PREMIER FINANCIAL BANCORP, INC.
VOTING RIGHTS AND PROXY INFORMATION
Only holders of record of shares of Common Stock as of the close of business on April 29, 2015May 3, 2017 (the "Record Date") will be entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement thereof. Such holders of shares of Common Stock are entitled to one vote per share on any matter, other than the election of directors, which may properly come before the Annual Meeting. In the election of directors, holders of Common Stock have cumulative voting rights whereby each holder is entitled to vote the number of shares of Common Stock held multiplied by nine (the number of directors to be elected at the Annual Meeting), and each holder may cast the whole number of votes for one candidate or distribute such votes among two or more candidates. The presence, either in person or by properly executed proxy, of the holders of a majority of the outstanding shares of Common Stock as of the Record Date is necessary to constitute a quorum at the Annual Meeting. As of the Record Date it is anticipated that 8,152,88910,657,699 shares of Common Stock will be outstanding.
Those nominees for election to the Board of Directors receiving the nine highest number of votes in the election of directors will be elected to the Board. The appointment of Crowe Horwath LLP as the Company's independent accountants for 20152017 will be ratified if the votes cast in favor of ratification exceed the votes cast against ratification. The proposal on executive compensation will be approved in a non-binding advisory vote if the shares cast in favor exceed the votes cast against approval.
You can vote by (i) signing, dating and mailing the enclosed proxy card, (ii) by attending the annual meeting in person, or (iii) following the instructions on your notice for voting by telephone or on the internet.
All shares of Common Stock that are represented at the Annual Meeting by properly executed proxies received prior to or at the Annual Meeting and not revoked will be voted at the Annual Meeting in accordance with the instructions indicated in such proxies. If no instructions are indicated, such proxies will be voted forFOR the election of the Board of Directors’ nine nominees as directors of the Company (or, if deemed appropriate by the individuals appointed in the proxies, cumulatively voted for less than all of the Board's nominees to ensure the election of as many of the Board's nominees as possible), forFOR the ratification of the appointment of Crowe Horwath LLP as the Company's independent accountants, and forFOR approval of the proposal on executive compensation.
Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before it is voted. Proxies may be revoked by (i) filing with the Secretary of the Company, at or before the Annual Meeting, a written notice of revocation bearing a later date than the proxy, (ii) duly executing a subsequent proxy relating to the same shares of Common Stock and delivering it to the Secretary of the Company at or before the Annual Meeting, (iii) attending the Annual Meeting and voting in person (although attendance at the Annual Meeting will not in and of itself constitute a revocation of a proxy), or (iv) entering a later dated telephone call or internet vote (if initially able to vote in that manner) so long as the vote or voting direction is received by 3:00 a.m. eastern daylight time on June 17, 2015.21, 2017. Any written notice revoking a proxy should be sent to the Company, to the attention of Toney K. Adkins, Secretary.
The Company will bear the cost of this solicitation. In addition to solicitation by mail, the Company will request banks, brokers and other custodian nominees and fiduciaries to supply proxy material to the beneficial owners of Common Stock, and will reimburse them for their expenses in so doing. Certain directors, officers and other employees of the Company, not specially employed for this purpose, may solicit proxies, without additional remuneration therefor, by personal meeting, mail, telephone, facsimile or other electronic means.
EFFECT OF NOT CASTING YOUR VOTE
If you hold your shares in street name, it is critical that you cast your vote if you want it to count in the election of directors (Item 1 of this proxy statement), and the advisory proposal on executive compensation (Item 3 of this proxy statement). In the past, if you held your shares in street name and you did not indicate how you wanted your shares voted in the election of directors or on executive compensation, your bank or broker was allowed to vote those shares on your behalf in the election of directors and on executive compensation as they felt appropriate.
Current regulations take away the ability of your bank or broker to vote your uninstructed shares in the election of directors and on executive compensation on a discretionary basis. Thus, if you hold your shares in street name and you do not instruct your bank or broker how to vote in the election of directors or on executive compensation no votes will be cast on your behalf. Your bank or broker will, however, continue to have discretion to vote any uninstructed shares on the ratification of the appointment of the Company’s independent registered public accounting firm (Item 2 of this proxy statement).
If you are a shareholder of record and you do not cast your vote, no votes will be cast on your behalf on any of the items of business at the annual meeting.
ANNUAL REPORT
The Company's 20142016 Annual Report, which includes audited consolidated financial statements, accompanies this Proxy Statement. The Company will furnish without cost to any shareholder, upon request, a copy of the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. Requests should be in writing and directed to the Company, to the attention of Brien M. Chase, Chief Financial Officer.
PRINCIPAL SHAREHOLDERS
As of March 20, 2015,21, 2017, the following individuals or entities reported beneficial ownership of Common Stock in excess of 5% of the Company's outstanding Common Stock:
NAME AND ADDRESS OF BENEFICIAL OWNER | NUMBER OF SHARES BENEFICIALLY OWNED(1) | PERCENTAGE OF OUTSTANDING SHARES |
Marshall T. Reynolds P.O. Box 4040 Huntington, West Virginia 25729 | 830,990 | 10.2% |
John Sheldon Clark 1633 Broadway, 30th Floor New York, New York 10019 | 506,095 | 6.2% |
Dimensional Fund Advisors LP (2) 6300 Bee Cave Road Austin, Texas 78746 | 417,934 | 5.1% |
| NAME AND ADDRESS OF BENEFICIAL OWNER | NUMBER OF SHARES BENEFICIALLY OWNED(1) | PERCENTAGE OF OUTSTANDING SHARES |
| John Sheldon Clark (2) 505 Beachland Blvd PMB 320 Vero Beach, Florida 32963 | 942,249 | 8.8% |
| Marshall T. Reynolds P.O. Box 4040 Huntington, West Virginia 25729 | 904,609 | 8.5% |
_______________
(1) | The information contained in this column is based upon information furnished to the Company by the named individuals and the shareholder records of the Company. Except where otherwise indicated, this column represents the number of shares beneficially owned, which includes shares as to which a person has sole or shared voting and/or investment power. |
(2) | Dimensional Fund Advisors LPMr. Clark reported beneficialdirect ownership of 417,934793,749 shares on December 31, 2014and reported another 148,500 shares in family trusts whereby Mr. Clark exercises discretionary control but is not a Schedule 13G filing withprincipal beneficiary of the Securities and Exchange Commission on February 5, 2015, but reported voting power for only 402,128 shares of its 417,934 beneficially owned shares.trusts. |
CERTAIN INFORMATION CONCERNING THE BOARD OF DIRECTORS
Board Meetings and Committees
During 2014,2016, the full Board of Directors met twelve times, the Compensation Committee met four times, the Information Technology Committee met four times, the Nominating Committee met twice,once, and the Audit Committee met eightnine times. Each director attended seventy-five percent or more of all meetings of the Board of Directors and committees of the Board on which he serves. The Company strongly encourages all members of the Board of Directors to attend the annual meeting of shareholders each year. At the prior year's annual shareholder meeting all directors were in attendance except Director Scaggs were in attendance.Molihan.
The Board of Directors consists of a majority of "independent directors" as such term is defined in the Nasdaq Stock Market Marketplace Rules. The Board of Directors has determined that Toney K. Adkins, Philip E. Cline, Harry M. Hatfield, Lloyd G. Jackson II, Keith F. Molihan, Neal W. Scaggs and Thomas W. Wright are independent directors. The independent directors met four timestwice in executive session during 2014.2016.
