| ☑ | No fee required. |
| ☐ | Fee paid previously with preliminary materials. |
| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. |
A MESSAGE TO OUR STOCKHOLDERS
Dear Fellow Stockholders,
Thank you for your continued investment in Hanmi Financial Corporation. On behalf of the Board of Directors and the management team, we are pleased to invite you to attend the 20222023 Annual Meeting of Stockholders, which will be held virtually on Wednesday, May 25, 202224, 2023 at 10:30 a.m., Pacific Time.
Celebrating 40 YearsConsistent Execution and Growth
In 2022, the Hanmi team demonstrated the value of Success – Helpingconsistent execution against winning growth initiatives, even during times of economic volatility. We finished the year with record financial performance and a strong capital base, outperforming many of our Customers Bankpeers across numerous metrics. As we navigated an uncertain economy that was adapting to rapidly rising interest rates, we maintained focus on their Dreams
Founded in Los Angeles, Hanmi Bank was the first Korean American institution established to serve the underbanked immigrant community in Koreatown. Since we opened our doors, we have helped our customers, capitalize on opportunities as well as navigate many challenges including recessions, inflation, debt and housing crises, social unrest, natural disasters and, most recently, a global pandemic. Through it all,ensuring that we have remained true to our mission and our values while supportingwere providing the communities we serve.
For 40 years, Hanmi Bank has served our customers with relationship-based bankingright products and services that have helped them achieveto meet their American dreams. We have done this by providing access to capital, advice,needs and business connections. Our close customer partnerships, along withstrengthen our deep community ties, have enabled Hanmi to grow and flourish overportfolio. This has been our approach for the past four decadesdecades: meeting our customers’ needs through diverse offerings to drive disciplined growth and deliver attractive returns for our shareholders.
As we begin our fifth decade in 2023, Hanmi is well positioned to build on this great legacy. Hanmi is in a very strong financial position, us exceptionally well for the next 40 years.
We are now the second-largest Korean American bank with $6.9 billion in assets, serving multi-ethnic communities through a network of 35 full-service branchesample liquidity and eight loan production offices across nine states, coast-to-coast. Overexcellent credit quality. For the past few years, we have been intently focused on building a foundation for sustainable growth and we have made meaningful investmentsgreat strides on our well-defined strategic initiatives to transform and diversify our loan portfolio and deposit franchises. Importantly, our banking relationships continue to be centered around the needs of individuals and small businesses, South Korean companies operating in new products, talent,the U.S., and technologyreal estate investors. The relationship-banking approach used in our humble beginnings continues to acceleratehelp us build a broad, diversified customer base.
We are proud of our evolution into a leading community bankteam’s performance this year and to ensurethe results we meetdelivered. Our 2022 return on average shareholder equity was strong at 14.83%. We also increased our customers’ needs and expectations. As a well-capitalized bank with a strong financial profile and a diversified business model, Hanmi is well positioned to serve a growing customer basetotal dividends paid for the year by deepening ties with existing customers while building new relationships across74%, which reflects our markets and business lines.improved performance.
Record 2021 Financial2022 Performance Highlights
Our team of 600 bankers performed exceptionally2022 results were strong across the board. We generated record net income and loan production, as well in 2021 while continuing to navigateas an improved net interest margin. At the challenges of the ongoing global pandemic, politicalsame time, we diligently managed operating expenses and social volatility, and shifting economic dynamics. Guidedimproved our asset quality. These results were driven by our team’s hard work as well as the strategic growth plan,investments we expanded our product andmade to enhance Hanmi’s service offerings and diversifiedbroaden our loan and deposit portfolios. Working closely with our customers, we also further strengthened our portfolio and asset quality metrics. All of this resulted in very strong financial results for the year, including:customer base. Key highlights include:
NetRecord net income of $101.4 million, or $3.32 per diluted share, up from 2021 net income of $98.7 million, or $3.22 per diluted share, up from $42.2 million, or $1.38 per diluted share in 2020.share.
RecordA 15.7% year-over-year increase in loan growth, driven by record loan production of $1.81 billion,$2.1 billion. This exceptional performance includes a year-over-year increasenew high of 12 percent, excluding $133.1$420 million in residential mortgage loan production, which represents approximately 20% of second round Paycheck Protection Program (PPP) loans.our total loan production for the year.
Deposit growthDeposits grew by 6.6%, with the mix of 9.7 percent, bringingnoninterest-bearing deposits to $5.79 billionremaining strong at year-end.41.2% of total deposits.
Improved assetAsset quality by reducing nonperformingimproved significantly in 2022 as we continued our focus on high-quality loans, by 84 percent year-over-year.disciplined underwriting, and vigilant credit administration practices.
SuccessManaging Through Uncertain Times
From our earliest days, we have dedicated ourselves to serving our communities. That dedication is part of Strategic Growth Initiatives
We successfully ramped up production in our residential mortgage program, which accounted for 11 percent of originations in 2021, excluding PPP loans, in its first full year of operation. In this business,foundation and continues to run through everything we originate nonqualified residentialdo. What began with much-needed loans and mortgage warehouse lines that help diversifybanking services for underserved Korean American immigrants in Los Angeles has now grown into the second largest Korean American bank with $7.4 billion in assets and operations in nine states.
Over the years, Hanmi has faced its share of challenges and grew stronger because of them. Today, our loan portfoliocurrent leadership team has broad experience in managing through dynamic economic cycles and challenging circumstances. Our team knows how to bring the necessary focus, discipline and ingenuity to work through any situation toward a solution.
As the past year progressed and interest rates began to rise, our team stepped up direct communication with our customers. We wanted to understand how shifting economic factors were impacting their businesses so we could work together to identify their specific needs and potential solutions. These circumstances presented yet another opportunity to partner with our customers, helping them to navigate these challenges while also improving our asset quality.
Our Competitive Advantage is Our Team
Hanmi’s outperformance is directly attributable to our ability to work cohesively as a lower-risk asset class thatteam. We do this by focusing on client relationships, harnessing our competitive nature, and most importantly, respecting open communication. Sharing ideas and constructively challenging one another enables us to be nimble, agile and creative as we can grow profitablyserve varied communities with differing needs.
Even in a tight labor market, we want to bring on new team members who will both embrace and contribute to this culture. We carefully invest in and train our entire Hanmi team to ensure we have deep bench strength at all levels of the organization. This approach is delivering results with most of our geographic regions and business units delivering increased production during 2022.
The same principles hold true for years to come.
We also advanced our Corporate Korea initiative, which accountedexecutive team, the majority of whom have worked together for more than 14 percenteight years, bringing to Hanmi average banking experience of over 30 years. Each executive brings a diverse set of experiences and expertise to their job, and the ideas we share are driving progress on each of our 2021 loan production and 12 percent of loans outstanding at year end. Through this initiative, Hanmi’s dedicated
bankers build relationships with Korean companies based in the U.S., providing them with banking advice and lines of credit, real estate investment loans, asset-based loans, and other services. In addition, driven by the strong relationships our bankers forge with clients, deposits from our Corporate Korea initiative clients represented six percent of deposits at year end. We expect this important program to make a growing contribution to both loan production and deposit growth in 2022 and beyond.
These strategic growth initiatives, along with strong momentum across our diverse business lines, fueled record growth in loan and lease production in 2021. initiatives.
Creating Shareholder Value
Our commercial leasing business made a solid contributiondedication to this performance, complementing our strength in commercial real estate and commercial and industrial lending businesses.
Community Banking Starts with Community
At Hanmi, we believe long-term corporate value is created from investing in the diverse communities we serve. This was never more evident than during the past two years as we managed through the global pandemic. While so much of the world seemed to close its doors, our teams immediately engaged to protect the financial stability ofeffectively serve our customers and the communities by processing nearly 2,500 loan modification requestswe operate in helps us to deliver attractive returns on your investment, which remains a top priority for all of us at Hanmi.
In 2022, Hanmi identified and funding more than 4,400 PPPresponded to needs in our community in the following ways:
We originated 289 small business and community development loans to help them navigate these uncertain times. totaling over $380 million.
| • | Our bank employees provided financial literacy and technical assistance to 45 organizations, which facilitated financial education to approximately 300 unbanked, underbanked, or underserved non-customers. |
We also continued to make loans anddeliver on our $7.5 million long-term commitment to collaborate closely with our customers to support their business needs and objectives.
From natural disasters to everyday needs in the community, our team members responded with both their time and ingenuity. Through our Hanmi Neighbor Volunteer Service Program, our team volunteered in a variety of educational efforts such as financial literacy, financial education for seniors, affordable housing education, and more. And, since 2016, our Hanmi Bank Dream Scholarship program has awarded life-changing scholarships to help many at-risk youths achieve their educational goals and future dreams.Community Reinvestment Act fund.
Hanmi Team: Our People Make Things Happen
We cannot achieve our mission without our talented team – an exemplary team that operatesenter 2023 with a customer focusstrong balance sheet and a growth mindset. A team that brings not just relevant expertisedemonstrated ability to manage through challenging times. Importantly, asset quality remains very healthy, and talent, but one that is diverse in ethnicity, gender, background, skills, and experiences.we have a strong capital base with all capital ratios above well-capitalized regulatory requirements. As we continuelook ahead, we remain focused on continuing to expandbuild upon our products and services, we will further evolve our internal resources and ensure our workforce reflectsfoundation for prudent growth while strengthening the customers we serve. A key factor in attracting and retaining diverse talent is fostering a corporate culture where every individual feels comfortable and safe and can see career mobility. This requires every Hanmi team member to live by our valuesfranchise, all with the view of integrity, transparency, fairness, and collaboration.
The Next Chapter for Hanmi
As we celebrate our rich 40-year history, we are very proud of what the entire Hanmi team – from our foundersdelivering attractive returns to our current team – has achieved on behalf of our customers and our communities. We will build upon those successes as we continue to grow Hanmi into a leading community bank. Hanmi is better positioned than ever to meet the evolving needs of tomorrow’s customers, while continuing to be a trusted community partner to customers who have banked with us for 40 years.shareholders.
In closing, we want to extend our deepest appreciationgratitude for your continued support and investment. We kindly request your support for our voting recommendations and we invite you to share your perspectives with us throughout the year.
Sincerely,
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John J. Ahn | Bonita I. Lee | |||||||||
Chairman of the Board | President and Chief Executive Officer |
HANMI FINANCIAL CORPORATION
900 Wilshire Boulevard, Suite 1250
Los Angeles, California 90017
(213) 382-2200
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON MAY 25, 202224, 2023
TO THE STOCKHOLDERS OF HANMI FINANCIAL CORPORATION:
NOTICE IS HEREBY GIVEN that the 20222023 annual meeting of stockholders (the “Annual Meeting”) of Hanmi Financial Corporation (“Hanmi,” the “Company,” “we,” “us” or “our”) will be held virtually, via live webcast, on Wednesday, May 25, 202224, 2023 at 10:30 a.m., Pacific Time, for the following purposes:
| 1. | To elect |
| 2. | To provide a non-binding advisory vote to approve the compensation of our Named Executive Officers (“Say-on-Pay” vote); |
| 3. | To provide a non-binding advisory vote to approve the frequency of future Say-on-Pay votes; |
| 4. | To ratify the appointment of Crowe LLP as our independent registered public accounting firm for the fiscal year ending December 31, |
To consider any other business properly brought before the meeting. |
Please note that this year’s meeting will be virtual. You will not be able to attend the Annual Meeting in person. A live webcast of the Annual Meeting will be available. Registration is required online at www.proxydocs.com/HAFC. Whether or not you plan to attend virtually, your vote is important and we encourage you to vote promptly by mail, telephone or via the Internet. If you attend the Annual Meeting virtually, you may vote online during the Annual Meeting.
By Order of Our Board of Directors,
John J. Ahn
Chairman of the Board
Los Angeles, California
April 15, 202214, 2023
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
This Proxy Statement and the www.hanmi.com by clicking on “Investor Relations” and then “Proxy Materials.” |
VIRTUAL ANNUAL MEETING
The Annual Meeting will be held in a virtual-only meeting format, via live video webcast that will provide stockholders of record and beneficial owners as of the close of business on the March 31, 20222023, the record date, with the ability to participate in the Annual Meeting, vote their shares electronically at the Annual Meeting via the virtual-only meeting platform, and submit questions. The virtual-only meeting format this year is reflective of the continuing sensitivity of COVID-19, pandemic, taking into consideration the concern for the health and safety of all stakeholders.
BENEFITS OF A VIRTUAL ANNUAL MEETING
The virtual-only meeting format will give stockholders the opportunity to exercise the same rights as if they had attended an in-person meeting and we believe that these measures will enhance stockholder access and encourage participation and communication with our Board of Directors and management.
We believe a virtual-only meeting format facilitates stockholder attendance and participation by enabling all stockholders to participate fully and equally, and without cost, using an Internet-connected device from any location around the world. In addition, the virtual-only meeting format increases our ability to engage with all stockholders, regardless of size, resources or physical location.
ATTENDANCE AT THE VIRTUAL ANNUAL MEETING
Only stockholders of record and beneficial owners of shares of our common stock as of the close of business on March 31, 2022,2023, the record date, may attend and participate in the Annual Meeting, including voting and asking questions during the virtual Annual Meeting. You will not be able to attend the Annual Meeting physically in person.
In order to attend the Annual Meeting, you must register at www.proxydocs.com/HAFC. Upon completing your registration, you will receive further instructions via email, including a unique link that will allow you to access to the Annual Meeting and to vote and submit questions during the Annual Meeting.
As part of the registration process, you must enter the control number located on your proxy card, voting instruction form, or Notice of Internet Availability. If you are a beneficial owner of shares registered in the name of a broker, bank or other nominee, you will also need to provide the registered name on your account and the name of your broker, bank or other nominee as part of the registration process.
On May 25, 2022,24, 2023, the day of the Annual Meeting, stockholders may begin to log in to the virtual-only Annual Meetinglive webcast 15 minutes prior to the Annual Meeting. The Annual Meeting will begin promptly at 10:30 a.m., Pacific Time.
We will have technicians ready to assist you with any technical difficulties you may have accessing the Annual Meeting. If you encounter any difficulties accessing the virtual-only Annual Meeting platform,live webcast, including any difficulties voting or submitting questions, you may call the technical support number that will be posted in your instructional email.
QUESTIONS AT THE VIRTUAL ANNUAL MEETING
Our virtual Annual Meeting will allow stockholders to submit questions before the Annual Meetinglive webcast, to be addressed during a designated question and answer period at the Annual Meeting. We will answer as many stockholder-submitted questions as time permits, and any questions that we are unable to address during the Annual Meeting will be answered following the meeting, with the exception of any questions that are irrelevant to the purpose of the Annual Meeting or our business, or that contain inappropriate or derogatory references whichthat are not in good taste. If we receive substantially similar questions, we will group such questions together and provide a single response to avoid repetition.
PLEASE NOTE YOU WILL NOT BE ABLE TO ATTEND THE ANNUAL MEETING IN PERSON.
| PROXY STATEMENT SUMMARY | 1 | |||
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Questions and Answers About These Proxy Materials and the Annual Meeting | 2 | |||
| CORPORATE GOVERNANCE AND BOARD MATTERS | 5 | |||
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| PROPOSAL NO. 1 ELECTION OF DIRECTORS | ||||
| EXECUTIVE OFFICERS | ||||
| EXECUTIVE COMPENSATION | ||||
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Potential Payments upon Termination of Employment or Change in Control | 42 | |||
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| PROPOSAL NO. 2 NON-BINDING ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION (“SAY-ON-PAY” VOTE) | |||||||
| PROPOSAL NO. 3 | |||||||
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| AUDIT AND NON-AUDIT FEES | 54 | ||||||
| AUDIT COMMITTEE REPORT | |||||||
| CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS | |||||||
Review, Approval or Ratification of Transactions with Related Persons | |||||||
| BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT | |||||||
| OTHER MATTERS | 59 | ||||||
| STOCKHOLDER PROPOSALS FOR THE 2023 ANNUAL MEETING | |||||||
| AVAILABILITY OF FORM 10-K | |||||||
| WHERE YOU CAN FIND MORE INFORMATION | |||||||
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FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 25, 202224, 2023
The Board of Directors (our “Board”) of Hanmi Financial Corporation is soliciting your proxy for use at the 20222023 annual meeting of stockholders (the “Annual Meeting”) to be held virtually on Wednesday, May 25, 202224, 2023 at 10:30 a.m., Pacific Time, and at any adjournments or postponements thereof.
PROXY STATEMENT SUMMARY
MATTERS TO BE CONSIDERED AND VOTE RECOMMENDATION
We are asking stockholders to vote on the following matters at the Annual Meeting of Stockholders:
Proposal | Our Board’s Recommendation | |
Item 1. Election of Directors (page | ||
The Board believes that the
| “FOR” each Director Nominee | |
Item 2. Advisory Vote to Approve Executive Compensation (“Say-on-Pay” Vote) (page | ||
The Company seeks a non-binding advisory vote from its stockholders to approve the compensation of its Named Executive Officers (“NEOs”) as described in the Compensation Discussion and Analysis and Executive Compensation sections beginning on page
| “FOR” | |
Item 3. Advisory Vote to Approve Frequency of Future Say-on-Pay Vote (page 52) | ||
The Company seeks a non-binding advisory vote from its stockholders to hold future Say-on-Pay votes every year. The Board values stockholders’ opinions and it will take into account the outcome of the advisory vote when considering the frequency of future Say-on-Pay votes. | Every “1 YEAR” | |
Item 4. Ratification of Auditors (page | ||
The Audit Committee and the Board believe that the continued retention of Crowe LLP to serve as the independent registered public accounting firm of the Company for the fiscal year ending December 31,
| “FOR” | |
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PROXY STATEMENT SUMMARY
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND THE ANNUAL MEETING
| Q: | Why did I receive this Proxy Statement? |
| A: | You received this Proxy Statement and the enclosed proxy card because we are soliciting your vote at the Annual Meeting. As a stockholder of record of our common stock, you are invited to virtually attend the Annual Meeting, and are entitled and requested to vote on the proposals described in this Proxy Statement. This Proxy Statement summarizes the information you need to know to cast an informed vote at the Annual Meeting. However, you do not need to attend the Annual Meeting to vote your shares. Instead, you may simply complete, sign and return the enclosed proxy card by mail. You may also vote by telephone or via the Internet. |
We will post thisThis Proxy Statement, notice of the Annual Meeting, and the enclosed proxy card were posted on the Investors Relations page of www.hanmi.comon or about April 15, 2022 to all stockholders entitled to vote.14, 2023.
| Q: | Who is entitled to vote and how many votes do I have? |
| A: | All stockholders of our common stock as of the close of business on March 31, |
| Q: | How many shares are eligible to be voted? |
| A: | As of March 31, |
| Q: | What is the difference between holding shares as a “record” holder and in “street name”? |
| A: | • | Record Holders: If your shares of common stock are registered directly in your name on our stock records, you are considered the stockholder of record, or the “record holder” of those shares. As the record holder, you have the right to vote your shares online at the virtual Annual Meeting or by proxy. |
• | Street Name Holders: If your shares of common stock are held in an account at a brokerage firm, bank, or other similar entity, then you are the beneficial owner of shares held in “street name.” The entity holding your account is considered the record holder for purposes of voting at the Annual Meeting. As the beneficial owner, you have the right to direct this entity on how to vote the shares held in your account. However, as described below, you may not vote these shares online at the virtual Annual Meeting unless you obtain a legal proxy from the entity that holds your shares giving you the right to vote the shares online at the virtual Annual Meeting. |
| Q: | What is a broker non-vote? |
| A: | Current regulations restrict the ability of your brokerage firm, bank or similar entity to vote your shares, on the election of directors and other matters, on a discretionary basis. Thus, if you hold your shares in street name and you do not instruct your bank or broker how to vote in the election of directors, |
| Q: | What is the required quorum at the Annual Meeting? |
| A: | A quorum for the transaction of business at the Annual Meeting requires the presence, online or by proxy, of the holders of a majority of all shares entitled to vote at a meeting of stockholders. Abstentions and broker non-votes are treated as being present for purposes of establishing a quorum. |
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PROXY STATEMENT SUMMARY
| Q: | What vote is required to approve each proposal at the Annual Meeting? |
| A: | 1. | Election of Directors. Directors are elected by a majority of votes cast in uncontested elections. In order to be elected to the Board, the votes cast “for” the nominee must exceed the number of votes cast “against” the nominee. |
| 2. | Advisory Vote on the Compensation of our |
| 3. | Advisory Vote on the Frequency of Future Say-on-Pay Votes. Our stockholders will have four options to choose from when voting on the advisory vote on the frequency of future advisory votes regarding NEO compensation: Every “1 YEAR”; “2 YEARS”; “3 YEARS”; or “ABSTAIN.” The option receiving the most votes will be the option selected by our stockholders. |
| 4. | Ratification of Selection of Auditors. Ratification of the selection of Crowe LLP as our independent registered public accounting firm for the fiscal year ending December 31, |
| Q: | What is the effect of broker non-votes and abstentions? |
| A: | Abstentions and broker non-votes will be counted for determining a quorum. Your broker, however, will not be entitled to vote without your instruction on Proposals 1 through 3 on the election of directors, and the advisory (non-binding) |
Your broker will be authorized to vote your shares on the ratification of our independent registered public accounting firm even if it does not receive instructions from you, and accordingly, broker non-votes will have no effect on this proposal.
