Those nominees for election to the Board of Directors receiving the nine highest number of votes in the election of directors will be elected to the Board. The appointment of Crowe Horwath LLP as the Company's independent accountants for 20172020 will be ratified if the votes cast in favor of ratification exceed the votes cast against ratification. The proposal on executive compensation will be approved in a non-binding advisory vote if the shares cast in favor exceed the votes cast against approval.
You can vote by (i) signing, dating and mailing the enclosed proxy card, (ii) by attending the annual meeting in person, or (iii) following the instructions on your notice for voting by telephone or on the internet.
All shares of Common Stock that are represented at the Annual Meeting by properly executed proxies received prior to or at the Annual Meeting and not revoked will be voted at the Annual Meeting in accordance with the instructions indicated in such proxies. If no instructions are indicated, such proxies will be voted FOR the election of the Board of Directors’ nine nominees as directors of the Company (or, if deemed appropriate by the individuals appointed in the proxies, cumulatively voted for less than all of the Board's nominees to ensure the election of as many of the Board's nominees as possible), FOR the ratification of the appointment of Crowe Horwath LLP as the Company's independent accountants, and FOR approval of the proposal on executive compensation.
Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before it is voted. Proxies may be revoked by (i) filing with the Secretary of the Company, at or before the Annual Meeting, a written notice of revocation bearing a later date than the proxy, (ii) duly executing a subsequent proxy relating to the same shares of Common Stock and delivering it to the Secretary of the Company at or before the Annual Meeting, (iii) attending the Annual Meeting and voting in person (although attendance at the Annual Meeting will not in and of itself constitute a revocation of a proxy), or (iv) entering a later dated telephone call or internet vote (if initially able to vote in that manner) so long as the vote or voting direction is received by 3:00 a.m. eastern daylight time on June 21, 2017.17, 2020. Any written notice revoking a proxy should be sent to the Company, to the attention of Toney K. Adkins, Secretary.
The Company will bear the cost of this solicitation. In addition to solicitation by mail, the Company will request banks, brokers and other custodian nominees and fiduciaries to supply proxy material to the beneficial owners of Common Stock, and will reimburse them for their expenses in so doing. Certain directors, officers and other employees of the Company, not specially employed for this purpose, may solicit proxies, without additional remuneration therefor, by personal meeting, mail, telephone, facsimile or other electronic means.
The annual bonus, number of stock options and salary increase, if any, are determined annually. Premier uses surveys conducted by local state banking associations and other industry specific surveys to assess competitive marketplace compensation for its executive officers and uses ranges of compensation rather than specific targets. The named executive officers do not have employment, severance or change-of-control agreements. They serve at the will of the Board of Directors, which enables Premier to terminate their employment with discretion as to the terms of any severance arrangement.
For any annual bonus, the Chief Executive Officer reviews the estimated full year financial results with the Board of Directors and, if appropriate, an annual bonus pool is determined. Allocations from the pool are made to Premier’s named executive officers. Premier does not use rigid incentive formulas to determine the annual bonus, as simple formulas may tend to improperly favor one aspect of financial performance to the detriment of others, while complex formulas provide no real focus or are inevitably adjusted for unforeseen events. A recommendation as to the bonus to be paid to each executive officer is based on an evaluation by the Chief Executive Officer of their individual performance for the prior year and their contribution toward Premier’s performance as a whole. After reviewing the final full year results, the Compensation Committee, with input from the Chief Executive Officer with respect to the other named executive officers, uses discretion in evaluating the individual award recommendations and determining the actual bonus amount to be awarded. Premier believes that the annual bonus rewards those high-performing individuals who drive the financial results and long-term performance of the Company.
Similar to the annual bonus, the number of stock options granted to individuals is determined, with input from the Chief Executive Officer, by the Compensation Committee. The number of stock options granted annually is modest so as to minimally affect diluted earnings per share either through the increase in the number of shares outstanding or through recorded stock compensation expense. Stock options are granted with an exercise price equal to the closing price on the grant date and therefore only have value to the optionee if there is a rise in Premier’s stock price beyond the grant date. Premier believes it is the accumulation of options over time that provides the real incentive for the named executive officers to propel the Company’s value to ever higher levels.
