DEF 14A of QNB Corp.
Filed Apr 9, 2024 · FY20230000950170-24-042803
ELECTION OF THE THREE CLASS III DIRECTOR NOMINEES
ELECTION OF THE THREE CLASS III DIRECTOR NOMINEES
The Board of Directors
The Board of Directors QNB’s Articles of Incorporation and Bylaws provide that the Board of Directors consists of no less than seven or no more than fifteen members divided into three classes, Class I, Class II, and Class III, as nearly equal in number as possible. The directors constituting Class III have been nominated for re-election at the annual meeting. The Directors in Class I will hold office until the 2025 annual meeting and the Directors in Class II will hold office until the 2026 annual meeting. Directors Dennis Helf and Thomas J. Bisko will retire as of the annual meeting.
The Class III Director Nominees of the Board of Directors
The Class III Director Nominees of the Board of Directors At the annual meeting, three Class III directors will be elected. Each director so elected will hold office until the 2027 Annual Meeting of Shareholders and until his or her successor in office is duly qualified and elected. To the extent given discretion, the persons named in the accompanying proxy intend to vote FOR each of the nominees listed below. Each nominee has consented to being nominated as a director and, as far as the Board of Directors and management of QNB are aware, will serve as a director if elected. In the event that any nominee should decline to serve or be unable to serve, the persons named in the accompanying proxy may vote for the election of such person or persons as the Board of Directors recommends. Set forth on the following pages, we include the following information with respect to each director and director nominee: • their names and ages; • the years they first became directors of QNB and the Bank; • their principal occupations and other directorships over the past five years; and • a brief discussion of the specific experience, qualifications, attributes or skills that led to our Board’s conclusion that the person should serve as a director.
Continuing Directors Serving Until 2025 (Class I Directors)
Continuing Directors Serving Until 2025 (Class I Directors)
Autumn R. Bayles
Autumn R. Bayles Director of QNB and the Bank since December 2012 Age 53 Ms. Bayles is Senior Vice President of Global Supply Chain and GPO’s for Aramark Corp., a global food and facilities company (September 2023-present). Prior to that, Ms. Bayles served as Senior Vice President of Global Supply Chain (August 2018 to September 2023). Ms. Bayles served as Aramark Corp’s Vice President of Global Operational Excellence (March 2013 to August 2018) and Vice President of Strategic Development (October 2011 to March 2013). Before joining Aramark Corp., Ms. Bayles was Senior Vice President of Strategic Operations from 2006 to 2011, and Chief Information Officer from 2003 to 2006 for Tasty Baking Company, a consumer-packaged goods company. Ms. Bayles’ educational background includes a Bachelor of Science degree in industrial engineering from Lehigh University and a Master of Business Administration from University of Pennsylvania’s Wharton School. Ms. Bayles’ career has focused on operational improvements and innovative growth opportunities leveraging technology and process changes. The Board believes that Ms. Bayles’ expertise in the areas of business strategy, operations and technology and her experience with a public company give her the qualifications and skills to serve as a QNB director.
David W. Freeman
David W. Freeman Director of QNB since December 2012 Director of the Bank since 2010 Age 67 Mr. Freeman has been the Chief Executive Officer of QNB and the Bank from January 2013 to present. Mr. Freeman served as the President of QNB and the Bank from September 2010 to present. Mr. Freeman also served as Chief Operating Officer of QNB and the Bank from September 2010 to December 2012. Prior to joining QNB, Mr. Freeman was the Division President of the Drovers Bank Division of Fulton Bank from March 2002 to March 2010. Mr. Freeman serves on several local boards, including Habitat for Humanity of Bucks County, Union Cemetery, Boy Scouts Minsi Trails, Bucks County Opportunity Council, and The Chamber of Commerce for Greater Montgomery County. Past volunteer board appointments include United Way of Bucks County, St. Luke’s Upper Bucks, Upper Bucks YMCA, and Bucks County Symphony. Mr. Freeman’s educational background includes a Bachelor of Science degree in business management from Franklin University, a Master of Business Administration from The Ohio State University and he is a graduate of ABA Stonier Graduate School of Banking. The Board believes Mr. Freeman’s career in banking, including his position as President and Chief Executive Officer of QNB and the Bank, gives him the qualifications and skills to serve as a QNB director.
