Penko Ivanov
About Penko Ivanov
Penko K. Ivanov is Arrow Financial Corporation’s Chief Financial Officer, Senior Executive Vice President, Treasurer and Chief Accounting Officer. He was appointed CFO effective February 21, 2023 and elevated to Senior Executive Vice President on July 18, 2023 . Under his tenure, Arrow reported 2024 net income of $29.7 million with diluted EPS of $1.77, ROE of 7.72% and ROA of 0.70% . Shareholders supported the company’s compensation program with 89% Say‑on‑Pay approval in 2024 .
Fixed Compensation
| Year | Base Salary ($) | Target Bonus % | Target Bonus ($) | Actual STIP Paid ($) | Sign‑On/Other Cash ($) |
|---|---|---|---|---|---|
| 2023 | 390,000 | 40% | 156,000 | 97,500 (paid Feb’24) | 40,000 sign‑on bonus |
| 2024 | 410,000 | 40% | 164,000 | 151,700 (paid Feb’25) | — |
| 2025 | 422,300 | 40% | 168,920 | — | — |
• Perquisites (2024): personal use of company vehicle and country club membership ($21,469), plus ESOP contribution ($17,977), insurance ($2,159), ESPP discount ($940), and dividends on unvested RS ($942); total “All Other Compensation” $43,487 .
Performance Compensation
Annual Incentive Plan (STIP) – 2024 Framework and Outcomes
| Performance Metric | Weight (of financial goals) | Target | Actual | Outcome |
|---|---|---|---|---|
| Diluted EPS | 80% | $2.35 | $2.05 | Between Threshold & Target |
| Tangible Book Value Growth | 5% | 6.50% | 6.52% | Between Target & Maximum |
| ROA | 5% | 0.95% | 0.81% | Between Threshold & Target |
| Non‑Performing Loans | 5% | 0.50% | 0.62% | Between Threshold & Target |
| Net Charge‑Offs | 5% | 0.15% | 0.06% | Maximum |
STIP target and payout for Ivanov in 2024:
- Base $410,000; target 40% ($164,000); maximum 150% of target ($234,000) .
- Actual award: $151,700 (92.5% of target) .
STIP (2023) design and payout reference:
- Corporate/individual mix typically 75%/25% for NEOs; CEO 100% corporate .
- Ivanov actual 2023 award: $97,500 (prorated for service) .
Long‑Term Incentives (LTIP)
| Grant | Instrument | Shares Granted | Grant‑Date Fair Value ($) | Vesting |
|---|---|---|---|---|
| May 2024 | Restricted Stock | 1,713 | 43,305 | 25% per year over 4 years |
| Jan 2025 | Restricted Stock | 3,708 | 102,526 | 25% per year over 4 years |
Outstanding at 12/31/2024:
- Restricted stock not vested: 1,713 shares (market value $49,180 at 12/31/2024) .
- No stock options outstanding for Ivanov .
Equity Ownership & Alignment
| Date (Record) | Shares Owned | Restricted Shares Vesting ≤60 Days | Options Exercisable ≤60 Days | Total Beneficial Ownership | % of Shares Outstanding |
|---|---|---|---|---|---|
| Apr 8, 2024 | 104 | — | — | 104 | <1% (*) |
| Apr 7, 2025 | 724 | 428 | — | 1,152 | <1% (*) |
Ownership policy and compliance timeline:
- NEO stock ownership guideline: 1x base salary (CEO 3x); measured annually; 5 years to comply. Ivanov has until February 21, 2028 to attain compliance .
- Hedging prohibited; pledging requires Board approval .
- Clawback policy in place and broadened under SEC/Nasdaq rules and reaffirmed in 2025 program highlights .
Insider selling/pressure indicators:
- 428 restricted shares scheduled to vest within 60 days of April 7, 2025 record date (potential near‑term supply) .
- Insider trading policy includes blackout restrictions and 10b5‑1 plans framework .
