Finward Bancorp
For the period ended May 24, 2024. Filed Mar 29, 2024.
View on SEC.govAbout this filing
What shareholders are asked to vote on at a company's meeting. It is where to find what directors and top executives are paid, and who owns the most shares.
May 24, 2024 · Filed Mar 29, 2024
Contents
Background
As required under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), our Board of Directors is submitting a “Say on Pay” proposal for shareholder consideration. While the vote on executive compensation isnon-binding and solely advisory in nature, our Board of Directors and the Compensation and Benefits Committee will take into account the outcome of the vote when considering future executive compensation arrangements.
In addition to the Say on Pay proposal for the approval of the compensation of the Bancorp’s Named Executive Officers, the Dodd-Frank Act also requires the Bancorp to separately seek, once every six years, shareholder approval of how often the Bancorp will seek advisory approval of the Named Executive Officers’ compensation (referred to as the frequency vote). The Dodd-Frank Act requires that the Bancorp present every one, two, or three years, or abstain, as voting alternatives for shareholders with respect to the frequency vote. As set forth in Proposal 4 below, this year our shareholders have the right to cast an advisory frequency vote.
Objectives of Executive Compensation Program. The objectives of the Compensation and Benefits Committee with respect to executive compensation are the following:
| (1) | Ensure that compensation is appropriate for the Bancorp in light of all relevant circumstances and provides incentives that further the Bancorp’s long-term strategic objectives; |
| (2) | Ensure that compensation is consistent with the culture of the Bancorp and the overall goal of enhancing shareholder value; |
| (3) | Ensure that the Bancorp’s cash compensation and equity and non-equity incentive compensation structures do not encourage excessive risk-taking and that risks are appropriately mitigated by effective controls and oversight; |
| (4) | Ensure the attraction and retention of key management personnel and motivate management to achieve the Bancorp’s corporate goals and strategies; and |
| (5) | Align the interests of management with the long-term interests of the Bancorp’s shareholders. |
For the past three years, the Bancorp has been profitable, demonstrating sustained profitability despite pressure on the banking sector. For the twelve months ended December 31, 2021, the Bancorp reported net income of $15.0 million, representing $4.30 in earnings per basic and diluted share. Net income decreased by $969 thousand or 6.1% from the twelve months ended December 31, 2020. The slight decrease in 2021 earnings related to highernon-interest expense, partially relating toone-time acquisition expenses as part of the Royal Financial, Inc. acquisition, and lowernon-interest income due to significant refinancing activity in the prior year as a result of the economic and rate environment, which resulted in more loans originated and sold in 2020. For the twelve months ended December
31, 2022, the Bancorp reported net income of $15.0 million, representing $3.61 in earnings per basic and $3.60 in earnings per diluted share. Net income increased by $117 thousand or 0.8% from the twelve months ended December 31, 2021. The slight increase in 2022 earnings related to the increase in interest-earning assets acquired from the acquisition of Royal, organic loan growth, and the overall improvement to the net interest margin during the year. For the twelve months ended December 31, 2023, the Bancorp reported net income of $8.4 million, representing $1.96 in earnings per basic and diluted share. Net income decreased by $6.7 million or 44.4% from the twelve months ended December 31, 2022. The decrease in 2023 earnings was primarily due to lower net interest income, an increase in the provision for credit losses and a decrease in noninterest income, which were partially offset by a decrease in noninterest expenses and a decrease in income tax expense.
