Board Committees and Corporate Governance
As further described below, the Company's Board of Directors has twothree standing committees, the Audit Committee the Compensation Committee, and the CompensationNominating and Corporate Governance Committee. The Company does not have a standing nominating committee; rather, as described below all independent directors on the Board serve the function of such a committee.
Audit Committee. The Audit Committee comprises Directors Steven BourgeoisNancy Putnam (Chair), Greg Sargent, Timothy Sargent and Schuyler Sweet.Janet Spitler. NASDAQ rules for listed companies and applicable securities laws require that the Company have an Audit Committee consisting of at least three directors, each of whom is independent. NASDAQ rules also require that all members of a listed company's audit committee be able to read and understand fundamental financial statements, including a company's balance sheet, income statement and cash flow statement, and require that at least one member of the committee qualify as “financially sophisticated,” based on past employment experience in finance or accounting, professional accounting certification or other comparable experience or background. Similarly, SEC rules require thatlisted companies to disclose whether at least one member of a listedthe company's audit committee qualifyqualifies as a “financial expert.” The Board of Directors, in its discretion, and based on all of the information available to it, has determined that each of the members of the Audit Committee is independent under applicable legal standards, that each is able to read and understand fundamental financial statements and that Mr. Bourgeois,Ms. Putnam, with his extensiveher bank management experience including formerly as a community bank President and CEO,public accounting experience, is “financially sophisticated” within the meaning of the NASDAQ rules and is an “audit committee financial expert” within the meaning of applicable SEC rules.
The Audit Committee is responsible for selecting the independent auditors and determining the terms of their engagement, for reviewing the reports of the Company's internal and external auditors, for monitoring the Company's adherence to accounting principles generally accepted in the United States of America and for overseeing the quality and integrity of the accounting, auditing and financial reporting practices of the Company and its system of internal controls. In addition, the Audit Committee has established procedures for the confidential reporting of complaints (including procedures for anonymous complaints by employees) on matters of accounting, auditing or internal controls. A copy of the Audit Committee's charter, as revised most recently in 2016,2023, is posted on the Investor Relations page of the Company's website at www.unlocal.comwww.ublocal.com.
During 2015,2022, the Company's Audit Committee met 7seven times. A report of the Audit Committee on its 20152022 activities is included elsewhere in this proxy statement under the caption “AUDIT COMMITTEE REPORT.”
Compensation Committee. The Compensation Committee comprises Directors Schuyler SweetDawn Bugbee (Chair), John Goodrich, John Steel,Joel Bourassa, Janet Spitler, and Neil Van Dyke. The Board has determined that each of such directors is independent under applicable NASDAQ rules for listed companies. The Compensation Committee evaluates, reviews and makes decisions or recommendations to the Board of Directors on executive salary levels, bonuses, equity-based
compensation, including stock option and restricted stock unit awards, and benefit plans. The Committee also annually reviews our director compensation program and makes recommendations to the Board regarding any changes. A copy of the Compensation Committee's charter, as revisedapproved most recently in 2015,2023, is posted on the Investor Relations page of the Company's website at www.ublocal.com.www.ublocal.com
.
During 2015,2022, the Compensation Committee met 10eleven times. A report of the Compensation Committee on its 20152022 activities is set forth elsewhere in this proxy statement under the caption “COMPENSATION COMMITTEE REPORT.”
Board Nominating Functionsand Corporate Governance Committee. In lieu of a separate committee, the functions of a nominating committee are performed byThe Nominating and Corporate Governance Committee comprises all of the Company's independent directors (all directors other than Mr. Silverman, who is not considered independent due to his current position as an executive officer of the Company and Union Bank). The independence of the Committee’s members is determined under applicable NASDAQ standards for listed companies. The purposes of the Committee are to identify and recommend individuals qualified to become members of the Boards of Directors of the Company and Union Bank and executive officers of the Company, to develop qualifications and criteria for the selection and evaluation of such individuals, and to perform such other duties pertaining to matters of corporate governance as the Board has elected notmay delegate to establish a separate nominating committee at thisit from time to time. A copy of the Nominating and Corporate Governance Committee’s charter, as approved most recently in order to obtain the widest possible input2022, is posted on the nominations process from allInvestor Relations page of the independent, nonmanagement directors.Company’s website at www.ublocal.com.
The independent directors have adopted a resolution addressing the process for director nominations, including recommendations by shareholders and minimum qualifications for director nominees. In accordance withUnder these criteria,qualification standards directors and director candidates should possess the following attributes:
•Strong personal integrity;
•Previous leadership experience in business or administrative activities;
•Ability and willingness to contribute to board activities, committees, and meetings;
•Willingness to apply sound and independent business judgment;
•Loyalty to the Company and concern for its success;
•Awareness of a director's role in the Company's corporate citizenship and image;
•Willingness to assume broad, fiduciary responsibility;
•Willingness to become familiar with the banking industry and regulations;
•Familiarity with the Company's service area; and
•Qualification as an independent director under applicable NASDAQ rules for listed companies.
Although the Board does not have a formal policy with regard to the consideration of diversity in identifying director nominees, the director nomination process is designed to ensure that the Board consists of members with diverse backgrounds and viewpoints, including diversity of skills and experience, with a focus on appropriate financial and other expertise relevant to the Company's business, as well as geographic location throughout our market area and community service. The goal of this process is to assemble a group of directors with deep, varied experience, sound judgment, personal integrity and commitment to the Company's success. For a discussion of the individual experience and qualifications of our directors and nominee Mary K. Parent, please refer to the section above under caption “Director Qualifications.”
In reviewing the composition of the Board, the directors are also mindful of the requirement that at least a majority of the directors must be independent under NASDAQ criteria for listed companies, and of the requirement under SEC rules and NASDAQ listed company criteria that at least one member of the Audit Committee must have the qualifications and skills necessary to be considered an “audit committee financial expert.”
The process followed by the independent directors to identify and evaluate director candidates includes requests to Board members and others for recommendations, meetings from time to time to evaluate biographical information and background material relating to potential candidates and, if warranted following preliminary evaluation, interviews of selected candidates.
In deciding to nominate Dawn BugbeeUnion Bank director Mary K. Parent for election to the Company'sCompany’s Board, the independent directors evaluated her business and professional experience and her personal attributes, andas well as her performance and contributions as a Union Bank director and concluded that she meets the criteria for Board membership.
In addition, all nominees for election at the annual meeting who are incumbent directors of the Company, were deemed
by the independent directors to meet the criteria for Board membership.
During 2016,2022, the independent directors met twicefour times to perform their nominating functions.
