DEF 14A of Citizens & Northern Corp
Filed Mar 14, 2025 · FY20240001104659-25-023871
TABLE OF CONTENTS
| Executive Compensation Tables | 29-32 | | Summary Compensation Table | | | Grants of Plan-Based Awards | | | Outstanding Equity Awards at Fiscal Year-End | | | Option Exercises and Stock Vested | | | CEO Pay Ratio | 33 | | Pay Versus Performance | 33-38 | | Pay Versus Performance | | | Compensation Actually Paid vs. CZNC and Peer Group Total Shareholder Return | | | Compensation Actually Paid vs. Net Income | | | Compensation Actually Paid vs. (PPNR-NCOs)/Average Equity | | | Employment Agreements | 38-40 | | Potential Payments Upon Termination or Change in Control | 40 | | Indemnification Agreements | 41 | | Compensation of Directors | 41-42 | | Director Summary Compensation Table | | | Director Fees | | | Stock Incentive Plans | | | Proposal 2 – Advisory Non-Binding Vote on Executive Compensation | 43 | | Proposal 3 – Ratification of Independent Registered Public Accounting Firm | 43 | | Fees of Independent Registered Public Accounting Firm | 43-44 | | Audit Committee Report | 44 | | Annual Report on Form 10-K | 44 | | Other Matters | 44 | | Appendix A – Reconciliation of U.S. GAAP to Non-GAAP Measures | 45 |
PROPOSAL 1 -- ELECTION OF DIRECTORS
PROPOSAL 1 -- ELECTION OF DIRECTORS
Board of Directors
Board of Directors Our Articles of Incorporation provide that the Board of Directors shall consist of not less than five (5) nor more than twenty-five (25) directors and that within these limits the number of directors shall be as established by the Board of Directors. The Articles further provide that the Board shall be classified into three classes, as nearly equal in number as possible. One class of directors is elected annually, and the term for each class is three (3) years. Any vacancy occurring on the Board of Directors, for any reason, may be filled by a majority of directors then in office to serve until the expiration of the term of the vacancy. There are currently eleven (11) members of the Corporation’s Board of Directors. At the 2025 Annual Meeting, four (4) Class II directors are to be elected to serve for a three-year term.
Nominees for Election
Nominees for Election The Board of Directors proposes the following four (4) nominees be elected as Class II directors for terms expiring at the 2028 Annual Meeting of Shareholders: Susan E. Hartley, Leo F. Lambert, Helen S. Santiago, and Katherine W. Shattuck. Each nominee currently serves as a director of the Corporation. The election of directors is subject to a majority vote requirement under which any director who does not receive a majority of the votes cast in an uncontested election must tender his or her resignation as a director of the Corporation via the Chairperson of the Corporate Governance and Nominating Committee. A director whose resignation is under consideration shall abstain from participating in any recommendation or decision regarding that resignation. The Corporate Governance and Nominating Committee shall make a recommendation to the Board whether to accept, reject or otherwise act with respect to the tendered resignation. Notwithstanding the foregoing, in the event of a contested election of directors, directors shall be elected by the vote of a plurality of the votes cast at any meeting for the election of directors at which a quorum is present. Unless otherwise instructed, proxies received from shareholders will be voted for the nominees named in this proxy statement. If a nominee should become unavailable for any reason, proxies will be voted for a substitute nominee determined by the Board of Directors. The Board of Directors has no reason to believe that the nominees will be unable to serve if elected. Cumulative voting does not exist in the election of directors. Each share of Corporation common stock is entitled to cast one vote for each nominee. For example, if a shareholder owns ten shares of common stock, he or she may cast up to ten votes for each of the four nominees to be elected. The Board of Directors recommends a vote “FOR” the election of the nominees identified above, each of whom has consented to be named as a nominee and to serve if elected.
Director Qualifications
Director Qualifications We provide below information as of the date of this proxy statement about each nominee and director of the Corporation. The information includes information each director has given us about his/her age, all positions held, principal occupation and business experience for the past five years, and the names of other publicly held companies of which he or she currently serves as a director or has served as a director during the past five years. In addition to the information presented below regarding each nominee’s specific experience, qualifications, attributes and skills that led the Board of Directors to conclude that he or she should serve as a director, we also believe that all of our directors and nominees have demonstrated good judgment, strength of character, and an independent mind, as well as a reputation for integrity and the highest personal and professional ethics. The age shown below for each director is as of April 24, 2025, which is the date of the annual shareholders meeting.
Nominees as Class II Directors for a term expiring at the 2028 Annual Meeting
Nominees as Class II Directors for a term expiring at the 2028 Annual Meeting
Susan E. Hartley
Susan E. Hartley Age: 67 Ms. Hartley has been an attorney since 1984. She received her Bachelor of Arts degree from Elmira College, Master of Arts degree from State University of New York at Buffalo, and Doctorate of Jurisprudence from State University of New York at Buffalo School of Law. Ms. Hartley has completed the Bank Director Certification Program. We believe Ms. Hartley’s qualifications to serve as a director of the Corporation include her experience as an attorney and her over 20 years of experience as a director of the Corporation.
Leo F. Lambert
Leo F. Lambert Director since: 2001 Age: 71 Mr. Lambert served as the President and General Manager of Fitzpatrick & Lambert, Inc., in Dushore, PA until retiring in 2022. Mr. Lambert received his Bachelor of Science degree from St. Francis College Loretto. Mr. Lambert has served and continues to serve on many nonprofit boards within his community. We believe Mr. Lambert’s qualifications to serve as a director of the Corporation include his over 40 years of experience as a local business owner, entrepreneur and community leader, as well as over 20 years of experience as a director of the Corporation.
Helen S. Santiago
Helen S. Santiago Director since: 2021 Age: 45 Ms. Santiago has served as a CPA for LaBarr & LaBarr, LLC in Sayre, PA since 2009 where her focus is income tax preparation, tax planning and financial statements. Prior to returning to Bradford County, she worked for KPMG in Philadelphia for seven years, earned her CPA license and served as an auditor before being promoted to Manager. Ms. Santiago earned her Bachelor of Science degree in Accounting from Susquehanna University. Ms. Santiago serves as a director for the Mutual Capital Group. She is involved in the community as Secretary of the Bradford/Sullivan Counties’ Outstanding Young Woman Program. She’s also active in the Parent/Teacher Guild (PTG) of St. Agnes School in Towanda, PA. We believe Ms. Santiago’s qualifications to serve as a director of the Corporation include her extensive experience in public accounting.
Katherine W. Shattuck
Katherine W. Shattuck Director since: 2021 Age: 50 Ms. Shattuck is a Managing Partner at Korn Ferry, the global leader in talent management and executive search, where she leads the Pennsylvania team and is a core member of the Global Financial Market practice. She is an expert in building and developing effective leadership teams at the C-suite, board and senior executive level. Ms. Shattuck holds an MBA from Harvard Business School and an MPA from Harvard Kennedy School. She graduated from The United States Military Academy at West Point and is an Army veteran. Ms. Shattuck has significant board governance experience, completing Phase I of Board Director Certification including Audit, Compensation, Governance, Risk and Regulatory Environment and Bank Director’s Corporate Governance Workshop. Currently, Ms. Shattuck serves as a Board Member of the Robert Packer Hospital, Investment Committee for the Felician Sisters of North America and Nominating Committee for the Girl Scouts of the National Capital Region. She served West Point as a volunteer for over fifteen years, culminating in service as a Director for the West Point Association of Graduates, with service as Chair, Ethics Committee and Vice-Chair, Finance Committee. We believe Ms. Shattuck’s qualifications to serve as a director of the Corporation include her extensive experience in leadership, financial services, governance and talent acquisition.
