DEF 14A of Orrstown Financial Services Inc
Filed Mar 22, 2024 · FY20230000826154-24-000065
PROPOSAL 1 – ELECTION OF DIRECTORS
PROPOSAL 1 – ELECTION OF DIRECTORS
Classification of the Company's Directors
Classification of the Company's Directors The bylaws of the Company provide that the Board of Directors shall consist of not less than nine and not more than 15 members, with such directors being divided into three classes, as nearly equal in number as possible, with each class of directors serving a three-year term of office. At each annual meeting of shareholders, a class of approximately one-third of all of the Company’s directors is elected to hold office for a term expiring at the annual meeting held in the third year following the year of his or her election. The Company currently has 11 directors, who are divided into three classes, Class A, Class B and Class C, with each class serving staggered three-year terms as follows: •The Class A directors are Cindy J. Joiner, Eric A. Segal, Glenn W. Snoke and Joel R. Zullinger and their terms will expire at the annual meeting of shareholders to be held in 2026; •The Class B directors are Mark K. Keller, Meera R. Modi, Thomas R. Quinn, Jr. and Michael J. Rice and their terms will expire at the annual meeting of the shareholders to be held in 2025; and •The Class C directors are Thomas D. Longenecker, Andrea L. Pugh and Floyd E. Stoner and their terms expire at the Annual Meeting. Subject to the completion of the Company’s proposed merger of equals with Codorus Valley Bancorp, Inc., the Company has agreed to expand the size of its Board of Directors to 13 directors, cause four existing directors of the Company to resign, and appoint six existing members of Codorus Valley Bancorp's board of directors to the Company's Board of Directors. Assuming the merger is completed, the Company presently expects that Directors Longenecker, Modi, Pugh and Stoner will resign from the Board of Directors at such time.
Nominees for Election
Nominees for Election At the Annual Meeting, the shareholders will be asked to elect three Class C director nominees to serve on our Board of Directors for a three-year term expiring in 2027. The Board of Directors has nominated the following persons for election as directors to Class C:
Nominees for Election
| Thomas D. Longenecker | | Andrea L. Pugh | | Floyd E. Stoner |
Nominees for Election
Ms. Pugh and Messrs. Longenecker and Stoner presently serve as directors of the Company and the Bank. If one or more of the named nominees is unable or unwilling to serve as a director, the persons named in the proxy will vote for the election of such substitute nominee, if any, as will be named by the Board of Directors. The Company has no reason to believe that any of the named nominees will be unable or unwilling to serve as a director. Each named nominee has expressed a willingness to serve if elected. Directors are elected by a plurality of votes. This means that the three director nominees receiving the highest number of affirmative votes will be elected as directors. You may vote for all of the director nominees, withhold authority to vote your shares for all director nominees, or withhold your authority to vote your shares with respect to any to any one or more of the director nominees. Votes withheld and broker non-votes will have no effect on the election of directors. The Board of Directors recommends that you vote FOR the election of each of the director nominees named in this proxy statement.
Board Overview
Board Overview The independence and skill set of the Board of Directors is crucial to the continued success of the Company. The Board of Directors evaluates needed skill sets through the use of a matrix which evaluates directors and prospective directors for specific expertise, such as accounting, risk management, technology, and market or regional knowledge, among others. More than half of the directors have led companies headquartered within the Company’s market areas and represent significantly different industry backgrounds. Aside from sitting on the Board of Directors of the Company, 27% of our directors have extensive careers in financial services. Ten of the eleven directors, or 91%, are “independent" under NASDAQ listing rules.
Independent Chairman
Independent Chairman The Board of Directors believes that an independent Chairman serves an important corporate governance function by providing separate leadership for the independent directors. In addition to his formal duties as set forth in the Company’s various corporate governance documents, the Chairman meets with regulators, participates in shareholder engagement calls and attends meetings with management. Our independent Chairman also presides over meetings of independent directors in executive session at such times as deemed necessary or appropriate.
Nomination of Directors
Nomination of Directors In connection with the Annual Meeting, the Nominating and Governance Committee of the Board of Directors has reviewed the qualifications of, and made recommendations regarding, potential candidates to be nominated by the Board of Directors for election as directors. The nominees named above were recommended by the Nominating and Governance Committee, then submitted to, and approved by, the Board of Directors as the three nominees for election as directors to Class C. The Nominating and Governance Committee is responsible for identifying, assessing and recommending the slate of candidates to be nominated for election to the Board of Directors. In addition to meeting the minimum criteria to serve as a director as outlined in the Company’s bylaws, the committee uses a variety of methods and considers a variety of factors for identifying and evaluating nominees for director and assesses the mix of skills and the performance of the Board of Directors as a whole on a regular basis. In the course of establishing the slate of nominees for director each year, the committee will consider whether any vacancies on the Board of Directors are expected due to retirement or otherwise, the skills represented by retiring and continuing directors, and additional skills highlighted during the Board self-assessment process that could improve the overall quality and ability of the Board to carry out its function. The committee also considers factors including each candidate’s integrity, independence, experience (including experience in finance and banking and diversity of experience in relation to other members of the Board of Directors), the strategic direction of the Company and the Bank, involvement in the communities served by the Bank and such other factors it deems to be in the best interest of the Company, the Bank and the Company’s shareholders, which factors may change from time to time. The Nominating and Governance Committee will consider the incumbent directors whose terms are expiring at the forthcoming annual meeting, other candidates, if any, recommended to it by shareholders, other qualified individuals within the community, including the Bank’s regional advisory boards, and any candidates nominated by shareholders in accordance with the procedures set forth in the Company’s bylaws. The criteria for consideration of director candidates nominated by the Company’s shareholders, if nominated in a timely manner, is the same as for other director nominees.
Director Eligibility Requirements
Director Eligibility Requirements The Company’s bylaws provide for certain director eligibility requirements for a nominee to be eligible to become a member of the Board. All directors must hold at least 5,000 shares of Company Common Stock. Directors will have one year from the date they join the Board to meet this requirement. In addition, no one may be nominated to serve as a director of the Company if such person: (a) is under indictment or has been convicted of a crime involving a breach of trust with a penalty of imprisonment for more than one year; (b) has been issued within the past 10 years a non-appealable cease and desist order by a federal or state bank regulatory agency related to conduct involving dishonesty or breach of trust; (c) has been found guilty in a final decision, either by any federal or state regulatory agency of: (i) committing a willful violation of any law governing banking, securities, commodities or insurance, or any final cease and desist order issued by a banking, securities, commodities or insurance regulatory agency, or (ii) breaching a fiduciary duty involving personal profit; or (d) has been nominated by someone who is ineligible to serve as a director of the Company under requirements (a)-(c) listed above. No recommendations were received by the Nominating and Governance Committee in connection with this Annual Meeting from shareholders or others, nor, as of the date of this proxy statement, had any candidates been nominated by shareholders in accordance with the procedures set forth in the bylaws. Any future nominations should be submitted in writing addressed to Orrstown Financial Services, Inc., 77 East King Street, Shippensburg, Pennsylvania 17257, Attn: Nominating and Governance Committee. Shareholder nominations must be made in accordance with the procedures set forth in the Company’s bylaws and must include a statement setting forth the background, education and business experience of the nominee. A copy of the Nominating and Governance Committee Charter is posted in the investor relations section of the Company’s website at www.orrstown.com.
