ITEM 10. DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Our Board of Directors is comprised of eight
members. Our Bylaws provide that directors are divided into three classes, with one class of directors elected annually. Our directors
are generally elected to serve for a three-year period and until their respective successors shall have been elected and shall
qualify.
Director Nominees for Terms Expiring in 2019
Bruce VanHorn
was appointed
as Executive Vice President of Poage Bankshares and President of Town Square Bank in March 2014. He is also a member of the board
of directors of Town Square Bank, to which he was appointed in December 2014. Previously, he served as President, Chief Executive
Officer and Chairman of the Board of Town Square Financial Corporation and Town Square Bank. Mr. VanHorn has worked in the financial
industry since 1987. He began his banking career with Third National Bank serving as Vice President and Branch Administrator where
he was responsible for seven branches in the Boyd and Greenup County markets. Mr. VanHorn was one of the founders of Town Square
Bank and held the position of Executive Vice President and Chief Operations Officer. In July of 2001, he was promoted to President
and Chief Executive Officer and later named Chairman of the Board. Mr. VanHorn’s educational background includes an associate
degree in chemistry from the University of Kentucky, a Bachelor of Business Administration from Marshall University, and an MBA
from Morehead State University. He has also graduated from the Kentucky School of Banking at the University of Louisville and the
Graduate School of Banking at Louisiana State University. Mr. VanHorn is very active in several not-for profit organizations within
Boyd County, and currently is an officer within those organizations. Mr. VanHorn was selected to serve on the Board of Directors
because his broad banking experience and leadership skills provide insight as well as management skills for the Company and because
his involvement in community organizations is beneficial to Town Square Bank’s lending activities.
Everett B. Gevedon, MD
is
President and Chief Executive Officer of Family Allergy Services, Inc. in Ashland, Kentucky, a position he has held for 23 years.
Dr. Gevedon is a founding member and past Chairman of the Ashland Alliance, the new Chamber of Commerce and Economic Development
serving a two-county area. He also served as Chairman of the City of Ashland’s Economic Development Board for five years.
His other community service and business activities include current service on the Ashland City Park Board and the Boyd County
Board of Health. Dr. Gevedon has previously served as Chairman of the Ashland Tourism Commission and as a board member of the Ashland
Community College Foundation and the Highlands Museum and Discovery Center. Dr. Gevedon has served as a director of Town Square
Bank since 1998. He was selected to serve as a director of Poage Bankshares because his long experience as President and Chief
Executive Officer of a small business provides insight with respect to the lending needs of owners and operators of small businesses
in our market area. Further, his extensive experience on area economic development boards provides insight into economic conditions
and business development projects within our market area, as well as contacts with area commercial loan prospects.
John C. Stewart, Jr.
was appointed
in March 2014 in connection with the acquisition of Town Square Financial Corporation and Town Square Bank after serving on the
boards of directors of those institutions since 2011. He retired as President of Big Sandy Furniture, Inc., a furniture retailer
in Ashland, Kentucky, in April 2010 after dedicating 42 years to the company where he began his career in 1968 as a salesperson.
Mr. Stewart is a life-long resident of Ashland, Kentucky and he graduated from the University of Kentucky with a B. S. in Business/Economics.
Mr. Stewart previously served on the Board of Directors for Community Trust and National City Bank. Mr. Stewart is very active
in civic and educational organizations within Boyd County, including service on the Executive Committee of KDMC, as Chairman of
the Board of ACTC, and as Financial Secretary of Holy Family Church and School. Mr. Stewart was selected to serve as a director
of Poage Bankshares because his extensive involvement in the management of a local business provides insight as to the lending
needs of owners and operators of small businesses in our market area.
Directors Continuing in Office
Stuart N. Moore, DMD
is retired
from dentistry in 2006 after practicing for twenty-five years at Dr. Stuart N. Moore PSC in Ashland, Kentucky. He has served as
President of Jasmine Properties LLC in Ashland, Kentucky, which owns and manages residential and commercial rental properties,
since 1982. Dr. Moore obtained his real estate sales license in 1993 and was listed as a part-time real estate agent for various
real estate agencies in Ashland, Kentucky until placing his license in an inactive escrow status in 2013. Dr. Moore has served
on the board of directors of Town Square Bank since 2005, and was selected to serve as a director of Poage Bankshares because his
knowledge of real estate value from construction, comparable sales and income approaches are helpful in evaluating loan approvals,
as well as experience reviewing financial statements.
Charles W. Robinson
is a director.
He is a certified public accountant who has worked extensively with businesses operating in our community. Mr. Robinson has worked
in public accounting since 1973, and has been employed at Charles W. Robinson P.S.C. CPA
in Ashland, Kentucky since 1984.
Mr. Robinson performed our audit before becoming a director in 1996. Mr. Robinson has served as a director of Town Square Bank
since 1996, and was selected to serve as a director of Poage Bankshares because his experience in public accounting and real estate
provides a broad and unique perspective on the challenges facing our organization and our business strategies and operations, and
because his experience as a certified public accountant provides unique insight into our financial accounting practices and procedures,
financial reporting and our relationship with our auditors.
