cstr-def14a_20210423.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

SCHEDULE 14A

 

(RULE 14a-101)

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.   )

 

Filed by the Registrant 

Filed by a Party other than the Registrant 

 

Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to § 240.14a-12

CapStar Financial Holdings, Inc.

(Name of Registrant as Specified in its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

 

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

 

(1)

Amount Previously Paid:

 

 

(2)

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(3)

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(4)

Date Filed:

 

 

 


 

 

 

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

You are hereby invited to participate in the 2021 Annual Meeting of Shareholders of CapStar Financial Holdings, Inc., which will be conducted virtually.

 

When

 

9:00 A.M. Central Time on April 23, 2021.

 

 

 

how to participate

 

The Annual Meeting will be held in a virtual-only meeting format, via live video webcast that will provide stockholders with the ability to participate in the Annual Meeting, vote their shares and ask questions. We are implementing a virtual-only meeting format in order to leverage technology to enhance stockholder access to the Annual Meeting by enabling attendance and participation from any location around the world. We believe that the virtual-only meeting format will give stockholders the opportunity to exercise the same rights as if they had attended an in-person meeting and believe that these measures will enhance stockholder access and encourage participation and communication with our Board of Directors and management.

 

In order to attend the Annual Meeting, you must register at www.proxydocs.com/CSTR. Upon completing your registration, you will receive further instructions via email, including a unique link that will allow you access to the Annual Meeting and to vote and submit questions during the Annual Meeting.

 

Certain presentation materials that will be used at the 2021 Annual Meeting of Shareholders will be available on our website the day of the 2021 Annual Meeting of Shareholders under “News and Events.”

 

 

 

how to vote

 

To vote by the Internet, go to the website address set forth on the enclosed proxy card and follow the instructions provided on the website.

To vote by telephone, dial the toll-free phone number set forth on the enclosed proxy card using a touch-tone phone. Have your proxy card available and follow the recorded instructions when voting by telephone.

To vote by mail, complete, sign and date the proxy card and return it promptly in the postage paid envelope provided.

 

Proxies delivered by mail, the Internet or telephone must be received prior to 9:00 A.M. Central Time on April 23, 2021.

 

Record Date

 

Shareholders of record as of the close of business on March 16, 2021 will be entitled to notice of and to vote at the 2021 Annual Meeting of Shareholders (the “Record Date”).  

 

 

 

Items of Business

 

(1)To elect the following twelve (12) directors to serve until the 2022 Annual Meeting of Shareholders and until their successors have been duly elected and qualified: Dennis C. Bottorff, L. Earl Bentz, Sam B. DeVane, Thomas R. Flynn, Louis A. Green III, Valora S. Gurganious, Myra NanDora Jenne, Joelle J. Phillips, Timothy K. Schools, Stephen B. Smith, James S. Turner, Jr., and Toby S. Wilt (Proposal 1);

 

(2)To ratify the appointment of Elliott Davis, LLC as our independent registered public accounting firm for the fiscal year ending December 31, 2021 (Proposal 2);

 

(3)To approve the CapStar Financial Holdings, Inc. 2021 Stock Incentive Plan (Proposal 3); and

 

(4)To conduct such other business as may properly come before the meeting or any adjournment or postponement thereof.

 

 

 

Recommendations

 

The Board of Directors recommends that you vote “FOR” each nominee for director in Proposal 1 and “FOR” each of Proposal 2 and Proposal 3.

 

 

 


PROXY MATERIALS

 

Our proxy materials, which include this Proxy Statement, the proxy card and our Annual Report on Form 10-K for the year ended December 31, 2020 (“Annual Report”) are first being delivered to shareholders on or about March 26, 2021.  Shareholders have the ability to access the proxy materials at www.proxydocs.com/cstr and complete their proxy card electronically at www.proxypush.com/cstr.

 

 

By Order of the Board of Directors,

 

 

 

 

 

 

 

Steven E. Groom

 

 

Secretary

 

March 26, 2021

Nashville, Tennessee

Important Notice Regarding the Availability of Proxy Materials

for the Annual Meeting of Shareholders to be Held on April 23, 2021

This Proxy Statement and the Annual Report

are available at http://www.proxydocs.com/cstr


TABLE OF CONTENTS

 

 

Page

INFORMATION ABOUT THE ANNUAL MEETING

1

INFORMATION ABOUT VOTING

2

PROPOSAL 1 ELECTION OF DIRECTORS

5

Introduction

5

Director Nominees

5

Required Vote

8

CORPORATE GOVERNANCE

9

Overview

9

Director Independence

9

Board Meetings and Attendance

9

Committees of our Board

10

Audit and Risk Committee

10

Compensation and Human Resources Committee

11

Nominating and Corporate Governance Committee

11

Community Affairs Committee

12

Credit Committee

12

Board and Committee Self-Evaluations

12

Board Leadership Structure

12

Role of the Board in Risk Oversight

13

Service Limitations on Other Boards of Directors

13

Director Nominations

13

Independent Compensation Consultant

14

Corporate Governance Guidelines

15

Code of Ethics and Conflicts of Interest Policy

15

Certain Relationships

15

Compensation Committee Interlocks and Insider Participation

15

Communications with the Board and Committees

15

Executive Officers

16

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

17

Banking Transactions with Related Parties

17

Lease of Corporate Headquarters

17

Policies and Procedures Regarding Related-Party Transactions

17

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

17

DELINQUENT SECTION 16(A) REPORTS

19


 

 

EXECUTIVE COMPENSATION

19

Summary Compensation Table

20

Narrative Discussion of Summary Compensation Table

21

Executive Compensation and Corporate Governance Enhancements

23

Outstanding Equity Awards at Year End

25

Employment Agreements

25

2020 Compensation Update

26

COMPENSATION AND HUMAN RESOURCES COMMITTEE REPORT

27

DIRECTOR COMPENSATION

27

AUDIT AND RISK COMMITTEE REPORT

28

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

30

Audit and Non-Audit Fees

30

Pre-Approval Policies and Procedures

30

Participation of Representatives of Independent Registered Public Accounting Firm

30

Required Vote

31

PROPOSAL 3 APPROVAL OF THE CAPSTAR FINANCIAL HOLDINGS, INC. 2021 STOCK INCENTIVE PLAN.

32

Required Vote

37

ADDITIONAL INFORMATION

38

OTHER MATTERS

39

APPENDIX A: CAPSTAR FINANCIAL HOLDINGS, INC. 2021 STOCK INCENTIVE PLAN

40

 

 

 


 

1201 Demonbreun Street, Suite 700

Nashville, Tennessee 37203

(615) 732-6400

 

PROXY STATEMENT FOR THE

2021 ANNUAL MEETING OF SHAREHOLDERS

 

This Proxy Statement (this “Proxy Statement”) is furnished by CapStar Financial Holdings, Inc., a Tennessee corporation, on behalf of its Board of Directors (the “Board”) for use at the 2021 Annual Meeting of Shareholders (the “Annual Meeting”), and at any adjournment or postponement thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting of Shareholders. This Proxy Statement and the accompanying proxy card are first being mailed or made available to shareholders on or about March 26, 2021. When used in this Proxy Statement, the terms “we,” “us,” “our” or the “Company” refer to CapStar Financial Holdings, Inc., and the “Bank” refers to CapStar Bank.

INFORMATION ABOUT THE ANNUAL MEETING

 

When is and how do I participate in the Annual Meeting?

 

The Annual Meeting will be held at 9:00 A.M. Central Time on Friday, April 23, 2021. As a result of the coronavirus outbreak and to support the health and well-being of our partners, employees, and shareholders, the Annual Meeting will be held in a virtual-only meeting format, via live video webcast that will provide stockholders with the ability to participate in the Annual Meeting, vote their shares and ask questions.  In order to attend the Annual Meeting, you must register at www.proxydocs.com/CSTR. Upon completing your registration, you will receive further instructions via email, including a unique link that will allow you access to the Annual Meeting and to vote and submit questions during the Annual Meeting. Certain presentation materials that will be used at the Annual Meeting will be available on our website the day of the Annual Meeting under “News and Events.”

 

What proposals will be voted upon at the Annual Meeting?

There are three proposals scheduled for a vote at the Annual Meeting:

 

(1)

To elect the following twelve (12) directors to serve until the 2021 Annual Meeting of Shareholders and until their successors have been duly elected and qualified: Dennis C. Bottorff, L. Earl Bentz, Sam B. DeVane, Thomas R. Flynn, Louis A. Green III, Valora S. Gurganious, Myra NanDora Jenne, Joelle J. Phillips, Timothy K. Schools, Stephen B. Smith, James S. Turner, Jr., and Toby S. Wilt (Proposal 1);

 

(2)

To ratify the appointment of Elliott Davis, LLC as our independent registered public accounting firm for the fiscal year ending December 31, 2021 (Proposal 2);

 

(3)

To approve the CapStar Financial Holdings, Inc. 2021 Stock Incentive Plan (Proposal 3); and

 

(4)

To conduct such other business as may properly come before the meeting or any adjournment or postponement thereof.

As of the date of this Proxy Statement, we are not aware of any additional matters that will be presented for consideration at the Annual Meeting.

What are the recommendations of the Board of Directors?

Our Board recommends that you vote:

 

FOR” the election of each of the twelve (12) nominees named herein to serve on the Board;

 

FOR” the ratification of the appointment of Elliott Davis, LLC as our independent registered public accounting firm for the fiscal year ending December 31, 2021; and

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FOR” the approval of the CapStar Financial Holdings, Inc. 2021 Stock Incentive Plan.

Will our directors participate at the Annual Meeting?

We expect that all of our directors will be participating in the Annual Meeting.

INFORMATION ABOUT VOTING

Who is entitled to vote at the Annual Meeting?

Only shareholders of record at the close of business on the record date, March 16, 2021 (the “Record Date”), are entitled to receive notice of and to vote at the Annual Meeting or any adjournment or postponement thereof.  As of the close of business on the Record Date, the Company had 22,078,293 shares of common stock outstanding.

How do I vote?

For Proposal 1 (election of directors), you may either vote “FOR” any of the nominees named herein to the Board or you may “WITHHOLD” your vote for any nominee that you specify.  For Proposal 2 (ratification of the appointment of Elliott Davis, LLC) and Proposal 3 (approval of the CapStar Financial Holdings, Inc. 2021 Stock Incentive Plan), you may vote “FOR” or “AGAINST” such proposal or “ABSTAIN” from voting.  The procedures for voting are set forth below:

Shareholder of Record: Shares Registered Directly in Your Name.  You may vote by completing, signing and dating the proxy card where indicated and mailing the proxy card in the postage paid envelope provided.  You may also vote by giving your proxy authorization over the Internet or by telephone using the toll-free number on the proxy card until 9:05 A.M. Central Time on April 23, 2021, the time at which the polls are closed at the telephonic Annual Meeting.  Whether or not you plan to participate in the telephonic Annual Meeting, we encourage you to vote by proxy or to give your proxy authorization to ensure that your votes are counted. If you have already voted by proxy or given your proxy authorization, you may still participate in the telephonic Annual Meeting and vote using the Internet or by calling the toll-free number on the proxy card until the time the polls are closed at the Annual Meeting.

 

To vote by mail, complete, sign and date the proxy card and return it promptly in the postage paid envelope provided.

 

To vote by the Internet, go to the website address set forth on the enclosed proxy card and follow the instructions provided on the website.

 

To vote by telephone, dial the toll-free phone number set forth on the enclosed proxy card using a touch-tone phone. Have your proxy card available and follow the recorded instructions when voting by telephone.

 

Beneficial Owner: Shares Registered in the Name of Broker, Bank or Other Agent.  If you are a beneficial owner of shares registered in the name of your broker, bank or other agent, you should have received the proxy materials from that organization rather than from the Company.  As a beneficial owner, you have the right to direct your broker, bank, or other agent how to vote the shares in your account.  You should follow the instructions provided by your broker, bank or other agent regarding how to vote your shares.  

How many votes do I have?

For each proposal to be voted upon, you have one vote for each share of common stock that you own as of the close of business on the Record Date.

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What if I return a proxy card but do not make specific choices?

Properly completed and returned proxies will be voted as instructed on the proxy card.  If you are a shareholder of record and you return the signed and dated proxy card without marking any voting selections, your shares will be voted “FOR” the election of all twelve (12) director nominees named herein, “FOR” the ratification of the appointment of Elliott Davis, LLC as our independent registered public accounting firm for the fiscal year ending December 31, 2021, and “FOR” the approval of the CapStar Financial Holdings, Inc. 2021 Stock Incentive Plan. If any other matter is properly presented at the Annual Meeting, your proxy (one of the individuals named on your proxy card) will vote your shares as recommended by the Board or, if no recommendation is given, will vote your shares using his or her discretion.  If any director nominee named herein becomes unavailable for election for any reason prior to the vote at the Annual Meeting, the Board may reduce the number of directors to be elected or substitute another person as nominee, in which case the proxy holders will vote for the substitute nominee.

If your shares are held by your broker, bank or other agent as your nominee, you will need to obtain a proxy card from the organization that holds your shares and follow the instructions included on that form regarding how to instruct your broker, bank or other agent to vote your shares.  Brokers, banks or other agents that have not received voting instructions from their clients cannot vote on their clients’ behalf with respect to proposals that are not “routine” but may vote their clients’ shares on “routine” proposals.  Under applicable state laws and the rules of the Nasdaq Global Select Market (“NASDAQ”), Proposals 1 (election of directors) and 3 (approval of the CapStar Financial Holdings, Inc. 2021 Stock Incentive Plan) are “non-routine” proposals. Conversely, Proposal 2 (ratification of the appointment of Elliott Davis, LLC) is a “routine” proposal.  If a broker, bank, or other agent indicates on a proxy card that it does not have discretionary authority to vote certain shares on Proposals 1 or 3, which are non-routine proposals, then those shares will be treated as broker non-votes for purposes of Proposals 1 and 3, and such shares will not be counted as a “FOR” or “WITHHOLD” vote for purposes of Proposal 1. Conversely, brokers will have the discretionary authority to vote “FOR”, “AGAINST” or “ABSTAIN” on Proposal 2, if you do not instruct your broker otherwise. Although broker non-votes are counted as shares that are present at the Annual Meeting and entitled to vote for purposes of determining the presence of a quorum, they will not be counted as votes cast and will not have any effect on voting for the non-routine proposals presented in this Proxy Statement.

Can I change my vote?