Board Leadership Structure and Role in Risk Oversight
The Company currently has a Chairman of the Board separate from the CEO. Our commitment to independent oversight is demonstrated by the fact that, except for President, CEO and Director David Silverman, all of our directors are considered independent. The Board believes that its structure, with a nonemployee Chairman providing leadership, helps to ensure that the Board discharges its independent oversight function by enabling nonemployee directors to raise issues and concerns for Board consideration without immediately involving management. The Chairman presides at meetings of the Board, including executive sessions and also serves as a liaison between the Board and senior management. Separation of the positions of Chairman and CEO permits the CEO to better focus on his management responsibilities and on expanding and strengthening our franchise. While the CEO’s leadership role is respected as to the day-to-day management and
operations of the Company and the Bank, the Chairman’s independence provides meaningful and appropriate oversight in fulfilling the fiduciary responsibilities of the Board and representing the interests of the Company’s stockholders.
Risk is inherent in every business, particularly financial institutions. We face a number of risks, including credit risk, interest rate risk, liquidity risk, operational risk, strategic risk, reputation risk and reputationcyber risk. As a one-bank holding company much of our risk management process takes place at the Bank level, where all of the Company's incumbent directors also serve on the Bank's Board, as does nominee Bugbee.Board. Union Bank's enterprise-wide risk management processes are designed to bring to the Board's attention material risks and to facilitate the Board's understanding and evaluation of those risks, as well as its decision-making process in overseeing how management addresses them.
The Board performs its risk oversight function in several ways. The Board establishes standards for risk management by approving policies and procedures that address and mitigate the Company's most material risks. These include policies addressing credit and investment risk, interest rate risk, liquidity risk, and risks relating to Bank Secrecy Act/Anti-Money Laundering compliance.compliance, and risks related to emergency situations. The Board also monitors, reviews and reacts to our risks through various reports presented by management, internal and external auditors and bank regulatory examiners.
In addition, Board committees, both at the Bank and Company Board level, provide risk oversight in discrete areas. In particular, at the holding company level the Audit Committee plays a central role in risk oversight of the Company's accounting, auditing and financial reporting practices and its system of internal controls. A description of the Audit Committee's 20152022 activities is contained elsewhere in this proxy statement under the caption “AUDIT COMMITTEE REPORT.”
Codes of Ethics
The Board expects all of its directors, officers and employees to maintain the highest standards of professionalism and business ethics. All directors, officers and employees are required to adhere to the Company's Code of Ethics, which is contained in the Union Bank Employee Handbook. In addition, President and CEO David Silverman and Treasurer and CFO Karyn Hale are subject to a separate Code of Ethics for Senior Financial Officers and the Chief Executive Officer. Copies of both Codes of Ethics are posted on the Investor Relations page of the Company's website at www.ublocal.com.
Securities Hedging
The Company has not adopted any practices or policies prohibiting directors, officers or other employees or their designees from purchasing financial instruments, or otherwise engaging in transactions for the purpose of hedging or offsetting any decrease in the market value of the Company’s stock. However, the Company has adopted insider trading guidelines and has informed its directors and officers of certain stock trading prohibitions under applicable law, including the prohibition under section 16(c) of the Exchange Act against insiders engaging sales of common stock that they do not own (“short sales”) or if owned, failing to deliver the sold shares within 20 days or to deposit them in the mail within five days after the sale (“sales against the box”).
Shareholder Recommendations for Board Nominations
Shareholders of record wishing to recommend individuals to the independent directorsNominating and Corporate Governance Committee for consideration as possible director nominees should submit the following information, in writing, at least ninety days before the annual meeting of shareholders:
•the name, address and share ownership of the shareholder making the recommendation;
•the proposed nominee's name, address, age, biographical information and number of shares beneficially owned (if available);
•a description of the particular experience, attributes or skills that qualify the individual to serve as a director of the Company; and
•any other information that the recommending shareholder believes may be pertinent to assist in evaluating the nominee.
The information should be delivered in person to the Assistant Corporate Secretary, Kristy Adams Alfieri, at the main office of Union Bank, 20 Lower Main Street, Morrisville, Vermont, or mailed to: Chairman, Nominating and Corporate Governance Committee, Union Bankshares, Inc., P.O. Box 1346, Morrisville, VT 05661. The independent directorsCommittee will use the same criteria to evaluate an individual recommended by a shareholder as they do other potential nominees. The recommending shareholder will be notified of the action taken on his or her recommendation.
Any beneficial owner of shares who is not a shareholder of record who wishes to recommend a person for consideration as a board nominee must make appropriate arrangements with such owner's nominee (record) holder to submit the recommendation through such nominee.
During the course of evaluating a potential nominee, the independent directorsCommittee may contact him or her for additional background and other information as they deem advisable, and may choose to interview the potential nominee in an effort to determine his or her qualifications under the specified criteria, as well as his or her understanding of director responsibilities. The independent directors will then determine if they will recommend the nominee to the shareholders. No person will be nominated unless he or she consents in writing to the nomination and to being named in the Company's proxy statement and agrees to serve, if elected.
Attendance at Annual Meeting of Shareholders
The Board of Directors has adopted a policy stating that incumbent directors are expected to attend the annual meeting of shareholders, absent exigent circumstances, such as illness, family emergencies and unavoidable business travel. Last year, all eight of the incumbent directors attended the annual meeting.
Communicating with the Board
Shareholders who wish to do so may communicate in writing with the Board of Directors, its committees, or individual directors regarding matters relating to the Company's business operations, financial condition or corporate governance. Any such communication should be addressed to the Board of Directors, or Board committee or individual director, as applicable, Union Bankshares, Inc., P.O. Box 1346, Morrisville, VT 05661. The correspondence will be forwarded to the addressee for review and response, as appropriate in the circumstances.
Compensation Committee Interlocks and Insider Participation
The Company is not aware of the existence of any interlocking relationships between the senior management of the Company and that of any other company.
Vote Required to Approve Proposal 1
Election of directors is by a plurality of the votes cast.
Unless authority is withheld, proxies solicited hereby will be voted to fix the number of directors at nine and in favor of each of the nine nominees listed above to serve a one year term expiring at the 20172023 annual meeting of shareholders, or until their successors are elected and qualify. If for any reason not now known by the Company any of such nominees should not be able to serve, proxies will be voted for a substitute nominee or nominees designated by the Board of Directors, or will be voted to fix the number of directors at fewer than nine and for fewer than nine nominees, as the Board may deem advisable in its discretion.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
2015
2022 AUDIT COMMITTEE REPORT
In accordance with its written charter adopted by the Board of Directors ("Board"(“Board”), the Audit Committee of Union Bankshares, Inc. (the “Company”) assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing and financial reporting practices of the Company.
The Audit Committee is comprised of Mr. BourgeoisMs. Nancy Putnam (Chair), Mr. Timothy Sargent, Mr. Gregory Sargent and Mr. Sweet.Ms. Janet Spitler. The Board has determined that each member of the Committee satisfies the independence requirements of the NASDAQ listing standards, that each member of the Committee is financially literate, knowledgeable and qualified to review financial statements, and that Mr. BourgeoisMs. Nancy Putnam has the attributes of an audit“audit committee financial expertexpert” as defined by the regulations of the SEC.Securities and Exchange Commission (SEC).
