DEF: SB Financial Group Announces Annual Meeting of Shareholders, Director Elections and Executive Compensation on the Agenda

SB Financial Group will hold its annual shareholder meeting on April 16, 2025, to elect directors, ratify the appointment of its accounting firm, and conduct advisory votes on executive compensation.

Summary

• SB Financial Group will hold its 2025 Annual Meeting of Shareholders on April 16, 2025, both virtually and in person.
• Shareholders of record as of February 21, 2025, are entitled to vote.
• The meeting will include the election of three directors for three-year terms, ratification of Forvis Mazars as the independent registered public accounting firm for the fiscal year ending December 31, 2025, and advisory votes on executive compensation.
• The Board of Directors recommends voting FOR the election of the director nominees, FOR Proposals 2 and 3, and Every One Year for Proposal 4.
• The proxy statement and annual report are available online, and paper copies can be requested.
• The company is furnishing proxy materials over the Internet to certain shareholders.
• The Board met 15 times during 2024.
• The company's executive compensation program includes base salary, short-term incentives (cash), long-term incentives (equity) and supplemental benefits.
• The company targets the 50th percentile (median) of its peer group when performance expectations are met and targets the upper quartile (75th percentile) when performance expectations are exceeded.
• The Compensation Committee engaged Blanchard Consulting Group (BCG) to evaluate board and executive compensation in 2022.
• The peer group for compensation analysis included 19 publicly traded bank holding companies with assets between $1.0 billion and $3.5 billion.
• The company granted Restricted Shares to its executive officers, including the NEOs and other management, as determined by the company's Return on Average Assets (ROAA) performance for the 2024 fiscal year.
• The company has a Clawback Policy in place to recover erroneously awarded compensation in the event of an accounting restatement.
• The company has established stock ownership guidelines for all executive officers and directors, requiring a minimum of 10,000 Common Shares to be owned within five years of appointment or election.
• The company's Insider Trading Policy prohibits directors, officers, and employees from engaging in transactions in securities of the company while in possession of material nonpublic information.
• The company has entered into Amended and Restated Employment Agreement with Mark A. Klein, Chairman, President and Chief Executive Officer.
• The company has entered into Amended and Restated Change of Control Agreements with certain executive officers, including each of the NEOs.
• The company has entered into Amended and Restated Supplemental Executive Retirement Plan Agreements with certain executive officers, including Mark A. Klein and Anthony V. Cosentino.
• The company also provides its executive officers with a few additional perquisites and other personal benefits, such as 401(k) matching contributions, auto allowances, life insurance benefits, social dues and memberships.
• The Audit Committee has appointed Forvis Mazars to serve as the company's independent registered public accounting firm for the fiscal year ending December 31, 2025.
• The Board of Directors recommends that shareholders vote to conduct future advisory votes on the compensation of the company's named executive officers every one year.

Sentiment

Score: 7

Explanation: The document is neutral to positive. It outlines standard corporate governance procedures and compensation practices. The company appears to be performing adequately within its peer group.

Positives

• The company has a Clawback Policy in place to recover erroneously awarded compensation in the event of an accounting restatement.
• The company has established stock ownership guidelines for all executive officers and directors, requiring a minimum of 10,000 Common Shares to be owned within five years of appointment or election.
• The company's Insider Trading Policy prohibits directors, officers, and employees from engaging in transactions in securities of the company while in possession of material nonpublic information.
• The Board of Directors recommends that shareholders vote to conduct future advisory votes on the compensation of the company's named executive officers every one year.

Risks

• The advisory vote on executive compensation is non-binding, so the Board and Compensation Committee are not obligated to follow the outcome.
• The company's financial performance varied compared to the peer group; however, most performance metrics (ROAA, ROAE, NPAs/assets, tangible equity ratio, core EPS growth, and three-year total return) were near or above the peer group 50th percentile.

Future Outlook

The Board and Compensation Committee will consider the outcome of the advisory vote on executive compensation when making future compensation decisions.

Management Comments

• The Board of Directors believes that the Company's compensation policies and practices do not threaten the value of the Company 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 the Company.
• The Board believes that the Company's culture focuses on sound risk management and appropriately rewards executives for performance.
• The Board further believes that the Company's compensation policies and procedures are reasonable in comparison both to the Company's peer bank holding companies and to the Company's performance during the 2024 fiscal year.

Industry Context

The document provides insights into the corporate governance practices, executive compensation strategies, and shareholder engagement approaches within the banking industry, particularly for institutions of similar asset size and business models to SB Financial Group.

Comparison to Industry Standards

• The company benchmarks its executive compensation against a peer group of 19 publicly traded bank holding companies with assets between $1.0 billion and $3.5 billion, located in Indiana, Kentucky, Michigan, Missouri, Ohio, Pennsylvania, and Wisconsin.
• The company targets the 50th percentile (median) of its peer group when performance expectations are met and targets the upper quartile (75th percentile) when performance expectations are exceeded.
• The company's director pay levels were competitive versus market (above the 50th percentile of peer).

Related Party Transactions

• Executive officers and directors of the Company and State Bank, as well as members of their respective immediate families and firms, corporations or other entities with which they are affiliated, were customers of and had banking transactions (including loans and loan commitments) with State Bank in the ordinary course of its business and in compliance with applicable federal and state laws and regulations.
• Loans to these persons have been made on substantially the same terms, including the interest rate charged and collateral required, as those prevailing at the time for comparable transactions with persons not affiliated with the Company or any of its subsidiaries.
• These loans have been, and are presently, subject to no more than a normal risk of uncollectibility and present no other unfavorable features.
• Each of the loans described in this paragraph was subject to our written policies, procedures and standard underwriting criteria applicable to loans generally as well as made in accordance with the requirements of Regulation O promulgated by the Federal Reserve Board and with the prior approval of the loan by the Board of Directors of State Bank.

Stakeholder Impact

• Shareholders have the opportunity to vote on key corporate governance matters, including director elections and executive compensation.
• The company's compensation policies are designed to attract, retain, and motivate key executives, which can contribute to the company's long-term success and benefit all stakeholders.
• The company's risk management practices and compliance with regulations aim to protect the interests of shareholders, customers, and other stakeholders.

Next Steps

• Shareholders are encouraged to vote on the proposals outlined in the proxy statement.
• The Board and Compensation Committee will consider the outcome of the advisory vote on executive compensation when making future compensation decisions.
• The company plans to engage BCG again in 2025 to conduct an updated board compensation study.

Key Dates