DEF 14A 1 pebo-def14a_20180426.htm DEF 14A pebo-def14a_20180426.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No. )

 

Filed by the Registrant

 

 

Filed by a Party other than the Registrant

 

 

Check the appropriate box:

 

 

 

 

 

Preliminary Proxy Statement

 

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

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material under §240.14a-12

 

Peoples Bancorp Inc.

(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):

 

 

 

 

 

No fee required

 

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:

 

 

 

 

 

 


 

 

Peoples Bancorp Inc. ●  138 Putnam Street ● P.O. Box 738

 

Marietta, OH 45750-0738

 

Telephone: (740) 374-6136

 

www.peoplesbancorp.com

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

PEOPLES BANCORP INC.

Marietta, Ohio

March 23, 2018

Dear Fellow Shareholders:

The Annual Meeting of Shareholders (the “Annual Meeting”) of Peoples Bancorp Inc. (“Peoples”) will be held at 10:00 a.m., Eastern Daylight Saving Time, on Thursday, April 26, 2018, at Peoples' corporate headquarters located at 138 Putnam Street, Marietta, Ohio, for the following purposes:

 

 

1.

To elect the following individuals as directors of Peoples for terms of three years each:

 

 

Nominee

 

Term Will Expire In

 

 

 

George W. Broughton

(for re-election)

2021

 

 

 

Charles W. Sulerzyski

(for re-election)

2021

 

 

 

Terry T. Sweet

(for re-election)

2021

 

 

 

 

 

 

 

 

2.

To consider and vote upon a non-binding advisory resolution to approve the compensation of Peoples' named executive officers as disclosed in the accompanying Proxy Statement for the Annual Meeting.

 

3.

To conduct an advisory vote on the frequency of future advisory votes on the compensation of Peoples’ named executive officers.

 

4.

To consider and vote upon a proposal to approve the Peoples Bancorp Inc. Third Amended and Restated 2006 Equity Plan.

 

5.

To consider and vote upon a proposal to adopt an amendment to Section 2.02 of Peoples' Code of Regulations in order to provide for the annual election of all directors commencing with the election of directors at Peoples' 2019 Annual Meeting of Shareholders.

 

 

 

 

 

 

 

6.

To consider and vote upon a proposal to ratify the appointment of Ernst & Young LLP as Peoples' independent registered public accounting firm for the fiscal year ending December 31, 2018.

 

 

 

 

 

 

 

7.

To transact any other business that properly comes before the Annual Meeting. Peoples' Board of Directors is not aware of any other business to come before the Annual Meeting.

If you were a holder of record of common shares of Peoples at the close of business on February 26, 2018, you will be entitled to vote in person or by proxy at the Annual Meeting.

You are cordially invited to attend the Annual Meeting.  Your vote is important, regardless of the number of common shares you own.  Whether or not you plan to attend the Annual Meeting in person, it is important that your common shares be represented.

Please complete, sign, date and return your proxy card in the postage-paid envelope provided as promptly as possible. Alternatively, refer to the instructions on the proxy card for details about transmitting your voting instructions electronically via the Internet or by telephone. Returning the proxy card or transmitting your voting instructions electronically does not deprive you of the right to attend the Annual Meeting and to vote your common shares in person in the manner described in the accompanying Proxy Statement.

Peoples’ 2017 Annual Report to Shareholders, which includes the Annual Report on Form 10-K for the fiscal year ended December 31, 2017, accompanies this notice and the Proxy Statement for the Annual Meeting.  To obtain directions to attend the Annual Meeting and vote in person, please call Investor Relations at 740-374-6136.

 

 

By Order of the Board,

 

 

M. Ryan Kirkham

 

Corporate Secretary

 

 


PEOPLES BANCORP INC.

PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS

To Be Held April 26, 2018

 

GENERAL INFORMATION

1

 

Mailing

1

 

 

 

 

 

SHAREHOLDER PROPOSALS FOR 2019 ANNUAL MEETING

1

 

 

 

 

 

VOTING INFORMATION

2

 

Who can vote at the Annual Meeting?

2

 

How do I vote?

2

 

How do I vote if my common shares are held through the Peoples Bancorp Inc. Retirement Savings Plan?

3

 

How will my common shares be voted?

3

 

How do I change or revoke my proxy?

3

 

If I vote in advance, can I still attend the Annual Meeting?

4

 

What constitutes a quorum and what is the vote required with respect to the proposals to be considered at the Annual Meeting?

4

 

Who pays the costs of proxy solicitation?

6

 

 

 

 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

7

 

 

 

 

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

11

 

 

 

 

 

TRANSACTIONS WITH RELATED PERSONS

11

 

 

 

 

 

PROPOSAL NUMBER 1: ELECTION OF DIRECTORS

12

 

Recommendation and Vote Required

13

 

 

 

 

 

EXECUTIVE OFFICERS

19

 

 

 

 

 

THE BOARD AND COMMITTEES OF THE BOARD

20

 

Independence of Directors

20

 

Executive Sessions

21

 

Meetings of the Board and Attendance at Annual Meetings of Shareholders

21

 

Committees of the Board

21

 

 

Audit Committee

21

 

 

Compensation Committee

23

 

 

Executive Committee

24

 

 

Governance and Nominating Committee

25

 

 

Risk Committee

26

 

 

 

 

 

NOMINATING PROCEDURES

27

 

 

 

 

 

SHAREHOLDER COMMUNICATIONS WITH THE BOARD

28

 

 

 

 

 

PROPOSAL NUMBER 2: VOTE ON ADVISORY RESOLUTION TO APPROVE NAMED EXECUTIVE OFFICERS' COMPENSATION

29

 

Recommendation and Vote Required

29

 

 

 

 

 

PROPOSAL NUMBER 3: ADVISORY VOTE ON THE FREQUENCY OF FUTURE SHAREHOLDER ADVISORY VOTES ON EXECUTIVE COMPENSATION

30

 

Recommendation and Vote Required

30

 

 

 

 

 

PROPOSAL NUMBER 4: APPROVAL OF THE PEOPLES BANCORP INC. THIRD AMENDED AND RESTATED 2006 EQUITY PLAN

 

31

 

General

31

 

Purpose

32

 

Effective Date and Expiration of the Third A&R 2006 Plan

33

 


 

Administration of the Third A&R 2006 Plan

33

 

Eligibility and Participation

34

 

Common Shares Available Under the Third A&R 2006 Plan

35

 

Limitations on Awards

36

 

Options

36

 

SARs

37

 

Restricted Stock and Restricted Performance Stock

38

 

Unrestricted Common Shares

38

 

Performance Units

38

 

General Performance Goals

39

 

Change in Control

40

 

Tax Withholding

42

 

Termination

42

 

Adjustments

43

 

Clawback

43

 

Limitation on Transferability of Awards

43

 

Amendment, Suspension and Termination of the Third A&R 2006 Plan

43

 

U.S. Federal Income Tax Consequences

44

 

Recommendation and Vote Required

47

 

 

 

PROPOSAL NUMBER 5: AMENDMENT TO SECTION 2.02 OF PEOPLES' CODE OF REGULATIONS TO PROVIDE FOR THE ANNUAL ELECTION OF ALL DIRECTORS COMMENCING WITH THE ELECTION OF DIRECTORS OF PEOPLES AT THE 2019 ANNUAL MEETING

47

 

Recommendation and Vote Required

48

 

 

 

 

 

EXECUTIVE COMPENSATION: COMPENSATION DISCUSSION AND ANALYSIS

48

 

Executive Summary of 2017 Fiscal Year Performance and Compensation

48

 

Compensation Philosophy and Objectives

58

 

Role of Executive Officers in Compensation Decisions

59

 

Setting Executive Compensation

60

 

2017 Executive Compensation Components

61

 

 

Base Salary

61

 

 

Cash and Equity-Based Incentive Program

62

 

 

Retirement and Other Benefits

66

 

 

Perquisites and Other Personal Benefits

69

 

 

Change in Control Agreements

69

 

Tax and Accounting Implications

70

 

 

Deductibility of Executive Compensation

70

 

 

Non-Qualified Deferred Compensation

70

 

 

Accounting for Equity-Based Compensation

71

 

Other Information

71

 

 

Stock Holding Requirement

71

 

 

Clawback Policy

71

 

 

CEO Pay Ratio

71

 

Summary

72

 

 

 

 

 

COMPENSATION COMMITTEE REPORT

72

 

Discussion of Risk Review and Assessment

72

 

 

 

 

 

SUMMARY COMPENSATION TABLE FOR 2017

74

 

 

 

 

 

GRANTS OF PLAN-BASED AWARDS FOR 2017

76

 

 

 

 

 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2017

78

 

 

 

 

 

OPTION EXERCISES AND STOCK VESTED FOR 2017

79

 

 

 

 

 

PENSION BENEFITS FOR 2017

80

 

 

 

 

 

NON-QUALIFIED DEFERRED COMPENSATION FOR 2017

80

 

 

 

 

 

OTHER POTENTIAL POST EMPLOYMENT PAYMENTS

83

 

Payments Made Upon Termination

83

 

 

Payments Made Upon Retirement

83

 

 

Payments Made Upon Death or Disability

84

 

 

Payments Made Upon a Change in Control

84

 

 

 

 

 

EQUITY COMPENSATION PLAN INFORMATION

88

 

 

 

 

 

DIRECTOR COMPENSATION

89

 

Compensation Paid to Board Members

89

 

 

2017 Fiscal Year

89

 

 

2018 Fiscal Year

90

 

Other Information Regarding Equity-Based Compensation

90

 

Deferred Compensation Plan for Directors

90

 

All Other Compensation

91

 

Stock Ownership Guidelines

91

 

 

 

 

DIRECTOR COMPENSATION FOR 2017

92

 

 

 

 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

93

 

 

 

 

AUDIT COMMITTEE REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017

93

 

 

 

 

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

94

 

Fees

94

 

Pre-Approval Policy

94

 

 

 

 

PROPOSAL NUMBER 6: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

95

 

Recommendation and Vote Required

95

 

 

 

 

HOUSEHOLDING OF ANNUAL MEETING MATERIALS

96

 

 

 

 

OTHER MATTERS

96

 

 

APPENDIX A – Peoples Bancorp Inc. Third Amended and Restated 2006 Equity Plan

A-1

 

 

APPENDIX B – Proposed Amendment to Section 2.02 of Code of Regulations of Peoples Bancorp Inc.

B-1

 

 

 


PEOPLES BANCORP INC.

138 Putnam Street

P.O. Box 738

Marietta, Ohio 45750-0738

(740) 374-6136

www.peoplesbancorp.com

PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS

To Be Held April 26, 2018

GENERAL INFORMATION

This Proxy Statement is furnished in connection with the solicitation of proxies on behalf of the Board of Directors (the “Board”) of Peoples Bancorp Inc. (“Peoples”) for use at the Annual Meeting of Shareholders, to be held on Thursday, April 26, 2018, at 10:00 a.m., Eastern Daylight Saving Time (the “Annual Meeting”). The Annual Meeting will be held at Peoples’ corporate headquarters located at 138 Putnam Street, Marietta, Ohio. This Proxy Statement summarizes the information that you will need in order to vote.

Peoples has two wholly-owned operating subsidiaries: Peoples Bank and Peoples Investment Company, and Peoples holds all of the common securities of NB&T Statutory Trust III. Peoples Bank's operating subsidiaries include an insurance agency, Peoples Insurance Agency, LLC, and an asset management company, Peoples Tax Credit Equity, LLC. In 2003, Peoples established Peoples Bank Foundation, Inc. as an independent charitable foundation to provide financial assistance and grants to local organizations within Peoples' market area.

Mailing

We mailed this Proxy Statement and the accompanying proxy card on or about March 23, 2018 to all shareholders entitled to vote their common shares at the Annual Meeting.  Other than the common shares, there are no voting securities of Peoples outstanding.  We also sent with this Proxy Statement  Peoples’ 2017 Annual Report to Shareholders, which includes the Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (the “2017 Annual Report”).

Additional copies of the 2017 Annual Report may be obtained, without charge, by sending a written request to: M. Ryan Kirkham, Corporate Secretary, Peoples Bancorp Inc., 138 Putnam Street, P.O. Box 738, Marietta, Ohio 45750-0738. A copy of the 2017 Annual Report can be obtained through the “SEC Filings - Documents” section of the “Investor Relations” page of Peoples' website at www.peoplesbancorp.com and is also on file with the Securities and Exchange Commission (the “SEC”) and available on the SEC's website at www.sec.gov.

SHAREHOLDER PROPOSALS

FOR 2019 ANNUAL MEETING

Proposals by shareholders intended to be presented at the 2019 Annual Meeting of Shareholders (the “2019 Annual Meeting”) must be received by the Corporate Secretary of Peoples no later than November 23, 2018, to be eligible for inclusion in Peoples' form of proxy, notice of meeting, Proxy Statement and Notice of Internet Availability of Proxy Materials, as applicable, relating to the 2019 Annual Meeting. Peoples will not be required to include in its form of proxy, notice of meeting, Proxy Statement or Notice of Internet Availability of Proxy Materials, as applicable, a shareholder proposal that is received after that date or that otherwise fails to meet the requirements for shareholder proposals established by the applicable SEC rules.

1


The SEC has promulgated rules relating to the exercise of discretionary voting authority under proxies solicited by the Board. If a shareholder intends to present a proposal at the 2019 Annual Meeting without inclusion of that proposal in Peoples' proxy materials, and does not notify the Corporate Secretary of Peoples of the proposal by February 6, 2019, or if Peoples meets other requirements of the applicable SEC rules, the proxies solicited by the Board for use at the 2019 Annual Meeting will confer discretionary authority to vote on the proposal should it then be raised at the 2019 Annual Meeting.

In each case, written notice must be given to Peoples' Corporate Secretary, at the following address: Peoples Bancorp Inc., 138 Putnam Street, P.O. Box 738, Marietta, Ohio 45750-0738, Attention: Corporate Secretary.

Shareholders desiring to nominate candidates for election as directors at the 2019 Annual Meeting must follow the procedures described in the section captioned “NOMINATING PROCEDURES.”

VOTING INFORMATION

Who can vote at the Annual Meeting?

Only holders of common shares of record at the close of business on February 26, 2018, are entitled to receive notice of and to vote at the Annual Meeting. At the close of business on February 26, 2018, there were 18,364,088 common shares outstanding and entitled to vote. Other than the common shares, there are no voting securities of Peoples outstanding.

Each common share entitles the holder thereof to one vote on each matter to be voted upon at the Annual Meeting. There is no cumulative voting with respect to the election of directors.

How do I vote?

Your common shares may be voted by one of the following methods:

 

by traditional paper proxy card;

 

by submitting voting instructions via the website identified on your proxy card;

 

by submitting voting instructions by telephone; or

 

in person at the Annual Meeting.

Submitting Voting Instructions via the Internet or by Telephone.  If you are a shareholder of record (i.e., if your common shares are registered with Peoples in your own name), you may submit voting instructions via the Internet or by telephone, by following the instructions stated on your proxy card. If your common shares are registered in the name of a broker, a financial institution or another nominee (i.e., you hold your common shares in “street name”), your nominee may be participating in a program that allows you to submit voting instructions via the Internet or by telephone. If so, the voting instruction form your nominee sent you will provide instructions for submitting your voting instructions via the Internet or by telephone. The last-dated proxy or voting instructions you submit (by any means) will supersede any previously-submitted proxies and voting instructions. Also, if you are a shareholder of record and you submit voting instructions via the Internet or by telephone and later decide to attend the Annual Meeting, you may revoke your previously-submitted voting instructions and vote in person at the Annual Meeting.

The deadline for submitting voting instructions via the Internet or by telephone as a shareholder of record is 11:59 p.m., Central Daylight Saving Time, on April 25, 2018. For shareholders whose common shares are registered in the name of a broker, a financial institution or another nominee, please consult the instructions provided by your nominee for information about the deadline for submitting voting instructions via the Internet or by telephone.

Voting in Person.  If you are a record shareholder and you attend the Annual Meeting, you may deliver your completed proxy card in person or you may vote by completing a ballot, which will be available at the Annual Meeting.

2


If you hold your common shares in “street name” through a broker, a financial institution or another nominee, then that nominee is considered the shareholder of record for voting purposes and will give you instructions for voting your common shares. As a beneficial owner, you have the right to direct the nominee how to vote the common shares held in your account. Your nominee may only vote the common shares of Peoples that your nominee holds for you in accordance with your instructions. If you have instructed a broker, a financial institution or another nominee to vote your common shares, the options for revoking your proxy described below do not apply and instead you must follow the instructions provided by your nominee to change your vote.

If you hold your common shares in “street name” and wish to attend the Annual Meeting and vote in person, you must bring an account statement or letter from your broker, financial institution or other nominee authorizing you to vote on behalf of such nominee. The account statement or letter must show that you were the direct or indirect beneficial owner of the common shares on February 26, 2018, the record date for voting at the Annual Meeting.

How do I vote if my common shares are held through the Peoples Bancorp Inc. Retirement Savings Plan?

If you participate in the Peoples Bancorp Inc. Retirement Savings Plan (the “Retirement Savings Plan”), you will be entitled to instruct the trustee of the Retirement Savings Plan how to vote common shares that have been allocated to your account. If you are such a participant, you will receive a proxy card for the common shares allocated to your account in the Retirement Savings Plan. If you do not provide voting instructions to the trustee of the Retirement Savings Plan by 11:59 p.m., Central Daylight Saving Time, on April 23, 2018, the trustee will not vote the common shares allocated to your account.

How will my common shares be voted?

Those common shares represented by a properly-executed proxy card that is received prior to the Annual Meeting or by properly-authenticated Internet or telephone voting instructions that are submitted prior to the deadline for doing so, and not subsequently revoked, will be voted in accordance with your instructions by your “proxies” (the individuals named on your proxy card or in the voting instructions). If you submit a valid proxy card prior to the Annual Meeting, or timely submit your voting instructions via the Internet or by telephone, but do not complete the proxy card or voting instructions, your proxy will vote your common shares as recommended by the Board, except in the case of broker non-votes, where applicable, as follows:

 

 

FOR” the election as Peoples directors of the nominees listed on pages 12 through 15 under “PROPOSAL NUMBER 1: ELECTION OF DIRECTORS”;

 

FOR” the non-binding advisory resolution to approve the compensation of Peoples' named executive officers as disclosed in this Proxy Statement;

 

to hold an advisory vote for the approval of the compensation of Peoples' named executive officers “EVERY ONE YEAR”;

 

FOR the approval of the Peoples Bancorp Inc. Third Amended and Restated 2006 Equity Plan;

 

FOR the adoption of an amendment to Section 2.02 of Peoples' Code of Regulations in order to provide for the annual election of all directors commencing with the election of directors at Peoples’ 2019 Annual Meeting; and

 

FOR” the ratification of the appointment of Ernst & Young LLP as Peoples' independent registered public accounting firm for the fiscal year ending December 31, 2018.

No appraisal or dissenters' rights exist for any action proposed to be taken at the Annual Meeting. If any other matters are properly presented for voting at the Annual Meeting, the individuals appointed as proxies will vote on those matters, to the extent permitted by applicable law, in accordance with their best judgment.

How do I change or revoke my proxy?

Registered shareholders who submit proxies retain the right to revoke them at any time before they are exercised. Unless revoked, the common shares represented by such proxies will be voted at the Annual Meeting. If

3


you are a registered shareholder, you may revoke your proxy at any time before it is actually exercised at the Annual Meeting by:

 

filing a written notice of revocation with the Corporate Secretary of Peoples at 138 Putnam Street, P.O. Box 738, Marietta, Ohio 45750-0738, which must be received prior to the Annual Meeting;

 

executing and returning a later-dated proxy card, which must be received prior to the Annual Meeting;

 

accessing the designated Internet website prior to the deadline for transmitting voting instructions electronically;

 

using the designated toll-free telephone number prior to the deadline for transmitting voting instructions telephonically; or

 

attending the Annual Meeting and giving notice of revocation in person.

Attendance at the Annual Meeting will not, by itself, revoke your proxy. The last-dated proxy or voting instructions you submit (by any means) will supersede all previously-submitted proxies and voting instructions. If you hold your common shares in “street name” and instructed your broker, financial institution or other nominee to vote your common shares and you would like to revoke or change your vote, then you must follow the instructions received from your nominee to change your vote.

If I vote in advance, can I still attend the Annual Meeting?

Yes. You are encouraged to vote promptly, by returning your signed proxy card by mail or by submitting your voting instructions via the Internet or by telephone, so that your common shares will be represented at the Annual Meeting. However, appointing a proxy or submitting voting instructions does not affect your right to attend the Annual Meeting and vote your common shares in person.

What constitutes a quorum and what is the vote required with respect to the proposals to be considered at the Annual Meeting?

Under Peoples' Code of Regulations, a quorum is a majority of the voting shares of Peoples then outstanding and entitled to vote at the Annual Meeting. Other than the common shares, there are no voting shares outstanding. Common shares may be present in person or represented by proxy at the Annual Meeting. Both abstentions and broker non-votes are counted as being present for purposes of determining the presence of a quorum. There were 18,364,088 common shares outstanding and entitled to vote on February 26, 2018, the record date for the Annual Meeting. A majority of the outstanding common shares, or 9,182,045 common shares, present in person or represented by proxy, will constitute a quorum. A quorum must exist to conduct business at the Annual Meeting.

If a proposal is routine, a broker holding common shares for a beneficial owner in street name may vote on the proposal without receiving instructions from the beneficial owner. If a proposal is non-routine, a broker may vote on the proposal only if the beneficial owner has provided voting instructions. A “broker non-vote” occurs when a broker holding common shares for a beneficial owner is unable to vote on a proposal because the proposal is non-routine and the beneficial owner has not provided any voting instructions.

The ratification of the appointment of Peoples' independent registered public accounting firm is the only routine proposal. Each of the other proposals is a non-routine proposal on which a broker may vote only if the beneficial owner has provided voting instructions.

