TABLE
OF CONTENTS
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PROXY
STATEMENT
Mailing Date: April 14, 2016
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Annual Meeting of Shareholders
Date: May 24, 2016
Time: 10:00 am local time
Where: First Financial Center
255 East Fifth Street
Room 950
Cincinnati, OH 45202
www.virtualshareholdermeeting.com/ffbc16
Record Date: March 30, 2016 -- Shareholders
of record as of the close of business on March 30, 2016 are entitled to vote at the Annual Meeting.
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How to Vote
Vote Online:
Before the Meeting
: go to
www.proxyvote.com
During the Meeting:
Go to
www.virtualshareholdermeeting.com/ffbc16
Vote by phone by calling 1-800-690-6903
Vote by mail by signing, dating, and returning your proxy card in the
enclosed envelope
Vote in person by attending the Annual Meeting
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We are sending this proxy statement and the accompanying proxy card to you
as a shareholder of First Financial Bancorp., an Ohio corporation, in connection with the solicitation of proxies for the 2016
Annual Meeting of Shareholders (the “Annual Meeting”). Our Board of Directors is soliciting proxies for use at the
Annual Meeting, or at any postponement or adjournment of the Annual Meeting.
Meeting Agenda and Voting Recommendations:
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Proposal
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Approval Required
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Board’s
Recommendation
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Page
Reference
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1. Election of Directors
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Affirmative vote of a plurality
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For Each Nominee
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6
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2. Re-approval of the Amended and Restated Key Executive Short Term Incentive Plan
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Majority of votes present, in person or by proxy, and entitled to vote
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For
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11
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3. Ratify the appointment of Crowe Horwath LLP as our independent registered public accounting firm for 2016
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Majority of votes present, in person or by proxy, and entitled to vote
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For
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13
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4. Approve, on an advisory basis, the compensation of the Company’s executive officers
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Majority of votes present, in person or by proxy, and entitled to vote
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For
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15
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We are not aware of any other matters that will be brought before the shareholders
for a vote at the Annual Meeting. If any other matter is properly brought before the meeting, your completed proxy may, if you
have so selected, give your proxies the authority to vote on these other matters in their best judgment.
In this proxy statement, the “Company,” “First Financial,”
“First Financial Bancorp,” “we,” “our,” or “us” all refer to First Financial Bancorp.
and its subsidiaries. We also refer to the Board of Directors of First Financial as the “Board.” References in this
proxy statement to “common shares” or “shares” refer to the Company’s common shares.
Unless otherwise noted, the information in this proxy statement covers our
2015 fiscal year that began January 1, 2015 and ended December 31, 2015.
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Proxy Statement, Voting and Annual Meeting Information
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Proxy Statement Information
Why am I receiving this Proxy Statement?
We are making available this Notice of Annual Meeting of Shareholders,
proxy statement, and annual report for the year ended December 31, 2015 (the “proxy materials”), either online or by
mail, in connection with the 2016 Annual Meeting of Shareholders of First Financial because you are a shareholder of record of
the Company as of the close of business on March 30, 2016 (the “record date”). This proxy statement describes the matters
on which you are asked to vote and provides information about those matters and about the Company so that you can make an informed
decision.
This proxy statement and related materials are being mailed to,
or can be accessed online by, shareholders on or about April 14, 2016.
What is Notice and Access and why did
First Financial elect to use it?
We are making the proxy materials and annual report available to
our shareholders electronically via the Internet under the Notice and Access regulations of the U.S. Securities and Exchange Commission
(“SEC”). Many of our shareholders have received a Notice of Internet Availability of Proxy Materials (“Notice
of Internet Availability”) in lieu of receiving a full set of printed materials in the mail. We are using the Notice and
Access method to expedite distribution and reduce the costs associated with printing and mailing these materials.
The Notice of Internet Availability includes information on how
to access and review the proxy materials and how to vote online, by phone, or by attending the Annual Meeting. The proxy materials
and annual report, as well as other reports filed with or furnished to the SEC, can be accessed free of charge at
www.bankatfirst.com/investor
.
You may also access this information by searching “Company Filings” at
www.sec.gov
.
I received a Notice of Internet Availability of Proxy Materials
only. How can I receive printed copies of the proxy statement and annual report?
Shareholders may receive a printed copy of the annual report and proxy
materials, free of charge, by following the instructions on the Notice of Internet Availability for receiving such materials:
1)
BY INTERNET
:
www.proxyvote.com
2)
BY TELEPHONE
: 1-800-579-1639
3)
BY E-MAIL
:
sendmaterial@proxyvote.com
Who is paying for the cost of this proxy
solicitation?
First Financial is paying for the costs associated with preparing,
printing and mailing these proxy materials, as well as the cost of soliciting proxies on behalf of the Board. We have retained
Advantage Proxy to aid in the solicitation of proxies for the Annual Meeting. Advantage Proxy will receive a base fee of $4,250
plus reimbursement of out-of-pocket fees and expenses for its services. In addition, we will reimburse banks, brokers and other
custodians, nominees and fiduciaries for reasonable expenses incurred in forwarding the proxy materials to beneficial owners of
our shares and soliciting their proxies.
Our directors, officers and associates also may solicit proxies
from our shareholders by further mailings, personal contact, phone, or e-mail, but these individuals will not receive additional
compensation for this solicitation activity.
Voting Information
Who can vote at the Annual Meeting?
Only shareholders of record at the close of business on March 30,
2016 will be entitled to notice of and to vote at the Annual Meeting. Each common share owned at the close of business on March
30, 2016 entitles its owner to one vote on each proposal being considered at the Annual Meeting.
The common shares are the Company’s only voting securities
entitled to vote at the Annual Meeting. At the close of business on March 30, 2016, there were 61,855,021 common shares outstanding
and entitled to vote.
How do I vote my shares?
Even if you plan to attend the Annual Meeting, in person or virtually
as described below, we strongly encourage you to vote prior to the meeting. Shareholders of record may vote using any of the following
methods:
Online Voting
: You may vote before or during the meeting
through the Internet as instructed on your Notice of Internet Availability or proxy card. Before the Annual Meeting, you may go
to
http://www.proxyvote.com
to transmit your voting instructions up until 11:59 p.m. Eastern
Time on May 23, 2016. During the meeting, you may go to
www.virtualshareholdermeeting.com/ffbc16
to attend the meeting via webcast and vote online. You should have your proxy card or Notice of Internet Availability
in hand when you access either of these websites and follow the instructions to obtain your records and to vote.
Vote by Phone
: Telephone voting is available toll-free
at 1-800-690-6903 up until 11:59 pm Eastern Time on May 23, 2016. You should have your proxy card or Notice of Internet Availability
or proxy card in hand when making this call.
Vote by Mail
: Complete, sign and date your proxy card and
return it in the envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
Vote in Person by Attending the Annual Meeting
: Please
see the question and answer “
How can I attend the Annual Meeting?”
provided below for additional information.
If you hold your shares in “street name” at a bank,
broker or other nominee, you should follow the instructions provided by your bank, broker or other nominee on how to vote your
shares.
What is the difference between holding shares directly as a
shareholder of record and holding shares in “street name” at a bank, broker or other nominee?
Shareholder of Record
: If your shares are registered directly
in your name with our transfer agent, Computershare Shareholder Services, you are considered the shareholder of record and the
proxy materials or a Notice of Internet Availability were sent directly to you. As the shareholder of record, you have the right
to grant your voting proxy directly by using the enclosed proxy card, through the online voting methods described in this proxy
statement, or by phone, or to vote in person at the Annual Meeting.
Holding shares in “street name” at a bank, broker
or other nominee
: If your shares are held by a bank, broker or other nominee, you are considered the beneficial owner of shares
held in “street name.” The proxy materials, Notice of Internet Availability, or voting instruction card was forwarded
to you by your bank, broker or other nominee who is considered the shareholder of record of your shares. Your bank, broker or other
nominee will send you, as the beneficial owner, separate information describing how you can vote your shares.
What happens if I sign, date and return my proxy card, or
complete the online or telephonic proxy methods, but do not specify how I want my shares voted on one or more of the proposals?
Your shares will be voted in the manner you specify on each proposal.
If you are a shareholder of record and complete and return a proxy, but do not provide voting instructions on one or more proposals,
your vote will be counted as a vote “for” all of the Company’s nominees for directors and for Proposals 2, 3
and 4.
If you hold your shares in “street name” and have not
returned voting instructions on one or more proposals, your bank, broker or nominee may vote your shares only on those proposals
for which it has discretion to vote. We believe that under applicable rules, your bank, broker or nominee has discretion to vote
your shares on routine matters such as the ratification of our independent registered accounting firm, Proposal 3. However, your
bank, broker or nominee does not have discretion to vote your shares on non-routine matters such as the election of directors or
Proposals 2 and 4. If you do not provide voting instructions on a non-routine proposal, your shares will be considered “broker
non-votes.” The effect of a “broker non-vote” on each proposal is detailed in the questions and answers concerning
“Annual Meeting Information” below.
What if I indicate “Withheld” with respect to
the election of one or more directors or “Abstain” with respect to any of the other proposals being considered?
The effect of these voting specifications on each proposal is detailed
in the questions and answers under the heading “Annual Meeting Information” below.
If you “abstain” on a proposal, your shares will be
counted for purposes of whether a quorum exists but will otherwise have the same effect as a vote against each proposal for which
you abstain.
Can I change my proxy vote?
You may revoke your proxy at any time before it is actually exercised
at the Annual Meeting by:
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Sending a written notice of revocation to First Financial Bancorp, Attn: Shannon
M. Kuhl, Corporate Secretary, 255 East Fifth Street, Suite 2900, Cincinnati, Ohio 45202;
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Delivering a later dated proxy (including by using the online or telephone voting
methods); or
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Attending the Annual Meeting and giving notice of revocation in person.
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If you hold your shares in “street name” and instructed
your bank, broker or other nominee to vote your common shares and you would like to revoke or change your vote, you must follow
the instructions provided by your bank, broker or other nominee.
What if my shares are held through the First Financial Bancorp
401(k) Savings Plan (applicable to traditional or Roth contribution plans)?
You will receive an electronic Notice of Internet Availability
unless you opted to receive paper copies of the proxy materials. The Notice of Internet Availability will contain voting instructions
for all shares registered in the exact same name, whether inside or outside of the First Financial Bancorp 401(k) Savings Plan
(the “Savings Plan”). If you hold shares outside of the Savings Plan and they are not registered in the same name as
those within the Savings Plan, you will receive a separate Notice of Internet Availability or proxy card for the shares held outside
of the Savings Plan.
Voting instructions with respect to shares held in the Savings
Plan must be received by 11:59 pm Eastern Time on May 22, 2016. All voting instructions you give with respect to these shares will
be kept confidential. If you do not timely submit voting instructions for these shares, the shares allocated to you, together with
all unallocated shares held in the Savings Plan, will be voted in accordance with the pro-rata vote of participants in the Savings
Plan who did provide instructions.
Who should I contact if I have questions about this proxy
solicitation and where can I get assistance in voting my shares?
You may contact us at
shareholderrelations@bankatfirst.com
or call our Investor Relations department toll free at 1-877-322-9530 if you have any questions or need assistance
in voting.
Annual Meeting Information
How many votes must be present in person or by proxy to hold
the Annual Meeting?
A quorum must exist before business can be conducted at the Annual
Meeting. Under our Amended and Restated Regulations (the “Amended Regulations”), a quorum will exist if a majority
of the common shares outstanding as of the record date are present in person or by proxy. At the close of business on March 30,
2016, there were
61,855,021 common shares outstanding. A majority, or 30,927,512 common shares, present in person or by
proxy, will constitute a quorum.
What proposals are being considered and how many votes are
needed for each proposal to be approved by the shareholders?
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Proposal
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Approval Required
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Effect of an
Abstention (or
Withheld Vote with
respect to Proposal 1)
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Effect of a Broker Non-Vote
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1. Election of Directors
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Affirmative vote of a plurality
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No effect on election voting but see “Policy on Majority Voting” in the Corporate Governance section of this proxy statement
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No effect
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2. Re-approval of the Amended and Restated Key Executive Short Term Incentive Plan
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Majority of votes present, in person or by proxy, and entitled to vote
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Will be treated as a vote AGAINST the proposal
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No effect
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3. Ratify the appointment of Crowe Horwath as our independent registered accounting firm for 2016
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Majority of votes present, in person or by proxy, and entitled to vote
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Will be treated as a vote AGAINST the proposal
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Not Applicable
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4. Approve, on an advisory basis, the compensation of the Company’s executive officers
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Majority of votes present, in person or by proxy, and entitled to vote
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Will be treated as a vote AGAINST the proposal
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No effect
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How can I attend the Annual Meeting?
You can attend our 2016 Annual Meeting in person, via the Internet,
or by proxy.
Our 2016 Annual Meeting will take place at our principal executive
offices at 255 East Fifth Street, Room 950, Cincinnati, Ohio. You will need to present photo identification, such as a driver’s
license, and proof of share ownership as of the record date, such as an account statement or copy of the proxy card or Notice of
Internet Availability with your printed name and address, for admission to the Annual Meeting. If you hold your shares in “street
name” and you wish to be able to vote at the Annual Meeting, you must obtain and follow instructions provided by the bank,
broker or other nominee who is the record holder of the shares. Cameras, recording devices, and other electronic devices will not
be permitted at the Annual Meeting.
You may also attend the Annual Meeting via a webcast at
www.virtualshareholdermeeting.com/ffbc16
.
You may vote while attending the webcast meeting by following the instructions at
www.virtualshareholdermeeting.com/ffbc16
.
You will not be able to submit questions to executive management or the Board via this webcast during the Annual Meeting. To attend
the Annual Meeting via
www.virtualshareholdermeeting.com/ffbc16
, you will need the control
number included on the Notice of Internet Availability or proxy card that was mailed to you. Instructions on how to attend and
participate in the Annual Meeting via the Internet are posted at
www.virtualshareholdermeeting.com/ffbc16
.
How do I find out the voting results from the Annual Meeting?
We plan to announce preliminary voting results at the Annual Meeting
and will disclose the final voting results in a current report on Form 8-K filed with the SEC within four business days of the
Annual Meeting.
Electronic Delivery of Proxy Statement and Annual Report
Can I elect to only receive First Financial’s proxy
materials and annual reports electronically?
Shareholders can elect to view future proxy materials and annual
reports electronically instead of receiving print copies of these items in the mail. You can make this election by following the
instructions provided on your proxy card or Notice of Internet Availability or by going to
www.proxyvote.com
and following the instructions provided there.
If you choose to receive future proxy statements and annual reports
electronically and you continue to hold shares as of the record date of the next annual meeting, you will receive an e-mail message
next year that includes access information for these materials as well as instructions for online voting.
Householding Information
What is “householding?”
If two or more shareholders reside at the same address and appear
to be members of the same family, we may send a single copy of the proxy materials, or Notice of Internet Availability, to that
address unless one of the shareholders at that address notifies us that they wish to receive individual copies of the material.
This procedure reduces our printing and mailing costs. Shareholders who participate in householding will continue to have access
to and utilize separate proxy voting instructions for each shareholder account.
How do I stop participating in the householding program?
To stop participating in the householding program, contact Broadridge
Financial Solutions, Inc. by calling toll free at 1-800-542-1061 or by writing to Broadridge Financial Solutions, Attn: Householding
Department, 51 Mercedes Way, Edgewood, NY 11717. You will be removed from the householding program within 30 days of Broadridge’s
receipt of your instruction.
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Proposal 1 -- Election of Directors
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Our Board currently consists of fourteen members, thirteen of whom are non-employee
directors. Our Amended Regulations provide that the Board shall consist of not less than nine nor more than 25 persons, with the
exact number to be fixed and determined from time to time by resolution of the Board or by resolution of the shareholders at any
annual or special meeting of shareholders. Any vacancy may be filled by the Board in accordance with law and our Amended and Restated
Regulations for the remainder of the term of the vacant directorship. The Board has established the number of directors at fourteen.
Mark A. Collar has chosen not to stand for re-election, and the Board has not appointed a nominee to fill Mr. Collar’s seat
on the Board. As a result, the Board has determined that it will decrease the number of directors to thirteen immediately following
the Annual Meeting.
Our Board has approved the nomination of the following thirteen persons as
candidates for election as director, each for a one-year term: J. Wickliffe Ach, David S. Barker, Cynthia O. Booth, Claude E. Davis,
Corinne R. Finnerty, Peter E. Geier, Murph Knapke, Susan L. Knust, William J. Kramer, Jeffrey D. Meyer, John T. Neighbours, Richard
E. Olszewski, and Maribeth S. Rahe. Each of the nominees is an incumbent director. The Corporate Governance and Nominating Committee
(“CGNC”) recommended all thirteen nominees to the Board, which in turn unanimously approved the nomination of all thirteen
persons.
In the event that any one or more of the nominees becomes unavailable or
unable to serve as a director prior to the Annual Meeting, the accompanying proxy will be voted to elect the remaining nominees
and any substitute nominee or nominees designated by the Board. We have no reason to believe that any nominee will be unable or
decline to serve as a director.
The thirteen nominees for director receiving the most votes at the Annual
Meeting will be elected as directors. You can find additional information about our Policy on Majority Voting in the Corporate
Governance section of this proxy statement. The general considerations and criteria for assessing director candidates are established
in the Charter of the Board’s Governance and Nominating Committee (available at
www.bankatfirst.com/investor
).
These considerations and criteria are also summarized in the Corporate Governance section of this proxy statement.
Below is information concerning the nominees for directors such as their
present and past professional positions, current directorships with other companies or organizations, and key qualifications and
attributes qualifying them to serve on our Board. The age indicated for each nominee below is their age as of March 30, 2016. For
information regarding ownership of shares of the Company by nominees and directors of the Company, see the Shareholdings of Directors,
Executive Officers and Nominees for Director section of this proxy statement. Except as noted, there are no arrangements or understandings
between any director or any nominee, and any other person pursuant to which such director or nominee is or was nominated to serve
as director.
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J. Wickliffe Ach
Director Since:
2007
Age:
67
Committees:
Corporate Governance & Nominating (Chair),
Compensation
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Mr. Ach currently serves
as the President and Chief Executive Officer of Hixson Inc., an architectural engineering firm located in Cincinnati,
Ohio. He has held these positions with Hixson Inc. since 1993.
Mr. Ach is the Vice Chair of the Board of
Directors of First Financial Bancorp. He presently serves on the board of directors of Hixson Inc. and Setzer Corp. (a
private corporation located in Dayton, Ohio that is a construction contractor). Mr. Ach also serves on the board of directors
of the CISE Foundation, a Cincinnati not for profit organization. He is or has been involved in a number of business and
civic organizations including the Cultural Facilities Task Force of Hamilton County, Ohio relating primarily to the Cincinnati
Museum Center and Music Hall facilities. Mr. Ach is President of the Union Terminal Corporation. He also is on the board
of trustees of the Architectural Foundation of Cincinnati.
As a seasoned business owner and entrepreneur,
Mr. Ach brings valuable insight to the Board in strategic and cultural matters. Mr. Ach’s involvement in the Cincinnati
business community provides added understanding of our growing Cincinnati market area. Furthermore, his specific background
in architectural engineering provides added value in our strategies related to physical banking center locations and design
.
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David S. Barker
Director Since:
2010
Age:
64
Committees:
Audit, Capital Markets, Compensation
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Mr. Barker is the President and Chief Executive
Officer of SIHO Insurance Services, Columbus, Indiana, a community health care benefits company serving over 150,000 members
throughout Indiana. He has held these positions since 1999 and has more than 30 years of experience in the insurance
industry.
He is active in many civic and community
endeavors, including serving as current Chairman of the Indiana University Purdue University Columbus Board of Advisors,
a Board member of the Heritage Fund Community Foundation, and a member of the Indiana University Advisory Board for Psychological
& Brain Sciences School of Neurology. Mr. Barker has been a Board member and past Chairman of the Columbus Area
Economic Growth Council, the Columbus Area Chamber of Commerce, and the United Way, as well as serving as a board
member of the Riley’s Children’s Foundation (Columbus Leadership Team),
Mr. Barker is an important member of the
business community in Columbus, Indiana and we look to his leadership and guidance as we continue to build our presence
in key southern Indiana markets. Furthermore, his experience as the President of a company provides the board with
insight on executive matters.
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Cynthia O. Booth
Director Since:
2010
Age:
58
Committees:
Risk and Compliance (Chair),
Corporate Governance & Nominating
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Ms. Booth is the President and Chief Executive
Officer of COBCO Enterprises, LLC, the owner and operator of six McDonald’s restaurants in the Cincinnati area.
Prior to forming COBCO in 2000, she held various executive positions at Firstar Bank (now U.S. Bank) in Cincinnati including
President, Firstar Bank Foundation, Senior Vice President—Director of Community Development, Vice President of Private
Wealth Group, Vice President of Residential Real Estate, Vice President of Human Resources, and Vice President, and before
that was President of Diversified Solutions, Inc., a bank consulting firm.
Ms. Booth is active in several civic and
community organizations, including serving as a director and the treasurer of the Greater Cincinnati Regional Chamber
of Commerce and as a director of the YWCA of Greater Cincinnati.
Ms. Booth brings deep banking experience
to the Board, including extensive knowledge in residential real estate lending, regulatory relations, the Community Reinvestment
Act and other regulatory compliance, private banking and human resources matters. Furthermore, her experience in the restaurant
franchise area provides valuable insight into the specialty area of lending conducted through our subsidiary First Franchise
Capital Corporation.
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Claude E. Davis
Director Since:
2004
Age:
55
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Mr. Davis is the Chief Executive Officer
of both First Financial Bancorp and First Financial Bank, positions he has held since October 1, 2004. He also serves
as the Chairman of the Board of First Financial Bank. Mr. Davis has over 28 years of experience in the financial
services industry.
Mr. Davis was elected to the board of directors
of the Federal Reserve Bank of Cleveland in 2013 and has served on its Executive Committee and Audit Review Committee
since January 2014. Beginning January 1, 2016, he is the chair of the board’s Audit Review Committee for the
Federal Reserve Bank of Cleveland. Mr. Davis also serves as a member of the Cincinnati Business Committee and the
American Banker’s Council.
Mr. Davis’ years of experience in the
banking industry as well as his extensive financial background provide leadership to the Board. As CEO, he is intimately
familiar with all aspects of our business activities. His involvement in other boards and organizations gives him
insight on important societal and economic issues relevant to our Company’s business and markets. His involvement
with the Federal Reserve Bank of Cleveland provides invaluable perspective on the financial services industry.
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Corinne R. Finnerty
Director Since:
1998
Age:
59
Committees:
Corporate Governance &
Nominating, Risk and Compliance
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Ms. Finnerty is the principal and sole shareholder
of the law firm of McConnell Finnerty PC located in North Vernon, Indiana. She has over 30 years of experience representing
financial institutions in a wide variety of legal matters. Ms. Finnerty was previously a director of a former affiliate
bank of First Financial from 1987 to 2005 and joined the board of the Company in 1998.
