DEF 14A of Eagle Financial Services Inc
Filed Apr 5, 2024 · FY20230000950170-24-042209
PROPOSAL ONE - ELECTION OF DIRECTORS
PROPOSAL ONE - ELECTION OF DIRECTORS The Board of Directors of the Company is structured into three classes (I, II, and III) with one class elected each year to serve a three-year term. The term of Class III Directors will expire at the Annual Meeting. The persons named below, all of whom are currently members of the Board, will be nominated to serve as Class III Directors. If elected, the Class III nominees will serve until the 2027 Annual Meeting of Shareholders or until their respective successors are elected and qualified. All nominees have consented to be named and have indicated their intent to serve if elected. Those nominees receiving the greatest number of votes shall be deemed elected even though they may not receive a majority. Abstentions and broker non-votes will not be considered votes cast and will have no effect on the outcome of this proposal. Certain information concerning the nominees for election at the Annual Meeting is set forth below, as well as certain information about the Class I and II Directors who will continue in office until the 2025 and 2026 Annual Meetings of Shareholders, respectively. The following biographical information discloses each Director’s age, principal occupation during the last five years and the year that each individual was first elected to the Board of Directors of the Company or previously to the Board of Directors of Bank of Clarke (the “Bank”), the predecessor to and now a wholly owned subsidiary of the Company. In addition, the following information includes the particular experiences, qualifications, attributes and skills that lead the Board to conclude that each person should serve as a Director. The Board of Directors recommends a vote FOR the Directors nominees set forth below. Class III (Nominees to serve until the 2027 Annual Meeting): Tatiana C. Matthews, 67, has been a director since 2022. Ms. Matthews is the Co-Founder, President and Chairman of the Board of the Matthews Group, Inc. t/a TMG Construction Corporation (TMG). TMG is a leading design/builder and general contractor serving institutional, governmental, and military clients. Woman/Native American owned and MBE-certified, TMG specializes in new construction, renovations and additions, and facilities maintenance support under Lump Sum, Indefinite Delivery/Indefinite Quantity (IDIQ) Task Order and Job Order contracts. Edward Hill, III, 59, has been a director since 2022. Dr. Hill is a physician executive, entrepreneur, investor, innovator and medical jurisprudence professional with cross-discipline education, training and experience and a cross-functional skill set. He is a founding member of several corporations and companies in the northern Virginia area including Alpharix Partners, LLC, Fetal Cerebral, Inc., and Forensic Perinatal, Inc. Mary Bruce Glaize, 68, has been a director since 1998. Mrs. Glaize is a retired educator and community volunteer. She currently serves as a Trustee on the Board of Shenandoah University. Additionally, Mrs. Glaize is a founder and trustee emerita of the Shenandoah Valley Discovery Museum. Her involvement in the communities in which the Company operates allows her to identify the needs of the Bank’s customers and potential customers. Cary C. Nelson, 49, has been a director since 2018. Mrs. Nelson is the President of H.N. Funkhouser & Company, a local family-owned petroleum company that operates in the Northern Shenandoah Valley of Virginia. Mrs. Nelson is a native of the Winchester/Frederick County, Virginia area. She is a Certified Public Accountant with a Bachelor of Science degree from the University of Richmond. Additionally, Mrs. Nelson is the board chair of the Top of Virginia Regional Chamber and the former President of the Rotary Club of Winchester. Mrs. Nelson is also a board member of the Mount Hebron Cemetery. Her business experience and skill set are valuable resources to the Company in both her role on the Board of Directors and the Company’s Audit Committee. Class II (Incumbent directors to serve until the 2026 Annual Meeting): Brandon C. Lorey, 55, has been a director since 2019. Mr. Lorey has been the President and Chief Executive Officer of both the Company and the Bank since July 2019. Prior to