Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )___)
Filed by the Registrant ☒
| Title of each class of securities to which transaction applies: | ||||
| 2 | Aggregate number of securities to which transaction applies: |
| 3 | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): |
| 4 | Proposed maximum aggregate value of transaction: |
| 5 | Total fee paid: | ||||||||||
| ☐ | Fee paid previously with preliminary materials: | ||||||||||
| ☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | ||||||||||||||
| 1 | Amount Previously Paid: | ||||||||||
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NOTICE OF 2017 ANNUAL MEETING OF STOCKHOLDERS | | |
| NOTICE OF 2020 ANNUAL MEETING OF STOCKHOLDERS | ||
| TIME AND DATE | : | 10:00 a.m. Eastern Time on | ||||||||||||||||||||||||||||||||||||
| PLACE | : | The 2020 Annual Meeting of The Community | ||||||||||||||||||||||||||||||||||||
| ITEMS OF BUSINESS | : | (1) | To elect | |||||||||||||||||||||||||||||||||||
| (2) | To ratify the appointment of Dixon Hughes Goodman LLP as the independent registered public accounting firm for the year ending December 31, | |||||||||||||||||||||||||||||||||||||
| (3) | To vote on a non-binding resolution to approve the compensation of the named executive officers; | |||||||||||||||||||||||||||||||||||||
| (4) | To transact such other business as may properly come before the meeting or any adjournments or postponement thereof. | |||||||||||||||||||||||||||||||||||||
| RECORD DATE | : | To vote, you must have been a stockholder at the close of business on March | ||||||||||||||||||||||||||||||||||||
| PROXY VOTING | : | It is important that your shares be represented and voted at the virtual meeting. You can vote your shares via the Internet, by telephone or by completing and signing a | ||||||||||||||||||||||||||||||||||||
| 2020 ANNUAL STOCKHOLDER MEETING | ||||||||||||||||||||||||||||||||||||||
In light of ongoing developments related to coronavirus (COVID-19) and after careful consideration, the Board of Directors has determined that this year’s annual meeting will be a virtual meeting conducted exclusively via live webcast at www.virtualshareholdermeeting.com/TCFC2020. Adopting this format for this year’s annual meeting will facilitate stockholder attendance and participation by enabling stockholders to safely participate from any location and at no cost. We believe this is the right choice for the Company at this time, as it enables engagement with our stockholders, regardless of size, resources, or physical location while safeguarding the health of our stockholders, Board, management and other partners. We are committed to ensuring that stockholders will be afforded the same rights and opportunities to participate as they would at an in-person meeting. You will be able to attend the meeting online, vote your shares electronically and submit questions during the meeting. To participate in the virtual meeting, you will need the 16-digit control number included on your Notice, proxy card or voting instruction form. The meeting webcast will begin promptly at 10:00 a.m., Eastern Time. We encourage you to access the meeting prior to the start time to complete the check-in procedures. Online check-in will begin at 9:30 a.m., Eastern Time. If you encounter any difficulties accessing the virtual annual meeting during the check-in or meeting time, please call the technical support number that will be posted on the virtual shareholder meeting log-in page. Technical support will be available starting at 9:30 a.m. Eastern Time on May 20, 2020. | ||||||||||||||||||||||||||||||||||||||
| Christy Lombardi Corporate Secretary | ||||||||||||||||||||||||||||||||||||||
GENERAL INFORMATION| GENERAL INFORMATION | ||
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS| HOW TO ATTEND THE ANNUAL MEETING | ||
| This year’s annual meeting will be a virtual meeting conducted exclusively via live webcast at www.virtualshareholdermeeting.com/TCFC2020. Adopting this format for this year’s annual meeting will facilitate stockholder attendance and participation by enabling stockholders to safely participate from any location and at no cost. In light of ongoing developments related to COVID-19, we believe this is the right choice for the Company at this time, as it enables engagement with our stockholders, regardless of size, resources, or physical location while safeguarding the health of our stockholders, Board, management and other partners. You will be able to attend the meeting online, vote your shares electronically and submit questions during the meeting. To participate in the virtual meeting, you will need the 16-digit control number included on your Notice, proxy card or voting instruction form. The meeting webcast will begin promptly at 10:00 a.m., Eastern Time. We encourage you to access the meeting prior to the start time to complete the check-in procedures. Online check-in will begin at 9:30 a.m., Eastern Time. If you encounter any difficulties accessing the virtual annual meeting during the check-in or meeting time, please call the technical support number that will be posted on the virtual shareholder meeting log-in page. Technical support will be available starting at 9:30 a.m. Eastern Time on May 20, 2020. We intend to provide access to this proxy statement and a proxy card to stockholders of record beginning on or about April 6, 2020. | ||
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDERS MEETING TO BE HELD ON MAY 20, 2020 | ||
INFORMATION ABOUT VOTINGINFORMATION ABOUT VOTING
19, 2020.
If you participate in the Community Bank of the Chesapeake Employee Stock Ownership Plan, you will receive a voting instruction card that reflects all shares you may direct the plan trustees to vote on your behalf under the plan. Under the terms of the Employee Stock Ownership Plan, all allocated shares of Company stock held by the plan are voted by the trustees, as directed by plan participants. All unallocated shares of Company common stock held by the plan, and allocated shares for which no voting instructions are received, are voted by the trustees in the same
13, 2020.
CORPORATE GOVERNANCE| CORPORATE GOVERNANCE | ||
Rebecca M. McDonald is the daughter of Michael L. Middleton, the current Chairman of the Board of the Company. Mr. Middleton submitted Ms. McDonald’s name to the Governance Committee for consideration as a prospective director nominee candidate. Mr. Middleton will be retiring from the Board of Directors effective June 30, 2020. There was no understanding or arrangement that Ms. McDonald would be nominated to shareholders for election to the Board of Directors. The Governance Committee conducted due diligence on Ms. McDonald and reviewed her credentials and background consistent with the Governance Committee’s Charter. In evaluating Ms. McDonald’s candidacy, and in determining that she would be considered “independent” under the SEC’s and Nasdaq’s rules, the Nominating and Corporate Governance Committee and the Board of Directors also considered Ms. McDonald’s familial relationship with Mr. Middleton, Mr. Middleton’s current status as the Chairman of the Board and his beneficial ownership interest in the Company’s common stock.
As previously disclosed on October 31, 2019, the Chairman of the Board, Michael Middleton, will retire from the Board of Directors effective June 30, 2020. At that time, Director Slater will become Chairman of the Board.
| | | | | ||||
| Director | Audit Committee | Enterprise Risk Management Committee | Governance Committee | Compensation Committee | ||||
| Eric S. Goldberg | ||||||||
| M. Arshed Javaid | X | |||||||
| Louis P. Jenkins, Jr. | X | X* | X* | |||||
| Michael L. Middleton | X | |||||||
| John K. Parlett, Jr. | X | X | ||||||
| William J. Pasenelli | X | |||||||
| Mary Todd Peterson | X* | X | ||||||
| Austin J. Slater, Jr. | X | X* | X | X | ||||
| Joseph V. Stone, Jr.** | X | X | X | X | ||||
| Kathryn Zabriskie | X | X | ||||||
| Number of Meetings in 2016 | 7 | 4 | 4 | 6 |
Director | Audit Committee | Enterprise Risk Management Committee | Governance Committee | Compensation Committee | ||||||||||||||||||||||
| Kimberly C. Briscoe-Tonic | X | |||||||||||||||||||||||||
| M. Arshed Javaid | X | |||||||||||||||||||||||||
| Louis P. Jenkins, Jr. | X | X* | X* | |||||||||||||||||||||||
| Michael L. Middleton | X | |||||||||||||||||||||||||
| William J. Pasenelli | X | |||||||||||||||||||||||||
| Mary Todd Peterson | X* | X | X | |||||||||||||||||||||||
| E. Lawrence Sanders, III | X | X | ||||||||||||||||||||||||
| Austin J. Slater, Jr.** | X | X* | X | X | ||||||||||||||||||||||
| Joseph V. Stone, Jr. | X | X | X | X | ||||||||||||||||||||||
| Kathryn Zabriskie | X | X | ||||||||||||||||||||||||
| Number of Meetings in 2019 | 8 | 4 | 5 | 6 | ||||||||||||||||||||||
* Chairperson
community, business and civic affairs, and also considers whether the candidate would adequately represent the Company’s market area. Any nominee for director must be highly qualified with regard to some or all of these attributes. In searching for qualified director candidates to fill vacancies on the Board, the Governance Committee solicits its current directors for the names of potential qualified candidates. The Governance Committee may also ask its directors to pursue their business contacts for the names of potentially qualified candidates. The Governance Committee would then consider the potential pool of director candidates, select the top candidates based on the candidates’ qualifications and the Company’s needs, and conduct a thorough investigation of each proposed candidate’s background. If a stockholder has submitted a proposed nominee in accordance with the procedures specified below, the Governance Committee would consider the proposed nominee, along with any other proposed nominees recommended by directors, in the same manner in which the Governance Committee would evaluate nominees for director recommended by the Board of Directors.
2019
except for Kimberly C. Briscoe-Tonic who was appointed to the Company’s Board effective September 25, 2019.| DIRECTOR COMPENSATION | ||
| | | | |||||||||
| Name | Fees Earned or Paid in Cash ($) | Non-qualified Deferred Compensation Earnings ($)(3) | Total ($) | |||||||||
| Eric S. Goldberg | $ | 23,692 | $ | — | $ | 23,692 | ||||||
| Philip T. Goldstein(1) | 41,150 | — | 41,150 | |||||||||
| M. Arshed Javaid | 38,575 | 2,491 | 41,066 | |||||||||
| Louis P. Jenkins, Jr | 47,125 | — | 47,125 | |||||||||
| Michael L. Middleton(4) | 25,000 | 10,099 | 35,099 | |||||||||
| Mary Todd Peterson | 43,975 | 3,257 | 47,232 | |||||||||
| James R. Shepherd(2) | 43,575 | — | 43,575 | |||||||||
| Austin J. Slater, Jr | 47,850 | — | 47,850 | |||||||||
| Joseph V. Stone, Jr | 49,550 | 10,199 | 59,749 | |||||||||
| Name | Fees Earned or Paid in Cash ($) | Non-qualified Deferred Compensation Earnings ($) (1) | Total ($) | |||||||||||||||||
Kimberly C. Briscoe-Tonic(2) | $ | 22,125 | $ | — | $ | 22,125 | ||||||||||||||
James F. Di Misa(3) | 15,692 | — | 15,692 | |||||||||||||||||
| M. Arshed Javaid | 37,825 | 5,317 | 43,142 | |||||||||||||||||
| Louis P. Jenkins, Jr. | 50,000 | — | 50,000 | |||||||||||||||||
| Michael L. Middleton | 55,000 | 7,139 | 62,139 | |||||||||||||||||
John K. Parlett, Jr.(4) | 34,925 | — | 34,925 | |||||||||||||||||
| Mary Todd Peterson | 49,800 | 5,230 | 55,030 | |||||||||||||||||
| E. Lawrence Sanders, III | 47,800 | 476 | 48,276 | |||||||||||||||||
James R. Shepherd(5) | 20,525 | — | 20,525 | |||||||||||||||||
| Austin J. Slater, Jr. | 51,125 | — | 51,125 | |||||||||||||||||
| Joseph V. Stone, Jr. | 54,775 | 10,543 | 65,318 | |||||||||||||||||
| Kathryn Zabriskie | 44,725 | 876 | 45,601 | |||||||||||||||||
______________________ (1)Represents the portion of non-qualified deferred compensation earnings under the Community Bank of the Chesapeake Retirement Plan for Directors that was above the Internal Revenue Service long-term rate. Under the plan, interest is credited at a rate equal |
The Company has not identified any agreements or arrangements relating to compensation provided by a third party to the Company’s directorsannualized return on equity or based on the gains or losses on the deemed investments.
of Directors of the Bank effective December 31, 2019.