Biographical Summaries of Nominees and Directors
Biographical Summaries of Nominees and Directors The Board of Directors believes that each of the nominees and directors possess such professional experience, recognized achievement in his or her respective field, involvement in the communities served by the Bank, ability to contribute to some aspect of the Company’s business and a willingness to make the commitment of time and effort required of a Company director. Information about the nominees for election as directors at the Annual Meeting and information about the continuing directors demonstrating these characteristics is set forth below. There are no family relationships among any of our directors. Unless otherwise stated, each director has held his or her current occupation for the last five years. Nominees for Director:
CLASS C DIRECTORS - TERM EXPIRES IN 2024
CLASS C DIRECTORS - TERM EXPIRES IN 2024 Thomas D. Longenecker - 56, was appointed to the Boards of Directors of the Company and the Bank in 2016. He has served as the President and CEO of Commonwealth Charter Academy, a cyber charter school headquartered in Harrisburg, Pennsylvania, since 2020 and served as its Chief Operating Officer from 2012 to 2020. Prior to that, Mr. Longenecker was the Director of Finance for the Carlisle Area School District in Carlisle, Pennsylvania. He is also a professor of public school finance for Wilkes University, Wilkes-Barre, Pennsylvania. The Board of Directors values Mr. Longenecker’s experience in accounting, finance, and technology, as well as his organizational leadership and knowledge of the market area. Andrea L. Pugh - 71, has been a member of the Boards of Directors of the Company and the Bank since 1996. She was formerly the President and sole member of PharmCare Consultants LLC, a pharmacy consulting business for thirty nursing homes in Pennsylvania. The Board of Directors values Ms. Pugh’s knowledge, experience and perspective as a woman who was an entrepreneur and small business owner. This experience provides her with insight into the financial services needs of, and business issues facing, many of the Bank’s small business clients, including those that are owned and operated by women. Floyd E. Stoner - 75, has been a member of the Boards of Directors of the Company and the Bank since 2012. Since January 2012, Mr. Stoner has served as a Senior Advisor with Alliance Partners, in Chevy Chase, Maryland. Mr. Stoner was the Executive Vice President for Congressional Relations and Public Policy at the American Bankers Association (“ABA”) until his retirement in December 2011 and has over 26 years of experience with the ABA. At the ABA, he was involved at the highest levels in all of the banking policy debates of recent years and he has a nearly unparalleled perspective on the issues facing the banking industry today, which the Board of Directors finds very valuable. Continuing Directors:
CLASS B DIRECTORS - TERM EXPIRES IN 2025
CLASS B DIRECTORS - TERM EXPIRES IN 2025 Mark K. Keller - 70, was appointed to the Company’s Board of Directors in 2009 and to the Bank’s Board of Directors in 2008. Mr. Keller served as a Representative to the Pennsylvania General Assembly, representing the 86th Legislative District, from 2004 to 2020. Mr. Keller is also the owner of Spring-Mar Farm and Mark Keller Auctioneer Real Estate, a real estate consulting business. The Board of Directors values Mr. Keller’s knowledge of the Bank’s market area obtained through his representation of that area in the General Assembly, and as a business owner operating in such market. Meera R. Modi - 41, was appointed to the Board of Directors of the Company and the Bank in 2022. Ms. Modi is a leading corporate mergers and acquisitions attorney and Member at McNees Wallace & Nurick LLC in Harrisburg, Pennsylvania, where she navigates clients through strategic ventures as well as day-to-day operations. The Board of Directors values Ms. Modi’s experience as a trusted legal advisor to businesses and executives throughout the Bank's market area. Thomas R. Quinn, Jr. - 64, was appointed as President and Chief Executive Officer and a director of the Company and the Bank in 2009. The Pennsylvania Banking Code requires that a bank president be a member of the bank’s board of directors. The Board of Directors believes that it is important that the President, who also is the Chief Executive Officer, be a member of the Board of Directors of the Company and the Bank so that the President may interact on a peer-to-peer basis with his fellow directors. In addition, the Board of Directors believes that the knowledge, experience and perspective that Mr. Quinn possesses as a result of his prior service as a senior executive with Fifth Third Bancorp and Citigroup have been, and will continue to be, valuable to the Company as it continues to execute its strategic plan as a relationship-based community bank. Michael J. Rice - 62, joined the Boards of Directors of the Company and the Bank in 2018 concurrent with the closing of the Company's acquisition of Mercersburg Financial Corporation ("Mercersburg"). He is the President of Mt. Parnell Fisheries, Co., a producer and international marketer of ornamental goldfish and koi carp. Prior to his appointment to the Boards of Directors of the Company and the Bank, he served more than 10 years on the boards of Mercersburg and its wholly-owned bank subsidiary. The Board of Directors values Mr. Rice's experience on a community banking board and his long tenure as an active participant in the business community in Franklin County.
CLASS A DIRECTORS - TERM EXPIRES IN 2026
CLASS A DIRECTORS - TERM EXPIRES IN 2026 Cindy J. Joiner, CPA - 62, was appointed to the Boards of Directors of the Company and the Bank in 2016. Since 2007, she has served as the Chief Financial Officer of The Bowman Group, LLC, a privately held corporation located in Williamsport, Maryland specializing in transportation, logistics, hospitality and real estate development. The Board of Directors values Ms. Joiner’s accounting expertise and knowledge of multiple industries that align with the Bank’s lending businesses. In addition, the Board believes her familiarity and knowledge of the Maryland market adds significant value to the Company. Eric A. Segal - 66, was appointed to the Boards of Directors of the Company and the Bank in 2013. Since 2012, Mr. Segal has been Managing Director, and head of the Banking and Financial Institutions Group at CFO Consulting Partners LLC in Princeton, New Jersey. In his role at CFO Consulting Partners, Mr. Segal periodically serves as the interim chief financial officer for public and private companies, including out-of-market financial institutions. The Board of Directors values Mr. Segal’s strong financial acumen and the knowledge and experience he has gained through his consulting experience in many banking organizations in the Mid-Atlantic and other regions. Glenn W. Snoke - 75, has been a member of the Boards of Directors of the Company and the Bank since 1999. Mr. Snoke is retired. He previously served as the President and Chief Executive Officer of Snoke’s Excavating & Paving, Inc. The Board of Directors values Mr. Snoke’s knowledge, experience and perspective as an entrepreneur and owner of a small business involved in the construction industry and the insight it provides him into the financial services needs and business issues facing many of the Bank’s construction industry clients. Joel R. Zullinger - 75, is Chairman of the Boards of Directors of the Company and the Bank. Mr. Zullinger has served as a director since 1981. He is an attorney, of counsel, with Zullinger-Davis-Trinh, P.C., with offices in Chambersburg and Shippensburg, Pennsylvania. The Board of Directors values the knowledge, experience and perspective Mr. Zullinger has obtained through his long tenure as a director of the Company and the Bank. The Board of Directors also values the leadership and communication skills manifested by Mr. Zullinger’s service as Chairman.
Compensation of Directors
Compensation of Directors The following table sets forth compensation received by directors of the Company in 2023, other than Thomas R. Quinn, Jr., President and Chief Executive Officer. Mr. Quinn does not receive compensation in his capacity as a director.