Abstentions and broker non-votes will have no effect on the election of directors in Proposal 1.1 and the frequency of future Say-on-Pay votes in Proposal 3. Abstentions and broker non-votes will have the effect of a vote “AGAINST” Proposal 2 for the advisory (non-binding) vote to approve the compensation of NEOs. Abstentions will have the effect of a vote “AGAINST” the ratification of our independent registered public accounting firm.firm in Proposal 4.
| Q: | How can I vote my shares? |
| A: | If you hold your shares of common stock in your own name and not through a broker or another nominee, you may vote your shares of common stock by the following methods, subject to compliance with the applicable cutoff times and deadlines described below: |
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By Internet You can vote via the
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| By Telephone You can vote by dialing the toll-free number printed on your proxy card. Telephone voting is available 24 hours a day until 11:59 p.m., Pacific Time, on May
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| By Mail You can vote by mail by signing, dating and returning the proxy card in the postage-paid envelope provided to you. Proxy cards sent by mail must be received by May
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| In Person By attending the Annual Meeting virtually and voting through www.proxydocs.com/
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PROXY STATEMENT SUMMARY
Whichever of these methods you select to transmit your instructions, the proxy holder will vote your shares of common stock in accordance with your instructions. If you give a proxy without specific voting instructions, your proxy will be voted by the proxy holder “FOR” each of the director nominees named in this Proxy Statement, “FOR” the approval, on an advisory basis, of the compensation of our NEOs, “1 YEAR” for frequency of future Say-on-Pay votes, “FOR” the ratification of our independent registered public accounting firm, and at the proxy holders’ discretion on such other matters, if any, as may properly come before the Annual Meeting (including any proposal to adjourn the Annual Meeting).
| Q: | Can I change or revoke my vote after I return my proxy card? |
| A: | You may revoke a proxy at any time before the vote is taken at the Annual Meeting by advising our Corporate Secretary in writing before the vote at the Annual Meeting is taken, by submitting a properly executed proxy of a later date by mail, telephone or via the Internet, or by attending the Annual Meeting virtually and voting online. Attendance at the Annual Meeting will not by itself constitute revocation of a proxy. Any filing with the Corporate Secretary should be addressed to Hanmi Financial Corporation, 900 Wilshire Boulevard, Suite 1250, Los Angeles, California 90017. |
| Q: | How do I attend the virtual Annual Meeting? |
| A: | To ensure the health and well-being of our stockholders, employees and Board during the continuing sensitivity of COVID-19, |
| Q: | How will proxies be solicited? |
| A: | In addition to soliciting proxies by mail, our officers, directors, and employees, without receiving any additional compensation, may solicit proxies by telephone, fax, in person, or by other means. Arrangements may also be made with brokerage firms and other custodians, nominees, and fiduciaries to forward proxy solicitation materials to the beneficial owners of our common stock held of record by such persons, and we will reimburse such brokerage firms, custodians, nominees, and fiduciaries for reasonable out-of-pocket expenses incurred by them in connection therewith. |
| Q: | Will any other matters be considered at the Annual Meeting? |
| A: | We are not aware of any matter to be presented at the Annual Meeting other than the proposals discussed in this Proxy Statement. If other matters are properly presented at the Annual Meeting, then the person named as a proxy will have the authority to vote all properly executed proxies in accordance with the direction of our Board, or, if no such direction is given, in accordance with the judgment of the person holding such proxies on any such matter, including any proposal to adjourn or postpone the Annual Meeting. |
| Q: | Are there any rules regarding admission to the Annual Meeting? |
| A: | Yes. You are entitled to attend the Annual Meeting only if you were a stockholder as of the record date, or you hold a valid legal proxy naming you to act for one of our stockholders on the record date. To attend the |
| Q: | Is my vote confidential? |
| A: | Your vote will not be disclosed either within the Company or to third parties, except as necessary to meet applicable legal requirements or to allow for the tabulation and certification of the vote. |
| Q: | Where can I find the voting results of the Annual Meeting? |
| A: | We will disclose voting results on a Current Report on Form 8-K to be filed with the U.S. Securities and Exchange Commission (the “SEC”) within four business days after the Annual Meeting. |
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CORPORATE GOVERNANCE AND BOARD MATTERS
The following table provides summary information about our directors as of March 31, 2022.2023.
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| Committee Memberships | ||||||||||||||||||||
| Name | Age | Director Since | Principal Occupation | A | CHR | NCG | RCP | Age | Director Since | Principal Occupation | A | CHR | NCG | RCP | ||||||||||||||
John J. Ahn* (Chairman) | 57 | 2014 | CEO of WhiteHawk Capital Partners |  | | 58 | 2014 | CEO of WhiteHawk Capital Partners |  | | ||||||||||||||||||
Christie K. Chu* | 57 | 2015 | President & CEO of CKC Accountancy Corporation |  |  | | 58 | 2015 | President & CEO of CKC Accountancy Corporation |  |  | | ||||||||||||||||
Harry H. Chung*FE | 52 | 2016 | Chief Operating Officer & Chief Financial Officer of |  | | 53 | 2016 | Chief Operating Officer & Chief Financial Officer of |  | | ||||||||||||||||||
Scott R. Diehl* | 60 | 2018 | Retired (former Group Head of Global Capital Solutions | | | | 61 | 2018 | Retired (former Group Head of Global Capital Solutions of | | | | ||||||||||||||||
Bonita I. Lee | 59 | 2019 | President & CEO of Hanmi and Hanmi Bank | | 60 | 2019 | President & CEO of Hanmi and Hanmi Bank | | ||||||||||||||||||||
Gloria J. Lee* | 44 | 2021 | Client Relations Partner of Rutan & Tucker | | | 45 | 2021 | Client Relations Partner of Rutan & Tucker | | | | |||||||||||||||||
David L. Rosenblum*FE (Vice Chairman) | 69 | 2014 | Retired (former Senior Principal of Deloitte Consulting LLP) | | | | 70 | 2014 | Retired (former Senior Principal of Deloitte Consulting LLP) | | | | ||||||||||||||||
Thomas J. Williams* | 59 | 2016 | Retired (former Senior Vice President & Chief Risk Officer of BofI Federal Bank) | | | 60 | 2016 | Retired (former Senior Vice President & Chief Risk Officer of BofI Federal Bank) | | | ||||||||||||||||||
Michael M. Yang* | 60 | 2016 | Founder & CEO of Michael Yang Capital Management, LLC | | | | 61 | 2016 | Founder & CEO of Michael Yang Capital Management, LLC | | | | ||||||||||||||||
Gideon Yu* | 51 | 2021 | Co-owner & Former President of San Francisco 49ers | | | 52 | 2021 | Co-owner & Former President of San Francisco 49ers | | | ||||||||||||||||||
Chairperson Member
Committees: A = Audit; CHR = Compensation and Human Resources; NCG = Nominating and Corporate Governance;
RCP = Risk, Compliance and Planning
* = Independent Director; FE = Audit Committee Financial Expert
Hanmi is committed to sound corporate governance principles and maintains formal Corporate Governance Guidelines and a Code of Business Conduct and Ethics for employees, executive officers and directors. The Corporate Governance Guidelines, the Code of Business Conduct and Ethics and other governance documents, are available through Hanmi’s website at www.hanmi.com on the “Investor Relations” page. Any amendments or waivers applicable to an executive officer or director to the Code of Business Conduct and Ethics will also be posted on Hanmi’s website.
Environmental, Social and Governance Matters
The Nominating and Corporate Governance (“NCG”) Committee has primary oversight of our efforts to be a responsible corporate citizen in our communities. In order to address opportunities and challenges arising from Environmental, Social and Governance (“ESG”) matters, the NCG Committee maintains an interdisciplinary subcommittee of directors and officers to discuss how Hanmi directly impacts our stakeholders – our valued employees, customers, and communities. The ESG Subcommittee has published an Environmental, Social and Governance Report, available on our website under the “Investor Relations” page, which seeks to provide insight into our continuing efforts to stand in partnership with our various stakeholders.
Our common stock is listed on the Nasdaq Global Select Market (“Nasdaq”). Under Nasdaq rules, independent directors must comprise a majority of a listed company’s board of directors. In addition, Nasdaq
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CORPORATE GOVERNANCE AND BOARD MATTERS
requires that, subject to specified exceptions, each member of a listed company’s audit, compensation, and nominating and corporate governance committees must be independent. Under these rules, a director is
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CORPORATE GOVERNANCE AND BOARD MATTERS
independent only if the board of directors of a company makes an affirmative determination that the director has no material relationship with the company that would impair his or her independence.
Our Board has reviewed the independence of each director in accordance with Nasdaq rules and the requirements of the SEC. Based on this review, our Board has determined that all of its directors are independent under the applicable listing standards of Nasdaq, except for Bonita I. Lee, our President and Chief Executive Officer. In making this determination, our Board considered the relationships that each non-employee director has with us and all other facts and circumstances that the Board deemed relevant in determining their independence, including those relationships that are not required to be disclosed in this proxy statementProxy Statement under the heading “Certain Relationships and Related Transactions,” and loans made to non-employee directors.
During the fiscal year ended December 31, 2021,2022, our Board held nine (9)ten (10) joint board meetings with the Board of Hanmi Bank (the “Bank”), the wholly-owned subsidiary of Hanmi. All Board members were present for more than 75% of the aggregate number of meetings of our Board and the committees on which he or she served. Hanmi’s policy is to encourage all directors to attend all Annual and Special Meetings of Stockholders. Hanmi’s 20212022 Annual Meeting of Stockholders was attended by all directors.
Our Board has four (4) standing committees: the Audit Committee, the Compensation and Human Resources Committee (the “CHR Committee”), the NCG Committee, and the Risk, Compliance and Planning Committee (the “RCP Committee”). Each committee is governed by a charter, each of which is available through Hanmi’s website at www.hanmi.com on the “Investor Relations” page. All members of each committee are independent in accordance with applicable Nasdaq listing requirements.
Audit Committee
The Audit Committee reports to the Board and is responsible for overseeing and monitoring financial accounting and reporting, the system of internal controls established by management, and our audit process and policies. Through its oversight of the audit function, the Audit Committee ensures compliance with laws and regulations.
As outlined in its charter, the Audit Committee has the following responsibilities, among others:
Assist the Board in fulfilling its oversight responsibilities for the financial reporting process, the system of internal controls, the audit process, and Hanmi’s process for monitoring compliance with laws and regulations and the code of conduct;
Review the unaudited quarterly and audited annual financial statements;
Review the adequacy of internal control systems and financial reporting procedures with management and the independent auditor;registered public accounting firm;
Review and approve the general scope of the annual audit and the fees charged by the independent registered public accounting firm;
Appoint the independent registered public accounting firm and meet with them to discuss the results of the annual audit and the independence of the independent registered public accounting firm; and
Review and approve the general scope of the annual internal audit plan and associated fees.
The Audit Committee held twelve (12) meetings during the fiscal year ended December 31, 2021.2022.
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CORPORATE GOVERNANCE AND BOARD MATTERS
Compensation and Human Resources Committee
The CHR Committee assists the Board by overseeing the compensation of Hanmi’s executive officers, including Hanmi’s Chief Executive Officer, as well as administering Hanmi’s compensation plans. As outlined in its charter, the CHR Committee has the following responsibilities, among others:
Review and approve the Company’s overall compensation philosophy, plans, policies and programs as it relates to directors, the Chief Executive Officer and executive officers;
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CORPORATE GOVERNANCE AND BOARD MATTERS
Approve directors overall compensation, policies and programs;
Oversee management development and management succession planning;
Review and approve executive officers’ separation plan and employment and severance agreements; and
Lead the Board in its annual review of executive management’s performance as it relates to metrics for short- and long-term incentive payouts.
The CHR Committee also sets the compensation policy of the Company as more fully described below under “Executive Compensation – Compensation Discussion and Analysis.” To evaluate and administer the compensation programs of our NEOs, the CHR Committee meets at least four (4) times a year or more frequently as necessary. The CHR Committee is also authorized to retain and provide funding to outside consultants to assist it in determining executive officer compensation.
Each member of the CHR Committee is a “non-employee director” (as defined in Section 16 of the Securities Exchange Act of 1934 (the “Exchange Act”)). The CHR Committee held eleven (11)nine (9) meetings during the fiscal year ended December 31, 2021.2022.
Nominating and Corporate Governance Committee
As described in its charter, the NCG Committee assists the Board as follows:
Identify individuals qualified to become directors;
Recommend to the Board nominees for the Board and its committees;
Develop, recommend, implement and monitor adherence to a set of corporate governance principles applicable to Hanmi;
Monitor the process to determine the effectiveness of the Board and its committees; and
Monitor the activities of the ESG Sub-Committee regarding its efforts to oversee the Company’s ongoing commitment to environmental performance, health and safety, corporate social responsibility, corporate governance, sustainability, and other public policy matters relevant to the Company.
| • | Monitor the activities of the ESG Sub-Committee regarding its efforts to oversee the Company’s ongoing commitment to environmental performance, health and safety, corporate social responsibility, corporate governance, sustainability, and other public policy matters relevant to the Company. |
See “Consideration of Director NomineesNominees” below for additional information regarding the director nomination process. The NCG Committee is authorized to retain outside consultants to assist it in fulfilling any of its duties, including Board and director assessment and Board evaluation.
The NCG Committee held five (5)four (4) meetings during the fiscal year ended December 31, 2021.2022.
Risk, Compliance and Planning Committee
As outlined in its charter, the RCP Committee provides oversight of the enterprise risk management framework, including the strategies, policies, procedures and systems established by management to identify, assess, measure and manage the significant risks facing the Company. It also oversees strategic planning generally and recommends new lines of business and the budget to our Board.
The RCP Committee held seven (7)eight (8) meetings during the fiscal year ended December 31, 2021.2022.
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CORPORATE GOVERNANCE AND BOARD MATTERS
BOARD LEADERSHIP STRUCTURE
The Board is committed to having a sound governance structure that promotes the best interest of Hanmi stockholders. Our leadership structure includes the following principles:
We believe that annual elections hold the directors of the Board more accountable to our stockholders.
All of the directors are independent, except for Bonita I. Lee, our President and Chief Executive Officer. The Board has affirmatively determined that the other nine (9) directors nominated for re-election are independent under applicable SEC and Nasdaq corporate governance rules.
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CORPORATE GOVERNANCE AND BOARD MATTERS
We have separated the positions of the Chairman of the Board and Chief Executive Officer in the Company’s Bylaws to ensure the independence of the Chairman. The Chairman focuses on board oversight responsibilities, strategic planning and mentoring Company officers. The Chairman also periodically represents the Bank at public functions. John J. Ahn serves as the Chairman. The Chief Executive Officer focuses on the development and execution of Company strategies.
We also maintain a Vice Chairman of the Board, who is an independent director exercising all the powers and discharging all the duties of the Chairman of the Board in such circumstances before a Chairman is appointed or a sitting Chairman is absent or becomes disabled. Director David L. Rosenblum serves as Vice Chairman.
We believe the Board structure serves the interests of the stockholders by balancing the practicalities of running the Company with the need for director accountability.
BOARD’S ROLE IN RISK OVERSIGHT
The Board oversees an enterprise-wide approach to risk management, designed to support the achievement of organization objectives in the areas of strategy, operations, reporting and compliance. The Board recognizes that these objectives are important to improve and sustain long-term performance and stockholder value. A fundamental part of risk management is not only identifying the risks the Company faces and the steps management is taking to manage those risks, but also determining what constitutes the appropriate level of risk based upon the Company’s activities and risk appetite.
The RCP Committee goes through an extensive review of the enterprise risk assessment on a quarterly basis with the guidance of the RCP Committee Chairperson and the Bank’s Chief Risk Officer. The risk assessment is also reviewed by the Board quarterly. In this process, risk is assessed throughout the Company by focusing on the following ten (10) areas: credit, liquidity, market, operations,operational, compliance, human resources / legal, reputational, strategic, information technology and security, and capital. Risks that simultaneously affect different parts of the Company are identified, and an interrelated assessment is made.
While the Board has the ultimate oversight responsibility for the risk management process, various committees of the Board also have responsibility for risk management. In particular, the RCP Committee assists the Board in fulfilling its oversight responsibility with respect to regulatory, compliance, operational risk and enterprise risk management issues that affect the Company, and works closely with the Company’s legal and risk departments. The RCP Committee also oversees risks associated with the short- and long-term direction of the Company and ensures ongoing Board involvement and oversight of the Company’s strategic plan. The Audit Committee helps the Board monitor financial risk and internal controls from a risk-based perspective, and oversees compliance and the annual audit plan. Reports from the Company’s internal audit department are also reviewed by the Audit Committee.
In overseeing compensation, the CHR Committee ensures that incentives encourage a conservative level of risk-taking behavior consistent with the Company’s business strategy and are in compliance with all laws and the Interagency Guidance on Incentive Compensation. The NCG Committee oversees the Code of Business Conduct and Ethics and conducts an annual assessment of corporate governance policies and any potential risk associated with governance and related party matters.
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CORPORATE GOVERNANCE AND BOARD MATTERS
The Bank also has two other board committees that oversee risk. The Loan and Credit Policy Committee (the “LCP Committee”) oversees credit risk by identifying, monitoring, and controlling repayment risk associated with the Bank’s lending activities. The LCP Committee evaluates the Bank’s loan portfolio for optimized risk adjusted profitability and ensures management is handling credit risk appropriately and in compliance with approved policies and procedures. The Asset Liability Management Committee oversees the process for managing the Bank’s interest rate, liquidity, and similar market risks relating to the Bank’s balance sheet and associated activities. The committee reviews the Bank’s investment portfolio on a regular basis to confirm that the risk level remains acceptable and consistent with the approved portfolio objectives, and ensures current market values are aligned with the investment policy.
The Board is committed to protecting personal and financial information, and devotes a significant amount of time to information security and cybersecurity risks. Members of the RCP Committee receive regular reports from the Chief Risk Officer related to information technology and information security to fulfill its role of assisting management in identifying, assessing, measuring and managing certain risks facing the Company.
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CORPORATE GOVERNANCE AND BOARD MATTERS
The Bank’s Information Security Officer meets at least quarterly with the RCP Committee to provide updates on cybersecurity and information security risk, and the Board annually reviews and approves our Information Security Program and Information Security Policy. The RCP Committee engages in key decisions to help set the direction for information security strategy, as well as to understand and prioritize information security capabilities and associated risk remediation.
The Executive IT Steering Committee is an internal Bank committee created to ensure that members of executive management overseeing multiple business units actively understand information security protections and associated risks. The Information Security Officer presents quarterly cybersecurity reports to the Executive IT Steering Committee. In addition, the Bank purchases cyber liability and other insurance to protect against cyber securitycybersecurity risks.
CONSIDERATION OF DIRECTOR NOMINEES
The NCG Committee believes that the Board should encompass a broad range of talent, skill, knowledge, experience, diversity and expertise enabling it to provide sound guidance with respect to Hanmi’s operations and interests. In addition to considering a candidate’s background and accomplishments, candidates are reviewed in the context of the current composition of the Board and the evolving needs of Hanmi’s business. Our Board has identified certain core competencies that its directors should possess, including: broad experience in business, finance, accounting, risk management, strategic planning, marketing or administration; familiarity with national and international business matters; familiarity with the Company’s industry; and the ability to understand the Company’s business. In addition to possessing one or more of these core competencies, the members of our Board should have and demonstrate personal qualities such as integrity, leadership, community prominence and a strong reputation. The experience, skills and qualifications contributed by each of our directors should diversify and complement the core competencies of our collective Board.
The NCG Committee seeks directors with a strong reputation and experience in areas relevant to the strategy and operation of Hanmi’s business, particularly industries and growth segments that Hanmi operates in, such as the banking and financial services industry, as well as key geographic markets and customer segments. The NCG Committee annually reviews the individual skills and characteristics of the directors, as well as the composition of the Board as a whole. This assessment includes a consideration of independence, diversity, age, skills, expertise and industry background in the context of the needs of the Board and Hanmi.
The Board conducts an annual evaluation to determine whether the Board and its committees are functioning effectively. The NCG Committee oversees the evaluation method and criteria for the Board’s annual evaluation of the composition, competence and performance of the Board and its committees. The NCG Committee may retain consultants or advisors to assess the performance and effectiveness of the Board, its committees and each individual director.
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CORPORATE GOVERNANCE AND BOARD MATTERS
The results of any self-evaluations, peer evaluations or evaluations by any consultant or advisor are submitted to the Board. The Board then takes appropriate action based on the Board’s assessment and performance evaluations. The Board and director evaluation process considers the best interests of Hanmi, its Board, employees, customers and stockholders. The assessment includes director succession planning and expected future needs of the Board and the Company, so as to ensure that Board effectiveness is not diminished during periods of transition.
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CORPORATE GOVERNANCE AND BOARD MATTERS
Board Diversity
The Corporate Governance Guidelines require the NCG Committee to consider diversity when reviewing the qualifications of candidates to the Board. The NCG Committee seeks to nominate members with diverse backgrounds, skills, professional and industry experience, and other personal qualities, attributes and perspectives that will help ensure a strong and effective governing body that, as a whole, reflects the current and anticipated needs of our Board and Company and can provide oversight responsibility to our stockholders. |   |
The table below provides certain highlights of the composition of our board members and nominees, representing our compliance with Nasdaq Rule 5605(f). Each of the categories listed in the below table has the meaning used in the rule.
| Board Diversity Matrix As of December 31, 2021 | Board Diversity Matrix As of December 31, 2022 | |||||||||||||||||||||||||||
Total Number of Directors | 10 | 10 | ||||||||||||||||||||||||||
| Female | Male | Non-Binary | Did Not Disclose Gender | Female | Male | Non-Binary | Did Not Disclose Gender | |||||||||||||||||||||
Part I: Gender Identity | ||||||||||||||||||||||||||||
Directors | 3 | 7 | — | — | 3 | 7 | — | — | ||||||||||||||||||||
Part II: Demographic Background | ||||||||||||||||||||||||||||
African American or Black | — | — | — | — | — | — | — | — | ||||||||||||||||||||
Alaskan Native or Native American | — | — | — | — | — | — | — | — | ||||||||||||||||||||
Asian | 3 | 4 | — | — | 3 | 4 | — | — | ||||||||||||||||||||
Hispanic or Latinx | — | — | — | — | — | — | — | — | ||||||||||||||||||||
Native Hawaiian or Pacific Islander | — | — | — | — | — | — | — | — | ||||||||||||||||||||
White | — | 3 | — | — | — | 3 | — | — | ||||||||||||||||||||
Two or More Races or Ethnicities | — | — | — | — | — | — | — | — | ||||||||||||||||||||
LGBTQ+ | — | — | ||||||||||||||||||||||||||
Did Not Disclose Demographic Background | — | — | ||||||||||||||||||||||||||
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CORPORATE GOVERNANCE AND BOARD MATTERS
Stockholder Recommendations
The NCG Committee will consider stockholder recommendations for director nominees. The Board of Directors may choose not to consider an unsolicited recommendation if no vacancy exists on the Board of Directors and the Board of Directors does not perceive a need to increase the size of the Board of Directors. Such notices must be submitted in writing to Hanmi Financial Corporation, 900 Wilshire Boulevard, Suite 1250, Los Angeles, California 90017, Attention: Corporate Secretary. Such notices also must comply with other requirements set forth in the Company’s Bylaws and be received by the Corporate Secretary within the deadlines provided below under “Stockholder Proposals for the 20232024 Annual Meeting.
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CORPORATE GOVERNANCE AND BOARD MATTERS
”
In identifying and evaluating director candidates, the NCG Committee will solicit and receive recommendations, and review qualifications of potential director candidates. The NCG Committee may also use search firms to identify director candidates when necessary. To enable the NCG Committee to effectively evaluate director candidates, the NCG Committee may also conduct appropriate inquiries into the backgrounds and qualifications of director candidates, including reference checks. As stated above, the NCG Committee will consider director candidates recommended by stockholders utilizing the same criteria as candidates identified by the NCG Committee.
Our Board has a process for stockholders to send communications to directors. Hanmi’s stockholders and interested parties may send communications to our Board by writing to our Board at Hanmi Financial Corporation, 900 Wilshire Boulevard, Suite 1250, Los Angeles, California 90017, Attention: Board of Directors. All such communications will be relayed directly to our Board. Any interested party wishing to communicate directly with Hanmi’s independent directors regarding any matter may send such communication in writing to Hanmi’s independent directors at Hanmi Financial Corporation, 900 Wilshire Boulevard, Suite 1250, Los Angeles, California 90017, Attention: Chairman of the Board. Any interested party wishing to communicate directly with the Audit Committee regarding any matter, including any accounting, internal accounting controls, or auditing matter, may submit such communication in writing to Hanmi Financial Corporation, 900 Wilshire Boulevard, Suite 1250, Los Angeles, California 90017, Attention: Chairperson of the Audit Committee.