Ranajoy Ray-Chaudhuri
Ranajoy Ray-Chaudhuri Director of QNB and the Bank since 2022 Dr. Ray-Chaudhuri is Associate Professor of Economics and Finance at Muhlenberg College from August 2021 to present. Dr. Ray-Chaudhuri served as Assistant Professor of Economics and Finance at Muhlenberg College from August 2015 to July 2021. His educational background includes a masters and a doctorate in Economics from The Ohio State University. His teaching interests include Money and Banking, Macroeconomics and Development Economics, and his research focuses on the history of financial regulations, regulatory changes in the financial sector, central bank anatomy and the conduct of monetary policy, and the impact of financial development on economic growth. The Board believes that Dr. Ray-Chaudhuri’s knowledge and perspective of financial regulations, central banking and economic development give him the qualifications and skills to serve as a QNB director.
Continuing Directors Serving Until 2026 (Class II Directors)
Continuing Directors Serving Until 2026 (Class II Directors)
Laurie A. Bergman
Laurie A. Bergman Age 46 Ms. Bergman is currently Chief Financial Officer of Liquid Environmental Solutions (June 2021 to present) and serves as a Director and Audit Committee chair for Advanced Emissions Solutions, Inc. (June 2023 to present). Prior to that, Ms. Bergman served as Vice President, Chief Accounting Officer and Corporate Controller of UGI Corporation (February 2019 to June 2021). She previously served as the Chief Accounting Officer and Corporate Controller of AmeriGas Propane, Inc. (2016 to 2019) and as its Group Director – Financial Planning and Operations (2014 to 2016). Ms. Bergman joined AmeriGas Propane, Inc. in 2006 as Manager – Disbursements and served in various roles for AmeriGas Propane, Inc., including Assistant Controller (2011 to 2012), Director of Financial Analysis and Planning (2012 to 2013), and Group Director of Financial Planning and Revenue Management (2013 to 2014). Prior to that, she held positions of increasing responsibility at AmeriGas Propane, Inc. Previously, Ms. Bergman served as a Financial Analysis Specialist and a Disbursement Operations Manager at CIGNA Corporation from 2001 to 2005. Ms. Bergman’s educational background includes a Bachelor of Business Administration degree in Finance from Temple University and a Master of Business Administration from Temple University. Ms. Bergman’s leadership of corporate accounting functions in large publicly traded organizations give her the qualifications and skills to serve as a director of QNB.
Randy S. Bimes
Randy S. Bimes Director of QNB and the Bank since 2020 Age 62 Dr. Bimes is President and managing partner of Quakertown Veterinary Clinic – (August 1996 to present). From December 2016 to October 2020 served as Vice President of Operations at MAVANA, a national aggregation of veterinary practices. Chair of the Medical Advisory Board of Community Veterinary Partners (July 2016 to present). Dr. Bimes’ educational background includes Doctor of Veterinary Medicine degree from University of Illinois College of Veterinary Medicine. His experience in small business operations and development, strategic planning and work in small business aggregation, as well as his role in the community give Dr. Bimes the qualifications and skills to serve as a director of QNB. Kenneth F. Brown, Jr. Director of QNB and the Bank since 1993 Age 68 Mr. Brown is the President of McAdoo & Allen, Inc., a manufacturer of pigment dispersions and high-performance coatings (September 1989 to present). Mr. Brown also serves or has served as a Director and Trustee for various local nonprofit organizations including the Upper Bucks YMCA and St. Luke’s Quakertown Hospital. The Board believes that Mr. Brown’s success in building and managing McAdoo and Allen, Inc. along with his prominent role in the community and years of service as a director of QNB give Mr. Brown the qualifications and skills to serve as a director of QNB.