Thomas Burnette
was appointed
as a director in March 2014 in connection with the acquisition of Town Square Financial Corporation and Town Square Bank after
serving on the boards of directors of those institutions since 2011, and was appointed as Vice Chairman of the Board of Directors
in December, 2014. Mr. Burnette has been the President and Owner of Ashland Office Supply, Inc., an office supply retailer in Ashland,
Kentucky, since 1978. He is a graduate of Morehead State University. Mr. Burnette has served in a variety of capacities at civic
and community organizations in Boyd County, including the Ashland Kiwanis Club, Ashland National Little League, United Way of Boyd
and Greenup Counties, King’s Daughters’ Health Foundation, Community Hospice, the YMCA, the Boyd County Public Library,
Junior Achievement of the Ohio Valley, ACC Entrepreneur Center, the Ashland Planning Commission, the Woodlands Foundation and the
Kentucky Heart Institute and Kingsbrook Lifecare Center. He has also previously served as a director of the Bank of Ashland and
Fifth-Third Bank of Ashland. Mr. Burnette was selected to serve as a director of Poage Bankshares because his extensive involvement
in the management of a local business provides insight as to the lending needs of owners and operators of small businesses in our
market area. In addition, his extensive community service will be beneficial to Town Square Bank’s operations.
Stephen S. Burchett
was elected
by shareholders in 2015. He has been a partner with the law firm of Offutt Nord Burchett, PLLC since 2002. As a long practicing
attorney in the area, he has repeatedly been named one of The Best Lawyers in America™ and a
Superlawyer
™ by
Superlawyer Magazine™. Mr. Burchett has successfully represented a wide range of clients in complex litigation throughout
Central Appalachia. These clients include several of the Tri-States’ largest private employers such as publicly traded energy,
healthcare and industrial companies. He has also represented a number of clients in mergers and acquisitions and has experience
advising and providing legal guidance to boards of directors and officers. He is the only attorney practicing in the Tri-State
who is board-certified by the American Board of Professional Liability Attorneys™. He attended the University of Virginia
on the prestigious Jefferson Scholarship and received his law degree from the University of Kentucky where he was president of
the Student Bar Association. He has also served as a representative to the Kentucky Bar Association Board of Governors. Mr.
Burchett is one of three partners on the management committee of Offutt Nord Burchett, PLLC. Mr. Burchette was selected to serve
on the Board of Directors because his extensive legal background and significant legal expertise and financial management experience
provides insight to local lending as well as familiarity with the legal aspects of our business.
Daniel King III
was appointed
as a director effective March 17, 2015 to fill the vacancy resulting from J. Thomas Rupert’s death in November, 2014. Mr.
King has practiced law as a solo practitioner in Catlettsburg, Kentucky since 1978. He is also the Assistant Attorney for Boyd
County, a position he has held since 1985. Mr. King holds a bachelor’s degree from the University of Kentucky and a JD from
the University of Kentucky College of Law. Mr. King was appointed to the board of directors because his extensive experience as
a business attorney provides a unique perspective on our business and operations, and because his client service and community
service provide insight into the needs of members of our community, particularly in the Catlettsburg area into which the Company
recently expanded.
Executive Officers Who Are Not Directors
Jane Gilkerson
was appointed
as Executive Vice President and Chief Financial Officer of Poage Bankshares and Town Square Bank in March 2014, after serving as
Senior Vice President and Chief Financial Officer of Town Square Financial Corporation and Town Square Bank since February 2003.
Previously, Ms. Gilkerson worked for Hayflich & Steinberg CPA in Huntington, West Virginia from February 2000 to February 2003.
Before entering public accounting, Ms. Gilkerson worked in the banking industry since 1979. She is a Certified Public Accountant
licensed to practice in West Virginia. She holds a Bachelor of Business Administration in Accounting from Marshall University.
Ms. Gilkerson currently serves as Treasurer for Hope’s Place, a not-for-profit organization, in Ashland, Kentucky.
Jeffery W. Clark
is Senior
Vice President and Controller of Poage Bankshares and Town Square Bank. He served as Chief Financial Officer from September 2011
until March 2014, after serving as Senior Accountant since July 2011. He previously served as Vice President and Chief Financial
Officer of Ohio River Bank, Ironton, Ohio since July 2007. Before his employment with Ohio River Bank, he served as Deputy
Treasurer with the Lawrence County, Ohio Treasurers Office since March 2006. Before his employment with the County Treasurers
Office, Mr. Clark served as Southeastern Ohio Market Area President for Classic Bank, Ashland, Kentucky since May 2003. Before
this position, Mr. Clark served as Controller of First Federal Savings Bank of Ironton, Ohio since September 1986 and Chief Financial
Officer of its holding company, First Federal Financial Bancorp of Ironton, Ohio, since 1996.
