TIME AND DATE | | | 10:00 a.m. on Wednesday, May | | |
| PLACE | | | Board Room | |
| | | | Community Bank of the Chesapeake 3035 Leonardtown Road Waldorf, Maryland 20601 | |
| 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 vote on the frequency of the advisory vote on the compensation of our named executive officers; and | |
| | | | (5) 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 meeting. You can vote your shares via the Internet, by telephone or by completing and signing a | |
| | | | Corporate Secretary | |
15, 2019
14, 2019.
8, 2019.
Director | | | Audit Committee | | | Enterprise Risk Management Committee | | | Governance Committee | | | Compensation Committee | |
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 | | | | | | X | |
E. Lawrence Sanders, III | | | 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 2018 | | | 8 | | | 3 | | | 5 | | | 9 | |
Director | Audit Committee | Enterprise Risk Management Committee | Governance Committee | Compensation Committee | ||||
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 | ||||||
E. Lawrence Sanders, III | 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 2017 | 8 | 4 | 5 | 6 |
community, business and civic affairs, and also considers whether the candidate would adequately represent
2018.
Name | | | Fees Earned or Paid in Cash ($) | | | Non-qualified Deferred Compensation Earnings ($)(1) | | | Total ($) | | |||||||||
Kimberly C. Briscoe-Tonic(2) | | | | $ | 18,000 | | | | | $ | — | | | | | $ | 18,000 | | |
M. Arshed Javaid | | | | | 36,000 | | | | | | — | | | | | | 36,000 | | |
Louis P. Jenkins, Jr. | | | | | 49,725 | | | | | | — | | | | | | 49,725 | | |
Michael L. Middleton | | | | | 50,000 | | | | | | 2,323 | | | | | | 52,323 | | |
John K. Parlett, Jr. | | | | | 43,500 | | | | | | — | | | | | | 43,500 | | |
Mary Todd Peterson | | | | | 47,900 | | | | | | — | | | | | | 47,900 | | |
E. Lawrence Sanders, III | | | | | 42,225 | | | | | | — | | | | | | 42,225 | | |
James R. Shepherd(3) | | | | | 21,125 | | | | | | — | | | | | | 21,125 | | |
Austin J. Slater, Jr. | | | | | 50,125 | | | | | | — | | | | | | 50,125 | | |
Joseph V. Stone, Jr. | | | | | 53,125 | | | | | | 3,634 | | | | | | 56,759 | | |
Kathryn Zabriskie | | | | | 44,725 | | | | | | — | | | | | | 44,725 | | |
Name | Fees Earned or Paid in Cash ($) | Non-qualified Deferred Compensation Earnings ($)(1) | Total ($) | |||||||||
Eric S. Goldberg(2) | $ | 32,975 | $ | — | $ | 32,975 | ||||||
Philip T. Goldstein(3) | 25,000 | — | 25,000 | |||||||||
M. Arshed Javaid | $ | 39,150 | 7,811 | 46,961 | ||||||||
Louis P. Jenkins, Jr | 48,080 | — | 48,080 | |||||||||
Michael L. Middleton | 50,000 | 10,551 | 60,551 | |||||||||
John K. Parlett, Jr | 43,625 | — | 43,625 | |||||||||
Mary Todd Peterson | 48,525 | 12,884 | 61,409 | |||||||||
E. Lawrence Sanders, III(4) | — | — | — | |||||||||
James R. Shepherd(5) | 38,050 | — | 38,050 | |||||||||
Austin J. Slater, Jr | 49,625 | — | 49,625 | |||||||||
Joseph V. Stone, Jr | 51,975 | 20,994 | 72,969 | |||||||||
Kimberly C. Briscoe-Tonic | 18,400 | — | 18,400 | |||||||||
Kathryn Zabriskie | 41,100 | — | 41,100 |
(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.
a director of the Bank.
2019:
| 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 | |
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 |
Bank: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 $ 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
Employee directors of the Company receive only the annual retainer and Board meeting fees; they do not receive fees for committee meetings. Employee directors of the Bank do not receive annual retainer,retainers, board meeting fees or fees for committee meetings.
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.
| | | 2018 | | | 2017 | | ||||||
Audit Fees(1) | | | | $ | 256,577 | | | | | $ | 186,328 | | |
Audit Related Fees(2) | | | | | 23,562 | | | | | | 22,580 | | |
Tax Fees | | | | | — | | | | | | 3,057 | | |
All Other Fees | | | | | — | | | | | | — | | |
2017 | 2016(1) | |||||||
Audit Fees(2) | $ | 186,328 | $ | 149,223 | ||||
Audit Related Fees(3) | 22,580 | 21,541 | ||||||
Tax Fees | 3,057 | 10,000 | ||||||
All Other Fees | — | — |
2017,2018, the Audit Committee approved 100% of all “audit-related,” “tax” and “other fees.”
