DEF 14A of Provident Financial Holdings Inc
Filed Oct 26, 2023 · FY20230000939057-23-000314
Vote Required to Approve Proposal 1: Election of Directors
Vote Required to Approve Proposal 1: Election of Directors Directors are elected by a plurality of the votes cast at the annual meeting by holders of Provident common stock. Accordingly, the three nominees for election as directors who receive the highest number of votes actually cast will be elected. Pursuant to our Certificate of Incorporation, shareholders are not permitted to cumulate their votes for the election of directors. Votes may be cast for or withheld from each nominee. Votes that are withheld and broker non-votes will have no effect on the outcome of the election because the three nominees receiving the greatest number of votes will be elected. Our Board of Directors unanimously recommends that you vote FOR the election of each of its director nominees.
PROPOSAL 1 – ELECTION OF DIRECTORS
PROPOSAL 1 – ELECTION OF DIRECTORS Our Board of Directors currently consists of seven members and is divided into three classes. Approximately one-third of the directors are elected annually to serve for a three-year period or until their respective successors are elected and qualified. Roy H. Taylor will retire effective as of the annual meeting and Brian N. Hawley has been nominated to fill the vacancy created by Mr. Taylor’s retirement. Mr. Hawley was recommended for appointment by non-management directors. Bruce W. Bennett has notified the Board of his intention to retire early, effective as of the annual meeting, and Matthew E. Webb has been nominated to fill the vacancy created by Mr. Bennett’s retirement. Mr. Webb was recommended for appointment by non-management directors. The Nominating Committee has nominated Craig G. Blunden and Brian Hawley for election to three-year terms, and Matthew E. Webb for election to a two-year term. The table below sets forth information regarding each director of Provident and each nominee for director. The Nominating Committee of the Board of Directors selects nominees for election as directors. Each nominee has consented to being named in this Proxy Statement and has agreed to serve if elected. If a nominee is unable to stand for election, the Board of Directors may either reduce the number of directors to be elected or select a substitute nominee. If a substitute nominee is selected, the proxy holders will vote your shares for the substitute nominee, unless you have withheld authority. At this time, we are not aware of any reason why a nominee might be unable to serve if elected. The Board of Directors recommends a vote FOR the election of Craig G. Blunden and Brian N. Hawley, each for a term of three years, and Matthew E. Webb for a term of two years.
PROPOSAL 1 – ELECTION OF DIRECTORS
| | Age as of | Year First Elected | Term to | | Name | June 30, 2023 | Director (1) | Expire | | BOARD NOMINEES | | | | | Craig G. Blunden | 75 | 1975 | 2026 (2) | | Brian N. Hawley | 55 | -- | 2026 (2) | | Matthew E. Webb | 64 | -- | 2025 (2) | | DIRECTORS CONTINUING IN OFFICE | | | | | Judy A. Carpenter | 66 | 2012 | 2024 | | William E. Thomas | 74 | 1997 | 2024 | | Debbi H. Guthrie | 72 | 1994 | 2025 | | Kathy M. Michalak | 68 | 2021 | 2025 | | ______________ | | | |
PROPOSAL 1 – ELECTION OF DIRECTORS
| (1) For years prior to 1996, includes prior service on the Board of Directors of Provident Savings Bank. |
PROPOSAL 1 – ELECTION OF DIRECTORS
| (2) Assuming election or reelection. |
PROPOSAL 1 – ELECTION OF DIRECTORS
Set forth below is the principal occupation of each nominee for director and each director continuing in office, as well as a brief description of the qualifications, attributes, skills and areas of expertise of each nominee or director that makes the director uniquely qualified to serve on Provident’s Board of Directors. All nominees and directors have held their present positions for at least five years unless otherwise indicated. Craig G. Blunden has been associated with Provident Savings Bank since 1974, currently serving as Chairman and Chief Executive Officer of the Bank and Provident, positions he has held since 1991 and 1996, respectively. Effective as of January 1, 2024, Mr. Blunden will no longer serve as Chief Executive Officer, becoming non-executive Chairman. He served as President of the Bank from 1991 until June 2011 and as President of Provident from its formation in 1996 until June 2011. Mr. Blunden also serves on the Board of Directors of the Western Bankers Association. Mr. Blunden has gained invaluable banking expertise in all areas of banking from his years of service in the financial services industry. Brian N. Hawley is the founder and Chief Executive Officer of Luminex Software, Inc. Founded in Riverside, California in 1994, Luminex develops unique data storage products to tackle the complex challenges of storing, archiving, distributing, and protecting data for many of the Fortune 500, including major financial and securities institutions around the world. Mr. Hawley graduated from the University of California – Riverside with a Bachelors and Masters of Science in Computer Science. He is an active member of the Riverside community, having served as the Chairman of the University of California – Riverside Foundation, President of the Monday Morning Group, Chairman of the Greater Riverside Chambers of Commerce, and President of the Riverside Fox Theater Foundation. Currently, he is the Chairman of the Riverside ExCITE Technology Incubator, is the Treasurer for the Science Technology Education Partnership, and remains active in many of the community