Miles R. Armentrout
was appointed
Executive Vice President and Chief Credit Officer of Poage Bankshares and Town Square Bank in June 2012. He previously served as
Senior Vice President and Senior Loan Officer of Farmers and Merchants Bank, Miamisburg, Ohio since 2011. Before his employment
with Farmers and Merchants Bank, he served as Executive Vice President and Senior Commercial Banking Officer with WesBanco Bank,
Wheeling, West Virginia since 2007 and Executive Vice President and Chief Lending Officer for Oak Hill Banks, Jackson, Ohio since
2005. Before holding this position, he served as Regional President for the Western Ohio markets since 2003 and Senior Vice President
and Senior Loan Officer of Oak Hill subsidiary bank, Towne Bank, Cincinnati, Ohio since 2001. Mr. Armentrout served as Regional
Executive of Sky Bank, Bowling Green, Ohio since 1999 and as a Vice President and Commercial Loan Officer for Mid-American Bank
and Trust Company, Bowling Green, Ohio since 1993. Before holding that position, he served in various lending management and commercial
lending positions with Farmers Banking Company, Lakeview, Ohio and BancOhio National Bank, Columbus, Ohio since 1978.
James W. King
currently serves
as Executive Vice President, Chief Information Officer and Secretary. He has also served as a member of the board of directors
of Town Square Bank since 1997. Mr. King has been employed by Town Square Bank since 1983, and has held several positions before
being named Executive Vice President in 1997 and adding the title of Chief Information Officer in 2010.
Section 16(a) Beneficial Ownership Reporting
Compliance
Our executive officers and directors and
beneficial owners of greater than 10% of the outstanding shares of common stock are required to file reports with the Securities
and Exchange Commission disclosing beneficial ownership and changes in beneficial ownership of our common stock. Securities and
Exchange Commission rules require disclosure if an executive officer, director or 10% beneficial owner fails to file these reports
on a timely basis. Based on our review of ownership reports required to be filed for the year ended December 31, 2015, no executive
officer, director or 10% beneficial owner of our shares of common stock failed to file ownership reports on a timely basis.
Code of Ethics for Senior Officers
Poage Bankshares has adopted a Code of Ethics
that is applicable to its senior financial officers, including the principal executive officer, principal financial officer, principal
accounting officer and all officers performing similar functions. We have posted this Code of Ethics on our Internet website at
www.townsquarebank.com
.
The Company has also established
procedures to receive, retain and treat complaints regarding accounting, internal accounting controls and auditing matters. These
procedures ensure that individuals may submit concerns regarding questionable accounting or auditing matters in a confidential
and anonymous manner.
Audit Committee
The Audit Committee is comprised of Directors
Burnette, Gevedon, Stewart and Robinson, each of whom is “independent” in accordance with applicable SEC rules and
Nasdaq listing standards. Mr. Robinson serves as chair of the Audit Committee. The Audit Committee also serves as the audit
committee of the board of directors of Town Square Bank. The Board of Directors has determined that Mr. Robinson qualifies as an
“audit committee financial expert” as defined under applicable SEC rules because Mr. Robinson is a certified public
accountant and has nearly 40 years of public accounting experience. In addition, each Audit Committee member has the ability to
analyze and evaluate our financial statements as well as an understanding of the Audit Committee’s functions. In addition,
each Audit Committee member has overseen and assessed the finances and financial reporting of various businesses that they own
or with which they have been employed.
Our Board of Directors has adopted a written
charter for the Audit Committee, which is available on our Internet website at
www.townsquarebank.com
. As more fully described
in the Audit Committee Charter, the Audit Committee reviews the financial records and affairs of Poage Bankshares and monitors
adherence in accounting and financial reporting to accounting principles generally accepted in the United States of America.
ITEM 11. EXECUTIVE
COMPENSATION
Summary Compensation Table
The table below sets forth the total compensation
paid to or earned by our President and Chief Executive Officer, former President and Chief Executive Officer and our other two
most highly compensated executive officers (the “named executive officers”) for the years ended December 31, 2015 and
2014.
Name and principal position
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
(1)
($)
|
|
|
Option
Awards
($)
|
|
|
All
Other
Compensation
(2)
($)
|
|
|
Total
($)
|
|
Bruce VanHorn
|
|
2015
|
|
|
202,000
|
|
|
|
4,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
47,721
|
|
|
|
254,221
|
|
President and Chief Executive
Officer
|
|
2014
|
|
|
154,109
|
|
|
|
—
|
|
|
|
—
|
|
|
|
38,200
|
|
|
|
7,018
|
|
|
|
199,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ralph E. Coffman, Jr.
