Gary A. Pacos
About Gary A. Pacos
Gary A. Pacos is Senior Vice President and Chief Risk Officer of Five Star Bank (Financial Institutions, Inc.) and a member of the Executive Management Committee; he was appointed to the CRO role in February 2023 and is 58 years old . His background spans enterprise compliance and fair lending across Bank OZK (Chief Compliance Officer), KeyBank, First Niagara, M&T Bank, and HSBC, and he served as a U.S. Army Senior Aviator, retiring as a Major in 2008 . Company performance over his tenure includes a 2024 net loss driven by the strategic investment securities restructuring and litigation settlement, versus 2023 net income; the Company reported diluted EPS of $(2.75) in 2024 and $3.15 in 2023, and provided “pay versus performance” TSR values of an initial $100 investment of $80.80 (2023) and $109.51 (2024) . The Company’s compensation framework emphasizes risk-balanced pay with clawbacks, stock ownership requirements for EMC members, and prohibits pledging/hedging, supporting alignment between executives and shareholders .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Bank OZK | Chief Compliance Officer | 2020–2023 | Led enterprise compliance; strengthened fair and responsible banking oversight in a highly regulated environment |
| KeyBank | SVP, Compliance Executive for Fair & Responsible Banking; Risk Evaluation & Assurance | 2016–2020 | Oversaw fair lending and compliance testing; enhanced risk assurance and control frameworks |
| First Niagara Bank, N.A. | Chief Compliance Officer; SVP, Director of Corporate Compliance & Ethics | 2010–2016 | Built corporate compliance and ethics programs; advanced regulatory adherence |
| M&T Bank | VP, Deputy Chief Compliance Officer; Compliance Testing Manager | 2006–2010 | Established compliance testing capabilities; embedded second-line challenge |
| HSBC Bank USA, N.A. | Various roles in Compliance, Consumer Credit, Audit, Operations | Early career | Developed foundational compliance, audit, and consumer credit expertise |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| United States Army & NY Army National Guard | Senior Army Aviator; retired as Major | Through 2008 | Leadership and operational discipline; risk management in high-stakes environments |
Fixed Compensation
No individual base salary, target bonus, or actual bonus for Mr. Pacos is disclosed in the proxy; NEO-level base pay adjustments in 2024 averaged 3%, and the Company’s programs use market data via an independent consultant (Aon) to set competitive pay ranges . The Executive Incentive Plan (EIP) requires meeting a Tier 1 capital gateway (8.5% target; actual 11.2% at 12/31/2024) and includes discretionary modifiers based on executive scorecards; seven executives participated in the 2024 EIP (five NEOs plus two other EMC members), although individual non-NEO participant names are not disclosed .
Performance Compensation
The Company’s EIP and LTIP link pay to risk-adjusted performance with metrics sensitive to capital, credit, and growth goals; EIP 2024 pool funding excluded the investment securities restructuring and a litigation settlement as extraordinary items to preserve pay-for-performance integrity .
| Metric | Weight | Threshold | Target | Maximum | Actual | Weighted Performance |
|---|---|---|---|---|---|---|
| PPNI (non-GAAP, $MM) | 40% | $44.87 | $59.83 | $68.80 | $54.47 | 32.8% |
| Total Loan Growth (%) | 20% | 0.94% | 1.45% | 1.81% | 0.41% | 0.0% |
| Non-Public Deposit Growth (%) | 20% | 4.22% | 6.49% | 8.11% | 3.92% | 0.0% |
| Net Charge-off Ratio (%) | 20% | 0.43% | 0.34% | 0.26% | 0.20% | 30.0% |
Notes:
- EIP total payout funded at 62.8% of target before individual/team discretionary adjustments; CEO and NEO adjustments are disclosed, but non-NEO names and amounts are not .
- 2024 LTIP awards: RSUs vest on the 3rd anniversary of grant; PSUs vest after a 3-year period based on ROAA (absolute) and Relative ROAE (vs NASDAQ Bank Index) with capital and performance gateways .
- Following the December 2024 investment securities restructuring, PSU performance for 2022–2024 grants is projected below threshold (0% payout) for both ROAA and Relative ROAE tranches, reflecting plan rigor under adverse outcomes .
Equity Ownership & Alignment
- Stock ownership requirements: EMC “Executive Vice Presidents” 1.5× base salary; other EMC members (which includes Mr. Pacos) 1× base salary; directors 3× annual cash retainer . In 2024 all directors and EMC members met the Stock Requirements .