EXECUTIVE AND DIRECTOR COMPENSATION
EXECUTIVE AND DIRECTOR COMPENSATION
Compensation Discussion and Analysis
The increase for named executive officers was determined based on merit, as well as internal pay equity and compensation levels of similar positions at financial institutions with similar operations and asset size. Cash Incentive Compensation In 2015, the Compensation Committee, with Board approval, established a cash incentive plan to reward QNB employees for achieving annual financial objectives. The cash incentive plan is paid for meeting annual goals established by the Board for earnings per share (EPS) growth, and three-year average performance of return on average equity (ROAE) and return on average assets (ROAA). Finally, QNB’s five-year average performance of ROAE and ROAA was compared to peer group ROAE and ROAA. For 2023, QNB’s ROAE and ROAA was compared to peers’ for the nine months ended September 30, 2023. The 2023, 2022 and 2021 peer groups include Mid-Atlantic publicly traded financial institutions with assets sizes between $1.0 billion and $2.0 billion. These pools included institutions headquartered in Pennsylvania, New Jersey, New York, and Maryland of forty-three in 2021, forty-two institutions in 2022, and thirty-two institutions in 2023. The following table details the members of the peer groups for 2022 and 2023:
Compensation Discussion and Analysis
| 2022 Peer Group Institutions (Mid-Atlantic) | 2023 Peer Group Institutions (Mid-Atlantic) | | 1st Summit Bncp Johnstown Inc. | 1st Summit Bncp Johnstown Inc. | | ACNB Corp. | | | AmeriServ Financial Inc. | AmeriServ Financial Inc. | | Bank of Utica | Bank of Utica | | Blue Foundry Bancorp | Blue Foundry Bancorp | | Capital Bancorp Inc. | | | CB Financial Services Inc. | CB Financial Services Inc. | | Chemung Financial Corp. | | | Citizens & Northern Corp. | | | Citizens Financial Services | | | Codorus Valley Bancorp Inc. | | | Embassy Bancorp Inc. | Embassy Bancorp Inc. | | ENB Financial Corp | ENB Financial Corp | | | Esquire Financial Holdings Inc. | | ESSA Bancorp Inc. | ESSA Bancorp Inc. | | Evans Bancorp Inc. | | | Fidelity D & D Bancorp Inc. | | | First Commerce Bank | First Commerce Bank | | First Keystone Corp. | First Keystone Corp. | | First United Corp. | First United Corp. | | | FNB Bancorp Inc. | | FNCB Bancorp Inc. | FNCB Bancorp Inc. | | Franklin Financial Services | Franklin Financial Services | | Greene County Bncp Inc. (MHC) | | | | Hanover Bancorp Inc. | | | Kish Bancorp Inc. | | Lyons Bancorp Inc | Lyons Bancorp Inc | | Malvern Bancorp Inc | Malvern Bancorp Inc | | Meridian Corp. | Meridian Corp. | | | Northeast Community Bancorp Inc. | | Norwood Financial Corp. | | | Orange County Bancorp Inc. | | | Parke Bancorp Inc. | | | Partners Bancorp | Partners Bancorp | | Pathfinder Bancorp Inc. | Pathfinder Bancorp Inc. | | PCSB Financial Corp. | PCSB Financial Corp. | | Penns Woods Bancorp Inc. | Penns Woods Bancorp Inc. | | Pioneer Bancorp (MHC) | Pioneer Bancorp (MHC) | | Ponce Financial Group, Inc. | Ponce Financial Group, Inc. | | Prudential Bancorp Inc. | | | | Princeton Bancorp Inc. | | | Rhinebeck Bancorp Inc. | | Riverview Financial Corp. | | | Shore Bancshares Inc. | | | | Solvay Bank Corp. | | Somerset Trust Holding Company | Somerset Trust Holding Company | | The Adirondack Trust Company | The Adirondack Trust Company | | The Bank of Princeton | | | The Community Financial Corp. | | | Unity Bancorp Inc. | |
Compensation Discussion and Analysis
| | | Threshold | Moderate | Excellent | Optimum | | Part 1 | One year earnings per share (EPS) growth | | | | | | | Goal | 5% | 6% | 7% | 8% | | | Potential bonus payout | 2.00% | 4.00% | 6.00% | 8.00% | | Part 2 | Three year return on average equity (ROAE) performance | | | | | | | Goal | 9% | 10% | 11% | 12% | | | Potential bonus payout | 1.00% | 2.00% | 3.00% | 4.00% | | | Three year return on average assets (ROAA) performance | | | | | | | Goal | 0.84% | 0.92% | 1.00% | 1.08% | | | Potential bonus payout | 1.00% | 2.00% | 3.00% | 4.00% | | Part 3 | Five year peer group ROAE | | | | | | | Goal | 95%-105% of peers | | | >105% of peers | | | Potential bonus payout | 2.00% | | | 4.00% | | | Five year peer group ROAA | | | | | | | Goal | 95%-105% of peers | | | >105% of peers | | | Potential bonus payout | 2.00% | | | 4.00% | | | Total Bonus Payout Potential | 8.00% | 12.00% | 16.00% | 24.00% |