The Board does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board as the Board believes it is in the best interests of the Company to make that determination based on the position and direction of the Company and the membership of the Board. Currently, the Board has determined that separating the roles of Chairman and Chief Executive Officer is in the best interest of the Company’s shareholders at this time. This structure permits the Chief Executive Officer to focus on the management of the company’s day-to-day operations and ensures a greater role for the Chairman in setting agendas, establishing priorities, and fulfilling the Board’s roles and responsibilities on behalf of the shareholders.
The Board of Directors has adopted a formal policy by which shareholders may communicate with members of the Board of Directors by mail addressed to an individual member of the Board, to the full Board, or to a particular committee of the Board, at the following address: c/o Premier Financial Bancorp, Inc., 2883 5th Avenue, Huntington, West Virginia 25702.
The Board of Directors has threefour standing committees: a Compensation Committee, a Nominating Committee, an Information Technology (“IT”) Committee and an Audit Committee.
Board Role in Risk Oversight
The Company faces a variety of risks including credit risk, liquidity risk, operational risk and reputational risk. An effective risk management system will identify the material risks the Company faces in a timely manner, communicate necessary information to senior executives and the Board related to those material risks, implement appropriate and responsive strategies to manage those risks, and integrate the process of risk management into regular decision-making. The Board has designated the Audit Committee to take the lead in overseeing risk management as the Committee regularly reviews the Company’s internal audit reports, independent compliance audit reports, regulatory examination reports and financial information of the Company. In addition to the Audit Committee, the Board encourages management to promote a corporate culture that incorporates risk management into the Company’s strategies and day-to-day operations. Certain Directors are also members of some of the subsidiary banks’ local Board of Directors to independently assess firsthand the application of risk management processes at the subsidiary bank level.
Compensation of the Board of Directors
Directors who are not full time employees of the Company or any subsidiary receive fees of $1,000 a month for their services. Board members are also reimbursed for expenses incurred in connection with their services as directors. Directors receive no compensation for attending committee meetings.
Security Ownership by Directors and Officers
The following table sets forth certain information concerning ownership of Premier’s Common Stock as of March 31, 20152017 by (i) each of the directors, (ii) each nominee for director, (iii) each executive officer, and (iv) all directors and executive officers as a group. Except as otherwise noted, each beneficial owner listed below has sole voting and investment power with respect to the shares listed next to the owner’s name.
Name of Beneficial Owner | | Common Stock Beneficially Owned as of 3/31/2017(1)(2) | | | Exercisable Options to Acquire Additional Common Stock as of 3/31/2017(3)(4) | | | Percentage Of Outstanding Shares | |
| | | | | | | | | |
Toney K. Adkins, Director | | | 7,910 | | | | | | | * | |
Philip E. Cline, Director | | | 68,200 | | | | | | | * | |
Harry M. Hatfield, Director (5) | | | 17,600 | | | | | | | * | |
Lloyd G. Jackson, II, Director | | | 15,152 | | | | | | | * | |
Keith F. Molihan, Director | | | 6,408 | | | | | | | * | |
Marshall T. Reynolds, Chairman of the Board (6) | | | 904,609 | | | | | | | 8.5 | % |
Neal W. Scaggs, Director (7) | | | 124,553 | | | | | | | 1.2 | % |
Robert W. Walker, Director & Chief Executive Officer (8) | | | 97,148 | | | | | | | * | |
Thomas W. Wright, Director | | | 49,835 | | | | | | | * | |
Brien M. Chase, Chief Financial Officer | | | 21,249 | | | | 18,212 | | | | * | |
J. Mark Bias, Senior Vice President | | | 110 | | | | 1,100 | | | | * | |
Michael R. Mineer, Senior Vice President | | | 18,892 | | | | 37,401 | | | | * | |
Scot A. Kelley, Vice President, Credit Administration | | | 10,975 | | | | 3,006 | | | | * | |
Katrina Whitt, Vice President, Human Resources | | | 1,452 | | | | 16,533 | | | | * | |
All directors and executive officers as a group (14 in number) | | | 1,344,093 | | | | 76,252 | | | | 13.3 | % |
Name of Beneficial Owner | | Common Stock Beneficially Owned as of 3/31/2015(1) | | | Exercisable Options to Acquire Additional Common Stock as of 3/31/2015(2) | | | Percentage Of Outstanding Shares | |
| | | | | | | | | |
Toney K. Adkins, Director | | | 7,191 | | | | | | | * | |
Philip E. Cline, Director | | | 61,000 | | | | | | | * | |
Harry M. Hatfield, Director (3) | | | 15,599 | | | | | | | * | |
Lloyd G. Jackson, II, Director | | | 13,775 | | | | | | | * | |
Keith F. Molihan, Director | | | 5,826 | | | | | | | * | |
Marshall T. Reynolds, Chairman of the Board (4) | | | 830,990 | | | | | | | 10.2 | % |
Neal W. Scaggs, Director (5) | | | 113,230 | | | | | | | 1.4 | % |
Robert W. Walker, Director & Chief Executive Officer (6) | | | 73,273 | | | | 13,560 | | | | 1.1 | % |
Thomas W. Wright, Director | | | 45,305 | | | | | | | | * | |
Brien M. Chase, Chief Financial Officer (7) | | | 11,894 | | | | 30,401 | | | | * | |
Michael R. Mineer, Senior Vice President | | | 17,175 | | | | 26,501 | | | | * | |
Scot A. Kelley, Vice President, Credit Administration | | | 6,566 | | | | 10,435 | | | | * | |
Katrina Whitt, Vice President, Human Resources | | | 550 | | | | 17,549 | | | | * | |
All directors and executive officers as a group (13 in number) | | | 1,202,374 | | | | 98,446 | | | | 16.0 | % |
* The percentage of outstanding shares beneficially owned is less than 1%.
(1) | The information contained in this column is based upon information furnished to the Company by the named individuals and the shareholder records of the Company. Except where otherwise indicated, this column represents the number of shares beneficially owned, which includes shares as to which a person has sole or shared voting and/or investment power. |
(2) | On December 9, 2016, the Company paid a 10% stock dividend (1 share for every 10 shares owned on record date) to shareholders of record on December 2, 2016. Reported shares in this column include the additional shares issued to the aboved named officers and directors as a result of the dividend. |
(2)(3) | Includes options that are exercisable or will become exercisable within 60 days of March 31, 20152017 |
(4) | On December 9, 2016, the Company paid a 10% stock dividend (1 share for every 10 shares owned on record date) to shareholders of record on December 2, 2016. Pursuant to the anti-dilution provisions of the stock option plans, the number of options awarded has been increased by 10% and the exercise price of the options awarded has been decreased by 10% to reflect the 10% stock dividend. |
(3)(5) | Includes 12,50013,750 shares joint voting and investment power shared with spouse. |
(4)(6) | Includes 67,83074,613 shares owned directly by spouse, with respect to which reporting person has no voting or investment power; 35,28638,814 shares owned by controlled organizations, and 100,836 jointly held with spouse. Mr. Reynolds hasThe total reported shares inlude 569,969 shares pledged 406,870 shares as collateral. |
(5)(7) | Includes 25,30127,831 shares owned by spouse, with respect to which reporting person has no voting or investment power. |
(6)(8) | Includes 9,40910,349 shares owned by spouse, with respect to which reporting person has no voting or investment power. |
(7) | Includes 194 shares owned by spouse, with respect to which reporting person has no voting or investment power. |
Other Directorships
The Company's Chairman of the Board, Marshall T. Reynolds, serves as a director of the following publicly held companies or banks whose shares are registered under the Securities Exchange Act of 1934: First Guaranty Bancshares, Hammond, Louisiana, and Energy Services of America Corporation, Huntington, West Virginia. He also serves as a director of Champion Industries, Inc., Huntington, West Virginia; First Guaranty Bancshares, Hammond, Louisiana; and Energy Services of America Corporation., Huntington, West Virginia. He also served as a director of Portec Rail Products, Inc., Pittsburgh, Pennsylvania,Virginia, which until January 13, 2011October 26, 2016 had a class of securities registered pursuant to the Securities Exchange Act of 1934. Directors Neal W. Scaggs and Keith F. Molihan also serve as directors of Energy Services of America Corporation. In addition, directors Philip E. Cline and Neal W. Scaggs serve as directors of Champion Industries, Inc. Directors Cline, Scaggs and Thomas W. Wright also served as directors of Portec Rail Products, Inc.
