The committee also may consider the extent to which the candidate would fill a present need on the Board of Directors.
The Nominating and Corporate Governance Committee will also consider candidates for director suggested by other directors, as well as our management and shareholders. A shareholder who desires to recommend a prospective nominee for the Board should notify our Secretary or any member of the Nominating and Corporate Governance Committee in writing with whatever supporting material the shareholder considers appropriate. Any shareholder wishing to make a nomination must follow our procedures for shareholder nominations, which are described under "Shareholder“Shareholder Proposals, Nominations and Communications with the Board of Directors."”
Set forth below is certain information with respect to current executive officers of Prudential Bancorp and its subsidiaries who are not directors. Ages are reflected as of September 30, 2017.2018.
Name | | Age and Principal Occupation During the Past Five Years |
| | |
Anthony V. Migliorino | | Executive Vice President and Chief Operating Officer of Prudential Bank since September 2015; from July 2015 until September 2015 served as Senior Vice President-Retail Business Development Officer. From September 2000 to September 2014, Mr. Migliorino served in various positions at Sterling National Bank, New York, New York, including Senior Vice President of Branch Banking. Prior to 2000, Mr. Migliorino served as a senior officer at several financial institutions including Stissing National Bank, Pine Plains, New York and Savings Bank of Rockland County, Spring Valley, New York. Age 62.63. |
| | |
Robert E. Pollard | | Vice President and Controller of Prudential Bancorp and Prudential Bank since November 2017. Prior thereto, Mr. Pollard served as Assistant Controller of First Choice Bank, Kingston, New Jersey from March 2014 to March 2017 and as Controller of First Bank of Delaware, Philadelphia, Pennsylvania, from 2002 until June 2013. Age 60.61. |
| | |
Jack E. Rothkopf | | Senior Vice President, Chief Financial Officer and Treasurer of Prudential Bancorp and Prudential Bank since June 2015; Senior Vice President and Treasurer of Prudential Bancorp from June 2013 until June 2015 and of Prudential Bank from April 2013 until June 2015; from January 2006 to April 2013, served as Vice President and Controller. Prior thereto, Mr. Rothkopf served as Assistant Vice President of Popular Financial Holdings, Marlton, New Jersey from October 2000 to January 2006. Age 54. |
| | 55. |
REPORT OF THE AUDIT COMMITTEE |
The Audit Committee has reviewed and discussed together with management and Prudential Bancorp'sBancorp’s independent registered public accounting firm, S.R. Snodgrass, P.C., Prudential Bancorp’s audited financial consolidated statements with management.and the results of management’s assessment of the effectiveness of Prudential Bancorp’s internal control over financial reporting and the independent registered accounting firm’s audit of internal control over financial reporting. The Audit Committee has discussed with Prudential Bancorp'sBancorp’s independent registered public accounting firm, S.R. Snodgrass, P.C., the matters required to be discussed under Public Company Accounting Oversight Board Auditing Standard No. 16, Communication with Audit Committees. The Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board under Rule 3526 regarding S.R. Snodgrass, P.C.'s’s communications with the Audit Committee concerning its independence and the Committee has discussed with S.R. Snodgrass, P.C. its independence. BasedIn reliance on the reviewreviews and discussions referred to above in this report, the Audit Committee recommended to the Board of Directors that the audited financial statements and management’s assessment of the effectiveness of Prudential Bancorp’s internal control over financial reporting be included in Prudential Bancorp'sBancorp’s Annual Report on Form 10-K for fiscal year 2017 for filing2018 filed with the Securities and Exchange Commission.
Members of the Audit Committee
A. J. Fanelli, Chairman
John C. Hosier
Bruce E. Miller
Francis V. Mulcahy
Compensation Discussion and Analysis
Overview of Compensation Philosophy and Program. Our compensation philosophy is to provide compensation to our executive officers that is competitive in the marketplace and provides elements of both reward and retention in order to attract and retain qualified and experienced officers. The compensation of our executive officers, including the various components of such compensation, is determined by our Compensation Committee. The Committee consists solely of non-employee directors who meet all applicable requirements to be independent of management.
When setting the compensation of our executive officers, the Committee generally targets compensation which is comparable with our peer group with respect to each of our components of compensation. The compensation we provide to our executive officers primarily consists of the following:
● | periodic grants of stock options and restricted stock awards, and |
● | other forms of compensation as approved by the Board of Directors, as appropriate, consisting principally of participation in an employee tax-qualified retirement plan consisting of a profit-sharing plan and medical, dental, life and related insurance programs. |
Since our mutual holding company reorganization in 2005 and our second-step conversion to a fully public holding company in 2013, we have implemented various stock option, restricted stock and stock incentive plans in order to more closely align the interests of our directors and executive officers with our shareholders. Each of these plans was approved by our shareholders. Grants of stock options and grants of restricted stock to our executive officers and directors are made periodically both as a reward for past service as well as to provide an incentive for future performance.
We also provide all of our employees, including our executive officers, with tax-qualified retirement benefits through a profit-sharing 401(k) plan. We also offer various fringe benefits to all of our employees, including our executive officers, on a non-discriminatory basis, including group policies for medical, dental, life, disability and accidental death insurance. In addition, we have entered into split dollar life insurance agreements with certain executive officers. The Committee believes such benefits are appropriate and assist such officers in fulfilling their employment obligations.
Independent Compensation Committee. The Committee, composed entirely of independent directors, administers the Company's executive compensation program. None of the members is a current or former officer or employee of the Company or any of its subsidiaries or has any separate business relationship with the Company. The role of the Committee is to oversee the Company's compensation and benefit plans and policies, administer its equity incentive plans (including reviewing and approving equity grants to executive officers) and review and approve annually all compensation decisions relating to executive officers, including those for the President and Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer and the other executive officers named in the Summary Compensation Table (the "named executive officers").
The Compensation Committee is committed to high standards of corporate governance, as embraced most notably in the Sarbanes-Oxley Act of 2002 and the various regulations implementing that statute. The Compensation Committee's Charter reflects the foregoing responsibilities and commitment, and the Committee and the Board periodically review and revise the Charter. The full text of the Compensation Committee Charter is available on our website at www.prudentialbanker.com under the "Investor Relations" tab. The Committee's membership is determined by the Board.
As a matter of philosophy, the Company and the Committee are committed to creating a compensatory structure for executives that is simple and readily comprehensible to investors. The types of compensation we offer our executives remain within the traditional categories: salary, short and long-term incentive compensation (discretionary cash bonuses and stock-based awards), standard executive benefits, and retirement and severance benefits. The Company does not provide executives with excessive or exotic perquisites. It also does not make loans to executives or their families or families' businesses, other than those made in the ordinary course of the Bank's business and on substantially the same terms as those prevailing at the time for comparable transactions with other persons in accordance with applicable federal banking regulations. We do not permit our executives to receive any income or gain from affiliated transactions or arrangements with the Company, a major concern addressed by recent corporate governance laws and regulations.
General Compensation Philosophy. The Committee believes that compensation paid to executive officers should be closely aligned with the performance of the Company on both a short-term and long-term basis, and that such compensation should assist the Company in attracting and retaining key executives critical to its long-term success. The compensation of executive officers is structured to ensure that a significant portion of an executive's compensation will be directly related to the Company's corporate performance and other factors that directly and indirectly influence shareholder value. To that end, it is the view of the Board that the total compensation program for executive officers should consist primarily of the following:
● | Annual cash bonus awards; and |
● | Long-term incentive compensation consisting of a mixture of stock options and restricted stock awards. |
The overriding philosophy in setting corporate goals is to both create an executive compensation program that will attract, motivate and retain qualified and experienced officers as well as to ensure that the interests of senior management are aligned with the interests of shareholders. The Compensation Committee reviews the overall compensation of each named executive officer to determine the appropriateness of the level of overall compensation as well as the amount for each element of that compensation based upon the performance of the individual employee and the performance of the Company. The Compensation Committee generally intends to set total compensation levels at within a range of between 85% and 115% of the 75th percentile (based upon a review of the particular executive and his or her respective performance) of market, including a review of a peer group consisting of eight publicly-traded bank and savings and loan holding companies located in Pennsylvania and New Jersey with assets between approximately $800 million and $1.1 billion as well as compensation data obtained from third party sources. The Committee believes that, over time, the financial performance of the Company is reflected in the value of its stock and that internal results, such as financial performance, and external results, such as stock price, ultimately move in a complementary fashion.
The financial performance of the Company on a period-to-period comparative basis is the major factor considered by the Compensation Committee when it determines salary adjustments and discretionary cash bonuses. The Committee uses these elements of compensation to incentivize executives to achieve continuous, near-term results. Executives' equity-based compensation, on the other hand, is focused on achievement of long-term success. The Committee believes that the return to shareholders investing in our stock, including the level of dividends, is a good indicator of corporate performance. Stock-based awards are thus a way to link executive compensation to long-term performance. In addition, the Company has never re-priced stock options downward or exchanged new lower priced options for outstanding higher priced options.
In determining the overall amounts and types of executive compensation, the Committee weighs personal factors as well, including commitment, leadership, teamwork and community involvement. The Committee also considers executive compensation practices of our competitors and peers.
No compensation consultants were utilized during fiscal 2016 or 2017, but the use of compensation consultants may be considered in the future.
Role of Executive Officers and Management. The Chief Executive Officer provides recommendations to the Compensation Committee on matters of compensation philosophy, plan design and the general guidelines for executive officer compensation. These recommendations are then considered by the Committee. The Chief Executive Officer attends certain Committee meetings but is not present for the executive sessions or for any discussion of his own compensation.
Base Salaries. We provide named executive officers and other employees with a base salary to compensate them competitively for services rendered during the year. Base salary ranges for named executive officers are determined for each employee based on his or her position and responsibility, performance and compensation levels paid by our peers to executives in similar positions. The Compensation Committee targets base salaries to fall within a range of 85% to 115% of the market median (50th percentile) and structures incentive and total compensation to fall within a range of 85% to 115% of the 75th percentile of market. Merit increases granted in fiscal 2017 took effect during January 2017 in conjunction with the completion of the acquisition of Polonia Bancorp.
During its annual review of base salaries for executives, the Compensation Committee primarily considers:
● | the financial condition and results of operations of the Company; |
● | individual performance of the executive; |
● | internal review of the executive's compensation, both individually and relative to other officers; |
● | peer and market data; and |
● | qualifications and experience of the officer. |
For fiscal 2017, the Compensation Committee determined the salaries of senior and executive officers should increase by 5.9% to 40.0% with the base salary of the named executive officers Pollack, Migliorino, Rothkopf, Hanuscin and Gallagher being increased by 35.8%, 40.0%, 5.9%, 8.0% and 6.7%, respectively. Mr. Gallagher began his employment with the Company during January 2017 in conjunction with the acquisition of Polonia Bancorp. The increases with regard to the Chief Executive Officer and the Chief Operating Office reflected the Committee's determination with regard to the central role played by such officers in returning the Company to sustainable core profitability.
Bonuses. In the past, a discretionary cash bonus for eligible employees, including executive officers, had been determined on an annual basis and generally paid in December of each year for the prior fiscal year ended September 30th based on years of service and compensation. Unlike prior years, the amount of the aggregate bonus pool and the manner of allocating such amounts to individuals with respect to 2017 were based on the Committee's assessment of both the Company's overall financial performance and as well as the performance of the individual participant and was not related to years of service. The bonuses reflected the Committee's assessment of the individual's performance and the role such performance played in driving the Company's substantial improvement for fiscal 2017. See "-Summary Compensation Table."
Long-Term Compensation. The long-term incentive compensation portion of the Company's compensation program consists of grants of stock options and restricted stock awards under the Company's 2008 Stock Option Plan (the "2008 SOP"), the 2008 Recognition and Retention Plan (the "2008 RRP" and collectively (the "2008 Equity Plans") and the 2014 SIP (collectively, the "Equity Plans"). Under the Equity Plans, the Compensation Committee has discretion in determining grants of stock options and restricted stock awards to executive officers, including the timing, amounts and types of awards. The level of an individual's grants typically has been based in large on the officer's position within the organization, his or her individual performance and length of service.
