UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box: | ||
☐ | Preliminary Proxy Statement | |
☐ | Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
☒ | Definitive Proxy Statement | |
☐ | Definitive Additional Materials | |
☐ | Soliciting Material Pursuant to §240.14a-12 |
☐
Soliciting Material Pursuant to §240.14a-12
The First of Long Island Corporation |
(Name of Registrant as Specified in Its Charter) |
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant) |
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box): | |||
☒ | No fee | ||
|
| ||
|
| ||
|
| ||
|
| ||
|
| ||
|
| ||
☐ | Fee paid previously with preliminary | ||
☐ |
| ||
|
| ||
|
| ||
|
| ||
|
| ||
THE FIRST OF LONG ISLAND CORPORATION
10 GLEN HEAD275 BROADHOLLOW ROAD
GLEN HEAD,MELVILLE, NEW YORK 1154511747
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 19, 202218, 2023
March 11, 20229, 2023
To the Stockholders of
The First of Long Island Corporation:
Notice is hereby given that the Annual Meeting of Stockholders of The First of Long Island Corporation will be held exclusively via live webcast on Tuesday, April 19, 2022,18, 2023, at 10:00 A.M., Eastern Time. We are holding the annual meeting online due to provide all shareholders equal and ready access to attend the public health impactlive meeting regardless of the coronavirus pandemic and in order to prioritize the health and well-being of our stockholders as well as our employees and other members of our community.their location. Stockholders will not be able to attend the annual meeting in person. To participate in the meeting, visitwww.cstproxy.com/fnbli/20222023, and enterregister for the meeting by entering the 12-digit annual meeting control number included on your proxy card. You may register for the meeting as early as 10:00 A.M., Eastern Time, on April 12, 2022.11, 2023. If you hold your shares through a bank, broker or other nominee, you will need to take additional steps to participate in the meeting, as described in the proxy statement. The annual meeting is for the purpose of considering and acting upon:
(1) | To elect |
(2) | To conduct a non-binding, advisory vote to approve the compensation paid to the Corporation’s named executive officers; |
(3) | To conduct a non-binding, advisory vote regarding the frequency of voting on the compensation paid to |
| (4) | To ratify the appointment of Crowe LLP as the Corporation’s independent registered public accounting firm for |
|
To transact any other business as may properly come before the meeting.
To transact any other business as may properly come before the meeting.
Only stockholders of record at the close of business on March 4, 20223, 2023 are entitled to notice of and to vote at such meeting or any adjournment thereof.
|
IMPORTANT -- PLEASE VOTE YOUR PROXY PROMPTLY.
IN ORDER THAT THERE MAY BE PROPER REPRESENTATION AT THE MEETING, YOU ARE URGED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE POSTAGE-PAID ENVELOPE PROVIDED, OR TO VOTE ELECTRONICALLY AS PROVIDED IN THE INSTRUCTIONS INCLUDED HEREWITH.
PROPOSAL 2 | |
Delinquent Section 16(A) Reports | 30 |
PROPOSAL | |
THE FIRST OF LONG ISLAND CORPORATION
10 Glen Head275 Broadhollow Road
Glen Head,Melville, New York 1154511747
(516) 671-4900
PROXY STATEMENT
INFORMATION ABOUT THE ANNUAL MEETING OF STOCKHOLDERS
The accompanying proxy is being solicited by the Board of Directors (“Board”) of The First of Long Island Corporation (“Corporation” or “Company”) for use at the Annual Meeting of Stockholders to be held on April 18, 2023 at 10:00 A.M., Eastern Time, via live webcastwebcast at www.cstproxy.com/fnbli/2022 on April 19, 2022.2023. The approximate date on which proxy statements and forms of proxy are first being sent or given to stockholders is March 18, 2022.17, 2023.
Proxies in the accompanying form that are properly executed and duly returned to the Corporation, or voted electronically, will be voted at the meeting in accordance with the instructions provided. Where no instructions are indicated, properly executed proxies will be voted “For” the proposals set forth in this proxy statement. Each proxy granted may be revoked at any time prior to its exercise by written notice filed with the secretary of the Corporation, by the submission of a later dated and executed proxy or by voting online at the meeting. The presence online or by proxy of the holders of a majority of the shares entitled to vote at the annual meeting constitutes a quorum for the transaction of business. The meeting (whether or not a quorum is present) may be adjourned to a subsequent date, provided notice of the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken. At an adjourned meeting, any business may be transacted which might have been transacted at the meeting as originally scheduled. In the event there are not sufficient votes for a quorum, or to approve or ratify any matter being presented at the time of this Annual Meeting, the Annual Meeting may be adjourned in order to permit the further solicitation of proxies.
If you were a stockholder of record as of the close of business on March 4, 2022,3, 2023 and wish to participate at the meeting by asking questions during the live webcast, you may do so by accessing the live webcast at www.cstproxy.com/fnbli/20222023 and entering your control number. As a registered stockholder, you received a proxy card with this proxy statement which includes your control number. You will need your control number for access. If you do not have your control number, contact our transfer agent, Continental Stock Transfer at (917) 262-2373, or proxy@continentalstock.com.proxy@continentalstock.com.
If your shares of Company common stock are held by a bank, broker or other nominee, you will need to contact your bank, broker or other nominee and obtain a legal proxy. Once you have received your legal proxy, contact Continental Stock Transfer to have a control number generated. The contact information for Continental Stock Transfer is (917) 262-2373, or proxy@continentalstock.com.proxy@continentalstock.com.
If you do not wish to participate in the meeting, but you merely wish to listen to the proceedings, we have set up telephone access for those purposes. In that case, please call, toll-free (within the United States and Canada), 1-800-450-7155. The passcode for listening by telephone is 1857860#.5054527#.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
The only class of voting securities of the Corporation is its Common Stock, $.10 par value ("Common Stock"), each share of which entitles the holder thereof to one vote except in the election of directors, where votes may be cumulated as described herein. Only stockholders of record at the close of business on March 4, 20223, 2023 are entitled to notice of and to vote at the meeting.
As of March 4, 2022,3, 2023, there were 23,120,29022,512,395 shares of the Common Stock issued, all of which were outstanding and entitled to vote. Based on information available, the only persons owning beneficially more than five percent (5%) of the Common Stock of the Corporation as of March 4, 20223, 2023 are identified in the table below.
1
Name and Address | Amount and Nature of | Percent | ||||
of Beneficial Owner | Beneficial Ownership |
| of Class | |||
FMR LLC | 2,037,006 shares(1) |
|
| 9.05% | ||
245 Summer Street | ||||||
Boston, | ||||||
BlackRock, Inc. | 2,019,118 shares(2) |
|
| 8.97% | ||
55 East 52nd Street | ||||||
New York, NY 10055 |
|
|
| |||
| |||||
|
(1) |
|
| Based on a Schedule 13G/A filed on February |
| Based on a Schedule 13G/A filed on |
Following is information with respect to the beneficial ownership of the Corporation's Common Stock as of March 4, 2022 by all directors and nominees, by the executive officers of the Corporation named in the “Summary Compensation Table” (“named executive officers” or “NEOs”), and by all directors and executive officers of the Corporation as a group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amount and Nature of |
| Percent |
Title of Class |
| Beneficial Owner |
| Beneficial Ownership (1) |
| of Class |
|
|
|
|
|
|
|
Common Stock |
| Christopher Becker |
| 41,810 |
| .18% |
($.10 par value) |
| Paul T. Canarick |
| 513,334 |
| 2.22% |
|
| Alexander L. Cover |
| 50,248 |
| .22% |
|
| John J. Desmond |
| 11,900 |
| .05% |
|
| Louisa M. Ives |
| 3,247 |
| .01% |
|
| Stephen V. Murphy |
| 56,556 |
| .24% |
|
| Peter Quick |
| 56,759 |
| .25% |
|
| Denise Strain |
| 16,441 |
| .07% |
|
| Milbrey Rennie Taylor |
| 24,526 |
| .11% |
|
| Walter C. Teagle III |
| 151,822 |
| .66% |
|
| Eric J. Tveter |
| 15,979 |
| .07% |
|
| Jay P. McConie |
| 6,568 |
| .03% |
|
| Christopher J. Hilton |
| 18,448 |
| .08% |
|
| Janet T. Verneuille |
| 7,613 |
| .03% |
|
| Susanne Pheffer |
| 1,769 |
| .01% |
|
| Directors and Executive |
|
|
|
|
|
| Officers as a group (18 persons) |
| 1,005,833 |
| 4.35% |
|
|
VOTING PROCEDURES AND METHODS OF COUNTING VOTES
As to Proposal 1 regarding the election of directors, the proxy card being provided by the Board enables a stockholder to vote “For” the election of the sixseven nominees proposed by the Board or to “Withhold Authority” to vote for the nominees being proposed. As discussed under Proposal 1, cumulative voting applies to the election of directors. Directors are elected by a plurality of the votes cast, without regard to either broker non-votes or proxies as to which the authority to vote for the nominee is withheld.
As to Proposals 2 and 3,4, a stockholder may: (1) vote “For” the item, (2) vote “Against” the item, or (3) “Abstain” from voting on the item. In order to approve Proposals 2 and 3,4, each proposal must receive the affirmative vote of a majority of the shares voting on each matter at the annual meeting without regard to either shares as to which the “Abstain” box is marked or broker non-votes. As to Proposal 3 with respect to the advisory vote on the frequency of future votes on executive compensation, a stockholder may vote for 1, 2 or 3 years, or may abstain, and the advisory vote on frequency will be determined by the number of years which receives the most votes cast.
Proxies solicited hereby will be returned to the Corporation, tabulated by the Corporation’s registrar and transfer agent and reviewed by the inspectors of election designated by the Board.
2PROPOSAL 1
PROPOSAL 1
ELECTION OF DIRECTORS FOR TWO YEAR TERMS
The Board of the Corporation currently consists of eleven members. twelve members, and is divided into two classes, Class I and Class II. The following table sets forth the present composition of the Board.
Expiration | ||||
Name | Class | of Term | ||
Christopher Becker | I | 2023 | ||
John J. Desmond | I | 2023 | ||
Edward J. Haye | I | 2023 | ||
Louisa M. Ives | I | 2023 | ||
Milbrey Rennie Taylor | I | 2023 | ||
Walter C. Teagle III | I | 2023 | ||
Paul T. Canarick | II | 2024 | ||
Alexander L. Cover | II | 2024 | ||
Stephen V. Murphy | II | 2024 | ||
Peter Quick | II | 2024 | ||
Denise Strain | II | 2024 | ||
Eric J. Tveter | II | 2024 |
The Board has nominated Paul T. Canarick, Alexander L. Cover, Stephen V. Murphy, Peter Quick, Denise StrainChristopher Becker, J. Abbott R. Cooper, John J. Desmond, Edward J. Haye, Louisa M. Ives, Milbrey Rennie Taylor and Eric J. TveterWalter C. Teagle III for election as Class III directors for re-election to serve two year terms. Each Board member, with the exception ofdirector and director nominee, except for Christopher Becker who serves as President and Chief Executive Officer (“CEO”) of the Corporation and its wholly owned bank subsidiary, The First National Bank of Long Island (“Bank”), is independent as defined in the Nasdaq Rules. Following the Annual Meeting, the Board will consist of thirteen members.
The
Mr. Cooper is being nominated by the Board is divided into two classes,for election by the stockholders as a Class I director pursuant to the terms of a Cooperation Agreement between with Corporation and Class II. TheDriver Opportunity Partners I LP, Driver Management Company LLC and J. Abbott R. Cooper (collectively, “Driver”) dated January 9, 2023. Under the Cooperation Agreement, the Corporation further agreed to appoint Mr. Cooper to the Governance and Nominating Committee following table sets forthhis election by the present compositionstockholders, and to nominate Mr. Cooper at the Corporation’s 2025 Annual Meeting of stockholders for an additional two year term. In accordance with the terms of the Board.Cooperation Agreement, Driver Management withdrew its notice of intent to nominate candidates for election to the Board at the Annual Meeting and agreed to cease all solicitations of proxies and other activities in connection with the Annual Meeting, subject to limited exceptions. Driver has also agreed to certain affirmative solicitation commitments during the term of the Cooperation Agreement and also agreed to certain customary standstill provisions and a voting commitment for the duration of the Cooperation Agreement. The Corporation has agreed to reimburse Driver for up to $100,000 of out-of-pocket expenses incurred by Driver in connection with its engagement with the Corporation under the Cooperation Agreement.
| ||||||
|
|
| ||||
|
|
| ||||
|
|
| ||||
|
|
| ||||
|
|
| ||||
|
|
| ||||
|
|
| ||||
|
|
| ||||
|
|
| ||||
|
|
| ||||
|
|
| ||||
|
|
|
As to the election of directors, each stockholder entitled to vote has the right to vote, online at the virtual Annual Meeting or by proxy, the number of shares owned by him or herthe stockholder for as many persons as there are directors to be elected. A stockholder may also cumulate his or her votes by giving one candidate as many votes as the number of directors to be elected multiplied by the number of his or her shares owned or by evenly distributing such votes on the same principle among any number of candidates. Cumulative voting can affect the election of directors if there are more nominees for director than positions to be filled. In the event thatIf cumulative voting is in effect, it is the intention of the proxies to vote cumulatively for the nominees listed, and if authority for any nominee or nominees is withheld, the votes will be distributed among the remaining candidates at the discretion of the Board.
