DEF 14A 1 f420210def14a.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.      )

 

 

Filed by the Registrant x

Filed by a Party other than the Registrant  o

 

Check the appropriate box:

 

o  Preliminary Proxy Statement

o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

x Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to §240.14a-12

 

1st Constitution Bancorp

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

x   No fee required.

 

o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  1. Title of each class of securities to which transaction applies:
     

 

  2. Aggregate number of securities to which transaction applies:
     

 

  3. Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):
     

 

  4. Proposed maximum aggregate value of transaction::
     

 

   5. Total fee paid:
     

  

¨ Fee paid previously with preliminary materials.

 

¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

  1. Amount Previously Paid:
     
     

 

  2. Form, Schedule or Registration Statement No.:
     
     

 

  3. Filing Party:
     
     

 

  4. Date Filed:
     

 

 

   
 

 

1ST CONSTITUTION BANCORP

P.O. Box 634

2650 Route 130 North

Cranbury, New Jersey 08512

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD THURSDAY, MAY 27, 2021

 

To Our Shareholders:

 

The 2021 Annual Meeting of Shareholders of 1st Constitution Bancorp will be held on Thursday, May 27, 2021 at 3:00 p.m. Eastern Time. This year, we are planning to hold the Annual Meeting virtually over the Internet via a live webcast at https://web.lumiagm.com/230355398. We determined that a virtual meeting is prudent for the health and well-being of our shareholders, employees and Board of Directors during the coronavirus (COVID-19) pandemic, and is necessary to comply with the governmental orders restricting travel and in-person gatherings. Unless we publicly announce a change in our plans in the manner set forth below, you will not be able to attend the Annual Meeting at a physical location.

 

Shareholders on the April 14, 2021 record date, or their proxy holders, are welcome to attend and participate in the live webcast of the Annual Meeting at https://web.lumiagm.com/230355398. To participate in the Annual Meeting virtually over the Internet, you must retain your 11-digit control number printed on your proxy card below your Account Number. Please carefully review the Proxy Statement for the 2021 Annual Meeting of Shareholders for further instructions on how to access the live webcast.

 

At the Annual Meeting, shareholders will be asked to consider and vote upon the following matters:

 

1.The election of four directors to the Company’s Board of Directors;

 

2.The approval of the compensation of our named executive officers on an advisory (non-binding) basis;

 

3.The ratification of the selection of BDO USA LLP as the Company’s independent registered public accounting firm for the 2021 fiscal year; and

 

4.The conduct of other business if properly raised.

 

The Board of Directors of the Company believes that the election of the nominees and the proposals being submitted to the shareholders are in the best interest of the Company and its shareholders and urges you to vote in favor of the nominees and the proposals.

 

Shareholders of record at the close of business on April 14, 2021 are entitled to notice of, and to vote at, the Annual Meeting or any postponement or adjournment thereof. As always, but especially now given the uncertainties posed by the COVID-19 pandemic, we encourage you to submit your proxy promptly and prior to the Annual Meeting, whether or not you plan to attend the Annual Meeting. You may submit your proxy by completing and mailing the enclosing proxy card or over the Internet by following the instructions on the enclosed proxy. Submitting your proxy now will not prevent you from voting at the Annual Meeting. You may revoke your proxy at any time before it is exercised at the Annual Meeting by delivering to the Company a later-dated proxy card, by delivering a written notice of revocation to the Company, or by voting at the Annual Meeting.

 

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As of the date of this letter, a state of emergency remains in effect in the State of New Jersey relating to the COVID-19 pandemic. We are permitted to hold a virtual meeting of shareholders under New Jersey law only if a state of emergency remains in effect on the date of the 2021 Annual Meeting. In the event that the state of emergency is lifted prior to the date fixed for the 2021 Annual Meeting and it is not, therefore, then legally permissible to hold a completely virtual annual meeting under New Jersey law, we will hold a “hybrid” meeting, meaning that you would be able to attend the Annual Meeting either over the Internet by participating in and listening to a live webcast of the meeting, or in-person at our Main Office. We will announce any plans to hold a meeting at a physical location in a press release and additional proxy materials that we would file with the Securities and Exchange Commission and make available on our website at http://www.1stconstitutionbank.com under “Investor Relations.” In such event, the physical component of the Annual Meeting would be held at our Main Office, located at 2650 Route 130 & Dey Road, Cranbury, New Jersey 08512.  At this time, we expect that the Annual Meeting will be held solely by means of live webcast over the Internet at https://web.lumiagm.com/230355398. Please monitor our website for further information.

 

Important notice regarding the availability of proxy materials for the 2021 Annual Meeting of Shareholders: The Proxy Statement for the 2021 Annual Meeting of Shareholders and 2020 Annual Report to Shareholders are available at: http://www.astproxyportal.com/ast/20330/.

 

  By Order of the Board of Directors
   
   
   
  ROBERT F. MANGANO
  President and Chief Executive Officer

 

Cranbury, New Jersey

April 22, 2021

 

 

YOUR VOTE IS IMPORTANT

 

To assure your representation at the Annual Meeting, please submit your proxy as promptly as possible, whether or not you plan to attend the Annual Meeting. The prompt return of proxies will save the Company the expense of further requests for proxies to ensure a quorum at the Annual Meeting. You may submit your proxy over the Internet or by completing and mailing the enclosed proxy card. You may also vote at the Annual Meeting. 

 

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1ST CONSTITUTION BANCORP

P.O. Box 634

2650 Route 130 North

Cranbury, New Jersey 08512

 

PROXY STATEMENT FOR ANNUAL MEETING

OF SHAREHOLDERS TO BE HELD ON MAY 27, 2021

 

GENERAL PROXY STATEMENT INFORMATION

 

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board of Directors” or the “Board”) of 1st Constitution Bancorp (the “Company”) for use at the 2021 Annual Meeting of Shareholders (the “Annual Meeting”) to be held on May 27, 2021, at 3:00 p.m. Eastern Time. This year, we are planning to conduct the Annual Meeting virtually over the Internet via live webcast at https://web.lumiagm.com/230355398 due to the public health concerns resulting from the coronavirus (COVID-19) pandemic. Unless we publicly announce a change in our plans in the manner set forth below, you will not be able to attend the Annual Meeting at a physical location.

 

To attend and participate in the live webcast of the Annual Meeting, you must login to https://web.lumiagm.com/230355398 using the 11-digit control number printed on your proxy card below your Account Number and the meeting password, which is 1st2021. To access the Annual Meeting virtually over the Internet, you must retain your 11-digit control number printed on your proxy card. Please carefully review the section below titled “Attending the Annual Meeting” for further instructions on how to access the live webcast.

 

In the event that it is not legally permissible to hold a virtual annual meeting under New Jersey law on the date fixed for the 2021 Annual Meeting because a state of emergency is not then in effect in New Jersey, we will hold a “hybrid” meeting, meaning that you would be able to attend the Annual Meeting either over the Internet by participating in and listening to a live webcast of the meeting, or in-person at our Main Office.  Any such change will be announced in a press release and additional proxy materials that we would file with the Securities and Exchange Commission and make available on our website at http://www.1stconstitutionbank.com under “Investor Relations.”  In such event, the physical component of the Annual Meeting would be held at our Main Office, located at 2650 Route 130 & Dey Road, Cranbury, New Jersey 08512.  At this time, we expect that the Annual Meeting will be held solely by means of live webcast over the Internet at https://web.lumiagm.com/230355398. Please monitor our website for further information.

 

The first date on which this proxy statement and the enclosed form of proxy are being sent to the shareholders of the Company is on or about April 22, 2021.

 

The Company’s principal executive office is 2650 Route 130 North, P.O. Box 634, Cranbury, New Jersey 08512. 1st Constitution Bank is a wholly-owned subsidiary of the Company and is referred to as the “Bank.”

 

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Outstanding Securities and Voting Rights and Procedures

 

The Board of Directors fixed the close of business of the Company (5:00 p.m. Eastern Time) on April 14, 2021 as the record date and time for determining shareholders entitled to notice of, and to vote at, the Annual Meeting. Only shareholders of record as of that date and time will be entitled to notice of, and to vote at, the Annual Meeting.

 

On the record date, there were 10,265,563 shares of common stock of the Company issued and outstanding and eligible to be voted at the Annual Meeting. Each share is entitled to one vote on each matter properly brought before the Annual Meeting. Other than Company common stock, there are no other outstanding securities of the Company entitled to vote at the Annual Meeting.

 

For each proxy timely submitted by a shareholder and that is not revoked, the shares represented thereby will be voted at the Annual Meeting in the manner specified on the proxy. However, if a proxy solicited by the Board of Directors does not specify how it is to be voted, it will be voted as the Board recommends, that is, (a) “FOR” the election of the four nominees for director named in this proxy statement; (b) “FOR” the approval (on an advisory basis) of the compensation of our named executive officers; (c) “FOR” the ratification of the selection of BDO USA LLP as the Company’s independent registered public accounting firm for the 2021 fiscal year; and (d) in connection with the conduct of other business, if properly raised, in accordance with the judgment of the person or persons named as proxies. If, for any reason, any nominee for director is unable or unavailable to serve or for good cause will not serve, an event that we do not anticipate, the shares represented by the accompanying proxy will be voted for a substitute nominee designated by the Board of Directors or the size of the Board of Directors may be reduced.

 

You may vote your proxy by mail, through the Internet or by attending and voting at the Annual Meeting. As always, but especially now given the uncertainties posed by the COVID-19 pandemic, we encourage you to submit your proxy promptly and prior to the Annual Meeting by mail or over the Internet, whether or not you plan to attend the Annual Meeting. To submit your proxy by mail, please complete your proxy card, sign your name exactly as it appears on your proxy card, date and mail your proxy card in the envelope provided as soon as possible. If you wish to vote using the Internet, you can access the web page at www.voteproxy.com and follow the on-screen instructions. Have your proxy card available when you access the web page and use the control number shown on your proxy card when prompted to do so. If you submit your proxy over the Internet, you must do so no later than 11:59 p.m. Eastern Time on May 26, 2021. Submitting your proxy now will not prevent you from voting at the Annual Meeting.

 

If any other matters are properly presented at the Annual Meeting for consideration, such as consideration of a motion to adjourn the Annual Meeting to another time or place, the persons named as proxies will have discretion to vote on those matters according to their best judgment to the same extent as the person delivering the proxy would be entitled to vote, unless the shareholder otherwise specifies in the proxy. As of the date of this proxy statement, we do not anticipate that any other matters will be raised at the Annual Meeting.

 

Attending the Annual Meeting

 

All shareholders as of the April 14, 2021 record date, or their proxy holders, are welcome to attend the Annual Meeting. We determined that a virtual meeting is prudent for the health and well-being of our shareholders, employees and Board of Directors during the COVID-19 pandemic, and is necessary to comply with the governmental orders restricting travel and in-person gatherings.

 

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As of the date of this letter, a state of emergency remains in effect in the State of New Jersey relating to the COVID-19 pandemic. We are permitted to hold a virtual meeting of shareholders under New Jersey law only if a state of emergency remains in effect on the date of the 2021 Annual Meeting. In the event that the state of emergency is lifted prior to the date fixed for the 2021 Annual Meeting and it is not, therefore, then legally permissible to hold a completely virtual annual meeting under New Jersey law, we will hold a “hybrid” meeting, meaning that you would be able to attend the Annual Meeting either over the Internet by participating in and listening to a live webcast of the meeting, or in-person. In such event, the physical component of the Annual Meeting would be held at our Main Office, located at 2650 Route 130 & Dey Road, Cranbury, New Jersey 08512.  At this time, we expect that the Annual Meeting will be held solely by means of live webcast over the Internet at https://web.lumiagm.com/230355398. Please monitor our website for further information.

 

Unless we publicly announce a change in our plans in a press release and additional proxy materials that we would file with the Securities and Exchange Commission and make available on our website at http://www.1stconstitutionbank.com under “Investor Relations,” you will not be able to attend the Annual Meeting at a physical location.

 

TO ENSURE THAT YOU ARE ABLE TO ATTEND THE ANNUAL MEETING, YOU MUST RETAIN THE 11-DIGIT CONTROL NUMBER PRINTED ON YOUR PROXY CARD.

 

All shareholders of record at the close of business on April 14, 2021 will be able to attend and participate in the Annual Meeting on May 27, 2021 at 3:00 p.m. via live webcast. You can access the Annual Meeting online by visiting https://web.lumiagm.com/230355398. We encourage you to access the meeting prior to the start time and to leave ample time to login. To login to the meeting as a “Shareholder,” you will need to enter your 11-digit control number, which is printed on your proxy card below your account number, and the meeting password, which is 1st2021. Otherwise, you may log into the meeting as a “Guest.” However, to have the ability to vote and ask questions during the Annual Meeting, you must login as a “Shareholder” with your control number and the meeting password.

 

If your shares are registered in the name of your broker, bank or other agent, you are the “beneficial owner” of those shares and those shares are considered to be held in “street name.” Beneficial owners should have received a proxy card and voting instructions with these proxy materials from the registered holder of your shares rather than directly from us. To participate in the live webcast of the Annual Meeting or to attend the Annual Meeting in person, you must obtain a valid legal proxy from your broker, bank or other agent. Follow the instructions from your broker or bank included with these proxy materials, or contact your broker or bank, to request a legal proxy form. It is expected that brokers and banks will receive a large number of requests for legal proxies, so we encourage you to contact the registered holder of your shares to obtain a legal proxy no later than 5:00 p.m., Eastern Time, on May 13, 2021.

 

To attend and participate in the live webcast of the Annual Meeting, you must then register in advance after obtaining a valid legal proxy from your broker, bank or other agent. To register to attend the Annual Meeting virtually, you must submit proof of your legal proxy reflecting the number of your shares along with your name and email address to our Transfer Agent, American Stock Transfer & Trust Company, LLC. Requests for registration should be directed to proxy@astfinancial.com or to facsimile number 718-765-8730. Written requests can be mailed to:

 

American Stock Transfer & Trust Company LLC

Attn: Proxy Tabulation Department

6201 15th Avenue

Brooklyn, NY 11219

 

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Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, on May 13, 2021. You will receive a confirmation of your registration by email from American Stock Transfer & Trust Company, LLC after your registration materials are received.

 

Required Vote

 

The presence, in person or by proxy, of the holders of a majority of the shares entitled to vote generally is necessary to constitute a quorum at the Annual Meeting. Abstentions and broker “non-votes” are counted as present and entitled to vote for purposes of determining a quorum. A broker “non-vote” occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary power with respect to that item and has not received voting instructions from the beneficial owner.

 

Certain proposals, such as the ratification of the appointment of auditors, are considered “routine” matters, and brokers generally may vote on behalf of beneficial owners who have not furnished voting instructions. For “non-routine” proposals, such as the election of directors and the advisory vote to approve the compensation of our named executive officers, brokers may not vote on the proposals unless they have received voting instructions from the beneficial owner.

 

The affirmative vote of a plurality of the votes cast at the Annual Meeting is required to elect each director. An abstention or a broker non-vote will have no effect on the outcome of the vote on the election of a director. The affirmative vote of a majority of the votes cast at the Annual Meeting is required to approve the compensation of our named executive officers and to ratify the selection of BDO USA LLP as the Company’s independent registered public accounting firm for the 2021 fiscal year. The vote for the approval of the compensation of our named executive officers is on an advisory basis and is therefore non-binding. Abstentions and broker non-votes will not be counted as votes cast and, accordingly, will have no effect on the outcome of the advisory vote on the approval of the compensation of our named executive officers and the vote on the ratification of the selection of BDO USA LLP as the Company’s independent registered public accounting firm for the 2021 fiscal year.

 

Election inspectors appointed for the Annual Meeting will tabulate the votes cast by proxy or during the meeting. The election inspectors will determine whether or not a quorum is present. Votes will NOT be considered cast if the shares are not voted for any reason, including an abstention indicated as such on a written proxy or ballot, if directions are given in a written proxy to withhold votes, or if the votes are withheld by a broker.

 

Revocability of Proxies

 

You can change or revoke your proxy at any time before it is exercised at the Annual Meeting:

 

1.By timely delivery of a properly executed, later-dated proxy card,
2.By timely delivery of a written revocation,
3.By submitting a new proxy via the Internet no later than 11:59 p.m. Eastern Time on May 26, 2021, or
4.By attending the Annual Meeting and either voting during the meeting or, if there is an in-person component of the Annual Meeting and you attend in-person, giving notice of revocation.

 

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A later-dated proxy or written revocation will be considered timely delivered if received by the Corporate Secretary of the Company (i) prior to the Annual Meeting at P.O. Box 634, 2650 Route 130 North, Cranbury, New Jersey 08512, or (ii) in the event that shareholders are permitted to attend the Annual Meeting in person in accordance with New Jersey law and you attend in person, at the Annual Meeting before proxies are voted.

 

If your shares are held in the name of a bank, broker, or other holder of record, you must obtain from the holder of record a valid legal proxy executed in your favor. To register to attend the Annual Meeting virtually, you must then submit proof of your legal proxy to our Transfer Agent, American Stock Transfer & Trust Company, LLC and follow the instructions set forth above under “Attending the Annual Meeting.” If you submit a proxy and then wish to change your vote, you will need to revoke the proxy that you have submitted.

 

Multiple Copies of Annual Report and Proxy Statement

 

When more than one holder of Company common stock shares the same address, we may deliver only one annual report and one proxy statement to that address unless we have received contrary instructions from one or more of those shareholders. Similarly, brokers and other intermediaries holding shares of Company common stock in “street name” for more than one beneficial owner with the same address may deliver only one annual report and one proxy statement to that address if they have received consent from the beneficial owners of the stock.

 

We will deliver promptly, upon written or oral request, a separate copy of the annual report and proxy statement to any shareholder, including a beneficial owner of stock held in “street name,” at a shared address to which a single copy of either of those documents was delivered. You may make such a request in writing to Stephen J. Gilhooly, Senior Vice President and Chief Financial Officer, 1st Constitution Bancorp, at P.O. Box 634, 2650 Route 130 North, Cranbury, New Jersey 08512, or by calling Mr. Gilhooly at (609) 655-4500. This proxy statement and the annual report are available at: http://www.astproxyportal.com/ast/20330/.

 

You may also contact Mr. Gilhooly at the address or telephone number above if you are a shareholder of record of the Company and you wish to receive a separate annual report or proxy statement, as applicable, in the future, or if you are currently receiving multiple copies of our annual report and proxy statement and want to request delivery of a single copy in the future. If your shares are held in “street name” and you want to increase or decrease the number of copies of our annual report and proxy statement delivered to your household in the future, you should contact the broker or other intermediary who holds the shares on your behalf.

 

Solicitation of Proxies

 

This proxy solicitation is being made by the Board of Directors. The cost of the solicitation will be borne by the Company. In addition to the use of the mail, proxies may be solicited personally or by telephone, facsimile, email, or other electronic means by officers, directors and employees of the Company. We will not specially compensate those persons for such solicitation activities. Although we do not expect to do so, we may retain a proxy-soliciting firm to assist us in soliciting proxies. If so, we would pay the proxy-soliciting firm a fee and reimburse it for certain out-of-pocket expenses. Arrangements may be made with brokerage houses and other custodians, nominees and fiduciaries for forwarding solicitation materials to the beneficial owners of common stock held of record by such persons, and we will reimburse such persons for their reasonable expenses incurred in forwarding the materials.

 

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ITEM 1 – ELECTION OF DIRECTORS

 

The Company’s Board of Directors is divided into three separate classes of directors, designated as Class I, Class II and Class III. The directors in Class I are serving a three-year term that expires at the 2021 Annual Meeting; the directors in Class II are serving a three-year term that expires at the 2022 Annual Meeting; and the directors in Class III are serving a three-year term that expires at the 2023 Annual Meeting; and in each case until their successors are duly elected and qualified. At each annual meeting of shareholders, one class of directors is elected for terms of three years to succeed to those directors in the class whose terms then expire.

 

The Company’s certificate of incorporation requires each class of directors to consist as nearly as possible of one-third of the authorized number of directors. In the event that a nominee stands for election as a director at an annual meeting of shareholders as a result of an increase by the Board of Directors of the authorized number of directors and such nominee is to serve in a class of directors whose term is not expiring at such annual meeting of shareholders, the nominee, if elected, may stand for an initial term expiring concurrent with the expiration of the term of the directors in the class to which such nominee is elected as a director.

 

The director nominees for election at the 2021 Annual Meeting are the four nominees for election as Class I directors: Charles S. Crow, III, J. Lynne Cannon, Carmen M. Penta and William J. Barrett, each of whom, if elected, will each serve a three-year term expiring in 2024 and until their successors are duly elected and qualified.

 

The number of nominees was determined by the Board of Directors pursuant to the Company’s by-laws. If, for any reason, any nominee for director is unable or unavailable to serve or for good cause will not serve, the shares represented by the accompanying proxy will be voted for a substitute nominee designated by the Board or the size of the Board may be reduced. The Board believes that the named nominees are available, and, if elected, will be able to serve.

 

DIRECTORS

 

The following tables set forth (i) the name, age and class of the nominees for election as directors at the Annual Meeting, and the expiration of their term as a director if such nominees are elected, (ii) the names, ages and classes of the directors whose terms extend beyond 2021 and the expiration of their terms, (iii) the other positions and offices presently held by the nominees and directors with the Company, if any, (iv) the period during which such persons have served on the Board of Directors, if applicable, and (v) the principal occupations and employment of such persons during the past five years. Additional biographical information for each person follows the tables.

