The Compensation Committee operates under a written charter that has been approved by the Board of Directors. The Charter is reviewed annually by the Compensation Committee with any recommended changes approved by the Board of Directors. The current Compensation Committee charter is available in the Investor Relations section on the Company’s website atwww.fncb.comby clicking on Corporate Information and then Committee Charting under the heading “Compensation Committee Charter.” As noted above, each of the directors serving on this committee was determined to meet the standards for independence. The Compensation Committee is responsible for evaluating and approving the Company’s compensation plans, policies and programs. The Compensation Committee has the authority to retain and terminate a compensation consulting firm, including the authority to approve the firm’s fees and other terms of retention. The Compensation Committee also has the authority to delegate responsibility to subcommittees. For a discussion of the role of the Compensation Committee in determining executive and director compensation, see the discussion under the heading “Compensation Discussion and Analysis.”

RISK MANAGEMENT COMMITTEE

On February 26, 2014, the Board of Directors established a Risk Management Committee. The Risk Management Committee operates under a written charter that has been approved by the Board of Directors. The Charter is reviewed annually by the Risk Management Committee with any recommended changes approved by the Board of Directors. The current Risk Management Committee charter is available in the Investor Relations section on the Company’s website atwww.fncb.comby clicking on Corporate Information and then Governance Documents under the heading “Risk Management Committee Charter.” The Risk Management Committee is responsible for ensuring management has established an enterprise-wide risk management program and for providing oversight and guidance to management regarding the Company’s risks. The Risk Management Committee has authority to retain independent counsel, experts and advisors it believes are appropriate in carrying out its duties, including the authority to approve the advisor’s fees and other terms of retention. The Risk Management Committee also has the authority to delegate responsibility to subcommittees.

Corporate Governance Committee

The Corporate Governance Committee operates under a written charter that has been approved by the Board of Directors. The Charter is reviewed annually by the Corporate Governance Committee with any recommended changes approved by the Board of Directors. The current Corporate Governance Committee charter is available in the Investor Relations section on the Company’s website atwww.fncb.comby clicking on Corporate Information and then Committee Charting under the heading “Corporate Governance Committee Charter.” Each of the directors serving on this committee was determined to meet the standards for independence. The Corporate Governance CommitteeCommittee: (1) recommends to the Board of Directors for its selection (i) potential nominees for director to stand for election at the Company’s annual meeting of shareholders, including without limitation, those proposed by shareholders, and (ii) individuals to be considered by the Board of Directors to fill vacancies; (2) in its discretion, considers candidates based on criteria for selecting new directors; (3) evaluates the background and qualifications of new director candidates; and (4) evaluates directors before nomination for reelection. The Corporate Governance Committee also oversees and makes recommendations to the Board of Directors with respect to corporate governance of the Company.

Director Nominations

The Corporate Governance Committee recommends director nominees to the Board of Directors. The Corporate Governance Committee seeks individuals who are qualified to be directors based on the committee’s judgment of the potential candidate’s experience, skills and knowledge of business and management practices. If needed, the Corporate Governance Committee will use a third party search firm to assist in finding director candidates. No third parties were engaged to evaluate or assist in identifying potential director nominees in 20142015 or 2015.2016.

The Corporate Governance Committee and the Board of Directors have not established a specific diversity component in their consideration of candidates for director and instead consider the diversity of directors as part of the overall mix of factors when identifying and evaluating candidates for the Board of Directors. The Company considers diversity broadly to include differences of viewpoint, professional experience, individual characteristics, qualities and skills, resulting in naturally varying perspectives among the directors and individual skills that complement the full Board. Therefore, the Board, as a unit, possesses the appropriate skills and experience to oversee the Company’s business.

The Corporate Governance Committee will give appropriate consideration to qualified persons recommended by shareholders for nomination as directors and will evaluate such qualified persons in the same manner as other identified candidates, when submitted prior to the shareholder proposal date referred to in the “Submission of Shareholder Proposals for 20162017 Annual Meeting” section of this Proxy Statement (the “Proposals Section”), provided such recommendations comply with the advance notice procedures in the Company’s bylaws, which are summarized in the Proposals Section. Such recommendations must also include: (i)(1) sufficient biographical information about the proposed nominee to permit the Corporate Governance Committee to evaluate their qualifications and experience, and (ii)(2) the nominee’s consent to serving as a director if elected. Shareholders must deliver any proposals or nominations in writing to the Corporate Governance Committee or the Secretary of First National Community Bancorp, Inc. at its principal executive office, 102 E. Drinker Street, Dunmore, Pennsylvania 18512.

Any nomination for director not made in accordance with Section 1.07 of the Company’s bylaws will be disregarded by the presiding officer of the annual meeting, and votes cast for each such nominee will be disregarded by the Judge of Election. In the event that the same person is nominated by more than one shareholder, if at least one nomination for such person complies with Section 1.07, the nomination will be honored and all votes cast for the nominee will be counted.

AUDIT COMMITTEE

The Board of Directors has a standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Board of Directors has determined that each of the members of the Audit Committee is considered independent, as that term is defined by the SEC and in the NASDAQ listing standards related to audit committees. The current Audit Committee charter is available in the Investor Relations section on the Company’s website atwww.fncb.comby clicking on Corporate Information and then on Committee Charting under the heading “Audit Committee Charter.” The principal duties of the Audit Committee, as set forth in its charter, include reviewing significant audit and accounting principles, policies and practices, reviewing performancethe effectiveness of the internal auditing procedures,function, reviewing reports of examination received from regulatory authorities, and reviewing the performance and independence of and recommending, annually, to the Board of Directors the engagement of an independent certified public accountant.