Name of Beneficial Owners | | | Number of Shares Beneficially Owned(1)(2) | | | Percent of Shares of Common Stock Outstanding(3) | | ||||||
Directors: | | | | | | | | | | | | | |
M. Arshed Javaid | | | | | 3,683 | | | | | | * | | |
Louis P. Jenkins, Jr. | | | | | 19,742 | | | | | | * | | |
Michael L. Middleton | | | | | 230,053(4) | | | | | | 4.12% | | |
John K. Parlett, Jr. | | | | | 5,250 | | | | | | * | | |
William J. Pasenelli | | | | | 48,707 | | | | | | * | | |
Mary Todd Peterson | | | | | 6,529 | | | | | | * | | |
E. Lawrence Sanders, III | | | | | 24,324(5) | | | | | | * | | |
Austin J. Slater, Jr. | | | | | 21,602 | | | | | | * | | |
Joseph V. Stone, Jr. | | | | | 29,125(6) | | | | | | * | | |
Kathryn Zabriskie | | | | | 2,550 | | | | | | * | | |
Named Executive Officers Who are Not Also Directors | | | | | | | | | | | | | |
James M. Burke | | | | | 20,599 | | | | | | * | | |
Gregory C. Cockerham | | | | | 123,977 | | | | | | 2.22% | | |
All Directors, Executive Officers and Nominees as a Group (17 persons) | | | | | 580,724(7)(8) | | | | | | 10.95% | | |
Name of Beneficial Owners | Number of Shares Beneficially Owned(1)(2) | Percent of Shares of Common Stock Outstanding(3) | ||||||
Directors: | ||||||||
M. Arshed Javaid | 3,526 | * | ||||||
Louis P. Jenkins, Jr. | 19,619 | * | ||||||
Michael L. Middleton | 258,048 | (4) | 4.63 | % | ||||
John K. Parlett, Jr. | 4,400 | * | ||||||
William J. Pasenelli | 47,998 | * | ||||||
Mary Todd Peterson | 6,529 | * | ||||||
E. Lawrence Sanders, III | 24,082 | (5) | * | |||||
Austin J. Slater, Jr. | 20,378 | * | ||||||
Joseph V. Stone, Jr. | 29,125 | (6) | * | |||||
Kathryn Zabriskie | 2,550 | * | ||||||
Named Executive Officers Who are Not Also Directors | ||||||||
James M. Burke | 20,935 | * | ||||||
Todd L. Capitani | 10,455 | * | ||||||
Gregory C. Cockerham | 123,386 | 2.21 | % | |||||
James F. Di Misa | 19,094 | * | ||||||
All Directors, Executive Officers and Nominees as a Group (17 persons) | 610,130 | (7)(8) | 10.95 | % | ||||
5% Owner(s): | ||||||||
Basswood Capital Management, L.L.C. Matthew Lindenbaum Bennett Lindenbaum 645 Madison Avenue, 10th Floor New York, New York 10022 | 412,072 | (9) | 7.39 | % |
On December 21, 2017, the Board of Directors appointed E. Lawrence Sanders, III to the Company’s Board of Directors, effective January 1, 2018 the effective time of the merger of County First Bank with and into Community Bank of the Chesapeake. Mr. Sanders filled the vacancy on the Board created by the November 6, 2017 resignation of Eric Goldberg and was appointed to serve until the 2018 annual meeting of stockholders.
William J. Pasenelli is President and Chief Executive Officer of the Company and Chief Executive Officer of the Bank. He also serves as Vice Chair for the Company and the Bank. Mr. Pasenelli joined the Bank as Chief Financial Officer in 2000 and was named President of the Bank in 2010, President of the Company in 2012 and Chief Executive Officer in July 2014. Before joining the Bank, Mr. Pasenelli had been Chief Financial Officer of Acacia Federal Savings Bank, Annandale, Virginia, since 1987. Mr. Pasenelli serves on the Board of Directors for the Maryland Bankers Association and the Maryland Chamber of Commerce. Mr. Pasenelli is a member of the American Institute of Certified Public Accountants and the Greater Washington Society of Certified Public Accountants and other civic groups. Age 59. Director of the Bank and the Company since 2010.
Mr. Pasenelli’s extensive experience in the local banking industry affords the Board valuable insight regarding the business and operations of the Bank. Mr. Pasenelli’s financial acumen and knowledge of the Company’s and the Bank’s business and history position him well to serve as President and Chief Executive Officer and as a Director.
E. Lawrence Sanders, IIIis President of Edward L. Sanders Insurance Agency, which provides multi-line insurance services to clients in Maryland since 1903. Mr. Sanders graduated from NC State University in 1978, obtained his Certified Insurance Counselor designation in 1979 and became a licensed Insurance Advisor in 1981. Mr. Sanders served on the board of directors of County First Bank for 28 years, and served as chairman of the board from 2013 to 2018. He is a current member and past President of the Charles County Rotary, past director for the Professional Insurance Agent’s Association, past director and past President for the Civista Foundation and current director for the Charles County Rotary Foundation. Age 61. Director of the Bank and the Company since 2018.
Through his experience as owner of an insurance agency, Mr. Sanders has extensive financial and operational knowledge. His years of experience serving as a bank director provides the Board valuable insight regarding corporate governance, regulatory compliance, risk assessment practices and bank operations.
Austin J. Slater, Jr.is the President and Chief Executive Officer of the Southern Maryland Electric Cooperative, which is one of the ten largest electrical distribution cooperatives in the country. Mr. Slater presently serves on the Board of Directors of the Federal Reserve Bank of Richmond, Baltimore Branch, serves on the Board of Directors as Secretary-Treasurer and is the Chair of the Board Finance Committee of the University of Maryland Charles Regional Medical Center. He has also served as Chairman of the Board of the Maryland Chamber of Commerce and Chairman of the Board of Trustees for the College of Southern Maryland, as well as numerous other industry and civic organizations. Mr. Slater holds a MBA in Finance from George Washington University and a BS in Accounting from Shepherd University. Age 64. Director of the Bank and the Company since 2003.
Mr. Slater has extensive management level experience in a large company setting outside of the financial services industry. Mr. Slater’s financial acumen and operational experience allow him to understand the complexities of the Company and the Bank. His experience in a regulated industry has exposed Mr. Slater to many of the issues facing companies today, particularly regulated entities, making Mr. Slater a valued component of a well-rounded board.
Joseph V. Stone, Jr. owned and operated Joe Stone Insurance Agency, which provides multi-line insurance services to clients in Maryland and Virginia, from 1981 to 2016. He has served as a director for the Southern Maryland Electric Cooperative since 1996. Age 63. Director of the Bank and the Company since 2006.
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.
Louis P. Jenkins, Jr. is the principal of Jenkins Law Firm, LLC, located in La Plata, Maryland. Before entering private practice, Mr. Jenkins served as an Assistant State’s Attorney in Charles County, Maryland from 1997 to 1999. In addition to his private practice, Mr. Jenkins serves as Court Auditor for the Circuit Court for Charles County, Maryland and attorney for the Charles County Board of Elections. Mr. Jenkins currently serves as a member of the Board of Directors of the University of Maryland Medical System which consists of twelve hospitals located throughout the State of Maryland with annual revenue in excess of $3.7 billion.$3.67 Billion. Mr. Jenkins has also served as a board member of several other public service organizations including the University of Maryland Charles Regional Medical Center, Southern Maryland Chapter of the American Red Cross, Charles County Chamber of Commerce and the Charles County Bar Association. Age 46.47. Director of the Bank and the Company since 2000.