Yes. If you are the record holder of your shares, you may revoke your proxy in any of the following ways:

 

You may change your vote at any time before the proxy is exercised by re-submitting your vote via the Internet or by telephone;

 

You may submit another properly completed proxy card bearing a later date which is received prior to the meeting date; or

 

You may send a written notice that you are revoking your proxy.  The notice must be sent to 1201 Demonbreun Street, Suite 700, Nashville, Tennessee 37203, Attention: Corporate Secretary, and must be received by 11:59 P.M., Eastern Time on April 22, 2021.

 

If your shares are held by your broker, bank or other agent as your nominee, you should follow the instructions provided by your broker, bank or other agent.

How many shares must be present to constitute a quorum for the Annual Meeting?

A quorum of shareholders is necessary to hold a valid meeting.  A quorum will be present if at least a majority of the outstanding shares entitled to vote are represented (via proxy or telephonic participation) at the Annual Meeting.  As of the close of business on the Record Date, there were 22,078,293 shares of common stock outstanding and entitled to vote.  Thus, 11,259,929 shares of common stock must be represented (via proxy or virtual participation) at the Annual Meeting to have a quorum.

Your shares will be counted towards the quorum if you vote by submitting the enclosed proxy card by mail, or by submitting your vote via the Internet address or toll-free telephone number included on your proxy card prior to the time the polls are closed at the telephonic Annual Meeting, submit a valid proxy (or one is submitted on your behalf by your broker, bank or other agent) or give your proxy authorization over the Internet or by telephone.  Additionally, “WITHHOLD” votes, abstentions and broker non-votes will also be counted towards the quorum requirement.  If there is no quorum, the Chairman of the Annual Meeting may adjourn or postpone the meeting until a later date.

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How are votes counted?

Votes will be counted by the inspector of election appointed for the Annual Meeting who will separately count (i) “FOR” and “WITHHOLD” votes and broker non-votes, if any, with respect to each of Proposal 1 (election of directors) and  Proposal 3 (approval of the CapStar Financial Holdings, Inc. 2021 Stock Incentive Plan) and (ii) “FOR”, “AGAINST” and “ABSTAIN” votes with respect to Proposal 2 (ratification of the appointment of Elliott Davis, LLC).

How many votes are needed to approve each proposal?

For Proposal 1 (election of directors), if a quorum is present, the director nominees will be elected by a plurality of the votes cast by the shares entitled to vote in the election at the Annual Meeting. Shareholders are not entitled to cumulative voting in the election of our directors.  For purposes of the election of directors, “WITHHOLD” votes and broker non-votes, if any, will not be counted as votes cast and will have no effect on the result of the vote.

For each of Proposal 2 (ratification of the appointment of Elliott Davis, LLC) and Proposal 3 (approval of the CapStar Financial Holdings, Inc. 2021 Stock Incentive Plan), if a quorum is present, the Proposals will be approved if the votes cast for the proposal exceed the votes cast against the proposal.  Abstentions and broker non-votes, if any, will not be counted as votes cast and will have no effect on the result of the vote.  

How can I determine the results of the voting at the Annual Meeting?

Preliminary voting results will be announced at the Annual Meeting.  Within four business days after the conclusion of the Annual Meeting, the Company will file a Current Report on Form 8-K with the Securities and Exchange Commission (“SEC”) that announces the final voting results.

Who can help answer any questions I may have?

Shareholders who have questions about the matters to be voted on at the Annual Meeting or how to submit a proxy or who desire additional copies of this Proxy Statement or additional proxy cards should contact our Investor Relations department via (i) mail at CapStar Financial Holdings, Inc., 1201 Demonbreun Street, Suite 700, Nashville, Tennessee 37203, Attention: Investor Relations, (ii) email at ir@capstarbank.com or (iii) telephone at (615) 732-6455.

 

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PROPOSAL 1

ELECTION OF DIRECTORS

Introduction

Our Charter and Amended and Restated Bylaws (“Bylaws”) provide that our Board will consist of between five and 25 directors, with the precise number being determined by our Board from time to time. The size of our current Board is fourteen (14).

In accordance with our Bylaws and Tennessee law, our Board oversees the management of the business and affairs of the Company.  Our directors are elected annually by our shareholders at our annual meetings of shareholders for one-year terms and serve until their successors are duly elected and qualified or until their earlier death, resignation, retirement or removal.  Our Board also serves as the Board of our wholly-owned bank subsidiary, CapStar Bank.

At the Annual Meeting, twelve (12) Directors are being recommended for election to serve on our Board until the 2022 Annual Meeting of Shareholders and until their successors have been duly elected and qualified or until such director’s earlier resignation or removal. Mr. Dale W. Polley and Mr. Jeffrey L. Cunningham have informed us that they are not standing for re-election to our Board at the Annual Meeting. Each person nominated for election has agreed to serve if elected, and management has no reason to believe that any nominee named herein will be unable to serve.  There are no family relationships among any of the members of our Board.

Our Nominating and Corporate Governance Committee has nominated Sam B. DeVane and Valora S. Gurganious to stand for election at the Annual Meeting. Accordingly, upon the election of the recommended slate of Directors, the Company will have twelve (12) Directors sitting on its Board of Directors. 

Set forth below is the background and qualifications of each director nominee.

Director Nominees

Dennis C. Bottorff—Chairman of the Board of Directors

Mr. Bottorff, age 76, was one of the founders of CapStar Bank and currently serves as Chairman of our Board and as a member of the Nominating and Corporate Governance Committee and the Compensation and Human Resources Committee. Mr. Bottorff has served on our Board since 2008.  He is also the Founding General Partner of Council Capital Management, a private equity firm located in Nashville, where he was previously a Managing Partner from 2001 to 2016. Mr. Bottorff began his career in banking in 1968 at the former Commerce Union Bank in Nashville. After serving in numerous positions, he was named President in 1981 and Chief Executive Officer shortly thereafter. When Commerce Union Bank merged with Sovran Financial Corporation, or Sovran, in 1987, Mr. Bottorff became Chief Operating Officer of Sovran and moved to Norfolk, Virginia. He continued in this position when Sovran merged with Citizens and Southern Bank in Atlanta to form C&S/Sovran. In 1991 C&S/Sovran merged with NCNB Corporation to form NationsBank. Mr. Bottorff returned to Nashville in 1991 to become Chief Executive Officer of First American Corporation. Following AmSouth’s acquisition of First American Corporation in 1999, Mr. Bottorff served as AmSouth’s Chairman of the board until his retirement in January 2001. He has served on over twelve corporate boards, including all of the banks at which he was an officer, Dollar General, Shoney’s, Ingram Industries and Tennessee Valley Authority, where he served as Chairman. Presently, he is Trustee Emeritus at Vanderbilt University. His leadership in the community has included serving as Chairman of the Tennessee Education Lottery Corporation, the United Way, the Nashville Symphony, the Nashville Area Chamber of Commerce, the Titans Advisory Board, and the Tennessee Performing Arts Center. He received a B.E. degree in electrical engineering from Vanderbilt University and an M.B.A. from Northwestern University. We believe Mr. Bottorff’s extensive leadership and governance experience at regional banks, in private equity and on corporate and non-profit boards gives him valuable insight and enables him to make significant contributions as a member of our Board.

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L. Earl Bentz—Director

Mr. Bentz, age 69, was one of the founders of CapStar Bank and currently serves on the Audit and Risk Committee and the Credit Committee. Mr. Bentz has served on our Board since 2008.  Since 1996, he has been President and Chief Executive Officer of Triton Boats, a company he sold to Brunswick Corporation in 2005. Mr. Bentz serves on the board of directors of the Country Music Hall of Fame, and he has formerly served on the boards of the Middle Tennessee Council, Boy Scouts of America, the Tennessee Wildlife Resources Foundation, the National Association of Boat Manufacturers, the National Marine Manufacturers’ Association, the Recreational Boating and Fishing Foundation and the Congressional Sportsman’s Foundation. Mr. Bentz attended Clemson University and participated in continuing education programs in business finance at Vanderbilt University; he has also completed the Dale Carnegie Human Relations courses and training. Mr. Bentz’s business background, which also includes extensive experience in commercial real estate development and start-up companies, gives him valuable insight and enables him to make significant contributions as a member of our Board.

Sam B. DeVane—Director

Mr. DeVane, age 61, serves on the Audit and Risk Committee and the Compensation and Human Resources Committee. Mr. DeVane has served on our Board since his appointment on January 14, 2021. With more than three decades of public accounting experience serving clients throughout the southeast, Mr. DeVane retired as Nashville Office Managing Partner of Ernst & Young LLP. He previously served as EY’s Tennessee Markets Leader, and as a coordinating partner and lead audit partner for over twenty years. The majority of Mr. DeVane’s career involved service to clients in the retail and consumer products sector along with numerous manufacturers, distributors, and retailers, including Dollar General Corporation, Tractor Supply Company and Ryman Hospitality Corporation. He brings extensive technical accounting, corporate governance, major transactions, strategy, process automation, financial reporting, and risk management experience. A licensed CPA in Tennessee, Mr. DeVane is a member of the American Institute of Certified Public Accountants and Tennessee Society of Certified Public Accountants. He earned a Bachelor of Science degree from the University of Alabama. Mr. DeVane has served on several distinguished professional boards, including United Way of Middle Tennessee (Chair of the Nashville Campaign), Junior Achievement (Centennial Leadership Award recipient), Harding Academy (Treasurer), and the University of Alabama President’s Cabinet and Accounting Advisory Board. We believe Mr. DeVane’s business experience and involvement in the community give him valuable insight and enable him to make significant contributions as a member of our Board.

Thomas R. Flynn—Director

Mr. Flynn, age 48, serves as Chair of the Compensation and Human Resources Committee and also serves on the Audit and Risk Committee. Mr. Flynn has served on our Board since 2008.  Mr. Flynn is a director of Flynn Enterprises, LLC, a family owned, multi-national garment manufacturing, sales and distribution company headquartered in Hopkinsville, Kentucky, and serves on the boards of Planters Bank, Hopkinsville, for which he is also a member of the Audit and Risk Committee, and Jennie Stuart Medical Center, a regional hospital that serves Western Kentucky. Mr. Flynn attended Vanderbilt University as a National Merit Scholar, graduating with a bachelor’s degree in English, and subsequently received a law degree from Vanderbilt University Law School. We believe Mr. Flynn’s leadership in manufacturing and experience as a director in banking, healthcare and manufacturing and legal knowledge give him valuable insight and enables him to make significant contributions as a member of our Board.

Louis A. Green III—Director

Mr. Green, age 67, serves on the Audit and Risk Committee and the Credit Committee and chairs our Advisory Board for Sumner County, which provides guidance to our management regarding that portion of our market. Mr. Green has served on our Board since 2012.  He was an incorporator of American Security, which merged with CapStar in July 2012. Mr. Green is General Partner of Green & Little, a real estate investment company, and President of Green-Little Corporation, a real estate management company. He holds partnership interests in several companies investing in industrial, commercial and retail real estate. Mr. Green has served as director of Commerce Union Bank of Sumner County and as an advisory director of NationsBank. He attended the University of Tennessee. We believe Mr. Green’s extensive experience in banking and real estate gives him valuable insight and enables him to make significant contributions as a member of our Board.

Valora S. Gurganious—Director

Ms. Gurganious, age 57, serves on the Community Affairs Committee and the Nominating and Corporate Governance Committee. Ms. Gurganious has served on our Board since her appointment on January 14, 2021. Ms. Gurganious serves as Partner and Senior Management Consultant for Knoxville-based DoctorsManagement, LLC, assisting clients in all medical specialties and providing services related to operational efficiency, workflow optimization, compliance, IT, accounting, marketing, and strategic planning. She also advises physicians and hospitals across the country on practice valuation, startup, contract negotiation and transition of ownership. Prior to joining DoctorsManagement, Ms. Gurganious served as Chief Operating Officer for Central Florida Sports Medicine and

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Orthopedic Center in Melbourne, and as Director and Vice Chair – Finance for Wuesthoff Foundation, a $10 million Florida health system foundation. She also held the position of senior vice president with Fleet Investment Advisors and Putnam Investments in Boston for seven years and is a licensed Business Broker in the state of Florida. Ms. Gurganious earned a Bachelor of Arts degree in economics and business administration from Vanderbilt University and MBA from Harvard Business School. She is a Certified Healthcare Business Consultant and a member of the National Society of Certified Healthcare Business Consultants (NSCHBC) as well as Executive Women International (EWI). A dynamic and accomplished speaker, Ms. Gurganious uses her expertise to deliver strategic healthcare and financial lectures at medical conferences across the country. We believe Ms. Gurganious’s business experience and involvement in the community give her valuable insight and enable her to make significant contributions as a member of our Board.

Myra NanDora Jenne—Director

Ms. Jenne, age 52, serves as Chair of the Community Affairs Committee and also serves on the Compensation and Human Resources Committee. Ms. Jenne has served on our Board since her appointment on October 24, 2018. She graduated with Honors with a B.S. from the University of Tennessee at Knoxville, where she served as captain of the Tennessee Dance Team. She went on to attend Samford University’s Cumberland School of Law and graduated with a J.D. in 1994. Ms. Jenne began practicing law with Carter, Harrod & Cunningham in Athens, Tennessee, and later practiced in Knoxville with Leitner, Williams, Dooley & Napolitan. She currently practices at The Jenne Law Firm in Cleveland, Tennessee, and also serves as the firm’s office manager. Ms. Jenne has served on the board of directors of Athens Federal Community Bank and on the Nalls Sherbakoff Group financial advisory board in Knoxville, Tennessee. She has been involved in various civic and charitable organizations in Cleveland, Tennessee over the past twenty years including serving on the boards at the Museum Center at Five Points and the Cleveland Athens Cotillion. She has also served on the Board of Trustees at Broad Street United Methodist Church and serves on several committees at The Baylor School in Chattanooga, Tennessee. We believe Ms. Jenne’s extensive leadership experience and professional experience give her valuable insight and enables her to make significant contributions as a member of our Board.

Joelle J. Phillips—Director

Ms. Phillips, age 54, serves on the Nominating and Corporate Governance Committee and the Community Affairs Committee. Ms. Phillips graduated magna cum laude with a B.F.A. from Birmingham-Southern College in 1989 and went on to attend Washington & Lee University, School of Law where she graduated summa cum laude with a J.D. in 1995. Ms. Phillips began practicing law as law clerk for Hon. Rhesa H. Barksdale of the U.S. Court of Appeals for the Fifth Circuit, and later practiced in Atlanta, Georgia with Long, Aldridge & Norman LLP and in Nashville with Waller Lansden Dortch & Davis, LLP. After serving as General Attorney for both BellSouth and AT&T Tennessee, she now serves as the President of AT&T Tennessee, a position she has held since 2013. Ms. Phillips is involved in several civic and charitable organizations in Nashville, Tennessee, including serving as the Chair for the Drive to 55 Coalition and serving on the boards of Birmingham-Southern College, Tennessee Business Leadership Coalition and Nashville Repertory Theatre.  Furthermore, Ms. Phillips was recognized as the Nashville Business Journal Newsmaker of the Year for 2015, Nashville’s Power 100 list, Nashville’s Women Business Leaders of the Year 2014, Tennessee Board of Regents’ Award for Philanthropy and was named one of Nashville’s Outstanding CEOs for 2017. We believe that Ms. Phillips’ professional experience combined with her long history of involvement in the Nashville community will allow her to make significant contributions as a member of our Board.

