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Section 1: DEF 14A (DEF 14A)

 

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) 

of the Securities Exchange Act of 1934 (Amendment No.     )

 

Filed by the Registrant

Filed by a Party other than the Registrant

Check the appropriate box:

Preliminary Proxy Statement Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement  
Definitive Additional Materials    
Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-12    

 

COLUMBIA BANKING SYSTEM, INC.

(Name of Registrant as Specified In Its Charter) 


(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

 

Fee computed on table below per Exchange Act Rules 12a(6)(i)(1) and 0-11.
 
(1) Title of each class of securities to which transaction applies:

 
 
 
   

(2) Aggregate number of securities to which transaction applies:

 
 
 
   

(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 
 
 
   

(4) Proposed maximum aggregate value of transaction:

 
 
 
   

(5) Total fee paid:

 
 
 
   

Fee paid previously with preliminary materials.

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1) Amount Previously Paid:

 
 
 
   
(2) Form, Schedule or Registration Statement No.:

 
 
 
   

(3) Filing Party:

 
 
 
   

(4) Date Filed:

 
 
 
   


 

COLUMBIA BANKING SYSTEM, INC. 

1301 “A” Street 

Tacoma, Washington 98402

 

April 12, 2019

 

Dear Shareholder:

 

We are pleased to invite you to Columbia Banking System’s Annual Meeting of Shareholders. The meeting will be at 1:00 p.m. on Wednesday, May 22, 2019 at the William W. Philip Hall at the University of Washington Tacoma, 1918 Pacific Avenue, Tacoma, Washington 98402.

 

At the meeting, you and the other shareholders will be asked to consider and vote on proposals with respect to (i) the election of eleven nominees for director to serve on our Board of Directors; (ii) the approval of an Amendment to our 2018 Equity Incentive Plan (iii) the approval, on an advisory basis (non-binding), of the compensation of our named executive officers; and (iv) the approval, on an advisory basis (non-binding), of the appointment of our independent registered public accounting firm for the 2019 fiscal year.

 

You also will have the opportunity to hear Columbia’s management discuss the developments in our business and industry in the past year and to ask questions. You will find additional information concerning Columbia Banking System and its operations, including its audited financial statements, in the Annual Report for the year ended December 31, 2018, which is available on our website at www.columbiabank.com.

 

We hope that you can join us on May 22nd . Whether or not you plan to attend, please take the time to vote online, by telephone or by completing and mailing the proxy card (if you received one) as soon as possible. Your opinion and your vote are important to us. Voting by proxy will not prevent you from voting in person if you attend the meeting, but it will ensure that your vote is counted if you are unable to attend.

     
-s- Craig D. Eerkes    -s- Hadley S. Robbins
Craig D. Eerkes   Hadley S. Robbins
Chairman   President & Chief Executive Officer

COLUMBIA BANKING SYSTEM, INC.

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 22, 2019 

 

TIME 1:00 p.m. on Wednesday, May 22, 2019
   
PLACE William W. Philip Hall at University of Washington Tacoma - 1918 Pacific Avenue, Tacoma, Washington 98402
   
ITEMS OF BUSINESS The purposes of the meeting are as follows:

  

(1) To elect the eleven nominees for director named in this proxy statement to serve on the Board of Directors until the 2020 Annual Meeting of Shareholders or until their successors have been elected and have qualified.

 

(2) To approve an Amendment to the 2018 Equity Incentive Plan.

 

(3) To approve, on an advisory basis (non-binding), the compensation of the Company’s named executive officers.

 

(4) To approve, on an advisory basis (non-binding), the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019.

 

(5) To transact such other business as may properly come before the meeting or any adjournment thereof.

 

RECORD DATE You are entitled to vote at the annual meeting and at any adjournments or postponements of the meeting if you were a shareholder at the close of business on March 25, 2019.
   
VOTING BY PROXY Please vote online or by telephone or submit your proxy card (if you received one) as soon as possible so that your shares can be voted at the annual meeting in accordance with your instructions. For specific instructions on voting, please refer to the instructions in the proxy statement and on the Notice of Internet Availability of Proxy Materials you received in the mail or, if you received a hard copy of the proxy materials, on the enclosed proxy card.

 

    By Order of the Board of Directors
     
    -s- Kumi Y. Baruffi
     
    Kumi Y. Baruffi
    Corporate Secretary

 

The proxy statement was first made available or mailed to shareholders on April 12, 2019.


TABLE OF CONTENTS

 

  Page
   
PROXY STATEMENT 1
   
INFORMATION ABOUT THE ANNUAL MEETING 1
   
COMPANY PHILOSOPHY 1
   
GENERAL INFORMATION 2
   
Why did I receive a Notice of Internet Availability of Proxy Materials instead of paper copies of the proxy materials? 2
What is being voted on at the Annual Meeting? 2
Who is entitled to vote? 2
How do I vote? 2
Can I revoke my proxy and/or change my vote? 3
What are the Board’s recommendations? 3
Will my shares be voted if I do not vote by using the Internet, by telephone or by signing and returning my proxy card? 3
How many votes are needed to hold the Annual Meeting? 4
What vote is required to elect directors? 4
What vote is required to approve the Amendment to the 2018 Equity Incentive Plan?  
What vote is required to approve the advisory (non-binding) resolution on the compensation of Columbia’s executive officers? 4
What vote is required to approve the advisory (non-binding) proposal on the appointment of the independent registered public accountants? 4
Can I vote on other matters? 4
Who is soliciting my proxy and who is paying the cost of solicitation? 5
How can I find out the results of the voting at the annual meeting? 5
When are proposals and director nominations for the 2020 Annual Meeting due? 5
   
STOCK OWNERSHIP 6
   
Beneficial Owners of More Than Five Percent 6
Beneficial Ownership of Directors and Executive Officers 7
   
INFORMATION ABOUT THE DIRECTORS AND NOMINEES 9
   
Size of the Board 9
Director Retirement Age 9
Replacement Nominees 9
   
PROPOSAL NO. 1 ELECTION OF DIRECTORS 10
   
CORPORATE GOVERNANCE 13
   
Guidelines 13
Board and Company Leadership Structure 13
Director Qualifications 13
Code of Ethics and Corporate Governance Documents 13
Director Independence 14
Compensation Committee Interlocks and Insider Participation 14
Shareholder Communications with the Board 14

15
   
2018 Board Meetings 15
Board Committees 15

 
i

 
  Page
   
Risk Oversight 17
Director Compensation 18
   
EXECUTIVE COMPENSATION 21
   
Compensation Discussion & Analysis 21
Compensation Tables 35
Equity Compensation 38
Post-Employment and Termination Benefits 41
Other Compensation Plans 50
   
PROPOSAL NO. 2 APPROVAL OF THE AMENDED 2018 EQUITY INCENTIVE PLAN 51
   
Summary of the Amended Plan 51
New Plan Benefits 56
Past Grants under the 2018 Equity Incentive Plan 56
Vote Required and Board Recommendation 56
   
PROPOSAL NO. 3 ADVISORY (NON-BINDING) VOTE ON EXECUTIVE COMPENSATION 57
   
Vote Required and Board Recommendation 57
   
MANAGEMENT 58
   
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 59
   
Fees Paid to Independent Registered Public Accounting Firm 59
   
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors 59
   
AUDIT COMMITTEE REPORT 60
   
PROPOSAL NO. 4 ADVISORY (NON-BINDING) VOTE ON APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 62
   
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE 62
   
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 62
   
ANNUAL REPORT TO SHAREHOLDERS AND FORM 10-K 63
   
Delivery of Documents to Shareholders Sharing an Address 63
   
APPENDIX A Non-GAAP Financial Measures A-1
   
APPENDIX B 2018 Equity Incentive Plan of Columbia Banking System, Inc.
B-1

ii

COLUMBIA BANKING SYSTEM, INC. 

1301 “A” Street 

Tacoma, Washington 98402-4200 

(253) 305-1900 


PROXY STATEMENT

 

Important Notice Regarding the Availability of Proxy Materials for the 2019 Shareholder Meeting:

 

This proxy statement, the Notice of Internet Availability of Proxy Materials (the “Notice”) and our annual report to shareholders for the year ended December 31, 2018 (the “2018 Annual Report”) are available at www.columbiabank.com.

 

The Columbia Board of Directors (the “Board”) is soliciting proxies for this year’s Annual Meeting of Shareholders (the “Annual Meeting”). This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the meeting. Please read it carefully.

 

INFORMATION ABOUT THE ANNUAL MEETING

 

The meeting will be at 1:00 p.m. on Wednesday, May 22, 2019 at the William W. Philip Hall, University of Washington, 1918 Pacific Avenue, Tacoma, Washington 98402.

 

The Board set March 25, 2019 as the record date for the meeting (the “Record Date”). Shareholders who owned Columbia common stock at the close of business on that date are entitled to vote at the Annual Meeting, with each share entitled to one vote for each matter to be voted on at the meeting. There were 73,469,797 shares of Columbia common stock outstanding on the Record Date.

 

In this proxy statement, the terms the “Company,” “Columbia,” “we,” “us” or “our” refer to Columbia Banking System, Inc.

 

Under the rules of the Securities and Exchange Commission (the “SEC”), we are furnishing proxy materials to our shareholders on the Internet, rather than mailing paper copies of the materials (including the 2018 Annual Report) to each shareholder. As a result, unless you previously elected to receive paper copies or request them this year, you will not receive paper copies of these proxy materials. We are sending to our shareholders (other than those that previously elected to receive paper copies) a copy of the Notice, which will instruct you as to how you may access and review the proxy materials over the Internet. The Notice will also instruct you as to how you may access your proxy card to vote your shares by telephone or over the Internet. If you would like to receive a paper copy of our proxy materials, free of charge, please follow the instructions included in the Notice.

 

The Notice was mailed to shareholders on April 12, 2019.

 

COMPANY PHILOSOPHY

 

Our goal is to be a leading Northwest regional community bank, with a significant presence in selected markets, and to consistently increase earnings per share and shareholder value. Management believes that there continues to be opportunity for organic growth based upon branch footprint and the organization’s commitment to delivering exceptional customer satisfaction and quality` products, and growth through selective acquisitions. Our business strategy is to provide our customers with the financial sophistication and breadth of products of a regional banking company while retaining the appeal and service level of a community bank. We continually evaluate our existing business processes while focusing on maintaining asset quality and balanced loan and deposit portfolios, building our strong core deposit base, expanding total revenue and controlling expenses in an effort to increase our return on average equity and gain operational efficiencies. We believe that, as a result of our strong commitment to highly personalized, relationship-oriented customer service, our varied products, our strategic branch locations and the long-standing community presence of our managers, banking officers and branch personnel, we are well positioned to attract and retain new customers and to increase our market share of loans, deposits, and other financial services in the communities we serve. We are committed to increasing market share in the communities we serve by continuing to leverage our existing branch network and considering business combinations that are consistent with our expansion strategy. We believe that achievement of these goals will create long-term value for our shareholders, consistent with protecting the interests of depositors.

1

GENERAL INFORMATION

 

Why did I receive a Notice of Internet Availability of Proxy Materials instead of paper copies of the proxy materials?

 

In accordance with rules and regulations adopted by the SEC, instead of mailing a printed copy of our proxy materials to all shareholders entitled to vote at the Annual Meeting, we are furnishing the proxy materials to our shareholders over the Internet. If you received the Notice by mail, you will not receive a printed copy of the proxy materials. Instead, the Notice will instruct you as to how you may access and review the proxy materials and submit your vote via the Internet. If you received the Notice by mail and would like to receive a printed copy of the proxy materials, please follow the instructions included in the Notice for requesting such materials.

 

We mailed the Notice on April 12, 2019 to all shareholders entitled to vote at the Annual Meeting. As of the date of mailing of the Notice, all shareholders and beneficial owners have the ability to access all of our proxy materials on a website referred to in the Notice. These proxy materials are available free of charge.

 

What is being voted on at the Annual Meeting?

 

At the Annual Meeting you will be asked to vote on:

 

the election of eleven nominees to serve on the Board until the 2020 Annual Meeting of Shareholders or until their successors have been elected and have qualified;

 

the approval of an Amendment to the 2018 Equity Incentive Plan;

 

the approval, on an advisory basis (non-binding), of the compensation of Columbia’s named executive officers; and

 

the approval, on an advisory basis (non-binding), of the appointment of Deloitte & Touche LLP (“Deloitte”) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019.

 

Who is entitled to vote?

 

Only shareholders who owned Columbia common stock, either directly or beneficially, as of the close of business on the Record Date are entitled to receive notice of the Annual Meeting and to vote the shares that they held on that date at the Annual Meeting, or any postponement or adjournment of the Annual Meeting.

 

How do I vote?

 

At the Meeting. Shares held in your name as the shareholder of record may be voted by you in person at the Annual Meeting. Shares held beneficially in “street name” may be voted by you in person at the Annual Meeting only if you obtain a legal proxy from the broker or other agent that holds your shares, giving you the right to vote the shares, and you bring the legal proxy to the Annual Meeting.

 

By Mail. Shareholders who ask for and receive a paper proxy card may vote by mail and should complete, sign and date their proxy card and mail it in the pre-addressed envelope that will accompany the delivery of the paper proxy card. Proxy cards submitted by mail must be received by the time of the meeting in order for your shares to be voted.

 

By Internet. For shares registered in your name, you may go to http://www.proxyvote.com to transmit a proxy to vote your shares by means of the Internet. You will be required to provide our number and the control number, both of which are contained on the Notice or the proxy card, as applicable. You will then be asked to complete an electronic proxy card. The votes represented by such proxy will be generated on the computer screen, and you will be prompted to submit or revise them as desired. We must receive votes submitted via the Internet by 11:59 p.m. ET on May 21, 2019.

 

2

By Telephone. You may grant a proxy to vote your shares by telephone. The telephone voting procedures are designed to authenticate your identity, to allow you to grant a proxy to vote your shares, and to confirm that your instructions have been recorded properly. To vote by telephone, call 1-800-690-6903 by 11:59 p.m. ET on May 21, 2019. Please see the instructions on the Notice or the proxy card, as applicable.

 

For shares registered in the name of a broker or bank. Most beneficial owners, whose stock is held in “street name,” receive instructions for granting proxies from their banks, brokers or other agents, rather than a proxy card. If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name,” and as the beneficial owner, you have the right to direct your broker on how to vote.

 

A number of brokers and banks are participating in a program provided through Broadridge Financial Solutions Inc. that offers the means to grant proxies to vote shares over the telephone and Internet. If your shares are held in an account with a broker or bank participating in the Broadridge program, you may grant a proxy to vote those shares by calling the telephone number or visiting the website shown on the instruction form received from your broker or bank.

 

Can I revoke my proxy and/or change my vote?

 

Yes. You may revoke your proxy and change your vote at any time before the proxy is exercised by filing with Columbia’s Secretary a notice of revocation, voting again by Internet or telephone (only your last Internet or telephone proxy submitted prior to the meeting will be counted), signing and returning a new proxy card with a later date, obtaining a legal proxy from the broker or other agent that holds your shares, or attending the Annual Meeting and voting in person. The powers of the proxy holders will be suspended if you attend the Annual Meeting in person and so request, although attendance at the meeting will not by itself revoke a previously granted proxy.

 

What are the Board’s recommendations?

 

The Board recommends a vote (i) FOR the election of the director nominees listed in this proxy statement, (ii) FOR the approval of the Amendment to the 2018 Equity Incentive Plan, (iii) FOR the approval, on an advisory basis (non-binding), of the compensation of Columbia’s named executive officers, and (iv) FOR the approval, on an advisory basis (non-binding), of Deloitte as the independent registered public accounting firm for the fiscal year 2019.

 

If you indicate when voting by Internet or by telephone that you wish to vote as recommended by the Board, or if you sign and return a proxy card without specific instructions as to how to vote, Craig D. Eerkes and Hadley S. Robbins, as the persons named as proxy holders on the proxy card, will vote as recommended by the Board of Directors. If any other matters are considered at the meeting, Mr. Eerkes and Mr. Robbins will vote as recommended by the Board. If the Board does not give a recommendation, Mr. Eerkes and Mr. Robbins will have discretion to vote as they think best.

 

Will my shares be voted if I do not vote by using the Internet, by telephone or by signing and returning my proxy card?

 

If your shares are registered in your name and you do not vote by using the Internet, by telephone or by returning a signed proxy card or do not vote in person at the Annual Meeting, your shares will not be voted.

 

If your shares are held in “street name” and you do not submit voting instructions to your broker, your broker may vote your shares at this meeting on the advisory (non-binding) approval of the appointment of the independent registered public accounting firm only. If no instructions are given with respect to the election of directors, the approval, on an advisory basis (non-binding), of the compensation of Columbia’s named executive officers or the selection on an advisory (non-binding) basis of the frequency for holding future advisory shareholder votes to approve executive compensation, your broker cannot vote your shares on these proposals.

3

How many votes are needed to hold the Annual Meeting?

 

A majority of Columbia’s outstanding shares as of the Record Date (a quorum) must be present at the Annual Meeting in order to hold the meeting and conduct business. Shares are counted as present at the meeting if a shareholder is present and votes in person at the meeting or has properly submitted a proxy card. As of the Record Date for the Annual Meeting, 73,469,797 shares of Columbia common stock were outstanding and eligible to vote. Both abstentions and broker non-votes are counted as present for the purpose of determining the presence of a quorum. Broker non-votes, however, are not counted as shares present and entitled to be voted with respect to a matter on which the broker has expressly not voted. Generally, broker non-votes occur when shares held by a broker for a beneficial owner are not voted with respect to a particular proposal because (i) the broker has not received voting instructions from the beneficial owner and (ii) the broker lacks discretionary voting power to vote such shares.

 

What vote is required to elect directors?

 

In an uncontested election, a nominee for election to a position on the Board will be elected as a director if the votes cast For the nominee exceed the votes cast Against the nominee (known as majority voting). The term of any director who does not receive a majority of votes cast in an election held under that standard terminates on the earliest to occur of: (i) 90 days after the date election results are certified; (ii) the date the director resigns; and (iii) the date the Board fills the position. Our Bylaws provide that an election is considered “contested,” and will be held under a plurality standard, if there are shareholder nominees for director pursuant to the advance notice provision in Section 1.17 of our Bylaws who are not withdrawn by the advance notice deadline set forth in that section. You may vote For, Against, or Abstain from voting for the listed nominees. The following will not be votes cast and will have no effect on the election of any director nominee: (i) a share whose ballot is marked as abstain; (ii) a share otherwise present at the meeting but for which there is an abstention; and (iii) a share otherwise present at the meeting as to which a shareholder gives no authority or direction. Shareholders may not cumulate their votes in the election of directors.

 

What vote is required to approve the Amendment to the 2018 Equity Incentive Plan?

 

To approve the Amendment to the 2018 Equity Incentive Plan, we must receive the affirmative vote For the proposal by holders of a majority of the shares present in person or by proxy and voting on the proposal. You may vote For, Against or Abstain from approving the proposal. Abstentions and broker non-votes will have no effect on the outcome of the proposal.

 

What vote is required to approve the advisory (non-binding) resolution on the compensation of Columbia’s executive officers?

 

The affirmative vote For by a majority of those shares present in person or by proxy and voting on this matter is required on the advisory (non-binding) resolution on the compensation of Columbia’s named executive officers. You may vote For, Against or Abstain from approving the advisory (non-binding) resolution to approve named executive officer compensation. Abstentions and broker non-votes will have no effect on the outcome of the proposal.

 

What vote is required to approve the advisory (non-binding) proposal on the appointment of the independent registered public accountants?

 

The proposal to approve, on an advisory basis (non-binding), the appointment of Deloitte as Columbia’s independent registered public accounting firm will be adopted if a majority of the votes present in person or by proxy and voting on this matter are cast For the proposal. You may vote For, Against or Abstain from approving the proposal. Abstentions and broker non-votes will have no effect on the outcome of the proposal.

 

Can I vote on other matters?

 

We have not received timely notice of any shareholder proposals to be considered at the Annual Meeting, and the Board does not know of any other matters to be brought before the Annual Meeting.

4

Who is soliciting my proxy and who is paying the cost of solicitation?

 

The Board is soliciting proxies for use at the 2019 Annual Meeting. Certain directors, officers and employees of Columbia and its banking subsidiary, Columbia State Bank, or its trust company subsidiary, Columbia Trust Company, may solicit proxies by mail, telephone, facsimile, or in person.

 

We will pay for the costs of solicitation. We do not expect to pay any compensation for the solicitation of proxies, except to brokers, nominees and similar record holders for reasonable expenses in mailing proxy materials to beneficial owners of our common stock. However, management may, if it determines it necessary to obtain the requisite shareholder vote, retain the services of a proxy solicitation firm.

 

How can I find out the results of the voting at the annual meeting?

 

Preliminary voting results will be announced at the Annual Meeting. We will publish final results in a Current Report on Form 8-K to be filed with the SEC within four business days after the Annual Meeting. After the Form 8-K is filed, you may obtain a copy by visiting our website at www.columbiabank.com, the SEC’s website at www.sec.gov, or by writing to: Columbia Banking System, Inc., Attention: Corporate Secretary, 1301 “A” Street, Tacoma, Washington, 98402-4200.

 

When are proposals and director nominations for the 2020 Annual Meeting due?

 

Proposals by shareholders to transact business at Columbia’s 2020 Annual Meeting must be delivered to Columbia’s Secretary no later than January 23, 2020 in order to be considered for inclusion in our proxy statement and proxy card and should contain such information as is required under our Bylaws. Such proposals will also need to comply with the SEC’s regulations regarding the inclusion of shareholder proposals in Columbia-sponsored proxy materials. In order for a shareholder proposal to be raised from the floor during next year’s annual meeting, or for a shareholder to nominate a person or persons for a director, written notice must be received by us no earlier than the 150th day and no later than the 120th day prior to the first anniversary of the 2019 Annual Meeting (meaning no earlier than December 24, 2019, and no later than January 23, 2020), and should contain such information as required under our Bylaws. However, if the date of the 2020 Annual Meeting is more than 30 days before or more than 60 days after the anniversary of the 2019 Annual Meeting, notice must be delivered no earlier than the 150th day and no later than the 120th day prior to the date of the 2020 Annual Meeting or, if the first public announcement of the 2020 Annual Meeting date is less than 100 days before the meeting date, notice must be delivered no later than the 10th day following the date of the Company’s first public announcement of the 2020 Annual Meeting date.

