8-K: First National Corporation Appoints Brad E. Schwartz as Executive Vice President and Chief Financial Officer

First National Corporation appoints Brad E. Schwartz as Executive Vice President and Chief Financial Officer, effective March 31, 2025.

Summary

• First National Corporation has appointed Brad E. Schwartz as Executive Vice President and Chief Financial Officer (CFO) of the Corporation and its subsidiary, First Bank.
• The appointment is effective March 31, 2025.
• Mr. Schwartz's employment agreement has a term beginning March 31, 2025, and continuing until March 31, 2027, with automatic one-year extensions unless either party provides notice of non-renewal.
• His initial base salary will be $300,000.
• He will participate in the company's employee benefit plans, including the Executive Incentive Plan, with a target incentive award of no less than 30%.
• The company will provide him with a car and relocation expense reimbursement up to $75,000.
• The agreement includes provisions for termination by the company without cause or by Mr. Schwartz for good reason, which would entitle him to salary and benefits for the remainder of the term, a $25,000 lump sum benefits supplement, and a prorated cash bonus.
• If the company does not renew the agreement and subsequently terminates him, he will receive salary continuation for one year.
• Termination within one year after a change of control, or in contemplation of a change of control, would entitle him to severance payments approximately equal to 299% of his annual cash compensation.
• The agreement includes restrictive covenants related to confidential information, non-disclosure, non-competition, and non-solicitation for 12 months post-employment.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to the appointment of an experienced executive and the anticipation of future growth. The terms of the employment agreement appear standard and reasonable.

Positives

• First National Corporation secures an experienced CFO with over 40 years in banking, including leadership roles at TowneBank and Monarch Bank.
• Brad Schwartz's expertise in M&A and community banking is expected to benefit First National's growth strategy.
• The employment agreement includes standard benefits and severance terms, providing security for both the company and the executive.
• The agreement contains provisions to comply with Code Section 409A, ensuring proper handling of deferred compensation.

Negatives

• The agreement includes restrictive covenants that may limit Mr. Schwartz's future employment options within a 10-mile radius of any First National office for 12 months after termination.
• Termination compensation is forfeited if Mr. Schwartz breaches confidentiality, non-competition, or non-solicitation covenants.
• The agreement allows for termination for cause, resulting in only payment for time worked and no further benefits.

Risks

• The agreement's terms are subject to regulatory requirements, and payments or actions may be restricted by governmental agencies or applicable laws.
• A change of control could trigger significant severance payments, potentially impacting the company's financial resources.
• The definition of 'Good Reason' for resignation is specific and may not cover all potential scenarios leading to executive dissatisfaction.
• The non-compete clause could be challenged in court, depending on its enforceability under Virginia law.

Future Outlook

The company anticipates continued growth and success with the addition of Brad E. Schwartz to the executive team.

Management Comments

• Scott C. Harvard, CEO of First National Corporation and First Bank, stated that Brad Schwartz's leadership, M&A experience, financial acumen, and understanding of community banking make him a perfect fit for First Bank.
• Brad Schwartz stated he is looking forward to joining First National and contributing to the company's continued growth and success.

Industry Context

The appointment of a seasoned banking executive like Brad Schwartz reflects a strategic move by First National Corporation to strengthen its leadership team amidst a competitive community banking landscape and recent acquisition activity.

Comparison to Industry Standards

• Executive compensation packages in the banking industry typically include a base salary, bonus potential, benefits, and severance provisions.
• A base salary of $300,000 for a CFO role at a bank holding company of First National's size is within the typical range, but can vary based on experience, location, and company performance.
• The 30% target incentive award is a common structure to align executive performance with company goals.
• Severance packages often include salary continuation and benefits, with change-of-control provisions providing additional protection for executives.
• Non-compete agreements are standard practice to protect confidential information and customer relationships.

Management Changes

Stakeholder Impact

• Shareholders may view the appointment positively, anticipating improved financial leadership and strategic direction.
• Employees may experience changes in financial processes and reporting under the new CFO's leadership.
• Customers are unlikely to be directly impacted by this executive appointment.
• Suppliers and creditors may benefit from the company's strengthened financial management.

Next Steps

• Brad E. Schwartz will assume his role as Executive Vice President and Chief Financial Officer on March 31, 2025.
• Mr. Schwartz will relocate to the Corporation's market area.
• Mr. Schwartz will participate in the First National Corporation Executive Incentive Plan.
• The company will integrate Mr. Schwartz into the executive team and strategic planning processes.

Key Dates