Continuing Class I Directors for a term expiring at the 2027 Annual Meeting
Continuing Class I Directors for a term expiring at the 2027 Annual Meeting
Bobbi J. Kilmer
Bobbi J. Kilmer Director since: 2018 Ms. Kilmer served as the President & Chief Executive Officer of Claverack Rural Electric Cooperative from 2006 until retiring in January 2021. She also served as the Co-President & CEO of C&T Enterprises, Inc., which is the owner of Valley Energy in Sayre, PA, Wellsboro Electric Company and Citizens Electric Company in Lewisburg. She previously served as the Executive Vice President & Chief Operating Officer of Claverack. Ms. Kilmer serves on the boards of various organizations within her local and surrounding communities. She received her Bachelor of Science degree from Mansfield University. In addition, Ms. Kilmer has completed the Bank Director Certification Program. We believe Ms. Kilmer’s qualifications to serve as a director of the Corporation include her business experience, as well as her executive leadership roles at Claverack Rural Electric Cooperative and C&T Enterprises, Inc.
Terry L. Lehman, CPA (Inactive), Chairman
Terry L. Lehman, CPA (Inactive), Chairman Mr. Lehman is a retired certified public accountant with over 35 years of experience in public accounting and private industry, including serving the roles of an Assurance Director at BDO, LLP in Harrisburg, an Audit Partner at ParenteBeard, LLC, and Beard Miller Company, LLP both located in Harrisburg, Senior Manager at Ernst & Young, and an Internal Auditor at Peoples National Bank of Lebanon. Mr. Lehman was a Board Member for both MidCoast Community Bancorp, Inc. and MidCoast Community Bank from October 2015 until 2020. He also is active with various organizations in his local communities and is a Pennsylvania CPA on inactive status. He received his B.S.B.A. degree in Accounting from Shippensburg University. In addition, Mr. Lehman has completed the Bank Director Certification Program. We believe Mr. Lehman’s extensive experience in public accounting and private industry, much of which has been concentrated in work for and on behalf of financial institutions and public companies, make him qualified to serve as a director of the Corporation.
Robert G. Loughery
Robert G. Loughery Director since: 2020 Age: 55 Mr. Loughery served on the Covenant Bank Board of Directors for 5 years. As a real estate investor and developer, Mr. Loughery currently serves as the President of Nehemiah Development Company, Inc. Mr. Loughery served as a County Commissioner in the County of Bucks from February 2011 until January 2020. Mr. Loughery serves on numerous private boards and public authorities. Mr. Loughery has a B.A. degree in Policy and Management Studies from Dickinson College in 1991. Following graduation, he was commissioned an officer in the US. Army Reserves. Mr. Loughery has completed the Bank Director Certification Program. We believe Mr. Loughery is qualified to serve as a director of the Corporation because of his over 20 years’ experience in real estate development and finance and his leadership abilities.
Frank G. Pellegrino
Frank G. Pellegrino Director since: 2016 Age: 61 Mr. Pellegrino is Owner/Developer with Carlton Associates, LLC, in Lycoming County PA and is the former Executive Vice President of Sales and Marketing and a founder of Primus Technologies Corp., Williamsport. He is a graduate of Indiana University of Pennsylvania. He serves as CEO or Board Chairman on many of his businesses in Lycoming, Montour, Centre, and Union Counties. He is a member of the Board of Directors, and Audit Committee Chairman, of Advance Technologies, Middletown, PA. We believe Mr. Pellegrino’s advanced education, director experience, more than 25 years of executive leadership roles with Primus Technologies and leadership roles through his more than 12 manufacturing and service companies and his extensive community board positions throughout Northcentral PA amply qualify him to serve as a director.
Continuing Class III Directors for a term expiring at the 2026 Annual Meeting
Continuing Class III Directors for a term expiring at the 2026 Annual Meeting
Stephen M. Dorwart
Stephen M. Dorwart Director since: 2020 Age: 55 Mr. Dorwart served on the Covenant Bank Board of Directors from 2007 until July 2020. He served as Chair for both the Audit and Compensation Committees and was the Lead Outside Director for 5 years. He received his Bachelor of Science degree in Business Administration from Bucknell University in 1991. Mr. Dorwart is the managing partner of the public accounting firm Fischer Dorwart, PC with offices in Audubon, NJ and Harrisburg, PA. He is a CPA licensed in Pennsylvania, New Jersey and Delaware. We believe Mr. Dorwart is qualified to serve as a director of the Corporation because of his extensive experience in public accounting and as a director of Covenant Bank.
John M. Reber
John M. Reber Age: 58 Mr. Reber has served as Executive Vice President and Chief Risk Management Officer of the Bank since February 2021. Previously, Mr. Reber served as Executive Vice President and Director of Risk Management of the Bank since January 2011. Mr. Reber was Vice President and Director of Risk Management of the Bank since June 2004. Prior to joining C&N, Mr. Reber held various staff and management positions in credit, lending and risk management with SunBank, headquartered in Lewisburg, Pennsylvania. Mr. Reber received a Bachelor of Science degree in Finance from Bloomsburg University of Pennsylvania. Thomas L. Rudy, Jr. Age: 61 Mr. Rudy has served as Executive Vice President, Chief Delivery Officer and Region President of the Bank since February 2021. Previously, Mr. Rudy served as Executive Vice President and Director of Branch Delivery of the Bank since February 2004; President of C&N Financial Services Corporation since January 2000; and President of Bucktail Life Insurance Company since May 2018. Mr. Rudy received a Bachelor of Science degree in Finance from The Pennsylvania State University and is a graduate of the ABA Graduate School of Banking at the Wharton School, University of Pennsylvania.
2024 Performance Highlights
| ● | For 2024, the corporate performance-based payout to NEOs under the short-term incentive plan was 126.0% of target, up from 97.32% of target for 2023. For 2024, the corporate performance component of the short-term incentive awards was calculated based on comparison of the Corporation’s percent ranking of pre-tax, pre-provision net revenue (PPNR) minus net charge-offs (NCOs) as a percentage of average equity ((PPNR-NCOs)/Average Equity). PPNR includes net interest income plus noninterest income minus total noninterest expense but excludes the provision for credit losses, realized gains or losses on securities, the income tax provision and nonrecurring items included in earnings and includes income from tax-exempt securities and loans on a fully-taxable-equivalent basis. For the twelve months ended September 30, 2024, the Corporation’s (PPNR-NCOs)/Average Equity was 12.01%, at the 63rd percentile as compared to results for the selected peer group (the “Performance Peer Group”). For 2023, the corporate performance component of short-term incentive awards was based on Core return on average equity (ROAE) which excluded from earnings the after-tax impact of certain items. For the twelve months ended September 30, 2023, the Corporation’s Core ROAE was 11.41% which was at the 49th percentile as compared to results for the peer group. |
2024 Key Compensation Decisions and Actions
| ● | 2024 Short-Term Incentive Awards: Payouts to NEOs for 2024 performance ranged from 26.6% to 34.6% of base salary, above target levels for four NEOs and approximately at target for one NEO. These awards included the following components: (1) corporate awards equal to 126.0% of target based on the Corporation’s (PPNR-NCOs)/Average Equity of 12.01% as compared to the median result for a the Performance Peer Group of 10.94% for the 12 months ended September 30, 2024, (2) awards based on key performance indicators totaling 8.0% to 12.2% of base salary, and (3) awards based on individual performance ranging from 2.5% to 6.0% of base salary. |
2024 Key Compensation Decisions and Actions
| ● | 2024 Long-Term Incentive Awards: Equity awards to NEOs in 2024 had grant date fair values of 30% of 2023 base salary for Mr. Scovill (excluding the 20,000 shares discussed below), 25% of 2023 base salary for Mr. Hoose and 20% of 2023 base salary each for Mr. Hughes, Mr. Rush and Ms. Cwiklinski. The awards included a mix based on 50% time-based restricted stock awards (“RSA”) and 50% performance-based restricted stock awards (“PRSA”). The time-based RSAs and PRSAs vest over three years, with one-third vesting on each anniversary date of the award. For PRSAs, awards only vest to the extent performance has been met for the prior year. |
2024 Key Compensation Decisions and Actions
| ● | On July 30, 2024, Mr. Scovill was granted 20,000 shares of restricted common stock pursuant to the amended and restated Employment Agreement entered into on May 22, 2024, between the Board of Directors of the Corporation and Mr. Scovill. The incentive award of 20,000 shares of restricted stock to Mr. Scovill will vest on April 30, 2027, subject to the terms and conditions in the Agreement. |
2024 Key Compensation Decisions and Actions
| ● | 2024 Performance Outcome: Based on 2024 performance compared to performance of the Performance Peer Group for the 12 months ended September 30, 2024, all of the potential shares for PRSA awards granted in 2022, 2023 and 2024 vested. |
Compensation Philosophy and Program Objectives
Compensation Philosophy and Program Objectives We believe that the compensation program for executives should directly support the achievement of specific annual, long-term and strategic goals of the business, and, thereby, align the interests of executives with the interests of our shareholders. We believe the current program provides sufficient levels of fixed pay elements, in the forms of base salary and health and welfare benefits, to attract high caliber executive talent to the organization. It also provides annual and long-term incentive opportunities to encourage specific performance and to reward the successful efforts of executives. The incentive opportunities are structured to produce a performance-leveraged program format in which executives may derive a significant portion of their total compensation, depending on their role in the organization, from short and long-term incentive opportunities, but only when performance targets are met and subject to appropriate controls to ensure management is not incented to take excessive risk. We believe that the features and composition of the current program provide a total compensation package for executive officers that is competitive in our marketplace but weighted toward variable pay based on corporate and individual performance, and which contributes to the creation of shareholder value.
