copy of the requested materials.
Similarly, a stockholder
sharing an address with another stockholder who has received multiple copies of the Company’s proxy materials may use the contact
information above to request delivery of a single copy of these materials.
Who May Vote at the Annual
Meeting
At the Annual
Meeting, only those holders of Common Shares at the close of business on March 23, 2021, the record date, will be entitled to
vote. As of the record date, 57,942,341 Common Shares were outstanding. Each holder is entitled to one vote per share on each
matter of business properly brought before the Annual Meeting. Stockholders do not have cumulative voting rights.
Quorum
The presence at the
Annual Meeting in person or by proxy of a majority of all the votes entitled to be cast at the Annual Meeting will constitute
a quorum. The presence of a quorum for any proposal establishes a quorum for all of the proposals, even if shareholders do
not vote on all of the proposals.
Effect of Broker Non-Votes
A failure by brokers to
vote Common Shares held by them in nominee name will mean that such Common Shares will not be counted for the purposes of establishing
a quorum and will not be voted. If a broker does not receive voting instructions from the beneficial owner of Common Shares
on a particular matter and does not have discretionary authority to vote on that matter but votes on another “routine”
matter, those Common Shares will be counted to determine whether a quorum exists but will not be considered cast on any proposal
on which they were not voted. Such shares are referred to as “broker non-votes.” Brokers generally only have
discretion to vote on the approval of the selection of the auditor (Proposal 3 below) if you do not provide voting instructions,
but do not have discretion to vote those shares with respect to the other proposals.
Required Vote
Proposal 1. The
number of votes required in order to be elected as a director is dependent on whether an election is contested or uncontested.
The Company’s bylaws define an election as “contested” if the number of nominees exceeds the number of directors to
be elected. As no Company stockholders have provided proper notice to the Company of an intention to nominate director candidates,
the director election described in Proposal 1 below is an uncontested election. To be elected as a director in an uncontested
election, each director is elected by a majority of votes cast meaning that the number of votes cast “for” a director’s
election exceeds the number of votes cast “against” that director’s election. Abstentions will have no effect on the
outcome of the election.
Proposal
2. The affirmative vote of a majority of the votes cast at the Annual Meeting is required to approve the
compensation of the Company’s named executive officers as described in Proposal 2 below. The vote is advisory, which allows
stockholders to express to the Board of Directors how they feel about certain issues facing the Company, such as executive
compensation. The results of an advisory vote are non-binding, which means that the Board of Directors is not required to
take any specific action in response to the results of the vote. However, the Board of Directors strongly values feedback
from the Company’s stockholders and will take the results of an advisory vote into account when considering future executive
compensation.
Proposal
3. The affirmative vote of the holders of a majority of the votes cast at the Annual Meeting is required to approve the
selection of Grant Thornton LLP, or Grant Thornton, as the Company’s independent registered public accounting firm.
Abstentions will have no effect on the outcome of the proposal.
Any
proxy not specifying to the contrary, and not designated as a broker non-vote, will be voted FOR:
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the election of the directors;
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the approval of the compensation for the named executive officers; and
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the approval of the selection of Grant Thornton as the Company’s independent registered public
accounting firm for the fiscal year ending December 31, 2021.
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Should any matters
not described above be properly presented at the Annual Meeting, the persons named in the proxy will vote in accordance with
their judgment. The proxy authorizes these persons, in their discretion, to vote upon such matters as may properly be brought
before the Annual Meeting or any adjournment, postponement or continuation thereof.
No Appraisal Rights
Under
Delaware law, holders of our voting stock are not entitled to demand appraisal of their shares or exercise similar rights of dissenters
as a result of the approval of any of the proposals to be presented at the Annual Meeting.
PROPOSAL 1. ELECTION OF DIRECTORS
Directors and Nominees
The Board of
Directors consists of thirteen members. All directors are elected for a term of one year or until their successors are
elected and qualified. The Board of Directors, upon the recommendation of its Nominating and Governance Committee, has
nominated Daniel G. Cohen, Walter T. Beach, Michael J. Bradley, John C. Chrystal, Matthew N. Cohn, John M. Eggemeyer, Hersh
Kozlov, Damian M. Kozlowski, William H. Lamb, James J. McEntee III, Daniela A. Mielke, Stephanie B. Mudick and Mei-Mei H.
Tuan, for election at the Annual Meeting for a term to expire at the annual meeting to be held in 2022 or until their
successors are elected or appointed.
It is the intention of
the persons named in the enclosed proxy, in the absence of a contrary direction, to vote for the election of all the current directors.
Should any of the nominees become unable or refuse to accept nomination or election as a director, the persons named as proxies
intend to vote for the election of such other person as the Nominating and Governance Committee of the Board of Directors may
recommend. Alternatively, the Board of Directors may adopt a resolution to reduce the size of the Board of Directors. The Board
of Directors knows of no reason why any of the nominees might be unable or refuse to accept nomination or election. There are
no family relationships among the directors, nominees and executive officers of the Company.
Following are summaries
of the background, business experience and principal occupations of the nominees and current directors.
Daniel G.
Cohen, age 51, currently serves as the Chairman of The Bancorp, Inc. and the head of its Executive Committee. He has held
both positions since 1999. In addition, he is Chairman of the Board of Directors of the Company’s
wholly-owned subsidiary, The Bancorp Bank, and Chairman of the Bank’s Executive Committee. He is also employed by the
Bank in a senior advisory role within its CRE lending and asset management group. Mr. Cohen had served as the Chief Executive
Officer of the Company from its creation in 1999 through 2001. Since January 2021, Mr. Cohen has served as Chairman of FTAC
Parnassus Acquisition Corporation, a SPAC. Since February 2018, Mr. Cohen has served as the Chairman of the Board of
Directors and of the Board of Managers of Cohen & Company, LLC, and has, since September 2013, served as the
President and Chief Executive of the European Business of Cohen and Company Inc.(NYSE American: COHN), a publicly-traded
financial services company with approximately $2.65 billion in assets under management as of September 30, 2020, and as
President, a director and the Chief Investment Officer of Cohen & Company Inc.’s indirect majority owned subsidiary,
Cohen & Company Financial Limited (formerly known as EuroDekania Management Limited), a Financial Conduct Authority
regulated investment advisor and broker dealer focusing on the European capital markets. Mr. Cohen served as Vice
Chairman of the Board of Directors and of the Board of Managers of Cohen & Company, LLC from
September 2013 to February 2018. Mr. Cohen served as the Chief Executive Officer and Chief Investment Officer
of Cohen & Company Inc. from December 2009 to September 2013 and as the Chairman of the Board of Directors from
October 2006 to September 2013. Mr. Cohen served as the executive Chairman of Cohen & Company Inc. from
October 2006 to December 2009. In addition, Mr. Cohen served as the Chairman of the Board of Managers of
Cohen & Company, LLC from 2001 to September 2013, as the Chief Investment Officer of Cohen &
Company, LLC from October 2008 to September 2013, and as Chief Executive Officer of Cohen &
Company, LLC from December 2009 to September 2013. Mr. Cohen served as the Chairman and Chief Executive
Officer of J.V.B. Financial Group, LLC (formerly C&Co/PrinceRidge Partners LLC), Cohen and Company, Inc.’s
indirect broker dealer subsidiary (“JVB”), from July 2012 to September 2013. Mr. Cohen has served as the
Chief Executive Officer of FinTech Acquisition Corp. IV, a special purpose acquisition company (SPAC), since May 2019,
FinTech Acquisition Corp. V, a SPAC, since October 2020, and FTAC Hera Acquisition Corp., a SPAC, since January 2021.
Mr. Cohen previously served as a director and Chief Executive Officer of FinTech Acquisition Corp. II from May 2015
until July 2018, and as Chief Executive Officer of FinTech Acquisition Corp. III from March 2017 to
October 2020. He has also served as Chairman of INSU Acquisition Corp. III, a SPAC, since October 2020. He previously
served as Chairman of Insurance Acquisition Corp., a SPAC, from December 2018 to October 2020, and INSU Acquisition Corp. II,
a SPAC, from January 2019 to February 2021. Mr. Cohen previously served as Chief Executive Officer of RAIT Financial
Trust, a real estate finance company focused on the commercial real estate industry, from December 2006 when it merged with
Taberna Realty Finance Trust to February 2009 and served as a trustee from the date RAIT acquired Taberna in 2006 until his
resignation from that position in February 2010. Mr. Cohen was Chairman of the board of trustees of Taberna Realty Finance
Trust from its inception in March 2005 until December 2006 and its Chief Executive Officer from March 2005 to December 2006.
Mr. Cohen served as a director of Star Asia, a joint venture investing in Asian commercial real estate, from February 2007 to
February 2014 and as a director of Muni Funding Company of America, LLC, a company investing in middle-market non-profit
organizations, from April 2007 to June 2011. Mr. Cohen is a member of the Academy of the University of Pennsylvania, a
member of the Visiting Committees for the Humanities and a member of the Paris Center of the University of Chicago.
Mr. Cohen is also a Trustee of the List College Board of the Jewish Theological Seminary, a member of the board of the
Columbia Global Center in Paris, a Trustee of the Paideia Institute and a Trustee of the Arete Foundation.
Walter T. Beach,
age 54, has been a director of The Bancorp, Inc. and the Bank since 1999. Mr. Beach has served as Managing Director of Beach Investment
Counsel, Inc., an investment management firm, since 1997. Previously, from 1993 to 1997, Mr. Beach was a Senior Analyst and Director
of Research at Widmann, Siff and Co., Inc., an investment management firm where, beginning in 1994, he was responsible for the
firm’s investment decisions for its principal equity product. Before that, he was an associate and financial analyst at Essex Financial
Group, a consulting and merchant banking firm, and an analyst at Industry Analysis Group, an industry and economic consulting firm.
Since December 2020, he has been a member of the board of INSU Acquisition Corp. III, a SPAC, and he also currently serves on the
board of directors of IG Wines, an internationally-focused company in the fine wines and spirits trade. From 2005 to 2020,
Mr. Beach served as a director of Exantas Capital Corp., now known as ACRES Commercial Realty Corp. (NYSE: ACR), a publicly-traded real estate investment trust. Mr. Beach also served on the board of directors of FinTech I from November 2014
until July 2016, and also served on the board of directors of FinTech II from May 2015 until July 2018. Mr. Beach
also served as a director of Institutional Financial Markets, Inc. and its predecessor, Cohen & Company, a publicly-traded
financial services company specializing in credit related fixed income investments, from December 2009 to 2013.
Michael J. Bradley,
age 76, has been a director of The Bancorp, Inc. and the Bank since 2005. Since August 2015 he has served as the lead independent
director of the Board of Directors. From 1998 to 2014, Mr. Bradley was a co-owner and Managing Director of BF Healthcare, Inc.,
a supplier of physician services to hospitals and assisted living facilities. Mr. Bradley has served on the Board of Directors
of Resource America, Inc., a specialized asset management company, since 2005, and SourceCorp, a provider of business outsourcing
solutions, since 1996. Mr. Bradley has served as Chief Executive Officer of several university hospitals, including Columbia Presbyterian
Medical Center and Thomas Jefferson University Hospital. Previously, Mr. Bradley served as Chairman of First Executive Bank, and
as Vice Chairman of First Republic Bank. Mr. Bradley is a certified public accountant.
John C. Chrystal,
age 63, served as Interim Chief Executive Officer of The Bancorp, Inc., and President of the Bank from January 2016 to June 2016;
and he has served as a Director of The Bancorp and the Bank since 2013. Mr. Chrystal’s service as Interim Chief Executive
Officer did not disqualify his qualification as an independent Director. In April 2017, the Board of Directors of The Bancorp,
Inc. named Mr. Chrystal as Vice Chairman. Mr. Chrystal has served as a director of MCAP Acquisition Corp, a SPAC, since February
2021. Mr. Chrystal has served as a director INSU Acquisition Corp. III, a SPAC, since December 2020, and previously served as a
director of Insurance Acquisition Corp. from March 2018 to October 2020, as a director of INSU Acquisition Corp. II from September
2020 to February 2021. Mr. Chrystal has served as an independent director of MoneyLion, Inc., a privately held financial wellness,
membership based mobile banking, and consumer lending platform, since November 2016; an independent director of Regatta
Loan Management LLC, a privately held, SEC-registered Investment Adviser, since 2015; and an independent director of the Trust
for Advised Portfolios, a mutual fund series trust focused on multiple asset classes, since 2010. Mr. Chrystal was an independent
director of Morgan Stanley Derivative Products, Inc., an entity providing credit enhancement for select derivative transactions,
from 2010 to 2017. Mr. Chrystal was an independent director of Javelin Mortgage Investments, Inc., a mortgage real estate
investment trust, from 2012 through its sale in 2016. From 2009 to 2012, Mr. Chrystal was a Managing Member of Bent Gate Advisors,
LLC, a firm providing strategic advice to financial institutions; from 2005 through 2008 was the Chief Risk Officer of DiMaio Ahmad
Capital, an investment management firm focused on corporate credit markets, and from 1993 to 2005 was a Managing Director with
multiple Credit Suisse entities, with oversight of asset management and financial product functions.
Matthew N. Cohn,
age 51, has been a director of The Bancorp, Inc. and the Bank since 1999. Mr. Cohn founded and serves
as Vice Chairman of The ASI Show, a leading producer of trade shows throughout the country and the recipient of prestigious awards,
including the INC 500 Award twice. In addition, since 1992, Mr. Cohn has been the Chairman of ASI Computer Systems, and the Vice
Chairman of the Advertising Specialty Institute, a SAAS, technology, and media company and a multi-year winner of the “Best
Place to Work” award. Mr. Cohn has served on the international board of YPO (the Young Presidents’ Organization). Mr. Cohn
was Chair of YPO’s International Event Committee. He was the recipient of YPO’s “Best of the Best”
international event award in 2019. Mr. Cohn was the Chief Executive Officer of the Medical Data Institute as well as
a past board member of The Society of Independent Show Organizers and Changing Attitudes, Decisions and Environments for Kids (CADEKids).
Mr. Cohn is currently on the Global Mission Board for JDRF (the world’s largest charitable funder of diabetes research) and serves
on the International Talent and Compensation Committee of the Board. Mr. Cohn is the immediate past President of the Board
of the Eastern Pennsylvania Chapter of JDRF.
John M. Eggemeyer,
age 74, has been a director of The Bancorp, Inc. and the Bank since August 2016. Mr. Eggemeyer is a Founder and Managing Principal
of Castle Creek® Capital LLC which has been an investor in the banking industry since 1990. The firm is currently one of the
most active investors in community banking with in excess of $900 million in assets under management in private equity. Mr.
Eggemeyer has over 40 years of experience in the banking industry and has been involved in more than 75 bank acquisitions.
In 2006, the American Banker honored Mr. Eggemeyer as “Community Banker of the Year” for his success
as a builder of community banking companies. Prior to founding Castle Creek®, Mr. Eggemeyer spent nearly 20 years as
a senior executive with some of the largest banking organizations in the U.S. with responsibilities across a broad spectrum of
banking activities. Mr. Eggemeyer has served as the Chairman of PacWest Bancorp since its formation in 2000, is a Board member
of Northpointe Bancshares, Inc. and was a founder and Director of Guaranty Bancorp. Previously, he was Chairman and Chief
Executive Officer of White River Capital and a Board member of TCF Financial Corporation, Western Bancorp and American Financial
Realty. Mr. Eggemeyer’s civic and philanthropic efforts have been focused in the areas of improving the quality of instruction
in education and expanding educational opportunities for lower income students. He was a founder and past President of the Rancho
Santa Fe Community School Endowment and was a member of the Rancho Santa Fe School Site Selection Committee. He also helped
establish the Minnesota Charter of A Better Chance, a national organization committed to creating improved educational opportunities
for minority high school students. Mr. Eggemeyer is a Life Trustee of Northwestern University where he serves on the Finance
and Investment Committees and is a past Trustee of the Bishop’s School of La Jolla, California and the Parent Advisory Board
at Stanford University. Mr. Eggemeyer holds a Bachelor of Science degree from Northwestern University and an M.B.A. from the University
of Chicago.
Hersh Kozlov, age
73, has been a director of The Bancorp, Inc. and the Bank since 2014. He has also served as a director of vTv Therapeutics, Inc.
a biopharmaceuticals company, since September 2019. He has been a partner at Duane Morris LLP (An international law firm) since
2009. Previously, he was a partner at Wolf, Block, Schorr and Solis-Cohen LLP (a law firm) from 2001 to 2009. Mr. Kozlov served
as a member of the board of directors of Resource America, Inc. and was previously a member of the board of directors of JeffBanks,
Inc., TRM Corporation, Hudson United Bank, US Healthcare Life Insurance Company, and Princeton Insurance Company. Mr. Kozlov
has also served as counsel to the board of directors of US Healthcare, Inc. and was appointed by the President of the United States
to be a member of the Advisory Committee for Trade Policy & Negotiations, serving in that role from 2002 to 2004.
Damian M. Kozlowski,
age 56, serves as Chief Executive Officer of The Bancorp, Inc., President of the Bank, and a Director of the Company and the Bank.
Mr. Kozlowski joined The Bancorp on June 1, 2016, after having served, since 2010, as Chief Executive Officer, President, and Director
of Modern Bank, N.A. From 2008-2009, Mr. Kozlowski served as Chief Executive Officer of Alpha Capital Financing Group, Inc., a
private equity firm he founded. From 2000 through 2006, Mr. Kozlowski served in executive capacities with Citigroup Private Bank;
as the CEO of its Global Private Bank (2005-2006); President of its US Private Bank (2002-2005); Chief Operating Officer and Chief
Financial Officer (2001-2002); and Global Head of Business Development and Strategy (2000-2001). Previously, from 1998-1999, he
was a Managing Director of Bank of America Securities, an investment bank.
William H. Lamb,
age 78, has been a director of The Bancorp, Inc. and the Bank since 2004. Mr. Lamb is a founding partner of Lamb McErlane PC.
From January 2003 through January 2004, Mr. Lamb served as a Justice of the Pennsylvania Supreme Court and is the only former
Pennsylvania Supreme Court Justice currently in practice. Mr. Lamb has been recognized as a Top 100 Pennsylvania Super Lawyer
for appellate law and as a Pennsylvania Super Lawyer since 2005. Mr. Lamb previously served as director and corporate secretary
of JeffBanks, Inc. and Jefferson Bank until their acquisition by Hudson United Bank in 1999. Since 2004, Mr. Lamb has been appointed
to the President’s Advisory Committee on the Arts, the Commonwealth of Pennsylvania’s Court of Judicial Discipline, and the Pennsylvania
Elections Reform Task Force. Mr. Lamb also served as President Judge of the Court of Judicial Discipline and on the Chester County
Boy Scout Council.
James J. McEntee III,
age 63, has been a director of both The Bancorp, Inc. and the Bank since 2000. Mr. McEntee has been President and Secretary
of FinTech Acquisition Corp. IV, a SPAC, since May 2019, FinTech Acquisition Corp. V, a SPAC, since June 2019, and FinTech Acquisition
Corp. VI, a SPAC, since November 2020. He previously served as President and Chief Financial Officer of FinTech Acquisition Corp.