organizations he has led. During his leadership and service to these, and other organizations, Mr. Hawley has served on numerous governance committees and boards while acquiring a deep understanding of the community. As a successful serial entrepreneur and business owner, he has a broad range of business experience. Mr. Hawley brings a unique knowledge of the evolving challenges and solutions facing information technology and infrastructure, particularly in the financial and securities industries. Matthew E. Webb has been the President and Chief Executive Officer and a director of Albert A. Webb Associates since 1999. Albert A. Webb Associates provides multi-discipline consulting expertise to a wide array of clients including cities, water and special districts, counties, regional agencies, and commercial/industrial and residential developers. Mr. Webb graduated from Stanford University with a Bachelors and Masters of Science in Civil Engineering. He holds triple registrations and/or licenses in civil engineering, traffic engineering, and land surveying in the state of California. He is also a registered civil engineer in Arizona, Nevada, Colorado, and Hawaii. Mr. Webb is an active member of the Riverside community. He currently serves as a director of the Monday Morning Group and serves on several boards, including Riverside Community Hospital Board, the Greater Riverside Chambers of Commerce Board, and the Riverside Unified School District Foundation Board. He formerly served as Chairman of the Inland Empire American Heart Association and is a former member of both the County of Riverside and City of Riverside General Plan Advisory Committees. Mr. Webb remains active in many of the community organizations he has led. During his leadership and service to these and other organizations, Mr. Webb has served on numerous governance committees and boards while acquiring a deep understanding of the community. As an advocate for the Inland Empire, Mr. Webb spends much of his time representing the citizens of our region on a variety of issues related to transportation, the environment, planning and civil engineering before local, state, and national representatives. He brings a unique knowledge of the evolving challenges and solutions facing the ongoing growth and development of the Inland Empire. Judy A. Carpenter is the head of medical network operations for Akido Labs and oversees all operations for Akido’s clinical enterprise. Prior to May 2023 she was a healthcare consultant. She also served as the President and Chief Operating Officer for Riverside Medical Clinic, the largest physician-owned medical group in the Inland Empire, from 1999 to 2022. Ms. Carpenter is a graduate of California State Polytechnic University-Pomona in Business Administration with a major in Accounting, and is a Certified Public Accountant (inactive). Ms. Carpenter has over 40 years of healthcare industry experience, beginning with her career in public accounting and with Riverside Medical Clinic. Active in the community, she is a member of the Monday Morning Group and the Greater Riverside Chambers of Commerce. In addition, she is Past Chairman for the Greater Riverside Chambers of Commerce. She currently serves on the boards for the Janet Goeske Foundation, Riverside University Health Foundation and Parkview Legacy Foundation. Ms. Carpenter currently serves on our Audit Committee and Nominating and Corporate Governance Committee. Ms. Carpenter is uniquely qualified to serve on our Board of Directors with extensive business knowledge, financial expertise and unparalleled familiarity with our local markets and communities. William E. Thomas is the Executive Vice President and General Counsel of The KPC Group (and its affiliates), which own and/or manage a diversified portfolio of hospitals, medical groups and healthcare management companies in Southern California. Prior to joining The KPC Group in 1998, Mr. Thomas was the founding and managing partner of a private law firm in Riverside, California. He currently serves as Chairman of our Long Range Planning Committee and Nominating and Corporate Governance Committee, and serves on our Personnel/Compensation Committee. As a practicing attorney, Mr. Thomas has advised boards of directors on corporate governance, mergers and acquisitions and regulatory matters, providing the Board with a unique understanding of a broad range of legal and regulatory responsibilities. Debbi H. Guthrie currently manages all accounting and property management for her family’s real estate holdings and developments in Arizona, California, Idaho and Utah. She retired in late 2016 from her position as Executive Vice President and Chief Communications Officer of Raincross Hospitality Corporation, a company contracted by the City of Riverside to manage and operate the Riverside Convention Center, Riverside Convention & Visitors Bureau and the Riverside Sports Commission. Prior to her position there, she was the President/Chief Financial Officer and Responsible Managing Officer of Roy O. Huffman Roof Company with which she was associated from 1971 until she sold the company in 2004. Ms. Guthrie continues to be actively involved in leadership positions in multiple community organizations in Inland Southern California. Ms. Guthrie serves on our Audit Committee and Nominating and Corporate Governance Committee. As an effective community leader, successful business owner and highly efficient manager, she has a broad range of experience that has resulted in her unique knowledge of the financial needs of businesses and homeowners in the markets and communities we serve.