 

To be in proper form, a shareholder’s notice must include the specified information concerning the proposal or director nominee as described in our Bylaws. The Company will not consider any proposal or nomination that is not timely or otherwise does not meet the Bylaw and SEC requirements for submitting a proposal or nomination.

 

Notice of intention to present proposals at the 2020 Annual Meeting, or to obtain a copy of the detailed procedures regarding notice requirements for proposals or director nominations, should be directed to Columbia’s Corporate Secretary, 1301 “A” Street, Tacoma, Washington 98402.

5

STOCK OWNERSHIP

 

Beneficial Owners of More Than Five Percent

 

As of March 15, 2019 (except as otherwise noted), the shareholders identified in the table below beneficially owned more than 5% of the outstanding Columbia shares. To the Company’s knowledge, based on the public filings which beneficial owners of more than 5% of the outstanding shares of Columbia common shares are required to make with the SEC, there are no other beneficial owners of more than 5% of the outstanding Columbia common shares as of March 15, 2019, other than those set forth below. The percentage ownership data is based on 73,467,373 Columbia common shares outstanding as of March 15, 2019.

 

Name and Address     Number of Shares (1)     Percentage  
                 
Blackrock, Inc. (2)     10,189,781       13.87 %
55 East 52nd Street                
New York, NY 10055                
                 
The Vanguard Group, Inc. (3)     7,687,182       10.46 %
100 Vanguard Blvd.                
Malvern, PA 19355                
                 
T Rowe Price (4)     4,335,517       5.9 %
100 East Pratt St.                
Baltimore, MD 21202                

 

(1)           Pursuant to rules promulgated by the SEC, a person or entity is considered to beneficially own shares of common stock if the person or entity has or shares (i) voting power, meaning the power to vote or direct the voting of the shares, or (ii) investment power, meaning the power to dispose of or direct the disposition of the shares.

 

(2) An amended Schedule 13G filed with the SEC on January 24, 2019 indicates that BlackRock, Inc. had sole voting power over 10,010,726 shares and sole dispositive power over 10,189,781 shares. Various persons had the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of the Columbia common shares. No one person’s interest in the Columbia common shares was more than five percent of the total outstanding Columbia common shares.

 

(3) An amended Schedule 13G filed with the SEC on February 11, 2019 indicates that The Vanguard Group, Inc. had sole voting power over 71,451 shares, shared voting power over 8,238 shares, sole dispositive power over 7,613,872 shares and shared dispositive power over 73,310 shares.

 

(4) A Schedule 13G filed with the SEC on February 14, 2019 indicates that T. Rowe Price Associates, Inc. had sole voting power over 1,105,160 shares and sole dispositive power over 4,335,517 shares.
6

Beneficial Ownership of Directors and Executive Officers

 

The following table shows, as of March 15, 2019, the amount of Columbia common stock directly owned (unless otherwise indicated) by (a) each director and director nominee; (b) the executive officers named in the Summary Compensation Table below; and (c) all of our directors and executive officers (including those not named in the Summary Compensation Table) as a group. Except as otherwise noted, we believe that the beneficial owners of the shares listed below, based on information furnished by such owners, have or share with a spouse voting and/or investment power with respect to the shares. Beneficial ownership is determined under the rules of the SEC.

 

Name   Position   Number     Percentage  
                 
Craig D. Eerkes   Chairman of the Board     10,322 (1)     *  
Hadley S. Robbins   Director, President, and Chief Executive Officer     64,964 (2)     *  
Kumi Y. Baruffi   Executive Vice President, General Counsel     20,148 (3)     *  
David A. Dietzler   Director     12,303 (1)     *  
Ford Elsaesser   Director     41,264 (1)     *  
Mark A. Finkelstein   Director     7,691 (1)     *  
John P. Folsom   Director     48,329 (4)     *  
Eric S. Forrest   Director     7,463 (5)     *  
Thomas M. Hulbert   Director     47,706 (1)     *  
Michelle M. Lantow   Director     15,191 (1)     *  
David C. Lawson   Executive Vice President, Chief Human Resources Officer     20,856 (6)     *  
Randal L. Lund   Director     3,524 (1)     *  
Andrew L. McDonald   Executive Vice President, Chief Credit Officer     43,683 (7)     *  
S. Mae Fujita Numata   Director     14,516 (8)     *  
Elizabeth W. Seaton   Director     9,691 (1)     *  
Gregory A. Sigrist   Executive Vice President, Chief Financial Officer     5,910 (9)     *  
Clint E. Stein   Executive Vice President, Chief Operating Officer     35,728 (10)     *  
Janine T. Terrano   Director     2,525 (1)     *  
William T. Weyerhaeuser   Director     253,437 (11)     *  
Directors and executive officers as a group (20)         677,924       0.92 %

 

 

* Represents less than 1% of outstanding common stock.


(1) Includes 1,691 unvested time-based restricted shares for which the director has voting but not investment power.

 

(2) Includes 4,183 vested performance shares, which were calculated and approved by the Personnel and Compensation Committee of the Columbia board of directors in February 2019, 20,413 unvested time-based restricted shares and 28,940 unvested performance-based restricted shares, the maximum amount of performance-based shares that Mr. Robbins is eligible to receive, which are subject to final calculation and approval by the Personnel and Compensation Committee of the Columbia board of directors. Mr. Robbins has voting but not investment power for his unvested restricted shares.
7

(3) Includes 2,627 vested performance shares, which were calculated and approved by the Personnel and Compensation Committee of the Columbia board of directors in February 2019, 5,172 unvested time-based restricted shares, and 5,400 unvested performance-based restricted shares, the maximum amount of performance-based shares that Ms. Baruffi is eligible to receive, which are subject to final calculation and approval by the Personnel and Compensation Committee of the Columbia board of directors. Ms. Baruffi has voting but not investment power for her unvested restricted shares.

 

(4) Includes 1,691 unvested time-based restricted shares for which Mr. Folsom has voting but not investment power, 10,600 shares held indirectly in Mr. Folsom’s IRA, 950 shares held in Mrs. Folsom’s IRA and 23,088 shares held in a joint account with his wife.

 

(5) Includes 1,691 unvested time-based restricted shares for which Mr. Forrest has voting but not investment power and 933 shares held in a joint account with his wife.

 

(6) Includes 2,844 vested performance shares, which were calculated and approved by the Personnel and Compensation Committee of the Columbia board of directors in February 2019, 5,436 unvested time-based restricted shares, and 5,610 unvested performance-based restricted shares, the maximum amount of performance-based shares that Mr. Lawson is eligible to receive, which are subject to final calculation and approval by the Personnel and Compensation Committee of the Columbia board of directors. Mr. Lawson has voting but not investment power for his unvested restricted shares.

 

(7) Includes 3,329 vested performance shares, which were calculated and approved by the Personnel and Compensation Committee of the Columbia board of directors in February 2019, 6,358 unvested time-based restricted shares, and 6,545 unvested performance-based restricted shares, the maximum amount of performance-based shares that Mr. McDonald is eligible to receive, which are subject to final calculation and approval by the Personnel and Compensation Committee of the Columbia board of directors. Mr. McDonald has voting but not investment power for his unvested restricted shares.

 

(8) Includes 1,691 unvested time-based restricted shares for which Ms. Numata has voting but not investment power, and 825 shares held jointly with spouse.

 

(9) Includes 2,370 unvested time-based restricted shares, and 3,540 unvested performance-based restricted shares, the maximum amount of performance-based shares that Mr. Sigrist is eligible to receive, which are subject to final calculation and approval by the Personnel and Compensation Committee of the Columbia board of directors. Mr. Sigrist has voting but not investment power for his unvested restricted shares.

 

(10) Includes 3,915 vested performance shares, which were calculated and approved by the Personnel and Compensation Committee of the Columbia board of directors in February 2019, 18,190 unvested time-based restricted shares, and 8,775 unvested performance-based restricted shares, the maximum amount of performance-based shares that Mr. Stein is eligible to receive, which are subject to final calculation and approval by the Personnel and Compensation Committee of the Columbia board of directors. Mr. Stein has voting but not investment power for his unvested restricted shares.

 

(11) Includes 1,691 unvested time-based restricted shares for which Mr. Weyerhaeuser has voting but not investment power, and 223,249 shares that are held indirectly by WBW Trust Number One, for which Mr. Weyerhaeuser is the trustee with sole voting and investment power.

 

8


INFORMATION ABOUT THE DIRECTORS AND NOMINEES

 

Size of the Board

 

Our Bylaws provide that the number of directors to be elected by the shareholders will be at least five and not more than 17. Under the Bylaws, the Board has authority to decide the exact number of directors to be elected within these limits. The Board has fixed the number of directors to be elected at the Annual Meeting at eleven and has nominated the persons listed on the following pages, each of whom has consented to serve as a director if elected, for election as directors to serve until the 2020 Annual Meeting or until their successors are elected.

 

Director Retirement Age

 

Our Bylaws provide that any person who has or will attain the age of 75 prior to a meeting of shareholders may not stand for election at such meeting. As a result, Mr. Dietzler, Mr. Folsom, and Mr. Weyerhaeuser, who have served as directors since, respectively, 2013, 1997 and 1998, have not been nominated for election at the Annual Meeting.

 

Replacement Nominees

 

If a nominee refuses or is unable to stand for election, the Board may reduce the number of seats on the Board or designate a replacement nominee. If the Board designates a substitute, shares represented by proxy will be voted FOR the substitute nominee. The Board presently has no knowledge that any of the nominees will refuse or be unable to serve.

9

PROPOSAL NO. 1

ELECTION OF DIRECTORS

 

Information regarding each of the nominees is provided below, including each nominee’s name, age as of the Record Date, principal occupation and public company directorships during the past five years, and the year first elected or appointed a director of Columbia, its predecessor corporation or one of its former or current subsidiaries. All of the nominees are presently directors of Columbia and Columbia Bank. There are no family relationships among any of our directors or executive officers, nor are any of the corporations or organizations referenced in the biographical information below a parent, subsidiary or affiliate of Columbia.

  Craig D. Eerkes Director since 2014
     
 

Mr. Eerkes, 67, has served as the President and Chief Executive Officer of Sun Pacific Energy, Inc., a Tri-Cities based retail and wholesale petroleum company with locations throughout Washington since 1981. He has an extensive background with financial institutions and broad experience in highly regulated industries, including sixteen years as a director of WMI Insurance Company, a health and life insurance company based in Salt Lake City, Utah. He was the chairman and a director of AmericanWest Bancorp from 2004 to 2012, as well as a director of First Hawaiian Bank from 1996 to 1999. He was founder, director and chairman of American National Bank, N.A., Kennewick, Washington, from 1981 to 1996. Mr. Eerkes is a graduate of the University of Puget Sound. He was named “Tri-Citian of the Year” for 2014 and is actively involved in the Boy Scouts, Boys & Girls Clubs, United Way and several other community organizations. His expertise in community banking and risk management brings strong operational depth to the Board. Mr. Eerkes was named as Chairman of the Board of Columbia in May 2018.

     
  Ford Elsaesser Director since 2014
     
 

Mr. Elsaesser, 67, was a member of the Intermountain Community Bancorp board of directors from 1997 until its acquisition by Columbia in 2014, serving as its Chairman from May 2013. An attorney with extensive experience with financial service companies, Mr. Elsaesser is a senior partner at Elsaesser Anderson Chtd, a Sandpoint, Idaho-based law firm founded in 1979. His practice focuses on commercial law and banking, civil litigation, bankruptcy and trusteeships and receiverships. He has served as Adjunct Professor at St. John’s University School of Law since 2003, and on the Advisory Board of the University’s Bankruptcy Program since 1999. He has also served as an Adjunct Professor at the University of Idaho Law School since 2005. A graduate of Goddard College and the University of Idaho Law School, Mr. Elsaesser has served as Chairman of the Lake Pend Oreille Commission since 2003 and Chairman of Bonner General Health Hospital since 2006. He is also a director of Food for Our Children, Bonner General Health Hospital, and the American Bankruptcy Institute. His knowledge of and contacts within the local Idaho market, as well as his legal experience, make him a valuable resource to the Board.

     
     Mark A. Finkelstein  Director since 2014
   
 

Mr. Finkelstein, 60, has extensive legal background and experience with financial services companies and public companies generally. He served as Chief Legal and Administrative Officer and Secretary of Blucora, Inc. from September 2014 through June of 2017. Prior to joining Blucora, he served as Executive Vice President - Corporate Development and General Counsel of Emeritus Corporation from December 2011 through July 2014, and as that company’s Corporate Secretary from May 2012 through July 2014. Before joining Emeritus, he served as a strategy advisor for private investment management firms in the United States and Europe and as the chief executive officer and a member of the board of directors of Novellus Capital Management, a specialized asset management firm. From 1986 to 2006, he practiced law with the Seattle law firm of Graham & Dunn, P.C., where he specialized in mergers and acquisitions, complex financing strategies and other corporate transactions involving financial institutions and other companies. A resident of Seattle, Washington, Mr. Finkelstein earned a B.A. in Economics with High Honors from the University of Michigan, and holds a law degree from the University of Michigan Law School. Mr. Finkelstein’s legal, strategic management and financial expertise make him a valuable resource to the Board.



10

  Eric S. Forrest Director since 2017
     
 

Mr. Forrest, 51, served as a director of Pacific Continental Corporation prior to its acquisition by Columbia. He is co-President of Eugene-based beverage distributor, Bigfoot Beverages, overseeing the company’s Pepsi franchises throughout Oregon and managing its day-to-day operations, warehousing and fleet. Mr. Forrest has served on the Board of Directors of Eugene School District 4J, chaired the Eugene Chamber of Commerce executive committee and served on the City of Eugene’s budget committee. He currently chairs the Oregon Beverage Recycling Board, which he also co-founded, and serves on the boards of directors of the Pepsi-Cola Bottlers Association and the Ford Family Foundation. He received an M.B.A. from Willamette University and a B.A. from Oregon State University. Mr. Forrest’s strong ties within the Eugene market, as well as his deep management experience and entrepreneurial drive, make him a valuable resource to the Board.

     
    Thomas M. Hulbert Director since 1999
   
 

Mr. Hulbert, 72, has been President and Chief Executive Officer of Hulco, Inc., Olympia, Washington, a family- held real estate holding and investment company focusing on the acquisition, management and sale of properties within Washington state since 1979. He was also President and Chief Executive Officer of Winsor Corporation, a Seattle-based research and development company specializing in lighting technologies from 1996 to 2013. Mr. Hulbert’s business experience also includes serving as President and Chief Executive Officer of a manufacturing company and supervising the operations of a timber contracting and logging company in Montana and Washington. He has served on numerous boards of local private companies, and his board and leadership experience, coupled with his knowledge of real estate investment and mergers and acquisitions, provide a valuable resource to the Board.

     
    Michelle M. Lantow Director since 2012
   
 

Ms. Lantow, 57, served as Chief Administrative Officer at New Season’s Market, LLC from July 2012 to September 2016, where she was responsible for all financial reporting, accounting, cash management, information technology and strategic planning. From 2010, she served as the Chief Financial Officer of McCormick & Schmick’s, a locally owned restaurant company established in 1970 and owning over 80 restaurants until the company was sold in 2012. As the Chief Financial Officer, Ms. Lantow was responsible for all financial reporting associated with a public company, in addition to human resources and information technology functions. Prior to that time, Ms. Lantow worked at lucy activewear, Inc., an apparel company that designs and sells fashion-forward performance apparel for athletic women, serving as the President from 2007 to 2009 and the Chief Financial Officer from 2000 to 2007. During the period 1995 to 2000, Ms. Lantow served as the Corporate Controller and Vice President of Investor Relations with The Gap, Inc., a diversified international specialty retailer. Ms. Lantow holds a BA in Business Economics from the University of California. She is active in her community and is Treasurer and Trustee of the Multnomah County Library Foundation. She also serves as a member of the advisory boards of the Women’s Venture Fund and Grand Central Bakery. Ms. Lantow’s depth of public company, strategic management and leadership experience make her a valuable resource for the Board. She is one of the Board’s designated audit committee financial experts.

     
    Randal L. Lund Director since 2017
   
 

Mr. Lund, 61, served as a partner for 37 years with the accounting firm KPMG and has extensive accounting and operational experience with public companies. He is a retired Certified Public Accountant in Oregon and a retired member of the American Institute of Certified Public Accountants. In his role as partner at KPMG, Mr. Lund was responsible for the audits of financial statements for a wide variety of companies, holding frequent meetings with audit committees and Securities and Exchange Commission regulators and reviewing and assessing company internal controls and corporate governance functions. He also worked for two years in the National Office of KPMG in New York City. He holds a Bachelor of Science degree from Montana State University and has served on the boards of directors of the Software Association of Oregon, Metropolitan Family Services and Business for Culture and the Arts. Mr. Lund’s deep expertise in the auditing and governance of public companies make him a valuable resource to the Board. He is one of the Board’s designated audit committee financial experts.

 

11

    S. Mae Fujita Numata Director since 2012
   
 

Ms. Numata, 62, is the founder of Numata Consulting PLLC. Through this consulting business, she has provided interim executive leadership services to privately-owned companies in Washington, Oregon and Montana. Ms. Numata is a former partner with a national consulting firm, a former Chief Financial Officer in the media industry for 11 years, and a former banker for 24 years. Ms. Numata is a board member, Chief Financial Officer and Treasurer of OSCCorp Inc., formerly known as Oberto Brands, and is a board member and Audit Committee Chair of GeoEngineers, Inc. She is a member of the Washington Society of and American Institute of Certified Public Accountants, Women Corporate Directors and National Association of Corporate Directors. She graduated from the University of Washington and holds a B.A. in Business Administration with a concentration in accounting. She is also a graduate of the Executive Development Institute. Ms. Numata’s extensive accounting and banking background provide the Board and Audit Committee with valuable expertise, and she is one of the Board’s designated audit committee financial experts.

     
    Hadley S. Robbins Director since 2017
   
 

Mr. Robbins, 62, was named President and Chief Executive Officer of Columbia and Columbia Bank effective July 1, 2017. He was appointed Interim Chief Executive Officer of Columbia and Columbia Bank in February 2017, and prior to that, served as Executive Vice President and Chief Operating Officer of Columbia Bank since March 2014. He joined Columbia Bank as Senior Vice President and Oregon Group Manager in April 2013, when Columbia acquired West Coast Bancorp, where Mr. Robbins had served as Executive Vice President and Chief Credit Officer since 2007. Mr. Robbins has over 35 years of banking experience and has held senior level positions with Wells Fargo Bank and community banks in the Pacific Northwest. He holds an M.B.A. from the University of Oregon and a B.S. in Business Administration from Lewis and Clark College. He currently serves on the boards of directors for the Multicare Foundation, Pacific Coast Bankers School (PCBS) and the Oregon Bankers Association. As CEO and a director, Mr. Robbins serves as the primary liaison between the Board and management, and as the executive with overall responsibility for executing the Company’s strategic plan.

     
    Elizabeth W. Seaton Director since 2014
   
 

Ms. Seaton, 58, is the President and CEO of Northern Aviation Services, an air cargo company headquartered in Seattle. She served as Senior Vice President of Operations for Saltchuk Resources Inc., a family of diversified transportation and fuel distribution companies, headquartered in Seattle from 2014 to 2018. Ms. Seaton served as Vice President of Strategic Planning and Corporate Development for Weyerhaeuser Company from 2008 to 2014. Her career with Weyerhaeuser spanned over twenty years, and included positions in strategic planning, capital investments and business leadership. Prior to Weyerhaeuser, she was Principal for Boston Consulting Group, a global management consulting firm. Ms. Seaton is a graduate of Princeton University, holds a J.D./M.B.A. from the University of Chicago and is a member of the California Bar. She has more than ten years of experience as a board member and advisor to a wide range of organizations, including Liaison Technologies, and she contributes to her community as the Board Chair of Planned Parenthood of the Great Northwest and Hawaii. Her broad experience in business leadership, change management, strategic development, mergers and acquisitions and enterprise risk management provides a valuable resource to the Board.

     
    Janine T. Terrano Director since 2018
   
 

Ms. Terrano, 57, has extensive business leadership expertise and experience building companies in the technology sector. Ms. Terrano founded Business Internet Services in 1996 and grew the organization to serve the web application development needs of large commercial and government clients. In 1999, Ms. Terrano launched Topia Technology, Inc. Topia’s patented solutions securely manage the movement of data between disparate platforms, components and devices, allowing commercial and government clients to connect new technologies to complex legacy systems. Ms. Terrano is a resident of Tacoma, Washington and attended Carroll College, University of Washington and University of Oklahoma. She currently serves on the Boards of MultiCare Health Systems, Geneva Foundation and Tacoma Art Museum. Ms. Terrano is a TEDx speaker and was the recipient of the 2013 University of Washington Tacoma Small Business Leader award. Her depth of technology, data security and business experience make her a valuable resource to the Board.

  

The Board unanimously recommends a vote “FOR” each of the nominees for director.

 

12

CORPORATE GOVERNANCE

 

Guidelines

 

The Board is committed to sound business practices, transparency in financial reporting and high standards of corporate governance. We operate within a comprehensive plan of corporate governance with the purpose of defining responsibilities, setting high standards of professional and personal conduct and assuring compliance with such responsibilities and standards. We regularly monitor developments in the area of corporate governance and our corporate governance policies, practices and committee charters are reviewed periodically and updated as necessary to reflect changes in regulatory requirements and evolving oversight practices.

 

Board and Company Leadership Structure

 

The Board is committed to maintaining an independent board, and an overwhelming majority has been comprised of outside directors for many years. It has further been the practice of Columbia to separate the duties of Chairman and Chief Executive Officer. In keeping with good corporate governance practices, the Board believes that the separation of the duties of Chairman and Chief Executive Officer eliminates any inherent conflict of interest that may arise when the roles are combined, and that an independent director can best provide the leadership and objectivity required as Chairman.

 

Director Qualifications

 

The Board believes each of the Company’s directors should bring a rich mix of qualities and skills to the Board. All of our directors bring to the Board a wealth of leadership experience derived from their service in a variety of professional and executive positions and extensive board experience.