III, a SPAC, from March 2017 to October 2020. He previously served as Chief Financial Officer and Chief Operating Officer of FinTech
Acquisition Corp., a SPAC, until July 2016, and served as President and Chief Financial Officer of FinTech Acquisition Corp. II,
a SPAC, until July 2018. Mr. McEntee has
served as the Managing Principal of StBWell, LLC, an owner and operator of real estate, since June 2010. Mr. McEntee was
the Chief Executive Officer of Alesco Financial, Inc. from its incorporation in 2006 until its merger with Cohen & Company
in December 2009 and was the Chief Operating Officer of Cohen & Company from March 2003 until December 2009 and was a managing
director of Cohen & Company Inc. and was the Vice-Chairman and Co-Chief Operating Officer of JVB Financial through October
2013. He was also a director of T-Rex Group, Inc., a provider of risk analytics software for investors in renewable energy, from
November 2014 until January 2018. From 1990 through 1999, Mr. McEntee was a stockholder at Lamb McErlane, PC, and from 2000 until
2004 was of counsel to Lamb McErlane. Mr. McEntee was previously a director of Pegasus Communications Corporation, a publicly
held provider of communications and other services, and of several other private companies. Mr.
McEntee served as a director of The Chester Fund, a nonprofit organization, from 2008 to June 2020, and served as its Chairman
from July 2012 to January 2018.
Daniela
A. Mielke, age 55, has been a director of both The Bancorp, Inc. and the Bank since August 2019. Ms.
Mielke is Managing Partner of Commerce Technology Advisors, LLC, a privately held firm which she founded in April 2016, and which
provides consulting services to technology, financial services and private equity companies on organic and inorganic growth strategies
including building payment businesses and using artificial intelligence. From 2018 to December 2020, Ms. Mielke served
as the North American CEO of RS2 Inc., one of the leading providers of payment processing services in Europe and Asia Pacific.
She had responsibility for sales and marketing as well as product development and customer relationship management for the company’s
operations in North America. From 2013 to 2016 Ms. Mielke was Chief Strategy and Product Officer at Vantiv, Inc., which
was at the time the largest merchant acquirer in the US. From 2010 to 2013 Ms. Mielke was the VP, Head of Global Strategy
and Market Intelligence for PayPal Inc. Ms. Mielke co-founded A-Connect in 2001, a consulting firm which provides financial
services and other consulting and rejoined in 2007 to establish and direct new operations for the West Coast and lead its global
marketing function. From 2002 to 2007 Ms. Mielke successively served as VP of Product and SVP of Strategy and Market Intelligence
at Visa International. From 1998 to2002, Ms. Mielke was an Engagement Manager for McKinsey & Company, a worldwide management
consulting firm. Since February 2021, she has served as a member of the board of directors of FTAC Athena Acquisition
Corp., a SPAC. She also currently serves as a member of the board of FINCA International, a global NGO dedicated to alleviating
poverty, and Nuvei (TSX: NVEI and NVEI.U), a global payment technology provider. Ms. Mielke is also a strategic advisor to
Machinify, an artificial intelligence platform company, and Linquineq, a blockchain company focused banking solutions.
Stephanie
B. Mudick, age 65, has been a director of both The Bancorp, Inc. and the Bank since August 2019. Ms. Mudick was
Executive Vice President of JPMorgan Chase from 2008 through 2018, where she also served as Head of Regulatory Strategy from
2010 through 2018. In that capacity, she managed the firm’s global regulatory agenda across all its businesses and products.
During this period, Ms. Mudick designed and drove the execution of that firm’s most significant regulatory deliverables,
was central to the design and development of controls infrastructure and managed conflicts of interest governance. From 2005
through 2007 she was EVP, CAO and Head of Consumer Operations of the Global Consumer Group at Citigroup, a business providing a
wide array of banking, lending, insurance and investment services to individual and small business consumers in over 50 countries.
From 1993 to 2005 Ms. Mudick served in various roles in Citigroup’s legal department including Co-General Counsel and Corporate
Secretary. At both JPMorgan Chase and Citigroup, she served on senior management committees and regularly engaged with and
advised their respective Boards of Directors and Board Committees. Ms. Mudick has previously served as a director of two
public company Boards: The Student Loan Corporation (NYSE: STU) and Ixe Grupo Financiero (BMV:IXE), and several not-for-profit
Boards, including City Year New York, which she chaired for six years, and the Institute for International Education.
Mei-Mei
H. Tuan, age 54 has been a director of both The Bancorp, Inc. and the Bank since 2013. Ms. Tuan is the co-founder and
co-owner of Notch Partners LLC, a firm providing leadership capital and managed-led buyout strategies exclusively for institutional
private equity funds. Ms. Tuan is also a founder and the Chief Executive Officer of Phoenyx Partners LLC, a boutique search firm
based in New York. Ms. Tuan has served as a director of FinTech Olympus Acquisition Corp., a SPAC, since August 2020, FTAC Athena
Acquisition Corp., a SPAC, since February 2021, and FTAC Hera Acquisition Corp., a SPAC, since March 2021. She also served, from
August 2018 until October 2020, as a director of FinTech Acquisition Corp. III, a SPAC. As an investment banker with Goldman Sachs,
BankAmerica and BankAustria, Ms. Tuan led domestic and international transactions in project finance, mergers and acquisitions,
real estate, syndications and sale leasebacks. Ms. Tuan’s operating experience includes serving as Chief Financial Officer and
Chief Operating Officer at the Sierra Foundation, from 1996 through 1997, and the San Francisco Food Bank, from 1997 through 1998.
Ms. Tuan is an active board member of Gorilla Commerce, Inc., the Clara Maass Medical Center and its Foundation, The Harvard Business
School Asian-American Alumnae Association and Montclair Kimberley Academy. In the recent past, she has served on the Boards
of Friends, Thirteen (WNET), the Museum of Chinese in America in New York City (Co-Chair), the Wellesley College Alumnae Association,
the New Jersey Women’s Forum, the Mid-Manhattan Performing Arts Foundation, Montclair Kimberley Academy and
the New Jersey Network (NJN). Ms. Tuan is also a current board member of the Committee of 100, an organization that addresses
issues concerning Sino-U.S. relations.
The Board of Directors
has not adopted specific minimum qualifications for service on the board, but rather has established a set of standards as set
forth in the Board’s Corporate Governance Guidelines. These standards may be accessed at https://investors.thebancorp.com/corporate-information/governance-documents/default.aspx
and are summarized below. The Board of Directors seeks a mixture of skills that are relevant to the Company’s business as a bank
holding company and the business of its subsidiary bank. The following presents a brief summary of the attributes of each
director that led to the conclusion that he or she should serve as such:
Mr. Cohen has served
as a director of, and in other significant management capacities, with a number of financial companies. In addition
to experience in commercial real estate, he has considerable experience in securities, investment management and capital markets.
Mr. Beach has extensive
experience in investment management, corporate finance and capital markets. While currently not serving in this capacity,
Mr. Beach is deemed an audit committee financial expert which, among other factors, reflects the quantitative and analytical skills
developed in his experience as a director of research for an investment management firm.
Mr. Bradley has served
as chairman and in other significant capacities for financial institutions and served as Chief Executive Officer of several university
hospitals, including Columbia Presbyterian Medical Center and Thomas Jefferson University Hospital. Within these capacities, he
was involved in significant management functions with respect to business and financial matters.
Mr. Chrystal has extensive
financial, investment and financial risk management experience, enabling him to provide the Company with advice and oversight
regarding financial markets, risk management and investments.
Mr.
Cohn has significant experience in founding, leading and having senior roles in a variety of companies, including mid-size businesses
of the type that are the Bank’s clients. In addition, he has considerable experience with electronic distribution and technology-based
companies.
Mr.
Eggemeyer has served as chairman and in other significant management capacities with a number of financial companies. He is experienced
in evaluating financial performance of financial institutions.
Mr. Kozlov has extensive
legal and business experience resulting from his partnerships at prominent law firms where he represented companies which included
banks, insurance companies and other financial institutions. He has board of director’s experience at multiple financial institutions.
His experience in general business matters also reflects service as a Presidential Appointee to the Advisory Commission for Trade
Policy and Negotiations of the United States.
Mr. Kozlowski has extensive
experience in commercial banking, wealth management, and investment banking. Additionally, he has held numerous leadership positions
in financial institutions and has a demonstrated record in improving both financial and regulatory performance.
Mr. Lamb has extensive
experience as a director of public bank holding companies, beginning in 1974. Additionally, he has significant legal experience
with respect to business and financial matters and has particular knowledge of the southeastern region of Pennsylvania which is
one market served by the Company.
Mr. McEntee has extensive
experience in corporate law and financial institution management, as well as significant managerial experience in real estate,
investments and capital markets operations.
Ms. Mielke has significant
experience as a senior officer of large payment processing and merchant acquiring companies. She has also served as a technology
and financial services consultant. This experience complements the Company’s payment processing and merchant acquiring lines
of business as well as its focus on technology and the emerging fintech marketplace.
Ms. Mudick has extensive
experience in bank regulatory matters as a senior regulatory officer and general counsel in major global banks and bank holding
companies. She has extensive experience in consumer financial products, complementing her regulatory expertise with product expertise.
Ms. Tuan has significant
experience in financing real estate projects and a variety of other investment banking experience. She has served as a Chief Financial
Officer and Chief Operating Officer and holds an M.B.A. from Harvard Business School.
Standard for Election of Directors
The director nominees
receiving a majority of the votes cast, in uncontested elections, will be elected. If an incumbent director is not elected by
a majority of votes cast, in an uncontested election, the incumbent director will tender his or her resignation to the Board for
consideration. The Nominating and Governance Committee must promptly consider any resignation offer so tendered and make a recommendation
to the Board of Directors as to the response to the resignation offer. The Board of Directors must take action on the Nominating
and Governance Committee’s recommendation within 90 days following certification of the stockholder vote. Any director whose resignation
is under consideration must abstain from participating in any board or committee deliberations regarding the acceptance of his
or her offer of resignation or the offer of resignation of any other director tendered because that director received a majority
against vote. In contested elections, the Company will use plurality voting. Each director nominee has indicated their willingness
to serve on our Board. Each proxy will be voted “FOR” the election of such director nominees unless instructions are
given on the proxy to vote “AGAINST” such director nominees.
If any nominee for
director who is not an incumbent fails in an uncontested election to receive a majority of votes cast at a meeting of
stockholders duly called and at which a quorum is present, such nominee will not be elected and will not take office. All of
the Board of Directors’ nominees for election as a director at the Annual Meeting are incumbents. If an incumbent director’s
offer of resignation is accepted by the Board of Directors, or if a non-incumbent nominee for director is not elected, the
Board of Directors may fill any resulting vacancy or may decrease the size of the Board of Directors pursuant to the
Company’s bylaws.
The Board of Directors unanimously recommends a vote
“FOR” the election of each nominee.
STOCK OWNERSHIP, SECTION 16 COMPLIANCE
AND HEDGING POLICY
The following table sets
forth the number and percentage of the Company’s Common Shares owned as of March 23, 2021, by each of the Company’s directors
and named executive officers, all of the directors and executive officers as a group and other persons who beneficially own more
than 5% of the Company’s outstanding voting securities. This information is reported in accordance with the beneficial ownership
rules of the SEC under which a person is deemed to be the beneficial owner of a security, if that person has or shares voting
power or investment power with respect to such security or has the right to acquire such ownership within 60 days. Shares issuable
pursuant to options or warrants are deemed to be outstanding for purposes of computing the percentage of the person or group holding
such options or warrants but are not deemed to be outstanding for purposes of computing the percentage of any other person.
|
|
Common
|
|
|
Percent
|
Non-NEO Directors (2)
|
|
Shares (1)
|
|
|
of Class
|
Cohen, Daniel G.
|
|
|
226,868
|
(3)
|
|
|
0.4
|
%
|
Beach, Walter T.
|
|
|
65,100
|
(4)
|
|
|
*
|
|
Bradley, Michael J.
|
|
|
110,100
|
(5)
|
|
|
*
|
|
Chrystal, John C.
|
|
|
230,916
|
(6)
|
|
|
*
|
|
Cohn, Matthew N.
|
|
|
136,163
|
(7)
|
|
|
*
|
|
Eggemeyer, John M.
|
|
|
43,100
|
(8)
|
|
|
*
|
|
Kozlov, Hersh
|
|
|
98,100
|
(9)
|
|
|
*
|
|
Lamb, William H.
|
|
|
220,841
|
(10)
|
|
|
*
|
|
McEntee III, James J.
|
|
|
119,070
|
(11)
|
|
|
*
|
|
Mielke, Daniela A.
|
|
|
35,370
|
(12)
|
|
|
*
|
|
Mudick, Stephanie B.
|
|
|
15,100
|
(13)
|
|
|
*
|
|
Tuan, Mei-Mei H.
|
|
|
51,100
|
(14)
|
|
|
*
|
|
Named Executive Officers (2)
|
|
|
|
|
|
|
|
|
Kozlowski, Damian
|
|
|
851,642
|
(15)
|
|
|
1.4
|
%
|
Frenkiel, Paul
|
|
|
198,209
|
(16)
|
|
|
*
|
|
Connolly, Mark
|
|
|
123,283
|
(17)
|
|
|
*
|
|
Garry, Gregor
|
|
|
32,320
|
(18)
|
|
|
*
|
|
Pareigat, Thomas
|
|
|
74,994
|
(19)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
All executive officers and directors (17) persons
|
|
|
2,632,276
|
|
|
|
4.5
|
%
|
|
|
|
|
|
|
|
|
|
Owners of more than 5% of outstanding shares
|
|
|
|
|
|
|
|
|
Frontier Capital Management Co. LLC
|
|
|
5,024,953
|
(20)
|
|
|
8.7
|
%
|
BlackRock, Inc.
|
|
|
4,440,623
|
(21)
|
|
|
7.7
|
%
|
Dimensional Fund Advisors, L.P.
|
|
|
3,772,269
|
(22)
|
|
|
6.5
|
%
|
* Less than 1%
|
(1)
|
Includes: (a) Common Shares, (b) Common Shares receivable upon vesting of restricted stock within 60 days of March 23,
2021 and (c) Common Shares receivable upon exercise of options held by such person which are vested or will vest within 60 days
of March 23, 2021.
|
|
(2)
|
The address of all of the Company’s directors and executive officers is c/o The Bancorp, Inc., 409 Silverside Road, Suite
105, Wilmington, Delaware 19809.
|
|
(3)
|
Consists of: (a) 116,633 Common Shares owned directly, (b) 50,000 Common Shares issuable upon exercise of options, (c) 235
Common Shares held in a 401(k) plan account for the benefit of Mr. Cohen, (d) 30,000 Common Shares owned by a charitable trust
of which Mr. Cohen is a co-trustee and (e) 30,000 Common Shares owned by a family trust of which Mr. Cohen is a co-trustee. Mr.
Cohen disclaims beneficial interest in shares owned by these trusts except for pecuniary interest.
|
|
(4)
|
Consists of: (a) 50,100 Common Shares owned directly and (b) options to purchase 15,000 Common Shares.
|
|
(5)
|
Consists of: (a) 95,100 Common Shares owned directly and (b) 15,000 Common Shares issuable upon exercise of options.
|
|
(6)
|
Consists of: (a) 225,916 Common Shares owned directly and (b) 5,000 Common Shares issuable upon exercise of options.
|
|
(7)
|
Consists of: (a) 121,163 Common Shares owned directly and (b) 15,000 Common Shares issuable upon exercise of options.
|
|
(8)
|
Consists of (a) 30,000 Common Shares and (b) 13,100 restricted stock units vesting on May 20, 2021 issued to Castle Creek Advisors
IV LLC on behalf of Mr. Eggemeyer in his capacity as a member of the Board of Directors of the Company. Mr. Eggemeyer is a managing
principal of Castle Creek Capital VI LLC, or CCC VI, the sole general partner of Castle Creek Capital Partners VI, LP, or CC Fund
VI. Based solely on the Form 13D/A filed on February 8, 2021 by CC Fund VI, CC Fund VI has shared voting and dispositive power
regarding 2,828,234 shares of Company common stock with CCC VI, the general partner of CC Fund VI and they ceased to be the beneficial
owners of more than five percent of the outstanding shares of the Company’s common stock on February 5, 2021. Based solely
on the Form 13D/A filed on June 4, 2020 by CC Fund VI, CCC VI has established a six-person investment committee to exercise such
voting and dispositive power and no person other than Fund VI and CCC VI has beneficial ownership of the shares of Company common
stock held by Fund VI. Based solely on the Form 4 filed by Mr. Eggemeyer on February 10, 2021, Mr. Eggemeyer disclaims beneficial
ownership of the shares of the Company common stock owned by Fund VI and they are not included in the shares reported for Mr. Eggemeyer.
|
|
(9)
|
Consists of 98,100 Common Shares owned directly.
|
|
(10)
|
Consists of: (a) 191,673 Common Shares owned directly, (b) 14,168 Common Shares held in trusts for the benefit of members of
Mr. Lamb’s immediate family, and (c) 15,000 Common Shares issuable upon exercise of options.
|
|
(11)
|
Consists of: (a) 104,070 Common Shares owned directly and (b) 15,000 Common Shares issuable upon exercise of options.
|
|
(12)
|
Consists of (a) 18,590 Common Shares owned directly and (b) 16,780 shares owned indirectly
by a family member.
|
|
(13)
|
Consists of 15,100 Common Shares owned directly.
|
|
(14)
|
Consists of 51,100 Common Shares owned directly.
|
|
(15)
|
Consists of: (a) 399,296 Common Shares owned directly, (b) 4,460 Common Shares held for the
benefit of members of Mr. Kozlowski’s immediate family (c) 432,552 Common Shares issuable upon exercise of options and (d) 15,334
Common Shares held in a 401(k) plan account for the benefit of Mr. Kozlowski.
|
|
(16)
|
Consists of: (a) 94,988 Common Shares owned directly, (b) 98,000 Common Shares issuable upon exercise of options and (c) 5,221
Common Shares held in a 401(k) plan account for the benefit of Mr. Frenkiel.
|
|
(17)
|
Consists of 120,105 Common Shares owned directly and (b) 3,178 Common Shares held in a 401(k) plan account for the benefit
of Mr. Connolly.
|
|
(18)
|
Consists of 28,439 Common Shares owned directly and (b) 3,881 Common Shares held in a 401(k) plan account for the benefit of
Mr. Garry.
|
|
(19)
|
Consists of: (a) 35,676 Common Shares owned directly, (b) 35,000 Common Shares issuable upon exercise of options and (c) 4,318
Common shares held in a 401 (k) plan account for the benefit of Mr. Pareigat.
|
|
(20)
|
Based solely on Form 13G/A filed by Frontier Capital Management Co., LLC, or Frontier, on February
16, 2021 reporting that Frontier has sole dispositive power over 5,024,953 shares of Company common stock and sole voting power
over 2,121,976 shares of Company common stock. The address of Frontier is 99 Summer Street, Boston, MA 02110.
|
|
(21)
|
Based solely on Form 13G/A filed by BlackRock, Inc, or BlackRock, on January 29, 2021, on behalf
of itself and its subsidiaries, BlackRock Life Limited, BlackRock Advisors, LLC, BlackRock Investment Management (UK) Limited,
BlackRock Asset Management Canada Limited, BlackRock (Netherlands) B.V., BlackRock Fund Advisors, BlackRock Asset Management Ireland
Limited, BlackRock Institutional Trust Company, National Association, BlackRock Financial Management, Inc., BlackRock Japan Co.,
Ltd., BlackRock Asset Management Schweiz AG and BlackRock Investment Management, LLC. This Form 13G/A reports that BlackRock and
these subsidiaries have sole dispositive power over 4,440,623 shares of Company common stock and sole voting power over 4,250,106
shares of Company common stock. The address of BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055.
|
|
(22)
|
Based solely on Form 13G/A filed by Dimensional Fund Advisors LP, or Dimensional Fund, on March 9, 2021, Dimensional Fund has
sole dispositive power regarding 3,772,269 shares of Company common stock and sole voting power regarding 3,588,083 shares of Company
common stock. Such Form 13G/A reports that Dimensional Fund, an investment adviser, furnishes investment advice to four investment
companies and serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts
(collectively referred to as the “Funds”). Such Form 13G/A reports that, in these roles, Dimensional Fund may possess
voting and/or investment power over the securities of the Issuer that are owned by the Funds and may be deemed to be the beneficial
owner of the shares of the Issuer held by the funds. Such Form 13G/A reports that all securities being are owned by the Funds and
Dimensional Fund disclaims beneficial ownership of such securities. The address of Dimensional Fund is 6300 Bee Cave Road, Building
One, Austin, TX 78746.
|
Section 16 Compliance
Section 16(a) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires the Company’s officers, directors and persons
who own more than ten percent of a registered class of the Company’s equity securities to file reports of ownership and changes
in ownership with the SEC and to furnish the Company with copies of all such reports.