The exercisability of options and the vesting of restricted stock awards generally depend upon the executive officer continuing to render services to the Company. In addition, although not granted to date, the Company's 2008 RRP and 2014 SIP provide that stock awards may be made based upon specified performance goals. All options granted under the Company's stock option plans must have an exercise price at least equal to the market value of the common stock on the date of grant. Options may be exercised only for a limited period of time after the optionee's departure from the Company in most cases. Under the terms of the Equity Plans, the grants cannot vest more rapidly than 20% per year except in certain specified circumstances, such as the death or disability of the award holder or in the event of a change in control (as defined in the Equity Plans) of the Company. To date, all the awards have been granted with five year vesting schedules.
Only limited equity grants were made in fiscal 2017, primarily to newly appointed or promoted officers who were not employees when equity grants were made in February 2015 upon receipt of shareholder approval of the 2014 SIP. Under the Company's 2014 SIP and the 2008 RRP, the Compensation Committee is also authorized to grant share awards, which are a right to receive a distribution of shares of common stock. Shares of common stock granted pursuant to a share award are in the form of restricted stock which vests upon such terms and conditions as established by the Committee. No grants of restricted stock were made to executive officers during fiscal 2017 in part due to the level of grants made in previous years.
Additional Components of Executive Compensation. The Bank and the Company currently have entered into employment agreements with Messrs. Pollack and Migliorino. The Bank also is party to a change in control severance agreement with Mr. Rothkopf. The purpose of the employment and change in control severance agreements is to retain for the benefit of the Bank and the Company the talents of highly skilled officers who are integral to the development and implementation of the Bank's and the Company's business. Such agreements, as discussed below, provide for termination benefits in the event of such executives' termination or in the event of the occurrence of certain events. The severance payments provided by the agreements are intended to align the executive officers' and the shareholders' interests by enabling executive officers to consider corporate transactions that are in the best interests of the shareholders and other constituents of the Company without undue concern over whether the transactions may jeopardize the executive officers' own employment or impose financial hardship on him or her. The grounds under which severance payments are triggered in the employment and change in control agreements are similar to or the same as those included in many employment agreements or severance agreements for senior executive officers of comparable financial institutions.
Employment Agreements. Prudential Bank and Prudential Bancorp entered into an amended and restated employment agreement in December 2016 with Mr. Pollack as well as an employment agreement with Mr. Migliorino. The amended and restated agreement with Mr. Pollack increased the term of the agreement and the severance benefits (as discussed below) as well as his compensation in view of the Compensation Committee's determination that his performance and value to the Company warranted such enhanced provisions. The employment agreement with Mr. Migliorino superseded the change in control agreement he had previously entered into with the Bank in November 2015 and reflected the Compensation Committee's determination that his continued employment was critical to the Bank's and Company's ongoing performance. In December 2015, in connection with the restructuring of certain aspects of executive compensation, Mr. Rothkopf, as well as certain other officers who had employment agreements, entered into a change in control agreement which became effective January 1, 2017, upon expiration of the term of his employment agreement on December 31, 2016.
The employment agreements have a term of three years, with respect to Mr. Pollack, and two years, with respect to Mr. Migliorino with the initial terms expiring, if the agreements are not extended, on December 31, 2019 and December 31, 2018, respectively. The term is extended annually for one year on each December 31st starting December 31, 2017 unless either the Company and the Bank or the executive gives notice at least 30 days prior to the annual anniversary date that the agreement shall not be extended. The Compensation Committee determined in November 2017 to extend the terms of the executives' employment agreements for an additional year. The agreements are automatically extended for one year upon a change in control. The terms of the employment agreements provide for an initial annual base salary, which is reviewed annually by the Compensation Committee of the Board of Directors. Each of the employment agreements is terminable with or without cause by the Company or the Bank. The executives have no right to compensation or other benefits pursuant to the employment agreements for any period after voluntary termination by the executive without good reason, as defined in the agreements and which includes, among other things, a material change in the officer's position, salary or entities without the officer's consent, or termination by the Bank for cause, disability, retirement or death.
In the event that the executive terminates his employment because of failure to comply with any material provision of the employment agreement by the Company or the Bank or the employment agreement is terminated by the Company or the Bank other than for cause, disability, retirement or death, Messrs. Pollack and Migliorino will be entitled to (i) the payment of two times (Mr. Pollack) and one times (Mr. Migliorino), respectively, the executive's respective average annual cash compensation (salary and cash bonuses) based upon the five calendar years preceding the date of termination as cash severance, (ii) the maintenance until the earlier to occur of the passage of two years and one year, respectively, from the date of termination or until the executive's full time employment with another employer (which provides substantially similar benefits), of the executive's continued participation in all group insurance, life insurance, health, dental and accident insurance and disability insurance plans at no cost to the officer and (iii) a lump sum cash payment equal to the projected cost of providing the executive with benefits for two years, or one year in the case of Mr. Migliorino, pursuant to other employee benefit plans (excluding retirement plans and stock compensation plans) in which the executive was entitled to participate. In the event the executive's continued participation in any group insurance plan is barred or would trigger the payment of an excise tax under Section 4980D of the Code, or if any such group insurance plan is discontinued, then the Company or the Bank shall either (1) provide substantially similar benefits under an alternative plan or (2) pay a lump sum cash amount to the executive equal to the projected cost of providing continued coverage to the executive until the two-year, or one-year in the case of Mr. Migliorino, anniversary of the executive's date of termination.
In the event that the executive's employment is terminated in connection with a change in control, as defined in the employment agreements, for other than cause, disability, retirement or death or the executive terminates his employment as a result of certain adverse actions which are taken with respect to the executive's employment (i.e., good reason) following a change in control, as defined, the executive will be entitled to a cash severance payment equal to three times (Mr. Pollack), or two times (Mr. Migliorino) their respective average annual cash compensation, the maintenance, as described above, of the group insurance plans for three years (Mr. Pollack) or two years (Mr. Migliorino), respectively, or until the executive's full-time employment with another employer that provides similar benefits plus the aforementioned lump sum cash payment for the projected cost of providing the other employee benefits as noted above until the third anniversary (Mr. Pollack) or second anniversary (Mr. Migliorino) of the executive's termination.
The employment agreements with respect to Pollack and Migliorino previously provided that in the event any of the payments to be made thereunder or otherwise upon termination of employment are deemed to constitute "parachute payments" within the meaning of Section 280G of the Code, then such payments and benefits received thereunder shall be reduced by the minimum amount necessary to result in no portion of the payments and benefits being non-deductible by the Company or the Bank for federal income tax purposes. In November 2017 the Company, and the Bank entered into amendments to each of the employment agreements with Messrs. Pollack and Migliorino addressing the applicability of Sections 4999 and 280G of the Code. The agreements were revised to provide that if the payments that were otherwise payable to Mr. Pollack or Mr. Migliorino, as applicable, in connection with a termination after the occurrence of a change in control would trigger the imposition of an excise tax under Section 4999 of the Code, such amounts would be required to be reduced only if doing so would result in a greater tax amount to be retained by Mr. Pollack or Mr. Migliorino, as applicable.
For a description of potential payments under the employment agreements in the event of a termination of Messrs. Pollack's and Migliorino's employment, see "- Potential Payments Upon Termination of Employment or a Change in Control."
Change in Control Agreement. The Bank entered into a change in control severance agreement in December 2015 (effective January 1, 2017) with Mr. Rothkopf. The change in control agreement is intended to assist the Bank (and indirectly the Company) in maintaining a stable and competent management base. The change in control severance agreement has an initial term ending December 31, 2017 if the term of the agreement is not extended. The term is extended annually for one year on each December 31st starting December 31, 2017 unless either the Bank or the executive gives notice at least 30 days prior to the annual anniversary date that the agreement shall not be extended. The agreement with Mr. Rothkopf was extended for an additional one year in November 2017. The agreement automatically extends for one year upon a change in control.
Mr. Rothkopf's agreement provides that in the event of an involuntary termination of employment without cause and other than for retirement, death or disability following a change in control (including a termination by the executive for "good reason," which includes a material change in the executive's position, salary or duties without his consent), the executive will be entitled to (i) the payment of two times his average annual cash compensation (salary and cash bonuses) based upon the five calendar years preceding the date of termination as cash severance, (ii) the maintenance until the earlier to occur of the passage of two years from the date of termination or until his full time employment with another employer (which provides substantially similar benefits) of the executive's continued participation in all group insurance, life insurance, health, dental and accident insurance and disability insurance plans at no cost to the officer and (iii) a lump sum cash payment equal to the projected cost of providing him with benefits for one year pursuant to other employee benefit plans (excluding retirement plans and stock compensation plans) in which he was entitled to participate. In the event Mr. Rothkopf's continued participation in any group insurance plan is barred or would trigger the payment of an excise tax under Section 4980D of the Code, or if any such group insurance plan is discontinued, then the Bank shall either (1) provide substantially similar benefits under an alternative plan or (2) pay a lump sum cash amount to him equal to the projected cost of providing continued coverage to him until the two-year anniversary of his date of termination.
The change in control severance agreement provides that in the event any of the payments to be made thereunder or otherwise upon termination of employment are deemed to constitute "parachute payments" within the meaning of Section 280G of the Code, then such payments and benefits received thereunder shall be reduced by the minimum amount necessary to result in no portion of the payments and benefits being non-deductible by the Bank for federal income tax purposes.
For a description of potential payments under the agreements in the event of a termination of Mr. Rothkopf's employment, see "- Potential Payments Upon Termination of Employment or a Change in Control." Mr. Hanuscin also had a change in control severance agreement structured substantially the same as Mr. Rothkopf's agreement; such agreement was terminated as a result of Mr. Hanuscin's voluntary resignation in October 2017.
Endorsement Split Dollar Agreements. The Bank has purchased insurance policies on the lives of certain of its executive officers named in the Summary Compensation Table as well as other officers, and has entered into Endorsement Split Dollar Agreements with each of those officers. The policies are owned by the Bank. Under the agreements with the named executive officers, upon an officer's death while he or she remains employed by the Bank, the officer's beneficiary will receive two times the officer's salary as of the date of death. Pursuant to the terms of the agreements, the Bank has elected generally to not extend such benefits after a termination of employment. Such amounts will be funded from the receipt of the death benefits under the insurance policies on such officer's life in excess of the cash surrender value. The Bank will receive the full cash surrender value, which is expected to reimburse the Bank in full for its life insurance investment as well as the remainder, if any, in excess of the net proceeds after payments to the officer's beneficiaries pursuant to the Endorsement Split Dollar Agreements.
The Endorsement Split Dollar Agreements may be terminated at any time by the Bank or the officer or by the Bank upon the officer's termination of service to Prudential Bank. Upon termination, the Bank may surrender the policy and collect the cash surrender value.
Retirement and Other Benefits. The Company also provides its employees, including the named executive officers, with tax-qualified retirement benefits through the Prudential Savings Bank Employees Savings and Profit Sharing Plan and Trust (the "401(k) Plan"). The Company previously provided additional benefits through two additional tax-qualified retirement plans: an employee stock ownership plan (the "ESOP") and the Pentegra Defined Benefit Plan for Financial Institutions (the "Defined Benefit Plan"). The determination was made to terminate the ESOP effective December 31, 2016. In addition, the Defined Benefit Plan was frozen during November 2015. Such actions were taken as part of the Company's efforts to effect significant cost savings while still providing competitive compensation structure. All employees who meet the age and service requirements participate in the 401 (k) Plan, on a non-discriminatory basis. The Bank did not provide a 401(k) match to employee contributions for the past several years due to the existence of the benefits provided by the ESOP. However, as a result of the termination of the ESOP, the Bank determined to initiate a 401(k) match commencing in January 2018.
The Company also offers various fringe benefits to all of its employees, including the named executive officers, including group policies for medical and dental insurance, life insurance and long-term disability. We provide individual and family medical and dental coverage to employees. We also provide all of our employees with life and accidental death and disability insurance at no cost to the employee. The President and Chief Executive Officer is provided an automobile allowance. The Compensation Committee believes such benefit is appropriate and assists the President and Chief Executive Officer in fulfilling his employment obligations.
