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Leslie S. Veluswamy,, age 34, is 37
Senior Vice President and Chief Accounting Officer of the Company and the Bank.Bank
Prior to the Merger on February 1, 2021, Ms. Veluswamy, a
certified public accountant, is responsible for financial accounting, budgeting and tax administration. From July 2016 to January 2019, Ms. Veluswamy served asCertified Public Accountant, was Senior Vice President and
DirectorChief Accounting Officer of
Financial Reporting for the CompanyLegacy Dime and
Senior Vice President and Head of Public Disclosure for the Bank.DCB. Prior to
July 2016, from 2014 tojoining Legacy Dime and DCB in 2016, Ms. Veluswamy was Assistant Controller with the insurance brokerage company, Crystal and Company
from 2014 to 2016, and, from 2008 to 2014, Ms. Veluswamy was an auditor with the public accounting firm of Crowe LLP, where her last position was as Manager.
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COMPENSATION DISCUSSION AND ANALYSIS
This compensation discussion and& analysis (the “CD&A”) describes our executive compensation program and explains how the Compensation and Human Resource Committee (the “Compensation and HR Committee”) made its compensation decisions for our named executive officers (also referred to in this CD&A as “NEOs”) listed below for fiscal year 2018.2021.
| | Kenneth J. MahonKevin M. O’Connor
| | | President and Chief Executive Officer (“CEO”)
| |
| | Stuart H. Lubow | | | President and Chief Operating Officer (“President”) | |
| | Avinash Reddy | | | Senior Executive Vice President and Chief BankingFinancial Officer (“CBO”CFO”) | |
Robert S. Volino
| Senior Executive Vice President and Chief Operating Officer (“COO”)
|
James L. Rizzo
| Senior Vice President and Comptroller (Principal Financial Officer)
|
Conrad J. Gunther | | | Senior Executive Vice President and Chief Lending Officer (“CLO”) | |
| | Patricia M. Schaubeck | | | Executive Vice President and General Counsel | |
On February 1, 2021, Bridge Bancorp, Inc. (“Legacy Bridge”) and Dime Community Bancshares, Inc. (“Legacy Dime”) closed on the merger of equals between the respective companies, with Legacy Bridge as the surviving legal entity and its name changed to Dime Community Bancshares, Inc. (the “Merger”). The initial senior executive officers of the Company were (i) Mr. O’Connor as CEO, (ii) Mr. Lubow as President, (iii) Mr. Reddy as CFO, (iv) Mr. Gunther as CLO, and (v) John M. McCaffery, Senior Executive Summary
Non-Interest bearing depositsVice President and relative shareholder returns continue to improve with upward trends. In addition to surpassing our loan growth goals for our relationship-based Business Banking division, a milestone event occurredChief Risk Officer of the Company. On June 14, 2021 Mr. McCaffery’s employment with the conversion of our core computer system to a commercial bank platformCompany terminated without Cause (as that term was defined in July 2018.
CEO Mahon,Mr. McCaffery’s Employment Agreement and Senior EVPs LubowRetention and Volino have now completed their second year together. Notably, the executive suite has only two members who have been with Dime longer than three years. We have new executives in Commercial and Residential Lending, Retail Banking, Finance, Marketing, Human Resources and Training, Technology, Information Security, Legal and Compliance, Risk, and Corporate Development among other functions. The over-arching takeaway is that there has been a virtual re-make of the entire management structure at Dime in less than two years. These are all highly qualified professionals who bring professionalism and experience from long and successful careers (primarily in banking) and with whom we plan to go forward and build long-term value for our shareholders.
Award Agreement, both dated October 16, 2020). The Company also added one new director, Ms. Barbara Koster, Chief Information Technology officer with Prudential.
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2018 Financial Performance/Strategic Highlights
The year ended December 31, 2018 was a solid year, with net income of $51.3 million, return on average assets (“ROAA”) of 0.82%, return on average equity (“ROAE”) of 8.44%, and earnings per share (“EPS”) of $1.38. During 2018,Mr. McCaffery entered into an Agreement and General Release pursuant to which the Company made significant progresspayment to Mr. Caffery in full satisfaction of the Company’s obligations under the Employment Agreement and investments towards transitioning its business model from a monoline thrift into a successful community commercial bank.the Retention and Award Agreement, as more fully described under the table, “Potential Payments Upon Termination or Change in Control,” below. Subsequent to Mr. McCaffery’s termination, Christopher Porzelt was appointed as Executive Vice President and Chief Risk Officer of the Company. He previously served as Executive Vice President and Deputy Chief Risk Officer of the Company.
Reported book value per share and tangible book value per share (which consists of tangible equity (please referPrior to the Appendix within this Proxy for a discussionMerger, Howard H. Nolan served as the Chief Operating Officer and Corporate Secretary of Legacy Bridge. As of the computationdate of tangible equity), dividedthe Merger, Mr. Nolan’s employment agreement with Bridge was cancelled pursuant to the terms of a Settlement and Release Agreement, as more fully described under the table, “Potential Payments Upon Termination or Change in Control,” below. Mr. Nolan provided consulting services to the Company from February 2, 2021 to June 30, 2021 pursuant to a Non-Competition and Consulting Agreement, as more fully described under the table, “Potential Payments Upon Termination or Change in Control,” below.
A significant milestone for the Company in 2021 was the closing of the Merger. The Merger created the opportunity to build an institution on complementary strengths and accelerate shareholder value. The Company was able to realize these opportunities in 2021 as evidenced by the number of shares outstanding) grew to $16.68 and $15.14, respectively, at December 31, 2018.following:
Successfully completed conversion of the core technology platform in June 2018. Transition to our new core platform is a key building block progress towards becoming a successful community commercial bank.
Exceptionally strong growth in non-interest bearing checking account balances. On a year-over-year basis, non-interest bearing checking deposit balances grew by 29%.
Continued strong growth in the Business Banking loan portfolio, with commercial and industrial loan balances increasing to $230 million and direct-sourced (relationship) commercial real estate (“CRE”) loan balances increasing to $429 million at year-end.
Continued expense discipline, with operating expenses to average assets (adjusted for non-recurring expenses) remaining well-controlled on a year-over-year basis.
Newly formed Residential Lending group commenced accepting residential loan applications in June 2018.
In December 2018, the Bank was designated a “Preferred Lender” by the U.S. Small Business Administration (“SBA”). The designation will enable the Bank to make SBA lending approvals more rapidly in the future. Earning this designation reflects our dedication to serving small businesses, which are essential to the economic vibrancy of our local communities.
Increase in the Company’s Liquidity levels, with Cash and Securities to Total Assets increasing to 10.4% at year-end 2018, versus 8.2% at year-end 2017.
The Company’s asset quality metrics improved on a year-over year basis, with Nonperforming assets and loans 90 days or more past due on accrual status declining by 88%; non-performing assets and loans 90 days past due or more represented only 0.04% of total assets at December 31, 2018.
Consolidated Company CRE concentration ratio declined to approximately 703% at year-end 2018, versus 778% at year-end 2017.
Returned approximately 91% of net income generated in 2018 to shareholders, via a combination of dividends and share repurchases.
2018 Key Compensation Decisions
In light of the important achievements in 2018, the Compensation and HR Committee set the total compensation packages for the NEOs in line with their responsibilities and roles at Dime.
Base salaries were increased as deemed appropriate by the Compensation and HR Committee to reflect market competitiveness.
The Company granted performance equity awards under the Company’s LTI based on reported ROAA percentile, with a potential negative modifier for Total Shareholder Return.
2018 AIP payouts were made at 79.8% of corporate targets for all NEOs, and 100% of individual target for Messrs. Mahon, Lubow, Volino, and Gunther.
Governance Best Practices
The Compensation and HR Committee, with the assistance of our independent compensation consultant, routinely reviews our compensation practices to ensure they support our compensation philosophy, are risk appropriate, market competitive and align our executives with shareholder interests. To further these objectives we:
Focus a substantial portion of pay based on achievement of predefined performance objectives as well as macro level view of performance and behaviors that enables assessment of not only accomplishments but also how they were achieved;
(1)
| Non-Interest-Bearing Deposits. In 2021, we experienced exceptional growth in non-interest-bearing deposits. Non-interest-bearing deposits increased by approximately $967 million since the closing of the Merger and represented 37.5% of total deposits at December 31, 2021. |
(2)
| Cost of Funds. We proactively managed the Bank’s cost of funds lower over the course of the year. The cost of deposits declined to 0.11% by the fourth quarter of 2021. |
(3)
| Small Business Administration Paycheck Protection Loans (“PPP Loans”). The Bank continued to be the leading community bank provider of PPP Loans on Greater Long Island. We originated over $580 million of PPP Loans in 2021. |
(4)
| Systems conversion. The Company successfully completed its Merger-related core systems integration on time without any customer disruption. |
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Maintain a recoupment policy(5)
| Efficiency Ratio. The Company maintained its strong focus on expense discipline and operated at a core efficiency ratio of 48% for fiscal 2021, compared to the announced 50% benchmark at the close of the Merger. |
(6)
| Asset Quality. The Company’s asset quality metrics remained stable on a year-over year basis. Nonperforming assets and loans 90 days or more past due on accrual status represented only 0.36% of total assets at year-end 2021 and the ratio of net charge-offs to average loans for 2021 was only 0.10%. |
(7)
| Commercial Real Estate (“CRE”) Concentration Ratio. The consolidated Company CRE concentration ratio declined to 519% at year-end 2021 versus 554% at year-end 2020. |
(8)
| Shareholder Return. The Company returned approximately 95% of reported net income generated in 2021 to shareholders, via a combination of common stock dividends and share repurchases. |
Key Compensation Decisions in 2021 – Executive Summary Compensation for all2021 was initially reviewed and discussed by the Compensation Committee of each of Legacy Bridge and Legacy Dime in conjunction with the Merger. Each Compensation Committee reviewed proposed terms of employment to be agreed upon with the NEOs, including new salary and incentive compensation paidopportunities, as well as certain transaction related compensation, including transaction bonuses, retention bonuses and one-time equity grants. These arrangements were compared to oursimilar merger of equals transactions and a peer group analysis was provided by Legacy Bridge’s Compensation Committee’s independent compensation consultant, McLagan, part of the Human Capital Solutions division of Aon plc (“McLagan”). Based on the comparison to similar merger of equals transactions and McLagan’s peer group analysis, the following compensation decisions were made by the Company in 2021, which are explained in more detail below.
Base Salaries
Base salaries were set in conjunction with the Merger and were maintained at those levels through 2021.
Employment and Change in Control Agreements
In conjunction with the Merger, new employment agreements were entered into with Messrs. O’Connor, Lubow, Reddy, Gunther and McCaffery. In addition, the Company entered into a retention and award agreement with each NEO and Messrs, McCaffery and Nolan, which provided for transaction and retention awards comprised of cash and equity, effective with the closing of the Merger, as described in more detail below under “Merger-Related Compensation.” The Company also entered into defense of tax position agreements with Messrs. O’Connor, Lubow, Reddy, Gunther and McCaffery. The agreements with the NEOs are described in more detail below under the heading, “Employment Agreements.”
In May 2021, the Company amended the Employment Agreements of Messrs. O’Connor, Lubow, Reddy and Gunther to delete the provision requiring the offset, in the event of a financial restatement;
Have stock ownership guidelines which set forth minimum stock ownership requirements for our NEOs;
Conduct risk assessments of our incentive compensation programs;
Maintain anti-hedging and pledging policies;
Pay long-term incentives in Company stock (including performance-based shares) to align NEO incentive compensation with shareholder interests; and
Include double triggers on potential change in control severance payments.occurring within twenty-four months of the Merger, of the value of the one-time equity grant granted to these executives in connection with the Merger. In addition, Ms. Schaubeck’s pre-existing change in control employment agreement was amended to provide that in the event of an involuntary termination under a Change in Control of the Company (as defined in the change in control employment agreement), Ms. Schaubeck would receive three times her compensation. The change in control employment agreement previously provided for the payment of two times compensation. Ms. Schaubeck’s agreement is described in more detail below under the heading, “Employment Agreements.”
In December 2021, Mr. Lubow’s Employment Agreement was further amended to increase his annual equity grant opportunity from 50% to 65% of base salary, commencing with the 2022 annual equity grant, and to increase his annual cash bonus opportunity from 65% to 100% of base salary, commencing with the annual cash bonus opportunity for the year beginning January 1, 2021. The increased award opportunities were made to better reflect Mr. Lubow’s efforts in the integration of the merged banks and his significant contribution to the positive results of the merged Company. The Compensation Committee acknowledged Mr. Lubow’s key responsibilities for the day-to-day operations of the Company. Further, the Compensation Committee viewed Mr. Lubow as having responsibilities that significantly contribute to the current and expected future success of the Company.
2021 Annual (Cash) Incentive Plan (“2021 AIP”)
In March 2022, the NEOs were paid annual cash incentives under the 2021 AIP for 2021 performance. As more fully discussed below under “2021 AIP,” each of the NEOs were paid 149% of the corporate performance goals under the 2021 AIP and 120% of the discretionary portion of the 2021 AIP.
2021 Long-Term (Equity) Incentive Plan (“2021 LTIP”)
Prior to the Merger, consistent with Legacy Bridge past practice, in January 2021, Messrs. O’Connor and McCaffery were granted restricted stock awards under Legacy Bridge’s 2021 Long Term Stock Incentive Program. The shares vest ratably over four years. In
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July 2021, the Compensation Committee awarded restricted stock to the NEOs under the 2021 LTIP and, except for Mr. O’Connor, were comprised of 60% performance-based awards and 40% time-vested awards. Mr. O’Connor’s July 2021 restricted stock award under the 2021 LTIP was reduced by the time-based restricted stock award granted to Mr. O’Connor in January 2021. Further, Mr. O’Connor’s award was comprised 100% of performance-based awards to better align the composition of his total 2021 long-term incentive award between time-vested and performance-based awards as provided under the 2021 LTIP. Long-term incentive awards are described in more detail below under the heading, “2021 LTIP.”
Retirement Benefits
In October 2021 the Company adopted a supplemental executive retirement plan (“SERP”). The SERP is intended to make participants in the SERP whole for the amounts that would have been contributed to the BNB Bank Pension Plan (the “Pension Plan”) and the Dime Community Bank 401(k) plan (the “401(k) Plan”) but for limits imposed by the Internal Revenue Code of 1986. Participation in the SERP commenced on
Pay ResultsOctober 1, 2021. Messrs. O’Connor and Lubow participate in the defined benefit portion and 401(k) portion of the SERP. Messrs. Reddy and Gunther and Ms. Schaubeck participate in the 401(k) SERP. Messrs. O’Connor’s, Lubow’s, Reddy’s and Gunther’s Employment Agreements provide that the executive shall be entitled to participate in benefits plans sponsored by the Company, including, without limitation, a supplemental executive retirement plan to the extent such plan is being provided to similarly situated executives in the Company. The SERP is discussed in more detail below under the heading, “Perquisites and Other Personal Benefits.”
Merger-Related Compensation
In conjunction with the Merger, the Company entered into retention and award agreements with each of the NEOs, as described in more detail below under the heading, “Employment Agreements.” The retention and award agreements provide for (i) a cash transaction bonus, which was paid in the first payroll period following the closing date of the Merger, (ii) a retention bonus, half of which was paid in cash on the one-year anniversary of the closing date of the Merger and half of which was a restricted stock retention award which cliff vested on the one-year anniversary of the closing date of the Merger, and (iii) a one-time equity grant of restricted stock which will vest in equal annual installments on the second, third, and fourth anniversary of the closing date of the Merger.
In connection with the Merger, the Compensation Committees of Legacy Bridge and Legacy Dime reviewed the proposed terms of employment to be agreed upon with certain executive officers (Messrs. O’Connor, Lubow, McCaffery, Reddy and Gunther), including new salary and incentive compensation opportunities, as well as certain transaction related compensation, including transaction bonuses, retention bonuses, and one-time equity grants, for approval by Board of Directors of Legacy Bridge. The major objective for the terms of employment was to retain these senior executives in the merged entity as they were key to the successful integration and performance of the resulting entity from the Merger. The importance of the retention of executive management was heightened as the Merger was being negotiated and likely to close during the COVID-19 pandemic. Further, the resultant entity of the Merger would exceed $10 billion in assets, crossing the threshold for enhanced regulatory scrutiny whereby executive leadership would be even more critical. The Compensation Committees acknowledged that management strength is particularly important in a merger of equals transaction and the goal in setting compensation for these key executives was to provide them with comprehensive, fair and reasonable compensation arrangements. These arrangements were compared to similar merger of equals transactions and a peer group analysis was provided by the Legacy Bridge Compensation Committee’s independent compensation consultant, McLagan. McLagan concluded that the proposed compensation was reasonable and appropriate as compared to market, based upon market data and the asset size of the combined entity.
At the Company’s 20182021 annual shareholder’sshareholders’ meeting, we received strong support for our executive compensation programs with 94.1%93.8% of the votes by shareholders cast in favor of a non-binding resolution to approve NEO compensation. The Compensation and HR Committee regardedCompany considered the results of thisshareholder advisory vote as supportfrom the most recent annual meeting to be a positive endorsement of its current pay practices and believes the vote result is evidence that its compensation policies and decisions have been in the best interests of shareholders. As a result, the Compensation Committee retained its overall approach to NEO compensation and, therefore, did not change its overall executive compensation policies or programswhich was revised as a consequenceresult of the shareholder vote.Merger as discussed herein. The Company continueswill continue to seek annual shareholder feedback on ourmonitor the level of support for each say-on-pay proposal in the future and will consider this alongside other factors as it makes future executive compensation programsdecisions.
Compensation Philosophy and
encourages shareholder feedback.Our Compensation Philosophy
Objectives
The Company’s executive compensation philosophy is, consistent with prudent banking business practices, to provide competitive target compensation opportunities with actual amounts earned commensurate with the Company’s financial performance and the generation of long-term value for shareholders through dividends and stock price appreciation. The goals of the executive compensation program are to enable the Company to attract, develop and retain an executive team capable of maximizing the Company’s performance for the benefit of its shareholders. The Company’s executive compensation philosophy is, consistent with prudent banking business practices, to provide competitive target compensation opportunities with actual amounts earned commensurate with its financial performance and the generation of long-term value for shareholders through dividends and stock price appreciation.
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To accomplish these goals, the Company sets a base salary to provide a reasonable level of predictable base income and near- and long-term performance-based compensation to provide the NEOs with clear opportunities to increase the value of their compensation by positive contribution to stockholder interests.
Pay opportunities are targeted at market median with the ability to increase or decrease actual pay earned based on our performance. The pay elements are intended to balance an appropriate mix of risk and return. Annual incentive awards are designed to provide incentives to encourage efforts to attain near-term goals, which do not encourage excessive risk taking. Long-term performance-based and time-vested restricted stock awards align
executive’sexecutives’ interests with the Company’s shareholders and serve to retain executives over the long term.
Pay Mix
Our compensation program consists of three primary components: (i) base salary, (ii) cash-based, annual incentive awards (“AIP”), and (iii) equity-based, long-term incentive awards (“LTI”). We also offer certain retirement and other benefits. During 2018, the Company was a party to employment agreements with Messrs. Mahon, Lubow and Gunther, and a party to change in control agreements with Messrs. Volino and Rizzo. The target pay mix for the CEO and average NEO for 2018 is illustrated in the following charts:
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Executive Compensation Program Components and 2018 Pay Decisions
Components of our NEO Compensation Program
Base salary;
Annual cash incentives;
Long-term equity incentives;
Employment, Change in Control, and Retention Agreements; and
Retirement benefits and limited perquisites.
Base Salary
The Company seeks to pay competitive base salaries that provide a reasonable level of recurring income to reflect each executive’s role. Executive base salary levels are generally reviewed on an annual basis in comparison to market benchmarking and adjusted as appropriate, with no guarantee of annual increases. Base salaries are targeted at market median with the ability to reflect performance, experience, contribution and unique roles. The Company desires to compensate executives fairly while being sensitive to managing fixed costs.
For 2018 NEO base salaries, the Compensation and HR Committee considered prevailing market conditions, individual contributions, Company performance, and competitive market perspective conducted by a nationally recognized compensation consulting firm. The salary increase for Mr. Rizzo was increased to reflect his expanded role as Principal Financial Officer. The salary increases for Messrs. Lubow, Volino, and Gunther were increased to be in-line with peer competitors based on market data provided by our independent compensation consultant.
Name | 2017 Salary | 2018 Salary | % Increase |
Kenneth J. Mahon | $ | 825,000 | | $ | 825,000 | | | 0.0 | % |
Stuart H. Lubow | | 450,000 | | | 475,000 | | | 5.6 | % |
Robert S. Volino | | 420,000 | | | 445,000 | | | 6.0 | % |
James L. Rizzo | | 250,430 | | | 262,952 | | | 5.0 | % |
Conrad J. Gunther | | 325,000 | | | 350,000 | | | 7.7 | % |
2018 Annual Incentive Plan (“AIP”)
Our 2018 Annual Incentive Plan, also referred to as our AIP, is a short-term incentive plan administered under our 2013 Equity and Incentive Plan to provide our NEOs with the opportunity to earn an annual cash award based on the achievement of pre-defined corporate, strategic, and individual performance goals. We designed our 2018 AIP to encourage teamwork and collaboration while recognizing the unique roles/contributions each executive has in driving our strategic plan and business performance.
The following table sets forth the award opportunities for each of our NEOs under the 2018 AIP(1).
Name and Principal Positions | Salary | Threshold Payout ($)
and % of Salary | Target Payout ($)
and % of Salary | Stretch (0r Max) Payout ($)
and % of Salary |
Kenneth J. Mahon | $ | 825,000 | | $ | 268,125 | | $ | 536,250 | | $ | 804,375 | |
President and CEO | | | | | 32.5 | % | | 65.0 | % | | 97.5 | % |
| | | | | | | | | | | | |
Stuart H. Lubow | | 475,000 | | $ | 106,875 | | $ | 213,750 | | $ | 320,625 | |
SEVP and CBO | | | | | 22.5 | % | | 45.0 | % | | 67.5 | % |
| | | | | | | | | | | | |
Robert S. Volino | | 445,000 | | $ | 100,125 | | $ | 200,250 | | $ | 300,375 | |
SEVP and COO | | | | | 22.5 | % | | 45.0 | % | | 67.5 | % |
| | | | | | | | | | | | |
Conrad J. Gunther | | 350,000 | | $ | 70,000 | | $ | 140,000 | | $ | 210,000 | |
EVP and CLO | | | | | 20.0 | % | | 40.0 | % | | 60.0 | % |
| (1) | Mr. Rizzo did not participate in the 2018 AIP as he was not an executive officer, an eligibility requirement of the plan. |
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Target dollars noted in the above chart represent the payout level for performance at threshold, target, and stretch, with payout at threshold equal to 50% of the target opportunity and stretch equivalent to a payout of 150% of target. Performance below threshold results in no payout under the AIP.