joining the Company in 2019, heserved as Executive Vice President, Head of Consumer Banking of United Bank, a $7.3 billion asset bank headquartered in Connecticut, since 2015. Previously, he served as Executive Vice President, Consumer Lending from April 2014 to June 2015, as Senior Vice President, Head of Consumer Lending from February 2013 to April 2014. Prior to joining United Bank and its predecessors, he served as Chief Credit and Lending Officer for H&R Block Bank in Kansas City, Senior Vice President at Sovereign Bank in Pennsylvania and held various roles at Chevy Chase Bank, a Federal Savings Bank in Maryland, including Vice President of risk, finance, operations and direct sales. Douglas C. Rinker, 64, has been a director since 2006. Mr. Rinker is the Chairman of the Board of Winchester Equipment Company, an equipment sales, rental and service company headquartered in Winchester, Virginia. Mr. Rinker also serves as the Senior Pastor of Round Hill Church. As the Chairman of a successful company, Mr. Rinker provides the Board with valuable insight and guidance on the issues of corporate strategy, business growth and risk management. He has demonstrated his commitment to the community by his past service in several community and civic organizations. John D. Stokely, Jr., 71, has been a director since 2006. Mr. Stokely is the President and owner of Cavalier Land Development Corp., a real estate development company in Oakton, Virginia and is a former President of the Northern Virginia Building Industry Association and the Home Builders Association of Virginia. Mr. Stokely is also a former Chairman and a current Trustee of Shenandoah University as well as a Trustee of the University of Virginia School of Engineering and Applied Science. His broad experience and perspective as an entrepreneur brings to the Board a substantial resource with respect to finance, strategic planning and corporate governance. Class I (Incumbent directors to serve until the 2025 Annual Meeting): Thomas T. Gilpin, 71, has been a director since 1986. Mr. Gilpin is the Chairman of the Board of both the Company and the Bank. He is the President of Lenoir City Company, a real estate investment company in Winchester, Virginia. He is also President of Clarco Corporation, which operates as Northside Lanes, a bowling center in Winchester,Virginia. He is also a Board member for Valley Health System. Mr. Gilpin’s broad experience provides the Company leadership and consensus-building skills to guide the Board through critical discussions regarding its current challenges and future strategic initiatives. Scott M. Hamberger, 52, has been a director since 2016. Mr. Hamberger is the President and Chief Executive Officer of Integrus Holdings, Inc. where he has been employed since founding the company in 1993. Integrus’ flagship business, Fortessa Tableware Solutions, is a recognized global leader in commercial foodservice and upscale consumer tableware. As an entrepreneur and executive, Mr. Hamberger brings analytical ability and leadership skills to his role as director. Additionally, he has served as a Director and Chairman of the Loudoun County Chamber of Commerce, as a Trustee and Chairman of Inova Loudoun Hospital, and as a Trustee of Marymount University. By living, volunteering, and operating a business in the Company’s area of operations, Mr. Hamberger is able to help identify the needs of the Company’s customers and potential customers. John R. Milleson, 67, has been a director since 1999.
PROPOSAL ONE - ELECTION OF DIRECTORS
Mr. Milleson had been the President and Chief Executive Officer of both the Company and the Bank from 1999 to July 2019. From 1997 to 1999, he was Executive Vice President and Secretary-Treasurer of the Company and Executive Vice President and Chief Administrative Officer of the Bank. He brings operational risk management and financial accounting knowledge. Robert W. Smalley, Jr., 71, has been a director since 1989. Mr. Smalley is the President of Smalley Package Co., Inc., a company focused on real estate management in Berryville, Virginia. He is also the Vice Chairman of Loudoun Mutual Insurance Company, a property and casualty insurance provider in the State of Virginia. Mr. Smalley’s institutional knowledge and longstanding board service make him a distinctively qualified member of the board.