Board of Directors of the Company: | ||||||||
| Annual Retainer | $15,000 | |||||||
| Fee per Board Meeting (Regular or Special) | $750 ($225 per telephone meeting) | |||||||
| Fee per Committee Meeting | $500 ($225 per telephone meeting) | |||||||
| Annual Retainer for the Chairman of the Board and Audit Committee Chair | $5,000 | |||||||
| Annual Retainer for Governance, Compensation, and Enterprise Risk Management Committee Chairs | $2,500 | |||||||
Board of Directors of the Bank: | ||||||||
| Annual Retainer | $10,000 | |||||||
| Fee per Board Meeting (Regular or Special) | $650 ($225 per telephone meeting) | |||||||
| Fee per Committee Meeting | $425 ($225 per telephone meeting) | |||||||
| Annual Retainer for ALCO and Credit Risk Committee Chairs | $2,500 | |||||||
| | |||
| Annual Retainer | $ | 15,000 | ||
| Fee per Board Meeting (Regular or Special) | $ | 750 ($225 per telephone meeting) | ||
| Fee per Committee Meeting | $ | 500 ($225 per telephone meeting) | ||
| Annual Retainer for Audit Committee Chair | $ | 5,000 | ||
| Annual Retainer for Governance, Compensation and Enterprise Risk Management Committee Chairs | $ | 2,500 | ||
| | |||
| Annual Retainer | $ | 10,000 | ||
| Fee per Board Meeting (Regular or Special) | $ | 650 ($225 per telephone meeting) | ||
| Fee per Committee Meeting | $ | 425 ($225 per telephone meeting) | ||
| Annual Retainer for Bank Committee Chairs | $ | 2,500 | ||
Employee directorsCompany receive only the annual retainer and Board meeting fees; they do not receive fees for committee meetings.
Directors Employee directors of the Bank do not receive annual retainers, board meeting fees or fees for committee meetings.
plan participants.
AUDIT RELATED MATTERS
independent.
The Company’s independent registered public accounting firm, Stegman & Company, announced that effective June 1, 2016 substantially all directors and employees of Stegman & Company joined Dixon Hughes Goodman LLP. As a result, effective June 1, 2016 Stegman & Company resigned as the Company’s independent registered public accounting firm. The Audit Committee of the Company’s Board of Directors engaged Dixon Hughes Goodman to serve as the Company’s independent registered public accounting firm effective June 1, 2016.
The reports of Stegman & Company on the audits of the consolidated financial statements of the Company as of and for the years ended December 31, 2015 and 2014, and audit of internal control over financial reporting as of December 31, 2015, did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles.
During the Company’s fiscal years ended December 31, 2015 and 2014 and the subsequent interim period through June 1, 2016, there were (i) no disagreements (as such term is used in Item 304(a)(1)(iv) of Regulation S-K) between the Company and Stegman & Company on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreement(s), if not resolved to the satisfaction of Stegman & Company, would have caused Stegman & Company to make reference to the subject matter of the disagreement(s) in connection with its report on the Company’s financial statements and (ii) no reportable events within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.
During the Company’s fiscal years ended December 31, 2015 and 2014 and the subsequent interim period through June 1, 2016, the Company did not consult with Dixon Hughes Goodman regarding any of the matters set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.
| 2019 | 2018 | |||||||||||||
Audit Fees(1) | $ | 209,108 | $ | 256,577 | ||||||||||
Audit Related Fees(2) | $ | 29,184 | $ | 23,562 | ||||||||||
| Tax Fees | $ | — | $ | — | ||||||||||
| All Other Fees | $ | — | $ | — | ||||||||||
| | | ||||||
| 2016 | 2015 | |||||||
| Audit Fees(1) | $ | 149,223 | $ | 128,883 | ||||
| Audit Related Fees(2) | 21,541 | 55,422 | ||||||
| Tax Fees | 10,000 | 18,250 | ||||||
| All Other Fees | — | — | ||||||
(2)Represents fees for the audit of the 401(k) and ESOP plans.Pre-Approval of Services by the Independent Registered Public Accounting Firm. The Audit Committee’s charter provides that the Audit Committee will approve in advance any non-audit services permitted by the Securities Exchange Act, including tax services that its independent registered public accounting firm renders to the Company, unless such prior approval may be waived because of permitted exceptions under the Securities Exchange Act, including but not limited to a 5%de minimis exception. The Audit Committee may delegate to one or more members of the Audit Committee the authority to grant pre-approvals for auditing and allowable non-auditing services, which decision shall be presented to the full Audit Committee at its next scheduled meeting for ratification. During the fiscal year ended December 31, 2016,2019, the Audit Committee approved 100% of all “audit-related,” “tax”audit-related, tax and “otherother fees.”12PRINCIPAL HOLDERS OF VOTING SECURITIES PRINCIPAL HOLDERS OF VOTING SECURITIESThe following table sets forth, as of March 9, 2017,23, 2020, certain information as to those persons known by the Company to beneficially own more than 5% of the Company’s outstanding shares of common stock and the shares of Company common stock beneficially owned by each director, each executive officer named in the summary compensation table and by all executive officers and directors of the Company as a group. All beneficial owners listed in the table have the same address as the Company, unless otherwise provided. Unless otherwise indicated, each of the named individuals has sole voting power and sole investment power with respect to the shares shown. Name of Beneficial Owners Number of
Shares Owned
(Excluding
Options)(1)(2) Number of
Shares That
May be
Acquired within
60 Days by
Exercising
Options Percent of Shares
of Common Stock
Outstanding(3)Name of Beneficial Owners Number of Shares Beneficially Owned (1)(2) Percent of Shares of Common Stock Outstanding (3) Directors: Directors: Eric S. Goldberg 26 — * Kimberly C. Briscoe-Tonic Kimberly C. Briscoe-Tonic 379 * M. Arshed Javaid 3,520 — * M. Arshed Javaid 3,986 * Louis P. Jenkins, Jr. 19,518 — * Louis P. Jenkins, Jr. 20,188 * Michael L. Middleton 258,746 (4) — 5.58 % Michael L. Middleton 228,347(4)3.86% John K. Parlett, Jr. 4,000 — * William J. Pasenelli 42,664 4,344 1.01 % William J. Pasenelli 51,819 * Mary Todd Peterson 6,529 — * Mary Todd Peterson 8,234 * E. Lawrence Sanders, III E. Lawrence Sanders, III 27,119(5)* Austin J. Slater, Jr. 20,191 — * Austin J. Slater, Jr. 24,718 * Joseph V. Stone, Jr. 28,625 (5) 500 * Joseph V. Stone, Jr. 33,652(6)* Kathryn Zabriskie 2,550 — * Kathryn Zabriskie 4,262 * Named Executive Officers
Who are Not Also Directors Named Executive OfficersWho are Not Also DirectorsJames M. Burke 19,848 1,865 * James M. Burke 21,453 * Todd L. Capitani 9,778 — * Gregory C. Cockerham 121,066 4,407 2.70 % Gregory C. Cockerham 124,518 2.11% James F. Di Misa 19,006 1,865 * All Directors, Executive Officers and Nominees as a Group (17 persons) 573,054 (6) 13,231 12.60 % 5% Owners: Basswood Capital Management, L.L.C.
Basswood Partners, L.L.C.
Basswood Enhanced Long Short GP, LLC
Basswood Financial Fund, L.P.
Basswood Financial Fund, Inc.
Basswood Financial Long Only Fund, LP
Basswood Enhanced Long Short Fund, LP
Basswood Opportunity Partners, LP
Basswood Opportunity Fund, Inc.
BCM Select Equity I Master, Ltd.
Matthew Lindenbaum Bennett Lindenbaum
645 Madison Avenue, 10th Floor
New York, New York 10022 456,209 (7) 9.83 % Banc Fund VI L.P. Banc Fund VII L.P. Banc Fund VIII L.P. Banc Fund IX L.P.
20 North Wacker Drive, Suite 3300
Chicago, Illinois 60606 261,132 (8) 5.63% All Directors, Executive Officers and Nominees as a Group (20 persons) All Directors, Executive Officers and Nominees as a Group (20 persons) 625,603(7)10.59% 5% Owner(s): 5% Owner(s): Fourthstone LLC8Fourthstone Master Opportunity Fund LtdFourthstone GP LLCFourthstone QP Opportunity Fund LP13476 Clayton RoadSt Louis, MO 63131Fourthstone LLC8Fourthstone Master Opportunity Fund LtdFourthstone GP LLCFourthstone QP Opportunity Fund LP13476 Clayton RoadSt Louis, MO 63131354,717(8)6.35% ____________________*Less than 1% of the shares outstanding(1) Includes shares allocated to the account of the individuals under the Community Bank of the Chesapeake Employee Stock Ownership Plan, with respect to which the individual has voting but not investment power as follows; Mr. Burke — 1,944 shares; Mr. Cockerham — 24,981 shares; and Mr. Pasenelli — 5,609 shares.(2) Includes shares of unvested restricted stock, with respect to which the individual has voting but no investment power as follows: Ms. Briscoe-Tonic – 294 shares; Mr. Javaid – 294 shares; Mr. Middleton — 294 shares; Ms. Peterson – 294 shares; Mr. Sanders – 294 shares; Mr. Slater – 294 shares; Mr. Stone – 294 shares; Ms. Zabriskie – 294 shares; Mr. Pasenelli — 1,576 shares; and Mr. Burke — 1,102 shares.(3) Based upon 5,910,064shares of Company common stock outstanding as of March 23, 2020.(4) Includes 64,351 shares beneficially owned by Mr. Middleton’s wife.(5) Includes 2,173 shares beneficially owned by the individual retirement account of Mr. Sanders’s wife.(6) Includes 2,000 shares beneficially owned by the individual retirement account of Mr. Stone’s wife.(7) Includes 10,603 shares beneficially owned by James F. Di Misa which 147 shares are unvested restricted stock which Mr.13
Di Misa has voting power but no dispositive power. Mr. Di Misa is a director of Community Bank of the Chesapeake. Includes 11,895 shares beneficially owned by Todd Capitani which 1,059 shares are unvested restricted stock which Mr. Capitani has voting power but no dispositive power and 10,778 shares beneficially owned by Christy Lombardi which 904 shares are unvested restricted stock which Ms. Lombardi has voting power but no dispositive power. Mr. Capitani and Ms. Lombardi are executive officers of the Company.Includes shares beneficially owned as follows: John Chappelle - 769; B. Scot Ebron - 18,691; and Talal Tay - 402. Of those shares beneficially owned, some of which are unvested restricted stock to which the individual has voting power but no dispositive power as follows: Mr. Chappelle - 177; Mr. Ebron - 1,755; and Mr. Tay - 370. Messrs. Chappelle, Ebron and Tay are executive officers of the Bank.Includes shares beneficially owned by Patrick Pierce and Lacey Pierce of 9,475 and 9,065, respectively, of which 7,035 shares are owned jointly by Mr. and Mrs. Pierce. Mr. and Mrs. Pierce each have voting power but not dispositive power for 489 shares of unvested restricted stock. Mr. and Mrs. Pierce are executive officers of the Bank. Name of Beneficial Owners Number of
Shares Owned
(Excluding
Options)(1)(2) Number of
Shares That
May be
Acquired within
60 Days by
Exercising
Options Percent of Shares
of Common Stock
Outstanding(3)EJF Capital LLC
Emanuel J. Friedman
EJF Financial Services Fund, L.P.