In arriving at its decision on
20162019 executive compensation, the Compensation Committee took into account the affirmative shareholder “say on pay” vote at the previous annual meeting of shareholders and continued to apply the same principles in determining the amounts and types of executive compensation. The specific compensation amounts for each of Premier’s named executive officers for
20162019 reflect the continued strength and stability in the Company’s financial performance. A more detailed analysis of Premier’s
20162019 financial results is contained in the Management Discussion and Analysis section contained in the annual report to shareholders and
our Form 10-K filed with the Securities and Exchange Commission.In determining the named executive officers’ compensation for 2016,2019, the Compensation Committee considered the Company’s performance during 2015.2018. Premier had net income of $20,168,000 in 2018 compared to $14,819,000 of net income in 2017. Net income available to common shareholders remained consistent with the prior year totaling $12,446,000increased in 2015 compared to $12,552,000 in 2014, as an increase in net operating costs,2018 largely due to the full year inclusion of the operations of the Bank of Gassaway purchasedincreases in April 2014, was only partially offset by an increase innet interest income and non-interest income andas well as a decrease in the provision for loan losses. These positive results more than offset an increase in non-interest expense. It is important to note that net income also improved in 2018 due to a decrease in the corporate income tax rate and a corresponding decrease in income tax expense. Basic earnings per share were $1.48 in 2018 compared to $1.11 in 2017. The increase in earnings per share in 2018 was largely the result of the increase in net income.
Net interest income decreased slightlyon a fully tax-equivalent basis was $59.9 million in 2015 when comparted to 2014.2018, a 3.6% increase of the $57.9 million earned in 2017. The increase in net interest income in 2018 was primarily the result of a $3.8 million, or 6.2%, increase in interest income partially reduced by a $194,000 increase in interest expense. In 2015,2018, average earning assets increased by 3.0%4.9% or $34.0$67.7 million from 2014, while average2017. Average interest-bearing liabilities, the primary source of funds supporting the earning assets, increased by 1.7%1.4%, or $13.8$13.9 million, in 20152018 from 2014. Although there2017. Supporting an increase in the net interest income (as a percentage of average earning assets) in 2018 was an 11.2%, or $35.6 million, increase in average non-interest bearing deposits. Net interest income (as a percentage of average earning assets) in 2018 was 4.13% compared to 4.18% in 2017. The increase in average earning assets in 2018 was primarily the result of a $13.6 million increase in average loans outstanding, a $4.8 million increase in federal funds sold, a $13.3 million increase in average investment securities, and ana $35.9 million increase in average interest-bearing bank balances. The increase in average interest-bearing liabilities net interest income in 20152018 was less than 2014. The decrease waslargely due to $6.7a $16.7 million increase in average interest-bearing deposits and a $3.0 million increase in average FHLB advances. These increases were partially offset by a $2.6 million decrease in average short-term borrowings (primarily customer repurchase agreements) and a $3.3 million decrease in average long-term borrowings.