2023 DIRECTOR COMPENSATION TABLE
2023 DIRECTOR COMPENSATION TABLE
2023 DIRECTOR COMPENSATION TABLE
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (2) | All Other Compensation ($)(3) | Total ($) | | Cindy J. Joiner | 26,500 | 45,550 | — | — | — | 7,850 | 79,900 | | Mark K. Keller | 26,500 | 45,550 | — | — | 11,292 | — | 83,342 | | Thomas D. Longenecker | 26,500 | 45,550 | — | — | — | 5,500 | 77,550 | | Meera R. Modi | 26,500 | 45,550 | — | — | — | — | 72,050 | | Andrea L. Pugh | 26,500 | 45,550 | — | — | 10,576 | — | 82,626 | | Michael J. Rice | 26,500 | 45,550 | — | — | — | — | 72,050 | | Eric A. Segal | 26,500 | 45,550 | — | — | — | 10,500 | 82,550 | | Glenn W. Snoke | 26,500 | 45,550 | — | — | 7,727 | — | 79,777 | | Floyd E. Stoner | 26,500 | 45,550 | — | — | — | 27,500 | 99,550 | | Joel R. Zullinger | 43,875 | 61,575 | — | — | 12,392 | — | 117,842 |
2023 DIRECTOR COMPENSATION TABLE
| (1) The grant date fair value of stock awards was calculated by multiplying the number of shares subject to the award by the fair value of Company Common Stock on the grant date ($23.85 per share on January 25, 2023 and $19.05 per share on May 2, 2023). Each director, other than Mr. Zullinger, received grants of 1,111 and 1,000 shares of Company Common Stock, respectively, on these dates. Mr. Zullinger received grants of 1,383 and 1,500 shares of Company Common Stock, respectively, on these dates. | | (2) Represents the annual expense impact related to the value of the directors’ accumulated benefit under defined benefit and supplemental plans for the year ended December 31, 2023. This includes both the director’s retirement and “brick” plans. | | (3) Represents amounts contributed by the Company into the Deferred Compensation Plan. |
2023 DIRECTOR COMPENSATION TABLE
Director Fees To further align director compensation with shareholder interests, and in response to direct shareholder input arising from shareholder engagement with members of both management and the Compensation Committee, the Compensation Committee has determined that the Company's non-employee directors shall be paid an annual retainer, with 50% being paid in cash and 50% being paid in restricted shares of Company Common Stock. Each non-employee director is also granted restricted shares of Company Common Stock at each year's annual meeting of shareholders. Cash Compensation. During 2023, the cash portion of the annual retainer paid to each non-employee director of the Company and the Bank was $26,500. Mr. Zullinger received an additional $17,375 in cash in recognition of the services he provided as Board Chairman. Fees are paid quarterly in arrears on the last day of each calendar quarter. Restricted Stock Awards. On January 25, 2023, as part of the equity portion of his or her annual retainer, each non-employee director was granted $26,500 of restricted shares of Company Common Stock with a 16-month vesting period as part of his or her 2023 compensation. Mr. Zullinger received an additional $6,500 in restricted shares of Company Common Stock with a 16-month vesting period in recognition of the services he provided as Board Chairman. Based on the fair value of the Company Common Stock on the date of the grant, this amounted to an equity award of 1,111 restricted shares of Company Common Stock for each non-employee director, except for Mr. Zullinger who received 1,383 restricted shares of Company Common Stock. In addition, on May 2, 2023, each non-employee director was granted 1,000 restricted shares of Company Common Stock with a 13-month vesting period and a grant date fair value of $19,050. Mr. Zullinger was granted an additional 500 restricted shares of Company Common Stock with a 13-month vesting period and a grant date fair value of $9,525 to compensate him for his role as Board Chairman. Deferred Compensation Plan In 1995, the Company and the Bank established a non-qualified deferred compensation plan for directors and executive officers. Participation in the plan is voluntary and, for directors, is limited to directors who joined the Board prior to September 1, 2018. Each participant may elect each year to defer all or a portion of his or her directors’ fees or, in the case of an executive officer, compensation. Directors deferring compensation must begin withdrawals from the plan by age 75 or termination of service as a director, whichever occurs later. Executive officers must begin withdrawals by age 65 or retirement, whichever occurs later. Payments may be made in equal monthly installments over ten years. Immediate distributions are to be made in the event the Company would experience a hostile takeover. If a participant were to die before payment of his or her entire account, the Company will pay the balance to his or her beneficiary in a single lump sum payment. The amounts deferred are invested in a rabbi trust with the trust department of the Bank as trustee. The participants direct the investment of their own accounts among various publicly available mutual funds designated by the Bank’s Trust Investment Policy Committee. Growth of each participant’s account is a result of investment performance and the public markets and is not a result of an interest factor or interest formula established by the participant or by the Company or the Bank. The Company may make contributions on behalf of directors to this rabbi trust from time to time. The Company’s accrued benefit obligations related to this plan totaled $2.2 million at December 31, 2023. Director Retirement Plan The Bank has entered into director retirement agreements with Ms. Pugh, and Messrs. Keller, Snoke and Zullinger. Each director retirement agreement provides the respective director with a normal retirement benefit in a specified amount, payable in 120 consecutive monthly installments commencing the month following the director’s termination of service as a director after having reached the normal retirement age of 65. Generally, the amount of a director’s annual normal retirement benefit is determined using his or her directors’ fees during the year in which he or she became a party to a director retirement agreement, projected to the normal retirement age of 65 with annual increases of 4%. For every complete plan year after normal retirement age and before termination of service, the amount of the annual benefit will increase by 4%. In 2018, the Board of Directors determined there would be no new benefits offered to current or future directors under the Director Retirement Plan. A director will forfeit his or her benefits under his or her director retirement agreement if the Bank terminates his or her service as a director for gross negligence or gross neglect of duties, commission of a felony or gross misdemeanor involving moral turpitude or fraud, disloyalty or willful violation of any law or policy committed in connection with the director’s service resulting in an adverse effect on the Bank or if the director, after termination of service (other than following a change in control of the Bank), competes with the Bank in violation of the restrictive covenants included in his or her director retirement agreement. The Bank would not be obligated to pay any benefit under a director retirement agreement to the extent the benefit would constitute an excess parachute payment under Section 280G of the Internal Revenue Code. If a director is in active service of the Bank at the time of a change in control of the Bank, as defined in Section 409A of the Internal Revenue Code, the director will be entitled to begin receiving his or her normal retirement benefit following the later of the director’s termination of service as a director or attaining normal retirement age. The director retirement agreement provides for an early termination benefit in a specified amount in the event of an early termination of service as a director before normal retirement age, a disability benefit in the event of an early termination of service as a director due to disability and a death benefit. The amount of the expense associated with the Director Retirement Plan includes increases in 2023 in the net present value of the accrued benefit under the directors’ retirement agreement and is reported in the 2023 Director Compensation Table for each participating director in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column. The Company's accrued benefit obligations related to this plan totaled $1.9 million at December 31, 2023. Brick Plan Mr. Zullinger participates in a so-called “brick plan” that provides Mr. Zullinger or his beneficiaries with a monthly cash benefit for a period of 10 years beginning at age 65. The change in the net present value of Mr. Zullinger’s accrued benefit under his brick plan during 2023 is reported in the 2023 Director Compensation Table above in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column. Under the brick plan, Mr. Zullinger’s annual benefit, which became fully vested following his service as a director for the five-year period beginning August 1, 1982, was $19,987 for the year ended December 31, 2023.