EJF Financial Services GP, LLC
2107 Wilson Boulevard, Suite 410 Arlington,
Virginia 22201 250,000 (9) 5.39 % Manulife Asset Management (US) LLC
200 Bloor Street East Toronto,
Ontario Canada, M4W 1E5 240,709 (10) 5.19 % Community Bank of the Chesapeake Employee Stock Ownership Plan 231,668 (11) 4.99 %
Ms. McDonald has been nominated to serve a three-year term as a new member of the Board to the class of directors that expires in 2023.
2023
John K. Parlett, Jr.
Mr. Parlett provides the Board with important knowledge and insight necessary to guide the Company and its management through the various issues facing financial institutions.
Bank.
Ms. Zabriskie brings a depth and breadth of knowledge to the board related to best practices in employee development, human resources, facilitation, and organizational planning. Her experience working nationally, internationally, and across industries offers a broad perspective on issues related to training and development, corporate culture, managing and attracting talent, and planning for the future.
Eric S. Goldberg is a senior analyst with Basswood Capital Management (“Basswood”), an alternative asset manager with over $1.2 billion of assets under management. Mr. Goldberg joined Basswood as a summer associate in 2005 and became an analyst in 2008. In his current role as a senior analyst, Mr. Goldberg is responsible for the research and investment analysis of companies in the financial sector, with a focus on small and regional banks. Mr. Goldberg graduated magna cum laude, with honors, from New York University’s Stern School of Business in 2008 with a B.S. in Finance and International Business and a minor in East Asian Studies. Mr. Goldberg also served on the board of directors of Florida-based Regent Bancorp, Inc. and Regent Bank as a director. Age 30. Director of the Bank and the Company since 2016.
Mr. Goldberg’s extensive experience in the capital markets and financial services industry make him a valuable member of the Board of Directors. In addition, as the representative of Basswood, one of the Company’s institutional shareholders, Mr. Goldberg provides valuable insights related to the Company’s institutional shareholder base and methods for further building shareholder value.
2021:
bank operations.
Mr. Stone provides the Board with significant marketing and operational knowledge through his experience as owner of an insurance agency and various director positions with companies outside of the financial services industry. Mr. Stone also has considerable experience in the insurance industry, corporate governance and risk assessment practices necessary in banking operations.
2022:
Chair of PCI’s Investment Committee and a member of PCI’s Executive and Finance Committees. Ms. Peterson is a member of the American Institute of Certified Public Accountants. Age 62.65. Director of the Bank and the Company since 2010.
stockholders.
| EXECUTIVE COMPENSATION | ||
| | |||||||
| Named Executive Officer | Title | |||||||
| William J. Pasenelli | President | |||||||
| James M. Burke | Executive Vice President and Bank President | |||||||
| Gregory C. Cockerham | ||||||||
The Company’s
During 2016, the Company and its subsidiary, Community Bank of the Chesapeake, made a number of strategic decisions to meet our longer-term objectives of increased profitability and shareholder value. The Company continued to increase operating leverage by executing its plans to improve asset quality, increase transaction deposits, and slow the growth of expenses. Below are a few highlights of our 2016 performance:
A more detailed analysis comparing the results of operations for the years ended December 31, 2016 and 2015 is provided in the Annual Report on Form 10-K for the year ended December 31, 2016.
The Committee began its work on executive compensation for 2016 by assessing competitive market compensation using a number of data sources including publicly disclosed information on a selected peer group of publicly traded banking organizations similar in asset size and geographic region. Consideration was given to the Company’s 2015 financial performance and the goals and objectives set forth in the Company’s strategic plan. Beginning in 2015, the Committee made changes in the structure of the annual incentive plan to include more competitive award opportunities and additional performance factors. In 2016, the Committee implemented a scorecard approach to executive incentive awards by establishing threshold, target and maximum incentive opportunities tied to a number of performance factors.
The Committee approved modest increases to base salaries for 2016. Incentive award targets and objectives were aligned with the annual strategic plan approved by the Board. Based on the Company’s performance and the achievement of specific strategic objectives, the Committee approved cash and equity awards as described under Performance-Based Incentive Compensation and Long-Term Equity Awards sections.
The Company provides its shareholders with the opportunity to cast an annual advisory vote on executive compensation. At the Company’s 2016 annual meeting of shareholders, approximately 93% of the votes cast on the say-on-pay proposal were voted for the proposal, demonstrating support of the Committee’s executive pay decisions.
The Committee will continue to consider the results of the Company’s say-on-pay votes when making future compensation decisions for the named executive officers.
Our compensation philosophy is grounded on the following guiding principles:
As such, compensation levels amongst the NEOs are closely aligned and their incentive opportunities are linked to similar performance metrics.
Internal Equity. Because the Company’s executive officers operate as a team, the Committee considers internal pay equity to be an important factor in its decisions on executive compensation. As a result, the incentive portion of compensation awarded to each of the Company’s executive officers in 2016 was generally the same, when expressed as a percent of salary.
Ownership.
our strategic objectives.
We believe that the design and objectives of our executive compensation program provide an appropriate balance of incentives for executives and avoid inappropriate risks. The Committee considers, in establishing and reviewing the executive compensation program, whether the program encourages unnecessary or excessive risk taking and has concluded that it does not. In this regard, our executive compensation program includes, among other things, the following design features:
The Committee conducts an annual evaluation of all of the Company’s compensation programs, policies and practices to ensure that compensation policies and incentive compensation programs in place are not reasonably likely to have a material adverse impact on the Company and do not encourage our employees to excessive risks.
Role of the Compensation Committee.. The Committee is responsible for overseeing and administering the Company’s employee benefit plans and policies. The Committee determines all compensation for the named executive officers. Each year, the Committee conducts an evaluation of each executive officer to determine if any changes in the officer’s compensation would be appropriate based on the considerations described above.
The executive compensation review included an assessment of our financial performance relative to peers and a review of equity compensation and bonuses for named executive officers. The Committee sought input from ChaseCompGroup on a range of external market factors, including evolving compensation trends, appropriate peer companies, and market survey data. The compensation assessment provided the Committee with a broad array of information from which to assess the effectiveness of our compensation programs and served as a foundation for 2017 compensation decisions. ChaseCompGroup assisted the Committee in developing a more performance based incentive philosophy which was implemented in 2016.
Compensation Peer Group and Benchmarking. With the assistance of ChaseCompGroup, the Committee identified a group of peer companies to use for compensation comparison purposes for compensation decisions. In determining the compensation peer group, the Committee selected regional, publicly traded banks with assets from approximately half to two times our asset size. These are banks in our view that compete with the Company for talent in the community banking industry. The Committee selected the following peer group for 2017, which ranged between $2.6 billion and $700 million in assets. The peer group remains unchanged from the prior year except for the removal of several banks due to merger and acquisition activity.
| | | ||
The Committee reviews both compensation and performance at peer companies to inform its decision-making process so it can set total compensation levelsopportunities that it believes are commensurate with the market and the Company’s scope and performance. The Committee refers to executive compensation studies prepared by its independent consultants when it reviews and approves executive compensation. The studies reflect compensation levels and practices for executives holding comparable positions at peer group companies, which help the Committee set compensation at competitive levels. The Committee’s primary selection criteria are industry (commercially focused banks), asset size, and geography. The Committee compares each executive officer’s base salary, target total cash compensation, and target long-term incentive compensation value to amounts paid for similar positions at peer group companies.
The Committee believes that the market median is a useful reference point in helping to achieve the executive compensation program objectives. However, the Committee also considers other factors when setting compensation; and target total direct compensation, for each executive may vary from the market median based on the factors the Committee considers relevant each year, including particularspecific job responsibilities and scope, adjustments for individual skills and expertise, and internal pay equity.
The executive compensation program for named executive officers reflects our compensation philosophy and uses a full range of pay components to achieve our objectives. We believe that we can meet the objectives of our compensation philosophy by reaching a balance among base salary, short-term incentives and long-term incentives for our named executive officers.
The allocation of base salary and performance-based compensation (short-term cash incentives and equity awards) varies depending upon the role of a named executive officer in our organization and his or her individual performance and achievements in support of our strategic objectives.
credit. The Company’s executive compensation program consistsnet loan to deposit ratio has decreased from 103.1% at December 31, 2017 to 93.5% at December 31, 2018 and 95.6% at December 31, 2019.
