NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY
6
, 20
1
4
TO THE SHAREHOLDERS OF FIDELITY D & D BANCORP, INC.:
NOTICE IS HEREBY GIVEN that Fidelity D & D Bancorp, Inc. will hold its Annual Meeting of Shareholders on Tuesday, May
6
, 20
1
4
at 3:00 p.m., Eastern Daylight Time, at the main office of Fidelity D & D Bancorp, Inc., at Blakely and Drinker Streets, Dunmore, Pennsylvania, 18512, to consider and vote upon the following proposals:
|
(1)
|
|
to elect t
hree (3
) Cl
ass B
Directors to serve for a t
hree-year term and until their successors are elected and qualified;
|
|
(2)
|
|
to ratify the selection of an independent registered public accounting firm for the Corporation for the ye
ar ending December 31, 2014
;
and
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(3)
|
|
to transact such other business as may properly come before the Annual Meeting and any adjo
urnment or postponement thereof.
|
Shareholders
of record at
the close of business on March
12
, 20
1
4
, are entitled to notice of the meeting and may vote at the annual meeting, either in person or by proxy.
Management welcomes your attendance at the annual meeting. Whether or not you expect to attend the annual meeting in person, we ask you to complete
either online, by telephone or
sign, date or
prom
ptly return the
proxy in the accompanying postage-paid envelope. The prompt return of your proxy will save expenses involved in further communications. Even if you return a proxy, you may vote in person if you give written notice to the Secretary of the Company and attend the annual meeting. Promptly returning your completed proxy will ensure that your shares are voted in accordance with your wishes and will guarantee the presence of a quorum.
The Board of Directors is distributing this proxy statement, form of proxy, and Fidelity D & D Bancorp, Inc.’s
2013
An
nual Report on or
about
March 2
6, 2014
.
|
|
|
By Order of the Board of Directors,
|
|
|
|
/s/ John T. Cognetti
|
|
John T. Cognetti
|
Dunmore, Pennsylvania
|
Secretary
|
March 26, 2014
|
|
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY
CARD
.
Important Notice Regarding Internet Availabil
ity of Proxy Materials for the
Shareholder Meeting to be held on May 6, 2014. The Proxy Statement, Proxy Card and 2013 Annual Report are available at www.bankatfidelity.com/proxymaterials.
PROXY STATEMENT
Date, Time and Place of the Annual Meeting
Fidelity D & D Bancorp, Inc. (the “Company”) is furnishing this proxy statement in connection with the solicitation by the Board of Directors of proxies to be voted at the Annual Meeting of Shareholders of the Company. The annual meeting will be held at the main office of Fidelity D & D Bancorp, Inc., Blakely and Drinker Streets, Dunmore, Pennsylvania 18512 on Tuesday, May
6
, 20
1
4
at 3:00 p.m., Eastern Daylight Time. The telephone number for the Company is (570) 342-8281. Please direct all inquiries to Salvatore R. DeFrancesco, Jr., Treasurer and Chief Financial Officer of the Company.
Description of the Company
Fidelity D & D Bancorp, Inc., a Pennsylvania corporation and registered bank holding company, was organized in 1999 and became the holding company for The Fidelity Deposit and Discount Bank (the “Bank”) on June 30, 2000. The Bank, the Company’s wholly-owned, sole subsidiary, was established in 1902 as a commercial banking institution under the laws of Pennsylvania. In 1997, the Bank acquired trust powers. The Bank offers a full range of traditional banking and trust services as well as alternative financial products and services.
The Board of Directors provides
a copy of the annual report for the fiscal year ended December 31,
201
3
, with this proxy statement.
The
annual report is
available online at www.
b
ankatfidelity
.
com/proxymaterials.
You may obtain additional
print
copies of the Company’s annual report for the
201
3
fiscal year at no cost by contacting Salvatore R. DeFrancesco, Jr., Treasurer and Chief Financial Officer, Fidelity D & D Bancorp, Inc., Blakely and Drinker Streets, Dunmore, Pennsylvania 18512, telephone (570) 342-8281.
We have not authorized anyone to provide you with information. You should rely only on the information contained in this document or in documents to which we refer you. Although we believe we have provided you with all the information you will need to make your decision to vote, events may occur at the Company subsequent to printing this proxy statement that might affect your decision or
the
value of your stock.
PROXY AND VOTING PROCEDURES
Solicitation and Voting of Proxies
The Board of Directors is sending this proxy statement and proxy
card
to
s
hareholders on or about
March 26, 2014
. The Board of Directors of the Company solicits this proxy
for use at the 20
1
4
Annual Meeting of Shareholders of the Company. The directors, officers and other employees of the Company or the Bank may solicit proxies in person or by telephone, facsimile, or other electronic means. The Company will pay the cost of preparing, assembling, printing, mailing and soliciting proxies and any additional material that the Company sends to shareholders. The Company will make arrangements with brokerage houses and other custodians, nominees and fiduciaries to forward proxy solicitation materials to the beneficial owners of stock held by these persons. The Company will reimburse these persons for their reasonable forwarding expenses.
Only shareholders of record as of the close of business on
Wednesday
, March
12
, 20
1
4
, the voting record date, may vote at the annual meeting. On all matters to come before the annual meeting, shareholders may cast one vote for each share held. Cumulative voting rights do not exist with respect to the election of directors.
By properly completing a proxy card, the shareholder appoints the proxy holders named on the proxy card to vote his or her shares as specified on the proxy card. Any signed proxy card, which does not specify how the shares are to be voted, will be voted
FOR
:
|
·
|
|
Election of
Mary E. McDonald, David L. Tressler, Sr. and Kristin Dempsey O’Donnell
as Class
B
Directors of the Company, each for three-year terms expiring in 201
7
;
and
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|
·
|
|
Ratification of
the selection of
Parente
Beard
LLC as the Company’s
independent
registered
public account
ing firm
for the year ending
December
31, 20
1
4
.
|
If a shareholder is a participant in the Fidelity D & D Bancorp, Inc. Dividend Reinvestment Plan, the enclosed proxy will also serve as a proxy for the shares
held in the plan. The Registrar
and Transfer Company, as the administrator of the plan, will not provide plan participants with separate proxies covering the shares held in the Dividend Reinvestment Plan. Each holder of common stock is entitled to one vote, in person or by proxy, for each whole share of common stock held as of the record date. If your proxy is signed but does not indicate your voting preferences, the proxy holders will vote your shares
for all nominees and
in favor of the proposal
s
to ratify
the Company’s
independent
registered
public account
ing firm
.
If you do not return a proxy, your shares will not be voted.
Quorum and Vote For Approval
The Company’s Articles of Incorporation authorize the issuance of up to
10,000,000
shares of common stock. At the close of business
on
March 12
, 20
1
4
, the
Company
ha
d
2,413,110
of common
stock
outstanding
, without par value. The Company’s Articles of Incorporation also authorize the issuance of up to 5,000,000 shares
of preferred stock. The Company has not issued preferred stock.
To hold the annual meeting, a “quorum” of shareholders must be present. Under Pennsylvania law and the by
-
laws of the Company, the presence, in person or by proxy, of the holders of a majority of the outstanding shares entitled to vote is necessary to constitute a quorum for the transaction of business at the meeting. Votes withheld and abstentions will be counted in determining the presence of a quorum for the particular matter. The Company will not count broker non-votes in determining the presence of a quorum. A broker non-vote occurs when a broker nominee, holding shares for a beneficial owner, does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item, and has not received instructions from the beneficial owner. Those shareholders present, in person or by proxy, may adjourn the meeting to another time and place if a quorum is lacking.
Assuming the presence of a quorum, the
three (3)
nominees
for Class B
directors receiving the highest number of votes cast by shareholders entitled to vote for the election of directors shall be elected. Votes withheld from a nominee and broker non-votes will not be cast for a nominee. The Company’s Articles of Incorporation do not permit cumulative voting in the election of directors.
Revocability of Proxy
Shareholders who sign and return proxies to the Company may revoke them at any time before they are voted by:
|
·
|
|
Delivering written notice of revocation to
John T. Cognetti
, Secretary of Fidelity D & D Bancorp, Inc., at Blakely and Drinker Streets, Dunmore, Pennsylvania 18512;
|
|
·
|
|
Delivering a properly executed proxy bearing a later date to
John T. Cognetti
, Secretary of Fidelity D & D Bancorp, Inc., at Blakely and Drinker Streets,
Dunmore, Pennsylvania 18512;
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|
·
|
|
Voting again via telephone or Internet vote; or
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·
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Attending the meeting and voting in person, after giving written notice to
John T. Cognetti
, Secretary of the Company.
|
You have the right to vote and, if desired, to revoke your proxy any time before the annual meeting. Should you have any questions, please call
John T. Cognetti
, Secretary, at (570) 342-8281.
Methods of Voting
If you are a shareholder whose shares are registered in your name, you may vote your shares by using one of the following four methods:
Mail.
To vote
your proxy by mail, please complete your proxy card and sign, date and return it in the enclosed envelope. To be valid, a returned proxy card must be signed and dated.
Telephone.
If you hold the Company’s common stock in your own name and not through a broker or other nominee, you can vote your
shares
of
common stock by telephone by dialing the t
oll-free
telephone number 1-855-658-0966
. Telephone voting is available 24 hours a day unti
l 3:00 a
.m. local time on
May 6, 2014
. Telephone voting procedures are designed to authenticate shareholders by using the individual control numbers on your proxy card. If you vote by telephone, you do not need to return
your proxy card.
Via the Internet.
If you hold the Company’s common stock in your own name and not through a broker or other nominee, you can vote your shares of common stock electroni
cally via the Internet at www.rtco
proxy.com/
fdbc.
Internet voting is avai
lable 24 hours a day unt
il 3:00 a.m. local time on May 6, 2014
. Internet voting procedures are designed to authenticate shareholders by using the individual control numbers on your proxy card. If you vote via the Internet, you do not need to return your proxy card.
In person.
If you attend the annual meeting in person, you may vote your shares by completing a ballot at the meeting. Attendance at the annual meeting will not by itself be sufficient to vote your shares; you still must complete and submit a ballot at the annual meeting.
If your shares are registered in the nominee name of a bank or brokerage firm, you will receive instructions from your holder of record that must be followed in order for the record holder to vote the shares per your instructions. Many banks and brokerage firms have a process for their beneficial holders to provide instructions over the telephone or via the Internet. If you hold shares through a bank or brokerage firm and wish to be able to vote in person at the meeting, you must obtain a legal proxy from your broker, bank or other holder of record and present it to the inspector of elections with your ballot.