Timothy K. Schools—Director, President and Chief Executive Officer of CapStar Financial Holdings, Inc. and CapStar Bank

Mr. Schools, age 51, has served as a Director and the President and Chief Executive Officer of the Company since July 2019 and is a member of the Tennessee Business Roundtable. Mr. Schools most recently served as a Director and the President and Chief Executive Officer at Highlands Bankshares, Inc.  At Highlands, he led the Board of Directors and Executive Committee in establishing and executing a strategic plan, following a private equity recapitalization, which led to “Best Bank” designations in each of their markets, remediation of a long-standing and preexisting regulatory Written Agreement, and materially improved financial performance.  Prior to his tenure with Highlands, Mr. Schools served as Chief Strategy Officer of United Community Bank and President of American Savings Bank.  He joined United Community Bank following a private equity recapitalization and as part of the Executive Committee led the company to national customer service recognition, remediated a preexisting regulatory Memorandum of Understanding, and restored financial health. At American Savings Bank, Mr. Schools served as President and led the Board of Directors and Executive Committee in developing and executing a strategic plan which resulted in increased market competitiveness, the creation of a market and industry leading culture, remediation of a preexisting regulatory Cease and Desist order, and substantial improvement in financial performance.  Mr. Schools previously served as Chief Financial Officer of The South Financial Group where he was recognized nationally by Institutional Investor and has served as a board member of APCO Employees Credit Union, First Market Bank, CRA Partners, Nasdaq Issuer Advisory Council, and OTC Markets Group Issuer Advisory Council. Mr. Schools graduated magna cum laude from James Madison University with a Bachelor’s degree in business administration and received his M.B.A from Emory University. We believe Mr. Schools’ extensive experience in the banking industry coupled with leadership roles on private and non-profit boards give him valuable insight and enable him to make significant contributions as a member of our Board.

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Stephen B. Smith—Director

Mr. Smith, age 67, serves on the Credit Committee and the Community Affairs Committee. Mr. Smith has served on our Board since 2008.  He is Chairman of Haury & Smith Contractors, Inc., a building and development company. He is active in the community, having served on the Metropolitan Nashville Planning Commission and the Regional Transit Authority and as Chairman of the Metropolitan Nashville Parks and Recreation board of directors. Mr. Smith served as National Finance Co-Chair for Senator Lamar Alexander’s presidential campaigns in 1996 and 2000, and he achieved Super Ranger status in President George W. Bush’s 2004 campaign. He was National Finance Chairman for Senate Majority Leader Bill Frist’s leadership political action committee, VOLPAC, served as Finance Chairman for Senator Lamar Alexander’s 2008 and 2014 re-election campaigns, and is currently the Finance Chairman for Senator Alexander’s leadership political action committee, TENNPAC. In addition he has served on the boards of the FHLB and Franklin Road Academy, and as director of the First Union National Bank community board. He holds a bachelor’s degree from Middle Tennessee State University.  He serves as Chairman of the Board of Trustees of Middle Tennessee State University, where he received his bachelor’s degree. We believe Mr. Smith’s business experience, banking board service and involvement in the community give him valuable insight and enable him to make significant contributions as a member of our Board.

James S. Turner, Jr.—Director

Mr. Turner, age 50, was one of the founders of CapStar Bank and serves as Chair of the Credit Committee and also serves on the Community Affairs Committee. Mr. Turner has served on our Board since 2008.  He joined Marketstreet Enterprises in 1999 and has served as the Managing Director since 2007. He serves on the boards of the Country Music Hall of Fame and the Nashville Downtown Partnership. He also had previously been a member of the board of directors of the Farmers National Bank Financial Corporation in Scottsville, Kentucky, for more than 15 years. He received his bachelor’s degree from Vanderbilt University and his law degree from Vanderbilt University Law School. We believe Mr. Turner’s experience in and knowledge of the commercial real estate industry, his community banking board service, as well as his investment and legal knowledge, give him significant insight and enable him to make significant contributions as a member of our Board.

Toby S. Wilt—Director

Mr. Wilt, age 76, was one of the founders of CapStar Bank and serves as Chair of the Nominating and Corporate Governance Committee and also serves on the Compensation and Human Resources Committee. He has served on our Board since 2008.  Mr. Wilt has nearly four decades of experience in the banking industry. Mr. Wilt is a retired, non-practicing certified public accountant, who is no longer affiliated with the Tennessee Association of Accountants or the AICPA.  He practiced accountancy with Ernst & Ernst in the 1970s.  He has previously served on the boards of directors of banks and public companies including C&S/Sovran Corporation, Commerce Union Bank, Outback Steakhouse and Genesco Inc. Mr. Wilt currently serves as President of TSW Investment Company, Founding President of Golf Club of Tennessee, and Chairman of the board of Christie Cookie Company. Mr. Wilt is also a former board member of First American Corporation. He earned a B.E. in civil engineering from Vanderbilt University and is a former pilot in the United States Air Force. We believe Mr. Wilt’s significant experience in banking and as a director of banks and public companies, including his service on audit and human resource committees, gives him valuable insight and enables him to make significant contributions as a member of our Board.

Required Vote

If a quorum is present, the director nominees will be elected by a plurality of the votes cast by the shares entitled to vote in the election at the Annual Meeting.  

THE BOARD RECOMMENDS A VOTE “FOR” EACH NOMINEE NAMED ABOVE.

 

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CORPORATE GOVERNANCE

Overview

We are committed to having sound corporate governance principles, which are essential to running our business efficiently and maintaining our integrity in the marketplace.  We understand that corporate governance practices change and evolve over time, and we seek to adopt and use practices that we believe will be of value to our shareholders and will positively aid in the governance of the Company.  To that end, we regularly review our corporate governance policies and practices and compare them to the practices of other peer public companies.  We will continue to monitor emerging developments in corporate governance and enhance our policies and procedures when required or when our Board determines that it would benefit us and our shareholders.

In this section, we describe the roles and responsibilities of our Board and its committees and describe our corporate governance policies, procedures and related-documents.  All of our Board’ committees have written charters, which can be found on our Investor Relations webpage under the tab entitled “Corporate Governance - Documents & Charters” at www.ir.capstarbank.com.   We will also provide a copy of any committee charter, our Corporate Governance Guidelines and our Code of Ethics and Conflicts of Interest Policy without charge upon written request sent to 1201 Demonbreun Street, Suite 700, Nashville, Tennessee 37203, Attention: Investor Relations.  Information that is presented or hyperlinked on our website is not incorporated by reference into this Proxy Statement.

Director Independence

NASDAQ rules require that independent directors comprise a majority of our Board.  In addition, NASDAQ rules, as well as those of the SEC, impose several other requirements with respect to the independence of our directors.  Accordingly, our Board has evaluated the independence of its members based upon the rules of NASDAQ and the SEC.  Applying these standards, our Board has affirmatively determined that, with the exception of Mr. Schools, each of our current directors is an independent director, as defined under the applicable rules.  Our Board determined that Mr. Schools does not qualify as an independent director because he is an executive officer of the Company.

Board Meetings and Attendance

The Board meets at least quarterly at regularly scheduled meetings. Directors are expected to attend and participate in all meetings, including the Company’s annual meeting of shareholders, and must be willing to devote sufficient time, energy and attention to properly discharging their duties and responsibilities to the Company and the Board effectively. All of our directors then serving on the Board attended the 2020 Annual Meeting of Shareholders. When considering nominees for re-election to the Board, the Nominating and Corporate Governance Committee may consider exceptions to our attendance policy for excusable absences.

Independent directors meet in executive session at each Board meeting, with no members of management and only independent directors being present.  Mr. Bottorff, the Chairman of the Board, presides at all executive sessions of independent directors.

During 2020, the Board met on thirteen (13) occasions, including five (5) specially called meetings of the Board. In 2020, each director attended at least 75% of the total of all meetings of the Board and the committees on which he or she served during the period in which he or she served on our Board or the respective committee of our Board.

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Committees of our Board

Our Board has the authority to appoint committees to perform certain management and administrative functions.  During 2020, our Board had five committees: the Audit and Risk Committee, the Nominating and Corporate Governance Committee, the Community Affairs Committee, the Compensation and Human Resources Committee and the Credit Committee.  These committees of our Board also performed the same functions for the Bank.  Our Board adopted written charters for each of these committees.  As necessary, from time to time, special committees may be established by our Board to address certain issues.  The following table shows the composition of each of the committees of our Board during 2020 and the number of times each committee met during 2020:

Name

 

Audit

(1)

 

Risk

(1)

 

Audit

and

Risk

(1)

 

Nominating, Governance

and

Community

Affairs

(2)

 

Nominating

and

Corporate

Governance

(2)

 

Community Affairs

(2)

 

Compensation

and Human Resources

 

Credit

Dennis C. Bottorff

 

 

 

 

 

 

 

X

 

X

 

 

 

X

 

X

L. Earl Bentz

 

X

 

X

 

X

 

 

 

 

 

 

 

 

 

X

Jeffrey L. Cunningham

 

 

 

X

 

X

 

 

 

 

 

X

 

 

 

 

Thomas R. Flynn

 

X*

 

 

 

X

 

 

 

 

 

 

 

X*

 

X

Julie D. Frist (3)

 

 

 

 

 

 

 

X*

 

 

 

 

 

X

 

 

Louis A. Green III

 

X

 

 

 

X

 

X

 

 

 

 

 

 

 

X

Myra NanDora Jenne

 

 

 

 

 

 

 

X

 

X

 

X*

 

X

 

 

Joelle J. Phillips

 

 

 

 

 

 

 

 

 

X

 

X

 

 

 

 

Dale W. Polley

 

X

 

X*

 

X*

 

X

 

X

 

 

 

 

 

 

Timothy K. Schools (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stephen B. Smith

 

 

 

 

 

 

 

X

 

 

 

X

 

 

 

X

James  S. Turner, Jr.

 

 

 

X

 

 

 

 

 

 

 

X

 

 

 

X*

Toby S. Wilt

 

X

 

 

 

 

 

 

 

X*

 

 

 

X

 

 

Number of Meetings in 2020

 

5

 

3

 

6

 

3

 

5

 

2

 

5

 

8

 

*

Committee Chair

(1)

Effective April 24, 2020, the Audit Committee and Risk Committee were combined to create one committee – the Audit and Risk Committee.

(2)

Effective April 24, 2020, the Nominating, Governance and Community Affairs Committee was split into two committees – the Nominating and Corporate Governance Committee and the Community Affairs Committee.

(3)

Although Mrs. Frist served during 2020, and served as the Chair of our Nominating, Governance and Community Affairs Committee and as a member of our Compensation and Human Resources Committee, she did not stand for re-election at the 2020 Annual Meeting.

(4)

Mr. Schools became a member of our Board effective July 31, 2019. Mr. Schools does not currently serve on any of the committees of our Board.

The table above and the following disclosure provides detail regarding the composition and responsibilities of each of the Board’s committees during the year ended December 31, 2020. On March 5, 2020, our Board approved the consolidation of our Audit Committee with our Risk Committee and certain committee reassignments, which was effective upon the election of director nominees at the 2020 Annual Meeting. For more information regarding these changes, please see “Corporate Governance — 2020 Committee Reassignments and Combining of Audit and Risk Committees.”

Audit and Risk Committee

Our Audit and Risk Committee consists of Messrs. Polley (Committee Chair), Bentz, Flynn and Green. Mr. DeVane began serving on the Audit and Risk Committee upon being appointed to the Board on January 14, 2021. Our Audit and Risk Committee charter requires that our Audit and Risk Committee be comprised entirely of independent directors. The committee is responsible for, among other things: monitoring the integrity of, and assessing the adequacy of, our financial statements, the financial reporting process and our system of internal accounting and financial controls; assisting our Board in ensuring compliance with laws, regulations, policies and procedures; selecting our independent registered public accounting firm and assessing its qualifications, independence and performance; monitoring the internal audit function; reviewing and, if appropriate, pre-approving all auditing and permissible non-audit services performed by the independent registered public accounting firm; and reviewing and, if appropriate, approving related-party transactions other than those subject to Regulation O.  At least once per year, our Audit and Risk Committee meets privately with each of our independent registered public accounting firm, management and our internal auditors.

Furthermore, this committee is responsible for, among other things, assisting our Board in its oversight of our enterprise risk management governance and processes and for reviewing and approving the risk parameters to be used by management in the operation

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of the Company.  Additionally, its roles include capital management oversight; providing oversight of asset liability management processes; reviewing our insurance risk management program; ensuring that our internal policies, procedures and guidelines are appropriate to manage risk; monitoring interest rate risk management; and approving our asset/liability and investment policies.

Our Board has affirmatively determined that each of Messrs. Polley, Bentz, DeVane, Flynn and Green satisfies the requirements for independence as an audit committee member under the Sarbanes-Oxley Act (“SOX”) and the rules and regulations of NASDAQ and the SEC. Further, the Board has determined that each of Messrs. Polley, Bentz, DeVane, Flynn and Green satisfies the requirements for financial literacy under the rules and regulations of NASDAQ and the SEC, and that each of Messrs. Polley, Bentz, DeVane, Flynn and Green qualify as an “audit committee financial expert” as defined in the SEC rules and satisfies the financial sophistication requirements of NASDAQ.

Compensation and Human Resources Committee

Our Compensation and Human Resources Committee consists of Mr. Flynn (Committee Chair), Mr. Bottorff, Ms. Jenne and Mr. Wilt.  Mr. DeVane began serving on the Compensation and Human Resources Committee upon being appointed to the Board on January 14, 2021. Our Compensation and Human Resources Committee charter requires that our Compensation and Human Resources Committee be comprised entirely of independent directors.  The committee is responsible for, among other things, reviewing and approving compensation arrangements with our Chief Executive Officer and other executive officers; advising management with respect to compensation, including equity and non-equity incentives; making recommendations to the Board regarding our overall equity-based incentive programs; administering a performance review process for, and, in collaboration with the Nominating and Corporate Governance Committee; and, in collaboration with the Nominating and Corporate Governance Committee, periodically reviewing the succession plan for the Chief Executive Officer and other executive officers. In addition, the committee annually reviews corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officers and recommends compensation levels to the Board based on this evaluation.  See “Executive Compensation – Narrative Discussion of Summary Compensation Table – Compensation Philosophy” for more information.