Base Salaries. Competitive base salaries are critical in attracting and retaining our executives. We establish base salaries and assess market competitiveness by comparing our executives’ qualifications, experience, and responsibilities as well as their individual performance and value with similar positions among our peers.
| Executive | Title | 2018 Salary | 2019 Salary | % Increase | ||||||||||||||||||||||
| William J. Pasenelli | President and CEO | $ | 440,000 | $ | 465,000 | 5.68 | % | |||||||||||||||||||
| James M. Burke | EVP and Bank President | $ | 336,000 | $ | 360,000 | 7.14 | % | |||||||||||||||||||
| Gregory C. Cockerham | EVP, CLO | $ | 320,000 | $ | 330,000 | 3.13 | % | |||||||||||||||||||
| | | | | | | ||||||||||||||||||
| Executive | Title | 2015 Salary | 2016 Salary | % Increase | 2017 Salary | % Increase | ||||||||||||||||||
| William J. Pasenelli | President, Chief Executive Officer | $ | 408,000 | $ | 408,000 | 0.00 | % | $ | 412,000 | 0.98 | % | |||||||||||||
| Todd L. Capitani | EVP, Chief Financial Officer | 275,400 | 278,154 | 1.00 | % | 285,000 | 2.46 | % | ||||||||||||||||
| James M. Burke | Bank President, Chief Risk Officer | 288,099 | 290,980 | 1.00 | % | 305,000 | 4.82 | % | ||||||||||||||||
| Gregory C. Cockerham | EVP, Chief Lending Officer | 288,099 | 290,980 | 1.00 | % | 294,000 | 1.04 | % | ||||||||||||||||
| James F. Di Misa | EVP, Chief Operating Officer | 288,099 | 290,980 | 1.00 | % | 294,000 | 1.04 | % | ||||||||||||||||
14, 2019, and vest ratably over a three-year period, beginning on the first anniversary of the grant date. initial adoption of the guidelines. All directors were in compliance with these guidelines at the end of 2019. Summary Compensation Table.The following table provides information concerning total compensation earned or paid for the last two completed fiscal years to the executive.Annual Performance-Based Incentive Compensation. We maintain a short-term annual compensation plan which allows us to provide our active named executive officers with the opportunity to earn incentive compensation for achieving specific Company performance goals. In 2016,The plan uses a balanced scorecard approach by establishing threshold, target and maximum incentive opportunities tied to performance factors aligned with the Committeeannual strategic plan approved a plan that ties incentive payments to achievement levels in several key performance areas.by the Board. A portion of the incentives, once earned, is paid in restricted stock which vests in thirdsratably over three years beginning on the first anniversary of the grant date.ForThe total amount of each NEO’s incentive award under the 2016 year,short-term incentive plan is determined by taking into account performance against a scorecard of financial performance metrics that tie to our annual business plan, along with the results of a holistic assessment of each executive. All of these components are part of a scorecard that is provided to each NEO and used by the Committee to determine annual short-term incentive awards. Under the terms of the short-term incentive plan, the Committee has discretionary authority to adjust for one-time non-recurring charges or other extenuating circumstances. The Committee did not exercise this authority for awards related to the 2019 plan year.The performance factors used to determine annual bonus awards for our named executive officers under the Bank’s Executive Incentive Compensation Plan in 2019 included profitability metrics, a regulatory results componentROAA, ROAE and efficiency ratio. The CEO’s planplans for the CEO and Bank President also included non-performing assets as a percentage of total assets.assets and net charge-offs. These criteria were chosen because they reflect commonly recognized measures of overall company performance and are associated with shareholder value creation. The plan included threshold, target and maximum levels of performance for each performance factor and a corresponding payout, weighted as a percentage of salary, to each of the named executive officers based upon actual achievement. The annual bonus2019 target incentive opportunity was 35% of base salary for the CEO ranged from 18% toand 30% of base salary and 17.5% to 27.5% for the other named executive officers. AtNEOs. The incentive opportunity ranged from 50% of target at threshold performance to a maximum of 150% of target for superior performance (from 17.5% to 52.5% of base salary for the end ofCEO and 15% to 45% for the other NEOs). As soon as practicable following year end, the Committee determines the amount of the bonus to be paidawarded to each executive officer by comparing the Company’s financial results to the established performance goals. For 2016,2019, ROAA and ROAE aligned slightly below target performance, metrics wereefficiency exceeded the annualized target goal and non-performing assets and net charge-offs achieved at target levels. See “Grantperformance below threshold.Following the Compensation Committee’s review of Plan-Based Awards” for information on the valueresults of the components of each active named executive officer’s annual incentive opportunity for 2016.Theplan scorecard in February 2020, the Committee interpolated the results and awarded each executive a discretionary incentive amount equal to 10% of his base salarypayouts near target levels as of December 31, 2016. noted below:Executive Target Incentive (% of Salary) Target Incentive ($) Amount Awarded (% of Salary) Amount Awarded ($) William J. Pasenelli 35.0% $ 162,798 30.50% $ 141,838 James M. Burke 30.0% 108,000 27.65% 99,522 Gregory C. Cockerham 30.0% 99,000 30.84% 101,772 Each active named executive officer received 25% of the discretionary incentive in restricted stock. This discretionary bonus recognized achievement of certain strategic objectives as well as financial performance and growth results which were not directly reflected in the 2016 annual incentive metrics. The discretionary awards are included in the table below. See also “Executive Compensation — Summary Compensation Table” for the bonus earned by our active named executive officers in 2016.Total incentive awards to executive officers for 2016 performance, including annual incentive awards and discretionary bonuses, ranged from 31-32% of base salary. Each named executive officer received 25% of his 20162019 total incentive award in restricted stock.stock, except for Mr. Cockerham who meets the minimum age and stock ownership requirements to receive a full cash payout. The23restricted stock awards were granted on February 20, 2020, and vest ratably over a three yearthree-year period, beginning on the first anniversary of the grant date. Executive Title 2016 Annual
Award %
of Salary Portion of
Award
Paid in EquityWilliam J. Pasenelli President, Chief Executive Officer $ 130,560 32.00 % 25.00 % Todd L. Capitani EVP, Chief Financial Officer 86,335 31.00 % 25.00 % James M. Burke Bank President, Chief Risk Officer 90,210 31.00 % 25.00 % Gregory C. Cockerham EVP, Chief Lending Officer 90,210 31.00 % 25.00 % James F. Di Misa EVP, Chief Operating Officer 90,210 31.00 % 25.00 % Executive Title Total 2019Annual AwardAmount Paid in Cash Amount Paid in Restricted Stock William J. Pasenelli President and CEO $ 141,838 $ 106,407 $ 35,431 James M. Burke EVP and Bank President 99,522 74,650 24,872 Gregory C. Cockerham EVP, CLO 101,772 101,772 — For 2017, the Company adopted an incentive plan for theEach named executive officers that is similar in structure to the plan for the 2016 year. The 2017 plan retains several metrics (profitability, efficiency ratio and non-performing assets) and ROAA will continue to be the most heavily weighted performance measure. In 2017, the plans for the CEO and Bank President will both include the asset quality metric. The regulatory results component will be used as a qualifier rather than a performance factor in the 2017 plan. The overall incentive opportunity levels as a percentageofficer received of salary remain similar to the 2016 plan. The Board of Directorsportion of the Company approved this plan2018 total incentive award in restricted stock as follows. The restricted stock awards were granted on February 9, 2017.Executive Title Number of Shares Issued FMV of Restricted Stock on Grant Date William J. Pasenelli President and CEO 404 $ 12,120 James M. Burke EVP and Bank President 264 7,920 Gregory C. Cockerham EVP, CLO 0 — Long-Term, Equity Based Compensation.The Committee believes that equity should represent a meaningful portion of executive compensation to align the interests of our executives and stockholders. Additionally, we believe that equity provides for a longer-term retention tool. These ownership and retention objectives are supported by paying a portion of incentives in restricted stock and through the use of time-based vesting for equity awards. The Committee makes an annual determination as to who will receive equity awards, the type of awards, vesting conditions, and level of the awards. All equity grants made to named executives have a minimum three year vesting period.period; however, in the event of death, disability or a change in control, participants will become fully vested in their awards. In addition, we require certain levels of stock ownership as described in the Other Compensation PhilosophyGuidelines, Practices and Guiding PrinciplesPolicies section above.Committee DiscretionThe Committee retains the discretionbelow.Except for restricted stock awarded to decrease all forms of incentive payouts based on significant individual or Company performance shortfalls. The Committee also retains the discretion to increase awards or consider special awards for significant performance or due to subjective factors, or exclude extraordinary non-recurring results. For purposes of 2016 incentive payout calculations, the Committee awarded executives an additional discretionary incentive amount above the amounts earned inour named executive officers under the annual incentive plan as described in the section above.Executive Benefits and PerquisitesOur objective is to attract and retain talented executive officers who will make positive contributions to the overall success of the Company. The Committee feels that the benefits offered to named executives are effective in achieving retention objectives and maintaining stability within the management team. These types of benefits are commonly offered by peers within the industry. The Company offers named executives the following additional executive benefits and perquisites.Employment Agreements. Our named executive officers have employment agreements that protect both the Company andabove, our named executive officers received no other equity awards in the event of certain separation events. The 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 — Employment Agreements” for information on the terms and conditions of the employment agreements with our active named executive officers.Business-Related Benefits and Perquisites. The Company also provides company owned cars to executive officers and a local country club membership to Mr. Cockerham for business development purposes. The values for other benefits and perquisites, if applicable, are represented under All 2019.Other Compensation inGuidelines, Practices and PoliciesStock Ownership Guidelines: Under the Summary Compensation table.Retirement Benefits. In addition to participation in the Bank’s employeeCompany’s stock ownership programguidelines for executives, our CEO is expected to own shares of Company common stock that have a value equal to 2.0 times his base salary. The Bank President is expected to own shares with a value equal to 1.5 times his base salary and 401(k) plan, our activeother named executives must own 1.0 times their salary. Until these target ownership levels are reached, an executive must retain 100% of his or her net shares from any vested awards (after taxes and any exercise price). All named executive officers are eligible for retirement benefits undermet the following non-qualified deferred compensation arrangements:Pension Benefits. The Company maintains Supplemental Executive Retirement Plans (SERPs) and Salary Continuation Agreements (SCAs) with each of the named executives which provide additional compensation at retirement or upon termination of employment due to death, disability, or a change of control. The SERPs and SCAs aim to provide named executives a percentage of projected final base salary for 15 years following retirement at age 65. The targets are based on final projected base salary and are approximately thirty-five percent (35%) for the CEO and twenty-five percent (25%) for our other named executives. See “Executive Compensation — Pension Benefits” for additional information on these arrangements.Executive Deferred Compensation Plan. The Company maintains a voluntary deferred compensation plan in which our named executives can defer all or a portion of their base salaries. Participants may elect to have their deferred account balances credited with earnings credit based on the consolidated ROE of the Company and/or the rate of return of mutual funds available as deemed investment options. See “Executive Benefits — Nonqualified Deferred Compensation” for additional information.Life Insurance. The