The performance goals were established by the Compensation and HR Committee early in 2018 to assist the Company in meeting its growth and profitability objectives for the year, which were rooted in the formal capital plan reviewed and approved by the Board of Directors (the “Capital Plan’). The three significant corporate financial measures (“Corporate Measures”) were: Reported Pre-Tax Earnings (25%), Non-Interest Expense (50%), and High Quality Deposits (25%). The Compensation and HR Committee also reserves the ability to consider other qualitative measures of performance and to adjust corporate earnings to reflect extraordinary or one-time events in considering the payout for the Corporate component of the AIP.
The Corporate Measures and weighting for the participating NEOs were as follows:
Name and Principal Positions | Corporate Goals | Individual/Strategic Goals |
Kenneth J. Mahon – President and CEO | | 75 | % | | 25 | % |
Stuart H. Lubow – SEVP and CBO | | 50 | % | | 50 | % |
Robert S. Volino – SEVP and COO | | 50 | % | | 50 | % |
Conrad J. Gunther – EVP and CLO | | 25 | % | | 75 | % |
For all of our NEOs who participated in the 2018 AIP, the performance criteria used for the 2018 AIP includes individual/strategic goals, although the weighting varies by role.
For Mr. Mahon, the 2018 AIP was based 75% on the Corporate goals as described above and 25% on individual/strategic goals. The Compensation and HR Committee’s review of Mr. Mahon’s leadership and guidance in order to accomplish the strategic plan goals for the year, as well as the attainment of the items summarized in the “2018 Financial Performance/Strategic Highlights”, determined that he satisfied 100% of his individual/strategic goals.
For Mr. Lubow, who has departmental responsibility for Business Banking, the 2018 AIP award was based 50% on the Corporate Goals and 50% on individual/strategic goals. In connection with the Compensation and HR Committee’s review of Mr. Lubow’s 2018 performance, the Compensation and HR Committee recognized his efforts in the continued buildout of Business Banking, which included strong growth of both the relationship-based loan portfolio and in non-interest bearing checking accounts. Additionally, Mr. Lubow oversaw the successful launch of the Company’s residential lending business. The Compensation and HR Committee awarded Mr. Lubow with 100% of his individual/strategic performance target under the 2018 AIP.
For Mr. Volino, the 2018 AIP was based 50% on the Corporate Goals and 50% on individual/strategic goals. As COO of the Company, Mr. Volino was charged with oversight of various projects that played a key role in the achievement of the Corporate Goals, such as the core system conversion and firm-wide initiatives to improve efficiency. Mr. Volino also devoted significant time focusing on the retail business transformation and the shift to business accounts from consumer accounts. The Compensation and HR Committee considered these efforts and awarded Mr. Volino with 100% of his individual/strategic performance target under the 2018 AIP.
For Mr. Gunther, who has responsibility to oversee the Company’s lending business, the 2018 AIP was based 25% on Corporate Goals and 75% on individual/strategic goals. Mr. Gunther played a key role in the managing the growth of both the relationship-based loan portfolio and in non-interest bearing checking accounts. His oversight of the SBA loan business also helped the Bank to achieve “Preferred Lender” designation by the SBA, which will enable the Bank to make SBA lending approvals more rapidly in the future. The Compensation and HR Committee determined that Mr. Gunther satisfied 100% of his 2018 AIP individual/strategic goals.
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Results of the Corporate Measures relative to the pre-established objectives were as follows:
Corporate Measures | Weight | Threshold | Target | Stretch | Result | Result as an
Interpolated
Percentage
of the Target | Weighted
Result |
Pre-tax Earnings | | 25 | % | $ | 53,600 | | $ | 66,600 | | $ | 83,700 | | $ | 66,715 | | | 100.3 | % | | 25.1 | % |
Non-interest expense | | 25 | % | $ | 87,000 | | $ | 86,100 | | $ | 84,000 | | $ | 86,890 | | | 56.1 | % | | 14.0 | % |
High Quality Deposits(1) | | 50 | % | $ | 548,159 | | $ | 599,081 | | $ | 718,897 | | $ | 580,049 | | | 81.3 | % | | 40.7 | % |
TOTAL | | | | | | | | | | | | | | | | | | | | 79.8 | % |
| (1) | High Quality Deposits defined as the sum of: Multifamily MMAs, Total Commercial Lending deposits, Business Banking MMAs, Total Branch Business deposits, and Branch Consumer Checking deposits. |
To balance incentives to achieve financial results against the need to discourage excessive risk-taking, the Compensation and HR Committee also considered Company performance on supplemental measures, including efficiency ratio, non-performing assets (in dollars and as a percentage of average total assets), net charge-offs (in dollars and as a percentage of average loans) and capital ratios, relative to historical and peer results.
Based upon the overall financial results, consideration of individual performance of the NEO’s individual goals, and the supplemental risk-based performance, the Compensation and HR Committee approved the annual incentive payouts in the table below. All NEOs were determined by the Compensation and HR Committee to achieve 100% of their individual performance goals. No negative risk adjustments were used. Based on the weight allocation between Company and individual performance, the approved payouts were determined below.
Name | Target | Corporate
Performance
Achieved
(79.8% of target) | Individual Performance
(% of Target
and $) | Total 2018
AIP Payment | Total Payment as a
% of Target |
Kenneth J. Mahon | $ | 536,250 | | $ | 320,817 | | $ | 134,063 (100 | %) | $ | 454,880 | | | 84.8 | % |
Stuart H. Lubow | | 213,750 | | | 85,252 | | | 106,875 (100 | %) | | 192,127 | | | 89.9 | % |
Robert S. Volino | | 200,250 | | | 79,868 | | | 100,125 (100 | %) | | 179,993 | | | 89.9 | % |
Conrad J. Gunther | | 140,000 | | | 27,919 | | | 105,000 (100 | %) | | 132,919 | | | 94.9 | % |
Total for NEOs | | 1,090,250 | | $ | 513,856 | | $ | 446,063 | | $ | 959,919 | | | | |
2018 Long Term (Equity) Incentive (“LTI”) Program
The foundation of our compensation philosophy is pay for performance, therefore we have designed a Long Term Incentive Program, also referred to as our LTI, that aligns our executives with our long-term performance and resulting shareholder value. We believe our 2018 LTI is an effective means of creating a link between the interests of our shareholders, our financial performance and retaining executive management.
Below are the target LTI opportunities for the four NEOs participating in the 2018 Program.
Name
| Target of
Base Salary
|
Kenneth J. Mahon, President and CEO
| 60%
|
Stuart Lubow, Senior EVP and CBO
| 50%
|
Robert S. Volino, Senior EVP and COO
| 50%
|
Conrad J. Gunther, EVP and CLO
| 40%
|
| (1) | Mr. Rizzo did not participate in the 2018 LTI as he was not an executive officer, an eligibility requirement of the plan. |
The 2018 LTI were granted as 60% of performance share awards (“PSAs”) and 40% as time-vested restricted stock awards (“RSAs”).
The PSAs were granted at target and vest based on 3-year (i.e. 2018 – 2020) ROAA percentile compared to a broad Bank Industry Index with an additional negative modifier if our Total Shareholder Return (“TSRs”) falls
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below the 30th percentile. The PSAs are performance based and will only vest based on performance related to our profitability and relative shareholder returns. The remaining 40% of the LTI were granted in the form of time-vested RSA with 4 year incremental vesting (i.e. 25% per year). The RSAs support our goal of executive ownership and shareholder alignment as well as provides powerful retention of key executives. The LTI is administered under the Company’s 2013 Equity and Incentive Plan.
The following table sets forth the performance goals for the PSAs. Once the defined threshold level of performance is achieved, payouts can vary from 50% of the target for the threshold level of performance to a maximum payout of 150% of the target for stretch performance. Payouts will be interpolated between these points.
Measure | Weight | Threshold | Target | Stretch |
3-year Relative ROAA | 100% | 40th percentile | 60th percentile | 70th percentile |
Payout Range (% of Target) | — | 50% | 100% | 150% |
3-Year Relative TSR Negative Adjustment (-20%) | — | If TSR relative to the Industry Index is lower than the 30th percentile, the payout will be adjusted negatively by 20% |
The following table sets forth the 2018 LTI opportunities for each NEO:
| Performance-
based | Time-vested | |
Name | PSA | Number of Shares
of RSA (#) | Grant Date Fair
Value of RSAs ($)(1) | Total Value |
Kenneth J. Mahon | $ | 297,000 | | | 10,025 | | $ | 198,000 | | $ | 495,000 | |
Stuart H. Lubow | | 142,500 | | | 4,810 | | | 95,000 | | | 237,500 | |
Robert S. Volino | | 133,500 | | | 4,506 | | | 89,000 | | | 222,500 | |
Conrad J. Gunther | | 84,000 | | | 2,835 | | | 56,000 | | | 140,000 | |
| (1) | Calculated based upon a grant date fair value of $19.75 per award, the closing price of the Common Stock on April 30, 2018. |
The Compensation and HR Committee does not have discretion to increase the size of the payout or to award compensation if the goals are not met, but may exercise negative discretion considering the Company’s performance relative to peers and other relevant factors. PSA’s are awarded as shares of Common Stock in the first quarter of 2021 if the NEO is employed on December 31, 2020 and based on actual performance. If an NEO’s employment terminates prior to the end of a performance period due to death, disability or retirement, the Company’s obligation will be prorated for performance as of the date of termination and paid at the end of the performance period unless the Compensation and HR Committee determines otherwise. The Compensation and HR Committee may provide for immediate payout in the case of death. In the event of a change of control, performance will be assessed through the change of control date and a prorated payment made as soon as possible after that date. If the actual performance results cannot be calculated, the target will be used.
Payout Under 2016 - 2018 LTI Program.
Our LTI program in 2016 included both a cash component and an equity-based long-term incentive of 60% granted as performance share awards and 40% granted as time-vested restricted stock awards. The time-vested restricted stock awards vest 25% per year and will continue to vest through 2019.
Payouts under the performance-based cash and equity components that vest based on performance over a 3 year period, January 1, 2016 – December 31, 2018 are described below.
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The cash component was based on relative TSR compared to the compensation peer group selected in 2016. The established performance goals, actual achievement levels and LTI earned for the measurement period are shown in the following table:
Performance Goal | Weight | Threshold | Target | Maximum | Result | Achievement
(% of Target) |
TSR (percentile rank in peer group)(2) | | 50 | % | | 40th | | | 50th | | | 75th | | | 58th | | | 116.0 | % |
| (1) | The peer group for this LTI component was developed, as of December 31, 2015, by a nationally recognized compensation consulting firm, and consisted of the following: Astoria Financial Corporation, Flushing Financial Corp., Investors Bancorp, Inc., Kearny Financial Corp, Northfield Bancorp, OceanFirst Financial Corporation, Oritani Financial Corp., Provident Financial, Sterling Bancorp, Sun Bancorp, Inc., TrustCo Bank Corp and Valley National Bancorp. |
The PSAs consisted of two metrics, cumulative core EPS and ROAE, each split evenly. The performance period was January 1, 2016 to December 31, 2018. Actual performance was assessed in March 2019 and certified by the Compensation and HR Committee for payout in March 2019. The established performance goals, actual achievement levels and PSAs earned for the measurement period are shown in the following tables:
Performance Goal | Weight | Threshold | Target | Maximum | Result | Achievement
(% of Target) | Weighted
Achievement(1) |
Cumulative Core EPS(2) | | 50 | % | $ | 3.89 | | $ | 4.58 | | $ | 5.27 | | $ | 3.87 | | | 0 | % | | 0 | % |
Cumulative ROAE(2) | | 50 | % | | 8.18 | % | | 9.62 | % | | 11.06 | % | | 8.23 | % | | 51.7 | % | | 25.9 | % |
TOTAL | | | | | | | | | | | | | | | | | | | | 25.9 | % |
| (1) | The Weighted Achievement is calculated as the Achievement (% of Target) multiplied by the weighting of the respective performance goal in determining the payout amount. |
| (2) | Please refer to the Appendix within this Proxy for a discussion of the computation of Cumulative Core EPS and Cumulative ROAE. |
The cash payments made under the 2016 – 2018 LTI Program were as follows(1):
| Cash Payments | Performance Shares |
Name | Achievement % | Payment Upon
Settlement | Achievement % | Shares Vested
Upon Settlement |
Kenneth J. Mahon | | 116.0 | | $ | 95,700 | | | 25.9 | | | 1,230 | |
Robert S. Volino | | 116.0 | | | 41,760 | | | 25.9 | | | 537 | |
| (1) | Messrs. Lubow, Gunther, and Rizzo did not participate in the 2016-2018 LTIP as they were not executive officers, an eligibility requirement of the plan. |
Executive Agreements
Employment and Change in Control Employment Agreements
During 2018, the Bank and the Company maintained employment agreements with Messrs. Mahon, Lubow and Gunther that protected both the Company and those individuals in the event of certain separation events. In 2019, the Company entered into Change in Control Employment Agreements (“Change in Control Agreements”) with Messrs. Lubow, Volino, Gunther and Rizzo. The Change in Control Agreements with Messrs. Lubow and Gunther replace their prior employment agreements. The Change in Control Agreements with Messrs. Volino and Rizzo replace their prior retention agreements. The employment agreement for Mr. Mahon generally protects Mr. Mahon in the event of certain terminations of employment within three years following a change in control. The Change in Control Agreements generally protect the covered individuals in the event of certain terminations of employment within two years following a change in control. The Compensation and HR Committee believes the terms of our employment agreements are in line with industry standards and are necessary to maintain a stable management team. See “Executive Compensation - Agreements with Our Named Executive Officers Upon Termination of Service and Change in Control” for additional information on the agreements.
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Retention Agreements with Other NEOs
During 2018, the Bank and the Company maintained Retention Agreements with Messrs. Volino and Rizzo. See “Executive Compensation - Agreements with Our Named Executive Officers Upon Termination of Service and Change in Control” for additional information on the agreements.
Retirement Benefits and Perquisites
Retirement Plan.The Bank maintains the Retirement Plan of Dime Community Bank (the “Retirement Plan”), a noncontributory, tax-qualified defined benefit pension plan for all eligible employees. Only Messrs. Mahon and Rizzo are participants in the plan as all participant benefits under the Retirement Plan were frozen effective April 1, 2000, and no benefits have been accrued under the Retirement Plan since that date.
KSOP. The KSOP allows eligible employees, including the NEOs, to supplement their retirement savings with elective deferral contributions that we match at specified levels. The KSOP also provides for additional discretionary employer contributions, subject to the Internal Revenue Code (“Code”) contribution limits.
Benefit Maintenance Plan (“BMP”). The BMP is a non-qualified deferred compensation plan that provides our NEOs with supplemental retirement benefits. We believe the benefits provided through the BMP reflect competitive practices for similarly-situated officers employed by our peers whose tax-qualified retirement benefits are limited by the Code. The Compensation and HR Committee reviews the BMP design periodically with due consideration given to prevailing market practices, overall executive compensation philosophy and cost to the Company. See “Executive Compensation - Pension Benefits” for information on the terms of the BMP. With the exception of Mr. Rizzo, the NEOs and certain other officers are eligible to participate in the BMP.
The Compensation and HR Committee believes that perquisites should be limited in scope and have a business-related purpose. The Compensation and HR Committee periodically reviews perquisites to ensure alignment with the desired philosophy. The Compensation and HR Committee approves specific perquisites or benefits for individuals based on the needs of the position.
In 2018, perquisites for all of the NEOs included either an automobile allowance or the right to use a Company automobile, which are represented under “Executive Compensation - Summary Compensation Table” under Footnote 7.
Executive Compensation Process
Role of the Compensation and HR Committee
The Compensation and HR Committee consists of three independent members of the Board. The Chairman of the Compensation and HR Committee presents a summary of each meeting during the Board meetings. The Compensation and HR Committee met five times during the year ended December 31, 2018.
The Compensation and HR Committee’s primary responsibilities include the following:
Oversees administration of the process for determining the compensation and benefits of officers and employees of the Company and the Bank.
Assists the Board in its oversight of the human resources activities of the Company and its subsidiaries.
Evaluates the performance of the CEO and executive officers in determination of base salary.
Evaluates the annual incentive program, based on Corporate and Individual performance components, in determination of cash awards to the CEO and executive officers.
Evaluates the long-term incentive program, based on the Company’s absolute and relative performance, in determination of cash and equity awards.
Reviews and approves all NEO agreements.
Recommends Director compensation to the Board.
Oversees the Company’s compliance with all regulations related to executive compensation.
Reviews and approves the CD&A.
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The Compensation and HR Committee, with the assistance of management and itsour independent compensation consultant, routinely reviews our compensation practices to ensure they support our compensation philosophy, are risk appropriate, market competitive and align our executives with shareholder interests. In support of this philosophy, the following summarizes the Company’s compensation governance and compensation practices:
| | Conduct annual shareholder advisory vote on compensation of our Named Executive Officers | | | We do not permit the hedging or pledging of Company securities | |
| | Maintain a Compensation Committee comprised entirely of independent directors | | | We do not allow for the repricing of the exercise price of stock options except in connection with corporate transactions or the approval of shareholders | |
| | Retain an independent executive compensation consultant to the Compensation Committee | | | We do not provide for gross-up payments to cover personal income taxes or excise taxes in connection with change in control severance payments | |
| | Conduct an annual incentive compensation risk assessment | | | | |
| | Maintain a clawback policy | | | | |
| | Require minimum stock ownership requirements for all directors and Named Executive Officers | | | | |
| | Maintain an Insider Trading Policy that establishes pre-determined window periods for trading in Company securities | | | | |
| | Double trigger on potential change in control severance payments. | | | | |
| | Provide annual and long-term incentive plans with performance goals aligned with shareholder interests | | | | |
| | Provide that a substantial portion of long-term equity awards are based on corporate goals | | | | |
| | Provide that 60% of long-term incentive equity awards are performance based | | | | |
For NEOs, compensation comparisons are based on a peer group of banks, taking into consideration asset size, geographic location, and loan portfolio composition. However, reasonable exceptions to this market comparison methodology are considered as appropriate by the Compensation Committee. The Compensation Committee uses competitive compensation data from the annual total compensation study of peer companies to inform its
philosophydecisions about overall compensation opportunities and
executivespecific compensation
programs annually.Roleelements. Additionally, the Compensation Committee uses multiple reference points when establishing targeted compensation levels. The Compensation Committee does not benchmark specific compensation elements or total compensation to any specific percentile relative to the peer companies or the broader market. Instead, the Compensation Committee applies judgment and discretion in establishing targeted pay levels, taking into account not only competitive market data, but also factors such as the Company’s business and individual performance, scope of Management
In orderresponsibility, critical needs and skill sets, leadership potential and succession planning.
The Charter for the Compensation
and HR Committee
to make decisions regarding base salary, annual and long-term incentives, and other aspects ofprovides that the Compensation Committee is responsible for reviewing the Company’s
benefit programs, members of Management and Human Resources (“HR”)incentive compensation arrangements to ensure that they are
asked to provide input on Corporate objectives and individual performance goals. Input from members of Management and HR are considered to be suggestions and recommendations for the Compensation and HR Committee’s consideration.Role of the Compensation Consultant and Advisors
The Compensation and HR Committee utilizes legal counsel, as necessary, and a nationally recognized compensation consulting firm, to assist in performing its duties. The Compensation and HR Committee relies on legal counsel to advise on its obligations and rights under applicable corporate, securities and employment laws, to assist in interpreting the Company’s obligations and rights under compensation plans and agreements, and to draft plans and agreements to document business decisions. Meridian Compensation Partners LLC (“Meridian”) served as independent advisor to the Compensation and HR Committee for benchmarking and decisions related to the 2018 compensation program.
The Compensation and HR Committee evaluated the independence of both the compensation consulting firm and legal counsel to assess whether their work raised conflicts of interest under NASDAQ listing standards and SEC rules. Based on this review, Meridian and legal counsel were both determined to be independent and their work did not raise any conflicts of interest.
Benchmarking and Peer Group
In making executive compensation decisions, the Compensation and HR Committee seeks to maintain a strong linkage between pay and corporate performance, both in absolute terms and in relation to a designated peer group. The Compensation and HR Committee uses a peer group to review pay program competitiveness and to assess corporate performance. The members of our peer group are reviewed each year to determine relevance of the peer set.
The table below shows how the peer group was chosen and how it is used:
HOW THE PEER GROUP IS CHOSEN
|
The Company approximates the median total asset size of the peer group.
| The Company approximates the median market capitalization of the peer group.
|
The peer group members operate in the Company’s region.
| The peer group has a similar overall business model to the Company.
|
The Company engages a nationally recognized compensation consulting firm to evaluate and recommend an appropriate peer group.
| |
| |
| |
HOW THE COMPENSATION AND HR COMMITTEE USES THE PEER GROUP
|
For input in developing base salary ranges, annual incentive targets and LTI award ranges.
| To benchmark share ownership guidelines.
|
To assess the competitiveness of total direct compensation awarded to executives.
| To validate whether executive compensation programs are aligned with Company performance.
|
As an input in designing compensation plans, benefits and perquisites.
| |
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The peer group utilized was comprised of the following companies in 2018:
Company Name | City and State of Corporate Headquarters | Total Assets(1) |
Bridge Bancorp, Inc. | Bridgehampton, NY | $ | 4.70 | |
ConnectOne Bancorp, Inc. | Englewood Cliffs, NJ | | 5.46 | |
Customers Bancorp, Inc. | Wyomissing, PA | | 9.83 | |
Eagle Bancorp, Inc. | Bethesda, MD | | 8.39 | |
First of Long Island Corporation | Glen Head, NY | | 4.24 | |
Flushing Financial Corporation | Uniondale, NY | | 6.83 | |
Investors Bancorp, Inc. | Short Hills, NJ | | 26.23 | |
Kearny Financial Corp. | Fairfield, NJ | | 6.58 | |
Lakeland Bancorp, Inc. | Oak Ridge, NJ | | 5.81 | |
Northfield Bancorp, Inc. | Woodbridge, NJ | | 4.41 | |
Northwest Bancshares, Inc. | Warren, PA | | 9.61 | |
OceanFirst Financial Corp. | Toms River, NJ | | 7.52 | |
Oritani Financial Corp. | Township of Washington, NJ | | 4.17 | |
Peapack Gladstone Financial Corporation | Gladstone, NJ | | 4.62 | |
Provident Financial Services, Inc. | Iselin, NJ | | 9.73 | |
Sandy Spring Bancorp, Inc. | Olney, MD | | 8.24 | |
TrustCo Bank Corp NY | Glenville, NY | | 4.96 | |
WSFS Financial Corporation | Wilmington, DE | | 7.25 | |
Median | | | 6.71 | |
Dime Community Bancshares, Inc. | Brooklyn, NY | | 6.40 | |
| (1) | As of December 31, 2018. Amount is in billions. |
In addition to the peer group, the Compensation and HR Committee considers market data from published industry surveys to supplement the proxy data and provide data for executives who are not NEOs.