Results from the 2016 Annual Meeting Advisory Vote on Executive Compensation. At our 2016 annual meeting of shareholders, we presented our advisory vote on the compensation of our named executive officers, commonly known as a "say-on-pay" proposal. The vote was not binding on the Company, the board of directors or the Compensation Committee. A substantial majority of the votes cast on the proposal, approximately 87%, was voted "FOR" the compensation of our named executive officers as disclosed in the proxy statement. The Compensation Committee believes that this affirms the shareholders' support of the Company's compensation policies and practices. The Compensation Committee will continue to consider the outcome of the Company's say-on-pay proposals when making future compensation decisions for the named executive officers.
Compensation Policies and Practices as They Relate to Risk Management
The Compensation Committee of the Board of Directors has reviewed the Company's policies and practices applicable to employees, including the Company's benefit plans, arrangements and agreements, and does not believe that they are reasonably likely to have a material adverse effect on the Company. The Committee does not believe that the Company's policies and practices encourage officers or employees to take unnecessary or excessive risks or behavior focused on short-term results rather than the creation of long-term value.
Report of the Compensation Committee
We have reviewed and discussed with management the Compensation Discussion and Analysis disclosures to be included in the Company's Proxy Statement for the Annual Meeting of Shareholders to be held in February 2018 and filed with the SEC pursuant to Section 14(a) of the Securities Exchange Act of 1934. Based on the reviews and discussions referred to above, we recommend to the Board of Directors that the Compensation Discussion and Analysis referred to above be included in the Company's Proxy Statement.
Compensation Committee
John C. Hosier (Chairman)
Francis V. Mulcahy
A.J. Fanelli
Bruce E. Miller
Summary Compensation Table
The following table summarizes the total compensation paid by Prudential Bank (including amounts deferred, if any, to future periods by the officers) for services rendered in all capacities during the fiscal years ended September 30, 2017, 20162018 and 20152017 to the principal executive officer the person who served as principal financial officer during fiscal 2017 and the threetwo other most highly compensated executive officers of Prudential Bank during fiscal 20172018 whose total compensation exceeded $100,000, including one executive officer who resigned subsequent to September 30, 2017, collectively referred to as our "named“named executive officers."” The Company has not paid separate cash compensation to our officers.
Name and Principal Position | | Fiscal | | | | | | | | | | | | Option | | | | | | | |
Dennis Pollack President and Chief Executive Officer | | | 2018 2017 | | | $
| 398,375 367,593 | | | $
| 200,000 135,000 | | | $
| 230,750 -- | | | $
| 290,400 -- | | | $
| 33,151 9,750 | | | $
| 1,152,676 512,343 | |
Anthony V. Migliorino Executive Vice President and Chief Operating Officer | | | 2018 2017 | | | | 281,538 263,077 | | | | 130,000 84,006 | | | | 138,450 -- | | | | 163,350 -- | | | | 8,371 47,869(4 | ) | | | 721,709 394,946 | |
Kevin Gallagher(5) Senior Vice President and Chief Lending Officer | | | 2018 2017 | | | | 160,462 111,154 | | | | 20,000 5,000 | | | | 55,380 -- | | | | 108,900 31,800 | | | | 4,324 -- | | | | 349,066 147,954 | |
___________________
Name and Principal Position | | Fiscal Year | | Salary | | | Bonus(1) | | | Stock Awards(2) | | | Option Awards(2) | | | Change in Pension Value and Nonqualified Deferred Compensation Earnings(3) | | | All Other Compensation | | | Total | |
| | | | | | | | | | | | | | | | | | | | | | | |
Dennis Pollack(4) | | 2017 | | $ | 367,593 | | | $ | 135,000 | | | $ | -- | | | $ | -- | | | $ | -- | | | $ | 9,750(5 | ) | | $ | 512,343 | |
President and Chief | | 2016 | | | 108,462 | | | | 20,000 | | | | 36,050 | | | | 21,300 | | | | -- | | | | 4,125 | | | | 189,937 | |
Executive Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Anthony V. Migliorino(6) | | 2017 | | | 263,077 | | | | 84,006 | | | | -- | | | | -- | | | | -- | | | | 47,869(7 | ) | | | 394,946 | |
Executive Vice President | | 2016 | | | 172,368 | | | | 20,000 | | | | 108,150 | | | | 31,950 | | | | -- | | | | 690 | | | | 333,158 | |
and Chief Operating | | 2015 | | | 33,750 | | | | -- | | | | -- | | | | -- | | | | -- | | | | 750 | | | | 24,500 | |
Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Kevin Gallagher(8) | | 2017 | | | 111,154 | | | | 5,000 | | | | -- | | | | 31,800 | | | | -- | | | | -- | | | | 147,954 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Jeffrey T. Hanuscin(9) | | 2017 | | | 132,885 | | | | -- | | | | -- | | | | -- | | | | -- | | | | 41,718(7 | ) | | | 174,602 | |
First Vice | | 2016 | | | 120,495 | | | | 10,000 | | | | -- | | | | -- | | | | 9,000 | | | | 16,690 | | | | 156,185 | |
President/Controller | | 2015 | | | 120,120 | | | | -- | | | | 61,150 | | | | 50,380 | | | | 15,000 | | | | 11,978 | | | | 258,628 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Jack E. Rothkopf | | 2017 | | | 177,874 | | | | 10,000 | | | | -- | | | | -- | | | | (5,000 | ) | | | 161,548(7 | ) | | | 344,422 | |
Senior Vice President, | | 2016 | | | 156,912 | | | | 5,000 | | | | -- | | | | -- | | | | 39,000 | | | | 28,894 | | | | 229,806 | |
Chief Financial Officer | | 2015 | | | 160,681 | | | | -- | | | | 183,450 | | | | 229,000 | | | | 46,000 | | | | 16,491 | | | | 635,622 | |
and Treasurer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
_____________________
(1) | Represents discretionary bonuses earned in each fiscal year reflected butand which were paid, with respect to fiscal 2016years 2018 and 2015, in2017, prior to the followingend of fiscal year. Bonuses were discretionarily determined based on Company performance as well as individual performance. |
(2) | Reflects the grant date fair value in accordance with FASB ASC Topic 718 for awards of restricted stock and stock options that were granted during fiscal 2015, fiscal 2016year 2018 and fiscal year 2017. The valuationsvaluation of the restricted stock awards granted in fiscal 2015 and fiscal 2016 areyear 2018 is based on a grant date fair valuesvalue of $12.23 and $14.42, respectively,$18.46 per share. The assumptions used in valuing the stock option awards granted in fiscal 2015,year 2018 and fiscal 2016 and fiscalyear 2017 are set forth in Note 13 to the Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended September 30, 2017.2018. |
(3) | RepresentsIncludes for fiscal 2018 an automobile allowance ($9,750) and club dues ($16,000) for Mr. Pollack. Also includes the sumamount of the actuarial change in pension value inmatching contribution under the Bank’s 401(k) plan years 2014, 2015 and 2016 (plan years end December 31st) for Messrs. Hanuscin and Rothkopf pursuant to their participation in the Defined Benefit Plan, a multiple employer tax-qualified defined benefit plan. The amounts reflect the effectfiscal 2018 for each of the adoption of the new mortality table (RP-2014). Messrs. Gallagher, Pollack and Migliorino are not participating in the Defined Benefit Plan. No value is reflected for Mr. Hanuscin since he resigned in October 2017 and had not become vested in his account in the Defined Benefit Plan at the time of his resignation. named executive officers. |
(4) | Effective as of May 1, 2016, Mr. Pollack was appointed President and Chief Executive Officer of the Company and Prudential Bank. Thus, Mr. Pollack's salary data for fiscal 2016 only reflects five months of salary. |
(5) | Consists of an automobile allowance in fiscal 2017. |
(6) | Mr. Migliorino joined Prudential Bank in June 2015. Accordingly, his salary amount for fiscal 2015 only reflects three and a half months of salary. |
(Footnotes continued on the following page)
___________________
(7) | Includes the fair market value on December 31, 2016 of the 2,796 2,436 and 9,436 shares allocated for plan year 2016 to the ESOP accountsemployees stock ownership plan (“ESOP”) account of Messrs.Mr. Migliorino Hanuscin and Rothkopf, respectively, based on a value of $17.12 per share on December 30, 2016 (last trading day of 2016). As of such date, Messrs. Gallagher and Pollack were not participants in the ESOP. The ESOP was terminated effective December 31, 2016. |
(8)(5) | Mr. Gallagher was appointed Senior Vice President and Chief Lending Officer effective January 1, 2017. Consequently, Mr. Gallagher'sGallagher’s salary data for fiscal 2017 only reflects nine months of salary. |
(9) | Mr. Hanuscin resigned in October 2017. As a consequence, the unvested portion of the grants of restricted stock and options awarded previously were forfeited. |
Narrative to Summary Compensation Table
Base salaries as well as bonuses, if any, for our named executive officers (as well as all other executive officers) are determined and approved by the Compensation Committee. The Compensation Committee, in its role as the administrator of the Company’s stock benefit plans, also determines whether to award equity incentive awards and if so, the amount and form of such awards (stock options and/or restricted share awards). In accordance with the Committee’s practices and procedures, the Committee annually reviews executive officers’ compensation in order to address appropriate adjustments, if any, to such persons’ base compensation as well as to consider awarding bonuses to such officers. Consistent with the methodology adopted in connection with the annual compensation reviews conducted in fiscal years 2016 and 2017, the analysis of potential bonuses consists of an assessment by the Compensation Committee both of the Company’s overall financial performance over the past year or more, as appropriate, as well as the performance of the individual officer under consideration. With respect to executive officers, especially the named executive officers, the Committee determined that individual performance and its effect on the Company’s performance is still the most relevant factor to be considered in determining both salary adjustments and bonus awards. Consistent with the revised methodology the Committee initially adopted in August 2016, the Committee reaffirmed its determination that years of service is not considered a relevant factor for purposes of analyzing potential adjustments to the compensation of executive officers’ salaries and bonuses. In addition, in connection with its deliberations, the Committee considered a number of factors including the salary adjustments effected in fiscal years 2016 and 2017 and the level of bonuses awarded in such years, in particular with respect to bonuses, the level of bonuses awarded in fiscal 2017. The Committee also analyzed the appropriateness of the level of current salaries of the Company’s executive officers, especially when reviewed in light of peer group data.
As a result of the foregoing considerations, modest adjustments to each of the named executive officer’s salary in the range of 2% to 3% were deemed appropriate in light of both such officers’ performances over the past year and the role they played in the Company’s significantly improved operational performance. Furthermore, in keeping with the Committee’s philosophy to maintain flexibility with regard to compensation and to reward exceptional performance, the Committee determined to recognize and reward the various executive officers’ roles in the Company’s materially improved performance through the use of bonuses rather than significant upward adjustments of salaries. Consequently, the Compensation Committee established salaries for fiscal 2019 for Messrs. Pollack, Migliorino and Gallagher of $400,000, $290,000 and $164,000, respectively, which amounted to increases of 3% for each of such officers. In addition, discretionary bonuses amounting to $200,000, $130,000 and $20,000 were awarded to Messrs. Pollack, Migliorino and Gallagher, respectively, based on Prudential Bancorp’s materially improved performance during fiscal 2018 and the individual officer’s roles in producing such improved performance.
During fiscal 2018, the Compensation Committee granted equity awards to the named executive officers as well as to other officers. During fiscal 2017, the Committee had determined to only address cash compensation (salaries and bonuses), postponing considering potential equity grants to senior management until at least the Company’s fiscal 2017 operating results were available since the amounts and composition of such awards are very much related to the Company’s performance. Furthermore, a number of the senior officers, including Mr. Pollack, had not served for the entire 2016 fiscal year and thus the Committee wanted to have the benefit of the results of fiscal 2017 operating performance as part of its review of the potential for equity grants to such persons. Since the grant of equity awards in February 2015 shortly after receipt of shareholder approval of the 2014 Stock Incentive Plan (“2014 SIP”), equity awards had subsequently been used on a case-specific basis generally to reflect either the recent hiring of an executive officer or in connection with the promotion of an executive officer. However, in light of the Company’s significant improvement in profitability during fiscal 2016 and 2017, which continued in fiscal 2018, which improvement reflected the efforts of senior management, in particular, the President and Chief Executive Officer and the Executive Vice President and Chief Operating Officer, the Committee, determined in March 2018 to award grants of equity to Messrs. Pollack, Migliorino and Gallagher. Accordingly, stock options, incentive stock options to the extent possible, covering 80,000, 45,000 and 30,000 shares were awarded to Messrs. Pollack, Migliorino and Gallagher, respectively. In addition, restricted stock awards in the amounts of 12,500, 7,500 and 3,000 shares were also awarded to Messrs. Pollack, Migliorino and Gallagher, respectively. All of such awards, both options and restricted stock awards, vest pro rata at the rate of 20% per year commencing in March 2019.