In 2015,2022, the Audit Committee appointed Berry, Dunn, McNeil & Parker, LLC. ("BerryDunn")(BerryDunn), an independent registered public accounting firm, to perform the audit of our consolidated financial statements for the year ended December 31, 2015. BerryDunn was also appointed to audit our controls over financial reporting as of December 31, 2015.2022. The appointment was ratified by the Board and the shareholders.
The Audit Committee has reviewed and discussed, both with management and with BerryDunn, the Company's audited consolidated financial statements, as of and for the year ended December 31, 2015.2022. The Audit Committee has also discussed with management its assertion on the design and effectiveness of the Company's internal control over financial reporting, as of December 31, 2015.2022. Management has the responsibility for the preparation of the Company’s consolidated financial statements and for assessing the effectiveness of internal controls over financial reporting; the independent registered public accounting firm has the responsibility for the audit of the consolidated financial statements and for expressing an opinion on whether such financial statements are in conformity with generally accepted accounting principles in the United States of America. The independent registered public accounting firm reports directly to the Audit Committee, which meets with the independent auditors on a regular basis, in separate executive sessions when appropriate. In 2015,2022, the Audit Committee met seven times.
The Audit Committee has also discussed with the independent auditors the matters required to be communicated to the Audit Committee in accordance with generally accepted audit standards, including the auditors’ judgment regarding the quality, as well as the acceptability of the Company’s accounting principles, as applied in its financial reporting. The Audit Committee has received and reviewed the written disclosures from the independent auditors required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditors’ communications with the Audit Committee concerning independence and has discussed with the independent auditors their independence from the Company and its management.The Committee has determined that the services performed by BerryDunn are compatible with maintaining that firm’s independence in connection with serving as the Company’s independent auditors.
Relying on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors, and the Board has approved, that the audited consolidated financial statements be included in the Company's Annual Report on Form 10-K for the year ended December 31, 20152022 for filing with the SEC.
Submitted by the Union Bankshares, Inc. Audit Committee
Steven J. BourgeoisNancy C. Putnam (Chair)
Timothy W. Sargent
Schuyler W. SweetGregory D. Sargent
Janet P. Spitler
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the Company's current executive officers:
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| | | | | | | |
| Name and Age | | Position(s) with the Company and Subsidiary |
| | | |
David S. Silverman, 5562 | | President, CEO and a Director of the Company and Union
Morrisville, VT
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| | |
Karyn J. Hale, 4653 | | Vice President, Treasurer, and Chief Financial Officer of the Company and SeniorExecutive Vice President of Union Bank
Morrisville, VT
|
| | |
Jeffrey G. Coslett, 58 | | Vice President of the Company and Senior Vice President of Union Bank
Morrisville, VT
|
Additional information about the business background, experience and qualifications of Ms. Hale and Mr. Coslett is set forth below, and such information pertaining to Mr. Silverman is contained elsewhere in this proxy statement under the caption “PROPOSAL 1: TO ELECT DIRECTORS - Director and Nominee Qualifications.”
Karyn Hale joined Union Bank in November 2005 as a project specialist and moved into the role of Finance Officer in early 2008 until she assumed the role as Chief Financial Officer and Treasurer of the Company and Union on April 1, 2014 and2014. She became a Senior Vice President of Union on May 21, 2014.2014 and was promoted to Executive Vice President on December 31, 2019. Ms. Hale's responsibilities include oversight of accounting, internal controls, treasury, taxation, regulatory reporting, asset/liability management, audit/exam processes, shareholder relations, human resources and serving on the senior management team. Ms. Hale is the Chair of the Company's Disclosure Control Committee and Union's Asset Liability Committee. Prior to joining the Company and Union, Ms. Hale worked in public accounting with A. M. Peisch & Company for twelve years. She graduated from St. Michael's College with a Bachelors of Science degree in Accounting and is a Certified Public Accountant. Her membership affiliations include the American Institute of Certified Public Accountants, the Vermont Society of CPAs, and the Financial Managers Society.
Jeffrey Coslett was named Vice PresidentSociety and she is currently serving on the Boards of Directors of Evernorth (fka Housing Vermont), the Vermont Economic Development Authority (VEDA) and the St. Johnsbury Development Fund and is a past member of the Company on May 15, 2013 and has served as Senior Vice President - Human Resources and Branch Administration OfficerMembers Advisory Panel of Union Bank since 2008. He joined Union Bank in 2003 as the Human Resources Officer. Prior to that, Mr. Coslett was withFederal Home Loan Bank of Lancaster County (PA) as a Branch Manager and Loan Officer, an Agricultural Loan Officer in the Farm Credit System, and as Operations Officer with Family Service of Lancaster, PA, a social service agency.Boston.
COMPENSATION DISCUSSION AND ANALYSIS
COMMITTEE REPORT
The Compensation Committee (the “Committee”) of the Board of Directors of Union Bankshares, Inc. (the “Company”) is made up of four nonemployee directors. Schuyler W. Sweetdirectors, Dawn D. Bugbee (Chair), John H. Steel, Cornelius (Neil) J. Van Dyke, Joel S. Bourassa and John M. Goodrich, eachJanet P. Spitler. Ms. Bugbee and Messrs. Van Dyke and Bourassa served on the Committee throughout 2015.2022, while Ms. Spitler was first appointed to the Committee in May 2022. Each of the members of the Committee was determined by the Board to be independent within the meaning of applicable listing standards of the NASDAQ Stock Market, taking into consideration all relevant factors under applicable NASDAQ rules, including compensation earned by Committee members in fulfilling their duties, any other fees paid by the Company to the Committee members, any other affiliation with the Company or subsidiary,Union Bank (“Union”), and all other factors specifically relevant to determining whether a Committee member has a relationship to the Company which is material to his or her ability to bedischarge his or her duties as a member of the Committee in a manner independent from management in discharging the duties of a Committee member.
management.
This Compensation Discussion and AnalysisCommittee Report discusses the compensation awarded to, earned by or paid to the Company’s named executive officers (the “NEOs”) listed in the 20152022 Summary Compensation Table elsewhere in this proxy statement under the caption “EXECUTIVE COMPENSATION,COMPENSATION.” This report also describes the objectives of our executive compensation program for 2015 (including certain elements for 2016), what the compensation program is designed to reward, a description of each element of compensation, why the Company has chosen to pay each element, how the amount of each element was determined,
how each element fits into the overall compensation objectives,2022, our risk management goals and practices, and how the most recent shareholder advisory “say-on-pay” vote in 2022 affected our executive compensation decision-making. For 2015,2022, the Company’s NEOs were: David S. Silverman, President and CEO; and Karyn J. Hale, Vice President, Treasurer and Chief Financial Officer; and Jeffrey G. Coslett, Vice President.Officer. Each of our NEOs also served as an executive officer of Union throughout 2022.
