The Company’s Board of Directors recommends that shareholders vote "FOR" the election of each of the Company's nominees for election as a director.
The Board of Directors does not contemplate that any of the nominees will be unable to accept election as a director for any reason. However, in the event that one or more of such nominees is unable or unwilling to serve, the persons named in the proxies or their substitutes shall have authority, according to their judgment, to vote or to refrain from voting for other individuals as directors.
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 twice in executive session during 2015.2017.
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 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.
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.
The following table sets forth certain information concerning ownership of Premier’s Common Stock as of March 31, 20162018 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.
* 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) | Includes options that are exercisable or will become exercisable within 60 days of March 31, 20162018 |
(3) | Includes 12,500 shares joint voting and investment power shared with spouse. |
(4) | 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 758,287 shares pledged 406,870as collateral. |
(4) | Includes 27,831 shares as collateral.owned by estate of late spouse. |
(5) | Includes 25,301 shares owned by spouse, with respect to which reporting person has no voting or investment power. |
(6) | Includes 9,409 shares owned by spouse, with respect to which reporting person has no voting or investment power. |
(7) | Includes 19410,349 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 iswas attached as Exhibit A to thisthe 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 of Directors believes that the members of the Audit Committee are able to read 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 as a member.
The Company’s Board of Directors has adopted a written charter for the Audit Committee of the Board. A copy of the written Audit Committee charter iswas attached as Exhibit B to thisthe 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 2015,2017, 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.
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 iswas attached as Exhibit C to thisthe 2016 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 | 6971 | President and Chief Executive Officer |
Brien M. Chase | 5153 | Senior Vice President and Chief Financial Officer (Principal Accounting Officer) |
J. Mark Bias | 5860 | Senior Vice President, Premier (President, Premier Bank, Inc.) |
Michael R. Mineer | 4951 | Senior Vice President, Premier (President, Citizens Deposit Bank & Trust) |
Scot A. Kelley | 5961 | Vice President, Credit Administration |
Katrina Whitt | 4143 | 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. 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. Bias was hired on September 15, 2015 as President and CEO of Premier Bank, Inc. A 33 year banking veteran, Mr. Bias began his banking 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 in Commercial Banking. He rose to other senior leadership positions in Commercial Banking, serving as Market President, BB&T WV Central Region, from 2004 until his retirement from BB&T in August 2015. Mr. Bias also serves on the Company’s asset/liability management committee and the Company’s loan committee.
Mr. Mineer was appointed Senior Vice President of Premier on April 1, 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.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 fourfive 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, J. 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 2015.2017.
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 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 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. 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 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 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.
In arriving at its decision on
20152017 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
20152017 reflect the continued strength and stability in the Company’s financial performance. A more detailed analysis of Premier’s
20152017 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.Commission.In determining the named executive officers’ compensation for 2015,2017, the Compensation Committee considered the Company’s performance during 2014.2016. Net income remained consistent with the prior year, totaling $13,150,000$12,174,000 in 20142016 compared to $13,229,000$12,446,000 in 2013,2015. The slight decrease in 2016 was largely due to an increase in the provision for loan losses. Otherwise, increases in net interest income which substantiallyand non-interest income more than offset an increase in non-interest expense, all largely from operations of First National Bankshares (“Bankshares”), newly acquired on January 15, 2016. Net interest income on a fully tax-equivalent basis was $54.1 million in 2016, an 11.3% increase over the provision expense and$48.7 million earned in 2015. The increase in net operating costsinterest income in 2016 is primarily the result of the $6.2 million of net interest income generated by the operations of Bankshares, which was acquired on January 15, 2016. Otherwise, net interest income decreased by $756,000 from Premier’s other operations. In 2016, average earning assets increased by 17.4% or $204.4 million from 2015, while average interest-bearing liabilities, the primary source of funds supporting the earning assets, increased by 18.2%, or $154.8 million, in 2016 from 2015. In 2016, the increase in average earning assets, average interest-bearing liabilities and average non-interest bearing deposits was largely the result of the acquisition of Bankshares on January 15, 2016. Bankshares added approximately $197.90 million in average earning assets, $173.5 million of average interest-bearing liabilities and $25.8 million of non-interest bearing deposits. Total loans at December 31, 2016 increased by $175.1 million, or 20.6%, from the total at December 31, 2015. The increase in 2016 is largely due to the $132.8 million of loans acquired via the acquisition of Bankshares.