Currently, the Board has identified Thomas J. Melone, CPA as the Audit Committee financial expert. Mr. Melone qualifies as a financial expert based on his extensive accounting experience as a certified public accountant and as a partner of the Albert B. Melone Company.

Report of the Audit Committee

To the Shareholders of First National Community Bancorp, Inc.:

The Audit Committee provides oversight of the Company’s financial reporting process on behalf of the Board of Directors. Management is responsible for the financial statements and the financial reporting process, including internal controls. In fulfilling its oversight responsibilities, the Audit Committee discussed the financial statements in the annual report with management, including a discussion of the quality, not just acceptability, of the accounting principles; the reasonableness of significant judgments; and the clarity of disclosures in the financial statements.

The Audit Committee discussed with the independent auditors their judgments as to the quality, not just the acceptability, of the Company’s accounting principles, and such other matters as required to be discussed with the Audit Committee under generally accepted auditing standards.the standards of the Public Company Accounting Oversight Board (United States). The independent auditors are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles. In addition, the Audit Committee has discussed with the independent registered public accounting firm the auditors’ independence from management and the Company, including the matters in written disclosures required by the Independence Standards Board, and considered the compatibility of non-audit services with the auditors’ independence.

The Audit Committee discussed with the Company’s internal and independent auditors the overall scope and plans for their respective audits. The Audit Committee meets with the internal auditors and independent registered public accounting firm, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting.

Based on these discussions, the Audit Committee has recommended to the Board of Directors (and the Board has approved) that the audited financial statements be included in the annual report on Form 10-K for the year ended December 31, 2014,2015, for filing with the Securities and Exchange Commission.

Audit Committee

/s/Thomas J. Melone, Chairman

/s/William G. Bracey

/s/Louis A. DeNaples, Jr.

/s/Keith W. Eckel

/s/John P. Moses

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

The Company is committed to responsible compensation practices and strives to balance sound risk management with the need to attract, hire, motivate and retain executive team members who will maximize successful performance. The Company intends to provide executives with a balanced mix of fixed and variable pay. The purpose of all incentive plans is to motivate, reward and reinforce performance and achievement of team and/or individual goals in support of the Company’s strategic objectives for growth and profitability. They provide the opportunity for reward for meeting and exceeding established financial goals as well as recognition of individual achievements.

Under

This Compensation Discussion and Analysis and the heading “Executive Compensation Tables,” you will find a series of tables containing specificthat follow contain information about the compensation earned or paid in 20142015 to Mr. Steven R. Tokach, the President and Chief Executive Officer and PEO of the Company, and Mr. James M. Bone, Jr., the Chief Financial Officer and PFO of the Company. Compensation information is also presented for Mr. Gerard A. Champi, the Chief Operating Officer of the Bank, Mr. Brian C. Mahlstedt, Chief Lending Officer of the Bank and Mary Griffin Cummings, the General Counsel of the Bank, the three most highly compensatedCompany’s named executive officers of the Company (including officers of the Bank) who received total compensation of $100,000 or more during the fiscal year ended December 31, 2014, referred to asofficers. For 2015, our “named executive officers” or “named executives.”named executives are:

The overall executive compensation philosophy and strategy and primary objective of the Board of Directors with respect to executive compensation at the Company is to provide a total compensation package that meets a number of interrelated goals. The Company’s compensation package is designed to:

1.●		Be balanced and competitive in the external market in a manner consistent with the Company’s size and industry;
2.●		Correlate with the Company’s strategic business plan;
3.●		Align the interests of executives with those of shareholders;
4.●		Drive superior performance and reward executives for achievement;
5.●		Enable the Company to attract, motivate, develop and retain key executives whose experience, expertise and abilities will promote the Company’s performance for the benefit of its shareholders without encouraging undue risk-taking that could materially threaten the safety and soundness of the Company;

●
6.	Achieve an appropriate mix of fixed and variable compensation;
7.●		Equally support annual and long-term financial and strategic performance objectives as well as the stability of the organization;
8.●		Ensure compliance with applicable regulations;
9.●		Deliver executive compensation in a manner that is prudent and cost-effective; and
10.●		Support the mission, vision and values of the Company.

Design of Compensation Program

In 2014,2015, executive compensation decisions were made by the Compensation Committee of the Board of Directors. The Board of Directors’Compensation Committee’s fundamental policy is to provide our executive officers with competitive compensation for their positions and to provide opportunities based upon their contributions to the Company’s development and financial success as well as their personal performance in accordance with the overall design of the Company’s compensation package.

The Role of Consultants

In 2014, management engaged Mosteller and Associates, (“Mosteller”), a Pennsylvania-based human resources consulting firm, to conduct an Executive Compensation Review (“the 2014 Report”). The 2014 ReportMosteller and Associates’ review included: (1) a market review of the Company’s compensation for executive positions against compensation levels of executive positions at other similar financial institutions; and (2) recommendations for enhancements to the Company’s overall executive compensation programs. The ReportMosteller and Associates’ review has served as a foundation for executive compensation decisions in 2014 and will serve2015.