Executive Chair and CEO have pre-retirement split dollar and supplemental life insurance benefits of $1 million and the other named executives have $500 thousand.Other Benefits. The named executive officers are also eligible to participate in the Company’s health and welfare programs and other broad-based programs on the same basis as other employees.Accounting and Tax ConsiderationsThe Committee considers the accounting and tax implications of compensation plans prior to making any changes. To the extent required by law, the Committee has structured the compensation program to comply with Section 162(m) and Section 409A of the Internal Revenue Code (the “Code”).Section 162(m) of the Internal Revenue Code (the “Code”) places a $1 million limit on the amount of compensation the Company can deduct in any one year for compensation paid to the chief executive officer and the three most highly-compensated executive officers employed by the Companyminimum stock ownership requirements at the end of 2019. Because an executive officer must retain 100% of net shares acquired from equity awards until the year. However,specified target of ownership is met, there is no minimum time period required to achieve the $1 million deduction limit generally does not applytarget level of ownership.The Company also maintains stock ownership guidelines for directors. Under these guidelines, Holding Company directors are required to compensationown shares of Company common stock that have a value that is performance-basedat least equal to a multiple of the Holding Company Board annual cash retainer for the immediate prior year. The cash retainer for 2019 was $15,000. The multiple is based on years of service on the Board. Directors with up to three years of service are required to own stock with a value equal to at least five times the annual cash retainer. Directors with between four and provided underfive years of service are required to own stock with a shareholder-approved plan. Whilevalue equal to at least 10 times the Committee considersannual cash retainer and the deductibilitymultiple for directors with more than five years of awards as one factor in determining executive compensation, it also looks at other factors in making its decisions, as noted above, and retainsservice is 15 times the flexibilityannual cash retainer. All directors of the Bank are required to grant awards it determines to be consistent with the Company’s goal for its executive compensation program, even if the award is not deductible byown shares of common stock of the Company having a value equal to at least three times the Bank Board annual cash retainer for tax purposes.In general, the Company’s performance-basedimmediate prior year. The cash bonuses have been designed to qualifyretainer for tax deductibility because they are paid based on achievement2019 was $10,000.24Bank and Company directors, shares must be acquired within the earlier of pre-determined performance goals established bythree years of first becoming a director or within three years of the Committee pursuant to its incentive plans.Responsible Equity Practices.Practices: The grant date for all equity awards is established when the grants and all key terms are approved by the Board or the Compensation Committee. Our 20162015 Equity Compensation Plan includes prohibitions on the repricing of stock options without shareholder approval.Prohibition on Hedging and Short Sales. Sales: The Company prohibits short sales and transactions in derivatives of Company securities, including hedging transactions, for all directors and officers of the Company.COMPENSATION COMMITTEE REPORTThe Compensation Committee has receivedRisk Considerations: In addition to our guiding principles, the Company engages in the following practices to ensure its executive compensation program is aligned with shareholders’ interests and discussed the foregoing Compensation Discussion and Analysis with management. Based on this review and discussions, the Compensation Committee recommended to the Board of Directorsprotects us against risk. We believe that the sectiondesign and objectives of our executive compensation program provide an appropriate balance of incentives for executives and avoid inappropriate risks. The Committee considers, in establishing and reviewing the executive compensation program, whether the program encourages unnecessary or excessive risk taking and has concluded that it does not. In this proxy statement entitled Compensation Discussionregard, our executive compensation program includes, among other things, the following design features:•Variable compensation based on a variety of performance goals•Committee discretion to lower annual incentive award amounts•Balanced mix of short-term and Analysis be included in this proxy statement and incorporated by reference intolong-term incentives•Stock ownership requirements•Claw-back provisionsThe Committee conducts an annual evaluation of all of the Company’s Annual Reportcompensation programs, policies and practices to ensure that compensation policies and incentive compensation programs in place are not reasonably likely to have a material adverse impact on Form 10-K for the year ended December 31, 2016.March 9, 2017Louis P. Jenkins, Jr., ChairJoseph V. Stone, Jr.Austin J. Slater, Jr.Kathryn ZabriskieEXECUTIVE COMPENSATIONChief Executive Officer, Chief Financial Officerprincipal executive officer and the fourtwo most highly compensated executive officers of the Company who served in such capacity as of December 31, 2016.2019. These sixthree officers are referred to as the named executive officers in this proxy statement. Name and Principal Position Year Salary
($) Bonus
($)(2) Stock
Awards
($)(3) Non-qualified
Deferred
Compensation
Earnings
($)(4) All Other
Compensation
($)(5) Total
($)William J. Pasenelli
President and Chief Executive Officer 2016 $ 408,000 $ 97,920 $ 62,707 $ 151,044 $ 59,240 $ 778,911 2015 423,692 67,320 76,420 137,026 60,638 765,096 2014 382,762 78,809 76,497 88,398 58,254 684,720 Todd L. Capitani
Executive Vice President and Chief Financial Officer 2016 $ 278,154 $ 64,751 $ 47,559 $ 42,548 $ 24,212 $ 457,224 2015 285,992 41,807 56,076 38,154 20,244 442,273 James M. Burke
Executive Vice President and Chief Risk Officer 2016 $ 290,980 $ 67,658 $ 47,829 $ 44,378 $ 28,656 $ 479,501 2015 299,180 43,735 57,325 41,079 24,870 466,189 Gregory C. Cockerham
Executive Vice President and Chief Lending Officer 2016 $ 290,980 $ 67,658 $ 47,829 $ 80,809 $ 34,213 $ 521,489 2015 299,180 43,735 57,325 73,700 27,421 501,361 2014 282,450 57,638 55,147 64,003 22,228 481,466 James F. Di Misa
Executive Vice President and Chief Operating Officer 2016 $ 290,980 $ 67,658 $ 47,829 $ 66,263 $ 21,727 $ 494,457 2015 299,180 43,735 57,325 61,122 24,451 485,813 Michael L. Middleton(1)
Executive Chairman 2016 $ 328,095 $ — $ 110,700 $ 55,841 $ 75,467 (6) $ 570,103 2015 330,366 — 13,041 46,026 58,854 448,287 2014 397,132 3,228 44,942 100,598 65,085 610,985 (1)On June 30, 2016, Mr. Middleton retired as an employee of the Bank and Company.(2)Includes incentive payments earned in 2016 under the Company’s annual incentive plan as well as discretionary bonus amounts earned. See “Compensation Discussion & Analysis” for information on the 2016 discretionary bonuses.(3)Represents the aggregate grant date fair value of the granting of 522, 292, 305, 305 and 305 shares of restricted stock awards to Messrs. Pasenelli, Capitani, Burke, Cockerham and Di Misa respectively, computed in accordance with FASB ASC Topic 718 based on a per share price of $20.75, on the date of grant for awards under the annual incentive plan in 2016. Also includes discretionary stock awards representing the aggregate grant fair value of the granting of 2,500 shares of restricted stock to Mr. Pasenelli and 2,000 shares of restricted stock each to Messrs. Capitani, Burke, Cockerham, and Di Misa, based on a per share price of $20.75 on the date of grant and 5,000 shares of restricted stock to Mr. Middleton based on a per share price of $22.14 on the date of grant for awards in 2016.(4)Represents the sum of above-market earnings under the Community Bank of the Chesapeake Executive Deferred Compensation Plan and the aggregate change in the present value of accumulated benefits under the Supplemental Executive Retirement Plans (“SERPs”) and Salary Continuation Agreements (“SCAs”) from the prior completed fiscal year to the current fiscal year. Includes above market earnings under the Bank’s Executive Deferred Compensation Plan in the amounts of $732, $1,816 and $28,110 for Messrs. Pasenelli, Cockerham and Middleton, respectively. Includes an aggregate change in the present value of accumulated benefits under the SERPs and SCAs of $150,312, $42,548, $44,378, $78,994, $66,263 and $27,731 for Messrs. Pasenelli, Capitani, Burke, Cockerham, Di Misa and Middleton, respectively.Name and Principal Position Year Salary ($) Stock Awards ($) (1)(2) Non-equity Incentive Plan Compensation $(3) Non-qualified Deferred Compensation Earnings ($) (4) All Other Compensation ($) (5) Total ($) William J. Pasenelli 2019 $ 465,000 $ 12,120 $ 106,407 $ 376,228 $ 46,439 $ 1,006,194 President and Chief Executive Officer 2018 440,000 27,736 68,730 320,521 53,480 910,467 James M. Burke 2019 $ 360,000 $ 7,920 $ 74,650 $ 62,466 $ 20,151 $ 525,187 Executive Vice President and President of Subsidiary 2018 336,000 20,514 45,000 59,796 27,247 488,557 Gregory C. Cockerham 2019 $ 330,000 $ — $ 101,772 $ 41,280 $ 27,561 $ 500,613 Executive Vice President and Chief Lending Officer 2018 320,000 19,769 57,600 119,462 30,402 547,233 ____________________(5)Details of the amounts reported in the “All Other Compensation” column for 2016 are provided in the table below.(6)Includes director fees paid for board service from January 1, 2016 through June 30, 2016. Director fees of $25,000 paid in 2016 beginning July 1 are reported in the Director Compensation table. Item Pasenelli Capitani Burke Cockerham Di Misa Middleton Directors’ fees $ 34,725 $ — $ 7,600 $ 7,600 $ 7,600 $ 30,625 Market value of allocations under the employee stock ownership plan 3,591 3,591 3,591 3,591 3,591 2,854 Employer contribution to 401(k) Plan 10,600 6,750 7,752 10,600 2,800 5,734 Imputed income under split-dollar life insurance arrangement 1,560 442 408 940 762 3,815 Automobile 6,191 11,520 7,374 5,674 5,043 30,806 Club dues — — — 3,876 — — Dividends paid on unvested restricted stock 2,225 1,686 1,708 1,709 1,708 1,561 Group term life benefit 223 223 223 223 223 72 Wellness allowance 125 — — — — — 25Grants(1) Represents the aggregate grant date fair value of Plan-Based Awards. The followingthe granting of 404 and 264 shares of restricted stock awards to Messrs. Pasenelli and Burke respectively, computed in accordance with FASB ASC Topic 718 based on a per share price of $30.00, on the date of grant for awards under the 2018 annual incentive plan granted in 2019.(2) Represents the aggregate grant date fair value of the granting of 745, 551 and 531 shares of restricted stock awards to Messrs. Pasenelli, Burke and Cockerham respectively, computed in accordance with FASB ASC Topic 718 based on a per share price of $37.23, on the date of grant for awards under the 2017 annual incentive plan granted in 2018.(3) Represents incentive payments earned in 2019 under the Company’s annual incentive plan.(4) Represents the sum of above-market earnings under the Community Bank of the Chesapeake Executive Deferred Compensation Plan and the aggregate change in the present value of accumulated benefits under the Supplemental Executive Retirement Plans (“SERPs”) and Salary Continuation Agreements (“SCAs”) from the prior completed fiscal year to the current fiscal year. Includes above market earnings under the Bank’s Executive Deferred Compensation Plan in the amounts of $8,309 for Mr. Cockerham. Includes an aggregate change in the present value of accumulated benefits under the SERPs and SCAs of $376,228, $62,466, and $32,971 for Messrs. Pasenelli, Burke and Cockerham, respectively.(5) Details of the amounts reported in the “All Other Compensation” column for 2019 are provided in the table provides information concerning our grants of plan-based awards for the named executive officers during fiscal 2016 under below.Item Pasenelli Burke Cockerham Company Directors’ fees $ 17,475 $ — $ — Market value of allocations under the employee stock ownership plan 2,217 2,217 2,217 Employer contribution to 401(k) Plan 11,000 10,400 11,200 Imputed income under split-dollar life insurance arrangement 1,879 473 1,125 Automobile 5,231 6,032 5,083 Club dues 6,369 — 4,630 Dividends paid on unvested restricted stock 747 546 439 Group term life benefit 1,386 483 2,667 Wellness allowance 135 — 200 Employment Agreements. The Community Financial Corporation 2015 Equity Compensation Plan. Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1) Estimated Future Payouts
Under Equity Incentive
Plan Awards All Other
Stock
Awards:
Number of
Shares(2) Grant
Date Fair
Value of
Stock
Awards(3)Name Grant Date Threshold Target Maximum Threshold Target Maximum William J. Pasenelli $ 73,440 $ 89,760 $ 122,400 1/21/2016 3,022 $ 62,707 Todd L.
Capitani 49,573 58,485 76,309 1/21/2016 2,292 47,559 James M.
Burke 51,798 61,110 79,734 1/21/2016 2,305 47,829 Gregory C.