GOVERNANCE OF THE COMPANY
Our Board of Directors believes that the purpose of corporate governance is to ensure that we maximize shareholder value in a manner consistent with legal requirements and the highest standards of integrity. The Board
of Directors
has adopted and adheres to corporate governance practices which the Board
of Directors
and M
anagement believe promote this purpose, are sound and represent best practices. We continually review these governance practices, Pennsylvania law (the state in which we are incorporated), the rules and listing standards of Nasdaq, and SEC regulations, as well as best practices suggested by recognized governance authorities.
B
oard
or Directors
L
eadership
S
tructure
The
Company
separates the roles of Chief Executive Officer and Chairman of the Board in recognition of the differences between the two roles. The Chief Executive Officer is responsible for setting the strategic direction for the
Company
and the day-to-day operation and performance of the
Company
, while the Chairman of the Board provides guidance to the Chief Executive Officer and
presides over meetings of the Board
of Directors
. The Board
of Directors
believes the separated roles of Chief Executive Officer and Chairman are in the best interest of shareholders because it promotes
both stra
tegic development and facilitates
information flow be
tween M
anagement and the Board
of Directors
, both essen
tial for effective governance.
The Company's Board of Directors oversees all business, property and affairs of the
Company
. The President and Chief Executive Officer
and the Company's Officers keep the members of the Board
of Directors
informed of the Company’s business through discussions at Board
of Directors
meetings and by providing them with reports and other materials. The directors of the Company also serve as the di
rectors of the Company's wholly-
owned bank subsidiary, The Fidelity Deposit and Discount Bank, upon election by the Company.
Currently, our Board of Directors has
nine
members. Under the Nasdaq listing standards for independence, Michael J. McDonald, David L. Tressler, Sr., Mary E. McDonald
, Brian J. Cali,
John T. Cognetti
,
Patrick J. Dempsey, Kristin Dempsey O’Donnell
a
nd Richard J. Lettieri
meet the Nasdaq standards for
independence.
In determining the Director’s independence, the Board of Directors considered loan transactions
between the Company and the
D
irector, their immediate family members and businesses with whom they are associated. T
his constitutes more than a majority of our Board of Directors.
The table below includes
a
description of other categories or types of transactions,
and
relationships or arrangements considered by the Board of Directors, in addition to those listed above, in reaching their determination that the directors are independent
under Nasdaq rules
.
Name
|
Independent
|
Other transactions, Relationships or Arrangements
|
Brian J. Cali
|
Yes
|
Legal services
|
John T. Cognetti
|
Yes
|
Real Estate services
|
Patrick J. Dempsey
|
Yes
|
Facility Services
|
Kristin Dempsey O’Donnell
|
Yes
|
Facility Services
|
Michael J. McDonald
|
Yes
|
None
|
David L. Tressler, Sr.
|
Yes
|
None
|
Mary E. McDonald
|
Yes
|
None
|
Richard J. Lettieri
|
Yes
|
None
|
In each case, the Board of Directors determined that none of the transactions above impaired
the
independence of the Director. For more information, please refer to “
Certain Business Relationships and
Transactions
with
Management
.”
Risk Management
The Board
of Director
's role in the Company's risk oversight process includes receiving regular
reports from members of M
anagement on areas of material risk to the Company, including operational, financial, legal and regulatory, and strategic and reputational risks. The Board
of Directors
receives reports from the various committees of the Board
of Directors
. The Chair of the respective committee reports on the discussion to the full Board
of Directors
during the committee minutes report agenda section of the
Board
of Directors
meetings. This enables
the Board
of Directors
and its committees to coordinate the risk oversight role, particularly with respect to risk interrelationships. As part of its charter, the Audit Committee discusses, with respect to audit and risk review,
the
adequacy and effectiveness of internal accounting controls, financial systems or financial statements, and the accuracy of management reporting and compliance with laws, regulations and Company policy.
The B
oard
of Directors
conducted a risk assessment of the Bank's compensation program and concluded that
the program is balanced, does not motivate imprudent risk taking, and is not reasonably likely to have a material adverse effect on the Corporation
.
Meetings and Committees of the Board of Directors
During
2013
, the Company’s Board of Directors maintained three standing committees, and the Bank’s Board of Directors maintained eight standing committees. T
he Board of Directors of the Company has a standing Executive Committee, Audit Committee and
Human Resource/
Employee Stock Incentive Committee. In addition, the full Board of Directors of the Company performs the functions of a Nominating Committee. The Board of Directors of the Bank has an Asset/Liability Committee, Audit and Compliance Committee, Credit Administration Committee, Executive Committee, Human Resource and Compensation Committee, Loan Application Committee, Trust/401(k)/Investment Commit
tee, and a Building Committee.
Executive
Committee.
The Executive Committee acts as the Compensatio
n Committee for named executive officers
and does not have a charter
.
Members of the Company’s Executive Committee were Patrick J. Dempsey, Chairman, Michael J. McDonald, and Brian J. Cali.
All
members of the Executive Committee
meet the Nasdaq listing standards for independence. The principal duties of the Executive Committee are to act on behalf of the Board
of Directors
between meetings to take action on loan approvals, to review and approve compensation paid to senior executive officers and to evaluate governance issues and strategic plans. The Executive Committee
m
et
once in
2013
.
Audit Committee.
Members of the Company’s Audit Committee were Michael J. McDonald, Chairman, Mary E. McDonald
, Richard J. Lettieri
and David L. Tressler, Sr.
All members are independent under Nasdaq and SEC standards.
The Board of Directors has determined that David L. Tressler, Sr. is an “audit committee fin
ancial expert”
as defined under applicable SEC and Nasdaq rules.
The principal duties of the Audit Committee, as set forth in its charter,
which is available on our website,
www.bankatfidelity.com
, under
Investor Relations –
Other Information -
Governance Documents
, include reviewing significant audit and accounting principles, policies and practices, reviewing performance of internal auditing procedures, reviewing reports of examination received from regulatory authorities and recommending annually, to the Board of Directors, the engagement of an independent registered public accounting firm
. The Audit Committe
e met six
(
6
) times during
2013
.
Human Resource/
Employee Stock Incentive Committee.
Members of the Company’s
Human Resource/
Employee Stock Incentive Committee were Patrick J. Dempsey, Chairman, John T. Cognetti and Michael J. McDonald. This committee determines which key employees are eligible for participation in the
Company’s Stock Incentive
Plan
. This committee also administers the Company’s Employee Stock Purchase Plan
.
The committee did not meet in
2013
.
Nominating Committee.
The entire Board of
Directors
desires to participate on and performs the functions of a Nominating Committee
.
All
members of the Board
of Directors
,
except for
Daniel J. Santaniello m
eet the Nasdaq listing standards for independence. Because of full
Director participation
, the Board of Directors believes there is no need to have a separate standing committee to perform similar functions.
The principal duties of a Nominating Committee include
developing and recommending the criteria for selecting qualified director candidates, identifying individuals qualified to become Board
of Directors
members, evaluating and selecting or recommending director nominees for each election of directors, considering committee member qualifications, appointment and removal, recommending codes of conduct and codes of ethics applicable to the Company and providing oversight in the evaluation of the Board
of Directors
and each committee. Because of the rare occurrence of shareholder recommendations, the Board of Directors has not developed a formal policy to consider potential director candidates recommended by shareholders, but will give due consideration to any and all such candidates. If a shareholder wishes to recommend a potential director candidate, the shareholder should mail the
information regarding the candidate as required by
the Company’s
by
-
law provision
section
9.1 to the Secretary of the Company at the Company's
offices at Blakely and Drinker Streets, Dunmore, PA
18512.
The
Board
of Directors
acting as a Nominating
Committee
did not meet in
201
3
.
Human Resource and Compensation Committee.
Members of the Bank’s Human Resources and Compensation Committee were David L. Tressler,
Sr.,
Chairman, Patrick J. Dempsey,
Richard J. Lettieri
and
Mary E. McDonald. The principal duties of the Human Resource and Compensation Committee include the establishment of policies dealing with employee compensation, retirement and welfare benefit plans for the Bank. The Human Resource an
d Compensation Committee met once
during
201
3
.
Composition Table of the Company and Bank Committees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HR/EMPLOYEE
|
|
|
|
|
TRUST/
|
|
|
|
|
CREDIT
|
STOCK
|
|
HUMAN
|
|
|
401K/
|
|
|
AUDIT*
|
ALCO
|
ADM.
|
INCENTIVE
|
EXEC.*
|
RESCS.
|
LOAN
|
NOM*
|
INVEST.
|
BUILDING
|
|
|
|
|
|
|
|
|
|
|
|
Brian J. Cali
|
|
|
X
|
|
X
|
|
X
|
X
|
|
X
|
John T. Cognetti
|
|
|
|
X
|
|
|
X
|
X
|
X
|
X
|
Patrick J. Dempsey
|
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
|
|
Mary E. McDonald
|
X
|
X
|
|
|
|
X
|
X
|
X
|
X
|
|
Michael J. McDonald
|
X
|
|
X
|
X
|
X
|
|
X
|
X
|
|
|
David L. Tressler, Sr.
|
X
|
|
|
|
|
X
|
X
|
X
|
|
X
|
Kristin Dempsey
O’Donnell
|
|
X
|
X
|
|
|
|
X
|
X
|
X
|
|
Richard J. Lettieri
|
X
|
|
|
|
|
X
|
X
|
X
|
X
|
|
Meetings held in 201
3
|
6
|
4
|
4
|
0
|
1
|
1
|
24
|
0
|
4
|
1
|
*Committee jointly serves both the Company and Bank.
The Board of Directors of the Company met 2
4
times during
2013
. There were a total of
4
5
meetings of the various committees of the Board of Directors in
2013
.
All
directors attended at least 75% or more of the meetings of the Board of Directors and of the various committees on which they served
.
The Board of Directors has no policy regarding annual meeting attendance.
All Directors
attended the
2013
Annual Meeting of Shareholders and plan to attend the 20
1
4
meeting.
Shareholder Communications
The Board of Directors has not adopted a formal process for shareholders to send communications to the Board
of Directors
. Due to the infrequency of shareholder communications, the Board
of Directors
does not believe that a formal process is necessary. Written communications received by the Company from shareholders are shared with the full Board
of Directors
no later than the next regularly scheduled Board
of Directors
meeting.
Nomination of Directors
In considering whether to recommend any candidate for inclusion as a nomination for director, including candidates recommended by shareholders, the Board of Directors has determined that the Board
of Directors
must have the right diversity. This includes the candidate's integrity, business acumen, age, experience,
education,
commitment, diligence, conflicts of interest and the ability to act in the best interests of all shareholders. The Board
of Directors
seeks nominees with a broad diversity of experience, professions, skills, geographic representation and backgrounds. Nominees are not discriminated against on the basis of race, religion, national origin, sexual orientation, disability or any other basis proscribed by law.