Other Compensation Policies/Practices
Stock Ownership and Retention Requirement - The Company has a policy that requires executives to own shares of Common Stock with an aggregate value tied to a multiple of their base salary. Mr. Mahon’s guideline is to own shares with an aggregate value of at least equal to 500% of his annual rate of base salary. Senior Executive Vice Presidents are required to own with an aggregate value at least equal to 300% of their annual rate of base salary, Executive Vice Presidents are required to own shares with an aggregate value at least equal to 200% of their annual rate of base salary. The stock ownership requirement is phased in ratably over five years for newly appointed executive officers. Shares owned directly and in vested retirement accounts, shares in vested accounts under the Company’s BMP and unvested restricted stock awards count toward these limits. Unexercised stock options do not count toward these requirements. The following table indicates the stock ownership requirement applicable to each NEO based on the salary of each NEO and the stock price, as well as the stock ownership of each, as of the Record Date:
Name of NEO(1) | Stock Ownership
Requirement
(multiple) | Stock Ownership
Requirement
at Record Date
(# of Shares) | Stock Ownership
at Record Date
(# of Shares) | Stock Ownership
Value at
Record Date(2) |
Kenneth J. Mahon | | 5x | | | 218,139 | | | 547,955 | | $ | 10,361,829 | |
Stuart H. Lubow(3) | | 3x | | | 75,357 | | | 29,488 | | | 557,618 | |
Robert S. Volino | | 3x | | | 70,598 | | | 85,157 | | | 1,610,319 | |
Conrad J. Gunther(4) | | 2x | | | 37,017 | | | 8,540 | | | 161,491 | |
| (1) | Mr. Rizzo was not subject to the stock ownership requirement in 2018, as he was not an executive officer during 2018. |
| (2) | The closing price of the Common Stock on the Record date was $18.91. |
| (3) | Mr. Lubow was hired in January 2017. |
| (4) | Mr. Gunther was hired in December 2016. |
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The Company’s policy further requires that each executive officer who is not in full compliance with the Company’s stock ownership guidelines must retain 100% of the net shares (after taxes and acquisition costs) acquired through stock option exercises and restricted stock vesting until he or she attains full compliance with the ownership guidelines.
Recoupment/Clawback Policy - The Company has adopted a policy permitting it to seek recovery of certain performance-based compensation in the event of a financial restatement due to the Company’s material non-compliance with the financial reporting requirements of the federal securities laws. In the event of such a restatement, performance-based compensation paid during the prior three years will be reviewed to determine if the right to, or amount of, the compensation was based on the achievement of performance goals derived from the financial statements and if so, whether the right to, or amount of, the compensation would be different based on the financial restatement. If, based on this review, an overpayment has occurred, the Company may require the recipient to repay the excess amount. This policy applies to the Company’s and Bank’s executive officers.
Restrictions on Hedging and Pledging - Executive officers and Directors of the Company and its subsidiaries are prohibited from: (i) entering into transactions designed to hedge or offset a decrease in the market value of Common Stock; and (ii) pledging, hypothecating, or otherwise encumbering shares of Common Stock as collateral for indebtedness.
Impact of Accounting and Tax Treatment
Section 162(m) - Under Section 162(m) of the Code (“Section 162(m)”), the Company is generally prohibited from deducting certain forms of compensation in excess of $1,000,000 paid to the Chief Executive Officer and the other “covered employees” as defined in Section 162(m). An exception to this $1,000,000 deduction limitation was availablebalanced with respect to compensation that qualified as “performance-based compensation” under Section 162(m), which required compliancerisk, have effective controls and are compatible with certain requirements set forth in Section 162(m) and the applicable regulations. As a result of new tax legislation that went into effect on December 22, 2017, this exception for performance-based compensation was no longer available for taxable years beginning after December 31, 2017, unless such compensation qualifies for certain transitionary relief contemplated in the new tax legislation.
The Company has believed that it was generally in the Company’s best interests to design compensation arrangements that were intended to satisfy the requirements for deductibility under Section 162(m). Accordingly, the Company took appropriate actions, to the extent feasible, that were designed and intended to preserve the deductibility of annual incentive and long-term performance awards previously granted to its executive officers who are covered by Section 162(m). However, notwithstanding this general policy, the Company also believes there may be circumstances in which the Company’s interests are best served by maintaining flexibility in the way compensation is provided, whether or not compensation is fully deductible.
As a result of the new tax legislation, compensation paid in excess of $1 million to individuals who, following December 31, 2017, are subject to Section 162(m) is not expected to be deductible under Section 162(m) of the Code, unless the compensation qualifies for transitionary relief. Therefore, certain compensation paid under our AIP and certain of our long-term equity awards originally designed with the intent that the amounts would qualify as “performance-based compensation” may not be deductible in the future. Although the Compensation and HR Committee will continue to analyze the impact that Section 162(m) and the potential lack of deduction associated with amounts paid in excess of the deduction limitation may have on the Company, the Compensation and HR Committee continues to retain the flexibility to make decisions with respect to the Company’s compensation programs that are based on factors other than Section 162(m) and related tax consequences. This flexibility may include amending or modifying the design elements of our historical compensation programs to the extent those design elements were principally adopted in an effort to comply with Section 162(m).
Sections 4999 and 280G - Section 4999 of the Code imposes a 20% excise tax on certain “excess parachute payments” made to “disqualified individuals” in connection with a change in control. Under section 280G of the Code, such excess parachute payments are also nondeductible to the Company. If payments that are contingent on a change of control to a disqualified individual (which includes the NEOs) exceed three times the individual’s “base amount” (as defined in the Code), they constitute “excess parachute payments” to the extent they exceed one time the individual’s base amount.
Pursuant to his Employment Agreement, the Company or Bank will reimburse Mr. Mahon for the amount of the excise tax, if any, and make an additional gross-up payment so that, after payment of the excise tax and all income
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and excise taxes imposed on the reimbursement and gross-up payments, Mr. Mahon would retain approximately the same net after-tax amounts under the Employment Agreement that he would have retained if there was no excise tax. Neither the Bank nor the Company is permitted to claim a federal income tax deduction for the portion of the change of control payment that constitutes an excess parachute payment, the excise tax reimbursement payment or the gross-up payment. The other NEOs’ agreements do not have gross-ups or cut-backs.
Accounting Considerations - The Compensation and HR Committee is informed of the financial statement implications of the elements of the NEO compensation program. However, the probable contribution of a compensation element to the objectives of the Company’s NEO compensation program and its projected economic cost, which may or may not be reflected on the Company’s financial statements, are the primary drivers of NEO compensation decisions.
Risk Assessment
regulatory guidance The Company’s compensation program is designed to mitigate risk by: (1) providing
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competitive non-performance-based salaries, retirement and fringe benefits, that permit executives to pay living expenses and plan for the future without reliance on incentives, (2) incorporating cash incentives to reward current successes, in relation to forecast performance derived from the CapitalStrategic Plan, and (3) including long-term incentives in the form of stock awards and performance-based shares, as well as maintaining stock ownership and retention requirements, to sustain focus on long-term shareholder value. The Compensation and HR Committee exercises discretion
In 2021, in
awarding annual incentives, including a retrospective assessment of management’s performance in light of prevailing business conditions, to discourage excessive focus on formulaic goals. This retrospective assessment includes, in addition to financial measures, consideration of indicators of business prudence such as credit quality and capital ratios. Management stock ownership and retention requirements and equity-based retirement benefits provided through the Company’s tax-qualified KSOP and related BMP assure that management retains a significant financial interest in the long-term performance of the Common Stock, and sensitivity to the potential long-term effects of short-term business strategies, throughout their tenureaccordance with
the Company. The Company believes these features recognize a balance between the need to accept risk exposure in the successful operation of its business and the need to identify and prudently manage such risks.In addition to assisting with the competitive review of executive compensation, a nationally recognized compensation consulting firm has been engaged to assistbest practices, the Compensation and HR Committee in conductingengaged McLagan to conduct a risk reviewassessment of the Company’s incentive compensation programs.arrangements. In performing its risk assessment, McLagan considered principles of sound incentive compensation practices. The goal of the assessment was to evaluate whether the Company was in line with evolving regulatory expectations and market practices. The review included an evaluation of the design features of each plan, the governance and oversight aspects of each plan, the mix of cash and equity incentives opportunities, the use of performance metrics, the performance periods and time horizon of each plan, the various termination provisions associated with the plans, and other dimensions of the plans deemed relevant for the risk review process. McLagan reviewed the results of its assessment with the Committee and with management. Based upon itson the results of the independent assessment by McLagan and the assessment of risks by the Committee, the Board has determined that the Company’s compensation policies, practices and programs do not promote excessive risk taking or pose risks that are reasonably likely to have a material adverse effect on the Company.
Role of Management in Compensation Decisions In order for the Compensation Committee to make decisions regarding base salary, annual and long-term incentives, and other aspects of the Company’s benefit programs, the CEO, the President and the director of human resources are asked to provide input on corporate objectives and individual performance. Input from these individuals is considered to be suggestions and recommendations for the Compensation Committee’s consideration. The NEOs do not attend portions of the Compensation Committee meetings during which their individual performance is being evaluated or their compensation is being determined. The CEO and the President annually review the
performance and determine the compensation
consultant indicated its belief thatfor senior management of the
incentive plans place a proper balance of reinforcing performance whileCompany who are not
encouraging inappropriate risk taking behavior.NEOs.
Setting Executive Compensation Based on the foregoing philosophy and
HR Committee ReportTheobjectives, the Compensation and HR Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management; and based on the review and discussions, the Compensation and HR Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included instructured the Company’s Proxy Statement on Schedule 14A forannual and long-term incentive-based cash and equity compensation to motivate executives to achieve the 2019 Annual Meeting of Shareholders.
COMPENSATION AND HR COMMITTEE OF DIME COMMUNITY BANCSHARES, INC.
Rosemarie Chen, Chair
Kathleen M. Nelson
Omer S. J. Williams
Compensation and HR Committee Interlocks and Insider Participation
There are no interlocks, as defined under the rules and regulations of the SEC, betweenbusiness goals set by the Company and reward the current membersexecutives for achieving such goals. In furtherance of this, McLagan’s annual review provides the Compensation Committee with relevant market data and HRalternatives to consider when making compensation decisions for the NEOs and on the recommendations being made by the Company’s management for other key executives. In making compensation decisions, the Compensation Committee and corporations with respect to which theycompares each element of total compensation against a peer group of publicly-traded financial institutions that are affiliated, or otherwise.
comparable in asset size (collectively, the “Compensation Peer Group”). The key measures used in selecting the Company’s 2021 peer group were: Asset Size
Geographic Location
Loan Portfolio Focused on Commercial Lending
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The Compensation Peer Group was reviewed by the Compensation Committee in 2021 and, generally, was the same peer group used by the Compensation Committee in 2020 to help establish post-Merger compensation levels. Changes were made to substitute previous peer banks that were involved in mergers. Not all companies in the Compensation Peer Group reported data for each of our executive positions. The 24 companies comprising the Compensation Peer Group used to set fiscal year 2021 pay levels were:
| | Atlantic Union Bankshares Corporation | | | Independent Bank Corp. | |
| | Berkshire Hills Bancorp, Inc. | | | Investors Bancorp, Inc. | |
| | Brookline Bancorp, Inc. | | | Lakeland Bancorp, Inc.(1) | |
| | Columbia Financial, Inc. | | | OceanFirst Financial Corp. | |
| | ConnectOne Bancorp, Inc.(1) | | | Park National Corporation | |
| | Customer Bancorp, Inc. | | | Provident Financial Services, Inc. | |
| | Eagle Bancorp, Inc. | | | S&T Bancorp, Inc. | |
| | First Commonwealth Financial Corporation | | | Sandy Spring Bancorp, Inc. | |
| | First Financial Bancorp. | | | TowneBank | |
| | First Midwest Bancorp, Inc. | | | United Bankshares, Inc. | |
| | Flushing Financial Corporation | | | WesBanco, Inc. | |
| | Fulton Financial Corporation | | | WSFS Financial Corporation | |
(1)
| These banks were added to the peer group in July 2021 based on their geographic location and size |
Each NEO’s current compensation was compared to the applicable benchmark position within the Compensation Peer Group. A significant percentage of total compensation is allocated to incentives as a result of the philosophy mentioned above. The Compensation Committee’s recommendations on granting restricted stock awards are based on the evaluation of the Company’s performance in connection with year-end results and the Compensation Committee’s discretion.
2021 Executive Compensation Components For fiscal year ended December 31, 2021, the principal components of compensation for NEOs were:
Base salary
Annual cash incentive compensation
Long term equity incentive compensation
Retirement benefits and perquisites
Employment and change in control employment agreements
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Our compensation program consists of three primary components: (i) base salary, (ii) cash-based, annual incentive awards (“AIP”), and (iii) equity-based, long-term incentive awards (“LTIP”). We also offer certain retirement and other benefits. During 2021, the Company was a party to employment agreements with Messrs. O’Connor, Lubow, Reddy, Gunther and McCaffery, and a party to a change in control employment agreement with Ms. Schaubeck. In addition, all NEOs were parties to retention and award agreements with the Company. The target pay mix for the CEO and average NEO for 2021 is illustrated in the following charts:
Base Salary
The Company provides NEOs and other employees with base salary to compensate them for services rendered during the fiscal year. Base salary ranges for NEOs are determined for each- executive based on his or her position and responsibility by using market data. The annual salary of the NEOs is reviewed annually by the Compensation Committee. Base salaries for the NEOs for 2021 and 2020 follow:
| | Kevin M. O’Connor | | | $900,000 | | | $750,000 | | | 20.0% | |
| | Stuart H. Lubow(1) | | | $700,000 | | | n/a | | | n/a | |
| | Avinash Reddy(1) | | | $500,000 | | | n/a | | | n/a | |
| | Conrad J. Gunther(1) | | | $440,000 | | | n/a | | | n/a | |
| | Patricia M. Schaubeck(1) | | | $350,000 | | | n/a | | | n/a | |
| | John M. McCaffery(2) | | | $500,000 | | | $390,000 | | | 28.2% | |
| | Howard H. Nolan(3) | | | $375,000 | | | $375,000 | | | 0.0% | |
(1)
| Messrs. Lubow, Reddy and Gunther and Ms. Schaubeck commenced employment with the Company effective with the closing of the Merger on February 1, 2021. |
(2)
| Mr. McCaffery’s employment with the Company terminated without Cause on June 14, 2021. |
(3)
| As of the closing of the Merger on February 1, 2021, Mr. Nolan’s employment agreement with the Company was cancelled pursuant to the terms of a settlement and release agreement, which is described in more detail below. Mr. Nolan performed consulting services for the Company from February 2, 2021 to June 30, 2021. |
The increases in 2021 base salaries addressed individual performance as well as the general shortfall to market and brought the NEOs into a competitive range of base salaries paid to comparable positions in the Peer Group.
2021 AIP
Our 2021 AIP provides the NEOs with the opportunity to earn an annual cash award based on the achievement of pre-defined corporate goals and by consideration of other discretionary items. The objectives of the 2021 AIP are to align annual incentive compensation with financial benchmarks set forth in the Company’s 2021 Strategic Plan, previously adopted by the Board, encourage teamwork and collaboration, and to motivate and reward the achievement of specific, measurable performance objectives.
The Target levels for the 2021 AIP were based on the Board approved Company budget for 2021 and were consistent with the Company’s goals for profitability and deposit growth at the time of the Merger announcement and the Merger closing.
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The following table provides information aboutsets forth the compensation paidperformance metrics under the 2021 AIP. The Adjusted PPNR/Average Assets and the Non-Interest Deposits/Deposits ratios are the “Corporate Factors.” Corporate Factors represent 70% of the AIP opportunity.
| | Adjusted PPNR / Average Assets(1) | | | 35% | | | 1.35% | | | 1.50% | | | 1.65% | |
| | Average Non-Interest Deposits / Deposits | | | 35% | | | 32.0% | | | 35.0% | | | 38.0% | |
| | Discretion | | | 30% | | | — | | | — | | | — | |
(1)
| Adjusted PPNR = adjusted pre-tax, pre-provision revenue. Excludes net interest income from SBA PPP, gains from sales of securities and other assets, Merger-related expenses, branch closure expenses, expenses related to termination of borrowings, and other one-time items. |
In addition to the Corporate Factors, the Compensation Committee may consider discretionary measures in finalizing 2021 AIP payouts: Regulatory Compliance, Status of Core and Ancillary Systems Conversions, Cybersecurity Risk and Response, Community Investment, Liquidity Compliance, Stock Price Performance, and Employee Engagement and Development. These supplemental factors comprise 30% of the AIP opportunity.
The Compensation Committee believes that the 2021 AIP should balance risk-taking with performance. Therefore, the Compensation Committee maintains a risk-based capital performance gate/trigger. If the Consolidated Company Total Risk-Based Capital ratio is below 10.5% at year-end, bonus payments will be reduced to zero.
Each performance metric has a weighting and a range of performance that determines the payouts. Incentives pay out at a reduced level (i.e. 50% of Target) for services renderedThreshold performance, at 100% for Target performance, and at higher level (i.e. 150% of Target) for Stretch performance. Performance below Threshold will be zero. Performance in all capacities bybetween levels is interpolated to reward incremental performance.
The table below summarizes the incentive opportunities for the NEOs for the
2021 plan year
ending December 31, 2018.Summary Compensation Table
| | | Equity Incentive
Plan Stock Awards
| Non-Equity Incentive
Plan Compensation(4) | | | | |
Name and
Principal Positions | Year | Salary(1) | Performance-
based
Stock
Awards(2) | Time-
Vesting
Restricted
Stock
Awards(3) | Annual
Incentive
Award | Long-
Term
Cash
Incentive
Award | Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
(5)(6) | All Other
Compensation
(7)(8) | Total | Total
Excluding the
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings(6) |
Kenneth J. Mahon
President and CEO | | 2018 | | | 825,000 | | | 297,000 | | | 198,000 | | | 454,880 | | | 95,700 | | | (3,421 | ) | | 79,364 | | | 1,946,523 | | | 1,949,944 | |
| 2017 | | | 825,000 | | | 396,000 | | | 264,000 | | | 376,984 | | | 124,925 | | | 117,991 | | | 99,921 | | | 2,204,821 | | | 2,086,830 | |
| 2016 | | | 550,000 | | | 82,500 | | | 165,000 | | | 264,941 | | | 87,189 | | | 36,929 | | | 581,767 | | | 1,768,326 | | | 1,731,397 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stuart H. Lubow(9)
SEVP and Chief
Banking Officer | | 2018 | | | 475,000 | | | 142,500 | | | 95,000 | | | 192,127 | | | — | | | — | | | 51,295 | | | 955,922 | | | 955,922 | |
| 2017 | | | 446,827 | | | — | | | 225,000 | | | 172,429 | | | — | | | — | | | 34,261 | | | 878,517 | | | 878,817 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Robert S. Volino(9)
SEVP and COO | | 2018 | | | 445,000 | | | 133,500 | | | 89,000 | | | 179,993 | | | 41,760 | | | — | | | 39,914 | | | 929,167 | | | 929,167 | |
| 2017 | | | 420,000 | | | 126,000 | | | 84,000 | | | 170,525 | | | 56,516 | | | — | | | 47,950 | | | 904,991 | | | 904,991 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
James L. Rizzo(9)
SVP and Comptroller | | 2018 | | | 259,821 | | | — | | | — | | | 42,072 | | | — | | | (17,038 | ) | | 24,265 | | | 309,129 | | | 326,158 | |
| 2017 | | | 231,055 | | | — | | | — | | | 62,608 | | | — | | | 21,434 | | | 27,172 | | | 342,269 | | | 320,835 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Conrad J. Gunther(9)
EVP and CLO | | 2018 | | | 350,000 | | | 84,000 | | | 56,000 | | | 132,919 | | | — | | | — | | | 50,233 | | | 673,152 | | | 673,152 | |
(1):
| | Kevin M. O’Connor
CEO | | | $900,000 | | | $450,000 | | | $900,000 | | | $1,350,000 | |
| | | | | 50.0% | | | 100.0% | | | 150.0% | |
| | Stuart H. Lubow
President and COO | | | $700,000 | | | $350,000 | | | $700,000 | | | $1,050,000 | |
| | | | | 50.0% | | | 100.0% | | | 150.0% | |
| | Avinash Reddy
SEVP and CFO | | | $500,000 | | | $112,500 | | | $225,000 | | | $337,500 | |
| | | | | 22.5% | | | 45.0% | | | 67.5% | |
| | Conrad J. Gunther
SEVP and CLO | | | $440,000 | | | $99,000 | | | $198,000 | | | $297,000 | |
| | | | | 22.5% | | | 45.0% | | | 67.5% | |
| | Patricia M. Schaubeck
EVP and General Counsel | | | $350,000 | | | $61,250 | | | $122,500 | | | $183,750 | |
| | | | | 17.5% | | | 35.0% | | | 52.5% | |
(1)
| Messrs. McCaffery and Nolan did not meet the eligibility requirements to participate in the 2021 AIP as they terminated employment during the plan year. |
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Results of the Corporate Measures relative to the pre-established objectives were as follows:
| | Adjusted PPNR/Average Assets(1) | | | 50% | | | 1.35% | | | 1.50% | | | 1.65% | | | 1.66% | | | $750,925 | | | $1,126,388 | | | 150.0% | |
| | Average Non-interest Deposits/Average Deposits(2) | | | 50% | | | 32.00% | | | 35.00% | | | 38.00% | | | 37.92% | | | $750,925 | | | $1,116,619 | | | 148.7% | |
| | TOTAL | | | | | | | | | | | | | | | | | | $1,501,850 | | | $2,243,007 | | | 149.3% | |
(1)
| For the nine months ended December 31, 2021. Excludes net interest income from PPP Loans, gains from sales of securities and other assets, Merger-related expenses, branch closure expenses, expenses related to termination of borrowings, and other one-time items. |
(2)
| Average for the quarter ended December 31, 2021. |
Since the Merger closed in the middle of the first quarter of 2021, the financial statements for the Company for the first quarter of 2021 did not include a full quarter of operations of Legacy Bridge. As such, the Compensation Committee determined that the starting point of the measurement period should begin on April 1, 2021 (for the Adjusted PPNPR/Average Assets ratio) to capture 100% of the operating results of the combined entity.
As permitted by the 2021 AIP, the Compensation Committee also considered each NEO’s contribution to the following discretionary factors in determining each NEO’s 2021 AIP payment.