Cockerham 51,798 61,110 79,734 1/21/2016 2,305 47,829 James F.
Di Misa 51,798 61,110 79,734 1/21/2016 2,305 47,829 Michael L.
Middleton — — — 1/21/2016 5,000 110,700 (1)Total incentive opportunity under the annual executive incentive plan for 2016 performance. At the end of the plan year the incentive is determined based upon actual performance and 75% of the incentive amount will be paid in cash and 25% will be issued in restricted stock. Actual number of shares of restricted stock issued will be calculated after the end of the performance period based on the fair market value on the date of stock issuance.(2)Represents number of shares of restricted stock earned under the annual incentive plan for the 2015 performance period and discretionary stock awards issued in 2016.(3)Represents the grant date fair value of restricted stock awards earned under the annual incentive plan for the 2015 performance period and discretionary stock awards issued in 2016 based on a per share price of $20.75 on the date of grant for awards for Messrs. Pasenelli, Capitani, Burke, Cockerham and Di Misa, and a per share price of $22.14 on the date of grant for awards for Mr. Middleton.Employment Agreements. The Community Financial Corporation and Community Bank of the Chesapeake maintain employment agreements with each of theits named executive officers. The term of the employment agreements with Messrs. Pasenelli, Capitani, Burke Cockerham and Di MisaCockerham are automatically extended by one day each day so that the term remains at three years, until either party gives notice to the other of its intent to stop the renewal of the term of the agreement or if the officer’s employment with the Bank terminates, whether by resignation, discharge or otherwise. Among other things, the employment agreements provide for an annual salary, participationeligibility to participate in any stock option plan oremployee benefit plans and programs maintained by the Company and the Bank for the benefit of their employees, including discretionary bonuses, incentive compensation programs, medical, dental, pension, profit sharing, retirement and stock-based compensation plans and certain fringe benefits applicable to executive personnel.Under the employment agreements if the executive’s employment is terminated for cause, he will receive only his base salary or other compensation earned through the date of termination and any other compensation or vested benefits provided under applicable Bank plans or programs. All other obligations of the Bank terminate on the date of termination.Further, under Messrs. Pasenelli and Burke’s employment agreements, if their employment is terminated without cause (as defined in their employment agreements), the executive will receive a lump sum payment equal to three times his base salary and three times his most recent annual incentive compensation payment. Messrs. Pasenelli and Burke would also receive an amount equal to the monthly COBRA premium that the executive would be required to pay to continue the benefits in effect as of his termination date under the Bank’s medical, dental and life insurance plans, multiplied by 36. Under the employment agreement for Mr. Cockerham, if his employment is terminated without cause (as defined in the his employment agreement), the executive would receive a lump sum payment equal to two times his base salary and two times his most recent annual incentive compensation payment. The executive would also receive an amount equal to the monthly COBRA premium that he would be required to pay to continue26the benefits in effect as of his termination date under the Bank’s medical, dental and life insurance plans, multiplied by 36.Upon voluntary termination of employment, our named executive officers would receive accrued and earned base salary and other compensation and benefits provided under the Bank’s benefit plans and programs as of the date of termination.The employment agreements also provide each executive with disability benefits. If an executive terminates employment after becoming disabled pursuant to the terms of the agreement, the executive will receive the compensation and benefits provided for under his employment agreement for (1) any period during the term of his agreement and before the establishment of the executive’s disability; or (2) any period of disability before the executive’s termination of employment due to disability.Upon an executive’s death, the employment agreements provide that the Company will pay the executives or their respective beneficiaries or estate any compensation due to the executive through the end of the month in which the executive’s death occurred, plus any other compensation or benefits to be provided in accordance with the terms and provisions of the Bank’s benefit plans and programs in which the executive participated as of the date of the executive’s death.Upon a change in control, Messrs. Pasenelli and Burke’s employment agreements provide that if (1) the executive’s employment is terminated without cause or without the executive’s consent and for a reason other than cause in connection with or within 12 months after a change in control (as defined in the agreement); or (2) the executive voluntary terminates employment within 12 months following a change in control upon the occurrence of events described in the agreement, he will receive a lump sum payment equal to three times his annual base salary and three times his most recent annual incentive compensation payment, plus an amount equal to the monthly COBRA premium that he would be required to pay to continue the benefits in effect as of his termination date under the Bank’s medical, dental and life insurance plans, multiplied by 36. Under Mr. Cockerham’s employment agreement, he will receive a lump sum payment equal to two times his annual base salary and two times his most recent annual incentive compensation payment, plus an amount equal to the monthly COBRA premium that he would be required to pay to continue the benefits in effect as of his termination date under the Bank’s medical, dental and life insurance plans, multiplied by 36.Section 280G of the Internal Revenue Code provides that severance payments that equal or exceed three times an individual’s base amount are deemed to be “excess parachute payments” if they are contingent upon a change in control. An individual’s base amount is generally equal to an average of the individual’s taxable compensation for the five taxable years preceding the year a change in control occurs. The employment agreements apply a “best net benefits” approach in the event that severance benefits under the agreement or otherwise result in “excess parachute payments” under Section 280G. Applying the “best net benefits” methodology, the Agreement provides for two separate calculations to address the application of Section 280G to payments that are contingent on a change in control. The first calculation establishes the after-tax benefit to the executive if the aggregate change in control-related payments are reduced below his Section 280G threshold, thereby avoiding the excise tax. The second calculation determines the after-tax benefit if the payments are made without reduction, and the executive’s after-tax benefit reflects payment of the golden parachute excise tax by the executive. The calculation that yields the greatest after-tax benefit to the executive determines whether the executive’s benefits are subject to reduction or whether the executive will receive all change in control-related benefits.2015 Equity Compensation Plan. The Company maintains the 2015 Equity Compensation Plan, a stock-based incentive plan to attract and retain key personnel. The 2015 Equity Compensation Plan provides for the extent authorized byaward of restricted stock, stock appreciation rights, stock units and stock options to members of the Company’s Board of Directors and key employees. See the Equity Awards Table below for participation in pension, group life insurance, medical coverage and in other employee benefits applicableinformation on the restricted stock awards granted to senior executivesour named executive officers. Under the terms of the Bank.See“Retirement Benefits”2015 Equity Compensation Plan, all awards will fully vest upon an executive’s death or disability. If an executive voluntarily terminates his employment or is terminated Without cause (as defined in the plan) all unvested shares of restricted stock are forfeited as of such termination date. In the event of a change in control, if an executive terminates his employment, other than for cause, during the 12-month27period following a change on control, unvested restricted stock awards will become fully vested and“Other Potential Post-Termination Benefits” for a discussion of benefits and payments transferable to the named executive officers may receive under the employment agreements upon their retirement or termination of their employment.Outstanding Equity Awards at Fiscal Year End.The following table provides information concerning unexercised optionsunvested restricted stock awards for each of the named executive officers outstanding as of December 31, 2016.2019.Option AwardsRestricted Stock Awards Name Grant Date Number of SecuritiesUnderlyingUnexercisedOptions(#)ExercisableNumber ofSecuritiesUnderlyingUnexercisedOptions(#)UnexercisableOptionExercisePrice($)OptionExpirationDateNumber of
Shares or
Units of Stock
That Have
Not Vested
(#)Market Value
of Shares or
Units of Stock
That Have
Not Vested
($)(1)William J. Pasenelli 02/09/2017 07/17/2007209(2)4,344—$ 27.7007/17/2017—$—7,434 02/15/2018 01/13/2014497(3)————800(2)23,20017,678 02/14/2019 01/23/2015————576(3)16,70401/23/2015————950404(4)27,55001/21/2016————3,022(5)87,638Todd L.Capitani01/13/2014————600(2)$17,40001/23/2015————304(3)8,81601/23/2015————1,260(4)36,54001/21/2016————2,292(5)66,46814,370 James M.
Burke07/17/20071,865—27.7007/17/02/09/2017145(2)—5,158 02/15/2018 01/13/2014368(3)————600(2)$17,40013,090 02/14/2019 01/23/2015————318(3)9,22201/23/2015————1,275264(4)36,97501/21/2016————2,305(5)66,8459,390 Gregory C. Cockerham 07/17/20074,407—27.7007/17/02/09/2017145(2)—5,158 02/15/2018 01/13/2014————600(2)$17,40001/23/2015————318355(3)9,22201/23/2015————1,275(4)36,97501/21/2016————2,305(5)66,845James F.Di Misa07/17/20071,865__27.707/17/2017—01/13/2014————600(2)$17,40001/23/2015————318(3)9,22201/23/2015————1,275(4)36,97501/21/2016————2,305(5)66,845Michael L. Middleton01/13/2014————842(2)$24,41801/23/2015————420(3)12,18007/01/2016————5,000(6)145,00012,627
Option Exercises and Stock Vested. The following table provides information concerning the vesting of stock awards for each named executive officer, on an aggregate basis, during 2016.
| | | ||||||
| Stock Awards | ||||||||
| Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||||
| William J. Pasenelli | 1,979 | $ | 40,674 | |||||
| Todd L. Capitani | 1,328 | 27,296 | ||||||
| James M. Burke | 1,396 | 28,692 | ||||||
| Gregory C. Cockerham | 1,403 | 28.836 | ||||||
| James F. Di Misa | 1,396 | 28,692 | ||||||
| Michael L. Middleton | 561 | 11,514 | ||||||
Pension Benefits. The following table provides information about the participation of executive officers in our retirement programs as of December 31, 2016. See“Retirement Benefits” for a discussion of the material terms and conditions of payments under the salary continuation agreements and supplemental executive retirement plans.
| | | | | ||||||||||||
| Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | ||||||||||||
| William J. Pasenelli | Supplemental Executive Retirement Plan – 2011 | 6 | $ | 226,295 | $ | — | ||||||||||
| Supplemental Executive Retirement Plan – 2014 | 3 | 102,653 | — | |||||||||||||
| Salary Continuation Agreement – 2003 | 16 | 360,775 | — | |||||||||||||
| Salary Continuation Agreement – 2006 | 11 | 91,148 | — | |||||||||||||
| Todd L. Capitani | Supplemental Executive Retirement Plan – 2011 | 6 | $ | 80,896 | — | |||||||||||
| Supplemental Executive Retirement Plan – 2014 | 3 | 51,027 | — | |||||||||||||
| James M. Burke | Supplemental Executive Retirement Plan – 2011 | 6 | $ | 67,159 | — | |||||||||||
| Supplemental Executive Retirement Plan – 2014 | 3 | 6,002 | — | |||||||||||||
| Salary Continuation Agreement – 2006 | 11 | 217,536 | — | |||||||||||||
| | | | | ||||||||||||
| Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | ||||||||||||
| Gregory C. Cockerham | Supplemental Executive Retirement Plan – 2011 | 6 | $ | 64,448 | — | |||||||||||
| Supplemental Executive Retirement Plan – 2014 | 3 | 10,410 | — | |||||||||||||
| Salary Continuation Agreement – 2003 | 28 | 510,226 | — | |||||||||||||
| Salary Continuation Agreement – 2006 | 11 | 35,372 | — | |||||||||||||
| James F. Di Misa | Supplemental Executive Retirement Plan – 2011 | 6 | $ | 117,545 | — | |||||||||||
| Supplemental Executive Retirement Plan – 2014 | 3 | 11,962 | — | |||||||||||||
| Salary Continuation Agreement – 2006 | 11 | 282,695 | — | |||||||||||||
| Michael L. Middleton | Supplemental Executive Retirement Plan – 2011 | 6 | $ | 238,844 | $ | 28,348 | ||||||||||
| Salary Continuation Agreement – 2003 | 43 | 1,235,188 | — | |||||||||||||
Nonqualified Deferred Compensation. The following table provides information with respect to the 2016 accrued balances for each of theOur named executive officers who participatehave the opportunity to accumulate retirement benefits through participation in the Executive Deferred Compensation Planour 401(k) and the Directors Retirement Plan. See“Retirement Benefits”Employee Stock Ownership Plans and “Director Compensation — Directors Retirement Plan” for a discussion of these plans.