Relations Council Administrative Committee andMr. Middleton completed his term on the Federal Reserve’s Community Depository Advisory Council in October 2015. He also serves on several philanthropic and civic boards. Age 70.71. Director of the Bank since 1979 and of the Company since 1989.
Kathryn M. Zabriskieis president of Business Training Works, Inc., an employee-development firm specializing in soft-skills training, leadership development, and customer-experience initiatives. Ms. Zabriskie started the company in 2000. Since that time, she and her team have worked with hundreds of
Named Executive Officer | | | Title | |
William J. Pasenelli | | | President and Chief Executive Officer (CEO) | |
James M. Burke | | | Executive Vice President and Chief Risk Officer (CRO) | |
Gregory C. Cockerham | | | Executive Vice President and Chief Lending Officer (CLO) | |
During 2017, the Company and its subsidiary, Community Bank of the Chesapeake, continued to successfully execute on its strategic longer-term objectives of increased profitability and shareholder value. We accomplished the increased profitability primarily by controlling expense growth and improved asset quality. The Company’s cost control efforts and continued asset growth continued to create operating leverage1 in 2017. Pretax income increased $4.6 million or 39.3% to $16.3 million for the year ended December 31, 2017 compared to $11.7 million for the year ended December 31, 2016. The Company’s pretax returns on average assets and common stockholders’ equity for 2017 were 1.19% and 14.88%, respectively, compared to 0.96% and 11.36%, respectively, for 2016. 2017 net income was impacted by the passage of the Tax Cuts and Jobs Act in December 2017, as well as for merger and acquisition costs related to the County First acquisition that closed in January 2018. Below are a few highlights of our 2017 performance:
The tax adjustments and the merger and acquisition costs resulted in a reduction of earnings per share of approximately $0.75 per share for 2017. The Company’s after-tax returns on average assets and common stockholders’ equity for 2017 were 0.52% and 6.55%, respectively, compared to 0.60% and 7.09%, respectively, for 2016.
The following is a summary of key actions taken by the Compensation Committee on executive compensation in 2017:
Base Salaries: Base salary increases for the NEOs ranged between 1% and 5% in 2017 to reward for individual performance.
2017 Short-Term Incentive Awards: Incentive payouts for all NEOs equaled 45% of base salary reflecting very strong corporate performance achievements across the predetermined performance metrics as well as other significant corporate and individual performance achievements during the year.
2017 Long-Term Incentives: A quarter (25%) of the earned short-term incentive award was paid to the executives in shares of restricted stock which vest over a three-year period.
The Company provides its stockholders with the opportunity to cast an annual advisory vote on executive compensation. At the Company’s 2017 annual meeting of stockholders, approximately 94.8% 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 considers the results of the Company’s say-on-pay votes when making compensation decisions for the named executive officers, along with the other factors discussed in this CD&A.
The Committee believes that the application of the executive compensation philosophy requires a compensation program design which considers a balanced evaluation of performance. Committee discretion, flexibility and judgement are essential to its ability to deliver incentive compensation that focuses on short term performance results and progress toward longer term initiatives which allow the Company to enhance shareholder value. The following table includes important features of our executive compensation program:
Our compensation philosophy is grounded on the following guiding principles:
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 2017 was generally the same percentage of salary.
incentives.
Thetarget 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. The allocation of base salary, annual incentive compensation and equity based compensation for our named executive officers in 2017 is illustrated
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 Pearl Meyer on a range of external market factors, including evolving compensation trends, appropriate peer companies, and market survey data.
Role of Compensation Peer Group and Benchmarking. The following peer group was used in making pay decisions in early 2017 for our NEOs. In determining the compensation peer group, the Committee selected publicly traded banks from Maryland and Virginia with assets ranging approximately one half to two times our asset size ($700 million to $2.6 billion)
In the Fall of 2017 and with the assistance of Pearl Meyer, the Committee updated the compensation peer group in light of its pending merger with County First Bank which was due to close in early 2018. The peer group was identified based, generally, on the following criteria:
The resulting peer group which was used in making pay decisions for 2018 consisted of the following 17 banks ranging in assets between $1.1 billion and $3.4 billion.
The following summary data for the peer group was obtained from SNL Financial’s database as of December 31, 2017:
Percentile | Total Assets ($) | |||
25th Percentile | $ | 1,469,743 | ||
50th Percentile | $ | 1,658,420 | ||
75th Percentile | $ | 2,208,292 | ||
Community Financial (post-merger) | $ | 1,700,000 | ||
Community Financial Percentile Rank | 53rd |
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 Committee’s executive compensation determinations are the result of the Committee’s business judgment, which is informed by the experiences of the members of the Committee and market data.
The Committee approved modest increases to base salaries for 2017. Incentive award targets and objectives were aligned with the annual strategic plan approved by the board. Based onsecond quarter positively impacted the Company’s performance in the second half of 2018.
TDRs to total assets increased 31 basis points to 2.02% at December 31, 2018 from 1.71% at December 31, 2017.
Executive | | | Title | | | 2017 Salary | | | 2018 Salary | | | % Increase | | |||||||||
William J. Pasenelli | | | President & CEO | | | | $ | 412,000 | | | | | $ | 440,000 | | | | | | 6.80% | | |
James M. Burke | | | EVP, CRO | | | | | 305,000 | | | | | | 336,000 | | | | | | 10.16% | | |
Gregory C. Cockerham | | | EVP, CLO | | | | | 294,000 | | | | | | 320,000 | | | | | | 8.84% | | |
Executive | Title | 2016 Salary | 2017 Salary | % Increase | 2018 Salary | % Increase | ||||||||||||||||||
William J. Pasenelli | President & CEO | $ | 408,000 | $ | 412,000 | 0.98 | % | $ | 440,000 | 6.80 | % | |||||||||||||
Todd L. Capitani | EVP, CFO | 278,154 | 285,000 | 2.46 | % | 298,000 | 4.56 | % | ||||||||||||||||
James M. Burke | EVP, CRO | 290,980 | 305,000 | 4.82 | % | 336,000 | 10.16 | % | ||||||||||||||||
Gregory C. Cockerham | EVP, CLO | 290,980 | 294,000 | 1.04 | % | 320,000 | 8.84 | % | ||||||||||||||||
James F. Di Misa | EVP, COO | 290,980 | 294,000 | 1.04 | % | 320,000 | 8.84 | % |
Historically, Messrs. Pasenelli, Burke Cockerham and Di MisaCockerham received $15,000 each year for their service on the Bank’s Board of Directors. The Committee chose to roll these fees into their base salaries beginning in 2018 and therefore, the percentpercentage increases reflect this action. Excluding the $15,000 increase, base pay increases rangeranged between 3% and 5% for the NEOs.