Executive Summary
Performance Summary
Our results in 2015 were very strong in comparison to prior years and in comparison with our peers in New England. The following summarizes the Company’s key performance highlights for the year:
Record earnings for 2015 of $7.9 million, a 2.4% increase from 2014
Net loan growth of $20.7 million, a 4.3% increase from 2014
Deposit growth of $8.3 million, a 1.5% increase from 2014
Total capital increase of $2.8 million, a 5.5% increase from 2014
Continuing to exceed regulatory guidelines for being well capitalized, with a total risk based capital ratio of 13.42% at December 31, 2015 versus the guideline of 10.0%.
We have been able to achieve these results despite the continuation of slow economic growth throughout partsobjectives of our market area,compensation program are to develop a continued low interest rate environment affecting net interest margin, cautious consumer confidence, and only sporadic improvement in the local housing market.
Creation of Shareholder Value
The following highlights our key achievements in creating shareholder value:
One-year cumulative total shareholder return (increase in market value of our common stock, assuming reinvestment of dividends) (TSR) of 22.7%, three-year TSR of 62.6% and five-year TSR of 93.6%
Increase in book value per common share of 5.5% from December 31, 2014 to December 31, 2015
Earnings per common share of $1.77 for 2015
Increase in dividends paid per common share from $1.04 in 2014 to $1.08 in 2015
Maintaining a dividend payout ratio of 61.0%.
2015 Compensation Objectives
We develop our total executive compensation package with the purpose of attracting, retaining and motivating talented members of senior management to help us achieve the Company’s business goals and objectives. Ultimately our compensation programs are designed to achieve the following objectives: provide a competitive total compensation and benefits package; reward superior performance while appropriately balancing short and long-term performance and incentives consistent with prudent risk management goals and practices; and align management interests with those to the Company’s shareholders, with the ultimate goal of enhancing overall shareholder value. To achieve these objectives, the Compensation Committee regularly reviews and modifies our compensation and incentive programs to ensure they align withadvance these core objectives. We assess our program from the perspective of our shareholders and regulators, considering best practices and making changes as appropriate.
Highlights of Compensation Program and 2015 Results:
Our NEOs received base salary increases in 2015 ranging between 3.0% - 9.1%.
For 2015, our NEOs earned annual cash incentives ranging between 8.7% and 21.7% of base salary based upon attaining in aggregate above budgeted (target) performance for the year. Overall, each NEO’s earned incentive was 108.8% of the target opportunity. These cash incentives were paid in February 2016.
In March 2015, the Company’s Board approved contingent awards of restricted stock units (RSUs) for the three NEOs under the 2014 Equity Incentive Plan, subject to certain conditions, including performance and time-based vesting conditions. The target awards ranged from 10% to 15% of base salary. Actual awards ranged from 12.5% to 18.8% of base salary, subject to time vesting conditions in future years, as designated by the terms of the 2015 Equity Award Summary.
Our Executive Compensation Program
Compensation Philosophy
Our compensation program and philosophy for executive officers was developed by the Compensation Committee and is subject to annual review and approval by our Board of Directors, most recently in March 2016.2023. The objectives of our executive compensation program are to:
(1) attract, retain and motivate talented members of senior management;
(2) provide a competitive total compensation and benefits package;
(3) reward superior performance while appropriately balancing short and long-term performance and incentives consistent with prudent risk management goals and practices; and
(4) align management interests with those of the Company’s shareholders, with the ultimate goal of enhancing overall shareholder value.
To meet our executive compensation objectives, our program is designed to provide the following:
provide: (1) base salary - pay commensurate with executive position, skill and responsibility (fixed compensation);
salary; (2) short-term incentives - reward for achievement of annual goals/results (variable compensation);
cash incentives; (3) long-term incentives (including equity-based awards) - reward for long-term sustained performance(equity grants); and shareholder value creation; and
(4) executive benefits - promote health and well-being and financial security for our executives.
benefits. The Compensation Committee strivesmay from time to ensure our executive compensation program is designed to appropriately balance risk by utilizing short and long-term performance and incentives, consistent with prudent risk management goals and practices.
The Compensation Committee will continue to review, evaluate, and revise the compensation philosophy as appropriate to meet its desired objectives and adhere to emerging regulations as well as industry best practices.
Our short term incentive performance plan is designed to:
recognize and reward achievement of our annual business goals;
motivate and reward superior performance;
attract andtime retain key talent needed to grow Union;
be competitive with market; and
ensure incentives are appropriately risk-balanced (i.e. do not unintentionally motivate inappropriate risk taking).
Our long-term incentive plan strategy and equity grant allocation guidelines for key executives are based upon the individual officer’s role and our desired total compensation philosophy. The objectives of our long-term incentive plan are to:
align the interests of our executives with those of our shareholders;
increase our executives’ Company stock ownership/holdings;
ensure sound risk management by providing a balanced view of performance and aligning rewards with the time horizon of risk;
position Union’s total compensation for our officers to be competitive with market for meeting performance goals;
motivate and reward long-term sustained performance; and
enable us to attract and retain the talent needed to drive our continued success.
Executive Compensation Mix
We strive to provide a total compensation package that is competitive with market practice, including awards of variable compensation that appropriately recognize Company and individual performance. In the aggregate, we believe our total compensation program provides the appropriate balance that enables us to ensure proper pay-performance alignment and reduces the potential that our compensation program might encourage inappropriate risk taking.
The objective is to pay competitive (i.e. market median) compensation for achieving performance goals consistent with our business goals and relative to the performance of industry peers. Actual compensation should exceed market, defined as 50th percentile of comparable banks, when superior performance is achieved, and be lower than market when performance falls below expectations.
The charts below summarize our 2015 total direct compensation mix for the CEO and for our other two NEOs for 2015 as a group. The charts illustrate the mix of pay expressed as a percentage of total direct compensation (base salary plus short-term incentives plus long-term incentives).
2015 Total Compensation Mix
Inputs to Compensation Committee Decision Making
Role of the Compensation Consultant
The Compensation Committee has the sole authority to retain and terminate a compensation consultant and to approve the consultant’s fees and all other terms of the engagement. The Compensation Committee has direct access to outside advisors and consultants throughout the year as they relate to executive compensation. The Compensation Committee has direct access to and meets periodically with the compensation consultant independently of management.
During 2015, the Compensation Committee retained the services of Pearl Meyer & Partners, LLC (“Pearl Meyer”), an independent outside consulting firm specializing in executive and Board compensation consultants to assist the Committee. Pearl Meyer reports directly to the Compensation Committee and carries out its responsibilities to the Compensation Committee in coordination with both the CEO and the Human Resources Officer. As discussed below, services provided in 2015 by Pearl Meyer consisted of providing a comprehensive assessment of the competitiveness and effectiveness of the Company’s executive total compensation program. Pearl Meyer then provided its recommendations based on the analysis they conducted.
