UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐
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☐ | Preliminary Proxy Statement | |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
☒ | Definitive Proxy Statement | |
☐ | Definitive Additional Materials | |
☐ | Soliciting Material Under Rule 14a-12 |
BAY BANKS OF VIRGINIA, INC.
(Name of registrant as specified in its charter)
(Name of person(s) filing proxy statement, if other than the registrant)
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September 12, 2017
Dear Fellow Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of Bay Banks of Virginia, Inc. on October 24, 2017, at 4:00 p.m., at the Hilton Richmond Hotel-Short Pump, Richmond, Virginia.
The primary business of the meeting will be to elect seven Company directors, to approve, on a non-binding advisory basis, the Companys named executive officer compensation as described in the accompanying proxy statement and to ratify the appointment of Dixon Hughes Goodman LLP as the Companys independent auditor for 2017. During the meeting, we also will report to you on the condition and performance of the Company and its subsidiaries, Virginia Commonwealth Bank and VCB Financial Group, Inc. You will have an opportunity to question management on matters that affect the interests of all stockholders.
We hope you can join us for the Annual Meeting on October 24. Whether or not you plan to attend, please complete, sign and date the enclosed proxy and return it promptly in the enclosed envelope. Alternatively, in order to make voting even easier, electronic and telephone voting is available. You will find instructions to vote via the Internet or by phone on your proxy card.
YOUR VOTE IS IMPORTANT
Thank you for your interest in the Companys affairs. As always, we are most grateful for your continued support of Bay Banks of Virginia.
Sincerely,
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C. Frank Scott, III |
Randal R. Greene |
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Chairman of the Board |
President and Chief Executive Officer |
If you hold your shares through a broker, it is necessary for you to actually vote the proxy you receive from the broker in order for your vote to be counted.
Your Vote is Important.
BAY BANKS OF VIRGINIA, INC.
1801 Bayberry Court
Richmond, Virginia 23226
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
October 24, 2017
To Our Stockholders:
The Annual Meeting of Stockholders of Bay Banks of Virginia, Inc. (the Company) will be held at the Hilton Richmond Hotel-Short Pump, 12042 West Broad Street, Richmond, Virginia, on October 24, 2017 at 4:00 p.m. for the following purposes:
1. | To elect three (3) Class I directors to serve three-year terms, two (2) Class II directors to serve one-year terms and two (2) Class III directors to serve two-year terms; |
2. | To approve, on a non-binding advisory basis, the Companys named executive officer compensation as described in the Companys 2017 proxy statement; |
3. | To ratify the appointment of Dixon Hughes Goodman LLP as the Companys independent registered public accounting firm for the year ending December 31, 2017; and |
4. | To transact such other business as may properly come before the meeting or any adjournment thereof. Management knows of no other business to be brought before the meeting. |
Only stockholders of record at the close of business on September 5, 2017 will be entitled to notice of and to vote at the Annual Meeting and any adjournments thereof.
By Order of the Board of Directors |
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Pamela A. Varnier |
Corporate Secretary |
September 12, 2017
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: A complete set of proxy materials relating to the Companys Annual Meeting is available on the Internet. These materials may be found at http://www.baybanks.com.
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY, OR VOTE YOUR SHARES VIA THE INTERNET OR TELEPHONE.
BAY BANKS OF VIRGINIA, INC.
1801 Bayberry Court
Richmond, Virginia 23226
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
October 24, 2017
GENERAL
The enclosed proxy is solicited by the Board of Directors of Bay Banks of Virginia, Inc., the holding company for Virginia Commonwealth Bank and VCB Financial Group, Inc., for the Companys Annual Meeting of Stockholders to be held on October 24, 2017 (the Annual Meeting), at the time and place and for the purposes set forth in the accompanying Notice of the Annual Meeting or any adjournment thereof. The date of this Proxy Statement is September 8, 2017 and the approximate mailing date of this Proxy Statement and accompanying proxy is September 12, 2017.
In this Proxy Statement, we refer to Bay Banks of Virginia, Inc. and its subsidiaries as a combined entity as the Company unless the context requires otherwise or unless otherwise noted, and we refer to Virginia Commonwealth Bank as the Bank.
Business Items of the Annual Meeting
At the Annual Meeting, you will be asked to vote on the following proposals:
| to elect three (3) Class I directors to serve three-year terms, two (2) Class II directors to serve one-year terms and two (2) Class III directors to serve two-year terms (Proposal 1); |
| to approve, on a non-binding advisory basis, the Companys named executive officer compensation as described in this Proxy Statement (Proposal 2); and |
| to ratify the appointment of Dixon Hughes Goodman LLP (DHG) as the Companys independent registered public accounting firm for the year ending December 31, 2017 (Proposal 3). |
Stockholders will also be asked to vote on any other matters which may properly come before the Annual Meeting.
Recommendation of the Board of Directors
The Board of Directors of the Company recommends that you vote FOR the election of the director nominees named in this Proxy Statement, FOR the approval of the Companys executive compensation as described in this Proxy Statement and FOR the ratification of DHG as the Companys independent auditors for 2017.
Record Date and Voting Rights of Stockholders
Only stockholders of record of the Companys common stock at the close of business on September 5, 2017 are entitled to notice of and to vote at the Annual Meeting or any adjournments thereof. The number of shares of the Companys common stock outstanding and entitled to vote as of the close of business on September 5, 2017 was 13,184,422. The Company has no other class of stock outstanding. Each share of common stock entitles the record holder thereof to one vote upon each matter to be voted upon at the Annual Meeting.
Quorum
The presence of holders of at least sixty percent (60%) of the Companys common stock entitled to vote at the Annual Meeting, in person or by proxy, will constitute a quorum for the transaction of business. Shares for which you have elected to abstain or to withhold the proxies authority to vote on a matter will count toward a quorum, but will not be included in determining the number of votes cast with respect to such matter. Shares held by a brokerage firm, bank, broker-dealer or similar organization that are voted on any matter are included in the quorum; if such shares are not voted on any matter they will not be included in determining whether a quorum is present.
Vote Required
Approval of each of the proposals at the Annual Meeting requires the affirmative vote of more than 60% of the shares represented at the Annual Meeting. With respect to Proposal 1, directors are elected by the affirmative vote of more than 60% of the shares represented at the Annual Meeting. With respect to Proposals 2 (advisory vote on executive compensation) and 3 (ratification of DHG), the proposals will be approved if more than 60% of the shares represented at the Annual Meeting vote for approval of such proposals.
Voting Shares Held in Accounts with Brokerage Firms and Similar Organizations
If your shares are held in an account with a brokerage firm, bank, broker-dealer or similar organization, then your shares are held in street name. The firm that holds your shares, or its nominee, is considered the registered stockholder for purposes of voting at the Annual Meeting, and you are considered the beneficial owner. As a beneficial owner, you have the right to direct the firm how to vote the shares held for you, and you must follow the instructions of that firm in order to vote your shares or to change a previously submitted voting instruction. If the firm does not receive instructions from you on how to vote your shares on a non-routine matter, that firm does not have the authority to vote on that matter with respect to your shares. Since you are not the registered owner, you may not vote the shares in person at the Annual Meeting unless you obtain a legal proxy from the firm that holds your shares giving you the right to vote shares registered in its name at the Annual Meeting. Please note that this legal proxy is different from the proxy card or voting instructions you generally receive in the mail. If you wish to vote your shares in person, please contact the firm holding your shares for a legal proxy.
Voting on Routine and Non-Routine Matters
If you own shares that are held in street name, and you do not provide the firm that holds the shares with specific voting instructions, then, under applicable rules, the firm that holds the shares may generally vote on routine matters but cannot vote on non-routine matters. If the firm that holds such shares does not receive instructions from you on how to vote your shares on a non-routine matter, that firm will inform the inspector of election of the Annual Meeting that it does not have the authority to vote on the matter with respect to the shares. This is generally referred to as a broker non-vote.
Proposals 1 (election of directors) and 2 (advisory vote on executive compensation) in this Proxy Statement are matters that are considered non-routine under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters, and therefore broker non-votes may exist in connection with such proposals.
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Proposal 3 (ratification of DHG) is considered a routine matter, A broker or other nominee generally may vote on routine matters, and therefore we expect no broker non-votes in connection with Proposal 3.
Revocation and Voting of Proxies
Execution or submission of a proxy will not affect a registered stockholders right to attend the Annual Meeting and vote in person. Any registered stockholder who has executed or submitted a proxy may revoke it by attending the Annual Meeting and voting in person. A registered stockholder may also revoke his or her proxy at any time before it is exercised by filing a written notice with the Corporate Secretary of the Company or by submitting a proxy bearing a later date. Proxies will extend to, and will be voted at, any adjourned session of the Annual Meeting.
If your shares are held in street name, please follow the instructions delivered with the notice from your bank or broker or contact them for instructions on how to change or revoke your vote.
How Shares will be Voted
Shares represented by proxies will be voted at the Annual Meeting as follows:
| Properly Completed Proxies Shares represented by a properly completed proxy that contains voting instructions will be voted in accordance with the voting instructions specified in the proxy. |
| Proxies Without Voting Instructions Shares represented by proxies that are properly signed and dated or submitted via the Internet but which do not contain voting instructions will be voted in accordance with the Boards recommendations set forth above. |
| Abstentions We will count a properly executed or submitted proxy indicating Abstain for purposes of determining whether there is a quorum present at the Annual Meeting, but the shares represented by that proxy will not be voted at the Annual Meeting. |
| Broker Non-votes Your broker may not vote your shares for you with respect to Proposals 1 and 2, unless you provide instructions to your broker on how to vote them. You should follow the directions provided by your broker regarding how to instruct your broker to vote your shares. If you do not do this, your broker may not vote your shares with respect to Proposals 1 and 2 (a broker non-vote). |
A properly submitted proxy indicating withhold with respect to the election of one or more directors will not be voted with respect to the director or directors indicated. Abstentions and broker non-votes will have the same effect as a vote against a director in Proposal 1 (election of directors). A failure to vote will have no effect on the outcome of Proposal 1.
Abstentions and broker non-votes will have the same effect as a vote against Proposal 2 (advisory vote on executive compensation). A failure to vote will have no effect on the outcome of Proposal 2.
Abstentions will have the same effect as a vote against Proposal 3 (ratification of DHG). We do not expect any broker non-votes in connection with Proposal 3. A failure to vote will have no effect on the outcome of Proposal 3.
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Costs of Solicitation
The cost of solicitation of proxies will be borne by the Company. Solicitation is being made by mail, and if necessary may be made in person, by telephone or email, or special letter by officers and regular employees of the Company, acting without compensation other than regular compensation.