PROPOSAL 1 – ELECTION OF DIRECTORS
Kathy M. Michalak served as Executive Director of Habitat for Humanity Riverside, a non-profit that builds and repairs homes for those in need, from April 2014 until her retirement on July 1, 2022. From June 2010 to April 2014, she was the Construction Supervisor for Habitat for Humanity Riverside. Prior to that, she worked for 35 years in the newspaper industry, holding positions in circulation, sales and marketing. Ms. Michalak is a member of the Board of Directors of Riverside Philharmonic and a member of the Board of Directors and Vice Chair of Marketing and Membership of the Greater Riverside Chambers of Commerce. She is also a member of the Grants Committee of the Community Foundation of Riverside and San Bernardino Counties and a member of Soroptimist International of Riverside, and previously served as the Commissioner of the Community Action Partnership of Riverside County. Ms. Michalak serves on our Audit Committee and Nominating and Corporate Governance Committee. Ms. Michalak brings a unique perspective to Provident’s Board of Directors based on her knowledge of affordable housing in Provident’s market area, as well as her proven leadership skills and extensive community involvement.
Board Diversity
Board Diversity As part of its director nominee evaluation process, the Board considers diverse viewpoints, backgrounds and experiences, as well as gender, age, race and ethnicity, as important in the selection of directors to enhance the Board’s diversity. The table below presents a summary of the Board’s diversity statistics, as required by Nasdaq. Each of the categories listed in the table below has the meaning as it is used in Nasdaq Rule 5605(f).
Board Diversity
| Board Diversity Matrix (As of October 12, 2023) | | | | | | Total Number of Directors | 7 | | | | | Part I: Gender Identity | Female | Male | Non-binary | Did Not Disclose Gender | | Directors | 3 | 4 | -- | -- | | Part II: Demographic Background | | | | | | Hispanic or Latinx | -- | 1 | -- | -- | | White | 3 | 3 | -- | -- | | Two or More Races or Ethnicities | -- | 1 | -- | -- | | LGBTQ+ | 1 | | | | | Did Not Disclose Demographic Background | 1 | | | | | Directors with Disabilities | 1 | | | |
BOARD OF DIRECTORS’ MEETINGS, BOARD COMMITTEES
BOARD OF DIRECTORS’ MEETINGS, BOARD COMMITTEES
AND CORPORATE GOVERNANCE MATTERS
AND CORPORATE GOVERNANCE MATTERS
Board of Directors
Board of Directors The Boards of Directors of Provident and Provident Savings Bank conduct their business through board and committee meetings. During the fiscal year ended June 30, 2023, the Provident Board of Directors held 11 meetings and the Bank Board of Directors held 11 meetings. No director attended fewer than 82% of the total meetings of the boards and committees on which that person served during this period.
DIRECTORS’ COMPENSATION
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Option Awards ($)(1) | All Other Compensation ($)(2) | Total ($) | | Bruce W. Bennett | 37,600 | -- | 10,400 | 337 | 48,337 | | Judy A. Carpenter | 37,900 | -- | 10,400 | -- | 48,300 | | Debbi H. Guthrie | 37,600 | -- | 10,400 | 9,506 | 57,506 | | Kathy M. Michalak | 37,200 | -- | 10,400 | -- | 47,600 | | Roy H. Taylor | 37,500 | -- | 10,400 | 8,876 | 56,776 | | William E. Thomas | 37,600 | -- | 10,400 | -- | 48,000 | | ___________ | | | | | |
Compensation Discussion and Analysis
| • | to attract and retain key executives who are highly qualified and are vital to the long-term success of Provident and its subsidiaries; |
Compensation Discussion and Analysis
| • | to align the interests of executives with shareholders by having a significant portion of total compensation based on meeting defined performance measures; |
Compensation Discussion and Analysis
| • | to motivate executives to enhance long-term shareholder value by helping them build their own ownership in Provident; and |
Compensation Discussion and Analysis
| • | to integrate the compensation program with the Bank’s long-term strategic planning and management process. |
Compensation Discussion and Analysis
| • | annual incentive compensation; and |
Compensation Discussion and Analysis
| • | long-term equity-based compensation. |
Compensation Discussion and Analysis
We adopted a clawback policy which reserves the right of the Board to modify any incentive compensation agreement before the final bonus amount is determined. Additionally, we may seek to recover incentive compensation paid if any of the following are discovered: (1) unreasonable risk-taking by the employee, (2) risk-taking by the employee not specifically approved by the Chief Executive Officer or the Board, (c) actions or omissions by the employee in conflict with our policies and procedures, or (d) in the event our financial statements are subject to restatement due to misconduct, to the extent permitted by governing law. Equity-based Compensation. Equity-based compensation is intended to attract and retain qualified personnel and nonemployee directors, to provide these persons with a proprietary interest in Provident as an incentive to contribute to our success and to reward personnel for outstanding performance. Equity-based compensation functions as a long-term incentive because awards are generally made with a multiple-year vesting schedule. Awards are made either in the form of stock options or restricted stock. The equity-based plans are administered and interpreted by the Personnel/Compensation Committee of the Provident Savings Bank Board of Directors. Under the plans, the Committee determines which officers and key employees will receive awards, the number of shares subject to each option or shares of restricted stock awarded, and the vesting of the awards. The per share exercise price of an option will equal at least 100% of the fair market value of a share of common stock on the date the option is granted. Awards are made at the discretion of the Committee and approved by the Board of Directors. In addition, newly hired employees may receive awards at the time of their employment. In determining whether to make option or restricted stock awards, the Personnel/Compensation Committee may take into account historical awards and then-current competitive conditions.