|
|
2015
|
|
|
146,265
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
114,879
|
|
|
|
261,144
|
|
Former President and Chief
Executive Officer
(3)
|
|
2014
|
|
|
211,180
|
|
|
|
20,930
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15,435
|
|
|
|
247,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miles R. Armentrout
|
|
2015
|
|
|
152,852
|
|
|
|
2,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,955
|
|
|
|
161,807
|
|
Executive Vice President
and Chief Credit Officer
|
|
2014
|
|
|
152,854
|
|
|
|
14,420
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,113
|
|
|
|
174,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James W. King
|
|
2015
|
|
|
121,746
|
|
|
|
2,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,200
|
|
|
|
132,446
|
|
Executive Vice President
and Chief Information Officer
|
|
2014
|
|
|
121,746
|
|
|
|
3,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,633
|
|
|
|
132,379
|
|
|
(1)
|
These amounts represent the aggregate grant date fair value for outstanding stock option awards granted during the year indicated
computed in accordance with FASB ASC Topic 718. The assumptions used to determine the value of stock option awards are described
in Note 18 of the notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for
the year ended December 31, 2015. The stock option award amounts reported are grant date fair values computed based upon the Black-Scholes
option valuation model, which estimated the present dollar value of the Company’s common stock options at the time of the
grant. The actual value, if any, that may be realized will depend on the excess of the stock price over the exercise price on the
date the option is exercised. Therefore, there is no assurance that the value realized by an executive officer will be at or near
the value shown above.
|
|
(2)
|
For 2015, the amounts in this column reflect what Town Square Bank paid for, or reimbursed, the applicable named executive
officer for the various benefits and perquisites as follows:
|
Name
|
|
Board
Fees
(1)
($)
|
|
|
Dividends
on
Restricted
Stock
(2)
($)
|
|
|
Auto
Expenses
(3)
($)
|
|
|
Life
Insurance
(4)
($)
|
|
|
Country
Club Dues
($)
|
|
|
Other
(5)
($)
|
|
|
Total All
Other
Compensation
($)
|
|
Bruce VanHorn
|
|
|
6,500
|
|
|
|
—
|
|
|
|
5,000
|
|
|
|
1,736
|
|
|
|
4,010
|
|
|
|
30,475
|
|
|
|
47,721
|
|
Ralph E. Coffman, Jr.
|
|
|
500
|
|
|
|
1,662
|
|
|
|
4,038
|
|
|
|
1,462
|
|
|
|
2,665
|
|
|
|
104,552
|
|
|
|
114,879
|
|
Miles R. Armentrout
|
|
|
—
|
|
|
|
1,397
|
|
|
|
—
|
|
|
|
1,548
|
|
|
|
4,010
|
|
|
|
—
|
|
|
|
6,955
|
|
James W. King
|
|
|
700
|
|
|
|
1,397
|
|
|
|
—
|
|
|
|
2,093
|
|
|
|
4,010
|
|
|
|
—
|
|
|
|
8,200
|
|
|
(1)
|
Represents fees paid for service on the Board of Directors of Poage Bankshares and the Board of Directors of Town Square Bank.
|
|
(2)
|
Represents dividends paid on non-vested restricted stock awards.
|
|
(3)
|
Represents amount paid for the named executive officer’s use of an automobile.
|
|
(4)
|
Represents imputed income from life insurance premiums paid by Town Square Bank.
|
|
(5)
|
Represents retention payment of $30,000 and cell phone reimbursement of $475 for Mr. VanHorn and severance payment of $104,099
and spousal expenses related to business travel of $453 for Mr. Coffman.
|
|
(3)
|
Mr. Coffman resigned effective August 21, 2015.
|
Benefit Plans and Agreements
Employment Agreement with Mr. VanHorn.
Town Square Bank entered into an employment agreement (the “Agreement”) with Bruce VanHorn, Executive Vice
President of Poage Bankshares and President of Town Square Bank (“Executive”), dated March 18, 2014. The Agreement
has an initial term of three years. Commencing on May 1, 2014 and on each anniversary date thereafter, the Agreement will be extended
for a period of one year in addition to the then-remaining term, unless a notice is provided to Executive that the Agreement will
not be extended further. The current base salary for Executive is $202,000. In addition to base salary, Executive received a retention
bonus of $30,000 on March 18, 2014, $30,000 on March 18, 2015 and $30,000 on March 18, 2016, and he will be eligible for a subsequent
retention payment of $30,000 each, provided Executive is employed with Town Square Bank on the following employment date: March
18, 2017. The Agreement also provides that Executive will be entitled to the continued use of an automobile, with maintenance and
insurance coverage provided by Town Square Bank. Town Square Bank will also reimburse or pay Executive amounts sufficient to establish
or maintain membership in a country club or any other club or organization that will benefit Town Square Bank. Executive will be
entitled to participate in incentive compensation and bonus programs, employee benefit plans, medical, life insurance and disability
income plans, retirement, vacation, and expense reimbursement plans and other benefit plans or credit card privileges which Town
Square Bank may from time to time have in effect for its senior executives.