PROPOSAL 1 ELECTION OF DIRECTORS
The Companys Board of Directors is divided into three classes (I, II and III), and the term of office for the Class I directors will expire at the Annual Meeting. The current Class I directors are Richard A. Farmar, III, Randal R. Greene and C. Frank Scott, III. If elected, Messrs. Farmar, Greene and Scott will serve until the Annual Meeting of Stockholders in 2020.
In connection with the Companys merger with Virginia BanCorp Inc. (Virginia BanCorp), on April 1, 2017 the Board appointed the following individuals to the Companys Board of Directors: C. Frank Scott, III, as a Class I director; Lawrence N. Ashworth and James B. McNeer, as Class II directors; and Larry C. Tucker and James P. VanLandingham, as Class III directors. Each of these individuals had been serving as directors of Virginia BanCorp prior to completion of the merger. Pursuant to Virginia law, these directors are to be elected to the Board by the Companys stockholders at the next stockholder meeting following his appointment.
The persons named in the proxy will vote for the election of the nominees named below unless authority is withheld. If, for any reason, the persons named as nominees should become unavailable to serve, an event that management does not anticipate, proxies will be voted for such other person as the Board of Directors may designate.
The following table provides certain biographical information with respect to each director and director nominee for election at the Annual Meeting. Information on the specific experience and qualifications that led the Board to conclude that each director or director nominee should serve as a director of the Company follows under Board of Directors Information Qualifications and Experiences of Directors beginning on page 6.
The Board of Directors recommends the nominees, as set forth below, for election. The Board of Directors recommends that stockholders vote FOR the nominees.
Name (Age) |
Company Director Since |
Principal Occupation During Past Five Years | ||
Class I (Nominees to serve until the 2020 Meeting): | ||||
Richard A. Farmar, III (60) | 2004 | President of SIFA Corporation Warsaw, Virginia. | ||
Randal R. Greene (58) | 2011 | President and Chief Executive Officer of the Company; Chief Executive Officer of the Bank; President of the Bank from August 2011 until the merger of Virginia BanCorp with the Company in April 2017. |
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Name (Age) |
Company Director Since |
Principal Occupation During Past Five Years | ||
C. Frank Scott, III (66) | 2017 | Chairman of the Board of Directors of the Company; President of the Bank; Chief Executive Officer of Virginia BanCorp from 2011 until its merger with the Company in April 2017. | ||
Class II (Nominees to serve until the 2018 Meeting): | ||||
Lawrence N. Ashworth (75) | 2017 | Retired from 35 year banking career as executive with regional and community banks. | ||
James B. McNeer (78) | 2017 | Retired President of Richard Bland College, Petersburg, Virginia. | ||
Class III (Nominees to serve until the 2019 Meeting): | ||||
Larry C. Tucker (73) | 2017 | Retired automobile dealership executive, Petersburg, Virginia. | ||
James P. VanLandingham (67) | 2017 | Retired President of Builders Supply Company, Petersburg, Virginia. | ||
Incumbent Directors | ||||
Class II (Directors serving until the 2018 Meeting): | ||||
Julien G. Patterson (66) | 2009 | Founder and past Chairman of OMNIPLEX World Services Corporation, Chantilly, Virginia; past Chairman of the Virginia State Chamber of Commerce, Richmond, Virginia. | ||
Class III (Directors serving until the 2019 Meeting): | ||||
C. Dwight Clarke (54) | 2013 | Partner, Dehnert, Clarke & Co., P.C., Irvington, Virginia. | ||
Elizabeth H. Crowther, Ed. D. (60) | 2012 | President of Rappahannock Community College, Warsaw, Virginia, since 2004. |
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Board of Directors Information
Board Independence. The Companys Board of Directors has determined that, except for Mr. Greene and Mr. Scott, each director is independent within the NASDAQ definition of independent director.
Board Meetings. Each director is expected to devote sufficient time, energy and attention to ensure diligent performance of the directors duties, including attendance at Board and Committee meetings. During 2016, there were 10 meetings of the Board of Directors. Each incumbent director attended at least 75% of the aggregate number of meetings of the Board of Directors and its Committees of which he or she was a member. Directors are encouraged to attend stockholders meetings, and all directors then serving attended the 2016 Annual Meeting of Stockholders.
There are no family relationships among any of the directors or among any directors and any executive officers. None of the directors serves as a director of any other publicly held company.
Leadership Structure. The positions of Chairman of the Board and Chief Executive Officer are held by separate persons. The Chief Executive Officer serves on the Board of Directors; however, his main focus is to provide leadership to the Company in accomplishing the directives established by the Board. In that role, he is responsible for the general administration, oversight, care and management of the business of the Company, as well as full authority over all officers, managers and employees. Historically, the Chairman of the Board has been an independent director. With the merger of the Company with Virginia BanCorp, however, the Board of Directors believes that it is now appropriate for Mr. Scott, current President of the Bank and former Chief Executive Officer of Virginia BanCorp, to serve as Chairman of the Board to provide enhanced Board oversight of the integration of the two banks and a seamless transition in the leadership of the companies as they are integrated. In addition, the Board of Directors provides independent oversight of the Chief Executive Officer, directs the business and affairs of the Company for the benefit of its stockholders, and balances the interests of the Companys diverse constituencies including stockholders, customers, employees and communities.
Qualifications and Experiences of Directors.
Class I Directors
Richard A. Farmar, III is President of SIFA Corporation, headquartered in Warsaw, Virginia. A graduate of Hampden-Sydney College, he joined B. H. Baird in 1979. In 1983, he received the AAI (Accredited Advisor in Insurance) designation and in 1994, the CPCU (Chartered Property Casualty Underwriter) designation. Mr. Farmar became President of SIFA Corporation, t/a B. H. Baird Insurance Agency in January 1999. He has served as President of the Independent Insurance Agents of Virginia and as a director of the Keystone Insurers Group and Virginia Financial Services Corporation. Active in his community, Mr. Farmar has served as President of the Warsaw Jaycees, President of the George Washington National Memorial Association, President of the Rappahannock Chapter of Ducks Unlimited and has coached Little League Baseball. He is a past President and current member of the Warsaw Rotary Club and a past director of The Haven. He currently serves on The Tidewater Foundation Board and the the Riverside Hospital Board. Mr. Farmar serves as the Chairman of the Board of Virginia Commonwealth Bank. His connections to Richmond County, Virginia provide valuable knowledge of that market area.
Randal R. Greene is the President, Chief Executive Officer and Vice Chairman of the Company. He is also a director and Chief Executive Officer of the Bank and Vice Chairman of VCB Financial Group, Inc. He received his Bachelor of Business Administration degree from East Tennessee University.
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He began his banking career in 1984 and brings over 30 years of community banking and management experience to the Company, which he joined in 2011. Prior to serving in his current positions with the Company and the Bank, Mr. Greene was Regional President of State of Franklin Bank, a division of Jefferson Federal Bank in Johnson City, Tennessee. From 1996 to 2008, he was President and Chief Executive Officer, director and founder of State of Franklin Savings Bank and Chairman of its Executive Committee. Mr. Greene was the President of State of Franklin Real Estate from 1997 to 2008, growing the company to 100 agents and to number two in market share. In addition, he served as President of State of Franklin Leasing Company. Mr. Greene has had a lifetime involvement in Boy Scouts of America and is currently a member of the Executive Board of the Capital Heart of Virginia Boy Scouts Council. He is a former President of the Sequoyah Council, which serves 17 counties in East Tennessee and Southwest Virginia, and former Chairman of the Silver Eagle Dinner for Boy Scouts of America. He has also served as the Leadership Chairman of United Way of East Tennessee, as a board member of the Childrens Advocacy Center, Chairman and board member of Comprehensive Community Services, Foundation Board member of East Tennessee State University, and board member of the Johnson City/Washington County Chamber of Commerce. He is a past Chairman of the Johnson City Medical Center Foundation, past board member of the City of Johnson City Community Development Board and the organizer of the Eastern Eight, a successful non-profit housing corporation. Currently, Mr. Greene serves on the Board of Directors of the Virginia Association of Community Bankers, and the Board of Bankers Title of Shenandoah, LLC. Mr. Greene formerly served on the board of the Rappahannock General Hospital Foundation. He also has been a participant of LEAD Northern Neck, a component of LEAD VIRGINIA, designed to build a network of informed, engaged and connected leadership for the Commonwealth of Virginia. Mr. Greene joined the local Boys & Girls Club Board of Directors in 2016.
C. Frank Scott, III is Chairman of the Board of Directors of the Company, President of the Bank and Chairman of the Board of Directors of VCB Financial Group, Inc. Prior to its merger with the Company, he served as Chief Executive Officer and President of Virginia BanCorp and Virginia Commonwealth Bank. Mr. Scott joined Virginia Commonwealth Bank in 1999 and was responsible for the overall management of the institution and implementation of business strategy. He became President in 2008 and followed Charles F. Scott, Jr. as Chief Executive Officer in 2011 upon his retirement. Mr. Scott served on the Board of Directors of Virginia BanCorp and Virginia Commonwealth Bank from 1987 until the merger with the Company and the Bank in April 2017, including service on numerous board committees. He also served on many bank committees as an outside director. Mr. Scott is past president of the Petersburg Lions Club, the Southside Virginia Association of Realtors, and the Tri Cities Independent Insurance Agents Association. He is currently a member of the board of the Appomattox Educational Foundation, the Prince George Alliance for Education Association, and the Richard Bland College Foundation. He is a member of Redeemer Lutheran Church in Midlothian, and currently serves as a member of the Board of Directors and as Treasurer. Mr. Scott received his B.S. degree in Finance from Virginia Tech in 1974 and his M.A. from the Charles F. Dolan School of Business at Fairfield University in Fairfield Connecticut in 2003.
Class II Directors
Lawrence N. Ashworth served as a director of Virginia Commonwealth Bank and Virginia BanCorp from 2011 until the merger with the Company in April 2017. Prior to retirement, Mr. Ashworth had a 35 year banking career within regional and community banks, with executive and general management responsibilities for risk management on a corporate basis and revenue and profitability growth at the business unit level. Prior to retirement, he worked for Signet Bank for 22 years, in charge of the Signet Business Credit Division, corporate wide, specializing in Asset Based Lending (Signet was sold in 1998), and, more recently, chief credit officer and chief lending officer of Essex Bank. Mr. Ashworth received an M.B.A. from the University of Richmond and B.B.A. in accounting and economics from Marshall University.