Correspondence may be submitted on an anonymous basis and submissions of complaints or concerns will not be traced. Confidentiality is a priority, and all communications will be treated confidentially to the fullest extent possible. For submissions that are not anonymous, the sender may be contacted in order to confirm information or to obtain additional information. The Company reserves the right not to forward to Board members any abusive, threatening or otherwise inappropriate materials.
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CORPORATE GOVERNANCE AND BOARD MATTERS
DIRECTOR COMPENSATION
The following table sets forth certain information regarding compensation paid to persons who served as outside (or non-employee) directors of Hanmi for the fiscal year ended December 31, 2021:2022:
| Name | Fees Earned or Paid in Cash |
| Stock Awards(4) |
| Total | Fees Earned or Paid in Cash |
| Stock Awards(1) |
| Total | ||||||||||||||||||||||||||||||
John J. Ahn | $ | 72,500 |
| $ | 41,016 |
| $ | 113,516 | $ | 75,500 |
| $ | 50,001 |
| $ | 125,501 | ||||||||||||||||||||||||
Kiho Choi(1) | $ | 57,292 |
| $ | 41,016 |
| $ | 98,308 | ||||||||||||||||||||||||||||||||
Christie K. Chu | $ | 59,417 |
| $ | 41,016 |
| $ | 100,433 | $ | 64,000 |
| $ | 50,001 |
| $ | 114,001 | ||||||||||||||||||||||||
Harry H. Chung | $ | 60,000 |
| $ | 41,016 |
| $ | 101,016 | $ | 60,000 |
| $ | 50,001 |
| $ | 110,001 | ||||||||||||||||||||||||
Scott R. Diehl | $ | 60,500 |
| $ | 41,016 |
| $ | 101,516 | $ | 56,500 |
| $ | 50,001 |
| $ | 106,501 | ||||||||||||||||||||||||
Gloria J. Lee(2) | $ | 3,958 |
| — |
| $ | 3,958 | |||||||||||||||||||||||||||||||||
Gloria J. Lee | $ | 50,000 |
| $ | 50,001 |
| $ | 100,001 | ||||||||||||||||||||||||||||||||
David L. Rosenblum | $ | 61,500 |
| $ | 41,016 |
| $ | 102,516 | $ | 69,000 |
| $ | 50,001 |
| $ | 119,001 | ||||||||||||||||||||||||
Thomas J. Williams | $ | 62,500 |
| $ | 41,016 |
| $ | 103,516 | $ | 62,500 |
| $ | 50,001 |
| $ | 112,501 | ||||||||||||||||||||||||
Michael M. Yang | $ | 53,667 |
| $ | 41,016 |
| $ | 94,683 | $ | 65,250 |
| $ | 50,001 |
| $ | 115,251 | ||||||||||||||||||||||||
Gideon Yu(3) | $ | 39,458 |
| $ | 41,016 |
| $ | 80,474 | ||||||||||||||||||||||||||||||||
Gideon Yu | $ | 50,500 |
| $ | 50,001 |
| $ | 100,501 | ||||||||||||||||||||||||||||||||
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CORPORATE GOVERNANCE AND BOARD MATTERS
NON-EMPLOYEE DIRECTOR COMPENSATION POLICY
Following the annual review of a director compensation reviewstudy conducted by the Company’s independent compensation consultants, the Board of Directors unanimously confirmed the following director compensation plan design. The Company provides its non-employee directors an annual cash retainer of $38,500 for service on the Board. In addition, members of committees receive additional annual cash retainers as follows:
Audit Committee | $ | 5,000 |
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LCP Committee | $ | 5,000 |
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CHR Committee | $ | 4,000 |
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NCG Committee | $ | 2,500 |
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RCP Committee | $ | 2,500 |
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Asset Liability Management Committee | $ | 2,500 |
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The Chairman of the Board receives an additional annual cash retainer of $24,000, and$30,000. The Vice Chairman of the Board receives an additional annual cash retainer of $15,000. The chairs of each committee receive an additional annual cash retainer, as follows:
Audit Committee | $ | 10,000 |
| $ | 10,000 |
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LCP Committee | $ | 8,000 |
| $ | 9,000 |
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CHR Committee | $ | 9,000 |
| $ | 9,000 |
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NCG Committee | $ | 9,000 |
| $ | 9,000 |
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RCP Committee | $ | 9,000 |
| $ | 9,000 |
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Asset Liability Management Committee | $ | 9,000 |
| $ | 9,000 |
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In addition, the directors receive an annual grant of restricted stock in the second quarter of the year. For 2021,2022, the value of the restricted stock grant was reduced to approximately $41,000,$50,000, in line with updated market compensation data.
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CORPORATE GOVERNANCE AND BOARD MATTERS
DIRECTOR STOCK OWNERSHIP GUIDELINES
Each director is encouraged to own shares of common stock of the Company at a level that demonstrates a meaningful commitment to the Company and the Bank, and to better align the director’s interests with the Company’s stockholders. A director’s stock ownership will be one of the factors considered in deciding whether to nominate or appoint a director to the Board of Directors of the Company.
All directors should acquire shares of the Company’s common stock valued at three times (3x) the yearly retainer. Directors are expected to meet the ownership standards set forth herein within five years from April 25, 2018, the date the guidelines were approved by the CHR Committee, or their first day as a director, whichever is later.director. Once the guidelines are met, if the stock price decreases, the director will not be required to acquire additional shares. In addition to the stock ownership guidelines described above, each director who acquires shares of Company common stock through the exercise or vesting of a stock option, stock appreciation right or restricted stock will be required to retain fifty percent (50%) of the “net” shares acquired (net of tax impact that the exercise or vesting has on the individual) for at least twelve (12) months following the date of exercise or vesting, or such earlier time if the individual ceases to be a member of the Board as a result of death, disability, illness, resignation, termination or other reason.
As of December 31, 2021,2022, all directors have met the stock ownership guidelines with the exception of Directors Gideon Yu and Gloria J. Lee, each of whom joined our Board in 2021.
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PROPOSAL NO. 1 ELECTION OF DIRECTORS
StockholdersOur Board currently consists of ten (10) members. Scott R. Diehl will retire at the Annual Meeting, at which point the size of the Board will be reduced to nine (9) members. Accordingly, stockholders are being asked to elect ten (10)nine (9) director nominees for a one-year term. Subject to their earlier resignation or retirement, directors elected at the Annual Meeting will serve until the 20232024 annual meeting of stockholders and until their successors are elected and qualified. Our Board believes that each director nominee satisfies our director qualification standards and accordingly nominates: John J. Ahn, Christie K. Chu, Harry H. Chung, Scott R. Diehl, Bonita I. Lee, Gloria J. Lee, David L. Rosenblum, Thomas J. Williams, Michael M. Yang and Gideon Yu.
BOARD OF DIRECTORS AND NOMINEES
Hanmi’s directors have a mix of experience and backgrounds, including those that started a business and grew it into a substantial entity, holding senior executive positions in large, complex organizations, andor holding positions of importance within regulatory agencies. In those positions, they have also gained experience in core management skills, such as strategic and financial planning, public company financial reporting, corporate governance, risk management, leadership development and, importantly, a deep understanding of our customers.
In addition to each director nominee’s professional experience, our Board believes that each director nominee has other key attributes that are important to an effective Board of Directors, such as,as: integrity and demonstrated high ethical standards; sound judgment; analytical skills; the ability to engage management and each other in a constructive and collaborative fashion; diversity of origin, background, experience, and thought; and the commitment to devote significant time and energy to service on our Board and its committees.
None of the director nominees was nominated pursuant to any arrangement or understanding. There are no family relationships among the director nominees or the executive officers of Hanmi.
The following sets forth information with respect to the director nominees.
John J. Ahn
Director since: 2014
Age:
Chairman of our Board
Board Committees: NCG, RCP
| Experience Mr. Ahn brings more than 30 years of experience in capital markets and financial advisory services to Hanmi. He is currently the founder and Chief Executive Officer of WhiteHawk Capital Partners, a middle market direct lending fund and SEC Registered Investment Advisor. Prior to his role at WhiteHawk, Mr. Ahn served as Chief Executive Officer of Great American Capital Partners, LLC, an SEC Registered Investment Advisor that originated and underwrote senior secured loans across a wide array of industries from 2015 to 2020. From 2004 to 2015, Mr. Ahn served as President of B. Riley & Co., a full-service investment banking firm providing corporate finance, research, sales and trading services, and asset management to corporate and institutional clients. Prior to joining B. Riley, Mr. Ahn held numerous leadership positions in the investment banking and sales and trading sectors.
Qualifications Our Board believes that Mr. Ahn should serve as a director because of his extensive experience and background in investment banking, finance, strategic planning and his strong understanding of institutional investors. | |||||
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PROPOSAL NO. 1 ELECTION OF DIRECTORS
Christie K. Chu
Director since: 2015
Age:
Board Committees: Audit, CHR, NCG
| Experience Ms. Chu
Qualifications Our Board believes that Ms. Chu should serve as a director because of her extensive business and accounting background and experiences at several major accounting firms. Ms. Chu understands our core business customer and how to appeal to the next generation of business leaders and the Korean business community. | |||||
Harry H. Chung
Director since: 2016
Age:
Board Committees: Audit, CHR
| Experience Mr. Chung brings over 25 years of experience in capital markets and financial services. He has served as the Chief Operating Officer and Chief Financial Officer of WhiteHawk Capital Partners since 2020.
Qualifications Our Board believes that Mr. Chung should serve as a director because of his experience in capital markets and financial services, including strategic planning and corporate development. Mr. Chung’s experience as a Chief Financial Officer has provided him with financial expertise that is valuable in his role as chair of the Audit Committee. | |||||
Director since:
Age: 60
Board Committees:
| Experience
| |||||
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PROPOSAL NO. 1 ELECTION OF DIRECTORS
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Ms. Lee has served as the President and Chief Executive Officer since May 2019. Prior to her promotion to Chief Executive Officer, she served as Senior Executive Vice President and Chief Operating Officer of Hanmi and Hanmi Bank since
Qualifications Our Board believes that Ms. Lee should serve as a director because she brings to the Board her extensive experience in the Korean-American banking industry, her many successes in safely and profitably growing her organization, her business acumen and good relationship with the investors in the Korean-American community. | |||||
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PROPOSAL NO. 1 ELECTION OF DIRECTORS
Gloria J. Lee
Director since: 2021
Age:
Board Committees: Audit, CHR, NCG
| Experience Ms. Lee has served as the Client Relations Partner for Rutan & Tucker, LLP, a full-service law firm in California, since 2014. She is the Chair of the firm’s Business Development Committee and is responsible for the strategic growth of business development opportunities and the implementation of client relationship initiatives for the firm. Before becoming the firm’s Client Relations Partner, Ms. Lee was a transactional real estate attorney from 2011 through 2013 focused on representing lenders on the financing of commercial real estate properties. In April 2020, Ms. Lee co-founded Kwell Laboratories LLC, the exclusive United States distributor, manufacturer and clinical trial sponsor for a leading South Korean biotech company. Ms. Lee is a Venture Partner of Ethos Fund, a venture capital fund investing in pre-seed technology companies in the U.S. and Southeast Asia. Ms. Lee serves on numerous non-profit boards, including the Board of the Council of Korean Americans.
Qualifications Our Board believes that Ms. Lee should serve as a director because of her business development and real estate experience, as well as her focus on diversity, which we believe will enable her to positively contribute to Hanmi’s continued growth and development. | |||||
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PROPOSAL NO. 1 ELECTION OF DIRECTORS
David L. Rosenblum
Director since: 2014
Age:
Vice Chairman of our Board
Board Committees: Audit, CHR, RCP
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Mr. Rosenblum is retired and is a former Senior Principal at Deloitte Consulting LLP (1979 to 2013), where he was the National Managing Director of Consulting Corporate Development and a key leader of the Strategy & Operations practice. Mr. Rosenblum is a member of Sage Partners, LLC, a strategic advisory firm, and is also an operating partner of Interlock Equity LP, a private equity firm focused on
Qualifications Our Board believes that Mr. Rosenblum should serve as a director because of his strategic planning, mergers and acquisitions, and corporate development experience in assisting financial institutions. In addition, his experience with NACD demonstrates his deep knowledge regarding best practices in running our Board. | |||||
| 16 |
PROPOSAL NO. 1 ELECTION OF DIRECTORS
Thomas J. Williams
Director since: 2016
Age:
Board Committees: Audit, RCP
| Experience Mr. Williams brings over 30 years of experience in bank regulation and the broader banking industry. Specifically, Mr. Williams brings extensive experience across a broad range of risk and lending activities. Prior to his retirement in May 2015, Mr. Williams served as Senior Vice President and Chief Risk Officer at BofI Federal Bank, overseeing all risk and control-related functions. Before that role, he served as Executive Director of Commercial Credit Review at Capital One and Director of Regulatory Relations at Silicon Valley Bank. Earlier in his career, Mr. Williams spent five years as Principal Examiner at the Federal Reserve Bank of San Francisco and ten years as a National Bank Examiner with the Office of the Comptroller of the Currency. Mr. Williams earned his B.S. degree in economics from the University of South Dakota.
Qualifications Our Board believes that Mr. Williams should serve as a director because of his broad-based regulatory experience and expertise. In the present regulatory environment, we believe Mr. Williams’ strength in risk management is critical to assisting with the safe and sound operation of the Bank. | |||||
Michael M. Yang
Director since: 2016
Age:
Board Committees: Audit, CHR, NCG
| Experience Mr. Yang brings over 30 years of experience as a successful technology entrepreneur and investor. He is currently the Founder and CEO of Michael Yang Capital Management, LLC, an investment management company that invests in public equities of disruptive technology companies. Prior to his current role, Mr. Yang was Co-Founder and CEO of three technology start-ups that were sold to larger enterprises at significant premiums, including mySimon.com Inc., which was acquired by CNET. Mr. Yang began his career at Xerox Corporation and Samsung Electronics Co., Ltd., where he held positions of increasing responsibility in engineering, marketing and corporate development. Mr. Yang earned his B.S. degree in electrical engineering from the University of California, Berkeley, his M.S. degree in computer science from Columbia University, and his M.B.A. degree from the Haas School of Business, University of California, Berkeley.
Qualifications Our Board believes that Mr. Yang should serve as a director because of his executive experience in growing companies, as well as his strategic planning, mergers and acquisitions, corporate development and technological knowledge. | |||||
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PROPOSAL NO. 1 ELECTION OF DIRECTORS
Gideon Yu
Director since: 2021
Age:
Board Committees: NCG, RCP
| Experience Mr. Yu has
Qualifications Our Board believes that Mr. Yu should serve as a director because of his executive experience in the finance and technology sectors, as well as his strategic views on digital growth opportunities. We believe Mr. Yu’s experience with managing strategy and risk in a high-growth environment will positively contribute to the development of Hanmi as a leader among regional community banks. | |||||
17 | |
PROPOSAL NO. 1 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. 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. In the event a director nominee is unable to serve, your proxy will be voted for an alternative director nominee as determined by our Board. Alternatively, the Board of Directors may adopt a resolution to reduce the size of the Board of Directors. At this time, our Board knows of no reason why any of the nominees might be unable to serve.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
“FOR” EACH OF THE TENNINE (9) DIRECTOR NOMINEES
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EXECUTIVE OFFICERS
The following sets forth information with respect to the executive officers of the Company. None of the executive officers of the Company were hired pursuant to any arrangement or understanding. There are no family relationships among the directors or the executive officers.
Name
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Age
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Experience and Qualifications
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Bonita I. Lee President and Chief Executive Officer (“CEO”); Director
| | For Ms. Lee’s experience and qualifications, see “Board of Directors and | ||||
Romolo C. Santarosa Senior Executive Vice President and Chief Financial Officer (“CFO”) |
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Mr. Santarosa has served as Senior Executive Vice President and Chief Financial Officer of Hanmi and Hanmi Bank since November 2015, after joining in June 2015, and brings more than 30 years of experience in banking and financial services. Over his career, he has been responsible for leading and directing growth strategies, cost reduction and process improvement initiatives, technology implementations and capital management. Prior to his tenure with
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Anthony Kim Executive Vice President and Chief Banking Officer (“CBO”)
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Mr. Kim | ||
Matthew D. Fuhr Executive Vice President and Chief Credit Administration Officer (“CCAO”)
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Mr. Fuhr has served as Executive Vice President and Chief Credit Administration Officer of Hanmi Bank since March 2017. He previously served as Senior Vice President and Deputy Chief Credit Officer from June 2015 until his promotion. Prior to his tenure with Hanmi Bank, he was Senior Vice President and Credit Administrator at Pacific Western Bank for 13 years. Earlier in his career, Mr. Fuhr served as a Commissioned Bank Examiner with the Federal Deposit Insurance Corporation. Mr. Fuhr earned his B.A. degree in business administration with emphasis in finance from the University of Northern Colorado. | ||
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EXECUTIVE OFFICERS
Name
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Age
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Experience and Qualifications
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Min Park Executive Vice President and Chief Credit Risk Officer (“CCRO”)
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| Mr. Park has served as Executive Vice President and Chief Credit Risk Officer of Hanmi Bank since March 2017. He previously served as Executive Vice President and Chief Credit Officer from April 2015 until the organizational change of the credit administration division. Mr. Park joined Hanmi Bank as Executive Vice President and Deputy Chief Credit Officer in August 2014. Prior to his tenure with Hanmi Bank, he was Senior Vice President and Manager of Commercial Business Credit at East West Bank for four years. Mr. Park has over 35 years of banking experience. Mr. Park earned his B.A. degree in business administration from Kansas State University.
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Michael Du Senior Vice President and Chief Risk Officer (“CRO”)
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Mr. Du joined Hanmi Bank in November 2019. He previously served as the Director of Internal Audit for Pacific Western Bank from June 2017 to November 2019 and Vice President of Risk Management for Unify Federal Financial Credit Union from May 2015 to November 2019. Mr. Du served in the United States Air Force/Reserves for over 25 years, and retired with the rank of Command Chief Master Sergeant. He is a Certified Public Accountant and holds certifications in multiple risk and audit disciplines. Mr. Du earned his B.S. degree in accounting and a M.S. in business administration from California State Universities, and completed an executive management program at the University of California, Los Angeles. | ||
Joseph Pangrazio Senior Vice President and Chief Accounting Officer
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Mr. Pangrazio joined Hanmi Bank in October 2021. Before joining the Company, Mr. Pangrazio has held accounting and | ||
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EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
This Compensation Discussion and Analysis (“CD&A”) describes our compensation philosophy, methodologies and our current practices with respect to the remuneration programs for our NEOs. The compensation programs of our NEOs are established, evaluated and maintained by the CHR Committee. The CHR Committee is comprised entirely of independent directors as defined by the Nasdaq listing requirements and SEC regulations. The NEOs for the fiscal year ended December 31, 20212022 are:
Bonita I. Lee: President and Chief Executive Officer
Romolo C. Santarosa: Senior EVP and Chief Financial Officer
Anthony Kim: EVP and Chief Banking Officer
Matthew D. Fuhr: EVP and Chief Credit Administration Officer
Michael Du: SVP and Chief Risk Officer
20212022 Financial and Strategic Highlights
In 2021,2022, we delivered strong financial performance, meetingwith full year record net income and even exceedingloan production, and improved net interest margin all while diligently managing operating expenses and significantly improving asset quality. We also successfully executed on strategic initiatives, including further diversifying our objectives. We are currently positioned to meet the evolving needs of tomorrow’sloan portfolio, strengthening relationships with existing customers, while continuing to be a trusted community partner to customers. With pandemic-related uncertainties diminished, strong recoveries of 2020 loan loss provisions, robust loan growth, a favorable mix of low-cost depositsexpanding our customer base, and effective management of credit quality,bolstering our core deposit franchise. Hanmi was able to achieve the following results during 2021.2022.
Operating Results, Profitability and Value Creation |
• Net income was
•
• Deposits were
• Efficiency ratio
• Nonperforming
• Dividends • Loans receivable, before the allowance for credit losses, were $5.97 billion at December 31, 2022, up from $5.15 billion at December 31, 2021, an increase of 15.8%. The loan portfolio reflected significant progress in diversification with commercial real estate accounting for 64.2% of the loan portfolio at December 31, 2022, compared with 71.6% at December 31, 2021
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Management Say-On-Pay Results and Stockholder Engagement
The CHR Committee evaluates the Company’s executive compensation programs in light of market conditions, stockholder views, and governance considerations, and makes changes as appropriate. As required by the Dodd-Frank Act, the Company seeks a separate non-binding advisory stockholder vote to
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EXECUTIVE COMPENSATION
approve the compensation of its NEOs. At our 20212022 annual meeting, our stockholders approved the
21 | |
EXECUTIVE COMPENSATION
compensation of our NEOs, with 97.5%98.7% of the stockholder vote cast in favor of the advisory say-on-pay proposal, a significant improvement from 2020. proposal. The CHR Committee viewed the approval by stockholders of the executive compensation program at such a strong level as evidence that a substantial majority of stockholders are aligned with our executive compensation program.
The Company continued our efforts to actively engage with our stockholders in 2021.2022. We reached out to our top 1510 stockholders representing approximately 63%over 55% of our outstanding shares and invited them to discuss our executive compensation and governance practices. We received responses from 89 of our investors, 7 of whom advised us that they did not seek to engage at this time. In January 2022,February 2023, we had a conversationconversations with onetwo of our largest institutional stockholders, representing approximately 14.5%14.1% of our shares. During the engagement discussion with this investor,discussions, the Company provided an update since our discussion in 2020, notedoverview of board composition, risk management and oversight by the changes onboard, diversification of the Boardloan portfolio, credit and the diversity of our current directors, management changes and our goal of long-term value creation, the changes to ourliquidity, compensation design,philosophy, human capital management and liquidity,succession planning, as well as our efforts related to ESG. The stockholderstockholders provided valuable commentary and insight regarding our positive movement with regard to compensationrisk management practices and the importance of our human capital management strategy.disclosures. All feedback received was shared and discussed with the full Board.
Pay Program and 20212022 Compensation Overview
The CHR Committee establishes and oversees the compensation practices, including the determination of base salary and annual and long-term incentives. The CHR Committee understands the importance of human capital management to our long-term success. We believe that our executive compensation design ispractices are generally aligned with our peer market norms for quantum and design. Compensation plans are designed to encourage the achievement of strategic objectives, to create stockholder value, to recognize individual performance, and to allow the Company to effectively compete for, retain and motivate talented executives critical to its success.
Element
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Type
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2021 Highlights
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Type
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2022 Highlights
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Base Salary | Fixed |
When setting base salaries, the CHR Committee considers factors such as experience, responsibilities, job performance, and market compensation information.