4


The following table sets forth the votes required, and the impact of abstentions and broker non-votes, if any, on the six proposals:

 

Item

 

Vote Required

 

 

Impact of Abstentions and

Broker

Non-Votes, if any

Election of Directors

 

Under Ohio law and Peoples' Code of Regulations, the three nominees for election as directors of Peoples receiving the greatest number of votes “FOR” their election will be elected as directors of Peoples in the class whose terms will expire in 2021.

 

 

 

 

 

 

Common shares as to which the authority to vote is withheld will be counted for quorum purposes but will not affect whether a nominee has received sufficient votes to be elected.

 

Broker non-votes will not count as a vote on the proposal and will not affect the outcome of the vote.

 

 

 

 

 

 

 

 

 

 

 

 

Approval of Non-Binding Advisory Resolution to Approve Compensation of Peoples' Named Executive Officers

 

The affirmative vote of a majority of the common shares represented at the Annual Meeting, in person or by proxy, and entitled to vote on the proposal, is required to approve the non-binding advisory resolution to approve the compensation of Peoples' named executive officers as disclosed in this Proxy Statement.

 

 

 

Abstentions have the same effect as a vote “AGAINST” the proposal.

 

Broker non-votes will not be counted in determining whether the proposal has been approved.

 

 

Determination, in a Non-Binding Advisory Vote, of the Frequency of Future Shareholder Advisory Votes on the Compensation of Peoples’ Named Executive Officers

 

The affirmative vote of a majority of the common shares represented at the Annual Meeting, in person or by proxy, and entitled to vote on the proposal, is required to approve on a non-binding advisory basis, one of the selections as to the frequency of future shareholder advisory votes on the compensation of Peoples’ named executive officers.

 

 

 

 

Abstentions will not count as a vote for any of the selections and will not affect the outcome of the vote.

 

Broker non-votes will not count as a vote for any of the selections and will not affect the outcome of the vote.

 

 

 

 

 

 

 

 

 

 

 

 

Approval of the Peoples Bancorp Inc. Third Amended and Restated 2006 Equity Plan

 

The affirmative vote of a majority of the common shares represented at the Annual Meeting, in person or by proxy, and entitled to vote on the proposal, is required to approve the Peoples Bancorp Inc. Third Amended and Restated 2006 Equity Plan.

 

 

 

Abstentions have the same effect as a vote “AGAINST” the proposal.

 

Broker non-votes will not be counted in determining whether the proposal has been approved.

Adoption of Amendment to Section 2.02 of Peoples’ Code of Regulations

 

The affirmative vote of at least a majority of the outstanding common shares is required to adopt the amendment to Section 2.02 of Peoples’ Code of Regulations.

 

 

 

Abstentions have the same effect as a vote “AGAINST” the proposal.

 

Broker non-votes have the same affect as a vote “AGAINST” the proposal.

5


Ratification of Appointment of Independent Registered Public Accounting Firm

 

The affirmative vote of a majority of the common shares represented at the Annual Meeting, in person or by proxy, and entitled to vote on the proposal, is required to ratify the appointment of Ernst & Young LLP as Peoples' independent registered public accounting firm for the fiscal year ending December 31, 2018.

 

Abstentions have the same effect as a vote “AGAINST” the proposal.

Peoples' policy is to maintain confidentiality with respect to proxy cards, ballots, voting instructions submitted electronically and telephonically and voting tabulations that identify individual shareholders. However, exceptions to this policy may be necessary in some instances to comply with applicable legal requirements and, in the case of any contested proxy solicitation, to verify the validity of proxies presented by any person and the results of the voting. Inspectors of election and any employees associated with processing proxy cards or ballots, reviewing voting instructions submitted electronically and telephonically and tabulating the vote must acknowledge their responsibility to comply with this policy of confidentiality. Who pays the costs of proxy solicitation? Peoples will pay the costs of soliciting proxies on behalf of the Board, other than the Internet access or telephone usage fees which may be charged to shareholders when voting electronically or by telephone. Although we are soliciting proxies by mailing these proxy materials to the holders of our common shares, the directors, officers and employees of Peoples and our subsidiaries also may solicit proxies by further mailings, telephone, electronic mail, facsimile, or personal contact without receiving any additional compensation for such solicitations. Arrangements will also be made with brokerage firms, financial institutions and other nominees who are record holders of common shares of Peoples for the forwarding of solicitation materials to the beneficial owners of such common shares. Peoples will reimburse its transfer agent, as well as these brokers, financial institutions and other nominees, for their reasonable out-of-pocket costs in forwarding the proxy materials to the beneficial shareholders. NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held on April 26, 2018:  Peoples' Notice of Annual Meeting of Shareholders, this Proxy Statement and Peoples' 2017 Annual Report are available at www.peoplesbancorp.com by selection the “Proxy Statement” or “2017 Annual Report” link as appropriate, next to the caption “Peoples Bancorp Inc. Proxy Materials.”

6


SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of February 26, 2018 (except as otherwise noted), information concerning the beneficial ownership of common shares by the only persons known by Peoples to be the beneficial owner of more than 5% of Peoples' outstanding common shares:

 

Name and Address of

Beneficial Owner

 

Amount and Nature of

Beneficial Ownership

 

 

Percent of Class (1)

 

 

 

 

 

 

 

 

 

 

Dimensional Fund Advisors LP

Building One

6300 Bee Cave Road

Austin, TX 78746

 

 

1,351,679

 

(2)

 

7.36

%

 

 

 

 

 

 

 

 

 

BlackRock, Inc.

55 East 52nd Street

New York, NY 10055

 

 

1,291,788

 

(3)

 

7.03

%

 

 

 

 

 

 

 

 

 

Peoples Bank - Trustee

138 Putnam Street

P.O. Box 738

Marietta, OH 45750-0738

 

 

1,288,263

 

(4)

 

7.02

%

 

 

 

 

 

 

 

 

 

Franklin Advisory Services, LLC                                                           55 Challenger Road                                                                                                                    Suite 501                                                                                                          Ridgefield Park, NJ 07660

 

 

988,988

 

(5)

 

5.39

%

 

 

(1)

The “Percent of Class” computation is based on 18,364,088 common shares outstanding and entitled to vote on February 26, 2018.

(2)

Based on information contained in a Schedule 13G/A, dated February 9, 2018 and filed with the SEC on the same date, on behalf of Dimensional Fund Advisors LP, a registered investment adviser, to report its beneficial ownership of common shares of Peoples as of December 31, 2017. The Schedule 13G/A reported that Dimensional Fund Advisors LP had sole voting power as to 1,295,218 common shares and sole investment power as to 1,351,679 common shares, all of which common shares were held in portfolios of four registered investment companies to which Dimensional Fund Advisors LP or one of its subsidiaries furnishes investment advice and of certain other commingled funds, group trusts and separate accounts for which Dimensional Fund Advisors LP or one of its subsidiaries serves as investment manager or sub-adviser. The common shares reported were owned by the investment companies, commingled funds, group trusts and separate accounts. Dimensional Fund Advisors LP disclaimed beneficial ownership of the reported common shares.

(3)

Based on information contained in a Schedule 13G/A dated January 24, 2018 and filed with the SEC on January 29, 2018, on behalf of BlackRock, Inc., to report the beneficial ownership by its subsidiaries (BlackRock Advisors, LLC; BlackRock Investment Management (UK) Limited; BlackRock Asset Management Canada Limited; BlackRock (Luxembourg) S.A.; BlackRock (Netherlands) B.V.; BlackRock Fund Advisors; BlackRock Asset Management Ireland Limited; BlackRock Institutional Trust Company, National Association; BlackRock Financial Management, Inc.; BlackRock Asset Management Schweiz AG; and BlackRock Investment Management, LLC) of common shares of Peoples as of December 31, 2017. The Schedule 13G/A reported that BlackRock, Inc., through its subsidiaries, had sole voting power as to 1,249,595 common shares and sole investment power as to 1,291,788 common shares.

(4)

Includes Peoples Bank's beneficial ownership through Trust and Investment Services, a division of Peoples Bank, in the following manner: 65,120 common shares with sole voting power; 1,223,143 common shares with shared voting power; 17,367 common shares with sole investment power; and 1,270,896 common shares

7


with shared investment power. The officers and directors of Peoples Bank and of Peoples disclaim beneficial ownership of the common shares beneficially owned by Peoples Bank through Trust and Investment Services.

(5)

Based on information contained in a Schedule 13G dated January 30, 2018 and filed with the SEC on February 5, 2018, on behalf of Franklin Advisory Services, LLC (“FAS”) to report its beneficial ownership of common shares of Peoples as of December 31, 2017. The Schedule 13G reported that FAS had sole voting power as to 906,788 common shares and sole investment power as to 988,988 common shares. The Schedule 13G reported that common shares reported were beneficially owned by one or more open-end investment management companies or other managed accounts that are clients of FAS, an indirect wholly-owned subsidiary of Franklin Resources, Inc. (“FRI”). The Schedule 13G further reported that when an investment management contract (including a sub-advisory agreement) delegates to FAS investment discretion or voting power over the securities held in the investment advisory accounts that subject to that agreement, FRI treats FAS as having sole investment discretion or voting authority, as the case may be, unless the agreement specifies otherwise. FAS disclaimed any pecuniary interest in, and disclaimed that it was the beneficial owner of, any of the common shares reported in the Schedule 13G.

The following table sets forth, as of February 26, 2018, certain information with respect to the common shares beneficially owned by each current director of Peoples (including each nominee for re-election as a director of Peoples), by each individual named in the “SUMMARY COMPENSATION TABLE FOR 2017” on page 74 and by all current executive officers and directors of Peoples as a group:

 

Amount and Nature of

Beneficial Ownership (1)

 

 

 

Name of Beneficial Owner

Common Shares Presently Held

Percent of Class (2)

 

Tara M. Abraham

 

6,391

 

(3)

(4)

 

S. Craig Beam

 

19,553

 

(5)

(4)

 

George W. Broughton

 

161,750

 

(6)

(4)

 

David F. Dierker

 

6,000

 

(7)

(4)

 

James S. Huggins

 

6,047

 

(8)

(4)

 

Brooke W. James

 

177,952

 

(9)

(4)

 

David L. Mead

 

12,362

 

(10)

(4)

 

Susan D. Rector

 

14,719

 

(11)

(4)

 

John C. Rogers (12)

 

13,908

 

(13)

(4)

 

Carol A. Schneeberger (12)

 

54,376

 

(14)

(4)

 

Robyn A. Stevens (12)

 

9,425

 

(15)

(4)

 

Charles W. Sulerzyski (12)

 

56,503

 

(16)

(4)

 

Terry T. Sweet

 

6,338

 

(17)

(4)

 

Douglas V. Wyatt (12)

 

10,727

 

(18)

(4)

 

All current directors and

   executive officers as a

   group (numbering 14)

 

556,052

 

(19)

3.03%

 

 

(1)

Unless otherwise indicated in the footnotes to this table, the beneficial owner has sole voting and investment power with respect to all of the common shares reflected in the table. All fractional common shares have been rounded down to the nearest whole common share. The mailing address of each of the current executive officers and directors of Peoples is 138 Putnam Street, P.O. Box 738, Marietta, Ohio 45750-0738.

(2)

The “Percent of Class” computation is based on 18,364,088 common shares outstanding and entitled to vote on February 26, 2018.

(3)

Includes 51 common shares held jointly by Tara M. Abraham and her husband, as to which Ms. Abraham exercises shared voting and investment power. Also includes 550 common shares held jointly in an investment account by Ms. Abraham and her husband, as to which Ms. Abraham exercises shared voting and investment power. Does not include 6,585 common shares accrued to Ms. Abraham's bookkeeping account under the

8


Third Amended and Restated Deferred Compensation Plan for Directors of Peoples Bancorp Inc. and Subsidiaries (the “Deferred Compensation Plan for Directors”), as to which Ms. Abraham has no voting or investment power.

(4)

Reflects beneficial ownership of less than 1% of the outstanding common shares.

(5)

Includes 6,326 common shares held in an investment account by S. Craig Beam, as to which Mr. Beam exercises sole voting and investment power. Also includes 8,709 common shares held jointly by Mr. Beam and his wife, as to which Mr. Beam exercises shared voting and investment power. Does not include 1,997 common shares held of record and beneficially owned by Mr. Beam's wife, as to which Mr. Beam has no voting or investment power and disclaims beneficial ownership.

(6)

Includes 10,913 common shares held in an Individual Retirement Account by Peoples Bank as custodian, as to which George W. Broughton exercises sole voting and investment power. Does not include 16,333 common shares held of record and beneficially owned by Mr. Broughton's wife, as to which Mr. Broughton has no voting or investment power and disclaims beneficial ownership. Does not include 1,793 common shares accrued to Mr. Broughton's bookkeeping account under the Deferred Compensation Plan for Directors, as to which Mr. Broughton has no voting or investment power.

(7)

Includes 5,000 common shares held in an investment account by David F. Dierker, as to which Mr. Dierker exercises sole voting and investment power. Does not include 7,991 common shares accrued to Mr. Dierker's bookkeeping account under the Deferred Compensation Plan for Directors, as to which Mr. Dierker has no voting or investment power.

(8)

Also includes 114 common shares held jointly by Mr. Huggins and his wife, as to which Mr. Huggins exercises shared voting and investment power. Includes 1,064 common shares held jointly in an investment account by Mr. Huggins and his wife, as to which Mr. Huggins exercises shared voting and investment power. Does not include 4,651 common shares accrued to Mr. Huggins' bookkeeping account under the Deferred Compensation Plan for Directors, as to which Mr. Huggins has no voting or investment power.

(9)

Includes 3,866 common shares held by Ms. James as custodian, as to which Ms. James exercises sole voting and investment power.

(10)

Includes 3,500 common shares held in an investment account by David L. Mead, as to which Mr. Mead exercises sole voting and investment power. Does not include 12,552 common shares accrued to Mr. Mead's bookkeeping account under the Deferred Compensation Plan for Directors, as to which Mr. Mead has no voting or investment power.

(11)

Includes 3,120 common shares held in an investment account by Susan D. Rector, as to which Ms. Rector exercises sole voting and investment power.

(12)

Executive officer of Peoples during the 2017 fiscal year and named in the “SUMMARY COMPENSATION TABLE FOR 2017” on page 74.

(13)

Includes 2,009 common shares held in an investment account by John C. Rogers, as to which Mr. Rogers exercises sole voting and investment power. Also includes 221 common shares held by John C. Rogers in the Peoples Bancorp Inc. Employee Stock Purchase Plan (the “ESPP”), as to which Mr. Rogers exercises sole voting and investment power. Also includes (i) 1,700 unvested restricted common shares which were granted to Mr. Rogers on February 13, 2017 and will vest as described in footnote (5) to the table under “OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2017;” and (ii) 2,540 unvested restricted common shares which were granted to Mr. Rogers on February 2, 2018 and will vest as described in footnote (7) to the table under “OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2017.” Mr. Rogers has voting power with respect to all of the reported restricted common shares and the right to receive dividends paid with respect to the underlying common shares at the same level as paid to other shareholders of Peoples; however, the dividends will be subject to the same restrictions on transfer as the restricted common shares with respect to which they were paid.

(14)

Includes 8,875 common shares held jointly by Carol A. Schneeberger and her husband, as to which Ms. Schneeberger exercises shared voting and investment power. Includes 18,274 common shares allocated to the account of Ms. Schneeberger in the Retirement Savings Plan, as to which Ms. Schneeberger has the power to

9


direct the voting and investment. Includes 1,771 common shares held by Ms. Schneeberger in the ESPP. Also includes (i) 1,700 unvested restricted common shares which were granted to Ms. Schneeberger on February 13, 2017 and will vest as described in footnote (5) to the table under “OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2017;and (ii) 2,116 unvested restricted common shares which were granted to Ms. Schneeberger on February 2, 2018 and will vest as described in footnote (7) to the table under “OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2017. Ms. Schneeberger has voting power with respect to all of the reported restricted common shares and the right to receive dividends paid with respect to the underlying common shares at the same level as paid to other shareholders of Peoples; however, the dividends will be subject to the same restrictions on transfer as the restricted common shares with respect to which they were paid.

(15)

Includes 501 common shares allocated to the account of Robyn A. Stevens in the Retirement Savings Plan, as to which Ms. Stevens has the power to direct the voting and investment. Also includes (i) 1,000 unvested restricted common shares which were granted to Ms. Stevens on February 2, 2016 and will vest as described in footnote (4) to the table under “OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2017;” (ii) 1,700 unvested restricted common shares which were granted to Ms. Stevens on February 13, 2017 and will vest as described in footnote (5) to the table under “OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2017;” and (iii) 1,975 unvested restricted common shares which were granted to Ms. Stevens on February 2, 2018 and will vest as described in footnote (7) to the table under “OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2017.” Ms. Stevens has voting power with respect to all of the reported restricted common shares and the right to receive dividends paid with respect to the underlying common shares at the same level as paid to other shareholders of Peoples; however, the dividends will be subject to the same restrictions on transfer as the restricted common shares with respect to which they were paid.

(16)

Includes 37,849 common shares held in an investment account by Charles W. Sulerzyski, as to which Mr. Sulerzyski exercises sole voting and investment power. Includes 3,515 common shares held by Mr. Sulerzyski in the ESPP. Also includes (i) 6,107 unvested restricted common shares which were granted to Mr. Sulerzyski on February 13, 2017 and will vest as described in footnote (5) to the table under “OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2017;” and (ii) 9,031 unvested restricted common shares which were granted to Mr. Sulerzyski on February 2, 2018 and will vest as described in footnote (7) the table under “OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2017.” Mr. Sulerzyski has voting power with respect to all of the reported restricted common shares and the right to receive dividends paid with respect to the underlying common shares at the same level as paid to other shareholders of Peoples; however, the dividends will be subject to the same restrictions on transfer as the restricted common shares with respect to which they were paid.

(17)

Includes 5,000 common shares held in investment accounts by Terry T. Sweet, as to which Mr. Sweet exercises sole voting and investment power.

(18)

Includes (i) 7,500 unvested restricted common shares which were granted to Douglas V. Wyatt on June 1, 2016 and will vest as described in footnote (6) to the table under “OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2017;” (ii) 970 unvested restricted common shares which were granted to Mr. Wyatt on February 13, 2017 and will vest as described in footnote (5) to the table under “OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2017;” and (iii) 2,257 unvested restricted common shares which were granted to Mr. Wyatt on February 2, 2018 and will vest as described in footnote (7) the table under “OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2017.” Mr. Wyatt has voting power with respect to all of the reported restricted common shares and the right to receive dividends paid with respect to the underlying common shares at the same level as paid to other shareholders of Peoples; however, the dividends will be subject to the same restrictions on transfer as the restricted common shares with respect to which they were paid.

10


(19)Includes common shares held jointly by current directors and executive officers with other persons, as well as an aggregate of 18,775 common shares allocated to the accounts of the current executive officers of Peoples in the Retirement Savings Plan. See notes (3), (5) through (11), and (13) through (18) above.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires that Peoples' directors and executive officers, and any persons beneficially holding more than 10 percent of Peoples' outstanding common shares, file statements with the SEC reporting their initial beneficial ownership of common shares and any subsequent changes in their beneficial ownership. Peoples is required to disclose in this Proxy Statement any late statements, if any statements were not filed within the time periods mandated by the SEC. Based solely on Peoples' review of (i) Section 16(a) statements filed on behalf of these persons for their transactions during Peoples' 2017 fiscal year and (ii) written representations received from these persons that no other Section 16(a) statements were required to be filed by them for transactions during Peoples' 2017 fiscal year, Peoples believes that all Section 16(a) filing requirements applicable to Peoples' executive officers and directors, and persons holding more than 10 percent of Peoples' outstanding common shares, were complied with, except:

 

George W. Broughton, a director of Peoples, filed late one Form 4 reporting one disposition of common shares which occurred on February 1, 2017, and was reported on February 8, 2017.

 

Terry T. Sweet, a director of Peoples, filed late one Form 4 reporting two acquisitions of common shares which occurred on December 4, 2017, and were reported on January 31, 2018.

TRANSACTIONS WITH RELATED PERSONS

During the 2017 fiscal year, Peoples Bank entered into banking transactions and lending relationships with certain executive officers and directors of Peoples, with members of their respective immediate families and with corporations or organizations as to which directors of Peoples serve as executive officers or beneficially own more than 10% of the equity securities. All such loans (i) were made in the ordinary course of business, (ii) were made on substantially the same terms, including interest rates charged and collateral required, as those prevailing at the time for comparable loans with persons not related to Peoples or Peoples Bank, and (iii) did not involve more than the normal risk of collectability or present other unfavorable features to Peoples or Peoples Bank.

The above loans were subject to Peoples Bank's written policies, procedures and standard underwriting criteria applicable to loans generally, and were made in accordance with the Federal Reserve Board's Regulation O (“Regulation O”) requiring loans to executive officers and directors of Peoples Bank in excess of $500,000 to be approved by the full Board of Directors of Peoples Bank.

The Board has adopted the Peoples Bancorp Inc. Related Person Transaction Policy (the “Related Person Transaction Policy”), a copy of which is posted under the “Governance Documents” tab on both the “Investor Relations” page and the “Corporate Governance” page of Peoples' website at www.peoplesbancorp.com. The purpose of the Related Person Transaction Policy is to set forth the guidelines and procedures under which certain related person transactions must be reviewed and approved or ratified by the Audit Committee.