2024 Program Components
| 2. | Short-Term (Annual) Incentives. The Corporation’s Annual Incentive Award Plan provides participating executives with opportunities to earn additional cash compensation in a given year when corporate and business unit operating results and individual performance contributions meet or exceed established thresholds. For 2024, corporate performance was measured in comparison to that of the Performance Peer Group based on (PPNR-NCOs)/Average Equity for the 12 months ended September 30, 2024. The Committee believes the use of (PPNR – NCOs)/Average Equity, which is a non-U.S. GAAP measure, provides useful information for evaluating the Corporation’s financial performance in comparison to the Performance Peer Group’s without the impact of realized gains or losses on securities or unusual items or events that may obscure underlying performance. A reconciliation of the Corporation’s earnings under U.S. GAAP to (PPNR – NCOs) for the 12 months ended September 30, 2024 is provided in Appendix A. Key performance indicators, for which actual results were compared to the budget, included average deposits (excluding brokered deposits), net interest income on a fully-taxable equivalent basis, wealth management revenue, noninterest income excluding wealth management revenue and the efficiency ratio. Each participant’s individual performance contribution is evaluated by his or her supervisor, with the Chief Executive Officer’s individual performance contribution evaluated by the Board of Directors. The Committee, in its discretion, may adjust or eliminate award payments under the Incentive Award Plan. All awards under the Incentive Award Plan are paid in cash as soon as it is practical after the end of a plan year. |
2024 Program Components
| 3. | Long-term Incentives (“LTI”). |
2024 Program Components
| 7. | Employment Agreements. The Corporation has entered into an Employment Agreement with each of the named executive officers. The Employment Agreements are described in more detail on pages 38-40. |
2024 Executive Compensation Decisions
2024 Executive Compensation Decisions Base Salaries. For 2024, the Compensation Committee approved annual increases in base salary ranging between 3% and 5% for each of the Named Executive Officers in recognition of each executive’s contribution and performance. Annual Incentive Awards. The table below presents the performance criteria, and the weighting of each criterion used in determining the annual incentive awards earned based upon 2024 performance for the named executive officers:
2024 Executive Compensation Decisions
| | Performance Criteria | Target Performance Result | Actual Performance Result | Criterion Weighting | Target % of Base Salary | Maximum % of Base Salary | Award % of Base Salary | | J. Bradley Scovill | Corporate Earnings Performance, | | | | | | | | | Results Compared to Peer Group (1) | 100% | 126.00% | 50% | 17.5% | 26.3% | 22.1% | | | Key Performance Indicators (2): | | | | | | | | | Annual Average Deposits, excluding Brokered Deposits | $2.010 Billion | $1.996 Billion | 7.5% | 2.6% | 3.9% | 1.4% | | | Net Interest Income, Fully-Taxable-Equivalent | $82.0 Million | $79.9 Million | 3.75% | 1.31% | 2.0% | 0.9% | | | Noninterest Income, Excluding Wealth Management Revenue | $17.6 Million | $18.7 Million | 3.75% | 1.31% | 2.0% | 2.0% | | | Total Wealth Management Revenue | $10.0 Million | $10.5 Million | 7.5% | 2.6% | 3.9% | 3.9% | | | Efficiency Ratio | 65.00% | 68.04% | 7.5% | 2.6% | 3.9% | 1.0% | | | Individual Performance (3) | | | 20% | 7.0% | 10.5% | 3.4% | | | Totals | | | 100% | 35.0% | 52.5% | 34.6% | | Mark A. Hughes | Corporate Earnings Performance, | | | | | | | | | Results Compared to Peer Group (1) | 100% | 126.00% | 50% | 15.0% | 22.5% | 18.9% | | | Key Performance Indicators (2): | | | | | | | | | Annual Average Deposits, excluding Brokered Deposits | $2.010 Billion | $1.996 Billion | 7.5% | 2.3% | 3.4% | 1.2% | | | Net Interest Income, Full-Taxable Equivalent | $82.0 Million | $79.9 Million | 3.75% | 1.1% | 1.7% | 0.8% | | | Noninterest Income, Excluding Wealth Management Revenue | $17.6 Million | $18.7 Million | 3.75% | 1.1% | 1.7% | 1.7% | | | Total Wealth Management Revenue | $10.0 Million | $10.5 Million | 7.5% | 2.3% | 3.4% | 3.4% | | | Efficiency Ratio | 65.00% | 68.04% | 7.5% | 2.3% | 3.4% | 0.9% | | | Individual Performance (3) | | | 20% | 6.0% | 9.0% | 6.0% | | | Totals | | | 100% | 30.0% | 45.0% | 32.8% | | Harold F. Hoose, III | Corporate Earnings Performance, | | | | | | | | | Results Compared to Peer Group (1) | 100% | 126.00% | 45% | 13.5% | 20.3% | 17.0% | | | Key Performance Indicators (2): | | | | | | | | | Annual Average Deposits, excluding Brokered Deposits | $2.010 Billion | $1.996 Billion | 10% | 3.0% | 4.5% | 1.6% | | | Net Interest Income, Full-Taxable Equivalent | $82.0 Million | $79.9 Million | 7.5% | 2.3% | 3.4% | 1.5% | | | Noninterest Income, Excluding Wealth Management Revenue | $17.6 Million | $18.7 Million | 7.5% | 2.3% | 3.4% | 3.4% | | | Total Wealth Management Revenue | $10.0 Million | $10.5 Million | 10% | 3.0% | 4.5% | 4.5% | | | Efficiency Ratio | 65.00% | 68.04% | 10% | 3.0% | 4.5% | 1.2% | | | Individual Performance (3) | | | 10% | 3.0% | 4.5% | 3.0% | | | Totals | | | 100% | 30.0% | 45.0% | 32.2% | | Blair T. Rush | Corporate Earnings Performance, | | | | | | | | | Results Compared to Peer Group (1) | 100% | 126.00% | 45% | 11.3% | 16.9% | 14.2% | | | Key Performance Indicators (2): | | | | | | | | | Annual Average Deposits, excluding Brokered Deposits | $2.010 Billion | $1.996 Billion | 11.25% | 2.8% | 4.2% | 1.5% | | | Net Interest Income, Full-Taxable Equivalent | $82.0 Million | $79.9 Million | 5.625% | 1.4% | 2.1% | 1.0% | | | Noninterest Income, Excluding Wealth Management Revenue | $17.6 Million | $18.7 Million | 5.625% | 1.4% | 2.1% | 2.3% | | | Total Wealth Management Revenue | $10.0 Million | $10.5 Million | 11.25% | 2.8% | 4.2% | 