UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

 

 

 

7800 East Orchard Road, Suite 300
Greenwood Village, CO 80111

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

To the Shareholders of National Bank Holdings Corporation:

We cordially invite you to attend the Annual Meeting of Shareholders of National Bank Holdings Corporation at
8:30 a.m. Mountain Time on Wednesday, May 4, 2016, at the DoubleTree by Hilton Denver Tech Center, located at 7801 East Orchard Road, Greenwood Village, Colorado 80111.  The purpose of the meeting is to:

Information with respect to these matters is contained in the proxy statement accompanying this notice.

A proxy for use at the meeting in the form accompanying this notice is hereby solicited on behalf of the Board of Directors from holders of Class A common stock.  The Board of Directors has fixed March 14, 2016 as the record date for determining which shareholders have the right to receive notice of, and to vote at, the meeting or any postponements or adjournments thereof.

The proxy statement and the accompanying form of proxy are first being sent to shareholders on or about March 28, 2016.

Whether or not you plan to attend the meeting, we urge you to vote and submit your proxy so that as many shares as possible may be represented at the meeting. Your vote is important and we appreciate your cooperation in returning your proxy promptly. Your proxy is revocable and will not affect your right to vote in person at the meeting.

Please call us at 720-529-3346 if you need directions to attend the meeting or have questions about how to vote in person.

 

Greenwood Village, Colorado

March 21, 2016

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to Be Held on May 4, 2016: Our Proxy Statement and 2015 Annual Report to Shareholders are also available at www.proxyvote.com.

 

 

NATIONAL BANK HOLDINGS CORPORATION

 

PROXY STATEMENT

2016 ANNUAL MEETING OF SHAREHOLDERS

 

Table of Contents

 

 

 

 

GENERAL INFORMATION

 

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board of Directors” or the “Board”) of National Bank Holdings Corporation, a Delaware corporation (the “Company”, “NBHC”, “we”, “us” or “our”), to be used at our 2016 Annual Meeting of Shareholders (the “Meeting”) and at any postponements or adjournments thereof. The Meeting will be held at the DoubleTree by Hilton Denver Tech Center, located at 7801 East Orchard Road, Greenwood Village, Colorado 80111, at 8:30 a.m. Mountain Time on Wednesday, May 4, 2016.

 

In this proxy statement, we refer to our employees as “associates.”  In this proxy statement, we also refer to the Notice of Annual Meeting of Shareholders, this proxy statement, our 2015 Annual Report to Shareholders and the accompanying proxy as our “Proxy Materials.”

 

Holders of record of shares of Class A common stock at the close of business on March 14, 2016 (the record date) are entitled to notice of, and to vote at, the Meeting. As of such date, there were 29,401,806 shares of Class A common stock outstanding and entitled to vote. In addition, as of such date, there were 912,109 shares of unvested restricted stock (Class A common stock) entitled to vote. Each share of our Class A common stock is entitled to one vote on all matters (in the case of Proposal 1, with respect to the election of each director). As of March 14, 2016, there were no shares of Class B non-voting common stock issued and outstanding. Shareholders cannot cumulate votes in the election of directors.

 

Please read the Proxy Materials carefully. You should consider the information contained in this proxy statement when deciding how to vote your shares. You have a choice of voting by proxy over the Internet, by using a toll-free telephone number or by completing a proxy card and mailing it in the postage-paid envelope provided. If your shares are held in the name of a bank, broker or other holder of record, please refer to your proxy card or the voting information provided by your bank, broker or other holder of record to see which voting options are available to you. Voting on the Internet, by telephone or by mail will not prevent you from attending or voting your shares at the Meeting. However, if you hold shares through a bank, broker or other holder of record, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote at the Meeting. Otherwise, your shares will be voted in the manner in which you instructed the record holder of your shares.

 

When you vote by proxy, your shares will be voted according to your instructions. If you are a shareholder of record, you may revoke your proxy at any time prior to the close of the polls at the Meeting by submitting a later dated proxy or delivering a written notice of revocation to our Secretary, Zsolt K. Besskó, at National Bank Holdings Corporation, 7800 E. Orchard Road, Suite 300, Greenwood Village, CO 80111.  If you hold shares through a bank, broker or other holder of record, you must contact the holder of record to revoke any prior voting instructions.

 

We pay the cost of soliciting proxies. Members of our Board and other associates may solicit proxies by mail, telephone, fax, email or in person. We will not pay directors or other associates any extra amounts for soliciting proxies. We may, upon request, reimburse brokerage firms, banks or similar nominees representing street name holders for their expenses in forwarding Proxy Materials to their customers who are street name holders and obtaining their voting instructions. We have engaged Kingsdale Shareholder Services (“Kingsdale”) as proxy solicitation agent and will pay fees of approximately $12,500 to Kingsdale plus certain out-of-pocket expenses to assist us with the solicitation of proxies.  

 

Any shareholder entitled to vote at the Meeting may attend the Meeting. If you hold shares through a bank, broker or other holder of record and would like to attend the Meeting, you will need to bring an account statement or other acceptable evidence of ownership of our Class A common stock as of the record date. Each shareholder who attends may be asked to present valid picture identification, such as a driver’s license or passport. Please note that the use of cell phones, tablets, recording and photographic equipment, computers and/or other similar devices is not permitted in the meeting room at the Meeting.

 

Our principal executive offices are located at 7800 E. Orchard Road, Suite 300, Greenwood Village, CO 80111.

VOTE REQUIRED FOR APPROVAL

 

The presence, by proxy or in person, of the holders of a majority of the outstanding shares of our Class A common stock entitled to vote at the Meeting shall constitute a quorum. Withheld votes, abstentions and broker “non-votes” (shares held by a broker or nominee that has not received voting instructions from its client and does not have discretionary authority to vote on a particular matter) are counted as present for purposes of establishing a quorum.  If you are a beneficial shareholder and your broker holds your shares in its name, the rules of the New York Stock Exchange (“NYSE”) permit your broker to vote your shares on the ratification of the appointment of our independent registered certified public accounting firm (Proposal 2), even if the broker does not receive voting instructions from you. However, under the NYSE rules, your broker cannot vote your shares on the other proposals if you do not timely provide instructions for voting your shares.

 

For Proposal 1 (election of directors), the six nominees for director receiving a plurality of the votes cast at the Meeting in person or by proxy will be elected. This means that the director nominee with the most votes for a particular slot is elected for that slot. Only votes “for” affect the outcome. Broker “non-votes” will have no effect on the voting results for this proposal.

 

Proposal 2 (ratification of the appointment of our independent registered certified public accounting firm) will be passed if a majority of the shares of our Class A common stock present at the Meeting and entitled to vote cast their votes “for” this proposal. Abstentions will be counted as votes present and entitled to vote and will have the same effect as votes “against” this proposal. No broker “non-votes” are expected to exist in connection with this proposal.

 

The advisory vote on executive compensation (Proposal 3)  is  non-binding, as provided by law. Our Board and our Compensation Committee, however, will review the results of the vote and, consistent with our commitment to shareholder engagement, will take it into account in making a determination concerning the advisory vote on executive compensation. Proposal 3 (the advisory proposal on the compensation of our named executive officers) will be approved if a majority of the shares of our Class A common stock present at the Meeting and entitled to vote cast their votes “for” this proposal. Abstentions will be counted as votes present and entitled to vote and will have the same effect as votes “against” this proposal. Broker “non-votes” are not considered to be entitled to vote and therefore will have no effect on the voting results for this proposal.

 

Approval of any other business that may properly come before the Meeting will require the affirmative vote of a majority of the shares present in person or represented by proxy at the Meeting and entitled to vote thereon.

 

VOTING FOR REGISTERED AND BENEFICIAL SHAREHOLDERS

 

Registered and beneficial shareholders can vote their shares in the following ways:

 

By Internet: You may vote your shares over the internet by going to www.proxyvote.com.  You will need to enter your 16-digit control number (found at the top right hand side of the form of proxy or voting instruction form that you received in the mail) to identify yourself as a shareholder on the voting website.

 

By Telephone: Vote by telephone by calling 1-800-690-6903. You will need to enter your 16-digit control number (found at the top right hand side of the form of proxy or voting instruction form that you received in the mail) to identify yourself as a shareholder.

 

By Mail: Mark, sign and date your proxy card and return it in the postage paid envelope we have provided or return it to Vote Processing c/o Broadridge, 51 Mercedes Way, Edgewood, NY, 11717.

 

In Person: If you are a “record” shareholder of Class A common stock (that is, you hold Class A common stock in your own name in NBHC’s stock records maintained by our transfer agent), register upon your arrival at the Meeting, request a ballot and submit the ballot with your voting instructions at the Meeting.

 

Beneficial shareholders who wish to vote at the Meeting will need to obtain a proxy form from the institution that holds your shares and follow the voting instructions on such form.