Average loans increased in 2018 by $13.6 million, or 1.3%, over 2017. The increase in 2018 was largely due to additional loan demand, primarily in Premier’s Cincinnati Metro and West Virginia markets, which more than offset scheduled loan principal payments, payoffs from borrowers accelerating their payments to reduce their outstanding debt, and payoffs due to the workout of problem loans. Average loans outstanding in 2018 increased by $7.0 million, or 12.4%, in Premier’s Cincinnati Metro market and increased by $58.7 million, or 12.1%, in Premier’s West Virginia market. The increase in West Virginia included $24.7 million of deferred interest income and loan purchase discounts recognized uponaverage loans added via the liquidationacquisition of non-performingFirst Bank of Charleston early in the fourth quarter of 2018. Otherwise, average loans in 2014, comparedthe West Virginia markets increased by $34.0 million, or 7.0%, in 2018 due to $1.4internal loan demand. Conversely, average loans outstanding decreased by $30.7 million, recognizedor 13.3%, in 2015. The Company successfully negotiated the May 6, 2015 repurchasePremier’s DC Metro market; decreased by $8.9 million, or 16.8%, in Premier’s Virginia market; decreased by $1.9 million, or 3.4%, in Premier’s rural Ohio market; and decreased by $10.5 million, or 6.4%, in Premier’s Kentucky market, as loan payoffs exceeded new loan demand. In 2018, total loan charge-offs were $1,368,000, or 0.13% of the 700,016 share Common Stock Warrant issued to the U.S. Treasury (“Warrant”) successfully concluding the Company’s participation in the Troubled Asset Relief Program (“TARP”) Capital Purchase Program. The purchase reduced shareholders’ equityaverage total loans and regulatory capital by the $5,675,000 purchase price but also reduced the dilutive effectnet loan charge-offs were $681,000, or 0.06% of potential additional common shares that would have been issued had the Warrant been exercised. The Company successfully negotiated a definitive merger agreement on July 5, 2015 with First National Bankshares Corporation, a $237 million single bank holding company headquartered in Ronceverte, West Virginia. Throughout the latter half of 2015, the Company sought and received First National Bankshares Corporation shareholder approval as well as regulatory approval to consummate the acquisition, which closed on January 15, 2016. average total loans.
Book value per share increased by $0.08 and$1.08 in 2018, but tangible book value per share increased by $0.19$0.36 in 2015, which includes the effect of the $0.632018. Both increases reflect an approximately $0.12 decrease in book value from a greater amount of net unrealized losses in the portfolio of securities available for sale at December 31, 2018. Annual cash dividends per share relatedincreased to the repurchase of the Warrant. Finally, non-performing assets decreased by $1.5 million, or 5.1% to $27.2 million or 2.19% of total assets.
$0.57 in 2018 compared $0.48 in 2017. Based upon an evaluation of his contributions toward achieving the Company’s performance in 2015,2018, the Compensation Committee, in lieu of an increase in Mr. Walker’s annual salary, an annual cash bonus or stock option grants, granted Mr. Walker an annual bonus in the form of an immediate stock award of 7,7007,500 shares of the Company’s common stock on March 16, 2016.April 17, 2019. This award was based upon an evaluation of his contribution toward the Company’s successful 20152018 financial performance, his leadership in negotiatingcompleting the Warrant repurchase, his leadership in negotiatingmerger and acquisition of the definitive agreement to acquire First National Bankshares Corporation,Bank of Charleston, Inc. on October 12, 2018, and other events through their meeting date in March 2016, andApril 2019, plus his potential to improve long-term shareholder value. In addition to the compensatory benefit to Mr. Walker, the committee believed that a stock award would also align more of Mr. Walker’s compensation to the long-term performance of the Company’s stock, as well as provide an incentive for consistent annual financial performance to maintain the Company’s attractive dividend yield. The 7,7007,500 shares had an estimated value of $104,335$125,850 based upon the Company’s closing stock price of $13.55$16.78 per share on the date of the stock awardas adjusted for the 10% stock dividend paid on December 9, 2016.. Additional information on Mr. Walker’s 20162019 compensation is detailed in the tables below.
Based upon an evaluation of hisMr. Chase’s contributions toward achieving the Company’s performance in 20152018 as summarized above, his leadership in providing clear, concise and quality financial disclosures to the Board of Directors and shareholders through Premier’s annual and quarterly reports and the proxy statement, his continued participation and oversight in the operations of Premier Bank and its regulatory examinations, Mr. Chase’s continued oversight of the parent company operations and its regulatory examinations and his potential to improve long-term shareholder value, the Compensation Committee granted Mr. Chase a salary increase to approximately $166,400$182,722 annually. Considering the specific accomplishments achieved by Premier and Premier Bank in 20152018 and Mr. Chase’s integral part in accounting for the preparation of regulatory applications and pro forma financial statements leading to the successful approval and acquisition of First National Bankshares Corporation on January 15, 2016; his integral part in the preparation of regulatory applications leading to the successful approval to repurchase the Warrant; his continued participation and oversight in the operations of Premier Bank and its regulatory examinations, and Mr. Chase’s continued participation in the integration of the Bank of Gassaway operations into Premier Bank,Charleston acquisition, the Compensation Committee awarded Mr. Chase a $23,000$22,000 cash bonus which was paid in March 2016.2019. As an incentive for Mr. Chase to further improve Premier’s financial performance, evaluate the financial viability of future acquisitions and to reward him for long-term improvements in the stock’s value, the Compensation Committee granted him 5,5006,300 options to buy Premier stock at $13.55$15.57 per share (the closing price on the March 16, 201620, 2019 grant date as adjusted for the 10% stock dividend paid on December 9, 2016.date.) This grant increased Mr. Chase’s total options to buy Premier stock to 73,150,110,238, some of which were exercised before the end of 2016.2019. Additional information on Mr. Chase’s 20162019 compensation is detailed in the tables below.