Compensation Discussion and Analysis
At its January 2024 meeting, the Board of Directors approved the calculation of cash incentive compensation program measures for 2023. QNB did not meet the any of the payout levels in Part 1 in the table above, with a one-year earnings per share growth at a negative 3.66%. QNB met Part 2 three-year average ROAA at 0.84% and three-year average ROAE at 9.71% at the Threshold level payout. QNB’s five-year average ROAE was 102.38% of the peer group five-year average ROAE and five-year average ROAA was 97.72% of the peer group five-year average ROAA, both meeting the Threshold level as detailed in Part 3 of the table above. As a result, an aggregate cash incentive paid to the named executive officers was equivalent to 6.00% of their base salary. The amounts paid under the cash incentive plan for 2023 are reflected in the Summary Compensation Table. Long-Term Incentive Compensation The named executive officers are eligible to participate in a long-term incentive award plan established to focus executive efforts on the strategic directions and goals of QNB and to reward them for their successes in these areas. The 2015 Stock Incentive Plan (the Plan) was approved by the shareholders at the 2015 Annual Meeting of Shareholders. The purpose of the Plan is also to provide ownership incentive to the executive officers and align their interests with the interests of shareholders. In establishing award levels, equity ownership levels of the recipients or prior awards that are fully vested are not considered. The Plan is administered by the Compensation Committee. The Plan provides for the granting of either (i) nonqualified stock options or (ii) incentive stock options. The exercise price of an option, as defined by the Plan, is the fair market value of QNB’s common stock on the date of grant. The Compensation Committee determines the type of grant, the number of shares of common stock subject to a particular grant and the vesting period for such grants. To date, options granted under the Plan have a three to five year vesting feature. The Compensation Committee determines the number of options granted in total and to Mr. Freeman, individually. Mr. Freeman determines the allocation of the remaining grants among eligible employees. The fair value of the stock options granted represented between 0% and 7.2% of named executive officers’ base salaries in 2023. Post-Retirement Plans QNB provides a qualified retirement plan to all employees, including the named executive officers. The QNB Bank Retirement Savings Plan provides for elective employee contributions up to the maximum allowed by the IRS and a matching company contribution limited to three percent of total compensation. In addition, the plan provides for safe harbor non-elective contributions of five percent of total compensation by QNB. Employees are able to contribute to the plan immediately; however, to receive the matching company contribution and safe harbour non-elective contribution, the employees must have completed six months of service. During 2001, QNB purchased Bank Owned Life Insurance (BOLI) for officers of QNB. A split-dollar agreement provides the employee’s beneficiary a portion of the death proceeds under the BOLI equal to two times their current base salary. Under this plan vesting occurs when the employee reaches age 55 and has a combined age and years of service of 70. When vested, the insurance would become portable to the participant after they are no longer in service with the Bank either through termination or retirement thereby creating the post-retirement benefit. Mr. Orzehoski