UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by a Party other than the Registrant | |||||||
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☐ | Preliminary Proxy Statement | ||||||
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☒ | Definitive Proxy Statement | ||||||
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☐ | Soliciting Material under | ||||||
First Midwest Bancorp, Inc. | |||||||
(Name of Registrant as Specified In Its Charter) | |||||||
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Welcome to the First Midwest Bancorp, Inc. |
Annual Meeting ofStockholders |
April 11, 2017
Dear Stockholder:
You are cordially invited to attend the 20172019 Annual Meeting of Stockholders of First Midwest Bancorp, Inc., which will be held on Wednesday, May 17, 201715, 2019 at 9:00 a.m., Central time, at the WestinThe Rose Hotel Chicago Northwest Hotel, 400 Park Boulevard, Itasca,O’Hare, 5200 Pearl Street, Rosemont, Illinois 60143.
The matters to be acted on at the Annual Meeting are described in the accompanying Notice of Annual Meeting of Stockholders and Proxy Statement. Also enclosed is a copy of our 20162018 Annual Report. Please review these materials carefully before voting.
We are pleased to offer multiple options for voting your shares. As detailed in the Questions and AnswersProxy Summary section of the attached Proxy Statement, you may vote your shares via the Internet, by telephone or by mail. Voting in any of these ways will not prevent you from attending the Annual Meeting. You also may vote in person by written ballot at the Annual Meeting.
Your vote is very important to us. Whether or not you plan to attend the meeting in person, your shares should be represented and voted.
On behalf of our Board of Directors, I would like to express our appreciation for your continued interest in First Midwest. I hope you will be able to attend the Annual Meeting.
Sincerely, | ||
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 | ||
Michael L. Scudder | ||
Chairman and Chief Executive Officer |
First Midwest Bancorp, Inc.
Notice of Annual Meeting of Stockholders |
Wednesday, May | First Midwest Bancorp, Inc. 8750 West Bryn Mawr Avenue Suite 1300 Chicago, Illinois 60631 | |||
Place: | ||||
The Rose Hotel Chicago O’Hare, 5200 Pearl Street, Rosemont, Illinois 60018 | ||||
Items of Business: | ||||
◆To elect as directors the | ||||
◆To approve an advisory (non-binding) resolution regarding the compensation paid in | ||||
◆To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, | ||||
◆To transact such other business as may properly come before the Annual Meeting. | ||||
Record Date:March 22, 2019 | ||||
You are entitled to vote at the Annual Meeting only if you owned shares of First Midwest Bancorp, Inc. common stock at the close of business on | ||||
Proxy Voting: | ||||
It is important that your shares be represented and voted at the Annual Meeting. You can vote your shares via the Internet, by telephone or by mail. Voting in any of these ways will not prevent you from attending or voting your shares in person at the Annual Meeting. | ||||
Internet | Telephone | In Person | ||||
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Visit the website noted on your proxy card to vote online. | Use the toll-free telephone number noted on your proxy card to vote by telephone. | Sign, date and return your proxy card in the postage pre-paid envelope provided to vote by mail. | Cast your vote in person at the Annual Meeting. |
By Order of the Board of Directors, | |
Nicholas J. Chulos | |
Executive Vice President, General Counsel | April 4, 2019 |
and Corporate Secretary |
TABLE OF CONTENTS
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Our Long-Standing Commitment to Corporate Social Responsibility | 26 | ||
INFORMATION REGARDING BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS, DIRECTORS AND MANAGEMENT | 29 | ||
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TABLE OF CONTENTS, CONT.
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PROXY SUMMARY
This Proxy Statement is being furnished in connection with a solicitation of proxies by the Board of Directors of First Midwest Bancorp, Inc., a Delaware corporation, to be used at our 20172019 Annual Meeting of Stockholders. The approximate date on which this Proxy Statement, the accompanying Proxy Card and our 20162018 Annual Report are first being sent or otherwise made available to stockholders is April 11, 2017.9, 2019. The following is a summary of items to be voted upon at the Annual Meeting.
Annual Meeting of Stockholders
| Time May 9:00 a.m., Central time |
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Items of Business | Board Voting Recommendation | |||
FOR | ||||
FOR | ||||
FOR | ||||
2019 Proxy Statement | 1 |
Proxy Summary
Election of Directors
The first item of business at the Annual Meeting will be the election of seventwelve directors of the Company. The nominees, including their key experience and our Board’s recommendation with respect to each, are Thomas L. Brown, Phupinder S. Gill, Kathryn J. Hayley, Frank B. Modruson, Ellen A. Rudnick, Michael J. Small and Stephen C. Van Arsdell.set forth in the table below. Each nominee is currently a director of the Company, with Mr. Brown, Ms. Hayley and Messrs. Modruson and Van Arsdell having been appointed to the Board following the 2016 annual meetingCompany. See Item 1 Election of stockholders.Directors.
2019 Director Nominees for Election | ||||
TITLE | KEY EXPERIENCE | RECOMMENDATION | ||
Barbara A. Boigegrain |
| FOR | ||
Thomas L. Brown |
| FOR | ||
Phupinder S. Gill |
| FOR | ||
Kathryn J. Hayley |
| FOR | ||
Peter J. Henseler |
| FOR | ||
Frank B. Modruson |
| FOR | ||
Ellen A. Rudnick |
| FOR | ||
Mark G. Sander |
| FOR | ||
Michael L. Scudder |
| FOR | ||
Michael J. Small | | FOR | ||
Stephen C. Van Arsdell |
| FOR | ||
J. Stephen Vanderwoude |
| FOR | ||
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2 | First Midwest Bancorp, Inc. |
| Director Nominees | Age | Director Since | Independent | Board of Directors Vote Recommendation | ||||
| Thomas L. Brown | 60 | 2017 | Yes | FOR | ||||
Vice President and Chief Financial Officer RLI Corp. | ||||||||
| Phupinder S. Gill | 56 | 2010 | Yes | FOR | ||||
Former Chief Executive Officer CME Group, Inc. | ||||||||
| Kathryn J. Hayley | 58 | 2016 | Yes | FOR | ||||
Former Executive Vice President UnitedHealthcare | ||||||||
| Frank B. Modruson | 57 | 2016 | Yes | FOR | ||||
Former Partner and Chief Information Officer Accenture plc | ||||||||
| Ellen A. Rudnick | 66 | 2005 | Yes | FOR | ||||
Senior Advisor and Adjunct Professor of Entrepreneurship University of Chicago Booth School of Business | ||||||||
| Michael J. Small | 59 | 2010 | Yes | FOR | ||||
President and Chief Executive Officer Gogo, Inc. | ||||||||
| Stephen C. Van Arsdell | 66 | 2017 | Yes | FOR | ||||
Former Senior Partner and Chairman and Chief Executive Officer Deloitte & Touche LLP | ||||||||
Proxy Summary
Advisory Vote on Executive Compensation
We are asking our stockholders to approve, on an advisory (non-binding) basis, a resolution regarding the compensation paid in 20162018 to our named executive officers as disclosed in this Proxy Statement.
Ratification of Independent Registered Public Accounting Firm
We are asking our stockholders to ratify, on an advisory (non-binding) basis, the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2017.
How to vote your shares of Common Stock at the Annual Meeting in the manner you instruct. Vote
Even if you plan to attend the Annual Meeting, you should vote your shares in advance.
Internet | Telephone | |||
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The web address for Internet voting can be found on the Proxy Card. Internet voting is available 24 hours a day. To be valid, your vote by Internet must be received by the deadline specified on the Proxy Card. | ||||
The number for telephone voting can be found on the Proxy Card. Telephone voting is available 24 hours a day. To be valid, your vote by telephone must be received by the deadline specified on the Proxy Card. | ||||
Request a paper copy of the Proxy Card if you have not received one, and mark the Proxy Card, sign and date it, and return it in the postage pre-paid envelope provided. To be valid, your vote by mail must be received by the deadline specified on the Proxy Card. | ||||
If you choose not to vote early, you can vote your shares in person at the Annual Meeting. You must present an acceptable form of identification (such as a valid driver’s license) to enter the Annual Meeting and vote in person.
If you hold your shares in street name, you may vote by following your broker’s instructions or, in order to vote in person at the Annual Meeting, you must obtain from the broker through which you hold your shares, both an account statement showing that you owned shares of Common Stock as of the Record Date and a “legal proxy” form, and bring them to the meeting.
If you attend the Annual Meeting as a representative of a stockholder that is an entity, then you must bring proof of your authorization to attend and act on behalf of that entity.
Important Notice Regarding the Availability of stockholders available for inspection?
Preliminary voting results will be announced at the Annual Meeting. Final voting results are expected to be published in a Current Report on Form 8-K filed with the SEC within four business days after the Annual Meeting. A copy of our Annual Report for the year ended December 31, 2018 accompanies this CurrentProxy Statement. The Notice, this Proxy Statement and our Annual Report on Form 8-K will beare available on our website at www.firstmidwest.com/investorrelationswww.proxyvote.com after its filing with(if you utilize www.proxyvote.com, you will need the SEC.control number included on your Proxy Card). If you would like to receive, without charge, an additional paper copy of our Annual Report, please contact our Corporate Secretary at First Midwest Bancorp, Inc., 8750 West Bryn Mawr Avenue, Suite 1300, Chicago, Illinois 60631.
2019 Proxy Statement | 3 |
Proxy Summary
Certain Terms
Certain terms that we use in this Proxy Statement have particular meanings, as set forth below.
Term | Meaning | |
401(k) Plan | First Midwest Bancorp, Inc. Savings and Profit Sharing Plan, as amended | |
2018 Stock and Incentive Plan | First Midwest Bancorp, Inc. 2018 Stock and Incentive Plan | |
Annual Meeting | 2019 Annual Meeting of Stockholders of First Midwest Bancorp, Inc. | |
Board of Directors or Board | Board of Directors of First Midwest Bancorp, Inc. | |
By-Laws | Amended and Restated By-Laws of First Midwest Bancorp, Inc. | |
Certificate of Incorporation | Restated Certificate of Incorporation of First Midwest Bancorp, Inc., as amended | |
Common Stock | Common Stock, $0.01 par value per share, of First Midwest Bancorp, Inc. | |
Company, we, us or our | First Midwest Bancorp, Inc. | |
Deferred Compensation Plan | First Midwest Bancorp, Inc. Nonqualified Retirement Plan, as amended | |
Exchange Act | Securities Exchange Act of 1934, as amended | |
FASB | Financial Accounting Standards Board | |
First Midwest Bank or Bank | First Midwest Bank, which is a wholly-owned subsidiary of First Midwest Bancorp, Inc. | |
Form 10-K | First Midwest Bancorp, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2018 | |
Gain Deferral Plan | First Midwest Bancorp, Inc. Stock Option Gain Deferral Plan, as amended | |
Internal Revenue Code | Internal Revenue Code of 1986, as amended | |
M&A | Mergers and acquisitions | |
Named executive officers | Executive officers named in the Summary Compensation Table contained in this Proxy Statement | |
Non-Employee Directors Stock Plan | First Midwest Bancorp, Inc. Amended and Restated Non-Employee Directors Stock Plan, as amended | |
Notice | The Notice of Annual Meeting of Stockholders that accompanies this Proxy Statement | |
Omnibus Stock and Incentive Plan | First Midwest Bancorp, Inc. Omnibus Stock and Incentive Plan, as amended | |
Pension Plan | First Midwest Bancorp, Inc. Consolidated Pension Plan, as amended | |
Proxy Card | The form of proxy card or voting instruction form that accompanies this proxy statement | |
Proxy Statement | This proxy statement | |
RATCE | Return on Average Tangible Common Equity | |
Record Date | March 22, 2019 | |
SEC | United States Securities and Exchange Commission | |
TSR | Total Stockholder Return |
4 | First Midwest Bancorp, Inc. |
ITEM 1—1 ELECTION OF DIRECTORS
Our Board of Directors currently consists of sixteenthirteen directors, but will be reduced to fifteentwelve members as described below. Historically, the Board has been divided into three classes, with only one class standing for election at each annual meeting and each director serving for a three-year term. At eachour 2017 annual meeting, only one class of directors stands for election. This year, as described more fully under Item 2—Approval and Adoption ofour stockholders approved an Amendmentamendment to the Company’s Certificate of Incorporation to Declassify the Board of Directors, we are seeking to amend our Certificate of Incorporation to provide that directors will be elected to one-year terms on a go-forward basis, beginning withas their terms expired, thereby declassifying the nominees standing for election at this Annual Meeting. Accordingly, with respect to the electionBoard of directors at this Annual Meeting, we are asking stockholders to elect our director nominees to one-year terms, subject to the outcome of the vote on the declassification of our Board. If our stockholders do not approve theDirectors. The declassification of our Board then our Board of Directors will remain classified, directors will continue to serveis a three-year process that concludes this year, with all nominees this year standing for staggered terms and our director nominees will be electedelection for the terms indicated in the table below.
Nominees for Election
Upon the recommendation of our Nominating and Corporate Governance Committee, our Board of Directors unanimously nominated Barbara A. Boigegrain, Thomas L. Brown, Phupinder S. Gill, Kathryn J. Hayley, Peter J. Henseler, Frank B. Modruson, Ellen A. Rudnick, Mark G. Sander, Michael L. Scudder, Michael J. Small, and Stephen C. Van Arsdell and J. Stephen Vanderwoude to stand for election at this year’s Annual Meeting, all of whom are currently serving as directors of the Company. Mr. Gill, Ms. Rudnick and Mr. Small presently serve inIn connection with the class of directors who were last elected in 2014 and whose term expires at the Annual Meeting. Mr. Brown, Ms. Hayley and Messrs. Modruson and Van Arsdell were appointedCommittee’s determination to recommend that the Board overnominate Mr. Vanderwoude to stand for election to an additional term, the courseCommittee considered Mr. Vanderwoude’s tendered resignation upon attaining age 75 earlier this year in accordance with the Company’s Corporate Governance Guidelines. Upon consideration of Mr. Vanderwoude’s significant experience, contributions to our Board and his role as Lead Independent Director, the last yearCommittee recommended, and have not yet been placed in a class. our Board subsequently approved, that Mr. Vanderwoude’s resignation be declined.
Each of the nominees, other than Mr. Scudder, our Chairman and Chief Executive Officer, and Mr. Sander, our President and Chief Operating Officer, meets the standards of independence under our Corporate Governance Guidelines and the rules of the NASDAQ Stock Market.
Br. James Gaffney also currently serves in the class of directors whoseas a director and his term expires at this Annual Meeting. As previously announced, Mr. Chlebowski,Br. James, who has served as one of our directors since 2007,1998, has advised us that he will retire from the Board upon the conclusion of his current term. Prior to the Annual Meeting, the Board will take action to reduce the number of directors to fifteentwelve members. As such, at and following the Annual Meeting, our Board of Directors will consist of fifteentwelve members until such time as the Board may determine to change the number of directors.
Directors of the Company are elected by a majority of the votes cast at the Annual Meeting. If a director nominee fails to receive the required majority vote for election, the nominee will tender his or her resignation as a director in accordance with our By-Laws and Corporate Governance Guidelines, and the Board of Directors, upon the recommendation of the Nominating and Corporate Governance Committee, will determine whether it is in the best interests of the Company to accept or reject any tendered resignation.
Each nominee has informed us that he or she is willing to serve as a director if elected. Should any nominee become unable or refuse to serve as a director upon election, it is intended that the persons named as proxies on the Proxy Card will vote for the election of such other person as the Board of Directors may recommend.
Board Composition Diversity, Tenure and Refreshment
Our fifteentwelve continuing directors have significant and diverse operational, financial, risk, technology, corporate governance, leadership and other experience. Over the past twoseveral years, twofive of our directors have announced their retirement and we have added four new directors. Throughout this process, we have enhanced the existing industry and Company-specific knowledge of our Board of Directors with the fresh perspectives brought by our new directors. We believe the result is an even more active and engaged Board with the skill sets necessary to guide the Company as it grows and as our business strategy and the banking industry around us continue to evolve.
2019 Proxy Statement | 5 |
Item 1 Election of Directors
The following charts illustrate the varying tenure, independence, diversity and qualifications and experience of our continuing directors:
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Tenure | ||||||
0-5 yrs | 6-10 yrs | >10 yrs | ||||
Independent | Women and Minority | Other Public Company Experience | ||
3 of 12 (25%) Women | ||||
Nomination Process
In identifying, evaluating and recommending nominees for the Board of Directors, our Nominating and Corporate Governance Committee places primary emphasis on the criteria set forth in our Corporate Governance Guidelines, which include:
We do not set specific minimum qualifications that nominees must meet in order to be recommended to the Board of Directors. Each nominee is evaluated based on his or her individual merits, taking into account the needs of the Company and the composition of the Board of Directors.our Board. The Nominating and Corporate Governance Committee discusses and evaluates possible candidates in detail, and outside consultants are sometimes engaged to help identify potential candidates.
6 | First Midwest Bancorp, Inc. |
Item 1 Election of Directors
When making recommendations for nominees to the Board, the Nominating and Corporate Governance Committee attempts to include directors who, when taken together with the other nominees and continuing directors, will create a group that offers a diversity of education, professional experience, background, age, gender or minority status, perspective, viewpoint and skill. The Nominating and Corporate Governance Committee will consider and evaluate director candidates recommended by stockholders in the same manner as other candidates identified by the Committee. A stockholder who desires to formally nominate a candidate must do so by following the procedures described in the Company’s Certificate of Incorporation and By-Laws.
Set forth below is the name of each member of the Board,director nominee, along with his or her principal occupation for at least the previous five years and other professional experience.
Nominees Standing for Election at the Annual Meeting
| Barbara A. Boigegrain | |
Current Position: Chief Executive Officer and General Secretary, Wespath Benefits and Investments | ||
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EXPERIENCE AND QUALIFICATIONS | ||
Ms. Boigegrain has served as the Chief Executive Officer and General Secretary of Wespath Benefits and Investments (formerly the General Board of Pension and Health Benefits of The United Methodist Church) since 1994. Wespath is a pension, health and welfare benefit trustee and administrator that is one of the largest faith-based pension funds in the United States, with $23 billion of assets under management, and a global leader in environmental, social and governance (ESG) investing. Prior to 1994, Ms. Boigegrain spent eleven years as a consultant with Towers Perrin and four years with KPMG LLP and Dart Industries as a manager and analyst. Ms. Boigegrain is a member of the board of directors of Church Benefits Association and the Church Alliance, and the board of trustees of Emory & Henry College. As the CEO and General Secretary of Wespath, Ms. Boigegrain has overseen its restructuring, significantly improved its performance and services and increased its assets under management. In her experience as a benefits consultant, she established the San Diego office of Towers Perrin. | ||
Age: 61 | ||
Ms. Boigegrain earned a Bachelor of Arts degree in Biology and Psychology from Trinity University in 1979. Through her extensive employee benefits, senior leadership and corporate governance experience, Ms. Boigegrain brings significant leadership, business development, operations and management skills to our Board of Directors. She also provides valuable knowledge of compensation, financial markets, strategic growth, ESG investing and governance. | ||
2019 Proxy Statement | 7 |
Item 1 Election of Directors
| Thomas L. Brown | |
Current Position: Senior Vice President and Chief Financial Officer, RLI Corp. (NASDAQ) | ||
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EXPERIENCE AND QUALIFICATIONS | ||
Mr. Brown has been the Senior Vice President and Chief Financial Officer of RLI Corp., a specialty insurer serving diverse niche property, casualty and surety markets, since 2017. From 2011 to 2017, he served as RLI Corp.’s Vice President and Chief Financial Officer. Previously, Mr. Brown was a partner of PricewaterhouseCoopers LLP, where he served for ten years as its Midwest Regional Financial Services Director and led teams responsible for the banking, insurance, capital markets and investment management business sectors. Mr. Brown currently serves on the board of directors of Prime Holdings Insurance Services, Inc. (since 2016). He also serves on the boards of directors of the Chicago Shakespeare Theater and Easter Seals Central Illinois. From 2004 through 2017, Mr. Brown served on the board of trustees of Illinois Wesleyan University. | ||
Age: 62 | ||
Mr. Brown earned a Bachelor of Science degree in Accounting from Illinois Wesleyan University in 1979. He is a certified public accountant. With his extensive finance and accounting background, combined with the insights of a member of senior management of a public company, Mr. Brown brings valuable finance, accounting, strategic planning, risk and business management skills and experience to our Board of Directors. | ||
Phupinder S. Gill | ||
Current Position: Former Chief Executive Officer, CME Group, Inc. (NYSE) | ||
EXPERIENCE AND QUALIFICATIONS | ||
Mr. Gill served as the Chief Executive Officer of CME Group Inc., a global derivatives marketplace and exchange, from 2012 until his retirement on December 31, 2016. Prior thereto, he served as President from 2007 until 2012, and he previously served as President and Chief Operating Officer of CME Holdings and of CME from 2004 until 2007. From 2000 to 2003, he served as Managing Director and President of CME Clearing. Mr. Gill was also the President of GFX Corp., a wholly-owned subsidiary of CME Group that provides liquidity in foreign exchange futures, from 1998 until 2012. Mr. Gill currently serves on the board of directors of The Alexander Maxwell Grant Foundation. From 2012 until his retirement on December 31, 2016, he served on the boards of CME Group and the World Federation of Exchanges. He also previously served on the boards of CME Clearing Europe (CME Group’s UK Clearing House), Bursa Malaysia Derivatives Berhad, Bolsa Mexicana de Valores, S.A.B. de C.V., CME Group Foundation and CME Group Community Foundation. Mr. Gill is a past member of CME Group’s Competitive Markets Advisory Council. | ||
Age: | ||
Mr. Gill earned a Bachelor of Science degree in Finance in 1985 and a Master of Business Administration with a concentration in Finance in 1987 from Washington State University. Through his board and executive management experience, Mr. Gill brings important public company, technology, risk management, operating and senior management experience to our Board of Directors, as well as experience with M&A and global affairs. He also provides the perspective of a former chief executive officer of a public company. | ||
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First Midwest Bancorp, Inc. |
Item 1 Election of Directors
| Kathryn J. Hayley | |
Current Position: Chief Executive Officer, Rosewood Advisory Services, LLC | ||
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EXPERIENCE AND QUALIFICATIONS | ||
Ms. Hayley is the Chief Executive Officer of Rosewood Advisory Services, LLC, a business advisory services firm. Previously, she served as an Executive Vice President of UnitedHealthcare (a subsidiary of UnitedHealth Group, Inc. (NYSE)), a position in which she served from 2012 to 2015, overseeing a number of strategic initiatives at this global healthcare company. From 2006 to 2012, she served as an executive of Aon plc (NYSE), including as Chief Executive Officer of Aon Consulting Worldwide and Aon Hewitt Consulting Americas. Prior to her service at Aon, Ms. Hayley was an information technology partner at Deloitte Consulting and led the U.S. financial services practice. She also served on the board of directors of Deloitte & Touche LLP U.S. Ms. Hayley currently serves on the board of Alight Solutions, LLC (since 2018) and the advisory board of E.A. Renfroe & Company, Inc. (since 2016). She previously served on the board of directors of Tribridge Holdings, LLC (2015 to 2017). She also serves on the board of the Chicago Shakespeare Theater. | ||
Age: 60 | ||
Ms. Hayley earned a Bachelor of Science degree in Applied Computer Science from Illinois State University in 1979 and a Master of Business Administration, with concentrations in Marketing and Finance, from the Kellogg School of Management at Northwestern University in 1984. Through her extensive information technology and financial services background and her broad executive management experience, as well as her human resources and talent management experience, Ms. Hayley provides our Board with valuable strategic planning and business, operations and management experience, as well as the insights of a former senior executive of several public companies. | ||
2019 Proxy Statement | |
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Item 1 Election of Directors
| Peter J. Henseler | |
Current Position: President, TOMY International | ||
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EXPERIENCE AND QUALIFICATIONS | ||
Mr. Henseler is the President and a director of TOMY International, a wholly-owned subsidiary of TOMY Company, Ltd., a global designer and marketer of toys and infant products. He is also the founder and President of Wise Consulting Group Inc., a strategy and management consulting firm. He rejoined TOMY International in 2017 after serving as Vice Chairman until his retirement in 2012. Mr. Henseler previously held the position of President of TOMY International from 2011 until 2012. He was President of RC2 Corporation (NASDAQ) from 2002 to 2011, at which time TOMY Company acquired RC2. He served as RC2’s Executive Vice President of Sales and Marketing from 1999 to 2002. Mr. Henseler also previously served as a director of RC2. Prior to joining RC2, Mr. Henseler held marketing positions at McDonald’s Corporation and Hasbro, Inc. In February 2018, he completed his tenure as Chairman of the Toy Industry Foundation and now serves as an executive advisor to the board. He also previously served on the board of directors of the American Toy Industry Association. | ||
Age: 60 | ||
Mr. Henseler earned a Bachelor of Science degree in Marketing from Xavier University in 1980. Mr. Henseler brings important executive management, operating and leadership skills and insights to our Board of Directors through his experience as a president of a global public company, as well as his substantial operational, brand management and marketing experience. | ||
| Frank B. Modruson | |
Current Position: President, Modruson & Associates, LLC | ||
EXPERIENCE AND QUALIFICATIONS | ||
Mr. Modruson has served as President of Modruson & Associates, LLC, a management consulting firm, since 2015. Previously, Mr. Modruson spent the majority of his career at Accenture plc, a global professional services company, where he served as a client partner and as Chief Information Officer. He currently serves on the board of directors of Zebra Technologies Corporation (since 2014; NASDAQ). Previously, Mr. Modruson served on the boards of directors of Landauer Corporation (2017; NYSE) and Forsythe Technology, Inc. (2014 to 2017), both of which were acquired in 2017. He also serves on the boards of the Lyric Opera of Chicago and the Glen Ellyn Volunteer Fire Company. | ||
Age: 59 | ||
Mr. Modruson earned a Bachelor of Science degree in Computer Science from Dickinson College in 1984 and a Master of Science degree in Computer Science from Pennsylvania State University in 1987. With his significant technology, strategy and consulting background, as well as experience on other public company boards, Mr. Modruson brings important strategic and business insights, as well as technology, risk management and operational efficiencies experience to our Board of Directors. | ||
10 | First Midwest Bancorp, Inc. |
Item 1 Election of Directors
| Ellen A. Rudnick | |
Current Position: Senior Advisor and Adjunct Professor of Entrepreneurship, University of Chicago Booth School of Business | ||
EXPERIENCE AND QUALIFICATIONS | ||
Ms. Rudnick has served at the University of Chicago Booth School of Business since 1999. She is currently a Senior Advisor and Adjunct Professor of Entrepreneurship, and she previously served as the Executive Director of the Polsky Center for Entrepreneurship and Innovation. Prior to joining the University of Chicago, Ms. Rudnick served as President and Chief Executive Officer of Healthcare Knowledge Resources, President of HCIA, Chairman of Pacific Biometrics and Corporate Vice President of Baxter Healthcare Corporation. Ms. Rudnick currently serves on the boards of directors of HMS Holdings, Corp. (since 1997; NASDAQ), Liberty Mutual Insurance Company (since 2001) and Patterson Companies (since 2003; NASDAQ). She has spent over thirty years in business management and entrepreneurial activities, primarily in the health care and information services industries. She serves in various leadership positions with several civic and nonprofit organizations in the Chicago metropolitan area, including having served on the board of the Northshore University Health System for over 20 years and on the board of Hyde Park Angels, and currently is on the boards of directors of the Chicagoland Entrepreneurship Center (1871) and Matter. She is the recipient of several honors, including the Today’s Chicago Woman 20th Anniversary Hall of Fame Award, the YWCA Leadership Award, the Illinois Venture Capital Industry Richard J. Daley Award and the 1871 Entrepreneurial Champion Award. | ||