4.1% | | | Efficiency Ratio | 65.00% | 68.04% | 11.25% | 2.8% | 4.2% | 1.1% | | | Individual Performance (3) | | | 10% | 2.5% | 3.8% | 2.5% | | | Totals | | | 100% | 25.0% | 37.5% | 26.6% | | Kelley Cwiklinski | Corporate Earnings Performance, | | | | | | | | | Results Compared to Peer Group (1) | 100% | 126.00% | 45% | 11.3% | 16.9% | 14.2% | | | Key Performance Indicators (2): | | | | | | | | | Annual Average Deposits, excluding Brokered Deposits | $2.010 Billion | $1.996 Billion | 10% | 2.5% | 3.8% | 1.4% | | | Net Interest Income, Full-Taxable Equivalent | $82.0 Million | $79.9 Million | 7.5% | 1.9% | 2.8% | 1.3% | | | Noninterest Income, Excluding Wealth Management Revenue | $17.6 Million | $18.7 Million | 7.5% | 1.9% | 2.8% | 2.8% | | | Total Wealth Management Revenue | $10.0 Million | $10.5 Million | 10% | 2.5% | 3.8% | 3.8% | | | Efficiency Ratio | 65.00% | 68.04% | 10% | 2.5% | 3.8% | 1.0% | | | Individual Performance (3) | | | 10% | 2.5% | 3.8% | 2.5% | | | Totals | | | 100% | 25.0% | 37.5% | 26.8% |
2024 Executive Compensation Decisions
| (1) The Corporate Earnings Performance award was calculated based upon achievement of annualized (PPNR-NCOs)/Average Equity as a percentile ranking compared to the Performance Peer Group. The Performance Peer Group included all publicly traded commercial banks and thrifts within MD, NJ, NY, OH, PA and WV with total assets between 0.5 and 2.5 times the Corporation (“CZNC”) as of September 30, 2024. The chart below was used to determine the incentive opportunity percentage of base salary from which a participant’s cash incentive award would be paid: |
2024 Executive Compensation Decisions
Mr. Scovill recommended the Individual Performance awards for the other NEOs, and after discussion of the performance criteria for each individual, the recommended awards were approved by the Compensation Committee and ratified by the Board of Directors. Mr. Scovill’s Individual Performance award was determined by the Board of Directors, based on recommendation of the Compensation Committee, and based on assessment of Mr. Scovill’s contributions to overall corporate performance. Long-term Performance Incentives. As a part of our annual compensation review process, we worked with our independent compensation consultant in 2023 to review pay opportunities relative to market and used those results to make changes/pay decisions for 2024. As a result of this review, the Committee elected to grant equity awards, including time-based and performance-based awards in January and February 2024. The awards with a grant date of January 31, 2024 are RSAs for which 1/3 of the shares vest annually over a 3-year period. The awards with a grant date of February 20, 2024 are PRSAs for which 1/3 of the shares vest annually, subject to meeting performance conditions, over a 3-year period. In addition, on July 30, 2024, the Corporation granted 20,000 shares of restricted stock to Mr. Scovill pursuant to the amended and restated Employment Agreement entered into on May 22, 2024. Unless events defined in the Employment Agreement occur, the time-based shares of restricted stock will vest on April 30, 2027. The awards granted in 2024 are as follows:
2024 Executive Compensation Decisions
| Name | Title | 2023 Base Salary | Type of Award | LTI Award as % of Base Salary | Grant Date Fair Value of LTI Awards | Grant Date | # of Shares Granted | | J. Bradley Scovill | Chief Executive Officer | $575,000 | RSA | 15.0% | $86,246 | 1/31/2024 | 4,033 | | | | | PRSA | 15.0% | $86,246 | 2/20/2024 | 4,492 | | | | | Employment Agreement | 70.5% | $405,300 | 7/30/2024 | 20,000 | | Mark A. Hughes | EVP and Chief Financial Officer | $332,500 | RSA | 10.0% | $33,232 | 1/31/2024 | 1,554 | | | | | PRSA | 10.0% | $33,235 | 2/20/2024 | 1,731 | | Harold F. Hoose, III | EVP and Chief Revenue Officer | $300,000 | RSA | 12.5% | $37,488 | 1/31/2024 | 1,753 | | | | | PRSA | 12.5% | $37,498 | 2/20/2024 | 1,953 | | Blair T. Rush | EVP and Region President | $295,000 | RSA | 10.0% | $29,490 | 1/31/2024 | 1,379 | | | | | PRSA | 10.0% | $29,491 | 2/20/2024 | 1,536 | | Kelley A. Cwiklinski | EVP and Chief Credit Officer | $292,000 | RSA | 10.0% | $29,191 | 1/31/2024 | 1,365 | | | | | PRSA | 10.0% | $29,184 | 2/20/2024 | 1,520 |
2024 Executive Compensation Decisions
| | | | Profitability- | | | | | | Profitability- | Based | | | | Grant | Vesting | based | Percentile | Corporation | Peer | | Date | Date | Indicator | Threshold | Result | Threshold | | 1/31/2022 and 1/31/2023 | 1/31/2025 | Core ROAE | 35th | 8.63% | 7.08% | | 1/31/2022 and 1/31/2023 | 1/31/2025 | Core ROAA | 65th | 0.87% | 0.87% | | 2/20/2024 | 2/20/2025 | (PPNR-NCOs)/Average Equity | 35th | 12.01% | 10.34% | | 2/20/2024 | 2/20/2025 | (PPNR-NCOs)/Average Assets | 65th | 1.22% | 1.14% |
Summary Compensation Table
Summary Compensation Table The following table contains information with respect to annual compensation for services in all capacities to the Corporation and the Bank for the fiscal year ended December 31, 2024, with comparative information for 2023 and 2022, of those persons who were, (i) the Chief Executive Officer, (ii) the Chief Financial Officer and (iii) the other three most highly compensated executive officers other than the Chief Executive Officer and the Chief Financial Officer to the extent such person’s total compensation exceeded $100,000 (collectively, the “named executive officers”):
Summary Compensation Table
