UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

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 Rule 14a-12

MID PENN 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:

 

 

 

349 Union Street, Millersburg, PA 17061

March 26, 2021

Dear Shareholders:

You are cordially invited to attend the live webcast of our 2021 Annual Meeting of Shareholders, which will be held in a virtual meeting format at 10:00 a.m. EDT on Tuesday, May 11, 2021. The meeting will be conducted solely online via live webcast to support the health and well-being of our shareholders, directors, officers, and employees given the COVID-19 pandemic and the uncertainty of related restrictions and social distancing measures. There is no physical location for the annual meeting. You will be able to attend the annual meeting online and vote your shares electronically by visiting www.meetingcenter.io/271328239 at the time of the meeting. To be admitted into the meeting, you will be required to enter the control number found on your proxy card.

The Notice of the Annual Meeting and the enclosed proxy statement address the formal business of the meeting. The formal business agenda includes the election of four Class B Directors, a non-binding vote to approve our executive compensation, and a proposal to ratify the appointment of our independent registered public accounting firm. At the meeting, management will review the Corporation’s operations during the past year.

You are encouraged to vote your shares online via the Internet, by telephone, or you can mark, sign, date and return the accompanying proxy as soon as possible in the postage-paid envelope. Whether or not you plan to attend the virtual annual meeting, please vote as soon as possible to ensure that your shares are represented and voted at the annual meeting.

 

349 Union Street, Millersburg, PA 17061

 

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD MAY 11, 2021

 

 

TO THE SHAREHOLDERS OF MID PENN BANCORP, INC.:

Notice is hereby given that the Annual Meeting of Shareholders of Mid Penn Bancorp, Inc. (the “Corporation”) will be held at 10:00 a.m. EDT on Tuesday, May 11, 2021. The meeting will be held in a virtual meeting format via a live webcast. At the meeting, you will be asked to consider and act upon the following matters:

 

1.

to elect four Class B Directors, each to serve for a three-year term or until the earlier of their resignation or their respective successors shall have been elected and qualified;

 

2.

to conduct a non-binding, advisory vote on the compensation paid to the Corporation’s named executive officers;

 

3.

to ratify the appointment of RSM US LLP as the Corporation’s independent registered public accounting firm for the year ending December 31, 2021; and

to transact any other business that may properly come before the annual meeting or any adjournment or postponement thereof.

You will not be able to attend the annual meeting in person; however, you will be able to attend the annual meeting online and vote your shares electronically by visiting www.meetingcenter.io/271328239 on the meeting date and time as described in the accompanying proxy statement. The password for the meeting is MPB2021.

In accordance with the Corporation’s By-laws and action of the Board of Directors, only those shareholders of record at the close of business on March 1, 2021, are entitled to notice of and to vote at the annual meeting and any adjournment or postponement thereof.

We have enclosed a copy of the Corporation’s Annual Report on Form 10-K (“annual report”) for the year ended December 31, 2020. You may obtain an additional copy of the Corporation’s annual report, including the financial statements and any exhibits for the 2020 year, at no cost, by contacting Michael D. Peduzzi, Chief Financial Officer, 349 Union Street, Millersburg, Pennsylvania 17061, telephone: (866) 642-7736 or by visiting www.edocumentview.com/MPB.

Whether or not you plan to attend the virtual annual meeting, your vote is very important, and we encourage you to vote promptly. To vote your shares, please mark, sign and date the enclosed proxy and mail it promptly in the enclosed, postage-paid return envelope. You may also vote online via the Internet or by telephone prior to the meeting, or by clicking on the “Cast Your Vote” link on the Meeting Center site during the meeting. If you execute a proxy but later decide to attend the annual meeting virtually, or for any other reason desire to revoke your proxy, you may do so as described in this proxy statement at any time before your proxy is voted. Submitting a proxy will not prevent you from attending the annual meeting virtually and voting electronically during the meeting if you so desire, but it will help us secure a quorum and reduce the expense of additional proxy solicitation.

 

Millersburg, Pennsylvania

March 26, 2021

Important Notice Regarding the Availability of Proxy Materials for the Shareholder

Meeting to Be Held on May 11, 2021. The proxy statement, proxy card and 2020 annual

report to shareholders are available at www.edocumentview.com/MPB.

349 Union Street, Millersburg, PA 17061

NASDAQ Global Market Trading Symbol: MPB

PROXY STATEMENT

2021 ANNUAL MEETING OF SHAREHOLDERS

MAY 11, 2021

Mailed to Shareholders on or about March 26, 2021

FREQUENTLY ASKED QUESTIONS AND ANSWERS

 

Q:	How can I attend the annual meeting?

 

A:

The annual meeting will be held in a virtual meeting format conducted exclusively by webcast. You are entitled to participate in the annual meeting only if you were a shareholder of the Corporation as of the close of business on March 1, 2021, or if you hold a valid proxy for the annual meeting. No physical meeting will be held.

You will be able to attend the annual meeting online by visiting www.meetingcenter.io/271328239. You will also be able to vote your shares online by attending the annual meeting by webcast, although we encourage you to vote your shares as soon as possible to ensure a quorum.

To participate in the annual meeting, you will need to review the information included on your Notice or on your proxy card. The password for the meeting is MPB2021.

If you hold your shares through an intermediary, such as a bank or broker, you must register in advance using the instructions below.

The meeting will begin promptly at 10:00 a.m. EDT. We encourage you to access the meeting prior to the start time leaving ample time for check in. Please follow the registration instructions as outlined in this proxy statement and your proxy card.

 

Q:	How do I register to attend the annual meeting via the Internet?

 

A:	If you are a registered shareholder (i.e., you hold your shares through our transfer agent, Computershare), you do not need to register to attend the annual meeting via the Internet. Please follow the instructions on the Notice or proxy card that you received.

If you hold your shares through an intermediary, such as a bank or broker, you must register in advance to attend the annual meeting via the Internet.

To register to attend the annual meeting online by webcast you must submit proof of your proxy power (legal proxy) reflecting your Mid Penn Bancorp, Inc. holdings, along with your name and email address, to Computershare. Forward the email from your broker, or attach an image of your legal proxy, to legalproxy@computershare.com. Requests for registration by mail should be directed to:

Computershare

Mid Penn Bancorp, Inc. Legal Proxy

P.O. Box 43001

Providence, RI 02940-3001

Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, on Wednesday, May 5, 2021.

You will receive a confirmation of your registration by email after Computershare receives your registration materials.

Should you have any questions regarding the registration process, please contact Cindy L. Wetzel, Secretary, Mid Penn Bancorp, Inc., 349 Union Street, Millersburg, Pennsylvania 17061, cindy.wetzel@midpennbank.com, (866) 642-7736.

 

Q:	Why are you holding a virtual meeting instead of a physical meeting?

 

A:

Our Board of Directors and management are sensitive to the ongoing restrictions and mitigation efforts associated with the coronavirus (COVID-19) pandemic, including social distancing measures. To ensure the health and well-being of our shareholders, directors, officers, and employees, we have decided to once again hold our annual meeting virtually. Your attendance at the annual meeting via the webcast affords you the same rights and opportunities as you would have at an in-person meeting. We intend to resume in-person meetings of our shareholders when normal circumstances permit.

Q.	WHO IS ENTITLED TO VOTE?

 

A.	Shareholders as of the close of business on March 1, 2021 (the voting record date) are entitled to vote at the annual meeting, and each share of common stock is entitled to one vote on all matters presented for a vote at the meeting.

 

Q.	ON WHAT AM I VOTING?

 

A.	At the annual meeting, you will be asked to:

 

(i)

elect four (4) directors to Class B for three (3) year terms expiring in 2024;

 

(ii)

approve a non-binding, advisory vote regarding the compensation paid to our named executive officers as disclosed in this proxy statement; and

 

(iii)

ratify the appointment of RSM US LLP as the Corporation’s independent registered public accounting firm for the year ending December 31, 2021.

The Board of Directors is not aware of any other matters to be presented for action at the meeting. If any other matter requiring a vote of the shareholders would be properly presented at the annual meeting, the proxies will vote according to the directions of the Board of Directors. Our Board of Directors recommends a vote “FOR” each of the aforementioned proposals.

 

Q.	HOW DO I VOTE?

 

A.	There are several methods. You may vote online via the Internet, by telephone, by completing and mailing your proxy, or by clicking the link on the Meeting Center site during the meeting. (See page 3 following for more details.)

 

Q.	HOW DOES DISCRETIONARY AUTHORITY APPLY?

 

A.

If your shares are held in an account at a bank, brokerage firm, broker-dealer or other similar organization, then you are a beneficial owner of shares held in street name. In that case, you will have received these proxy materials from that organization holding your account and, as a beneficial owner, you have the right to instruct your broker, bank, trustee, or nominee how to vote the shares held in your account. If no voting instructions are given, your broker or nominee has discretionary authority to vote your shares on your behalf on routine matters. A “broker non-vote” results on a matter when your broker or nominee returns a proxy but does not vote on a particular proposal because it does not have discretionary authority to vote on that proposal and has not received voting instructions from you. We believe that your broker or nominee only has discretionary voting power with respect to the proposal regarding the ratification of the appointment of the independent registered public accounting firm. You may not vote shares held in street name at the annual meeting unless you obtain a legal proxy from that organization holding your account.

If you appropriately mark, sign and return the enclosed proxy card or voting instruction card, as the case may be, in time to be voted at the annual meeting, or if you vote by telephone or Internet in accordance with the instructions on the proxy card or voting instruction card, as the case may be, the shares represented thereby will be voted in accordance with your instructions. Signed proxies not marked to the contrary will be voted “FOR” the election of the four named nominees for our Board of Directors, “FOR” a non-binding advisory vote on the compensation of our named executive officers, and “FOR” the ratification of the appointment of our independent registered public accounting firm for the year ending December 31, 2021.

Q.	IS MY VOTE CONFIDENTIAL?

 

A.	Yes. Only the Judges of Election, our transfer agent, Computershare, proxy holders, and Secretary/Assistant Secretary have access to your proxy. All comments remain confidential unless you ask that your name be disclosed.

 

Q.	WHO WILL COUNT THE VOTES?

 

A.	Kathy I. Bordner, Olivia M. Caley and Justin T. Webb will review the tabulations of the votes as provided by Computershare and act as Judges of Election.

 

Q.	WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY?

 

A.

Your shares are probably registered differently or are in more than one account. Vote all proxies you receive to ensure that all your shares are voted. If you have all of your accounts registered in the same name and address, you should only receive one set of proxy materials in future years. If you are receiving multiple statements and reports and wish to receive only one, please notify your broker if your shares are held in a brokerage account or our transfer agent, Computershare at (800) 368-5948, if you directly hold registered shares.

 

Q.	WHAT CONSTITUTES A QUORUM?

 

A.

At the close of business on March 1, 2021, the Corporation had 8,413,383 shares of common stock outstanding and eligible to vote. A majority of the outstanding shares of common stock, present or represented by proxy, constitutes a quorum for the transaction of business at the meeting. Proxies received but marked as abstentions and broker non-votes will be included in the calculation of the number of shares considered to be present at the annual meeting for purposes of determining the presence of a quorum.

 

Q.	WHAT PERCENTAGE OF STOCK DO THE DIRECTORS AND OFFICERS OWN?

 

A.	Approximately 18.7% of our common stock, as of close of business on March 1, 2021, is owned by our directors and officers. (See page 32 for more details.)

 

Q.	WHEN ARE THE 2022 SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS DUE?

 

A.

In order to be considered timely, you must submit your shareholder proposal or director nomination in writing by November 26, 2021, to Cindy L. Wetzel, Secretary, Mid Penn Bancorp, Inc., 349 Union Street, Millersburg, Pennsylvania 17061. (See page 35 with regard to shareholder proposal and director nomination procedures.)

 

Q.	HOW MAY I SUBMIT A QUESTION FOR THE ANNUAL MEETING?

 

A.