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James B. McNeer served as a director of Virginia Commonwealth Bank and Virginia BanCorp from 2005 until the merger with the Company in April 2017. Prior to retirement, Dr. McNeer served as President of Richard Bland College for 16 years. He spent 44 years in teaching and served as Provost and Dean during those years. He is currently a member of the Southside Regional Medical Center Hospital Board. He received his B.A. from Emory and Henry College, an M.A. from West Virginia University and a Doctorate from the College of William & Mary.
Julien G. Patterson brings to the Board valuable entrepreneurial business and board skills as past Chairman of OMNIPLEX World Services Corporation, a company he founded 29 years ago. The company employs approximately 3,500 men and women worldwide. Mr. Pattersons security career began with the Central Intelligence Agency (the CIA), during which time he designed a wide variety of comprehensive and specialized security training programs, and led those mobile training teams. In 1987, Mr. Patterson left the CIA to begin his career as an entrepreneur. In 1997, Mr. Patterson was named the Greater Washington Entrepreneur of the Year from a field of over 890 nominees. The Entrepreneur of the Year award, sponsored by Ernst & Young LLP, the NASDAQ Stock Market and other nationally known companies, was established to recognize an elite group of entrepreneurs whose vision, innovation and hard work have established and sustained successful growing businesses. Mr. Patterson received his undergraduate and honorary doctorate degrees from Norfolk State University, and previously served on its Board of Visitors. He is the past Chairman of the Virginia Economic Development Partnership (for former Governors McDonnell and Kaine), a past Chairman of the Virginia Chamber of Commerce, a past Chairman of the Virginia Community College Foundation, a past Chairman of Virginia FREE, a director of the Boys & Girls Club of the Northern Neck, the Northern Neck Insurance Company, and a past director of the Steamboat Era Museum and a past trustee of the Virginia Foundation for Independent Colleges. Mr. Patterson is currently a keynote speaker, entrepreneurial coach, economic development activist, and international security consultant.
Class III Directors
C. Dwight Clarke is a Partner and Certified Public Accountant of Dehnert, Clarke & Co., P.C., an accounting firm located in Irvington, Virginia. Mr. Clarke has been associated with the firm since 1985 and a partner since June 1990. He works with clients throughout the counties of Lancaster, Northumberland, Middlesex and Mathews. Mr. Clarke graduated from Virginia Tech in 1985 with a B.S. degree in Accounting. He is a member of the American Institute of CPAs and the Virginia Society of CPAs. Active in his community, Mr. Clarke is a member, past President and Treasurer of the Kilmarnock-Irvington-White Stone Rotary Club; board member and Treasurer of the Tidewater Foundation; board member of Rappahannock Westminster Canterbury in Irvington, Virginia; a past board member and Treasurer for both the Lancaster County Chamber of Commerce and the Lancaster Community Library. He is a past member of Bank of Lancasters Lancaster/Middlesex Community Board.
Elizabeth H. Crowther, Ed. D. is President of Rappahannock Community College (RCC), headquartered in Glenns, Virginia. RCC is the only institution of higher education located in the 12 counties of the Northern Neck and Middle Peninsula. Under her leadership, RCC has added three locations, including the Kilmarnock Center, and the college serves approximately 5,000 students in credit programs and 2,000 in workforce training. She is responsible for establishing guaranteed admission agreements with leading four-year colleges and universities across Virginia, which allow RCC graduates to transfer seamlessly into such institutions. Dr. Crowther earned her B.A. and M.A. degrees from Virginia Tech and her Doctor of Education from the College of William & Mary. Active in her community, Dr. Crowther serves on numerous civic and charitable boards, including the boards for Bon Secours Richmond Health Systems, Lilian Lumber Company, Northern Neck Insurance Company,
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Rappahannock Community College Educational Foundation, River Counties Community Foundation, Visions of Lancaster and Northumberland Counties, and the Mary Washington regional GO Virginia Board. Dr. Crowther is a current member of the Middlesex Rotary Club and past President of the Strasburg Club, as well as a Paul Harris Fellow.
Larry C. Tucker served as a director of Virginia Commonwealth Bank from 1994 and Virginia BanCorp from 2001, in each case until the merger with the Company in April 2017. Mr. Tucker spent his career in the automobile business starting out in Service Management in 1963 at the former Master Chevrolet-Cadillac and in 1973 was offered a position at the former Petersburg Motors as Service Manager. In 1981 he was promoted to General Manager and became a partner and stockholder. In 1989 he was given the opportunity to buyout his partner and became the sole owner. He operated the dealership along with his son until 2006 when they sold the dealership and he retired from the automobile business. Mr. Tucker also served in the United States Army from 1965 until 1967 and during that period he had a 13 month tour in South Korea. He has served as a Director of The Cameron Foundation for twelve years and was Board Chairman for four years. He is a 33-year member of the Rotary Club of Petersburg and a past president. He served on the City Council for the City of Petersburg from 1994-2000 and was Vice-Mayor. He served on the Hospital Authority of the City of Petersburg from 1989 until 1994 and was Vice Chairman when he resigned. Mr. Tucker is married to Elizabeth Wright Tucker, they have two children, six grandchildren and three great grandchildren. They are members of Christ and Grace Episcopal Church in Petersburg.
James P. VanLandingham served as a director of Virginia Commonwealth Bank and Virginia BanCorp from 2005 until the merger with the Company in April 2017. Prior to retirement, Mr. VanLandingham was President of Builders Supply Company of Petersburg where he worked since 1975 after receiving his B.A. from Old Dominion University. Mr. VanLandingham has served as past President and current Board Member of the Petersburg Rotary Club and is the current Treasurer for the Southside Virginia Emergency Crew. He also serves as Treasurer of the Dinwiddie IDA (Industrial Development Authority).
Board Involvement in Risk Oversight. Via the Enterprise Risk Committee, established in 2014, the Board oversees risk management to be reasonably certain that the Companys risk management practices are consistent with Company strategy and functioning appropriately. The Enterprise Risk Committee directs managements Enterprise Risk Management (ERM) program. The ERM program assesses six risk areas on a quarterly basis. These risk areas are credit, market, liquidity, operational, legal and compliance. Furthermore, the Board establishes standards for risk management by approving policies that address and mitigate the aforementioned risks, plus capital risk and fiduciary risk. The Audit Committee oversees financial, accounting and internal control risk management. The Board also monitors, reviews, and reacts to risk through various reports presented by management, internal and external auditors, and regulatory examiners.
Board Committees
The Board of Directors of the Company has, among others, a standing Audit Committee and Compensation Committee.
Audit Committee. The Audit Committee currently consists of C. Dwight Clarke-Chairman, Lawrence N. Ashworth, Richard A. Farmar, III and James P. VanLandingham. All members of the Audit Committee meet the requirements for independence as set forth in the NASDAQ definition of independent director and meet the definition of an independent director as set forth in Rule 10A-3 of the Securities Exchange Act of 1934. The Board has determined that Mr. Clarke qualifies as an audit committee financial expert as defined by Securities and Exchange Commission regulations. All Audit Committee members bring a diversity of financial knowledge and expertise and have extensive business backgrounds that the Board has determined are sufficient for the proper exercise of their duties on the Committee.
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The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the Companys independent registered public accounting firm. Accordingly, the independent registered public accounting firm reports directly to the Audit Committee of the Company. It is the responsibility of the Audit Committee to select the Companys independent registered public accounting firm, to approve the scope of the independent registered public accounting firms audits and to review the reports of examination by the regulatory agencies, the independent registered public accounting firm and the internal auditor. The Committee regularly reports to the Board of Directors of the Company. The charter of the Audit Committee was included in the Companys proxy statement relating to its 2015 annual stockholders meeting, and is available upon request. To obtain a copy of the charter, please submit a written request to the Companys Corporate Secretary at the address given in the Stockholder Proposals section in the Proxy Statement. The Audit Committee met seven times during 2016.
Compensation Committee. The Compensation Committee currently consists of Larry C. Tucker- Chairman, Elizabeth H. Crowther, James B. McNeer and Julien G. Patterson. All members of the Compensation Committee meet the requirements for independence as set forth in the NASDAQ definition of independent director. As part of its responsibilities, the Committee acts on behalf of the Board in setting executive compensation policy and administering compensation plans; makes decisions or develops recommendations for the Board with respect to the compensation of the Companys executive officers; recommends to the Board the amount of contributions to the retirement plans of the Company; and selects independent compensation consultants if needed. In the opinion of the Compensation Committee and the Board of Directors, the Companys compensation programs, practices and policies do not encourage excessive or inappropriate risk taking and are not reasonably likely to have a material adverse effect on the Company. The charter of the Compensation Committee is attached as Exhibit A to this Proxy Statement, and is available upon request. To obtain a copy of the charter, please submit a written request to the Companys Corporate Secretary at the address given in the Stockholder Proposals section in this Proxy Statement. The Compensation Committee met twice in 2016.
Nominating Committee. The Companys Board of Directors does not have a standing nominating committee. The Board of Directors does not believe that it is necessary to have a nominating committee because it has determined that the functions of a nominating committee can be adequately performed by its independent members and that stockholders are best served by having such directors participate in the selection of board nominees.
In accordance with the Companys Bylaws, nominations for the election of directors shall be made by the Board of Directors or by any stockholder entitled to vote in the election of directors generally. However, any stockholder entitled to vote in the election of directors generally may nominate one or more persons for election as director(s) at a meeting only if written notice of such stockholders intent to make such nomination or nominations has been given, either by personal delivery or by U.S. mail, postage prepaid, to the Secretary of the Company not later than (i) with respect to an election to be held at an annual meeting of stockholders, 120 days prior to the date of the anniversary of the immediately preceding Annual Meeting, and (ii) with respect to an election to be held at a special meeting of stockholders for the election of directors, the close of business on the seventh day following the date on which notice of such meeting is first given to stockholders. Each notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the
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stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the Board of Directors; and (e) the consent of each nominee to serve as director of the Company if so elected. The Chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. The above procedures are in addition to the procedures regarding inclusion of stockholder proposals in proxy materials set forth in Stockholder Proposals in this Proxy Statement.
Qualifications for consideration as a director nominee may vary according to the particular areas of expertise being sought as a complement to the existing board composition. High-level leadership experience in business activities, breadth of knowledge about issues affecting the Company and time available for meetings and consultation on Company matters are among the initial criteria the Board looks for in a candidate. Although the Board has not adopted a formal policy relating to Board diversity, the independent directors seek a diverse group of candidates who possess the background, skills and expertise to make a significant contribution to the Board, to the Company and to its stockholders. The independent directors, along with the other board members as appropriate, evaluate potential nominees, whether proposed by stockholders or otherwise, by reviewing their qualifications, reviewing results of personal and reference interviews and reviewing other relevant information. Consideration is made of a candidates ability to complement the existing Board, and the Boards need for operational, management, financial, technological or other expertise, as well as geographical representation within the Companys market areas. Other factors, such as a candidates race, gender, or national origin, are considered if all other qualifications are met. The full Board selects and recommends candidates for nomination as directors for stockholders to consider and vote upon at an annual meeting.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following provides certain biographical information with respect to each executive officer of the Company who is not a director.