(1)
| (1)Regulatory Compliance. As a result of the Merger, total assets of the Company exceeded $10 billion resulting in enhanced regulatory expectations. Since the closing of the Merger, the Company and the Bank maintained full regulatory compliance. |
(2)
| Salary represents amount earned forStatus of Core and Ancillary Systems Conversions. The conversion of the fiscal year, whether or not actually paid during such year.Bank’s core system and other ancillary systems post- Merger were completed in a timely manner and with no notable customer disruption. |
(3)
| Cybersecurity Risk and Response. The Bank continues to prioritize cyber risk and manages the increased risk of ransomware and other sophisticated threats. |
(4)
| Community Reinvestment. The Bank exceeded its lending, community development lending, 1-4 family lending, and qualified investment Community Reinvestment Act goals. |
(5)
| Liquidity Compliance. Management operated the Company with appropriate liquidity levels in 2021 while managing the net interest margin. |
(6)
| Stock Price Performance. The Company outperformed the median stock performance of its peer group since the Merger, as shown in the following table: |
| | Dime Community Bancshares, Inc. | | | 43.3% | |
| | Median of Peer Group (1) | | | 31.9% | |
*
| The amounts reported areMerger closed on February 1, 2021. |
(1)
| Peer group includes: Atlantic Union Bankshares Corporation, Berkshire Hills Bancorp Inc., Brookline Bancorp Inc., Columbia Financial Inc., ConnectOne Bancorp Inc., Customer Bancorp Inc., Eagle Bancorp Inc., First Commonwealth Financial Corporation, First Financial Bancorp, Flushing Financial Corp., Fulton Financial Corp., Independent Bank Corp., Lakeland Bancorp, Inc., OceanFirst Financial Corp., Park National Corporation, Provident Financial Services, Inc., S&T Bancorp Inc., Sandy Spring Bancorp Inc., TowneBank, United Bankshares, Inc., WesBanco Inc. and WSFS Financial Corporation. Does not include First Midwest Bancorp Inc. and Investors Bancorp Inc due to their announced merger transactions in 2021. |
(7)
| Employee Engagement and Development. The Bank conducted an employee engagement survey and based on the aggregateresults of the survey put in place various initiatives such as employee focus groups, quarterly officer meetings. targeted employee meetings, and the alignment of performance reviews to the Company’s Mission, Vision, Values and Purpose statement. |
After considering the above, the Compensation Committee concluded that the NEOs outperformed in the discretionary metric of the 2021 AIP which warranted payout at 120%.
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Based upon the overall financial results and evaluation of the discretionary measures, in finalizing 2021 AIP payouts, the Compensation Committee approved the annual incentive payments in the table below. These amounts are noted in the column, “Non-Equity Incentive Plan Compensation,” in the Summary Compensation Table below.
| | Kevin M. O’Connor | | | $900,000 | | | $940,902 | | | $324,000 | | | $1,264,902 | | | 140.5% | |
| | Stuart H. Lubow | | | $700,000 | | | $731,813 | | | $252,000 | | | $983,813 | | | 140.5% | |
| | Avinash Reddy | | | $225,000 | | | $235,226 | | | $81,000 | | | $316,226 | | | 140.5% | |
| | Conrad J. Gunther | | | $198,000 | | | $206,999 | | | $71,280 | | | $278,279 | | | 140.5% | |
| | Patricia M. Schaubeck | | | $122,500 | | | $128,067 | | | $44,100 | | | $172,167 | | | 140.5% | |
| | Total for NEOs | | | $2,145,500 | | | $2,243,007 | | | $772,380 | | | $3,015,387 | | | 140.5% | |
2021 LTIP
The 2021 LTIP is designed to support the Company's pay for performance philosophy and reward the participants for creating long-term shareholder value. The program is designed to reward executives for driving long-term, sustained performance and to align executives with shareholder interests through performance goals and focus on shareholder value appreciation.
The 2021 LTIP consists of a combination of time-vested restricted stock and performance-vested restricted stock (i.e., performance shares) as follows:
Performance-vested Restricted Stock Awards - PRSAs (60% of Target award value) reward future performance; awards are paid out based on achievement of pre-defined performance goals. Grants are earned and cliff vest after three years based on actual performance against defined performance goals.
Time-vested Restricted Shares Awards - RSAs (40% of Target award value) support our goals to encourage stock ownership and align executives with shareholder interests. Grants vest ratably over three years (33% per year).
The table below reflects the performance metrics selected for the PRSAs for the 2021-2023 performance cycle. Once the defined threshold level of performance is achieved, payouts can vary from 50% of the goal for the Threshold level of performance to a maximum payout of 150% of the goal for Stretch performance. Performance in between levels is interpolated to reward incremental performance. TSR performance will be measured based on the Company’s performance relative to constituents of the KBW Regional Banking Index.
| | Total Shareholder Return(1) | | | 30% | | | 25th percentile | | | 50th percentile | | | 75th percentile | |
| | Adjusted Efficiency Ratio(1)(2) | | | 35% | | | 55% | | | 51% | | | 47% | |
| | Average Non-Interest Bearing Deposits / Total Deposits(3) | | | 35% | | | 35% | | | 40% | | | 45% | |
(1)
| Measurement period is from April 1, 2021 through December 31, 2023. |
(2)
| Excludes net interest income from SBA PPP, gains from sales of securities, severance, Merger-related expenses, branch closure expenses, expenses related to termination of borrowings, and other one-time items. |
(3)
| Average for the quarter ended December 31, 2023. |
The Target level for the 2021 LTIP for the Adjusted Efficiency Ratio was based on the Board approved Company budget for 2021-2023. The Compensation Committee deemed the Adjusted Efficiency Ratio as an important driver of longer-term shareholder performance, as it balances the achievement of revenue growth with appropriate expense control.
The Target level for Average Non-Interest Bearing Deposits to Total Deposits was based on the Board approved Company budget for 2021-2023 and the Company’s stated goal to grow non-interest bearing deposits to total deposits to the 40% level by the end of a 3-year time horizon. The Target metric for the LTIP for Average Non-Interest-Bearing Deposits of 40% (for the quarter ended December 31, 2023) was significantly above the Target metric for the 2021 AIP of 35% (for the quarter ended December 31, 2021), and reflects sustained and robust growth in deposits over a multi-year time frame.
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Since the Merger closed in the middle of the first quarter of 2021, the financial statements for the Company for the first quarter of 2021 did not include a full quarter of operations of Legacy Bridge. As such, the Compensation Committee determined that the starting point of the measurement period should begin on April 1, 2021 (for the Total Shareholder Return and Adjusted Efficiency ratio) to capture 100% of the operating results of the combined entity.
The table below summarizes the incentive opportunities for the NEOs for the 2021 plan year(1):
| | Kevin M O’Connor
CEO | | | $900,000 | | | $292,500 | | | $585,000 | | | $877,500 | |
| | — | | | 32.5% | | | 65.0% | | | 97.5% | |
| | Stuart H. Lubow
President and COO | | | $700,000 | | | $175,000 | | | $350,000 | | | $525,000 | |
| | — | | | 25.0% | | | 50.0% | | | 75.0% | |
| | Avinash Reddy
SEVP and CFO | | | $500,000 | | | $87,500 | | | $175,000 | | | $262,500 | |
| | — | | | 17.5% | | | 35.0% | | | 52.5% | |
| | Conrad J. Gunther
SEVP and CLO | | | $440,000 | | | $77,000 | | | $154,000 | | | $231,000 | |
| | — | | | 17.5% | | | 35.0% | | | 52.5% | |
| | Patricia M. Schaubeck
EVP and General Counsel | | | $350,000 | | | $61,250 | | | $122,500 | | | $183,750 | |
| | — | | | 17.5% | | | 35.0% | | | 52.5% | |
(1)
| Messrs. McCaffery and Nolan did not meet the eligibility requirements to participate in the 2021 LTIP as they terminated employment during the plan year. |
Prior to the closing of the Merger, consistent with past Legacy Bridge practice, Mr. O’Connor received 100% time-vested restricted stock awards in January 2021 under the Legacy Bridge 2021 Long Term Stock Incentive Program based on his pre-Merger target long-term incentive of $450,000. The restricted shares vest ratably over four years. Prior to the closing of the Merger, Messrs. Lubow, Reddy and Gunther and Ms. Schaubeck did not receive a grant of equity in 2021 for 2021 performance. In July 2021, the Compensation Committee awarded restricted stock to the NEOs under the 2021 LTIP: Mr. O’Connor – 65% of base salary, or $585,000; Mr. Lubow - 50% of base salary, or $350,000; Mr. Reddy – 35% of base salary, or $175,000; Mr. Gunther – 35% of base salary, or $154,000; and Ms. Schaubeck – 35% of base salary, or $122,500. To better align the composition of Mr. O’Connor’s total 2021 long-term incentive award between time-vested and performance-based awards as provided under the 2021 LTIP, the long-term incentive award to Mr. O’Connor in July 2021 was 100% performance-based. The long-term incentive awards to the remaining NEOs was split 60% performance-based and 40% time-vested in accordance with the terms of the 2021 LTIP. The time-vested restricted shares vest ratably over three years. In addition, the Compensation Committee deducted Mr. O’Connor’s January 2021 grant of $450,000 from the full updated equity award opportunity of $585,000, thereby resulting in an equity grant to Mr. O’Connor in July 2021 of $135,000, which was all performance-based.
The following awards were made under the 2021 LTIP.
| | Kevin M. O’Connor | | | $134,983 | | | 17,321 | | | $450,000 | | | $584,983 | |
| | Stuart H. Lubow | | | $210,000 | | | 4,158 | | | $140,000 | | | $350,000 | |
| | Avinash Reddy | | | $104,983 | | | 2,079 | | | $70,000 | | | $174,983 | |
| | Conrad J. Gunther | | | $92,390 | | | 1,829 | | | $61,582 | | | $153,972 | |
| | Patricia M. Schaubeck | | | $73,468 | | | 1,455 | | | $48,990 | | | $122,458 | |
(1)
| Assuming vesting of performance-based shares at the maximum level, the grant date fair value of the awards computed in accordance with FASB ASC Topic 718. Awards consist of performance-based stock awards which vest based on the achievement of certain performance criteria. Thethese performance-based awards assume the probable outcome of performance conditions for the targeted potential value of the award. For valuation and discussion of the assumptions related to these awards, see Note 15 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K. Based on the fair value at grant date, the following are the maximum potential values of the performance shares for the 2018 – 2020 performance period assuming maximum level of performance is achieved:$33.67 per award would have been as follows: Mr. Mahon, $445,500;O’Connor $202,491, Mr. Lubow $213,750;$314,983, Mr. Volino, $200,250, andReddy $157,475, Mr. Gunther $126,000.$138,586, and Ms. Schaubeck $110,236. |
(2)
| (3) | The amounts reported areFor Mr. O’Connor, the aggregatenumber of RSAs was calculated based upon a grant date fair value of $25.98 per share, the awards computed in accordance with FASB ASC Topic 718. Awards consist of restricted stock which vests ratably over four years. For valuation and discussion of the assumptions related to these awards, see Note 21 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K. The disclosed amounts do not reflect the value of dividends paid on unvested restricted stock, which is included in the Summary Compensation Table under the caption “All Other Compensation.” |
| (4) | Amount represents cash payments made to the NEO under the Cash LTI or the AIP in the respective year. Please refer to “Compensation Discussion and Analysis – Compensation Program Components – Long-Term Incentive Program” for the determination of the LTI payout shown for 2018, and “Compensation Discussion and Analysis – Compensation Program Components Short-term Incentive Plan” for the determination of the AIP payout shown for 2018. |
| (5) | Includes for each NEO: (a) the increase (if any) for the fiscal year in the present value of the individual's accrued benefit (whether or not vested) under the Retirement Plan and BMP calculated by comparing the present value of each individual's accrued benefit under both such plans in accordance with FASB ASC Topic 715 (“ASC Topic 715”) as of the plan's measurement date in such fiscal year to the present value of the individual's accrued benefit as of the plan's measurement date in the prior fiscal year, plus (b) the amount of interest accrued on defined contribution deferred compensation balances at a rate in excess of 120% of the applicable federal long-term rate under section 1274(d) of the Code. There were no “above-market earnings” associated with these amounts. |
| (6) | The Company does not regard amounts reported for 2018 under the caption “Change in Pension Value and Nonqualified Deferred Compensation Earnings” in the Summary Compensation Table as recurring compensation. All of the Company’s defined benefit plans have been frozen to future benefits since 2000. The compensation amount associated with Change in Pension Value and Nonqualified Deferred Compensation Earnings therefore results solely from the application of different actuarial valuation assumptions during each period. The 2018 earnings amounts shown in the column entitled “Change in Pension Value and Nonqualified Deferred Compensation Earnings” resulted from increases in the statutory discount rate assumption of 66 basis points for the Retirement Plan valuation and 67 basis points for the BMP valuation, as well as the Society of Actuaries’ recent issuance of new mortality tables projecting longer life expectancies. The amounts in the column entitled “Total Excluding the Change in Pension Value and Nonqualified Deferred Compensation Earnings” represent total compensation excluding the amounts listed in the column entitled “Change in Pension Value and Nonqualified Deferred Compensation Earnings.” |
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| (7) | The NEOs participate in certain group life, health, and disability insurance, retirement and medical reimbursement plans not disclosed in the Summary Compensation Table that are generally available to salaried employees and do not discriminate in scope, terms and operation (other than the BMP). For 2018, the figure shown for each NEO includes the following items: |
Name | Life Insurance Premiums | Automobile | KSOP Cash Contribution | BMP (a) | Other (b) | Total |
Kenneth J. Mahon | $ | 15,081 | | $ | 1,874 | | $ | 8,250 | | $ | 28,954 | | $ | 16,955 | | $ | 79,364 | |
Stuart H. Lubow | | 2,874 | | | 7,671 | | | 8,250 | | | 17,620 | | | 6,630 | | | 51,295 | |
Robert S. Volino | | 499 | | | 1,230 | | | 7,725 | | | 15,404 | | | 6,805 | | | 39,914 | |
James L. Rizzo | | 735 | | | 9,600 | | | 5,566 | | | — | | | 114 | | | 24,265 | |
Conrad J. Gunther | | 20,189 | | | 12,000 | | | 8,250 | | | 5,940 | | | 3,854 | | | 50,233 | |
| (a) | Amount represents BMP benefits earned during the year ended December 31, 2018 associated with the KSOP. |
| (b) | Amount represents dividends paid on unvested restricted stock awards during 2018 for each NEO. |
| (8) | 2016 amount for Mr. Mahon represents both the annual ESOP allocation as well as the final one-time allocation of surplus shares following the full prepayment of the outstanding ESOP loan balance. The value of the final ESOP allocation was $460,612. The value was determined based upon the $20.10 closing price of the Common Stock on January 8, 2021. For Messrs. Lubow, Reddy and Gunther and Ms. Schaubeck the last trading daynumber of 2016. (See NotesRSAs was calculated based upon a grant date fair value of $33.67 per award, the closing price of the Common Stock on July 1, 2021. |
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Merger-Related Compensation
At the closing of the Merger on February 1, 2021, the NEOs received cash transaction bonuses to reward for the successful completion of the transaction in the following amounts: Mr. O’Connor, $750,000, Mr. Lubow, $750,000, Mr. Reddy, $500,000, Mr. Gunther $500,000, and Ms. Schaubeck, $225,000. These amounts are noted in the column, “Non-Equity Incentive Plan Compensation,” in the Summary Compensation Table below.
Also in connection with the Merger, on February 1, 2021, the NEOs received a restricted stock award grant with the following values, to cliff vest on the one year anniversary of the Merger: Mr. O’Connor, $749,976, Mr. Lubow, $499,993, Mr. Reddy, $249,984, Mr. Gunther $249,984, and Ms. Schaubeck, $112,490. Each NEO also received a one-time equity grant to vest ratably over three years commencing on the two-year anniversary of the Merger, with the following values: Mr. O’Connor, $1,169,978, Mr. Lubow, $699,995, Mr. Reddy, $349,997, Mr. Gunther $349,997, and Ms. Schaubeck, $209,988. These amounts are noted in the column, “Stock Awards,” in the Summary Compensation Table below.
The major objective for these transaction and retention bonuses was to retain these senior executives in the merged entity as they were key to the successful integration and performance of the resulting entity from the Merger. The importance of the retention of executive management was heightened as the Merger was being negotiated and likely to close during the COVID-19 pandemic. Further, the resultant entity of the Merger would exceed $10 billion in assets, crossing the threshold for enhanced regulatory scrutiny whereby executive leadership would be even more critical. The Compensation Committees acknowledged that management strength is particularly important in a merger of equals transaction and the goal in setting compensation for these key executives was to provide them with comprehensive, fair and reasonable compensation arrangements. These arrangements were compared to similar merger of equals transactions and a peer group analysis was provided by the Legacy Bridge Compensation Committee’s independent compensation consultant, McLagan. McLagan concluded that the proposed compensation was reasonable and appropriate as compared to market, based upon market data and the asset size of the combined entity.
Retirement and Other Benefits
Legacy Dime maintained the Dime Community Bank KSOP (the “KSOP”), which was a defined contribution retirement plan under ERISA. The KSOP allowed individuals, including the NEOs, to supplement their retirement savings with elective deferral contributions that were matched at specified levels by Legacy Dime. The KSOP also provided for additional discretionary employer contributions, subject to Internal Revenue Code contribution limits. Immediately prior to the Merger, on January 29, 2021, the KSOP was terminated.
The Bank maintains the 401(k) Plan for the benefit of its employees. During 2021, the Bank matched 100% of the employee’s contributions up to 1% of pay plus 50% of the employee’s contributions that exceed 1% but are less than 6% of pay (a maximum company match of 3.5% of pay). All employees, including the NEOs, can defer a minimum of 1% and a maximum of 100% of their annual income as long as the deferred compensation does not exceed Internal Revenue Service (IRS) limits. In addition, employees at Tier 2 and Tier 3 (Tiers described below) may receive a discretionary profit-sharing benefit. No profit-sharing benefits were paid for 2021.
The Bank maintains a non-contributory, tax-qualified defined benefit pension plan (the “Pension Plan”) for eligible employees. All employees hired before October 1, 2012 that are at least age 21 and have completed at least one year of service are eligible to participate in the Pension Plan. The Pension Plan provides for a benefit for each participant according to the Tier the employee belongs to as outlined below. Compensation used to determine benefits are all wages, tips, and other compensation as reported on form W-2, such as any amounts which are treated as salary reduction contributions under a 401(k) plan, a cafeteria plan or a qualified flexible benefits plan. The Normal Benefit Form is a Single Life Pension with 60 payments guaranteed. There are a number of optional forms of benefit available to the participants, all of which are adjusted actuarially. Participants are eligible for early retirement upon attaining age 55. As required by law, the Pension Plan is covered by the insurance program of the Pension Benefit Guaranty Corporation.
Tier 1 – NEOs and Certain Employees Who Met Specified Age and Service Requirements
These employees’ benefits under the Pension Plan are 1.50% of the participant’s average annual compensation multiplied by creditable service (up to 35 years); plus 1.00% of the participant’s average annual compensation multiplied by creditable service (in excess of 35 years); minus 0.49% of the participant’s average annual compensation in excess of Covered Compensation multiplied by creditable service (up to 35 years). The employee’s average annual compensation is determined using the highest average compensation during five consecutive years of employment or all years of employment, if less than five.
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Tier 2 – All Other Employees Hired before October 1, 2012
These employee’s benefits under the Pension Plan are their accrued benefits determined using the Tier 1 formula above, but frozen for increases in service and compensation as of December 31, 2012. In addition, these employees receive benefits under the Pension Plan using a cash balance formula for all plan years beginning after December 31, 2012. The “Pay credits” under the cash balance formula are 3.75% of annual compensation for employees with less than 15 years of service and 5% of annual compensation for employees with more than 15 years of service. The “interest credits” are determined by multiplying the employee’s hypothetical account balance as of the beginning of a plan year by the actual dollar-weighted rate of return on plan investments during that plan year.
Tier 3 – All Employees Hired on or after October 1, 2012
These employees are excluded from the Pension Plan.
The Legacy Bridge Supplemental Executive Retirement Plan (the “Legacy BNB SERP”) terminated at the closing of the Merger and the covered participants were paid their account balances pursuant to the terms of the Legacy BNB SERP and in accordance with Section 409A of the Internal Revenue Code of 1986. Messrs. O’Connor and Nolan received a lump sum cash payment under the Legacy BNB SERP of $3,619,936 and $1,598,533, respectively, at the effective time of the Merger. These amounts are noted in the column, “All Other Compensation,” in the Summary Compensation Table below. Mr. Lubow and Community National Bank are parties to the Community National Bank Supplemental Executive Retirement Plan Agreement (the “CNB SERP”), dated April 3, 2012, which provides for nonqualified supplemental pension benefits to be paid to Mr. Lubow under certain conditions. Legacy Bridge merged with Community National Bank in 2015 and assumed all obligations under the CNB SERP. No payments have been made to Mr. Lubow under the CNB SERP as of December 31, 2021.
Legacy Dime maintained the Benefit Maintenance Plan of Dime Community Bancshares, Inc. (the “Legacy Dime BMP”), a non-qualified deferred compensation plan with both a defined benefit and defined contribution component. The BMP terminated at the closing of the Merger and covered participants were paid their account balances pursuant to the terms of the Legacy Dime BMP and in accordance with Section 409A of the Internal Revenue Code of 1986. To restore the lost benefits of the terminated Legacy BNB SERP and the terminated Legacy BMP to the NEOs, the Company adopted the SERP. The SERP is intended to make participants in the SERP whole for the amounts that would have been contributed to the Pension Plan and the Dime Community Bank 401(k) Plan (the “401(k) Plan”) but for limits imposed by the Internal Revenue Code of 1986. Participation in the SERP commenced on October 1, 2021. Messrs. O’Connor’s, Lubow’s, Reddy’s and Gunther’s Employment Agreements provide that the executive shall be entitled to participate in benefits plans sponsored by the Company, including, without limitation, a supplemental executive retirement plan to the extent such plan is being provided to similarly situated executives in the Company. Messrs. O’Connor and Lubow participate in the defined benefit component of the SERP, under which the amount of supplemental retirement benefits is based upon a benefit at normal retirement which approximates the differences between (i) the total retirement benefit the participant would have received under the Pension Plan without taking into account limitations on compensation and annual benefits; and (ii) the retirement benefit the participant is actually entitled to under the Pension Plan at normal retirement. Messrs. Reddy and Gunther and Ms. Schaubeck participate under the defined contribution component of the SERP, which is the difference between (i) the total matching contribution that would have been contributed by the Bank to the executive’s account under the 401(k) Plan based on the executive’s compensation, without taking into account limitations on compensation and annual benefits; and (ii) the maximum amount that could have been contributed to the executive’s account under the 401(k) Plan with respect to such compensation.