Nominating Committee
The Nominating Committee nominates individuals to serve on the Company’s Board of Directors, to serve on other committees of the Board of Directors, and to serve on the boards of directors of the Company’s subsidiaries. The Nominating Committee currently consists of Messrs Scaggs, Molihan and Jackson,Hatfield, all of whom are independent directors as defined in the Nasdaq Stock Market Marketplace Rules.
A copy of the Nominating Committee charter was attached as Exhibit A to the 2016 annual meeting proxy statement.
The Company does not have a formal policy with regard to the consideration of diversity in identifying director nominees, but the Nominating Committee strives to nominate directors with a variety of complementary skills so that, as a group, the Board will possess the appropriate talent, skills and expertise to oversee the Company’s business. When considering a potential director candidate, the Nominating Committee evaluates the entirety of each candidate’s experience and qualifications. The Committee looks for personal and professional integrity, demonstrated ability and judgment and business experience. The Nominating Committee will review and consider director nominees recommended by shareholders. There are no differences in the manner in which the Nominating Committee evaluates director nominees based on whether the nominee is recommended by a shareholder.
Audit Committee
The Audit Committee meets with the Company’s financial management, internal auditors and independent auditors and reviews the accounting principles and the scope and control of the Company’s financial reporting practices. The Audit Committee makes reports and recommendations to the Board with respect to audit matters and oversees the internal audit function, reviews the internal audit reports, and provides direction for the resolution of internal audit findings and recommendations. The Audit Committee also recommends to the Board the appointment of the firm selected to be independent certified public accountants for the Company and monitors the performance of such firm; reviews and approves the scope of the annual audit and evaluates with the independent certified public accountants the Company's annual audit and annual consolidated financial statements; and reviews with management the status of internal accounting controls and internal audit procedures and results.
The Audit Committee consists of Messrs. Hatfield, Molihan, Scaggs, and Wright. The Audit Committee is required to have and will continue to have at least three members, all of whom must be "independent directors" as defined in the Marketplace Rules of the Nasdaq Stock Market.
The Board determined that Messrs. Hatfield, Molihan, Scaggs, and Wright are financially literate in the areas that are of concern to the Company, and are able to read and understand fundamental financial statements. The Board has also determined that Messrs. Hatfield, Molihan, Scaggs, and Wright each meet the independence requirements set forth in the Marketplace Rules of the Nasdaq Stock Market.
The Securities and Exchange Commission ("SEC") has adopted rules to implement certain requirements of the Sarbanes-Oxley Act of 2002 pertaining to public company audit committees. One of the rules adopted by the SEC requires a company to disclose whether it has an "audit committee financial expert" serving on its audit committee. Based on its review of the criteria of an audit committee financial expert under the rule adopted by the SEC, the Board of Directors does not believe that any member of the Board of Directors' Audit Committee could be described as an audit committee financial expert. The Board has not yet determined whetherof Directors believes that the members of the Audit Committee are able to search forread and understand Premier’s financial statements, are familiar with Premier and its business, and are capable of fulfilling the duties and responsibilities of an Audit Committee without the necessity of having an audit committee financial expert oras a member.
The Company’s Board of Directors has adopted a written charter for the appropriate process for such search.
Audit Committee of the Board. A copy of the written Audit Committee charter was attached as Exhibit B to the 2016 annual meeting proxy statement.
Audit Committee Report
It is the responsibility of management to prepare the financial statements and the responsibility of Crowe Horwath LLP, the Company’s independent auditors, to audit the financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States).
In connection with its review of the Company’s financial statements for 2014,2016, the Audit Committee:
· | Has reviewed and discussed the audited financial statements with management; |
· | Has discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol 1, AU section 380),1301, as adopted by the Public Company Accounting Oversight Board in Rule 3200T;Board; and |
· | Has received the written disclosures and the letter from the independent accountant required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communication with the audit committee concerning independence, and has discussed with the independent accountant the independent accountant’s independence. |
The Audit Committee also discussed with management and the independent auditors the quality and adequacy of the Company’s internal controls and considered the internal audit function’s organization, responsibilities, budget and staffing. The Committee reviewed with the independent auditors their audit plans, audit scope and identification of audit risks.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in Premier Financial Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2014.2016.
Members of the Audit Committee:
/s/ Keith F. Molihan, Chairman
/s/ Neal W. Scaggs
/s/ Harry M. Hatfield
/s/ Thomas W. Wright
Compensation Committee
The Compensation Committee consists of Messrs. Wright, Scaggs and Molihan, all of whom are independent directors as defined in the Nasdaq Stock Market Marketplace Rules. The Committee reviews and determines salaries and other benefits for executive and senior management of the Company and its subsidiaries, reviews and determines the employees to whom stock options are to be granted and the terms of such grants, and reviews the selection of officers who participate in incentive and other compensation plans and arrangements. The Committee establishes the management compensation policy and the general compensation policies of the Company.
The Company’s Board of Directors has adopted a written charter for the Compensation Committee of the Board. A copy of the written Compensation Committee charter was attached as Exhibit C to the 20132016 annual meeting proxy statement. Please review the Company’s Compensation Discussion and Analysis as well as the Compensation Committee Report below.
EXECUTIVE OFFICERS OF THE COMPANY
The individuals named in the following table are the executive officers of the Company under applicable SEC disclosure rules. Except as otherwise indicated, each executive officer has held the position indicated for the last five years.
Name | Age | Position |
Robert W. Walker | 6870 | President and Chief Executive Officer |
Brien M. Chase | 5052 | Senior Vice President and Chief Financial Officer (Principal Accounting Officer) |
Dennis KlingensmithJ. Mark Bias | 6159 | Senior Vice President, Premier (First Central Division President,(President, Premier Bank)Bank, Inc.) |
Michael R. Mineer | 4850 | Senior Vice President, Premier (President, Citizens Deposit Bank & Trust) |
Scot A. Kelley | 5860 | Vice President, Credit Administration |
Katrina Whitt | 4042 | Vice President, Human Resources |
Mr. Walker has held this position since October, 2001. From September, 1998 until October, 2001 Mr. Walker was President, Boone County Bank, Inc. Prior to that time, Mr. Walker was a Regional Vice President at Bank One, West Virginia, N.A. Mr. Walker also serves on the Company’s asset/liability management committee and the Company’s loan committee and iscommittee. Prior to September 15, 2015, Mr. Walker served as President and Chief Executive Officer of Premier Bank, Inc.