In 2021, the CHR Committee approved base salary increases for all NEOs in 2021.
| Fixed |
When setting base salaries, the CHR Committee considers factors such as experience, responsibilities, job performance, and market compensation information.
In 2022, the CHR Committee approved base salary increases for all NEOs.
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Short-Term Cash Incentive Compensation (Annual Incentive Plan) | Variable |
The Company maintains a performance-based annual cash incentive plan for the NEOs, which is contingent on the achievement of pre-established financial results for the Company and individual performance objectives tied to each NEO’s specific role and responsibilities. The financial performance metrics have threshold, target and maximum goals to further align pay with performance.
As in years past, the CHR Committee established target incentive award opportunities for each NEO and assessed performance relative to established goals. Resulting annual incentive payouts for each NEO are summarized in the table below:
| Variable |
The Company maintains a performance-based annual cash incentive plan for the NEOs, which is contingent on the achievement of pre-established financial results for the Company and individual performance objectives tied to each NEO’s specific role and responsibilities. The financial performance metrics have threshold, target and maximum goals to further align pay with performance.
As in years past, the CHR Committee established target incentive award opportunities for each NEO and assessed performance relative to established goals. Resulting annual incentive payouts for each NEO are summarized in the table below:
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Executive
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Annual Cash Incentive (% of Target)
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Annual Cash Incentive (% of Salary)
| Executive
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Annual Cash Incentive (% of Target)
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Annual Cash Incentive (% of Salary)
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| Ms. Lee | 135% | 102% | Ms. Lee | 145% | 109% | |||||||||||||||||||
| Mr. Santarosa | 130% | 65% | Mr. Santarosa | 138% | 69% | |||||||||||||||||||
| Mr. Kim | 129% | 51% | Mr. Kim | 129% | 58% | |||||||||||||||||||
| Mr. Fuhr | 137% | 48% | Mr. Fuhr | 133% | 53% | |||||||||||||||||||
Mr. Du
| 124%
| 31%
| Mr. Du
| 115%
| 35%
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EXECUTIVE COMPENSATION
Element
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Type
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Long-Term Incentive Awards (Equity) |
| The CHR Committee, in its discretion, determines equity grants for the NEOs after considering each executive’s performance, previous grant history, stock ownership level, comparison to our peer group, and retention needs. | ||||||||||
• In
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Good Governance
The Company is committed to pay for performance and sound compensation and governance practices, including the following:
A clawback policy applicable to all executive officers which was adopted in 2018.
Stock ownership guidelines established for the CEO and CFO.
No excise tax gross-up payments.
| • | No excise tax gross-up payments. |
No dividends are accrued or paid on unvested shares of performance-based awards.
No hedging or pledging transactions.
A focus on variable compensation, evidenced by the fact that variable, performance-based compensation comprises a majority of our CEO’s pay. The target pay mix for our CEO and other NEOs, on average, is shown in the charts below. Target pay mix includes 20212022 salary, 20212022 Annual Incentive Plan target, and the grant date fair value of equity awards granted in 2021.2022.
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EXECUTIVE COMPENSATION
Compensation Objective and Philosophy
The CHR Committee uses competitive compensation data from the annual total compensation study of peer companies to inform its decisions about overall compensation opportunities and specific compensation
23 | |
EXECUTIVE COMPENSATION
elements. Additionally, the CHR Committee uses multiple reference points when establishing targeted compensation levels. The CHR Committee does not benchmark specific compensation elements or total compensation to any specific percentile relative to the peer companies or the broader market. Instead, the CHR Committee applies judgment and discretion in establishing targeted pay levels, taking into account not only competitive market data, but also factors such as Company and individual performance, scope of responsibility, critical needs and skill sets, leadership potential and succession planning. All decisions are made in consideration of the key goal of aligning executive pay and performance.
The policies and underlying philosophy governing the Company’s executive compensation program, as endorsed by the CHR Committee and the Board of Directors, are designed to accomplish the following:
Maintain a compensation program that is equitable in a competitive marketplace.
Provide opportunities that integrate pay with the Company’s annual and long-term performance goals.
Align NEO compensation with the Company’s performance.
Manage the risk profile of the Company by aligning risk mitigation within the performance of individual and Company-wide goals.
Encourage achievement of strategic objectives and the creation of stockholder value.
Recognize and reward individual initiative and achievements while managing risk.
Maintain an appropriate balance between base salary and short- and long-term incentive opportunities.
Allow the Company to compete for, retain and motivate talented executives critical to its success, consistent with its compensation philosophy.
Allow the Company to effectively engage institutional stockholders. Hanmi values our stockholders and works to have open two-way communication on all matters of importance. We proactively seek out our stockholders’ opinions, as appropriate.
| • | Allow the Company to effectively engage institutional stockholders. Hanmi values our stockholders and works to have open two-way communication on all matters of importance. We proactively seek out our stockholders’ opinions, as appropriate. |
Establish bonus and equity plans subject to “clawback” in the event of material inaccurate financial statements or materially inaccurate performance metric criteria resulting in the payment of excess incentive compensation.
Foster an ownership culture among the chief executive officer, chief financial officer and the directors through minimum stock ownership guidelines.
Compensation Determination Process
Role of CHR Committee
The CHR Committee is responsible for the creation, implementation, and administration of the overall compensation program for the CEO and other senior executive officers. The CHR Committee takes into consideration the recommendations of the CEO for executive officers other than the CEO, as well as considering and making recommendations concerning compensation, benefit plans, and implementation of sound personnel policies and practices Company wide. The CHR Committee has the following responsibilities:
Review the overall human resource development and compensation strategy for the CEO, executive officers, and directors.
Lead the Board in its annual review of executive management’s performance.
Evaluate CEO performance, set annual goals and evaluate total compensation.
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EXECUTIVE COMPENSATION
Evaluate compensation recommendations from the CEO for other NEOs.
Evaluate the annual executive incentive compensation plan in light of participation, goals and budgetary considerations.
| 24 |
EXECUTIVE COMPENSATION
Review broad-based incentive compensation plans to ensure compliance with regulations and laws.
Administer the Company’s long-term incentive program.
The CHR Committee approves compensation for all NEOs other than the CEO. The CHR Committee discloses all compensation decisions related to the CEO to the full Board of Directors. The full Board has ultimate responsibility for determining the compensation of our CEO, after considering the recommendation from the CHR Committee.
Role of Compensation Consultant
In 2021,2022, the CHR Committee retained the services of Aon’s Human Capital Solutions practice, a division of Aon plc (otherwise known as McLagan), to provide executive compensation consulting services. McLagan helped facilitate the executive officer compensation process, including the creation of a compensation peer group for comparing our NEOs’ compensation to the market. McLagan reported directly to the CHR Committee, who has the authority, in its sole discretion, to retain any adviser to assist in the performance of its duties or to terminate any advisor to the CHR Committee. The CHR Committee determined that McLagan is independent and that there is no conflict of interest resulting from retaining McLagan during 20212022, after taking into account the factors set forth in the SEC rules.
Role of Management
Management assists the CHR Committee in recommending agenda items for its meetings and by gathering and producing information for these meetings. The CEO and other executive officers may participate in CHR Committee meetings to provide background information and other requested items, but are not present during the voting or discussions of their own compensation. The CEO provides recommendations to the CHR Committee for the other NEOs regarding compensation, performance goals, and other employment-related matters, such as hiring, promotions, terminations or severance payments. The CHR Committee considers the CEO’s recommendations but retains authority to approve or recommend to the Board of Directors compensation decisions to be approved.
Peer Group
In April 2021,May 2022, the CHR Committee worked with McLagan to construct a peer group of banking companies with assets at the time of selection generally between $3.0 and $12.0 billion that have similar business models and that are likely to compete with Hanmi for executive talent. The peer group was modified from 20202021 to reflect peer asset size changes and acquisitions. The following changes were made to the 20212022 peer group: Farmers & MerchantsMeridian Bancorp and Peapack-Gladstone Financial Corp. were added; Century Bancorp Inc. was removed as they were acquired; and CVB Financial Corp. and First Financial Bankshares were removed as they were no longer appropriate peers for the Company.acquired. Although the decisions regarding the compensation levels are guided by the information provided from the peer group and market survey data, the CHR Committee does not commit to setting our executive pay levels at any particular percentile of the peer group. The CHR Committee also takes into account the prevailing economic environment, individual performance, experience and the current financial condition of Hanmi. The 20212022 peer group was as follows:
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EXECUTIVE COMPENSATION
follows
Allegiance Bancshares Inc. |
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Banc of California Inc. |
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Bank of Marin Bancorp |
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Central Pacific Financial |
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Farmers & Merchants Bancorp |
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First Foundation Inc. |
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Heritage Commerce |
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Heritage Financial Corp. |
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| Triumph Bancorp Inc. | |
| Westamerica | |
National Bank Holdings Corp. |
25 | |
2021
EXECUTIVE COMPENSATION
2022 Pay Components and Compensation Decisions
Base Salary
Annual base salaries are the fixed portion of our NEOs’ cash compensation and are intended to reward the day-to-day aspects of their roles and responsibilities and to reflect the value that they bring to the Company. Our NEOs’ annual salaries are established after taking into account several factors including the executive’s experience, responsibilities, management abilities, job performance and market compensation information. The CHR Committee believes that the 20212022 base salaries of Hanmi’s NEOs are competitive with companies of similar size, including those in the peer group.
Pay adjustments, if any, are generally made annually, after reviewing overall Company performance, individual performance and the affordability of the increases. In 2021,2022, the CHR Committee approved base salary increases for all NEOs, ranging from 5%6% to 24%10%. The CHR Committee determined the salary increases for the NEOs based on individual officer performance, the breadth of specific duties and responsibilities assigned to each officer, and a compensation comparison to external market data. The Company approved the CEO’s base salary increase for 20212022 in an amendment to the CEO’s employment agreement. The amendment to the CEO’s employment agreement became effective on July 30, 2021, butFebruary 22, 2022, and the CEO’s 2021 base salary of $650,000 was retroactivelyfor 2022 ($715,000) became effective as of April 4, 2021.on that date.
The table below shows the NEOs’ annual base salaries in 20202021 and 2021.2022.
| Name | Title | 2020 Base Salary | Increase Percentage | 2021 Base Salary | ||||||||||||||||
| Bonita I. Lee | President & CEO | $ | 525,000 | 24 | % | $ | 650,000 | |||||||||||||
| Romolo C. Santarosa | Sr. EVP & CFO | $ | 400,000 | 5 | % | $ | 420,000 | |||||||||||||
| Anthony Kim | EVP & CBO | $ | 267,157 | 12 | % | $ | 300,000 | |||||||||||||
| Matthew D. Fuhr | EVP & CCAO | $ | 266,508 | 5 | % | $ | 280,000 | |||||||||||||
| Michael Du1 | SVP & CRO | — | — | $ | 239,113 | |||||||||||||||
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Name | Title | 2021 Base Salary | Increase Percentage | 2022 Base Salary | ||||||||||||||||
Bonita I. Lee | President & CEO | $ | 650,000 | 10 | % | $ | 715,000 | |||||||||||||
Romolo C. Santarosa | Sr. EVP & CFO | $ | 420,000 | 6 | % | $ | 445,200 | |||||||||||||
Anthony Kim | EVP & CBO | $ | 300,000 | 6 | % | $ | 318,000 | |||||||||||||
Matthew D. Fuhr | EVP & CCAO | $ | 280,000 | 6 | % | $ | 296,800 | |||||||||||||
Michael Du | SVP & CRO | $ | 239,113 | 6 | % | $ | 253,460 | |||||||||||||
Short-Term Cash Incentives – Annual Incentive Plan (“AIP”)
In accordance with Hanmi’s compensation philosophy, a significant portion of the compensation of our NEOs is performance-based and payable only if pre-established Company and individual performance objectives are achieved. For each NEO, target AIP bonuses are stated as a percentage of annual base salary. Under the terms of the CEO’s amended employment agreement, the 2021 target AIP bonus payable to the CEO was reduced from 100% to 75% of her annual base salary. In addition, the CEO’s target payout cap was removed and replaced with a maximum payout opportunity of 112.5% of the CEO’s annual base salary. The target AIP bonuses payable to the other NEOs for 20212022 performance were, as a percentage of their respective annual base salary, as follows: Ms. Lee – 75%, Mr. Santarosa – 50%, Mr. Kim – 40%45%, Mr. Fuhr – 35%40%, and Mr. Du – 25%30%.
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EXECUTIVE COMPENSATION
The 2022 target opportunities for Messrs. Kim, Fuhr, and Du were increased by 5% from the 2021 level to align their compensation with the competitive market for similar experience and responsibilities.
The CHR Committee reviews performance against pre-established financial and non-financial goals on an annual basis to determine the short-term cash incentive compensation of our NEOs. Awards under the AIP are substantially based on formulaic scorecard results across weighted performance measure categories. The CHR Committee reviewed and approved scorecards for each NEO to be used for 20212022 performance, which are summarized in the tables below. Payments under the AIP are contingent upon the achievement of pre-established goals relating to objective Company financial metrics for all NEOs, and upon the goals specific to each NEO’s area of responsibility. Each of the metrics has an assigned weight and the CHR Committee established threshold, target, and maximum performance levels for each of the Company financial metrics.
In 2021,2022, the CHR Committee set the threshold payout at 50% of each NEO’s target opportunity upon attaining a threshold level of all the metrics, a target payout of 100% upon attaining 100% of the target level of all the metrics, and a maximum payout of 150% of the target opportunity upon attaining certain maximum performance levels. Payouts are interpolated on a straight-line basis for achievement for a particular performance metric between these three levels of performance.
The measurements in the AIP for all NEOs are based on the approved 20212022 budget in the strategic plan. For 2021,2022, all NEOs were allocated certain weightings of three corporate financial measures: return on average
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EXECUTIVE COMPENSATION
assets (“ROAA”), non-performing assets to total assets ratio (“NPA/Total Assets”), and efficiency ratio. As shown in the table below, all three corporate financial measures were earned at maximum.
| Performance Goals | Actual Result | Actual Result as |
Performance Goals | Actual Result | Actual Result as | |||||||||||||||
| Metric | Threshold | Target | Maximum | Threshold | Target | Maximum | ||||||||||||||
ROAA | 0.63% | 0.79% | 0.87% | 1.64% | 150% | 0.96% | 1.20% | 1.32% | 1.44% | 150% | ||||||||||
NPA/Assets | 2.20% | 1.83% | 1.46% | 0.20% | 150% | 0.22% | 0.18% | 0.14% | 0.14% | 150% | ||||||||||
Efficiency Ratio | 63.34% | 57.58% | 54.70% | 52.84% | 150% | 59.05% | 53.68% | 51.00% | 47.9% | 150% | ||||||||||
Each of the NEOs also had additional objective metrics to reflect each individual’s specific area of control and responsibility, while retaining accountability for overall Company profitability, risk management and regulatory compliance. The AIP was designed to allow for objective goal measurement while also allowing for the exercise of judgment by the CHR Committee and the Board of Directors. If an NEO has met or exceeded the requirements for a specific goal, the NEO is given 100% credit for the weighting of a particular category. However, if a category is met at the minimum expected level, the NEO is given 50% credit for the weighting of a particular credit, and if a category is met at the maximum expected, the NEO is given 150% credit for the weighting of a particular credit. Achievement between threshold and target, and target and maximum, isPayouts are interpolated on a straight-line basis.
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EXECUTIVE COMPENSATION
basis for achievement for a particular performance metric between these three levels of performance.
Performance measures, weightings, target award opportunities, and results for each NEO are summarized in the tables below.
Bonita I. Lee – President & CEO
| Performance Goals | Performance Goals | |||||||||||||||||||||||
| Weight | Threshold | Target | Maximum | Actual | Achievement % | Weight | Threshold | Target | Maximum | Actual | Achievement % | |||||||||||||
ROAA | 20% | 0.63% | 0.79% | 0.87% | 1.64% | 30% | 20% | 0.96% | 1.20% | 1.32% | 1.44% | 30% | ||||||||||||
NPA/Assets | 20% | 2.20% | 1.83% | 1.46% | 0.2% | 30% | 15% | 0.22% | 0.18% | 0.14% | 0.14% | 22.5% | ||||||||||||
Efficiency Ratio | 20% | 63.34% | 57.58% | 54.70% | 52.84% | 30% | 20% | 59.05% | 53.68% | 51.00% | 47.9% | 30% | ||||||||||||
Risk Management | 10% | Based on bank risk management results | See footnote (1) | 10% | 15% | Based on bank risk | See footnote (1) | 22.5% | ||||||||||||||||
Strategic Plan / Project | 20% | Based on completion of strategic plan business initiatives | See footnote (2) | 20.2% | 20% | Based on completion of | See footnote (2) | 30% | ||||||||||||||||
Discretionary | 10% | Discretionarily assessed based on personal performance factors | See footnote (3) | 12.5% | 10% | Discretionarily assessed | See footnote (3) | 10% | ||||||||||||||||
Eligible Salary | $650,000 |
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| $715,000 | |||||||||||||||||
Target % of Salary | 75% |
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| 75% | |||||||||||||||||
% Achieved | 135% |
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| 145% | |||||||||||||||||
Payout % of Base Salary | 101.55% |
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| 108.75% | |||||||||||||||||
Actual Payout | $660,750 |
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| $777,563 | |||||||||||||||||
| (1) | In its evaluation of Ms. Lee’s performance, the CHR Committee based achievement on the Company’s effective risk management results for the performance period. |
| (2) | The strategic plan/project metric achievement is based on the completion of strategic plan initiatives and projects. |
| (3) | The discretionary metric achievement is based on the progress on key operational and strategic initiatives. |
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EXECUTIVE COMPENSATION
Romolo C. Santarosa – Sr. EVP & CFO
| Performance Goals | Performance Goals | |||||||||||||||||||||||
| Weight | Threshold | Target | Maximum | Actual | Achievement % | Weight | Threshold | Target | Maximum | Actual | Achievement % | |||||||||||||
ROAA | 20% | 0.63% | 0.79% | 0.87% | 1.64% | 30% | 20% | 0.96% | 1.20% | 1.32% | 1.44% | 30% | ||||||||||||
NPA/Assets | 15% | 2.20% | 1.83% | 1.46% | 0.20% | 22.5% | 15% | 0.22% | 0.18% | 0.14% | 0.14% | 22.5% | ||||||||||||
Efficiency Ratio | 15% | 63.34% | 57.58% | 54.70% | 52.84% | 22.5% | 15% | 59.05% | 53.68% | 51.00% | 47.9% | 22.5% | ||||||||||||
Risk Management | 10% | Based on bank risk management results | See footnote (1) | 9.8% | 10% | Based on bank risk | See footnote (1) | 15% | ||||||||||||||||
Strategic Plan / Project | 30% | Based on completion of strategic plan business initiatives | See footnote (2) | 30% | 30% | Based on completion of | See footnote (2) | 37.50% | ||||||||||||||||
Discretionary | 10% | Discretionarily assessed based on personal performance factors. | See footnote (3) | 12.5% | 10% | Discretionarily assessed | See footnote (3) | 10% | ||||||||||||||||
Eligible Salary | $420,000 |
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|
|
| $445,200 | |||||||||||||||||
Target % of Salary | 50% |
|
|
|
|
| 50% | |||||||||||||||||
% Achieved | 130% |
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|
|
|
| 138% | |||||||||||||||||
Payout % of Base Salary | 64.80% |
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|
|
|
| 68.75% | |||||||||||||||||
Actual Payout | $272,160 |
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|
|
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| $306,075 | |||||||||||||||||
| (1) | In its evaluation of Mr. Santarosa’s performance, the CHR Committee based achievement on the Company’s effective risk management results for the performance period. |
| (2) | The |
| (3) | The |
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EXECUTIVE COMPENSATION
Anthony Kim – EVP & CBO
| Performance Goals | Performance Goals | |||||||||||||||||||||||
| Weight | Threshold | Target | Maximum | Actual | Achievement % | Weight | Threshold | Target | Maximum | Actual | Achievement % | |||||||||||||
ROAA | 10% | 0.63% | 0.79% | 0.87% | 1.64% | 15% | 10% | 0.96% | 1.20% | 1.32% | 1.44% | 15% | ||||||||||||
NPA/Assets | 10% | 2.20% | 1.83% | 1.46% | 0.075%(1) | 15% | 10% | 0.168% | 0.140% | 0.112% | 0.02%(1) | 15% | ||||||||||||
Efficiency Ratio | 10% | 63.34% | 57.58% | 54.70% | 52.84% | 15% | 10% | 59.05% | 53.68% | 51.00% | 47.9% | 15% | ||||||||||||
Loan Balance | 10% | ~$3.25B | ~$4.3B | ~$5.4B | ~$4.5B | 10.3% | 7.5% | ~$3.6B | ~$4.8B | ~$6.0B | ~$5.15B | 8.6% | ||||||||||||
Loan Production Budget | 5% | ~$703.5M | ~$938M | ~$1.17B | ~$1.4B | 7.3% | 7.5% | ~$904.4M | ~$1.2B | ~$1.5B | ~$1.5B | 11.3% | ||||||||||||
Deposit Balance | 10% | ~$3.6B | ~$4.8B | ~$5.9 | ~$5.5B | 11.5% | 10% | ~$4.3B | ~$5.7B | ~$7.2B | ~$5.9B | 10.7% | ||||||||||||
Income Budget | 10% | ~$54.5M | ~$72.6M | ~$90.8M | ~$97.45M | 13.4% | 10% | ~$113.25M | ~$151.0M | ~$188.75M | ~$159.9M | 11.2% | ||||||||||||
Residential Mortgage | 5% | $157.5M | $210M | $267.5M | $336.7M | 8.0% | ||||||||||||||||||
CRM / OAO | 5% | Based on internal review of CRM system | See footnote (2) | 2.5% | ||||||||||||||||||||
Key Business Initiatives | 15% | Based on financial metrics in key divisions | See footnote (2) | 22.5% | ||||||||||||||||||||
Risk Management | 10% | Based on bank risk management results and internal and external audit reviews | See footnote (3) | 8.8% | 10% | Based on bank risk management results and internal and external audit reviews | See footnote (3) | 10% | ||||||||||||||||
Discretionary | 15% | Discretionarily assessed based on personal performance factors | See footnote (4) | 18.75% | 10% | Discretionarily assessed based on personal performance factors | See footnote (4) | 9.9% | ||||||||||||||||
Eligible Salary |
|
|
|
|
| $300,000 |
|
|
|
|
| $318,000 | ||||||||||||
Target % of Salary |
|
|
|
|
| 40% |
|
|
|
|
| 45% | ||||||||||||
% Achieved |
|
|
|
|
| 129% |
|
|
|
|
| 129% | ||||||||||||
Payout % of Base Salary |
|
|
|
|
| 51.44% |
|
|
|
|
| 58.09% | ||||||||||||
Actual Payout |
|
|
|
|
| $154,324 |
|
|
|
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| $184,718 | ||||||||||||
| (1) | As applied to Mr. Kim’s assigned divisions, which excludes Small Business Administration loans and commercial equipment leasing division. |
| (2) |
|
|
In its evaluation of Mr. Kim’s performance, the CHR Committee based achievement on certain financial metrics in key divisions. |
| (3) | The risk management metric achievement is based on the results of internal and external audit reviews of divisions. |
| (4) | The discretionary metric achievement is based on certain financial metrics in specific |
|
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EXECUTIVE COMPENSATION
Matthew D. Fuhr – EVP & CCAO
| Performance Goals | Performance Goals | |||||||||||||||||||||||
| Weight | Threshold | Target | Maximum | Actual | Achievement % | Weight | Threshold | Target | Maximum | Actual | Achievement % | |||||||||||||
ROAA | 15% | 0.63% | 0.79% | 0.87% | 1.64% | 22.5% | 20% | 0.96% | 1.20% | 1.32% | 1.44% | 30% | ||||||||||||
NPA/Assets | 15% | 2.20% | 1.83% | 1.46% | 0.20% | 22.5% | 20% | 0.22% | 0.18% | 0.14% | 0.14% | 30% | ||||||||||||
Efficiency Ratio | 10% | 63.34% | 57.58% | 54.70% | 52.84% | 15% | 20% | 59.05% | 53.68% | 51.00% | 47.9% | 30% | ||||||||||||
Risk Management | 30% | Based on bank risk management results and, audit and key operational initiatives | See footnote (1) | 36% | 20% | Based on bank risk management results and, | See footnote (1) | 20% | ||||||||||||||||
Strategic Plan / Project | 20% | Based on support of initiatives in business units and transition of CELD leadership | See footnote (2) | 20% | 10% | Based on support of | See footnote (2) | 7.5% | ||||||||||||||||
Discretionary | 10% | Discretionarily assessed based on personal performance factors | See footnote (3) | 12.5% | 10% | Discretionarily assessed | See footnote (3) | 15% | ||||||||||||||||
Eligible Salary |
|
|
|
|
| $280,000 |
|
|
|
|
| $296,800 | ||||||||||||
Target % of Salary |
|
|
|
|
| 35% |
|
|
|
|
| 40% | ||||||||||||
% Achieved |
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|
|
|
| 137% |
|
|
|
|
| 133% | ||||||||||||
Payout % of Base Salary |
|
|
|
|
| 47.95% |
|
|
|
|
| 53.00% | ||||||||||||
Actual Payout |
|
|
|
|
| $134,260 |
|
|
|
|
| $157,304 | ||||||||||||
| (1) | In its evaluation of Mr. Fuhr’s performance, the CHR Committee based achievement on internal and external audit ratings, the Company’s effective risk management, and progress on other key operational initiatives related to risk management. |
| (2) |
|
| (3) |
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|
|
|
EXECUTIVE COMPENSATION
Michael Du – SVP & CRO
| Performance Goals | Performance Goals | |||||||||||||||||||||||
| Weight | Threshold | Target | Maximum | Actual | Achievement % | Weight | Threshold | Target | Maximum | Actual | Achievement % | |||||||||||||
ROAA | 20% | 0.63% | 0.79% | 0.87% | 1.64% | 30% | 10% | 0.96% | 1.20% | 1.32% | 1.44% | 15% | ||||||||||||
NPA/Assets | 10% | 2.20% | 1.83% | 1.46% | 0.20% | 15% | 10% | 0.22% | 0.18% | 0.14% | 0.14% | 15% | ||||||||||||
Efficiency Ratio | 10% | 63.34% | 57.58% | 54.70% | 52.84% | 15% | 10% | 59.05% | 53.68% | 51.00% | 47.9% | 15% | ||||||||||||
BSA | 15% | Based on enhancements to BSA program | See footnote (1) | 18.75% | 20% | Based on enhancements to BSA program | See footnote (1) | 25% | ||||||||||||||||
Information Security | 15% | Based on enhancements to information security program and compliance management system | See footnote (2) | 14% | 15% | Based on enhancements | See footnote (2) | 10% | ||||||||||||||||
Compliance | 10% | Based on enhancements to compliance management system | See footnote (3) | 7.5% | 15% | Based on enhancements | See footnote (3) | 15% | ||||||||||||||||
Risk Management | 10% | Based on enhancements to risk management program and internal audit reviews | See footnote (4) | 9% | 10% | Based on enhancements to risk management program and internal audit reviews | See footnote (4) | 10% | ||||||||||||||||
Discretionary | 10% | Discretionarily assessed based on personal performance factors | See footnote (5) | 12.5% | 10% | Discretionarily assessed based on personal performance factors | See footnote (5) | 10% | ||||||||||||||||
Eligible Salary |
|
|
|
|
| $239,113 |
|
|
|
|
| $253,460 | ||||||||||||
Target % of Salary |
|
|
|
|
| 25% |
|
|
|
|
| 30% | ||||||||||||
% Achieved |
|
|
|
|
| 124% |
|
|
|
|
| 115% | ||||||||||||
Payout % of Base Salary |
|
|
|
|
| 30.88% |
|
|
|
|
| 34.50% | ||||||||||||
Actual Payout |
|
|
|
|
| $73,826 |
|
|
|
|
| $87,444 | ||||||||||||
| (1) | In its evaluation of Mr. Du’s performance, the CHR Committee based achievement on the completion of operational and risk management goals related to the Bank Security Act (“BSA”) program. |
| (2) |
|
| (3) |
|
| (4) |
|
| (5) |
|
Long-Term Incentives
Long-term incentive awards, such as stock options, restricted stock and performance stock units, are the third key component of our NEOs’ total compensation. The CHR Committee believes employee stock ownership is significant for our NEOs, thereby aligning the interests of employees and stockholders. The CHR Committee also believes equity-based compensation complements the short-term cash incentive compensation and helps balance short-term decisions with long-term outcomes. This compensation approach limits an executive’s ability to reap short-term gains at the expense of Hanmi’s long-term success. This is also an important tool in retaining NEOs.