Perquisites and Other Personal Benefits
The Company provides NEOs with perquisites and other personal benefits that the Company and the Compensation Committee believe are reasonable and consistent with its overall compensation program to better enable the Company to attract and retain employees for key positions. In lieu of any perquisites, Messrs. O’Connor and Lubow are paid an annual sum of $100,000 and Messrs. Reddy and Gunther are paid an annual sum of $50,000. As of the closing of the Merger, the Bank transferred ownership to Messrs. O’Connor and McCaffery of automobiles previously provided to the executives by Legacy Bridge. In April 2021 the Bank transferred ownership to Messrs. Lubow and Gunther of automobiles previously provided to the executives by the Bank. Ms. Schaubeck is paid a car allowance of $700 per month. In addition, the NEOs are eligible to participate in the plans and programs described above. Attributed costs of personal benefits described for the NEOs for the fiscal year ended December 31, 2021 are included in the “All Other Compensation” column of the “Summary Compensation Table.”
The Company and the Bank have entered into employment agreements with Messrs. O’Connor, Lubow, Reddy and Gunther, and a change in control employment agreement with Ms. Schaubeck, which are described under the heading “Employment Agreements.”
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Tax Deductibility of Executive Compensation
Prior to the implementation of The Tax Cuts and Jobs Act of 2017 (the “Tax Act”), our compensation philosophy and policies generally took into account certain aspects of Section 162(m) of the Internal Revenue Code when designing the compensation program for NEOs, to the extent the Compensation Committee determined appropriate, to maximize the deduction for compensation paid to the NEOs. Section 162(m) generally disallowed a federal income tax deduction for compensation over $1 million paid for any fiscal year to the Chief Executive Officer and specified other executive officers, subject to certain exceptions such as for “performance-based” compensation. As a result of the Tax Act, we expect that the Company may no longer take an annual deduction for any compensation paid to covered employees in excess of $1 million per specified executive officers. Due to the continued importance and benefit to the Company and our shareholders of awarding compensation that is structured to properly incentivize our executive officers, the Compensation Committee believes that it is in our best interests to retain flexibility in awarding compensation, even if some awards may be non-deductible compensation expenses to the Company.
The Compensation Committee has adopted a clawback policy to recover certain incentive payments including performance-based awards paid to the Company’s NEOs if (1) the payments or awards were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria, and (2) the amount of the incentive compensation, as calculated under the restated financial results, is less than the amount actually paid or awarded under the original financial results. Recovery may include reimbursement of the gross amount of the incentive payments, cancellation of equity awards, and/or reimbursement of any gains realized in the exercise of options and the vesting or sale of equity awards.
Stock Ownership Guidelines The Board of Directors believes it is in the best interests of its shareholders, and promotes the Company’s commitment to sound corporate governance, that every director and NEO possess a meaningful personal financial interest in the Company. In the opinion of the Board of Directors, such an investment commits the individual to the future of the Company and aligns his/ her interests with those of the Company’s shareholders. The minimum common stock ownership requirement must be satisfied within three years of the later of adoption of, or becoming subject to, these guidelines. All directors and NEOs must retain ownership of 100% of shares received through the vesting of restricted stock or the exercise of stock options until he or she is in compliance with the applicable, fully phased-in, minimum common stock ownership requirement. The Corporate Governance Committee periodically, however, no less than annually, reviews the compliance of each director and NEO with these common stock ownership guidelines.
These guidelines allow for extenuating circumstances and discretion in the evaluation process. As of December 31, 2021, all directors and NEOs were in compliance with the Company’s stock ownership guidelines or were within the three year period to achieve compliance.
The minimum stock ownership guidelines are:
| | Directors: | | | Five times (5.0x) annual cash retainer | |
| | CEO: | | | Five times (5.0x) annual base salary | |
| | President: | | | Five times (5.0x) annual base salary | |
| | Other NEOs: | | | Two times (2.0x) annual base salary | |
Pledging and Anti-Hedging Policies Directors, officers and other employees are prohibited from holding Company securities in a margin account or pledging Company securities as collateral for a loan.
Also, directors, officers and other employees are prohibited from entering into any hedging, derivative or other equivalent transaction that is specifically designed to reduce or limit the extent to which declines in the trading price of the Company Common Stock would affect the value of the shares of Company Common Stock owned by the director, officer or employee. This policy provides that examples of prohibited hedging transactions include (i) short sales of the Company Common Stock (the practice of selling a security borrowed from another), (ii) buying put options or selling call options relating to the Company Common Stock, (iii) selling security futures contracts relating to Company Common Stock, (iv) entering into prepaid variable forward sale contracts, equity swaps, or zero cost collars relating to the Company Common Stock, and (v) contributing Company Common Stock to an exchange fund in exchange for an interest in the fund.
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Compensation and Human Resources Committee Report 1.
| The Compensation and 19Human Resources Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management; and |
2.
| Based on the review and discussions referred to in paragraph 1 above, the Compensation and Human Resources Committee recommended to the audited consolidated financial statementsBoard of Directors that the Compensation Discussion and Analysis be included in the Company’s 2018Proxy Statement for the 2022 Annual Meeting of Shareholders. |
COMPENSATION and HUMAN RESOURCES COMMITTEE OF DIME COMMUNITY BANCSHARES, INC.
Rosemarie Chen (Chairperson)
Michael P. Devine, Member
Matthew A. Lindenbaum, Member
Albert E. McCoy, Jr., Member
SUMMARY COMPENSATION TABLE The following table sets forth information concerning compensation paid to the NEOs for the years ended December 31, 2021, 2020 and 2019.
| | Kevin M. O’Connor
Chief Executive Officer | | | 2021 | | | $885,577 | | | $750,000 | | | $2,572,445 | | | $— | | | $1,264,902 | | | $246,142 | | | $3,955,246 | | | $9,674,312 | |
| | 2020 | | | $750,000 | | | $— | | | $430,920 | | | $105,000 | | | $675,000 | | | $1,839,053 | | | $36,298 | | | $3,836,271 | |
| | 2019 | | | $700,000 | | | $— | | | $314,820 | | | $112,500 | | | $463,680 | | | $733,890 | | | $34,595 | | | $2,359,485 | |
| | Stuart H. Lubow
President &
Chief Operating Officer | | | 2021 | | | $632,692 | | | $750,000 | | | $1,654,971 | | | $— | | | $983,813 | | | $198,956 | | | $356,810 | | | $4,577,242 | |
| | Avinash Reddy
Senior Executive Vice President & Chief Financial Officer | | | 2021 | | | $451,923 | | | $500,000 | | | $827,456 | | | $— | | | $316,226 | | | $— | | | $137,086 | | | $2,232,691 | |
| | Conrad J. Gunther
Senior Executive Vice President & Chief Lending Officer | | | 2021 | | | $397,692 | | | $500,000 | | | $800,149 | | | $ — | | | $278,279 | | | $— | | | $177,954 | | | $2,154,074 | |
| | Patricia M. Schaubeck
Executive Vice President &
General Counsel | | | 2021 | | | $316,346 | | | $225,000 | | | $481,704 | | | $— | | | $172,167 | | | $— | | | $53,670 | | | $1,248,887 | |
| | Former NEOs | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Howard H. Nolan
Former SEVP & COO | | | 2021 | | | $37,500 | | | $— | | | $— | | | $— | | | $— | | | $— | | | $3,983,759 | | | $4,021,259 | |
| | 2020 | | | $375,000 | | | $150,000 | | | $136,875 | | | $45,625 | | | $225,000 | | | $941,990 | | | $27,280 | | | $1,901,770 | |
| | 2019 | | | $365,000 | | | $— | | | $148,540 | | | $52,500 | | | $201,500 | | | $391,582 | | | $23,963 | | | $1,183,085 | |
| | John M. McCaffery
Former EVP & CFO | | | 2021 | | | $222,115 | | | $750,000 | | | $794,961 | | | $— | | | $— | | | $— | | | $1,724,427 | | | $3,491,503 | |
| | 2020 | | | $390,000 | | | $— | | | $140,625 | | | $46,875 | | | $234,000 | | | $109,707 | | | $21,567 | | | $942,774 | |
| | 2019 | | | $375,000 | | | $— | | | $148,540 | | | $52,500 | | | $207,000 | | | $89,964 | | | $25,974 | | | $898,978 | |
(1)
| Messrs. Lubow, Reddy, Gunther and Ms. Schaubeck are NEOs for the first time in 2021 and, pursuant to SEC rules, compensation for prior years is not required to be reported. |
(2)
| For Messrs. Lubow, Reddy, Gunther and Ms. Schaubeck, the amounts in this column reflect the base salary paid from February 1, 2021, which was the date of the Merger and the first day of their employment with the Company, to December 31, 2021. For 2021, the annual base salary for Messrs. O’Connor, Lubow, Reddy, Gunther and Ms. Schaubeck is $900,000, $700,000, $500,000, $440,000 and $350,000, respectively. |
(3)
| Reflects the amount of the transaction bonus which each NEO received in February 2021 in connection with the Merger as follows: Mr. O’Connor $750,000, Mr. Lubow $750,000, Mr. Reddy $500,000, Mr. Gunther $500,000, and Ms. Schaubeck $225,000. |
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(4)
| The amounts in this column reflect the aggregate grant date fair value, computed in accordance with FASB ASC No. 718, of restricted stock awards and performance-based restricted stock awards, at the maximum level, pursuant to the 2021 LTIP. Assumptions used in the calculation of these amounts are included in footnote 20 to our audited financial statements for the fiscal year ended December 31, 2021 included in our Annual Report on Form 10-K,10 K. Included in this column are the dollar amounts of the (i) the value of time vested restricted stock awards granted in January 2021 to Mr. O’Connor in the amount of $450,000; (ii) value of the restricted stock award portion of the retention payment which discusseach NEO received in February 2021 in connection with the mannerMerger as follows: Mr. O’Connor $749,976, Mr. Lubow $499,993, Mr. Reddy $249,984, Mr. Gunther $249,984, and Ms. Schaubeck $112,490, (iii) the value of the one-time equity grant which each NEO received in February 2021 in connection with the Merger as follows: Mr. O’Connor $1,169,978, Mr. Lubow $699,995, Mr. Reddy $349,997, Mr. Gunther $349,997, and Ms. Schaubeck $209,988, (iv) the value of time-based restricted stock awards granted in July 2021 to the following NEOs: Mr. Lubow $140,000, Mr. Reddy $70,000, Mr. Gunther $61,582, and Ms. Schaubeck $48,990, and (v) the value of the performance-based restricted stock unit grant assuming vesting, at the maximum level, as follows: Mr. O’Connor $202,491, Mr. Lubow $314,983, Mr. Reddy $157,475, Mr. Gunther $138,586, and Ms. Schaubeck $110,236. The number of performance share units are determined on the third anniversary of the date of grant, based on the achievement of the board established performance metrics. The vesting schedule for awards under the 2021 LTIP are described in the “Outstanding Equity Awards at Fiscal Year-End” table below. |
(5)
| The amounts represent the grant date fair value of stock options computed in accordance with FASB ASC No. 718. Assumptions used in the calculation of these amounts are included in footnote 20 to our audited financial statements for the fiscal year ended December 31, 2021 included in our Annual Report on Form 10-K. |
(6)
| Included in this column are the amount of the cash awards under the 2021 AIP as follows: Mr. O’Connor $1,264,902, Mr. Lubow $983,813, Mr. Reddy $316,226, Mr. Gunther $278,279, and Ms. Schaubeck $172,167. See discussion of “Merger-Related Compensation” in the above Compensation Discussion and Analysis. |
(7)
| Based on the same assumptions used for financial reporting purposes under generally accepted accounting principles for 2021, 2020, and 2019, respectively. Reflects change in present value of accumulated benefits under the pension plan component of the SERP for Messrs. O’Connor and Lubow. |
(8)
| Details of the amounts reported in the “All Other Compensation” column for 2021 are provided in the table below. |
| | Kevin M. O’Connor | | | $10,150 | | | $89,165 | | | $57,317 | | | $5,119 | | | $91,667 | | | $3,701,828 | | | $3,955,246 | |
| | Stuart H. Lubow | | | $10,150 | | | $47,332 | | | $75,898 | | | $1,742 | | | $89,903 | | | $131,785 | | | $356,810 | |
| | Avinash Reddy | | | $9,854 | | | $23,665 | | | $— | | | $319 | | | $45,833 | | | $57,415 | | | $137,086 | |
| | Conrad J. Gunther | | | $10,150 | | | $23,545 | | | $36,601 | | | $7,477 | | | $44,885 | | | $55,296 | | | $177,954 | |
| | Patricia M. Schaubeck | | | $10,150 | | | $12,882 | | | $7,700 | | | $1,096 | | | $— | | | $21,842 | | | $53,670 | |
| | Howard H. Nolan | | | $2,049 | | | $— | | | $39,603 | | | $310 | | | $— | | | $3,941,797 | | | $3,983,759 | |
| | John M. McCaffery | | | $10,150 | | | $14,936 | | | $27,272 | | | $1,150 | | | $45,833 | | | $1,625,086 | | | $1,724,427 | |
*
| Included in this column are (i) cash severance payments to Messrs. Nolan and McCaffery in the amount of $2,343,264 and $1,625,086, respectively, (ii) payments in connection with the termination of the NEO’s legacy SERPs due to the Merger, and (iii) amounts credited to the 401(k) portion of the NEOs account balance under the SERP pursuant to the terms of the SERP as follows: Mr. O’Connor $81,892, Mr. Lubow $52,440, Mr. Reddy $29,437, Mr. Gunther $26,607, and Ms. Schaubeck $10,430. |
EMPLOYMENT AGREEMENTS
Employment Agreements with Messrs. O’Connor, Lubow, Reddy and Gunther. The Company and the Bank have entered into employment agreements with Messrs. O’Connor, Lubow, Reddy, and Gunther, effective as of February 1, 2021, setting forth the terms of the executive’s employment with the Company and the Bank. The employment agreement, which supersedes all prior employment and change in control agreements with these executives, are for an initial term of three (3) years, subject to an annual renewal for an additional year, unless the Company provides the executive with a written notice of non-renewal at least ninety (90) days before a renewal date. Mr. O’Connor’s employment agreement provides for an annual base salary of $900,000, an annual cash bonus with a target of 100% of base salary, an annual equity award with a target of 65% of base salary, and an annual cash allowance of $100,000 in lieu of perquisites. Mr. Lubow’s employment agreement, as amended on December 23, 2021, provides for an annual base salary of $700,000, an annual cash bonus with a target of 100% of base salary, an annual equity award with a target of 65% of base salary, and an annual cash allowance of $100,000 in lieu of perquisites. Prior to the amendment, Mr. Lubow’s employment agreement provided for an annual cash bonus with a target of 65% of base salary and an annual equity award with a target of 50% of base salary. Mr. Reddy’s employment agreement provides for an annual base salary of $500,000, an annual cash bonus with a target of 45% of base salary, an annual equity award with a target of 35% of base salary, and an annual cash allowance of $50,000 in lieu of perquisites. Mr. Gunther’s employment agreement provides for an annual base salary of $440,000, an annual cash bonus with a target of 45% of base salary, an annual equity award with a target of 35% of base salary, and an annual cash allowance of $50,000 in lieu of perquisites If the executive’s employment is terminated by the Company and the Bank without cause or the executive officer resigns for good
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reason, he would be entitled to the following payments and benefits: the sum of (1) an amount equal to the product of (x) the executive’s annual cash bonus for the fiscal year immediately preceding the fiscal year in which the event of termination occurs (which we refer to as the “Recent Bonus”) if such bonus has not been paid as of the date of the event of termination and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the date of termination, and the denominator of which is 365 (which we refer to as the “Pro Rata Bonus”); (2) the amount equal to the product of (a) three and (b) the sum of (c) executive’s base salary and (d) the Recent Bonus; (3) an amount equal to the Company and its affiliates contributions under the tax-qualified defined contribution plan and any excess or supplemental defined contribution plans sponsored by the Company or its affiliates, in which executive participates as of immediately prior to the date of termination that executive would receive if executive’s employment continued for the three-year period following the date of termination (which we refer to as the “Benefits Period”); and (4) an amount equal to the product of (a) 150% of the monthly premiums for coverage under the Company’s or and its affiliates health care plans and life insurance plans for purposes of continuation coverage under Section 4980B of the Code with respect to the maximum level of coverage in effect for executive and his or her spouse and dependents as of immediately prior to the date of termination, and (b) the number of months in the Benefits Period. The executive shall also be entitled to outplacement services the scope and provider of which shall be selected by the Company or the Bank, provided that such outplacement benefits shall end not later than the last day of the second calendar year that begins after the date of termination.
If the executive’s employment is terminated by reason of death or disability, the executive shall be entitled to the following from the Bank: (a) an amount equal to the product of the most recent annual cash bonus multiplied by a fraction, with the numerator equal to the number of days in the current fiscal year through the date of termination due to death or disability and the denominator equal to 365, (b) any unvested restricted stock awards subject to time-based vesting shall become fully and immediately vested, and the payment or delivery of such awards or benefits shall be accelerated to the extent permitted by Section 409A or other applicable law and the terms of such plan or arrangement, and (c) any unvested performance stock awards shall become fully and immediately vested and pro-rated based on actual performance and if actual performance is not determinable, at target, and the payment or delivery of such awards or benefits shall be accelerated to the extent permitted by Section 409A or other applicable law and the terms of such plan or arrangement.
In consideration for the foregoing payments and benefits payable upon a termination by the Company and the Bank, as applicable, without cause or by the executive officer for good reason prior to a change in control, the executive is required to execute a release of claims in favor of the Company and the Bank. In addition, the employment agreement contains restrictive covenants concerning nondisclosure of confidential information, mutual non-disparagement of either party and a one-year non-solicitation and one-year noncompetition restriction. However, if the executive’s employment is terminated following a change in control, the non-competition and non-solicitation restrictions shall apply for the period of time mutually agreed to by the parties, and in no event shall the time period be less than six months or exceed two years. In the event that payments to the executive become subject to Sections 280G and 4999 of the Code, such payments would be reduced if such reduction would leave the executive officer better off on an after-tax basis.
On May 26, 2021, the employment agreements of these executives were amended to delete the provision in the agreements requiring the offset of the value of the one-time equity grant granted in the Merger which vests in the event of a change in control occurring within twenty-four months of the Merger.
Defense of Tax Position Agreements with Messrs. O’Connor, Lubow Reddy and Gunther. The Company and the Bank have entered into Defense of Tax Position Agreements with Messrs. O’Connor, Lubow, Reddy and Gunther, effective as of February 1, 2021. The Agreements provide that the Company will pay the costs of defending the executive’s tax position related to any claim by the United States Internal Revenue Service (together with any state or local taxing authority) with respect to any excise tax due under Section 4999 of the Internal Revenue Code; provided, however, such agreement shall only provide defense expense reimbursement but will not entitle the executive to reimbursement for any taxes, excise taxes or penalties under Section 4999. The Agreements do not entitle the executives to a gross-up. C
Change in Control Employment Agreement with Ms. Schaubeck. The Company and the Bank have entered into a change in control employment agreement with Ms. Schaubeck, effective February 1, 2019, as amended. The agreement was for an initial term of three (3) years, subject to an annual renewal for an additional year, unless the Company provides Ms. Schaubeck with a written notice of non-renewal at least sixty (60) days before a renewal date. If during the employment period, which commenced on the date of the Merger (February 1, 2021) and ends on the second anniversary of such date, Ms. Schaubeck’s employment is terminated by the Company and the Bank without cause or if Ms. Schaubeck resigns for good reason, she would be entitled to the following payments and benefits: the sum of (1) her Pro Rata Bonus; (2) the amount equal to the product of (a) three and (b) the sum of (c) Ms. Schaubeck’s base salary (currently $350,000; $375,000 effective April 1, 2022) and (d) the Recent Bonus; (3) an amount equal to the Company and its affiliates contributions under the tax-qualified defined contribution plan and any excess or supplemental defined contribution plans sponsored by the Company or its affiliates, in which Ms. Schaubeck participates as of immediately prior to the date of termination that she would receive for the Benefits Period; and (4) an amount equal to the product of (a) 150% of the monthly premiums for coverage under the Company’s or and its affiliates health care plans and life insurance plans for purposes of
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continuation coverage under Section 4980B of the Code with respect to the maximum level of coverage in effect for Ms. Schaubeck and her spouse and dependents as of immediately prior to the date of termination, and (b) the number of months in the Benefits Period. Ms. Schaubeck shall also be entitled to outplacement services the scope and provider of which shall be selected by the Company or the Bank, provided that such outplacement benefits shall end not later than the last day of the second calendar year that begins after the date of termination. In the event that payments to the executive become subject to Sections 280G and 4999 of the Code, such payments would be reduced if such reduction would leave the executive officer better off on an after-tax basis.
If Ms. Schaubeck’s employment is terminated by reason of death or disability, she shall be entitled to an amount equal to the product of the most recent annual cash bonus multiplied by a fraction, with the numerator equal to the number of days in the current fiscal year through the date of termination due to death or disability and the denominator equal to 365.
Retention and Award Agreements with the NEOs. The Company has entered into retention and award agreements with each of Messrs. O’Connor, Lubow, Reddy, Gunther and Schaubeck. The retention and award agreements provide for (i) a cash transaction bonus, which was paid in the first payroll period following the closing date of the Merger, (ii) a retention bonus, half of which was paid in cash on the one-year anniversary of the closing date of the Merger and half of which was a restricted stock retention award which cliff vested on the one-year anniversary of the closing date of the Merger, and (iii) a one-time equity grant of restricted stock which will vest in equal annual installments on the second, third, and fourth anniversary of the closing date of the Merger.
| | Kevin M. O’Connor | | | $750,000 | | | $1,499,976 | | | $1,169,978 | |
| | Stuart H. Lubow | | | $750,000 | | | $999,993 | | | $699,995 | |
| | Avinash Reddy | | | $500,000 | | | $499,984 | | | $349,997 | |
| | Conrad J. Gunther | | | $500,000 | | | $499,984 | | | $349,997 | |
| | Patricia M. Schaubeck | | | $225,000 | | | $224,990 | | | $209,988 | |
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GRANTS OF PLAN BASED AWARDS The following table sets forth certain information pertaining to grants of Plan Based Awards to the NEOs during 2021.
| | Kevin M.
O’Connor | | | | | | $450,000 | | | $900,000 | | | $1,350,000 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | 01/08/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 17,321 | | | — | | | — | | | $450,000 | |
| | 02/01/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 29,515 | | | — | | | — | | | $749,976 | |
| | 02/01/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 46,044 | | | — | | | — | | | $1,169,978 | |
| | 07/01/21 | | | — | | | — | | | — | | | 2,004 | | | 4,009 | | | 6,014 | | | — | | | — | | | — | | | $202,491 | |
| | Stuart H.
