Jeremiah Smith

About Jeremiah Smith

Jeremiah Z. Smith, age 49, is President, CEO, and a Director of First Northern Community Bancorp and First Northern Bank since January 1, 2023, after serving as CFO (2010–2014) and COO (2014–2022); he joined the Bank in 2003, holds a B.S. in Business Administration (Finance) from CSU Sacramento, and graduated from Pacific Coast Banking School in 2008 . In 2024, the Company delivered net income of $20.0 million, diluted EPS of $1.24, ROAE of 11.95%, and ROAA of 1.06% as management focused on margin discipline and efficiency; book value per share rose 12.9% in 2024 . Total shareholder return (value of $100 investment) improved to $113 in 2024 from $96 in 2023 (2022: $83), while reported net income was $20,034 (company table figure) in 2024 . Smith is a non‑independent inside director; the Company employs an independent Chairman (Sean P. Quinn), with all directors other than Smith and Louise Walker deemed independent under Nasdaq rules, mitigating dual‑role concerns .

Past Roles

External Roles

Fixed Compensation

Notes:

• Employment agreement sets base salary at $475,000 with annual review; initial one‑year term auto‑renews and was extended through Dec 31, 2025 .

Performance Compensation

Summary (SCT line items)

Annual Cash Incentive (NEIP) – 2024 Design and Results

• Target opportunity: 40% of base salary; maximum 60%; actual payout 19.2% for Smith (paid March 2025) .
• Scorecard weightings: Asset Quality (25%), Efficiency Ratio (25%), ROE (25%), Quality Loan Growth (25%) .
• No discretionary bonus overlay used in 2024; payout strictly formulaic .

Non‑Qualified Deferred Compensation (Executive Retirement/Retention) – 2024

• Plan metrics and outcome determined an additional company contribution equal to 9.26% of salary for Smith .
• Vesting/payment triggers: continued employment to age 65 (Smith’s amended agreement uses age 62 for certain provisions), death, disability, involuntary termination without Cause/for Good Reason, or within 24 months of a Change in Control; Smith became 50% vested as of Jan 1, 2023, and will be fully vested at his 62nd birthday subject to continued service and performance conditions .

Equity Awards and Vesting

• 2024 grants were restricted stock (time‑based) under the 2016 Plan; options were not granted in 2023 or 2024 .
• RSAs cliff‑vest on the earlier of the fourth anniversary of grant or normal retirement (age 65) .
• Smith’s outstanding options and unvested shares at 12/31/2024 are below; remaining unexercisable options vest 3/29/2025 and 3/29/2026 .

Reference prices: $9.51 adjusted close on 12/31/2024 (used for RSA valuation) and $10.18 close on 3/31/2025 .

Equity Ownership & Alignment

• Insider trading policy prohibits speculative trading in Company securities, including short sales and trading in derivatives; the proxy does not disclose any pledging by Smith, and no pledging prohibition is explicitly stated in the policy summary .
• Plan mechanics allow pledged‑share financing for option exercise/tax in limited cases where permitted by the Company, but this is a payment mechanism rather than a disclosure of executive pledging activity .
• 5%+ holders include Fourthstone (9.65%), Banc Fund IX/X combined (6.20%), and M3 complex (5.69%), signaling active small‑cap financials investors on the register .