| | | | | | | ||||||||||||||||||
| Name | Plan Name | Executive Contributions in Last FY ($) | Registrant Contributions in Last FY ($) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | ||||||||||||||||||
| William J. Pasenelli | Executive Deferred Compensation Plan | $ | 16,320 | $ | — | $ | 1,437 | $ | — | $ | 30,426 | |||||||||||||
| Gregory C. Cockerham | Executive Deferred Compensation Plan | 43,647 | — | 3,559 | — | 77,028 | ||||||||||||||||||
| Michael L. Middleton | Executive Deferred Compensation Plan | 93,507 | — | 55,538 | 186,000 | 787,099 | ||||||||||||||||||
| Directors Retirement Plan | 55,749 | — | 19,969 | 201,352 | 298,390 | |||||||||||||||||||
The Bank maintainsto earn supplemental retirement benefits through Salary Continuation Agreements (the “SCAs”(“SCAs”) and Supplemental Executive Retirement Plans (“SERPs”) sponsored by the Bank. All of our named executive officers have SERPs and SCAs with Messrs. Pasenelli, Burke, Cockerham and Di Misa tothe Bank.
Code Section 280G (“280G Limit”), the Bank will reduce such benefit payment to the extent necessary to avoid treating such benefit payment as an excess parachute payment; however, the payments or benefits shall not be reduced if the net after tax benefit to the executive of receiving the total payments exceeds the net after tax benefit of receiving the reduced benefits by at least $50,000.
Payments Made Upon Termination
Under the 2011 and 2014 SERPs if the executive’s employment is terminated for Cause, he will not be entitled to any benefitsSummary Compensation Table under the terms of his SERPs.
column “All Other Compensation.” Under the SCAs if the executive’s employment is terminated for Cause, he will not be entitled to any benefits under the terms of his SCAs.
Pursuant to the terms of the award agreements entered into under the 2005 Equity Compensation Plan, if the executive is terminated for Cause, all restricted stock awards and stock options expire immediately as of the effective date of termination.
Pursuant to the terms of the award agreements entered into under the 2015 Equity Compensation Plan, if the executive is terminated for Cause, all rights to any restricted stock granted under the plan and held by the terminated employee will expire as of the effective date of termination. No stock options have been granted under this plan.
Payments Made Upon Termination Without Cause. Under Mr. Pasenelli’s employment agreement, if Mr. Pasenelli’s employment is terminated Without Cause, he will receive a lump sum payment equal to three times his base salary and three times his most recent annual incentive compensation payment. Mr. Pasenelli would also receive medical, dental and life insurance benefits for 36 months. Under the employment agreement for Messrs. Capitani, Burke, Cockerham or Di Misa, if we terminate the executive’s employment Without Cause, he would receive a lump sum payment equal to two times his base salary and two times his most recent annual incentive compensation payment. The executive would also receive medical, dental and life insurance benefits for 36 months.
Pursuant to the terms of the award agreements entered into under the 2005 Equity Compensation Plan, if the executive’s employment is terminated for reasons other than termination for Cause, death, disability, retirement or a change in control, all unvested shares of restricted stock and stock options are forfeited as of such termination date.
Pursuant to the terms of the award agreements entered into under the 2015 Equity Compensation Plan, if the executive’s employment is terminated Without Cause all unvested shares of restricted stock are forfeited as of such termination date. No stock options have been granted under this plan.
Payments Made Upon Voluntary Termination by Executive. Under Messrs. Pasenelli’s, Capitani’s, Burke’s, Cockerham’s or Di Misa’s employment agreement, if he voluntarily terminates his employment with the Bank, he would receive his base salary and other compensation and benefits provided under the Bank’s benefit plans and programs as of the date of termination.
Pursuant to the terms of the award agreements entered into under the 2005 Equity Compensation Plan, if the executive’s employment is terminated for reasons other than termination for Cause, death, disability, retirement or a change in control, all unvested shares of restricted stock and stock options are forfeited as of such termination date. In addition, upon the executive’s retirement, all unvested shares of restricted stock will be forfeited as of his retirement date, unless the executive is immediately engaged as a consultant, advisor or director emeritus of the Company or the Bank. In which case, his restricted stock award would continue to vest.
Pursuant to the terms of the award agreements entered into under the 2015 Equity Compensation Plan, if the executive voluntarily terminates his employment, all unvested shares of restricted stock are forfeited as of the termination date. No stock options have been granted under this plan.
Payments Made Upon Disability. Under Messrs. Pasenelli’s, Capitani’s, Burke’s, Cockerham’s and Di Misa’s employment agreements, if we terminate an executive due to disability pursuant to the terms of the agreement, the executive will receive the compensation and benefits provided for under his employment agreement for (1) any period during the term of his agreement and before the establishment of the executive’s disability; or (2) any period of disability before the executive’s termination of employment due to disability.
Under the 2011 and 2014 SERPs, ifthese arrangements, Messrs. Pasenelli, Capitani, Burke Cockerham or Di Misa becomes disabled before he terminates his employment with the Bank or his retirement, and prior to a Change in Control, he is entitled to receive a disability benefit equal to his accrued benefit under the SERPs as of the date of determination of disability. Payment of the disability benefit will commence on the first day of the month following the earlier of the executive’s 65th birthday or death and is paid in 15 equal annual installments.
Under the salary continuation agreements dated September 6, 2003, as amended, upon termination of employment as a result of disability, Messrs. Pasenelli and Cockerham are entitled to an annuala pre-retirement split dollar benefit for a period of 15 years of $74,112 and $72,235, respectively, commencing with the month following the executive attaining age 65. Under the salary continuation agreements dated August 21, 2006, as amended, Messrs. Pasenelli and Cockerham are entitled to an annual disability benefit ranging from $13,484 to $18,100 and $4,160 to $4,800, respectively, depending on the date of termination, commencing with the month following the executive attaining age 65. Under the salary continuation agreement dated August 21, 2006, as amended, Messrs. Burke and Di Misa are entitled to an annual disability benefit ranging from $58,843 to $101,000 and $45,521 to $65,000, respectively, on the date of termination, commencing with the month following the executive attaining age 65.
Pursuant to the terms of the award agreements under the 2005 Equity Compensation Plan, if we terminate the executive’s employment with the Bank due to a disability, all unvested shares of restricted stock will immediately vest as of the date of such termination.
Pursuant to the terms of the award agreements under the 2015 Equity Compensation Plan, if we terminate the executive’s employment with the Bank due to a disability, all outstanding restricted stock will immediately vest as of the date of such termination. No stock options have been granted under this plan.
Payments Made Upon Death. Under Messrs. Pasenelli’s, Capitani’s, Burke’s, Cockerham’s and Di Misa’s employment agreements, upon the executive’s death, the Company will pay his beneficiary or estate any compensation due to the executive through the end of the month in which his death occurred, plus any other compensation or benefits to be provided in accordance with the terms and provisions of the Bank’s benefit plans and programs in which the executive participated as of the date of his death.
Under the 2011 and 2014 SERPs, if the executive dies while actively employed by the Bank and before reaching his normal retirement age of 65, the SERPs provide for a death benefitamount equal to the executive’s accruedlesser of $1,000,000, $500,000 and $500,000, respectively, or the net amount at risk insurance portion of the proceeds. These arrangements provide a post-retirement split dollar benefit under the SERPs, payableto Messrs. Pasenelli, Burke and Cockerham equal to the executive’s beneficiary in 15 equal annual installments. Iflesser of $500,000, $100,000 and $600,000, respectively, or the
executive dies after the commencement of his SERP benefit payments, the executive’s beneficiary is entitled to the unpaid balance net amount at risk insurance portion of the payments forproceeds. The net amount at risk portion is the balance of 15 annual installments.
Under their salary continuation agreements, iftotal proceeds less the executive dies while in active service with the Bank, the executive’s designated beneficiaries will receive an annual benefit, for a period of 15 years, of $92,212 for Mr. Pasenelli, $101,000 for Mr. Burke, $77,035 for Mr. Cockerham, and $65,000 for Mr. Di Misa commencing with the month following the executive’s death. If the executive dies after his employment has terminated but before payments under the agreement have commenced, their designated beneficiary will be entitled to the same payments beginning on the first day of the month after the executive’s death. If the executive dies after the benefit payments have commenced, but before receiving all payments, their designated beneficiary will be entitled to the remaining benefits that would have been paid to the executive if the executive had survived.
Pursuant to the terms of the award agreements under the 2005 Equity Compensation Plan, if an executive dies while employed with the Bank, all unvested shares of restricted stock will immediately vest as of the date of such termination.
Pursuant to the terms of the award agreements under the 2015 Equity Compensation Plan, if an executive dies while employed with the Bank, all outstanding restricted stock awards will immediately vest as of the date of such termination. No stock options have been granted under this plan.
Payments Made Upon a Change in Control. Mr. Pasenelli’s employment agreement provides that if (1) the executive’s employment is terminated without cause or without the executive’s consent and for a reason other than cause in connection with or within 12 months after a change in control (as defined in the agreement); or (2) the executive voluntary terminates employment within 12 months following a change in control upon the occurrence of events described in the agreement, he will receive a lump sum payment equal to three times his annual base salary and three times his most recent annual incentive compensation payment, plus continued health and welfare benefits for 36 months following termination. Under Messrs. Capitani’s, Burke’s, Cockerham’s and Di Misa’s employment agreement, each will receive a lump sum payment equal to two times his annual base salary and two times his most recent annual incentive compensation payment, plus continued health and welfare benefits for 36 months following termination. Section 280G of the Internal Revenue Code provides that payments related to a change in control that equal or exceed three times the individual’s “base amount” (defined as average annual taxable compensation over the five preceding calendar years) constitute “excess parachute payments.” Messrs. Pasenelli’s, Capitani’s, Burke’s, Cockerham’s or Di Misa’s employment agreements provide that if thecash value of the benefits provided under the agreements in connection with a change in control exceed his 280G Limit, his payment will be reduced or revised so that the aggregate payments do not exceed his 280G Limit.