In 2015, management engaged Mosteller and Associates to provide a recommendation regarding an appropriate design for additional variable pay component for key executives. Mosteller and Associates’ recommendation was used as the foundationbasis for executive compensation decisions in 2015.

The 2014 Report included market data from proxy statement analysis of a peer group of banks as well as three published survey sources. Specific analysis and comments were provided for eachthe creation of the supplemental executive pay components (base, short term incentive, long-term incentive,retirement plans that the Company and/or the Bank provided to Messrs. Champi, Bone and all other) as well as total compensation. The 2014 Report provided the Compensation Committee, the Board and management with what they believe was a solid base of relevant information upon which to develop compensation strategy and to base compensation-related decisions throughout 2014 and forMahlstedt during 2015.

The Company continues to engage Mosteller and Associates to provide consulting services on an ongoing basis, advising with regard to executive and broad-based compensation matters as well as a variety of human resources topics.matters. Mosteller and Associates was chosen because of its expertise in the field of human resources, the financial services industry and the geographic footprint of the Bank and its understanding of the organization. The Compensation Committee has evaluated the independence of Mosteller and Associates and concluded that no conflict of interest exists.

Incentive PlansDuring 2015, the Company engaged the law firm of Cozen and O’Connor to provide advisory support for the creation of the employment agreements and supplemental executive retirement plans that the Company and/or the Bank provided to Messrs. Champi, Bone and Mahlstedt.

On December 19, 2012, upon the recommendation of the Compensation Committee, the Board of Directors approved three Short-Term Incentive Plans (the “Incentive Plans”), which came into effect January 1, 2013. These consist of an Executive Incentive Plan (the “EIP”), a Commercial Incentive Plan (the “CIP”) and a Staff Incentive Plan (the “SIP”). The Incentive Plans are designed to link annual cash compensation awards to specific Bank financial targets and individual performance metrics. According to the terms of these Incentive Plans, the Board of Directors is responsible for establishing the Bank-wide financial targets that are utilized to trigger funding of the Plans. The Board of Directors determines the individual performance goals used to evaluate the President and Chief Executive Officer. For all other executives and employees, management is responsible for establishing individual performance goals which, in conjunction with achievement of Bank-wide financial goals, are used to determine individual awards. Each of the incentive plans provides for a potential claw-back of award payments if the relevant performance measures on which they are based are restated or otherwise adjusted within a 36-month period following the public release of the financial information.

On February 26, 2014 the Board approved a 2014 Performance Target for purposes of the 2014 Incentive Plans. The Compensation Committee recommended the use of budgeted net income (excluding certain non-core items) as the key measure of performance for the 2014 fiscal year.

On December 17, 2014, and upon the recommendation of the Compensation Committee, the Board of Directors approved amendments to the EIP, the CIP, the SIP and the Branch Banking Incentive Plans. Those amendments became effective for incentive awards based on 2015 results. In each of the revised Plans, the “Threshold Target” was removed as an achievement level that would result in making payments under the Plans. Effective in 2015, each of the Plans will measure results based on “Target”, “Stretch” and “Maximum” levels of financial results. The bank-wide performance targets will continue to be established each year by the Board of Directors. Under the terms of the Incentive Plans, the Board of Directors will continue to have discretion to evaluate overall results and consider the financial impact of extraordinary items.

On February 25, 2015, and upon the recommendation of the Compensation Committee, the Board approved that incentive payments be made under the CIP and the SIP based on the Bank reaching its 2014 Budget Target for net income (excluding non-core items). The Board did not approve 2014 awards under the EIP. Awards were made to non-executive employees in the Commercial Unit under the CIP in February, 2015. Additionally, awards under the SIP were made to non-executive employees in March, 2015.

Upon the recommendation of the Compensation Committee, the Long-term Incentive Plan (“LTIP”) was formally adopted by the Board of Directors on October 23, 2013 and approved by the shareholders at the 2013 Annual Meeting of Shareholders on December 23, 2013.

The LTIP is designed to reward directors, executives and key employees for their contributions to the long-term success of the Company, primarily as measured by the increase in the Company’s stock price. The LTIP design provides the Board with the authority to offer several different types of long-term incentives, including stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares.

Upon the recommendation of the Compensation Committee, the Board approved awards to executives and key employees under the terms of the LTIP on February 26, 2014. The 2014 grants were awarded on March 1, 2014 was and were comprised solely of restricted stock. The 2014 grants utilized 47,750 common shares of the 1.2 million common shares reserved for issuance under the LTIP.

On February 25, 2015 and upon the recommendation of the Compensation Committee, the Board approved awards under the terms of the LTIP to executives and key employees. The 2015 grants were awarded on March 1, 2015 and were comprised solely of restricted stock. The 2015 grants utilized 84,450 common shares of the 1.2 million common shares reserved and available for issuance under the LTIP. In combination, the 2014 and 2015 LTIP grants have utilized 132,200 of the 1.2 million authorized common shares.

The Role of Management

Input from senior management, including the President and Chief Executive Officer and the Human Resources Officer, along with ourthe Company’s external consultants was critical in order to permit the Board of Directors and Compensation Committee to make informed and appropriate decisions. InputFor 2015, input from senior management may include:included:

Each member of senior management excuses himself or herself from all Board and Compensation Committee discussions of that individual’s compensation.