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EXECUTIVE COMPENSATION
We provide long-term incentive awards to our executive officers through our stockholder approved 2013 Equity Compensation Plan (“2013 Plan”) and 2021 Equity Compensation Plan (“2021 Plan”). The CHR
31 | |
EXECUTIVE COMPENSATION
Committee approves all equity award grants and acts as an administrator of the 2013 Plan and the 2021 Plan. The Company does not have a policy or an exact formula regarding the allocation of compensation between cash and equity compensation; rather, the size, timing and other material terms of the long-term incentive awards for our NEOs are made at the discretion of the CHR Committee. Factors considered by the CHR Committee include each executive’s performance, previous grant history and stock ownership level, comparison to our peer group, and retention needs.
In 2021,2022, the CHR Committee adoptedcontinued using a new long-term incentive award program mix for NEOs using a mix of 55% performance-based restricted stock units and 45% time-based restricted stock grants. For 2021,2022, the CHR Committee determined that the aggregate dollar value of the performance-based restricted stock units and time-based restricted stock granted to each NEO equalas a percentage of the NEO’s base salary on the date of grant as set forth in the table below, with the target performance-based restricted stock units and time-based restricted stock amounts determined by dividing the applicable percentage of the NEO’s base salary by the fair market value of Hanmi’s common stock on the grant date. The percentage of base salary was based on the NEO’s position, responsibilities, comparison to peer and market practices for comparable positions, and historical and expected contributions to Hanmi.
20212022 Time-Based Restricted Stock Grants
On March 24, 2021,23, 2022, the CHR Committee granted shares of restricted stock to our NEOs, at which time our closing price was $18.90$25.37 per share. The shares vest in equal annual installments over three years beginning on the first anniversary of the date of grant.
The award size for these NEOs was determined based in part on existing equity ownership levels, a review of past grant sizes, competitive market practices, contributions to Hanmi’s performance results and retention considerations.
20212022 Performance-Based Restricted Stock Units
On March 24, 2021,23, 2022, the CHR Committee granted shares of performance-based restricted stock units to our NEOs.
| • | The performance-based restricted stock units will vest at the end of the three-year performance period based on the Company’s TSR relative to companies in the KBW Regional Banking Index (the “KBW Index”) for the three-year performance period. No shares will be issued and the award will be forfeited if the Company’s TSR is |
| • | At the 35th percentile TSR achievement |
If the Company’s absolute TSR for the performance period is a negative number (without regard to the TSR of the KBW Index), then irrespective of the Company’s relative TSR to the KBW Index, the number of units earned and shares issued will be capped at the Target level.
The following chart outlines the Company’s potential level of achievement and associated earning of units and issuance of shares for each year of the four-year period.three-year period
| Company TSR Percent Rank vs. KBW Index | Percent of Total Number Earned and Vested | |
Below 35th Percentile | 0% | |
35th Percentile | 50% | |
50th Percentile | 100% | |
75th Percentile | 150% | |
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EXECUTIVE COMPENSATION
The CompensationCHR Committee granted the following performance-based restricted stock units and time-based restricted stock to each of the NEOs in 2021:2022:
| Named Executive Officer | 2021 Long-Term Incentive Target Awards | 2022 Long-Term Incentive Target Awards | |||||||||||||||||||||||||
Total Target a % of Salary | Time-Based Restricted Stock (#) | Performance- Based Restricted Stock Units (#) | Total Target Equity Award Opportunity as a % of Salary | Time-Based Restricted Stock (#) | Performance- Based Restricted Stock Units (#) | ||||||||||||||||||||||
Bonnie Lee | 100% | 12,500 | 15,692 | ||||||||||||||||||||||||
Bonita I. Lee | 100% | 11,530 | 14,244 | ||||||||||||||||||||||||
Ron Santarosa | 50% | 4,761 | 5,978 | ||||||||||||||||||||||||
Romolo C. Santarosa | 50% | 3,725 | 4,602 | ||||||||||||||||||||||||
Anthony Kim | 30% | 2,142 | 2,690 | 35% | 1,863 | 2,301 | |||||||||||||||||||||
Matthew Fuhr | 25% | 1,666 | 2,092 | ||||||||||||||||||||||||
Matthew D. Fuhr | 30% | 1,490 | 1,841 | ||||||||||||||||||||||||
Michael Du | 25% | 1,423 | 1,786 | 25% | 1,061 | 1,310 | |||||||||||||||||||||
The CHR Committee increased the 2022 target long-term incentive award opportunities for Messrs. Kim and Fuhr by 5%, compared to the prior year, to better align their compensation with market practices.
On February 28, 2018, the CHR Committee granted Mr. Santarosa a performance-based restricted stock grant consisting of 32,680 shares intended to cover a four-year period. The grant provided for annual vesting of a maximum of 25% of the shares in each of 2018, 2019, 2020 and 2021, provided the Company’s TSR was at or above the 50th percentile of the KBW Index for each respective year. To the extent that the performance requirements were not met for any given year, the percentage of unearned shares applicable to that year were forfeited.
The following chart outlines the Company’s level of achievement and associated vesting of shares for each year of the four-year period.
Company TSR Percent Rank vs. KBW Index | Percent of Total Number of | Total Number of Shares | Company TSR Percent Rank vs. KBW Index | Percent of Total Number of | Total Number of | |||||||
2018 Results | Below 50th | 0% | — | Below 50th | 0% | — | ||||||
2019 Results | Below 50th | 0% | — | Below 50th | 0% | — | ||||||
2020 Results | Below 50th | 0% | — | Below 50th | 0% | — | ||||||
2021 Results | Above 50th | 25% | 8,170 | Above 50th | 25% | 8,170 |
Additional Compensation Elements
Employment Agreements
The Company maintainmaintains employment agreements with Ms. Lee and Mr. Santarosa. These agreements set forth each individual’s base salary, bonus compensation, equity compensation granted in connection with their promotions and employee benefits, as well as providing them with the opportunity to receive certain post-employment payments and benefits, including acceleration of equity awards, in the case of certain involuntary terminations of employment without cause or resignations for good reason. The agreements also reconfirm the agreements previously entered into prohibiting them from recruiting or soliciting our employees or disclosing our confidential information or business practices. In August 2021, the Company amended Ms. Lee’s employment agreement to provide a base salary of $650,000, retroactively effective as of April 4, 2021, and an annual target cash bonus of 75% of salary for the fiscal year ending December 31, 2021.
In February 2022, the Company entered into an amended and restated employment agreement with Ms. Lee (“Lee Amended Agreement”). The Lee Amended Agreement is effective as of February 28, 2022 and replaces Ms. Lee’s then-existing employment agreement with the Company and the Bank. The Lee Amended Agreement provides for (i) a three-year term commencing on February 28, 2022, and ending on February 28, 2025, which then renews automatically for one-year periods unless either Ms. Lee or the Company or Bank provides written notice of non-renewal, (ii) annual salary of $715,000, which will be reviewed at least annually beginning in 2023, (iii) annual target cash bonus of 75% of salary, and (iii)(iv) twenty-five days of paid vacation annually.
33 | |
EXECUTIVE COMPENSATION
In July 2022, the Company entered into a first amendment to the amended and restated employment agreement with Mr. Santarosa (“Santarosa Amended Agreement”). The Santarosa Amended Agreement is effective as of June 30, 2022, and provides for an extended term to February 28, 2025, which then renews automatically for one-year periods unless either Mr. Santarosa or the Company provides notice of non-renewal. All other terms of Mr. Santarosa’s amended and restated employment agreement remain in effect.
Post-Employment Compensation
Our post-employment compensation arrangements are designed to provide reasonable compensation to Ms. Lee and Mr. Santarosa if they are terminated by us without cause or in connection with a change in
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EXECUTIVE COMPENSATION
control. Further, we seek to mitigate any potential employer liability and avoid future disputes or litigation by requiring a departing executive officer to sign a separation and release agreement acceptable to us as a condition to receiving post-employment compensation payments or benefits.
Our CHR Committee and the Board of Directors do not consider specific amounts payable under these post-employment compensation arrangements when establishing annual compensation. It does believe, however, that these arrangements are necessary to offer compensation packages that are competitive.
Pursuant to the termsThe treatment of the 2013 Plan and the 2021 Plan, all time-basedoutstanding equity awards granted to any participant automatically vestheld by NEOs upon the occurrencetermination of employment or in connection with a change in control.control is described below in the “Employment Agreements” and “Potential Payments Upon Termination of Employment or Change in Control” sections.
All other executives are employed “at-will,” and Hanmi does not provide any right to additional payments or benefits in the event of a termination of employment or a change in control of Hanmi.
Executive Perquisites
CertainOur NEOs receive the following benefits in addition to their other compensation: cellular phone allowance, automobile allowance, gas allowance, wellness benefit and gift cards for the holidays. Mr. Santarosa receives a membershipmemberships to a social club. Ms. Lee also receives or is entitled to receive memberships to a country club and social club, company-provided welfare benefits and additional term life insurance. These benefits are detailed in the “Summary Compensation Table.”
Broad-Based Benefits Programs
Our NEOs participate in the benefit programs that are available to all full-time employees. These benefits include health, dental, vision, life insurance, short-term and long-term disability insurance, healthcare reimbursement accounts, paid vacation, 401(k) plan matching contributions, and a year of service award upon achieving certain years of service milestones with the Company.
Other Compensation Considerations
Pledging and Hedging Policies
None of the executive officers, directors, employees, consultants and contractors of the Company who receive or have access to material nonpublic information may directly or indirectly engage in short sales, hedging, share lending, or the purchase or sale of any type of derivatives including but not limited to options, warrants, puts, calls, cash settled or other swaps or synthetic securities or any other similar instruments involving Company securities. Directors and Senior Vice Presidents and above are also prohibited from holding Company securities in a margin account or pledging Company securities as security for a loan.
Clawback Policy
The Company has implemented a clawback policy consistent with the requirements of Section 304 of the Sarbanes-Oxley Act that mandates the recovery of incentive awards that would not have otherwise been
| 34 |
EXECUTIVE COMPENSATION
paid in the event we are required to restate our financial statements due to non-compliance with any financial reporting requirements as a result of misconduct. In that case, the CEO and CFO must reimburse the Company for: (1)(i) any bonus or other incentive, or equity-based compensation received during the 12twelve (12) months following the first public issuance or filing with the SEC (whichever first occurs) of the non-complying document; and (2)(ii) any profits realized from the sale of our securities during those 12twelve (12) months.
We also maintain a more broad-based clawback policy that applies to all executive officers. The policy survives and remains in force following an executive officer’s termination of employment. Under the Company’s clawback policy, the Company will clawback any cash or equity incentive compensation payments or awards to the extent such payments or awards were made or determined during the one-year
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EXECUTIVE COMPENSATION
period preceding the date on which the Company determines it has materially inaccurate financial statements or any other materially inaccurate performance metric criteria and the amount of incentive compensation, as calculated under the restated financial results, is less than the amount actually paid or awarded under the original financial results (i.e., the “excess incentive compensation”). The policy provides that the clawback could be effected through any of the following methods: reimbursement of the pre-tax amount of the excess incentive compensation, cancellation of outstanding equity awards that constitute excess incentive compensation or reimbursement of any gains realized in the exercise of stock options, vesting of or open market sales of restricted stock, restricted stock units or other equity awards granted that are attributable to the excess incentive compensation.
The Company plans to amend its broad-based clawback policy once Nasdaq adopts listing standards requiring listed issuers like the Company to adopt and comply with clawback policies and to provide disclosure about their policies and implementation consistent with a final SEC rule adopted in November 2022 to implement Section 954 the Dodd-Frank Act.
Stock Ownership Guidelines
The CHR Committee adopted the following stock ownership guidelines for the CEO and CFO. The CEO is required to hold shares of the Company’s common stock valued at five times (5x) her base salary and the CFO is required to hold shares of the Company’s common stock valued at one and one-half times (1.5x) his base salary. This goal must be obtained within five years from April 25, 2018, the date the guidelines were approved by the CHR Committee, or from their first day in their respective role, whichever is later.role. Once the guidelines are met, if the stock price decreases, the executive will not be required to acquire additional shares. Until the stock ownership guidelines are met, the executive will be required to retain at least fifty percent (50%) of the shares granted to him or her by the Company (50% of the shares granted may be used to satisfy tax withholding requirements). Mr. Santarosa is in compliance with the stock ownership guidelines, while Ms. Lee was promoted to the position of CEO during 2019, and has five years from the time of her promotion to acquire an amount of Company common stock equal to five times (5x) her base salary.
Compensation Policy Risk Assessment
The CHR Committee reviews the compensation of our NEOs, as well as the overall compensation practices for the organization. Performance incentive programs and annual salary adjustments are reviewed and approved by the CHR Committee for all NEOs, with the exception of the CEO, whose compensation is reviewed and approved by the CHR Committee and subsequently presented to our full Board for ratification. An important aspect of the review is an assessment of whether the programs encourage our NEOs or any other employee of Hanmi to take unacceptable risk, in the short or long term.
Upon due consideration of these items, the CHR Committee believes that the Company’s compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on its business or operations.
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EXECUTIVE COMPENSATION
TAX DEDUCTABILITY OF EXECUTIVE OFFICER COMPENSATION
Under Section 162(m) of the Internal Revenue Code of 1986 (the “Code”), as amended by the Tax Cuts and Jobs Act enacted on December 22, 2017 (the “Tax Act”), publicly traded companies are subject to limits on the deductibility of executive compensation. Deductible compensation is limited to $1 million per year for each “covered employee,” defined as the public company’s principal executive officer, principal financial officer and three additional highest compensated officers during any taxable year of the company beginning after December 31, 2017. For tax years prior to January 1, 2018, compensation that was considered “qualified performance-based compensation” was exempt from this limit. The Tax Act provides “grandfathered” treatment for certain compensation in excess of the $1 million deductibility limitation, including compensation that is “qualified performance-based compensation” within the meaning of Section 162(m) prior to the Tax Act, if payable pursuant to a written binding contract in effect as of November 2, 2017 that is not modified in any material respect thereafter. Our stock option grants (and other performance-vesting equity grants) made prior to November 2, 2017 are intended to qualify as qualified performance-based compensation that is exempt from the deductibility limitation under Section 162(m).
Prior to January 1, 2018, the CHR Committee considered the impact of Section 162(m) in determining the appropriate pay mix and compensation levels for our NEOs. Now that the qualified performance-based
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EXECUTIVE COMPENSATION
compensation exception is generally no longer available, the CHR Committee may determine to award compensation that exceeds the deductibility limit under 162(m) or otherwise pay non-deductible compensation when it believes that other considerations outweigh the tax deductibility of compensation.
COMPENSATION AND HUMAN RESOURCES COMMITTEE REPORT
The CHR Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the CHR Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
Compensation and Human Resources Committee of the Board
Christie K. Chu (Chairperson)
Harry H. Chung
Scott R. Diehl
Gloria J. Lee
David L. Rosenblum
Michael M. Yang
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EXECUTIVE COMPENSATION
The following table summarizes the total compensation paid to or earned by each of the NEOs for the years ended December 31, 2022, 2021, 2020, and 2019.2020.