Certain events resulting in Executive’s
termination or resignation entitle Executive to payments of severance benefits following termination of employment. In the event
of Executive’s involuntary termination for reasons other than for cause, change in control or retirement, or if the Executive
resigns during the term of the Agreement following (a) failure to appoint Executive to the executive position set forth in
the Agreement, (b) relocation of Executive’s office by more than 20 miles, (c) a material reduction in the benefits
or perquisites paid to Executive unless such reduction is part of a reduction that is generally applicable to officers or employees
of Town Square Bank, (d) a liquidation or dissolution of Town Square Bank, or (e) a material breach of the Agreement by Town
Square Bank, then Executive would be entitled to a severance payment in the form of a cash lump sum equal to (a) one times
the sum of (i) the highest rate of base salary paid to Executive at any time, (ii) the highest bonus paid to Executive
with respect to the three completed fiscal years before the date of termination, and (iii) the remaining retention payments that
have not yet been paid. Internal Revenue Code Section 409A may require that a portion of the above payments cannot be made
until six months after termination of employment if Executive is a “key employee” under IRS rules. In addition, Executive
would be entitled, at no expense to Executive, to the continuation of life insurance and non-taxable medical and dental coverage
for one year.
In the event of a change in control of Town
Square Bank or Poage Bankshares followed by Executive’s involuntary termination other than for cause or retirement, or resignation
for one of the reasons set forth above within 18 months thereafter, Executive would be entitled to a severance payment in
the form of a cash lump sum equal to (a) three times the sum of (i) the highest rate of base salary paid to Executive
at any time, (ii) the highest bonus paid to Executive with respect to the three completed fiscal years before the change of
control, and (iii) the remaining retention payments that have not yet been paid. In addition, Executive would be entitled, at no
expense to Executive, to the continuation of life insurance and non-taxable medical and dental coverage for thirty-six months following
the termination of employment. If payments made to Executive include an “excess parachute payment” as defined in Section 280G
of the Internal Revenue Code, such payments will be cutback by the minimum dollar amount necessary to avoid this result.
Upon termination of Executive’s employment,
Executive will be subject to certain restrictions on his ability to compete, or to solicit business or employees of Town Square
Bank and Poage Bankshares for a period of two years following termination of employment. The covenant not to compete will not apply
if Executive’s termination of employment occurs after a change in control of Town Square Bank or Poage Bankshares.
Change in Control Agreement with Mr.
Armentrout
. On January 19, 2016, Town Square Bank entered into a change in control agreement with Miles R. Armentrout.
The agreement has a fixed term of one year and may be extended at the discretion of the Board of Directors of the Bank. However,
if Poage Bankshares enters into a definitive agreement to engage in a transaction that would be considered a change in control,
or a change in control otherwise occurs, the agreement will automatically renew for a period of one year following the effective
time of the change in control, except if the definitive agreement is terminated or the change in control does not occur, the term
of the agreement will not renew.
If the executive’s employment is terminated
after a change in control during the term of the Agreement either by Town Square Bank for a reason other than cause or by the executive
for good reason (as defined in the agreement), then Town Square Bank will pay the executive an amount equal to one time’s
the executive’s annual base salary at the time of the change in control in a lump sum. In addition to the cash severance
payment, the executive would be entitled to the continuation of non-taxable medical and dental coverage for twelve months following
the executive’s termination of employment. If payments made to the executive constitute an “excess parachute payment”
as defined under Section 280G of the Internal Revenue Code, the payments will be reduced to avoid this result.
Change in Control Agreement with Mr.
King
. On December 12, 2011, Town Square Bank entered into a change in control agreement with James W. King. The change
in control agreement provides a benefit in the event of an involuntary termination of employment or resignation for good reason
following a change in control. The agreement defines good reason as:
|
•
|
the failure to appoint the executive to his executive position (as defined in the agreement);
|
|
•
|
a material change in the executive’s position to become one of lesser responsibility, importance or scope than the position
the executive held immediately before the change in control;
|
|
•
|
the relocation of the executive’s principal place of employment by more than 30 miles from its location as of the date
of the agreement;
|
|
•
|
a material reduction in the executive’s base salary and benefits; or
|
|
•
|
the liquidation or dissolution of Town Square Bank, other than a liquidation or dissolution caused by reorganizations that
do not affect the status of the executive.
|
The severance payment is an amount equal
to three times the sum of the executive’s base salary and the highest bonus earned during the prior three years, payable
in a lump sum, and the continuation of non-taxable medical and dental coverage for a three-year period. The amount of the payment
to be made in connection with a change in control will be reduced, if necessary, to an amount that is $1.00 less than the amount
that would otherwise be an “excess parachute payment” under Section 280G of the Internal Revenue Code of 1986,
as amended (the “Section 280G Limit”). Should Mr. King have his employment terminated in connection with a change in
control as of December 31, 2015, Mr. King would receive a maximum cash severance payment of approximately $365,238 based upon his
current level of compensation, and such amounts may be reduced pursuant to his Section 280G Limit.
Executive Supplemental Retirement
Plan with Mr. King.
Town Square Bank has purchased an insurance policy on the life of Mr. King and has entered into an
Executive Supplemental Retirement Plan (the “Plan”) with Mr. King. The insurance policy is owned by Town Square Bank,
which paid the premium due on the policy in a single lump sum. The amount of the premium paid for the life insurance policy was
$365,405. Under the Executive Supplemental Retirement Plan, upon the executive’s death while he was employed, the executive’s
beneficiary will be paid a death benefit equal to the executive’s Pre-Retirement Account, as defined in the Plan. If Mr.