Under the Company’s by-laws, nominations for director may be made by the Board of Directors or by a shareholder of record entitled to vote. In order for a shareholder to make a nomination, the shareholder must provide a notice along with the additional information and materials required by the by-laws to the
Company’s
Secretary not less than 60 days prior to the date of any meeting of shareholders called for the election of directors. For our annual meeting in the
year 20
1
5
, we
must receive this notice
on or
before March
5
, 20
1
5
.
You can obtain a copy of the full text of the by-law provision by writing to
John T. Cognetti
, Secretary, Blakely a
nd Drinker Streets, Dunmore, PA.
A copy of our by-laws has been filed with the Securities and Exchange Commission as an exhibit to Registrant’s
current report on Form 8-K,
filed with the SEC on November
21, 2007.
Submission of Shareholder Proposals
Any shareholder who, in accordance with the proxy rules of the SEC, wishes to submit a proposal for inclusion in the Company’s proxy statement for its 20
1
5
Annual Meeting of Shareholders must deliver such proposal in writing to the Secretary of Fidelity D & D Bancorp, Inc.
at its principal executive office, Blakely and Drinker Streets, Dunmore, Pennsylvania 18512, not later
than November 26
, 20
1
4
.
A shareholder may have other business brought before the 20
1
5
Annual Meeting by submitting the proposal to the
Company’s
Secretary, in accordance with our by-laws. The proposal must be delivered to our executive offices at Blakely and Drinker Streets, Dunmore, PA 18512, to the attention of the
Company’s
Secretary. We are not required to include any proposal receiv
ed after
No
vember 26
, 20
1
4
in our proxy materials for the 20
1
5
annual meeting.
Employee Code of Ethics
Since 1993, the Bank has had a Code of Ethics. As required by law and regulation, the Board of Directors amended the Code of Ethics as of March
16
, 200
4
, so that our Code of Ethics is applicable to the Company’s and the Bank’s directors, officers and employees, including the Chief Executive Officer
and senior financial officers.
The Code of Ethics encourages individuals to report any conduct that they believe in good faith to be an actual or apparent violation of the code of ethics. The Board
of Directors
periodically receives reports on our compliance program. The Code of Ethics is posted on our website at
www.
bankatfidelity
.com,
under
Investor Relations –
Other Information -
Governance Documents
.
We have also filed a copy of the Code of Ethics with the SEC as Exhibit 14 to our December 31, 2003 Annual Report on Form 10-K.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
Qualification and Nomination of Directors
The Company’s by-laws provide that the Board of Directors consist of at least three directors and be classified into three classes. Each class is elected for a term of three years. Accordingly, the terms of the classes expire at successive annual meetings. The Board
of Directors
may fix the number of directors and their respective classifications within the foregoing limits. A majority of the Board
of Directors
may also fill vacancies on the Board, and the person appointed to fill the vacancy serves, until the expiration of the term of office of the class of directors to which he or she was appointed.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
FOR
THE PROPOSAL TO ELECT THE
THREE
NOMINEES LISTED BELOW AS CLASS
B
DIRECTORS OF THE COMPANY.
Currently, Class A consists of
three
directors, Class B consists of
three
directors, and Class C consists of
three
directors. Shareholders
will elect
t
hree
Class
B
directors at the annual meet
ing to serve for a three-
year term that expires at the Company’s annual meeting in the year 201
7
.
The proxy holders will vote the proxies for the election of each of the nominees named below, unless you indicate that your vote should be withheld from any or all of them. Each nominee elected as a director will continue in office until his or her successor has been duly elected and qualified, or until his or her death, resignation or retirement.
The Board of Directors nominated
Mary E. McDonald, David L. Tressler, Sr. and Kristin Dempsey O’Donnell to serve as Class B
d
irectors to serve until the 2017
annual meeting of
shareholders
.
Mesdames
McDon
ald and O’Donnell and
Mr. Tressler, Sr.
are presently members of the Board of Directors and have consented to serve another term if elected.
If any of the nominees is unable to serve for any reason, a majority of the Board of Directors then in office may fill the vacancy until the expiration of the term of the class of directors to which he or she was appointed.
The Board of Directors is proposing the following nominees for election as Class
B
Directors at the annual meeting:
Mary E. McDonald
|
David L. Tressler, Sr.
|
Kristin Dempsey O’Donnell
|
The Board of Directors recommends a vote
FOR
the election of the above named nominees for directors.
BOARD OF DIRECTORS AND MANAGEMENT
Information as to Directors and Nominees
The following biographies contain selected information with respect to the directors of the Company. The information includes each person’s age as of March
12
, 20
1
4
, and principal occupation for at least the past five years.
Current Class A
Directors
(to serve until 20
15
)
John T. Cognetti
Mr. Cognetti,
age
6
4
,
has
been a Director of the Company since 1999. He has served as a member of the Bank’s Board of Directors since 1988. Mr. Cognetti is President of Hinerfeld
Commercial
Real
Estate
, in Scranton, Pennsylvania.
Mr. Cognetti’s
education and
experien
ce in real estate provides valuable insight on the
regional
real estate market to
the commercial division of the bank
. Having managed sales professionals
ove
r the years, gives Mr. Cognetti
the ability to provide guidance on
person
ne
l
matters
, marketing/sales and management
issues
.
Michael J. McDonald, Esquire
Mr. McDonald,
age 59
,
has
been a Director of the Company since 1999. Mr. McDonald has served as a member of the Bank’s Board of Directors since 1994. He is a partner with the law firm
of McDonald
and MacGregor
, LLC in
Scranton, Pennsylvania.
Mr. McDonald’s
education
and legal
experien
ce provides valuable insight for
the
B
ank
.
Richard
J. Lettieri
Mr.
Lettieri, age
66
,
was appointed as
a Director of the Company
and B
ank on
March 20,
2012. I
n 1986,
Mr.
Lettieri founded Dock
Square Consultants in Boston, MA, and managed the firm until his retirement in 2005. Since then he has continued
consulting as a sole proprietor.
His consulting practice
is focused on business strategy and market development.
Mr.
Lettieri’s
expertise in
strategic
consulting, centering
on helping to solve complex problems and plot future directions in a wide variety of business environments
,
provide
s
valuable
insight for the
Company and
Bank.
Current Class B Directors
(to serve until 20
14
)
and Nominees
(to serve until 2017
, if re-elected)
Mary E. McDonald
Mrs. McDonald, age
81
,
has been a Director of the Company a
nd
member of the Bank’s Board of Directors since 2000. Mrs. McDonald is a retired educator.
Mrs. McDonald’s many years in
education provides valuable insight
f
or the
Company and
B
ank
.
David L. Tressler, Sr.
Mr. Tressler
,
age
77
, has been a Director of the Company since 1999. Mr. Tressler has been a member of the Bank’s Board of Direct
ors since 1998. He is
currently a
consultant for The Quandel Group,
Inc., in Scranton, Pennsylvania
. Mr. Tressler has a broad knowledge from his many years of banking experience which included 16 years as Chairman and CEO of a regional bank.
Kristin Dempsey O’Donnell
M
r
s. O’Donnell, age 44
,
was appointed as
a Director of the Company
and Bank on
March 20,
2012. M
r
s. O’Donn
ell experience includes over eleven
years as a vice president of sales and marketing for
Dempsey Uniform & Linen Supply, Inc., in Jessup, Pennsylvania
, driving the responsible and successful growth of the company. As an own
er and member of the company’s B
oard
of Directors
, she has also participated in risk assessment, financial statement preparation, review and analysis
, and
acquisitions
. M
r
s.
O’Donnell has an undergraduate degree in Engineering and a M.B.A. M
r
s. O’Donnell’s
education
and
experien
ce provides valuable insight for
the
Company and
B
ank
.
Current Class C Directors
(to serve until 20
1
6
)
Brian J. Cali, Esquire
Mr. Cali,
age 61
,
has been a Director of the Company a
nd
member of the Bank’s Board of Directors since February of 2001. He is a self-employed attorney
for
36
years
practicing in Dunmore, Pennsylvania
and is also affiliated with several businesses located in Northeastern Pennsylvania.
Mr. Cali’s law practice and the several
businesses with which
he is affiliated
with
provide a wealth of every day business experience.
Patrick J. Dempsey
Mr. Dempsey,
age 80
,
has been a Director of the Company since 1999. Mr. Dempsey has also served as a member of the Bank’s Board of Directors since 1985. He is the
founder and
Chairman of the Board
of Dempsey Uniform & Linen Supply, Inc., in
Jessup
, Pennsylvania.
In addition to his formal education, Mr. Dempsey has gained extensive knowledge in Human Resources, Finance, Marketing/Sales and Operations.
Daniel J. Santaniello
Mr.
Santaniello, age
48
,
has been a Director of the
C
ompany and a member of the Bank’s Boar
d of Directors since March 2011
.
Mr. Santaniello was named President and Chief Executiv
e Officer on December 2, 2010.
Mr. Santaniello had previously served as Vice President and Chief Operating Officer of the Company since May 2004.
Mr. Santaniello
has a broad knowledge
of banking
from
his many years in
ban
king
.
Family Relationships
Director Mary E. McDonald is the aunt of
Director Michael J. McDonald.
Director
Kristin Dempsey O’Donnell
is
the daughter of
Director
Patrick J. Dempsey
.
Executive Officers of the Company and Bank
Daniel J.
Santaniello
, age 48
,
was named President and Chief Executive Officer on December 2, 2010. Mr. Santaniello had previously served as Vice President and Chief Operating Officer of the Company since May 2004. Mr. Santaniello has been employed by the Bank since July 2001
.
Salvatore R. DeFrancesco, Jr., CPA,
CGMA,
age 4
4
,
has served as Treasurer and Chief Financial Officer of the Company since January 2003. Mr. DeFrancesco has been employed by the Bank since January 2003 and serves as Executive Vice President and Chief Financial Officer.
Timothy P. O’Brien,
age
62
,
has been employed by the Bank since January 2008 and serves as
Senior
Executive Vice President and Chief
Lending
Officer
.
E
ugene J. Walsh, age 49, re-joined
the Bank on March 17, 2014 as Executive Vice President and Chief Risk Officer. Mr. Walsh was previously Executive Vice President and Senior Loan Officer of the Bank from 2001 to 2005. During the interim period, Mr. Walsh served as Vice President, Government Banking & Corporat
e Lending at M&T Bank in Wilkes-
Barre, Pennsylvania, and Chief Financial Officer of Intific, Inc. in Peckville, Pennsylvania.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors is comprised of directors who meet the Nasdaq standards for independence
.