 

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NOMINEES FOR ELECTION AT 2021 ANNUAL MEETING

 

Name and Position with

the Company, if any

 

Age

 

Class

Director
Since
If Elected,
Expiration of
Term

 

Principal Occupation

           
Charles S. Crow, III 71 I 1999 2024

Attorney, Crow & Cushing,

Princeton, New Jersey

           
J. Lynne Cannon 74 I 2013 2024

Chief Executive Officer, Consulting,

Princeton Management Development Institute, Trenton, NJ

           
Carmen M. Penta 76 I 2017 2024 CPA, Partner, Addeo, Polacco & Penta, LLC, Eatontown, New Jersey
           
William J. Barrett 65 I 2017 2024

Associate Dean, Madden School of Business, Le Moyne College

CPA, Retired Partner, Ernst & Young, LLP

           

 

Set forth below are the names of, and certain biographical information regarding, the director nominees.

 

Charles S. Crow, III has served as the Chairman of the Board of the Company and of the Bank since March 2005. Mr. Crow served as Corporate Secretary of the Company from February 2000 until May 2005 and as Chairman of the Audit Committee from May 2002 until May 2005. Mr. Crow is a partner in the law firm of Crow & Cushing in Princeton, New Jersey, which is the successor to Crow & Associates. From January 1, 1992 to November 30, 1998, Mr. Crow was a partner in the law firm of Crow & Tartanella in Somerset, New Jersey. Mr. Crow also previously served as a Chief Compliance Officer for Mount Lucas Management LP for eleven years. Mr. Crow presently serves as a director and Audit Committee member of the following funds: Parsoon Opportunity Fund Ltd.; Tenor Opportunity Master Fund, Ltd.; and Tenor Opportunity Fund, Ltd. Mr. Crow previously served as a director of the following funds: QCM OTUS Fund SPC LTD AFP SP; Blenheim Commodity Fund, Ltd; Blenheim Global Markets Fund, Ltd.; Blenheim Diversified Dynamic Alpha Fund Ltd.; Arden-Sage Multi-Strategy Fund; Arden Sage Multi-Strategy TEI Fund; Arden Investment Series Trust (ARDNX); Aria Opportunity Fund, Ltd.; and Aria Opportunity Offshore Fund, Ltd. In the past, Mr. Crow has served as a trustee with respect to alternative mutual funds and other registered investment advisory companies registered with the SEC under the Investment Company Act of 1940. The companies mentioned are private open-ended fund companies invested in traditional and alternative investments. Mr. Crow is also a director and member of the Compensation and Finance Committees of Centurion Ministries, Inc., a nonprofit entity that seeks to vindicate and free from prison those individuals who are factually innocent of the crimes for which they have been convicted. In addition, Mr. Crow currently serves as Chair of the Finance Committee, Vice Chair and Trustee of the Antique Boat Museum in Clayton, New York, having previously served as the Chair of the Audit Committee.

 

Mr. Crow is qualified to serve on our Board of Directors because of his education, his business skills and expertise, and his extensive legal knowledge, acquired over the years from private legal practice as well as through his service on other boards.

 

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J. Lynne Cannon, has served as a director of the Company and the Bank since 2013. Ms. Cannon has served as Chief Executive Officer of the Princeton Management Development Institute, a firm serving biotechnology and pharmaceutical businesses, since 2008. Prior to this, Ms. Cannon served as Global Senior Vice President of Human Resources for Novartis Biomedical Research Institute and for Bristol Myers Pharmaceutical Research. Ms. Cannon has more than 30 years of corporate and consulting experience in areas such as global strategic business and human resources management, compensation planning and strategy, succession planning, organizational development, integration and restructuring, including mergers and acquisitions and divestitures, executive search and selection and leadership development.  Ms. Cannon holds graduate degrees in Organizational and Counseling Psychology from Columbia University where she has also pursued doctoral studies. Ms. Cannon has been a member of the Board of Directors of Robert Wood Johnson University Hospital at Hamilton for more than 16 years, where she has served as the Chair and Vice Chair. Ms. Cannon is also a current member of the Arcadia University Board of Trustees, where she serves as the Chair of the Governance Committee. Ms. Cannon previously served on the Mercer County Community College Foundation Board of Trustees and served on the Robert Wood Johnson Healthcare System Board of Directors from 2008 to 2014. She was the recipient of the New Jersey Hospital Associations Trustee of the Year Award in 2014 and served on the American Hospital Association Governance Committee on American Hospital Association Board of Trustees from 2015 to 2017.

 

Ms. Cannon is qualified to serve on our Board of Directors because of her education, her business skills and expertise, and her extensive consulting experience, as well as her service on other boards.

 

Carmen M. Penta, has served as a director of the Company and the Bank since 2017. Mr. Penta, a Certified Public Accountant, has been a partner at the firm of Addeo, Polacco & Penta, LLC in Eatontown, New Jersey since 2014. From January 1998 to March 2014, Mr. Penta was a partner at EisnerAmper LLP. Prior to that, Mr. Penta was a partner in the accounting firms of Wiener, Penta & Goodman, P.C., and Amper, Politziner & Mattia, P.C., Certified Public Accountants and Consultants. Mr. Penta previously served as a director for Colonial American Bank, where he served as a member of the Colonial American Bank compensation committee and loan committee and as chairman of the audit committee. Colonial American Bank subsequently merged into Ocean First Bank. Mr. Penta also served as a member of the Board of Directors of Central Jersey Bancorp from January 26, 2006 until November 30, 2010 when Central Jersey Bancorp was merged with and into Kearny Financial Corp.  Prior to the consummation of the combination of Central Jersey Bancorp and Allaire Community Bank on January 1, 2005, Mr. Penta served as a member of the Board of Directors of Monmouth Community Bancorp (the predecessor to Central Jersey Bancorp) since its inception.  Mr. Penta also served as a member of the Board of Directors of Central Jersey Bank, N.A. since its inception.  Mr. Penta serves on the Board of Trustees of the Brookdale Foundation. He is a former member of the Congressional Award Council, a past member of the Advisory Board of Jersey Shore Bank, past Assistant Treasurer for the Long Branch Ronald McDonald House and served on the Board of Directors of the West Long Branch Sports Association.  He is also a member of the New Jersey Society of Certified Public Accountants, the American Institute of Certified Public Accountants and the Finance Committee of Big Brothers, Big Sisters.  Mr. Penta attended Pennsylvania State University and received a B.S. degree from Monmouth University. 

 

Our Corporate Governance Principles provide that individuals will not be eligible for nomination to the Board after they reach the age of 75, except that that the Board may waive this policy with respect to any such person upon the approval of a majority of the directors then in office. On the recommendation of the Nominating Committee, the Board nominated Mr. Penta as a director nominee based on his extensive experience and particular contributions to each of the Company and the Bank, which are especially relevant and necessary in order to respond to the challenges posed by the ongoing COVID-19 pandemic.  In addition, waiving the retirement age requirement for Mr. Penta allows leadership continuity on the Board and on the Compensation Committee during this uncertain time. Due to Mr. Penta’s central role on the Board and its committees, we believe that his continued service on the Board is in the best interests of the Company and our shareholders.

 

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Mr. Penta is qualified to serve on our Board of Directors because of his education, his business skills and expertise, and his extensive accounting knowledge, acquired through the years from practicing as a Certified Public Accountant, as well as from his service on other boards, and his familiarity with the communities that the Bank serves.

 

William J. Barrett, a Certified Public Accountant, retired from Ernst & Young LLP in June 2016, where he was a partner since October 1989, and has served as a director of the Company and the Bank since 2017. While at Ernst & Young LLP, Mr. Barrett provided accounting, auditing and advisory services to clients across a variety of industries, including local, regional and international banks and other financial services organizations. Mr. Barrett has experience in advising on business strategy, risk management, business technology, and technology-related risks, including cybersecurity. Since August 2016, Mr. Barrett has been on the faculty of Le Moyne College in Syracuse, New York, and currently serves as a Professor of Practice on the accounting faculty and the Associate Dean of the Madden School of Business. He served as a member of Le Moyne College’s Board of Trustees and Finance and Audit Committee from 2008 to 2017. Additionally, Mr. Barrett currently serves on the Risk Advisory Committee of Geller and Company, a financial and professional services firm in New York. Mr. Barrett has a B.S. degree in Accounting from Le Moyne College and an M.B.A. in Finance from Case Western Reserve University.

 

Mr. Barrett is qualified to serve on our Board of Directors because of his education, his business skills and expertise, extensive accounting knowledge, and extensive experience with enterprise and technology-related risks.

 

DIRECTORS WHOSE TERMS EXTEND BEYOND THE 2021 ANNUAL MEETING

 

Name and Position with

the Company, if any

 

Age

 

Class

Director
Since
Expiration
of Term

 

Principal Occupation

           
James G. Aaron 76 II 2014 2022 Attorney, Partner, Ansell Grimm & Aaron, Ocean Township, NJ
           
Antonio L. Cruz 65 II 2016 2022 Retired Attorney
           
William M. Rue, Director and
Corporate Secretary
73 II 1999 2022

Chairman, Chas E. Rue & Son, Inc.,

Hamilton, New Jersey

           
Raymond R. Ciccone 63 III 2019 2023

CPA, Managing Partner, Ciccone, Koseff & Company, CPAs, Ship Bottom, New Jersey

 

Forensic Accountant, Partner, The Forensic Accounting Group, Inc., Ship Bottom, New Jersey

           
Edwin J. Pisani 71 III 2016 2023 CPA, Retired Partner, Ernst & Young, LLP
           
Roy D. Tartaglia 70 III 2016 2023 Retired CEO
           

Robert F. Mangano,

President and Chief

Executive Officer

75 III 1999 2023

President and Chief Executive Officer,

1st Constitution and 1st Constitution Bank, Cranbury, New Jersey

           

 

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Set forth below are the names of, and certain biographical information regarding, the directors whose terms extend beyond the 2021 Annual Meeting.

 

James G. Aaron is a senior member and shareholder in the law firm of Ansell, Grimm &Aaron, P.C., located in Ocean Township, New Jersey, and has been with such law firm since 1996.  Mr. Aaron chairs the firm’s Municipal Law and Bankruptcy Practice Department.  Mr. Aaron is licensed to practice law in the State of New Jersey, the United States District Court for the District of New Jersey, the United States District Court for the Eastern District of New York, and the United States Court of Claims, and is a member of the Monmouth County and New Jersey State Bar Associations. Mr. Aaron served as the municipal attorney for the City of Long Branch from 1994 to 2018. Mr. Aaron is a founder of Central Jersey Bank, N.A., a federally chartered institution, and served from 1996 until 2010 as a director and member of its executive committee. Mr. Aaron also served as a director of Colonial American Bank, and as chairman of the Board of Directors of Rumson-Fair Haven Regional Bank (prior to its merger with the Bank in February 2014). Mr. Aaron has served as a director of the Company and the Bank since 2014 and currently serves on the Loan and Investment Committee and the Nominating Committee. Mr. Aaron is also a member of the Board of Trustees of the Axelrod Performing Arts Center, the vice president and chairman of the Board of Directors of ERBA Co., Inc., and a member of the Board of Trustees of the New Jersey Jewish Home for Rehabilitation and Nursing. From 2011 to 2020, Mr. Aaron served as a member of the Board of Trustees of Monmouth Medical Center, which is a part of the Saint Barnabas Medical System, where he served on the strategic planning, medical practices, and community action committees. Additionally, Mr. Aaron served as a member of the board of trustees of Hollywood Golf Club in Deal, New Jersey from 2009 to 2017, and as president of Hollywood Golf Club from 2014 to 2017. Mr. Aaron received his B.A. degree from Dickinson College in Carlisle, Pennsylvania and his J.D. from New York University School of Law.  

 

Mr. Aaron is qualified to serve on our Board of Directors because of his education, his business skills and expertise, including service on the Board of Directors of the Bank, and his extensive legal knowledge, acquired through the years from private legal practice, as well as from his service on other boards.

 

Antonio L. Cruz has served as a director of the Company since 2016 and as a director of the Bank since 2003, where he serves on the Loan and Investment Committee and the ALCO Committee. Mr. Cruz was an attorney in private practice in Perth Amboy, New Jersey. Previously, he served as a general counsel to the Perth Amboy Board of Education and has represented a number of financial institutions as a review attorney in both residential and commercial real estate law. Mr. Cruz was a member of the Hispanic Bar Association of New Jersey in which he served as a member of the Board of Trustees for many years. Additionally, Mr. Cruz served as the Commissioner of Middlesex County Utilities for 16 years and as a member of the Board of Directors of Raritan Bay Medical Center in Perth Amboy, New Jersey. Mr. Cruz received his J.D. from Northeastern University School of Law in Boston, Massachusetts, and practiced civil litigation and transactional real estate for 28 years.

 

Mr. Cruz is qualified to serve on our Board of Directors because of his education, his business skills and expertise, including service on the Board of Directors of the Bank, and his extensive legal knowledge, acquired through the years from private legal practice, as well as from his service on other boards.

 

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William M. Rue has served as a director of the Company since 1999 and as a director of the Bank since 1989. Mr. Rue has served as the Corporate Secretary of the Company since 2013. Mr. Rue has served as the Chairman of Chas. E. Rue & Son, Inc., an insurance agency that has its principal office in Hamilton, New Jersey, in which role he has been since 2013, and served previously as its President from 1985 to February 2013. Mr. Rue is a director of The Rue Foundation, a nonprofit corporation, and is a general partner at 3812 Quakerbridge Realty, LLC. Mr. Rue also served as Chairman of Rue Financial Services, Inc., a financial services provider, from 2002 to 2012. Mr. Rue has been a Chartered Property Casualty Underwriter since 1972 and an Associate in Risk Management since 1994. Mr. Rue also serves as a member of the board of directors of board of trustees of the following organizations, as applicable: Selective Insurance Group, Inc. (a Nasdaq Global Select Market listed company), PL Services, LLC, Robert Wood Johnson University Hospital at Hamilton and Rider University, a nonprofit private university. In addition, Mr. Rue formerly served on the compensation committees of each of Robert Wood Johnson University Hospital at Hamilton and Rider University and on the board of directors of Robert Wood Johnson University Hospital Corporation. Mr. Rue is a Certified Insurance Counselor and holds a Bachelor of Science degree in Commerce from Rider University.

 

Mr. Rue is qualified to serve on our Board of Directors and brings valuable insight to our Board of Directors as a result of his broad range of business skills and his insurance and financial literacy and expertise. Mr. Rue honed these skills and expertise during his long and successful business career, in which he served as president of an insurance agency and president of a financial services provider, as well as through his service on nonprofit boards of directors.

 

Raymond R. Ciccone, a Certified Public Accountant, has served as a director of the Company and the Bank since November 2019 and has been practicing forensic accounting for over 30 years. Mr. Ciccone is the managing partner of Ciccone, Koseff & Company, Certified Public Accountants in Ship Bottom, New Jersey, which he founded in 1988, and has served as a partner and forensic accountant with The Forensic Accounting Group, Inc., which specializes in providing litigation services, due diligence review, business consulting, claim investigation, expert witness services and more to individuals and businesses, since 1995. In addition to being a Certified Public Accountant and Certified in Financial Forensics by the American Institute of Certified Public Accountants, Mr. Ciccone holds a Bachelor of Science degree in Accounting from Stockton University and Master of Science degree in Taxation from Seton Hall University. Since 2008, Mr. Ciccone served as a director and Chairman of the Audit Committee of Shore Community Bank until November 2019, when Shore Community Bank was merged with and into the Bank. Mr. Ciccone has served as a Trustee of Stockton University since 2011, and was named as Chairman of the Board of Trustee of Stockton University in 2020.

 

Mr. Ciccone is qualified to serve on our Board of Directors because of his education, his business skills and expertise, his extensive financial and accounting knowledge, and his familiarity with the communities that the Bank serves.

 

Edwin J. Pisani, a Certified Public Accountant, has served as a director of the Company since 2016, as a director of the Bank since 2014, and has over 40 years of audit and advisory experience in the financial services industry, most recently as the managing partner of Ernst & Young LLP’s Risk Management and Regulatory Consulting practice, from which he retired on June 30, 2014. Mr. Pisani currently serves on the Board of Directors of Centurion Ministries, Inc., a nonprofit organization. Mr. Pisani has a B.S. in electrical engineering from Clarkson University, a Masters of Business Administration from Carnegie Mellon University, and a Masters of Accounting from Northwestern University.

 

Mr. Pisani is qualified to serve on our Board of Directors because of his education, his business skills and expertise, including his service as Chairman of the Audit Committee, and his extensive financial and accounting knowledge, gained through years of practicing as a Certified Public Accountant in the financial services industry.

 

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Roy D. Tartaglia was a co-founder and has served as a director of the Company since 2016 and the Bank since 1989, where he serves on the Loan and Investment Committee. Prior to his retirement in 2000, Mr. Tartaglia was the chief executive officer of RTK Group, a telecommunications company, where he oversaw mergers and acquisition activity, operations, finance and marketing functions. Mr. Tartaglia was educated at Brandywine College, and was named to Who’s Who Among Students in American Junior Colleges (1971).

 

Mr. Tartaglia is qualified to serve on our Board of Directors because of his education, his business skills and expertise, including service on the Board of Directors of the Bank, and his extensive management knowledge, gained through years of serving as a chief executive officer.

 

Robert F. Mangano is the President and Chief Executive Officer of the Company and of the Bank, in which roles he has served since 1996. Prior to joining the Bank in 1996, Mr. Mangano was President and Chief Executive Officer of Urban National Bank, a community bank in northern New Jersey, for a period of three years and a Senior Vice President of another bank for one year. Prior to such time, Mr. Mangano held a senior position with Midlantic Corporation for 21 years. Mr. Mangano is Chairman of the Audit Committee of the Englewood Hospital Medical Center and serves on the Board of Trustees of Englewood Hospital Medical Center and its parent board.

 

Mr. Mangano is qualified to serve on our Board of Directors because of his business skills and experience, his extensive knowledge of financial and operational matters acquired from a long and illustrious career working for several banks in increasingly senior roles and leadership positions, and his deep understanding of the Company’s and the Bank’s people and products that he has acquired in over 24 years of service.

 

Directors

 

No director of the Company, other than Messrs. Crow and Rue, is also currently a director of any other company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any company registered as an investment company under the Investment Company Act of 1940. Each of the above directors of the Company also serves as a director of the Bank.

 

Recommendation

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE DIRECTOR NOMINEES.

 

ITEM 2 – ADVISORY VOTE ON EXECUTIVE COMPENSATION

 

We are asking our shareholders to cast an advisory vote to approve the compensation of our named executive officers as disclosed in our proxy statement under “Executive Compensation” and “Termination of Employment and Change in Control Arrangements” in the tabular and accompanying narrative disclosure regarding named executive officer compensation.

 

As required by Section 14A(a)(1) of the Exchange Act, our shareholders are entitled to vote at the 2021 Annual Meeting to approve the compensation of the Company’s named executive officers, as disclosed in this proxy statement, pursuant to Item 402 of Regulation S-K (“say on pay vote”). The shareholder vote on executive compensation is an advisory vote only, and is not binding on the Company, the Board of Directors or the Compensation Committee. At our 2019 annual meeting of shareholders held on May 30, 2019, an advisory vote was held on the frequency of the say on pay vote. In such advisory vote, the Company’s shareholders voted to hold an advisory vote on the compensation of the Company’s named executive officers once every year.

 

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Our executive compensation arrangements are designed to enhance shareholder value on an annual and long-term basis. Through the use of base pay as well as annual and long-term incentives, we seek to compensate our named executive officers for their contributions to our short-term and long-term profitability and success and their efforts to increase shareholder value. Please read the Compensation Discussion and Analysis beginning on page 33, the compensation tables beginning on page 50 and the section titled “Termination of Employment and Change in Control Arrangements” beginning on page 61 of this proxy statement for additional details about our executive compensation arrangements, including information about the 2020 compensation of our named executive officers. We believe that the compensation of our named executive officers for 2020 was consistent with our compensation philosophy and our performance. We are asking our shareholders to indicate their support for our named executive officers’ compensation arrangements as described in this proxy statement. The vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers described in this proxy statement.

 

For the reasons discussed above, the Board recommends that shareholders vote in favor of the following resolution:

 

RESOLVED, that the compensation of the Company’s named executive officers, as disclosed in the Company’s Proxy Statement for the 2021 Annual Meeting of Shareholders, pursuant to Item 402 of Regulation S-K, including the compensation tables and narrative discussion, is hereby APPROVED on an advisory basis.”

 

The affirmative vote of a majority of votes cast is required to approve the compensation of our named executive officers. Because your vote is advisory, it will not be binding upon or overrule any decisions of the Board or of the Compensation Committee, nor will it create any additional fiduciary duty on the part of the Board or of the Compensation Committee. This advisory vote also does not seek to have the Board or the Compensation Committee take any specific action. However, the Board and the Compensation Committee value the view expressed by our shareholders in their vote on this proposal and will take into account the outcome of the vote when considering executive compensation matters in the future. In considering the outcome of this advisory vote, the Board will review and consider all shares voted in favor of the proposal and not in favor of the proposal. Abstentions and broker non-votes will have no impact on the outcome of this advisory vote.

 

Recommendation

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO ITEM 402 OF REGULATION
S-K.