Our 2023 Compensation Outcomes
Our 2023 Compensation Outcomes Base Salary Base salary increases for 2023 were 2.0% for each NEO. 2023 Incentive Compensation Incentive awards link annual compensation to annual Company performance and link the long-term compensatory interests of NEOs to the interests of shareholders in the long-term success and growth of the Company. Our incentive compensation program for 2023 provided cash opportunities through the STIP and equity opportunities through the LTIP, which consists of time-vested and performance-vested equity awards. Incentive compensation to our NEOs in 2023 was targeted evenly between cash and equity award opportunities, with actual awards initially earned based on our Net Income and ROAE performance in 2023. In reviewing actual performance results for calculation of initial STIP and LTIP awards, the Compensation Committee determined that it was appropriate to exclude $1.1 million of pre-tax merger-related expenses incurred in 2023 when calculating Net Income and ROAE as the committee believes that our pending merger will drive long-term growth and profitability in future years, and therefore enhance long-term shareholder value. These adjusted figures are sometimes referred to in this proxy statement as Adjusted Net Income and Adjusted ROAE, respectively. The actual amounts earned under the 2023 incentive programs based on adjusted performance in 2023 are described below: •Adjusted Net Income for 2023 was $36.6 million compared to $36.5 million at target, resulting in rewards payable under both the STIP and LTIP at the target level of the performance range with respect to this performance metric. •Adjusted ROAE for 2023 was 15.06% compared to 15.00% at target, resulting in awards payable under both the STIP and LTIP at the target level of the performance range with respect to this performance metric. In light of the significant headwinds faced by financial institutions, including Orrstown, during 2023 and the Compensation Committee’s subjective evaluation of overall Company performance in spite of those headwinds, the Compensation Committee utilized the adjustment mechanism within the plan to adjust both STIP and LTIP awards upward by 20% of the earned award. In addition, the Compensation Committee made additional LTIP awards to each of our NEOs. For our CEO, CFO and Chief Risk Officer, each of whom played a significant role in the Company's efforts to sign the merger agreement with Codorus Valley Bancorp, Inc., the additional LTIP awards increased their total LTIP award to the top of the potential LTIP payout range. For our other NEOs, the additional LTIP awards increased their total LTIP award to 158% of the target award level. All LTIP awards consisted of 50% time-vested restricted stock awards and 50% performance-vested restricted stock units. STIP awards were additionally contingent on the Company maintaining an acceptable level of credit quality, a condition which was satisfied for 2023. As a result, STIP awards were paid in cash at as described in more detail below. Time-vested restricted stock awards will vest 33% on each of the first three anniversaries of the grant date, provided the NEO is employed on the vesting date. Performance-vested restricted stock units will vest 100% after three years, with the number of restricted stock units that vest dependent on performance against pre-established goals during the three-year performance period from 2024-2026, as well as continued employment. The performance measurement on these awards uses a two-step measurement process: 1.First, the Company’s Return on Average Assets (“ROAA”) is tracked against internal expectations that are communicated at the time of grant based on budgeted performance expectations at that time. 2.After determining the initial vesting amount based on the Company's performance relative to ROAA targets, the Company’s total shareholder return will be measured against an index of similarly-sized banks determined on the date of the award. The number of restricted stock units earned using the ROAA performance measures then will be adjusted upward or downward by up to 20% based on the Company’s total shareholder return performance against the index.
Role of Compensation Consultant
Role of Compensation Consultant Pursuant to its charter, the Company's Compensation Committee may, in its sole discretion, retain or obtain the advice and assistance of a compensation consultant, legal counsel or other adviser. The Compensation Committee may retain or obtain the advice of an adviser only after taking into consideration factors related to that person’s independence from management, including each of the factors it is required to take into consideration under the Corporate Governance Standards under NASDAQ Rule 5600, subject to limited exceptions. The Compensation Committee is responsible for the appointment, compensation, and oversight of any adviser it retains. The Company is obligated to provide appropriate funding for the compensation of any such adviser. For 2023, the Company, at the behest of the Compensation Committee, retained the services of Aon, which is an independent executive compensation consulting firm. In 2023, Aon did not provide any other services to the Company and worked with the Company’s executive management team only on matters for which the Compensation Committee is responsible. The Compensation Committee assessed the independence of Aon in 2023 pursuant to SEC and NASDAQ requirements and concluded that no conflict of interest exists that would prevent Aon from serving as an independent consultant to the Compensation Committee. The Compensation Committee periodically seeks input from Aon on a range of external market factors, including evolving compensation trends, appropriate peer group companies, and market survey data. Aon also provides general observations on the Company’s compensation programs, but it does not determine or recommend the amount or form of compensation for the NEOs.
Overview
| Element of Pay | Description | Purpose | | Base Salary | Fixed cash compensation | To attract and retain key executive talent by providing a stable source of compensation for services rendered during the fiscal year | | Short-Term Incentive Plan | Performance-based cash payment based on financial, operational, and strategic metrics | To motivate executive officers to achieve the Company’s annual strategic and financial goals and reward individual performance | | Long-Term Incentive Plan—Time-Vesting | Performance-based share awards with multi-year vesting periods; award sizes are based on financial metrics | To align long-term interests of executives and shareholders and provide appropriate balance of at-risk compensation that incentivizes long-term value creation and retention | | Long-Term Incentive Plan—Performance-Vesting | Restricted Stock Unit (RSU) grants with multi-year vesting and performance periods; RSUs vest based on achievement of specific financial metrics | To align long-term interests of executives and shareholders and provide appropriate balance of at-risk compensation that incentivizes executives to achieve long-term performance goals | | Deferred Compensation Plans | Include deferred compensation plans and salary continuation plans | To provide NEOs an economic incentive for long-term service to the Company | | Perquisites | Car allowances and/or club membership dues | To defray the NEOs’ expenses for recruitment or client entertainment and reduce the Company’s mileage reimbursement expense |
Benchmarking of Compensation Levels
Benchmarking of Compensation Levels In making compensation decisions for 2023, the Compensation Committee reviewed market data related to base salary, annual bonus and total compensation from the most recent public information available for the peer group identified in the table below. The Compensation Committee selected a peer group of banks which met the following basic criteria: •Commercial banks; •Having assets of approximately $2.2 billion to $6.0 billion at December 31, 2022, compared to the Company, which had approximately $2.9 billion in assets as of December 31, 2022; •Domiciled in the states of MD, NJ, NY, PA, and VA, but not headquartered in New York City or on Long Island; and •Having similar business models, including a commercial banking focus with a wealth and/or mortgage business. Applying these criteria resulted in the following 22 institutions, which the Compensation Committee determined to be most closely comparable to the Company:
Benchmarking of Compensation Levels
| ACNB Corporation | American National Bankshares, Inc. | Arrow Financial Corporation | | BCB Bancorp, Inc. | C&F Financial Corporation | Carter Bankshares, Inc. | | Chemung Financial Corporation | Citizens & Northern Corporation | City Holding Company | | CNB Financial Corporation | Codorus Valley Bancorp, Inc. | Evans Bancorp, Inc. | | Financial Institutions, Inc. | First Bank | First Community Bancshares, Inc. | | Mid Penn Bancorp, Inc. | Peapack-Gladstone Financial Corporation | Peoples Financial Services Corp. | | Primis Financial Corp. | Summit Financial Group, Inc. | The Community Financial Corporation | | TrustCo Bank Corp NY | | |
Benchmarking of Compensation Levels
The Company reviewed both the data from this peer group and other industry surveys. When comparing the Company and its peers, the Company did not use a formulaic approach to benchmarking compensation for individual job positions, due primarily to the lack of direct comparability among job functions and responsibilities, and individual experience.