Mr. Chase began his duties as CFO of the Company in April, 2002. From June 1994 to January 2001, Mr. Chase was corporate accounting manager for One Valley Bancorp, Inc. He also served as controller for four of the One Valley Bancorp subsidiaries. Prior to that time, Mr. Chase was the senior accountant for One Valley Bancorp for six years. Mr. Chase also serves on the Company’s asset/liability management committee, the Company’s loan committee and is Executive Vice President and Chief Financial Officer of Premier Bank, Inc.
Mr. Klingensmith has held this position since June, 1998Bias was hired on September 15, 2015 as President and served as CEO of First Central Bank from November 2001 to April 2011. On April 9, 2011, First Central Bank was merged into Premier Bank, Inc..Inc. A 33 year banking veteran, Mr. Klingensmith continuedBias began his rolebanking career with PNC Financial Corporation in 1983, as an International Banking Officer. He joined One Valley Bank (now BB&T) in 1988 as a Senior Vice President of the Firstin Commercial Banking. He rose to other senior leadership positions in Commercial Banking, serving as Market President, BB&T WV Central Division of Premier Bank. Prior to November 2001,Region, from 2004 until his retirement from BB&T in August 2015. Mr. Klingensmith was an area Chief Executive Officer for Bank One, West Virginia, N. A. Mr. Klingensmith wasBias also acting CEO of Citizens’ Bank (Kentucky), Inc. from November 2002 to February 2003 and acting CEO of Farmers Deposit Bank from June 2003 to October 2003. Mr. Klingensmith also servedserves on the Company’s asset/liability management committee and the Company’s loan committee. Mr. Klingensmith retired from the Company effective March 26, 2015.
Mr. Mineer was appointed Senior Vice President of Premier on April 1, 2013.2013 and currently manages the Company’s product development and emerging technology implementation. Mr. Mineer joined Premier in October 2003 as President and CEO of Citizens Deposit Bank & Trust in Vanceburg, Kentucky. Prior to October 2003, Mr. Mineer was a District Manager for U.S. Bank in-charge of multiple branches in Northern Kentucky. Mr. Mineer also serves on the Company’s asset/liability management committee and its loan committee.
Mr. Kelley began his duties in charge of Credit Administration in August, 2003. Prior to that time, Mr. Kelley served Bank One, West Virginia, N.AN.A. in several capacities including Manager of Credit Analysis, Internal Auditor and Branch Manager from 1991 to 2003. Mr. Kelley was appointed as Vice President of the Company in March, 2008. While not a voting member, Mr. Kelley presides over the Company’s loan committee. Mr. Kelley also serves as Executive Vice President and Chief Credit Officer of Premier Bank, Inc.
Ms. Whitt began her duties in charge of Human Resources in July, 2003. From October 1998 to July 2003, Ms. Whitt was Human Resources Generalist for Applied Card Systems. Ms. Whitt was appointed as Vice President of the Company in March, 2008.
Ms. Whitt also serves as Vice President and Human Resources Officer of Premier Bank, Inc.
For additional information about Mr. Walker, see "ELECTION OF DIRECTORS.”
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Premier has identified five executives that meet the definition of a “named executive officer” to be discussed in the Compensation Discussion and Analysis: the Chief Executive Officer, Robert W. Walker; the Chief Financial Officer, Brien M. Chase; Senior Vice President, Dennis J. Klingensmith;Mark Bias; Senior Vice President Michael R. Mineer, and Vice President, Scot A. Kelley. The following discussion details the Company’s goals in how it compensates these named executive officers, analyzes how the elements in the Company’s compensation programs meet these goals, discusses how the Company determines the actual amounts paid to the named executive officers and finally presents, in tabular form, the amounts of compensation paid to each named executive officer in 2014.
2016.
The objectives of Premier’s compensation program are to attract and retain qualified individuals of high integrity, to motivate them to achieve the goals set forth in the Company’s business plan; to link executive and stockholder interests through incentive-based compensation; and to enhance the Company’s performance, measured by both short-term and long-term achievements. Premier believes these goals will provide consistent, long-term shareholder value as well as build a vibrant franchise that will attract locally well-known community bankers and customers.
To achieve these goals, Premier compensates its named executive officers using a base salary, a performance based annual bonus, and stock option awards. Premier believes the interests of the Company and its shareholders are served by this three-part approach. Under this approach the compensation of executive officers involves a part of their pay that is “at risk”--namely, the annual bonus and any stock option awards. The variable annual bonus permits individual performance to be recognized on an annual basis, and is based, in significant part, on the performance of the respective executive officer, whereas stock options typically only have value to the executive officer if there is a rise in Premier’s stock price beyond the grant date.
To attract and retain qualified individuals of high integrity, Premier pays a competitive base salary to its executive officers and offers the option to participate in customary benefits such as medical insurance and a 401k retirement plan. Salaries are commensurate with an individual’s experience; ability to lead, implement and achieve the Company’s strategic goals; capability in enhancing the Company’s performance in light of potentially adverse changes in banking regulation, interest rates, the local and/or national economy, and other factors beyond the influence of management; and the executive’s level of integrity in dealing with customers, employees, shareholders and the directorship.
To reward the named executive officers as well as other key employees of the Company, Premier pays a discretionary annual bonus. The bonus rewards better than anticipated financial performance, such as asset growth, income enhancing strategies, expense reduction strategies, and non-performing asset resolution. The bonus also rewards other events such as successful regulatory examinations, the ability to recruit replacement management, quality financial disclosures and controls, strategic acquisitions or dispositions and other events the Company may consider from time-to-time. The annual bonuses are entirely discretionary at the direction of the Board of Directors via the Compensation Committee. They are not based on any formulaic quantification that would encourage the Company’s named executive officers or the officers of its subsidiaries to choose one course of action over another. Rather, the bonuses are subjective in their determination based upon the Compensation Committee’s determination, with the aid of the Chief Executive Officer, of the individual’s performance toward achieving the Company’s performance and improving overall shareholder value.
To reward long-term performance and enhancements to long-term shareholder value, Premier offers stock options to the named executive officers as well as other key employees of the Company.officers. Options are typically granted once a year, near the beginning of the year, in conjunction with a regularly scheduled board of directors meeting. Scheduling decisions are made without regard to anticipated earnings or other major announcements by the Company. As a matter of practice, Premier does not reprice stock options. To reward long-term performance, the options typically vest in three equal annual installments beginning on the grant date and have a maximum ten-year term. Premier believes the vesting schedule also provides incentive for the named executive officers to continue their employment with the Company.
The annual bonus, number of stock options and salary increase, if any, are determined annually. Premier uses surveys conducted by local state banking associations and other industry specific surveys to assess competitive market placemarketplace compensation for its executive officers and uses ranges of compensation rather than specific targets. The named executive officers do not have employment, severance or change-of-control agreements. They serve at the will of the Board of Directors, which enables Premier to terminate their employment with discretion as to the terms of any severance arrangement.
For any annual bonus, the Chief Executive Officer reviews the estimated full year financial results with the Board of Directors and, if appropriate, an annual bonus pool is determined. Allocations from the pool are made to Premier’s subsidiary banks whose senior management make individual award recommendations.named executive officers. Premier does not use rigid incentive formulas to determine the annual bonus, as simple formulas may tend to improperly favor one aspect of financial performance to the detriment of others, while complex formulas provide no real focus or are inevitably adjusted for unforeseen events. A recommendation as to the bonus to be paid to each executive officer is based on an evaluation by the Chief Executive Officer of their individual performance for the prior year and their contribution toward Premier’s performance as a whole. After reviewing the final full year results, the Compensation Committee, with input from the Chief Executive Officer with respect to the other named executive officers and affiliate bank presidents, uses discretion in evaluating the individual award recommendations and determining the actual bonus amount to be awarded. Premier believes that the annual bonus rewards those high-performing individuals who drive the financial results and long-term performance of the Company.