A “related person transaction” is any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which: (1) Peoples or one of our subsidiaries was, is or will be a party or participant, or had, has or will have a direct or indirect interest; (2) the amount involved exceeds or is expected to exceed $120,000, or if the limitations prescribed by Regulation O apply, such lesser amount, if any, as may be prescribed by Regulation O; and (3) a related person had, has or will have a direct or indirect interest. A “related person” is a person who is or was a director, an executive officer, or a nominee for election as a director at any time since the beginning of Peoples' last fiscal year or a five percent shareholder of Peoples at the time of the occurrence or at any time during the existence of the transaction, and their respective immediate family members. Related person transactions deemed pre-approved or ratified, as appropriate, include: (1) any transaction where the related person's interest arises solely from ownership of common shares if all shareholders receive the same benefit; (2) any transaction involving compensation to an executive officer if the executive officer is not an immediate family member of another executive officer or director of Peoples and the compensation has been approved by the

11


Compensation Committee or the Board; (3) any transaction involving compensation to Peoples' directors if the compensation is required to be reported pursuant to Item 402(k) of SEC Regulation S-K; (4) any extension of credit by Peoples Bank to an immediate family member of a related person, or extension of credit in respect of which an immediate family member of a related person has an interest, if the extension of credit is not subject to Regulation O and meets certain terms specified in the Related Person Transaction Policy; (5) any transaction where the related person’s interest derives solely from the related person’s position as a director of another corporation or organization that is a party to the transaction; and (6) any transaction where the related person’s interest derives solely from the related person’s direct or indirect ownership of less than 10% of the equity interest in another person (other than a partnership) which is a party to the transaction or ownership of a limited partner interest of less than 10% of the partnership and the related person is not a general partner and does not hold another position in the partnership, with the determination of whether the ownership threshold is exceeded made in accordance with the terms of the Related Person Transaction Policy.

Under the Related Person Transaction Policy, all related person transactions not otherwise pre-approved are referred to the Audit Committee for review and approval or disapproval. The Audit Committee may approve or ratify a related person transaction only if the Audit Committee determines that the related person transaction is in the best interest of Peoples. In making this determination, the Audit Committee will review and consider all information available to it which it deems relevant, including:

 

the related person's interest in the transaction;

 

the approximate dollar value of the amount involved in the transaction;

 

the approximate dollar value of the amount of the related person's interest in the transaction without regard to the amount of any profit or loss;

 

whether the transaction was undertaken in the ordinary course of business of Peoples or the applicable subsidiary of Peoples;

 

whether the transaction is on terms no less favorable to Peoples or the applicable subsidiary of Peoples than terms that could have been reached with an unrelated third party;

 

the purpose of, and the potential benefits to Peoples or the applicable subsidiary of Peoples of, the transaction;

 

the impact of the transaction on the related person's independence; and

 

any other information regarding the transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.

PROPOSAL NUMBER 1:

ELECTION OF DIRECTORS

As of the date of this Proxy Statement, there were 10 members of the Board: three directors in the class whose terms expire at the Annual Meeting; four directors in the class whose terms will expire at the 2019 Annual Meeting; and three directors in the class whose terms will expire at the 2020 Annual Meeting of Shareholders.

On January 14, 2017, Thomas J. Wolf notified Peoples of his decision to retire from the Board effective January 14, 2017. Mr. Wolf was in the class whose terms expire at the 2019 Annual Meeting.

Upon the recommendation of the Governance and Nominating Committee, at the January 26, 2017 Board meeting, the Board elected Terry T. Sweet as a director to fill the vacancy created by the retirement of Mr. Wolf. Mr. Sweet was elected as a director in the class whose terms expire at the Annual Meeting. Mr. Sweet was identified by the Governance and Nominating Committee through a search process led by the Chair of the Governance and Nominating Committee.

On February 22, 2017, Carl L. Baker, Jr. notified Peoples of his decision to retire from the Board effective February 22, 2017. The Board then fixed the number of directors of Peoples at 11 to reflect the number of directors

12


remaining on the Board following Mr. Baker's retirement. Mr. Baker was in the class whose terms expire at the Annual Meeting.

Dr. Brenda F. Jones served in the class of directors whose terms expired at the 2017 Annual Meeting of Shareholders and was not a nominee for re-election. Dr. Jones' term as a director expired immediately prior to the 2017 Annual Meeting of Shareholders. Upon the recommendation of the Governance and Nominating Committee, the Board fixed the number of directors at 10, effective upon the expiration of the term of Dr. Jones immediately prior to the 2017 Annual Meeting of Shareholders.

The Board proposes that each of the three nominees identified below be re-elected for a new three-year term and until the nominee's successor is duly elected and qualified, or until the nominee's earlier resignation, removal from office or death. The Governance and Nominating Committee recommended each nominee for re-election. Proxies cannot be voted at the Annual Meeting for more than three nominees.

Recommendation and Vote Required

The three nominees for election as directors receiving the greatest number of votes “FOR” election as a director of Peoples will be elected to serve in the class whose terms expire in 2021. Except in the case of broker non-votes, common shares represented by properly-executed and returned proxy cards, or by properly-authenticated Internet or telephone voting instructions, that are submitted prior to the deadline for doing so, will be voted as specified or, if no instructions are given, “FOR” the election of the Board's nominees. Common shares as to which the authority to vote is withheld and broker non-votes will not be counted toward the election of directors, or toward the election of the individual nominees specified on the proxy card and in the voting instructions. THE BOARD UNANIMOUSLY RECOMMENDS THATSHAREHOLDERS VOTE “FOR” THE ELECTION OF ALL NOMINEES LISTED BELOW. The following table gives certain information, as of the date of this Proxy Statement, concerning each nominee for re-election as a director of Peoples. Unless otherwise indicated, each individual has had the same principal occupation for more than five years. Each individual also serves as a director of Peoples Bank.

13


Nominee

Age

Position(s) Held with Peoples and Our

Principal Subsidiaries and Principal Occupation(s)

Director

Continuously

Since

Nominee

For Term

Expiring In

 

 

 

 

 

George W. Broughton

60

Owner and President of GWB Specialty Foods, LLC, an ice cream, frozen food, and coffee service distributor. Owner and President of Broughton Commercial Properties, LLC, a commercial properties rental company. Chairman of Broughton Foundation, a nonprofit charitable foundation, and Broughton Park, a park facility owned by the Broughton Foundation and made available to the public. President and Controller of George Broughton Family LP, an asset management company. Owner and President of GWB Oil & Gas LLC, an independent oil and gas producing company. All of these entities are based in Marietta, Ohio. Director of Peoples Bank Foundation, Inc. since December 2003. Mr. Broughton has served as Vice Chairman of the Board of Peoples and Peoples Bank since July 2013.

1994

2021

 

Mr. Broughton brings substantial experience in various small business ventures representing a number of different industries to the Board. His extensive executive experience and proven general business and leadership skills are valuable to the Board and enhance its overall capabilities. Mr. Broughton's service as a director of Peoples since 1994 allows him to provide valuable perspective to the Board as to issues affecting local and regional businesses in Peoples' market area.

 

 

 

 

 

Charles W. Sulerzyski

60

President and Chief Executive Officer of Peoples and Peoples Bank since April 4, 2011. Member of the Board of Managers of Peoples Insurance Agency, LLC since 2011, serving as President from April 2011 to April 2012, and from June 2015 until October 2015. Formerly Regional President of the Great Lakes Region for KeyBank, N.A., a national bank located in Cleveland, Ohio, from 2005 to 2010; Managing Director at Marsh & McClennan, Inc., a company located in New York, New York, which provides risk and insurance services and solutions, from 2000 to 2005; and Executive Vice President, Community Banking Group, at The Provident Bank, Cincinnati, Ohio, from 1996 to 2000. Director of Peoples Bank Foundation, Inc. since May 2011.

2011

2021

 

Mr. Sulerzyski's role as President and Chief Executive Officer of Peoples and Peoples Bank provides him with intimate knowledge of the organization and its operations through his day-to-day management responsibilities. In addition, Mr. Sulerzyski's service as a director allows him to share this valuable day-to-day perspective with the full Board. Mr. Sulerzyski's many years of experience as a financial services executive also allows him to bring extensive industry knowledge in banking, insurance and investment organizations to the Board.


14


Nominee

Age

Position(s) Held with Peoples and Our

Principal Subsidiaries and Principal Occupation(s)

Director

Continuously

Since

Nominee

For Term

Expiring In

 

 

 

 

 

Terry T. Sweet

66

Retired partner of KPMG LLP, a professional services company and one of the “Big Four” U.S. accounting firms, which is headquartered in New York City, New York. Mr. Sweet was employed by KPMG LLP from 1979 to 2012 and was admitted as a partner in 1989. From 2006 to 2012, he was Filing Review Partner for KPMG LLP's U.S. Capital Markets Group in London, England and New York City, New York, where he served as the lead filing review partner for the U.S. capital raises and related regulatory filings of large non-U.S. financial services companies. From 1989 to 2006, he was Audit Engagement Partner and SEC Reviewing Partner in the Philadelphia office of KPMG LLP where he served as the lead audit partner on public and private banking and finance company audits throughout the Mid-Atlantic area and performed concurring reviews on public company bank and finance companies in his role as SEC reviewing partner.

2017

2021

 

Mr. Sweet brings to the Board nearly 34 years of financial services industry public accounting experience. As an audit engagement partner and bank practice leader with KPMG LLP for many years, Mr. Sweet oversaw the execution of hundreds of financial institution audit engagements. His knowledge and experience in public accounting are of great value to the Board, and, in particular, to the Audit Committee.

While it is contemplated that all nominees will stand for re-election at the Annual Meeting, if one or more nominees at the time of the Annual Meeting should be unable to serve or for good cause will not serve as a candidate for re-election as a director, the individuals designated as proxies on the proxy card or in the voting instructions will have full discretion to vote the common shares represented by the proxies they hold for the re-election of the remaining nominees and for the election of any substitute nominee or nominees designated by the Board following recommendation by the Governance and Nominating Committee. The Board knows of no reason why any of the nominees named above would be unavailable or unable to serve if re-elected to the Board.

The following table gives certain information, as of the date of this Proxy Statement, concerning the current directors of Peoples who will continue to serve after the Annual Meeting. Unless otherwise indicated, each individual has had the same principal occupation for more than five years. Each individual also serves as a director of Peoples Bank.


15


 

Name

Age

Position(s) Held with Peoples and Our

Principal Subsidiaries and Principal Occupation(s)

Director

Continuously

Since

Term

Expiring

In

 

 

 

 

 

Tara M. Abraham

51

Chairwoman and Co-CEO of Accel Inc., a contract packaging company. Co-owner of TaDa Holdings LLC, a holding company for eight businesses in the areas of real estate and business investment, product development and temporary staffing. Co-owner of Accel Business Solutions LLC, a company that sells and distributes technology. Co-owner of TMA Licensing LLC, a company that licenses retail products and consumer packaged goods. Co-owner of TMA Consulting LLC, a business consulting firm. All of these entities are based in New Albany, Ohio. Board Member of the Women's Business Enterprise National Council since 2007 and a former Board member of the National Women Business Council (2011-2014). Director of Peoples Bank Foundation, Inc. since 2014.

2012

2020

 

 

 

 

 

Ms. Abraham brings to the Board the perspective of an accomplished entrepreneur, business investor and strategist, with an in-depth knowledge of the retail industry. Ms. Abraham is a successful business operator in a market served by Peoples. She is also a dedicated supporter and advocate of women-owned businesses.

 

 

 

 

 

S. Craig Beam

66

Co-Owner of Thorobeam Farm, LLC, a thoroughbred horse business headquartered in Sabina, Ohio, since 2006, and private investor since his retirement in 1999. He sold his sand, gravel and stone production business in 1999 after 28 years of ownership and operation. He was a member of the Board of Directors of NB&T Financial Group, Inc., a bank holding company headquartered in Wilmington, Ohio (“NB&T”), from 1990 until March 6, 2015, when NB&T merged into Peoples. During that time, he served on and chaired NB&T's Compensation Committee, and Nominating and Corporate Governance Committee. Mr. Beam was one of the two former NB&T directors selected by Peoples to join the Board as required by the merger agreement.

2015

2019

 

Mr. Beam brings to the Board many years of experience as a board member of a publicly-traded bank holding company and an in-depth knowledge of the southwest Ohio markets served by Peoples.

 

 

 

 

 

David F. Dierker

60

Retired banking executive with SunTrust Banks, Inc., a financial services company headquartered in Atlanta, Georgia. Mr. Dierker held various senior level positions with SunTrust Banks, Inc. from 1996 until his retirement in 2013, including serving as Chief Administrative Officer from 2006 to 2013.

2014

2019

 

Mr. Dierker brings to the Board more than 36 years of experience working with financial institutions, including roles in finance and administration. In his role as Chief Administrative Officer of SunTrust Banks, Inc. he directed a variety of corporate functions, such as human resources, internal audit, business strategy, supplier management, corporate real estate, regulatory reform and corporate communications. His extensive industry experience and financial expertise make him a valuable asset to the Board and, in particular, the Audit Committee and the Risk Committee.

 

 

 

 

 

16


Name

Age

Position(s) Held with Peoples and Our

Principal Subsidiaries and Principal Occupation(s)

Director

Continuously

Since

Term

Expiring

In

James S. Huggins

60

Attorney-At-Law, Of Counsel, Theisen Brock, a Legal Professional Association, a law firm located in Marietta, Ohio (“Theisen Brock”).  Mr. Huggins status with Theisen Brock changed from “partner” to “of counsel” on January 1, 2017, at which time he no longer owned a partnership interest in the firm.

2012

2020

 

Mr. Huggins has over 35 years of experience as a practicing attorney in the areas of commercial law, creditor's rights, and oil and gas law. In addition to his expertise in these areas, he brings to the Board a wealth of knowledge of the Marietta, Ohio and Parkersburg, West Virginia market areas, having lived and worked in Marietta, Ohio since 1981.

 

 

 

 

 

Brooke W. James

45

Partner and co-business administrator for WMSALL Farms, her family's farming operation in Wilmington, Ohio, since 1999. School teacher at the Columbus School for Girls in Columbus, Ohio, from 2001 to 2005. She was a member of the Board of Directors of NB&T from 2005 until March 6, 2015, when NB&T merged into Peoples. During that time, she served on NB&T's Audit Committee. Ms. James was one of the two former NB&T directors selected by Peoples to join the Board as required by the merger agreement.

2015

2020

 

 

 

 

 

Ms. James brings to the Board many years of experience as a board member of a publicly-traded bank holding company and knowledge of the southwest Ohio markets served by Peoples. She also provides the Board with insight into the expectations of Peoples' shareholders.


17


Name

Age

Position(s) Held with Peoples and Our

Principal Subsidiaries and Principal Occupation(s)

Director

Continuously

Since

Term

Expiring

In

 

 

 

 

 

David L. Mead

62

Associate Professor on the business faculty of Marietta College, located in Marietta, Ohio, from August 2011 through the end of the 2015-2016 academic year. Formerly interim President and Chief Executive Officer of Peoples from August 2, 2010 until April 4, 2011, interim President and Chief Executive Officer of Peoples Bank from August 6, 2010 until April 4, 2011, and interim President of Peoples Insurance Agency, LLC from December 21, 2010 until April 4, 2011. Prior to his service with Peoples and our subsidiaries, Mr. Mead served as Vice President for Business Affairs at Otterbein University, located in Westerville, Ohio, from September 2006 until June 2010; Associate Professor of Finance at Marietta College from August 2004 to September 2006; Chief Financial Officer and Treasurer of First Place Financial Corp., headquartered in Warren, Ohio, from December 2002 to June 2004; and Treasurer of First Place Bank, headquartered in Warren, Ohio, from May 2002 to December 2002. Mr. Mead has served as Chairman of the Board of Peoples and Peoples Bank since May 2016. Mr. Mead has been a Certified Public Accountant since 1978.

2006

2019

 

 

 

 

 

Mr. Mead's previous role as interim President and Chief Executive Officer of Peoples has provided him with intimate knowledge of the Peoples organization and its operations. Mr. Mead's 26 years of banking experience and his previous executive positions with bank holding companies provide significant value to the collective knowledge of our organization and the Board. His extensive experience, professional certification as a Certified Public Accountant, financial expertise and background are also assets to the Board. In addition, Mr. Mead's service as a director of Peoples Bank since 2005 and of Peoples since 2006 has provided valuable perspective to the Board in the areas of financial oversight, audit, accounting, and general financial knowledge relevant to the financial services industry.

 

 

 

 

 

Susan D. Rector

59

Attorney-At-Law, Partner in the law firm of Peterson Connors LLP in Columbus, Ohio since April of 2017. Partner in the law firm of Ice Miller LLP (formerly Schottenstein, Zox & Dunn Co., LPA) in Columbus, Ohio from 1987 until April 2017.

2011

2019

 

Ms. Rector brings to the Board valuable experience as an attorney, practicing primarily in the areas of intellectual property law, information technology law and business transactions, including business formation, restructurings, and mergers and acquisitions. Her extensive experience in assisting both start-up and established businesses with complex technology, information technology and e-commerce issues provide significant value to the Board as the Internet and mobile operations of Peoples Bank continue to grow. Her practice with regulated entities provides experience with compliance issues and governmental oversight. She also has over 25 years of experience serving on nonprofit boards where she has focused on trustee nominations, board governance and oversight.

 

 

 

 

 

There are no family relationships among any of the directors, nominees for election as a director and executive officers of Peoples.

None of the directors or nominees for election as a director of Peoples is or has been involved in legal proceedings required to be reported or disclosed in this Proxy Statement.

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EXECUTIVE OFFICERS

The following individuals serve as the executive officers of Peoples as of the date of this Proxy Statement. Each executive officer is elected annually and serves at the pleasure of the Board. The age of each executive officer as of the date of this Proxy Statement, the positions presently held by each executive officer with Peoples and our principal subsidiaries, and each executive officer's individual business experience are set forth below.

 

Name

 

Age

 

 

Position

Charles W. Sulerzyski

 

 

60

 

 

President and Chief Executive Officer

John C. Rogers

 

 

57

 

 

Executive Vice President, Chief Financial Officer and Treasurer

Douglas V.  Wyatt

 

 

56

 

 

Executive Vice President and Chief Commercial Banking Officer

Carol A. Schneeberger

 

 

61

 

 

Executive Vice President and Chief Administrative Officer

Robyn A. Stevens

 

 

49

 

 

Executive Vice President and Chief Credit Officer

 

Mr. Sulerzyski was appointed as President and Chief Executive Officer of both Peoples and Peoples Bank on April 4, 2011. Mr. Sulerzyski serves as a member of the boards of directors of Peoples and Peoples Bank, and as a member of the Board of Managers of Peoples Insurance Agency, LLC. From April 2011 to April 2012, and from June 2015 to October 2015, he served as President of Peoples Insurance Agency, LLC. Prior to joining Peoples, he served as Regional President of the Great Lakes Region for KeyBank, N.A., a national bank located in Cleveland, Ohio, from 2005 to 2010. From 2000 to 2005, Mr. Sulerzyski was a Managing Director at Marsh & McClennan, Inc., a company located in New York, New York, which provides risk and insurance services and solutions; and from 1996 to 2000, he served as Executive Vice President, Community Banking Group, at The Provident Bank, in Cincinnati, Ohio.

Mr. Rogers joined Peoples in November 2015 when he was appointed as Executive Vice President, Chief Financial Officer and Treasurer of Peoples and Peoples Bank. Prior to joining Peoples, Mr. Rogers worked for PNC Financial Services Group, Inc. (“PNC”) in Pittsburgh, Pennsylvania, from 2001 to October 2015. Mr. Rogers served at PNC as Risk Executive from 2011 to 2015, Executive Vice President and Chief Financial Officer, Retail Business Banking from 2003 to 2011, and Vice President and Chief Financial Officer, Consumer Lending from 2001 to 2003. Mr. Rogers worked as a Senior Manager for Ernst & Young LLP in Pittsburgh, Pennsylvania, from 1998 to 2001, and as Regional Line of Business Audit Director for PNC in Pittsburgh, Pennsylvania, from 1991 to 1998. He worked as an Audit Manager for Price Waterhouse LLP in Buffalo, New York, from 1982 to 1991.

Mr. Wyatt serves as Executive Vice President and Chief Commercial Banking Officer of both Peoples and Peoples Bank, positions he has held since April 1, 2017. From April 2016 until April 1, 2017, Mr. Wyatt served as Executive Vice President, Commercial Banking of Peoples Bank, where he led Peoples Bank’s commercial line of business efforts in the central and southeastern portions of Ohio, as well as in West Virginia and Kentucky.  Prior to joining Peoples, Mr. Wyatt worked for Fifth Third Bank in Cincinnati, Ohio from 2005 to April 2016. Mr. Wyatt served at Fifth Third Bank as an Executive Vice President, Senior Commercial Banker from 2006 to 2016 and as a Vice President, Commercial Banking Division, from 2005 to 2006. Prior to 2006, Mr. Wyatt worked for 16 years for U.S. Bank, National Association, in Cincinnati, Ohio.

Ms. Stevens serves as Executive Vice President and Chief Credit Officer of both Peoples and Peoples Bank, positions she has held since June 17, 2016. From January 2012 until June 2016, she served as Senior Vice President, Credit Administration of Peoples Bank. Ms. Stevens managed Peoples Bank's loan and appraisal review functions from 1997 to 2011. Prior to 1997, Ms. Stevens worked for five years with Bank One in Marietta, Ohio.

Ms. Schneeberger, a Certified Public Accountant, serves as Executive Vice President and Chief Administrative Officer of Peoples and Executive Vice President, Chief Administrative Officer and Cashier of Peoples Bank, positions she has held since July 2011. From April 1999 to July 2011, she served as Executive Vice President, Operations of Peoples, and from February 2000 to July 2011, she served as Executive Vice President, Operations and Cashier of Peoples Bank. From April 2007 to May 2008, Ms. Schneeberger served as interim Chief Financial Officer and Treasurer of both Peoples and Peoples Bank. From October 1988 to April 1999, Ms. Schneeberger was Vice President of Operations of Peoples. Prior thereto, she was Auditor of Peoples from August 1987 to October 1988 and Auditor of Peoples Bank from January 1986 to October 1988. Ms. Schneeberger joined Peoples Bank in 1977.