Otherwise, outstanding loans increased by $42.3 million via internal loan growth. Outstanding loans increased in Premier’s West Virginia markets by $83.2 million, or 22.0%, increased in Premier’s Washington DC Metro market by $40.6 million, or 21.7%, increased in Premier’s Kentucky markets by $38.2 million, or 21.3%, and increased in Premier’s Virginia markets by $14.4 million, or 32.7%. The total loan increases in the West Virginia and Virginia markets were due to the acquisition of the Bank of Gassaway. The Company consummated the acquisition of the Bank of Gassaway in April 2014 for $20,250,000 in cash, successfully converted the data systems and integrated the six acquired branch locations into the Company’s subsidiary, Premier Bank, Inc. The Company redeemed the remaining $12,000,000 of its Series A Preferred stock prior to the automatic increase in the dividend rate to 9.00% to begin in November 2014. The redemption saved the Company approximately $1,080,000 per year in preferred dividends assuming the 9.00% per annum dividend rate; the equivalent of approximately 13 cents per share in 2015.Bankshares. Book value per share increased by $1.11 and$0.01 in 2016, but tangible book value per share increased by $0.57$0.28 in 2014.2016. Both increases were net of the approximately $0.21 decrease in book value from a greater amount of net unrealized losses in the portfolio of securities available for sale at December 31, 2016. Annual cash dividends per share increased to $0.56 in 2016 and a 10% stock dividend was paid on December 9, 2016. Finally, non-performing assetsin 2016, total charge-offs decreased by $13.6 million,to $1,010,000, or 32.2%just 0.10% of average total loans and net charge-offs decreased to $28.9 million$559,000, or 2.29%0.06% of average total assets.loans, the lowest ratio since 2013.
Based upon an evaluation of his contributions toward achieving the Company’s performance in 2014,2016, the Compensation Committee, in lieu of an increase in Mr. Walker’s annual salary, an annual cash bonus or stock option grants, granted Mr. Walker an annual bonus in the form of an immediate stock award of 7,0006,000 shares of the Company’s common stock on March 18, 2015.April 19, 2017. This award was based upon an evaluation of his contribution toward the Company’s successful 20142016 financial performance, his leadership in assimilating the acquisition and operations of First National Bankshares Corporation, the declaration and payment of a 10% stock dividend, and other events through their meeting date in March 2015, his leadership performance, andApril 2017, plus 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. The 7,0006,000 shares had an estimated value of $103,040$124,200 based upon the Company’s closing stock price of $14.72$20.70 per share on the date of the stock award. award. Additional information on Mr. Walker’s 20152017 compensation is detailed in the tables below.
Based upon an evaluation of his contributions toward achieving the Company’s performance in 20142016 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, his continued participation and oversight in the operations of Premier Bank and its regulatory examinations, Mr. Chase’s continued oversight of the parent company operations and its regulatory examinations and his potential to improve long-term shareholder value, the Compensation Committee granted Mr. Chase a salary increase to approximately $151,000$172,224 annually. Considering the specific accomplishments achieved by Premier in 20142016 and Mr. Chase’s integral part in the preparation regulatory applications and pro forma financial statements related to the acquisitionoversight of the Bank of Gassaway; the oversight provided in determining adequate fair value adjustments and additional financial statement footnote disclosures related to acquisition of Bankshares on January 15, 2016; his integral part in the assets and liabilities acquired;subsidiary merger of First National Bank into Premier Bank, Inc. on March 4, 2016; his leadership in assimilating the preparationoperations of First National Bank into Premier Bank; as well as implementation of the regulatory requests to redeem first the $7,000,000 of Series A Preferred10% stock in September 2014 and then the final $5,000,000 of the Series A Preferred stock in November 2014, and Mr. Chase’s continued participation in the integration of the five subsidiary bank operations into Premier Bank,dividend on December 9, 2016, the Compensation Committee awarded Mr. Chase a $25,000an $18,000 cash bonus which was paid in March 2015. To continue to incent2017. As an incentive for Mr. Chase to continuefurther improve Premier’s financial performance, evaluate the financial viability of future acquisitions and to reward him for long-term improvements in the stock’s value, the Compensation Committee granted him 5,000 options to buy Premier stock at $14.72$19.01 per share (the closing price on the March 18, 201515, 2017 grant date.) This grant increased Mr. Chase’s total options to buy Premier stock to 61,500,78,150, some of which were exercised before the end of 2015.2017. Additional information on Mr. Chase’s 20152017 compensation is detailed in the tables below.