Similar to the annual bonus, the number of stock options granted to individuals is determined, with input from the Chief Executive Officer, by the Compensation Committee. The number of stock options granted annually is modest so as to minimally affect diluted earnings per share either through the increase in the number of shares outstanding or through recorded stock compensation expense. Stock options are granted with an exercise price equal to the closing price on the grant date and therefore only have value to the optionee if there is a rise in Premier’s stock price beyond the grant date. Premier believes it is the accumulation of options over time that provides the real incentive for the named executive officers to propel the Company’s value to ever higher levels.
On October 2, 2009, as part of the TARP Capital Purchase Program, the Company entered into a Purchase Agreement with the U.S. Treasury. Pursuant to the Purchase Agreement, the Company issued and sold to the U.S. Treasury 22,252 shares of the Series A Preferred Stock and the Warrant to purchase 628,588 shares of the Company’s common stock, no par value, at an exercise price of $5.31 per share, for an aggregate purchase price of $22,252,000 in cash. The TARP Purchase Agreement subjected the Company to certain of the executive compensation limitations included in the EESA. As part of the Purchase Agreement, the Company adopted the U.S. Treasury’s standards for executive compensation and corporate governance for the period during which the U.S. Treasury owned any securities acquired from the Company pursuant to the Purchase Agreement or upon exercise of the Warrant (the “TARP Period”).
The ARRA and the Interim Final Rule imposed limitations on the Company’s executive compensation practices during the TARP Period (October 2, 2009 through August 10, 2012) by, among other things: (i) prohibiting the payment or accrual of any bonus, retention award or incentive compensation to the Company’s single most highly-compensated employee, except in the form and under the limited circumstances permitted by the Interim Final Rule; (ii) prohibiting the payment of golden parachute payments (as defined in the Interim Final Rule) to the Company’s Senior Executive Officers or any of our next five most highly-compensated employees upon a departure from the Company or due to a change in control of the Company, except for payments for services performed or benefits accrued; (iii) requiring the Company to “claw back” any bonus, retention award or incentive compensation paid (or under a legally binding obligation to be paid) to a Senior Executive Officer or any of the Company’s next 20 most highly-compensated employees if the payment was based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria; (iv) prohibiting the Company from maintaining any Employee Compensation Plan that would encourage the manipulation of reported earnings to enhance the compensation of any of the Company’s employees; (v) prohibiting the Company from maintaining any Senior Executive Officer Compensation Plans that encourage the Senior Executive Officers to take unnecessary and excessive risks that threaten the value of the Company; (vi) requiring the Company to limit any Employee Compensation Plan that unnecessarily exposes the Company to risk; (vii) prohibiting the Company from providing (formally or informally) “gross-ups” to any of the Company’s Senior Executive Officers or next 20 most highly-compensated employees; (viii) requiring that the Company disclose to the U.S. Treasury and the Company’s primary regulator the amount, nature and justification for offering the most highly-compensated employee any perquisites whose total value exceeds $25,000; (ix) requiring that the Company disclose to the U.S. Treasury and the Company’s primary regulator whether the Company, the Company’s Board of Directors or the Committee engaged a compensation consultant and the services performed by that compensation consultant and any of its affiliates; and (x) requiring that the Company disclose to the U.S. Treasury the identity of its Senior Executive Officers and next 20 most highly-compensated employees, identified by name and title and ranked in descending order of annual compensation.
The ARRA and the Interim Final Rule also required that the Company’s Board of Directors adopt a company-wide policy regarding “excessive or luxury expenditures,” which was adopted on December 16, 2009, and post this policy on the subsidiary banks’ websites. The Company was also required to permit in its proxy statements for annual meetings a non-binding “say on pay” shareholder vote on the compensation of executives, as disclosed pursuant to the compensation disclosure rules of the SEC. The Company complied with the “say on pay” requirement in 2009, 2010, 2011 and 2012, and will continue to conduct a non-binding “say on pay” shareholder vote as required by Federal securities laws and regulations. Additionally, the Company was required to establish a compensation committee consisting solely of independent directors for the purpose of reviewing employee compensation plans. This compensation committee was required to meet at least semiannually to discuss and evaluate employee compensation plans in light of an assessment of any risk posed to the Company from such plans.
On August 10, 2012, the U.S. Treasury successfully completed an auction of its investment in Premier’s Series A Preferred Stock along with similar investments the U.S. Treasury had made in 11 other financial institutions, principally to qualified institutional buyers. Premier successfully bid to repurchase 10,252 shares of the 22,252 outstanding shares. The remaining 12,000 shares are held by private investors. The foregoing limitations on executive compensation (except for the “say on pay” shareholder vote and maintenance of a compensation committee, which are required by Federal securities laws and regulations) terminated upon completion of the U.S. Treasury’s auction of the Series A Preferred Stock on August 10, 2012. Therefore the Company defines the TARP Period as being from October 2, 2009 through August 10, 2012.
In connection with the Company’s participation in the Capital Purchase Program, Mr. Walker, Mr. Chase, Mr. Klingensmith, and Mr. Kelley entered into letter agreements that modify all compensation and benefit plans during the TARP Period in which the executive officers participated to the extent necessary to comply with the executive compensation limitations under EESA. The Company’s next 20 most highly-compensated employees (which included Mr. Mineer) also entered into letter agreements that modify all compensation and benefit plans in which the 20 most highly-compensated employees participated during the TARP Period to the extent necessary to comply with compensation limitations under the ARRA and the Interim Final Rule.
In arriving at its decision on 20142016 executive compensation, the Compensation Committee took into account the affirmative shareholder “say on pay” vote at the previous annual meeting of shareholders and continued to apply the same principles in determining the amounts and types of executive compensation. The specific compensation amounts for each of Premier’s named executive officers for 20142016 reflect the continued strength and stability in the Company’s financial performance. A more detailed analysis of Premier’s 20142016 financial results is contained in the Management Discussion and Analysis section contained in the annual report to shareholders and our Form 10-K filed with the Securities and Exchange Commission.