Executive Officers Who Are Not Directors
Executive Officers Who Are Not Directors Kathleen J. Chappell, 57, has served as Executive Vice President and Chief Financial Officer of the Company and the Bank since 2019. Previously, she served as Senior Vice President and Chief Financial Officer of the Company and the Bank from 2009 to 2019. From 2005 to 2008 she served as Senior Vice President and Chief Financial Officer of Middleburg Financial Corporation. Kaley P. Crosen, 58, has served as Secretary of the Company and as Executive Vice President and Chief Human Resources Officer of the Bank since 2019. Previously, she served as Senior Vice President and Human Resources Director from 2008 to 2019. Ms. Crosen served as Vice President of Human Resources from 1999 to 2008. Joseph T. Zmitrovich, 54, has served as President and Chief Banking Officer of the Bank since 2022. Previously, he served as Executive Vice President and Chief Banking Officer from 2020 to 2022 and Executive Vice President and Chief Revenue Officer of the Bank from 2019 to 2020. Mr. Zmitrovich served as Senior Vice President and Chief Lending Officer of the Bank from 2016 to 2019. From 2015 to July 2016, he served as Market President of the Southern Pennsylvania region for BB&T. From 2008 to 2015 he served as Senior Vice President and Commercial Executive for Susquehanna Bank.
Director Compensation
Director Compensation The following table provides compensation information for the year ended December 31, 2023, for each non-employee director of the Company’s Board of Directors:
Director Compensation Table
Director Compensation Table
Fiscal Year 2023
| | Fees Earned | | | | | or Paid in Cash | Stock Awards | Total | | Name (1) | ($) | ($) (2) | ($) | | Thomas T. Byrd | 14,300 | 21,570 | 35,870 | | Thomas T. Gilpin | 45,600 | 21,570 | 67,170 | | Mary Bruce Glaize | 27,200 | 21,570 | 48,770 | | Edward Hill, III | 27,200 | 21,570 | 48,770 | | Scott M. Hamberger | 29,000 | 21,570 | 50,570 | | Tatiana C. Matthews | 29,800 | 21,570 | 51,370 | | John R. Milleson | 30,600 | 21,570 | 52,170 | | Cary C. Nelson | 34,000 | 21,570 | 55,570 | | Douglas C. Rinker | 30,400 | 21,570 | 51,970 | | Robert W. Smalley, Jr. | 30,200 | 21,570 | 51,770 | | John D. Stokely, Jr. | 30,200 | 21,570 | 51,770 |
EXECUTIVE COMPENSATION
The performance-based shares granted in 2023 contained vesting conditions whereby the executive was entitled to receive up to one half of target shares depending upon the Company’s 2023 performance with vesting of any earned shares one year from the grant date. The remainder of the shares that may be earned depend upon the Company’s two-year average performance for 2023 through 2024 and vesting two-years from the grant date. For performance-vested shares, we measure the Company’s Return on Average Assets “ROAA” percentile ranking versus a custom performance peer group of SEC-reporting banks in Virginia and nearby states with median assets comparable to the Company and generally in a range from half to twice our asset level. A portion of each executive’s target performance-vested share grant can be earned based on ROAA percentile ranking for the performance periods defined above:
EXECUTIVE COMPENSATION
For ROAA percentile ranking that falls between the percentiles shown above, straight-line interpolation is used to determine the portion of target award earned. Number of earned shares is capped at 1.5 times target. A participant must be employed on the vesting date of each performance period to receive shares earned for performance during that period. Retirement and Other Benefits: The Company provides additional compensation to the named executive officers through various plans which are also available to some or all of the employees. The Compensation Committee oversees these plans and the Compensation Committee considers these plans when reviewing a named executive officer’s total annual compensation and when determining the annual and long-term compensation components described above. These plans are described below. Employee 401(k) Savings and Stock Ownership Plan The Company sponsors a 401(k) savings plan under which eligible employees, including executive officers, may defer a portion of their salary on a pretax basis, subject to certain IRS limits. Each participant in this plan has the right to vote the shares of Common Stock allocated to his or her account. The 401(k) plan was amended, effective January 1, 2007, to include a non-elective safe-harbor employer contribution and an age-weighted employer contribution. Each December 31st, qualifying employees will receive a non-elective safe-harbor contribution equal to three percent of their salary for that year. Also, each December 31st, qualifying employees will receive an additional contribution based on their age and years of service. The percentage of salary for the age-weighted contribution increases on both factors, age and years of service, with a minimum of one percent of salary and a maximum of ten percent of salary. In 2023, all executive officers participated in the 401(k) plan and each received all eligible matching contributions under the amended plan. The Company’s contribution to this plan on behalf of each named executive is disclosed in the “Summary Compensation Table” below. Employment Agreements. In order to retain and attract executive officers, the Company recognizes the need to enter into employment agreements with provisions for benefits in connection with a termination of employment. The Compensation Committee evaluates the potential payments to executive officers under various arrangements that provide for severance payments, including termination and change of control arrangements, in connection with its annual review of executive compensation. A description of the terms of our severance plans, the specific circumstances that trigger payment of benefits, an estimate of benefits payable upon the occurrence of those triggering events and other information relating to such plans can be found under the captions of “Employment Agreements” and “Potential Payments upon Termination of Employment or Change-in-Control” below.