The 2011 and 2014 SERPs provide that upon a Change in Control prior to Messrs. Pasenelli, Capitani, Burke, Cockerham or Di Misa (i) attaining age 65, (ii) his death, (iii) disability, (iv) retirement, or (v) Separation from Service, he will become 100% vested in his accrued retirement benefit under the SERPs. Payments will commence at the earliest of his attaining age 65 or his death. However, if the executive experiences a Separation from Service within 24 months following a Change in Control, the executive is entitled to his full accrued retirement benefit, with payments to commence no later than the second month following his Separation from Service. Under the 2011 SERPs for Messrs. Capitani, Burke, Cockerham, and Di Misa, if the benefit payment would be treated as an “excess parachute payment” under Code Section 280G (“280G Limit”), the Bank will reduce such benefit payment to the extent necessary to avoid treating such benefit payment as an excess parachute payment. Mr. Pasenelli’s 2011 SERP and the 2014 SERPs provide for an additional tax indemnification payment if payments under the SERP exceed the executive’s 280G Limit.
Under the salary continuation agreements dated September 6, 2003, as amended, upon the termination of employment within 12 months subsequent to a change in control and before age 65, Mr. Pasenelli and Mr. Cockerham are entitled to an annual benefit for a period of 15 years of $74,112 and $72,235, respectively, commencing with the month following the executive attaining age 65. Each of Mr. Pasenelli’s and Mr. Cockerham’s salary continuation agreements dated September 6, 2003, as amended, provide that if the value of the benefits provided in connection with a change in control exceed his 280G Limit, his payment will be reduced or revised so that the aggregate payments do not exceed his 280G Limit. Under the salary
continuation agreement dated August 21, 2006, as amended, Mr. Pasenelli is entitled to an additional annual benefit ranging from $13,141 to $18,100 (based on the date of termination) if his employment is terminated within 12 months subsequent to a change in control and before age 65. Under the salary continuation agreement dated August 21, 2006, as amended, Mr. Cockerham is entitled to an additional annual benefit equal to the present value of $4,800 using an interest factor of 5% upon the termination of employment within 12 months subsequent to a change in control and before age 65. Under the salary continuation agreement dated August 21, 2006, as amended, Messrs. Burke and Di Misa are entitled to an additional annual benefit ranging from $45,154 to $101,000 and $44,354 to $65,000, respectively, (based on the date of termination) if his employment is terminated within 12 months subsequent to a change in control and before age 65.
Under the Company’s 2005 Equity Compensation Plan, upon a Change in Control all outstanding equity awards will immediately vest.
Under the 2015 Equity Compensation Plan, if the executive terminates his employment, other than for Cause, during the 12-month period following a Change on Control, unvested restricted stock awards will become fully vested and transferable to the executive.
Potential Post-Termination Benefits Table. The amount of compensation payable to each named executive officer upon the occurrence of certain events is provided in the table below. The amounts shown assume a termination date of December 31, 2016, and include amounts earned through such time and are estimates of the amounts that would be paid to the executives upon their termination. The amounts shown relating to unvested equity awards are based on $29.00 per share, which was the fair market value of Company common stock on December 30, 2016. The actual amounts to be paid can only be determined at the time of such executive’s separation from the Company. These amounts do not take into account any reductions that may be required in order to comply with the 280G cutback provisions in employment agreements or pension benefit agreements, if such cutback is applicable, and do not reflect the tax indemnification payments that may be made under certain arrangements in the event an executive exceeds his 280G limit.
| | | | | | | ||||||||||||||||||
| Termination For Cause | Involuntary Termination Without Cause | Voluntary Termination By Executive | Termination Upon Disability | Termination Upon Death | Termination After Change in Control | |||||||||||||||||||
| William J. Pasenelli | ||||||||||||||||||||||||
| Employment Agreement | $ | — | $ | 1,517,760 | $ | — | $ | — | $ | — | $ | 1,517,760 | ||||||||||||
| Equity Awards | — | — | — | 155,091 | 155,091 | 155,091 | ||||||||||||||||||
| Supplemental Executive Retirement Plan 2011 | — | 226,295 | 226,295 | 226,295 | 226,295 | 995,595 | ||||||||||||||||||
| Supplemental Executive Retirement Plan 2014 | — | 102,653 | 102,653 | 102,653 | 102,653 | 879,015 | ||||||||||||||||||
| Salary Continuation Agreement 2003 | — | 800,415 | 800,415 | 1,111,680 | 1,111,680 | 1,111,680 | ||||||||||||||||||
| Salary Continuation Agreement 2006 | — | 202,260 | 202,260 | 202,260 | 271,500 | 197,115 | ||||||||||||||||||
| Todd L. Capitani | ||||||||||||||||||||||||
| Employment Agreement | $ | — | $ | 685,810 | $ | — | $ | — | $ | — | $ | 685,810 | ||||||||||||
| Equity Awards | — | — | — | 129,224 | 129,224 | 129,224 | ||||||||||||||||||
| Supplemental Executive Retirement Plan 2011 | — | 80,896 | 80,896 | 80,896 | 80,896 | 955,185 | ||||||||||||||||||
| Supplemental Executive Retirement Plan 2014 | — | 51,027 | 51,027 | 51,027 | 51,027 | 1,365,480 | ||||||||||||||||||
OTHER INFORMATION RELATING TO DIRECTORS AND EXECUTIVE OFFICERS | ||
| | | | | | | ||||||||||||||||||
| Termination For Cause | Involuntary Termination Without Cause | Voluntary Termination By Executive | Termination Upon Disability | Termination Upon Death | Termination After Change in Control | |||||||||||||||||||
| James M. Burke | ||||||||||||||||||||||||
| Employment Agreement | $ | — | $ | 717,276 | $ | — | $ | — | $ | — | $ | 717,276 | ||||||||||||
| Equity Awards | — | — | — | 130,442 | 130,442 | 130,442 | ||||||||||||||||||
| Supplemental Executive Retirement Plan 2011 | — | 67,159 | 67,159 | 67,159 | 67,159 | 963,840 | ||||||||||||||||||
| Supplemental Executive Retirement Plan 2014 | — | 6,002 | 6,002 | 6,002 | 6,002 | 197,670 | ||||||||||||||||||
| Salary Continuation Agreement 2006 | — | 882,645 | 882,645 | 882,645 | 1,515,000 | 677,310 | ||||||||||||||||||
| Gregory C. Cockerham | ||||||||||||||||||||||||
| Employment Agreement | $ | — | $ | 717,276 | $ | — | $ | — | $ | — | $ | 717,276 | ||||||||||||
| Equity Awards | — | — | — | 130,442 | 130,442 | 130,442 | ||||||||||||||||||
| Supplemental Executive Retirement Plan 2011 | — | 64,448 | 64,448 | 64,448 | 64,448 | 157,260 | ||||||||||||||||||
| Supplemental Executive Retirement Plan 2014 | — | 10,410 | 10,410 | 10,410 | 10,410 | 39,045 | ||||||||||||||||||
| Salary Continuation Agreement 2003 | — | 996,840 | 996,840 | 1,083,525 | 1,083,525 | 1,083,525 | ||||||||||||||||||
| Salary Continuation Agreement 2006 | — | 62,400 | 62,400 | 62,400 | 72,000 | 63,300 | ||||||||||||||||||
| James F. Di Misa | ||||||||||||||||||||||||
| Employment Agreement | $ | — | $ | 717,276 | $ | — | $ | — | $ | — | $ | 717,276 | ||||||||||||
| Equity Awards | — | — | — | 130,442 | 130,442 | 130,442 | ||||||||||||||||||
| Supplemental Executive Retirement Plan 2011 | — | 117,545 | 117,545 | 117,545 | 117,545 | 622,875 | ||||||||||||||||||
| Supplemental Executive Retirement Plan 2014 | — | 11,962 | 11,962 | 11,962 | 11,962 | 127,425 | ||||||||||||||||||
| Salary Continuation Agreement 2006 | — | 682,815 | 682,815 | 682,815 | 780,000 | 665,310 | ||||||||||||||||||
| Michael L. Middleton | ||||||||||||||||||||||||
| Employment Agreement | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
| Equity Awards | — | — | — | 181,597 | 181,597 | 181,597 | ||||||||||||||||||
| Supplemental Executive Retirement Plan 2011 | — | — | — | — | 238,844 | — | ||||||||||||||||||
| Salary Continuation Agreement 2003 | — | — | — | — | 1,920,720 | — | ||||||||||||||||||
| Consulting Agreement | — | — | — | — | — | — | ||||||||||||||||||
Section 16(a) Beneficial Ownership Reporting Compliance.Compliance
requirements, except for Messrs. Burke, Capitani, Pasenelli and Ms. Lombardi, each of whom filed one Form 4, reporting one transaction, after its due date.
Relationships and Transactions with the Company and the Bank. The Sarbanes-Oxley Act of 2002 generally prohibits loans by the Company to its executive officers and directors. However, the Sarbanes-Oxley Act contains a specific exemption from such prohibition for loans by the Bank to its executive officers and directors in compliance with federal banking regulations. Federal regulations require that all loans or extensions of credit to executive officers and directors of insured financial institutions must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons not related to the Bank and must not involve more than the normal risk of repayment or present other unfavorable features. The Bank is therefore prohibited from making any new loans or extensions of credit to executive officers and directors at different rates or terms than those offered to the general public. Notwithstanding this rule, federal regulations permit the Bank to make loans to executive officers and directors at reduced interest rates if the loan is made under a benefit program generally available to all other employees and does not give preference to any executive officer or director over any other employee. The Bank does not currently have such a program in place. From time to time, the Bank makes loans and extensions of credit to its executive officers and directors, and members of their immediate families. The outstanding loans made to our directors and executive officers, and members of their immediate families, were made in the ordinary course of business, were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to the Bank, and did not involve more than the normal risk of collectibility or present other unfavorable features. As of December 31, 20162019,these loans were performing according to their original terms.
| STOCKHOLDER PROPOSALS AND NOMINATIONS | ||
BOARD POLICIES REGARDING COMMUNICATIONS WITH THE BOARD OF DIRECTORS | ||
| MISCELLANEOUS | ||
Dear ESOP Participant:
On behalf of the Board of Directors, I am forwarding to you the attached vote authorization form to convey your voting instructions to Austin J. Slater, Jr., Joseph V. Stone, Jr., and Kathryn Zabriskie, Trustees for the Community Bank of the Chesapeake Employee Stock Ownership Plan and Trust (the “ESOP”) on the proposals presented at the Annual Meeting of Stockholders of The Community Financial Corporation (the “Company”) on May 9, 2017.20, 2020. Also enclosed is a Notice of Annual Meeting and Proxy Statement for the Company’s Annual Meeting of Stockholders and the 20162019 Annual Report on Form 10-K.
13, 2020.
![[GRAPHIC MISSING]](https://capedge.com/proxy/DEF 14A/0001144204-17-017634/v462928_voteauth.jpg)
![[GRAPHIC MISSING]](https://capedge.com/proxy/DEF 14A/0001144204-17-017634/v462928_pc-1.jpg)
![[GRAPHIC MISSING]](https://capedge.com/proxy/DEF 14A/0001144204-17-017634/v462928_pc-2.jpg)