Name and Principal Position | Year | Salary ($) (2) | Stock Awards ($) (3) | Non-Equity Incentive Plan Compensation ($) (4) | All Other Compensation ($) (5) | Total ($) | Year | Salary ($) (2) | Stock Awards ($) (3) | Non-Equity Incentive Plan Compensation ($) (4) | All Other Compensation ($) (5) | Total ($) | ||||||||||||||||||||||||||||||||
Bonita I. Lee President & CEO | 2021 | 616,346 | 524,983 | 660,075 | 68,382 | 1,869,786 | 2022 | 703,750 | 650,041 | 777,563 | 81,755 | 2,213,109 | ||||||||||||||||||||||||||||||||
| 2020 |
|
| 545,192 |
|
| 419,994 |
|
| 428,930 |
|
| 69,499 |
|
| 1,463,615 |
|
| 2021 |
|
| 616,346 |
|
| 524,983 |
| 660,075 | 68,382 |
| 1,869,786 |
| |||||||||||||
|
| 2019 |
|
| 477,404 |
|
| 525,011 |
|
| 352,065 |
|
| 65,144 |
|
| 1,419,624 |
|
| 2020 |
|
| 545,192 |
|
| 419,994 |
| 428,930 | 69,499 |
| 1,463,615 |
| ||||||||||||
Romolo C. Santarosa Sr. EVP & CFO | 2021 | 414,615 | 199,978 | 272,160 | 52,696 | 939,449 | 2022 | 438,416 | 210,013 | 306,075 | 54,741 | 1,009,245 | ||||||||||||||||||||||||||||||||
| 2020 |
|
| 415,385 |
|
| 309 |
|
| 176,722 |
|
| 47,880 |
|
| 640,296 |
|
| 2021 |
|
| 414,615 |
|
| 199,978 |
| 272,160 | 52,696 |
| 939,449 |
| |||||||||||||
|
| 2019 |
|
| 362,308 |
|
| 400,020 |
|
| 134,120 |
|
| 47,659 |
|
| 944,107 |
|
| 2020 |
|
| 415,385 |
|
| 309 |
| 176,722 | 47,880 |
| 640,296 |
| ||||||||||||
Anthony Kim(1) EVP & CBO |
| 2021 |
|
| 291,158 |
|
| 89,980 |
|
| 154,324 |
|
| 34,114 |
|
| 569,575 |
| ||||||||||||||||||||||||||
| 2020 | 277,432 | 18,660 | 93,388 | 33,834 | 423,314 | |||||||||||||||||||||||||||||||||||||||
Anthony Kim EVP & CBO |
| 2022 |
|
| 313,154 |
|
| 105,019 |
| 184,718 | 36,106 |
| 638,997 |
| ||||||||||||||||||||||||||||||
| 2021 |
|
| 291,158 |
|
| 89,980 |
| 154,324 | 34,114 |
| 569,575 |
| |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| 2020 |
|
| 277,432 |
|
| 18,660 |
| 93,388 | 33,834 |
| 423,314 |
| ||||||||||||||||||||||||
Matthew D. Fuhr EVP & CCAO | 2021 | 276,368 | 69,980 | 134,260 | 33,271 | 513,879 | 2022 | 292,277 | 84,010 | 157,304 | 34,343 | 567,935 | ||||||||||||||||||||||||||||||||
| 2020 |
|
| 276,758 |
|
| 28,299 |
|
| 80,387 |
|
| 32,967 |
|
| 418,411 |
|
| 2021 |
|
| 276,368 |
|
| 69,980 |
| 134,260 | 33,271 |
| 513,879 |
| |||||||||||||
|
|
| 2019 |
|
| 264,862 |
|
| 65,010 |
|
| 48,963 |
|
| 31,746 |
|
| 410,580 |
|
| 2020 |
|
| 276,758 |
|
| 28,299 |
| 80,387 | 32,967 |
| 418,411 |
| ||||||||||||
Michael Du(1) SVP & CRO |
| 2021 |
|
| 238,006 |
|
| 57,757 |
|
| 73,826 |
|
| 24,178 |
|
| 395,767 |
| ||||||||||||||||||||||||||
Michael Du(1) EVP & CRO |
| 2022 |
|
| 249,597 |
|
| 59,577 |
| 87,444 | 25,236 |
| 422,075 |
| ||||||||||||||||||||||||||||||
| 2021 |
|
| 238,006 |
|
| 57,757 |
| 73,826 | 24,178 |
| 395,767 |
| |||||||||||||||||||||||||||||||
| (1) |
|
| (2) | The amounts shown in this column represent salaries earned during the fiscal year shown. |
| (3) | Amounts in this column represent the aggregate grant date fair value of stock awards for the year indicated in accordance with FASB ASC Topic 718. The grant date fair value of time-based restricted stock awards is calculated using the closing market price of our common stock on the grant date. The per-share grant date fair value for performance-based restricted stock units are estimated based on the use of a Monte Carlo valuation methodology and the probable outcome of the achievement of the performance conditions as determined in accordance with FASB Topic 718, which resulted in a per-share grant date fair value of |
| (4) | Amounts in this column represent the performance-based cash bonuses earned under the AIP during the year indicated. For a more complete description of the bonuses earned by the NEOs for |
| (5) | All Other Compensation for |
| Name
| 401(k)
| Perquisites &
| 401(k)
| Perquisites &
| ||||||||||
Bonita I. Lee | 17,400 | 50,982 |
| 18,300 | 63,455 |
| ||||||||
Romolo C. Santarosa | 17,400 | 35,296 |
| 18,300 | 36,441 |
| ||||||||
Anthony Kim | 17,100 | 17,014 |
| 18,300 | 17,806 |
| ||||||||
Matthew D. Fuhr | 17,400 | 15,871 |
| 18,300 | 16,043 |
| ||||||||
Michael Du | 14,317 | 9,861 |
| 15,375 | 9,861 |
| ||||||||
(a) Perquisites consist of auto allowance for the NEOs, which totaled $36,000 for Ms. Lee and $26,220 for Mr. Santarosa, holiday gift cards, social and country club dues for Ms. Lee, social club dues for Mr. Santarosa, gas |
|
|
|
EXECUTIVE COMPENSATION
The following table provides information concerning plan-based awards granted or awarded during 20212022 to each of the NEOs.
Estimated Future Payouts Under Non-Equity Incentive
|
Estimated Future Payouts
| All Other
| Grant
|
Estimated Future Payouts Under Non-Equity Incentive
|
Estimated Future Payouts
| All Other
| Grant
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Award Type | Grant Date | Threshold ($) | Target ($) | Maximum ($) |
Threshold |
Target |
Maximum | Award Type | Grant Date | Threshold ($) | Target ($) | Maximum ($) |
Threshold |
Target |
Maximum | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bonita I. Lee | Annual Incentive Plan |
| 243,750 | 487,500 | 731,250 |
|
|
|
|
| Annual Incentive Plan |
| 268,125 | 536,250 | 804,375 |
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Based Restricted Stock | 3/24/2021 |
|
|
|
|
|
| 12,500 | 236,250 | Time-Based Restricted Stock | 3/23/2022 |
|
|
|
|
|
| 11,530 | 292,516 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Performance-Based Restricted Stock Units | 3/24/2021 |
|
|
| 7,846 | 15,692 | 23,538 |
| 288,733 | Performance-Based Restricted Stock Units | 3/23/2022 |
|
|
| 7,122 | 14,244 | 21,366 |
| 357,524 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Romolo C. Santarosa | Annual Incentive Plan |
| 105,000 | 210,000 | 315,000 |
|
|
|
|
| Annual Incentive Plan |
| 111,300 | 222,600 | 333,900 |
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Based Restricted Stock | 3/24/2021 |
|
|
|
|
|
| 4,761 | 89,983 | Time-Based Restricted Stock | 3/23/2022 |
|
|
|
|
|
| 3,725 | 94,503 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Performance-Based Restricted Stock Units | 3/24/2021 |
|
|
| 2,989 | 5,978 | 8,967 |
| 109,995 | Performance-Based Restricted Stock Units | 3/23/2022 |
|
|
| 2,301 | 4,602 | 6,903 |
| 115,510 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Anthony Kim | Annual Incentive Plan |
| 60,000 | 120,000 | 180,000 |
|
|
|
|
| Annual Incentive Plan |
| 71,550 | 143,100 | 214,650 |
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Based Restricted Stock | 3/24/2021 |
|
|
|
|
|
| 2,142 | 40,484 | Time-Based Restricted Stock | 3/23/2022 |
|
|
|
|
|
| 1,863 | 47,264 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performance-Based Restricted Stock Units | 3/24/2021 |
|
|
| 1,345 | 2,690 | 4,035 |
| 49,496 | Performance-Based Restricted Stock Units | 3/23/2022 |
|
|
| 1,151 | 2,301 | 3,452 |
| 57,755 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Matthew D. Fuhr | Annual Incentive Plan |
| 49,000 | 98,000 | 147,000 |
|
|
|
|
| Annual Incentive Plan |
| 59,360 | 118,720 | 178,080 |
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Based Restricted Stock | 3/24/2021 |
|
|
|
|
|
| 1,666 | 31,487 | Time-Based Restricted Stock | 3/23/2022 |
|
|
|
|
|
| 1,490 | 37,801 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Performance-Based Restricted Stock Units | 3/24/2021 |
|
|
| 1,046 | 2,092 | 3,138 |
| 38,493 | Performance-Based Restricted Stock Units | 3/23/2022 |
|
|
| 921 | 1,841 | 2,762 |
| 46,209 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael Du | Annual Incentive Plan |
| 29,889 | 59,778 | 89,667 |
|
|
|
|
| Annual Incentive Plan |
| 38,019 | 76,038 | 114,057 |
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Based Restricted Stock | 3/24/2021 |
|
|
|
|
|
| 1,423 | 26,895 | Time-Based Restricted Stock | 3/23/2022 |
|
|
|
|
|
| 1,061 | 26,918 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Performance-Based Restricted Stock Units | 3/24/2021 |
|
|
| 893 | 1,786 | 2,679 |
| 32,862 | Performance-Based Restricted Stock Units | 3/23/2022 |
|
|
| 655 | 1,310 | 1,965 |
| 32,881 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | The Annual Incentive Plan provides a cash payout based on performance. The amounts disclosed in these columns reflect the threshold, target, and maximum annual cash incentive opportunities for NEOs in |
| (2) | Amounts in these columns represent the award of performance-based restricted stock units granted to all NEOs. The indicated threshold, target and maximum amounts correspond to the number of shares that would be earned in the event that specified threshold, target and maximum targets were achieved (with linear interpolation for performance between the threshold and target and target and maximum levels). For more information on the |
| (3) | Amounts disclosed in this column reflect the number of restricted stock awards granted to our NEOs in |
| (4) | Amounts in this column represent the grant date fair values of stock awards granted to our NEOs in accordance with FASB ASC Topic 718. The grant date fair value of the restricted stock awards is calculated using the closing market price of our common stock on the grant date. The per-share grant date fair value for the performance-based restricted stock units with market-based conditions (TSR) is estimated based on the use of a Monte Carlo valuation methodology and the probable outcome of the achievement of the performance conditions as determined in accordance with FASB ASC Topic 718 which resulted in a per-share grant date fair value of |
|
|
|
EXECUTIVE COMPENSATION
Ms. Lee February 2022 Amended and Restated Employment Agreement
In February 2022, the Company entered into an amended and restated employment agreement with Ms. Lee (the “Lee Employment Agreement”) to clarify the terms of her annual bonus and change in control cash severance payment. The Lee Employment Agreement supersedes and replaces the employment agreement between the Company and Ms. Lee, dated as of February 26, 2020 as amended in August 2021. The terms of her employment agreement are described below.
TERM: The Lee Employment Agreement provides for a term that commences on February 28, 2022, and ends on February 28, 2025 (unless earlier terminated by either party), subject to automatic renewal for successive one-year periods unless either party provides notice of non-renewal prior to the expiration of the then-current term.
| • | TERM: The Lee Employment Agreement provides for a term that commences on February 28, 2022, and ends on February 28, 2025 (unless earlier terminated by either party), subject to automatic renewal for successive one-year periods unless either party provides notice of non-renewal prior to the expiration of the then-current term. |
COMPENSATION: The annual base salary for Ms. Lee is $715,000, which may be increased, but not decreased, in the sole discretion of the Board. Under the terms of her employment agreement, Ms. Lee is eligible to receive an annual cash bonus pursuant to the annual cash bonus plan. Under the Lee Employment Agreement, Ms. Lee is entitled to participate in employee benefit plans for which she may be eligible and will receive certain perquisites, including a monthly automobile allowance of $3,000, payment of membership club dues not to exceed $20,000 annually, Company-provided welfare benefits, including but not limited to medical, dental, vision and life insurance coverage, and 25 days of paid vacation annually. In addition, the Lee Employment Agreement provides Ms. Lee with term life insurance coverage of up to $1,000,000, or such lesser amount as can be purchased for an annual premium of $25,000, during the term of the Lee Employment Agreement.
TERMINATION WITHOUT CAUSE OR FOR GOOD REASON: The termination provisions remain unchanged in the Lee Employment Agreement, which provides that if Ms. Lee’s employment is terminated either by the Company without “cause” or by her for “good reason,” in either case, other than within 18 months following a “change in control,” and subject to Ms. Lee’s execution of a general release of claims, Ms. Lee will be entitled to receive the following severance payments and benefits: (i) continued payment of her then-current annual base salary for 12 months following the date of termination, (ii) a lump-sum payment equal to the pro-rated portion of her prior year’s annual bonus based on the number of days worked during the year of termination, (iii) accelerated vesting of that portion of any unvested time-based equity awards held by Ms. Lee that would have vested if Ms. Lee’s employment had continued for one year following the date of termination, and (iv) continued health insurance benefits at the Company’s expense under COBRA for up to 18 months.
| • | TERMINATION WITHOUT CAUSE OR FOR GOOD REASON: The termination provisions remain unchanged in the Lee Employment Agreement, which provides that if Ms. Lee’s employment is terminated either by the Company without “cause” or by her for “good reason,” in either case, other than within eighteen (18) months following a “change in control,” and subject to Ms. Lee’s execution of a general release of claims, Ms. Lee will be entitled to receive the following severance payments and benefits: (i) continued payment of her then-current annual base salary for twelve (12) months following the date of termination, (ii) a lump-sum payment equal to the pro-rated portion of her prior year’s annual bonus based on the number of days worked during the year of termination, (iii) accelerated vesting of that portion of any unvested time-based equity awards held by Ms. Lee that would have vested if Ms. Lee’s employment had continued for one year following the date of termination, and (iv) continued health insurance benefits at the Company’s expense under COBRA for up to eighteen (18) months. |
TERMINATION IN CONNECTION WITH A CHANGE IN CONTROL: The change in control termination provisions remain unchanged in the Lee Employment Agreement, which provides that if, within 18 months following a change in control, Ms. Lee’s employment with the Company is terminated either by the Company without cause or by her for good reason, and subject to Ms. Lee’s execution of a general release of claims, Ms. Lee will be entitled to receive the following severance payments and benefits: (i) a lump sum payment equal to two and one-half times the sum of her then-current annual base salary and the greater of her then-average annual bonus earned over the prior three consecutive calendar years or her then-target annual bonus (which is at “target” under the AIP), and (ii) continued health insurance benefits at the Company’s expense under COBRA for up to 18 months.
| • | TERMINATION IN CONNECTION WITH A CHANGE IN CONTROL: The change in control termination provisions remain unchanged in the Lee Employment Agreement, which provides that if, within eighteen (18) months following a change in control, Ms. Lee’s employment with the Company is terminated either by the Company without cause or by her for good reason, and subject to Ms. Lee’s execution of a general release of claims, Ms. Lee will be entitled to receive the following severance payments and benefits: (i) a lump sum payment equal to two and one-half times the sum of her then-current annual base salary and the greater of her then-average annual bonus earned over the prior three consecutive calendar years or her then-target annual bonus (which is at “target” under the AIP), and (ii) continued health insurance benefits at the Company’s expense under COBRA for up to eighteen (18) months. |
TERMINATION DUE TO DEATH OR DISABILITY: The termination provisions related to death or disability remain unchanged in the Lee Employment Agreement, which provides that if Ms. Lee’s employment terminates due to her death or disability, then she or her estate, as applicable, will be entitled to receive a lump-sum payment equal to the pro-rated portion of her prior year’s annual bonus based on the number of days worked during the year of termination.
| • | TERMINATION DUE TO DEATH OR DISABILITY: The termination provisions related to death or disability remain unchanged in the Lee Employment Agreement, which provides that if Ms. Lee’s employment terminates due to her death or disability, then she or her estate, as applicable, will be entitled to receive a lump-sum payment equal to the pro-rated portion of her prior year’s annual bonus based on the number of days worked during the year of termination. |
CHANGE IN CONTROL: In the event of a change in control of the Company, Ms. Lee’s time-based equity awards will fully vest and performance-based equity awards will be treated in accordance with the terms of the applicable award agreements.
|
|
|
EXECUTIVE COMPENSATION
Mr. Santarosa February 2020First Amendment to the Amended and Restated Employment Agreement
In February 2020, the Company entered into an amended employment agreement with Senior Executive Vice President and CFO, Romolo C. Santarosa to clarify the change in control cash severance payment. The amended agreement, which superseded and replaced his employment agreement entered into in July 2019. In July 2022, the Company entered into a first amendment to the amended and restated employment agreement with Mr. Santarosa (“Santarosa Amended Agreement”) that extended the term of the employment agreement. The terms of the amended agreementSantarosa’s Amended Agreement are described below.
TERM: The agreement provides for a term commencing on February 26, 2020 and ending on May 6, 2022 (unless earlier terminated by either party), subject to automatic renewal for successive one-year periods unless either party provides notice of non-renewal prior to the expiration of the then-current term.
| • | TERM: The agreement provides for a term commencing on June 30, 2022 and ending on February 28, 2025 (unless earlier terminated by either party), subject to automatic renewal for successive one-year periods unless either party provides notice of non-renewal prior to the expiration of the then-current term. |
COMPENSATION: The annual base salary of Mr. Santarosa is $400,000, and may be increased, but not decreased (except in limited circumstances set forth in the employment agreement) by the Board, based on the recommendation of the CHR Committee. Mr. Santarosa is also entitled to participate in employee benefit plans for which he may be eligible and fringe benefits to which the Company’s senior executives are entitled. In addition, Mr. Santarosa received, on the effective date of the employment agreement, a time-based restricted stock grant equal to approximately $400,000 that will vest in approximately three equal annual installments beginning on the first anniversary of the date of grant, provided Mr. Santarosa remains employed by the Company in such position on each anniversary date.
TERMINATION WITHOUT CAUSE OR FOR GOOD REASON: The employment agreement provides that if Mr. Santarosa’s employment is terminated either by the Company without “cause” or by him for “good reason,” in either case, other than within 18 months following a “change in control,” and subject to Mr. Santarosa’s execution of a general release of claims, Mr. Santarosa will be entitled to receive the following severance payments and benefits: (i) continued payment of his then-current annual base salary for 12 months following the date of termination, (ii) a lump-sum payment equal to the pro-rated portion of his prior year’s annual bonus based on the number of days worked during the year of termination, (iii) accelerated vesting of unvested time-based equity awards held by Mr. Santarosa that would have vested if Mr. Santarosa’s employment had continued for one year following the date of termination, and (iv) continued health insurance benefits at the Company’s expense under COBRA for up to 18 months.
| • | TERMINATION WITHOUT CAUSE OR FOR GOOD REASON: The employment agreement provides that if Mr. Santarosa’s employment is terminated either by the Company without “cause” or by him for “good reason,” in either case, other than within eighteen (18) months following a “change in control,” and subject to Mr. Santarosa’s execution of a general release of claims, Mr. Santarosa will be entitled to receive the following severance payments and benefits: (i) continued payment of his then-current annual base salary for twelve (12) months following the date of termination, (ii) a lump-sum payment equal to the pro-rated portion of his prior year’s annual bonus based on the number of days worked during the year of termination, (iii) accelerated vesting of unvested time-based equity awards held by Mr. Santarosa that would have vested if Mr. Santarosa’s employment had continued for one year following the date of termination, and (iv) continued health insurance benefits at the Company’s expense under COBRA for up to eighteen (18) months. |
TERMINATION IN CONNECTION WITH A CHANGE IN CONTROL: If, within 18eighteen (18) months following a change in control, Mr. Santarosa’s employment with the Company is terminated either by the Company without cause or by Mr. Santarosa for good reason, and subject to Mr. Santarosa execution of a general release of claims, he will be entitled to receive the following severance payments and benefits: (i) a lump sum payment equal to two times the sum of his then-current annual base salary and the greater of his then-average annual bonus earned over the prior two consecutive calendar years or his then-target annual bonus, and (ii) continued health insurance benefits at the Company’s expense under COBRA for up to 18eighteen (18) months.
TERMINATION DUE TO DEATH OR DISABILITY: If Mr. Santarosa’s employment terminates due to his death or disability, then he or his estate, as applicable, will be entitled to receive a lump-sum payment equal to the pro- rated portion of his prior year’s annual bonus based on the number of days worked during the year of termination.
| • | TERMINATION DUE TO DEATH OR DISABILITY: If Mr. Santarosa’s employment terminates due to his death or disability, then he or his estate, as applicable, will be entitled to receive a lump-sum payment equal to the pro- rated portion of his prior year’s annual bonus based on the number of days worked during the year of termination. |
CHANGE IN CONTROL: In the event of a change in control of the Company, Mr. Santarosa’s time-based equity awards will fully vest and performance-based equity awards will be treated in accordance with the terms of the applicable award agreements.
In the event of Mr. Santarosa’s termination for any of the reasons set forth above, Mr. Santarosa’s performance-based equity awards will be treated in accordance with the terms of the applicable award agreements.
RESTRICTIVE COVENANTS: Mr. Santarosa also remains subject to the confidentiality, non-solicitation and other covenants included in his restrictive covenant agreement with the Company
|
|
|
EXECUTIVE COMPENSATION
| • | RESTRICTIVE COVENANTS: Mr. Santarosa also remains subject to the confidentiality, non-solicitation and other covenants included in his restrictive covenant agreement with the Company and the non-disparagement covenant set forth in his employment agreement. In addition, if any payments or benefits provided to Mr. Santarosa in connection with a change in control are subject to excise taxes as a result of the application of Sections 280G and 4999 of the Internal Revenue Code, such payments and benefits will be reduced so that no excise tax is payable, but only if this reduction results in a more favorable after-tax position for the executive. |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
The following table provides information relating to outstanding equity awards held by NEOs as of December 31, 2021.2022.
Option Awards
| Stock Awards
| Option Awards
| Stock Awards
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of Securities
| Option Price ($) | Option Expiration | Number Vested | Market Vested | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not | Number of Securities
| Equity Number of Securities Underlying Unexercised Unearned Options (#) | Option Price ($) | Option Expiration | Number Vested | Market Vested | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Exercisable (#) | Unexercisable (#) | Vested ($) (1) | Exercisable (#) | Unexercisable (#) | Vested ($) (1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bonita I. Lee | 50,000 | — | 16.43 | 8/28/2023 |
|
|
|
| 50,000 | 16.43 | 8/28/2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6,524 | (2) | 161,469 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| 7,324 | (2) | 173,432 |
|
| 8,375 | (3) | 207,281 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11,530 | (4) | 285,368 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| 12,856 | (3) | 304,430 |
|
| 35,906 | (5) | 888,661 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 23,538 | (6) | 582,566 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| 12,500 | (4) | 296,000 |
|
| 21,366 | (7) | 528,809 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
| 35,906 | (5) | 850,242 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
| 23,538 | (6) | 557,380 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Romolo Santarosa | 25,000 | — | 23.31 | 6/8/2025 |
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| 6,091 | (7) | 144,235 |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| 4,761 | (4) | 112,740 |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Romolo C. Santarosa | 25,000 | 23.31 | 6/8/2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| 8,170 | (8) | 193,466 |
|
| 3,190 | (3) | 78,953 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3,725 | (4) | 92,194 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
| 8,967 | (6) | 212,339 | 8,967 | (6) | 221,933 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6,903 | (7) | 170,849 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Anthony Kim | 15,000 | — | 22.25 | 4/23/2024 |
|
|
|
| 15,000 | 22.25 | 4/23/2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| 2,040 | (9) | 48,307 |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| 1,340 | (10) | 31,731 |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 680 | (8) | 16,830 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| 2,142 | (4) | 50,723 |
|
| 1,436 | (3) | 35,541 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1,863 | (4) | 46,109 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
| 4,035 | (6) | 95,549 | 2,825 | (6) | 69,906 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3,452 | (7) | 85,425 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Matthew D. Fuhr | 3,000 | — | 24.83 | 6/22/2025 |
|
|
|
| 3,000 | 24.83 | 6/22/2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1,020 | (9) | 25,245 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| 2,010 | (11) | 47,597 |
|
| 1,117 | (3) | 27,646 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1,490 | (4) | 36,878 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| 1,666 | (4) | 39,451 |
|
| 3,138 | (6) | 77,666 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2,762 | (7) | 68,347 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
| 3,138 | (6) | 74,308 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael Du |
| — | — | — | 1,700 | (12) | 40,256 |
|
| 954 | (3) | 23,612 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1,061 | (4) | 26,260 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| 1,423 | (4) | 33,697 |
|
| 2,679 | (6) | 66,305 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1,965 | (7) | 48,634 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| 2,679 | (6) | 63,439 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | Amount calculated using the closing stock price of |
| (2) |
|
On August 5, 2020, Ms. Lee was granted 19,188 shares of restricted stock which vest ratably over three years. |
41 | |
EXECUTIVE COMPENSATION
| (3) | On March 24, 2021, all of the named executive officers were granted shares of restricted stock that vest ratably over three years. |
| (4) | On March 24, 2021, all of the named executive officers were granted shares of restricted stock that vest ratably over three years. |
|
|
|
EXECUTIVE COMPENSATION
| (5) | On August 5, 2020, Ms. Lee was awarded performance-based restricted |
| (6) | On March 24, 2021, our NEOs were awarded performance-based restricted stock units that may vest subject to the Company’s TSR performance relative to companies in the KBW Index at the end of the three-year performance period. Amounts shown are the number of shares that would be earned if the maximum level of performance is met for the three-year performance period. |
| (7) | On |
|
|
On June 25, 2020, Mr. Kim was granted 2,000 shares of restricted stock which vest ratably over three years. |
On June 25, 2020, Mr. Fuhr was granted 3,000 shares of restricted stock which vest ratably over three years. |
|
OPTION EXERCISES AND STOCK VESTED
The following table shows information as of December 31, 2022, for the NEOs concerning the vesting of restricted stock awards during 2021.2022. No stock options were exercised by the NEOs in 2021.2022.