Ms. Finnerty served as a member of the Indiana
Supreme Court Disciplinary Commission from 2003 to 2013.
Ms. Finnerty’s deep roots in the North
Vernon, Indiana area provide representation on the Board for our southeast Indiana market. Her participation for ten years
on the Indiana Supreme Court Disciplinary Commission allows her to provide insight on governance and ethical issues. Furthermore,
her years as a practicing attorney, including the representation of financial institutions for over thirty years, give
her enhanced perspective on legal and regulatory issues.
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Peter E. Geier
Director Since:
2014
Age:
58
Committees:
Audit, Compensation
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Mr. Geier is principal of PGeier Consulting,
LLC, a business consulting firm. As of April 1, 2016, he is a Senior Lecturer at the Fisher College of Business,
Department of Management Science at The Ohio State University. He previously served as the Chief Executive Officer
of The Ohio State University Health System and the Chief Operating Officer of The Ohio State University Wexner Medical
Center from 2001 to 2015. In his roles with The Ohio State University Health System and The Ohio State University
Wexner Medical Center, he was responsible for the financial performance and operations of the university’s academic
medical center which includes six hospitals, multiple out-patient sites, the College of Medicine and an integrated faculty
practice group.
Mr. Geier was previously a director and Chairman
of the Board of Insight Bank since 2006, serving on the executive, asset liability and loan committees of the bank. Pursuant
to the Agreement and Plan of Merger among the Company, First Financial Bank, and Insight Bank, the Company agreed to appoint
one qualified, independent director associated with Insight Bank to the Company’s Board as well as to the Board
of Directors First Financial Bank, National Association. Mr. Geier was appointed to our Board in September 2014 pursuant
to this agreement following the consummation of the merger in August 2014. Mr. Geier also served on the board of directors
of Huntington Bancshares from 1999 to 2001 where he held the positions of President and Chief Operating Officer.
Mr. Geier presently serves on the board of
Santa Rosa Consulting, a for-profit consulting firm, as well as serving previously on the board of the Ronald McDonald
House and the boards of the following not-for-profit hospitals: University Hospital, Ross Heart Hospital, Harding Hospital,
James Cancer Hospital, The Ohio State University Hospital East, The Ohio State University Wexner Medical Center, and Children’s
Hospital.
Mr. Geier’s extensive executive experience
and financial expertise, including specific experience in the financial services industry, provides valuable, sophisticated
insight to the Company. He also qualifies as an audit committee financial expert. Mr. Geier’s relationships and
ties in Columbus, Ohio are an important asset as the Company strengthens its presence in the Columbus market.
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Murph Knapke
Director Since:
1983, Chairman of
the Board since 2009
Age:
69
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Mr. Knapke is a partner of Knapke Law Office
located in Celina, Ohio. He has served as the Company’s Chairman of the Board since 2009 and has guided the Company
through its many significant events since that time.
Mr. Knapke has tenure with our Company and/or
a bank affiliate since 1983 and provides valuable historical perspective on both the Company and the banking industry.
His deep roots in the Celina, Ohio area provide representation on the Board for our Northwest Ohio market. His years
as a practicing attorney give him enhanced perspective on legal and regulatory issues, Board fiduciary duties, and a balanced
perspective with regard to merger and acquisition opportunities.
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Susan L. Knust
Director Since:
2005
Age:
62
Committees:
Compensation (Chair), Corporate Governance
& Nominating
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Ms. Knust is the owner and managing partner
or president of several businesses:
·
Omega
Warehouse Services (since 2002) which is located in Monroe, Ohio and provides public warehousing and manufacturing services;
·
K.P. Properties of Ohio (since 1986) which is located
in Monroe, Ohio and owns, leases and manages industrial and commercial real estate in Ohio;
·
K.P.
Properties of Colorado (since 2010) which is located in Monroe, Ohio and owns, leases and manages commercial real estate
in Colorado; and
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K.P.
Properties of Florida (since 2014) which is located in Monroe, Ohio and owns, leases and manages commercial real estate
in Florida.
As a seasoned business owner and entrepreneur
for 33 years in the areas of manufacturing, warehousing and industrial real estate, Ms. Knust brings valuable insight
to the Board in strategic and other matters. Ms. Knust’s business interests are similar in size to our key client
base and she also has an understanding of our growing Cincinnati market area. Also, as a female business owner, her perspective
and experiences have proven valuable to us.
|
|
|
|
|
William J. Kramer
Director Since:
2005
Age:
55
Committees:
Audit (Chair), Capital Markets, Compensation
|
Mr. Kramer is the Vice President of Operations
and a member of the board of directors of Valco Companies, Inc. which has principal offices in New Holland, Pennsylvania
and whose principal activity is the design, manufacture, and sale of equipment used in the animal production industry.
He has held his current position with Valco Companies, Inc. since 2008, having previously held other executive positions
at Valco Companies, Inc. Mr. Kramer was previously a director of a former affiliate bank of First Financial from 1987
to 2005 and joined the board of First Financial in 2005.
Mr. Kramer has been a CPA since 1984 with
both public accounting and private company experience with substantial experience in financial reporting and accounting
controls. He qualifies as an audit committee financial expert. Furthermore, his tenure with our Company and/or a bank
affiliate since 1987 provides valuable historical perspective on both the Company and the banking industry.
|
|
|
|
|
Jeffrey D. Meyer
Director Since:
2014
Age:
50
Committees:
Capital Markets, Risk and Compliance
|
Mr. Meyer is an owner and the President of
Clean Title Agency, Inc. in Columbus, Ohio. He has held these positions since 1998. He is also a part owner and operator
of three other title agencies in central Ohio: Columbia Title Agency, Leadership Title Agency, and Win Title Agency. Each
of his title agencies issue title insurance and handle real estate closings.
Mr. Meyer was a founder of The First Bexley
Bank and previously a director of The First Bexley Bank since 2006, serving on the loan, information technology and audit
committees of the bank. Pursuant to the Agreement and Plan of Merger among the Company, First Financial Bank, and The
First Bexley Bank, the Company agreed to appoint one qualified, independent director associated with The First Bexley
Bank to the Company’s Board as well as to the Board of Directors of First Financial Bank. Mr. Meyer was appointed
to our Board in September 2014 pursuant to this agreement following the consummation of the merger in August 2014.
Mr. Meyer presently serves on the Board of
Trustees and is President of The Columbus Jewish Foundation.
Mr. Meyer’s extensive experience in
residential and commercial real estate matters provides valuable insight to the Company with respect to our mortgage and
commercial lending business. Mr. Meyer’s relationships and ties in Columbus, Ohio are an important asset as the
Company strengthens its presence in the Columbus market.
|
|
|
|
|
John T. Neighbours
Director Since:
2015
Age:
66
Committees:
Capital Markets, Risk and Compliance
|
Mr. Neighbours is a partner in the law firm
of Faegre Baker Daniels. He has practiced law for over 40 years and has represented employers throughout the country in
all aspects of labor and employment law. Additionally, he has become an adviser to business, educational and not-for-profit
executives on a variety of topics which assist them in problem solving.
Mr. Neighbours presently serves on the board
of Real Estate Corporation of America. He is involved in and serves as a director (or in an equivalent position) of a
number of non-profit and civic organizations including:
·
Greater
Indianapolis Chamber of Commerce
·
United
Way of Central Indiana
·
Meadows
Community Foundation (Chair)
·
Charles
A. Tindley Accelerated Schools
·
Indianapolis
Public Safety Foundation
·
Christian
Theological Seminary
·
Indiana
University-Purdue University Indianapolis Advisory Board
·
Indianapolis
Zoological Society
In addition, he served as a council member
for the American Bar Association - Section on Labor and Employment Law for 12 years, as well as chairman of the Developments
Under the National Labor Relations Act Committee from 1997 to 2000. He also served on the Labor Relations Committee for
the United States Chamber of Commerce.
Mr. Neighbours is also active in the Indianapolis
real estate market, with 35 years of experience in development and leasing activities, including development projects
in low income areas. His most recent development project involves managing a $100 million investment in a low income area
and coordinating the development with the City of Indianapolis, the local YMCA, healthcare providers, and charter schools.
Mr. Neighbours is well known in Indianapolis
and is a recognized leader in the local business community, providing valuable insight to the board on the local business
environment. His years as a practicing attorney give him an enhanced perspective on legal and employment matters as well
the business climate generally given his national practice.
|
|
|
|
|
Richard E. Olszewski
Director Since:
2005
Age:
66
Committees:
Corporate Governance & Nominating, Risk
and Compliance
|
Mr. Olszewski is the owner and operator of
two 7-Eleven Food Store franchises in Griffith, Indiana. He was previously a director of a former affiliate bank of First
Financial from 1995 to 2005 and joined the board of the Company in 2005.
Mr. Olszewski’s 30 plus years of retail
experience and several years of service to our Company provides us with a deeper understanding of our important northwest
Indiana market. Furthermore his business and retail experience as a small business owner provides our Company with a better
understanding of a key client constituency.
|
|
|
|
|
Maribeth S. Rahe
Director Since:
2010
Age:
67
Committees:
Capital Markets (Chair), Audit
|
Ms. Rahe is the President and Chief Executive
Officer of Fort Washington Investment Advisors, Inc., positions she has held since 2003. She also serves on the
board of directors of Fort Washington Advisors, Inc. Fort Washington Investment Advisors, Inc. is an investment management
firm and wholly owned subsidiary of Western & Southern Financial Group located in Cincinnati, Ohio. Ms. Rahe
has more than 43 years of experience in the banking and financial services industries with 30 years of experience in management
or executive management positions.
Since 2005, Ms. Rahe has served as a director
of Consolidated Communications Holdings, Inc. (NASDAQ: CNSL) which is an integrated communication services company located
in Mattoon, Illinois that provides exchange carrier and broadband services. She serves as the chair of the audit
committee and also on the compensation committee of the company.
Ms. Rahe is involved in and serves as a director
(or in an equivalent position) of several organizations, including:
·
Cincinnati
Arts Association (Vice Chair)
·
Cincinnati
Country Club (Board)
·
Cincinnati
Women’s Executive Forum (Board)
·
Cintrifuse
(Advisory Board)
·
Commonwealth
Club (Executive Committee)
·
Institutional
Real Estate Inc. (Editorial Advisory Board)
·
New
York Landmark Conservancy (Life Trustee)
·
Rush-Presbyterian-St.
Luke’s Medical Center (Life Trustee)
·
Sisters
of Notre Dame de Namur (Development Advisory Board)
·
The
Greater Cincinnati Foundation (Board)
·
United
Way of Cincinnati (Investment Committee)
·
Xavier
University Williams College of Business (Board of Executive Advisors)
Ms. Rahe is well known in Cincinnati and
is a recognized leader in the financial services community, both locally and nationally. She brings a seasoned perspective,
insight, and financial acumen into issues and strategies relating to our business, including regulatory relationships
and enterprise risk management.
|
|
|
|
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “
FOR
”
THE ELECTION OF EACH OF THE NOMINEES.
Proposal 2 – Re-approval of the Amended and Restated
Key Executive Short Term Incentive Plan
|
We are asking you to re-approve the Company’s Amended and Restated
Key Executive Short Term Incentive Plan, or STIP, to meet the requirements under Section 162(m) of the United States Internal Revenue
Code (the “Code”) so that payments made to certain key executive employees of the Company will be tax deductible to
the Company. The STIP was originally approved by our shareholders on April 15, 2011 at the Company’s annual meeting.
A copy of the STIP is attached as Exhibit A to this proxy statement. The
description that follows is qualified in its entirety by reference to the full text of the STIP as set forth in Exhibit A.
Background
The STIP is designed to provide incentive compensation for designated officers
and key executives of the Company that is directly related to the performance of the Company and those employees. Section 162(m)
of the Code generally does not allow publicly held companies to obtain tax deductions for compensation of more than $1.0 million
paid in any year to their chief executive officer or any of their three highest compensated officers (other than the chief executive
officer and chief financial officer) (together, the “Covered Executives”) unless such payments are “performance-based”
in accordance with the conditions specified under Section 162(m) of the Code and the related Treasury Regulations. One of those
conditions requires the Company to obtain shareholder approval of the material terms of the performance goals set by a committee
of outside directors. In addition, if such committee has the authority to change the targets under a performance goal after shareholder
approval of the goal, the material terms of the performance goals must be disclosed and reapproved by shareholders no later than
five years after such shareholder approval was first obtained. Because the STIP was last approved
by shareholders in 2011, the Company is now seeking re-approval
of the STIP in order to meet the deductibility condition under the Code.
Under the terms of the STIP, the Compensation Committee of the
Board has the authority to establish performance goals and the applicable targets thereunder each year based on the objective performance
criteria set forth in the STIP. For this reason, the Board of Directors is recommending that the shareholders approve the material
terms of the STIP as described below. Subject to such approval, and if the applicable performance goals are satisfied, this proposal
would enable the Company to continue to pay “performance-based” compensation to the Covered Executives and to obtain
federal income tax deductions for such payments, without regard to the limitations of Section 162(m) of the Code.
If shareholders fail to re-approve the STIP, any compensation
paid under the STIP in the future would not meet the conditions for tax deductibility under Section 162(m).
Summary of the STIP
Administration
The STIP is administered by a committee that is selected by the
Board and is composed of two or more members of the Board, each of whom is required to be an “outside director” (within
the meaning of Section 162(m) of the Code). The Board has designated the Compensation Committee of the Board to act as such committee.
The Compensation Committee has the authority that may be necessary or appropriate to enable it to discharge its responsibilities
with respect to the STIP, including authority to determine the eligibility for participation, establish the maximum award that
may be earned by each participant (which may be expressed in terms of dollar amount, percentage of salary or any other measurement),
establish goals for each participant, calculate and determine each participant’s award based upon level of attainment of
such goals. Except as otherwise specifically limited in the STIP, the Compensation Committee has full power and authority to construe,
interpret and administer the STIP.
Maximum Award
The STIP provides that the maximum 162(m) award payable for any
fiscal year to an eligible participant is the lower of two times the target award or $2.0 million.
Eligibility
Officers and key executives of the Company and its subsidiaries
designated by the Compensation Committee for each performance period (which is the period during which the performance is measured
to determine the level of an award), are eligible for awards. The performance period is the fiscal year of the Company, which
is currently the calendar year.
Incentive Awards and Performance Goals
The Compensation Committee establishes for each performance period
a maximum award (and, if the committee so determines, a target or threshold award) and goals relating to Company, subsidiary, division,
department, or functional performance for each participant (the “Performance Goals”) within the time frame permitted
under Section 162(m) of the Code (the first 90 days of the Company’s fiscal year) and communicates these Performance Goals
to each participant. Participants earn awards based only upon the attainment of the applicable Performance Goals during the applicable
performance period.
The Performance Goals for Covered Executives will be based on
attainment of specific levels of performance of the Company (or of a subsidiary, division, department or function thereof) with
reference to one or more of the following criteria:
|
|
|
|
|
Assets
|
Average Total Common Equity
|
Deposits
|
|
|
|
|
|
Earnings Per Share
|
Economic Profit Added
|
Efficiency Ratio
|
|
|
|
|
|
Gross Margin
|
Gross Revenue
|
Internal Rate Of Return
|
|
|
|
|
|
Loans
|
Net Charge-Offs
|
Net Income
|
|
|
|
|
|
Net Income Before Tax
|
Net Interest Income
|
Non-Interest Expense
|
|
|
|
|
|
Non-Interest Income
|
Non-Performing Assets
|
Operating Cash Flow
|
|
|
|
|
|
Pre-Provision Net Revenue
|
Return On Assets
|
Return On Equity
|
|
|
|
|
|
Return On Risk Weighted Assets
|
Return On Sales
|
Stock Price
|
|
|
|
|
|
Tangible Equity
|
Total Shareholder Return
|
|
These performance criteria may be measured against peer group
performance over a period of one year or such other period as the Compensation Committee may determine.
As soon as practicable following the end of the applicable performance
period, the Compensation Committee certifies the attainment of the Performance Goals and calculates the award, if any, payable
to each participant. Incentive awards are paid in a lump sum cash payment as soon as practicable following the determination of
the amount by the Compensation Committee, provided, however that the Committee may elect to pay a percentage of such awards in
common shares of the Company pursuant to the First Financial Bancorp. 2012 Stock Plan. Such shares may be subject to restrictions
as may be
determined by the Compensation Committee. The Compensation Committee retains the right to reduce any award, in its discretion.
Incentive awards are subject to clawback if the Compensation Committee determines that payment was based upon materially inaccurate
financial statements or any other materially inaccurate performance metric criteria.
If the Committee determines that a change in the business, operations,
corporate structure or capital structure of the Company, or the manner in which it conducts its business, or other events or circumstances,
renders the performance criteria to be unsuitable, the Committee may modify the performance criteria or the related minimum acceptable
level of achievement as the Committee deems appropriate or equitable. However, no such modification may be made if the effect would
be to cause an Incentive Award to fail to meet the conditions for tax deductibility under Section 162(m).
Amendment to Plan
The Company may amend, suspend or terminate the STIP, at any
time, provided that no amendment may be made without the approval of the Company’s shareholders if the effect of the amendment
would be to cause outstanding or pending Incentive Awards that are intended to qualify for the performance-based compensation exception
to Section 162(m) of the Code to cease to qualify for such exception.
Plan Benefits
Future benefits to be received by a person or group under the
STIP are not determinable at this time and will depend on individual and corporate performance. Actual awards under the STIP to
our NEOs for 2015 are reported in this proxy statement in the “Non-Equity Incentive Plan Compensation” column of the
Summary Compensation Table and under the heading “2015 STIP Design and Payout” and “2015 STIP Performance Results”
in this proxy.
The
Board of Directors unanimously recommends a vote “
FOR
” the RE-APPROVAL OF THE STIP.
|
Proposal
3 -- Ratify the appointment of Crowe Horwath LLP
as
our independent registered public accounting firm for 2016
|
Our Audit Committee has appointed Crowe Horwath LLP (“Crowe
Horwath”) as the Company’s independent registered public accounting firm for the Company’s 2016 fiscal year.
Ernst & Young LLP (“Ernst & Young”) served
as our independent registered public accounting firm for the year ended December 31, 2015. The Audit Committee periodically considers
whether there should be a rotation of the independent registered public accounting firm. As part of that consideration, during
2015, the Audit Committee conducted a competitive selection process to determine the Company’s independent registered public
accounting firm. As a result of that process, the Audit Committee decided to approve the appointment of Crowe Horwath for 2016.
We are asking our shareholders to ratify this appointment.
Our Audit Committee is responsible for the appointment, compensation,
retention, termination and oversight of the independent registered public accounting firm. The Audit Committee is also responsible
for the negotiation of audit fees payable to Crowe Horwath.
While the Audit Committee is not required to take any action
as a result of the outcome of the vote on this proposal, if shareholders do not ratify the appointment, the Audit Committee will
consider whether or not to retain Crowe Horwath in the future. Even if the appointment is ratified, our Audit Committee, at its
discretion, may change the appointment at any time if it determines that doing so would be in the best interests of the Company
and its shareholders.
No formal statement by representatives of Crowe Horwath or Ernst
& Young is anticipated at the Annual Meeting. However, representatives of Crowe Horwath are expected to attend the Annual Meeting
to respond to appropriate questions.
Accounting Firm Fees
The following table sets forth the aggregate fees billed for
audit services, as well as fees billed with respect to audit-related, tax and all other services, provided by Ernst & Young
to the Company and its related entities for the last two fiscal years. Any engagement of the Company’s independent registered
public accounting firm for permissible audit, audit-related, tax and other services are preapproved by the Audit Committee. The
Audit Committee may provide a general preapproval for a particular type of service or require specific preapproval.
|
Fees
by Category
|
2015
|
2014
|
|
Audit Fees
|
$ 1,021,500
|
$ 913,000
|
|
|
|
|
|
Audit-Related Fees
|
223,250
|
152,000
|
|
|
|
|
|
Tax Fees
|
0
|
0
|
|
|
|
|
|
All Other Fees
|
0
|
87,000
|
|
TOTAL
|
$ 1,244,750
|
$ 1,152,000
|
Description of Services:
Audit Fees
consist of fees billed for professional
services rendered in connection with the audit of our annual consolidated financial statements and internal control over financial
reporting, review of consolidated financial statements included in Form 10-Qs, review of certain periodic reports and other documents
filed with the SEC, and services that are normally provided in connection with statutory or regulatory filings or engagements.
Audit-Related Fees
consist of fees billed for
assurance and related services that are reasonably related to the performance of the audit or review of financial statements, including
employee benefit plan audits, due diligence services in connection with mergers and acquisitions, services performed in connection
with the issuance of subordinated debt offerings and attestation or audit services that are not required by statute or regulation.
Tax Fees
consist of fees for professional services
for tax compliance, tax planning, and tax advice such as advice related to mergers and acquisitions and employee benefit plans.
All Other Fees
include fees related to information
technology attack and penetration assessments and assessments relating to the design and operating effectiveness of internal controls.
The Board of Directors
unanimously recommends a vote “
FOR
” the ratification of the appointment of Crowe Horwath LLP as the Company’s
independent registered public accounting firm for the fiscal year ending December 31, 2016.
Report of the Audit Committee
In accordance with its written charter, the Audit Committee oversees
the Company’s financial reporting process on behalf of the Board. Management has the primary responsibility for the financial
statements and the reporting process including the systems of internal controls. The Company’s independent registered public
accounting firm is responsible for expressing an opinion on the conformity of the Company’s audited financial statements
to generally accepted accounting principles and on the Company’s internal control over financial reporting. In this context,
the Audit Committee has reviewed and discussed with management and Ernst & Young the audited financial statements for the year
ended December 31, 2015 and Ernst & Young’s evaluation of the Company’s internal control over financial reporting.
The Audit Committee has discussed with Ernst & Young the matters that are required to be discussed by Auditing Standards No. 16
(Communications with Audit Committees) as amended and adopted by the Public Company Accounting Oversight Board (“PCAOB”)
in Rule 3200T.
Ernst & Young has provided to the Audit Committee the written
disclosures and the letter required by applicable requirements of the PCAOB regarding the independent accountant’s communications
with the Audit Committee concerning independence, and the Audit Committee has discussed with Ernst & Young that firm’s
independence. The Audit Committee has concluded that Ernst & Young’s provision of audit and non-audit services to First
Financial and its affiliates is compatible with Ernst & Young’s independence.
The Audit Committee discussed with the Company’s internal
auditors and Ernst & Young the overall scope and plans for their respective audits. The Audit Committee met with the internal
auditors and with Ernst & Young, with and without management present, to discuss the results of their examinations, their evaluations
of the Company’s internal controls, and the overall quality of the Company’s financial reporting.