Gary L. Armstrong, 57, has served as Executive Vice President of the Company and Executive Vice President and Richmond Market Executive of the Bank since February 2017. Mr. Armstrong is a 32-year banking veteran. After 12 years with larger banks, Mr. Armstrong began his community banking career as the founder of the commercial banking effort at First Market Bank in Richmond, Virginia. Beginning in 2009, Mr. Armstrong spent six years as Executive Vice President and Chief Lending Officer for First Capital Bank. In 2016, he became Richmond Market President for Park Sterling Bank following its acquisition of First Capital Bank.
C. Rodes Boyd, Jr., 60, has served as Executive Vice President of the Company and Executive Vice President and Chief Lending Officer of the Bank since April 2017. Previously, he had served as Executive Vice President and Chief Banking Officer of Virginia Commonwealth Bank since July 2012. Mr. Boyd joined Virginia Commonwealth Bank in April 2011 as Executive Vice President and Chief Credit Officer, a role he served in until July 2012. Prior to joining Virginia Commonwealth Bank, Mr. Boyd was a Vice President in Commercial Banking with The Bank of Richmond and Gateway Bank from 2002 until 2009, and was the Richmond Market President for the Bank of Hampton Roads from March 2009 through December 2010. Mr. Boyd is currently serving a two year term as Chairman of the Lending Executive Committee for the Virginia Bankers Association.
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Deborah M. Evans, 54, has served as Senior Vice President of the Company and Senior Vice President and Chief Accounting Officer of the Bank since April 2017. Previously, she served as Chief Financial Officer of the Company from December 2011 until April 2017. From 2005 until December 2011, Ms. Evans served as Treasurer and Principal Financial and Accounting Officer of the Company. Ms. Evans joined the Bank in 1999 and over the last 17 years has served as Regulatory Accountant, Assistant Cashier, Cashier and Chief Financial Officer of the Bank.
Douglas F. Jenkins, Jr., 57, has served as Executive Vice President of the Bank since December 2011 and of the Company since May 2014. He currently serves as Chief Banking Officer of the Bank. Mr. Jenkins was Senior Vice President of the Bank from December 2009 until December 2011 and served as Senior Lending Officer from May 2008 until April 2013. He also served as Retail Delivery Administrator from June 2011 until April 2013. Prior to joining the Bank in 2006 as a Business Development Officer, Mr. Jenkins was a Vice President at SunTrust Bank, where he was a member of its Financial Institutions Group.
Eric F. Nost, 60, has served as President and Chief Executive Officer of VCB Financial Group, Inc. since March 2017. Prior to joining the Company, he served as President of C&F Wealth Management, Inc., based in West Point, Virginia for 22 years. Mr. Nost began his career in the financial services industry in 1983 with the former Richmond, Virginia based Wheat, First Securities, Inc. (now part of Wells Fargo) where he served for nine years as Vice President/Investment Officer. Mr. Nost is a Certified Financial Planner.
James A. Wilson, Jr., 57, has served as Executive Vice President and Chief Financial Officer of the Company and the Bank since April 2017. Previously, he served as Executive Vice President, Treasurer and Chief Financial Officer of Virginia Commonwealth Bank and as Vice President and Treasurer of Virginia BanCorp. Mr. Wilson joined Virginia Commonwealth Bank in August 1989 as Treasurer and Controller and was soon thereafter promoted to Senior Vice President and Chief Financial Officer. In 2012, he was promoted to Executive Vice President and Chief Financial Officer of Virginia Commonwealth Bank. Mr. Wilson is a Certified Public Accountant, CFA® charterholder and Chartered Global Management Accountant.
DIRECTOR COMPENSATION
In 2016, non-employee directors of the Company received a $7,000 annual retainer, with the exception of the Chairman, who received a $12,000 annual retainer. They also received $500 for each meeting of the Board attended, and $300 for each committee meeting attended. Randal R. Greene, the Companys President and Chief Executive Officer, is not compensated for his service on the Board or the boards of directors of the Companys subsidiaries. In addition, certain non-employee directors serve as chairpersons on various community boards for the Bank, and received $50 for each meeting attended.
The Company has a nonqualified Directors Deferred Compensation Plan which allows for the deferral of pre-tax income associated with the payment of cash fees and retainers. Directors may elect to defer all or a portion of their director fees and retainers under this plan. Amounts deferred pursuant to the plan can be invested in various mutual funds, with the portfolio composition up to the discretion of the director. Amounts under the plan will be paid following a distributable event. A distributable event includes termination of service as a director or a specific date without regard to continued service as a director. Distributions can be received either as a lump-sum payment or in substantially equal payments over a period of not more than 20 years.
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During 2016, each non-employee director received stock options under the Companys 2013 Stock Incentive Plan. The Chairman of the Board of the Company and the Chairman of the Board of the Bank each received options for 1,000 shares of the Companys common stock and all other directors of the Company received options for 500 shares of the Companys common stock. The per share exercise price for the options is equal to the fair market value of a share of the Companys common stock on the grant date.
The following table presents compensation information on the non-employee directors of the Company for 2016. Such information includes fees and retainers received for service on the boards of directors of the Companys subsidiaries.
2016 Director Compensation
Name |
Fees Earned or Paid in Cash(1) |
Option Awards(2) |
Change in Pension Value and Nonqualified Deferred Compensation Earnings(3) |
All Other Compensation |
Total | |||||||||||||||
Kenneth O. Bransford, Jr. |
$ | 23,900 | $ | 1,068 | | | $ | 24,968 | ||||||||||||
C. Dwight Clarke |
22,350 | 1,068 | | | 23,418 | |||||||||||||||
Elizabeth H. Crowther |
14,750 | 1,068 | | | 15,818 | |||||||||||||||
Richard A. Farmar, III |
30,300 | 2,137 | $ | 12,501 | | 44,938 | ||||||||||||||
Robert F. Hurliman |
33,710 | 2,137 | | | 35,847 | |||||||||||||||
Julien G. Patterson |
13,050 | 1,068 | | | 14,118 |
(1) | Includes fees and retainers earned and deferred under the Directors Deferred Compensation Plan previously described. |
(2) | The amounts reported reflect the aggregate grant date fair value of the awards computed in accordance with the Financial Accounting Standards Boards Accounting Standards Codification Topic 718, CompensationStock Compensation. Assumptions used to calculate the value can be found in Note 19 in the Notes to the Companys consolidated financial statements contained in the Companys Annual Report on Form 10-K for the year ended December 31, 2016. |
(3) | Consists of investment gains and losses under the Directors Deferred Compensation Plan. |
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COMMON STOCK OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides, as of September 5, 2017, certain information with respect to the beneficial ownership of the Companys common stock for (i) the directors and director nominees of the Company, (ii) each executive officer named in the Summary Compensation Table in the Executive Compensation section of this Proxy Statement, (iii) all directors, director nominees and executive officers of the Company as a group, and (iv) each stockholder known by the Company to own beneficially more than 5% of the Companys common stock.
Name |
Amount and Nature of Beneficial Ownership (1) |
Percent of Class |
||||||
Executive Officers and Directors: |
||||||||
Gary L. Armstrong |
15,351 | * | ||||||
Lawrence N. Ashworth |
2,762 | (3) (4) | * | |||||
C. Rodes Boyd, Jr |
14,282 | (2) | * | |||||
C. Dwight Clarke |
13,152 | (3) (4) | * | |||||
Elizabeth H. Crowther |
4,141 | (4) | * | |||||
Deborah M. Evans |
34,416 | (2) (3) (4) | * | |||||
Richard A. Farmar, III |
58,064 | (3) (4) | * | |||||
Randal R. Greene |
77,482 | (2) (3) | * | |||||
Douglas F. Jenkins |
46,925 | (2) (3) | * | |||||
James B. McNeer |
6,536 | (3) (4) | * | |||||
Eric F. Nost |
2,500 | * | ||||||
Julien G. Patterson |
354,427 | (3) (4) | 2.69 | % | ||||
C. Frank Scott, III |
204,792 | (2) (3) (4) | 1.55 | % | ||||
Larry C. Tucker |
76,600 | (3) (4) | * | |||||
James P. VanLandingham |
11,279 | (3) | * | |||||
James A.Wilson, Jr. |
117,539 | (2) (3) | * | |||||
All directors, director nominees and executive officers as a group (16 persons) |
1,040,248 | (5) | 7.89 | % | ||||
5% Stockholders: |
||||||||
Entities and persons affiliated with |
869,829 | (6) | 6.60 | % | ||||
Bay Banks of Virginia, Inc. |
841,097 | 6.38 | % |
* | Represents less than 1% of Company common stock. |
(1) | For purposes of this table, beneficial ownership has been determined in accordance with the provisions of Rule 13d-3 of the Securities Exchange Act of 1934 under which, in general, a person is deemed to be the beneficial owner of a security if he has or shares the power to vote or direct the voting of the security or the power to dispose of or direct the disposition of the security, or if he or she has the right to acquire beneficial ownership of the security within 60 days. |
(2) | Includes shares held in the Companys Employee Stock Ownership Plans, as follows: Mr. Boyd, 13,741 shares; Ms. Evans, 1,813 shares; Mr. Greene, 124 shares; Mr. Jenkins, 1,560 shares; Mr. Scott, 39,296 shares; and Mr. Wilson, 74,698 shares. |
(3) | Includes shares held by affiliated corporations, close relatives and children, and shares held jointly with spouses or as custodians or trustees, as follows: Mr. Ashworth, 1,181 shares; Mr. Clarke, 1,000 shares; Ms. Evans, 432 shares; Mr. Farmar, 4,637 shares; Dr. McNeer, 4,789 shares; Mr. Patterson, 349,866 shares; Mr. Scott, 164,996 shares; Mr. Tucker, 58,209 shares; and Mr. Wilson, 42,300 shares. |
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(4) | Includes shares that may be acquired pursuant to currently exercisable stock options granted under the Companys equity compensation plans as follows: Mr. Ashworth, 500 shares; Mr. Clarke, 5,102 shares; Dr. Crowther, 3,000 shares; Ms. Evans, 18,771 shares; Mr. Farmar, 10,602 shares; Mr. Greene, 30,000 shares; Mr. Jenkins, 19,231 shares; Dr. McNeer, 500 shares; Mr. Patterson, 4,561 shares; Mr. Scott, 500 shares; Mr. Tucker, 500 shares; and Mr. VanLandingham, 500 shares. |
(5) | Includes 93,767 shares that may be acquired pursuant to currently exercisable stock options granted under the Companys equity compensation plans, and 131,232 shares held in the Companys Employee Stock Ownership Plan. |
(6) | Based on the most current information available to the Company and a Schedule 13G/A filed with the Securities and Exchange Commission (the SEC) on February 2, 2017 by (i) Maltese Capital Management LLC (MCM), (ii) Maltese Capital Holdings, LLC (Holdings), (iii) Malta Hedge Fund II, L.P. (MHFII), and (iv) Terry Maltese, Managing Member of MCM and Holdings, MCM, by reason of its position as investment advisor to certain private investment funds, including MHFII, shares voting and dispositive power over shares of the Companys common stock beneficially owned by such private investment funds. The address of the principal offices of each of MCM, Holdings and MHFII, and the business address of Mr. Maltese, is Maltese Capital Management LLC, 150 East 52nd Street, 30th Floor, New York, New York 10022. |
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EXECUTIVE COMPENSATION
The following table provides information on the total compensation paid to or earned by the Companys executive officers for the years indicated below (the named executive officers). No other executive officers of the Company earned over $100,000 in total compensation in 2016. No officer receives compensation from the Company, and all compensation is paid through the Companys subsidiaries.