Lubow | | | | | | $350,000 | | | $700,000 | | | $1,050,000 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | 02/01/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 19,677 | | | — | | | — | | | $499,993 | |
| | 02/01/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 27,548 | | | — | | | — | | | $699,995 | |
| | 07/01/21 | | | — | | | — | | | — | | | 3,118 | | | 6,237 | | | 9,355 | | | 4,158 | | | — | | | — | | | $454,983 | |
| | Avinash
Reddy | | | | | | $112,500 | | | $225,000 | | | $337,500 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | 02/01/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 9,838 | | | — | | | — | | | $249,984 | |
| | 02/01/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 13,774 | | | — | | | — | | | $349,997 | |
| | 07/01/21 | | | — | | | — | | | — | | | 1,559 | | | 3,118 | | | 4,677 | | | 2,079 | | | — | | | — | | | $227,475 | |
| | Conrad J.
Gunther | | | | | | $99,000 | | | $198,000 | | | $297,000 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | 02/01/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 9,838 | | | — | | | — | | | $249,984 | |
| | 02/01/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 13,774 | | | — | | | — | | | $349,997 | |
| | 07/01/21 | | | — | | | — | | | — | | | 1,372 | | | 2,744 | | | 4,116 | | | 1,829 | | | — | | | — | | | $200,168 | |
| | Patricia M.
Schaubeck | | | | | | $61,250 | | | $122,500 | | | $183,750 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | 02/01/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 4,427 | | | — | | | — | | | $112,490 | |
| | 02/01/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 8,264 | | | — | | | — | | | $209,988 | |
| | 07/01/21 | | | — | | | — | | | — | | | 1,091 | | | 2,182 | | | 3,274 | | | 1,455 | | | — | | | — | | | $159,226 | |
| | Howard H.
Nolan | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | John M.
McCaffery | | | 01/08/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 7,505 | | | — | | | — | | | $194,980 | |
| | 02/01/21 | | | | | | — | | | — | | | — | | | — | | | — | | | 9,838 | | | — | | | — | | | $249,984 | |
| | 02/01/21 | | | — | | | — | | | — | | | — | | | — | | | — | | | 13,774 | | | — | | | — | | | $349,997 | |
(1)
| The information in these columns reflects the range of possible payments under the 2021 AIP. For an explanation of the incentive opportunities, see the section above titled “Compensation Discussion and Analysis – 2021 Annual (Cash) Incentive Plan (“2021 AIP”).” |
(2)
| The information in these columns reflects the range of possible awards for vesting of PRSAs. The awards will vest based on the achievement of three pre-determined performance goals: Total Shareholder Return, Adjusted Efficiency Ratio and Average Non-Interest-Bearing Deposits/Total Deposits, each for the performance period ending on December 31, 2023. During June 2021, the Compensation Committee approved threshold, target and stretch opportunities based on consultation with an independent compensation consulting firm ranging from 50% to 150% of threshold level of performance. For an explanation of the performance goals, see the section above titled “Compensation Discussion and Analysis – 2021 Long-Term (Equity) Incentive Plan (“2021 LTIP”).” |
(3)
| The amounts shown in column (d) reflect the number of shares of restricted stock granted to each NEO pursuant to the restricted stock award portion of the retention payment which the NEO received in February 2021 in connection with the Merger; the number of shares of restricted stock under the one-time equity grant which each NEO received in February 2021 in connection with the Merger; the number of shares of restricted stock granted in July 2021 to each NEO pursuant to the 2021 LTIP; and, with respect to Messrs. O’Connor and McCaffery, the number of shares of restricted stock granted in January 2021 to each executive pursuant to the Legacy Bridge 2021 Long Term Stock Incentive Program. |
(4)
| The amounts included in column (e) reflect the full grant date fair value of the restricted stock and stock option awards calculated in accordance with FASB ASC No. 718, based on attaining the performance at the maximum level. |
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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END The following table sets forth information pertaining to outstanding equity awards held by the NEOs as of December 31, 2021.
| | Kevin M.
O’Connor | | | 17,255 | | | — | | | $36.19 | | | 2/13/2028 | | | 92,880(2) | | | $3,265,660 | | | 6,014(7) | | | $211,452 | |
| | 22,277 | | | — | | | $35.35 | | | 2/12/2029 | | | — | | | — | | | — | | | — | |
| | 25,610 | | | — | | | $34.87 | | | 2/13/2030 | | | — | | | — | | | — | | | — | |
| | Stuart H.
Lubow | | | — | | | — | | | — | | | — | | | 51,383(3) | | | $1,806,626 | | | 9,355(7) | | | $328,922 | |
| | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Avinash
Reddy | | | — | | | — | | | — | | | — | | | 25,691(4) | | | $903,296 | | | 4,677(7) | | | $164,443 | |
| | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Conrad J.
Gunther | | | — | | | — | | | — | | | — | | | 25,441(5) | | | $894,506 | | | 4,116(7) | | | $144,719 | |
| | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | — | | | | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Patricia M.
Schaubeck | | | — | | | — | | | — | | | — | | | 14,146(6) | | | $497,373 | | | 3,274(7) | | | $115,114 | |
| | Howard H.
Nolan | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | John M.
McCaffery | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
(1)
| Amounts based on closing price of our Common Stock as of December 31, 2021 ($35.16), as reported on the NASDAQ®. |
(2)
| 29,515 shares cliff vest on February 1, 2022; 46,044 shares vest in equal installments on the second, third, and fourth anniversary of the closing date of the Merger; and 17,321 shares vest in equal installments on February 15, 2022, 2023, 2024, and 2025. |
(3)
| 19,677 shares cliff vest on February 1, 2022; 27,548 shares vest in equal installments on the second, third, and fourth anniversary of the closing date of the Merger; and 4,158 shares vest in equal installments on the first, second, and third anniversary of the date of grant of July 1, 2021. |
(4)
| 9,838 shares cliff vest on February 1, 2022; 13,774 shares vest in equal installments on the second, third, and fourth anniversary of the closing date of the Merger; and 2,079 shares vest in equal installments on the first, second, and third anniversary of the date of grant of July 1, 2021. |
(5)
| 9,838 shares cliff vest on February 1, 2022; 13,774 shares vest in equal installments on the second, third, and fourth anniversary of the closing date of the Merger; and 1,829 shares vest in equal installments on the first, second, and third anniversary of the date of grant of July 1, 2021. |
(6)
| 4,427 shares cliff vest on February 1, 2022; 8,264 shares vest in equal installments on the second, third, and fourth anniversary of the closing date of the Merger; and 1,455 shares vest in equal installments on the first, second, and third anniversary of the date of grant of July 1, 2021. |
(7)
| Three year cliff vesting in 2024 upon satisfaction of performance requirements. |
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OPTION EXERCISES AND STOCK VESTED The following table sets forth information regarding the value realized by our NEOs on option exercises and stock awards vested during the year ended December 31, 2021.
| | Kevin M. O’Connor | | | — | | | — | | | 17,733 | | | $450,596 | |
| | Stuart H. Lubow | | | — | | | — | | | — | | | — | |
| | Avinash Reddy | | | — | | | — | | | — | | | — | |
| | Conrad J. Gunther | | | — | | | — | | | — | | | — | |
| | Patricia M. Schaubeck | | | — | | | — | | | — | | | — | |
| | Howard H. Nolan | | | 29,346 | | | $73,603 | | | 6,190 | | | $157,288 | |
| | John M. McCaffery | | | — | | | — | | | 16,096 | | | $494,884 | |
(1)
| Based on the closing price of our common stock on the respective vesting dates. |
On October 28, 2021, Dime Community Bank adopted the Dime Community Bank Supplemental Executive Retirement Plan (the “SERP”), which is a non-qualified deferred compensation plan, to provide benefits for certain executives and officers. The SERP is designed to compensate for the benefits reduced under the Dime Community Bank 401(k) Plan (the “401(k) Plan”) and the legacy BNB Bank Pension Plan (the “Pension Plan”) due to the application of the compensation dollar limits and annual benefit limits under the Internal Revenue Code of 1986, as amended (the “Code”). The SERP’s effective date is October 1, 2021.
Under the terms of the SERP, the amount of a participant’s annual 401(k) credit and/or annual pension credit is generally equal to the excess of the annual benefit to which the participant would have been entitled under the 401(k) Plan and/or the Pension Plan if the compensation dollar limits under the Code did not apply for each plan year. A participant’s account balance will be fully vested at all times. Messrs. O’Connor and Lubow are the only NEO’s that participate in the Pension Plan benefit under the SERP.
The following table sets forth certain information pertaining to the present value of accumulated benefits payable to Messrs. O’Connor and Lubow. The amounts reflected have been determined using interest rate and mortality rate assumptions consistent with those used in Dime’s financial statements.
| | Kevin M. O’Connor | | | SERP | | | 1 | | | $246,142 | | | — | |
| | Stuart H. Lubow | | | SERP | | | 1 | | | $198,956 | | | — | |
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NONQUALIFIED DEFERRED COMPENSATION | | Kevin M. O’Connor | | | — | | | $81,892 | | | — | | | — | | | — | |
| | Stuart H. Lubow | | | — | | | $52,440 | | | — | | | — | | | — | |
| | Avinash Reddy | | | — | | | $29,437 | | | — | | | — | | | — | |
| | Conrad J. Gunther | | | — | | | $26,607 | | | — | | | — | | | — | |
| | Patricia M. Schaubeck | | | — | | | $10,430 | | | — | | | — | | | — | |
| | Howard H. Nolan | | | — | | | — | | | — | | | — | | | — | |
| | John M. McCaffery | | | — | | | — | | | — | | | — | | | — | |
(1)
| Contributions included in the “Registrant Contributions in Last Fiscal Year” column are included as compensation for the NEO in the Summary Compensation Table. |
As previously disclosed, under the terms of the SERP, the amount of a participant’s annual 401(k) credit and/or annual pension credit is generally equal to the excess of the annual benefit to which the participant would have been entitled under the 401(k) Plan and/or the Pension Plan if the compensation dollar limits under the Code did not apply for each plan year. A participant’s account balance will be fully vested at all times.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL The following table shows estimated payments that would be made to the NEOs, other than Messrs. Nolan and McCaffery, upon specified events, assuming such events occurred on December 31, 2021, pursuant to each NEO’s employment agreement, equity awards, and other benefit plans or arrangements under the various circumstances presented. In addition, the NEOs are entitled to certain retirement benefits under plans maintained by the Bank or the Company that are not conditioned on a termination of employment or a change in control of the Bank or the Company. The NEOs are participants in a SERP, as described above in the Pension Benefits and Nonqualified Deferred Compensation section of this Proxy Statement, and details regarding their benefits in the SERP are disclosed in the Pension Benefits table and the Nonqualified Deferred Compensation table of this Proxy Statement. Since Messrs. Nolan and McCaffery terminated employment during 2021, the payments made to the two executives are provided below.
| | Kevin M. O’Connor | | | | | | | | | | | | | |
| | Stock Based Incentive Plans | | | — | | | $3,477,112(3) | | | $3,477,112(3) | | | $3,477,112(3) | |
| | Employment Agreement | | | $5,745,190(1) | | | $6,420,190(4) | | | $675,000(5) | | | $675,000(5) | |
| | Stuart H. Lubow | | | | | | | | | | | | | |
| | Stock Based Incentive Plans | | | — | | | $2,135,548(3) | | | $2,135,548(3) | | | $2,135,548(3) | |
| | Employment Agreement | | | $3,693,147(1) | | | $4,865,022(4) | | | $309,375(5) | | | $309,375(5) | |
| | Avinash Reddy | | | | | | | | | | | | | |
| | Stock Based Incentive Plans | | | — | | | $1,067,739(3) | | | $1,067,739(3) | | | $1,067,739(3) | |
| | Employment Agreement | | | $2,508,888(1) | | | $2,551,074(4) | | | $210,938(5) | | | $210,938(5) | |
| | Conrad J. Gunther | | | | | | | | | | | | | |
| | Stock Based Incentive Plans | | | — | | | $1,039,225(3) | | | $1,039,225(3) | | | $1,039,225(3) | |
| | Employment Agreement | | | $2,418,230(1) | | | $2,418,230(4) | | | $210,000(5) | | | $210,000(5) | |
| | Patricia M. Schaubeck | | | | | | | | | | | | | |
| | Stock Based Incentive Plans | | | — | | | $612,487(3) | | | $612,487(3) | | | $612,487(3) | |
| | Change in Control Employment Agreement | | | $1,671,153(2) | | | $1,671,153(2) | | | $127,970(5) | | | $127,970(5) | |
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(1)
| This amount represents the sum of (i) an amount equal to the product of (a) the executive’s Recent Bonus and (b) a fraction, the numerator of which is the number of days in the current fiscal year through the date of termination, and the denominator of which is 365; (ii) the amount equal to the product of (a) three and (b) the sum of (c) executive’s base salary and (d) the Recent Bonus; (iii) an amount equal to the Company and its affiliates contributions under the tax-qualified defined contribution plan and any excess or supplemental defined contribution plans sponsored by the Company or its affiliates, in which ESOP expense is recognized). |
| (9) | Compensation is presented onlyexecutive participates as of immediately prior to the date of termination that executive would receive if executive’s employment continued for the yearsBenefits Period; and (iv) an amount equal to the product of (a) 150% of the monthly premiums for coverage under the Company’s or and its affiliates health care plans and life insurance plans for purposes of continuation coverage under Section 4980B of the Code with respect to the maximum level of coverage in effect for executive and his or her spouse and dependents as of immediately prior to the date of termination, and (b) the number of months in the Benefits Period. |
(2)
| This amount represents the sum of (1) the executive’s Pro Rata Bonus; (2) the amount equal to the product of (a) three and (b) the sum of (c) executive’s base salary and (d) the Recent Bonus; (3) an amount equal to the Company and its affiliates contributions under the tax-qualified defined contribution plan and any excess or supplemental defined contribution plans sponsored by the Company or its affiliates, in which the individual wasexecutive participates as of immediately prior to the date of termination that she would receive for the Benefits Period; and (4) an NEO.amount equal to the product of (a) 150% of the monthly premiums for coverage under the Company’s or and its affiliates health care plans and life insurance plans for purposes of continuation coverage under Section 4980B of the Code with respect to the maximum level of coverage in effect for the executive and her spouse and dependents as of immediately prior to the date of termination, and (b) the number of months in the Benefits Period. In the event that payments to the executive become subject to Sections 280G and 4999 of the Code, such payments would be reduced if such reduction would leave the executive officer better off on an after-tax basis. |
(3)
| This amount represents the value of unvested restricted stock units and restricted stock awards, subject to time-based and performance-based vesting, that become fully vested upon certain events, including death, disability and a qualifying termination of employment following a change in control. |
(4)
| In the event of an involuntary termination after a change in control, this amount represents the sum of (i) an amount equal to the product of (a) the executive’s Recent Bonus and (b) a fraction, the numerator of which is the number of days in the current fiscal year through the date of termination, and the denominator of which is 365; (ii) the amount equal to the product of (a) three and (b) the sum of (c) executive’s base salary and (d) the greater of the Annual Cash Bonus (at target) in the year of a Change in Control or the average of the Annual Cash Bonus earned by Executive during the three years prior to a Change in Control (including the full value of the Annual Cash Bonus, whether payable in cash or another form); (iii) an amount equal to the Company and its affiliates contributions under the tax-qualified defined contribution plan and any excess or supplemental defined contribution plans sponsored by the Company or its affiliates, in which executive participates as of immediately prior to the date of termination that executive would receive if executive’s employment continued for the Benefits Period; and (iv) an amount equal to the product of (a) 150%of the monthly premiums for coverage under the Company’s or and its affiliates health care plans and life insurance plans for purposes of continuation coverage under Section 4980B of the Code with respect to the maximum level of coverage in effect for executive and his or her spouse and dependents as of immediately prior to the date of termination, and (b) the number of months in the Benefits Period. In consideration for the foregoing payments and benefits, each employment agreement contains restrictive covenants concerning nondisclosure of confidential information, mutual non-disparagement of either party and non-competition and non-solicitation restrictions, which shall apply for the period of time mutually to be agreed to by the parties, and in no event shall the time period be less than six months or exceed two years. In the event that payments to the executive become subject to Sections 280G and 4999 of the Code, such payments shall be reduced if such reduction would leave the executive officer better off on an after-tax basis, and accordingly, the amount shown in this column may be reduced. |
(5)
| This amount represents the Recent Bonus paid by Legacy Bridge to Mr. O’Connor and by Legacy Dime to Messrs. Lubow, Reddy, Gunther and Ms. Schaubeck. |
In connection with the Merger, Mr. Nolan terminated employment on February 1, 2021 and Mr. Nolan entered into a: (i) Non-Competition and Consulting Agreement under which Mr. Nolan was paid $50,000 per month, pro-rated for a partial month, in exchange for Mr. Nolan providing consulting services up to 160 hours per month, commencing February 2, 2021 and ending June 30, 2021, and Mr. Nolan became subject to non-competition and non-solicitation restrictions for thirteen (13) months, commencing on February 1, 2021, and a (ii) Settlement and Release Agreement under which Mr. Nolan’s employment agreement was terminated and Mr. Nolan was paid $2,343,264, less required withholding, in full satisfaction of the payment obligations under Mr. Nolan’s employment agreement and in exchange for a legal release of claims. In addition, pursuant to the terms of Mr. Nolan’s SERP, Mr. Nolan was paid his vested account balances of $1,439,000 and $159,533 and Mr. Nolan’s non-vested equity awards were accelerated on February 1, 2021 with a value of $157,317. Mr. Nolan received full ownership of his automobile with a value of $38,600.
The Company and Mr. McCaffery were parties to an Employment Agreement and a Retention and Award Agreement, both dated October 16, 2020, which provided for certain payments upon a qualifying termination of Mr. McCaffery’s employment. Mr. McCaffery’s departure on June 14, 2021 was a termination without Cause under the Employment Agreement. The Company and Mr. McCaffery have entered into an Agreement and General Release (the “Agreement”), pursuant to which the Company paid Mr. McCaffery $1,625,086, less legally required withholdings, in full satisfaction of the Company’s obligations under the Employment Agreement and the Retention and Award Agreement, in a lump sum after a seven day revocation period lapsed. In addition, Mr. McCaffery was engaged as a consultant for a transition period of four months and received $250,000 for his consultation services. The Agreement includes non-disparagement, non-solicitation, and non-competition provisions and a full release of claims by Mr. McCaffery.
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Pursuant to Section 953 (b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, (the “Dodd-Frank Act”),and Item 402 (u) of Regulation S-K, we are required to discloseproviding the reasonable estimate offollowing information about the ratiorelationship of the annual total compensation of our median compensated employee and the annual total compensation of our CEO.
For 2021, annual total compensation of our median employee other than our CEO was $82,249 and the annual total compensation for our CEO as reported in
termsthe 2021 Summary Compensation Table was $9,674,312. Based on this information, for 2021 we estimate the ratio of
compensation, excluding Kenneth J. Mahon, our
Chief Executive Officer,CEO’s annual total compensation to the annual total compensation of
Mr. Mahon, calculated in a manner consistent with the Dodd-Frank Act and Securities and Exchange Commission rules.Ourour median employee for 2018 was determined118 to 1.
On February 1, 2021, we completed the Merger and we identified our median employee using
the annualized base W-2 earnings for the year endedour entire workforce, as of December 31,
20182021, including all full-time and part-time employees of Legacy Dime and Legacy Bridge. We used wages from our payroll records as reported to the Internal Revenue Service on Form W-2 for
all employees who were actively employed on December 31, 2018.fiscal 2021. We annualized compensation for full-time and part-time permanent employees who were employed on December 31,
20182021, but did not work for us the entire year. No full-time equivalent adjustments were made for part-time employees.
The
We determined the annual total compensation for our median employee by calculating total compensation for such employee in accordance with the requirements of Item 402 (c)(2)(x) of Regulation S-K.
With regard to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 2021 Summary Compensation Table, which is included in this Proxy Statement. If the cash transaction bonus of $750,000 and other Merger-related compensation of $3,701,828, as shown on the Summary Compensation Table, is excluded from the CEO’s total compensation, the ratio of our CEO’s annual total compensation to the annual total compensation of our median employee usingwould be 63:1.
The SEC’s rules for identifying the same methodology we usemedian employee and calculating the pay ratio allow companies to calculateapply various methodologies and various assumptions and, as a result, the CEO’s total annual compensation, as reflected inpay ratio reported by the Summary Compensation Table compensation onCompany may not be comparable to the previous page, waspay ratio reported by other companies.
DELINQUENT SECTION 16(a) REPORTS Our Common Stock is
$62,818. The annual total compensationregistered pursuant to Section 12(b) of the
CEO, Kenneth J. Mahon was $1,946,523. Accordingly, the final pay ratio calculation was 31:1 for 2018. TABLE OF CONTENTS
GrantsSecurities Exchange Act of Plan-based Awards for Fiscal Year 2018
1934. The following table sets forth information regarding plan-based awards granted to the NEOs during the last fiscal year.
| | | Estimated Future Payouts Under Equity
Incentive Plan Awards(1) | Time-vested Restricted Stock
Awards |
Executive | Type | Grant Date | Threshold
(#) | Target
(#) | Maximum
(#) | Number of
Shares | Grant Date Fair
Value of
Awards(2) |
Kenneth J. Mahon | | PSA | | | 3/28/2018 | | | 8,005 | | | 16,010 | | | 24,016 | | | — | | | — | |
| | RSA | | | 4/30/2018 | | | — | | | — | | | — | | | 10,025 | | $ | 198,000 | |
Stuart H. Lubow | | PSA | | | 3/28/2018 | | | 3,840 | | | 7,681 | | | 11,522 | | | — | | | — | |
| | RSA | | | 4/30/2018 | | | — | | | — | | | — | | | 4,810 | | | 95,000 | |
Robert S. Volino | | PSA | | | 3/28/2018 | | | 3,598 | | | 7,196 | | | 10,795 | | | — | | | — | |
| | RSA | | | 4/30/2018 | | | — | | | — | | | — | | | 4,506 | | | 89,000 | |
Conrad J. Gunther | | PSA | | | 3/28/2018 | | | 2,264 | | | 4,528 | | | 6,792 | | | — | | | — | |
| | RSA | | | 4/30/2018 | | | — | | | — | | | — | | | 2,835 | | | 56,000 | |
| (1) | The information in these columns reflects the range of possible awards for vesting of PSA. The awards will vest based on the achievement of one pre-determined performance goal: reported ROAA, for the performance period from January 1, 2018 through December 31, 2020. During March 2018, the Compensation and HR Committee approved threshold, target and maximum opportunities based on consultation with the independent compensation consulting firm. Target performance represents our budget performance, threshold payout level (50% of the target) represents a baseline level of acceptable performance to receive any award and maximum payout (150% of the target) represents exceptional performance. |
| (2) | The amounts in this column reflect the aggregate grant date fair value of the awards, the closing price of the Common Stock on the grant date, $19.75 as of April 30, 2018. See “Grant of Plan-Based Awards Table” for additional information on the restricted stock award grants. |
2004 Stock Incentive Plan. The Company's Board of Directors has adopted the 2004 Stock Incentive Plan, which was approved by the Company's shareholders at their annual meeting held in 2004. Future awards under the plan were terminated upon reaching its tenth anniversary in 2014. The Compensationofficers and HR Committee of the Board of Directors administers the 2004 Stock Incentive Plan and authorized all equity grants. All equity grants under the 2004 Stock Incentive Plan are fully vested. Options granted under the 2004 Stock Incentive Plan are intended to qualify as “incentive stock options” under Section 422 of the Code.
