Kelly J. Potes
About Kelly J. Potes
- Age 63; Chief Executive Officer of ChoiceOne Financial Services since June 1, 2016; CEO of ChoiceOne Bank since October 1, 2019; director since June 1, 2015 .
- 2024 performance: Net income rose to $26.7M (from $21.3M in 2023) and diluted EPS to $3.25 (from $2.82), with 3-year TSR rising from $102.02 to $135.60 on a $100 base (2022→2024) .
- Board structure mitigates dual-role risk: independent Chair and 13 of 15 directors deemed independent; Potes serves as a director and sits on the Board Risk Committee (non-independent officer-director) .
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| ChoiceOne Financial Services, Inc. | Chief Executive Officer | 2016–present | Oversaw growth, integrations, and capital actions including 2024 equity raise and 2025 Fentura merger close . |
| ChoiceOne Financial Services, Inc. | President & CEO | 2015–2019 | Led holding company pre/post County Bank Corp. merger . |
| ChoiceOne Bank | CEO | 2019–present | Post-merger bank leadership; asset-liability positioning and credit discipline . |
| ChoiceOne Bank | SVP, Retail Services | 1984–1998 | Retail growth, distribution and product development . |
| ChoiceOne Bank | SVP | 2011–2015 | Bank operations leadership preceding CEO transition . |
| ChoiceOne Insurance Agencies, Inc. | President | 2016–present | Non-interest revenue and cross-sell initiatives . |
| ChoiceOne Insurance Agencies, Inc. | SVP & General Manager | 2001–2016 | Built insurance platform scale . |
| Kent-Ottawa Financial Advisors, Inc. | President | 1998–2001 | Advisory services leadership . |
External Roles
| Organization | Role | Years | Notes |
|---|---|---|---|
| Community Bankers of Michigan | Chairman | n/a | State banking advocacy and best practices leadership . |
| ChoiceOne Insurance Agencies, Inc. | Director | n/a | Subsidiary governance . |
| Sparta Downtown Development Authority | Director | n/a | Community development . |
| Urban Transformation Ministries | Director | n/a | Non-profit governance . |
| Bankers Retirement Services | Board member | n/a | Industry retirement services . |
| Kent City Baptist Church | Deacon Board | n/a | Community engagement . |
Fixed Compensation
| Metric | 2023 | 2024 | Notes |
|---|---|---|---|
| Base salary ($) | 468,000 | 488,000 | 2024 salaries increased ~4% merit adjustment . |
| Target annual cash incentive (% of salary) | 45% | 45% | Applies to CEO. |
| Actual non-equity incentive paid ($) | 125,424 | 202,032 | Reflects plan model payouts. |
| All other comp ($) | 34,761 | 41,223 | Car allowance, benefits, 401(k) match . |
| Total compensation ($) | 722,253 | 888,391 |
Performance Compensation
- Annual incentive plan design: Based on defined model using expected asset growth and return on average assets (ROAA), adjusted by asset quality modifier; total payout capped at 200% of target .
- 2024 incentive delivery mix for CEO: 45% cash; 35% stock awards (balance to reach 100% plan payout via structure) .
| Equity awards | Grant features | Vesting | 2023 grant | 2024 grant |
|---|---|---|---|---|
| Time-based RSUs | Service-based retention | Cliff vest after 3 years | Included | Included . |
| Performance-based RSUs (PSUs) | Five-year cumulative EPS growth | Vest at 5 years; payout curve | Target level; vest at 5 years | Target level; vest at 5 years . |
Performance PSU payout schedule (2024 plan):
| EPS 5-year growth rate | Payout |
|---|---|
| 7% | 125% |
| 5% (Target) | 100% |
| 3% | 67% |
| 2% | 50% |
| 1% | 33% |
| 0% (Threshold) | 25% |
Stock award values to CEO:
| Year | Stock awards ($) |
|---|---|
| 2023 | 94,068 |
| 2024 | 157,136 |
Outstanding equity and vesting (CEO, as of 12/31/2024):
| Award type | Units | Value ($) | Vesting detail |
|---|---|---|---|
| RSUs (2/15/2022) | 1,973 | 70,318 | Vest 4/30/2025 . |
| RSUs (4/30/2023) | 1,572 | 56,026 | Vest 4/30/2026 . |
| RSUs (4/30/2024) | 1,606 | 57,235 | Vest 4/30/2027 . |
| PSUs (2/15/2022) | 1,972 | 70,282 | Vest at 5 years based on EPS growth (up to 125%) . |
| PSUs (4/30/2023) | 1,573 | 56,062 | Vest at 5 years based on EPS growth . |
| PSUs (4/30/2024) | 1,605 | 57,202 | Vest at 5 years based on EPS growth . |
Implications: multi-year cliff vesting (3–5 years) and EPS-growth PSUs concentrate value beyond one year, supporting retention and medium-term EPS focus .
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Beneficial ownership (CEO) | 42,704 shares (6,890 sole; 35,814 shared); <1% of class . |
| Shares outstanding reference dates | 14,975,034 as of 3/31/2025 (post-merger count used in proxy) . |
| Options | None disclosed for CEO . |
| Hedging/short sales | Prohibited for directors/executives . |
| Pledging | Prohibited except limited FDIC-insured bank loan exception; CEO had no pledges disclosed; one non-employee director disclosed pledged shares under permitted exception . |
| Director ownership guideline | 5,000 shares minimum for non-employee directors; all in compliance as of proxy date . |
Potential vesting supply and tax withholding windows (monitoring note):
- RSU cliffs for CEO in 2025, 2026, 2027; PSUs in 2027–2029 (subject to EPS outcomes) . These dates can create administrative share settlements/withholdings around vesting.
