THE FIRST OF LONG ISLAND CORPORATION
10 Glen Head Road
Glen Head, New York 11545
(516) 671-4900
PROXY STATEMENT
INFORMATION ABOUT THE ANNUAL MEETING OF STOCKHOLDERS
The accompanying proxy is being solicited by the Board of Directors (“Board”) of The First of Long Island Corporation (“Corporation” or “Company”) for use at the Annual Meeting of Stockholders to be held at 3:30 P.M. local time at
North Hempstead Country Club
,
291 Port Washington Blvd.
,
Port Washington
, New York on April
1
6
, 201
9
. The approximate date on which proxy statements and forms of proxy are first being sent or given t
o stockholders is March 1
5
, 201
9
.
Proxies in the accompanying form that are properly executed and duly returned to the Corporation, or voted electronically, will be voted at the meeting
in accordance with the instructions provided. Where no instructions are indicated,
properly
executed proxies will be voted “F
or
” the proposals set forth in this proxy statement
.
Each proxy granted may be revoked at any time prior to its exercise by written notice filed with the secretary of the Corporation
, by
the
submission of a
later dated and executed proxy
or by notice given during the meeting by the stockholder to the presiding officer of the meeting. The presence in person or by proxy of the holders of a majority of the shares entitled to vote at the annual meeting constitutes a quorum for the transaction of business.
The
meeting (whether or not a quorum is present) may be adjourned to a subsequent date, provided notice of the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken.
At an adjourned meeting, any business may be transacted which might have been transacted at the meeting as originally scheduled.
In the event there are not sufficient votes for a quorum, or to approve or ratify any matter being presented at the time of this Annual Meeting, the Annual Meeting may be adjourned in order to permit the further solicitation of proxies.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
The only class of voting securities of the Corporation is its Common Stock, $.10 par value ("Common Stock"), each share of which entitles the holder thereof to one vote except in the election of directors, where votes may be cumulated as described herein. Only stockholders of record at the close of business on
March 1
, 201
9
are entitled to notice of and to vote at the meeting.
As of
March 1
, 201
9
, there were
2
5
,
153
,
936
shares of the Common Stock
issued
, all of which were outstanding and entitled to vote. To the best knowledge of the Corporation, the only persons owning beneficially more than five percent (5%) of the Common Stock of the Corporation as of
March 1, 201
9
are identified in the table below.
|
|
|
Name and Address
of Beneficial Owner
|
Amount and Nature of
Beneficial Ownership
|
Percent
of Class
|
BlackRock, Inc.
55 East 52
nd
Street
New York, NY 10055
|
1,861,519 shares
(1)
|
7.40%
|
Franklin Mutual Advisors, LLC
101 John F. Kennedy Parkway
Short Hills, NJ 07078-2789
|
2,149,469 shares
(2)
|
8.55%
|
|
(1)
|
|
Based on a Schedule 13G
/A
filed on
February 4
, 201
9
.
|
|
(2)
|
|
Based on a Schedule 13G
/A
filed on
January 30
, 201
9
.
|
Following is information with respect to the beneficial ownership of the Corporation's Common Stock as of
March 1, 201
9
by all directors and nominees, by the executive officers of the Corporation named in the “Summary Compensation Table” (“named executive officers” or “NEOs”), and by directors and all executive officers of the Corporation as a group.
|
|
|
|
|
Title of Class
|
Beneficial Owner
|
Amount and Nature of
Beneficial Ownership
(1)
|
Percent
of Class
|
Common Stock
|
Paul T. Canarick
|
309,529
|
(2)
|
1.23%
|
($.10 par value)
|
Alexander L. Cover
|
41,653
|
(3)
|
.17%
|
|
John J. Desmond
|
5,105
|
|
.02%
|
|
Howard Thomas Hogan, Jr.
|
203,109
|
(4)
|
.81%
|
|
Louisa M. Ives
|
75
|
|
-
|
|
Stephen V. Murphy
|
50,281
|
(5)
|
.20%
|
|
Peter Quick
|
40,223
|
|
.16%
|
|
Denise Strain
|
1,999
|
|
.01%
|
|
Milbrey Rennie Taylor
|
32,540
|
(6)
|
.13%
|
|
Walter C. Teagle III
|
149,658
|
(7)
|
.59%
|
|
Eric J. Tveter
|
9,704
|
|
.04%
|
|
Michael N. Vittorio
|
115,679
|
|
.46%
|
|
Mark D. Curtis
|
82,244
|
(8)
|
.33%
|
|
Christopher Becker
|
17,005
|
|
.07%
|
|
Christopher Hilton
|
6,654
|
|
.03%
|
|
Paul Daley
|
12,426
|
|
.05%
|
|
Directors and Executive Officers as a group (19 persons)
|
1,244,157
|
(9)
|
4.93%
|
|
(1)
|
|
Includes shares as to which a person (or his/her spouse) directly or indirectly has or shares voting power and/or investment power (which includes the power to dispose) and all shares which the person has a right to acquire within 60 days of the reporting date.
|
|
(2)
|
|
Includ
es
6
,
272
shares that can be acquired by the exercise of stock options.
|
|
(3)
|
|
Includ
es
6
,
272
shares that can be acquired by the exercise of stock options.
|
|
(4)
|
|
Includ
es
6
,
272
shares that can be acquired b
y the exercise of stock options.
|
|
(5)
|
|
I
nclud
es
6
,
272
shares that can be acquired by the exercise of stock options.
|
|
(6)
|
|
Includ
es
6
,
272
shares that can be acquired by the exercise of stock options.
|
|
(7)
|
|
Includ
es 1
2
,
540
shares that can be acquired by the exercise of stock options.
|
|
(8)
|
|
In
clud
es
11
,
6
29
shares that can be acquired by the exercise of stock options.
|
|
(9)
|
|
Includ
es
77
,
581
shares that can be acquired by the exercise of stock options.
|
VOTING PROCEDURES AND METHODS OF COUNTING VOTES
As to Proposal 1 regarding the election of directors, the proxy card being provided by the Board enables a stockholder to vote “For” the election of the
six
nominees proposed by the Board or to “Withhold Authority” to vote for the nominees being proposed. As discussed under Proposal 1, cumulative voting applies to the election of directors. Directors are elected by a plurality of the votes cast, without regard to either broker non-votes or proxies as to which the authority to vote for the nominee is withheld.
As to Proposals 2 and
3
, a stockholder may: (1) vote “For” the item, (2) vote “Against” the item, or (3) “Abstain” from voting on the item. In order to approve Proposals 2 and
3
,
each proposal must receive the affirmative vote of a majority of the shares voting on each matter at the annual meeting without regard to either shares as to which the “Abstain” box is marked or broker non-votes.
Proxies solicited hereby will be returned to the Corporation, tabulated by the Corporation’s registrar and transfer agent and reviewed by the inspectors of election designated by the Board.
PROPOSAL 1
ELECTION OF DIRECTORS
FOR TWO YEAR TERMS
The Board of the Corporation currently consists of
twelve
members.
T
he Board has nominated
John J. Desmond, Howard Thomas Hogan, Jr., Milbrey Rennie Taylor, Walter C. Teagle III and Michael N. Vittorio
as
the Class I directors for re-election
and
Louisa M. Ives
for election as a Class
I
director
. Each Board member and nominee, with the exception of Michael N. Vittorio who serves as President and Chief Executive Officer (“CEO”) of the Corporation and its wholly owned bank subsidiary, The First National Bank of Long Island (“Bank”), is independent as defined in the Nasdaq Rules.
The Board is divided into two classes, Class I and Class II. The following table sets forth the present composition of the Board.
|
|
|
Name
|
Class
|
Expiration
of Term
|
John J. Desmond
|
I
|
2019
|
Howard Thomas Hogan, Jr.
|
I
|
2019
|
Louisa M. Ives
|
I
|
2019
|
Milbrey Rennie Taylor
|
I
|
2019
|
Walter C. Teagle III
|
I
|
2019
|
Michael N. Vittorio
|
I
|
2019
|
Paul T. Canarick
|
II
|
2020
|
Alexander L. Cover
|
II
|
2020
|
Stephen V. Murphy
|
II
|
2020
|
Peter Quick
|
II
|
2020
|
Denise Strain
|
II
|
2020
|
Eric J. Tveter
|
II
|
2020
|
As to the election of directors, each stockholder entitled to vote has the right to vote, in person or by proxy, the number of shares owned by him or her for as many persons as there are directors to be elected. A stockholder may also cumulate his or her votes by giving one candidate as many votes as the number of directors to be elected multiplied by the number of his or her shares or by
evenly
distributing such votes on the same principle among any number of candidates. Cumulative voting can affect the election of directors if there are more nominees for director than positions to be filled. In the event that cumulative voting is in effect, it is the intention of the
proxies
to vote cumulatively for the nominees listed, and if authority for any nominee or nominees is withheld, the votes will be distributed among the remaining candidates
at
the discretion of the Board.
It is intended that shares represented by properly executed proxies will be voted at the meeting in accordance with the instructions indicated thereon and, in the absence of contrary indication, for the
re-
election of d
irectors
Desmond, Hogan, Taylor, Teagle and Vittorio
and
for
the election of
d
irector
Ives
. Each of the Class
I
director
s
will hold office until his
or her
successor is elected and qualified
, except that it is expected that Mr. Vittorio, in accordance with the terms of his employment agreement, will discontinue his service as a director at the annual meeting of stockholders following the year ending December 31, 2019
. If at the time of the 201
9
Annual Meeting any of the nominees named above is unavailable or chooses not to serve as a director (an event that the Board does not now anticipate), the proxies will be voted for the election as director of such other person or persons as the Board may designate.
The Board of Directors recommends a vote FOR all named nominees.
The following table sets forth a brief description of the business experience
during the past five years
of each of the
nominees and
Board members continuing in office
. It also indicates any other directorships held during the past five years in any company with a class of securities registered pursuant to section 12 of the Securities Exchange Act of 1934 (“
1934
Act”) or subject to the requirements of section 15(d) of the
1934
Act or any company registered as an investment company under the Investment Company Act of 1940. The year set forth for each director is the year in which the person named became a director of the Corporation and the Bank with the exception of Mr. Hogan
,
who became a director of the Corporation upon its formation in 198
4.
BUSINESS EXPERIENCE OF DIRECTORS
|
|
|
Name
|
Principal Occupations and
Other Directorships for Last 5 Years
|
Director
Since
|
Paul T. Canarick
(Age 62)
|
President and Principal, Paul Todd, Inc. (Construction Company)
|
1992
|
Alexander L. Cover
(Age 75)
|
Business and Management Consultant (Private Practice); Retired Partner of Ernst & Young LLP
|
2003
|
John J. Desmond
(Age 68)
|
Retired Partner of Grant Thornton LLP; Director and Chairman of the Audit Committee of MusclePharm Corporation
|
2016
|
Howard Thomas Hogan, Jr.
(Age 74)
|
Hogan & Hogan (Attorney, Private Practice)
|
1978
|
Louisa M. Ives
(Age 52)
|
Managing Director and member of the Executive and Investment Committees of Chilton Trust Company
|
2019
|
Stephen V. Murphy
(Age 73)
|
President, S.V. Murphy & Co. (Financial Advisory Services); Director: Man FRM Alternative Multi-Strategy Fund LLC; UST Global Private Markets Fund, LLC; Excelsior Venture Partners III, LLC; Excelsior Private Markets Fund II, LLC; Excelsior Private Markets Fund III, LLC; NB Crossroads Private Markets Fund IV, LLC; NB Crossroads Private Market Fund V Holdings, LP; NB Crossroads Private Market Fund VI; Holborn Corporation
|
2005
|
Peter Quick
(Age 63)
|
Retired President of the American Stock Exchange; Retired Partner of Burke and Quick Partners Holdings LLP, the parent company of Burke & Quick Partners LLC, a broker dealer; Director: Medicure Inc.; Gain Capital
|
2015
|
Denise Strain
(Age 65)
|
Retired Managing Director of Citigroup Inc.
|
2017
|
Milbrey Rennie Taylor
(Age 72)
|
Retired Executive Producer of CBS News
|
2008
|
Walter C. Teagle III
(Age 69)
|
Chairman of the Board, The First of Long Island Corporation and The First National Bank of Long Island; President and Owner, Teagle Management, Inc. (Private Investment Firm); Managing General Partner, Gulo Capital Partners L.P. (Private Investment Partnership); Chairman and Director, The Teagle Foundation, Inc. (Private Foundation)
|
1996
|
Eric J. Tveter
(Age 60)
|
Chairman of Upc Switzerland and Chief Executive Officer of Upc Central and Eastern Europe, Liberty Global plc; Chief Executive Officer, Central Europe Group, Liberty Global plc; Formerly: Chief Executive Officer, upc cablecom GmbH of Switzerland; Formerly: Chief Executive Officer, Austria/Switzerland Region Liberty Global plc
|
2013
|
Michael N. Vittorio
(Age 66)
|
President and Chief Executive Officer, The First of Long Island Corporation and The First National Bank of Long Island
|
2003
|
QUALIFICATIONS OF DIRECTORS
Diversity
.
The Governance and Nominating Committee believes that the Board as a whole should adequately reflect the diversity of the Company’s constituencies and the communities in which the Company conducts business. Although the Committee considers diversity in identifying nominees for director, it does not have a formal policy in this regard. The Committee has a broad view of diversity, and conceptualizes it to include differences of viewpoint, professional experience, education, skill and other individual qualities and attributes that contribute to board heterogeneity, as well as race,
ethnicity,
gender, and other characteristics.
Specific Core Competencies
.
In addition to general qualifications and the consideration of diversity, the Governance and Nominating Committee has developed a Skill Sets Matrix
that sets forth the specific core competencies it believes one or more Board members should possess. The matrix is used to evaluate the collective skills of the existing
B
oard and identify the skills that the Committee should seek when filling a Board vacancy or increasing the size of the Board. The Governance and Nominating Committee recognizes that some Board members may possess many of the core competencies, while others will possess only a few,
but that each Board member should have particular strength with respect to at least one. The identified core competencies, which are
subject to change from time to time, include, but are not limited to:
corporate governance, banking, strategic planning,
business leadership, organizational management
and
/or
business operations, ac
counting and reporting, finance
and/
or investments
,
technology
and/
or information security,
mergers and acquisitions,
legal
and/
or regulatory
, real estate, marketing
and/
or
public relations
and
financial accounting
experience necessary to qualify as an “audit committee financial expert” as defined in Regulation S-K of the Securities and Exchange Commission
(“SEC”)
.
With respect to each of the
Corporation
’s directors, the narrative that follows sets forth the specific experience, qualifications, attributes and skills that led to the conclusion that the person should serve as a director
considering
the Company’s business and structure and the general qualifications and core competencies identified and deemed desirable by the Governance and Nominating Committee.
Paul T. Canarick -
Mr. Can
arick joined the Board in 1992 and
is a member of the Governance and Nominating, Loan and Asset Liability Committees. Mr. Canarick is President and Principal of Paul Todd, Inc., a privately held construction company. Mr. Canarick’s experience has provided him with a number of the core competencies identified by the Governance and Nominating Committee,
which include
banking,
business leadership, organizational management and business operations and
real estate.