Our Board has determined that each member of our Compensation and Human Resources Committee meets the requirements for independence under the rules and regulations of NASDAQ and the SEC, qualifies as an “outside director” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended, (the “Code”), and as a “non-employee director” for purposes of Rule 16b‑3 of the Exchange Act. Our board has determined that each of Mr. Flynn, Mr. Bottorff, Mr. DeVane, Ms. Jenne and Mr. Wilt are independent; thus, a majority of the directors serving on our Compensation and Human Resources Committee are independent as required by the Compensation and Human Resources Committee charter.

Nominating and Corporate Governance Committee

Our Nominating and Corporate Governance Committee consists of Mr. Wilt (Committee Chair), Mr. Bottorff, Ms. Phillips and Mr. Polley. Ms. Gurganious began serving on the Nominating and Corporate Governance Committee upon being appointed to the Board on January 14, 2021. Our Nominating and Corporate Governance Committee charter requires that our Nominating and Corporate Governance Committee be comprised entirely of independent directors.  The committee is responsible for, among other things, identifying and recommending to our Board qualified individuals to become directors; nominating candidates for election to our Board to fill vacancies that occur between annual meetings of shareholders; in collaboration with the Compensation and Human Resources Committee, periodically reviewing the succession plan for the Chief Executive Officer and other executive officers; advising our Board with respect to the roles and composition of committees; overseeing the evaluation of our Board; assisting our Board in establishing and maintaining effective corporate governance practices; annually evaluating our Board and committees and providing recommendations to help them function more effectively; and establishing and overseeing a compliance risk program that enables the Company to manage compliance risks related to regulatory and internal and external oversight.

Our Board has determined that each member of our Nominating and Corporate Governance Committee meets the requirements for independence under the rules and regulations of NASDAQ and the SEC.


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Community Affairs Committee

 

Our Community Affairs Committee consists of Ms. Jenne (Committee Chair), Mr. Cunningham, Mr. Smith, Mr. Turner and Ms. Phillips, all of whom are independent directors. Ms. Gurganious began serving on the Community Affairs Committee upon being appointed to the Board on January 14, 2021. The purposes of the Community Affairs Committee are to ensure that the Company embraces its Mission, Vision and Values, to oversee the Company’s local involvement and leadership in the communities where the Company operates, including matters related to employee engagement, community development, philanthropy, government affairs, reputation management, and diversity and inclusion, and to oversee the Company’s Community Reinvestment Act (“CRA”) Program and Fair Lending Compliance Program.

Credit Committee

Our Credit Committee consists of Messrs. Turner (Committee Chair), Bentz, Cunningham, Green and Smith. The charter of our Credit Committee provides that a majority of the members of the committee must be independent.  The Credit Committee is responsible for, among other things, monitoring the management of our assets, with a primary focus on loans, other real estate owned, and other customer-related assets; reviewing and monitoring compliance with our Loan and Credit Administration Policy; ensuring review of each criticized and classified loan; reviewing charge-offs and recoveries; monitoring exceptions to loan policies, collateral and financial statements; ensuring that extensions of credit to directors, executive officers and their affiliates are in compliance with law and reviewing loans subject to Regulation O, and, to the extent required by Regulation O and where appropriate, recommending approval of such loans by the full Board; and reviewing progress with respect to management’s goals for improvements in credit quality.  

2020 Committee Reassignments and Combining of Audit and Risk Committees

Upon the election of the director nominees at the 2020 Annual Meeting, our Board approved the consolidation of our Audit Committee with our Risk Committee. The newly consolidated Audit and Risk Committee has all of the same responsibilities as were previously assigned to each of the respective committees. Further, all members of the newly consolidated Audit and Risk Committee were required to be independent pursuant to the new Audit and Risk Committee charter, SOX and the rules and regulations of NASDAQ and the SEC. The Board appointed Mr. Polley to chair our Audit and Risk Committee and Messrs. Bentz, Flynn and Green served as members of the Audit and Risk Committee.

Additionally, the Nominating, Governance and Community Affairs Committee was split into two committees – the Nominating and Corporate Governance Committee and the Community Affairs Committee. The Board appointed Mr. Wilt to chair our Nominating and Corporate Governance Committee and Mr. Bottorff, Ms. Phillips and Mr. Polley served as members of the Nominating and Corporate Governance Committee. The Board appointed Ms. Jenne to chair our newly created Community Affairs Committee and Mr. Cunningham, Ms. Phillips, Mr. Smith and Mr. Turner served as members of the Community Affairs Committee.

Further, the Board appointed Mr. Wilt to serve as the chair of our Nominating and Corporate Governance Committee and Mr. Flynn to serve as the chair of our Compensation and Human Resources Committee. The Board also approved the following committee reassignments: Mr. Bottorff was reassigned from the Credit Committee to serve on the Compensation and Human Resources Committee; Mr. Green was reassigned from the Nominating, Governance and Community Affairs Committee to serve on the Credit Committee.

Board and Committee Self-Evaluations

The Board conducts annual self-evaluations and completes questionnaires to assess the qualifications, attributes, skills and experience represented on the Board and to determine whether the Board and its committees are functioning effectively.  The Nominating and Corporate Governance Committee oversees this annual review process and, through its Chair, discusses the input with the full Board.  In addition, each committee reviews annually the qualifications and effectiveness of that committee and its members. Each year the Board also reviews the Company’s governance documents and modifies them as appropriate.  These documents include the charters for each Board committee, our Corporate Governance Guidelines, our Code of Ethics and Conflicts of Interest Policy and other key policies and practices.

The Board and each of the Board committees will continue to monitor corporate governance developments and will continue to evaluate committee charters, duties and responsibilities under our Corporate Governance Guidelines and Code of Ethics and Conflicts of Interest Policy with the intention of maintaining full compliance with all applicable corporate governance requirements.

Board Leadership Structure

Our Corporate Governance Guidelines provide for separation of the roles of Chief Executive Officer and Chairman of our Board, a structure which our Board has determined is in the best interests of our shareholders at this time. Mr. Bottorff serves as Chairman of the Board, and Mr. Schools serves as our President and Chief Executive Officer. Mr. Schools also serves as Chief Executive Officer and President of CapStar Bank and as a member of the Bank’s Board.

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The Board has determined that our bifurcated leadership structure is appropriate for the Company and our shareholders because it (i) enables Mr. Schools to focus directly upon identifying and developing corporate priorities, executing our business plan and providing daily leadership while concurrently ensuring that Mr. Schools and his intimate knowledge of our Company and of the banking industry generally remain as an invaluable resource to our Board and (ii) assists Mr. Bottorff in fulfilling his duties of overseeing the implementation of our strategic initiatives, facilitating the flow of information between the Board and management and fostering executive officer accountability.

Role of the Board in Risk Oversight

The Board has an active role, as a whole and at the committee level, in the Company’s risk oversight process.  The Board and its committees receive regular reports from members of senior management on areas of material risk to the Company, including operational, financial, legal, regulatory, strategic and reputational risks.  At the committee level, (i) the Audit and Risk Committee oversees the management of accounting, financial and legal risks as well as helping our Board execute its risk management objectives by overseeing an enterprise-wide approach to risk management; (ii) the Compensation and Human Resources Committee oversees the management of risks relating to the Company’s executive compensation program as well as compensation matters involving all employees and the Company’s directors; (iii) the Nominating and Corporate Governance Committee manages risks associated with the independence of the members of the Board and potential conflicts of interest and certain regulatory risks; (iv) the Credit Committee manages risks associated with the Company’s credit risk management, which is structured to achieve our strategic objectives, improve our long-term performance and support growth in shareholder value; and (v) the Community Affairs Committee oversees the Company’s risks associated with the Company’s Community Reinvestment Act (“CRA”) Program and the Fair Lending Compliance Program.

Although each committee is directly responsible for evaluating certain enumerated risks and overseeing the management of such risks, the entire Board is generally responsible for and is regularly informed through committee reports about such risks and any corresponding remediation efforts designed to mitigate such risks.  In addition, appropriate committees of the Board receive reports from senior management within the organization to enable the committees to understand risk identification, risk management and risk mitigation strategies.  When a committee receives such a report, the Chair of the relevant committee reports on the discussion to the full Board during the committee reports portion of the next Board meeting.  This enables the Board and its committees to coordinate the risk oversight role.

Service Limitations on Other Boards of Directors

Our Corporate Governance Guidelines require that directors should not serve on more than four other boards of public companies (or private, not-for-profit or service organization boards that are deemed by the Board to be equivalent) in addition to our Board.  The Nominating and Corporate Governance Committee may, in its discretion, grant exceptions to this limit on a case-by-case basis. None of our directors serve on more than four other boards.

Director Nominations

Overview.  Pursuant to its charter, the Nominating and Corporate Governance Committee is responsible for the process relating to director nominations, including identifying, reviewing and selecting individuals who may be nominated for election to the Board.  The Nominating and Corporate Governance Committee considers nominees to serve as directors of the Company and recommends such persons to the Board.  The Nominating and Corporate Governance Committee also considers director candidates recommended by shareholders in accordance with the Company Bylaws and provides a process for receipt and consideration of any such recommendations.  On October 24, 2019, our Board approved an amendment and restatement of the Company’s Bylaws that, among other things, expanded the scope of disclosures required of a shareholder to bring a nomination to our Board before a shareholder meeting. This increased disclosure requirement allows our Nominating and Corporate Governance Committee to better assess the qualifications of director nominees and to ensure that nominees are and will remain in compliance with all laws applicable to the Company’s directors. In approving candidates for election as director, the Nominating and Corporate Governance Committee also seeks to ensure that the Board and its committees will satisfy all applicable requirements of the federal securities laws and the corporate governance requirements for NASDAQ-listed issuers.

Committee Selection Process.  The Nominating and Corporate Governance Committee regularly assesses the mix of experience, skills, diversity and industries currently represented on our Board, whether any vacancies on the Board are expected due to retirement or otherwise, the experience, skills and diversity represented by retiring directors, and additional skills highlighted during the self-assessment process that could improve the overall quality and ability of the Board to carry out its functions.

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The Nominating and Corporate Governance Committee and the Board do not believe the Company should establish term or age limits for its directors. Although such limits could help ensure that there are fresh ideas and viewpoints available to the Board, they hold the disadvantage of losing the knowledge and contributions of directors who have been able to develop, over a period of time, deep insight into the Company and its operations and, therefore, provide an increasing contribution to the Board as a whole. As an alternative to term or age limits, the Nominating and Corporate Governance Committee reviews each director’s continuation on the Board every year. This review includes the analysis of the Nominating and Corporate Governance Committee regarding each director’s independence and whether any director has had a significant change in his or her business or professional circumstances during the past year.

Prior to completing its recommendation to the Board of nominees for election, the Nominating and Corporate Governance Committee requires each potential candidate to complete a director’s and executive officer’s questionnaire and a report on all transactions between the candidate and the Company, its directors, officers and related parties. The Nominating, and Corporate Governance Committee will also consider such other relevant factors as it deems appropriate. After completing this evaluation, the Nominating and Corporate Governance Committee will make a recommendation to the Board of the persons who should be nominated, and the Board will then determine the nominees after considering the recommendations of the Committee.

Criteria for Director Nominees.  In identifying, reviewing and selecting potential nominees for director, the Nominating and Corporate Governance Committee considers individuals from various disciplines and diverse backgrounds.  The Nominating and Corporate Governance Committee and Board believe that diversity is an important attribute of the members who comprise our Board and that the members should represent an array of backgrounds and experiences and should be capable of articulating a variety of viewpoints. Accordingly, pursuant to its charter and our Corporate Governance Guidelines, the Nominating and Corporate Governance Committee considers in its identification, review and selection of potential director nominees various criteria, including individual integrity, education, business experience, accounting and financial expertise, age, diversity, reputation, civic and community relationships, knowledge and experience in matters impacting financial intuitions, and the ability of the individual to devote the necessary time to serving the board of directors of a public company.  When re-nominating incumbent directors, the Nominating and Corporate Governance Committee considers among all relevant factors, the individuals contributions, including the value of his or her experience as a director of the Company, the availability of new director candidates who may offer unique contributions, and the Company’s changing needs.

Procedure to be Followed by Shareholders.  On an ongoing basis, the Nominating and Corporate Governance Committee considers potential director candidates identified on its own initiative as well as candidates referred or recommended to it by other directors, members of management, shareholders and other resources (including individuals seeking to join the Board).  Shareholders who wish to recommend candidates may contact the Nominating and Corporate Governance Committee in the manner described below under “Communications with the Board and Committees.” All candidates are required to meet the criteria outlined above, as well as the director independence and other standards set forth in our Corporate Governance Guidelines and other governing documents, as applicable, as determined by the Nominating and Corporate Governance Committee in its sole discretion.

Shareholder nominations must be made according to the procedures required under our Amended and Restated Bylaws and described in this Proxy Statement under the heading “Additional Information — How and when may I submit a shareholder proposal for the 2022 Annual Meeting of Shareholders?” The Nominating and Corporate Governance Committee strives to evaluate all prospective nominees to the Board in the same manner and in accordance with the same procedures, without regard to whether the prospective nominee is recommended by a shareholder, the Nominating and Corporate Governance Committee, another board member or members of management.  However, the Nominating and Corporate Governance Committee may request additional information in connection with the evaluation of candidates submitted by shareholders due to the potential that the existing directors and members of management will not be as familiar with the proposed candidate as compared to candidates recommended by existing directors or members of management. The Nominating and Corporate Governance Committee will conduct the same analysis that it conducts with respect to its director nominees for any director nominations properly submitted by a shareholder and, as a result of that process, will decide whether to recommend a candidate for consideration by the full Board.

Independent Compensation Consultant

To facilitate the fulfillment of its duties, the Compensation and Human Resources Committee has sole authority to retain, and to delegate the authority to retain, outside advisors, including compensation consultants, to assist the Compensation and Human Resources Committee with executive compensation matters. The Compensation and Human Resources Committee has sole authority to approve the fees and retention terms of any such advisors or consultants. During 2020, the Compensation and Human Resources Committee relied upon a compensation consultant (McLagan), retained by the Company, to review the Company’s executive compensation program and establish specific levels of executive compensation. The decision to retain McLagan was recommended by management and approved by the Compensation and Human Resources Committee.