The Audit Committee operates under a written charter adopted in 2004 by the Board of Directors, which was reviewed and revised in February 2008, and is available through our website, www.bankatfidel
ity.com,
under
Investor Relations –
Other Information -
Governance Documents
.
The Audit Committee met with M
anagement periodically during the year to consider the adequacy of the Company’s internal controls and the objectivity of its financial reporting. The Audit Committee discussed these matters with the Company’s independent registered public accountants and with appropriate Company financial personnel and internal auditors. The Audit Committee also disc
ussed with the Company’s M
anagement and independent registered public accountants the process used for certifications by the Company’s Chief Executive Officer and Chief Financial Officer which are required for certain of the Company’s filings with the Securities and Exchange Commission.
The Audit Committee met privately at its regular meeting with both the independent registered public accountants and the internal auditors, as well as wi
th the Chief Financial Officer
and the Chief Executive Officer on a number of occasions, each of whom has unrestricted access to the Audit Committee.
The Audit Committee has outsourced the internal audit function to the
independent registered
public accounting firm of McGrail Merkel Quinn & Associates. The main responsibility of this firm was to complete the internal audits necessary to meet the monitoring component of the
Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Other responsibilities included the identifying, re-testing and reporting all significant findings to the Audit Committee.
The Audit Committee also outsources the regulatory compliance audit function to the independent firm
Fidelity Information Services
, LLC
, “FIS”, formally known
as ICS R
isk Advisors. FIS
specializes in providing regulatory compliance services
to the financial services industry. The main
responsibility of the firm is to provide comprehensive regulatory compliance audits to identify compliance exceptions and report all significant exceptions to the Audit Committee.
The commitment of the Audit Committee, internal audit, and management, resulted in the completion of the scheduled internal audits. Management, in response to findings, has taken corrective action and internal audit re-testing was performed as required. The combined efforts were successful in meeting the internal control components of risk assessment and monitoring required by year end. The internal audit outsource arrangement, audit schedule and the commitment to maintain an effective system of internal controls, required under regulation, caused the Audit Committee to meet
five (6
) times
in
2013
.
The Audit Committee selected ParenteBeard LLC as the independent registered public accounting firm for the Company in
2013
after reviewing the firm’s per
formance and independence from M
anagement.
Management has primary responsibility for the Company’s consolidated financial statements and the overall reporting process, including the Company’s system of internal controls.
ParenteBeard LLC audited the annual consolidated fi
nancial statements prepared by M
anagement, expressed an opinion as to whether those consolidated financial statements fairly present the consolidated financial position, results of operations and cash flows of the Company in conformity with accounting principles generally accepted in the United States of America and discussed with the Audit Committee any issues they believed should have been raised with the Audit Committee.
The
Audit Committee reviewed with M
anagement and ParenteBeard LLC the Company’s audited consolidated financial statements
and met separately with both M
anagement and ParenteBeard LLC to discuss and review those consolidated financial statements and reports prior to issuance. Management has represented, and ParenteBeard LLC has confirmed, to the Audit Committee, that the consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America.
The Audit Committee received from ParenteBeard LLC the written disclosure and the letter required by Public Company Accounting Oversight Board (PCAOB) Rule 3526,
Communication with Audit Committees Concerning Independence.
The Audit Committee first discussed with ParenteBeard LLC the items related to the firm’s independence from the Company. The Audit Committee also discussed with ParenteBeard LLC matters required to be discussed by
PCAOB Auditing Standards No. 16,
Communication with Audit Committee
. As such, the Audit Committee implemented a procedure to monitor auditor independence, reviewed audit and non-audit services performed by ParenteBeard LLC and discussed with th
e auditors their independence.
In reliance on these reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the Company’s audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2013
, fo
r filing with the Securities and Exchange Commission. The Committee and the Board
of Directors
have also recommended, subject to shareholder
ratification
, the selection of
ParenteBeard LLC, as the
Company
’s
independent
registered
public
account
ing firm for the year ending December 31, 20
14
.
Members of the Audit Committee
Michael J. McDonald, Chairman
David L. Tressler, Sr.
Mary E. McDonald
Richard J. Lettieri
BENEFICIAL OWNERSHIP OF THE COMPANY’S COMMON STOCK BY PRINCIPAL SHAREHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS
The following table shows, to the best of our knowledge, the names and address of each person or entity
who owned more than 5% of the Company’s outstanding common stock, either on the Company’s records or indirectly as a “beneficial” owner
,
as of
February 28
, 201
4
:
Name and
address
|
Amount and Nature of Beneficial Ownership of Company’s Common
Stock
(1)
|
Percentage of Company’s Common Stock Beneficially
Owned
|
Brian J. Cali
103 East Drinker Street
Dunmore, PA 18512
|
1
80
,72
8
(2)
|
7.43
%
|
(1) & (2) footnote reference listed at table below.
The following table provides information, as
of
February 2
8
, 20
1
4
, with respect to the following beneficial owners of the Company’s common stock:
|
·
|
|
Each Director of the Company
|
|
·
|
|
Each
N
amed
E
xecutive
O
fficer
|
|
·
|
|
All Executive Officers and Directors as a group
|
We determined beneficial ownership by applying the General Rules and Regulations of the SEC, which state that a person may be credited with the ownership of common stock:
|
·
|
|
Owned by or for the person’s spouse, minor children or any other relative sharing the person’s home;
|
|
·
|
|
Of which the person shares voting power, which includes the power to vote or to direct the voting of the stock; and
|
|
·
|
|
Of which the person has investment power, which includes the power to dispose of or direct the disposition of the stock.
|
Also, a person who has the right to acquire shares within 60 days after
February 2
8
,
2014
, will be considered to own the shares. As of
February 2
8
,
2
014
,
the number of shares of common stock outstanding was approximately
2,413,110
.
The calculation of percentages is based upon this number, plus
the exercisable number of options for that individual or for the group which has a total of
19,500
shares of common stock subject to exercisable options for a total of
2,432,610
shares.
|
|
|
Name of Individual and
Position with Company
|
Amount and Nature of Beneficial Ownership of Company’s Common
Stock
(1)
|
Percentage of Company’s Common Stock Beneficially
Owned
|
Brian J. Cali
|
180,728
(2)
|
7.43%
|
Director
|
|
|
|
|
|
Mary E. McDonald
|
89,600
(3)
|
3.68%
|
Assistant Secretary, Director & Nominee
|
|
|
|
|
|
Michael J. McDonald
|
85,296
(4)
|
3.51%
|
Vice Chairman, Director
|
|
|
|
|
|
Patrick J. Dempsey
Chairman of the Board & Director
|
63,167
(5)
|
2.60%
|
|
|
|
Richard J. Lettieri
Director
|
42,735
(6)
|
1.76%
|
|
|
|
Kristin Dempsey O’Donnell
Director & Nominee
|
34,524
(7)
|
1.42%
|
|
|
|
David L. Tressler, Sr.
Director
& Nominee
|
14,777
(8)
|
*
|
|
|
|
John T. Cognetti
Secretary, Director
|
12,722
(9)
|
*
|
|
|
|
Daniel J. Santaniello
President & Chief Executive Officer, Director
|
20,778
(10)
|
*
|
|
|
|
Salvatore R. DeFrancesco, Jr.
Treasurer & Chief Financial Officer
|
10,619
(11)
|
*
|
|
|
|
Timothy P. O’Brien
Senior Executive Vice President & Chief Lending Officer of the Bank
|
6,849
(12)
|
*
|
|
|
|
All Officers and Directors as a Group
(9 Directors, 3 Officers, 11 persons in total)
|
561,795
|
23.09%
|
*
Represents beneficial ownership of less than 1% of the Company’s common stock.
|
(1)
|
|
Information furnished by the directors
, named executive officers and
the Company.
|
|
(2)
|
|
Figure includes
101,176
shares held solely by Mr. Cali,
28,771
shares held for Mr. Cali in a self-employed retirement trust,
8,044
shares held jointly by Mr. Cali and his children,
5,973
held by Mr. Cali’s children
,
33,514
held in Samuel C. Cali, GST Exempt Residuary Trust
,
2,500
exercisable stock options
and
750
shares of restricted stock
.
|
|
(3)
|
|
Figure includes 86,350
shares h
eld solely by Mrs. McDonald,
2,500 exercisable
stock options
and 750
shares of restricted stock
.
|
|
(4)
|
|
Figure includes
6
4,181
shares held solely by Mr. McDonald,
1
4,656
shares h
eld
by Mr. McDonald’s spouse, 1,437
shares held
jointly
by Mr. McDonald’s spouse and children, 1,
772
shares held by
Mr. McDonald’s children,
2,500
exe
rcisable stock options and 750
shares of restricted stock
.
|
|
(5)
|
|
Figure includes
1
3,073
shares held solely by Mr. Dempsey,
46,844
shares
h
eld by Mr. Dempsey’s spouse,
2,500
ex
ercisable stock options and 750
shares of restricted stock
.
|
|
(6)
|
|
Figure includes 29,542
shares held in
t
rust
for Mr.
Letteri
, 3,808 shares held in trust
for Mr. Letteri’s spouse
,
4,471 shares held jointly
by his
son
and Mr. Letteri
,
4,164 shares held jointly by his daughter and Mr. Letteri’s spouse
and 750
shares of restricted stock
.
|
|
(7)
|
|
Figure includes 14,427
shares held sol
ely by Mrs. O’Donnell, 16,964
held by Mrs. O’Donnell
’s
spouse
, 2,383
held by Mrs. O’Donnell
’s spouse and children
and 750
shares of restricted stock
.
|
|
(8)
|
|
Figure includes
3,455
shares
held solely by Mr. Tressler, 7
27
shares held jointly by Mr.
Tressler and his spouse, 1,396
shares held in trust for Mr. Tress
ler’s spouse and children, 5,306
shares held jointly for Mr. Tre
ssler in trust with his son, 478
shares held jointly by Mr
. Tressler and his daughter, 165
shares held jointly by Mr. Tre
ssler and his grandchildren,
2
,500 exe
rcisable stock options and 750
shares of restricted stock
.
|
|
(9)
|
|
Figure includes
570
shares held solely by Mr. Cognetti,
7,019
shares held solely for Mr. Cognetti in an IRA,
2
52
shares held jointly by Mr. Cognetti and his spouse,
5
76
shares held by Mr. Cognetti’s spouse,
1,
055
shares held by Mr. Cog
netti’s spouse and children,
2,500
exe
rcisable stock options and 750
shares of restricted stock
.
|
|
(10)
|
|
Figure includes
5,839
shares h
el
d solely by Mr. Santaniello, 819
shares held jointly by Mr. Santaniello and his spouse,
11,670
shares held jointly by Mr. S
antaniello and his son,
1,000
exercisable stock options
and
1,450
shares of restricted stock.
|
|
(11)
|
|
Figure includes
301 shares held
solely
by
Mr.