Alexander L. Cover -
Mr. Cover joined the Board in 2003 and is Chairman of the Audit Committee and a member of the Governance and Nominating and Asset Liability Committees. He is currently a business and management consultant in private practice and, among other things, assists privately held companies with developing business pl
ans. Previously
,
he was Partner-In-
Charge of the financial institutions practice of the Long
Island office of Ernst & Young
LLP. At Ernst & Young, Mr. Cover’s experience also included, among other things, serving as review partner on both SEC and non-SEC engagements. Mr. Cover has also been a director of a number of not-for-profit entities. Mr. Cover’s experience has provided him with a number of the core competencies identified by the Governance and Nominating Committee, w
hich include
corporate governance,
banking,
strategic planning,
business leadership, organizational management and business operations,
accounting and reporting, finance
,
mergers and acquisitions
, legal
and regulatory
.
John J. Desmond -
Mr. Desmond joined the Board in 2016 and is a member of the Audit
and Compensation
Committee
s
. Previously
,
he was Partner-In-
Charge of the Long Island office of
Grant Thornton
LLP
from 1988 through his retirement from the firm in 2015
, having served over 40 years in the public accounting industry
. At
Grant Thornton
, Mr.
Desmond
’s experience also included, among other things, serving as
lead audit
partner
for many public and privately-held c
ompanie
s. Mr. Desmond was elected by the U.S. Partners of Grant Thornton LLP to be a Partnership Board Member
from 2001 through 2013
. The Board was responsible for oversight of many of the firm’s activities including strategic planning, the performance of the senior leadership team and financial performance.
Mr. Desmond
also
serves as a
director
of a publicly held company
,
and
serves or has served as a board member of a number of not-for-profit entities.
Mr.
Desmond
’s experience has provided him with a number of the core competencies identified by the Governance and Nominating Committee, which include corporate governance, banking, strategic planning, business leadership, organizational management and business operations, accounting and reporting, finance, mergers and acquisitions, legal and regulatory.
Howard Thomas Hogan, Jr., Esq. -
Mr. Hogan joined the Board in 1978 and is a member of the Loan and Governance and Nominating Committees. Mr. Hogan is currently an attorney in private practice, with an emphasis on real estate. He currently serves and has served as a director of numerous not-for-profit and community organizations. His experience has provided him with a number of the core competencies identified by the Governance and Nominating Committee,
which include
corporate governance,
banking,
legal,
real estate
and
public relations
.
Louisa M. Ives -
Ms. Ives
joined
the Board in
January 2019
.
Ms. Ives has substantial experience in the financial services industry
currently serving as
Head of Manag
er Research at Chilton Trust
Company
where she is responsible for external manager selection and due diligence for Chilton clients.
Prio
r
to her current role, Ms. Ives was a Managing Director and
research analyst at Chilton Investment Company and served on the company’s Board of Directors.
She currently serves on the boards of various not-for-profit and community organizations.
Ms. Ives experience has provided her with a number of the core competencies identified by the Governance and Nominating Committee, which include corporate governance, strategic planning, business leadership, organizational management and business opera
tions, finance and investments and
mergers and acquisitions
.
Stephen V. Murphy -
Mr. Murphy joined the Board in 2005 and is Chairman of the
Asset Liability
Committee and a member of the Compensation
and Loan
Committees. He is currently President of S.V. Murphy & Co., a financial advisory firm. He also serves as a director of several registered investment companies. Mr. Murphy’s experience includes Merrill Lynch Capital Markets, where he was Managing Director in the Investment Banking Department in charge of the Financial Institutions Mergers and Acquisitions Group. Prior to that, Mr. Murphy was with The First Boston Corporation as Managing Director in the Corporate Finance Department in charge of the Commercial Banking Group for Financing and Strategic Services. Mr. Murphy also serves or has served as a director for various publicly held and not-for-profit entities. Mr. Murphy’s experience has provided him with a number of the core competencies identified by the Governance and Nominating Committee, w
hich include
corporate governance, banking, strategic planning, accounting and reporting, finance
and investments and
mergers and acquisitions
.
Peter Quick -
Mr. Quick joined the Board in 2015 and is
Chairman of the Loan Committee and
a member of the Audit
and
Governance and Nominating
Committees. Mr. Quick has over 30 years of experience in the securities and financial services industries. He is a recognized leader in the securities industry with experience in the domestic and international equit
y
market
s
, equities market making, market structure reform, trading technology and clearing operations. Mr. Quick is a
retired
Partner of Burke and Quick Partners Holdings LLP, the parent company of Burke & Quick Partners LLC, a broker dealer. Mr. Quick was President of the American Stock
Exchange from 2000 to 2005. Prior to joining the American Stock Exchange
,
he served as President of Quick & Reilly Inc., a Quick & Reilly subsidiary and a national discount brokerage firm. Mr. Quick
also
serves
or has served
as a director of
a number of
publicly held companies and
n
ot-for-profit entities. Mr. Quick’s experience has provided him with a number of the core competencies identified by the Governance and Nominating Committee,
which include
corporate governance,
banking,
strategic planning
,
business leadership, organizational management and business operations
,
accounting and reporting, finance
and investments
,
technology and information security,
mergers and acquisitions,
legal and regulatory and real estate
.
Denise Strain
-
Ms. Strain joined the Board in 2017
and is a member of the Governance and Nominating and Loan Committees
. Ms. Strain
has 35 years of experience in the banking industry including most recently as the Managing Director and Senior Tax Counsel of
Citigroup Inc
.
Ms. Strain
has
serve
d
as a member of the Board of Trustees of a not-for-profit educational institution.
Ms.
Strain’s experience has provided h
er
with a number of the core competencies identified by the Governance and Nominating Committee, which include
corporate governance,
banking, strategic planning, business leadership, organizational management and business operations, accounting and reporting, finance, mergers and acquisitions, legal and regulatory.
Milbrey Rennie Taylor -
Ms. Taylor joined the Board in 2008 and is
Chair of the
Governance and Nominating Committee
and a member of the Compensation Committee
. Ms. Taylor’s experience includes over thirty years in the television news business. She served as Executive Producer of CBS News Sunday Morning and CBS Weekend News. Ms. Taylor also served as Vice President of ThirdAge Media, an Internet company partly owned by CBS, Inc. Ms. Taylor serves and has served as a director of a number of not-for-profit entities. Ms. Taylor’s experience has provided her with a number of the core competencies identified by the Governance and Nominating Committee, w
hich include
corporate governance,
strategic planning,
business leadership, organizational management and business operations,
marketing
and public relations.
Walter C. Teagle III -
Mr. Teagle joined the Board in 1996, became Chairman of the Board in 2005 and is an ex officio member for all purposes of all Board committees of the Corporation and the Bank. Mr. Teagle is currently President and owner of Teagle Management, Inc., a private investment firm, Chairman and
D
irector of The Teagle Foundation, Inc. and Managing General Partner of Gulo Capital Partners L.P., a private investment partnership. Mr. Teagle’s past experience includes a variety of executive and board positions including Managing Director, Groton Partners LLC, a merchant banking firm; Officer and Managing Director, Groton Asset Management LLC, an investment management company; Executive Vice President and Director, Lexent, Inc., a publicly-held infrastructure service provider; and President, Chief Executive Officer, and Director, Metro Design Systems, Inc., an engineering design services firm. Mr. Teagle has also been a director of not-for-profit entities. Mr. Teagle’s experience has provided him with a number of the core competencies identified by the Governance and Nominating Committee,
which include
corporate governance,
banking,
strategic planning
,
business leadership, organizational management and business operations,
finance
and investments
, technology and information security,
and
mergers and acquisitions
.
Eric J. Tveter -
Mr. Tveter joined the Board in 2013 and is
Chairman of the Compensation Committee
. He is currently
Chairman of Upc Switzerland and
Chief Executive Officer
of Upc
Central
and Eastern
Europe, Liberty Global plc
. Prior to that he was
Chief Executive Officer
, Central Europe Group,
Liberty Global
plc;
Chief Executive Officer, Austria/Switzerland
Region
,
L
iberty Global
plc
; and Chief Executive Officer, upc cablecom GmbH of Switzerland
. Mr. Tveter has extensive knowledge and experience in the US, UK and European cable industries. He was President of UK cable operator Telewest Global Inc. and held a range of senior management positions at Time Warner Cable, Comcast Corporation and Cablevision Systems Corporation. Mr. Tveter
also
served as Chairman of Sightspeed
Inc.
, a video conferencing and communications provider.
Mr. Tveter’s experience has provided him with a number of the core competencies identified by the Governance and Nominating Committee,
which include
corporate governance,
banking,
strategic planning,
business leadership, organizational management and business operations,
accounting and reporting, finance,
technology and information security,
mergers and acquisitions,
legal and regulatory,
real estate,
marketing
and public relations
.
Michael N. Vittorio -
Mr. Vittorio has been CEO
of the Corporation and the Bank since 2003
and is a member of the Loan and Asset Liability Committees
of the Bank
.
Prior to his employment by the Company in 2002, Mr. Vittorio was employed at J.P. Morgan Chase as Senior Vice President responsible for managing Chase Insurance Agency’s Insurance Brokerage and Advisory Service Business. Previously he served in various capacities at J.P. Morgan Chase including Senior Credit Officer for Small Business Financial Services, Middle Market Regional Manager and Division Executive in the Small Business/Commercial Division. Mr. Vittorio also serves or has served as a director of a variety of not-for-profit entities. Mr. Vittorio’s experience has provided him with a number of the core competencies identified by the Governance and Nominating Committee,
which include
corporate governance,
banking,
strategic planning,
business leadership, organizational management and business operations,
mergers and acquisitions, real estate, marketing
and public relations
.
BOARD LEADERSHIP STRUCTURE
The Board has determined that the Chairman of the Board will be an independent director.
The Board believes that stockholder interests are best served by having a Chairman of the Board who is independent of management and whose exclusive responsibility is the long-term best interest of the Corporation’s stockholders.
Walter C. Teagle III has served as Chairman of the Board since May 2005. As Chairman, Mr. Teagle organizes the work of the Board and ensures that the Board has access to sufficient information to enable it to carry out its
functions
, including monitoring the Corporation’s performance and the performance of
the B
oard and
management.
The role of the Chairman of the Board includes: (1) presiding over all meetings of the Board and stockholders, including regular executive sessions of the Board in which the C
E
O, a management director, and other members of management do not participate; (2) establishing the annual agenda of the Board and agendas of each meeting in consultation with the CEO; (3) serving as an ex officio member of each board committee and advising wi
th respect to the work of each B
oard committee; (4) coordinating periodic Board reviews of management’s strategic plan for the Corporation; and (5) coordinating the Compensation Committee annual performance review of the CEO.
BOARD’S ROLE IN RISK OVERSIGHT
Risk is an integral part of Board and Board committee discussions. The significant risks facing the Corporation are set forth in an Enterprise Risk Management document. The Corporation’s management team, which includes a Chief Risk Officer, is responsible for identifying, assessing and managing risk and the Board is responsible for risk oversight and fulfills this responsibility primarily through its committees. In granting authority to management, approving policies and strategies and receiving management reports, the Board and its committees consider, among other things, the risks that the Corporation faces. For each critical risk, such as credit risk, interest rate risk
,
liquidity risk,
and cybersecurity risk,
the Corporation has a formal written policy that is approved by an appropriate Board committee or the full Board.
As reflected in the Corporation’s Corporate Governance Guidelines, the Board and its committees address succession planning risk both in the ordinary course of business and
on a
contingen
t basis
in case of unexpected events.
The Corporation has comprehensive written succession planning documents that cover the Board and its committees, the CEO and the other members of executive management and from time to time retains consultants with expertise in succession planning matters. The Corporation’s succession planning documents are updated no less often than annually and are actively used by the Board and its committees to oversee and ensure a smooth transition should Board members or key members of executive management retire or otherwise leave the employ of the Corporation.
The following table sets forth the risk oversight responsibilities
of the Board and Board committees
.
|
|
Board or Board Committee
|
Risk Oversight Responsibilities
|
Board of Directors
|
Strategic, Earnings and Management Succession
|
Loan Committee
|
Credit and Allowance for Loan Losses
|
Asset Liability Committee
|
Interest Rate, Liquidity, Price, Market and Economic Conditions
|
Audit Committee
|
Operational, Regulatory and Legislative, Technology and Cybersecurity, and Income Tax
|
Governance and Nominating Committee
|
Reputation, Legal and Board Succession
|
Compensation Committee
|
Key Personnel, Compensation and Retention
|
CEO Succession
.
It is expected that Michael N. Vittorio will retire as President and CEO of the Corporation and the Bank on December 31, 2019. In addition, and in accordance with the terms of his employment agreement, Mr. Vittorio is expected to continue his service as a director until the annual meeting of stockholders following the year ending December 31, 2019. A process for this planned succession to a new CEO has been underway for
a
period of time and is being led by a designated committee of the Board. The services of a nationally recognized leadership consulting firm have been engaged. The Board intends to make a decision and a public announcement as to Mr. Vittorio’s successor in a timeframe that will allow for an orderly transition.
MEETINGS OF THE BOARD OF DIRECTORS
All of the members of the Board of the Corporation also serve on the Board of the Bank. The Board of the Corporation held ten regular
and three special
meetings during 201
8
. Each director attended at least 75% of the aggregate number of Board meetings and meetings of the committees on which such director served.
The Board meets
regularly
in executive session
throughout the year.
BOARD COMMITTEES AND MEETINGS
The Board of the Corporation has three standing committees: the Governance and Nominating Committee; the Audit Committee; and the Compensation Committee. The Board of the Bank also has two standing committees: the Loan Committee and the Asset Liability Committee.
Governance and Nominating Committee
All the members of the Corporation’s Governance and Nominating Committee are independent directors as defined in the Nasdaq Rules. The members of the Governance and Nominating Committee are Paul T. Canarick, Alexander L. Cover, Howard Thomas Hogan, Jr.,
Peter Quick
,
Denise Strain,
Milbrey Rennie Taylor and Walter C. Teagle III. The Committee met
six
times during 201
8
.
The Corporation’s Board has adopted a formal written charter for the Governance and Nominating Committee. A current copy of the charter and the Corporation’s Corporate Governance Guidelines are available on the Corporation’s website by going to
www.FNBLI.com
,
placing the cursor over “Investor Relations,” then clicking on “Corporate Governance” and then clicking on “Board Governance and Nominating Committee Charter” or “Corporate Governance Guidelines.”
Among other things, t
he Governance and Nominating Committee is currently responsible for:
(1) maintaining the director succession plan;
(
2
) identifying individuals qualified to become Board members and recommending to the Board the director nominees for the next annual meeting of stockholders; (
3
)
recommending to the Board written corporate governance guidelines and monitoring compliance with said guidelines; (
4
) leading the Board in an annual Board self-assessment and reporting to the Board on its own self-assessment and the self-assessments performed by the other Board committees; (
5
) recommending to the Board
,
director candidates for each committee
; and (
6
)
establishing the director skill sets matrix to evaluate the collective skills of the existing board and to identify skills that may be sought when filling vacancies
.