It is intended that shares represented by properly executed proxies will be voted at the meeting in accordance with the instructions indicated thereon and, in the absence of contrary indication, for the re-electionelection of directors Canarick, Cover, Murphy, Quick, Straindirector nominees Becker, Cooper, Desmond, Haye, Ives, Taylor and Tveter.Teagle. Each of the nominees for Class III director will hold office until his or hera successor is elected and qualified. If at the time of the 20222023 Annual Meeting any of the nominees named above is unavailable or chooses not to serve as a director (an event that the Board does not now anticipate), the proxies will be voted for the election as director of such other person or persons as the Board may designate.
The Board
Following is information with respect to the beneficial ownership of Directors recommendsthe Corporation's Common Stock as of March 3, 2023 by all directors and nominees, by the executive officers of the Corporation named in the “Summary Compensation Table” (“named executive officers” or “NEOs”), and by all directors, director nominees and executive officers of the Corporation as a vote FOR all named nominees.group.
Amount and Nature of | Percent | |||||
Title of Class | Beneficial Owner | Beneficial Ownership(1) | of Class | |||
Common Stock | Christopher Becker | 59,316 | .26% | |||
($.10 par value) | Paul T. Canarick | 517,073 | 2.30% | |||
J. Abbott R. Cooper | 340,224(2) | 1.51% | ||||
Alexander L. Cover | 53,987 | .24% | ||||
John J. Desmond | 15,639 | .07% | ||||
Edward J. Haye | 1,588 | .01% | ||||
Louisa M. Ives | 6,986 | .03% | ||||
Stephen V. Murphy | 60,295 | .27% | ||||
Peter Quick | 60,498 | .27% | ||||
Denise Strain | 23,007 | .10% | ||||
Milbrey Rennie Taylor | 28,265 | .13% | ||||
Walter C. Teagle III | 150,630 | .67% | ||||
Eric J. Tveter | 19,718 | .09% | ||||
Jay P. McConie | 11,213 | .05% | ||||
Christopher J. Hilton | 23,125 | .10% | ||||
Janet T. Verneuille | 12,734 | .06% | ||||
Michael J. Spolarich | 5,077 | .02% | ||||
Directors and Executive Officers as a group (20 persons) | 1,426,969 | 6.33% |
(1) | Includes shares as to which a person (or spouse) directly or indirectly has or shares voting power and/or investment power (which includes the power to dispose) and all shares which the person has a right to acquire within 60 days of the reporting date. |
(2) | Includes 163,929 shares beneficially owned by Driver Opportunity Partners I LP (“Driver LP”). As the controlling person of Driver Management Company LLC (“Driver LLC”), the general partner of Driver LP, Mr. Cooper may be deemed to be the beneficial owner of the shares owned by Driver LP. Mr. Cooper disclaims beneficial ownership of any shares owned by Driver LP except to the extent of his pecuniary interest therein. Includes 175,969 shares held in separately managed accounts (“SMAs”) for which Driver LLC serves as the investment manager and over which Driver LLC has the exclusive power to vote, or direct the vote of, and dispose, or direct the disposition of. As the controlling person of Driver LLC, Mr. Cooper may be deemed to be the beneficial owner of the shares held in SMAs. Mr. Cooper disclaims beneficial ownership of any shares held in SMAs except to the extent of his pecuniary interest therein. |
The following table sets forth a brief description of the business experience during the past five years of each of the nominees and Board members continuing in office. It also indicates any other directorships held during the past five years in any company with a class of securities registered pursuant to section 12 of the Securities Exchange Act of 1934 (“1934 Act”) or subject to the requirements of section 15(d) of the 1934 Act or any company registered as an investment company under the Investment Company Act of 1940. The year set forth for each director is the year in which the person named became a director of the Corporation and the Bank.
.
3
BUSINESS EXPERIENCE OF DIRECTORS
Principal Occupations and | Director | |||||
Name | Other Directorships for Last 5 Years | Since | ||||
NOMINEES | ||||||
Christopher Becker (Age 57) | President and Chief Executive Officer, The First of Long Island |
| ||||
| Corporation and The First National Bank of Long Island | 2020 | ||||
J. Abbott R. Cooper (Age 55) | Founder and managing member of Driver Management Company LLC | (1) | ||||
|
|
| ||||
| ||||||
|
|
| ||||
|
| |||||
John J. Desmond (Age 72) | Retired Partner of Grant Thornton LLP; Director of Clip Money, Inc.; Director of Spirit of America Investment Fund Inc.; Former Director and Chairman of the |
| ||||
| Audit Committee of MusclePharm Corporation | 2016 | ||||
Edward J. Haye (Age 63) | Partner at Cullen and Dykman LLP; Former Chief Regulatory Counsel for American Water Works Company, Inc. | 2022(2) | ||||
Louisa M. Ives (Age 56) | Managing Director, | 2019 | ||||
| ||||||
|
|
| ||||
(Age 76) |
| |||||
| ||||||
| ||||||
| ||||||
| ||||||
| ||||||
|
|
| ||||
|
| |||||
| ||||||
|
|
| ||||
| ||||||
| Retired Executive Producer of CBS News | 2008 | ||||
| ||||||
Walter C. Teagle III | Chairman of the Board, The First of Long Island Corporation and The |
| ||||
| First National Bank of Long Island; President and Owner, Teagle | |||||
Management, Inc. (Private Investment Firm); Chairman Emeritus and | ||||||
Director, The Teagle Foundation, Inc. (Private Foundation) | 1996 | |||||
CONTINUING DIRECTORS | ||||||
Paul T. Canarick (Age 66) | President and Principal, Paul Todd, Inc. (Construction Company) | 1992 | ||||
Alexander L. Cover | Business and Management Consultant (Private Practice); Retired Partner of Ernst & Young LLP | 2003 | ||||
Stephen V. Murphy | President, S.V. Murphy & Co. (Financial Advisory Services); Former Director: Man FRM Alternative Multi-Strategy Fund LLC; UST Global Private Markets Fund, LLC; Excelsior Venture Partners III, LLC; Director: NB Private Markets Fund II, LLC (and two feeder funds); NB Private Markets Fund III, LLC (and two feeder funds); NB Crossroads Private Markets Fund IV, LLC (and two feeder funds); NB Crossroads Private Markets Fund V Holdings, LLC (and four feeder funds); NB Crossroads Private Markets Fund VI, LP (and two feeder funds); NB Crossroads Private Markets Fund VII (and two feeder funds); NB Crossroads Private Markets Access Fund, LLC | 2005 | ||||
Peter Quick | Retired President of the American Stock Exchange; Former Partner of Burke and Quick Partners Holdings LLP, the parent company of Burke & Quick Partners LLC, a broker dealer; Director: Medicure Inc. | 2015 | ||||
Denise Strain | Retired Managing Director, Senior Tax Counsel, Citigroup Inc. | 2017 | ||||
Eric J. Tveter (Age 64) |
|
| ||||
|
| |||||
Communications Equity Associates, | ||||||
| ||||||
| 2013 |
(1) | Mr. Cooper is being nominated by the Board for election by stockholders as a Class I director at the Annual Meeting pursuant to the terms of a Cooperation Agreement. |
(2) | Mr. Haye was appointed by the Board effective November 15, 2022. |
The Board of Directors recommends a vote FOR all named nominees.
QUALIFICATIONS AND RESPONSIBILITIES OF DIRECTORS
The qualifications the Board seeks for individual directors are identified as a set of core competencies that are assessed and amended periodically by the Board as the banking industry changes. Core competencies include, but are not limited to: corporate governance, banking, strategic planning, business leadership, environmental and social, accounting and reporting, finance and/or investments, technology and/or cybersecurity, mergers and acquisitions, legal and/or regulatory, real estate, and marketing and/or public relations.
In addition to the core competencies, the Board will include a director with financial accounting experience necessary to qualify as an “audit committee financial expert” as defined in Regulation S-K of the Securities and Exchange Commission (“SEC”). The Board has determined that a least two directors should and do meet this qualification.
Other top priorities include diversity cybersecurity expertise and a strong background in the financial services industry including banking, finance, investment, treasury and mergers and acquisitions. The Board has determined that at least one director should meet the cybersecurity qualification and at least two the financial services industry qualification. When considering succession, these qualifications along with diversity, must be a top priority if there is not the requisite number of qualified directors or it is likely there will be an opening in one of these qualifications in the near term generally defined as within two years.
4
The Board should adequately reflect the diversity of the Company’s constituencies and the communities in which the Company conducts business.
Following are the duties and responsibilities of each director:
(1) | Demonstrate the knowledge, skills, and leadership experience that make a director a valuable resource in fulfilling the responsibilities of the Board. |
(2) | Provide contributions to Board discussions that are forward-looking, constructive, timely, independent and to the point. |
(3) | Demonstrate the |
other directors. |
|
|
|
|
(4) | Exhibit an up-to-date understanding of the national banking business. |
|
(5) | Serve on at least two committees and participate on a regular basis. |
|
(6) | Bring useful outside information and perspective to Board and Committee deliberations. |
|
(7) | Attend meetings well prepared to evaluate and/or add value to agenda items presented to the Board and/or |
(8) | Be participative and engaged at meetings. |
|
(9) | Show understanding and sensitivity to the fiduciary, ethical and legal responsibilities of Board membership. |
|
(10) | Dedicate sufficient time to the changing responsibilities as a Board member. |
|
(11) | Commit to ongoing learning to stay current on the responsibilities as a Board member. |
(12) | Represent the company appropriately when interacting with members of the public. |
(13) | Promote the Bank in personal and professional circles. |
(14) | Commit to |
meet these responsibilities. |
|
|
|
|
|
|
With respect to each of the Corporation’s directors, the
The narrative that follows sets forth the specific experience, qualifications, attributes and skills that led to the conclusion that the person should serve as a director considering the Company’s business and structure and the general qualifications and core competencies identified and deemed desirable by the Governance and Nominating Committee.
Christopher Becker - Mr. Becker joined the Board in January 2020 upon being named President and Chief Executive Officer of the Corporation and the Bank. Mr. Becker is a member of the Loan, Asset Liability and Risk Committees of the Bank. Mr. Becker has been employed by the Bank since 2011 and served as Executive Vice President and Chief Risk Officer of the Corporation and the Bank and Corporate Secretary of the Corporation through the end of 2019. In these positions, Mr. Becker was responsible for the Bank’s enterprise risk management program including oversight of strategic planning, technology, loan and deposit operations, compliance, administration of internal audit, facilities, and certain credit administration functions. Prior to joining the Bank, Mr. Becker served as Executive Vice President and Chief Financial Officer at the Bank of Smithtown and previously as Director, President and Chief Executive Officer of a national bank in organization. Mr. Becker began his career at Bridgehampton National Bank and served ultimately as Executive Vice President and Chief Operating Officer. Mr. Becker’s experience has provided him with the core competencies identified by the Governance and Nominating Committee, which include corporate governance, banking, strategic planning, business leadership, environmental and social, accounting and reporting, finance and investments, technology and cybersecurity, mergers and acquisitions, legal and regulatory, real estate, and marketing and public relations.
Paul T. Canarick - Mr. Canarick joined the Board in 1992 and is a member of the Governance and Nominating, Asset Liability and Loan Committees. Mr. Canarick is President and Principal of Paul Todd, Inc., a privately held construction company. Mr. Canarick’s experience has provided him with the core competencies identified by the Governance and Nominating Committee, which include banking, business leadership, environmental and social, and real estate.
J. Abbott R. Cooper - Mr. Cooper is the founder and managing member of Driver Management Company LLC (“Driver”). Prior to founding Driver, Mr. Cooper was the senior portfolio manager of the Financial Opportunity Strategy at Hilton Capital Management. Prior to that, Mr. Cooper was a senior investment banker covering depository institutions at Jefferies and Bank of America Merrill Lynch. Mr. Cooper began his career as a corporate lawyer, focusing on public and private company mergers and acquisitions, corporate governance, contests for corporate control and capital markets. Mr. Cooper earned his J.D. from the University of Montana School of Law and his B.A. from the University of Virginia. Mr. Cooper’s experience has provided him with the core competencies identified by the Governance and Nominating Committee, which include corporate governance, banking, strategic planning, business leadership, accounting and reporting, finance and investments, mergers and acquisitions, and legal and regulatory. The Board believes that Mr. Cooper's extensive financial, investment banking and capital markets experience, coupled with his legal expertise, would make him a valuable addition to the Board.
Alexander L. Cover - Mr. Cover joined the Board in 2003 and is Chairman of the Audit Committee and a member of the Audit, Asset Liability and Risk Committees. He is currently a business and management consultant in private practice and assists privately held companies with developing business plans. Previously, he was Partner-In-Charge of the financial institutions practice of the Long Island office of Ernst & Young LLP. Mr. Cover’s experience included serving as review partner on both SEC and non-SEC engagements. Mr. Cover has also been a director for several not-for-profit entities. Mr. Cover’s experience has provided him with the core competencies identified by the Governance and Nominating Committee, which include corporate governance, banking, strategic planning, business leadership, accounting and reporting, finance, technology and cybersecurity, mergers and acquisitions, and legal and regulatory.
