Mark A. Hughes
About Mark A. Hughes
Mark A. Hughes is Executive Vice President and Chief Financial Officer of Citizens & Northern Bank and Treasurer of Citizens & Northern Corporation; he has served as CFO since August 2000 and Treasurer since November 2000, and was Interim President & CEO from August 12, 2014 to March 1, 2015. He holds a B.A. in Accounting from Lycoming College and is 64 years old as of April 24, 2025 . Company performance context for incentive alignment: in 2024, CZNC reported net income of $25,958,000 (ROAA 1.00%, ROAE 9.76%), and company-selected performance measure (PPNR-NCOs)/Average Equity for calendar 2024 was 12.34% . CZNC’s five-year TSR value (from a $100 base on 12/31/2019) was $85.52 as of 12/31/2024 .
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| Citizens & Northern Corporation/Bank | EVP & CFO (Bank); Treasurer (Corp.) | CFO since Aug 2000; Treasurer since Nov 2000 | Long-tenured finance leadership through multiple cycles and M&A integrations |
| Citizens & Northern Corporation/Bank | Interim President & CEO | Aug 12, 2014 – Mar 1, 2015 | Maintained leadership continuity during CEO transition |
Fixed Compensation
- 2024 base salary: $345,800; discretionary “holiday award” bonus: $500 .
- 2024 base salary increases for NEOs were 3%–5% vs. 2023; individual increase percentages not itemized by executive .
Multi-year compensation (reported):
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Salary ($) | 315,000 | 332,500 | 345,800 |
| Discretionary Bonus ($) | 500 | 500 | 500 |
| Stock Awards ($) | 89,997 | 51,930 | 66,467 |
| Non-Equity Incentive Plan ($) | 33,000 | 77,436 | 113,379 |
| All Other Compensation ($) | 78,804 | 92,850 | 88,800 |
| Total ($) | 517,301 | 555,216 | 614,946 |
Key fixed/benefit elements in 2024 (select components of “All Other”):
- Employer 401(k): $16,500; ESOP: $6,900; SERP contribution: $56,868; group term life/LTD premiums: $3,980; dividends on restricted stock: $3,952; perquisites (auto/cell/club): $600 .
Performance Compensation
Annual cash incentive construct and outcome for 2024 (target and realized as % of base salary):
| Performance component | Weight | Target | Actual result | Payout (% of base salary) |
|---|---|---|---|---|
| Corporate earnings performance: (PPNR–NCOs)/Avg Equity rank vs. peers | 50% | 100% | 126.00% (63rd percentile) | 18.9% |
| KPI – Average deposits ex-brokered | 7.5% | $2.010B | $1.996B | 1.2% |
| KPI – Net interest income (FTE) | 3.75% | $82.0M | $79.9M | 0.8% |
| KPI – Noninterest income ex-wealth | 3.75% | $17.6M | $18.7M | 1.7% |
| KPI – Wealth management revenue | 7.5% | $10.0M | $10.5M | 3.4% |
| KPI – Efficiency ratio | 7.5% | 65.00% | 68.04% | 0.9% |
| Individual performance | 20% | — | — | 6.0% |
| Total payout | 100% | Target 30.0% | — | 32.8% |
Design notes:
- 2024 corporate metric changed from Core ROAE (2023) to (PPNR–NCOs)/Average Equity vs peer group; corporate payout calibrated at 33%/100%/150% for 25th/50th/75th percentiles; actual was 126% at 63rd percentile .
- KPIs paid only if Key Risk Indicators were within acceptable ranges; they were acceptable as of 9/30/2024 .
- 2024 corporate metric, KPI targets, and payout mechanics detailed in CD&A .