Summary Compensation Table
Summary Compensation Table The following table shows information regarding compensation earned by our named executive officers, who are: (1) Craig G. Blunden, our principal executive officer; and (2) Donavon P. Ternes and David S. Weiant, our two next most highly compensated executive officers.
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Stock Awards ($)(1) | Option Awards ($) | Non-equity Incentive Plan Compensa- tion ($) | Change in Pension Value and Non- qualified Deferred Compensa- tion Earnings ($) | All Other Compensa- tion ($)(2)(3) | Total ($) | | Craig G. Blunden | 2023 | 540,742 | 97,125 | -- | 280,748 | (4) | 32,439 | 951,054 | | Chairman and Chief | 2022 | 529,783 | -- | -- | -- | (4) | 31,855 | 561,638 | | Executive Officer | | | | | | | | | | Donavon P. Ternes | 2023 | 388,653 | 97,125 | -- | 201,939 | (4) | 34,796 | 722,513 | | President, Chief Operating | 2022 | 373,782 | -- | -- | -- | (4) | 33,725 | 407,507 | | Officer, Chief Financial | | | | | | | | | | Officer and Secretary | | | | | | | | | | David S. Weiant | 2023 | 275,703 | 43,383 | -- | 64,429 | -- | 34,320 | 417,835 | | Senior Vice President - | 2022 | 265,960 | -- | -- | -- | -- | 34,135 | 300,095 | | Chief Lending Officer | | | | | | | | |
Summary Compensation Table
| (1)` | Represents the aggregate grant date fair value of awards, computed in accordance with FASB ASC Topic 718. For a discussion of valuation assumptions, see Note 11 of the Notes to Consolidated Financial Statements in Provident’s Annual Report on Form 10-K for the year ended June 30, 2023. | | (2) | Please see the table below for more information on the other compensation paid to our named executive officers in the year ended June 30, 2023. | | (3) | Provident Savings Bank may provide certain non-cash perquisites and personal benefits to the named executive officers that do not exceed $10,000 in the aggregate for any individual that are not included. | | (4) | The value of Mr. Blunden’s and Mr. Ternes’ post retirement compensation agreement decreased by $440,415 and $687,771, respectively, in fiscal 2023 and by $129,047 and $25,268, respectively, in fiscal 2022. |
Summary Compensation Table
All Other Compensation. The following table sets forth details of “All Other Compensation,” as presented above in the Summary Compensation Table.