Based upon an evaluation of his contributions toward achieving the Company’s performance in 2014,2016, his banking insight as President of Citizens Deposit Bank, adding $15.9$24.8 million of net new loandeposit and customer repurchase agreement volume to the Company, increasing the loan portfolio in the markets served by Citizens Deposit Bank by $36.9 million, achieving a 20142016 return on average assets of 1.15%1.13% for Citizens Deposit Bank, achieving a past due ratio of 0.72% of totaland expanding Citizens Deposit Bank loans at December 31, 2014,Bank’s operations in the metro Cincinnati market area; his leadership in reducing Premier’s operating costs and improving customer convenience through technology, his role as Senior Technology Officer for Premier, and his potential to improve long-term shareholder value, the Compensation Committee granted Mr. Mineer a salary increase to approximately $174,500$190,523 annually. Considering the specific accomplishments achieved by Premier and Citizens Deposit Bank in 2014,2016, the Compensation Committee awarded Mr. Mineer a $16,000an $18,000 cash bonus which was paid in March 2015. To continue to incent2017. 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 5,000 options to buy Premier stock at $14.72$19.01 per share (the closing price on the March 18, 201515, 2017 grant date.) This grant increased Mr. Mineer’s total options to buy Premier stock to 47,900,63,190, some of which were exercised before the end of 2015.2017. Additional information on Mr. Mineer’s 2017 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 2016, 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, increasing the loan portfolio in the markets served by Premier Bank by $14.9 million, achieving a 2016 return on average assets of 0.91% for Premier Bank, and his potential to improve long-term shareholder value, the Compensation Committee granted Mr. Bias a salary increase to approximately $204,516 annually. Considering the specific accomplishments achieved by Premier and Premier Bank in 2016, and Mr. Bias’ leadership in assimilating the operations of First National Bank into Premier Bank the Compensation Committee awarded Mr. Bias an $18,000 cash bonus which was paid in March 2017. 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 5,000 options to buy Premier stock at $19.01 per share (the closing price on the March 15, 2017 grant date.) This grant increased Mr. Bias’ total options to buy Premier stock to 8,300, some of which were exercised before the end of 2017. Additional information on Mr. Bias’ 2017 compensation is detailed in the tables below.
Based upon an evaluation of his contributions toward achieving the Company’s performance in 2014,2016, his leadership over the evaluation, underwriting and presentation of larger loans to the Premier loan committee, the Premier board of directors and the Premier Bank board of directors; 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 $93,700approximately $102,500 annually. Considering the specific accomplishments achieved by Premier in 2014,2016, his direct role in the credit administration function of Premier Bank, Inc. including facilitating external reviews of the loan portfolio by banking regulators and other third parties, and his assistance in integrating the integration of the First National Bank of Gassawayoperations into Premier Bank, Inc., the Compensation Committee awarded Mr. Kelley a $10,000$12,000 cash bonus which was paid in March 2015. To continue to incent2017. 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 2,8503,000 options to buy Premier stock at $14.72$19.01 per share (the closing price on the March 18, 201515, 2017 grant date.) This grant increased Mr. Kelley’s total options to buy Premier stock to 29,000,38,035, some of which were exercised before the end of 2015.2017. Additional information on Mr. Kelley’s 20152017 compensation is detailed in the tables below.