Employment Terms

• Employment agreement (effective Jan 1, 2023; auto‑renews annually; extended through Dec 31, 2025) provides: base salary $475,000 with annual adjustments .
• Severance: If terminated without cause or for good reason outside a change‑in‑control (CoC) period, lump sum 150% of (salary + average prior 3‑year bonus) plus continued health coverage for Smith and dependents up to 36 months .
• CoC protections: If terminated without cause/for good reason or if the Bank elects not to extend within two years following a CoC, lump sum 250% of (salary + average prior 3‑year bonus), up to 36 months health coverage, and outplacement assistance .
• SERP: Target benefit up to 50% of “average compensation” (3‑yr average salary × 7‑yr average bonus ratio), with CEO accrual at 2.5% per year; offsets for Social Security and profit‑sharing; early commencement reduction schedule; CoC termination within 24 months pays greater of actuarial equivalent to age 65 (age 62 under Smith’s amended SERP) or otherwise due benefit, typically in a lump sum .
• Executive Retirement/Retention (NQDC): Smith became 50% vested as of Jan 1, 2023; fully vests at age 62 conditioned on service/performance; 2024 contribution equal to 9.26% of salary per plan formula .
• Securities trading guidelines emphasize avoidance of speculative trading and conflicts of interest across personal investments and insider activities .

Board Governance and Committee Roles

• Board Structure: Independent Chairman (Sean P. Quinn); Smith and Walker are the only non‑independent directors; all committee members (Audit, Compensation, Nominating & Corporate Governance) are independent under Nasdaq standards .
• Committees Smith serves on (Bank level, which perform the Company’s committee functions): Asset/Liability, Asset Quality, Compliance, Information Services Steering, Loan, and Profit Sharing .
• Board Meeting Attendance: In 2024, each Director attended ≥75% of Board/committee meetings except Mr. Brady (61%); implies Smith met attendance expectations .

Performance & Track Record Highlights

• 2024 operational/financial outcomes: disciplined margin management, expense reductions (-1.9% YoY), average non‑interest‑bearing deposits at 43.6%, low net charge‑offs (9 bps), and ACL at 1.49% .
• Capital actions: 5% stock dividend (record 2/29/2025; paid 3/25/2025), 6% repurchase authorization (up to ~979,695 shares); 389,071 shares repurchased in 2024 for $3.8 million .
• Technology/process: Deployed RPA in back office; launched customer service chat capability .

Pay‑for‑Performance and Incentive Design Assessment

• Cash incentive alignment: 2024 NEIP paid 19.2% of salary vs 40% target, reflecting mixed results (asset quality and ROE near target; efficiency above target; loan growth negative) and no discretionary uplift, indicating formulaic discipline .
• Equity mix/vesting: Shift toward time‑based RSAs (no options granted in 2023–2024) reduces performance leverage but promotes retention via 4‑year cliff vesting; sizeable unvested RSAs ($484k at 12/31/2024) enhance alignment but may create future sell windows at vesting .
• Ownership: 1.78% beneficial ownership plus 152,110 options exercisable within 60 days provide meaningful exposure; no pledging disclosed; policy restricts speculative trading .
• CoC/severance: 1.5x salary+bonus outside CoC and 2.5x within CoC with extended benefits; robust protections support retention in consolidation scenarios common to community banks .

Investment Implications

• Near‑term vesting/selling pressure: Unexercisable option tranches (14,564 shares) vest on 3/29/2025 and 3/29/2026; RSAs cliff‑vesting on four‑year anniversaries (2021–2024 grants, including April 5, 2024) create identifiable windows for potential Form 4 activity; monitor for sell‑to‑cover/liquidity events around these dates .
• Alignment vs risk: Ownership stake (1.78%) and unvested equity underpin alignment; policy limits speculative trading and no pledging is disclosed, reducing hedging misalignment risk .
• Pay outcomes vs performance: Sub‑target cash incentive (19.2% vs 40% target) plus rising TSR and stable profitability metrics suggest incentive discipline and improving shareholder outcomes in 2024; continued focus on efficiency and deposit mix are key levers under Smith .
• Retention: SERP and NQDC (50% vested, full vesting at age 62) and CoC provisions significantly reduce flight risk for the CEO; any M&A could trigger elevated payouts (2.5x) but also ensure leadership continuity through a transaction .
• Governance: Independent Chair and independent committees mitigate traditional CEO/director dual‑role concerns; Smith’s extensive committee participation concentrates influence but also embeds accountability within formal oversight structures .

Appendix: Additional Reference Tables

Pay vs Performance (Company disclosure)