Benchmarking and Peer Group

During 2014,2015, the Company utilized a peer group based on industry, asset size, organizational structure, performance levels and geographic location. The Company selected that peer group to provide comparative market data for executive compensation pay levels.

This peer group included financial organizations from the Mid-Atlantic states with asset size ranging from approximately $624$650 million to almost $2.2 billion as of December 31, 2013, the most recent year for which information was available at the time of the 2014 Report. We believebillion. The Company believes these companies arewere an appropriate group against which to benchmark our compensation for 2014.2015.

Below is a listing of the peer group used by the Company in 20142015 to benchmark its executive compensation:

Material Differences in Named Executive Officers’ Compensation

The overall factors that come into consideration when making executive compensation decisions include the following:

The named executive officers receive base salaries commensurate with their positions and responsibilities. In determining the appropriate types and amounts of compensation for the President and Chief Executive Officer each year, the Board of DirectorsCompensation Committee evaluates both corporate and individual performance. The corporate factors include the financial performance of the Company, including return on stockholders’ equity, return on assets, asset quality and trends in the foregoing measures, the performance of the Company’s stock price, comparative results achieved by the Company’s peer group institutions, and progress in realizing the Company’s long-term strategic plan. The individual factors include initiation and implementation of successful business strategies, formation of an effective management team and various personal qualities, including leadership.

In determining the appropriate types and amounts of compensation for the named executive officers other than the President and Chief Executive Officer, the Board of DirectorsCompensation Committee takes into consideration the officer’s experience, expected personal performance and salary levels for comparable positions.

Compensation Components

The compensation package for each named executive officer is comprised primarily of base salary, short-term incentives in the form of cash bonuses and long-term stock-based incentive awards. Three of the five named executive officers also receive contributions under the SERP. The Company also offers executives who meet the eligibility requirements the opportunity to participate in a nonqualified deferred compensation plan, in addition to a 401(k) Plan and health and welfare benefits available to all of the Bank’s employees.

Base Salary -The Bank has established salary ranges that are competitive with ourits peer group and the banking industry in our local region. Each job classification has been evaluated based upon the required skills, knowledge, responsibility and experience needed. Salary increases are based upon merit, performance, quality of work, and other job related factors. Salary increases are not guaranteed and a satisfactory performance review may not warrant an increase. The base salary for each named executive officer is determined based upon experience, personal performance, salary levels in effect for comparable positions in the banking industry, internal base salary comparability considerations and the responsibilities assumed by the named executive officer. The weights given to these factors differ from individual to individual as the Board determines is appropriate. Base salaries are reviewed annually and adjusted from time to time, based on ourthe Company’s review of market data and assessment of Company and individual executive performance.

Please refer to “Executive Compensation Tables” below for additional information on compensation of ourthe Company’s named executive officers.

Short-Term Incentive Program/Cash Bonuses

On December 19, 2012, the Board approved the EIP -The Company has an Executive Incentive Plan (“EIP”) which became effective during calendar year 2013. On December 17, 2014, the Board amended the EIP to eliminate “Threshold” as an achievement level against Performance Targets that would fund the Plan. The EIP is designed to link annual cash bonus awards to specific bank financial targets and individual performance metrics. According to the terms of the EIP, the Board of Directors is responsible for establishing the Bank-wide financial targets which are utilized to trigger funding of the EIP. The Board of Directors determines the individual performance goals used to evaluate the President and Chief Executive Officer. For all other executives, the President and Chief Executive Officer and Chief Operating Officer are responsible for establishing individual performance goals which, in conjunction with achievement of Bank-wide financial goals, are used to determine individual awards. The EIP provides for a potential claw-back of award payments if the relevant performance measures on which they are based are restated or otherwise adjusted with a 36-month period following the public release of the financial information.

On February 25, 2015 the Board approved a 2015 Performance Target for purposes of the 2015 Incentive Plans. The 2015 Performance Target was the budgeted Net Income for the 2015 fiscal year (excluding certain non-core items). Based on the 2014Bank’s 2015 financial results there were no cash bonuses awardedin which core banking net income exceeded the budgetary target, the Board authorized the 2015 EIP to be paid in March, 2016. The 2015 Performance Targets for the Company’s named executive officers under the EIP in 2014.are as follows:

Long-Term Incentive Programs -The Company has a Long-term Incentive Plan (“LTIP”) which was formally adopted by the Board of Directors on October 23, 2013 and approved by the shareholders at the 2013 Annual Meeting of Shareholders on December 23, 2013. The LTIP authorizes the Board to grant up to 1.2 million shares of the Company’s common stock over a 10-year period.

The Company believes that stock ownership by management and equity-based performance compensation arrangements are useful tools to align the interests of management with those of the Company’s shareholders. Where executives are shareholders themselves, the executives will realize a direct benefit by achieving the objective of maximizing shareholder value.

The LTIP is designed to reward directors, executives and key employees for their contributions to the long-term success of the Company, primarily as measured by the increase in the Company’s stock price. The LTIP design provides the Board with the authority to offer several different types of long-term incentives, including stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares.