 

Your voting instructions must be received by the proxy voting deadline which is Wednesday, May 3, 2016. The internet and telephone voting facilities will close at 11:59 p.m. Eastern time on May 3, 2016.

 

If you have any questions or require voting assistance, please contact our proxy solicitation agent, Kingsdale Shareholder Services, toll-free at 1-855-682-4840 (or 1-416-867-2272 for callers outside North America), or by e-mail at contactus@kingsdaleshareholder.com.

 

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth, as of March 14, 2016, information regarding the beneficial ownership of our Class A common stock by (i) each of our Chief Executive Officer, Chief Financial Officer and the three other highest paid executive officers for 2015 (those five executive officers are listed in the table captioned “Summary Compensation Table” elsewhere in this proxy statement and are collectively referred to as the “Named Executive Officers” or “NEOs”); (ii) each director; (iii) all current directors and executive officers as a group and (iv) each person known by us to own beneficially more than five percent of the shares of our Class A common stock (our only class of voting securities outstanding).

 

We have determined beneficial ownership in accordance with the rules of the Securities Exchange Commission (“SEC”). Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the tables below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws. We have based our calculation of the percentage of beneficial ownership on 30,313,915 shares, which number is comprised of 29,401,806 shares of Class A common stock outstanding and 912,109 shares of unvested restricted stock (which shares of restricted stock are entitled to voting rights), in each case as of March 14, 2016.  

 

In computing the number of shares of Class A common stock beneficially owned by a person and the percentage ownership of that person, we deemed outstanding shares of Class A common stock subject to options held by that person that are currently exercisable or exercisable within sixty days of March 14, 2016. We, however, did not deem these shares outstanding for the purpose of computing the percentage ownership of any other person. Beneficial ownership representing less than 1% is denoted with an asterisk (*).

 

 

PROPOSAL 1- ELECTION OF DIRECTORS

 

Size of Board. We have set the size of the Board at seven members. The current members of the Board are G. Timothy Laney (Chairman), Ralph W. Clermont (independent Lead Director), Frank V. Cahouet, Robert E. Dean, Fred J. Joseph, Micho F. Spring and Burney S. Warren, III. Mr. Cahouet has decided to retire from the Board and not stand for re-election at the Meeting. The Board intends to decrease the fixed number of directors to six after the Meeting.

 

Nominees. Upon the recommendation of the Nominating and Governance Committee, the Board has nominated the persons named below for reelection to the Board. With the exception of Mr. Laney, who serves as our Chairman, President and CEO, the Board has determined that each of these nominees is an independent director, as discussed further below under “Director Independence.”

 

Each of the directors elected at the Meeting will be elected for a one-year term which expires at the next annual meeting of shareholders and will serve until the director’s successor has been elected and qualified, or until the director’s earlier resignation or removal.

 

The Board recommends you vote FOR each of the nominees set forth below.

 

In the event that any nominee is no longer a candidate for director at the time of the Meeting, the proxyholders will vote for the rest of the nominees and may vote for a substitute nominee in their discretion. To the best of its knowledge, the Company has no reason to believe that any of the nominees will be unable to serve as directors if elected.

 

Ralph W. Clermont, Age 68

 

Mr. Clermont has served as a director for the Company since 2009 and as the Board’s independent Lead Director since May 2014. Mr. Clermont also serves as Chair of the Board’s Audit & Risk Committee. Mr. Clermont retired in 2008 as Managing Partner of the St. Louis office of KPMG LLP, and was formerly the partner in charge of KPMG’s Midwest financial services practice. Mr. Clermont joined the St. Louis office of KPMG in 1969 and was elected to partnership in 1977. Mr. Clermont spent over 39 years providing services to the banking industry and has had responsibility for the audits of numerous banking organizations. Subsequent to retiring, Mr. Clermont has served as a consultant to various banking institutions on strategic planning, risk management and corporate governance matters. In October 2015, Mr. Clermont was appointed to the Board of Directors of Cass Information Systems, Inc., where he also serves on the Audit Committee. Mr. Clermont is a certified public accountant and a member of the American Institute of Certified Public Accountants and Missouri Society of Certified Public Accountants. Mr. Clermont was a member of the KPMG’s Assurance Services Committee and was chairman of KPMG’s Quality Improvement Audit Subcommittee. Mr. Clermont received a Bachelor of Science degree in accounting from Saint Louis University. Mr. Clermont’s qualifications to serve on our Board of Directors include his expertise in financial and accounting matters for complex financial organizations. As the independent Lead Director, Mr. Clermont is an ex officio member of all of our Board committees with full voting rights.

 

Robert E. Dean, Age 64

 

Mr. Dean has served as a director for the Company since 2009 and also serves as Chairman of the Nominating & Governance Committee. Mr. Dean is a private investor. From 2000 to 2003, Mr. Dean was with Ernst & Young Corporate Finance LLC, a wholly owned broker-dealer subsidiary of Ernst & Young LLP, serving as a Senior Managing Director and member of the Board of Managers from 2001 to 2003. From 1976 to 2000, Mr. Dean practiced corporate, banking and securities law with Gibson, Dunn & Crutcher LLP. Mr. Dean co-chaired the firm’s banking practice and advised bank clients on numerous capital markets and merger and acquisition transactions (including FDIC-assisted transactions). Mr. Dean was Partner-in-Charge of the Orange County, California office from 1993 to 1996 and was a member of the law firm’s Executive Committee from 1996 to 1999. Mr. Dean holds a Bachelor of Arts degree from the University of California at Irvine and a Juris Doctor degree from the University of Minnesota Law School. Since November 2014, Mr. Dean has served as a member of the boards of trustees of two related Cornerstone closed-end mutual funds (Strategic Value (CLM) and Total Return (CRF)) and as a member of each audit and nominating and governance committee thereof. Mr. Dean’s substantial experience in bank capital markets and merger and acquisition transactions, bank regulatory matters and public company corporate governance matters qualifies him to serve on our Board of Directors.

 

Fred J. Joseph, Age 63

 

Mr. Joseph has served as a director of the Company since 2014. Mr. Joseph was a financial services regulator for 30 years, retiring at the end of 2013 as the Banking and Securities Commissioner for the State of Colorado, a dual role created in 2011. He was originally appointed as the Securities Commissioner in 1999. In that role, he oversaw the regulatory agency that licenses stockbrokers, brokerage firms and investment advisers in Colorado. In his role as the Banking Commissioner, he had regulatory oversight of state-chartered commercial banks, money transmitters and trust companies in Colorado. Mr. Joseph also served as the Acting Banking Commissioner for the State of Colorado from 2008 to 2010. From 1992 to 1999, he was the Deputy Securities Commissioner for the State of Colorado. In that position, he oversaw the examination functions as well as the administrative matters for the Colorado Division of Securities. Prior to that, he was the Deputy Commissioner of Financial Services in Colorado for eight years, where he was responsible for the examination and regulatory oversight of state-chartered savings and loan associations and credit unions in Colorado. Mr. Joseph is a past President of the North American Securities Administrators Association (NASAA), and also served as a director on NASAA’s Board for almost a decade. Mr. Joseph currently serves as a board member of the Colorado Board of Mortgage Loan Originators, being appointed to that position by the Colorado Governor in 2014. He also serves as a member of the Investor Issues Committee for the Financial Industry Regulatory Authority (FINRA). He also serves as an advisory board member of Plains Dedicated, a privately-held trucking company. Mr. Joseph holds a Bachelor of Science degree in Business Administration from Colorado State University-Pueblo and an MBA in Finance and Accounting from Regis University in Denver. Mr. Joseph’s substantial experience in the regulatory fields of financial services and securities qualifies him to serve on our Board of Directors.

 

G. Timothy Laney, Age 55

 

Mr. Laney has served as the Company’s President and Chief Executive Officer and as a director for the Company since 2010. Mr. Laney was appointed as Chairman of the Company’s Board of Directors in 2014. Mr. Laney is the former Senior Executive Vice President and Head of Business Services at Regions Financial, one of the nation’s largest full-service banks. He joined Regions Financial in late 2007 to lead the transformation of the bank’s wholesale lines of business. Prior to his tenure at Regions Financial, Mr. Laney had a 24-year tenure with Bank of America, where he held senior management roles in small business, commercial banking, private banking, corporate marketing and change management. He also served as President of Bank of America, Florida, with more than 800 banking centers and $50 billion in total assets. He was also a member of Bank of America’s Management Operating Committee. Mr. Laney brings to our Board of Directors valuable and extensive experience from managing and overseeing a broad range of operations during his tenures at Bank of America and Regions Financial.