Age: 68 | ||
Ms. Rudnick earned a Bachelor of Arts degree in Italian (with a minor in Economics) from Vassar College in 1972 and a Master of Business Administration with a concentration in Finance from the University of Chicago in 1973. With her extensive business background and her public company board experience, Ms. Rudnick brings important leadership, corporate and entrepreneurial experience to our Board of Directors, as well as valuable experience in business management. | ||
2019 Proxy Statement | 11 |
Item 1 Election of Directors
| Mark G. Sander | |
Current Position: President and Chief Operating Officer of the Company | ||
EXPERIENCE AND QUALIFICATIONS | ||
Mr. Sander is the President and Chief Operating Officer of the Company and of First Midwest Bank. Mr. Sander also serves as Vice Chairman of the Board of First Midwest Bank. He served as the Senior Executive Vice President and Chief Operating Officer of the Company from 2011 until his promotion in January 2019. Prior to joining the Company in 2011, Mr. Sander served as Executive Vice President, Director of Commercial Banking at Associated Banc-Corp (NYSE), where he oversaw Associated’s commercial banking, treasury management, insurance brokerage and capital markets businesses. He also served as a member of Associated’s Executive and ALCO Committees. Previously, he served as a commercial banking executive at Bank of America and in numerous leadership positions in commercial banking at LaSalle Bank. Mr. Sander has more than thirty-five years of experience in the financial services industry. | ||
Age: 60 | ||
Mr. Sander earned a Bachelor of Science degree in Finance from the University of Illinois in 1980 and a Master of Business Administration with a concentration in Finance and International Economics from the University of Chicago in 1983. Mr. Sander brings significant banking industry and executive experience to our Board of Directors. His important leadership position with the Company and First Midwest Bank and his involvement with the operations, vision and strategy of the Company and the Bank provide the Board with an understanding of the Company’s day-to-day operations and strategic goals. | ||
12 | First Midwest Bancorp, Inc. |
Item 1 Election of Directors
| Michael L. Scudder | |
Current Position: Chairman and Chief Executive Officer of the Company | ||
EXPERIENCE AND QUALIFICATIONS | ||
Mr. Scudder is the Chairman of the Board (since 2017) and Chief Executive Officer (since 2008) of the Company. He also serves as Chairman and Chief Executive Officer of First Midwest Bank. Mr. Scudder served as the Company’s President from 2007 to January 2019, as its Chief Operating Officer from 2007 to 2008 and as its Chief Financial Officer from 2002 to 2007. He previously served as the Group Executive Vice President and Chief Financial Officer of First Midwest Bank from 1995 to 2001. He also has served in various other management capacities in his over thirty years of service to the Company. Mr. Scudder began his professional career at KPMG LLP, an international public accounting firm. Mr. Scudder is an active member of the ABA’s American Bankers CEO Council and the Mid-Size Bank Coalition of America. He also serves on the board of directors of Silver Cross Hospital, the board of trustees of DePaul University, the executive committee of DePaul University’s Center for Financial Services and the Chicago Metropolitan Planning Council’s Executive Advisory Board. Additionally, he is a member of the Economic Club of Chicago, the Commercial Club of Chicago and the Bankers Club of Chicago. He previously served as an inaugural member of the Federal Reserve Bank of Chicago’s Community Depository Institution Advisory Council. | ||
Age: 58 | ||
Mr. Scudder earned a Bachelor of Science degree in Accounting from Illinois Wesleyan University in 1982, and a Master of Business Administration with a concentration in Finance from DePaul University in 1993. Mr. Scudder brings extensive executive management, financial and banking experience to our Board of Directors and has important institutional knowledge of the Company and its business and clients. His day-to-day management of the Company provides the Board with Company-specific experience and expertise, including a complete understanding of the Company’s vision, strategy and operations, as well as deep financial services industry knowledge. | ||
| Michael J. Small | |
Current Position: Chief Executive Officer, K4 Mobility LLC | ||
EXPERIENCE AND QUALIFICATIONS | ||
Mr. Small is a founder and the Chief Executive Officer of K4 Mobility LLC, a technology developer and provider of satellite communications services, since August 2018. Previously, Mr. Small served as the President and Chief Executive Officer and a director of Gogo, Inc. (NASDAQ), an airborne communications service provider, from 2010 until March 2018. Prior to joining Gogo, Mr. Small served as the Chief Executive Officer and a Director of Centennial Communications Corp. (NASDAQ) from 1999 to 2009. From 1995 to 1998, Mr. Small was the Executive Vice President and Chief Financial Officer of 360 Degrees Communications Company. Prior to 1995, he held the position of President of Lynch Corporation (NYSEMKT), a diversified acquisition-oriented company with operations in telecommunications, manufacturing and transportation services. | ||
Age: | ||
Mr. Small earned a Bachelor of Arts degree in History from Colgate University in 1979 and a Master of Business Administration with a concentration in Finance from the University of Chicago in 1981. Through his board, executive and financial experience, Mr. Small brings extensive public company, operating and management experience to our Board of Directors, as well as strategic, financial, technology and M&A experience. He also provides the perspective of a former chief executive officer of a public company. | ||
2019 Proxy Statement | 13 |
Item 1 Election of Directors
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Stephen C. Van Arsdell | ||
Current Position: Former Senior Partner, Chairman and Chief Executive Officer, Deloitte & Touche LLP | ||
EXPERIENCE AND QUALIFICATIONS | ||
Mr. Van Arsdell is a former senior partner of Deloitte & Touche LLP, where he served as Chairman and Chief Executive Officer from 2010 to 2012, and as Deputy Chief Executive Officer from 2009 to 2010. Previously, he served as Deloitte’s partner-in-charge of its financial services practice in the Midwest, and he was a member of Deloitte’s board from 2003 through 2009. Mr. Van Arsdell is a member of the Audit Committee of Brown Brothers Harriman & Co. (since 2015). He also is a member of the Dean’s advisory council for the Geis College of Business at the University of Illinois and Chair of the board of directors of the University of Illinois Alumni Alliance. He is a member of the Illinois Alumni Association Board of Advisors. Mr. Van Arsdell currently serves on the board of trustees of the Morton Arboretum and previously chaired the board of trustees of the Conservation Foundation. | ||
Age: | ||
Mr. Van Arsdell earned a Bachelor of Science degree in Accounting and a Masters of Accounting Science degree from the University of Illinois in 1972 and 1973, respectively. He is a certified public accountant. Mr. Van Arsdell brings to our Board extensive accounting, auditing, risk management and financial experience, together with strategic and leadership skills developed through executive leadership positions with a global accounting and advisory services organization. | ||
| J. Stephen Vanderwoude | |
Current Position: Lead Independent Director of the Company, Private Investor | ||
EXPERIENCE AND QUALIFICATIONS | ||
Mr. Vanderwoude has served as the Company’s Lead Independent Director since 2017. He is currently a private investor. From 1996 until 2007, Mr. Vanderwoude served as Chairman and Chief Executive Officer at Madison River Communications Corp., a company that acquired and operated rural telephone companies. Prior to his service to Madison River, he served as the President, Chief Executive Officer and a director of Powerhouse Technologies, Inc. (NASDAQ), and President, Chief Operating Officer and a director of Centel Corporation (NYSE). Mr. Vanderwoude served as a member of the board of directors of Centennial Communications Corp. (NASDAQ) from 2002 to 2009 and as its Chairman from 2007 to 2009. | ||
Age: 75 | ||
Mr. Vanderwoude earned a Bachelor of Science degree in Engineering from the University of Pennsylvania in 1967 and a Master of Business Administration with concentrations in Economics and Marketing from the University of Chicago in 1977. Through his chief executive officer and director experience at other public companies, professional background and considerable business accomplishments and achievements, Mr. Vanderwoude brings valuable skills and experience in leadership, business and risk management, strategic planning, finance, M&A and public company matters to our Board of Directors. | ||
14 | First Midwest Bancorp, Inc. |
Item 1 Election of Directors
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For more information regarding our Board of Directors, its members, its committees and our corporate governance practices, please see the section of this Proxy Statement titledentitled Corporate Governance at First Midwest or visit the Investor Relations section of our website at www.firstmidwest.com/officersdirectors.
Directors’ Recommendation |
The Board of Directors unanimously recommends that stockholders vote FOR the election of each of |
2019 Proxy Statement | 15 |
In accordance with applicable SEC rules, we are required to provide stockholders with an opportunity to approve, on an advisory basis, the compensation of our named executive officers as disclosed in this Proxy Statement. We refer to this proposal as the “say-on-pay” proposal. Our executive compensation programs, including detailed information regarding the compensation paid to our named executive officers for 2016,2018, are described in the Compensation Discussion and Analysis and Executive Compensation Tables sections of this Proxy Statement.
Our Board of Directors views it as a good corporate governance practice to present the say-on-pay proposal to our stockholders annually. The Board made this recommendation to our stockholders at our 20122018 annual meeting, and our stockholders overwhelmingly voted in favor of holding a say-on-pay vote every year, as opposed to every other year or every third year. Our stockholders will next have the opportunity to indicate their preference for the frequency of the say-on-pay vote at
At our 2018 annual meeting.
We are asking our stockholders to indicate their support for our executive compensation program as described in this Proxy Statement. This proposal gives our stockholders the opportunity to express their views on executive compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers described in this Proxy Statement. Accordingly, we will ask our stockholders to vote on the following resolution at the Annual Meeting:
RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to the executive compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables and related narrative discussion set forth in the 20172019 annual meeting proxy statement, is hereby approved by the Company’s stockholders on an advisory basis.
The say-on-pay vote is advisory and is therefore not binding on the Company, the Compensation Committee or our Board of Directors. We value the opinions of our stockholders, and the Compensation Committee will consider the results of the vote on our say-on-pay proposal when establishing the design of and amounts paid under our future executive compensation programs.
Directors’ Recommendation |
The Board of Directors unanimously recommends that stockholders vote FORapproval of |
16 | First Midwest Bancorp, Inc. |
Independent Registered Public Accounting Firm
The Audit Committee of the Board of Directors is responsible for appointing the Company’s independent registered public accounting firm, and the Audit Committee has selected Ernst & Young LLP to serve as our independent registered public accounting firm for the year ending December 31, 2017.2019. We are submitting this selection for stockholder ratification at the Annual Meeting. We expect a representative of Ernst & Young LLP to be present at the Annual Meeting and to have an opportunity to make a statement if he or she desires to do so and to be available to respond to appropriate questions from stockholders. Ernst & Young LLP also served as our independent registered public accounting firm for the year ended December 31, 2016.
Although we are not required to have our stockholders ratify the selection of our independent registered public accounting firm, our Board of Directors has determined to seek this ratification from stockholders. This ratification is advisory and is, therefore, not binding on the Audit Committee. If our stockholders do not ratify the selection, the Audit Committee will reconsider whether to retain Ernst & Young LLP, but may retain them nonetheless. Even if the selection is ratified, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interests of the Company.
Fees Paid to Independent Registered Public Accounting Firm
The Audit Committee, or a designated member of the Audit Committee, approves in advance all audit and any non-audit services rendered by Ernst & Young LLP on behalf of the Company. The following table shows information about fees paid by the Company to Ernst & Young LLP for services related to the fiscal years indicated below. The increase in the total fees of Ernst & Young LLP in 2016 as compared to 2015 resulted primarily from the additional services provided by Ernst &Young LLP in connection with the Company’s M&A activity, subordinated notes offering and sale-leaseback transaction that occurred in 2016.
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| $ | 1,658,979 |
| 100 | % | $ | 1,802,409 |
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Audit-related fees(2) |
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| 2016 | Percent of 2016 Services Approved by Audit Committee | 2015 | Percent of 2015 Services Approved by Audit Committee | ||||||||
Audit fees(1) | $ | 1,593,904 | 100% | $ | 1,377,269 | 100% | |||||
Audit-related fees(2) | 145,450 | 100% | 96,472 | 100% | |||||||
Tax fees(3) | 166,940 | 100% | 106,720 | 100% | |||||||
| Total fees | $ | 1,906,294 | $ | 1,580,461 | |||||||
(1) | Includes fees and expenses for the audit of the Company’s annual financial statements, internal control over financial reporting and review of financial statements included in the Company’s quarterly reports filed with the SEC, as well as other services normally provided by an independent auditor in connection with statutory and regulatory filings or engagements, including consents and assistance with review of SEC filings |
(2) | Includes fees related to the audits of the Company’s benefit plans and |
(3) | Includes fees related to assistance with routine audits and tax planning, consulting and compliance services. |
(4) | Includes fees and expenses related to regulatory compliance consulting services. |
Audit and all other fees for 2017 were elevated primarily due to the services provided by Ernst & Young LLP in connection with the Company’s 2017 M&A activity, changes in audit and accounting scope and regulatory compliance consulting services. Tax fees for 2018 were elevated due to the services provided by Ernst & Young LLP in connection with federal income tax reform.
2019 Proxy Statement | 17 |
Item 3 Ratification of the Appointment of the Company’s Independent Registered Public Accounting Firm
For audit, audit-related, services, tax-related services and all other services, our Audit Committee has determined specific services and dollar thresholds under which such services would be considered pre-approved. To the extent management requests services other than these pre-approved services, or beyond the dollar thresholds, our Audit Committee must specifically approve the services. Further, under our fee policy, our independent registered public accounting firm may not perform the non-audit services identified by the SEC as prohibited. Our fee policy requires management to provide to our Audit Committee on a quarterly basis a summary of all services performed by the independent registered public accounting firm.
Directors’ Recommendation |
The Board of Directors unanimously recommends that stockholders vote FOR ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending |
18 | First Midwest Bancorp, Inc. |
CORPORATE GOVERNANCE AT FIRST MIDWEST
Our Board of Directors is committed to maintaining strong corporate governance principles and practices. If you would like
www.firstmidwest.com/corporategovernance or request them in print by sending a written request to the Corporate Secretary at First Midwest Bancorp, Inc., One Pierce Place, Suite 1500, Itasca, Illinois 60143:
Our Board of Directors determines annually the independence of all non-employee directors in accordance with the independence requirements of the NASDAQ Stock Market rules. Accordingly, each year the Board affirmatively determines whether each non-employee director has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Annually, each non-employee director is required to complete a questionnaire that provides information about relationships that might affect the determination of independence. Management then provides the Nominating and Corporate Governance Committee and Board of Directors with relevant facts and circumstances of any relationship bearing on the independence of a director or nominee that is outside the categories permitted under the rules of the NASDAQ Stock Market.
2019 Proxy Statement | 19 |
Corporate Governance at First Midwest
Based on the review and recommendation by the Nominating and Corporate Governance Committee, the Board of Directors analyzed the independence of each of the Company’s nominees and other current directors, and determined that all of our directors meet the standards of independence under our Corporate Governance Guidelines and the NASDAQ Stock Market rules, other than Michael L. Scudder, the Company’s PresidentChairman and Chief Executive Officer, and Mark G. Sander, the Company’s Senior Executive Vice President and Chief Operating Officer, who are not considered to be independent under the standards of our Corporate Governance Guidelines and the rules of the NASDAQ Stock Market because they are employees.employees of the Company. In addition, our Board of Directors determined that:
u | Each member of the Audit Committee is financially literate and has accounting or related financial management expertise (as such qualifications are defined under the rules of the NASDAQ Stock Market). |
u | Thomas L. Brown and Stephen C. Van Arsdell are “audit committee financial experts” within the meaning of the rules and regulations of the SEC. |
u | Each member of the Compensation Committee is a “non-employee director” within the meaning of Exchange Act Rule 16b‑3, and an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code. |
Board Leadership and Structure
As provided in our Corporate Governance Guidelines, our Board of Directors does not have a fixed policy regarding the separation of the offices of Chairman and Chief Executive Officer and believes that it should maintain the flexibility to select the Chairman and itsthe Board leadership structure, from time-to-time, based on the criteria that it deems to be in the best interests of the Company and its stockholders.
Since 2017, Michael L. Scudder has served as the Company’s Chairman of the Board is presently held by Robert P. O’Meara and the position of President and Chief Executive Officer is held by Michael L. Scudder. and J. Stephen Vanderwoude has served as Lead Independent Director.
The Board of Directors believes that, at this time, the separationcombination of the offices of Chairman of the Board and of President and Chief Executive Officer isand the maintenance of a separate Lead Independent Director role are appropriate for the Company. This separation presentlyThe combination allows Mr. Scudder to focus onleverage his responsibilities of running the day-to-day affairsextensive knowledge of the Company enhancingand industry experience into the strategic vision for the management and direction of the Company at both the Board and management level. This further allows him to drive the enhancement of stockholder value, grow and expanding and strengtheningexpand the Company’s business. Concurrently,business and execute the Company’s strategies.
Additionally, the Board believes it is appropriate to have a Lead Independent Director while Mr. O’Meara,Scudder serves as Chairman of the Board can utilize his intimate knowledgein order to provide a leadership role for our independent directors. Mr. Vanderwoude has a strong understanding of the Company and its business, as well as significant industry experience toleadership, corporate governance and public company experience.
Consistent with Mr. Scudder’s focus on the Company’s strategic vision and direction, in January 2019, the Board approved the appointment of Mark G. Sander to the position of President of the Company in addition to his position as Chief Operating Officer. In this role, Mr. Sander leads significant portions of the day-to-day management of the Company and the Bank.
Our Lead Independent Director must satisfy the independence requirements of the NASDAQ Stock Market and must have served as a director of the Company for least one year. The Lead Independent Director serves in a leadership capacity among our independent directors and as an additional resource for the Chairman of the Board in order to continue to foster a highly engaged and strong-performing Board of Directors.
20 | First Midwest Bancorp, Inc. |
Corporate Governance at First Midwest
The principal duties and responsibilities of the Lead Independent Director are as it provides advice to and independent oversight of management. As the independent Chairman, Mr. O’Meara also serves as lead independent director and the presiding director at Board meetings, chairs Board meetings and has final approval of Board meeting agendas.follows:
u | Act as a liaison on behalf of the independent directors with the Chairman of the Board. |
u | Preside at all meetings of the Board of Directors and stockholders at which the Chairman of the Board is not present. |
u | Consult with the Chairman of the Board on the agendas and schedules for meetings of the Board of Directors. |
u | Have the ability to call meetings of the Board. |
u | Determine, in conjunction with the Board of Directors, the need for, have the ability to call, and preside at meetings of the independent directors and, following each such meeting, promptly communicate to the Chairman of the Board the substance of the discussions that occurred at the meeting. |
u | Serve as a member of the Advisory Committee of the Board of Directors. |
u | Serve as the acting Chairman of the Board in the event of an extended incapacitation of the Chairman until the incapacitation has ended or a successor to the Chairman is elected. |
u | Together with the Chairman of the Board and the Chair of the Nominating and Corporate Governance Committee, interview all new director candidates. |
u | Consult with the Chairman of the Board with respect to the quality and timeliness of information provided to the Board. |
u | Perform such other duties and responsibilities as may be assigned to the Lead Independent Director by the Board. |
Risk Oversight
Risk is inherent with every business, particularly for financial institutions, and we face a number ofseveral risks, including, for example, credit, market, liquidity, operational, strategic, compliance, legal cyber and reputation risks, as well as risks related to general economic conditions.risks. We do not view risk in isolation, but rather consider risk as part of our ongoing consideration of business strategy and business decisions.
We support our risk oversight process through a governance structure involving our Board of Directors and management. Management is responsible for the day-to-day management of the risks the Company faces. It establishes and maintains risk management processes and policies designed to balance our operations and business opportunities with risk mitigation in order to create stockholder value. It is management’s responsibility to anticipate, identify and communicate risks to the Board of Directors and its committees. The Company also has a Chief Risk Officer.
We have a Strategic Risk Management Committee composed of members of executive management. The purpose of this committee is to provide a centralized forum to manage key risks that could negatively impact the Company’s operating performance and execution of its business plan. This committee, through our Chief Risk Officer, also reports at least quarterly to the Enterprise Risk Committee of our Board of Directors on significant risk management matters.
The Board of Directors, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the Board of Directors has the responsibility to satisfy itself that the risk management processes,framework, policies and levelsprofiles designed and implemented by management are appropriate and functioning as designed. contemplated.
2019 Proxy Statement | 21 |
Corporate Governance at First Midwest
The Board performs its risk oversight function primarily through its committees and the operation of the Bank’s board of directors. The Board committee that is primarily involved in assisting the Board of Directors with its oversight of enterprise-wide risk management is the Enterprise Risk Committee. Among other responsibilities, this committee approves risk appetites and profiles established by management for key business risks and confirms that business decisions are executed within the established risk tolerances.
Each of the Board’s standing committees is chaired by ancomprised of independent directordirectors and supports the Board’s oversight functions by regularly addressing various risks in their respective areas of oversight.oversight, as follows:
u | Audit Committee. Assists the Board with risk oversight in the areas of financial reporting, internal controls, tax and compliance with certain public reporting requirements. |
u | Compensation Committee. Assists the Board with risk oversight associated with our compensation policies and programs, including maintaining an executive compensation program that is designed to encourage the achievement of corporate objectives and strategies, enhance stockholder value and incent and retain our executive officers, and discourage unnecessary or excessive risk taking. |
u | Enterprise Risk Committee. Assists the Board with the oversight of the Company’s enterprise-wide risk management framework. |
u | Nominating and Corporate Governance Committee |
Each committee reports to the full Board of Directors at least quarterly at regular meetings concerning the activities of the committee, the significant matters it has discussed and the actions taken by the committee. The Board also receives reports directly from the President andour Chief Executive Officer, theChief Operating Officer, Chief Financial Officer, Chief Risk Officer and General Counsel, as well as other members of management, regarding the Company’s risk management functions. In addition, the Chairman of the
Cybersecurity risk is a component of operational risk at the Company. We recognize the importance of maintaining the trust of our customers with respect to their confidential financial information and devote significant attention to cybersecurity risk. In this regard, we use a variety of techniques that are intended to secure our operations and confidential information, consult with third-party security advisors and maintain cyber insurance.
Our Board of Directors oversees our efforts to manage cybersecurity risk. Senior management is responsible for the day-to-day management of cybersecurity risk, designing and implementing policies, processes and procedures to address and mitigate this risk. The Board and its committees receive periodic reports from and engage in discussions with senior management on the effectiveness of our cybersecurity program and review our inherent risks, the plans and programs designed to address these risks and our progress in doing so.
Meetings
Our Board of Directors holds regular quarterly meetings and special meetings as needed. In 2016,2018, the Board held four regularly scheduled meetings and fourone special meetings.meeting, and our independent directors met separately without management present following each regular meeting. Our directors also communicate with each other between meetings. Further, the Board of Directors devotes additional time outside of its regular meetings to presentations and discussions with senior management about the Company’s long-term strategy, corporate objectives and initiatives, financial operating plans and industry and market updates, which are then discussed further at the Board’s quarterly meetings.
We expect our directors to attend all Board and committee meetings for those committees on which they serve. Directors are also expected to attend each annual meeting of stockholders. Other than Mr. Brown, Ms. Hayley and Messrs. Modruson and Van Arsdell, each of whom joined the Board after our last annual meeting of stockholders, and Ms. Boigegrain, all of our current directors, including the current nominees for director, attended last year’s annual meeting. EightAll of our directors attended last year’s
22 | First Midwest Bancorp, Inc. |
Corporate Governance at First Midwest
annual meeting and 100% of the total number of meetings of the Board of Directors and Board committees on which he or she served during 2016, with the remaining six directors attending at least 75% of the meetings and with the average attendance for all directors being 95%.
Board Committees
Our Board of Directors has threefour standing committees,committees: our Audit Committee, Compensation Committee, Enterprise Risk Committee and Nominating and Corporate Governance Committee. Each standing committee has a written charter and the Board of Directors has determined that each of the members of our standing committees is “independent”independent under the provisions of our Corporate Governance Guidelines and the rules of the NASDAQ Stock Market. The Board of Directors has also established an Advisory Committee for the purpose of providing general advice to management with respect to general business matters as needed between regular meetings of the Board. Additionally,Board and undertaking such other duties and responsibilities as may be delegated to this committee by the Board intends to establish an Enterprise Risk Committee in May 2017, which will be comprised entirely of independent directors.