 

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ITEM 3 – RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Audit Committee of the Board of Directors has selected BDO USA LLP (“BDO”) as the Company’s independent registered public accounting firm for the 2021 fiscal year. BDO has served as the Company’s independent registered public accounting firm since June 28, 2013. The Company’s shareholders ratified the selection of BDO as the Company’s independent registered accounting firm for the 2020 fiscal year at the Company’s 2020 annual meeting of shareholders on May 21, 2020.

 

Ratification of the Selection of BDO by Shareholders

 

In addition to selecting BDO as the Company’s independent registered public accounting firm for the Company’s 2021 fiscal year, the Audit Committee has directed that management submit the selection of the Company’s independent registered public accounting firm for ratification by the Company’s shareholders at the 2021 Annual Meeting.

 

One or more representatives of BDO are expected to be present at the Annual Meeting. The representatives will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.

 

Shareholder ratification of the selection of BDO as the Company’s independent registered public accounting firm is not required by the Company’s By-laws or otherwise. However, the Board is submitting the selection of BDO to shareholders for ratification as a matter of good corporate practice. If the shareholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain BDO. Unless contrary instructions are given, the shares of common stock represented by the proxies being solicited will be voted “FOR” the ratification of the selection of BDO as the Company’s independent registered public accounting firm for the Company’s 2021 fiscal year.

 

Principal Accounting Fees and Services

 

The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and the SEC auditor independence rules require all public accounting firms that audit issuers to obtain pre-approval from their respective audit committees in order to provide professional services without impairing independence.

 

The fees billed by BDO, the Company’s independent registered public accounting firm, relating to the 2020 and 2019 fiscal years were as follows:

 

Type of Service   2020 2019
Audit Fees (1) $ 319,335 374,949
Audit-Related Fees (2) $ 33,650 62,695
Tax Fees (3) $ 29,400 29,742
All Other Fees $ -- --
Total $ 382,385 467,386

 

(1)Includes fees for professional services rendered for the audit of the Company’s annual consolidated financial statements and review of consolidated financial statements included in Forms 10-Q, including out-of-pocket expenses.

 

(2)Includes fees for professional services rendered in connection with the review of the Registration Statement filed on Form S-8 filed in connection with the 1st Constitution Bancorp 2020 Directors Stock Plan, Registration Statement filed on Form S-4 filed in connection with the merger of Shore Community Bank with and into the Bank in 2019, the review of the Registration Statement filed on Form S-8 filed in connection with the 1st Constitution Bancorp 2019 Equity Incentive Plan and the Bank’s compliance with the Federal Housing Authority (“FHA”) Title II Single Family Lending Program for 2020 and 2019.

 

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(3)Includes fees for services rendered for tax compliance.

 

In accordance with the Sarbanes-Oxley Act, the Audit Committee established policies and procedures under which all audit and non-audit services performed by the Company’s principal accountants must be approved in advance by the Audit Committee. As provided in the Sarbanes-Oxley Act, all audit and non-audit services must be pre-approved by the Audit Committee in accordance with these policies and procedures.

 

All services described above were approved in accordance with the Audit Committee’s Pre-Approval policy described directly below.

 

Audit Committee Pre-Approval Procedures

 

The Audit Committee has adopted a formal policy concerning the pre-approval of audit and non-audit services to be provided by the Company’s independent registered public accounting firm. The policy requires that all services to be performed by the Company’s independent registered public accounting firm, including audit services, audit-related services and permitted non-audit services, be pre-approved by the Audit Committee. The policy permits the Audit Committee to delegate pre-approval authority to one or more members, provided that any pre-approval decisions are reported to the Audit Committee at or prior to its next meeting. Specific services being provided by the independent registered public accounting firm are regularly reviewed in accordance with the pre-approval policy. At subsequent Audit Committee meetings, the Audit Committee receives updates on services being provided by the independent registered public accounting firm, and management may present additional services for approval. Each new engagement of the Company’s independent registered public accounting firm has been approved in advance by the Audit Committee.

 

Recommendation

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE SELECTION OF BDO USA LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE COMPANY’S 2021 FISCAL YEAR.

 

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CORPORATE GOVERNANCE

 

General

 

The Company is committed to establishing sound principles of corporate governance which promote honest, responsible and ethical business practices. The Company’s corporate governance practices are actively reviewed and evaluated by the Board of Directors and, if requested by the Board of Directors, the Nominating and Corporate Governance Committee of the Board of Directors. This review includes comparing the Board’s current governance policies and practices with those suggested by authorities active in corporate governance, as well as the practices of other public companies. Based on this evaluation, the Board has adopted those policies and practices that it believes are the most appropriate corporate governance policies and practices for the Company.

 

Board Leadership Structure and Role in Risk Oversight

 

The Board is currently composed of Charles S. Crow, III (Chairman), Robert F. Mangano, James G. Aaron, William J. Barrett , J. Lynne Cannon, Raymond R. Ciccone, Antonio L. Cruz, Carmen M. Penta, Edwin J. Pisani, Roy D. Tartaglia and William M. Rue. Mr. Crow serves as the Chairman of the Boards of Directors of the Company and of the Bank, and Mr. Mangano serves as the President and Chief Executive Officer of the Company and of the Bank. We separate the roles of Chairman of the Board and Chief Executive Officer in recognition of the differences between the two roles, as we have done since prior to the time that we became an SEC reporting company in 2001. The Chief Executive Officer is responsible for implementing the strategic goals of the Company and for the day-to-day leadership, operations and performance of the Company, whereas the Chairman of the Board provides strategic guidance to the Chief Executive Officer, presides over meetings of the full Board and, if the Chairman is independent, presides over executive sessions of the independent directors.

 

Our Audit Committee is primarily responsible for overseeing the Company’s risk management processes, and undertakes in its charter to discuss with management the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies. The Audit Committee meets periodically with management to discuss policies with respect to risk assessment and risk management and to review the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures. Each of our other Board committees also considers the risk within its area of responsibilities. For example, our Compensation Committee considers the risks that may be implicated by our executive compensation programs.

 

While our Audit Committee oversees the Company’s risk management processes with input from our Board, management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our Company and that our Board leadership structure supports this approach.

 

Committee Memberships

 

The Company’s Board of Directors maintains an Audit Committee (the “Audit Committee”); a Nominating and Corporate Governance Committee (the “Nominating and Corporate Governance Committee”); and a Compensation Committee (the “Compensation Committee”). The table below provides the current membership for each of these Board committees. Mr. Mangano does not serve on any committee of the Company’s Board of Directors, but he is a member of the Bank’s Officers Loan Committee and Loan and Investment Committee.

 

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Name

 

 

Audit

Committee

 

 

Compensation

Committee

Nominating and
Corporate
Governance

Committee

Charles S. Crow, III X X   X*
William M. Rue X    X* X
Edwin J. Pisani   X*    
Roy D. Tartaglia X   X
J. Lynne Cannon   X  
James G. Aaron   X X
Antonio L. Cruz   X X
William J. Barrett X    
Carmen M. Penta   X  
Raymond R. Ciccone X    

 

X = Committee member; * = Chairman

 

Director and Nominee Independence

 

The Board of Directors has affirmatively determined that a majority of the directors, and all of the members of the Audit Committee, Nominating and Corporate Governance Committee and Compensation Committee, are “independent” within the meaning of the Nasdaq independence standards. The Board has further determined that the members of the Audit Committee are also “independent” for purposes of Section 10A(m)(3) of the Exchange Act and that each member of the Compensation Committee is an “outside director” within the meaning of Regulation 1.162-27 under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and is a “non-employee director” within the meaning of Rule 16b-3(b)(3) promulgated under the Exchange Act (“Exchange Act Rule 16b-3”).

 

The Board has affirmatively determined that each of Messrs. Aaron, Barrett, Ciccone, Crow, Cruz, Penta, Pisani, Tartaglia and Rue and Ms. Cannon have no material relationship with the Company affecting his or her independence as a director and that each is “independent” within the meaning of the independence standards established by Nasdaq. In making each of these independence determinations, the Board considered and broadly assessed, from the standpoint of materiality and independence, all of the information provided by each director and nominee in response to detailed inquiries concerning his or her independence and any direct or indirect business, family, employment, transactional or other relationship or affiliation of such director with the Company and considered the deposit and other banking relationships with each director.

 

In making the independence determinations, the Board also considered the following relationships: (i) with respect to Mr. Rue, the Board considered the fact that Chas. E. Rue & Sons, Inc., which is owned and controlled by Mr. Rue, acts as the Company’s insurance broker, and that Mr. Rue, certain of Mr. Rue’s family members and certain entities owned or controlled by Mr. Rue are customers of, and conduct banking transactions with, the Bank in the ordinary course of business on customary terms; (ii) with respect to Mr. Crow, the Board considered the fact that certain entities owned or controlled by Mr. Crow are customers of, and conduct banking transactions with, the Bank and that Mr. Crow’s son and daughter-in-law have a mortgage on their primary residence through the Bank, with an outstanding balance of approximately $1.1 million as of March 31, 2021, which was obtained in the ordinary course of business on customary terms; (iii) with respect to Mr. Aaron, the Board considered the fact that Ansell, Grimm & Aaron, P.C., a law firm where Mr. Aaron is a partner, provided legal services to the Bank, that Mr. Aaron and his spouse have a home equity line of credit with the Bank with no balance outstanding as of March 31, 2021, and that Mr. Aaron has an ownership interest in an entity that has a line of credit with the Bank which has an outstanding balance of approximately $50,000 as of March 31, 2021; (iv) with respect to Mr. Cruz, the Board considered that an entity in which Mr. Cruz’s spouse has an ownership interest leases a branch in Perth Amboy, NJ to the Bank, and that certain entities owned or controlled by Mr. Cruz are customers of, and conduct banking transactions with, the Bank in the ordinary course of business on customary terms; and (v) with respect to Mr. Penta, the Board considered that Mr. Penta has an ownership interest in three entities that have a permanent amortizing commercial mortgage loan with the Bank, and that Mr. Penta maintains a deposit account with the Bank. These transactions were made in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and did not involve more than the normal risk of collectability or present other unfavorable features.

 

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Audit Committee

 

The Audit Committee is currently comprised of Messrs. Edwin J. Pisani (Chairman), Charles S. Crow, III, William J. Barrett, William M. Rue, Roy D. Tartaglia and Raymond R. Ciccone, each of whom served on the Audit Committee for all of 2020, except for Mr. Ciccone, who was appointed to the Audit Committee in May 2020 following the 2020 annual meeting of shareholders. The Audit Committee serves as a communication point among non-Audit Committee directors, internal auditors, employees of the Company’s independent registered public accounting firm and Company management with respect to, among other things, financial accounting, financial reporting and internal controls. The Audit Committee assists the Board of Directors in fulfilling its responsibilities with respect to accounting policies, internal controls, financial and operating controls, standards of corporate conduct and performance, financial reporting practices and sufficiency of auditing.

 

The principal functions of the Audit Committee include:

 

·assisting the Board in the oversight of the integrity of the Company’s financial statements and its financial reporting processes and systems of internal controls;

 

·overseeing the Company’s accounting and financial reporting processes and the audits of the Company’s financial statements; and

 

·appointing and retaining, compensating and overseeing the work of any independent registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company.

 

The Board has determined that all Audit Committee members are able to read and understand financial statements and at least one member has accounting or related financial management expertise in accordance with the applicable Nasdaq rules. The Board has also determined that Edwin J. Pisani qualifies as an “audit committee financial expert” and he serves as the Company’s “audit committee financial expert.” No member of the Audit Committee received any compensation from the Company during fiscal year 2020 other than compensation for services as a director or member of a Committee of the Board. The Audit Committee charter is available on the Investor Relations/Governance Documents page of our website at www.1stconstitution.com.

 

Report of the Audit Committee

 

The Audit Committee of the Company is currently comprised of six independent directors appointed by the Board of Directors, each of whom is independent for purposes of Audit Committee membership under applicable Nasdaq and SEC rules. The Audit Committee charter provides that the Audit Committee shall have the sole authority to appoint or replace the Company’s independent registered public accounting firm.

 

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Management is responsible for the preparation, presentation and integrity of the Company’s financial statements, accounting and financial reporting principles, internal controls, and procedures designed to ensure compliance with accounting standards and applicable laws and regulations. The Company’s independent registered public accounting firm performs an annual independent audit of the financial statements and expresses an opinion on the conformity of those financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) (the “PCAOB”). The Audit Committee’s responsibility is to monitor and oversee these processes and report its findings to the full Board. The Audit Committee assists the Board in monitoring:

 

·the integrity of the financial statements of the Company;

 

·the independent registered public accounting firm’s qualifications and independence;

 

·the performance of the Company’s internal audit function and independent registered public accounting firm; and

 

·the compliance by the Company with legal and regulatory requirements.

 

The Audit Committee reviews the results of the Company’s audit and interim quarterly reviews, as well as the overall quality of the Company’s accounting policies and other required communications, including those described by Auditing Standard No. 1301, as adopted by the PCAOB. The Company’s independent registered public accounting firm assists management, as necessary, in updating the Audit Committee concerning new accounting developments and their potential impact on the Company’s financial reporting. The Audit Committee also meets four times a year with the Company’s independent registered public accounting firm without management present.

 

The Audit Committee reviews and discusses with management the Company’s annual audited financial statements and quarterly financial statements, including the Company’s disclosures under Management’s Discussion and Analysis of Financial Condition and Results of Operations. The Audit Committee also meets with Company management, without the Company’s independent registered public accounting firm present, to discuss management’s evaluation of the performance of the independent registered public accounting firm.

 

With respect to fiscal year 2020, the Audit Committee:

 

·met with management and BDO and reviewed and discussed the Company’s audited financial statements and discussed significant accounting issues;

 

·periodically met with management to review and discuss quarterly financial results;

 

·discussed with BDO the scope of its services, including its audit plan;

 

·reviewed the Company’s internal control processes and procedures;

 

·discussed with BDO the matters required to be discussed by PCAOB Auditing Standard No. 1301 (communications with the Audit Committee);

 

·received and reviewed the written disclosures and letters from BDO required by applicable requirements of the PCAOB regarding BDO’s communications with the Audit Committee concerning independence, and discussed with BDO its independence from management and the Company; and

 

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·reviewed and approved all audit and non-audit services provided by BDO during fiscal year 2020.

 

Based on the foregoing review and discussions, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 for filing with the SEC.

 

  Members of the Audit Committee
   
  EDWIN J. PISANI (Chairman)
  ROY D. TARTAGLIA
  CHARLES S. CROW, III
  WILLIAM M. RUE
  WILLIAM J. BARRETT
  RAYMOND R. CICCONE

 

 

Compensation Committee

 

The Compensation Committee is currently comprised of Messrs. William M. Rue (Chairman), Charles S. Crow, III, James G. Aaron, Antonio L. Cruz and Carmen M. Penta and Ms. J. Lynne Cannon, each of whom served on the Compensation Committee for all of 2020. Each member of the Compensation Committee has been determined by the Board to be “independent” within the meaning of the Nasdaq independence standards, and each of whom is an “outside director” within the meaning of Code Section 162(m) and is a “non-employee director” within the meaning of Exchange Act Rule 16b-3.

 

The Compensation Committee reviews and approves the compensation arrangements for the Company’s executives and outside directors. The Compensation Committee administers the Company’s equity incentive plans and makes awards pursuant to those plans.

 

No Compensation Committee member participates in any of the Company’s employee compensation programs. The Board has determined that none of the current Compensation Committee members has any material business relationships with the Company.

 

The Compensation Committee charter is available on the Investor Relations/Governance Documents page of our website at www.1stconstitution.com.

 

Role of the Compensation Committee

 

The Compensation Committee is appointed by the Board of Directors. Subject to the final review and approval by the Board, the Compensation Committee evaluates, determines and approves the compensation of the Company’s Chief Executive Officer, Chief Financial Officer, principal accounting officer to the extent that the principal accounting officer is not the Chief Financial Officer, other executive officers and outside directors. The Compensation Committee administers the Company’s equity plans. The Compensation Committee also has overall responsibility for monitoring, on an ongoing basis, the executive compensation policies, plans and programs of the Company. The Compensation Committee may delegate its authority relating to non-employee director compensation to a subcommittee consisting of one or more members when appropriate.

 

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Compensation Committee Process and Role of Management

 

The Compensation Committee generally holds two regularly scheduled in-person meetings each year and additional meetings as appropriate, either in person or by telephone. Generally, the Compensation Committee Chairman works with management in establishing the agenda for Compensation Committee meetings. Management also prepares and submits information during the course of the year for the consideration of the Compensation Committee, such as management’s proposed recommendations to the Compensation Committee for performance measures and proposed financial targets, management’s proposed recommendations to the Compensation Committee for salary increases, management’s performance evaluations of executive officers, and other data and information, if requested by the Compensation Committee.

 

Although many of the compensation decisions are made during the Compensation Committee’s annual review process, the compensation planning process spans throughout the year. Subject to the final review and approval by the Board, the Compensation Committee reviews and approves the Company’s goals and objectives relevant to the Chief Executive Officer’s compensation, evaluates the Chief Executive Officer’s performance in light of those goals and objectives at least once per year and determines the Chief Executive Officer’s compensation level based on this evaluation. The Chief Executive Officer is not present during voting or deliberations with respect to his compensation. On an annual basis, the Compensation Committee also reviews and approves base salary, annual incentive compensation and long-term equity-based compensation of the other executive officers of the Company.

 

Risk Assessment of Compensation Programs

 

The Compensation Committee discusses, evaluates and reviews with the Company’s senior risk officer all of our employee compensation programs in light of the risks posed to us by such programs and how to limit such risks and to assess whether any aspect of these programs would encourage any employees to manipulate reported earnings to enhance their compensation and assess whether any aspect of these programs would encourage the Company’s senior executive officers to take any unnecessary or excessive risks that could threaten the value of the Company. Included in the analysis are such factors as (i) the appropriate levels of “fixed” and “variable” or “at risk” compensation, (ii) the appropriate levels of long-term incentive compensation between service-based and performance-based compensation and (iii) the risk and performance criteria, if any, attached to the awards under employee compensation plans. Based on this assessment, the Compensation Committee determined that the Company’s executive compensation programs are not reasonably likely to encourage the Company’s senior executive officers to take unnecessary or excessive risks that could have a material adverse effect on the Company.

 

Compensation Committee Advisors

 

The Compensation Committee charter grants the Compensation Committee full authority to engage compensation consultants and other advisors to assist it in the performance of its responsibilities. Prior to retaining, or seeking advice from, a compensation consultant or other advisor, the Compensation Committee must consider the independence of such compensation consultant or other advisor, taking into consideration the factors set forth in the Compensation Committee charter. A compensation consultant retained by the Compensation Committee reports directly to the Compensation Committee.

 

The Compensation Committee relies on management and outside advisers for staff work and technical guidance in conducting its affairs. It retains full authority to engage independent third party advisers. In 2019, the Compensation Committee engaged Pearl Meyer & Partners, LLC (the “Compensation Consultant”) as compensation consultant to the Compensation Committee to conduct independent studies and provide recommendations with respect to executive and employee compensation for 2020. The Compensation Consultant’s primary role with the Company is as independent adviser to the Compensation Committee on matters relating to executive and employee compensation. The Compensation Committee assessed the independence of the Compensation Consultant and determined that its work for the Compensation Committee has not raised any conflict of interest.

 

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The Compensation Consultant provided the following services to the Compensation Committee with respect to 2020 executive compensation: (i) a refreshed compensation review for up to 10 executive officers of the Company and/or the Bank, including the Company’s named executive officers, (ii) an assessment of the Bank’s compensation components compared to survey and peer group data and (iii) recommendations for total compensation opportunity guidelines (i.e., base salary and short and long-term incentive targets). The Compensation Consultant does not provide any services to the Company or any of its subsidiaries other than the services provided to the Compensation Committee.

 

Director Compensation Process

 

A discussion of the Company’s determination of director compensation is included in the “Director Compensation” section of this proxy statement.

 

Compensation Committee Interlocks and Insider Participation

 

During 2020, Messrs. Rue (Chairman), Crow, Aaron, Cruz and Penta and Ms. Cannon served on our Compensation Committee. There are no compensation committee interlocks between the Company and other entities involving our executive officers and directors.

 

Nominating and Corporate Governance Committee

 

The Nominating and Corporate Governance Committee is currently comprised of Messrs. Charles S. Crow, III (Chairman), William M. Rue, James G. Aaron, Roy D. Tartaglia and Antonio L. Cruz, each of whom served on the Nominating and Corporate Governance Committee for all of 2020. The Nominating and Corporate Governance Committee is responsible for recommending, for consideration by the Board, candidates to serve as directors of the Company, as well as the re-election of current directors. The committee also reviews recommendations from shareholders regarding director candidates and corporate governance. The procedure for submitting recommendations of director candidates is set forth below under the caption “Selection of Director Candidates.”

 

In accordance with the marketplace rules of the Nasdaq Global Market, the Nominating and Corporate Governance Committee is currently, and was during 2020, composed entirely of independent members of the Board of Directors.

 

The Nominating and Corporate Governance Committee charter is available on the Investor Relations/Governance Documents page of our website at www.1stconstitution.com.

 

Selection of Director Candidates

 

The Nominating and Corporate Governance Committee has established a policy regarding the consideration of director candidates, including those recommended by shareholders. The Nominating and Corporate Governance Committee, together with the President and CEO and other Board members, will, from time to time as appropriate, identify the need for new Board members. Particular proposed director candidates who satisfy the criteria set forth below and otherwise qualify for membership on the Board will be identified by the Nominating and Corporate Governance Committee. In identifying candidates, the Nominating and Corporate Governance Committee will seek input and participation from the President and CEO, other Board members, and other appropriate sources, to ensure that all points of view can be considered and the best possible candidates can be identified. The Nominating and Corporate Governance Committee may also, as appropriate, engage a search firm to assist it in identifying potential candidates. Members of the Nominating and Corporate Governance Committee, the President and CEO and other Board members, as appropriate, may personally interview selected director candidates and provide input to the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee will determine which candidate(s) are to be recommended to the Board for approval.