 

The Corporate Governance and Nominating Committee is responsible for the oversight and nomination process for director nominees. The Corporate Governance and Nominating Committee has not historically adopted formal “director qualification standards” for recommended nominees. However, the Corporate Governance and Nominating Committee annually reviews the experience, qualifications, attributes and skills of each director and nominee as part of its evaluation of whether these are the right individuals to serve on Columbia’s Board to help Columbia successfully meet its strategic plans. Because directors are elected for one-year terms, the Corporate Governance and Nominating Committee has an annual opportunity to assess these factors and, if appropriate, determine not to re-nominate any director. A more detailed discussion regarding the considerations given by the Corporate Governance and Nominating Committee when considering director nominees is set forth below in the section entitled “Board Structure and Compensation—Board Committees—Corporate Governance and Nominating Committee.”

 

The biographical information set forth above summarizes the experience, qualifications, attributes and skills that Columbia believes qualifies each director to serve on the Board. The Corporate Governance and Nominating Committee and the Board believe each respective director’s professional and business acumen and board experience, and the total mix of all directors’ experience and skills, are beneficial to the Company and the Board.

 

Code of Ethics and Corporate Governance Documents

 

We have adopted a Code of Ethics for senior financial officers, which applies to our principal executive officer, principal financial officer, principal accounting officer or controller, and any persons performing similar functions.

 

You can access our Code of Ethics, Audit Committee, Corporate Governance and Nominating Committee and Personnel and Compensation Committee charters, and our Bylaws in the “About—Investor Relations— Governance Documents” section of our website at www.columbiabank.com, or by writing to: Columbia Banking System, Inc., Attention: Corporate Secretary, 1301 “A” Street, Tacoma, Washington, 98402-4200.

13

Director Independence

 

With the assistance of legal counsel to Columbia, the Corporate Governance and Nominating Committee has reviewed the applicable legal standards for Board and committee member independence, and the criteria applied to determine “audit committee financial expert” status. The Corporate Governance and Nominating Committee has also reviewed the answers to annual questionnaires completed by each of the directors, which included questions regarding any potential director-affiliated transactions.

 

The Board then analyzed the independence of each director and nominee and determined that the following members of the Board meet the standards regarding “independence” required by applicable law, regulation and NASDAQ listing standards, and that each such director is free of relationships that would interfere with the exercise of independent judgment. In determining the independence of each director, the Board considered many factors, including any loans to the directors, each of which (i) were made in the ordinary course of business; (ii) were substantially made on the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to the Company or the Bank; and (iii) did not involve more than the normal risk of collectability or present other unfavorable features. Such arrangements are discussed in detail in the section entitled “Certain Relationships and Related Transactions.”

 

Based on these standards, the Board has determined that each of the following current non-employee directors and director nominees is independent:

 

Craig D. Eerkes Michelle M. Lantow
Ford Elsaesser Randal L. Lund
Mark A. Finkelstein S. Mae Fujita Numata
Eric S. Forrest Elizabeth W. Seaton
Thomas M. Hulbert Janine T. Terrano

 

Based on the standards described above, the Board determined that Hadley S. Robbins, who serves as the President and Chief Executive Officer of the Company, is not independent because he is an executive officer of the Company.

 

Compensation Committee Interlocks and Insider Participation

 

During 2018, the Personnel and Compensation Committee consisted of Ms. Lantow (Chair), Mr. Eerkes, Mr. Finkelstein, Mr. Forrest , Mr. Hulbert and Ms. Numata and Mr. Weyerhaeuser, who was appointed in June, 2018. During 2018, none of our executive officers served on the compensation committee (or equivalent body) or board of directors of another entity whose executive officer served on the Personnel and Compensation Committee.

 

Shareholder Communications with the Board

 

Shareholders and other interested parties may communicate with the Board by writing to the Chairman of the Board c/o Columbia’s Corporate Secretary, Columbia Banking System, Inc., 1301 “A” Street, Tacoma, Washington, 98402-4200. These communications will be reviewed by our Corporate Secretary and if they are relevant to, and consistent with, our operations and policies, they will be forwarded to the Chairman of the Board.

14

BOARD STRUCTURE AND COMPENSATION

 

2018 Board Meetings

 

The Board met 11 times during 2018. Each director attended at least 75% of the total number of meetings of the Board and committees on which he or she served. Columbia directors are expected to attend the annual shareholder meeting. Last year, all of our directors who were then serving on the Board, with the exception of Ms. Seaton, attended the annual shareholder meeting. During 2018, the independent directors held 11 meetings without management present.

 

Board Committees

 

The Board has established, among others, an Audit Committee, a Personnel and Compensation Committee, a Corporate Governance and Nominating Committee, and an Enterprise Risk Management Committee.

 

The following table shows the membership of these committees during 2018.

 

Committee Membership

 

Name Audit   Compensation   Nominating   E.R.M.
David A. Dietzler     þ *   ¨   ¨   þ
Craig D. Eerkes(1) ¨   þ  
þ*
  ¨
Ford Elsaesser þ   ¨   þ   ¨
Mark A. Finkelstein(2) ¨   þ   þ   ¨
John P. Folsom(3) þ   ¨   þ  
þ *
Eric S. Forrest(4) ¨   þ   ¨   þ
Thomas M. Hulbert þ   þ   ¨   ¨
Michelle M. Lantow(5) þ  
þ *
  þ   ¨
Randal Lund(6) þ   ¨   ¨   þ
S. Mae Fujita Numata þ   þ   þ   ¨
Elizabeth W. Seaton(7) ¨   ¨   ¨  
þ*
Janine Terrano þ   ¨   ¨   þ
William T. Weyerhaeuser(8) ¨   þ  
þ *
  ¨
Total Meetings in 2018 9   8   4   6


 
*
Committee Chair

 

(1) Mr. Eerkes served on the ERM Committee until June 2018. He was appointed to the Nominating Committee and named as its Chair in June 2018.
(2) Mr. Finkelstein served on the ERM Committee until, and was appointed to the Nominating Committee in, June 2018.
(3) Mr. Folsom served on the Nominating Committee and as Chair of the ERM Committee until June 2018.
(4) Mr. Forrest was appointed to the ERM Committee in June 2018.
(5) Ms. Lantow served on the Nominating Committee until, and was appointed to the Audit Committee in, June 2018.
(6) Mr. Lund was appointed to the ERM Committee in June 2018.
(7) Ms. Seaton was appointed Chair of the ERM Committee in June 2018.
(8) Mr. Weyerhaeuser served as Chair of the Nominating Committee until June 2018. He was appointed to the Compensation Committee in June 2018.

 

Audit Committee. The Audit Committee is comprised of eight directors, each of whom is considered “independent” as defined by the NASDAQ listing standards and applicable SEC rules. The Audit Committee operates under a formal written charter, a copy of which is posted on our website at www.columbiabank.com. The Board has determined that Mr. Dietzler, Ms. Lantow, Mr. Lund and Ms. Numata are “Audit Committee Financial Experts” as defined by SEC rules.

15

The Audit Committee is responsible for the oversight of the quality and integrity of Columbia’s financial statements, its compliance with legal and regulatory requirements, the qualifications and independence of its independent auditors, the performance of its internal audit function and independent auditors and other significant financial matters. In discharging its duties, the Audit Committee is expected to, among other things:

 

have the sole authority to appoint, retain, compensate, oversee, evaluate and replace the independent auditors;

 

review and approve the engagement of the independent auditors to perform audit and non-audit services and related fees;

 

meet independently with the internal auditing department, independent auditors and senior management;

 

review the integrity of the financial reporting process;

 

review the financial reports and disclosures submitted to appropriate regulatory authorities;

 

maintain procedures for the receipt, retention and treatment of complaints regarding financial matters; and

 

review and approve related party transactions.

 

Personnel and Compensation Committee. The Personnel and Compensation Committee is comprised of seven directors, each of whom is considered independent as defined by the NASDAQ listing standards and applicable SEC and IRS rules. The Personnel and Compensation Committee is charged with the responsibility of reviewing the performance of our Chief Executive Officer and other key employees and determines, approves and reports to the Board on the elements of their compensation and long-term equity based incentives. The committee may periodically retain an independent consultant to assist the committee in its deliberations regarding compensation for the Chief Executive Officer and other key executives. The committee is directly responsible and has full authority for the appointment, compensation and oversight of compensation consultants, legal counsel and any other advisors retained by the committee. The committee solicits and receives input and recommendations from the Chief Executive Officer with respect to the compensation of the other executive officers. In addition, the Chief Human Resources Officer assists the committee in its work.

 

The Personnel and Compensation Committee commissioned Pearl Meyer and Partners (“Pearl Meyer”), an independent outside compensation consultant, to conduct a study in June 2017 of the Company’s executive compensation compared to a peer group comprised of other publicly traded financial services companies. The committee has used this report as a reference in making compensation decisions. The Pearl Meyer report provided information on executive base salaries and short-term and long-term incentives based on competitive data from published proxy filings of a peer group of 17 bank holding companies. Further information relating to the Pearl Meyer report is discussed in the section entitled “Compensation Discussion and Analysis.”

 

In addition, the Personnel and Compensation Committee:

 

reviews all employee benefit plans; and

 

makes determinations in connection with compensation matters as may be necessary or advisable.

 

The Personnel and Compensation Committee operates under a written charter, a copy of which is posted on our website at www.columbiabank.com. The committee meets as needed, and may delegate to one or more of its members the responsibility of meeting with consultants and management to obtain information for presentation and consideration by the entire committee.

 

Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee is currently comprised of five directors, each of whom is considered “independent” as defined by the NASDAQ listing standards. The committee is responsible for recommending a slate of directors to the full Board for election at the annual meeting, recommending directors to fill vacancies as they occur, monitoring Columbia’s corporate governance principles and practices and making appropriate recommendations for enhancements or other changes to the full Board.

16

The Corporate Governance and Nominating Committee will consider nominees recommended by shareholders provided that the recommendations are made in accordance with the procedures described in this proxy statement under the section “General InformationWhen are proposals and director nominations for the 2020 Annual Meeting due?” The committee evaluates all candidates, including shareholder-proposed candidates, using generally the same methods and criteria. The Corporate Governance and Nominating Committee operates under a formal written charter, a copy of which is posted on our website at www.columbiabank.com.

 

In deciding whether to recommend incumbent directors for re-nomination, the committee evaluates Columbia’s evolving needs and assesses the effectiveness and contributions of its existing directors. The committee is authorized to establish guidelines for the qualification, evaluation and selection of new directors to serve on the Board. The committee has not adopted, nor does it anticipate adopting, specific minimum qualifications for committee-recommended nominees, nor has the committee adopted a formal policy relating to Board diversity, although the committee and the Board value and seek to include members with diversity in gender, age, race, professional experience and skills relevant to the Company. The committee instead evaluates each nominee on a case-by-case basis, including assessment of each nominee’s business experience, involvement in the communities served by Columbia, diversity and special skills. The Corporate Governance and Nominating Committee also evaluates whether the nominee’s skills are complementary to existing Board members’ skills, and the Board’s need for operational, management, financial, technological or other expertise.

 

The committee has the authority and responsibility to monitor and review the appropriateness of the Company’s principles and practices of corporate governance in light of emerging standards and best practices and the needs of the Company and its shareholders, and make such recommendations to the full Board as the Committee considers appropriate. The committee also has the authority and responsibility to review the level and form of director compensation, taking into account such factors as the compensation paid to directors of comparable companies, and recommends any changes to the full Board for consideration. The process and procedures used in determining Board compensation for 2018 are discussed in the section below.

 

Enterprise Risk Management Committee. The Enterprise Risk Management Committee (the “ERM Committee”) was formed in 2009 and is comprised of six directors, each of whom is considered independent under NASDAQ rules. The ERM Committee works closely with the Audit Committee and is responsible for the oversight of Columbia’s policies, procedures, and practices related to business, market, and operational risks as they impact the strategic, operational, reporting, and compliance objectives of its strategic plan. The ERM Committee is responsible for reporting risk issues and events to the Board and providing the Board with necessary oversight and advice to set risk tolerances. In 2018, the Company appointed a Chief Risk Officer who assists the committee in its work.

 

Risk Oversight

 

The Board has ultimate authority and responsibility for overseeing risk management at Columbia. Some aspects of risk oversight are fulfilled at the full Board level. For example, the Board regularly receives reports from management on credit risk, liquidity risk and operational risk, including cybersecurity. The Board delegates other aspects of its risk oversight function to its committees. The Audit Committee oversees financial, accounting and internal control risk management; the head of the Company’s internal audit function reports directly to the Audit Committee. The executive officers have regularly reported directly to the entire Board and to appropriate Board committees with respect to the risks they are responsible for managing.

 

The ERM Committee is responsible for the oversight of Columbia’s policies, procedures, and practices related to business, market, and operational risks as they impact the strategic, operational, reporting, and compliance objectives of its strategic plan. The ERM Committee defines the Company’s overarching risk objectives through risk policies, limits and a risk appetite statement.

 

The Personnel and Compensation Committee oversees the management of risks that may be posed by the Company’s compensation practices and programs. As part of this process, the Personnel and Compensation Committee is responsible for reviewing the compensation policies and practices for all employees, not just executive management. In its review of these policies and practices, the Personnel and Compensation Committee has determined that the current policies and practices do not create or encourage risks that are reasonably likely to have a material adverse effect on the Company.

17

Director Compensation

 

The Corporate Governance and Nominating Committee has authority over director compensation subject to the Board’s authority to approve changes. Directors receive compensation in the form of cash and, as applicable, equity awards in the form of restricted stock or, in the past, stock options. We do not pay directors who are also employees of Columbia or Columbia Bank additional compensation for their service as directors.

 

Cash Compensation. Non-employee directors are paid an annual retainer as compensation plus a per-meeting attendance fee for service as a director. Members of the ERM, Audit, Personnel and Compensation, and Corporate Governance and Nominating Committees, respectively, receive an additional per meeting attendance fee for committee meetings. The Chairman of the Board and the Chairs of the Audit, the Personnel and Compensation, ERM and certain other committees receive an additional retainer in light of the increased demands associated with those positions. Non-employee directors may elect to defer the receipt of meeting and/or director fees in accordance with the terms of the Company’s Deferred Compensation Plan.

 

Equity Compensation. Non-employee directors may from time to time be granted restricted stock awards pursuant to our 2018 Equity Compensation Plan, the material terms of which are discussed under the section “Executive Compensation – Equity Compensation.” Restricted stock awards generally vest over a pre-determined period.

 

Long Term Care Program. In 2001, we implemented a long-term care program for directors serving at that time, which provides benefits in the event those individuals become chronically ill. The coverage is for a period of three years up to a lifetime, depending on the age of the director, and the amount of the benefit is based on the director’s years of service with Columbia after the inception of the long-term care program. We paid a one-time premium for the long-term care policies. Expenses are allocated to the directors participating in the program on an annual basis. All directors covered by this plan are fully vested. The long-term care program was available to all directors when the plan was implemented, including executive officers that were also directors. We have purchased Bank Owned Life Insurance policies to fund this program. The Board has no plans to extend the program to any officers or directors who were not directors in 2001.

 

Deferred Compensation Plan. We maintain a deferred compensation plan known as the 401 Plus Plan (the “Deferred Compensation Plan”) for certain directors, a select group of senior management and key employees, as designated by resolution of the Board. The Deferred Compensation Plan generally provides for the deferral of certain taxable income earned by participants in the Deferred Compensation Plan. Non-employee directors may elect to have any portion, up to 100%, of his or her director’s fees deferred.

 

Stock Ownership Guidelines. The Company’s Stock Ownership Policy requires non-executive directors to hold shares equal in value to five times the annual Board cash retainer. As of year-end 2018, all non-executive directors satisfied the Stock Ownership Policy requirements other than Mr. Lund, who joined the Board in 2017, and Ms. Terrano, who joined the Board in 2018. See “Stock Ownership Guidelines and No Hedging” in the Compensation Discussion & Analysis below for additional details regarding the Stock Ownership Policy

 

The following table shows compensation paid or accrued for the last fiscal year to our non-employee directors. The footnotes to the table describe the details of each form of compensation paid to directors.

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2018 Director Compensation Table

Name
 
Fees Earned or
Paid in Cash
($)
(1)
   
Stock Awards
($)
(2)
   
Option Awards ($)
   
Non-Equity
Incentive Plan
Compensation
   
Change In Pension Value
and Nonqualified
Deferred Compensation
Earnings
(3)
   
All Other
Compensation
($)
   
Total
($)
 
David A. Dietzler
 
$
78,000
   
$
69,974
     
     
     
     
   
$
147,974
 
Craig D. Eerkes
   
99,250
     
69,974
     
     
     
     
     
169,224
 
Ford Elsaesser
   
72,000
     
69,974
     
     
     
     
     
141,974
 
Mark A. Finkelstein
   
67,000
     
69,974
     
     
     
     
     
136,974
 
John P. Folsom
   
75,750
     
69,974
     
     
     
     
     
145,724
 
Eric Forrest
   
66,000
     
69,974
     
     
     
346
     
     
136,320
 
Thomas M. Hulbert
   
82,000
     
69,974
     
     
     
     
     
151,974
 
Michelle M. Lantow
   
80,000
     
69,974
     
     
      4,158

   
        154,132
 
Randal Lund
   
69,000
     
69,974
     
     
     
     
     
138,974
 
S. Mae Fujita Numata
   
69,000
     
69,974
     
     
      2,857
 
   
     
141,831
 
Elizabeth W. Seaton
   
69,250
     
69,974
     
     
     
     
     
139,224
 
Janine Terrano
   
65,000
     
107,704
     
 
     
 
     
 
     
 
     
172,704
 
William T.Weyerhaeuser
   
85,750
     
69,974
     
     
     
     
     
155,724
 
 


(1)
Amount shown for Mr. Dietzler represents (i) a retainer in the amount of $35,000; (ii) $15,000 received as chairman of the Audit Committee; and (iii) aggregate per meeting board and committee attendance fees of $11,000 and $17,000, respectively.
 
Amount shown for Mr. Eerkes represents (i) a retainer in the amount of $35,000; (ii) $26,250 received as Chairman of the Board from June through December; (iii) aggregate per meeting board and committee attendance fees of $11,000 and $27,000, respectively.
 
Amount shown for Mr. Elsaesser represents (i) a retainer in the amount of $35,000; (ii) $9,000 received as chairman of Columbia Trust Company; and (iii) aggregate per meeting board and committee attendance fees of $11,000 and $17,000, respectively.
 
Amount shown for Mr. Finkelstein represents (i) a retainer in the amount of $35,000; and (ii) aggregate per meeting board and committee attendance fees of $11,000 and $21,000, respectively.
 
Amount shown for Mr. Folsom represents (i) a retainer in the amount of $35,000; (ii) $3,750 received as chairman of the ERM Committee from January through May; and (iii) aggregate per meeting board and committee attendance fees of $11,000 and $26,000, respectively.
 
Amount shown for Mr. Forrest represents (i) a retainer in the amount of $35,000; and (ii) aggregate per meeting board and committee attendance fees of $11,000 and $20,000, respectively.
 
Amount shown for Mr. Hulbert represents (i) a retainer in the amount of $35,000; (ii) $9,000 received as chairman of the M&A Committee; and (iii) aggregate per meeting board and committee attendance fees of $11,000 and $27,000, respectively.
 
Amount shown for Ms. Lantow represents (i) a retainer in the amount of $35,000; (ii) $12,000 received as chairwoman of the Compensation Committee; and (iii) aggregate per meeting board and committee attendance fees of $11,000 and $22,000, respectively.
 
Amount shown for Mr. Lund represents (i) a retainer in the amount of $35,000; and (ii) aggregate per meeting board and committee attendance fees of $11,000 and $23,000, respectively.
 
Amount shown for Ms. Numata represents (i) a retainer in the amount of $35,000; and (ii) aggregate per meeting board and committee attendance fees of $11,000 and $23,000, respectively.
 
Amount shown for Ms. Seaton represents (i) a retainer in the amount of $35,000; (ii) $5,250 received as chairwoman of the ERM Committee from June through December; and aggregate per meeting board and committee attendance fees of $10,000 and $19,000, respectively.
 
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Amount shown for Ms. Terrano represents (i) a retainer in the amount of $35,000; and (ii) aggregate per meeting board and committee attendance fees of $11,000 and $19,000, respectively.
 
Amount shown for Mr. Weyerhaeuser represents (i) a retainer in the amount of $35,000; (ii) $18,750 received as Chairman of the Board from January through May; and (iii) aggregate per meeting board and committee attendance fees of $10,000 and $22,000, respectively.
 

(2)
For each director other than Ms. Terrano, represents a restricted stock award of 1,691 shares granted on June 27, 2018 at the grant date fair value. For Ms. Terrano, includes a restricted stock award of 834 shares granted on January 24, 2018 when she joined the Board, which represents a prorated portion of the 2017 – 2018 Board restricted stock award. The fair value of these awards was determined in accordance with the Compensation—Stock Compensation topic of the FASB ASC 718. Assumptions used to calculate these amounts are set forth in the notes to the Company’s audited financial statements for the fiscal year ended 2018, included in the Company’s 2018 Annual Report.
 

(3)
Represents above-market earnings on Mr. Forrest’s, Ms. Lantow’s and Ms. Numata’s deferred compensation accounts, the material terms of which are described below under “Deferred Compensation Plan.”
 
Compensation Committee Report
 
The Personnel and Compensation Committee of the Board makes the following report which, notwithstanding anything to the contrary set forth in any of Columbia’s filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, will not be incorporated by reference into any such filings and will not otherwise be deemed to be proxy soliciting materials or to be filed under such Acts.
 
The Personnel and Compensation Committee of the Board met and discussed with management the Compensation Discussion and Analysis (“CD&A”) required by Item 402(b) of Regulation S-K, and based on that review and discussion, the committee recommended to the Board that the CD&A be included as part of this proxy statement and the 2018 10-K Annual Report.
 
Members of the Personnel and Compensation Committee
Michelle M. Lantow, Chairwoman
Craig D. Eerkes
Mark A. Finkelstein
Thomas M. Hulbert
Eric S. Forrest
S. Mae Fujita Numata
William T. Weyerhaeuser
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EXECUTIVE COMPENSATION
Compensation Discussion & Analysis

The Personnel and Compensation Committee (as referred to in this Compensation Discussion and Analysis, the “Committee”) made compensation decisions for our executive team in the context of Columbia’s core performance results and other achievements.