| | | | | | | Non-Equity | All | | | | | | | Stock | Option | Incentive Plan | Other | | | Name and | | Salary | Bonus(1) | Awards(2)(3) | Awards(4) | Compensation(5) | Compensation(6) | Total | | Principal Position | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) | | J. BRADLEY SCOVILL | 2024 | 592,000 | 0 | 577,792 | 0 | 205,012 | 70,441 | 1,445,245 | | President and | 2023 | 575,000 | 0 | 132,301 | 0 | 146,168 | 372,118 | 1,225,587 | | Chief Executive Officer | 2022 | 535,000 | 0 | 224,429 | 0 | 62,942 | 265,749 | 1,088,120 | | MARK A. HUGHES | 2024 | 345,800 | 500 | 66,467 | 0 | 113,379 | 88,800 | 614,946 | | Executive Vice President | 2023 | 332,500 | 500 | 51,930 | 0 | 77,436 | 92,850 | 555,216 | | and Chief Financial Officer | 2022 | 315,000 | 500 | 89,997 | 0 | 33,000 | 78,804 | 517,301 | | HAROLD F. HOOSE,III | 2024 | 312,000 | 500 | 74,986 | 0 | 100,311 | 61,978 | 549,775 | | Executive Vice President | 2023 | 300,000 | 500 | 58,515 | 0 | 55,429 | 69,471 | 483,915 | | and Chief Revenue Officer | 2022 | 284,000 | 500 | 100,405 | 0 | 30,000 | 64,400 | 479,305 | | BLAIR RUSH | 2024 | 303,850 | 500 | 58,981 | 0 | 80,781 | 45,467 | 489,579 | | Executive Vice President | 2023 | 295,000 | 500 | 47,634 | 0 | 44,065 | 53,222 | 440,421 | | and Region President | 2022 | 289,000 | 500 | 83,491 | 0 | 20,000 | 51,024 | 444,015 | | KELLEY A. CWIKLINSKI | 2024 | 306,600 | 500 | 58,375 | 0 | 82,146 | 38,544 | 486,165 | | Executive Vice President and Chief Commercial Lending Officer | 2023 | 292,000 | 500 | 21,856 | 0 | 46,782 | 46,905 | 408,043 |
Summary Compensation Table
(1) The bonus amounts were paid pursuant to discretionary “holiday awards” that were paid in December of each year to essentially all employees except the Chief Executive Officer. (2) The grant date fair market value of stock awards is computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (the “ASC”) topic 718, “Compensation—Stock Compensation,” excluding the effect of estimated forfeitures. The value used for restricted stock awards is based on the market value of the stock at the grant date. The amounts shown in the “Stock Awards” column equal the values of restricted stock awards determined based on the average of the high and low stock price at each grant date. For 2024, the value as of the January 31, 2024 grant date of time-based awards was $21.385 per share, the value as of the February 20, 2024 grant date of performance-based awards was $19.20 and the value as of the July 30, 2024 grant date to Mr. Scovill pursuant to an amended employment agreement was $20.265. For 2023, the value as of the January 31, 2023 grant date was $23.35 per share. In 2022, the value as of the January 31, 2022 grant date was $25.02 per share. With the exception of the award to Mr. Scovill pursuant to an amended employment agreement, restricted stock awards to NEOs under the Stock Incentive Plan in 2024, 2023 and 2022 provided for vesting over a three-year term, with vesting for half of the shares dependent on satisfactory performance (time vesting) and vesting for half of the shares based on time vesting and upon the Corporation meeting defined performance conditions. In 2024 and 2023, the Corporation met the performance conditions defined in the applicable awards. In 2022, the Corporation did not meet the performance conditions; accordingly, in the first quarter 2023, the following forfeitures occurred: Mr. Scovill – 4,983 shares; Mr. Hughes – 2,041 shares; Mr. Hoose – 2,165 shares; Mr. Rush - 549 shares. (3) On July 30, 2024, the Corporation granted 20,000 shares of restricted stock to Mr. Scovill pursuant to the amended and restated Employment Agreement entered into on May 22, 2024. The total value of this stock award included in the table was $405,300. Unless events defined in the Employment Agreement occur, the shares of restricted stock will vest on April 30, 2027. (4) There were no options awarded in 2024, 2023 or 2022. (5) The amounts shown in the “Non-Equity Incentive Plan Compensation” column were paid pursuant to the Incentive Award Plan, which is described in the “Program Components” section of Compensation Discussion and Analysis. (6) Amounts shown as “All Other Compensation” include the following:
Summary Compensation Table
| ALL OTHER COMPENSATION TABLE | | | | | | | | | | | | Employer | | | | | | | | | | Contributions | Employer | Employer | | | | | | | | to the | Contributions | Contributions to | Dollar Value of | | | | | | | Employee | to the 401 (k) | the Supplemental | Insurance Premium | Dividends | Perquisites | | | | | Stock | Employee | Executive | paid for Group- | Paid on | and Other | | | | | Ownership | Savings | Retirement | Term Life and Long- | Restricted | Personal | | | | | Plan | Plan | Plan (SERP) | Term Disability | Stock | Benefits(1) | Total | | Name | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) | | J. Bradley Scovill | 2024 | 6,900 | 16,500 | 0 | 7,020 | 9,942 | 30,079 | 70,441 | | | 2023 | 13,200 | 16,500 | 289,639 | 3,980 | 18,103 | 30,696 | 372,118 | | | 2022 | 12,200 | 15,250 | 186,799 | 2,748 | 20,636 | 28,116 | 265,749 | | Mark A. Hughes | 2024 | 6,900 | 16,500 | 56,868 | 3,980 | 3,952 | 600 | 88,800 | | | 2023 | 13,200 | 16,500 | 51,306 | 3,980 | 7,264 | 600 | 92,850 | | | 2022 | 12,200 | 15,250 | 39,598 | 2,748 | 8,408 | 600 | 78,804 | | Harold F. Hoose, III | 2024 | 6,900 | 16,500 | 26,224 | 2,833 | 4,405 | 5,116 | 61,978 | | | 2023 | 13,200 | 16,500 | 23,523 | 2,833 | 7,972 | 5,443 | 69,471 | | | 2022 | 12,200 | 15,250 | 19,300 | 2,032 | 9,002 | 6,616 | 64,400 | | Blair T. Rush | 2024 | 6,900 | 16,500 | 0 | 3,980 | 3,324 | 14,763 | 45,467 | | | 2023 | 12,980 | 16,225 | 0 | 3,980 | 6,250 | 13,787 | 53,222 | | | 2022 | 12,200 | 15,250 | 0 | 2,748 | 7,639 | 13,187 | 51,024 | | Kelley A. Cwiklinski | 2024 | 6,900 | 16,500 | 0 | 3,980 | 1,564 | 9 600 | 38,544 | | | 2023 | 13,200 | 16,500 | 0 | 3,801 | 3,804 | 9,600 | 46,905 |
Summary Compensation Table
| (1) Perquisites and other personal benefits include the estimated personal use portion of the cost of a company-supplied automobile and personal reimbursement for cell phones and club memberships, which were used primarily, but not exclusively, for business purpose |
Grants of Plan-Based Awards
Grants of Plan-Based Awards The following table sets forth information concerning awards granted to the named executive officers for the year ended December 31, 2024 under the 2023 Stock Incentive Plan.