 

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Diversity is one of the factors that the Nominating and Corporate Governance Committee considers in identifying nominees for director. Therefore, the Nominating and Corporate Governance Committee seeks nominees for recommendation who bring a variety of business backgrounds, experiences and perspectives to the Board. We believe that the backgrounds and qualifications of the directors, considered as a group, should provide a broad diversity of experience, professions, skills, geographic representations, knowledge and abilities that will allow the Board to fulfill its responsibilities. In selecting director nominees for recommendation, the Nominating and Corporate Governance Committee considers all aspects of a potential nominee’s background to determine who will enhance and add valuable perspective to the Board, including educational background, business and professional experience and particular skills, as well as self-identified diversity characteristics, such as gender, racial, cultural, geographical and generational diversity. The goal of the Nominating and Corporate Governance Committee is to identify individuals who will enhance and add valuable perspective to the Board and who will help us capitalize on business opportunities in a challenging and highly competitive market. The Nominating and Corporate Governance Committee has not adopted a formal diversity policy with regard to the selection of director nominees.

 

Shareholders wishing to submit a director candidate for consideration by the Nominating and Corporate Governance Committee must submit the recommendation to the Secretary, 1st Constitution Bancorp, P.O. Box 634, 2650 Route 130 North, Cranbury, New Jersey 08512, in writing, not less than 90 days prior to the first anniversary date of the preceding year’s annual meeting. The request must be accompanied by the same information concerning the director candidate and the recommending shareholder as described in Article I, Section 9 of the Company’s By-laws for shareholder nominations for director. The Nominating and Corporate Governance Committee may also request any additional background or other information from any director candidate or the recommending shareholder as it may deem appropriate. Nothing above shall limit a shareholder’s right to propose a nominee for director at an annual meeting in accordance with the procedures set forth in the Company’s By-laws.

 

All directors play a critical role in guiding the Company’s long-term business strategy and in overseeing the management of the Company. Board candidates are considered based on various criteria which may change over time and as the composition of the Board changes. The following factors, at a minimum, are considered by the Nominating and Corporate Governance Committee as part of its review of all director candidates and in recommending potential director candidates to the Board:

 

·appropriate mix of educational background, professional background and business experience to make a significant contribution to the overall composition of the Board;

 

·global business and social perspective;

 

·if the Committee deems it applicable, whether the candidate would be considered a financial expert or financially literate, as described in SEC or Nasdaq rules, or an audit committee financial expert, as defined by the Sarbanes-Oxley Act;

 

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·if the Committee deems it applicable, whether the candidate would be considered independent under Nasdaq rules and the Board’s additional independence guidelines set forth in the Company’s Corporate Governance Guidelines;

 

·demonstrated character and reputation, both personal and professional, consistent with the image and reputation of the Company;

 

·willingness to apply sound and independent business judgment;

 

·ability to work productively with the other members of the Board; and

 

·availability for the substantial duties and responsibilities of a director of the Company.

 

Attendance at Board Meetings, Committee Meetings, and Annual Meetings

 

In fiscal year 2020, the Board of Directors of the Company and the Bank held 14 meetings, the Audit Committee held nine meetings, the Compensation Committee held three meetings and the Nominating and Corporate Governance Committee held one meeting. Each director attended at least 75% of the aggregate meetings of the Board of Directors and the committees of which such director was a member.

 

Our current director attendance policy provides that, unless there are mitigating circumstances, such as medical, family or business emergencies, Board members are expected to participate in all Board meetings and in all meetings of committees on which the director is a member and to attend the annual meeting of shareholders. All members of the Board at the time of last year’s annual meeting of shareholders attended such annual meeting of shareholders.

 

Executive Sessions of Non-Management Directors

 

Our Corporate Governance Guidelines, which were adopted in March of 2004 and most recently amended on February 21, 2019, require non-management directors to meet in executive sessions at least two times per year. The Chairman of the Board will preside at the executive sessions. In the event the Chairman of the Board is not available, the Chairman of the Audit Committee, the Chairman of the Compensation Committee or the Chairman of the Nominating and Corporate Governance Committee will preside in his place. Six executive sessions of non-management directors were held in 2020.

 

Shareholder Communications Process

 

The Board of Directors provides a process for security holders to send communications to the Board. Information regarding the Company’s process for shareholders to communicate with the Board of Directors and the manner in which such communications are forwarded is available on the Company’s website located at www.1stconstitution.com, under “Investor Relations.”

 

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Code of Business Conduct and Ethics and Corporate Governance Guidelines

 

The Company has adopted a Code of Business Conduct and Ethics (the “Code of Conduct”), which applies to the Company’s Chief Executive Officer and principal financial and accounting officers and to all other Company directors, officers and employees. The Code of Conduct is available on the Company’s website at www.1stconstitution.com under the “Investor Relations” tab. The Company will disclose any substantive amendments to, or waivers from, provisions of the Code of Conduct made with respect to the chief executive officer or principal financial and accounting officer(s) on its website.

 

The Company has also adopted Corporate Governance Guidelines which are intended to provide guidance to the Board and its committees regarding the governance of the Company. The Corporate Governance Guidelines were most recently amended on February 21, 2019, to provide for a director retirement policy, which provides that no person shall be eligible for election or re-election as a director after such person attains the age of seventy-five (75) years, except that the Board may waive this policy with respect to any such person upon the approval of a majority of the directors then in office. Both the Code of Conduct and the Corporate Governance Guidelines are available on the Investor Relations/Governance Documents page of our website at www.1stconstitution.com.

 

STOCK OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS

 

The following table sets forth information concerning the beneficial ownership of Company common stock by each director, by the Company’s named executive officers, by all directors and executive officers as a group and by any person or group (as such term is used in Section 13(d)(3) of the Exchange Act) known to the Company to be the beneficial owner of more than 5% of Company common stock, if any. Except as noted below, the Company knows of no person or group that beneficially owns more than 5% of Company common stock. Unless otherwise provided, beneficial ownership of Company common stock is calculated as of April 14, 2021, as of which date there were 10,265,563 shares of Company common stock outstanding.

 

  Amount and nature of
beneficial ownership (1)
Percent of
Class
Name of Beneficial Owner  - Principal Shareholders    
Banc Fund VIII L.P., Banc Fund IX L.P. and Banc Fund X
L.P.
653,169(2) 6.36%
AllianceBernstein L.P. 522,115(3) 5.09%
Name of Beneficial Owner – Directors and Named
Executive Officers (4)
   
Robert F. Mangano 580,705(5) 5.66%
William M. Rue 269,122(6) 2.62%
Charles S. Crow, III 111,469(7) 1.09%
Edwin J. Pisani 28,227(8) *
Roy D. Tartaglia 84,585(9) *
J. Lynne Cannon 7,221(10) *
James G. Aaron 24,076(11) *
Antonio L. Cruz 135,977(12) 1.32%
Carmen M. Penta 10,825(13) *
William J. Barrett 6,927(14) *
Raymond R. Ciccone 30,039(15) *
Stephen J. Gilhooly 19,254(16) *
John T. Andreacio 29,730 (17) *

All Directors and Executives Officers of the Company

as a Group (14 Persons)

 

1,345,801 (18)

13.11 %

 

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* Less than 1%

 

(1)The securities “beneficially owned” by a person are determined in accordance with the definition of “beneficial interest” set forth in SEC regulations and, accordingly, may include securities owned by or for, among others, the spouse and/or minor children of the individual and any other relative who has the same home as the individual, as well as other securities as to which the person has or shares voting or investment power and securities as to which such person does not own, but has a right to acquire presently or within sixty days. Beneficial ownership may be disclaimed as to some of the shares. Unless otherwise specified, all persons have sole voting and investment power with respect to the shares of Company common stock beneficially owned.

 

(2)Based on information provided as of December 31, 2020 in a Schedule 13G/A filed on February 9, 2021, The Bank Funds Company, L.L.C. and its affiliates named in such report beneficially own 653,169 shares of common stock, with sole voting power over 653,169 shares, shared voting power over no shares, sole dispositive power over 653,169 shares and shared dispositive power over no shares. The principal business address for The Bank Funds Company, L.L.C. is 20 North Wacker Drive, Suite 3300, Chicago, IL 60606.

 

(3)Based on information provided as of December 31, 2020 in a Schedule 13G filed on February 8, 2021, AllianceBernstein L.P. beneficially owns 522,115 shares of common stock, with sole voting power over 522,115 shares, shared voting power over no shares, sole dispositive power over 522,115 shares and shared dispositive power over no shares. The principal business address for AllianceBernstein L.P. is 1345 Avenue of the Americas, New York, NY 10105.

 

(4)All correspondence to the Company’s directors and executive officers is sent care of the Company to its principal executive office at P.O. Box 634, 2650 Route 130 North, Cranbury, New Jersey 08512.

 

(5)Includes 523,058 shares owned directly by Mr. Mangano, options to purchase 33,834 shares of Company common stock, which are currently exercisable or that will become exercisable within sixty days after April 14, 2021, and 23,813 unvested shares of restricted stock issued to Mr. Mangano under the Company’s 2005 Equity Incentive Plan, 2013 Equity Incentive Plan and 2019 Equity Incentive Plan, which may be voted immediately upon grant but which may not be sold prior to the vesting date.

 

(6)Includes 214,288 shares owned directly by Mr. Rue, 1,413 shares of restricted stock that are unvested but will vest within sixty days after April 14, 2021, and 755 unvested shares of restricted stock issued to Mr. Rue under the Company’s 2015 Directors Stock Plan and 2020 Directors Stock Plan, which may be voted immediately upon grant but which may not be sold prior to the vesting date, 46,615 shares held by Mr. Rue’s wife and 6,051 shares held by Rue Investment Company LLC (formerly Chas. E. Rue & Sons, Inc.), over which Mr. Rue may be deemed to have beneficial ownership.

 

(7)Includes 50,248 shares owned directly by Mr. Crow, 1,874 shares of restricted stock that have vested or that will vest within sixty days after April 14, 2021, and 945 unvested shares of restricted stock issued to Mr. Crow under the Company’s 2015 Directors Stock Plan and 2020 Directors Stock Plan, which may be voted immediately upon grant but which may not be sold prior to the vesting date, 46,185 shares held by Crow & Cushing Profit Sharing Plan, 5,494 shares held by Crow Family Associates, LLC, 5,117 shares held in accounts for Mr. Crow’s grandchildren, and 1,653 shares held in Mr. Crow’s wife’s IRA account, over which Mr. Crow may be deemed to have beneficial ownership. Includes 47,825 shares owned directly by Mr. Crow, 922 shares of restricted stock that have vested or that will vest within sixty days after April 8, 2020, and 1,432 unvested

 

(8)Includes 26,059 shares owned directly by Mr. Pisani, 1,413 shares of restricted stock that are unvested but will vest within sixty days after April 14, 2021, and 755 unvested shares of restricted stock issued to Mr. Pisani under the Company’s 2015 Directors Stock Plan and 2020 Directors Stock Plan, which may be voted immediately upon grant but which may not be sold prior to the vesting date.

 

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(9)Includes 40,649 shares owned directly by Mr. Tartaglia, 1,413 shares of restricted stock that are unvested but will vest within sixty days after April 14, 2021, and 755 unvested shares of restricted stock issued to Mr. Tartaglia under the Company’s 2015 Directors Stock Plan and 2020 Directors Stock Plan, which may be voted immediately upon grant but which may not be sold prior to the vesting date, 350 shares held in trust for the benefit of Mr. Tartaglia’s grandson, 21,550 shares held in Mr. Tartaglia’s IRA account, and 19,868 shares held by the Tartaglia Family Trust, over which Mr. Tartaglia may be deemed to have beneficial ownership.

 

(10)Includes 5,053 shares owned directly by Ms. Cannon, 1,413 shares of restricted stock that are unvested but will vest within sixty days after April 14, 2021, and 755 unvested shares of restricted stock issued to Ms. Cannon under the Company’s 2015 Directors Stock Plan and 2020 Directors Stock Plan, which may be voted immediately upon grant but which may not be sold prior to the vesting date.

 

(11)Includes 12,342 shares owned directly by Mr. Aaron, 1,413 shares of restricted stock that are unvested but will vest within sixty days after April 14, 2021, and 755 unvested shares of restricted stock issued to Mr. Aaron under the Company’s 2015 Directors Stock Plan, which may be voted immediately upon grant but which may not be sold prior to the vesting date, 2,500 shares held in Mr. Aaron’s IRA account, 2,362 shares held by ERBA Co Inc., and 4,862 shares held by the Aaron Family Partnership and Investment Company, over which Mr. Aaron may be deemed to have beneficial ownership.

 

(12)Includes 133,809 shares owned directly by Mr. Cruz, 1,413 shares of restricted stock that are unvested but will vest within sixty days after April 14, 2021, and 755 unvested shares of restricted stock issued to Mr. Cruz under the Company’s 2015 Directors Stock Plan and 2020 Directors Stock Plan, which may be voted immediately upon grant but which may not be sold prior to the vesting date.

 

(13)Includes 8,657 shares owned directly by Mr. Penta, 1,413 shares of restricted stock that are unvested but will vest within sixty days after April 14, 2021, and 755 unvested shares of restricted stock issued to Mr. Penta under the Company’s 2015 Directors Stock Plan and 2020 Directors Stock Plan, which may be voted immediately upon grant but which may not be sold prior to the vesting date.

 

(14)Includes 4,759 shares owned directly by Mr. Barrett, 1,413 shares of restricted stock that are unvested but will vest within sixty days after April 14, 2021, and 755 unvested shares of restricted stock issued to Mr. Barrett under the Company’s 2015 Directors Stock Plan and 2020 Directors Stock Plan, which may be voted immediately upon grant but which may not be sold prior to the vesting date.

 

(15)Includes 4,029 shares owned directly by Mr. Ciccone, 24,500 shares owned indirectly by Mr. Ciccone that are held between Mr. Ciccone’s IRA accounts, 755 shares of restricted stock that are unvested but will vest within sixty days after April 14, 2021, and 755 unvested shares of restricted stock issued to Mr. Ciccone under the Company’s 2020 Directors Stock Plan, which may be voted immediately upon grant but which may not be sold prior to the vesting date.

 

(16)Includes 6,921 shares directly owned by Mr. Gilhooly, options to purchase 7,958 shares that are currently exercisable or that will become exercisable within sixty days after April 14, 2021 and 4,375 shares of unvested restricted stock issued to Mr. Gilhooly under the Company’s 2013 Equity Incentive Plan and 2019 Equity Incentive Plan, which may be voted immediately upon grant but which may not be sold prior to the vesting date.

 

(17)Includes 14,672 shares directly owned by Mr. Andreacio, 815 shares indirectly owned by Mr. Andreacio through the Company’s 401(k) Plan, options to purchase 5,793 shares that are currently vested and exercisable or that will become exercisable within sixty days after April 14, 2021 and 8,450 unvested shares of restricted stock, which may be voted immediately upon grant but which may not be sold prior to the vesting date, issued to Mr. Andreacio under the Company’s 2013 Equity Incentive Plan and 2019 Equity Incentive Plan.

 

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(18)Includes options to purchase 48,252 shares of Company common stock, which are currently exercisable or that will become exercisable within sixty days after April 14, 2021, 13,933 shares of restricted stock that will vest within sixty days after April 14, 2021, and 48,653 unvested shares of restricted stock, which may be voted immediately upon grant.

 

Delinquent Section 16(a) Reports

 

Section 16(a) of the Exchange Act requires the Company’s officers, directors and persons who own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the SEC. Based on a review of such reports filed with the SEC and written representations from such reporting persons, the Company believes that, during the year ended December 31, 2020, all officers, directors and 10% beneficial owners complied with applicable Section 16(a) filing requirements except that, due to a clerical error, two Form 4 filings for Naqi A. Naqvi were inadvertently filed late. The Forms 4 reported a total of three separate grants of equity securities. 

 

DIRECTOR COMPENSATION

 

The following table details the compensation paid to our non-employee directors for the year ended December 31, 2020.

 

NON-EMPLOYEE DIRECTOR COMPENSATION

 

Name

 

Fees
Earned or
Paid in
Cash

($)

Stock
Awards

($) (1)

Option

Awards

($)

All Other
Compensation

($) (2)

Total

($)

           
Charles S. Crow, III 19,100 33,573 -- 561 53,234
           
William M. Rue 13,900 17,788 -- 993 32,681
           
Edwin J. Pisani 11,600 27,212 -- 608 39,420
           
Roy D. Tartaglia 17,600 17,788 -- 2,062 37,450
           
J. Lynne Cannon 11,100 17,788 -- 771 29,659
           
James G. Aaron 17,100 17,788 -- -- 34,888
           
Antonio L. Cruz 16,600 17,788 -- 509 34,897
           
Carmen M. Penta 17,100 17,788 -- 647 35,535
           
William J. Barrett 11,600 17,788 -- 195 29,583
           
Raymond R. Ciccone 10,600 17,788 -- 319 28,707
           

 

(1)The amounts listed in this column reflect the dollar amount to be recognized for financial statement reporting purposes, calculated in accordance with FASB ASC Topic 718. A discussion of the assumptions used in calculating these values may be found in Note 1 of the Notes to Consolidated Financial Statements in our 2020 Annual Report on Form 10-K.

 

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(2)The amounts listed in this column reflect imputed income attributable to Bank Owned Life Insurance (“BOLI”) for our directors under the Directors’ Insurance Plan described in the narrative below.

 

Processes, Procedures and Rationale

 

The Compensation Committee periodically reviews the appropriateness and competitiveness of the compensation of non-employee directors. Subject to approval by the Board of Directors, the Compensation Committee is responsible for establishing policies that govern non-employee director compensation and for implementing, administering and interpreting non-employee director compensation plans, programs and policies. The Compensation Committee may delegate its authority relating to non-employee director compensation to a subcommittee consisting of one or more members when appropriate.

 

As part of this process, the Compensation Committee regularly reviews the structure, composition and operation of the Board and its committees and annually solicits comments from all directors concerning the Board’s performance. The Board also considers the significant amount of time spent by the directors in their duties for the Company. The Board, in consultation with the Compensation Committee, then determines the form and amount of non-employee director compensation.

 

Compensation Paid to Board Members

 

Non-employee directors receive a combination of cash and equity compensation. Mr. Mangano, currently the only management director on the Board, does not receive any separate compensation for his service as a director.

 

Cash Compensation

 

During 2020, non-employee directors of the Company were compensated for services rendered in such capacity at the rate of $800 per Board meeting attended and $500 per Board committee meeting attended, except that Mr. Rue, as Chairman of the Compensation Committee was compensated at the rate of $750 per Compensation Committee meeting attended.

 

Non-employee directors of the Company are also eligible to participate in the Directors’ Insurance Plan and Messrs. Barrett, Ciccone, Crow, Cruz, Penta, Pisani, Tartaglia and Rue and Ms. Cannon currently participate in the plan. See “Directors’ Insurance Plan” below. No cost of this benefit is allocable to any individual director.

 

Stock Grants

 

The Company currently maintains the 1st Constitution Bancorp 2020 Directors Stock Plan (the “2020 Directors Plan”), an equity plan for its non-employee directors (which is discussed under the heading “Equity Plans” below). The 2020 Directors Plan was adopted by the Board of Directors of the Company on March 19, 2020 and was approved by our shareholders on May 21, 2020. The 2020 Directors Plan is administered by the Compensation Committee, which determines the terms of each grant under the plan.

 

Under the 2020 Directors Plan, the Company may grant participants stock options or shares of restricted stock relating to an aggregate maximum of 62,129 shares (as adjusted for all stock dividends) of the Company’s common stock. Awards may be granted under the 2020 Directors Plan only to non-employee directors of the Company or directors of any of the Company’s subsidiaries or affiliates.

 

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The exercise price of options granted under the 2020 Directors Plan must equal at least the fair market value of the Company common stock at the time of grant. The number of shares of Company common stock covered by the 2020 Directors Plan, and the amount and grant price for each award, shall be proportionally adjusted for any increase or decrease in the number of issued shares of Company common stock resulting from the subdivision or consolidation of shares or the payment of a stock dividend or any other increase or decrease in the number of shares effected without receipt of consideration by the Company.

 

Except as otherwise determined by the Board, upon termination of service as a director during the applicable restriction period, restricted stock that is at that time subject to restrictions will be forfeited and reacquired by the Company, except that the Board may, in its sole determination, waive the restrictions or forfeiture conditions relating to restricted stock.

 

In 2020, each non-employee director received (i) a grant of 1,000 shares of restricted stock, and (ii) a grant of 510 shares of restricted stock which was awarded in lieu of a cash retainer for 2020 Board service. Mr. Crow received a grant of an additional 1,000 shares of restricted stock for his service as Chairman of the Board and received a grant of 850 shares of restricted stock in lieu of a cash retainer. Mr. Pisani received a grant of an additional 800 shares of restricted stock for his service as Chairman of the Audit Committee. All grants were made under the 2020 Directors Plan and vest in equal installments on the first anniversary and second anniversary of the grant date, provided that the recipients of the grants are serving as directors of the Company on such anniversaries of the grant date, except for the additional grants of 1,000 and 800 shares of restricted stock awarded to Messrs. Crow and Pisani, respectively, which were made under the 2015 Directors Stock Plan and vested immediately upon grant.