Incentive Compensation
Incentive Compensation General Incentive awards link annual compensation to annual Company performance, and link the long-term compensatory interests of NEOs to the interests of shareholders in the long-term success and growth of the Company. Our incentive compensation program for 2023 provided cash opportunities through the STIP and equity opportunities through the LTIP, which provides for both time-vested restricted stock awards and performance-vested restricted stock units awards. Incentive compensation to our NEOs based on 2023 performance was targeted evenly between cash opportunities under the STIP and equity award opportunities under the LTIP, with actual awards in both programs initially earned based on our Net Income and ROAE performance in 2023. Awards under the STIP and LTIP are made early each year based on the Company’s performance in the previous year. Upon completion of each fiscal year, the Compensation Committee determines each NEO’s STIP award and LTIP award relative to corporate performance against the pre-established metrics and targets. For 2023, the Compensation Committee selected Net Income and ROAE as the financial metrics that determined initial award amounts for both STIP and LTIP awards. The Compensation Committee further selected ROAA and total shareholder return as the performance metrics to determine the vesting, if any, of the portion of LTIP awards that are subject to future performance vesting. These metrics were selected because the Compensation Committee considers them the most significant indicators of the Company’s financial performance. Objective Performance Evaluation Under both the STIP and the LTIP, each of the two objective performance goals of Net Income and ROAE represented 50% of each NEOs’ total target incentive payout between the two plans. The target performance for these goals equaled the Company’s budgeted Net Income and ROAE for 2023. Each NEO’s STIP award and initial LTIP award is targeted at a specified percentage of base salary based on the specific tier to which the officer is assigned. For 2023, Mr. Quinn was the only NEO in Tier 1; Messrs. Kalani, Metz, Coradi, and Holt were all in Tier 2. The following table represents the Net Income and ROAE targets for 2023 as approved by the Compensation Committee and the corresponding payout scale as a percentage of base salary.
Incentive Compensation
| | Net Income | | | Return on Average Equity | | | | | | Total Incentive Payout % of Base | | | Total Incentive Payout % of Base | | | | Performance Level | Tier 1 | Tier 2 | Performance | Tier 1 | Tier 2 | | | ($000) | (CEO) | (Other NEOs) | Level | (CEO) | (Other NEOs) | | Threshold | 33,500 | 25.0% | 20.0% | 13.8% | 25.0% | 20.0% | | Target | 36,500 | 50.0% | 40.0% | 15.0% | 50.0% | 40.0% | | Maximum | 39,500 | 75.0% | 60.0% | 16.2% | 75.0% | 60.0% |
Incentive Compensation
| 2023 Incentive Plan Performance | | | | | | | Dollars in thousands | Threshold | Target | Maximum | 2023 GAAP Results | 2023 Adjusted Results(1) | | Net Income | $33,500 | $36,500 | $39,500 | $35,663 | $36,643 | | Return on Average Equity | 13.80% | 15.00% | 16.20% | 14.66% | 15.06% |
Incentive Compensation
(1) Adjusted to exclude the impact of the merger-related expenses for the year ended December 31, 2023. Subjective Performance Evaluation If the Company’s performance is at or above threshold for a given performance goal, following the calculation of awards earned based on objective performance, the Compensation Committee has the ability to adjust STIP and/or LTIP awards upward or downward by up to 20% of the earned award. This adjustment potential is intended to provide the Compensation Committee with a flexible but limited tool to recognize company or individual performance results, whether positive or negative, outside of the two objective performance measures. The Compensation Committee has the flexibility to consider any factors it deems relevant to its adjustment of earned awards, including but not limited to growth, risk, compliance and technology factors, special projects or initiatives, and other factors. When discussing the Company's financial performance during 2023, the Compensation Committee noted the significant headwinds faced by banks during the year. These headwinds included, without limitation, continuing interest rate increases promulgated by the Federal Reserve, which resulted in additional net interest margin compression throughout the banking industry; the large bank failures in March and April of 2023, which resulted in extreme volatility in the prices of securities issued by financial institutions, industry-wide liquidity challenges, the flight of deposits to "too big to fail" depository institutions, and a general loss of investor and depositor confidence in the banking industry; and management's intense focus, particularly in the fourth quarter, on the merger of equals transaction with Codorus Valley Bancorp, Inc., which the Board of Directors believes will drive long-term growth in 2024 and forward and therefore enhance long-term shareholder value, but which negatively impacted 2023 financial results not only by increasing operating expenses but also by diverting management's time and attention, as well as the Company's resources, from initiatives which could otherwise have increased 2023 earnings. In light of these negative headwinds, the Compensation Committee believed that the Company’s financial performance in 2023 (particularly, the achievement of the highest net income in the Company's history) was indicative of an exceptional performance year. For these reasons, the Compensation Committee utilized the adjustment mechanism within the plan to adjust both STIP and LTIP awards upward by 20% of the earned award. In addition, the Compensation Committee made additional LTIP awards to each of our NEOs. For our CEO, CFO and Chief Risk Officer, each of whom played a significant role in the Company's efforts to sign the merger agreement with Codorus Valley Bancorp, Inc., the additional LTIP awards increased their total LTIP award to the top of the potential LTIP payout range. For our other NEOs, the additional LTIP awards increased their total LTIP award to 158% of the target award level. All LTIP awards consisted of 50% time-vested restricted stock awards and 50% performance-vested restricted stock units.
Short-Term Incentive Plan (STIP) Awards with Credit Quality Modifier
Short-Term Incentive Plan (STIP) Awards with Credit Quality Modifier STIP awards are paid in cash. Each NEO’s STIP award is targeted at a specified percentage of base salary based on the specific tier to which the officer is assigned, as described above. The base salary used in incentive calculations will generally be the NEO’s annualized salary rate as of the last day of the relevant fiscal year. In the case of a mid-year salary increase associated with a change in role, the Compensation Committee retains the discretion to pro-rate the salary used in the calculation based on the date of the salary increase. Any incentive awards under the STIP are contingent on the Company maintaining an acceptable level of credit quality, as defined by the ratio of non-performing assets to total assets. If the ratio of non-performing assets to total assets is greater than 2%, STIP awards will be reduced by 30%. If the ratio of non-performing assets to total assets is greater than 4%, STIP awards will be eliminated. For the year ended December 31, 2023, Adjusted Net Income was $36.6 million, compared to $36.5 million at target, and Adjusted ROAE was 15.06%, compared to 15.00% at target, resulting in cash awards payable, before any discretionary adjustment, under the STIP at the target of the performance range with respect to both performance metrics. As discussed above, the Compensation Committee determined that it was appropriate to adjust STIP awards upwards in light of the Company's financial performance against the significant headwinds faced by the Company in 2023. In addition, the Company’s non-performing assets to total assets ratio was less than 2%, so no credit-related downward modification was applied to the awards. The following table summarizes the STIP opportunities available, and actual payments made, to NEOs for 2023 performance.