In order for management to thoroughly answer any questions that you may have about the Corporation or our annual meeting materials, including financial statements, we ask that you submit your questions prior to the Annual Meeting of Shareholders. You may submit questions either by mail, email or telephone by contacting Cindy L. Wetzel, Secretary, Mid Penn Bancorp, Inc., 349 Union Street, Millersburg, Pennsylvania 17061, cindy.wetzel@midpennbank.com, (866) 642-7736. Questions received in advance of the meeting will be compiled by the Secretary and relayed promptly to management and the Board. Management and the Board will endeavor to address all relevant questions submitted at the Annual Meeting of Shareholders.

PROXY STATEMENT

FOR THE ANNUAL MEETING OF SHAREHOLDERS OF

MID PENN BANCORP, INC.

MAY  11, 2021

GENERAL INFORMATION

Date, Time and Place of Annual Meeting

Mid Penn Bancorp, Inc. (the “Corporation”), a Pennsylvania business corporation and registered financial holding company, furnishes this proxy statement in connection with the solicitation by the Corporation’s Board of Directors (“the Board”) of proxies to be voted at the 2021 Annual Meeting of Shareholders. The annual meeting will be held in a virtual meeting format only on Tuesday, May 11, 2021, at 10:00 a.m. EDT. As there is no physical location for the meeting, you will not be able to attend the annual meeting in person. The Corporation’s principal executive office is located at 349 Union Street, Millersburg, Pennsylvania 17061; the telephone number is (866) 642-7736. All inquiries regarding the annual meeting should be directed to Rory G. Ritrievi, President and Chief Executive Officer of the Corporation, at the corporate address and telephone number listed above.

Attending the Virtual Meeting as a Shareholder of Record

If you were a holder of record of common stock of the Corporation at the close of business on March 1, 2021 (the “Record Date”) (i.e., you held your shares in your own name as reflected in the records of our transfer agent, Computershare), you may attend the meeting by accessing www.meetingcenter.io/271328239 and entering the 15-digit control number on the proxy card. The meeting password is MPB2021. The virtual meeting URL and password will also be printed on your proxy card.

Registering to Attend the Annual Meeting as a Beneficial Owner

If you were a beneficial holder of record of common stock of the Corporation as of the Record Date (i.e. you hold your shares in “street name” through an intermediary, such as a bank or broker), you must register in advance to virtually attend the annual meeting. To register, you must obtain a legal proxy, executed in your favor, from the holder of record and submit proof of your legal proxy reflecting the number of shares of Mid Penn Bancorp, Inc. common stock you held as of the Record Date, along with your name and email address, to Computershare. Please forward the email from your broker, or attach an image of your legal proxy to legalproxy@computershare.com. Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, on Wednesday, May 5, 2021. You will then receive a confirmation of your registration, with a control number, by email from Computershare. At the time of the meeting, go to www.meetingcenter.io/271328239 and enter your control number. The meeting password is MPB2021.

Reduce Duplicate Mailings

In accordance with Securities Exchange Act Rule 14a-3(e)(1), the Corporation in the future intends to deliver only one annual report and proxy statement to multiple shareholders sharing an address unless the Corporation receives contrary instructions from one or more of the shareholders. This method of delivery is known as “householding.” Upon written or oral request, the Corporation will promptly deliver a separate copy of the annual report or proxy statement, as applicable, to a shareholder at a shared address to which a single copy of the documents was delivered. Further, shareholders should notify Cindy L. Wetzel at Mid Penn Bancorp, Inc., 349 Union Street, Millersburg, Pennsylvania 17061 or call (866) 642-7736 and inform us that the shareholder wishes to receive a separate copy of an annual report or proxy statement in the future. If you are receiving multiple statements and reports and wish to receive only one, please notify your broker if your shares are held in a brokerage account or the Corporation’s transfer agent, Computershare, at (800) 368-5948, if you directly hold registered shares.

VOTING PROCEDURES

Solicitation and Voting of Proxies

The Board solicits this proxy for use at the Corporation’s 2021 Annual Meeting of Shareholders. The Corporation’s directors, officers and Bank employees may solicit proxies in person or by telephone, facsimile, email or

 

1

other similar means without additional compensation. The Corporation will pay the cost of preparing, assembling, printing, mailing and soliciting proxies and any additional material that the Corporation sends to its shareholders. The Corporation will make arrangements with brokerage firms and other custodians, nominees and fiduciaries to forward proxy solicitation materials to the beneficial owners of stock held by these entities. The Corporation will, upon request, reimburse these third parties for their reasonable expenses in forwarding solicitation material to the beneficial owners of stock.

Only shareholders of record as of the close of business on March 1, 2021, may vote at the annual meeting. The Corporation’s records show that, as of the voting record date, 8,413,383 shares of common stock were outstanding and eligible to vote. On all matters to come before the annual meeting, shareholders may cast one vote for each share held. Cumulative voting rights do not exist with respect to the election of directors. See “Principal Shareholders” on page 32 for a list of the persons known by the Corporation to be beneficial owners of 5% or more of the Corporation’s common stock.

If your shares are registered directly in your name with the Corporation’s transfer agent, Computershare, you are considered, with respect to those shares, the shareholder of record, and these proxy materials are being sent directly to you by the Corporation. As the shareholder of record, you have the right to grant your voting proxy directly to the proxy holders or to vote on the Meeting Center site during the meeting. The Corporation has enclosed a proxy for your use or you may vote online via the Internet or by telephone.

If your shares are held in an account at a bank, brokerage firm, broker-dealer or other similar organization, then you are a beneficial owner of shares held in street name. In that case, you will have received these proxy materials from that organization holding your account and, as a beneficial owner, you have the right to instruct your broker, bank, trustee, or nominee how to vote the shares held in your account. If no voting instructions are given, your broker or nominee has discretionary authority to vote your shares on your behalf on routine matters. A “broker non-vote” results on a matter when your broker or nominee returns a proxy, but does not vote on a particular proposal because it does not have discretionary authority to vote on that proposal and has not received voting instructions from you. We believe that your broker or nominee only has discretionary voting power with respect to the proposal regarding the ratification of the appointment of the independent registered public accounting firm. You may not vote shares held in street name during the annual meeting unless you obtain a legal proxy from that organization holding your account.

If you appropriately mark, sign and return the enclosed proxy card or voting instruction card, as the case may be, in time to be voted at the annual meeting, or if you vote by telephone or Internet in accordance with the instructions on the proxy card or voting instruction card, as the case may be, the shares represented thereby will be voted in accordance with your instructions. Signed proxies not marked to the contrary will be voted FOR the election of each of Kimberly J. Brumbaugh, Gregory M. Kerwin, Rory G. Ritrievi, and David E. Sparks as Class B directors for three-year terms expiring in 2024, FOR the non-binding advisory proposal on executive compensation, and FOR the ratification of RSM US LLP as the Corporation’s independent registered public accounting firm for 2021.

Quorum and Vote Required for Approval

In order to hold the annual meeting, a “quorum” of shareholders must be present. Under Pennsylvania law and the Corporation’s By-laws, the presence, virtually or by proxy, of the holders of a majority of the shares entitled to vote is necessary to constitute a quorum for the transaction of business at the meeting. Broker non-votes and abstentions will be counted for the purpose of determining whether a quorum is present, but broker non-votes will not be included for determining whether shareholder approval of a matter has been obtained.

If a quorum is present, the four candidates for director receiving the highest number of votes cast by shareholders, even if less than a majority, will be elected. Consequently, any shares not voted (whether by abstention, broker non-vote or otherwise) will not be included in determining which nominees received the highest number of votes. A properly executed proxy that withholds authority with respect to the election of one or more directors will not be voted with respect to the director or directors indicated, although it will be counted for purposes of determining whether there is a quorum.

If a quorum is present, approval of each of the other proposals will require the affirmative vote of the holders of at least a majority of the votes cast at the annual meeting. Under Pennsylvania law, abstentions are not considered “votes cast” and, accordingly, will not affect the outcome of the voting on the non-binding advisory proposal on executive compensation or ratification of the appointment of RSM US LLP.

 

2

Revocability of Proxy

Shareholders of record who sign proxies may revoke them at any time before they are voted by:

 

•

delivering a written notice of revocation to Cindy L. Wetzel, Secretary of Mid Penn Bancorp, Inc., at 349 Union Street, Millersburg, Pennsylvania 17061, before the vote is taken at the annual meeting;

 

•

voting online via the Internet, by telephone, or delivering a duly executed proxy bearing a later date to the Secretary of the Corporation, before the vote is taken at the annual meeting; or

 

•

voting electronically during the virtual annual meeting after giving written notice to the Secretary of the Corporation. (Your virtual attendance at the annual meeting, in and of itself, will not revoke the proxy.)

You have the right to vote and, if desired, to revoke your proxy any time before the vote is taken at the annual meeting. Should you have any questions, please call Cindy L. Wetzel at (866) 642-7736.

Methods of Voting

Shareholders of record can choose one of the following ways to vote:

Voting by Proxy

 

•

Mark your selections.

 

•

Date your proxy and sign your name exactly as it appears on your proxy.

 

•

Mail it to the Corporation in the enclosed, postage-paid envelope.

Voting by Internet

 

•

Go to www.investorvote.com/MPB.

 

•

Follow the steps outlined on the secure website.

Voting by Telephone

 

•

Call toll free (800) 652-VOTE (8683) on a touch tone telephone.

 

•

Follow the instructions provided by the recorded message.

Voting during the Annual Meeting

If you have not already voted your shares in advance, you will be able to vote your shares electronically during the annual meeting by clicking on the “Cast Your Vote” link on the Meeting Center site.

Shareholder Questions

In order for management to thoroughly answer any questions that shareholders may have about the Corporation or our annual report, including financial statements, we ask that shareholders submit their questions prior to the Annual Meeting of Shareholders. Shareholders may submit questions either by mail, telephone or email by contacting Cindy L. Wetzel, Secretary, Mid Penn Bancorp, Inc., 349 Union Street, Millersburg, Pennsylvania 17061, (866) 642-7736, cindy.wetzel@midpennbank.com. Questions received in advance of the meeting will be compiled by the Secretary and relayed promptly to management and the Board. Management and the Board will endeavor to address all relevant questions submitted prior to the meeting at the Annual Meeting of Shareholders.

 

3

GOVERNANCE OF THE CORPORATION

Overview

The Board believes that the purpose of corporate governance is to ensure that it maximizes shareholder value in a manner consistent with legal and regulatory requirements and the highest standards of integrity. The Board has adopted and adheres to corporate governance practices which the Board believes promote these objectives, are sound and represent best practices. These governance practices, Pennsylvania law (the state of incorporation), the rules and listing standards of The NASDAQ Stock Market LLC (“NASDAQ”) and the Securities and Exchange Commission (the “SEC”) regulations, as well as best practices suggested by recognized governance authorities, are continually reviewed for consistency and applicability.

The Corporation seeks director candidates who uphold the highest standards of professionalism, are committed to the Corporation’s values and are strong independent stewards of the long-term interests of shareholders, employees, customers and the communities in which we work. The Board, through the Nominating and Corporate Governance Committee, considers Board composition on an ongoing basis, with a focus on recruiting directors who have the qualities required to effectively oversee the Corporation, including its present and future strategies. The Board primarily seeks directors with experience in fields relevant to the Corporation’s businesses and operations and who are able to band together to effectively challenge and provide independent oversight of management. The Board seeks candidates who have a diversity of age, experience, perspectives and viewpoints, including diversity with respect to gender, race, ethnicity and geography.

In the biographical information about each of our directors that begins on page 11, the ages indicated are as of May 11, 2021, the date of the annual meeting, and all other information (other than share ownership) is as of the date of this proxy. There are no family relationships among the directors or between the directors and any executive officer.

All of our directors must be qualified in terms of education, professional experience and applicable skills or core competencies. Each director must exhibit integrity, sound judgment, strong work ethic, strength of conviction, a collaborative approach to decision making, inquisitiveness and, of extreme importance, an independent mindset.

The Board believes that it is important that a director’s and shareholders’ interests are financially aligned. In order to promote such alignment of interests, it is the Corporation’s policy that a newly elected director own at least 500 shares of Corporation common stock upon his or her election, and accumulate a total of at least 2,500 shares by the end of his or her second year on the Board.