At the annual meeting of stockholders of Prudential Bancorp held on February 11, 2013, the stockholders recommended, on an advisory basis, that future advisory votes on executive compensation should be held every three years. Consistent with the stockholder recommendation, the Board of Directors of the Company determined that it will hold an advisory vote on executive compensation every three years. The next advisory vote on the compensation of the named executive officers is being presented at this annual meeting as described in this proxy statement. Prudential Bancorp is required to hold stockholder advisory votes on the frequency interval every six years. As a consequence, at this annual meeting stockholders are being asked to consider the frequency of such advisory votes on executive compensation.
Compensation Policies and Practices as They Relate to Risk Management
The Compensation Committee of the Board of Directors has reviewed the Company’s policies and practices applicable to employees, including the Company’s benefit plans, arrangements and agreements, and does not believe that they are reasonably likely to have a material adverse effect on the Company. The Committee does not believe that the Company’s policies and practices encourage officers or employees to take unnecessary or excessive risks or behavior focused on short-term results rather than the creation of long-term value.
Equity Compensation Plans
Grants of Plan-Based Awards for the Year Ended September 30, 2017.2018. The table below sets forth information regarding grants of awards pursuant to plans our executive officers named in the Summary Compensation Table during the fiscal year ended September 30, 2017.2018.
Name | | Grant Date | | All Other Stock Awards: Number of Shares of Stock or Units | | | All Other Option Awards: Number of Securities Underlying Options(1) | | | Exercise or Base Price of Option Awards(2) | | | Grant Date Fair Value of Stock and Option Awards(3) | | | | | All Other Stock Awards:
Number of Shares of Stock or Units(1) | | | All Other Option Awards: Number of
Securities Underlying Options(2) | | | Exercise or
Base Price of Option Awards(3) | | | Grant Date Fair Value
of Stock and
Option Awards(4) | |
| | | | | | | | | | | | | | | |
Dennis Pollack | | | 3/21/2018 3/21/2018 | | 12,500 -- | | | -- 80,000 | | | -- 18.46 | | | $
| 230,750 290,400 | |
Anthony V. Migliorino | | | 3/21/2018 3/21/2018 | | 7,500 -- | | | -- 45,000 | | | -- 18.46 | | | 138,450 163,350 | |
Kevin Gallagher | | 5/17/2017 | | | -- | | | | 10,000 | | | $ | 18.36 | | | $ | 31,800 | | | 3/21/2018 3/21/2018 | | 3,000 -- | | | -- 30,000 | | | -- 18.46 | | | 55,380 108,900 | |
___________________
(1) | The restricted stock awards granted March 21, 2018 vest at the rate of 20% per year, commencing March 21, 2019. |
(2) | The stock options granted vest at the rate of 20% per year, starting May 17, 2018.March 21, 2019. |
(2)(3) | Based upon the fair market value of a share of Company common stock on the date of grant. |
(3) | (4) The fair value of the stock options granted is computed in accordance with FASB ASC Topic 718.
|
Outstanding Equity Awards at Fiscal Year-End. The table below sets forth outstanding equity awards at September 30, 20172018 held by our executive officers named in the Summary Compensation Table above, which grants were made in fiscal years 2009, 2013, 2015, 2016, 2017 and 2017. With respect to restricted stock awards and stock options granted prior to the completion of the second-step conversion on October 9, 2013, the number of shares subject to the stock options and the stock awards as well as the exercise price of the stock options have been adjusted to reflect the second-step conversion.2018.
| | | | | | | | | | | | Stock Awards(1) | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Market Value | | | | | | | | | | | | | | | | Market Value | |
| | Option Awards(1) | | Number of Shares | | | Of Shares or | | | | | Number of Shares | | | of Shares or | |
| | Number of Securities Underlying | | | | | Option | | or Units of Stock | | | Units of stock | | | Number of Securities Underlying | | | | | Option | | or Units of Stock | | | Units of Stock | |
| | Unexercised Options | | | Exercise | | Expiration | | That Have Not | | | That Have Not | | | | | | Exercise | | Expiration | | That Have Not | | | That Have Not | |
Name | | Exercisable | | | Unexercisable | | | Price | | Date | | Vested | | | Vested(2) | | | | | | | | | | | | | | | | | |
Dennis Pollack | | | 12,000(3 | ) | | | 18,000 | | | $ | 12.23 | | 2/18/2025 | | | 6,000(3 | ) | | $ | 111,180 | | | 18,000(2 | ) | | 12,000 | | | $ | 12.23 | | 2/18/2025 | | 4,000(2 | ) | | $ | 70,120 | |
| | | 2,000(4 | ) | | | 8,000 | | | | 14.42 | | 8/17/2026 | | | 2,000(4 | ) | | | 37,060 | | | 4,000(3 | ) | | 6,000 | | | 14.42 | | 8/17/2026 | | 1,500(3 | ) | | 26,295 | |
| | | | | | | | | | | | | | | | | | | | | | | -- | | | 80,000(4 | ) | | 18.46 | | 3/21/2028 | | 12,500(4 | ) | | 219,125 | |
Anthony V. Migliorino | | | 3,000(4 | ) | | | 12,000 | | | | 14.42 | | 8/17/2026 | | | 6,000(4 | ) | | | 111,180 | | | 6,000(3 | ) | | 9,000 | | | 14.42 | | 8/17/2026 | | 4,500(3 | ) | | 78,885 | |
| | | | | | | | | | | | | | | | | | | | | | | -- | | | 45,000(4 | ) | | 18.46 | | 3/21/2028 | | 7,500(4 | ) | | 131,475 | |
Kevin Gallagher | | | -- | | | | 10,000(5 | ) | | | 18.36 | | 5/17/2027 | | | -- | | | | -- | | | 2,000(5 | ) | | 85,000(5 | ) | | 18.36 | | 5/17/2027 | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | -- | | | 30,000(4 | ) | | 18.46 | | 3/21/2028 | | 3,000(4 | ) | | 52,590 | |
Jack E. Rothkopf | | | 18,683(6 | ) | | | -- | | | | 11.84 | | 1/5/2019 | | | 416(7 | ) | | | 7,708 | | |
| | | 4,720(7 | ) | | | 1,181 | | | | 7.68 | | 1/5/2023 | | | 9,000(8 | ) | | | 166,770 | | |
| | | 20,000(3 | ) | | | 30,000 | | | | 12.23 | | 2/18/2025 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Jeffrey T. Hanuscin(9) | | | 8,136(8 | ) | | | 2,035 | | | | 10.24 | | 6/19/2023 | | | 737(8 | ) | | | 13,657 | | |
| | | 4,400(3 | (7) | | | 6,600 | | | | 12.23 | | 2/18/2025 | | | 3,000(3 | ) | | | 55,590 | | |
___________________
(1) | Each of the option awards and stock awards outstanding as of October 9, 2013 was converted into an option award or stock award to purchase a number of shares of common stock of Prudential Bancorp equal to the product of the number of shares of common stock multiplied by the exchange ratio of 0.9442, rounded down to the nearest whole share. Each option after the exchange has an adjusted exercise price equal to the quotient obtained by dividing the option exercise price by the exchange ratio of 0.9442, rounded up to the nearest whole cent. |
(Footnotes continued on the following page)
______________________
(2) | Calculated by multiplying the closing market price per share of our common stock on September 29, 2017,28, 2018, which was $18.53,$17.31, by the applicable number of shares of common stock underlying the named executive officer'sofficer’s unvested stock awards. |
(3)(2) | Granted pursuant to our 2014 SIP and vest at a rate of 20% per year commencing on February 18, 2016. |
(4)(3) | Granted pursuant to our 2008 Stock Option Plan ("(“2008 SOP"SOP”), our 2014 SIP and our 2008 Recognition and Retention Plan ("(“2008 RRP"RRP”), as applicable, and vest at a rate of 20% per year commencing on August 17, 2017. |
(4) | Granted pursuant to our 2014 SIP, our 2008 RRP and our 2008 SIP, as applicable, and vest at a rate of 20% per year commencing March 21, 2019. |
(5) | Granted pursuant to our 2014 SIP and vest at a rate of 20% per year commencing on May 17, 2018. |
(6) | Granted pursuant to our 2008 SOP and our 2008 RRP, as applicable, and vested at a rate of 20% per year commencing on January 5, 2010, becoming fully vested on January 5, 2014. |
(7) | Granted pursuant to our 2008 SOP and 2008 RRP, as applicable, and vest at a rate of 20% per year commencing on January 5, 2014. |
(8) | Granted pursuant to our 2008 SOP and our 2008 RRP, as applicable, and vest at a rate of 20% per year commencing on June 19, 2014. |
(9) | Mr. Hanuscin resigned in October 2017. In accordance with the terms of the 2008 SOP, the 2008 RRP and the 2014 SIP, all unvested restricted stock awards and stock options granted to him were forfeited upon his resignation. |
Option Exercises and Stock Vested. The following table sets forth certain information with respect to restricted stock awards which vested for the named executive officers during the fiscal year ended September 30, 2017.2018. No stock options were exercised by any of the named executive officers during the fiscal year.
| | Stock Awards | | | | |
Name | | Number of Shares Acquired On Vesting(1) | | | Value Realized On Vesting(2) | | | Number of Shares Acquired On Vesting(1) | | | Value Realized On Vesting(2) | |
| | | | | | | |
Dennis Pollack | | | 2,000 | | | $ | 34,960 | | | | 2,000 | | | $ | 35,400 | |
| | | 500 | | | | 9,080 | | | | 500 | | | 9,190 | |
| | | | | | | | | | | | | | | |
Anthony Migliorino | | | 1,500 | | | | 27,240 | | | | 1,500 | | | 27,570 | |
| | | | | | | | | |
Jack E. Rothkopf | | | 416 | | | | 7,193 | | |
| | | 3,000 | | | | 52,440 | | |
| | | | | | | | | |
Jeffrey T. Hanuscin | | | 737 | | | | 13,413 | | |
| | | 1,000 | | | | 17,480 | | |
______________________________________
(1) | Does not reflect the sale or withholding of shares to satisfy income tax withholding obligations. |
(2) | Based upon the fair market value of a share of Company common stock on the date of vesting. Value is calculated by multiplying the number of shares of Company common stock that vested by the fair market value on the date of vesting. |
Potential Payments Upon Termination of Employment or aand Change in Control Agreements
The following tables present potential payments to the named executive officers (other than Messrs. Hanuscin and Gallagher) if their employment was terminated under various situations. However, the presentation is based on the employment arrangements that were in effect as of September 30, 2017. Subsequent to such date,Employment Agreements. Prudential Bank and Prudential Bancorp entered into amendments to thean amended and restated employment agreement in December 2016 with Mr. Pollack and theas well as an employment agreement with Mr. Migliorino. The amended and restated agreement with Mr. Pollack increased the term of the agreement and the severance benefits (as discussed below) as well as his compensation in view of the Compensation Committee’s determination that his performance and value to the Company warranted such enhanced provisions. The employment agreement with Mr. Migliorino superseded the change in control agreement he had previously entered into with the Bank in November 2015 and reflected the Compensation Committee’s determination that his continued employment was critical to the Bank’s and Company’s ongoing performance.