In reliance on the reviews and discussions referred to above,
the Audit Committee recommended to the Board, and the Board has approved, that the audited financial statements be included in
the Annual Report on Form 10-K for the year ended December 31, 2015, for filing with the SEC.
|
|
Audit Committee
|
|
|
|
|
|
William J. Kramer, Chair
|
|
|
David S. Barker
|
|
|
Peter E. Geier
|
|
|
Maribeth S. Rahe
|
|
Proposal 4 – Non-Binding, Advisory Vote to Approve Executive Officer Compensation
|
We are asking our shareholders to approve, on a (non-binding)
advisory basis, the compensation of the Company’s named executive officers (“named executive officers“ or “NEOs”)
identified in the Summary Compensation Table included in the Executive Compensation portion of this proxy statement beginning at
page 27. While this vote is advisory, and not binding on our Company, it will provide information to us regarding shareholder sentiment
about our compensation principles and objectives and may be considered in future executive compensation related decisions. As determined
by our shareholders at the 2011 Annual Meeting of Shareholders, we request this advisory approval each year.
We strongly encourage you to review the Executive Compensation
- Compensation Discussion and Analysis section of this proxy statement as well as the Summary Compensation Table and other related
compensation tables for detailed information about the compensation of our NEOs when making your voting decision on this proposal.
We believe our compensation program has contributed to our Company’s
recent and long-term successes. Our compensation philosophy is based on the following guiding principles and that our executive
compensation programs:
|
|
·
|
Drive
alignment between Company strategy, executive pay, and shareholder value creation;
|
|
|
·
|
Drive
alignment between an executive’s performance and the interests of shareholders by tying compensation to our Company’s
performance, also known as “Pay for Performance;”
|
|
|
·
|
Attract,
motivate, and retain key talent to deliver consistent, long-term performance; and
|
|
|
·
|
Incorporate
proper governance practices to prevent or mitigate inappropriate risk-taking.
|
We believe information provided in the Executive Compensation
portion of this proxy statement demonstrates that our executive compensation program has been designed appropriately to ensure
our management’s interests are aligned with our shareholders’ interest to support long-term value creation and to differentiate
pay based on our performance within our peer group.
Your vote is requested on the following resolution:
RESOLVED,
that the shareholders of First Financial Bancorp approve, on an advisory basis, the compensation of the Company’s named
executive officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation
tables, notes and narrative in the proxy statement for the Company’s 2016 Annual Meeting of Shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “
FOR
”
THE APPROVAL OF THE ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION.
Principal Shareholders
The table below identifies all persons known to us to own beneficially
more than 5% of our outstanding common shares as of the record date for the Annual Meeting (March 30, 2016).
|
|
Amount
and Nature of
Beneficial Ownership of
Common Shares
|
Percentage
of Class
|
|
|
|
|
|
BlackRock, Inc.
55 East 52
nd
Street
New York, NY 10055
|
6,357,273
1
|
10.3%
|
|
The Vanguard Group Inc.
100 Vanguard Blvd.
Malvern, PA 19355
|
4,532,164
2
|
7.35%
|
1
Information based upon a Schedule 13G/A filed on January 8, 2016. As of December 31, 2015, BlackRock had sole voting power
for 6,204,411 and sole dispositive power for 6,357,273 shares.
2
Information based on a Schedule 13G/A filed on February 10, 2016. As of December 31, 2015, Vanguard had sole power to vote
for 76,981 shares; sole dispositive power for 4,453,283 shares; and shared dispositive power for 78,881 shares.
Shareholdings of Directors, Executive Officers and Nominees
for Director
The following table shows the number of shares of First Financial
beneficially owned, as of March 30, 2016, by each director and nominee for director of the Company, each of the named executive
officers listed in the Summary Compensation Table provided in the Executive Compensation portion of this proxy statement, and all
executive officers and directors of the Company as a group. None of the individuals in the following table owned one percent or
greater of the Company’s outstanding common shares.
A beneficial owner of shares is a person who has sole or shared
voting power, meaning the power to control voting decisions, or sole or shared investment power, meaning the power to cause a sale
or other disposition of the shares. A person is also considered the beneficial owner of shares to which that person has the right
to acquire beneficial ownership within 60 days. For this reason, the following table includes exercisable share options and restricted
shares that would become exercisable or vest within 60 days.
|
|
|
|
Amount
and Nature of Beneficial Ownership
|
|
Name
|
Position
|
|
Common
Shares
Beneficially Owned
Excluding Options
|
|
Stock
Options
Exercisable within
60 days of Record
Date
1
|
|
Total
Common
Shares
Beneficially
Owned
|
|
Non-Employee
Directors
|
|
|
|
|
|
|
|
J.
Wickliffe Ach
|
Director
and Nominee
|
|
16,782
2
|
|
0
|
|
16,782
|
|
David
S. Barker
|
Director and Nominee
|
|
18,203
2
|
|
0
|
|
18,203
|
|
Cynthia
O. Booth
|
Director and Nominee
|
|
11,396
2
|
|
0
|
|
11,396
|
|
Mark
A. Collar
|
Director
|
|
15,835
2
|
|
0
|
|
15,835
|
|
Corinne
R. Finnerty
|
Director and Nominee
|
|
50,543
2
|
|
0
|
|
50,543
|
|
Peter
E. Geier
|
Director and Nominee
|
|
37,471
2
|
|
0
|
|
37,471
|
|
Murph
Knapke
|
Director and Nominee
|
|
79,425
2
|
|
0
|
|
79,425
|
|
Susan
L. Knust
|
Director and Nominee
|
|
34,902
2
|
|
0
|
|
34,902
|
|
William
J. Kramer
|
Director and Nominee
|
|
26,353
2
|
|
0
|
|
26,353
|
|
Jeffrey
D. Meyer
|
Director and Nominee
|
|
43,003
2
|
|
0
|
|
43,003
|
|
John
T. Neighbours
|
Director and Nominee
|
|
2,140
2
|
|
0
|
|
2,140
|
|
Richard
E. Olszewski
|
Director and Nominee
|
|
39,418
2
|
|
0
|
|
39,418
|
|
Maribeth
S. Rahe
|
Director and Nominee
|
|
21,252
2
|
|
0
|
|
21,252
|
|
Named
Executive Officers
|
|
|
|
|
|
|
|
Claude
E. Davis
|
Director, Nominee and CEO
|
|
429,147
3
|
|
0
|
|
429,147
|
|
John
Gavigan
|
Chief Financial Officer
|
|
12,845
3
|
|
0
|
|
12,845
|
|
Richard
S. Dennen
|
President, Oak Street Funding
|
|
85,822
3
|
|
0
|
|
85,822
|
|
C. Douglas Lefferson
|
President, Community Banking
|
|
93,634
3
|
|
66,609
|
|
160,243
|
|
Anthony M. Stollings
|
President, Chief Operating Officer of
First Financial Bancorp; EVP, Chief Operating Officer of First Financial Bank
|
|
70,256
3
|
|
0
|
|
70,256
|
|
|
|
|
|
|
|
|
|
All
executive officers, directors and nominees as a group (27 persons)
|
|
1,292,994
3
|
|
66,609
|
|
1,359,603
|
|
Percent
of outstanding shares held by this group:
|
|
|
|
|
|
2.19%
|
1
None of
the 66,609 options listed above have a strike price above the closing price of First Financial common stock on March 30, 2016,
which was $18.32 per share.
2
Includes
1,586 restricted shares that vest on May 26, 2016 for all directors except Mr. Neighbours. Mr. Knapke, Chairman of the Board,
received an additional 231 shares. Mr. Neighbours became a member of the Board on August 24, 2015 and received a prorated amount
of restricted shares (1,276 shares) that will vest on May 24, 2016. Directors retain voting and dividend rights on unvested shares.
However, dividends on unvested shares are held in escrow until vested. See “Board Compensation.”
3
Includes
unvested restricted and restricted performance shares (Davis—123,924; Gavigan – 7,895; Stollings—23,692; Dennen—85,822;
Lefferson—33,765; and all executive officers as a group (14
persons)—376,028). Officers
retain voting and dividend (subject to escrow until vesting) rights on unvested shares. For vesting schedules, see “Grants
of Plan-Based Awards” and “Outstanding Equity Awards at Fiscal Year-End.”
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires
our officers, directors and persons who own more than 10 percent of a registered class of the Company’s equity securities
to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC. Officers, directors and greater than 10
percent shareholders are required by SEC regulations to furnish the Company with copies of all Forms 3, 4 and 5 they file.
Based solely on our review of the copies of these forms received
by the Company and written representations from certain reporting persons that they were not required to file a Form 5 for the
specified fiscal year, the Company believes that all of its officers, directors and greater than 10 percent shareholders complied
with all filing requirements applicable to them with respect to transactions completed in 2015, except that Mr. Langford filed
a late Form 4 reporting one transaction.
General
We at First Financial are committed to conducting business
according to our core Company Values and our Mission Statement. Our Mission Statement, Company Values, and our Code of Conduct
embodying our Mission Statement and Company Values, guide us in managing our business in line with high standards of business practices
and in the best interest of our shareholders, clients, associates, and other stakeholders.
|
Our Mission
We will exceed our clients’ expectations and satisfy their
financial needs by building long-term relationships using a client-centered, value-added approach.
|
|
Our Values
|
|
|
Integrity.
We steadfastly adhere to ethical
principles and professional standards.
Respect.
We value the diversity and individuality
of each associate and client.
Responsiveness.
We readily react to the
needs and deadlines of our clients and co-workers.
|
Commitment.
We are committed to doing whatever
we can to meet the needs of our clients and other stakeholders.
Leadership.
We believe that leadership
should be encouraged and demonstrated at every level in our Company.
Excellence.
Our business decisions and our
service to every stakeholder should reflect the highest standards.
|
Code of Conduct
Our Board has adopted a Code of Conduct that applies
to everyone at First Financial: our directors, officers and associates. The Code of Conduct identifies our commitment to our Values
and our responsibilities to our stakeholders, including our clients, our shareholders, our fellow associates, our regulators, and
our community. The Code of Conduct provides guidance on compliance with laws and regulations, non-discrimination, diversity and
equal opportunity, protecting Company assets and confidential information, conflicts of interest, accuracy of records and information
reporting, and our responsibilities to the communities in which we conduct business. The Code of Conduct also encourages associates
to report any illegal or unethical behavior. All newly hired associates are required to certify that they have reviewed and understand
the Code of Conduct. In addition, each year all other associates receive training and are asked to affirmatively acknowledge their
obligation to follow the Code of Conduct.
Code of Ethics for the CEO and Senior Financial
Officers
Our Board has also adopted a Code of Ethics for our
chief executive officer and senior financial officers that provides further guidance about their responsibilities for full, fair,
accurate, timely and understandable disclosure in the periodic reports we file with the SEC.
Corporate Governance Principles
We believe that effective corporate governance is built
on adherence to a number of “best practices.” These practices are consistent with the Board’s responsibilities
to effectively oversee the Company’s strategy, evaluate and compensate Company executives, and plan for management succession.
Most importantly, these practices are believed to strengthen the Company and protect our shareholders’ interests. Accordingly,
the Board has developed and follows our Corporate Governance Principles to set forth common procedures and standards relating to
corporate governance. The Corporate Governance Principles cover, among other things, executive sessions of the Board,
director
qualifications, director responsibilities, director independence, voting for directors, limitations on membership on other boards,
continuing education for members of the Board, and Board performance evaluations.
Policies and Procedures Relating to Complaints
The Audit Committee has approved procedures for the
receipt, retention and treatment of reports or complaints to the Audit Committee regarding accounting, internal accounting controls,
auditing matters and legal or regulatory matters. These procedures also provide for the submission by associates of confidential,
anonymous reports to the Audit Committee of concerns regarding questionable accounting or auditing matters.
Please visit the Corporate Governance portion of our investor
relations website (at
www.bankatfirst.com/investor
) to learn more about our corporate governance practices and access the
following documents:
|
·
|
Code of Conduct
|
·
|
Code of Ethics for the CEO and Senior Financial Officers
|
|
|
|
|
|
|
·
|
Corporate Governance Principles
|
·
|
Charters for our Board Committees
|
Our Board’s Role in Risk Oversight
Assessing and managing risk is the responsibility of management
of First Financial. Our Board, with the assistance of the Risk and Compliance Committee and other Board committees as discussed
below, reviews and oversees our Enterprise Risk Management (“ERM”) program, which is designed to enable effective and
efficient identification and management of critical enterprise risks and to facilitate the incorporation of risk consideration
into decision-making. The ERM program was established to clearly define risk management roles and responsibilities, bring together
senior management to discuss risk, and promote visibility and constructive dialogue around risk at all levels of the organization.
The Company’s risk governance structure starts with each
line of business being responsible for managing its own risks. In addition, the Board and executive management have appointed a
Chief Risk Officer to support the risk-oversight responsibilities of the Board and its committees.
An Enterprise Risk Management Committee (“ERMC”)
comprised of senior management is the senior most focal point within our Company to monitor, evaluate, and recommend comprehensive
policies and solutions to deal with all aspects of risk and to assess the adequacy of any risk remediation plans in the Company’s
businesses. Currently reporting up to the ERMC are various risk-related committees whose members are comprised of representatives
from the lines of business, risk management, and senior management.
The Chief Risk Officer provides the Board with a quarterly risk
profile of the Company, as well as a report on the risk exposure of the Company from the viewpoint of the ERMC. Under the ERM program,
management develops a holistic portfolio of Company enterprise risks by facilitating business and function risk assessments, performing
targeted risk assessments and incorporating information regarding specific categories of risk gathered from various internal Company
operations. Management then develops risk response plans for risks categorized as needing management focus and response and monitors
other identified risk focus areas. Management provides regular reports on the risk portfolio and risk response and monitoring efforts
to the ERMC and to the Risk and Compliance Committee of our Board.
Our Board assumes a significant oversight role in risk management
both through its actions as a whole and through its committees. Additional information concerning each of the following committees
may be found in the “Corporate Governance – Board Committees” section of this proxy statement.
|
|
·
|
The Corporate Governance and Nominating Committee (“CGNC”)
oversees our corporate governance functions.
|
|
|
·
|
The Compensation Committee evaluates, with our senior officers, risks
posed by our incentive compensation programs and seeks to limit any unnecessary or excessive risks these programs may pose to us,
in order to avoid programs that might encourage such risks.
|
|
|
·
|
The Audit Committee reviews our internal control systems to manage
and monitor financial reporting and accounting risk with management and our internal audit department.
|
|
|
·
|
The Risk and Compliance Committee assists the Board in overseeing enterprise-wide
risks, including credit, market, operational, technology, regulatory, legal, strategic, and reputation risks.
|
|
|
·
|
The Capital Markets Committee oversees the Company’s capital
markets, treasury and capital planning activities.
|
While each of these committees is responsible for evaluating
certain risks and overseeing the management of these risks, the entire Board is regularly informed through committee reports about
such risks. Select members of management attend our Board and Board committee meetings (other than executive sessions) and are
available for questions regarding particular areas of risk.
Director Independence
Our Board has determined that all of our directors, except our CEO,
are independent directors as that term is defined in the Nasdaq Stock Market Marketplace Rules (the “Nasdaq Rules”).
In addition, our Board has determined that each member of the Audit, Compensation, and Nominating and Corporate Governance Committees
is independent under such definition and that the members of the Audit Committee are independent under the additional, more stringent
requirements of the Nasdaq Stock Market applicable to audit committee members. These determinations are made annually, most recently
in February 2016.
Under the Nasdaq Rules and our Corporate Governance Principles,
independent directors must not have a relationship with the Company that would interfere with the exercise of independent judgment
in carrying out the responsibilities of being a director. In making this determination, our Board reviews and evaluates certain
transactions and relationships with Board members to determine the independence of each of the members. In making the independence
determinations for each of the directors, the Board took into consideration the transactions and relationships disclosed in this
proxy statement under “Review and Approval of Related Person Transactions” below.
Board Leadership Structure
The Chairman of our Board, Murph Knapke, is an independent director
who presides over each board meeting and performs such other duties as may be incident to the office. Although our corporate documents
would allow our chair to also hold the position of chief executive officer, our Corporate Governance Principles provide that these
two positions must be separate. Our Board believes this separation allows our chair to provide additional independent oversight
of management. The offices of the chair of the Board and the chief executive officer at the Company have been separate since 1997.
In addition to our current Chairman, the Vice-Chair of our Board, J. Wickliffe Ach, is also an independent director.
All members of the Board of First Financial Bancorp also serve
as directors of the Company’s subsidiary bank, First Financial Bank, National Association.
Board Self-Assessment
Our Board conducts a self-assessment annually, which our CGNC
reviews and discusses with the Board. In addition, each of the committees of the Board is expected to conduct periodic self-assessments.
Evaluating Nominees and Electing Directors
Evaluating Nominees
The CGNC evaluates director candidates based upon criteria
established by the committee and applies the same evaluation process to all director nominees regardless of whether the nominee
is recommended by a shareholder or by the Company. The criteria evaluated by the committee may include, among other things, the
candidate’s judgment, integrity, leadership ability, business experience, industry knowledge, public company experience,
professional reputation, and ability to contribute to board member diversity (including, but not limited to gender, race, and ethnicity,
as well as experience, geography, qualifications, attributes, and skills). The CGNC recognizes that diversity of the Board is an
important part of its analysis as to whether the Board constitutes a body that possesses a variety of complementary skills and
experiences. The committee also considers whether the candidate meets independence standards, is “financially literate”
or a “financial expert” if appropriate for governance needs, is available to serve, and is not subject to any disqualifying
factor. No single individual trait is given particular weight in the decision process.
Policy on Majority Voting
Although our Articles of Incorporation and Amended
Regulations provide that director nominees who receive the greatest number of shareholder votes are automatically elected to the
Board, our Board has adopted a policy on majority voting for the election of directors which is included in our Corporate Governance
Principles. The majority voting policy requires nominees who receive a greater number of votes “withheld” from his
or her election than votes “for” his or her election to tender his or her written resignation to the CGNC for consideration
by the committee following the certification of the shareholder vote. This requirement applies only in an uncontested election
of directors, which is an election in which the only nominees are persons nominated by the Board.
Upon its receipt of a resignation from a director who
has not received the requisite shareholder vote, the CGNC will then consider the resignation and make a recommendation to the Board
concerning whether to accept or reject such resignation. In making its recommendation to the Board, the committee will consider
all factors deemed relevant by members of the committee, including the stated reason or reasons why shareholders who cast “withhold”
votes for the director did so, the qualifications of the director (including, for example, whether the director serves on the Audit
Committee of the Board as an “audit committee financial expert” and whether there are one or more other directors
qualified,
eligible, and available to serve on such committee in such capacity), and whether the director’s resignation from the Board
would be in the best interest of First Financial and its shareholders.
The CGNC also will consider a range of possible alternatives
concerning the director’s tendered resignation, including acceptance of the resignation, rejection of the resignation, or
rejection of the resignation coupled with a commitment to seek to address and cure the underlying reasons reasonably believed by
the committee to have substantially resulted in the “withheld” votes. The Board will take formal action on the committee’s
recommendation no later than 90 days following the certification of the shareholder vote. In considering the committee’s
recommendation, the Board will consider the information, factors and alternatives raised by the committee and such additional information,
factors and alternatives as the Board deems relevant. We will publicly disclose, in a Form 8-K filed with the SEC, the Board’s
decision, together with an explanation of the process by which the Board made its decision and, if applicable, the Board’s
reason or reasons for rejecting the tendered resignation within four business days after the Board makes its decision.
Nominating Procedures
The CGNC will consider director candidates recommended
by shareholders in accordance with the procedures outlined in the Amended Regulations. In order to be recommended for a position
on the Board by the committee, a proposed nominee must, at a minimum, (i) be able to comply with the Company’s Corporate
Governance Principles, and (ii) through a combination of experience and education, have the skills necessary to make an effective
contribution to the Board.
In connection with next year’s Annual Meeting
of Shareholders, the CGNC will consider director nominees recommended by shareholders provided that notice of a proposed nomination
is received by the Company no later than February 23, 2017, as provided in the Amended Regulations. Notice of a proposed nomination
must include the information outlined in the Amended Regulations and should be sent to First Financial Bancorp, Attention: Shannon
M. Kuhl, Corporate Secretary, 255 E. Fifth Street, Suite 2900, Cincinnati, OH 45202.
Director Education
We recognize the importance of our directors keeping current
on Company and industry issues and their responsibilities as directors. All new directors attend orientation training soon after
being elected to the Board. The Board also encourages attendance at continuing education programs for Board members, which may
include internal strategy or topical meetings, third-party presentations, and externally-offered programs.
Share Ownership Guidelines
We require directors to own First Financial shares equal to
at least three times the director’s annual retainer, with a minimum of 4,000 shares, within three years of first becoming
a director of the Company. All directors who have been non-employee directors for at least three years are in compliance with
this requirement. We have also implemented stock ownership and retention guidelines for our named executive officers described
further in the Executive Compensation portion of this proxy statement.
Succession Planning
In light of the critical importance of executive leadership
to our success, we have instituted an annual succession planning process which is guided by the CGNC. The succession planning
process addresses our chief executive officer position, the positions directly reporting to the chief executive officer, and senior-level
managers enterprise-wide. Management regularly identifies high-potential executives for additional responsibilities, new positions,
promotions, or similar assignments to expose them to diverse operations within the Company, with the goal of developing well-rounded
and experienced senior leaders. The CGNC reports to the full Board on its findings and the Board deliberates in executive session
on the CEO succession plan.
Board Meetings
During 2015, the Board held eight scheduled meetings and one
special meeting. We believe it is important for our directors to participate in board and committee meetings. Directors who participate
in fewer than 75% of scheduled board and committee meetings, or who do not attend the annual meeting of shareholders, unless excused
by the Board, are subject to not being re-nominated to the Board. In 2015, all of the incumbent directors/nominees attended more
than 75% of the scheduled meetings. All directors who were on the Board at the time attended the 2015 Annual Meeting of Shareholders.
The Board also held eight executive sessions in 2015 where only
independent directors were present.
Board Committees
Our Board has established the following standing committees:
Audit Committee, Capital Markets Committee, Compensation Committee, CGNC, and Risk and Compliance Committee. Each committee operates
pursuant to a committee charter that is approved by the Board, which is the case for the CGNC Charter, or by the CGNC to whom the
Board has delegated the authority to approve other committee charters. Each Board committee serves as a joint board committee of
First Financial Bank in addition to being a Board committee of First Financial Bancorp.
The charters of the Audit, Compensation, Corporate Governance
and Nominating, and Risk and Compliance Committees each comply with current Nasdaq Rules relating to charters and corporate governance.
Each of these charters is available under the Corporate Governance portion of our investor relations website (at
www.bankatfirst.com/investor
).
|
Audit Committee
Members:
William J. Kramer, Chair
David S. Barker
Peter E. Geier
Maribeth S. Rahe
All members of the Audit Committee were determined
to meet the independence and financial literacy standards of the Nasdaq Rules. Directors Kramer and Geier are “audit committee
financial experts” for purposes of SEC regulations.