Director Independence

The Corporation’s current Board is comprised of thirteen individuals. The Board has determined that all but one of the Corporation’s non-executive Board members are independent under NASDAQ’s corporate governance listing standards, resulting in 85% of the Board being deemed independent of management. In accordance with NASDAQ listing standards, only independent directors serve on the Audit, Compensation, and Nominating and Corporate Governance Committees.

To be considered independent, a director must have no disqualifying relationships as defined by the NASDAQ listing rules, and the Board must have affirmatively determined that the director has no other relationship with the Corporation, either directly or indirectly, that would interfere with his or her exercise of independent judgment in carrying out the responsibilities of a director.

In determining the directors’ independence, the Board considered both loan and non-loan transactions between the Bank and the directors, their family members and businesses with whom they are associated, as well as any contributions made to non-profit organizations with whom they are associated.

Applying the foregoing, the Board has determined that the following directors are independent: Robert A. Abel, Kimberly J. Brumbaugh, Matthew G. DeSoto, Robert C. Grubic, Brian A. Hudson, Sr., Gregory M. Kerwin, Donald F. Kiefer, Theodore W. Mowery, John E. Noone, Noble C. Quandel, Jr., and William A. Specht, III. Rory G. Ritrievi, current President and Chief Executive Officer of the Corporation, and David E. Sparks, who received consulting fees from the Corporation in 2020, are not considered independent.

 

4

For more information regarding types of transactions, relationships or arrangements considered by the Board in reaching its determination that the directors are independent, please refer to “Certain Relationships and Related Transactions” on page 31.

Board Leadership Structure

The Board is led by a non-executive Chair selected by the Board from time to time. Robert C. Grubic currently serves as Board Chair. The Board believes that a non-executive Board Chair enables the Board to effectively provide guidance to and oversight and accountability of management. In carrying out his or her responsibilities of the position, the Chair preserves the distinction between management and oversight, maintaining the responsibility of management to develop corporate strategy and the responsibility of the Board to review and express its views on corporate strategy. The functions of the Chair include:

 

•

presiding over all meetings of the Board and shareholders, including regular executive sessions of non-management directors of the Board;

 

•

establishing the annual agenda of the Board and the agendas of each meeting in consultation with the Chief Executive Officer;

 

•

advising committee chairs, in consultation with the Chief Executive Officer, on meeting schedules, agenda and information needs for the committees of the Board;

 

•

defining the subject matter, quality, quantity and timeliness of the flow of information between management and the Board and overseeing the distribution of that information;

 

•

coordinating periodic review of management’s strategic plan for the Corporation;

 

•

leading the Board review of the succession plan for the Chief Executive Officer and other key members of senior management;

 

•

serving as Acting Chief Executive Officer in concert with the Board or appointing an interim Chief Executive Officer until a successor is selected in the event there is a separation with the existing Chief Executive Officer;

 

•

coordinating the annual performance review of the Chief Executive Officer;

 

•

consulting with committee chairs about the retention of advisors and experts;

 

•

acting as the principal liaison between the independent directors and the Chief Executive Officer on sensitive issues;

 

•

working with the Nominating and Corporate Governance Committee to develop and maintain the agreed-on definitions of the role of the Board and the organization, processes and governance guidelines necessary to carry it out;

 

•

after consulting with other members of the Board and the Chief Executive Officer, making recommendations to the Nominating and Corporate Governance Committee as to the membership of various Board committees and committee chairs;

 

•

working with management on effective communication with shareholders, including being available for consultation and direct communication upon the reasonable request of major shareholders;

 

•

encouraging active participation by each member of the Board; and

 

•

performing such other duties and services as the Board may require.

Risk Oversight by Board

The Board oversees all business, property and affairs of the Corporation and Bank. The Board Chair and the Corporation’s officers keep the members of the Board informed of the Corporation’s business through meetings and by providing reports and other materials to Board members.

In addition to the general oversight of Corporation and Bank business, the Board also reviews a comprehensive quarterly Risk Management Report, prepared by the Bank’s Chief Operating Officer, which includes metrics and trends on major risk areas, including cybersecurity, asset quality, interest rate risk, operations, capital adequacy, and liquidity. Through its focused role in providing information technology reporting and oversight, the IT/Compliance Committee provides additional support to the Board in its role overseeing cybersecurity risks affecting the Corporation.

 

5

Code of Ethics

The Corporation has adopted a Code of Ethics that applies to directors, officers and employees of the Corporation and the Bank. The Corporation last amended the Code of Ethics on March 12, 2021. A copy is posted under Governance Documents in the Corporate Information section under the Investors link on the Corporation’s website, www.midpennbank.com. The Corporation’s Code of Ethics may be viewed on the Mid Penn website at www.midpennbank.com or requested from the Corporate Secretary by telephone at (866) 642-7736.

Restrictions on Hedging

Our Code of Ethics includes anti-hedging provisions that prohibit all employees and directors from day trading or short-selling Corporation securities and from engaging in transactions in any derivative of Corporation securities (other than securities issued under a Corporation compensation plan), including buying and writing options.

Shareholder Communications

Any shareholder who wishes to communicate with the Board may send correspondence to Rory G. Ritrievi, President and Chief Executive Officer, Mid Penn Bancorp, Inc., at 349 Union Street, Millersburg, Pennsylvania 17061, with a copy to Cindy L. Wetzel, Secretary, at the same address. Written communications received from shareholders are shared with the full Board or appropriate committee as warranted. The Board has a complaint procedure for communicating accounting, internal accounting controls and auditing matters. Complaints generated are directed to a separate mailing address, which is under the control of the Chair of the Audit Committee. Please refer to Governance Documents in the Corporate Information section under the Investors link on the Corporation’s website at www.midpennbank.com for complete details.

A shareholder who intends to nominate an individual for election to the Board (other than a candidate proposed by the Board) must notify the Secretary of the Corporation in compliance with the requirements of Article 10, Section 10.1 of the Corporation’s By-laws. Any shareholder who intends to nominate a candidate for election to the Board must notify the Secretary of the Corporation in writing not less than the earlier of (1) 120 days prior to the anniversary date of the initial proxy materials or of a notice of the meeting by the Corporation in connection with the immediately preceding Annual Meeting of Shareholders (which would be November 26, 2021 for the 2022 annual meeting), or (2) the deadline for submitting shareholder proposals for inclusion in a proxy statement and form of proxy as calculated under Rule 14a-8(e) promulgated by the SEC (which is also November 26, 2021 for the 2022 annual meeting).

Annual Meeting Attendance

All directors attended the 2020 Annual Meeting of Shareholders. While the Corporation does not have a formal policy regarding attendance, all directors are strongly encouraged to attend the Annual Meeting of Shareholders.

Committees and Meetings of the Corporation’s Board

During the year ended December 31, 2020, the Corporation’s Board of Directors held sixteen meetings. In addition, the Corporation’s independent Board members held one independent Board Meeting during 2020.

During 2020, the Board maintained seven standing committees, four of which serve only the Corporation: Nominating and Corporate Governance, Executive, Audit, and Compensation; and three of which jointly serve the Corporation and the Bank: Real Estate, IT/Compliance, and Directors Loan. Only independent directors serve on the Audit, Compensation, and Nominating and Corporate Governance Committees. Current committee membership is displayed in the following table.

 

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COMMITTEE MEMBERSHIP TABLE

 

Nominating and Corporate Governance (Corporation only)

Executive (Corporation only)

Audit (Corporation only)

Compensation (Corporation only)

Real Estate (Joint)

IT/Compliance (Joint)

Directors Loan (Joint)

Robert A. Abel

CC

X / FE

Kimberly J. Brumbaugh

X

X

Matthew G. DeSoto

X

X

Robert C. Grubic

X

CC

X

X

X

Brian A. Hudson, Sr.

X / FE

Gregory M. Kerwin

X

X

Donald F. Kiefer

X

X

Theodore W. Mowery

CC

X

John E. Noone

CC / FE

X

Noble C. Quandel, Jr.

X

X

CC

Rory G. Ritrievi

X

X

X

X

David E. Sparks

X

X

William A. Specht, III

X

X

X

CC

Meetings Held in 2020

4

3

5

5

2

4

8

 

CC	- Committee Chair

X

- Member

FE	- Financial Expert per Section 407 of Sarbanes-Oxley

Each of the directors attended at least 95% of the total number of Board meetings and committee meetings for the Corporation during their tenure on the Board in 2020.

The function of each of the Corporation’s committees is described below.

NOMINATING AND CORPORATE GOVERNANCE COMMITTEE. This committee identifies individuals qualified to become members of the Board; evaluates and recommends to the Board nominees for each election of directors; and monitors and makes recommendations to the Board on other matters of policies and practices relating to corporate governance. All members of the Nominating and Corporate Governance Committee are independent (as independence is currently defined by NASDAQ listing standards). Robert A. Abel serves as Chair of this committee.

The Nominating and Corporate Governance Committee has a charter which is available under Governance Documents in the Corporate Information section under the Investors link on the Corporation’s website at www.midpennbank.com. The principal responsibility of the Nominating and Corporate Governance Committee is director recruitment and Board succession.

When developing a list of potential nominees, the Nominating and Corporate Governance Committee may take into consideration names provided by shareholders, directors or executive management. Information is gathered concerning the potential Board member’s location of business and residence, shares owned, profession or business, and deposit and loan relationship with the Bank. Personal information about the individual is also gathered to determine if the candidate meets the criteria listed in the Nominating and Corporate Governance Committee Policy and Charter. The Nominating and Corporate Governance Committee screens this information to narrow its search of final candidates to be interviewed. Upon completion of the interviews, the Nominating and Corporate Governance Committee makes a final recommendation to the full Board for appointment. All potential candidates are screened by the same process regardless of whether they are recommended by a director, a member of executive management, or a shareholder.

With a goal of making progress toward increasing the representation of women, underrepresented minorities and the LGBTQ+ community on the Board, in the interest of inclusive representation, the Nominating and Corporate Governance Committee has identified a goal of achieving, over time, a balanced level of diversity in the composition of the Board.

 

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BOARD COMPOSITION MATRIX

 

Abel

Brumbaugh

DeSoto

Grubic

Hudson

Kerwin

Kiefer

Mowery

Noone

Quandel

Ritrievi

Sparks

Specht

Core Competencies

Executive/Leadership

X

X

X

X

X

X

X

X

X

X

X

X

X

Financial/Accounting/ Banking

X

X

X

X

X

X

X

X

X

X

X

X

X

Legal/Regulatory

X

X

X

X

X

X

X

X

X

Development, Succession, Benefits, Compensation

X

X

X

X

X

X

X

X

X

X

X

X

X

Information Technology

X

X

X

X

X

X

Self-Identified Personal Information

Age

62

52

44

69

66

70

66

62

61

73

57

77

59

Gender (1)

M

F

M

M

M

M

M

M

M

M

M

M

M

Race (2)

C

C

C

C

B

C

C

C

C

C

C

C

C

Years Served on MPB Board

10

2

13

15

<1

22

3

18

9

6

12

3

15

Share Ownership

13,111

2,707

37,221

46,499

500

34,429

1,043,911

20,949

32,074

137,631

23,976

110,377

43,450

Independence

Y

Y

Y

Y

Y

Y

Y

Y

Y

Y

N

N

Y

 

(1)	M - Male / F - Female

(2)	C - Caucasian / B - Black

Percent of Board members who meet diversity objectives - 15%

Average Age - 63

Average Share Ownership – 118,987

EXECUTIVE COMMITTEE. This committee may exercise the authority of the Board in the intervals between the meetings of the Board so far as may be permitted by law. Robert C. Grubic serves as Chair of this committee.

AUDIT COMMITTEE. This committee oversees audit coverage, selects the independent registered public accounting firm, reviews the annual and quarterly financial statements of the Corporation and auditor’s reports, and monitors with management and the internal and external auditors the system of internal controls and its accounting and reporting practices. All members of the Audit Committee are non-employee directors and are independent (as independence is currently defined by NASDAQ listing standards). The Audit Committee has a charter which is available under Governance Documents in the Corporate Information section under the Investors link on the Corporation’s website at www.midpennbank.com. John E. Noone serves as Chair of this committee. Robert A. Abel, Brian A. Hudson, Sr., and John E. Noone serve as the Audit Committee Financial Experts.