Compensation Committee Report
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, thus discouraging the manipulation of reported earnings in order to achieve a substantial portion of the named executive officers’ annual compensation. The Company believes that 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, and (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, 20152017 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 | 2015 | 350,000 | --- | 103,040 | --- | 12,280 | 465,320 | 2017 | | 350,000 | | --- | | 124,200 | | --- | | 12,128 | | 486,328 | |
President and CEO | 2014 | 350,000 | --- | 85,200 | --- | 23,450 | 458,650 | 2016 | | 350,000 | | --- | | 104,335 | | --- | | 12,422 | | 466,757 | |
| 2013 | 350,000 | 30,000 | --- | --- | 19,031 | 399,031 | 2015 | | 350,000 | | --- | | 103,040 | | --- | | 12,280 | | 465,320 | |
J. Mark Bias | | 2017 | | 204,516 | | 18,000 | | --- | | 11,600 | | 24,081 | | 258,197 | |
Senior Vice President and | | 2016 | | 197,600 | | 7,500 | | --- | | 3,498 | | 23,213 | | 231,811 | |
President, Premier Bank, Inc. | | 2015 | | 51,150 | | --- | | 1,499 | | --- | | 6,109 | | 58,758 | |
Brien M. Chase | 2015 | 151,000 | 25,000 | --- | 6,850 | 8,135 | 190,985 | 2017 | | 172,224 | | 18,000 | | --- | | 11,600 | | 8,253 | | 210,077 | |
Senior Vice President | 2014 | 136,000 | 23,000 | --- | 18,700 | 7,456 | 185,156 | 2016 | | 166,400 | | 23,000 | | --- | | 5,830 | | 8,671 | | 203,901 | |
and CFO | 2013 | 128,000 | 22,000 | --- | 14,250 | 7,042 | 171,292 | 2015 | | 151,000 | | 25,000 | | --- | | 6,850 | | 8,135 | | 190,985 | |
Michael R. Mineer | 2015 | 174,500 | 16,000 | --- | 6,850 | 13,060 | 210,410 | 2017 | | 190,523 | | 18,000 | | --- | | 11,600 | | 18,077 | | 238,200 | |
Senior Vice President and | 2014 | 165,000 | 16,000 | --- | 18,700 | 13,220 | 212,920 | 2016 | | 184,100 | | 16,000 | | --- | | 5,830 | | 13,787 | | 219,717 | |
President, Citizens Deposit Bank | 2013 | 155,000 | 14,000 | --- | 14,250 | 11,548 | 194,798 | 2015 | | 174,500 | | 16,000 | | --- | | 6,850 | | 13,060 | | 210,410 | |
Scot A. Kelley | 2015 | 93,700 | 10,000 | --- | 3,905 | 5,366 | 112,971 | 2017 | | 102,500 | | 12,000 | | --- | | 6,960 | | 5,936 | | 127,396 | |
Vice President - | 2014 | 88,400 | 8,500 | --- | 9,350 | 5,095 | 111,345 | 2016 | | 97,450 | | 10,000 | | --- | | 3,323 | | 5,516 | | 116,289 | |
Credit Administration | 2013 | 85,000 | 8,500 | --- | 7,125 | 4,950 | 105,575 | 2015 | | 93,700 | | 10,000 | | --- | | 3,905 | | 5,366 | | 112,971 | |
________________________
(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, 20152017 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission.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. Bias 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. The amounts presented for Mr. Walker include $12,077, $12,000 $11,667 and $8,637$12,000 of matching contributions to his 401k plan account for 2015, 20142017, 2016 and 2013,2015, respectively. For Mr. Mineer,Bias, the amounts include $7,657, $7.277$8,937, $8,215 and $6,797$0 of matching contributions to his 401k plan account for 2017, 2016 and 2015, 2014respectively. For Mr. Mineer, the amounts include $8,378, $8,040, and 2013,$7,657 of matching contributions to his 401k plan account for 2017, 2016 and 2015, respectively. |
Grants of Plan Based Awards in Fiscal Year 20152017
The following table provides information about options granted to the named executive officers in 2016.2017.