Short-Term Incentive Plan (STIP) Awards with Credit Quality Modifier
| | % of Base Salary | | | Potential Payout Amounts ($) | | | Actual | | | Threshold | Target | Maximum | Threshold | Target | Maximum | Cash Incentive Award ($) | | Thomas R. Quinn, Jr. | 25% | 50% | 75% | 178,500 | 357,000 | 535,500 | 428,400 | | Neelesh Kalani | 20% | 40% | 60% | 66,300 | 132,600 | 198,900 | 159,120 | | Adam L. Metz | 20% | 40% | 60% | 60,288 | 120,577 | 180,865 | 144,692 | | Robert G. Coradi | 20% | 40% | 60% | 60,180 | 120,360 | 180,540 | 144,432 | | Christopher D. Holt | 20% | 40% | 60% | 71,007 | 142,015 | 213,022 | 170,418 |
Long-Term Incentive Plan (LTIP)
Long-Term Incentive Plan (LTIP) The Compensation Committee believes that equity awards under the LTIP effectively align the interests of executives with those of our shareholders by providing individuals who have responsibility for management and growth of the Company with an opportunity to increase their ownership of Company Common Stock, to have a meaningful interest in the future of the Company and sustained shareholder value creation and to receive compensation that varies based on multi-year performance. As discussed in the “Incentive Compensation” section above, the initial value of each NEO’s LTIP award is targeted at a specified percentage of base salary based on the specific tier to which the officer is assigned and is subsequently expressed as a number of shares of Company Common Stock valued on the date of grant. Fractional shares cannot be distributed. The base salary used in incentive calculations will generally be the NEO’s annualized salary rate as of the last day of the relevant fiscal year. In the case of a mid-year salary increase associated with a change in role, the Compensation Committee retains the discretion to pro-rate the salary used in the calculation based on the date of the salary increase. Awards initially earned under the LTIP based on performance against the plan’s Net Income and ROAE goals are granted early in the following year and consist of 50% time-vested restricted stock awards and 50% performance-vested restricted stock units. Time-Vested Restricted Stock Awards Time-vested restricted stock awards vest 33% in each of the first three years following the grant date, provided the NEO is employed on the vesting date. Performance-Vested Restricted Stock Units With Total Shareholder Return Modifier. Performance-vested restricted stock units vest 100% after three years, with the number of restricted stock units that vest dependent on the Company’s performance against pre-established goals during the performance period from beginning in the year of grant and ending following two additional fiscal years, as well as the NEO’s continued employment through the vesting date. The performance measurement on these awards uses a two-step measurement process, which considers the Company's performance against a ROAA goal, as well as the Company’s total shareholder return: 1.First, the Company’s ROAA is tracked against internal expectations that are communicated at the time of grant based on budgeted performance expectations at that time. 2.After determining the initial vesting amount based on the Company's performance relative to ROAA targets, the Company’s total shareholder return will be measured against an index of similarly-sized banks determined on the date of the award. The number of restricted stock units earned using the ROAA performance measures then will be adjusted upward or downward by up to 20% based on the Company’s total shareholder return performance against the index. The three-year ROAA goal has a defined threshold, target and maximum performance levels based on budgeted ROAA levels at the time the plan was established. We have elected not to disclose these performance levels until the conclusion of the applicable performance period for competitive reasons. The table below illustrates the payout relationships between threshold, target and maximum for the ROAA goal.
Long-Term Incentive Plan (LTIP)
| % of Target Payout | | | | Threshold Performance | Target Performance | Maximum Performance | | 50% | 100% | 200% |
Long-Term Incentive Plan (LTIP)
Performance between threshold and target or between target and maximum will result in interpolated vesting on a straight-line basis. If performance is below threshold, no restricted stock units will vest. Performance above maximum will result in vesting at maximum. After determining the initial vesting amount based on the Company's performance relative to ROAA targets, the Company’s total shareholder return will be measured against an index of 92 publicly-traded banks between $2 billion and $5 billion in total assets as of December 31, 2023. The number of restricted stock units earned using the ROAA performance measures then will be adjusted upward or downward by up to 20% based on the Company’s total shareholder return performance against the above referenced index. The following table illustrates the percentage of payout modified under the total shareholder return modifier for restricted stock units performance-vesting under the LTIP:
Long-Term Incentive Plan (LTIP)
| Three-Year Total Shareholder Return | | | Orrstown Total Shareholder Return Compared to Index 50th Percentile | Modifier | | Underperform the 50th by 20% or more | (20)% | | Perform at the 50th | —% | | Outperform the 50th by 20% or more | 20% |
Long-Term Incentive Plan (LTIP)
Unlike restricted stock awards, performance-vested restricted stock units are not eligible to vote or receive dividends until vested and settled into shares of Company Common Stock. The Compensation Committee views the bifurcation of a) the metrics to determine the grant of STIP awards and LTIP awards and b) the vesting metrics of the performance-vested restricted stock units as consistent with feedback from shareholders that they prefer incentive plans to consider a variety of performance measures and time horizons. Incentive awards link annual compensation to annual Company performance and link the compensatory interests of NEOs to the interests of shareholders in the long-term success and growth of the Company. Equity Awarded in 2024 for 2023 Performance For the year ended December 31, 2023, Adjusted Net Income was $36.6 million, compared to $36.5 million at target, and Adjusted ROAE was 15.06%, compared to 15.00% at target, resulting in equity awards payable, before any discretionary adjustment, under the LTIP at the target level of the performance range with respect to both performance metrics. As discussed above, the Compensation Committee determined it was appropriate to adjust LTIP awards upward by 20% of the earned award. In addition, the Compensation Committee made additional LTIP awards to each of our NEOs. For our CEO, CFO and Chief Risk Officer, the additional LTIP awards increased their total LTIP award to the top of the potential LTIP payout range. For our other NEOs, the additional LTIP awards increased their total LTIP award to 158% of the target award level. All LTIP awards granted in early 2024 consisted of 50% time-vested restricted stock awards and 50% performance-vested restricted stock units. The following table summarizes the equity awards made pursuant to the terms of the LTIP under the Company’s 2011 Stock Incentive Plan to NEOs in 2024 based on 2023 performance. In accordance with SEC reporting rules, these awards will be disclosed as 2024 compensation in the Summary Compensation Table of the Company’s 2025 proxy statement.
Long-Term Incentive Plan (LTIP)
| Name | Target Opportunity ($) | Payout as % of Target(1) | Total Value of Equity Incentive Award ($) | Time-Vested Restricted Stock Award(2)($) | Time-Vested Restricted Stock Award (#) | Performance-Vested Restricted Stock Unit Award(3)($) | Performance-Vested Restricted Stock Unit Award (#) | | Thomas R. Quinn, Jr. | 357,000 | 180% | 642,586 | 321,293 | 11,620 | 321,293 | 11,620 | | Neelesh Kalani | 132,600 | 180% | 238,675 | 119,337 | 4,316 | 119,337 | 4,316 | | Adam L. Metz | 120,577 | 158% | 189,900 | 94,950 | 3,434 | 94,950 | 3,434 | | Robert G. Coradi | 120,360 | 180% | 216,610 | 108,305 | 3,917 | 108,305 | 3,917 | | Christopher D. Holt | 142,015 | 158% | 223,633 | 111,817 | 4,044 | 111,817 | 4,044 |
Long-Term Incentive Plan (LTIP)
| (1) At December 31, 2023, the Company exceeded the Target after excluding the effects of the merger-related expenses, resulting in the Tier 1 NEO receiving 90% of his base salary and Tier 2 NEOs receiving between 63% to 72% of their base salaries, after giving effect to the discretionary increase made by the Compensation Committee. The Payout as a % of Target is calculated as the percentage of the Total Value of Equity Incentive Award divided by the percentage for Target Opportunity. | | (2) Granted on February 16, 2024. Restricted stock awards vest 33% on February 16, 2025, 2026 and 2027, provided the NEO is employed on the vesting date. | | (3) Granted on February 16, 2024. Restricted stock units vest on February 16, 2027 contingent on performance against pre-established goals during the three-year performance period (2024-2026) as well as continued service through the vesting date using the two-step measurement process described above. |
Long-Term Incentive Plan (LTIP)
As discussed earlier, the performance-vested restricted stock units are subject to future performance conditions on pre-established performance metrics, including an internal ROAA goal and the Company’s TSR compared to an index of 92 publicly-traded banks between $2 billion and $5 billion in assets as of December 31, 2023. Vesting of Equity Awarded in 2021 In 2021, we awarded performance-vested restricted stock units which vested on February 14, 2024 and were certified and distributed by March 31, 2024. Based on the three-year ROAA goal established at the time of grant and Company performance from 2021-2023, the awards vested at target.