COMPENSATION COMMITTEE. This committee assures that senior executives are compensated effectively in a manner consistent with the Corporation’s compensation strategy, internal equity considerations, competitive practice and the requirements of the appropriate regulatory bodies. This committee also reviews salary adjustments, compensation and benefits programs for all employees and makes recommendations to the Board. All members of the Compensation Committee are independent (as independence is currently defined by NASDAQ listing standards). The Compensation Committee has a charter which is available under Governance Documents in the Corporate Information section under the Investors link on the Corporation’s website at www.midpennbank.com. Theodore W. Mowery serves as Chair of this committee.

Environmental and Social Commitments

As a publicly traded community financial institution, it is incumbent upon the Corporation to assure that its operations are conducted in a manner that is both consistent with environmental preservation and supportive of the entire community in which it operates.

 

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While the Corporation does not have a formal environmental policy because the nature of its operations does not result in a direct, material impact on the environment, the Corporation strives to operate in a manner that is environmentally friendly. We are currently in the process of developing a multi-year plan to make each of the buildings in which the Corporation and its subsidiaries operate more environmentally friendly through scheduled renovations utilizing materials intended to leave as small a carbon footprint as economically feasible. Additionally, through its credit portfolio, the Corporation has strived to focus its efforts on companies that also operate in an environmentally favorable manner.

Additionally, the Corporation believes it to be a socially responsible corporate citizen. From the hundreds of thousands of dollars it contributes to charitable causes throughout its footprint; the thousands of hours of community service hours provided by its employees during work hours; the two main fundraising causes (breast cancer and prostate cancer) it has supported each year; the initiatives it has developed centering on women in banking and promoting diversity and inclusion, the Corporation’s commitment to social responsibility is strong and improving.

EXECUTIVE OFFICERS

Executive Officers of the Corporation and the Bank

The following table sets forth, as of March 1, 2021, selected information about the Corporation’s and Bank’s executive officers, each of whom is appointed by the Board and each of whom holds office at the Board’s discretion.

 

Name		Age				Principal Occupation for the Past Five Years and Position Held with Mid Penn Bancorp, Inc. and Subsidiaries
Rory G. Ritrievi			57			President, Chief Executive Officer and Director of the Corporation and the Bank since 2009.
Michael D. Peduzzi			55			Senior Executive Vice President of the Bank since October 2018 and Chief Financial Officer of the Corporation and the Bank since March 2016; Executive Vice President of the Bank from March 2016 to October 2018.
Justin T. Webb			38			Senior Executive Vice President of the Bank since October 2018 and Chief Operating Officer of the Bank since May 2018; Executive Vice President from July 2014 to October 2018; Chief Risk Officer from July 2014 to May 2018.
Scott W. Micklewright			38			Senior Executive Vice President and Chief Revenue Officer of the Bank since October 2018; Executive Vice President from February 2013 to October 2018; Chief Lending Officer from June 2010 to October 2018.
Joseph L. Paese			61			Executive Vice President and Director of Trust and Wealth Management of the Bank since April 2016.
Joan E. Dickinson			56			Executive Vice President and Chief of Staff of the Bank since October 2018; Regional President from December 2017 to October 2018; Commercial Loan Manager from February 2017 to December 2017; Senior Vice President from January 2014 to October 2018; Commercial Loan Officer from February 2013 to February 2017.

AUDIT COMMITTEE REPORT

The Board adopted a written charter for the Audit Committee. The Audit Committee Charter is available under Governance Documents in the Corporate Information section under the Investors link on the Corporation’s website at www.midpennbank.com. As required by the charter, the Audit Committee, in fulfilling its oversight responsibilities regarding the audit process:

 

•

reviewed and discussed the fiscal year 2020 audited financial statements, and the management report on internal controls over financial reporting, with both management and the independent registered public accounting firm, RSM US LLP;

 

9

•

discussed with the independent registered public accounting firm, the matters required to be discussed by PCAOB Audit Standard 1301 (Communications with Audit Committees) as issued by the Public Company Accounting Oversight Board; and

 

•

reviewed the written disclosures and the letter from the independent registered public accounting firm required by the Public Company Accounting Oversight Board Independence Rules and discussed with the independent auditors any relationships that may impact their objectivity and independence.

Based upon the review and discussions referred to above, the Audit Committee recommended to the Board that the audited consolidated financial statements for the year ended December 31, 2020, be included in the Corporation’s annual report and filed with the SEC.

Mid Penn’s independent registered public accounting firm for the year ended December 31, 2020 was RSM US LLP and for the year ended December 31, 2019, our independent registered public accounting firm was BDO USA, LLP. The Audit Committee of the Board has appointed RSM US LLP as its independent registered public accounting firm for the year ending December 31, 2021.

Aggregate fees billed to the Corporation and the Bank by BDO USA, LLP for 2020 and 2019, and RSM US LLP for 2020, the independent registered public accountants, for professional services rendered are as follows:

 

Year Ended December 31,		2020				2019
Audit fees		$	300,325			$	314,842
Audit-related fees		$	0			$	21,203
Tax fees		$	0			$	0
All other fees		$	0			$	0

Audit fees for 2020 and 2019 include professional services rendered for the audit of the Corporation’s annual consolidated financial statements (including amounts not yet billed, but expected to be billed) and review of consolidated financial statements included in Forms 10-Q, including out-of-pocket expenses. Audit fees for 2020 also include amounts not yet billed but expected to be billed for the HUD audit.

Audit-related fees for 2019 include fees billed for the review of the Registration Statement on Form S-3 that was filed with the SEC on August 8, 2019 and fees billed for professional services rendered for the performance of the retirement plan audit.

This report of the Audit Committee shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Corporation specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.

The foregoing report has been furnished by the current members of the Audit Committee, which is comprised of five directors, all of whom are considered “independent” as defined in NASDAQ listing standards and are listed in the table below. John E. Noone, Robert A. Abel and Brian A. Hudson, Sr. are qualified as Audit Committee financial experts within the meaning of rules and regulations promulgated by the SEC and NASDAQ listing standards, and the Board has determined that they have accounting and related financial management expertise to satisfy the requirements of the SEC and NASDAQ.

The Audit Committee Charter requires the Audit Committee to pre-approve all audit and permissible non-audit services provided by the independent registered public accountants. These services may include audit services, audit-related services, tax services and other permissible services. Under the charter, pre-approval will generally be provided for up to one year, and any pre-approval is detailed as to the particular service or category of services. In addition, the Audit Committee may also pre-approve particular services on a case-by-case basis. Prior to approval, the Committee verifies with the auditor the nature of the proposed services to ensure independence will not be compromised. Under the charter, a de minimis exception is provided whereby pre-approval may be waived for non-audit services that meet all of the following requirements:

 

•

the aggregate amount of all such services is not more than five percent of the total amount of fees paid to the independent auditor during the year in which the services are provided;

 

10

•

such services were not recognized as non-audit services by the Corporation at the time of the engagement; and

 

•

the services are promptly brought to the attention of the Audit Committee and approved prior to completion of the audit.

RSM US LLP advised us that it is independent with respect to the Corporation, within the meaning of the applicable rules and regulations of the Securities and Exchange Commission, and in compliance with Rule 3520 of the Public Company Accounting Oversight Board. Current committee membership is displayed in the following table.

Audit Committee

 

John E. Noone, Chair		Brian A. Hudson, Sr.
Robert A. Abel		William A. Specht, III
Robert C. Grubic

PROPOSAL NO. 1: ELECTION OF DIRECTORS

Qualifications and Nomination of Directors

The Corporation’s By-laws authorize the number of directors to be not less than five (5) nor more than twenty-five (25). The By-laws also provide for three classes of directors with staggered three-year terms of office. Terms of the members of each Class expire at successive annual meetings. Currently, Class A consists of five directors; Class B and Class C each consist of four directors.

The Board nominated the four persons named below to serve as directors until the 2024 Annual Meeting of Shareholders and until their successors are duly elected and qualified or until their earlier death, resignation, retirement or removal from office. The Board Chair individually met with and interviewed each candidate for re-nomination to assess if the candidate desired to serve an additional term and to determine the best manner in which each director could serve most effectively in the next three years. The nominees are presently members of the Board and have consented to serve another term as a director if re-elected. If the nominees should be unavailable to serve for any reason, a majority of the Board then in office may select someone to fill the vacancy until the expiration of the term of the Class of directors to which he or she is appointed.

The proxy holders intend to vote proxies for the election of each of the four nominees named below, unless you indicate that your vote should be withheld from any or all of them. Brokers holding shares beneficially owned by their clients do not have the ability to cast votes with respect to the election of directors unless they have received instructions from the beneficial owner of the shares. It is therefore important that you provide instructions to your broker if your shares are held by a broker so that your vote with respect to directors is counted.

The Board proposes the following nominees for election as Class B Directors at the annual meeting:

 

•

Kimberly J. Brumbaugh

 

•

Gregory M. Kerwin

 

•

Rory G. Ritrievi

 

•

David E. Sparks

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES LISTED ABOVE AS CLASS B DIRECTORS OF MID PENN BANCORP, INC.

INFORMATION REGARDING DIRECTOR NOMINEES AND CONTINUING DIRECTORS

The following individuals currently are serving three-year terms on the Corporation’s Board and will serve until their successors are duly elected and take office. Information, as of the date of this proxy statement, concerning the four nominees to the Board and the nine continuing directors appears below. The ages of our directors are as of May 11, 2021. You will find information about their share ownership on page 32.

 

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Class A Directors (to serve until 2023)

Robert C. Grubic, age 69, has been a director since 2006. In 1989, Mr. Grubic became President and Chief Executive Officer of Herbert, Rowland & Grubic, Inc., a consulting engineering firm based in Harrisburg, PA and currently serves as Chairman and Chief Executive Officer. He has been employed by the firm and its predecessor firm since 1973. Mr. Grubic has a Bachelor of Civil Engineering Degree from Villanova University and a Master of Administration Degree from The Pennsylvania State University. He has served on numerous civic and community boards and groups in the greater Harrisburg area. Mr. Grubic has overall management responsibility of the 250+ person engineering firm of Herbert, Rowland & Grubic, Inc., including oversight of all financial, administrative, human resources and technical components of the firm. Due to his many years of experience in managing a successful engineering firm, the Board feels Mr. Grubic’s vast knowledge of business operations is invaluable and qualifies him to serve on the Board. Mr. Grubic was appointed Chairman of the Board of the Corporation and the Bank in 2012, after previously serving as Vice Chairman. Mr. Grubic also serves as Chair of the Executive Committee and is a member of the Audit, Directors Loan, Real Estate, and Nominating and Corporate Governance Committees.

Brian A. Hudson, Sr., age 66, became a director on January 27, 2021. Prior to his retirement, Mr. Hudson served as the Executive Director and Chief Executive Officer of the Pennsylvania Housing Finance Agency (PHFA), an agency whose mission is to address affordable housing finance through specialized financing programs at the federal, state, and local levels. He is a Certified Public Accountant, a Chartered Global Management Accountant, and a Certified Treasury Professional. Currently, he serves, with the designation of SEC Financial Expert, as a Director and Audit Committee Chair of Erie Indemnity Company, a NASDAQ-listed company, and as a Director for both the Community Development Trust and the Penn State Health Milton S. Hershey Medical Center. Mr. Hudson is Past President and former board member of the National Council of State Housing Agencies, is Past Chair of the Commonwealth Cornerstone Group, and previously served on the board of the National Housing Trust. He has also served on the Federal Reserve Board Consumer Advisory Council and is former Director and Audit Committee Chair of the Federal Home Loan Bank of Pittsburgh. While at the Federal Home Loan Bank of Pittsburgh, he was designated an SEC Financial Expert and also served on the Governance, Human Resources, Affordable Housing, Executive, and Enterprise Risk Management Committees. Mr. Hudson earned a Bachelor’s Degree in Business Administration from The Pennsylvania State University. The Board has determined that Mr. Hudson’s extensive background in accounting and finance and industry knowledge, and his current and past service on a number of boards qualify him to serve on the Board and to also serve as Financial Expert on the Audit Committee, adding great value to the Corporation.