Summary Compensation Table
Year | Salary | Bonus | Stock Awards(1) |
Option Awards(1) |
Non-Equity Incentive Plan Compensation(2) |
Change in Pension Value and Nonqualified Deferred Compensation Earnings(3) |
All Other Compensation |
Total | ||||||||||||||||||||||||||||
Randal R. Greene |
2016 | $ | 281,585 | | | $ | 10,015 | $ | 70,450 | $ | 15,707 | $ | 48,792 | (4)(5) | $ | 426,549 | ||||||||||||||||||||
President & CEO |
2015 | 277,710 | | | 11,400 | 26,780 | 1,011 | 70,063 | 386,964 | |||||||||||||||||||||||||||
Douglas F. Jenkins |
2016 | $ | 205,546 | | | $ | 5,007 | $ | 30,855 | $ | 3,607 | $ | 28,336 | (4)(5) | $ | 273,351 | ||||||||||||||||||||
Executive Vice President |
2015 | 202,942 | | | 5,700 | 14,678 | 389 | 38,587 | 262,296 | |||||||||||||||||||||||||||
Deborah M. Evans |
2016 | $ | 148,896 | | | $ | 5,007 | $ | 14,905 | $ | 4,489 | $ | 19,552 | (4) | $ | 192,849 | ||||||||||||||||||||
Senior Vice President & CFO |
2015 | 144,196 | | | 5,700 | 6,257 | 31 | 32,272 | 188,456 |
(1) | The amounts reported reflect the aggregate grant date fair value of the awards computed in accordance with the Financial Accounting Standards Boards Accounting Standards Codification Topic 718, CompensationStock Compensation. Assumptions used to calculate the value can be found in Note 19 in the Notes to the Companys consolidated financial statements contained in Item 8 of the Companys Annual Report on Form 10-K for the year ended December 31, 2016. |
(2) | Consists of (i) cash bonus payments made to the officer in February 2017 under the Companys annual incentive plan for 2016 performance, and (ii) cash bonus payments made to the officer on February 10, 2016 under the Companys annual incentive plan for 2015 performance. |
(3) | Amounts shown reflect the change in cash value of the executives pension plan account and/or the change in the actuarial fair value of the executives deferred compensation under the executives deferred compensation plan account, and consists of, for 2016: (i) for Mr. Greene, $464 accrued on his behalf under the pension plan and a gain of $15,243 under the deferred compensation plan; (ii) for Mr. Jenkins, $1,670 accrued on his behalf under the pension plan and a gain of $1,937 under the deferred compensation plan; and (iii) for Ms. Evans, $1,880 accrued on her behalf under the pension plan and a gain of $2,609 under the deferred compensation plan. See Benefit PlansPension Plan and Benefit PlansDeferred Compensation Plan below. |
(4) | Consists of, for 2016: (i) for Mr. Greene, $8,448 accrued on his behalf under the 401(k) Plan, $1,068 accrued on his behalf for life insurance, $3,072 contributed on his behalf to the Companys Employee Stock Ownership Plan, Company contributions of $19,583 to the Companys deferred compensation plan, $1,188 for personal use of a company vehicle and $15,433 related to relocation; (ii) for Mr. Jenkins, $5,689 accrued on his behalf under the 401(k) Plan, $781 accrued on his behalf for life insurance, $2,585 contributed on his behalf to the Companys Employee Stock Ownership Plan, Company contributions of $18,374 to the Companys deferred compensation plan, and $907 for personal use of a company vehicle; and (iii) for Ms. Evans, $5,410 accrued on her behalf under the 401(k) Plan, $556 accrued on her behalf for life insurance, $1,806 contributed on her behalf to the Companys Employee Stock Ownership Plan, and Company contributions of $11,780 to the Companys deferred compensation plan. |
(5) | Perquisites included the use of a Company-owned vehicle for Messrs. Greene and Jenkins. The aggregate incremental cost to the Company for all other perquisites was less than $10,000 and therefore is not included here. |
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Executive Compensation Overview
In June 2013, after thorough discussion, the Compensation Committee approved and recommended, and the Companys Board of Directors adopted, a Compensation Committee Charter to codify the organization and responsibilities of the Compensation Committee. In addition, the Compensation Committee adopted an Executive Compensation Philosophy and Strategy statement that describes generally the approach the Company will use in compensating its executive officers. That statement provides, in general, as follows:
As part of our mission to provide outstanding banking service to our community and to provide an excellent return to our stockholders, we provide a comprehensive total compensation program that allows the Company to attract, retain and reward skilled and motivated key executives who are essential to our business plan.
We intend to have a total compensation program that is generally consistent with our identified industry peers and is designed to reward key executives for achieving operational and financial goals with a view to long-term success and rewards for our stockholders.
At the discretion of the Compensation Committee and, where appropriate, the Companys Board of Directors:
| Our executive compensation programs may be benchmarked to an industry-specific peer group of financial services organizations in Virginia and, where appropriate, to standardized financial services survey data. Compensation comparability may be determined using, among other criteria, asset size, earnings, location, organizational structure, number of employees, market capitalization and service offerings. |
| Our annual incentive plan(s) should provide each participant with target incentive awards that generally track short-term individual goals, as well as performance results for the Company. |
| We believe that meaningful equity participation in the Company by key executives helps align their interests with those of other stockholders. When appropriate, key executives may be eligible to participate in the Companys long-term equity program. Among other things, company and individual performance may be considered when determining the size, frequency and vesting of stock grants. Grants may be in the form of options, stock or units. |
| When appropriate, executives may be selected to participate in the Companys supplemental and/or perquisite programs. Among other things, consideration may be dependent on comparable data, retention value of the executive and cost to the Company. |
| Contractual arrangements between the Company and individual executives may be provided at the discretion of the Compensation Committee. |
| The Compensation Committee is charged with creating an equitable compensation program that is in the best interests of stockholders and aligns executive compensation opportunity to the short- and long-term financial success of the Company. |
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Elements of Compensation
For 2016, the principal components of compensation for the Companys executive officers were base salary, incentive stock options and performance-based incentive compensation in the form of cash. These and other elements of compensation are described below and are detailed in the Summary Compensation Table.
Review of Compensation
The Compensation Committee uses a peer group of 13 Virginia banks and bank holding companies for benchmarking. The Compensation Committee reviews an executive compensation analysis annually which compares the Companys practices (and company performance) to those institutions in the peer group as a reference when setting compensation.
The Compensation Committee reviews the compensation for the President and Chief Executive Officer on an annual basis, taking into account, among other things, the Companys executive compensation philosophy and strategy, the information it receives from any outside sources (including the peer group analysis) and the performance of the Company during the review period.
The Compensation Committee then recommends to the full Board the compensation for the President and Chief Executive Officer for review, discussion, revision if requested, and approval. Compensation for executive officers other than the President and Chief Executive Officer is recommended to the Compensation Committee by the President and Chief Executive Officer on an annual basis. The President and Chief Executive Officer takes into account substantially the same information as the Compensation Committee does when setting the President and Chief Executive Officers compensation. The Compensation Committee reviews these recommendations and has the authority to revise the proposed compensation, and approve and finalize such officers compensation.
Base Salary
The Companys executive compensation program has substantially relied on base salary as its primary component. Base salary is paid to recognize the day-to-day duties and responsibilities of the Companys executive officers. Individual base salary determinations involve consideration of market competitiveness, incumbent qualifications, performance and service longevity. Effective January 1, 2016, the named executive officers received merit increase adjustments. The base salaries for 2016 after these adjustments were:
Randal R. Greene |
$ | 281,800 | ||
Douglas F. Jenkins, Jr. |
$ | 205,700 | ||
Deborah M. Evans |
$ | 149,050 |
Incentive Compensation
The Companys incentive compensation consists of a short-term performance-based cash incentive plan that includes measurable objectives for each of the Companys executive officers. The categories for measurement under the plan are as follows: Regulatory Compliance, Financial Reporting, Budget Compliance, Credit Quality, Asset Growth, Net Income Growth, and Critical Factors, each of which include position-specific objectives. Depending upon the executive officer position, the categories are weighted to reflect the individual executives span of responsibility for the Companys performance. Cash bonus opportunities, expressed as a percentage of annual salary, for the executive officers range from 25% (Mr. Greene) to 15% (Mr. Jenkins) to 10% (Ms. Evans). For 2016, a performance-based cash incentive plan was approved by the Compensation Committee that established measurable objectives for each of the Companys executive officers, which was based solely on a net income goal. The Compensation Committee approved in February 2017, the 2016 performance awards. Mr. Greene received $70,450, Mr. Jenkins received $30,855 and Ms. Evans received $14,905.
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Equity Compensation Plans
The Companys current equity compensation plan, the Bay Banks of Virginia, Inc. 2013 Stock Incentive Plan (2013 Plan), was adopted by the Companys Board of Directors on February 21, 2013 and was approved by stockholders on May 20, 2013 at the Companys 2013 annual meeting. The 2013 Plan makes available up to 385,000 shares of common stock for granting stock options in the form of incentive stock options and non-statutory stock options, restricted stock awards and other stock-based awards to employees and directors of the Company and its subsidiaries. The 2013 Plan superseded and replaced the Companys 2003 Incentive Stock Option Plan and 2008 Non-Employee Directors Stock Option Plan.