King had died as of December 31, 2015, his beneficiaries would have received a death benefit of approximately $264,961.
If Mr. King remains in the employment of
Town Square Bank until normal retirement age (age 65), he shall receive the balance in the Pre-Retirement Account in 240 equal
monthly installments commencing 30 days following the date of the executive’s retirement. If he terminates employment following
a change in control, then he shall receive the benefits as if the executive had attained normal retirement age. If a termination
of employment following a change in control had occurred as of December 31, 2015, Mr. King would have been entitled to receive,
beginning at normal retirement age (as defined in the agreement), an estimated monthly benefit of $3,981, which would be payable
for 240 months.
Split Dollar Agreement.
Town
Square Bank has purchased an insurance policy on the life of Mr. King and has entered into endorsement Split Dollar Agreement with
Mr. King. The policy is owned by Town Square Bank, which paid the premium due on the policy in a single lump sum. The amount of
the premium paid for the life insurance policy was $365,405. Under the Split Dollar Agreement, upon the executive’s death
while he is an executive of Town Square Bank, the executive’s beneficiary will be paid a death benefit equal to 80% of the
total death proceeds of the life insurance policy minus the cash surrender value of the policy. If Mr. King had died as of December
31, 2015, his beneficiaries would have received a death benefit of $498,017.
If Mr. King dies after he terminates
employment for any reason, including retirement, his beneficiary will be entitled to a reduced benefit, which will be determined
based on the number of full years the executive has been employed since the date of hire. When Mr. King attains the age of
55, his beneficiary will be entitled to the full death benefit, as described above.
The Split Dollar Agreement may be terminated
if the executive’s employment is terminated for cause (as defined in the agreement) or upon Town Square Bank’s cancellation
of the life insurance policies. Upon termination, the executive will have an option to purchase the insurance policies for an amount
equal to the greater of the cash value of the policies or the amount of premiums paid by Town Square Bank.
Retirement Plans
401(k) Plan.
Town Square Bank
participates in the Pentegra Defined Contribution Plan for Financial Institutions, a tax-qualified defined contribution plan for
eligible employees (the “401(k) Plan”). Employees who have completed two consecutive months of service and attained
the age of 21 will be eligible to participate in the 401(k) Plan.
Under the 401(k) Plan, a participant may
elect to defer, on a pre-tax basis, up to 75% of his or her salary in any plan year, subject to limits imposed by the Internal
Revenue Code. For 2014, the salary deferral contribution limit is $17,500, provided, however, that a participant over age 50 may
contribute an additional $5,500 to the 401(k) Plan. During 2014, Town Square Bank provided an employer matching contribution equal
to 50% of a participant’s 401(k) contributions up to 6% of a participant’s annual salary. A participant is always 100%
vested in his or her salary deferral contributions and a participant will become 100% vested in employer contributions after completing
three years of service. Generally, unless the participant elects otherwise, the participant’s account balance will be distributed
as a result of a participant’s termination of employment with Town Square Bank.
Defined Benefit Pension Plan.
Town
Square Bank participates in the Pentegra Defined Benefit Plan for Financial Institutions, a multi-employer pension plan (the “Pension
Plan”). The Pension Plan covers all eligible employees meeting certain service and age requirements that were employed by
Town Square Bank before January 1, 2007. Effective January 1, 2007, the Pension Plan was amended to provide that employees
hired after December 31, 2006 would not be eligible to participate in the Pension Plan. No new or additional benefits accrue
under the Pension Plan. During the year ended December 31, 2015, Town Square Bank recognized $87,252 as a pension expense.
Employee Stock Ownership Plan.
Town
Square Bank has adopted an employee stock ownership plan for eligible employees. Eligible employees who have attained age 21 and
completed one year of service are eligible to participate in the employee stock ownership plan.
The employee stock ownership plan trustee
purchased, on behalf of the employee stock ownership plan, 269,790 shares of common stock issued in the offering. The employee
stock ownership plan funded its stock purchase with a $2.7 million loan from Poage Bankshares, to be repaid over 20 years. The
loan will be repaid principally through Town Square Bank’s contribution to the employee stock ownership plan and dividends
payable on common stock held by the employee stock ownership plan over the 20-year term of the loan. The interest rate for the
employee stock ownership plan loan is an adjustable rate equal to the prime rate, as published in
The Wall Street Journal
,
on the first business day of the calendar year, retroactive to January 1 of such year.