Donald F. Kiefer, age 66, became a director on January 8, 2018, pursuant to the Agreement and Plan of Merger, dated March 29, 2017, by and among Mid Penn Bancorp, Inc., Mid Penn Bank and The Scottdale Bank & Trust Company. Mr. Kiefer was employed by The Scottdale Bank & Trust Company, Scottdale, PA since December 1981, where he served as Trust Officer from 1981 until September 1984. He was elected President and Chief Executive Officer of The Scottdale Bank & Trust Company in September 1984 and has held that position until the merger with Mid Penn Bank in January 2018. He was elected to The Scottdale Bank & Trust Company Board of Directors in 1984 and has served as Chairman since 2003. Mr. Kiefer earned a Bachelor’s Degree in Economics from Allegheny College, Meadville, PA and a Master’s in Business Administration from Rochester Institute of Technology (RIT), Rochester, NY. Upon graduation from RIT in 1979, Mr. Kiefer was employed by The Community Savings Bank in Rochester, NY as a staff auditor. Mr. Kiefer is President of The Scottdale Cemetery Association and has been on the Board of Directors since 1985. He is a past member of the Kiwanis Club, the Rotary, The Scottdale Chamber of Commerce, and other community and civic organizations. The Board has determined that Mr. Kiefer’s extensive banking experience and leadership qualify him to serve on the Board, as well as on the Directors Loan Committee and the Nominating and Corporate Governance Committee.

John E. Noone, age 61, has been a director since 2012. Mr. Noone is President of Shamrock Investments, LLC, a Central Pennsylvania firm investing in commercial real estate and private business equity. He began his career in Accounting, and he became a Pennsylvania Certified Public Accountant before entering banking and corporate finance. As a banker, Mr. Noone managed a $300 million Commercial Banking Division of Pennsylvania National Bank as Vice President and Regional Commercial Banking Manager in Harrisburg, PA. He became an entrepreneur with the acquisition of McCann School of Business in 1993, which after significant growth, was sold in late 2002. In 2003, Mr. Noone was a co-founder of Higher Education Solutions, LLC and began developing privatized student apartments for colleges and universities. The apartment portfolio of HES was sold in late 2007, and Mr. Noone formed Shamrock Investments, LLC. Mr. Noone earned a Bachelor of Science Degree in Business with a concentration in Accounting from

 

12

Marywood University. He also completed the Central Pennsylvania School of Commercial Banking at Bucknell University and the Advanced Commercial Lending School at the University of Virginia. He is a member of the American Institute of Certified Public Accountants. Mr. Noone previously served on the Board of the Pennsylvania Economic Development Financing Authority, Pennsylvania Chamber of Business and Industry, Pennsylvania Association of Private School Administrators, West Shore Country Club (past President), and various other civic and community organizations. He is a current member of the Operational Committee of the Pennsylvania Community Development Bank. Due to his extensive business experience and his accounting and banking background, the Board has determined that Mr. Noone adds value to the Corporation and is qualified to serve on the Board and on the Directors Loan Committee, and as a Financial Expert and Chair of the Audit Committee.

Noble C. Quandel, Jr., age 73, became a director on March 1, 2015, pursuant to the Agreement and Plan of Merger, dated August 27, 2014, by and between Mid Penn Bancorp, Inc. and Phoenix Bancorp, Inc. Mr. Quandel joined the Phoenix Bancorp, Inc. Board in 2004, where he served most recently as Vice Chairman. Mr. Quandel is Executive Chairman of Quandel Enterprises, Inc. in Harrisburg, PA, a company that provides construction, construction management, engineering and development services in the Mid-Atlantic region. Mr. Quandel is a graduate of Bloomsburg University. Upon graduation, he continued working in the company business with his parents and assumed the position of President and Chief Executive Officer from his father in 1977. Under his management, the Company has grown to operate twelve offices in a geographical area which encompasses the Mid-Atlantic region. Mr. Quandel currently serves on the Board of Directors of the Northeastern Pennsylvania Alliance (NEPA), the Board of Directors of Schuylkill Economic Development Corporation, the Keystone Contractors Association and the Minersville Area Community Improvement Organization. He also serves on the Board of Directors for the Pottsville Area School District as Board President and is the President of the General Contractors Association of Pennsylvania. He has served as Past Chairman of the Easter Seals of Central Pennsylvania’s inaugural Capital Campaign. Mr. Quandel has been a guest lecturer at Bucknell University, Bloomsburg University School of Business and The Pennsylvania State University. He is a past member of the Board of Directors of Pennsylvania National Bank and is also past Chairman of the Board of Directors of Keystone Contractors Association and Schuylkill Economic Development Corporation. He is a past member of the Board of Directors of Capital Region Economic Development Corporation and Schuylkill Chamber of Commerce. In 2002, Mr. Quandel was the recipient of the Torch of Liberty Award from the Anti-Defamation League of B’nai B’rith, which celebrates families with a tradition of community service who have passed the torch of good deeds, leadership and philanthropy to the next generation. The Board has determined that Mr. Quandel’s vast knowledge of business operations and his community involvement qualify him to serve on the Board and on the Compensation and Executive Committees and as Chair of the Real Estate Committee. Mr. Quandel also serves as Chair of the Bank’s Schuylkill County Business Development Advisory Board.

Class B Directors and Class B Director Nominees (to serve until 2024)

Kimberly J. Brumbaugh, age 52, became a director on February 27, 2019. Ms. Brumbaugh is the Chief Executive Officer and founded Brumbaugh Wealth Management, LLC (formerly known as Brumbaugh Wealth Management Group) in 2004 after having worked in the industry for a Philadelphia firm since 1998. This was a career change after transitioning from the automotive industry where she managed a department of thirty employees for many years while attending Widener University at night for Business Administration. She continued her education at the American College in Bryn Mawr, PA where she earned her securities licenses and certifications in Financial Services. Ms. Brumbaugh has served on community boards for more than two decades, currently as a Trustee for Penn Medicine Chester County Hospital Foundation board, and is a past Chair of the Chester County Chamber of Business and Industry, and the Southeastern Pennsylvania Autism Resource Center “SPARC”. In addition, she supports her industry as a member of the Million Dollar Round Table-Top of the Table, the Financial Planning Association, and the National Association of Insurance and Financial Advisors “NAIFA”. Ms. Brumbaugh’s firm manages $385 million in client assets, received the 2018 Velocity 50 Award from CEO Report, and was recognized as a Top Wealth Manager in the Wall Street Journal in 2019 and Fortune Magazine, January 2021. The Board has determined that Ms. Brumbaugh’s extensive knowledge in business operations, development of employees, financial management, leadership and community involvement qualifies her to serve on the Board, as well as on the Compensation Committee and the Nominating and Corporate Governance Committee.

Gregory M. Kerwin, age 70, has been a director since 1999. He is the senior partner of Kerwin & Kerwin, LLP, a small family law firm in Elizabethville, PA that has been serving clients in Central Pennsylvania since 1945. He is a member of the Pennsylvania Bar Association and former director and current member of the Dauphin County Bar Association. He is admitted to practice before all courts in Pennsylvania, the United States Middle District Court and the

 

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U.S. Supreme Court. The focus of his firm is on real estate, estates and trusts, commercial and municipal law. During his legal career, he has served as solicitor for numerous townships, boroughs and municipal authorities in Dauphin and Schuylkill Counties. His firm currently represents nine municipal governments. Mr. Kerwin has served on the Board of Directors of the Miners Bank of Lykens, the Dauphin County General Authority, Villa Teresa Nursing Home, Reiff & Nestor Company in Lykens, the Lykens Community Development Corporation, Goodwill Industries of Elizabethville, the Finance Council for the Catholic Diocese of Harrisburg and the Elizabethville Bicentennial Steering Committee. He is a member of the Lykens Chamber of Commerce. A licensed commercial pilot and former certified flight instructor, Mr. Kerwin serves as co-trustee for Bendigo Airport, a public use airport in Tower City, PA. He is a graduate of The Pennsylvania State University and lifetime member of the alumni association and Nittany Lion Club. He earned his Juris Doctorate from the Dickinson School of Law in Carlisle, PA. Mr. Kerwin is a member of Our Lady of Help Christians Church in Lykens, where he has served as an usher and Eucharistic Minister. Because of his legal expertise and his knowledge of the Bank’s local communities, the Board has determined that Mr. Kerwin adds substantial value to the Corporation and is qualified to serve on the Board, as well as on the Executive Committee and the Real Estate Committee.

Rory G. Ritrievi, age 57, has been a director since 2009. On February 25, 2009, Mr. Ritrievi joined the Corporation and the Bank as President and Chief Executive Officer. Mr. Ritrievi has worked in the financial services industry for more than 35 years. He previously served as Senior Executive Vice President/Market President and Chief Lending Officer of Commerce Bank/Harrisburg, where he managed all aspects of the customer experience including the retail network, lending, marketing and public relations. As Chief Lending Officer, Mr. Ritrievi was responsible for loan production, credit quality and credit administration. Mr. Ritrievi holds a Juris Doctor from Widener University School of Law and a Bachelor of Arts Degree in Economics from the University of Pittsburgh. He is a licensed, but non-practicing attorney in the state of Pennsylvania. He is currently serving on the Advisory Board for Widener Law Commonwealth’s Business Advising Certificate Program and on the Board of Directors of the Harrisburg Area YMCA. He previously served on the Federal Reserve Bank of Philadelphia’s Community Depository Institution Advisory Council and on the Board of Directors of the Pennsylvania Association of Community Bankers. Because of his banking experience, his educational background and leadership skills, the Board concluded that Mr. Ritrievi is the right person to lead the Corporation and the Bank and that these attributes qualify him to serve as President and Chief Executive Officer and Board member of the Corporation and the Bank, and as a member of the Executive Committee, Real Estate Committee, Directors Loan Committee, and Information Technology/Compliance Committee. Mr. Ritrievi has been a valuable addition to the Corporation and the Bank.

David E. Sparks, age 77, became a director on August 1, 2018, pursuant to the Agreement and Plan of Merger, dated January 16, 2018, by and between Mid Penn Bancorp, Inc. and First Priority Financial Corp. Mr. Sparks retired from banking on August 1, 2019. Prior to his joining the Mid Penn Board, he was the Founder, Chairman and Chief Executive Officer of First Priority Bank in 2005 and Chairman and Chief Executive Officer of First Priority Financial Corp., the parent company of First Priority Bank since its formation in 2007. Mr. Sparks is a graduate of Furman University, Greenville, SC, and attended Harvard University’s Advanced Management Program (AMP). He has over forty years of bank management experience with an emphasis on finance and capital markets, mergers and acquisitions and strategic planning. Prior to forming First Priority, Mr. Sparks was Founder, Chairman and Chief Executive Officer of Millennium Bank, Malvern, PA, which was sold in 2004. Mr. Sparks currently serves as Executive Vice Chairman and a Director of Cumberland Advisors, a registered investment advisor headquartered in Sarasota, FL. The Board has determined that Mr. Sparks’ extensive banking experience qualifies him to serve on the Board, the Real Estate Committee, and the Information Technology/Compliance Committee, adding great value to the Corporation.

Class C Directors (to serve until 2022)

Robert A. Abel, age 62, has been a director since 2011. Mr. Abel, a Certified Public Accountant and Certified Specialist in Estate Planning, is a Principal, Shareholder and a member of the Board of Directors of Brown Schultz Sheridan & Fritz, in Camp Hill, PA. This regional CPA firm with five offices provides tax, audit and consulting services. Mr. Abel has written many articles and participated in seminars on the topics of estate planning, wealth transfer and financial planning for the closely held corporation. He received a Bachelor of Science Degree from Shippensburg University, from which he graduated Summa Cum Laude. He is a member of the American Institute of Certified Public Accountants, the Pennsylvania Institute of Certified Public Accountants and the National Association of Estate Planners & Councils. He served as past Chairman of the Harrisburg YMCA and assisted in founding a non-profit organization. The Board has determined that Mr. Abel’s vast knowledge in the accounting industry qualifies him to serve as a member of the Board, as Financial Expert of the Audit Committee and as Chair of the Nominating and Corporate Governance Committee, adding great value to the Corporation. Mr. Abel also serves as Chair of the Bank’s Lancaster Business Development Advisory Board.

