Dustin M. Warford
About Dustin M. Warford
Executive Vice President and Chief Banking Officer (CBO) of Heritage Bank of Commerce since June 2022; with the bank since 2006. Age 45. Education: B.S. in Finance and MBA in Finance from Santa Clara University; graduate of Pacific Coast Banking School. 2024 company context: deposits +10% YoY; loans +4% YoY; net income $40.5M; efficiency ratio 65.88%; nonperforming assets $7.7M (0.22% of total loans). Cumulative TSR index for 2024 was 95.61 vs KBW Bank Index 132.60. These frame incentive calibration and pay outcomes.
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Heritage Bank of Commerce | EVP, Chief Banking Officer | 2022–present | Leads enterprise-wide banking, sales culture, and growth execution; qualitative goals tied to sales targets and risk management. |
| Heritage Bank of Commerce | Head, Real Estate Industries Division & Peninsula Market | 2012–2022 | Consistent growth contribution in commercial real estate and Peninsula market. |
| Heritage Bank of Commerce | Commercial and Private Banking | 2006–2012 | Front-line production and relationship banking foundation. |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| 19 for Life | Board/Finance committee | n/a | Community engagement; local brand equity. |
| The Bronco Bench Foundation | Board/Finance committee | n/a | Athletics/nonprofit network in Bay Area. |
| San Jose Sports Hall of Fame | Board/Finance committee | n/a | Regional relationships. |
| Sacred Heart Nativity School | Board/Finance committee | n/a | Community impact; philanthropic presence. |
Fixed Compensation
| Component | 2024 |
|---|---|
| Base Salary | $362,070 (effective 4/1/2024; +14.87% YoY; Committee noted an 11.1% market adjustment for Warford) |
| 401(k) Company Match | $3,000 |
| Auto Allowance | $800 per month |
| Other Insurance Benefit | $990 |
| Cash Dividends on Unvested RS/RSUs | $2,404 |
| Total “All Other Compensation” (proxy category) | $15,794 |
Performance Compensation
| Metric/Instrument | Design/Weighting | Target/Structure | 2024 Outcome |
|---|---|---|---|
| Annual Cash Incentive | Company scorecard 75%; qualitative 25% | Target 45% of base (Threshold 22.5%, Max 67.5%) | Paid $150,000 based on performance mix (max NPA control; upper-target growth; below-target pre-tax income) |
| Company Scorecard Metrics | Pre-Tax Income (20%); Nonperforming Assets (20%); Loan Growth (17.5%); Deposit Growth (17.5%) | Threshold/Target/Max set; interpolation used; capital “gate” 10.5% TRBC required | Company achieved max on NPA; upper-target growth; below-target pre-tax income |
| Qualitative Goals (Warford) | 25% | Sales targets; adopt foundational sales culture; effective risk management; performance management | Committee cited achievement and practices |
| 2024 RSUs (time-based) | 50% of LTI; ratable vest over 3 years; dividends deferred; accelerate on CoC, death, disability | 12,794 units; $108,621 grant-date value (granted 3/8/2024) | Unvested at 12/31/2024 included within totals below |
| 2024 PRSUs (performance-based) | 50% of LTI; 3-year cliff vest on relative ROATCE vs peer group; 2025–2027 cycle | Vesting: 35th pct=50%; 50th=100%; 75th=150%; straight-line between | 12,793 target units; $108,613 grant-date value (granted 3/8/2024) |
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Beneficial Ownership | 65,026 shares; less than 1% of outstanding |
| Exercisable Options (within 60 days) | 52,000 |
| Options Detail (12/31/2024) | Multiple grants exercisable: 10,000 @ $16.80 (exp. 5/1/2028), 10,000 @ $14.48 (5/2/2027), 10,000 @ $12.16 (5/22/2029), 10,000 @ $8.91 (4/28/2030), 11,000 exercisable/1,000 unexercisable @ $12.09 (4/27/2031) |
| Unvested RS/RSUs (time-based) | 47,450 units total (3,083; 20,414; 23,953); market value $445,071 at $9.38 close |
| 2024 Vested Stock | 6,478 shares vested; $53,801 realized value |
| Ownership Guidelines | Execs required to hold 1x base salary; all executives in compliance as of 12/31/2024 |
| Pledging/Hedging | Prohibited for executives and directors |
| Clawback | “No-fault” recoupment for restatements (last 3 completed FYs) |
Employment Terms
| Term | Detail |
|---|---|
| Employment Agreement | Effective February 1, 2024 |
| Base, Benefits | Initial salary $362,070; group insurance paid; life insurance = 2x salary (max $700k); long-term care up to $72k lifetime; auto allowance $800/month |
| Incentive Eligibility | Eligible for Executive Officer Cash Incentive Program; equity under 2023 Equity Plan |
| Severance (No CoC) | Lump sum = 1x base salary + average bonus (last 3 yrs); 12 months of group insurance continuation |
| Change-in-Control (Double Trigger for Cash) | If terminated without cause or resigns for Good Reason within 120 days before or 2 years after CoC: 2x base salary + average bonus (last 3 yrs) + 24 additional months benefits (on top of initial 12) |
| Equity Acceleration | RS/RSUs/PRSUs generally accelerate upon change in control, death or disability (note: equity acceleration is single-trigger on CoC under plan terms) |
| Restrictive Covenants | 12-month non-solicit and competitive activity restrictions within California counties where HCC has HQ/branches |
Compensation Structure Analysis
- Mix shifts and rigor: Since 2023, 50% of LTI delivered in PRSUs tied to relative ROATCE with a three-year horizon; in 2024, the Committee approved a one-time increase in equity grant percentage vs salary, enhancing at-risk equity exposure. RSUs vest over 3 years; PRSUs vest based on 35th/50th/75th percentile outcomes (50%/100%/150%).