2023 SUMMARY COMPENSATION TABLE
2023 SUMMARY COMPENSATION TABLE
2023 SUMMARY COMPENSATION TABLE
| Name and Principal Position | Year | Salary ($) | Cash Bonus ($) | Stock & RSU Awards ($)(1)(4) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(2) | All Other Compensation ($)(3) | Total ($) | | Thomas R. Quinn, Jr. | 2023 | 709,154 | — | 454,992 | — | 428,400 | 1,022,734 | 22,737 | 2,638,017 | | President and | 2022 | 694,681 | — | 365,121 | — | 455,000 | 992,095 | 19,801 | 2,526,698 | | Chief Executive Officer | 2021 | 552,448 | — | 159,604 | — | 365,110 | 875,735 | 14,160 | 1,967,057 | | Neelesh Kalani | 2023 | 329,250 | — | 178,752 | — | 159,120 | — | 9,309 | 676,431 | | Executive Vice President and | 2022 | 299,281 | — | 142,507 | — | 178,750 | — | 8,567 | 629,105 | | Chief Financial Officer | 2021 | 263,769 | — | 123,498 | — | 142,500 | — | 7,591 | 537,358 | | Adam L. Metz | 2023 | 299,396 | — | 162,552 | — | 144,692 | 85,372 | 24,817 | 716,829 | | Executive Vice President and | 2022 | 293,526 | — | 144,858 | — | 162,543 | 20,000 | 24,142 | 645,069 | | Chief Revenue Officer | 2021 | 284,961 | — | 82,330 | — | 144,870 | — | 21,088 | 533,249 | | Robert G. Coradi | 2023 | 298,858 | — | 162,240 | — | 144,432 | 135,062 | 12,530 | 753,122 | | Executive Vice President and | 2022 | 275,465 | — | 133,879 | — | 162,250 | 129,775 | 11,828 | 713,197 | | Chief Risk Officer | 2021 | 263,340 | — | 76,101 | — | 133,878 | 124,694 | 11,464 | 609,477 | | Christopher D. Holt | 2023 | 352,627 | — | 191,448 | — | 170,418 | 280,044 | 13,464 | 1,008,001 | | Executive Vice President and | 2022 | 345,713 | — | 170,618 | — | 191,441 | 266,215 | 13,372 | 987,359 | | Market President | 2021 | 335,625 | — | 96,968 | — | 170,626 | 231,724 | 12,712 | 847,655 |
2023 SUMMARY COMPENSATION TABLE
| (1) Stock and option awards are valued based on the aggregate grant date fair value of awards granted during the year computed for financial reporting purposes pursuant to FASB ASC Topic 718. There is no assurance the value realized by an executive officer will be at or near the value estimated by ASC Topic 718. The actual value, if any, an executive officer may realize will depend upon the excess of the stock price over the exercise price on the date the option is exercised or the value of stock awards when they vest. Please see the 2023 Outstanding Equity Awards at Fiscal Year-End Table below for more information regarding stock awards and options outstanding at December 31, 2023. | | (2) Represents the aggregate increase in the present value of the officer’s accumulated benefit under the salary continuation plan. | | (3) See 2023 All Other Compensation Table below. | | (4) Awards were issued in 2023 based on the Company’s performance in 2022, as described in the definitive proxy statement filed by the Company on March 31, 2023. |
2023 SUMMARY COMPENSATION TABLE
The compensation represented by the amounts set forth in the “All Other Compensation” column in the 2023 Summary Compensation Table is detailed in the following table.
Grants of Plan-Based Awards
Grants of Plan-Based Awards The following table sets forth information concerning plan-based awards made to the NEOs during the last fiscal year based on the Company's performance in 2022 as described in the definitive proxy statement filed by the Company on March 31, 2023.
2023 GRANT OF PLAN-BASED AWARDS TABLE
2023 GRANT OF PLAN-BASED AWARDS TABLE
2023 GRANT OF PLAN-BASED AWARDS TABLE
| | | Payouts under non-equity incentive plan awards | | | Estimated future payments under equity incentive plan awards | | | | | | Name | Grant date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | All other stock awards: number of shares of stock or units (#) | Grant date fair value of stock and option awards (4) ($) | | Thomas R. Quinn, Jr. | 2/10/2023 (1) | 181,997 | 454,992 | 1,091,981 | — | — | — | — | — | | | 2/10/2023 (2) | — | — | — | 3,792 | 9,479 | 22,750 | — | 227,496 | | | 2/10/2023 (3) | — | — | — | — | — | — | 9,479 | 227,496 | | Neelesh Kalani | 2/10/2023 (1) | 71,501 | 178,752 | 429,005 | — | — | — | — | — | | | 2/10/2023 (2) | — | — | — | 1,490 | 3,724 | 8,938 | — | 89,376 | | | 2/10/2023 (3) | — | — | — | — | — | — | 3,724 | 89,376 | | Adam L. Metz | 2/10/2023 (1) | 65,021 | 162,552 | 390,125 | — | — | — | — | — | | | 2/10/2023 (2) | — | — | — | 1,355 | 3,387 | 8,128 | — | 81,264 | | | 2/10/2023 (3) | — | — | — | — | — | — | 3,387 | 81,288 | | Robert G. Coradi | 2/10/2023 (1) | 64,896 | 162,240 | 389,376 | — | — | — | — | — | | | 2/10/2023 (2) | — | — | — | 1,352 | 3,380 | 8,112 | — | 81,120 | | | 2/10/2023 (3) | — | — | — | — | — | — | 3,380 | 81,120 | | Christopher D. Holt | 2/10/2023 (1) | 76,579 | 191,448 | 459,475 | — | — | — | — | — | | | 2/10/2023 (2) | — | — | — | 1,595 | 3,989 | 9,572 | — | 95,712 | | | 2/10/2023 (3) | — | — | — | — | — | — | 3,989 | 95,736 |
2023 GRANT OF PLAN-BASED AWARDS TABLE
| (1) These amounts illustrate the threshold, target, and maximum cash awards payable under the annual incentive compensation plan. Cash awards were paid out at between 130% and 138% of target. | | (2) Represents performance-vested restricted stock units which vest, if at all, three years from the date of the grant, subject to performance on pre-established ROAA and TSR goals. | | (3) Represents time-vested restricted stock awards which vest, if at all, 33% in each of the first three years following the grant date. | | (4) The fair value of the award is the fair value of the Company Common Stock on the date of grant ($24.00 per share) multiplied by the number of shares granted. |
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
| | Option Awards | | | Restricted Stock Awards / Units | | | | | Name | Number of Securities Underlying Unexercised Options (#) Exercisable (1) | Option Exercise Price ($) | Option Expiration Date | Number of shares or units of stock that have not vested (#) | Market value of shares or units of stock that have not vested ($) (2) | Equity incentive plan awards: number of unearned shares that have not vested (#) | Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested ($) (2) | | Thomas R. Quinn, Jr | — | — | — | 39,836 | 1,175,162 | 39,836 | 1,175,162 | | Neelesh Kalani | — | — | — | 17,876 | 527,342 | 13,876 | 409,342 | | Adam L. Metz | — | — | — | 16,094 | 474,773 | 16,094 | 474,773 | | Robert G. Coradi | — | — | — | 15,375 | 453,563 | 15,375 | 453,563 | | Christopher D. Holt | — | — | — | 18,955 | 559,173 | 18,955 | 559,173 |