Under our Corporate Governance Guidelines, the members of each Board committee (including each committee chair) are appointed by the Board of Directors upon the recommendation of the Nominating and Corporate Governance Committee, and a member may only serve as the chair of one committee of the Board at any given time. The table below provides
Below is a brief description, including membership and meeting information for each Board committee for the 2016 fiscal year, as well as the expected committee membership for our new directors who have not yet been appointed to a committee and for the Enterprise Risk Committee that is in the process of being formed.
| Name | Audit | Compensation | Nominating and Corporate Governance | Advisory | Enterprise Risk(1) | |||||
| Barbara A. Boigegrain | ü | ü | ||||||||
Thomas L. Brown(2) | ü | ü | ||||||||
John F. Chlebowski, Jr.(3) | ü | |||||||||
| Br. James Gaffney | ü* | ü | ||||||||
| Phupinder S. Gill | ü | ü | ||||||||
Kathryn J. Hayley(4) | ü | ü | ||||||||
| Peter J. Henseler | ü | ü | ||||||||
| Patrick J. McDonnell | ü* | ü | ü | |||||||
Frank B. Modruson(4) | ü | ü | ||||||||
| Robert P. O’Meara | ü* | |||||||||
| Ellen A. Rudnick | ü | ü | ||||||||
| Mark G. Sander | ||||||||||
| Michael L. Scudder | ü | |||||||||
| Michael J. Small | ü | ü | ||||||||
Stephen C. Van Arsdell(2) | ü | ü | ||||||||
| J. Stephen Vanderwoude | ü* | ü | ü | ü | ||||||
| Total committee meetings 2016 | 8 | 5 | 6 | 2 | N/A | |||||
Audit Committee
# of Meetings | ||
Committee Members | Primary Responsibilities | in 2018 |
Stephen C. Van Arsdell (Chair) | ◆Select and retain our independent registered public accounting firm and pre-approve all services performed by this firm. ◆Oversee the external financial reporting process and the adequacy of the Company’s internal controls. ◆Oversee the scope of the audit activities of the independent registered public accounting firm and the Company’s internal auditors. ◆Oversee the process for determining the independence of the independent registered public accounting firm. ◆Oversee the procedures for the receipt, retention and resolution of complaints regarding accounting, internal controls or auditing matters. ◆Discuss with management and the independent registered public accounting firm the critical accounting policies and practices used by the Company, any off-balance sheet items and judgments made in connection with the preparation of the Company’s financial statements. | 8 |
2019 Proxy Statement | 23 |
Corporate Governance at First Midwest
Compensation Committee
# of Meetings | ||
Committee Members | Primary Responsibilities | in 2018 |
Barbara A. Boigegrain (Chair) | ◆Review and approve the Company’s general compensation philosophy. ◆Oversee the development and implementation of our compensation policies and programs. ◆Review and monitor the Company’s incentive and other compensation programs. ◆Recommend to our Board of Directors goals and objectives relating to the compensation of our Chief Executive Officer. ◆Assist our Board of Directors in evaluating our Chief Executive Officer and recommend to our Board the Chief Executive Officer’s compensation. ◆Review and recommend to our Board of Directors the annual compensation of senior management. ◆Review and recommend to our Board of Directors the annual compensation of our directors. ◆Administer our 2018 Stock and Incentive Plan and Non-Employee Directors Stock Plan. ◆Oversee the Company’s health and welfare programs. ◆Oversee the Company’s retirement plans. ◆Conduct an annual risk assessment of the Company’s compensation programs. ◆Retain an independent compensation consultant to provide advice to the Compensation Committee relative to compensation matters. | 8 |
Enterprise Risk Committee reviews and evaluates our general compensation philosophy and oversees the development, implementation and any revisions to our compensation policies and programs. The responsibilities
# of Meetings | ||
Committee Members | Primary Responsibilities | in 2018 |
J. Stephen Vanderwoude (Chair) | ◆Review and approve policies establishing risk management governance, risk appetite, risk management procedures and risk control infrastructure for the Company’s enterprise-wide operations. ◆Oversee management’s efforts to manage the processes and systems for implementing and monitoring compliance with the Company’s enterprise risk management framework. ◆Review reports from management to evaluate the Company’s assessment and management of enterprise-wide risks identified through the enterprise risk management program. ◆Review and recommend to the Board for approval annually the Company’s capital management policy. ◆Review and recommend to the Board for approval annually the Company’s capital plan and monitor management’s adherence to the plan. | 5 |
24 | First Midwest Bancorp, Inc. |
Table of the Compensation Committee include, among others:Contents
Corporate Governance at First Midwest
Nominating and Corporate Governance Committee
# of Meetings | ||
Committee Members | Primary Responsibilities | in 2018 |
Br. James Gaffney (Chair) | ◆Recommend to the Board of Directors the director nominees for election at any meeting of stockholders at which directors are elected. ◆Identify, interview and recruit individuals to serve as members of our Board of Directors. ◆Oversee matters of corporate governance, including review of the Company’s Corporate Governance Guidelines, Code of Ethics and Standards of Conduct and stock ownership guidelines. ◆Advise the Board of Directors on Board and committee organization, membership, function, performance and effectiveness. ◆Recommend to the Board of Directors the appointment of a director to serve as the Chairperson and, if the Chairperson also serves as the CEO, the Lead Independent Director. ◆Review director independence standards and qualifications and make recommendations to the Board of Directors with respect to the determination of the independence and qualifications of directors. ◆Review related person transactions, if and when they arise. ◆Oversee the annual self-evaluation process of the Board of Directors and each of its committees. ◆Review stockholder proposals and consider responses or actions regarding such proposals. | 4 |
Advisory Committee
# of Meetings | ||
Committee Members | Primary Responsibilities | in 2018 |
Michael L. Scudder (Chair) | ◆Advise and consult with management with respect to business matters as needed between regular meetings of the Board of Directors. ◆Undertake such other duties and responsibilities as may be delegated to this committee by the Board of Directors. | — |
. The primary responsibility of the Advisory Committee is to advise and consult with management with respect to general business matters as needed between regular meetings of the Board of Directors.
The Board and the Audit, Compensation, Enterprise Risk and Nominating and Corporate Governance Committees conduct an annual self-evaluation, which includes both a qualitative and quantitative assessment by each director of the performance of the Board and the committees on which the director sits. The Nominating and Corporate Governance Committee oversees these evaluations. As part of this process, each director completes an annual self-evaluation of the Board and the committees on which the director sits and has a one-on-onean individual meeting with the Chair of the Nominating and Corporate Governance Committee. The results of the self-evaluations are reported to the Board of Directors.
Related Person Transactions
We maintain a written policy for reviewing, approving and monitoring transactions involving the Company and related persons (generally, directors and executive officers or their immediate family members, or stockholders owning 5% or more of our Common Stock).
2019 Proxy Statement | 25 |
Corporate Governance at First Midwest
Our Nominating and Corporate Governance Committee is responsible for reviewing and approving (or ratifying) all transactions with related persons. The Nominating and Corporate Governance Committee will take into account all relevant factors in its analysis, including whether the transaction is on terms comparable to those available to third parties. The Nominating and Corporate Governance Committee will also determine whether any transaction with a related person impairs the independence of a director, or presents a conflict of interest on the part of a director or executive officer. The Chair of the Nominating and Corporate Governance Committee may pre-approve or ratify any transaction with a related person involving an amount up to $500,000. The policy also provides that transactions involving competitive bids, the rendering of services by a regulated entity and certain ordinary course banking transactions, including loans made by First Midwest Bank, will be deemed to be pre-approved by the Nominating and Corporate Governance Committee.
During 2016,2018, First Midwest Bank engaged in transactions with certainsome of our executive officers, directors and entities with which they are associated. These transactions involved loans extended in accordance with Regulation O of the Federal Reserve and other banking services, all of which were in the ordinary course of business and on substantially the same terms, including current interest rates and collateral, as those prevailing at the time for comparable transactions with others not related to the Company and did not involve more than the normal risk of collectability or present other unfavorable features.
Compensation Committee Interlocks and Insider Participation
No member of our Compensation Committee has served as one of our executive officers or employees. None of our executive officers serves as a member of the board of directors or compensation committee of any other company that has an executive officer serving on our Board of Directors or our Compensation Committee.
Stockholder Communication with Directors
Stockholders may contact the Chairman of the Board, the Lead Independent Director, an individual director, the entire Board of Directors, our independent directors as a group or a specific Board committee by submitting written correspondence to First Midwest Bancorp, Inc., Attn: Corporate Secretary, One Pierce Place,8750 West Bryn Mawr Avenue, Suite 1500, Itasca,1300, Chicago, Illinois 60143.60631. Each communication should specify the applicable addressee(s) to be contacted as well as the general topic of the
Our Long-Standing Commitment to Corporate Social Responsibility
Our commitment to corporate social responsibility has been part of our corporate fabric since the founding of our Company. When forming First Midwest Bank shortly after the Great Depression, our founders established a commitment to treat all of our customers with respect and a focus on their financial needs. Since then,
Corporate Governance at First Midwest
generations of colleagues have sustained that commitment. Today, our vision, mission and values continue to drive our culture and are centered on client needs, rooted in service excellence, invested in bettering our communities, focused on attracting top talent and influenced by technological change. We always strive to help our customers achieve financial success.
As we grow, we do so with respect for social responsibility, environmental impact, strong governance and uncompromised integrity—to do what is right for our business, our stockholders, our communities and our colleagues.
To this end, a critical component of our success is effectively serving the communities in which we operate. We offer products, services and branch locations that we believe are conducive and responsive to the needs of the communities that we serve, including low- and moderate-income areas. In 2018, we extended approximately $170 million in community development loans. The Company’s commitment to the community also includes financial education, and our colleagues reached approximately 6,000 participants through financial education programs in 2018. We have maintained the highest community reinvestment rating from the Federal Reserve for over 20 consecutive years.
We and our colleagues also support many nonprofit organizations in our communities through donations, sponsorships and volunteer hours. Our colleagues serve on numerous nonprofit boards and give their time to many charitable and community causes. Since 2017, we have provided approximately $3 million in corporate contributions and sponsorships, and our First Midwest Charitable Foundation has made approximately $2 million in contributions since its inception.
In addition, we support initiatives that help sustain our environment for the long-term, whether that be through natural resource preservation, energy conservation, responsible waste management or recycling programs. When building or remodeling offices, we do so in an environmentally responsible manner and with an effort to use energy efficiently.
We are committed to strong corporate governance practices and business ethics that are fully embraced by our Board of Directors, executive management team and all colleagues. This unwavering commitment is observed throughout our Company and ultimately protects our business reputation, customers and stockholders.
A number of our corporate governance and business ethics practices are discussed in this proxy statement—for example, our Board of Directors is comprised of independent directors (other than our Chief Executive Officer and
2019 Proxy Statement | 27 |
Corporate Governance at First Midwest
President), our independent directors meet following each regular Board meeting without members of management present, the women and minority representation on our Board consists of one-third of our directors, we maintain strong enterprise-wide risk management processes and we adhere to a comprehensive Code of Ethics and Standards of Conduct that our colleagues are required to certify that they have reviewed each year.
28 | First Midwest Bancorp, Inc. |
INFORMATION REGARDING BENEFICIAL OWNERSHIP OF PRINCIPAL
The following table sets forth, as of March 24, 2017,22, 2019, the Record Date, information about the beneficial ownership of our Common Stock by all directors, our named executive officers and our directors and all executive officers as a group. Except as described below, each stockholder has sole voting and investment power for all shares shown. In addition, unless otherwise indicated, the address of each beneficial owner is c/o First Midwest Bancorp, Inc., One Pierce Place,8750 West Bryn Mawr Avenue, Suite 1500, Itasca,1300, Chicago, Illinois 60143.
We calculated the percent of class based on 102,840,266107,000,522 shares of Common Stock outstanding on March 24, 2017.22, 2019. We include shares of restricted stock subject to future vesting conditions for which an individual has voting but not dispositive power. We also include shares underlying restricted stock units and performance shares that could vest and shares subject to options that are currently exercisable or will become exercisable, within 60 days of March 24, 2017,22, 2019, even though an individual has neither voting nor dispositive power. Those shares are deemed to be outstanding and beneficially owned by the person holding such securities for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
|
|
|
|
|
|
|
| Number of |
| Percent of |
|
Beneficial Owner |
| Shares/Units(1)(2)(3) |
| Class |
|
Directors |
|
|
|
|
|
Barbara A. Boigegrain |
| 35,094 |
| * |
|
Thomas L. Brown |
| 12,455 |
| * |
|
Br. James Gaffney(4) |
| 98 |
| * |
|
Phupinder S. Gill |
| 51,258 |
| * |
|
Kathryn J. Hayley |
| 23,000 |
| * |
|
Peter J. Henseler |
| 24,624 |
| * |
|
Frank B. Modruson |
| 10,171 |
| * |
|
Ellen A. Rudnick |
| 33,115 |
| * |
|
Mark G. Sander |
| 204,512 |
| * |
|
Michael L. Scudder |
| 296,988 |
| * |
|
Michael J. Small |
| 29,851 |
| * |
|
Stephen C. Van Arsdell |
| 18,725 |
| * |
|
J. Stephen Vanderwoude |
| 33,116 |
| * |
|
Named Executive Officers (other than Messrs. Sander and Scudder) |
|
|
|
|
|
Patrick S. Barrett |
| 52,126 |
| * |
|
Michael W. Jamieson |
| 36,613 |
| * |
|
Thomas M. Prame |
| 52,396 |
| * |
|
All directors and executive officers (including named executive officers) as a group |
|
|
|
|
|
(25 persons)(5) |
| 1,209,615 |
| 1.1 | % |
* Less than 1%.
| Beneficial Owner | Number of Shares/Units(1)(2)(3)(4) | Percent of Class | |||
| Directors | |||||
| Barbara A. Boigegrain | 30,291 | * | |||
Thomas L. Brown(5) | — | * | |||
| John F. Chlebowski, Jr. | 27,979 | * | |||
Br. James Gaffney(6) | 3,838 | * | |||
| Phupinder S. Gill | 40,999 | * | |||
| Kathryn J. Hayley | 16,000 | * | |||
| Peter J. Henseler | 20,097 | * | |||
| Patrick J. McDonnell | 35,893 | * | |||
| Frank B. Modruson | 1,151 | * | |||
| Robert P. O’Meara | 392,203 | * | |||
| Ellen A. Rudnick | 32,393 | * | |||
| Mark G. Sander | 214,667 | * | |||
| Michael L. Scudder | 339,517 | * | |||
| Michael J. Small | 25,389 | * | |||
| Stephen C. Van Arsdell | 14,000 | * | |||
| J. Stephen Vanderwoude | 78,535 | * | |||
| Named Executive Officers (other than Messrs. Sander and Scudder) | |||||
| Paul F. Clemens | 87,625 | * | |||
| Thomas M. Prame | 44,634 | * | |||
| Nicholas J. Chulos | 42,604 | * | |||
| All directors and executive officers (including named executive officers) as a group | |||||
(28 persons)(7) | 1,738,435 | 1.69% | |||
(1) |
Some of our directors and officers have deferred cash compensation (in the form of phantom Common Stock) or stock option gains (in the form of Common Stock equivalents) under our deferred compensation plans. Some of these deferred amounts will be paid in shares of our Common Stock upon the director’s or officer’s retirement or other termination of employment or service with the |
(2) | Includes the following shares of Common Stock held through the Company’s 401(k) Plan: |
(3) | Includes the following shares of restricted stock subject to future vesting conditions for which the individual has voting but not dispositive power: |
2019 Proxy Statement | 29 |
Information Regarding Beneficial Ownership of Principal Stockholders, Directors and Management
(4) | Includes 98 shares of Common Stock owned by Lewis University as to which Br. James |
(5) | Includes: |
Other Security Ownership
The following table identifies each person known to us as of March 24, 201722, 2019 to beneficially own more than 5% of our outstanding Common Stock.
|
|
|
|
|
|
|
| Number |
| Percent |
|
Name and Address of Beneficial Owner |
| of Shares |
| of Class |
|
BlackRock, Inc.(1) |
| 14,648,741 |
| 13.8 | % |
55 East 52nd Street |
|
|
|
|
|
New York, New York 10055 |
|
|
|
|
|
The Vanguard Group(2) |
| 10,750,483 |
| 10.1 | % |
100 Vanguard Boulevard |
|
|
|
|
|
Malvern, Pennsylvania 19355 |
|
|
|
|
|
Wellington Management Group LLP(3) |
| 7,429,182 |
| 7.0 | % |
c/o Wellington Management Company LLP |
|
|
|
|
|
280 Congress Street |
|
|
|
|
|
Boston, Massachusetts 02210 |
|
|
|
|
|
Dimensional Fund Advisors LP(4) |
| 6,978,181 |
| 6.6 | % |
Building One |
|
|
|
|
|
6300 Bee Cave Road |
|
|
|
|
|
Austin, Texas 78746 |
|
|
|
|
|
| Name and Address of Beneficial Owner | Number of Shares | Percent of Class | ||||
BlackRock, Inc.(1) | 9,365,981 | 11.5 | % | |||
55 East 52nd Street New York, NY 10055 | ||||||
The Vanguard Group(2) | 6,882,836 | 8.5 | % | |||
100 Vanguard Boulevard Malvern, PA 19355 | ||||||
Dimensional Fund Advisors LP(3) | 6,829,752 | 8.4 | % | |||
Building One 6300 Bee Cave Road Austin, TX 78746 | ||||||
Wellington Management Group LLP(4) | 4,742,504 | 5.8 | % | |||
c/o Wellington Management Company LLP 280 Congress Street Boston, MA 02210 | ||||||
(1) | This information is based solely on a Schedule 13G filed with the SEC on January 28, 2019 by BlackRock, Inc., which reported sole voting power as to 14,405,929 shares and sole dispositive power as to 14,648,741 shares as of December 31, 2018. |
(2) | This information is based solely on a Schedule 13G/A filed with the SEC on January |
(3) | This information is based solely on a Schedule 13G/A filed with the SEC on February |
(4) | This information is based solely on a Schedule 13G/A filed with the SEC on February 8, 2019 by Dimensional Fund Advisors LP, which reported sole voting power as to 6,857,470 shares and sole dispositive power as to 6,978,181 shares as of December 31, 2018. Dimensional Fund Advisors LP and its subsidiaries disclaim beneficial ownership of all securities reported on the Schedule 13G/A. |
30 | First Midwest Bancorp, Inc. |
DIRECTOR COMPENSATION
We use a combination of cash and equity-based compensation set at levels we believe will allow us to attract and retain qualified individuals to serve on our Board of Directors. Each year, the Compensation Committee reviews, with the assistance of our independent compensation consultant, and makes a recommendation to our Board of Directors regarding the compensation that we pay to our directors. In setting director compensation, we consider the significant amount of time that directors devote to fulfilling their duties, advice that we receive from our compensation consultant and comparative data regarding director compensation at the companies in our peer group.
For 2018, the Compensation Committee recommended to our Board of Directors, and the Board subsequently approved, that both the annual fixed cash retainer and the annual award of Common Stock paid to each non-employee director should remain at $52,500, for a total of $105,000. The awards of Common Stock are granted as fully-vested shares of Common Stock, and our directors may elect to receive the stock component of their director compensation in cash.
Michael L. Scudder, our PresidentChairman and Chief Executive Officer, and Mark G. Sander, our Senior Executive Vice President and Chief Operating Officer, do not receive compensation for serving as a member of the Board. In addition, Br. James Gaffney has elected not to receive any director compensation.
The following table summarizes our annual compensation for non-employee directors for 2016:2018:
|
|
|
|
Component |
| Amount | |
An annual fixed cash retainer for each non-employee director |
| $ | 52,500 |
An annual award of Common Stock for each non-employee director(1) |
| $ | 52,500 |
An annual fixed cash retainer for the Lead Independent Director |
| $ | 25,000 |
An annual fixed cash retainer for the Audit Committee and Enterprise Risk Committee Chairs |
| $ | 15,000 |
An annual fixed cash retainer for the Compensation Committee and Nominating and Corporate Governance Committee Chairs |
| $ | 10,000 |
An annual fixed cash retainer for each member of the Audit Committee and the Enterprise Risk Committee (excluding the committee Chairs) |
| $ | 4,000 |
| Component | Amount | |||
| An annual fixed cash retainer for each non-employee director | $ | 50,000 | ||
| An annual award of Common Stock for each non-employee director* | $ | 50,000 | ||
| An annual fixed cash retainer for the Board Chair | $ | 150,000 | ||
| An annual fixed cash retainer for the Audit Committee Chair | $ | 15,000 | ||
| An annual fixed cash retainer for the Compensation Committee and Nominating and Corporate Governance Committee Chairs | $ | 10,000 | ||
| An annual fixed cash retainer for each member of the Audit Committee (excluding the Audit Committee Chair) | $ | 4,000 | ||
(1) | A director may elect to receive the stock component of his or her director compensation in cash. |
Each director’s annual cash retainer isand Common Stock award are paid in equal quarterly installments in arrears. Payment of each retainer installment is contingent upon the director’s service during the preceding quarter. We do not pay separate fees for attendance at Board or Board committee meetings. We also reimburse our directors for their reasonable Board and committee attendance-related expenses.
Barbara A. Boigegrain, Phupinder S. Gill, Peter J. Henseler, Patrick J. McDonnell,Frank B. Modruson, Ellen A. Rudnick and Michael J. Small each received an award of 2,4942,223 shares, and Patrick J. McDonnell, who retired from the Board at our 2018 annual meeting of stockholders, received an award of 1,021 shares, of fully-vested Common Stock for their 20162018 service as the stock component of their director compensation. Additionally, Frank B. Modruson, who joined the Board in August 2016, received an award of 1,149 shares of fully-vested Common Stock for his 2016 service as the stock component of his director compensation.Thomas L. Brown, Kathryn J. Hayley, John F. Chlebowski, Jr., John L. Sterling,Robert P. O’Meara, who retired from the Board at our 20162018 annual meeting of stockholders, Stephen C. Van Arsdell and J. Stephen Vanderwoude each elected to receive cash in lieu of shares of fully-vested Common Stock for 2016; each2018. All of them hasour directors have satisfied our director stock ownership guidelines for directors. In lightdirectors, with the exception of his significant holdingstwo of our Common Stock, Robert P. O’Meara also has elected to receive cash in lieu of the stock component of his director compensation.
Deferred Compensation Plan for Non-Employee Directors
Our Deferred Compensation Plan allows non-employee directors to defer receipt of either 50% or 100% of their director fees and retainers. Deferral elections are made in December of each year for amounts payable in the following year. Amounts are deemed to be invested in separate investment accounts under the plan, with the various investment alternatives available under our Deferred Compensation Plan, including an investment account for shares of our Common Stock.
2019 Proxy Statement | 31 |
Director Compensation
Directors are able to modify their investment allocationselections at any time, subject to applicable stock trading blackout periods. Deferred director fees and retainers are payable at the director’s election, either as a lump sum or in installments over a period not to exceed fifteen years. Payments under the Deferred Compensation Plan begin at the date specified by the director or upon cessation of service as a director.
2018 Director Compensation Table
The following table and explanatory notes provide information regarding the cash and Common Stock awarded to each non-employee director during 2016.2018.
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|
|
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|
| Change in |
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|
|
| |||||||
|
|
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|
|
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| Pension Value(3) |
|
|
|
| |||||||
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|
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|
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| and |
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| |||||||
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| Fees |
|
|
|
|
|
|
| Nonqualified |
|
|
|
| |||||||
|
| Earned or |
|
|
|
|
| Non-Equity |
| Deferred |
|
|
|
| |||||||
|
| Paid in |
| Stock |
| Option |
| Incentive Plan |
| Compensation |
| All Other |
|
| |||||||
Name |
| Cash(1) |
| Awards(2) |
| Awards |
| Compensation(3) |
| Earnings |
| Compensation(4) |
| Total | |||||||
Barbara A. Boigegrain |
| $ | 62,500 |
| $ | 52,500 |
| $ | — |
| $ | — |
| $ | — |
| $ | 2,500 |
| $ | 117,500 |
Thomas L. Brown |
|
| 113,000 |
|
| — |
|
| — |
|
| — |
|
| 2,304 |
|
| — |
|
| 115,304 |
Br. James Gaffney(5) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Phupinder S. Gill |
|
| 60,500 |
|
| 52,500 |
|
| — |
|
| — |
|
| 10,336 |
|
| — |
|
| 123,336 |
Kathryn J. Hayley |
|
| 109,000 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 109,000 |
Peter J. Henseler |
|
| 52,500 |
|
| 52,500 |
|
| — |
|
| — |
|
| 15,079 |
|
| — |
|
| 120,079 |
Patrick J. McDonnell(6) |
|
| 33,396 |
|
| 26,250 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 59,646 |
Frank B. Modruson |
|
| 60,500 |
|
| 52,500 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 113,000 |
Robert P. O’Meara(6)(7) |
|
| 91,875 |
|
| — |
|
| — |
|
| — |
|
| 443,807 |
|
| 11,539 |
|
| 547,221 |
Ellen A. Rudnick |
|
| 52,500 |
|
| 52,500 |
|
| — |
|
| — |
|
| — |
|
| 2,500 |
|
| 107,500 |
Michael J. Small |
|
| 60,500 |
|
| 52,500 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 113,000 |
Stephen C. Van Arsdell(8) |
|
| 115,854 |
|
| — |
|
| — |
|
| — |
|
| 1,123 |
|
| 2,500 |
|
| 119,477 |
J. Stephen Vanderwoude |
|
| 145,000 |
|
| — |
|
| — |
|
| — |
|
| 8,802 |
|
| — |
|
| 153,802 |
| Name | Fees Earned or Paid in Cash(1) | Stock Awards(2) | Option Awards(3) | Non-Equity Incentive Plan Compensation(4) | Change in Pension Value(4) and Nonqualified Deferred Compensation Earnings | All Other Compensation(5) | Total | |||||||||||||||||||||||
| Barbara A. Boigegrain | $ | 50,000 | $ | 50,000 | $ | — | $ | — | $ | — | $ | — | $ | 100,000 | ||||||||||||||||
Thomas L. Brown(6) | — | — | — | — | — | — | — | |||||||||||||||||||||||
| John F. Chlebowski, Jr. | 104,000 | — | — | — | — | — | 104,000 | |||||||||||||||||||||||
Br. James Gaffney(7) | — | — | — | — | — | — | — | |||||||||||||||||||||||
| Phupinder S. Gill | 54,000 | 50,000 | — | — | 6,436 | — | 110,436 | |||||||||||||||||||||||
Kathryn J. Hayley(8) | 50,000 | — | — | — | — | — | 50,000 | |||||||||||||||||||||||
| Peter J. Henseler | 50,000 | 50,000 | — | — | 6,768 | — | 106,768 | |||||||||||||||||||||||
| Patrick J. McDonnell | 65,000 | 50,000 | — | — | — | — | 115,000 | |||||||||||||||||||||||
Frank B. Modruson(8) | 25,000 | 25,000 | — | — | — | — | 50,000 | |||||||||||||||||||||||
Robert P. O’Meara(9) | 300,000 | — | — | — | 67,207 | 10,542 | 377,749 | |||||||||||||||||||||||
| Ellen A. Rudnick | 50,000 | 50,000 | — | — | — | 2,500 | 102,500 | |||||||||||||||||||||||
| Michael J. Small | 54,000 | 50,000 | — | — | — | — | 104,000 | |||||||||||||||||||||||
John L. Sterling(10) | 50,000 | — | — | — | — | — | 50,000 | |||||||||||||||||||||||
Stephen C. Van Arsdell(6) | — | — | — | — | — | — | — | |||||||||||||||||||||||
| J. Stephen Vanderwoude | 110,000 | — | — | — | 7,042 | — | 117,042 | |||||||||||||||||||||||
(1) | Includes amounts deferred at the election of the directors pursuant to our Deferred Compensation Plan. |
(2) | Amounts represent the aggregate grant-date fair value of Common Stock awards granted under our Non-Employee Directors Stock Plan during the period, calculated in accordance with FASB Accounting Standards Codification Topic 718 (“ASC 718”). Assumptions used in the calculation of these amounts are described in Note 17 to our audited financial statements included in our Form |
(3) |
The Company does not maintain a non-equity incentive plan or pension plan for directors. |
(4) | The amount for |
(5) |
Br. James |
(6) | Messrs. McDonnell and |
(7) | Included in |
(8) | Upon the retirement of Mr. |
2019 Director Compensation
Consistent with the Compensation Committee’s annual review of our director compensation program, in late 2018, the Compensation Committee reviewed the amount of compensation paid to our directors. In connection with its review of our director compensation program, the Compensation Committee held discussions with its independent
32 | First Midwest Bancorp, Inc. |
Director Compensation
compensation consultant Deloitte Consulting LLP, and considered publicly available director compensation data from the companies in our peer group and other public companies in the Midwest, as well as other information.
Upon the conclusion of this process, the Compensation Committee determined that director compensation for 2017 should be increased modestly, both because the Compensation Committee believed that the Company’s director compensation was below the levels prevalentbeginning in the Chicago market and to allow the Company to continue to remain competitive in its ability to retain and attract qualified directors. Specifically, the Compensation Committee determined that2019, it was appropriate to increase both the annual fixed cash retainer and the annual award of Common Stock paid to each non-employee director from $50,000$52,500 to $52,500,$55,000, for a total of $105,000,$110,000. The Committee also determined that the retainer for the Chair of the Compensation Committee be increased from $10,000 to $15,000 annually, the committee fees for the Audit Committee and recommended this changeEnterprise Risk Committee be increased from $4,000 to $7,500 and $5,000 annually, respectively, and that a committee fee of $6,000 and $2,500, annually, be established for members of the Compensation Committee and the Nominating and Corporate Governance Committees, respectively. Following these increases, director, committee and Lead Independent Director compensation was generally between the 25th percentile and the median of compensation for similar positions at companies in our Boardpeer group.