Grants of Plan-Based Awards
Grants of Plan-Based Awards
Grants of Plan-Based Awards
| | | | Estimated Future Payouts Under Non- Equity Incentive Awards (a) | | | Estimated Future Payouts Under Equity Incentive Plan Awards (b) | | | | | | | Board/ | | | | | | | Grant Date | | | | Committee | | | | | | | Fair Value of | | | Grant | Action | Threshold | Target | Maximum | Threshold | Target | Maximum | Stock | | Name | Date | Date | $ | $ | $ | # | # | # | Awards ($) (b) | | J. Bradley Scovill | 1/31/2024 | 1/23/2024 | 69,086 | 207,200 | 310,800 | | 4,033 | | 86,246 | | | 2/20/2024 | 1/23/2024 | | | | | 4,492 | | 86,246 | | | 7/30/2024 | 5/22/2024 | | | | | 20,000 | | 405,300 | | Mark A. Hughes | 1/31/2024 | 1/23/2024 | 34,580 | 103,740 | 155,610 | | 1,554 | | 33,232 | | | 2/20/2024 | 1/23/2024 | | | | | 1,731 | | 33,235 | | Harold F. Hoose | 1/31/2024 | 1/23/2024 | 31,200 | 93,600 | 140,400 | | 1,753 | | 37,488 | | | 2/20/2024 | 1/23/2024 | | | | | 1,953 | | 37,498 | | Blair T. Rush | 1/31/2024 | 1/23/2024 | 25,311 | 75,963 | 113,944 | | 1,379 | | 29,490 | | | 2/20/2024 | 1/23/2024 | | | | | 1,536 | | 29,491 | | Kelley A. Cwiklinski | 1/31/2024 | 1/23/2024 | 25,490 | 76,500 | 114,750 | | 1,365 | | 29,191 | | | 2/20/2024 | 1/23/2024 | | | | | 1,520 | | 29,184 |
Grants of Plan-Based Awards
| (a) Compensation opportunities under the Corporation’s Annual Incentive Award were established based on a percentage of 2024 base salary as recommended by the Compensation Committee and approved by the Board of Directors on January 23, 2024. Additional information related to the Annual Incentive Award Plan, including the performance criteria and amounts awarded for 2024 (expressed as a percentage of 2024 base salary), are provided in the Compensation Discussion and Analysis section of this proxy statement. |
Grants of Plan-Based Awards
| (b) The grant date fair market value of stock awards is computed in accordance with ASC topic 718, “Compensation—Stock Compensation.” The value used for restricted stock awards is based on the market value of the stock at the grant date, with no assumed forfeitures. The market value per share of the January 31, 2024 awards was $21.385, as of the February 20, 2024 awards was $19.20 and as of the July 30, 2024 award was $20.265. |
Grants of Plan-Based Awards
With the exception of the July 30, 2024 award to Mr. Scovill pursuant to an amended employment agreement, restricted stock awards to NEOs under the Stock Incentive Plan in 2024 provide for vesting over a three-year term, with vesting for half of the shares dependent on satisfactory performance (time vesting) and vesting for half of the shares based on time vesting and upon the Corporation’s attainment of earnings-based performance-based standards, based on the following criteria:
Grants of Plan-Based Awards
| ● | Release of 50% (one-sixth of the total shares awarded) each year based on the Corporation achieving a percent ranking of at least 35% of (PPNR-NCOs)/Average Equity within a defined peer group of bank holding companies and thrifts for the defined measurement period as determined by the Compensation Committee. |
Grants of Plan-Based Awards
| ● | Release of 50% (one-sixth of the total shares awarded) each year based on the Corporation achieving a percent ranking of at least 65% of (PPNR-NCOs)/Average Assets within a defined peer group of bank holding companies and thrifts for the defined measurement period as determined by the Compensation Committee. |
Grants of Plan-Based Awards
In 2024, the Corporation met the performance conditions defined in the awards.
Outstanding Equity Awards at Fiscal Year-End
Outstanding Equity Awards at Fiscal Year-End The following table sets forth information with respect to non-vested stock awards as of December 31, 2024 for the named executive officers. There were no outstanding stock option awards for the named executive officers as of December 31, 2024.
Outstanding Equity Awards at Fiscal Year-End
| | Stock Awards | | | | | Market | | | Number of | Value of | | | Shares or | Shares or | | | Units of | Units of | | | Stock | Stock | | | That Have | That Have | | | Not Vested | Not Vested | | Name | (#) | ($) | | J. Bradley Scovill | 35,292 | $656,431 | | Mark A. Hughes | 5,966 | $110,968 | | Harold F. Hoose, III | 6,713 | $124,862 | | Blair T. Rush | 5,374 | $99,956 | | Kelley A. Cwiklinski | 4,018 | $74,735 |
Option Exercises and Stock Vested
Option Exercises and Stock Vested The following table sets forth information concerning the value realized on the vesting of restricted stock, during 2024 for each of the named executive officers. There were no exercises of stock options by executive officers in 2024.
Option Exercises and Stock Vested
| | Stock Awards | | | | Number of | | | | Shares Acquired | Value Realized | | | on Vesting | On Vesting | | Name | (#) | ($) | | J. Bradley Scovill | 8,438 | 174,582 | | Mark A. Hughes | 3,389 | 70,118 | | Harold F. Hoose, III | 3,703 | 76,615 | | Blair T. Rush | 2,036 | 42,125 | | Kelley A. Cwiklinski | 1,055 | 21,828 |
CEO Pay Ratio
CEO Pay Ratio The SEC requires disclosure of the ratio of the median employee’s annual total compensation to the total compensation of the principal executive officer (“PEO”). This ratio is commonly referred to as the “CEO Pay Ratio.” The Corporation’s PEO is Mr. Scovill, the President and Chief Executive Officer (“CEO”). For 2024, the annual total compensation of our CEO was 21.4 times that of the Corporation’s median employee, based on annual total compensation of $1,445,245 for Mr. Scovill and $67,600 for the median employee, detailed as follows:
CEO Pay Ratio
| | President | Median | | | and CEO | Employee | | Salary | $592,000 | $62,652 | | Bonus | - | 500 | | Stock Awards | 577,792 | - | | Non-Equity Incentive Plan Compensation | 205,012 | - | | All Other Compensation | 70,441 | 4,448 | | Total | $1,445,245 | $67,600 |
CEO Pay Ratio
The median employee was identified using a listing of all employees as of December 31, 2024, and calculating the median amount of total 2024 compensation as it would be reported based on the IRS instructions for Box 5, Medicare wages and tips. Actual amounts reported on Box 5 for 2024 were used for all employees who were employed throughout the entire year. We further annualized pay for those individuals not employed for a full year in 2024. As applicable, compensation reported on Box 5 included the amount paid in 2024 for salary, bonus, dividends on restricted stock and non-equity incentive plan (cash) awards, along with any amount deferred by the employee to the Savings & Retirement Plan (a 401(k) plan) and the imputed value of the cost of group term life insurance and certain perquisites. Compensation reported on Box 5 also included any amounts that vested in 2024 for SERP benefits and for stock awards (based on the market value of the stock on the vesting date). Compensation deferred at the election of the Corporation’s officers, and the amount of employer contributions to the ESOP and Savings & Retirement Plan, were excluded from Box 5. This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Pay Versus Performance
Pay Versus Performance The SEC has adopted rules requiring disclosure of the relationship between executive compensation and financial performance. Consistent with these rules, the Corporation (“CZNC”) is disclosing the information presented in this “Pay Versus Performance” section. The Corporation’s process for evaluating executive compensation is described in the Compensation Discussion and Analysis section of this proxy statement. The following table sets forth summary information concerning executive compensation for each of the last five years.
Pay Versus Performance
| Pay Versus Performance | | | | | | | | | | For the Years Ended December 31, 2024, 2023, 2022, 2021 and 2020 | | | | | | | | | | | | | | | Value of Initial Fixed $100 Investment on 12/31/2019 Based on: | | | | | Year | Summary Compensation Table Total for PEO ($) | Compensation Actually Paid to PEO ($) | Average Summary Compensation Table Total for Non-PEO Named Executive Officers ($) | Average Compensation Actually Paid to Non-PEO Named Executive Officers ($) | Total Shareholder Return ($) | Peer Group Total Shareholder Return ($) | Net Income ($) | (PPNR- NCOs)/ Average Equity (1) | | 2024 | 1,445,245 | 1,357,418 | 535,116 | 516,576 | 85.52 | 128.85 | 25,958,000 | 12.34% | | 2023 | 1,225,587 | 1,219,593 | 478,533 | 469,811 | 97.39 | 106.87 | 24,148,000 | 13.13% | | 2022 | 1,088,120 | 915,313 | 463,238 | 404,421 | 93.91 | 110.67 | 26,618,000 | 13.86% | | 2021 | 1,109,193 | 1,203,089 | 475,533 | 514,543 | 102.47 | 132.19 | 30,554,000 | 13.59% | | 2020 | 1,045,911 | 952,598 | 488,880 | 437,792 | 74.23 | 92.50 | 19,222,000 | 12.77% |
Pay Versus Performance
| (1) In 2024, the Corporation changed its Company-Selected Measure from Core Return on Average Equity (Core ROAE) to Pre-Tax Pre-Provision less Net-Charge Offs as a percentage of Average Equity (PPNR-NCOs/Average Equity). |
Pay Versus Performance
Mr. Scovill, the CEO, was the PEO in each of the five years presented in the table above. The non-PEO named executive officers included in table above are Mr. Hughes, Mr. Hoose, Mr. Rush and Stan Dunsmore for 2020 through 2023 and Ms. Cwiklinski in 2024. The index values shown in the table above are market-weighted dividend-reinvestment numbers, which measure the total return for investing $100.00 five years ago. The Peer Group Total Shareholder Return amounts are determined based on the NASDAQ Bank Index. A reconciliation of Summary Compensation Table Total amounts to amounts described as “Actually Paid” for each year in the Pay Versus Performance table above is presented in the following table.