The trustee holds the shares purchased by
the employee stock ownership plan in an unallocated suspense account, and shares will be released from the suspense account on
a pro-rata basis as we repay the loan. The trustee will allocate the shares released among participants on the basis of each participant’s
proportional share of compensation relative to all participants. A participant will become 100% vested in his or her account balance
after completing three years of service. Participants who were employed by Town Square Bank immediately before the offering received
credit for vesting purposes for years of service before adoption of the employee stock ownership plan. Participants also become
fully vested automatically upon normal retirement, death or disability, a change in control, or termination of the employee stock
ownership plan. Generally, participants will receive distributions from the employee stock ownership plan upon separation from
service. The employee stock ownership plan reallocates any unvested shares forfeited upon termination of employment among the remaining
participants.
The employee stock ownership plan permits
participants to direct the trustee as to how to vote the shares of common stock allocated to their accounts. The trustee votes
unallocated shares and allocated shares for which participants do not provide instructions on any matter in the same ratio as those
shares for which participants provide instructions, subject to fulfillment of the trustee’s fiduciary responsibilities.
Under applicable accounting requirements,
Town Square Bank records a compensation expense for the employee stock ownership plan at the fair market value of the shares as
they are committed to be released from the unallocated suspense account to participants’ accounts, which may be more or less
than the original issue price. The compensation expense resulting from the release of the common stock from the suspense account
and allocation to plan participants results in a corresponding reduction in the Company’s earnings.
Outstanding Equity Awards at Fiscal
Year-End
The following table provides information
concerning unexercised options and stock awards that had not vested as of December 31, 2015 for each named executive officer other
than Ralph E. Coffman, Jr. He did not have any unexercised options and stock awards that had not vested as of December 31, 2015.
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
(1)
|
|
Option
Exercise
Price ($)
|
|
Option
Expiration Date
|
|
Number of
Shares or
Units of Stock
That Have Not
Vested (#)
(2)
|
|
Market Value
of Shares or
Units of Stock
That Have Not
Vested ($)
(3)
|
Bruce VanHorn
|
|
8,000
|
|
12,000
|
|
14.16
|
|
3/18/2024
|
|
—
|
|
—
|
Miles R. Armentrout
|
|
10,000
|
|
15,000
|
|
15.00
|
|
5/10/2023
|
|
5,665
|
|
96,872
|
James W. King
|
|
10,000
|
|
15,000
|
|
15.00
|
|
5/10/2023
|
|
5,665
|
|
96,872
|
|
(1)
|
Stock options vest at the rate of 20% per year commencing May 21, 2014 (March 18, 2015 for Mr.
VanHorn), one year from the date of grant, and continuing on each anniversary thereafter through May 21, 2018 (March 18, 2019 for
Mr. VanHorn), five years from the date of grant.
|
|
(2)
|
Restricted stock vests at the rate of 20% per year commencing April 16, 2014, one year from the
date of grant, and continuing on each anniversary thereafter through April 16, 2018.
|
|
(3)
|
Reflects the closing market price of the stock on December 31, 2015 ($17.10) multiplied by the
number of shares of restricted stock held by the named executive officer on such date.
|
Stock Benefit Plan
2013 Equity Incentive Plan.
In
January 2013, the Company’s stockholders approved the Poage Bankshares, Inc. 2013 Equity Incentive Plan (the “Equity
Incentive Plan”), which provides officers, employees, and directors of Poage Bankshares and Town Square Bank with additional
incentives to promote the Company’s growth and performance. Most of the companies that the Company competes with for directors
and management-level employees are public companies that offer equity compensation as part of their overall director and officer
compensation programs. By approving the Equity Incentive Plan, the Company’s stockholders have given the Company flexibility
needed to continue to attract and retain highly qualified officers and directors by offering a competitive compensation program
that is linked to the performance of the Company’s common stock.
The Equity Incentive Plan authorizes the
issuance or delivery of up to 472,132 shares of Poage Bankshares common stock pursuant to grants of restricted stock awards, incentive
stock options, and non-qualified stock options; provided, however, that the maximum number of shares of stock that may be delivered
pursuant to the exercise of stock options is 337,237 (all of which may be granted as incentive stock options) and the maximum number
of shares of stock that may be issued as restricted stock awards is 134,895.
The Equity Incentive Plan is administered
by the members of the Company’s Compensation Committee of the Board of Directors (the “Committee”) who are “Disinterested
Board Members,” as defined in the Equity Incentive Plan. The Committee has the authority and discretion to select the persons
who will receive awards; establish the terms and conditions relating to each award; adopt rules and regulations relating to the
Equity Incentive Plan; and interpret the Equity Incentive Plan. The Equity Incentive Plan also permits the Committee to delegate
all or any portion of its responsibilities and powers.
The Company’s employees and outside
directors are eligible to receive awards under the Equity Incentive Plan. Awards may be granted in a combination of restricted
stock awards, incentive stock options, and non-qualified stock options. The exercise price of stock options granted under the Equity
Incentive Plan may not be less than the fair market value on the date the stock option is granted. Stock options are subject to
vesting conditions and restrictions as determined by the Committee. Stock awards under the Equity Incentive Plan will be granted
only in whole shares of common stock. All restricted stock and stock option grants will be subject to conditions established by
the Committee that are set forth in the award agreement.