Employment Terms
| Item | Detail |
|---|---|
| Current agreement | Two‑year employment agreement effective Feb 1, 2025; base salary $422,300; target bonus 40% of salary . |
| Prior agreement | Two‑year employment agreement effective Feb 1, 2024; base salary $410,000; target bonus 40% . |
| Termination (without cause / good reason) | Lump sum = greater of remaining term’s base salary or one year’s base salary . |
| Change‑of‑Control (double trigger) | If terminated without cause or resigns for good reason within 12 months post‑CoC: aggregate present value of 2x (base salary + target bonus) paid over two years; equity vests immediately upon CoC . |
| Non‑compete / Non‑solicit | Two years post‑termination; applies to any NY county where Arrow conducts/establishes business; also confidentiality and non‑disparagement . |
| Clawback | Policy compliant with SEC/Nasdaq; discretionary recoupment for misconduct and other triggers . |
Estimated potential payouts (as of 12/31/2024):
- Involuntary without cause/good reason (non‑CoC): $444,167 cash; total $444,167 .
- Post‑CoC termination: Cash $1,123,400; RS acceleration $49,180; benefits $585; total $1,173,165 .
Retirement, Deferred Compensation, and Perquisites
- Pension/SERP participation: By 12/31/2024, Ivanov participates in the “make‑up” SERP feature; retirement plan present value $11,329 (years credited: 1.00) .
- Nonqualified deferred compensation: No deferrals elected by NEOs for 2024 (or prior two years) .
- 2024 perquisites >$10,000: company vehicle and country club membership; amount detail shown above in Fixed Compensation .
Compensation Structure Analysis
- Mix evolution: For 2024, Ivanov’s compensation comprised salary ($410,000), STIP ($151,700), restricted stock grant ($43,305), and other compensation ($43,487) . In 2025, equity emphasis increased with a larger RS grant (3,708 shares; $102,526) alongside a 3% salary increase to $422,300 .
- Program guardrails: No tax gross‑ups; no option repricing; ownership requirements; hedging/pledging controls; double‑trigger CoC .
Say‑on‑Pay, Peer Benchmarking, and Governance
- Say‑on‑Pay approval: 89% support in 2024; 2025 Say‑on‑Pay again recommended and approved on an advisory basis .
- Peer benchmarking: Compensation committee leverages Pearl Meyer and a Northeast bank peer set for market context; total executive pay positioned in line with peers .
Risk Indicators & Red Flags
- Litigation: CFO named among individual defendants in a 2023 securities class action; settlement approved February 13, 2025 with no material financial impact (recognized in 2023 and Q1’24) . A related shareholder derivative action reached settlement in principle for governance enhancements; not expected to be material .
- Controls history: Previously reported material weaknesses related to internal control over financial reporting around a 2022 core system conversion; audit firm transition from KPMG to Crowe in 2024; remediation described in filings .
- Alignment mitigants: Hedging prohibited; pledging restricted; clawback policy adopted/updated; ownership guidelines in place .
Investment Implications
- Pay‑for‑performance alignment: 2024 STIP paid at 92.5% of target on balanced financial metrics, indicating payouts are sensitive to operating performance and not purely formulaic .
- Equity alignment and dilution: Ivanov’s equity is entirely time‑vested RS (no PSUs), vesting over four years; while this supports retention and long‑term focus, the absence of explicit performance‑vesting may modestly dilute direct pay‑performance sensitivity .
- Ownership/retention: Beneficial ownership remains small (<1%), but policy‑driven accumulation is required by 2028; near‑term vesting (428 shares within 60 days of record) suggests modest incremental float but within typical banking peer norms .
- Downside protection and change‑in‑control economics: Double‑trigger CoC benefits (2x base+target) and immediate equity vesting provide standard market protection; severance outside CoC capped at one year or remaining term, which is shareholder‑friendly relative to higher‑multiple plans .
- Governance and risk: Strengthened clawback, hedging/pledging restrictions, and prior control remediation efforts reduce governance risk; resolved/settling litigation lowers headline risk, though continued monitoring is warranted .