Upon the recommendation of Directors. Ourthese changes by the Compensation Committee to the Board of Directors, our Board unanimously approved the recommended changes to the compensation paid to our directors, consistent with the Compensation Committee’s recommendation, effective as of January 1, 2017. The awards of Common Stock will continue to be granted as fully-vested shares of Common Stock, and our directors may continue to elect to receive the stock component of their director compensation in cash.
Director Stock Ownership Guidelines
We believe that each director should have a meaningful equity investment in our Company. Our director stock ownership guidelines provide that directors are encouragedexpected to own Common Stock equal in value to three times3x the total annual base compensation for non-employee directors, or $315,000.$330,000. This amount is the equivalent of six times6x the base annual cash retainer paid to our non-employee directors. Directors are expected to acquire and maintain this share ownership threshold within five years of joining the Board of Directors. All of our directors own a sufficient number of shares of Common Stock under our stock ownership guidelines, except for two of our newest directors who joined our Board within the past several monthsin 2016 and 2017, respectively, and who are in the process of accumulating shares to comply with our stock ownership guidelines. Br. GaffneyJames is exempt from our stock ownership guidelines because he does not accept any director compensation for serving on our Board.
2019 Proxy Statement | 33 |
COMPENSATION DISCUSSION AND ANALYSIS
The following Compensation Discussion and Analysis describes our executive compensation philosophy and programsprogram as established by our Compensation Committee. OurBelow is a roadmap to our Compensation Discussion and Analysis is presented in the following sections:.
34 | First Midwest Bancorp, Inc. |
Compensation Discussion and Analysis
This Compensation Discussion and Analysis provides information and perspective regarding our 20162018 executive compensation program and decisions for our executive officers generally and, more specifically, for our named executive officers identified below:
Name | Title | ||
Michael L. Scudder | Chairman and Chief Executive Officer of the Company and | ||
Mark G. | President and Chief Operating Officer of the Company and Vice Chairman, President and Chief Operating Officer of First Midwest Bank | ||
Patrick S. Barrett | |||
Executive Vice President and Chief Financial Officer of the Company and First Midwest Bank | |||
Michael W. Jamieson | |||
Executive Vice President and Director | |||
Thomas M. Prame | Executive Vice President and Director of Consumer Banking of First Midwest Bank | ||
*Mr. Sander was promoted to President of the Company effective January 18, 2019.
We seek to align the interests of our executives with the interests of our stockholders. As such, we believe it is important to incent and reward our executives for corporate and individual performance, with a clear emphasis
Our executive compensation program is designed to accomplish the following goals:
u | Encourage the achievement of short- and long-term corporate financial objectives that create value for our stockholders. |
u | Align the interests of our executives with our stockholders. |
u | Attract and retain high-performing executives. |
Our Compensation Committee also annually reviews, and discusses with its independent compensation consultant, the risks and rewards associated with each element of our executive compensation program to assure that the program does not encourage our executive officers to take excessive risks to enhance their compensation.
Certain Financial Information Presented on an Adjusted Basis
Our Compensation Discussion and Analysis contains references to certain financial information on an adjusted basis. This information, as adjusted, excludes certain items, such as the effects of our acquisition and integration related expenses, implementation costs related to our Delivering Excellence initiative and other items. We believe that presenting certain financial information in this manner assists stockholders in assessing the Company’s underlying operational performance since these items do not pertain to our core business operations, and their exclusion facilitates better comparability between periods and enhances comparability for peer comparison purposes. For a reconciliation of the GAAP and non-GAAP financial measures discussed in this Compensation Discussion and Analysis, which include earnings, earnings per share, return on assets, return on average tangible common equity (RATCE) and net interest margin, in each case as adjusted to exclude certain items, see our Form 10‑K filed with the SEC on March 1, 2019.
2019 Proxy Statement | 35 |
Compensation Discussion and Analysis
Consistent with our longstanding compensation practices, performance-based and at-risk cash and equity awards in 20162018 constituted a significant portion of the compensation packagepackages of our named executive officers. In 2016, approximately two-thirds2018, over 70% of the total direct compensation (base salary, annual cash incentive and long-term incentive) paid to each of our Chief Executive Officer and two-thirds of the total direct compensation paid to our Chief Operating OfficerPresident was at risk, through compensation that is either performance-based or tied to the value of our Common Stock.
Additionally, our short-term and long-term performance goals require the Company to achieve performance at or exceeding aour Board-approved budget in order for our executives to receive target payout levels and are in furtherance of strategic and operating objectives that we believe will create long-term value for our stockholders. Our performance-based compensation programs are designed to be rigorous, as evidenced by the payouts under our annual cash incentive compensation program and performance shares program over the last three years:
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| Payout | ||||
Program |
| 2016 |
| 2017 |
| 2018 |
Annual Cash Incentive Compensation |
| 111% |
| 98% |
| 100% |
Performance Shares |
| 78% |
| 97% |
| 92% |
Our performance goals are centered around our business and financial plans, whichand we believe willdo not encourage undue risk taking or imprudent actions by our executive officers to take undue risks or imprudent actions in order to achieve these goals.
Building on our corporate strategic prioritiesmomentum, 2018 was an exceptionally strong and productive year for our Company where we continued to execute on our strategy of building and maintaining the highest quality and engaged team, growing and diversifying our revenues through disciplined acquisitions and growing loansorganic growth and revenues, and balancing investment andmanaging business risk. During 2016, we accomplished balanced execution across our business lines thatThis strategy resulted in recordadded scale and expertise to provide us with the resources and strategic flexibility to continue to grow profitably.
In 2018, we generated total revenues of $538$727 million and record net income, adjusted, of $92.3$173 million, or $1.14 per share, a 9% improvement from 2015. This performance includes costs associatedboth of which were at record levels for our Company, and finished the year with our M&A activityassets of nearly $16 billion. Underlying these strong financial results were solid organic growth, higher interest rates and other significant transactions. Our total return to stockholders asthe impact of the end of 2016 was 39% and 52% over the last year and three years, respectively.
During this year of growth and accomplishment, we continued to remain focused on our mission, vision and values that drive a purchase priceculture that is centered on client needs, rooted in service excellence, invested in bettering our communities, focused on attracting top industry talent and influenced by technological change. These provide significant momentum for future earnings growth and enhance our position as the premier Midwest-based commercial bank that is committed to helping our clients achieve financial success. That commitment is at the core of $150 million, which resulted inall that we do.
Results for 2018 were impacted by certain significant items that skew our financial results, including acquisition and integration related expenses, implementation costs related to our Delivering Excellence initiative and certain tax benefits resulting from federal income tax reform. We review our performance on an initial pre-tax gain of almost $90 millionadjusted basis to exclude these items to properly assess our performance both standalone and which will add approximately $50 million of tier 1 capital upon our adoption of recent FASB leasing guidance.
36 | First Midwest Bancorp, Inc. |
Compensation Discussion and Analysis
grow, both organically and through acquisitions, and will evaluate our named executive officers based on their ability to continue to enhance stockholder value and to execute on our corporate strategies.
Significant InvestmentOur Successes in 2018
Our compensation program is designed to encourage the achievement of corporate financial objectives that create value for our Leadership. In 2016, we welcomedstockholders. We select several new executive and senior level leaders and added over 450 new colleagues through both organic and M&A growth. Our new executive team members add talent with new perspectives and experiencecorporate performance metrics against which to measure our success in operatingachieving this goal. The charts below illustrate our achievements in larger, more diverse businesses.
Net Income, adjusted | RATCE, adjusted |
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Organizationally, we achieved a number of additional successes in 2018, which are summarized below:
2019 Proxy Statement | 37 |
Compensation Discussion and Analysis
Delivering Excellence | M&A Transactions | ||
~$30 million in | 3 Transactions | ||
Dedicated significant time, effort and resources, including $16 million in capital, to our Delivering Excellence initiative, which leverages our colleagues, greater scale and investments in technology to provide an enhanced client experience and a more efficient platform for future growth. Identified client-facing improvements and operational efficiencies that will result in a one-year earnback on our investments and grow to nearly $30 millionin pre-tax annual benefits over the next three years. For 2019, we expect to realize a benefit of approximately $0.17 per share from our initiatives. | Completed our acquisition and integration of NorStates Bank ($600 million of assets) located in the northern Chicago suburbs. Announced in late 2018 our acquisitions of Northern Oak Wealth Management, a registered investment adviser in Milwaukee, and Bridgeview Bank, with locations throughout Chicagoland. Completed our acquisition of Northern Oak ($800 million of assets under management) in January 2019 and expect to complete our acquisition of Bridgeview Bank ($1.3 billion of assets) in the second quarter of 2019. For 2019, we expect to realize a benefit of approximately $0.10 per share from these acquisitions, which is expected to grow to at least $0.16 per sharein 2020. | ||
◆Return on Assets. Achieved a return on average assets, adjusted of 1.17%as compared to 0.98% in 2017. ◆Capital. Maintained strong regulatory capital ratios, even with capital deployment for acquisition activity, and significantly above the requirement for a well-capitalized institution as defined by the Federal Reserve. Common equity tier 1 capital to risk-weighted assets grew to 10.2% at December 31, 2018, an increase of over 50 bpsfrom the end of 2017. Total capital to risk-weighted assets grew to 12.6%from 12.2% at December 31, 2018. | ◆Loan Quality. Maintained solid loan quality in 2018 with continued loan growth. Non-performing loans to total loans decreased to 0.57%at December 31, 2018, an improvement of 16% compared to the end of 2017. ◆Dividends. Paid our 144th consecutive quarterly cash dividend in 2018. With continued confidence in our Company and our business strategy, as well as our desire to return value to our stockholders, our Board of Directors increased our cash dividends to $0.45 per share in 2018, a 15% increase from 2017. | ||
Continued Investment in our Communities | |||
During 2018, we and our colleagues continued our support of many nonprofit organizations and the communities we serve through donations and volunteer hours. We discuss this further under Corporate Governance at First Midwest—Our Long-Standing Commitment to Corporate Social Responsibility. | |||
38 | First Midwest Bancorp, Inc. |
Compensation Discussion and Analysis
Total Stockholder Return
In addition to theour 2018 achievements noted above, we created long-term stockholder value in 2016. The table below reflectsover the last five years. Below is our one-, three- and five-year TSRtotal stockholder return as compared to the average TSR for our 20162018 peer group and the KBW NASDAQ BankRegional Banking Index (the Company is included in this index)^KRX, which includes the Company):
2018 CEO Pay Decisions and Program Updates
As described above, 2018 was a successful year for the Company, building on a strong 2017 to achieve continued growth while focusing on operating efficiency. Our Compensation Committee reviewed target compensation for our Chief Executive Officer in the first quarter of 2018 and set target opportunities for the year with reference to CEO pay data among our peer group. Based on an assessment of our CEO’s performance and continued importance in leading the Company, as well as an analysis of CEO compensation in our peer group, the Committee made the following decisions relating to CEO compensation for 2018:
u | Continuation of base salary at $850,000. |
u | An increase to the target opportunity for the annual cash incentive award from 75% to 85% of base salary. |
u | An increase to the target opportunity for the performance share award from 100% to 110% of base salary. |
u | An increase to the target opportunity for the restricted stock award from 50% to 60% of base salary. |
These actions increased the emphasis on performance-based compensation, link the majority of our CEO’s pay to long-term incentives and positioned his target total direct compensation slightly below the median of our peer group.
In the first quarter of 2019, actual performance for the 2018 annual cash incentive plan was determined to be 100% of target, resulting in a target payout for our CEO. The 2016 performance shares (2016-2018 performance period) were earned at 92% of target based on our three-year return on average tangible common equity (RATCE), adjusted, and relative total stockholder return (TSR) performance.
2019 Proxy Statement | 39 |
Compensation Discussion and Analysis
In June 2018, we entered into a new employment agreement with our Chief Executive Officer that provides for the continuation of his annual base salary then in effect, as well as his continued participation in our annual cash incentive and long-term incentive programs consistent with the target award levels for 2018 described above. In January 2019, we also entered into a new employment agreement with our Chief Operating Officer that provides for his promotion to President of the Company and an increase in his annual base salary from $655,000 for 2018 to $675,000 commensurate with this increase in responsibilities, as well as continued participation in our annual cash incentive and long-term incentive programs consistent with the target award levels for 2018. The new employment agreements with our CEO (as amended in January 2019) and President provide for the payment of certain enhanced severance benefits in the event of certain qualifying terminations, as discussed more fully below under Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control.
The new employment agreements for our CEO and President are intended to recognize the substantial growth and increased profitability of our Company under their leadership. At the same time that we entered into these new employment agreements, we also entered into new confidentiality and restrictive covenant agreements with our CEO and President. These agreements continue to provide for enhanced confidentiality, non-solicitation and non-disparagement provisions and add non-competition provisions. The restrictive covenants to which our CEO and President are subject are discussed more fully under Compensation Discussion and Analysis—Peer GroupPolicies, Guidelines and Other Practices—Employment and Restrictive Covenant Agreements with Our Executive Officers, at its November 2016 meeting,.
For 2019, our Compensation Committee also approved various changescertain updates to our peer group for 2017.annual cash incentive and long-term incentive programs, as follows:
u | Annual Cash Incentive Program. Based on recommendations from management and concurrence from the Committee’s independent compensation consultant, our Compensation Committee selected net income, adjusted (weighted 80%), asset quality (weighted 10%) and execution on specified strategic initiatives (weighted 10%) as the performance metrics for 2019. Net income, adjusted, and asset quality remain as metrics, while the addition of a strategic initiatives component is intended to incentivize the timely, successful completion of certain initiatives related to talent and colleague development, client experience, technology enhancement and risk mitigation programs and M&A activity that we believe are important to our continued success and achieving long-term top tier results. The annual cash incentive compensation awards for our Chief Executive Officer and President continue to be based entirely on Company performance. |
u | Long-Term Incentive Program. Beginning with our 2019 performance share (2019-2021 performance period) and restricted stock awards, our Compensation Committee determined that these awards will vest (or, in the case of performance shares, be eligible to be earned and vest based on actual performance for the entire performance period) on a pro rata basis in the event a participant is terminated and eligible for severance benefits under the Company’s severance plans or his or her employment agreement. The Committee recommended this pro rata treatment of awards in the event of a qualifying termination upon the advice of management, with concurrence from the Committee’s independent compensation consultant, and following a review of peer practices. |
Stockholder Say-on-Pay Vote in 2016
Our Compensation Committee reviews the annual advisory vote by our stockholders on executive compensation when designing our executive compensation program and setting executive compensation levels. With respect to compensation decisions in 20162018 (and in 2017)2019), the Compensation Committee considered the say-on-pay approval by 93%of 92% of the votes cast at our 20162018 annual meeting of stockholders.
Although the Compensation Committee believes these vote results confirm that our stockholders are in agreement with our approach to executive compensation, the Compensation Committee annually evaluates our compensation program and our compensation disclosure practices in an effort to confirm that our pay and performance are linkedaligned and that our compensation practices are clearly disclosed.
Our Compensation Committee intends to consider the vote results from this year, and future advisory votes, when determining the design and amounts provided under our executive compensation program.
40 | First Midwest Bancorp, Inc. |
Compensation Discussion and Analysis
Our Compensation Committee, with input from our independent compensation consultant and management, has designed a compensation program that promotes a pay-for-performance environment intended to create stockholder value as well asand encourage and reward the Company’s short-term and long-term financial success and the achievement of performance goals established by the Compensation Committee at the beginning of each performance period. As such, a significant portion of the compensation of our executive officers (including our named executive officers) is at-risk compensation, with the amount of compensation that can be earned tied to the attainment of pre-determined performance goals and the long-term value of our Common Stock. The Committee selects performance goalsmetrics that it believes are closely correlated to the creation of stockholder value.value and sets performance goals based on these metrics that it believes are of sufficient rigor.
2019 Proxy Statement | 41 |
Compensation Discussion and Analysis
Our Compensation Committee also believes that our compensation program must be market competitivemarket-competitive to attract and retain skilled and motivated executives who can successfully grow and manage our business in an increasingly competitive and regulated environment. Adherence to this philosophy forms the overall premise forof our executive compensation program and is based on the compensation principles set forth below.
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First Midwest Bancorp, Inc. |
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Compensation Discussion and Analysis
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The Compensation Committee considers various compensation and corporate governance best practices when making executive compensation decisions, including the following:
WHAT WE DO | |||||
√ | Double Trigger Vesting of Equity Awards Upon a Change-in-Control | ||||
√ | Double Trigger for Severance Upon a Change-in-Control | ||||
√ | Capped Incentive Payouts | ||||
√ | Clawback of Compensation | ||||
√ | Anti-Pledging and Anti-Hedging Policy | ||||
√ | Stock Ownership Guidelines | ||||
√ | Independent Compensation Consultant | ||||
√ | Minimum Vesting Periods | ||||
√ | Compensation Risk Assessment | ||||
√ | Protective Covenants | ||||
WHAT WE DON’T DO | |||||
x | No Excise Tax Gross-ups | ||||
We do not pay our executives a tax gross-up in the event they incur an excise tax from severance benefits paid following a change-in-control. | |||||
x | |||||
No Dividends Paid on Equity Awards Prior to Vesting | |||||
We do not pay dividends on performance shares or restricted stock awards before they are earned and vested. | |||||
x | No Share Recycling | ||||
Neither our 2018 Stock and Incentive Plan, nor the predecessor Omnibus Stock and Incentive Plan, | |||||
x | No Excessive Perquisites | ||||
x | No Stock Option Repricing | ||||
Both our 2018 Stock and Incentive Plan and the predecessor Omnibus Stock and Incentive Plan | |||||
2019 Proxy Statement | 43 |
Compensation Discussion and Analysis
Set forth below are the compensation procedures followed each year by the Compensation Committee, our compensation consultant and management.
Subject to approval of our Board of Directors, the Compensation Committee reviews and approves the principal elements and amounts of compensation paid to our Chief Executive Officer, Chief Operating Officer and other executive officers. Our Compensation Committee reviews the Chief Executive Officer’s performance and considers the recommendations of the Chief Executive Officer when determining compensation for our Chief Operating Officer and other executive officers other than himself. Our Compensation Committee considers information provided by its compensation consultant and management and obtained from publicly available information about the companies in our peer group. | ||||
Our Chief Executive Officer and Chief Operating Officer review the performance of | ||||
Individual performance ratings impact the amount of annual cash incentive compensation earned by, and the restricted stock awards granted to, our executive officers | ||||
CAP assists our | ||||
| program and the amounts and mix of cash, equity and incentive compensation to be paid to our executive officers. CAP also provides analysis of the compensation practices of companies in our peer group and in our market area, assessment of the market competitiveness of our executive compensation program, say-on-pay analysis and peer group composition. CAP participates in Compensation Committee meetings on request, regularly provides input for Committee meetings and attended [__] meeting[s] in 2017. Members of our Compensation Committee also consult with CAP outside of Committee meetings. Our Compensation Committee assesses CAP’s independence each year and concluded that CAP is independent under applicable rules of the NASDAQ Stock Market. | ||||
◆ Our Compensation Committee reviews and approves our executive compensation philosophy. ◆ Our Compensation Committee considers information provided by its independent compensation consultant, Compensation Advisory Partners LLC (“CAP”), and management, as well as obtained from publicly available information about the companies in our peer group. ◆ Subject to approval of our Board of Directors, the Compensation Committee reviews and recommends the principal elements and amounts of compensation paid to our Chief Executive Officer, President and other executive officers. ◆ Our Compensation Committee reviews the Chief Executive Officer’s performance and considers the recommendations of the Chief Executive Officer when determining compensation for our President and other executive officers other than himself. ◆ Our Compensation Committee assesses CAP’s independence each year and concluded that CAP is independent under applicable rules of the NASDAQ Stock Market. | ◆ Our Compensation Committee retained CAP to serve as its independent compensation consultant for 2018. CAP reports directly to the Compensation Committee. ◆ CAP assists our Compensation Committee with executive compensation program design, ongoing review of our executive compensation program and the amounts and mix of cash, equity and incentive compensation to be paid to our executive officers. ◆ CAP also provides analysis of the compensation practices of companies in our peer group and in our market area, assessment of the market competitiveness of our executive compensation program, say-on-pay analysis and peer group composition recommendations. ◆ CAP participates in Compensation Committee meetings on request, regularly provides input for Committee meetings and attended all Committee meetings in 2018. Members of our Compensation Committee also consult with CAP outside of Committee meetings. | ◆ Our Chief Executive Officer makes recommendations to the Compensation Committee with respect to the compensation for our President and other executive officers. ◆ Our Chief Executive Officer and President review the performance of the Company and their respective direct reports and each determines the individual performance ratings of these executives for the year, subject to review by the Compensation Committee. ◆ Individual performance ratings impact the amount of annual cash incentive compensation earned by our executive officers other than our Chief Executive Officer and President, whose performance is based solely on the Company’s performance. Individual performance ratings also impact the restricted stock awards granted to our executive officers other than our CEO. |
44 | ||||
First Midwest Bancorp, Inc. |
Compensation Discussion and Analysis—Executive Summary—2017 Compensation
Role of the Compensation CommitteePeer Group. Each year, our
Our Compensation Committee reviews publicly-available information about a group of regional bank holding companies whose size, business lines or geographical markets are generally similar to ours and approves the compensation philosophy of the Company. Thewith whom we may compete for executive talent. We refer to these institutions as our peer group.
Our Compensation Committee reviewsuses peer information as one of several factors when evaluating and approves each year, subject tosetting the approval of our Board of Directors, the principal elements and the amounts of the compensation paid to our Chief Executive Officer, our Chief Operating Officer and our othernamed executive officers. Our Compensation Committee also reviews our Chief Executive Officer’s performance and determines his individual performance rating. The Compensation Committee considers peer group and other available data, including market surveys, as a competitive market check when establishing the recommendationscompensation of our Chief Executive Officer when determiningnamed executive officers. The Committee strives to set compensation at approximately the base salary, annual cash incentive compensation and equity awardsmedian for comparable officers of the peer group.
Our peer group is developed with input from our Chief Operating Officer and the executive officers other than himself. In determining executive compensation, our Compensation Committee considers information provided by the Committee’sindependent compensation consultant and management, and obtainedis approved annually by the Compensation Committee. The peer group may be changed from publicly available information aboutyear-to-year if a company in the companies in our peer group.
Name of Institution | ||
BancorpSouth Bank (Tupelo, MS) | ||
Chemical Financial Corporation (Detroit, MI) | ||
F.N.B. Corporation (Pittsburgh, PA) | ||
Fulton Financial Corporation (Lancaster, PA) | ||
Great Western Bancorp, Inc. (Sioux Falls, SD) | ||
Hancock Whitney Corporation (Gulfport, MS) | ||
IBERIABANK Corporation (Lafayette, LA) | ||
MB Financial, Inc. (Chicago, IL) | ||
Old National Bancorp (Evansville, IN) | ||
Sterling Bancorp (Montebello, NY) | ||
TCF Financial Corporation (Wayzata, MN) | ||
Texas Capital Bancshares, Inc. (Dallas, TX) | ||
Trustmark Corporation (Jackson, MS) | ||
UMB Financial Corporation (Kansas City, MO) | ||
United Bankshares, Inc. (Charleston, WV) | ||
Valley National Bancorp (Wayne, NJ) | ||
Western Alliance Bancorporation (Phoenix, AZ) | ||
Wintrust Financial Corporation (Rosemont, IL) | ||
Several institutions in our peer group and in our market area, assessment of the market competitiveness of our executive compensation program, say-on-pay analysis and peer group composition. Deloitte Consulting participates in Compensation Committee meetings on request, regularly provides input for Committee meetings and attended one meeting in 2016. Members of2018 are or have been subject to M&A activity. As a result, our Compensation Committee also consult withexpects to re-evaluate the compensation consultant outsidepeer group during 2019.
2019 Proxy Statement | 45 |
Compensation Discussion and concluded that Deloitte Consulting is independent under applicable rules of the NASDAQ Stock Market.Analysis
How We Measure Company Performance
At the beginning of the year, management recommends to our Compensation Committee, and the Committee, following discussions with its independent compensation consultant, approves and recommends to our Board of Directors for approval, corporate-wide financial performance goals against which actual performance of the Company is measured for that year for our annual cash incentive compensation program and for a three-year performance period for our performance share awards.
The dominantprimary metric for our annual cash incentive program has historically been an earnings-based performance measure.metric. In 2016, core2018, net income, adjusted, was weighted at 80%90% of the short-term cash incentive award opportunity, with the remaining 20% tied to asset quality (levels(level of nonperformingnon-performing assets and classified loans) weighted at 10%. Payouts of short-term incentive compensation are made only if threshold financial performance is attained and are based on the degree to which the corporate performance goals are achieved. This amount may be increased for individual executive officers (other than our Chief Executive Officer and President) based on their individual performance ratings.
For our 20172019 annual cash incentive program, the Compensation Committee again determined to use core net income, adjusted (weighted at 75%80%) and, asset quality (weighted at 10%) metrics, and added execution on certainspecified strategic initiatives (weighted at 15%10%) as a new metric.
For the performance share component of our executive compensation program, in 2016 (2016-2018we have historically used an external metric (relative TSR) and an internal metric (RATCE, adjusted) and weighted these metrics equally at 50% each. In 2018 (2018‑2020 performance period), our Compensation Committee again selected, and our Board of Directors approved, an external metric (relative total stockholder return)relative TSR and an internal metric (core return on average tangible common equity) andRATCE, adjusted, weighted theseequally, as the performance metrics equally.for our performance share awards. With regard to the external metric, the Company’s total stockholder returnTSR during a three-year performance period will be compared to total stockholder returnsthe TSR of our peer group for the same period. With respect to the internal metric, the Company’s core return on average tangible common equity forRATCE, adjusted, over a three-year performance period will be measured against predetermined return on average tangible common equityRATCE goals for each year of the sameperformance period.
Beginning with the 2018 awards, performance shares may be earned based on the level that the metrics are achieved and, if earned, the shares will vest in full on the March 15thfollowing the Committee’s certification of the Company’s performance relative to the performance goals for that three-year performance period. For performance share awards granted in 2017 and earlier years, the earned awards will vest in full after an additional two-year period following the completion of the three-year performance period. The Compensation Committee updated the vesting period.
For our 20172019 performance share awards (2017-2019(2019‑2021 performance period), granted in February 2019, the Compensation Committee again determined to use relative total stockholder returnTSR and core return on average tangible common equity,RATCE, adjusted, weighted equally, at 50% each, as the performance metrics.