NEOs in 2018.
For
exceeded maximum performance levels, efficiency ratio aligned slightly below2018 target and non-performing assets achieved performance slightly above target.
Based upon actual performance across these corporate performance metrics, the executives earned the following incentive awards:
Executive | Title | Short-Term Annual Incentive Award | % of 2017 Salary | |||||||||
William J. Pasenelli | President & CEO | $ | 107,120 | 26 | % | |||||||
Todd L. Capitani | EVP, CFO | 72,319 | 25 | % | ||||||||
James M. Burke | EVP, CRO | 74,725 | 25 | % | ||||||||
Gregory C. Cockerham | EVP, CLO | 74,603 | 25 | % | ||||||||
James F. Di Misa | EVP, COO | 74,603 | 25 | % |
In addition to the earned incentive award, the Committee awarded each executive a supplemental bonus which was intended to recognize significant improvement in performance metrics which weren’t included in the 2017 annual incentive plan such as stock performance and shareholder return, as well as individual performance achievements during the year.
Executive | Title | Supplemental Bonus Award | % of 2017 Salary | |||||||||
William J. Pasenelli | President & CEO | $ | 77,880 | 19 | % | |||||||
Todd L. Capitani | EVP, CFO | 55,681 | 20 | % | ||||||||
James M. Burke | EVP, CRO | 62,275 | 20 | % | ||||||||
Gregory C. Cockerham | EVP, CLO | 57,398 | 20 | % | ||||||||
James F. Di Misa | EVP, COO | 57,398 | 20 | % |
The Compensation Committee, at its discretion, has the ability to adjust for one-time non-recurring charges. Through its deliberations, the Compensation Committee decided to adjust for the effects of the expenses associated to the acquisition of County First Bank as well as the impact of the $2.7 million write-off of our net deferred tax asset as a result of the Tax Cuts and Jobs Act enacted in December 2017. In awarding the supplemental bonus, the Compensation Committee considered the Company’s strong performance and enhanced profitability as discussed in the 2017 Performance Highlights section above, which was accomplished during a year in which the Company’s management team was working through the acquisition of County First Bank that legally closed on January 1, 2018.
The supplemental bonus 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 2017.
Total incentive awards to executive officers for 2017 performance, including annual incentive awards and supplemental bonuses, totaled 45% of base salary. Each named executive officer received 25% of the 2017 total incentive award in restricted stock. The restricted stock awards vest over a three year period, beginning on the first anniversary of the grant date.
Executive | Title | 2017 Annual Award | % of Salary | 25% of Award Paid in Equity | ||||||||||||
William J. Pasenelli | President & CEO | $ | 185,000 | 45.00 | % | $ | 46,250 | |||||||||
Todd L. Capitani | EVP, CFO | 128,000 | 45.00 | % | 32,000 | |||||||||||
James M. Burke | EVP, CRO | 137,000 | 45.00 | % | 34,250 | |||||||||||
Gregory C. Cockerham | EVP, CLO | 132,000 | 45.00 | % | 33,000 | |||||||||||
James F. Di Misa | EVP, COO | 132,000 | 45.00 | % | 33,000 |
See “Grant of Plan-Based Awards” for information on the value of each active named executive officer’s incentive opportunity for 2017.
For 2018, the Company adopted an incentive plan for the named executive officers that is similar in structure to the plan for the 2017 year. The 2018 plan retains several metrics (profitability, efficiency ratio and non-performing assets) and ROAA will continue to be the most heavily weighted performance measure. In 2018, the plans for the CEO and EVP, Chief Risk Officer (this individual also serves as the Bank’s President) will again include the asset quality metric. The 2018 plan will include a holistic assessment component for all executives which will encompass individual performance and achievements, successful execution of strategic initiatives and other qualitative factors which may not be effectively measured by the plan’s performance metrics. The holistic component will replace the additional discretionary bonus award which has historically been provided in addition to the earned EIP awards. In 2018 the target bonus opportunity will bewas 35% of base salary for the CEO and 30% of base salary for the other NEOs. The incentive opportunity betweenranged from 50% of target at threshold and stretch performance will range between 50% andto a maximum of 150% of target. target for superior performance (from 17.5% to 52.5% of base salary for the CEO and 15% to 45% for the other NEOs). As soon as practicable following year end, the Committee determines the amount to be awarded to each executive officer by comparing the Company’s financial results to the established performance goals. For 2018, ROAA, EPS growth, and efficiency ratio aligned slightly below threshold performance, and non-performing assets achieved performance below threshold.
Executive | | | Target Incentive (% of Salary) | | | Target Incentive ($) | | | Amount Awarded (% of Salary) | | | Amount Awarded ($) | | ||||||||||||
William J. Pasenelli | | | | | 35.0% | | | | | $ | 154,000 | | | | | | 18.38% | | | | | $ | 80,850 | | |
James M. Burke | | | | | 30.0% | | | | | | 100,800 | | | | | | 15.75% | | | | | | 52,920 | | |
Gregory C. Cockerham | | | | | 30.0% | | | | | | 96,000 | | | | | | 18.00% | | | | | | 57,600 | | |
February 14, 2019, and vest ratably over a three-year period, beginning on the first anniversary of the grant date.