Based solely on its review
of the reports received by it, the Company believes that, during 2020, no officers, directors or beneficial owners failed to file
reports of ownership and changes of ownership on a timely basis.
Hedging Policy
The Company has an Insider Trading
Policy that prohibits hedging transactions. The policy may be accessed at https://investors.thebancorp.com/corporate-information/governance-documents/default.aspx.
The prohibition against hedging is as follows:
PROHIBITED TRANSACTIONS. The
Company considers it improper and inappropriate for any employee, officer or director to engage in speculative transactions in
Company securities. It therefore is Company policy that insiders may not engage in any of the following transactions:
Hedging Transactions. Certain forms of hedging or monetization
transactions, such as zero-cost collars and forward sale contracts, allow an employee, officer or director to lock in much of the
value of his or her stock holdings, often in exchange for all or part of the potential for upside appreciation in the stock. These
transactions allow the employee, officer or director to continue to own the covered securities, but without the full risks and
rewards of ownership. In these situations, the employee, officer or director may no longer have the same objectives as other shareholders.
Therefore, employees, officers and directors are prohibited from engaging in any such transactions.
NAMED EXECUTIVE OFFICERS
Information is set forth
below regarding the background of each of the Company’s executive officers who is not also a director. For the Company’s officer
who is a director nominee, Damian Kozlowski, this information can be found above under “Proposal 1. Election of Directors—Directors
and Nominees.”
Mark Connolly, age 53, joined
The Bancorp in June 2016 and has served as Executive Vice President and Head of Credit Markets since February 2017 and Chief Credit
Officer since December 2019. From 2013 to 2015, Mr. Connolly held a variety of senior management roles including Chief Financial
Officer, Head of Operations and Head of Financial Services of Tresata, Inc., a data analytics software company. Previously, from
2010 to 2012, Mr. Connolly served as Managing Director – Private Bank Head of Products which included US Lending, Mortgages,
Banking and Trust Services at Morgan Stanley Wealth Management. Additionally, Mr. Connolly served as the Co-Chief Executive Officer/Chief
Operating Officer of the U.S. Private Bank at Citi Global Wealth Management from 2009 to 2010 and served as the Head of U.S. Lending,
Mortgages, Banking and Trust Services at Citi Global Wealth Management from 2005 to 2010. Before joining Citigroup, Mr. Connolly
also held a senior management position within Bank of America’s Corporate and Investment Bank from 1998 to 2005.
Paul Frenkiel,
age 68, has served as Chief Financial Officer and Executive Vice President of Strategy at The Bancorp since joining the organization
in September 2009; he also serves as the organization’s Principal Accounting Officer. From November 2000 through October 2008
he was Chief Financial Officer and Executive Vice President of Republic First Bancorp Inc. From January 2005 through September
2009, Mr. Frenkiel also served as Chief Financial Officer and in other capacities for First Bank of Delaware, which was spun off
from Republic First Bancorp Inc. Additionally, he served as Chief Financial Officer of JeffBanks, Inc., from 1987 through its
acquisition by Hudson United Bancorp in 2000, and also served as Chief Financial Officer at Dominion Bank. A chartered bank auditor
and certified public accountant, Mr. Frenkiel is a member of the American Institute of Certified Public Accountants.
Gregor Garry, age
37, has served as the Chief Operating Officer and Executive Vice President at The Bancorp since July 2019. He has also served
as the organization’s Chief Risk Officer, Deputy Chief Operating Officer, Chief Audit Executive, and Vice President of Internal
Audit since joining The Bancorp in October 2014. From December 2009 – October 2014 he served as the Internal Audit Manager
and in other capacities for The First National Bank in Sioux Falls, Sioux Falls, South Dakota. From July 2007 – December
2009 Mr. Garry was a Senior Management Consultant for Milo Belle Consultants. Mr. Garry is a Certified Internal Auditor, a Certified
Fiduciary and Investment Risk Specialist, and holds a certification in Risk Management Assurance.
Thomas Pareigat,
age 61, has served as General Counsel since February 2011. From 2003 to 2005 and from 2007 to 2011 he was a partner in the Minneapolis,
Minnesota law firm of Lindquist & Vennum LLP, where he concentrated his practice on banking law and regulatory compliance matters
as a member of the firm’s Financial Institutions Practice Group. Between 2005 and 2007 he served as Senior Vice President
and Regulatory Counsel for Marshall BankFirst Corp. From 2001 to 2002, Mr. Pareigat was Vice President and Corporate Counsel for
Marquette Bancshares, Inc. and its subsidiary banks until their acquisition by Wells Fargo. From 1989 to 2001 he served as Senior
Attorney with Bankers Systems, Inc. (now Wolters Kluwer Financial Services). A frequent speaker on emerging risk issues within
the financial services industry, Mr. Pareigat serves on the Editorial Board of the American Bankers Association’s Bank Compliance
magazine and has served on the faculty of the ABA’s National Compliance School and Graduate School for Compliance Risk Management.
CORPORATE GOVERNANCE
Director Independence
The Common Shares are listed on
the NASDAQ Global Select Market under the symbol “TBBK.” The Board of Directors has determined that each of the directors
meet the definition of an independent director set forth in the NASDAQ listing standards and the
Bancorp Director Independence Categorical Standards, or the Director Independence Standards, except for Messrs. Cohen and Kozlowski
who are Chairman of the Board and Chief Executive Officer and President of the Company and the Bank, respectively. The Company’s
independent directors are Mr. Beach, Mr. Bradley, Mr. Chrystal,
Mr. Cohn, Mr. Eggemeyer, Mr. Kozlov, Mr. Lamb, Mr. McEntee, Ms. Mielke,
Ms. Mudick and Ms. Tuan. In making
these determinations, the Board of Directors reviewed information from each of these directors concerning all their respective
relationships with the Company and its affiliates and analyzed the materiality of those relationships. In considering the independence
of Mr. Kozlov, the Board considered that Mr. Kozlov is a partner at Duane Morris LLP, or Duane Morris, an international law firm,
and that the Company paid amounts to Duane Morris for legal services described below under “Certain Relationships and Related
Party Transactions.” The Board confirmed that these payments did not exceed 5% of Duane Morris’ consolidated gross
revenues for 2020 and so did not preclude the Board determining Mr. Kozlov to be independent under NASDAQ listing standards and
further determined that this relationship would not interfere with his exercise of independent judgment in carrying out his responsibilities
as a director.
Board Leadership and Committee Structure
and Role in Risk Oversight
Daniel G. Cohen serves
as the Company’s Chairman of the Board and Damian M. Kozlowski serves as its Chief Executive Officer and as a director.
The Company believes that the most effective leadership structure at the present time is to have separate Chairman of the Board
and Chief Executive Officer positions because this allows the board to benefit from having two strong voices bringing separate
views and perspectives to meetings. In addition, since August 2015, Michael J. Bradley has served as the lead independent director
of the Board of Directors. In this role, Mr. Bradley acts as an alternative point of contact between other directors and the Chairman
of the Board, and facilitates executive sessions held by the independent directors.
During 2020, five of
the seven standing committees of the Board assisted the Board of Directors with risk oversight: the Risk Committee, the Complaint
and Error Claim Committee, the Bank Secrecy Act, or BSA Committee, the Audit Committee and the Compensation Committee. These committees
each perform risk-related oversight functions on behalf of the Board and report regularly to the Board of Directors, which also
considers the Company’s entire risk profile, including additional strategic and reputational risks.
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The Risk Committee meets at least quarterly, and, while the Board of Directors and all of its committees are sensitive to risks
related to the Company and its operations, the Risk Committee is primarily responsible for overseeing the Company’s enterprise
risk management processes on behalf of the Board of Directors. The Company’s Chief Risk Officer meets at least quarterly
with the Risk Committee to discuss potential risk or control issues that are monitored through the Company’s enterprise risk
management framework. Other key control function officers of the Company also provide reporting to the Risk Committee. Members
of the Risk Committee also serve as members of a subcommittee, known as the Consent Order Oversight Committee, or Oversight Committee
which was formed as a requirement of the Bank’s 2015 Consent Order, or the 2015 Consent Order, with the Federal Deposit Insurance
Corporation, or the FDIC. The Oversight Committee meets at least quarterly to oversee the Bank’s compliance with the requirements
of the 2015 Consent Order as it relates to the Bank’s consumer compliance, third-party risk management and compliance auditing
functions. The 2015 Consent Order which required the formation of the Oversight Committee was terminated by the FDIC on November
17, 2020.
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The Complaint and Error Claim Committee, or the CECC, is also comprised of directors who serve on the Risk Committee. The CECC
was formed as a requirement of the 2015 Consent Order. This committee meets monthly and focuses on the process for handling, monitoring
and resolving customer complaints and Regulation E error claims received directly by the Bank or through its third-party product
contributors. The 2015 Consent Order which required the formation of CECC was terminated by the FDIC on November 17, 2020.
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The BSA Committee, required by a 2014 Consent Order, or the 2014 Consent Order, between the Bank and the FDIC, meets monthly
and oversees compliance with BSA and anti-money laundering regulations and identified risks, compliance with the requirements of
the 2014 Consent Order, and the implementation of the Company’s financial crimes risk management program. The 2014 Consent
Order, which required the formation of the BSA Committee was terminated by the FDIC on May 20, 2020.
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The Audit Committee meets at least quarterly, and focuses on financial reporting risk, oversees the entire audit function and
evaluates the effectiveness of internal and external audit efforts.
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The role of the Compensation Committee in providing oversight of compensation risk is described below.
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These committees receive
reports from management regularly regarding the Company’s assessment of risks and the adequacy and effectiveness of internal control
systems. Through their interaction with the Company’s senior management, these committees oversee credit risk, market risk (including
liquidity and interest rate risk) and operational risk (including compliance and legal risk). With the Bank’s successful
emergence from the terminated 2014 Consent Order and 2015 Consent Order, the Board evaluated the Board’s committee structure
related to risk management and determined that it would be consistent with the Board’s commitment to effective risk oversight
to consolidate the CECC and the BSA Committee into the oversight duties of the Risk Committee. The Board has determined to make
this consolidation effective as of April 1, 2021.
While the Board of Directors
oversees the Company’s risk management across the enterprise, senior management at the Company and Bank are responsible for the
day-to-day risk management processes and implementation of risk management programs. Senior management comprises the Company’s
Enterprise Risk Management Committee which meets at least quarterly and addresses various risks, controls and related monitoring.
While the Board of Directors believes that this division of responsibility is the most effective approach for addressing the risks
facing the Company, it will continue to re-examine this structure on a regular basis, recognizing that different structures may
be appropriate in different situations faced by the Company.
Board Meetings
The Board of Directors
held a total of 12 meetings during 2020. During 2020 all directors attended at least 75% of the aggregate of (a) the total number
of meetings of the Board of Directors held during the period for which the director had been a director and (b) the total number
of meetings held by all committees of the Board of Directors on which the director served during the periods that the director
served. It is the policy of the Board of Directors that all directors attend the annual meeting of stockholders of the Company,
if practicable. All directors attended the last annual meeting.
Communications with the Board
Stockholders, employees
and others who wish to communicate with the Board of Directors may do so by sending their correspondence to The Bancorp, Inc.,
Attention: Paul Frenkiel, Secretary, 409 Silverside Road, Suite 105, Wilmington, Delaware 19809. The mailing envelope must contain
a clear notation indicating that the enclosed letter is a “Stockholder-Board Communication.” All such letters must identify
the author as a stockholder of the Company and clearly state whether the intended recipients are all or individual members of the
Board. The Secretary will make copies of all such letters and circulate them to the appropriate director or directors. The Secretary
has been authorized to screen commercial solicitations and materials which pose security risks, are unrelated to the business or
governance of the Company or are otherwise inappropriate.
Corporate Governance Materials
The Company’s Code of
Ethics and Business Conduct (the “Code of Business Conduct”) which applies to all employees, including our principal
executive officer, principal financial officer and principal accounting officer, Corporate Governance Guidelines, Director Independence
Standards, Insider Trading Policy and the charters of the Audit Committee, the Compensation Committee and the Nominating and Governance
Committee are available on the Company’s website: https://investors.thebancorp.com/corporate-information/governance-documents/default.aspx.
Copies of these documents
are available, free of charge, upon written request to: The Bancorp, Inc., Attention: Andres Viroslav, Investor Relations, 409
Silverside Road, Suite 105, Wilmington, Delaware 19809. The Company will satisfy the disclosure requirement under Item 5.05 of
Form 8-K regarding an amendment to, or waiver from, a provision of the Code of Business Conduct by posting such information on
the Company’s website.
Board Committees
During 2020, the Board
of Directors had seven standing committees: Audit Committee, Compensation Committee, Risk Committee, Complaint and Error Claim
Committee, BSA Committee, Nominating and Governance Committee and Executive Committee. The committees on which directors serve,
the chairperson of each committee, and the number of meetings held during 2020 are set forth below. Mr. Kozlowski is not listed
because he did not serve on any committee during 2020.
Board Member
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Audit
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Compensation
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Risk
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Bank
Secrecy
Act
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Nominating
and
Governance
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Executive
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Complaint
and
Error Claim
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Daniel G. Cohen
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Chair
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Walter T. Beach
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Chair
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Michael J. Bradley
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Chair
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X
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John C. Chrystal
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X
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X
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Chair
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X
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X
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Matthew N. Cohn
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X
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X
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John M. Eggemeyer
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X
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X
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William H. Lamb
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X
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X
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Hersh Kozlov (1)
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X
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X
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James J. McEntee III
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Chair
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X
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Chair
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Daniela A. Mielke
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X
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X
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X
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Stephanie B. Mudick
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X
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X
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X
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Mei-Mei H. Tuan (2)
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X
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Chair
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X
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Meetings held in 2020
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7
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4
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4
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12
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5
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-
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12
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(1)
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Mr. Kozlov resigned from the Compensation Committee effective April 29, 2020 and was added to
the Risk Committee and the Complaint and Error Claim Committee effective October 21, 2020.
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(2)
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Ms. Tuan was added to the Compensation Committee effective October 21, 2020.
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Audit Committee.
The Audit Committee is appointed by the Board of Directors to assist the Board of Directors’ audit-related oversight of
(a) the integrity of the Company’s financial statements, (b) the Company’s compliance with legal and regulatory requirements,
(c) the independent auditor’s qualifications and independence and (d) the performance of the Company’s internal audit function
and independent auditors. The Audit Committee also prepares the Audit Committee Report required by the rules of the SEC to be
included in the Company’s annual Proxy Statement. Each member of the Audit Committee meets the independence standards for Audit
Committee members set forth in applicable NASDAQ rules, as well as those set forth in Rule 10A-3(b)(1) of the Exchange Act.
The Board of Directors has determined that Mr. Bradley qualifies as an “Audit Committee financial expert” as that term
is defined in applicable SEC rules and regulations.
Compensation Committee.
The Compensation Committee is appointed by the Board of Directors to have direct responsibility for approving the compensation
of the Chief Executive Officer and certain other officers and the non-management directors of the Company as described in “Compensation
Committee Report” and the related “Compensation Discussion and Analysis” below. The Compensation Committee also
(a) administers the Company’s equity-based compensation plans and (b) reviews any extraordinary bonus or other compensatory payments
to any employee of the Company. For officers and employees reporting to named executive officers, or NEOs, the Compensation
Committee has delegated primary responsibility for recommending salary changes to the President and Chief Executive Officer. All
of the members of this committee have been determined by the Board of Directors to be independent under applicable NASDAQ and
SEC rules and regulations, as well as the Director Independence Standards.
Risk
Committee. The Risk Committee is appointed by the Board of Directors to oversee the Company’s enterprise risk
management framework, including management’s efforts related to risk assessment and the implementation of risk-related
policies, programs and practices used in identifying and managing Company risks. The Committee meets at least quarterly with
the Company’s Chief Risk Officer and other key control function officers. A subset of members of this committee served
as the Bank’s Consent Order Oversight Committee for purposes of confirming compliance with the requirements of the 2015
Consent Order which was terminated by the FDIC on November 17, 2020. Additionally, the members of this Committee served as
members of the CECC and the BSA Committee, which focused on consumer compliance risks and BSA risks, respectively. See
“—Board Leadership and Committee Structure and Role in Risk Oversight.”
Nominating and Governance
Committee. The Nominating and Governance Committee is appointed by the Board of Directors to (i) assist the Company and the
Board of Directors in maintaining an effective and knowledgeable Board of Directors, including assisting the Board of Directors
in identifying individuals qualified to become directors and recommending to the Board of Directors the director nominees for
the next annual meeting of stockholders; (ii) reviewing the Board’s committee composition and making membership recommendations
as needed; and (iii) overseeing the Company’s environmental, social and governance, or ESG, practices and related policies
and practices including human capital management, diversity and inclusion, health and safety issues, corporate social responsibility
and other ESG-related activities. All of the members of this committee have been determined by the Board of Directors to be independent
under applicable NASDAQ and SEC rules and regulations, as well as the Director Independence Standards.
The Nominating and Governance
Committee will consider candidates for nomination as a director recommended by stockholders, directors, officers, third party
search firms and other sources. The procedures for nominations by stockholders are described below in a section titled “Stockholder
Proposals and Nominations”. The Company describes how it addresses such submissions in the “Submission of Director-Nominee
Candidate” section of the Corporate Governance Guidelines which may be accessed at https://investors.thebancorp.com/corporate-information/governance-documents/default.aspx.
In evaluating candidates, the Nominating and Governance Committee considers the attributes of the candidate (including skills,
experience, diversity, age, and legal and regulatory requirements) and the needs of the Board of Directors, and will review all
candidates in the same manner, regardless of the source of the recommendation.
The Nominating and Governance
Committee has not adopted specific, minimum qualifications or specific qualities or skills that must be met by a Nominating and
Governance Committee-recommended nominee. The Board will consider the overall experience and expertise represented by the Board
as well as the qualifications of each candidate. During the evaluation process, the Committee and the Board will take the following
standards into account:
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At least a majority of the Board must be comprised of “independent” directors determined in accordance with the
requirements of the Nasdaq Rules and any additional “independence” standards established by the Board from time to
time.
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Candidates should be capable of working in a collegial manner with persons of different educational, business and cultural
backgrounds and should possess skills and expertise that complement the attributes of the existing directors.
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Candidates should represent a diversity of viewpoints, backgrounds, experiences and other demographics, and ties to the Company’s
markets.