 

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Matthew G. DeSoto, age 44, has been a director since 2008. In 2013, Mr. DeSoto became President and Chief Executive Officer of MI Windows and Doors, LLC, based in Gratz, PA. He previously held numerous sales and operational roles since joining the business in 1999. MI Windows and Doors is a leading fabricator of window and patio door products designed for residential and light commercial projects throughout the United States. Mr. DeSoto serves on the Penn State Health Four Diamonds Fund Advisory Board, the Board of the MI Charitable Foundation and is an active member of the Young Presidents Organization. Mr. DeSoto attended The Pennsylvania State University pursuing a Bachelor of Science Degree in Marketing. The Board has determined that, as President and Chief Executive Officer of MI Windows and Doors, Mr. DeSoto’s knowledge in all aspects of business operations is an asset to the Corporation and well qualifies him to serve on the Board. Mr. DeSoto serves on the Compensation Committee and the Nominating and Corporate Governance Committee.

Theodore W. Mowery, age 62, has been a director since 2003. Mr. Mowery is a licensed insurance agent in life, health, property and casualty insurance and holds Securities Series 6 and 63 licenses. He is a founding partner of Gunn Mowery LLC, who currently employs 60 people and manages insurance and employee benefit programs for over 10,000 clients. He is a founding partner in Mowery Insurance, Inc. and is also a partner in Gunn Mowery Properties, LLC, a real estate holding company. Mr. Mowery is a member of the National Association of Insurance and Financial Advisors and the Estate Planning Council of Central Pennsylvania. He formerly served as President of the Camp Hill School Board, President of the Mental Health Association of Cumberland, Dauphin and Perry Counties, and past Board member of the Capital Region Economic Development Council, the Lion Foundation and the West Shore Country Club. Mr. Mowery has a Bachelor of Arts Degree from Gettysburg College. Due to his vast knowledge of the insurance services industry and his experience in managing all aspects of his company, the Board has determined that Mr. Mowery adds substantial value to the Corporation and is well qualified to serve as a member of the Board, the Directors Loan Committee and Chair of the Compensation Committee.

William A. Specht, III, age 59, has been a director since 2006. Mr. Specht is President and Chief Executive Officer of Seal Glove Manufacturing, Inc. and Ark Safety, and serves on the Board of Directors. As President and Chief Executive Officer of his business affiliations, Mr. Specht is knowledgeable in all aspects of business operations. Mr. Specht served on the Dauphin County Planning Commission for a total of nine years, from 2010 through 2019, serving as Chairman for two years and Vice Chairman for two years. Mr. Specht previously served as a Board member of MANTEC, a non-profit corporation, a member of the Consumer Advisory Board of Capital Blue Cross and as a School Board Director of the Millersburg Area School District. Mr. Specht is an active member of the Millersburg community and has served and continues to serve in various capacities with various organizations. The Board has determined Mr. Specht’s knowledge and management of his business affiliations add value to the Corporation and well qualify him to serve on the Board. In 2012, Mr. Specht was appointed Vice Chairman of the Board of the Corporation and the Bank. Mr. Specht serves on the Executive, Audit, and Compensation Committees, and as Chair of the Directors Loan Committee.

Compensation of the Board

The Corporation periodically obtains or conducts a survey of director fees, committee fees and other director compensation of banks that are similar in asset size and in similar markets to the Corporation and the Bank. The Compensation Committee reviews these surveys and recommends to the full Board any changes to the compensation of Board members for the upcoming year. The Board has final approval of the compensation of its directors. Directors, with the exception of the Board Chair and Vice Chair, received an annual Board fee of $50,000 for the year 2020. Committee Chairs, excluding the Board Chair and Vice Chair, received an additional $2,000 in annual compensation. The Board Chair and Vice Chair received an annual fee of $90,000 and $75,000, respectively. Board members who also serve on the Bank’s Regional Business Development Advisory Boards receive an additional fee for each meeting attended. In 2020, Ms. Brumbaugh attended two meetings of the Mid Penn Bank Southeast Region Business Development Advisory Board, receiving total fees of $1,500 for such additional service. No other directors received such additional meeting fees. Mr. Ritrievi does not receive a fee for serving on the Board.

On July 24, 2020, each non-employee Director who was serving on the Board at that time was granted 500 shares of the Corporation’s common stock, with a fair market value of $18.65 per share, or $9,325, as part of his or her compensation. These common stock awards were granted with a one-year vesting restriction.

 

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The Corporation and Bank maintain a deferred fee plan for directors, which enables a director to annually elect to defer payment of his or her fees until he or she terminates service on the Board. For 2020, the maximum amount each director could defer was 100% of his or her annual director’s fee. Participating directors may elect to receive either a lump sum or equal monthly installments in an amount equal to his or her deferral account (plus interest) upon retirement, early termination, disability, change in control or a hardship. If a director dies before distribution of his or her deferral account commences, the director’s designated beneficiary is entitled to receive the amounts in his or her deferral account or the projected account balance at the time the Corporation adopted the deferred fee plan (limited by the amount of net coverage purchased by the Bank), whichever is greater. For 2020, current members of the Corporation’s Board participated in this plan as follows: Mr. Abel deferred $34,000; Messrs. Mowery and Noone each deferred $52,000; and Chairman Grubic deferred $72,000.

In May 1995, the Bank adopted the Mid Penn Bank Director Retirement Plan, which we refer to as the “Director Retirement Plan.” Under the Director Retirement Plan, Bank directors who terminate their service on the Board other than for cause with at least five years of service are eligible to receive a retirement benefit. The five-year service requirement is waived if a director’s service is terminated for disability or within 90 days of a change in control. The annual benefit is determined by multiplying the “base retirement amount” for the director’s position ($647.53 for the Chair, $323.77 for all other directors, which reflect the inflationary adjusted rates for 2020) by the number of full years the member served. The plan contains an annual inflationary adjustment provision. Benefits are paid in cash on a quarterly basis and continue for 60 quarterly payments or until the director’s death, if earlier.

As detailed in the “Director Compensation Table” below, in 2020, the current non-employee members of the Corporation’s Board were paid $767,161, in the aggregate, for their service as directors, which includes (i) all Board fees and fees paid to Ms. Brumbaugh for attendance at Mid Penn Bank Business Development Advisory Board Meetings, (ii) the value of restricted stock awards, and (iii) change in pension value and nonqualified deferred compensation earnings. Additionally, pursuant to the terms of the First Priority merger agreement, Mr. Sparks was paid $180,000 in 2020 for his services as a non-employee consultant.

The following table summarizes the total compensation that non-employee directors earned for service as directors or a non-employee consultant of the Corporation for the year ended December 31, 2020.

 

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DIRECTOR COMPENSATION TABLE

 

Name		Fees Earned or Paid in Cash ($)				Stock Awards ($) (1)				Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (2)				All Other Compensation ($) (3)				Total ($)
Robert A. Abel			52,000				9,325				4,026				—				65,351
Kimberly J. Brumbaugh			51,500	(4)			9,325				3,534				—				64,359
Matthew G. DeSoto			50,000				9,325				3,213				—				62,538
Robert C. Grubic			90,000				9,325				8,766				—				108,091
Gregory M. Kerwin			50,000				9,325				4,423				—				63,748
Donald F. Kiefer			50,000				9,325				4,229				—				63,554
Theodore W. Mowery			52,000				9,325				4,034				—				65,359
John E. Noone			52,000				9,325				3,993				—				65,318
Noble C. Quandel, Jr.			52,000				9,325				—				—				61,325
David E. Sparks			50,000				9,325				—				180,000				239,325
William A. Specht, III			75,000				9,325				3,868				—				88,193

 

(1)	Amounts reflect the 500 shares of restricted stock granted on July 24, 2020 based on the fair value of the common stock on the grant date ($18.65 per share).

(2)	Amounts reflect the present value of the amount accrued to the directors in 2020 for the Mid Penn Bank Director Retirement Plan.

(3)	Amount reflects the payment of $15,000 per month to Mr. Sparks in the form of non-employee consultant fees for 24 months beginning August 1, 2019 and ending July 1, 2021 per the terms of the First Priority merger agreement.

(4)	Includes $1,500 in fees paid to Ms. Brumbaugh for attending the Bank’s Southeast Region Business Development Advisory Board Meetings.

PROPOSAL NO. 2: NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION

In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (which was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”)) and the related rules of the SEC, we are including in these proxy materials a separate resolution subject to shareholder vote to approve, in a non-binding advisory vote, the compensation of our named executive officers.

As described in detail in this proxy statement, our executive compensation programs are designed to attract, motivate, reward and retain our named executive officers, who are critical to our success. We are asking our shareholders to indicate their support for our named executive officer compensation as described in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives our shareholders the opportunity to express their views on our named executive officer compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. Accordingly, we ask our shareholders to vote “FOR” the following resolution at the Annual Meeting of Shareholders:

“Resolved, that the shareholders hereby approve the executive compensation, as described in the Compensation Discussion and Analysis and the tabular disclosure (together with the accompanying narrative disclosure), regarding named executive officers in this proxy statement.”

Because your vote is advisory, it will not be binding upon the Board. However, the Compensation Committee will take into consideration the outcome of the vote when considering future executive compensation arrangements.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE EXECUTIVE COMPENSATION, AS DESCRIBED IN THE COMPENSATION DISCUSSION AND ANALYSIS AND THE TABULAR DISCLOSURE REGARDING NAMED EXECUTIVE OFFICERS (TOGETHER WITH THE ACCOMPANYING NARRATIVE DISCLOSURE) IN THIS PROXY STATEMENT.

 

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COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

Our Key 2020 Business Accomplishments

In the midst of a global pandemic that severely impacted each of the United States, including Mid Penn’s home state of Pennsylvania, the Corporation had a very successful year financially and operationally, while delivering on several key accomplishments:

Key 2020 Strategic Accomplishments

 

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We worked diligently to create a safe environment for both our customers and our employees in which to operate. These moves included closing retail lobbies to “by appointment only banking” while enabling 80% of our employees to work from home.

 

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We stabilized 60,000 paychecks throughout our footprint by originating over 4,100 Paycheck Protection Program (PPP) loans totaling $630 million between the months of April and August of 2020.

 

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We stabilized our portfolio of borrowers by providing much needed loan deferrals for companies that were shut down due to stay-at-home orders, in accordance with joint guidance issued by the federal banking agencies and accounting guidance issued by the Financial Accounting Standards Board.

 

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We continued to provide liquidity to borrowers throughout our footprint by originating over $1.2 billion in non-PPP commercial loans, residential mortgages, and consumer loans.

 

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We completed two subordinated debt issuances in 2020 totaling $27,150,000 which effectively added a net amount of $17,650,000 of fresh Tier 2 capital to the Corporation after retiring $9,500,000 of higher cost subordinated debt that was previously outstanding. We successfully completed these issuances without utilizing the services of an investment banker, thereby saving the Corporation approximately $600,000 in fees.

 

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We launched our first non-bank subsidiary, MPB Financial Services, LLC, which will focus on the delivery of specialized Trust and Wealth Management solutions, risk management and more, delivered in a private banking and family office environment.

Key 2020 Financial Accomplishments

 

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Reported record annual basic earnings per share of $3.11 for 2020, increased book value per share to $30.37 or 8%, and increased tangible book value per share (a non-GAAP measure) to $22.39 or 12% for the year ended December 31, 2020.

 

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Total assets grew to nearly $3 billion as of December 31, 2020. Organic loan growth for 2020 was $233 million, or an annual increase of 13%. Organic deposit growth for 2020 was $562 million, or an annual increase of 29%.

 

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As a result of our PPP efforts, we generated nearly $21 million in loan processing fees, of which $13 million was recognized as income for 2020, with the remainder anticipated to be recognized in future periods as the PPP loans are forgiven or otherwise repaid.

