DEF 14A of Investar Holding Corp
Filed Apr 2, 2024 · FY20230001437749-24-010596
BOARD OF DIRECTORS
BOARD OF DIRECTORS
Board Composition and Refreshment
Board Composition and Refreshment On June 21, 2023, upon the recommendation of the Nominating and Governance Committee, the board increased the size of the board from 10 to 12 directors and appointed Anita M. Fontenot, Julio A. Melara, and James E. Yegge as directors to serve until the 2024 Annual meeting. Ms. Fontenot and Dr. Yegge have served as directors of the Bank since May 2017, and Mr. Melara has served as a director of the Bank since July 2020. As previously announced, David J. Lukinovich resigned from our board on February 21, 2024. Mr. Lukinovich had served on our board since 2013. James H. Boyce, III resigned from the board on June 21, 2023. Mr. Boyce had served on the board since 2013. Following the resignation of Mr. Lukinovich in February 2024, our board is currently comprised of 11 directors, and each of our current directors has been nominated to serve a one-year term.
Information about Directors and Director Nominees
Information about Directors and Director Nominees The following table lists the 11 directors currently serving on our board and nominated for election to our board at the 2024 Annual Meeting, each of whom also serves as a director of the Bank. The information below includes a brief discussion of the experience, qualifications and skills that led us to conclude that such individual should serve as a member of our board. We believe that our board consists of a diverse collection of individuals who possess the integrity, education, work ethic and ability to work with others necessary to oversee our business effectively and to represent the interests of all shareholders. The information presented below highlights certain notable experience, qualifications and skills for each director nominee, but does not provide an exhaustive catalog of each and every qualification and skill that a director nominee possesses.
Information about Directors and Director Nominees
| Name | Age | Background, Qualifications and Skills | | John J. D’Angelo Director since 2013 | 64 | Mr. D’Angelo has been the President and Chief Executive Officer of the Company since our organization as a bank holding company in 2013. He has also served as the Bank’s President and Chief Executive Officer since its organization in 2006. Prior to the Bank’s organization, Mr. D’Angelo was manager of the private banking, small business banking, construction lending, brokerage and trust areas of Hibernia National Bank (the predecessor to Capital One, N.A.) for more than six years in the East Baton Rouge Parish, Louisiana, market. From 1996 to 2005, Mr. D’Angelo was president and director of Aegis Lending Corporation, a company with lending operations in 46 states and the District of Columbia. As the founder of the Bank and its current Chief Executive Officer, Mr. D’Angelo has a detailed understanding of our history, current operations, future plans and strategies. His extensive banking experience is an additional qualification to serve on our board. | | Anita M. Fontenot Director since 2023 Independent | 68 | Ms. Fontenot is a Lafayette, Louisiana resident and has been president of Southwest Fidelity Corporation since 2001. Southwest Fidelity Corporation is the holding company for nine finance companies located in Louisiana's Acadiana region and a full-service independent insurance agency that manages real estate, rental properties, and other investments. She is also involved in numerous civic and non-profit associations in the Acadiana area. Ms. Fontenot brings to the board an intimate knowledge of Louisiana’s Acadiana region, one of our primary markets. Ms. Fontenot's extensive experience in the business community and her significant contacts qualify her to serve on our board. | | William H. Hidalgo, Sr. Director since 2013 | 84 | Mr. Hidalgo, the Chairman of our board, is the owner and managing member of Halimar Shipyard, LLC, a shipyard management company in Morgan City, Louisiana, and is an active marine consulting engineer. From May 1994 to October 2001, Mr. Hidalgo served as President and CEO of Conrad Industries, Inc., a publicly-traded marine vessel and offshore drilling component construction company in Morgan City. Mr. Hidalgo’s experience as president and CEO of a public company provides the board with knowledge of matters relevant to the successful management of a public company. As with a number of other directors, as a business owner, Mr. Hidalgo is able to add a borrower’s perspective to board discussions. His significant experience owning and operating companies also enables him to help the board efficiently manage the Company’s growth. | | Rose J. Hudson Director since 2022 Independent | 59 | Ms. Hudson is the President and CEO of Louisiana Lottery Corporation and has served in that capacity since 2006. Ms. Hudson has been active in service to the Baton Rouge community for many years. She is currently chair of the Woman’s Hospital Foundation and immediate past chair of the board of directors of the Mary Bird Perkins Cancer Foundation. In addition, as the President and CEO of Louisiana Lottery Corporation for almost 20 years, Mrs. Hudson brings to the board valuable insight into the processes and procedures necessary to manage a large, highly-regulated enterprise. Ms. Hudson’s leadership experience, business and management experience and