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None of the executive officers of Peoples is or has been involved in legal proceedings required to be reported or disclosed in this Proxy Statement.

THE BOARD AND COMMITTEES OF THE BOARD

The Board has adopted the Peoples Bancorp Inc. Corporate Governance Guidelines, a copy of which is posted under the “Governance Documents” tab on both the “Investor Relations” page and the “Corporate Governance” page of Peoples' website at www.peoplesbancorp.com. The Board has also adopted the Code of Ethics for Directors, Officers and Employees of Peoples Bancorp Inc. and its Subsidiaries (“Code of Ethics”), a copy of which is posted under the “Governance Documents” tab on each of the “Investor Relations” page and the “Corporate Governance” page of Peoples' website at www.peoplesbancorp.com.

Independence of Directors

The rules (the “NASDAQ Rules”) of The NASDAQ Stock Market (“NASDAQ”) require that a majority of the members of the Board be independent directors. The definition of an independent director for purposes of the NASDAQ Rules includes a series of objective criteria, which the Board has used in determining whether its members are independent.

Peoples is led by Charles W. Sulerzyski, who serves as President and Chief Executive Officer and as a director, and David L. Mead, an independent director who serves as non-executive Chairman of the Board, a position he has held since May 2016. George W. Broughton, an independent director, serves as non-executive Vice Chairman of the Board, a position he has held since July 2013. The Board is comprised of Mr. Sulerzyski and nine non-management directors, eight of whom are independent. Peoples believes that the independent directors provide objective oversight of management performance as a key component of efficient corporate governance and overall risk management. The Board has determined that the most effective leadership structure for Peoples is for a different person to serve as each of the Chief Executive Officer and the Chairman of the Board, coupled with independent chairs of each of the Audit Committee, the Compensation Committee and the Governance and Nominating Committee. The Board regularly deliberates and discusses what it believes is the appropriate leadership structure and the role and responsibilities of the Chairman of the Board based upon the needs of Peoples in order to provide effective oversight of management.

In addition to considering the objective criteria, as required by the NASDAQ Rules, the Board has made a subjective determination as to each independent director that no relationships exist, which, in the opinion of the Board, would interfere with such individual's exercise of independent judgment in carrying out the responsibilities of a director. In making these independence determinations, the Board has reviewed, considered and discussed each director's business and personal relationships, both direct and indirect, with Peoples and our subsidiaries, and the compensation and other payments each director and such director's immediate family members have, both directly and indirectly, received from or made to Peoples and our subsidiaries and presently expect to receive from or make to Peoples and our subsidiaries. Based on that review, consideration and discussion, the Board has determined that at least a majority of its members qualify as independent directors. The Board has further determined that each of the following directors has no financial or personal ties, either directly or indirectly, with Peoples or our subsidiaries (other than compensation received in the individual's capacity as a director of Peoples and our subsidiaries, non-preferential banking relationships in the ordinary course of business with Peoples Bank, ownership of common shares of Peoples as described in this Proxy Statement and, in the case of Mr. Mead, service for a period of approximately nine months as interim President and Chief Executive Officer of Peoples and Peoples Bank) and thus qualifies as independent: Tara M. Abraham; S. Craig Beam; George W. Broughton; David F. Dierker; Brooke W. James; David L. Mead; Susan D. Rector; and Terry T. Sweet.

The Board also determined that: (i) during his service as a director from January 1, 2017 through January 14, 2017, Thomas J. Wolf qualified as an independent director; (ii) during his service as a director from January 1, 2017 through February 22, 2017, Carl L. Baker, Jr. qualified as an independent director; and (iii) during her service from January 1, 2017 through April 27, 2017, Dr. Brenda F. Jones qualified as an independent director, in each case because he or she had no financial or personal ties, either directly or indirectly, with Peoples or our subsidiaries (other than compensation received in the individual's capacity as a director of Peoples and our subsidiaries, non-

20


preferential banking relationships in the ordinary course of business with Peoples Bank and ownership of common share of Peoples).

The Board has determined that, due to his status as a former partner in the law firm of Theisen Brock, having been a partner in the firm until January 1, 2017, James S. Huggins does not qualify as an independent director under the applicable NASDAQ Rules. The amount and variety of work Theisen Brock performed and continues to perform for Peoples, and Mr. Huggins' former role as a partner with Theisen Brock, were recognized and considered by the Board in its evaluation of Mr. Huggins' qualifications as a director.

Charles W. Sulerzyski does not qualify as an independent director, because he serves as an executive officer of Peoples and Peoples Bank.

Executive Sessions

In accordance with applicable NASDAQ Rules, the independent directors were given the opportunity to meet in executive session during each meeting of the Board and at such other times as the independent directors deemed necessary. Each executive session is presided over by the Chairman of the Board.

Meetings of the Board and Attendance at Annual Meetings of Shareholders

The Board held a total of 18 meetings during the 2017 fiscal year. Each incumbent director attended 90% or more of the aggregate of the total number of meetings held by the Board and the total number of meetings held by all committees of the Board on which he or she served, in each case during his or her period of service.

Peoples encourages all incumbent directors and director nominees to attend each annual meeting of shareholders. All of the incumbent directors attended Peoples' last annual meeting of shareholders held on April 27, 2017.

Committees of the Board

The Board has five standing committees: Audit, Compensation, Executive, Governance and Nominating, and Risk. Each of the standing committees, with the exception of the Risk Committee, is chaired by a separate independent director. The Risk Committee is chaired by director James S. Huggins. The Audit Committee and the Risk Committee are charged with the majority of the risk oversight responsibilities of the Board. The Risk Committee is the committee providing the primary oversight of significant risks on an enterprise-wide level within all the defined risk categories, as discussed below. However, the Audit Committee's duties include overseeing a substantial portion of management's actions to address compliance, legal and operational risks. The Compensation Committee evaluates, with Peoples' senior risk officer, all risks posed by Peoples' executive compensation programs and makes all reasonable efforts required to limit any unnecessary risks these programs may pose to Peoples and to ensure that the programs do not encourage participants to take unnecessary or excessive risks that threaten the value of Peoples. These evaluations are conducted in accordance with guidance from applicable federal regulators. The Audit Committee, the Compensation Committee and the Risk Committee are focused on maintaining our key risks within acceptable tolerances and work in concert to provide enterprise-wide oversight. Each committee's role and its interaction with the full Board regarding the committee's oversight responsibilities are described more fully below. Through these committees and effective working relationships with management, the Board is able to effectively monitor and maintain an active role in the oversight of the key aspects of the risks to which Peoples is exposed. Peoples believes that this risk oversight structure, coupled with Peoples' leadership structure of having an independent director serve as Chairman of the Board, maximizes the independence and objectivity of the Board in carrying out its functions.

Audit Committee

The Audit Committee was established in accordance with Section 3(a)(58)(A) of the Exchange Act and conducts its business pursuant to a written charter adopted by the Board. A copy of the current charter of the Audit Committee is posted under the “Governance Documents” tab on both the “Corporate Governance” page and the “Investor Relations” page of Peoples' website at www.peoplesbancorp.com. At least annually, the Audit Committee reviews and reassesses the adequacy of its charter and recommends any proposed changes to the full Board as

21


necessary to reflect changes in regulatory requirements, authoritative guidance and evolving practices. Among other duties set forth in its charter, the Audit Committee is responsible for:

 

overseeing the accounting and financial reporting processes of Peoples;

 

overseeing the audits of the consolidated financial statements of Peoples;

 

appointing, terminating, compensating and overseeing the work of Peoples' independent registered public accounting firm, including resolving any disagreements between Peoples' management and Peoples' independent registered public accounting firm regarding financial reporting;

 

pre-approving all audit and non-audit services provided by Peoples' independent registered public accounting firm;

 

discussing with Peoples' independent registered public accounting firm the matters required to be communicated to the Audit Committee under applicable auditing standards and reviewing all relationships between Peoples' independent registered public accounting firm and Peoples and our subsidiaries;

 

discussing with management, the auditors performing Peoples' internal audit function (the “Internal Auditors”) and Peoples' independent registered public accounting firm the adequacy and effectiveness of Peoples’ internal control over financial reporting and related accounting and financial controls;

 

reviewing with the Internal Auditors and Peoples’ independent registered accounting firm annually, before each audit begins, the overall scope and plans for their respective audits, including the adequacy of staffing and compensation;

 

appointing, terminating, compensating, and overseeing the Internal Auditors, including approving the scope of the internal audit, and overseeing the operation and performance of the Internal Auditors;

 

naming, defining the overall roles and responsibilities of and assessing the effectiveness of, an individual within management to act as a liaison between the Internal Auditors, the Board and management;

 

reviewing all transactions with related persons required to be reported to the Audit Committee under the Related Person Transaction Policy for potential conflict of interest situations, and approving or ratifying such transactions as appropriate;

 

reviewing Peoples' earnings press releases, earnings conference call scripts, and financial statements and related disclosures in Peoples' periodic reports;

 

setting hiring policies for employees or former employees of Peoples' independent registered public accounting firm;

 

establishing and reviewing the procedures for the receipt, retention and treatment of complaints received by Peoples regarding accounting, internal controls or auditing matters;

 

reviewing with the Internal Auditors and Peoples' counsel, legal and regulatory matters that may have a material impact on Peoples' consolidated financial statements, related compliance policies of Peoples and compliance with Peoples' Code of Ethics and programs and reports received from regulatory agencies;

 

assisting the Board in the oversight of the performance of Peoples' independent registered public accounting firm, and  the independent registered public accounting firm's qualifications and independence;

 

preparing the report of the Audit Committee required to be included in Peoples' annual Proxy Statement;

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reviewing the structure, operations and effectiveness of Peoples Bank's compliance program at least annually and receiving periodic reports from Peoples Bank’s Compliance Officer and Bank Secrecy Act Officer concerning Peoples Bank’s compliance with applicable laws, regulations and policies;

 

preforming the duties required by applicable laws and regulations to be performed by the audit committee for Peoples Bank, in its capacity as an Ohio state-chartered bank;

 

performing the duties required by applicable laws and regulations to be performed by the fiduciary audit committee for Peoples Bank, in its capacity as a bank exercising fiduciary powers; and

 

other duties and responsibilities as may be delegated to the Audit Committee by the Board.

The Audit Committee held ten meetings during the 2017 fiscal year. The “AUDIT COMMITTEE REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017” appears beginning on page 93.

The Audit Committee is currently comprised of four directors: David F. Dierker (Chair); Brooke W. James; David L. Mead; and Terry T. Sweet. Each of these directors served as a member of the Audit Committee throughout the entire 2017 fiscal year. Former directors Thomas J. Wolf, Carl L. Baker, Jr. and Dr. Brenda F. Jones served as members of the Audit Committee in 2017 through their retirement dates of January 14, 2017, February 22, 2017 and April 27, 2017, respectively. The Board has determined that each of the current members of the Audit Committee qualifies, and that during their respective periods of service in the 2017 fiscal year, each of Mr. Wolf , Mr. Baker, and Dr. Jones, qualified, as an independent director for purposes of Rule 10A-3 under the Exchange Act and under the applicable NASDAQ Rules.

The Board has concluded that each member of the Audit Committee is able to read and understand fundamental financial statements, including Peoples' balance sheet, income statement and cash flow statement. Based upon their respective backgrounds, knowledge, qualifications, experience and professions, the Board has determined that David F. Dierker, David L. Mead and Terry T. Sweet qualify as “audit committee financial experts” under the SEC's rules, and as “financially sophisticated” for purposes of the applicable NASDAQ Rules.

Compensation Committee

The Compensation Committee is currently comprised of four directors: George W. Broughton (Chair); S. Craig Beam; Susan D. Rector; and Terry T. Sweet. Messrs. Beam and Broughton and Ms. Rector served as members of the Compensation Committee throughout the entire 2017 fiscal year. Mr. Sweet was appointed as a member of the Compensation Committee on January 26, 2017. Director David F. Dierker served as a member of the Compensation Committee in 2017 until April 27, 2017. Former director Carl L. Baker, Jr. served as a member of the Compensation Committee in 2017 through his retirement date of February 22, 2017. The Board has determined that each of the current members of the Compensation Committee qualifies, and that during their respective periods of service in the 2017 fiscal year, each of Mr. Dierker and Mr. Baker qualified, as (i) an “independent director” under the applicable NASDAQ Rules, including those specifically applicable to members of a compensation committee, (ii) an “outside director” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”),and (iii) a “non-employee director” for purposes of Rule 16b-3 under the Exchange Act.

The Compensation Committee is organized and conducts its business pursuant to a written charter adopted by the Board. A copy of the current charter of the Compensation Committee is posted under the “Governance Documents” tab on both the “Corporate Governance” page and the “Investor Relations” page of Peoples' website at www.peoplesbancorp.com. At least annually, the Compensation Committee reviews and reassesses the adequacy of its charter and recommends any proposed changes to the full Board for approval as necessary.

The primary function of the Compensation Committee is to review and approve, on behalf of the Board, management recommendations regarding all forms of compensation to be provided to the executive officers and other designated employees of Peoples and our subsidiaries, including incentive-based compensation, equity-based compensation, bonus compensation, perquisites, employee benefits and salary programs. In carrying out this function, the Compensation Committee is responsible for reviewing and approving individual goals and objectives, and recommending to the Board corporate goals and objectives relevant to the compensation of Peoples' executive officers and other employees designated by the Board, evaluating such individuals' performance in light of those

23


goals and objectives, and determining compensation based on that evaluation. The Compensation Committee administers Peoples' Second Amended and Restated 2006 Equity Plan (the “2006 Plan”), ESPP and Peoples' incentive programs, and approves grants of awards under the 2006 Plan and the incentive programs in compliance with applicable securities and tax laws. The Compensation Committee also undertakes such other responsibilities as the full Board may from time to time prescribe.

The Compensation Committee held eight meetings during the 2017 fiscal year. Its Chair determines the agenda for the meetings with the assistance of Peoples' Chief Administrative Officer. The Director of Human Resources serves as Secretary to the Compensation Committee. The Compensation Committee reviewed management's recommendations on, and approved, all forms of compensation provided to the executive officers. The Compensation Committee also reviewed recommendations regarding all forms of compensation for directors of Peoples and our subsidiaries and made recommendations to the Board for its consideration. Additionally, the Compensation Committee reviewed and approved all equity-based compensation and cash incentives under Peoples' incentive programs, as well as perquisites, employee benefits, salary programs, and human resources policies and procedures for employees of Peoples and our subsidiaries. The Compensation Committee also reviewed and approved the goals and objectives for the 2017 fiscal year relevant to the compensation of Peoples' executive officers, and recommended the 2017 fiscal year corporate performance goals to the Board, which were subsequently approved by the Board. The Compensation Committee evaluated the executive officers' performance in light of those goals and objectives for the 2017 fiscal year and determined the compensation earned by each executive officer based on that evaluation. At least annually, the Compensation Committee reviews and discusses Peoples' management succession and development activities. The Compensation Committee also provides recommendations to the full Board on compensation-related proposals to be considered at Peoples' annual meetings of shareholders and reviews and considers with Peoples' management the results of votes on those proposals. The Compensation Committee also reviews and approves the plan design and structure of insurance benefits for officers, directors and employees of Peoples and our subsidiaries.

The Compensation Committee has the authority to retain one or more compensation consultants or advisors to assist in the evaluation of director and executive officer compensation. The Compensation Committee has sole authority to retain and terminate any such compensation consultant or advisor, including sole authority to approve the fees and other retention terms of any consultant or advisor. The Compensation Committee has engaged Pay Governance, LLC (“Pay Governance”) as the Compensation Committee's compensation and benefits consultant. The Compensation Committee has direct access to its compensation and benefits consultant and may engage the consultant on an as needed basis for advice with respect to the amount and form of executive and director compensation. Pay Governance does not provide services to Peoples or our subsidiaries other than those provided to or at the request of the Compensation Committee. Please see the discussion of the consulting services provided to the Compensation Committee by Pay Governance in the section captioned “EXECUTIVE COMPENSATION: COMPENSATION DISCUSSION AND ANALYSIS - Setting Executive Compensation” beginning on page 61 of this Proxy Statement.

The Compensation Committee determined that the work of Pay Governance during the 2017 fiscal year did not raise any actual conflict of interest. Additionally, the Compensation Committee determined that Pay Governance was independent of management after considering several factors, including (1) whether Pay Governance provided any other services to Peoples; (2) the amount of fees received from Peoples by Pay Governance as a percentage of the firm's total revenue; (3) Pay Governance's policies and procedures that are designed to prevent conflicts of interest; (4) any business or personal relationship of the individual compensation consultants providing services to Peoples with a member of the Compensation Committee; (5) the number of Peoples common shares owned by the individual compensation consultants providing services to Peoples; and (6) any business or personal relationships between the executive officers of Peoples and Pay Governance or the individual compensation consultants providing services to Peoples.

The “EXECUTIVE COMPENSATION: COMPENSATION DISCUSSION AND ANALYSIS” regarding executive compensation for the 2017 fiscal year appears beginning on page 48, and the “COMPENSATION COMMITTEE REPORT” for the 2017 fiscal year appears beginning on page 72 of this Proxy Statement.

Executive Committee

The Executive Committee is currently comprised of six directors: David L. Mead (Chair); George W. Broughton; David F. Dierker; James S. Huggins; Susan D. Rector; and Charles W. Sulerzyski. Messrs. Mead,

24


Broughton, Direrker and Sulerzyski, and Ms. Rector served on the Executive Committee throughout the entire 2017 fiscal year. Mr. Huggins was appointed as a member of the Executive Committee on April 27, 2017. Former directors Carl L. Baker, Jr. and Thomas J. Wolf served as members of the Executive Committee in 2017 through their retirement dates of February 22, 2017 and January 14, 2017, respectively. The Executive Committee is organized and conducts its business pursuant to a written charter adopted by the Board. A copy of the current charter of the Executive Committee is posted under the “Governance Documents” tab of both the “Corporate Governance” page and the “Investor Relations” page of Peoples' website at www.peoplesbancorp.com. The Executive Committee did not meet during the 2017 fiscal year.

The responsibilities of the Executive Committee include exercising, during the intervals between the meetings of the Board, all the powers of the Board in the management of the business, properties and affairs of Peoples, including authority to take all action provided in Peoples' Code of Regulations to be taken by the Board, not delegated to another Board committee, provided, however, that the foregoing is subject to the applicable provisions of law and the limitations contained in the Executive Committee's charter.

Governance and Nominating Committee

The Governance and Nominating Committee is currently comprised of five directors: Susan D. Rector (Chair); Tara M. Abraham; George W. Broughton; David F. Dierker; and Brooke W. James. Each of these directors served as members of the Governance and Nominating Committee throughout the entire 2017 fiscal year.  Former director Dr. Brenda F. Jones served as a member of the Governance and Nominating Committee in 2017 through her retirement date of April 27, 2017.The Board has determined that each of the current members of the Governance and Nominating Committee qualifies, and that during her period of service in the 2017 fiscal year, Dr. Jones qualified, as an independent director under applicable NASDAQ Rules.

The Governance and Nominating Committee is organized and conducts its business pursuant to a written charter adopted by the Board, a copy of which is posted under the “Governance Documents” tab on both the “Corporate Governance” page and the “Investor Relations” page of Peoples' website at www.peoplesbancorp.com. At least annually, the Governance and Nominating Committee reviews and reassesses the adequacy of its charter and recommends any proposed changes to the full Board for approval as necessary. The Governance and Nominating Committee held five meetings during the 2017 fiscal year.

The Governance and Nominating Committee is primarily responsible for:

 

establishing and articulating qualifications, desired background and selection criteria for members of the Board consistent with any eligibility requirements set forth in Peoples' Code of Regulations, considering such factors as it deems appropriate;

 

evaluating Board candidates recommended by shareholders and periodically reviewing the procedures used by the Governance and Nominating Committee in such evaluation process;

 

screening and making recommendations to the Board of qualified candidates for election, nomination or appointment to the Board, including nominees for re-election as directors and candidates to fill vacancies;

 

evaluating and recommending to the Board determinations of Board member independence and of financial expertise and financial sophistication with respect to Audit Committee members;

 

recommending assignments to committees of the Board and chairs of Board committees for consideration by the Board;

 

reviewing with the Chairman of the Board, or another director designated by the Board, issues involving potential conflicts of interest and/or any change of status of directors pursuant to applicable law and the applicable provisions of Peoples' Code of Ethics, Peoples' Code of Regulations or Peoples' Corporate Governance Guidelines;

 

periodically administering and reviewing with the Chairman of the Board, or another director designated by the Board, an evaluation of the processes and performance of the Board and the Board's committees, and reporting such review to the Board;

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recommending to the Board for its consideration the number of members to serve on the Board;

 

periodically reviewing Peoples' Code of Ethics and the Related Person Transaction Policy and recommending changes, as deemed necessary or appropriate by the Governance and Nominating Committee, to the Board for approval;

 

reviewing and reporting to the Board on board education opportunities and additional corporate governance matters as necessary or as directed by the Chairman of the Board or the Board as a whole;

 

overseeing the orientation and education of new and continuing members of the Board

 

developing and recommending to the Board a set of Corporate Governance Guidelines applicable to Peoples; and

 

reviewing the appropriateness of continued Board service by a Board member who changes his or her principal occupation, position or responsibility from that held when elected to the Board and volunteers to resign from the Board for such reason.

Risk Committee

The Risk Committee is currently comprised of nine directors: James S. Huggins (Chair); Tara M. Abraham; S. Craig Beam; George W. Broughton; David F. Dierker; Brooke W. James; David L. Mead; Susan D. Rector; and Terry T. Sweet. Each of these directors, with the exception of Mr. Sweet, served as members of the Risk Committee throughout the entire 2017 fiscal year.  Mr. Sweet was appointed as a member of the Risk Committee on January 26, 2017. Former directors Thomas J. Wolf, Carl L. Baker, Jr. and Dr. Brenda F. Jones served as members of the Risk Committee in 2017 through their retirement dates of January 14, 2017, February 22, 2017 and April 27, 2017, respectively. The Board has determined that each of the current members of the Risk Committee, except Mr. Huggins, qualifies, and that during their respective periods of service in the 2017 fiscal year, Mr. Wolf, Mr. Baker and Dr. Jones each qualified, as independent directors under applicable NASDAQ Rules.