John J. Desmond - Mr. Desmond joined the Board in 2016 and is Chairman of the Audit Committee and a member of the Audit, Compensation and Risk Committees. Previously, he was Partner-In-Charge of the Long Island office of Grant Thornton LLP from 1988 through his retirement from the firm in 2015, having served over 40 years in the public accounting industry. Mr. Desmond’s experience included serving as lead audit partner for many public and privately-held companies. Mr. Desmond was elected by the U.S. Partners of Grant Thornton LLP to be a Partnership
5
Board Member from 2001 through 2013. The Board was responsible for oversight of many of the firm’s activities including strategic planning, the performance of the senior leadership team and financial performance. Mr. Desmond also served as a director of a publicly held company through May 2021, and serves or has served as a board memberdirector for severalvarious publicly held and not-for-profit entities. Mr. Desmond’s experience has provided him with the core competencies identified by the Governance and Nominating Committee, which include corporate governance, banking, strategic planning, business leadership, accounting and reporting, finance, mergers and acquisitions, and legal and regulatory.
Edward J. Haye – Mr. Haye joined the Board in November 2022. Mr. Haye has substantial experience working for regulated companies and for law firms serving various regulated industries and government agencies. He is currently a partner at Cullen and Dykman LLP and formerly served as Chief Regulatory Counsel for American Water Works Company, Inc., the largest publicly traded water and wastewater utility company in the United States. Mr. Haye’s leadership responsibilities have included corporate governance, contract administration, affiliate transactions, intellectual property and labor and employment law. He currently serves or has served on the boards of various not-for-profit and community organizations. Mr. Haye’s experience has provided him with the core competencies identified by the Governance and Nominating Committee, which include corporate governance, strategic planning, business leadership, environmental and social, legal and regulatory, real estate, and marketing and public relations.
Louisa M. Ives - Ms. Ives joined the Board in 2019 and is a member of the Compensation, Asset Liability and Loan Committees. Ms. Ives has substantial experience in the financial services industry currently serving as Head of Manager ResearchManaging Director at Chilton Trust Company where she is responsible for external manager selection and due diligence for Chilton clients. Prior to her current role, Ms. Ives was a Managing Director and research analyst at Chilton Investment Company and served on the company’s Boardboard of Directors.directors. She currently serves on the boards of various not-for-profit and community organizations. Ms. Ives’ experience has provided her with the core competencies identified by the Governance and Nominating Committee, which include corporate governance, strategic planning, business leadership, environmental and social, finance and investments, and mergers and acquisitions.
Stephen V. Murphy - Mr. Murphy joined the Board in 2005 and is Chairman of the Asset Liability Committee and a member of the Compensation, Governance and Nominating and Loan Committees. He is currently President of S.V. Murphy & Co., a financial advisory firm. He also serves as a director of several registered investment companies. Mr. Murphy’s experience includes Merrill Lynch Capital Markets, where he was Managing Director in the Investment Banking Department in charge of the Financial Institutions Mergers and Acquisitions Group. Prior to that, Mr. Murphy was with The First Boston Corporation as Managing Director in the Corporate Finance Department in charge of the Commercial Banking Group for Financing and Strategic Services. Mr. Murphy also serves or has served as a director for various publicly held and not-for-profit entities. Mr. Murphy’s experience has provided him with the core competencies identified by the Governance and Nominating Committee, which include corporate governance, banking, strategic planning, business leadership, accounting and reporting, finance and investments, and mergers and acquisitions.
Peter Quick - Mr. Quick joined the Board in 2015 and is Chairman of the Loan Committee and a member of the Audit, Compensation, Governance and Nominating and Asset Liability Committees. Mr. Quick has over 30 years of experience in the securities and financial services industries. He is a recognized leader in the securities industry with experience in the domestic and international equity markets, equities market making, market structure reform, trading technology and clearing operations. Mr. Quick is a retired Partner of Burke and Quick Partners Holdings LLP, the parent company of Burke & Quick Partners LLC, a broker dealer. Mr. Quick was President of the American Stock Exchange from 2000 to 2005. Prior to joining the American Stock Exchange, he served as President of Quick & Reilly Inc., a Quick & Reilly subsidiary and a national discount brokerage firm. Mr. Quick also serves or has served as a director for several publicly held companies and not-for-profit entities. Mr. Quick’s experience has provided him with the core competencies identified by the Governance and Nominating Committee, which include corporate governance, banking, strategic planning, business leadership, environmental and social, accounting and reporting, finance and investments, technology and cybersecurity, mergers and acquisitions, legal and regulatory, and real estate.
Denise Strain- Ms. Strain joined the Board in 2017 and is Chair of the Risk Committee and a member of the Audit and Governance and Nominating Committees. Ms. Strain has 35 years of experience in the banking industry including most recently as the Managing Director and Senior Tax Counsel of Citigroup Inc. Ms. Strain has served as a member on the Board of Trustees of a not-for-profit educational institution. Ms. Strain’s experience has provided her with the core competencies identified by the Governance and Nominating Committee, which include corporate governance, banking, strategic planning, business leadership, environmental and social, accounting and reporting, finance, mergers and acquisitions, and legal and regulatory.
Milbrey Rennie Taylor - Ms. Taylor joined the Board in 2008 and is Chair of the Governance and Nominating Committee and a member of the Compensation and Asset Liability Committees. Ms. Taylor’s experience includes over 30 years in the television news business. She served as Executive Producer of CBS News Sunday Morning and CBS Weekend News. Ms. Taylor also served as Vice President of ThirdAge Media, an Internet company partly owned by CBS, Inc. Ms. Taylor currently serves and has served as a director on several not-for-profit entities. Ms. Taylor’s experience has provided her with the core competencies identified by the Governance and Nominating Committee, which include corporate governance, strategic planning, business leadership, environmental and social, marketing, and public relations.
Walter C. Teagle III - Mr. Teagle joined the Board in 1996, became Chairman of the Board in 2005 and is an ex officio member for all purposes of all Board committees of the Corporation and the Bank. Mr. Teagle is currently President and owner of Teagle Management, Inc., a private investment firm and Chairman Emeritus and Director of The Teagle Foundation, Inc., a private foundation. Mr. Teagle’s past experience includes a variety of executive and board positions including Managing Director, Groton Partners LLC, a merchant banking firm; Officer and Managing Director, Groton Asset Management LLC, an investment management company; Executive Vice President and Director, Lexent, Inc., a publicly-held infrastructure service provider; and President, Chief Executive Officer, and Director, Metro Design Systems, Inc., an engineering design services firm. Mr. Teagle has also been a director of not-for-profit entities. Mr. Teagle’s experience has provided him with the core competencies identified by the Governance and Nominating Committee, which include corporate governance, banking, strategic planning, business leadership, environmental and social, finance and investments, and mergers and acquisitions.
6
Eric J. Tveter - Mr. Tveter joined the Board in 2013 and is Chairman of the Compensation Committee and a member of the Audit and Risk Committees. He is currently Managing MemberChairman of ETC Ventures LLC Director of Veloce Esports Limited, and Senior Advisor to Arthur D. Little, a global management consultancy firm, Communications Equity Associates, an investment banking advisory firm and Cyverse, a Swiss cybersecurity firm. He is former CEO of the Austria and Switzerland businesses of Liberty Global plc.The Roda Group. Mr. Tveter has extensive knowledge and experience in the US, UK and European cable industries. Mr. Tveter’s experience has provided him with the core competencies identified by the Governance and Nominating Committee, which include corporate governance, banking, strategic planning, business leadership, environmental and social, accounting and reporting, finance, technology and cybersecurity, mergers and acquisitions, legal and regulatory, real estate, and marketing and public relations.
The Board has determined that the Chairman of the Board will be an independent director. The Board believes that stockholder interests are best served by having a Chairman of the Board who is independent of management and whose exclusive responsibility is the long-term best interest of the Corporation’s stockholders.
Walter C. Teagle III has served as Chairman of the Board since May 2005. As Chairman, Mr. Teagle organizes the work of the Board and ensures that the Board has access to sufficient information to enable it to carry out its functions, including monitoring the Corporation’s performance and the performance of the Board and management. The role of the Chairman of the Board includes: (1) presiding over all meetings of the Board and stockholders, including regular executive sessions of the Board in which the CEO, a management director, and other members of management do not participate; (2) establishing the annual agenda of the Board and agendas of each meeting in consultation with the CEO; (3) serving as an ex officio member of each Board committee and advising with respect to the work of each Board committee; (4) coordinating periodic Board reviews of management’s strategic plan for the Corporation; and (5) coordinating the Compensation Committee annual performance review of the CEO.
BOARD’SBOARD’S ROLE IN RISK OVERSIGHT
Risk is an integral part of Board and Board committee discussions. The significant risks facing the Corporation are set forth in an Enterprise Risk Management document. The Corporation’s management team, which includes a Chief Risk Officer, is responsible for identifying, assessing and managing risk and the Board is responsible for risk oversight and fulfills this responsibility primarily through its committees. In granting authority to management, approving policies and strategies and receiving management reports, the Board and its committees consider, among other things, the risks that the Corporation faces. For significant risks, such as credit risk, interest rate risk, liquidity risk, and cybersecurity risk, the Corporation has formal written policies that are approved by an appropriate Board committee or the full Board.
As reflected in the Corporation’s Corporate Governance Guidelines, the Board and its committees address succession planning risk both in the ordinary course of business and on a contingent basis in case of unexpected events. The Corporation has comprehensive written succession planning documents that cover the Board and its committees, the CEO and the other members of executive management and from time to time retains consultants with expertise in succession planning matters. The Corporation’s succession planning documents are updated no less often than annually and are actively used by the Board and its committees to oversee and ensure a smooth transition should Board members or key members of executive management retire or otherwise leave the employ of the Corporation.
The following table sets forth the risk oversight responsibilities of the Board and Board committees.
Board or Board Committee | Risk Oversight Responsibilities | |
Board of Directors | Strategic, Earnings and | |
|
| |
|
| |
Audit Committee | Internal and External Audits, Financial Statements, Internal | |
Controls and Regulatory | ||
|
| |
| ||
Compensation Committee | Key Personnel, Compensation and Retention | |
|
|
DIVERSITY, INCLUSION AND RESPECT IN THE WORKPLACE
Management and staff at all levels of the Corporation and the Bank are expected to behave in a fair, ethical and legal manner in all circumstances. This includes both internal interactions with other members of the organization and external interactions with customers, members of the community and applicants for employment. We firmly believe that our high standard of ethical behavior will maintain the favorable reputation of the Bank in the marketplace and ensure the Bank remains a great place to work, invest in and do business with.
7
We communicate our expectations for honest, fair and ethical behavior through numerous policies within the organization. This begins with our Code of Ethics which describes the moral, ethical, legal and regulatory requirements by which all personnel must conduct themselves. Every employee and Director is required to annually sign a statement that he/she has read the Code of Ethics and understands its provisions and agrees to abide by them. The commitment of our directors and senior management team to moral and ethical behavior means that the proper tone is set from the top of the organization.
Our policy for Equal Employment and Affirmative Action states that the Bank will recruit, hire, train and promote, in all job classifications, without regard to any classification protected by applicable federal, state or municipal law. Our Anti-Harassment policy states that the Bank is unequivocally opposed to and will not tolerate any harassment of a sexual, racial, ethnic, age or religious nature, or based on any other personal characteristics protected by law from such harassment, that is directed toward any employee or applicant for employment or any other person in the workplace by any other employee or person in the workplace.
Additional policies that communicate the importance and expectations of honest, ethical and fair behavior include the Nepotism Policy which describes the Bank’s commitment to employment and advancement based on an individual’s qualifications and merit, and the Insider Trading Policy which prohibits Directors, officers and other employees from trading shares of the Corporation’s common stock based on material nonpublic information.
To reinforce the importance of the policies above, annual training programs on certain policies are provided to all employees. These programs help employees understand how the policies apply on a day-to-day basis and how to deal with events and situations that may occur. Employees are encouraged to report concerns without fear of retaliation and may do so in a confidential manner.
The Corporation’s diversity is demonstrated by the members of the Executive Vice President team. Of our eight EVPs, two are women and one is a member of an underrepresented minority group. Overall, the Bank’s staff is made up of 68% female and 32% male. In addition, the Board of Directors currently includes three women and the Board has made it a priority to further expand its diversity.
Environmental, Social and Corporate Governance (“ESG”)
We recognize and are committed to our corporate responsibility to conduct business in an environmentally sustainable and socially appropriate manner. We care about the environment and the communities in which we operate and in that regard we carefully consider who we do business with and how we do business. We believe this commitment and focus supports long-term shareholder value.
The Governance and Nominating Committee has oversight of the Bank’s ESG program. This program is intended to monitor the Bank’s business activities to ensure that the interests of all stakeholders, including shareholders, employees, customers and communities, are considered. ESG matters are discussed at the Committee’s quarterly meetings where ideas and actions are monitored. Actions taken to date with a view toward being environmentally conscious include reducing the amount of paper utilized within the Bank, minimizing the reliance on printers through increased use of technology and increasing recycling. In addition, the Bank has reduced the number of corporate-owned vehicles and intends to support only energy efficient vehicles in the future. In terms of corporate facilities, the Bank’s plan to consolidate corporate office space in 2022 into a single location should reduce our land usage. The Bank’s ESG program continues to be expanded including training for Board members and remains a priority for the Board and management.
MEETINGS OF THE BOARD OF DIRECTORS
All of the members of the Board of the Corporation also serve on the Board of the Bank. The Board of the Corporation held ten regular meetings and three special meetings during 2021. Each director attended at least 75% of the aggregate number of Board meetings and meetings of the committees on which such director served. The Board meets regularly in executive session throughout the year.