Stock Awards
| Stock Awards
| |||||||||||||||||||
| Name | Number of Shares Acquired on Vesting (#)
| Value Realized on Vesting ($) (1)
| Number of
| Value Realized ($) (1)
| ||||||||||||||||
Bonita I. Lee | 13,653 | 273,493 | 17,781 | 438,448 | ||||||||||||||||
Romolo C. Santarosa | 5,911 | 113,550 | 15,832 | 394,560 | ||||||||||||||||
Anthony Kim | 3,574 | 75,476 | 3,406 | 81,492 | ||||||||||||||||
Matthew D. Fuhr | 3,508 | 71,347 | 1,539 | 36,395 | ||||||||||||||||
Michael Du | 1,650 | 39,056 | ||||||||||||||||||
Min Park | 2,169 | 56,305 | ||||||||||||||||||
| (1) | “Value Realized on Vesting” is determined by multiplying the number of shares of stock by the market value of the underlying shares on the vesting date or if the vesting date occurred on a weekend, the trading day immediately prior to the vesting date. |
POTENTIAL PAYMENTS UPON TERMINATION OF EMPLOYMENT OR CHANGE IN CONTROL
Our NEOs may be entitled to certain payments and benefits in the event of a qualifying termination of employment and/or change in control.
Employment and Severance Agreements. Ms. Lee’s and Mr. Santarosa’s employment agreements provide for certain severance pay and benefits upon a qualifying termination of employment, including in connection with a change in control, in addition to accelerated vesting of certain equity awards upon a change in control. For additional information, see “Employment Agreements Agreements” section above.
Performance Based Restricted Stock Unit Grant.
For performance-based restricted stock units granted under the 2013 Plan:
In the event that a change“Change in control ofControl” (as defined in the Company2013 Plan) occurs during the NEO’s service, the shares of performance-based restricted stock units granted under the 2013 Plan will vest on the date of the change“Change in controlControl” based on actual achievement of the performance goals measured through the date of the change in control, and any units that do not become vested based on the actual performance through the date of the change in control will be forfeited.
If the NEO’s employment is terminated by the Company without cause“Cause” or by the executive for good reason“Good Reason” (as those terms are defined underin the terms of the award
|
|
|
EXECUTIVE COMPENSATION
agreement)2013 Plan), the performance-based restricted stock units granted under the 2013 Plan will vest on the date of termination based on actual achievement of the performance goals measured through the date of termination, and any units that do not become vested based on the actual performance through the date of the change in control will be forfeited.
2018 Performance Restricted Stock Grant. If
| 42 |
EXECUTIVE COMPENSATION
For performance-based restricted stock units granted under the 2021 Plan:
All shares of performance-based restricted stock units granted under the 2021 Plan will only vest upon the occurrence of a change“Change in controlControl” (as defined in the 2021 Plan) that is coincident with or followed by the termination of the Company occurs during Mr. Santarosa’s service, up to 25% of the shares of restricted stock eligible to vest in that year will vest on the date of the change in control based on actual achievement of the performance measures measured through the date of the change in control, and any shares applicable to future periods not yet commenced will be forfeited. If Mr. Santarosa’sNEO’s employment is terminated by the Company without cause“Cause” or by the executiveNEO for good reason“Good Reason” (as those terms are defined underin the terms of the awards), up to 25% of the shares of2021 Plan or award agreements) and these performance-based restricted stock eligible to vest in that yearunits will vest on the date of termination based onupon actual achievement of the performance goals measured through the date of termination, and any shares applicable to future periodsthe qualifying termination. Any units that do not yet commencedbecome vested based on the actual performance through the date of the change in control will be forfeited.
Other Equity Awards
| • | If the NEO’s employment is terminated by the Company without “Cause” or by the executive for “Good Reason” (as those terms are defined in the in the 2021 Plan), the performance-based restricted stock units granted under the 2021 Plan will vest on the date of termination based on actual achievement of the performance goals measured through the date of termination, pro-rated for the number of days worked during the performance period. Any units that do not become vested based on the actual performance through the date of the change in control will be forfeited. |
Restricted Stock. All time-based equity awards other thangranted pursuant to the performance –based awards (as described above)Company’s 2013 Plan will automatically vest upon the occurrence of a change“Change in controlControl” (as defined in the 2013 Plan). All time-based equity awards granted pursuant to the terms ofCompany’s 2021 Plan, except as provided in the 2013 PlanLee Amended Agreement and the Company’s 2007 Equity Compensation Plan.Santarosa Amended Agreement, will only vest upon the occurrence of a “Change in Control” (as defined in 2021 Plan) that is coincident with or followed by the termination of NEO’s employment without “Cause” or by the NEO for “Good Reason” (as those terms are defined in the 2021 Plan or award agreements). As noted above, the time-based restricted stock awards held by Ms. Lee and Mr. Santarosa will automatically vest upon the occurrence of a “Change in Control” (as defined in their employment agreements) pursuant to their respective employment agreements.
Voluntary Termination and Termination for Cause. Upon voluntary termination or termination by the Company for cause NEOs would forfeit all unvested equity and are not eligible to receive any termination- related compensation, except payments for services performed or benefits already accrued.
|
|
|
EXECUTIVE COMPENSATION
The tables below set forth for each of the NEOs the amount of the severance payments and benefits and the accelerated vesting of equity awards that the NEOs would have been entitled to upon various change in control and termination of employment events as described above, assuming that a change in control and/or termination of employment occurred on December 31, 2021.2022.
| Name | Cash Severance ($) | Accelerated Vesting of Stock Awards ($) (1)(2) | Health and Welfare Benefits ($) | Total ($) | Cash Severance ($) | Accelerated Vesting of Stock Awards ($) (1)(2) | Health and Welfare Benefits ($) | Total ($) | ||||||||||||||||||||||||||||||||
Bonita I. Lee(3) |
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Involuntary termination (other than for Cause) or for Good Reason | 1,145,852 | 1,831,936 | 44,114 | 3,021,902 | ||||||||||||||||||||||||||||||||||||
Termination Without Cause or for Good Reason | 1,466,788 | 1,968,486 | 45,885 | 3,481,159 | ||||||||||||||||||||||||||||||||||||
Involuntary termination in Connection with a Change in Control | 2,910,672 | 2,181,484 | 44,114 | 5,136,271 | ||||||||||||||||||||||||||||||||||||
Qualifying Termination in Connection with a Change in Control | 3,219,838 | 2,654,153 | 45,885 | 5,919,876 | ||||||||||||||||||||||||||||||||||||
Death or Disabilty(5) | 495,852 |
|
| 495,852 | 751,788 |
|
| 751,788 | ||||||||||||||||||||||||||||||||
Change in Control |
| 2,181,484 |
| 2,181,484 |
| 2,125,344 |
| 2,125,344 | ||||||||||||||||||||||||||||||||
Romolo C. Santarosa(4) |
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Involuntary termination (other than for Cause) or for Good Reason | 627,805 | 587,619 |
| 1,215,424 | ||||||||||||||||||||||||||||||||||||
Termination Without Cause or for Good Reason | 744,336 | 336,412 | 38,374 | 1,119,122 | ||||||||||||||||||||||||||||||||||||
Involuntary termination in Connection with a Change in Control | 1,291,083 | 662,780 |
| 1,953,863 | ||||||||||||||||||||||||||||||||||||
Qualifying Termination in Connection with a Change in Control | 1,366,258 | 563,929 | 38,374 | 1,968,561 | ||||||||||||||||||||||||||||||||||||
Death or Disabilty(5) | 207,805 |
|
| 207,805 | 299,135 |
|
| 299,135 | ||||||||||||||||||||||||||||||||
Change in Control |
| 662,780 |
| 662,780 |
| 393,080 |
| 393,080 | ||||||||||||||||||||||||||||||||
Anthony Kim |
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Involuntary termination (other than for Cause) or for Good Reason |
| 95,549 |
| 95,549 | ||||||||||||||||||||||||||||||||||||
Termination Without Cause or for Good Reason |
| 92,042 |
| 92,042 | ||||||||||||||||||||||||||||||||||||
Involuntary termination in Connection with a Change in Control |
|
|
|
| ||||||||||||||||||||||||||||||||||||
Qualifying Termination in Connection with a Change in Control |
| 253,811 |
| 253,811 | ||||||||||||||||||||||||||||||||||||
Death or Disabilty |
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Change in Control |
| 226,310 |
| 226,310 |
| 122,277 |
| 122,277 | ||||||||||||||||||||||||||||||||
Matthew D. Fuhr |
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Involuntary termination (other than for Cause) or for Good Reason |
| 74,308 |
| 74,308 | ||||||||||||||||||||||||||||||||||||
Termination Without Cause or for Good Reason |
| 95,376 |
| 95,376 | ||||||||||||||||||||||||||||||||||||
Involuntary termination in Connection with a Change in Control |
|
|
|
| ||||||||||||||||||||||||||||||||||||
Qualifying Termination in Connection with a Change in Control |
| 235,781 |
| 235,781 | ||||||||||||||||||||||||||||||||||||
Death or Disabilty |
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Change in Control |
| 161,356 |
| 161,356 |
| 130,556 |
| 130,556 | ||||||||||||||||||||||||||||||||
Michael Du |
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Involuntary termination (other than for Cause) or for Good Reason |
| 63,439 |
| 63,439 | ||||||||||||||||||||||||||||||||||||
Termination Without Cause or for Good Reason |
| 78,907 |
| 78,907 | ||||||||||||||||||||||||||||||||||||
Involuntary termination in Connection with a Change in Control |
|
|
|
| ||||||||||||||||||||||||||||||||||||
Qualifying Termination in Connection with a Change in Control |
| 164,810 |
| 164,810 | ||||||||||||||||||||||||||||||||||||
Death or Disability |
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Change in Control |
| 137,391 |
| 137,391 |
| 89,917 |
| 89,917 | ||||||||||||||||||||||||||||||||
| (1) | The amount shown is equal to the number of shares of time-based restricted stock and performance-based restricted stock units |
| (2) | As described above, the performance-based restricted stock unit awards held by the NEOs are eligible to vest as a result of a termination without cause or resignation for good reason or upon a change in control (only awards under the 2013 Plan) based on actual achievement of the performance goal measured through the employment termination date or change in control. |
| 44 |
EXECUTIVE COMPENSATION
| (3) |
|
| — | Termination Without Cause or For Good Reason: Ms. Lee is entitled to payment of her then current base salary for one year (which is |
|
|
|
EXECUTIVE COMPENSATION
| — | Termination in Connection with a Change in Control: If Ms. Lee’s employment is terminated by us without cause or by her for good reason, in either case, within 18 months of a change in control, she is entitled to receive a lump-sum payment in an amount equal to two and one half times the sum of (a) her then current base salary and (b) the greater of (i) the average annual bonus earned over the past three calendar years or (ii) her then current year’s target annual bonus, accrued but unused vacation, accelerated vesting of all time-based shares, vesting of the performance-based restricted stock unit awards based on performance as of December 31, |
| (4) |
|
| — | Termination Without Cause or For Good Reason: Mr. Santarosa is entitled to payment of his then current base salary for one year (which is |
| — | Termination in Connection with a Change in Control: If Mr. Santarosa’s employment is terminated by us without cause or by him for good reason, in either case, within 18 months of a change in control, he is entitled to receive a lump-sum payment in an amount equal to two times the sum of (a) his then current base salary and (b) greater of (i) the average annual bonus earned over the past two calendar years or (ii) his then current year’s target annual bonus, accrued but unused vacation, accelerated vesting of all time-based shares, vesting of the performance-based restricted stock unit awards based on performance as of December 31, |
| (5) | Employment agreements for Ms. Lee and Mr. Santarosa provide that, upon death or disability, the Company will pay an amount equal to any accrued but unused vacation and a pro-rated portion of the prior year’s bonus based on the number days worked during the year of termination. Ms. Lee and Mr. Santarosa would each receive the full amount of the 2021 bonus payout ($660,075 and $272,160, respectively), as this table assumes the termination |
|
|
|
EXECUTIVE COMPENSATION
As required by Section 953(b) of the Dodd-Frank Act, and Item 402(u) of Regulation S-K, we are providing the following information.
For 2021:2022:
The median of the annual total compensation of all employees of our company (other than our CEO), was $76,642$87,471 and
The annual total compensation of Ms. Lee, our CEO was $1,869,786.$2,213,109.
Based on this information, the ratio for 20212022 of the annual total compensation of our CEO to the median of the annual total compensation of all employees is 2425 to 1.
SEC rules allow us to identify our median employee once every three years unless there has been a change in our employee population or employee compensation arrangements that we reasonably believe would result in a significant change in our pay ratio disclosure. We believe there have been no changes in our employee population or employee compensation arrangements that would result in a significant change to this pay ratio disclosure. Therefore, we are using the same median employee identified for 2020 for this year’s disclosure.
We completed the following steps to identify the median of the annual total compensation of all our employees and to determine the annual total compensation of our median employee and CEO:
The median employee was identified for 2020 based on the employee population on December 31, 2020, which consisted of all full-time, part-time, temporary, and seasonal employees employed on that date.
To find the median of the annual total compensation of our employees (other than our CEO), we used wages from our payroll records as reported to the Internal Revenue Service on Form W-2 for fiscal 2020. In making this determination, we annualized compensation for full-time and part-time permanent employees who were employed on December 31, 2020, but did not work for us the entire year. No full-time equivalent adjustments were made for part-time employees.
| • | To find the median of the annual total compensation of our employees (other than our CEO), we used wages from our payroll records as reported to the Internal Revenue Service on Form W-2 for fiscal 2020. In making this determination, we annualized compensation for full-time and part-time permanent employees who were employed on December 31, 2020, but did not work for us the entire year. No full-time equivalent adjustments were made for part-time employees. |
We identified our median employee using this compensation measure and methodology, which was consistently applied to all our employees included in the calculation.
After identifying the median employee, we added together all of the elements of such employee’s compensation for 2021 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $76,642.
| • | After identifying the median employee, we added together all of the elements of such employee’s compensation for 2022 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $87,471. |
With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 20212022 Summary Compensation Table, which is also in accordance with the requirements of Item 402(c)(2)(x).
|
|
Value of Initial Fixed $100 Investment Based On: | ||||||||||||||||||||||||||||||||||||||||
Year | Summary Compensation Table Total for CEO ($) (1) | Compensation Actually Paid to CEO ($) (1) | Average Summary Compensation Table Total for Non-CEO NEOs ($) (2) | Average Compensation Actually Paid to Non-CEO NEOs ($) (2) | Total Shareholder Return ($) | Peer Group Total Shareholder Return ($) (3) | Net Income MM ($) (4) | Return on Average Assets (5) | ||||||||||||||||||||||||||||||||
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | ||||||||||||||||||||||||||||||||
| 2022 | 2,213,109 | 2,543,027 | 659,563 | 694,852 | 124 | 106 | 101.4 | 1.44% | ||||||||||||||||||||||||||||||||
| 2021 | 1,869,786 | 2,927,802 | 604,668 | 750,438 | 118 | 117 | 98.7 | 1.64% | ||||||||||||||||||||||||||||||||
| 2020 | 1,463,615 | 1,193,723 | 452,948 | 344,616 | 57 | 88 | 42.2 | 0.72% | ||||||||||||||||||||||||||||||||
| (1) | The CEO was Bonita I. Lee for each year shown in the table above. |
| (2) | Non-CEO NEOs for 2021 and 2022 were Romolo C. Santarosa, Anthony Kim, Matthew D. Fuhr, and Michael Du.Non-CEO NEOs for 2020 were Romolo C. Santarosa, Anthony Kim, Matthew D. Fuhr, and Min Park. |
| (3) | The Peer Group used for this calculation was the KBW Regional Banking Index. |
| (4) | Net Income reflected represents GAAP Net Income as reported on Form 10-K consolidated financials. |
| (5) | Return on Average Assets (ROAA) is the Company-selected performance measure, per the requirements of item 402(v) of Regulation S-K. |
Year | SCT Total for CEO ($) | SCT Reported Equity Award Value for CEO ($) | Equity Award Adjustments for CEO ($) (1) | Compensation Actually Paid to CEO ($) | ||||||||||||||||
| 2022 | 2,213,109 | (650,041 | ) | 979,959 | 2,543,027 | |||||||||||||||
| 2021 | 1,869,786 | (524,983 | ) | 1,582,999 | 2,927,802 | |||||||||||||||
| 2020 | 1,463,615 | (419,994 | ) | 150,102 | 1,193,723 | |||||||||||||||
47 |
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| (1) | Represents the year-over-year change in the fair value of equity awards to Bonita I. Lee as summarized below: |
Year | Year End Fair Value of Unvested Equity Awards Granted in the Year ($) | Year over Year Change in Fair Value of Outstanding Unvested Equity Awards Granted in Prior Years ($) | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year ($) | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year ($) | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year ($) | Value of Dividends or other Earnings Paid on Equity Awards not Otherwise Reflected in Fair Value or Total Compensation ($) | Total Equity Award Adjustments ($) | ||||||||||||||||||||||||||||
| 2022 | 663,546 | 271,424 | — | 17,346 | — | 27,643 | 979,959 | ||||||||||||||||||||||||||||
| 2021 | 723,607 | 722,845 | — | 117,954 | — | 18,593 | 1,582,999 | ||||||||||||||||||||||||||||
| 2020 | 455,526 | (127,383 | ) | — | (69,990 | ) | (123,732 | ) | 15,681 | 150,102 | |||||||||||||||||||||||||
Year | Average SCT Total for Non-CEO NEOs ($) | Average SCT Reported Equity Award Value for Non-CEO NEOs ($) | Average Equity Award Adjustments for Non-CEO NEOs($) (1) | Average Compensation Actually Paid to Non-CEO NEOs ($) | ||||||||||||||||
| 2022 | 659,563 | (114,655 | ) | 149,944 | 694,852 | |||||||||||||||
| 2021 | 604,668 | (104,424 | ) | 250,194 | 750,438 | |||||||||||||||
| 2020 | 452,948 | (14,616 | ) | (93,716 | ) | 344,616 | ||||||||||||||
| (1) | Represents the average of the year-over-year change in the fair value of equity awards to our Non-CEO NEO’s as summarized below: |
Year | Year End Fair Value of Unvested Equity Awards Granted in the Year ($) | Year over Year Change in Fair Value of Outstanding Unvested Equity Awards Granted in Prior Years ($) | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year ($) | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year ($) | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year ($) | Value of Dividends or other Earnings Paid on Equity Awards not Otherwise Reflected in Fair Value or Total Compensation ($) | Total Equity Award Adjustments ($) | ||||||||||||||||||||||||||||
| 2022 | 117,094 | $22,068 | — | 5,055 | — | 5,727 | 149,944 | ||||||||||||||||||||||||||||
| 2021 | 144,622 | 82,591 | — | 29,494 | (11,581) | 5,069 | 250,194 | ||||||||||||||||||||||||||||
| 2020 | 17,577 | (65,841 | ) | 165 | (30,942 | ) | (20,420) | 5,745 | (93,716 | ) | |||||||||||||||||||||||||
 Annual Meeting Proxy Statement 2023 | 48 |
Performance Measure |
| Return on Average Assets |
Non-Performing Assets to Total Assets |
| Efficiency Ratio |
49 | Annual Meeting Proxy Statement 2023 |
| Annual Meeting Proxy Statement 2023 | 50 |
PROPOSAL NO. 2 NON-BINDING ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION (“SAY-ON-PAY” VOTE)
Our overall executive compensation program, as described in this Proxy Statement, is designed to pay for performance and directly aligns the interest of our executive officers with the long-term interests of our stockholders. Our stockholders have the opportunity to vote to approve, on a non-binding advisory basis, the compensation of our NEOs as disclosed in this Proxy Statement in accordance with the SEC’s rules.
Because your vote is advisory, it will not be binding upon the Board. In the event this non-binding proposal is not approved by our stockholders, then such a vote will neither be construed as overruling a decision by our Board or our CHR Committee, nor create or imply any additional fiduciary duty by our Board or our CHR Committee. Notwithstanding the foregoing, the Board of Directors and the CHR Committee will consider the non-binding vote of our stockholders on this proposal when reviewing compensation policies and practices in the future.
Our overall executive compensation policies and procedures are described in the Compensation Discussion and Analysis and the tabular disclosure regarding NEO compensation (together with the accompanying narrative disclosure) in this Proxy Statement. We believe that going forward, our compensation policies and procedures will continue to be centered on a pay-for-performance culture and are aligned with the long-term interests of our stockholders, as described in the Compensation Discussion and Analysis. The CHR Committee, which is comprised entirely of independent directors, oversees our executive compensation program and continually monitors our policies to ensure that they continue to emphasize programs that reward executives for results that are consistent with stockholder interests.