Pay Versus Performance
| | | | | | | Add: Change in | | Less: Fair Value | | | | | | | | Add: Fair Value | Fair Value of | | at End of Prior | | | | | | | Less: Stock | at Year-end of | Awards | Add: Change in | Year of any | | | | | | | Awards from | Stock Awards | Granted in | Fair Value of | Awards | | | | | | | Summary | Granted | any | Shares that | Granted | | | | | | | Compensation | During the | Prior Year | Vested as of | in a Prior Year | | | | | | | Table | Year that are | that are | the Vesting | that Failed to | | | | | Summary | Less: | Valued | Outstanding | Outstanding | Date as | Meet Vesting | Total | | | | Compensation | Change in | Based on | and Unvested | and Unvested | Compared | Conditions | Compensation | | | | Table | Pension | Fair Value at | at the End | at the End | to the End of | in the | Actually | | | Year | Total | Value | Grant Date | of the Year | of the Year | the Prior Year | Covered Year | Paid | | PEO | 2024 | 1,445,245 | - | 577,792 | 530,565 | (25,918) | (14,682) | - | 1,357,418 | | | 2023 | 1,225,587 | - | 132,301 | 127,088 | (4,102) | 3,321 | - | 1,219,593 | | | 2022 | 1,088,120 | - | 224,429 | 170,879 | (21,457) | (6,693) | 91,107 | 915,313 | | | 2021 | 1,109,193 | - | 213,754 | 278,883 | 45,198 | 9,222 | 25,653 | 1,203,089 | | | 2020 | 1,045,911 | - | 196,638 | 175,723 | (52,243) | (1,905) | 18,250 | 952,598 | | AVERAGE OF | 2024 | 535,116 | - | 64,702 | 59,478 | (8,886) | (4,430) | - | 516,576 | | NON-PEO | 2023 | 478,533 | 4,252 | 49,531 | 47,580 | (1,448) | (1,071) | - | 469,811 | | NEOs | 2022 | 463,238 | - | 85,869 | 65,197 | (8,644) | (3,198) | 26,303 | 404,421 | | | 2021 | 475,533 | - | 65,315 | 85,217 | 21,041 | 5,662 | 7,594 | 514,543 | | | 2020 | 488,880 | 14,535 | 76,024 | 67,939 | (20,526) | (738) | 7,204 | 437,792 |
Pay Versus Performance
Notes:
Pay Versus Performance
| 1. | There was no pension service cost or prior service cost in the years included in the table. |
Pay Versus Performance
| 2. | There were no stock awards that were granted and vested in the same year. |
Pay Versus Performance
| 3. | There were no modifications to stock-based awards during the years included in the table. |
Pay Versus Performance
| 4. | The valuation assumptions used to calculate equity award fair values did not materially differ from those used at the time of grant. |
Pay Versus Performance
| 5. | There were no other earnings paid on stock or option awards in the covered fiscal years prior to the vesting dates that were not otherwise included in total compensation. |
Pay Versus Performance
The Corporation has selected Pre-Tax Pre-Provision Net Revenue Less Net-Charge Offs as a percentage of Average Equity ((PPNR-NCOs)/Average Equity) as its “Company-Selected Measure,” meaning the most important measure the Corporation used in linking compensation actually paid in 2024 to company performance. The Corporation’s calculations of (PPNR-NCOs)/Average Equity reflect adjustments to earnings determined based on U.S. GAAP to eliminate amounts identified as “extraordinary occurrences” as described in the 2024 Annual Incentive Plan Award document. Reconciliation of the Corporation’s earnings under U.S. GAAP to the non-GAAP earnings amount included in (PPNR-NCOs)/Average Equity for each year included in the Pay Versus Performance table is presented in the following table.
Pay Versus Performance
| | Year Ended December 31, | | | | | | (Dollars In Thousands) | 2020 | 2021 | 2022 | 2023 | 2024 | | Net Income | $19,222 | $30,554 | $26,618 | $24,148 | $25,958 | | Add: Provision for income taxes | 3,990 | 7,133 | 5,732 | 6,335 | 5,913 | | Add: Provision for credit losses | 3,913 | 3,661 | 7,255 | 186 | 2,195 | | Add: Adjustment to reflect net interest income on a fully taxable-equivalent basis | 980 | 1,135 | 1,226 | 919 | 819 | | Less: curtailment gain on Postretirement Plan | 0 | 0 | 0 | 0 | (469) | | Add (less): realized (gains) losses on available-for-sale s debt securities | (169) | (24) | (20) | 3,036 | 0 | | Less: enhancement fee Included in noninterest income related to purchase of BOLI | 0 | 0 | 0 | (2,100) | 0 | | Add: professional fees expense related to broker-dealer conversion | 0 | 0 | 0 | 389 | 0 | | Add (Less): realized loss (gain) on marketable securities | (21) | 29 | 112 | (12) | 8 | | Less: gain on sale of land | 0 | (46) | 0 | 0 | 0 | | Add: merger-related expenses | 7,708 | 0 | 0 | 0 | 0 | | Add: loss on prepayment of borrowings | 1,636 | 0 | 0 | 0 | 0 | | Pre-Provision Net Revenue (PPNR) - Non-GAAP | $37,259 | $42,442 | $40,923 | $32,901 | $34,424 | | Net Charge-offs (NCOs) | $(2,364) | $(1,509) | $(4,177) | $(264) | $(1,603) | | PPNR Less Net Charge-offs | $34,895 | $40,933 | $36,746 | $32,637 | $32,821 | | Average Equity | $273,351 | $301,226 | $265,093 | $248,494 | $265,884 | | PPNR less NCOs as a percentage of Average Equity | 12.77% | 13.59% | 13.86% | 13.13% | 12.34% |
Pay Versus Performance
The following table presents a description of the relationship between compensation amounts actually paid to the PEO and the average compensation amounts paid to the non-PEO named executive officers to the Corporation’s Total Shareholder Return (“TSR”) and the Peer Group TSR. In the table that follows, TSR measures return to an investor for a $100 investment in CZNC or the Peer Group at December 31, 2019 and reflects reinvestment of all dividends. The Total Shareholder Return amounts in the graph below reflect the values described in the “Pay Versus Performance” table on page 34. The following table presents a description of the relationship between compensation amounts actually paid to the PEO and the average compensation amounts paid to the non-PEO named executive officers to the Corporation’s net income. The following table presents a description of the relationship between compensation amounts actually paid to the PEO and the average compensation amounts paid to the non-PEO named executive officers to Pre-Tax Pre-Provision Net Revenue (PPNR) less Net Charge-Offs as a percentage of Average Equity ((PPNR-NCOs)/Average Equity), which is the Corporation’s Company-Selected Measure as described above. In the table, (PPNR-NCOs)/Average Equity is based on the Corporation’s results for the calendar years ended December 31, 2020, through 2024. In contrast, the Non-Equity Incentive Award amounts included in Compensation Actually Paid were based on the Corporation’s results as compared to results for a defined peer group for the 12-month periods ended September 30 of each year included in the table. A list of performance measures the Corporation considers the most important inputs for linking executive compensation with financial performance is as follows:
Pay Versus Performance
| 1. | PPNR less NCOs as a Percentage of Average Equity (as described above) |
Pay Versus Performance
| 2. | PPNR less NCOs as a Percentage of Average Assets |
Pay Versus Performance
| 3. | Average Deposits, Excluding Brokered Deposits |
Pay Versus Performance
| 4. | Net Interest Income on a Fully Taxable-Equivalent Basis |
Pay Versus Performance
| 5. | Noninterest Income, excluding Security Gains or Losses and Wealth Management Revenue |
Pay Versus Performance
| 6. | Efficiency Ratio |
Pay Versus Performance
| 7. | Total Wealth Management Revenue |
Pay Versus Performance
Each of these performance measures is described in detail in the Compensation Discussion and Analysis section.