On February 25, 2015 and upon the recommendation of the Compensation Committee, the Board approved awards under the terms of the LTIP to executives and key employees. The 2015 grants were awarded on March 1, 2015 and were comprised solely of restricted stock. For more information about these awards to the Company’s named executive officers, see the Summary Compensation Table and the Grants of Plan-Based Awards Table.   

Prior Plans

During 2014,2015, the Company had in place two expired stock incentive plans: the 2000 Stock Incentive Plan (the “Stock Incentive Plan”) and the 2000 Independent Directors’ Stock Incentive Plan (the “Directors’ Stock Plan,” and together with the Stock Incentive Plan, the “Company Plans”), each of which expired on August 30, 2010 and, as such, no additional awards have been granted from the Company Plans, though the expiration of the Company Plans does not affect any awards outstanding as of the expiration date of the Company Plans.

Under the Stock Incentive Plan, shares of common stock are subject to issuance upon the exercise of incentive stock options (“ISOs”), non-incentive stock options (“Non-ISOs”) and stock appreciation rights (“SARs”), and the award of shares of restricted stock to such key officers or other employees of the Company or the Bank as the Compensation Committee may designate. However, only ISOs were ever awarded under the Stock Incentive Plan. The exercise price of qualified stock options under the Stock Incentive Plan was not permitted to be less than 100% of the fair market value of the common stock on the date of grant, as determined in the Stock Incentive Plan.

Under the Stock Incentive Plan, the time period during which any qualified incentive stock option is exercisable, as determined by the Compensation Committee, does not commence before the expiration of six (6) months or continue beyond the expiration of ten (10) years after the date such option is awarded.

2013 Long-Term Incentive Compensation Plan

Upon the recommendation of the Compensation Committee, the LTIP was formally adopted by the Board of Directors on October 23, 2013 and was approved by shareholders at the 2013 Annual Meeting of Shareholders on December 23, 2013. We have reserved 1,200,000 shares under the LTIP. The LTIP became effective as of January 1, 2014 and will remain in effect, subject to the right of the Board of Directors to terminate the LTIP at any time, until all awards granted under the LTIP have been paid or otherwise disposed of in accordance with the provisions of the LTIP. Awards may not be made under the LTIP on or after January 1, 2024.

The LTIP is administered by the Compensation Committee. The Compensation Committee has the discretionary authority to: (i) select the persons to be granted awards under the LTIP; (ii) determine the terms, conditions and types of awards to be made to each person selected; (iii) determine when awards are to be made and the conditions that must be satisfied before an award is to be made; (iv) establish objectives and conditions for earning awards; (v) determine the terms of each award agreement; (vi) determine whether the conditions for earning an award have been met and whether an award should be paid at the end of a performance period; (vii) determine if and when an award may be deferred; (viii) determine whether the amount or payment of an award should be reduced or eliminated and (iv) determine the guidelines and procedures for the payment or exercise of an award. The Compensation Committee may delegate to the Chief Executive Officer or to other officers of the Company its authority under the LTIP except with respect to the grant of awards or the exercise of discretion with respect to awards to employees who are “covered employees” (as defined in the LTIP). The Compensation Committee determines whether to grant awards of stock options, stock appreciation rights, restricted stock and restricted stock units, performance units and performance share awards, each of which is described in further detail below.

Stock Options

The Compensation Committee determines the number of shares of stock subject to each option, the terms and conditions including vesting and expiration, and whether the option is an “incentive stock option” or a “nonqualified stock option.” The exercise price for each option is determined by the Compensation Committee but may not be less than 100% of the fair market value of the stock on the date the option is granted. No option may be exercisable after the expiration date as determined by the Compensation Committee and defined in the award agreement; provided, however, that no incentive stock option is exercisable later than ten years after the date of its grant, and no nonqualified stock option is exercisable later than ten years and one month after the date of its grant. No stock options were granted in 2014 under the LTIP. The Compensation Committee believes that including stock options in the compensation program serves the Company’s longer-term goals in the same manner as other equity-based compensation.

Stock Appreciation Rights

A stock appreciation right, or “SAR,” may be exercised upon such terms and conditions and for the term the Compensation Committee determines in the award agreement; provided, however, that no stock appreciation right will be exercisable later than ten years after the date of its grant. Upon exercise of a SAR, the participant is entitled to receive an amount determined by multiplying: (i) the difference between the fair market value of a share of stock on the exercise date and the price fixed by the Compensation Committee on the date of the grant (which price may not be less than 100% of the fair market value of a share of stock on the date of the grant); by (ii) the number of shares of stock with respect to which the SAR is exercised. The payment to the recipient of the amount due upon exercise of a SAR is made in shares of stock having a fair market value as of the date of exercise equal to the amount determined by multiplying (i) and (ii) above, unless the Compensation Committee otherwise provides for payment in cash in the applicable award agreement or any amendment or modification of the award agreement. The Compensation Committee believes that stock appreciation rights, which provide value to our executives only if the Company’s share price increases relative to the share price on the date the awards are granted, generally serve the Company’s longer-term goals and fit into the Company’s overall compensation philosophy. No SARs were granted in 2014 under the LTIP.