The purpose of the 2013 Plan is to further the long-term stability and financial success of the Company by attracting and retaining employees and directors through the use of stock incentives. The Company believes that ownership of its common stock will stimulate the efforts of those persons upon whose judgment, interest and efforts the Company is and will be largely dependent for the successful conduct of its business, and will further the identification of those persons interests with the interests of the Companys stockholders.
The 2013 Plan is administered by the Compensation Committee, which has the power to select plan participants and to grant stock options, restricted stock awards and other-stock based awards on terms the Compensation Committee considers appropriate, including based on performance. In addition, the Compensation Committee has the authority to interpret the plan, to adopt, amend, or waive rules or regulations for the plans administration, and to make all other determinations for administration of the plan. For 2016, Mr. Greene was granted incentive stock options for 5,000 shares, Mr. Jenkins was granted incentive stock options for 2,500 shares and Ms. Evans was granted incentive stock options for 2,500 shares. Each of these grants was made on December 15, 2016 with an exercise price of $7.74 and an expiration date of December 15, 2026.
Under the 2013 Plan, of the 385,000 shares authorized, 338,209 were available for granting purposes as of December 31, 2016. Option grants for 218,300 shares are available for exercise.
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The following table presents certain information on the unexercised stock options and restricted stock held by the named executive officers as of December 31, 2016.
Outstanding Equity Awards at Fiscal Year End
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||
Name |
Year of Award |
Number of Securities Underlying Unexercised Options Exercisable(1) |
Number of Securities Underlying Unexercised Options Unexercisable |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options |
Option Exercise Price |
Option Expiration Date |
Number of Shares or Units of Stock That Have Not Vested |
Market Value of Shares or Units of Stock That Have Not Vested(1) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(1) |
||||||||||||||||||||||||||||||
Randal R. Greene |
2016 | 5,000 | $ | 7.74 | 12/15/2026 | |||||||||||||||||||||||||||||||||||
2015 | 5,000 | | | 5.75 | 12/10/2025 | | | | | |||||||||||||||||||||||||||||||
2014 | | | | | | | | | | |||||||||||||||||||||||||||||||
2013 | 15,000 | | | 5.25 | 2/21/2023 | | | | | |||||||||||||||||||||||||||||||
2012 | | | | | | | | | | |||||||||||||||||||||||||||||||
2011 | 5,000 | | | 3.20 | 10/6/2021 | | | | | |||||||||||||||||||||||||||||||
Douglas F. Jenkins, Jr. |
2016 | 2,500 | $ | 7.74 | 12/15/2026 | |||||||||||||||||||||||||||||||||||
2015 | 2,500 | | | 5.75 | 12/10/2025 | | | | | |||||||||||||||||||||||||||||||
2014 | | | | | | | | | | |||||||||||||||||||||||||||||||
2013 | 10,000 | | | 5.25 | 2/24/2023 | | | | | |||||||||||||||||||||||||||||||
2012 | | | | | | | | | | |||||||||||||||||||||||||||||||
2011 | 2,000 | | | 4.85 | 3/22/2021 | | | | | |||||||||||||||||||||||||||||||
2010 | 1,014 | | | 5.43 | 6/3/2020 | | | | | |||||||||||||||||||||||||||||||
2009 | 487 | | | 7.40 | 4/29/2019 | | | | | |||||||||||||||||||||||||||||||
2008 | 730 | | | 11.09 | 4/8/2018 | | | | | |||||||||||||||||||||||||||||||
2007 | 610 | | | 13.87 | 4/10/2017 | | | | | |||||||||||||||||||||||||||||||
Deborah M. Evans |
2016 | 2,500 | $ | 7.74 | 12/15/2026 | |||||||||||||||||||||||||||||||||||
2015 | 2,500 | | | 5.75 | 12/10/2025 | | | | | |||||||||||||||||||||||||||||||
2014 | | | | | | | | | | |||||||||||||||||||||||||||||||
2013 | 10,000 | | | 5.25 | 2/24/2023 | | | | | |||||||||||||||||||||||||||||||
2012 | | | | | | | | | | |||||||||||||||||||||||||||||||
2011 | 2,000 | | | 4.85 | 3/22/2021 | | | | | |||||||||||||||||||||||||||||||
2010 | 858 | | | 5.43 | 6/3/2020 | | | | | |||||||||||||||||||||||||||||||
2008 | 913 | | | 11.09 | 4/8/2018 | | | | | |||||||||||||||||||||||||||||||
2007 | 649 | | | 13.87 | 4/10/2017 | | | | |
(1) | All stock options have vested and are exercisable. |
Employment Agreement and Change in Control Arrangements
On November 2, 2016, the Company entered into new employment agreements with Randal R. Greene, Deborah M. Evans and Douglas F. Jenkins, Jr., effective immediately. The new employment agreements supersede and replace the existing employment agreement and management continuity agreements with these officers.
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Employment Agreement with Randal R. Greene. Under the terms of the employment agreement with Mr. Greene, dated November 2, 2016, he was employed as President and Chief Executive Officer of the Company and the Bank prior to the completion of the merger with Virginia BanCorp, and is currently employed as President and Chief Executive Officer of the Company and Chief Executive Officer of the Bank. The term of Mr. Greenes agreement commenced on November 2, 2016 and will expire on November 2, 2019, unless earlier terminated or extended as provided therein. Beginning on the first anniversary of his agreement and on each anniversary thereafter, the term will be extended an additional year, unless either party gives at least three months prior notice to the other.
Mr. Greene receives a base salary of not less than $281,800 and may receive base salary increases and incentive, bonus compensation or other compensation in the amounts determined by the Board of Directors of the Bank. Mr. Greene also will be eligible to participate in the Companys long-term and short-term incentive plans, with a maximum annual incentive compensation of 25% of his base salary, and in cash and non-cash employee benefit plans and will be provided with use of a bank-owned automobile and reimbursement for country club membership and fees and certain expenses.
Mr. Greenes agreement also provides for the termination of his employment at any time by the Company for other than Cause or by Mr. Greene for Good Reason (as those terms are defined in his agreement). Upon termination under either of these circumstances and provided that Mr. Greene releases and waives his claims against the Company as provided in his agreement, Mr. Greene will be entitled to the following:
| an amount equal to the greater of (i) a monthly amount equal to one-twelfth of his annual base salary in each month for the remainder of the term of his agreement, or (ii) a monthly amount equal to one-twelfth of his annual base salary for a period of one year; |
| any bonus or other short-term incentive compensation earned, but not yet paid, for the year prior to the year in which his employment terminates; and |
| if Mr. Greene so elects, continued participation in the Companys group health and dental plans for the period in which payments are made above and payment by the Company of its portion of premiums in effect at the date of termination. |
If within one year after a Change in Control (as defined in his agreement), Mr. Greenes employment is terminated without Cause or if he resigns for Good Reason, Mr. Greene will be entitled to receive a lump sum cash payment equal to 2.99 times the sum of his base salary and most recent annual bonus (in each case, as of the date of termination or, if greater, as of the Change in Control) and continued participation in benefit plans as described above for a period of two years.
Mr. Greene also will be subject, in certain circumstances, to non-competition and non-solicitation restrictions for a period of 24 months following the termination of his employment.
Employment Agreement with Deborah M. Evans. Under the terms of the employment agreement with Ms. Evans, dated November 2, 2016, she was employed as Senior Vice President and Chief Financial Officer of the Company and the Bank prior to the completion of the merger with Virginia BanCorp, and is currently employed as Senior Vice President of the Company and Senior Vice President and Comptroller of the Bank. The term of Ms. Evanss employment agreement commenced on November 2, 2016 and will expire on November 2, 2017, unless earlier terminated or extended as provided therein. The agreement automatically will renew for successive one year terms, unless either party gives at least three months prior notice to the other.
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Ms. Evans receives a base salary of not less than $149,050 and may receive base salary increases and incentive, bonus compensation or other compensation in the amounts determined by the Board of Directors of the Bank. Ms. Evans also will be eligible to participate in the Companys long-term and short-term incentive plans and in cash and non-cash employee benefit plans and will be provided with reimbursement for certain expenses.
Ms. Evanss agreement also provides for the termination of her employment at any time by the Company for other than Cause or by Ms. Evans for Good Reason (as those terms are defined in her agreement). Upon termination under either of these circumstances and provided that Ms. Evans releases and waives her claims against the Company as provided in her agreement, Ms. Evans will be entitled to the following:
| a monthly amount equal to one-twelfth of her annual base salary for a period of one year; |
| any bonus or other short-term incentive compensation earned, but not yet paid, for the year prior to the year in which her employment terminates; and |
| if Ms. Evans so elects, continued participation in the Companys group health and dental plans for the period in which payments are made above and payment by the Company of its portion of premiums in effect at the date of termination. |
If within one year after a Change in Control (as defined in her agreement), Ms. Evanss employment is terminated without Cause or if she resigns for Good Reason, Ms. Evans will be entitled to receive a lump sum cash payment equal the sum of her base salary and most recent annual bonus (in each case, as of the date of termination or, if greater, as of the Change in Control) and continued participation in benefit plans as described above for a period of one year.
Ms. Evans also will be subject, in certain circumstances, to non-competition and non-solicitation restrictions for a period of one year following the termination of her employment.
Employment Agreement with Douglas F. Jenkins, Jr. Under the terms of the employment agreement with Mr. Jenkins, dated November 2, 2016, Mr. Jenkins will be employed as Executive Vice President of the Company and Executive Vice President and Chief Banking Officer of the Bank. The term of Mr. Jenkinss agreement commenced on November 2, 2016 and will expire on November 2, 2018, unless earlier terminated or extended as provided therein. The agreement automatically will renew for successive two year terms, unless either party gives at least three months prior notice to the other.
Mr. Jenkins receives a base salary of not less than $205,700 and may receive base salary increases and incentive, bonus compensation or other compensation in the amounts determined by the Board of Directors of the Bank. Mr. Jenkins also will be eligible to participate in the Companys long-term and short-term incentive plans and in cash and non-cash employee benefit plans and will be provided with use of a bank-owned automobile and reimbursement for certain expenses.