DeFrancesco, 7,068
shares held jointly by Mr. DeFrance
sco and his spouse,
2,000
exercisable stock options and
1,250 shares
of restricted stock.
|
|
(12)
|
|
Figure includes
301
shares held
solely by
Mr. O’Brien
, 4
,
298
shares held jointly
by Mr. O’Brien
and his spouse,
1,000 exe
rcisable stock options and 1,250
shares of restricted stock.
|
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 require
s
the Company’s officers and directors, and persons who own more than 10% of the registered class of the Company’s equity securities to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission. Officers, directors and greater than 10% shareholders are required by SEC regulation to furnish the Company with copies of all filed Section 16(a) forms. The Board of Directors knows of no persons who own greater than 10% of the Company’s outstanding common stock.
Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons, the Company believes that during the period from January 1, 20
13
, through December 31, 20
13
, all officers and directors were in compliance with all filing requirements applicable to
them
,
except for
one late filing
occurrence
by John T.
Cognetti on one purchase transaction.
CERTAIN BUSINESS RELATIONSHIPS AND TRANSACTIONS
WITH MANAGEMENT
Except as described below, the Company has not entered into and does not intend to enter into any material transactions with any director or executive officer of the Company and/or the Bank or their immediate family members or associated companies.
Some of our directors, officers, their immediate family members and the companies with which they are associated had banking transactions with the Bank in the ordinary course of business during 2013, and the Bank expects to continue such banking transactions in the future.
Total loans outstanding from the Bank at December 31, 2013, to the Company’s/Bank’s officers and directors as a group, members of their immediate families and companies in which they had an ownership interest of 5% or more, amounted to $3,485,141 or approximately 5% of the total shareholder’s equity of the Bank. The Bank made these loans in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, not associated with the Bank, and they did not involve more than the normal risk of collection or present other unfavorable features.
The largest total amount of indebtedness outstanding during 2013 to the above described group was approximately $4,039,359. The aggregate amount of indebtedness outstanding as of the latest practicable date, February 28, 2014, to the above group was approximately $3,589,341.
Written p
olicies and procedures for approving loans to related parties are comparable to those applied to non-related parties. In deciding whether to approve other types of related person transactions the following factors may be considered:
•
information about the goods or services proposed to be or being provided by or to the related party or the nature of the transactions;
•
the nature of the transactions and the costs to be incurred by the Company or payments to the Company;
•
an analysis of the costs and benefits associated with the transaction and a comparison of comparable or alternative goods or services that are available to the Company from unrelated parties; and
•
the business advantage the Company would gain by engaging in the transaction.
To receive approval, the related person transaction must be on terms that are fair and reasonable to the Company, and that are as favorable to the Company as would be available from non-related entities in comparable transactions.
Other than loans, there have been no material transactions between the Company or the Bank, or any material transactions proposed, with any Director or Executive Officer of the Company or the Bank, or any associate of these persons. The Bank does, from time-to-time, enter into non-material transactions with related parties.
During 2013
, the Bank paid, in its ordinary course of business, for legal services performed by Brian J. Cali, Esquire and by Tressler Law LLC, of which James M. Tressler, Esquire is an owner and the
son of David L. Tressler, Sr.
During 201
3
, the Bank paid fees for architectural services performed by DX Dempsey, of which Michelle Dempsey, daughter of Patrick J. Demp
sey
and sister of Kristin Dempsey O’Donnell
,
is
owner. Further, in 2013
, the Bank paid Dempsey Uniform & Linen Supply, Inc., of which Patrick J. Dempsey is Chairman of the Board, and of which Kristin Dempsey O’Donnell is a vice president for laundry and uniform services; Guy Cali and Associates, Inc., of which Guy Cali, brother of Brian J. Cali, is owner, for photography services and creative projects. All of these products and services were sold or provided according to the customary price or fee schedule of the seller or service provider.
COMPENSATION DISCUSSION AND ANALYSIS
The Company’s Executive Committee
of the Board of Directors
acts as
and performs the duties of
the Compensation Committee. The Committee members include Patrick J. Dempsey, Michael J. McDonald and Brian J. Cali.
Named executive officers include the principal executive officer, the principal financial officer, the Corporation’s three most highly compensated executive officers (earning over $100,000) other than the principal executive officer and the principal financial officer who were serving as executive officers at the end of the last completed fiscal year, and up to two individuals who would have been a named executive officer but for the fact that the individual was not serving as an executive officer at the end of the fiscal year.
The named exec
utive officers for the year 2013
are Daniel J. Santaniello, President and Chief Executive Officer; Salvatore R. DeFrancesco, Jr., Treasurer and Chief Financial Officer; Timothy P. O’Brien, Senior Executive Vice President and Chief Lending Officer
;
Raymond J. Fox,
former
Executive Vice President and
Chief Operating Offi
cer; and John T. Piszak, former Executive Vice President and Chief Risk Officer.
Objectives of Compensation Programs
The Committee does not have a formal written charter or policy that guides the Committee’s actions. The Company’s compensation philosophy is to have a simple compensation plan that provides competitive levels of pay and benefits that will serve to attract and retain management talent, while at the same time motivating the executives to work toward providing a competitive level of returns for shareholders. The committee seeks to avoid
overly
complex compensation and bonus plans that could provide unintended areas of motivation or yield overly high levels of pay or bonuses. Unintended areas of motivation are deemed to be short-term actions that may yield rapid growth in assets, loans or deposits, but provide earnings or revenues that are not sustainable, or introduce elements of unintended risk t
o the Company’s long-term
goals.
The Committee has determined that executive compensation should consist of:
|
|
•
Base Pay
|
•
Incentive Plan
|
•
Broad Based Benefits
|
•
Retirement Plan
|
•
Profit Sharing Contributions
|
•
Equity Based Compensation
|
•
Perquisites
|
|
Base Pay
Base pay is deemed to be the prevailing part of the Company’s executive compensation and allows the executive to have a predictable level of income. The levels of base pay are primarily determined by levels of experience, position, performance and longevit
y with the Company,
though no specific
formula or weight
is ascribed to any of the above factors. The Committee uses its business judgment in determining the amount of increase in base pay to award the named executive officers.
Incentive Plan
In 2013, the Committee approved incentive plans for various areas of the Company, including a Senior Management incentive plan, covering the
named
executive
officers.
A vital component of the Company’s s
uccess is the ability of M
anagement to meet and exceed the performance objectives consistent with the financial and strategic objectives of the Company and the best interests of the shareholders. The purpose of the incentive plan is to motivate, reward, and reinforce performance and achievement of team and/or individual goals in support of the Company’s strategic objectives for growth and profitability.
The plan provides a form of variable compensation which is directly linked to individual and collective performance
factors, which may change from year to year,
with a focus on achieving annual performance objective
s
. These objectives are coordinated with the long term objectives of the Company.
For the year 2013, the plan focused upon net income and return on assets as follows:
|
|
|
|
|
|
|
|
|
|
Chief Executive Officer
|
|
Chief Financial Officer and
Chief Lending Officer
|
|
|
Performance Measures
|
|
Performance Measures
|
|
|
Net Income (50%)
|
|
Net Income (50%)
|
|
|
Threshold
|
Budget
Target
|
Maximum
|
|
Threshold
|
Budget
Target
|
Maximum
|
|
|
$4,780,691
|
$5,311,879
|
$6,374,254
|
|
$4,780,691
|
$5,311,879
|
$6,374,254
|
|
|
|
|
|
|
|
|
|
|
|
Return on Assets (50%)
|
|
Return on Assets (50%)
|
|
Threshold
|
Budget
Target
|
|
|
Threshold
|
Budget
Target
|
Maximum
|
|
|
0.77%
|
0.86%
|
1.03%
|
|
0.77%
|
0.86%
|
1.03%
|
|
|
|
|
|
|
|
|
|
|
|
Awards (% of Base Pay)
|
|
Company Goal Award – 67% of Award
|
|
|
Threshold
|
Budget
Target
|
Maximum
|
|
Threshold
|
Budget
Target
|
Maximum
|
|
|
8%
|
15%
|
22%
|
|
3.5%
|
7%
|
10%
|
|
|
|
|
|
|
|
|
|
|
|
Individual Performance Lever
|
|
Individual Goal Award – 33% of Award
|
|
|
Individual performance multiplier of
+/- 20% of the award
as determined by Board of Directors
|
|
Threshold
|
Budget
Target
|
Maximum
|
|
|
|
|
|
|
2%
|
3%
|
6%
|
|
|
|
|
|
|
|
|
|
|
|
Potential Award Range (% of Base Pay)
|
|
Potential Award Range (% of Base Pay)
|
|
|
Threshold
|
Budget
Target
|
Maximum
|
|
Threshold
|
Budget
Target
|
Maximum
|
|
|
6.4 – 11.8%
|
12 – 18%
|
18.2 – 26%
|
|
6%
|
10%
|
16%
|
|
Based upon the Company’s financial results, the Chief Executive Officer was awarded a $40,000 bonus and the Chief Financial Officer and Chief Lending Officer were awarded $24,000 bonuses
,
each
,
under the plan.
The plan does contain a clawback provision where in awards will be recalculated if the relevant performance factor upon which they are based are restated or otherwise adjusted within the thirty-six (36) month period following the public release of the financial information.
Broad Based Benefits
The Company believes it has comprehensive and competitive benefit plans that are available to all of the Company’s employees which are an additional incentive used in attracting and retaining employees. These include health insurance, short and long-term disability programs and term life insurance. The Bank provides these benefits to help protect its employees from the possibility of financial ruin that often results after an uninsured person suffers an illness or death. Each executive is eligible to participate in these plans to the same extent as all other employees of the Company.
Retirement Plan
Consistent with the Company’s compensation philosophy, the Company provides a 401(k) plan for all of its full-time employees, subject to certain eligibility requirements regarding age and length of employment. In order to encourage employees to save for retirement, the Company matches the employee
contribution to the first 6% of pay contributed. Contributions by the executives are subject to the normal discrimination testing for these types of plans and are limited by those rules.
Profit Sharing Contribution
The 401(k) plan also has a profit sharing component. This component has the same eligibility requirements as the 401(k) plan plus the requirement of being an active employee as of the plan’s year end. This plan is designed for the Company to pay a discretionary amount annually to all eligible employees based on the Company’s profitability. The executives are eligible to participate in this plan under the same terms as other employees. The Company believes that this plan encourages longevity with the Company and encourages the employees to assist in keeping the Company profitable.