Although the Corporation has a long history of being able to attract and maintain a cohesive Board with the variety of skills necessary to oversee the affairs of the Corporation, the Governance and Nominating Committee will consider director candidates recommended by stockholders. Submission of candidates may be made in writing at any time. However, to be considered by the Governance and Nominating Committee for nomination at the 20
20
annual meeting, such submissions should be made no later than
December
1
6
, 201
9
to the Chair of the Governance and Nominating Committee at the Corporation’s address set forth in this proxy statement. In addition, nominations for the election of directors may be made by any stockholder entitled to vote for the election of directors provided that such nominations are made in accordance with the provisions of the Corporation’s bylaws establishing the information and notice requirements for such nominations.
In addition to interviews, the Governance and Nominating Committee may evaluate potential nominees by reviewing resumes, checking business and/or personal references, and performing background checks as deemed appropriate. The Corporation has not paid a fee to any third party or parties to assist in identifying or evaluating potential nominees.
Except for M
s
.
Ives
who was
appointed
by the Board
effective
January
1,
201
9
, a
ll of the Class I nominees approved by the Governance and Nominating Committee for inclusion on the Corporation’s proxy card for the Annual Meeting of Stockholders to be held April
1
6
, 201
9
are directors standing for re-election.
M
s
.
Ives
introduction
to the Board was based on
a referral from
a
business associate of a
current
non-management
Board member
.
Audit Committee
The members of the Audit Committee are Alexander L. Cover,
J
ohn J. Desmond,
Peter Quick
and
Walter C. Teagle III. The Committee met
eight
times during 201
8
.
The Corporation’s Board has adopted a formal written charter for the Audit Committee. A current copy of the charter is available on the Corporation’s website by going to
www.FNBLI.com
,
placing the cursor over “Investor Relations,” then clicking on “Corporate Governance” and then clicking on “Board Audit Committee Charter.”
The Board has determined that all members of the Audit Committee are independent as independence for audit committee members is defined in SEC Rule 10A-3 and the Nasdaq Rules. The Board has also determined that Alexander L. Cover
and
John J. Desmond
each
qualify as
an “audit committee financial expert” as that term is defined in Item 407 of Regulation S-K of the Securities and Exchange Commission. The Board has also determined that all members of the Audit Committee have banking or related financial management expertise.
The responsibilities of the Audit Committee are described under the heading “Audit Committee Report”
in
this proxy statement
.
Compensation Committee
All the members of the Corporation’s Compensation Committee are independent directors as defined in the Nasdaq Rules. The members of the Compensation Committee are
John J. Desmond,
Stephen V. Murphy, Milbrey Rennie Taylor, Walter C. Teagle III and Eric J. Tveter. The Committee met
five
times during 201
8
.
The Corporation’s Board has adopted a formal written charter for the Compensation Committee. A current copy of the charter is available on the Corporation’s website by going to
www.FNBLI.com
,
placing the cursor over “Investor Relations,” then clicking on “Corporate Governance” and then clicking on “Board Compensation Committee Charter.”
The purpose of the Compensation Committee is to assist the Board in fulfilling its oversight responsibilities by reviewing and evaluating the Corporation’s compensation practices to ensure that appropriate policies, procedures and systems are in place to identify, measure, and control related risks, including strategic, reputation and operational risk. The Committee should identify those employees, including but not limited to the CEO and other executive officers, who could potentially expose the Corporation to material amounts of such risk and arrive at compensation for these employees and non-management directors that is appropriate and competitive and does not expose the Corporation to unacceptable risk.
Among other things, t
he Compensation Committee is responsible for: (1)
implementing and maintaining guiding principles, compensation policies and compensation plans for the
CEO, other executive officers and non-
management
directors
, all as set forth in the Corporation’s
Proxy Statement for its annual meeting of shareholders,
and reporting and making recommendations to the Board with respect thereto
taking into account market competitive data
; (2) recommending to the Board
approval of employment agreements
for the CEO and other executive officers;
(3) evaluating the performance of the CEO
against established goals and objectives
and
approving for
Board
ratification
the base salary level for the CEO
subject to any existing employment agreement
; (4) reviewing
the CEO’s performance evaluation of the other executive officers of the Corporation and
approving for
Board
ratification the
base salary level of each such officer
subject to any existing employment agreements
; (5)
approving for
Board
ratification
cash
incentives and bonuses
to be paid to
the CEO and other executive officers pursuant to the Corporation’s incentive compensation plans or otherwise
; (6) setting corporate goals
, objectives and compensation plans
used to determine
cash incentives and bonuses paid to the CEO and other executive officers and equity compensation awarded to the CEO, other executive officers and non-management directors
– the Compensation Committee will periodically engage a compensation consulting firm to assist them in this endeavor
; (7)
approving for
Board
ratification
awards of equity compensation to the CEO, other executive officers and non-management directors pursuant to the Corporation’s equity compensation plans or otherwise
; (8)
recommending to the Board compensation proposals such as the compensation to be paid to the Corporation’s NEOs, say-on-pay, say-when-on-pay or equity incentive plans to be included in the Corporation’s annual proxy statement
; (9) reviewing the overall annual salary budget for the Bank’s entire employee population; (10) conducting, or causing to be conducted, at its discretion, a periodic review of the Corporation’s pension, 401(k), supplemental executive retirement and health and welfare plans; (11) reviewing
and approving
the compensation
discussion and analysis
included in the Corporation’s annual proxy statement and preparing or causing to be prepared
the
Compensation
Committee
Report
to
be included therein; (12)
reviewing executive management’s determination of compensation of non-executive officers of the Corporation including the total amount of incentive compensation to be paid to such officers;
(13)
periodically reviewing the incentive compensation plans for senior vice presidents and other employee categories below the level of executive officer;
and
(1
4
)
considering the results of the most recent non-binding, stockholder advisory vote on executive compensation and, if deemed necessary, recommending to the Board changes in compensation policies, practices and decisions.
The Compensation Committee a
dminist
ers
the Corporation’s equity incentive plan
,
includ
ing
selecting directors and officers to whom awards are to be made and determining the timing, duration, amount, type and terms of each award. Members of the Compensation Committee as well as all other non-employee directors of the Corporation have been eligible for awards of stock-based compensation in the past and it is currently anticipated that they will
be eligible for future awards.
In determining an appropriate level of compensation for the CEO
,
other executive officers
and the Board
, the Compensation Committee periodically engages an independent compensation consulting firm to gather and help analyze the information necessary to make such determinations. In 201
7
, the Compensation Committee engaged Pearl Meyer & Partners (“PM&P”), an independent national compensation consulting firm, to conduct a review of the compensation of the Company’s CEO
,
other executive officers
and the B
oard
. The objective of the review was to provide an assessment of the competitiveness and effectiveness of the Corporation’s compensation programs relative to peer banks.
The Compensation Committee anticipates engaging a compensation consulting firm in 2019 to perform a similar review.
In performing their
2017
review, PM&P worked with the Compensation Committee to develop a custom
peer group. The peer banks
were
similar in size and scope to the Bank, with
total assets
averaging
approximately $
4
.
1
billion. This
average
compare
d
to total assets for the Bank of approximately $
3
.
9
billion at year-end 201
7
. The peer group consist
ed
of
eight
een (1
8
) publicly-held bank holding companies located in the Bank’s gene
ral geographic area and include
d
Arrow Financial Corporation, Bridge Bancorp, Inc.,
Brookline Bancorp, Inc.,
Bryn Mawr Bank Corporation,
Century Bancorp, Inc.,
CNB Financial Corporation,
ConnectOne Bancorp, Inc.,
Financial Institutions, Inc.,
First Connecticut Bancorp, Inc.,
Flushing Financial Corporation, Lakeland Bancorp, Inc.,
Northfield Bancorp, Inc., OceanFirst Financial Corp.,
Peapack-Gladstone Financial Corporation, Sun Bancorp, Inc.,
TrustCo Bank Corp NY,
Univest Corporation of Pennsylvania and Washington Trust Bancorp, Inc.
In addition to gathering and analyzing compensation data for the peer group,
PM&P also gathered
and analyzed
peer
compensation
data from published industry surveys, including their own survey and surveys performed by
the American Bankers Association
and
other nationally recognized compensation consulting firms. In performing their reviews, PM&P assessed
total remuneration and the individual elements of total remuneration
including base salary, annual cash incentive compensation
,
annual equity awards
, retirement benefits and perquisites
. Based on their reviews, PM&P provided the Compensation Committee with a comparison of the compensation of the CEO and other executive officers to the market
10
th
,
25
th
, 50
th
,
75
th
and 90
th
percentiles
.
PM&P also assessed the elements of Board compensation both individually and in the aggregate, including annual retainers, meeting-based fees and fees for chair roles and special meetings.
In addition to
the services described above, PM&P
was also engaged
in 2017
to perform a review of the structural elements of the Corporation’s executive incentive plan
.
The Compensation Committee received a letter from PM&P regarding its independence under the six factors to be considered for such purposes under N
asdaq
R
ules
, assessed
the independence of PM&P pursuant
to such rules and determined that
PM&P is
an independent and conflict-free advi
sor to the Corporation.
The Compensation Committee considers
the most recent stockholder say-on-
pay
advisory vote in reviewing the Corporation’s executive compensation policies, practices and decisions. The Compensation Committee concluded that no significant revisions were necessary to our executive compensation program as a result of the most recent say
-
on
-
pay
advisory vote
.
Compensation Committee Interlocks and Insider Participation.
No member of the Compensation Committee: (1) was an officer or employee of the Corporation or the Bank; (2) was formerly an officer of the Corporation or the Bank; or (3) had any relationship requiring disclosure by the Corporation under the SEC’s rules governing disclosure of related party transactions. No executive officer of the Corporation served as a director or member of a compensation committee of another entity, one of whose executive officers served as a member of the Corporation’s Board or Compensation Committee.
Loan Committee of the Bank
The members of the Loan Committee are Paul T. Canarick, Howard Thomas Hogan, Jr., Stephen V. Murphy,
Peter Quick,
Denise Strain,
Walter C. Teagle III and Michael N. Vittorio.
The Committee met
four
times during 201
8
.
The Loan Committee is responsible for providing oversight with respect to the Bank’s lending activities. In this regard, the Committee: (1) oversees credit risk and approves policies that govern lending activities and credit risk management; (2) reviews and ratifies the allowance for loan and lease losses; (3) reviews and approves specific loan transactions where required by policy; and (4) reviews reports from management, internal auditors, the internal loan review function and regulators related to lending activities and credit risk.
Asset Liability Committee of the Bank
The members of the Asset Liability Committee are Paul T. Canarick, Alexander L. Cover, Stephen V. Murphy, Walter C. Teagle III and Michael N. Vittorio. The Committee met
five
times during 201
8
.
The Asset Liability Committee is responsible for providing oversight with respect to the Bank’s achievement of its overall objective of optimizing returns consistent with prudent risk management regarding assets, liabilities, equity and off-balance sheet activities. In this regard, the Committee: (1) oversees investment risk and approves the investment policy limits and operating guidelines set forth in
the Bank’s Investment Policy; (2) oversees
the Bank’s investment in and management of bank-owned life insurance and approves the pre-purchase, ongoing monitoring and other requirements set forth in the Bank’s Bank-Owned Life Insurance Policy;
(3
) oversees interest rate risk and approves the risk limits and operating guidelines set forth in the Bank
’s Interest Rate Risk Policy; (4
) oversees liquidity risk and approves the risk limits and operating guidelines set forth in the Bank’s Liquidity Policy and Liquidity Contingency Plan; and (
5
) oversees management’s use
of embedded and stand-alone derivative instruments for purposes
of managing interest rate risk and approves the hedging policy
appendix
of the Bank’s interest rate risk policy.
BOARD MEMBER ATTENDANCE AT ANNUAL MEETINGS
The Board strongly encourages each of its members to attend the Annual Meeting of Stockholders. In this regard, the Board sets the date for the Annual Meeting of Stockholders to coincide with its April Board meeting. All directors
attended the prior year’s Annual Meeting of Stockholders which was h
eld on April
1
7
, 201
8
.
SECURITY
HOLDER COMMUNICATIONS TO THE BOARD OF DIRECTORS
The Corporation’s Board does not hav
e a formal process for
security holders
to send communications to the Board. The Board believes that a formal process is unnecessary because the Corporation is relatively small and both the Chairman of the Board and the CEO, who is also a director, are easily accessible by telephone and mail.
COMPENSATION OF DIRECTORS
Cash Compensation
The Chairman of the Board of the Corporation and the Bank receives a
n annual
retainer for service on both boards. Non-employee directors of the Corporation receive a
n annual
retainer for service on
both b
oard
s for attending up to
ten
meetings per year
and
a
per meeting fee for
each meeting in excess of ten
.
Annual
retainers and per meeting fees for service on both boards
in 201
8
are shown in the following table.
|
|
|
Board Member
|
Annual Retainer
|
Per Meeting Fee
|
Chairman
|
$113,500
|
None
|
Non-employee Directors
|
$35,000
|
$1,250
|
Non-employee directors of the Corporation and the Bank receive annual retainers for Board committee service as shown in the following table.
|
|
|
Committee
|
Committee Chair
|
Committee Member
|
Audit Committee
|
$16,000
|
$7,500
|
Compensation Committee
|
$11,000
|
$5,000
|
Governance and Nominating Committee
|
$9,000
|
$4,000
|
Asset Liability Committee
|
$11,000
|
$5,000
|
Loan Committee
|
$11,000
|
$4,000
|
There are no per meeting fees for
standing
committee meetings
.
Loan Committee members are paid $500 for each Management Loan Committee meeting attended
,
Ad-Hoc Committee
chairs
are paid
fees ranging from $500 to $1,000 and Ad-Hoc Committee
members
are paid
fees ranging from $500 to $750
for each
meeting attended
.
The Chairman does not receive per meeting fees or committee retainers. The CEO does not receive retainers or per meeting fees for Board or Board committee service.
Stock-based Compensation
The Corporation’s 2014 Equity Incentive Plan
(“2014 Plan”)
allows for the granting of equity awards to non-employee directors of the Corporation. Equity compensation for directors consists of restricted stock units (“RSUs”). The
grant date fair
value
of RSUs granted to the Chairman and each non-employee director
in 2019 based on 2018 service was $70,000 and $35,000, respectively
.
RSUs granted to non-employee directors
i
n 2016
through
201
9
are time-based RSUs that vest ratably and convert into shares of Common Stock over a three-year time period. The RSUs granted in January 2016 also receive
d
annual cash dividend
equivalent
s at the same rate as the dividends declared by the Board on the Corporation’s
C
ommon
S
tock.
All outstanding
RSUs
granted to directors
immediately vest upon a
n involuntary termination following a
change in control, total and permanent disability
or death
.
Retirement Plan
On June 18, 1991, the Board of the Bank adopted The First National Bank of Long Island Retirement Plan for Directors ("Retirement Plan"). Effective December 31, 2000, benefits earned
to date
under the Retirement Plan
were frozen and the ability of directors to earn additional benefits was discontinued. Upon retirement after attaining the age of sixty (60), each of the current directors who was a director prior to 2001 will receive a credit ("Credit Percentage") of ten percent (10%) multiplied by the number of years of service on the Board through December 31, 2000,
not to exceed
one hundred percent (100%). The annual benefit ("Annual Benefit")
payable
under the Retirement Plan is equal to the monthly Board of Directors’ attendance fee in effect as of December 31, 2000
, which was
$1,000, multiplied by twelve (12) and then multiplied by the Credit Percentage. The Annual Benefit is payable in quarterly installments for a period of seven (7) years from the date of
retirement (
"Payment Period"). In the event of the death of a director or a retired director, the surviving spouse of such director is entitled to receive an annual payment equal to seventy-five percent (75%) of the Annual Benefit, calculated as set forth above, and payable over the remainder of the applicable Payment Period.