 

As of March 31, 2021, there were no options to purchase shares of Company common stock outstanding under the 2020 Directors Plan. As of March 31, 2021, grants of 15,950 restricted shares of Company common stock (as adjusted for all stock dividends) have been previously made under the 2020 Directors Plan and 46,179 shares (as adjusted for all stock dividends) remain available for future issuance under the 2020 Directors Plan. As of the close of business on March 31, 2021, the value of the shares of common stock to be reserved and available for awards under the Plan was approximately $813,212 (based on the closing price of the common stock of the Company on such date of $17.61 per share).

 

Directors’ Insurance Plan

 

The Company adopted the 1st Constitution Bancorp Directors’ Insurance Plan (the “Directors’ Insurance Plan”), which was effective as of October 1, 2002 and amended as of February 19, 2004 and June 16, 2005. The Directors’ Insurance Plan covers all individuals who were members of the Board of Directors of the Company or of the Bank (who were not also employees of the Company or the Bank) on the effective date. Thereafter, members of the Board of Directors of the Company or of the Bank become participants in the Directors’ Insurance Plan after completion of ten years of service as a member of the applicable Board of Directors (provided that they are not then employed by the Company or the Bank) or at such earlier time as determined by the Board of Directors of the Company.

 

Under the Directors’ Insurance Plan, a covered individual is provided with life insurance coverage in the amount of one hundred thousand dollars. Coverage will remain in effect even if the individual’s service as a member of the Board of Directors ceases.

 

The premiums for the Directors’ Insurance Plan and the Company’s Executive Life Insurance Program (which is discussed below under “Executive Life Insurance Program”) were paid by the Company in October 2002, October 2005, October 2011, October 2012, June 2016, September 2017 and October 2017. The premium paid in 2017 was $1,145,256. The Company has all ownership rights to the policies and all cash values thereunder.

 

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The Directors’ Insurance Plan may be amended, suspended or terminated at any time, except that (i) any amendment, suspension or termination of the Directors’ Insurance Plan with respect to a particular director that is not applicable to all other participants does not require the approval of the particular director, and no such amendment, suspension or termination with respect to a particular director shall become effective with respect to the particular director without his or her approval unless “Cause” (as defined in the Directors’ Insurance Plan) exists with respect to a particular director; and (ii) termination may not occur without the consent of an affected director following a “Change of Control” (as defined in the Directors’ Insurance Plan). Nevertheless, the Directors’ Insurance Plan may be terminated or suspended (in whole or in part) at any time if failure to terminate or suspend the Plan would subject the Company, its officers or its directors to sanctions by a regulatory agency.

 

Mr. James G. Aaron does not participate in the Directors’ Insurance Plan. Pursuant to an agreement with the Company, the Company has provided a death benefit to Mr. Aaron equal to $100,000 in lieu of providing him with a Bank Owned Life Insurance Policy. In 2020, the Company incurred an expense of $2,605 related to the death benefit provided to Mr. Aaron.

 

EXECUTIVE COMPENSATION

 

Compensation Discussion & Analysis

 

This Compensation Discussion & Analysis (“CD&A”) explains our executive compensation program for our named executive officers (“NEOs”) listed below. For 2020, we provide information for three NEOs. The Company, did not have any other executive officers who oversaw a principal business unit, division or function or any other officers who performed a policy making function for the Company in 2020. This CD&A also describes the Compensation Committee’s process for making pay decisions, as well as its rationale for specific decisions related to the fiscal year ended December 31, 2020 (“fiscal 2020”).

 

NEO Title
Robert F. Mangano President & Chief Executive Officer (“CEO”)
Stephen J. Gilhooly Senior Vice President, Chief Financial Officer (“CFO”) and Treasurer
John T. Andreacio Executive Vice President, Chief Credit and Lending Officer

 

Executive Summary

 

2020 Business Overview

 

1st Constitution recorded record earnings for 2020, despite the unprecedented challenges presented by the COVID-19 pandemic. The Bank’s diversified lending platforms contributed significantly to the increase in revenue and net income throughout fiscal 2020 as the Bank’s residential mortgage banking and mortgage warehouse lending operations benefited from the low interest rate environment. As a long-standing preferred lender of the Small Business Administration (the “SBA”), the Company actively participated in the Paycheck Protection Program (“PPP”) and worked with customers impacted by the economic disruption resulting from the COVID-19 pandemic.

 

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Our leadership team remained focused on our strategic priorities, allowing the Company to continue to capitalize on the right opportunities for long-term growth and profitability, as well as to deliver the value that we believe our shareholders have come to expect. At the same time, the health and safety of our employees and customers were of primary concern, and we implemented various measures to ensure the well-being of those we employ and serve by:

 

·Initially adjusting branch hours and temporarily closing our branch lobbies to customers, except on an appointment only basis

 

·Deploying 50% of our staff to work remotely while continuing to service customers through drive-up facilities and ATMs

 

·Leveraging our robust technology capabilities to allow customers to execute transactions and apply for residential mortgage loans through our website

 

·Providing all of our employees with Personal Protective Equipment (“PPE”) and installing protective shields, partitions and social distancing markings in branch offices

 

We believe it is our unique and diverse model and the talent, teamwork and tireless efforts of our workforce that drives our sustainable growth even under the most volatile market conditions, as demonstrated by the following overall results for fiscal 2020:

 

·Net income for 2020 was $18.1 million and diluted earnings per share was $1.76, compared to net income of $13.6 million and diluted earnings per share of $1.53 for the year ended December 31, 2019 (“fiscal 2019”).

 

·Return on Average Assets (“ROAA”) was 1.05% for fiscal 2020, compared to ROAA of 1.06% for fiscal 2019.

 

·Total assets increased by $220.6 million to $1.81 billion at December 31, 2020 from December 31, 2019.

 

·At December 31, 2020, loans totaled $1.4 billion and increased $217.7 million from December 31, 2019.

 

·At December 31, 2020, deposits totaled $1.6 billion and increased $285.5 million, with non-interest demand deposits increasing $137.7 million from December 31, 2019.

 

·As of December 31, 2020, we had funded 467 SBA PPP loans totaling $75.6 million, $15.8 million of which PPP loans were forgiven by the SBA in the fourth quarter of 2020.

 

·For fiscal 2020, approximately $351.2 million of residential mortgages were originated, $321 million of residential mortgages were sold and $9.5 million of gain on sales of loans were recorded. This compares to approximately $148.3 million of residential mortgages originated, $132.2 million of residential mortgage loans sold and a $3.9 million of gain on sales of loans recorded for fiscal 2019.

 

·During fiscal 2020, $5.4 billion of residential mortgage loans were financed through the Mortgage Warehouse Funding Group, compared to $3.5 billion of mortgage loans financed in fiscal 2019.

 

·The Company continued to maintain a strong capital position in fiscal 2020.

 

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Shareholder Value Creation

 

The below graph compares 1st Constitution’s Total Shareholder Return over the five-year period ended December 31, 2020, on a dividend reinvested basis, to the Total Shareholder Return which exceeded the returns of the SNL US Bank & Thrift Index, SNL US NASDAQ Banks Index and the SNL US Bank Index ($1B-$5B).

 

 

2020 Shareholder Engagement and Response to Say-On-Pay

 

We value our shareholders’ perspective on our business and regularly interact with shareholders through engagement activities, including our annual meeting of shareholders, quarterly calls and annual investor conferences. Through these interactions, we can reach our top shareholders representing approximately 30% of shares outstanding about key governance and compensation topics specific to the Bank, along with other topics and trends our shareholders wish to discuss.

 

At the Company’s 2020 Annual Meeting of Shareholders, we received majority support for our executive compensation program, with approximately 89% of the shareholders who voted on the “say on pay” proposal approving the compensation of our NEOs. This result demonstrated that our shareholders are broadly supportive of our overall executive compensation approach. We will continue to ensure that our executive compensation program will remains aligned with our business strategy and investor expectations.

 

Good Compensation Governance

 

Our executive compensation program promotes sound compensation governance. Our program is prepared based on the guidance of our independent compensation consultant and includes certain best-practice features and policies, such as a long-term incentive compensation plan that emphasizes performance-based equity awards, a formal Clawback Policy, the use of double-trigger vesting provisions upon a change-of-control for our equity awards and annual risk assessments.

 

What Guides Our Program

 

Our Compensation Philosophy

 

Our executive compensation program is designed to ensure that we execute on our goal to establish a community bank with the means to deliver a superior level of service and enhance long-term shareholder value. Our compensation philosophy is driven by the following guiding principles that underpin the critical connections between performance, long-term value creation, talent management and compensation governance:

 

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Performance-Driven A portion of an executive officer’s total compensation should be variable (“at-risk”) and linked to the achievement of specific short- and long-term performance objectives.
Shareholder-Aligned Executive officers should be compensated through pay elements (base salaries and short- and long-term incentives) designed to enhance shareholder value by making the Bank, which is our primary operating subsidiary, a driving force towards providing shareholders with a suitable rate of return on their investment.
Competitively-Positioned Target compensation should be competitive with that being offered to individuals in comparable roles at other companies with which we compete for talent to ensure that we employ the best people to lead our success.
Responsibly-Governed Decisions about compensation should be guided by best-practice governance standards and rigorous processes that encourage prudent decision-making.

 

The Principal Elements of Pay

 

Our compensation philosophy is supported by the following principal elements of pay:

 

Pay Element How It’s Paid Purpose
Base Salary Cash
(Fixed)
Provide a competitive base salary rate relative to similar positions in the market and enable the Company to attract and retain critical executive talent.
Annual Incentives Cash
(Variable)
Reward executive officers for delivering on annual financial and strategic objectives that contribute to the creation of shareholder value.
Long-Term Incentives Equity
(Variable)
Provide incentives for executive officers to execute on longer-term financial goals that drive the creation of shareholder value.  Grant incentives that support stock ownership and aid in the Company’s retention strategy.

 

Our Decision-Making Process

 

The Compensation Committee oversees the executive compensation program for our NEOs. The Compensation Committee is composed of independent, non-employee members of the Board of Directors. The Compensation Committee works very closely with its independent consultant and management to examine the effectiveness of the Company’s executive compensation program throughout the year. Details of the Compensation Committee’s authority and responsibilities are specified in the Compensation Committee charter. The charter is available under the “Investor Relations” tab on the Company’s website at www.1stconstitution.com.

 

The Role of the Compensation Committee

 

The Compensation Committee is appointed by the Board. Subject to the final review and approval by the Board, the Compensation Committee evaluates, determines and approves the compensation of the NEOs, including the Company’s CEO, and its non-employee directors. The Compensation Committee administers the Company’s equity plans and has overall responsibility for monitoring the Company’s executive compensation policies, plans and programs. The Compensation Committee may delegate its authority relating to non-employee director compensation to a subcommittee consisting of one or more members when appropriate.

 

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The Role of Management

 

The Compensation Committee generally holds two regularly scheduled in-person meetings a year and additional meetings as appropriate, either in person or by telephone. Generally, the Compensation Committee Chairman works with management in establishing the agenda for Compensation Committee meetings. Management also prepares and submits information during the course of the year for the consideration of the Compensation Committee, such as management’s proposed recommendations to the Compensation Committee for performance measures and proposed financial targets, management’s proposed recommendations to the Compensation Committee for salary increases, management’s performance evaluations of executive officers, and other data and information, if requested by the Compensation Committee.

 

Although many of the compensation decisions are made during the Compensation Committee’s annual review process, the compensation planning process spans throughout the year. Subject to the final review and approval by the Board, the Compensation Committee reviews and approves the Company’s goals and objectives relevant to the CEO’s compensation, evaluates the CEO’s performance in light of those goals and objectives and determines the CEO’s compensation level based on this evaluation. The CEO is not present during voting or deliberations with respect to his compensation. On an annual basis, the Compensation Committee also reviews and approves base salary, annual incentive compensation and long-term equity-based compensation of the other executive officers of the Company.

 

The Role of the Independent Consultant

 

The Compensation Committee has the full authority to engage compensation consultants and other advisors to assist it in the performance of its responsibilities. Prior to retaining, or seeking advice from, a compensation consultant or other advisor, the Compensation Committee must consider the independence of such compensation consultant or other advisor. The independent compensation consultant retained by the Compensation Committee reports directly to the Compensation Committee.

 

The Compensation Committee engaged Pearl Meyer & Partners, LLC (“Pearl Meyer”) as its independent compensation consultant to provide services related to 2020 executive compensation. The Compensation Committee assessed the independence of Pearl Meyer and determined that its work for the Compensation Committee has not raised any conflicts of interest.

 

The services provided by Pearl Meyer to the Compensation Committee relating to 2020 executive compensation, included the following: (i) a refreshed compensation review for the NEOs; (ii) an assessment of the Company’s and the Bank’s compensation components compared to survey and peer group data; and (iii) recommendations for total compensation opportunity guidelines (i.e., base salary and short- and long-term incentive targets). Pearl Meyer does not provide any services to the Company or any of its subsidiaries other than the services provided to the Compensation Committee.

 

The Role of the Peer Group

 

The Compensation Committee strives to set a competitive level of total compensation for each NEO as compared with executive officers in similar positions at peer companies. For purposes of setting 2020 compensation levels, in conjunction with the recommendation of Pearl Meyer, the Compensation Committee considered publicly-available data from industry compensation surveys and proxy statements from the group of peer companies listed below, which was primarily the same peer group used to set 2019 compensation. (Industry survey data was data collected from surveys of bank holding companies or banks with an asset size of approximately $1.0 billion. Proxy data was compiled for publicly-traded commercial bank holding companies or banks with assets between approximately $900 million and $2.5 billion.)

 

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·    BCB Bancorp, Inc. ·    Metropolitan Bank Holding Corp.
·    Bank of Princeton ·    Parke Bancorp, Inc.
·    Bankwell Financial Group, Inc. ·    Pathfinder Bancorp, Inc.
·    Chemung Financial Corporation ·    Patriot National Bancorp, Inc.
·    Evans Bancorp Inc. ·    SB One Bancorp
·    First Bank ·    Unity Bancorp, Inc.
·    Malvern Bancorp, Inc  

 

It is important to note that this market data is not the sole determinant in setting pay levels for executive officers of the Company. The Compensation Committee also considers Company and individual performance and the nature of an individual’s role within the Company, as well as his or her experience and contributions to his or her current role when making its compensation-related decisions.

 

The 2020 Executive Compensation Program in Detail

 

Base Salary

 

We provide each of our NEOs with a competitive fixed annual base salary. The base salaries for our NEOs are reviewed annually by the Compensation Committee by taking into account the results achieved by each executive officer, his future potential, scope of responsibilities and experience, and competitive pay practices. The NEOs received base salary increases ranging between approximately 3% and 5%, based on a review of market data, individual performance and the Company’s continued growth and performance. Base salaries for each NEO are shown below:

 

NEO 2019 2020 % Change
Robert F. Mangano $685,000 $700,000 2.2%
Stephen J. Gilhooly $240,000 $250,000 4.35%
John T. Andreacio $350,000 $365,000 4.28%

 

2020 Short-Term Incentives

 

Under our short-term incentive plan, referred to as the “Annual Incentive Plan,” our NEOs are eligible to earn a performance-based annual cash award. The Annual Incentive Plan is designed to motivate executives to achieve pre-established annual financial and strategic goals that drive long-term shareholder value. Annual incentive awards are paid out of an incentive pool. The incentive pool is established by the Compensation Committee based on budgeted net income adjusted for non-recurring income and expenses. Award payouts can range between 0% and 150% of target based on actual results. Target award opportunities, as well as the performance measures, weightings and results, for the 2020 Annual Incentive Plan are set forth below.

 

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Target Award Opportunities. Target award opportunities under the Annual Incentive Plan are expressed as a percentage of base salary and are established according to each NEO’s level of responsibility. For 2020, target award opportunities were as follows:

 

NEO Target Award Opportunity (as a % of base salary)
Robert F. Mangano 50%
Stephen J. Gilhooly 15%
John T. Andreacio 25%

 

2020 Performance Measures, Weightings and Results. The Compensation Committee establishes performance measures on an annual basis that are tailored to the Company’s financial performance (adjusted net income) and individual NEO performance. Adjusted net income is defined as net income, as adjusted to exclude the after-tax effect of merger-related expenses.* No amount of any awards under the Annual Incentive Plan will be earned or paid out in the event that threshold performance with respect to the corporate financial component of the award is not achieved.

 

The weight assigned to each performance measure is summarized in the following table:

 

Performance Measure Weight Threshold Target Maximum
Adjusted Net Income* 80% $15.5 million $17.0 million $18.5 million
Individual Performance 20% Discretionary

 

Following the 2020 fiscal year end, the Compensation Committee calculated a payout percentage based on year-end adjusted net income results, as well as assessed each NEO’s performance and contribution toward the Company’s strategic goals. For fiscal 2020, net income, as adjusted to exclude the after-tax effect of merger-related expenses, was $18.1 million.* As a result, the Compensation Committee certified performance results with respect to the corporate financial component of the 2020 award (i.e., adjusted net income) at 147% of target.

 

In assessing individual performance, the Compensation Committee determined that each NEO executed on his strategic priorities, allowing the Company to continue capitalizing on opportunities for long-term growth and profitability. Consequently, the Compensation Committee certified each NEO’s individual performance results at above target levels. Based on these performance results, the NEOs received the following cash payouts for 2020 performance:

 

  Actual Payout (as a % of Target) Actual Cash Payout
Robert F. Mangano 143% $500,000
Stephen J. Gilhooly 146% $55,000
John T. Andreacio 142% $130,000

 

2020 Long Term Incentives

 

Effective for 2019, the Compensation Committee approved and fully implemented a new Long-Term Incentive Plan (“LTIP”) that emphasizes performance-based equity awards. Equity awards granted under the LTIP combine a variety of equity-based vehicles, such as performance-based restricted stock units, stock options and time-based restricted stock. LTIP opportunities that are performance-based are reported at target levels, which are expressed as a percentage of base salary and are established according to the NEO’s level of responsibility, as follows:

 

_____________________________

* Please see Appendix A to the Proxy Statement for information on non-GAAP reconciliation.

 

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NEO

Target Award Opportunity

(as a % of base salary)

Robert F. Mangano 50%
Stephen J. Gilhooly 25%
John T. Andreacio 30%

 

For 2020, the Compensation Committee granted the following awards under the LTIP. The performance-based restricted stock units (“PSUs”) are reported at target.

 

NEO

PSUs

(#)

Stock Options

(#)

Time-Based
Restricted Stock

(#)

Robert F. Mangano 8,750 - 8,750
Stephen J. Gilhooly 1,000 2,000 1,500
John T. Andreacio 1,200 3,000 2,500

 

Performance-Based Restricted Stock Units (“PSUs”). The Company granted PSUs under the LTIP on January 6, 2020 based on fiscal 2019 Company and individual performance. PSUs are performance-based and vest ratably over a three-year performance period subject to the achievement of certain performance metrics, which are established at the time of grant. The ultimate number of PSUs earned, if any, will depend on the performance achievement measured over each annual performance period. If performance measures are achieved, the PSUs will vest on the date of certification of performance achievement by the Compensation Committee following each annual performance period. Awards of PSUs are settled in cash unless the recipient timely elects for the PSUs to be settled in shares of common stock.

 

The potential number of PSUs that can be earned range from 0% to 150% of target. The PSUs will vest in three equal installments over the performance period from January 1, 2020 through December 31, 2022 following Compensation Committee certification of performance results for the applicable annual performance period. Performance is measured based on the Bank’s Reported Return on Average Assets (“ROAA”) for the annual performance period relative to an FDIC peer group average of all commercial banks of similar size in the New York Geographic Region during the same time period. ROAA is adjusted for non-recurring income and expenses.

 

1st Constitution vs. FDIC Peer Index

PSUs Earned

(as a % of Target)

75th Percentile and above 150%
50th Percentile 100%
40th Percentile 50%
Below 40th Percentile 0%

 

On March 3, 2021, following the conclusion of the January 1, 2020 to December 31, 2020 performance period (the “2020 Performance Period”), the Compensation Committee certified that the Bank’s Reported ROAA performance relative to the FDIC Peer Index was achieved at the 71st percentile. As a result, the NEOs each earned 142% of their target PSUs. In accordance with the terms of the award agreements, awards for the 2020 Performance Period were settled in cash based on the closing price of the Company’s common stock on the applicable valuation date, as reflected in the following tables. The cash equivalents reported in the following tables are rounded to the nearest whole dollar.

 

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The cash amounts paid in settlement of the PSUs awarded in 2019 for the 2020 Performance Period were determined using the closing price of the Company’s Common Stock on the January 4, 2021 valuation date, which was $15.56.

 

NEO

PSUs at Target-
Level
Performance

(#)

Actual
Achievement as a
Percentage of
Target
PSUs Earned
(#)

Cash Equivalent
Payout

($)

Robert F. Mangano 2,666.66 142% 3,787 58,925.72
Stephen J. Gilhooly 333.33 142% 473 7,369.88
John T. Andreacio 433.33 142% 615 9,569.40

 

The cash amounts paid in settlement of the PSUs awarded in 2020 for the 2020 Performance Period were determined using the closing price of the Company’s Common Stock on the on January 6, 2021 valuation date, which was $17.58.