 
2018 Financial Results
Consolidated net income for 2018 was a record $172.9 million, representing a 53% increase compared to the prior year. The increase in net income was a result of higher net interest income primarily due to income from interest-earning assets acquired in the Pacific Continental acquisition, which closed on November 1, 2017. Higher rates on earning assets and a decrease in income tax expense in 2018 also contributed to the increase in net income compared to 2017.
Operating noninterest expense to average assets (1), a measure of operating efficiency, improved during 2018, declining to 2.60% from 2.67% in 2017. Reported noninterest expense to average assets improved significantly in 2018, decreasing to 2.68% compared to 2.87% in 2017 as a result of higher average assets resulting from the Pacific Continental acquisition.
       
Record loan originations for 2018 of $1.43 billion, with loan growth of $32.9 million.
Credit quality remained solid, with total nonperforming assets to period-end assets declining to 0.46% compared to 0.63% at December 31, 2017.
     
Our ongoing commitment to our customers and the communities we serve resulted in a low cost deposit base and a core deposit ratio of 95%. Our 12 basis points average cost of total deposits is an important factor in the stability of our net interest margin.
 
 
2018 Shareholder Return
Shareholder value. Our shareholders realized a 14% decline in total return on their investment during 2018. The KBW Regional Banking and NASDAQ Composite Indexes had declines in total returns of 18% and 3% respectively, during 2018. Our three-year total shareholder return is 23%, compared to returns of 17% and 37% for the KBW Regional Banking and NASDAQ Composite Indexes, respectively.
   
Increases in regular dividends. We raised our regular cash dividend from $0.88 to $1.00 per share during 2018, and paid a special dividend of $0.14 during the year. Our dividend payout ratio was 48% for 2018 compared to 47% for 2017. Our 2018 dividend yield was 3%, based on our closing price at December 31, 2018.
 
 
(1) Operating noninterest expense to average assets is a non-GAAP financial measure. Please refer to Appendix A for additional information and reconciliations to the most directly comparable GAAP financial measure.

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2018 Milestones
Market Share. As of June 30, 2018, Columbia Bank ranked seventh in deposit market share in the Northwest. The bank ranked eighth in deposit market share out of 79 institutions in Washington, seventh out of 46 in Oregon and 14th out of 32 in Idaho.
 
Income, Loan Production and Deposits. Columbia achieved record loan production of $1.43 billion for the year and record net income of $172.9 million. Deposits, including core deposits, continued to exceed $10 billion at December 31, 2018.
Industry Accolades. For the 8th consecutive year, Columbia Bank was recognized by Forbes on its 2019 list of “America’s Best Banks,” in the country. The rankings were based on asset quality, capital adequacy, net interest margin and profitability of the nation’s 100 largest publicly traded banks and thrifts.
Outstanding Corporate Citizen. Columbia fosters a culture of giving back to the communities where we live and conduct business. We support numerous nonprofit organizations both monetarily and through the volunteer efforts of our employees. In 2018, we provided support to organizations that serve the homeless, the arts, chambers of commerce, economic development organizations, public school districts, and numerous other causes.
 
Through generous donations from customers, employees and the community, Columbia’s fourth annual “Warm Hearts Winter Drive” raised $257,033 and 6,542 warm winter items to benefit homeless shelters across the Northwest.
 
In addition, our board of directors was recognized for its corporate stewardship including the Board Governance Award by Seattle Business Magazine and a Lifetime Achievement Award from the Puget Sound Business Journal for past board chairman, William Weyerhaeuser.
Workplace Accolades. Our continued commitment to employees contributed to Columbia Bank being named as one of “Washington’s Best Workplaces” in 2018 by the Puget Sound Business Journal for the 12th consecutive year, and a Top Workplaces ranking from the Oregonian.
25th Anniversary. In 2018, Columbia Bank celebrated its 25th anniversary. To celebrate this milestone, Columbia Bank launched its anniversary community giving campaign which celebrates the positive impact that Columbia Bank has had on growth opportunities for families, businesses, and nonprofit organizations throughout the Northwest. Four $25,000 grants were awarded to nonprofit organizations in the Northwest. In addition, 10,000 financial literacy kits were distributed to children throughout Columbia’s geographic footprint.
 
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Target Direct Compensation
 
The table below shows the 2018 total target direct compensation opportunities for our Named Executives. The Committee focuses on target direct compensation as shown below in making annual compensation decisions.

    2018 Target Direct Compensation*  
Current Named Executive
 
Annual
Base Salary
   
Target
Annual
Incentive
   
Target
Long-Term
Incentive
   
Total
 
Hadley S. Robbins,
President and Chief Executive Officer
 
$
730,000
   
$
438,000
   
$
675,000
   
$
1,825,000
 
Gregory A. Sigrist**
Executive Vice President, Chief Financial Officer
   
375,000
     
150,000
     
206,250
     
731,250
 
Clint E. Stein,
Executive Vice President, Chief Operating Officer***
   
427,000
     
213,500
     
277,550
     
918,050
 
Andrew L. McDonald,
Executive Vice President, Chief Credit Officer
   
336,000
     
134,000
     
184,800
     
655,200
 
David C. Lawson,
Executive Vice President, Chief Human Resources Officer
   
290,000
     
116,000
     
159,500
     
565,500
 
Kumi Y. Baruffi,
Executive Vice President, General Counsel
   
290,000
     
116,000
     
159,500
     
565,500
 
 

* The amounts reported differ from the amounts determined under SEC rules as reported for 2018 in the Summary Compensation Table set forth under “Compensation Tables” below. The above table is not a substitute for the Summary Compensation Table.
** The amounts reflected in the table above are Mr. Sigrist’s annual compensation levels. Mr. Sigrist’s base salary and target annual incentive for 2018 were prorated to reflect the portion of 2018 in which he was employed following his start date on June 4, 2018. Additionally, the one-time sign on cash bonus paid to Mr. Sigrist in connection with his appointment are not included in this table.
***Mr. Stein also served as Chief Financial Officer during 2018 prior to Mr. Sigrist’s hire.

Compensation Philosophy
 
In keeping with our long-term goal to consistently increase earnings per share and shareholder value, the Committee is guided by the following key principles in determining the compensation of our Named Executives:
 

Accountability for Business Performance. The executives’ compensation in salary, as well as annual incentive and long-term incentive compensation opportunities, should be tied in part to overall Company financial performance.
 

Accountability for Individual Performance. To encourage and reflect individual contributions to the Company’s performance, compensation should be tied in part to the individual’s performance.
 

Alignment with Shareholder Interests. Compensation should be tied in part to the Company’s stock performance through the granting of stock awards with multi-year vesting and performance-based vesting, which serves to align executives’ interests with those of our shareholders.
 

Competition. Compensation should reflect the competitive marketplace, so that we can attract, retain, and motivate key executives of superior ability who are critical to our future success.
 

Reasonable Levels of Compensation. Total compensation opportunities and payouts should be reasonable and not excessive. We do not rigidly target or formulaically set compensation at a specific percentile compared to our peers. However, we do target overall compensation for executive officers in amounts that are roughly in line with the median of our peers.
 
23

 

Independent Oversight. The Committee, composed solely of independent directors, is responsible for reviewing and establishing the compensation for the Named Executives. The Committee periodically receives advice from an independent compensation consultant who has been retained by and reports directly to the Committee and performs no other work for management without the authorization of the Committee. In addition, the Committee may choose to review compensation analyses prepared by consultants retained by management.
 

Risk Management. Compensation policies and practices should align with sound risk management and be structured not to create incentives that subject the Company to excessive risk. Such policies and practices should strike a healthy balance between contributing to the Company’s growth and promoting a conservative exposure to risk.

Our Key Compensation Best Practices
Pay-for-performance
Share ownership guidelines
Double-trigger severance benefits
Independent compensation consultant
Clawback policy
Policy against hedging
No tax gross-ups on severance payments

No equity grants below 100% of fair market value

No significant perquisites
 
The compensation tables that appear later in this proxy statement reflect decisions made by the Committee. We encourage you to refer to the tables while reviewing this section in order to understand how our compensation philosophy is put into action.
 
Factors in Setting Overall Compensation Levels
 
When establishing overall compensation opportunities for the Named Executives, the Committee considers the following factors:
 

the Company’s overall performance and performance relative to its peers during the past year, including meeting its financial and other strategic goals;
 

the executives’ respective levels of responsibility and functions within the Company;
 

each executive’s performance during the past year in meeting individual objectives;
 

how compensation of our executives compares to executives at peer institutions, with a particular focus on financial institutions with similar corporate objectives and comparable asset size;
 

the alignment of executive compensation decisions and policies with the decisions and policies applicable to other employees;
 

the need to provide a competitive executive compensation package to attract and retain superior executive talent;
 

as appropriate, general economic conditions within our market area and the overall banking industry;
 

the recommendations of our Chief Executive Officer in setting compensation for other executives; and
 
24


the results of the prior year’s shareholder advisory vote on executive compensation, which, consistent with prior years, received solid shareholder support in 2018, reflecting our shareholders’ support for our compensation philosophy and the executive compensation decisions made by the Committee.
 
The Committee generally follows this process for determining executive compensation; however, other discretionary and subjective components may also be considered if appropriate.
 
Role and Relationship of the Compensation Consultant
 
The Committee has the sole authority to retain and terminate a compensation consultant and to approve the consultant’s fees and all other terms of the engagement. The Committee has direct access to outside advisors and consultants throughout the year.
 
The Committee engaged Pearl Meyer with respect to recommendations regarding 2018 executive compensation decisions. The Committee made these decisions in part based on Pearl Meyer’s study of the Company’s executive compensation program in June 2017 (the “2017 Executive Compensation Study”), as described below in “The Role of Benchmarking.
 
In accordance with SEC rules and NASDAQ listing standards, the Committee took appropriate actions in 2018 to consider the independence of Pearl Meyer.
 
The Role of Benchmarking
 
The 2017 Executive Compensation Study compared the Company’s executive compensation program to the compensation programs of a peer group comprised of other publicly traded financial services companies, as described below. The Committee used the report as a tool in setting compensation levels in 2018.
 
Pearl Meyer’s 2017 Executive Compensation Study provided market observations on executive base salaries and short- and long-term incentive opportunities based on competitive data from published proxy filings of a peer group of 17 bank holding companies. In considering the 2017-2018 peer group, Pearl Meyer considered the assets, operating revenue, market capitalization, and loan mix and revenue mix of the peer companies, which the Committee determined to be the appropriate parameters. The 2017-2018 peer group approved by the Committee consists of the following bank holding companies:

2017-2018 Peer Group
BancorpSouth, Inc.
Great Western Bancorp, Inc.
Banner Corporation
MB Financial, Inc.
Chemical Financial Corporation*
Old National Bancorp
CVB Financial Corp.
Pinnacle Financial Partners, Inc.
First Financial Bancorp
Sterling Bancorp
First Interstate BancSystem, Inc.
Texas Capital Bancshares, Inc.*
First Midwest Bancorp, Inc.
Trustmark Corporation
Fulton Financial Corporation*
Western Alliance Bancorporation
Glacier Bancorp Inc.
 
 
* Denotes a company added to the peer group in 2017
 
NBT Bancorp Inc. and Heartland Financial USA, Inc. were removed from the peer group in 2017 because their size and/or loan mix were determined to no longer fit within the parameters of the peer group.
 

25


 
Compensation Structure
 
Principal Elements of Compensation
 
Our overall compensation program for executives currently consists of six key elements:
 
 
Base Salary
 ●
Retirement Benefits
       
 ●   Annual Incentive Compensation  ●   Severance and Change-in-Control Benefits
       
 ●
  Long-Term Equity Incentives
 ●   General Employee Benefits
 
The combination of these six key elements reinforces our pay‑for‑performance philosophy and strengthens our ability to attract and retain highly qualified executives in our highly competitive banking environment. We believe that this mix of fixed and variable pay advances both the short- and long-term interests of our business, promotes creating long‑term shareholder value and helps us recruit and retain top executives. The Committee’s decisions regarding the executive compensation program design and individual pay are made in the context of the total compensation philosophy outlined above, including our financial performance.
 
Base Salary
 
Salaries are used to provide a competitive fixed amount of base compensation. Our goal is to provide base salary levels that reflect a combination of factors, including competitive pay levels relative to our peer group (as in effect at the time of the determination), the executives’ individual performance and overall contribution to the organization, the relevant position’s scope of responsibilities, the executives’ experience and tenure, and our overall annual budget, which takes into account Company financial performance. The salaries of the Named Executives are reviewed on an annual basis, as well as at the time of a promotion or other change in responsibilities. In 2018, the Committee approved merit-based adjustments to the base salaries of Messrs. Robbins, Stein, McDonald and Lawson of approximately 4%, 5%, 4% and 5%, respectively effective March 2018. The Committee also approved an adjustment to the base salary of Ms. Baruffi of approximately 14%, which adjustment was both merit-based and intended to generally reflect market observations from the 2017 Executive Compensation Study.
 
Annual Cash Incentive Compensation
 
Consistent with competitive practices, we believe that a portion of our Named Executives’ target compensation should be at risk, contingent upon the Committee’s assessment of performance. When determining earned annual cash incentive awards, the Committee considers the Company’s performance against pre-established financial performance measures as well as the executive’s individual performance and contribution to the Company’s overall performance. Annual cash incentive awards therefore seek to drive progress toward achieving the Company’s annual business objectives and permit individual performance to be recognized.
 
In early 2018, the Committee established target annual cash incentive opportunities for 2018 equal to 60% of base salary for Mr. Robbins (with a maximum of 90% of base salary), 50% of base salary for Mr. Stein (with a maximum of 75%) and 40% of base salary for Messrs. McDonald and Lawson and Ms. Baruffi (with a maximum of 60% of base salary). In connection with his appointment as Chief Financial Officer, the Committee established Mr. Sigrist’s target annual cash incentive opportunity for 2018 equal to 40% of base salary (with a maximum of 60% of base salary). Earned annual incentive awards were determined based on the level of achievement of the following performance goals:
 

26


 
 
Performance Goals
Weighting
2018 Actual
% Achieved
 
Threshold
(50% of Target)
Target
(100% of Target)
Stretch
(150% of Target)
Core Pretax Return on
Average Assets (%)*
1.48%
1.64%
1.80%
30%
1.73%
128.13%
Core Pretax Return on Average Tangible Common Equity (%)*
16.61%
18.61%
20.61%
25%
20.21%
140.00%
Ratio of Operating Noninterest Expense to Average Assets (%)*
2.81%
2.61%
2.41%
15%
2.60%
102.50%
Ratio of Average Non-Performing Assets to period end Total Loans, OREO and OPPO (%)*
1.00%
0.75%
0.50%
15%
0.88%
74.00%
Individual Performance
N/A
N/A
N/A
15%
**
100%
Total:        
115% of Target

* Core pretax returns on average assets and average tangible equity, the ratio of operating noninterest expense to average assets, and the ratio of average nonperforming assets to period end total loans, Other Real Estate Owned (OREO) and Other Personal Property Owned (OPPO) are non-GAAP financial measures. Please refer to Appendix A for additional information regarding how these performance measures are calculated from the Company’s audited financial statements.
 
** The individual performance results for each Named Executive are discussed below.
 
The Committee established and approved individual performance factors for the Chief Executive Officer, and the Chief Executive Officer established the individual performance factors for the other Named Executives, which factors are discussed in more detail below.
 
Performance below the “threshold” level results in no payout earned for the applicable performance goal. If performance falls between the “threshold” and “target” or “target” and “stretch” levels, then the earned payout is determined using straight line interpolation. Once earned annual incentive awards were calculated based on actual performance as compared to the goals set forth above, the Committee had the discretion to reduce or increase the payouts to the extent it determined appropriate to reflect the business environment and market conditions that may affect Columbia’s financial and stock price performance. Based in part on the recommendations of the Chief Executive Officer, the Committee approved the final annual incentive award payouts to the Named Executives other than the Chief Executive Officer. The Committee approved and recommended to the Board for approval the final annual incentive award payout to the Chief Executive Officer.
 
The table above shows the Company performance in 2018 for each of the four Company performance metrics, as well as the resulting weighted achievement percentage earned as a result of 2018 performance. For the individual performance component, the Company considered the following achievements for each Named Executive with respect to his or her individual performance factors. For Mr. Robbins, who was responsible for leading the performance of the Company as a whole, the Committee considered the advancement of the bank’s digital technology and change management road map initiative, the design and launch of our cultural rebranding program along with building out a scalable risk management organization to optimize long-term shareholder value while supporting employees, clients and communities. For Mr. Sigrist, the Company considered establishing an effective leadership presence within the executive leadership team and organizational-wide leaders as a strategic business partner along with maintaining stability within the accounting and finance departments following the transition in leadership from the prior Chief Financial Officer. For Mr. Stein, the Company considered his reorganization of the commercial leadership to scale and align with the Company’s Retail organizational structure and the reorganization of Information Technology, Banking Solutions and Operations into the Innovation and Technology group. Additionally, the Company considered Mr. Stein’s dual Chief Financial Officer and Chief Operating Officer roles for the first five months of 2018 and his transition of the Chief Financial Officer role to Mr. Sigrist. For Mr. Lawson, the Company considered his execution of expanded talent and leadership development programs, actionable succession plans for critical roles and charter development and approval to deploy a new human capital management workforce solution in 2019. For Mr. McDonald, the Company considered his active role in the current expected credit losses (CECL) project and collaboration with the Finance team along with his work in integrating and stabilizing the former Pacific Continental Bank credit administration team. For Ms. Baruffi, the Company considered her successful implementation of corporate governance objectives and continued achievement of in-house legal support initiatives. After considering each Named Executive’s performance in 2018, the Committee approved the achievement of the individual performance component at 100% of the target level for each Named Executive.
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Based on these 2018 Company and individual performance results, the Committee approved annual incentive awards to the Named Executives for 2018 as follows:
 
Named Executive
 
Target
Annual Incentive
   
Earned
Annual Incentive
 
Hadley S. Robbins          
 
$
438,000
   
$
503,317
 
Gregory A. Sigrist          
   
87,500
*
   
100,548
 
Clint E. Stein          
   
213,500
     
245,338
 
Andrew L. McDonald          
   
134,400
     
154,442
 
David C. Lawson          
   
116,000
     
133,299
 
Kumi Y. Baruffi          
   
116,000
     
133,299
 
                   
 
* Mr. Sigrist’s target and earned incentive for 2018 were prorated to reflect his period of employment with the Company in 2018.
 
In addition to his annual bonus opportunity for 2018, Mr. Sigrist, was paid a one-time signing and relocation bonus of $100,000 in connection with the commencement of his employment. Mr. Sigrist is required to repay a portion of this one-time bonus if his employment is terminated for cause or if Mr. Sigrist resigns before completing two years of service to the Company. The portion that must be repaid is determined on a straight-line basis over the two-year period.

Long-Term Equity Incentive Compensation
 
Columbia believes executive officers and other key management positions should have a meaningful portion of their competitive total compensation opportunity linked to shareholder return, which is directly tied to our long-term vision of growth, stability, asset quality and our commitment to a personalized banking approach. Long-term incentives take the form of equity awards that are intended to align the interests of the executive with those of our shareholders by encouraging ownership of our common stock and tying value to the long-term market value of the Company’s stock. These awards also serve to promote an executive’s continued service to the organization by vesting over a period of years and encourage sound risk management by providing a balanced view of performance and aligning awards with the longer-term time horizon of risk outcomes.
 
Since 2014, our long-term incentive compensation has consisted of a combination of performance-based restricted stock awards (“Performance Shares”) that are earned over a three-year performance period and time-based restricted stock awards (“Restricted Stock”), in each case issued under the Company’s 2014 Stock Option & Equity Compensation Plan (the “2014 Plan”) or the Company’s 2018 Equity Incentive Plan (the “2018 Plan”), which was approved by our shareholders at our 2018 Annual Meeting.
 
Grant of 2018 Long-Term Incentive Awards
 
In 2018, we granted our Named Executives Performance Shares that are earned and vest at the end of a three-year performance period based on achieving relative total shareholder return (“TSR”) compared to the KBW Regional Banking Index (KRX) and our return on average assets (“ROAA”) against targets established by the Committee. After the end of the performance period, the Committee will assess performance against the goals and determine the amount, if any, of earned Performance Shares. We also granted our Named Executives Restricted Stock awards that vest over four years, 20% on the second anniversary of grant, 30% on the third anniversary, and the remaining 50% on the fourth anniversary subject to continued service.
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Performance Measures for 2018 Performance Shares
 
For 2018, Performance Shares are earned and vest based on achievement of the following performance goals for the period from January 1, 2018 through December 31, 2020, as established by the Committee:
 
Performance Measure
Weighting
Measurement Perspective
Performance Goals
Threshold
Target
Stretch
Return on Average Assets
(“ROAA”)
50%
Relative to KBW Regional Banking Index (KRX)
30th Percentile
50th Percentile
80th Percentile
Total Shareholder Return
(“TSR”)
50%
Relative to KBW Regional Banking Index (KRX)
30th Percentile
50th Percentile
80th Percentile
Payout as % of Target
   
50%
100%
150%
 
The performance measures are calculated as follows:
 
ROAA: Average of the Company’s ROAA for the 12 calendar quarters (with each calendar quarter calculated separately) measured on a relative basis against a defined group of peer banks over the period January 1, 2018 through December 31, 2020. The Committee determined to measure the Company’s average ROAA relative to peers, rather than to measure the ROAA relative to absolute performance goals, based on the Committee’s advice from Pearl Meyer regarding market practices.
 
TSR: Measured on a relative basis against a defined group of peer banks over the period January 1, 2018 through December 31, 2020 (calculated assuming that dividends during the period are reinvested in company shares on the date paid).
 