is the only named executive officer that is insured through BOLI. During 2023, QNB implemented a Non-qualified Deferred Compensation Plan (NQDC Plan) for the benefit of a select group of the Bank's management team. The NQDC Plan provides a deferred compensation vehicle to which the Bank may credit discretionary amounts on behalf of Participants for recruitment and reward. Health and Welfare Benefits The named executive officers participate in QNB’s qualified health and welfare benefits program on the same terms and conditions as all other salaried employees. Perquisites and Other Benefits; Agreements Perquisites received by the named executive officers are reviewed annually. The primary perquisite received by Mr. Freeman is the reimbursement of country club dues. Certain executive officers are encouraged to belong to a golf or social club to provide the appropriate entertainment forum for customers and appropriate interaction with the communities served by QNB. Certain members of senior management are parties to change in control agreements with QNB. Executive management and other employees have built QNB into a successful enterprise, and the Board believes that it is important to protect them in the event of a change in control. Further, it is our belief that the interests of shareholders will be best served if the interests of our executive management are aligned with them, and providing change in control benefits should eliminate, or at least reduce, the reluctance of executive management to pursue potential change in control transactions that may be in the best interests of shareholders. Future Compensation Determination The committee will continue to reassess QNB’s executive compensation program to ensure that it promotes the long-term objectives of QNB, encourages growth in shareholder value and attracts and retains top-level executives. Conclusion The Committee links executive compensation to corporate performance and growth in shareholder value. The Committee intends to continue this policy, recognizing that the business cycle may, from time-to-time, result in an imbalance for a particular period.
EXECUTIVE COMPENSATION
| | | Salary | Bonus | Stock Awards | Option Awards | Non-Equity Incentive Plan Compen- sation | Change in pension value and non- qualified deferred compen- sation earnings | All Other Compen- sation | Total | | Name and Position | Year | ($)(1) | ($) | ($) | ($)(2) | ($) | ($)(3) | ($) | ($) | | David W. Freeman | 2023 | $584,000 | $— | $— | $— | $35,040 | $31,485 | $41,230(4) | $691,755 | | Principal Executive | 2022 | 551,565 | — | — | 18,209 | 55,151 | — | 38,827(4) | 663,752 | | Officer | 2021 | 525,300 | — | — | 10,392 | 105,112 | — | 36,661(4) | 677,465 | | Jeffrey Lehocky | 2023 | 325,000 | — | — | 3,290 | 19,500 | 15,742 | 18,084(5) | 381,616 | | Principal Financial | 2022 | 40,000 | — | — | — | 4,000 | — | 147(5) | 44,147 | | Officer | | | | | | | | | | | Scott G. Orzehoski | 2023 | 305,000 | — | — | 14,393 | 18,300 | 15,742 | 24,400(6) | 377,835 | | Executive Vice | 2022 | 284,550 | — | — | 18,209 | 28,452 | — | 22,764(6) | 353,975 | | President | 2021 | 271,000 | — | — | 10,392 | 54,227 | — | 21,680(6) | 357,299 | | Christopher T. Cattie | 2023 | 250,000 | — | — | 14,393 | 15,000 | 15,742 | 21,886(7) | 317,021 | | Executive Vice | 2022 | 223,650 | — | — | 18,209 | 22,363 | — | 18,048(7) | 282,270 | | President | 2021 | 213,000 | — | — | 10,392 | 42,621 | — | 17,039(7) | 283,052 | | Courtney L. Covelens | 2023 | 200,000 | — | — | 14,393 | 12,000 | 15,742 | 16,065(8) | 258,200 | | Executive Vice | 2022 | 154,014 | — | — | 5,203 | 15,400 | — | 12,594(8) | 187,211 | | President | 2021 | 127,521 | — | — | 2,309 | 17,011 | — | 10,449(8) | 157,290 |
EXECUTIVE COMPENSATION