 

Micho F. Spring, Age 66

 

Ms. Spring has served as a director for the Company since 2009. Ms. Spring is Chair, Global Corporate Practice and President, New England of Weber Shandwick. Prior to joining Weber Shandwick, Ms. Spring was Chief Executive Officer of Boston Telecommunications Company. She served for four years as Deputy Mayor of Boston. She previously served as Chief of Staff to Boston Mayor Kevin H. White after four years of service in New York City government. Ms. Spring also served as a director of Citizens Bank of Massachusetts, one of the largest state-chartered banks in Massachusetts at the time of her service. Ms. Spring currently serves as Vice Chair of the Greater Boston Chamber of Commerce and on the board of Partners Healthcare System (a member of the Corporation of Partners Healthcare, Inc.). She also serves on numerous boards of civic organizations including John F. Kennedy Library Foundation, Friends of Caritas Cubana and the Massachusetts Women’s Forum, of which she is a past President, and the Massachusetts Conference for Women. Ms. Spring attended Georgetown and Columbia Universities and received a Masters in Public Administration from Harvard’s Kennedy School of Government. Ms. Spring’s extensive public policy experience, expertise in public relations, involvement in community activities and knowledge of financial institutions make her a valuable member of our Board.

 

Burney S. Warren, III, Age 68

 

Mr. Warren has served as a director for the Company since 2009 and also serves as Chairman of the Compensation Committee. Mr. Warren has also served as an advisor to South State Corporation, a bank holding company based in South Carolina, over the past five years. Prior to retirement in December 2007, Mr. Warren was Executive Vice President and Director of Mergers and Acquisitions for Branch Banking and Trust Company (“BB&T”), one of the largest commercial banks in the United States. Mr. Warren was responsible for the development, structure and negotiation of BB&T’s bank and non-bank acquisitions. During his tenure, he successfully completed the acquisition of over 50 banks and thrifts and numerous nonbank transactions, including capital markets, brokerage, fixed income and consumer finance. Prior to joining BB&T in 1990, Mr. Warren was President and Chief Executive Officer of First Federal Savings Bank, Greenville, N.C. Mr. Warren is currently chairman of East Carolina University’s Real Estate Foundation and serves on the board and executive committee of the East Carolina University Foundation. Mr. Warren received a Bachelor of Science degree in Business Administration from East Carolina University. Mr. Warren’s qualifications to serve on our Board of Directors include his extensive financial institutions experience, including identifying and integrating acquisitions for complex financial institutions.

 

PROPOSAL 2- RATIFICATION OF APPOINTMENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Audit and Risk Committee of the Board of Directors has appointed KPMG LLP (“KPMG”) as our independent registered public accounting firm for the year ending December 31, 2016.  KPMG has audited the financial statements of the Company since 2009.  Shareholders will vote at the Meeting to ratify such appointment. Representatives from KPMG are expected to be present at the Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

 

The Board recommends that shareholders vote FOR the proposal to ratify the appointment of KPMG as our independent registered public accounting firm for 2016 (Proposal 2).

 

KPMG Fees

 

We incurred the fees shown in the following table for professional services provided by KPMG for 2015 and 2014:

 

 

Audit Fees. Audit fees principally relate to the audit of our annual financial statements, the review of our quarterly financial statements included in our Quarterly Reports on Form 10-Q and the audit of our internal control over financial reporting. 2015 audit fees also include fees for audit services related to the implementation of the 2013 COSO framework, our core processing system conversion and our integration of Pine River Valley Bank into our Community Banks of Colorado family.  In addition, 2015 and 2014 audit fees include fees for services related to the review of registration statements and related consent filings of $8,500 and $8,925, respectively.

 

Audit-Related Fees. Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees” above. There were no audit-related fees in 2015 and 2014.

 

Tax Fees. Tax fees principally relate to the preparation of tax returns and compliance services, tax planning and consultation services.

 

Audit and Risk Committee Pre-Approval Policies and Procedures

 

The Audit and Risk Committee selects and oversees our independent registered public accounting firm. The Audit and Risk Committee’s charter requires that the committee pre-approve all audit, audit-related, tax and other services performed by the independent registered public accounting firm, subject to de minimis exceptions for certain non-audit services, so long as such services are approved by the committee prior to the completion of the audit. In approving any non-audit services, the Audit and Risk Committee considers whether the provision of the services would impair the independent registered public accountant’s independence.

 

The Audit and Risk Committee may delegate pre-approval authority and responsibility to individuals or to designated subcommittees consisting of one or more members of the committee, provided that any such pre-approvals are presented to the committee at its next scheduled meeting. The Audit and Risk Committee has delegated such pre-approval authority to its Chair.

 

In 2015 and 2014, the Audit and Risk Committee pre-approved all of the audit and non-audit services provided by KPMG.

 

 

PROPOSAL 3- ADVISORY VOTE ON EXECUTIVE COMPENSATION (SAY-ON-PAY)

 

Non-Binding Advisory Vote

 

The Company seeks your advisory vote on the following resolution to approve the compensation of our named executive officers:

 

“Resolved, that the shareholders of National Bank Holdings Corporation hereby approve, on an advisory, non-binding basis, the compensation paid to the Company’s named executive officers as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.”

 

Effect of Non-Binding Advisory Vote

 

This advisory vote is not binding on the Company, the Board, or the Compensation Committee. Our Board and our Compensation Committee, however, will review the results of the vote and, consistent with our commitment to shareholder engagement, will take it into account in making a determination concerning the advisory vote on executive compensation.

 

Compensation Philosophy

 

The Company’s compensation philosophy is designed to attract, develop and retain the talent needed for the organization’s continued success in building a competitive franchise and executing our strategic plan. We intend these programs to be aligned with performance goals that motivate executives to achieve strategic goals prudently and within acceptable risk parameters. Our executive compensation program is designed to reward individual contributions and to create long-term shareholder value. Our compensation philosophy is discussed in greater detail in the “Compensation Discussion and Analysis” section elsewhere in this proxy statement.

 

Recommendation

 

We strongly believe you should approve the compensation of our named executive officers for the reasons cited in the “Executive Compensation” section elsewhere in this proxy statement, including the “Introductory Letter from the Compensation Committee” and the “Compensation Discussion and Analysis” subsections thereunder.

 

The Board recommends that the shareholders vote FOR the proposal to approve the Advisory Vote on Executive Compensation (Say-on-Pay) (Proposal 3).

 

GOVERNANCE

 

The Board is committed to sound and effective governance principles and practices. The Board has adopted Governance Guidelines to provide the framework for the governance of the Board and the Company. These Guidelines set forth, among other matters, qualifications for Board membership, director independence standards, director responsibilities, information about the structure of the Board and its committees, director compensation, management succession and Board self-evaluation. Each director serves for a one-year term. We do not have a staggered or classified board.

 

The Board has adopted a Code of Business Conduct and Ethics that applies to all of our associates, including our directors. Additionally, the Board has adopted a Supplemental Code of Ethics for CEO and Senior Financial Officers (together, with the Code of Business Conduct and Ethics, the “Codes of Ethics”). We expect all of our associates to adhere to the highest standards of ethics and business conduct with other associates, clients, shareholders, and the communities we serve and to comply with all laws, rules, and regulations that govern our business.

 

Shareholders and other interested persons may view our Governance Guidelines, our Codes of Ethics and other key information about our corporate governance on our website at www.nationalbankholdings.com.

 

Board and Committee Meetings; Annual Meeting Attendance

 

Directors are expected to attend all Board meetings and meetings of committees on which they serve.

 

The Board held eight meetings during 2015. During 2015, each director attended at least 75% of the total number of meetings of the Board and committees on which he or she served. The Board and each standing committee regularly meet in executive session. During 2015, the Board met in executive sessions without the CEO and other members of management five times. During 2015, the independent Lead Director chaired each of the executive sessions of the Board, and the chairs of each committee chaired the executive sessions of the committees.

 

All directors are expected to attend each annual meeting of shareholders of the Company. In 2015,  all directors attended the Company’s annual meeting of shareholders.

 

Committees of the Board

 

The Board has established three standing committees: Audit and Risk Committee, Compensation Committee and Nominating and Governance Committee. The Board’s committees act on behalf of the Board and report on their activities to the entire Board. The Board appoints the members and chair of each committee based on the recommendation of the Nominating and Governance Committee.

 

The following table provides membership information for each of the Board’s standing committees as of the date of this proxy statement.

 

 

With respect to each committee, the Board has adopted a charter that addresses its purpose, authority and responsibilities and contains other provisions relating to, among other matters, membership and meetings. In its discretion, each committee may form and delegate all or a portion of its authority to subcommittees of one or more of its members. As required by its charter, each committee periodically reviews and assesses its charter’s adequacy and reviews its performance, and also is responsible for overseeing risk related to the responsibilities described in its charter. Shareholders and other interested persons may view each committee’s charter on our website at www.nationalbankholdings.com.