Messrs. Canarick, Hogan and Teagle are the only directors participating in the Retirement Plan.
The following table sets forth information concerning the compensation of directors for 201
8
.
D
irector Compensation
|
|
|
|
|
|
|
|
Fees Earned or Paid in Cash
|
Stock Awards
(1)
|
Change in Pension Value and Nonqualified Deferred Compensation Earnings
(2)
|
Total
|
Aggregate Option Awards Outstanding
At Year End
|
Aggregate Stock Awards Outstanding
(3)
|
Name
|
($)
|
($)
|
($)
|
($)
|
(#)
|
(#)
|
Paul T. Canarick
|
52,750
|
35,000
|
1,590
|
89,340
|
6,272
|
4,525
|
Alexander L. Cover
|
65,250
|
35,000
|
-
|
100,250
|
10,118
|
4,525
|
John J. Desmond
|
51,250
|
35,000
|
-
|
86,250
|
-
|
3,339
|
Howard Thomas Hogan, Jr., Esq.
|
45,500
|
35,000
|
3,954
|
84,454
|
6,272
|
4,525
|
Louisa M. Ives
(4)
|
-
|
-
|
-
|
-
|
-
|
-
|
Stephen V. Murphy
|
60,750
|
35,000
|
-
|
95,750
|
7,868
|
4,525
|
Peter Quick
|
66,127
|
35,000
|
-
|
101,127
|
-
|
4,139
|
Denise Strain
|
48,417
|
35,000
|
-
|
83,417
|
-
|
1,905
|
Milbrey Rennie Taylor
|
52,750
|
35,000
|
-
|
87,750
|
10,118
|
4,525
|
Walter C. Teagle III
|
113,500
|
70,000
|
1,255
|
184,755
|
12,540
|
9,050
|
Eric J. Tveter
|
49,000
|
35,000
|
-
|
84,000
|
-
|
4,525
|
|
(1)
|
|
The values shown are for
time-based
RSU awards made in January 201
9
based on 201
8
service
and represent the aggregate grant date fair values computed in accordance with
FASB ASC Topic 718. (See Note I
"Stock-Based Compensation" to the Corporation's 201
8
Consolidated Financial Statements.
)
|
|
(2)
|
|
The change in pension value represents interest on the benefit frozen as of December 31, 2000.
|
|
(3)
|
|
Includes grants in January 201
9
based on 201
8
service
.
|
|
(4)
|
|
M
s
.
Ives
was appointed to the Board
effective
January
1,
201
9
.
|
MANAGEMENT
S
et forth
below is the business experience during the past five years and other
information
as to
all executive officers of the Corporation and the Bank as of the date of this proxy statement.
|
|
|
|
Executive Officers
|
Age
|
Present Capacity
|
Officer Since
|
Michael N. Vittorio
|
66
|
Director, President and Chief Executive Officer of the Corporation and the Bank
|
2002
|
Mark D. Curtis
|
64
|
Senior Executive Vice President and Chief Financial Officer of the Corporation and the Bank; Treasurer of the Corporation and Cashier of the Bank
|
1997
|
Christopher Becker
|
53
|
Executive Vice President and Chief Risk Officer of the Corporation and the Bank; Corporate Secretary of the Corporation
|
2011
|
Christopher Hilton
|
41
|
Executive Vice President of the Corporation and the Bank; Commercial Banking Division Executive of the Bank
|
2017
|
Paul Daley
|
59
|
Executive Vice President of the Corporation and the Bank; Senior Commercial Banking Officer of the Bank
|
1996
|
Donald L. Manfredonia
|
67
|
Executive Vice President of the Corporation and the Bank
; Head of New Business Development for the Bank
|
1987
|
Richard P. Perro
|
53
|
Executive Vice President of the Corporation and the Bank; Branch Distribution Officer and Security Officer of the Bank
|
2002
|
Anne Marie Stefanucci
|
59
|
Executive Vice President of the Corporation and the Bank; Senior Credit Officer of the Bank
|
2006
|
Mr. Hilton joined the Bank in June 2017 as Senior Vice President and
Commercial Banking Division Executive. On January 1, 2018, Mr. Hilton was promoted to Executive Vice President of the Corporation and the Bank.
Prior to joining the Bank, Mr. Hilton served as Executive Vice President & Chief Credit Officer of Suffolk County National Bank and its holding company, Suffolk Bancorp, until its acquisition by People’s United Bank in April 2017. Mr. Hilton joined People’s United Bank and served as Senior Credit Officer until May 2017. Prior to his employment at Suffolk County National Bank, Mr. Hilton served as Executive Vice President & Chief Credit Officer of Empire National Bank and Vice President of its holding company, Empire Bancorp.
Ms. Stefanucci joined the Bank in 2006 and for the past six years was Senior Vice President, Credit Risk and Administration Officer. Ms. Stefanucci was promoted to Executive Vice President of the Corporation and the Bank effective December 1, 2018 and is the Bank’s Senior Credit Officer.
PROPOSAL 2
NON-BINDING, ADVISORY VOTE TO APPROVE THE COMPENSATION PAID TO THE
CORPORATION’S NAMED EXECUTIVE OFFICERS
The compensation paid to our
NEOs
is disclosed in this proxy statement in the sections entitled “Compensation Discussion and Analysis,” “Compensation of Executive Officers,” “Compensation Pursu
ant to Plans” and “Employment Agreements
.” We believe that our compensation policies, practices and decisions are focused on pay-for-performance principles and are strongly aligned with the long-term best interests of our stockholders. Compensation of our
NEOs
is designed to enable us to attract and retain talented and experienced senior executives to lead the Corporation successfully in a competitive environment. Stockholders are being asked to cast a non-binding, advisory vote on the following resolution:
RESOLVED, that the compensation paid to the Corporation’s
NEOs
as disclosed in its proxy statement for the April
1
6
, 201
9
Annual Meeting of Stockholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.
The affirmative vote of the holders of a majority of shares represented in person or by proxy and voting on this item will be required for approval.
Your vote on this Proposal 2 is advisory, and therefore not binding on the Corporation, the Compensation Committee or the Board. The vote will not be construed to overrule any decision by the Corporation
, the Compensation Committee
or the Board; to create or imply any change to the fiduciary duties of the Corporation
, the Compensation Committee
or the Board; or to create or imply any additional fiduciary duties for the Corporation
, the Compensation Committee
or the Board. However, our Board and our Compensation Committee value the opinions of our stockholders and to the extent there is a significant vote against the compensation paid to our
NEOs
as disclosed in this proxy statement, we will consider our stockholders’ concerns and the
Board and the
Compensation Committee will evaluate whether any actions are necessary to address those concerns.
The Board of Directors recommends a vote FOR the proposal to approve the
compensation paid to the Corporation’s named executive officers.
COMPENSATION COMMITTEE REPORT
We have reviewed and discussed with management the Compensation Discussion and Analysis included herein and provided pursuant to Item 402(b) of Regulation S-K.
Based on this review and discussion, we recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. The Compensation Committee:
|
·
|
|
Eric J. Tveter
, Chairman
|
The preceding report shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 (“1933 Act”) or the 1934 Act, except to the extent the Corporation specifically incorporates this information by reference, and shall not otherwise be deemed filed under the 1933 Act or the 1934 Act.
COMPENSATION DISCUSSION AND ANALYSIS
The following is a discussion of the compensation awarded to, earned by or paid to the
NEOs
. The discussion explains all the material elements of the Corporation’s compensation of the
NEOs
. It should be read in conjunction with the other executive compensation disclosures that appear elsewhere in this proxy statement.
Guiding Principles
In designing and maintaining a compensation program for the Corporation’s
NEOs
,
other executive officers and employees,
the Compensation Committee adheres to the following guiding principles:
|
(1)
|
|
The compensation program should be principles-based, employ best practices in executive compensation and consider all relevant regulatory guidance regarding sound incentive compensation policies.
|
|
(2)
|
|
The compensation program should be designed and supervised by the Compensation Committee with, as needed, the assistance of independent compensation consultants, legal counsel and other advisors who have significant experience in risk management, compensation practices and legal matters in the financial services industry.
|
|
(3)
|
|
The Compensation Committee should consist entirely of independent directors and operate under a charter adopted by the Board that clearly defines its duties and responsibilities. Significant approvals by the Compensation Committee regarding the provisions of the executive compensation program and awards thereunder should be ratified by the full Board.
|
|
(4)
|
|
A significant portion of executive compensation awarded under the program should be directly tied to corporate performance and thereby closely aligned with the interests of stockholders. The corporate performance levels necessary to earn threshold, target and maximum cash incentive and equity awards should be determined by the Compensation Committee and should not encourage inappropriate risks that could lead to material financial loss to the Bank.
|
|
(5)
|
|
The compensation program should enable the Corporation to attract and retain highly skilled professionals in each necessary discipline (i.e., executive, financial, lending, operations, risk management).
|
|
(6)
|
|
Compensation paid should be appropriately balanced between short and long-term components. The short-term components should
primarily
consist of base salary and cash incentive compensation and the long-term components should be equity awards that vest over time as well as retirement benefits.
|
|
(7)
|
|
The competitiveness of total direct compensation, which consists of base salary, cash incentive and equity awards, should be tested regularly by a comparison to: (1) a group of peer banks selected by the Compensation Committee that are similar in size and scope to the Corporation; and (2) amounts published in compensation surveys for the banking industry conducted by nationally recognized independent compensation consulting firms.
|
|
(8)
|
|
The compensation program should achieve internal equity among the Corporation’s executive officers.
|
|
(9)
|
|
Retirement benefits should be market competitive and evaluated based on the percentage of the executive’s income replaced in retirement.
|
|
(10)
|
|
Payments upon a change in control or termination should be market competitive, reasona
ble in amount and designed to en
sure that the executive officers of the Bank are not significantly harmed nor unduly enriched and are therefore objective with respect to the consummation of a transaction, such as a sale or merger of the Bank, that may be in the best interests of the Corporation’s stockholders.
|
|
(11)
|
|
The Compensation Committee should identify those employees, whether they
are
executive officers or otherwise, who could potentially expose the Corporation to material amounts of risk. The compensation of such employees should be designed to discourage imprudent risk taking and contain maximum incentive amounts that do not represent windfalls.
|
|
(12)
|
|
Clawbacks should be utilized within the compensation program
in accordance with our clawback policy and applicable law
.
|
|
(13)
|
|
Retention of vested or exercised equity awards should be required
until
stock ownership guidelines
are met
.
|
|
(14)
|
|
Employees, whether they are
executive officers or otherwise, should be prohibited from hedging the value of equity compensation that vests over time.
|
|
(15)
|
|
Performance
goals should be established by the Compensation Committee
and ratified by the full Board.
|
|
(16)
|
|
Achievement of performance goals should be certified by the Compensation Committee
prior to the payment of awards.
|
Objectives of the Executive Compensation Program
The Corporation’s executive compensation program is designed to enable the Corporation to attract and retain talent
ed executive officers
necessary to safely and successfully operate and grow the Bank.
The executive compensation program promotes sound risk management and long-term value creation for our stockholders.
What the Executive Compensation Program is Designed to Reward
Certain elements of the executive compensation program are intended to reward current performance
.
By offering long-term equity compensation, the executive compensation program is
also
designed to reward executive officers who help maximize long-term financial performance and earnings growth of the Corporation.
Elements of Executive Compensation
The executive compensation program consists of four basic components: (1) base salary; (2)
annual
cash incentive compensation; (3) equity awards; and (4) other noncash compensation, consisting primarily of retirement benefits
and reasonable perquisites
.
Why We Choose To Pay Each Element of Executive Compensation
Base Salary.
The Compensation Committee believes that base salary for a
n
NEO
should compensate the officer for the skills and effort required to perform the officer’s day-to-day responsibilities, taking into account the size and complexity of the Compa
ny.
Annual
Cash Incentive
Compensation
.
The Compensation Committee has included annual cash incentive compensation in the executive compensation program as a means to incent executive officers to optimize corporate performance through, among other things, the achievement of annual corporate goals set forth in the Corporation’s strategic plan.
Our Compensation
Committee recom
mended,
the Board
adopted and the stockholders approved
the 2016 Cash Incentive Plan, which provides the opportunity for a cash incentive payment based upon the achievement of corporate and individual goals.
Equity Awards
. The Compensation Committee uses equity awards granted under the Corporation’s equity incentive plan as a means to incent executive officers to optimize corporate performance over a
n extended
time-period. Equity awards, together with retirement benefits, are the longer-term components of
executive
compensation.
Other Noncash Compensation.
Other noncash compensation consists of: (1) retirement benefits paid under the Bank’s defined benefit pension plan
(“Pension Plan”), 401(k) P
lan and Supplemental Executive Retirement Plan (“SERP”); and (2) noncash fringe benefits not available to the general employee population of the Bank. Noncash fringe benefits, other than those available to the general employee population at the Bank, include the personal use of business automobiles and
a
country club
membership for the CEO
.
Retirement benefits provided by the Corporation’s
P
ension
and
401(k) Plan
s are
intended
to encourage
the
NEOs
to maintain their employment with the Corporation and maximize long-term corporate performance. The SERP
, of which
the CEO
is
the only participant
,
provides
the additional pension and 401(k) benefits that
t
he
CEO
would receive in the absence of Internal Revenue Code provisions which limit the amount of compensation that can be considered in determining retirement benefits to be paid under the Bank’s tax-qualified retirement plans.
The SERP is explained in the “PENSION BENEFIT
S
” section of this proxy statement.
A country club membership is provided to the CEO to aid him in developing and retaining business. Business automobiles are provided to all of the Bank’s executive officers as a competitive perquisite and as an alternative to reimbursing such officers for mileage driven on account of business conducted on behalf of the Corporation.
How We Determine The Amount To Pay For Each Element of Executive Compensation
The total compensation paid by the Corporation to each of
the
NEOs
is based on a variety of factors including: (1) the Company’s recent and expected future overall financial performance; (2) current economic conditions and the effect thereof on the Company’s performance and that of its peers; (3) the executive officer’s experience and tenure in his or her current po
sition, years of service to
the Bank, scope of responsibilities, leadership ability, compensation relative to the Company’s other executive officers, recent and expected future performance, and contributions to corporate performance; (4) a comparison of total compensation and each element of compensation paid to the executive to compensation amounts paid by peer banks to executives with similar roles and compensation amounts set forth in published industry surveys for executives with similar roles; and (5) the most recent stockholder advisory vote on executive compensation. As previously discussed, comparative compensation studies are performed and updated on a periodic basis by an independent compensation consulting firm engaged by and working under the direction of the Compensation Committee.