For purposes of the performance measures, the peer banks will consist of all companies included in the KBW Regional Banking Index as of December 31, 2020.
29

Payout Determination for Performance Shares
 
At the end of the performance period, the Committee will review the Company’s actual performance and determine the number of earned awards. Performance below “threshold” for a given performance measure will result in forfeiture of the respective shares; performance at or above “stretch” for a given performance measure will result in payout equal to 150% of the respective target shares. Performance between threshold and target and target and stretch will be determined using straight line interpolation and rounded up to the nearest whole number of shares. All financial performance determinations for the Company and the peer banks will be made at the ultimate parent company level. Dividends earned on Performance Shares will accrue, but will not be paid until vesting is determinable and will only be paid on those shares earned and released from restriction.
 
2018 Target Long-Term Equity Incentive Award Opportunities
 
The target long-term equity incentive award opportunities granted in early 2018 represented (or, for Mr. Sigrist, in June 2018 in connection with his appointment), in the aggregate, approximately 90% of base salary for Mr. Robbins, approximately 65% of base salary for Mr. Stein and approximately 55% of base salary for our other Named Executives. Mr. Robbins’ total long-term incentive opportunity was granted 25% in the form of restricted stock and 75% in the form of Performance Shares, in order to increase the proportion of his total compensation opportunity that is tied to the achievement of objective performance criteria in light of his role as Chief Executive Officer. For each of our other Named Executives, approximately 50% of the total target opportunity was granted in the form of restricted stock and 50% in the form of Performance Shares.
 
Equity award values are based on the closing market price of our stock on the date the Board approves the grant.
 
Current Named Executive
Target Performance Shares
(Performance-Based Vesting)
Restricted Stock
(Time-Based Vesting)
Hadley S. Robbins          
11,790
3,936
Gregory A. Sigrist          
 2,360
2,370
Clint E. Stein          
 3,320
3,324
Andrew L. McDonald          
 2,210
2,214
David C. Lawson          
 1,900
1,918
Kumi Y. Baruffi          
 1,900
1,918
 
In establishing award levels, the Committee views each grant of an equity award to an executive as a separate incentive intended to drive future shareholder return and to promote retention. In determining the value of equity awards to executives, the Committee also considers comparisons to our peer group. Additionally, the Committee also considers awards to executives compared to the level of equity awards offered to other Company employees.
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2016 Performance Share Award Payout
 
The Performance Shares granted in 2016 were subject to performance vesting conditions tied to the Company’s ROAA and TSR relative to a defined group of peer banks, in each case over the period from January 1, 2016 through December 31, 2018. In February 2019, the Committee reviewed the Company’s actual performance against the ROAA and TSR targets and determined that the awards would pay out at 128% of target. A summary of the Company’s performance as measured against the goals, and the resulting payout, is set forth below:
 
Performance Measure
Weighting
Measurement Perspective
Performance Goals
Results
Threshold (50% Payout)
Target (100% Payout)
Stretch (150% Payout)
Actual Performance
Percent of Target Payout
ROAA
50%
Columbia
0.85%
1.00%
1.25%
1.21%
142%
TSR
50%
Relative to
KRX
30th Percentile
50th Percentile
80th Percentile
58th Percentile
113%
           
Total:
128%

Retirement Benefits
 
We believe that a retirement plan for our Named Executives is an important part of the total compensation package and provides a mechanism for attracting and retaining superior executives. We have not adopted a formal pension plan but, instead, have historically provided retirement benefits through a retirement plan that provides lifetime benefits (also known as a Supplemental Executive Retirement Plan, or “SERP”), a long-term compensation plan (also known as a “Unit Plan”) and an Executive Deferred Compensation Plan. In 2013, the Unit Plans for the Named Executives were frozen and supplemented by SERPs. Both programs are described in greater detail below under “Compensation Tables—Pension Benefits.
 
In 2001, the Company implemented a SERP for certain executive officers to provide retirement benefits to those officers. The SERP provides a lifetime annual retirement benefit, the amount of which declines to the extent the executive retires before a specified retirement age. The SERPs serve a retention purpose by vesting over a period of time and by restricting the executive from working for a competitor for a period following termination of employment. Starting in 2004, the Company began using supplemental compensation arrangements, which we called Unit Plans, to provide retirement benefits for executive officers instead of SERPs. Between 2004 and 2012, we awarded three separate Unit Plans to Mr. McDonald and a Unit Plan to Mr. Stein.
 
In 2013, the Committee approved offering SERPs to replace the Named Executives’ Unit Plans. Accordingly, the Company entered into SERPs with Messrs. McDonald and Stein, which provide that amounts drawn under their SERPs will be reduced by the amount that is attributable to each respective Unit Plan. This approach provides these executives with a retirement benefit that is consistent with Columbia’s compensation philosophy, while optimally leveraging the expense already incurred in funding the Unit Plans.
 
In 2013, following the acquisition of West Coast Bancorp, the Company assumed the SERP that was provided to Mr. Robbins as an executive of West Coast Bancorp; the Company also entered into a SERP with Mr. Lawson in 2013 and Ms. Baruffi in 2015. A more detailed description regarding payments under the SERPs and Unit Plans is set forth below under “Compensation Tables—Post Employment and Termination Benefits.”
 
As more fully described below under “Compensation Tables—Post Employment and Termination Benefits,” we also provide non-employee directors and highly-compensated employees (as defined by IRS rules) with the opportunity to defer compensation through two Executive Deferred Compensation Plans. The participation in our 401(k) plan for these individuals is limited under federal income tax rules, and we believe they should have other similar means of saving for retirement. Currently, interest paid on the participant deferrals is three-month LIBOR (the “London Interbank Offered Rate”) plus 3.58%.
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Executive Employment and Change-in-Control Agreements
 
We provide severance and change-in-control benefits to executives that are payable in circumstances the Committee believes are appropriate and market-competitive. Change-in-control benefits are generally “double-trigger,” meaning they are payable only if the executive experiences a qualifying termination of employment in connection with a change-in-control of the Company.
 
Employment Agreement with Mr. Robbins. Mr. Robbins serves as President and Chief Executive Officer of Columbia and Columbia Bank pursuant to an employment agreement entered into effective July 1, 2017, which is described in detail in the section entitled “Compensation Tables—Post Employment and Termination Benefits” below. We believe that an employment agreement with our President and Chief Executive Officer helps protect the interests of our shareholders in a number of meaningful ways. It guarantees continuity of leadership through retention and through severance and change-in-control provisions and reduces potential concerns from shareholders about the degree to which the Chief Executive Officer is affected by short-term prospects for continued employment when making key strategic, long-term decisions.
 
In general, upon a qualifying termination, Mr. Robbins’ agreement entitles him to receive any earned but unpaid bonus for a prior fiscal year, cash severance equal to two times Mr. Robbins’ annual base salary, a prorated bonus for the year of termination based on actual performance, a prorated portion of any long-term incentive awards (based on actual performance in the case of awards subject to performance-based vesting) and continued health and welfare benefits for twenty-four months.
 
Upon a qualifying termination related to a change-in-control, Mr. Robbins’ agreement entitles him to receive any earned but unpaid bonus for a prior fiscal year, cash severance equal to two and a half times the sum of Mr. Robbins’ annual base salary and target annual bonus, a prorated target bonus for the year of termination and continued health and welfare benefits for thirty months. Mr. Robbins is subject to customary restrictive covenants, including non-competition and non-solicitation covenants, during his employment and for two years following termination of employment for any reason.
 
 Change-in-Control Agreements with Other Named Executives. The Company has entered into change-in-control agreements with each of the current Named Executives, which are described in more detail below under “Compensation Tables—Post Employment and Termination Benefits.” Mr. Robbins’ change-in-control agreement was superseded by his employment agreement effective as of July 1, 2017. The change-in-control agreements contain provisions, similar to those in Mr. Robbins’ employment agreement, that require payments in the event of termination of employment related to a change-in-control. These arrangements are “double trigger,” meaning that they provide payments only upon a covered termination of employment in connection with a change-in-control, and no covered executive will receive payments under the agreements due to a change-in-control alone. In general, upon a qualifying termination related to a change-in-control, an executive with a change-in-control agreement will be entitled to two years’ annual base salary paid monthly over two years, accelerated vesting of any options and lapse of restrictions on restricted stock awards and will be subject to two-year non-compete and non-solicit covenants.
 
Additionally, as discussed under “Compensation Tables—Post-Employment and Termination Benefits” below, unvested Shares will vest in full as of the date of the closing of a change-in-control transaction (for Performance Shares, based on the greater of target or actual performance) unless the Shares are replaced or assumed, in which case the Shares will continue as replaced or assumed.
 
Retirement Vesting of Earned Performance Awards. In the event that a Named Executive’s employment terminates (other than for “cause”) at a time when the Named Executive is at least age 62 with at least five years of service, the Named Executive will remain eligible to earn a prorated portion of any outstanding Performance Shares based on actual performance. The prorated portion will be determined based on the portion of the performance period in which the Named Executive was employed. As of December 31, 2018, only Messrs. Robbins and McDonald met the definition of retirement applicable to the Performance Shares.
32

Perquisites and General Employee Benefits
 
As with all of our employees, we strive to assist our executives in meeting their retirement income, health care, disability income, time off and other needs through competitive, cost-effective, Company-sponsored programs that provide individuals with reasonable flexibility in the context of their individual circumstances, and the Named Executives participate in these and other benefits to the same extent as other employees. These benefits include medical and dental insurance, disability insurance, and the Company’s 401(k) plan. The Named Executives do not receive any perquisites or similar benefits such as Company-provided cars, car allowances, or country club memberships.
 
Clawback Policies for the Recovery of Incentive Compensation
 
Our annual and long-term incentive compensation programs provide for the recovery of incentive compensation under certain circumstances. Under these programs, the Company will recover incentive compensation awarded to current or former executive officers (during the preceding three years) if the Company restates its financial results due to material noncompliance with any financial reporting requirement under the securities laws (a “restatement”), to the extent the original awards exceeded the amounts that would have been paid under the restated results.
 
In June 2017, the Committee approved, and in July 2017, the Board adopted, a new Clawback Policy that covers current and former executive officers of the Company and applies to all incentive compensation granted following the date of adoption. The Clawback Policy provides that, to the full extent permitted by law, the Committee may require the forfeiture and/or repayment of unpaid incentive compensation (whether vested or unvested) and incentive compensation paid in the preceding three-year period (but not prior to July 2017) if a “triggering event” occurs.
 
For purposes of the Clawback Policy, a “triggering event” is any of the following events: (1) the Company is required to prepare a restatement, (2) the executive engages in conduct that causes material financial or reputational harm to the Company or its business activities, (3) the grant or payment of incentive compensation was based on materially inaccurate performance metrics or a material misrepresentation by the executive, (4) the executive improperly or with gross negligence failed to identify, raise or assess, in a timely manner, risks material to the Company or its business activities or (5) the executive engages in a fraudulent act or knowing and willful misconduct or violates restrictive covenants or employment restrictions to which the executive is subject.
 
Stock Ownership Guidelines and No-Hedging
 
Stock Ownership Guidelines
 
In March 2017, the Board adopted a Stock Ownership Policy, which replaced our prior stock ownership guidelines effective as of January 1, 2017. The Stock Ownership Policy requires each Named Executive to own shares equal in value to a multiple of his or her annual base salary rather than a fixed number of shares, as was required under the prior stock ownership guidelines. For the Chief Executive Officer, the multiple is three; for Executive Vice Presidents, which include the Chief Financial Officer, Chief Operating Officer, Chief Credit Officer, Chief Human Resources Officer, and General Counsel, the multiple is two. The Stock Ownership Policy also requires non-employee directors to own shares equal in value to five times the annual Board cash retainer. The share value is based on the average closing price of Company’s common stock over the 200 trading days preceding December 31 of the applicable calendar year.
 
The Named Executives and non-employee directors may satisfy the ownership requirements in the Stock Ownership Policy with common stock owned directly or indirectly (if the participant has a pecuniary interest in the shares), vested stock-based awards (other than options) and unvested restricted stock or restricted stock unit awards that are subject to time-based vesting requirements. If a participant is not in compliance with the Stock Ownership Policy as of December 31 of any year, he or she must retain all of the shares held as of that date and all shares acquired in the following year (including any shares granted to the participant pursuant to an equity award or acquired on exercise of an option), other than any shares withheld to pay an option exercise price or tax obligations.
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At year-end 2018, each Named Executive satisfied the new Stock Ownership Policy requirements other than Mr. Robbins, who joined the Company in 2013 following its acquisition of West Coast Bancorp and whose salary was increased in connection with his appointment as our Chief Executive Officer in 2017; and Mr. Sigrist, who joined the Company in June, 2018. Accordingly, Mr. Robbins and Mr. Sigrist will be required to retain the shares that each held as of December 31, 2018 and any shares acquired in 2019, except as described above.
 
No-Hedging
 
The Company has also adopted insider-trading policies that prohibit directors, executive officers and certain other individuals from (1) trading in any put, call, short sale or other derivative securities relating to the Company’s securities and (2) engaging in any hedging transactions with respect to any of the Company’s securities.
 
Impact of Tax Treatment of Compensation
 
The Committee and management consider the accounting and tax impacts of various programs designed to balance the potential cost to the Company with the benefit/value to the executive. Section 162(m) of the Code generally prohibits publicly held companies from deducting compensation paid to a Named Executive that exceeds $1 million during the tax year. Prior to the adoption of the Tax Cuts and Jobs Act (the “Tax Act”), which was enacted on December 22, 2017, to the extent that compensation was based upon the attainment of performance goals set by the Committee pursuant to plans approved by our shareholders, the compensation generally was not included in the $1 million limit. The Tax Act repealed this exemption, and, as a result, compensation paid to Named Executive in excess of $1 million will no longer be deductible, even if performance-based, other than with respect to certain arrangements in place on November 2, 2017. The Committee continues to consider the deductibility of compensation, including in light of the changes to Section 162(m); however, the primary goals of our executive compensation programs are to attract, incentivize and retain key employees and align pay with individual and business performance. The Committee retains the ability to pay compensation that exceeds deductibility limits as it determines.
34

Compensation Tables

 

The following table shows compensation paid or accrued in the years shown for Columbia’s Named Executives. As required by SEC rules, Columbia’s Named Executives include Columbia’s Chief Executive Officer; Mr. Stein, who served as the Chief Financial Officer for a portion of 2018 and Mr. Sigrist who served as Chief Financial Officer beginning on June 4, 2018; and the three other most highly paid executive officers.

 

   

2018 Summary Compensation Table

 

Name and Principal

Position

 

Year

 

Salary
($)
(1)

   

Bonus
($)(2)

   

Stock
Awards
($)
(3)(4)

   

Option Awards

   

Non-Equity

Incentive Plan

Compensation (5)

   

Change in
Pension Value

and Non-
Qualified
Deferred

Compensation
Earnings
($)
(6)

   

All Other
Compensation
($)
(7)

   

Total
($)

 
Hadley S. Robbins   2018     724,231             866,297             503,317       252,367       55,774       2,401,986  
President, Chief
  2017     538,616             919,666             441,593       1,561,485       39,770       3,501,130  
Executive Officer
  2016     374,000             222,319             162,630       166,147       41,772       966,868  

Gregory A. Sigrist

Executive Vice President, Chief Financial Officer (7)

  2018     187,500       100,000       229,875             100,548       77,081       18,010       713,014  
Clint E. Stein   2018     423,077             336,458             245,338       37,224       45,704       1,087,801  
Executive Vice President, Chief
  2017     385,300             623,572             220,541       278,731       41,671       1,549,815  
Operating Officer (7)
  2016     349,865             208,068             152,205       148,412       40,996       899,546  
David C. Lawson   2018     287,308             193,208             133,299       130,068       32,004       775,887  
Executive Vice President,
  2017     273,885             157,545             148,047       197,959       30,064       807,500  

Chief Human Resources Officer

  2016     253,327             151,123             110,505       130,978       31,124       677,057  
Andrew L. McDonald   2018     333,500             224,222             154,442       88,445       55,780       856,389  
Executive Vice President, Chief
  2017     320,500             184,336             173,258       286,740       50,595       1,015,429  
Credit Officer
  2016     297,603             176,821             129,270       206,825       48,202       858,721  

Kumi Y. Baruffi

  2018     283,269             193,208             133,299       121,333       28,950       760,059  

Executive Vice

President, General Counsel
  2017     253,077             145,558             136,783       141,430       27,019       703,867
 

 


(1) Amounts include discretionary contributions under the Deferred Compensation Plan as follows: Mr. Stein $46,081, Mr. Lawson $22,605, and Ms. Baruffi $10,400. The material terms of the Deferred Compensation Plan are described under “Post-Employment and Termination Benefits—Deferred Compensation Plan.”
   
(2) For Mr. Sigrist, reflects a one-time signing and relocation bonus paid in connection with the commencement of his employment, a portion of which Mr. Sigrist will be required to repay if his employment is terminated for cause or he resigns within two years following his start date of June 4, 2018. The portion that must be repaid is determined on a straight-line basis over the two-year period.
35


(3) For 2018, amounts shown for the NEOs other than Mr. Sigrist include the grant date fair value of Restricted Stock awards granted on February 28, 2018, that vest 20% on the second anniversary of grant date, 30% on the third anniversary of grant date and the remaining 50% vesting on February 28, 2022 and the grant date fair value of Performance Shares granted on March 28, 2018 for the period commencing January 1, 2018 and ending December 31, 2020. For Mr. Sigrist, amounts shown include the grant date fair value of Restricted Stock awards granted on June 4, 2018 that vest 20% on February 28, 2020, 30% on February 26, 2021 and the remaining 50% vesting on February 28, 2022 and the grant date fair value of Performance Shares granted on June 28, 2018 for the period commencing January 1, 2018 and ending December 31, 2020. At stretch performance, the Performance Shares grant date fair value would be $701,851 for Mr. Robbins, $126,520 for Mr. Sigrist, $197,582 for Mr. Stein, $113,074 for Mr. Lawson, $131,721 for Mr. McDonald, and $113,074 for Ms. Baruffi.

 

For 2017, amounts shown include the grant date fair value of (a) Restricted Stock awards granted on February 22, 2017 that vest 20% on the second anniversary of grant date, 30% on the third anniversary of grant date and the remaining 50% vesting on February 22, 2021, (b) in the case of Messrs. Robbins and Stein, Restricted Stock awards granted on April 26, 2017 that vest on April 26, 2019, (c) in the case of Mr. Robbins, Restricted Stock awards granted on July 3, 2017 that vest on the same schedule as the Restricted Stock awards granted on February 22, 2017 and (d) the grant date fair value of Performance Shares granted on February 22, 2017 and, in the case of Mr. Robbins, July 3, 2017 for the period commencing January 1, 2017 and ending December 31, 2019 (the 2017-2019 performance period). At stretch performance, the Performance Shares grant date fair value would be $389,547 for Mr. Robbins, $129,258 for Mr. Stein, $94,006 for Mr. Lawson, $109,844 for Mr. McDonald, and $86,853 for Ms. Baruffi.

 

For 2016, amounts shown include the grant date fair value of Restricted Stock awards granted on February 24, 2016 that vest 20% on the second anniversary of the grant date, 30% on the third anniversary of the grant date and the remaining 50% of which vest on February 24, 2020 and the grant date fair value of Performance Shares granted on March 23, 2016 for the period commencing January 1, 2016 and ending December 31, 2018 (the 2016-2018 performance period). At stretch performance, the Performance Shares grant date fair value would be $135,571 for Mr. Robbins, $126,891 for Mr. Stein, $92,171 for Mr. Lawson, and $107,878 for Mr. McDonald.

 


(4) The grant date fair value of stock awards was determined in accordance with FASB ASC 718. Assumptions used to calculate these amounts are set forth in footnote 4 to “2018 Grants of Plan-Based Awards” and in Note 22 to the Company’s audited financial statements for the fiscal year ended 2018, included in the Company’s 2018 Annual Report. The fair market value of Restricted Stock awards granted in 2018 was based on the closing price of Columbia’s common stock on NASDAQ on the grant date, February 28, 2018 ($41.78 per share) and June 4, 2018 ($43.61 per share). The fair market value of 50% of the Performance Shares was based on the closing price of Columbia’s common stock on NASDAQ on the grant date March 28, 2018 ($42.01 per share) and June 28, 2018 ($41.38 per share) and 50% on a fair value calculation using a Monte-Carlo simulation ($37.34 per share) and ($30.10 per share), respectively.

 


(5) The amounts in this column reflect the annual incentive awards earned under the 2014 Stock Option & Equity Compensation Plan for 2018 performance.

 


(6) The amounts in this column do not represent amounts actually paid to a Named Executive. Includes the change in actuarial present value of the accumulated projected benefit under the SERP, which is a non-cash amount that can vary significantly from year-to-year based upon assumptions underlying the actuarial calculations. Assumptions such as discount rate and retirement age are reviewed annually by the Company and are intended to be individually appropriate. The SERP is discussed in further detail under “Post Employment and Termination Benefits—Supplemental Executive Retirement Plan.”
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For 2018, amounts shown include: for Mr. Robbins $229,538 of change in the actuarial present value of projected benefit under the Supplemental Executive Retirement Plan (the “SERP”), which he is not currently entitled to receive because such amounts are not fully vested, and $22,829 of above-market earnings on his DCA; for Mr. Sigrist includes $77,081 of change in the actuarial present value of projected benefit under the SERP, which he is not currently entitled to receive because such amounts are not fully vested; for Mr. Stein includes $30,100 of change in the actuarial present value of projected benefit under the SERP, which he is not currently entitled to receive because such amounts are not fully vested, and $7,124 of above-market earnings on his DCA; for Mr. Lawson includes $127,188 of change in the actuarial present value of projected benefit under the SERP, which he is not currently entitled to receive because such amounts are not fully vested, and $2,880 of above-market earnings on his DCA; for Mr. McDonald includes $85,456 of change in the actuarial present value of projected benefit under the SERP, which he is not currently entitled to receive because such amounts are not fully vested, and $2,989 of above-market earnings on his DCA; for Ms. Baruffi includes $119,676 of change in the actuarial present value of projected benefit under the SERP, which she is not currently entitled to receive because such amounts are not fully vested, and $1,657 of above-market earnings on her DCA.