extensive involvement in the local community qualify her to serve on our board. | | Gordon H. Joffrion, III Director since 2013 Independent | 70 | Mr. Joffrion has worked as a licensed general contractor since 1979. Since 2006, he has served as the General Manager of Joffrion Construction, Inc., a commercial and residential construction business in Baton Rouge, Louisiana, one of our primary markets. Mr. Joffrion’s long-standing business and personal relationships in the Baton Rouge area, as well as his strong knowledge of the business conditions in Baton Rouge, qualify him to serve on the board. Commercial real estate lending is a significant aspect of our operations. Mr. Joffrion’s extensive knowledge of the real estate and construction industries provides the board with an additional resource in understanding the risks and trends associated with commercial real estate. | | Robert Chris Jordan Director since 2017 Independent | 70 | Mr. Jordan, a resident of New Iberia, Louisiana, has served as Managing Member of Vermillion Business Group since 1989. Vermillion Business Group develops properties for several Fortune 500 companies and also develops gated and non-gated subdivisions and industrial parks. Mr. Jordan is also involved in numerous civic and non-profit associations in the Lafayette, Louisiana region. Commercial real estate lending is a significant aspect of our operations. Mr. Jordan’s extensive experience in commercial real estate development enables him to provide valuable insight with respect to our commercial real estate operations throughout our footprint. In addition, Mr. Jordan’s extensive experience in the Lafayette business community, and his significant contacts within the community, qualify him to serve on our board. |
Information about Directors and Director Nominees
| Julio A. Melara Director since 2023 Independent | 59 | Mr. Melara is the President and CEO of Melara Enterprises, LLC which publishes the Greater Baton Rouge Business Report, 225 Magazine, inRegister Magazine, Daily Report online news, 1012 Industry Report, and other specialty publications. He is also the President and CEO of StudioE, a content, communications, and creative studio. He serves and has served on numerous Boards of Directors, including the National Alliance of Area Business Publishers, Tiger Athletic Foundation, and Joe Burrow Foundation. In addition to his extensive involvement in the local community, Mr. Melara's background as a businessman allows him to add a customer’s perspective to the board’s discussions and qualifies him to serve on our board. Mr. Melara currently serves as our audit committee financial expert. | | Suzanne O. Middleton Director since 2013 Independent | 64 | Ms. Middleton currently serves as the chairman of the Bank. Since April 1999, she has worked as the Chief Financial Officer of Credit One, LLC, a debt buying and collection company based in Metairie, Louisiana. As a chief financial officer, Ms. Middleton brings to our board extensive accounting, management, strategic planning, risk assessment and financial skills, which are important to the oversight of our financial reporting, enterprise and operational risk management operations. Her background and experience are important in the formulation of board policy. Her knowledge of the New Orleans area allows her to provide insight regarding our growth plans in this market. | | Andrew C. Nelson, M.D. Director since 2013 Independent | 58 | Dr. Nelson is a board certified gastroenterologist and is currently a partner with Texas Digestive Disease Consultants, a medical practice. From 1997 to 2018, he worked as a practicing partner with Gastroenterology Associates, a medical practice in Baton Rouge, Louisiana. In addition to the different perspective on our banking operations that Dr. Nelson’s background as a physician gives him, Dr. Nelson’s experience as a business owner allows him to provide insight and understanding of our customer’s needs, as well as an understanding of successful business operations. | | Frank L. Walker Director since 2013 Independent | 63 | Mr. Walker has been the Chief Financial Officer of JP Oil Holdings, LLC since 1996. JP Oil Holdings, LLC, headquartered in Lafayette, Louisiana, is an oil and gas exploration and production company as well as an investor in commercial real estate. Mr. Walker also serves on the Board of Trustees and as Treasurer of Ochsner Lafayette General Health, a seven-hospital system with an additional six clinical affiliate hospitals in southwest Louisiana. Mr. Walker’s financial and accounting expertise, combined with his experience in the oil and gas industry are valuable to our Company and our board. In addition, Mr. Walker’s knowledge and contacts in Lafayette help us to develop our strategies to further expand our presence in this area. | | James E. Yegge, M.D. Director since 2023 Independent | 58 | Dr. Yegge is a board certified nephrologist at the Renal Associates of Baton Rouge, LLC. He has lived in the Baton Rouge area since 2002. Dr. Yegge’s extensive experience in the healthcare industry and his community ties in our markets are valuable to our Company and our board. In addition, Dr. Yegge’s background as a physician and relationships in the local community offer a unique perspective on our banking operations with regard to understanding how we can better serve our customers’ needs. |
Evaluation of Director Nominees