Equity Based Compensation
In 2012, the Company approved a Stock Incentive Plan that
is designed to provide stock-based compensation including
qualified
,
non-qualified stock options
, restricted stock or stock appreciation rights
. There is no policy governing the amount and timing of any stock grant. The Stock Incentive Plan is intended to align the interests of the participants with those of the shareholders. The Committee uses its discretion and business judgment in determining to whom and the amount of equity awarded.
Although in 2012, no equity grants were made to named executive officers, in 2013 and in the first quarter of 2014, each named executive officer was awarded restricted stock which vests over four years to align their interests with those of our shareholders and to encourage management continuity.
Employee Stock Purchase Plan
In an effort to align the interests of the employees with those of the shareholders and to incent the employees to enhance the financial results of the Company, the Company established an Employee Stock Purchase Plan. Under the plan, employees are allowed to purchase a limited number of shares of Company stock at a discount to encourage employees to participate in the plan.
The plan is available to all employees.
Perquisites
The Committee recognizes that perquisites are an important part of the executive compensation mix. Accordingly, in limited cases, the Company provides for automobiles and country club dues for select executives. These are designed to further the business goals of the Company. The country club is used to entertain and market new and current clients. The automobile is essential as the executives are expected to have out-of-the-office meetings while conducting bank business. The executives are expected to reimburse the Company for any personal use of the selected benefit.
Role of Executive Officers in Compensation Decisions
The
Committee makes all compensation decisions with respect to executive officers. The Chief Executive Officer provides input regarding the performance of the other named executive officers and makes recommendations for their respective compensation amounts. After carefully reviewing the recommendations of the Chief Executive Officer and based upon the interactions with the named executive officers in their respective positions, the Compensation Committee determines the appropriate level of compensation. The Chief Executive Officer is not present when his performanc
e or compensation is discussed.
Role of Compensation Consultant in Determining Executive Compensation
The Committee retained the services of Mosteller & Associates (“Mosteller”) headquartered in Reading, Pennsylvania to assist the Committee in in developing a more formulized bonus structure, which culminated in establishment of the Incentive Plan described above. The Committee did not seek and Mosteller did not provide specific compensation recommendations for the named executive officers.
Additionally, Mosteller’s engagement did not create a conflict of interest, and Mosteller did not provide any additional services to
the Company or its subsidiary.
Benchmarking
The Committee does not specifically benchmark compensation to the compensation paid at other financial institutions. In determining the appropriate levels of executive compensation, the Committee reviews levels of compensation from a variety of standard sources:
|
·
|
|
L.R. Webber’s financial institutions study of executive compensation
which provides general salary ranges for certain executive positions
;
|
|
·
|
|
Reviews of public information containing the compensation levels of peer banks of similar size and within the same
or similar markets;
|
|
·
|
|
Miscellan
eous other
general
compensation surveys
; and
|
|
·
|
|
Comparison of l
ocal and regional executive
general
compensation levels.
|
No specific weight is given
to any of the resources. The
Committee uses the above resources as a method to educate itself on the current tren
ds in compensation.
Additionally, with banking being a highly regulated industry, adherence with regulatory guidelines is also considered.
Material Differences in 2013
Executive Officer Compensation
The actual compensation of the executive officers is set forth in the Summary Compensation Table. The material differences in base pay for named executive officers were based upon their performance, their longevity with the Bank, and their respective positions. The Company also provides employment agreements to the President and Chief Executive Officer
and the Chief Lending Officer and
a
Change in Control A
greement
to the Chief Financial
Officer
.
The Company also provided a change in Change in Control Agreement to the former Chief Risk Officer and former Chief Operating Officer which terminated upon their termination of employment.
The Committee believes that it is appropriate to provide employment agreements to the President and Chief Executive Officer and the Chief Lending Officer in order to protect the Company through the non
-
competition provisions contained in the agreements.
The Committee also believes that it was appropriate to provide a Change in Control Agreement to the Chief Financial Officer, Chief Risk Officer and Chief Operating Officer based upon their indi
vidual roles with the Company.
Impact of Accounting and Tax
There were no compensation decisions made as a result of accounting and/or tax treatments except the inclusion of gross-up or gross-down provisions contained in the respective agreements as discussed below.
Section 162(m) of the Internal Revenue Code of 1986, as amended, imposes a $1 million limit on the amount that a public company may deduct for compensation paid to the company’s Chief Executive Officer or any of the Company’s three other most highly compensated executive officers who are employed as of the end of the year. The amount of the executive’s compensation does not trigger Section 162(m) limitation.
The employee stock purchase plan, the 401(k) plan, stock incentive plan, the employment agreements, and change in control agreements are designed to be compliant with the applicable Internal Revenue Code sections.
Triggering Events in Contracts
The Company is currently a party to employment agreements with Messrs. Santaniello and
O’Brien. Employment agreements are standard in the financial services industry and are used to protect the Company’s client base through non-competition provisions. The agreements are also used to balance the financial goals of the executive with the needs of the Bank. The triggering events that provide payment which are prevalent in the financial services industry include:
|
2.
|
|
Termination for good reason
|
|
4.
|
|
Termination without cause
|
|
6.
|
|
Termination by the employee without good reason
|
|
7.
|
|
Non
-
renewal of employment agreement
|
The triggering events for payment incent executives to maintain expected performance levels for continued employment. If the employment agreement is terminated upon the employee’s death, a termination by the employee without good reason, the employee’s disability or a termination for cause, the employee will not receive any payments under the agreement. Because of life insurance or that the employee may receive payments under the Company’s disability insurance plan; the Board
of Directors
did not feel it was necessary to provide payment upon a disability or death. The employee only receives a payment under the agreement if the employee’s employment is terminated after a change in control, without cause, or by the employee for good reason. The contracts give the executive the security of knowing that if he is terminated in one of those scenarios, the executive will receive some form of compensation during his transition phase. The contracts contain change of control provisions whereby the executive is compensated upon a termination after a change of control in order to ensure that decisions regarding potential change of controls are made in the best interests of the shareholders and that personal concerns regarding subsequent employment are minimized. In addition, the contracts contain a non-competition provision, whereby the executive is not allowed to compete with the Company or solicit customers of the Company for a specific period of time, typically the time period during which he is being compensated.
Additionally, the Company is a party to change in control agreements with Salvatore R. DeFrancesco, Jr
.
and
was a party to change in control agreements
with
John T. Piszak and
Raymond J. Fox
, which agreements terminated upon their termination of employment.
The Compensation Committee believe
d
that it
was
appropriate to off
er these executives a change in control agreement as it gave
the executive the security knowing that if he
were
terminated as a res
ult of a change in control he would
receive some form of compensatio
n during his transition phase.
COMPENSATION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Executive Committee of the Board of Directors
acting as the Compensation Committee
has reviewed and discussed the
Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Executive Committee
acting as the Compensation Committee
recommended
to the Board
of Directors
that the Compensation Discussion and Analysis be included in this Proxy Statement and the Company’s
Form 10-K.
Executive Committee
acting as the Compensation
Committee
Patrick J. Dempsey, Chairman
Michael J. McDonald
Brian J. Cali
S
UMMARY
C
OMPENSATION
T
ABLE
The following table provides the annual and equity based compensation for services rendered in all capacities to the Company and the Bank for the fiscal year ended December 31, 2013, for those persons who were:
The current President and Chief Executive Officer,
and the Chief Financial Officer;
the other most highly compensated executive officers of the Company or Bank to the extent such p
erson’s total exceeded $100,000; and up to two individuals who would have been named executive officers but for the fact the individual was not serving as an executive officer at the end of the fiscal year.
Name and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
All other Compensation ($)
|
Total
($)
|
Daniel J. Santaniello,
President and Chief Executive Officer of the Company and the Bank
|
2013
2012
2011
|
$
217,540
$ 206,005
$ 198,313
|
$
40,000
$ 30,000
$ 27,500
|
$ 21,200
-
-
|
$ 23,045
(1)
$ 22,285
(1)
$ 18,765
(1)
|
$ 301,785
$ 258,290
$ 244,578
|
Salvatore R. DeFrancesco, Jr.,
Treasurer and Chief Financial Officer of the Company; Executive Vice President and Chief Financial Officer of the Bank
|
2013
2012
2011
|
$ 165,922
$ 158,690
$ 149,566
|
$ 24,000
$ 19,000
$ 17,500
|
$
21,200
-
-
|
$ 16,654
(2)
$ 16,332
(2)
$ 15,361
(2)
|
$ 227,776
$ 194,022
$ 182,427
|
Timothy P. O’Brien,
Sr Executive Vice President and
Chief Lending Officer of the Bank
|
2013
2012
2011
|
$ 181,192
$ 177,690
$ 172,106
|
$ 24,000
$ 18,000
$ 17,500
|
$
21,200
-
-
|
$ 17,632
(3)
$ 18,725
(3)
$ 16,671
(3)
|
$ 244,024
$ 214,415
$ 206,277
|
John T. Piszak,
Former
Executive Vice President and
Chief Risk Officer of the Bank
(6)
|
2013
2012
2011
|
$ 54,516
$ 127,691
$ 118,843
|
-
$ 12,500
$ 12,000
|
-
-
-
|
$ 8,042
(4)
$ 13,577
(4)
$ 11,645
(4)
|
$ 62,558
$ 153,768
$ 142,488
|
Raymond J. Fox
Former
Executive Vice President and
Chief Operating Officer of the Bank
(7)
|
2013
2012
|
$ 131,365
$ 49,327
|
-
-
|
-
-
|
$ 38
,988
(5)
$ 10,623
(5)
|
$ 170
,353
$ 59,950
|
|
(1)
|
|
Figure represents the personal use value of a company automobile of $2,134 in 2013, $2,746 in 2012, and $2,412 in 2011. It also includes contributions for the 401(k) match and profit sharing plan of $13,952 in 2013, $13,793 in 2012, and $10,311 in 2011. Included is $810 of life insurance premiums paid by the Company in 2013, $810 in 2012, and $810 in 2011. In addition, $6,149 was paid by the Company on behalf of Mr. Santaniello for country club and membership dues during 2013, $4,936 in 2012, and $5,232 in 2011.
|
|
(2)
|
|
Figure represents contributions for the 401(k) match and profit sharing plan of $10,141 in 2013, $9,827 in 2012, and $8,971 in 2011. It also includes $810 of life insurance premiums paid by the Company in 2013, $810 in 2012, and $770 in 2011. In addition, $5,703 was paid by the Company on behalf of Mr. DeFrancesco for country club and membership dues in 2013, $5,695 in 2012, and $5,620 in 2011.
|
|
(3)
|
|
Figure represents the personal use value of a company automobile of $987 in 2013, $1,222 in 2012, and $1,230 for 2011. It also includes contributions to the 401(k) match and profit sharing plan of $11,412 for 2013, $12,251 for 2012, and $10,326 for 2011. Included is $810 of life insurance premiums paid by the Company in 2013, $810 in 2012 and $810 in 2011. In addition, $4,423 was paid by the Company on behalf of Mr. O’Brien for country club and membership dues during 2013, $4,442 in 2012, and $4,305 in 2011.