Based upon an evaluation of hisMr. Mineer’s contributions toward achieving the Company’s performance in 2015,2018, his banking insight as President of Citizens Deposit Bank, adding $15.8$11.1 million (or 2.9%) of average new deposit and customer repurchase agreement volume to the Company, opening a second branchincreasing the average loan portfolio in the Cincinati metro area of northern Kentucky,markets served by Citizens Deposit Bank, decreasing non-accrual loans by $1.1 million, or 46.9%, achieving a 20152018 return on average assets of 1.00%1.30% for Citizens Deposit Bank, and achieving a past due ratio of 0.80% of totalexpanding Citizens Deposit Bank loans at December 31, 2015;Bank’s operations in the metro Cincinnati market area; his leadership in reducing Premier’s operating costs and improving customer convenience through technology, his role as Senior Technology Officer for Premier, and his potential to improve long-term shareholder value, the Compensation Committee granted Mr. Mineer a salary increase to approximately $184,100$202,126 annually. Considering the specific accomplishments achieved by Premier and Citizens Deposit Bank in 2015,2018, the Compensation Committee awarded Mr. Mineer a $16,000$22,000 cash bonus which was paid in March 2016.2019. As an incentive for Mr. Mineer to further improve Premier’s financial performance and to reward him for long-term improvements in the stock’s value, the Compensation Committee granted him 5,5006,300 options to buy Premier stock at $13.55$15.57 per share (the closing price on the March 16, 201620, 2019 grant date as adjusted for the 10% stock dividend paid on December 9, 2016.date.) This grant increased Mr. Mineer’s total options to buy Premier stock to 58,190,91,538, some of which were exercised before the end of 2016.2019. Additional information on Mr. Mineer’s 20162019 compensation is detailed in the tables below.
Mr. Bias began his employment with the Company on September 15, 2015 as senior vice president and as president and chief executive officer of Premier Bank, Inc. Mr. Bias’ beginning annual salary was $190,000 and the amount reported for 2015 in the tables below reflect that salary based upon the period he was employed during 2015. The compensation committee also awarded Mr. Bias 110 shares of Company common stock to enable him to fufill his company ownership requirements as a director of Premier Bank under state law. At the time of his employment, the directors and employees of the company were in a standard “blackout” period and prohibited from purchasing Company stock. Based upon an evaluation of hisMr. Bias’ contributions toward achieving the Company’s performance in 2015,2018, his banking insight as President of Premier Bank, Inc. including his leadership, adding $40.9 million (or 4.4%) of average new deposit and customer repurchase agreement volume to the Company, increasing the average loan portfolio in developing loan production goals andthe markets served by Premier Bank by $13.2 million (or 1.7%), achieving a 2018 return on average assets of 1.53% for Premier Bank, decreasing past due and non-performing loans,the balance of other real estate owned by $6.1 million (or 38.1%) and his potential to improve long-term shareholder value, the Compensation Committee granted Mr. Bias a salary increase to approximately $197,600$216,970 annually. Considering the specific accomplishments achieved by Premier and Premier Bank in 2015,2018, and Mr. Bias’ leadership in assimilating the operations of First Bank of Charleston into Premier Bank the Compensation Committee awarded Mr. Bias a $7,500$22,000 cash bonus which was paid in March 2016.2019. As an incentive for Mr. Bias to further improve Premier’s financial performance and to reward him for long-term improvements in the stock’s value, the Compensation Committee granted him 3,3006,300 options to buy Premier stock at $13.55$15.57 per share (the closing price on the March 16, 201620, 2019 grant date as adjusted for the 10% stock dividend paid on December 9, 2016.date.) This grant wasincreased Mr. Bias’ first grant resulting in total options to buy Premier stock to 22,925, some of 3,300 atwhich were exercised before the end of 2016.2019. Additional information on Mr. Bias’ 20162019 compensation is detailed in the tables below.
