Dimitar Karaivanov
COMMUNITY FINANCIAL SYSTEMAbout Dimitar Karaivanov
Dimitar A. Karaivanov is President and CEO of Community Financial System, Inc. (CBU) and Community Bank, N.A. effective January 1, 2024; he joined CBU in June 2021, served as EVP of Financial Services and Corporate Development, then EVP/COO in October 2022; he was appointed to the Board on January 1, 2024 and serves on the Risk Committee (Age: 42; MBA, Ohio State; ABA Stonier Graduate School of Banking) . For CBU’s 2022–2024 performance shares, three‑year TSR was −8.7% (−3.0% p.a.) with TSR at the 15th percentile and three‑year average Core ROATCE of 25.5% at the 100th percentile vs KRX, yielding a 100% payout, illustrating mixed market returns but strong profitability metrics . The Board has an engaged independent non‑executive Chair, 11/12 nominees are independent, and independent committees meet in executive sessions—mitigating dual‑role risks from CEO/Director service; Mr. Karaivanov is not independent as CEO .
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| Community Financial System, Inc. / Community Bank, N.A. | President & CEO; Director (Risk Committee) | 2024–present | CEO added to Board to provide insight on challenges/opportunities; Board Risk Committee member . |
| Community Financial System, Inc. | EVP & Chief Operating Officer | Oct 2022–Dec 2023 | Added banking business to responsibilities, expanding oversight to all operations . |
| Community Financial System, Inc. | EVP Financial Services & Corporate Development | Jun 2021–Oct 2022 | Responsible for employee benefits, insurance, and wealth businesses (3 of 4 business lines) . |
External Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| Lazard (Financial Institutions Group) | Managing Director | Jun 2018–Jun 2021 | Investment banking for banks/fintech; M&A and finance expertise brought to CBU . |
Fixed Compensation
| Year | Base Salary ($) | Target Bonus (% of base) | Actual Cash Bonus ($) | Notes |
|---|---|---|---|---|
| 2023 | 542,325 | 55% | 192,011 | As COO; 2023 MIP paid at 62.5% of target company-wide . |
| 2024 | 900,000 | 75% | 776,250 | CEO; 2024 scorecard achieved 122.5% of target, adjusted to 115%; CEO payout 86.25% of applicable salary . |
| 2025 | 900,000 | 75% | n/a | Salary remained unchanged per employment agreement; 2025 MIP structure maintained . |
Performance Compensation
2024 Management Incentive Plan (MIP) Scorecard
| Metric | Weighting | 2024 Attainment/Payout Notes |
|---|---|---|
| Pre-provision net revenue from banking operations | 25% | Part of corporate goals framework introduced for 2024 . |
| Operating earnings from financial subsidiaries | 15% | . |
| Operating core ROA relative to KRX | 10% | . |
| Capital, net charge-offs, and liquidity thresholds | 30% | . |
| Strategic priorities (leadership development, data plans, branch expansion) | 20% | . |
| Total weighted attainment (company) | — | 122.5%; awards approved at 100–115% of target at CEO request . |
| CEO payout mechanics | — | Adjusted Weighted Attainment 115% × 75% target = 86.25% of applicable base; paid $776,250 . |
2024 Long-Term Incentive (granted March 19, 2024)
| Instrument | Grant Date | Shares/Units | Key Terms | Grant-Date Value ($) |
|---|---|---|---|---|
| Stock Options | 3/19/2024 | 19,114 | Exercise $44.27; vest 20% annually on 3/19/2025–2029 . | 235,484 . |
| Time-Vested RSUs | 3/19/2024 | 5,332 | Time-based vesting (per plan); net share retention 75% until guideline met . | 236,048 . |
| Performance-Based RSUs (2024–2026) | 3/19/2024 | Target 10,666 (Thresh 5,546; Max 21,332) | Metrics: 50% 3‑yr rel TSR vs KRX; 50% 3‑yr avg Core ROATCE vs KRX . | 454,798 . |
Performance Share Outcomes (prior cycle granted 2022; performance period 2022–2024)
| Grant (Target) | Shares Granted at Target (#) | Shares Earned (#) | Outcome Drivers | Value Earned ($) |
|---|---|---|---|---|
| 2022 PSU (3/15/2022) | 3,069 | 3,391.9843 | 3‑yr TSR −8.7% (15th percentile); 3‑yr avg Core ROATCE 25.5% (100th percentile); payout 100% of target . | 201,866 (3/6/2025 close $59.83) . |
Equity Ownership & Alignment
- Beneficial ownership (3/24/2025): 44,427 shares; includes options exercisable within 60 days of 3/24/2025 of 17,975 shares; percent of class: “*” less than 0.25% (shares outstanding 52,836,642) .
- Stock ownership guidelines: CEO required to hold ≥4x base salary in shares/equivalents within 6 years; must retain 75% of net shares from equity until compliant; as of 3/24/2025 all senior executives are in compliance or exceed guidelines .
- Hedging/pledging restrictions: Short sales, hedging, and derivatives prohibited; pledging/margin only with prior written consent; “prohibit hedging and pledging” highlighted in governance snapshot .
Outstanding Equity Awards at FY-End 2024 (12/31/2024)
| Category | Detail | Amount |
|---|---|---|
| Unvested time-based stock (RSUs) | Shares unvested | 8,487 |
| Market value | $523,478 | |
| Unearned performance stock (PSUs) | Target/unearned shares | 36,864 |
| Market/payout value | $2,273,772 |
Option Grants by Tranche (as of 12/31/2024)
| Exercisable (#) | Unexercisable (#) | Exercise Price | Expiration |
|---|---|---|---|
| 7,028 | 4,686 | $80.01 | 6/09/2031 |
| 2,466 | 3,700 | $71.78 | 3/15/2032 |
| 1,712 | 6,851 | $54.06 | 3/14/2033 |
| 0 | 19,114 | $44.27 | 3/19/2034 |
Employment Terms
- Employment Agreement: Executed July 5, 2023; term January 1, 2024–December 31, 2026 .