The following table describesemployment agreements have a term of three years, with respect to Mr. Pollack, and two years, with respect to Mr. Migliorino with the potential paymentsinitial terms expiring, if the agreements are not extended, on December 31, 2019 and December 31, 2018, respectively. The term is extended annually for one year on each December 31st starting December 31, 2017 unless either the Company and the Bank or the executive gives notice at least 30 days prior to Dennisthe annual anniversary date that the agreement shall not be extended. The Compensation Committee determined in October 2018 to extend the terms of the executives’ employment agreements for an additional year. The agreements are automatically extended for one year upon a change in control. The terms of the employment agreements provide for an initial annual base salary, which is reviewed annually by the Compensation Committee of the Board of Directors. Each of the employment agreements is terminable with or without cause by the Company or the Bank. The executives have no right to compensation or other benefits pursuant to the employment agreements for any period after voluntary termination by the executive without good reason, as defined in the agreements and which includes, among other things, a material change in the officer’s position, salary or entities without the officer’s consent, or termination by the Bank for cause, disability, retirement or death.
In the event that the executive terminates his employment because of failure to comply with any material provision of the employment agreement by the Company or the Bank or the employment agreement is terminated by the Company or the Bank other than for cause, disability, retirement or death, Messrs. Pollack President and Chief Executive Officer,Migliorino will be entitled to (i) the payment of two times (Mr. Pollack) and one times (Mr. Migliorino), respectively, the executive’s respective average annual cash compensation (salary and cash bonuses) based upon the five calendar years preceding the date of termination as cash severance, (ii) the maintenance until the earlier to occur of the passage of two years and one year, respectively, from the date of termination or until the executive’s full time employment with another employer (which provides substantially similar benefits), of the executive’s continued participation in all group insurance, life insurance, health, dental and accident insurance and disability insurance plans at no cost to the officer and (iii) a lump sum cash payment equal to the projected cost of providing the executive with benefits for two years, or one year in the case of Mr. Migliorino, pursuant to other employee benefit plans (excluding retirement plans and stock compensation plans) in which the executive was entitled to participate. In the event the executive’s continued participation in any group insurance plan is barred or would trigger the payment of an assumed terminationexcise tax under Section 4980D of the Code, or if any such group insurance plan is discontinued, then the Company or the Bank shall either (1) provide substantially similar benefits under an alternative plan or (2) pay a lump sum cash amount to the executive equal to the projected cost of providing continued coverage to the executive until the two-year, or one-year in the case of Mr. Migliorino, anniversary of the executive’s date of termination.
In the event that the executive’s employment oris terminated in connection with a change in control, as defined in the employment agreements, for other than cause, disability, retirement or death or the executive terminates his employment as a result of September 30, 2017.
Payments and Benefits | | Voluntary Termination | | | Termination for Cause | | | Involuntary Termination Without Cause or Termination by the Executive for Good Reason Absent a Change in Control | | | Change in Control With Termination of Employment | | | | | | Retirement | |
| | | | | | | | | | | | | | | | | | |
Severance payments and benefits: (a) | | | | | | | | | | | | | | | | | | |
Cash severance (b) | | $ | -- | | | $ | -- | | | $ | 563,334 | | | $ | 845,000 | | | $ | -- | | | $ | -- | |
Medical and other insurance benefits (c) | | | -- | | | | -- | | | | 37,167 | | | | 58,582 | | | | -- | | | | -- | |
Automobile expenses (d) | | | -- | | | | -- | | | | -- | | | | 29,700 | | | | -- | | | | -- | |
§280G cut-back (e) | | | -- | | | | -- | | | | -- | | | | (652,009 | ) | | | -- | | | | -- | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Equity awards: (f) | | | | | | | | | | | | | | | | | | | | | | | | |
Unvested stock options (g) | | | -- | | | | -- | | | | | | | | 146,280 | | | | 146,280 | | | | -- | |
Unvested restricted stock awards (h) | | | -- | | | | -- | | | | | | | | 148,240 | | | | 148,240 | | | | -- | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total payments and benefits (i) | | $ | -- | | | $ | -- | | | $ | 600,501 | | | $ | 575,793 | | | $ | 294,520 | | | $ | -- | |
Thecertain adverse actions which are taken with respect to the executive’s employment (i.e., good reason) following table describes the potential payments to Anthony V. Migliorino, Executive Vice President and Chief Operating Officer, upon an assumed termination of employment or a change in control, as defined, the executive will be entitled to a cash severance payment equal to three times (Mr. Pollack), or two times (Mr. Migliorino) their respective average annual cash compensation, the maintenance, as described above, of September 30, 2017.the group insurance plans for three years (Mr. Pollack) or two years (Mr. Migliorino), respectively, or until the executive’s full-time employment with another employer that provides similar benefits plus the aforementioned lump sum cash payment for the projected cost of providing the other employee benefits as noted above until the third anniversary (Mr. Pollack) or second anniversary (Mr. Migliorino) of the executive’s termination.
Payments and Benefits | | Voluntary Termination | | | Termination for Cause | | | Involuntary Termination Without Cause or Termination by the Executive for Good Reason Absent a Change in Control | | | Change in Control With Termination of Employment | | | | | | Retirement | |
| | | | | | | | | | | | | | | | | | |
Severance payments and benefits: (a) | | | | | | | | | | | | | | | | | | |
Cash severance (b) | | $ | -- | | | $ | -- | | | $ | 169,584 | | | $ | 339,168 | | | $ | -- | | | $ | -- | |
Medical and other insurance benefits (c) | | | -- | | | | -- | | | | 7,726 | | | | 16,226 | | | | -- | | | | -- | |
Automobile expenses (d) | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | |
§280G cut-back (e) | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Equity awards: (f) | | | | | | | | | | | | | | | | | | | | | | | | |
Unvested stock options (g) | | | -- | | | | -- | | | | -- | | | | 49,320 | | | | 49,320 | | | | -- | |
Unvested restricted stock awards (h) | | | -- | | | | -- | | | | -- | | | | 111,180 | | | | 111,180 | | | | -- | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total payments and benefits (i) | | $ | -- | | | $ | -- | | | $ | 177,310 | | | $ | 515,894 | | | $ | 160,500 | | | $ | -- | |
(Footnotes followingThe employment agreements with respect to Pollack and Migliorino previously provided that in the table on page 22)event any of the payments to be made thereunder or otherwise upon termination of employment are deemed to constitute “parachute payments” within the meaning of Section 280G of the Code, then such payments and benefits received thereunder shall be reduced by the minimum amount necessary to result in no portion of the payments and benefits being non-deductible by the Company or the Bank for federal income tax purposes. In November 2017, the Company, and the Bank entered into amendments to each of the employment agreements with Messrs. Pollack and Migliorino addressing the applicability of Sections 4999 and 280G of the Code. The agreements were revised to provide that if the payments that were otherwise payable to Mr. Pollack or Mr. Migliorino, as applicable, in connection with a termination after the occurrence of a change in control would trigger the imposition of an excise tax under Section 4999 of the Code, such amounts would be required to be reduced only if doing so would result in a greater tax amount to be retained by Mr. Pollack or Mr. Migliorino, as applicable.
Change in Control Agreement.The following table describes the potential payments to Jack E. Rothkopf, Senior Vice President, Chief Financial Officer and Treasurer, upon an assumed termination of employment orBank entered into a change in control as of September 30, 2017.
Payments and Benefits | | Voluntary Termination | | | Termination for Cause | | | Involuntary Termination Without Cause or Termination by the Executive for Good Reason Absent a Change in Control | | | Change in Control With Termination of Employment | | | | | | Retirement | |
| | | | | | | | | | | | | | | | | | |
Severance payments and benefits: (a) | | | | | | | | | | | | | | | | | | |
Cash severance (b) | | $ | -- | | | $ | -- | | | $ | -- | | | $ | 283,499 | | | $ | -- | | | $ | -- | |
Medical and other insurance benefits (c) | | | -- | | | | -- | | | | -- | | | | 1,166 | | | | -- | | | | -- | |
Automobile expenses (d) | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | |
§280G cut-back (e) | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Equity awards: (f) | | | | | | | | | | | | | | | | | | | | | | | | |
Unvested stock options (g) | | | -- | | | | -- | | | | -- | | | | 201,814 | | | | 201,814 | | | | -- | |
Unvested restricted stock awards (h) | | | -- | | | | -- | | | | -- | | | | 174,478 | | | | 174,478 | | | | -- | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total payments and benefits (i) | | $ | -- | | | $ | -- | | | $ | -- | | | $ | 660,957 | | | $ | 376,292 | | | $ | -- | |
__________________________
(a) | These severance payments and benefits are payable if the employment of Mr. Pollack or Mr. Migliorino is terminated either prior to a change in control or more than two years following a change in control either (i) by the Bank for any reason other than cause, disability, retirement or death or (ii) by Mr. Pollack or Mr. Migliorino if the Bank takes certain adverse actions (a "good reason" termination). The severance payments and benefits are also payable if the executive's employment is terminated concurrently with or within two years following a change in control if the termination of employment occurs during the term of Mr. Pollack's or Mr. Migliorino's employment agreement or during the term of Mr. Rothkopf's severance agreement. |
(b) | If the employment of Mr. Pollack or Mr. Migliorino is terminated prior to a change in control or more than two years following a change in control, the executive will be entitled to a lump sum payment equal to two times (one times for Mr. Migliorino) the average of his base salary and cash bonus received by the executive (excluding any deferred amounts) during the five calendar years preceding the year in which the date of termination occurs (or such shorter period that the executive was employed). The amounts in the change in control column represent a lump sum payment equal to three times for Mr. Pollack and two times for Messrs. Migliorino and Rothkopf the average of the executive's base salary and cash bonus received by the executive (excluding any deferred amounts) during the five calendar years preceding the year in which the date of termination occurs (or such shorter period that the executive was employed). |
(c) | If the employment of Mr. Pollack or Mr. Migliorino is terminated prior to a change in control or more than two years following a change in control, the amounts shown represent the estimated present value cost of providing continued medical, dental, vision, life and accidental death and disability coverage to Messrs. Pollack and Migliorino for an assumed additional 24 months and 12 months, respectively, at no cost to the executives. The amounts in the change in control column represent the estimated present value cost of providing continued medical, dental, vision, life and accidental death and disability coverage for 36 months for Mr. Pollack and 24 months for Messrs. Migliorino and Rothkopf at no cost to the executives. The estimated costs assume the current insurance premiums increase by 10% on each renewal date. The amounts have not been discounted to present value. |
(Footnotes continued on the following page)
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(d) | Represents a lump sum cash payment equal to the estimated costs of paying automobile related expenses for Mr. Pollack for an assumed (i) 24 months if his employment is terminated prior to or more than two years following a change in control or (ii) 36 months if his employment is terminated concurrently with or within two years following a change in control, based on the amounts paid during 2016. |
(e) | If the parachute amounts associated with the payments and benefits to Messrs. Pollack, Migliorino and Rothkopf in the change in control column equal or exceed three times the executive's average taxable income for the five calendar years immediately preceding the year in which the change in control occurs (or such shorter period that the executive was employed), such payments and benefits in the event of a change of control will be reduced by the minimum amount necessary so that they do not trigger the 20% excise tax imposed by Sections 280G and 4999 of the Internal Revenue Code. Based upon the assumptions made, Mr. Pollack is above his Section 280G threshold and would be subject to a cutback, while Messrs. Migliorino and Rothkopf are each below their respective Section 280G threshold. The employment agreements for Messrs. Pollack and Migliorino were amended in November 2017 to provide for a Section 280G cutback only if such cutback would result in a greater after-tax benefit to the executive than the after-tax benefit the executive would realize if he received his full change in control benefits and paid the applicable excise taxes. |
(f) | The vested stock options held by Messrs. Pollack, Migliorino and Rothkopf had a value of approximately $87,100, $12,300 and $302,200, respectively, based on the September 29, 2017 closing price of $18.53 per share. Such value can be obtained in the event of termination due to voluntary termination, death, disability, retirement or cause only if the executive actually exercises the vested options in the manner provided for by the relevant option plan and subsequently sells the shares received for $18.53 per share. In the event of a termination of employment, each executive (or his or her estate in the event of death) will have the right to exercise vested stock options for the period specified in his or her option grant agreement. If the termination of employment occurs following a change in control, each executive can exercise the vested stock options for the remainder of the original ten-year term of the option. |
(g) | Represents the value of the unvested stock options held by Messrs. Pollack, Migliorino and Rothkopf that had an exercise price below the September 29, 2017 closing price of $18.53 per share, based on the difference between the September 29, 2017 closing price and the per share exercise price of the unvested stock options. All unvested stock options will become fully vested upon an executive's death or disability or upon a change in control. |
(h) | Represents the value of the unvested restricted stock awards held by Messrs. Pollack, Migliorino and Rothkopf based on the September 29, 2017 closing price of $18.53 per share, excluding accumulated cash dividends, if any, on the unvested shares for each of the executives. All unvested restricted stock awards will become fully vested upon an executive's death or disability or upon a change in control. |
(i) | Does not include the value of the vested benefits to be paid under our tax-qualified defined benefit pension plan, 401(k) plan and ESOP. See the pension benefits table under "- Benefit Plans – Retirement Plan" below. The ESOP was terminated effective December 31, 2016, and the unallocated ESOP shares held in the suspense account were first used to repay the then outstanding balance of the ESOP loan, with the remaining balance in the suspense account allocated among the ESOP participants on a pro rata basis. At September 30, 2017, all shares of common stock held by the ESOP were fully allocated, and the shares held by the named executive officers are reflected in the table under "Beneficial Ownership of Common Stock by Certain Beneficial Owners and Management." Also does not include the value of vested stock options set forth in Note (f) above, earned but unpaid salary, accrued but unused vacation leave and reimbursable expenses. |
(j) | If the employment of Mr. Pollack, Mr. Migliorino or Mr. Rothkopf had terminated at September 30, 2017 due to death, his beneficiaries or estate would have received life insurance proceeds of approximately $874,000, $660,000 and $460,000, respectively. If the employment of Mr. Pollack, Mr. Migliorino or Mr. Rothkopf had terminated at September 30, 2017 due to disability, they each would have received disability benefits under our disability policy of $12,000 per year. |
Mr. Hanuscin resigned in October 2017, which resulted in his change in control severance agreement being terminatedin March 2018 with Mr. Gallagher. The change in control agreement is intended to assist the Bank (and indirectly the Company) in maintaining a stable and deemed null and void. Mr. Hanuscin did not receive any severance benefit under the terms of his agreement since his resignation was voluntary. In addition, since his termination was voluntary, his unvested restricted stock awards and options were forfeited.