 

Audit and Risk Committee

 

Purpose and Responsibilities. The Audit and Risk Committee is responsible for, among other things:

 

 

Membership and Meetings. Under its charter, the Audit and Risk Committee must have a minimum of three members. No Audit and Risk Committee member may serve on the audit committee of more than two other public companies. Each member of the Audit and Risk Committee is independent, as independence for audit committee members is defined

by NYSE and SEC rules, as discussed below under “Director Independence.” The Board has determined, in its business judgment, that each current member of the Audit and Risk Committee is financially literate as required by NYSE rules, and that Mr. Clermont, the committee’s chair, qualifies as an “audit committee financial expert” as defined by SEC regulations.

 

The Audit and Risk Committee meets as often as necessary to carry out its responsibilities but no less than quarterly. In 2015, the Audit and Risk Committee met four times.  

 

Compensation Committee

 

Purpose and Responsibilities. The Compensation Committee is responsible for, among other things:

 

The Compensation Committee’s process and procedures for establishing compensation for named executive officers is discussed in the “Compensation Discussion and Analysis” section elsewhere in this proxy statement.

 

Membership and Meetings. Under its charter, the Compensation Committee must have a minimum of three members, two of which must meet the definition of a “non-employee director” under Rule 16b-3 of the Securities Exchange Act of 1934 (the “Exchange Act”) and qualify as an “outside director” under Internal Revenue Code Section 162(m). All Compensation Committee members must be independent under NYSE rules. The Board has determined that each current Compensation Committee member meets these qualifications, as further discussed below under “Director Independence.” The Compensation Committee meets as often as necessary to carry out its responsibilities. In 2015, the Compensation Committee met five times.

 

Nominating and Governance Committee

 

Purpose and Responsibilities. The Nominating and Governance Committee is responsible for, among other things:

 

 

Information about the Nominating and Governance Committee’s process and procedures for establishing director compensation appears below under the “Director Compensation” section.

 

Membership and Meetings. Under its charter, the Nominating and Governance Committee must have a minimum of three members, each of whom must be independent under NYSE rules. The Board has determined that each member meets this standard, as discussed below under “Director Independence.” The Nominating and Governance Committee meets as often as necessary to carry out its responsibilities. In 2015, the Nominating and Governance Committee met four times.

 

Director Independence

 

Our Governance Guidelines and committee charters require that a majority of the members of the Board of Directors and all members of the Audit and Risk Committee, the Compensation Committee and the Nominating and Governance

Committee meet the criteria for independence required by the NYSE. Our Governance Guidelines require all members of the Audit and Risk Committee to meet the heightened independence requirements for audit committee members under the Exchange Act.

 

In February 2016, the Board, with the assistance of the Nominating and Governance Committee, undertook its annual review of director independence. In connection with this review, the Board evaluated banking, commercial, business, investment, legal, charitable, consulting, familial or other relationships with each director, and us and our affiliates. As a result of this review, the Board affirmatively determined that all of the directors are independent of the Company and its management under the corporate governance standards of the NYSE, including applicable SEC rules, with the exception of G. Timothy Laney because of his employment as an executive of the Company.

 

Board Leadership Structure

 

The Board is responsible for overseeing the exercise of corporate power and seeing that our business and affairs are managed to meet our stated goals and objectives and that the long-term interests of our shareholders are served. The Company currently does not have a fixed policy with respect to whether the same person may serve as both the Chairman of the Board and the Chief Executive Officer. The Board believes that it is in the best interests of the Company for the Board, in consultation with the Nominating and Governance Committee, to make this determination from time to time. Pursuant to the Company’s Governance Guidelines, when the position of Chairman of the Board is not held by an independent director, the independent directors shall appoint an independent director to serve as the independent Lead Director.

 

In 2014, the Board elected G. Timothy Laney, President and Chief Executive Officer of the Company, to serve as Chairman of the Board and the independent directors appointed Ralph W. Clermont to serve as the independent Lead Director. The Board concluded, based upon the Company’s current size and history and its four years of experience with Mr. Laney as Chief Executive Officer and as a fellow director, that a combined Chairman/CEO role for Mr. Laney and an independent Lead Director with a strong role and defined authorities is the better corporate governance structure for the Company at this point in its history. The Board considered Mr. Laney’s strong leadership roles with the Company’s shareholders and other stakeholders and with ongoing strategic planning, among other factors, and Mr. Clermont’s demonstrated ability to work with the Company’s senior management and provide leadership on Board and committee issues. The Board believes that the duties of the independent Lead Director under the Company’s Governance Guidelines and the Board’s practice of regular meetings of, and communications between, independent directors in executive session without management both are important parts of the Company’s corporate governance safeguards.

 

Pursuant to the Company’s Governance Guidelines, the duties of the independent Lead Director include: (i) serving as a liaison, and facilitating communication, between the Chairman of the Board and the independent directors; (ii) organizing, convening and presiding over executive sessions of the independent directors; (iii) presiding at all meetings of the Board at which the Chairman of the Board is not present; (iv) approving meeting schedules and agendas proposed by the Chairman and Chief Executive Officer, and consulting with the Chairman and Chief Executive Officer regarding the information to be provided to the directors in conjunction with such meetings; (v) serving as an advisor to the Board committees, chairs of the Board committees and other directors; (vi) serving as a member ex officio of each of the Board’s standing committees, with full voting rights on each such committee; (vii) if requested by major shareholders, ensure that he or she is available for consultation and direct communication; (viii) call meetings of the Board if deemed advisable by the independent Lead Director; and (ix) such other duties and responsibilities as assigned from time-to-time by the independent directors.

 

Our current board leadership structure supports the independence of the independent directors. The independent directors meet in executive session at each Board meeting and each of the standing committees is comprised solely of and led by independent directors. Our independent Lead Director presides at each executive session of the independent directors of the Board and the independent committee chairs preside over the executive sessions of their respective committees.

 

The Board’s Role in Risk Oversight

 

Our Board of Directors oversees risk management throughout the Company. The Board accomplishes this primarily through its three standing committees, each of which is active in risk management.

 

The Audit and Risk Committee is responsible for oversight of the Company’s market, credit, liquidity, fraud, legal, compliance and other financial, operational (including cybersecurity) and reputational risks. The Audit and Risk Committee is further responsible for reviewing and approving guidelines, policies and processes for managing these risks. The Audit and Risk Committee monitors the Company’s risk exposure in all risk categories through regular reports prepared by members of management, including the Company’s Chief Risk Management Officer. The Audit and Risk Committee determines the risk appetite of the Company. Additionally, the Audit and Risk Committee meets with representatives from the Company’s internal audit function and the Company’s independent registered public accountant, including in executive sessions without management present.

 

The Compensation Committee oversees risks related to compensation, including risks that may arise from the Company’s incentive compensation practices. The Compensation Committee oversees and evaluates the design, administration and risk management of all of the Company’s material incentive compensation arrangements to ensure consistency with the safety and soundness of the Company and to appropriately balance risk and reward. The Compensation Committee also oversees the annual compensation risk assessment to identify any compensation practices that may present an unacceptable level of risk to the Company.

 

The Nominating and Governance Committee oversees the Company’s governance program. This includes the Company’s Code of Ethics, insider trading policy, disclosure policies, management of potential conflicts of interest, including related party transactions, and director independence.

 

Communications with Directors

 

Shareholders and other interested parties who wish to communicate with the Board, the independent directors as a group, or one or more individual directors may do so by contacting the Board’s Secretary by mail at National Bank Holdings Corporation, 7800 E. Orchard Road, Suite 300, Greenwood Village, CO 80111. Under our Governance Guidelines, the Secretary is responsible for referring such communication to the Board.

 

Director Nomination Process and Board Diversity

 

The Nominating and Governance Committee is responsible for recommending candidates for membership on our Board of Directors. The Nominating and Governance Committee is responsible for identifying and reviewing the qualifications and independence of Board candidates. While the Nominating and Governance Committee does not have a formal policy regarding diversity, pursuant to our Governance Guidelines, the Nominating and Governance Committee considers diversity in its assessment of potential nominees for Board membership.

 

Shareholders are welcome to recommend candidates for membership on the Board. The Nominating and Governance Committee, in accordance with its charter, will evaluate candidates in the same manner that it evaluates other potential nominees. Our Bylaws require timely notice of shareholder nominations to our Secretary, as further discussed in the section “2017 Annual Meeting of Shareholders -Shareholder Proposals” elsewhere in this proxy statement. In order to make a nomination, a shareholder must be a shareholder at the time the Company gives notice of its annual meeting and at the time of the annual meeting, must be entitled to vote at the annual meeting, and must comply with the procedures of our Bylaws. The Bylaws require certain information regarding shareholders who wish to nominate candidates for Board membership. This includes (i) the name and address of such shareholder, as they appear on the Company’s books, of such beneficial owner, if any, and of their respective affiliates or associates or others acting in concert therewith, (collectively, the “Nominating Party”), (ii) information regarding the shares owned by the Nominating Party, (iii) information regarding derivative and other instruments regarding the Company’s stock that the Nominating Party owns, (iv) contracts, arrangements, understandings or relationships the Nominating Party has entered into concerning the Company’s stock and (v) other information relating to the Nominating Party that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. For complete description of the requirements and procedures for shareholder nominations, please refer to our Bylaws.