The Board of the Corporation has three standing committees: the Governance and Nominating Committee; the Audit Committee; and the Compensation Committee. The Board of the Bank also has three standing committees: the Loan Committee; the Asset Liability Committee; and the Risk Committee. The Corporation’s Board has adopted a formal written charter for each of its committees. A current copy of the charters may be viewed on the Corporation’s website at www.FNBLI.comthrough the “Investor Relations” page using the “Corporate Governance” documents link.
Governance and Nominating Committee
The Corporation’s Governance, Reputation, Director and NominatingSenior Management Succession, Environmental and Social
Asset Liability Committee consists
Interest Rate, Liquidity, Price, Market and Economic Conditions
Loan Committee
Credit and Allowance for Credit Losses
Risk Committee
Compliance, Cybersecurity, Technology, Legal and Operational
DIVERSITY, INCLUSION AND RESPECT IN THE WORKPLACE
Management and staff at all levels are expected to behave in a fair, ethical and legal manner in all circumstances. This includes both internal interactions with other members of the organization and external interactions with customers, shareholders, members of the community and applicants for employment. We firmly believe that our high standard of ethical behavior will maintain the favorable reputation of the Company in the marketplace and ensure it remains a great place to work, invest in and do business with.
We communicate our expectations for honest, fair and ethical behavior through numerous policies within the organization. This begins with our Code of Ethics which describes the moral, ethical, legal and regulatory requirements by which all personnel must conduct themselves. Every employee and Director is required to annually sign a statement that he/she has read the Code of Ethics and understands its provisions and agrees to abide by them. The commitment of our directors and senior management team to moral and ethical behavior means that the proper tone is set from the top of the organization and reinforced through compliance and corporate governance best practices.
Our policy for Equal Employment and Affirmative Action states that the Bank will recruit, hire, train and promote, in all job classifications, without regard to any classification protected by applicable federal, state or municipal law. Our Anti-Harassment policy states that the Bank is unequivocally opposed to and will not tolerate any harassment of a sexual, racial, ethnic, age or religious nature, or based on any other personal characteristics protected by law from such harassment, that is directed toward any employee or applicant for employment or any other person in the workplace by any other employee or person in the workplace.
Additional policies that communicate the importance and expectations of honest, ethical and fair behavior include the Nepotism Policy which describes the Bank’s commitment to employment and advancement based on an individual’s qualifications and merit, and the Insider Trading Policy which prohibits Directors, officers and other employees from trading shares of the Corporation’s common stock based on material nonpublic information.
To reinforce the importance of the policies above, annual training programs on certain policies are provided to all employees. These programs help employees understand how the policies apply on a day-to-day basis and how to deal with events and situations that may occur. Employees are encouraged to report concerns without fear of retaliation and may do so in a confidential manner.
The Corporation is committed to the success and development of our employees and provides opportunities for personal and professional growth. Our professional development program strives to develop the next generation of financial leaders and provides opportunities to enhance employees’ overall banking knowledge. Tuition reimbursement of up to $5,000 per year is offered to employees to encourage continued education, and the Bank’s virtual Learning Center provides opportunities for learning through continuous course offerings. In addition, the Bank’s summer internship program provides an immersive workplace experience for select college students. Finally, on-the-job training focused on an exchange of information and professional experiences between colleagues remains a very important part of development in the workplace and achieving high levels of productivity.
The Corporation’s diversity is demonstrated by the members of the Board, three are female and one is a member of two underrepresented minority groups. Of our seven Executive Vice Presidents, two are female and one is a member of an underrepresented minority group. The Company provides diversity statistics of the full Bank staff on its website and below. We are committed to being an inclusive and equitable Company at all levels of the organization.
Board and Employee Diversity Matrices. The following tables presents information regarding the gender identity and demographic background of the Board and employee populations as of December 31, 2022:
Board of Directors Diversity Matrix:
Total Number of Directors | 12 | |||
Part I: Gender Identity | Female | Male | Non-Binary | Did Not Disclose Gender |
Directors | 3 | 9 | ||
Part II: Demographic Background | ||||
African American or Black | 1 | |||
Asian | 1 | |||
White | 3 | 8 | ||
Two or More Races or Ethnicities | 1 |
Employee Diversity Matrix:
Total Number of Employees | 307 | |||
Part I: Gender Identity | Female | Male | Non-Binary | Did Not Disclose Gender |
Employees | 209 | 98 | ||
Part II: Demographic Background | ||||
African American or Black | 29 | 4 | ||
Alaskan Native or American Indian | 1 | |||
Asian | 18 | 14 | ||
Hispanic or Latinx | 26 | 10 | ||
Native Hawaiian or Pacific Islander | 3 | |||
White | 126 | 70 | ||
Two or More Races or Ethnicities(1) | 6 |
(1) | Specific races or ethnicities not available for these six employees. |
ENVIRONMENTAL, SOCIAL AND CORPORATE GOVERNANCE (“ESG”)
We recognize and are committed to our responsibilities to conduct business in an environmentally sustainable and socially appropriate manner that benefits our shareholders as well as the customers, employees and communities that we serve. We continue to track regulatory developments relative to cybersecurity, environmental, social and governance practices and expectations, and we are cognizant of our corporate responsibilities.
The Governance and Nominating Committee has oversight of the Bank’s ESG program. This program is intended to monitor the Bank’s business activities to ensure that the interests of all stakeholders are considered. ESG matters are discussed at the Committee’s quarterly meetings where ideas, priorities and actions are monitored. The Bank’s ESG program remains a priority for the Board and management, and it continues to be expanded. We believe this commitment and focus supports long-term shareholder value.
Actions taken to date represent some of the Company’s ESG efforts:
Environmental
● | Reduced the number of |
● | Declining land use as the branch optimization strategy consolidated branches and reduced our physical footprint while maintaining service to communities with digital banking offerings; |
● | Practicing responsible waste management and recycling practices on bank premises; |
● | Implemented eStatements to reduce the number of paper statements generated and sent to customers saving paper, associated production, equipment and delivery emissions; |
● | Installed LED lighting, occupancy sensor lighting in new branches and back-office space; |
● | Recently acquired Southampton branch location uses geothermal cooling and heating; |
● | Continued exploration of ways to reduce energy usage. |
Social
● | Encouraged employee volunteerism through the Community First initiative benefiting various social and charitable causes across Long Island, Manhattan, Brooklyn and Queens; |
● | Monetary donations to various not for profit organizations within the Bank’s service area; |
● | Bank directors, |
● | Ongoing community development and reinvesting lending; |
● | Providing educational materials on cybersecurity and financial literacy via social media and through community organizations; |
● | Fostering employee engagement with corporate culture surveys, bank wide employee meetings and skip level meetings; |
● | Numerous sustainable investment options offered for customers available in all five risk tolerances through First Investments; |
● | Implemented the |
Governance
| Rolled out investor relations webpage to |
● | Ongoing ESG training for the |
● | Code of |
● |
|
MEETINGS OF THE BOARD OF DIRECTORS
All of the members of the Board of the Corporation also serve on the Board of the Bank. The Board of the Corporation held ten regular meetings and three special meetings during 2022. Each director attended at least 75% of the aggregate number of Board meetings and meetings of the committees on which such director served. The Board meets regularly in executive session throughout the year.
The Board of the Corporation has three standing committees: the Governance and Nominating Committee; the Audit Committee; and the Compensation Committee. The Board of the Bank also has three standing committees: the Loan Committee; the Asset Liability Committee; and the Risk Committee. The Corporation’s Board has adopted a formal written charter for each of its committees. A current copy of the charters may be viewed on the Corporation’s website atwww.FNBLI.comthrough the “Investor Relations” page using the “Corporate Governance” documents link.
Governance and Nominating Committee
The Corporation’s Governance and Nominating Committee consists of independent directors as defined in the Nasdaq Rules. The members of the Governance and Nominating Committee are Paul T. Canarick, Stephen V. Murphy, Peter Quick, Denise Strain, Milbrey Rennie Taylor and Walter C. Teagle III. The Committee met four times during 2022.
The Governance and Nominating Committee is currently responsible for, among other things: (1) maintaining the director and senior management succession plans; (2) identifying individuals qualified to become Board members and recommending to the Board the director nominees for the next annual meeting of stockholders; (3) recommending to the Board written corporate governance guidelines and monitoring compliance with these guidelines; (4) leading the Board in an annual self-assessment and reporting to the Board on its own self-assessment and the self-assessments performed by the other Board committees; (5) recommending to the Board director candidates for each committee; (6) establishing the director skill sets matrix to evaluate the collective skills of the existing Board members and to identify skills that may be sought when filling vacancies; and (7) reviewing and assessing the Corporation’s ESG guidelines and recommending any proposed changes to the Board for approval.
Although the Corporation has a long history of being able to attract and maintain a cohesive Board with the variety of skills necessary to oversee the affairs of the Corporation, the Governance and Nominating Committee will consider director candidates recommended by stockholders. Submission of candidates may be made in writing at any time. However, to be considered by the Governance and Nominating Committee for nomination at the 2024 Annual Meeting, such submissions should be made no later than December 12, 2023 to the Chair of the Governance and Nominating Committee at the Corporation’s address set forth in this proxy statement. In addition, nominations for the election of directors may be made by any stockholder entitled to vote for the election of directors provided that such nominations are made in accordance with the provisions of the Corporation’s bylaws establishing the information and notice requirements for such nominations.
In addition to interviews, the Governance and Nominating Committee may evaluate potential nominees by reviewing resumes, checking business and/or personal references, and performing background checks as deemed appropriate. The Corporation has not paid a fee to any third party or parties to assist in identifying or evaluating potential nominees.
All of the Class I nominees approved by the Governance and Nominating Committee for inclusion on the Corporation’s proxy card for the Annual Meeting of Stockholders to be held April 18, 2023 are directors standing for re-election, except for Mr. Haye who was appointed by the Board effective November 15, 2022 and Mr. Cooper who is nominated by the Board for election by stockholders as a Class I director at the Annual Meeting. Mr. Haye’s introduction to the Board was based on a referral from a member of executive management who is not a Board member. Mr. Cooper’s introduction to the Board was based on a December 8, 2022 notice from Driver Opportunity Partners I LP regarding its intent to nominate Mr. Cooper and another individual to the Corporation’s Board at the Corporation’s 2023 Annual Meeting.
Audit Committee
The members of the Audit Committee are Alexander L. Cover, John J. Desmond, Peter Quick, Denise Strain, Walter C. Teagle III and Eric J. Tveter. The Committee met six times during 2022.
The Board has determined that all members of the Audit Committee are independent. Independence is defined in SEC Rule 10A-3 and the Nasdaq Rules. The Board has also determined that Alexander L. Cover and John J. Desmond each qualify as an “audit committee financial expert” as that term is defined in Item 407 of Regulation S-K of the SEC. The Board determined that all members of the Audit Committee have banking or related financial management expertise.
The responsibilities of the Audit Committee are described under the heading “Audit Committee Report” in this proxy statement.
Compensation Committee
All the members of the Corporation’s Compensation Committee are independent directors as defined in the Nasdaq Rules. The members of the Compensation Committee are John J. Desmond, Louisa M. Ives, Stephen V. Murphy, Peter Quick, Milbrey Rennie Taylor, Walter C. Teagle III and Eric J. Tveter. The Committee met five times during 2022.
The Compensation Committee is to assist the Board in fulfilling its oversight responsibilities by reviewing and evaluating the Corporation’s compensation practices ensuring that appropriate policies, procedures and systems are in place to identify, measure, and control related risks, including strategic, reputation and operational risk. The Committee seeks to identify those employees, including but not limited to the CEO and other executive officers, who could potentially expose the Corporation to material amounts of such risk and arrive at compensation for these employees and non-management directors that is appropriate and competitive and does not expose the Corporation to unacceptable risk.
The Compensation Committee is responsible for: (1) implementing and maintaining guiding principles, compensation policies and compensation plans for the CEO, other executive officers and non-management directors, all as set forth in the Corporation’s proxy statement for its annual meeting of stockholders, and making recommendations to the Board taking into account market competitive data; (2) recommending to the Board approval of employment agreements for the CEO and other executive officers; (3) evaluating the performance of the CEO against established goals and objectives and approving for Board ratification the base salary level for the CEO subject to any existing employment agreement; (4) reviewing the CEO’s performance evaluations of the other executive officers of the Corporation and approving for Board ratification the base salary level of each such officer subject to any existing employment agreements; (5) approving for Board ratification cash incentives and bonuses to be paid to the CEO and other executive officers pursuant to the Corporation’s incentive compensation plans or otherwise; (6) setting corporate goals, objectives and compensation plans used to determine cash incentives and bonuses paid to the CEO and other executive officers and equity compensation awarded to the CEO, other executive officers and non-management directors; (7) approving for Board ratification awards of equity compensation to the CEO, other executive officers and non-management directors pursuant to the Corporation’s equity compensation plans or otherwise; (8) recommending to the Board compensation proposals such as the compensation to be paid to the Corporation’s NEOs, say-on-pay, say-when-on-pay or equity incentive plans to be included in the Corporation’s annual proxy statement; (9) reviewing the overall annual salary budget for the Bank’s entire employee population; (10) conducting, or causing to be conducted, at its discretion, a periodic review of the Corporation’s pension, 401(k), and health and welfare plans; (11) reviewing and approving the compensation discussion and analysis included in the Corporation’s annual proxy statement and preparing or causing to be prepared the Compensation Committee Report to be included therein; (12) reviewing executive management’s determination of compensation of non-executive officers of the Corporation including the total amount of incentive compensation to be paid to such officers; (13) periodically reviewing the incentive compensation plans for senior vice presidents and other employee categories below the level of executive officer; and (14) considering the results of the most recent non-binding, stockholder advisory vote on executive compensation and, if deemed necessary, recommending to the Board changes in compensation policies, practices and decisions.