Number of Meetings in 2015: 9
|
Committee Primary Responsibilities:
§
Monitor
the integrity of the consolidated financial statements of the Company.
§
Monitor
compliance with the Company’s Code of Conduct and Code of Ethics for the CEO and Senior Financial Officers.
§
Evaluate
and monitor the qualifications and independence of the Company’s independent auditors.
§
Evaluate
and monitor the performance of the Company’s internal audit function and independent auditors, with respect to First Financial
and its subsidiaries
|
|
|
|
|
Compensation Committee
Members:
Susan L. Knust, Chair
J. Wickliffe Ach
David S. Barker
Peter E. Geier
William J. Kramer
All members of the Compensation Committee were determined
to meet the independence standards of the Nasdaq Rules.
Number of Meetings in 2015: 5
|
Committee Primary Responsibilities:
§
Determine
and approve the compensation of the CEO and each executive officer of the Company.
§
Evaluate
the performance of the Company’s CEO for all elements of compensation and all other executive officers with respect to incentive
goals and compensation.
§
Review
and evaluate all equity and benefit plans of the Company.
§
Oversee
the preparation of the compensation discussion and analysis and recommend to the full Board its inclusion in the annual proxy statement.
§
Annually
review the executive incentive compensation arrangements to see that such arrangements do not encourage such officers to take unnecessary
and excessive risks that threaten the value of the Company.
§
Recommend
to the Board compensation for non-employee directors.
|
|
|
|
|
Corporate Governance and Nominating Committee
Members:
J. Wickliffe Ach, Chair
Cynthia O. Booth
Corinne Finnerty
Susan L. Knust
Richard E. Olszewski
All members of the CGNC were determined to meet the
independence standards of the Nasdaq Rules.
Number of Meetings in 2015: 5
|
Committee Primary Responsibilities:
§
Develop
and periodically review the effectiveness of the Company’s Corporate Governance Principles.
§
Monitor
and protect the Board’s independence.
§
Consult
with the Chairman of the Board concerning the appropriate Board committee structures and appointment of members to each committee
of the Board.
§
Establish
procedures for the director nomination process and recommend nominees for election to the Board.
§
Oversee
the formal evaluation of the Board and all Board committees, including any formal assessment of individual directors.
§
Review
shareholder proposals and proposed responses.
§
Promote
the quality of directors through continuing education experiences.
§
Annually
delegate to the respective committees of the Board or to management, the authority and responsibility for reviewing and approving
policies and procedures of the Board (including the board of directors of First Financial Bank) in connection with the Company’s
ERM program.
|
|
|
|
|
Risk and Compliance Committee
Members:
Cynthia O. Booth , Chair
Mark A. Collar
Corinne Finnerty
Jeffrey D. Meyer
John T. Neighbours
Richard E. Olszewski
All members of the Risk and Compliance Committee
were determined to meet the independence standards of the Nasdaq Rules.
Number of Meetings in 2015: 4
|
Committee Primary Responsibilities:
§
Review
with management the Company’s procedures and techniques and approve policies to measure the Company’s risk exposures and
for identifying, evaluating and managing the significant risks to which the Company is exposed.
§
Review
with management the Company’s policies, procedures, and practices involving compliance with applicable laws and regulations.
§
Monitor
the Company’s risk management performance and obtain reasonable assurance that the Company’s risk management policies for
significant risks are being adhered to.
§
Consider
and provide advice to the Board on the risk impact of any strategic decision that the Board may be contemplating.
§
Periodically
examine the risk and compliance cultures of the Company.
§
Periodically
set the risk appetite for the Company and monitor compliance with the risk appetite statement including development of risk tolerances,
targets and limits.
|
|
|
|
|
Capital Markets Committee
Members:
Maribeth S. Rahe, Chair
David S. Barker
Mark A. Collar
William J. Kramer
Jeffrey D. Meyer
John T. Neighbours
Number of Meetings in 2015: 4
|
Committee Primary Responsibilities:
§
Monitor
the management of the purchase, sale, exchange, and other disposition of the investments of the Company, including review of management
reports concerning current equity debt security investment positions.
§
Monitor
the investment activities of the Company to ensure compliance with external regulations and the Company’s applicable policies
including requirements relating to composition, diversification, credit risk, and yield.
§
Monitor
the capital position of the Company and the capital management activities undertaken by the Company to ensure that capital levels
are maintained in accordance with regulatory requirements and management directives.
§
Monitor
and oversee interest rate risk, capital market activities, the investment portfolio, and capital planning of First Financial Bank.
|
2015 Board Compensation
Our Compensation Committee reviews the individual components
and total amount of director compensation at least annually. The Compensation Committee will recommend changes in director compensation
to the Board aided by its review of competitive pay data for non-employee directors of financial services companies in the Company’s
peer group (described in the Compensation Discussion and Analysis – Market Competitiveness section of this proxy statement).
It may recommend changes to director compensation based on its analysis of this competitive data. The Compensation Committee uses
the same Peer Group for this purpose as used by the committee to determine competitive pay for named executive officers listed
in the Summary Compensation Table (see Compensation Discussion and Analysis). The Compensation Committee has retained Willis Towers
Watson to act as the committee’s independent compensation consultant. Our director compensation is designed to align the
Board with our shareholders, and to attract, motivate, and retain high performing members critical to the Company’s success.
In 2015, we provided the following compensation to our non-employee
directors. Claude E. Davis, who is also an employee of the Company, did not receive any additional fees for serving on the Board
and therefore has been omitted from the table. For a discussion of Mr. Davis’s compensation, see “Executive Compensation.”
|
Name
|
Fees Earned
or
Paid in Cash
1, 2
($)
|
Stock
Awards
3
($)
|
All
Other
Compensation
4
($)
|
Total
($)
|
|
J. Wickliffe Ach
|
49,750
|
27,500
|
980
|
78,230
|
|
David S. Barker
|
38,750
|
27,500
|
980
|
67,230
|
|
Cynthia O. Booth
|
32,750
|
27,500
|
980
|
61,230
|
|
Mark A. Collar
|
29,750
|
27,500
|
980
|
58,230
|
|
Corinne R. Finnerty
|
32,000
|
27,500
|
980
|
60,480
|
|
Peter E. Geier
|
36,500
|
27,500
|
—
|
64,000
|
|
Murph Knapke
|
68,250
|
31,500
|
1,074
|
100,824
|
|
Susan L. Knust
|
45,375
|
27,500
|
980
|
73,855
|
|
William J. Kramer
|
49,500
|
27,500
|
980
|
77,980
|
|
Jeffrey D. Meyer
|
32,000
|
27,500
|
—
|
59,500
|
|
John T. Neighbours
5
|
10,833
|
22,917
|
—
|
33,750
|
|
Richard E. Olszewski
|
42,125
|
27,500
|
980
|
70,605
|
|
Maribeth
S. Rahe
|
40,750
|
27,500
|
980
|
69,230
|
1
Includes
retainers, board and committee attendance fees and retainers for committee chairs for both First Financial Bancorp and First Financial
Bank.
2
Pursuant
to the Company’s Director Fee Stock Plan, directors may elect to have all or any part of the annual retainer fee paid in
common shares. See also “- Director Stock Fee Plan” below. This column includes fees used to purchase shares in the
open market under such plan as follows:
|
Name
|
Amount
of Fees Used to
Purchase Common
Shares ($)
|
|
J. Wickliffe Ach
|
6,500
|
|
David S. Barker
|
26,000
|
|
Cynthia O. Booth
|
15,600
|
|
Mark A. Collar
|
2,600
|
|
Corinne R. Finnerty
|
10,400
|
|
Peter E. Geier
|
6,500
|
|
Murph Knapke
|
13,000
|
|
Susan L. Knust
|
13,000
|
|
William J. Kramer
|
6,500
|
|
Jeffrey D. Meyer
|
26,000
|
|
John T. Neighbours
|
6,500
|
|
Richard E. Olszewski
|
17,342
|
|
Maribeth S. Rahe
|
26,000
|
3
Total value
is computed utilizing the grant date market value for restricted stock awards. See Note 17—Stock Options and Awards of the
Company’s Annual Report on Form 10-K for additional information on valuation methodology. Based on the closing price of
First Financial’s common shares as of the date of grant (May 26, 2015) of $17.34 per share, Directors Ach, Barker, Booth,
Collar, Finnerty, Knapke, Knust, Olszewski, and Rahe received 1,586 shares each. Director Knapke received an award of 1,586 shares
and an additional 231 shares as the chairperson of the First Financial Bancorp Board of Directors. These shares vest on May 26,
2016. Director Neighbors received a prorated award of 1,276 shares upon becoming a director on August 24, 2015. The value of Mr.
Neighbors’ share grant is based on the closing price of First Financial’s common shares as of the date of grant (August
24, 2015) of $17.97 per share. These shares vest on May 26, 2016. Dividends on unvested restricted stock are held in escrow and
only paid upon vesting of the shares. See “Director Fee Stock Plan.”
4
Includes
accrued dividends paid on restricted stock vesting in 2015.
5
New Director
effective August 24, 2015.
Board/Committee Fees
Non-employee directors of the Company received annual
retainers of $13,000 and received annual retainers of $13,000 as non-employee directors of First Financial Bank. The Chair and
Vice Chair of the Board receive additional annual retainers of $40,000 and $7,500, respectively. The chair of the CGNC of the Company
received an additional annual retainer of $7,500. The chairs of the Audit Committee, Compensation Committee, and Risk and Compliance
Committee receive additional $10,000 annual retainers. These committee chair retainers are to recognize the extensive time that
is devoted to committee matters including meetings with management, auditors, attorneys and consultants, and preparing committee
agendas. Director fees are paid quarterly.
Director Stock Plans
In 2009, First Financial’s shareholders approved
the 2009 Non-Employee Director Stock Plan and in 2012 approved amendments to the plan. In 2012, our shareholders also approved
the First Financial Bancorp. 2012 Stock Plan to become available for share grants to the directors upon depletion of the shares
held in the 2009 Non-Employee Director Stock Plan. The shares in the 2009 Non-Employee Director Stock Plan were depleted in May
of 2015, and all shares granted after that time came from the 2012 Stock Plan.
In 2015, each non-employee director received $27,500
in value of restricted stock, or a prorated portion of this amount, which vests one year from the date of grant, or in the case
of the pro-rated restricted stock grant to Mr. Neighbours on August 24, 2015, which shares will vest on the date of the next annual
meeting. The Chair of the Board received an additional $4,000 in value of restricted stock which also vests one year from the date
of grant. All dividends on such restricted stock accrue and are paid at the time the restricted stock vests. Grants to non-employee
directors are made on the date of the annual meeting based on the closing price of the Company’s common shares that day unless
a director takes office after an annual meeting in which case such director receives a pro-rated number of restricted shares.
Stock Grants to Nominee Directors
In the event the twelve nominees currently serving
as non-employee directors are re-elected to the Board, each of these directors will receive a grant of restricted stock having
a market value of $27,500 from the 2012 Stock
Plan. At March 30, 2016, the closing price of our common shares was $18.32 per share,
which would equate to a grant of approximately 1,501 restricted shares each. The Chair of the Board will receive an additional
$4,000 in value of restricted stock. All restricted stock grants will vest one year from the date of grant and all dividends on
such restricted stock will accrue and be paid at the same time as the restricted stock vests.
Director Fee Stock Plan
Each year, directors are given the opportunity to
have all or a portion of their board fees invested in the Company’s common shares. Elections are made once a year. Shares
are purchased on the open market by an independent broker dealer after the payment of the quarterly Board fees.
Reimbursement
Directors are entitled to reimbursement of their
reasonable travel expenses for attending Board and committee meetings.
Review and Approval of Related Person Transactions
Each year, our directors and executive officers complete annual
questionnaires designed to elicit information about potential related person transactions and transactions that may otherwise affect
the independence of an independent director. The responses to these questionnaires are reviewed by the Chief Legal Officer and
Corporate Secretary of the Company, and outside counsel if appropriate, to determine if there are related person transactions.
Related person transactions will originally be submitted to the Audit Committee of the Board for approval as well as to the CGNC
for its consideration when making independence determinations.
Pursuant to the Corporate Governance Principles, no director
shall perform professional services for the Company or its affiliates in a manner that interferes with that director’s independence
under the Nasdaq Rules. This prohibition applies to services provided (1) directly by the director (or an immediate family member)
or (2) where the director (or an immediate family member) is affiliated with the organization that provides the professional services
to the Company. This prohibition does not apply to professional services that are provided by the director to clients of the Company
(or its affiliates) where the Company (or its affiliates) has not given instruction that the service be provided by the director
and the Company (or its affiliates) is not the party responsible for payment for the professional services. Professional services
can be characterized as advisory in nature, generally involve access to sensitive company information or to strategic decision-making,
and typically have a commission- or fee-based payment structure. Professional services may include services such as investment
services, insurance services, accounting/auditing services, consulting services, marketing services, legal services, property management
services, realtor services, lobbying services, executive search services, and IT consulting services. This prohibition does not
apply to services initiated prior to January 1, 2011.
First Financial Bank has had, and expects to have in the future,
banking relationships in the ordinary course of business with directors, officers, principal shareholders, and their affiliates
on the same terms, including interest rates and collateral on loans, as those prevailing at the same time for comparable transactions
with others. We do not consider normal, arms-length banking relationships entered into in the ordinary course of business, and
consistent with applicable federal banking regulations, to interfere with a director’s independence. Any loan or extension
of credit to a director or officer, or their affiliate, will only be made in compliance with Federal Reserve Board Regulation O.
To comply with Regulation O, any loan or extension of credit to an officer or director, or their affiliate, must (1) be made in
the ordinary course of business, (2) be made on substantially the same terms, including interest and nature of collateral, as those
prevailing at the time for comparable transactions with other persons, and (3) not involve more than the normal risk of collectability
or present other unfavorable features. In addition, the Company or its subsidiaries from time to time pays immaterial amounts for
such items as membership, event sponsorship, and contributions made to non-profit entities with which our directors have relationships
and which payments are in furtherance of our Company’s business interests.
During 2015, no related person transactions involving our directors
or executive officers (or members of their immediate family) requiring disclosure in this proxy statement were identified.
In making the independence determinations for each of the directors, the Board took into consideration the following transactions
and relationships involving members of the Board: the payment of rent to an entity in which a director has an ownership interest
(with the lease agreements being entered into prior to 2015 following arms-length negotiations) and the payment of rent to an
entity in which a director has an ownership interest for placement of an “ATM” machine. The Board concluded that these
transactions were routine transactions and considered them to be immaterial and did not impact the independence of the relevant
director.
Policy Against Hedging Activities
Our Insider Trading Policy prohibits our
directors, officers and associates from engaging in any hedging transactions with respect to First Financial shares, including
prepaid variable forward contracts, equity swaps, collars and exchange funds, and trading in any derivative security relating to
First Financial shares.
Communicating with the Board of Directors
Shareholders may send communications to the Company’s Board or to individual
directors by writing to:
Attn: Board of Directors (or name of individual director)
First Financial Bancorp
255 E. Fifth Street, Suite 2900
Cincinnati, OH 45202
Letters mailed to this address will be received by the director who serves
as Chair of the Audit Committee or the director who serves as Chair of the CGNC, as alternate. A letter addressed to an individual
director will be forwarded unopened to that director by the Chair of the Audit Committee.
Shareholders may also contact the Company’s Corporate Secretary, Shannon
M. Kuhl, at First Financial Bancorp, 255 E. Fifth Street, Suite 2900, Cincinnati, OH 45202.
Information regarding this process is also available within
the Investor Relations section of our website at
www.bankatfirst.com/investor
under the “Corporate Governance”
link under the “Corporate Information” tab.
Compensation Committee Report
The Compensation Committee has reviewed and discussed with management the
CD&A below. Based on this review and these discussions, the Compensation Committee has recommended to the Board that the CD&A
be included in this proxy statement and incorporated by reference in our Annual Report on Form 10-K for the year ended December
31, 2015 for filing with the SEC.
Members of the Compensation Committee
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Susan L. Knust, Chair
J. Wickliffe Ach
David S. Barker
Peter E. Geier
William J. Kramer
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Compensation Discussion and Analysis (CD&A)
This CD&A describes and explains the material elements of 2015 compensation
for the executive officers named in the Summary Compensation Table (the “NEOs”). We also provide an overview of our
executive compensation philosophy and our executive compensation program. In addition we explain how and why the Compensation Committee
of our Board arrived at specific compensation policies and decisions involving the NEOs who are listed below:
Claude E. Davis, Chief Executive Officer
John M. Gavigan, Chief Financial Officer and Principal Accounting
Officer
Richard S. Dennen, President, Oak Street Funding
C. Douglas Lefferson, President, Community Banking
Anthony M. Stollings, President, Chief Operating Officer
Kevin T. Langford, President, Community Banking (through October
23, 2015)
You should read this section of the proxy statement when determining your
vote on the compensation of our NEOs (see Proposal 4 – Non-Binding, Advisory Vote to Approve Executive Officer Compensation).
This CD&A contains information that is important to your voting decision.
Introduction
Despite challenges the banking industry has faced over the past
several years, through a combination of robust organic loan and deposit growth, strong credit results, solid non-interest income
growth, and diligent expense management, First Financial extended its profitability to 101 consecutive quarters during 2015.
2015 Business Highlights
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Acquired Oak Street Funding, LLC, a nationwide specialty lender to insurance brokers
and agencies.
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Celebrated the first anniversary of our expansion into the vibrant Columbus, Ohio
market.
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Executed a $120 million Tier 2 qualifying subordinated debt offering.
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Introduced our new website, enhancing product and service delivery to our clients
through a more modern online experience.
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Total loans increased by $612 million, or 12.8% during the year.
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Total deposits increased by $524 million, or 9.3% during the year.
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Return on average assets was 1.00%, or 1.04% when adjusted for non-recurring items,
1
,
which compares favorably to the KBW Regional Bank Index component company median of 1.00%.
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Return on average equity of 9.33%, or 9.73% when adjusted for the non-recurring
items,
1
which also compares favorably to the peer median of 8.21%.
2
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Maintained strong capital position. Tangible Common Equity ratio of 7.53% and Common
Equity Tier 1 Capital ratio of 10.28% compared to peer medians of 8.64% and 10.68%, respectively.
2
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Dividend yield of 3.54% as of December 31, 2015, which compares favorably to the
peer median of 2.47%.
2
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2015 Executive Compensation Highlights
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Consistent with Company-wide merit practices, on March 10, 2015, the Compensation
Committee increased base salaries by approximately 3% for all NEOs except for Mr. Gavigan and Mr. Stollings who received base salary
increases of approximately 35% and 9% respectively as a result of their promotions to Chief Financial Officer and Chief Operating
Officer, respectively, in late 2014. Mr. Dennen joined the Company on August 14, 2015 as a result of the acquisition of Oak Street
Funding LLC by First Financial Bank. At the time of the acquisition, Mr. Dennen’s base pay was increased from $365,790 to
$380,000 (4%).
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There were no target incentive changes for NEOs except for Mr. Gavigan whose short-term
incentive target increased from 20% to 30% and long-term incentive target increased from 25% to 30% as a result of the promotion
mentioned above.
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Consistent with past practice, annual awards under the Company’s Long-Term
Incentive Plan, or LTIP, were in the form of restricted stock grants. 2015 restricted stock grants to the NEOs included both time-based
and performance-based vesting features. The time-based awards vest over a three year period. The performance-based awards vest
after three years only upon the attainment of certain pre-determined performance measures concerning total shareholder return and
return on assets relative to peers for all NEOs except for Mr. Dennen.
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Mr.
Dennen was awarded restricted stock with both time-based and performance-based vesting features at the closing of the acquisition
of Oak Street Funding LLC by First Financial on August 14, 2015. The time-based awards vest over three years while the performance-based
awards vest over three years only upon the
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1
Full
year results included approximately $5.0 million of pre-tax, non-operating expenses which were primarily related to severance benefits
accrued during the year, expenses related to the Oak Street acquisition and adjustments to reserves for litigation related items.
2
Based upon KBW Regional Bank Index peer reporting through February
19, 2016.
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attainment of certain pre-determined
performance measures concerning Oak Street Funding LLC net income. See “2015 Long-Term Incentive Plan Design and Awards.”
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The Company’s payout for 2015 under its Short-Term Incentive Plan, or STIP,
was 100% of target for all NEOs except for Mr. Dennen who received a payout of 100% of target under the Oak Street Funding short-term
incentive arrangement in place prior to the acquisition. See “2015 STIP Design and Payout – 2015 STIP Performance Results.”
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The committee revised the share ownership and retention guidelines in 2015 requiring
NEOs (other than the CEO) and other executives to hold the lesser of two times base salary or 75,000 shares.
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Additionally, the Compensation Committee approved a change in the retention requirement
for NEOs and other executives such that 100% of shares from exercises or vestings must be retained until ownership guidelines are
met.
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Committee Actions for 2016
The Company’s executive compensation program is reviewed
annually to ensure the program continues to support the Company’s compensation philosophy and strategic business objectives.
During the most recent review, the Compensation Committee identified opportunities to more closely align the program with the Company’s
overall compensation philosophy and objectives. The following changes to the program were made for 2016:
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Consistent with Company-wide merit
practices, on March 8, 2016, the Compensation Committee approved increases to NEO base salaries that ranged from 2.4%
to 9%.
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There were no changes from 2015 to 2016 to the short-
or long-term incentive target percentages for the NEOs except for Mr. Dennen whose short-term incentive target was reduced from
the pre-acquisition target of 70% to 40% to reflect the addition of a long-term incentive plan target of 50% to his post-acquisition
target compensation.
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A portion of long-term incentive awards to the NEOs and to certain other executives
will continue to include a performance-based vesting feature.
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Similar to 2015, the Company’s 2016 STIP will
be based on two equally weighted measures: return on assets versus the peer group and actual net income compared to the Company’s
2016 budget. 100% of each NEO’s short-term incentive will be based on performance under this plan except for Mr. Dennen who
will have 25% of his short-term incentive based on the Company’s STIP and 75% based on net income performance of Oak Street
Funding.
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Due to business needs requiring Mr. Davis to spend
a significant amount of time in Indianapolis as well as in the Company’s Cincinnati headquarters, a taxable
housing and mileage allowance of $25,000 was approved to compensate Mr. Davis as reimbursement for this travel as related
travel expenses
will no longer be considered deductible business travel expenses by the Company.