Mr. Gallagher is not a party to an employment orcompetent management base. The change in control severance agreement. As a result,agreement has an initial term ending December 31, 2019 if his employmentthe term of the agreement is terminatednot extended. The term is extended annually for any reason, he wouldone year on each December 31st starting December 31, 2019 unless either the Bank or the executive gives notice at least 30 days prior to the annual anniversary date that the agreement shall not be entitled to anyextended. The agreement automatically extends for one year upon a change in control. The Bank has entered into substantially identical change in control severance benefits. Ifagreements with three other officers including Mr. Gallagher'sRothkopf, Senior Vice President and Chief Financial Officer.
Mr. Gallagher’s agreement provides that in the event of an involuntary termination of employment is terminated due to disability orwithout cause and other than for retirement, death or ifdisability following a change in control occurs,(including a termination by the executive for “good reason,” which includes a material change in the executive’s position, salary or duties without his unvestedconsent), the executive will be entitled to (i) the payment of one times his average annual cash compensation (salary and cash bonuses) based upon the five calendar years preceding the date of termination as cash severance, (ii) the maintenance until the earlier to occur of the passage of one year from the date of termination or until his full time employment with another employer (which provides substantially similar benefits) of the executive’s continued participation in all group insurance, life insurance, health, dental and accident insurance and disability insurance plans at no cost to the officer and (iii) a lump sum cash payment equal to the projected cost of providing him with benefits for one year pursuant to other employee benefit plans (excluding retirement plans and stock optionscompensation plans) in which he was entitled to participate. In the event Mr. Gallagher’s continued participation in any group insurance plan is barred or would become fully vested. Iftrigger the payment of an excise tax under Section 4980D of the Code, or if any such group insurance plan is discontinued, then the Bank shall either (1) provide substantially similar benefits under an alternative plan or (2) pay a lump sum cash amount to him equal to the projected cost of providing continued coverage to him until the one-year anniversary of his date of termination.
The change in control severance agreement provides that in the event any of the payments to be made thereunder or otherwise upon termination of employment are deemed to constitute “parachute payments” within the meaning of Section 280G of the Code, then such events had occurred aspayments and benefits received thereunder shall be reduced by the minimum amount necessary to result in no portion of September 30, 2017, the value of Mr. Gallagher's unvested options would have been $1,700.payments and benefits being non-deductible by the Bank for federal income tax purposes.
Benefit Plans
Retirement Plan. Prudential Bank participates in the Financial Institutions Retirement Fund, a multiple employer defined benefit plan intended to satisfy the tax-qualification requirements of Section 401(a) of the Internal Revenue Code. In November 2015, the retirement plan was frozen such that no new participants can be added and existing participants will receive no further benefit service credit, compensation credit or other accrued benefit increases except for additional service credits which may affect a participant'sparticipant’s vesting or early vesting retirement eligibility or as otherwise required by law to maintain the tax-qualified status of such plan.
The retirement plan provides for a monthly benefit upon a participant'sparticipant’s retirement at or after the age of 65, or if later, the fifth anniversary of the participant'sparticipant’s initial participation in the retirement plan (i.e., the participant's "normalparticipant’s “normal retirement date"date”). A participant may also receive a benefit on his early retirement date, which is the date on which he attains age 45 and is partially or fully vested under the terms of the retirement plan. Benefits received prior to a participant'sparticipant’s normal retirement date are reduced by certain factors set forth in the retirement plan. The retirement plan provides a benefit of 1.50% of a participant'sparticipant’s highest 5-year average earnings, multiplied by the participant'sparticipant’s years of benefit service. Earnings are defined as base salary, subject to an annual Internal Revenue Service limit of $265,000 on earnings for 2015. Annual benefits provided under the retirement plan also are subject to Internal Revenue Service limits, which vary by age and benefit payment type. Participants become fully vested in their benefits under the retirement plan upon the completion of five years of vesting service as well as upon the attainment of normal retirement age (age 65).
The table below shows the present value of accumulated benefits payable to Mr. Rothkopf, the only named executive officer participating in the Plan, including the number of years of credited service, under the retirement plan determined using interest rate and mortality rate assumptions consistent with those used in our financial statements. No named executive officer received paymentsis a participant in the retirement plan.
401(k) and Profit Sharing Plan. The Bank also provides its employees, including the named executive officers, with tax-qualified retirement benefits through the Prudential Savings Bank Employees Savings and Profit Sharing Plan and Trust (the “401(k) Plan”). The Company previously provided additional benefits through two additional tax-qualified retirement plans: the ESOP and the Pentegra Defined Benefit Plan for Financial Institutions (the “Defined Benefit Plan”). The determination was made to terminate the ESOP effective December 31, 2016. In addition, the Defined Benefit Plan was frozen during November 2015. Such actions were taken as part of the Company’s efforts to effect significant cost savings while still providing a competitive compensation structure. All employees who meet the age and service requirements participate in the 401(k) Plan, on a non-discriminatory basis. The Bank did not provide a 401(k) match to employee contributions for the past several years due to the existence of the benefits provided by the ESOP. However, as a result of the termination of the ESOP, the Bank initiated a 401(k) match commencing in January 2018.
Endorsement Split Dollar Agreements. The Bank has purchased insurance policies on the lives of certain of its executive officers named in the Summary Compensation Table as well as other officers, and has entered into Endorsement Split Dollar Agreements with each of those officers. The policies are owned by the Bank. Under the agreements with the named executive officers, upon an officer’s death while he or she remains employed by the Bank, the officer’s beneficiary will receive two times the officer’s salary as of the date of death. Pursuant to the terms of the agreements, the Bank has elected generally to not extend such benefits after a termination of employment. Such amounts will be funded from the retirement plan during fiscal 2017.
Name | | Plan Name | | Number of Years Credited Service | | | Present Value of Accumulated Benefit(2) | | | Payments During Last Fiscal Year | |
Dennis Pollack(3) | | Financial Institutions Retirement Fund(1) | | | 0 | | | $ | -- | | | $ | -- | |
Kevin Gallagher(3) | | Financial Institutions Retirement Fund(1) | | | 0 | | | | -- | | | | -- | |
Jeffrey T. Hanuscin(4) | | Financial Institutions Retirement Fund(1) | | | 3 | | | | -- | | | | -- | |
Anthony V. Migliorino(3) | | Financial Institutions Retirement Fund(1) | | | 0 | | | | -- | | | | -- | |
Jack E. Rothkopf | | Financial Institutions Retirement Fund(1) | | | 10 | | | | 181,000 | | | | -- | |
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(1) A multiple employer tax-qualified defined benefit plan.
(2) Reflectsreceipt of the death benefits under the insurance policies on such officer’s life in excess of the cash surrender value. The Bank will receive the full cash surrender value, which is expected to reimburse the Bank in full for its life insurance investment as well as the remainder, if any, in excess of September 30, 2017.
(3) | None of Messrs. Pollack, Migliorino or Gallagher are participants in the Plan since the plan was frozen prior to their ability to participate. |
(4) | Mr. Hanuscin resigned, effective October 13, 2017; at the time of his resignation, he was not vested in any retirement benefit under the Plan. |
the net proceeds after payments to the officer’s beneficiaries pursuant to the Endorsement Split Dollar Agreements.
The Endorsement Split Dollar Agreements may be terminated at any time by the Bank or the officer or by the Bank upon the officer’s termination of service to Prudential Bank. Upon termination, the Bank may surrender the policy and collect the cash surrender value.
Long-Term Incentive Compensation
The long-term incentive compensation portion of the Company’s compensation program consists of grants of stock options and restricted stock awards under the Company’s 2008 SOP, the 2008 RRP and the 2014 SIP (the 2008 SOP, 2008 RRP and the 2014 SIP are collectively referred to as the “Equity Plans”). Under the Equity Plans, the Compensation Committee has discretion in determining grants of stock options and restricted stock awards to executive officers, including the timing, amounts and types of awards. The level of an individual’s grants typically has been based in large on the officer’s position within the organization, his or her individual performance and length of service.
The exercisability of options and the vesting of restricted stock awards generally depend upon the executive officer continuing to render services to the Company. In addition, although not granted to date, the Company’s 2008 RRP and 2014 SIP provide that stock awards may be made based upon specified performance goals. All options granted under the Company’s stock option plans must have an exercise price at least equal to the market value of the common stock on the date of grant. Options may be exercised only for a limited period of time after the optionee’s departure from the Company in most cases. Under the terms of the Equity Plans, the grants cannot vest more rapidly than 20% per year except in certain specified circumstances, such as the death or disability of the award holder or in the event of a change in control (as defined in the Equity Plans) of the Company. To date, all the awards have been granted with five-year vesting schedules.
Under the Company’s 2014 SIP and the 2008 RRP, the Compensation Committee is also authorized to grant share awards, which are a right to receive a distribution of shares of common stock. Shares of common stock granted pursuant to a share award are in the form of restricted stock which vests upon such terms and conditions as established by the Committee. For specific information regarding equity compensation awarded the named executive officers, see “-Equity Compensation Plans.”
Related Party Transactions
In accordance with applicable federal laws and regulations, Prudential Bank offers mortgage loans to its directors, officers and employees as well as members of their immediate families for the financing of their primary residences and certain other loans. These loans are made on substantially the same terms as those prevailing at the time for comparable loans with persons not related to Prudential Bank except that Prudential Bank provides for a reduced interest rate of one hundred basis points to all employees, officers and directors for a first mortgage on their primary residence and waives the origination fees, other than appraisal and document review fees. Other than as described below, it is the belief of management that these loans neither involve more than the normal risk of collectability nor present other unfavorable features.