Stockholders are encouraged to carefully review the Compensation Discussion and Analysis section of this Proxy Statement for a detailed discussion of the Company’s executive compensation program. Our Board and our CHR Committee believe that our commitment to these responsible compensation practices justifies a vote by stockholders “FOR” the following resolution approving the compensation of our executives:
Resolved, that the stockholders of Hanmi Financial Corporation hereby approve the compensation of our Named Executive Officers pursuant to Item 402 of Regulation S-K, as described in the Compensation Discussion and Analysis, the executive compensation tables and narrative discussion contained in the Proxy Statement.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE
NON-BINDING RESOLUTION APPROVING THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS
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PROPOSAL NO. 3 NON-BINDING ADVISORY VOTE TO APPROVE FREQUENCY OF FUTURE SAY-ON-PAY VOTES
In Proposal No. 2 above, the Company’s stockholders are asked to cast an advisory Say-on-Pay vote. Pursuant to the Dodd-Frank Act, at least once every six years the Company is required to ask stockholders to cast an advisory vote on how often the Company should include in its proxy materials for future stockholder meetings the Say-on-Pay vote. Under this Proposal No. 3, stockholders may vote to have the Say-on-Pay vote every 1 year, every 2 years or every 3 years or abstain from voting.
VOTING AND EFFECT OF VOTE
The Board values the opinions of the Company’s stockholders as expressed through their votes on this Proposal. Although the vote is advisory and not binding on the Board, it will carefully consider the outcome of this vote when making future decisions regarding the frequency of Say-on-Pay votes.
BOARD RECOMMENDATION
After careful consideration of the most appropriate frequency for the Say-on-Pay vote, the Board has determined that an advisory vote on executive compensation that occurs every year is the best alternative for the Company and its stockholders. In formulating its recommendation, the Board considered that an annual Say-on-Pay vote will allow our stockholders to provide their input on NEO compensation on the most frequent basis, which the Board believes is the optimum method for promoting stockholder engagement. If the Say-on-Pay vote is held less frequently than annually, the compensation being voted upon and the results of the vote may be confusing and less clear to both stockholders and the Board. Further, an annual Say-on-Pay vote aligns with the Board’s annual decision-making on NEO compensation as described in this Proxy Statement. Therefore our Board recommends that you vote to hold an advisory vote on executive compensation annually.
OUR BOARD OF RECOMMENDS THAT STOCKHOLDERS VOTE THE OPTION OF
“1 YEAR” AS THE FREQUENCY WITH WHICH STOCKHOLDERS ARE PROVIDED A SAY-ON-PAY VOTE
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PROPOSAL NO. 34 RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We are asking our stockholders to ratify the appointment by the Audit Committee of Crowe LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022.2023. Crowe LLP has advised us that it has no direct or indirect financial interest in us. Representatives of Crowe LLP are expected to be available at the Annual Meeting and will have the opportunity to make a statement if they desire to do so. It is also expected that they will be available to respond to appropriate questions.
Under applicable SEC regulations, the selection of our independent registered public accounting firm is solely the responsibility of the Audit Committee. Neither our Bylaws nor other governing documents or law require stockholder ratification of the selection of Crowe LLP as the Company’s independent registered public accounting firm. However, we are submitting the selection of Crowe LLP to our stockholders for ratification to obtain our stockholders’ views. If our stockholders fail to ratify the selection of Crowe LLP, the Audit Committee will reconsider whether or not to retain that firm. Even if the selection of Crowe LLP is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in our and our stockholders’ best interests.
The Board considers the selection of Crowe LLP as our independent registered public accounting firm to be in the best interests of Hanmi and our stockholders.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE
RATIFICATION OF THE APPOINTMENT OF CROWE LLP AS OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDED DECEMBER 31, 20222023
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The following table sets forth information regarding the aggregate fees billed for professional services rendered by Crowe LLP for 20212022 and 2020:2021:
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| 2021 |
| 2020 | 2022 |
| 2021 | ||||||||||||||||||
Audit Fees(1) | $ | 1,220,750 |
| $ | 1,475,000 | $ | 1,237,000 |
| $ | 1,220,750 | ||||||||||||||
Audit-Related Fees(2) | $ | 221,000 |
| $ | 32,000 | $ | 20,000 |
| $ | 221,000 | ||||||||||||||
Tax Fees | $ | — |
| $ | — | $ | — |
| $ | — | ||||||||||||||
All Other Fees(3) | $ | 14,332 |
| $ | — | $ | — |
| $ | 14,332 | ||||||||||||||
TOTAL | $ | 1,456,082 |
| $ | 1,507,000 | $ | 1,257,000 |
| $ | 1,456,082 | ||||||||||||||
| (1) | Includes fees billed for the integrated audit of our annual consolidated financial statements and internal control over financial reporting, for the reviews of the consolidated financial statements included in our Quarterly Reports on Form 10-Q, and for compliance with the Federal Deposit Insurance Corporation Improvement Act. |
| (2) | Fees relate to review of and consents issued by Crowe for the Form S-3 registration |
| (3) | Fees relate to |
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee has established “Pre-Approval Policies and Procedures” for independent auditor services. Any proposed services not pre-approved or exceeding pre-approved cost levels require specific pre-approval by the Audit Committee. The Audit Committee may not delegate to management its responsibilities to pre-approve services performed by the independent auditor; however, the Audit Committee may delegate pre-approval authority to one or more of its members.
In 2021,2022, the Audit Committee Chairperson was permitted to approve fees up to $50,000 with the requirement that any pre-approved decisions be reported to the Audit Committee at its next scheduled meeting. All services provided by the independent auditors were pre-approved in accordance with the Audit Committee’s pre-approval requirements.
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The following Audit Committee Report is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to the SEC’s proxy rules or the liabilities of Section 18 of the Exchange Act and the report shall not be deemed to be incorporated by reference into any prior or subsequent filing by the Company under the Securities Act or the Exchange Act, except to the extent the Company specifically incorporates this Audit Committee Report therein.
In performing its functions, the Audit Committee met and held discussions with management and with Crowe LLP, the independent registered public accounting firm for the Company and its wholly-owned subsidiary, Hanmi Bank. Management represented to the Audit Committee that all consolidated financial statements were prepared in accordance with generally accepted accounting principles, and the Audit Committee has:
Reviewed and discussed the audited financial statements with management;
Discussed with the independent registered public accounting firm the matters required to be discussed under the Public Company Accounting Oversight Board (the “PCAOB”); and
Received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent accountant’sregistered public accounting firm’s communications with the Audit Committee regarding independence. The Audit Committee discussed any relationships that may impact the objectivity and independence of Crowe LLP, and satisfied itself as to their independence.
In performing these 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 the consolidated financial statements, and of the independent registered public accounting firm that, in its report, expresses an opinion on the conformity of the Company’s consolidated financial statements with U.S. generally accepted accounting principles. 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 control over financial reporting 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 Company’s consolidated financial statements are presented in accordance with U.S. generally accepted accounting principles, that the audit of the Company’s consolidated financial statements has been carried out in accordance with the standards of the Public Company Accounting Oversight Board (United States) or that the Company’s independent registered public accounting firm is “independent.”
Based on these discussions and reviews, the Company’s Audit Committee recommended to the Board of Directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20212022 for filing with the SEC.
Audit Committee of the Board
Harry H. Chung (Chairperson)
Christie K. Chu
Gloria Lee
David L. Rosenblum
Thomas J. Williams
Michael M. Yang
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
REVIEW, APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED PERSONS
Hanmi has adopted a Code of Business Conduct and Ethics, which governs the review and approval of transactions with related persons. This policy requires that executive officers, directors, and their family members and entities for which any of those persons serve as officers or partners or in which they have a ten percent (10%) or greater interest, notify Hanmi’s Corporate Secretary before entering into transactions or other arrangements with Hanmi or any of its affiliates (other than loans subject to Regulation O promulgated by the Board of Governors of the Federal Reserve System such as loans exceeding $25,000). Hanmi’s Corporate Secretary will determine whether, under these guidelines, the transaction or arrangement should be submitted to the Audit Committee for review and approval. In determining whether to submit proposed transactions to the Audit Committee for consideration, Hanmi’s Corporate Secretary will consider, among other things, the aggregate value of the proposed transaction and whether the related person has an indirect or direct material interest in the transaction. The Audit Committee will review all relevant material information and consider, among other things, the benefits to Hanmi of the proposed transaction, and whether the terms of the proposed transaction are comparable to the terms available to an unrelated third party and employees generally. These policies also include provisions for the review and possible ratification of transactions and arrangements that are entered into without prior review.
The Bank did not enter into any related-party transactions that required review, approval, or ratification under these policies in 2021.2022.
TRANSACTIONS WITH RELATED PERSONS
Some of Hanmi’s directors and executive officers, and their immediate families, as well as the companies with which they are associated, are customers of, or have had banking transactions with, Hanmi or Hanmi Bank in the ordinary course of Hanmi’s business, and Hanmi expects to have banking transactions with such persons in the future. Any banking or lending transactions that exist have been made and would be made in the ordinary course of business, in compliance with applicable laws on substantially the same terms, including interest rates and collateral, as those prevailing for comparable transactions with other persons of similar creditworthiness and have and would not involve more than a normal risk of repayment or present other unfavorable features.
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BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth information pertaining to “beneficial ownership” (as defined below) of Hanmi’s common stock, by (i) individuals or entities known to Hanmi to own more than five percent (5%) of the outstanding shares of Hanmi’s common stock, (ii) each director and nominee for election, (iii) our NEOs, and (iv) all directors and executive officers of Hanmi as a group. The information contained herein has been obtained from Hanmi’s records and from information furnished to Hanmi by each individual or entity. Management knows of no other person who owns, beneficially or of record, either individually or with associates, more than five percent (5%) of Hanmi’s common stock.
The number of shares “beneficially owned” by a given stockholder is determined under SEC Rules. In general, the beneficial ownership as set forth below includes shares over which an individual or entity has sole or shared voting or investment power and certain shares over which such person has a vested right to acquire, under stock options or otherwise, within sixty (60) days of March 31, 2022,2023, the record date for the annual meeting. Unless otherwise noted, the address for each director and NEO listed below is: c/o Hanmi Financial Corporation, 900 Wilshire Boulevard, Suite 1250, Los Angeles, California 90017. The following information is as of March 31, 2022.2023.
| Name and Address of Beneficial Owner | Shares Owned | Percentage Beneficially Owned (%) | Shares Owned | Percentage Beneficially Owned (%) | ||||||||||||||
Beneficial Owners of More than 5% of our Common Stock |
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BlackRock, Inc.(1) | 4,402,804 | 14.45 | 4,351,047 | 14.23 | ||||||||||||||
FMR LLC(2) | 2,632,494 | 8.64 | 2,740,701 | 8.97 | ||||||||||||||
Dimensional Fund Advisors LP(3) | 2,069,734 | 6.79 | 2,427,043 | 7.94 | ||||||||||||||
Massachusetts Financial Services Company(4) | 2,041,405 | 6.70 | ||||||||||||||||
Vanguard Group Inc.(4) | 2,134,846 | 6.99 | ||||||||||||||||
Vanguard Group Inc.(5) | 2,000,909 | 6.57 | ||||||||||||||||
Massachusetts Financial Services Company(5) | 1,560,158 | 5.11 | ||||||||||||||||
Directors |
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John J. Ahn | 37,908 | * | 40,102 | * | ||||||||||||||
Christie K. Chu | 16,893 | * | 19,087 | * | ||||||||||||||
Harry H. Chung | 20,908 | * | 23,102 | * | ||||||||||||||
Scott R. Diehl | 15,134 | * | 17,328 | * | ||||||||||||||
Bonita I. Lee (6)(7) | 149,015 | * | 117,121 | * | ||||||||||||||
Gloria J. Lee | — | * | 2,194 | * | ||||||||||||||
David L. Rosenblum | 23,168 | * | 25,362 | * | ||||||||||||||
Thomas J. Williams | 12,908 | * | 15,102 | * | ||||||||||||||
Michael M. Yang | 16,908 | * | 19,168 | * | ||||||||||||||
Gideon Yu | 1,993 | * | 4,187 | * | ||||||||||||||
Named Executive Officers |
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Romolo C. Santarosa (6)(7) | 72,951 | * | 75,334 | * | ||||||||||||||
Anthony Kim(6)(7) | 45,945 | * | 47,701 | * | ||||||||||||||
Matthew D. Fuhr(6)(7) | 26,418 | * | 28,280 | * | ||||||||||||||
Michael Du(6) | 6,286 | * | 7,049 | * | ||||||||||||||
All executive officers and directors as a group (14 persons) | 446,435 | 1.46 | (8) | 441,117 | 1.44 | (8) | ||||||||||||
| * | Less than 1%. |
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BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
| (1) | Based on information as of December |
| (2) | Based on information as of December |
| (3) | Based on information as of December |
| (4) | Based on information as of December |
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| (5) | Based on information as of December 30, 2022 contained in a Schedule 13G/A filed with the SEC on February 8, 2023. Massachusetts Financial Services Company has the sole power to vote or direct the voting of 1,560,158 shares and the sole power to dispose of or direct the disposition of 1,560,158 shares. The address for Massachusetts Financial Services Company is 111 Huntington Avenue, Boston, Massachusetts 02199. |
| (6) |
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| (7) | Includes options presently exercisable under the 2013 Plan by |
| (8) | Percentage of beneficial ownership based on shares outstanding as of March 31, 2022, the record date and shares over which persons have a vested right to acquire, under stock options or otherwise, within sixty (60) days of the date thereof. |
DELINQUENT SECTION 16(a) REPORTS
Section 16(a) of the Securities Exchange Act of 1934 requires the Hanmi’s Directors and Executive Officers, and persons who own more than ten percent of a registered class of the Hanmi’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of Hanmi common stock. Executive Officers, Directors and greater than ten percent stockholders are required by SEC regulations to furnish Hanmi with copies of all Section 16(a) forms they file.
To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required during the fiscal year ended December 31, 2021,2022, all Section 16(a) reports by its Officers and Directors were timely filed with respect to transactions in Hanmi’s common stock, except for one late reportreports filed by Romolo Santarosa and one late report filed by Michael Du relating toassociated with the withholdinggrant of shares related to the vesting of aannual restricted stock award.awards granted to each of the non-employee directors on May 25, 2022.
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Other than the business and proposals described in this Proxy Statement, our Board knows of no other business that will be presented for consideration at the Annual Meeting. If, however, other business shall properly come before the Annual Meeting, the person named in the proxies intends to vote the shares represented by the proxies on such matters in accordance with the recommendation of our Board, or in the absence of a recommendation, in accordance with her judgment.
STOCKHOLDER PROPOSALS FOR THE 20232024 ANNUAL MEETING
Stockholder proposals should be sent to our Corporate Secretary at Hanmi Financial Corporation, 900 Wilshire Boulevard, Suite 1250, Los Angeles, California 90017. To be considered for inclusion in Hanmi’s proxy statement for the 20232024 annual meeting of stockholders, the deadline for submission of stockholder proposals, pursuant to Rule 14a-8 under the Exchange Act, is December 16, 2022.15, 2023. Additionally, pursuant to our Bylaws, Hanmi must receive notice of any stockholder proposal to be submitted at the 20232024 annual meeting of stockholders, but not required to be included in our proxy statement, no earlier than January 26, 202325, 2024 and no later than February 25, 2023.24, 2024. To be in proper form, the stockholder proposal must contain such information as is required by our Bylaws and applicable law. In addition to the applicable requirements discussed above, for a director nomination to be properly made by a stockholder, such stockholder must have given timely notice thereof in proper written form to our Corporate Secretary and the stockholder’s notice must set forth such information as is required by our Bylaws.
Under new SEC Rule 14a-19, a stockholder intending to engage in a director election contest with respect to the Company’s annual meeting of stockholders to be held in 20232024 must give the Company notice of its intent to solicit proxies by providing the names of its nominees and certain other information at least 60 calendar days before the anniversary of the previous year’s annual meeting. This deadline is March 27, 2023.24, 2024.
We will provide to any stockholder, without charge and by first class mail, upon the written request of that stockholder, a copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021,2022, as filed with the SEC. Such requests should be addressed to: Legal Department, Hanmi Financial Corporation, 900 Wilshire Boulevard, Suite 1250, Los Angeles, California 90017, 213-382-2200. The Annual Report on Form 10-K includes a list of exhibits. If you wish to receive copies of the exhibits, we will send them to you upon request. Expenses for copying and mailing copies of the exhibits will be your responsibility. In addition, the SEC maintains a website at www.sec.gov that contains information we file with them.
WHERE YOU CAN FIND MORE INFORMATION
The SEC maintains a website that contains reports, proxies and information statements and other information regarding us and other issuers that file electronically with the SEC at www.sec.gov. Our proxy statements, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as any amendments to those reports, are available free of charge through the SEC’s website.
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| YOUR VOTE IS IMPORTANT! PLEASE VOTE BY: | ||||
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Go To: www.proxypush.com/HAFC • Cast your vote online • Have your Proxy • Follow the simple instructions to record your vote | ||
| P.O. BOX 8016, CARY, NC 27512-9903 |  | PHONE Call1-866-648-8132 • Use any touch-tone telephone • Have your Proxy Card ready • Follow the simple recorded instructions | ||
 | • Mark, sign and date your Proxy Card • Fold and return your Proxy Card in the postage-paid envelope provided | |||
P.O. BOX 8016, CARY, NC 27512-9903YOUR VOTE IS IMPORTANT! PLEASE VOTE BY:INTERNET• Go To: www.proxypush.com/HAFC• Cast your vote online• Have your Proxy Card readyFollow the simple instructions to record your votePHONE Call 1-866-648-8132• • Use any touch-tone telephone• Have your Proxy Card readyFollow the simple recorded instructionsMAIL• • Mark, sign and date your Proxy CardFold and return your Proxy Card in the postage-paid envelope provided
Hanmi Financial Corporation
Annual Meeting of Stockholders
For Stockholders of record as of March 31, 2022TIME: Wednesday, May 25, 2022 10:30 AM, Pacific Time PLACE: Annual Meeting to be held live via the Internet—please visit www.proxydocs.com/HAFC for more details.
2023
| TIME: | Wednesday, May 24, 2023 10:30 AM, Pacific Time | |
| PLACE: | Annual Meeting to be held live via the Internet - please visit www.proxydocs.com/HAFC for more details. |
This proxy is being solicited on behalf of the Board of Directors
The undersigned stockholder(s) of Hanmi Financial Corporation hereby nominates and appoints Vivian Kim, the attorney, agent, and proxy of the undersigned, with full power of substitution and revocation, and authorizes her to vote all the shares of capital stock of Hanmi Financial Corporation which the undersigned is entitled to vote at said meeting and any adjournment thereof upon the matters specified and upon such other matters as may be properly brought before the meeting or any adjournment thereof, conferring authority upon such true and lawful attorney to vote in her discretion on such other matters as may properly come before the meeting and revoking any proxy heretofore given.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, SHARES WILL BE VOTED IDENTICAL TO THE BOARD OF DIRECTORS RECOMMENDATION. This proxy, when properly executed, will be voted in the manner directed herein. In their discretion, the Named Proxy is authorized to vote upon such other matters that may properly come before the meeting or any adjournment or postponement thereof.
You are encouraged to specify your choice by marking the appropriate box (SEE REVERSE SIDE) but you need not mark any box if you wish to vote in accordance with the Board of Directors’ recommendation. The Named Proxy cannot vote your shares unless you sign (on the reverse side) and return this card.
PLEASE BE SURE TO SIGN AND DATE THIS PROXY CARD AND MARK ON THE REVERSE SIDE
Hanmi Financial Corporation
Annual Meeting of StockholdersPlease make your marks like this:
| Please make your marks like this: |  |
The Board of Directors recommends a vote FOR each of the directors listed below
and FOR proposalsproposal 2, “1 YEAR” for proposal 3, and 3.BOARD OF DIRECTORSPROPOSAL YOUR VOTE RECOMMENDS
FOR AGAINST ABSTAINPROPOSAL1 Election of Directors1a. John J. Ahn 1b. Christie K. Chu 1c. Harry H. Chung 1d. Scott R. Diehl 1e. Bonita I. Lee 1f. Gloria J. Lee 1g. David L. Rosenblum 1h. Thomas J. Williams 1i. Michael M. Yang 1j. Gideon Yu2 To provide a non-binding advisory vote to approve the compensation of our Named Executive Officers (“Say-On-Pay” vote). #P12#3 To ratify the appointment of Crowe LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022. #P13# NOTE: To transact such other business as may properly come before the Annual Meeting and at any adjournments or postponements thereof. Management at present knows of no other business to be presented by or on behalf of Hanmi Financial Corporation or its Board of Directors at the Annual Meeting.
proposal 4.
| BOARD OF | ||||||||||||||
| DIRECTORS | ||||||||||||||
| PROPOSAL | YOUR VOTE | RECOMMENDS | ||||||||||||
1. | Election of Directors |  | ||||||||||||
| FOR | AGAINST | ABSTAIN | ||||||||||||
| 1a. | John J. Ahn | ☐ | ☐ | ☐ | FOR | |||||||||
| 1b. | Christie K. Chu | ☐ | ☐ | ☐ | FOR | |||||||||
| 1c. | Harry H. Chung | ☐ | ☐ | ☐ | FOR | |||||||||
| 1d. | Bonita I. Lee | ☐ | ☐ | ☐ | FOR | |||||||||
| 1e. | Gloria J. Lee | ☐ | ☐ | ☐ | FOR | |||||||||
| 1f. | David L. Rosenblum | ☐ | ☐ | ☐ | FOR | |||||||||
| 1g. | Thomas J. Williams | ☐ | ☐ | ☐ | FOR | |||||||||
| 1h. | Michael M. Yang | ☐ | ☐ | ☐ | FOR | |||||||||
| 1i. | Gideon Yu | ☐ | ☐ | ☐ | FOR | |||||||||
| ☐ | ☐ | ☐ | FOR | |||||||||||
| FOR | AGAINST | ABSTAIN | ||||||||||||
| 2. | To provide a non-binding advisory vote to approve the compensation of our Named Executive Officers (“Say-On-Pay” vote). | ☐ | ☐ | ☐ | FOR | |||||||||
| 1YR | 2YR | 3YR | ABSTAIN | |||||||||||
| 3. | To provide a non-binding advisory vote on the frequency of future Say-on-Pay votes. | ☐ | ☐ | ☐ | ☐ | 1 YEAR | ||||||||
| FOR | AGAINST | ABSTAIN | ||||||||||||
| 4. | To ratify the appointment of Crowe LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023. | ☐ | ☐ | ☐ | FOR | |||||||||
| NOTE: To transact such other business as may properly come before the Annual Meeting and at any adjournments or postponements thereof. Management at present knows of no other business to be presented by or on behalf of Hanmi Financial Corporation or its Board of Directors at the Annual Meeting. | ||||||||||||||
To attend the meeting online, you must register at www.proxydocs.com/HAFC
Authorized Signatures—Signatures - Must be completed for your instructions to be executed.
Please sign exactly as your name(s) appears on your account. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the Proxy/Vote Form.Signature (and Title if applicable) Date Signature (if held jointly) Date
| Signature (and Title if applicable) | Date | Signature (if held jointly) | Date | |||