All stock options and restricted stock awards
are subject to time-based vesting and vest over a five-year period, with 20% of the awards vesting each year. The recipients of
restricted stock awards are entitled to receive the cash dividends paid on all restricted stock awards, whether such awards are
vested or not.
Director Compensation
The following table sets forth for the fiscal
year ended December 31, 2015 certain information as to the total remuneration we paid to our directors other than to our named
executive officers. Information with respect to director compensation paid to directors who are also named executive officers is
included above in “—Executive Compensation—Summary Compensation Table.”
Name
|
|
Fees earned
or paid in
cash ($)
|
|
|
Stock awards
($)
|
|
|
Option awards
($)
|
|
|
All other
compensation
(1)
($)
|
|
|
Total ($)
|
|
Darryl Akers.
|
|
|
18,200
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30,875
|
|
|
|
49,075
|
|
Stephen Burchett
|
|
|
8,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,000
|
|
Thomas Burnette
|
|
|
27,750
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
27,750
|
|
Thomas P. Carver II
(2)
|
|
|
43,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,198
|
|
|
|
44,198
|
|
Everett B. Gevedon
|
|
|
25,100
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,594
|
|
|
|
27,694
|
|
Daniel King III
|
|
|
15,100
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15,100
|
|
Stuart N. Moore
|
|
|
25,600
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,230
|
|
|
|
28,830
|
|
Charles W. Robinson
|
|
|
27,100
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,787
|
|
|
|
30,887
|
|
John C. Stewart, Jr
|
|
|
27,100
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
27,100
|
|
|
(1)
|
Represents long term care insurance premiums paid by Town Square Bank on behalf of each director, except Messrs. Burchett,
Burnette, Carver, King and Stewart. The amount for Mr. Akers only, includes $24,300 for consulting services and $4,118 of life
insurance premiums paid by Town Square Bank. In addition, the amounts include dividends paid on non-vested restricted stock awards
in the amount of $1,197 for each director,
except the amount for Messrs. Akers, Burchett, Burnette, King and Stewart is
$399, $0, $0, $0 and $0, respectively.
|
|
(2)
|
Mr. Carver passed away on February 7, 2016.
|
Director Fees
Each person who serves as a director of
Poage Bankshares, other than Messrs. Akers and King, also serves as a director of Town Square Bank and earns director and committee
fees in his capacity as a director or committee member of Poage Bankshares and Town Square Bank. However, if a Poage Bankshares
meeting immediately precedes or follows a Town Square Bank meeting the directors will only be paid for one meeting. All director
fees are paid by Town Square Bank. Each director or committee member is paid only if in attendance in person or by telephone.
Employee directors are only paid for special meetings if they are held after 5:00 p.m.
Each director of Town Square Bank is paid
a regular monthly meeting fee of $1,400, except that Mr. Carver received, and Mr. Burnette receives, $2,500 as Chairman of the
Board, Mr. Burnette received, and Mr. Robinson currently receives, $1,450 as Vice-Chairman of the Board and Mr. VanHorn receives
$1,450. Each non-employee director receives $500 per committee meeting, except that each non-employee director receives $150
per meeting of the Directors Loan Committee.
Director Plans
Director Supplemental Retirement Plans.
Town Square Bank has purchased insurance policies on the lives of Messrs. Carver, Gevedon, Moore and Robinson and has entered
into a Director Supplemental Retirement Plan (the “Plan”) with each of Messrs. Carver, Gevedon, Moore and Robinson.
The insurance policies are owned by Town Square Bank, which paid each premium due on the policies in a single lump sum. The amount
of the premiums paid for the life insurance policies was $220,000, $60,845, $121,000 and $115,504, respectively, on behalf of Messrs.
Carver, Gevedon, Moore and Robinson. Under the Director Supplemental Retirement Plans, upon a director’s death, the director’s
beneficiary will be paid a death benefit equal to the director’s accrued liability retirement plan, as defined in the plan.
If the directors had died as of December 31, 2015, the beneficiaries of Messrs. Carver, Gevedon, Moore and Robinson would have
received a death benefit of approximately $93,750, $32,581, $37,677 and $125,051, respectively. Upon Mr. Carver’s death on
February 7, 2015, $95,581 was paid to his beneficiary pursuant to the terms of the plan.
If Messrs. Gevedon, Moore and Robinson remain
in the service of Town Square Bank until normal retirement age (age 70), each shall receive an annual benefit payable over thirteen
years (fourteen years for Mr. Robinson) in monthly installments commencing thirty (30) days following the date of the director’s
retirement. If a director terminates employment following a change in control, then the director shall receive the benefits as
if the director had attained normal retirement age. If a termination of employment following a change in control had occurred as
of December 31, 2015, Messrs. Gevedon, Moore and Robinson would have received, beginning at normal retirement age (as defined in
the plan), amounts specified in an exhibit to each director’s agreement, which provides for different payment amounts in
different years. The first year’s payment amounts are $12,921, $8,655 and $11,832, respectively, which would be payable for
up to thirteen years (fourteen for Mr. Robinson).