- Cash incentives balance growth and risk: 2024 plan weighted 75% formulaic financials (pre-tax income, NPA, loan and deposit growth) and 25% differentiated qualitative goals, with a 10.5% total risk-based capital threshold “gate,” plus interpolation and ex-post adjustment discretion—mitigating risk-taking.
- Market alignment and salary action: Committee cited market benchmarking with a specific 11.1% market adjustment for Warford and overall +14.87% YoY salary change to $362,070, reflecting scope and peer calibration.
- Shareholder support: 2024 Say-on-Pay passed with 97.2% approval, signaling investor acceptance of design and outcomes.
- Shareholder-unfriendly element: Equity awards accelerate on a single-trigger CoC (common in peer banks but a governance caution), while cash severance is double-trigger (no tax gross-ups).
Related Party Transactions, Hedging/Pledging, and Section 16
- Related party transactions governed by Audit Committee policy; no Warford-specific related party dealings disclosed.
- Hedging and pledging of company stock are prohibited.
- All Section 16(a) filings for executives and directors were timely in 2024.
Equity Vesting & Potential Selling Pressure
| Item | Detail |
|---|---|
| Near-to-mid-term supply | 47,450 unvested time-based units vest ratably over 3 years from their grant dates; 2024 grant on 3/8/2024 vests 1/3 annually; dividend equivalents deferred to vest. |
| Performance equity overhang | 12,793 target PRSUs from 3/8/2024 cliff-vest post 2025–2027 performance, depending on relative ROATCE percentile (50–150% payout). |
| Options overhang | 52,000 currently exercisable options across strikes $8.91–$16.80; 1,000 unexercisable at $12.09; exercises depend on price/in-the-money status. |
| Sale constraints | Ownership guidelines require retention until guideline met; anti-hedging/pledging; clawback policy further constrains behavior. |
Performance & Track Record (role-specific)
- The Committee cited Warford for achieving sales targets, instituting a foundational sales culture, effective risk management practices, and performance management—aligned with the bank’s 2024 profile: deposits +10%, loans +4%, tight NPA control and strategic investments through rate headwinds.
- 2024 non-equity incentive payout of $150,000 reflects mixed scorecard outcomes (max NPA control; upper-target growth; below-target pre-tax income) and qualitative execution.
Compensation Peer Group (benchmarking)
Peer set used for 2024 decisions included: Banc of California; Bank of Marin Bancorp; BayCom; Central Valley Community Bancorp; Farmers & Merchants Bancorp; First Foundation; Five Star Bancorp; Heritage Financial; HomeStreet; Luther Burbank (subsequently acquired); PCB Bancorp; Sierra Bancorp; TriCo; Westamerica. Positioning targeted median practices, adjusted for Bay Area wages.
Say-on-Pay & Shareholder Feedback
- 2024 Say-on-Pay approval: 97.2%.
- Shareholder engagement informed adding PRSUs tied to relative ROATCE, refined peer groups, differentiated qualitative goals, and enhanced CD&A disclosure.
Investment Implications
- Alignment: High portion of at-risk pay (cash scorecard + PRSUs) tied to profitability, credit quality, and organic growth. Ownership guidelines, anti-pledging/hedging, and clawback reinforce alignment; no tax gross-ups.
- Retention: Recent salary market adjustment, substantial unvested equity (time- and performance-based), and double-trigger CoC severance reduce near-term flight risk; however, single-trigger equity acceleration on CoC could incent neutrality or openness to strategic alternatives.
- Trading signals: Large unvested RS/RSU stack and PRSU cycle (2025–2027) create predictable vesting supply; options are concentrated at strikes near/above current levels, limiting near-term exercise-driven sales unless price appreciates. Monitor Form 4s around March/anniversary vesting dates and post-earnings windows.
- Execution focus: Incentive architecture emphasizes NPA containment, core deposit and loan growth—consistent with 2024 results—suggesting continued bias toward prudent growth and balance-sheet quality under Warford’s banking leadership.