The Compensation Committee must certify the level of achievement of the performance goals for both the annual cash incentive compensation program and the performance share awards before the awards may be earned.
| Name of Institution | Asset Size as of 12/31/2015 (Dollars in Billions) | Location | ||||
1st Source Corporation(1) | $ | 5.2 | South Bend, IN | |||
| Chemical Financial Corporation | 9.2 | Midland, MI | ||||
Community Bank System, Inc.(1) | 8.6 | DeWitt, NY | ||||
First Commonwealth Financial Corporation(1) | 6.6 | Indiana, PA | ||||
First Financial Bancorp.(1) | 8.1 | Cincinnati, OH | ||||
First Merchants Corporation(1) | 6.1 | Muncie, IN | ||||
| F.N.B. Corporation | 17.6 | Pittsburgh, PA | ||||
| MB Financial, Inc. | 15.6 | Chicago, IL | ||||
| Old National Bancorp | 12.0 | Evansville, IN | ||||
Park National Corporation(1) | 7.2 | Newark, OH | ||||
Pinnacle Financial Partners, Inc.(1) | 8.7 | Nashville, TN | ||||
PrivateBancorp, Inc.(2) | 17.3 | Chicago, IL | ||||
Provident Financial Services, Inc.(1) | 8.9 | Jersey City, NJ | ||||
| Texas Capital Bancshares, Inc. | 18.9 | Dallas, TX | ||||
| Trustmark Corporation | 12.7 | Jackson, MS | ||||
| UMB Financial Corporation | 19.1 | Kansas City, MO | ||||
Umpqua Holdings Corporation(1) | 23.4 | Portland, OR | ||||
| United Bankshares, Inc. | 12.6 | Charleston, WV | ||||
| Valley National Bancorp | 21.6 | Wayne, NJ | ||||
WesBanco, Inc.(1) | 8.5 | Wheeling, WV | ||||
| Wintrust Financial Corporation | 22.9 | Rosemont, IL | ||||
| Median | $ | 12.0 | ||||
| First Midwest Bancorp, Inc. | 9.7 | Itasca, IL | ||||
| Name of Institution | Asset Size as of 12/31/2015 (Dollars in Billions) | Location | ||||
| BancorpSouth, Inc. | $ | 13.6 | Tupelo, MS | |||
| Fulton Financial Corporation | 17.9 | Lancaster, PA | ||||
| Great Western Bancorp, Inc. | 10.0 | Sioux Falls, SD | ||||
| Hancock Holding Company | 22.8 | Gulfport, MS | ||||
| IBERIABANK Corporation | 19.5 | Lafayette, LA | ||||
| Sterling Bancorp | 12.0 | Montebello, NY | ||||
| TCF Financial Corporation | 20.7 | Wayzata, MN | ||||
| Western Alliance Bancorp | 14.3 | Phoenix, AZ | ||||
| Median of 2017 Peer Group (at 12/31/2016) | $ | 19.1 | ||||
| First Midwest Bancorp, Inc. (at 12/31/2016) | 14.0(1) | |||||
How We Measure Individual Performance
In 2016,2018, a portion of the annual cash incentive compensation awards that could be earned by our named executive officers, other than our Chief Executive Officer and President, was tied to each officer’s individual
46 | First Midwest Bancorp, Inc. |
Compensation Discussion and Analysis
performance rating for the year and a percentage of base salary. In addition,Additionally, the number of shares of restricted stock awarded to our named executive officers, other than our Chief Executive Officer, was based on the named executive officer’s individual performance rating and a percentage of his or herthe officer’s base salary.
The determination of a named executive officer’s individual performance rating is based on a review of actions taken or results achieved by the executive and how these actions and results impacted overall corporate performance and achievement of the corporate financial goals under our annual cash incentive compensation and performance share programs.programs, as well as specific individual goals established for the executive at the beginning of the year. A subjective assessment of an executive officer’s leadership and other contributions to the Company also may be factored into his or her individual performance rating.
, for 2017 compensation purposes, we no longer will use individual performance ratings for our Chief Executive Officer and our Chief Operating Officer and their annual cash incentive awards and restricted stock awards, which are the awards based, in part, on individual performance ratings, instead will be based entirely on Company performance. The awards for our other executive officers will continue to have an individual performance element.
Our Compensation Committee believes that our executive compensation programs must be internally consistent and equitable in order for the Company to be able to attract and retain the executive officers necessary to achieve our business and financial objectives and to create a cohesive team atmosphere within the Company. As such, the Committee reviews total compensation and various elements of compensation paid to our Chief Executive Officer in relation to our Chief Operating OfficerPresident and to our other named executive officers as a group, as well as the mediancompensation of the relationship ofour CEO compensationas compared to the executive officers withinat the companies in our peer group. The Committee uses this information as another point of reference in its compensation decisions.
2019 Proxy Statement | 47 |
Compensation Discussion and Analysis
The Compensation Committee approves, subject to approval by our full Board of Directors, the compensation of our Chief Executive Officer and other named executive officers each year. In determining the compensation of our named executive officers other than our Chief Executive Officer, the Compensation Committee considers the recommendations of the Chief Executive Officer.Officer and, with respect to his direct reports, the President. The Committee also considers guidance from its independent compensation consultant. Compensation is determined based on a consideration of overall corporate financial performance relative to financial objectives (with emphasis on the performance metrics used for our annual cash incentive compensation program and our performance share awards) and each named executive officer’s individual performance, market factors and our views regarding a named executive officer’s scope of job responsibilities, demonstrated leadership abilities and management experience and effectiveness.
Components of Our Executive Compensation Program
48 | First Midwest Bancorp, Inc. |
Table of our executive compensation program are:Contents
Compensation Discussion and Analysis
When setting the total compensation opportunity for our named executive officers, our Compensation Committee uses data available from various sources, including peer group information, publicly available data and advice from ourits compensation consultant. We also consider other relevant factors, such as Company and individual performance, internal equity and our compensation philosophy.
We reflect at-risk compensation below as compensation that must be earned on the basis of achievement of performance goals (annual cash incentive and performance shares) or that has a future value based on the performance of our Common Stock (restricted stock). In 2016,2018, the percentages of each element of total direct compensation (excluding the supplemental achievement award described below) paid to our Chief Executive Officer and Chief Operating Officer President were as follows:
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Base Salary
We pay our named executive officers a base salary as part of a competitive compensation package. Base salary is not directly subject to the achievement of any corporate or individual performance goals. In setting base salary levels, we consider a range of data, including the median base salary paid for positions of similar responsibility at the institutionscompanies in our peer group as well as the executive’s performance and level of responsibility.
Annually, our Chief Executive Officer recommends to the Compensation Committee changes in base salaries for our named executive officers, other than himself. Chief Executive Officer pay is set directly by the Compensation Committee, and the base salaries of all named executive officers, including the Chief Executive Officer, are approved by our Compensation Committee and our Board of Directors.
Annual Cash Incentive Compensation
Our annual cash incentive compensation program constituted between 20% and 23% of the total direct compensation paid to our named executive officers in 2016. It is a performance-based program with one-year pre-established performance goals and is our vehicle for awarding annual cash bonuses to our named executive officers and other eligible employees. Executives may earn an incentive cash bonus only upon the achievement of corporate financial goals approved by the Compensation Committee and the Board of Directors. The goals are approved at the beginning of the fiscal year based on the Company’s Board-approved budget for the year. The amount of the bonus is determined based on the level of achievement that the Company attains with respect to these corporate financial goals and a percentage of the executive’s base salary, as adjusted upward or downward depending upon the executive’s individual performance rating for the year.year, other than for our Chief Executive Officer and President, whose bonus is based entirely on Company performance. The annual cash incentive element of our compensation
2019 Proxy Statement | 49 |
Compensation Discussion and Analysis
program encourages our named executive officersexecutives to attain corporate financial performance goals that the Compensation Committee believes are consistent with the strategies established for the Company.
Cash bonus opportunities under our annual cash incentive compensation program are awarded under our Omnibusstockholder-approved 2018 Stock and Incentive Plan, approved bywhich succeeded our stockholders and are expressed as a percentage of a named executive officer’s base salary. Our Compensation Committee establishes corporate performance goalsOmnibus Stockholder Incentive Plan following stockholder approval at the beginning of the fiscal year, and thresholdour 2018 annual meeting. Threshold performance for at least one of the net income, adjusted, corporate performance goalsgoal must be achieved in order for cash bonuses to be earned and paid.
u | Company Performance. Annually, the Compensation Committee selects the corporate financial performance goals for the fiscal year and the weighting for the goals selected. Awards for our named executive officers and our other executive officers are weighted more toward Company financial performance than individual performance. |
u | Individual Performance. Individual performance is based on the achievement of objectives that were established for our named executive officers at the beginning of the year and that contribute to the strategic, operational or financial performance of the Company. An annual evaluation of each named executive officer’s performance results in an individual performance rating for the officer for the year. However, with respect to our Chief Executive Officer and our President, their annual cash incentive award is based entirely on Company performance. |
Base Salary | x | Target | x | Company | + | Individual | = | Annual | ||||
The allocation between Company performance and individual performance, and the target award expressed as a percentage of base salary, for our named executive officers in 20162018 were as follows:
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| Target Bonus Opportunity |
| Performance Weighting |
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| Company |
| Individual |
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Named Executive Officer |
| Percentage of Base Salary) |
| Performance |
| Performance |
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Michael L. Scudder |
| 85 | % | 100 | % | — | % |
Mark G. Sander |
| 65 | % | 100 | % | — | % |
Patrick S. Barrett |
| 50 | % | 75 | % | 25 | % |
Michael W. Jamieson |
| 50 | % | 75 | % | 25 | % |
Thomas M. Prame |
| 40 | % | 70 | % | 30 | % |
| Target Bonus Opportunity | Performance Weighting* | |||||
| Named Executive Officer | (Expressed as a Percentage of Base Salary) | Company Performance | Individual Performance | |||
| Michael L. Scudder | 60% | 85% | 15% | |||
| Mark G. Sander | 50% | 70% | 30% | |||
| Paul F. Clemens | 40% | 70% | 30% | |||
| Thomas M. Prame | 40% | 70% | 30% | |||
| Nicholas J. Chulos | 40% | 60% | 40% | |||
50 | First Midwest Bancorp, Inc. |
Compensation Discussion and Analysis
For 2018, the 2016 fiscal year,Compensation Committee selected two corporate performance metrics for our annual cash incentive compensation program, included three corporate performance metrics: core net income (weighted at 80%), average non-performing assets (weighted at 10%) and average classified loans (weighted at 10%).
Metric | Weight | Description | Purpose | ||||
Net Income, adjusted | 90 | % | Net income excluding non-recurring items, such as gains or losses on securities, acquisition and integration related expenses, implementation costs associated with Delivering Excellence and costs associated with other significant items approved by the Compensation Committee | Encourages executive management to continue to focus on our current operating performance; this metric also is frequently used to assess short-term corporate performance by stockholders and the investment community | |||
Asset Quality | 10 | % | Non-performing assets and classified loans, excluding accruing troubled debt restructurings | Reflects the importance and continued emphasis on maintaining a high quality credit portfolio | |||
The Compensation Committee utilized annual cash incentive compensation in 20162018 in furtherance of the following strategic priorities:
u | Emphasize core profitability of the Company. |
u | Continue to profitably increase our loans and diversify our loan portfolio. |
u | Grow deposits, and maintain our strong core deposit base and low cost of funds. |
u | Continue to diversify our revenues by increasing fee-based revenues. |
u | Balance investment in our business against risk. |
u | Continued emphasis on our strong credit quality. |
u | Control expenses while funding strategic initiatives, such as additional investment in digital delivery channels. |
The range of performance and possible payout (as a percentage of base salary) for each metric were as follows:
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| Performance Range |
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Metric |
| Threshold |
| Target |
| Maximum |
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Net Income, adjusted |
| $ | 140 | million | $ | 175 | million | $ | 210 | million |
Payout (% of Target) |
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| 50 | % |
| 100 | % |
| 175 | % |
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Asset Quality |
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| $400 - $435 | million |
| $335 - $365 | million |
| <$305 | million |
Payout (% of Target) |
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| 50 | % |
| 100 | % |
| 150 | % |
2019 Proxy Statement | 51 |
Compensation Discussion and Analysis
| Metric | Performance Range | |||||
| Threshold | Target | Maximum | ||||
| Core Net Income | $77.1 million | $96.4 million | $106.0 million | |||
| Payout (% of Target) | 50% | 100% | 175% | |||
| Non-Performing Assets | 1.35% | 1.05% | 0.75% | |||
| Payout (% of Target) | 50% | 100% | 150% | |||
| Classified Loans | 5.00% | 4.50% | 4.00% | |||
| Payout (% of Target) | 50% | 100% | 150% | |||
The calculation of the payouts for 20162018 allocated to Company performance under our annual cash incentive program for all participants, including our named executive officers, was determined as follows:follows (including certain adjustments to net income in accordance with our annual cash incentive program):
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| 2018 Actual |
| Payout as a |
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| Weighted Payout |
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Performance Goal |
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| Performance |
| Percentage of Target |
| Weighting |
| Percentage |
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Net Income, adjusted |
| $ | 181.0 | million | 105.0 | % | 90 | % | 95.0 | % |
Asset Quality |
| $ | 416.0 | million | 50.0 | % | 10 | % | 5.0 | % |
Total Percentage Earned |
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| 100.0 | % |
| Performance Goal | 2016 Actual Performance | Payout as a Percentage of Target | Weighting | Weighted Payout Percentage | ||||
| Core Net Income | $98.4 million | 116.0% | 80% | 92.8% | ||||
| Non-Performing Assets | 0.93% | 120.0% | 10% | 12.0% | ||||
| Classified Loans | 4.84% | 66.0% | 10% | 6.6% | ||||
| Total Percentage Earned | 111.4% | |||||||
Based on the Company’s performance and, for those named executive officers other than our CEO and President, the individual performance rating of each named executive officer, the Compensation Committee approved the following cash bonus awards under our annual cash incentive compensation program for 2016:
For 2017,2019, the Compensation Committee again determined to use core net income, andadjusted, asset quality metrics, and added execution on certainspecified strategic initiatives as the performance metrics for our annual cash incentive compensation program. Additionally, individual performance for executive officers (other than our CEO and President) will be applied as a new metric.
these transactions while, at the same time, attaining strong financial performance in 2016 and executing on our strategic goals, the Compensation Committee approved, at its February 2017 meeting, a supplemental achievement award totaling $1.2 million. Most of this award was allocated to employees who were disproportionately impacted by these transactions (those who significantly contributed to these transactions and still performed their normal duties and responsibilities). Any supplemental award exceeding $10,000 was paid one-half in cash and one-half in restricted stock, with the stock portion subject to a three-year vesting requirement. The amounts paid to our Named Executive Officers are included in the 2016 Summary Compensation Table.
Our Compensation Committee believes that a significant portion of each named executive officer’s compensation should consist of at-risk equity awards in the form of performance shares and restricted stock. The value of these at-risk equity awards is based on the Company’s achievement of financial objectives or increases in the Company’s stock price.performance of our Common Stock. As such, we further align the interests of our executive management with our stockholders, link pay with performance and enhance the retention of our senior officers. These awards incent forward-looking and sustained corporate performance together with balanced risk-taking. Long-term equity awards arewere made in 2018
52 | First Midwest Bancorp, Inc. |
Compensation Discussion and Analysis
under our stockholder-approved Omnibus Stock and Incentive Plan, approvedwhich was replaced by our stockholders.
Performance-Based Equity Compensation.In 2016,2018, our named executive officers were awarded performance shares that may be earned based on the Company’s level of performance over a three-year period. If the performance goals are achieved, the performance shares would be earned. Once earned, one-third of the performance shares vest in full on the March 15thimmediately one-third vest the following year and the remaining one-third vest at the end of the second year,performance period, assuming continued employment with the Company during the performance period and the subsequent two-year vestingthis entire period. We accrue cash dividends that otherwise would be paid on the performance shares, but the accrued, unpaid dividends are not paid to the named executive officer unless and until the underlying performance shares are earned and subsequently vest.
The number of performance shares granted is based upon a percentage of the base salary of each officer eligible to receive performance shares, with the percentage based on the officer’s level of responsibility at the Company. The determination of the number of performance shares earned for each participant is based solely upon the Company achieving certain corporate financial performance goals approved by the Compensation Committee and the Board of Directors without reference to individual performance ratings.
Base Salary | x | Target | x | Relative | + | RATCE, adjusted | = | Earned | ||||
Based upon a review of peer practices and input from management and the Compensation Committee’s independent compensation consultant, our Compensation Committee selected both external and internal performance metrics for our 20162018 performance share program (2016-2018(2018-2020 performance period), with each metric weighted equally at 50% of the total award opportunity.. For the external metric, the Compensation Committee selected total stockholder returnTSR relative to the Company’s peer group. For the internal metric, the Compensation Committee chose core return on average tangible common equityRATCE, adjusted, of the Company relative to the Board-approved budget.
Our Compensation Committee selected these metrics to encourage our named executive officers to pursue corporate strategies that will enhance long-term stockholder value and build the value of our Common Stock while at the same time deploying our capital prudently. The Compensation Committee also believed that comparing our total stockholder returnTSR to an external metric would reward superior corporatecompany performance relative to our peer group. These awards are designed to encourage executives to increase the value of our Common Stock within acceptable risk tolerances, with the value of the awards increasing as the value of our stock increases.
For purposes of the external metric, the total stockholder returnTSR of the Company and the peer group is calculated for a three-year performance period. Performance shares will beare earned based on the total stockholder returnTSR of the Company, ranked against the TSR of the companies within our peer group. Total stockholder returnTSR is defined as the price appreciation on our Common Stock and the common stock of each company in the peer group
For the internal metric, the Company’s core return on average tangible common equityRATCE, adjusted, for the three-year period is calculated and compared to predetermined return on average tangible common equityRATCE goals for each year of the performance period. The goals for each year are based on the Company’s Board-approved budget and are established and approved by the Compensation Committee at the beginning of each year. The target goal for core return on average tangible common equityRACTE, adjusted, was set at 11.18%15.02% for 20162018, up from 13.20% for 2017. For 2018, we achieved actual RATCE, adjusted, of 15.40% as compared to 11.56%12.54% for 2015 to reflect the budgeted short-term impact on the Company’s tangible common equity resulting largely from the issuance2017.
2019 Proxy Statement | 53 |
Table of Common Stock in connection with mergerContents
Compensation Discussion and acquisition activity in 2016 and, to a lesser extent, the costs associated with the investment in systems and talent to support organizational growth as well as to position the Company for the heightened regulatory scrutiny resulting from the Company exceeding $10 billion in assets. For 2016, we achieved actual core return on average tangible common equity of 11.56% as compared to 10.92% for 2015.Analysis
Our Compensation Committee awarded performance shares in 20162018 in furtherance of the following strategic objectives:
u | Emphasize the Company’s long-term strategies and growth objectives. |
u | Encourage achievement of business goals that will enhance the long-term value of our Common Stock and increase the value of our Common Stock. |
u | Create a long-term focus based on sustainable results. |
u | Link pay with corporate performance. |
u | Provide additional stock ownership opportunities for our named executive officers, which further align the interests of our named executive officers with those of our stockholders. |
u | Foster retention of our named executive officers and avoid management turnover. |
u | Discourage our named executive officers from taking excessive or imprudent risks to enhance their compensation. |
In February 2016,2018, our Compensation Committee granted performance share award opportunities to our named executive officers as follows:
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| Number of Performance |
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| Target Performance Share |
| Shares Awarded for |
| Grant Date Fair Value of | |
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| Award Opportunity |
| 2018‑2020 Performance |
| Performance Share Award | |
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| (Expressed as a Percentage |
| Period (Based on Target |
| Opportunity (Based on | |
Named Executive Officer |
| of Base Salary) |
| Award Level) |
| Target Award Level) | |
Michael L. Scudder |
| 100 | % | 34,061 |
| $ | 890,952 |
Mark G. Sander |
| 70 | % | 18,373 |
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| 480,593 |
Patrick S. Barrett |
| 40 | % | 8,463 |
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| 221,372 |
Michael W. Jamieson |
| 40 | % | 7,165 |
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| 187,420 |
Thomas M. Prame |
| 30 | % | 4,274 |
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| 111,797 |
| Named Executive Officer | Target Performance Share Award Opportunity (Expressed as a Percentage of Base Salary) | Number of Performance Shares Awarded for 2016-2018 Performance Period (Based on Target Award Level) | Grant Date Fair Value of Performance Share Award Opportunity (Based on Target Award Level) | ||||||
| Michael L. Scudder | 65% | 31,843 | $ | 546,426 | |||||
| Mark G. Sander | 60% | 21,265 | 364,907 | ||||||
| Paul F. Clemens | 25% | 5,889 | 101,055 | ||||||
| Thomas M. Prame | 20% | 3,808 | 65,345 | ||||||
| Nicholas J. Chulos | 20% | 3,504 | 60,129 | ||||||
Conclusion of 2014-20162016-2018 Performance Period. In 2014,2016, our named executive officers (other than Messrs. Barrett and Jamieson, who had not yet joined the Company) were awarded performance shares subject to a three-year performance period that concluded on December 31, 2016.2018. Earned awards are subject to vesting one-third on each of March 15, 2019, 2020 and 2021. As with the performance shares awarded in February 2016 ,2018, the performance metrics applicable to the performance shares awarded in 20142016 were total stockholder returnTSR relative to the Company’s peer group and core return on the Company’s average tangible common equityRATCE, adjusted, relative to budget, each weighted at 50%. The range of performance and possible payout for each metric were as follows:
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| 25 | % | 100 | % | 200 | % |
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| Threshold |
| Target |
| Maximum |
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| 2016 |
| 10.06 | % | 11.18 | % | 11.74 | % |
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| 2017 |
| 11.88 | % | 13.20 | % | 13.86 | % |
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| 2018 |
| 13.52 | % | 15.02 | % | 15.77 | % |
Payout (% of Target)* |
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*At the end of the performance period, the actual performance for each year is averaged to determine the final payout as a percentage of target.
| Relative Total Stockholder Return (TSR) | ||||||
| Threshold | Target | Maximum | ||||
| Percentile | 25th | 50th | 90th | |||
| Payout (% of Target) | 25% | 100% | 200% | |||
| Core Return on Average Tangible Common Equity (CRATCE) | ||||||||
| Year | Threshold | Target | Maximum | |||||
| CRATCE | 2014 | 9.10% | 10.10% | 10.60% | ||||
| 2015 | 10.40% | 11.56% | 12.14% | |||||
| 2016 | 10.06% | 11.18% | 11.74% | |||||
Payout (% of Target)(1) | 25% | 100% | 200% | |||||
54 | First Midwest Bancorp, Inc. |
Compensation Discussion and Analysis
In February 2017,2019, based on the Company’s performance during the 2014-20162016‑2018 performance period, our Compensation Committee certified the Company’s performance applicable to the 20142016 performance shares as follows:follows (including certain adjustments to RATCE in accordance with our performance share program):
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| Payout |
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Performance Goal |
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| Performance |
| of Target |
| Percentage |
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Relative TSR (50%) |
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| 36th Percentile |
| 59 | % | 30 | % |
RATCE, adjusted (50%) |
| 2016 |
| 11.56 | % | 159 | % |
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| 2017 |
| 12.54 | % | 63 | % |
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| 2018 |
| 15.40 | % | 150 | % |
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| 3-Year Average |
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| 124 | % | 62 | % |
Total Percentage Earned |
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| 92 | % |
| Performance Goal | 2014-2016 Actual Performance | Payout as a Percentage of Target | Weighted Payout Percentage | |||
| Relative TSR (50% weighting) | 40th Percentile(1) | 72.0% | 36.0% | |||
| CRATCE (50% weighting) | 3-Year Average(2) | 83.0% | 41.5% | |||
| Total Percentage Earned | 77.5% | |||||
Accordingly, subject to applicable vesting provisions, as described above, our named executive officers will earn their 2016 performance share awards for(2016-2018 performance period) as follows:
Messrs. Barrett and Jamieson were not employees of the 2014-2016Company at the time the 2016 performance periodshare awards were granted and, as follows:
Restricted Stock Awards. In 2016,2018, our named executive officers were awarded restricted stock or restricted stock units that fully vest over a three-year period in equal installments on the second and third anniversaries of the grant date, assuming continued employment with the Company. Executives who have attained, or will attain during the vesting cycle, the age of 65 receive restricted stock units. Mr. ClemensAll of our named executive officers received restricted stock units in 2016 because he will turn age 65 during the three-year vesting cycle.2018.
2019 Proxy Statement | 55 |
Compensation Discussion and Analysis
The number of shares of restricted stock or restricted stock units awarded in a given year is determined based on a percentage of the named executive officer’s base salary, and then is adjusted upward or downward depending upon the officer’sofficer���s individual performance rating for the year. year, other than for awards to our Chief Executive Officer as to whom individual performance is not considered.
Base Salary | x | Restricted | x | Individual | = | Shares of |
We accrue cash dividends that otherwise would be paid on the restricted stock, and the Common Stock underlying restricted stock units, but the accrued, unpaid dividends on the unvested shares or units are not paid to the named executive officer unless the underlying shares vest.
In 2016,2018, our Compensation Committee granted restricted stock or restricted stock unit award opportunities to our named executive officers as follows:
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Named Executive Officer |
| Base Salary) |
| Granted |
| Stock Granted | |
Michael L. Scudder |
| 50 | % | 17,031 |
| $ | 425,009 |
Mark G. Sander |
| 50 | % | 13,780 |
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| 343,880 |
Patrick S. Barrett |
| 40 | % | 9,310 |
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| 232,331 |
Michael W. Jamieson |
| 40 | % | 7,523 |
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| 187,736 |
Thomas M. Prame |
| 40 | % | 5,983 |
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| 149,306 |
| Named Executive Officer | Restricted Stock/Unit Award Opportunity (Expressed as a Percentage of Base Salary) | Number of Shares of Restricted Stock/Units Granted | Grant Date Fair Value of Shares of Restricted Stock/Units Granted | ||||||
| Michael L. Scudder | 50% | 28,169 | $ | 473,803 | |||||
| Mark G. Sander | 50% | 20,379 | 342,775 | ||||||
| Paul F. Clemens | 35% | 7,832 | 131,734 | ||||||
| Thomas M. Prame | 35% | 7,998 | 134,526 | ||||||
| Nicholas J. Chulos | 40% | 9,812 | 165,038 | ||||||
Retirement and Other Welfare Benefits
We provide our named executive officers with retirement, health, life and disability insurance and other welfare benefits under plans that are generally available to all employees of the Company who meet plan eligibility requirements. Our retirement plans constitute our 401(k) Plan, PensionDeferred Compensation Plan and Deferred CompensationPension Plan. Executive officers are eligible to participate in these plans on the same basis as other employees in accordance with the terms of the plans.
Under the last several years, upon the recommendation of management, our Compensation Committee and the Board of Directors have approved various amendments to our Pension Plan. The first set of amendments were adopted in 2007 and eliminated any new enrollments of employees into this plan. In 2013, upon a subsequent recommendation of management, the Compensation Committee and the Board of Directors also approved amendments, effective as of January 1, 2014, to the Company’s (1) Pension Plan to freeze future benefit accruals under this plan, (2) Deferred Compensation Plan such that no annual pension restoration amounts will be credited to this plan on behalf of any participant, and (3) 401(k) Plan, to provide employer contributions to this plan on behalf of all eligible employees of (a)the Company makes an annual contribution equal to 2% of an employee’s total cash compensation (subject to a six-year vesting schedule), (b) on behalf of all eligible employees and a matching contribution equal to 100% of an employee’s first 3% of pre-tax contributions and 50% of the employee’s next 2% of pre-tax contributions, and (c) for the 2014 and 2015 plan years, a transition benefit only for participants in the Pension Plan as of January 1, 2014 equal to a contribution of 2% of total cash compensation for participants aged 40-49, 3% of total compensation for participants aged 50-59, and 4% of total cash compensation for participants aged 60 and older.
Our Deferred Compensation Plan allows certain employees to elect to defer a portion of their base salaries and annual cash incentive compensation and also allows us to provide make-up benefits to our executive officers for any reduction in benefits under our 401(k) Plan due to limitations on contributions to the plan imposed by the Internal Revenue Code.