 

For 2017, amounts shown include: for Mr. Robbins $1,546,008 of change in the actuarial present value of projected benefit under the SERP and which he is not currently entitled to receive because such amounts are not fully vested, and $15,477 of above-market earnings on his DCA; for Mr. Stein, $276,704 of change in the actuarial present value of projected benefit under the SERP, which he is not currently entitled to receive because such amounts are not fully vested, and $2,027 of above-market earnings on his DCA; for Mr. Lawson, $196,366 of change in the actuarial present value of projected benefit under the SERP, which he is not currently entitled to receive because such amounts are not fully vested, and $1,593 of above-market earnings on his DCA; for Mr. McDonald, $282,604 of change in the actuarial present value of projected benefit under the SERP, which he is not currently entitled to receive because such amounts are not fully vested, and $2,027 of above-market earnings on his DCA; and for Ms. Baruffi, $140,390 of change in the actuarial present value of projected benefit under the SERP, which she is not currently entitled to receive because such amounts are not fully vested, and $1,040 of above-market earnings on her DCA.

 

For 2016, amounts shown include: for Mr. Stein, $144,953 of change in the actuarial present value of projected benefit under the SERP, which he is not currently entitled to receive because such amounts are not fully vested, and $3,459 of above-market earnings on his DCA; for Mr. Lawson, $129,771 of change in the actuarial present value of projected benefit under the SERP, which he is not currently entitled to receive because such amounts are not fully vested, and $1,207 of above-market earnings on his DCA; for Mr. McDonald, $204,854 of change in the actuarial present value of projected benefit under the SERP, which he is not currently entitled to receive because such amounts are not fully vested, and $1,971 of above-market earnings on his DCA; and for Mr. Robbins, $151,430 of change in the actuarial present value of projected benefit under the SERP and $14,717 of above-market earnings on his DCA.

 


(7) Amount shown for Mr. Robbins includes $8,250 in 401(k) plan matching contributions, $13,750 in 401(k) discretionary contributions, $12,133 in split dollar life insurance premiums, $8,089 in split dollar bonus earnings, $240 in group term life insurance premiums, and $13,312 in accrued dividends on unvested Performance Shares.

 

Amount shown for Mr. Sigrist includes $5,409 in 401(k) plan matching contributions, $9,014 in 401(k) discretionary contributions, $1,478 in split dollar life insurance premiums, $842 in split dollar bonus earnings, and $99 in group term life insurance premiums, and $1,168 in accrued dividends on unvested Performance Shares.

 

Amount shown for Mr. Stein includes $8,250 in 401(k) plan matching contributions, $13,750 in 401(k) discretionary contributions, $2,970 in split dollar life insurance premiums, $1,980 in split dollar bonus earnings, $195 in group term life insurance premiums, $4,036 in accrued dividends on unvested Performance Shares, 3,686 in non-qualified deferred compensation matching contributions, and $10,837 in Company contributions to a supplemental retirement benefit plan (“UNIT plan”). UNIT plans are described in further detail under “Post Employment and Termination Benefits—Unit Plans.”

 

Amount shown for Mr. Lawson includes $8,250 in 401(k) plan matching contributions, $13,750 in 401(k) discretionary contributions, $3,290 in split dollar life insurance premiums, $2,193 in split dollar bonus earnings, $132 in group term life insurance premiums, $2,581 in accrued dividends on unvested Performance Shares, and $1,808 in non-qualified deferred compensation matching contributions.

 

Amount shown for Mr. McDonald includes $8,250 in 401(k) plan matching contributions, $13,750 in 401(k) discretionary contributions, $4,602 in split dollar life insurance premiums, $3,068 in split dollar bonus earnings, $155 in group term life insurance premiums, $3,011 in accrued dividends on unvested Performance Shares, and $22,944 in Company contributions to a UNIT plan.

37

Amount shown for Ms. Baruffi includes $8,250 in 401(k) plan matching contributions, $13,750 in 401(k) discretionary contributions, $2,108 in split dollar life insurance premiums, $1,405 in split dollar bonus earnings, $121 in group term life insurance premiums, $2,484 in accrued dividends on unvested Performance Shares, and $832 in non-qualified deferred compensation matching contributions.

 


(8) Mr. Stein served as the Company’s Chief Financial Officer until June 4, 2018 when Mr. Sigrist was appointed the Company’s Chief Financial Officer.

 

Equity Compensation

 

Stock Option and Equity Compensation Plan. The 2018 Plan provides for the grant of restricted stock, incentive stock options, nonqualified stock options, restricted stock units and stock appreciation rights. All eligible employees and directors may participate in the 2018 Plan. As of December 31, 2018, 3,015,957 shares remained available for future grant under the 2018 Plan. The 2018 Plan replaced the 2014 Plan; however, any awards remaining outstanding under the 2014 Plan continue to be governed by the terms of that plan.

 

2018 Grants of Plan-Based Awards  

Name

 

Grant Date

  Estimated Future Payments Under Non-
Equity Incentive Plan Awards(1)
   

Estimated Future Payments Under
Equity Incentive Plan Awards(2)

   

All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)(3)

   

Grant
Date Fair
Value of
Stock
and
Option
Awards
($)(3)(4)

 
 

Threshold
($)

   

Target
($)

   

Maximum
($)

   

Threshold
(#)

   

Target
(#)

   

Maximum
(#)

 
Hadley S. Robbins   3/28/2018   $ 219,000     $ 438,000     $ 657,000                                
     2/28/2018                                               3,936     $ 164,446  
     3/28/2018                             5,895       11,790       17,690             $ 701,851  
Gregory A. Sigrist   6/4/2018   $ 43,750     $ 87,500     $ 131,250                               2,370     $ 103,355  
     6/28/2018                             1,180       2,360       3,540             $ 126,520  
Clint E. Stein   3/28/2018   $ 106,750     $ 213,500     $ 320,250                                          
     2/28/2018                                                     3,324     $ 138,877  
     3/28/2018                             1,660       3,320       4,980             $ 197,582  
David C. Lawson   3/28/2018   $ 58,000     $ 116,000     $ 174,000                                          
     2/28/2018                                                     1,918     $ 80,134  
     3/28/2018                             950       1,900       2,850             $ 113,074  
Andrew L. McDonald   3/28/2018   $ 67,200     $ 134,400     $ 201,600                                          
     2/28/2018                                                     2,214     $ 92,501  
     3/28/2018                             1,105       2,210       3,320             $ 131,721  
Kumi Y. Baruffi   3/28/2018   $ 58,000     $ 116,000     $ 174,000                                          
     2/28/2018                                                     1,918     $ 80,134  
     3/28/2018                             950       1,900       2,850             $ 113,074  

 


(1)
Represents the possible range of possible cash payouts under the 2018 annual cash incentive opportunities granted under the 2014 Plan. Actual amounts earned, as determined by the Committee in the first quarter of 2019, are reflected in the 2018 Summary Compensation Table under Non-Equity Incentive Plan Compensation. See “Compensation Discussion & Analysis—Compensation Structure—Annual Cash Incentive Compensation.”

38

(2) Represents the possible range of Performance Shares granted on March 28, 2018 and June 4, 2018 under the Long-Term Incentive Plan, a subplan under the 2014 Plan. Actual amounts of Performance Shares earned will be based on achieving relative ROAA and TSR compared to the KBW Regional Banking Index as determined by the Committee, in each case over the 2018-2020 performance period. Dividends earned on Performance Shares will accrue, but will not be paid until vesting is determinable and will only be paid on those shares earned and released from restriction. See “Compensation Discussion & Analysis—Compensation Structure—Long-Term Equity Incentive Compensation.”

 


(3) Represents the number of shares of Restricted Stock granted on February 28, 2018 under the 2014 Plan and June 4, 2018 under the 2018 Plan that vest 20% on the February 28, 2020, 30% on the February 28, 2021 and the remaining 50% vesting on February 28, 2022. Dividends earned on Restricted Stock are paid to award holders at the same time as dividends are paid to shareholders.

 

(4) Amounts shown represent the grant date fair value of Restricted Stock and Performance Shares granted on February 28, 2018, March 28, 2018 and June 4, 2018, determined in accordance with FASB ASC 718. Assumptions used to calculate these amounts are set forth in Note 22 to the 2018 Annual Report. The grant date fair value of Restricted Stock was based on the closing prices of Columbia’s common stock on NASDAQ on the grant dates, February 28, 2018 ($41.78 per share), March 28, 2018 ($42.01 per share) and June 4, 2018 ($43.61 per share). The grant date fair values of the Performance Shares are shown at stretch performance and is based on the closing price of Columbia’s common stock on NASDAQ on the grant dates March 28, 2018 and June 28, 2018 ($42.01 per share and $41.38, respectively) and 50% on a fair value calculation using a Monte-Carlo simulation ($37.34 per share and $30.10, respectively).

 

 
  Outstanding Equity Awards at Fiscal Year-End 2018  
Name
 
Option Awards
   
Stock Awards
 
 
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
   
Number of
Securities
Underlying
Unexercised
Options (#)
Un-exercisable
   
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
   
Option
Exercise
Price ($)
   
Option
Expiration
Date
   
Number
of Shares
or Units of
Stock That
Have Not
Vested
(#)
(1)
   
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
(2)
   
Equity Incentive
Plan
Awards:
Number
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
(#)
(3)
   
Equity
Incentive
Plan
Awards:
Market of
Payout
Value of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
($)(2)(3)
 
Hadley S. Robbins
   
     
     
     
     
     
22,302
     
809,340
     
28,940
     
1,050,233
 
Gregory A. Sigrist
   
     
     
     
     
     
2,370
     
86,007
     
3,540
     
128,467
 
Clint E. Stein
   
     
     
     
     
     
19,660
     
713,461
     
8,775
     
318,445
 
David C. Lawson
   
     
     
     
     
     
6,503
     
235,994
     
5,610
     
203,587
 
Andrew L. McDonald
   
     
     
     
     
     
7,607
     
276,058
     
6,545
     
237,518
 
Kumi Y. Baruffi
   
     
     
     
     
     
6,158
     
223,474
     
5,400
     
195,966
 



(1) For Mr. Robbins, represents 1,323 shares of restricted stock granted on March 25, 2015 that vest on March 25, 2019; 2,741 shares of Restricted Stock granted on February 24, 2016 that vest 37.5% on the third anniversary of the grant date and the remaining 62.5% on the fourth anniversary of the grant date; 4,302 shares of Restricted Stock granted on February 22, 2017 that vest 20% on the second anniversary of the date of grant, 30% on the third anniversary, and 50% on the fourth anniversary of the grant date, respectively; 10,000 shares of restricted stock granted on April 26, 2017 that vest on April 26, 2019; and 3,936 shares of restricted stock granted on February 28, 2018 that vest 20% on the second anniversary of the grant date, 30% on the third anniversary and the remaining 50% on the fourth anniversary of the grant date, respectively.
39

For Mr. Sigrist, represents 2,370 shares of restricted stock granted on June 4, 2018 that vest 20% on the second anniversary of the grant date, 30% on the third anniversary and the remaining 50% on the fourth anniversary of the grant date, respectively.


For Mr. Stein, represents 1,235 shares of restricted stock granted on March 25, 2015 that vest on March 25, 2019; 2,565 shares of Restricted Stock granted on February 24, 2016 that vest 37.5% on the third anniversary of the grant date and the remaining 62.5% on the fourth anniversary of the grant date; 2,536 shares of Restricted Stock granted on February 22, 2017 that vest 20% on the second anniversary of the date of grant, 30% on the third anniversary, and 50% on the fourth anniversary of the grant date, respectively; 10,000 shares of restricted stock granted on April 26, 2017 that vest on April 26, 2019; and 3,324 shares of restricted stock granted on February 28, 2018 that vest 20% on the second anniversary of the grant date, 30% on the third anniversary and the remaining 50% on the fourth anniversary of the grant date, respectively.

 

For Mr. Lawson, represents 882 shares of restricted stock granted on March 25, 2015 that vest on March 25, 2019; 1,863 shares of Restricted Stock granted on February 24, 2016 that vest 37.5% on the third anniversary of the grant date and the remaining 62.5% on the fourth anniversary of the grant date; 1,840 shares of Restricted Stock granted on February 22, 2017 that vest 20% on the second anniversary of the date of grant, 30% on the third anniversary, and 50% on the fourth anniversary of the grant date, respectively; and 1,918 shares of restricted stock granted on February 28, 2018 that vest 20% on the second anniversary of the grant date, 30% on the third anniversary and the remaining 50% on the fourth anniversary of the grant date, respectively.

 

For Mr. McDonald, represents 1,058 shares of restricted stock granted on March 25, 2015 that vest on March 25, 2019; 2,179 shares of Restricted Stock granted on February 24, 2016 that vest 37.5% on the third anniversary of the grant date and the remaining 62.5% on the fourth anniversary of the grant date; 2,156 shares of Restricted Stock granted on February 22, 2017 that vest 20% on the second anniversary of the date of grant, 30% on the third anniversary, and 50% on the fourth anniversary of the grant date, respectively; and 2,214 shares of restricted stock granted on February 28, 2018 that vest 20% on the second anniversary of the grant date, 30% on the third anniversary and the remaining 50% on the fourth anniversary of the grant date, respectively.

 

For Ms. Baruffi, represents 818 shares of restricted stock granted on March 25, 2015 that vest on March 25, 2019; 1,722 shares of Restricted Stock granted on February 24, 2016 that vest 37.5% on the third anniversary of the grant date and the remaining 62.5% on the fourth anniversary of the grant date; 1,700 shares of Restricted Stock granted on February 22, 2017 that vest 20% on the second anniversary of the date of grant, 30% on the third anniversary, and 50% on the fourth anniversary of the grant date, respectively; and 1,918 shares of restricted stock granted on February 28, 2018 that vest 20% on the second anniversary of the grant date, 30% on the third anniversary and the remaining 50% on the fourth anniversary of the grant date, respectively.

 


(2) Amounts shown are calculated using the closing price of Columbia’s common stock on NASDAQ on December 31, 2018 of $36.29 per share.

 

(3) Actual amounts vested and earned, if any, depend on actual performance against the performance measures for the 2017-2019 performance period that ends December 31, 2019 and 2018-2020 performance period that ends December 31, 2020, respectively. For Mr. Robbins, represents 11,250 Performance Shares granted on February 22, 2017 and 17,690 Performance Shares granted on March 28, 2018. For Mr. Sigrist, represents 3,540 Performance Shares granted on June 28, 2018. For Mr. Stein, represents 3,795 Performance Shares granted on February 22, 2017 and 4,980 Performance Shares granted on March 28, 2018. For Mr. Lawson, represents 2,760 Performance Shares granted on February 22, 2017 and 2,850 Performance Shares granted on March 28, 2018. For Mr. McDonald, represents 3,225 Performance Shares granted on February 22, 2017 and 3,320 Performance Shares granted on March 28, 2018. For Ms. Baruffi, represents 2,550 shares granted on February 22, 2017 and 2,850 shares granted on March 28, 2018.
40




2018 Option Exercises and Stock Vested  

Name

 

Option Awards

   

Stock Awards

 
 

Number of

Shares

Acquired on

Exercise (#)

   

Value Realized

on Exercise ($)

   

Number of
Shares
Acquired on
Vesting
(#)

   

Value
Realized on
Vesting
($)(1)

 
Hadley S. Robbins                 6,662       256,437  
Gregory A. Sigrist                        
Clint E. Stein                 6,298       242,690  
David C. Lawson                 4,839       187,573  
Andrew L. McDonald                 5,509       212,914  

Kumi Y. Baruffi

                4,799       184,818
 


(1) For Mr. Robbins, represents the fair market value of 1,000 shares of restricted stock granted in 2014 that vested on February 26, 2018, 793 shares of restricted stock granted in 2015 that vested on March 23, 2018, 686 shares of restricted stock granted in 2016 that vested on February 23, 2018, and 4,183 performance shares granted in 2016 that vested on December 31, 2018.

 

For Mr. Stein, represents the fair market value of 1,000 shares of restricted stock granted in 2014 that vested on February 26, 2018, 741 shares of restricted stock granted in 2015 that vested on March 23, 2018, 642 shares of restricted stock granted in 2016 that vested on February 23, 2018, and 3,915 performance shares granted in 2016 that vested on December 31, 2018.

 

For Mr. Lawson, represents the fair market value of 1,000 shares of restricted stock granted in 2014 that vested on February 26, 2018, 529 shares of restricted stock granted in 2015 that vested on March 23, 2018, 466 shares of restricted stock granted in 2016 that vested on February 23, 2018, and 2,844 performance shares granted in 2016 that vested on December 31, 2018.

 

For Mr. McDonald, represents the fair market value of 1,000 shares of restricted stock granted in 2014 that vested on February 26, 2018, 635 shares of restricted stock granted in 2015 that vested on March 23, 2018, 545 shares of restricted stock granted in 2016 that vested on February 23, 2018, and 3,329 performance shares granted in 2016 that vested on December 31, 2018.

 

For Ms. Baruffi, represents the fair market value of 1,250 shares of restricted stock granted in 2014 that vested on November 30, 2018, 491 shares of restricted stock granted in 2015 that vested on March 23, 2018, 431 shares of restricted stock granted in 2016 that vested on February 23, 2018, and 2,627 performance shares granted in 2016 that vested on December 31, 2018.

 

Post-Employment and Termination Benefits

 

The following is a discussion regarding the post-employment and termination arrangements currently in place for the Named Executives. The amounts are based on the maximum amounts that could be paid under these arrangements.

41

2018 Nonqualified Deferred Compensation

 

The following table provides information regarding nonqualified deferred compensation paid to the Named Executives during fiscal year 2018.

 

   

Name

 

Executive
Contributions
in Last FY
($)

(1)

   

Registrant
Contributions
in Last FY
($)

   

Aggregate
Earnings in
Last FY
($)

(2)

   

Aggregate
Withdrawals/
Distributions
($)

   

Aggregate
Balance at
Last FYE
($)

(3)

 
Hadley S. Robbins   $     $     $ 58,453     $     $ 1,044,572  
Gregory A. Sigrist                              
Clint E. Stein     46,081       3,686       18,247             342,462  
David C. Lawson     22,605       1,808       7,377             140,275  
Andrew L. McDonald                 7,654             136,778  

Kumi Y. Baruffi

    10,400       832       4,245             81,741  



(1) Amounts were deferred in 2018 under the Deferred Compensation Plan, which is described below under “Deferred Compensation Plan.” The amounts for Messrs. Stein and Lawson and Ms. Baruffi are reflected in the salary column of the Summary Compensation Table.

 


(2) The interest rate is the three-month LIBOR rate plus 3.58%. The Plan Administrator annually reviews for appropriateness the calculation of the rate of interest (the “Interest Crediting Rate”) that is applied to a participant’s DCA in the Deferred Compensation Plan. The Interest Crediting Rate is adjusted quarterly for fluctuations in the three-month LIBOR rate. Plan participants are notified of any adjustments to the Interest Crediting Rate.

 

On the last date of each month, the each participant’s DCA is credited with an amount equal to the product of (i) one-twelfth (1/12th) of the Interest Crediting Rate for the quarter in which such month occurs, times (ii) the average balance of the DCA in the DCA for that month. The credited amount is treated as part of the credit balance for all purposes of the Deferred Compensation Plan. As used herein, the average balance in a DCA for a month is equal to the quotient determined by dividing (i) the sum of the credit balance in the DCA at the close of business each day in the calendar month, by (ii) the number of days in such month.

 

(3) For Mr. Robbins includes amounts previously reported in the Summary Compensation Table for 2017 ($15,477), 2016 ($113,664), 2015 ($476,273), and 2014 ($299,808). For Mr. Stein includes amounts previously reported in the Summary Compensation Table for 2017 ($39,323), 2016 ($47,346), 2015 ($41,223) 2014 ($35,132), 2013 ($25,407), and 2012 ($16,005). For Mr. Lawson includes amounts previously reported in the Summary Compensation Table for 2017 ($21,952), 2016 ($25,200), 2015 ($23,877), 2014 ($23,796). For Mr. McDonald includes amounts previously reported in in the Summary Compensation Table for 2017 ($2,027), 2016 ($1,971), 2015 ($985), 2014 ($106), 2013 ($464), 2012 ($1,118), 2010 ($5,562), 2009 ($5,191), 2008 ($6,799), 2007 ($2,072), 2006 ($9,733), 2005 ($11,149), and 2004 ($35,000). For Ms. Baruffi includes amounts previously recorded in the Summary Compensation table for 2017 ($1,040) and 2016 ($62,017).

 

Deferred Compensation Plan. In February 2004, the Board adopted the 2005 Deferred Compensation Plan for certain directors, a select group of senior management and key employees, as designated by resolution of the Board. The Deferred Compensation Plan generally provides for the deferral of certain taxable income earned by participants in the Deferred Compensation Plan. Designated officers or key employees may elect to defer annually under the Deferred Compensation Plan up to 50% of his or her salary to be earned in the calendar year, and up to 100% of any cash bonuses or other incentive compensation. In October 2016, the Board and the Committee approved an Amended and Restated 2005 Deferred Compensation Plan, which froze that plan to new participants effective as of October 26, 2016, and a 2016 Deferred Compensation Plan. Except as noted below, the 2016 Deferred Compensation Plan is substantially the same as the 2005 Deferred Compensation Plan.

42

Distribution Election Notice. At the time a participant first makes an election to defer covered compensation, he or she must deliver to the Company a signed “distribution election notice” in which he or she elects to receive distributions of the credit balance in his or her DCA in the form of either a single lump-sum payment or monthly installment payments over a period not to exceed 120 months. A participant may change such election from time to time; but if a distribution election notice is delivered to the Company less than 12 calendar months before the month in which distributions begin, such notice will not be effective and the Company will instead treat the distribution election notice that was last delivered to the Company before such 12 calendar month period as the effective notice.

 

Distributions Upon Retirement or Disability. The Company will distribute the credit balance in a DCA maintained for a participant at the time he or she retires or becomes disabled as either a single lump sum or monthly installment payments, as elected by the participant. If the participant has elected a single lump-sum distribution, such distribution will be made within 90 days after the date that a participant retires or becomes disabled. If the participant has elected monthly installment payments, such distribution will be made on the first day of each month, beginning with the first day of the third month following the month in which a participant retires or becomes disabled and continuing until the full amount of the DCA maintained for the participant has been distributed. Until the DCA has been distributed in full, interest will continue to be credited to the DCA. The monthly installment payments will be in as nearly equal amounts as possible. Notwithstanding any contrary provisions of the Plan, if the participant dies after monthly installment payments of the credit balance in the DCA maintained for him or her have begun, then the remaining credit balance in the DCA will be distributed to his or her designated beneficiary in a single lump sum within 30 days after the Company receives notice that the participant has died.