The Compensation Committee regularly reviews the services provided by its outside consultants and believes that Pearl Meyer is independent in providing executive compensation consulting services. The Committee conducted a specific review of its relationship with Pearl Meyer in 2015, and determined that Pearl Meyer’s work for the Committee did not raise any conflicts of interest. In making this determination, the Compensation Committee noted that during 2015:
Pearl Meyer did not provide any services to us or our management other than services to the Compensation Committee and its services were limited to executive and director compensation advisory services;
Fees paid by the Company and Union were less than 1% of Pearl Meyer’s total revenue for FY 2015;
Pearl Meyer maintains a Conflicts Policy to prevent a conflict of interest or any other independence issues;
None of the Pearl Meyer consultants had any business or personal relationship with Committee members outside of the engagement;
None of the Pearl Meyer consultants had any business or personal relationship with executive officers of the Company outside of the engagement; and
None of the Pearl Meyer consultants maintains any direct individual position in the Company’s common stock.
The Compensation Committee continues to monitor the independence of Pearl Meyer and its other compensation advisers on a periodic basis.
Role of Management
Although the Compensation Committee makes independent recommendations to the Board of Directors on all matters related to compensation of the NEOs, certain members of management are requested to attend and provide input to the Compensation Committee throughout the year.duties. Input may also be sought from the CEO, CFO, Human Resources Officer and others as needed to ensure the Compensation Committee has the information and perspectiveperspectives it needs to carry out its duties.
As part of a bi-annual process, in 2022 the Compensation Committee retained the services of McLagan, part of the Rewards Solutions practice at AON, an independent consulting firm specializing in executive and Board compensation. McLagan benchmarked the salary, short-term cash incentive and long-term equity plans for fifteen distinct senior officer positions of the Bank, including the two NEOs. Recommendations were then provided with regard to salary levels, short-term incentive plan design and target payouts, and long-term equity plan design and target awards. Current salary survey data specific to banking continues to be utilized for benchmarking compensation.
The Compensation Committee meetswill continue to review, evaluate, and revise our compensation program as appropriate to meet the Company’s desired objectives and adhere to changing regulations and emerging corporate best practices.
While the COVID-19 pandemic has had significant impacts on the economy as a whole and with the CEO each year to discuss his performance and compensation package, but the Compensation Committee’s recommendations for the CEO compensation package are subject to the approvalgeneral operations of the BoardBank, no changes were made with regard to our compensation practices in 2022, no discretionary adjustments were made to our short-term or long term incentive compensation plans for 2022, and the CEO does not participate in the Board deliberations or vote on his own compensation. For thefor 2023 no design changes have been made with these incentive compensation plans other executives the Compensation Committee considers recommendations from the CEOthan normal and customary plan metric changes designed to determine and approve compensation packages, as reported to the Board.
Annual Performance Evaluations
CEO: The Compensation Committee evaluates the performance of the CEO annually in the following seven categories:
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1. | Strategy and Vision - How well the CEO conveys the Company’s vision and develops a clear guide for current and future courses of action. |
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2. | Leadership - How well the CEO motivates and energizes employees to implement the business strategy and achieve the Company’s vision. |
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3. | Innovation/Technology - Providing a vision for the development of new/better products and services. |
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4. | Operating Metrics - How well the Company is meeting its current financial objectives. |
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5. | Risk Management - Adequately managing risk and receiving satisfactory regulatory reviews. |
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6. | People Management - To what extent the CEO takes steps to improve and expand the capabilities of senior managers. |
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7. | External Relationships - How well the CEO interacts with shareholders, the Board, customers, regulators, media and other stakeholders. |
Other NEOs: The CEO evaluates the performance ofreflect our other executive officers annually. Each executive officer’s annual performance review serves as the basis for adjustments to his or her base salary. Individual performance evaluations are tied closely to achievement of short-term and long-term business goals and objectives, individual initiative, team-building skills, level of responsibility and corporate performance.for 2023.
The CEO makes annual recommendations to the Compensation Committee for changes to executive officer salaries (other than his own) for the following year. These recommendations are based on individual performance within their respective areas of expertise, the CEO’s assessment of their contributions to our earnings and growth during the year, as well as their management style and effectiveness in relation to our customers, shareholders, employees, fellow executive officers, Board and committee members and the community. The Compensation Committee reviews these recommendations and makes its final recommendations to our Board of Directors. Decisions regarding compensation for executive officers, including that of the CEO, are approved by our Board of Directors based on the recommendations from the Compensation Committee.
Benchmarking
The Compensation Committee typically engages a compensation consultant (Pearl Meyer in 2015 and previously in 2013 and 2011) to conduct a competitive review of our executive compensation program every two years. A primary data source used in setting market-competitive guidelines for the executive officers is the information publicly disclosed by a peer group of other publicly traded banks and thrifts. Our peer group is developed jointly by the Compensation Committee and Pearl Meyer using objective parameters that reflect bank holding companies of similar asset size, performance and geographic region.
When developing the peer group, Pearl Meyer includes financial institutions ranging from approximately one-half to two times our asset size that are located in the New England and New York region of the United States (excluding Boston and the New York City metro areas). The peer group is also designed to position us at approximately the 50th percentile in regards to assets.
Pearl Meyer conducted a competitive review of our executive compensation programs in 2015 and at that time, a peer group was developed and approved by the Compensation Committee. This peer group was used to make decisions related to adjustments in executive compensation during 2015 and 2016 compensation decisions.
The following banking organizations constituted our peer group for decisions related to executive compensation made by the Compensation Committee and Board for 2015:
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| | |
First Bancorp, Inc. | | Community Bancorp |
Bar Harbor Bankshares | | Pathfinder Bancorp, Inc. |
Westfield Financial, Inc. | | Elmira Savings Bank |
Salisbury Bancorp, Inc. | | Wellesley Bancorp, Inc. |
Evans Bancorp, Inc. | | Lake Shore Bancorp, Inc. (MHC) |
Northeast Bancorp | | Jeffersonville Bancorp |
Green County Bancorp, IN. (MHC) | | |
Pearl Meyer’s review encompassed an assessment of Union’s executive compensation compared to market through the use of proprietary survey information along with proxy data from the peer group. Recommendations were made for total compensation opportunity guidelines, including base salary, annual incentive and long-term equity incentive targets.
Information from the competitive analysis is used by the consultant to provide market-competitive guidelines that support our total compensation philosophy. Guidelines for base salary, short and long-term incentive targets and estimated total direct compensation are provided with suggested ranges for performance. This allows the Compensation Committee to see the potential pay, and range of pay, for each executive role. These guidelines provided a useful framework for consideration by the Compensation Committee in setting cash and non-cash compensation levels.