|
|
(4)
|
|
Figure represents the contributions for the 401(k) match and profit sharing plan of $3,646 in 2013, $8,756 in 2012, and $7,131 in 2011. It also includes $158 for life insurance premiums paid by the Co
mpany in 2013
, $422 in 2012, and $412 in 2011. In 2013, Mr. Pisza
k received dividends of $250
on restricted stock which stock was forfeited upon termination. In addition, $3,988 was paid by the Company on behalf of Mr. Piszak for country club and membership dues during 2013, $4,399
in 2012
,
and $4,102
in 2011.
|
|
(5)
|
|
Figure represents the contributions
for the 401
(k) match and profit sharing plan of $7,750 in 2013 and $632 in 2012. It also includes $488 for life insurance premiums paid by the Company in 2013. In 2013, Mr. F
ox received dividends of $759
on restricted stock which stock was forfeited upon termination. In addition $3,991 was paid by the Company on behalf of Mr. Fox for country club and membership dues during 2013. In 2012, Mr. Fox was paid a signing on bonus of $10,000. Mr. Fox was paid a
lump sum payment of $5,000
and $
21,000 in severance in 2013.
|
|
(6)
|
|
Mr. Piszak retired effective May 1, 2013
|
|
(7)
|
|
Mr. Fox’s employment was terminated on November 26, 2013
|
Employment Agreement with Daniel J. Santaniello
On March 23, 2011, the Company and the Bank entered into a three year term employment agreement with Mr. Santaniello. Under the terms of the employment agreement, in the event Mr. Santaniello is terminated without cause, after a change in control, or by Mr. Santaniello for good reason, he will receive two (2) times his annual base salary plus benefits for two years. He is also bound by non-competition and non-solicitation provisions.
Employment Agreement with Timothy P. O’Brien
On March 23, 2011
, the Company and the Bank
entered into a three year term employment agreement with Mr. O’Brien. Under the terms of the employment agreement, in the event Mr. O’Brien is terminated without cause, after a change in control, or by Mr. O’Brien for good reason, he will receive two (2) times his annual base salary plus benefits for two years. He is also bound by non-competition and non-solicitation provisions.
Change of Control and Severance Agreement with Salvatore R. DeFrancesc
o, Jr
Mr. DeFrancesco has a change of control agreement and severance agreement dated December 31, 2008 which provides for payments to the executive in the event of termination without cause, as defined in the agreement, or in the event of a change of control, as defined in the agreement. In the event that Mr. DeFrancesco is terminated or terminates his employment because he has experienced an adverse employment condition as delineated in the agreement after a change in control, he shall receive one (1) times his annual base salary. In the event that he is terminated without cause, he shall receive six (6) months of his annual base salary. Mr. DeFrancesco is also bound by non-competition and non-solicitation provisions commensurate with the payments.
Separation
Agreement with Raymond J. Fox
Upon Mr. Fox’s termin
ation of employment, the Company and the Bank
entered into a standard release agreement
with Mr. Fox,
on December 6
, 2013,
whereby
in exchange for Mr. Fox releasing the
Company and the
Bank from his Change in Control agreement and from any other p
ossible liability, the Bank paid
Mr. Fox
$5,000 in a lump sum payment, $
21,
000
monthly for three months and bank sponsored and paid life, disability and health/medical insurance benefits for a period of six months.
STOCK
OPTION GRANTS AND OUTSTANDING EQUITY AWARDS
There were no
stock
option grants to the n
amed execu
tives made during 2013
.
There were no
stock options
exercised
by named executives during 2013
.
EQUITY COMPENSATION PLAN INFORMATION
2012 Omnibus
Stock Incentive Plan
The Company maintains an
omnibus
stock incentive plan (the 2012
Omnibus
Plan
) that was approved by the shareholders at the 2012 Annual Meeting. The purpose of this plan is to advance the development, growth and financial condition of the Company by providing
incentives through participation in the appreciation of the common stock of the Company to secure, retain and motivate employees who may be responsible for the operation and for the management of the affairs
of the Company. In the 2012
Omnibus
Plan
, the Company reserved 500,000 shares of its no-par common stock for issuance under the plan. In the 2012
Omnibus
Plan employees
are eligible to be awarded stock-based
compensation
grants which can consist of stock options (qualified and non-qualified), SARs or restricted stock. The following table is a summary of the activity and the status o
f the 2012 Omnibus
Plan for restricted stock grants awarded to the named executives during 2013 and as of December 31, 2013:
|
Grant of Equity Based Awards
|
|
|
|
|
Grant Date
|
Name
|
Grant
Date
|
Shares #
|
Fair Value ($)
|
Daniel J. Santaniello
|
February, 2013
|
1,000
|
$21,
20
0
|
Salvatore DeFrancesco, Jr
|
February, 2013
|
1,000
|
$21,
20
0
|
Timothy O’Brien
|
February, 2013
|
1,000
|
$21,
20
0
|
In February
201
4
, the Company granted
a total of 2
,
120
restricted shares to its
senior officers including named executive officers and other key employees
. On the date of grant, the value of the Company’s common stock was
$27.00
per share. The grants will vest over
a four year
period
, during
which time
t
he Company expects to recognize compensat
ion expense of
$57,240.
2000 Stock Incentive Plan
The Company maintained a stock incentive plan that was approved by the shareholders at the 2001 Annual Meeting and which expired in 2011 and no additional options may be grant
ed. The purpose of this plan was
to advance the development, growth and financial condition of the Company by providing incentives through participation in the appreciation of the common stock of the Company in order to secure, retain and motivate personnel responsible for the operation and management of the Company and the Bank. The purchase price of the option
s granted was
the fair market value of the Company’s common stock on the date of grant.
The following table summarizes each outstanding
equity
award as of December 31, 2013
.
Outstanding Equity Awards at Fiscal Year-End Table
|
Options Awards
|
Stock Awards
|
Name
|
Number of Securities Underlying Unexercised Options
(#) Exercisable
|
Number of Securities Underlying Unexercised Options
(#) Unexercisable
|
Option Exercise Price
($)
|
Option Expiration Date
|
Vesting Date
|
Shares of Stock
Not Vested (#)
(1)
|
Market Value of
Unvested Shares ($)
|
Salvatore R. DeFrancesco, Jr.
|
2,000
|
-
|
$28.90
|
12/18/2017
|
06/18/2008
|
1,000
|
$26,500
|
Daniel J. Santaniello
|
1,000
|
-
|
$27.75
|
02/19/2018
|
08/19/2008
|
1,000
|
$26,500
|
Timothy P. O’Brien
|
1,000
|
-
|
$26.05
|
02/05/2018
|
08/05/2008
|
1,000
|
$26,500
|
(1)
Shares vest in 250 share increments each February through 2017.
20
02 Employee Stock Purchase Plan
The Company maintains an employee stock purchase plan that was approved by the shareholders at the 2002 Annual Meeting. The purpose of this plan is to provide employees the opportunity to acquire ownership interests in the Company and to motivate the employees to improve job performance and enhance the financial results of the Company. Under the plan, each eligible employee may purchase a limited number of shares of the Company’s common stock on each January 1st at a purchase price per share equal to 90% of the lower of the ten trading day average fair market value of the Company’s common stock measured as of December 31st or January 1st of the previous year. The subsequent sale or transfer of the purchased shares under the plan is restricted for one year from the purchase date.
POTENTIAL PAYMENTS UPON TERMINATION
Payments under each executive's contract as detailed below would be triggered by termination of executive's employment for cause, good reason, disability, death, voluntary separation absent good reason, involuntary termination absent cause, and in the event of a change in control.
Daniel J. Santaniello
The table below shows the payments upon termination of Mr. Santaniello as of December 31, 201
3
:
Form of Compensation:
|
Death
|
Disability
|
Cause
|
Good Reason
*
|
Voluntary, Absent Good Reason
|
Change in
Control
*
|
Non- renewal
|
Involuntary
Without
Cause
*
|
Employment
Agreement
|
$
0
|
$
0
|
$
0
|
$
44
0,000
|
$
0
|
$
44
0,000
|
$
0
|
$
44
0,000
|
Life Insurance
|
$
450,000
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Equity :
|
|
|
|
|
|
|
|
|
Vested Stock
Options
Restricted Stock
|
$
0
$
26,500
|
$
0
$ 0
|
$
0
$ 0
|
$
0
$ 0
|
$
0
$ 0
|
$
0
$
26,500
|
$
0
$ 0
|
$
0
$ 0
|
*
This does not
includ
e
cost of benefits
On December 31, 2013
, if the Company terminated Mr. Santaniello's employment without cause
,
if Mr. Santaniello terminated his employment for good reason,
or if
Mr. Santaniello's employment terminated in connection with a change in control, he would have been entitled to a severance payment equal to two times his current annual salary, payable on the first business day of the month following the date that is six months after his termination from employment, and health care, life
and disability benefits for two
year
s
.
Timothy P. O’Brien
The table below shows the payments upon termination of Mr. O’Brien as of December 31, 201
3
:
Form of Compensation:
|
Death
|
Disability
|
Cause
|
Good Reason
*
|
Voluntary, Absent Good Reason
|
Change in
Control
*
|
Non- renewal
|
Involuntary
Without
Cause
*
|
Employment
Agreement
|
$
0
|
$
0
|
$
0
|
$
3
64,000
|
$
0
|
$
3
64,000
|
$
0
|
$
3
64,000
|
Life Insurance
|
$
450,000
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Equity :
|
|
|
|
|
|
|
|
|
Vested Stock
Options
Restricted Stock
|
$
0
$ 26,500
|
$
0
$ 0
|
$
0
$ 0
|
$
0
$
0
|
$
0
$ 0
|
$
0
$ 26,500
|
$
0
$ 0
|
$
0
$ 0
|
*
This does not
includ
e
cost of benefits
On December 31, 2013
, if the Company terminated Mr. O’Brien’s employment without caus
e,
if Mr. O’Brien terminated his employment for good reason,
or i
f Mr. O’Brien’s employment terminated in connection with a change in control, he would have been entitled to a severance payment equal to two times his current annual salary, payable on the first business day of the month following the date that is six months after his termination from employment, and health care, life
and disability benefits for two
year
s
.
Salvatore R. DeFrancesco, Jr.