Summary Compensation Table
Summary Compensation Table
Summary Compensation Table
| | | | | | Non- | | | | | | | | | Equity | | | | | | | | | Incentive | | | | | | | | | Plan | All Other | | | | | | | Stock | Compen- | Compen- | | | Name and | | Salary | Bonus | Awards | sation | sation | Total | | Principal Position | Year | ($) | ($) | ($) (1) | ($) (2) | ($) (3) | ($) | | Brandon C Lorey | 2023 | 540,750 | — | 201,248 | — | 53,224 | 795,222 | | President and Chief | 2022 | 515,000 | 25,000 | 188,517 | 139,050 | 50,729 | 918,296 | | Executive Officer | | | | | | | | | Kathleen J. Chappell | 2023 | 327,010 | — | 105,477 | — | 50,089 | 482,576 | | Executive Vice President and | 2022 | 308,500 | — | 103,459 | 69,413 | 46,252 | 527,624 | | Chief Financial Officer | | | | | | | | | Joseph T. Zmitrovich | 2023 | 391,650 | — | 127,551 | — | 45,721 | 564,921 | | Executive Vice President and Chief | 2022 | 373,000 | — | 118,088 | 83,925 | 47,967 | 622,980 |
Summary Compensation Table
____________________ (1) The amounts reported reflect the aggregate grant date fair value of the awards computed in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718, Compensation – Stock Compensation (formerly FASB 123R Share–Based Payment). This presentation replaces the dollar amount recognized for financial statements purposes and has been reflected for all fiscal years presented. Stock awards consist of both restricted time and performance-based awards. Performance-based awards in the above table assume the probable outcome of performance conditions is equal to the target potential value of the awards. The maximum value of performance-based awards can equal 1.5 times target should the Company achieve certain performance conditions. Please see page 11 for a detailed discussion of equity compensation. For valuation and discussion of assumptions related to stock and option awards, please refer to Note 11 to the Company’s audited financial statements for the fiscal year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 29, 2024. (2) This column represents bonus amounts earned under the Company’s Senior Officer Incentive Compensation Plan for achievements relating to Company performance and is discussed in further detail beginning on page 10 under the heading “Annual Incentive Bonus”. Based on the attainment of Company performance goals, the payout, as a percentage of base salary, for the 2023 incentive plan was 0% for the President and CEO, 0% for the Executive Vice President and CFO and 0% for the President and CBO. Based on the attainment of Company performance goals, the payout, as a percentage of base salary, for the 2022 incentive plan was 27.00% for the President and CEO, 25.00% for the Executive Vice President and CFO and 25.00% for the Executive Vice President and CBO. The amounts in this column are detailed in the table titled “All Other Compensation” below. The Company has entered into employment agreements with the named executive officers as described below in the “Employment Agreements” section. All compensation paid to the named executive officers is determined as described above in the Executive Compensation section.
Outstanding Equity Awards
Outstanding Equity Awards
Potential Payments upon Termination of Employment or Change-in-Control
Potential Payments upon Termination of Employment or Change-in-Control
Potential Payments Upon Termination Following Change-in-Control
Potential Payments Upon Termination Following Change-in-Control In the event of termination without cause or resignation for good reason following a change in control, the Company’s employment agreements with Mr. Lorey, Ms. Chappell and Mr. Zmitrovich provide for the payments described under “Employment Agreements” above. Additionally, under the term of the Company’s Stock Incentive Plan, accelerated vesting of both outstanding stock options and restricted stock grants will occur in the event of a change in control. Typically, the payments relating to stock options represent the value of the unvested and accelerated stock options, calculated by multiplying the number of accelerated options by the difference between the exercise price and the closing price of the Company’s Common Stock on the applicable date.