Summary Compensation Table
| Name | 401(k) Matching Contribution ($) | ESOP Contribution ($) | Personal Use of Company Car/ Car Allowance ($) | Tax Preparation ($) | | Craig G. Blunden | 8,979 | 19,148 | 3,512 | 800 | | Donavon P. Ternes | 9,648 | 19,148 | 6,000 | -- | | David S. Weiant | 8,286 | 17,034 | 9,000 | -- |
Summary Compensation Table
Employment Agreement. Provident Savings Bank entered into an employment agreement with Mr. Blunden in December 2005 that was extended for one year on July 28, 2022. The agreement has a term of three years and may be renewed by the Board for an additional year each year unless the Bank or Mr. Blunden has given written notice of their intention not to extend the term of the agreement at least 90 days prior to the anniversary date. Mr. Blunden’s current base salary under the agreement is $552,000 and is subject to annual review and approval by the Board. Mr. Blunden may also receive performance-based or discretionary bonuses, as authorized by the Board. Under the agreement, Mr. Blunden is eligible to participate in all benefit programs to the same extent as employees of the Bank as well as any program made available to senior executives of the Bank, including the use of an employer-provided automobile. The agreement also provides for the reimbursement of expenses incurred by Mr. Blunden in the course of his employment. The agreement provides that compensation may be paid in the event of disability, death, involuntary termination or a change in control, as described below under “Potential Payments Upon Termination.” Provident and Provident Savings Bank intend to enter into a Transition Agreement with Mr. Blunden in connection with his transition from serving as Chief Executive Officer to becoming non-executive Chairman of the Board of Directors of both Provident and Provident Savings Bank, effective January 1, 2024. As of January 1, 2024, Mr. Blunden’s employment agreement with respect to his employment as Chief Executive Officer will terminate and he will be entitled to no further payments under that agreement. For his services as non-executive Chairman of Provident, Mr. Blunden will receive a $3,700 monthly retainer. He will not be compensated for performing services as non-executive Chairman of the Bank, but will be compensated for his committee member services. During the transition agreement term, Mr. Blunden will be reimbursed for reasonable and customary expenses incurred in connection with serving as non-executive Chairman, including monthly club dues, the business portion of his monthly club expenses, approved business travel to conferences and approved industry memberships. During the term he also will be eligible to participate in any benefit, fringe benefit, and equity compensation plan available to directors generally, but will be personally responsible for paying his and his family’s medical, dental, life, tax preparation fees and costs. He also will have use of an automobile and office space, each as appropriate considering his position as non-executive Chairman. In addition, the Bank will transfer to Mr. Blunden Provident’s membership interest in a country club, which has an estimated value of $5,000. Severance Agreements. We extended the existing change in control severance agreements with Mr. Ternes and Mr. Weiant effective as of March 1, 2023. The agreements have a term of one year, which may be extended for an additional year on the anniversary of the effective date of the agreement by the Board of Directors. The agreements provide for compensation in the event of an involuntary termination, other than for cause, within 12 months following a change in control of Provident or Provident Savings Bank, as described under “Potential Payments Upon Termination.” Clawback Provision. Mr. Blunden’s employment agreement and the severance agreements with Mr. Ternes and Mr. Weiant provide for the clawback of incentive payments, as described above under “Compensation Discussion and Analysis – Compensation Program Elements – Annual Incentive Compensation.”
Grants of Plan-Based Awards
Grants of Plan-Based Awards The following table shows information regarding grants of plan-based awards made to our named executive officers for the fiscal year ended June 30, 2023.
Grants of Plan-Based Awards
| Name | Estimated Possible Payouts Under the Non-Equity Incentive Plan Awards (1) | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(2) | All Other Option Awards: Number of Securities Underlying Options (#)(3) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) | | | Threshold ($) | Target ($) | Maximum ($) | | | | | | Craig G. Blunden | 108,240 | 270,600 | 507,375 | 7,500 | -- | -- | 97,125 | | Donavon P. Ternes | 77,856 | 194,640 | 364,950 | 7,500 | -- | -- | 97,125 | | David S. Weiant | 27,600 | 69,000 | 129,375 | 3,350 | -- | -- | 43,383 |
Grants of Plan-Based Awards
____________
Grants of Plan-Based Awards
| (1) Amounts represent the possible payouts under our annual incentive plan. |
Grants of Plan-Based Awards
| (2) Reflects award of restricted stock on August 12, 2022 under the Provident 2013 Equity Incentive Plan, 50% of which vest on August 12, 2024 and August 12, 2026, respectively. |
Grants of Plan-Based Awards
| (3) No option awards were granted for the fiscal year ended June 30, 2023. |
Outstanding Equity Awards
Outstanding Equity Awards The following information with respect to outstanding equity awards as of June 30, 2023 is presented for the named executive officers.
Outstanding Equity Awards
| | | Option Awards (1) | | | | Stock Awards (1) | | | Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expir- ation Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | | Craig G. Blunden | 09/30/14 | 43,000 | -- | 14.59 | 09/30/24 | -- | -- | | | 08/12/22 | -- | -- | -- | -- | 7,500 | 95,625 | | Donavon P. Ternes | 09/30/14 | 40,000 | -- | 14.59 | 09/30/24 | -- | -- | | | 08/12/22 | -- | -- | -- | -- | 7,500 | 95,625 | | David S. Weiant | 09/30/14 | 17,500 | -- | 14.59 | 09/30/24 | -- | -- | | | 08/12/22 | -- | -- | -- | -- | 3,350 | 42,713 | | ____________ | | | | | | | |
Outstanding Equity Awards
| (1) Awards have a cliff vesting schedule of four years, with 50% vesting two years from the grant date and 50% vesting four years from the grant date. |
Outstanding Equity Awards
| (2) Based on the closing market price of $12.75 per share of Provident’s common stock on June 30, 2023. |
Options Exercised and Stock Vested
Options Exercised and Stock Vested The following table shows the value realized upon exercise of stock options and vesting of stock awards for our named executive officers in the fiscal year ended June 30, 2023.