14


Corporate Governance Guidelines

Our Board has adopted Corporate Governance Guidelines, which, in conjunction with our committee charters and Board Supervision Policy, set forth the framework within which our Board, assisted by Board committees, direct the affairs of the Company. Our Corporate Governance Guidelines address, among other things, the composition and functions of our Board, director independence, compensation of directors, management succession and review, Board committees, Board and committee evaluation processes and selection of new directors.  The Board believes such guidelines to be appropriate for the Company in its effort to maintain “best practices” regarding corporate governance.

Code of Ethics and Conflicts of Interest Policy

Our Board has adopted a Code of Ethics and Conflicts of Interest Policy (the “Code of Ethics”) governing all of our directors, officers, including our principal executive officer, principal financial officer and principal accounting officer, and other employees.  The Code of Ethics covers compliance with law, fair and honest dealings with us, with competitors and with others, fair and honest disclosure to the public, conflicts of interest, and procedures for ensuring accountability and adherence to the Code of Ethics.  We expect that any amendments to the Code of Ethics, or any waivers of its requirements, will be disclosed on our website, as well as any other means required by the SEC and NASDAQ.

Certain Relationships

There are no family relationships between any of our directors, executive officers or persons nominated to become a director or executive officer.  

Compensation Committee Interlocks and Insider Participation

No member of our Compensation and Human Resources Committee (i) is or has ever been an employee of the Company or our Bank, (ii) was, during the last completed fiscal year, a participant in any related-party transaction requiring disclosure under “Certain Relationships and Related Transactions,” except with respect to loans made to such committee members in the ordinary course of business on substantially the same terms as those prevailing at the time for comparable transactions with unrelated parties or (iii) had, during the last completed fiscal year, any other interlocking relationship requiring disclosure under applicable SEC rules.

Communications with the Board and Committees

We have established procedures for shareholders or other interested parties to communicate directly with our Board or with a committee of the Board.  Such parties can contact our Board, a committee or a specific director by sending written correspondence by mail to:

CapStar Financial Holdings, Inc.

Attention: Corporate Secretary

1201 Demonbreun Street, Suite 700

Nashville, Tennessee 37203

 

The Corporate Secretary is responsible for reviewing all communications addressed to our Board, any committee or any specific director to determine whether such communications require Board, committee or personal review, response or action.  Generally, the Corporate Secretary will not forward to the Board, any committee or any specific director any communications relating to Company products and services, solicitations, or otherwise improper or irrelevant topics.  If, however, the Corporate Secretary determines that a communication relates to corporate governance or otherwise requires review, response or action by the Board, any committee or any specific director, then the Secretary will promptly send a copy of such communication to each director serving on the Board, the applicable committee or the applicable director.

15


Executive Officers

Our Nominating and Corporate Governance Committee annually makes recommendations to our Board concerning the appointment or re-appointment of certain officers of the Company and CapStar Bank, including the Chief Executive Officer and Chief Financial Officer. On May 4, 2020, the Company announced the hiring of Michael J. Fowler as CapStar’s new Chief Financial Officer, replacing the Company’s departing Chief Financial Officer, Robert B. Anderson. Mr. Fowler’s appointment was effective July 1, 2020. On August 21, 2020, Mr. Fowler advised CapStar that due to an unexpected family health matter, he would not be able to continue in his role as Chief Financial Officer. On September 21, 2020, CapStar announced that Mr. Fowler would stay with CapStar and assume the role of Treasurer, and the Company announced that Denis J. Duncan would join the Company and serve as Chief Financial Officer.

Set forth below is background information regarding each of our executive officers, other than Mr. Schools whose biography is set forth above under the caption “Election of Directors —Director Nominees.”  There are no family relationships among any of our executive officers. Further, other than the employment agreements described in this Proxy Statement, there are no arrangements or understandings between the executive officers listed below and any other person(s) pursuant to which he or she was selected as an executive officer.

John A. Davis - Chief Operations and Technology Officer, CapStar Financial Holdings, Inc.

Mr. Davis, age 57, has served as the Chief Operations and Technology Officer for CapStar Bank since November 2019. Mr. Davis leads the deposit and loan operations, information technology and project management office of the Bank.  Mr. Davis has over 29 years of banking experience, serving most recently as the Executive Vice President and Chief Operating Officer of MidSouth Bank, NA in Louisiana from 2018 to 2019. At MidSouth Bank, Mr. Davis was responsible for overseeing and revamping the infrastructure of a bank with over $2 billion in assets. Prior to joining MidSouth Bank, Mr. Davis served as a Project Manager at Southern Bank and Trust Company from June 2017 to May 2018. Mr. Davis was previously with Yadkin Bank in Raleigh, North Carolina for approximately 11 years where he served as Senior Vice President and Director of Operations from October 2014 to May 2017. At Yadkin Bank, Mr. Davis oversaw operations and led the integrations of four bank mergers during his tenure. Mr. Davis holds a bachelor’s degree from Elon University and obtained a BAI certificate from Vanderbilt University.

Denis J. Duncan - Chief Financial Officer, CapStar Financial Holdings, Inc.

Mr. Duncan, age 62, is the Chief Financial Officer for CapStar Financial Holdings, Inc. and CapStar Bank and has served in this capacity since September 21, 2020. He recently retired from PricewaterhouseCoopers, LLP (PwC) where he was a senior banking and capital markets partner and previously served as the Partner-in-Charge of the firm’s southeast banking practice where he was lead partner for numerous PwC financial services clients including Union Planters, SunTrust, Edward Jones and Legg Mason. He brings extensive experience advising major money-center banks, regional and community banks, broker-dealers, asset managers, and insurance and real estate companies. He also serves as the Treasurer and a Board Member of the Atlanta Downtown Rotary, and as a Trustee of Oglethorpe University. He has been a previous director of YMCA of Metro Atlanta, Atlanta Opera, Grady Hospital Board of Visitors, and Tennessee Golf Association. He graduated summa cum laude with a bachelor’s degree from Lipscomb University in Nashville.

Steven E. Groom - Chief Risk Officer, General Counsel and Corporate Secretary, CapStar Financial Holdings, Inc.

Mr. Groom, 69, has been Chief Risk Officer, General Counsel and Corporate Secretary of CapStar Financial Holdings, Inc. and CapStar Bank since April 1, 2020. He has served in executive and general counsel roles with four publicly-traded companies, and has practiced law with three prominent law firms. Mr. Groom received a bachelor’s degree from Lipscomb University and a doctor of jurisprudence degree from the University of Memphis, where he was a member, editor and author of the Law Review. Mr. Groom has also received extensive training in negotiation, leadership and strategic planning from the Executive Education programs of Harvard University, the Wharton School of the University of Pennsylvania, and the Kellogg School of Management, Northwestern University. He is also a graduate of the Stanford Director’s College, the nation’s premier board leadership program. 

Christopher G. Tietz - Chief Credit Officer, CapStar Financial Holdings, Inc.

Mr. Tietz, age 58, is the Chief Credit Officer of CapStar Bank. Mr. Tietz joined the Bank in March 2016 and has over 32 years of banking experience starting as a trainee of First American National Bank in Nashville in 1985 and rising to the position of Executive Vice President and Regional Senior Credit Officer for First American’s West Tennessee Region including oversight of credit functions for private banking, business banking, middle-market, and corporate banking functions.  Subsequent to his positions at First American, Mr. Tietz held various Chief Credit Officer roles at banks in the Midwest including at First Place Bank in Ohio from 2011 to 2012. From 2012 to 2016 he was Chief Credit Officer of FSG Bank in Chattanooga, Tennessee.  His experience includes capital raising activities, asset quality resolution, development of lending initiatives to achieve quality asset growth, and management and resolution of regulatory actions.  Mr. Tietz holds a bachelor’s degree from the University of Alabama.

16


 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Banking Transactions with Related Parties

Our Bank has made in the past and, assuming continued satisfaction of generally applicable credit standards, expects to continue to make loans to directors, executive officers, principal shareholders and their affiliates including corporations or organizations for which they serve as officers or directors or in which they have beneficial ownership interests of 10% percent or more.  These loans have all been made in the ordinary course of our business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons not related to us.  Further, such loans are and will be subject to the policies and procedures regarding related-party transactions discussed below, and they do not present us with more than the normal risk of uncollectibility or other unfavorable characteristics.

Lease of Corporate Headquarters

As of the date of this Proxy Statement, we understand that one of our principal shareholders, Mr. Gaylon Lawrence or his affiliates, who acquired a greater than 5% interest in the Company in August 2017, has an economic interest in the lease of our corporate headquarters located at 1201 Demonbreun Street, Suite 700, Nashville, Tennessee via a direct or indirect ownership in the landlord entity.  However, as of the date of this Proxy Statement, we have been unable to ascertain the extent of the ownership of Mr. Lawrence or his affiliates in the landlord entity, and, therefore, we are unable to approximate the dollar value of the interest of Mr. Lawrence or his affiliates in the lease and whether such amount is material.  Mr. Lawrence or his affiliates were not 5% or greater shareholders at the commencement of our lease in March 2017.  During the fiscal year ended December 31, 2020, the Company paid the landlord entity approximately $1,308,417 in the aggregate in rent pursuant to the terms of the lease.  

Policies and Procedures Regarding Related-Party Transactions

Transactions involving the Company and/or the Bank and their respective affiliates and insiders are subject to regulatory requirements and restrictions as well as our own policies and procedures. These requirements and restrictions include Sections 23A and 23B of the Federal Reserve Act (which govern certain transactions by our Bank with its affiliates) and the Federal Reserve’s Regulation O (which governs certain loans by our Bank to its executive officers, directors, and principal shareholders). We have adopted policies to comply with these regulatory requirements and restrictions, including provisions in our Loan and Credit Administration Policy that place restrictions on the Bank with respect to loans to our executive officers, directors and principal shareholders.  Pursuant to its charter, our Credit Committee is responsible for ensuring that extensions of credit to directors, executive officers and their affiliates comply with all applicable law, reviewing loans that are subject to Regulation O and, if required by Regulation O and where appropriate, recommending such loans to the full Board for approval.  Our Audit and Risk Committee approves all related-party transactions that are not subject to Regulation O.

In addition, our Board has adopted a written policy governing the approval of related-party transactions that complies with all applicable requirements of the SEC and NASDAQ concerning related-party transactions. Related-party transactions, for purposes of the requirements of the SEC and NASDAQ, are transactions in which we are a participant, the amount involved exceeds $120,000 and a related-party has or will have a direct or indirect material interest.  Our related parties include our directors (including nominees for election as directors), executive officers, 5% or greater shareholders and the immediate family members of these persons. Our Chief Financial Officer, in consultation with management and outside counsel, as appropriate, will review potential related-party transactions to determine if they are subject to the policy.  If so, the transaction will be referred to our Audit and Risk Committee or, if such transaction is a loan subject to Regulation O, our Credit Committee.  In determining whether to approve a related-party transaction, our Audit and Risk Committee or Credit Committee, as applicable, will consider, among other factors, the fairness of the proposed transaction, the direct or indirect nature of the related-party’s interest in the transaction, the appearance of an improper conflict of interests for any director, executive officer or 5% or greater shareholder, taking into account the size of the transaction and the financial position of the related-party, whether the transaction would impair a director’s independence, the acceptability of the transaction to our regulators and the potential violations of other company policies. Our Related-Party Transactions Policy is available on our website at www.ir.capstarbank.com, as an annex to our Corporate Governance Guidelines.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the beneficial ownership of our common stock as of March 16, 2021 by:

 

each shareholder known by us to beneficially own more than 5% of our outstanding common stock;

 

each of our directors;

 

each of our named executive officers; and

 

all of our directors and executive officers as a group.

17


 

 

Name of Beneficial Owner(1)

 

Amount and Nature

of Beneficial

Ownership(2)

 

 

Percent of Class (3)

 

 

5% Shareholders Who Are Not Directors

 

 

 

 

 

 

 

 

 

Blackrock, Inc. (4)

 

 

1,269,816

 

 

 

5.8

 

 

Gaylon M. Lawrence, Jr. (5)

 

 

1,156,675

 

 

 

5.2

 

 

Directors

 

 

 

 

 

 

 

 

 

L. Earl Bentz (6)

 

 

240,333

 

 

 

1.1

 

 

Dennis C. Bottorff (7)

 

 

308,018

 

 

 

1.4

 

 

Jeffrey L. Cunningham

 

 

339,840

 

 

 

1.5

 

 

Sam B. DeVane

 

 

 

 

 

 

 

Thomas R. Flynn (8)

 

 

169,046

 

 

*

 

 

Louis A. Green, III (9)

 

 

114,743

 

 

*

 

 

Valora S. Gurganious

 

 

 

 

 

 

 

Myra NanDora Jenne (10)

 

 

82,855

 

 

*

 

 

Joelle J. Phillips

 

 

 

 

 

 

 

Dale W. Polley (11)

 

 

47,538

 

 

*

 

 

Timothy K. Schools (12)

 

 

66,299

 

 

*

 

 

Stephen B. Smith (13)

 

 

52,295

 

 

*

 

 

James S. Turner, Jr. (14)

 

 

259,492

 

 

 

1.2

 

 

Toby S. Wilt (15)

 

 

406,177

 

 

 

1.8

 

 

Executive Officers Who Are Not Directors

 

 

 

 

 

 

 

 

 

John A. Davis (16)

 

 

3,868

 

 

*

 

 

Denis J. Duncan (17)

 

 

28,862

 

 

*

 

 

Steven E. Groom (18)

 

 

2,886

 

 

*

 

 

Christopher G. Tietz (19)

 

 

70,591

 

 

*

 

 

Directors and Executive Officers as a Group (18 persons)

 

 

 

 

 

 

 

 

 

 

*

Indicates one percent or less.

(1)

Unless otherwise noted, the address for each shareholder listed in the table above is: c/o CapStar Financial Holdings, Inc., 1201 Demonbreun Street, Suite 700, Nashville, Tennessee 37203.

(2)

We have determined beneficial ownership in accordance with the rules of the SEC.  These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting of securities or to dispose or direct the disposition of securities.  A security holder is also deemed to be, as of any date, the beneficial owner of all securities that such security holder has the right to acquire within 60 days after such date through (i) the exercise of any option or warrant, (ii) the conversion of a security, (iii) the power to revoke a trust, discretionary account or similar arrangement or (iv) the automatic termination of a trust, discretionary account or similar arrangement.  Except as disclosed in the footnotes to this table and subject to applicable community property laws, to our knowledge, each person identified in the table has sole voting and investment power over all of the shares shown opposite such person’s name.