Executive | | | Title | | | Total 2018 Annual Award | | | Amount Paid in Cash | | | Amount Paid in Restricted Stock | | |||||||||
William J. Pasenelli | | | President & CEO | | | | $ | 80,850 | | | | | $ | 68,730 | | | | | $ | 12,120 | | |
James M. Burke | | | EVP, CRO | | | | | 52,920 | | | | | | 45,000 | | | | | | 7,920 | | |
Gregory C. Cockerham | | | EVP, CLO | | | | | 57,600 | | | | | | 57,600 | | | | | | — | | |
Executive | | | Title | | | Number of Shares Issued | | | FMV of Restricted Stock on Grant Date | | ||||||
William J. Pasenelli | | | President & CEO | | | | | 745 | | | | | $ | 27,736 | | |
James M. Burke | | | EVP, CRO | | | | | 551 | | | | | | 20,514 | | |
Gregory C. Cockerham | | | EVP, CLO | | | | | 531 | | | | | | 19,769 | | |
For 2017, no executives received additional equity awards outside of what was provided through the short-term incentive plan (25% of earned incentive award was paid in restricted stock).
The Committee retains the discretion 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 2017 incentive payout calculations, the Committee awarded executives a supplemental incentive amount in addition to the amounts earned in the annual incentive plan as described in the section above.
Guidelines:
Under the Company’s stock ownership guidelines, our CEO is expected to own shares of Company common stock that have a value equal to 2.0 times his base salary. The EVP, CRO (this individual also serves as the Bank’s President) is expected to own shares with a value equal to 1.5 times his base salary and other 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 met the minimum stock ownership requirements at the end ofConsiderations:
In addition to our guiding principles, the Company engages in the following practices to ensure its executive compensation program is aligned withEmployment Agreements. Our named executive officers have employment agreements that protect both the Company and our named executive officers in the event of certain separation events including termination following a change-in-control. Our employment agreements include a double trigger for payment upon a change in control. 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.
Our 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.
Retirement Benefits. In addition to participation in the Bank’s employee stock ownership program and 401(k) plan, our active named executive officers are eligible for retirement benefits under 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 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 CEO has 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.
The 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 NEOs. Prior to tax reform in 2018, this included our chief executive officer and the three most highly-compensated executive
officers employed by the Company at the end of the year, and also included an exception for “performance-based compensation” Following tax reform the limitation also applies to our CFO and anyone who has served as an NEO since 2017, with the performance-based compensation limitation being repealed. While the Committee considers the deductibility of awards as one factor in determining executive compensation, it also looks at other factors in making its decisions, as noted above, and retains the flexibility 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 by the Company for tax purposes.
In general, prior to 2018 the Company’s performance-based cash bonuses were designed to qualify for tax deductibility because they are paid based on achievement of pre-determined performance goals established by the Committee pursuant to its incentive plans. There are certain transition rules that may allow for further extension of the performance-based exception, but rules have not yet been promulgated.
Responsible Equity 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 2015 Equity Compensation Plan includes prohibitions on the repricing of stock options without stockholder approval.
Prohibition on Hedging and Short Sales. The Company prohibits short sales and transactions in derivatives of Company securities, including hedging transactions, for all directors and officers of the Company.
The Compensation Committee has received and discussed the foregoing Compensation Discussion and Analysis with management. Based on this review and discussions, the Compensation Committee recommended to the Board of Directors that the section of this proxy statement entitled Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.
March 7, 2018
Louis P. Jenkins, Jr., ChairJoseph V. Stone, Jr.Austin J. Slater, Jr.Kathryn Zabriskie
Summary Compensation Table. The following table provides information concerning total compensation earned or paid for the last two completed fiscal years to the Chief Executive Officer, Chief Financial Officerprincipal executive officer and the threetwo most highly compensated executive officers of the Company who served in such capacity as of December 31, 2017.2018. These fivethree officers are referred to as the named executive officers in this proxy statement.
Name and Principal Position | | | Year | | | Salary ($) | | | Stock Awards ($)(1) | | | Non-equity Incentive Plan Compensation ($)(2) | | | Non-qualified Deferred Compensation Earnings ($)(3) | | | All Other Compensation ($)(4) | | | Total ($) | | |||||||||||||||||||||
William J. Pasenelli President and Chief Executive Officer | | | | | 2018 | | | | | $ | 440,000 | | | | | $ | 27,736 | | | | | $ | 68,730 | | | | | $ | 320,521 | | | | | $ | 53,480 | | | | | $ | 910,467 | | |
| | | 2017 | | | | | | 412,000 | | | | | | 18,905 | | | | | | 157,264 | | | | | | 167,887 | | | | | | 48,466 | | | | | | 804,522 | | | ||
James M. Burke Executive Vice President and Chief Risk Officer | | | | | 2018 | | | | | $ | 336,000 | | | | | $ | 20,514 | | | | | $ | 45,000 | | | | | $ | 59,796 | | | | | $ | 27,247 | | | | | $ | 488,557 | | |
| | | 2017 | | | | | | 305,000 | | | | | | 13,077 | | | | | | 116,558 | | | | | | 47,923 | | | | | | 25,930 | | | | | | 508,488 | | | ||
Gregory C. Cockerham Executive Vice President and Chief Lending Officer | | | | | 2018 | | | | | $ | 320,000 | | | | | $ | 19,769 | | | | | $ | 57,600 | | | | | $ | 119,462 | | | | | $ | 30,402 | | | | | $ | 547,233 | | |
| | | 2017 | | | | | | 294,000 | | | | | | 13,077 | | | | | | 112,303 | | | | | | 92,581 | | | | | | 31,536 | | | | | | 543,497 | | |
Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Non-qualified Deferred Compensation Earnings ($)(3) | All Other Compensation ($)(4) | Total ($) | |||||||||||||||||||||
William J. Pasenelli President and Chief Executive Officer | 2017 | $ | 412,000 | $ | 157,250 | $ | 18,905 | $ | 167,887 | $ | 48,466 | $ | 804,508 | |||||||||||||||
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 | ||||||||||||||||||||||
Todd L. Capitani Executive Vice President and Chief Financial Officer | 2017 | $ | 285,000 | $ | 108,800 | $ | 12,503 | $ | 47,332 | $ | 26,124 | $ | 479,759 | |||||||||||||||
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 | 2017 | $ | 305,000 | $ | 116,450 | $ | 13,077 | $ | 47,923 | $ | 25,930 | $ | 508,380 | |||||||||||||||
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 | 2017 | $ | 294,000 | $ | 112,200 | $ | 13,077 | $ | 92,581 | $ | 31,536 | $ | 543,394 | |||||||||||||||
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 | ||||||||||||||||||||||
James F. Di Misa Executive Vice President and Chief Operating Officer | 2017 | $ | 294,000 | $ | 112,200 | $ | 13,077 | $ | 111,803 | $ | 32,553 | $ | 563,633 | |||||||||||||||
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 |
Item | Pasenelli | Capitani | Burke | Cockerham | Di Misa | |||||||||||||||
Directors’ fees | $ | 18,975 | $ | — | $ | — | $ | — | $ | — | ||||||||||
Market value of allocations under the employee stock ownership plan | 3,654 | 3,654 | 3,654 | 3,654 | 3,654 | |||||||||||||||
Employer contribution to 401(k) Plan | 17,351 | 13,550 | 16,454 | 18,896 | 20,046 | |||||||||||||||
Imputed income under split-dollar life insurance arrangement | 1,620 | 476 | 408 | 1,023 | 835 | |||||||||||||||
Automobile | 4,863 | 6,850 | 3,805 | 2,503 | 6,409 | |||||||||||||||
Club dues | — | — | — | 3,851 | — | |||||||||||||||
Dividends paid on unvested restricted stock | 1,780 | 1,371 | 1,386 | 1,386 | 1,386 | |||||||||||||||
Group term life benefit | 223 | 223 | 223 | 223 | 223 |
GrantsPlan-Based Awards. The followingabove-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 $2,936 for Mr. Cockerham. Includes an aggregate change in the present value of accumulated benefits under the SERPs and SCAs of $320,521, $59,796, and $116,526 for Messrs. Pasenelli, Burke and Cockerham, respectively.provides information concerning our grants of plan-based awards for the named executive officers during fiscal 2017 under The Community Financial Corporation 2015 Equity Compensation Plan.below. 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 $ 74,160 $ 90,640 $ 123,600 2/09/2017 626 $ 18,905 Todd L.