Evaluation of Director Nominees When evaluating director candidates, the nominating and governance committee’s objective is to craft a board composed of individuals with a broad mix of backgrounds and experiences and possessing, as a whole, all of the skills and expertise necessary to guide a company like ours in the prevailing business environment. The committee uses the same criteria to assess all candidates for director, regardless of who proposed the candidate. Our By-laws set forth the minimum qualifications that any director or director candidate must possess, which include, as to such individual, the following: (1) ownership (together with his or her affiliates) of at least $100,000 of our stock, unless the board determines otherwise; (2) satisfaction of all qualifications to serve as a director under applicable laws, rules and regulations; (3) no felony convictions or conduct inconsistent with our Code of Ethics or otherwise not in the best interests of our Company or our employees; and (4) attendance each calendar year of not less than 80% of all board and committee meetings. In addition to the minimum qualifications in our By-laws, the nominating and governance committee considers whether the candidate possesses the following qualifications and qualities:
Evaluation of Director Nominees
| • | independence for purposes of the Nasdaq Stock Market Rules and SEC rules and regulations, and a record of honest and ethical conduct and personal integrity; |
Evaluation of Director Nominees
| • | experience in banking, marketing, finance, legal, accounting or other professional disciplines; |
Evaluation of Director Nominees
| • | familiarity with and participation in our markets; |
Evaluation of Director Nominees
| • | ability to represent the interests of all of our shareholders; and |
Evaluation of Director Nominees
| • | ability to devote time to the board and to enhance the board’s knowledge of our industry, our customers' industries, and our customers. |
Evaluation of Director Nominees
Although the board has not adopted a formal policy regarding the consideration of diversity when evaluating director candidates, the board believes that its membership should reflect diversity in its broadest sense. Accordingly, whenever the nominating and governance committee evaluates a potential candidate, we expect it to consider a candidate’s gender, ethnicity, experience, education, geographic location, and difference of viewpoint in the context of the composition of the board as a whole.
NON-EMPLOYEE DIRECTOR COMPENSATION
NON-EMPLOYEE DIRECTOR COMPENSATION During 2023, our non-employee directors received an award of RSUs as compensation for their service on our board and did not receive any cash fees. The RSUs vest in one-half increments each year over a two-year vesting period. Directors who are also our employees do not receive additional compensation for their service as directors. On January 18, 2023, our non-employee directors of the Company at the time were granted RSUs, with the number of RSUs granted to each director determined based on the following target grant date award values: chairman of the board of the Company or the Bank - $34,000, chairman of each Company or Bank board committee - $32,000, and each other member of the Company’s board - $27,500. On January 18, 2023, our non-employee directors of the Bank at the time were granted RSUs, with the number of RSUs granted to each director determined based on the following target grant date award values: chairman of each Bank board committee - $27,500, and each other member of the Bank's board - $25,000. The RSUs vest in two equal installments. The first installment vested on January 18, 2024, and the second will vest on January 1, 2025. We also reimburse our directors for reasonable expenses incurred in connection with their service on our board, such as travel and lodging expenses. The following table sets forth compensation paid during 2023 to each of our non-employee directors at the time.
NON-EMPLOYEE DIRECTOR COMPENSATION
| Director Compensation Table | | | | Name(1) | Stock Award(2) | Total | | Robert M. Boyce, Sr.(3)(6) | $41,583 | $41,583 | | James H. Boyce, III(4) | 31,999 | 31,999 | | Anita M. Fontenot(5) | 27,486 | 27,486 | | William H. Hidalgo, Sr. | 33,997 | 33,997 | | Rose J. Hudson | 31,999 | 31,999 | | Gordon H. Joffrion, III | 31,999 | 31,999 | | Robert Chris Jordan(6) | 41,583 | 41,583 | | David J. Lukinovich | 31,999 | 31,999 | | Julio A. Melara(5) | 27,486 | 27,486 | | Suzanne O. Middleton | 33,997 | 33,997 | | Andrew C. Nelson, M.D. | 27,486 | 27,486 | | Frank L. Walker | 27,486 | 27,486 | | James E. Yegge, M.D.(5) | 24,993 | 24,993 |
NON-EMPLOYEE DIRECTOR COMPENSATION
| (1) As of December 31, 2023, each of our non-employee directors serving on that date held the number of unvested RSUs set forth in the table below. James H. Boyce, III and Robert M. Boyce, Sr., who each left the board of directors during 2023, forfeited their unvested RSUs upon their departure and had no unvested RSUs as of December 31, 2023. |
NON-EMPLOYEE DIRECTOR COMPENSATION
| Name | Unvested RSUs | | Anita M. Fontenot | 1,934 | | William H. Hidalgo, Sr. | 2,369 | | Rose J. Hudson | 2,013 | | Gordon H. Joffrion, III | 2,236 | | Robert Chris Jordan | 2,459 | | David J. Lukinovich | 2,236 | | Julio A. Melara | 1,803 | | Suzanne O. Middleton | 2,369 | | Andrew C. Nelson, M.D. | 1,803 | | Frank L. Walker | 2,026 | | James E. Yegge, M.D. | 1,818 |
NON-EMPLOYEE DIRECTOR COMPENSATION