(3)

As of March 16, 2021, there were 22,078,293 shares of CapStar common stock outstanding.

(4)

The indicated ownership is based solely upon a Schedule 13G filed with the SEC by the beneficial owner on January 28, 2021 reporting beneficial ownership as of December 31, 2020. BlackRock, Inc. reports sole voting power with respect to 1,246,298 shares and sole dispositive power over 1,269,816 shares. The address for BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055.  

(5)

The indicated ownership is based solely upon a Schedule 13D/A filed with the SEC by the beneficial owner on July 24, 2020 reporting beneficial ownership as of July 23, 2020.  Mr. Lawrence reports sole voting and sole dispositive power over all the shares included in this table. The address for Mr. Lawrence is 1201 Demonbreun Street, Suite 1460, Nashville, Tennessee 37203.

(6)

Includes shares owned by Mr. Bentz and Bentz Properties LLC, an entity he controls, including 2,167 shares of restricted stock over which Mr. Bentz retains voting control.

(7)

Includes shares owned by Mr. Bottorff, including 4,893 shares of restricted stock over which Mr. Bottorff retains voting control.

(8)

Includes shares owned by Mr. Flynn and shares held in UTMA on behalf of his two minor children, over which Mr. Flynn has voting and investment control. Also includes 1,967 shares of restricted stock over which Mr. Flynn retains voting control.

18


(9)

Includes shares owned by Mr. Green and members of his family, of which he does not disclaim investment or voting control. Also includes 1,688 shares of restricted stock over which Mr. Green retains voting control. Mr. Green shares voting and investment power with respect to 11,976 of these shares.

(10)

Includes shares owned by Ms. Jenne, including 1,286 shares of restricted stock over which Ms. Jenne retains voting control.

(11)

Includes shares owned by Mr. Polley, including 3,509 shares of restricted stock over which Mr. Polley retains voting control.

(12)

Includes shares owned by Mr. Schools, including 14,360 shares of restricted stock over which Mr. Schools retains voting control. Does not include 33,333 shares of our common stock underlying options that will remain subject to vesting more than 60 days after March 16, 2021.

(13)

Includes shares owned by Mr. Smith, the Matthew Carlton Smith Family Trust and the Stephen B. Smith Jr. Family Trust. Also includes 1,870 shares of restricted stock over which Mr. Smith retains voting control.

(14)

Includes shares owned by Mr. Turner, including 2,194 shares of restricted stock over which Mr. Turner retains voting control.

(15)

Includes shares owned by Mr. Wilt, including 2,074 shares of restricted stock over which Mr. Wilt retains voting control. Also includes 70,786 shares owned by WF Partners.  Mr. Wilt is the managing partner of WF Partners and has voting and investment power with respect to all such shares.

(16)

Includes shares owned by Mr. Davis, including (i) 3,675 shares of restricted stock over which Mr. Davis retains voting control and (ii) 193 equivalent shares held by unitized stock fund in the Company’s 401(k) plan based on the $17.08 closing price of the issuer’s common stock on March 16, 2021.

(17)

Includes shares owned by Mr. Duncan, including (i) 3,985 shares of restricted stock over which Mr. Duncan retains voting control and (ii) 357 equivalent shares held by unitized stock fund in the Company’s 401(k) plan based on the $17.08 closing price of the issuer’s common stock on March 16, 2021.

(18)

Includes shares owned by Mr. Groom, including 2,886 shares of restricted stock over which Mr. Groom retains voting control.

(19)

Includes shares owned by Mr. Tietz, including (i) 9,674 shares of restricted stock over which Mr. Tietz retains voting control, (ii) 1,421 equivalent shares held by unitized stock fund in the Company’s 401(k) plan based on the $17.08 closing price of the issuer’s common stock on March 16, 2021 and (iii) 25,000 shares of our common stock underlying options that are currently exercisable.

 

DELINQUENT SECTION 16(A) REPORTS

Section 16(a) of the Exchange Act requires our executive officers and directors and the holders of greater than 10% of our common stock to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers and directors are required by SEC regulations to furnish us with copies of these reports.  Copies of Section 16(a) reports can be found on the Investor Relation’s page of our corporate website at www.ir.capstarbank.com under the category “Financials and Filings.”  Based upon a review of these filings and written representations from our directors and executive officers, we believe that all reports required to be filed with the SEC pursuant to Section 16(a) with respect to the period from January 1, 2020 through December 31, 2020 were filed in a timely manner except: each of Timothy K. Schools, Denis J. Duncan and Christopher G. Tietz filed Forms 4 on January 22, 2021 for shares of restricted stock that were awarded on November 24, 2020; John A. Davis filed a Form 4 on January 25, 2021 for shares of restricted stock that were awarded on November 24, 2020; each of John A. Davis and Jennie O’Bryan filed forms 3 on March 13, 2020 upon being designated executive officers of the Company on March 5, 2020; Michael J. Fowler filed a form 3 on August 7, 2020 upon being designated an executive officer of the Company on May 4, 2020; Denis J. Duncan filed a form 3 on September 29, 2020 upon being designated an executive officer of the Company on September 21, 2020; Joelle J. Phillips filed a form 3 on May 11, 2020 upon being appointed a director of the Company on April 24, 2020.

EXECUTIVE COMPENSATION

 

We are providing executive compensation disclosure that satisfies the requirements applicable to “emerging growth companies,” as such term is defined in the Jumpstart Our Business Startups Act of 2012.  Our named executive officers for 2020 include the following:

 

 

Timothy K. Schools, Chief Executive Officer and President of CapStar Financial Holdings, Inc.;

 

John A. Davis, Chief Operations and Technology Officer of CapStar Financial Holdings, Inc.

 

 

Christopher G. Tietz, Chief Credit Officer of CapStar Financial Holdings, Inc.

 

 

Robert B. Anderson, Former Chief Financial Officer and Chief Administrative Officer of CapStar Financial Holdings, Inc.


19


Summary Compensation Table

The following table sets forth information regarding the compensation earned by or paid or awarded to each of our named executive officers during 2020 and 2019.

Name and Principal Position

 

Year

 

Salary

 

 

Stock

Awards

(1)

 

 

Option Awards (1)

 

 

Nonequity Incentive Plan Compensation (2)

 

 

All Other

Compensation

(3)

 

 

Total

 

Timothy K. Schools (4)

 

2020

 

$

525,000

 

 

$

200,454

 

 

$

 

 

$

116,736

 

 

$

117,577

 

 

$

959,767

 

Chief Executive Officer and President - CapStar Financial Holdings, Inc.

 

2019

 

 

311,266

 

 

 

91,264

 

 

 

267,291

 

 

 

116,736

 

 

 

9,005

 

 

 

795,562

 

John A. Davis (5)

 

2020

 

$

250,000

 

 

$

59,650

 

 

$

 

 

$

 

 

$

62,112

 

 

$

371,762

 

Chief Operations & Technology Officer - CapStar Financial Holdings, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Christopher G. Tietz

 

2020

 

$

315,000

 

 

$

90,213

 

 

$

 

 

$

87,031

 

 

$

12,703

 

 

$

504,947

 

Chief  Credit Officer - CapStar Financial Holdings, Inc.

 

2019

 

 

315,000

 

 

 

85,041

 

 

 

 

 

 

87,031

 

 

 

11,173

 

 

 

498,245

 

Robert B. Anderson (6)

 

2020

 

$

177,500

 

 

$

 

 

$

 

 

$

143,815

 

 

$

756,843

 

 

$

1,078,158

 

Former Chief  Financial Officer and Chief Administrative Officer - CapStar Financial Holdings, Inc.

 

2019

 

 

355,000

 

 

 

95,836

 

 

 

 

 

 

142,981

 

 

 

11,713

 

 

 

605,530

 

 

 

(1)

The amounts represent the aggregate grant date fair value of restricted stock awards and stock option awards, determined in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures during the applicable vesting periods. Refer to Note 18, “Stock Options and Restricted Shares,” to the consolidated audited financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 for a discussion of the relevant assumptions used to determine the grant date fair value of these awards.  These restricted stock awards and stock option awards were granted pursuant to the CapStar Bank 2008 Stock Incentive Plan and the CapStar Financial Holdings, Inc. Stock Incentive Plan.  For more information regarding our long-term equity incentive plans and the grants of these awards, see the discussion under the caption “— Narrative Discussion of Summary Compensation Table — Long-Term Equity Compensation” below.  These amounts do not necessarily reflect the actual amounts that were paid to, or that may be realized by, the named executive officers for any of the fiscal years reflected.

 

(2)

The amounts listed in this column reflect the dollar amounts of annual cash incentive awards paid to our named executive officers.  For more information regarding annual cash incentive awards paid to our named executive officers, see the discussion under the caption “— Narrative Discussion of Summary Compensation Table — Components of Compensation — Annual Cash Incentive Awards” below.

 

(3)

The following table shows the specific details regarding all other compensation earned by our named executive officers during 2020:

Name

 

401(k)

Contribution

 

 

Relocation Bonus

 

 

Phone

Allowance

 

 

Sign-On Bonus

 

 

Severance

 

 

Long-Term

Disability/Group

Term Life

 

Timothy K. Schools

 

$

8,550

 

 

$

108,060

 

 

$

 

 

$

 

 

$

 

 

$

967

 

John A. Davis

 

 

7,500

 

 

 

 

 

 

 

 

 

52,000

 

 

 

 

 

 

2,612

 

Christopher G. Tietz

 

 

8,550

 

 

 

 

 

 

1,380

 

 

 

 

 

 

 

 

 

2,773

 

Robert B. Anderson

 

 

5,325

 

 

 

 

 

 

690

 

 

 

 

 

 

750,344

 

 

 

484

 

 

 

(4)

Mr. Schools was hired on May 13, 2019. The compensation shown for Mr. Schools in the Summary Compensation Table for 2019 is prorated and represents the amounts paid to or earned by Mr. Schools for the fiscal year 2019 since he began employment with the Company on May 13, 2019.

 

(5)

Mr. Davis was designated an Executive Officer of the Company on March 5, 2020 and, therefore, was not one of the Company’s named executive officers in 2019.

 

(6)

Effective June 30, 2020, Mr. Anderson was separated from the company and his position as the Company’s Chief Financial Officer and Chief Administrative Officer. The compensation shown for Mr. Anderson in the Summary Compensation Table represents the compensation paid to or earned by Mr. Anderson including separation pay.

Narrative Discussion of Summary Compensation Table

 

20


General.  We have compensated our named executive officers through a combination of base salary, annual cash incentive awards, long-term equity incentive compensation and other benefits, including perquisites.  Each of our named executive officers has substantial responsibilities in connection with the day-to-day operations of the Company and our Bank, and together function as a leadership team responsible for the success of the organization.  

 

Compensation Philosophy.  As an organization, we focus on sound, profitable growth. We seek to address client needs, maintain critical quality standards and drive shareholder value, and our overall compensation philosophy is a direct reflection of those values.  Our executive compensation program carries out these values by rewarding our named executive officers for the achievement of specific short- and long-term individual and corporate goals and the realization of increased value to our shareholders.  Our goal is to provide compensation that is fair to our named executive officers, focused on performance, and aligned with the long-term best interests of our shareholders.  

 

In regards to overall base compensation levels, we target levels that approximate the median of our peers, taking into consideration company and individual performance. We aim to provide performance based short-term incentive opportunities that are in line with those of our peers at the market median but allow for superior rewards for superior performance that will move cash compensation (base salary and annual cash incentive awards) to the upper quartile of market.  In addition, we provide our named executive officers the opportunity to participate in the long-term success of the Company by granting equity incentive awards.  We are also committed to helping maintain the health and welfare of our named executive officers and offer competitive benefits packages.  Our philosophy is to maintain a total compensation package at the median of market if performance expectations are met and at the upper quartile of market if performance expectations are exceeded.

 

Compensation Process.  Our Compensation and Human Resources Committee regularly reviews our executive compensation program to ensure it achieves our desired goals and is responsible for approving compensation arrangements for each of our named executive officers.  As part of this process, the committee annually reviews and approves corporate goals and objectives relevant to the compensation of our named executive officers and evaluates the performance of the named executive officers in light of these goals and objectives. The committee approves the compensation levels for the named executive officers based on such evaluation, with consideration for each individual’s role and responsibilities within the leadership team.  The committee annually reviews our incentive compensation arrangements to confirm they do not encourage unnecessary risk-taking.  In determining the long-term incentive component of our executive compensation program, the Compensation and Human Resources Committee considers our performance and relative shareholder return, the value of similar incentive awards to the named executive officers of our peers and the awards given to our named executive officers in past years.

 

Components of Compensation.  Our executive compensation program consists primarily of the following elements:

 

 

base salary;  

 

 

annual cash incentive awards;  

 

 

long-term equity compensation;  

 

 

participation in our 401(k) Plan, to which we make annual contributions;  

 

 

health and welfare benefits; and  

 

 

perquisites.  

 

Base Salary.  The base salaries of our named executive officers have been historically reviewed and set annually by our Board through the review and recommendations of our Compensation and Human Resources Committee as part of our performance review process.  Base salaries are also reviewed upon the promotion of an executive officer to a new position or another change in job responsibility.  In establishing base salaries for our named executive officers, our Compensation and Human Resources Committee has relied on external market data and peer data obtained from outside sources, including independent compensation consultants.  In addition to considering the information obtained from such sources, our Compensation and Human Resources Committee considers:

 

 

each named executive officer’s scope of responsibility;

 

 

each named executive officer’s years of experience;  

 

 

the types and amount of the elements of compensation to be paid to each named executive officer;  

 

 

our financial performance and performance with respect to other aspects of our operations, such as our growth, asset quality, profitability and other matters, including the status of our relationship with the banking regulatory agencies; and  

 

 

each named executive officer’s individual performance and contributions to our performance, including leadership and team work.  

21


 

Annual Cash Incentive Awards.  Each year our named executive officers are eligible to receive an annual cash incentive award as determined by the Compensation and Human Resources Committee.  These awards to our named executive officers are based on their achievement of individual performance goals and on our achievement of various organizational metrics to be determined by the Compensation and Human Resources Committee annually. Annual cash incentive awards are intended to recognize and reward those named executive officers who contribute meaningfully to our performance for the year.  These annual cash incentive awards are recommended and approved by the Compensation and Human Resources Committee but are ultimately subject to the discretion of the Board each year as to whether and in what amounts they will be paid.