- Clawback: Company adopted an incentive compensation clawback for Section 16 officers covering the prior three completed fiscal years in the event of a material financial restatement; no clawback actions taken to date .
- Insider policy prohibits pledging, margin accounts, hedging, and derivatives (collars, swaps, forward contracts) in Company stock, reducing misalignment and forced sale risks .
- Equity form: Company does not grant stock options and pays no dividends on unvested awards; equity awards emphasize RSUs/PSUs with minimum vesting and double-trigger change-in-control protection under the LTIP .
Employment Terms
- Change-in-control agreements are disclosed for five executives (Birmingham, Plants, Quinn, Burruano, Collins) with double-trigger protection, salary+bonus multiples ranging from 1.25× to 2.99×, health benefit continuations, and accelerated vesting (PSUs at greater of target or actual); Mr. Pacos is not listed among agreement holders in the proxy .
- Non-compete/non-solicit durations (upon qualifying termination with benefits) are 24 months for the CEO, 18 months for Plants/Burruano, and 9 months for Quinn/Collins; no tax gross-ups; 280G cutback applies .
- LTIP plan-level change-in-control terms are double-trigger: awards assumed/replaced do not accelerate unless an involuntary termination without cause or for good reason occurs within two years post-transaction .
Performance & Track Record
- 2024 performance context: Net loss driven by investment securities restructuring (pre-tax loss $100.2MM; after-tax ~$75MM funded by equity offering proceeds) and a litigation settlement; management expects improved NIM and net interest income in 2025 due to portfolio repositioning .
- Pay vs performance disclosure: TSR value of initial $100 investment was $80.80 (2023) and $109.51 (2024); Company-selected measure PPNI was $60,440k (2023) and $54,471k (2024) .
- 2025 progress: Q3 2025 net income $20.5MM; diluted EPS $0.99; ROAE 13.45%; ROA 1.32%; NIM 3.65%; Provision for credit losses $2.7MM; allowance coverage and credit metrics remained solid .
Board Governance (Context)
- MD&C Committee oversees compensation risk; independent consultant Aon provides benchmarking and plan design support; say-on-pay approval was 88.5% in 2024, indicating shareholder support for program design .
- Compensation philosophy emphasizes pay-for-performance, clawbacks, minimum vesting, double-trigger CIC, prohibitions on hedging/pledging, and ownership requirements for EMC members .
Compensation Peer Group (Benchmarking)
2024 peer group included 1st Source, Arrow Financial, Camden National, CNB Financial, Community Trust, First Commonwealth, First Financial, German American Bancorp, Horizon Bancorp, Independent Bank, Lakeland Financial, Midland States, Park National, Peoples Bancorp, QCR, S&T, Stock Yards, Tompkins, Washington Trust; peer group updated for 2025 to include several replacements (e.g., Mercantile Bank, Farmers National, First Busey, Premier Financial, Civista) .
Company Financials Snapshot
| Metric | FY 2023 | FY 2024 |
|---|---|---|
| Net Income - (IS) ($USD) | $50,264,000* | $(41,646,000)* |
| Revenues ($USD) | $48,244,000* | $(46,681,000)* |
| EBITDA ($USD) | n/a* | n/a* |
Values retrieved from S&P Global. Periods shown oldest to newest. An asterisk indicates values without document citations.
Investment Implications
- Alignment and retention: Ownership requirements for EMC members, clawback coverage, and prohibition on pledging/hedging reduce misalignment and forced sale risk, supporting long-term stewardship in risk roles such as CRO .
- Incentive rigor: EIP and LTIP gateways (capital thresholds, minimum performance ratings) and PSU outcomes projected at 0% after the 2024 restructuring demonstrate plan discipline; this reduces near-term equity vesting supply and insider selling pressure from PSUs, though RSUs continue to vest on three-year schedules .
- Retention risk: Mr. Pacos is not disclosed as having an individual CIC agreement; broader plan-level protections exist under the LTIP, but lack of a named CIC agreement may imply lower severance economics relative to NEOs, modestly elevating external poaching risk if market demand for senior risk talent rises .
- Performance context: The 2024 reset (equity raise and securities portfolio restructuring) created a trough in GAAP earnings but improved 2025 run-rate profitability (higher NIM, stronger ROA/ROAE), aligning future-year incentive realizations with core banking execution where CRO oversight is pivotal .
Note: The proxy does not disclose Mr. Pacos’s individual base salary, cash incentives, or equity grant amounts. Form 4 insider transaction analysis and precise individual holdings were not disclosed in the proxy; additional Form 4 review would be required for trading signal assessment .