| (2) The dollar amount of our time-based RSUs reflects the aggregate fair value determined as of the date of the grant based on the closing price of our common stock on such date, which on January 18, 2023 was $21.49, in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation. | | (3) Robert M. Boyce, Sr. resigned as a director effective February 8, 2023. | | (4) James H. Boyce, III resigned as a director effective June 21, 2023. | | (5) Anita M. Fontenot, Julio A. Melara, and James E. Yegge joined our board effective June 21, 2023. Ms. Fontenot and Dr. Yegge have served as directors of the Bank since May 2017, and Mr. Melara has served as a director of the Bank since July 2020. Ms. Fontenot, Mr. Melara, and Mr. Yegge each received a stock award on January 18, 2023 (which are reflected in the table above), as a member of the board of directors of the Bank and did not receive an additional award upon joining the board of directors of the Company. | | (6) Robert M. Boyce, Sr. and Robert Chris Jordan were each granted RSUs totaling $31,999 for their respective service as a non-employee director of the Company who served as chairman of a Company or Bank committee and RSUs totaling $9,584 for previously unawarded service as a chairman of a Company or Bank committee. |
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION This discussion should be read in conjunction with the “Compensation Tables” section beginning on page 23, as it provides context to the disclosures in the tables and detail regarding our executive compensation program, which is applicable to the executive officers identified in the tables (our “named executive officers” or “NEOs” ). For 2023, our NEOs were:
EXECUTIVE COMPENSATION
| • | John J. D’Angelo, President and Chief Executive Officer | | • | John R. Campbell, Executive Vice President and Chief Financial Officer | | • | Linda M. Crochet, Executive Vice President and Chief Operations Officer |
EXECUTIVE COMPENSATION
Mr. D’Angelo served as our interim Chief Financial Officer for a brief period in 2023 until John R. Campbell joined us as Executive Vice President and Chief Financial Officer of the Company and the Bank on January 23, 2023. The fundamental purpose of our executive compensation program is to assist us in achieving our financial and operating performance objectives. Specifically, we tailor our executives’ compensation with the following objectives in mind:
EXECUTIVE COMPENSATION
| • | Rewarding executives based on our performance, focusing on achievement of company-wide, department and individual performance goals; |
EXECUTIVE COMPENSATION
| • | Aligning the executives’ interests with the creation of long-term shareholder value, without encouraging excessive risk taking; and |
Shareholder Outreach and Engagement
| What We Heard | How We Responded | | Demonstrate clearer performance criteria for LTI award program | In an effort to incorporate a more formulaic, objective structure into the LTI program, the compensation committee began working with its independent compensation consultant to develop pre-established, objective performance metrics that will determine each executive’s LTI target award value beginning with the 2024 LTI awards granted in April 2024. See “Long-term Incentive Awards” under “Narrative to Summary Compensation Table for 2023.” | | Performance goals for annual cash incentive program were not disclosed | We added tables detailing the performance metric goals, the weighting of each metric, and actual results achieved. See “Annual Cash Incentives” under “Narrative to Summary Compensation Table for 2023”. | | Improve disclosure of the executive perquisites | We added disclosure detailing the executive perquisites. See "Summary Compensation Table" under “Compensation Tables.” | | Improve disclosures to reflect the relevant experience of board members | We updated the biographies of certain board members to highlight their unique experiences and explain how they provide value to the Company and its shareholders. See “Information about Directors and Director Nominees” under “Board of Directors.” |
Compensation Committee Processes
Compensation Committee Processes Our compensation committee determines the compensation of our executive officers and recommends to our full board the amount and type of compensation for our directors, and any employment agreements, severance or termination agreements, or change of control agreements. Except as may be limited by applicable law, stock exchange rules and its charter, the compensation committee may delegate its authority to the extent it deems necessary or appropriate. The compensation committee generally determines the compensation to be paid to our named executive officers at a meeting held in the first quarter of each new fiscal year. At this meeting, the committee evaluates the performance of our named executive officers during the past year and approves adjustments to base salaries and individual incentive award targets for the upcoming year, including any performance objectives or other restrictions that must be satisfied as a condition of vesting of any grant or award. In addition, the committee determines the amount of our named executive officers’ annual cash incentive awards for the immediately completed fiscal year and, to the extent any LTI award for that year was contingent on the attainment of performance goals, determines whether and to what extent the goals have been satisfied.