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Candidates should demonstrate notable or significant achievement and possess senior-level business, management, legal or regulatory
experience that would benefit the Company.
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Candidates shall be individuals of the highest character and integrity.
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Candidates shall be free from any conflict of interest that would interfere with their ability to properly discharge their
duties as a director or would violate any applicable law or regulation.
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Candidates shall be capable of devoting the necessary time to discharge their duties, taking into account memberships on other
Boards and other responsibilities.
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Candidates shall have the desire to represent the interests of all stockholders.
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The
Nominating and Governance Committee seeks to ensure that the membership of the Board of Directors and each committee of the Board
of Directors satisfies all relevant NASDAQ rules and applicable laws and regulations and all requirements of the Company’s governance
documents. The Nominating and Governance Committee seeks to achieve a mixture of skills that are related to the Company’s business.
The nature of the specific qualifications, qualities or skills that the Nominating and Governance Committee may look for in any
particular director nominee depends on the qualifications, qualities and skills of the rest of the directors at the time of any
vacancy on the Board of Directors.
Executive Committee.
The Executive Committee has the delegated authority to act in lieu of the Company’s Board of Directors in between meetings
of the Board.
Compensation Committee Interlocks and
Insider Participation
Messrs. Beach, Lamb, Kozlov and Ms. Tuan
were all directors who served as a member of the Compensation Committee during 2020. Ms. Tuan served on the Compensation Committee
since October 21, 2020. Mr. Kozlov served on the Compensation Committee during 2020 until he resigned from the Compensation Committee
effective April 29, 2020. As described below under “Certain Relationships and Related Party Transactions,” Mr. Kozlov
is a partner at Duane Morris LLP, or Duane Morris, an international law firm. The Company paid Duane Morris $1.7 million
in 2020 for legal services.
No executive officer of the Company served on the board of directors or compensation committee of any
entity that has one or more executive officers serving as members of the Company’s Board of Directors or Compensation Committee.
CERTAIN RELATIONSHIPS AND RELATED
PARTY TRANSACTIONS
Under the Code of Business
Conduct, the Company has established a procedure regarding the review and approval of transactions that would be required to be
reported under Item 404 of Regulation S-K. Under this procedure, the Audit Committee must approve any such transaction and find
it to be on terms comparable to those available on an arms’ length basis from an unaffiliated third party or find that it otherwise
does not create a conflict of interest. If the Audit Committee finds a conflict of interest to exist with respect to a particular
transaction, that transaction is prohibited unless a waiver of the Code of Business Conduct is approved by the Audit Committee.
The
Bank has entered into lending transactions in the ordinary course of business with directors, executive officers, principal stockholders
and affiliates of such persons. All loans were made on substantially the same terms, including interest rate and collateral, as
those prevailing at the time for comparable loans with persons not related to the lender. At December 31, 2020, these loans were
current as to principal and interest payments and did not involve more than normal risk of collectability or present other unfavorable
features. At December 31, 2020, loans to these related parties amounted to $4.7 million.
The Bank has periodically
purchased securities under agreements to resell and engaged in other securities transactions through J.V.B. Financial Group, LLC,
or JVB, a broker dealer in which the Company’s Chairman is a registered representative and has a minority interest. The
Company’s Chairman also serves as the President, a director and the Chief Investment Officer of Cohen & Company Financial
Limited (formerly Euro Dekania Management Ltd.), a wholly-owned subsidiary of Cohen & Company Inc. (formerly Institutional
Financial Markets Inc.), the parent company of JVB. In 2020, the Company did not purchase any securities from JVB. In 2019, the
Company purchased $2.3 million of government guaranteed SBA loans for Community Reinvestment Act purposes from JVB. Prices for
the SBA loans are verified to market rates and no separate commissions or fees are paid to that firm. The Company previously purchased
securities under agreements to resell through JVB primarily consisting of Government National Mortgage Association certificates
which are full faith and credit obligations of the United States government issued at competitive rates. JVB fully complied with
the terms of the repurchase agreements. There were no repurchase agreements outstanding at December 31, 2020 respectively.
Mr. Hersh Kozlov, a director
of the Company, is a partner at Duane Morris LLP, or Duane Morris, an international law firm. The Company paid Duane Morris
$1.7 million in 2020 for legal services.
PROPOSAL 2. ADVISORY (NON-BINDING)
VOTE ON EXECUTIVE COMPENSATION
Introduction
The Dodd-Frank Wall Street
Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires public companies to provide their stockholders with
a non-binding vote to approve executive compensation at least once every three years, or more frequently, as directed by stockholder
vote. The Company is seeking this stockholder advisory vote on its executive compensation in accordance with applicable SEC rules
and pursuant to the stockholder vote of the Company’s 2017 annual meeting that required the advisory vote to be on an annual basis.
The Board of Directors Supports a Say-On-Pay
Vote and Will Consider the Results Carefully.
At the Company’s
2020 Annual Meeting, 96% of the votes cast approved the Company’s 2019 executive compensation program, compared to 70% of
the votes cast for the Company’s 2018 executive compensation program at the Company’s 2019 Annual Meeting. At the
Company’s 2018 Annual Meeting, 53% of the votes cast approved the Company’s 2017 executive compensation program. Notwithstanding
that 70% of stockholders approved the 2018 program, the Compensation Committee acted on stockholder feedback to increase the approval
rate. The Compensation Committee restructured the CEO’s compensation to “pay for performance” and made other
changes to address input from stockholders and their advisors. The restructuring of the CEO’s compensation and other changes
are described in a chart in the Compensation Discussion and Analysis, or CD&A, below. The Board of Directors values the Company’s
stockholders’ opinions. As it does each year, the Board of Directors intends to evaluate the results of the advisory vote on compensation
carefully when making future decisions regarding compensation of the named executive officers.
Compensation of Named Executive Officers
As described in the CD&A
below, the Compensation Committee has developed an executive compensation program designed to align the long-term interests of
the Company’s named executive officers with the long-term interests of its stockholders. The disclosure in the CD&A and the
disclosure included in the section entitled “Executive and Director Compensation” below have been provided in response
to the requirements of SEC rules and explain the compensation policies under which the Company paid its named executive officers
in 2020.
Advisory or Non-Binding Effect of Vote
Under the Dodd-Frank
Act and the related SEC rules, your vote on this resolution is an advisory or “non-binding” vote. This means that the
purpose of the vote is to provide stockholders with a method to give their opinion to the Board of Directors about certain issues,
like executive compensation. The Board of Directors is not required by law to take any action in response to the stockholder vote.
However, the Board of Directors values the Company’s stockholders’ opinions, and the Board of Directors intends to evaluate the
results of the vote carefully when making future decisions regarding compensation of the named executive officers. The Company
believes that providing its stockholders with an advisory vote on its executive compensation program will further enhance communication
with stockholders, while also meeting the Company’s obligations under the Dodd-Frank Act and applicable SEC’s rules.
Resolution
The Board of Directors
recommends that stockholders approve the following resolution:
RESOLVED, that the compensation
paid to named executive officers, as disclosed in the Company’s Proxy Statement for its 2021 Annual Meeting of Stockholders pursuant
to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion,
is hereby APPROVED.
The Board of Directors
unanimously recommends a vote “FOR” approval of the compensation of executive officers as described in this Proxy Statement.
COMPENSATION
DISCUSSION AND ANALYSIS
General
The Company is required
under SEC disclosure rules to provide information in this Proxy Statement regarding its compensation program in place for its
Chief Executive Officer, Chief Financial Officer and its three other most highly compensated executive officers. The Company must
also provide compensation information for up to two additional individuals who would have been included but for the fact that
they were not executive officers at the end of the fiscal year. There were no such additional individuals during 2020. This discussion
refers to the Company’s Chief Executive Officer, Chief Financial Officer and the three other most highly-compensated executive
officers as “Named Executive Officers” or “NEOs.” This discussion should be read in conjunction with the detailed
tables and narrative descriptions under “Executive and Director Compensation.”
The Compensation Committee
is responsible for formulating and presenting recommendations to the Board of Directors with respect to the compensation of the
Company’s NEOs. The Compensation Committee is also responsible for administering the Company’s employee benefit plans, including
incentive plans. The Compensation Committee is comprised solely of independent directors.
Executive Summary
The Compensation Committee
has established specific pay for performance requirements with significant “at-risk” compensation components.
It emphasizes sustained multi-year performance in determining incentive compensation, which comprises the majority of CEO compensation.
In 2020, approximately 84% of total CEO compensation was comprised of incentive compensation for achieving and exceeding these
pre-established requirements for a multi-year period. Accordingly, most of the CEO compensation is “at risk” as it
is dependent on the achievement of specific shareholder return, financial performance and other requirements. The Company periodically
discloses its long-term strategic plans, financial goals and guidance in presentations it publicly furnishes to the SEC and makes
available on its website (the most recent being available at https://investors.thebancorp.com/presentations/default.aspx).
They include return on assets, or ROA, and return on equity, or ROE. As prior period financial performance requirements were achieved,
the Company updated its website in October 2020 with increased future financial performance requirements. The “Balanced
Score Card: CEO Performance Matrix” set forth in “Determination of Compensation Amounts” summarizes the
requirements for incentive at-risk compensation for the CEO. In 2020, the at-risk components of the CEO’s total compensation
consisted of cash bonus and equity awards and amounted to $3,906,000, or 84% of total compensation. Base salary of $750,000 comprised
approximately 16% of total compensation.
In addition to achieving
specific pay for performance requirements, both the cash bonus and equity awards are forward looking to motivate further progress
toward the long-term financial goals set by the Board of Directors and published on the Company’s website. As part of the
evaluation process, sustained multi-year financial progress toward those long-term goals is emphasized. Accordingly, in 2018,
the cash bonus and equity compensation were maintained at the same level as 2017, at $300,000 each. After sustained incremental
financial progress in 2018 and 2017, the cash bonus and equity compensation were both increased to $675,000 in 2019, with an additional
$250,000 value assigned to stock options which were also awarded. In 2020, the CEO received $1,650,000 for cash bonus, $1,350,000
for equity, with a $906,000 value assigned to stock options which were also awarded, which reflected further sustained financial
improvements.
Excluding the Company’s
gain on sale of the of the Safe Harbor Individual Retirement Account (SHIRA) portfolio in 2018,
income before tax increased to $72.5 million in 2019 from $54.8 million in 2018 and $40.4 million in 2017. In 2020, further
progress was made toward long term financial goals which were further increased, as income before tax increased to $108.3 million.
Budgets, with formal quarterly reports of progress toward financial goals, are presented to the full Board of Directors which continuously
monitors financial performance, to validate incentive compensation. Budget targets in each year since Mr. Kozlowski was engaged
have been increased and have been met or exceeded. As published on the Company’s website, long-term targets have been increased
to 20% for ROE and 2.00% for ROA. For 2019, the previously published goals were an ROA of 1.20% and an ROE of 14% which were achieved
or exceeded. After adding back civil money penalties of $1.4 million and $7.5 million, which related to orders and actions
prior to Mr. Kozlowski’s employment, the 2019 ROA was 1.28% and the ROE was 13.5%. In 2018, the ROA and ROE were 2.07% and
24.3%, respectively, which reflected the sale of the safe harbor IRA deposit portfolio. In 2020, further progress was made toward
the long-term goals noted above. ROA amounted to 1.34% while ROE amounted to 15.1%.
The Compensation Committee
believes that its forward-looking approach of providing cash bonus and equity to motivate future performance has been validated
by the above historical results since Mr. Kozlowski’s tenure began in 2016, as income before tax has increased significantly
each year under his leadership. Additionally, the Compensation Committee performs a peer analysis to compare the Company’s
compensation analysis with its peers. The Compensation Committee believes that the complexities of the Company’s niche lending
business and payments businesses are only partially present in any single peer. Accordingly, peer comparisons are considered with
the other factors discussed throughout this presentation.
In summary, notwithstanding
that the Company exceeded all requirements and metrics for the payment of bonus and equity grants, Mr. Kozlowski’s total
compensation in 2018 was kept at 2017 levels as the Compensation Committee monitored financial performance sustainability. Cash
bonus and equity increases in 2019 and 2020 reflected the sustained multi-year financial improvements in 2017, 2018 and 2019.
Financial results in 2020 showed further improvements in financial performance as detailed throughout this report. Additionally,
to address shareholder input, base salary was lowered from $900,000 for 2018 to $755,000 in 2019 and it was maintained at approximately
that lower level in 2020. Further, in 2019 and 2020, the Compensation Committee allocated a significant portion of equity grants
to options instead of restricted stock units. The salary reduction and maintenance at that lower level and the allocation of a
portion of equity grants to options resulted from stockholder input, as noted in the chart appearing later in this report “Stockholder
Input and Company Actions”. The financial results described above and the other elements in the CEO Performance Matrix
were significant reasons why the Compensation Committee decided to substantially increase the CEO’s total compensation through
increased incentive compensation and equity compensation in the years from 2018 to 2020.
Compensation Objectives and the Focus
of Compensation Awards
The Company’s compensation
policies are intended to provide appropriate compensation packages to motivate, reward, attract and retain talented and experienced
executive officers, and support the management succession plan. The policies are also intended to manage the Company’s compensation
costs.
The Compensation Committee
believes that an appropriate compensation program should draw a balance between providing motivation to executive officers while
at the same time effectively controlling compensation costs. Executive officers are compensated at levels to attract and retain
highly qualified individuals and to motivate them to perform in a manner that maximizes corporate performance.
The Company’s executive
compensation program consists of three elements to compensate and motivate its executive officers in line with the Compensation
Committee’s objectives described above:
|
•
|
long-term equity incentives reflected in grants of stock options, restricted stock awards and phantom
units.
|
The
criteria for CEO cash bonuses and long-term equity incentives are shown in the “Balanced Score Card: CEO Performance”
section. The Compensation Committee has required sustained multi-year improvements in financial performance, consistent with
the financial goals which are posted to the Company’s website, as a determinant for cash bonuses and equity awards. This
compensation is forward-looking, as motivation to achieve the long-term financial goals on the Company’s website. As published
on the Company’s website, long-term targets have been increased to 20% for ROE and 2.00% for ROA, as the prior goals of
1.2% ROA and 14% ROE were achieved.
Generally, the Compensation
Committee reviews annually the Company’s mix of short-term performance incentives versus longer-term incentives. It primarily
focuses compensation on base salary and equity incentives with additional consideration for cash bonuses. The Compensation Committee
has not established set percentages of short-term versus long-term incentives. Instead, it looks to provide a reasonable balance
between those incentives and base salary. The Compensation Committee’s policy for allocating between long-term and currently paid
compensation is to set base compensation at levels adequate to attract and retain personnel, while providing incentives to maximize
long-term value for the Company and its stockholders. As discussed in “Specific Elements of the Compensation Program,”
below, the Company provides cash compensation in the form of base salary to meet competitive salary norms. The Company also provides
non-cash equity compensation to align this form of compensation with shareholder interests and the Company’s long-term
strategic goals. Cash bonuses provide a shorter-term incentive which may align with competitive norms, acknowledge and motivate
the achievement of individual goals and assist in compensation expense management. They are also forward looking to motivate management
to sustain performance and reach the longer-term financial goals of 2% ROA and 20% ROE and other Company goals as published on
its website. Because of performance generally in years prior to 2017, cash bonuses were not previously paid. As a result of either
achieving or exceeding pre-established financial goals, including revenue increases and sustainable expense reductions, cash bonuses
were subsequently paid to selected named executive officers. See rationales and conclusions noted in “Determination of Compensation
Amounts”. As noted previously, the Compensation Committee has required sustained multi-year improvements in financial performance,
which it has monitored and validated since Mr. Kozlowski’s tenure began in 2016.
In order to further confirm
its objectives, the Compensation Committee also “benchmarks” the Company’s compensation programs to a peer group of
banking institutions based upon its review of financial statements and other publicly available data. The level of these institution’s
total assets and their regional location are factors the Compensation Committee considers in establishing the peer group. In 2019,
the Compensation Committee added two peers with certain lines of business similar to that of the Company: Greendot Corporation
(prepaid card accounts) and Axos Financial, Inc. (specialized banking products). Additionally, the Compensation Committee’s
peer group includes other banks supplied by McLagan, a company which provides salary databases for peer comparisons. This expanded
peer group of twenty-six banks provides a wider peer group on which to assess the Company’s performance, especially ROA
and ROE. The peer group is also used to compare the CEO’s compensation to peers. Although considerable knowledge about the
competitiveness of the Company’s compensation programs is gained through the benchmarking process, the Compensation Committee
recognizes that each financial institution is unique and that significant differences in executive compensation practices exist.
The Compensation Committee also considered the added complexity and earnings stream resulting from the payments businesses unique
to the Company. For instance, while Green Dot Corporation and Meta Financial Group Inc. also engaged in certain payments businesses,
they did not engage in the specialized SBLOC and SBA businesses. While the Compensation Committee considered CEO salaries in the
whole 26 bank peer group, it concluded that the following banks had the most comparable lines of business and related complexities
and would be the most relevant: Axos Financial, Inc., Green Dot Corporation, Live Oak Bancshares Inc., Meta Financial Group Inc.
and TriState Holdings Inc. After the additions discussed above, the expanded peer group is comprised of the following banks.
Axos Financial, Inc.
|
Meta Financial Group Inc.
|
Brookline Bancorp Inc.
|
OceanFirst Financial Corp.
|
Bryn Mawr Bank Corp.
|
Peapack-Gladstone Financial
|
Camden National Corp.
|
Provident Financial Services
|
ConnectOne Bancorp, Inc.
|
S&T Bancorp Inc.
|
Eagle Bancorp Inc.
|
Sandy Spring Bancorp Inc.
|
Financial Institutions Inc.
|
Tompkins Financial Corporation
|
First Commonwealth Financial
|
TriState Capital Holdings Inc.
|
Flushing Financial Corp.
|
TrustCo Bank Corp NY
|
Green Dot Corporation
|
United Financial Bancorp
|
Lakeland Bancorp
|
Univest Corp. of Pennsylvania
|
Live Oak Bancshares Inc.
|
Washington Trust Bancorp Inc.
|
Meridian Bancorp Inc.
|
WSFS Financial Corp.
|
The median asset size
of the peer group is approximately $6.5 billion at December 31, 2019 and Bancorp’s asset size at December 31, 2019 was $5.7
billion. The range of revenues for the peer group was $150-$380 million during 2019 and Bancorp’s revenues for 2019 were
$245 million.
The Compensation Committee
believes that the combination of short and long-term compensation that the Company provides fulfills its objectives of providing
a competitive level of compensation and benefits in order to attract and retain key executives. The Compensation Committee also
believes that the Company’s incentive programs appropriately motivate performance to achieve sustained profitability and growth
to achieve its financial goals while at the same time allowing the Company to maintain controls over its compensation costs.
The Company did not utilize
an outside compensation consultant in assessing compensation.
Compensation Methodology
The Compensation Committee
ordinarily determines compensation amounts for individual NEOs for 12-month periods. The Chief Executive Officer typically provides
the Compensation Committee with key elements of both the Company’s and the NEOs’ (other than the Chief Executive Officer’s) performance
as well as recommendations to assist it in determining compensation levels. The Compensation Committee determines the amount of
equity awards and cash bonuses, if any, at its discretion and reviews the Company’s performance during the fourth quarter
of each year and at interim periods at its discretion. With the full Board of Directors, the Compensation Committee compares financial
performance to the financial goals published on the Company’s website on a quarterly basis.