The Compensation Committee administers the Corporation’s equity incentive plan, including selecting directors and officers to whom awards are to be made and determining the timing, duration, amount, type and terms of each award. Members of the Compensation Committee as well as all other non-employee directors of the Corporation have been eligible for awards of stock-based compensation in the past and it is currently anticipated that they will be eligible for future awards.
The Compensation Committee considers the most recent stockholder say-on-pay advisory vote in reviewing the Corporation’s executive compensation policies, practices and decisions. The Compensation Committee concluded that no significant revisions were necessary to our executive compensation program as a result of the most recent say-on-pay advisory vote.
The Committee’s use of an independent compensation consultant in designing a compensation program is described in Compensation Discussion and Analysis in this proxy statement under the heading “Role of Independent Compensation Consultant.”
Compensation Committee Interlocks and Insider Participation. No member of the Compensation Committee: (1) was an officer or employee of the Corporation or the Bank; (2) was formerly an officer of the Corporation or the Bank; or (3) had any relationship requiring disclosure by the Corporation under the SEC’s rules governing disclosure of related party transactions. No executive officer of the Corporation served as a director or member of a compensation committee of another entity, one of whose executive officers served as a member of the Corporation’s Board or Compensation Committee.
Bank Committees: Loan Committee, Asset Liability Committee and Risk Committee
The Loan Committee is responsible for providing oversight with respect to the Bank’s lending activities. The Asset Liability Committee is responsible for providing oversight with respect to the Bank’s achievement of its overall objective of optimizing returns consistent with prudent risk management regarding assets, liabilities, equity and off-balance sheet activities. The Risk Committee assists the Board in fulfilling its oversight responsibilities by reviewing and evaluating the Bank’s risk management practices to ensure that appropriate policies, procedures and systems are in place to identify, measure and control related risks, including compliance, cybersecurity and technology functions.
BOARD MEMBER ATTENDANCE AT ANNUAL MEETINGS
The Board strongly encourages each of its members to attend the Annual Meeting of Stockholders. In this regard, the Board sets the date for the Annual Meeting of Stockholders to coincide with its April Board meeting. All directors attended the prior year’s Annual Meeting of Stockholders by conference call, which was held on April 19, 2022.
SECURITY HOLDER COMMUNICATIONS TO THE BOARD OF DIRECTORS
The Corporation’s Board does not have a formal process for security holders to send communications to the Board. The Board believes that a formal process is unnecessary because the Corporation is relatively small and both the Chairman of the Board and the CEO, who is also a director, are easily accessible by telephone and mail.
Cash Compensation
The Chairman of the Board of the Corporation and the Bank receives an annual retainer for service on both boards. Non-employee directors of the Corporation receive an annual retainer for service on both boards for attending regularly scheduled board meetings and a per meeting fee for special Board meetings. Annual retainers and per meeting fees for service on both boards in 2022 are shown in the following table.
Board Member | Annual Retainer | Special Meeting Fees |
Chairman | $113,500 | None |
Non-employee Directors | $37,000 | $1,250 |
Non-employee Directors | — | $500 for loan approval meetings |
Non-employee directors of the Corporation and the Bank receive annual retainers for Board committee service as shown in the following table.
Committee | Committee Chair | Committee Member |
Audit Committee | $17,500 | $7,500 |
Compensation Committee | $11,000 | $5,000 |
Governance and Nominating Committee | $11,000 | $5,000 |
Asset Liability Committee | $11,000 | $5,000 |
Loan Committee | $11,000 | $4,000 |
Risk Committee | $11,000 | $5,000 |
There are no per meeting fees for committee meetings except Loan Committee members are paid $500 for each Management Loan Committee meeting attended.
The Chairman does not receive per meeting fees or committee retainers. The CEO does not receive retainers or per meeting fees for Board or Board committee service.
Stock-based Compensation
Non-employee directors of the Corporation receive compensation in the form of equity grants. Equity compensation for directors consists of restricted stock units (“RSUs”) or stock awards. Directors are expected to continue to receive compensation in the form of equity awards.
Stock awards granted to non-employee directors in 2022 are Class II directors standing for re-election.
Audit Committee
The members of the Audit Committee are Alexander L. Cover, John J. Desmond, Peter Quick, Denise Strain, Walter C. Teagle III and Eric J. Tveter. The Committee met seven times during 2021.
The Board has determined that all members of the Audit Committee are independent. Independence is defined in SEC Rule 10A-3 and the Nasdaq Rules. The Board has also determined that Alexander L. Cover and John J. Desmond each qualify as an “audit committee financial expert” as that term is defined in Item 407 of Regulation S-K of the SEC. The Board determined that all members of the Audit Committee have banking or related financial management expertise.
The responsibilities of the Audit Committee are described under the heading “Audit Committee Report” in this proxy statement.
Compensation Committee
All the members of the Corporation’s Compensation Committee are independent directors as defined in the Nasdaq Rules. The members of the Compensation Committee are John J. Desmond, Louisa M. Ives, Stephen V. Murphy, Peter Quick, Milbrey Rennie Taylor, Walter C. Teagle III and Eric J. Tveter. The Committee met ten times during 2021.
The Compensation Committee is to assist the Board in fulfilling its oversight responsibilities by reviewing and evaluating the Corporation’s compensation practices ensuring that appropriate policies, procedures and systems are in place to identify, measure, and control related risks, including strategic, reputation and operational risk. The Committee seeks to identify those employees, including but not limited to the CEO and other executive officers, who could potentially expose the Corporation to material amounts of such risk and arrive at compensation for these employees and non-management directors that is appropriate and competitive and does not expose the Corporation to unacceptable risk.
The Compensation Committee is responsible for: (1) implementing and maintaining guiding principles, compensation policies and compensation plans for the CEO, other executive officers and non-management directors, all as set forth in the Corporation’s Proxy Statement for its annual meeting of stockholders, and making recommendations to the Board taking into account market competitive data; (2) recommending to the Board approval of employment agreements for the CEO and other executive officers; (3) evaluating the performance of the CEO against established goals and objectives and approving for Board ratification the base salary level for the CEO subject to any existing employment agreement; (4) reviewing the CEO’s performance evaluations of the other executive officers of the Corporation and approving for Board ratification the base salary level of each such officer subject to any existing employment agreements; (5) approving for Board ratification cash incentives and bonuses to be paid to the CEO and other executive officers pursuant to the Corporation’s incentive compensation plans or otherwise; (6) setting corporate goals, objectives and compensation plans used to determine cash incentives and bonuses paid to the CEO and other executive officers and equity compensation awarded to the CEO, other executive officers and non-management directors; (7) approving for Board ratification awards of equity compensation to the CEO, other executive officers and non-management directors pursuant to the Corporation’s equity compensation plans or otherwise; (8) recommending to the Board compensation proposals such as the compensation to be paid to the Corporation’s NEOs, say-on-pay, say-when-on-pay or equity incentive plans to be included in the Corporation’s annual proxy statement; (9) reviewing the overall annual salary budget for the Bank’s entire employee population; (10) conducting, or causing to be conducted, at its discretion, a periodic review of the Corporation’s pension, 401(k), and health and welfare plans; (11) reviewing and approving the compensation discussion and analysis included in the Corporation’s annual proxy statement and preparing or causing to be prepared the Compensation Committee Report to be included therein; (12) reviewing executive management’s determination of compensation of non-executive officers of the Corporation including the total amount of incentive compensation to be paid to such officers; (13) periodically reviewing the incentive compensation plans for senior vice presidents and other employee categories below the level of executive officer; and (14) considering
9
the results of the most recent non-binding, stockholder advisory vote on executive compensation and, if deemed necessary, recommending to the Board changes in compensation policies, practices and decisions.
The Compensation Committee administers the Corporation’s equity incentive plan, including selecting directors and officers to whom awards are to be made and determining the timing, duration, amount, type and terms of each award. Members of the Compensation Committee as well as all other non-employee directors of the Corporation have been eligible for awards of stock-based compensation in the past and it is currently anticipated that they will be eligible for future awards.
The Compensation Committee considers the most recent stockholder say-on-pay advisory vote in reviewing the Corporation’s executive compensation policies, practices and decisions. The Compensation Committee concluded that no significant revisions were necessary to our executive compensation program as a result of the most recent say-on-pay advisory vote.
The Committee’s use of an independent compensation consultant in designing a compensation program is described in Compensation Discussion and Analysis in this proxy statement under the heading “Role of Independent Compensation Consultant.”
Compensation Committee Interlocks and Insider Participation. No member of the Compensation Committee: (1) was an officer or employee of the Corporation or the Bank; (2) was formerly an officer of the Corporation or the Bank; or (3) had any relationship requiring disclosure by the Corporation under the SEC’s rules governing disclosure of related party transactions. No executive officer of the Corporation served as a director or member of a compensation committee of another entity, one of whose executive officers served as a member of the Corporation’s Board or Compensation Committee.
Bank Committees: Loan Committee, Asset Liability Committee and Risk Committee
The Loan Committee is responsible for providing oversight with respect to the Bank’s lending activities. The Asset Liability Committee is responsible for providing oversight with respect to the Bank’s achievement of its overall objective of optimizing returns consistent with prudent risk management regarding assets, liabilities, equity and off-balance sheet activities. The Risk Committee assists the Board in fulfilling its oversight responsibilities by reviewing and evaluating the Bank’s risk management practices to ensure that appropriate policies, procedures and systems are in place to identify, measure and control related risks, including compliance, cybersecurity and technology functions.
BOARD MEMBER ATTENDANCE AT ANNUAL MEETINGS
The Board strongly encourages each of its members to attend the Annual Meeting of Stockholders. In this regard, the Board sets the date for the Annual Meeting of Stockholders to coincide with its April Board meeting. All directors attended the prior year’s Annual Meeting of Stockholders by conference call, which was held on April 20, 2021.
SECURITY HOLDER COMMUNICATIONS TO THE BOARD OF DIRECTORS
The Corporation’s Board does not have a formal process for security holders to send communications to the Board. The Board believes that a formal process is unnecessary because the Corporation is relatively small and both the Chairman of the Board and the CEO, who is also a director, are easily accessible by telephone and mail.
Cash Compensation
The Chairman of the Board of the Corporation and the Bank receives an annual retainer for service on both boards. Non-employee directors of the Corporation receive an annual retainer for service on both boards for attending regularly scheduled board meetings and a per meeting fee for special Board meetings. Annual retainers and per meeting fees for service on both boards in 2021 are shown in the following table.
|
|
|
|
|
|
Board Member | Annual Retainer | Per Meeting Fee |
|
|
|
Chairman | $113,500 | None |
Non-employee Directors | $35,000 | $1,250 |
Non-employee directors of the Corporation and the Bank receive annual retainers, paid by the Corporation, for Board committee service as shown in the following table.
|
|
|
|
|
|
Committee | Committee Chair | Committee Member |
|
|
|
Audit Committee | $17,500 | $7,500 |
Compensation Committee | $11,000 | $5,000 |
Governance and Nominating Committee | $11,000 | $5,000 |
Asset Liability Committee | $11,000 | $5,000 |
Loan Committee | $11,000 | $4,000 |
Risk Committee | $11,000 | $5,000 |
10
There are no per meeting fees for standing committee meetings, except Loan Committee members are paid $500 for each Management Loan Committee meeting attended, Directors are paid $500 for Special Meetings for loan approvals and Ad-Hoc Committee Chairs are paid $1,000 for each meeting attended and Ad-Hoc Committee members are paid $500 for each meeting attended.
The Chairman does not receive per meeting fees or committee retainers. The CEO does not receive retainers or per meeting fees for Board or Board committee service.
Stock-based Compensation
Non-employee directors of the Corporation receive compensation in the form of equity grants. Equity compensation for directors consists of restricted stock units (“RSUs”) or stock awards. Directors are expected to continue to receive compensation in the form of equity awards.
Stock awards granted to non-employee directors in 2021 were granted under the 2021 Equity Incentive Plan (“2021 Plan”) after the Annual Meeting of Stockholders and vest on April 18, 2023. Stock awards granted to non-employee directors in 2021 were granted under the 2021 Plan after the Annual Meeting of Stockholders and vested on April 19, 2022. Stock awards granted to non-employee directors in 2020 were granted under the 2014 Equity Incentive Plan (“2014 Plan”), vested immediately and were distributed after the 2020 Annual Meeting of Stockholders. All awards granted to directors under the 2014 Plan immediately vested upon retirement, an involuntary termination following a change in control, total and permanent disability or death. Awards granted to directors under the 2021 Plan immediately vest upon an involuntary termination following a change in control, total and permanent disability or death.
Retirement Plan
On June 18, 1991, the Board of the Bank adopted The First National Bank of Long Island Retirement Plan for Directors ("Retirement Plan"). Effective December 31, 2000, benefits earned to date under the Retirement Plan were frozen and the ability of directors to earn additional benefits was discontinued. Upon retirement after attaining the age of sixty (60), each of the current directors who was a director prior to 2001 will receive a credit ("Credit Percentage") of ten percent (10%) multiplied by the number of years of service on the Board through December 31, 2000, not to exceed one hundred percent (100%). The annual benefit ("Annual Benefit") payable under the Retirement Plan is equal to the monthly Board of Directors’ attendance fee in effect as of December 31, 2000, which was $1,000, multiplied by twelve (12) and then multiplied by the Credit Percentage. The Annual Benefit is payable in quarterly installments for a period of seven (7) years from the date of retirement ("Payment Period"). In the event of the death of a director or a retired director, the surviving spouse of such director is entitled to receive an annual payment equal to seventy-five percent (75%) of the Annual Benefit, calculated as set forth above, and payable over the remainder of the applicable Payment Period.