 

NEO

PSUs at Target-
Level
Performance

(#)

Actual
Achievement as a
Percentage of
Target
PSUs Earned
(#)

Cash Equivalent
Payout

($)

Robert F. Mangano 2,916.66 142% 4,142 72,816.36
Stephen J. Gilhooly 333.33 142% 473 8,315.34
John T. Andreacio 400 142% 265 9,985.44

 

Stock Options. Stock options provide meaningful incentives for management to execute on the longer-term financial and strategic growth goals that drive the creation of shareholder value. That is because they provide value to the NEOs and other officers of the Company only if the price of the Company’s stock appreciates over time. Specifically, the value of the award depends on the price of Company common stock in the future as compared to the exercise price of the options granted.

 

The exercise price of the stock options issuable under the awards granted on January 6, 2020 is $21.92 per share, which was the closing price of Company common stock on the date of grant. The stock options granted on January 6, 2020 vest 20% per year, commencing on the effective date of the grant and then annually on each anniversary of the grant date. These stock options are also contingent upon the continued employment of the holder through each vesting date.

 

As disclosed in the Company’s proxy statement for the 2020 Annual Meeting of Shareholders, on March 19, 2020, the Compensation Committee reviewed the equity compensation previously granted to our employees based on 2019 performance, including the outstanding stock options granted on January 6, 2020 to Messrs. Gilhooly and Andreacio for 2019 performance. The Compensation Committee determined that the exercise price of these stock options sharply exceeded the then-current trading value of our common stock, primarily due to the market volatility and changing economic landscape resulting from the COVID-19 pandemic. To compensate our employees for their past performance and individual achievements, the Compensation Committee granted the same number of stock options to such individuals, which included Messrs. Gilhooly and Andreacio, on the same terms as the stock options granted on January 6, 2020, except that the exercise price of the stock options issuable under the one-time awards granted on March 19, 2020 is $13.13 per share, which amount reflects the tangible book value on December 31, 2019 and a slight premium over the closing price of Company common stock on the March 19, 2020 grant date.

 

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Termination of employment for any reason other than death or disability results in the forfeiture of any unvested options. Vesting and exercisability of unvested options may also accelerate under special circumstances such as involuntary termination associated with a change in control.

 

Restricted Stock Awards. Restricted stock awards are intended to provide the NEOs and other officers of the Company with direct ownership interest in the Company during the vesting period and provide the Company with significant retention security regardless of post-grant share price volatility. The time-based restricted stock awards granted to Mr. Mangano on January 6, 2020, in recognition of corporate and individual performance in 2019, and to Messrs. Gilhooly and Andreacio on August 5, 2020, in recognition of mid-year corporate and individual performance, vest in 25% increments on each of the first four anniversaries of the date of grant. Termination of employment for any reasons other than death or disability results in the forfeiture of any unvested shares. The vesting of unvested shares may also accelerate under special circumstances, such as certain involuntary terminations associated with a change in control.

 

Actions Taken in 2021. In connection with its review of 2020 performance, the Compensation Committee granted the following awards to the NEOs on January 4, 2021 based on fiscal 2020 corporate results and individual achievements. The PSUs are reported at target.

 

NEO

PSUs

(#)

Stock Options

(#)

Time-Based
Restricted Stock

(#)

Robert F. Mangano 8,750 - 8,750
Stephen J. Gilhooly 1,500 2,000 -
John Andreacio 3,000 3,000 -

 

The terms of such awards are substantially similar to the 2020 LTIP awards. The exercise price of the stock options issuable under the awards granted on January 2, 2021 is $15.56 per share, which was the closing price of Company common stock on the date of grant.

 

Other Practices, Policies and Guidelines

 

Stock Ownership Guidelines 

 

The Company maintains stock ownership guidelines that are designed to promote our ownership culture and further align the interests of our shareholders and senior management. Our NEOs are expected to acquire and hold a minimum of Company common stock that is equal to a multiple of his annual base salary within five years from the time he becomes an NEO.

 

Title Guideline as a Multiple of Salary
CEO 3x
Other NEOs 2x

 

The following ownership interests are considered when determining compliance with stock ownership guidelines:

 

·Common shares held directly or indirectly;

 

·Common shares (on an as converted full value basis) held in 401(k) or other benefit plan; and

 

·All vested or unvested stock options, shares of restricted stock and restricted stock units.

 

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2020 Risk Assessment

 

Each year, the Company performs a detailed risk analysis of each of its compensation programs. If warranted, the Compensation Committee will recommend changes to address concerns or considerations raised in the risk review process. Changes may be recommended for the program design or its oversight and administration in order to mitigate unreasonable risk, if any such risk is determined to exist. The Compensation Committee has concluded that the Company’s compensation arrangements do not encourage any employees to take unnecessary and excessive risks. We do not believe that any risks arising from our compensation policies and practices are reasonably likely to have a material adverse effect on the Company.

 

Hedging & Pledging

 

The Company’s Insider Trading Policy prohibits the directors, officers and employees of the Company and the Bank, as well as other persons informed by management to be subject to the policy from time to time, from:

 

·Entering into any hedging transaction with respect to the Company’s securities, including, but not limited to, the purchase or use of, directly or indirectly through any other persons or entities, any stock option, prepaid variable forward contracts, equity swaps, collars, exchange funds or any other instruments designed to offset any decrease in the market value of the Company’s securities;

 

·Pledging of Company securities owned by such persons; and

 

·Placing any Company securities in margin accounts, unless the margin accounts are treated as non-marginable by the brokerage firm.

 

Benefits & Perquisites

 

Our NEOs also generally participate in other employee benefit plans on the same terms as all of our other employees. NEOs are entitled to participate in the employee benefit plans maintained by the Company and the Bank, including the 401(k) program, the medical insurance and reimbursement program, the group term life insurance program, and the group disability program.

 

Our NEOs also receive certain personal benefits in connection with their employment with the Company. To facilitate the business-related travel of our CEO, the Company provides Mr. Mangano with a late-model automobile, which he uses for this purpose. In addition, the Company pays for the operation and maintenance of this automobile, which is valued at cost to the Company. In 2020, Mr. Mangano was also reimbursed for a golf club membership and a social membership at a country club located near the Company’s main office, which facilities are used by Mr. Mangano for business meetings and other business purposes, from time to time.

 

The other NEOs receive limited perquisites, which include automobile allowances and fuel reimbursement cards.

 

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Executive Life Insurance Program

 

The Company has life insurance arrangements with certain executive officers of the Company. These employer-paid arrangements provide for a life insurance benefit of three times his or her annual base salary in the event of death while employed with the Company. Benefits are based on the annual base salary in effect at the time of death or retirement, minus amounts payable by reason of any other group term life insurance coverage provided by the Company.

 

All coverage under these arrangements terminates upon termination of a covered executive officer’s employment with the Company. However, with the exception of termination for cause, coverage will remain in effect after termination only if (i) the executive is at least 60 years old and has a minimum of 10 years of service with the Company, or (ii) there is a change in control.

 

Supplemental Executive Retirement Plan (“SERP”)

 

The Company maintains the SERP, which is a non-qualified, unfunded retirement plan, to provide a competitive level of pay replacement to executive officers designated by the Compensation Committee upon retirement. The Compensation Committee administers the SERP in accordance with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). The Compensation Committee is also responsible for designating eligible participants. As of December 31, 2020, Mr. Mangano was the only eligible participant. He is 100% vested in his SERP benefit, pursuant to the terms of the SERP.

 

SERP benefits are generally equal to the product of (i) a participant’s final base compensation times (ii) a percentage multiplier selected for such participant by the Compensation Committee. Final base compensation means a participant’s highest annual rate of base compensation in effect for the twelve month period prior to his or her termination from employment. Bonuses, overtime pay, commissions, other extraordinary payments, reimbursements or other expense allowances, equity compensation, fringe benefits (cash and non-cash), moving expenses, deferred compensation, and welfare benefits are excluded, and amounts contributed to the Company’s 401(k) plan and cafeteria plan are included in the determination of final base compensation. The percentage multiplier used to calculate benefits under the SERP for Mr. Mangano is 55%.

 

In 2020, the Compensation Committee authorized retirement allocations under the SERP to Mr. Mangano, as listed in the 2020 Nonqualified Deferred Compensation table and as included in the All Other Compensation column of the 2020 Summary Compensation Table. For 2020 and 2019, respectively, the Company incurred expenses of $147,000 and $182,206 for Mr. Mangano in connection with the retirement allocations under the SERP, which amounts are not reflected in the 2020 Summary Compensation Table.

 

Employment Agreements

 

The Company maintains employment agreements with the NEOs, as summarized below:

 

Mangano Agreement

 

The Company and Mr. Mangano are parties to an employment agreement (the “Mangano Agreement”) dated July 1, 2010, as amended, whereby Mr. Mangano serves as the President and Chief Executive Officer, and as a director, of each of the Company and the Bank. The Mangano Agreement has a term of three years, with automatic one-year extensions starting on the first anniversary of the date of the Mangano Agreement and then on each anniversary (i.e., July 1) of such date thereafter, absent notice of non-renewal.

 

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The Mangano Agreement provides for a minimum base salary of $505,000, an annual cash bonus of up to fifty percent (50%) of base salary, and participation in the Company’s equity plans. It also provides for participation in employee benefit plans and use of an automobile and a country club membership.

 

The Mangano Agreement provides certain severance and change in control (CIC) benefits to Mr. Mangano, as follows:

 

·Termination without “just cause” or for “good reason” (other than in in connection with a CIC): Lump sum severance payment equal to two times the sum of his base salary plus appropriate cash bonus;

 

·Termination due to death or disability: Base salary through date of termination plus appropriate cash bonus, prorated to date of termination, plus, in the case of disability, non-monetary employee benefits provided for under the Mangano Agreement;

 

·Termination for “just cause”: No severance payment;

 

·Termination without “just cause” or by Mr. Mangano for any reason in connection with or within 12 months after a CIC: Lump sum severance payment equal to three times the sum of his base salary plus a projected cash bonus.

 

Pursuant to a legacy program that has been in place for Mr. Mangano since the inception of the Mangano Agreement, if any of these severance payments would be subject to the excise tax imposed by Section 4999 of the Code, Mr. Mangano will be entitled to receive a gross-up to offset any such amounts. Employment agreements entered subsequent to Mr. Mangano’s agreement do not contain gross-up provisions.

 

Upon Mr. Mangano’s retirement, his outstanding stock options will vest, but unvested restricted stock and restricted stock unit awards will be forfeited unless he enters into a consulting agreement (described below) with the Company. In this case, the unvested restricted stock and RSUs will continue to vest during the consultancy period.

 

The Mangano Agreement requires that the Company offer to enter into such a consulting agreement with Mr. Mangano in connection with his retirement, pursuant to which he may provide consulting services for no more than fifteen (15) hours per calendar month and be paid no salary other than reimbursement of expenses. Any such consulting agreement shall remain in place for at least as long as is necessary for Mr. Mangano’s unvested restricted stock and restricted stock units to vest.

 

The Mangano Agreement includes a covenant not to compete with the Company effective during the term of the Mangano Agreement and for one year following the termination or discontinuation of Mr. Mangano’s employment or services. Mr. Mangano’s compensation is also subject to recoupment pursuant to the Company’s clawback policy and otherwise as required by law.

 

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The Mangano Agreement and the Andreacio Agreement (described below) generally contain the following definitions:

 

·A CIC occurs (i) if more than 35% of our common stock is acquired, (ii) upon a tender or exchange offer, (iii) if any person directly or indirectly acquires control of the election of a majority of the Company’s directors, (iv) if any person or group within the meaning of Sections 13(d)(3) or 14(d)(2) of the Exchange Act exercises a controlling influence over the management or policies of the Company, (v) if we experience a substantial and rapid turnover in the membership of our Board of Directors (changes in Board membership occurring within any period of 2 consecutive years result in two-thirds (2/3) of our Board members not being continuing directors unless such change in Board members is approved by at least two-thirds (2/3) of our Board), (vi) if our shareholders approve a merger or consolidation with another company (other than a merger where the Company is the surviving company and which does not result in a reclassification or reorganization of the Company’s shares or a change in the Company’s directors, other than the addition of three or fewer directors; (vii) if our shareholders approve a sale or disposition of all or substantially all of our assets, or (viii) if we adopt a plan of dissolution or liquidation.

 

·“Just cause” includes (i) the conviction of a felony or criminal offense involving moral turpitude, (ii) the willful commission of an act likely to cause substantial economic damage to the Company or injury to the business reputation of the Company, (iii) fraud in the performance of his duties, (iv) a continued, willful failure to perform employment duties, or (v) an order of a federal or state regulatory agency or court of competent jurisdiction requiring his termination of employment.

 

·“Good reason” includes (i) a material reduction in responsibilities, authority, base salary or benefits, (ii) a material and uncured breach of the agreement by the Company, (iii) relocation, or (iv) material diminution of duties and responsibilities.

 

Andreacio Agreement

 

The Company and Mr. Andreacio are parties to an employment agreement (the “Andreacio Agreement”) dated January 1, 2015 whereby he serves as the Executive Vice President and Chief Credit Officer of the Bank. The Andreacio Agreement has a term of two years, with automatic one-year extensions starting on the first anniversary of the date of the agreement, and then on each anniversary (i.e., January 1) of such date thereafter, absent notice of non-renewal.

 

The Andreacio Agreement provides for a minimum base salary of $250,000, an annual cash bonus determined by the Compensation Committee, and participation in the Company’s equity plans. It also provides for participation in employee benefit plans and an automobile allowance.

 

The Andreacio Agreement provides certain severance and change in control (“CIC”) benefits to Mr. Andreacio, as follows:

 

·Termination without “just cause” or for “good reason” (other than in in connection with a CIC): Lump sum severance payment equal to two times the sum of his base salary plus most recent cash bonus.

 

·Termination due to death or disability: Base salary through date of termination plus appropriate cash bonus, prorated to date of termination, plus, in the case of disability, non-monetary employee benefits provided for under the Andreacio Agreement, subject to his employee contributions for such benefits.

 

·Termination for “just cause” or quit: No severance payment.

 

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·Termination without “just cause” or by Mr. Andreacio for any reason in connection with or within 12 months after a CIC: Lump sum severance payment equal to two times the sum of his base salary plus most recent cash bonus.

 

If any of these severance payments would be subject to the excise tax imposed by Section 4999 of the Code, Mr. Andreacio’s severance will be cut-back to the extent necessary to avoid such taxes.

 

The Andreacio Agreement includes a covenant not to compete with the Company effective during the term of the Andreacio Agreement and for one year following the termination or discontinuation of Mr. Andreacio’s employment or services. Mr. Andreacio’s compensation is also subject to recoupment pursuant to the Company’s clawback policy and otherwise as required by law.

 

Gilhooly Agreement

 

The Company, the Bank and Mr. Gilhooly are parties to an employment agreement (the “Gilhooly Agreement”) dated as of February 9, 2021, which terminates and replaces the letter agreement dated January 31, 2014 and pursuant to which Mr. Gilhooly serves as the Senior Vice President and Chief Financial Officer of the Company and the Bank. The Gilhooly Agreement has an initial term of one year, with automatic one-year extensions beginning on the anniversary of the date of the agreement, absent notice of non-renewal.

 

The Gilhooly Agreement provides for a minimum base salary of $250,000, an annual cash bonus determined by the Compensation Committee, and participation in the Company’s equity plans. It also provides for participation in employee benefit plans and an automobile allowance.

 

The Gilhooly Agreement provides certain severance and change in control (“CIC”) benefits to Mr. Gilhooly, as follows:

 

·Termination by the Company without “just cause” (other than in in connection with a CIC): Lump sum severance payment equal to Mr. Gilhooly’s base salary.

 

·Termination due to death: Base salary through the last day of the calendar month in which death occurs.

 

·Termination due to disability: Base salary through the date of termination plus any benefits that may be available under the Company’s or the Bank’s disability plans, subject to his employee contributions for such benefits.

 

·Termination by the Company for “just cause” or by Mr. Gilhooly without “good reason”: No severance payment.

 

·Termination by the Company without “just cause” or by Mr. Gilhooly for “good reason,” in each case within 18 months of a CIC: Lump sum severance payment equal to one hundred fifty percent (150%) of Mr. Gilhooly’s annual unreduced base salary.

 

If any of these severance payments and benefits would not be deductible (in whole or part) as a result of Section 162(m) or Section 280G of the Code, or any combination of Section 162(m) and Section 280G of the Code, Mr. Gilhooly’s severance will be cut-back until no portion of the severance is not deductible, or the severance payments and benefits are reduced to zero.

 

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The Gilhooly Agreement includes a covenant not to compete with the Company or the Bank for one year following the termination or discontinuation of Mr. Gilhooly’s employment. Mr. Gilhooly’s compensation is also subject to recoupment pursuant to any compensation recovery or clawback policy adopted by the Company or the Bank, whether adopted before or after the date of the Gilhooly Agreement, and otherwise as required by law.

 

Equity Incentive Plans

 

Our 2005 Equity Incentive Plan (the “2005 Plan”), 2013 Equity Incentive Plan (the “2013 Plan”) and 2019 Equity Incentive Plan (the “2019 Plan”) provide our NEOs with CIC and severance benefits with respect to their equity awards (if not otherwise covered by an employment agreement). Under the terms of the 2005 Plan, upon the occurrence of a CIC (as defined in the 2005 Plan), all unvested stock options and restricted stock awards shall vest. The award agreements under the 2005 Plan also provide that all outstanding awards shall become fully vested and exercisable upon the death, disability or in some cases retirement of the NEO. The terms of the 2013 Plan similarly provide for a “single trigger” acceleration of outstanding awards upon a CIC (as defined in the 2013 Plan) unless otherwise provided by the Compensation Committee. The award agreements under the 2013 Plan also provide that all outstanding awards shall become fully vested and exercisable upon the death or disability of the NEO. Unless otherwise provided in any employment agreement or change in control agreement between the NEO and the Company, all unvested shares of restricted stock will be forfeited upon the NEO’s termination of employment for reasons other than death or disability.

 

The terms of the 2019 Plan provide for a “double trigger” acceleration of outstanding awards upon a CIC (as defined in the 2019 Plan) unless otherwise provided by the Compensation Committee. If awards are assumed or substituted by a surviving entity in connection with a CIC and the NEO has a Qualifying Termination (as defined in the 2019 Plan) within two years after the CIC, then (i) all non-forfeited stock options and SARs shall become fully vested and exercisable; (ii) all time-based awards other than options and SARs shall become fully vested and paid within 90 days following the Qualifying Termination; and (iii) all performance-based awards shall be paid out in an amount determined under the 2019 Plan based on (A) how much of the performance period is completed at the time of the Qualifying Termination, and (B) in some instances, actual performance. If awards are not assumed or substituted by a surviving entity in connection with a CIC, then (i) outstanding stock options and SARs shall become fully vested and shall remain exercisable for the remainder of their terms; (ii) time-based awards shall become fully vested and paid within 90 days following the CIC; and (iii) performance-based awards shall be paid out in an amount determined under the 2019 Plan based on (A) how much of the performance period is completed at the time of the CIC, and (B) in some instances, actual performance.

 

Tax and Accounting Considerations

 

We take tax, accounting and regulatory requirements into consideration in choosing the particular elements of our compensation programs and in the procedures we use to set and pay those elements. We want to pay compensation in the most tax-effective manner reasonably possible and, therefore, take tax considerations into account.

 

·Section 409A of the Code provides that deferred compensation (including certain forms of equity awards) is subject to additional income tax and interest unless it is paid pursuant to a plan and procedures that meet certain requirements of the Code. It is our intention to deliver compensation that complies with the requirements under Section 409A.

 

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·We have generally granted all of our stock options to NEOs as incentive stock options under Section 422 of the Code, subject to the volume limitations contained in the Code. Generally, for stock options that do not qualify as incentive stock options, upon exercise of the options, the holders of the stock options recognize taxable income and we are entitled to a tax deduction. For stock options that qualify as incentive stock options, we do not receive a tax deduction and the holder of the stock option may receive more favorable tax treatment than he or she would otherwise receive for a non-qualified stock option. For federal income tax purposes, the NEO will generally be deemed to have received compensation income on each vesting date equal to the fair market value of the shares vesting on such date, and the Company will generally be entitled to a tax deduction for such amount as compensation expense unless limited by tax rules.

 

Compensation Committee Report

 

This report is submitted by the Compensation Committee of the Board of Directors. The Compensation Committee has reviewed and discussed with management the CD&A contained in this Proxy Statement. Based on its review of the CD&A and its discussions with management, the Compensation Committee recommended to the Board of Directors, and the Board of Directors has agreed, that the CD&A be included in this Proxy Statement.

 

No portion of this Compensation Committee Report shall be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, through any general statement incorporating by reference in its entirety the Proxy Statement in which this report appears, except to the extent that the Company specifically incorporates this report or a portion of it by reference. In addition, this report shall not be deemed filed under either the Securities Act or the Exchange Act.

 

Respectfully submitted by the Compensation Committee,

 

WILLIAM M. RUE, CHAIRMAN

CHARLES S. CROW, III

J. LYNNE CANNON

JAMES G. AARON

ANTONIO L. CRUZ

CARMEN M. PENTA

 

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SUMMARY COMPENSATION TABLE(1)

 

The table below summarizes the total compensation paid to or earned by each of the Company’s named executive officers for the fiscal years ended December 31, 2020, 2019 and 2018.