Capitani 49,875 59,850 79,800 2/09/2017 414 12,503 James M.
Burke 53,375 64,050 85,400 2/09/2017 433 13,077 Gregory C. Cockerham 51,450 61,740 82,320 2/09/2017 433 13,077 James F.
Di Misa 51,450 61,740 82,320 2/09/2017 433 13,077
Item Pasenelli Burke Cockerham Company Directors’ fees $ 20,700 $ — $ — Market value of allocations under the employee stock
ownership plan 7,844 7,844 7,844 Employer contribution to 401(k) Plan 11,000 10,400 11,000 Imputed income under split-dollar life insurance arrangement 1,713 439 975 Automobile 5,391 7,420 4,798 Club dues 5,417 — 4,446 Dividends paid on unvested restricted stock 1,193 922 916 Group term life benefit 222 222 223 Wellness allowance — — 200
by the Company’s Board of Directorsprograms, medical, dental, pension, profit sharing, retirement and for participation in pension, group life insurance, medical coveragestock-based compensation plans and in other employeecertain fringe benefits applicable to senior executives of the Bank.
See“Retirement Benefits” and“Other Potential Post-Termination Benefits” for a discussion of benefits and payments 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 options for each of the named executive officers outstanding as of December 31, 2017.
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 2017.
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||||||||||
William J. Pasenelli | 4,344 | $ | 46,915 | 2,458 | $ | 73,609 | ||||||||||
Todd L. Capitani | — | — | 1,787 | 53,511 | ||||||||||||
James M. Burke | 1,865 | 12,682 | 1,810 | 54,200 | ||||||||||||
Gregory C. Cockerham | 4,407 | 42,351 | 1,810 | 54,200 | ||||||||||||
James F. Di Misa | 1,865 | 13,615 | 1,810 | 54,200 |
Pension Benefits. The following table provides information about the participation of executive officers in our retirement programs as of December 31, 2017. 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 | 7 | $ | 279.851 | $ | — | ||||||||||
Supplemental Executive Retirement Plan – 2014 | 4 | 160,178 | — | |||||||||||||
Salary Continuation Agreement – 2003 | 17 | 403,045 | — | |||||||||||||
Salary Continuation Agreement – 2006 | 12 | 102,806 | — | |||||||||||||
Todd L. Capitani | Supplemental Executive Retirement Plan – 2011 | 7 | $ | 100,041 | — | |||||||||||
Supplemental Executive Retirement Plan – 2014 | 4 | 79,214 | — | |||||||||||||
James M. Burke | Supplemental Executive Retirement Plan – 2011 | 7 | $ | 83,053 | — | |||||||||||
Supplemental Executive Retirement Plan – 2014 | 4 | 9,295 | — | |||||||||||||
Salary Continuation Agreement – 2006 | 12 | 246,272 | — | |||||||||||||
Gregory C. Cockerham | Supplemental Executive Retirement Plan – 2011 | 7 | $ | 79,700 | — | |||||||||||
Supplemental Executive Retirement Plan – 2014 | 4 | 16,220 | — | |||||||||||||
Salary Continuation Agreement – 2003 | 29 | 570,007 | — | |||||||||||||
Salary Continuation Agreement – 2006 | 12 | 39,901 | — |
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | ||||||||||||
James F. Di Misa | Supplemental Executive Retirement Plan – 2011 | 7 | $ | 145,364 | — | |||||||||||
Supplemental Executive Retirement Plan – 2014 | 4 | 18,579 | — | |||||||||||||
Salary Continuation Agreement – 2006 | 12 | 360,062 | — |
Nonqualified Deferred Compensation. The following table provides information with respect to the 2017 accrued balances for each of the named executive officers who participate in the Executive Deferred Compensation Plan. See“Retirement Benefits” for a discussion of this plan.
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 | $ | 41,200 | $ | — | $ | 4,228 | $ | 32,629 | $ | 43,226 | |||||||||||||
Gregory C. Cockerham | Executive Deferred Compensation Plan | 58,475 | — | 10,541 | — | 146,044 |
Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC adopted a rule requiring the annual disclosure of the ratio of the median employee’s annual total compensation to the total compensation of the principal executive officer (“PEO”). This ratio is commonly referred to as the “CEO Pay Ratio.” The Company’s PEO is Mr. Pasenelli, the Chief Executive Officer (“CEO”).
For 2017, the annual total compensation of our CEO was 21.1 times that of the Company’s median employee, based on annual total compensation of $804,508 for Mr. Pasenelli and $38,124 for the median employee.