2013 Equity and Incentive Plan. The 2013 Equity and Incentive Plan was adopted by the Company’s Board of Directors and subsequently approved by the Company’s shareholders at their annual meeting held in 2013. The 2013 Equity and Incentive Plan provides the Company with the flexibility to make equity compensation available to Outside Directors, officers (including the CEO) and other employeesdirectors of the Company or its subsidiaries. Asand beneficial owners of greater than 10% of our shares of common stock (“10% beneficial owners”) are required to file reports on Forms 3, 4 and 5 with the SEC disclosing beneficial ownership and changes in beneficial ownership. SEC rules require disclosure in our Proxy Statement and Annual Report on Form 10-K of the Record Date, up to 533,377failure of an officer, director or 10% beneficial owner of the shares of Common Stock remained eligible for award grants to either to Directors, NEOs or other officers of the Company under the 2013 Equity and Incentive Plan.
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Outstanding Equity Awards at 2018 Fiscal Year End
| | Option Awards | Stock Awards |
Restricted Stock | Performance Shares |
Name | Grant Date | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable(1) | Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#) | Option
Exercise
Price
($) | Option
Expiration
Date | Number
of Shares
of Stock
That
Have Not
Vested
(#)(1) | Market
Value of
Shares of
Stock
That
Have Not
Vested
($)(2) | Number
of Shares
of Stock
That
Have Not
Vested
(#)(3) | Market
Value
of Shares
of Stock
That
Have Not
Vested
($)(2) |
Kenneth J. Mahon | | 4/30/2010 | | | 3,044 | | | — | | | — | | | 12.75 | | | 4/30/2020 | | | — | | | — | | | — | | | — | |
| | 4/29/2011 | | | 9,709 | | | — | | | — | | | 15.46 | | | 4/29/2021 | | | — | | | — | | | — | | | — | |
| | 4/30/2015 | | | — | | | — | | | — | | | — | | | — | | | 1,963 | | | 33,332 | | | — | | | — | |
| | 4/29/2016 | | | — | | | — | | | — | | | — | | | — | | | 4,556 | | | 77,361 | | | — | | | — | |
| | 3/23/2017 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 20,050 | | | 340,449 | |
| | 4/28/2017 | | | — | | | — | | | — | | | — | | | — | | | 10,180 | | | 172,856 | | | — | | | — | |
| | 3/28/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 16,010 | | | 271,850 | |
| | 4/30/2018 | | | — | | | — | | | — | | | — | | | — | | | 10,025 | | | 170,225 | | | — | | | — | |
Robert S. Volino | | 4/30/2015 | | | — | | | — | | | — | | | — | | | — | | | 888 | | | 15,078 | | | — | | | — | |
| | 4/29/2016 | | | — | | | — | | | — | | | — | | | — | | | 1,988 | | | 33,756 | | | — | | | — | |
| | 3/23/2017 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 6,380 | | | 108,332 | |
| | 4/28/2017 | | | — | | | — | | | — | | | — | | | — | | | 3,239 | | | 54,998 | | | — | | | — | |
| | 3/28/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 7,196 | | | 122,188 | |
| | 4/30/2018 | | | — | | | — | | | — | | | — | | | — | | | 4,506 | | | 76,512 | | | — | | | — | |
Stuart H. Lubow | | 1/3/2017 | | | — | | | — | | | — | | | — | | | — | | | 8,232 | | | 139,779 | | | — | | | — | |
| | 3/28/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 7,681 | | | 130,423 | |
| | 4/30/2018 | | | — | | | — | | | — | | | — | | | — | | | 4,810 | | | 81,674 | | | — | | | — | |
Conrad J. Gunther | | 1/3/2017 | | | — | | | — | | | — | | | — | | | — | | | 4,756 | | | 80,757 | | | — | | | — | |
| | 3/28/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 4,528 | | | 76,885 | |
| | 4/30/2018 | | | — | | | — | | | — | | | — | | | — | | | 2,835 | | | 48,138 | | | — | | | — | |
| (1) | Please refer to the sections titled “2004 Stock Incentive Plan” and “2013 Equity and Incentive Plan” commencing on page 36 for a discussion of the vesting dates for each of the unexercisable options and unvested restricted stock awards. |
| (2) | Market value is calculated on the basis of $16.98 per share, the closing sale price of the Common Stock on the Nasdaq Stock Market on the final trading day of 2018. |
| (3) | These shares are subject to vesting based upon the achievement of specific goals. The amounts shown assume the target level of performance is achieved. The actual award, if any, will be determined as of the completion of the performance period for each award. |
On April 30, 2014, a grant of restricted stock awards was made to Mr. Mahon (7,362 shares), Mr. Volino (4,908 shares) and Mr. Rizzo (3,251 shares). 25% of these awards vested on May 1, 2015, 2016, 2017, and 2018 respectively. On April 30, 2015, a grant of restricted stock awards was made to Mr. Mahon (7,852 shares) and Mr. Volino (3,552 shares). 25% of these awards vested on May 1, 2016, 2017, and 2018, respectively, with the remaining shares vesting on May 1, 2019. On March 24, 2016, PSAs assuming target performance were granted to Mr. Mahon (4,756 shares) and Mr. Volino (2,074 shares). These shares vest based upon the achievement of specific goals during the performance period, ending December 31, 2018. On April 29, 2016, a grant of restricted stock awards was made to Mr. Mahon (9,111 shares) and Mr. Volino (3,976 shares). 25% of these awards vested on May 1, 2017 and 2018, with the remaining shares vesting in equal annual installments on May 1, 2019 and 2020. On January 3, 2017, a grant of restricted stock awards was made to Mr. Lubow (10,975 shares) and Mr. Gunther (6,341 shares). 25% of these awards vested on January 3, 2018, with the remaining shares vesting in equal annual installments on January 3, 2019, 2020 and 2021. On March 23, 2017, PSAs assuming target performance were granted to Mr. Mahon (20,050 shares) and Mr. Volino (6,380 shares). These shares vest based upon the achievement of specific goals during the performance period, ending December 31, 2019. On April 28, 2017, a grant of restricted stock awards was made to Mr. Mahon (13,573 shares) and Mr. Volino (4,318 shares). 25% of these awards vested on May 1, 2018, with the remaining shares vesting in equal annual installments on May 1, 2019, 2020 and 2021. On March 28, 2018, PSAs assuming target performance were granted to Mr. Mahon (16,010 shares), Mr. Volino (7,196 shares), Mr. Lubow (7,681 shares) and Mr. Gunther (4,528 shares). These shares vest based upon the achievement of specific goals during the performance period, ending December 31, 2020. On April 28, 2018, a grant of restricted stock awards was made to Mr. Mahon (10,025 shares), Mr. Volino (4,506 shares) and Mr. Gunther (2,835 shares). These shares vest in equal annual installments on May 1, 2019, 2020, 2021 and 2022, respectively.
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Option Exercises and Stock Vested for Fiscal Year 2018
The following table sets forth the stock awards that vested for and the option awards that were exercised by, the NEOs during the last fiscal year:
| Option Awards | Stock Awards |
Name | Number of
Shares
Acquired
on Exercise | Value
Realized on
Exercise(1) | Number of
Shares
Acquired
on Vesting (#) | Value
Realized on
Vesting ($)(2) |
Kenneth J. Mahon | | 2,927 | | | 7,376 | | | 9,475 | | $ | 187,131 | |
Robert S. Volino | | — | | | — | | | 4,188 | | | 82,713 | |
Stuart H. Lubow | | — | | | — | | | 2,713 | | | 57,603 | |
James L. Rizzo | | — | | | — | | | 813 | | | 16,057 | |
Conrad J. Gunther | | — | | | — | | | 1,585 | | | 33,285 | |
| (1) | All option exercise transactions during 2018, consisted of the simultaneous issuance and sale of an equivalent number of shares of Common Stock to the options exercised. Value realized in the table above is calculated as the difference between the aggregate value received on the simultaneous sale of the underlying shares (net of applicable fees and brokerage commissions) and the aggregate exercise cost of the applicable options on the respective dates of exercise. |
| (2) | Amount calculated on the basis of the closing price for a share of Common Stock on the Nasdaq Stock Market for various grants to the NEOs which contractually vested on that date. |
Pension Benefits
Retirement Plan. The Bank sponsors the Retirement Plan, a non-contributory, tax-qualified defined benefit pension plan for eligible employees. Effective April 1, 2000, all participant benefits under the Retirement Plan were frozen, and no benefits have been accrued under the Retirement Plan since that date. Messrs. Lubow, Volino and Gunther are not eligible to participate in the plan. The Retirement Plan provides each participant, including Messrs. Mahon and Rizzo, a benefit equal to 2% of the participant's average annual earnings multiplied by the participant's years (and any fraction thereof) of eligible employment (up to a maximum of 30 years). The benefit is not reduced by a Social Security offset. Participants are fully vested in his or her benefit under the Retirement Plan after five years of service. The Retirement Plan is funded by the Bank on an actuarial basis and all assets are held in trust by the Retirement Plan trustee.
BMP. Our BMP is a non-qualified deferred compensation plan with both a defined benefit and defined contribution component. The BMP provides eligible employees who are members of a select group of management with benefits that would be due under the Bank’s tax-qualified plans, if such benefits were not limited under the Code. Benefit accruals with respect to the defined benefit component of the BMP were eliminated in April 2000 in connection with the Retirement Plan freeze. However, the present value of the BMP benefits related to the Retirement Plan continues to increase as the participating NEOs approach normal retirement age. Messrs. Mahon, Lubow, Volino and Gunther (defined contribution portion only) participated in the BMP in 2018. Mr. Rizzo was not eligible to participate in the plan.
The following table sets forth information regarding pension benefits accrued by the NEOs as of December 31, 2018 under our Retirement Plan and BMP.
Name | Plan Name | Number of
Years
Credited
Service (#)(1) | Present
Value of
Accumulated
Benefit ($)(1) | Payments
During Last
Fiscal Year($)(2) |
Kenneth J. Mahon | Retirement Plan | | 19.7 | | $ | 1,017,679 | | | — | |
| BMP (Defined Benefit Portion) | | 19.7 | | | 285,861 | | | — | |
James L. Rizzo | Retirement Plan | | 13.4 | | | 178,107 | | | — | |
| (1) | The figures shown are determined as of the plan's measurement date during 2018 under accounting principles generally accepted in the U.S. (“U.S. GAAP”), as disclosed in Notes 1 and 20 to the Company's audited consolidated financial statements included in the Company's 2018 Annual Report on Form 10-K. The discount rate and other assumptions used for this purpose are discussed in Note 20 to the audited consolidated financial statements included in the Company's 2018 Annual Report on Form 10-K. The assumed mortality rates were as follows: Mr. Mahon, 1.06% and Mr. Rizzo, 0.45%. |
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Non-Qualified Deferred Compensation
The following table shows the 2018 activity for each of our NEOs, as well as their defined contribution account balances in our BMP. The defined benefit component of the BMP is discussed under “Pension Benefits – BMP” above. The defined contribution component noted in this table reflects the supplemental retirement benefit each NEO received due to the compensation limitations imposed by the Code on benefits provided under tax-qualified plans, such as our KSOP in the BMP. No executive contributions were made under the BMP in fiscal 2018.
Name | Company
Contributions
in Last Fiscal
Year($)(1) | Aggregate
Losses in
Last Fiscal
Year($)(2) | Aggregate
Withdrawals/
Distributions($)(3) | Aggregate
Balance at
Last Fiscal
Year End ($)(1) |
Kenneth J. Mahon | $ | 28,954 | | $ | (570,673 | ) | $ | 75,671 | | $ | 4,620,673 | |
Stuart H. Lubow | | 17,620 | | | — | | | — | | | 17,620 | |
Robert S. Volino | | 15,404 | | | (8,345 | ) | | 860 | | | 70,832 | |
Conrad J. Gunther | | 5,940 | | | — | | | — | | | 5,940 | |
| (1) | Company contributions in the last fiscal year and aggregate balance at last fiscal year end both reflect compensation items recognized in 2018 in the Summary Compensation Table. |
| (2) | Earnings did not accrue at above-market or preferential rates. These numbers are not reflected in the Summary Compensation Table. |
| (3) | Amount represents pass through dividends on shares of Common Stock held in the KSOP component of the BMP. |
Potential Payments to Our Named Executive Officers Upon Termination of Service or Change in Control
The following table provides an estimate of the value of NEO potential post-termination and change of control benefits under the Employment Agreement with Mr. Mahon, the Change in Control Agreements with Messrs. Lubow, Volino, Gunther, and Rizzo, and certain other benefits and compensation arrangements. These estimates assume the termination of employment or change in control as of December 31, 2018. Tax-qualified benefits payable under the Pension Plan, the KSOP and vested balances under our non-qualified plans are not included in this table. Our NEOs receive only earned and vested compensation and benefits as of their termination date upon voluntary termination of service. Mr. Mahon maintains separate employment agreements with the Bank and the Company which have substantially similar terms and conditions. For purposes of the table below, the employment agreements with Mr. Mahon will collectively be referred to as the Employment Agreement. The Company’s common stock closing priceto file a Form 3, 4 or 5 on December 31, 2018 was $16.98.
The payments toa timely basis. Based solely on our NEOs are governedreview of such ownership reports and representations made by various agreements and arrangements described in the footnotes to the table. The timing of the payments described below may be subject to a delay in the event an NEO is considered a “Specified Employee” and defined under Section 409A of the Code.
| Kenneth J.
Mahon | Stuart H.
Lubow | Robert S.
Volino | James L.
Rizzo | Conrad J.
Gunther |
Death
| | | | | | | | | | | | | | | |
Death Benefit(1) | $ | 2,475,000 | | $ | — | | $ | — | | $ | — | | $ | — | |
Restricted Stock Award(5) | | 302,785 | | | 149,491 | | | 120,088 | | | — | | | 86,882 | |
Performance-based Stock Award(6) | | 208,829 | | | 15,790 | | | 70,767 | | | — | | | 9,308 | |
| | | | | | | | | | | | | | | |
Disability
| | | | | | | | | | | | | | | |
Disability Benefit(2) | | 2,475,000 | | | — | | | — | | | — | | | — | |
Restricted Stock Award(5) | | 302,785 | | | 149,491 | | | 120,088 | | | — | | | 86,882 | |
Performance-based Stock Award(6) | | 208,829 | | | 15,790 | | | 70,767 | | | — | | | 9,308 | |
| | | | | | | | | | | | | | | |
Discharge without Cause or Resignation with Good Reason – No Change in Control
| | | |
Severance Pay(3) | | 4,167,570 | | | — | | | — | | | — | | | — | |
Health and Welfare Benefits(4) | | 61,502 | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | |
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| Kenneth J.
Mahon | Stuart H.
Lubow | Robert S.
Volino | James L.
Rizzo | Conrad J.
Gunther |
Discharge without Cause or Resignation with Good Reason – Change in Control Related
| | | |
Severance Pay(3) | | 4,450,023 | | | 2,119,932 | | | 1,972,237 | | | 351,544 | | | 1,054,871 | |
Health and Welfare Benefits(4) | | 61,502 | | | — | | | — | | | — | | | — | |
Restricted Stock Award(5) | | 453,706 | | | 221,453 | | | 180,345 | | | — | | | 128,895 | |
Performance-based Stock Award(6) | | 208,829 | | | 15,790 | | | 70,767 | | | — | | | 9,308 | |
Tax Indemnification Payment(7) | | 2,363,277 | | | — | | | — | | | — | | | — | |
| (1) | Mr. Mahon’s employment agreement provides that if Mr. Mahon dies while in employment with the Company and the Bank his beneficiaries will receive a death benefit payable through life insurance or otherwise equal to three times his then annual base salary. Mr. Mahon’s beneficiaries are also entitled to an additional cash payment equal to any earned but unpaid salary and the value of his unused vacation days and floating holidays in the year of his death. All vested benefits under the Bank and Company sponsored compensation plans and arrangements in which Mr. Mahon participated will be distributed following his death in accordance with the terms of the respective arrangements. The cash death benefit under Mr. Mahon’s employment agreement is payable within 30 days of his death. |
| (2) | The disability benefits provided under Mr. Mahon’s employment agreement is the same as the respective death benefits described in footnote (1) above. Mr. Mahon is also eligible to receive payments under the Bank’s disability insurance program. |
| (3) | In the event of a termination without cause or a resignation with good reason not in connection with a change in control, Mr. Mahon’s employment agreement provides for a lump sum salary severance payment in an amount equal to the present value of the salary that the executive would have earned if he had worked for the Company and the Bank during the remaining unexpired employment period at the highest annual rate of salary (assuming, if a change in control has occurred, that annual 6% salary increases would apply from the time of the change in control); a lump sum severance payment related to the annual cash incentive award in an amount equal to the lump sum salary severance, multiplied by the greater of (i) the target annual cash incentive bonus award (expressed as a percentage of salary) in effect at the time of termination, or (ii) the average of the actual annual cash incentive bonus payments (expressed as a percentage of salary) earned for the most recent three years, and a lump sum payment in an amount approximately equal to the present value of matching contributions for three years of participation in the KSOP, and the present value of excess benefits under the BMP that would have been due for three years participation in the KSOP if such benefits were not limited under the Code (assuming, if a change in control has occurred, that annual 6% salary increases would apply from the time of the change in control). Each such present value is determined using a discount rate of six percent per annum, compounded with the frequency corresponding to the regular payroll periods. In the event of a delay in payments for Mr. Mahon, all payments will be held in a grantor trust which satisfies the requirements of Revenue Procedure 92-65 until the date the payments can be made under Section 409A. Under the Change in Control Agreements with Messrs. Lubow, Volino, Gunther and Rizzo, in the event of a change in control, the executive officer is entitled to certain employment protections during the period beginning on the date of a change in control and ending on the second anniversary of that date. If, during that period, the executive officer’s employment is terminated by the executive officer for good reason or by the Company for a reason other than for cause, death or disability, then within 30 days after the date of termination, the executive officer shall receive a lump sum severance equal to the aggregate of: (i) a portion of the recent bonus pro-rated through the date of termination; (ii) three times his annual base salary and most recent bonus in the case of Messrs. Lubow and Volino, two times his annual base salary and most recent bonus in the case of Mr. Gunther, and one times his annual base salary and most recent bonus in the case of Mr. Rizzo; (iii) the amount of contributions under the savings plans that the executive officer would receive if his employment continued for three years in the case of Messrs. Lubow, and Volino, two years in the case of Mr. Gunther, and one year in the case of Mr. Rizzo, following the date of termination; and (iv) an amount equal to 150% of the premiums for healthcare and life insurance coverage under the Company’s healthcare plans that the Company would have paid if the executive officer continued his employment for three years in the case of Messrs. Lubow and Volino, two years in the case of Mr. Gunther, and one year in the case of Mr. Rizzo, following the date of termination. |
| (4) | In the event of a termination without cause or a resignation with good reason, Mr. Mahon’s employment agreement provides for continued group life, health (including hospitalization, medical, major medical, and dental), accident and long-term disability insurance benefits, in addition to benefits to which the executive is entitled as a former employee, after taking into account the coverage provided by any subsequent employer. These continued benefits will be provided if and to the extent necessary to provide the executive and his family and dependents for a period of three years following termination of employment, with coverage identical to, and in any event no less favorable than, the coverage to which they would have been entitled under plans in effect on the date of termination of employment. If Mr. Mahon’s termination of employment occurs after a change in control, he may elect coverage to which he would be entitled under plans in effect on the date of his termination of employment or during the one-year period ending on the date of such change in control. These continued benefits will be determined as if Mr. Mahon had continued working for the Company during the remaining unexpired employment period as defined in the Employment Agreement at the highest annual rate of compensation (assuming, if a change in control has occurred, that annual 6% salary increases would apply from the time of the change in control) under the employment agreement. |
| (5) | All outstanding restricted stock awards granted under the 2013 Equity and Incentive Plan vest upon a change of control with a qualifying termination unless they were forfeited prior to such qualifying termination becoming effective. In addition, for grants under either Plan, accelerated vesting occurs on a pro-rated basis for restricted stock awards in the event of retirement, death or disability. The figures shown are calculated based on a per share value of $16.98, which was the closing sale price for a share of Common Stock on December 31, 2018. There are no restricted stock awards outstanding under the 2004 Stock Incentive Plan. |
| (6) | In 2017, each of the NEOs other than Messrs. Lubow, Gunther, and Rizzo were granted PSAs with a performance period ending December 31, 2019. In 2018, each of the NEOs other than Mr. Rizzo was granted PSAs with a performance period ending December 31, 2020. Descriptions of the award levels and criteria are set forth in the “Compensation Discussion and Analysis – Compensation Program Components – Long-term Incentive Plan.” Upon a change of control, death, disability or retirement, each amount is pro-rated based on performance through the date of such event. Since the amount of the performance awards cannot be determined at this time, the estimate has been prepared based on the target opportunities under each award. |
| (7) | In the event Mr. Mahon receives payments and benefits in connection with a change in control that exceed the limits imposed under Section 280G of the Code (“excess parachute payments”), those payments and benefits would be subject to a 20% excise tax under Section 4999 of the Code and the deduction for said payments would be lost by the Company and the Bank. In order to put Mr. Mahon in the same economic position he would have been had there been no excise tax, Mr. Mahon’s employment agreement provides him, on an after-tax basis, with a payment for any excise taxes triggered under Section 4999 of the Code, as well as applicable Federal, State, and employment taxes that apply to the additional amounts paid (“Tax Indemnification Payment”). The dollar amount noted represents an estimated of the Tax Indemnification Payment Mr. Mahon would have received had a change in control occurred and his employment terminated on December 31, 2018. The Tax Indemnification Payment is triggered only in the context of Mr. Mahon’s involuntary termination of employment or voluntary termination for good reason following a change in control of the Company and only if Mr. Mahon’s severance payments and benefits, when |
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aggregated with other payments and benefits made or provided in connection with the change in control, result in an excess parachute payments. The calculation takes into account all possible excess parachute payments triggered under Mr. Mahon’s Employment Agreement, as well as other plans or arrangements, including the accelerated vesting of restricted stock awards and other payments triggered solely by the occurrence of a change in control. Mr. Mahon has the only remaining legacy employment agreement that contains a Tax Indemnification Payment.