 

Name and Principal Position

Year

 

 

Salary

(2)

 

Stock
Awards

(3)

Option
Awards

(3)

Non-Equity
Incentive Plan
Compensation

(4)

 

All Other
Compensation

 

Total

 

 

    ($) ($) ($) ($) ($) ($)
               
Robert F. Mangano 2020 700,000 479,500 (5) 500,000 83,505 (6) 1,763,005
President and CEO 2019 685,000 310,080 (5) 500,000 81,323 (6) 1,576,403
  2018 660,000 329,400 475,000 77,440 (6) 1,541,840
               
Stephen J. Gilhooly 2020 250,000 51,760 (5) 35,050 55,000 12,456 (7) 404,266
Senior Vice President, 2019 240,000 54,040 (5) 19,380 52,500 12,075 (7) 377,995
CFO and Treasurer 2018 230,000 51,750 18,300 32,500 11,844 (7) 344,394
               
John T. Andreacio 2020 365,000 71,056 (5) 52,575 130,000 18,195 (8) 636,826
Executive Vice President 2019 350,000 91,048 (5) 29,070 125,000 17,464 (8) 612,582
and Chief Lending and    Credit Officer 2018 340,000 100,810 18,300 95,500 16,909 (8) 571,519

 

(1)The Company has only three executive officers, as such term is defined in Rule 3b-7 of the Exchange Act, for fiscal years 2018, 2019 and 2020. Amounts shown in this table are rounded to the nearest whole dollar.

 

(2)Amounts include compensation deferred under the Company’s 401(k) Plan as follows: In fiscal year 2020, our named executive officers deferred the following amounts into the Company’s 401(k) Plan; Mr. Mangano – $26,000, Mr. Gilhooly – $23,998 and Mr. Andreacio – $22,212. In fiscal year 2019, our named executive officers deferred the following amounts into the Company’s 401(k) Plan: Mr. Mangano – $25,000, Mr. Gilhooly – $23,998 and Mr. Andreacio – $21,288. In fiscal year 2018, our named executive officers deferred the following amounts into the Company’s 401(k) Plan: Mr. Mangano – $24,500, Mr. Gilhooly – $23,998 and Mr. Andreacio – $20,688.

 

(3)Amounts shown in these columns reflect the aggregate grant date fair value of time-based restricted stock awards, awards of performance-based restricted stock units and option awards, as determined in accordance with FASB ASC Topic 718. Additional information concerning our accounting for restricted stock and options is included in Note 1 and Note 16 of the Notes to Consolidated Financial Statements in our 2020 Annual Report on Form 10-K.

 

(4)Amounts shown in this column for 2020 reflect the payouts made in 2021 under the Company’s 2020 Annual Incentive Program with respect to 2020 performance as discussed above under “—The 2020 Executive Compensation Program in Detail—2020 Short-Term Incentives.”

 

(5)Amounts shown reflect the aggregate grant date fair value of time-based restricted stock awards and awards of performance-based restricted stock units. Restricted stock units were first awarded in January 2019 and vest ratably over a three-year performance period subject to Compensation Committee performance results. The grant date fair value of the restricted stock units are reported at target. The maximum potential value of the performance-based awards of restricted stock units (assuming the highest level of performance achievement on the date of grant) granted on January 6, 2020 are as follows: Mr. Mangano – $287,700, Mr. Gilhooly – $32,800 and Mr. Andreacio – $39,456. The restricted stock units that remain unearned and unvested with respect to the 2021 and 2022 annual performance periods are reflected below in the “Outstanding Equity Awards at 2020 Fiscal Year-End” table.

 

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(6)Includes: (i) the value of the Company’s match of employee contributions under our 401(k) Plan; (ii) imputed income attributable to BOLI; (iii) the annual cost to the Company of a country club membership; and (iv) the value of the Company provided automobile of $41,462 for 2020, $44,069 for 2019 and $41.830 for 2018. The Company calculates the aggregate incremental cost to the Company for the provision to Mr. Mangano of the Company provided car as the sum of the total cost of the automobile attributable to the fiscal year, including lease payments, plus maintenance costs, insurance and fuel paid by the Company. This amount has not been reduced to reflect the costs attributable to business use. Mr. Mangano is taxed on the imputed income attributable to personal use of the Company car and does not receive tax assistance from the Company with respect to these amounts.

 

(7)Includes: (i) the value of the Company’s match of employee contributions under our 401(k) Plan and (ii) the value of an automobile reimbursement allowance.

 

(8)Includes: (i) the value of the Company’s match of employee contributions under our 401(k) Plan, (ii) the value of an automobile reimbursement allowance and (iii) imputed income attributable to BOLI.

 

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GRANTS OF PLAN-BASED AWARDS

 

The following table sets forth the grants that each NEO received under the Company’s 2013 Executive Incentive Plan and 2019 Incentive Plan in 2020.

 

Name
 
Grant
Date

 

Estimated Future Payouts
Under Non-Equity Incentive
Plans

(1)

Estimated Future Payouts Under
Equity Incentive Plans

(2)

All Other
Stock
Awards:
Number of
Shares of
Stock or
Units

 

(#)

 

All Other
Option
Awards:
Number of
Securities
Underlying
 Options

 

(#)

 

Exercise
or Base
Price of
Option
Awards

 

($/Sh)

 

Grant
Date Fair
Value of
Stock and
Option
Awards

 

($)

 

Threshold

(#)

 

Target

(#)

 

Maximum

(#)

 

Threshold

(#)

 

Target

(#)

 

Maximum

(#)

 

Robert F. 1/6/2020       4,375 8,750 13,125       287,700
Mangano                      
  1/6/2020             8,750 (3)     191,800
                       
  3/19/2020 171,250 342,500 513,750              
                       
Stephen J. 1/6/2020       500 1,000 1,500       32,880
Gilhooly                      
  1/6/2020               1,000 (4) 21.92 21,920
                       
  3/19/2020 18,000 36,000 54,000         1,000 (5) 13.13 13,13
                       
  8/5/2020             1,500 (6)     18,960
                       
John T. 1/6/2020       600 1,200 1,800       39,456
Andreacio                      
  1/6/2020               1,500 (4) 21.92 32,880
                       
  3/19/2020 43,750 87,500 131,250         1,500 (5) 13.13 19,695
                       
  8/5/2020             2,500 (6)     31,600
                       

 

(1)Represents the threshold, target and maximum, as applicable, annual cash incentive amounts payable under the 2020 Annual Incentive Plan, as described above under “—The 2020 Executive Compensation Program in Detail—2020 Short-Term Incentives.” The actual incentive amounts paid to the NEOs in 2021 for 2020 performance pursuant to the 2020 Annual Incentive Plan are reported in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table.

 

(2)Award of performance-based restricted stock units that vest pro-rata in three annual installments commencing in 2021, subject to achievement of pre-established performance metrics. The ultimate number of shares earned, if any, or the cash equivalent, will depend upon performance achievement measured over each annual period during the period from January 1, 2020 through December 31, 2022. If performance measures are achieved, vesting will occur on the date of certification of performance achievement by the Compensation Committee following each annual period. On March 3, 2021, the Compensation Committee certified 2020 performance results, and the cash equivalents, as determined in accordance with the applicable award agreements, were subsequently paid out to the award recipients with respect to the first tranche of the awards. The number of restricted stock units earned and the value realized upon Compensation Committee certification of 2020 performance results are reflected below in the Option Exercises and Stock Vested table. The grant date fair values of these awards are reported at target.

 

(3)Award of restricted stock that vests in equal installments on January 6, 2021, January 6, 2022, January 6, 2023 and January 6, 2024.

 

(4)Award of options that become exercisable in equal annual installments on January 6, 2020, January 6, 2021, January 6, 2022, January 6, 2023 and January 6, 2024.

 

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(5)Award of options that become exercisable in equal annual installments on March 19, 2020, March 19, 2021, March 19, 2022, March 19, 2023 and March 19, 2024.

 

(6)Award of restricted stock that vests in equal installments on August 5, 2021, August 5, 2022, August 5, 2023 and August 5, 2024.

 

2019 Equity Incentive Plan

 

The 1st Constitution Bancorp 2019 Equity Incentive Plan (the “2019 Plan”) was adopted by the Board of Directors of the Company on March 21, 2019 and was approved by our shareholders on May 24, 2019. A total of 406,822 shares (as adjusted for all stock dividends) have been reserved and are available for delivery in connection with awards under the 2019 Plan; however, the total number of shares which may be issued and delivered in connection with awards that are granted as incentive stock options (“ISOs”) is limited to 220,500 as adjusted for all stock dividends). Shares delivered under the 2019 Plan shall be authorized and unissued shares or treasury shares, or partly out of each, as shall be determined by the Board of Directors of the Company. Shares subject to an award under the 2019 Plan that are canceled, expired, forfeited, settled in cash or otherwise terminated without a delivery of shares to the participant will again be available for awards, but with respect to shares reserved and available for ISOs, only to the extent consistent with applicable regulations relating to ISOs under the Code.

 

The 2019 Plan is administered by the Compensation Committee, which determines the terms of each grant under the plan. Under the 2019 Plan, the Company may grant participants stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”) or such other awards as the Compensation Committee may determine to employees of the Company or any subsidiary or affiliate, including any executive officer or employee director of the Company, a consultant or other person who provides substantial services to the Company or a subsidiary or affiliate, and any person who has been offered employment by the Company or a subsidiary or affiliate, provided that such prospective employee may not receive any payment or exercise any right relating to an award until such person has commenced employment with the Company or a subsidiary or affiliate. Non-employee directors shall not be eligible to participate in the 2019 Plan.

 

Participants are limited in any year to awards under the 2019 Plan relating to no more than 110,250 shares per type of award (that is, options, restricted stock and other awards).

 

The exercise price per share purchasable under an option shall not be less than the fair market value of a share of Company common stock on the date of grant of the option. The Compensation Committee shall determine the term of each option, provided, that no option may have a term in excess of ten years from the date of grant. The Compensation Committee shall determine the time or times at which, or the circumstances under which, an option may be exercised, in whole or in part, the methods by which such exercise price may be paid or deemed to be paid and the form of such payment, including, without limitation, cash, stock, other awards or awards granted under other plans of the Company or any subsidiary or affiliate, or other property, and the methods by or forms in which Company common stock will be delivered or deemed to be delivered in satisfaction of options.

 

The Compensation Committee may grant SARs in tandem with an option or on a freestanding basis. Upon exercise of a SAR, the participant will be entitled to payment of the positive difference in value between the exercise price and the fair market value of a share of Company common stock on the date of exercise. The exercise price will be at least equal to the fair market value of a share of Company common stock as of the date of grant. The Compensation Committee shall determine the term of each SAR, provided that no SAR may have a term in excess of ten years from the date of grant. The Compensation Committee shall determine the time or times at which, or the circumstances under which, a SAR may be exercised, in whole or in part, the methods by which the SAR may be settled, including, without limitation, cash or stock, and all other terms and conditions of the SAR.

 

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The Compensation Committee will determine the period over which restricted stock and RSUs will vest, and will impose such restrictions on transferability, risk of forfeiture and other restrictions as the Compensation Committee may, in its discretion, determine. The minimum stated vesting period for awards covering at least 95% of the shares of stock reserved under the 2019 Plan will be one year. Delivery of stock (or cash equivalent) in connection with the lapse of restrictions with respect to RSUs shall occur at such times as the Compensation Committee shall determine. Unless restricted by the Compensation Committee, a participant granted restricted stock shall have all of the rights of a shareholder, including the right to vote the restricted stock and the right to receive dividends thereon. In the case of RSUs, no shares of stock shall be issued at the time an award is made, and the Compensation Committee shall determine whether such award of RSUs will be credited with dividends paid on shares of the Company’s common stock during the applicable restricted period. In no event will any dividends or dividend equivalents be paid unless and until the award associated with such dividend or dividend equivalent has vested.

 

The Compensation Committee is authorized to grant such other awards to participants as the Compensation Committee, in its discretion, may determine; provided, however, that such other awards shall comply with applicable federal and state securities laws, the Code, as applicable, and Nasdaq Listing Rules applicable to the Company. The Compensation Committee shall determine the terms, conditions, restrictions and other provisions of such other awards.

 

The 2019 Plan contains customary anti-dilution provisions pursuant to which the Compensation Committee may, in such manner as it may deem equitable, make certain adjustments in the event of a stock dividend, stock split, recapitalization or other similar transaction, including adjustments to the aggregate number of shares that may be issued under the 2019 Plan and the number of shares available for grant as ISOs.

 

As of March 31, 2021, there were 47,900 options to purchase shares of Company common stock (as adjusted for all stock dividends) under the 2019 Plan. As of March 31, 2021, grants of 87,950 shares of time-based restricted stock (as adjusted for all stock dividends) and 33,200 performance-based RSUs have been previously made under the 2019 Plan and 289,891 shares (as adjusted for all stock dividends) remain available for future issuance under the 2019 Plan.

 

2013 Equity Incentive Plan

 

The 1st Constitution Bancorp 2013 Equity Incentive Plan (the “2013 Plan”) was adopted by the Board of Directors of the Company on March 21, 2013 and was approved by our shareholders on May 23, 2013. Following the adoption of the 2019 Plan by shareholders on May 24, 2019, (i) the Compensation Committee discontinued granting awards under the 2013 Plan; (ii) no shares that currently remain available for future grant under the 2013 Plan will be added to the number of shares available for grant under the 2013 Plan; and (iii) none of the shares that may be returned to the 2013 Plan in accordance with its provisions will be added to the number of shares available for grant under the 2013 Plan.

 

The 2013 Plan is administered by the Compensation Committee, which determines the terms of each grant under the plan. Under the 2013 Plan, the Company was able to grant participants stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”) or other awards determined by the Compensation Committee relating to an aggregate maximum of 406,822 shares of the Company’s common stock (as adjusted for all stock dividends). Participants were limited in any year to awards under the 2013 Plan relating to no more than 110,250 shares per type of award (that is, options, restricted stock and other awards).

 

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Awards were granted under the 2013 Plan to employees of the Company or any subsidiary or affiliate, including any executive officer or employee director of the Company, a consultant or other person who provided substantial services to the Company or a subsidiary or affiliate, and any person who had been offered employment by the Company or a subsidiary or affiliate, provided that such prospective employee did not receive any payment or exercise any right relating to an award until such person had commenced employment with the Company or a subsidiary or affiliate. Non-employee directors were not eligible to participate in the 2013 Plan.

 

The exercise price per share purchasable under an option granted under the 2013 Plan could not be less than the fair market value of a share of Company common stock on the date of grant of the option. The Compensation Committee determined the term of each option, provided, that no option could have a term in excess of ten years from the date of grant. The Compensation Committee determined the time or times at which, or the circumstances under which, an option could be exercised, in whole or in part, the methods by which such exercise price could be paid or deemed to be paid and the form of such payment, including, without limitation, cash, stock, other awards or awards granted under other plans of the Company or any subsidiary or affiliate, or other property, and the methods by or forms in which Company common stock could be delivered or deemed to be delivered in satisfaction of options.

 

The Compensation Committee could grant SARs in tandem with an option or on a freestanding basis. Upon exercise of a SAR, the participant would be entitled to payment of the positive difference in value between the exercise price and the fair market value of a share of Company common stock on the date of exercise. The exercise price must have been at least equal to the fair market value of a share of Company common stock as of the date of grant. The Compensation Committee determined the term of each SAR, provided that no SAR could have a term in excess of ten years from the date of grant. The Compensation Committee determined the time or times at which, or the circumstances under which, a SAR could be exercised, in whole or in part, the methods by which the SAR could be settled, including, without limitation, cash or stock, and all other terms and conditions of the SAR.

 

The Compensation Committee determined the period over which restricted stock and RSUs would vest, and imposed such restrictions on transferability, risk of forfeiture and other restrictions as the Compensation Committee, in its discretion, determined. Delivery of stock (or cash equivalent) in connection with the lapse of restrictions with respect to RSUs occurred at such times as the Compensation Committee determined. Unless restricted by the Compensation Committee, a participant granted restricted stock had all of the rights of a shareholder, including the right to vote the restricted stock and the right to receive dividends thereon. In the case of RSUs, no shares of stock were issued at the time an award was made, and the Compensation Committee determined whether such award of RSUs would be credited with dividends paid on shares of the Company’s common stock during the applicable restricted period.

 

The 2013 Plan contains customary anti-dilution provisions pursuant to which the Compensation Committee could, in such manner as it may deem equitable, make certain adjustments in the event of a stock dividend, stock split, recapitalization or other similar transaction, including adjustments to the aggregate number of shares that could be issued under the 2013 Plan and the number of shares available for grant as ISOs.

 

As of March 31, 2021, there were 45,682 options to purchase shares of Company common stock (as adjusted for all stock dividends) under the 2013 Plan. As of March 31, 2021, grants of 329,899 shares of time-based restricted stock (as adjusted for all stock dividends) and 15,300 performance-based RSUs have been previously made under the 2013 Plan. As a result of the adoption of the 2019 Plan by shareholders on May 24, 2019, no shares are available for future grant under the 2013 Plan.

 

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2005 Equity Incentive Plan

 

The 1st Constitution Bancorp 2005 Equity Incentive Plan (the “2005 Plan”) was adopted by the Board of Directors of the Company on February 17, 2005 and was approved by our shareholders on May 19, 2005. Following the adoption of the 2013 Plan by shareholders on May 23, 2013, (i) the Compensation Committee discontinued granting awards under the 2005 Plan; (ii) no shares that currently remain available for future grant under the 2005 Plan will be added to the number of shares available for grant under the 2005 Plan; and (iii) none of the shares that may be returned to the 2005 Plan in accordance with its provisions will be added to the number of shares available for grant under the 2005 Plan.

 

The 2005 Plan is administered by the Compensation Committee, which determines the terms of each grant under the plan. Under the 2005 Plan, the Company was able to grant participants stock options, restricted stock, or other awards determined by the Compensation Committee relating to an aggregate maximum of 474,304 shares of the Company’s common stock (as adjusted for all stock dividends). Participants were limited in any year to awards under the 2005 Plan relating to no more than 24,541 shares per type of award (that is, options, restricted stock, and other awards) (as adjusted for all stock dividends), plus the amount of the participant’s unused annual limit relating to the same type of award as of the close of the previous year, subject to future adjustment.

 

Awards were granted under the 2005 Plan to employees of the Company or any subsidiary or affiliate, including any executive officer or employee director of the Company, a consultant or other person who provided substantial services to the Company or a subsidiary or affiliate, and any person who had been offered employment by the Company or a subsidiary or affiliate, provided that such prospective employee did not receive any payment or exercise any right relating to an award until such person had commenced employment with the Company or a subsidiary or affiliate. Non-employee directors were not eligible to participate in the 2005 Plan.

 

The exercise price of options granted under the 2005 Plan must equal the fair market value of Company common stock at the time of grant, and the term of any option cannot exceed 10 years after the date of the grant. The number of shares of Company common stock covered by the 2005 Plan, and the amount and grant price for each award, were proportionally adjusted for any increase or decrease in the number of issued shares of Company common stock resulting from the subdivision or consolidation of shares or the payment of a stock dividend or any other increase or decrease in the number of shares effected without receipt of consideration by the Company.

 

As of March 31, 2021, there were 55,759 options to purchase shares of Company common stock (as adjusted for all stock dividends) outstanding under the 2005 Plan. As of March 31, 2021, grants of 59,170 restricted shares of Company common stock (as adjusted for all stock dividends) have been previously made under the 2005 Plan. As a result of the adoption of the 2013 Plan by shareholders on May 23, 2013, no shares are available for future grant under the 2005 Plan.

 

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OUTSTANDING EQUITY AWARDS AT 2020 FISCAL YEAR-END

 

The following table represents stock options and stock awards outstanding for each named executive officer as of December 31, 2020.

 

  Option Awards Stock Awards
Name

Number of
Securities
Underlying
Unexercised
Options

Exercisable

(#)

Number of
Securities
Underlying
Unexercised
Options

Unexercisable

(#)

Option
Exercise
Price

($)

Option
Expiration
Date (1)

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)

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested

(#)(4)

Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights that
Have Not
Vested

($)(5)

Robert F.  Mangano 33,834 0 5.63 09/22/21 5,000 a 79,350 4000 e 63,480
          9,000 c 142,830 7292 g 115,724
          6,000 e 95,220    
          8,750 g 138,863    
                 
Stephen J. Gilhooly 3308 0 9.30 04/02/24 250 a 3,968 500 e 7,935
  1,050 0 11.98 01/04/26 375 b 5,951 1000 g 15,870
  800 200 18.65 01/03/27 500 c 7,935    
  600 400 18.30 01/02/28 750 d 11,903    
  400 600 19.38 01/04/29 1500 f 23,805    
  200 800 21.92 01/06/30 1500 h 23,805    
  200 800 13.13 03/19/30        
                 
John T. Andreacio 221 0 10.24 01/06/24 250 a 3,968 650 e 10,316
  442 0 10.10 01/02/25 1,000 b 15,870 1200 g 19,044
  630 0 11.98 01/04/26 500 c 7,935    
  800 200 18.65 01/03/27 1,850 d 29,360    
  600 400 18.30 01/02/28 2,850 f 45,230    
  600 900 19.38 01/04/29 2,500 h 39,675    
  300 1,200 21.92 01/06/30        
  300 1,200 13.13 03/19/30        

 

(1)Option awards vest 20% at grant and 20% in equal annual installments on the first four anniversaries of the date of grant. Each option has a ten-year term.

 

(2)Stock awards in this column represent restricted stock grants, which vest in 25% annual increments on the first four anniversaries of the date of grant. Vested shares are subject to certain transferability restrictions. The following table provides the grant date for each restricted stock award reflected above.