Use of Compensation Consultants
Use of Compensation Consultants Under its charter, the compensation committee has the authority to retain its own independent compensation consultant. The compensation committee has retained Blanchard. Blanchard provided a market analysis used by the compensation committee in setting the base salaries of our executive officers in 2023, and in setting the annual cash incentive targets and maximum opportunities for certain executive officers for 2023. As required by the SEC and Nasdaq rules, the compensation committee has assessed the independence of Blanchard and concluded that its work did not raise any conflicts of interest. Market Analysis. Blanchard compared the compensation for our named executive officers against a group of 15 publicly traded banks. In 2023, the compensation committee reviewed Blanchard’s market analysis in assessing the level of each element of compensation paid to our executives and approving changes to the compensation levels and annual and LTI programs for our executive officers. The 15 publicly traded companies used by Blanchard were the following:
Use of Compensation Consultants
| - Business First Bancshares, Inc. | - Red River Bancshares, Inc. | | - Capital City Bank Group, Inc. | - SmartFinancial, Inc. | | - CapStar Financial Holdings, Inc. | - South Plains Financial, Inc. | | - First Bancshares, Inc. | - Third Coast Bancshares, Inc. | | - First Guaranty Bancshares, Inc. | - Triumph Financial, Inc. | | - Guaranty Bancshares, Inc. | - USCB Financial Holdings, Inc. | | - Home Bancorp, Inc. | - Wilson Bank Holding Company | | - Professional Holding Corp. | |
Role of Our Officers Relating to Executive Compensation
| • | Recommending pay levels and annual and LTI awards for key executive officers, other than our chief executive officer; |
Narrative to Summary Compensation Table for 2023
Annual Cash Incentives. We maintain an annual cash incentive program (the “AIP”) in which our NEOs and other employees participate. The program is intended to drive achievement of short-term corporate strategic objectives and encourage high levels of performance and to enable the Company to recruit, retain and motivate executives and employees by rewarding individuals for the Company’s performance. Under the AIP, cash incentives are earned and paid on a quarterly and annual basis based on the achievement of pre-determined performance metrics applicable to each executive. At the beginning of each year, the compensation committee approves the target and maximum cash incentive award that each officer is eligible to earn in a given year and the performance metrics and goals applicable to Mr. D’Angelo, while the individual performance metrics and goals for other officers and employees are set by Mr. D’Angelo. For 2023, the program was structured as follows:
Narrative to Summary Compensation Table for 2023
| Metrics and Goals: | o 75% of the AIP award (the “Quarterly Component”) is paid in quarterly installments based on the year-to-date results compared to the target goals established for each executive. For 2023, core net income represented the sole performance metric in this component for our NEOs, and the compensation committee established goals under this metric after considering the budgeted core net income of $23.2 million for 2023. Payouts were contingent on the attainment of a threshold performance level calculated as 75% of budgeted core net income. Target and maximum performance goals are calculated based on the achievement of 100% and 125%, respectively, of core net income. o 25% of the AIP award (the “Annual Component”) is paid following the end of the year based on the year-end results compared to the target goals established for Company-wide core performance metrics. For 2023, this component of the AIP was measured based on the following four core performance metrics, and the compensation committee established goals under each of these metrics after considering the Company's annual budget. • Diluted earnings per share - represents the normalized earnings power of the business and correlates directly to shareholder value • Return on average assets - represents how well the Company utilizes the asset base to generate net earnings • Efficiency ratio - represents the Company's focus on improving operational efficiency and profitability • Delinquencies - represents the credit quality of the Company's loan portfolio Payouts with respect to each metric were contingent on the attainment of a threshold performance level. | | Target and Maximum Pay Opportunities: | The target award opportunities for Messrs. D’Angelo and Campbell and Ms. Crochet represented 50%, 28%, and 16%, respectively, of each named executive officer’s new 2023 annual base salary effective April 15, 2023. Maximum award opportunities reflect approximately 150% of the target awards for each executive. Based on a review of the Blanchard market analysis and given the Company’s performance, the target award opportunities were designed to move the executives’ total compensation closer to the median total compensation of the peer group. |