| Year | Summary compensation table total for Principal Executive Officer ("PEO") (1) | Compensation actually paid to PEO (2) | Average summary compensation table total for non-PEO named executive officers ("NEOs") (3) | Average compensation actually paid to NEOs (4) | Value of initial fixed $100 investment based on total shareholder return ("TSR") (5) | Net income (in thousands) (6) | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | | 2023 | $691,755 | $691,755 | $333,668 | $322,051 | $94.57 | $9,483 | | 2022 | 663,752 | 645,543 | 299,484 | 285,827 | 91.01 | 15,921 | | 2021 | 677,465 | 667,073 | 313,568 | 305,774 | 116.69 | 16,492 |
EXECUTIVE COMPENSATION
| Year | Reported summary compensation table total for PEO | Reported value of equity awards (a) | Equity award adjustments (b) | Compensation actually paid to PEO | | 2023 | $691,755 | $— | $— | $691,755 | | 2022 | 663,752 | 18,209 | — | 645,543 | | 2021 | 677,465 | 10,392 | — | 667,073 |
Analysis of the Information Presented in the Pay Versus Performance Table
Analysis of the Information Presented in the Pay Versus Performance Table In accordance with Item 402(v) of Regulation S-K, we are providing the following descriptions of the relationships between information presented in the Pay Versus Performance Table. Compensation Actually Paid and Cumulative TSR The graph below illustrates the trend in “compensation actually paid” over the last three years to our TSR performance. This illustrates that from 2021 to 2023; our compensation moved in alignment with our TSR performance, decreasing in 2022 and increasing in 2023. Compensation Actually Paid and Net Income The graphs below illustrate the trend in “compensation actually paid” over the last three years relative to our GAAP Net Income. This illustrates that from 2021 to 2023; our compensation moved in alignment with our GAAP Net Income decreasing in 2022; but in 2023, GAAP Net Income decreased and as our compensation increased. As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K, below is a list of the most important financial measures used by the Compensation Committee to link executive compensation to performance for the 2023 performance year: Return on Average Equity • Earnings Per Share Growth • Return on Average Equity versus Peer Group All information provided above under the “Pay Versus Performance Information” heading will not be deemed to be incorporated by reference in any filing of our company under the Securities Act of 1933, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION The following table sets forth compensation earned by non-employee directors for the year ended December 31, 2023. Each director of QNB is also a member of the Bank’s Board of Directors.
DIRECTOR COMPENSATION
| | Fees Earned or | Stock | Option | Non-equity incentive plan | Change in pension value and nonqualified | | | | Paid in Cash | Awards | Awards | compensation | deferred compensation earnings | Total | | Name | ($) | ($) | ($) | ($) | ($) | ($) | | Autumn R. Bayles | $26,350 | $3,995 | $— | $— | $— | $30,345 | | Laurie Bergman | 25,100 | 3,995 | — | — | — | 29,095 | | Randy S. Bimes | 43,900 | 3,995 | — | — | — | 47,895 | | Thomas J. Bisko | 27,025 | 3,995 | — | — | — | 31,020 | | Kenneth F. Brown, Jr. | 35,400 | 3,995 | — | — | — | 39,395 | | Dennis Helf | 57,975 | 3,995 | — | — | — | 61,970 | | Jennifer L. Mann | 29,100 | 3,995 | — | — | — | 33,095 | | Ranajoy Ray-Chaudhuri | 25,100 | 3,995 | — | — | — | 29,095 | | Randall Stauffer | 24,750 | 3,995 | — | — | — | 28,745 | | Scott R. Stevenson | 27,700 | 3,995 | — | — | — | 31,695 |
DIRECTOR COMPENSATION
During 2024, directors, except for Mr. Freeman, will receive an annual retainer of $10,500. The Chairman of the Board will receive an annual retainer of $15,000. In addition, each director will receive a fee of $850 for each Board meeting attended plus $1,200 if all 12 meetings are attended. Directors are not reimbursed for travel to or from Board meetings. Members of the committees of the Board of Directors will receive $400 for each committee meeting attended. The Chairperson of the Audit Committee receives additional compensation of $3,400. In addition, the Chairperson of the Compensation Committee receives additional compensation of $850.