Options Exercised and Stock Vested
| | Option Awards | | Stock Awards | | | | Number of Shares | Value | Number of Shares | Value | | | Acquired on | Realized on | Acquired on | Realized on | | Name | Exercise (#) | Exercise ($) | Vesting (#) | Vesting ($) | | Craig G. Blunden | -- | -- | 15,000 | 178,050 | | Donavon P. Ternes | -- | -- | 15,000 | 178,050 | | David S. Weiant | -- | -- | 6,750 | 80,123 |
Pension Benefits
Pension Benefits The following information is presented with respect to the nature and value of pension benefits for the named executive officers at June 30, 2023.
Pension Benefits
| Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | | Craig G. Blunden | Post-Retirement Compensation Agreement | (1) | 2,702,373 | -- | | Donavon P. Ternes | Post-Retirement Compensation Agreement | (1) | 3,001,288 | -- | | David S. Weiant | -- | -- | -- | -- |
Pension Benefits
____________
Pension Benefits
| (1) Number of years of credited service is not relevant. Benefit is calculated based on whether the executive has reached age 62 at the time of retirement, or how many months remain until his 62nd birthday. |
Pension Benefits
Provident Savings Bank has entered into post-retirement compensation agreements with Messrs. Blunden and Ternes. The agreements provide that if the executive terminates employment with the Bank after attaining age 62, the Bank will provide the executive with a monthly benefit for life equal to 50% of his final average monthly salary. The agreement also provides for early retirement benefits and payments in the event of the executive’s death or disability. These payments are described below under “Potential Payments Upon Termination.”
Potential Payments Upon Termination
Potential Payments Upon Termination We have entered into agreements with the named executive officers that provide for potential payments upon disability, termination, retirement and death. In addition, our equity plans also provide for potential payments upon termination. The following table shows, as of June 30, 2023, the value of potential payments and benefits following a termination of employment under a variety of scenarios.
Potential Payments Upon Termination
| | Death ($) | Disability ($) | Involuntary Termination ($) | Change in Control ($) | Early Retirement ($) | Normal Retirement ($) | | Craig G. Blunden | | | | | | | | Employment Agreement (1) | -- | 214,063 | 1,093,830 | 2,355,418 | -- | 214,063 | | Post-Retirement Compensation Agreement (2) | 22,788 | 22,788 | 22,788 | 22,788 | -- | 22,788 | | Equity Plans (3) | 95,625 | 95,625 | -- | 95,625 | -- | -- | | Donavon P. Ternes | | | | | | | | Severance Agreement (1) | -- | -- | 1,260,951 | 1,260,951 | -- | -- | | Post-Retirement Compensation Agreement (2) | 16,027 | 16,027 | 16,027 | 16,027 | -- | 16,027 | | Equity Plans (3) | 95,625 | 95,625 | -- | 95,625 | -- | -- | | David S. Weiant | | | | | | | | Severance Agreement (1) | -- | -- | 726,731 | 726,731 | -- | -- | | Equity Plans (3) | 42,713 | 42,713 | -- | 42,713 | -- | -- |
Potential Payments Upon Termination
___________
Potential Payments Upon Termination
| (1) Includes cash severance and the estimated value of continued insurance benefits. Does not reflect the impact of any deferrals in the payment of the cash severance to preserve the deductibility of such severance under Section 162(m) of the Internal Revenue Code, with interest equal to 8% per annum to be paid on the amounts deferred as described below. The payments and benefits to Mr. Blunden in the event of a change in control will be reduced by the minimum amount necessary so that they do not trigger the 20% excise tax imposed by Sections 280G and 4999 of the Internal Revenue Code. Any required reduction is not reflected in the above table. If the timing of the change in control permitted tax planning to be done, we believe that the amount of any cutbacks that may be triggered in the future could be reduced or even eliminated. |
Potential Payments Upon Termination
| (2) Represents the monthly benefit to the executive or his spouse for life. The lifetime benefits will be discounted to present value and paid in a lump sum. |
Potential Payments Upon Termination
| (3) Represents the value of unvested restricted stock awards held by the executive based on the June 30, 2023 closing price of $12.75 per share. |
Potential Payments Upon Termination
Employment Agreement. Mr. Blunden’s employment agreement provides for potential payments in the event of his disability, death or termination. If Mr. Blunden becomes entitled to benefits under the terms of the then-current disability plan, if any, of Provident Savings Bank or becomes otherwise unable to fulfill his duties under his employment agreement, he shall be entitled to receive such group and other disability benefits as are then provided by the Bank for executive employees. In the event of his disability, the employment agreement will not be suspended, except that payments of salary and bonus will be discontinued for as long as Mr. Blunden is disabled. In the event of Mr. Blunden’s death or disability while employed under the employment agreement and prior to any termination of employment, the Bank shall pay to him or his estate, or such person as he may have previously designated, the salary which was not previously paid to him and which he would have earned if he had continued to be employed under the agreement through the last day of the calendar month in which he died or become disabled, together with the benefits provided under the employment agreement through that date. In the event of Mr. Blunden’s death or disability, or in the event of his normal retirement, the Bank shall continue to provide the following benefits to him or his estate, as applicable: (1) the Bank shall continue in force, without cost to Mr. Blunden, those life and accidental death and dismemberment