Key findings from the 2015 Pearl Meyer compensation analysis included a determination that base salaries were in general positioned competitively with the market, although some variations were noted. Total cash compensation (the combination
of base salary and annual incentive compensation) was found in some cases to be lagging the market. Total direct compensation, which includes total cash compensation and long-term equity incentive compensation, was not analyzed in this review because the compensation data under analysis was for 2014, prior to implementation of the shareholder-approved 2014 Equity Incentive Plan, which is described below. Future compensation studies will incorporate the long-term equity component. Development of the 2014 Equity Incentive Plan was a result of the 2013 compensation analysis conducted by Pearl Meyer, which suggested that, consistent with peer group practices, the Company’s executive compensation program should include an equity-based component. The 2015 compensation analysis validated the actions taken by the Compensation Committee to implement a long-term equity incentive plan.
Risk Oversight of Compensation Programs
We believe thatThe Compensation Committee strives to ensure our executive compensation program is structureddesigned to encourage executiveappropriately balance risk by utilizing short and long-term performance in a mannergoals and incentives, consistent with prudent risk management goals and practices.
In establishing the overall compensation program for employees, including the executive officers, the Compensation Committee and the Board are mindful of the potential implications for enterprise risk management. AmongThe Committee and Board believe that the factors inCompany’s compensation practices, which for executives are heavily weighted to fixed salary, do not create material adverse risks to the Company because they do not encourage excessive risk-taking. In addition, the short-term incentive program is focused solely on Bank-wide performance, which encourages overall achievement of annual goals rather than individual or business line performance, and includes a recoupment provision which discourages inappropriate risk-taking that might lead to improper financial reporting.
Effect of 2022 Advisory Vote on NEO Compensation
At our 2022 annual meeting, our shareholders cast a non-binding advisory vote on our executive compensation program that support our enterprise risk management goals are the following:
The Company’s only operating subsidiary, Union Bank, is subject to regulation and supervision by the Federal Deposit Insurance Corporation and the Commissioner(a “say-on-pay proposal”), with 97.5% of the Vermont Departmentshares represented and entitled to vote at the meeting cast in support of Financial Regulation;the compensation paid to our NEOs. The Compensation Committee believes this affirms our shareholders’ support of the Company’s executive compensation program, and as such adhereswe have not significantly changed our approach to defined risk guidelines, practices and controlsexecutive compensation. A "say-on-frequency" advisory vote is held every six years, regarding the shareholders' preference on whether to ensurehold say-on-pay advisory votes every one, two or three years. Our most recent say-on-frequency vote was held at the safety and soundness2019 Annual Meeting of Shareholders, at which 81.3% of the organization.
Managementshares represented and entitled to vote were cast in a non-binding advisory vote to approve a frequency of Union conducts regular reviewsthree years for future nonbinding say-on-pay votes. Accordingly, our next say-on-pay and say-on-frequency advisory votes will occur no later than at the Company’s 2025 annual shareholder meeting. The Compensation Committee and Board will continue to consider the outcome of our business processes to ensure we adhere to appropriatesay-on-pay votes, regulatory guidelineschanges and practices. Theseemerging best practices are monitoredwhen making future recommendations regarding compensation for the Company’s NEOs.
Impact of Accounting and supplemented by our internal audit function, as well as our external auditors.
Our incentive plan provides a maximum capTax Consequences on payment and does not have highly leveraged payout curves and steep payout cliffs at specific performance levels that could encourage short-term actions to meet payout thresholds.
Our short and long term incentive plans are subject to clawbacks in the eventForm of accounting restatement due to fraud or misconduct or in the event of material violations of our code of ethics.
A balanced mix of fixed and variable compensation is utilized.Compensation
The Company’s Board hasCompensation Committee and management consider the discretion to make positive or negative adjustments as they deem advisable based on business environmentaccounting and market conditions.
Components of Executive Compensationtax (individual and 2015 Decisions
Our compensation program for all executive officers, including the CEO, consists of four key components, which are reviewed regularly by the Committee:
Base Salary;
Short-term Incentive;
Long-Term Incentive (including equity-based incentive awards); and
Executive Benefits.
As in prior years, during 2015 we provided a Company-owned vehicle for our CEO, an annual benefit valued at less than $10,000, but provided no other perquisites of any kind to any of our executive officers.
The executive officers are not covered by employment agreements and hence are considered employees at will. They are not entitled to any severance benefits upon termination of employment, except for a termination that is preceded within a specified period by a change-in-controlcorporate) consequences of the Company or Union, as described below under the captions “ - Change in Control Agreements” and “EXECUTIVE COMPENSATION - Potential Payments upon Change in Control.”
The following section summarizes the role of each component of our compensation package, how decisions are made and the resulting 2015 decision process as it relatesplans prior to making changes to the NEOs.
Base Salary
We believe the purpose of base salary is to provide competitive and fair baseCompany’s compensation that recognizes the executives’ role, responsibilities, experience and performance. Base salary represents fixed compensation that is targeted to be competitive with our peer group.
Typically, the Compensation Committee reviews and sets base pay for each executive in January of each year following the performance evaluation process. Competitive markets for similar roles are considered, as well as each individual’s experience, performance and contributions.
In January 2015, the Compensation Committee recommended and the Board approved the following 2015 base salary adjustments for NEOs that were intended to recognize each executive’s contribution and performance, as well as the factors referred to in the preceding paragraph, and if needed, bring salaries more in line with market:
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| Name | Title | 2014 Base Salary | 2015 Base Salary | Percent Increase in 2015 | 2016 Base Salary | Percent Increase in 2016 |
| David S. Silverman | President and CEO | $275,000 | $286,000 | 4.00% | $315,000 | 5.00% |
| Karyn J. Hale | SVP, CFO and Treasurer | $100,310 | $123,600 | 3.00% | $133,600 | 8.09% |
| Jeffrey G. Coslett | SVP, Human Resources and Branch Administration | $119,140 | $124,000 | 4.08% | $130,000 | 4.84% |
plans or programs.
The executive compensation objective set
Submitted by the Compensation Committee is to pay competitive (i.e. market median)
Dawn D. Bugbee, Chair
Joel S. Bourassa
Janet P. Spitler
Cornelius (Neil) J. Van Dyke
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes the total compensation that was paid or accrued for achieving goals consistent witheach of our named executive officers (NEOs) during each of the two most recent fiscal years:
2022 Summary Compensation Table
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Name and
Principal Position | Year | Salary (1)(2) | Stock Awards
($)(3) | | Non-Equity
Incentive
Plan
Compensation
(4) | | All Other
Compensation (5) | Total |
| | | | | | | | |
David S. Silverman,
President and CEO | 2022 | $437,000 | $109,250 | | $172,003 | | $70,760 | $789,013 |
| 2021 | $418,000 | $104,505 | | $146,633 | | $71,550 | $740,688 |
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| | | | | | | | |
Karyn J. Hale,
EVP, CFO and Treasurer | 2022 | $230,000 | $46,000 | | $60,352 | | $28,191 | $364,543 |
| 2021 | $227,986 | $44,021 | | $51,450 | | $27,454 | $350,911 |
| | | | | | | |
| | | | | | | | |
____________________
(1)Includes current voluntary deferrals by certain of the NEOs under the Company’s business goals2020 Amended and relativeRestated Executive Nonqualified Excess Plan and Union’s 401(k) plan.