Restricted Stock and Restricted Stock Units

Shares of restricted stock and restricted stock units may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the termination of the applicable restricted period or for such period of time as is established by the Compensation Committee and as is specified in the award agreement. After the last day of a restricted period, shares of restricted stock covered by such restricted period will become freely transferrable by the recipient, and the recipient will receive one share of stock with respect to each restricted stock unit covered by such restricted period. Participants holding shares of restricted stock may exercise full voting rights with respect to those shares, unless otherwise specified in the applicable award agreement. The form of award agreement adopted by the Compensation Committee (the “Form of Restricted Stock Agreement”) provides for voting rights with respect to vested shares of restricted stock, but not for unvested shares. During the restricted period, participants holding shares of restricted stock or restricted stock units are entitled to receive all dividends and other distributions paid with respect to those shares while they are so held, unless otherwise specified in the applicable award agreement. The Form of Restricted Stock Agreement only permits participants holding shares of restricted stock to receive dividends and distributions with respect to vested shares of restricted stock, but not for unvested shares. Effective March 1, 2014, grants aggregating to a total of 45,750 shares of restricted stock were made in accordance with the terms of the Form of Restricted Stock Agreement to the named executive officers and to other officers of the Bank. Effective March 1, 2015, grants aggregating to a total of 84,450 shares of restricted stock were made in accordance with the terms of the Form of Restricted Stock Agreement to the named executive officers and to other officers of the Bank. The Compensation Committee believes that restricted stock awards generally share the same beneficial characteristics of stock options, with a significant retention element, and fit into the Company’s overall compensation philosophy in the same manner.

Performance Unit and Performance Share Awards

The Compensation Committee has discretion in determining the number of performance units or performance shares granted to each participant and the terms and condition of such awards, except that the maximum dollar amount of performance units that may be granted to any single Participant is $200,000 during any one calendar year. The Compensation Committee may establish in advance performance goals over performance periods for each award. Prior to each grant of performance units or performance shares, the Compensation Committee will establish an initial value for each performance unit and an initial number of shares of stock for each performance share granted to each participant for that performance period. Prior to each grant of performance units or performance shares, the Compensation Committee also will set the performance goals that will be used to determine the extent to which the participant receives a payment of the value of the performance units or number of shares of stock for the performance shares awarded for such performance period. Each performance unit award entitles the participant to a payment in cash or stock upon the attainment of performance criteria and other terms and conditions specified in the award. Subject to limitations applicable to payments to covered employees, the Compensation Committee has the authority to modify, amend or adjust the terms and conditions of any award of performance units or performance shares, including any performance goals that are established. No performance units or performance share awards were granted in 2014.

Tax and Accounting Considerations

To the extent the recipient of an incentive award recognizes ordinary income, generally the Company will be entitled (subject to the requirement of reasonableness, the provisions of Code Section 162(m), and the satisfaction of any tax reporting obligations) to a corresponding income tax deduction. Wherever possible, the Company structures compensation for its executive officers in a way that preserves tax deductibility under Section 162(m).

The Company does not generally consider the tax consequences to named executive officers of cash compensation or of equity-based compensation, though it considers the tax treatment to the Company for non-qualified options and the non-qualifying disposition of qualified options to be favorable.

Employee Stock Grant Plans

-On October 29, 2014,November 25, 2015, the Board of Directors adopted the 20142015 Employee Stock Grant Plan (the “2014“2015 Grant Plan”), which became effective upon implementation on December 1, 2014,the same date, pursuant to which the Board authorized the grant of up to 13,50013,550 common shares in order to make one-time grants of 50 common shares to each active full and part-time employee of the Company, including the named executive officers. This program was implemented to provide all of the Company’s employees with a long-term financial interest in the Company’sits future growth and profitability by providing them with Company ownership in the form of common shares.

Profit Sharing and 401(k) Plan

-The Bank has adopted the First National Community Bank 401(k) Profit Sharing Plan (the “401(k) Plan”), a tax qualified retirement savings plan pursuant to which ourthe Bank’s employees, including the named executive officers, are able to make pre-tax or Roth contributions from their cash compensation. The 401(k) Plan provides for a discretionary employer contribution, which is determined each year by the Board of Directors, in the form of profit sharing. For the year 2014,2015, the Board of Directors did not declare a profit sharing contribution.

The 401(k) Plan permits the Bank to match employee 401(k) contributions to employees who are 21 on the first day of the month following their day of hire. The Board of Directors has approved a 50%100% match of employee salary deferrals up to an employee’s first 4% of payroll contribution.2% for each employee. The match is subject to amendment at the Board of Director’s discretion.

Supplemental Executive Retirement Plan - On September 30, 2015, the Board of Directors authorized providing Supplemental Executive Retirement Plans (each, a “SERP”) to Messrs. Bone, Champi and Mahlstedt. The purpose of each SERP agreement was to further align shareholder interests with the compensation of these three (3) key executives and to provide them with a long term retention incentive. The provisions of each executive’s SERP are identical except for the amounts that the Bank is required to contribute to each executive’s SERP account as described below. Each SERP is a non-qualified plan and each participant has the status of a general unsecured creditor to the Bank.

Upon execution of the SERP Agreements in 2015, each executive received a one-time contribution to their SERP account. Mr. Champi received $50,000, Mr. Bone received $50,000 and Mr. Mahlstedt received $30,000.