Narrative to Summary Compensation Table for 2023
| | 2023 Quarterly Component (75% of Award) | | | | 2023 Annual Component (25% of Award) | | | | 2023 AIP Total (100% of Award) | | | | | Executive | Target | Maximum | Target Achieved Payout (% of Target) | Award Earned | Target | Maximum | Target Achieved Payout (% of Target) | Award Earned | Target | Maximum | Target Achieved Payout (% of Target) | Award Earned | | John J. D’Angelo | $225,673 | $338,510 | 81% | $183,556 | $75,225 | $112,837 | 46% | $34,261 | $300,898 | $451,347 | 72% | $217,817 | | John R. Campbell | 62,500 | 93,750 | 81 | 50,835 | 20,833 | 31,250 | 46 | 9,489 | 83,333 | 125,000 | 72 | 60,324 | | Linda M. Crochet | 25,000 | 37,500 | 81 | 20,334 | 8,333 | 12,500 | 46 | 3,795 | 33,333 | 50,000 | 72 | 24,129 |
Narrative to Summary Compensation Table for 2023
| Performance Metric | Weighting | Threshold | Target | Maximum | 2023 Actual Results | Target Payout Achieved | | Quarterly Component (75% of AIP) | | | | | | | | Core Bank Net Income | 75% | $17,424 | $23,232 | $29,040 | $18,831 | 81% | | Annual Component (25% of AIP) | | | | | | | | Core Diluted Earnings Per Share | 6.25% | $1.74 | $2.32 | $2.90 | $1.91 | 82% | | Core Return on Average Assets | 6.25% | 0.86% | 0.92% | 0.95% | 0.68% | — | | Core Efficiency Ratio | 6.25% | 71.0% | 68.0% | 63.9% | 82.0% | — | | Core Delinquencies | 6.25% | 0.75% | 0.50% | 0.40% | 0.50% | 100% | | Weighted Annual Component Total | | | | | | 46% |
Narrative to Summary Compensation Table for 2023
Long-Term Incentive Awards. LTI awards are granted under our shareholder approved Amended and Restated 2017 Long-Term Incentive Compensation Plan (the “Plan”). The purpose of our LTI program is to ensure that our executives focus not only on short-term returns but also on achieving long-term Company goals and creation of shareholder value. LTI awards are intended to align the interests of our executives with the interests of our shareholders in a manner that does not encourage excessive risk-taking. The committee uses a combination of equity vehicles in the LTI program, including RSUs to provide immediate alignment of executive and shareholder interests, and stock options to incentivize longer-term performance because options are considered “at-risk” incentive compensation and have value only to the extent our share price increases during the exercise period. Our executives may receive LTI awards in the form of one or both of these awards. LTI awards vest at a rate of 20% per year over a five year period. The vesting of the awards is time-based; however, the amount of the awards granted is determined based on each executive's performance over the previous fiscal year against pre-established metrics. LTI awards are generally granted in early April. For each year, the compensation committee establishes each executive’s LTI target award value, which for Messrs. D’Angelo and Campbell could range from 40% to 80% of the executive’s base salary, and for Ms. Crochet could range from 30% to 60% of the executive’s base salary. When establishing the NEOs’ LTI target award range, the compensation committee, working with Blanchard, has evaluated the Company’s and each executive’s performance over the previous fiscal year, and also considered the competitive positioning of the value of LTI awards granted in prior years relative to our peers, with the goal of moving our executives’ target award values closer to the median. Target level performance award values approximate to the midpoint of the range of each executive's base salary. In determining each executive's LTI target award value for 2023, the compensation committee evaluated performance over the prior year by reference to the results against budget of the following Company-wide core performance metrics used in the Annual Component of the AIP: diluted earnings per share, return on average assets, efficiency ratio and delinquencies. The LTI awards granted in 2023 are based on the Company’s results for 2022; therefore, there is a lag between the date the award is granted and the performance period. After reviewing the Company’s results for these metrics for 2022, the compensation committee approved the LTI target award value for each of the executive officers for 2023 shown in the table below. The compensation committee also determined the award allocation for each executive, which for Mr. D’Angelo was 40% stock options and 60% RSUs, and for Mr. Campbell and Ms. Crochet was 100% RSUs, and approved the following grants under the Plan to our NEOs.