The median employee was identified using a listing of all employees as of December 31, 2017, and calculating the median amount of total 2017 compensation as it would be reported based on the IRS instructions for Box 5, Medicare wages and tips. Actual amounts reported on Box 5 for 2017 were used for all employees. As applicable, compensation reported on Box 5 included the amount paid in 2017 for salary, bonus, non-equity incentive plan (cash) awards, along with any amount deferred by the employee to the 401(k) Plan and Trust and the imputed value of the cost of group term life insurance and certain perquisites. Compensation reported on Box 5 also included any amounts that vested in 2017 for SERP benefits and for stock awards (based on the market value of the stock on the vesting date). Compensation deferred at the election of the Company’ officers, and the amount of employer contributions to the ESOP Plan, were excluded from Box 5.
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
The Bank maintains Salary Continuation Agreements (the “SCAs”) with Messrs. Pasenelli, Burke, Cockerham and Di Misa to provide the executives with additional compensation at retirement or upon termination of employment due to death, disability or a change in control. Messrs. Pasenelli, Burke, Cockerham and Di Misa are entitled to a total annual benefit for a period of 15 years of $92,212, $101,000, $77,035, and $65,000 respectively, upon normal retirement at or after age 65. A reduced benefit is payable if the executive retires before normal retirement age. The annual benefits are payable on a monthly basis to the executives or their designated beneficiaries.
The Bank also maintains 2011 and 2014 supplemental executive retirement plans (the “SERPs”) with each of Messrs. Pasenelli, Capitani, Burke, Cockerham and Di Misa to provide the executives with additional compensation at retirement or upon termination of employment due to death, disability or a change in control. If he remains employed with the Bank until his normal retirement age of 65, Messrs. Pasenelli, Capitani, Burke, Cockerham and Di Misa are entitled to receive an accrued retirement benefit payable annually for a period of 15 years of $124,974, $154,711, $77,434, $13,087, and $50,020, respectively. A reduced benefit is payable if the executive retires before normal retirement age or terminates service with the Bank for other reasons. See“Other Potential Post-Termination Benefits” for a discussion of benefits Messrs. Pasenelli, Capitani, Burke, Cockerham and Di Misa may receive under his respective SERPs.
The Bank maintains an Executive Deferred Compensation Plan under which Messrs. Pasenelli, Capitani, Burke, Cockerham and Di Misa may defer all or any portion of their base salary. Deferred amounts may be credited annually with interest at a rate equal to the Company’s consolidated return on equity for the calendar year or credited with earnings or losses based on the rate of return of mutual funds selected by the plan participants. The executive’s account balance under this plan will be distributed to the executive following the executive’s termination of service or on a specified date in either a lump sum or over a period of one to ten years, as elected by the executive.
Payments Made Upon Termination for Cause.Under the named executive officer’s 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.
Under the 2011 and 2014 SERPs if the executive’s employment is terminated for Cause, he will not be entitled to any benefits
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’shis employment is terminated Without Cause (as defined in his employment agreement), 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 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 benefits for 36 months.plans, multiplied by 36. Under the employment agreement for Messrs. Capitani, Burke and Cockerham, or Di Misa, if we terminate theeither executive’s employment
is terminated Without Cause he(as defined in the executives employment agreements), 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 continue the benefits in effect as of his termination date under the Bank’s medical, dental and life insurance benefits for 36 months.
Pursuant to the termsplans, multiplied by 36.
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, heour named executive officers would receive hisaccrued and earned 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
Under
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 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. Under the salary continuation agreements dated August 21, 2006, as amended, Messrs. Pasenelli and Cockerham are entitled to an annual disability benefit ranging from $14,325 to $18,100 and $4,420 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 $62,746 to $101,000 and $48,544 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,provide that the Company will pay his beneficiarythe executives or their respective beneficiaries or estate any compensation due to the executive through the end of the month in which histhe 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 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 benefit equal to the executive’s accrued benefit under the SERPs, payable to the executive’s beneficiary in 15 equal annual installments. If the executive dies after the commencement of his SERP benefit payments, the executive’s beneficiary is entitled to the unpaid balance of the payments for the balance of 15 annual installments.
Under their salary continuation agreements, if 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 $65,000 for Mr. Di Misa commencing with the month following the executive’s death. If the executive dies after his employment has terminated but before payments under the agreement have commenced, their designated beneficiary will be entitled to the same payments beginning on the first day of the month after the executive’s death. If the executive dies after the benefit payments have commenced, but before receiving all payments, their designated beneficiary will be entitled to the remaining benefits that would have been paid to the executive if the executive had survived.
Pursuant to the terms of the award agreements under the 2005 Equity Compensation Plan, if an executive dies while employed with the Bank, all unvested shares of restricted stock will immediately vest as of the date of such termination.
Pursuant to the terms of the award agreements under the 2015 Equity Compensation Plan, if an executive dies while employed with the Bank, all outstanding restricted stock awards will immediately vest as of the date of such termination. No stock options have been granted under this plan.
Payments Made
threshold, thereby avoiding the excise tax. The 2011second calculation determines the after-tax benefit if the payments are made without reduction, and 2014 SERPs providethe executive’s after-tax benefit reflects payment of the golden parachute excise tax by the executive. The calculation that yields the greatest after-tax benefit to the executive determines whether the executive’s benefits are subject to reduction or whether the executive will receive all change in control-related benefits.
| | | Restricted Stock Awards | | |||||||||||||||
Name | | | Grant Date | | | Number of Shares or Units of Stock That Have Not Vested (#) | | | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | | |||||||||
William J. Pasenelli | | | | | 01/23/2015 | | | | | | 475(2) | | | | | $ | 13,889 | | |
| | | | | 01/21/2016 | | | | | | 1,008(3) | | | | | | 29,474 | | |
| | | | | 02/09/2017 | | | | | | 418(4) | | | | | | 12,222 | | |
| | | | | 02/15/2018 | | | | | | 745(5) | | | | | | 21,784 | | |
James M. Burke | | | | | 01/23/2015 | | | | | | 425(2) | | | | | $ | 12,427 | | |
| | | | | 01/21/2016 | | | | | | 769(3) | | | | | | 22,486 | | |
| | | | | 02/09/2017 | | | | | | 289(4) | | | | | | 8,450 | | |
| | | | | 02/15/2018 | | | | | | 551(5) | | | | | | 16,111 | | |
Gregory C. Cockerham | | | | | 01/23/2015 | | | | | | 425(2) | | | | | $ | 12,427 | | |
| | | | | 01/21/2016 | | | | | | 769(3) | | | | | | 22,486 | | |
| | | | | 02/09/2017 | | | | | | 289(4) | | | | | | 8,450 | | |
| | | | | 02/15/2018 | | | | | | 531(5) | | | | | | 15,526 | | |
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 paymentsany benefits under the SERP exceedterms of his SCAs.