Base salary for the CEO is reviewed by the Compensation Committee on an annual basis. The Compensation Committee
also performs
an annual review of the base salary recommendations made by the CEO for the Company’s other
NEOs
. Each executive officer does not necessarily receive an increase in base salary each year. In reviewing each
NEO
’s base salary, the Compensation Committee considers the amounts paid by peer banks
, the
amounts set forth in compensation surveys performed by nationally recognized independent compensation consulting firms
and
the Corporation’s overall budget for base salary increases.
Regular annual
salary increases for 201
8
for the NEOs ranged from
4
.
0
% to
2
6
.
3
%
and averaged
12
.
7
%
.
For the Corporation’s CEO
and CFO
,
annual
cash incentive compensation has been
based on corporate performance measured by net income,
return on assets (“
ROA
”)
and
bank safety
and Compensation Committee discretion
.
C
ash incentive compensation
for the other NEOs
has been
based on a combination of corporate and personal performance with
weights of 80% and 20%, respectively, for Mr. Becker, 70% and 30%, respectively, for Mr. Hilton and 50%
each
for Mr. Daley.
Corporate
performance for the other NEOs is measured by net income, ROA, bank safety and Compensation Committee discretion, and p
ersonal performance is measured by the achievement of goals, monetary and nonmonetary, assigned
to the NEO
.
Compensation Committee disc
retion is
based on, among other things,
a qualitative assessment of corporate performance in light of current conditions.
The following table sets forth the range of annual cash incentive compensation for 201
8
under the 201
6
Cash Incentive Plan assuming that the Corporation achieved threshold, target and maximum levels of performance
and, where applicable, the NEO achieved threshold, target and maximum levels of performance with respect to personal goals
.
Each NEO
’
s cash incentive target for 201
8
was a percentage of base salary as
determined by the Compensation Committee
.
Achievement of corporate
and
,
where applicable
,
personal
performance levels greater than the threshold level but less than the maximum level results in
a cash incentive payment that is proportionately greater than the threshold level of incentive but less than the maximum level of incentive.
|
|
|
|
NEO
|
Threshold ($)
|
Target ($)
|
Maximum ($)
|
Michael N. Vittorio
|
119,700
|
266,000
|
399,000
|
Ma
rk D. Curtis
|
69,840
|
155,200
|
232,800
|
Christopher Becker
|
52,800
|
132,000
|
198,000
|
Christop
her Hilton
|
39,000
|
104,000
|
156,000
|
Paul Daley
|
32,191
|
99,050
|
148,575
|
Equity ince
ntive compensation
for
the NEOs
before 2019
primarily consisted of
performance-based
RSUs that were
awarded
based on corporate performance measured by the same metrics used for cash incentive compensation
.
Equity awards before 2019 also
occasionally included smaller amounts of
time-based RSUs
that
were based on the discretion of the Compensation Committee after considering, among other things, the strength and consistency of the Corporation’s performance over an extended period of time.
Performance-based RSUs
award
ed
before 2018
vest
ed
and convert
ed
into shares of Common Stock based on the satisfaction of net income and ROA performance metrics for the final year of the three calendar year performance period beginning with the year in which the RSUs were awarded.
Performance-based RSUs awarded
in 2018
included two-thirds (⅔)
that were
performance-based and one-third (⅓)
that were
time-based.
One-third (⅓) vests and converts into shares of Common Stock based on the satisfaction of net income and ROA performance metrics for 2018, one-third (⅓) vests and converts based on the satisfaction of net income and ROA performance metrics for 2019 and the final one-third (⅓) vests and converts three years from the date of grant.
Equity incentive compensation
for
the NEOs in
2019
consisted of RSUs
that
were
awarded
based on a fixed percentage of salary as determined by the Compensation Committee.
These awards includ
e
two-thirds (⅔) that
are
performance-based and one-third (⅓) that
are
time-based. One-third (⅓) vests and converts into shares of Common Stock based on the satisfaction of net income and ROA performance metrics for 2019, one-third (⅓) vests and converts based on the satisfaction of net income and ROA performance metrics for 2020 and the final one-third (⅓) vests and converts three years from the date of grant.
Multi-year performance periods for the performance-based RSUs encourage long-term strategic focus.
P
erformance-based RSUs
granted in
2017
,
2018
and 2019
have upside conversion potential in that a
maximum level of performance will result in
the distribution of more than one share of Common Stock for
one RSU
. For the 2017 grant,
a maximum level of performance
will result in a conversion ratio of one RSU for
one-and-one-
quarter (
1
¼)
shares of Common Stock. Performance greater than the t
hreshold
level but less than the maximum level will result in a conversion ratio proportionately greater than one RSU for
one-half
(½)
share of Common Stock but less than one RSU for
one-and-one-
quarter
(
1
¼)
shares of Common Stock.
For the 2018 and 2019 grants, a maximum level of performance will result in a conversion ratio of one RSU for one-and-one-
half
(1
½
) shares of Common Stock. Performance greater than the threshold level but less than the maximum level will result in a conversion ratio proportionately greater than one RSU for one-half (½) share of Common Stock but less than one RSU for one-and-one-
half
(1
½
) shares of Common Stock.
The
maximum level of performance
for RSUs granted before 2018
has been
125% of the target level, whereas the th
reshold level of performance has been
75% of the target level.
For the RSUs granted in
2018
and 2019
, the maximum level of performance is 115% of the target level, whereas the threshold level of performance is 80% of the target level.
For the RSUs granted
in
201
7
,
exceeding the target level of performance by 25% results in vesting 25% more than the target level of shares,
while
falling 25% short of the target level of performance results in vesting 50% less than the target level of shares.
For the RSUs granted in 2018
and 2019
, exceeding the target level of performance by 15% results in vesting 50% more than the target level of shares, while
falling 20
% short of the target level of performance results in vesting 50% less than the target level of shares.
Falling short by more than 25%
for the
2017
RSU grant and 20% for the 2018
and 2019
grant
s
results in expiration of the RSUs without any vesting of the target le
vel of shares. The
punitive impact of falling short of the target level of performance and the upside potential for exceeding the target level of performance is designed to encourage senior management to outperform.
In setting
the current
threshold, target and maximum level
s of performance and related
payouts, the Compensation Committee
utilized the study performed by PM&P of the structural elements of the Corporation’s incentive compensation plan and
considered, among other things, performance and payout levels for the Corporation’s peer banks.
Over the last three years, cash incentive compensation for the NEOs as a group has averaged approximately one
-
third (
⅓
) of total incentive compensation, while equity incentive compensation has averaged approximately two
-
thirds
(⅔)
of total incentive compensation.
By their terms, a
ll
outstanding
performance-based
RSUs held by NEOs immediately vest in the event of an involuntary termination following a change in control, total and permanent disability, as defined, or death
. F
or
performance-based
RSUs granted in 2018
and 2019
,
upon retirement vesting will occur
only after the
completion of the applicable performance period and attainment of the relevant performance criteria.
For
performance-based
RSUs granted before 2018
to NEOs, other than the
Chief Financial Officer (“
CFO
”)
, i
n the event of retirement, and in
order to qualify as tax-deductible
performance-b
ased compensation under the pre-
2018 provisions of Section 162(m) of the Internal Revenue Code
,
vesting
can only occur upon completion of the related performance period and attainment of the relevant performance criteria. The
performance-based
RSUs
granted to
the CFO
before
2018
immediately vest in the event of retirement because the CFO is exempt from the pre-2018 provisions of Section 162(m).
A
ll outstanding time-based RSUs granted to
NEOs immediately vest in the event of an involuntary termination following a change in control, total and permanent disab
ility, as defined, or death, and
, unlike
many of
the performance-based RSUs, also immediately vest in the event of retirement.
For a further discussion of the tax-deductibility of executive compensation, see
the
Tax Deductibi
lity of Executive Compensation section of this proxy statement.
The value of a RSU realized at vesting can be more or less than its grant date fair value if the Common Stock price at the date of vesting is more or less than its fair market value on the date of grant
or
the aggregate conversion ratio described above is
more or
less than one RSU for one share of Common Stock.
T
he following table sets forth the grant date fair value of
performance-based
equity
incentive compensation
awarded in 2019
for 201
8
performance
.
|
|
NEO
|
Equity Awards ($)
|
Michael N. Vittorio
|
598,500
|
Ma
rk D. Curtis
|
213,400
|
Christopher Becker
|
165,000
|
Christophe
r Hilton
|
130,000
|
Paul Daley
|
113,200
|
T
he following table sets forth the performance metrics and weights established by the Compensation Committee for use in determining
cash incentives paid
in January 201
9
for
201
8
performance
along with
the
actual 201
8
performance
for
each metric.
|
|
|
|
|
|
Metric
|
Weight
(1)
|
Threshold
|
Target
|
Maximum
|
Actual Results
|
Net Income
|
45%
|
$33,185,000
|
$41,481,000
|
$47,703,000
|
$41,573,000
|
ROA
|
30%
|
.81%
|
1.01%
|
1.16%
|
1.00%
|
Bank Safety Rating
|
10%
|
Below Standard
|
Meets Standard
|
Above Standard
|
Above Standard
|
Compensation Committee Discretion
|
15%
|
Minimum
|
Average
|
Maximum
|
Between Average and Maximum
|
|
(1)
|
|
The weights for
each metric apply to all NEOs.
|
The following table sets forth performance-based cash incentive compensation earned in 201
8
and the grant date fair value of equity incentive compensation
awarded on account of
201
8
.
|
|
|
|
NEO
|
Cash Incentive ($)
|
Equity Awards ($)
|
Total ($)
|
Michael N. Vittorio
|
292,092
|
598,500
|
890,592
|
M
ark D. Curtis
|
170,423
|
213,400
|
383,823
|
Christopher Becker
|
142,126
|
165,000
|
307,126
|
Christophe
r Hilton
|
107,172
|
130,000
|
237,172
|
Paul Daley
|
102,874
|
113,200
|
216,074
|
In the future the Compensation Committee may use different metrics to measure corporate performance such as earnings per share, return on average stockholders’ equity or the efficiency ratio
, or may change the weights applied to each metric
.
The Compensation Committee believes that
total
t
arget
remuneration
for executive officers should be market competitive
, benchmarked to the 50
th
percentile of
the Bank’s peer group
and take into consideration individual and corporate performance and tenure
.
In performing their
2017
review of executive compensation, PM&P
compiled
compensation data from the
proxy statements of the
Corporation’s
custom
peer group and
from
published industry surveys
and, based on this data, calculated
percentile amounts against which total compensation for the
Company
’s
NEOs
could be compared. The PM&P study showed that total
target
compensation for all
NEOs ranged from the 19
th
to
the 54
th
percentile
.
Termination and Change in Control Payments
Each of the
NEOs
has an employment agreement wi
th the Corporation
that provides for severance compensation in the event
that the executive is terminated by the Board without cause or terminates his employment for Good Reason, as defined, whether or not such termination occurs in connection with a change in control (see Employment Agreements section of this proxy statement).
These provisions are
designed to insure, among other things, that the NEOs
are not significantly harmed or unduly enriched and are therefore objective with respect to the consummation of a transaction, such as a sale or merger of the Bank that may be in the best interests of the Corporation’s stockholders. In determining the severance arrangement for the CEO and each of th
e other NEOs
, the Compensation Committee considered the severance arrangements
offered b
y peer banks to their
NEOs
.
Impact of Accounting and Tax Treatment of Certain Elements of Compensation
T
he Compensation Committee
has
grant
ed
non-qualified stock options (“NQSOs”)
and RSUs as equity compensation.
NQSOs
and RSUs
are advantageous from the Corporation’s standpoint because the Corporation records a book tax benefit for the compensation cost recognized for financial statement reporting purposes under FASB ASC Topic 718 and receives a tax benefit upon the exercise of in-the-money
NQSOs and the vesting of RSUs
.
Tax Deductibility of Executive Compensation
Internal Revenue Code Section 162(m)
limits the
tax
deducti
bility of
compensation paid to any covered employee to $1
million
per year.
The Tax Cuts and Jobs Act
(the “Act”)
was signed into law on December 22, 2017
and amends Section 162(m) to treat all NEOs as covered employees (previously the CFO was
not
a covered employee) and
to
eliminate the exclusion of
qualified
performance-based compensation in determining compensation subject to the $1 million limitation.
In addition, the Act provides “grandfathered” treatment for qualified performance-based compensation in excess of $1 million that meets the requirements of Section 162(m), is payable pursuant to a written binding contract in effect as of November 2, 2017 and is not modified in any material respect.
M
ost of the compensation paid to the NEOs
as a group
through year-end 201
8
wa
s deductible under
the applicable provisions of
Section 162(m)
.
A number of requirements must be met for particular compensation to qualify for tax deductibility, so there can be no assurance that incentive compensation paid to the
NEOs
will be fully deductible in all circumstances.
The Compensation Committee
will consider the impact of the Act on the design of our executive compensation programs going forward. While the Compensation Committee
does not have a formal policy with respect to the payment of compensation in excess of the deduction limit under Code Section 162(m)
, t
he Compensation Committee’s practice is to structure compensation programs offered to the NEOs with a view towards maximizing tax deductibility of amounts paid. However, in structuring compensation programs, the Compensation Committee considers a variety of factors, including the Corporation’s tax position, the materiality of the payments and tax deductions involved and the need for flexibility to address unforeseen circumstances. After considering these factors, the Compensation Committee may decide to authorize payments, all or part of which may be nondeductible for federal
income
tax purposes.
Role of Executive Officers In Determining Executive Compensation
The
Compensation Committee approves the
proposed compensation of executive officers
after considering, among other things, executive compensation studies
periodically
performed by
independent compensation consult
ing firms
. From time to time,
the C
E
O
and CFO
have served as a resource to the Compensation Committee in gathering the information necessary to make such compensation determinations.
However, these officers do not have a policy-making role with respect to determining the amount or form of executive compensation and do not participate in Compensation Committee deliberations regarding their own compensation.
Compensation Policies and Practices As They Relate To Risk Management
The Corporation has a written incentive-based compensation policy that sets forth governance roles for the Compensation Committee, senior management and the Corporation’s internal auditors. The policy is reviewed annually by the Compensation Committee, modified if deemed appropriate and approved. T
he purpose of the policy is to e
nsure that the Corporation’s incentive-based compensation arrangements, or any feature of any such arrangement, do not encourage executive officers or employees to: (1) expose the Corporation to inappropriate risks by providing such persons with excessive compensation, fees or benefits; or (2) take inappropriate risks that could lead to material financial loss to the Corporation. Pursuant to this policy, the Corporation’s incentive-based compensation arrangements are required to: (1) balance risk and financial rewards, through such things as risk adjustments of awards, deferral of payments, longer performance periods and/or reduced sensitivity to short-term performance; (2) be compatible with effective internal controls and risk management; and (3) be supported by strong corporate governance, including active and effective oversight by the Compensation Committee. The Compensation Committee has determined that the Company’s compensation policies and practices for its employees, including non-executive officers, are not reasonably likely to have a material adverse effect on the Company.
Stock Ownership Guidelines
and Equity Award Retention Policy
As a condition to receiving equity awarded under the Corporation’s equity incentive plan each director and executive officer shall enter into an agreement
with the Company providing that any stock acquired from the exercise of stock options or the vesting of equity awards, net of the disposition of shares for tax withholding requirements, must be held until stock ownership requirements are met.