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Compensation Philosophy and Objectives
Our Compensation Committee has identified the following guiding
principles to best support the overall objectives of the executive compensation program and our business strategy. Our executive
compensation programs should:
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Drive alignment between Company strategy, executive pay, and shareholder value
creation
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Create a clear line of sight between individual responsibilities and Company objectives
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Provide transparency around corporate goals and objectives, measures, and performance
outcomes
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Incorporate simplicity, flexibility and discretion to reflect individual circumstances
and changing business conditions/priorities
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Align with market (peer) median for target performance and incorporate upside potential
for top quartile performance
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Differentiate pay based on performance, contribution, and value added
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Attract, motivate, and retain key talent to deliver consistent long-term performance
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Promote a competitive, balanced market-based total compensation package
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Support internal equity through eligibility and target opportunities
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Incorporate proper governance practices to prevent/mitigate inappropriate risk-taking
by:
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Encompassing a long-term focus with the ability to claw back compensation
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Limiting upside potential via maximum payout ceilings
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Including threshold requirement(s) before payout is made
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Cross-functional plan design reviews and committee approval of final design and
payouts
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Elements and Mix of Compensation
To achieve the above-stated principles and objectives, the 2015
executive compensation program, as in prior years, consisted primarily of the following elements:
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Base Salary.
To competitively compensate for day-to-day contributions, skills,
experience, and expertise.
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Annual short-term incentive compensation.
To motivate and share in
the rewards of the current year’s results.
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Long-term equity incentive compensation.
To motivate and share in
the rewards of sustained long-term results and value creation consisting of both time- and performance-based restricted stock.
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Non-performance based benefits.
To provide for the security and protection
of executives and their families, including:
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Employment agreements and change in control and severance
agreements;
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Retirement and other benefits; and
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Certain perquisites and other personal benefits.
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The Compensation Committee takes a holistic approach to establishing
the total compensation package for its executives and each element of compensation is interdependent on the other elements. Applying
the Company’s core values and drawing upon the principles and philosophy discussed above, the Compensation Committee utilizes
these elements of compensation as building blocks to construct a complete compensation package for each executive that appropriately
satisfies the core design criteria of pay for performance, alignment with shareholder interests, competitiveness, and compliance
with all legal and regulatory guidelines.
The mix and the relative weighting of each compensation element
reflect the competitive market and the Company’s compensation philosophy. The mix of pay may be adjusted from time to time
to best support our immediate or longer-term objectives, changes in executive responsibility, as well as internal consistency.
Target compensation for each NEO is a mix of cash and long-term
incentives. A substantial portion of this mix is at risk and varies based on performance. The emphasis on compensation elements
related to performance is specifically intended to affect the actual level of compensation realized versus target. If the Company
performs well (based on internal objectives, as well as peer group comparison) and longer-term shareholder value increases, award
levels are intended to be strong. If the Company underperforms, award levels and values will be negatively impacted.
Below is a chart that reflects the mix of each element of target
compensation as well as compensation at risk as percentages of target total compensation as of December 31, 2015. Compensation
at risk is comprised of short and long-term incentives. Approximately 63% of our CEO’s and 46% of our other NEOs’ target
compensation in 2015 was subject to performance and/or vesting requirements.
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Base
Salary
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Annual
Short-Term
Incentive
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Long-Term
Incentive
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%
of Total Compensation
at
Risk
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CEO
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37%
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22%
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41%
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63%
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Other
NEOs (Average)
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54%
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20%
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26%
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46%
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The 2015 Compensation Decision-Making Process
Three parties play an important role in establishing compensation
levels for the Company’s executive officers: (i) the Compensation Committee, (ii) senior management, and (iii) outside advisors.
The sections that follow describe the role that each of these parties plays in the compensation-setting process, as well as other
important factors that impact compensation decisions.
Role of the Compensation Committee.
The Compensation
Committee has the authority to:
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Review and approve the composition of the peer group
companies used to assess the Company’s pay practices, target pay opportunities, and establish performance goals and objectives;
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Approve the executive compensation plan design and
target structure, including setting targets for incentives using management’s internal business plan, industry and market
conditions and other factors;
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Review the performance and compensation of the CEO
and other NEOs, as well as other senior officers;
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Determine the amount of, and approve, each element
of total compensation paid to the NEOs, and determine the general elements of total compensation for other senior officers;
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Review all components of compensation (both target
and actuals) for the CEO and the other NEOs, including base salary, bonus, and long-term incentives; and
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Define potential payments to executive officers under
various termination events, including retirement, termination for cause and not for cause, and upon a change in control.
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In determining the amount of NEO compensation each year, the Compensation
Committee reviews competitive market data from the banking industry as a whole and as well as peer group data. It makes specific
compensation decisions and awards based on such information, along with Company performance, individual performance and other circumstances
as appropriate.
At meetings in early 2015, the Compensation Committee reviewed and
considered corporate and individual performance, changes in NEO responsibilities, data regarding peer practices, and other factors.
In addition, the committee reviewed tally sheets prepared by management. The tally sheets provide a comprehensive view of the Company’s
payout to NEOs, including all components of compensation, benefits and perquisites. (See also “Tally Sheets”).
At the annual meeting of shareholders in 2015, the Company’s
2014 executive compensation program received overwhelming shareholder approval with 95% of shareholder votes cast in favor of the
Company’s “say on pay” resolution. The committee carefully considers the substantial support that shareholders
have consistently conveyed for our executive compensation program. The committee has and will continue to consider the Company’s
“say-on-pay” vote results when making future compensation decisions.
Role of Executive Management in Compensation Decisions for NEOs
Throughout the year, the Compensation Committee meets with the CEO
and other executive officers to solicit and obtain recommendations with respect to the Company’s compensation programs and
practices. The CEO makes recommendations to the Compensation Committee as to the appropriate base salaries, annual cash incentive
opportunities, and stock awards for the NEOs other than himself. In making a recommendation for any executive officer who does
not report directly to him, the CEO considers compensation recommendations made by the executive officer’s manager.
The Company’s Talent Management Department and other members
of management assist the Compensation Committee in the administration of the Company’s executive compensation program and
the Company’s overall benefits program. Members of the Talent Management Department periodically make available to the Compensation
Committee information regarding the value of prior long-term incentive grants and participation in the Company’s plans. This
information includes: (i) accumulated gains, both realized and unrealized, under restricted stock, stock options, and other equity
grants; (ii) the cost of providing each perquisite; (iii) projected payments under the Company’s retirement plans; and (iv)
aggregate amounts accumulated under nonqualified deferred compensation plans. Management helps prepare the information, including
the tally sheets, used by the Compensation Committee in making its decisions.
Management also provides the Compensation Committee with information
regarding potential payments to the Company’s executive officers under various termination events, including both the dollar
value of benefits that are enhanced as a result of the termination event and the total accumulated benefit, which is sometimes
called the “walk-away” amount. Similar information is provided regarding the “Other Potential Post-Employment
Payments” defined below.
In 2015, the CEO and Chief Talent Management Officer attended Compensation
Committee meetings, but were not present at executive sessions when matters related to them were being decided. In addition, the
Company’s Total Rewards Director attends committee meetings and participates in executive sessions of the committee.
In approving compensation for 2015, the Compensation Committee considered
the CEO’s recommendations for the NEOs other than himself. The Compensation Committee, in consultation with Willis Towers
Watson, made its own determinations regarding the compensation for the CEO, which were then ratified and approved by the Board.
Role of the Compensation Consultant
To assist in its efforts to meet the objectives outlined above in
2015, the Compensation Committee retained Willis Towers Watson to provide general executive compensation consulting services to
the committee and to support management’s need for advice and counsel. Pursuant to the Compensation Committee’s charter,
the Compensation Committee has the power to retain or terminate such consultant and engage other advisors.
The independent compensation consultant typically collaborates with
management to obtain data, clarify information, and review preliminary recommendations prior to the time they are shared with the
Compensation Committee. The consultant provides data regarding market practices and works with management to develop recommendations
for changes to plan designs and policies consistent with the philosophies and objectives discussed earlier.
Fees billed by Willis Towers Watson in 2015 for advice and services
provided to the Compensation Committee were $45,710.
During 2015, Willis Towers Watson also provided services to our
Company relating to non-executive compensation, including ad hoc compensation projects, retirement and pension plan administration,
health benefits and actuarial services and related disclosure requirements. Services provided to management and not the Compensation
Committee were approved by management and not the Compensation Committee. Fees billed by Willis Towers Watson in 2015 for additional
services provided were $260,284.
Upon consideration of factors pursuant to NASDAQ compensation committee
independence rules, the committee has concluded that no conflict of interest exists that would prevent the outside compensation
advisor from independently representing the committee. The committee’s conclusion was based on the following factors:
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Executive compensation consulting services provided
to the Compensation Committee and other consulting services provided to management were performed by separate and distinct divisions
of Willis Towers Watson;
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The Compensation Committee’s decision to engage
Willis Towers Watson was independent of management’s engagement of Willis Towers Watson;
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Total fees paid in 2015 to Willis Towers Watson were
not material in the context of total revenues disclosed in Willis Towers Watson’s most recent annual report;
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Willis Towers Watson has adopted and disclosed to
the committee its executive compensation consulting protocols for client engagements and the committee believes these protocols
provide reasonable indications that conflicts of interest will not arise;
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The advisor reports directly to the Compensation Committee
Chair;
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The Compensation Committee members and executive officers
of the Company have no business or personal relationship with the advisor; and
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The Compensation Committee, in its discretion, determines
whether to retain or terminate the advisor.
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Market Competitiveness
To ensure market competitiveness, Willis Towers Watson presents
market pricing information from published surveys of financial services companies of approximately the same asset size. Information
from surveys representative of the broader general industry population are utilized to provide appropriate compensation data for
positions that are not specific to the financial services/banking industry.
Willis Towers Watson also provides a customized proxy analysis of
similarly sized publicly-traded financial services/banking organizations designated as the Company’s peer group. Companies
have historically been included in the Company’s peer group based on their relevance in terms of asset size (one-half to
two times the asset size of the Company), business model, products, services and geographic location as compared to that of the
Company, as well as those the committee deems to be high performing financial institutions. With data gathered from Willis Towers
Watson and management, the committee conducts its annual peer group review to assess the continued relevance of the individual
peers. From 2014 to 2015, no peers were removed from the peer group while United Bancshares Inc. was added to the group for 2015.
The 2015 peer group consisted of the following 17 financial services
companies:
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1st
Source Corp.
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First
Merchants Corp.
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Republic
Bancorp, Inc.
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Chemical
Financial Corp.
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First
Midwest Bancorp, Inc.
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Texas
Capital Bancshares, Inc.
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Columbia
Banking System Inc.
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MB
Financial, Inc.
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Trustmark
Corporation
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Community
Banking System Inc.
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National
Penn Bancshares, Inc.
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United
Bancshares Inc.
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First
Busey Corp.
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Old
National Bancorp
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WesBanco
Inc.
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First
Commonwealth Financial
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Park
National Corporation
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The market review assists the committee in making executive compensation
decisions that are consistent with the stated philosophy and objectives for executive compensation, especially those of attracting,
retaining, and motivating our executive officers and paying for performance. Willis Towers Watson also reviews competitive pay
data for non-employee directors of companies in the peer group and advises the Compensation Committee on the market competitiveness
paid to the Company’s non-employee directors.
Company Performance
Willis Towers Watson provides an annual pay for performance analysis
using most recent proxy filings that compares the Company’s pay and performance versus the peer group. This analysis demonstrates
pay and performance in various perspectives to facilitate a broad assessment of how pay relates to performance. The committee reviews
and discusses this information typically in the latter half of the year and it serves as one of the other factors described herein
that the committee considers when making pay decisions for the following year.
In determining payouts under the STIP, Company performance is also
assessed across specific performance measures and a broader peer group (Component companies of the KBW Regional Bank Index) as
described under “2015 Short-term Incentive Plan Design and Payout.” We believe our approach of reviewing pay and performance
from multiple perspectives enables well-informed pay decisions both in terms of setting appropriate targets and determining the
overall payout levels.
Evaluation for Excessive Risk
The following outlines the method by which the Company reviews and
evaluates compensation policies and procedures to prevent unnecessary and excessive risks that could threaten the value of the
Company:
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Internal talent management, finance, legal, and risk management personnel conduct
a review of the components of the Company’s incentive plans including any proposed design changes;
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Incentive plans undergo a risk assessment that considers specific risk factors
and plan alignment with the
Guidance on Sound Incentive Compensation Policies
adopted by banking regulators in 2010;
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The Compensation Committee discusses annually the relationship between risk management
policies and practices and compensation policies and procedures; and
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To further mitigate risk, the committee has responsibility for the evaluation and
ratification of the Company’s incentive compensation plans.
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In light of the above reviews, the Company and the Compensation
Committee have not identified any risks arising from the Company’s compensation policies and practices for the Company’s
NEOs and our associates generally that are reasonably likely to have a material adverse effect on the Company. It is both the committee’s
and management’s intent to continue to evolve our processes going forward by monitoring regulations and best practices for
sound incentive compensation.
Tally Sheets
When making executive compensation decisions, the Compensation Committee
reviews tally sheets showing, for each executive officer: (i) targeted value of base pay, annual incentive bonus and equity grants
for the current year and each of the past several years; (ii) actual realized value for each of the past several years (the sum
of cash received, gains realized from equity awards, and the value of perquisites and other benefits); (iii) the amount of unrealized
value from prior equity grants and accumulated deferred compensation; and (iv) the amount the executive could realize upon a change
in control or any severance arrangement. Although tally sheets do not drive individual executive compensation decisions, the Compensation
Committee uses tally sheets for several purposes. First, it uses tally sheets as a reference so that committee members understand
the total compensation being delivered to executives each year and over a multi-year period. Second, tally sheets enable the Compensation
Committee to validate its strategy of paying a substantial portion of executive compensation in the form of equity by showing amounts
realized and unrealized by executives from prior equity grants. In some cases, the Compensation Committee’s review of tally
sheets may lead to changes in the NEO’s benefits and perquisites.
Use of Discretion and Other Factors in Pay Decisions
The exercise of discretion by the Compensation Committee in determining
the various elements of compensation is an important feature of the Company’s compensation philosophy. Because the Company
has always taken a long-term view, we use judgment and discretion rather than relying solely on formulaic results and we do not
reward executives for taking outsized risks that produce short-term results. Therefore, the Company believes it is important that
the Compensation Committee have sufficient flexibility to respond to: (i) the Company’s unique circumstances; (ii) prevailing
market trends; (iii) the rapidly evolving financial and regulatory environment in which the Company operates; (iv) the Company’s
use of cross-functioning of executive assignments and cross-training as a matter of executive development and succession planning;
and (v) risk management objectives. The Company also believes it is in the best interest of the Company and its shareholders that
the Compensation Committee have sufficient discretion to recognize and reward extraordinary individual performance in non-financial
areas that may or may not directly affect the Company’s achievement of specific financial metrics for a particular year,
but are nevertheless important to long-range growth and the enhancement of shareholder value.
Summary Compensation Table
The table below sets forth the annual and long-term compensation
of our (i) CEO, (ii) our Chief Financial Officer, (iii) and the three most highly compensated executive officers, other than the
CEO and the Chief Financial Officer, who were serving as executive officers at the end of 2015, and (iv) Kevin Langford, who served
as an executive officer through October 23, 2015 and would have been included in the group described in clause (iii) if he had
been an executive officer as of the end of 2015.
|
Year
|
Salary
1
|
Bonus
2
|
Stock
Awards
3
|
Non-Equity
Incentive Plan Compensation
4
|
Change
in
Pension Value
and
Non-qualified
Deferred
Compensation
Earnings
5,6
|
All
Other Compensation
7
|
Total
|
|
Claude
E. Davis, Chief Executive Officer
|
|
|
|
|
2015
|
$756,370
|
$0
|
$805,532
|
$453,822
|
$78,509
|
$87,550
|
$2,181,783
|
|
2014
|
$706,967
|
$0
|
$889,859
|
$424,180
|
$113,550
|
$105,815
|
$2,240,371
|
|
2013
|
$686,154
|
$0
|
$759,024
|
$0
|
$121,840
|
$151,124
|
$1,718,142
|
|
John
M. Gavigan,
8
Senior Vice Pres., Chief Financial Officer
|
|
|
|
2015
|
$235,906
|
$0
|
$67,524
|
$70,772
|
$17,264
|
$5,109
|
$396,575
|
|
2014
|
$165,169
|
$0
|
$41,614
|
$32,670
|
$9,884
|
$4,436
|
$253,773
|
|
Richard
S. Dennen,
9
President, OSF
|
|
|
|
|
|
2015
|
$146,154
|
$0
|
$1,444,500
|
$99,750
|
$0
|
$67,222
|
$1,757,626
|
|
C.
Douglas Lefferson, Community Banking President
|
|
|
|
|
2015
|
$383,347
|
$0
|
$259,709
|
$153,339
|
$16,354
|
$30,048
|
$842,797
|
|
2014
|
$358,889
|
$0
|
$252,722
|
$141,976
|
$183,714
|
$32,288
|
$969,589
|
|
2013
|
$348,077
|
$0
|
$245,000
|
$70,451
|
$0
|
$40,611
|
$704,139
|
|
Anthony
M. Stollings, President, Chief Operating Officer
|
|
|
|
|
2015
|
$368,075
|
$50
|
$180,018
|
$147,230
|
$31,474
|
$21,383
|
$748,230
|
|
2014
|
$328,071
|
$0
|
$165,026
|
$129,785
|
$24,272
|
$18,975
|
$666,129
|
|
2013
|
$292,625
|
$0
|
$142,514
|
$59,227
|
$31,544
|
$24,780
|
$550,690
|
|
Kevin
T. Langford,
10
Community Banking President
|
|
|
|
|
2015
|
$351,152
|
$188,843
|
$170,022
|
$0
|
$46,287
|
$18,684
|
$774,988
|
|
2014
|
$328,071
|
$0
|
$165,026
|
$129,785
|
$23,924
|
$286,966
|
$933,772
|
|
2013
|
$293,510
|
$0
|
$142,514
|
$59,406
|
$26,296
|
$25,381
|
$547,107
|
|
|
|
|
|
|
|
|
|
|
1
The dollar value of base salary earned during the fiscal year.
2
The dollar value of bonus (cash and non-cash) earned during the fiscal year. For 2015, represents the post-employment short-term
bonus payment paid to Mr. Langford as a result of his termination on December 31, 2015. Mr. Stollings bonus represents a referral
incentive.
3
Includes long-term restricted stock incentive amounts both time- and performance-based awarded during the year shown. In
2014 for Mr. Davis only, also includes portion of short-term incentive payout above 100% that was awarded in immediately vested
restricted stock with a three year holding period. Our accounting for employee stock-based incentives granted during the years
ended December 31, 2015, 2014 and 2013, in accordance with Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) topic 718, Stock Compensation is described in Note 17—Stock Options and Awards
to the Company’s consolidated financial statements in the 2015 Annual Report at page 90 (generally multiplying the number
of restricted shares granted by the NASDAQ closing price per share on the grant date). These amounts do not reflect the actual
value that may be realized by the NEOs. Depending on our stock performance, the actual value may be more or less than the amount
shown or zero. For actual value received in 2015 for awards granted in previous years, see the table “Options Exercised
and Stock Vested” in this proxy. See also “Outstanding Equity Awards at Fiscal Year End.”
4
The dollar value of all earnings for services
performed during the fiscal year pursuant to awards under non-equity incentive plans (Short-Term Incentive Plan). In 2014 for Mr.
Davis only, the amount above 100% was paid in immediately vested restricted stock with a three year holding period and is reported
in the Stock Awards column.
5
The amounts in this column represent the annual
net increase in the present value of accumulated benefits under the SERP and the Pension Plan for the years ended December 31,
2015, 2014 and 2013 (the measurement date for reporting purposes of these plans in the Company’s Annual Report on Form 10-K)
with respect to our NEOs. No NEO participated in a plan with above-market earnings. Effective January 1, 2014, the annual Pension
Benefits allocation for all associates, including NEOs and other executives, was reduced from 9% to 5% of eligible earnings. The
present values of accumulated benefits under the SERP and Pension Plan were determined using assumptions consistent with those
used for reporting purposes of these plans in the Company’s Annual Report on Form 10-K for each year, with no reduction for
mortality risk before age 65. Actual amount for Mr. Lefferson for 2013 was a negative $86,996 and is shown as $0 for purposes of
the Summary Compensation Table. See also the “Pension Benefits Table” and related narrative for a detailed explanation
of the terms of the Pension Plan and SERP.
6
For Mr. Davis only, the amounts provided include
2015 nonqualified deferred compensation earnings of $2,395 for the Nonqualified Deferred Compensation. 2015 earnings under the
Supplemental Savings Plan were negative $1,391.57 and are included as $0 for purposes of the Summary Compensation Table. In 2014
earnings were $8,247 and $14,996 for the Nonqualified Deferred Compensation and Supplemental Savings Plan, and in 2013 earnings
were $34,441 and $35,112 for the Nonqualified Deferred Compensation and Supplemental Savings Plan. Please refer to the Nonqualified
Deferred Compensation Earnings table and related narrative for a detailed explanation of these items. May reflect unvested benefits,
which the NEO may not be entitled to receive if he terminates employment before the required vesting date.
7
All other compensation for the year that could
not properly be reported in any other column. The specific elements are discussed below. The “Other” category includes
(where applicable): taxable benefits for health savings accounts, long-term disability gross-up, and company paid benefits.
8
Mr. Gavigan became Chief Financial Officer effective
December 1, 2014. He received a base salary increase on March 13, 2015 that was retroactive to the date of his appointment as Chief
Financial Officer. Of the amount shown for him for 2015, $5,183.83 was retroactive pay for 2014. Amounts reported in this table
for 2014 also include compensation paid to Mr. Gavigan prior to being named Chief Financial Officer.
9
Mr. Dennen joined First Financial as a result
of the acquisition of Oak Street Funding by First Financial Bank. Amounts reported in this table for 2015 include compensation
paid to Mr. Dennen since the close of the acquisition on August 14, 2015.
10
Mr. Langford served as an executive officer of
the Company through October 23, 2015, although he remained an associate of the Company through December 31, 2015. Compensation
reported in this table includes compensation paid to Mr. Langford in all capacities in 2015.
|
|
Imputed
Income Split-
Dollar Insurance
|
Accrued
Dividends
Paid on Vested
Restricted Stock
|
Other
1
|
Total
2
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
Davis
3
|
$7,562
|
$64,473
|
$15,515
|
$87,550
|
|
Gavigan
|
$408
|
$3,175
|
$1,526
|
$5,109
|
|
Dennen
4
|
$270
|
$0
|
$66,952
|
$67,222
|
|
Lefferson
|
$2,442
|
$25,908
|
$1,698
|
$30,048
|
|
Stollings
|
$6,202
|
$13,573
|
$1,608
|
$21,383
|
|
Langford
|
$1,738
|
$15,871
|
$1,075
|
$18,684
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
Davis
|
$6,300
|
$87,490
|
$12,025
|
$105,815
|
|
Gavigan
|
$303
|
$3,133
|
$1,000
|
$4,436
|
|
Lefferson
|
$2,127
|
$28,486
|
$1,675
|
$32,288
|
|
Stollings
|
$4,774
|
$12,598
|
$1,603
|
$18,975
|
|
Langford
5
|
$1,349
|
$16,232
|
$269,385
|
$286,966
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
Davis
|
$4,941
|
$94,610
|
$41,374
|
$151,124
|
|
Stollings
|
$3,063
|
$9,859
|
$1,658
|
$24,780
|
|
Lefferson
|
$1,667
|
$27,068
|
$1,676
|
$40,611
|
|
Langford
|
$1,019
|
$12,589
|
$1,573
|
$25,381
|
1
For Mr. Davis includes $31,121 in 2013 for the 401(k) restoration plan or executive supplemental savings agreement. No additional
employer contributions have been provided under the Supplemental Savings Account (see “- Executive Supplemental Savings
Agreement”).