The Risk Committee is organized and conducts its business pursuant to a written charter adopted by the Board, which is posted under the “Governance Documents” tab on both the “Corporate Governance” page and the “Investor Relations” page of Peoples' website at www.peoplesbancorp.com. The primary responsibilities of the Risk Committee are:

 

reviewing and annually approving Peoples' enterprise risk management framework and policy;

 

reviewing and overseeing the development of Peoples' risk appetite, risk tolerances, risk targets and risk limits;

 

reviewing and monitoring management of credit, liquidity, market, compliance, operational, IT operational, strategic, and reputation risks through the enterprise risk management framework;

 

reviewing management's analysis of potential scenarios and future emerging risks that would have a material impact on the earnings and/or capital of Peoples, and ensuring that residual risk exposures are within desired levels, and when they are not that management's responses and any plans of action are reasonable;

 

approving limits and/or operating guidelines for Peoples' material risks, including credit, market and operational risks, on at least an annual basis, and reviewing the trend and current risk levels of Peoples and monitoring compliance with established limits;

 

reviewing and approving Peoples Bank’s lending policies and lending concentration limits;

 

overseeing management’s compliance with Peoples Bank’s lending policies;

 

establishing lending authorities for Peoples Bank’s loan officers and reviewing and approving such lending authorities no less frequently than annually;

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reviewing the structure and performance of Peoples Bank’s loan portfolio, including loan activity, loan charge offs, concentrations, quality and risk;

 

reviewing Peoples Bank’s loan review procedures and allowance for loan and lease losses;

 

assessing, at least annually, the effectiveness of the Director of Risk Management;

 

performing an evaluation of the Committee's performance at least annually to determine whether it is functioning effectively; and

 

carrying out such other duties and responsibilities as may be delegated to the Risk Committee by the Board.

The Risk Committee reviews and reassesses the adequacy of its charter at least annually and recommends any proposed changes to the full Board for approval as necessary. The Risk Committee held six meetings during the 2017 fiscal year.

NOMINATING PROCEDURES

As described above, Peoples has a standing Governance and Nominating Committee that has the responsibility to identify and recommend to the full Board individuals qualified to become directors. Each candidate must satisfy the eligibility requirements set forth in Peoples' Code of Regulations. To be eligible for election as a director, an individual must be a shareholder of Peoples. Peoples' Corporate Governance Guidelines require that directors establish a financial stake in Peoples by developing a meaningful ownership position in Peoples over time as is appropriate given the director's personal financial circumstances; provided, however, that within seven years after the date of his or her initial election to the Board, each director must own at least 10,000 common shares of Peoples or common shares of Peoples having a market value of $200,000, whichever is less.

Beyond the above qualifications, the Governance and Nominating Committee will consider such factors as it deems appropriate in evaluating potential individuals for Board membership, including a consideration of the individual's contribution to the diversity of the Board. When considering potential candidates for the Board, the Governance and Nominating Committee strives to assure that the composition of the Board, as well as its practices and operation, contribute to value creation and to the effective representation of Peoples' shareholders.

In considering candidates for the Board, the Governance and Nominating Committee evaluates the entirety of each candidate's credentials. The Governance and Nominating Committee believes that all members of the Board should have the highest character and integrity, a reputation for working constructively with others, sufficient time to devote to Board matters and no conflict of interest that would interfere with performance as a director. When identifying nominees to serve as directors, the Governance and Nominating Committee will consider candidates in light of Peoples' strategic plan and the current composition and needs of the Board. Factors that will be given weight in the consideration may include diversity in business and professional experience, skills, gender, ethnic background, as well as experience and/or residence in Peoples' diverse market areas. Each of these factors will be considered in order to provide the greatest benefit to the shareholders of Peoples by selecting directors with the most exemplary credentials relative to Peoples' business and markets.

Because of the importance placed on the directors' business and professional experience and skills, a director who changes his or her principal occupation from that held when elected to the Board is expected to volunteer to resign from the Board. Although Peoples does not believe that it will be necessary in every instance that a director who makes such a change should leave the Board, the Governance and Nominating Committee is afforded the opportunity to review the appropriateness of continued Board service under the new circumstances and make a recommendation to the full Board.

Peoples' Corporate Governance Guidelines also provide that a director must submit his or her resignation effective as of the next annual meeting of shareholders following his or her 72nd birthday.

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A director must advise the Chairman of the Board and the Chair of the Governance and Nominating Committee in advance of accepting an invitation to serve as a director of another public company. The Governance and Nominating Committee will then review whether such other board membership may unduly impact the ability of the director to fulfill his or her responsibilities as a director of Peoples and, if so, must make a recommendation to the full Board. Generally, the Board believes that a director of Peoples should not serve on more than three public company boards of directors (including Peoples' Board).

The Governance and Nominating Committee considers candidates for the Board from any reasonable source, including shareholder recommendations, and does not evaluate candidates differently based on who has made the recommendation. The Governance and Nominating Committee has the authority under its charter to hire and pay a fee to consultants or search firms to assist in the process of identifying and evaluating director candidates.

Shareholders may recommend director candidates for consideration by the Governance and Nominating Committee by writing to the Corporate Secretary of Peoples at Peoples' executive offices in Marietta, Ohio. Such recommendation must provide the candidate's name, age, business address, residence address, principal occupation or employment, and number of common shares beneficially owned. The recommendation must also describe the qualifications, attributes, skills or other qualities of the recommended director candidate. A written statement from the candidate consenting to be named as a director candidate and, if nominated and elected, to serve as a director must accompany any such recommendation.

Shareholders who wish to nominate an individual for election as a director at an annual meeting of the shareholders of Peoples must comply with the provisions of Peoples' Code of Regulations regarding shareholder nominations. Shareholder nominations must be made in writing and delivered or mailed to the Corporate Secretary of Peoples not less than 14 days nor more than 50 days prior to any meeting of shareholders called for the election of directors. However, if less than 21 days notice of the meeting is given to the shareholders, the nomination must be mailed or delivered to the Corporate Secretary no later than the close of business on the seventh day following the day on which the notice of the meeting was mailed to the shareholders. Nominations for the Annual Meeting must be received by April 12, 2018. Each nomination must contain the following information to the extent known by the nominating shareholder:

 

the name, age, business address and residence address of each proposed nominee;

 

the principal occupation or employment of each proposed nominee;

 

the number of shares of capital stock of Peoples beneficially owned by each proposed nominee and by the nominating shareholder; and

 

any other information required to be disclosed with respect to a nominee for election as a director under the SEC's proxy rules.

Each nomination must be accompanied by the written consent of the proposed nominee to serve as a director of Peoples if elected. Nominations not made in accordance with the above requirements and Peoples' Code of Regulations will not be considered.

SHAREHOLDER COMMUNICATIONS WITH THE BOARD

Any communication to the Board or to individual directors may be sent to the Board or one or more individual directors in one of two ways. It may be mailed, in care of Peoples' Corporate Secretary, to Peoples' headquarters in Marietta, Ohio, and the mailing envelope must contain a clear notation indicating that the enclosed correspondence is a “Shareholder-Board Communication” or a “Shareholder-Director Communication” as appropriate. In addition, shareholders may communicate with the Board or individual directors by utilizing the “Feedback” function on the “Investor Relations” page of Peoples' website that is monitored by the Corporate Secretary. All such communications, whether via mail or the website, must identify the author as a shareholder of Peoples and clearly state whether the intended recipients are all members of the Board or certain specified individual directors. The Corporate Secretary will make copies of all such communications and circulate them to the appropriate director or directors without any screening. Any correspondence marked “personal and confidential” will be delivered by the Corporate Secretary to the intended recipient(s) without opening.

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PROPOSAL NUMBER 2:

VOTE ON ADVISORY RESOLUTION TO APPROVE NAMED EXECUTIVE

OFFICERS' COMPENSATION

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and corresponding SEC rules enable Peoples' shareholders to vote to approve, on an advisory and non-binding basis, the compensation of Peoples' named executive officers as disclosed in this Proxy Statement in accordance with SEC rules. Accordingly, the following resolution will be submitted for shareholder approval at the Annual Meeting:

“RESOLVED, that the shareholders of Peoples Bancorp Inc. (“Peoples”) approve, on an advisory basis, the compensation of Peoples' named executive officers as disclosed in Peoples' Proxy Statement for its 2018 Annual Meeting of Shareholders pursuant to Item 402 of SEC Regulation S-K, including in the “EXECUTIVE COMPENSATION: COMPENSATION DISCUSSION AND ANALYSIS”, the “SUMMARY COMPENSATION TABLE FOR 2017”, and the related executive compensation tables, notes and narratives.”

The Board believes that Peoples' compensation policies and procedures, which are reviewed and approved by the Compensation Committee, are effective in aligning the compensation and incentives paid to Peoples' named executive officers with Peoples' short-term goals and long-term success, and that such compensation and incentives are designed to attract, retain and motivate Peoples' key executives who are directly responsible for Peoples' continued success. The Board believes that Peoples' compensation policies and practices do not threaten the value of Peoples or the investments of our shareholders, or create incentives to engage in behaviors or business activities that are reasonably likely to have a material adverse impact on Peoples. The Board further believes that Peoples' culture focuses executives on sound risk management and appropriately rewards executives for performance. The Board also believes that Peoples' compensation policies and procedures are reasonable in comparison both to Peoples' peer bank holding companies and to Peoples' performance during the 2017 fiscal year.

Similar “Say on Pay” proposals were approved by a significant majority of the common shares voted at each of Peoples' last nine annual meetings of shareholders.

Shareholders are encouraged to carefully review the information provided in this Proxy Statement regarding the compensation of Peoples' named executive officers in the section captioned “EXECUTIVE COMPENSATION: COMPENSATION DISCUSSION AND ANALYSIS” beginning on page 48 of this Proxy Statement.

The vote on the advisory resolution relates to the compensation of Peoples’ named executive officers as a whole. Because your vote is advisory, the outcome of the vote will not: (i) be binding upon the Board or the Compensation Committee with respect to future executive compensation decisions, including those relating to Peoples' named executive officers, or otherwise; (ii) overrule any decision made by the Board or the Compensation Committee; or (iii) create or imply any additional fiduciary duty by the Board or the Compensation Committee. However, the Compensation Committee expects to take into account the outcome of the vote when considering future executive compensation arrangements. The current policy of the Board is to include an advisory resolution regarding approval of the compensation of Peoples’ named executive officers annually.  Accordingly, unless the Board modifies its policy on the frequency of future votes, the next advisory vote to approve the compensation of Peoples’ named executive officers will occur at the 2019 Annual Meeting.  The Board will take into account the vote with respect to Proposal Number 3 regarding the frequency of future advisory votes to approve the compensation of Peoples’ named executive officers.

Recommendation and Vote Required

THE BOARD UNANIMOUSLY RECOMMENDS THAT PEOPLES' SHAREHOLDERS VOTE “FOR”

THE APPROVAL OF THE NON-BINDING ADVISORY RESOLUTION TO APPROVE THE

COMPENSATION OF PEOPLES' NAMED EXECUTIVE OFFICERS.

The affirmative vote of a majority of the common shares represented at the Annual Meeting, in person or by proxy, and entitled to vote on the proposal is required to approve the non-binding advisory resolution to approve the compensation paid to Peoples' named executive officers as disclosed in this Proxy Statement. Except in the case of

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broker non-votes, a proxy received by Peoples and not revoked prior to or at the Annual Meeting will be voted in favor of this non-binding, advisory resolution unless otherwise instructed by the shareholder. The effect of an abstention is the same as a vote “AGAINST” the proposal. Broker non-votes will not be counted in determining whether the proposal has been approved.

PROPOSAL NUMBER 3:

ADVISORY VOTE ON THE FREQUENCY OF FUTURE SHAREHOLDER ADVISORY VOTES ON

EXECUTIVE COMPENSATION

In Proposal Number 2, Peoples is asking shareholders to vote on an advisory resolution on the approval of the compensation of Peoples' named executive officers and has provided this type of advisory vote every year since 2009. Under the Dodd-Frank Act and corresponding SEC rules, Peoples is required to include a separate resolution subject to a separate shareholder advisory vote at least once every six years with respect to the frequency of the future advisory votes on the compensation of Peoples’ named executive officers.  The last such advisory vote occurred at Peoples’ 2012 Annual Meeting of Shareholders.  Accordingly, Peoples is now asking shareholders to vote on whether future advisory votes on the compensation of Peoples’ named executive officers should occur every one year, every two years or every three years. The following resolution will be submitted for an advisory shareholder vote at the Annual Meeting:

“RESOLVED, that the shareholders advise that an advisory resolution with respect to the compensation of Peoples' named executive officers should be presented to the shareholders every one year, every two years or every three years as reflected by their votes for each of these alternatives in connection with this resolution.”

In voting on this resolution, you should mark your proxy for every one year, every two years or every three years based on your preference as to the frequency with which an advisory vote on executive compensation should be held.  If you have no preference, you should abstain.

After careful consideration, the Board has determined that holding an advisory vote on the compensation of Peoples' named executive officers every one year continues to be the most appropriate for Peoples, and unanimously recommends that you vote for a frequency of every one year for future advisory votes on the compensation of Peoples' named executive officers.  While Peoples' executive compensation programs are designed to promote both a short-term and a long-term connection between pay and performance, the Board recognizes that executive compensation disclosures are made annually.  Holding an annual advisory vote on the compensation of Peoples' named executive officers provides Peoples with more direct and immediate feedback on Peoples' compensation disclosures.  However, you should note that because the advisory vote on the compensation of Peoples' named executive officers occurs well after the beginning of the compensation year, and because the different elements of Peoples' executive compensation programs are designed to operate in an integrated manner and to complement one another, in many cases it may not be appropriate or feasible to change Peoples' executive compensation programs in consideration of any one year’s advisory vote on the compensation of Peoples' named executive officers by the time of the following year’s annual meeting of shareholders.

Peoples understands that our shareholders may have different views as to what is an appropriate frequency for advisory votes on the compensation of Peoples' named executive officers, and the Board and the Compensation Committee will carefully review the voting results on the proposal.  However, because your vote is advisory, it will not be binding upon the Board or the Compensation Committee. Notwithstanding the outcome of the shareholder vote, the Board may in the future decide to conduct advisory votes on a more or less frequent basis and may vary its practice based on factors such as discussions with shareholders and the adoption of major changes to compensation programs.

Recommendation and Vote Required

THE BOARD RECOMMENDS HOLDING A VOTE ON AN ADVISORY RESOLUTION

FOR THE APPROVAL OF THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS

“EVERY ONE YEAR.”

 

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The affirmative vote of a majority of the common shares represented at the Annual Meeting, in person or by proxy, and entitled to vote on the proposal, is required to approve, on a non-binding advisory basis, one of the selections under this advisory proposal.  Proxies received by Peoples and not revoked prior to the Annual Meeting will be voted in favor of “every one year” unless otherwise instructed by the shareholder.  Common shares as to which the vote is expressed as an “ABSTAIN” vote on the proxy card or in voting instructions and broker non-votes with respect to this proposal will not affect its outcome.

 

PROPOSAL NUMBER 4:

APPROVAL OF THE PEOPLES BANCORP INC.

THIRD AMENDED AND RESTATED 2006 EQUITY PLAN

General

Upon the recommendation of the Compensation Committee, on February 22, 2018, the Board adopted the Peoples Bancorp Inc. Third Amended and Restated 2006 Equity Plan (the “Third A&R 2006 Plan”), subject to approval by the shareholders of Peoples.  The Peoples Bancorp Inc. 2006 Equity Plan (the “Original 2006 Plan”) was originally adopted on February 9, 2006 by the Board and approved by Peoples’ shareholders on April 13, 2006.  The Original 2006 Plan was subsequently amended by the Board on June 8, 2006 and February 8, 2007 and was further amended and restated in the form of the Peoples Bancorp Inc. Amended and Restated 2006 Equity Plan (the “A&R 2006 Plan”) effective December 11, 2008.  The A&R 2006 Plan was amended and restated in the form of the Peoples Bancorp Inc. Second Amended and Restated 2006 Equity Plan (the “Second A&R 2006 Plan”) effective February 28, 2013 and approved by Peoples’ shareholders on April 25, 2013.  The Second A&R 2006 Plan was amended by the Board on January 25, 2018.  The Second A&R 2006 Plan is proposed to be further amended and restated in the form of the Third A&R 2006 Plan.  The Third A&R 2006 Plan will become effective upon the approval thereof by Peoples’ shareholders (the “Third Restatement Effective Date”).

The Third A&R 2006 Plan makes the following changes to the material terms of the Second A&R 2006 Plan:

 

Provides that the number of common shares that may be issued under the Third A&R 2006 Plan after the Third Restatement Effective Date (the “Common Share Authorization”) will be 800,000 common shares plus (i) the number of common shares attributable to Awards that are outstanding under the Second A&R 2006 Plan immediately prior to the approval of the Third A&R 2006 Plan by Peoples’ shareholders and (ii) the number of common shares that were authorized to be issued under the Second A&R 2006 Plan immediately prior to the approval of the Third A&R 2006 Plan by Peoples’ shareholders but that were not subject to an outstanding Award immediately prior to such approval.  Based on the number of common shares subject to outstanding Awards, and the number of common shares available for future grants of Awards, under the Second A&R 2006 Plan as of February 26, 2018, the aggregate number of common shares available under the Third A&R 2006 Plan (including common shares subject to outstanding Awards (294,100 common shares) and common shares that were authorized to be issued but that were not subject to outstanding Awards (73,470 common shares)) would be 1,167,570common shares;

 

 

Adds to the common shares that count against the Common Share Authorization: the number of common shares tendered by a participant to satisfy the participant’s tax withholding obligations or to pay the option price of an Option or satisfy the exercise price of an SAR, as applicable; and the number of common shares withheld from any Option or any SAR to satisfy a participant’s tax withholding obligations or to pay the option price of such Option or the exercise price of such SAR;

 

Changes the maximum aggregate dollar value of, and the maximum number of common shares subject to, Awards of Restricted Stock and Performance Units that may be granted to any one Employee or any one Advisor with respect to a performance period or a restriction period to the lesser of $550,000 or 100,000 common shares (from $500,000 and 500,000 common shares) for each fiscal year included in such performance period or such restriction period;

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Reduces the maximum number of common shares subject to Options or SARs that may be granted to any one participant in any one fiscal year from 500,000 to 100,000;

 

Adds a $150,000 maximum aggregate dollar value limit with respect to Award(s) that may be granted to any one Non-Employee Director in any one fiscal year;

 

Extends the termination date for the Third A&R 2006 Plan to the tenth anniversary of the Third Restatement Effective Date;

 

Expands the list of performance criteria upon which performance goals relating to the payment or vesting of an Award may be based;

 

Clarifies the events that will be deemed to constitute a “change in control” for purposes of the Third A&R 2006 Plan;

 

Allows the Compensation Committee or the full Board, as applicable, to approve a participant’s authorization to deduct or withhold a higher level of tax withholding than the minimum statutory total tax;

 

Allows Peoples to clawback gains from Awards if certain financial restatements occur;

 

Prohibits the transfer of Awards except by will or the laws of descent and distribution; and

 

Clarifies that no dividends or dividend equivalent rights contained in an Award will be paid to the participant holding such Award until the restrictions on the related Award lapse and that any accrued dividends or dividend equivalent rights contained in an Award will be forfeited to the extent the participant forfeits the related Award.

The Board believes it is desirable to continue to have Awards available to be used to attract and retain talented Employees, Non-Employee Directors and Advisors of Peoples and our subsidiaries and to promote the long-term growth and financial success of Peoples by encouraging ownership of common shares and motivating the achievement of long-term performance goals and objectives. The Third A&R 2006 Plan continues to make common shares available for a variety of Awards, allowing Peoples to choose the equity-based incentives most appropriate to individual circumstances and most likely to benefit Peoples and our shareholders. The Third A&R 2006 Plan will continue to make the following equity-based Awards available for grant to eligible participants in the Third A&R 2006 Plan:

 

Incentive Stock Options;

 

Nonqualified Stock Options (and together with Incentive Stock Options, “Options”);

 

SARs;

 

Restricted Stock;

 

Restricted Performance Stock (and together with Restricted Stock, where appropriate ,“Restricted Stock”);

 

unrestricted common shares; and

 

Performance Units.

The following summary of the material provisions of the Third A&R 2006 Plan is qualified in its entirety by reference to the specific provisions of the Third A&R 2006 Plan, the full text of which is attached to this Proxy Statement as Appendix A. All capitalized terms which are not defined in this summary are defined in the Third A&R 2006 Plan.

Purpose

The purpose of the Third A&R 2006 Plan is to provide financial incentives for selected Employees, Advisors and Non-Employee Directors of Peoples and our subsidiaries, thereby promoting the long-term growth and

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financial success of Peoples by: (i) attracting and retaining Employees, Advisors and Non-Employee Directors of outstanding ability; (ii) strengthening Peoples’ capability to develop, maintain and direct a competent management team; (iii) providing an effective means for selected Employees, Advisors and Non-Employee Directors to acquire and maintain ownership of common shares; (iv) motivating Employees to achieve long-range performance goals and objectives; and (v) providing incentive compensation opportunities competitive with peer financial institution holding companies.