Each SERP provides that the Bank is required to make additional annual contributions to that executive’s SERP account. This annual contribution for each executive is as follows: Mr. Champi, $35,000, Mr. Bone, $25,000 and Mr. Mahlstedt, $20,000. In addition, each executive is eligible to receive an annual Performance Based Contribution to their SERP account. Should the Board authorize a payment to that executive under the terms of the EIP; each executive will receive a performance-based contribution to his or her SERP account in an amount equal to the difference between the amount that we are required to contribute and the amount of such cash payment under the EIP. Should the executive not receive a payment from the EIP that exceeds the amount of the Bank’s required contribution for that fiscal year, the executive will not receive a performance-based contribution for that year.

Each participant becomes fully vested in the fair market value of their individual SERP account upon the first to occur of the following: (1) the participant becoming disabled, (ii) the participant’s involuntary termination of employment from the Bank without cause, (iii) the participant’s death, (iv) change of control of the Company, or (v) the participant reaching age 62 prior to a separation from service or other termination of employment.      

Account balances in each executive’s SERP account will receive an interest credit on December 31^st of each year. The annual amount of interest credited on the account balance is equal to 1.0% plus the average of the one year Treasury Bill rates in effect on and between December 1 and December 15 of the Plan year to which the rate of interest applies.

Deferred Compensation Plan -All officers of the Bank employed at the beginning of a year for at least two (2) years with earnings in excess of $40,000 annually are entitled to participate in the Bank’s Director’s and Officer’s Deferred Compensation Plan, as amended (“Deferred Compensation Plan”). The Deferred Compensation Plan allows named executive officers who have been employed by the Bank for ten10 or more years to defer up to 25% of their compensation, including base salary and cash bonuses. All other eligible named executive officers may defer up to 15% of their compensation. The Deferred Compensation Plan is designed to provide a long-term incentive to remain in the employ of the Bank.

An account for each participant is maintained and credited with deferred compensation on the date such compensation would have been paid to a participant had no election to defer been made. The interest rate to be creditedInterest paid on amounts in each participant’s account balances in the Deferred Compensation Plan was reviewed by the Board during 2010 and the Deferred Compensation Plan was amended prior to December 31, 2010. The amendment provides for the interest rate to beis determined annually based on the sum of 1% plus the average of the one-year U.S. Treasury Bill rates in effect on and between December 1 and December 15 of the Plan Year to which it applies. There is no minimum rate in this amendment. This amendment was adopted byinterest rate. The Bank does not match participant deferrals to the Board on December 29, 2010 and applied to accounts for the December 31, 2010 interest crediting and thereafter.Deferred Compensation Plan.

The Bank’s obligation under the Deferred Compensation Plan is an unfunded and unsecured promise to pay. The Bank is not obligated to fund any of such obligations, but it may, in its sole discretion, elect to fund the Deferred Compensation Plan in whole or in part. To date, the Company has not funded any Deferred Compensation Plan obligations. As such, executive officer and other participantparticipants’ account balances in the Deferred Compensation Plan are unsecured and at-risk, meaning the balances may be forfeited in the event of the Company’s financial distress such as bankruptcy. The Bank does not match executive deferralsare subject to the Deferred Compensation Plan.Bank’s creditors.

Participants, including each of the named executive officers, are immediately vested in their account balance in the deferred compensation plan. The benefit payments to be made to a participant under the Deferred Compensation Plan begin on the first business day of the month after the participant’s “normal retirement date,” which is the date on which a participant reaches age 60, the date on which he has been a participant for five years, or his or her termination of service, whichever is later. “Termination of service” means the participant’s ceasing to serve as a director or officer of the Bank for any reason whatsoever, voluntary or involuntary, including by reason of death or disability. The participant will receive equal monthly or annual installments over the period chosen, the amount of such payments being determined by annuitizing the amount in his Deferred Compensation Plan account, plus interest.

Distributions are paid in a lump sum or in annual or monthly installments according to the participant’s designation, provided, however, that the Bank may, subject to approval by the Board of Directors, pay the participant’s deferred compensation account in annual payments upon such Participant’s termination of service. All distributions are also subject to any regulatory requirements, as in effect from time to time.

Additional Employee Benefit Plans -The Bank also provides additional benefit programs to employees, including the named executive officers, including health, vision and dental insurance, life andinsurance, long-term and short-term disability insurance.insurance and an employee assistance program.

Supplemental Life Insurance for Certain Executive Officers -Certain executive officers also participate in the Company’s supplemental executive life insurance plan which provides a split-dollar share of death benefits to the executive’s beneficiary, depending upon the executive’s eligibility to receive payments. The plan is funded with bank-owned lifeinsurance and is used to provide an additional benefit to certain executives with a minimal cost to the Company. Split-dollar life insurance plans are widely available in the banking industry, because it allows the employer to recover its plan costs upon the death of the executive, and the executive’s beneficiary to receive a split of the insurance proceeds.

These benefits are provided to further incent longevity with the Company and also to provide an executive benefit package that is fully competitive within ourthe Company’s industry and market place. The costs of providing such benefits to all eligible employees are not considered when determining specific salaries of the named executive officers and are seen as a worthwhile investment in employees that will help keep the employee productive and engaged.

Perquisites -The Company provides a Company-owned vehicle to several of the named executive officers, as their positions require travel offsite frequently for Bank business. The provision of a Company vehicle to these individuals is viewed by the Board of Directors as a normal benefit in the highly competitive financial services industry.

