Frank Banko III

About Frank Banko III

Frank “Chip” Banko III, 66, is a Class 1 director of Embassy Bancorp, Inc. (EMYB) whose term expires in 2026; he joined the Company’s board in 2011 after serving in family-owned businesses since 1979 and retiring as President of Warren Distributing Co. . He is not independent under NASDAQ standards due to his role as managing member and 51% owner of Red Bird Associates, LLC (landlord to EMYB’s headquarters) and receipt of rent from the Bank for a branch office . The Board has combined Chairman/CEO roles and has not appointed a Lead Independent Director, increasing reliance on committee oversight .

Past Roles

External Roles

Board Governance

• Committee assignments: Banko serves on the Bank’s Personnel Committee (functions as Compensation Committee) alongside Englesson, Lesavoy (Chair), and Lobach; the Committee has no formal charter and did not use a compensation consultant in 2024 .
• Audit Committee composition excludes Banko; Audit Committee members are all independent (Boyer, Englesson—Chair, Pittman, Yurconic, Gates Smith) and met quarterly in 2024 .
• Independence: As of April 21, 2025, Banko is not independent under NASDAQ due to Red Bird and branch lease relationships; all but three directors are independent (the non-independent directors are Lobach, Lesavoy, and Banko) .
• Attendance: Board held 14 meetings in 2024; all directors attended 100% of aggregate board/committee meetings except Banko (90%) .
• Leadership: Chairman/CEO roles are combined; no Lead Independent Director is designated .
• Governance policies: Anti-hedging policy prohibits short selling and derivative transactions by directors and employees; Whistleblower and Code of Conduct policies in place .

Fixed Compensation

| Year (Service Period) | Fees Earned or Paid in Cash (USD) | Restricted Stock Awards (USD) | All Other Compensation (USD) | Total (USD) | |---|---|---:|---:|---:|---:| | 2024 (services in 2023) | $26,924 | $26,896 | $53 | $53,873 |

• Program features: Non-employee director compensation includes cash fees and restricted stock; Lobach (Chairman/CEO) does not receive director compensation .

Performance Compensation

• Compensation philosophy (employees, not directors): Annual salary adjustments and both cash/equity bonuses are discretionary based on employee and Company performance and budget constraints; no external consultant used in 2024 .
• No specific performance metrics were disclosed for director equity grants (restricted stock awards reported for directors; plan allows various grant types and CIC vesting) .

Other Directorships & Interlocks

Expertise & Qualifications

• Entrepreneurial operator with decades of experience in wholesale distribution and real estate; Board views business knowledge as qualification .
• Local market engagement through prior non-profit board service; contributes to community-oriented banking model .
• Not designated as an Audit Committee Financial Expert; Audit Committee does not have one by Board determination, though members can read/understand financials .

Equity Ownership

• Options currently exercisable: none outstanding within 60 days (across reporting group; footnotes note no presently exercisable options) .
• Pledging: Not disclosed for Banko; pledging noted for other directors (e.g., Pittman, Lobach) but no pledge footnote for Banko .
• Anti-hedging: Company policy prohibits hedging and derivatives transactions for directors .

Governance Assessment

• Strengths

  • Significant ownership stake (~7.08% of common stock), aligning economic interests with shareholders; board and management collectively hold ~29% of shares, reinforcing alignment .
  • Longstanding local operator with direct experience relevant to a community bank’s relationship model .

• Risks and RED FLAGS

  • Related-party exposure: Red Bird Associates is insider-controlled (Banko managing member, 51% owner; multiple insiders with equity interests). EMYB paid $830,694 in rent in 2024 for HQ; lease extended through February 28, 2027; automatic vesting on change-in-control may compound incentives around CIC outcomes. Banko also personally leases a branch site to the Bank ($47,418 paid in 2024; $54,096 remaining commitment) . This results in formal non-independence under NASDAQ and presents potential conflicts in real estate/lease decisions .
  • Board independence and structure: Combined Chairman/CEO and no Lead Independent Director; three non-independent directors including Banko—heightened need for robust committee oversight and executive sessions .
  • Attendance: 90% attendance vs peers at 100% in 2024—lower engagement than other directors .
  • Loans to insiders: ~$14.0 million of loans/commitments outstanding to directors/officers/affiliated businesses (~13% of shareholders’ equity), increasing related-party credit exposure at the Bank (policy states market terms) .

• Compensation and incentives observations

  • Director pay is balanced between cash and restricted stock grants; no disclosed performance metrics or benchmarked peer group for director compensation; Personnel Committee lacks a charter and did not use a compensation consultant in 2024, which can signal process informality relative to best practices .
  • Plan provides for automatic vesting upon change-of-control—a shareholder-sensitive term that can be viewed as generous if not offset by strong performance conditions .

• Mitigants

  • Company policies on anti-hedging, whistleblower protections, and related-party lending standards (market terms, normal risk) provide some governance safeguards .
  • Audit Committee composed fully of independent directors and meets quarterly; external auditors have unrestricted access .

Overall, while Banko’s ownership and local operating experience can support shareholder alignment and market knowledge, his non-independence and related-party leases (alongside broader board structural issues) warrant close monitoring by investors for potential conflicts and board effectiveness.