Effective Date and Expiration of the Third A&R 2006 Plan

The Original 2006 Plan became effective on April 13, 2006. The A&R 2006 Plan became effective on December 11, 2008. The Second A&R 2006 Plan became effective on April 25, 2013. If the Third A&R 2006 Plan is approved by Peoples' shareholders at the Annual Meeting, the Third A&R 2006 Plan will become effective on April 26, 2018, which will be the Third A&R Restatement Effective Date. Unless earlier terminated by the Board, the Third A&R 2006 Plan will terminate on the tenth anniversary of the Third Restatement Effective Date (i.e., on April 26, 2028). No Award may be made pursuant to the Third A&R 2006 Plan after its termination date, but Awards made prior to the termination date will remain in effect in accordance with their respective terms.  In any event, no Incentive Stock Options may be granted after February 22, 2028.

Administration of the Third A&R 2006 Plan

The Third A&R 2006 Plan will continue to be administered by the Compensation Committee (the “Committee”) which has the authority to grant Awards to Employees, Advisors and non-employee directors who are members of the board of directors of a subsidiary of Peoples but are not also members of the Peoples Board (“Subsidiary Directors”). The full Peoples Board has the authority to grant Awards to non-employee directors who are members of the Peoples Board (“Company Directors” and together with the Subsidiary Directors, “Non-Employee Directors”). The Committee, or the full Board, as the case may be, has the full power and authority to interpret and administer the Third A&R 2006 Plan and to establish and amend rules and regulations for the administration of the Third A&R 2006 Plan. Any action or decision by the full Board or the Committee, as the case may be, will be final, binding and conclusive with respect to the interpretation of the Third A&R 2006 Plan and any Award made under it.

More specifically, the Committee or the full Board, as appropriate, has the authority, in its discretion:

 

to determine those Employees, Advisors and Non-Employee Directors who will receive an Award; the timing of Award grants; the vesting schedule, if any, for each Award; and the type of Award to be granted, the number of common shares to be subject to each Option, each SAR and each Restricted Stock Award, the value of each Performance Unit and all other terms and conditions of any Award;

 

to determine and set forth in an award agreement the terms of each Award, including those terms, restrictions and provisions necessary to cause certain Options to qualify as Incentive Stock Options;

 

to correct any defect or supply any omission or reconcile any inconsistency in the Third A&R 2006 Plan or in any award agreement, in order to carry out the purposes of the Third A&R 2006 Plan; and

 

to accelerate (i) the date on which an Option or an SAR may be exercised, (ii) the date of termination of the restrictions applicable to a Restricted Stock Award, or (iii) the end of a performance period under a Performance Unit Award, if the Committee or the full Board, as applicable, determines that to do so will be in the best interests of Peoples and the participants in the Third A&R 2006 Plan.

All Awards will be subject to the terms and conditions of the Third A&R 2006 Plan and to such other terms and conditions determined in the sole discretion of the Committee or the full Board, as applicable. The terms of Awards need not be uniform among all participants who receive an Award, whether or not similarly situated. Awards may be granted under two or more provisions of the Third A&R 2006 Plan, may be combined in one award

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agreement and may contain any combination of Awards granted at one time and on more than one occasion to the same Employee, Advisor or Non-Employee Director.

Eligibility and Participation

All Employees, Advisors and Non-Employee Directors will continue to be eligible to participate in the Third A&R 2006 Plan. For purposes of the Third A&R 2006 Plan, an “Employee” means an individual who is a common law employee of Peoples or any of our subsidiaries and an “Advisor” is an advisor who renders bona fide services to Peoples and/or one or more of our subsidiaries as an advisory or marketing board member and who is neither an Employee nor a Non-Employee Director, provided that such services are not provided in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the common shares of Peoples.

As of the date of this Proxy Statement, except as disclosed below under Plan Benefits,” no determination has been made regarding the identity of the individuals to whom future Awards may be granted under the Third A&R 2006 Plan. Peoples estimates that approximately 105 of the Employees of Peoples and our current subsidiaries will be eligible to receive Awards, including the executive officers of Peoples named in the “SUMMARY COMPENSATION TABLE FOR 2017” beginning on page 74 of this Proxy Statement. Following the election of three directors at the Annual Meeting, there will be ten Non-Employee Directors eligible to receive Awards as Company Directors. As of the date of this Proxy Statement, there were no Non-Employee Directors who qualified as Subsidiary Directors. Peoples is unable to reasonably estimate the number of Advisors who will be eligible to receive Awards.

Employees may be granted Incentive Stock Options. Employees, Advisors and Non-Employee Directors may be granted Nonqualified Stock Options, SARs, Restricted Stock, Restricted Performance Stock, unrestricted common shares and Performance Unit Awards.

Plan Benefits

The amount and nature of Awards to be granted in the future under the Third A&R 2006 Plan are at the discretion of the Committee with respect to participants other than Company Directors and the full Board with respect to Company Directors. Except as discussed below, the amount and nature of Awards to be granted after the date of the Annual Meeting to participants in the Third A&R 2006 Plan cannot be determined at this time. The Awards described below may not, however, be reflective of future Awards under the Third A&R 2006 Plan.

2018 Fiscal Year

The table included under “EXECUTIVE COMPENSATION:  COMPENSATION DISCUSSION AND ANALYSIS - 2017 Executive Compensation Components - Cash and Equity-Based Incentive Program- 2017 Long-Term Incentive (Equity)” on page 64 of this Proxy Statement shows the number of common shares subject to Restricted Stock Awards granted under Peoples' 2017 incentive program (which grants were made on February 2, 2018) to the NEOs.  Restricted Stock Awards covering an aggregate of 17,919 common shares were granted to all current executive officers of Peoples as a group under the 2017 incentive program and Restricted Stock Awards covering an aggregate of 67,127 common shares were granted to all employees, excluding current executive officers, as a group.  All of these grants were made under the Second A&R 2006 Plan.

For the 2018 fiscal year, each of the current Company Directors (including director nominees George W. Broughton and Terry T. Sweet) received an annual grant of 400 unrestricted common shares (or an aggregate of 3,600 unrestricted common shares) on January 31, 2018, which were delivered under the Second A&R 2006 Plan.  Company Directors then serving in that capacity are to receive unrestricted common shares as part of the annual retainers they receive as described under the caption “DIRECTOR COMPENSATION - Compensation Paid to Board Members” beginning on page 89 of this Proxy Statement.  None of the Company Directors has received any portion of the payment of their respective annual retainers to be paid with respect to the 2018 fiscal year through February 26, 2018. Any unrestricted common shares received by the Company Directors before the Annual Meeting will be delivered from the Second A&R 2006 Plan and any unrestricted common shares received after the Annual Meeting will be delivered from the Third A&R 2006 Plan.

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2017 Fiscal Year

The table included under “EXECUTIVE COMPENSATION - GRANTS OF PLAN-BASED AWARDS FOR 2017” beginning on page 76 of this Proxy Statement shows the Restricted Stock Awards granted under the Second A&R 2006 Plan to the NEOs during the 2017 fiscal year in respect of performance under the 2016 incentive program. During the 2017 fiscal year, Restricted Stock Awards covering an aggregate of 12,177 common shares were granted under the Second A&R 2006 Plan to all current executive officers of Peoples as a group and Restricted Stock Awards covering an aggregate of 45,140 common shares were granted to all current employees, excluding current executive officers, as a group, in each case, in respect of performance under the 2016 incentive program.  In addition, during the 2017 fiscal year, Charles W. Sulerzyski was granted a Performance Unit Award with threshold, target and maximum opportunities of $70,625, $282,500 and $423,750, respectively. Based on the performance levels achieved for 2017 with respect to the performance goals applicable to the Performance Unit Award, Mr. Sulerzyski earned $327,000, which was paid in cash on February 21, 2018.

On July 26, 2017, the Committee approved a one-time supplemental long-term incentive program in the form of a grant of Performance Unit Awards, with the maximum dollar amount represented by the Performance Units being $350,000 for Mr. Sulerzyski and $150,000 for each of the other NEOs. The Performance Unit Awards cover a 24-month performance period beginning January 1, 2018 and ending on December 31, 2019, and are subject to two performance goals.  After the vesting date, each NEO will receive a number of common shares equal to (i) the aggregate number of Performance Units that vested based on the performance achieved under both goals, divided by (ii) the fair market value of a common share on the date of such vesting.  Any common shares earned under these Performance Unit Awards will be delivered from the Third A&R 2006 Plan.

As discussed under “DIRECTOR COMPENSATION FOR 2017” beginning on page 89 of this Proxy Statement, during the 2017 fiscal year, director nominees George W. Broughton and Terry T. Sweet were granted Awards covering an aggregate of 749 and 638 unrestricted common shares, respectively, as a part of their annual retainers and a Restricted Stock Award covering 300 common shares each. During the 2017 fiscal year, the current Company Directors as a group were granted Awards covering an aggregate of 6,948 unrestricted common shares as part of their annual retainers and Restricted Stock Awards covering an aggregate of 3,000 common shares.

Common Shares Available Under the Third A&R 2006 Plan

Subject to certain adjustments as described below under “Adjustments,” the maximum number of common shares that may be issued under the Third A&R 2006 Plan (the “Common Share Authorization”) will be 800,000 common shares plus (i) the number of common shares attributable to Awards that are outstanding under the Second A&R 2006 Plan immediately prior to the approval of the Third A&R 2006 Plan by Peoples' shareholders and (ii) the number of common shares that were authorized to be issued under the Second A&R 2006 Plan immediately prior to the approval of the Third A&R 2006 Plan by Peoples' shareholders but that were not subject to an outstanding Award immediately prior to such approval.  Based on the number of common shares subject to outstanding Awards, and the number of common shares available for future grants of Awards, under the Second A&R 2006 Plan, in each case as of February 26, 2018, the aggregate number of common shares available under the Third A&R  2006 Plan (including common shares subject to outstanding Awards (294,100 common shares) and common shares that were authorized to be issued but that were not subject to outstanding Awards (73,470 common shares)) would be 1,167,570 common shares. The maximum number of common shares that may be issued subject to Incentive Stock Options under the Third A&R 2006 Plan will be 1,000,000 common shares. The authorized common shares may consist of (i) common shares previously issued and outstanding and reacquired by Peoples or (ii) authorized but unissued common shares not reserved for any other purpose.

The following common shares will not be counted against the Common Share Authorization:

 

the common shares subject to an Award granted under the Third A&R 2006 Plan which Award for any reason on or after the Third Restatement Effective Date terminates by expiration, forfeiture, cancellation or otherwise without having been exercised or paid; and

 

the common shares withheld from any Award that is not an Option or an SAR or tendered by a participant to Peoples, in either case to satisfy a participant’s tax withholding obligations in connection with that Award.

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The Common Share Authorization will have counted against it:

 

the number of common shares tendered by a participant to Peoples to satisfy the participant’s tax withholding obligations or to pay the option price of an Option or the exercise price of an SAR, as applicable;

 

the number of common shares withheld from any Option or any SAR to satisfy a participant’s tax withholding obligations or to pay the option price of such Option or satisfy the exercise price of such SAR;

 

if an SAR is settled in whole or in part by the issuance of common shares, the number of common shares which represents the difference between (i) the number of common shares which remain subject to such SAR on the date of such settlement and (ii) the number of common shares actually issued upon settlement of such SAR; and

 

the number of common shares subject to an Option which is equal to the number of common shares acquired by Peoples on the open market using the cash proceeds received by Peoples from the exercise of such Option; provided, however, that such number of common shares will in no event be greater than the number which is determined by dividing (i) the amount of cash proceeds received by Peoples from the participant upon the exercise of such Option by (ii) the fair market value of a common share on the date of exercise of such Option.

Limitations on Awards

In addition to the overall Common Share Authorization under the Third A&R 2006 Plan, the maximum number of common shares subject to Options or SARs that may be granted to any one participant in any one fiscal year of Peoples is 100,000, subject to adjustment under the terms of the Third A&R 2006 Plan as described below under “Adjustments.” The maximum aggregate dollar value of, and the maximum number of common shares subject to, Restricted Stock and Performance Units that may be granted to any one Employee or any one Advisor with respect to a performance period or a restriction period may not exceed the lesser of $550,000 or 100,000 common shares (subject to adjustment under the terms of the Third A&R 2006 Plan as described below under “Adjustments”) for each fiscal year of Peoples included in such performance period or restriction period.

Options

Nonqualified Stock Options may be granted to any participant under the Third A&R 2006 Plan. Incentive Stock Options, however, may be granted only to Employees of Peoples or of any of our subsidiaries as permitted under the applicable provisions of the Internal Revenue Code. Additionally, grants of Incentive Stock Options will be subject to the restrictions and conditions set forth in the relevant sections of the Internal Revenue Code, including the $100,000 limitation on Incentive Stock Options first becoming exercisable in a calendar year and limitations for Employees possessing more than 10% of the total combined voting power of all classes of stock of Peoples or any of our subsidiaries.

Options may be granted for terms of up to, but not exceeding, ten years from the date of grant. Each Option grant is to be evidenced by an award agreement that specifies whether the Option is intended to be an Incentive Stock Option or a Nonqualified Stock Option, the exercise price of the Option, the duration of the Option, the number of common shares to which the Option pertains, the conditions upon which the Option will vest and become exercisable, and such other provisions as the Committee or the Board, as applicable, determines.

The Committee or the Board, as applicable, will determine the exercise price of each Option (the “option price”); however, the option price must be at least equal to 100% of the fair market value of the underlying common shares on the grant date. For purposes of the Third A&R 2006 Plan, the “fair market value” of a common share on a particular date will generally be the closing price of a common share on that date on NASDAQ.  On March 16, 2018, the fair market value of a common share was $36.54. The Committee or the Board, without shareholder approval, may not reduce the option price, cancel an outstanding Option in exchange for an Option with an option price that is less than the option price of the original Option; or cancel an outstanding Option with an option price which is above the current fair market value of a common share in exchange for cash or other securities.

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Once an Option vests, the Option may be exercised at any time during the term of the Option in such manner as specified in the award agreement and upon proper notice to Peoples as specified in the Third A&R 2006 Plan, but only if a participant is then, and continually (except for sick leave, military service, or other approved leave of absence) after the grant of the Option has been, an Employee, an Advisor or a Non-Employee Director. The option price of any Option must be paid in full at the time of exercise (i) in cash; (ii) in previously acquired common shares having a fair market value equal to the option price on the date of exercise (or the immediately preceding date if the date of exercise is not a trading day); (iii) in a combination of cash and common shares; or (iv) by a cashless (broker-assisted) exercise.

The option price must be fully paid before Peoples will issue or transfer the acquired common shares.  A participant has no shareholder rights with respect to the common shares covered by an Option until such common shares are issued to the participant.

Notwithstanding the foregoing, the Committee may, in its discretion, prescribe additional conditions, restrictions or terms on the vesting of an Option, including the full or partial attainment of performance goals.  After an Option vests, the Option may be exercised at any time during the term of the Option, in whole or in installments, as specified in the related award agreement.

SARs

The Committee may award SARs to any participant under the Third A&R 2006 Plan other than Company Directors. The Board has the authority to grant SARs to Company Directors. Each SAR represents the right to receive payment of an amount equal to (i) the amount by which the fair market value of one common share on the date of exercise of the SAR exceeds the exercise price of the SAR (the “exercise price”), multiplied by (ii) the number of common shares covered by the SAR.

Each SAR granted under the Third A&R 2006 Plan will be subject to the terms and conditions prescribed by the Committee or the Board, as applicable, in an award agreement, which will specify the exercise price, the term of the SAR and such other provisions as the Committee or the Board determines. The exercise price for each SAR will be determined by the Committee or Board, as applicable, but must be at least equal to 100% of the fair market value of a common share on the date of grant. The Committee or the Board may prescribe conditions and limitations on the exercise of any SAR.  At the discretion of the Committee or the Board, the payment upon the exercise of an SAR may be made in cash, common shares or a combination of the two, or in any other manner set forth in the award agreement.

Each SAR will expire on the date set by the Committee or the Board at the time of the grant, provided that the term of each SAR may not be more than ten years. An SAR is exercisable only by written notice to the Chief Financial Officer of Peoples or the Secretary of the Committee, or his or her designee. To the extent not previously exercised, all SARs will automatically be exercised on the last trading day prior to their expiration, so long as the fair market value of a common share on that date exceeds the exercise price, unless prior to that date, the participant gives proper and timely notice to the contrary to Peoples. The Committee or the Board, without shareholder approval, may not reduce the exercise price, cancel an outstanding SAR in exchange for an SAR with an exercise price that is less than the exercise price of the original SAR; or cancel an outstanding SAR with an exercise price which is above the current fair market value of a common share in exchange for cash or other securities.

Restricted Stock and Restricted Performance Stock

The Committee may award Restricted Stock and/or Restricted Performance Stock to any participant under the Third A&R 2006 Plan other than Company Directors. The Board has the authority to grant Restricted Stock and/or Restricted Performance Stock to Company Directors.

An award of Restricted Stock granted under the Third A&R 2006 Plan will be subject to the terms and conditions prescribed by the Committee or the Board, as applicable, in an award agreement. Each award agreement will specify the restriction period(s), the number of common shares covered by the Restricted Stock Award, and such other provisions as the Committee or the Board determines. Among other things, the Committee or the Board

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may impose different restriction periods for each Restricted Stock Award or conditions upon the Award including the attainment of performance goals (making the Award a grant of Restricted Performance Stock).

Unless otherwise determined by the Committee or the Board and set forth in a participant’s award agreement, the participant will be entitled to receive dividends during the restriction period, will have the right to vote such Restricted Stock and will have all other shareholder rights, except that (i) in the case of Restricted Stock, dividends otherwise payable in connection with common shares underlying any Restricted Stock Award will be accrued and paid to the participant at the same time as the restrictions on the Restricted Stock lapse, if at all; (ii) in the case of Restricted Performance Stock, dividends which would otherwise be received during the restriction period will be accrued and paid to the participant in the same proportion and at the same time as the underlying Restricted Performance Stock vests, if at all, (iii) if any dividends are paid in common shares, those common shares will be subject to the same restrictions as the common shares underlying the Restricted Stock with respect to which they were issued, (iv) the participant will not be entitled to delivery of any stock certificate evidencing the common shares underlying the Restricted Stock during the restriction period, (v) Peoples will retain custody of the Restricted Stock during the restriction period, and (vi) a breach of a restriction or a breach of the terms and conditions established by the Committee or the Board pursuant to the Restricted Stock Award will cause a forfeiture of the Restricted Stock Award.

Under the Third A&R 2006 Plan, the term “Restricted Performance Stock” means common shares subject to performance goals and grants of Restricted Performance Stock are subject to the same terms and conditions specified for grants of Restricted Stock.

Unrestricted Common Shares

The Committee may grant unrestricted common shares to any participant under the Third A&R 2006 Plan other than Company Directors on such terms and conditions as the Committee determines. The Board has the same authority to grant unrestricted common shares to Company Directors.

Performance Units

The Committee may grant Performance Units to any participant under the Third A&R 2006 Plan other than Company Directors. The Board has the same authority to grant Performance Units to Company Directors.

Each Performance Unit represents the right of a participant to receive an amount equal to the value of the Performance Unit, established by the Committee or the Board at the time the Award is granted. The Committee or the Board will determine the maximum dollar value of each Performance Unit and, in the discretion of the Committee or the Board, the measure of a Performance Unit may be equal to the fair market value of one common share.

In each award agreement, the Committee or the Board, as appropriate, will establish (i) the performance period during which performance will be measured and (ii) the performance goals for a participant for a particular performance period based upon various performance measures (described below under “General Performance Goals”).  Further, the Committee or the Board will set performance goals in its discretion which will, depending on the extent to which they are met, determine the value and/ or number of Performance Units that will be paid out to the participant.

After the applicable performance period has ended, the holder of Performance Units will be entitled to receive payout on the value and number of Performance Units earned during such performance period to the extent the applicable performance goals have been met. In determining the number of Performance Units to be granted to any participant, the Committee or the Board will take into account the participant’s responsibility level, performance, potential, cash compensation level, other incentive awards, and any other considerations as it deems appropriate.  Awards may be paid in cash or common shares, or any combination of the two, as determined by the Committee or the Board. Payment may be made in a lump sum or in installments and will be subject to such other terms and conditions as the Committee or the Board determines.

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General Performance Goals

The performance goals, upon which the payment or vesting of an Award to any employee that is intended to qualify as “performance-based compensation” under Section 162(m) may be based, are limited to the following performance measures:

 

earnings per share (actual or targeted growth);

 

net income after capital costs;

 

net income (before or after taxes);

 

return measures (including, but not limited to, return on average assets, risk-adjusted return on capital, return on average equity, pre-provision net revenue, or return on tangible common equity);

 

efficiency ratio;

 

full-time equivalency control;

 

stock price (including, but not limited to, growth measures, share price appreciation, or total shareholder return);

 

non-interest income compared to net interest income ratio;

 

expense targets (including, but not limited to, reduction in or maintenance of non-interest expense);

 

operating efficiency;

 

economic value added or EVA(R);

 

credit quality measures;

 

customer satisfaction measures;

 

loan growth;

 

deposit growth;

 

net interest margin;

 

fee income;

 

operating expense;

 

balance sheet measures including assets, loans, charge-offs, loan loss reserves, non-performing assets, deposits, asset quality levels, and investments;

 

balance sheet management;

 

fair market value of the common shares of Peoples;

 

interest income;

 

investment management;

 

maintenance or improvement of net interest income;

 

market capitalization;

 

market share;

 

non-interest income growth;

 

pretax income;

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productivity ratios;

 

reduction or maintenance in non-interest expense;

 

revenues;

 

risk management measures including interest-sensitivity gap levels, regulatory compliance, satisfactory internal or external audits, and financial ratings;

 

shareholder returns;

 

share price appreciation; and

 

tangible common equity.

For Awards not intended to comply with Section 162(m), the Committee or the Board may establish performance goals based upon any of the performance measures described above or upon any other performance criteria the Committee or the Board deems appropriate.