Mr. Jenkinss agreement also provides for the termination of his employment at any time by the Company for other than Cause or by Mr. Jenkins for Good Reason (as those terms are defined in his agreement). Upon termination under either of these circumstances and provided that Mr. Jenkins releases and waives his claims against the Company as provided in his agreement, Mr. Jenkins will be entitled to the following:
| an amount equal to the greater of (i) a monthly amount equal to one-twelfth of his annual base salary in each month for the remainder of the term of his agreement, or (ii) a monthly amount equal to one-twelfth of his annual base salary for a period of one year; |
22
| any bonus or other short-term incentive compensation earned, but not yet paid, for the year prior to the year in which his employment terminates; and |
| if Mr. Jenkins so elects, continued participation in the Companys group health and dental plans for the period in which payments are made above and payment by the Company of its portion of premiums in effect at the date of termination. |
If within one year after a Change in Control (as defined in his agreement), Mr. Jenkinss employment is terminated without Cause or if he resigns for Good Reason, Mr. Jenkins will be entitled to receive a lump sum cash payment equal to two times the sum of his base salary and most recent annual bonus (in each case, as of the date of termination or, if greater, as of the Change in Control) and continued participation in benefit plans as described above for a period of two years.
Mr. Jenkins also will be subject, in certain circumstances, to non-competition and non-solicitation restrictions for a period of 24 months following the termination of his employment.
Benefit Plans
Pension Plan. The Company has a non-contributory cash balance pension plan which was frozen effective December 31, 2012. Prior to that date, the account balance for each participant grew each year with annual pay credits based on age and years of service and monthly interest credits based on an amount established each year by the Companys Board of Directors, subject to a minimum of 3% per the Internal Revenue Code. Pursuant to the terms of the cash balance pension plan, employees are 100% vested after three years of service. Once vested, the accumulated cash balance is available to the participant upon retirement, death or other termination of employment and is payable in various forms at the election of the participant, including as a lump sum. As of December 31, 2012, annual pay credits were discontinued, but each participants account balance will continue to grow based on monthly interest credits.
At December 31, 2016, the lump sum value of accrued benefit in this plan was $15,714 for Mr. Greene, $63,705 for Ms. Evans and $56,572 for Mr. Jenkins.
401(k) Plan. The Company has a contributory 401(k) plan. In 2016, all salaried employees of the Companys subsidiaries were eligible to participate on the first of the month following an employees hire date. There is no age requirement. Participants can elect to defer between 1% and 15% of their base compensation, which will be contributed to the plan, providing the amount deferred does not exceed the federal dollar maximum election deferral for each year. The Companys subsidiaries match 100% up to a 3% deferral, then 50% on the next 3% of deferrals. Employees become 100% vested in the subsidiarys match after two years of service. Distributions to participants are made at death, retirement or other termination of employment in a lump sum payment. The plan permits certain in-service withdrawals. Normal retirement age is considered 65; early retirement is considered at 55 with 10 years of vested service; disability retirement has no age requirements but a service requirement of 10 years of vested service.
As a result of the merger with Virginia BanCorp, the Company has a second 401(k) Plan (the VCB 401(k)), which is available to employees of the Company who were eligible employees of the former Virginia Commonwealth Bank prior to the merger with Bank of Lancaster in April 2017. Any employee is eligible to participate in the VCB 401(k) after reaching age 21. Participants can elect to defer between 1% and 15% of their base compensation, which will be contributed to the plan providing the amount deferred does not exceed the federal dollar maximum election deferral for each year. Prior to the
23
merger, Virginia Commonwealth Bank matched 100% of employee deferrals up to 4% with a contribution to the employees ESOP account, subject to a vesting schedule. Employees become vested in the match immediately. The Company is currently in the process of merging the 401(k) plans.
Employee Stock Ownership Plan (the ESOP). The ESOP is a non-contributory plan supported by annual contributions made at the discretion of the Companys Board of Directors. The ESOP is a stock bonus plan qualified under Section 401(a) of the Internal Revenue Code and an employee stock ownership plan under Section 4975(E)(7) of the Internal Revenue Code. During 2016, the ESOP is eligible to each Bank of Lancaster (prior name of Virginia Commonwealth Bank) and Bay Trust Company (prior name of VCB Financial Group, Inc.) employee over the age of 21 and credited with at least 1,000 hours of service for the plan year.
As a result of the merger with Virginia BanCorp, the Company has a second Employee Stock Ownership Plan (the VCB ESOP), which is available to employees of the Bank who were employees of former Virginia Commonwealth Bank prior to the merger. The VCB ESOP is a non-contributory plan supported by contributions made at the discretion of Banks Board of Directors. The VCB ESOP is a stock bonus plan qualified under Section 401(a) of the Internal Revenue Code and an employee stock ownership plan under Section 4975(e)(7) of the Internal Revenue Code. The VCB ESOP is eligible to each Bank employee over the age of 21 who has been employed by the bank for at least one month. The Bank makes semi-monthly safe harbor cash contributions totaling 3% of an eligible employees compensation to the employees VCB ESOP account. The VCB ESOP safe harbor contributions made by the bank are not subject to a vesting schedule. At the discretion of the Board of Directors on an annual basis, the bank also matches 100% of employee 401(k) plan contributions up to 4% of earned compensation and this match is deposited into the employees VCB ESOP account. Such matching contributions made by the company are subject to a vesting schedule whereby participants must be credited with at least 1,000 hours of service for the plan year. The Company is currently in the process of merging the employee stock ownership plans.
Deferred Compensation Plan. The named executive officers, in addition to certain other eligible executive officers, are entitled to participate in the Bay Banks of Virginia, Inc. Executive Deferred Compensation Plan. Pursuant to the nonqualified plan, eligible executive officers can defer up to 100% of base salary and/or bonus on an annual basis.
Amounts deferred pursuant to the plan can be invested in the Companys common stock and various mutual funds, with the portfolio composition up to the discretion of the executive officer. Although the Company does not make matching contributions to the plan, it may elect to make contributions approved by the Compensation Committee and/or the Board. In 2016, the Company made discretionary contributions to the plan of $19,583 for Mr. Greene, $18,374 for Mr. Jenkins, and $11,780 for Ms. Evans.
Amounts under the plan will be paid following a distributable event. A distributable event includes a specific date, termination of employment with the Company, retirement or a date based on the later of a combination of these dates. Distributions can be received either as a lump-sum payment or in substantially equal payments over a period of not more than 20 years.
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PROPOSAL 2 ADVISORY VOTE ON EXECUTIVE COMPENSATION
In accordance with SEC regulations, the Company is providing stockholders with an advisory (non-binding) vote on the compensation of the named executive officers as disclosed in this Proxy Statement. Such a proposal, commonly known as a say-on-pay proposal, gives stockholders the opportunity to endorse or not endorse the Companys executive compensation programs and policies. At the Companys 2013 Annual Meeting, the stockholders voted in favor of having an advisory (non-binding) vote on executive compensation every year. Accordingly, stockholders may vote on the following resolution at the Annual Meeting:
RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the Companys named executive officers as disclosed in the Executive Compensation section of the Companys 2017 Proxy Statement, including the compensation tables and related narrative disclosure in the 2017 Proxy Statement.
The Company believes its compensation programs and policies are strongly aligned with the long-term interests of its stockholders. Because this vote is advisory, it will not be binding upon the Companys Board of Directors or the Compensation Committee. However, the Board and the Compensation Committee will take into account the outcome of the vote when considering future executive compensation decisions.
The Board of Directors unanimously recommends that you vote for the approval, on an advisory basis, of Companys executive compensation programs and policies, by voting FOR the approval of the above resolution.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of Bay Banks of Virginia, Inc. oversees the Companys financial reporting process on behalf of the Board of Directors of the Company. The Audit Committee is elected by the Board of Directors of the Company. All members of the Audit Committee are independent of management. The Audit Committee operates under a written charter adopted by the Board of Directors and the Audit Committee.
While management has the primary responsibility for the quality and integrity of the Companys financial statements and reporting processes, the Audit Committee provides assistance to management in fulfilling this responsibility. In its oversight responsibilities, the Audit Committee reviewed with management and DHG the audited financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2016, and discussed the quality and acceptability of the accounting principles, the reasonableness of significant judgments and the clarity of disclosure in the financial statements.
The Committee also discussed with DHG all communications required by Public Company Accounting Oversight Boards (PCAOB) Auditing Standard No. 16 Communications with Audit Committees.
In addition, the Audit Committee obtained from DHG a formal written statement discussing any disclosed relationship or service which may impact the objectivity and independence of the independent registered public accounting firm, as required by applicable requirements of the PCAOB, and the Audit Committee has discussed with DHG the firms independence. The Audit Committee has concluded that DHGs provision of audit and non-audit services to the Company and its affiliates is compatible with DHGs independence.
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The Audit Committee also monitored the internal audit functions of the Company including the independence and authority of its reporting obligation, the proposed internal audit plan for the coming year, and the adequacy of management responses to internal audit findings and recommendations. In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board has approved) that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2016 for filing with the Securities and Exchange Commission.
Audit Committee |
Bay Banks of Virginia, Inc. |
C. Dwight Clarke, Chair |
Lawrence N. Ashworth |
Richard A. Farmar, III James P. VanLandingham |
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PROPOSAL 3 RATIFICATION OF INDEPENDENT AUDITORS
The Companys Board of Directors has appointed the firm of DHG as independent registered public accountants to audit the consolidated financial statements of the Company for the fiscal year ending December 31, 2017.
DHG audited the financial statements included in the Companys Annual Report on Form 10-K for the years ended December 31, 2016 and 2015. Representatives of DHG are expected to be present at the Annual Meeting, will have an opportunity to make a statement, if they desire to do so, and are expected to be available to respond to appropriate questions from stockholders.
Although the Companys Bylaws do not require stockholder ratification or other approval of the retention of the Companys independent registered public accounting firm, as a matter of good corporate governance, the Board of Directors is requesting that the stockholders ratify the appointment of DHG as the Companys independent registered public accounting firm for the fiscal year ending December 31, 2017.
The Board of Directors unanimously recommends that you vote for the approval of the ratification of the appointment of DHG as the Companys independent registered public accounting firm for the fiscal year ending December 31, 2017.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES
The following table presents aggregate fees paid or to be paid by the Company and the Bank for professional services rendered by Dixon Hughes Goodman LLP. Audit fees include audit and review services, consents and review of documents filed with the Securities and Exchange Commission. Audit-related fees consist of research and consultation concerning financial accounting and reporting standards and audits of the Companys benefit plans. Tax fees include preparation of federal and state tax returns and consultation regarding tax compliance issues.
Fees to Dixon Hughes Goodman LLP in 2016 and 2015
Fiscal 2016 | Fiscal 2015 | |||||||
Audit Fees |
$ | 123,958 | $ | 127,713 | ||||
Audit-related Fees |
66,400 | 20,300 | ||||||
Tax Fees |
15,500 | 9,902 | ||||||
|
|
|
|
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Total Fees |
205,858 | 157,915 | ||||||
|
|
|
|
The Audit Committee pre-approves all audit, audit related and tax services on an annual basis, and in addition, authorizes individual engagements that exceed pre-established thresholds. Any additional engagement that falls below the pre-established thresholds must be reported by management at the Audit Committee meeting immediately following the initiation of such an engagement.