2
For 2013, the Total amounts include company paid
matches under the 401(k) Plan.
3
Amount includes $10,410 in organizational dues
and memberships, a $500 Company-provided health savings account contribution, $3,406 for a taxable housing allowance, $598 for
additional parking benefit and $601 for the executive long-term disability benefit (including a tax gross-up).
4
Amount in “Other” includes $66,952
paid to Mr. Dennen under the Oak Street Funding LLC Nonqualified Deferred Compensation Plan that was terminated on August 13, 2015
in connection with the acquisition of Oak Street Funding by First Financial Bank.
5
Amount in “Other”
includes
total payments related to relocation of $267,829. These payments include a tax gross-up in the amount of $104,651.
Executive Compensation
2015 Compensation Decisions for Named Executives
Annual Base Salary Decisions
.
Base salaries for our
NEOs reflect their role and value to the Company. Base salaries are reviewed annually and adjusted as appropriate to reflect each
NEO’s performance, contribution, and experience as well as relative position to the market and each other. Base salary levels
are a foundational component of compensation since several elements of compensation are linked to this core element (e.g., cash
and stock incentives). At lower executive levels, base salaries represent the largest portion of total compensation, but at senior
executive levels such fixed compensation is progressively replaced by compensation that is “at risk” and that varies
based on performance outcomes.
The Compensation Committee sets base salaries for NEOs by utilizing
published survey data that is position specific at or near the median of the estimated base salaries. In addition, the committee,
to the extent available, will supplement the survey data with proxy information on base salaries paid by the peer group to executive
officers with comparable positions. The committee will also allow for recognition of each executive’s role, contribution,
performance and experience. The Compensation Committee annually reviews base salaries and has increased them as necessary to address
competitive increases or to reflect increases in a particular NEO’s responsibilities. In March 2015, consistent with Company-wide
merit practices, base salary increases for the NEOs were approximately 3% for all NEOs except for Mr. Gavigan and Mr. Stollings
who received base salary increases of approximately 35% and 9% respectively as a result of their promotions to Chief Financial
Officer and Chief Operating Officer, respectively, in late 2014. Mr. Dennen joined the Company on August 14, 2015 as a result of
the acquisition of Oak Street Funding LLC by First Financial Bank. At the time of the acquisition, Mr. Dennen’s base pay
was increased from $365,790 to $380,000 (4%).
Target Compensation Structure Changes.
Target compensation
levels for our NEOs are set at the beginning of each fiscal year by the Compensation Committee taking into consideration such factors
as the board-approved compensation philosophy, program objectives, relevant market data, individual performance and the scope and
responsibility of each individual. In general, pay opportunities are targeted at market median levels, with actual compensation
realized being higher or lower as determined by overall performance of the Company.
On March 10, 2015, the Compensation Committee established 2015 target
compensation levels for its senior executives, including the NEOs. Short- and long-term incentive targets remained unchanged from
2014 levels except for Mr. Gavigan whose short-term incentive target increased from 20% to 30% and long-term incentive target increased
from 25% to 30% as a result of the promotion mentioned above.
Mr. Dennen’s 2015 short-term incentive target did not change
as a result of the merger and remained at 70% through the end of 2015. His short-term incentive target will be reduced to 40% in
2016 to align with the Company’s target compensation structure and eligibility for annual long-term incentives starting in
2016.
The Compensation Committee believes the 2015 target compensation
decisions provided reasonable target pay opportunities in relation to pay offered for comparable positions by financial services
companies included in our peer group.
2015 STIP Design and Payout
Overview.
Short-term incentives serve as a key mechanism
to vary pay levels according to Company-wide short-term performance, thereby linking executive financial rewards to value delivered
to our shareholders. Such incentives are earned and paid annually but only after established threshold corporate performance levels
are achieved. To underscore the importance of creating value for our shareholders, payouts under the Company’s STIP are based
entirely on corporate, rather than individual, performance. This approach also suggests that the collective individual performance
will result in improved business performance and favorably impact shareholder value.
Targets.
As mentioned above, target annual short-term incentive
opportunities are established by the Compensation Committee early in the year and are intended to approximate market median levels
for similarly- positioned roles. Target award opportunities are expressed as a percentage of actual base salary paid for the performance
year for all participants (minimum of 3%). Actual awards may range from 0% to a maximum of 200% of the target award opportunity
based on financial, risk management, and other considerations. The NEO target levels were as follows for the 2015 plan year:
|
|
2015
Target STIP
% of Base
|
2015
Target Payout
@ 100% Target
1, 2
|
|
Claude
E. Davis
|
60%
|
$
439,380
|
|
John
M. Gavigan
|
30%
|
$
67,500
|
|
Richard
S. Dennen
3
|
70%
|
$
99,750
|
|
C.
Douglas Lefferson
|
40%
|
$
148,400
|
|
Anthony
M. Stollings
|
40%
|
$
144,000
|
|
Kevin
T. Langford
4
|
40%
|
$
136,000
|
1
100% target payout
amounts are based on salary as of 12/31/2015.
2
Actual payout is
derived from applying the Performance Payout Percent to actual base wages earned in 2015.
3
Mr. Dennen’s
target and payout are in accordance with the Oak Street Funding plan that was in place for 2015. Amounts shown reflect the pro-rated
target and payout under that plan after the close of the Oak Street Funding acquisition on August 14, 2015. Amounts earned under
this plan prior to the close are not included in this chart.
4
Mr. Langford was
not eligible for payout under the STIP due to his termination on 12/31/2015. Per his Severance and Change in Control Agreement,
he received a bonus payout of $188,843 in place of a payout under the STIP.
Performance Measures.
Performance measures and their relative
weightings are selected and approved by the Compensation Committee based on their relevance as key, balanced measures that drive
shareholder value creation and align with the Company’s internal, board-approved business plan. Performance is measured over
a 12-month period for all participants (including the NEOs). For 2015, the Compensation Committee set the following parameters:
Financial and Operating Performance Measures
(equally weighted):
|
|
·
|
Return on assets (ROA) relative to peers:
|
The Company’s ROA performance for the year is compared
against peers in the KBW Regional Bank Index. This index is made up of approximately 49 regional banks (excluding the Company,
which is a component company of the index) located throughout the country that are generally within an asset and market capitalization
range comparable to the Company. This peer group is broader than the peer group established for compensation competitive assessment
purposes as previously described.
|
|
·
|
Net income goal attainment:
|
The Company’s actual net income achieved at the end of
the year is compared to the net income target established by the Company for the year.
Enterprise Risk Management Performance.
This category
applies only to senior management (including NEOs) participants. Performance and results against ERM objectives are assessed to
determine whether the payout factor as calculated for financial performance should be adjusted downward. A risk management performance
modifier is available to the Compensation Committee as a discretionary tool to make a downward adjustment to the payout in the
event of a material risk management failure or a material error that results in financial restatement.
The committee did
not identify any risk management failures or financial errors that would indicate a reduction in the payout level for the 2015
STIP was warranted.
Other Considerations.
The Compensation
Committee may use discretion to adjust the formulaically calculated payout for performance in non-financial areas that may or may
not directly affect the Company’s achievement of specific financial metrics for a particular year, but are nevertheless important
to the enhancement of shareholder value
.
Payout Calculation.
ROA performance must be equal to or greater than the 25th percentile
of the peer group to generate a payout for the ROA component. The actual ROA component payout is interpolated with a maximum payout
of 200% of the target award opportunity for performance at or above the top quartile (75th percentile) of the peer group.
A threshold portion of the net income goal (84%) must be achieved
in order to generate a payout under this component. The actual net income component payout is interpolated with a maximum payout
of 200% of the target award opportunity for exceeding the net income goal by 18%.
In total and for each participant, the STIP payout may not exceed
200% of the target award opportunity.
Earnings per diluted common share greater than $0 must be achieved
before any payout will be made under the STIP.
Payout Method.
Incentive payments under the STIP are paid
in cash to eligible participants with the exception of payouts above 100% of target to senior executive officers (including NEOs)
which are delivered in stock that is subject to a three-year holding period.
2015 STIP Performance Results
Payout for NEOs.
As mentioned earlier, the Compensation
Committee approved a payout under the Company’s STIP for 2015 of 100% of the target opportunity for all NEOs except for Mr.
Dennen whose approved payout of 100% of target was under the Oak Street Funding short-term incentive arrangement in place prior
to the acquisition.
Under the approved plan design, performance results for the STIP
exclude merger and acquisition (M&A) related expenses. However, the acquisition of Oak Street Funding, LLC (a commercial finance
firm focused on insurance industry financing) by the Company was distinct in the type of business being acquired and its impact
on the Company’s results when compared with prior activity involving entire bank mergers. Mr. Davis recommended that the
Committee consider this distinction and include expenses related to the Oak Street acquisition when assessing the Company’s
performance for 2015. Upon considering Mr. Davis’ recommendation and the Company’s performance against the pre-acquisition
net income goal, the Committee exercised its discretion to approve a reduction to the standard payout calculation down to 100%
of target.
The Company’s final 2015 results for each STIP component,
including acquisition-related expenses for Oak Street Funding, are set forth below.
|
2015
STIP Results
|
|
|
FFBC
Results
1
(%)
|
Peer
Median
(%)
|
FFBC
Percentile
Rank versus
Peers
|
Payout
Multiple
(%)
|
Approved
Payout
|
|
Return
on Assets versus Peers
2
|
1.02
|
.99
|
52.7
|
108.1
|
100%
of
Target
|
|
Net
Income Goal Attainment
|
99
|
N/A
|
N/A
|
88.1
|
1
Results
exclude merger and acquisition-related costs except for those related to the Oak Street Funding acquisition.
2
Peer
performance reflects data for the twelve months ending September 30, 2015. Company performance based on 12 month GAAP (adjusted)
actuals ending December 31, 2015.
Final Payout
.
The table below sets forth the STIP payouts to our NEOs for 2015.
|
|
2015
Target
STIP % of Base
|
2015
Target Payout
@ 100% Target
1
|
2015
STIP
Performance
Payout Percent
|
Actual
Results
Total Value of
Payout
2
|
|
Claude
E. Davis
|
60%
|
$
439,380
|
100.0%
|
$
453,822
|
|
John
M. Gavigan
|
30%
|
$
67,500
|
100.0%
|
$
70,772
|
|
Richard
S. Dennen
3
|
70%
|
$
99,750
|
100.0%
|
$
99,750
|
|
C.
Douglas Lefferson
|
40%
|
$
148,400
|
100.0%
|
$
153,339
|
|
Anthony
M. Stollings
|
40%
|
$
144,000
|
100.0%
|
$
147,230
|
|
Kevin
T. Langford
4
|
40%
|
$
136,000
|
0.0%
|
$
0
|
1
100% target payout amounts are based on salary
as of 12/31/2015.
2
Actual payout is derived from applying the Performance
Payout Percent to actual base wages earned in 2015.
3
Mr. Dennen’s target and payout are in
accordance with the Oak Street Funding plan that was in place for 2015. Amounts shown reflect the pro-rated target and payout under
that plan after the close of the Oak Street Funding acquisition on August 14, 2015. Amounts earned under this plan prior to the
close are not included in this chart.
4
Mr. Langford was not eligible for payout under
the STIP due to termination on 12/31/2015. Per his Severance and Change in Control Agreement, he received a bonus payout of $188,843
in place of a payout under the STIP.
2015 Long-Term Incentive Plan (LTIP) Design and Awards
The LTIP is designed for the Company’s top leaders who have
a direct and measurable impact on the long-term performance of the Company. In addition to base pay and short-term incentive opportunities,
the LTIP is a key component of the total compensation package to attract, motivate and retain top professionals in the organization
and serves to align management and shareholder interests through stock incentives linked to the long-term success of the Company
and increased shareholder value. The LTIP is the only plan available for new grants of stock-based long-term incentive compensation
to eligible associates, including the NEOs.
Senior managers and key sales executives of the Company are eligible
to participate in the LTIP. Actual participation is determined annually and is at the discretion and approval of management, the
CEO, and the Compensation Committee.
LTIP Targets.
In March 2015, the Committee reviewed target
compensation levels in the context of relative performance versus peers as well as survey and peer proxy data. The following chart
summarizes NEO LTIP target amounts for 2015:
|
|
Grant Date
|
Total Number of Shares Granted
|
Grant Date Fair Value
1
|
Shares of Time-based Restricted Stock Granted
2
|
Shares of Performance-based Restricted Stock Granted
2
|
|
Claude E. Davis
|
3/10/2015
|
47,468
|
$ 805,532
|
23,734
|
23,734
|
|
John M. Gavigan
|
3/10/2015
|
3,979
|
$ 67,524
|
2,984
|
995
|
|
Richard S. Dennen
3
|
8/14/2015
|
75,000
|
$ 1,444,500
|
37,500
|
37,500
|
|
C. Douglas Lefferson
|
3/10/2015
|
15,304
|
$ 259,709
|
11,478
|
3,826
|
|
Anthony M. Stollings
|
3/10/2015
|
10,608
|
$ 180,018
|
7,956
|
2,652
|
|
Kevin T. Langford
|
3/10/2015
|
10,019
|
$ 170,022
|
7,514
|
2,505
|
1
This is
the amount reported in the Grants of Plan-Based Awards table, below (based on a stock price of $16.97 per share as of March 10,
2015 and $19.26 per share as of August 14, 2015).
2
Mr. Davis’
long-term incentive award was divided 50% time-based restricted stock and 50% performance-based restricted stock. Messrs. Gavigan,
Stollings, Lefferson, and Langford long-term incentive awards were divided 75% time-based restricted stock and 25% performance-based
restricted stock.
3
Shares awarded
to Mr. Dennen on August 14, 2015 were in connection with the acquisition of Oak Street Funding by First Financial Bank. 75,000
shares were awarded, 50% as time-based restricted stock and 50% as performance-based restricted stock.
Restricted Stock Awards.
In connection with its annual review
of executive salaries, historically the Compensation Committee has granted stock awards in the beginning of each fiscal year. The
stock awards in recent years, have primarily been in the form of restricted stock awards with a three-year vesting period to satisfy
the retention goals for granting the awards and to align executive interests with those of the shareholders. Dividends paid on
restricted stock are held in escrow and not paid until the restrictions lapse and the stock is fully vested.
Performance-Based Restricted Stock Awards.
Performance-based
restricted stock vests after three years only upon the attainment of certain pre-determined performance measures (generally total
shareholder return and return on assets). The award is structured such that at the end of the three-year performance period:
|
|
·
|
No portion of the award may vest if performance against
peers in the KBW Regional Bank Index is below the 25
th
percentile.
|
|
|
·
|
Above median performance (60
th
percentile
versus peers) must be achieved in order for 100% of the award to vest.
|
|
|
·
|
The award has limited upside potential. The maximum
payout is capped at 120% of the initial award amount for performance at or above the 75
th
percentile.
|
Mr. Dennen’s
2015 award was issued in connection with the acquisition of Oak Street Funding
by
First Financial Bank. The award is structured such that at the end of each of the three performance years:
|
|
·
|
No portion of the award may vest if less than 85%
of the established annual net income target is attained;
|
|
|
·
|
The annual net income target must be achieved in
order for 100% of the award to vest; and
|
|
|
·
|
The award has limited upside potential as the maximum
payout is capped at 120% for performance at or above 125% of the annual net income target.
|
Mix of Awards.
The following chart summarizes the mix of
award types granted to the NEOs in 2015:
|
|
Portion
of LTIP
Awarded as
Performance Based Restricted Stock
|
Portion
of LTIP
Awarded as Time
Based Restricted
Stock
|
|
Claude
E. Davis
|
50%
|
50%
|
|
John
M. Gavigan
|
25%
|
75%
|
|
Richard
S. Dennen
|
50%
|
50%
|
|
C.
Douglas Lefferson
|
25%
|
75%
|
|
Anthony
M. Stollings
|
25%
|
75%
|
|
Kevin
T. Langford
|
25%
|
75%
|
Mr. Dennen’s
2015 awards were in connection with the acquisition of Oak Street Funding
by First
Financial Bank. Additional information about the long-term incentive grants can be found in the Summary Compensation Table and
following tables and footnotes, as well as the narrative following these tables.
Pay for Performance Compared to KBW Regional Bank Index
The following charts illustrate how the CEO’s compensation,
over the past four years (as shown in the Summary Compensation Table) compares to the Company’s performance in Return on
Assets, EPS Growth Rate and Efficiency Ratio over the same period as well as to KBW Regional Bank Index median performance.
|
|
·
|
The Company’s return on assets was consistent with or better than the median
performance of the peer group during 2012 through 2015, while CEO compensation declined in both 2013 and 2015.
|
|
|
·
|
CEO pay in 2014 reflected an increase from 2013 that was consistent with (i) a
significant increase in the Company’s earnings per share in 2014 and (ii) a 2014 total shareholder return that exceeded the
median return of companies in the KBW Regional Bank Index.
|
|
|
·
|
During the period from 2011 thru 2014, the Company’s efficiency ratio has
been generally consistent with or better than the median level of the companies in the KBW Regional Bank Index.
|
Total
Shareholder Return Performance.
The following graph compares the cumulative return to shareholders of the Company with that
of companies that comprise the NASDAQ Composite Index and KBW Regional Bank Index (which are peers under the Company’s STIP)
over a one, three, five, and seven year period. The Company’s long-term cumulative return over the last seven years has
outpaced the returns of KBW peers who experienced dramatic declines in shareholder return during the financial crisis. From a
three- and five-year perspective, peer returns reflect recovery from the substantial declines experienced during the financial
crisis. The Company did not experience such declines during the crisis, therefore, the Company’s return for this period
did not achieve levels similar to that of peers. On a one-year basis returns continue to converge to more normalized levels post
crisis.
Executive
Benefits and Perquisites
Benefits.
Executives can participate in group medical and life insurance programs, a 401(k) plan with a performance-based contribution
by the Company, and a pension plan which are generally available to all of our associates on a non-discriminatory basis. The benefits
serve to protect executives and their families against financial risks associated with illness, disability, and death and provide
financial security during retirement through a combination of personal savings and Company contributions, taking advantage of
tax-deferral opportunities where permitted. Our NEOs are also participants in a life insurance program that insures them for two
to three times their base salary.
Executive
Benefits.
NEOs are eligible for the Supplemental Executive Retirement Plan (“SERP”). The SERP is designed to make
up for pension allocations limited by the IRS for highly compensated individuals, so that our NEOs receive the same percentage
of compensation funded for retirement as all other associates. See “Executive Supplemental Retirement Plan.”
Mr. Davis
is a party to an Executive Supplemental Savings Agreement (SSA) which was designed to supplement his 401(k) Plan benefits above
the IRS statutory limits. Since January 1, 2014, no additional credits have been provided to Mr. Davis under the SSA. See “Executive
Supplemental Savings Agreement.” Additionally Mr. Davis is the only NEO that in the past has utilized the deferred compensation
plan. See “Nonqualified Deferred Compensation.”
Other
Guidelines and Procedures Affecting Executive Compensation
Section 162(m).
The Compensation Committee has reviewed the qualifying compensation regulations issued by the Internal Revenue Service
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) which provide that no
deduction is allowed for applicable employee remuneration paid by a publicly-held corporation to its CEO or any of its other
three highest paid officers, excluding the principal financial officer, to the extent that the remuneration paid to such
employees exceeds $1.0 million for the applicable taxable year, unless certain conditions are met. Compensation pursuant
to certain stock option plans and other performance-based compensation may be excluded from Section 162(m). While in
general the Compensation Committee attempts to design its compensatory arrangements to preserve the deductibility of
executive compensation, in certain situations, the Compensation Committee may approve compensation that will not meet these
requirements in order to ensure competitive levels of total compensation for its executive officers. The Company believes
that shareholders’ interests are best served if the Compensation Committee’s discretion and flexibility in
awarding compensation is not restricted, even though some compensation awards may result in non-deductible compensation
expenses. Neither First Financial nor any of its subsidiaries currently has a policy requiring that compensation paid to a
covered officer be deductible under Section 162(m). The Board, however, does consider the after-tax cost and value to
First Financial and its subsidiaries of all compensation.
It is
the Company’s position that stock options awarded under its stock option plans will not count toward the Section 162(m)
limit. Restricted stock grants that are not performance based are not, however, treated as exempt
from the calculation. Furthermore,
amounts previously deferred by executives under the Deferred Compensation Plan will not count toward the Section 162(m) limit.
The Company
believes that qualifying awards made under the STIP after 2012 will not count toward the Section 162(m) limit. Also, it is anticipated
that a portion of the performance-based long-term incentive awards made to the CEO and other NEOs as described in “2015
Long-Term Plan Design and Awards” will qualify as deductible under Section 162(m), thus reducing the amount of foregone
deductions in the future.
In 2015,
the Company paid an aggregate of approximately $523,400 in compensation to its NEOs in excess of the applicable individual deduction
limits under Section 162(m) of the Code (all of which was paid to the CEO), thereby foregoing approximately $183,200 in aggregate
tax deductions related to NEO compensation, calculated at a 35% corporate tax rate. Based on the Company’s 2015 income before
taxes of approximately $111 million, the amount of deduction lost represents approximately 0.17% of such income. While the Compensation
Committee believes the tax-deductibility of executive compensation is important, it was outweighed for 2015 executive compensation
purposes by the critical importance to the Company’s future success to provide competitive pay.
Sections 280G.
Since January 1, 2011, we have not provided for a 280G gross-up to our NEOs.
Stock-Based
Compensation—Procedures Regarding Timing and Pricing of Grants.
Our policy is to make grants of equity-based compensation
only at current market prices. We have not granted options since 2008; however at that time we set the exercise price of stock
options at the closing stock price on the date of grant, and did not grant “in-the-money” options or options with
exercise prices below market value on the date of grant. Absent special circumstances, it is our policy to make the majority of
equity grants at a regularly scheduled meeting of our Compensation Committee. However, we may make a small percentage of grants
at other times throughout the year, generally once per quarter, in connection with exceptional circumstances, such as the hiring
or promotion of an executive officer, special retention circumstances, or merger and acquisition activity.