Each director of the Corporation is required to have beneficial ownership of shares of
C
ommon
S
tock of the Corporation with a current market value equal to three (3) times cash retainers, which includes Committee retainers and per meeting fees. The CEO of the Corporation is required to have beneficial ownership of shares of common stock of the Corporation with a current market value equal to three (3) times his
or her
current base salary. Each other executive officer of the Corporation is required t
o have beneficial ownership of
shares of common stock of the Corporation with
a current market value equal to one (1) times his or her current base salary.
All ownership requirements need to be met as follows:
(
1) within five years of becoming a director or executive officer;
(
2) within five years of an increase in ownership requirements for the incremental increase only; or
(
3) within three years of falling out of compliance with these requirements due to compensation increases or fluctuations in market value.
Clawback Policy
The Corporation has
a clawback policy to
enable the Company to
recover
any bonus or incentive compensation awarded or paid
to the Company’s executive officers if
:
(1) the payments or awards were based on materially inaccurate financial statements or any other materially inaccurate performance metric, and (2) the amount of the incentive compensation, as calculated under restated financial results, is less than the amount actually paid or awarded under the original financial results.
Anti-Hedging Policy
Directors, NEOs, other officers and employees are prohibited from hedging the Corporation’s securities with the use of financial instruments (including prepaid variable forward contracts, equity swaps, calls, puts
,
collars, and exchange funds) that offset a decre
ase in the market value of the C
ompany’s equity securities and any other transaction with comparable economic consequences.
Shareholder Advisory Vote on Compensation
The Compensation Committee
considers
the results of the annual say
-
on
-
pay stockholder advisory vote on the compensation paid to NEOs. To the extent there is a significant vote against the compensation paid to our NEOs,
the Compensation Committee
will consider our stockholders’ concerns and evaluate whether any actions are necessary to addr
ess tho
se concerns. At the 201
8
Annual Meeting of Stockholders, there was substantial support for the say
-
on
-
pay proposal
with approximately 97% of the votes cast on the proposal v
oting in support of the compensation outlined in last year’s proxy statement.
After a comprehensive market review and in light of strong stockholder support, the Compensation Committee concluded that no significant revisions were necessary to our executive compensation program.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information with respect to the aggregate compensation paid, earned or awarded for the years ended December 31, 201
8
, 201
7
and 201
6
to the CEO, CFO and each of the additional three most highly compensated executive officers of the Bank. All compensation information is provided pursuant to the SEC
executive compensation disclosure rules for proxy statements. All of the listed officers are also officers of the Corporation but received salaries only from the Bank.
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
Bonus
|
Stock Awards
(1)
|
Non-Equity Incentive Plan Compensation
(2)
|
Change in Pension Value and Nonqualified Deferred Compensation Earnings
(3)
|
All Other Compensation
(4)
|
Total
|
Name and Principal Position
|
Year
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
Michael N. Vittorio
|
2018
|
665,000
|
-
|
598,500
|
292,092
|
215,636
|
120,616
|
1,891,844
|
Director, President
|
2017
|
613,000
|
15,000
|
564,160
|
250,742
|
189,022
|
37,285
|
1,669,209
|
and CEO
|
2016
|
566,000
|
-
|
650,760
|
197,469
|
233,752
|
130,357
|
1,778,338
|
Mark D. Curtis
|
2018
|
388,000
|
-
|
213,400
|
170,423
|
-
|
16,441
|
788,264
|
Senior Executive Vice
President,
|
2017
|
326,900
|
12,500
|
190,538
|
133,715
|
176,230
|
16,157
|
856,040
|
Chief
F
inancial
Officer and Treasurer
|
2016
|
299,400
|
-
|
255,817
|
96,066
|
71,551
|
16,228
|
739,062
|
Christopher Becker
|
2018
|
330,000
|
-
|
165,000
|
142,126
|
21,207
|
17,020
|
675,353
|
Executive Vice President, Chief
R
isk
|
2017
|
261,250
|
10,000
|
114,875
|
91,742
|
53,867
|
14,910
|
546,644
|
Officer and
Corporate Secretary
|
2016
|
231,500
|
-
|
148,925
|
72,087
|
30,911
|
9,571
|
492,994
|
Christophe
r Hilton
|
2018
(5)
|
260,000
|
-
|
130,000
|
107,172
|
8,233
|
9,582
|
514,987
|
Executive Vice President,
|
|
|
|
|
|
|
|
|
Commercial Banking Division
|
|
|
|
|
|
|
|
|
Executive
|
|
|
|
|
|
|
|
|
Paul Daley
|
2018
|
283,000
|
-
|
113,200
|
102,874
|
36,378
|
15,721
|
551,173
|
Executive Vice President
|
2017
|
266,500
|
10,000
|
117,183
|
89,057
|
168,428
|
16,595
|
667,763
|
Senior Commercial Banking Officer
|
2016
|
258,000
|
-
|
166,631
|
79,074
|
106,277
|
13,859
|
623,841
|
|
(1)
|
|
The amounts shown for each year represent RSU grants for that year but granted subsequent to the close of the year. T
he aggregate grant date fair values
are
computed in accordance with FASB ASC Topic 718.
The values shown for 2016 include time-based RSU
s
that
were a discretionary grant by the Compensation Committee after considering, among other things, the Corporation’s strong financial performance for 2016 and its consistent earnings growth ov
er an extended period of time.
|
|
(2)
|
|
The amounts shown for each year represent cash incentive compensation
earned
based on performance for that year but paid subsequent to the close of the year.
|
|
(3)
|
|
The amounts reported are computed in accordance with
FASB ASC Topic 715
and reflect the actuarial increase in the present value at year end compared to the prior year end of the
NEO’s
benefits under all defined benefit pension plans
. (See Note J
"Retirement Plans" to the Corporation's 201
8
Consolidated Financial Statements.) The Corporation applies the “no negative number” position for reporting the change in pension value. The fluctuations are primarily attributable to movement in the
actuarial
discount rate. In 201
6
through 20
1
8
the discount rates were 4
.
4
0
%
,
3
.
93
%
and
4
.
5
3
%, respectively.
|
|
(4)
|
|
The components of the 201
8
amounts shown in the “All Other Compensation
”
c
olumn are set forth in the table that follows. The 401(k) SERP contributions shown in the table
that follows
are also reported in the “Nonqualified Deferred Compensation Table” appearing elsewhere in this proxy statement. The “All Other Compensation” column does not include the incremental cost to the Corporation of providing the
NEOs
with group term life and health insurance benefits, because such benefits do not discriminate in scope, terms or operation in favor of the
NEOs
and are available generally to all employees.
|
|
(5)
|
|
Mr. Hilton
joined
the Corporation in June 2017 and became a NEO
for t
he year ending
December 31, 2018.
|
All Other Compensation Table
|
Perquisites and Other Personal Benefits
|
Tax Gross Up on SERP Contributions and Tax Reimbursements
(1)
|
401(k) Matching Contributions and 401(k) SERP Contributions
|
Total
|
Personal Use of Business Auto
|
Personal Use of Country Club
|
Name
|
($)
|
($)
|
($)
|
($)
|
($)
|
Michael N. Vittorio
|
8,
125
|
-
|
92
,
541
|
1
9
,
950
|
120,616
|
Mark D. Curtis
|
8,
191
|
-
|
-
|
8,250
|
16,
441
|
Christopher Becker
|
8
,
770
|
-
|
-
|
8,250
|
1
7
,
020
|
Christopher Hilton
|
5
,
8
32
|
-
|
-
|
3
,
750
|
9
,
582
|
Paul Daley
|
7
,
471
|
-
|
-
|
8,250
|
1
5
,
721
|
|
(1)
|
|
The Bank has a
legacy
SERP
for the CEO
that is explained in the “PENSION BENEFIT
S
” section of this proxy statement.
The CEO’s participation in the legacy SERP began upon his
tenure as
CEO
of
the Corporation and the Bank in 2004. Except for this one legacy SERP, the Board has adopted a prohibition of tax gross-up arrangements and
has
included this prohibition in the Corporation’s published Corporate Governance Guidelines
.
|
The Compensation Committee
believes that each
NEO
’s total compensation is appropriately balanced between currently paid out and deferred compensation, with deferred compensation consisting of equity awards that vest over time and retirement benefits provided under the Corporation’s 401(k), Pension and SERP plans.
Pay Ratio
Pursuant to Item 402(u) of Regulation S-K and Section 953(b) of the Dodd-Frank Act, presented below is the ratio of annual total compensation of the Corporation’s CEO to the annual total compensation of the Corporation’s median paid employee, excluding the CEO.
The ratio presented below is a reasonable estimate calculated in a manner consistent with Item 402(u).
T
he Corporation utilized the same median paid employee
for
2017
and 2018
. The Corporation believes
this
is appropriate because there have not been significant changes in the employee population
or compensation arrangements.
In identifying the median paid employee in 2017 and in determining the compensation of the median paid employee in 2017 and 2018,
the Corporation utilized year-to-date compensation from the final (twenty-sixth) bi-weekly payroll of each year paid on December 22
nd
and 21
st
, respectively. C
ompensation included, as applicable, regular earnings plus overtime, Saturday pay, commissions, cash incentives and stock-based compensation.
The Corporation considered all full-time and part-time permanent employees when identifying the median paid employee in 2017.
E
arnings of employees included on
the
final
payroll
of
2017
that were employed for less than a full year were converted to a twenty-six bi-weekly payroll equivalent. Full-time equivalent adjustments were not made.
There were no seasonal or temporary employees on the final payroll of 2017.
The 201
8
annual total compensation of our CEO and median paid employee
was determined under Item 402 of Regulation S-K and was
$1,
891
,
844
and $
60
,
496
, respectively. The CEO’s annual total compensation for 201
8
was
31
times that of the annual total compensation for 201
8
of the median paid employee.
This compares to 2017 annual total compensation of $1,669,209 and $59,360, respectively, and a 2017 pay ratio of
28 times.
COMPENSATION PURSUANT TO PLANS
Equity Incentive Plans
The Corporation has awards outstanding
u
nder the 2006 Stock Compensation Plan (“2006 Plan”) and the 2014 Plan.
Currently, a
wards can only be granted under the 2014 Plan, which was approved by the Corporation’s stockholders on April 22, 2014 as a successor to the 2006 Plan. The 2014 Plan gives the Board flexibility to attract and retain highly qualified officers and directors by offering a competitive compensation program. Equity awards align the interests of our directors and management with the interests of our stockholders by potentially increasing the ownership interests of directors and officers in our
C
ommon
S
tock.
Awards under the 2014 Plan may be granted as incentive and non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units or any combination thereof.
S
ubstantially all awards granted under the 2014 Plan
have bee
n restricted stock units with
performance or time-based vesting
, while awards granted under the
predecessor
plan
consisted of a combination of nonqualified stock options and restricted stock units
.
The following table
presents
the number of shares of Common Stock to be issued upon the exercise of outstanding stock options
and
vesting of RSUs
,
and the number of
shares of Common Stock
remaining available for future issuance
under the 2014 Plan, as of December 31, 201
8
, adjusted to reflect
107
,
511
RSUs granted in January 201
9
for
201
8
. The table also presents the weighted average exercise price of outstanding stock options as of December 31, 201
8
.
EQUITY COMPENSATION PLAN INFORMATION
|
|
|
|
Plan Category
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
(1)
|
Weighted-average exercise price of outstanding options, warrants and rights
|
Number of securities remaining available for future issuance under the 2014 Plan
(2)
|
Equity compensation plans approved by security holders
|
418,707
|
$11.80
|
1,752,873
|
|
(1)
|
|
Includes
3
22
,
595
RSUs
.
The weighted-average exercise price does not take these awards into account.
|
|
(2)
|
|
Of these shares,
298
,
266
are available to be granted as restricted stock or RSUs
.
|
The Corporation does not have any equity compensation plans that have not been approved by stockholders.
The following table sets forth information regarding the grant of plan-based awards
during 201
8
, both cash and equity, to the
NEOs
.
Grant
O
f Plan Based Awards
|
|
Estimated Future Payouts Under Non-
|
Estimated Future Payouts Under
|
|
|
Equity Incentive Plan Awards
(1)
|
Equity Incentive Plan Awards
(2)
|
|
|
Threshold
|
Target
|
Maximum
|
($)
|
Name
|
Grant Date
|
($)
|
($)
|
($)
|
Michael N. Vittorio
|
1/2
5
/1
8
|
119,700
|
266,000
|
399,000
|
598
,
500
|
Mark D. Curtis
|
1/2
5
/1
8
|
69,840
|
155,200
|
232,800
|
213
,
400
|
Christopher Becker
|
1/2
5
/1
8
|
5
2
,
8
00
|
132,000
|
198,000
|
165
,
000
|
Christophe
r Hilton
|
1/2
5
/1
8
|
39
,
0
00
|
104,000
|
156,000
|
130
,
000
|
Paul Daley
|
1/2
5
/1
8
|
32
,
191
|
99,050
|
148,575
|
113
,
200
|
|
(1)
|
|
The amounts shown represent cash incentive compensation that could have been earned by the
NEO
in 201
8
under the Corporation’s incentive compensation plan. The actual amount paid to each
NEO
in February 201
9
based on 201
8
performance is included in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table”
in
this proxy statement.
|
|
(2)
|
|
The amounts shown represent RSU awards
earned by the
NEOs
in 201
8
. The amount
s
earned
were
awarded in
January 201
9
in
the form of RSUs under the 2
014 Plan and are
included
in
the
“Stock Awards” column for 201
8
of the “Summary Compensation Table”
in
this proxy statement.
Two-thirds
(⅔)
of the RSUs granted in January 201
9
are performance-based and one-third
(⅓)
are time-based. One-third
(⅓)
vests and converts into shares of Common Stock based on the satisfaction of net income and ROA performance metrics for 201
9
, one-third
(⅓)
vests and converts based on the satisfaction of net income and ROA performance metrics for 20
20
and the final
one-
third
(⅓)
vests and converts three
years from the date of grant.
|
The following table sets forth information regarding outstanding equity awards for the NEOs at December 31, 201
8
, as updated to include grants in January 201
9
based on 201
8
performance
.
Outstanding Equity Awards
Name
|
Option Awards
|
Stock Awards
|
Number of Securities Un
derlying Unexercised Options
(#)
|
Number of Securities
Underlying Unexercised Options
(
#)
|
Option Exercise Price
|
Option Expiration
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(1)
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
(2)
|
Exercisable
|
Unexercisable
|
($)
|
Date
|
(#)
|
($)
|
Michael N. Vittorio
|
|
|
|
|
87
,
682
|
1
,
749
,
256
|
Mark D. Curtis
|
1,0
00
|
|
11.14
|
1/18/20
|
|
|
|
10,629
|
|
12.90
|
1/24/21
|
|
|
|
|
|
|
|
3
1
,
330
|
625
,
034
|
Christopher Becker
|
|
|
|
|
21
,
039
|
419
,
728
|
Christopher Hilton
|
|
|
|
|
12,107
|
241,535
|
Paul Daley
|
|
|
|
|
18
,
407
|
367
,
220
|
|
(1)
|
|
Represents the
maximum
number of shares
into which
outstanding RSUs can potentially be converted
.