In determining the named executive officers’ compensation for 2014,2016, the Compensation Committee considered the Company’s performance during 2013.2015. Net income increased from $10,323,000available to common shareholders remained consistent with the prior year totaling $12,446,000 in 20122015 compared to $13,229,000 for 2013,$12,552,000 in 2014, as an increase in net operating costs, largely due to the full year inclusion of the operations of the Bank of Gassaway purchased in April 2014, was only partially offset by an increase in non-interest income and a decrease in the provision for loan losseslosses. Net interest income decreased slightly in 2015 when comparted to 2014. In 2015, average earning assets increased by 3.0% or $34.0 million from 2014, while average interest-bearing liabilities, the primary source of funds supporting the earning assets, increased by 1.7%, or $13.8 million, in 2015 from 2014. Although there was an increase in average earning assets and an increase in average interest-bearing liabilities, net operating expenses. Non-performing assets decreasedinterest income in 2015 was less than 2014. The decrease was due to $6.7 million of deferred interest income and loan purchase discounts recognized upon the liquidation of non-performing loans in 2014, compared to $1.4 million recognized in 2015. The Company successfully negotiated the May 6, 2015 repurchase of the 700,016 share Common Stock Warrant issued to the U.S. Treasury (“Warrant”) successfully concluding the Company’s participation in the Troubled Asset Relief Program (“TARP”) Capital Purchase Program. The purchase reduced shareholders’ equity and regulatory capital by $14.9 million, or 26.0% to $42.3 million or 3.84%the $5,675,000 purchase price but also reduced the dilutive effect of total assets. Similar to net income, earnings per diluted share increased from $1.24 in 2012 to $1.49 in 2013. Finally,potential additional common shares that would have been issued had the Warrant been exercised. The Company successfully negotiated a definitive merger agreement on November 19, 2013, Premier and Gassaway Bancshares, Inc.,July 5, 2015 with First National Bankshares Corporation, a $165$237 million single bank holding company headquartered in Gassaway,Ronceverte, West Virginia, jointly announced that they had entered into a definitive agreement whereby Premier Bank, a wholly owned subsidiaryVirginia. Throughout the latter half of 2015, the Company sought and received First National Bankshares Corporation shareholder approval as well as regulatory approval to consummate the acquisition, which closed on January 15, 2016. Book value per share increased by $0.08 and tangible book value per share increased by $0.19 in 2015, which includes the effect of the Company, would acquire$0.63 decrease in book value per share related to the Bank of Gassaway in a cash purchase valued at approximately $20.3 million. The purchaserepurchase of the BankWarrant. Finally, non-performing assets decreased by $1.5 million, or 5.1% to $27.2 million or 2.19% of Gassaway closed on April 4, 2014.total assets.
Despite the specific accomplishments achieved by Premier during the TARP Period and Mr. Walker’s integral part in overseeing
Based upon an evaluation of his contributions toward achieving the Company’s success, the American Recovery and Relief Act (ARRA) and the Interim Final Rule imposed limitations on the Company’s executive compensation practices during the TARP Period, prohibiting the payment or accrual of any bonus, retention award or incentive compensation to Mr. Walker as the Company’s single most highly-compensated employee. The prohibitions also prevented Premier from granting Mr. Walker any additional stock options during the TARP Period. Considering the specific accomplishments achieved by Premier after the TARP Period endedperformance in 2012, including the integration of three subsidiary banks, the termination of the Written Agreement with the Federal Reserve Bank of Richmond and the capital preserved by participating in the U.S. Treasury’s auction of the Company’s Series A Preferred Shares,2015, the Compensation Committee, awarded Mr. Walker a $35,000 cash bonus which was paid in December 2012. In 2013, the Compensation Committee excluded Mr. Walker’s annual bonus determination from the annual bonus pool that is evaluated by the Compensation Committee for the other named executive officers and key employees during the first quarter of the calendar year. Instead, Mr. Walker’s annual bonus was separately evaluated and paid during the middle of the calendar year commensurate with the Company’s overall performance. Based on the Company’s financial performance through their meeting date in September 2013,
the Compensation Committee awarded Mr. Walker a $30,000 cash bonus which was paid in October 2013. In 2014, the Compensation Committee changed its approach toward providing performance based increases in Mr. Walker’s compensation. In lieu of an increase in Mr. Walker’s annual salary, an annual cash bonus or stock option grants, the Compensation Committee granted Mr. Walker an annual bonus in the form of an immediate stock award of 6,0007,700 shares of the Company’s common stock on AprilMarch 16, 2014.2016. This award was based upon an evaluation of his contribution toward the Company’s successful 2015 financial performance, his leadership in negotiating the Warrant repurchase, his leadership in negotiating the definitive agreement to acquire First National Bankshares Corporation, other events through their meeting date in March 2016, and his potential to improve long-term shareholder value. In addition to the compensatory benefit to Mr. Walker, the committee believed that a stock award would also align more of Mr. Walker’s compensation to the long-term performance of the Company’s stock, as well as provide an incentive for consistent annual financial performance to maintain the Company’s attractive dividend yield. This award was based upon an evaluation of his contribution toward the Company’s successful 2013 financial performance and other events through their meeting date in April 2014, his leadership performance, and his potential to improve long-term shareholder value. The 6,0007,700 shares had an estimated value of $85,200$104,335 based upon the Company’s closing stock price of $14.20$13.55 per share on the date of the stock award. award as adjusted for the 10% stock dividend paid on December 9, 2016. Additional information on Mr. Walker’s 20142016 compensation is detailed in the tables below.
Based upon an evaluation of his contributions toward achievingachieving the Company’s performance in 20132015 as summarized above, his leadership in providing clear, concise and quality financial disclosures to the Board of Directors and shareholders through Premier’s annual and quarterly reports and the proxy statement, and his potential to improve long-term shareholder value, the Compensation Committee granted Mr. Chase a salary increase to approximately $136,000$166,400 annually. Considering the specific accomplishments achieved by Premier in 20132015 and Mr. Chase’s integral part in the preparation of regulatory applications and pro forma financial statements withleading to the Banksuccessful approval and acquisition of Gassaway to aid management in negotiating a successful definitive agreement to purchase the Bank of Gassaway, participationFirst National Bankshares Corporation on January 15, 2016; his integral part in the Bank of Gassaway due diligence team, accounting for loans acquired at a discount, participation in refining the Company’s internal controls in preparation of regulatory applications leading to the Company’s first Sarbanes-Oxley Act Section 404 internal control audit,successful approval to repurchase the Warrant; his continued participation and oversight in the operations of Premier Bank and its regulatory examinations, and Mr. Chase’s continued participation in the integration of the five subsidiary bankBank of Gassaway operations into Premier Bank, the Compensation Committee awarded Mr. Chase a $23,000 cash bonus which was paid in March 2014. To continue to incent2016. As an incentive for Mr. Chase to continuefurther improve Premier’s financial performance, to continue withevaluate the successful integrationfinancial viability of the five subsidiary banksfuture acquisitions and to reward him for long-term improvements in the stock’s value, the Compensation Committee granted him 5,0005,500 options to buy Premier stock at $14.43$13.55 per share (the closing price on the March 19, 201416, 2016 grant date.date as adjusted for the 10% stock dividend paid on December 9, 2016.) This grant increased Mr. Chase’s total options to buy Premier stock to 56,500,73,150, some of which were exercised before the end of 2014.2016. Additional information on Mr. Chase’s 20142016 compensation is detailed in the tables below.
Based upon an evaluation of his contributions toward achieving the Company’s performance in 2013, his banking insight as President of the First Central Division of Premier Bank, Inc. located in Premier’s fastest growing market, his leadership at First Central which brought in over $11.8 million of net new loan volume to the Company, his participation on the Bank of Gassaway due diligence team, and his potential to improve long-term shareholder value, the Compensation Committee granted Mr. Klingensmith a salary increase to approximately $151,735 annually. Considering the specific accomplishments achieved by Premier and the First Central Division of Premier Bank in 2013, the Compensation Committee awarded Mr. Klingensmith a $10,000 cash bonus which was paid in March 2014. In on-going discussions with Mr. Klingensmith about his desire and various plans and dates to retire, it was determined that any stock option grants awarded in 2014 would likely not complete the initial vesting period prior to Mr. Klingensmith’s retirement. Therefore, the Compensation Committee determined there was no incentive value in awarding Mr. Klingensmith any further options to buy Premier stock. Additional information on Mr. Klingensmith’s 2014 compensation is detailed in the tables below.