We try
to make equity-based grants at times when they will not be influenced by scheduled releases of information. Grants of equity-based
awards primarily have grant dates corresponding to regularly scheduled meetings of the Compensation Committee in the early part
of the fiscal year. For 2015, we chose the March meeting of the Committee. This date allowed time for performance reviews following
the determination of corporate financial performance for the previous year. We seek to make grants when our financial results
have already become public, and when there is little potential for abuse of material non-public information in connection with
equity-based grants. We believe we minimize the influence of our disclosures of non-public information on the long-term incentives
by selecting meeting dates well in advance which fall several days or weeks after we report our financial results, and by setting
the initial vesting periods at least one year from the date of grant. We follow the same procedures regarding the timing of grants
to our NEOs as we do for all other participants.
Claw
backs.
For awards made prior to 2012, in the event: (a) the Company is required to prepare an accounting restatement
due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the
securities laws during the Performance Period; or (b) the committee determines that senior executive management has taken risks
that jeopardize the safety and soundness of the Company, the members of senior executive management (including the NEOs) shall
reimburse the Company for any award under the STIP.
For awards
made during and after 2012, any bonus, commission, or other compensation, including but not limited to payments made under the
STIP or stock grants may be subject to recovery, or “claw back”, by the Company for a period of three years (or such
longer period as may be required by law) if the payments were based on materially inaccurate financial statements or any other
materially inaccurate performance metric criteria, or as otherwise required by law.
Share
Ownership Requirements.
The Company maintains a share ownership requirement for its CEO equal to the lesser of five
times base pay or 250,000 shares. The CEO is currently in compliance with this requirement.
The share
ownership requirement for the other NEOs and other executives is the lesser of two times base salary or 75,000 shares. The timeframe
for executives to comply with this requirement is two years or within five years of being first appointed to a role with share
ownership guidelines. All NEO’s are currently in compliance with this requirement except for Messrs. Gavigan and Dennen
who, as of February 2016, have three and five years, respectively, to comply.
Share
Retention Guidelines.
Beginning
in 2015, NEOs and other executives must retain 100% of shares acquired through exercises or vestings until their share ownership
guidelines are met. All associates receiving options, including our NEOs, are required to hold the shares received upon the exercise
of options for a period of one year after the exercise of the option.
Hedging
or Pledging.
The Company considers it improper and inappropriate for insiders to engage in short-term or speculative transactions
in the Company’s securities. It therefore is the Company’s policy that such individuals may not engage in hedging
or pledging transactions, unless otherwise in compliance with the pre-clearance and approval requirements as set forth in the
Company’s Insider Trading Policy.
Grants of Plan-Based Awards
The following table shows all individual grants of plan-based
awards to the NEOs of the Company during the fiscal year ended December 31, 2015. Total value is computed utilizing the grant
date market value for restricted stock awards and the grant date fair value in accordance with ASC Topic 718 on stock option awards.
There were no stock options awarded in 2015.
|
|
|
|
Estimated
Future Payouts Under
Non-Equity Incentive Plans
1,2,3
|
All
Other Stock
Award: No. of
Shares of
Stock or
Units
4,5
|
Grant
Date fair
Value of Stock
and Options
Awards
|
|
|
Grant
Date
|
Award
Type
|
Threshold
|
Target
|
Maximum
|
|
Claude
E. Davis
|
|
|
n/a
|
STIP
|
$0
|
$439,380
|
$878,760
|
|
|
|
|
3/10/2015
|
Restricted
Stock
|
|
|
|
23,734
|
$402,766
|
|
|
3/10/2015
|
Performance
Stock
|
|
|
|
23,734
|
$402,766
|
|
|
|
|
|
|
|
|
|
|
John
M. Gavigan
|
|
|
n/a
|
STIP
|
$0
|
$67,500
|
$135,000
|
|
|
|
|
3/10/2015
|
Restricted
Stock
|
|
|
|
2,984
|
$50,638
|
|
|
3/10/2015
|
Performance
Stock
|
|
|
|
995
|
$16,885
|
|
|
|
|
|
|
|
|
|
|
Richard
S. Dennen
|
|
|
n/a
|
STIP
|
$0
|
$0
|
$0
|
|
|
|
|
8/14/2015
|
Restricted
Stock
|
|
|
|
37,500
|
$722,250
|
|
|
8/14/2015
|
Performance
Stock
|
|
|
|
37,500
|
$722,250
|
|
|
|
|
|
|
|
|
|
|
C.
Douglas Lefferson
|
|
|
n/a
|
STIP
|
$0
|
$148,400
|
$296,800
|
|
|
|
|
3/10/2015
|
Restricted
Stock
|
|
|
|
11,478
|
$194,782
|
|
|
3/10/2015
|
Performance
Stock
|
|
|
|
3,826
|
$64,927
|
|
|
|
|
|
|
|
|
|
|
Anthony
M. Stollings
|
|
|
n/a
|
STIP
|
$0
|
$144,000
|
$288,000
|
|
|
|
|
3/10/2015
|
Restricted
Stock
|
|
|
|
7,956
|
$135,013
|
|
|
3/10/2015
|
Performance
Stock
|
|
|
|
2,652
|
$45,004
|
|
|
|
|
|
|
|
|
|
|
Kevin
T. Langford
|
|
|
n/a
|
STIP
|
$0
|
$136,000
|
$272,000
|
|
|
|
|
3/10/2015
|
Restricted
Stock
|
|
|
|
7,514
|
$127,513
|
|
|
3/10/2015
|
Performance
Stock
|
|
|
|
2,505
|
$42,510
|
|
|
|
|
|
|
|
|
|
1
Cash payouts
equal to 100% of target under the 2015 STIP were made February 19, 2016, for all NEOs except Mr. Dennen who was paid under the
Oak Street Funding short-term incentive plan.
2
The amounts of
the estimated future payouts under the non-equity incentive plans column represent the opportunities in the event the Company
meets certain targets pursuant to the terms of the Short-term Incentive Plan. See “2015 Short-term Incentive Plan Design
and Payout” in the Compensation Discussion and Analysis.
3
Mr. Dennen’s
target and payout are in accordance with the continued 2015 Oak Street Funding plan at a target of 70% or $266,000 based on his
First Financial salary.
4
Restricted shares
vest annually over a three-year period beginning March 10, 2015. The closing price of the Company’s common shares on the
date of grant was $16.97 (March 10, 2015). 50% of Mr. Davis’ 2015 long-term-incentive award (23,734 shares) and 25% of Messrs.
Gavigan, Langford, Lefferson, and Stollings’ long-term-incentive awards (995 shares, 2,505 shares, 3,826 and 2,652 shares respectively)
were comprised of performance-based restricted stock that vests after three years only upon the attainment of certain pre-determined
performance measures (generally, total shareholder return and return on assets). Depending on the performance level achieved,
the maximum award that may be earned for these performance-based restricted shares is 120% of the initial shares awarded. See
“Performance Based Restricted Stock Awards” for more details. Dividends paid on both types of stock shares are held
in escrow until the shares vest.
5
For Mr. Dennen,
restricted shares vest annually over a three-year period beginning August 14, 2015. The closing price of the Company’s common
shares on the date of grant was $19.26 (August 14, 2015). 50% of Mr. Dennen’s 2015 long-term-incentive award (37,500 shares) was
comprised of performance-based restricted stock that vests annually over a three-year performance period beginning January 1,
2016 only upon the attainment of certain pre-determined performance measures (generally, Oak Street Funding net income results).
Depending on the performance level achieved, the maximum award that may be earned for these performance-based restricted shares
is 120% of the initial shares awarded. See “Performance Based Restricted Stock Awards” for more details. Dividends
paid on both types of stock shares are held in escrow until the shares vest.
Outstanding Equity Awards at Fiscal Year End
The following table represents stock options
and restricted stock awards outstanding for each NEO as of December 31, 2015. All stock options and restricted awards have been
adjusted for stock dividends and stock splits. The closing per share price of the Company’s stock on the last trading date
of the fiscal year was $18.07.
|
Option
Awards
|
Restricted
Stock Awards
|
|
|
Number
of
Securities
Underlying
Unexercised
Options
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
|
Option
Exercise
Price
|
Option
Expiration
Date
|
Number
of
Shares or
Units of
Stock That
Have Not
Vested
1
|
Market
Value
of Shares or
Units of Stock
That Have Not
Vested
|
|
|
|
|
|
|
|
|
|
Claude
E. Davis
|
|
|
|
|
|
|
118,641
|
2,143,843
|
|
|
0
|
0
|
|
|
|
|
|
John
M. Gavigan
|
|
|
|
|
|
|
6,314
|
114,094
|
|
|
0
|
0
|
|
|
|
|
|
Richard
S. Dennen
|
|
|
|
|
|
|
75,000
|
1,355,250
|
|
|
0
|
0
|
|
|
|
|
|
C.
Douglas Lefferson
|
|
|
|
|
|
|
31,814
|
574,879
|
|
|
25,500
|
0
|
$16.02
|
04/24/2016
|
|
|
|
|
28,200
|
0
|
$14.90
|
04/30/2017
|
|
|
|
|
38,409
|
0
|
$11.64
|
02/14/2018
|
|
|
|
Anthony
M. Stollings
|
|
|
|
|
|
|
21,016
|
379,759
|
|
|
0
|
0
|
|
|
|
|
|
Kevin
T. Langford
|
|
|
|
|
|
|
0
|
0
|
|
|
0
|
0
|
|
|
|
|
1
Restricted
shares vest according to the following schedule:
|
Vesting
Date
|
Davis
|
Gavigan
|
Dennen
|
Lefferson
|
Stollings
|
Langford
2
|
|
March
3, 2016
|
7,758
|
826
|
0
|
3,760
|
2,455
|
0
|
|
March
6, 2016
|
8,096
|
683
|
0
|
5,227
|
3,040
|
0
|
|
March
6, 2016 (Performance)
|
24,281
|
0
|
0
|
0
|
0
|
0
|
|
March
10, 2016
|
7,910
|
994
|
0
|
3,825
|
2,651
|
0
|
|
August
14, 2016
|
0
|
0
|
12,498
|
0
|
0
|
0
|
|
January
31, 2017 (Performance)
|
0
|
0
|
12,498
|
0
|
0
|
0
|
|
March
3, 2017
|
7,761
|
826
|
0
|
3,762
|
2,457
|
0
|
|
March
3, 2017 (Performance)
|
23,277
|
0
|
0
|
3,761
|
2,456
|
0
|
|
March
10, 2017
|
7,911
|
995
|
0
|
3,826
|
2,652
|
0
|
|
August
14, 2017
|
0
|
0
|
12,499
|
0
|
0
|
0
|
|
January
31, 2018 (Performance)
|
0
|
0
|
12,499
|
0
|
0
|
0
|
|
March
10, 2018
|
7,913
|
995
|
0
|
3,827
|
2,653
|
0
|
|
March
10, 2018 (Performance)
|
23,734
|
995
|
0
|
3,826
|
2,652
|
0
|
|
August
14, 2018
|
0
|
0
|
12,503
|
0
|
0
|
0
|
|
January
31, 2019 (Performance)
|
0
|
0
|
12,503
|
0
|
0
|
0
|
2
Mr. Langford’s
unvested restricted shares were cancelled on 12/31/2015.
Option Exercises and Stock Vested
The following table shows the stock options exercised by, and
restricted stock that vested for, the NEOs in 2015 and the value realized upon exercise.
|
|
Option
Awards
|
Stock
Awards
|
|
|
|
|
Number
of
Shares
Acquired on
Exercise
|
Value
Realized on
Exercise
|
Number
of
Shares
Acquired on
Vesting
|
Value
Realized on
Vesting
|
|
Claude E.
Davis
|
0
|
$0
|
39,740
|
$691,029
|
|
|
|
|
|
|
|
John M.
Gavigan
|
0
|
$0
|
2,126
|
$36,679
|
|
|
|
|
|
|
|
Richard
S. Dennen
|
0
|
$0
|
0
|
$0
|
|
|
|
|
|
|
|
C. Douglas
Lefferson
|
10,000
|
$55,300
|
14,953
|
$258,476
|
|
|
|
|
|
|
|
Anthony
M. Stollings
|
0
|
$0
|
8,366
|
$144,597
|
|
|
|
|
|
|
|
Kevin
T. Langford
|
9,077
|
$46,724
|
9,212
|
$159,371
|
Pension Benefits Table
The following table shows, for each NEO, each pension plan that
the NEO participates in, the number of years of credited service and the present value of accumulated benefits. Values reflect
the actuarial assumptions used for financial reporting purposes.
|
|
Plan
Name
1
|
Number
of Years
of Credited
Service
2
|
Present
Value of
Accumulated
Benefit
3
|
Payments
During Last
Fiscal Year
|
|
Claude E. Davis
|
Pension
Plan
|
11
|
$220,973
|
$0
|
|
|
SERP
|
11
|
$551,833
|
$0
|
|
John M. Gavigan
|
Pension
Plan
|
7
|
$55,821
|
$0
|
|
|
SERP
|
7
|
$0
|
$0
|
|
Richard S. Dennen
|
Pension
Plan
|
0
|
$0
|
$0
|
|
|
SERP
|
0
|
$0
|
$0
|
|
C. Douglas Lefferson
|
Pension
Plan
|
30
|
$673,397
|
$0
|
|
|
SERP
|
30
|
$331,031
|
$0
|
|
Anthony M. Stollings
|
Pension
Plan
|
9
|
$155,097
|
$0
|
|
|
SERP
|
9
|
$51,010
|
$0
|
|
Kevin T. Langford
|
Pension
Plan
|
10
|
$148,985
|
$0
|
|
|
SERP
|
10
|
$70,561
|
$0
|
1
Effective January
1, 2014, the annual Pension Benefits allocation for all employees, including NEOs and other executives, was reduced from 9% to
5% of eligible earnings.
2
The number of years
of service credited to the NEOs under the plan are computed as of December 31, 2015, the pension plan measurement date used for
financial statement reporting purposes with respect to the registrant’s audited financial statements which are included with the
Company’s 2015 Annual Report and filed with the 2015 Form 10-K.
3
The present value
of accumulated benefits shown in this column is calculated as of December 31, 2015, the measurement date used for reporting purposes
in the Company’s 2015 Annual Report. Assumptions used in determining these amounts include a 4.05% discount rate, a 4.05% lump
sum interest rate, and the 2015 PPA Mortality Table, described in IRS Notice 2013-49 consistent with assumptions used for reporting
purposes in the Company’s 2015 Annual Report filed with the Form 10-K of the present value of accumulated benefits under the SERP
and Pension Plan, except without reduction for mortality risk before age 65. (See Footnote 14 – Employee Benefit Plans to
the consolidated financial statements contained in the Company’s 2015 Annual Report filed with the 2015 Form 10-K – for
information regarding the assumptions made by the Company for reporting purposes in the Company’s 2015 Annual Report.)
Pension Plan
The First Financial Bancorp Associate Pension Plan and Trust
(“Pension Plan”) is a tax-qualified pension plan covering eligible employees of the Company. Effective January 1, 2008
(July 1, 2007 for new participants), we made several changes to the Pension Plan to be better positioned competitively to attract
and retain employees and to manage the escalating and varying costs of retiree benefits. These changes also resulted in revisions
to benefits under our non-qualified retirement plans.
Benefits under the Pension Plan’s
previous traditional pension benefit formula were frozen as of December 31, 2007 (except with respect to certain employees, as
explained below), and as of January 1, 2008 participants accrue benefits under a new account balance formula. The changes reflect
a shift towards account balance formulas and a shift away from traditional annuity-type formulas. The material terms and conditions
of the Pension Plan as applicable to the NEOs for 2015 who are currently employees of the Company are as follows:
Eligibility
The Pension Plan covers employees
of the Company who have attained age 21 and completed the earlier of 1,000 hours of service within a calendar year, the first anniversary
of hire or any subsequent calendar year.
Benefit Formula
The Pension Plan provides an accrual to a participant’s
account for each year in which he works 1,000 hours. Prior to 2014, the accrual was equal to 5% of the participant’s
compensation
plus an additional 4% of the participant’s compensation in excess of 50% of the Social Security wage base. Effective January
1, 2014, the composition of the Company’s overall retirement benefit changed. As a result, the additional accrual of 4% of
the participant’s compensation in excess of 50% of the Social Security wage base was discontinued. All eligible associates
now receive a pension benefit annual accrual of 5% of compensation.
For this purpose, compensation means the participant’s
total cash remuneration from the Company prior to contributions to a cafeteria plan or a 401(k) plan, including bonuses, overtime
pay and other special cash remuneration. However, compensation cannot exceed the compensation limit of Code Section 401(a) (17).
Interest
For allocations prior to 2014, participant accounts
are credited with interest for each year at the rate on five-year Treasury securities as of November of the preceding plan year.
For allocations after January 1, 2014, participant accounts are credited with a rate of return equal to the S&P 500 Index and
Barclays U.S. Aggregate Bond Index weighted 40% and 60% respectively.
Vesting
A participant becomes immediately
vested in this retirement benefit upon hire.
Distribution
A participant’s account may be distributed at
the participant’s election at any time after the participant separates from service. However, it must be distributed no later
than 60 days after the later of the date the participant attains age 65 and the date of the participant’s separation from
service. The participant may elect to receive his account in a lump sum or as an annuity with an actuarial value equivalent to
the value of his account.
Each of our NEOs is eligible to
participate in the Pension Plan with respect to the account balance formula and are fully vested in their Pension Plan retirement
benefit.
Traditional Pension Benefit Formula
Benefits accruing prior to January 1, 2008 are generally
calculated based on benefit service and average monthly compensation as of December 31, 2007.
Executive Supplemental Retirement Plan
The Company maintains a supplemental executive retirement
plan to supplement the retirement benefits provided under the Pension Plan for certain senior executive officers of the Company
in order to make up for legal limits applicable to the benefits provided under the Pension Plan. The SERP is an unfunded, unsecured
pension benefit plan for a select group of highly compensated employees. The material terms and conditions of the SERP as they
pertain to the NEOs for 2015 are as follows:
Eligibility
The SERP benefit is generally provided to those highly
compensated employees of the Company whose compensation exceeds the IRS limits imposed on the Pension Plan and who have been designated
as eligible to participate in the plan by the Company. With the exception of Mr. Gavigan and Mr. Dennen, all NEOs participated
in the SERP in 2015.
Benefit Formula
The SERP provides a benefit in excess of the IRS compensation
and benefit limits imposed by Sections 401(a) (17) and 415 of the Code, respectively, with respect to the service benefit component
of the Pension Plan and the account benefit component of the Pension Plan. The benefit under the SERP is calculated as the difference
between (x) the lump sum or periodic benefit the executive would have received under the Pension Plan, but for the applicable IRS
compensation limits under Section 415 and 401(a) (17) of the Code, and (y) the lump-sum or periodic benefit the executive is entitled
to under the Pension Plan. Compensation and years of service under the SERP generally have the same meanings provided under the
Pension Plan.
Vesting
Participants are vested in their SERP benefit to the
same extent they are vested in their retirement benefit provided under the Pension Plan. However, the Company generally reserves
the right to forfeit and/or reduce a participant’s benefit under the SERP.
Time
and Form of Payment
Payment
of benefits under the SERP generally commence upon the participant’s qualifying termination of employment. The benefit generally
may be payable in an annuity or lump sum, as agreed to by the executive and the Company.
Pursuant
to the Defined Benefit Plan changes effective January 1, 2014 described above, SERP benefits for all NEOs and other executives
were reduced from 9% to 5% of eligible earnings.
Nonqualified
Deferred Compensation
The Company
maintains two nonqualified deferred compensation plans for the CEO: the First Financial Bancorp Deferred Compensation Plan (“DCP”)
and the Supplemental Savings Agreement (“SSA”). The DCP was frozen in 2010 to any future employee or Company contributions.
Effective January 1, 2014, the annual Company contribution pursuant to the terms of the SSA was discontinued. No other NEO is
eligible to participate in these plans. The table below shows earnings and distributions for the DCP and SSA.
|
|
Plan
Name
|
Executive
Contributions in Last Fiscal Year
1
|
Registrant
Contributions in Last Fiscal Year
|
Aggregate
Earnings in Last Fiscal Year
2
|
Aggregate
Withdrawals / Distributions
|
Aggregate
Balance at Last Fiscal Year End
3
|
|
Claude
E. Davis
|
|
|
DCP
|
$0
|
$0
|
$2,395
|
$0
|
$178,175
|
|
|
SSA
4
|
$0
|
$0
|
$0
|
$0
|
$252,569
|
|
Richard
S. Dennen
5
|
|
|
Oak
Street Deferred Compensation Plan
|
$0
|
$0
|
$0
|
$66,952
|
$0
|
|
|
|
|
|
|
|
|
1
The DCP was frozen to future contributions in 2010.
2
The investment earnings / loss for 2015 reported in this column is included in the Summary Compensation table.
3
The aggregate balance for the DCP as of December 31, 2014 includes prior deferrals of base salary and bonus that were previously
earned and reported as compensation on the Summary Compensation Table for prior years. These amounts have since been adjusted,
pursuant to the terms of the plan, for investment performance (e.g., earnings and losses), deferral credits and distributions
(as applicable).
4
Effective January 1, 2014, no additional employer contributions will be provided under the Supplemental Savings Account.
5
Amount in “Aggregate Withdrawals / Distributions” includes $66,951.56 paid to Mr. Dennen under the Oak Street
Funding LLC Nonqualified Deferred Compensation Plan that was terminated on August 13, 2015 in connection with the acquisition
of Oak Street Funding by First Financial Bank.
Deferred
Compensation Plan
The DCP
is an unfunded, unsecured deferred compensation plan maintained for the CEO only that was frozen to future employee and employer
contributions in 2010. The material terms and conditions of the DCP in 2015 are as follows:
Investments
The
account is credited with earnings and losses based on investments selected by the CEO from the investments available under the
DCP, as determined by the Company. Investment elections can be changed monthly. No securities of the Company are available for
investment under the DCP.
Distributions
Distribution
of the DCP account will be paid or commence as of the first day of the third month following the participant’s termination
of employment, except as otherwise required by Section 409A of the Code. Before any deferrals are made under the plan, the participant
may elect to receive distribution of his DCP account in a lump sum or in monthly, quarterly or annual installments over up to
ten years. If the participant dies while receiving installment payments, the remainder of his DCP account will be distributed
to his beneficiary in a lump sum 60 days following the participant’s death;
otherwise, the DCP account of the participant
will be distributed on the first day of the ninth month following the participant’s death.
Executive
Supplemental Savings Agreement
The Company
has entered into an Executive Supplemental Savings Agreement with Mr. Davis to supplement the benefits provided under the First
Financial Bancorp 401(k) Savings Plan. The SSA is an unfunded, unsecured deferred compensation plan. The SSA was amended and restated
effective December 31, 2013 to state that no additional Company contributions will be provided under the SSA after December 31,
2013. The material terms and conditions of the SSA are as follows:
Employer
Contributions
For
each calendar year, ending with the 2013 calendar year, the Company made a contribution to Mr. Davis’ account in the SSA
equal to 4% of the difference between (i) Mr. Davis’s total pay for the year and (ii) the compensation limit of Code Section
401(a) (17).