Eligibility to participate in our noncontributory tax-qualified defined benefit pension plan was frozen in 2007. Benefit accruals under the Pension Plan were frozen effective as of January 1, 2014 and no additional benefits will accrue to participants after that date, including for Mr. Scudder, who is the only named executive officer who participates in the plan. Less than 25% of our employees participate in the Pension Plan.
56 | First Midwest Bancorp, Inc. |
Compensation Discussion and Analysis
We provide limited perquisites to our named executive officers, which the Compensation Committee believes are reasonable and within competitive practices.
These perquisites include a vehicle policy that provides a car allowance to our named executive officers.officers, other than our Chief Executive Officer, who receives Company-provided automobile transportation for business purposes in lieu of a car allowance. We also provide a mobile telephone servicestipend to our named executive officers, reimburse them for various subscriptions and industry, trade and professional organization dues and also reimburse certain of them for a portion of country club dues, which memberships are used to promote the business interests of the Company. For our Chief Executive Officer, we also provide security and financial planning services.
Stock Ownership Guidelines
We maintain stock ownership guidelines for our executive officers. The purpose of these guidelines is to further align the interests of our executive officersmanagement team and our stockholders. For 2017,We believe our Compensation Committee increased the stock ownership guidelines are significant and reinforce our desire for our Chief Executive Officer from three-times base salaryexecutives to five-times base salary, andretain a meaningful portion of equity. The guidelines for our Chief Operating Officer from two-times base salary to three-times base salary. Under the guidelines, our named executive officers are encouraged to hold shares of Common Stock as follows:
Position | Stock Ownership Guidelines | |
Chief Executive Officer | 5x base salary | |
Chief Operating Officer | 3x base salary | |
Chief Financial Officer | 2x base salary | |
Other Named Executive Officers | 2x base salary |
Our named executive officers have met these guidelines, other than Messrs. Barrett and Jamieson who joined the Company in 2017 and 2016, respectively, and are in the process of accumulating shares to comply with our stock ownership guidelines. For purposes of the guidelines, we include shares owned directly or indirectly by the executive and his spouse and minor children and unvested restricted stock.
Clawback, Anti-Pledging, Anti-Hedging and Other Policies
We have clawback provisions in the employment agreements with our named executive officers that allow us to recover cash bonuses and other incentive compensation under certain circumstances. WeOur 2018 Stock and Incentive Plan also includes clawback provisions. Additionally, we have a policy that prohibits our employees, including our named executive officers, from pledging or hedging our Common Stock or engaging in short sales and other short-term, speculative trading in our Common Stock.
Risk Assessment of Executive Compensation Program
Each year, our Compensation Committee reviews ourChief Risk Officer performs an executive compensation program and conducts a risk assessment relativeand presents the assessment results to this program.the Compensation Committee. The Committee reviews the results and discusses the risk assessment with its independent compensation consultant. This risk assessment allows our Compensation Committee to confirm that our executive compensation program is designed such that executive officers are not
2019 Proxy Statement | 57 |
Compensation Discussion and Analysis
encouraged to take excessive or imprudent risks to enhance their compensation. As part of its risk assessment process in 2016,2018, the Compensation Committee confirmed the following:
u | The risks associated with the Company’s compensation plans for all employees are appropriately identified and managed by the Company. |
u | The Company’s compensation plans for all employees do not create risks that are reasonably likely to have a material adverse effect on the Company as a whole. |
u | The Company’s incentive compensation policies do not undermine the safety and soundness of the Company by encouraging employees to take imprudent risks. |
u | The Company’s compensation plans for all employees are compatible with effective internal controls and risk management, and are supported by strong and effective corporate governance practices. |
As a result of the Company by encouraging employees to take imprudent risks;December 2017 enactment of the Tax Cuts and
Employment and Restrictive Covenant Agreements with Our Executive Officers
We have entered into employment agreements with our senior management, including our named executive officers. The Compensation Committee has determined that the terms of the agreements are consistent with competitive practices and are important to attracting and retaining high caliber executive talent. The agreements describe the executive’s position, compensation and benefits, including severance payments in the event of a termination of employment. The agreements also impose confidentiality, non-solicitation and non-disparagement obligations on the executive. In the event of a termination of employment by the Company without cause or by the executive officer for good reason prior to or following a change-in-control of the Company, severance benefits are triggered. Certain aspects of these agreements for our named executive officers are detailed in the tables and narrative following this Compensation Discussion and Analysis.
The employment agreements do not provide for walk-away rights upon a change-in-control or any tax gross-up payments relating to severance benefits following a change-in-control. In addition, our named executive officers are bound by separate Confidentiality and Restrictive Covenant Agreements that supplement the confidentiality and restrictive covenants set forth inAgreements. Each of our named executive officers’ employment agreements.officers is subject to confidentiality, non-disparagement and non-solicitation covenants. The duty to maintain the confidentiality non-
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis that appears in this Proxy Statement. Based on this review and discussion, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
Barbara A. Boigegrain | Br. James Gaffney, FSC | |||
Kathryn J. Hayley | Peter J. Henseler | |||
Ellen A. Rudnick | ||||
Members, Compensation Committee |
2019 Proxy Statement | 59 |
EXECUTIVE COMPENSATION TABLES
2018 Summary Compensation Table
The table and explanatory notes below summarize the total compensation for the years 2016, 20152018, 2017 and 20142016 paid to or earned by our named executive officers other than Mr. Chulos,Messrs. Barrett and Jamieson, who waswere not a named executive officerofficers in 2015 or 2014.2016. The information relating to Mr. ChulosMessrs. Barrett and Jamieson for those years2016 has been omitted in accordance with SEC rules.
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Name and |
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| Incentive Plan |
| Compensation |
| All Other |
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Principal Position |
| Year |
| Salary |
| Bonus(1) |
| Awards(2) |
| Compensation(3) |
| Earnings(4) |
| Compensation(5) |
| Total | |||||||
Michael L. Scudder |
| 2018 |
| $ | 850,000 |
| $ | — |
| $ | 1,391,224 |
| $ | 722,500 |
| $ | 226,790 |
| $ | 249,063 |
| $ | 3,439,577 |
Chairman and Chief |
| 2017 |
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| 846,000 |
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| — |
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| 1,515,354 |
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| 624,750 |
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| 272,472 |
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| 131,571 |
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| 3,390,147 |
Executive Officer |
| 2016 |
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| 824,307 |
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| 50,000 |
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| 1,088,685 |
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| 542,307 |
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| 153,763 |
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| 146,311 |
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| 2,805,373 |
Mark G. Sander |
| 2018 |
| $ | 655,000 |
| $ | — |
| $ | 872,035 |
| $ | 425,750 |
| $ | 105,997 |
| $ | 133,372 |
| $ | 2,192,154 |
President and Chief |
| 2017 |
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| 645,941 |
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| — |
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| 900,037 |
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| 417,235 |
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| 72,150 |
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| 93,403 |
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| 2,128,766 |
Operating Officer |
| 2016 |
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| 596,325 |
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| 35,000 |
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| 753,495 |
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| 344,198 |
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| 32,359 |
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| 80,398 |
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| 1,841,775 |
Patrick S. Barrett |
| 2018 |
| $ | 526,769 |
| $ | — |
| $ | 487,086 |
| $ | 273,900 |
| $ | 5,246 |
| $ | 407,495 |
| $ | 1,700,496 |
EVP and Chief |
| 2017 |
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| 504,000 |
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| 485,000 |
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| 1,609,524 |
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| 262,200 |
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| 2,534 |
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| 118,808 |
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| 2,982,066 |
Financial Officer |
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Michael W. Jamieson |
| 2018 |
| $ | 445,923 |
| $ | — |
| $ | 388,054 |
| $ | 234,675 |
| $ | 14,481 |
| $ | 59,347 |
| $ | 1,142,480 |
EVP and Director, |
| 2017 |
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| 439,231 |
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| — |
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| 347,236 |
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| 176,176 |
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| 1,427 |
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| 64,418 |
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| 1,028,488 |
Commercial Banking, |
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First Midwest Bank |
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Thomas M. Prame |
| 2018 |
| $ | 354,654 |
| $ | — |
| $ | 274,292 |
| $ | 150,732 |
| $ | 2,690 |
| $ | 37,759 |
| $ | 820,127 |
EVP and Director, |
| 2017 |
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| 345,430 |
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| — |
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| 296,026 |
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| 140,140 |
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| 1,947 |
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| 32,565 |
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| 816,108 |
Consumer Banking, |
| 2016 |
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| 320,436 |
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| 12,500 |
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| 211,604 |
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| 144,567 |
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| 1,585 |
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| 32,522 |
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| 723,214 |
First Midwest Bank |
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Name and Principal Position | Year | Salary | Bonus(1) | Stock Awards(2) | Non-Equity Incentive Plan Compensation(3) | Change in Pension Value and Non-qualified Deferred Compensation Earnings(4) | All Other Compensation(5) | Total | ||||||||||||||||||||||
| Michael L. Scudder | 2016 | $ | 824,307 | $ | 50,000 | $ | 1,088,685 | $ | 542,307 | $ | 153,763 | $ | 146,311 | $ | 2,805,373 | |||||||||||||||
| President and Chief Executive Officer | ||||||||||||||||||||||||||||||
| 2015 | 800,000 | — | 1,254,111 | 521,196 | 179,501 | 133,384 | 2,888,192 | |||||||||||||||||||||||
| 2014 | 750,000 | 47,000 | 1,103,667 | 482,400 | 221,576 | 64,644 | 2,669,287 | |||||||||||||||||||||||
| Mark G. Sander | 2016 | $ | 596,325 | $ | 35,000 | $ | 753,495 | $ | 344,198 | $ | 32,359 | $ | 80,398 | $ | 1,841,775 | |||||||||||||||
| Senior EVP and Chief Operating Officer | ||||||||||||||||||||||||||||||
| 2015 | 579,880 | — | 862,121 | 318,108 | 38,139 | 77,979 | 1,876,227 | |||||||||||||||||||||||
| 2014 | 545,000 | 20,015 | 723,140 | 304,159 | 19,915 | 72,685 | 1,684,914 | |||||||||||||||||||||||
| Paul F. Clemens | 2016 | $ | 396,315 | $ | 15,000 | $ | 248,248 | $ | 180,631 | $ | 7,934 | $ | 46,784 | $ | 894,912 | |||||||||||||||
| EVP and Chief Financial Officer | ||||||||||||||||||||||||||||||
| 2015 | 386,528 | — | 307,127 | 160,355 | 6,923 | 34,054 | 894,987 | |||||||||||||||||||||||
| 2014 | 376,000 | 9,898 | 263,999 | 156,593 | 5,268 | 48,088 | 859,846 | |||||||||||||||||||||||
| Thomas M. Prame | 2016 | $ | 320,436 | $ | 12,500 | $ | 211,604 | $ | 144,567 | $ | 1,585 | $ | 32,522 | $ | 723,214 | |||||||||||||||
| EVP and Director, Strategic Planning and Consumer Banking, First Midwest Bank | ||||||||||||||||||||||||||||||
| 2015 | 309,163 | — | 228,690 | 133,897 | 1,648 | 30,478 | 703,876 | |||||||||||||||||||||||
| 2014 | 300,158 | 9,839 | 199,877 | 127,560 | 1,068 | 20,034 | 658,536 | |||||||||||||||||||||||
| Nicholas J. Chulos | 2016 | $ | 295,077 | $ | 30,000 | $ | 236,546 | $ | 149,522 | $ | 2,355 | $ | 29,479 | $ | 742,979 | |||||||||||||||
| EVP, Corporate Secretary and General Counsel | ||||||||||||||||||||||||||||||
(1) | For 2017, Mr. Barrett received a one-time make-whole cash payment in connection with his recruitment to the Company as our Chief Financial Officer. For 2016, |
(2) | Amounts represent the aggregate grant-date fair value of stock awards, including performance |
(3) | Amounts represent cash bonuses paid under our performance-based short-term incentive compensation plan for the years indicated. |
60 | First Midwest Bancorp, Inc. |
Executive Compensation Tables
(4) | Amounts represent the |
(5) | Amounts represent the following: |
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Contributions to Defined Contribution Retirement Plans and Perquisites | ||||||||||||||
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Name |
| Year |
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| Plan(b) |
| Benefits(c) |
| Total | ||||
Michael L. Scudder |
| 2018 |
| $ | 16,500 |
| $ | 122,866 |
| $ | 109,697 | (d) | $ | 249,063 |
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| 2017 |
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| 16,200 |
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| 65,670 |
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| 49,701 | (d) |
| 131,571 |
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| 2016 |
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| 15,900 |
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| 98,011 |
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| 32,400 |
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| 146,311 |
Mark G. Sander |
| 2018 |
| $ | 16,500 |
| $ | 82,418 |
| $ | 34,454 |
| $ | 133,372 |
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| 2017 |
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| 16,200 |
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| 40,868 |
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| 36,335 |
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| 93,403 |
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| 2016 |
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| 15,900 |
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| 39,162 |
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| 25,336 |
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| 80,398 |
Patrick S. Barrett |
| 2018 |
| $ | 16,500 |
| $ | 10,965 |
| $ | 380,030 | (e) | $ | 407,495 |
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| 2017 |
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| — |
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| 46,800 |
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| 72,008 | (e) |
| 118,808 |
Michael W. Jamieson |
| 2018 |
| $ | 16,500 |
| $ | 6,942 |
| $ | 35,905 |
| $ | 59,347 |
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| 2017 |
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| — |
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| 36,540 |
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| 27,878 |
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| 64,418 |
Thomas M. Prame |
| 2018 |
| $ | 16,500 |
| $ | 9,046 |
| $ | 12,213 |
| $ | 37,759 |
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| 2017 |
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| 16,200 |
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| 3,890 |
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| 12,475 |
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| 32,565 |
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| 2016 |
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| 15,900 |
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| 3,688 |
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| 12,934 |
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| 32,522 |
| Contributions to Defined Contribution Retirement Plans and Perquisites | |||||||||||||||||||
| Name | Year | Qualified Plan(a) | Non- Qualified Plan(b) | Perquisites and Other Personal Benefits(c) | Total | ||||||||||||||
| Michael L. Scudder | 2016 | $ | 15,900 | $ | 98,011 | $ | 32,400 | (d) | $ | 146,311 | |||||||||
| 2015 | 23,850 | 88,893 | 20,641 | (d) | 133,384 | ||||||||||||||
| 2014 | 22,231 | 24,231 | 18,182 | (d) | 64,644 | ||||||||||||||
| Mark G. Sander | 2016 | $ | 15,900 | $ | 39,162 | $ | 25,336 | (d) | $ | 80,398 | |||||||||
| 2015 | 15,900 | 36,011 | 26,068 | (d) | 77,979 | ||||||||||||||
| 2014 | 11,431 | 36,643 | 24,611 | (d) | 72,685 | ||||||||||||||
| Paul F. Clemens | 2016 | $ | 15,900 | $ | 19,306 | $ | 11,578 | (d) | $ | 46,784 | |||||||||
| 2015 | 15,900 | 6,754 | 11,400 | (d) | 34,054 | ||||||||||||||
| 2014 | 15,600 | 20,013 | 12,475 | (d) | 48,088 | ||||||||||||||
| Thomas M. Prame | 2016 | $ | 15,900 | $ | 3,688 | $ | 12,934 | (d) | $ | 32,522 | |||||||||
| 2015 | 15,683 | 3,258 | 11,537 | (d) | 30,478 | ||||||||||||||
| 2014 | 7,509 | — | 12,525 | (d) | 20,034 | ||||||||||||||
| Nicholas J. Chulos | 2016 | $ | 15,900 | $ | 2,547 | $ | 11,032 | (d) | $ | 29,479 | |||||||||
(a) | The Company maintains the 401(k) Plan as its defined contribution plan. For eligible employees, this plan provides for an annual 2% automatic Company contribution and matching Company contributions. All Company contributions were made on eligible compensation under our 401(k) Plan, subject to compensation limitations under the Internal Revenue Code. |
(b) | The Company maintains the Deferred Compensation Plan as its nonqualified deferred compensation plan. This plan provides for a tax-deferred vehicle to accommodate contributions that are otherwise limited and not able to be made to our tax-qualified plans, as well as voluntary participant contributions. The Deferred Compensation Plan is subject to Section 409A of the Internal Revenue Code. |
(c) | Represents amounts paid to the named executive officer for an annual automobile allowance (other than, beginning in 2017, Mr. Scudder, who receives Company-provided automobile transportation for business purposes in lieu of an automobile allowance) and amounts paid by the Company on behalf of the named executive officer for other customary perquisites, including a mobile telephone stipend and reimbursement for subscriptions and industry, trade and professional organization dues. For Mr. Scudder, also includes amounts paid by the Company on his behalf for security and financial planning services. For Messrs. Sander and Jamieson, also includes amounts paid by the Company on their behalf for country club dues, which memberships are maintained for business entertainment but may be used for personal use. Except as otherwise described, no individual perquisite paid to any of our named executive offers exceeded $25,000 for any of the years listed. |
(d) | For Mr. Scudder, also includes $63,802 in 2018 and |
(e) | For Mr. |
2019 Proxy Statement | 61 |
Executive Compensation Tables
2018 Grants of Plan-Based Awards Table
The following table provides information with regard to the stock awards granted during 20162018 (and reported as Stock Awards in the Summary Compensation Table) and the annual cash incentive compensation award opportunity for 20162018 for our named executive officers.
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| Equity Incentive Plan Awards(2) |
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| Option | ||||||||||||
Name |
| Date |
| Threshold |
| Target |
| Maximum |
| Threshold |
| Target |
| Maximum |
| Units(3) |
| Awards(4) | ||||
Michael L. |
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| $ | 361,250 |
| $ | 722,500 |
| $ | 1,246,313 |
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Scudder |
| 2/21/2018 |
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| 8,515 |
| 34,061 |
| 68,122 |
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| $ | 890,952 |
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| 2/21/2018 |
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| 17,031 |
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| 425,009 |
Mark G. |
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| $ | 212,875 |
| $ | 425,750 |
| $ | 734,419 |
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Sander |
| 2/21/2018 |
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| 4,593 |
| 18,373 |
| 36,746 |
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| $ | 480,593 |
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| 2/21/2018 |
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| 13,780 |
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| 343,880 |
Patrick S. |
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| $ | 99,000 |
| $ | 264,000 |
| $ | 440,550 |
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Barrett |
| 2/21/2018 |
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| 2,116 |
| 8,463 |
| 16,926 |
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| $ | 221,372 |
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| 2/21/2018 |
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| 9,310 |
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| 232,331 |
Michael W. |
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| $ | 83,813 |
| $ | 223,500 |
| $ | 372,966 |
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Jamieson |
| 2/21/2018 |
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| 1,791 |
| 7,165 |
| 14,330 |
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| $ | 187,420 |
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| 2/21/2018 |
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| 7,523 |
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| 187,736 |
Thomas M. |
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| $ | 49,770 |
| $ | 142,200 |
| $ | 235,697 |
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Prame |
| 2/21/2018 |
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| 1,069 |
| 4,274 |
| 8,548 |
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| $ | 111,797 |
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| 2/21/2018 |
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| 5,983 |
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| 149,306 |
| Name | Grant Date | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Possible Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units(3) | Grant Date Fair Value of Stock and Option Awards(4) | ||||||||||||||||||||||||||
| Threshold | Target | Maximum | Threshold | Target | Maximum | ||||||||||||||||||||||||||
| Michael L. Scudder | $ | 123,600 | $ | 494,400 | $ | 825,648 | |||||||||||||||||||||||||
| 2/17/2016 | 7,961 | 31,843 | 63,686 | $ | 546,426 | ||||||||||||||||||||||||||
| 2/17/2016 | 28,169 | 473,803 | |||||||||||||||||||||||||||||
| Mark G. Sander | $ | 74,515 | $ | 298,058 | $ | 488,815 | |||||||||||||||||||||||||
| 2/17/2016 | 5,316 | 21,265 | 42,530 | $ | 364,907 | ||||||||||||||||||||||||||
| 2/17/2016 | 20,379 | 342,775 | |||||||||||||||||||||||||||||
| Paul F. Clemens | $ | 39,619 | $ | 158,476 | $ | 259,901 | |||||||||||||||||||||||||
| 2/17/2016 | 1,472 | 5,889 | 11,778 | $ | 101,055 | ||||||||||||||||||||||||||
| 2/17/2016 | 7,832 | 131,734 | |||||||||||||||||||||||||||||
| Thomas M. Prame | $ | 32,029 | $ | 128,117 | $ | 207,550 | |||||||||||||||||||||||||
| 2/17/2016 | 952 | 3,808 | 7,616 | $ | 65,345 | ||||||||||||||||||||||||||
| 2/17/2016 | 7,998 | 134,526 | |||||||||||||||||||||||||||||
| Nicholas J. Chulos | $ | 29,471 | $ | 117,882 | $ | 190,970 | |||||||||||||||||||||||||
| 2/17/2016 | 876 | 3,504 | 7,008 | $ | 60,129 | ||||||||||||||||||||||||||
| 2/17/2016 | 9,812 | 165,038 | |||||||||||||||||||||||||||||
(1) | Amounts reflect the range of possible payouts under our short-term cash incentive compensation plan based on a combination of Company performance and individual performance rating assumptions. For additional information, see Compensation Discussion and Analysis— |
(2) | Awards represent the range of estimated possible payouts granted in the form of performance shares under our Omnibus Stock and Incentive Plan, which, if earned, vest in shares of Common Stock. Our named executive officers are eligible to earn performance shares totaling between 25% and 200% of the number of performance shares granted if performance levels are achieved using the following two metrics: |
(3) | Awards represent restricted stock |
(4) | Amounts represent the aggregate grant-date fair value of stock awards, including performance shares and restricted stock |
62 | First Midwest Bancorp, Inc. |
Executive Compensation Tables
2018 Outstanding Equity Awards at Fiscal Year-End Table
The following table provides information regarding unexercised stock options and unvested stock awards held by our named executive officers as of December 31, 2016.2018. All values in the table are based on a market value for our Common Stock of $25.23,$19.81, which was the closing price of our stock on December 30, 2016,31, 2018, the last trading day of the year, as reported by the NASDAQ Stock Market. Information regarding when unvested awards are scheduled to vest is set forth in the notes to the table. Vesting also is subject to continued employment and acceleration under certain circumstances. As of December 31, 2018, no stock options remained outstanding under our equity compensation plans.
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| Stock Awards | |||||||||||||
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| Equity | |||
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| Awards: | |||
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| Number of |
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| Unearned | |||
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| Underlying |
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| Units of |
| or Other |
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| Unexercised |
| Option |
| Option |
| Units of Stock |
| Stock that |
| Rights that |
| or Other Rights | |||
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| Options |
| Exercise |
| Expiration |
| that Have Not |
| Have Not |
| Have Not |
| that Have Not | |||
Name |
| Exercisable |
| Price |
| Date |
| Vested |
| Vested |
| Vested |
| Vested | |||
Michael L. Scudder |
| — |
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| 14,084 | (2) | $ | 279,004 |
| 34,423 | (8) | $ | 681,920 |
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| 22,679 | (3) |
| 449,271 |
| 34,061 | (9) |
| 674,748 |
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| 17,031 | (4) |
| 337,384 |
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| 9,438 | (5) |
| 186,967 |
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| 19,990 | (6) |
| 396,002 |
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| 29,134 | (7) |
| 577,145 |
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Mark G. Sander |
| — |
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| 10,189 | (2) | $ | 201,844 |
| 15,916 | (8) | $ | 315,296 |
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| 17,996 | (3) |
| 356,501 |
| 18,373 | (9) |
| 363,969 |
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| 13,780 | (4) |
| 272,982 |
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| 5,252 | (5) |
| 104,042 |
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| 13,375 | (6) |
| 264,959 |
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| 19,453 | (7) |
| 385,364 |
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Patrick S. Barrett |
| — |
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| 8,404 | (10) | $ | 166,483 |
| 23,149 | (8) | $ | 458,582 |
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| 32,441 | (11) |
| 642,656 |
| 8,463 | (9) |
| 167,652 |
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| 9,310 | (4) |
| 184,431 |
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Michael W. Jamieson |
| — |
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| 5,213 | (12) | $ | 103,270 |
| 5,333 | (8) | $ | 105,647 |
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| 8,178 | (10) |
| 162,006 |
| 7,165 | (9) |
| 141,939 |
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| 7,523 | (4) |
| 149,031 |
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Thomas M. Prame |
| — |
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| 3,999 | (2) | $ | 79,220 |
| 4,242 | (8) | $ | 84,034 |
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| 7,057 | (10) |
| 139,799 |
| 4,274 | (9) |
| 84,668 |
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| 5,983 | (4) |
| 118,523 |
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| 963 | (5) |
| 19,077 |
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| 2,376 | (6) |
| 47,069 |
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| 3,482 | (7) |
| 68,978 |
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Option Awards(1) | Stock Awards | ||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options Exercisable | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested | Market Value of Shares or Units of Stock that Have Not Vested | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested | ||||||||||||||||||
| Michael L. Scudder | 18,898 | $ | 38.62 | 2/21/2017 | 14,577 | (2) | $ | 367,778 | 30,916 | (7) | $ | 780,011 | |||||||||||||
| 25,019 | 28.10 | 2/20/2018 | 38,817 | (3) | 979,353 | 31,843 | (8) | 803,399 | |||||||||||||||||
| 28,169 | (4) | 710,704 | |||||||||||||||||||||||
| 18,101 | (5) | 456,688 | |||||||||||||||||||||||
| 28,319 | (6) | 714,488 | |||||||||||||||||||||||
| Mark G. Sander | 42,328 | $ | 12.17 | 6/20/2021 | 11,440 | (2) | $ | 288,631 | 20,685 | (7) | $ | 521,883 | |||||||||||||
| 27,374 | (3) | 690,646 | 21,265 | (8) | 536,516 | ||||||||||||||||||||
| 20,379 | (4) | 514,162 | |||||||||||||||||||||||
| 12,058 | (5) | 304,223 | |||||||||||||||||||||||
| 15,762 | (6) | 397,675 | |||||||||||||||||||||||
| Paul F. Clemens | 5,380 | $ | 38.62 | 2/21/2017 | 4,911 | (2) | $ | 123,905 | 5,745 | (7) | $ | 144,946 | |||||||||||||
| 18,464 | 28.10 | 2/20/2018 | 11,413 | (3) | 287,950 | 5,889 | (8) | 148,579 | |||||||||||||||||
| 7,832 | (4) | 197,601 | |||||||||||||||||||||||
| 3,526 | (5) | 88,961 | |||||||||||||||||||||||
| 4,531 | (6) | 114,317 | |||||||||||||||||||||||
| Thomas M. Prame | 4,084 | (2) | $ | 103,039 | 3,676 | (7) | $ | 92,745 | |||||||||||||||||
| 9,209 | (3) | 232,343 | 3,808 | (8) | 96,076 | ||||||||||||||||||||
| 7,998 | (4) | 201,790 | |||||||||||||||||||||||
| 2,256 | (5) | 56,919 | |||||||||||||||||||||||
| 2,894 | (6) | 73,016 | |||||||||||||||||||||||
| Nicholas J. Chulos | 4,011 | (2) | $ | 101,198 | 3,160 | (7) | $ | 79,727 | |||||||||||||||||
| 8,648 | (3) | 218,189 | 3,504 | (8) | 88,406 | ||||||||||||||||||||
| 9,812 | (4) | 247,557 | |||||||||||||||||||||||
| 1,932 | (5) | 48,744 | |||||||||||||||||||||||
| 2,487 | (6) | 62,747 | |||||||||||||||||||||||
(1) | None of our named executive officers has been granted a stock option award since 2011. |
(2) | Restricted stock |
(3) | Represents restricted stock |
(4) | Represents restricted stock |
2019 Proxy Statement | 63 |
Executive Compensation Tables
(5) | Represents the third tranche of performance shares earned at the completion of a three-year performance period that ended on December 31, 2016. The third tranche vested on March 15, 2019. See note 7, below, for additional information regarding the vesting of earned performance shares. |
(6) | Represents the second and third tranche of performance shares earned at the completion of a three-year performance period that ended on December 31, |
(7) | Represents performance shares earned at the completion of a three-year performance period that ended on December 31, |
(8) | Represents performance shares that may be earned upon completion of a three-year performance period ending on December 31, |
(9) | Represents performance shares that may be earned upon completion of a three-year performance period ending on December 31, |
(10) | Represents restricted stock awards granted in 2017, the first tranche of which vested on February 22, 2019 and the second tranche of which is scheduled to vest on February 22, 2020. See note 2, above, for additional information regarding the vesting of restricted stock awards. |
(11) | Represents a restricted stock award granted in 2017, the first tranche of which vested on February 27, 2019 and the second tranche of which is scheduled to vest on February 27, 2020. See note 2, above, for additional information regarding the vesting of restricted stock awards. |
(12) | Represents a restricted stock award granted in 2016 that vests over three years in three equal installments beginning one year from the date of grant (subject to continued employment and accelerated vesting under certain circumstances), the third tranche of which is scheduled to vest on September 29, 2019. |
64 | First Midwest Bancorp, Inc. |
Executive Compensation Tables
2018 Option Exercises and Stock Vested Table
The following table provides information with respect to the value realized by our named executive officers during 20162018 as a result of the exercise of non-qualified stock options and the vesting of restricted stock awards, or units, based on the average of the high and low sales price of a share of Common Stock on the NASDAQ Stock Market on the exercise or vesting date, as applicable.