Specific Elements of the Compensation
Program
Below are the specific
elements of the Company’s compensation program for named executive officers. A chart showing the percentage of each component
to the total of salary, cash bonus and equity in 2020 is as follows:
Name
|
Principal Position
|
Salary %
|
2020 Cash Bonus ($)
|
Cash Bonus %
|
2020 Equity Grant ($)
|
Equity Grant %
|
Total ($)
|
Damian Kozlowski
|
Chief Executive Officer
|
16
|
1,650,000
|
35
|
2,256,000
|
49
|
4,656,000
|
Paul Frenkiel
|
Chief Financial Officer
|
50
|
220,000
|
28
|
180,000
|
22
|
800,000
|
Mark Connolly
|
Chief Credit Officer
|
31
|
412,500
|
38
|
337,500
|
31
|
1,100,000
|
Gregor Garry
|
Chief Operating Officer
|
50
|
220,000
|
28
|
180,000
|
22
|
800,000
|
Thomas Pareigat
|
General Counsel
|
44
|
275,000
|
31
|
225,000
|
25
|
900,000
|
Base Salary.
The Company believes that it is important to maintain a competitive salary structure to retain its existing qualified executive
officers which includes base pay consistent with similarly situated executives at similarly sized banking institutions. The Company
believes that a key objective of its salary structure is to maintain reasonable “fixed” compensation costs by targeting
base salaries at a competitive average, considering the Company’s and the individual’s performance. Base salaries are paid
to executive officers on a bi-weekly basis and are generally reviewed annually by the Compensation Committee as described in “Compensation
Methodology,” above. Base pay change, if any, is normally determined after considering:
|
•
|
the executive’s total itemized compensation for the prior year;
|
|
•
|
the executive’s current base pay position relative to the peer group;
|
|
•
|
the Company’s performance and the individual’s contribution to that performance for a sustained
period;
|
|
•
|
the impact of the complexity of certain of the Company’s payments and specialized lending
businesses on the individual’s responsibilities; and
|
|
•
|
national and regional economic conditions, their effect upon the Company and how the executive
has dealt with them within his or her area of responsibility.
|
The CEO’s base
salary was lowered from $900,000 in 2018 to $755,000 in 2019 reflecting an adjustment based on the median of the Compensation
Committee’s peer group and stockholder input. It was further lowered to $750,000 in 2020. For 2019, the base salary of Messrs.
Frenkiel, Connolly and Pareigat was increased from 2018 in consideration of peer data for their positions, with further low single
digit increases in 2020 as shown in the table below. The peer data utilized was provided by McLagan, a company which provides
salary databases for peer comparisons. The data consisted of regional and community banks for Messrs. Frenkiel, Pareigat and Garry,
and regional and national banks for Mr. Connolly. Mr. Garry received increases to base salary from 2018 to 2019 and from 2019
to 2020. Those increases reflected Mr. Garry’s promotions from Chief Audit Officer, to Deputy Operations Officer and then
to Chief Operating Officer in that period and reflected the peer comparisons. A chart showing the changes in base salary in 2020
compared to 2019 detailing the ranges in the peer data utilized is as follows.
Name
|
Principal Position
|
Base Salary 2019 ($)
|
Base Salary 2020 ($)
|
Percentage Increase/ (Decrease)
|
Peer
Range of
Base Salary ($) (a)
|
Damian Kozlowski
|
Chief Executive Officer
|
755,000
|
750,000
|
(1) %
|
(b)
|
|
|
|
|
|
|
Paul Frenkiel
|
Chief Financial Officer
|
396,500
|
400,000
|
1%
|
304,500-500,000
|
Mark Connolly
|
Chief Credit Officer
|
348,000
|
350,000
|
1%
|
290,000-437,700
|
|
|
|
|
|
|
Gregor Garry
|
Chief Operating Officer
|
323,000
|
400,000
|
24%
|
325,000-578,200
|
Thomas Pareigat
|
General Counsel
|
398,462
|
400,000
|
1%
|
279,000-418,300
|
|
(a)
|
Peer ranges reflect 50th to 90th percentile for base salary.
|
|
(b)
|
In 2019, Mr. Kozlowski’s base salary was lowered to adjust to approximately the median of the Compensation Committee’s
peer group and was maintained at approximately that level in 2020. Thus, incentive compensation only awarded by the achievement
of pre-established requirements, detailed in the “Balanced Scorecard: CEO Performance Matrix”, now comprises
the majority of his total compensation. These requirements include financial goals published on the Company’s website.
|
Cash Bonus. In
evaluating providing a cash bonus to an NEO, the Compensation Committee primarily focuses on the sustained contributions made to
the Company by the NEO under consideration. The Chief Executive Officer makes recommendations to the Compensation Committee with
respect to annual bonuses for the other named executive officers, based on their respective sustained contributions to the performance
of the areas for which they are responsible. Because of improved financial performance, cash bonuses have been awarded since 2017.
While the Compensation Committee examines pre-established requirements in determining whether to pay a cash bonus to any NEO and
the amount of such bonus, the Compensation Committee has determined it is in the Company’s best interest to retain full discretion
with respect to these cash bonuses to retain flexibility as opposed to requiring set payments for various levels of satisfying
these requirements.
The primary factor in
the CEO cash bonus award was achieving or exceeding pre-established requirements on a sustained basis as detailed in the “Balanced
Score Card: CEO Performance Matrix” under “Determination of Compensation Amounts”. Sustained multi-year financial
performance and achievement of financial performance goals published on the Company’s website are central to compensation
decisions. Each of the pre-established criteria as shown in that matrix was determined to have been exceeded. The Compensation
Committee also considered the cash bonus as a percentage of base salary. For the Chief Executive Officer, the 2020 cash bonus of
$1.65 million compared to $675,000 in 2019 and $300,000 in 2018. Cash bonus represented approximately 2.2x base salary in 2020,
compared to 89% in the prior year. The increase reflected the improved financial performance of the Company which had been sustained
for a multi-year period. Please see the chart entitled “Balanced Score Card: CEO Performance Matrix” in the
“Determination of Compensation Amounts” for the performance metrics for a cash bonus for the CEO. Please see the chart
and footnotes under “Determination of Compensation Amounts- “Other NEO Compensation”, which summarize the metrics
and other factors for a cash bonus for the other NEOs.
Long-Term Equity Incentive
Compensation. Long-term equity incentives in 2020 were provided to Named Executive Officers through the Company’s 2020
Equity Incentive Plan, or the 2020 Plan. The 2020 Plan permits the grant of stock options, restricted stock awards, stock appreciation
rights and phantom units. Stock options are granted to NEOs at exercise prices equal to the then current market price of the Company’s
Common Shares. Awards under the 2020 Plan are granted based on the Company’s financial performance and each executive’s contribution
to such performance. Overall, the objective of long-term equity incentive compensation awards is to tie the interests of named
executive officers directly to increases in stockholder value. The criteria utilized for each NEO is that which is used for
cash bonuses as discussed directly above under “Cash Bonus” and presented in a chart under “Other NEOs”.
In 2020, to balance the short-term incentive of cash bonus, equity grants were granted equal in value to 45% of the total of cash
bonus and equity. Additionally, Mr. Kozlowski received 300,000 stock options, which were valued on the day of grant under the Black-Scholes
method at $3.02 each.
Compensation Risk Analysis
As a financial holding
company regulated by the Federal Reserve Bank, which has a subsidiary bank regulated by the FDIC and the State of Delaware, the
Company adheres to defined risk guidelines, practices and controls to ensure the safety and soundness of the institution.
The Company’s management and Board of Directors conduct regular reviews of its business to ensure that it is operating within
appropriate regulatory guidelines and with appropriate practices, supplemented by its internal audit function.
On an annual basis, the
Compensation Committee reviews the Company’s compensation practices to determine that (1) base salaries are appropriately competitive
in light of overall compensation; (2) the Company’s use of equity grants provides appropriate long term incentives; (3) the Company
offered an appropriate mix of cash and equity compensation to facilitate the alignment of the interests of the Company’s senior
executives with those of the Company and its stockholders; and (4) cash bonuses are balanced with other compensation to incent
financial performance and safety and soundness while managing compensation expense. In light of regulatory releases, the ultimate
goal of the review is to assess the design, governance, policies and procedures of the Company’s compensation structure to ensure
that, as designed and executed, it does not motivate excessive risk-taking that could adversely impact the long-term value of
the Company.
After conducting the review,
the Compensation Committee concluded that the Company’s incentive programs do not motivate or encourage unnecessary or excessive
risk-taking. This conclusion reflected a review of the Company’s structure to determine that credit and other new business
approvals are independent of new business efforts. Other factors, such as fostering an appropriate risk management culture,
were also considered. The Company will continue to review and monitor its compensation programs to ensure that they continue to
not motivate excessive risk-taking that could adversely impact the long-term value of the Company.
Tax and Accounting Considerations
The Company claims tax
deductions in connection with stock awards under its equity compensation plans in an amount equal to the ordinary income reported
to the I.R.S. for the recipient. The amount reported as ordinary income to the recipient, and deducted by the Company, is based
on the stock price at the date stock options are exercised or restricted stock vests, subject to a $1 million limit for each named
executive officer. While the Compensation Committee considers the deductibility of compensation as one factor in determining executive
compensation, the Compensation Committee retains the discretion to award and pay compensation that is not deductible as it believes
that it is in the best interests of our stockholders to maintain flexibility in our approach to executive compensation and to structure
a program that we consider to be the most effective in attracting, motivating and retaining key employees.
The compensation that
we pay to our executive officers is expensed in our financial statements as required by U.S. generally accepted accounting principles.
As one of many factors, the Compensation Committee considers the financial statement impact in determining the amount of, and allocation
among the elements of, compensation. Stock-based compensation is accounted for as required under Financial Accounting Standards
Board Accounting Standards Codification Topic 718.
Determination of Compensation Amounts
CEO Compensation Determination
Factors
Pay for Performance
and “At-Risk” Compensation. The Compensation Committee has established specific pay for performance requirements
which must be achieved before incentive compensation, which comprises the majority of CEO compensation, is awarded. In 2020, approximately
84% of total CEO compensation was comprised of incentive compensation for achieving and exceeding these pre-established requirements
Accordingly, most of the CEO compensation is “at risk” as it is dependent on the achievement of specific shareholder
return, financial performance and other requirements. The financial goals have been established in advance and are publicly available
on the Company’s website. As prior period financial performance requirements were achieved, the website has been updated
for future financial performance requirements, which have been further increased. The “Balanced Score Card: CEO Performance
Matrix” below summarizes the requirements for incentive at-risk compensation. In 2020, the at-risk component of the
CEO’s total compensation was $3,906,000 (84% of total compensation), while base salary of $750,000 comprised approximately
16% of total compensation.
Forward-Looking.
In addition to achieving specific pay for performance requirements and sustained financial performance, both the cash bonus and
equity awards are forward looking to motivate further progress toward the long-term financial goals set by the Board of Directors
and published on the Company’s website. As part of the evaluation process, sustained multi-year financial progress toward
those long-term goals is emphasized. Accordingly, in 2018, the cash bonus and equity compensation were maintained at the same level
as 2017, at $300,000 each. After sustained incremental financial progress in 2018 and 2017, the cash bonus and equity compensation
were both increased to $675,000 in 2019. In 2020, $1,650,000 for cash bonus and $1,350,000 for equity compensation were awarded,
which reflected multi-year sustained financial improvements in 2019. Excluding the gain on sale of the safe harbor in 2018, income
before tax increased to $72.5 million in 2019 from $54.8 million in 2018 and $40.4 million in 2017. In 2020, further progress
was made toward long term financial goals, as income before tax increased to $108.3 million. Budgets, with formal quarterly reports
of progress toward financial goals, are presented to the full Board of Directors reflecting a continuous monitoring of financial
performance, to validate incentive compensation. Budget targets in each year since Mr. Kozlowski was engaged have been met
or exceeded. As published on the Company’s website, long-term targets for 2020 have been increased from 2019 to 20%
for ROE and 2.00% for ROA. For 2019, the previously published goals were: ROA of 1.20% and ROE of 14%, which were achieved. After
adding back civil money penalties of $1.4 million and $7.5 million, which related to orders and actions prior to Mr. Kozlowski’s
employment, the 2019 ROA was 1.28% and the ROE was 13.5%. In 2018, the ROA and ROE were 2.07% and 24.3%, which reflected the sale
of the safe harbor IRA deposit portfolio. In 2020, further progress was made toward the long-term goals noted above, as ROA amounted
to 1.34% while ROE amounted to 15.1%.
The Compensation Committee
believes that its forward-looking approach of providing cash bonus and equity to motivate future performance, has been validated
by the above historical results since Mr. Kozlowski’s 2016 tenure began. Additionally, the Compensation Committee performs a peer
analysis to compare the Company’s compensation analysis with its peers. The Compensation Committee believes that the complexities
of the Company’s niche lending businesses and payments businesses are only partially present in any single peer. Accordingly,
peer comparisons are considered with the other factors noted above and in the “Balanced Scorecard: CEO Performance Matrix”
below.
Financial Performance.
The Compensation Committee monitors financial performance. In addition to the improvements in income noted above, other recent
financial highlights are as follows:
|
·
|
Total year-end SBLOC (securities-backed lines of credit) and IBLOC (insurance backed lines of credit) loans increased 30% year
over year to $1.0 billion at December 31, 2019, after increasing 8% in the comparable prior year period. At December 31, 2020,
balances had increased 56%, to $1,598 billion year over year.
|
|
·
|
Small Business Loans, including those held-for-sale, increased 22% year over year to $572.6 million at December 31, 2019, after
increasing 17% in the comparable prior year period. At December 31, 2020, balances had increased 14%, to $654 million year over
year.
|
|
·
|
Average loans and leases, including loans held for sale, increased 31% to $2.5 billion for the quarter ended December 31, 2019,
compared to $1.9 billion for fourth quarter 2018. At December 31, 2020, balances had increased 72%, to $4.3 billion year over year.
|
|
·
|
Average prepaid card deposits of $2.7 billion for the fourth quarter 2019, reflected an increase of 22% over the $2.2 billion
for fourth quarter 2018. At December 31, 2020, balances had increased 33%, to $3.59 billion.
|
|
·
|
Book value per common share at December 31, 2019 was $8.52 per share compared to $7.22 a year earlier, an increase of 18%,
after increasing 24% in the prior year period. At December 31, 2020, book value amounted to $10.10, an increase of 19% over the
prior year.
|
|
·
|
Significant multi-year progress in addressing FDIC regulatory issues culminated in the lifting of consent orders.
|
In summary, notwithstanding
that the Company exceeded all requirements and metrics for the payment of bonus and equity grants, Mr. Kozlowski’s total
compensation in 2018 was kept at 2017 levels as the Compensation Committee monitored financial performance sustainability. Cash
bonus and equity increases in 2019 and 2020 reflected the sustained multi-year financial improvements in 2017, 2018 and 2019. Financial
results in 2020 showed further improvements in financial performance as noted above. Additionally, to address shareholder input,
his base salary was lowered from $900,000 for 2018 to $755,000 in 2019 and then to $750,000 in 2020. Further, in 2019 and 2020,
the Compensation Committee allocated a significant portion of equity grants to options instead of restricted stock units. The salary
reduction and maintenance at that lower level and the allocation of a portion of equity grants to options resulted from stockholder
input, as noted in the chart appearing later in this report “Stockholder Input and Company Actions”. Cash bonus was
increased after financial goals published on the Company’s website were met and ultimately exceeded, and the other requirements
on the balanced scorecard were also exceeded for a sustained multi-year period.
Metrics and other
criteria. An analysis of the metrics and other criteria for the payment of CEO compensation is as follows.
Balanced Score
Card: CEO Performance Matrix
|
Pre-established requirements for incentive compensation
|
Did not meet
|
Substantially met
|
Exceeded
|
Financial & Strategic Performance
|
Publicly Announced Financial Metrics (a)
|
|
|
x
|
Strategic Agenda (b)
|
|
|
x
|
Integrated Business Plan Objectives (c)
|
|
|
x
|
Stock Performance
|
Competitor Peer Group (d)
|
|
|
x
|
Russell 2000 Index (d)
|
|
|
x
|
KBW Bank Index (d)
|
|
|
x
|
Enterprise Risk Management
|
Credit Risk Management (e)
|
|
|
x
|
Compliance Risk Management (f)
|
|
|
x
|
Regulatory (f)
|
|
|
x
|
|
(a)
|
Publicly Announced Financial Metrics: The Company publishes its financial goals on its website. For 2019, the previously published
goals were: ROA of 1.20%, ROE of 14% and a tier 1 capital to average assets ratio of at least 8.5%. After adding back civil money
penalties of $1.4 million and $7.5 million, which related to orders and actions prior to Mr. Kozlowski’s employment, the
ROA was 1.28% and the ROE was 13.5%. The tier 1 capital to average assets ratio was 9.6% at December 31, 2019. Thus, financial
parameters were exceeded in 2019. In 2018, the ROA and ROE were 2.07% and 24.3%, respectively, which reflected the sale of the
safe harbor IRA deposit portfolio. In October 2020, the previous goals of 1.20% ROA and 14% ROE were increased to future goals
of 2% ROA and 20% ROE. In 2020, further multi-year progress was sustained and further improved toward the increased financial goals.
In 2020, ROA amounted to 1.34% while ROE amounted to 15.1%.
|
|
(b)
|
Strategic Agenda: The strategic agenda included specific strategic objectives which are required to be met. Those
objectives and related performance are as follows. (i) Capture securities backed lines of credit (SBLOC) and insurance backed
lines of credit (IBLOC) market share with a newly automated origination application: Additional SBLOC and IBLOC market share
was captured with the implementation of Talea software. In 2018, year-end over year-end balances for these categories
increased by 8%, and in 2019 balances increased by 30%. Further increases were achieved in 2020, for which there was a 56%
increase in year end balances over the prior year end. (ii) Expand commercial real estate securitizations: Commercial real
estate securitizations in 2019 were expanded with greater than projected results. In 2020, the Company decided to retain
loans previously originated for securitization on its balance sheet, resulting in an approximate $1.5 billion portfolio.
(iii) Create core values statement and strengthen the Bancorp community through diversity and inclusion: The Company has
expanded its diversity and related outreach structure.
|
|
(c)
|
Integrated Business Plan Objectives: As part of the budget process, each line of business establishes goals which supported
the attainment of companywide financial goals as detailed above. Actual results are compared to each line of business’s pre-established
goals and reported to the Board of Directors quarterly. The specific line of business goals for all six operating departments were
concluded to have been exceeded, as the overall financial requirements had been exceeded. However, in addition to revenue goals,
certain of the 58 goals related to departmental improvements warranted review. Upon such review, it was concluded that of the 58
departmental goals for 2019, 54 were concluded to have been achieved, which exceeded expectations. In 2020, of 44 goals, 40 were
considered to have been met.
|
|
(d)
|
Stock Performance: In the three-year period ended December 31, 2019, the KBW Bank Index appreciated 24%. Bancorp (stock symbol
TBBK), appreciated 65% over that period, more than two times that index. In the three-year period ended December 31, 2020, the
KBW Bank Index depreciated 12% while Bancorp appreciated 38%, again exceeding industry performance.
|
|
(e)
|
Credit Risk and Loan Growth Management: Exceeding those two defined parameters resulted in the exceeded rating. Total loans
outstanding increased 21% at year-end 2019 over the prior year-end with an 8% increase in the prior year. Comparable growth for
2020 was 49% and further validated the already established sustained multi-year growth history. Credit risk was deemed acceptable
as charge-offs, for a sustained multi-year period, remained at relatively low levels. Results met or exceeded the budget, and the
factors above resulted in an exceeded rating.
|
|
(f)
|
Compliance Risk Management and Regulatory: The Board of Directors monitors compliance issues at its monthly meetings.