The following table sets forth information concerning the compensation of directors for 2022.
Director Compensation
Name | Fees Earned or Paid in Cash | Stock Awards(1) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(2) | Total | Aggregate Option Awards Outstanding At Year End | Aggregate Stock Awards Outstanding |
Paul T. Canarick | 54,750 | 37,000 | 1,908 | 93,658 | — | 2,035 |
Alexander L. Cover | 60,750 | 37,000 | — | 97,750 | — | 2,035 |
John J. Desmond | 65,750 | 37,000 | — | 102,750 | — | 2,035 |
Edward J. Haye(3) | 8,667 | 15,417 | — | 24,084 | — | 871 |
Louisa M. Ives | 55,750 | 37,000 | — | 92,750 | — | 2,035 |
Stephen V. Murphy | 66,000 | 37,000 | — | 103,000 | — | 2,035 |
Peter Quick | 76,750 | 37,000 | — | 113,750 | — | 2,035 |
Denise Strain | 64,370 | 37,000 | — | 101,370 | — | 2,035 |
Milbrey Rennie Taylor | 61,750 | 37,000 | — | 98,750 | — | 2,035 |
Walter C. Teagle III | 113,500 | 70,000 | 1,335 | 184,835 | — | 3,850 |
Eric J. Tveter | 64,250 | 37,000 | — | 101,250 | — | 2,035 |
(1) | Stock awards were granted in 2022 and vest on April
Set forth below is the business experience during the past five years and other information as to all executive officers of the Corporation and the Bank as of the date of this proxy statement.
Mr. Becker joined the Board in January 2020 upon being named President and Chief Executive Officer of the Corporation and the Bank. Mr. Becker has been employed by the Bank since 2011 most recently serving as Executive Vice President and Chief Risk Officer of the Corporation and the Bank and Corporate Secretary of the Corporation. Mr. Becker has been responsible for the Bank’s enterprise risk management program including oversight of strategic planning, technology, loan and deposit operations, compliance, administration of internal audit, facilities and certain credit administration functions. Mr. McConie joined the Bank in 2015 as Senior Vice President and Chief Investment Officer. Effective January 1, 2020, Mr. McConie was promoted to Executive Vice President and Chief Financial Officer of the Corporation and the Bank. Prior to joining the Bank, Mr. McConie served as Executive Vice President and Chief Financial Officer of Community National Bank from 2007 to 2015. Mr. McConie began his career at KPMG LLP in their Financial Services Group and is a Certified Public Accountant. Mr. Hilton joined the Bank in June 2017 as Senior Vice President and Commercial Banking Division Executive. On January 1, 2018, Mr. Hilton was promoted to Executive Vice President of the Corporation and the Bank. Prior to joining the Bank, Mr. Hilton served as Executive Vice President & Chief Credit Officer of Suffolk County National Bank until its acquisition by People’s United Bank in April 2017. Mr. Hilton joined People’s United Bank and served as Senior Credit Officer until May 2017. Prior to his employment at Suffolk County National Bank, Mr. Hilton served as Executive Vice President & Chief Credit Officer of Empire National Bank. Ms. Verneuille joined the Bank in 2019 as Executive Vice President and Chief Risk Officer of the Corporation and the Bank. Prior to joining the Bank, Ms. Verneuille served as Executive Vice President and Chief Financial Officer of Empire National Bank. Ms. Verneuille previously served as Director, Executive Vice President and Chief Financial Officer of a national bank in organization after serving fifteen years at Bridgehampton National Bank, ultimately as Executive Vice President and Chief Financial Officer. Ms. Verneuille obtained her public accounting experience at KPMG LLP and is a Certified Public Accountant. Ms. Pheffer joined the Bank in 2020 as Executive Vice President and Chief Information Officer. Prior to joining the Bank, Ms. Pheffer served six years as Executive Vice President and Chief Technology Officer of Empire National Bank. Ms. Pheffer previously served as a Senior Consultant and Director of Operations for a bank consulting firm headquartered on Long Island from 2007 to 2014. Prior to that, Ms. Pheffer served twenty-five years at another Long Island-based community bank where she was promoted to Senior Vice President and Chief Information Officer. Mr. Spolarich joined the Bank in 2020 as Senior Vice President and Senior Credit Officer. Effective December 1, 2020, Mr. Spolarich was promoted to Executive Vice President and Chief Credit Officer. Prior to joining the Bank in 2020, Mr. Spolarich served as Senior Credit Officer for the New York City and Long Island districts of People's United Bank and Chief Credit Officer for Empire National Bank. Mr. Spolarich was previously employed with the First National Bank of Long Island. Mr. Ansari joined the Bank in 2014 as Senior Vice President and Chief Compliance Officer. Effective January 1, 2022, Mr. Ansari was promoted to Executive Vice President and was named Internal Counsel. Prior to joining the Bank, Mr. Ansari served as Associate General Counsel and Compliance Officer of Bethpage Federal Credit Union from 2007 to 2014 and in various management capacities at two Long Island/New York City banks from 1999 to 2007. Mr. Ansari is a licensed attorney admitted to the New York State Bar (2009) and United States Supreme Court Bar (2015). NON-BINDING, ADVISORY VOTE TO APPROVE THE COMPENSATION PAID TO THE CORPORATION’S NAMED EXECUTIVE OFFICERS The compensation paid to our NEOs is disclosed in this proxy statement in the sections entitled “Compensation Discussion and Analysis,” “Compensation of Executive Officers,” “Compensation Pursuant to Plans,” “Executive Compensation and Financial Performance” and “Employment Agreements.” We believe that our compensation policies, practices and decisions are focused on pay-for-performance principles and are strongly aligned with the long-term best interests of our stockholders. Compensation of our NEOs is designed to enable us to attract and retain talented and experienced senior executives to lead the Corporation successfully in a competitive environment. Stockholders are being asked to cast a non-binding, advisory vote on the following resolution: RESOLVED, that the compensation paid to the Corporation’s NEOs as disclosed in its proxy statement for the April 18, 2023 Annual Meeting of Stockholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED. The affirmative vote of the holders of a majority of shares represented online at the virtual Annual Meeting or by proxy and voting on this item will be required for approval. Your vote on this Proposal 2 is advisory, and therefore not binding on the Corporation, the Compensation Committee or the Board. The vote will not be construed to overrule any decision by the Corporation, the Compensation Committee or the Board; to create or imply any change to the fiduciary duties of the Corporation, the Compensation Committee or the Board; or to create or imply any additional fiduciary duties for the Corporation, the Compensation Committee or the Board. However, our Board and our Compensation Committee value the opinions of our stockholders and to the extent there is a significant vote against the compensation paid to our NEOs as disclosed in this proxy statement, we will consider our stockholders’ concerns and the Board and the Compensation Committee will evaluate whether any actions are necessary to address those concerns. The Board of Directors recommends a vote FOR the proposal to approve the compensation paid to the Corporation’s named executive officers. NON-BINDING, ADVISORY VOTE REGARDING THE FREQUENCY OF VOTING ON THE COMPENSATION PAID TO THE CORPORATION’S NAMED EXECUTIVE OFFICERS As required by Section 14A of the Exchange Act, the Company is also providing stockholders with a non-binding, advisory vote on the frequency with which the Corporation’s stockholders shall have the advisory say-on-pay vote on compensation paid to our named executive officers provided for in Proposal 2. We currently hold the say-on-pay vote every year. The Corporation is presenting this Proposal 3, which gives you as a stockholder the opportunity to inform the Corporation as to how often you wish us to include a proposal, similar to Proposal 2 above, in our proxy statement. In particular, we are asking whether the advisory vote should occur every year, every two years or every three years. The Corporation asks that you support a frequency period of every year for future non-binding, advisory stockholder votes on the compensation paid to our named executive officers. Stockholders are being asked to vote on the following resolution: RESOLVED, that the stockholders of the Corporation determine, on an advisory basis, that the frequency with which the stockholders of the Corporation shall have an advisory vote on the compensation paid to our named executive officers set forth in the Corporation’s proxy statement is: Choice 1 – every year; Choice 2 – every two years; Choice 3 – every three years; or Choice 4 – abstain from voting. If there is no designation on any proxy as to how the shares represented should be voted, the proxy will be voted for Choice 1 – every year. The Board continues to believe that an annual stockholder vote on the compensation paid to our named executive officers represents a best practice in corporate governance and will provide the Board with current information on stockholder sentiment about our executive compensation program and enable the Board to respond timely, when deemed appropriate, to stockholder concerns about the program. Our stockholders voted on a similar proposal in 2017, with a majority voting to hold the say-on-pay voting every year. As with your vote on Proposal 2, your vote on this Proposal 3 is advisory, and therefore not binding on the Corporation, the Compensation Committee or the Board. The vote will not be construed to overrule any decision by the Corporation or the Board; to create or imply any change to the fiduciary duties of the Corporation or the Board; or to create or imply any additional fiduciary duties for the Corporation or the Board. However, our Board and our Compensation Committee value the opinions of our stockholders and to the extent there is any significant vote in favor of one frequency over the other options, we will consider our stockholders’ sentiment and the Board will evaluate any appropriate next steps. The Board of Directors recommends a vote FOR the “every year” option.
We have reviewed and discussed with management the Compensation Discussion and Analysis included herein and provided pursuant to Item 402(b) of Regulation S-K.
Based on this review and discussion, we recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. The Compensation Committee:
|
The preceding report shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 (“1933 Act”) or the 1934 Act, except to the extent the Corporation specifically incorporates this information by reference, and shall not otherwise be deemed filed under the 1933 Act or the 1934 Act.
COMPENSATION DISCUSSION AND ANALYSIS
The Corporation’s NEOs for 2022 are as follows:
|
| |||||||||||||||||||||
|
| |||||||||||||||||||||
|
| |||||||||||||||||||||
|
| |||||||||||||||||||||
| Chief Risk Officer of the Corporation and | |||||||||||||||||||||
Michael J. Spolarich | Chief Credit Officer of the Bank |
Key financial results and performance metrics for 2022 and 2021, including those used in determining incentive compensation, are as follows:
Results and Performance Metrics | 2022 | 2021 |
Net Income | $46,932,000 | $43,089,000 |
Diluted Earnings per Share | $2.04 | $1.81 |
Return on Average Assets (“ROA”) | 1.11% | 1.04% |
Return on Average Equity (“ROE”) | 12.13% | 10.34% |
The following is a discussion of the compensation awarded to, earned by or paid to the NEOs. The discussion explains all the material elements of the Corporation’s compensation of the NEOs. It should be read in conjunction with the other executive compensation disclosures that appear elsewhere in this proxy statement.
Guiding Principles
In designing and maintaining a compensation program for the Corporation’s NEOs, other executive officers and employees, the Compensation Committee adheres to the following guiding principles:
|
|
|
|
|
|
Results and Metrics | 2021 | 2020 |
Net Income | $43,089,000 | $41,203,000 |
Diluted Earnings per Share | $1.81 | $1.72 |
Return on Average Assets (“ROA”) | 1.04% | 1.00% |
Return on Average Equity (“ROE”) | 10.34% | 10.47% |
The following is a discussion of the compensation awarded to, earned by or paid to the NEOs. The discussion explains all the material elements of the Corporation’s compensation of the NEOs. It should be read in conjunction with the other executive compensation disclosures that appear elsewhere in this proxy statement.
Guiding Principles
In designing and maintaining a compensation program for the Corporation’s NEOs, other executive officers and employees, the Compensation Committee adheres to the following guiding principles:
(1) | The compensation program should be principles-based, employ best practices in executive compensation and consider all relevant regulatory guidance regarding sound incentive compensation policies. |
(2) | The compensation program should be designed and supervised by the Compensation Committee with, as needed, the assistance of independent compensation consultants, legal counsel and other advisors who have significant experience in risk management, compensation practices and legal matters in the financial services industry. |
(3) | The Compensation Committee should consist entirely of independent directors and operate under a charter adopted by the Board that clearly defines its duties and responsibilities. Significant approvals by the Compensation Committee regarding the provisions of the executive compensation program and awards thereunder should be ratified by the full Board. |
(4) | A significant portion of executive compensation awarded under the program should be directly tied to corporate and peer group performance and thereby closely aligned with the interests of stockholders. The corporate performance levels necessary to earn threshold, target and maximum cash incentive and equity awards should be determined by the Compensation Committee and should not encourage inappropriate risks that could lead to material financial loss to the Bank. |
(5) | The compensation program should enable the Corporation to attract and retain highly skilled professionals in each necessary discipline (i.e., executive, financial, lending, operations, risk management). |
(6) | Compensation paid should be appropriately balanced between short and long-term components. The short-term components should primarily consist of base salary and cash incentive compensation and the long-term components should be equity awards that vest over time as well as retirement benefits. |
(7) | The competitiveness of total direct compensation, which consists of base salary, cash incentive and equity awards, should be tested regularly by a comparison to: (1) a group of peer banks selected by the Compensation Committee that are similar in size and scope to the Corporation; and (2) amounts published in compensation surveys for the banking industry conducted by nationally recognized independent compensation consulting firms. |
(8) | The compensation program should achieve internal equity among the Corporation’s executive officers. |
(9) | Retirement benefits should be market competitive and evaluated based on the percentage of the executive’s income replaced in retirement. |
(10) |
|
14
| Payments upon a change in control or termination should be market competitive, reasonable in amount and designed to ensure that the executive officers of the Bank are not significantly harmed nor unduly enriched and are reasonable with respect to the consummation of a transaction, such as a sale or merger of the Bank, that may be in the best interests of the Corporation’s stockholders. |
(11) | The Compensation Committee should identify those employees, whether they are executive officers or otherwise, who could potentially expose the Corporation to material amounts of risk. The compensation of such employees should be designed to discourage imprudent risk taking and contain maximum incentive amounts that do not represent windfalls. |
(12) |
|
|
|
| Clawbacks should be utilized within the compensation program in accordance with our clawback policy and applicable laws and regulations. |
(13) | Retention of vested or exercised equity awards should be required until stock ownership guidelines are met. |
(14) | Employees, whether they are executive officers or otherwise, should be prohibited from hedging the value of equity compensation that vests over time. |
(15) | Performance goals should be established by the Compensation Committee and ratified by the full Board. |
(16) | Achievement of performance goals should be determined by the Compensation Committee prior to the payment of awards. |
Objectives of the Executive Compensation Program
The Corporation’s executive compensation program is designed to enable the Corporation to attract and retain talented executive officers necessary to safely and successfully operate and grow the Bank. The executive compensation program promotes sound risk management and long-term value creation for our stockholders.