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| Value Realized |
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| Value Realized | ||
Name |
| on Exercise |
| on Exercise |
| on Vesting |
| on Vesting | ||
Michael L. Scudder |
| — |
| $ | — |
| 61,977 |
| $ | 1,579,566 |
Mark G. Sander |
| 42,328 |
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| 584,444 |
| 41,848 |
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| 1,065,423 |
Patrick S. Barrett |
| — |
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| — |
| — |
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| — |
Michael W. Jamieson |
| — |
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| — |
| 5,214 |
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| 138,171 |
Thomas M. Prame |
| — |
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| — |
| 11,883 |
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| 300,902 |
| Option Awards | Stock Awards | ||||||||||
| Name | Number of Shares Acquired on Exercise | Value Realized on Exercise | Number of Shares Acquired on Vesting | Value Realized on Vesting | |||||||
| Michael L. Scudder | — | — | 40,451 | $ | 668,851 | ||||||
| Mark G. Sander | — | — | 28,602 | 472,296 | |||||||
| Paul F. Clemens | — | — | 11,649 | 191,167 | |||||||
| Thomas M. Prame | — | — | 9,593 | 156,871 | |||||||
| Nicholas J. Chulos | — | — | 6,925 | 113,500 | |||||||
Pension Benefits
We maintain a noncontributory tax-qualified defined benefit Pension Planpension plan for eligible employees. Eligibility to participate in this plan was frozen in 2007. Benefit accruals under this plan were frozen effective as of January 1, 2014 and no additional benefits will accrue to participants after that date, including for Mr. Scudder, who is the only named executive officer who participates in our Pension Plan.
The amount of the monthly pension benefit under our Pension Plan is based on the average monthly pension-eligible compensation and years of credited service of the participant. Average monthly compensation is the average of the highest eighty-four consecutive months of pay within the last 120 months of service and years of credited service is based on the period of employment with the Company, subject to limitations on service prior to 1980.
Pension-eligible compensation consists of base salary, cash bonuses, incentive compensation and vacation pay, but excludes severance and amounts realized from the exercise of non-qualified stock options and the vesting of restricted stock, restricted stock unit and performance share awards. Pension-eligible compensation is capped by provisions of the Internal Revenue Code applicable to tax-qualified pension plans. For 2016,2018, this limit was $265,000.$275,000. Any amounts that become ineligible due to the Internal Revenue Code limits are used to compute the pension restoration contribution to the Deferred Compensation Plan as discussed further below under the section titled Non-Qualified Deferred Compensation.
Our Pension Plan provides for pension benefits under normal retirement (the attainment of age 65), early retirement (the attainment of age 55 with fifteen or more years of service), termination after five years of service,
Early retirement pension benefits are reduced by 6% for each of the first five years (ages 60-65)60‑65) and by 4% for each of the next five years (ages 55-60)55‑60) that the pension commencement date precedes the normal retirement age of 65.
Executive Compensation Tables
2018 Pension Benefits Table
The following table shows the present value of the accumulated benefit as of December 31, 20162018 payable to each of the named executive officers, including the number of years of service credited to each named executive officer under our Pension Plan determined using interest rate and mortality rate assumptions consistent with those used in our 20162018 audited financial statements included in our Form 10-K.10‑K.
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| During Last | ||
Name |
| Plan Name |
| Service |
| Benefit |
| Fiscal Year | ||
Michael L. Scudder |
| Pension Plan |
| 27.75 |
| $ | 734,450 |
| $ | — |
Mark G. Sander* |
| N/A |
| N/A |
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| N/A |
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| N/A |
Patrick S. Barrett* |
| N/A |
| N/A |
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| N/A |
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| N/A |
Michael W. Jamieson* |
| N/A |
| N/A |
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| N/A |
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| N/A |
Thomas M. Prame* |
| N/A |
| N/A |
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| N/A |
|
| N/A |
| Name | Plan Name | Number of Years Credited Service | Present Value of Accumulated Benefit | Payments During Last Fiscal Year | ||||||||
| Michael L. Scudder | Pension Plan | 27.75 | $ | 694,946 | $ | — | ||||||
| Mark G. Sander* | N/A | N/A | N/A | N/A | ||||||||
| Paul F. Clemens* | N/A | N/A | N/A | N/A | ||||||||
| Thomas M. Prame* | N/A | N/A | N/A | N/A | ||||||||
| Nicholas J. Chulos* | N/A | N/A | N/A | N/A | ||||||||
*The Pension Plan was closed to new participants as of April 1, 2007. Based on the date of hire for Messrs. Sander, Barrett, Jamieson and Prame, they are not eligible to participate in the Pension Plan.
Non-Qualified Deferred Compensation
We maintain two non-qualified deferred compensation plans in which our named executive officers may participate,are participants, the Deferred Compensation Plan and the Gain Deferral Plan.
Deferred Compensation Plan
The Deferred Compensation Plan is a non-qualified defined contribution deferred compensation plan under which participants are credited with deferred compensation equal to contributions and benefits based on amounts that would have accrued under our Pension Plan or been contributed under our 401(k) Plan but for limitations under the Internal Revenue Code, andCode. Further, participants may elect to defer up to 75%100% of base salary and up to 100% of short-term cash incentive compensation thatinto the participant has elected to defer.plan. Deferral elections aremust be made by eligible participants in December of each year for amountsduring the initial or annual enrollment period and apply to becompensation earned in the following calendar year. The elections remain in effect for each subsequent calendar year until a participant makes a qualifying change. Participant accounts are deemed to be invested in separate investment accounts in an irrevocable rabbi trust under the Deferred Compensation Plan, with similar investment alternatives as those available under our 401(k) Plan, including an investment account deemed invested in shares of our Common Stock. Participants are able to modify their investment elections at any time, subject to applicable blackout periods.
Gain Deferral Plan
We maintainestablished the Gain Deferral Plan with the purpose of encouraging stock ownership by certain key executives. In response to the addition of Section 409A of the Internal Revenue Code, participation in the Gain Deferral Plan was frozen on January 1, 2005 and no additional contributions or deferrals may be made under this plan. This plan combinescombined traditional deferred compensation arrangements with stock option exercise transactions by allowing eligible stock option participants to defer to a future date the receipt of shares representing the value realized upon exercise of the underlying stock options. In response to the addition of Section 409A of the Internal Revenue Code, the Gain Deferral Plan was frozen and no additional contributions or deferrals may be made
Distributions
Under both the Deferred Compensation Plan and the Gain Deferral Plan, payments begin after termination of employment and are payable at the participant’s election either as a lump sum or in installments over a period not to exceed fifteen years. Earlier payment may be made upon showing of financial hardship to the satisfaction of the Compensation Committee. Distributions are paid in cash under the Deferred Compensation Plan, and are paid as
66 | First Midwest Bancorp, Inc. |
Executive Compensation Tables
in-kind stock distributions under the Gain Deferral Plan. Payments to named executive officers will be delayed as necessary to comply with Section 409A of the Internal Revenue Code.
2018 Non-Qualified Deferred Compensation Table
The table set forth below summarizes the activity in the Deferred Compensation Plan and Gain Deferral Plan accounts of our named executive officers during 2016.2018.
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Name |
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| in 2018(2) |
| 2018 |
| in 2018 |
| 2018(3)(4) | |||||
Michael L. Scudder |
| Deferred Comp. Plan |
| $ | 34,332 |
| $ | 97,564 |
| $ | 222,528 |
| $ | — |
| $ | 3,503,267 |
|
| Gain Deferral Plan |
|
| — |
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| — |
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| 4,262 |
|
| — |
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| 195,989 |
Mark G. Sander |
| Deferred Comp. Plan |
| $ | 52,913 |
| $ | 66,473 |
| $ | 105,997 |
| $ | — |
| $ | 946,964 |
|
| Gain Deferral Plan |
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| N/A |
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| N/A |
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| N/A |
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| N/A |
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| N/A |
Patrick S. Barrett |
| Deferred Comp. Plan |
| $ | 827 |
| $ | 624 |
| $ | 5,246 |
| $ | — |
| $ | 60,675 |
|
| Gain Deferral Plan |
|
| N/A |
|
| N/A |
|
| N/A |
|
| N/A |
|
| N/A |
Michael W. Jamieson |
| Deferred Comp. Plan |
| $ | 160,605 |
| $ | — |
| $ | 14,481 |
| $ | — |
| $ | 185,984 |
|
| Gain Deferral Plan |
|
| N/A |
|
| N/A |
|
| N/A |
|
| N/A |
|
| N/A |
Thomas M. Prame |
| Deferred Comp. Plan |
| $ | — |
| $ | 4,650 |
| $ | 2,690 |
| $ | — |
| $ | 62,844 |
|
| Gain Deferral Plan |
|
| N/A |
|
| N/A |
|
| N/A |
|
| N/A |
|
| N/A |
| Name | Plan Name | Executive Contributions in 2016(1) | Company Contributions in 2016(2) | Aggregate Earnings in 2016 | Aggregate Withdrawals/Distributions in 2016 | Aggregate Balance at December 31, 2016(3)(4) | ||||||||||||||||
| Michael L. Scudder | Deferred Comp. Plan | $ | 33,277 | $ | 98,011 | $ | 96,016 | $ | — | $ | 2,666,280 | |||||||||||
| Gain Deferral Plan | — | — | 3,419 | — | 241,538 | |||||||||||||||||
| Mark G. Sander | Deferred Comp. Plan | $ | 79,959 | $ | 39,162 | $ | 32,359 | $ | — | $ | 630,790 | |||||||||||
| Gain Deferral Plan | N/A | N/A | N/A | N/A | N/A | |||||||||||||||||
| Paul F. Clemens | Deferred Comp. Plan | $ | 6,095 | $ | 19,306 | $ | 7,934 | $ | — | $ | 200,325 | |||||||||||
| Gain Deferral Plan | N/A | N/A | N/A | N/A | N/A | |||||||||||||||||
| Thomas M. Prame | Deferred Comp. Plan | $ | — | $ | 3,688 | $ | 1,585 | $ | — | $ | 62,623 | |||||||||||
| Gain Deferral Plan | N/A | N/A | N/A | N/A | N/A | |||||||||||||||||
| Nicholas J. Chulos | Deferred Comp. Plan | $ | 32,014 | $ | 2,547 | $ | 2,355 | $ | — | $ | 125,260 | |||||||||||
| Gain Deferral Plan | N/A | N/A | N/A | N/A | N/A | |||||||||||||||||
(1) | Executive contributions represent amounts that would have been contributed by the named executive officer under our 401(k) Plan, but for limitations under the Internal Revenue Code, and salary and short-term incentive compensation the named executive officer has elected to defer. |
(2) | Company contributions represent amounts that would have been contributed under our tax-qualified benefit plans but for limitations under the Internal Revenue Code. The Company contributions to the Deferred Compensation Plan for each named executive officer |
(3) | Aggregate balances at December 31, |
(4) | As of December 31, |
2019 Proxy Statement | 67 |
Executive Compensation Tables
Potential Payments Upon Termination or Change-in-Control
We have entered into employment agreements and maintain plans covering our named executive officers that will require the Company to provide severance payments in the event of an involuntary termination of employment (other than for cause) or a resignation of employment for good reason both prior to and following a change-in-control of the Company.
Overview
Our employment agreements with each of our named executive officers provide for automatic annual one-year extensions, except for Messrs. Scudder and Sander whose employment agreements provide for automatic two-year extensions every other year. Among other items, the agreements set forth the executive’s title, responsibilities, and compensation confidentiality, non-solicitation and non-disparagement covenants by the executive and severance payments to be made to the executive upon certain terminations of employment. Termination of employment also may impact equity awards that we have granted, as well as benefits payable under our employee benefit plans.
In addition to their employment agreements, our named executive officers are parties to Confidentiality and Restrictive Covenants Agreements with us throughunder which we enhancedthey are subject to confidentiality, non-disparagement, non-solicitation and, in the case of Messrs Scudder and Sander, non-competition covenants. The restrictive covenants applicable to which our named executive officers. The non-solicitation provisions in these agreements apply for eighteen months after termination of employment for Messrs. Scudderofficers are subject are described more fully above under Compensation Discussion and Sander,Analysis—Policies, Guidelines and one year after termination for Messrs. Clemens, PrameOther Practices—Employment and Chulos.
The following discussion takes each termination of employment situation—voluntary resignation, discharge for cause, discharge without cause, resignation for good reason, death and disability—both prior to and following a change-in-control of the Company, and describes the severance or other additional amounts that the Company would pay or provide to the named executive officer or the officer’s beneficiaries as a result. The discussion below and the amounts shown reflect certain assumptions we have made in accordance with applicable SEC rules. These assumptions are that the termination of employment or change-in-control occurred on December 31, 20162018 and that the value of a share of our Common Stock on that day was $25.23,$19.81, which is the closing price of our stock as reported by the NASDAQ Stock Market on December 30, 2016,31, 2018, which was the last trading day of the year.
The following discussion and amounts exclude the payments and benefits that are not enhanced by a termination of employment or change-in-control. These payments and benefits, which are referred to in the following discussion as the executive officer’s “vested benefits,” include:
u | Base salary payable through the date of termination; |
u | Any other cash compensation earned through the date of termination but not paid, including any amounts earned and vested but not paid under our annual cash incentive compensation program; |
u | Benefits accrued under our 401(k) Plan, in which all employees participate, and Pension Plan; |
u | Accrued vacation pay, group health plan continuation and other similar amounts payable when employment terminates under programs applicable to our salaried employees generally; |
u | Balances accrued under our Deferred Compensation Plan and Gain Deferral Plan; and |
u | Restricted stock and performance shares that have vested prior to the employment termination or change-in-control. |
68 | First Midwest Bancorp, Inc. |
Executive Compensation Tables
Voluntary Resignation
Prior to age 65, we are not obligated to pay amounts over and above vested benefits in the event of employment termination due to voluntary resignation, and all unearned or unvested restricted stock restricted stock unit and performance share awards will lapse and not vest. Following attainment of age 65, in the event of a named executive officer’s retirement, we have provided that, in addition to payment of the executive’s vested benefits:
u | All unvested restricted stock awards, as well as all earned but unvested performance shares, become fully vested; and |
u | A pro-rated portion of all unearned performance shares may vest following the end of the performance periods applicable to the executive’s performance share awards outstanding at the time of retirement and as to which the performance periods have not concluded. The portion of each unearned performance share award that may vest is based on the achievement of the applicable performance goals during the entire performance period, and is calculated by multiplying the target number of performance shares by a fraction, the numerator of which is the number of whole months that have elapsed from the beginning of the applicable performance period to the date of resignation and the denominator of which is 36. |
As of December 31, 2016,2018, none of our named executive officers had attained age 65.
Discharge for Cause
We are not obligated to pay any amounts over and above vested benefits if a named executive officer’s employment terminates because of discharge for cause. The named executive officer’s right to exercise vested options expires upon discharge for cause and, ifIf the cause is fraud or embezzlement of funds, benefits under the Gain Deferral Plan are subject to forfeiture. In general, a discharge will be for cause if the executive has intentionally failed to perform his or her duties of employment, engaged in illegal or gross misconduct that harms the Company, has been convicted of a felony involving dishonesty, fraud, theft or financial impropriety or has violated a material requirement of any code of ethics or standard of conduct of the Company.
Death or Disability
We provide our employees, including our named executive officers, with group life and disability insurance coverage. The group life insurance benefit is based on a multiple of base salary, subject to limits contained in the policy. Participants in our group life insurance plan may, if eligible, purchase additional insurance at their own cost. The disability benefit is a monthly benefit, paid until age 65, equal to 60% of base salary at the time of disability. These benefits would be paid to the named executive officer or his beneficiary, in addition to the executive’s vested benefits, in the event of death or disability.
The amount of the payments to our named executive officers assuming death or disability on December 31, 20162018 is set forth in the following table:
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| Disability Benefits | ||||||
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| Life Insurance |
| Monthly |
| Months to |
| Total | |||
Name |
| (Death) Benefit |
| Amount |
| Age 65 |
| Payment | |||
Michael L. Scudder |
| $ | 1,000,000 |
| $ | 42,500 |
| 79 |
| $ | 3,357,500 |
Mark G. Sander |
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| 750,000 |
|
| 32,750 |
| 59 |
|
| 1,932,250 |
Patrick S. Barrett |
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| 750,000 |
|
| 26,400 |
| 120 |
|
| 3,168,000 |
Michael W. Jamieson |
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| 750,000 |
|
| 22,350 |
| 49 |
|
| 1,095,150 |
Thomas M. Prame |
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| 700,000 |
|
| 17,775 |
| 191 |
|
| 3,395,025 |
2019 Proxy Statement | 69 |
| Disability Benefits | |||||||||||||||
| Name | Life Insurance (Death) Benefit | Monthly Amount | Months to Age 65 | Total Payment | |||||||||||
| Michael L. Scudder | $ | 1,000,000 | $ | 41,215 | 103 | $ | 4,245,145 | ||||||||
| Mark G. Sander | 750,000 | 29,816 | 83 | 2,474,728 | |||||||||||
| Paul F. Clemens | 752,000 | 19,816 | 7 | 138,712 | |||||||||||
| Thomas M. Prame | 641,000 | 16,022 | 215 | 3,444,730 | |||||||||||
| Nicholas J. Chulos | 590,000 | 14,754 | 94 | 1,386,876 | |||||||||||
Executive Compensation Tables
We also have provided for the vesting of unearned or unvested equity awards in the event of the death or disability of the named executive officer as follows:
u | All unvested restricted stock awards, as well as all earned but unvested performance shares, become fully vested; and |
u | A pro-rated portion of all unearned performance shares may vest following the end of the performance periods applicable to the executive’s performance share awards outstanding at the time of death or disability and as to which the performance periods have not concluded. The portion of each unearned performance share award that may vest is based on the achievement of the applicable performance goals during the entire performance period, and is calculated by multiplying the target number of performance shares by a fraction, the numerator of which is the number of whole months that have elapsed from the beginning of the applicable performance period to the date of termination of employment and the denominator of which is 36. |
The following table summarizes the unvested restricted stock, or restricted stock units, earned but unvested performance shares and unearned performance shares (assuming target performance) that would have vested on December 31, 20162018 if the executive’s employment terminated that day due to death or disability.
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| Restricted Stock |
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| Awards |
| Performance Shares |
| Total | |||||||
Name |
| Number |
| Value |
| Number |
| Value |
| Equity Value | |||
Michael L. Scudder |
| 53,794 |
| $ | 1,065,659 |
| 92,864 |
| $ | 1,839,636 |
| $ | 2,905,295 |
Mark G. Sander |
| 41,965 |
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| 831,327 |
| 54,815 |
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| 1,085,885 |
|
| 1,917,212 |
Patrick S. Barrett |
| 50,155 |
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| 993,571 |
| 18,254 |
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| 361,612 |
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| 1,355,182 |
Michael W. Jamieson |
| 20,914 |
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| 414,306 |
| 4,944 |
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| 97,941 |
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| 512,247 |
Thomas M. Prame |
| 17,039 |
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| 337,543 |
| 11,074 |
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| 219,376 |
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| 556,919 |
Restricted Stock Awards/Units | Performance Shares | Total Equity Value | ||||||||||||||||
| Name | Number | Value | Number | Value | ||||||||||||||
| Michael L. Scudder | 81,563 | $ | 2,057,834 | 77,646 | $ | 1,959,009 | $ | 4,016,843 | ||||||||||
| Mark G. Sander | 59,193 | 1,493,439 | 48,698 | 1,228,651 | 2,722,090 | |||||||||||||
| Paul F. Clemens | 24,156 | 609,456 | 13,850 | 349,436 | 958,892 | |||||||||||||
| Thomas M. Prame | 21,291 | 537,172 | 8,870 | 223,790 | 760,962 | |||||||||||||
| Nicholas J. Chulos | 22,471 | 566,943 | 7,694 | 194,120 | 761,063 | |||||||||||||
Discharge Without Cause; Resignation Forfor Good Reason
Our employment agreements obligate us to pay severance benefits if a named executive officer’s employment is involuntarily terminated other than for cause. This includes the resignation by the executive for good reason. A good reason generally will occur if the executive determines we have breached the employment agreement by not maintaining histhe executive’s appointed positions, responsibilities or authority, failed to pay or provide the agreed-upon compensation, given notice that the agreement will not automatically renew, or required the executive to move to an office location more than eighty milesa specified distance from histhe current location. Our primary obligation inIn these circumstances is to continue the executive’s salary and participation in group health plans for a defined severance period and to pay a pro-rata annual bonus (based on target performance) for the year employment terminates. We will also provide outplacement assistance. The severance period is nine months for Messrs. Scudder and Sander and six months for the other named executive officers. The severance period may be extended for up to an additional six-month period in the Company’s sole discretion. circumstances:
u | Each executive is eligible to receive a pro-rata annual bonus based, in the case of Messrs. Scudder and Sander, on the greater of (1) the executive’s target bonus for the year of termination or (2) the actual bonus earned for the year of termination or, in the case of our other named executive officers, on the executive’s target bonus for the completed year immediately preceding the year of termination; |
u | Each executive is eligible to receive severance payments. In the case of Messrs. Scudder and Sander, these severance payments are equal to 2x the executive’s base salary and target bonus in effect at the time of termination, payable over 24 months. In the case of our other named executive officers, the executive is eligible to receive six months of salary continuation following termination, subject to extension in the Company’s discretion for up to an additional six months; |
70 | First Midwest Bancorp, Inc. |
Executive Compensation Tables
u | Messrs. Scudder and Sander are eligible to receive pro-rata vesting of unearned or unvested equity awards. To the extent that the provisions of the applicable award agreements are not more favorable, (1) a portion of all unvested restricted stock awards, as well as all earned but unvested performance shares, will vest upon termination of the executive’s employment equal to the total number of shares of common stock subject to the award multiplied by a fraction, the numerator of which is the number of whole months that have elapsed from the grant date to the date of termination of employment and the denominator of which is the number of whole months in the period from the grant date to the final scheduled vesting date of the award, to the extent that the pro-rata portion exceeds the portion of the award that vested prior to the date of termination of employment, and (2) a portion of all unearned performance shares for which the applicable performance period will end after the date of termination of employment may remain outstanding and be eligible to be earned and vest based on actual performance at the end of the performance period, which portion is equal to the total number of performance shares granted under the award multiplied by a fraction, the numerator of which is the number of whole months that have elapsed from the first day of the performance period to the date of termination of employment and the denominator of which is the number of months in the performance period; |
u | Each executive is eligible to continue to participate in group health plans. In the case of Messrs. Scudder and Sander, the executive, the executive’s spouse and the executive’s age-eligible dependent children are eligible to maintain health benefits coverage on the same basis, including cost-sharing, as if the executive’s employment continued until the executive and the executive’s spouse are eligible for Medicare coverage and the executive’s dependents are no longer age-eligible for coverage under the Company’s plans. In the case of our other named executive officers, the executive is eligible to maintain health benefits coverage on the same basis as if the executive’s employment continued for a period of six months, subject to extension in the Company’s discretion for up to an additional six months; and |
u | Each of our named executive officers other than Messrs. Scudder and Sander are eligible for outplacement assistance. |
The executive is required to reaffirm compliance with the executive’s Confidentiality and Restrictive Covenants Agreement and execute a general release of claims as a condition to receiving severance benefits.