Significant multi-year progress in addressing FDIC regulatory issues culminated in the lifting of consent orders.
Improvements in compliance controls continue to be sustained and warranted an exceeded rating.
|
Stockholder Input and Company Actions
Notwithstanding receiving
more than a 90% affirmative advisory vote on executive compensation at its 2020 annual meeting, the Company reached out to its
stockholders to obtain feedback on company performance and any other matters of interest to stockholders. The Chief Financial Officer
and Chief Executive Officer are the Company’s primary representatives who meet with investors. Mr. Frenkiel addressed executive
compensation with stockholders. In 2020, these officers met with stockholders owning more than 50% of the Company’s Common
Shares as they had in previous years. Related stockholder feedback from prior meetings had resulted in structural changes to the
CEO’s compensation determination and other changes which were sustained. A summary of the stockholder input and resulting
actions are as follows:
Stockholder Input
|
Company Actions
|
The CEO’s base salary exceeded the peer
median. A lower base salary better aligns pay for performance which places greater emphasis on incentive compensation and less
emphasis on base salary.
|
In 2019, the CEO’s base salary was $755,000, compared to $900,000 in 2018. In 2020, salary was set at $750,000.
|
The CEO’s equity awards upon his hire
included stock options, but 2017 and 2018 grants consisted solely of restricted stock units. Stock options provide incentive for
pay for performance, as their value equals the increase in stock price after the grant date.
|
In 2019 and 2020, a significant allocation of equity compensation granted was awarded as stock options. As of December 31, 2020, Mr. Kozlowski had 258,049 unvested restricted stock units versus 665,104 stock options.
|
Publicizing the pre-established financial
targets required to be achieved for pay for performance awards on the Company’s website, creates transparency and accountability
for pay for performance.
|
Pre-established financial and other goals
are presented on the Company’s website and were used in the determination of cash bonus and equity incentive compensation.
https://investors.thebancorp.com/presentations/default.aspx
|
Increases in net income and other performance measures have been significant, but related financial performance sustainability should be considered.
|
Total CEO compensation for 2018 was maintained
at 2017 levels, notwithstanding the significant increases in income, ROA and ROE in 2017, with further increases in 2018. After
continued sustained earnings, cash bonus and equity compensation in 2019 was increased while base salary was decreased. The Compensation
Committee continues to validate sustainability of financial performance including ROA, ROE and other measures, which showed further
improvement in 2020.
|
Comparisons to peers on key financial metrics provide a tool to help determine that financial goals adequately reward stockholders.
|
The Compensation Committee added peer comparisons
for ROA and ROE to its decisioning parameters. The detailed financial targets required for pay for performance awards on the Company’s
website are also compared to peers.
|
Some companies use grids or assign percentages to their various pre-established metrics which weight those factors in incentive compensation awards.
|
In 2019, the Compensation Committee required that the Company achieve pre-established metrics for the award of incentive compensation. The grid precedes this section under “Balanced Score Card: CEO Performance Matrix”. The Compensation Committee determined that grid component requirements were exceeded for 2019. The grid has been maintained in 2020 and grid components were also exceeded in that year.
|
Other Considerations Impacting CEO Compensation
Mr. Kozlowski was named
the Company’s CEO in June 2016, a year in which the Company had significant regulatory requirements outstanding, and in
which it incurred losses. He was engaged because of his proven experience in financial turnaround, improving compliance with regulatory
requirements, and reducing financial and regulatory risk, while sustaining financial performance. The Compensation committee continues
to evaluate the Company’s performance in each of the areas above as follows. Mr. Kozlowski was engaged as CEO in June 2016
and charged with engineering a financial turnaround from the losses in that year. The Company has since exceeded the required
financial targets set by the Board of Directors and published on the Bancorp website. Excluding the gain on sale of the safe harbor
in 2018, income before tax increased to $72.5 million in 2019 from $54.8 million in 2018 and $40.4 million in 2017. In 2020,
further progress was made toward long term financial goals which were further increased, as income before tax increased to $108.3
million. The Compensation Committee considered earnings results for the above multi-year period in concluding that the turn-around
had exceeded expectations. The Board of Directors including the Compensation Committee has monitored the implementation of a unique
software system for BSA, as well as other infrastructure improvements. These include the creation of a Center of Excellence for
BSA and related regulatory requirements. The system and infrastructure have been largely implemented and enhancements continue
to be made. Based on its monitoring, these improvements were concluded to have been sustained. Significant multi-year progress
in addressing FDIC regulatory issues culminated in the lifting of FDIC consent orders. During Mr. Kozlowski’s tenure, the
Company has sold or otherwise disposed of the majority of its higher risk discontinued assets and related investment in unconsolidated
entity. Additionally, higher risk lines of business such as European operations were sold, while lower charge-off lending lines
have grown significantly, with total loans outstanding increasing 21% at year-end 2019 over the prior year end with a comparable
8% increase at year end 2018. In 2020, loan growth continued, and loans outstanding were 49% higher than the prior year-end. In
addition to the key areas set forth above, under the oversight of the CEO, new sources of revenue, including the rapid funds product,
were initiated, an innovation framework and process was created, operating platforms were reengineered, including a securities-backed
line of credit platform to facilitate scalability, and corporate culture was enhanced to include a formal diversity and inclusion
program.
A graphic representation
of income before taxes, in thousands, shows the improvement in income from 2016. Mr. Kozlowski has served as CEO since June 2016
and financial performance during his tenure shows dramatic sustained improvements. Excluding the gain on sale of the safe harbor
in 2018, income before tax increased to $72.5 million in 2019 from $54.8 million in 2018 and $40.4 million in 2017. In 2020,
income before tax amounted to $108.3 million.
*Continuing
Operations** 2018 excludes sale of Safe Harbor IRA. Total income before income taxes for 2018 including the Safe Harbor IRA sale
was $119,781
|
CEO Compensation
The following factors
impact the Compensation Committee’s determination of the amounts of cash bonus and equity awards for pay for performance:
1. Sustaining Improved Financial Performance Validated by Pre-established, Publicly Disclosed Financial Goals
In determining the Chief Executive Officer’s
compensation, the Compensation Committee established specific, pre-set financial goals. See “Balanced Score Card: CEO Performance
Matrix” above. For transparency, these goals were posted on the Company’s website. These goals were achieved sooner
than expected and the goals were increased and updated on the Company’s website in October 2020. Mr. Kozlowski has maintained
a consistent record of achieving and exceeding these goals since he joined the Company in June 2016. His performance through 2018
validated maintenance of base salary for 2018 at the original level necessary to retain him. After further sustained financial
improvement, and exceeding pre-set financial and other targets, cash bonus and equity compensation were increased in 2019. Base
salary was decreased in that year, to emphasize “pay for performance” and continued to be maintained at the lower
level in 2020. After sustained, multi-year improvements in financial performance, his cash and equity awards were further increased
in 2020 to reflect that performance, while his salary was maintained at approximately the same level as the prior year. At the
CEO’s request and as determined appropriate by the compensation committee, his total compensation in 2018 was maintained
at the same level as 2017. Both the CEO and the committee were focused on sustaining financial improvements as a primary determinant
for additional compensation, which was awarded beginning in 2019.
2. Performance versus Peers
The Compensation Committee refined its peer
group in 2019 as detailed under “Compensation Objectives and the Focus of Compensation Awards”. While it did review
the results of comparisons with its prior smaller peer group, the Compensation Committee now utilizes only one peer group, comprised
of twenty-six banks. For 2018, the Company’s 2.07% ROA was significantly more than the peer group which averaged in the
1.2% range, which was also the approximate median. The Company’s 24.26% ROE also significantly exceeded peer averages in
the 11% range, which was also the approximate median. Both the ROA and ROE were in the top quartile of these peer groups. For
2019, peer groups were also exceeded. In 2020, while the peer group financial performance generally declined, Bancorp’s
ROA and ROE respectively increased to 1.34% and 15.1%. The Company’s progress toward ultimately achieving 2018 performance
in the top quartile of peers validated maintenance of CEO base salary for 2018 at the original level necessary to engage the CEO
in 2016. It also validated the 2018 cash and restricted stock equity awards at the levels necessary to retain the CEO’s
service. The sustained multiyear improvements in financial performance validated the subsequent increases in cash bonus and equity
compensation. As noted previously, base salary was nonetheless reduced to the approximate median of the Compensation Committee’s
peer group effective January 2, 2019, to increase the pay for performance element of compensation.
3. Multi-Year Analysis of CEO Compensation and Comparison of CEO Total Compensation to Peers
Mr. Kozlowski’s total compensation
was $1.5 million in both 2017 and 2018. In 2018, the Compensation Committee considered the following: (a) that pre-established
financial goals were exceeded ahead of schedule, (b) financial performance now exceeded peers, and (c) the other pre-established
goals set by the Board of Directors had been satisfied. Nonetheless, total compensation in 2018 was maintained at the same level
as 2017. For 2017 and 2018, the CEO’s total compensation was below the 2017 total compensation (the most recent year available)
of the Compensation Committee’s 26 bank peer group. Mr. Kozlowski’s total compensation for 2018 of $1.5 million, compared
to 2017 median compensation of $2.0 million for the 26-bank peer group. After monitoring the sustained multi-year financial performance
of the Company and the exceeding of financial and non-financial metrics, the Compensation Committee increased cash bonus and equity
awards in subsequent years. While various peer comparisons show that total compensation in subsequent years is above average,
sustained multi-year financial improvement and the exceeding of all items on the balanced scorecard validate above average performance.
While the Compensation Committee considered CEO salaries in the whole 26 bank peer group, it concluded that the banks with the
most comparable lines of business and related complexities were more relevant. Accordingly, it considered the CEO compensation
of Axos, Green Dot, Tri-State, Meta and Live Oak for 2019. The CEO compensation for those banks ranged from $511,000 to $6.1 million,
with two banks higher and two banks lower than Bancorp’s 2020 compensation of $4.7 million, with one bank approximately
the same.
4. Other Goals
In addition to pre-established and publicly
disclosed financial parameters on the Company’s website and financial performance comparisons with peer groups, the Board
of Directors pre-established other goals in the form of a strategic agenda. The strategic agenda was comprised of the following:
capture securities backed lines of credit and insurance backed lines of credit market share with a newly automated origination
application, build out rapid funds transfer capability, improve data analysis, improve the leasing platform, mature financial
crimes center of excellence and create core value statement and strengthen the Bancorp community. The Board of Directors and Compensation
Committee were advised of progress on these goals and determined that results exceeded these targets. The Compensation Committee
reviewed each of these goals and determined that they had been either fully implemented or significant progress had been made
to satisfy the Compensation Committee as outlined above. Especially important to the Compensation Committee was the progress made
on regulatory issues.
5. Risk Considerations
The Compensation Committee viewed the Board
of Director’s financial and other publicly disclosed goals in tandem with the institution’s risk profile. For financial
performance especially, levels of risk required ongoing consideration so as not to incentivize excessive risk taking. Accordingly,
specific percentages of additional compensation were not assigned to specific measures of performance. Instead, risk would be
considered as part of a balanced scorecard approach. Upon its review, the Compensation Committee determined that risk had been
reduced, while financial performance had been significantly improved. Significant reductions in higher risk discontinued operations
loans had been exceeded by growth in lower credit loss lines of business such as securities-backed lines of credit. The sale of
the IRA portfolio concluded the sale of niche deposit lines of business which had unique risk elements. A significant component
of the improvement in financial performance resulted from expense reductions which also had been demonstrated not to result in
additional risk. Accordingly, risk had been reduced, while financial performance had been significantly improved over a sustained
period.
All five factors above
supported increased compensation levels. All the pre-established financial goals were either achieved or significantly exceeded
while risk was decreased. Pre-established strategic, non-quantifiable goals, which would impact financial performance in the future
were all either met or showed expected progress. The Compensation Committee received frequent updates from Board subcommittees
and other reporting to monitor the regulatory related and other goals to reach this conclusion.
In addition to achieving
specific pay for performance requirements as described above, both the cash bonus and equity awards are forward looking to motivate
further progress toward the long-term financial goals set by the Board of Directors and published on the Company’s website.
As part of the evaluation process, sustained multi-year financial progress toward those long-term goals is emphasized. Accordingly,
in 2018, the cash bonus and equity compensation were maintained at the same level as 2017, at $300,000 each. After sustained incremental
financial progress in 2018 and 2017, the cash bonus and equity compensation were both increased to $675,000 in 2019. In 2020,
$1,650,000 for cash bonus and $2,256,000 for equity compensation were awarded, which reflected further sustained financial improvements
in 2019. Total compensation in 2020 was comprised of the $1,650,000, the $2,256,000 and $750,000 base salary, for a total of $4,656,000.
The amount of compensation exceeding $1,000,000 is not deductible for federal tax purposes. At the federal tax rate of 21% for
2020, the resulting impact on tax expense was considered, as it was reflected in tax expense for the year ended 2020. Excluding
the gain on sale of the safe harbor in 2018, income before tax increased to $72.5 million in 2019 from $54.8 million in 2018 and
$40.4 million in 2017. In 2020, further progress was made toward long term financial goals, as income before tax increased
to $108.3. Budgets, with formal quarterly reports of progress toward financial goals, are presented to the full Board of Directors
reflecting a continuous monitoring of financial performance, to validate incentive compensation. Budget targets in each year since
Mr. Kozlowski was engaged have been met or exceeded. As published on the Company’s website, long-term targets have been
increased to 20% for ROE and 2.00% ROA. For 2019, the previously published goals were: ROA of 1.20% and ROE of 14%, which were
achieved. After adding back civil money penalties of $1.4 million and $7.5 million, which related to orders and actions prior
to Mr. Kozlowski’s employment, the 2019 ROA was 1.28% and the ROE was 13.5%. In 2018, the ROA and ROE were 2.07% and 24.3%,
which reflected the sale of the safe harbor IRA deposit portfolio. In 2020, further progress was made toward the long-term goals
noted above. ROA amounted to 1.34% while ROE amounted to 15.1%.
The Compensation
Committee will continue to evaluate Mr. Kozlowski’s performance with respect to the Company’s multi-year plan which
projects increasing profitability in each year. For shareholder transparency, financial goals are published on the Company’s
website and as a result of the achievement of prior goals, long-term targets have been increased to 20% for ROE and 2.00% for
ROA.
Other NEO Compensation
A chart of NEO compensation
is as follows: The footnotes to the chart list the performance requirements which must be sustained for cash bonus and equity
grants.
Name
|
Principal Position
|
Base Salary 2020 ($)
|
2020 Cash Bonus ($)
|
% of Base Salary
|
2020 Equity Grant ($)
|
% of Base Salary
|
Damian Kozlowski
|
Chief Executive Officer
|
750,000
|
1,650,000
|
220%
|
2,256,000
|
301%
|
Paul Frenkiel (1)
|
Chief Financial Officer
|
400,000
|
220,000
|
55%
|
180,000
|
45%
|
Mark Connolly (2)
|
Chief Credit Officer
|
350,000
|
412,500
|
118%
|
337,500
|
96%
|
Gregor Garry (3)
|
Chief Operating Officer
|
400,000
|
220,000
|
55%
|
180,000
|
45%
|
Thomas Pareigat (4)
|
General Counsel
|
400,000
|
275,000
|
69%
|
225,000
|
56%
|
|
(1)
|
For the Chief Financial Officer, Paul Frenkiel, the cash bonus of $220,000 in 2020, compared to $125,000 in 2019 and $100,000
in 2018, and was 55% of his base salary. Mr. Frenkiel’s responsibilities include all financial functions of the Company,
including supporting each line of business in managing their financial operations. The increased awards reflected the impact of
those financial functions on the sustained improved financial performance of the Company. Additionally, Mr. Frenkiel is responsible
for the investment portfolio which has consistently ranked in the upper quartile of peers. The upper quartile peer ranking requirement
was based on the yields reported in the Uniform Bank Performance Report for FDIC insured banks.
|
|
(2)
|
For the Head of Credit Markets and Chief Credit Officer, Mark Connolly, the cash bonus of $412,500 in 2020, compared to $300,000
in 2019 and $225,000 in 2018, and was 118% of his base salary. Mr. Connolly oversees all lending operations and is also responsible
for the disposition of the balance of discontinued operations to maximize shareholder value. Under Mr. Connolly’s leadership,
loan revenues have continued their consistent increases and amounted to $171 million in 2020 from $127 million in 2019, $95 million
in 2018 and $79 million in 2017. These higher revenues reflected 22% and 30% respective growth in 2019 year-end loan balances
for SBA and SBLOC with a 9% increase in year over year lease balances, after a 17% increase in year-end 2018 SBA balances. In 2020,
total loan balances again were increased significantly, by 49%. Additionally, Mr. Connolly exceeded his targeted 25% year over
year reduction in discontinued assets, which were reduced 29% to $140.7 million at year end 2019, and 35% to $197.8 million at
year end 2018 from $304.3 million at year end 2017.
|
|
(3)
|
For the Chief Operating Officer, Gregor Garry, the cash bonus of $220,000 in 2020, compared to $100,000 in 2019 and $50,000
in 2018, and was 55% of his base salary. Mr. Garry is responsible for Operations, Financial Crimes Risk Management, Enterprise
Risk Management, and Consumer Compliance. In addition to supporting cost reductions related to operations, Mr. Garry completed
the build out of an infrastructure which managed all outstanding regulatory issues. In the performance of those duties, he managed
the further maturation of the financial crimes Center of Excellence. Additionally, Mr. Garry oversaw the completion of an Integrated
Compliance Plan which addressed root causes for regulatory issues. This performance was acknowledged by the Compensation Committee
even though Mr. Garry’s contributions are not immediately reflected in financial results.
|
|
(4)
|
For the General Counsel, Thomas Pareigat, the cash bonus of $275,000 in 2020, compared to $150,000 in 2019 and $100,000 in
2018, and was 69% of base salary. Mr. Pareigat’s primary responsibilities include oversight, management and resolution of
all legal matters affecting the Company. Mr. Pareigat reports on legal matters to the Board of Directors at its monthly meetings.
The Board of Directors includes several attorneys who can assess Mr. Pareigat’s performance. Mr. Pareigat also manages a
legal staff which is charged with minimizing external legal costs. Mr. Pareigat’s performance was determined to exceed expectations
in these areas.
|
Director Compensation
The Compensation Committee
also oversees an annual compensation evaluation of the Board of Directors. A survey of twenty-four institutions was performed
to confirm that Board of Director compensation fell within appropriate peer ranges based on that survey. The Compensation Committee
granted equity with a market value at date of grant of approximately $90,000 to independent directors in 2020, to align their
interests with other stockholders. The $90,000 was added to cash compensation and that total was compared to the survey of other
institutions. Independent Directors also received an annual fee of $75,000 and are paid separately for committee meetings. The
annual fee and per meeting fees for Independent Directors have not been increased since 2018. See “Director Compensation
Table.”
Compensation Recoupment Policy
The Compensation Committee
reiterated its previously approved compensation recoupment policy as follows:
The compensation recoupment
policy applies if the Company is required to provide an accounting restatement for any of the prior three fiscal years for which
audited financial statements have been completed, due to material noncompliance with any financial reporting requirement under
the federal securities laws. In the event of such a restatement, the Compensation Committee will determine, in its discretion,
whether (1) NEOs, regardless of whether they were directly responsible for the restatement, or (2) all other recipients of cash-based
or equity-based incentive compensation who were directly responsible for the restatement, have received any cash-based or equity-based
incentive compensation that they would not have been entitled to receive under the restated results. In the event of any future
financial restatements, the Audit Committee will evaluate the facts and formally consider whether any compensation recoupment
(clawback) from any Company officer is warranted.