What the Executive Compensation Program is Designed to Reward
Certain elements of the executive compensation program are intended to reward current performance. By offering long-term equity compensation, the executive compensation program is also designed to reward executive officers who help maximize long-term financial performance and earnings growth of the Corporation. The short-term and long-term incentives and the metrics used to determine the amount of incentive earned are intended to align the interests of management with the interests of stockholders.
Role of Independent Compensation Consultant
In determining an appropriate level of compensation for the CEO, other executive officers and the Board, the Compensation Committee periodically engages an independent compensation consulting firm to gather and help analyze the information necessary to make such determinations. In 2021, the Compensation Committee engaged Pearl Meyer & Partners LLC (“Pearl Meyer”), an independent national compensation consulting firm, to conduct a review of the compensation of the Company’s CEO, other executive officers and the Board. The objective of the review was to provide an assessment of the competitiveness and effectiveness of the Corporation’s compensation programs relative to peer banks.
In performing their 2021 review, Pearl Meyer worked with the Compensation Committee to develop a custom peer group. The peer banks were similar in size and scope to the Bank, with total assets averaging approximately $5.0 billion. This average compared to total assets for the Bank of approximately $4.1 billion at year-end 2021. The peer group consists of twenty-three publicly-held bank holding companies located in the Bank’s general geographic area and included: ACNB Corporation, Arrow Financial Corporation, BCB Bancorp, Inc., Cambridge Bancorp, C&F Financial Corporation, Chemung Financial Corporation, CNB Financial Corporation, ConnectOne Bancorp, Inc., Enterprise Bancorp, Inc., Financial Institutions, Inc., Flushing Financial Corporation, HarborOne Bancorp, Inc., Kearny Financial Corp., Northfield Bancorp, Inc., Orrstown Financial Services, Inc., Peapack-Gladstone Financial Corporation, Primis Financial Corp., Republic First Bancorp, Inc., Tompkins Financial Corporation, TrustCo Bank Corp NY, Univest Financial Corporation, Washington Trust Bancorp, Inc. and Western New England Bancorp, Inc. In addition to gathering and analyzing compensation data for the peer group, Pearl Meyer also gathered and analyzed peer compensation data from published industry surveys and other proprietary data sources. In performing their reviews, Pearl Meyer assessed total remuneration and the individual elements of total remuneration including base salary, long-term incentives, annual cash incentive compensation, annual equity awards, retirement benefits and perquisites. Based on their reviews, Pearl Meyer provided the Compensation Committee with a comparison of the compensation of the CEO and other executive officers to the market 25th, 50th, and 75th percentiles. Pearl Meyer also assessed the elements of Board compensation both individually and in the aggregate, including annual retainers, meeting-based fees and fees for chair roles and special meetings.
In addition to the services described above, Pearl Meyer was also engaged in 2021 to perform a review of the long-term incentive plan design of the Corporation’s executive incentive plan.
The Compensation Committee received a letter from Pearl Meyer regarding its independence under the six factors to be considered for such purposes under Nasdaq Rules, assessed the independence of Pearl Meyer pursuant to such rules and determined that Pearl Meyer is an independent and conflict-free advisor to the Corporation.
Elements of Executive Compensation
The executive compensation program consists of four basic components: (1) base salary; (2) annual cash incentive compensation; (3) equity awards; and (4) other noncash compensation, consisting primarily of retirement benefits and reasonable perquisites.
Objectives of the Executive Compensation Program
The Corporation’s executive compensation program is designed to enable the Corporation to attract and retain talented executive officers necessary to safely and successfully operate and grow the Bank. The executive compensation program promotes sound risk management and long-term value creation for our stockholders.
What the Executive Compensation Program is Designed to Reward
Certain elements of the executive compensation program are intended to reward current performance. By offering long-term equity compensation, the executive compensation program is also designed to reward executive officers who help maximize long-term financial performance and earnings growth of the Corporation. The short-term and long-term incentives and the metrics used to determine the amount of incentive earned are intended to align the interests of management with the interests of stockholders.
Role of Independent Compensation Consultant
In determining an appropriate level of compensation for the CEO, other executive officers and the Board, the Compensation Committee periodically engages an independent compensation consulting firm to gather and help analyze the information necessary to make such determinations. In 2021, the Compensation Committee engaged Pearl Meyer & Partners LLC (“Pearl Meyer”), an independent national compensation consulting firm, to conduct a review of the compensation of the Company’s CEO, other executive officers and the Board. The objective of the review was to provide an assessment of the competitiveness and effectiveness of the Corporation’s compensation programs relative to peer banks.
In performing their 2021 review, Pearl Meyer worked with the Compensation Committee to develop a custom peer group. The peer banks were similar in size and scope to the Bank, with total assets averaging approximately $5.0 billion. This average compared to total assets for the Bank of approximately $4.1 billion at year-end 2021. The peer group consists of twenty-three publicly-held bank holding companies located in the Bank’s general geographic area and included: ACNB Corporation, Arrow Financial Corporation, BCB Bancorp, Inc., Cambridge Bancorp, C&F Financial Corporation, Chemung Financial Corporation, CNB Financial Corporation, ConnectOne Bancorp, Inc., Enterprise Bancorp, Inc., Financial Institutions, Inc., Flushing Financial Corporation, HarborOne Bancorp, Inc., Kearny Financial Corp., Northfield Bancorp, Inc., Orrstown Financial Services, Inc., Peapack-Gladstone Financial Corporation, Primis Financial Corp., Republic First Bancorp, Inc., Tompkins Financial Corporation, TrustCo Bank Corp NY, Univest Financial Corporation, Washington Trust Bancorp, Inc. and Western New England Bancorp, Inc.
In performing their 2021 review of executive compensation, Pearl Meyer compiled compensation data from the proxy statements of the Corporation’s custom peer group and from published industry surveys and, based on this data, calculated percentile amounts against which total compensation for the Company’s NEOs could be compared. The Compensation Committee found the results of the Pearl Meyer study to be directionally consistent with their stated philosophy and took the results of the study into account to make compensation decisions.
In addition to gathering and analyzing compensation data for the peer group, Pearl Meyer also gathered and analyzed peer compensation data from published industry surveys and other proprietary data sources. In performing their reviews, Pearl Meyer assessed total remuneration and the individual elements of total remuneration including base salary, long-term incentives, annual cash incentive compensation, annual equity awards, retirement benefits and perquisites. Based on their reviews, Pearl Meyer provided the Compensation Committee with a comparison of the compensation of the CEO and other executive officers to the market 25th, 50th, and 75th percentiles. Pearl Meyer also assessed the elements of Board compensation both individually and in the aggregate, including annual retainers, meeting-based fees and fees for chair roles and special meetings.
In addition to the services described above, Pearl Meyer was also engaged in 2021 to perform a review of the long-term incentive plan design of the Corporation’s executive incentive plan.
The Compensation Committee received a letter from Pearl Meyer regarding its independence under the six factors to be considered for such purposes under Nasdaq Rules, assessed the independence of Pearl Meyer pursuant to such rules and determined that Pearl Meyer is an independent and conflict-free advisor to the Corporation.
Elements of Executive Compensation
The executive compensation program consists of four basic components: (1) base salary; (2) annual cash incentive compensation; (3) equity awards; and (4) other noncash compensation, consisting primarily of retirement benefits and reasonable perquisites.
Why We Choose To Pay Each Element of Executive Compensation
Base Salary. The Compensation Committee believes that base salary for an NEO should compensate the officer for the skills and effort required to perform the officer’s day-to-day responsibilities, taking into account the size and complexity of the Company.
Annual Cash Incentive Compensation. The Compensation Committee has included annual cash incentive compensation in the executive compensation program as a means to incent executive officers to optimize corporate performance through the achievement of annual corporate goals set forth in the Corporation’s strategic plan. Our Compensation Committee recommended, the Board adopted and the stockholders approved the 2016 Cash Incentive Plan, which provides the opportunity for a cash incentive payment based upon the achievement of corporate and individual goals.
Equity Awards. The Compensation Committee uses equity awards granted under the Corporation’s equity incentive plan as a means to incent executive officers to optimize corporate performance over an extended time-period. Equity awards, together with retirement benefits, are the longer-term components of our executive compensation program.
Other Noncash Compensation. Other noncash compensation consists of: (1) retirement benefits paid under the Bank’s defined benefit pension plan (“Pension Plan”) and 401(k) Plan; and (2) noncash fringe benefits not available to the general employee population of the Bank. Noncash fringe benefits, other than those available to the general employee population at the Bank, include the personal use of business automobiles and a country club membership for the CEO.
Retirement benefits provided by the Corporation’s Pension and 401(k) Plans are intended to encourage the NEOs to maintain employment with the Corporation and maximize long-term corporate performance. A country club membership is provided to the CEO to aid him in developing and retaining business. Business automobiles are provided to most of the Bank’s executive officers as a competitive perquisite and as an alternative to reimbursing such officers for mileage driven on account of business conducted on behalf of the Corporation.
How We Determine The Amount To Pay For Each Element of Executive Compensation
The total compensation paid by the Corporation to each of the NEOs is based on a variety of factors including: (1) the Company’s recent and expected future overall financial performance; (2) current economic conditions and the effect on the Company’s performance and that of its peers; (3) the executive officer’s experience and tenure, years of service to the Bank, scope of responsibilities, leadership ability, compensation relative to the Company’s other executive officers, recent and expected future performance, and contributions to corporate performance; (4) a comparison of total compensation and each element of compensation paid to the executive to compensation amounts paid by peer banks to executives with similar roles and compensation amounts set forth in published industry surveys for executives with similar roles; and (5) the most recent stockholder advisory vote on executive compensation. As previously discussed, comparative compensation studies are performed and updated on a periodic basis, most recently in 2021, by an independent compensation consulting firm engaged by and working under the direction of the Compensation Committee.
Base salary for the CEO is reviewed by the Compensation Committee on an annual basis. The Compensation Committee also performs an annual review of the base salary recommendations made by the CEO for the Company’s other NEOs. Each executive officer does not necessarily receive an increase in base salary each year. In reviewing each NEO’s base salary, the Compensation Committee considers the amounts paid by peer banks, the amounts set forth in compensation surveys performed by nationally recognized independent compensation consulting firms and the Corporation’s overall budget for base salary increases.
The Compensation Committee believes that total target remuneration for executive officers should be market competitive, benchmarked to the 50th percentile of the Bank’s peer group and take into consideration individual and corporate performance and tenure.
Cash Incentive Compensation. Annual cash incentive compensation for 2022 for the Corporation’s CEO and other NEOs was based on:
CEO | Other NEOs | |
Corporate Performance(1) | 100% | 75% |
Personal Goals(2) | N/A | 25% |
The following table sets forth the metrics and weights established by the Compensation Committee for use in determining cash incentives paid in February 2023 for 2022 along with the actual 2022 results for each corporate performance metric.
| Weight(1) |
|
|
|
| |
Metric | CEO | Other NEOs | Threshold | Target | Maximum | Actual Results |
Net Income | 50.0% | 37.5% | $36,191,000 | $45,239,000 | $52,025,000 | $46,932,000 |
ROA | 30.0% | 22.5% | 0.86% | 1.08% | 1.24% | 1.11% |
Balance Sheet Growth | 20.0% | 15.0% | 3% | 6% | 9% | 5.4% |
Personal Goals(2) | N/A | 25.0% | N/A | N/A | N/A | N/A |
(1) | In the
|
(2) | Measured by
|
The following table sets forth the range of annual cash incentive compensation for 2022 under the 2016 Cash Incentive Plan assuming that the Corporation achieved threshold, target and maximum levels of performance and, where applicable, the NEO achieved threshold, target and maximum levels of performance with respect to personal goals. Each NEO’s cash incentive target for 2022 was a percentage of base salary as determined by the Compensation Committee. Achievement of corporate and, where applicable, personal performance levels greater than the threshold level but less than the maximum level results in a cash incentive payment that is proportionately greater than the threshold level of incentive but less than the maximum level of incentive.