Name | Grant Date | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/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 | Mar-18-2015 | 7,000 | --- | 14.72 | 103,040 | Apr-19-2017 | 6,000 | --- | 20.70 | 124,200 |
J. Mark Bias | | Mar-15-2017 | n/a | 5,000 | 19.01 | 11,600 |
Brien M. Chase | Mar-18-2015 | n/a | 5,000 | 14.72 | 6,850 | Mar-15-2017 | n/a | 5,000 | 19.01 | 11,600 |
Michael R. Mineer | Mar-18-2015 | n/a | 5,000 | 14.72 | 6,850 | Mar-15-2017 | n/a | 5,000 | 19.01 | 11,600 |
Scot A. Kelley | Mar-18-2015 | n/a | 2,850 | 14.72 | 3,905 | Mar-15-2017 | n/a | 3,000 | 19.01 | 6,960 |
________________________
(1) | Options awarded in 20152017 vest in three equal annual installments beginning on March 18, 2016.15, 2018. The exercise price of the options awarded in 20152017 was the closing price on March 18, 2015,15, 2017, the date of grant.grant (see footnote 2 below). The $1.37$2.32 per share grant date fair value of each option awarded was determined in accordance with FASB Topic 718 as more fully described in footnote 1415 to Premier's December 31, 20152017 Financial Statements. |
Option Exercises and Stock Vested in Fiscal Year 20152017
The following table provides information about options exercised by the named executive officers in 2015.2017.
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | 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 ($) |
Robert W. Walker | 8,560 | 16,270 | n/a | n/a | |
J. Mark Bias | | 1,100 | 8,695 | n/a |
Brien M. Chase | 13,010 | 99,479 | n/a | n/a | 5,500 | 38,223 | n/a |
Michael R. Mineer | n/a | n/a | n/a | |
Scot A. Kelley | 3,804 | 27,749 | n/a | n/a | 3,006 | 18,402 | n/a |
Outstanding Equity Awards at 20152017 Fiscal Year-End
The following table provides information on the current holdings of stock options by the named executive officers. This table includes unexercised and unvested option awards. Each option grant is shown separately for each named executive officer.
Name | Option Awards |
Number of Securities Underlying Options (#) | Number of Securities Underlying Unexercised Options (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | Option Exercise Price | Option Expiration |
Exercisable | Unexercisable | (#) | ($) | Date |
Robert W. Walker | 5,000 | 0 | n/a | 16.00 | Feb-16-2016 |
Brien M. Chase | 0 | 5,000 | n/a | 14.72 | Mar-18-2025 |
| 1,667 | 3,333 | n/a | 14.43 | Mar-19-2024 |
| 3,334 | 1,666 | n/a | 11.39 | Mar-20-2023 |
| 500 | 0 | n/a | 7.47 | Mar-21-2022 |
| 2,390 | 0 | n/a | 8.90 | Mar-17-2020 |
| 5,000 | 0 | n/a | 12.92 | Feb-20-2018 |
| 2,500 | 0 | n/a | 14.22 | Jan-17-2017 |
| 2,500 | 0 | n/a | 16.00 | Feb-16-2016 |
Michael R. Mineer | 0 | 5,000 | n/a | 14.72 | Mar-18-2025 |
| 1,667 | 3,333 | n/a | 14.43 | Mar-19-2024 |
| 3,334 | 1.666 | n/a | 11.39 | Mar-20-2023 |
| 8,000 | 0 | n/a | 7.47 | Mar-21-2022 |
| 8,000 | 0 | n/a | 6.95 | Mar-16-2021 |
| 3,000 | 0 | n/a | 8.90 | Mar-17-2020 |
| 2,500 | 0 | n/a | 16.00 | Feb-16-2016 |
Scot A. Kelley | 0 | 2,850 | n/a | 14.72 | Mar-18-2025 |
| 834 | 1,666 | n/a | 14.43 | Mar-19-2024 |
| 1,667 | 833 | n/a | 11.39 | Mar-20-2023 |
| 130 | 0 | n/a | 8.90 | Mar-17-2020 |
| 1,500 | 0 | n/a | 12.92 | Feb-20-2018 |
| 1,500 | 0 | n/a | 14.22 | Jan-17-2017 |
| 1,000 | 0 | n/a | 16.00 | Feb-16-2016 |
Name | Option Awards |
Number of Securities Underlying Options (#) | Number of Securities Underlying Unexercised Options (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | Option Exercise Price | Option Expiration |
Exercisable | Unexercisable | (#) | ($) | Date |
Robert W. Walker | None | None | n/a | | |
J. Mark Bias | 0 | 5,000 | n/a | 19.0100 | Mar-15-2027 |
(1) | 0 | 2,200 | n/a | 13.5454 | Mar-16-2026 |