 

We believe that our cash-based Annual Incentive Plan for our Named Executive Officers is well designed to align our strategic objectives with short-term and long-term shareholder value and to not encourage risky employee behavior. The corporate performance metrics take into consideration income statement, credit quality and equity factors.  Threshold goals under such measures were reasonably achievable with good performance and therefore were sufficiently challenging but not overly difficult.  Specified performance metrics did not include steep cliffs for not achieving nor exponential upside to achieving them (prorating awards at various performance levels). In addition, based on peer group comparisons, the incentives payable to our executive officers were capped at reasonable levels and the maximum awards represent an appropriate portion of total pay.

 

We have adopted a compensation clawback policy which allows the Company to recoup awards under certain circumstances, such as a material misstatement of financial performance. For more information regarding our clawback policy, see “—Narrative Discussion of Summary Compensation Table — Executive Compensation Enhancements — Clawback Policy” below.

 

Long-Term Equity Compensation.  Prior to the incorporation of CapStar Financial Holdings, Inc. and the completion of a share exchange with the shareholders of CapStar Bank (the “Share Exchange”), we issued long-term equity incentive awards under the CapStar Bank 2008 Stock Incentive Plan (the “2008 Stock Incentive Plan”). In 2016, in connection with the Share Exchange, the outstanding awards of restricted stock and stock options previously granted under the 2008 Stock Incentive Plan were exchanged for similar long-term equity incentive awards issued by CapStar Financial Holdings, Inc. under the CapStar Financial Holdings, Inc. Stock Incentive Plan (the “2016 Stock Incentive Plan”).

 

The 2016 Stock Incentive Plan provides for the grant of stock-based incentives, including stock options, restricted stock units, performance awards and restricted stock, to employees, directors and service providers that are subject to forfeiture until vesting conditions have been satisfied by the award recipient under the terms of the award.  We believe these awards help align the interests of our named executive officers and our shareholders and reward our named executive officers for improved Company performance. Specifically, the 2016 Stock Incentive Plan, like the 2008 Stock Incentive Plan, is intended to provide incentives to certain officers, employees, and directors to stimulate their efforts toward the continued success of the Company and to operate and manage the business in a manner that will provide for our long-term growth and profitability.  Additionally, the 2016 Stock Incentive Plan is intended to encourage stock ownership as a means of rewarding and retaining officers, employees and directors.  The Board initially reserved a total of 1,969,475 shares of common stock for issuance pursuant to the 2016 Stock Incentive Plan. In 2018, the Company’s shareholders approved an amendment to the 2016 Stock Incentive Plan which added an additional 400,000 shares of common stock to the 2016 Stock Incentive Plan and, as of March 16, 2021, there were 144,454 shares of common stock remaining for issuance under the terms of the 2016 Stock Incentive Plan.

 

The 2016 Stock Incentive Plan is administered by our Compensation and Human Resources Committee. In order to be eligible for participation in the 2016 Stock Incentive Plan, an individual must be an officer, employee, director or other service provider of the Company or otherwise be an affiliate of the Company.  In determining awards under the 2016 Stock Incentive Plan, the Compensation and Human Resources Committee takes into account the nature of the services rendered by the eligible individual, their present and potential contributions to our success, and such other factors as the Compensation and Human Resources Committee deems relevant.  

 

On November 24, 2020, we granted 15,754 shares, 7,090 shares and 4,688 shares of restricted stock to each of Mr. Schools, Mr. Tietz and Mr. Davis, respectively, which are subject to the achievement of certain performance goals specified by the Performance-Based Incentive Program or time-based vesting periods. For more information regarding our Performance-Based Incentive Program, see “Performance-Based Incentive Program” explained in further detail below. On May 26, 2019, we granted 50,000 stock option awards to Mr. Schools in connection with his hiring that month. On January 23, 2019, we granted 2,734 shares of restricted stock to Mr. Anderson and 2,357 shares of restricted stock to Mr. Tietz, which were earned by the named executive officers in 2018.  The awards granted in 2020 and 2019 were granted pursuant to the 2016 Stock Incentive Plan.

 

The stock option awards granted to Mr. Schools in May 2019 vest ratably over a three-year period, with one-third of the option subject to the award vesting on each of the first three anniversaries of the grant date. Stock awards that were granted in December 2018 were fully vested upon issuance. Stock awards that were granted in 2018 and 2019 vest ratably over a three-year period from the grant date, with one-third of the stock subject to the award vesting on each of the first three anniversaries of the grant date.  Notwithstanding

22


such vesting schedules, the vesting of such awards will be accelerated in the event of the holder’s death or disability while in the service of the Company or upon such other event as determined by the Compensation and Human Resources Committee in its sole discretion.  Vesting may also be accelerated upon certain extraordinary events (such as a change in control).  Unvested shares issued as restricted stock awards must be retained by the executive officer and therefore may not be sold, transferred or otherwise disposed of and shall not be pledged, assigned or otherwise hypothecated or encumbered during the vesting periods.

 

CapStar Bank 401(k) Plan.  The CapStar Bank 401(k) Plan (the “401(k) Plan”) is designed to provide retirement benefits to all eligible full-time and part-time employees.  The 401(k) Plan provides employees with the opportunity to save for retirement on a tax-favored basis. Mr. Anderson and Mr. Tietz were eligible to participate in the 401(k) Plan during 2020, and 2019. Mr. Davis and Mr. Schools were eligible to participate in the 401(k) Plan in 2020 and beginning from their respective dates of hire in 2019. As participants, our named executive officers may elect to participate in the 401(k) Plan on the same basis as all other employees.  We have elected a safe harbor 401(k) Plan and as such make an annual contribution of 3% of the employees’ salaries annually.  An employee does not have to contribute to receive the employer contribution.

 

Health and Welfare Benefits.  Our named executive officers are eligible to participate in the same benefit plans designed for all of our full-time employees, including health, dental, vision, disability and basic group life insurance coverage. Messrs. Davis, Schools and Tietz are entitled to life insurance in an amount equal to two times their respective base salary, subject to a maximum amount of $400,000. The purpose of our employee benefit plans is to help us attract and retain quality employees, including executives, by offering benefit plans similar to those typically offered by our competitors.

 

Perquisites.  We provide our named executive officers with a limited number of perquisites that we believe are reasonable and consistent with our overall compensation program to better enable us to attract and retain superior employees for key positions.  Our Compensation and Human Resources Committee periodically reviews the levels of perquisites and other personal benefits provided to our named executive officers.  Based on these periodic reviews, perquisites are awarded or adjusted on an individual basis.  The perquisites received by our named executive officers in 2020 and 2019 included automobile and phone allowances. For more information, see footnote 3 to the Summary Compensation Table above.

 

Section 162(m) of the Code.  Section 162(m) of the Code generally limits the corporate tax deduction for compensation in excess of $1 million that is paid to our named executive officers. Section 162(m) of the Code was amended by the Tax Cut and Jobs Act of 2017 so that the exceptions for payment of “performance based compensation” and commissions have been eliminated. In 2020, compensation paid to our named executive officers did not exceed $1 million, with the exception of Mr. Anderson, whose total compensation was $1,078,158. Therefore, the amount of compensation paid to Mr. Anderson in excess of $1 million is not deductible for corporate tax purposes. The tax-deductibility of compensation paid to our other named executive officers was not limited by Section 162(m) of the Code.

 

Executive Compensation and Corporate Governance Enhancements

 

We have implemented the following enhancements to our executive compensation program:

 

Clawback Policy. Incentive awards that are provided to our executive officers, including our named executive officers, and that are based on Company financial metrics are subject to our compensation clawback policy.  This clawback policy allows us to recoup awards that have been previously paid or awarded under certain circumstances, such as a material misstatement of the Company’s financial performance.  Annual cash incentive awards paid and equity awards granted to our named executive officers are subject to our “clawback” policy.  

 

Insider Trading Policy with an Anti-Hedging Provision.  We maintain an insider trading policy that seeks to prevent insider trading or allegations of insider trading, that seeks to protect the Company’s reputation for adhering to the highest standards of conduct and that includes an anti-hedging provision.  Additionally, the policy states that specific restrictions upon trading, such as specified trading windows and blackout periods, must be adhered to.  We believe it is improper and inappropriate for of our personnel to engage in short-term or speculative transactions involving our stock, so those persons who are subject to the policy are prohibited from the following:

 

Trading while in possession of material non-public information;

 

 

Tipping information to others;

 

 

Trading in our securities on a short-term basis (securities should be held for a minimum of six months);

 

 

Selling our stock short;

 

23


 

Buying or selling, on an exchange or in any other organized market, puts or calls or other derivative instruments that relate to the future value of our stock;

 

 

Hedging their investment in our stock through covered calls, collars or other derivative transactions; and

 

 

Holding our stock in a margin account or pledge a significant amount of our stock as collateral for a loan.

 

Disclosure Committee.  The Disclosure Committee is composed of members of management.  This committee has established controls and procedures designed to ensure that information the Company may be required to disclose is gathered and communicated to the committee and that all required disclosures are made in a timely and accurate manner.  The committee has implemented a financial review process that enables our Chief Executive Officer and Chief Financial Officer to certify our quarterly and annual reports, as well as procedures designed to ensure our compliance with SEC Regulation FD (Fair Disclosure).


24


Outstanding Equity Awards at Year End

 

The following table provides information regarding outstanding equity awards held by the named executive officers as of December 31, 2020.  

 

 

Option Awards

 

 

Stock Awards

 

Name of Executive

 

Grant Date

 

 

Number of Securities Underlying Unexercised Options Exercisable

 

 

Number of Securities Underlying Unexercised Options Unexercisable

(1)

 

 

Option

Exercise

Price

 

 

Option

Expiration

Date

 

 

Grant Date

 

 

Number

of

Shares

that

have not

Vested

(2) (3)

 

 

Market

Value of

Shares of

Stock that

have not

Vested ($) (4)

 

Timothy K. Schools

 

5/22/2019

 

 

 

16,666

 

 

 

33,334

 

 

$

14.84

 

 

5/22/2029

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1/31/2020

 

 

 

4,019

 

 

$

59,280

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11/24/2020

 

 

 

15,754

 

 

$

232,372

 

John A. Davis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11/24/2020

 

 

 

4,688

 

 

$

69,148

 

Christopher G. Tietz (5)

 

3/2/2016

 

 

 

25,000

 

 

 

 

 

$

13.22

 

 

3/2/2026

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4/25/2018

 

 

 

550

 

 

$

8,113

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1/24/2019

 

 

 

1,572

 

 

$

23,187

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1/31/2020

 

 

 

3,745

 

 

$

55,239

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11/24/2020

 

 

 

7,090

 

 

$

104,578

 

Robert B. Anderson (5)

 

12/10/2012

 

 

 

50,000

 

 

 

 

 

$

12.27

 

 

12/10/2022

 

 

 

 

 

 

 

 

 

 

 

 

2/27/2015

 

 

 

30,000

 

 

 

 

 

$

11.41

 

 

2/27/2025

 

 

 

 

 

 

 

 

 

 

 

 

(1)

The option awards to Mr. Schools vest over a three-year period from the grant date, with one-third of the options under the grant becoming exercisable on each of the first three anniversaries of the grant date. With the exception of the option awards to Mr. Schools, these option awards vest over a four-year period from the grant date, with one-fourth of the options under the grant becoming exercisable on each of the first four anniversaries of the grant date.

(2)

Stock awards that were granted in April 2018, January 2019 and January 2020 vest over a three-year period from the grant date with one-third of the stock subject to the award vesting on each of the first three anniversaries of the grant date.

(3)

Stock awards that were granted in November 2020 vest over a two-year period from the grant date with one-half of the stock subject to the award vesting on each of the first two anniversaries of the grant date, except for 9,452, 4,254 and 2,813 shares of restricted common stock that were granted to each of Messrs. Schools, Tietz and Davis which are performance awards subject to achievement of certain performance goals measured over a performance period from January 1, 2020 to December 31, 2022. These performance awards vest as soon as practicable after the end of the performance period.

(4)

Market value of restricted common stock is based on the closing price of $14.75 of our common stock on December 31, 2020 (rounded to the nearest whole dollar).

(5)

Does not include 5,600 and 13,800 shares of common stock granted to Messrs. Anderson and Tietz, respectively, on December 28, 2018, because the shares were fully vested upon issuance. See “Executive Compensation — Narrative Discussion of Summary Compensation Table — Components of Compensation — Long-Term Equity Compensation.”

 

Employment Agreements

 

We have employment agreements with Mr. Schools and Mr. Tietz. Our other named executive officers do not have employment agreements. The employment agreement for Mr. Schools specifies a three-year period of employment that expires on May 13, 2022 with an option for annual renewal by mutual agreement of the parties. The employment agreement for Mr. Tietz specifies a two-year, six-month term of employment until May 31, 2021 and the option for annual renewal by mutual agreement. All parties have the right to terminate the employment agreements at any time, with or without cause, as defined in the employment agreements, subject to the potential for severance payments as discussed below.  The employment agreements specify each executive’s base salary and eligibility to participate in certain benefits programs.

 

Potential Payments upon Termination or Change in Control.  Our employment agreements with our named executive officers provide for certain severance payments to be made in connection with the termination of employment in certain circumstances.

 

 

Specifically, these officers are entitled to a severance payment equal to continued payment of base salary and benefits in the event we terminate the employment agreements without cause or the executive resigns for good reason, as such terms

25


 

are defined in the employment agreement.  For Mr. Schools, base salary and benefits would continue for a period of 24 months following termination.  For Mr. Tietz, base salary and benefits would be continued for 12 months from termination.  

 

 

For termination occurring within 12 months of a change in control, as defined in the employment agreement, Messrs. Schools and Tietz would receive payments equal to two times their respective base salary (payable in 24 equal monthly installments) and continuation of benefits for 24 months from termination, unless employment was terminated with cause or by reason of disability or the executive resigned without good reason, as defined in their employment agreements. For Mr. Davis, base salary and benefits would continue for a period of 18 months from termination.

 

Confidentiality and Restrictive Covenants.  Under the employment agreements, our named executive officers agree to maintain the confidentiality of non-public information and trade secrets learned during the course of employment and further agree that we maintain ownership over their work product.  In addition, the executives are subject to restrictive covenants relating to their ability to (i) solicit our clients for or on behalf of a competing business, (ii) solicit employees of us or our Bank for another business, or (iii) engage in a competing business that operates in Davidson or Williamson Counties, Tennessee, or any other county inside or outside of Tennessee in which we operate.  These restrictions apply for the duration of employment and following termination for a period of 24 months for Mr. Schools and for a period of 12 months for Messrs. Anderson and Tietz.

2020 Compensation Update

 

Performance-Based Incentive Program.  In 2019, the Compensation and Human Resources Committee of the Board adopted an incentive award program (the “LTIP”) under the existing Stock Incentive Plan pursuant to which awards having performance-based vesting restrictions were granted to our executive officers which will fully vest in 2022.

