Thomas L. Rudy, Jr.

About Thomas L. Rudy, Jr.

Executive Vice President, Chief Delivery Officer and Region President at Citizens & Northern Bank since February 2021; previously Executive Vice President and Director of Branch Delivery (since February 2004), President of C&N Financial Services Corporation (since January 2000), and President of Bucktail Life Insurance Company (since May 2018). He holds a B.S. in Finance from Penn State and is a graduate of the ABA Graduate School of Banking at Wharton; age 61 as of the 2025 annual meeting date . Company performance context for 2024: net income increased to $25.96M (from $24.15M in 2023), ROAA rose to 1.00% (0.98% prior year), and ROAE was 9.76% (9.72% prior year) . On a pay-versus-performance basis (company-wide), total shareholder return index fell to 85.52 in 2024 (base 100 at 12/31/2019), and the company-selected profitability measure (PPNR−NCOs/Average Equity) was 12.34% in 2024 .

Past Roles

Fixed Compensation

• Individual base salary, target bonus, and actual bonus for Mr. Rudy were not disclosed (he was not a Named Executive Officer in the proxy). The Compensation Committee increased 2024 base salaries for NEOs by 3%–5% versus 2023 (program context) .

Performance Compensation

2024 short-term incentive (program design for executive officers/NEOs):

• Corporate metric: Relative (PPNR−NCOs)/Average Equity vs. peer group; actual at 63rd percentile drove a 126.0% corporate payout factor for 2024 .
• KPIs: deposits (ex-brokered), net interest income (FTE), noninterest income (ex-wealth), total wealth management revenue, and efficiency ratio—with budget-based targets and pass/fail risk gates (KRIs) .

Proxy-disclosed EVP templates (illustrative of the structure applied to EVP roles; Mr. Rudy’s individual award details were not disclosed):

Long-term incentives (program design and 2024 outcomes):

• Mix: 50% time-based RSAs, 50% performance-based RSAs (PRSAs); RSAs/PRSAs vest over 3 years, 1/3 on each anniversary (PRSAs vest only if performance met) .
• 2024 PRSA metrics/thresholds: 50% on relative (PPNR−NCOs)/Average Equity (≥35th percentile) and 50% on relative (PPNR−NCOs)/Average Assets (≥65th percentile), assessed annually within the 3-year performance period .
• Grant dates and prices for 2024: RSAs on Jan 31, 2024 at $21.385; PRSAs on Feb 20, 2024 at $19.20 (company-wide awards to NEOs) .
• Based on 2024 results (12 months ended Sept 30, 2024), all potential PRSA shares from 2022–2024 grant cycles vested (peer-relative thresholds achieved) .

Equity Ownership & Alignment

• Stock ownership guidelines: CEO 3× prior-year base salary; EVPs 1× prior-year base salary; 5-year compliance window from appointment/election . Presently, all directors and named executive officers meet minimums or are within their 5-year window; status for non-NEO EVPs (including Mr. Rudy) was not individually disclosed .
• Anti-hedging: Directors and officers are prohibited from hedging (puts, calls, swaps, collars, exchange funds, etc.) .
• Options: No options awarded in 2024–2022 and no outstanding stock options as of the ownership record date (indicates minimal forced-exercise pressure) .
• Pledging: No explicit pledging prohibition was disclosed; only anti-hedging policy is specified .

Employment Terms

• An individual employment agreement for Mr. Rudy was not described in the proxy. By contrast, current employment agreements exist for the CEO and select EVPs (Hughes, Hoose, Rush, Cwiklinski) with non-compete periods (12–24 months depending on role) and severance/change-in-control multipliers as below .

• Clawback: Executive compensation recoupment policy applies to bonuses, equity, and performance-based pay in the event of a restatement, aligned with Nasdaq listing standards .
• Nonqualified plans/perquisites: The company provides a SERP framework (historically designed to target ~20% of highest five-year average comp at age 65) and a nonqualified deferred compensation plan; perquisites for some executives may include auto and limited club dues (business purpose). Mr. Rudy’s specific participation is not disclosed .

Performance Snapshot (company context)

Compensation Structure Analysis

• Shift in performance focus: For 2024, STIP and PRSA evaluations pivoted from Core ROAE to relative (PPNR−NCOs)/Average Equity and (PPNR−NCOs)/Average Assets, emphasizing pre-provision profitability and credit quality; peer-relative targets (35th/65th percentiles) set clearer hurdle rates .
• Above-target corporate payout: 126% corporate factor in 2024 (vs. ~97% in 2023), reflecting stronger relative profitability vs. peers; KPIs were mixed (e.g., deposits slightly below target, wealth and noninterest income above target) .
• Equity risk profile: No stock options outstanding or awarded (reduces repricing risk/option exercise–driven selling) and 3-year ratable vesting of RSAs/PRSAs spreads supply over time; PRSA vesting contingent on sustained relative performance .

Say‑on‑Pay & Shareholder Feedback

• Say‑on‑pay approval at 2024 annual meeting: ~82% (management cited this as support for its compensation program; no major changes made as a result) .

Risk Indicators & Red Flags

• Hedging ban in place; no tax gross‑ups in employment agreements; robust clawback policy; no related‑party transactions requiring disclosure in 2024; no option repricings disclosed .
• Pledging policy not explicitly disclosed (monitor for future updates) .
• Disclosure shows no options outstanding and a pay program aligned to peer-relative profitability metrics, which reduces some governance and incentive risk vectors .

Investment Implications

• Alignment: EVP stock ownership requirement (1× salary) and 50/50 RSA/PRSA structure with 3-year ratable vesting create ongoing alignment and staggered supply; corporate payout at 126% suggests incentives paid above target on relative profitability execution .
• Retention: No individual agreement for Mr. Rudy is disclosed, limiting visibility to severance/CIC economics; however, equity vesting and ownership guidelines support retention. Peers’ agreements suggest the company uses competitive protections for senior EVPs when warranted .
• Trading signals: Lack of options reduces forced selling; RSAs/PRSAs vest annually on award anniversaries (e.g., Jan 31 and Feb 20 grant cycles) which can create modest, predictable supply windows; monitor Form 4s around those dates for incremental flow (company-wide dates from NEO grants) .
• Execution focus: The pivot to (PPNR−NCOs)-based relative metrics keeps management keyed to pre‑tax, pre‑provision profitability and credit outcomes—critical for community bank value creation through cycles .

Note: Where Mr. Rudy’s individual compensation, ownership, or contract specifics are not disclosed in the proxy, program-level structures and peer EVP disclosures are provided for context.