 

Lump-Sum Distributions Upon Termination of Employment Other Than Because of Death, Disability, or Retirement or if DCA is Less Than $25,000. The 2005 Deferred Compensation Plan provides that, notwithstanding a participant’s election to receive a distribution of the credit balance in the DCA maintained for him or her in the form of monthly installment payments, such credit balance will be distributed to the participant in a single lump sum within 90 days after the date on which he or she terminates his or her services or employment with the Company, if (i) such termination of services or employment is for any reason other than because he or she retires or becomes disabled, or (ii) if the credit balance of the DCA maintained for him or her does not exceed $25,000. Unlike the 2005 Deferred Compensation Plan, the 2016 Deferred Compensation Plan permits participants to elect installment payments for any termination of employment, rather than only on a termination due to retirement or disability. If a participant’s services or employment with the Company is terminated because of his or her death, the credit balance in the participant’s DCA will be distributed to his or her designated beneficiary.

 

2018 Pension Benefits

Name

 

Plan Name
(1)

 

Number of

  Years

Credited

 Service
(#)

   

Present Value of

 Accumulated Benefit
($)
(2)

   

Payments

  During Last

 Fiscal Year
($)

 
Hadley S. Robbins   SERP     12       2,742,105     $  
Gregory A. Sigrist   SERP     1       77,081          
Clint E. Stein   SERP     13       1,173,217        
David C. Lawson   SERP     5       660,623        
Andrew L. McDonald   SERP     14       1,910,671        
Kumi Y. Baruffi   SERP     4       448,620        


(1) Under the terms of the SERP, executives must, in addition to other conditions, be fully vested. Full vesting is based on a 20 year schedule. As of December 31, 2018, only Messrs. Robbins and McDonald were eligible to receive benefits upon a voluntary termination. Messrs. Sigrist, Stein and Lawson will first become eligible to receive vested benefits upon a voluntary termination at ages 61, 55 and 65, respectively and Ms. Baruffi will first become eligible to receive vested benefits upon a voluntary termination at age 55. Named Executives (other than Mr. Robbins) must have at least 10 years of service with the Company in order to receive benefits upon a voluntary termination that occurs prior to reaching the early retirement age of 55. Mr. Robbins became fully vested in a retirement benefit upon the Company’s acquisition of West Coast Bancorp.

 

(2) The estimated maximum annual retirement benefit payable under the SERP for the Named Executives upon achieving age 64 for Mr. Robbins and age 65 for Messrs. Stein, Lawson and McDonald and Ms. Baruffi; and is as follows assuming a single life annuity: Messrs. Robbins, Sigrist, Stein, Lawson, and McDonald, $336,446, $234,033, $423,583, $96,069 and $229,935, respectively and Ms. Baruffi, $279,300.
43

 
Supplemental Executive Retirement Plan. Over the years, Columbia has implemented a supplemental executive retirement plan, or SERP, for certain executive officers of Columbia to provide retirement benefits to those officers. Where a participant has twenty years of service and is therefore fully vested, the SERP is designed to provide lifetime retirement benefits equal to 60% of the average of the three highest years of base salary (which we refer to as the “SERP formula”), with an annual two percent cost of living adjustment to benefit payments. Prior to 2015, the SERP benefits available to each participant were calculated based on a fixed dollar amount set forth in the officer’s SERP, which was intended to approximate the SERP formula. In 2015, in order to better account for fluctuations in the participant’s base salary over time, the Company amended the SERP to provide that the SERP benefit available to each participant would instead equal the SERP formula described above. On September 27, 2017, the Committee approved an amendment to the SERP, which revised the vesting schedule from vesting on an annual basis to vesting on a monthly basis in order to conform vesting with the methodology for determining early retirement benefits under the SERP.
 
Each SERP includes a number of restrictions on payment, including a requirement, subject to certain exceptions, that the Named Executive (other than Mr. Robbins) attain age 65 (62 in the event of a change-in-control). Each Named Executive’s SERP, other than Mr. Robbins’ SERP, includes a number of potential adjustments to the date on which retirement payments are initiated and to the amount of the Named Executive’s benefit. These potential adjustments include provisions for early retirement subject to the early commencement reduction factor of 5% for each year that the benefit is paid prior to reaching age 65, payable upon reaching age 55, with a minimum of 10 years of credited service, and a 2% annual inflation adjustment to benefit payments. As of December 31, 2018, Mr. McDonald was eligible for early retirement benefits. Named Executives terminated pursuant to a change-in-control of Columbia will be vested in the benefit that the executive would have received had the Named Executive remained employed by Columbia until reaching the normal retirement age. In the event the Named Executive becomes disabled, the executive will be 100% vested, regardless of tenure. Other potential SERP adjustments include an elimination of benefits if the Named Executive violates non-competition requirements or if the Named Executive is terminated for cause or resigns voluntarily before reaching the normal retirement age and does not have ten years of service or before achieving 100% vesting. Under the terms of each SERP, the Named Executive and the Company will cooperate and use all reasonable efforts, in compliance with applicable law, to minimize the amount of any excise tax imposed by Section 4999 of the Internal Revenue Code.
 
The SERP is unsecured and unfunded and there are no plan assets. Columbia has purchased Bank-Owned Life Insurance (“BOLI”) policies on the lives of the Named Executives and other officers and intends to use income from these policies to offset SERP benefit expenses. In 2016, Columbia purchased additional BOLI policies to supplement Columbia’s existing portfolio. The BOLI policies, through the split dollar life insurance agreements with the officers, provide a death benefit equal to three times the officer’s then current base salary and approximately ten times the projected benefit at normal retirement age of the officer’s SERP. The agreements take into account any other life insurance policies purchased by and owned by the Company that pay benefits to the participant’s beneficiary at death. This split dollar benefit is payable to the officer’s beneficiaries if the officer dies while employed with the Company, in which case the officer (and his or her beneficiaries) would not be entitled to any benefits under the SERP. If the officer retires or terminates employment for any reason other than death, then the officer and his or her beneficiaries forfeit any benefits under the split dollar agreement, and all proceeds from the BOLI policies are instead paid to the Company.
 
The income generated from the BOLI policies is projected to, on a cumulative basis, substantially offset the ongoing costs of the SERP program. This projection includes assumptions related to future BOLI policy performance, the Bank’s cost of funds and discount rates applicable to the SERP program. Any excess revenue generated from the BOLI will be used to offset other employee benefit costs. BOLI is not a permissible bank investment but BOLI may be purchased in order to offset employee benefit expenses pursuant to the authority granted by the “Interagency Statement on the Purchase and Risk Management of Life Insurance,” dated December 7, 2004 and described for State-Chartered Federal Reserve member banks in Supervisory Letter SR 04-19.
 
As described below, the Company had previously entered into Unit Plans with each of Messrs. McDonald and Stein in lieu of a SERP. In 2013, the Company entered into SERPs with Messrs. McDonald and Stein, and their respective Unit Plan were frozen to new contributions. Payments under each Unit Plan were postponed until benefits are drawn from the Named Executive’s SERP (and the SERP benefits will be reduced by the amount that is attributable to the respective Unit Plan).
44

Long-Term Incentive Awards Change-in-Control Treatment. In the event of a change-in-control, all unvested Shares will vest in full as of the date of the closing of such change-in-control transaction (for Performance Shares, based on the greater of target or actual performance) unless the Shares are replaced or assumed, in which case the Shares will continue as replaced or assumed.
 
Executive Employment Agreement. Mr. Robbins serves as President and Chief Executive Officer of Columbia and Columbia Bank pursuant to an employment agreement entered into effective July 1, 2017. The term of the employment agreement with Mr. Robbins extends for three-years following its effective date.
 
Mr. Robbins’ employment agreement provides that if his employment is terminated without cause or if he resigns for good reason, then he would receive cash severance equal to two times his annual base salary, a prorated portion of any incentive payment earned during the year of termination, continued welfare benefits for two years and vesting of a pro rata portion of his long-term incentive awards (based on the portion of the vesting period in which Mr. Robbins remained employed with the Company), subject to achievement of any performance criteria. The employment agreement also provides for certain benefits and payments if Mr. Robbins terminates his employment within two years following a change-in-control (as defined in the agreement) or if Mr. Robbins’ employment was terminated by the Company without cause or by Mr. Robbins with good reason at any time from and after six months prior to the public announcement of a transaction that will result in a change-in-control. In such event, the agreement provides that Mr. Robbins would receive an amount equal to 2.5 times the sum of his annual base salary and target bonus, a prorated target bonus for the year of termination, continued welfare benefits for 30 months and his long-term incentive awards would be treated in accordance with their terms. In the event Mr. Robbins is terminated without cause, or he voluntarily terminates for good reason, and within six months the Company publicly announced a change-in-control, upon closing of the change-in-control, the agreement provides that he would be entitled to receive the change-in-control payments set forth above, less any payments that he received as a termination payment.
 
The table below shows the maximum amounts that could be paid to Mr. Robbins under his agreements, and (i) is based on his salary at December 31, 2018; and (ii) assumes the triggering event was December 31, 2018.
 
                        2018 Termination/Change-in-Control Payments – Hadley S. Robbins  
       
Death
     
Disability
     
Voluntary Termination For Good Reason (Not Due to CIC)
     
Termination
w/o Cause (Not Due to CIC)
     
Termination Due to CIC(1)
     
Retirement
 
Employment Agreement(2)
   
$
   
$
   
$
1,460,000
   
$
1,460,000
   
$
1,460,000
   
$
 
Annual Incentive(3)
     
     
   
$
503,317
   
$
503,317
   
$
438,000
     
 
CIC Termination Payment(4)
     
     
     
     
   
$
1,460,000
     
 
Benefits Payable Under SERPs or Split Dollar Life Insurance(5)
   
$
3,410,096
   
$
4,803,858
   
$
181,773
*  
$
181,773
*  
$
230,542
*    
 
Bank Owned Life Insurance(6)
   
$
2,190,000
     
     
     
     
     
 
Healthcare and Other Benefits(7)
     
     
   
$
20,352
   
$
20,352
   
$
25,440
     
 
FMV of Accelerated Equity Vesting(8)
   
$
1,859,572
   
$
1,859,572
   
$
806,703
   
$
806,703
   
$
1,859,572
   
$
288,105
 
Total
   
$
7,459,668
   
$
6,663,430
   
$
2,972,145
   
$
2,972,145
   
$
5,473,554
   
$
288,105
 

* Reflects the annual lifetime annuity payable following the triggering event under the terms of the applicable plan.
45

(1)
In the event Mr. Robbins was terminated without cause, or he voluntarily terminated for good reason, and within six months the Company publicly announced a change-in-control, upon closing of the change-in-control, he would be entitled to receive change-in-control payments, less any payments that he received as a termination payment.
 
(2)
Represents two times Mr. Robbins annual salary in the year of termination payable in equal monthly installments over two years following termination.
 
(3)
For voluntary termination for good reason and termination without cause, represents the prorated portion of any incentive payment earned during the year of termination payable in a lump sum; provided that, if such termination is due to change-in-control, represents the prorated portion of Mr. Robbins’ target annual incentive.
 
(4)
For termination due to change-in-control, represents 0.5 times Mr. Robbins annual salary in the year of termination plus 2.5 times Mr. Robbins target annual incentive payable in equal monthly installments over a 30-month period following termination.
 
(5)
Reflects the aggregate SERP benefits (or split dollar life insurance benefits calculated based on SERP benefits) to which Mr. Robbins would be entitled, including the retirement benefit in which Mr. Robbins vested upon the Company’s acquisition of West Coast Bancorp, which had a value at December 29, 2018 of $1,241,383 and which reduces the benefits otherwise payable under Mr. Robbins’ existing SERP. See “Pension Benefits” above for more details regarding these benefits. Annual amounts reflected in the table above reflect a single lifetime annuity; however Mr. Robbins alternatively may elect a joint and survivor annuity.
 
Benefits on Death. Death benefits are not payable pursuant to the SERP; however, in the event of Mr. Robbins’ death while employed, a Split Dollar Agreement provides a one-time lump sum benefit of a stated dollar amount calculated as ten times the projected annual SERP benefit at normal retirement.
 
Benefits on Disability. In the event that Mr. Robbins becomes Disabled, the amount represents a one-time lump sum payment calculated as the present value of the projected stream of retirement benefit payments that Mr. Robbins would expect to receive had he remained employed until normal retirement age.
 
Benefits on Termination without Cause or Due to CIC. Upon a termination without cause or due to a change-in-control, benefits are payable in a lifetime annuity.
 
(6)
Represents the amount equal to three times base salary as of the date of death that would be due to Mr. Robbins’ beneficiaries under a bank owned life insurance policy payable by the insurer.
 
(7)
Represents the value of continued employer-paid health and welfare benefits for two years following termination (or in the event of a termination due to change-in-control, for 30 months following termination).
 
(8)
In the case of death, disability or termination in connection with a change-in control, represents the fair market value of unvested equity awards with performance shown at stretch performance. In the case of a voluntary termination for good reason or a termination without cause not in connection with a change-in-control, represents the fair market value of a prorated portion of the unvested equity awards with performance shown at stretch performance. In the case of retirement, represents a prorated portion of Performance Shares at stretch performance. Fair market value was determined based on the closing price of Columbia’s common stock on NASDAQ on December 31, 2018 of $36.29 per share.
 
Change-in-Control Agreements. Columbia Bank has entered into change-in-control agreements with Messrs. Sigrist, Stein, Lawson and McDonald and Ms. Baruffi.
 
The agreements contain provisions, similar to those contained in the employment agreement for Mr. Robbins discussed above, that require payments in the event of termination of employment without cause or by the executive for good reason within 365 days following a change-in-control (as defined in the agreements) or termination of employment without cause prior to the change-in-control at any time from and after sixty days prior to the public announcement of a transaction that will result in a change-in-control, provided that the change-in-control occurs within 18 months of the executive’s termination date. Under the agreements, the executives are entitled to (i) receive their base salary for terms of two years; (ii) accelerated vesting of options; and (iii) removal of restrictions on any restricted stock or other restricted securities, subject to Federal securities laws. These agreements also contain a covenant that the executive will not compete with or solicit employee, customer or business partner of Columbia or any of its subsidiaries for up to two years after the commencement of severance benefit payments, unless payments of such severance benefits are waived by the executive. The terms of the agreements are five years unless otherwise extended in writing. In 2018, the Company extended the change-in-control agreement with Mr. Lawson for an additional five years.
46

Unit Plans. Columbia previously entered into Unit Plans with each of Mr. McDonald (three plans, one each in 2004, 2006 and 2007) and Mr. Stein (in 2008). The plans were provided primarily to supplement retirement benefits in lieu of a SERP. Each separate Unit Plan provides that the executive will begin receiving a monthly payment beginning the first month following the tenth anniversary of each plan, based on an annual aggregate payment of $25,000 per year for ten years. In the event the executive’s employment is terminated by the Company without cause, or he is terminated due to disability, the executive will be entitled to receive a payment based on the prorated portion of his term of employment, payable in monthly payments following the tenth anniversary of each plan. If the executive leaves the employment of Columbia prior to expiration during the respective ten-year period, the entire amount is forfeited. Once receiving the benefit, there is a non-competition clause restricting the executive from working for a competitor.
 
As noted above, in 2013, the Company entered into a SERP with Messrs. McDonald and Stein. Benefits under the Unit Plans were frozen to new contributions. In the event any benefit payments due Messrs. McDonald or Stein pursuant to their respective SERP plans are to be made simultaneously with payment amounts due them pursuant to their respective Unit Plans, then any SERP benefit payments will be reduced by amounts to be paid out from their Unit Plans. The reduced SERP benefit payment will be determined by deducting the amount of the Unit Plan payments from the scheduled SERP benefit payments. Once the Unit Plan benefit payment periods expire, retirement benefit payments under the SERP plan will no longer be reduced.
 
The tables below show the maximum amounts that could be paid to Messrs. Sigrist, Stein, Lawson, McDonald and Ms. Baruffi under their respective agreements, which are based on (i) the executive’s salary at December 31, 2018; and (ii) assumes the triggering event was December 31, 2018.
 
   
2018 Termination/Change-in-Control Payments – Gregory A. Sigrist
 
   
Death
   
Disability
   
Termination
w/o Cause
(Not Due to CIC)
   
Termination
Due to CIC
   
Retirement
 
Change in Control Agreement(1)
 
$
   
$
   
$
   
$
750,000
   
$
 
Benefits Payable Under SERPs, Unit Plans or Split Dollar Life Insurance(2)
 
$
2,361,540
   
$
1,953,186
     
   
$
1,329,637
     
 
Bank Owned Life Insurance(3)
 
$
1,125,000
     
     
     
     
 
FMV of Accelerated Equity Vesting(4)
 
$
214,474
   
$
214,474
     
   
$
214,474
     
 
Total
 
$
3,701,014
   
$
2,167,660
     
   
$
2,294,111
     
 
   

47

   
2018 Termination/Change-in-Control Payments - Clint E. Stein
 
   
Death
   
Disability
   
Termination
w/o Cause
(Not Due to CIC)
   
Termination
Due to CIC
   
Retirement
 
Change in Control Agreement(1)
 
$
   
$
   
$
   
$
854,000
   
$
 
Benefits Payable Under SERPs, Unit Plans or Split Dollar Life Insurance(2)
 
$
4,132,638
*
 
$
2,873,725
   
$
1,110,302
   
$
1,708,157
     
 
Bank Owned Life Insurance(3)
 
$
1,281,000
     
     
     
     
 
FMV of Accelerated Equity Vesting(4)
 
$
1,031,906
   
$
1,031,906
     
   
$
1,031,906
     
 
Total
 
$
6,445,544
   
$
3,905,631
   
$
1,110,302
   
$
3,594,063
     
 
   

* Includes $249,960, which is the aggregate amount that would be payable in monthly installments over a ten-year period under Mr. Stein’s Unit Plan.
 
   
2018 Termination/Change-in-Control Payments - David C. Lawson
 
   
Death
   
Disability
   
Termination
w/o Cause
(Not Due to CIC)
   
Termination Due to CIC
   
Retirement
 
Change in Control Agreement(1)
 
$
   
$
   
$
   
$
580,000
   
$
 
Benefits Payable Under SERPs or Split Dollar Life Insurance(2)
 
$
947,460
   
$
1,259,351
   
$
33,759
*
 
$
63,167
*
   
 
Bank Owned Life Insurance(3)
 
$
870,000
     
     
     
     
 
FMV of Accelerated Equity Vesting(4)
 
$
439,581
   
$
439,581
     
   
$
439,581
     
 
Total
 
$
2,257,041
   
$
1,698,932
   
$
33,759
   
$
1,082,748
     
 
   

* Reflects the annual lifetime annuity payable following the triggering event under the terms of the applicable plan.

   
2018 Termination/Change-in-Control Payments - Andrew L. McDonald
 
   
Death
   
Disability
   
Termination
w/o Cause
(Not Due to CIC)
   
Termination
Due to CIC
   
Retirement
 
Change in Control Agreement(1)
 
$
   
$
   
$
   
$
672,000
   
$
 
Benefits Payable Under SERPs, Unit Plans or Split Dollar Life Insurance(2)
 
$
3,141,840
*
 
$
2,888,360
   
$
98,354
**
 
$
138,195
**
 
$
98,354
**
Bank Owned Life Insurance(3)
 
$
1,008,000
     
     
     
     
 
FMV of Accelerated Equity Vesting(4)
 
$
513,576
   
$
513,576
     
   
$
513,576
   
$
77,210
 
Total
 
$
4,663,416
   
$
3,401,936
   
$
98,354
   
$
1,323,771
   
$
175,564
 
 

* Includes $749,880, which is the aggregate amount that would be payable in monthly installments over a ten-year period under Mr. McDonald’s Unit Plans.
** Reflects the annual lifetime annuity payable following the triggering event under the terms of the applicable plan.
48

   
2018 Termination/Change-in-Control Payments – Kumi Y. Baruffi  
 
   
Death
   
Disability
   
Termination
w/o Cause
(Not Due to CIC)
   
Termination
Due to CIC
   
Retirement
 
Change in Control Agreement(1)
 
$
   
$
   
$
   
$
580,000
   
$
 
Benefits Payable Under SERPs or Split Dollar Life Insurance(2)
 
$
2,529,593
   
$
1,847,427
   
$
257,447
   
$
1,153,915
     
 
Bank Owned Life Insurance(3)
 
$
870,000
     
     
     
     
 
FMV of Accelerated Equity Vesting(4)
 
$
419,440
   
$
419,440
     
   
$
419,440
     
 
Total
 
$
3,819,033
   
$
2,266,867
   
$
257,447
   
$
2,153,355
     
 
   

(1)
The amount for Messrs. Stein, Lawson, McDonald and Ms. Baruffi represents two times each Named Executive’s annual base salary payable in equal monthly installments for two years following the termination date.
 
(2)
Reflects the benefits to which each Named Executive would be entitled under their SERPs (or split dollar life insurance benefits calculated based on SERP benefits) and, in the case of Messrs. McDonald and Stein, under their Unit Plans, which reduce the benefits otherwise payable under their SERPs (except in the event of death). See “Pension Benefits” and “Unit Plans” above for more details regarding these benefits. Annual amounts reflected in the tables above reflect a single lifetime annuity; however the Named Executives alternatively may elect a joint and survivor annuity.
 
Benefits on Death. Death benefits are not payable pursuant to the SERP; however, in the event of death of a Named Executive while employed, a Split Dollar Agreement provides a one-time lump sum benefit of a stated dollar amount calculated as ten times the projected annual SERP benefit at normal retirement. For Messrs. McDonald and Stein, amounts also include the benefits that each would be entitled under their Unit Plans, which would not reduce the benefits payable under their SERPs. Mr. Stein’s Unit Plan provides for $24,996 annually for ten years following death and Mr. McDonald’s Unit Plans collectively provide for $74,988 annually for ten years following death. In the event that Mr. McDonald or Mr. Stein dies after their respective Unit Plan payments have begun, then any remaining payments in the ten-year benefit stream will be made to his beneficiaries.
 