Transactions with Certain Related Persons
Federal laws and regulations generally require that all loans or extensions of credit to directors and executive officers, musttwo Form 4 reports for the Company’s Chief Risk Officer, each relating to one transaction, were inadvertently filed late.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Sarbanes-Oxley Act of 2002 allows for loans made by the Bank, as an FDIC insured institution, to our executive officers and directors in compliance with federal banking regulations. Federal banking regulations allow for loans made to executive officers or directors under a benefit program maintained by the Bank that is generally available to all other employees and that does not give preference to any executive officer or director over any other employee. Through June 30, 2021 the Bank offered its employees interest rate discounts of up to 100 basis points, based on years of service, for residential mortgage loans on their primary residence. Commencing July 1, 2021, this program was revised to provide that employees and directors with at least six months of service with the Bank are eligible to receive a credit of 1.00% to be applied towards costs or a reduction in the interest rate. Except for the interest rate discount or credit applied towards costs, loans to our directors and executive officers (and their immediate family members and companies in which they are principal owners), are made in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactionsloans with the general publicpersons not related to, and mustdo not involve more than the normal risk of repaymentcollectability or present other unfavorable features. However, regulations also permit
During the year ended December 31, 2021, the Bank had two residential mortgage loans to two directors,
and executive officerstwo residential mortgage loans to
receive the same terms through benefit or compensation plans that are widely available to other employees, as long as the director or executive officer is not given preferential treatment compared to participating employees.The Bank has previously extended loans or credit to certain executive officers as well as certain persons related totwo executive officers, and Directors.one commercial real estate loan to an entity controlled by one of our directors. The residential mortgage loans were made with the interest rate discount under the program available to all employees described in the immediately preceding paragraph. All suchfive loans were: (i)were made by the Bank in the ordinary course of business; (ii) madebusiness, on substantially the same terms, including the interest ratesrate (other than the discounted interest rate under the employee discount rate program described above) and collateral, as those prevailing at the time for comparable transactionsloans with other persons not related to the Bank, and (iii) did not involve more than the normal risk of repayment or presentcollectability or present other unfavorable features. Pursuant to its current written policy, effective April 2018,
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Additionally, during the
Bank is permitted to make loans to NEOs and Directors for their owner occupied primary residences at interest rates 0.25% below that offered to the Bank’s customers. All other loan terms are substantially the same as offered to the Bank’s customers. As ofyear ended December 31,
2018,2021, Mr. Mahon received a transaction bonus of $750,000 in connection with the
Bank had no loans or loan commitments outstandingcompletion of the Merger pursuant to
its Directorsan Executive Chairman and
NEOs or their related persons.Our Code of Business Ethics requires DirectorsSeparation Agreement.
The Board (excluding any director involved in the transaction) reviews and
executive officers to promptly disclose any interest they may have in any proposed transaction involvingapproves all transactions between the Company or the Bank and any
such director or executive officer
shall abstain from any deliberation or voting on the transaction. The Corporate Governance Committee also reviews any transaction between the Company and its directors, executive officers or any other related person. Any such transaction requires the approval of a majority of the directors who have no interest in the proposed transaction. In addition, our directors and executive officers annually disclosethat would require proxy statement disclosure pursuant to
the Company any transactions, relationships or arrangements they or their related interests may have with the Company or the Bank. These disclosures, together with information obtained from each director’s annual statement of interest form, are used to monitor related party transactions and make independence determinations. The daughter of Patrick E. Curtin, a director of the Company and the Bank, is the Managing Partner in the law firm of Conway, Farrell, Curtin & Kelly, P.C. The law firm received payments from third parties for providing legal services to the Bank in connection with closings of certain commercial real estate loans.Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's executive officers and Directors, and persons who own more than 10% of the Common Stock, to file with the SEC reports of ownership and changes in ownership of Common Stock. Executive officers, Directors and greater than 10% shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms that they file. Based solely on review of the copies of such forms received by the Company, or written representations from certain reporting persons, the Company believes that its executive officers, Directors and greater than 10% beneficial owners complied with all applicable filing requirements, except for Kenneth Mahon, who filed one late Form 4 reporting two acquisitions totaling 750 shares on one day, and Rosemarie Chen, who filed one late Form 4 reporting one acquisition of 50 shares on one day, due to administrative oversight on their part.
Item 404(a). TABLE OF CONTENTS
PROPOSAL 2
2. — RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT AUDITORS
REGISTERED PUBLIC ACCOUNTING FIRMGeneral
The Audit CommitteeCrowe LLP (“Crowe”) was the independent registered public accounting firm of the Board of DirectorsCompany for the year ended December 31, 2021, and has appointed the firm of Crowe LLPbeen selected to actserve as the Company'sCompany’s independent registered public accounting firm for the year ending December 31, 2019. The Company is seeking a vote to ratify the appointment2022. Representatives of Crowe LLP as the Company’s independent registered public accounting firm for 2019. A representative of Crowe LLP isare expected to be present at the Annual Meeting,Meeting. They will be providedhave an opportunity to make a statement if he or shethey so desires,desire and isare expected to be available to respond to appropriate questions. No determination has been madequestions from shareholders.
Shareholder ratification of the selection of Crowe is not required by the Company’s Bylaws or otherwise. However, the Board is submitting the selection of the independent registered public accounting firm to the shareholders for ratification as
a matter of good corporate practice. If the shareholders fail to
any actionratify the selection of Crowe, the Audit Committee
would takewill reconsider whether or not to retain that firm. Even if the
shareholders do not ratifyselection is ratified, the
appointment.Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such change is in the best interests of the Company and its shareholders.
The following table
summarizespresents fees for professional audit services rendered by Crowe for the
aggregate fees either paid or contractually owed byaudit of our annual financial statements and other professional services provided for the
Company to Crowe LLP: | Year Ended December 31, |
| 2018 | 2017 |
Audit Fees (a) | $ | 583,289 | | $ | 558,379 | |
Audit-Related Fees (b) | | 83,500 | | | 105,750 | |
Tax Fees (c) | | 150,513 | | | 105,869 | |
All Other Fees (d) | | 238,147 | | | 114,576 | |
Total | $ | 1,055,449 | | $ | 884,573 | |
years ended December 31, 2021 and 2020.
| | Audit Fees (1) | | | $870,000 | | | $660,000 | |
| | Audit Related Fees(2) | | | $488,725 | | | $133,100 | |
| | Tax Fees (3) | | | $106,211 | | | $98,723 | |
| | All Other Fees (4) | | | $21,617 | | | $237,606 | |
| | Total Fees | | | $1,486,553 | | | $1,129,430 | |
(1)
| (a) | FeesAudit fees for 2021 and 2020 consist of professional services rendered for the annual audit servicesof our financial statements and audit of internal controls over financial reporting, along with the review of financial statements included in 2018 and 2017 consisted of:our quarterly reports. |
Audits of the Company’s annual consolidated financial statements
Reviews of the Company’s quarterly unaudited consolidated financial statements
(2)
| (b) | FeesAudit-related fees in the case of 2021 consist of services provided in connection with the Merger, the adoption of ASU 2016-13, “Financial Instruments: Credit Losses,” and procedures related to critical accounting matters. Audit-related fees in the case of 2020 consist of services provided in connection with the adoption of ASU 2016-13, “Financial Instruments: Credit Losses.” Additionally, both years consist of audit-related fees for audit-related services in 2018employee benefit plan audits and 2017 consisted of:Uniform Single Audit Program for Mortgage Bankers (USAP) procedures. |
Employee benefit plan audits
Uniform Single Audit Program for Mortgage Bankers (USAP) audit
| (c)(3)
| Tax compliance services are services rendered based upon facts already in existence or transactions that have already occurred to document, compute, or obtain government approval for amounts to be included in tax filings and consisted of: |
Federal, state and local income tax return assistance
Sales and use, property and other tax return assistance
Research & Development tax credit documentation and analysis for purposes of filing amended returns
Requests for technical advice from taxing authorities
(4)
| i. | Federal, state and local income tax return assistance |
| ii. | Sales and use, property andAll other tax return assistance |
| iii. | Research & Development tax credit documentation and analysisfees consist of services for purposes of filing amended returns |
| iv. | Requests for technical advice from taxing authorities |
| (d) | Comfort letters for subordinated debt issuance, consents, permitted advisory services andconsent procedures related to regulatory filings or other services which may include SEC matters.matters, and in the case of 2020 includes fees related services for Legacy Dime’s issuance of preferred stock. |
Pre-Approval Policy
The services performed by the independent auditor in 2018 were pre-approved in accordance with the Audit Committee's pre-approval policy. Pursuant to the policy, the on Audit Committee must pre-approve all auditPre-Approval of Audit and permitted non-auditNon-Audit Services of the Independent Registered Public Accounting Firm
The Audit Committee has adopted policies and procedures for the pre-approval of the above fees. All requests for services to be provided by Crowe are pre-approved by the Audit Committee. A schedule of approved services is then reviewed and approved by the entire Audit Committee at the next Audit Committee meeting.
In order to ratify the selection of Crowe as the Company’s independent auditor, includingregistered public accounting firm for the fees and terms thereof.2022 fiscal year, the proposal must receive the affirmative vote of at least a majority of the votes cast at the Annual Meeting, either in person or by proxy.
|
| | | THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERSA VOTE “FOR”“FOR” THE RATIFICATION OF THE APPOINTMENT OF CROWE HORWATH LLP AS THE COMPANY'SCOMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2019. |
FIRM. |
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PROPOSAL 3
3. — ADVISORY NON-BINDING VOTE ON THETO APPROVE EXECUTIVE COMPENSATION OF NAMED EXECUTIVE OFFICERS The Company is seekingBoard believes that the Company’s compensation programs and policies are centered on a pay for performance culture and are strongly aligned with the long-term interests of shareholders.
In accordance with Section 14A of the Exchange Act, we are asking shareholders to vote in an advisory, non-binding
advisory vote onmanner to approve the compensation
of thepaid to our Named Executive Officers, as disclosed in this Proxy
Statement.As discussed inStatement pursuant to Item 402 of Regulation S-K (including the Compensation Discussion and Analysis, compensation tables and accompanying narrative discussion). Item 402 of Regulation S-K is the Company'sSEC regulation that sets forth the disclosure companies must include in their proxy statement as to executive compensation program has been designed to attract, retain and motivatecompensation. At the highest quality executive officers, directly link pay to2017 Annual Meeting of Shareholders, the Company's performance, and build value for its shareholders. The Company's executive compensation philosophy is, with the benefitBoard of objective input from an independent consultant, to provide competitive target compensation opportunities with actual amounts earned commensurate with financial performanceDirectors recommended, and the generationshareholders approved, a non-binding vote in favor of long-term valueholding an annual advisory vote on executive compensation. As a result, the Board of Directors determined that Bridge would hold an annual advisory vote to shareholders. The Company believes that the compensation data in this Proxy Statement demonstrates the success of this philosophy.
approve executive compensation.
This proposal, commonly known as a “Say-on-Pay”“Say on Pay” proposal, gives the Company's shareholdersyou as a shareholder the opportunity to express their viewsvote on our executive pay program. The Board of Directors is requesting shareholders to cast a non-binding advisory vote on the following resolution:
“Resolved, that the compensation
providedpaid to
theDime’s Named Executive
Officers. This vote is not intendedOfficers, as disclosed pursuant to
address any specific itemItem 402 of
compensation, but rather the overall compensation of the Named Executive Officers.Accordingly, the Board invites you to review carefullyRegulation S-K, including the Compensation Discussion and Analysis, as well as the tabularcompensation tables and other disclosures on compensation under the section titled “Compensation Program Components” and approve the following resolution:
| | RESOLVED, that the compensation paid to the Company's Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED. |
narrative discussion, is hereby APPROVED.” Under applicable law, the Say-on-PayBecause this vote is advisory, and therefore not binding on the Company or its Board of Directors. The shareholders’ advisory voteit will not overrule any decision made bybe binding upon the Board or anyBoard. However, the Compensation Committee will take into account the outcome of its committees or create or imply any additional fiduciary duty by the Company's Directors. The Company's Board of Directors and Compensation and HR Committee value the opinions of shareholders and will consider the voting results, along with relevant factors, in connection with their ongoingvote when considering future executive compensation activities.
arrangements. |
| | | THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS AN ADVISORYA VOTE “FOR” APPROVAL OF THE COMPENSATION OF NAMED EXECUTIVE OFFICERS AS DESCRIBED IN THIS PROXY STATEMENT |
PROPOSAL. |
SHAREHOLDER COMMUNICATIONS WITH THE BOARD
The Company's Board of Directors provides a process for shareholders to send communications to the Board. The Company's Policy Regarding Shareholder Communication with the Board is available on its website at www.dime.com by selecting “Investor Relations,” then in the “Investor Menu”, select the drop down arrow next to “Corporate Overview” then select “Governance Documents”.
OTHER MATTERS
As of the date of this Proxy Statement, the Company's Board of Directors is not aware of any other matters to be brought before the shareholders at the Annual Meeting. If, however, any other matters not known are properly rought before the meeting, the persons named in the accompanying proxy will vote the shares represented by all properly executed proxies on such matters in such manner as shall be determined by a majority of the Board of Directors.
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2020 ANNUAL MEETING SHAREHOLDER PROPOSALSIn UNDER SEC RULES
Under SEC Rule 14a-8, in order to be consideredeligible for inclusion in the Company's Proxy Statementproxy materials for next year’s Annual Meeting of Shareholders, any shareholder proposal to take action at such meeting must be received at the Company’s executive office, 898 Veterans Memorial Highway, Suite 560 Hauppauge, New York 11788, no later than December 15, 2022. Any such proposals shall be subject to the requirements of the proxy rules adopted under the Exchange Act.
Additionally, under SEC Rule 14a-19, a stockholder intending to engage in a director election contest at next year’s Annual Meeting of Shareholders must give the Company notice of its intent to solicit proxies by providing the names of its nominees and formcertain other information by March 27, 2023.
ADVANCE NOTICE OF BUSINESS OR NOMINATIONS TO BE BROUGHT BEFORE AN ANNUAL MEETING The Company’s Bylaws provide an advance notice procedure for certain business, or nominations to the Board of
Directors, to be brought before an annual meeting of shareholders. In order for a shareholder to properly nominate persons for election to the Board of Directors or bring business before an annual meeting, the shareholder must give written notice to the Corporate Secretary not less than 90 days prior to the date of the Company’s proxy
materials for
the preceding year’s annual meeting; provided, however, that if the date of the annual meeting
to be held in 2020, all shareholder proposals, including, but not limited to, nominations for Director, must be submitted to the Secretary of the Company at its offices at 300 Cadman Plaza West, 8th Floor, Brooklyn, New York 11201 on or before December 14, 2019. Under the Company's Bylaws, shareholder nominations for Director and shareholder proposals not included in the Company's 2019 Proxy Statement, in order to be considered for possible action by the shareholders at the annual meeting to be held in 2020, must be deliveredis advanced more than 30 days prior to or
receiveddelayed by
the Secretary of the Company, at the address set forth above: (i) sixtymore than 30 days
in advance of such meeting if such meeting is to be held on a day which is within thirty days preceding the anniversary of the previous year's annual meeting, or ninety days in advance of such meeting if such meeting is to be held on or after the anniversary of the
previous year's annual meeting; and (ii) with respect to anpreceding year’s annual meeting,
held at a time othernotice by the shareholder to be timely must be so delivered not later than
within the time periods set forth in the immediately preceding clause (i), the close of business on the tenth day following the
dateday on which
noticepublic announcement of
the date of such
annual meeting is first
given to shareholders. Notice shall be deemed to be first given to shareholders when disclosuremade. The Bylaws require that the notice must include, among other things, the shareholder’s name, record address, and number of
such dateshares owned, describe briefly the proposed business, the reasons for bringing the business before the annual meeting, and any material interest of the
meeting of shareholders is first madeshareholder in
a press release reported to Dow Jones News Services, the
Associated Press or a comparable national news service, or in a document publicly filed by the Company with the SEC pursuant to Section 13, 14 or 15(d) of the Exchange Act. A shareholder's notice to the Secretary shall set forth such information as required by, and otherwise comply with, the Company's Bylaws.proposed business. Nothing in this paragraph shall be deemed to require the Company to include in its
annual meeting proxy statement
and proxy card relating to an annual meetingunder SEC Rule 14a-8 any shareholder proposal
or nomination whichthat does not
satisfymeet all of the requirements for inclusion established by the SEC in effect at the time such proposal
is received, or
nomination is received.to include in a universal proxy card the names of shareholder nominees for which the shareholder did not provide proper notice under SEC Rule 14a-19. In accordance with the foregoing, advance notice for certain business or nominations to the Board of Directors to be brought before next year’s Annual Meeting of Shareholders must be given to the Company by January 16, 2023.
The Board of Directors
is not aware of any business to come before the Annual Meeting other than the matters described above in this Proxy Statement. However, if any matters should properly come before the Annual Meeting, it is intended that holders of the proxies will
review any shareholder proposals that are filed as required and determine whether such proposals satisfy applicable criteria for consideration at the annual meetingact in accordance with their best judgment. Whether you intend to be held in 2020.Multiple Shareholders Sharing One Address
Only one copy of the Proxy Statement and Annual Reportpresent at this meeting or not, you are being deliveredurged to multiple shareholders sharing an addressreturn your signed proxy promptly. For your convenience, you may also cast your vote electronically.
If you receive proxy materials by mail, unless the Company has receivedyou have provided us contrary instructions, from one or more of the shareholders. The Company will deliver promptly upon written or oral request separate copies of the Proxy Statement and Annual Report to a shareholder at a shared address to whichwe have sent a single copy of these proxy materials to any household at which one or more shareholders reside if we believe the Proxy Statement and Annual Report were delivered. Shareholders may notifyshareholders are members of the Company that they desire tosame household. Each stockholder in the household will receive a separate copyProxy Card. This process, known as “householding,” reduces the volume of duplicate information received by you and helps reduce the currentcost and environmental impact of providing these materials. If you would like to receive your own set of proxy materials, please follow these instructions:
If your shares are registered in your own name, contact our transfer agent, Computershare, and inform them of your request to revoke householding by calling 1-800-368-5948, or a future Proxy Statement and Annual Report by writing Dime Community Bancshares, Inc., 300 Cadman Plaza West, 8th Floor, Brooklyn, NY 11201, Attn: Secretary,them at Computershare, PO Box 505000 Louisville, KY 40233, Attention: Householding Department.
If a bank, broker or by telephoning the Company’s Secretary at (718) 782-6200. By using either of these methods, shareholders sharing an address may additionally request delivery of a single copy of a Proxy Statement and Annual Report if they are receiving multiple copies.other nominee holds your shares, contact your bank, broker or other nominee directly.
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Annual Report
A copy of the Annual Report to shareholders for the period ended December 31,
2018,2021, including the consolidated financial statements prepared in conformity with U.S. GAAP for the year ended December 31,
2018,2021, accompanies this Proxy Statement. The consolidated financial statements for the year ended December 31,
20182021 have been audited by Crowe LLP, whose report appears in the Annual Report.
Shareholders may obtain, free of charge, a copy of the Annual Report on Form 10-K filed with the SEC (without exhibits) by writing to Corporate Secretary, Dime Community Bancshares, Inc., 300 Cadman Plaza West, 8th Floor, Brooklyn,898 Veterans Memorial Highway, Suite 560, Hauppauge, New York 11201,11788, or by calling (718) 782-6200,(631) 537-1000, or by accessing the Company'sCompany’s Investor Relations website http://investors.dime.com/inforequest.By Order of the Board of Directors
Patricia M. Schaubeck
Corporate Secretary
Brooklyn,
Hauppauge, New York
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING, PLEASE
COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED.TABLE OF CONTENTS
APPENDIX
Defined terms
U.S. GAAP - generally accepted accounting principles in the United States of America.
Tangible Equity - Common equity less goodwill.
(Amount in thousands except share amounts) | Tangible Book Value at
December 31, 2018 |
Total common equity | $ | 602,081 | |
Less:
| | | |
Goodwill | | 55,638 | |
Tangible common equity | $ | 546,443 | |
Performance Measures
Use of Non-U.S. GAAP Performance Measures
For purposes of certifying the Company’s performance under its compensation plans, the Compensation Committee typically makes adjustments to the Company’s U.S. GAAP results to ensure that the participants are compensated for the Company’s core performance. These adjustments neither penalize nor reward for one-time charges, unusual gains, or similar non-core events. These disclosures should not be viewed as a substitute for operating results determined in accordance with U.S. GAAP, nor are they necessarily comparable to non-U.S. GAAP performance measures that may be presented by other companies.
Cumulative Core EPS - A non-U.S. GAAP measure derived from EPS, and adjusted for various items recognized in EPS in which the extraction is deemed valuable in assessing the Company’s consolidated operating results. A reconciliation of U.S. GAAP EPS and Core EPS for the Company for the three-year period ended December 31, 2018 is presented as follows:
| Cumulative for the Three
Years Ended
December 31, 2018 |
EPS | $ | 4.73 | |
Gain on the sale of real estate | | (1.16 | ) |
Gain on the sale of assets (including real estate) | | (0.11 | ) |
Prepayment fee income above financial forecasted levels | | (0.01 | ) |
Prepayment of ESOP Share Acquisition Loan | | 0.31 | |
Loss from extinguishment of debt | | 0.02 | |
De-conversion costs | | 0.03 | |
Tax adjustments | | 0.06 | |
Core EPS | $ | 3.87 | |
Cumulative Return on Average Equity - A non-U.S. GAAP measure derived from net income, as reported in a company’s consolidated statements of operations or income, and adjusted for various items divided by average stockholders’ equity. A reconciliation of U.S. GAAP net income and adjusted net income for the Company for the three-year period ended December 31, 2018 is presented as follows:
(Amount in thousands) | Cumulative for the
Three Years Ended
December 31, 2018 |
Net Income | $ | 175,684 | |
Gain on the sale of real estate | | (43,204 | ) |
Prepayment of ESOP Share Acquisition Loan | | 11,319 | |
Tax adjustments | | (1,458 | ) |
Adjusted net Income | $ | 142,338 | |
Total Shareholder Return - The return provided to a shareholder who invests in a share of the common stock of a company assuming full reinvestment of cash dividends into additional shares of the respective common stock. Amounts obtained from the Bloomberg financial database.