- Severance (no cause/good reason): Greater of (i) 200% of current base salary + most recent MIP payment, or (ii) base salary + expected MIP through end of term; accelerated vesting: all options vest; RSU restrictions waived; PSUs prorated at actual performance or target if unmeasurable; non‑compete 1 year (waived if no‑cause/good reason termination); non‑solicit 2 years .
- Death/Disability: Immediate vesting treatment as above; death: 90 days continued base salary; disability: 26 weeks base salary reduced by other income replacement .
- Change-in-Control (double trigger within 2 years): Greater of (i) 300% of current base + prior 12‑month MIP, or (ii) base + target MIP through end of term; cash equivalent of fringe benefits for 36 months; full option vest; RSU restrictions waived; PSUs prorated at actual or target if unmeasurable; no single‑trigger; no tax gross‑ups on CIC .
Potential Payments if Terminated on 12/31/2024 (illustrative)
| Scenario | Cash/Severance ($) | Benefits ($) | Equity Acceleration ($) | Total ($) |
|---|---|---|---|---|
| Death | 223,359 | 0 | 1,539,185 | 1,762,544 |
| Disability | 446,717 | 0 | 1,539,185 | 1,985,902 |
| Retirement (in good standing) | 0 | 0 | 1,539,185 | 1,539,185 |
| Involuntary termination without cause | 3,973,500 | 0 | 1,539,185 | 5,512,685 |
| Involuntary/good reason after CIC | 3,256,335 | 69,199 | 3,263,275 | 6,588,809 |
- Clawbacks: Two policies—(i) SEC/NYSE‑compliant recoupment of erroneously awarded incentive‑based compensation from Section 16 officers; (ii) discretionary policy for annual cash and all equity upon restatement or misconduct; prohibited option repricing without shareholder approval .
Board Governance
- Director since 2024; Committee: Risk .
- Independence: Not independent as CEO; Board has independent non‑executive Chair; Audit, Governance, and Compensation Committees entirely independent; executive sessions held regularly .
- Stock ownership guidelines for directors (≥5× annual cash retainer within 6 years; 75% net share retention until compliant) .
- Say‑on‑Pay (2025 AGM): Votes For 39,208,889; Against 1,232,650; Abstain 134,633; broker non‑votes 5,176,446; advisory executive compensation program approved .
Compensation Committee Analysis and Peer Benchmarking
- Independent consultant: Meridian provides peer benchmarking; committee supplements with broader financial services surveys .
- 2024 peer group retained; 2024–2025 updated peer group spans 17 banks (e.g., F.N.B., Old National, WSFS, Trustmark, Pinnacle, NBT, TowneBank) reflecting size/geography and non‑interest income mix; CBU positioned at 35th percentile total assets, 59th percentile operating revenue, 71st percentile market cap vs updated peer group .
- 2025 target equity grant set at 115% of base salary for CEO (up from 105%) to further align toward variable, performance‑based pay .
Performance & Track Record
- 2022–2024 long‑term performance results: three‑year TSR −8.7% (15th percentile) and three‑year average Core ROATCE 25.5% (100th percentile) vs KRX; 2022 PSUs vested at 100% of target .
- 2024 strategic execution under CEO included scorecard emphasis on PPNR, subsidiary earnings, KRX‑relative ROA, capital/credit/liquidity thresholds, and strategic priorities including leadership development, data plans, and de novo branch expansion initiatives for 2024–2025 .
- Management bench dynamics: CFO announced retirement targeted around July 1, 2025; Chief Banking Officer announced retirement effective December 31, 2025—key transitions to manage under CEO’s tenure .
Equity Ownership & Insider Selling Pressure Considerations
- Significant unvested/unearned equity (8,487 RSUs; 36,864 PSUs) and multi‑year option vesting through 2029 create staggered monetization windows; company policy requires 75% net share retention until ownership guidelines are met, reducing near‑term selling pressure .
- Hedging and short sales prohibited; pledging permitted only with prior written consent—further limiting hedging‑related overhang risks .
Employment Terms Summary (Severance/CIC Mechanics)
- No single‑trigger CIC; double‑trigger with 3× cash multiple and 36 months benefits; broad-based equity acceleration consistent with market norms; 1‑year non‑compete (except no‑cause/good reason) and 2‑year non‑solicit support retention and transition planning .
Investment Implications
- Pay‑for‑performance alignment: High variable pay mix (equity + MIP), robust clawbacks, no gross‑ups, no option repricing, and double‑trigger CIC are shareholder‑friendly; 2025 increase in equity target to 115% of salary further tilts toward performance‑based incentives .
- Retention risk: Contract runs through 2026 with meaningful severance/CIC protection and restrictive covenants; executive ownership guidelines and staged vesting support retention, though simultaneous CFO (mid‑2025) and CBO (year‑end 2025) retirements elevate execution risk and leadership succession sensitivity in 2025–2026 .
- Trading signals/overhang: Multi‑year option vesting (2025–2029) and sizable unearned PSUs imply ongoing event windows; retention rules (75% net share hold) and anti‑hedging/pledging policies mitigate sell‑pressure; 2025 say‑on‑pay support indicates limited governance‑driven activism risk near‑term .
- Performance lens: While three‑year TSR lagged peers, superior Core ROATCE drove full PSU vesting—underscoring profitability strength even amid market headwinds; continued focus on PPNR, credit/capital/liquidity thresholds, and growth initiatives (de novo expansion) will be key drivers of incentive outcomes and stock performance under Karaivanov’s tenure .