Severance
The following table summarizes the severance benefits that would be payable to our named executive officers had their employment been terminated involuntarily without cause or for good reason on December 31, 2016:2018:
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Name |
| Amount |
| Months |
| Amount |
| Bonus(1) |
| Number |
| Value |
| Placement(3) |
| Total | ||||||
Michael L. Scudder |
| $ | 100,938 |
| 24 |
| $ | 2,422,500 |
| $ | 722,500 |
| 100,755 |
| $ | 1,995,957 |
| $ | 169,827 |
| $ | 5,310,784 |
Mark G. Sander |
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| 72,323 |
| 24 |
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| 1,735,750 |
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| 425,750 |
| 63,252 |
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| 1,253,022 |
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| 184,531 |
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| 3,599,053 |
Patrick S. Barrett |
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| 44,000 |
| 6 |
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| 264,000 |
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| 260,000 |
| — |
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| — |
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| 129,917 |
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| 653,917 |
Michael W. Jamieson |
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| 37,250 |
| 6 |
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| 223,500 |
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| 176,000 |
| — |
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| — |
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| 110,514 |
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| 510,014 |
Thomas M. Prame |
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| 29,625 |
| 6 |
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| 177,750 |
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| 140,000 |
| — |
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| — |
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| 88,609 |
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| 406,359 |
| Salary Continuation | ||||||||||||||||||||||
| Name | Monthly Amount | Number of Months | Total Salary Continuation/ Lump Sum | Pro-Rated Annual Bonus(1) | Medical Benefits/Out-placement(2) | Total | ||||||||||||||||
| Michael L. Scudder | $ | 68,667 | 9 | $ | 618,003 | $ | 494,400 | $ | 110,752 | $ | 1,223,155 | |||||||||||
| Mark G. Sander | 49,676 | 9 | 447,084 | 298,058 | 83,405 | 828,547 | ||||||||||||||||
| Paul F. Clemens | 33,016 | 6 | 198,096 | 158,476 | 53,100 | 409,672 | ||||||||||||||||
| Thomas M. Prame | 26,691 | 6 | 160,146 | 128,117 | 38,435 | 326,698 | ||||||||||||||||
| Nicholas J. Chulos | 24,559 | 6 | 147,354 | 117,882 | 43,433 | 308,669 | ||||||||||||||||
(1) | The pro-rated annual bonus |
(2) | For Messrs. Scudder and Sander, includes 29,545 shares and 22,750 shares of restricted stock, respectively, and 71,210 shares and 40,502 shares underlying vested and unvested performance shares, respectively, that would vest in the event of a qualifying termination |
(3) | For Messrs. Scudder and Sander, reflects an estimate of the |
2019 Proxy Statement | 71 |
Executive Compensation Tables
named executive officers, reflects the amount of health benefit continuation (COBRA) premium paid by the Company during the salary continuation period and outplacement services estimated to be 12% of annual base salary. |
Change-in-Control
We have provisions in the employment agreements with our named executive officers and in our employee benefit plans for the payment of severance benefits in the event of a change-in-control of the Company. In the event of a change-in-control, our employment agreements require a “double trigger” to occur before enhanced severance benefits are paid. A “double trigger” involves both a change-in-control of the Company and a qualifying termination of the named executive’sexecutive officer’s employment following the change-in-control. The enhanced severance benefits consist of a lump sum payment of, in the case of Messrs. Scudder and Sander, approximately 2.5 times the sum of base salary, the average of the annual cash incentive compensation earned for the prior three completed years (or, in the case of Mr. Scudder, if greater, his target annual cash incentive compensation for the year in which the termination occurs), and certain other amounts, and, inof:
u | In the case of Messrs. Scudder and Sander, 3x the sum of (1) the executive’s base salary in effect as of the date of termination of employment or, if greater, the date immediately preceding the change-in-control, and (2) the executive’s target bonus in effect for the year in which the change-in-control occurs or, if greater, the year in which the date of termination of employment occurs; |
u | In the case of our other named executive officers, 2x the sum of (1) the executive’s base salary in effect as of the date of termination of employment or, if greater, the date immediately preceding the change-in-control, (2) the greater of the average of the annual cash incentive compensation earned by the executive for (a) the three years immediately preceding the year in which the date of termination of employment occurs, or (b) the three years immediately preceding the year in which the change-in-control occurs (or, in the case of Messrs. Barrett and Jamieson, the target annual cash incentive compensation for the year in which the termination occurs), and (3) certain other amounts; and |
u | A pro-rata annual bonus based, in the case of Messrs. Scudder and Sander, on target performance for the year employment terminates or, in the case of our other named executive officers, on target performance for the year prior to the year employment terminates. |
In addition, our named executive officers approximately 2 timesare eligible to receive the sum of base salary,following additional benefits in the averageevent of the annual cash incentive compensation earned for the prior three completed years (or, in the case of Mr. Clemens, if greater, his target annual cash incentive compensation for the year in which theexecutive’s qualifying termination occurs), and certain other amounts. The lump sum further includes payment offollowing a pro-rata annual bonus (based on target performance) for the year employment terminates. In addition, all unearned and unvested equity awards granted prior to 2016 will vest in full upon a change-in-control, whether or not the executive’s employment terminates. However, beginning with our equity awards granted in 2016, all new equity awards will require a “double trigger” to occur before unearned and unvested equity awards will vest in connection with a change-in-control. As such, both a change-in-control of the Company and a termination of employment within 24 months following the change-in-control by either the executive for good reason or an acquirer without cause must occur in order for the unearned or unvested equity awards to vest. change-in-control:
u | For all unearned and unvested equity awards granted prior to 2016, the awards will vest in full upon a change-in-control, whether or not the executive’s employment terminates. For all equity awards granted in 2016 or later, a “double trigger” is required to occur before unearned and unvested equity awards will vest in connection with a change-in-control. As such, both a change-in-control of the Company and a termination of employment within 24 months following the change-in-control by either the executive for good reason or an acquirer without cause must occur in order for the unearned or unvested equity awards to vest; |
u | In the case of Messrs. Scudder and Sander, the executive, the executive’s spouse and the executive’s age-eligible dependent children are eligible to maintain health benefits coverage on the same basis, including cost-sharing, as if the executive’s employment continued until the executive and the executive’s spouse are eligible for Medicare coverage and the executive’s dependents are no longer age-eligible for coverage under the Company’s plans; and |
u | Each of our named executive officers other than Messrs. Scudder and Sander are eligible for outplacement assistance. |
None of the employment agreements with our named executive officers provide for a gross-up payment should the executive be subject to an excise tax under the Internal Revenue Code.
72 | First Midwest Bancorp, Inc. |
Executive Compensation Tables
The table below summarizes the severance payments we would be obligated to make if a change-in-control occurred and the named executive officer’s employment terminated (other than for cause) on December 31, 2016.2018.
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Name |
| Amount |
| Number |
| Value |
| Number |
| Value |
| Value |
| Placement |
| Total | ||||||
Michael L. Scudder |
| $ | 5,440,000 |
| 53,794 |
| $ | 1,065,659 |
| 127,048 |
| $ | 2,516,821 |
| $ | 3,582,480 |
| $ | 169,827 |
| $ | 9,192,307 |
Mark G. Sander |
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| 3,668,000 |
| 41,965 |
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| 831,327 |
| 72,374 |
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| 1,433,729 |
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| 2,265,056 |
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| 184,531 |
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| 6,117,587 |
Patrick S. Barrett |
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| 2,246,375 |
| 50,155 |
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| 993,571 |
| 31,612 |
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| 626,234 |
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| 1,619,804 |
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| 126,720 |
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| 3,992,899 |
Michael W. Jamieson |
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| 1,813,528 |
| 20,914 |
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| 414,306 |
| 12,498 |
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| 247,585 |
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| 661,892 |
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| 107,280 |
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| 2,582,700 |
Thomas M. Prame |
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| 1,371,385 |
| 17,039 |
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| 337,543 |
| 15,339 |
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| 303,866 |
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| 641,408 |
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| 85,320 |
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| 2,098,113 |
In accordance with applicable SEC rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we determined an estimate of the ratio of Mr. Scudder’s annual total compensation to the annual total compensation of our median employee.
To determine our median employee for 2018, we considered the W-2 reported total compensation for all employees (other than Mr. Scudder) who were employed by the Company as of December 31, 2018, including all full-time, part-time, temporary and seasonal employees. No adjustments were made to the compensation data for purposes of annualization or otherwise.
Upon identification of our 2018 median employee, we calculated that employee’s total compensation using the same methodology as required under SEC rules for disclosure in the summary compensation table of our named executive officers’ total compensation. In the 2018 Summary Compensation Table, we report the annual cash incentive compensation paid to our Chief Executive Officer in 2019 for performance in 2018. Our median employee did not participate in our annual cash incentive compensation program in 2018, but instead participated in a separate cash incentive plan that paid periodically throughout 2018. Accordingly, we used the amounts received in 2018 under this periodic cash incentive plan for purposes of calculating the median employee’s 2018 annual total compensation. For both our median employee and Mr. Scudder, we also added the total cost of Company-paid health insurance.
Using the methodology described above, we determined that the annual total compensation of our median employee for 2018 was $60,672, which, when compared to Mr. Scudder’s total compensation of $3,465,098, resulted in a CEO to median employee pay ratio of 57 to 1. Our pay ratio is 53 to 1, excluding non-qualified deferred compensation earnings included in Mr. Scudder’s total compensation for 2018, which totaled $226,790.
2019 Proxy Statement | 73 |
| Total Lump Sum Cash Severance Amount | Equity Awards | Total Severance Payment | ||||||||||||||||||||||||
Restricted Stock Awards/Units | Performance Shares | |||||||||||||||||||||||||
| Name | Number | Value | Number | Value | Total Equity Value | |||||||||||||||||||||
| Michael L. Scudder | $ | 4,963,183 | 81,563 | $ | 2,057,834 | 109,179 | $ | 2,754,586 | $ | 4,812,420 | $ | 9,775,603 | ||||||||||||||
| Mark G. Sander | 3,272,446 | 59,193 | 1,493,439 | 69,770 | 1,760,297 | 3,253,736 | 6,526,182 | |||||||||||||||||||
| Paul F. Clemens | 1,565,926 | 24,156 | 609,456 | 19,691 | 496,804 | 1,106,260 | 2,672,186 | |||||||||||||||||||
| Thomas M. Prame | 1,238,250 | 21,291 | 537,172 | 12,634 | 318,756 | 855,928 | 2,094,178 | |||||||||||||||||||
| Nicholas J. Chulos | 1,127,294 | 22,471 | 566,943 | 11,083 | 279,624 | 846,567 | 1,973,861 | |||||||||||||||||||
AUDIT COMMITTEE REPORT
The primary responsibilities of the Audit Committee are, among others, to: (1) assist the Board of Directors in its oversight of the integrity of the Company’s financial statements and systems of internal control over financial reporting, (2) oversee the Company’s compliance with legal and regulatory requirements relating to financial reporting and disclosure, (3) evaluate the independence and qualifications of the Company’s independent registered public accounting firm, and (4) oversee the performance of the Company’s independent registered public accounting firm and our internal audit function. The Audit Committee also is solely responsible for the appointment and compensation of the Company’s independent registered public accounting firm. The Board of Directors has adopted an Audit Committee Charter, which sets forth the specific duties of the Audit Committee, a copy of which is available on the Company’s website.
In carrying out its oversight responsibilities, the Audit Committee relies on the expertise and knowledge of management, the independent registered public accounting firm and the internal auditors. Management is responsible for determining that the Company’s financial statements are complete, accurate and in accordance with U.S. generally accepted accounting principles. Management is responsible for maintaining appropriate accounting and financial reporting principles and policies as well as internal controls and procedures that provide for compliance with accounting standards and applicable laws and regulations. The Company’s independent registered public accounting firm is responsible for planning and carrying out a proper audit of the Company’s financial statements and internal control over financial reporting. The internal auditors are responsible for evaluating the adequacy and effectiveness of the Company’s processes and system of internal controls to achieve the Company’s stated goals and objectives. It is not the duty of the Audit Committee to plan or conduct audits, to determine that the Company’s financial statements are complete and accurate and are in accordance with U.S. generally accepted accounting principles, or to conduct investigations or other types of auditing or accounting reviews or procedures.
The Audit Committee has reviewed and had discussions with management and Ernst & Young LLP regarding the Company’s audited financial statements for the year ended December 31, 2016.2018. The Audit Committee also has discussed with Ernst & Young LLP the matters required to be discussed by the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 16.auditing standard on “Communications with Audit Committees.” The Audit Committee has received the required disclosures from Ernst & Young LLP under applicable PCAOB standards regarding auditor independence, and has discussed with Ernst & Young LLP its independence. The Audit Committee has established policies and procedures regarding the pre-approval of all services provided by Ernst & Young LLP. The Audit Committee has reviewed the audit and non-audit services provided by Ernst & Young LLP for the year ended December 31, 20162018 and considered whether such services are compatible with maintaining its independence, and determined to engage Ernst & Young LLP as the Company’s independent registered public accounting firm of the Company for the year ending December 31, 2017.
Based upon the Audit Committee’s review of the Company’s audited financial statements and the discussions noted above, and subject to the limitations on the role and responsibilities of the Audit Committee referred to above and in its charter, the Audit Committee has recommended to the Board of Directors that the Company’s audited financial statements for the year ended December 31, 20162018 be included in the Company’s Form 10-K10‑K for the same year filed with the SEC.
Stephen C. Van Arsdell (Chair) | Thomas L. Brown | |
Phupinder S. Gill | Kathryn J. Hayley | |
Frank B. Modruson | Michael J. Small | |
Members, Audit Committee |
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OTHER MATTERS
Voting Your Shares
You are entitled to vote your shares of Common Stock at the Annual Meeting if you were a stockholder of record of the Exchange Act requires our directorsCompany at the close of business on March 22, 2019, the Record Date for the Annual Meeting. On that date, there were 107,000,522 shares of Common Stock outstanding, each of which is entitled to one vote for each matter to be voted on at the Annual Meeting. On the Record Date, we had 2,259 stockholders of record.
Appointing a Proxy
A proxy is your direction to another person to vote your shares. When you vote your shares, whether via the Internet, by telephone or by signing and executivemailing a Proxy Card, you will appoint certain officers of the Company to vote your shares of Common Stock at the Annual Meeting in the manner you instruct. Even if you plan to attend the Annual Meeting, you should vote your shares in advance.
Record Stockholders and persons who own more than 10% of a registered classBeneficial Ownership; Proxy Materials
If you hold shares of our equity securitiesCommon Stock that are registered in your name through our transfer agent, Computershare Trust Company, N.A., as of the Record Date, you are the stockholder of record with respect to file reports of ownership of, and transactions in, our equity securities with the SEC. These directors, executive officers and stockholders are also required to furnish us with copies of all reports they file under Section 16(a). Reports of purchases and salesthose shares.
If you hold shares of our securities by such personsCommon Stock indirectly through a bank, broker or similar institution, you are available on our website at www.firstmidwest.com/secdocuments/. Based onconsidered a reviewbeneficial owner of those shares but are not the copiesstockholder of such reports,record. We refer to banks, brokers and on written representations from our directors and executive officers, we believe that all Section 16(a) filing requirements applicable to our directors and executive officers were complied with during the fiscal year ended December 31, 2016.
We sent copies of our proxy materials directly to all stockholders of record. If you are a beneficial owner whose shares are held in street name, these materials were sent to you by the broker through which you hold your shares. As the beneficial owner, you may direct your broker how to vote your shares at the Annual Meeting and the broker is obligated to provide you with a voting instruction form for you to use for this purpose.
A list of the stockholders of record as of the Record Date will be available for inspection for purposes germane to the Annual Meeting during ordinary business hours at our offices, 8750 West Bryn Mawr Avenue, Suite 1300, Chicago, Illinois 60631, from May 3, 2019 to May 14, 2019, as well as at the Annual Meeting.
Participants in the Company’s Benefit Plans
Current and former employees who participate in the First Midwest Bancorp, Inc. Savings and Profit Sharing Plan, First Midwest Bancorp, Inc. Nonqualified Retirement Plan, First Midwest Bancorp, Inc. Stock Option Gain Deferral Plan and/or the First Midwest Bancorp, Inc. Dividend Reinvestment Plan, and have a Company e-mail address, will receive an e-mail from Broadridge Financial Solutions, Inc. describing how to access proxy materials and vote via the Internet or by telephone. One e-mail will be sent for all accounts registered in the same employee name. If the employee’s accounts are registered in different names, he or she will receive a separate e-mail for each account. This e-mail will be titled: FIRST MIDWEST BANCORP, INC. 2019 ANNUAL MEETING OF STOCKHOLDERS AND PROXY VOTE. Participants without a Company e-mail address will receive proxy materials by mail.
The trustees under these plans (other than the First Midwest Bancorp, Inc. Dividend Reinvestment Plan) are the stockholders of record of all shares of Common Stock held in the plans, and the trustees will vote the shares held for the account of each participant in accordance with the instructions received from the participant. If the trustees do not receive voting instructions by the specified deadline, the trustees will vote the shares proportionally in the same manner as those shares for which instructions were received. Because the participants are not the record owners of the related shares, the participants may not vote these shares in person at the Annual Meeting. Individual voting instructions to the plan trustees will be kept confidential and will not be disclosed to any of our directors, officers or employees.
2019 Proxy Statement | 75 |
Other Matters
Proxy Cards
If you receive multiple Proxy Cards, this means you hold your reference.shares in more than one account. To vote all of your shares by proxy, please vote the shares in each account via the Internet or by telephone, or complete, sign, date and return each Proxy Card that you receive.
If you lose, misplace or otherwise need to obtain a Proxy Card, and:
u | you are a stockholder of record, contact our Corporate Secretary’s office at (708) 831‑7483; or |
u | you hold Common Stock in street name through a broker, contact your account representative at that organization. |
Requirement of a Quorum
A quorum is required to transact business at the Annual Meeting. The informationholders of a majority of the outstanding shares of Common Stock on these websites isthe Record Date, present in person or represented by proxy and entitled to vote, will constitute a quorum for the transaction of business at the Annual Meeting. Abstentions and broker non-votes, which are described more fully in the following section, are treated as present for quorum purposes.
Voting and Required Votes
If you are a stockholder of record, you may cast your vote via the Internet, by telephone, by mail or in person at the Annual Meeting. If you hold your shares in street name, you may vote by following your broker’s instructions. The various methods of voting are described in more detail under Proxy Summary—How to Vote.
If you are a stockholder of record on the Record Date and you properly vote your shares via the Internet, by telephone or by mail, your shares will be voted in accordance with your instructions. If you sign and return your Proxy Card, but do not partgive voting instructions, your shares will be voted in the manner recommended by the Board of Directors, as follows: FOR each director nominee named in this Proxy Statement and FOR each of the other items set forth in the Notice attached to this Proxy Statement. If you sign and return your Proxy Card, but do not give voting instructions, you also will grant discretionary authority to the named proxies to vote on any other matters that may properly come before the Annual Meeting, or any adjournment or postponement, which will be voted in accordance with the best judgment of the named proxies.
If your shares are held in street name, on routine matters, the shares will be voted by the broker through which you hold your shares in accordance with your instructions and, if no instructions are given, your broker is entitled to vote your shares in its discretion. On non-routine matters, your broker will vote your shares only if you have provided the broker with voting instructions. If you do not give your broker voting instructions for non-routine items, your shares will be treated as “broker non-votes.” This means your shares will be counted for the purpose of determining if a quorum is present but, except as provided below, will not be included as votes cast with respect to the non-routine items. The determination of whether a matter is routine or non-routine is made under the rules of the NASDAQ Stock Market.
An abstention occurs when a stockholder marks his or her Proxy Card as ABSTAIN and thereby abstains from voting on a matter.
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Other Matters
The following chart explains which items to be voted upon at our Annual Meeting are routine and non-routine and the treatment of broker non-votes and abstentions.
Item | Voting Requirements | Effect of Broker Non-Votes and Abstentions | ||
Election of Directors (Non-Routine) | ◆You may vote FOR or AGAINST any or all director nominees named in this Proxy Statement, or you may ABSTAIN as to one or more directors. ◆A majority of the votes cast at the Annual Meeting with respect to the election of a director must be voted FOR the director in order for the director to be elected. | Broker non-votes and votes to ABSTAIN are not treated as a “vote cast” with respect to the election of a director, and thus will have no effect on the outcome of the vote. | ||
Approval of an Advisory (Non-Binding) Resolution Regarding the Compensation Paid in 2018 to the Company’s Named Executive Officers (Non-Routine) | ◆You may vote FOR or AGAINST the advisory resolution regarding the compensation paid to our named executive officers, or you may ABSTAIN. ◆This is an advisory resolution that is non-binding on our Board. A majority of the votes present in person or represented by proxy and entitled to vote at the Annual Meeting must be voted FOR this item in order for it to be considered approved by our stockholders on an advisory basis. | Broker non-votes will have no effect on the outcome of the vote on this item. Votes to ABSTAIN will have the effect of a vote AGAINST this item. | ||
Ratification of the Appointment of the Company’s Independent Registered Public Accounting Firm (Routine) | ◆You may vote FOR or AGAINST the ratification of our Audit Committee’s appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2019, or you may ABSTAIN. ◆ A majority of the votes present in person or represented by proxy and entitled to vote at the Annual Meeting must be voted FOR ratification in order for this item to pass. | Broker non-votes are not expected to exist because brokers have discretionary authority to vote on this item. Votes to ABSTAIN will have the effect of a vote AGAINST this item. |
As described under Item 1 Election of Directors, if a director who currently serves on the Board of Directors fails to receive a majority of the votes cast FOR his or her election, he or she will tender his or her resignation to the Board of Directors for consideration and our Board will determine whether to accept or reject the resignation, or whether other action should be taken.
Revoking or Changing a Vote
You can revoke or change your vote at any time before your shares are voted at the Annual Meeting by timely:
u | resubmitting your vote via the Internet or by telephone; or |
u | executing and mailing a Proxy Card that is dated and received on a later date; or |
u | giving written notice of revocation to our Corporate Secretary at 8750 West Bryn Mawr Avenue, Suite 1300, Chicago, Illinois 60631; or |
u | voting in person at the Annual Meeting. |
If your shares are held in street name, you should contact your broker to change your vote.
2019 Proxy Statement | 77 |
Other Matters
Other Business and Discretionary Authority
As of the date of this Proxy Statement, our Board of Directors knows of no matters to come before, and does not intend to present any matters at, the Annual Meeting other than those items set forth in the Notice of Annual Meeting of Stockholders attached to this Proxy Statement. If other matters properly come before the Annual Meeting, or any adjournment or postponement, the persons named as proxies on the Proxy Card accompanying this Proxy Statement will have discretionary authority to vote pursuant to the Proxy Card, and the named proxies intend to vote on such matters in accordance with their best judgment. In addition, the persons named as proxies on the Proxy Card will have the discretionary authority to vote pursuant to the Proxy Card on any proposal to adjourn the Annual Meeting for any reason, and they will vote on any such proposal to adjourn in accordance with their best judgment.
Each of the nominees for election as directors named in this Proxy Statement has consented to serve on our Board of Directors if elected, and we have no reason to believe that any of the nominees will be unwilling or unable to serve. However, should any nominee become unable or unwilling to serve as a director, the persons named as proxies on the Proxy Card accompanying this Proxy Statement intend to vote for the election of any other person who may be nominated by our Board of Directors.
Important Notice Regarding Delivery of Stockholder Documents
SEC rules allow us to mail a single copy of our proxy materials to multiple stockholders of record sharing the same address and who we reasonably believe are members of the same household or to one stockholder who has multiple stockholder accounts. This practice is referred to as “householding” and can result in significant savings of paper and mailing costs. We will deliver promptly to any stockholder sharing the same address a separate copy of this Proxy Statement and our 20162018 Annual Report upon a request orally or in writing, to our Corporate Secretary (1) by mail at One Pierce Place,8750 West Bryn Mawr Avenue, Suite 1500, Itasca,1300, Chicago, Illinois 60143,60631, or (2) by telephone at (630) 875-7463.
We have been notified that certain brokers and banks holding our Common Stock for their customers also will household proxy materials. If you hold your shares in street name, you may contact your broker or bank if you desire to receive a separate copy of our proxy materials.
Stockholders sharing an address who now receive multiple copies of our proxy materials and who wish to receive only one copy of these materials per household in the future should contact our Corporate Secretary as indicated above (if your shares are held directly) or your broker or bank (if your shares are held in street name).
Expenses of Proxy Solicitation
We will pay the expenses of the preparation of proxy materials and the solicitation of proxies for the Annual Meeting. In addition to the solicitation of proxies by mail, solicitations may be made by certain of our directors, officers, employees or affiliates telephonically, electronically or by other means of communication. Directors, officers and employees will receive no additional compensation for any such solicitation. Although we do not anticipate using a paid proxy solicitor in connection with the Annual Meeting, we may do so if we believe this to be appropriate. We will reimburse brokers for costs incurred by them in mailing proxy materials to beneficial owners in accordance with applicable requirements.
Attending the Annual Meeting
All stockholders must bring an acceptable form of identification, such as a valid driver’s license, in order to attend the Annual Meeting. If you hold shares in street name and would like to attend our Annual Meeting, you also will need to bring an account statement showing that you owned shares of Common Stock as of the Record Date and a “legal proxy” form from the broker through which you hold your shares. If you attend the Annual Meeting as a representative of a stockholder that is an entity, then you must bring proof of your authorization to attend and act on behalf of that entity.
78 | First Midwest Bancorp, Inc. |
Other Matters
Reporting of Voting Results
Preliminary voting results will be announced at the Annual Meeting. Final voting results are expected to be published in a Current Report on Form 8‑K filed with the SEC within four business days after the Annual Meeting. A copy of this Current Report on Form 8‑K will be available on our website at www.firstmidwest.com/investorrelationsafter its filing with the SEC.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers and persons who own more than 10% of a registered class of our equity securities to file reports of ownership of, and transactions in, our equity securities with the SEC. Such directors, executive officers and stockholders are also required to furnish us with copies of all reports they file under Section 16(a). Reports of purchases and sales of our securities by such persons are available on our website at www.firstmidwest.com/secdocuments. Based on a review of the copies of such reports, and on written representations from our directors and executive officers, we believe that all Section 16(a) filing requirements applicable to our directors and executive officers were complied with during the year ended December 31, 2018.
Stockholder Proposals for 2020 Annual Meeting of Stockholders
Stockholders who, in accordance with the SEC’s Rule 14a‑8, wish to present proposals for inclusion in our proxy materials in connection with our 2020 annual meeting of stockholders must submit their proposals on or before December 11, 2019 to First Midwest Bancorp, Inc., Attn: Corporate Secretary, 8750 West Bryn Mawr Avenue, Suite 1300, Chicago, Illinois 60631.
In accordance with our Certificate of Incorporation, for a proposal or director nomination to be properly presented at the 2020 annual meeting of stockholders (but not necessarily contained in our proxy statement), a stockholder’s notice of the matter must comply with the requirements in our Certificate of Incorporation and be timely delivered to First Midwest Bancorp, Inc., Attn: Corporate Secretary, 8750 West Bryn Mawr Avenue, Suite 1300, Chicago, Illinois 60631, not less than 120 nor more than 180 days prior to the date of the meeting, which currently is scheduled for May 20, 2020. As a result, any notice given by or on behalf of a stockholder under these provisions of our Certificate of Incorporation (and not pursuant to the SEC’s Rule 14a‑8) must be received no earlier than November 22, 2019 and no later than January 21, 2020.
Incorporation by Reference
To the extent that this Proxy Statement is incorporated by reference into any other filing by the Company under the Securities Act of 1933, as amended, or the Exchange Act, the sections of this Proxy Statement entitled Compensation Committee Report and Audit Committee Report will not be deemed incorporated therein, unless specifically provided otherwise in such filing. We also include several website addresses in this Proxy Statement for your reference. The information on these websites is not part of this Proxy Statement.
2019 Proxy Statement | 79 |
Other Matters
Additional Information
You may obtain additional information regarding the Company, including our corporate governance policies and practices, by visiting our website at www.firstmidwest.com/investorrelations, or by making a written request to our Corporate Secretary at First Midwest Bancorp, Inc., One Pierce Place,8750 West Bryn Mawr Avenue, Suite 1500, Itasca,1300, Chicago, Illinois 60143.60631.
By Order of the Board of |
| Directors, | |
Nicholas J. Chulos | |
Executive Vice President, General Counsel | |
and Corporate Secretary | |
First Midwest Bancorp, Inc. | |
April 4, 2019 |
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| VIEW MATERIALS & VOTE w SCAN TO 8750 WEST BRYN MAWR AVENUE, SUITE 1300 CHICAGO, ILLINOIS 60631 VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of |
| Important Notice Regarding the Availability of Proxy Materials For the Annual Meeting of Stockholders on May 15, 2019: The Annual Report on Form 10-K, Notice of Annual Meeting of Stockholders and Proxy Statement and Telephone/Internet Voting Instructions are available at www.proxyvote.com E71159-P23656 Proxy Solicited on Behalf of the Board of Directors |
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