The Compensation Committee
then will take such actions as it deems necessary or appropriate, depending on all the facts and circumstances as determined during
its review, including (i) the recoupment of all or part of any such excess compensation, (ii) recommending disciplinary actions
to the Board of Directors, up to and including termination, and/or (iii) the pursuit of other available remedies.
COMPENSATION COMMITTEE REPORT
The Compensation Committee
has reviewed and discussed the Compensation Discussion and Analysis above and has discussed that analysis with management. Based
on its review and discussions with management, the Compensation Committee recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this Proxy Statement and incorporated by reference in the Company’s Annual Report on Form
10-K for the year ended December 31, 2020.
Walter T. Beach, Chairman
William H. Lamb
Mei-Mei H. Tuan
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides
information concerning total compensation earned or paid to the NEOs for the years ended December 31, 2020, 2019 and 2018.
Name and Principal Position
|
Year
|
Salary
($)
|
Bonus
|
Stock
Awards
($) (1)
|
Option
Awards
($) (2)
|
All other
compensation
($) (3)
|
Total
|
|
|
|
|
|
|
|
|
Damian Kozlowski
|
2020
|
750,000
|
1,650,000
|
1,350,000
|
906,000
|
9,714
|
4,665,714
|
Chief Executive Officer (4)
|
2019
|
755,000
|
675,000
|
675,000
|
250,000
|
10,476
|
2,365,476
|
|
2018
|
900,000
|
300,000
|
300,000
|
-
|
9,324
|
1,509,324
|
|
|
|
|
|
|
|
|
Paul Frenkiel
|
2020
|
400,000
|
220,000
|
180,000
|
-
|
18,426
|
818,426
|
Chief Financial Officer/
|
2019
|
396,500
|
125,000
|
125,000
|
-
|
18,560
|
665,060
|
Secretary
|
2018
|
310,660
|
100,000
|
100,000
|
-
|
18,396
|
529,096
|
|
|
|
|
|
|
|
|
Mark Connolly
|
2020
|
350,000
|
412,500
|
337,500
|
-
|
9,354
|
1,109,354
|
Executive Vice President/
|
2019
|
348,000
|
300,000
|
300,000
|
-
|
9,424
|
957,424
|
Chief Credit Officer
|
2018
|
300,000
|
225,000
|
225,000
|
-
|
8,862
|
758,862
|
|
|
|
|
|
|
|
|
Gregor Garry
|
2020
|
400,000
|
220,000
|
180,000
|
-
|
8,837
|
808,837
|
Executive Vice President/
|
2019
|
323,000
|
100,000
|
100,000
|
-
|
6,559
|
529,559
|
Chief Operating Officer
|
2018
|
273,000
|
50,000
|
50,000
|
-
|
8,929
|
381,929
|
|
|
|
|
|
|
|
|
Thomas Pareigat
|
2020
|
400,000
|
275,000
|
225,000
|
-
|
17,328
|
917,328
|
Executive Vice President/
|
2019
|
398,462
|
150,000
|
150,000
|
-
|
17,321
|
715,783
|
General Counsel
|
2018
|
360,000
|
100,000
|
100,000
|
-
|
16,884
|
576,884
|
|
|
|
|
|
|
|
|
|
(1)
|
Reflects the aggregate grant date fair value of stock awards granted during each of the last three fiscal years in accordance
with FASB ASC Topic 718. The values of stock awards were determined by multiplying the grant date closing price of the stock, by
the number of shares granted. The assumptions utilized in determining the fair value of stock awards are described in footnote
M to the annual financial statements included in the Company’s Annual Report on Form 10-K for its fiscal year ending December
31, 2020.
|
|
(2)
|
Reflects the aggregate grant date fair value of stock options granted in accordance with FASB ASC Topic 718. There were no
option awards granted in 2018. The assumptions utilized in determining the fair value of stock options are described in footnote
M to the annual financial statements included in the Company’s Annual Report on Form 10-K for its fiscal year ending December
31, 2020.
|
|
(3)
|
Represents the aggregate dollar amount for each NEO for perquisites and other personal benefits comprised of the Company’s
contributions to its 401(k) savings plan, insurance premiums and personal use of automobiles.
|
|
(4)
|
Effective January 1, 2019, the Compensation Committee reduced Mr. Kozlowski’s base salary from $900,000 per year to $755,000
per year, to increase the proportion of his incentive compensation as a result of stockholder feedback. Base salary was further
reduced to $750,000 in 2020.
|
Ratio of Chief Executive Officer Pay to
Median Pay
For 2020, the median
of the annual total compensation of all employees of the Company, other than the Chief Executive Officer (CEO), was $89,421, and
the total compensation of the CEO was $4,665,714, as reported in the Summary Compensation Table above. Based on this information,
for 2020, the CEO’s annual total compensation was 52 times that of the median of the annual total compensation of all employees.
To identify the median
of the annual total compensation of all of the Company’s employees, as well as to determine the annual total compensation
of the median employee and the CEO, the Company took the following steps:
|
·
|
The Company determined that as of the payroll for December 18, 2020, there were 614 employees. This population consisted of
the Company’s full-time and an insignificant number of part-time workers. Independent contractors were not included in the
analysis. December 18, 2020 was selected as the date to identify the “median employee” because it was the last payroll
date within the last three months of 2020, and it enabled the Company to make such identification in a reasonably efficient and
economical manner.
|
|
·
|
To identify the “median employee”, the Company analyzed the salary, wages and overtime pay of all employees, to
account for employees who had only worked a portion of the year. It also considered additional compensation consisting of 401(k)
matches and health insurance. Since less than 10% of Company employees receive equity awards, such awards were excluded from the
compensation measure.
|
|
·
|
The Company identified its median employee using this compensation measure, which was consistently applied to all employees
included in the calculation. Since all Company employees are located in the United States, including the CEO, the Company did not
make any cost of living adjustments.
|
|
·
|
Once the median employee was identified, the Company combined the elements of such employee’s compensation for 2020 in
accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in total compensation of $89,421. The difference
between such employee’s salary, wages and overtime pay and the employee’s annual total compensation represents the
estimated value of health care benefits which were estimated at $10,441 per employee, which includes coverage for dependents.
The Company’s 401(k) match was also included in the compensation analysis.
|
|
·
|
With respect to the total annual compensation of the CEO, the Company used the amount reported in the “Total” column
of the Summary Compensation Table above.
|
Equity Compensation Plan Information
As of December 31, 2020,
the status of our equity compensation plans is as follows:
Plan category
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
|
Weighted-average exercise price of outstanding options, warrants and rights
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
|
|
(a)
|
(b)
|
(c)
|
Equity compensation plans approved by security holders
|
2,949,547(1)
|
$7.62(2)
|
1,720,120
|
Equity compensation plans not approved by security holders
|
Not applicable
|
Not applicable
|
Not applicable
|
Total
|
2,949,547
|
$7.62
|
1,720,120
|
|
(1)
|
Includes 1,787,943 outstanding unvested restricted stock units which are awarded upon vesting
without consideration from the recipient. Restricted stock units have reduced the number of securities remaining available for
future issuance in column c.
|
|
(2)
|
Excludes 1,787,943 outstanding unvested restricted stock units which are awarded upon vesting without consideration from the
recipient.
|
Grants of Plan-Based Awards
The following table provides
information concerning each grant of an award made to an NEO during 2020 under any plan of the Company. In the following table,
the values of stock awards were determined by multiplying the grant date closing price of the stock by the number of shares granted.
The values of stock options granted were determined in accordance with FASB ASC Topic 718. The assumptions utilized in determining
the fair value of stock options are described in footnote M to the annual financial statements. The stock options vest over a
period of four years from grant date, while the stock awards vest over a period of two years and eight months from grant date.
Name
|
Grant Date
|
All Other Stock Awards: Number of Shares of Stock or Units (#)
|
Fair Market Value on Date of Grant ($/Share)
|
All Other Option Awards: Number of Securities Underlying Options (#) (1)
|
Exercise Price of Stock Options
(1)
($/Share)
|
Grant Date Fair Value of Stock and Option Awards ($)
|
Damian Kozlowski
|
05/20/20
|
196,506
|
6.87
|
|
|
1,350,000
|
|
|
|
|
|
|
|
Damian Kozlowski
|
05/20/20
|
|
|
300,000
|
6.87
|
906,000
|
|
|
|
|
|
|
|
Paul Frenkiel
|
05/20/20
|
26,200
|
6.87
|
-
|
-
|
180,000
|
|
|
|
|
|
|
|
Mark Connolly
|
05/20/20
|
49,126
|
6.87
|
-
|
-
|
337,500
|
|
|
|
|
|
|
|
Gregor Garry
|
05/20/20
|
26,200
|
6.87
|
-
|
-
|
180,000
|
|
|
|
|
|
|
|
Thomas Pareigat
|
05/20/20
|
32,751
|
6.87
|
-
|
-
|
225,000
|
|
|
|
|
|
|
|
|
(1)
|
These stock options had a $3.02 per share fair value as of date of grant computed consistent with
FASB ASC Topic 718.
|
Outstanding Equity Awards at Fiscal Year-End Table
The following table provides
information on the holdings by the Company’s NEOs as of year-end December 31, 2020 which details unexercised stock options and
stock awards that have not vested.
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of securities underlying unexercised options Exercisable
|
Number of securities underlying unexercised options Unexercisable
|
Options exercise price
|
Option expiration
|
Number of shares or units of stock that have not vested (2)
|
Market value of shares or units of stock that have not vested (3)
|
Name
|
Grant Date
|
(#)
|
(#)
|
($)
|
date
|
(#)
|
($)
|
Damian Kozlowski
|
6/01/2016
|
300,000
|
-
|
6.75
|
6/1/2026
|
-
|
-
|
|
5/16/2018
|
-
|
-
|
-
|
-
|
9,034
|
123,314
|
|
2/8/2019
|
16,276
|
48,828
|
8.57
|
2/8/2029
|
-
|
-
|
|
2/8/2019
|
-
|
-
|
-
|
-
|
52,509
|
716,748
|
|
5/20/2020
|
|
300,000
|
6.87
|
5/20/2030
|
|
|
|
5/20/2020
|
|
|
|
|
196,506
|
2,682,307
|
|
Total
|
316,276
|
348,828
|
-
|
-
|
258,049
|
3,522,369
|
|
|
|
|
|
|
|
|
Paul Frenkiel
|
8/11/2011
|
38,000
|
-
|
7.36
|
8/11/2021
|
-
|
-
|
|
1/25/2012
|
40,000
|
-
|
8.50
|
1/25/2022
|
-
|
-
|
|
1/23/2013
|
20,000
|
-
|
10.45
|
1/23/2023
|
-
|
-
|
|
5/16/2018
|
-
|
-
|
-
|
-
|
3,011
|
41,100
|
|
2/8/2019
|
|
|
|
|
9,724
|
132,733
|
|
5/20/2020
|
-
|
-
|
-
|
-
|
26,200
|
357,630
|
|
Total
|
98,000
|
-
|
-
|
-
|
38,935
|
531,463
|
|
|
|
|
|
|
|
|
Mark Connolly
|
5/16/2018
|
-
|
-
|
-
|
-
|
6,775
|
92,479
|
|
2/8/2019
|
-
|
-
|
-
|
-
|
23,338
|
318,564
|
|
5/20/2020
|
-
|
-
|
-
|
-
|
49,126
|
670,570
|
|
Total
|
-
|
-
|
-
|
-
|
79,239
|
1,081,613
|
|
|
|
|
|
|
|
|
Gregor Garry
|
5/16/2018
|
-
|
-
|
-
|
-
|
1,506
|
20,557
|
|
2/8/2019
|
-
|
-
|
-
|
-
|
7,780
|
106,197
|
|
5/20/2020
|
-
|
-
|
-
|
-
|
26,200
|
357,630
|
|
Total
|
-
|
-
|
-
|
-
|
35,486
|
484,384
|
|
|
|
|
|
|
|
|
Thomas Pareigat
|
1/25/2012
|
25,000
|
-
|
8.50
|
1/25/2022
|
-
|
-
|
|
1/23/2013
|
10,000
|
-
|
10.45
|
1/23/2023
|
-
|
-
|
|
5/16/2018
|
-
|
-
|
-
|
-
|
3,011
|
41,100
|
|
2/8/2019
|
-
|
-
|
-
|
-
|
11,669
|
159,282
|
|
5/20/2020
|
-
|
-
|
-
|
-
|
32,751
|
447,051
|
|
Total
|
35,000
|
-
|
-
|
-
|
47,431
|
647,433
|
|
|
|
|
|
|
|
|
|
Total
|
449,276
|
348,828
|
-
|
-
|
459,140
|
6,267,262
|
|
(1)
|
All options listed vest at a rate of one fourth per year over a period of four years from grant date.
|
|
(2)
|
All stock awards listed are Restricted Stock Units, or RSUs, which vest at a rate of one third per year over three years from
grant date, except those issued in 2018 and 2020 which vest one third each after years one and two, with the balance vesting after
eight months. Upon vesting, shares of Company common stock equal to the number of units vested are issued to the NEO.
|
|
(3)
|
Market value is based on the closing market price of the Company’s common stock on December 31, 2020, which was $13.65. In
the event of death, disability or retirement, unvested RSUs would vest to the benefit of the recipient. In the event of a change
of control, vesting could occur if the recipient were not offered comparable employment after the change of control. While the
values shown are as of year-end, the value actually realized would be determined by the stock price at the date of these occurrences.
|
Option Exercises and Stock Vested
The following disclosures
provide information for the Company’s NEOs regarding restricted stock units vested and options exercised in 2020.
Name
|
Option awards
|
Stock awards
|
Number of shares
acquired on
exercise
(#)
|
Value
realized on
exercise
($)
|
Number of shares
acquired on vesting
(#)
|
Value
realized on
vesting
($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
Damian Kozlowski
|
|
|
55,050
|
621,863
|
Paul Frenkiel
|
25,000
|
118,000
|
7,873
|
78,760
|
Mark Connolly
|
|
|
13,361
|
265,951
|
Gregor Garry
|
|
|
7,865
|
87,554
|
Thomas Pareigat
|
|
|
12,139
|
130,769
|
Potential Payments Upon Termination
or Change in Control
The following discussion
presents the potential payments for each of our named executive officers upon a termination of employment or change in control.
Pursuant to applicable SEC rules, the analysis contained in this discussion does not consider or include payments made to a named
executive officer with respect to contracts, agreements, plans or arrangements to the extent they do not discriminate in scope,
terms or operation in favor of named executive officers of the Company and that are available generally to all salaried employees.
The actual amounts that would be paid upon a named executive officer’s termination of employment can only be determined
at the time of such executive officer’s termination. Due to the number of factors that affect the nature and amount of any
compensation or benefits provided upon the termination events, any actual amounts paid or distributed may be higher or lower than
reported below. Among other factors that could affect these amounts are the timing during the year of any such event and our stock
price. This discussion assumes the relevant trigger event occurred on December 31, 2020, in accordance with SEC rules.
The Company’s
named executive officers serve at the discretion of the Board of Directors. We have not entered into formal employment agreements
with any of our named executive officers. In connection with Mr. Kozlowski’s hire in 2016, however, we provided him with
a Letter Agreement, or the DK Letter Agreement, outlining his basic compensation terms and providing for grants of equity compensation,
among other things. The DK Letter Agreement specified that his employment was terminable by either party at any time with or without
cause or advance notice. In the event of a named executive officer’s termination of employment for any reason whatsoever,
any severance benefits or other cash payments, if any, would be negotiated on an individual basis.
Awards Under the Company’s Equity
Compensation Plans
The Company has granted awards of stock
options, restricted stock units and restricted stock to each of the NEOs under one or more of the Company’s Stock Option
and Equity Plan of 2011, Stock Option and Equity Plan of 2013, 2018 Equity Incentive Plan and 2020 Equity Incentive Plan (collectively,
the “Equity Compensation Plans”). The currently outstanding wards granted to the NEOs are described above in the “Outstanding
Equity Awards at Fiscal Year-End” table. These awards are subject to certain trigger events which would affect their terms
and as a result represent our only obligation to make any potential payments upon termination or change of control of our NEOs.
As described in this table, these awards are comprised of unvested options (not exercisable) and vested options (exercisable)
and unvested RSUs.
Mr. Kozlowski received stock options
from the 2018 Equity Incentive Plan and the 2020 Equity Incentive Plan. With respect to such vested options, in the event of death,
disability or retirement, the exercise period is one year from the trigger date, subject to termination on the expiration date
of this option, if earlier. In the event of an involuntary termination following a change in control, all options would remain
exercisable (subject to the expiration provisions otherwise applicable to the option) and would be exercisable for a period of
one year following such termination. If his employment is terminated for cause, all options that have not been exercised will
expire and be forfeited. If his employment terminates for any other reason, these options may thereafter be exercised, to the
extent exercisable at the time of such termination, for a period of three months following termination, subject to termination
on the option’s expiration date, if earlier.
With respect to unvested options, in
the event of death, disability or retirement, such options would vest on the one year anniversary of the date of termination of
service and, since the one year vesting period would coincide with the one year permitted exercise period, notice of exercise
would be required to be provided prior to the expiration of the one year period following termination, with exercise permitted
immediately after the one year period, provided that no option would become vested after the expiration of its term and subject
to restrictions based on ISO treatment. In the event of an involuntary termination following a change in control, all options
would become exercisable (subject to the expiration provisions otherwise applicable to the option) and would be exercisable for
a period of one year following such termination. If employment has been terminated for cause or for any other reason, these options
would expire and be forfeited.
With respect to unvested RSUs, in the
event of death, disability or retirement, the unvested RSUs would vest on the one-year anniversary of such termination of service.
In the event of an involuntary termination following a change in control, all such RSUs would become fully earned and vested immediately.
In the event of a termination for cause or other termination, unvested RSUs would be forfeited. All RSUs were granted from the
2018 Equity Incentive Plan and the 2020 Equity Incentive Plan, thus these conditions additionally apply to the other NEOs, all
of whose RSUs were granted from those two plans.
See Exhibits 10.15 and 10.7.1 to our
Annual Report on Form 10K for the year ended December 31, 2020 (“the 2020 Annual Report”) for plan documents which
detail the definitions related to the trigger events summarized above.
Mr. Frenkiel and Mr. Pareigat
received stock options from the Stock Option and Equity Plan of 2011 which are now fully vested. In the event of death,
disability or retirement or other circumstances, the plan document specifies that the Compensation Committee has discretion
to determine amounts payable pursuant to the grant instruments. Accordingly, it could make both these vested options payable
to grantees at its discretion, subject to Treasury regulations. In the event of a change of control, the Compensation
Committee also has discretion as to the payment or disposition of options. See Exhibit 10.1 to the 2020 Annual Report for the
plan document which details the definitions related to trigger events.
The amount each NEO
would accrue under the relevant trigger event is set forth below.