Potential Payments Upon Involuntary Termination Without Cause or Good Reason
Potential Payments Upon Involuntary Termination Without Cause or Good Reason In the event of termination without cause or resignation for good reason, the Company’s employment agreements with Mr. Lorey, Ms. Chappell and Mr. Zmitrovich provide for the payments described under “Employment Agreements” above.
Pay Versus Performance
Pay Versus Performance In accordance with a final rule adopted by the SEC in August 2022 implementing Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing the following table that sets forth certain compensation measures for certain of our officers alongside certain performance metrics for the Company:
Pay Versus Performance
| | | | Average | | | | | | | | Summary | Average | Value of | | | | | | Compensation | Compensation | Initial Fixed | | | | | | Table Total | Actually Paid | $100 Investment | | | | Summary | Compensation | for Non-PEO | to Non-PEO | Based on | | | | Compensation Table | Actually Paid | Named Executive | Named Executive | Total Shareholder | Net Income | | | Total for PEO(1) | to PEO(2) | Officers(1) | Officers(2) | Return(3) | (in thousands) | | Year | ($) | ($) | ($) | ($) | ($) | ($) | | 2023 | 795,222 | 708,845 | 523,749 | 474,812 | 112.97 | 9,357 | | 2022 | 918,296 | 921,209 | 575,302 | 577,200 | 130.32 | 14,521 | | 2021 | 915,723 | 847,345 | 584,976 | 613,703 | 115.69 | 11,021 |
Pay Versus Performance
___________________ (1) The PEO and non-PEOs for each year are as follows: a. PEO: Brandon C. Lorey b. Non-PEOs were Kathleen J. Chappell and Joseph T. Zmitrovich (2) Compensation Actually Paid is a calculation that begins with the Summary Compensation Table “SCT” total compensation in the given year with certain adjustments prescribed by the SEC rules. The following table provides a reconciliation of SCT total compensation with Compensation Actually Paid:
Pay Versus Performance
| | | | | | | | Change in Fair | | | | | | | | | Change in Fair | Fair Value of | Value of Stock | | | | | | | | Fair Value of | Value of | Stock Awards | Awards from | | | | | | | | Stock Awards | Unvested Stock | Granted and | Prior Years that | Fair Value of | | | | | | SCT Stock | Granted in the | Awards from | Vested in the | Vested in the | Stock Awards | Compensation | | Name | Year | SCT Total | Awards | Covered Year | Prior Years | Covered Year | Covered Year | Forfeited | Actually Paid | | PEO | 2023 | $795,222 | $(201,248) | $167,940 | $(26,959) | $— | $(6,069) | $(20,040) | $708,845 | | NEO | | | | | | | | | | | Average | 2023 | 523,749 | (116,514) | 97,230 | (19,727) | — | (505) | (9,420) | 474,812 |
Pay Versus Performance
___________________ Total Shareholder Return represents the value of a hypothetical $100 investment beginning at market close on the last day of trading of 2020, assuming reinvestment of all dividends. The relationship between (1) compensation actually paid to the PEO and the average compensation actually paid to NEOs other that the PEO and (2) cumulative total shareholder return on the common stock of the Company for the last two completed fiscal years is as shown in Figure 1.
Figure 1: Compensation Actually Paid and Total Shareholder Return (TSR)
Figure 1: Compensation Actually Paid and Total Shareholder Return (TSR) The relationship between (1) compensation actually paid to the PEO and the average compensation actually paid to NEOs other than the PEO and (2) net income of the Company for the last two completed fiscal years is shown in Figure 2.
Figure 2: Compensation Actually Paid and Net Income
Figure 2: Compensation Actually Paid and Net Income