 

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For the year ended December 31, 2020, we increased noninterest income by $5.3 million or 42% compared to the prior year, primarily from significant expansion of our mortgage banking operation and revenues from secondary market mortgage sales, as well as favorable growth in our Trust and Wealth Management activities, and increased debit card and interchange income.

 

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Paid cash dividends during 2020 of $0.77 per common share.

 

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Compensation Program Authority and Objectives

The Board has delegated the task of administering Mid Penn’s compensation program to the Compensation Committee. The Committee’s primary responsibility is to assure that the compensation structure and components for executive officers of the Corporation and its subsidiaries are designed to (i) align with the interests of our shareholders and the strategic goals of the Corporation and its subsidiaries, (ii) attract and retain highly-qualified executives who are motivated to achieve high levels of performance, both short-term and long-term, (iii) be competitive with compensation programs of peer institutions, (iv) not encourage undue risk-taking which would negatively affect the safety and soundness of the Corporation and its subsidiaries, and (v) comply with the requirements of the appropriate regulatory bodies.

In making its compensation decisions for 2020, the Compensation Committee desired to recognize the efforts of the members of the executive management team who each continued to work through quarantine periods in guiding the Corporation to achieving the foregoing milestones.

This Compensation Discussion and Analysis describes the key elements of our compensation program for our named executive officers. For the year 2020, our named executive officers are:

 

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Rory G. Ritrievi, President and Chief Executive Officer of the Corporation and Bank

 

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Michael D. Peduzzi, Senior Executive Vice President and Chief Financial Officer of the Corporation and Bank

 

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Justin T. Webb, Senior Executive Vice President and Chief Operating Officer of the Bank

 

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Scott W. Micklewright, Senior Executive Vice President and Chief Revenue Officer of the Bank

 

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Joan E. Dickinson, Executive Vice President and Chief of Staff of the Bank

Compensation Program Design Overview

The main elements of compensation for 2020 for the named executive officers were base salary, short-term incentives and bonuses, restricted stock awards, and the roll-off of retention loans implemented in 2019. Such elements are consistent with the Corporation’s compensation objectives to align with the long-term growth and sustained earnings objectives of shareholders, and our ability to attract, retain, and motivate highly-qualified executives.

Management’s Input Involving the Compensation Program

The Compensation Committee considers the views and recommendations of the Chief Executive Officer in making compensation decisions affecting executive officers who report to him. The Chief Executive Officer’s role in recommending compensation levels and compensation program elements is to develop and recommend appropriate performance measures and targets for each individual, to report on the respective individual’s performance, to provide data and background material to enable the Compensation Committee to assess the labor market and to make specific recommendations on each named executive officer’s respective salary. The Chief Executive Officer does not recommend his own salary and is not present during the Compensation Committee’s or the Board’s discussions or decisions regarding his or his team’s specific compensation.

Supplementary to executive compensation peer data provided by the Corporation’s independent compensation consultant, members of the Corporation’s Finance and Human Resources management team periodically provide the Chief Executive Officer and the Compensation Committee with updated peer analyses, which compile compensation program data disclosed by other peer banks in their respective SEC filings, in order for the Compensation Committee to assess the competitive market for executive compensation, and the consistency of the Corporation’s elements and amount and trend of executive compensation with those of similarly-profiled peer banks.

 

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Compensation Consultant’s Role in Determining Compensation

In 2020, the Compensation Committee continued to utilize the services of Meridian Compensation Partners, LLC, an independent consulting firm that specializes in executive and board compensation. In connection with the 2020 engagement, Meridian provided relevant peer data analysis (utilizing 2019 proxy information, the most recent compensation data publicly available) and advice for consideration by the Committee in evaluating compensation for the named executive officers. The Board’s objective is to compensate our executive officers at or around the 50^th percentile of peers. The following peer group comprised of commercial banks with total assets ranging between $1.5 billion and $4 billion was used in Meridian’s analysis:

 

CNB Financial Corporation		Howard Bancorp, Inc.
Republic First Bancorp, Inc.		First Bank
Enterprise Bancorp, Inc.		MVB Financial Corp.
Arrow Financial Corporation		Codorus Valley Bancorp, Inc.
BCB Bancorp, Inc.		Bankwell Financial Group, Inc.
Cambridge Bancorp		The Community Financial Corporation
First Community Bankshares, Inc.		Chemung Financial Corporation
Southern National Bancorp of Virginia, Inc.		Premier Financial Bancorp, Inc.
American National Bankshares, Inc.		ACNB Corporation
Peoples Financial Services Corp.		Penns Woods Bancorp, Inc.
Summit Financial Group, Inc.		Citizens & Northern Corporation
Orrstown Financial Services, Inc.

Results of Shareholder Say on Pay Vote in Determining Compensation

Each year, the Corporation asks its shareholders to cast a non-binding advisory vote on the compensation of our named executive officers, known as a “say-on-pay” vote. At the 2020 Annual Meeting, the Corporation’s shareholders approved the compensation of our named executive officers by an overwhelming majority of 91% of votes cast. The Compensation Committee considers the shareholders’ voted level of approval of our executive compensation practices relative to both the current year, and say-on-pay voting trends over several years, as a key input when considering whether to significantly change the Corporation’s compensation policies and practices. The strong past-shareholder support of our compensation philosophy, combined with the strong retention of the executive management team, has led the Compensation Committee to conclude that a material change to such philosophy is not currently necessary, although the Committee continues to seek the advice of an independent compensation consultant, as well as data from management, to ensure that the Corporation’s pay practices are consistent with current market conditions and best practices.

CEO Pay Ratio Disclosure

In 2015, the Securities and Exchange Commission, as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, adopted a rule requiring certain public companies to disclose, for each fiscal year beginning on or after January 1, 2017, the ratio of the total compensation of the CEO to the median compensation of its other employees.

For the Corporation, the median employee was determined using a census of all full-time and part-time employees as of November 30, 2020, which totaled 468 personnel excluding the CEO. The annual total compensation for all employees on this census was calculated using the same pay elements shown for the CEO in the “Summary Compensation Table – 2020” on page 27. The primary elements of this 2020 total compensation calculation included base salary/wages, bonuses and incentive compensation, employer matching contributions to the Corporation’s 401(k) plan, restricted stock grants, auto allowances, employer-paid life insurance premiums and nonqualified deferred compensation. For full-time employees who were hired during 2020, the base salary/wages element was annualized to determine the respective individual’s total compensation.

As disclosed in the “Summary Compensation Table – 2020,” the total compensation of the CEO for 2020 was $1,125,984. The 2020 total compensation of the median employee was $46,992. The resulting ratio of the CEO’s total compensation to that of the median employee is 24.0 to 1.

 

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Components of Compensation

Base Salary

Base salary levels are set to attract and retain executives who can further the Corporation’s and Bank’s strategic objectives and who are motivated to achieve high levels of performance, both short-term and long-term. Base salary is the most significant component of the named executive officers’ compensation, and the Compensation Committee reviews it every year to determine whether the salary for each respective named executive officer is at an appropriate level when considering the relevant inputs. As mentioned above, the Chief Executive Officer reviews each named executive officer’s performance, other than his own, in making salary recommendations to the Compensation Committee. The Chief Executive Officer and the Compensation Committee consider each named executive officer’s general management performance; policy, procedure, and regulatory compliance; public relations; strategic objectives management; length of service with the Corporation and Bank; and the named executive officer’s position and areas of responsibility in making its determination of the appropriate level of base salary. The Compensation Committee reviews the Chief Executive Officer’s performance in making a salary recommendation to the Board.

Short-Term Incentives and Bonuses

The Corporation maintains an informal incentive compensation plan pursuant to which our named executive officers are eligible to receive bonuses or short-term incentive payments for the achievement of corporate performance goals and individual performance goals. Historically, in order to receive a payment under the plan, the named executive officer has to be employed prior to September 30^th of the previous year and on the date of payout, and both the corporate and individual performance goals, which include actions that can only be taken by the named executive officer for the respective performance period, must be achieved. The short-term incentives for performance in 2019 and for the first quarter of 2020 paid to named executive officers were awarded in the second quarter of 2020, and a key input considered by the Compensation Committee in determining whether to recommend an award and the amounts thereof was the actual earnings performance of the Corporation for the full year of 2019 and the first quarter of 2020 compared to the Board-approved targeted net income available to common shareholders for the respective periods. The Board’s targeted net income for 2019 was $20,015,000 and the Corporation’s actual net income for such period was $17,701,000, and the Board’s targeted net income for the first quarter of 2020 was $3,874,000 and the Corporation’s actual net income for such period was $3,818,000. The Compensation Committee believed that the Board-approved earnings targets were aggressive and difficult to achieve, particularly following the consummation of two material bank acquisitions in 2018.

As a result of this performance relative to the Board-approved targets, and taking into account the impacts of the integration of the two 2018 acquisitions on the 2019 results, and considering each named executive officer’s respective performance goals and achievements, the Compensation Committee awarded cash incentive payments of $87,500 to Mr. Ritrievi, $20,000 each to Messrs. Peduzzi, Webb, and Micklewright, and $10,000 to Ms. Dickinson. These cash incentive payouts ranged from 4.3% to 17.5% of such executive’s 2020 base salary amounts.

Additionally, upon the recommendation of the Compensation Committee, the Board awarded a discretionary, one-time cash bonus to each named executive officer for 2020 in order to recognize the extraordinary efforts put forth by those individuals in contributing to a record year of annual earnings, as the executives worked through statewide shutdowns and after hours, in order to position the Corporation to be a leader in the brand-new Paycheck Protection Program, while simultaneously focusing on the core banking operations and increasing organic growth and assisting affected borrowers through the implementation of a new loan deferral program, all of which contributed to the success of the Corporation in 2020.

Restricted Stock Plan

The Corporation continues to make restricted common stock awards to named executive officers, other members of management, and directors under the Mid Penn Bancorp, Inc. 2014 Restricted Stock Plan, which was initially approved by the Corporation’s shareholders in 2014 and subsequently amended in 2020 with shareholder approval. Restricted stock is common stock granted to an employee or director that does not vest until specific conditions are met. Typical conditions for employees receiving restricted stock grants include performance goals for the individual or the Corporation, and for the vesting thereof, the individual being required to remain employed with the Corporation or Bank for a specific number of years. Once the conditions are met, then the common stock vests and the employee obtains the shares without restrictions. The Board believes that restricted stock awards can serve as an important element in attracting and retaining

 

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employees and directors whom the Board expects to contribute to the Corporation’s growth and success both in the near-term, and over the longer-term vesting period and beyond, to realize benefits in the growth on the value of the Corporation’s stock in alignment with shareholder interests. By compensating employees and directors with shares of Corporation common stock, the employees and directors have additional incentive to ensure that the Corporation is successful. Based on the recommendations of the Compensation Committee, the Board determines to whom specifically it grants restricted stock, as well as the timing, vesting schedule, and number of shares subject to the award. The number of shares of common stock which may be issued under the Restricted Stock Plan, as amended, may not exceed 200,000 shares. The Compensation Committee may suspend or terminate the Restricted Stock Plan at any time and may amend the Restricted Stock Plan at any time provided that no such amendment may be made without shareholder approval if such approval is required by law, agreement or the rules of any exchange upon which the shares of common stock are listed. In addition, no such amendment, suspension or termination may impair the rights of participants still employed by the Corporation with respect to outstanding restricted shares previously awarded under the Restricted Stock Plan without their consent.

Two-Year Retention Bonuses

Beginning in 2019, following a year in which the Corporation consummated two acquisitions, the Compensation Committee awarded certain of the named executive officers with two cycles (2019 and 2020) of discretionary retention bonuses. While advanced in full on the grant date, these bonuses were structured such that they vest over a two-year period (one-half on each anniversary of the grant date), subject to the executive’s continued employment. In the event that the executive’s employment is terminated for cause or the executive resigns prior to the second anniversary of the grant date, the executive is required to repay any unvested portion plus interest on the unvested portion. Bonuses issued in 2020 will fully vest by 2022, and the amounts vested in 2020 are reflected in the Summary Compensation Table below. The Compensation Committee does not presently intend to issue any such awards in the future.