Based upon an evaluation of hisMr. Kelley’s contributions toward achieving the Company’s performance in 2015,2018, his leadership over the evaluation, underwriting and presentation of larger loans to the Premier loan committee, the Premier board of directors and the Premier Bank board of directors; his direct supervision over the Company’s lending policy and practices, his leadership during regulatory examinations regarding lending practices and credit quality, and his potential to improve long-term shareholder value by identifying and suggesting solutions to mitigate credit risk in the Company’s larger loan relationships, the Compensation Committee granted Mr. Kelley a salary increase to approximately $97,450$135,000 annually. Considering the specific accomplishments achieved by Premier in 2015,2018, his direct role in the credit administration function of Premier Bank, Inc. including presentation of larger loans during board meetings and facilitating external reviews of the loan portfolio by banking regulators and other third parties and his leadership in evaluating the pre-acqusition due diligence reviewcredit quality of the First National Bankshares Corporationacquired loan portfolio and his assistance in the continuing integration of thefrom First Bank of Gassaway locations into Premier Bank, Inc.,Charleston, the Compensation Committee awarded Mr. Kelley a $10,000an $18,000 cash bonus which was paid in March 2016.2019. As an incentive for Mr. Kelley to further improve the Company’s financial performance and to reward him for long-term improvements in the stock’s value, the Compensation Committee granted him 3,1353,900 options to buy Premier stock at $13.55$15.57 per share (the closing price on the March 16, 201620, 2019 grant date as adjusted for the 10% stock dividend paid on December 9, 2016.date.) This grant increased Mr. Kelley’s total options to buy Premier stock to 35,035,55,194, some of which were exercised before the end of 2016.2019. Additional information on Mr. Kelley’s 20162019 compensation is detailed in the tables below.
Compensation Committee Report
How Compensation Plans Do Not Encourage Excessive Risk Taking
The compensation plans of the Company consist of three basic components, an annual salary, an annual bonus (awarded in common stock in the case of Mr. Walker), and grants of stock options. The annual bonus and the granting of stock options are entirely discretionary at the direction of the Board of Directors via the Compensation Committee. They are not based on any formulaic quantification that would encourage the Company’s named executive officers or the officers of its subsidiaries to choose one course of action over another. Rather, the bonuses and the amount of stock options granted are subjective in their determination based upon the Compensation Committee’s determination, with the aid of the Chief Executive Officer, of the individual’s performance toward achieving the Company’s performance and improving overall shareholder value. The annual bonus is relatively small in comparison to an employee’s annual salary, thus discouraging the manipulation of reported earnings in order to achieve a substantial portion of the named executive officers’ annual compensation. The Company believes that the risk of losing a named exectutiveexecutive officer’s entire salary in the event of termination is sufficient to deter the manipulation of reported earnings or the taking of excessive risks that would threaten the value of the Company.
Given (i) the long term incentive aspect of the base salary and stock option components of the Company’s compensation plan, (ii) the absence of any specific incentive formula in the annual bonus component, and (iii) that the named executive officers do not have employment, severance or change-of-control agreements but serve at the will of the Board of Directors, the Company does not believe its compensation plans encourage SEOs or any other employees to take unnecessary and excessive risks, including behavior focused on short term rather than long term results and value creation, or encourage manipulation of reported earnings to enhance employee compensation.