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
| (1) There were no outstanding or exercisable options at December 31, 2023. | | (2) Calculated using the December 29, 2023 closing stock price of $29.50 per share. |
2023 OPTION EXERCISES AND STOCK VESTED TABLE
2023 OPTION EXERCISES AND STOCK VESTED TABLE
2023 OPTION EXERCISES AND STOCK VESTED TABLE
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (1) | | Thomas R. Quinn, Jr. | — | — | 14,432 | 347,378 | | Neelesh Kalani | — | — | 1,950 | 40,017 | | Adam L. Metz | — | — | 5,349 | 128,750 | | Robert G. Coradi | — | — | 4,943 | 118,978 | | Christopher D. Holt | — | — | 2,317 | 51,438 |
2023 OPTION EXERCISES AND STOCK VESTED TABLE
| (1) Calculated using the closing market price of the Company's Common Stock on the date of vesting. |
2023 PENSION BENEFITS TABLE
2023 PENSION BENEFITS TABLE
2023 PENSION BENEFITS TABLE
| Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | | Thomas R. Quinn, Jr. | Salary Continuation Agreement | 14 | 3,847,418 | — | | | Deferred Compensation Agreement | | 2,346,963 | — | | Adam L. Metz | Deferred Compensation Agreement | 7 | 105,372 | — | | Robert G. Coradi | Salary Continuation Agreement | 11 | 713,293 | — | | Christopher D. Holt | Deferred Compensation Agreement | 4 | 869,233 | — |
2023 PENSION BENEFITS TABLE
In this table: •The number of years of credited service equals the number of years of employment service. •The present value of accumulated benefits shown in the table above has been determined using the assumptions set forth in the audited consolidated financial statements for the year ended December 31, 2023. •No amounts were actually paid or provided to the NEOs during 2023.
Potential Payments Upon Termination or Change in Control
Potential Payments Upon Termination or Change in Control
PAY VERSUS PERFORMANCE
PAY VERSUS PERFORMANCE In accordance with rules adopted by the SEC pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Company provides the following disclosure regarding executive compensation for our principal executive officer (“PEO”) and Non-PEO NEOs and Company performance for the fiscal years listed below. The Compensation Committee did not consider the pay versus performance disclosure below in making its pay decisions for any of the years shown.
Pay Versus Performance Table
Pay Versus Performance Table
Pay Versus Performance Table
| Year | Summary Compensation on Table Total for PEO ($)(1) | Compensation Actually Paid to PEO ($)(1)(2) | Average Summary Compensation Table Total for Non-PEO NEOs ($)(1) | Average Compensation Actually Paid to Non-PEO NEOs ($)(1)(2) | Total Shareholder Return ($)(3) | Net Income ($)(4) | | 2023 | 2,638,016 | 2,903,210 | 788,596 | 898,562 | 192.85 | 35,663,000 | | 2022 | 2,526,698 | 2,451,820 | 743,683 | 714,211 | 107.39 | 22,037,000 | | 2021 | 1,967,057 | 2,225,978 | 631,930 | 722,902 | 113.34 | 32,881,000 |
Pay Versus Performance Table
(1) From 2021 to 2023, Mr. Quinn was the Company’s PEO and our remaining NEOs consisted of Messrs. Kalani, Coradi, Metz and Holt. (2) The amounts shown for Compensation Actually Paid have been calculated in accordance with Item 402(v) of Regulation S-K as applied to smaller reporting companies and do not reflect compensation actually earned, realized, or received by the Company’s NEOs. These amounts reflect the Summary Compensation Table Total with the following adjustments:
Pay Versus Performance Table
| Year | Summary Compensation Table Total for PEO ($) | Summary Compensation Table Value of Equity Awards ($) | Equity Award Adjustments($)(a) | Compensation Actually Paid to PEO ($) | | 2023 | 2,638,016 | (454,992) | 720,186 | 2,903,210 |
Pay Versus Performance Table
| Year | Average Reported Summary Compensation Table Total for Non-PEO NEOs ($) | Average Summary Compensation Table Value of Equity Awards for Non-PEO NEOs ($) | Equity Award Adjustments($)(a) | Average Compensation Actually Paid to Non-PEO NEOs ($) | | 2023 | 788,596 | (173,748) | 283,714 | 898,562 |
Pay Versus Performance Table
(a) The following table sets forth the adjustments made during each year represented in the Pay Versus Performance Table to arrive at compensation “actually paid” to our PEO and non-PEO NEOs during each of the years in question. Equity values are calculated in accordance with FASB ASC Topic 718.
Pay Versus Performance Table
| Year | Year End Fair Value of Equity Awards in the Year for PEO ($) | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years for PEO ($) | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year for PEO ($) | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year for PEO ($) | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year for PEO ($) | Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation for PEO ($) | Total Equity Award Adjustments for PEO ($) | | 2023 | 559,261 | 147,792 | — | 13,133 | — | — | 720,186 |
Pay Versus Performance Table
| Year | Average Year End Fair Value of Equity Awards for Non-PEO NEOs ($) | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years for Non-PEO NEOs ($) | Average Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year Non-PEO NEOs ($) | Year over Year Average Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year Non-PEO NEOs ($) | Average Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year Non-PEO NEOs ($) | Average Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation Non-PEO NEOs ($) | Total Equity Award Adjustments ($) | | 2023 | 213,565 | 68,608 | — | 1,541 | — | — | 283,714 |
Pay Versus Performance Table
(3) Represents the total shareholder return of an investment of $100 in Company Common Stock on December 31, 2021 through December 31, 2023, assuming the reinvestment of dividends on the date of payment without commissions (“Total Shareholder Return”). (4) Excluding the impact of the one-time expenses, Adjusted Net Income was $36.6 million and $34.8 million for the years ended December 31, 2023 and 2022, respectively. The graphs below display the relationship between compensation actually paid to the PEO and the average actual compensation paid to the non-PEO NEOs and the Company's total shareholder return and net income (on a GAAP and adjusted basis).
2023 PAY RATIO DISCLOSURE
2023 PAY RATIO DISCLOSURE
2023 PAY RATIO DISCLOSURE
| | 2023 | | Median annual compensation of all employees, excluding CEO | $62,896 | | Annual compensation of CEO | $2,638,017 | | Ratio of CEO total pay to median pay of all employees | 41.9x |