Potential Payments upon Termination or Change in Control
Potential Payments upon Termination or Change in Control The table that follows provides quantitative information regarding contracts, agreements, plans or arrangements that provide for payments to a named executive officer upon termination of employment. The table does not include information with respect to contracts, agreements, plans or arrangements to the extent they do not discriminate in scope, terms, or operation, in favor of executive officers or the Corporation and that are available generally to all salaried employees.
Potential Payments upon Termination or Change in Control
| As of December 31, 2024: | | Supplemental | | Value of | Payment Under | | | | Executive | Health | Restricted | Split Dollar | | | | Retirement | and | Stock | Bank Owned | | | | Plan | Welfare | Subject to | Life Insurance | | | Cash | Benefit | Benefits | Acceleration | Programs (1) | | Name | ($) | ($) | ($) | ($) | | | Termination Due to Retirement | | | | | | | J. Bradley Scovill | - | 1,317,447 | - | - | - | | Mark A. Hughes | - | 682,288 | - | - | - | | Harold F. Hoose, III | - | 296,046 | - | - | - | | Blair T. Rush | - | - | - | | - | | Kelley A. Cwiklinski | - | - | - | - | - | | Termination Due to Disability | | | | | | | J. Bradley Scovill | - | 1,317,447 | - | - | - | | Mark A. Hughes | - | 682,288 | - | - | - | | Harold F. Hoose, III | - | 296,046 | - | - | - | | Blair Rush | - | - | - | - | - | | Kelley A. Cwiklinski | - | - | - | - | - | | Termination Without Cause or for Good Reason - Before a Change in Control | | | | | | | J. Bradley Scovill | 1,374,804 | 1,317,447 | 17,332 | - | - | | Mark A. Hughes | 549,676 | 682,288 | 17,749 | - | - | | Harold F. Hoose, III | 261,108 | 296,046 | 11,599 | - | - | | Blair Rush | 385,131 | - | 15,827 | - | - | | Kelley A. Cwiklinski | 447,621 | - | 15,944 | - | - | | Termination Due to Death | | | | | | | J. Bradley Scovill | - | 1,317,447 | - | - | 575.000 | | Mark A. Hughes | - | 682,288 | - | - | 332,500 | | Harold F. Hoose, III | - | 296,046 | - | - | 300,000 | | Blair Rush | - | - | - | - | 659,060 | | Kelley A. Cwiklinski | - | - | - | - | 723,186 | | Termination Without Cause or for Good Reason - Upon or After a Change in Control | | | | | | | J. Bradley Scovill | 4,110,664 | 1,317,447 | 51,996 | 656,431 | - | | Mark A. Hughes | 1,643,531 | 682,288 | 53,247 | 110,968 | - | | Harold F. Hoose, III | 783,324 | 296,046 | 34,796 | 124,862 | - | | Blair Rush | 577,697 | - | 15,827 | 99,956 | | | Kelley A. Cwiklinski | 671,432 | - | 23,916 | 74,735 | - |
Potential Payments upon Termination or Change in Control
| (1) The amounts represent death benefits payable under split-dollar life insurance policies purchased or acquired by the Corporation pursuant to business combinations. |
Compensation of Directors
Compensation of Directors The following table summarizes the compensation paid by the Corporation and Bank to directors for the fiscal year ended December 31, 2024, other than J. Bradley Scovill who did not receive compensation as a director.
DIRECTOR COMPENSATION (1)(2)
DIRECTOR COMPENSATION (1)(2)
DIRECTOR COMPENSATION (1)(2)
| | Fees | | | | | Earned or | | | | | Paid in | Stock | | | | Cash (3) | Awards (4) | Total | | Name | ($) | ($) | ($) | | Stephen M. Dorwart | 64,342 | 21,385 | 85,727 | | Susan E. Hartley | 55,667 | 21,385 | 77,052 | | Bobbi J. Kilmer | 59,717 | 21,385 | 81,102 | | Leo F. Lambert | 52,167 | 21,385 | 73,552 | | Terry L. Lehman | 95,683 | 21,385 | 117,068 | | Robert G. Loughery | 51,867 | 21,385 | 73,252 | | Frank G. Pellegrino | 58,467 | 21,385 | 79,852 | | Helen S. Santiago | 52,767 | 21,385 | 74,152 | | Katherine W. Shattuck | 53,467 | 21,385 | 74,852 | | Aaron K. Singer | 54,500 | 21,385 | 75,885 |
DIRECTOR COMPENSATION (1)(2)
(1) The columns disclosing option awards, non-equity incentive plan compensation, changes in pension value and nonqualified deferred compensation earnings, and other forms of compensation have been omitted from the table because no director earned any compensation during 2024 of a type required to be disclosed in those columns. (2) As of December 31, 2024, each non-employee director owned 1,000 shares of common stock awarded pursuant to the 2023 Equity Plan for which transfer restrictions had not yet lapsed. For each director, those shares had a value of $18,600 based on the closing price of the Corporation’s common stock on December 31, 2024 (the last business day of the year). (3) Includes annual cash retainer, Chairman chair retainer (if any) and attendance fees. (4) The amount shown in the “Stock Awards” column equals the value of restricted stock awards of 1,000 shares, determined based on the grant date fair market value of $21.385 per share. Director Fees. Compensation of the Board of Directors is established by the Board upon recommendation of the Compensation Committee. In developing its recommendations for 2024, the Compensation Committee considered information provided by Pearl Meyer. Employee directors are not entitled to additional compensation for board or committee service. As shown in the following schedule, in 2024, the Board made several changes to the fee structure for determining cash compensation to non-employee directors for their service as directors. These changes were implemented effective May 1, 2024. In 2024, the amount of payments to the directors for the annual retainers and fees were made on a pro rata basis for the monthly periods indicated.
DIRECTOR COMPENSATION (1)(2)
| Fee Schedule - Independent Directors | January 1, 2024 to | May 1, 2024 to | | | April 30, 2024 | December 31, 2024 | | Annual Fees: | | | | Cash Retainer (All Independent Directors) | $20,000 | $45,000 | | Additional Cash Retainer and Fee – Chairman | $25,000 | $25,000 | | Committee Chair Fees: | | | | Executive Committee | None | None | | M&A Committee | None | None | | Risk Committee | $4,000 | $8,000 | | Audit Committee | $7,500 | $7,500 | | Compensation Committee | $5,000 | $5,000 | | All Other Committees | $4,000 | $4,000 | | Per-Meeting Attendance Fees: | | | | Board Meetings (All Directors) | $1,000 | $0 | | Committee Meetings - 1-to-5 meetings: | | | | Audit Committee | $700 | $0 | | Compensation Committee | $700 | $0 | | All Other Committees | $600 | $0 | | Committee Meetings - after 5 or more meetings: | | | | Audit Committee | $700 | $700 | | Compensation Committee | $700 | $700 | | All Other Committees | $600 | $600 |
DIRECTOR COMPENSATION (1)(2)
Attendance fees are not doubled in the event of joint meetings of the Corporation and Bank Boards. Stock Incentive Plans. In addition to cash fees, non-employee directors may also receive compensation in the form of Corporation common stock pursuant to the 2023 Equity Incentive Plan.