Benefits on Disability. In the event of disability, the amounts for Messrs. Stein, Lawson, McDonald and Ms. Baruffi represent a one-time lump sum payment calculated as the present value of the projected stream of retirement benefit payments that the Named Executive would expect to receive had he or she remained employed until normal retirement age.
 
Benefits on Termination without Cause or Due to CIC. Upon a termination without cause or due to a change-in-control, benefits are payable in a one-time lump sum, except that for Messrs. Lawson and McDonald benefits are payable in a lifetime annuity.
 
Retirement Benefits. Mr. McDonald was eligible to retire as of December 31, 2018 and receive benefits under his SERP payable in a lifetime annuity.
 
(3)
Represents the amount equal to three times base salary as of the date of death that would be due to each Named Executive’s beneficiaries under a bank owned life insurance policy payable by the insurer.
 
(4)
Represents the fair market value of unvested equity awards (or, for Mr. McDonald in the case of retirement, represents a prorated portion of Performance Shares) based on the closing price of Columbia’s common stock on NASDAQ on December 31, 2018 of $36.29 per share. Performance Shares granted in 2017 and 2018 are shown at stretch performance.
49

Other Compensation Plans
 
Employee Stock Purchase Plan. We also maintain an Employee Stock Purchase Plan (the “ESPP”) that was adopted in 1995, and amended in 2000, 2006, 2009 and 2010. The ESPP was further amended in 2018 to make certain administrative updates. The ESPP allows eligible employees to purchase shares of Columbia common stock at 90% of the lower of the market price at either the beginning or the end of each six-month offering period by means of payroll deductions. At December 31, 2018, there were 383,793 shares available for purchase under the ESPP.
Pay Ratio
 
Set forth below is the total annual compensation for 2018 of Mr. Robbins, the median of the total annual compensation of our employees (other than Mr. Robbins) and the ratio of those two values:
 
CEO Total Annual Compensation
as reported in the Summary
Compensation Table (A)
Median Total Annual
Compensation of Our Employees (B)
Ratio of (A) to (B)
$
2,401,986  
$
52,276  
46 to 1
 
To identify our median employee, we used our entire employee population as of December 31, 2018. We measured compensation based on total gross pay for 2018 as reported to the Internal Revenue Service on Form W-2 for 2018 and annualized the compensation of all permanent employees hired or rehired during 2018. In accordance with SEC rules, after identifying our median employee, we calculated 2018 total annual compensation for both our median employee and Mr. Robbins using the same methodology that we use to determine our Named Executives’ total annual compensation for the Summary Compensation Table. This calculation produced the ratio shown in the table above.

50

PROPOSAL NO. 2

APPROVAL OF THE AMENDED 2018 EQUITY INCENTIVE PLAN
 
The Board has adopted an Amendment to the 2018 Equity Incentive Plan (“Amended Plan”), subject to shareholder approval at the Annual Meeting. The Amended Plan will be effective on May 22, 2019 if it is approved by our shareholders at the 2019 Annual Meeting (the “Effective Date”).

The only change to the 2018 Equity Incentive Plan reflected in the Amended Plan is updating our non-employee director compensation program to (1) remove the $1,000 per-meeting Board meeting attendance fees and adjust the annual cash retainer for each non-employee director to $47,000 (from $35,000) and (2) establish an annual committee retainer of up to $8,000 per committee, which would replace the current practice of paying $1,000 per each committee meeting attended. The Board believes that the changes reflected in the Amended Plan, which were developed in consultation with Pearl Meyer, the Compensation Committee’s independent compensation consultant, will simplify administration of the non-employee director compensation program and are consistent with market practices. If the Amended Plan is not approved by our shareholders then the 2018 Equity Incentive Plan will continue in accordance with its terms (prior to the Amendment). The Amended Plan will not increase the number of shares available for issuance under the 2018 Equity Incentive Plan.

The Board unanimously recommends a vote “FOR” the Amended 2018 Equity Incentive Plan

Summary of the Amended Plan
 
The following summary of the terms of the Amended Plan is qualified in its entirety by reference to the text of the Amended Plan, which is attached as Appendix B to this Proxy Statement.

Administration

The Amended Plan will be administered by the Personnel and Compensation Committee (the “Committee”). Among other things, the Committee will determine, in its discretion, the persons who will receive awards under the Amended Plan, the time when awards will be granted, the terms of the awards and the number of shares of the Company’s common stock subject to the awards. Subject to applicable law and rules of a stock exchange or quotation system, the Committee may delegate all or some of its power and authority to administer the Amended Plan to one or more of its members or any other person selected by it, and may revoke any such delegation at any time. The Board may take any action under the Amended Plan that would otherwise be the responsibility of the Committee. All decisions of the Board or Committee relating to the Amended Plan and awards granted thereunder do not need to be uniform and generally will be final and binding on all persons.

Eligibility

All employees and directors of the Company and its subsidiaries are eligible to participate in the Amended Plan. As of December 31, 2018, approximately 2,137 employees and 13 non-employee directors would have been eligible to receive awards under the Amended Plan. For purposes of the following summary, an eligible person who has been granted an award under the Amended Plan is referred to as a “Grantee.”

Stock Available for Issuance Through the Amended Plan

Generally. The Amended Plan provides for a number of forms of stock-based compensation, as further described below. The number of shares of the Companys common stock that may be subject to awards under the 2018 Equity Incentive Plan, which is not changed by the Amended Plan, is 3,050,000 shares. The number of shares remaining available for grant as of December 31, 2018 is 3,015,957.

Acquired Awards. Shares of the Company’s common stock subject to Awards (as defined below) that are assumed, converted or substituted under the Amended Plan as a result of the Company’s acquisition of another company (including by way of merger, combination or similar transaction) will not count against the number of shares that may be granted under the Amended Plan. Available shares under a stockholder approved plan of an acquired company (as appropriately adjusted to reflect the transaction) may be used for Awards under the Amended Plan and do not reduce the maximum number of shares available for grant under the Amended Plan, subject to applicable stock exchange requirements.

51

Share Counting. Shares subject to an Award that are not issued because the Award is forfeited or cancelled will be returned and made available for further grant under the Amended Plan; provided that shares will not again be available for further grant in the case of shares that are (i) used to satisfy a withholding obligation of the Grantee, (ii) tendered to the Company to pay the exercise price or consideration required to be paid with respect to an Award or (iii) subject to a stock appreciation right, to the extent the stock appreciation right is exercised.

Non-Employee Director Awards. The only changes reflected in the Amended Plan are updates to our non-employee director compensation program effective after the Annual Meeting. For the 12 month period following the first Board meeting after each annual meeting of the Company’s stockholders (each, an “Annual Period”), each non-employee director of the Company will receive for his or her service on the Board: (1) an annual cash retainer of $47,000 and (2) an annual equity retainer of $70,000. Non-employee directors will no longer receive per-meeting attendance fees. Additionally, the Board may establish an annual retainer for each non-employee director chairing or serving on any standing committee of the Board that does not exceed (x) $15,000 for each committee chaired plus (y) $8,000 for each committee on which the non-employee director serves. All retainers will increase by 5% each year beginning with the 2020-2021 Annual Period unless the Board determines to defer and cumulate the increase (or a portion of the increase). The Board may at any time provide a retainer or other fee for service as a non-employee director, including for service as Chair of the Board or for serving on a specific purpose committee.

Description of Awards Under the Amended Plan

The Committee may award to eligible Grantees incentive stock options and nonqualified stock options; restricted shares; restricted stock units; stock appreciation rights; and cash awards, each of which is referred to as an “Award.”

The terms of these Awards as set forth in the Amended Plan are described in greater detail below.

Stock Options. Options granted under the Amended Plan may include options intended to meet the requirements of an incentive stock option as defined in Section 422 of the Internal Revenue Code and non-qualified options; provided that the maximum number of shares of common stock underlying incentive stock options that may be granted to any one Grantee (other than a non-employee director) in a calendar year is 100,000 shares. The exercise price for each option granted under the Amended Plan is determined by the Committee, but may not be less than 100% of the fair market value on the date of grant. Fair market value is defined in the Amended Plan to mean the closing sale price of a share of the Companys common stock as reported on the NASDAQ Stock Market. The term of each option will be fixed by the Committee and may not exceed 10 years from the date of grant; provided that vested options will expire on an earlier date if the Grantees employment with the Company terminates. During the lifetime of the Grantee, options may only be exercised by the Grantee.

Restricted Stock Awards. A restricted stock Award means a share of common stock issued to an employee or director that is subject to restrictions and conditions determined by the Committee, including, for example, completing a specified number of years of service or attaining specified performance goals. No cash or other consideration need be paid for shares of common stock subject to an Award, other than in the form of services performed under terms and conditions determined by the Committee. Any portion of a restricted stock Award that is not vested because the specified objectives were not attained is forfeited. A Grantee holding a restricted stock Award (both vested and unvested) will have the rights of a shareholder (including voting and liquidation rights) with respect to the shares subject to the Award; provided that all ordinary cash dividends or other ordinary distributions paid during the period of restriction upon any share of restricted stock will be retained by the Company and will be paid to the Grantee (without interest) if and to the extent that the restricted stock vests.

Restricted Stock Unit. A restricted stock unit means the right to receive common stock or a payment in cash in an amount equal to the fair market value of such common stock on the date on which the restricted stock unit Award is settled. No cash or other consideration need be paid for shares of common stock subject to an Award, other than in the form of services performed under the terms and conditions determined by the Committee. The holder of a restricted stock unit will have none of the rights of a shareholder until such time as shares, if any, are actually issued. Any portion of an Award that is not vested because the specified objectives were not attained is forfeited. The Amended Plan provides that a restricted stock unit may include a right to a dividend equivalent, which is an amount equal to the total dollar value of all dividends that would have been paid on the shares of common stock covered by the Award between the date of grant of the restricted stock units and the date on which the restricted stock units are settled if such shares of common stock had been delivered pursuant to the Award. A restricted stock unit does not include a dividend equivalent unless the applicable Award agreement clearly specifies that it does. Any restricted stock units that are granted with dividend equivalents will accrue dividend equivalents at the time and at the same rate as dividends are paid on shares of Common Stock, which dividend equivalents will be retained by the Company and will be paid to the Grantee (without interest) if and to the extent that the restricted stock units vest.
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Stock Appreciation Right.  A stock appreciation right means the right to receive payment in cash or common stock in an amount equal to the excess of the fair market value of the Companys common stock on the date of exercise of the right to receive payments under the stock appreciation right and the fair market value of the Companys common stock on the date of grant. The reference price applicable to a stock appreciation right may never be less than the fair market value of the underlying stock on the date on which the stock appreciation right is granted, and no stock appreciation right may be exercisable later than 10 years after the grant date.
 
Cash Awards. The Committee will also have the discretion to grant cash Awards (including, without limitation, retainers and meeting-based fees for non-employee directors) under the Amended Plan upon such terms and conditions as it establishes. Each cash Award will have a value as determined by the Committee. The Committee may establish performance goals in its discretion and determine payout in its discretion.

Change in Control

Except as otherwise provided in the Award Agreement, in the event of a change in control in which the surviving, successor or acquiring corporation in the transaction agrees to replace Awards with rights to its equity that confer substantially the same benefits as those represented by the Awards, as determined by the Committee, Awards under the Amended Plan will be subject to double-trigger vesting so that, if a Grantees employment is terminated by the Company or any successor entity thereto without cause, or the Grantee resigns his or her employment for good reason, in either case, on or within two years after the change in control, each Award granted to the Grantee prior to such change in control will become fully vested. If the surviving, successor or acquiring corporation in the transaction does not agree to replace Awards with equity awards that confer substantially the same benefits, then all Awards will vest on the closing of the transaction or any earlier date selected by the Committee. Unless the Committee determines otherwise, any outstanding Awards that are subject to performance-vesting conditions will be deemed earned at the greater of the target level and the actual performance level as of the change in control date and will cease to be subject to any further performance conditions but will continue to be subject to time-based vesting following the change in control in accordance with the original performance period.

In the event of a change in control or similar transaction, a Grantees Award will be treated in accordance with one or more of the following methods as determined by the Committee in its sole discretion: (i) settle Awards for an amount of cash or securities equal to their value, where in the case of stock options and stock appreciation rights, the value of such Awards will be equal to their in-the-money spread value (if any); (ii) provide for the assumption of or the issuance of substitute Awards that will substantially preserve the otherwise applicable terms of any affected Awards; (iii) modify the terms of the Awards to add events, conditions or circumstances upon which the vesting of the Awards will accelerate; or (iv) provide that for a period of at least 20 days prior to the change in control, any stock options or stock appreciation rights that would not otherwise become exercisable prior to the change in control will be exercisable as to all shares subject thereto (contingent upon and subject to the occurrence of the change in control) and that any stock options or stock appreciation rights not exercised prior to the consummation of the change in control will terminate and be of no further force and effect as of the change in control. In the event of a change in control where all options and stock appreciation rights are settled for an amount (as determined in the sole discretion of the Committee) of cash or securities, the Committee may, in its sole discretion, terminate any option or stock appreciation right for which the exercise price is equal to or exceeds the per share value of the consideration to be paid in the change in control transaction without payment of consideration therefor.

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Adjustments for Changes in Capitalization

Subject to any required action by the shareholders of the Company, the number of shares subject to Awards, the number of shares available for grants, the exercise price for shares specified in Awards, the value of shares used to determine amounts required to be paid under restricted stock units (and any associated dividend equivalent) and stock appreciation rights and the individual Grantee limitations set forth in the Amended Plan will be proportionately adjusted for any increase or decrease in the number of issued shares of the Companys common stock resulting from a stock split or other subdivision or consolidation of shares, the payment of any extraordinary cash or stock dividend on shares or any other increase or decrease in the number of such shares effected without receipt of consideration by the Company. The Committee will make such adjustments and its determination in that respect will be final, binding and conclusive. The grant of an Award will not affect in any way the right or power of the Company to adjust, reclassify, reorganize or change its capital or business structure.

No Re-pricing or Repurchase of Options and Stock Appreciation Rights

The exercise price of outstanding options and stock appreciation rights may not be changed, and the Company may not make an offer to purchase outstanding options or stock appreciation rights for cash, or exchange outstanding options or stock appreciation rights for other securities, at a time when the exercise price of the outstanding options or stock appreciation rights exceeds the fair market value of the common stock covered by the options or stock appreciation rights, except with approval of the Companys shareholders or as otherwise required or permitted in the Amended Plan (for example, proportionate adjustments in the event of a corporate transaction that impacts the Companys common stock).

Clawback Policies

Awards under the Amended Plan will be subject to any clawback or recapture policy that the Company may adopt from time to time to the extent provided in such policy and, in accordance with such policy, may be subject to the requirement that the Awards be repaid to the Company after they have been distributed to the Grantee. For a description of our clawback policy, see Compensation Discussion & Analysis-Clawback Policies for the Recovery of Incentive Compensation.

Non-Transferability of Awards

No Award granted under the Amended Plan may be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner, other than by will or by the laws of descent or distribution if permitted by the Amended Plan.

Term of the Amended Plan; Amendment and Termination

The 2018 Equity Incentive Plan was approved by our shareholders on May 23, 2018 and the Amended Plan will continue to have a term of 10 years following the date of that approval. The Amended Plan may be amended or terminated at any time by the Board subject to any required shareholder approval. If the Amended Plan is terminated, it will remain in effect with respect to any Awards granted under it that are outstanding at the time of its termination. The Board or Committee may amend outstanding Awards under the Amended Plan; provided that any amendment may not, without the Grantees consent, materially impair or diminish the Grantees rights under the Award.

Federal Income Tax Consequences
 
The following is a brief description of the current U.S. federal income tax treatment generally arising with respect to grants of Awards under the Amended Plan. This summary is not intended to constitute tax advice, is not intended to be exhaustive and, among other things, does not describe state, local or foreign tax consequences.
 
Incentive Stock Options. Holders of incentive stock options incur no federal income tax (other than potential alternative minimum tax) on the grant or exercise of such options. Although there is no limit on the aggregate fair market value of stock that can be subject to an incentive stock option, to the extent the fair market value of stock (measured at the date of grant) with respect to which the option becomes exercisable for the first time during a calendar year exceeds $100,000, then the option will be treated as a nonqualified stock option to the extent of the excess. If stock received upon exercise of an incentive stock option is disposed on or after the later of (i) the second anniversary of the date of grant of the incentive stock option and (ii) the first anniversary of the date of exercise of the incentive stock option (the statutory holding period), then the holder incurs tax at capital gain rates, provided the stock is treated in its hands as a capital asset. The Company will generally not be entitled to a deduction for any amount relating to stock issued under an incentive stock option.

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If stock received upon exercise of an incentive stock option is disposed before the statutory holding period, then the holder will be subject to tax as follows: (1) on the excess of the fair market value of the shares on the date of exercise (or the amount realized on the disqualifying disposition, if less) over the exercise price paid, as ordinary income, and (2) on the excess, if any, of the amount realized on the disqualifying disposition over the fair market value of the shares on the date of exercise, as capital gain. If the amount realized from a disqualifying disposition is less than the exercise price paid (i.e., the holders basis) and the loss sustained upon such disposition would otherwise be recognized, the holder will not recognize any ordinary income from the disqualifying disposition and instead will recognize a capital loss. In the event of a disqualifying disposition, the amount recognized by the holder as ordinary income is generally deductible by the Company.

The current position of the Internal Revenue Service is that income tax withholding and FICA and FUTA taxes (“employment taxes”) do not apply upon the exercise of an incentive stock option or upon any subsequent disposition, including a disqualifying disposition, of shares acquired pursuant to the exercise of the incentive stock option.

Nonqualified Stock Options. The holder of a nonqualified stock option recognizes income subject to federal income tax on the date of exercise of such option. The holder is taxed on the excess of (i) the fair market value of the stock (measured on the date of exercise) acquired upon exercise of the option over (ii) the option exercise price. The income is taxable at ordinary income rates and subject to employment taxes, and the Company is entitled to a deduction for the amount included by the holder in income.

Restricted Stock Awards. A Grantee of restricted stock will generally not be subject to federal income tax or employment taxes with respect to the stock at the time of grant if the stock is subject to a substantial risk of forfeiture. Instead, the Grantee is subject to federal income tax and employment taxes with respect to such stock in the taxable year in which the stock is transferable or is no longer subject to such substantial risk of forfeiture, whichever is applicable. The amount that the Grantee must include in gross income with respect to the restricted stock is the excess of the fair market value of the stock at the time it is transferable or no longer subject to a substantial risk of forfeiture, whichever is applicable, over the amount (if any) that was paid for the stock. In lieu of the foregoing, a Grantee of restricted stock can make a special election under Section 83(b) of the Code to include in gross income, for the taxable year in which the stock is granted, the excess of the fair market value of the stock at the time of grant over the amount (if any) paid for the stock. The Company is entitled to a deduction for the amount included by the Grantee in income.

Restricted Stock Units. The grant of a restricted stock unit will result in no income to the Grantee or deduction for the Company until such time as payments are actually made to the Grantee under the restricted stock unit. Upon vesting of the restricted stock unit, the fair market value of the shares covered by the Award on the vesting date will be subject to employment taxes. At the time the Company settles the Award, the Grantee will recognize ordinary income and the Company will be entitled to a deduction measured by the fair market value of the shares plus cash, if any, transferred to the Grantee.

Stock Appreciation Rights. The grant of a stock appreciation right will result in no income to the Grantee or deduction for the Company until such time as payments are actually made to the Grantee under the stock appreciation right. Upon exercise of a stock appreciation right, an amount equal to the cash and/or the fair market value (measured on the date of exercise) of the shares received will be taxable to the holder as ordinary income, and such amount will be deductible by the Company. This amount of income will be subject to employment taxes.

Cash Awards. At the time the Company makes a payout pursuant to a cash Award the Grantee will recognize ordinary income and the Company will be entitled to a deduction equal to the amount of such cash payment. This amount of income will be subject to employment taxes.

Additional Medicare Tax. Grantees will also be subject to a 3.8% tax on the lesser of (i) net investment income for the relevant taxable year and (ii) the excess of modified adjusted gross income for the taxable year over a certain threshold (between $125,000 and $250,000, depending on the Grantees circumstances). The Grantees net investment income generally includes net gains from the disposition of shares.

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Section 162(m). Under Section 162(m) of the Code, the Company may not deduct compensation in any taxable year in excess of $1,000,000 that is paid to any individual who was a covered employee (generally, our named executive officers) for any taxable year beginning after December 31, 2016.

Non-Employee Director Awards. The discussion above regarding the federal income tax implications of Awards generally applies to Awards granted to non-employee directors of the Company, except that non-employee directors are not eligible to receive incentive stock options and any amounts taxable to non-employee directors in respect of Awards are not subject to employment taxes (including the additional 3.8% Medicare tax) but may be subject to certain self-employment taxes.

New Plan Benefits
 
Awards granted under the Amended Plan will be subject to the Committees discretion, and the Committee has not determined future Awards or who might receive them. As a result, the benefits that will be awarded or paid under the Amended Plan are not currently determinable. The Awards granted for the 2018 fiscal year would not have changed if the Amended Plan had been in place instead of the 2018 Plan and are set forth in the following table and, for our Named Executives, in the 2018 Summary Compensation Table and the 2018 Grants of Plan-Based Awards table and, for our non-employee directors, in the 2018 Director Compensation Table above.
 
Past Grants under the 2018 Equity Incentive Plan

Since the effective date of the 2018 Equity Incentive Plan, the Company has not awarded any options, warrants or rights to acquire securities of the Company. As of December 31, 2018, the Company had awarded an aggregate of 34,043 restricted stock and Performance Share awards under the 2018 Equity Incentive Plan.
 
Vote Required and Board Recommendation
 
The affirmative vote of a majority of those shares present and entitled to vote is required to adopt the 2018 Plan. Brokers do not have discretion to cast a vote for the adoption of the 2018 Plan without your direction. Therefore, if your shares are in street name and you do not instruct your broker how to vote, your shares will not be voted on this proposal.

The Board of Directors unanimously recommends that you vote “FOR” the Amended 2018 Equity Plan as described above and attached to this Proxy Statement as Appendix B.
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