 

Compensation Committee Interlocks and Insider Participation

 

During 2015,  Messrs. Warren, Clermont, Dean and Fish and Ms. Spring served as members of our Compensation Committee. None of them has at any time been an officer or associate of the Company (other than Mr. Fish, who acted

on an exigent basis as Interim Chief Executive Officer in 2010 following the death of our original Chief Executive Officer until Mr. Laney began as CEO), and none has had any relationship with the Company of the type that is required to be disclosed under Item 404 of Regulation S-K. None of our executive officers serves or has served as a member of the board of directors, compensation committee or other board committee performing equivalent functions of another entity that has one or more executive officers serving as a member of our Board of Directors or Compensation Committee.

 

DIRECTOR COMPENSATION

 

Compensation Principles. The Nominating and Governance Committee reviewed director compensation in accordance with its charter in 2012, assisted by F.W. Cook & Co., Inc. (“F.W. Cook”), the independent compensation consultant that the Nominating and Governance Committee engages for director compensation matters. Based upon such review, the committee recommended and the full Board determined that director compensation should be based upon the following principles:

 

 

Compensation Elements. Each independent director receives an annual cash retainer of $60,000 for his or her service as a member of the Board of Directors, except that the independent Lead Director receives an additional $10,000 annual cash retainer. The chair of the Audit and Risk Committee receives an additional annual cash retainer of $30,000 and each of the chairs of the Compensation and Nominating and Governance Committees receives an additional annual cash retainer of $20,000. In addition, each independent director receives an annual grant of restricted stock with an aggregate grant date fair value of $90,000, except that the independent Lead Director receives an annual grant of restricted stock with an aggregate grant date fair value of $105,000. The grants are made on the date immediately following our Annual Meeting of Shareholders, with 50% of the shares vesting 180 days following such date and 50% of the shares vesting on the date immediately preceding our next Annual Meeting of Shareholders, in each case, subject to continued service. No individual meeting fees are paid for either Board meetings or committee meetings, whether in person or by telephone. We reimburse directors for expenses incurred in their Board service, including the cost of attending Board and committee meetings. We generally do not provide personal benefits (perquisites) to our directors.

 

Stock Ownership Guidelines. We believe that ownership of NBHC stock helps align the interests of our directors with those of shareholders and emphasizes the long-term aspects of equity-based compensation. The Board of Directors adopted stock ownership guidelines for independent directors in 2012. Under these guidelines, our independent directors are required to beneficially own shares of NBHC stock worth four times their annual board cash retainer within five years. Independent directors who do not meet the guidelines are required to retain 50% of the after-tax portion of vested stock awards until the guidelines are met. As of December 31, 2015, the NBHC common stock ownership of each independent director exceeded this stock ownership requirement, with the exception of Mr. Joseph, who only joined the Board on July 1, 2014.

 

Mr. Laney, as an associate of the Company, does not receive separate compensation for his service on the Board of Directors. Information on his compensation is included under the section “Executive Compensation” elsewhere in this proxy statement.

 

Compensation for our independent directors during 2015 was as follows:

 

2015 Director Compensation Table

 

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

Related Person Transactions Policy and Procedures

 

The Board has adopted a written policy that establishes a framework for the review and approval or ratification of transactions between the Company and its related persons and/or their respective affiliated entities. We refer to this policy as our “Related Person Transactions Policy. The Related Person Transactions Policy is available on our website at www.nationalbankholdings.com.

 

“Related Persons” under this policy include our directors, director nominees, executive officers, persons who recently served as directors or executive officers, holders of more than 5% of any class of our voting securities and immediate family members of any of the foregoing persons. An “immediate family member” of a related person means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law of a related person and any person (other than a tenant or employee) sharing a household with a related person.

 

Under the Related Person Transactions Policy, no Related Person Transaction may be consummated or continued unless approved by the Nominating and Governance Committee.

 

A “Related Person Transaction” is any transaction, arrangement or relationship (or series of similar transactions, arrangements or relationships) in which the Company (or any of its subsidiaries) is, was or will be a participant and the amount involved exceeds $120,000, and in which the Related Person had, has or will have a direct or indirect material interest, other than:

 

 

The Nominating and Governance Committee is responsible for approving, ratifying or disapproving of all Related Person Transactions. Company management is responsible for providing the Nominating and Governance Committee with all material information regarding Related Person Transactions and the interest of Related Persons in such transactions. The Nominating and Governance Committee shall only approve or ratify a Related Person Transaction if the committee determines that the transaction is in, or not inconsistent with, the best interests of the Company and its shareholders. No member of the Nominating and Governance Committee shall participate in the review, consideration or approval of any Related Person Transaction with respect to which such member or any member of his or her immediate family is a Related Person.

 

In the event management determines it is impractical or undesirable to wait until the next meeting of the Nominating and Governance Committee to approve a Related Person Transaction, the Chair of the Nominating and Governance Committee may review and approve the Related Person Transaction, in accordance with the criteria set forth herein. The Chair of the Nominating and Governance Committee will report any such approval to the Nominating and Governance Committee at its next regularly scheduled meeting.

 

Ordinary Course Transactions

 

During 2014 and 2015, certain of the executive officers and directors of the Company or of NBH Bank, our wholly-owned bank subsidiary, and affiliates of such persons have, from time to time, engaged in banking transactions with NBH Bank and are expected to continue such relationships in the future. All loans or other extensions of credit made by NBH Bank to such individuals were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unaffiliated third parties and did not involve more than the normal risk of collectability or present other unfavorable features.

 

Warrants Issued to Certain Shareholders

 

In connection with the agreement by several of our largest shareholders to be bound by the FDIC Statement of Policy on Qualifications for Failed Bank Acquisitions, we issued warrants to purchase common stock to such investors. Currently, we  have outstanding (1) a warrant to purchase 237,500 shares of common stock to Ithan Creek Investors USB, LLC (an investment advisory client of Wellington Management Company, LLP), issued on October 20, 2009, (2) a warrant to purchase 237,500 shares of common stock to Ithan Creek Investors USB, LLC, issued on March 23, 2010, and (3) a warrant to purchase 250,750 shares of common stock to Paulson Master Recovery Fund LTD, issued on March 15, 2010. These warrants are exercisable for 10.5 years from the date of issuance and have an exercise price of $20.00 per share. During 2015, we repurchased the warrant to purchase 42,000 shares of common stock from Elliott Associates, L.P. and a warrant to purchase 63,000 shares of common stock to a wholly owned subsidiary from Elliott International, L.P.

 

EXECUTIVE OFFICERS

 

The age, business experience and current position of each person who currently serves as an executive officer of the Company are as follows:

 

G. Timothy Laney, Age 55

 

Biographical information for Mr. Laney is provided in the section “Proposal 1-Election of Directors” elsewhere in this proxy statement.

 

Brian F. Lilly, Age 58

 

Mr. Lilly has served as our Chief Financial Officer since 2012 and as our Chief of M&A and Strategy since 2014. Mr. Lilly is the former Vice Chairman and Chief Operating Officer of F.N.B. Corporation (“FNB”), where he was responsible for all activities of finance, investor relations, treasury, asset and liability committee, credit administration, risk management, technology and operations, legal, facilities and consumer finance. He was a key leader in FNB’s mergers and acquisitions strategy and execution, helping to build FNB into a leading $12 billion regional bank holding company. Prior to the Chief Operating Officer role, he spent six years as FNB’s Chief Financial Officer and Chief Administrative Officer, having reestablished those functions following the unique spin-off of the company in 2003. In addition, Mr. Lilly worked with PNC Financial for 15 years, principally in line-of-business and geographic Chief Financial Officer roles as well as corporate strategic planning. Mr. Lilly also worked for four years at Ernst & Young as a certified public accountant.

 

Richard U. Newfield, Jr., Age 54

 

Mr. Newfield has served as the Company’s Chief Risk Management Officer since 2011. Mr. Newfield is the former Head of Business Services Credit at Regions Bank. He joined Regions in 2008 after a 23-year career at Bank of America. Mr. Newfield held various senior positions at Bank of America, including roles in risk management, credit, commercial banking, global bank debt and corporate marketing. He brings significant experience in development and implementation of business models and integration of businesses during mergers. In addition, Mr. Newfield has led credit process reengineering initiatives, including risk and credit policy design, and corporate governance.