In either case, the Committee or the Board must establish performance goals in writing for each performance period no later than the earlier of (i) 90 days after the beginning of the performance period or (ii) the expiration of 25% of the performance period. Except as otherwise provided in the Third A&R 2006 Plan or an award agreement, as of the end of each performance period, the Committee or the Board must certify in writing the extent to which a participant has or has not met the participant’s performance goal(s). To the extent consistent with Section 162(m), if applicable, performance goals may be calculated without regard to extraordinary items or adjusted, as the Committee deems equitable, in recognition of unusual or non-recurring events affecting Peoples and/or one of our subsidiaries or changes in applicable tax laws or accounting principles.

Additionally, to the extent permitted by Section 162(m), if applicable, the Committee or the Board must make (i) appropriate adjustments to performance criteria to reflect the effect on any performance criteria of any stock dividend or stock split affecting the common shares of Peoples, recapitalization, merger, consolidation, combination, spin-off, distribution of assets to shareholders, exchange of shares or similar corporate change and (ii) similar adjustments to any portion of performance criteria that is not based on common shares but which is affected by an event having an effect similar to those just described.

Furthermore, any of the performance measures described above may be used to measure performance with respect to solely Peoples and/or any of our subsidiaries, or relatively between Peoples and/or any subsidiary and one or more unrelated entities. In addition, the Committee can apply different performance measures to different participants or groups of participants, and to results achieved by solely Peoples or any of our subsidiaries, a combination of the two, or any combination of business units or divisions of Peoples and our subsidiaries.

Change in Control

Under the Third A&R 2006 Plan, “change in control” means a change in the ownership or effective control of Peoples or in the ownership of a substantial portion of the assets of Peoples (within the meaning of Section 409A of the Internal Revenue Code). The Third A&R 2006 Plan clarifies that a “change in control” means:

 

a change in the ownership of Peoples where one person, or more than one person acting as a group (as determined under the terms of the Third A&R 2006 Plan), acquires ownership of more than 50% of Peoples’ stock, measured based on the total fair market value or total voting power of Peoples’ stock;

 

a change in the effective control of Peoples where one person, or more than one person acting as a group, acquires ownership of more than 30% of the total voting power of Peoples’ stock;

 

a change in the members of the Board, where a majority of Peoples’ directors are replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election; or

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a change in the ownership of more than 40% of the total gross fair market value of all of the assets of Peoples immediately before such acquisition or acquisitions.

In the event of a change in control where the surviving entity is not Peoples and the surviving entity (the “Acquiror”) does not assume or substitute equivalent Awards for outstanding grants of Options, SARs, Restricted Stock, Restricted Performance Stock or Performance Units, all outstanding Options and SARs will become immediately and fully exercisable and, in the case of Restricted Stock (other than Restricted Performance Stock), all outstanding Awards will become immediately and fully vested. In the case of Restricted Performance Stock and Performance Units, all outstanding Awards will be deemed to have been fully earned based on the target level of performance being attained as of the effective date of the change in control. Additionally, the Board or its designee may, in its sole discretion, provide for a cash payment to be made to each participant for the outstanding Restricted Stock, Restricted Performance Stock or Performance Units upon the consummation of the change in control, determined on the basis of the fair market value that would be received in such change in control by the holders of Peoples’ securities relating to such Awards. Notwithstanding the foregoing, any Option intended to qualify as an Incentive Stock Option under Section 422 of the Internal Revenue Code will be adjusted in a manner to preserve such status.

In the event of a change in control where Peoples is the surviving entity, or the Acquiror assumes the outstanding Options, SARs, Restricted Stock, Restricted Performance Stock or Performance Units or substitutes equivalent equity awards relating to the securities of such Acquiror or its affiliates, then all outstanding Awards or substitutes will remain outstanding and be governed by their respective terms and the provisions of the Third A&R 2006 Plan. In such a change in control scenario:

 

if a participant is terminated without cause or the participant terminates for good reason within 24 months following the change in control, and Peoples is the surviving corporation or the Acquiror has assumed the outstanding Awards, then all of the participant’s outstanding Options and SARs or substituted equivalent equity awards will become immediately and fully exercisable and, in the case of Restricted Stock (other than Restricted Performance Stock Awards), all outstanding Awards will become immediately and fully vested.  In the case of Restricted Performance Stock and Performance Units, all of the participant’s outstanding Awards will be deemed to have been fully earned based on the target level of performance being attained.  In the case of outstanding Options or SARs, the participant may exercise these Options or SARs at any time within one year after such termination, except that an Option or SAR will not be exercisable on any date beyond the expiration date of such Option or SAR.  If the participant dies after such termination, the exercisability of all outstanding Options or SARs will be treated in the same manner as that provided for a termination due to retirement (as further described below in “Termination”); and

 

if a participant is terminated for cause within 24 months following such change in control and Peoples is the surviving corporation or the Acquiror has assumed the outstanding Awards, then any outstanding Options or SARs of such participant will expire, any non-vested outstanding Restricted Stock, Restricted Performance Stock or Performance Units will be forfeited, and all rights under all such outstanding Awards will terminate immediately.

Peoples does not have the power to amend or terminate any provision regarding the effect of a change in control if any such amendment or termination would adversely affect the rights of any participant under the Third A&R 2006 Plan.

Tax Withholding

Peoples has the power and the right to deduct or withhold, or require a participant to remit to Peoples, the minimum statutory amount to satisfy federal, state and local taxes required by law or regulation to be withheld with respect to any taxable event arising as a result of the Third A&R 2006 Plan. With respect to withholding required upon any taxable event arising as a result of an Award granted under the Third A&R 2006 Plan, a participant may elect, subject to the approval of the Committee or the Board, as appropriate, to satisfy the withholding requirement, in whole or in part, by having Peoples withhold common shares having a fair market value on the date the tax is to be determined equal to the minimum statutory total tax that could be imposed on the transaction. All such elections

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will be irrevocable, must be made in writing and signed by the participant, and will be subject to any restrictions or limitations that the Committee or the Board, as applicable, in its sole discretion, deems appropriate. However, the Committee or the Board, as applicable, may approve a participant’s authorization to deduct or withhold a higher level of tax withholding than the minimum statutory total tax.

Termination

Subject to the provisions of individual award agreements, the following summarizes the effect of various termination events on Awards to participants in the Third A&R 2006 Plan:

 

Termination due to death: Unless otherwise provided by the Committee, all outstanding Options, SARs and Restricted Stock not subject to performance goals will vest and, if applicable, become exercisable; a portion of the Options, SARs and Restricted Stock subject to performance goals, determined by multiplying the number of common shares subject to such Options, SARs and Restricted Stock by a fraction, the numerator of which is the number of whole months elapsed during the performance period prior to the participant’s death, and the denominator of which is the number of months in the performance period, will immediately vest; and any SARs and any Options that are then, or become, exercisable (and have not yet been exercised) may be exercised by the participant’s personal representative at any time before the earlier of (i) one year after the participant’s death, or (ii) the expiration date of the Award.

 

Termination due to disability or retirement: Unless otherwise provided by the Committee, all outstanding unvested Options, SARs and Restricted Stock will become fully vested and, if applicable, exercisable at the time and under the conditions, including attainment of the performance goals, as such Options, SARs and Restricted Stock would otherwise vest and become exercisable pursuant to the terms of the award agreement; and any Options and SARs that are exercisable at the time of the participant's termination or become exercisable at that time (and have not yet been exercised) may be exercised at any time before the earlier of (i) one year after the date such Option or SAR became vested, or (ii) the expiration date of the Award.  However, an Option which is intended to qualify as an Incentive Stock Option will only be treated as such to the extent it complies with the requirements of Section 422 of the Internal Revenue Code.

 

Termination due to any reason other than death, disability, discharge for cause, or retirement:  Any outstanding Options or SARs may be exercised at any time within three months after such termination up to the number of common shares covered by the portion of such Options or SARs which is exercisable (and has not yet been exercised) at the date of such termination.  However, no Option or SAR will be exercisable after the expiration date of such Option or SAR.  Any other Awards that are not vested on the date of termination will immediately terminate and be of no further force or effect.  

 

Termination for cause: Any Options or SARs, whether or not then exercisable, will expire and any rights thereunder will terminate immediately, and any non-vested Restricted Stock Awards will immediately be forfeited and any rights thereunder will terminate.

 

Termination due to retirement, but participant dies with one year of such retirement and before the exercise of all of the participant's outstanding Options or SARs: Such Options or SARs may be exercised by the participant’s personal representative at any time before the earlier of (i) one year after the participant's death or (ii) the expiration date of the Award. However, an Option which is intended to qualify as an Incentive Stock Option will only be treated as such to the extent it complies with the requirements of Section 422 of the Internal Revenue Code.

 

Termination at any time during an applicable performance period: Awards of Performance Units will terminate for all purposes, except as may otherwise be determined by the Committee.

 

Termination at any time following the end of an applicable performance period, but prior to full payment: Awards of Performance Units will terminate except when the termination is due to death, disability or retirement or as may otherwise be determined by the Committee.

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Adjustments

In the event of any reorganization, recapitalization, reclassification, stock split, stock dividend, distribution, combination of shares, merger, consolidation, rights offering, or any other change in the corporate structure or shares of Peoples, appropriate adjustments will be made by the Committee or the Board, as the case may be, (or if Peoples is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) in the aggregate number and kind of shares subject to the Third A&R 2006 Plan, the number and kind of shares and the option price per share subject to outstanding Option or the exercise price per share subject to outstanding SARs or the number and kind of shares which may be issued under outstanding Restricted Stock Awards or pursuant to Awards of unrestricted common shares.

Subject to the provisions of the Third A&R 2006 Plan, appropriate adjustments will also be made by the Committee or the Board, as the case may be, in the terms of any Awards to reflect such changes and to modify any other terms of outstanding Awards on an equitable basis. Any such adjustments made by the Committee or the Board will be conclusive and binding for all purposes under the Third A&R 2006 Plan.

All adjustments will be made consistent with the requirements of Section 409A of the Code, to the extent applicable.

Clawback

Any Award which is subject to recovery under any law, governmental regulation or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, governmental regulation or stock exchange listing requirement (or any policy adopted by Peoples whether or not such adoption was pursuant to such law, governmental regulation or stock exchange listing requirement). The Third A&R 2006 Plan clarifies that Peoples may clawback gains from Awards if certain financial restatements occur.

Limitations on Transferability of Awards

During a participant’s lifetime, any Award held by the participant may be exercised only by the participant or any guardian or legal representative of the participant. In addition, Awards are not transferable except by will or the laws of descent and distribution.

Amendment, Suspension and Termination of the Third A&R 2006 Plan

The Board, in its discretion, may suspend or terminate the Third A&R 2006 Plan or any portion of the Third A&R 2006 Plan at any time and may amend the Third A&R 2006 Plan from time to time as needed (i) in order that any Awards thereunder conform to any change in applicable laws or regulations, or (ii) in any other respect deemed by the Board to be in the best interests of Peoples. No termination, amendment or suspension of the Third A&R 2006 Plan by the Board may adversely affect in any material way any outstanding Options, SARs, Restricted Stock Awards or Performance Units without the consent of the affected participant.

Without shareholder approval, no amendment may: (i) increase the number of common shares which may be issued under the Third A&R 2006 Plan (except as provided above in “Adjustments”); (ii) expand the types of awards available to participants under the Third A&R 2006 Plan; (iii) materially expand the class of employees and/or advisors eligible to participate in the Third A&R 2006 Plan; (iv) materially change the method of determining the option price of Options or the exercise price of SARs; (v) delete or limit the provisions of the Third A&R 2006 Plan prohibiting the repricing of Options and SARs; or (vi) extend the termination date of the Third A&R 2006 Plan. Additionally, to the extent that shareholder approval is required to satisfy applicable laws, regulations or standards of any stock exchange on which the common shares are listed, such amendment may be made without the requisite approval.

The Committee may amend or modify any outstanding Options, SARs, Restricted Stock Awards or Performance Unit Awards in any manner to the extent that the Third A&R 2006 Plan has provided the initial authority to the Committee to grant such Awards as so modified or amended.

Subject to the above conditions, the Board can amend the Third A&R 2006 Plan and any award agreements without any additional consideration to affected participants to the extent necessary to comply with,

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or avoid penalties under, Section 409A of the Internal Revenue Code, even if those amendments reduce, restrict or eliminate rights granted prior to such amendments.

U.S. Federal Income Tax Consequences

The following is a brief summary of the general U.S. federal income tax consequences relating to the Third A&R 2006 Plan. This summary is based on U.S. federal income tax laws and regulations in effect on the date of this Proxy Statement and does not purport to be a complete description of the U.S. federal income tax laws. In addition, this summary is not intended to be exhaustive, does not constitute tax advice, and does not describe federal employment, state, local or foreign tax consequences. Each participant will be advised to consult with his or her own tax advisor concerning the U.S. federal income tax and other tax consequences of participating in the Third A&R 2006 Plan.

Incentive Stock Options

Incentive Stock Options are intended to qualify for special treatment available under Section 422 of the Internal Revenue Code. A participant will not recognize any income when an Incentive Stock Option is granted and Peoples will not receive a deduction at that time. A participant will not recognize ordinary income upon the exercise of an Incentive Stock Option provided that the participant was, without a break in service, an employee of Peoples or one of our subsidiaries during the period beginning on the grant date of the Incentive Stock Option and ending on the date three months prior to the date of exercise (one year prior to the date of exercise if the participant’s employment is terminated due to death or disability).

If a participant acquires common shares by exercising an Incentive Stock Option and continues to hold those common shares for one year or, if longer, until the second anniversary of the grant date (each of these periods is called an “ISO Holding Period”), the amount the participant receives when the participant disposes of the common shares minus the option price will be taxable at long-term capital gain or loss rates (this is referred to as a “qualifying disposition”), depending on whether the amount the participant receives when the participant disposes of the common shares is greater or less than the option price the participant paid. Upon a qualifying disposition, Peoples is not entitled to a deduction.

If a participant disposes of the common shares before the end of either ISO Holding Period (this is referred to as a “disqualifying disposition”), the participant will recognize ordinary income equal to the excess, if any, of (i) the fair market value of the common shares on the date the Incentive Stock Option was exercised or, if less, the amount received on the disposition, over (ii) the option price. Peoples will be entitled to a deduction equal to the ordinary income that the participant recognizes.  Any amount realized in excess of the fair market value of the common shares on the date of exercise will be capital gain. If the amount realized is less than the option price, the participant generally will recognize a capital loss equal to the excess of the option price over the amount realized upon the disposition of the common shares.

The rules that generally apply to Incentive Stock Options do not apply when calculating any alternative minimum tax liability. The rules affecting the application of the alternative minimum tax are complex and their effect depends on individual circumstances, including whether a participant has items of adjustment other than those derived from Incentive Stock Options.


44


Nonqualified Stock Options

Nonqualified Stock Options do not receive the special tax treatment afforded to Incentive Stock Options under the Internal Revenue Code, although a participant will not recognize any income when a Nonqualified Stock Option is granted and Peoples will not receive a deduction at that time. However, unlike an Incentive Stock Option, when a Nonqualified Stock Option is exercised, a participant will recognize ordinary income equal to the excess, if any, of the fair market value of the common shares that the participant purchased on the date of exercise over the option price. If a participant uses common shares or a combination of common shares and cash to pay the option price of a Nonqualified Stock Option, the participant will have ordinary income equal to the fair market value of the excess of the number of common shares that the participant purchases over the number the participant surrenders, less any cash the participant uses to pay the option price. When a Nonqualified Stock Option is exercised, Peoples will be entitled to a deduction equal to the ordinary income that the participant recognizes.

If the amount a participant receives when the participant disposes of the common shares that the participant acquired by exercising a Nonqualified Stock Option is greater than the option price the participant paid, the excess will be treated as a long-term or short-term capital gain, depending on whether the participant held the common shares for more than one year after the participant acquired the common shares. But, if the amount a participant receives when the participant disposes of the common shares that the participant acquired by exercising a Nonqualified Stock Option is less than the option price the participant paid, the difference will be treated as a long-term or short-term capital loss, depending on whether the participant held the common shares for more than one year after the participant acquired the common shares.

SARs

A participant will not recognize any income when an SAR is granted and Peoples will not receive a deduction at that time. When an SAR is exercised, a participant will recognize ordinary income equal to the cash and/or the fair market value of the common shares the participant receives upon exercise over the aggregate exercise price.  Peoples will be entitled to a deduction equal to the ordinary income that the participant recognizes. If the amount a participant receives when the participant disposes of any common shares acquired upon the exercise of an SAR is greater than the fair market value of the common shares when the SAR was exercised, the excess will be treated as a long-term or short-term capital gain, depending on whether the participant held the common shares for more than one year after the SAR was exercised. But, if the amount the participant receives when the participant disposes of the common shares is less than the fair market value of the common shares when the SAR was exercised, the difference will be treated as a long-term or short-term capital loss, depending on whether the participant held the common shares for more than one year after the SAR was exercised.

Restricted Stock

Unless a participant makes an election under Section 83(b) of the Internal Revenue Code, the participant will not recognize ordinary income when Restricted Stock is granted and Peoples will not receive a deduction at that time. Instead, a participant will recognize ordinary income when the shares of Restricted Stock vest (i.e., when the participant can no longer forfeit them) equal to the fair market value of the common shares the participant receives when the restrictions lapse, less any consideration paid for the Restricted Stock, and Peoples generally will be entitled to a deduction equal to the ordinary income that the participant recognizes.

If the amount a participant receives when the participant disposes of these common shares is greater than the fair market value of the common shares when the Restricted Stock vested, the excess will be treated as a long-term or short-term capital gain, depending on whether the participant held the common shares for more than one year after the Restricted Stock vested. But, if the amount the participant receives when the participant disposes of these common shares is less than the fair market value of the common shares when the Restricted Stock vested, the difference will be treated as a long-term or short-term capital loss, depending on whether the participant held the common shares for more than one year after the Restricted Stock vested.

If a participant makes a Section 83(b) election, the participant will recognize ordinary income on the grant date equal to the fair market value of the common shares underlying the Restricted Stock on the grant date, and Peoples will be entitled to a deduction equal to the ordinary income that the participant recognizes at that time.  However, the participant will not recognize income when (and if) the restrictions lapse. If a participant earns the common shares, any appreciation in the fair market value of the common shares between the grant date and the

45


date the participant disposes of the common shares will be treated as a long-term or short-term capital gain, depending on whether the participant held the common shares for more than one year after the grant date. But, if the amount the participant receives when the participant disposes of these common shares is less than the fair market value of the common shares underlying the Restricted Stock on the grant date, the difference will be treated as a long-term or short-term capital loss, depending on whether the participant held the common shares for more than one year after the grant date. Also, if a participant forfeits the participant’s Restricted Stock, the participant cannot take a tax deduction in connection with that forfeiture.

Restricted Performance Stock and Performance Units

A participant will not recognize taxable income when Peoples grants the participant Restricted Performance Stock and/or Performance Units and Peoples will not receive a deduction at that time. However, if the participant satisfies the conditions imposed on the Award, the participant will recognize ordinary income equal to the cash and/or the fair market value of the common shares the participant receives upon settlement.  Peoples generally will be entitled to a deduction equal to the ordinary income that the participant recognizes.

If the amount a participant receives when the participant disposes of the common shares acquired upon the settlement of Restricted Performance Stock or Performance Units is greater than the fair market value of the common shares when the participant received them, the excess will be treated as a long-term or short-term capital gain, depending on whether the participant held the common shares for more than one year after they were issued.  But, if the amount the participant receives when the participant disposes of these common shares is less than the fair market value of the common shares when they were issued, the difference will be treated as a long-term or short-term capital loss, depending on whether the participant held the common shares for more than one year after they were issued.

Unrestricted Common Shares

Upon an issuance of an Award of unrestricted common shares, a participant will recognize ordinary income equal to the fair market value of the common shares issued and Peoples will receive a deduction in the same amount at that time.

Section 162(m) of the Internal Revenue Code

Prior to December 22, 2017, when the Tax Cuts and Jobs Act of 2017 (the “TCJA”) was signed into law, Section 162(m) of the Internal Revenue Code (“Section 162(m)”) generally disallowed a tax deduction to publicly-held companies for compensation paid in excess of $1,000,000 in a year for certain officers except to the extent such excess compensation qualified as “performance-based compensation.”  Certain Awards granted under the Second A&R 2006 Plan may qualify as “performance-based compensation” under Section 162(m).  For an Award granted under the Second A&R 2006 Plan, other than an Option or an SAR, to qualify as “performance-based compensation,” the lapse of restrictions on the Award, and distribution of cash, common shares or other property pursuant to such Award was required to be contingent upon satisfying one or more of the performance goals described above under the caption “General Performance Goals”, as established and certified by the Committee and the Award must satisfy the other requirements under Section 162(m). Any Options or SARs granted under the Second A&R 2006 Plan were historically expected to qualify as “performance-based compensation” due to the terms under which such Awards must be granted.

Under the TCJA, the performance-based exception has been repealed and the $1,000,000 deduction limitation now applies to (i) anyone serving as the chief executive officer or the chief financial officer of Peoples at any time during the taxable year, (ii) the top three other highest compensated executive officers of Peoples serving at the end of the taxable year and (iii) any individual who had been a covered employee for any taxable year of Peoples that started after December 31, 2016.  However, the new rules do not apply to remuneration provided pursuant to a written binding contract in effect on November 2, 2017 that has not been modified in any material respect after that date.  Because of ambiguities and uncertainties as to the application and interpretation of this transition relief, no assurance can be given that compensation intended to satisfy the requirements for the “performance-based compensation” exemption from Section 162(m) will avoid the deduction limit. We believe the amount of compensation paid to our executive officers that can be deducted will decrease compared to prior years.

46


Sections 280G and 4999 of the Internal Revenue Code

Sections 280G and 4999 of the Internal Revenue Code impose penalties on “excess parachute payments.” A parachute payment occurs when payments are made to a “disqualified individual” (as defined under Section 280G of the Internal Revenue Code) in connection with a change in control in an amount equal to or greater than 300% of the recipient's taxable compensation averaged over the five calendar years ending before the change in control (or over the entire period of employment if the participant has been employed less than five calendar years). This average is called the “base amount.” An “excess parachute payment” is an amount equal to the excess of any parachute payments over 100% of the base amount.