Long-term equity incentives (2024 grants to Hughes):
| Grant date | Award type | Shares | Grant date FMV ($) | Vesting |
|---|---|---|---|---|
| Jan 31, 2024 | Time-based RSA | 1,554 | 33,232 | 1/3 each anniversary over 3 years (performance of duties) |
| Feb 20, 2024 | Performance-based PRSA | 1,731 | 33,235 | 1/3 each anniversary over 3 years, contingent on annual peer-relative thresholds (50% (PPNR–NCOs)/Avg Equity ≥35th pct; 50% (PPNR–NCOs)/Avg Assets ≥65th pct) |
- 2024 LTI sizing: for Hughes, total LTI grant-date fair value set at 20% of 2023 base salary; mix 50% RSA / 50% PRSA .
- 2024 performance evaluation resulted in vesting of all potential PRSA shares from 2022–2024 awards for the year’s tranche .
Expected vesting cadence (supply watch):
- 2024 RSA: ~518 shares/yr on 1/31/2025, 1/31/2026, 1/31/2027, subject to service .
- 2024 PRSA: ~577 shares/yr on 2/20 anniversaries, subject to annual performance vs peer thresholds .
Equity Ownership & Alignment
Ownership, vesting status, and guidelines:
- Beneficial ownership (Feb 5, 2025): 87,993 shares, including 5,604 restricted shares; indicates <1% of class .
- Shares outstanding (Feb 5, 2025): 15,467,390; implied ownership ≈0.57% (87,993 / 15,467,390) based on disclosed figures .
- Unvested stock awards at 12/31/2024: 5,966 shares (market value $110,968) .
- Stock options: none outstanding at Feb 5, 2025; no options awarded in 2022–2024 .
- Ownership guidelines: EVPs required to hold stock equal to 1x prior-year base salary; all NEOs presently meet requirements or are within five-year compliance window .
- Hedging/pledging: anti-hedging policy prohibits hedging and derivative transactions; no explicit anti-pledging policy disclosure or pledging activity disclosure identified .
Employment Terms
Key terms of Hughes’ employment agreement and protections:
- Agreement effective September 19, 2013; auto-renews for successive three-year terms each September 19 unless 90 days’ notice of nonrenewal; upon nonrenewal, term continues for two years from the next annual renewal date .
- Post-termination restrictions: non-compete and non-solicit for 24 months within 35 miles of any C&N office (applies after voluntary or involuntary termination) .
- Severance (double-trigger) upon termination by the Company without cause or by the executive for good reason following a change in control: lump-sum equals highest salary + highest bonus/incentive + highest stock incentive value from prior three years, multiplied by 2.99x; benefits continuation for 3 years .
- Severance (without change in control): similar construct at 1.0x; benefits continuation for 1 year .
- No excise tax gross-ups; payments subject to cutback/optimization under Section 280G/4999 .
- Clawback policy: recoupment applies to bonuses and equity in the event of a required financial restatement consistent with Nasdaq standards .
Quantified potential payments (as of 12/31/2024):
| Scenario | Cash ($) | SERP benefit ($) | Health/welfare ($) | Equity acceleration ($) |
|---|---|---|---|---|
| Termination w/o cause or for good reason – before CoC | 549,676 | 682,288 | 17,749 | — |
| Termination w/o cause or for good reason – upon/after CoC | 1,643,531 | 682,288 | 53,247 | 110,968 |
| Death (select benefits) | — | 682,288 | — | Split-dollar life benefit $332,500 |
Compensation Structure Analysis
- Mix shifts modestly toward at-risk pay in 2024: Non-equity incentive rose to $113,379 from $77,436 with corporate performance at 126% of target, while stock award value was $66,467; total comp up to $614,946 from $555,216 in 2023 .
- Equity risk profile: no options outstanding or granted; equity awarded as RSAs/PRSAs with three-year ratable vesting and annual performance hurdles—lower leverage than options but aligns to peer-relative profitability (PPNR–NCOs) thresholds .
- Strong pay-performance linkage: corporate payout determined by (PPNR–NCOs)/Average Equity rank vs peers; 2024 realized 63rd percentile (corporate factor 126%) reinforcing performance sensitivity .