Members of the Compensation Committee:
/s/ Thomas W. Wright, Chairman
/s/ Keith F. Molihan
/s/ Neal W. Scaggs
________________________
(1) | The amounts reported in this column represent the number of options granted times the grant date fair value of stock options granted to each of the named executive officers in accordance with FASB Topic 718. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. More information about stock compensation expense, including the assumptions used in the calculation of the fair value, is included in footnote 15 to our audited financial statements for the fiscal year ended December 31, 20162019 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission.Commission. These amounts reflect the Company's accounting expense for these awards and do not necessarily correspond to the actual value that may be ultimately recognized by the named executive officers. |
(2) | The Company provides automobiles to Mr. Walker, Mr. Bias and Mr. Mineer due to their extensive travel for business purposes. The Company's expense for providing the vehicle for the executive's personal use along with all other perquisites does not exceed $10,000 and therefore is not included in this table. |
(3) | All other compensation consists of the Company's matching contributions to the executive's 401k plan account and amounts paid by the Company for the executive's participation in the Company’s benefit programs. The amounts presented for Mr. Walker include $12,000, $12,000$11,200, 7,538, and $11,667$12,077 of matching contributions to his 401k plan account for 2016, 20152019, 2018 and 2014,2017, respectively. For Mr. Bias, the amounts include $8,215$9,596, $9,263, and $0$8,937 of matching contributions to his 401k plan account for 20162019, 2018 and 2015,2017, respectively. For Mr. Mineer, the amounts include $8,040, $7,657,$9,002, $8,686, and $7.277$8,378 of matching contributions to his 401k plan account for 2016, 20152019, 2018, and 2014,2017, respectively. |
Grants of Plan Based Awards in Fiscal Year 20162019
The following table provides information about options granted to the named executive officers in 2016.2019.
Name | Grant Date | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) | Grant Date | All Other Stock Awards: Number of Shares of Stock or Units(3) (#) | All Other Option Awards: Number of Securities Underlying Options(2) (#) | Exercise or Base Price of Option Awards(2)(3) ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) |
Robert W. Walker | Mar-16-2016 | 7,700 | --- | 13.55 | 104,335 | Apr-17-2019 | 7,500 | --- | 16.78 | 125,850 |
J. Mark Bias | Mar-16-2016 | n/a | 3,300 | 13.55 | 3,498 | Mar-20-2019 | n/a | 6,300 | 15.57 | 18,333 |
Brien M. Chase | Mar-16-2016 | n/a | 5,500 | 13.55 | 5,830 | Mar-20-2019 | n/a | 6,300 | 15.57 | 18,333 |
Michael R. Mineer | Mar-16-2016 | n/a | 5,500 | 13.55 | 5,830 | Mar-20-2019 | n/a | 6,300 | 15.57 | 18,333 |
Scot A. Kelley | Mar-16-2016 | n/a | 3,135 | 13.55 | 3,323 | Mar-20-2019 | n/a | 3,900 | 15.57 | 11,349 |
________________________
(1) | Options awarded in 20162019 vest in three equal annual installments beginning on March 16, 2017.20, 2020. The exercise price of the options awarded in 20162019 was the closing price on March 16, 2016,20, 2019, the date of grant (see footnote 2 below).grant. The $1.06$2.91 per share grant date fair value of each option awarded was determined in accordance with FASB Topic 718 as more fully described in footnote 15 to Premier's December 31, 20162019 Financial Statements. |
(2) | On December 9, 2016, the Company paid a 10% stock dividend (1 share for every 10 shares owned on record date) to shareholders of record on December 2, 2016. Pursuant to the anti-dilution provisions of the stock option plans, the original number of shares of stock and options awarded has been increased by 10% and the exercise price of the options awarded has been decreased by 10% to reflect the 10% stock dividend. |
Option Exercises and Stock Vested in Fiscal Year 20162019
The following table provides information about options exercised by the named executive officers in 2016.2019.
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) |
Brien M. Chase | 4,890 | 23,478 | n/a | |
Scot A. Kelley | 8,247 | 29,868 | n/a | 3,806 | 7,464 | n/a |
The following table provides information on the current holdings of stock options by the named executive officers. This table includes unexercised and unvested option awards. Each option grant is shown separately for each named executive officer.