 

In 2020, the company amended the LTIP plan under the existing Stock Incentive Plan pursuant to which awards having performance and service-based vesting restrictions were granted to our executive officers.  The Compensation and Human Resources Committee adopted objective performance targets including the following three financial goals: Relative Return on Average Assets, Relative Earnings Per Share Growth, and Relative Tangible Book Value Per Share Growth. Once the number of earned PSUs is determined for each financial goal, the total number of earned PSUs is modified based upon the Relative Total Shareholder Return (“TSR”) of CapStar’s common stock compared to the TSRs of the components of a predetermined group of peer companies as listed in the award agreement (“Peer Group”). TSR for CapStar and each peer company will be calculated over the period from January 1, 2020 through December 31, 2022 (“Performance Period”) that must have been satisfied before the Compensation and Human Resources Committee could make awards to our executive officers. On November 25, 2020, the Compensation and Human Resources Committee approved the 2020 LTIP stock awards for our executive officers.  Under the plan the targeted performance-based shares awarded were 9,452, 2,813 and 4,254 shares of restricted stock to Mr. Schools, Mr. Davis, and Mr. Tietz, respectively, under the performance-based component of the LTIP. The performance-based shares earned by our named executive officers will vest as soon as administratively possible after the end of the performance period, conditioned upon the continued employment of the executive officer.  On the same date, the Compensation and Human Resources Committee awarded 6,302, 1,875 and 2,836 shares of restricted stock to Mr. Schools, Mr. Davis, and Mr. Tietz, respectively, under the service-based component of the LTIP.  The service-based shares earned by our named executive officers will vest annually over a two-year period, conditioned upon the continued employment of the executive officer.

On March 3, 2021, we granted restricted stock awards to our directors who are not executive officers consistent with our 2020 Director Compensation Program, as described in the section entitled “Director Compensation” below.


26


 

COMPENSATION AND HUMAN RESOURCES COMMITTEE REPORT

 

The Compensation and Human Resources Committee has reviewed and discussed with management the information contained in the Executive Compensation section of this Proxy Statement and recommended to the Board that the Executive Compensation be included in this Proxy Statement and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

 

Submitted by the Compensation and Human Resources Committee of the Board:

 

 

Thomas R. Flynn (Chair)

Dennis C. Bottorff

Sam B. DeVane

Myra NanDora Jenne

Toby S. Wilt

 

The foregoing report shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act, or under the Exchange Act, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Securities Act and/or Exchange Act.

 

DIRECTOR COMPENSATION

 

During 2020, our non-employee directors received compensation for service and attendance based upon the following compensation program guidelines (“2020 Director Compensation Program”):

 

 

$75,000 annual retainer for the Chairman of the Board;  

 

 

$37,500 annual retainer for the Vice-Chairs of the Board;

 

 

$26,000 annual retainer for directors;

 

$10,000 annual retainer for director attendance at meetings of the Board;  

 

 

$7,500 annual retainer for Audit and Risk Committee Chair, $5,000 annual retainer for Nominating and Corporate Governance Committee Chair and $6,000 annual retainer for all other committee Chairs;  

 

 

$7,500 annual retainer for Audit and Risk Committee members; $6,000 annual retainer for Compensation and Human Resources, Credit Committee and Community Affairs members; $4,000 annual retainer for Nominating and Corporate Governance Committee members; and

 

 

$500 for each meeting of the Executive Loan Committee.

 

Mr. Schools did not receive fees or other compensation for his service as a director of our Company in 2020.  Other than the retainers for our Chairman of the Board and the retainers for the Vice-Chairs of the Board, which are paid in one-third cash in equal monthly payments and two-thirds restricted stock awards, all director compensation is generally paid in equal parts cash and restricted stock awards that vest ratably over three years.  The following table sets forth information regarding compensation paid to our directors for 2020 that were not named executive officers:

 

 

 

 

 

 

 

 

 

 

 

 

27


 

 

 

 

 

 

Fees Earned or Paid in Restricted Stock

 

 

 

 

 

Name

 

Fees Earned or

Paid in Cash

 

 

Amount ($)(1)

 

Actual Number of Restricted Shares (2)

 

 

Total

 

Dennis C. Bottorff

 

$

48,000

 

 

$

73,000

 

 

4,612

 

 

$

121,000

 

L. Earl Bentz

 

 

28,500

 

 

 

28,500

 

 

1,800

 

 

 

57,000

 

Jeffrey L. Cunningham

 

 

36,333

 

 

 

44,667

 

 

2,822

 

 

 

81,000

 

Thomas R. Flynn

 

 

28,000

 

 

 

28,000

 

 

1,769

 

 

 

56,000

 

Julie D. Frist

 

 

12,667

 

 

 

16,833

 

 

1,063

 

 

 

29,500

 

Louis A. Green III

 

 

24,417

 

 

 

24,417

 

 

1,542

 

 

 

48,834

 

Myra NanDora Jenne

 

 

25,667

 

 

 

25,667

 

 

1,621

 

 

 

51,334

 

Joelle J. Phillips

 

 

21,333

 

 

 

21,333

 

 

1,348

 

 

 

42,666

 

Dale W. Polley

 

 

40,083

 

 

 

52,583

 

 

3,321

 

 

 

92,666

 

Timothy K. Schools (3)

 

 

 

 

 

 

 

 

 

 

 

Stephen B. Smith

 

 

26,417

 

 

 

26,417

 

 

1,669

 

 

 

52,834

 

James  S. Turner, Jr.

 

 

29,750

 

 

 

29,750

 

 

1,879

 

 

 

59,500

 

Toby S. Wilt

 

 

26,250

 

 

 

26,250

 

 

1,658

 

 

 

52,500

 

 

(1)

The amounts set forth in this column represent the value of incentive awards approved by our Board pursuant to our 2020 Director Compensation Program, as described above. The aggregate grant date fair value of restricted stock awards for the year ended December 31, 2020 are computed in accordance with FASB ASC Topic 718 based on the closing price per share of $15.83 on February 23, 2021, the closest practical date prior to the date of the awards.

(2)

The amounts set forth in this column represent the actual number of shares of restricted stock awarded to our directors for the year ended December 31, 2020, determined by dividing the value of awards approved by the Board by the closing price of $15.83 per share on February 23, 2021, the closest practical date prior to the date of the awards , and then rounding to the nearest whole share.

(3)    Mr. Schools did not receive fees or other compensation for his service as a director of the Company in 2020, given his service as an employee of the Company.

 

 

AUDIT AND RISK COMMITTEE REPORT

The Audit and Risk Committee consists of five non-employee directors all of whom have been determined by the Board to qualify as independent directors under SOX and the rules and regulations of NASDAQ and the SEC.  The Audit and Risk Committee operates under a written charter adopted by the Board. The Audit and Risk Committee’s Charter is evaluated annually to ensure compliance with SEC rules and regulations and NASDAQ listing standards and was last reviewed on March 4, 2021.  A copy of the Audit and Risk Committee’s Charter is available on the Company’s Investor Relations webpage at www.ir.capstarbank.com under the caption “Corporate Governance – Documents & Charters.”

The Audit & Risk Committee oversees the Company’s auditing, accounting and financial reporting processes on behalf of the Board.  In fulfilling its oversight responsibilities, the Audit and Risk Committee, among other things, reviewed and discussed with management the Company’s audited consolidated financial statements for the year ended December 31, 2020, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.

The Audit and Risk Committee is responsible for approving and recommending to the Board the selection of the Company’s independent auditors annually. The Audit and Risk Committee reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of the Company’s audited financial statements with accounting principles generally accepted in the United States, their judgments as to the quality, not just the acceptability, of the Company’s accounting principles and such other matters required to be discussed by Auditing Standard No. 1301 (Communications with Audit Committees).  In addition, the Audit and Risk Committee has received from the independent auditors the written disclosures and the letter from the independent auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditors’ communication with the Audit Committee concerning independence, and the Audit and Risk Committee has discussed with the independent auditors the independent auditors’ independence from the Company and its management.  The Audit and Risk Committee also considered whether the independent auditors’ provision of non-audit services to the Company is compatible with the auditors’ independence and has concluded that such provision is compatible with the auditors’ independence.

The Audit and Risk Committee discussed with the Company’s internal and independent auditors the overall scope and plans for their respective audits.  The Audit and Risk Committee meets with the internal and independent auditors, with and without management

28


present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting.

In reliance on the reviews and discussions referred to above, the Audit and Risk Committee recommended to the Board that our audited consolidated financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2020 for filing with the SEC.

 

Submitted by the Audit and Risk Committee

of the Board of Directors:

 

Dale W. Polley (Chair)

L. Earl Bentz

Sam B. DeVane

Thomas R. Flynn

Louis A. Green III

 

 

The foregoing report shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act or under the Exchange Act, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under the Securities Act and/or the Exchange Act.

 


29


PROPOSAL 2

RATIFICATION OF THE APPOINTMENT OF THE

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Company’s Board, as recommended and approved by the Audit and Risk Committee, has appointed Elliott Davis, LLC as our independent registered public accounting firm for the year ending December 31, 2021 and seeks ratification of the appointment by our shareholders. Elliott Davis, LLC has served as our independent registered public accounting firm since 2017. The Board, however, retains sole authority over the appointment and replacement of the Company’s independent registered public accounting firm. As a result, despite any ratification of this engagement of Elliott Davis, LLC by the Company’s shareholders, the Board will continue to be authorized to terminate the engagement at any time during the year, to retain another independent registered public accounting firm to examine and audit the consolidated financial statements of the Company for fiscal year ending December 31, 2021, or to take any other related action if judged by the Board to be in the best interests of the Company.  If the appointment of Elliott Davis, LLC as the Company’s independent registered public accounting firm for the year ending December 31, 2021 is not ratified by the shareholders, then the matter will be referred to the Audit and Risk Committee for further review and action.

Audit and Non-Audit Fees

The following table presents the aggregate fees billed by Elliott Davis, LLC for the two most recent fiscal years ended December 31, 2020 and December 31, 2019, respectively:

 

 

2020

 

 

2019

 

Audit Fees (1)

 

$

260,250

 

 

$

227,825

 

Audit-Related Fees (2)

 

 

12,000

 

 

 

12,000

 

Tax Fees

 

 

 

 

 

 

All Other Fees

 

 

 

 

 

 

Total Fees

 

$

272,250

 

 

$

239,825

 

 

(1)

Audit fees relate to services rendered in connection with the annual independent audit of the Company’s consolidated financial statements for the years ended December 31, 2020 and 2019 and reviews of the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, and registration statements on Forms S-3 and S-4.

(2)

Audit-related fees relate to services rendered in connection with a required regulatory audit for the U.S. Department of Housing and Urban Development.

Pre-Approval Policies and Procedures

Pursuant to its charter, the Audit and Risk Committee reviews and pre-approves audit and permissible non-audit services performed by the Company’s independent registered public accounting firm as well as the scope, fees, and other terms of such services.  The Audit and Risk Committee may not approve any service that individually or in the aggregate may impair, in the Audit and Risk Committee’s opinion, the independence of the independent registered public accounting firm.  The Audit and Risk Committee may delegate to one or more designated committee members the authority to grant pre-approvals of audit and permitted non-audit services, provided that any decisions to pre-approve shall be presented to the full Audit and Risk Committee at its next scheduled meeting.  The Audit and Risk Committee has delegated its authority to pre-approve audit, audit-related, and non-audit services to the Chair of the Committee.  For the fiscal years 2020 and 2019, respectively, all of the audit and non-audit services provided by the Company’s independent registered public accounting firm were pre-approved by the Chair of the Audit and Risk Committee in accordance with the Audit and Risk Committee Charter.

Participation of Representatives of Independent Registered Public Accounting Firm

Representatives of Elliott Davis, LLC will participate in the Annual Meeting and will have the opportunity to make a statement if they desire to do so and to respond to appropriate questions.


30


Required Vote

Shareholder ratification of the Audit and Risk Committee’s appointment of Elliott Davis, LLC as our independent registered public accounting firm for the year ending December 31, 2021 is not required by our Bylaws or otherwise.  Nonetheless, the Board has elected to submit the appointment of Elliott Davis, LLC to our shareholders for ratification.

If a quorum is present, this Proposal 2 will be approved if the votes cast for Proposal 2 exceed the votes cast against Proposal 2. If this Proposal 2 is not approved, the matter will be referred to the Audit and Risk Committee for further review.

 

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF ELLIOTT DAVIS, LLC AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2021


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PROPOSAL 3

APPROVAL OF THE

2021 CAPSTAR FINANCIAL HOLDINGS, INC. STOCK INCENTIVE PLAN

Background and Purpose of the Proposal

On March 4, 2021, subject to the approval of our shareholders, our Board of Directors, on the recommendation of the Compensation and Human Resources Committee adopted the CapStar Financial Holdings, Inc. 2021 Stock Incentive Plan (the “2021 Stock Incentive Plan”), which supersedes and replaces the 2016 Stock Incentive Plan, to:

 

Carry over the shares available for grant (144,454) from the 2016 Stock Incentive Plan to the 2021 Stock Incentive Plan and increase the number of shares available for grant under the 2021 Stock Incentive Plan by 800,000 shares;

 

Update and improve certain definitions and provisions of the 2021 Stock Incentive Plan to provide enhanced administration and more clarity pertaining to the terms and conditions of shares granted under the 2021 Stock Incentive Plan.

We are submitting the 2021 Stock Incentive Plan to our shareholders for approval at the Annual Meeting. The 2021 Stock Incentive Plan will not be implemented unless it is approved by our shareholders, in which case we will continue to grant stock based awards under the 2016 Stock Incentive Plan until the shares remaining available for issuance are exhausted. We believe approval of the 2021 Stock Incentive Plan is advisable to ensure the Company has a sufficient reserve of common stock available for our compensation programs and to reflect current best practices for stock incentive plans.

We recognize that the 2021 Stock Incentive Plan, if approved, will create additional “overhang” on our outstanding shares. Overhang is the potential dilutive effect of the 2021 Stock Incentive Plan, calculated as a percentage of our outstanding shares. We have calculated the potential dilutive effect as follows, based on 22,078,293 common shares that were outstanding on March 16, 2021.

 

 

 

Current Overhang

 

 

Effect of 2021 Stock Incentive Plan

 

Outstanding Stock Options

 

 

224,089

 

 

 

224,089

 

Current Share Reserve

 

 

144,454

 

 

 

944,454

 

Total Shares

 

 

368,543

 

 

 

1,168,543