 

Zsolt K. Besskó, Age 46

 

Mr. Besskó has served as our Chief Administrative Officer & General Counsel since 2013, and currently oversees our legal, compliance, human resources, facilities and enterprise technology functions. Mr. Besskó brings significant experience in banking, corporate, securities, mergers and acquisitions and corporate governance matters over the span of his 19-year career. Prior to joining the Company, Mr. Besskó was a partner with the law firm of Stinson Leonard Street LLP (f.k.a. Stinson Morrison & Hecker LLP) and, prior to that, a shareholder of the law firm of Jones & Keller, P.C. Previously, he served as the Executive Vice President, General Counsel & Secretary of Guaranty Bancorp, a publicly traded bank holding company, where he oversaw the company’s legal and compliance departments. As an attorney in private practice, Mr. Besskó assisted publicly traded and privately held companies and financial institutions involving mergers and acquisitions, securities transactions, SEC reporting, corporate governance, executive compensation, employment and human resources, regulatory issues and general corporate matters. He began his legal career at Sullivan & Cromwell LLP in New York City.

 

EXECUTIVE COMPENSATION

 

INTRODUCTORY LETTER TO SHAREHOLDERS

FROM THE COMPENSATION COMMITTEE

 

Fellow Shareholders,

 

Our Board and Compensation Committee ensure that our executive compensation program is designed to pay for performance, while allowing the Company to attract and retain the talent that is essential to our long-term  strategy. The Board and the Compensation Committee believe in providing clear and comprehensive disclosure to help you understand how (i) our compensation plans are structured, (ii) we assess performance and (iii) this performance leads to pay outcomes that are aligned with our shareholders’ expectations.

 

Company History

To better understand the evolution and maturation of our executive compensation program, it is essential to have a historical perspective of the formation and development of the Company. The Company was formed in late 2009 through a private capital raise during the depths of the financial crisis, with no banking operations or assets.  Our primary strategy at this early stage of our life was to acquire failed or troubled banks with the goal of creating a leading regional financial institution that would deliver meaningful value to its communities and investors.  In a span of 12 months between October 2010 and October 2011, we completed the acquisition of four problem or failed banks, three of which were FDIC-assisted transactions. During 2011 and 2012, our foundational infrastructure was built from the ground up and we ultimately integrated our acquisitions onto a single platform. In September 2012, we launched our IPO and were listed on the NYSE. During 2015, we completed the acquisition of Pine River Valley Bank, which is included in our Community Banks of Colorado brand. Over the past five years, we have transformed our five acquisitions into one collective banking operation with steadily increasing organic growth, prudent underwriting, and meaningful market share with continued opportunity for expansion. As of December 31, 2015, we had $4.7 billion in assets, $2.6 billion in loans, $3.8 billion in deposits and $0.6 billion in equity.

As part of our building process, the Board sought to ensure that the right management team was established and that management was properly incentivized to achieve the Company’s strategic goals. As a result, in the early years of the Company’s existence and in connection with the recruitment and hiring of our management team, the executive compensation program was principally focused on providing our executives with significant performance-based restricted stock awards and options to align the executives’ interests with the interests of our shareholders, while also providing incentives within our annual cash incentive bonus program to successfully deploy our capital and operationalize our company (typical performance metrics were not appropriate measures for performance at this stage of our life). The program evolved further between 2013 and 2015, where we established more concrete corporate and business unit objectives for our annual cash incentive bonus program and a more consistent, annual equity award program in the form of time-based vesting restricted stock and options, with a primary focus on retention.

2015 Accomplishments

As we continue to evolve and grow our market share, the Company achieved significant accomplishments in 2015, including the following:

 

 

We believe these accomplishments have brought us to a maturity level where the Company can implement more quantitative and performance-based metrics in our executive compensation program. In particular, we believe that the termination of the FDIC loss-share agreements will improve the transparency of our financial results and better position us to set appropriate performance goals for both the annual cash incentive bonus and long term equity awards, and to continue to further enhance the alignment of the interests of executives with the interests of our shareholders.

 

Shareholder Engagement & 2015 Say-on-Pay

The Board and management have actively engaged with shareholders over the past year to ensure we are addressing questions and concerns, to seek input and to provide perspective on our executive compensation program. Shareholders’ feedback from this engagement is considered by the Board and the Compensation Committee and reflected in enhancements to our program. Our outreach to shareholders over the past year covered approximately 60% of our shareholder base. Please refer to the Compensation Discussion and Analysis (CD&A) section immediately following this letter for further details on our outreach to shareholders and the resulting actions taken by the Board and the Compensation Committee regarding our executive compensation program. 

 

In addition to direct engagement, the Company instituted an annual advisory say-on-pay vote to approve executive compensation. At the annual meeting of shareholders held on May 6, 2015, the Company’s first advisory say-on-pay proposal received the support of approximately 62% of the votes cast. Despite obtaining a favorable majority vote, this result was a disappointment to us, as both the Board and management are deeply committed to the Company’s success and the creation of value for our shareholders, and to the alignment of executive pay with company performance. The votes “against” and our subsequent shareholder engagement made it clear to us that, notwithstanding our commitment, we have work to do. Specifically, we need to fully explain the Board’s comprehensive approach to assessing performance for the purposes of determining our executives’ compensation, and we need to demonstrate the direct impact the Company’s performance has on our executives’ compensation. Our new CD&A section in this proxy statement provides this information.

 

Compensation Changes for 2015 and Beyond

As a result of our review of our executive compensation program, including the shareholder engagement process, the Compensation Committee implemented the following executive compensation program changes, which further strengthen the alignment between pay and performance:

 

We provide further details on these changes throughout the CD&A section immediately following this letter.

 

2015 CEO Compensation

After reviewing both the Company’s and our CEO’s performance in 2015, and reflecting upon the results of the Company’s 2015 cash incentive bonus program, the Board awarded a cash incentive bonus payout of 124% of target ($834,000), a decline of 21% from  2014 ($1,062,000 million). Our CEO’s total compensation was approximately

$2.4 million for the year, down from $2.6 million in 2014. Base salary remained at the same level as 2014.

 

Conclusion

The Board and the executive team remain committed to moving your company forward with one clear priority: delivering superior growth and performance for you, our shareholders. The Board and the Compensation Committee have the utmost confidence in the talent and determination of the executive team as we work to continue to execute on our long-term strategy and deliver value to our shareholders.

 

The Board and the Compensation Committee are also committed to ensuring the link between executive compensation and shareholder value creation is strong. We are confident that the changes to our program enhance this alignment. We remain committed to improving our compensation and disclosure practices, and we will continue to re-evaluate our current practices and monitor emerging best practices.

 

On behalf of the Board and the Compensation Committee, we thank you for taking the time to read our disclosure and encourage you to vote in favor of our approach to executive compensation.

 

Sincerely,

 

National Bank Holdings Corporation Compensation Committee

 

Compensation Discussion and Analysis

 

Introduction

 

We explain in this section, which we refer to as the “CD&A”, how we compensate the executive officers named in the table captioned “Summary Compensation Table” below (our “NEOs”). Our NEOs for 2015 were:

 

 

Mr. Metzger retired from the Company as our Chief of Enterprise Technology & Integration effective December 18, 2015.  For 2015, Mr. Metzger did not receive an annual cash incentive bonus or grants of equity awards. As a result, this CD&A focuses on the compensation of the NEOs other than Mr. Metzger. For further information regarding Mr. Metzger’s retirement and the compensation paid to Mr. Metzger in connection with his retirement,  please see “Mr. Metzger’s Employment Agreement and Separation and Consulting Agreement” under the “Employment Agreements with Named Executive Officers” section below.  There are no other executive officers of the Company.

 

Our approach to executive compensation is to pay for performance and to ensure compensation programs are aligned with effective risk management. We believe that approaching compensation in this way will create sustainable shareholder value over the long term.

 

Shareholder Engagement and Consideration of Say-on-Pay Vote

 

Last year was the Company’s first say-on-pay vote and the Company received a shareholder vote of 62% in favor of the Company’s executive compensation for 2014.  Although we received the support of over a majority vote of our shareholders, this result was a disappointment to us, as both the Board and management have been and remain deeply committed to the Company’s success and the creation of value for our shareholders, and to the alignment of executive pay with company performance.

 

As part of the Company’s ongoing review of our executive compensation program,  including an assessment of the results of last year’s say-on-pay vote, and consistent with our commitment to the creation of value for our shareholders,  the Board and the Compensation Committee put in place a process with management to engage with the Company’s shareholders regarding our executive compensation program.  

 

Over the past year, the Company engaged with shareholders representing 60% of the shares outstanding.  The purpose of the dialogue was to explain the Company’s executive compensation program and understand the specific concerns and viewpoints of our shareholders. Common feedback received from shareholders included the following:

 

As part of the shareholder engagement process, the Chair of the Compensation Committee, the Chief Administrative Officer and the Associate General Counsel also had discussions with proxy advisory firms to understand their concerns and to explain the evolution of our executive compensation program.  In addition, the Company has confirmed that pay and performance are aligned with respect to its Compensation Peer Group (as defined under “Peer Group and Market Data Review” below) using the evaluation methodology published by a leading proxy advisory firm.