Based upon an evaluation of his contributions toward achieving the Company’s performance in 2013,2015, his banking insight as President of Citizens Deposit Bank, adding $6.3$15.8 million of net new loandeposit and customer repurchase agreement volume to the Company, increasing net incomeopening a second branch in the Cincinati metro area of northern Kentucky, achieving a 2015 return on average assets of 1.00% for Citizens Deposit Bank, by over $530,000, or 11.6%,and achieving a past due ratio of 0.80% of total Citizens Deposit Bank loans at December 31, 2015; his leadership in integrating the operations of the two subsidiary banks that were merged into Citizens Deposit Bank in 2012,reducing operating costs and improving customer convenience through technology, and his potential to improve long-term shareholder value, the Compensation Committee granted Mr. Mineer a salary increase to approximately $165,000$184,100 annually. Considering the specific accomplishments achieved by Premier and Citizens Deposit Bank in 2013,2015, the Compensation Committee awarded Mr. Mineer a $16,000 cash bonus which was paid in March 2014. To continue to incent2016. As an incentive for Mr. Mineer to continuefurther improve Premier’s financial performance and to reward him for long-term improvements in the stock’s value, the Compensation Committee granted him 5,0005,500 options to buy Premier stock at $14.43$13.55 per share (the closing price on the March 19, 201416, 2016 grant date.date as adjusted for the 10% stock dividend paid on December 9, 2016.) This grant increased Mr. Mineer’s total options to buy Premier stock to 42,900,58,190, some of which were exercised before the end of 2014.2016. Additional information on Mr. Mineer’s 20142016 compensation is detailed in the tables below.
Mr. Bias began his employment with the Company on September 15, 2015 as senior vice president and as president and chief executive officer of Premier Bank, Inc. Mr. Bias’ beginning annual salary was $190,000 and the amount reported for 2015 in the tables below reflect that salary based upon the period he was employed during 2015. The compensation committee also awarded Mr. Bias 110 shares of Company common stock to enable him to fufill his company ownership requirements as a director of Premier Bank under state law. At the time of his employment, the directors and employees of the company were in a standard “blackout” period and prohibited from purchasing Company stock. Based upon an evaluation of his contributions toward achieving the Company’s performance in 2015, his banking insight as President of Premier Bank, Inc. including his leadership in developing loan production goals and decreasing past due and non-performing loans, and his potential to improve long-term shareholder value, the Compensation Committee granted Mr. Bias a salary increase to approximately $197,600 annually. Considering the specific accomplishments achieved by Premier and Premier Bank in 2015, the Compensation Committee awarded Mr. Bias a $7,500 cash bonus which was paid in March 2016. As an incentive for Mr. Bias to further improve Premier’s financial performance and to reward him for long-term improvements in the stock’s value, the Compensation Committee granted him 3,300 options to buy Premier stock at $13.55 per share (the closing price on the March 16, 2016 grant date as adjusted for the 10% stock dividend paid on December 9, 2016.) This grant was Mr. Bias’ first grant resulting in total options to buy Premier stock of 3,300 at the end of 2016. Additional information on Mr. Bias’ 2016 compensation is detailed in the tables below.
Based upon an evaluation of his contributions toward achieving the Company’s performance in 2013,2015, his leadership over the evaluation, underwriting and presentation of larger loans to the Premier loan committee, his direct supervision over the Company’s lending policy and practices, his leadership during regulatory examinations regarding lending practices and credit quality, and his potential to improve long-term shareholder value by identifying and suggesting solutions to mitigate credit risk in the Company’s larger loan relationships, the Compensation Committee granted Mr. Kelley a salary increase to $88,400approximately $97,450 annually. Considering the specific accomplishments achieved by Premier in 2013 and2015, his direct role in integrating the credit administration function of Premier Bank, Inc. including presentation of larger loans during board meetings and facilitating external reviews of the loan portfolio by banking regulators and other third parties, his leadership in the pre-acqusition due diligence review of the First National Bankshares Corporation loan portfolio and his assistance in the continuing integration of the Bank of Gassaway locations into Premier Bank, Inc., the Compensation Committee awarded Mr. Kelley an $8,500a $10,000 cash bonus which was paid in March 2014. To continue to incent2016. As an incentive for Mr. Kelley to continue tofurther improve the Company’s financial performance and to reward him for long-term improvements in the stock’s value, the Compensation Committee granted him 2,5003,135 options to buy Premier stock at $14.43$13.55 per share (the closing price on the March 19, 201416, 2016 grant date.date as adjusted for the 10% stock dividend paid on December 9, 2016.) This grant increased Mr. Kelley’s total options to buy Premier stock to 26,150,35,035, some of which were exercised before the end of 2014.2016. Additional information on Mr. Kelley’s 20142016 compensation is detailed in the tables below.
Compensation Committee Report
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis set forth above. Based on such review and discussions, the compensation committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated into Premier’s Annual Report on Form 10-K for the year ended December 31, 20142016 filed with the Securities and Exchange Commission.
How Compensation Plans Do Not Encourage Excessive Risk Taking
The compensation plans of the Company consist of three basic components, an annual salary, an annual bonus (awarded in common stock in the case of Mr. Walker), and grants of stock options. The annual bonus and the granting of stock options are entirely discretionary at the direction of the Board of Directors via the Compensation Committee. They are not based on any formulaic quantification that would encourage the Company’s named executive officers or the officers of its subsidiaries to choose one course of action over another. Rather, the bonuses and the amount of stock options granted are subjective in their determination based upon the Compensation Committee’s determination, with the aid of the Chief Executive Officer, of the individual’s performance toward achieving the Company’s performance and improving overall shareholder value. The annual bonus is relatively small in comparison to an employee’s annual salary. Furthermore,salary, thus discouraging the named executive officers and the next twenty highest paid employees have signed letter agreements with the Company acknowledging that their bonuses paid during the TARP Period are subject to “clawback” provisions should any bonus recipient contribute to manipulation of reported earnings or any other statistic that would enhance the employee’s individual bonus. (The Company defines the TARP Period as being from October 2, 2009 through August 10, 2012 when the U.S. Treasury owned the Company’s Series A Preferred Stock issued as partin order to achieve a substantial portion of the TARP Capital Purchase Program.)named executive officers’ annual compensation. The Company believes that the “clawback” provision as well as the risk of losing theira named exectutive officer’s entire salary in the event of termination is sufficient to deter the manipulation of reported earnings or the taking of excessive risks that would threaten the value of the Company.
Given (i) the long term incentive aspect of the base salary and stock option components of the Company’s compensation plan, (ii) the absence of any specific incentive formula in the annual bonus component, (iii) the “clawback” provisions related to the bonus paid during the TARP Period, and (iv)(iii) that the named executive officers do not have employment, severance or change-of-control agreements but serve at the will of the Board of Directors, the Company does not believe its compensation plans encourage SEOs or any other employees to take unnecessary and excessive risks, including behavior focused on short term rather than long term results and value creation, or encourage manipulation of reported earnings to enhance employee compensation.
Members of the Compensation Committee:
/s/ Thomas W. Wright, Chairman
/s/ Keith F. Molihan
/s/ Neal W. Scaggs
Summary Compensation Table
The following table summarizes compensation earned in each of the three years ended December 31, 20142016 by the Company's named executive officers.