(2)Includes a year-end payout of unused earned time off (ETO) for 2021. This was a bank-wide initiative covering all employees who could not utilize their paid leave due to industry peers. When the 2015 Pearl Meyer executiveunique nature of operating during the COVID pandemic. In 2021 for Ms. Hale, this amount included additional salary compensation review was conducted,of $7,986.
(3)Represents contingent awards of restricted stock units (RSUs) granted under the 2014 salary information was utilized but indexed upwardEquity Incentive Plan (LTIP), pursuant to reflect estimated industry average salary increases for 2015. As such, the CEO’s base salary was determined to be at approximately the 30th percentileterms of the peer group. The Committee has recommended that2022 and 2021 Equity Award Summaries, respectively, assuming achievement of target-level performance in the CEO’sapplicable plan year and disregarding (i) the effect of potential forfeitures, and actual performance results for the applicable periods. Based on actual 2022 performance attained under the provisions of the plan at the 100th percentile level
and a closing price of $26.90 per share on February 8,2023 as reported on the NASDAQ Stock Market, awards of RSUs were made to our NEOs for 2022 services, as follows: Mr. Silverman, 5,077 shares ($136,571); and Ms. Hale, 2,137 shares ($57,485). Based on actual 2021 performance attained under the provisions of the plan at the 98.7th percentile level and a closing price of $31.99 per share on March 2, 2022 as reported on the NASDAQ Stock Market, final awards of RSUs were made to our NEOs for 2021 services as follows: Mr. Silverman, 4,084 shares ($130,647) and Ms. Hale, 1,720 shares ($55,023).
(4)All amounts shown were earned under the Company’s Short-Term Incentive Performance Plan (STIPP) with respect to 2022 and 2021 services and performance, respectively, but paid during the first quarter of the following year.
(5)Includes Union match on 401(k) plan salary be increased over time to be closer to the market median. As such, in November 2015 the Compensation Committee recommendeddeferrals, safe harbor contributions and the Board approved a retroactive base salary adjustmentprofit-sharing contribution attributable to services rendered in the specified year but paid in the following year. In 2022 and 2021, respectively, for Mr. Silverman to an annualized amountthese amounts were: match of $300,000, a 9.1% increase from his 2014 annual base salary. This action was taken to better align$10,383 and $8,669, safe harbor contribution of $10,394 and $8,700, and profit-sharing contribution of $ 12,688 and $11,887. In 2022 and 2021, respectively, for Ms. Hale these amounts were: match of $8,397 and $8,219, safe harbor contribution of $8,397 and $8,219,and profit-sharing contribution of $11,397 and $11,016. For Mr. Silverman’s salary to the medianSilverman, also includes (i) Company contributions under Mr. Silverman's Supplemental Retirement Plan of $ 25,645 and $30,984 for the peer group utilized by Pearl Meyer2022 and was reflective2021 plan years, respectively and (ii) Company director’s fees of Union’s continued strong financial performance. Base salary$11,650 for the other NEOs,2022 and $11,310 for 2021 paid in cash. Mr. Silverman does not receive equity compensation for serving as reported in the 2015 Pearl Meyer executivea director of Company, nor does he receive any separate compensation review, reflecting similar market analysis adjustmentsfor serving as that for the CEO and were in the 25th to 45th percentilea director of the peer group.Union Bank or on its Advisory Boards.
Short-termShort-Term Incentive
Performance Plan
Annually, the Board, on a discretionary basis, may choose to offer incentive compensation under the Union Bank Short Term Incentive Performance Plan (the “STIPP”) by establishing annual performance and award targets for a designated performance period, which has generally been the calendar year. In February 2015, upon recommendation of the Compensation Committee, the Board adopted the 2015 performance criteria and bonus opportunities under the STIPP, following the general pattern and timing of adoption of STIPP performance measures and bonus opportunities for the 2014 and 2013 annual performance periods. However, a change was made to the 2015 STIPP from previous years to reduce the weighting for net income from 30% to 25% and to increase the weighting of loan growth from 15% to 20%. Participants are designated each year by the Union Board, upon recommendation of the Compensation Committee. All three of the NEOs were designated as participants for 2015, 2014 and 2013, and have been so designated for 2016.
In February 2016, the Union Board adopted annual performance and award targets under the STIPP for 2016. Financial results utilized in establishing performance targets and calculating awards are based on performance of Union Bank only, not the consolidated results of the Company. Awards (if any) are paid in cash within two and one-half months after the endIn February 2022, upon recommendation of the calendar year. The 2015 awards were paid in February 2016 forCompensation Committee, the account of Mr. Silverman, Ms. HaleBoard adopted 2022 performance criteria and Mr. Coslett,bonus opportunities under the 2014 awards were paid in February 2015 for the account of Mr. Silverman, Ms. Hale and Mr. Coslett, and the 2013 awards were paid in March 2014 for the account of Mr. Silverman and Mr. Coslett, all of which are includedSTIPP.
Participants in the 2015 SummarySTIPP are designated each year by the Union Board, upon recommendation of the Compensation Table under "Non-equity Incentive Plan Compensation"Committee. The NEOs were included as designated participants in the plan for the year earned. Participants do not have a vested right in any award prior to payout.
2022 and 2021.
The objectiveobjectives of our STIPP isare to recognize and reward achievement of Union’s annual business goals, motivate and reward superior performance, attract and retain key talent needed to grow the franchise, be competitivemaintain competitiveness within our market, and ensure that incentives are appropriately risk-balanced. Rewards under this Planthe STIPP represent variable compensation that must be earned based upon performance by the Company’s subsidiary, Union Bank.
Our proposedannual performance goals for the incentive plan are based on budget projections, andwhich are typically presented by the CEO to the Compensation Committee during the first quarter of the year. Once the Compensation Committee finalizes and preliminarily approves the performance goals, the goals are presented to the Board of Directors for final approval. The following details the framework of the 2015 STIPP:
2022 STIPP and related performance results:
Incentive Opportunity: Each participant had a target award (expressed as a percentage of earned base salary during the fiscal year) and range that defined the incentive opportunity. The CEO’sFor 2022, the target for 2015the CEO was 20.0%30.0% of base salary, and the target for all other executive officers was 8.0%20% of base salary.salary for the other NEO. Actual STIPP awards vary based on individual and Union Bank actual performance during the year and may range from 0% of target (not achieving threshold performance for a goal) to 150% of target for meeting or exceeding stretch performance. The target incentive opportunity for the CEO was increased by the Union Board from 12% of base salary to 20% of base salary for 2015 following a recommendation from the Compensation Committee after reviewing the results of the 2015 Pearl Meyer compensation study. The target incentive opportunities for the other two NEOs remained at 8% of base salary for 2015 but have been increased to 12% of base salary for 2016.