At December 31, 201
9
and
20
20
,
97
,
68
5
and
31
,
31
5
, respectively,
performance-based RSUs may
vest
based on net income
and ROA
performance goals
, each with
a
50%
weight
as
established by the Compensation Committee.
Additionally,
in January 201
9
, 20
20
,
202
1
and 202
2
,
2
,
903
,
5
,
4
03
,
1
2
,
3
7
9
and
2
0
,
880
, respectively,
time-based RSUs will vest.
|
|
(2)
|
|
Represents the value of the
maximum
number of shares into which RSUs can potentially be converted based on the closing price of the Common Stock on December 31, 201
8
of $
19
.
95
.
|
The following table sets forth information for the
NEOs
for 201
8
regarding stock options exercised and stock
awards
acquired on
vest
ing
during the year
.
Stock Option Exercises And Stock Vested
Name
|
Option Awards
|
Stock Awards
|
Number of Shares Acquired on Exercise
|
Value Realized on Exercise
(1)
|
Shares Acquired on Vesting
|
Value Realized on Vesting
(
2
)
|
(#)
|
($)
|
(#)
|
($)
|
Michael N. Vittorio
|
-
|
-
|
35
,
778
|
721
,
603
|
Mark D. Curtis
|
9,029
|
115
,
053
|
1
2
,
490
|
2
55
,
588
|
Christopher Becker
|
-
|
-
|
6
,
926
|
14
2
,
449
|
Christopher Hilton
|
-
|
-
|
-
|
-
|
Paul Daley
|
-
|
-
|
8
,
065
|
16
5
,
172
|
|
(1)
|
|
T
he value realized on stock option exercise
s
is the difference between the
closing market value on the day prece
ding the
exercise date and the
amount paid to exercise the options
.
|
|
(2)
|
|
The value realized on vesting represents the market value on December 31, 201
8
of $
19
.
95
or earlier vesting date
.
|
PENSION BENEFITS
The Bank has a tax-qualified defined benefit pension
plan and
maintains the related SERP described hereinafter. The following table sets forth the present value of accumulated benefits under the Pension Plan as of December 31, 201
8
,
under
the
pension portion of the
SERP as of September 30, 201
8
, and the number of years of credited service for each
NEO
through December 31, 201
8
. No
pension benefits were distributed
to the
NEOs
during 201
8
.
Pension Benefits
Name
|
|
Number of Years of Credited Service
|
Present Value of Accumulated Benefit
(1)
|
Plan Name
|
(#)
|
($)
|
Michael N. Vittorio
|
Tax-qualified defined benefit pension plan
|
1
5
.42
|
7
91
,
985
|
|
Supplemental Executive Retirement Plan
|
|
1
5
.42
|
1,
257
,
744
|
Ma
rk D. Curtis
|
Tax qualified defined benefit pension plan
|
2
1
.00
|
1,
080
,
780
|
Christopher Becker
|
Tax qualified defined benefit pension plan
|
6
.83
|
1
86
,
262
|
Christopher Hilton
|
Tax qualified defined benefit pension plan
|
.5
|
8
,
233
|
Paul Daley
|
Tax qualified defined benefit pension plan
|
2
1
.8
3
|
9
74
,
509
|
|
(1)
|
|
The actuarial assumptions used in determining the present value of the accumulated benefit for each
NEO
under the Pension Plan are set forth in Note
J
“Retirement Plans”
to the Corporation’s 201
8
C
onsolidated
F
inancial
S
tatements. With respect to the SERP,
the present value of the accumulated benefit is equal to the
present value of the
annuity on
October 1
, 201
8
.
|
Pension Plan
Employees, including the NEOs, who are over 21 years of age and have been employed by the Bank for more than one year, are eligible to participate in the Pension Plan. Compensation used to determine benefits include
s
base salary, commissions, cash incentive compensation
and
taxab
le fringe benefits, but excludes
employer contributions to the
401(k) Plan
, amounts realized from the exercise of nonqualified stock options, amounts realized from the conversion of restricted s
tock units into shares of stock
and amounts realized from the sale, exchange or other disposition of stock. Employees that elect to participate in the Pens
ion Plan make contributions of 2
%
of their compensation used to determine benefits. Employees become fully vested in the Pension Plan after 5 years of service with the Bank and 4 years of participation in the Pension Plan (no vesting occurs during that 5-year period) or, for employees hired before February 28, 2011, upon attainment of age 55. The normal retirement age is 65. For benefits earned through February 28, 2011, early retirement with an unreduced benefit is available at age 62, provided that at least 10 years of vesting service ha
d
been completed by age 62 and employment by the Bank began at age 55 or prior. Early retirement with a reduced benefit is available beginning at age 55. For benefits earned through February 28, 2011, the reduction is equal to 3% per year for each year that early retirement precedes age 65, or age 62 provided that at least 10 years of vesting service have been completed by age 62 and employment began at age 55 or prior. For benefits earned after February 28, 2011, the reduction is b
ased on actuarial equivalence.
Upon retirement, each participant with a spouse is paid a benefit in the form of a joint and survivor annuity. Participants without a spouse are paid a benefit in the form of a single life annuity guaranteed for sixty (60) months. All participants, whether with or without a spouse, may elect optional forms of benefit payments. For all participants, the annuity benefit is an amount equal to the sum
of: (1) the participant’s Average Annual Compensation multiplied by the product of 1.75 percent and the participant’s credited years of service through February 28, 2011; plus (2) the participant’s Average Annual Compensation multiplied by the product of 1.50 percent and the participant’s credited years of service after February 28, 2011, with total years of credited service under clauses “1” and “2” limited to a maximum of 35 years; plus (3) 1.25 percent of Average Annual Compensation multiplied by the participant’s credited years of service in excess of 35 years (up to five such years); and less (4) the product of .49 percent of the participant’s Final Average Annual Compensation, limited to Covered Compensation, and the participant’s Benefit Service up to 35 years. The 0.49 percent represents the minimum Social Security offset to the pension benefit.
Average Annual Compensation, Final Average Annual Compensation, Covered Compensation and Benefit Service are all a
s defined in the Plan document.
Supplemental Executive Retirement Plan
The Bank has a legacy SERP with the CEO as its only participant. The CEO’s participation in this legacy plan began upon his
tenure
as CEO
of
the Corporation and the Bank in 2004. The SERP provides the additional benefits that would have been provided to
the CEO under the Pension
and
401(k) Plan
s
in the absence of Internal Revenue Code limitations for qualified plans.
The SERP was also designed so that the supplemental pension and
401(k)
contributions are made to a "secular trust" for the benefit of the CEO so that the assets are protected in the same manner as those of the Pension and 401(k)
P
lans (amounts contributed to the secular trust are not subject to the claims of creditors of the Bank). The Bank’s contributions to the secular trust are tax-deductible by the Bank when made and, even though the SERP benefits will not be distributed to the CEO until a later time, such contributions and earnings thereon are taxable to the CEO when received or earned by the trust. The Bank’s contributions to the SERP are reduced by applicable income tax withholdings. As a result of the foregoing, in lieu of increasing the Bank’s contributions to the SERP or the CEOs other sources of compensation to take into account the taxes incurred by the CEO, the Bank contributes an amount to the SERP that, after applicable withholding taxes, will be sufficient to fund the SERP’s benefit obligation when due. The assets in the secular trust are invested in equity and fixed income mutual funds, which produce earnings from dividends and interest. Except for this one legacy SERP
arrangement, the Board of Directors has since adopted a prohibition of tax gross-up arrangements and included this prohibition in the Corporation’s published Corporate Governance Guidelines.
The following table sets forth Nonqualified Deferred Compensation information as of and for the year ended December 31, 201
8
for Mr. Vittorio with respect to the supplemental
401(k) Plan
portion of the SERP.
NONQUALIFIED DEFERRED COMPENSATION
|
Registrant Contributions
|
Aggregate
Investment
Earnings
|
Aggregate Balance
|
Name
|
in Last Fiscal Year
(1)
|
(Loss)
in Last Fiscal Year
(2)
|
at Last Fiscal Year End
(3)
|
($)
|
($)
|
($)
|
Michael N. Vittorio
|
1
1
,
700
|
(1
,
409)
|
102
,
402
|
|
(1)
|
|
Registrant contributions
to the SERP
are included in the “All Other Compensation” column of the “Summary Compensation Table”
in
this proxy statement.
|
|
(2)
|
|
Aggregate earnings are not included in the “Summary Compensation Table”
in
this proxy statement.
|
|
(3)
|
|
Includes $
8
8
,
469
previously reported as compensation to the
NEO
in the Summary Compensation Tables for previous years.
|
401(k) Plan
The Bank has a
tax-qualified
401(k)
P
lan. Employees, including the NEOs, are eligible to participate provided they are at least 18 years of age. The Bank may, at its sole discretion, make matching contributions to each participant's account based on the amount of the participant's tax deferred contributions. Eligibility for employer matching contributions, if any, occurs after completing twelve (12) consecutive months of Eligibility Service, as defined, in which the participant worked a minimum of 1,000 hours. The sum of employee elective contributions and employer matching contributions plus any other additions to a participant’s account
for 201
8
cannot exceed the lesser of $5
5
,000 or 100% of the participant’s compensation.
Participants are fully vested in their elective contributions and
fully vest in any employer matching contributions
after five years of participation
.
Employer matching contributions made during the first five years of participation vest ratably over the remainder of the five-year period.
Participants in the
401(k) Plan
will receive benefits generally upon attainment of age 65. However, the
401(k) Plan
contains provisions allowing pre-termination withdrawals and loans under certain circumstances. The amount of a participant’s Normal Retirement Benefit
, as defined,
will depend upon the accumulation of contributions and forfeitures and the investment performance of the
401(k)
Plan. The 401(k)
Plan
matching contributions for 201
8
made to the account
of each NEO
are set forth in the “All Other Compensation Table” appearing elsewhere in this proxy statement.
E
MPLOYMENT AGREEMENTS
The NEOs
each
have employment agreements with the Corporation pursuant to which Mr. Vittorio is employed as CEO of the Corporation, Mr. Curtis is employed as Senior Executive Vice President and CFO
of the Corporation, Mr. Becker is employed as Executive Vice President and Chief Risk Officer of the Corporation, Mr.
Hilton
is employed as Executive Vice President
of the Corporation
and Mr. Daley is employed as Executive Vice President and Senior Commercial Banking Officer of the Corporation.
Mr. Vittorio’s employment agreement has a term of three (3) calendar years beginning January 1, 2017
and expiring on December 31, 2019
. Mr. Hilton’s employment agreement has a term of two (2) calendar years beginning January 1, 2018 and the employment agreements with the other NEOs have terms of two (2) calendar years beginning January 1, 2017. Commencing on the first anniversary of each of these two-year employment agreements and continuing on each anniversary thereafter, each of these agreements shall renew for an additional period of one year such that the remaining term shall be two years unless written notice of non-renewal is provided to the NEO at least thirty (30) days prior to any such anniversary date. Notwithstanding the foregoing, each of these two-year employment agreements shall expire on December 31 of the calendar year in which the NEO attains age 65 (“Retirement Age Termination Date”). Mr. Curtis’ employment agreement has been extended for two years beyond its Retirement Age Termination Date of December 31, 2019. Nothing in these two-year employment agreements shall mandate or prohibit employment of the NEOs beyond their Retirement Age Termination Dates. However, a NEO shall not be entitled to any benefits or payments under his employment agreement following the Retirement Age Termination Date unless the Corporation has elected to extend such agreement pursuant to its terms for an additional period of two years.
Pursuant to each NEO’s employment agreement, if the
NEO is terminated by the Board without cause or the NEO terminates his employment following an event constituting Good Reason, the NEO will receive a cash lump sum severance payment equal to a multiple of the NEO’s base salary (three times base salary for the CEO and two times base salary for the other NEOs) plus an amount equal to the product of the reasonably estimated monthly cost of the medical, dental and vision insurance coverage maintained by the Bank for the NEO immediately prior to the NEOs date of termination multiplied by thirty-six (36) for the CEO and twenty-four (24) for the other NEOs. The cash lump sum payment is conditioned on the NEO executing a release of the NEO’s claims against the Corporation and
any affiliate, and their officers, directors, successors and assigns. The CEO’s cash lump sum payment is also conditioned on the CEO not being eligible to receive compensation and benefits pursuant to the CEO’s employment agreement in connection with a change in control
, as defined
. In addition to receiving a cash lump sum payment, outstanding restricted stock units granted to the CEO shall become vested and payable under the same terms and conditions as would apply upon the CEO’s retirement as set forth in the applicable award agreements between the Corporation and the CEO.
Upon termination of the CEO’s employment by the Corporation without cause or by the CEO with Good Reason on or after the effective time of a change in control, as defined, the CEO shall receive a cash lump sum payment equal to three (3) times the sum of CEOs highest rate of base salary payable during the current calendar year of the CEO’s date of termination or either of the two (2) calendar years immediately preceding the CEO’s date of termination. In addition, the CEO shall receive a cash lump sum equal to thirty-six (36) times the reasonably estimated monthly cost of the medical, dental and vision insurance coverage maintained by the Bank for CEO immediately prior to the CEO’s date of termination. In the case of the other NEOs, termination of employment by the Corporation without cause or by the NEO with Good Reason after the effective time of a change in control, as defined, results in the same severance payment that would be made in the absence of a change in control. In the event of a change in control, and pursuant to the terms of the award agreements between the NEOs and the Corporation, all outstanding and unvested equity awards shall immediately vest.
Good Reason exists if, without the NEO’s express written consent, any of the following occurs: (i) the failure to appoint the NEO during the term of the NEOs employment agreement to the executive position occupied by the NEO at the
date of
commencement of the employment agreement; (ii) a reduction in the NEO’s base salary; (iii) the failure of the Bank to maintain the NEO’s participation under the Bank’s employee benefit, retirement, or material fringe benefit plans, policies, practices, or arrangements in which the NEO participates; or (iv) a relocation of the NEO’s principal place of employment by more than 50 miles from the NEO’s principal place of employment at the
date of
commencement of the NEO’s employment agreement.
Notwithstanding the foregoing,
the change in control severance payments under the employment agreements for the NEOs will be reduced to avoid an excess parachute payment under Section 280G of the Internal Revenue Code if doing so results in a greater after-tax benefit to the NEO
.
Each NEO’s employment agreement subjects the NEO to non-compete and non-solicitation provisions
for a period of two years for the CEO or one year for the other NEOs following their date of termination, provided, however, that such restrictions would not apply in the event of the NEOs termination for cause or termination of employment following a change in control
.
The following table sets forth potential payments to the NEOs upon termination of their employment by the Corporation without cause or by the NEOs for Good Reason absent a change in control. The table also sets forth for the NEOs the accelerated vesting, if any, of unvested option and stock awards.
|
|
|
|
|
|
|
Payment Resulting from Termination Without Cause or For Good Reason
Absent a Change in Control
|
|
Lump Sum Cash Payment Based on:
|
|
|
|
|
Multiple of Base Salary
|
Multiple of Cost of
Medical, Dental and Vision Insurance
|
Total Lump Sum Cash Payment
|
Accelerated Vesting of Equity Awards
|
Total Termination
Payment
|
Name
|
($)
|
($)
|
($)
|
($)
|
($)
|
Michael N. Vittorio
|
1,995,000
|
41,17
|
2,036,170
|
889,930
|
2,926,100
|
Mark D. Curtis
|
776,000
|
57,842
|
833,842
|
-
|
833,842
|
Christopher Becker
|
660,000
|
81,765
|
741,765
|
-
|
741,765
|
Christopher Hilton
|
520,000
|
2,952
|
522,952
|
-
|
522,952
|
Paul Daley
|
566,000
|
81,765
|
647,765
|
-
|
647,765
|
A
ll outstanding and unvested equity awards for the NEOs by their terms will immediately vest upon a change in control.