 

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Footnote Reference Grant Date
a 01/03/2017
b 07/28/2017
c 01/02/2018
d 08/13/2018
e 01/04/2019
f 08/13/2019
g 01/06/2020
h 08/05/2020

 

(3)Amounts in this column reflect the number of unvested shares of restricted stock multiplied by the closing market price per share of 1st Constitution common stock on the last trading day in 2020, which was $15.87.

 

(4)Reflects the number of unearned and unvested restricted stock units remaining under the January 4, 2019 and January 6, 2020 grants of performance-based restricted stock units reported at maximum performance. Earned restricted stock units, if any, will vest subject to Compensation Committee certification of performance results for the 2021 annual performance period. On March 3, 2021, the Compensation Committee certified 2020 performance results, and the cash equivalents, as determined in accordance with the applicable award agreements, were subsequently paid out to the award recipients with respect to the second tranche of the January 4, 2019 award and the first tranche of the January 6, 2020 award. The number of restricted stock units earned and the value realized upon Compensation Committee certification of 2020 performance results are reflected below in the “Option Exercises and Stock Vested” table.

 

(5)Amounts reflected in this column reflect the number of unearned and unvested restricted stock units multiplied by the closing market price per share of 1st Constitution common stock on the last trading day in 2020, which was $15.87, rounded to the nearest whole dollar.

 

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OPTION EXERCISES AND STOCK VESTED

 

The following table shows amounts realized by the named executive officers upon the vesting of restricted stock awards during 2020 or upon the vesting of performance-based restricted stock units based on 2020 performance. The NEOs did not exercise any option awards during 2020.

 

  Stock Awards

 

Name

Number of Shares
Acquired on
Vesting

(#)

Value Realized on
Vesting

($)(1)

 

 

 

 

Robert F.  Mangano 6,280 (2) 140,107
  5,000 (4) 111,550
  4,500 (6) 101,070
  2,000 (8) 44,620
  3,787 (9) 58,926
  4,142 (11) 72,816
     
Stephen J. Gilhooly 500 (3) 6,230
  250 (4) 5,777
  375 (5) 4,672
  250 (6) 5,615
  375 (7) 4,961
  473 (9) 7,370
  500 (10) 6,615
  473 (11) 8,315
     
John T. Andreacio 262 (2) 5,845
   1,375 (3) 17,133
   250 (4) 5,576
  1,000 (5) 12,460
  250 (6) 5,615
   925 (7) 12,238
  250 (8) 9,569
  615 (9) 12,569
  950 (10) 9,985
  568 (11) 5,845

 

(1)Amounts in this column reflect the number of shares vested multiplied by the closing market price per share of 1st Constitution common stock on the vested date (or the next trading day if the vesting date fell on a date on which there was no trading on the Nasdaq Global Market, LLC).

 

(2)Reflects award of restricted stock granted on January 4, 2016, 25% of which vested on January 4, 2020.

 

(3)Reflects award of restricted stock granted on July 28, 2016, 25% of which vested on July 28, 2020.

 

(4)Reflects award of restricted stock granted on January 3, 2017, 25% of which vested on January 3, 2020.

 

(5)Reflects award of restricted stock granted on July 28, 2017, 25% of which vested on July 28, 2020.

 

(6)Reflects award of restricted stock granted on January 2, 2018, 25% of which vested on January 2, 2020

 

(7)Reflects award of restricted stock granted on August 13, 2018, 25% of which vested on August 13, 2020.

 

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(8)Reflects award of restricted stock granted on January 4, 2019, 25% of which vested on January 4, 2020.

 

(9)Reflects award of performance-based RSUs granted on January 4, 2019, which vested on March 3, 2021, following Compensation Committee certification of performance results for the January 1, 2020 to December 31, 2020 performance period. The cash equivalents, as determined in accordance with the applicable award agreements, were subsequently paid out to the award recipients. The unearned and unvested restricted stock units that remain available for the 2021 performance period are reflected above in the “Outstanding Equity Awards at 2020 Fiscal Year-End” table.

 

(10)Reflects award of restricted stock granted on August 13, 2019, 25% of which vested on August 13, 2020.

 

(11)Reflects award of performance-based RSUs granted on January 6, 2020, which vested on March 3, 2021, following Compensation Committee certification of performance results for the January 1, 2020 to December 31, 2020 performance period. The cash equivalents, as determined in accordance with the applicable award agreements, were subsequently paid out to the award recipients. The unearned and unvested restricted stock units that remain available for the 2021 and 2022 performance periods are reflected above in the “Outstanding Equity Awards at 2020 Fiscal Year-End” table.

 

PENSION BENEFITS

 

Supplemental Executive Retirement Plans

 

The Company maintains a Supplemental Executive Retirement Plan (the “SERP”), which is a non-qualified, unfunded retirement plan, to provide a competitive level of pay replacement to executive officers designated by the Compensation Committee upon retirement. As of December 31, 2020, Mr. Mangano was the only eligible participant.

 

Name Plan Name

Number of Years
Credited Service

(#)

Present Value of
Accumulated

Benefit ($)

Payments During
Last Fiscal Year

 

Robert F. Mangano

SERP 23 4,631,001  
         
Stephen J. Gilhooly -- -- -- --
         
John T. Andreacio -- -- -- --
         

 

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Termination of Employment and Change in Control Arrangements

 

As discussed in more detail in the CD&A of this proxy statement, the Company has entered into certain agreements with the NEOs and maintains certain plans that will require the Company to provide compensation to our NEOs in the event of a termination of employment or a change in control. The table below reflects the amount of compensation payable to each of Messrs. Mangano, Gilhooly and Andreacio assuming that each of the hypothetical termination and change in control situations described in the table occurred on December 31, 2020.

 

Compensation and/or Benefits
Payable Upon Termination or
Change in Control

Termination
Without “Just
Cause” or for
“Good Reason”

 

 

Termination
Due to Death or
Disability

 

 

Termination for
“Just Cause”
Termination Without
“Just Cause” or for any
reason in connection with
or within 12 Months of a
Change in Control
  ($) ($) ($) ($)
Robert F. Mangano        
Cash Severance (1) 1,900,000 - -- 2,600,000
         
Acceleration of Equity Awards (2) 1,208,222 1,208,222 -- 1,208,222
         
Non-Qualified Pension Benefits (3) 4,775,832 4,775,832 -- 4,775,832
         
Life Insurance Benefits (4) 2,100,000 2,100,000 -- 2,100,000
         
Total Termination Benefits 9,984,054 8,084,054 -- 10,684,054
         
Stephen J. Gilhooly (5)        
Cash Severance -- -- -- 67,308
         
Acceleration of Equity Awards (2) -- 146,514 -- 146,514
         
Non-Qualified Pension Benefits -- -- -- --
         
Life Insurance Benefits (4) -- -- -- --
         
Total Termination Benefits -- 146,514 -- 213,822
         
John T. Andreacio        
Cash Severance (1) 860,000 -- -- 860,000
         
Acceleration of Equity Awards (2) -- 219,580 -- 219,580
         
Non-Qualified Pension Benefits -- -- -- --
         
Life Insurance Benefits (4) -- 1,095,000 -- 1,095,000
         
Total Termination Benefits 860,000 1,314,580 -- 2,174,580
         

 

(1)Amounts include lump sum payments and any cash bonus to which the NEO was entitled on December 31, 2020.

 

(2)For Mr. Mangano, amounts shown reflect that, upon his retirement, he would be entitled to receive his compensation, vested rights (including restricted stock units earned for 2020 performance) and employee benefits up to the date of his termination and his outstanding stock options would vest. Amounts shown also assume that Mr. Mangano would enter into a consulting agreement with the Company upon his retirement, in which case any unvested shares of restricted stock and unearned awards of restricted stock units would continue to vest in accordance with their terms during the consultancy period and would not be forfeited. Amounts shown for all NEOs assume that (i) upon a termination due to death or disability, the NEO (or his estate) would be entitled to receive equity awards earned and vested as of December 31, 2020 (including restricted stock units earned for 2020 performance), and (ii) the successor entity in a Change in Control would assume all outstanding equity award agreements.

 

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(3)Amounts include benefits that Mr. Mangano would be entitled to under the SERP, in which he is fully vested.

 

(4)Amounts include the employer paid life insurance of three times annual base salary in the event of death while employed. Coverage will remain in effect after termination only if (i) the executive is at least 60 years old and has a minimum of 10 years of service with the Company, or (ii) there is a change in control unless terminated for cause.

 

(5)The amounts reported in the table above reflect all payments to which Mr. Gilhooly would be entitled under his Letter Agreement as in effect on December 31, 2020. Mr. Gilhooly would be entitled to the payments reported in the below table if a trigger event had occurred on December 31, 2020 and his current Employment Agreement had been in effect at such time:

 

Compensation and/or Benefits
Payable Upon Termination or
Change in Control
Termination
Without
“Just
Cause” or
for “Good
Reason”

Termination
Due to
Death or
Disability

 

Termination
for “Just
Cause”
Termination Without
“Just Cause” or for
“Good Reason” reason
in connection with or
within 18 Months of a
Change in Control
  ($) ($) ($) ($)
         
Cash Severance 250,000 -- -- 375,000
         
Acceleration of Equity Awards (2) -- 146,514 -- 146,514
         
Non-Qualified Pension Benefits -- -- -- --
         
Life Insurance Benefits (4) -- -- -- --
         
Total Termination Benefits 250,000 146,514 -- 521,514

 

CEO PAY RATIO

 

We determined that the 2020 annual total compensation of the median compensated employee, which was determined after a review of the 2020 annual total compensation of all of our employees as of November 30, 2020, other than our CEO, Robert F. Mangano, was $62,840.  Mr. Mangano’s 2020 annual total compensation was $1,763,005, and the ratio of Mr. Mangano’s 2020 annual total compensation to the median employee’s 2020 annual total compensation was 28:1.

 

As of November 30, 2020, there were 218 employees working at our parent company and consolidated subsidiaries, with 100% of these individuals located in the United States. To identify the median compensated employee, we used a Consistently Applied Compensation Measure (“CACM”) defined as the aggregation of base salary and bonus received in 2020 as provided by our payroll records. Compensation for full-time employees hired during fiscal 2020 was annualized.

 

This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect a company’s compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.

 

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CERTAIN TRANSACTIONS WITH RELATED PERSONS

 

Policy for Transactions with Related Persons

 

The Board has adopted a policy addressing the Company’s procedures with respect to the review, approval and ratification of “related person transactions” that are required to be disclosed pursuant to Item 404(a) of Regulation S-K.  The policy provides that any transaction, arrangement or relationship, or series of similar transactions, in which the Company will participate or has participated and a “related person” (as defined in Item 404(a) of Regulation S-K) has or will have a direct or indirect material interest, and which exceeds $120,000 in the aggregate, is subject to review.  In its review of related person transactions, the Nominating and Corporate Governance Committee reviews the material facts and circumstances of the transaction and takes into account certain factors, where appropriate, based on the particular facts and circumstances, including: (i) the nature of the related person’s interest in the transaction; (ii) the significance of the transaction to the Company and to the related person; and (iii) whether the transaction is likely to impair the judgment of the related person to act in the best interest of the Company.

 

The Board has determined that, other than the transactions described in the following section, no transactions occurred since January 1, 2019 involving any director, director nominee or executive officer of the Company, any known 5% shareholder of the Company or any immediate family member of any of the foregoing persons (together “related persons”) that would require disclosure as a “related person transaction.”

 

Transactions with Related Persons

 

The Company, through its subsidiary, the Bank, has made loans to its directors and executive officers and their affiliates and, assuming continued compliance with generally applicable credit standards, it expects to continue to make such loans. All of these loans (i) were made in the ordinary course of business, (ii) were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and (iii) did not involve more than the normal risk of collectability or present other unfavorable features. As of December 31, 2020, the Bank had total loans and loan commitments outstanding to directors and executive officers and their affiliates of $6.7 million, or approximately 3.6% total shareholder’s equity, at such date. Rent of approximately $129,000 was paid in 2020 to an entity affiliated with a director for the lease of one of the Company’s offices. As of December 31, 2020, no director or executive officer of the Company or their affiliates was in default under any loan transaction with the Bank. As of December 31, 2019, the Bank had total loans and loan commitments outstanding to directors and executive officers and their affiliates of $6.3 million, or approximately 3.7% of total shareholder’s equity, respectively, at such dates. Rent of approximately $128,000 was paid in 2019 to an entity affiliated with a director for the lease of one of the Company’s offices. As of December 31, 2019, no director or executive officer of the Company or their affiliates was in default under any loan transaction with the Bank.

 

 63 
 

 

SHAREHOLDER PROPOSALS AND NOMINATIONS FOR THE 2022 ANNUAL MEETING

 

Proxy Statement Proposals

 

New Jersey corporate law requires that the notice of shareholders’ meeting (for either a regular or special meeting) specify the purpose or purposes of the meeting. Thus, any substantive proposal, including shareholder proposals, must be referred to in the Company’s notice of shareholders’ meeting for the proposal to be properly considered at a shareholders’ meeting.

 

Proposals of shareholders which are eligible under the rules of the SEC to be included in the Company’s 2022 proxy materials must be received by the Corporate Secretary of the Company no later than December 23, 2021.

 

If the Company changes the date of its 2022 annual meeting of shareholders to a date more than 30 days from the anniversary of the date of its 2021 Annual Meeting, then the deadline for submission of shareholder proposals will be changed to a reasonable time before the Company begins to print and mail its proxy materials. If the Company changes the date of its annual meeting in a manner that alters the deadline, the Company will so state under Part II, Item 5 of the first Quarterly Report on Form 10-Q it files with the SEC after the date change, or will notify its shareholders by another reasonable method.

 

Nominations and Other Proposals

 

Under our By-laws, written notice of shareholder nominations to the Board of Directors must be delivered to the Company’s Secretary not less than 90 days prior to the first anniversary of the preceding year’s annual meeting of shareholders. Accordingly, any shareholder who wishes to have a nomination considered at the 2022 annual meeting of shareholders must deliver a written notice (containing the information specified in our By-laws regarding the shareholder and the proposed action) to the Company’s Secretary by February 26, 2022.

 

Other business proposals that a shareholder wishes to have considered at our next annual meeting of shareholders, but which are not included in the Company’s proxy statement, may be made by a shareholder entitled to vote who has delivered a notice to the Company’s Secretary no later than March 8, 2022.

 

These advance notice provisions are in addition to, and separate from, the requirements that a shareholder must meet to have a proposal included in the proxy statement under the rules of the SEC. A proxy granted by a shareholder will give discretionary authority to the proxies to vote on any matters introduced pursuant to the above advance notice provisions, subject to applicable rules of the SEC.

 

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OTHER MATTERS

 

As of the date of this proxy statement, the Board is not aware of any other matters that may come before the Annual Meeting. However, in the event such other matters come before the meeting, the persons named on the white proxy card will have the discretion to vote on those matters using their best judgment.

 

Shareholders are urged to vote by Internet or sign the enclosed proxy and return it in the enclosed envelope. The proxy is solicited on behalf of the Board.

 

  By Order of the Board of Directors
   
   
  ROBERT F. MANGANO
  President and Chief Executive Officer

 

A copy of the annual report to shareholders for the fiscal year ended December 31, 2020 accompanies this proxy statement. The annual report is a combined report with the Company’s Annual Report on Form 10-K (without exhibits) for the year ended December 31, 2020 filed with the SEC. The Company will provide copies of the exhibits to the Form 10-K upon payment of a reasonable fee, upon receipt of a request addressed to the Corporate Secretary, 1st Constitution Bancorp, 2650 Route 130 North, Cranbury, New Jersey 08512.

 

 65 
 

 

Appendix A

 

Reconciliation of Non-GAAP Financial Measures1

 

(Dollars in thousands)  2020   2019 
Net interest income  $58,503   $47,336 
Provision for loan losses   6,698    1,350 
Non-interest income   14,643    8,237 
Non-interest expense   41,755    35,549 
Net income before income taxes   24,693    18,674 
Income taxes   6,607    5,040 
Net income   18,086    13,634 
Adjustments:          
Merger-related expenses   64    1,730 
Income tax effect of adjustments 2   (19)   (394)
Adjusted Net Income  $18,131   $14,970 
           
Earnings per share:          
Basic, as reported  $1.77   $1.54 
Adjustments   --    0.15 
Basic, as adjusted  $1.77   $1.69 
           
Diluted, as reported  $1.76   $1.53 
Adjustments   0.01    0.15 
Diluted, as adjusted  $1.77   $1.68 
           
Return on average total assets:          
As reported   1.05%   1.06%
           
Adjusted net income  $18,131   $14,970 
Average assets   1,716,202    1,283,302 
As adjusted   1.06%   1.17%
           
Return on average shareholders' equity          
As reported   10.20%   9.87%
           
Adjusted net income  $18,131   $14,970 
Average shareholders’ equity   177,318    138,101 
As adjusted   10.23%   10.84%

 

1 The Company used the non-GAAP financial measures, adjusted net income, adjusted net income per diluted share, adjusted return on average total assets, adjusted return on average shareholders' equity and tangible book value per common share, because the Company believes that it is helpful to readers in understanding the Company's financial performance and the effect on its financial statements of the merger-related expenses related to the Shore Merger in 2019. These non-GAAP measures improve the comparability of the current period results with the results of the prior periods. The Company cautions that the non-GAAP financial measures should be considered in addition to, but not as a substitute for, the Company's GAAP financial results.

 

 A-1 
 

 

 

 

   

 

 

   

 

0 1ST CONSTITUTION BANCORP Proxy Solicited on Behalf of the Board of Directors for the Annual Meeting of Shareholders on May 27, 2021 The undersigned hereby appoints Robert F. Mangano and Stephen J. Gilhooly and each of them, with full power of substitution, as attorneys and proxies for the undersigned, to attend the 2021 Annual Meeting of Shareholders of 1st Constitution Bancorp (the "Company"), to be held on May 27, 2021, at 3:00 p.m. Eastern Time, over the Internet at https://web.lumiagm.com/230355398 (password: 1st2021) unless the Company publicly announces by press release and on its website a change to a physical location, or any adjournment thereof, and to vote the number of shares of common stock of the Company that the undersigned would be entitled to vote, and with all the power the undersigned would possess, if personally present, as follows: (Continued and to be signed on the reverse side.) . 1.1 14475 .ANNUAL MEETING OF SHAREHOLDERS OF 1ST CONSTITUTION BANCORP May 27, 2021 NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of Meeting, proxy statement and proxy card are available at http://www.astproxyportal.com/ast/20330 Please sign, date and mail your proxy card in the envelope provided as soon as possible. Please detach along perforated line and mail in the envelope provided. 0000AAAAONN000000000UL 0 ANI4E THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND "FOR" PROPOSALS 2 AND 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x❑ If this proxy is properly signed and is not revoked, the proxies will vote as specified herein or, if a choice is not specified, they will vote "FOR" the four nominees listed in Item 1, "FOR" the proposals set forth in Items 2 and 3, and in their discretion on the conduct of other business if properly raised. This proxy is solicited by the Board of Directors of the Company. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. 1. The election of the following nominees as a director of the Company: FOR WITHHOLD Charles S. Crow, Ill J. Lynne Cannon Carmen M. Penta William J. Barrett FOR AGAINST ABSTAIN 2. To conduct an advisory vote on executive compensation. 3. The ratification of the selection of BDO USA LLP as independent registered public accounting firm of the Company for the Company's 2021 fiscal year. 4. In their discretion, on the conduct of other business if properly raised. Signature of Shareholder Date: Signature of Shareholder Date: Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full ■ title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. ANNUAL MEETING OF SHAREHOLDERS OF 1ST CONSTITUTION BANCORP May 27, 2021 PROXY VOTING INSTRUCTIONS INTERNET - Access "www.voteproxy.com" and follow the on-screen instructions or scan the QR code with your smartphone. Have your proxy card available when you access the web page. 0 Vote online until 11:59 PM EST the day before the meeting. MAIL - Sign, date and mail your proxy card in the envelope provided as soon as possible. VIRTUALLY AT THE MEETING - The company will be hosting the meeting live via the Internet this year. To attend the meeting via the Internet please visit https://web.lumiagm.com/230355398 (password: 1st2021) and be sure to have available the control number. GO GREEN - e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access. COMPANY NUMBER ACCOUNT NUMBER NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of Meeting, proxy statement and proxy card are available at http://www.astproxyportal.com/ast/20330 Please detach along perforated line and mail in the envelope provided IF you are not voting via the Internet. 00002222033000000000 9 052721 THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND "FOR" PROPOSALS 2 AND 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x❑ If this proxy is properly signed and is not revoked, the proxies will vote as specified herein or, if a choice is not specified, they will vote "FOR" the four nominees listed in Item 1, "FOR" the proposals set forth in Items 2 and 3, and in their discretion on the conduct of other business if properly raised. This proxy is solicited by the Board of Directors of the Company. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. 1. The election of the following nominees as a director of the Company: FOR WITHHOLD Charles S. Crow, Ill J. Lynne Cannon Carmen M. Penta William J. Barrett FOR AGAINST ABSTAIN 2. To conduct an advisory vote on executive compensation. 3. The ratification of the selection of BDO USA LLP as independent registered public accounting firm of the Company for the Company's 2021 fiscal year. 4. In their discretion, on the conduct of other business if properly raised. Signature of Shareholder Date: Signature of Shareholder Date: Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full ■ title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.