Employment Terms
| Provision | CEO (Potes) |
|---|---|
| Employment agreement date | Effective October 1, 2019 . |
| Termination without cause / good reason | Salary continuation for 2 years + 12 months of healthcare continuation payments (or until new employment) . |
| Change in control (CIC) | Double-trigger: if qualifying termination within 6 months before or 3 years after CIC, lump sum = 3x current base salary + 12 months healthcare continuation; 280G cutback to ≤2.99x base amount (no gross-up) . |
| Equity on CIC | All unvested equity awards and stock options become immediately fully vested upon CIC per plan . |
| Restrictive covenants | 24-month non-compete and non-solicit; confidentiality obligations . |
| Clawback | SEC Rule 10D-1-compliant recoupment policy (restatement-based recovery of erroneously awarded incentive comp) . |
| Anti-hedging/pledging | Hedging/shorts/margin accounts banned; limited pledging exception with FDIC-insured lender . |
Potential payments (illustrative, assuming 12/31/2024 levels):
| Trigger | CEO payout |
|---|---|
| CIC (incl. accelerated equity and cutback if applicable) | $1,607,550 . |
| Death | $575,146 (includes insurance-related amounts/equity treatment per plan) . |
| Disability/Retirement | $107,146 . |
Board Governance
- Independence/leadership: 13 of 15 directors independent; independent Chair; mandatory retirement at 70 .
- Committee service (CEO): Member, Risk Committee (chair: Michelle M. Wendling) .
- Attendance: All directors ≥75% attendance in 2024; all attended 2024 annual meeting .
- Director compensation: CEO receives no director fees or equity for board service (management directors excluded) .
Board service history for Potes:
- Director of ChoiceOne and ChoiceOne Bank since June 1, 2015; standing for re-election for term expiring 2028; not Chair (Chair transitions per 2025 8-K due to mandatory retirement) .
Dual-role implications:
- As CEO-director, Potes is non-independent; however, independent Chair and fully independent compensation committee oversee CEO evaluation and pay setting, reducing entrenchment risk .
Director Compensation (for completeness)
- Non-employee director standard: $39,000 cash retainer + $20,000 equity; additional chair/committee chair retainers as specified; CEO receives none .
Performance & Track Record
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Net income ($000) | 23,640 | 21,261 | 26,727 |
| Diluted EPS ($) | 3.15 | 2.82 | 3.25 |
| $100 TSR value (end of year) | 102.02 | 107.40 | 135.60 |
| Compensation actually paid to PEO ($) | 678,579 | 715,362 | 872,366 |
Management commentary highlights (2024 results press release):
- Net interest income expanded with core loan growth (+$114.5M YoY), proactive balance sheet management, and swap settlements; asset quality remained strong (NPLs 0.27% of loans) .
- Capital actions: July 2024 common stock offering (1.38M shares) bolstered equity ahead of merger with Fentura (closed March 1, 2025) .
Compensation Structure Analysis
- Pay-for-performance: Annual cash and equity awards tied to asset growth, ROAA, and EPS growth (for PSUs), with an asset quality modifier and PSU upside/downside features (25%–125%) .
- Mix shift/retention: 3-year RSU cliffs plus 5-year PSU cliffs extend duration and retention; January 2024 modification extended outstanding 2022–2023 PSU performance/vesting from 3 to 5 years (longer horizon) .
- Risk controls: SEC-compliant clawback, anti-hedging/pledging policy, independent comp committee; no excise tax gross-up; CIC equity vests on change (plan) but cash requires double trigger .
Related Party / Red Flags
- Ordinary-course lending to insiders on market terms; no defaults outstanding as of proxy date .
- Pledging: One non-employee director disclosed pledged shares under permitted policy; none disclosed for CEO .
- Equity award modification: Extension of PSU performance/vesting period in Jan 2024 (governance awareness point) .
Equity Ownership & Vesting Schedules (detail)
| Category | CEO detail |
|---|---|
| Beneficial ownership | 42,704 shares (<1%); mix of sole/shared voting power . |
| Unvested RSUs (units/vest dates) | 1,973 (4/30/2025); 1,572 (4/30/2026); 1,606 (4/30/2027) . |
| Unvested PSUs (units/vest windows) | 1,972 (2027); 1,573 (2028); 1,605 (2029), subject to EPS growth targets . |
| Options | None . |
Employment Terms (detail)
| Item | CEO |
|---|---|
| Non-compete / Non-solicit | 24 months post-employment . |
| Severance (no cause/good reason) | 24 months salary + up to 12 months healthcare continuation . |
| CIC cash severance | 3x base salary (double-trigger) + up to 12 months healthcare; 280G cutback to ≤2.99x base amount . |
| Equity on CIC | Full acceleration of unvested equity . |
Investment Implications
- Alignment/retention: Multi-year RSU/PSU cliffs and EPS-growth PSU design align incentives to multi-year earnings compounding; anti-hedging and clawback policies strengthen alignment and risk hygiene .
- Potential selling pressure windows: RSU cliffs in April 2025/2026/2027 and PSU cliffs 2027–2029 could create periodic settlement-related flow; monitor Form 4s around these dates .
- Change-in-control economics: Double-trigger 3x salary cash plus equity acceleration can increase retention through integration cycles but presents moderate shareholder cost in M&A scenarios .
- Governance quality: Independent Chair, majority-independent board, and fully independent compensation committee offset CEO-director dual-role concerns; CEO service on Risk Committee keeps management close to risk oversight, but independent chairing and committee composition help maintain checks and balances .
- Performance trend: 2024 profitability and TSR inflected positively under Potes, supported by core loan growth and disciplined credit; monitor sustainability of NIM tailwinds as swap cash flows taper and rate cycle evolves .