Under the salary continuation agreementsSCAs dated September 6, 2003, as amended, upon termination of employment as a result of disability, Messrs. Pasenelli and 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. Under the SCAs dated August 21, 2006, as amended, Messrs. Pasenelli and Cockerham are entitled to an annual disability benefit ranging from $14,325 to $18,100 and $4,420 to $4,800, respectively, depending on the date of termination, commencing with the month following the executive attaining age 65. Under the SCA dated August 21, 2006, as amended, Mr. Burke is entitled to an annual disability benefit ranging from $62,746 to $101,000, on the date of termination, commencing with the month following the executive attaining age 65.
Undercommence on the 2015 Equity Compensation Plan,first day of the month following the earlier of the executive’s 65th birthday or death and is paid in 15 equal annual installments.
Potential Post-Termination Benefits Table.extent necessary to avoid treating such benefit payment as an excess parachute payment.
Termination for cause | Termination without cause | Voluntary Termination by Executive | Disability | Death | Change in Control | |||||||||||||||||||
William J. Pasenelli | ||||||||||||||||||||||||
Employment Agreement | $ | — | $ | 1,517,760 | $ | — | $ | — | $ | — | $ | 1,517,760 | ||||||||||||
Equity Awards | — | — | — | 152,855 | 152,855 | 152,855 | ||||||||||||||||||
Supplemental Executive Retirement Plan 2011 | — | 279,851 | 279,851 | 279,851 | 279,851 | 995,595 | ||||||||||||||||||
Supplemental Executive Retirement Plan 2014 | — | 160,178 | 160,178 | 160,178 | 160,178 | 879,015 | ||||||||||||||||||
Salary Continuation Agreement 2003 | — | 855,990 | 855,990 | 1,111,680 | 1,111,680 | 1,111,680 | ||||||||||||||||||
Salary Continuation Agreement 2006 | — | 214,875 | 214,875 | 214,875 | 271,500 | 207,195 |
Termination for cause | Termination without cause | Voluntary Termination by Executive | Disability | Death | Change in Control | |||||||||||||||||||
Todd L. Capitani | ||||||||||||||||||||||||
Employment Agreement | $ | — | $ | 787,600 | $ | — | $ | — | $ | — | $ | 787,600 | ||||||||||||
Equity Awards | — | — | — | 118,079 | 118,079 | 118,079 | ||||||||||||||||||
Supplemental Executive Retirement Plan 2011 | — | 100,041 | 100,041 | 100,041 | 100,041 | 955,185 | ||||||||||||||||||
Supplemental Executive Retirement Plan 2014 | — | 79,214 | 79,214 | 79,214 | 79,214 | 1,365,480 | ||||||||||||||||||
James M. Burke | ||||||||||||||||||||||||
Employment Agreement | $ | — | $ | 842,900 | $ | — | $ | — | $ | — | $ | 842,900 | ||||||||||||
Equity Awards | — | — | — | 119,534 | 119,534 | 119,534 | ||||||||||||||||||
Supplemental Executive Retirement Plan 2011 | — | 83,053 | 83,053 | 83,053 | 83,053 | 963,840 | ||||||||||||||||||
Supplemental Executive Retirement Plan 2014 | — | 9,295 | 9,295 | 9,295 | 9,295 | 197,670 | ||||||||||||||||||
Salary Continuation Agreement 2006 | — | 941,190 | 941,190 | 941,190 | 1,515,000 | 711,180 | ||||||||||||||||||
Gregory C. Cockerham | ||||||||||||||||||||||||
Employment Agreement | $ | — | $ | 812,400 | $ | — | $ | — | $ | — | $ | 812,400 | ||||||||||||
Equity Awards | — | — | — | 119,534 | 119,534 | 119,534 | ||||||||||||||||||
Supplemental Executive Retirement Plan 2011 | — | 79,700 | 79,700 | 79,700 | 79,700 | 157,260 | ||||||||||||||||||
Supplemental Executive Retirement Plan 2014 | — | 16,220 | 16,220 | 16,220 | 16,220 | 39,045 | ||||||||||||||||||
Salary Continuation Agreement 2003 | — | 1,029,345 | 1,029,345 | 1,083,525 | 1,083,525 | 1,083,525 | ||||||||||||||||||
Salary Continuation Agreement 2006 | — | 66,300 | 66,300 | 66,300 | 72,000 | 66,525 | ||||||||||||||||||
James F. Di Misa | ||||||||||||||||||||||||
Employment Agreement | $ | — | $ | 812,400 | $ | — | $ | — | $ | — | $ | 812,400 | ||||||||||||
Equity Awards | — | — | — | 119,534 | 119,534 | 119,534 | ||||||||||||||||||
Supplemental Executive Retirement Plan 2011 | — | 145,364 | 145,364 | 145,364 | 145,364 | 622,875 | ||||||||||||||||||
Supplemental Executive Retirement Plan 2014 | — | 18,579 | 18,579 | 18,579 | 18,579 | 127,425 | ||||||||||||||||||
Salary Continuation Agreement 2006 | — | 728,160 | 728,160 | 728,160 | 780,000 | 698,565 |
requirements.
2017,2018, these loans were performing according to their original terms.November 29, 2018.December 4, 2019. If next year’s annual meeting is held on a date more than 30 calendar days from May 16, 2019,15, 2020, a stockholder proposal must be received by a reasonable time before the Company begins to print and mail its proxy solicitation materials. Any stockholder proposals will be subject to the requirements of the proxy rules adopted by the Securities and Exchange Commission.
WITH THE BOARD OF DIRECTORS