Some participants in the Third A&R 2006 Plan may receive payments in connection with a change in control. If this happens, the value of any such participant’s payments from the Third A&R 2006 Plan must be combined with other payments that the participant is entitled to receive in connection with a change in control under other agreements with or plans of Peoples or any of our subsidiaries. If the participant is a disqualified individual and the combined value of all payments is equal to or greater than 300% of the base amount, the participant must pay a 20% excise tax on all amounts in excess of 100% of the base amount.  This tax is in addition to other federal, state and local income, wage and employment taxes.  Peoples may not deduct the amount of any excess parachute payment.

Section 409A of the Internal Revenue Code

Section 409A of the Internal Revenue Code imposes certain restrictions on amounts deferred under non-qualified deferred compensation plans and a 20% additional tax on amounts that are subject to, but do not comply with, Section 409A.  Section 409A includes a broad definition of non-qualified deferred compensation plans, which includes certain types of equity-based incentive compensation. It is intended that the Awards granted under the Third A&R 2006 Plan comply with or be exempt from the requirements of Section 409A.

Recommendation and Vote Required

THE COMPENSATION COMMITTEE AND THE FULL BOARD UNANIMOUSLY
RECOMMEND THAT PEOPLES’ SHAREHOLDERS VOTE “FOR” THE
APPROVAL OF THE THIRD AMENDED AND RESTATED 2006 EQUITY PLAN.

The affirmative vote of the majority of the common shares represented at the Annual Meeting, in person or by proxy, and entitled to vote on the proposal is required to approve the Third A&R 2006 Plan. Broker non-votes will not be counted in determining whether the proposal has been approved. The effect of an abstention is the same as a vote “AGAINST” the proposal.

PROPOSAL NUMBER: 5

AMENDMENT TO SECTION 2.02 OF PEOPLES’ CODE OF REGULATIONS TO PROVIDE FOR THE ANNUAL ELECTION OF ALL DIRECTORS COMMENCING WITH THE ELECTION OF DIRECTORS OF PEOPLES AT THE 2019 ANNUAL MEETING

Upon recommendation by the Governance and Nominating Committee, on January 25, 2018, the Board adopted and now recommends shareholder adoption of an amendment to division (D) of Section 2.02 of Peoples' Code of Regulations to eliminate the classification of the Board.  Division (D) of Section 2.02 currently provides that the Board shall be divided into three classes, with the directors in each class standing for election at every third annual meeting of shareholders. The Board has determined that this provision should be amended to provide instead for the annual election of all directors. The Board unanimously adopted a resolution approving a declassification amendment to the Code of Regulations, which will provide for the annual election of all directors, and is recommending that Peoples’ shareholders adopt that amendment.

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If the proposed amendment is approved, all directors would be elected to one-year terms commencing with the 2019 Annual Meeting. In order to facilitate the transition from classified three-year terms to non-classified one-year terms, each director whose term would not otherwise expire at the 2019 Annual Meeting has agreed to tender his or her resignation effective immediately prior to the 2019 Annual Meeting.

The Board believes that the election of directors is a primary means for shareholders to influence corporate governance policies and hold management accountable for implementing those policies. Although proponents of classified boards believe that they provide continuity and stability to the board, facilitate a long-term outlook by the board and enhance the independence of non-employee directors, an increasing number of investors have come to believe that classified boards reduce accountability of directors because they limit the ability of shareholders to evaluate and elect all directors on an annual basis. Accordingly, an increasing number of companies have been taking actions to provide for the annual election of directors.

Peoples is committed to good corporate governance. Accordingly, the Board considered the various positions for and against a classified board, particularly in light of evolving corporate governance practices and investor sentiment.  The Board recognizes that annual elections are considered a “best practice” in the area of corporate governance, as it provides shareholders the opportunity to hold every member of the Board accountable for performance every year. The Board has determined that adopting a resolution adopting an amendment to division (D) of Section 2.02 of the Code of Regulations that provides for the annual election of all directors is in the best interests of Peoples and its shareholders.

Appendix B shows the changes to the relevant portions of division (D) of Section 2.02 of Peoples' Code of Regulations resulting from the proposed amendment, with deletions indicated by strike-outs and additions indicated by underlining. If approved, this amendment will become immediately effective.

 

Recommendation and Vote Required

 

THE BOARD UNANIMOUSLY RECOMMENDS THAT PEOPLES’ SHAREHOLDERS VOTE “FOR” THE ADOPTION OF THE AMENDMENT TO SECTION 2.02 OF PEOPLES’ CODE OF REGULATIONS.

 

The affirmative vote of the holders of at least a majority of the outstanding common shares is required to adopt the amendment to division (D) of Section 2.02 of Peoples’ Code of Regulations. The effect of either an abstention or a broker non-vote is the same as a vote “AGAINST” the proposed amendment.

EXECUTIVE COMPENSATION:

COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary of 2017 Fiscal Year Performance and Compensation

The Compensation Committee has responsibility for establishing, implementing and continually monitoring our executive compensation program. In particular, the Compensation Committee determines the compensation of our named executive officers (“NEOs”), which included our Chief Executive Officer (“CEO”), our Chief Financial Officer, and our three other most highly-compensated executive officers who were serving as executive officers at the end of 2017. The NEOs for 2017 were:

 

Charles W. Sulerzyski, President and CEO

 

John C. Rogers, Executive Vice President, Chief Financial Officer and Treasurer

 

Douglas V. Wyatt, Executive Vice President and Chief Commercial Banking Officer (Mr. Wyatt assumed this position effective April 1, 2017)

 

Carol A. Schneeberger, Executive Vice President and Chief Administrative Officer

 

Robyn A. Stevens, Executive Vice President and Chief Credit Officer

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The Compensation Committee strives to ensure that the total compensation paid to the NEOs is reasonable, competitive and aligned with the best interests of the shareholders.

2017 Business Highlights

Peoples achieved success in several major areas in 2017. We generated quality loan growth, increased our net interest margin, effectively managed our credit costs, grew our revenues and controlled our expenses, while completing two insurance agency acquisitions and entering into our first bank acquisition agreement since 2014. Below is a list of notable accomplishments in 2017:

 

We grew total revenues by 6% compared to 2016.

 

We controlled expenses, with only 1% growth in non-interest expenses compared to 2016.

 

We grew average loan balances by 8% compared to 2016.

 

Net interest margin increased to 3.62%, compared to 3.54% in 2016.

 

Nonperforming assets at December 31, 2017 decreased by 32% compared to December 31, 2016.

These accomplishments drove the improvement in our key performance metrics in 2017 compared to 2016 -- in particular, increased net income, increased diluted earnings per common share, greater return on average assets, and greater return on average stockholders' equity. The solid performance contributed to the increase in the market price of our common shares and allowed us to increase the rate of cash dividends paid, which resulted in a greater total return to our shareholders.

Goals for 2017 Incentive Awards

The performance goals for the incentive awards based on 2017 performance were designed so that the target level of awards would be paid if we met our budgetary goals, which represented our target level of performance. We believed that these goals would position Peoples for future growth. Highlights of our performance goals for 2017 are as follows:

 

 

Target return on average assets of 0.99% was 3 basis points higher than the target in 2016 of 0.96% and 5 basis points higher than the result used in determining 2016 incentive payment amounts.

 

Target efficiency ratio of 62.33% represented a 237 basis point improvement over the 2016 target of 64.70% and a 280 basis point improvement over the results used in determining 2016 incentive payment amounts.

 

Target diluted earnings per share of $1.92 was 9% higher than the target of $1.76 in 2016 and 12% higher than the results used in determining 2016 incentive payment amounts.

2017 Actual Results vs. Performance Goals

The following is a comparison of our 2017 results versus our 2017 performance goals:

 

 

We achieved between target and maximum levels of performance for each of the metrics applicable to our incentive awards, which supported incentive awards under our annual cash and equity-based incentive program that were greater than target but less than the maximum award opportunities.

 

Our return on average assets of 1.10% was 11 basis points above the target level of 0.99% and nine basis points short of the maximum level of 1.19%.

 

Our efficiency ratio of 62.20% was slightly better than the target level of 62.33%, but not as good as the maximum level of 60.46%.

49


 

Our diluted earnings per share of $2.10 was $0.18 above the target level of $1.92 and $0.20 short of the maximum level of $2.30.

 

Our NEOs achieved, to varying degrees, their respective individual performance objectives.

2017 Compensation Actions

Our compensation philosophy is designed to provide incentives and recognition for Peoples' execution of a strategy that increases shareholder value over time. Accordingly, and by design, the executive compensation received by the NEOs for 2017 generally reflected the 2017 results of achieving between the target and maximum levels of the performance goals we set for the year. Thus, cash and equity incentives were awarded to each of the NEOs generally at levels between the applicable target and maximum payout potentials for those awards. Mr. Sulerzyski's total direct compensation for 2017 performance was $1,161,968, compared to the total direct compensation he received for 2016 performance in the amount of $916,971. Total direct compensation means the total of base salary and any cash and equity-based incentive payments earned for a given year's performance.

Highlights of our 2017 compensation actions were as follows:

 

 

Cash incentive payments were awarded to the NEOs for 2017 results based on achieving between the target and maximum levels of performance for each of the corporate performance goals.

 

Equity-based incentive payments were awarded to the NEOs from a pool created by using 2017 results based on achieving between the target and maximum levels of performance for each of the corporate performance goals.

 

For the purpose of providing an additional link between executive compensation and the achievement of the long-term objectives of Peoples’ strategic plan, the Compensation Committee approved a one-time supplemental long-term incentive program in the form of a grant of performance unit awards to the NEOs covering a 24-month performance period beginning January 1, 2018 and ending on December 31, 2019.

 

A salary increase was approved for each of the NEOs for 2018.

Notable Pay Practices

We believe our compensation programs and philosophy are appropriately designed to reward performance, protect the interests of our shareholders, and provide appropriate incentives to executive management, while not encouraging excessive risk-taking. We believe in tying compensation to the results achieved. Below is an overview of our pay practices, which reflect these beliefs:

 

We target market median pay levels, and we consider peer and market data in setting pay.

 

We link pay to performance.

 

We require a minimum level of corporate performance before any incentive compensation is paid to the NEOs.

 

We have a stock holding requirement with respect to equity-based compensation awarded to the NEOs.

 

We have an executive incentive compensation clawback policy to ensure that incentive compensation paid to our NEOs is based on accurate financial data.

 

A double trigger (i.e., both a change in control and a termination of employment) is required for payment under our change in control agreements with our NEOs.  Beginning in 2016 with the change in control agreements with Ms. Stevens and Mr. Wyatt, we define compensation for the purpose of calculating the amount of severance to be the sum of the NEO’s annualized monthly base salary plus the average of annual cash incentives paid to the NEO over the prior three years.

50


 

We prohibit our NEOs from hedging or pledging their Peoples common shares, and we require that they obtain pre-clearance before trading in Peoples common shares.

 

We conduct an annual risk assessment of our compensation programs.

 

We hold an annual shareholder advisory “say-on-pay” vote.

 

We annually review the independence of our compensation advisors.

 

Our Compensation Committee is comprised entirely of independent directors.

Additional information about our annual results and our compensation decisions follows. We believe this information will provide guidance on how our decisions, established programs, and corporate results came together in the compensation decisions made by the Compensation Committee.

Total Shareholder Return

The value we return to our shareholders is an important component of our compensation philosophy. Peoples' corporate performance is benchmarked against many metrics in order to provide a view of the more specific performance components that combine to drive the total annual return for our shareholders. Long-term growth in total shareholder return is a tenet of our compensation strategy, as a large portion of our NEOs’ compensation is paid in the form of restricted common shares, the value of which is tied to our stock price. As shown on the graphs below, the return to solid operating performance in 2016 and 2017 translated into greater total returns for our shareholders. Peoples' total one-year shareholder return was 3.1% for 2017 and 77.6% for 2016 compared to a negative 25.3% for 2015. The Peer Group (as defined on page 61) median total one-year shareholder return was 1.7% for 2017, 54.1% for 2016 and 8.3% for 2015.

Mr. Sulerzyski's total direct compensation for performance in 2017 reflects the continued improvement in total shareholder return for 2017 and represents an increase of 26.7% compared to his total direct compensation for performance in 2016.

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The following graphs show the total shareholder return for Peoples and the median of the Peer Group for each of the three years ending December 31, 2017.

Total Shareholder Return as of December 31, 2017 (1)

 

 

 

 

(1)

Comparison of one-year, three-year, and five-year annualized total shareholder returns of Peoples and the Peer Group. Each total shareholder return includes the impact of dividends.

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Total Shareholder Return as of December 31, 2017, December 31, 2016 and December 31, 2015 (1)

 

 

 

(2)

Comparison of one-year annualized total shareholder returns of Peoples and the Peer Group. Each total shareholder return includes the impact of dividends.

Performance Relative to Specific Key Metrics which Drive Shareholder Return

We objectively review our performance in various categories to ensure that we are making progress towards our strategic goals. The metrics below provide an overall view of our performance in specific, measurable areas, which ultimately translate to the measurable total returns for our shareholders noted in the previous chart.

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The following table illustrates the performance of Peoples during the five-year period ended December 31, 2017 with respect to several key performance metrics. The table highlights the improved results in 2017 compared to 2016. Generally, we showed marked improvement across these metrics, which supports the incentives awarded for 2017 performance.

 

2017

 

2016

 

2015

 

2014

 

2013

 

Net Income (in 000s)

$

38,471

 

$

31,157

 

$

10,941

 

$

16,684

 

$

17,574

 

Diluted Earnings per Common Share

$

2.10

 

$

1.71

 

$

0.61

 

$

1.35

 

$

1.63

 

Return on Average Assets

 

1.10

%

 

0.94

%

 

0.35

%

 

0.74

%

 

0.91

%

Pre-Provision Net Revenue to Total

Average Assets (1)

 

1.65

%

 

1.48

%

 

0.96

%

 

1.10

%

 

1.26

%

Return on Average Stockholders' Equity

 

8.54

%

 

7.20

%

 

2.69

%

 

6.16

%

 

7.92

%

Tier 1 Capital Ratio

 

13.74

%

 

13.21

%

 

13.67

%

 

14.32

%

 

12.42

%

Nonperforming Assets as a Percent of

Total Assets

 

0.49

%

 

0.75

%

 

0.62

%

 

0.47

%

 

0.39

%

Provision for (Recovery of) Loan Losses

(in 000s)

$

3,772

 

$

3,539

 

$

14,097

 

$

339

 

$

(4,410

)

Criticized Loans as Percent of Total

Loans (2)

 

3.84

%

 

4.46

%

 

5.89

%

 

4.60

%

 

4.94

%

Classified Loans as Percent of Total

Loans (3)

 

1.97

%

 

2.59

%

 

2.91

%

 

2.76

%

 

3.07

%

 

(1)

These amounts represent non-Generally Accepted Accounting Principles (“GAAP”) financial measures since pre-provision net revenue, which is defined as net interest income plus total fee-based income minus non-interest expense, excludes the provision for loan losses and all gains and losses included in earnings. Additional information regarding the calculation of these measures can be found in “ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” of Peoples' Annual Report on Form 10-K for the fiscal year ended December 31, 2017, under the caption “Pre-Provision Net Revenue.”

(2)

Criticized loans includes loans categorized as special mention, substandard or doubtful.

(3)

Classified loans includes loans categorized as substandard or doubtful.

Pay for Performance

The Compensation Committee and management believe that our executive compensation programs are designed to incentivize sound and fundamental growth and profitability of Peoples, which will lead to improved returns to the shareholders. In years where we achieve our strategic goals, and where actual performance meets or exceeds performance goals, compensation in the form of incentive payouts will increase. When we do not meet the expectations and goals we set as a company, incentive payouts will be reduced or not made at all, reflecting the design of our incentive awards.

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The chart below shows Mr. Sulerzyski's total direct compensation for fiscal years 2012 through 2017 and Peoples' corresponding return on average assets (“ROAA”) in those years (and, for fiscal year 2014, ROAA as adjusted for one-time expenses incurred in 2014 relating to financial institution acquisitions, which was a performance goal measured that year). The compensation amount displayed for each year reflects the amount earned for performance in terms of growth and profitability of Peoples in that year.  This chart illustrates how the changes in Mr. Sulerzyski’s annual direct compensation generally tracked the changes in Peoples’ annual return on average assets.

 

 

The table below shows incentive compensation payouts for the NEOs based upon 2016 and 2017 results. Performance for 2016 and 2017 was consistent with the objectives of our strategic plan, and, therefore, incentive compensation was paid to the NEOs for 2016 and 2017 results. Incentive compensation paid for 2016 performance generally reflected Peoples’ performance between threshold and target levels in 2016.  Whereas, incentive compensation paid for 2017 performance generally reflected Peoples’ performance between target and maximum levels of performance in 2017.  These awards reflected Peoples’ performance as compared to the goals for 2016 and 2017.

 

Name

2016 Cash

Incentive as

% of 2016

Base Salary

(1)

 

2017 Cash

Incentive as

% of 2017

Base Salary

(2)

 

2016 Equity-

Based

Incentive as

% of 2016

Base Salary

(3)

 

2017 Equity-

Based

Incentive as

% of 2017

Base Salary

(4)

 

Charles W. Sulerzyski

43.8%

 

63.5%

 

39.6%

 

62.1%

 

John C. Rogers (5)

35.0%

 

43.1%

 

18.4%

 

29.5%

 

Douglas V. Wyatt (6)

-

 

44.2%

 

-

 

32.0%

 

Robyn A. Stevens

27.9%

 

43.5%

 

32.8%

 

32.5%

 

Carol A. Schneeberger

35.4%

 

38.2%

 

23.7%

 

30.0%

 

 

(1)

Amounts in this column reflect the percentage of 2016 base salary represented by cash incentive payments earned for 2016 performance and paid in 2017, excluding discretionary cash bonuses. Each percentage is based upon the actual base salary earned in 2016. Base salary is reported in the “Salary” column and the cash incentive payment earned is reported in the “Non-Equity Incentive Plan Compensation” column, in each case for 2016, in the “SUMMARY COMPENSATION TABLE FOR 2017” beginning on page 74 of this Proxy Statement.

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(2)

Amounts in this column reflect the percentage of 2017 base salary represented by cash incentive payments earned for 2017 performance and paid in 2018.  No discretionary cash bonuses were paid for 2017 performance. Each percentage is based upon the actual base salary earned in 2017. Base salary is reported in the “Salary” column and the cash incentive payment earned is reported in the “Non-Equity Incentive Plan Compensation” column, in each case for 2017, in the “SUMMARY COMPENSATION TABLE FOR 2017” beginning on page 74 of this Proxy Statement.

(3)

Amounts in this column reflect the percentage of 2016 base salary represented by awards of restricted common shares (valued using The NASDAQ Global Select Market® closing price of Peoples' common shares on the grant date) which were granted in 2017 for 2016 performance. Base salary is reported in the “Salary” column for 2016 in the “SUMMARY COMPENSATION TABLE FOR 2017” beginning on page 74 of this Proxy Statement. The restricted common share awards are reported in the “Stock Awards” column for 2017 in the “SUMMARY COMPENSATION TABLE FOR 2017” beginning on page 74 of this Proxy Statement.

(4)

Amounts in this column reflect the percentage of 2017 base salary represented by awards of restricted common shares (valued using The NASDAQ Global Select Market® closing price of Peoples' common shares on the grant date) which were granted in 2018 for 2017 performance. Base salary is reported in the “Salary” column for 2017 in the “SUMMARY COMPENSATION TABLE FOR 2017” beginning on page 74 of this Proxy Statement. The restricted common share awards will be reported in the “Stock Awards” column for 2018 in the “SUMMARY COMPENSATION TABLE FOR 2018” in the Proxy Statement for the 2019 Annual Meeting of Shareholders.

(5)

Mr. Rogers' compensation package when he joined Peoples in 2015 included receiving at least a target cash incentive payout of 35% for 2016 performance. Standalone 2016 performance would have resulted in a cash incentive payment totaling 32.8% of base salary.

(6)

Mr. Wyatt became Executive Vice President and Chief Commercial Banking Officer of Peoples on April 1, 2017.

Pay for Performance - Our Key Compensation Decisions

Because we believe in tying compensation to performance, the Compensation Committee made the following decisions regarding the NEOs' compensation as a result of the performance results for 2017, performance relative to our peers and to our goals, and the level of achievement of both annual and long-term goals described below. Additionally, the Compensation Committee considered Peoples' objectives in attracting, rewarding and retaining talent within the organization and providing incentives to the NEOs to provide leadership in the execution of Peoples' strategic plan.

 

CEO Compensation: Based upon the Compensation Committee's review of corporate and individual performance, Mr. Sulerzyski's base salary was increased from $515,000 to $565,000 for 2018. The increase was in recognition of the improved performance of Peoples and the quality of Mr. Sulerzyski’s leadership. For 2017 performance, Mr. Sulerzyski earned a cash incentive payment of $327,000 (63.5% of his 2017 base salary, between target of 50% and maximum of 75%) and 9,031 restricted common shares under the equity-based long-term incentive plan. The restricted common shares were granted to Mr. Sulerzyski on February 2, 2018, and are subject to both time-based and performance-based vesting in that they will vest on the third anniversary of the grant date, provided that Peoples has maintained a well-capitalized status and had positive net income for each of the fiscal years comprising the vesting period. In the event the performance metrics are not met in a given year, then the number of common shares as to which restrictions will lapse at the end of the cliff-vesting period will be reduced by one-third. The grant date fair value of the restricted common shares was $319,968 (62.1% of 2017 base salary), based on the closing price of Peoples' common shares on the grant date. Each of the cash incentive payment and the grant of restricted common shares was determined based on corporate and individual achievement of the threshold level or above in the performance goals set by the Compensation Committee and the independent members of the full Board.

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2016

 

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