The amounts shown in the table below do not take into account any reduction in payments required to comply with Section 280G of the Code.
|
|
|
|
|
|
|
Payment Resulting from Termination Without Cause or For Good Reason
Following a Change in Control
|
|
Lump Sum Cash Payment Based on:
|
|
|
|
|
Multiple of Base Salary
|
Multiple of Cost of Medical, Dental and Vision Insurance
|
Total Lump Sum Cash Payment
|
Accelerated Vesting of Equity Awards
|
Total Termination
Payment
|
Name
|
($)
|
($)
|
($)
|
($)
|
($)
|
Michael N. Vittorio
|
1,995,000
|
41,170
|
2,036,170
|
1,365,857
|
3,402,027
|
M
ark D. Curtis
|
776,000
|
57,842
|
833,842
|
491,428
|
1,325,270
|
Christopher Becker
|
660,000
|
81,765
|
741,765
|
328,517
|
1,070,282
|
Christo
pher Hilton
|
520,000
|
2,952
|
522,952
|
197,146
|
720,098
|
Paul Daley
|
566,000
|
81,765
|
647,765
|
290,033
|
937,798
|
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Corporation’s Corporate Governance Guidelines require the Board to conduct an appropriate review of all related party transactions for potential conflict of interest situations. Related party transactions are those required to be disclosed pursuant to Item 404 of Regulation S-K. The Board fulfills the requirement to review related party transactions in conjunction with the Audit Committee, which is comprised entirely of independent directors. The Governance and Nominating Committee is charged with the responsibility of reviewing and assessing the adequacy of and compliance with the Corporation’s Corporate Governance Guidelines and recommending any proposed changes to the Board for approval.
In 1992, the Bank, as tenant, entered into a lease with H. T. Hogan Jr., d/b/a Briar Ridge Properties, covering premises in a building located in Locust Valley, New York, used as a branch office.
The Bank subsequently modified and extended the lease in 2002 and 2012. The 2012 modification and extension
,
including the current
five-year
renewal period
,
expires on
October 31, 20
22
.
In addition to base rent, the Bank is responsible for its proportionate share of the real estate taxes on the building in which the leased premises are located. Under the terms of the lease, the Bank was obligated to pay $4
4
,
38
9
for the year ended December 31, 201
8
. In 2009, the Bank, as tenant, entered into a lease with CSH Realty LLC, covering premises in a building located in Cold Spring Harbor, New York used as a branch office. The lease expires on December 31, 2019. Under the terms of the lease, the Bank was obligated to pay $33,014 for the year ended December 31, 201
8
. Howard Thomas Hogan, Jr., a director of the Corporation and the Bank
, owns
or controls companies that own
both properties. The Corporation believes that the terms of the leases are comparable to competitive terms that could have been obtained from an unrelated third party.
The Bank has had, and expects to have in the future, banking transactions in the ordinary course of its business with directors, executive officers, principal stockholders of the Corporation and their associates. Such transactions, including borrowings and loan commitments, are made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for compa
rable transactions with others
and
,
in the opinion of management
,
do not involve more than a
normal risk of collectability
nor do they present other unfavorable features.
Certain directors are officers, directors, partners or stockholders of companies or partnerships which, or associates of which, may have been customers of the Bank in the ordinary course of business during 201
8
and up to the present time. Additional transactions of this type may occur in the future. All such transactions were effected on substantially the same terms as comparable transactions with other persons.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Our executive officers
,
directors and beneficial owners of greater than 10% of the outstanding shares of Common Stock are required to file reports with the SEC
disclosing beneficial ownership and changes in beneficial ownership of our Common Stock. SEC
rules require disclosure if an executive officer, director or 10% beneficial owner does not file these reports on a timely basis. Based on our review of ownership reports required to be filed for the year ended December 31, 201
8
, all filing requirements were satisfied
on a timely basis
.
PROPOSAL
3
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The consolidated financial statements of the Corporation for the year ended December 31, 201
8
were audited by Crowe LLP (“Crowe”). The Audit Committee has appointed Crowe as the Corporation’s independent registered public accounting firm to audit the Corporation’s consolidated financial statements for the year ending December 31, 201
9
. A resolution will be presented at the Annual Meeting of Stockholders to ratify the appointment of Crowe. The affirmative vote of the holders of a majority of shares represented in person or by proxy and voting on this item will be required for ratification. If there is no designation on an executed proxy as to how the shares represented should be voted, the proxy will be voted for the ratification. If the stockholders do not ratify the appointment of Crowe, the Audit Committee will reconsider its selection of Crowe as the Corporation’s independent registered public accounting firm. Even if the stockholders ratify the appointment of Crowe, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm
at any time during the year if it determines that such change is in the best interests of the Corporation and its stockholders.
A representative of Crowe
is expected to
be present at the Annual Meeting of Stockholders and will have the opportunity to make a statement and respond to appropriate questions from stockholders.
The Board of Directors recommends a vote FOR ratification of the appointment of Crowe as the Corporation’s independent registered public accounting firm.
Audit Fees
Crowe
’s
fees for audit services for 201
8
and 201
7
were $
30
5
,
00
0 and $
2
70
,
00
0, respectively.
The increase in audit fees is mainly due to the Corporation’s continued growth and expansion.
Audit services include the following: (1) professional services rendered for the audit of the Corporation’s annual consolidated financial statements; (2) reviews of the consolidated financial statements
included in the Corporation’s Quarterly R
eports on Form 10-Q; (3)
a reading of the Corporation’s Annual R
eport on Form 10-K; and (4) rendering an opinion on the effectiveness of the Corporation’s internal control over financial reporting.
Audit Related Fees
Audit related fees, as described in Item 9(e)(2) of Schedule 14A of the SEC’s Proxy Rules, are fees billed to the Corporation by its
Independent Registered Public Accounting Firm (“Independent Auditors”)
for assurance and related services that are reasonably related to the performance of the audit or review of the Corporation’s consolidated financial statements and are not audit fees as described in the previous paragraph.
In 201
8
, Crowe did not bill the Corporation for any audit related fees.
Tax Fees
Crowe’s fees in 201
8
and 201
7
for preparing the Corporation’s tax returns, providing tax advice and performing tax compliance
work were $
3
1
,
0
00
and $
29
,
500
, respectively.
Crowe’s fees in 2018 for other tax-related work, mainly the completion of a cost segregation study relating to
accelerated
tax depreciation, were $78,825.
All Other Fees
In neither of the last two fiscal years was the Corporation billed by Crowe for any fees other than those described above under the captions “Audit Fees,” “Audit Related Fees” and “Tax Fees.”
Audit Committee Approval of Audit Related, Tax and Other Fees
In 201
8
and 201
7
, the Audit Committee specifically approved or pre-approved all fees reported under the sections “Audit Related Fees” and “Tax Fees.”
Engagement of Independent Auditors to Perform Audit Services and Non-Audit Services
On an annual basis, and in accordance with the terms of written engagement letters, the Audit Committee
has
engage
d
the Corporation’s Independent Auditors to perform audit services as previously defined and to prepare the Corporation’s income tax returns.
In addition, from time to time the Audit Committee may engage the Corporation’s Independent Auditors to perform non-audit services such as providing tax advice and performing tax compliance work. The Audit Committee has pre-approved specific types of non-audit services provided that the cost of such services does not exceed $50,000 in any calendar year. The Audit Committee will not engage the Independent Auditors to perform any non-audit service or pre-approve any non-audit service that could impair, in fact or appearance, the independence of the Independent Auditors. In addition, the Audit Committee will not pre-approve any non-audit service if such pre-approval constitutes delegation to management of the Audit Committee’s responsibilities under the 1934
Act
.
AUDIT COMMITTEE REPORT
Under its charter, the Audit Committee is responsible to assist the Board in fulfilling its oversight responsibilities by reviewing and evaluating: 1) the qualifications and independence of the Independent Auditors; 2) the performance of the Corporation’s Independent Auditors
, i
nternal audit function
and vendors providing internal auditing services
; 3) the integrity of the Corporation’s financial statements; and 4) management’s responsibilities to assure that there is in place an effective system of internal controls.
While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Corporation’s financial statements and disclosures are complete and accurate and are in accordance with Generally Accepted Accounting Principles (“GAAP”) and applicable rules and regulations. These are the responsibilities of management and the Independent Auditors.
Specific duties and responsibilities of the Audit Committee include, among other things:
1) appoint, retain, compensate, evaluate and, where appropriate, replace the
Independent Auditors; 2)
approve all fees and terms of engagement of the Independent Auditors; 3) confirm the independence of the Independent Auditors; 4) review and discuss with management and the Independent Auditors the Corporation’s audited consolidated financial statements and internal control over financial reporting; 5) meet with the Corporation’s Independent Auditors and review the scope of audit services and the results of their annual audit of the Corporation’s consolidated financial statements, including any recommendations the
Independent A
uditors may have with respect to internal controls or other business matters; 6) approve the internal audit plan and review the scope and results of internal audits; 7) review the results of examinations performed by regulatory authorities; 8) oversee management’s responsibility to fulfill the annual internal control reporting requirements of Section 404 of the Sarbanes-Oxley Act and the annual audit and management reporting requirements of the Federal Deposit Insurance Corporation Improvement Act of 1991; 9) review the Bank's performance of its obligations under various laws and regulations, including those affecting consumers; 10) review
related party transactions; and 11) oversee management’s responsibility to implement internal controls over information technology
and information security
risk
s
.
The evaluation of the Independent Auditors
occurs at least annually and
includes, among other things, a review of the most recent Public Company Accounting Oversight Board (“PCAOB”) report and
communications required by PCAOB Auditing Standard Number 1
301
regarding the independence and appointment of the Independent Auditors and the results of the annual audit. The evaluation also includes consideration of the
Independent Auditors
qualifications
and
industry experience
, the
performance
of the
a
udit
p
artner and audit team
and the tenure
of the firm
and appropriateness of fees
.
Crowe has served as the
Corporation’s I
ndependent
A
uditor
s
since 2003 and the audit partner is rotated at least every five years.
The Audit Committee received and reviewed the written disclosures and the letter from Crowe required by applicable requirements of the PCAOB regarding Crowe’s communications with the Audit Committee concerning independence, and discussed with Crowe their independence.
The Audit Committee reviews and discusses with management and the Independent Auditors the annual audited financial statements,
the Annual Report on
Form 10-K,
Quarterly Reports on
Form 10-Q
and earnings press releases prior to their filing, including reviewing the disclosures made in "Management's Discussion and Analysis of Financial Condition and Results of Operation
s
." The Audit Committee also reviews and d
iscusses policies with respect to risk assessment and risk management. Such discussions include the Corporation’s major financial and accounting risk exposures and the steps management has undertaken to control them
.
The Audit Committee reviews reports from management regarding, among other things, the framework and effectiveness of internal controls over financial reporting
and disclosure controls
, compliance with laws and regulations, and controls over information technology risk
.
The Audit Committee met
eight
times during 201
8
and schedules meetings to ensure it devotes enough time and attention to the duties and responsibilities outlined in this report. Periodic executive sessions are held with the Independent Auditors, Chief Auditor and other members of management to discuss any matters that the Committee or these persons believe should be discussed.
The Audit Committee regularly reports its activities to the Board, and
annually
conducts a review of its Charter and
performs
a self-assessment.
Based on the review and discussions referred to above, we recommended to the Board that the audited financial statements be included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 201
8
for filing with the Securities and Exchange Commission.
The Audit Committee:
|
·
|
|
Alexander L. Cover, Chairman
|
The preceding report shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the 1933 Act
or
1
934 Act, except to the extent the Corporation specifically incorporates this information by reference, and shall not otherwise be deemed filed under the 1933 Act or the 1934 Act.
OTHER MATTERS
The Board of the Corporation does not know of any matters for action by stockholders at the Annual Meeting other than the matters described in the Notice of Annual Meeting. However, the enclosed Proxy will confer discretionary authority with respect to matters which are not known to the Board at the time of the printing hereof and which may properly come before the meeting. It is the intention of the persons named in the
p
roxy to vote such
p
roxy with respect to such matters in accordance with their best judgment.
The entire expense of preparing, assembling and mailing the enclosed material will be borne by the Corporation. In addition to using the mail, directors, officers and employees of the Bank acting on behalf of the Corporation, and without extra compensation, may solicit proxies in person, by telephone
or
by facsimile.
STOCKHOLDER PROPOSALS
Any proposals of stockholders intended to be submitted at the 20
20
Annual Meeting of Stockholders under SEC Rule 14a-8 must be received by the Chairman of the Board or the President no later than November 1
5
, 201
9
in order to be considered for inclusion in the proxy statement and form of proxy for such meeting under SEC Rule 14a-8.
Under the Corporation’s bylaws, a stockholder must follow certain procedures to nominate persons for election as directors or to introduce an item of business at a meeting of stockholders. These procedures provide, generally, that stockholders desiring to make nominations for directors, or to bring a proper subject of business before the 20
20
Annual Meeting, must do so by a written notice timely delivered to the Corporation’s Secretary generally not later than December 1
6
, 201
9
.
If the Corporation is not notified of a matter to be brought before the 20
20
Annual Meeting by December 1
6
, 201
9
or if a matter is omitted from the proxy statement or proxy pursuant to SEC Rule 14a-8, then the proxy may provide discretionary authority to management of the Corporation to vote against such matter.
Nothing in this proxy statement will be deemed to require us to include in our proxy statement and proxy relating to an annual meeting any stockholder proposal that does not meet all of the requirements for inclusion established by the SEC in effect at the time such proposal is received.
INTERNET AVAILABILITY OF PROXY MATERIALS
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of
Stockholders to be held on
April
1
6
, 201
9
The Company’s proxy statement and form of proxy for its 201
9
Annual Meeting of Stockholders and its 201
8
Annual R
eport on Form 10-K to security holders is available at
ht
tp://www.cstproxy.com/fnbli/2019
.
For driving directions to
North Hempstead Country Club
, the location of the annual meeting, please go to
https://www.nhccli.com
.
ANNUAL REPORTS TO STOCKHOLDERS
Consolidated financial statements for the Corporation are included in the Corporation’s 201
8
Annual Report on Form 10-K which was mailed with this Proxy Statement. In addition, copies of the 201
8
Annual Report on Form 10-K as filed with the Securities and Exchange Commission will be sent to any stockholder upon written request without charge. Such request should be directed to Mark D. Curtis,
Senior
Executive Vice President, Chief Financial Officer and Treasurer, at the Corporation’s principal office, 10 Glen Head Road, Glen Head, New York 11545.
|
|
|
By Order of the Board of Directors
|
|
Christopher Becker
|
March 15, 2019
|
Executive Vice President
Chief Risk Officer and Corporate Secretary
|