Brien M. Chase | 0 | 5,000 | n/a | 19.0100 | Mar-15-2027 |
(1) | 1,834 | 3,666 | n/a | 13.5454 | Mar-16-2026 |
(1) | 3,667 | 1,833 | n/a | 13.3818 | Mar-18-2025 |
(1) | 5,500 | 0 | n/a | 13.1182 | Mar-19-2024 |
(1) | 5,500 | 0 | n/a | 10.3545 | Mar-20-2023 |
Michael R. Mineer | 0 | 5,000 | n/a | 19.0100 | Mar-15-2027 |
(1) | 1,834 | 3,666 | n/a | 13.5454 | Mar-16-2026 |
(1) | 3,667 | 1,833 | n/a | 13.3818 | Mar-18-2025 |
(1) | 5,500 | 0 | n/a | 13.1182 | Mar-19-2024 |
(1) | 5,500 | 0 | n/a | 10.3545 | Mar-20-2023 |
(1) | 8,800 | 0 | n/a | 6.7909 | Mar-21-2022 |
(1) | 8,800 | 0 | n/a | 6.3182 | Mar-16-2021 |
(1) | 3,300 | 0 | n/a | 8.0909 | Mar-17-2020 |
Scot A. Kelley | 0 | 3,000 | n/a | 19.0100 | Mar-15-2027 |
(1) | 1,045 | 2,090 | n/a | 13.5454 | Mar-16-2026 |
(1) | 0 | 1,045 | n/a | 13.3818 | Mar-18-2025 |
________________________
(1) | 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 options awarded has been increased by 10% and the original exercise price of the options awarded has been decreased by 10% to reflect the 10% stock dividend. |
CEO Pay Ratio
As required by applicable SEC rules, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of our Chief Executive Officer, Robert W. Walker.
For 2017, our last completed fiscal year:
(a) | The annual total compensation of our median employee was $35,845, and |
(b) | The annual total compensation of Mr. Walker, as reported in the Summary Compensation Table on page 18 above, was $486,328. |
(c) | The ratio of the annual total compensation of Mr. Walker to the annual total compensation of our median employee was 13.57 to 1. |
To determine our median employee in the range of all employees except Mr. Walker for this calculation,
1. | We selected the October 13, 2017 pay period which included a total of 371 full-time and part-time employees. |
2. | For each of these employees, we ranked the total amount of salary, wages, overtime pay, and cash bonuses from our payroll records on each employee from lowest to highest and identified the middle employee as the “median employee.” |
3. | Once the median employee was identified, we calculated that employee’s annual total compensation for 2017 in the same manner as required by Item 402(c)(2)(x) of Regulation S-K that we use to compute Mr. Walker’s annual total compensation in the table on page 18, resulting in annual total compensation of $35,845 for this median employee. |
4. | For the annual total compensation of Mr. Walker, we used the amount reported in the “Total” column for the year 2017 included in the Summary Compensation Table on page 18. |
The SEC rules for identifying the median employee used in determining the CEO pay ratio permit companies to employ a wide range of methodologies, estimates and assumptions and, as a result, the CEO pay ratio reported above may not be comparable to the CEO pay ratio reported by other companies.
Director Compensation
The following table summarizes compensation earned in 20152017 by the Company's directors.
Name | Fees Earned or Paid in Cash ($) | Option Awards ($) | All Other Compensation ($) | Total ($) |
Toney K. Adkins | 12,000 | n/a | n/a | 12,000 |
Philip E. Cline | 12,000 | n/a | n/a | 12,000 |
Harry M. Hatfield | 12,000 | n/a | n/a | 12,000 |
Lloyd G. Jackson II | 12,000 | n/a | n/a | 12,000 |
Keith F. Molihan | 12,000 | n/a | n/a | 12,000 |
Marshall T. Reynolds | 12,000 | n/a | n/a | 12,000 |
Neal W. Scaggs | 12,000 | n/a | n/a | 12,000 |
Robert W. Walker | (1) | n/a | n/a | 0 |
Thomas W. Wright | 12,000 | n/a | n/a | 12,000 |
________________________
(1) | In accordance with Company policy, as an employee of the Company, Mr. Walker does not receive any director compensation. |