The table below shows the payments upon termination of Mr. DeFrancesco as of Decembe
r 31, 2013
:
Form of Compensation:
|
Death
|
Disability
|
Cause
|
Good Reason
|
Voluntary, absent good Reason
*
|
Change in
Control
*
|
Non- renewal
|
Involuntary
Without
Cause
*
|
Agreement
|
$
0
|
$
0
|
$
0
|
$
0
|
$
0
|
$
16
6,400
|
$
0
|
$
83,200
|
Life Insurance
|
$
450,000
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Equity :
|
|
|
|
|
|
|
|
|
Vested Stock
Options
Restricted Stock
|
$
0
$ 26,500
|
$
0
$ 0
|
$
0
$ 0
|
$
0
$ 0
|
$
0
$ 0
|
$
0
$ 26,500
|
$
0
$ 0
|
$
0
$ 0
|
* This does not include cost of benefits
Mr. DeFrancesco has a change of control agreement and severance agreement dated December 31, 2008, which provides for payments to the executive in the event of termination without cause or in the event of a change of control. Payment for termination without cause will be six months of the executive’s then current annual salary, plus a continuation of benefits for the same period. The change in control benefit is equal to his current annual salary plus continuation of benefits for up to one year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
T
here were no Executive Committee (which functions as the Compensation Committee) interlocks or any insider participation during 20
13
. In addition, none of the executive officers has served as a member of a board of directors or compensation committee, or other
committee serving an equivalent function of any other
entity,
one of whose executive officers serves as a member of t
he Company’s Board of Directors.
Compensation of Directors
Directors receive no remuneration for attendance at the Company’s Board of Directors meetings. However, the Bank pays each non-employee member of its Board
of Directors
a regular quarterly fee. During 20
13
, the Bank paid a quarterly retainer of $7,500 to each non-employee Bank director for his or her services. In addition the Chairman of the Board received an additional $3,750 per quarter, the Audit Committee Chairman received an additional $1,250 per quarter
,
and members of the Executive Committee received an additional $1,250 per quarter. The Bank does not compensate employee directors for attendance at Board of Directors meetings or committee meetings. In the aggregate, the Bank paid
its directors $
549
,
6
00 for all services rendered
for
20
13
.
Director Compensation Table
Name
|
Fees Earned or Paid in Cash
(1)
|
Stock
Awards
($)
|
All Other
Compensation
|
Total
|
Brian J. Cali
|
$
4
5
,000
|
$
21,200
|
$
25,000
(
2
)
|
$
9
1
,
2
00
|
Patrick J.
Dempsey
|
$
6
0
,000
|
$
21,200
|
-
|
$
8
1,2
00
|
Michael J. McDonald
|
$
5
0
,000
|
$
21,200
|
-
|
$
7
1,2
00
|
John T. Cognetti, Mary E. McDonald,
David L. Tressler, Sr.,
Kristin Dempsey O’Donnell, Richard J. Lettieri,
each
|
$
4
0,
000
|
$
21,200
|
-
|
$
6
1,2
00
|
|
(1)
|
|
Includes a $
10
,000 bonus for each Director over and above their regular Director, Chairman and Committee fees for 201
3
, paid in the first quarter of 201
4.
|
|
(2)
|
|
Annual retainer as General Counsel of the Company
.
|
The aggregate number of outstanding option awards for each listed Director as of December 31, 20
13
was: Mr. Dempsey –
2,500
; Mr. McDonald –
2,500; Mr. Cali – 2,500
; Mr. Cognetti –
2,500
; Mrs. McDonald –
2,500
; and Mr. Tressler –
2,500
.
2000 Independent Directors Stock Option Plan
The Company maintained an independent director stock option plan that was approved by the shareholders at the 2001 Annual Meeting. The purpose of this plan was to advance the development, growth and financial condition of the Company by providing an incentive, through participation in the appreciation of the common stock of the Company, in order to secure, retain and motivate members of the Company’s Board of Directors who are not officers or employe
es of the Company or the Bank.
This Plan expired in 2011 and no additional options may be granted.
20
12 Director Stock Incentive Plan
The Company maintains an independent director stock incentive plan (the 2012 Director Plan) that was approved by the shareholders at the 2012 Annual Meeting. The purpose of this plan is to advance the development, growth and financial condition of the Company by providing an incentive, through participation in the appreciation of the common stock of the Company, in order to secure, retain and motivate members of the Company’s Board of Directors who are not officers or employees of the Company or the Bank. In the 2012 Director Plan, the Company reserved 500,000 shares of its no-par common stock f
or issuance under the plan. Under
the 2012 Director Plan, directors are eligible to be awarded stock-based compensation grants which can consist of
non-qualified
stock options; stock appreciation rights (SARs) or restricted
stock. The following table is a summary of the activity and the status of the 2012 Director Stock Incentive Plan for restricted stock grants awarded to the Board of Directors during 2013 and as of December 31, 2013:
|
|
|
|
|
|
Grant of Equity Based Awards
|
|
|
|
|
|
|
|
|
|
Shares
|
Grant Date
|
Shares of Stock
|
|
Name
|
Grant
Date
|
#
|
Fair Value ($)
|
Not Vested (#)
(1)
|
|
Brian J. Cali
|
February, 2013
|
1,000
|
$
21,200
|
1,000
|
|
Mary E. McDonald
|
February, 2013
|
1,000
|
$
21,200
|
1,000
|
|
Patrick J. Dempsey
|
February, 2013
|
1,000
|
$
21,200
|
1,000
|
|
Richard J. Lettieri
|
February, 2013
|
1,000
|
$
21,200
|
1,000
|
|
Kristin Dempsey O’Donnell
|
February, 2013
|
1,000
|
$
21,200
|
1,000
|
|
David L. Tressler, Sr.
|
February, 2013
|
1,000
|
$
21,200
|
1,000
|
|
John T. Cognetti
|
February, 2013
|
1,000
|
$
21,200
|
1,000
|
|
(1) Shares vest in
500 share increments each February through
2015.
In February
201
4
, the Company granted
a total of 2,000
restricted shares to its
Board of Directors
. On the date of grant, the value of the Company’s common stock was
$27.00
per share. The grants will vest
in one year from the date of grant; t
he Company expects to recognize compensat
ion expens
e of
$54,000.
FREQUENCY OF SHAREHOLDER ADVISORY VOTE ON EXECUITVE COMPENSATION
The shareholders approved a proposal at the Company’s 2013 Annual Meeting of Shareholders to conduct an advisory vote on the Company’s executive compensation for the named executive officers every three years. The next shareholders advisory vote on the frequency by which shareholders will vote on executive compensation will take place at the 2019 Annual Meeting of Shareholders.
RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(PROPOSAL NO. 2)
The Board of Directors has selected ParenteBeard LLC as the independent registered public accounting firm for the audit of the Company’s consolidated financial statements for the year ending December 31, 201
4
. The Board of Directors of the Company and the Audit Committee believe that ParenteBeard LLC’s knowledge of Fidelity D & D Bancorp, Inc. and The Fidelity Deposit and Discount Bank is invaluable. ParenteBeard LLC advised the Company that none of its members has any financial interest in the Company or the Bank. ParenteBeard LLC served as the Company’s independent registered accountants for the 201
3
year. It assisted the Company and the Bank with the preparation of their federal and state tax returns and provided assistance in connection with regulatory matters, charging for such services at its customary hourly billing rates. The Company’s and the Bank’s Audit Committee approved these non-audit services after due consideration of the accountants’ objectivity and after finding them to be wholly independent.
Aggregate fees billed to the Company by ParenteBeard LLC for services rendered are presented below:
|
|
|
|
For Year Ended December 31,
|
|
201
3
|
201
2
|
Audit fees………………….
|
$ 13
1
,
1
00
|
$ 1
39
,
000
|
Audit related fees………….
|
-
|
2,
000
|
Tax fees……………………
|
9
,
0
00
|
6
,
600
|
All other fees………………
|
31
,
629
|
40,172
|
Audit fees included fees for professional services rendered for the audit of the Company’s consolidated financial statements and the review of the Company’s Forms 10-Q. Audit related fees included fees for services that are normally provided by ParenteBeard LLC in connection with statutory and regulatory filings that are reasonably related to the audit of the Company's financial statements. Also, fees billed for other engagements of assurance and related services by ParenteBeard LLC that are reasonably related to the performance of the audit are reported under the audit related fees section.
Tax fees include fees billed for professional services rendered by ParenteBeard LLC for tax compliance or advice. These services included the preparation of the Company’s 201
2
and 201
1
Consolidated Federal Corporate Income Tax Returns and the preparation of the Company’s 201
2
and 201
1
Pennsylvania Corporate Tax Reports along with the Bank’s 201
3
and 201
2
Pennsylvania Bank Shares Tax Returns.
All other fees include fees billed for professional services rendered to prepare for the SEC’s Interactive Data (XBRL) mandate required to be
included with
the Company’s
regulatory filings
.
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Accountants
The Audit Committee pre-approves all audit and permissible non-audit services provided by the independent registered accountants. These services may include audit services, audit related services, tax services and other services. The Audit Committee has adopted a policy for the pre-approval of services provided by the independent registered accountants. Under the policy, pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is subject to a specific budget. In addition, the Audit Committee may also pre-approve particular services on a case-by-case basis. For each proposed service, the independent registered accountant is required to provide detailed back-up documentation at the time of approval.
In the event that the shareholders do not ratify the selection of
ParenteBeard
LLC as the independent registered public accounting firm for the 201
4
fiscal year, the Board of Directors may choose another accounting firm to provide independent registered public accountant/audit services for the 201
4
fiscal year.
Representatives of
ParenteBeard
LLC are expected to attend the annual meeting, will have an opportunity to make a statement, if they desire, and will be available to answer questions.
The Board of Directors recommends a vote
FOR
the ratification of
ParenteBeard
LLC, as the independent registered public accounting firm for 201
4
.
OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
The Board of Directors knows of no matters other than those referred to in the Notice of Annual Meeting of Shareholders that properly may come before the annual meeting. However, if any other matter should be properly presented for consideration and voting at the annual meeting or any adjournments of the meeting, the persons named as proxy holders will vote the proxies in what they determine to be the best interest of the Company on the recommendation of the Board of Directors.
ADDITIONAL INFORMATION
The Company encloses a copy of the annual report for the fiscal year ended December 31, 20
13
, with this proxy statement.
The annual report is also available online at www.bankatfidelity.com/proxy
m
aterials.
In addition, upon request, any shareholder may obtain, without charge, a copy of the Company’s annual report on Form 10-K for its fiscal year ended December 31, 20
13
, including the consolidated financial statements and the schedules thereto, required to be filed with the Securities and Exchange Commission, from Salvatore R. DeFrancesco, Jr., Treasurer and Chief Financial Officer, Fidelity D & D Bancorp, Inc., Blakely and Drinker Streets, Dunmore, Pennsylvania 18512 or by calling (570) 342-8281.