Performance Measures: The Committee and Board believe that the 2015 performance measures are aligned with our strategy and business plan. In order for the 20152022 STIPP to activate, attainment of 90% of budgeted 20152022 annual net income of Union (as defined above) was required. Additionally, each eligible participant,participants, including the NEOs, neededare expected to achieve in aggregate a rating of “fully meets expectations” or greater for theirhis or her most recent annual performance evaluation. The awards for all NEOs were based upon achieving budgeted targets (on a Bank-onlybank-only basis) with respect to our return on average assets, net income, efficiency ratio, loan growth (excluding municipal loans) and loan quality (defined as the actual expense of loan charge-offs plus net other real estate owned write downs plus (gain) or loss on sale of other real estate owned and other assets owned,write-downs, less loan recoveries), deposit growth (defined as gross deposits less purchased brokered deposits) and our return on average assets relative to that of a peer group of New England banks and thrifts between $500 million and $1.5 billion in assets, as compiled and published by S&P Global, Inc. (fka SNL Financial LLC). Minimum (threshold), target and maximum (stretch) levels of performance were defined for the 20152022 STIPP and are summarized in the table below. No awards are paid for performance below threshold for a particular performance measure. Actual payoutsPayouts for each performance goal are based upon finalactual performance between threshold to
target and between target and stretch levels, and are awarded on a five steplinear slope basis across the payout levels from thresholdThreshold (50% payout), Lower Mid (75% payout), to Target (100% payout), Upper Mid (125% payout) and from Target to Stretch (150% payout). , subject to the exercise of discretion by the Committee. No such discretion was exercised for payouts under the 2022 STIPP.
The Compensation Committee may recommend2022 STIPP performance measures, their relative weights, and the Board has the discretion to make positive or negative adjustments to any payouts as they deem advisable to reflect the business environment and market conditions.
The 2015plan performance measuresresults for Mr. Silverman, and Ms. Hale and Mr. Coslett were as follows:
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| | | | | | | | |
| Performance Measure | | Weighting | | Threshold (Minimum) Goal Funds 50% of target award | | Target Goal Funds 100% of target award | | Stretch (Maximum) Goal Funds 150% of target award |
| Return on Average Assets (ROAA) | | 25% | | 1.15% | | 1.28% | | 1.41% |
| Net Income (dollars in thousands) | | 25% | | $7,050 | | $7,834 | | $8,617 |
| Efficiency Ratio* | | 15% | | 69.46% | | 67.46% | | 63.46% |
| Loan Growth (dollars in thousands) | | 20% | | $7,794 | | $12,255 | | $21,165 |
| Loan Quality (dollars in thousands) | | 15% | | $625 | | $500 | | $375 |
| | | | | | | | | | | | | | | | | | | | |
| Performance Measure | Weighting | Threshold (Minimum) Goal (1) Funds 50% of target award | Target Goal (1) Funds 100% of target award | Stretch (Maximum) Goal (1) Funds 150% of target award | 2022 Union
Actual Result
(1) | Payout Allocation
(0-150% of target
opportunity) |
| Relative One-Year ROAA | 25% | 70th Percentile | 80th Percentile | 90th Percentile | 84.72th Percentile | 123.6% |
| Net Income | 25% | $12,100 | $13,444 | $14,788 | $13,475 | 101.13% |
| Efficiency Ratio (2) | 10% | 70.66% | 69.66% | 68.66% | 65.87% | 150% |
| Loan Growth | 15% | $46,630 | $54,858 | $63,087 | $148,820 | 150% |
| Deposit Growth | 10% | $48,857 | $57,478 | $66,100 | $73,791 | 150% |
| Loan Quality | 15% | $500 | $400 | $300 | $(3) | 150% |
| Total Actual Weighted Average Percentage of Target Opportunity = | 131.2% |
____________________
| |
* | (1)Dollars in thousands. (2)The ratio of noninterest expense to tax equivalent net interest income and noninterest income, excluding securities gains and losses. |
At the end of the calendar (fiscal) year, the Compensation Committee assesses Union’s performance relativenoninterest expense to each of the performance measurestax equivalent net interest income and determines the awards based upon the extent to which each goal has been attained. The Compensation Committee retains the discretion to recommend to the Board modification of executives’ incentive payouts based on significant individual performance or Union performance shortfalls. Our Board of Directors has the discretion to determine the amountnoninterest income, excluding securities gains and manner of executive incentive payments and to make such adjustments as they deem appropriate. No such adjustments were made in 2015.
losses.
2015 Performance Results:
The following table summarizes the 2015 performance results and the associated payouts (as a percent of target opportunity for each predefined performance measure) for Mr. Silverman, Ms. Hale and Mr. Coslett:
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| | | | | | | |
| Performance Measure | | Weighting | 2015 Target Goal | | 2015 Union Actual Result | | Payout Allocation (0-150% of target opportunity) |
| ROAA | | 25% | 1.28% | | 1.31% | | 100% |
| Net Income (dollars in thousands) | | 25% | $7,834 | | $8,138 | | 100% |
| Efficiency Ratio | | 15% | 67.46% | | 67.56% | | 75% |
| Loan Growth (dollars in thousands) | | 20% | $12,255 | | $19,999 | | 125% |
| Loan Quality (dollars in thousands) | | 15% | $500 | | $64.4 | | 150% |
| | | | | | TOTAL | | 108.8% of Target |
| | | | | | | | Incentive Opportunity |
Based upon the actual performance results summarized above, the table below summarizesshows the actual incentive cash payouts (as a dollar amount and percentpercentage of base salary) for each of the NEOs.
| | | | | 2015 Annual Incentive Target Opportunity | | 2015 Annual Incentive Actual Awards | | 2022 Annual Incentive
Target Opportunity | | 2022 Annual Incentive
Actual Awards |
| Executive | | Title | | Amount | | % of Base Salary | | Amount | | % of Base Salary* | Executive | | Title | | Amount (1) | | % of Base
Salary | | Amount (1) | | % of Base
Salary* |
| David S. Silverman | | President and CEO | | $59,509 | | 20% | | $64,716 | | 21.70% | David S. Silverman | | President and CEO | | $131,100 | | 30% | | $172,003 | | 39.36% |
| Karyn J. Hale | | SVP, CFO and Treasurer | | $9,877 | | 8% | | $10,741 | | 8.70% | Karyn J. Hale | | EVP, CFO and Treasurer | | $46,000 | | 20% | | $60,352 | | 26.24% |
| Jeffrey G. Coslett | | SVP, Human Resources and Branch Administration | | $9,905 | | 8% | | $10,772 | | 8.70% | |