The Compensation and Benefits Committee has adopted a balanced approach to executive compensation, consistent with best practices, the Bancorp’s performance and strategic goals, and the interests of shareholders. The Bancorp’s executive compensation practices are responsibly governed by the Compensation and Benefits Committee, which is comprised of independent directors, and by direct Board oversight. The Compensation and Benefits Committee took several actions to align executive compensation with shareholder interests, including the following:
| · | In January of 2023, the Board, acting upon the recommendation of Benjamin J. Bochnowski, the President and Chief Executive Officer of the Bancorp, and the Compensation and Benefits Committee, and after reviewing the Bancorp’s 2022 performance, agreed to increase the base salaries of executive management by 2%. However, no cash incentives were earned by or paid to the Bancorp’s executive officers in 2022 under the Executive Incentive Plan. This reflects management’s ongoing commitment to tying their compensation to the Bancorp’s performance, and to reflect the fact the Bancorp did not achieve the performance goals established by the Compensation and Benefits Committee for 2022. |
| · | In January of 2024, the Board, acting upon the recommendation of Benjamin J. Bochnowski, the President and Chief Executive Officer of the Bancorp, and the Compensation and Benefits Committee, and after reviewing the Bancorp’s 2023 performance, agreed to increase the base salaries of executive management by 2.5%. However, no cash incentives were earned by or paid to the Bancorp’s executive officers in 2023 under the Executive Incentive Plan. This decision continues to reflect management’s ongoing commitment to tying executive management compensation to the Bancorp’s performance, and to reflect the fact the Bancorp did not achieve the performance goals established by the Compensation and Benefits Committee for 2023. |
| · | In January of 2023, the Board, acting upon the recommendation of Benjamin J. Bochnowski, the President and Chief Executive Officer of the Bancorp, and the Compensation and Benefits Committee, and after reviewing the Bancorp’s 2022 performance, agreed not to increase the base salary of Benjamin J. Bochnowski. |
| · | In January of 2024, the Board, acting upon the recommendation of the Compensation and Benefits Committee, and after reviewing the Bancorp’s 2023 performance, agreed to provide Benjamin J. Bochnowski with a 2.5% cost-of-living adjustment, but did not otherwise increase Mr. Bochnowski’s base salary. |
| · | The Compensation and Benefits Committee reviews the compensation of the Bancorp’s President and Chief Executive Officer and his direct reports annually. The Compensation and Benefits Committee Charter authorizes the hiring by the committee members of independent advisors, including attorneys, to assist the Committee in carrying out its responsibilities. To further align the executives’ interests with those of the Bancorp’s shareholders and the long-term business objectives of the Bancorp, the Compensation and Benefits Committee retained the services of Meridian in June of 2023 to assist it with the assessment of the Bancorp’s executive compensation plans. |
| · | The Bancorp manages its long-term incentive stock awards program responsibly and conservatively. Under the Executive Incentive Plan, restricted stock awards in the form of common equity with a three year vesting period align management’s interests with those of the Bancorp’s shareholders. For 2023, the Compensation and Benefits Committee set the target long-term equity incentive opportunity at 25% |
of base salary for the Chief Executive Officer and 20% of base salary for the Bancorp’s other executive officers. Grants under the Executive Incentive Plan become fully vested three years from the grant date of the award.
| · | Based on 2022 financial results, the Bancorp’s executive officers agreed not to receive any awards of restricted stock in 2023 under the Executive Incentive Plan. In February 2024, the Board approved restricted stock awards to the Bancorp’s executive officers, which represented a reduced level of award compared to previous years, to reinforce the alignment of executive performance to the long-term results of the Bancorp. In this regard, the Bancorp made awards under the Executive Incentive Plan on February 2, 2024 of 1,815, 937, and 1,017 shares of restricted stock with a three-year vest to Messrs. Bochnowski, Lowry, and Scheub, respectively. |
| · | No incentive stock options have been granted to any executive officer since 2009. |
| · | The Bancorp’s insider trading policy prohibits hedging transactions by its directors, officers, and employees, and the Bancorp’s Executive Incentive Plan contains a “clawback” provision that requires executives to reimburse amounts received under the Plan in the event the Bancorp is required to prepare an accounting restatement within three years of payout. |
| · | Under the Dodd–Frank Act, the SEC was required to adopt a rule directing national securities exchanges to establish listing standards which provide that companies listed on a national securities exchange must adopt a policy providing for the recovery of incentive-based compensation in the event of an accounting restatement based on erroneous data. Under such a policy, compensation would be recovered, or “clawed back,” from any current or former executive officer of the company who received the incentive-based compensation during the three fiscal years preceding the date on which the company is required to prepare the restatement. The amount to be recovered would be the excess of the amount that would have been paid to the executive officer under the restatement. On November 17, 2023, the Bancorp adopted a compensation recovery policy that incorporates the requirements of Section 10D of the Securities Exchange Act of 1934, as amended, and Nasdaq Listing Rule 5608, as mandated by the Dodd-Frank Act. |
Over this period, the Bancorp has been able to retain key executives who believe in the long-term prospects of the Bancorp and are willing to tie their compensation to achieving the performance goals established by the Compensation and Benefits Committee.
The Board of Directors believes the Bancorp’s compensation programs are well tailored to recruit and retain key executives and drive shareholder value.
Please review this proxy statement and consider the following proposal:
“RESOLVED, that the Bancorp’s shareholders approve, on anon-binding advisory basis, the compensation of the Named Executive Officers, as disclosed in the Bancorp’s Proxy Statement for the 2024 Annual Meeting of Shareholders, including the compensation set forth or described in the 2023 Summary Compensation Table and the other related tables and disclosures.”
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