Executive Management Transition
Effective January 11, 2021, Mr. Karafa transitioned from his role as Executive Vice President and Chief Financial Officer to Executive Vice President and Chief Accounting Officer. Also on January 11, 2021, the Board appointed Mr. Switzer as Executive Vice President and Chief Financial Officer.
Overview of Compensation Program
The Compensation Committee of the Board of Directors is responsible for developing and making recommendations to the Board with respect to the Company’s executive compensation policies. John F. Biagas, Robert Y. Clagett, W. Rand Cook (ex-officio), and F.L. Garrett III serve on the Compensation Committee (the “Compensation Committee”). The Compensation Committee, along with the Board, has reviewed the compensation policies and practices for all employees and concluded that any risks arising from such policies and practices are not reasonably likely to have a material adverse effect on the Company.
Compensation Philosophy and Objectives
The fundamental objectives of the Bank’s executive compensation policies are to ensure that Bank executives are provided incentives and compensated in a way that advances both the short- and long-term interests of stockholders while also ensuring that the Company and the Bank are able to attract, retain and motivate executive management talent. Accordingly, compensation is based on: (1) the employee’s individual performance and his or her ability to lead the Company and the Bank to achieve their respective financial goals, (2) the Company’s consolidated financial performance and (3) compensation compared to peer institutions’ executive compensation. In making decisions with respect to any element of an executive officer’s compensation, the Compensation Committee considers the total compensation that may be awarded to the executive officer, including salary, annual bonus, long-term equity incentive compensation, accumulated realized and unrealized stock option gains, and the dollar value to the executive and cost to the Company of all perquisites and other personal benefits. The Compensation Committee’s goal is to award compensation that is reasonable when all elements of potential compensation are considered.
Setting Executive Compensation
In reviewing the 2021 compensation of each of our executive officers, the Compensation Committee reviewed all components of his or her respective compensation, including base salary, annual bonus, long-term equity incentive compensation, accumulated realized and unrealized stock option gains, and the dollar value to the executive and cost to the Company of all perquisites and other personal benefits. In addition, the Compensation Committee reviewed each executive officer’s compensation history and performance information and the market data discussed below.
Role of Compensation Consultant and Market Data
As discussed earlier in this Proxy Statement, in 2021, the Compensation Committee engaged the Consultant to provide advice with respect to executive officer and director compensation for 2021.
The Consultant reviewed a peer group comprised of 24 mid-Atlantic U.S. banks ranging in assets from $2.2 billion to $7.1 billion, with median assets of $3.37 billion. The peer group consisted of the following banks: American National Bankshares, Atlantic Capital Bancshares, Bryn Mawr Bank, C&F Financial Corporation, CapStar Financial Holdings, Carter Bankshares, City Holding, CNB Financial, Community Financial Corporation, First Community Bancshares, HomeTrust Bancshares, Howard Bancorp, Mid Penn Bancorp, MVB Financial, Orrstown Financial Services, Peoples Financial Services, Reliant Bancorp, Republic First Bancorp, SmartFinancial Inc., Southern First Bancshares, Summit Financial Group, Shore Bancshares, Inc., First Bank and Univest Financial. The Consultant reviewed base salary, total cash compensation, targeted total cash compensation and targeted total direct compensation of our executive officers as compared to the peer group.