Name
|
|
Principal Position
|
|
Involuntary Termination following a Change in Control ($)
|
|
Death,
Disability,
Retirement ($)
|
Damian Kozlowski (1)
|
|
Chief Executive Officer
|
|
5,804,415
|
|
5,804,415
|
Paul Frenkiel (2)
|
|
Chief Financial Officer
|
|
531,463
|
|
531,463
|
Mark Connolly (2)
|
|
Chief Credit Officer
|
|
1,081,612
|
|
1,081,612
|
Gregor Garry (2)
|
|
Chief Operating Officer
|
|
484,384
|
|
484,384
|
Thomas Pareigat (2)
|
|
General Counsel
|
|
647,433
|
|
647,433
|
|
|
|
|
|
|
|
|
(1)
|
Amounts for Mr. Kozlowski were computed by adding the December 31, 2020 share price of $13.65 times the number of unvested
RSUs, plus the number of unvested stock options times the difference of that share price and exercise prices.
|
|
(2)
|
Amounts for Messrs. Frenkiel, Connolly, Garry and Pareigat consisted of multiplying the share price of $13.65 times the number
of unvested RSUs, as they had no unvested stock options.
|
DIRECTOR COMPENSATION
Director Compensation Table
The following table provides information concerning the compensation
of the Company’s non-NEO directors for 2020. The compensation of the only director who is an NEO, Mr. Kozlowski, is described
above and he receives no additional compensation for his services as a member of the Board. Mr. Cohen is employed by the Company
and serves as its Chairman of the Board and his salary and other compensation for these services are described below. Each independent
director receives annual cash compensation of $75,000, paid quarterly. In addition, each independent director receives $500 for
each meeting of a committee of the Board of Directors he or she attends; the Chairman of the Audit Committee and the Chairman
of the Risk Committee receives $1,500 for each committee meeting attended; and the chairmen of the other committees
receive $1,000 for each committee meeting attended. The independent lead director, Michael J. Bradley, receives additional annual
cash compensation of $20,000 per annum. As independent lead director, Mr. Bradley serves on the executive, audit, risk and
compensation committees, which allows him to provide independent leadership. The Compensation Committee granted equity with a
market value at date of grant of $90,000 to independent directors, to align their interests with other stockholders. The annual
cash compensation of $75,000 and individual meeting fees were not increased in 2020 compared to the prior year.
|
Fees Earned or Paid in Cash ($)
|
Stock Awards
($)(4)
|
Total ($)
|
Walter T. Beach
|
79,000
|
90,000
|
169,000
|
Michael J. Bradley
|
105,500
|
90,000
|
195,500
|
John C. Chrystal (1)
|
96,000
|
90,000
|
186,800
|
Daniel G. Cohen (2)
|
602,500
|
247,500
|
850,000
|
Matthew N. Cohn
|
81,000
|
90,000
|
171,000
|
John M. Eggemeyer
|
80,500
|
90,000
|
170,500
|
Hersh Kozlov
|
77,000
|
90,000
|
167,000
|
William H. Lamb
|
79,500
|
90,000
|
169,500
|
James J. McEntee III
|
96,000
|
90,000
|
186,000
|
Daniela A. Mielke
|
88,000
|
90,000
|
178,000
|
Stephanie B. Mudick
|
86,500
|
90,000
|
176,500
|
Mei-Mei H. Tuan
|
80,000
|
90,000
|
170,000
|
|
(1)
|
Mr. Chrystal serves as Vice Chairman.
|
|
(2)
|
Mr. Cohen’s fees and stock awards reflect his compensation as Chairman of the Board and for his role in the commercial
real estate securitization division, which he established. His compensation is comprised of salary of $300,000 per year and, in
2020, of additional cash and stock awards, respectively, of $302,500 and $247,500. The commercial real estate securitization division,
prior to 2020, originated commercial real estate loans which it sold into securitizations. Related gains on sale amounted to approximately
$24 million in 2019, $21 million in 2018, and $18 million in 2017. In 2020, this division originated approximately $722 million
of these loans and the Company decided to retain loans originated on the balance sheet. Including loans generated in the prior
year, the portfolio amounted to approximately $1.5 billion at year end.
|
|
(3)
|
Outstanding restricted stock units and stock options as of December 31, 2020 are as follows. Each director in the table above,
except for Mr. Cohen, had 13,100 of restricted stock units outstanding. Mr. Cohen had 57,606 restricted stock units outstanding.
Directors Beach, Bradley, Cohn, Lamb and McEntee had 15,000 options, comprised of three 5,000 share grants with exercise prices
of $7.36, $8.50 and $10.45. Mr. Cohen had two 50,000 option grants outstanding at $7.36 and $8.50 exercise prices. Mr. Chrystal
had 5,000 options outstanding with a $10.45 exercise price. The fair values of the options at the respective exercise prices of
$7.36, $8.50 and $10.45, were $3.54, $4.51 and $4.24 as of the date of grant. Directors Eggemeyer, Kozlov, Tuan, Mielke and Mudick
had no options outstanding. The compensation and stock awards to Mr. Eggemeyer are made to Castle Creek Partners VI L.P., the fund
with which he is affiliated.
|
AUDIT COMMITTEE REPORT
In connection with the
preparation and filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Annual
Report on Form 10-K”):
|
1.
|
the Audit Committee reviewed and discussed the audited financial statements included in the 2020 Annual Report on Form 10-K
with the Company’s management;
|
|
2.
|
the Audit Committee discussed with the Company’s independent registered public accounting firm, Grant Thornton LLP (“Grant
Thornton”), the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight
Board (“PCAOB”) and the SEC;
|
|
3.
|
the Audit Committee received the written disclosures and the letter from Grant Thornton required by applicable requirements
of the PCAOB regarding Grant Thornton’s communications with the Audit Committee concerning independence, and has discussed
with Grant Thornton the independence of Grant Thornton; and
|
|
4.
|
based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors of the Company
that the audited financial statements be included in the Company’s 2020 Annual Report on Form 10-K for filing with the SEC.
|
In
performing its functions, the Audit Committee acts only in an oversight capacity. In its oversight role, the Audit Committee relies
on the work and assurances of the Company’s management, which has the primary responsibility for financial statements and
reports, and of the independent registered public accounting firm who, in its report, expressed an opinion on the conformity of
the Company’s consolidated financial statements to generally accepted accounting principles (“GAAP”). The Audit
Committee’s oversight does not provide it with an independent basis to determine that management has maintained appropriate
accounting and financial reporting principles or policies, or appropriate internal controls and procedures designed to assure
compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee’s considerations
and discussions with management and the independent registered public accounting firm do not assure that the financial statements
are presented in accordance with GAAP, that the audit of the financial statements has been carried out in accordance with GAAP
or that the independent registered public accounting firm is “independent.”
The Audit Committee of
the Board of Directors of the Company has provided this report. This report shall not be deemed to be filed under, nor shall it
be deemed to be incorporated by reference by any general statement incorporating this Proxy Statement into any filing under the
Securities Act of 1933, as amended, and the Exchange Act (collectively, the “Acts”), except to the extent the Company
specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.
Michael J. Bradley, Chairman
Matthew N. Cohn
John C. Chrystal
Stephanie B. Mudick
PROPOSAL 3. APPROVAL OF ACCOUNTANTS
The Board of
Directors unanimously recommends that the stockholders approve the selection of Grant Thornton LLP, independent registered
public accounting firm, to audit the financial statements of the Company for the fiscal year ending December 31, 2021.
Representatives of Grant Thornton are expected to be present at the Annual Meeting. These representatives will have the
opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.
The following table
presents the aggregate fees billed by Grant Thornton for each of the services listed below for each of the Company’s last two
fiscal years.
|
|
2020
|
|
|
2019
|
Audit Fees (1)
|
|
$
|
819,001
|
|
|
$
|
820,627
|
Audit – Related Fees (2)
|
|
|
140,700
|
|
|
|
25,521
|
|
|
|
|
|
|
|
|
Tax Fees (3)
|
|
|
174,892
|
|
|
|
97,930
|
Other Fees
|
|
|
-
|
|
|
|
-
|
Total
|
|
$
|
1,134,593
|
|
|
$
|
944,078
|
|
(1)
|
Audit fees consisted of the aggregate fees billed for professional services rendered by Grant Thornton in connection with its
audit of the Company’s consolidated financial statements and its limited reviews of the unaudited consolidated interim financial
statements that are normally provided in connection with statutory and regulatory filings or engagements for these fiscal years.
|
|
(2)
|
In 2020, audit-related fees were primarily comprised of services related to the Company’s 2020 debt offering and secondarily
for an audit of its 401k plan. In 2019, these fees were incurred for the audit of the Company’s 401k plan.
|
|
(3)
|
Tax fees consisted of the aggregate fees billed for professional services rendered by Grant Thornton for tax compliance, tax
advice and tax planning in 2020 and 2019.
|
Policy on Audit Committee
Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
Exchange Act rules generally
require any engagement by a public company of an accountant to provide audit or non-audit services to be pre-approved by the audit
committee of that public company. This pre-approval requirement is waived with respect to the provision of services other than
audit, review or attest services if certain conditions set forth in rule 2-01(c)(7)(i)(C) under the Exchange Act are met. None
of the audit-related and tax services described above were subject to this Rule and the approval procedures set forth therein.
All services provided to the Company by Grant Thornton in 2020 and 2019 were pre-approved by the Audit Committee.
The Board of Directors
unanimously recommends a vote “FOR” the selection of Grant Thornton as the Company’s independent registered public accounting
firm for the fiscal year ending December 31, 2021.
OTHER MATTERS
As of the date of
this Proxy Statement, the Board of Directors does not intend to present and has not been informed that any other person
intends to present any other matters for action at the Annual Meeting. However, if other matters do properly come before the
Annual Meeting or any adjournment, postponement or continuation thereof, it is the intention of the persons named as proxies
to vote upon them in accordance with their best judgment. For any other matter which may properly come before the Annual
Meeting, the affirmative vote of the holders of at least a majority of the votes cast at the Annual Meeting at which a quorum
is present is required, either in person or by proxy, for approval, unless otherwise required by law.
Except as set forth in
this section, all Common Shares represented by valid proxies received will be voted in accordance with the provisions of the proxy.
STOCKHOLDER PROPOSALS AND NOMINATIONS
Rule 14a-8 the Exchange
Act establishes the eligibility requirements and the procedures that must be followed for a stockholder’s proposal to be included
in a public company’s proxy materials. Proposals submitted for inclusion in the Company’s Proxy Statement for its 2022 annual
meeting of stockholders must be received by the Company’s Secretary on or before the close of business December 10, 2021. If
next year’s annual meeting is held on a date that is more than 30 calendar days from May 19, 2022, a stockholder proposal
must be received by a reasonable time before the Company’s printer begins to print and mail its proxy solicitation materials
for such annual meeting. Any stockholder proposals will be subject to the requirements of the proxy rules adopted by the Securities
and Exchange Commission. Notice of a shareholder proposal submitted outside of Rule 14a-8 is considered untimely if submitted
after 45 days prior to the mailing date of the proxy. Additionally, the persons named as proxies in the Proxy Statement and/or
form of proxy will have discretionary authority to vote on a stockholder proposal received before February 23, 2022, if we briefly
describe the matter in the Proxy Statement and how management’s proxy holders intend to vote on it, or if the stockholder does
not comply with the requirements of Rule 14a-4(c) (2) under the Exchange Act.
Stockholders who wish
to submit their recommendations for director candidates to the Nominating and Governance Committee should send their written recommendation
to the Company’s executive offices, The Bancorp, Inc., and Attention: Nominating and Governance Committee Chairman, 409 Silverside
Road, Suite 105, Wilmington, Delaware 19809. These stockholders must represent that they are stockholders of the Company and will
remain so through the date of the relevant annual meeting of stockholders of the Company and include the written consent of the
person so recommended to serve as a director if nominated and elected and to provide such information as the Nominating and the
Governance Committee may request, as well as a description of the nominee’s background and qualifications. All stockholder recommendations
received by the Nominating and Governance Committee will be reviewed at the first meeting of the Nominating and Governance Committee
held after receipt of the recommendation. The Nominating and Governance Committee will consider nominees recommended by security
holders for the annual meeting of stockholders to be held in 2022, if submitted as described above by December 10, 2021. The Company
describes how it addresses such submissions in greater detail in the “Submission of Director-Nominee Candidate” section
of the Corporate Governance Guidelines which may be accessed at https://investors.thebancorp.com/corporate-information/governance-documents/default.aspx.
These Corporate Governance Guidelines were adopted by the Board on December 16, 2020 and largely memorialized prior practices of
the Nominating and Governance Committee. The candidate attributes examined by the Nominating and Governance Committee and the standards
taken into account by the Nominating and Governance Committee are summarized above. See “Corporate Governance.”
STOCKHOLDER OUTREACH
We seek to actively engage
with our stockholders. We recognize the benefits that come from this interaction. We engage with stockholders throughout the year
to:
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Provide visibility and transparency into our business, our performance and our governance practices: The financial metrics and other targets utilized by the Company and Compensation Committee to assess performance and determine incentive compensation are at https://investors.thebancorp.com/presentations/default.aspx.
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Discuss with our stockholders the issues that are important to them, hear their expectations for us, and share our views: The Company’s Chief Executive Officer and Chief Financial Officer host quarterly phone calls in which all stockholders may participate, and which includes a question and answer session.
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Assess emerging issues that may affect our business, inform our decision making, enhance our corporate disclosures and help shape our practices: Notwithstanding more than a 90% approval for the advisory vote on compensation taken at the Company’s annual meeting held in 2020, executive management reached out to stockholders to provide input on that or any topic they wished. The Chief Financial Officer and Chief Executive Officer are the Company’s primary representatives who meet with investors. The Chief Financial Officer addresses outreach relating to CEO compensation. In 2020, these officers met with stockholders owning over 50% of the Company’s stock. A chart detailing the specific stockholder recommendations made and corresponding steps to implement pay for performance and other governance, is presented in “Determination of Compensation Amounts” under “Stockholder Input and Company Actions”.
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How
We Engage
In
addition to quarterly phone calls in which all stockholders may participate, we provide institutional investors with many opportunities
and events to provide feedback to our Board and senior management. We participate in:
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One-on-one sessions
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Group meetings throughout the year
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The Company’s Board of
Directors and management value direct interaction and communication with stockholders. The Company encourages stockholders to contact
it at any time to discuss compensation and any other topics of importance to them. In 2020, senior management held more than
50 meetings and conference calls with most of the Company’s major stockholders, although some investors have a policy of not meeting
directly with management. The Company uses these meetings to obtain feedback from its stockholders about areas important to them;
including the Company’s business model, performance, corporate governance, compensation practices and other investor topics.
Based upon continuing
stockholder engagement throughout the past two years, we believe there is a more positive view of executive compensation resulting
from sustained multi-year improvement in quarterly and annual results. The Company maintains a stockholder relations department
headed by Andres Viroslav, and the Company encourages you to call either him at 215.861.7990 or its Corporate Secretary and Chief
Financial Officer, Paul Frenkiel at 302.385.5122 for your feedback and financially-related or other questions.
ANNUAL MEETING OF STOCKHOLDERS OF
May 19, 2021
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PROXY VOTING INSTRUCTIONS
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INTERNET - Access “www.voteproxy.com” and follow the on-screen instructions or scan the QR code with your smartphone. Have your proxy card available when you access the web page.
Vote online until 11:59 PM EST the day before the meeting.
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MAIL
- Sign, date and mail your proxy card in the envelope provided as soon as possible.
VIRTUALLY
AT THE MEETING - The company will be hosting the meeting live via the Internet this year. To attend the
meeting via the Internet, please visit https://web.lumiagm.com/239103630 (password: bancorp2021) and be sure to have your
control number available.
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COMPANY NUMBER
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GO GREEN - e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access.
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ACCOUNT NUMBER
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IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR
THE STOCKHOLDER MEETING TO BE HELD ON MAY 19, 2021:
The Notice of Annual Meeting,
Proxy Statement, Annual Report and Proxy Card
are available at - https://investors.thebancorp.com/financial-information/proxy-materials/default.aspx
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/ Please detach along perforated line and
mail in the envelope provided IF you are not voting via the Internet. /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS
AND “FOR”
ITEMS 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE: ☒
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1.
Election of Directors
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FOR
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AGAINST
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ABSTAIN
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FOR
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AGAINST
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ABSTAIN
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Damian
Kozlowski
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Daniela
A. Mielke
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Walter
T. Beach
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Stephanie
B. Mudick
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2.
Proposal to approve a non-binding advisory vote on the Company’s compensation program for its named executive officers.
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3. Proposal to
approve the selection of Grant Thornton LLP as independent public accountants for the Company for the fiscal year ending December
31, 2021.
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4. In their discretion, the proxies are
authorized to vote upon such other business as may properly come before the meeting and any adjournment, postponement, or
continuation thereof. This proxy is solicited on behalf of the Board of Directors of the Company. This proxy, when properly
executed, will be voted in accordance with the instructions given above. If no instructions are given, this proxy will be
voted “FOR” election of the Directors and “FOR” proposals 2 and 3.
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To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
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Signature
of Stockholder
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Date:
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Signature
of Stockholder
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Date:
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Note:
Please sign exactly as your name or names appear on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title
as such. If signer is a partnership, please sign in partnership name by authorized person.
ANNUAL MEETING OF STOCKHOLDERS OF
THE BANCORP, INC.
May
19, 2021
GO
GREEN
e-Consent
makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents
online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR
THE STOCKHOLDER MEETING TO BE HELD ON MAY 19, 2021:
The
Notice of Annual Meeting, Proxy Statement, Annual Report and Proxy Card
are
available at https://investors.thebancorp.com/financial-information/proxy-materials/default.aspx
Please sign,
date and mail
your proxy card
in the
envelope provided
as soon
as possible.
/ Please detach along perforated line and
mail in the envelope provided. /
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS
AND
“FOR” ITEMS 2 AND 3.
PLEASE
SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE:
☒
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1.
Election of Directors
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FOR
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AGAINST
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ABSTAIN
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FOR
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AGAINST
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ABSTAIN
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☐
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☐
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☐
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☐
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☐
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☐
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☐
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☐
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☐
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Damian
Kozlowski
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☐
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☐
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☐
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Daniela
A. Mielke
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☐
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☐
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☐
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Walter
T. Beach
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☐
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Stephanie
B. Mudick
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2.
Proposal to approve a non-binding advisory vote on the Company’s compensation program for its named executive officers.
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☐
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☐
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☐
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☐
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3. Proposal to
approve the selection of Grant Thornton LLP as independent public accountants for the Company for the fiscal year ending December
31, 2021.
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☐
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4. In their discretion, the proxies are
authorized to vote upon such other business as may properly come before the meeting and any adjournment, postponement or
continuation thereof. This proxy is solicited on behalf of the Board of Directors of the Company. This proxy, when properly
executed, will be voted in accordance with the instructions given above. If no instructions are given, this proxy will be
voted “FOR” election of the Directors and “FOR” proposals 2 and 3.
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To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
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☐
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Signature
of Stockholder
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Date:
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Signature
of Stockholder
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Date:
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Note:
Please sign exactly as your name or names appear on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title
as such. If signer is a partnership, please sign in partnership name by authorized person.
THE BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD ON MAY 19, 2021
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The
undersigned hereby appoints Damian M. Kozlowski and Paul Frenkiel as proxies, each with full power of substitution, to
represent and vote as designated on the reverse side, all the Common Shares of The Bancorp, Inc. held of record by the
undersigned on March 23, 2021, at the Annual Meeting of Stockholders to be held virtually at
https://web.lumiagm.com/239103630 (password: bancorp2021), on
May 19, 2021, or any adjournment or postponement thereof.
(Continued and to be signed on the reverse
side)
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