Country club memberships, the dues for which are paid by the Company, are provided to certain of ourthe Company’s named executive officers and used as a vehicle to attract, retain and expand customer relationships. They are viewed as an important resource for certain named executive officers to further the business of the Bank.

Employment and Severance Arrangements -NoneOn September 30, 2015 and upon the recommendation of the executive officers or directorsCompensation Committee, the Board of Directors authorized Employment Agreements (“Agreements”) for Messrs. Bone, Champi and Mahlstedt. Accordingly, on October 1, 2015 the Company orand the Bank entered into an Employment Agreement with Mr. Bone and the Bank entered into Employment Agreements with Mr. Champi and Mr. Mahlstedt. Employment Agreements are commonly used by the banking industry and by the Company’s peer group to define an overall compensation package that is aligned with shareholder interests and to retain key executives. There were no written Employment Agreements in place prior to October 1, 2015. Below is a summary of each executive’s Agreement.

The provisions under the Employment Agreements for Mr. Champi, Mr. Bone and Mr. Mahlstedt are identical in all respects except for each executive’s base salary. The base salaries for each executive as specified in the Agreement are: Mr. Champi, $252,500; Mr. Bone, $207,000 and Mr. Mahlstedt, $192,000. Each Agreement specifies that the base salary is subject to annual review by the Compensation Committee and the Board.

Each Agreement states that the executive is eligible to participate in the EIP and LTIP according to the terms of those Plans. The Agreement also states that each executive will be provided with a SERP whose terms are described elsewhere in this document. The Agreement specifies that each executive will be reimbursed for annual country club dues and use of a Bank provided automobile.

Each executive’s Agreement has a term of three years, with consideration for an annual renewal of an additional three years on March 31^st of each calendar year.

In the event of a Change of Control during which his employment with the Bank is currentlyterminated without Cause 1) within 120 days immediately prior to and in conjunction with a partyChange in Control or within one year following consummation of a Change in Control or 2) the terms and conditions of his position are substantially altered as defined in the Agreement, each executive will receive a total Severance payment equal to 2.99 years base salary at the highest rate in effect during the 12-month period immediately preceding his last day of employment plus the average Executive Incentive Plan cash award received over the last three preceding years. Each executive will remain eligible to participate in the Bank’s medical benefits program while receiving severance.

In the event that the executive is released without cause while the Agreement is in effect, he will receive a total Severance payment equal to 2.99 years base salary at the highest rate in effect during the 12-month period immediately preceding his last day of employment plus the average cash award paid to him over the last three preceding years from the Executive Incentive Plan.

Each executive will remain eligible to participate in the Bank’s medical benefits program while receiving severance from either involuntary separation not for cause or because of a Change of Control.

Each executive’s contract would terminate upon his death except that any remaining separation payments due to the executive as a result of a change of control or involuntary separation not for cause will be paid to the executive’s beneficiary.

Each executive’s Agreement includes a non-compete clause which will be in effect for twelve months after an individual employment contract or any other agreement with the Company orinvoluntary separation by the Bank containing severance and/or changeafter a Change of Control termination as defined in control arrangements with the Company or the Bank.his Agreement.

Inter-Relationship of Elements of Total Compensation

The Company’s executive compensation philosophy and strategy is intended to be competitive in the marketplace andto reward executives for strong performance through multiple compensation vehicles and to not reward executives for weak performance.vehicles. All of the components are balanced, integrated, and designed to provide a total compensation environment which will enhance the executives’ relationship with the Company and support the growth of overall shareholder value.

The various elements of the total compensation package are subtly interrelated basedbut are intended to focus the executive on a varietyboth short-term and long-term performance of factors.the Company. While there is not a direct relationship between components, if in a given year the Board of Directors or Compensation Committee decides, for purposeful reasons, to “overweight” one component of total compensation (as compared to the market) they may “underweight” another so that total compensation remains competitive. The Company held its first “say-on-pay” vote at the 2013 annual meeting and intends to continue to holdholds an advisory vote on the compensation of executives on an annual basis.

Equity Ownership Guidelines

We haveThe Company has no equity or security ownership requirements or guidelines for executive officers other than Steven R. Tokach who, as director of the Company and the Bank, is required to own shares of the Company’s common stock. However, all of the executive officers own common stock, restricted stock or options to purchase common stock pursuant to ourits equity compensation plans. Pursuant to the Company’s bylaws, shareholders who submit proposals for inclusion in the Company’s proxy statement must disclose details regarding hedged positions.

Risk Analysis of Incentive Compensation Programs

The Compensation Committee evaluated the Company’s compensation policies and practices for its employees and concluded that ourits compensation programs (1) are appropriately structured to reward prudent risk taking, (2) do not encourage or promote inappropriate risk taking, (3) do not pose a material risk to the Company, and (4) are not reasonably likely to have a material adverse effect on the Company. The Compensation Committee presented their findings to the Board of Directors in 2014.2015. The Compensation Committee intends to conduct a risk analysis of the Incentive Compensation Programs on an annual basis.

Summary Compensation Table - 2015

Shown below is information concerning the annual compensation for services in all capacities to the Company and the Bank for the fiscal years ended December 31, 2015, 2014, 2013, and 20122013 of the Chief Executive Officer, the Chief Financial Officer, and the three other most highly compensated executive officers of the Company and the Bank, to the extent such persons’ total compensation exceeded $100,000.