The table below lists the outstanding loans made by Prudential Bank to related persons, where the amount involved exceeds $120,000 and the interest rate was reduced and loan origination fee was waived.
| | | | | Largest Principal | | | | | | | | | | | | | |
| | | | | Amount | | | Amount | | | Amounts Paid | | | | |
| | Year ended | | | Outstanding | | | Outstanding at | | | During Year | | | Interest | |
Name | | September 30, | | | During Year | | | Year-End | | | Principal | | | Interest | | | Rate | |
| | | | | | | | | | | | | | | | | | | | | | | | |
John C. Hosier | | | 2017 | | | $ | 369,147 | | | $ | 359,469 | | | $ | 9,678 | | | $ | 11,398 | | | | 3.125 | % |
| | | 2016 | | | | 378,527 | | | | 369,147 | | | | 9,380 | | | | 11,695 | | | | 3.125 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Jack E. Rothkopf | | | 2017 2016 | | | | 164,040 169,140 | | | | 158,337 164,040 | | | | 5,703 5,100 | | | | 5,051 5,210 | | | | 3.125 3.125 | |
| | | | | Largest Principal | | | | | | | | | | | | | |
| | | | | Amount | | | Amount | | | Amounts Paid | | | | |
| | Year ended | | | Outstanding | | | Outstanding at | | | During Year | | | Interest | |
Name | | September 30, | | | During Year | | | Year-End | | | Principal | | | Interest | | | Rate | |
John C. Hosier | | | 2018 2017 | | | $
| 359,469 369,147 | | | $
| 349,484 359,469 | | | $
| 9,985 9,678 | | | $
| 11,091 11,398 | | | | 3.125 3.125
| %
|
Jack E. Rothkopf | | | 2018 2017 | | | | 158,337 164,040 | | | | 152,897 158,337 | | | | 5,440 5,703 | | | | 4,870 5,051 | | | | 3.125 3.125 | |
BENEFICIAL OWNERSHIP OF COMMON STOCK BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
The following table sets forth information as to Prudential Bancorp common stock beneficially owned, as of December 29, 2017,31, 2018, by (i) the only persons or entities, including any "group"“group” as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), who or which was known to Prudential Bancorp to be the beneficial owner of more than 5% of the issued and outstanding Prudential Bancorp common stock, based on filings made with the Securities and Exchange Commission, (ii) each director of Prudential Bancorp, (iii) certain executive officers of Prudential Bancorp and (iv) all directors and executive officers of Prudential Bancorp as a group.
Name and Address of Beneficial Owner | | Amount and Nature of Beneficial Ownership as of December 29, 2017(1)(2) | | | Percent of Common Stock | | | Amount and Nature of Beneficial Ownership as of December 31, 2018(1)(2) | | | Percent of | |
Firefly Value Partners, LP 601 West 26th Street Suite 1520 New York, New York 10001 | | | 475,250(3 | ) | | | 5.3 | % | | 475,250(3 | ) | | 5.3 | % |
Warren A. Mackey 40 Worth Street, 10th Floor New York, New York 10013 | | | 871,204(4 | ) | | | 9.7 | % | | 871,204(4 | ) | | 9.8 | % |
Lawrence B. Seidman 100 Misty Lane, 1st Floor Parsippany, New Jersey 07054 | | | 831,559(5 | ) | | | 9.3 | % | | 831,559(5 | ) | | 9.4 | % |
Directors: | | | | | | | | | | | | | | |
A. J. Fanelli | | | 69,171(6 | (7) | | | * | | | 55,719(6 | )(7) | | * | |
John C. Hosier | | | 71,649(6 | (8) | | | * | | | 84,279(6 | )(8) | | * | |
Bruce E. Miller | | | 56,750(6 | ) | | | * | | | 82,913(6 | ) | | * | |
Francis V. Mulcahy | | | 73,031(6 | (9) | | | * | | | 68,449(6 | )(9) | | * | |
Dennis Pollack | | | 54,936(6) | (10) | | | * | | | 83,997(6 | )(10) | | * | |
Certain Executive Officers | | | | | | | | | | | | | | |
Anthony V. Migliorino | | | 18,182(6) | (11) | | | * | | | 33,881(6 | )(11) | | * | |
Jack E. Rothkopf | | | 94,393(6) | (12) | | | 1.0 | | | 85,335(6 | ) | | 1.0 | |
Kevin Gallagher | | | -- | | | | * | | | 5,000(6 | ) | | * | |
All Directors and Executive Officers as a Group (9 persons) | | | 448,788(6 | ) | | | 4.8 | % | | 499,573(6 | ) | | 5.5 | % |
* Represents less than one percent of Prudential Bancorp'sBancorp’s outstanding common stock.
(1) | Based upon filings made pursuant to the Securities Exchange Act of 1934 and information furnished by the respective individuals. In addition, due to share repurchases by the Company, the ownership percentages reflected in the filings may differ from the percentages reflected in the table above. Furthermore, share ownership reflected on Schedules 13D, 13G and/or 13F may differ from what is actually held by the reporting persons as of December 29, 201731, 2018 due to changes in ownership which were not required to be reported prior to such date. In addition, the amounts held by persons other than directors and officers of the Company may not reflect shares that may have been received by such persons in the merger with Polonia Bancorp, Inc. (“Polonia Bancorp”) by shareholders of the Company who owned in excess of 5% of the Company'sCompany’s common stock who were also shareholders of Polonia Bancorp if the changes in share ownership were not required to be reported. Under regulations promulgated pursuant to the Securities Exchange Act of 1934, shares of common stock are deemed to be beneficially owned by a person if he or she directly or indirectly has or shares (i) voting power, which includes the power to vote or to direct the voting of the shares, or (ii) investment power, which includes the power to dispose or to direct the disposition of the shares. Unless otherwise indicated, the named beneficial owner has sole voting and dispositive power with respect to the shares. |
(Footnotes continued on following page)
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(2) | Each beneficial owner'sowner’s percentage ownership is determined by assuming that options held by such person (but not those held by any other person) and that are exercisable within 60 days of December 29, 201731, 2018 have been exercised. |
(3) | Based on a Schedule 13G/A and a Schedule 13F filed with the Securities and Exchange Commission on February 14, 2017 and November 14, 2017, respectively,2018 by Firefly Value Partners, LP ("(“Firefly Partners"Partners”), FVP GP, LLC ("FVPGP"(“FVP GP”), Firefly Management Company GP, LLC ("(“Firefly Management"Management”), FVP Master Fund, L.P. ("(“FVP MasterFund"Master Fund”), Ryan Heslop and Ariel Warszawski. Firefly Partners is the investment manager of FVP Master Fund; FVP GP serves as the general partner of FVP Master Fund; and Firefly Management serves as general partner of Firefly Partners. Messrs. Heslop and Warszawski are the managing members of FVP GP and Firefly Management. FVP Master Fund directly owns the shares set forth in the Schedule 13G/A. Messrs. Heslop and Warszawski, Firefly Partners, Firefly Management and FVP GP may be deemed to share with FVP Master Fund both voting and dispositive power with respect to such shares. |
(4) | Based on a Schedule 13D/A filed with the Securities and Exchange Commission on February 12, 2014 by Warren A. Mackey, Homestead Partners LP, a Delaware limited partnership, Arles Partners LP, a New York limited partnership, and Arles Advisors Inc., a New York corporation. Arles Advisors is the general partner of Homestead Partners and Arles Partners. The sole shareholder, director and executive officer of Arles Advisors is Warren A. Mackey. By virtue of his position with Arles Advisors, Mr. Mackey has the shared investment discretion and voting authority with respect to the 838,676 shares owned by Homestead Partners and Arles Partners. Arles Advisors, as general partner of Homestead Partners and Arles Partners, may be deemed to beneficially own the 838,976 shares owned by these partnerships. Mr. Mackey individually has the sole investment discretion and voting authority with respect to the 32,228 shares held for himself. Additional shares of Prudential Bancorp common stock may have been received in connection with the merger with Polonia Bancorp. |
(5) | Based on a Schedule 13D/A and a Schedule 13F filed on December 6, 2016 and November 8, 2017, respectively, by Lawrence B. Seidman, Seidman and Associates L.L.C. ("SAL"(“SAL”), Seidman Investment Partnership, L.P. ("SIP"(“SIP”), Seidman Investment Partnership II, L.P. ("SIPII"(“SIPII”), Seidman Investment Partnership III, L.P. ("SIPIII"(“SIPIII”), LSBK06-08 ("LSBK"(“LSBK”), Broad Park Investors ("(“Broad Park"Park”), CBPS, L.L.C. ("CBPS"(“CBPS”), JRBC I, LLC ("JRBC"(“JRBC”), 2514 Multi-Strategy Fund, L.P. ("(“2514 MSF"MSF”), Veteri Place Corporation ("Veteri"(“Veteri”), Chewy Gooey Cookies, L.P. ("CGC"(“CGC”), and Sonia Seidman (collectively, the "Seidman Group"“Seidman Group”). Pursuant to the Schedule 13D/A, Mr. Seidman (i) as the manager of SAL, may be deemed the beneficial owner of the 139,347 shares owned by SAL, (ii) as the sole officer of Veteri, the corporate general partner of each of SIP and SIPII, may be deemed the beneficial owner of the 110,606 shares owned by SIP and the 157,905 shares owned by SIPII, (iii) as the managing member of JBRC I, LLC, the co-general partner of SIPIII, may be deemed the beneficial owner of the 27,780 shares owned by SIPIII, (iv) as the sole officer of Veteri, the Trading Advisor of LSBK and CBPS, may be deemed the beneficial owner of the 75,393 shares owned by LSBK and the 83,181 shares owned by CBPS, (v) as the investment manager for each of Broad Park and CGC, may be deemed the beneficial owner of the 90,968 shares owned by Broad Park and the 22,147 shares owned by CGC, and (vi) as the husband of Sonia Seidman, may be deemed the beneficial owner of the 43,261 shares owned by Sonia Seidman. Accordingly, Seidman may be deemed the beneficial owner of an aggregate of 750,318 shares. In the foregoing capacities, Seidman has sole and exclusive investment discretion and voting authority with respect to all such shares. Additional shares of Prudential Bancorp may have been received in connection with the merger with Polonia Bancorp. |
(6) | Includes shares held in trust by Prudential Bancorp'sBancorp’s 2008 RRP or granted pursuant to the 2014 SIP which have been awarded to the directors and officers and stock options which have been granted to the directors and officers under Prudential Bancorp'sBancorp’s 2008 SOP or under the 2014 SIP and which are exercisable within 60 days of December 29, 201731, 2018 as follows: |
Name | | Restricted Stock | | | Stock Options | |
A.J. Fanelli | | | 6,000 | | | | 44,690 | |
John C. Hosier | | | 7,068 | | | | 44,690 | |
Bruce E. Miller | | | 7,070 | | | | 42,021 | |
Francis V. Mulcahy | | | 6,000 | | | | 44,690 | |
Dennis Pollack | | | 8,000 | | | | 20,000 | |
Anthony V. Migliorino | | | 6,000 | | | | 3,000 | |
Jack E. Rothkopf | | | 9,416 | | | | 54,584 | |
Kevin Gallagher | | | -- | | | | -- | |
All directors and executive officers as a group (9 persons) | | | 49,554 | | | | 253,695 | |
| | | | | | | | |
| | | | | | | |
| A.J. Fanelli | | | 7,426 | | | | 26,282 | |
| John C. Hosier | | | 7,426 | | | | 52,972 | |
| Bruce E. Miller | | | 7,426 | | | | 52,972 | |
| Francis V. Mulcahy | | | 7,426 | | | | 26,282 | |
| Dennis Pollack | | | 18,000 | | | | 28,000 | |
| Anthony V. Migliorino | | | 12,000 | | | | 6,000 | |
| Kevin Gallagher | | | 3,000 | | | | 2,000 | |
| Jack E. Rothkopf | | | 6,000 | | | | 45,901 | |
| All directors and executive officers as a group (9 persons) | | | 68,704 | | | | 240,409 | |
(Footnotes continued on following page)
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(7) | Includes 3,304 shares held jointly with Mr. Fanelli'sFanelli’s spouse. |
(8) | Includes 6,1196,185 shares held in Mr. Hosier'sHosier’s account in his 401(k) plan. |
(Footnotes continued on following page)
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(9) | Includes 4,000 shares held jointly with Mr. Mulcahy'sMulcahy’s spouse and 2,832 shares held directly by Mr. Mulcahy'sMulcahy’s spouse. |
(10) | Includes 19,588 shares held in Mr. Pollack'sPollack’s individual retirement account.account and 210 shares held directly by Mr. Pollack’s spouse. |
(11) | Includes 2,8865,086 shares allocated to Mr. Migliorino in the Prudential Bank 401(k) Plan and 2,796 shares allocated to Mr. Migliorino's account in the ESOP over which Mr. Migliorino has voting authority as well as 1,0003,796 shares held in Mr. Migliorino'sMigliorino’s individual retirement account. |
(12) | Includes 19,680 shares allocated to Mr. Rothkopf's account in the Prudential Bank ESOP, over which Mr. Rothkopf has voting authority. |
SectionSection 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the officers and directors, and persons who own more than 10% of Prudential Bancorp'sBancorp’s common stock to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and greater than 10% shareholders are required by regulation to furnish Prudential Bancorp with copies of all Section 16(a) forms they file.