Benefit Plans Available for All Employees

Certain benefit plans, including group insurance plans as described below, are not tied to Bank or individual performance. The cost of providing such plans to all eligible employees, including named executive officers, is viewed as a cost of doing business and not taken into account when determining specific compensation of the named executive officers.

Group Insurance Plans

The named executive officers participate in group insurance benefit plans that are generally available to all employees. These plans include group life insurance, group disability, health insurance and dental and vision benefits. Such plans are standard in the industry and in the geographic area for all industries, as well as necessary to compete for talented employees at all levels of the Bank. Under the group life insurance plan, Mr. Ritrievi was unable to get the same percentage of coverage as other employees due to the maximum benefit provided for in the plan. In order to afford Mr. Ritrievi the same long-term disability coverage as other employees, an individual policy was purchased with the premium (and Mr. Ritrievi’s associated income tax liability) reimbursed by the Bank.

Retirement Plan

In an effort to encourage its employees, including the named executive officers, to save for retirement, the Bank has established a tax-qualified 401(k) retirement plan for employees. The Bank believes that it is important to assist employees in saving for retirement and believes that by providing a mechanism to save for retirement, and through Bank matching of certain employee contributions, the Bank is providing the named executive officers with a reasonable and industry-expected incentive to continue in the employ of the Bank.

Employee Stock Purchase Plan

The Corporation has a Board approved Employee Stock Purchase Plan (the “Plan”), which has been in place effective January 1, 2011, to provide eligible employees of the Corporation or the Bank, including the named executive officers, with an opportunity to purchase shares of common stock of the Corporation at fair market value through payroll deductions. The Plan provides participants with a convenient method to acquire an interest in the common stock of the Corporation and realize the benefits of their efforts toward the long-term performance and success of the Corporation in alignment with our shareholders’ interests.

 

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Company Vehicle

Each of the named executive officers is provided a company vehicle. Provision of a company vehicle is standard in the financial services industry as executive officers frequently meet clients and business associates at locations offsite of the Corporation’s offices. Each executive’s personal use of the company vehicle is tracked and calculated for inclusion in their taxable and total compensation.

Accounting and Tax Treatments

The Compensation Committee, in consultation with Finance management, considers the accounting and tax consequences of the compensation program and its elements, both for the Corporation and the individual, prior to making any changes to the compensation structure. Section 162(m) of the Internal Revenue Code limits the deduction of compensation paid to the named executive officers if certain thresholds are exceeded. Based upon the current base salary and compensation structure and existing agreements with the executives, the Corporation does not believe that Section 162(m) limitations were triggered in 2020 for our named executive officers, but this may be applicable in future years dependent upon factors including legislative changes to the limits, specific provisions and exclusions, or applicability of this tax code section.

Material Differences in Named Executive Officers’ Compensation

The differential between salary levels for each of the named executives is primarily driven by their respective positions, with consideration also given to the experience and time in their respective positions.

Employment, Change in Control, and Supplemental Executive Retirement Plan Agreements

Change in Control Agreements

The Corporation has entered into change in control severance agreements with each of its named executive officers, each of which has a “double-trigger” payment feature requiring both a change in control of the Corporation and the involuntary termination of the executive’s employment without cause or voluntary termination of employment by the executive for “good reason” in order for the benefit to be payable.

More specifically, in the event an executive’s employment is terminated on or within twelve months after a “change in control” during the term of the agreement either by the Corporation, other than for death or disability or for a reason other than “cause” (as defined in the agreement), or by the executive after the occurrence of certain specified events constituting “good reason” (described below), the Corporation will pay the executive a lump-sum cash payment. That payment is equal to 2.99 times the executive’s highest annual base salary in effect during the twelve months preceding the executive’s termination of employment with respect to Mr. Ritrievi, 2.5 times with respect to Messrs. Peduzzi, Micklewright, and Webb, and 2 times with respect to Ms. Dickinson. In addition, the executive and the executive’s beneficiaries will remain eligible to participate, on the same terms and conditions as apply from time to time to the Corporation’s executive management team, medical, vision and dental programs for two years (three years for Mr. Ritrievi), or a cash payment equal to the estimated after-tax cost to obtain such benefits, or substantially similar benefits, within thirty days following the executive’s termination. In the event that an executive other than Mr. Ritrievi becomes entitled to and receives benefits under the Agreement after a change in control, the executive will be subject to a six-month non-solicitation covenant. In the event that Mr. Ritrievi becomes entitled to and receives benefits under the Agreement after a change in control, he will be subject to a twelve-month non-solicitation covenant. In the event that the executive voluntarily terminates employment during the term of the Agreement prior to a change in control, the executive will be subject to non-compete and non-solicitation covenants for six months.

The specified events of “good reason” permitting an executive to terminate employment following a change in control and receive payments or benefits under the Agreement include: (i) a diminution in executive’s authority, title, duties or responsibilities following a change in control from the authority, title, duties or responsibilities existing as of a change in control; (ii) requirement that the executive perform a substantial portion of his or her duties at a location more than 50 miles from executive’s principal executive office on the date of the Agreement; or (iii) a diminution in executive’s base salary and other compensation and benefits existing as of a change in control.

 

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If, within ninety days after a termination of an executive’s employment that entitles such executive to payments under the Agreement, the Corporation’s Board becomes aware of facts that, if known during the executive’s employment, it reasonably believes would have justified termination of such executive’s employment for cause (as defined in the Agreement), the Corporation may refrain from paying any unpaid amounts due under the Agreement or require the executive to promptly, but in no event less than ninety days after notice to such executive of such determination by the Corporation’s Board, repay any amounts previously paid or the value of any benefits previously received under the Agreement.

The agreement with each executive provides that, in the event that the payments to be received by the executive, when taken together with payments and benefits payable to or on behalf of the executive under any other plans, contracts or arrangements, would constitute an excess parachute payment under Internal Revenue Code Section 280G, the executive may elect to reduce the payment actually received in order to reduce or eliminate the impact of the excise tax under Section 4999 of the Code. As amended in March 2021, these change in control agreements no longer provide gross up language that would provide for an additional payment to the employee to reduce the effect of the tax under Section 4999 of the Code.

Each agreement is for a term of three years and shall renew for an additional year on each anniversary of the respective named executive officer’s signing, absent notice of non-renewal from either party.

Employment Agreement with Mr. Ritrievi

On November 3, 2016, Mr. Ritrievi entered into an employment agreement with the Corporation and the Bank, which was in effect for the period of three years from November 3, 2016, and automatically renews for a total of the next three years on each anniversary of November 3^rd. The employment agreement provides that Mr. Ritrievi will serve as the Chief Executive Officer and President of the Corporation and the Bank, reporting to their respective Boards of Directors. During the term of the employment agreement, Mr. Ritrievi will serve on the Bank’s Board and will be re-nominated for election to the Corporation’s Board, with the Corporation’s Board recommending such election to its shareholders, for any annual meeting of shareholders at which the Class of directors in which Mr. Ritrievi is serving will be elected. Mr. Ritrievi’s service as Director of the Corporation, the Bank, and any affiliate or subsidiary will immediately terminate upon the termination of his employment for any reason.

Under his employment agreement, Mr. Ritrievi is entitled to, among other things: (i) an annual base salary of at least $360,488, with any subsequent Board-approved increases to this amount being deemed to constitute amendments to the employment agreement to reflect the increased annual base salary amount; (ii) participate in any of the Corporation’s short-term performance plans generally made available to executives of the Corporation or the Bank; (iii) such stock-based incentives as may be granted from time to time by the Corporation’s Board under the Corporation’s stock-based incentive plans, and as are consistent with Mr. Ritrievi’s responsibilities and performance; (iv) participate in a supplemental executive retirement plan under the terms and conditions as determined by the Bank’s Board; (v) participate in or receive the benefits of any employee benefit plan currently in effect at the Bank, subject to his specific eligibility for and the terms of each such plan; (vi) certain other perquisites related to paid annual vacation, personal and sick days, and use of a Corporation automobile in accordance with the automobile policy as established from time to time by the Corporation or the Bank. In the event that Mr. Ritrievi becomes entitled to receive benefits after a change in control of the Corporation, he will be subject to a twelve-month non-solicitation covenant. In the event that Mr. Ritrievi voluntarily terminates employment during the term of his employment agreement prior to a change in control, he will be subject to non-compete and non-solicitation covenants for twelve months.

The employment agreement and Mr. Ritrievi’s employment may be terminated for cause (as defined in the employment agreement) by written notice from the Corporation or the Bank. If the employment agreement is terminated for cause, Mr. Ritrievi’s rights under the employment agreement terminate as of the effective date of termination. The employment agreement also terminates without further payments to Mr. Ritrievi as of the termination date, in the event of his voluntary termination of employment or death. In the case of his disability (as defined in the employment agreement), Mr. Ritrievi will become eligible for employer-provided short-term and/or long-term disability benefits, or worker’s compensation benefits, in which case the Bank’s obligation to pay Mr. Ritrievi his annual base salary will be reduced by such benefits. Under certain other types of disabilities set forth in the employment agreement, the employment agreement will terminate six months following a determination related to such disability by the Corporation’s Board.

 

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In the event that Mr. Ritrievi’s employment is either involuntarily terminated other than for cause, death or disability, he will continue to receive his base salary in effect on the date of termination for a period equal to the greater of the remaining employment term or six months and participate in the Bank’s life, disability, medical/health insurance and other benefits substantially similar to those which Mr. Ritrievi was receiving during the year prior to the date of termination for the same period described above immediately following the date of termination, or a cash payment equal to the estimated after-tax cost to obtain such benefits, or substantially similar benefits. Additionally, if Mr. Ritrievi’s employment is involuntarily terminated other than for cause, death or disability, he may elect, with respect to the automobile made available to him, to, as applicable, purchase such vehicle, assume the lease, or return the vehicle to the Bank without any further liability.

Supplemental Executive Retirement Plan Agreements

In the third quarter of 2018, the Bank entered into supplemental executive retirement plan agreements (“SERPs”) with Messrs. Ritrievi, Peduzzi, Webb and Micklewright, which were last amended in March 2021. Ms. Dickinson entered into a SERP with the Bank during the fourth quarter of 2020, which was subsequently amended in March 2021. Each SERP provides for the monthly payment of a fixed cash benefit over a period of fifteen (15) years, commencing on the first day of the month following the executive’s separation from service: (i) occurring on or after reaching normal retirement age (age 70); (ii) due to disability; (iii) due to death; or (iv) within two (2) years following a change in control of the Bank. As amended, each executive’s SERP benefit partially vests each year until fully vested on January 1, 2026 for Messrs. Ritrievi, Peduzzi, Webb and Micklewright, and January 1, 2028 for Ms. Dickinson. Any unvested portion of the benefit fully vests upon a change in control of the Bank. The terms of the SERPs are identical for each executive, except for the amount of the annual benefit, which is as follows: Mr. Ritrievi - $125,000; Mr. Peduzzi - $90,000; Messrs. Micklewright and Webb - $80,000; and Ms. Dickinson - $60,000. The Board of Directors of the Corporation reserves the right to increase the amount of the benefit from time to time, in its discretion.

In the event that any payment owing under the SERP would constitute an excess parachute payment under Section 280G of the Internal Revenue Code, each SERP provides the executive with the same election right as that described under the heading “Change in Control Agreements” above. As amended in March 2021, these change in control agreements no longer provide gross up language that would provide for an additional payment to the employee to reduce the effect of the tax under Section 4999 of the Code.

The SERP also contains non-competition and non-solicitation covenants substantially similar to those contained in the employment agreement to which Mr. Ritrievi is currently a party and the change in control agreement to which each of the other executives is a party. A violation of such covenants, except in limited circumstances, would result in the forfeiture of any unpaid benefits to the executive.

Risk Analysis of Compensation Practices and Policies

The Compensation Committee reviewed the compensation policies and practices for all employees and determined that they do not create risks that are reasonably likely to have a material adverse effect on the Corporation or Bank.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management, and, based on the review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Corporation’s proxy statement.

Compensation Committee

 

Theodore W. Mowery, Chair		Noble C. Quandel, Jr.
Kimberly J. Brumbaugh		William A. Specht, III
Matthew G. DeSoto

 

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