insurance coverages being provided by the Bank to Mr. Blunden and his spouse and his eligible dependents as of the date of such termination; (2) the Bank shall continue to provide to Mr. Blunden and his eligible dependents medical insurance coverage equivalent in benefits, duration and terms to that provided to him and such persons as of the date of such termination; and (3) the Bank shall continue to reimburse Mr. Blunden for the expenses outlined in Section 4(c) of his employment agreement, which includes club dues. The employment agreement also provides for benefits in the event of Mr. Blunden’s involuntary termination. If Mr. Blunden’s employment is terminated for any reason other than cause, death, permanent disability, retirement or change in control, or Mr. Blunden terminates his own employment because of a material diminution of or interference with his duties, responsibilities or benefits, he is entitled to payment and benefits. Specifically, the Bank must make a lump sum payment equal to the discounted present value of the aggregate future base salary payments Mr. Blunden would have received over the then remaining term of the agreement. If Mr. Blunden’s employment is terminated within 12 months following a change in control of Provident, or he terminates his own employment within 12 months following a change in control for any of the reasons listed in the previous paragraph, the Bank must pay him a lump sum equal to 299% of his base amount (as defined in Section 280G of the Internal Revenue Code) and must provide during the remaining term of the employment agreement substantially the same group life insurance, hospitalization, medical, dental, prescription drug and other health benefits, and long-term disability insurance (if any) for the benefit of Mr. Blunden and his dependents and beneficiaries who would have been eligible for such benefits if he had not suffered involuntary termination. However, if the value of the lump sum and benefits described in the preceding sentence exceeds the amount that could be paid without violating Section 280G (pertaining to golden parachute payments), taking into account other payments due Mr. Blunden in connection with a change in control and other amounts counted against the Section 280G limit, then the value of such lump sum and benefits may be reduced so that Section 280G is not violated. Mr. Blunden’s employment agreement provides that if Mr. Blunden’s aggregate compensation from the Bank exceeds the maximum amount of compensation deductible by the Bank in any calendar year under Section 162(m) of the Internal Revenue Code (the “maximum allowable amount”), then any such amount in excess of the maximum allowable amount will be deferred with interest on the deferred amount at 8% annually to a calendar year such that the amount to be paid to Mr. Blunden in that year does not exceed the maximum allowable amount. Deferred amounts, including interest, will be paid at the earliest time permissible. Severance Agreements. We extended the existing change in control severance agreements with Mr. Ternes and Mr. Weiant effective as of March 1, 2023. The agreements have a term of one year, which may be extended for an additional year on the anniversary of the effective date of the agreement by the Board of Directors. If the employment of the executive is involuntarily terminated, other than for cause, within 12 months following a change in control of Provident or Provident Savings Bank, or the executive terminates his or her own employment within 12 months following a change in control because of any demotion, loss of title, office or significant authority, reduction in the executive’s annual compensation or benefits, or relocation of the executive’s principal place of employment more than 35 miles from the pre-change in control location, the executive would be entitled to payment and benefits. The agreements provide that the Bank must pay a lump sum payment equal to two times the executive’s then current base salary and a lump sum payment equal to two times the largest annual bonus paid to the executive during the two years prior to termination of employment. The Bank or its successor also would be obligated to continue the executive’s life, medical, dental and disability coverage for a two-year period following termination of employment. Post-Retirement Compensation Agreement. Provident Savings Bank entered into a post-retirement compensation agreement with Mr. Blunden, which was amended on December 15, 2005, and a post-retirement compensation agreement with Mr. Ternes as of July 7, 2009. The agreements provide that if Mr. Blunden and Mr. Ternes terminate employment with the Bank after having attained age 62 (which both have attained), or on account of death, disability or involuntary termination, the Bank will pay the executive a lump sum amount equal in value to a stream of payments, payable over the executive’s life, the annual amount of which is 50% of the executive’s final average monthly salary (reduced in the case of disability by amounts received by the executive from any long-term disability policies maintained by the Bank). For purposes of the agreements, “final average monthly salary” is defined as the average of the executive’s highest paid 36 months of employment with the Bank determined by reference to the average gross amount of his basic monthly salary (before tax withholding and other payroll deductions), excluding bonus or incentive awards, director fees, if any, and accelerated payments of future salary. The value of this lump sum benefit is calculated using National Association of Insurance Commissioners standard mortality tables as of such date, and a discount rate equal to the lesser of the then-current prime rate or the Freddie Mac Enterprise 11th District COFI Replacement Index – Consumer Products (Single-Family).