- Governance safeguards: explicit clawback; anti-hedging; no 280G gross-up; independent consultant (Pearl Meyer) supports market calibration .
Related Party Transactions and Red Flags
- Related-party transactions: none requiring disclosure in 2024; insider lending governed by Reg O and on market terms .
- Section 16 compliance: all directors and officers timely filed except one director’s administrative late filing; no issues noted for Hughes .
- Say-on-Pay: 2024 approval ~82%, indicating shareholder support for program design .
Compensation Peer Group (benchmarking)
The 2024 peer group used for pay and performance calibration included 20 Mid-Atlantic community banks (e.g., ACNB, Arrow Financial, CNB Financial, Orrstown, Peoples Financial Services, Fidelity D&D, Norwood, Penns Woods, Mid Penn, Shore Bancshares, Summit) .
Equity Ownership & Alignment (detail table)
| Item | Detail |
|---|---|
| Beneficial ownership | 87,993 shares incl. 5,604 restricted (Feb 5, 2025) |
| Shares outstanding | 15,467,390 (Feb 5, 2025) |
| Implied ownership % | ~0.57% (derived from above) |
| Unvested at 12/31/2024 | 5,966 shares ($110,968) |
| 2024 grants | 1,554 RSAs (1/31/2024), 1,731 PRSAs (2/20/2024) |
| Vesting mechanics | RSAs: 1/3 annually; PRSAs: 1/3 annually subject to annual peer-relative performance thresholds |
| Ownership guideline | EVP: 1x prior-year salary; currently in compliance (NEOs) |
| Hedging/Pledging | Hedging prohibited; no pledge policy disclosure identified |
| Options | None outstanding; none granted 2022–2024 |
Employment Terms (detail table)
| Term | Provision |
|---|---|
| Agreement | Effective 9/19/2013; auto-renews for successive 3-year terms; nonrenewal by 90-day notice; then runs 2 years from next renewal date |
| Non-compete/Non-solicit | 24 months; 35-mile radius of any C&N office |
| Severance – CoC (double-trigger) | 2.99x lump sum; benefits 3 years; includes highest of salary/bonus/stock incentive formula from prior 3 years |
| Severance – no CoC | 1.0x; benefits 1 year |
| Clawback | Applies to cash/equity incentive upon restatement |
| Gross-up | None; 280G cutback/optimization provision |
Say-on-Pay & Shareholder Feedback
- 2024 say-on-pay approval ~82%; committee retained structure and philosophy given shareholder support .
Performance & Track Record (company-level context)
- 2024 net income $25,958,000; ROAA 1.00%; ROAE 9.76%; net interest margin 3.30%; average loans up 5.0%; average deposits up 4.3% .
- (PPNR–NCOs)/Average Equity 12.34% for calendar 2024; five-year TSR value $85.52 vs NASDAQ Bank Index peer TSR value $128.85 baseline=100 (12/31/2019) .
Investment Implications
- Alignment: Hughes’ compensation is heavily performance-conditioned—50% of annual equity in PRSAs with annual peer-relative profitability hurdles and corporate bonus keyed to (PPNR–NCOs)/Average Equity; this ties pay to durable profitability vs peers rather than transitory items .
- Retention and overhang: Unvested 5,966 shares and multi-year vesting cadence suggest steady retention hooks; absence of options limits future option-exercise selling pressure; potential tax-withholding-related supply each vest date is modest (~500–600 shares/year tranche per 2024 grants) .
- Change-in-control economics: Double-trigger at 2.99x and three-year benefits is robust for a regional bank CFO; could be a meaningful cash outlay in a consolidation scenario, but reduces flight risk during M&A .
- Governance quality: Clawback, anti-hedging, no 280G gross-up, independent consultant, and strong say-on-pay (82%) mitigate governance risk; no related-party red flags disclosed .
- Performance sensitivity: 2024 corporate factor at 126% (63rd percentile) boosted incentives; continuation depends on sustaining peer-relative PPNR performance in a normalizing rate environment .