Based solely on our review of the copies of such forms furnished to us, or written representations from our officers and directors, we believe that during, and with respect to, the fiscal year ended September 30, 2017,2018, our officers and directors complied in all respects with the reporting requirements promulgated under Section 16(a) of the Securities Exchange Act of 1934.1934 with the exception of Mr. Mulcahy who was late in reporting one transaction on Form 4.
PROPOSAL TO ADOPT A NON-BINDING RESOLUTION TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS (PROPOSAL TWO) |
Pursuant to Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the proxy rules of the Securities and Exchange Commission were amended to require that not less frequently than once every three years, a proxy statement for an annual meeting of shareholders for which the proxy solicitation rules of the Securities and Exchange Commission require compensation disclosure must also include a separate resolution subject to shareholder vote to approve the compensation of the company’s named executive officers disclosed in the proxy statement.
The executive officers named in the summary compensation table and deemed to be “named executive officers” are Messrs. Pollack, Migliorino and Gallagher. Reference is made to the summary compensation table and disclosures set forth under “Management Compensation” in this proxy statement.
The proposal gives shareholders the ability to vote on the compensation of our named executive officers through the following resolution:
“Resolved, that the shareholders approve the compensation of the named executive officers as disclosed in this proxy statement.”
The shareholder vote on this proposal is not binding on Prudential Bancorp or the Board of Directors and cannot be construed as overruling any decision made by the Board of Directors or creating or implying any additional fiduciary duty of the Board of Directors. However, the Board of Directors of Prudential Bancorp will review the voting results on the non-binding resolution and take them into consideration when making future decisions regarding executive compensation.
Our Board of Directors believes that our executive compensation for fiscal year 2018 continued to achieve the objectives of our executive compensation philosophy and programs.
The Board of Directors recommends that you vote “FOR” the non-binding resolution to approve the compensation of our named executive officers.
ADVISORY VOTE ON THE FREQUENCY OF THE NON-BINDING RESOLUTION TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS (PROPOSAL THREE) |
Section 951 of the Dodd-Frank Act also amended the proxy rules of the Securities and Exchange Commission to require that not less frequently than once every six years, a proxy statement for an annual meeting of shareholders for which the proxy solicitation rules of the Securities and Exchange Commission require compensation disclosure must also include a separate proposal subject to shareholder vote to determine whether the shareholder vote to approve the compensation of the named executive officers will occur every one, two or three years.
Accordingly, we are seeking a shareholder vote regarding whether the non-binding resolution to approve the compensation of our named executive officers should occur every three years, every two years or every year.
The Board of Directors asks that you support a frequency of every three years for future non-binding resolutions on compensation of our named executive officers. Setting an advisory vote every three years will be the most effective timeframe for Prudential Bancorp to respond to shareholder feedback and provide us with sufficient time to engage with shareholders to understand and respond to the vote results. At our 2013 annual meeting, when we were last required to hold this frequency vote, our stockholders expressed a preference to hold the say-on-pay vote every three years, which we have done.
The advisory vote on this proposal is not binding on Prudential Bancorp or the Board of Directors and cannot be construed as overruling any decision made by the Board of Directors. However, the Board of Directors of Prudential Bancorp will review the results on the advisory vote and take them into consideration when making future decisions regarding the frequency of submitting to shareholders the non-binding resolution to approve the compensation of our named executive officers.
The Board of Directors recommends an advisory vote for a frequency of “THREE YEARS” for future non-binding resolutions to approve the compensation of our named executive officers.
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PROPOSAL TWO)FOUR) |
The Audit Committee of the Board of Directors of Prudential Bancorp has appointed S.R. Snodgrass, P.C., an independent registered public accounting firm, to perform the audit of our financial statements for the year ending September 30, 2018,2019, and further directed that the appointment of S.R. Snodgrass as our auditors be submitted for ratification by the shareholders at the annual meeting.
We have been advised by S.R. Snodgrass that neither that firm nor any of its associates has any relationship with Prudential Bancorp or its subsidiaries other than the usual relationship that exists between an independent registered public accounting firm and its clients. S.R. Snodgrass will have one or more representatives at the annual meeting who will have an opportunity to make a statement, if they so desire, and will be available to respond to appropriate questions.
In determining whether to appoint S.R. Snodgrass as our independent registered public accounting firm, the Audit Committee considered whether the provision of services, other than auditing services, by S.R. Snodgrass is compatible with maintaining its independence. In addition to performing auditing services, our independent registered public accounting firm reviewed our public filings. The Audit Committee believes that S.R. Snodgrass'sSnodgrass’s performance of these other services is compatible with maintaining the independent registered public accounting firm'sfirm’s independence.
Audit Fees
The following table sets forth the aggregate fees paid by us to S.R. Snodgrass for professional services in connection with the audit of Prudential Bancorp'sBancorp’s consolidated financial statements for fiscal 20172018 and 20162017 and the fees paid by us to S.R. Snodgrass for audit-related services, tax services and all other services during fiscal 20172018 and 2016.
2017.
| | | |
| | | | | | |
Audit fees (1) | | $ | 188,022 | | | $ | 207,216 | |
Audit-related fees | | | -- | | | | -- | |
Tax fees (2) | | | 21,125 | | | | 40,423 | |
All other fees | | | -- | | | | -- | |
Total | | $ | 209,147 | | | $ | 247,639 | |
___________________
| | Year Ended September 30, | |
| | 2017 | | | 2016 | |
Audit fees (1) | | $ | 207,216 | | | $ | 178,000 | |
Audit-related fees | | | -- | | | | -- | |
Tax fees (2) | | | 40,423 | | | | 20,300 | |
All other fees (3) | | | -- | | | | 9,000 | |
Total | | $ | 247,300 | | | $ | 207,300 | |
___________________
(1) | Audit fees consist of fees incurred in connection with the audit of our annual financial statements and the review of the interim financial statements included in our quarterly reports filed with the Securities and Exchange Commission, as well as work generally only the independent auditor can reasonably be expected to provide, such as statutory audits, consents and assistance with and review of documents filed with the Securities and Exchange Commission. |
(2) | Tax fees consist of compliance fees for the preparation of tax returns during fiscal 20172018 and 2016. |
(3) | Consists of fees related to registration statements filed by the Company during fiscal 2016 with the Securities and Exchange Commission.2017. |
The Audit Committee selects our independent registered public accounting firm and pre-approves all audit services to be provided by it to Prudential Bancorp. The Audit Committee also reviews and pre-approves all audit-related and non-audit related services rendered by our independent registered public accounting firm in accordance with the Audit Committee'sCommittee’s Charter. In its review of these services and related fees and terms, the Audit Committee considers, among other things, the possible effect of the performance of such services on the independence of our independent registered public accounting firm. The Audit Committee pre-approves certain audit-related services and certain non-audit related tax services which are specifically described by the Audit Committee on an annual basis and separately approves other individual engagements as necessary. The Chairman of the Audit Committee has been delegated the authority to approve non-audit related services in lieu of the full Audit Committee. On a quarterly basis, the Chairman of the Audit Committee presents any previously approved engagements to the full Audit Committee.
Each new engagement of S.R. Snodgrass, P.C. was approved in advance by the Audit Committee or its Chairman, and none of those engagements made use of the de minimis exception to pre-approval contained in the Securities and Exchange Commission'sCommission’s rules.
The Board of Directors recommends that you vote FOR the ratification of the
appointment of S.R. Snodgrass, P.C. for the fiscal year ending September 30, 2018.2019.
SHAREHOLDER PROPOSALS, NOMINATIONS AND COMMUNICATIONS WITH THE BOARD OF DIRECTORS |
Shareholder Proposals. Any proposal which a shareholder wishes to have included in the proxy materials of Prudential Bancorp relating to the next annual meeting of shareholders of Prudential Bancorp, which is expected to be held in February 2019,2020, must be received at the principal executive offices of Prudential Bancorp, 1834 West Oregon Avenue, Philadelphia, Pennsylvania 19145, Attention: Dennis Pollack, President and Chief Executive Officer, no later than September 17, 2018.20, 2019. If such proposal is in compliance with all of the requirements of Rule 14a-8 under the Securities Exchange Act of 1934, it will be included in the proxy statement and set forth on the form of proxy issued for such annual meeting of shareholders. It is urged that any such proposals be sent certified mail, return receipt requested. We did not receive any shareholder proposals for this annual meeting.
Shareholder proposals which are not submitted for inclusion in Prudential Bancorp'sBancorp’s proxy materials pursuant to Rule 14a-8 may be brought before an annual meeting pursuant to Section 2.10 of Prudential Bancorp'sBancorp’s Bylaws. Notice of the proposal must be given in writing and delivered to, or mailed and received at, our principal executive offices by September 18, 2018.20, 2019. The notice must include the information required by Section 2.10 of our Bylaws.
Shareholder Nominations. Our Bylaws provide that, subject to the rights of the holders of any class or series of stock having a preference over the common stock as to dividends or upon liquidation, all nominations for election to the Board of Directors, other than those made by the Board or a committee thereof, shall be made by a shareholder who has complied with the notice and information requirements contained in Section 3.12 of our Bylaws. Written notice of a shareholder nomination generally must be communicated to the attention of the Secretary and either delivered to, or mailed and received at, our principal executive offices not later than, with respect to an annual meeting of shareholders, 120 days prior to the anniversary date of the mailing of proxy materials by us in connection with the immediately preceding annual meeting of shareholders or, in the case of the 20192020 annual meeting, by September 18, 2018.20, 2019. We did not receive any shareholder nominations for this annual meeting.
Other Shareholder Communications. Shareholders who wish to communicate with the Board may do so by sending written communications addressed to the Board of Directors of Prudential Bancorp, Inc., c/o Sharon M. Slater, Corporate Secretary, at 1834 West Oregon Avenue, Philadelphia, Pennsylvania 19145. Ms. Slater will forward such communications to the director or directors to whom they are addressed.
A copy of Prudential Bancorp'sBancorp’s Annual Report to Shareholders, which includes the Annual Report on Form 10-K for the year ended September 30, 2017,2018, accompanies this proxy statement. Such Annual Report is not part of the proxy solicitation materials.
Upon receipt of a written request, we will furnish to any shareholder a copy of the exhibits to the Annual Report on Form 10-K. Such written requests should be directed to Mr. Jack E. Rothkopf, Senior Vice President and Chief Financial Officer, Prudential Bancorp, Inc., 1834 West Oregon Avenue, Philadelphia, Pennsylvania 19145.
Management is not aware of any business to come before the annual meeting other than the matters described above in this proxy statement. However, if any other matters should properly come before the meeting, it is intended that the proxies solicited hereby will be voted with respect to those other matters in accordance with the judgment of the persons voting the proxies.
Solicitation of Proxies. The cost of the solicitation of proxies will be borne by Prudential Bancorp. Prudential Bancorp will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending the proxy materials to the beneficial owners of Prudential Bancorp'sBancorp’s common stock. In addition to solicitations by mail, directors, officers and employees of Prudential Bancorp may solicit proxies personally or by telephone without additional compensation.
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