 

As a result of our review of our executive compensation program, including the shareholder engagement process discussed above, the Compensation Committee implemented several executive compensation program changes as identified in the introductory letter above and as further described in the sections below, which further strengthen the alignment between pay and performance.

 

Philosophy, Objectives and Components of Our Executive Compensation Program

 

Philosophy

 

Because a key expectation of management is to build an effective organizational structure, it is particularly important that our executive compensation program be designed to attract, develop and retain the talent needed for the organization’s continued success in building a competitive franchise and executing our strategic plan. We intend this program to be aligned with performance goals that motivate executives to achieve our strategic goals prudently and within acceptable risk parameters. Our executive compensation program is designed to reward individual contributions and to create long-term shareholder value.

 

Objectives

 

Our executive compensation philosophy is designed to meet five key objectives:

 

 

Compensation Components

 

The total compensation of our NEOs consists primarily of the following components:

 

 

 

Compensation Best Practices

 

The following are some best practices we have implemented with respect to our executive compensation program:

 

 

Setting Compensation for our Named Executive Officers

 

The process of setting executive compensation is a collaborative effort of the Compensation Committee, the compensation consultant and management.

 

Role of Compensation Committee

 

The Compensation Committee determines executive compensation. The Compensation Committee, which is comprised entirely of independent directors, sets compensation policy and administers our executive compensation program. The Compensation Committee acts independently, but works closely with our Board of Directors and members of management. The Compensation Committee has responsibility for setting the components of the CEO’s compensation and uses the assistance of F.W. Cook, its independent compensation consultant, in determining executive compensation.

The Chairman of our Compensation Committee takes an active role in meeting with F.W. Cook. Our CEO, with the assistance of F.W. Cook and our Chief Administrative Officer, develops initial recommendations for the other NEOs for the Compensation Committee’s consideration.

Role of Compensation Consultant

 

The Compensation Committee engages its own advisors to assist in carrying out its responsibilities. The Compensation Committee has engaged F.W. Cook to advise and support the Compensation Committee on compensation decisions.  At the direction of the Compensation Committee, F.W. Cook assists in collecting and analyzing market data on compensation and provides expert knowledge of competitive practices and trends as well as developments in regulatory and technical matters.  F.W. Cook has no other relationships with the Company (other than advising the Nominating and Governance Committee on matters related to director compensation). As part of the engagement of F.W. Cook in 2015, the Compensation Committee considered the independence factors required under the NYSE corporate governance standards, including the applicable SEC rules, and determined that F.W. Cook was independent.

 

Role of Management

 

In 2015, our CEO and Chief Administrative Officer worked closely with the Compensation Committee in managing our executive compensation program. Our CEO attended meetings and made recommendations to the Compensation Committee on the compensation of the other NEOs. We expect that our CEO, Chief Administrative Officer and other members of management will continue to have a role in assisting the Compensation Committee in designing our programs and setting compensation levels. None of our NEOs provided recommendations with respect to his own compensation in 2015.

Peer Group and Market Data Review

 

In 2015, F.W. Cook, with input from the Compensation Committee and management, developed a peer group of 17 financial institutions to assist the Compensation Committee in reviewing comparative compensation data. For 2015, this peer group, as approved by the Compensation Committee (the “Compensation Peer Group”), consisted of:

 

 

The companies included in the Compensation Peer Group have a median asset size of $8.6 billion (as of June 30, 2015), ranging from approximately $6 billion to $16 billion.  The Compensation Peer Group includes a number of institutions with a strong market presence in the Midwest and the Rocky Mountains. To ensure we have executives capable of managing a company with the scope and size consistent with our long-term strategic growth objectives ($8-10 billion in assets), the median of the Compensation Peer Group has been positioned above our current size.  We also believe the peers are a diverse group of companies that provide the necessary breadth to be meaningful in evaluating NEO compensation.  The Compensation Peer Group is reviewed annually and may be changed if a company’s size or other factors have changed such that the Compensation Committee believes that a particular company no longer continues to be representative of the Compensation Peer Group or when a company in the Compensation Peer Group has been acquired. 

 

F.W. Cook summarized and provided the Compensation Committee with market data relating to base salaries, short-term cash bonuses, long-term equity awards, and total compensation for each of the top five officers at these peer companies, using the data provided in the peer company’s latest available proxy statement. The Compensation Committee considered this information, together with other factors discussed in this CD&A, in determining NEO compensation and also considered how the shifts from cash to equity and overall payouts under the annual cash incentive bonus compared against the Compensation Peer Group.  

 

Executive Compensation Framework

 

As result of the Company’s ongoing review of our executive compensation program,  including an assessment of the results of last year’s say-on-pay vote, the shareholder engagement efforts described above, and consistent with our commitment to performance,  the Compensation Committee implemented three fundamental shifts with respect to the executive compensation program, which further strengthen the alignment between pay and performance:

 

 

As a result of these three fundamental shifts, the Compensation Committee made the following determinations with respect to each of the compensation components further described below. In addition, the Compensation Committee believes that these changes further align pay with performance as demonstrated by the mix of pay for compensation related to performance in 2015 (2015 base salary, 2015 cash incentive bonus and equity awarded in 2016).

 

 

Base Salary

 

For 2015 and 2016, the Compensation Committee determined that the base salaries for all NEOs should remain unchanged.

Annual Cash Incentive Compensation

 

In connection with our IPO, the Company adopted the Senior Executive Bonus Plan, which is intended to provide an incentive for superior work and to motivate our NEOs and other covered key executives toward strong achievement and business results, to tie their goals and interests to those of the Company and the Company’s shareholders and to enable the Company to attract and retain highly qualified executives. The Senior Executive Bonus Plan provides for incentive bonuses to be paid based on the attainment of pre-established goals or at the discretion of the Compensation Committee.

 

2015 Cash Incentive Bonus Program

In prior years, the maximum annual cash incentive opportunity was 200% of the NEO’s annual incentive cash bonus target opportunity. Beginning with the 2015 cash incentive bonus program, the Compensation Committee reduced the maximum payout percentage by 50% from 200% to 150% of the target opportunity, while leaving the target opportunity unchanged, and also added a 50% threshold payout level. The new structure is as follows:

 

 

In its consideration of the cash incentive bonus payments for 2015, the Compensation Committee determined that payouts should be based on the attainment of quantitative financial metrics as well as a qualitative assessment of certain objectives and individual performance. The Compensation Committee determined that 60% of the total cash incentive bonus should be based on the attainment of specific quantitative financial metrics for 2015 as interpolated for performance between threshold, target and maximum levels of performance. There is no payout with respect to a given metric if the threshold level of performance is not achieved. The financial metrics and relative targets established are a reflection of what the Compensation Committee deemed important to align the NEOs’ performance with the achievement of the Company’s strategic goals and key long-term financial targets (see Corporate Objectives below).

The Compensation Committee also determined that the remaining 40% of the 2015 cash incentive bonus payment should be based on a qualitative assessment of (i) the Company’s achievement of corporate objectives, (ii) the achievement of other objectives specific to each NEO’s areas of responsibility (for each NEO other than the CEO), and (iii) individual performance. The Compensation Committee decided that a 40% weighting for these qualitative factors was warranted given the Company’s history, state of maturation, evolution of its building process and the volatility of the significant non-cash charges related to the FDIC loss-share agreements.  

The following is a summary of the specific metrics considered by the Compensation Committee for 2015, including the actual results for each metric:

 

Based upon the actual performance across all of these metrics, the Committee set the payout percentage for the 2015 cash incentive bonus at 124% of Target.

 

2015 Quantitative Financial Metrics (60% Weighting)

For purposes of determining the achievement levels with respect to quantitative financial metrics, the Compensation Committee set threshold, target and maximum levels of performance with respect to each of the following financial metrics identified by the Compensation Committee for 2015:

 

 

 

 

Each metric is weighted 10% towards the overall payout, which ranges from a 50% payout at threshold, a 100% payout at target and a 150% payout at maximum, with interpolation for performance between the threshold, target and maximum levels of performance.

The Compensation Committee selected the metrics Adjusted EPS, Adjusted Efficiency Ratio, Loan Growth and Transaction Deposit Growth as they are critical to our operating performance and because these metrics are important to our strategic goals and key long-term financial targets (see Corporate Objectives below). In addition, the Compensation Committee chose Net Charge-Offs because of the importance and continued emphasis on asset quality.

 

2015 Qualitative Assessment (40% Weighting)

In performing a qualitative assessment for the 2015 cash incentive bonus, the Compensation Committee considered the following corporate objectives that were established by the Compensation Committee for 2015 (we refer to these objectives as the “Corporate Objectives”):

 

 

 

 

The CEO’s performance was evaluated based on these Corporate Objectives as well as individual performance. For the other NEOs, the Compensation Committee considered the Corporate Objectives, other objectives specific to each NEO’s areas of responsibility that were established by the Compensation Committee for 2015, and individual performance. In evaluating these objectives and individual performance, the Compensation Committee considered input from management and from members of the Board. While the determination is ultimately qualitative, it is made consistent with a rigorous and comprehensive goal-setting and evaluation process.