NEO | Threshold ($) | Target ($) | Maximum ($) |
Christopher Becker | 155,000 | 310,000 | 465,000 |
Jay P. McConie | 67,000 | 134,000 | 201,000 |
Christopher J. Hilton | 65,000 | 130,000 | 195,000 |
Janet T. Verneuille | 66,000 | 132,000 | 198,000 |
Michael J. Spolarich | 60,000 | 120,000 | 180,000 |
Equity Incentive Compensation. Equity incentive compensation for the NEOs as a group has averaged approximately one-third (⅓) of total incentive compensation, while equity incentive compensation has averaged approximately two-thirds (⅔) of total incentive compensation.
All outstanding performance-based RSUs held by NEOs consists of a combination of performance-based and time-based RSUs that are awarded based on a fixed percentage of salary as determined by the Compensation Committee.
RSUs awarded in 2020 and 2021 included two-thirds (⅔) that were performance-based and one-third (⅓) that were time-based. One-third (⅓) vests and converts into shares of Common Stock based on the Corporation’s ROE and ROA compared to the peer group median each with a weighting of 40% and net income growth with a weighting of 20% for the year awarded, one-third (⅓) vests and converts into shares of Common Stock based on the Corporation’s ROE and ROA compared to the peer group median each with a weighting of 40% and net income growth with a weighting of 20% for the year subsequent to the year awarded, and the final one-third (⅓) vests and converts three years from the date of grant.
RSUs awarded in 2022 included two-thirds (⅔) that were performance-based and one-third (⅓) that were time-based. One-third (⅓) vests and converts into shares of Common Stock based on the Corporation’s ROE and ROA compared to the peer group median each with a weighting of one-third (⅓) and diluted earnings per share growth with a weighting of one-third (⅓) for the year awarded, one-third (⅓) vests and converts into shares of Common Stock based on the Corporation’s ROE and ROA compared to the peer group median each with a weighting of one-third (⅓) and diluted earnings per share growth with a weighting of one-third (⅓) for the year subsequent to the year awarded, and the final one-third (⅓) vests and converts three years from the date of grant.
The performance-based RSUs granted in 2020, 2021 and 2022 have upside conversion potential in that a maximum level of performance will result in the distribution of more than one share of Common Stock for one RSU. A maximum level of performance will result in a conversion ratio of one RSU for one-and-one-half (1½) shares of Common Stock. Performance greater than the threshold level but less than the maximum level will result in a conversion ratio proportionately greater than one RSU for one-half (½) share of Common Stock but less than one RSU for one-and-one-half (1½) shares of Common Stock. For the ROA and ROE performance metrics, the maximum level of performance is 115% of the target level, whereas the threshold level of performance is 80% of the target level. For the net income and diluted earnings per share performance metric, the maximum, target and threshold levels of performance are set upon award by the Compensation Committee. The Compensation Committee utilizes a study performed by Pearl Meyer of the structural elements of the Corporation’s incentive compensation plan and performance and payout levels for the Corporation’s peer banks.
Over the last three years, cash incentive compensation for the NEOs as a group has averaged approximately one-third (⅓) of total incentive compensation, while equity incentive compensation has averaged approximately two-thirds (⅔) of total incentive compensation.
Outstanding performance-based and time-based RSUs granted under the 2014 and 2021 Plans immediately vest in the event of an involuntary termination following a change in control, total and permanent disability, as defined, or death. The 2021 Plan generally does not permit the accelerated vesting of either performance-based or time-based awards in the event of retirement. The 2014 Plan permits the accelerated vesting of time-based awards in the event of an involuntary termination following a change in control, total and permanent disability, as defined, or death. Upon retirement, but performance-based RSUs granted under the 2014 Plan will vest only after the completion of the applicable performance period and attainment of the relevant performance criteria. All outstanding time-based RSUs granted to NEOs under the 2014 Plan immediately vest in the event of an involuntary termination following a change in control, total and permanent disability, as defined, death or retirement. While the 2014 Plan permitted the accelerated vesting of awards in the event of retirement, the 2021 Plan generally does not permit the accelerated vesting of either performance-based or time-based awards in the event of retirement. For a further discussion of the tax-deductibility of executive compensation, see the Tax Deductibility of Executive Compensation section of this proxy statement.
The value of a RSU realized at vesting can be more or less than its grant date fair value if the Common Stock price at the date of vesting is more or less than its fair market value on the date of grant or the aggregate conversion ratio described above is more or less than one RSU for one share of Common Stock.
Termination and Change in Control Payments
Each of the NEOs had an employment agreement with the Corporation during 2022, which provides for severance compensation in the event that the executive is terminated by the Board without cause or the NEO terminates employment for Good Reason, as defined, whether or not such termination occurs in connection with a change in control (see Employment Agreements section of this proxy statement). These provisions are designed to insure, among other things, that the NEOs are not significantly harmed or unduly enriched and are reasonable with respect to the consummation of a transaction, such as a sale or merger of the Bank that may be in the best interests of the Corporation’s stockholders. In determining the severance arrangement for the CEO and each of the other NEOs, the Compensation Committee considered the severance arrangements offered by peer banks to their NEOs.
Impact of Accounting and Tax Treatment of Certain Elements of Compensation
The Compensation Committee has granted RSUs as equity compensation. RSUs are advantageous from the Corporation’s standpoint because the Corporation records a book tax benefit for the compensation cost recognized for financial statement reporting purposes under FASB ASC Topic 718. Upon vesting of RSUs the Corporation records an income tax benefit or expense in earnings.
Tax Deductibility of Executive Compensation
Internal Revenue Code Section 162(m) limits the tax deductibility of compensation paid to any covered employee to $1 million per year. The Tax Cuts and Jobs Act (the “Act”) was signed into law on December 22, 2017 and amended Section 162(m) to treat all NEOs as covered employees (previously the Chief Financial Officer was not a covered employee) and eliminated the exclusion of qualified performance-based compensation in determining compensation subject to the $1 million limitation. In addition, the Act provides “grandfathered” treatment for qualified performance-based compensation in excess of $1 million that meets the requirements of Section 162(m), is payable pursuant to a written binding contract in effect as of November 2, 2017 and is not modified in any material respect. Substantially all of the compensation paid to the NEOs as a group through year-end 2022 was deductible under the applicable provisions of Section 162(m). A number of requirements must be met for particular compensation to qualify for tax deductibility, so there can be no assurance that incentive compensation paid to the NEOs will be fully deductible in all circumstances.
While the Compensation Committee does not have a formal policy with respect to the payment of compensation in excess of the deduction limit under Code Section 162(m), the Compensation Committee’s practice is to structure compensation programs offered to the NEOs with a view towards maximizing tax deductibility of amounts paid. However, in structuring compensation programs, the Compensation Committee considers a variety of factors, including the Corporation’s tax position, the materiality of the payments and tax deductions involved and the need for flexibility to address unforeseen circumstances. After considering these factors, the Compensation Committee may decide to authorize payments, all or part of which may be nondeductible for federal income tax purposes.
Role of Executive Officers In Determining Executive Compensation
The Compensation Committee approves the proposed compensation of executive officers after considering executive compensation studies periodically performed by independent compensation consulting firms. The CEO has served as a resource to the Compensation Committee in gathering the information necessary to make such compensation determinations. The CEO does not have a policy-making role with respect to determining the amount or form of executive compensation and does not participate in Compensation Committee deliberations regarding his own compensation.
Compensation Policies and Practices As They Relate To Risk Management
The Corporation has a written incentive-based compensation policy that sets forth governance roles for the Compensation Committee, senior management and the Corporation’s internal auditors. The policy is reviewed annually by the Compensation Committee, modified if deemed appropriate and approved. The purpose of the policy is to ensure that the Corporation’s incentive-based compensation arrangements, or any feature of any such arrangement, do not encourage executive officers or employees to: (1) expose the Corporation to inappropriate risks by providing such persons with excessive compensation, fees or benefits; or (2) take inappropriate risks that could lead to material financial loss to the Corporation. Pursuant to this policy, the Corporation’s incentive-based compensation arrangements are required to: (1) balance risk and financial rewards, through such things as risk adjustments of awards, deferral of payments, longer performance periods and/or reduced sensitivity to short-term performance; (2) be compatible with effective internal controls and risk management; and (3) be supported by strong corporate governance, including active and effective oversight by the Compensation Committee. The Compensation Committee has determined that the Company’s compensation policies and practices for its employees, including non-executive officers, are not likely to have a material adverse effect on the Company.
Stock Ownership Guidelines and Equity Award Retention Policy
As a condition to receiving equity awarded under the Corporation’s equity incentive plan each director and executive officer shall enter into an agreement with the Company providing that any stock acquired from the exercise of stock options or the vesting of equity awards, net of the disposition of shares for tax withholding requirements, must be held until stock ownership requirements are met.
Each director of the Corporation is required to have beneficial ownership of shares of Common Stock of the Corporation with a current market value equal to three (3) times cash retainers, which includes Committee retainers and per meeting fees. The CEO of the Corporation is required to have beneficial ownership of shares of common stock of the Corporation with a current market value equal to three (3) times current base salary. Each other executive officer of the Corporation is required to have beneficial ownership of shares of common stock of the Corporation with a current market value equal to one (1) times current base salary. All ownership requirements need to be met as follows: (1) within five years of becoming a director or executive officer; (2) within five years of an increase in ownership requirements for the incremental increase only; or (3) within three years of falling out of compliance with these requirements due to compensation increases or fluctuations in market value.
Clawback Policy
The Corporation has a clawback policy to enable the Company to recover any bonus or incentive compensation awarded or paid to the Company’s executive officers if: (1) the payments or awards were based on materially inaccurate financial statements or any other materially inaccurate performance metric, and (2) the amount of the incentive compensation, as calculated under restated financial results, is less than the amount actually paid or awarded under the original financial results.
Policies Prohibiting Hedging, Margining and Pledging of the Corporation’s Securities
Directors, NEOs, other officers and employees are prohibited from hedging the Corporation’s securities with the use of financial instruments (including prepaid variable forward contracts, equity swaps, calls, puts, collars, and exchange funds) that offset a decrease in the market value of the Company’s equity securities and any other transaction with comparable economic consequences. Directors, NEOs and other executive officers are also prohibited from holding the Corporation’s securities in a margin account and are prohibited from pledging such securities as collateral for any loan. The Board, in its sole discretion and in limited circumstances, may grant an exception to the prohibitions against margining and pledging after giving consideration to the number of shares involved. These prohibitions are documented in the Corporation’s Insider Trading Policy.
The information provided under this section shall not be deemed incorporated by reference into any filing under the 1933 Act or the 1934 Act, except to the extent that the Corporation specifically incorporates this information by reference.
Shareholder Advisory Vote on Compensation and Policy Prohibiting Tax Gross-Up Arrangements
The Compensation Committee considers the results of the most recent annual stockholder say-on-pay advisory vote on the compensation paid to NEOs. To the extent there is a significant vote against the compensation paid to our NEOs, the Compensation Committee will consider our stockholders’ concerns and evaluate whether any actions are necessary to address those concerns. At the 2022 Annual Meeting of Stockholders, 97% of the shares voting on this issue supported the compensation outlined in last year’s proxy statement, while 3% voted against or abstained.
The Board has a longstanding prohibition against tax gross-up arrangements which is published in the Corporation’s Corporate Governance Guidelines.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information with respect to the aggregate compensation of the CEO, CFO and each of the additional three most highly compensated executive officers of the Bank. All compensation information is provided pursuant to the SEC executive compensation disclosure rules for proxy statements. All of the listed officers are also officers of the Corporation but received salaries only from the Bank.
Summary Compensation Table
Base | Bonus | Stock Awards(1) | Non-Equity Compensation(2) | Change in | All Other | Total | ||
Name and Principal Position | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) |
Christopher Becker | 2022 | 620,000 | 20,000 | 620,000 | 332,630 | — | 26,255 | 1,618,885 |
Director, President and CEO | 2021 | 560,000 | — | — | 292,880 | 39,605 | 21,881 | 914,366 |
2020 | 500,000 | — | 500,000 | 215,145 | 108,854 | 28,192 | 1,352,191 | |
Jay P. McConie | 2022 | 335,000 | 13,250 | 167,500 | 142,710 | — | 21,330 | 679,790 |
Executive Vice President; | 2021 | 315,000 | — | — | 130,637 | 38,639 | 20,816 | 505,092 |
Chief Financial | 2020 | 300,000 | — | 150,000 | 118,320 | 65,951 | 15,729 | 650,000 |
Officer and Treasurer | ||||||||
Christopher J. Hilton | 2022 | 325,000 | 13,250 | 162,500 | 141,180 | — | 18,335 | 660,265 |
Executive Vice President; | 2021 | 315,000 | — | — | 157,387 | 25,909 | 18,782 | 517,078 |
Chief Lending Officer | 2020 | 305,000 | 5,000 | 152,500 | 116,900 | 45,298 | 16,878 | 641,576 |
Janet T. Verneuille | 2022 | 330,000 | 13,250 | 165,000 | 140,052 | 25,031 | 14,928 | 688,261 |
Executive Vice President; | 2021 | 315,000 | — | — | 129,377 | 55,189 | 16,833 | 516,399 |
Chief Risk Officer | 2020 | 305,000 | 5,000 | 152,500 | 116,510 | 27,752 | 9,928 | 616,690 |
Michael J. Spolarich | 2022(5) | 300,000 | 13,250 | 150,000 | 128,760 | — | 18,376 | 610,386 |
Executive Vice President; | ||||||||
Chief Credit Officer |