Potential Payments Upon Termination
Equity Plans. Our 2006 Equity Incentive Plan and 2010 Equity Incentive Plan provide for accelerated vesting of awards in the event of a change in control. If a change in control occurs prior to the vesting of an award, the vesting date will be accelerated to the effective date of the change in control. The 2013 Equity Incentive Plan and the 2022 Equity Incentive Plan provide for accelerated vesting of awards in the event of a change in control and involuntary termination of the award recipient within 12 months of the change in control. The 2006 Equity Incentive Plan, the 2010 Equity Incentive Plan, the 2013 Equity Incentive Plan and the 2022 Equity Incentive Plan also provide that if an award recipient’s employment terminates due to death or disability prior to the vesting of an award, the vesting date will be accelerated to the date of termination of service.
Pay Versus Performance
Pay Versus Performance In August 2022 pursuant to a mandate of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), the SEC adopted Item 402(v) of Regulation S-K, requiring information about the relationship between executive compensation actually paid to our named executive officers and Provident’s financial performance.
Pay Versus Performance
| Year | Summary Compensation Table Total for PEO ($)(1) | Compensation Actually Paid to PEO ($)(2) | Average Summary Compensation Table Total for Non-PEO NEOs ($)(1) | Average Compensation Actually Paid to Non-PEO NEOs ($)(2) | Value of Initial Fixed $100 Investment Based on Total Shareholder Return ($)(3) | Net Income ($) | | 2023 | 951,054 | 905,454 | 570,174 | 537,129 | 79.56 | 8,592,000 | | 2022 | 561,638 | 533,738 | 353,801 | 333,573 | 88.86 | 9,093,000 |
Pay Versus Performance
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Pay Versus Performance
| (1) The principal executive officer (“PEO”) for 2023 and 2022 is Craig G. Blunden. The non-PEO named executive officers (non-PEO NEOs) for 2023 and 2022 are Donavon P. Ternes and David S. Weiant. |
Pay Versus Performance
| (2) The amounts shown for Compensation Actually Paid have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized, or received by Provident’s NEOs. These amounts reflect the Summary Compensation Table totals with certain adjustments, as follows: |
Pay Versus Performance
| | 2023 | | 2022 | | | Name | PEO ($) | Average of Non- PEO NEOs ($) | PEO ($) | Average of Non- PEO NEOs ($) | | Summary Compensation Table total | 951,054 | 570,174 | 561,638 | 353,801 | | Decrease for amounts reported under the Stock Awards column in the Summary Compensation Table | (97,125) | (70,254) | -- | -- | | Increase for fair value at year-end of awards granted during year that remain unvested as of year-end | 87,825 | 63,527 | -- | -- | | Decrease for change in fair value from prior period year-end to vesting date of award granted in prior years that vested during the year | (36,300) | (26,318) | -- | -- | | Decrease for change in fair value at year-end of awards granted in prior years that remain unvested as of year-end | -- | -- | (27,900) | (20,228) | | Compensation Actually Paid | 905,454 | 537,129 | 533,738 | 333,573 |
Pay Versus Performance
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Pay Versus Performance
| (3) Total Shareholder Return assumes $100 invested on June 30, 2021, with all dividends reinvested. |
Pay Versus Performance
The following charts illustrate the relationship between the compensation actually paid to our named executive officers, calculated in accordance with Item 402(v) of Regulation S-K, and Provident’s total shareholder returns on a cumulative basis, assuming an investment of $100 on June 30, 2021 and all dividends reinvested, and net income over the two most recently completed fiscal years.