 

Mr. Laney

 

With respect to Mr. Laney, the Compensation Committee evaluated the following achievements with respect to the Corporate Objectives and his related individual results:

 

Mr. Lilly

 

With respect to Mr. Lilly, the Compensation Committee considered the Corporate Objectives (and related results) as well as the following factors specific to his areas of responsibility and his related individual results:

 

 

Mr. Newfield

 

With respect to Mr. Newfield, the Compensation Committee considered the Corporate Objectives (and related results) as well as the following factors specific to his areas of responsibility and his related individual results:

 

 

Mr. Besskó

 

With respect to Mr. Besskó, the Compensation Committee considered the Corporate Objectives (and related results) as well as the following factors specific to his areas of responsibility and his related individual results:

 

 

 

After taking into account these factors and results, the Compensation Committee determined that the CEO and the other NEOs achieved the maximum payout under the qualitative allocation of the cash incentive bonus program.

Final Payouts Under the 2015 Cash Incentive Bonus Program

Based on the Compensation Committee’s analysis of the achievement of the quantitative financial metrics and the qualitative assessments, the Compensation Committee awarded an overall payout of 124% of Target with respect to the 2015 cash incentive bonus program for each of the NEOs (other than Mr. Metzger). The relative cash incentive bonus payments as a percentage of salary for each of the NEOs (other than Mr. Metzger) are set forth below:

 

 

2016 Cash Incentive Bonus Program

 

The Compensation Committee, in its continued focus on achieving target returns while bearing acceptable risk, established certain metrics for 2016 that are aligned with the Company’s strategic goals and which reflect important risk metrics. In addition, with the continued evolution and maturation of the Company, the Compensation Committee believed it was important to increase the total percentage of the quantitative metrics, while decreasing the percentage of the qualitative assessment in its overall formula for awarding the cash incentive bonus.

The cash incentive bonus payout for 2016 will be based upon achievement of threshold, target and maximum performance levels for the following metrics and respective weightings:

 

 

The total payout will range from 50% at threshold, 100% at target and 150% at maximum, as interpolated for performance between threshold, target and maximum levels of performance for each metric as established by the Compensation Committee. There is no payout with respect to a given metric if the threshold level of performance is not achieved.

Consistent with the metrics established for the 2015 Cash Incentive Bonus, the Compensation Committee focused on the metrics that play the most significant role in driving the Company to meet its Corporate Objectives. Specifically, Core Net Income was deemed important by the Compensation Committee and given more weight given its importance to operating performance and long-term shareholder value. In addition, Loan Growth and Transaction Deposit Growth are both important levers in executing the Company’s growth strategy. Finally, the Compensation Committee believes that the Non-Performing Assets Ratio and specific Enterprise Risk Management criteria are both important given the emphasis on asset quality and prudent risk management.

Equity Compensation

 

Historical Equity Awards Overview

 

The Company was formed in 2009 with no operations or formal structure in place. As part of its building process, the Board of Directors sought to ensure that the right management team was established and that management was properly

incentivized to achieve the Company’s growth goals. As a result, in the early years of the Company’s existence and in connection with the recruitment and hiring of our management team, certain of our NEOs principally received significant performance-based restricted stock awards that vest based on the attainment of certain stock prices (which awards continue to remain unvested and outstanding today) and options (which we consider to be performance-based) to further incentivize these individuals and align the executives’ interests with the interests of our shareholders. See the table “Outstanding Equity Awards at 2015 Fiscal Year-End” below for further information regarding these awards.

 

From 2013 through 2015, the Compensation Committee established a consistent, annual equity award program in the form of time-based vesting restricted stock and options, with a primary focus on retention.

 

Starting with 2016, the Compensation Committee determined that the Company is now in a position to introduce longer term performance-based awards into its mix of annual equity awards to continue to align the interests of executives with the interest of shareholders, but still ensure retention.

 

2015 Long-Term Equity Awards

 

To further its goals of retention, the Compensation Committee awarded equity in 2015 to each of our NEOs (other than Mr. Metzger) in the form of restricted stock and options that each vest in one-third increments over three years. The Compensation Committee believes equity in this form is an important element to ensure retention of its key executives and to incentivize performance, with respect to options.

 

The Compensation Committee approved the following equity award amounts for the equity granted to the NEOs (other than Mr. Metzger) in 2015:

 

 

With the addition of these awards in 2015, as well as the existing awards described in the table “Outstanding Equity Awards at 2015 Fiscal Year-End”, a significant portion of equity awards remains outstanding in the form of performance-based awards. 89% of the CEO’s outstanding equity awards through 2015 were performance-based.

 

2016 Long-Term Equity Awards 

 

In its reassessment of the executive compensation program, the Compensation Committee reevaluated the current mix of equity awards and determined that the Company, considering its current stage of maturation and evolution, is now in a position to introduce a longer term performance based award into the mix of its annual equity award program. As a result, the equity awards granted in 2016 took the following forms:

 

 

Three-Year Performance Award

 

In 2016, the Compensation Committee introduced a long-term performance stock unit award (“PSU Award”) with vesting that is based on the Company’s achievement of two financial metrics over a three-year performance period (January 1, 2016 through December 31, 2018). The PSU Award will vest March 1, 2019 and the number of shares delivered will be based upon the Compensation Committee’s certification of the attainment of the results at the end of the three-year performance period. The payout under the award will be based upon an interpolation of threshold, target and maximum performance levels. The payouts at threshold, target, and maximum levels are 50%, 100% and 150%, respectively. In addition, dividends accrue during the three-year performance period and are paid on vested shares at the time they vest.  The two financial metrics and respective weightings for the PSU Award are as follows:

 

 

The Company believes the PSU Award is important because it aligns a significant portion of the executive’s compensation against performance over an extended period and aligns the performance goals with the long-term Corporate Objectives of the Company. The Company believes linking compensation to long-term Company performance encourages prudent risk management and discourages excessive risk taking for short-term gain. Moreover, the Compensation Committee allocated 60% of the award on Cumulative EPS  given the importance of earnings growth for the Company with the remaining 40% allocated to TSR to ensure the NEOs interests are closely aligned with the interests of shareholders.

 

Restricted Stock and Option Awards

 

In addition to the PSU Award, the Committee also awarded equity to each of our NEOs in the form of restricted stock and options that each vest in one-third increments over three years. The Compensation Committee believes equity in this form is still an important element to ensure retention of its key executives and to incentivize performance, with respect to options.

 

One-Time Market-Based Performance Award

 

In recognition of the substantial efforts associated with the termination of the OCC Operating Agreement, the termination of the FDIC loss-share agreements and the successful charter conversion to a Colorado state-chartered bank, the Compensation Committee awarded Messrs. Lilly, Newfield and Besskó a one-time equity award that vests upon the later of (a) three years and (b) an average closing stock price for any consecutive 30-day trading period equaling or exceeding $25.00 per share. The Committee believes this award is important to recognize and reward the accomplishments of these NEOs and to incentivize future performance of the Company.

 

2016 Equity Award Mix

 

With the changes implemented in 2016, the equity mix for the CEO and the other NEOs is at least 70% performance-based for the equity awards granted in 2016.

Stock Ownership Guidelines

 

We believe that ownership of our stock helps align the interests of our executive officers with those of shareholders and emphasizes the long-term aspects of equity-based compensation. The Board adopted the following stock ownership guidelines applicable to executive officers:

 

Executive officers must beneficially own shares as shown in the table below. Executive officers who do not meet the guidelines are required to retain 50% of the after-tax portion of vested stock awards until the guidelines are met.

 

 

 

Insider Trading Restrictions

 

We have adopted an Insider Trading Policy. To further strengthen the alignment between stock ownership and your interests as shareholders, our Insider Trading Policy prohibits all associates, including our directors and executive officers, from engaging in short selling or hedging transactions involving NBHC stock.  In addition, pledging or hypothecation of Company’s securities is strongly discouraged.

 

Clawback Policy

 

Each NEO’s employment agreement contains a clawback provision, which requires, if the Company is required to prepare an accounting restatement due to material noncompliance of the Company with any financial reporting requirement as a result of misconduct, the executive to reimburse the Company for all amounts received under any incentive compensation plans and any gains realized on the sale of the Company’s securities, in each case during the 12 month period following the first public issuance or filing with the SEC (whichever first occurs) of the financial document embodying such financial reporting requirement.  The clawback provision also provides that if the executive is found guilty of misconduct by any judicial or administrative authority in connection with any (A) formal investigation by the SEC or (B) other federal or state regulatory investigation, the Compensation Committee may require the