Narrative to Summary Compensation Table for 2023
| Executive | Total LTI Award Value | Percentage of Base Salary | Stock Options | RSUs | | John J. D’Angelo(1) | $395,000 | 65% | 34,497 | 16,977 | | John R. Campbell(2) | 75,000 | 25 | — | 3,814 | | Linda M. Crochet(3) | 100,000 | 47 | — | 7,163 |
Narrative to Summary Compensation Table for 2023
| (1) Mr. D’Angelo was granted an LTI award calculated as approximately 108% of the midpoint of his base salary range, which is 60% of his base salary, based on the percentage of target achieved for each performance metric, as shown in the table below. | | (2) Mr. Campbell’s LTI award was granted on March 1, 2023 in conjunction with his appointment as Executive Vice President and Chief Financial Officer of the Company and the Bank on January 23, 2023. He did not receive an additional grant on April 1, 2023. | | (3) Ms. Crochet was granted an LTI award calculated as approximately 108% of the midpoint of her base salary range, which is 45% of her base salary, based on the percentage of target achieved for each performance metric, as shown in the table below. |
Narrative to Summary Compensation Table for 2023
| | | Performance Goals | | | | | | Performance Metric | Weighting | Threshold | Target | Maximum | 2022 Actual Results | % of Target Achieved | | Core Diluted Earnings Per Share | 25% | $2.05 | $2.28 | $2.85 | $2.63 | 115% | | Core Return on Average Assets | 25% | 0.84% | 0.93% | 1.16% | 1.03% | 111% | | Core Efficiency Ratio | 25% | 73.4% | 66.7% | 55.6% | 63.15% | 106% | | Core Delinquencies | 25% | 0.75% | 0.50% | 0.40% | 0.51% | 100% | | Weighted Total | | | | | | 108% |
Narrative to Summary Compensation Table for 2023
Please refer to “Compensation Tables-Outstanding Equity Awards at December 31, 2023” for information about the terms of our outstanding stock option and RSU awards. As noted above, in early 2023, in an effort to incorporate a more formulaic, objective structure into the LTI program, the compensation committee began working with Blanchard to develop pre-established, objective performance metrics that will determine each executive’s LTI target award value beginning with the 2024 LTI awards. As a result, we implemented the formulaic approach shown below, which reflects the achievement of certain core performance metrics that we use to measure performance. Based on the revised LTI award formula, Mr. D’Angelo will receive an LTI award of 83% of his target award, which is the midpoint of his base salary range, in April 2024 compared to 108% in April 2023. We believe this structure for determining LTI awards based on performance results evidences a strong pay versus performance alignment between Company results and long-term executive compensation. For 2024, the LTI program was measured based on the following four core performance metrics, and the compensation committee established goals under each of these metrics after considering the Company's annual budget. • Diluted earnings per share - represents the normalized earnings power of the business and correlates directly to shareholder value • Return on average assets - represents how well the Company utilizes the asset base to generate earnings • Delinquencies - represents the credit quality of the Company's loan portfolio • Strategic goals - represents each executive’s individual contributions to the achievement of the Company's strategic priorities
Narrative to Summary Compensation Table for 2023
| | | Performance Goals | | | | | | Performance Metric | Weighting | Threshold | Target | Maximum | 2023 Actual Results | % of Target Award Payout | | Core Diluted Earnings Per Share | 25% | $1.86 | $2.32 | $2.78 | $1.91 | 71% | | Core Return on Average Assets | 25% | 0.66% | 0.83% | 1.00% | 0.68% | 70% | | Core Delinquencies | 25% | 0.75% | 0.50% | 0.40% | 0.50% | 100% | | Strategic Goals | 25% | 1 | 5 | 10 | 4 | 92% | | Weighted Total | | | | | | 83% |
Narrative to Summary Compensation Table for 2023
| ● | an amount equal to two times the sum of his then-current base salary plus the average annual incentive paid to him over the preceding three calendar years, to be paid in equal monthly installments over 24 months; and |
Narrative to Summary Compensation Table for 2023
In addition, if, during the term of the employment agreement, Mr. D’Angelo’s employment is terminated by us or the Bank other than for cause, death or disability, or he terminates employment for good reason, within six months prior to or 12 months following a change in control, he will be entitled to the benefits outlined above and to an additional amount paid in a lump sum equal to the sum of his then-current base salary plus the average annual bonus paid to him over the preceding three calendar years. The employment agreement contains provisions governing the non-disclosure and non-use of our trade secrets and confidential information and mutual covenants not to disparage the other party. In addition, the employment agreement includes non-competition, non-solicitation of customers and non-piracy of employees covenants, which remain in effect for 12 months following the termination of Mr. D’Angelo’s employment (or 24 months following termination in connection with a change in control). Additionally, Mr. D’Angelo is subject to certain forfeiture, regulatory and recoupment restrictions and must execute a valid release of claims in order to receive any severance payments. SERP Benefits: In 2018, after reviewing the analysis of its independent compensation consultant, the Board authorized the Bank to enter into a Salary Continuation Agreement with selected executives, including Mr. D’Angelo, effective February 28, 2018, which was supplemented effective May 22, 2019. In addition, the Bank has purchased $21 million of bank owned life insurance to fund the SERPs and entered into split-dollar life insurance agreements with each of the executives receiving a SERP. The SERP provides that Mr. D’Angelo shall receive annual payments of $300,000 upon attaining the age of 65, with such payments payable monthly over a period of 120 months. Mr. D’Angelo is also entitled to certain reduced payments following a termination of employment prior to attaining age 65 (other than a termination due to death or with cause), which payments will be made on the same schedule as set forth above. Mr. D’Angelo’s SERP provides for a lump sum payment of the normal retirement age accrual balance benefit upon a qualifying change in control. The payment of the benefits is subject to forfeiture if Mr. D’Angelo’s employment is terminated with cause, or if under the Federal Deposit Insurance Act, the executive is subject to a final removal or prohibition order issued by an appropriate federal banking agency or the Bank is in default.