Name and principal position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards (1) ($) | All Other Compensation (2) (3) ($) | Total ($) | Year | | Salary ($) | | Bonus ($) | | Stock Awards ($) | | Option Awards (1) ($) | | All Other Compensation (2) (3) ($) | | Total ($) | |
Robert W. Walker (4) | 2014 | 350,000 | --- | 85,200 | --- | 23,450 | 458,650 | 2016 | | 350,000 | | --- | | 104,335 | | --- | | 12,422 | | 466,757 | |
President and CEO | 2013 | 350,000 | 30,000 | --- | 19,031 | 399,031 | 2015 | | 350,000 | | --- | | 103,040 | | --- | | 12,280 | | 465,320 | |
| 2012 | 325,000 | 35,000 | --- | 24,650 | 384,650 | 2014 | | 350,000 | | --- | | 85,200 | | --- | | 23,450 | | 458,650 | |
J. Mark Bias | | 2016 | | 197,600 | | 7,500 | | --- | | 3,498 | | 23,213 | | 231,811 | |
Senior Vice President and | | 2015 | | 51,150 | | --- | | 1,499 | | --- | | 6,109 | | 58,758 | |
President, Premier Bank, Inc. | | 2014 | | n/a | | n/a | | n/a | | n/a | | n/a | | n/a | |
Brien M. Chase | 2014 | 136,000 | 23,000 | --- | 18,700 | 7,456 | 185,156 | 2016 | | 166,400 | | 23,000 | | --- | | 5,830 | | 8,671 | | 203,901 | |
Senior Vice President | 2013 | 128,000 | 22,000 | --- | 14,250 | 7,042 | 171,292 | 2015 | | 151,000 | | 25,000 | | --- | | 6,850 | | 8,135 | | 190,985 | |
and CFO | 2012 | 121,680 | 20,000 | --- | 23,400 | 6,712 | 171,792 | 2014 | | 136,000 | | 23,000 | | --- | | 18,700 | | 7,456 | | 185,156 | |
Dennis J. Klingensmith | 2014 | 151,735 | 10,000 | --- | 7,831 | 169,566 | |
Senior Vice President and | 2013 | 145,977 | 10,000 | --- | 8,550 | 7,549 | 172,076 | |
EVP Premier Bank | 2012 | 140,288 | 10,000 | --- | 18,720 | 7,224 | 176,232 | |
Michael R. Mineer | 2014 | 165,000 | 16,000 | --- | 18,700 | 13,220 | 212,920 | 2016 | | 184,100 | | 16,000 | | --- | | 5,830 | | 13,787 | | 219,717 | |
Senior Vice President and | 2013 | 155,000 | 14,000 | --- | 14,250 | 11,548 | 194,798 | 2015 | | 174,500 | | 16,000 | | --- | | 6,850 | | 13,060 | | 210,410 | |
President, Citizens Deposit Bank | 2012 | 146,035 | 12,000 | --- | 18,720 | 10,931 | 187,686 | 2014 | | 165,000 | | 16,000 | | --- | | 18,700 | | 13,220 | | 212,920 | |
Scot A. Kelley | 2014 | 88,400 | 8,500 | --- | 9,350 | 5,095 | 111,345 | 2016 | | 97,450 | | 10,000 | | --- | | 3,323 | | 5,516 | | 116,289 | |
Vice President - | 2013 | 85,000 | 8,500 | --- | 7,125 | 4,950 | 105,575 | 2015 | | 93,700 | | 10,000 | | --- | | 3,905 | | 5,366 | | 112,971 | |
Credit Administration | 2012 | 80,000 | 8,500 | --- | 15,210 | 4,757 | 108,467 | 2014 | | 88,400 | | 8,500 | | --- | | 9,350 | | 5,095 | | 111,345 | |
________________________
(1) | The amounts reported in this column represent the number of options granted times the grant date fair value of stock options granted to each of the named executive officers in accordance with FASB Topic 718. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. More information about stock compensation expense, including the assumptions used in the calculation of the fair value, is included in footnote 1415 to our audited financial statements for the fiscal year ended December 31, 20142016 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission. These amounts reflect the Company's accounting expense for these awards and do not necessarily correspond to the actual value that may be ultimately recognized by the named executive officers. |
(2) | The Company provides automobiles to Mr. Walker, Mr. KlingensmithBias and Mr. Mineer due to their extensive travel for business purposes. The Company's expense for providing the vehicle for the executive's personal use along with all other perquisites does not exceed $10,000 and therefore is not included in this table. |
(3) | All other compensation consists of the Company's matching contributions to the executive's 401k plan account and amounts paid by the Company for the executive's participation in the Company’s benefit programs. |
(4) | Premier's participation in the TARP Capital Purchase Program from October 2, 2009 through August 10, 2012 prohibited The amounts presented for Mr. Walker as the Company’s highest paid executive officer, from receiving a cash bonus or stock options. The amount presented for the 2012 bonus reflect payments made in the fourth quarter of 2012 related to Mr. Walker's performance after August 10, 2012. The amount presented for 2014, 2013include $12,000, $12,000 and 2012 all other compensation includes $11,667 $8,637, and $14,437 of matching contributions to Mr. Walker’shis 401k plan account for 2016, 2015 and 2014, respectively. For Mr. Bias, the amounts include $8,215 and $0 of matching contributions to his 401k plan account for 2016 and 2015, respectively. For Mr. Mineer, the amounts include $8,040, $7,657, and $7.277 of matching contributions to his 401k plan account for 2016, 2015 and 2014, respectively. |
Grants of Plan Based Awards in Fiscal Year 20142016
The following table provides information about options granted to the named executive officers in 2014.2016.
Name | Grant Date | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) | Grant Date | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) |
Robert W. Walker | Apr-16-2014 | 6,000 | --- | 14.20 | 85,200 | Mar-16-2016 | 7,700 | --- | 13.55 | 104,335 |
J. Mark Bias | | Mar-16-2016 | n/a | 3,300 | 13.55 | 3,498 |
Brien M. Chase | Mar-19-2014 | n/a | 5,000 | 14.43 | 18,700 | Mar-16-2016 | n/a | 5,500 | 13.55 | 5,830 |
Dennis J. Klingensmith | Mar-19-2014 | n/a | --- | --- | |
Michael R. Mineer | Mar-19-2014 | n/a | 5,000 | 14.43 | 18,700 | Mar-16-2016 | n/a | 5,500 | 13.55 | 5,830 |
Scot A. Kelley | Mar-19-2014 | n/a | 2,500 | 14.43 | 9,350 | Mar-16-2016 | n/a | 3,135 | 13.55 | 3,323 |
________________________
(1) | Options awarded in 20142016 vest in three equal annual installments beginning on March 19, 2015.16, 2017. The exercise price of the options awarded in 20142016 was the closing price on March 19, 2014,16, 2016, the date of grant.grant (see footnote 2 below). The $3.74$1.06 per share grant date fair value of each option awarded was determined in accordance with FASB Topic 718 as more fully described in footnote 1415 to Premier's December 31, 20142016 Financial Statements. |
(2) | On December 9, 2016, the Company paid a 10% stock dividend (1 share for every 10 shares owned on record date) to shareholders of record on December 2, 2016. Pursuant to the anti-dilution provisions of the stock option plans, the original number of shares of stock and options awarded has been increased by 10% and the exercise price of the options awarded has been decreased by 10% to reflect the 10% stock dividend. |
Option Exercises and Stock Vested in Fiscal Year 20142016
The following table provides information about options exercised by the named executive officers in 2014.2016.
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) |
Robert W. Walker | 21,440 | 113,706 | n/a | n/a | |
Brien M. Chase | 14,200 | 115,298 | n/a | n/a | 4,890 | 23,478 | n/a |
Dennis J. Klingensmith | 19,334 | 125,612 | n/a | n/a | |
Michael R. Mineer | 10,400 | 35,711 | n/a | n/a | |
Scot A. Kelley | 7,566 | 56,275 | n/a | n/a | 8,247 | 29,868 | n/a |