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INTEREST OF DIRECTORS AND OFFICERS IN CERTAIN TRANSACTIONS
Some of the Companys directors, executive officers and members of their immediate families, and corporations, partnerships and other entities, of which such persons are officers, directors, partners, trustees, executors or beneficiaries, are customers of the Bank. All loans and loan commitments to them were originated in the ordinary course of business, upon substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and, other than as set forth below, do not involve more than normal risk of collectibility or present other unfavorable features. It is the policy of the Bank to provide loans to officers who are not executive officers and to employees at more favorable rates than those prevailing at the time for comparable transactions with other persons. These loans do not involve more than the normal risk of collectibility or present other unfavorable features.
The Company and the Bank occasionally purchase insurance products through B. H. Baird Insurance Agency (Baird). Richard A. Farmar, III, a director of the Company and the Bank, was President of Baird in 2015 and 2016.
The Bank outsources certain information technology services and equipment from Compass Information Services, LLC (Compass), of which C. Frank Scott, IV, the Chairmans son, is the owner. During 2017, the Bank has paid approximately $170,000, including pass-through of independent contractors to manage information technology projects, to Compass.
The Company has not adopted a formal policy that covers the review and approval of related person transactions by the Companys Board of Directors. The Board reviews all proposed related party transactions for approval. During such a review, the Board will consider, among other things, the related persons relationship to the Company, the facts and circumstances of the proposed transaction, the aggregate dollar amount of the transaction, the related persons relationship to the transaction and any other material information.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, directors and executive officers of the Company are required to file reports with the Securities and Exchange Commission indicating their holdings of and transactions in the Companys common stock. Based upon a review of filings with the Securities and Exchange Commission and written representation that no other reports were required, the Company believes that all of its directors and executive officers were in compliance with the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934 during 2016.
OTHER MATTERS
General
Management knows of no other business to be brought before the Annual Meeting. Should any other business properly be presented for action at the meeting, the shares represented by the enclosed proxy shall be voted by the persons named therein in accordance with their best judgment and in the best interests of the Company.
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STOCKHOLDER PROPOSALS
The Companys Bylaws provide that, in addition to any other applicable requirements, for business (including stockholder nominations of director candidates) to be properly brought before an annual meeting by a stockholder, the stockholder must give timely notice in writing to the Secretary of the Company no later than 120 days before the anniversary date of the immediately preceding annual meeting. As to each matter, the notice must comply with certain informational requirements set forth in the Bylaws. These requirements are separate and apart from and in addition to the Securities and Exchange Commissions requirements that a stockholder must meet to have a proposal included in the Companys proxy materials. In order for a stockholder proposal to be considered for inclusion in the Companys proxy materials relating to the 2018 Annual Meeting of Stockholders pursuant to applicable Securities and Exchange Commission rules, the Secretary of the Company must receive such proposal no later than December 10, 2017. Stockholder proposals should be addressed to Corporate Secretary, Pamela A. Varnier, Bay Banks of Virginia, Inc., 1801 Bayberry Court, Suite 101, Richmond, Virginia 23226.
Stockholder Communication
The Company has a process whereby stockholders can contact the Companys directorship. Corporate stockholder contact information is available on the Company website at www.baybanks.com.
ANNUAL REPORT ON FORM 10-K
A copy of the Companys Annual Report on Form 10-K for the year ended December 31, 2016, excluding exhibits, as filed with the Securities and Exchange Commission can be obtained without charge by writing to Randal R. Greene, President and Chief Executive Officer, Bay Banks of Virginia, Inc., 1801 Bayberry Court, Suite 101, Richmond, Virginia 23226. This information may also be accessed, without charge, by visiting either the Companys website at www.baybanks.com or the Securities and Exchange Commissions website at www.sec.gov. The information on the Companys website is not a part of this Proxy Statement.
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EXHIBIT A
BAY BANKS OF VIRGINIA, INC.
Compensation Committee Charter
Reaffirmed December 8, 2016
Organization - The Board of Directors shall have a Compensation Committee composed of three or more outside Directors who are independent of the management of Bay Banks of Virginia, Inc. (the Company), not employed by the Company, and are free of any relationship that would interfere with their exercise of independent judgment as a Committee member.
Statement of Policy - The Compensation Committee shall provide assistance to the corporate directors in fulfilling their responsibility to the shareholders, potential shareholders, and investment community to ensure that the Companys officers, key executives, and Board members are compensated in accordance with the Companys total compensation objectives and executive compensation philosophy and strategy. The Committee shall advise, recommend, and approve compensation policies, strategies, and pay levels necessary to support organizational objectives.
Responsibilities - The Compensation Committees policies should remain flexible to react to changing conditions and to ensure the Board of Directors and shareholders that: (1) the overall goals and objectives of the Company can be supported by implementing an effective total compensation program, and (2) the total compensation program and practices of the Company are designed with full consideration of all accounting, tax, securities law, and regulatory requirements.
The Compensation Committee shall:
| Assist the Company with defining an executive total compensation policy that (1) supports the Companys overall business strategy and objectives, (2) attracts and retains key executives, (3) links total compensation with business objectives and organizational performance in good and bad times, and (4) provides competitive total compensation opportunities at a reasonable cost while enhancing shareholder value. |
| Act on behalf of the Board of Directors in setting executive compensation policy, administering compensation plans approved by the Board of Directors and shareholders, and making decisions or developing recommendations for the Board of Directors with respect to the compensation of Company executives. |
| Review and recommend to the full Board of Directors for approval the annual base salary levels, annual and long-term incentive opportunity levels, employment/change in control agreements, supplemental benefits and perquisites for the Chief Executive Officer and review and approve on behalf of the Board, with input from the Chief Executive Officer, the compensation and benefits for other key executives of the Company. |
| Review and comment on the Companys strategic and financial plans to determine their relationship to the compensation program. |
| Review and assess performance target goals established before start of the plan year and determine when performance goals have been achieved at the end of the plan year. In conducting oversight of the design and administration of executive incentive plans, the Compensation Committee shall pay particular attention to assessing and mitigating any risk to the Company resulting from such plans. |
A-1
| Recommend to the Board the amount of contributions to the retirement plans of the Company. |
| Select independent compensation consultants, if necessary, to advise the Compensation Committee. |
| From time to time, as directed by the Board, conduct a market study and make recommendations for determining outside Directors pay components (retainers, fees, long term incentive plans, benefits, and perquisites). |
| Keep abreast of current developments in executive compensation outside the Company and in particular, within the financial services industry. |
A-2
YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
Vote by Internet or Telephone QUICK «« « EASY
IMMEDIATE 24 Hours a Day, 7 Days a Week or by Mail
BAY BANKS OF VIRGINIA, INC. |
Your phone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card. Votes submitted electronically over the Internet or by telephone must be received by 11:59 p.m., Eastern Time, on October 23, 2017. | |||
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INTERNET/MOBILE www.cstproxyvote.com Use the Internet to vote your proxy. Have your proxy card available when you access the above website. Follow the prompts to vote your shares. | |||
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PHONE 1 (866) 894-0536 Use a touch-tone telephone to vote your proxy. Have your proxy card available when you call. Follow the voting instructions to vote your shares. | |||
PLEASE DO NOT RETURN THE PROXY CARD IF YOU ARE VOTING ELECTRONICALLY OR BY PHONE. |
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MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope provided. |
▲ FOLD HERE DO NOT SEPARATE INSERT IN ENVELOPE PROVIDED ▲ | ||||||||
PROXY |
Please mark your votes like this |
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS INDICATED, OR IF NO DIRECTION IS
INDICATED, WILL BE VOTED FOR ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3.
FOR | AGAINST | ABSTAIN | ||||||||||||||
2. To approve on a non-binding advisory basis, the Companys named executive officer compensation as described in the Companys 2017 proxy statement. |
☐ | ☐ | ☐ | |||||||||||||
1. To elect three (3) Class I directors to serve three-year terms, two (2) Class II directors to serve one-year terms and two (2) Class III directors to serve two-year terms. |
FOR all Nominees listed to the left |
WITHHOLD AUTHORITY to vote (except as marked to the contrary for all nominees listed to the left) |
|
|||||||||||||
☐ | ☐ | |||||||||||||||
Class I (01) Richard A. Farmar, III (02) Randal R. Greene (03) C. Frank Scott, III Class II (04) Lawrence N. Ashworth (05) James B. McNeer Class III (06) Larry C. Tucker (07) James P. VanLandingham |
FOR | AGAINST | ABSTAIN | |||||||||||||
3. To ratify the appointment of Dixon Hughes Goodman LLP as the Companys independent registered public accounting firm for the year ending December 31, 2017; and |
☐ | ☐ | ☐ | |||||||||||||
4. To transact such other business as may properly come before the meeting or any adjournment thereof. Management knows of no other business to be brought before the meeting. |
CONTROL NUMBER | ||||||
(Instruction: To withhold authority to vote for any individual nominee, strike a line through that nominees name in the list above) |
Signature__________________________ Signature, if held jointly_____________________________ Date_____________, 2017.
Note: Please sign exactly as name appears hereon. When shares are held by joint owners, both should sign. When signing as attorney, executor, administrator, trustee, guardian or corporate officer, please give title as such.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held October 24, 2017
The proxy statement and our 2016 Annual Report on Form 10-K
are available at http://www.baybanks.com.
▲ FOLD HERE DO NOT SEPARATE INSERT IN ENVELOPE PROVIDED ▲
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
BAY BANKS OF VIRGINIA, INC.
The undersigned appoints C. Dwight Clarke and Julien G. Patterson, and each of them, as proxies, each with the power to appoint his substitute, and authorizes each of them to represent and to vote, as designated on the reverse hereof, all of the shares of common stock of Bay Banks of Virginia, Inc. held of record by the undersigned at the close of business on September 5, 2017 at the Annual Meeting of Stockholders of Bay Banks of Virginia, Inc. to be held on October 24, 2017, or at any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS INDICATED. IF NO CONTRARY INDICATION IS MADE, THE PROXY WILL BE VOTED IN FAVOR OF ELECTING THE NOMINEES TO THE BOARD OF DIRECTORS LISTED IN PROPOSAL 1, IN FAVOR OF PROPOSALS 2 AND 3, AND IN ACCORDANCE WITH THE JUDGMENT OF THE PERSONS NAMED AS PROXY HEREIN ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF BAY BANKS OF VIRGINIA, INC.
(Continued, and to be marked, dated and signed, on the other side)
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