COMPENSATION TABLES
| Summary Compensation Table | | | | | | | | | Name and Principal Position | Year | Salary(1) | Stock Awards(2) | Option Awards(2) | Non-Equity Incentive Plan Compensation(3) | All Other Compensation(4) | Total | | John J. D’Angelo | 2023 | $603,675 | $236,999 | $157,996 | $217,817 | $50,651 | $1,267,138 | | President and Chief Executive Officer | 2022 | 570,182 | 224,997 | 149,996 | 400,950 | 46,133 | 1,392,258 | | John R. Campbell | 2023 | 276,941 | 74,983 | — | 60,324 | 14,093 | 426,341 | | Executive Vice President and Chief Financial Officer | | | | | | | | | Linda M. Crochet | 2023 | 205,800 | 99,995 | — | 24,129 | 11,524 | 341,448 | | Executive Vice President and Chief Operations Officer | 2022 | 192,120 | 49,987 | — | 33,128 | 11,902 | 287,137 |
COMPENSATION TABLES
| Pay Versus Performance Table | | | | | | | | Year | Summary Compensation Table Total for PEO(1) | Compensation Actually Paid to PEO(2) | Average Summary Compensation Table Total for Non-PEO NEOs(3) | Average Compensation Actually Paid to Non-PEO NEOs(2) | Value of Initial $100 Investment Based on Total Shareholder Return | Net Income ($ in thousands) | | 2023 | $1,267,138 | $847,582 | $383,895 | $359,073 | $96.87 | $16,678 | | 2022 | 1,392,258 | 1,650,048 | 442,527 | 410,068 | 135.71 | 35,709 | | 2021 | 1,232,157 | 1,272,792 | 386,068 | 294,493 | 114.00 | 8,000 |
COMPENSATION TABLES
| Summary Compensation Table Total to CAP Reconciliation | | | | | | | | | | | | | | Adjust Value of Current Year’s Equity Grant | | Adjust For Incremental Increase/(Decrease) in Value of All Other Outstanding Equity Grants | | | | | | Year | | Summary Compensation Table Total | Subtract Grant Date Fair Value as reported in Summary Compensation Table | Add Fair Value at 12/31 | Add Change in Fair Value of Unvested Awards as of 12/31 | Add Change in Fair Value of Awards Vested during Year | Forfeited during Year | Accrued Dividend Equivalents | CAP | | 2023 | PEO | $1,267,138 | $(394,995) | $425,267 | $(347,227) | $(102,699) | $— | $98 | $847,582 | | | Average NEOs | 383,895 | (87,489) | 81,834 | (14,905) | (4,262) | — | — | 359,073 | | 2022 | PEO | 1,392,258 | (374,993) | 442,802 | 161,286 | 28,168 | — | 527 | 1,650,048 | | | Average NEOs | 442,527 | (99,988) | 84,451 | 5,011 | 14,451 | (36,455) | 71 | 410,068 | | 2021 | PEO | 1,232,157 | (374,992) | 301,570 | 60,708 | 52,506 | — | 843 | 1,272,792 | | | Average NEOs | 386,068 | (111,239) | 51,314 | 8,818 | 11,645 | (52,244) | 131 | 294,493 |
Relationship Between CAP and Financial Performance
| Outstanding Equity Awards at December 31, 2023 | | | | | | | | | | Option Awards | | | | | Stock Awards | | | Name | Option Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(1) | Market Value of Shares of Units or Stock That Have Not Vested ($)(2) | | John J. D’Angelo | 7/1/2014 | 60,000 | —(3) | $14.00 | 7/1/2024 | 37,327 | $556,546 | | | 4/30/2015 | 30,000 | —(4) | 15.74 | 4/1/2025 | | | | | 3/1/2016 | 29,070 | —(5) | 14.28 | 3/1/2026 | | | | | 3/1/2017 | 19,944 | —(6) | 20.25 | 3/1/2027 | | | | | 3/1/2018 | 17,466 | —(7) | 24.30 | 3/1/2028 | | | | | 3/1/2019 | 16,437 | 4,110(8) | 24.40 | 3/1/2029 | | | | | 3/1/2020 | 19,148 | 12,766(9) | 21.36 | 3/1/2030 | | | | | 4/1/2021 | 8,298 | 12,448(10) | 20.72 | 4/1/2031 | | | | | 4/1/2022 | 4,484 | 17,937(11) | 18.92 | 4/1/2032 | | | | | 4/1/2023 | — | 34,497(12) | 13.96 | 4/1/2033 | | | | John R. Campbell | — | — | — | — | — | 3,814 | 56,867 | | Linda M. Crochet | — | — | — | — | — | 11,666 | 173,940 |