DEF 14A: Fidelity D & D Bancorp Sets Date for Annual Shareholder Meeting, Outlines Proposals

Fidelity D & D Bancorp will hold its annual shareholder meeting on May 7, 2024, to elect directors and ratify the selection of its independent auditor.

Summary

• Fidelity D & D Bancorp, Inc. will hold its Annual Meeting of Shareholders on May 7, 2024, at its main office in Dunmore, Pennsylvania.
• Shareholders of record as of March 13, 2024, are entitled to vote on the proposals.
• The primary business of the meeting includes the election of three Class A directors for a three-year term and the ratification of Wolf & Company, P.C. as the independent registered public accounting firm for the year ending December 31, 2024.
• The Board of Directors is soliciting proxies from shareholders, with the proxy statement being distributed on or about March 27, 2024.
• As of March 13, 2024, the Company had 5,804,611 shares of common stock outstanding.
• The Board of Directors recommends voting for the election of John T. Cognetti, Michael J. McDonald, and HelenBeth G. Vilcek as Class A directors.
• The Board of Directors also recommends voting for the ratification of Wolf & Company, P.C. as the independent registered public accounting firm.
• The Company's executive compensation program aims to reward management for exceptional performance and enhance shareholder value.
• The Company offers various compensation components, including base pay, incentive plans, broad-based benefits, retirement plans, equity-based compensation, and an employee stock purchase plan.
• The Company's Audit Committee has selected Wolf & Company, P.C. as the independent registered public accounting firm for the year ending December 31, 2024, after dismissing RSM US LLP.

Sentiment

Score: 7

Explanation: The document is primarily informational, outlining the details of the upcoming shareholder meeting and related proposals. The tone is professional and straightforward, with a focus on corporate governance and compliance. The change in auditors and minor reporting delays are slightly negative, but overall the document presents a stable and well-managed company.

Positives

• The Company has a comprehensive executive compensation program designed to reward performance and align executive interests with shareholder value.
• The Board of Directors is actively engaged in corporate governance and risk oversight.
• The Audit Committee has taken steps to ensure auditor independence and has selected a new independent auditor.
• The Company offers various benefits and retirement plans to its employees, including executives.
• The Company has a clawback provision in its incentive plans to address potential misconduct or fraudulent activity.

Negatives

• The Company changed its independent registered public accounting firm from RSM US LLP to Wolf & Company, P.C. due to an independence issue RSM had with the Company's internal auditors.
• There was a late report for two dividend reinvestment purchases made through a brokerage account by Brian J. Cali and a late report for a sale of common stock by Richard M. Hotchkiss.

Risks

• Events may occur subsequent to the printing of the proxy statement that might affect shareholders' decisions or the value of the stock.
• The Company's success depends on its ability to attract, retain, and motivate qualified personnel.
• The financial services industry is highly regulated, and changes in regulations could impact the Company's operations and profitability.
• The Company faces risks related to loan transactions with directors, officers, and their affiliates, although these are managed through written policies and procedures.

Future Outlook

The Board of Directors anticipates all directors attending the 2024 Annual Meeting.

Management Comments

• The Board of Directors believes the separated roles of Chief Executive Officer and Chairman are in the best interest of shareholders because it promotes both strategic development and facilitates information flow between Management and the Board of Directors, both essential for effective governance.
• Our Board of Directors believes that the purpose of corporate governance is to ensure that shareholder value is maximized in a manner consistent with legal requirements and the highest standards of integrity.

Industry Context

Employment agreements are standard in the financial services industry and are used to protect the Company's client base through non-competition provisions.

Comparison to Industry Standards

• The Compensation Committee gains guidance from similar positions within the marketplace, input from compensation consultants, and reviews of peer banks of comparable asset size within the state to determine executive compensation.
• The Company benchmarks executive compensation against Blanchard Consulting Group's study, public information on peer banks, general compensation surveys, and regional comparisons.
• The Company's Audit Committee outsources trust and compliance management operational audits to S.R. Snodgrass, P.C., a common practice in the financial services industry.
• The Company's Audit Committee outsources the regulatory compliance audit function to the independent firm Snodgrass, specializing in providing regulatory compliance services to the financial services industry.
• The Company's Audit Committee outsourced the Information Technology audit, including an audit of the FFIEC Maturity level and Cybersecurity, to Bancsec, Inc. of Raleigh, NC, which specializes in providing information technology services to the financial services industry.

Related Party Transactions

• Some directors, officers, their immediate family members, and associated companies had banking transactions with the Bank in the ordinary course of business during 2023, and the Bank expects to continue such banking transactions in the future.
• Total loans outstanding from the Bank on December 31, 2023, to the Company's/Bank's officers and directors as a group, members of their immediate families and companies in which they had an ownership interest of 5% or more, amounted to $10,297,775, or approximately 6% of the total Shareholders equity of the Bank.
• The Bank made these loans in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, not associated with the Bank, and they did not involve more than the normal risk of collection or present other unfavorable features.
• During 2023, the Bank paid, in its ordinary course of business, ETA Inc., for loan closing representation services, of which Brian J. Cali is owner, Richard M. Hotchkiss for real estate inspection services, and Kennedy Water JJWR Inc, of which William J. Joyce, Sr. is a part owner, along with his brothers Joseph and John Joyce for a property the Bank leases.

Stakeholder Impact

• Shareholders have the opportunity to vote on the election of directors and the ratification of the independent auditor, influencing the direction and oversight of the Company.
• Employees are impacted by the Company's compensation and benefits programs, as well as the Code of Ethics.
• Customers and the community benefit from the Bank's financial stability and commitment to ethical practices.
• The selection of the independent auditor ensures the integrity of the Company's financial reporting, which is important for investors and creditors.

Next Steps

• Shareholders are encouraged to vote on the proposals by internet, telephone, or mail.
• The Board of Directors will consider the outcome of the shareholder vote on the election of directors and the ratification of the independent auditor.
• The Company will continue to monitor and update its corporate governance practices and executive compensation programs.

Key Dates

Keywords

proxy statement, annual meeting, directors, executive compensation, audit committee, independent auditor, shareholders, corporate governance, risk management, stock incentive plan, beneficial ownership, related party transactions, Fidelity D & D Bancorp