Earnings
Mr.
Davis’s account under the SSA accrues earnings as if it were invested in investments available under the 401(k) Savings
Plan as selected by the Company.
Vesting
Mr.
Davis’s account under the SSA is 100% vested at all times, except that it will be forfeited if he is terminated for cause
(as is defined by the SSA).
Distribution
Mr.
Davis’s account under the SSA will be distributed in a lump sum six months following his separation from service. In the
event of his death before distribution, his account will be distributed to his beneficiary.
Split-Dollar
and Group Term Life Insurance
The Company
maintains split-dollar insurance on the lives of all its NEOs who are currently employed with the Company (with the exception
of Messrs. Gavigan and Dennen). Under the split-dollar insurance program, upon the death of a NEO, the company-owned life insurance
policy first pays the Company the premiums that the Company paid for the policy, and then pays the NEO’s beneficiary a death
benefit equal to three times the executive’s base salary in effect at his or her death.
In the
event Mr. Davis or Mr. Lefferson terminate employment and are also eligible to receive an immediate retirement benefit under the
Pension Plan (including an early retirement benefit), the Company will keep their life insurance policies in force until the executive’s
death with a death benefit payable to the executive’s beneficiary equal to three times the executive’s base salary
at the time of his termination of employment. The Company no longer offers this retirement benefit provision in its life insurance
policies. As of December 31, 2015, Mr. Davis and Mr. Lefferson are the only NEOs eligible for this benefit.
Messrs.
Gavigan and Dennen are eligible for the Company-paid group term-life insurance benefit that is available to all full-time associates
in the amount of two times annual base salary up to $600,000.
Other
Potential Post-Employment Payments
NEO
Employment and Non-Competition Agreements
The
Company is a party to
Employment and Non-Competition Agreements with each of Messrs. Davis, Stollings, Lefferson, and Dennen
(the “NEO Employment Agreements”). The NEO Employment Agreements provide for the employment of these individuals in
their current positions with the Company or in a position that is comparable to such position in responsibility.
Term
of the NEO Employment Agreements
. The current terms of the NEO Employment Agreements for Messrs. Davis, Lefferson, and Stollings
will expire on April 30, 2016, and the current term of the NEO Employment Agreement for Mr. Dennen will expire on August 14, 2018.
The NEO Employment Agreements renew automatically for additional one-year periods unless the executive or the Company gives at
least 90 days written notice prior to a scheduled expiration date that the term will not renew.
Compensation
.
Under the NEO Employment Agreements, an executive is entitled to receive a minimum annual base salary at the rate stated in the
executive’s agreement. In addition, each of the NEO Employment Agreements provides that the executive is eligible to participate
in the Company’s STIP as in effect from time to time. The agreement for Mr. Davis provides for a target annual bonus opportunity
that is presently 60% (as established by the
Compensation Committee) of his annual base salary, and the agreements for Messrs.
Dennen, Lefferson, and Stollings provide for target bonus opportunities of 40% of their annual base salaries. In addition, the
NEO Employment Agreements for Messrs. Davis, Dennen, Lefferson, and Stollings provide that the executive is eligible to receive,
during the term of the agreement, an annual long-term incentive award having a value on the grant date equal to a specified percentage
of the executive’s base salary. The applicable percentages for Messrs. Davis, Dennen, Lefferson, and Stollings are 110%,
50%, 70% and 50%, respectively, of their annual base salaries. The NEO Employment Agreements also provide that the executives
are eligible to participate in all employee benefit plans and benefits that are offered generally to the Company’s other
executive officers, subject to the terms and conditions of the applicable plan or program.
Severance
Benefits
. The NEO Employment Agreements provide for the payment of severance benefits if, during the term of the agreement
or during the one-year period following the expiration of such term due to the Company’s non-renewal of the term, the Company
terminates the executive’s employment without “Cause” (as defined in the agreement) or the executive resigns
his employment with “Good Reason” (as defined in the agreement). Upon termination of employment by the Company without
Cause (other than for disability or death) or by the executive for Good Reason, the executive is entitled to receive the following
payments and benefits:
|
|
·
|
earned
and unpaid base salary and vacation pay through the date of termination;
|
|
|
·
|
continued
payment of base salary for 24 months;
|
|
|
·
|
a
lump sum amount, or installments in the case of Mr. Davis, equal to two times the executive’s
target bonus amount under the STIP, except that for Mr. Davis and Mr. Stollings the amount
is the lesser of (i) two times the average of the STIP bonuses earned during the three
years prior to the termination and (ii) two and one-half times the STIP bonus target
in effect for the year of termination if Mr. Davis or Mr. Stollings is a “Covered
Employee” under Section 162(m) of the Code for the year in which employment terminates
or would have been a “Covered Employee” if he had continued his employment
through the end of such year;
|
|
|
·
|
outplacement
assistance at the Company’s expense (at a cost of up to 5% of the executive’s
base salary); and
|
|
|
·
|
up
to twelve months of the employer portion of COBRA premium payment contributions from
the Company.
|
If
an executive’s employment is terminated by reason of his death or long-term disability, by the Company for Cause or voluntarily
by the executive other than for Good Reason, the Company’s obligations to the executive are limited to payment of any accrued
and unpaid base salary through the date of termination and the payment of any other benefits that are required to be provided
to the executive under the terms of a plan or program in which such executive is a participant.
Change
in Control
. Upon a Change in Control of the Company, the terms of the NEO Employment Agreements for Messrs. Davis, Lefferson,
and Stollings will end on the second anniversary of the date of occurrence of the Change in Control, and the term of the NEO Employment
Agreement for Mr. Dennen will end on the first anniversary of the Change in Control.
Section
280G
. In the event that any of the payments or benefits provided under the NEO Employment Agreements or otherwise would constitute
an “excess parachute payment” as defined in Section 280G of the Code, the payments or benefits under such agreements
will be reduced to the maximum level that would not result in an excise tax under Section 4999 of the Code, if such reduction
would cause the executive to retain an after-tax amount in excess of what would be retained if no reduction were made.
Restrictive
Covenants
. The NEO Employment Agreements prohibit the executive from revealing confidential information of the Company and
disparaging the Company. In addition, the NEO Employment Agreements prohibit the executive from competing with the Company or
its affiliated companies or soliciting their clients or hiring their employees while employed by the Company or an affiliated
company and for varying time periods after employment terminates. The noncompetition period will end one year following separation
of employment for Mr. Davis, six months following separation of employment for Messrs. Lefferson and Stollings, and three years
following separation of employment for Mr. Dennen (one year if separation of employment occurs during a renewal term of the agreement).
The nonsolicitation period for Messrs. Davis, Stollings, and Lefferson will end two years following separation of employment and
three years following separation of employment for Mr. Dennen (one year if separation of employment occurs during a renewal term).
Definitions
.
As used in the NEO Employment Agreements, the terms “Change in Control” and “Good Reason” are defined
as follows:
|
|
·
|
A
“Change in Control” is deemed to have occurred if (i) any person (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) acquires beneficial
ownership (within the meaning of the Securities Exchange Act of 1934) of shares representing
20% or more of the Company’s voting power in the election of directors, (ii) there
is a change in a majority of the members of the Board of Directors over a two-year period,
unless each new director is approved by a vote of at least two-thirds of the directors
in office at the beginning of such two-year period, (iii) there is a reorganization,
merger, consolidation or share
|
|
|
|
exchange as a result of which the Company’s common
shares are exchanged or converted for shares of another corporation, a dissolution or
liquidation of the Company or a sale or disposition of 50% or more of the Company’s
assets, (iv) there is any other form of reorganization, merger, consolidation or share
exchange, unless the persons who were beneficial owners of the Company’s common
shares before the completion of such transaction own more than 65% of the outstanding
shares of the successor or surviving corporation following the completion of such transaction
and certain other conditions are met; or (v) any other transaction occurs that would
be required to be reported by the Company as a change of control under specified provisions
of the federal securities laws.
|
|
|
·
|
“Good
Reason” is defined in the NEO Employment Agreements as the occurrence, without
the executive’s consent, of: (i) a significant/material reduction in the executive’s
base salary/base compensation, except for any decrease that is generally applicable to
other similarly situated senior executives/officers of the Company; (ii) the failure
of the Company (after notice and an opportunity to cure) to pay or provide to the NEO
when due any material amount of compensation or material benefit that is required to
be paid or provided under the agreement; (iii) a significant reduction in the NEO’s
authority or responsibilities; or (iv) the failure of the Company to obtain the written
agreement of any successor to the Company or the business of the Company to assume the
agreement (solely to the extent such assumption does not occur by operation of law).
|
Severance
and Change in Control Agreement.
The
Company is a party to a Severance and Change in Control Agreement with Mr. Gavigan dated March 13, 2015 (the “CIC Agreement”).
Under the CIC Agreement, Mr. Gavigan will receive severance benefits in the event the Company terminates his employment without
Cause or he terminates his employment for Good Reason within 12 months following a Change in Control. As used in the CIC Agreement,
the definitions of the terms “Cause,” and “Change in Control” are substantially the same as the definitions
for those terms in the NEO Employment Agreements. The term “Good Reason” is defined in the CIC Agreement to include
termination of employment by the executive within 90 days following the occurrence (and after the expiration of any cure period)
of either (i) a material reduction in the executive’s base compensation (other than a reduction applicable to all similarly
situated executives) or (ii) a material breach by the Company of the CIC Agreement.
The
initial term of the CIC Agreement will end on April 30, 2016. The CIC Agreement will renew automatically for an additional, one-year
period, and will continue to renew unless Mr. Gavigan or the Company gives at least 90 days written notice prior to a scheduled
expiration date that the term will not renew. In the event of a Change in Control, the term of the CIC Agreement will be the one-year
period following the consummation of the Change in Control, provided that the agreement will not automatically renew at the end
of the term following such Change in Control.
Upon
termination of Mr. Gavigan by the Company without Cause (other than as a result of death or disability) and not in connection
with a Change in Control, Mr. Gavigan will be entitled to receive the following payments and benefits: (i) earned and unpaid base
salary and vacation pay through the date of termination; (ii) continued payment of base salary for 24 months; (iii) an amount
equal to a multiple of Mr. Gavigan’s target bonus amount under the STIP as described below; (iii) outplacement assistance
at the Company’s expense (at a cost of up to 5% of the executive’s base salary); and (iv) up to twelve months of the
employer portion of COBRA premium payment contributions from the Company. If Mr. Gavigan is a covered employee for purposes of
Section 162(m)(3) of the Code for the year in which employment terminates (or would have been a Covered Employee if the executive
had continued employment until the end of the year), the STIP severance amount payable to Mr. Gavigan will be equal to the lesser
of (i) two times the average of the STIP bonuses earned during the three years prior to the qualifying termination (or such lesser
period for which Mr. Gavigan was eligible to participate in the STIP) or (ii) two and one-half times the STIP bonus target in
effect for the year of termination. If Mr. Gavigan is not a Covered Employee or if a severance benefit is being paid in connection
with a Change in Control, the STIP severance amount will be two times his target bonus amount under the STIP. Mr. Gavigan is not
presently a Covered Employee.
If,
immediately prior to a Change in Control or during the one-year period that commences upon a Change in Control, the Company terminates
Mr. Gavigan’s employment without Cause (other than for disability or death) or if Mr. Gavigan terminates his employment
for Good Reason, Mr. Gavigan will be entitled to receive the following payments and benefits: (i) earned and unpaid base salary
and vacation pay through the date of termination; (ii) continued payment of base salary for 24 months; (iii) an amount equal to
two times his target amount under the STIP; (iii) outplacement assistance at the Company’s expense (at a cost of up to 5%
of the executive’s base salary); and (iv) up to twelve months of the employer portion of COBRA premium payment contributions
from the Company.
The
CIC Agreement provides that, in the event that any of the payments or benefits provided under such agreement or otherwise would
constitute an “excess parachute payment” as defined in Section 280G of the Code, the payments or benefits will be
reduced to the maximum level that would not result in an excise tax under Section 4999 of the Code, if such reduction would cause
the executive to retain an after-tax amount in excess of what would be retained if no reduction were made.
For
six months following termination of employment (other than upon termination for Cause), Mr. Gavigan may not compete with the Company
and, for two years following termination of employment, he may not solicit the Company’s clients or solicit or hire the
Company’s employees.
Potential
Payments for Termination Following a Change-in-Control
The
table below summarizes the potential change-in-control benefits that would become payable to each of the NEOs as of December 31,
2015 pursuant to such executive’s NEO Employment Agreement or CIC Agreement, as applicable, and under such executive’s
equity award agreements (“Equity Agreements”). Mr. Langford is not included because he was not an executive officer
of the Company on December 31, 2015.
In
calculating these benefits, we assumed a change in control of the Company on December 31, 2015. To the extent relevant, the
amounts are based on the Company’s closing share price on December 31, 2015 of $18.07 per share. If we calculated these
amounts using a different date, the change in the amounts could be significant. For example, other equity awards have vested and/or
were granted since December 31, 2015 and our stock value has fluctuated. Therefore, if we had calculated the amounts payable based
on an April 2016 change in control and termination, the total payment amount would differ. In addition, several of the items shown
(particularly under “Cash Severance” and “Excise Tax Gross-Up”) depend on compensation received over a
period of time.
We
are applying the definitions of a change in control that are included in the NEO Employment Agreements, the CIC Agreements and
the Equity Agreements, which are substantially identical with the exception of Mr. Dennen’s Equity Agreements. The definition
of a change in control in Mr. Dennen’s Equity Agreements includes, in addition to the change in control definitions used
in the other Equity Agreements, that the sale of Oak Street Funding by First Financial will also be treated as a change in control
under the agreement.
In
accordance with SEC regulations, we do not show in the table any amount to be provided to a NEO under any arrangement which does
not discriminate in scope, terms or operation in favor of our executive officers and which is available generally to all salaried
employees. Also, the following table does not include amounts disclosed above under the Pension Benefits Table, the Nonqualified
Deferred Compensation Table or the Outstanding Equity Awards at Fiscal Year End Table, except to the extent that the amount payable
to the NEO would be enhanced by the termination event.
The
benefits shown under “Acceleration of Unvested Equity” reflect the market value of restricted stock held by each of
the NEOs on December 31, 2015 for all outstanding, unvested awards including accrued dividends. Awards made in 2014 and 2015
do not immediately vest upon a change in control. In order for these awards to vest, a second qualifying trigger (i.e., loss of
employment) must occur in conjunction with the change in control. The values shown in assume a double trigger event for those
awards and thus include the value of all outstanding equity awards and accrued dividends.
We
computed the amounts in accordance with the terms of the change in control employment or severance agreements. In addition, it
is possible that an excise tax payment may be required if a change in control occurred even without a qualifying employment termination
with respect to those benefits that become payable or vested solely upon the occurrence of a change in control.
|
|
Mr.
Davis
|
Mr.
Gavigan
|
Mr.
Dennen
|
Mr.
Lefferson
|
Mr.
Stollings
|
|
Change-in-Control
(“CIC”) Severance Benefits
|
|
|
|
|
|
|
|
|
|
Base Salary
1
|
$1,464,600
|
$450,000
|
$760,000
|
$742,000
|
$720,000
|
|
|
|
|
|
|
|
|
Bonus for
Year of Separation
2
|
$512,687
|
$135,000
|
$304,000
|
$296,800
|
$182,522
|
|
|
|
|
|
|
|
|
General Health
and Welfare Benefits / Outplacement
|
$53,716
|
$28,107
|
$29,873
|
$34,757
|
$35,101
|
|
CIC
Severance Benefits
|
$2,031,003
|
$613,107
|
$1,093,873
|
$1,073,557
|
$937,623
|
|
Acceleration
of Unvested Equity
3
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
Stock
|
$2,143,843
|
$96,114
|
$1,355,250
|
$574,879
|
$379,759
|
|
Accrued Dividends
on Restricted Stock
|
$127,300
|
$5,032
|
$24,000
|
$29,741
|
$19,003
|
|
Unvested
Options
|
$0
|
$0
|
$0
|
$0
|
$0
|
|
Total
Unvested Equity
|
$2,271,143
|
$101,146
|
$1,379,250
|
$604,620
|
$398,762
|
|
Total
Compensation Under Agreements
|
|
|
|
|
Cutback to avoid
280G Excise tax
(if applicable)
4
|
$0
|
$0
|
$0
|
$0
|
$0
|
|
Total
Benefits
5
|
$4,302,146
|
$714,253
|
$2,473,123
|
$1,678,177
|
$1,336,385
|
1
The multiplier for all NEOs is 2 times base salary.
2
Bonus for Messrs. Davis and Stollings is equal to the lesser of (x) two and one-half times the Target Bonus Amount or (y)
two times the three-year average of the actual annual bonus awards paid (or payable) to the employee by the Company for the three
(3) completed calendar years that immediately precede the employee’s termination of employment, payable in equal bi-weekly
installments over the Severance Period, commencing with the first payroll period following the sixtieth (60th) day after employee’s
date of termination of employment (the Termination Compensation and Termination Short-Term Bonus, collectively, the “Severance
Benefits”). Messrs. Gavigan, Dennen, and Lefferson have a multiplier of 2 times bonus.
3
Per the 1999, 2009 and 2012 Stock Plans, all unvested stock options and restricted shares shall become fully exercisable
or vested as of the date of a Change in Control. The values shown in the table above assume a double trigger event for those awards
and thus includes the value of all outstanding equity awards and accrued dividends. For purposes of this table, performance shares
are assumed to be earned at target, however under a true change in control the Committee would assess actual performance prior
to the change and control, if possible and pro-rate the awards.
4
Includes reduction in payments to avoid 280G excise tax only in the event the reduction in payment results in a greater
net after-tax amount than retained by the executive had no cutback been made.
5
These are the amounts assigned to these benefits for purposes of IRC Section 280G calculations. They do not necessarily
reflect the actual cash payments to be paid to the applicable employees upon the event of a change in control.
Payments
for Termination Without Regard to a Change in Control
The
table below summarizes the potential benefits payable to each of the NEOs under his NEO Employment Agreements or CIC agreement,
as applicable, upon an involuntary termination of the NEO’s employment by the Company without Cause or upon the NEO’s
resignation for “Good Reason” without regard to the occurrence of a change in control of the Company.
As
described above, a NEO is entitled to certain payments if he terminates his employment for “Good Reason.”
|
|
Mr.
Davis
|
Mr.
Gavigan
|
Mr.
Dennen
|
Mr.
Lefferson
|
Mr.
Stollings
|
|
|
|
|
|
|
|
|
Termination
for Good Reason Severance Benefits
|
|
|
|
|
Base Salary
1
|
$1,464,600
|
$450,000
|
$760,000
|
$742,000
|
$720,000
|
|
Bonus for
Year of Separation
2
|
$512,687
|
$48,219
|
$304,000
|
$296,800
|
$182,522
|
|
General Health
and Welfare Benefits / Outplacement
|
$53,716
|
$28,107
|
$29,873
|
$34,757
|
$35,101
|
|
|
|
|
|
|
|
|
Total
Benefits
|
$2,031,003
|
$526,326
|
$1,093,873
|
$1,073,557
|
$937,623
|
|
|
|
|
|
|
|
1
The multiplier for all NEOs is 2 times base salary.
2
In the event Messrs. Davis, Gavigan, and Stollings are covered employees as defined under Section 162 (m) of the Code, payout,
as shown above, is equal to the lesser of (x) two and one-half times the Target Bonus Amount or (y) two times the three-year average
of the actual annual bonus awards paid (or payable) to the employee by the Company for the three (3) completed calendar years
that immediately precede the employee’s termination of employment, payable in equal bi-weekly installments over the Severance
Period, commencing with the first payroll period following the sixtieth (60th) day after employee’s date of termination
of employment (the Termination Compensation and Termination Short-Term Bonus, collectively, the “Severance Benefits”).
However, Mr. Gavigan in his current role as Chief Financial Officer is not a covered employee and his bonus amount would be equal
to 2 times target or $135,000 in this instance. Messrs. Dennen and Lefferson have a multiplier of 2 times bonus target amount.
Payments
for Voluntary Termination by NEO, Termination for Cause
In
the event of a NEO’s voluntary termination of the agreement (other than as specifically set forth in the agreement) or termination
for cause, the NEO is not entitled to any special benefits under his employment agreement or any stock awards. All such benefits
are void.
Payments
upon Death or Disability
There
are no additional benefits or payments due to disability of a NEO, other than under the existing disability policies of the Company
that apply to all employees.
Upon
the death of a NEO (other than Messrs. Gavigan and Dennen), the NEO’s estate would be entitled to three (3) times the NEO’s
base salary at the time of death pursuant to the split-dollar life insurance policies previously
discussed. Messrs. Gavigan and
Dennen are eligible for the Company-paid group life benefit that is available to all full time associates. See “Split-Dollar
and Group Term Life Insurance.”
Awards
granted after January 1, 2014, immediately vest in the event of death or disability.
Retirement
Benefits
In
the event of retirement by the NEOs, they would be entitled to certain retirement benefits that can be paid over time or taken
in a lump sum. Below is a presentation regarding lump sum benefits for early retirement under the Pension Plan:
|
|
Total
Present Value of Accumulated Benefit using ASC Topic 715 Assumptions
1
|
Total
Present Value of Vested Accumulated Benefit using Actual Lump Sum Basis
2
|
Incremental
Value due to the Difference between ASC Topic 715 Assumptions and Actual Lump Sum Basis
3
|
Incremental
Value due to Early Retirement Subsidies
|
|
Claude E.
Davis
|
$772,806
|
$847,004
|
$66,887
|
$7,311
|
|
John M.
Gavigan
|
$55,821
|
$74,588
|
$18,767
|
$0
|
|
Richard
S. Dennen
|
$0
|
$0
|
$0
|
$0
|
|
C. Douglas
Lefferson
|
$1,004,428
|
$936,582
|
($67,846)
|
$0
|
|
Anthony
M. Stollings
|
$206,107
|
$218,059
|
$11,952
|
$0
|
|
Kevin
T. Langford
|
$219,546
|
$264,429
|
$44,883
|
$0
|
|
|
|
|
|
|
1
See “Pension Benefits Table.”
2
Calculated assuming NEO terminates employment on December 31, 2015 and receives an immediate lump sum distribution using
the rate in effect for December 2015 payments.
3
For information purposes only. Allocates the increase in retirement value over the values shown in the Pension Benefit Table
to its two primary sources: (i) Difference between U.S GAAP assumptions and actual lump sum interest rate basis; and (ii) Value
of early retirement subsidies that are included in the actual lump sum payment if the NEO terminates employment.
Other
than as set forth above, NEOs are not entitled to any additional benefits. For example, there currently is no acceleration of
restricted stock or options upon retirement.
Compensation
Committee Interlocks and Insider Participation
During
2015, no member of the Compensation Committee was an employee, officer or former officer of the Company. None of our executive
officers served in 2015 on the Board or Compensation Committee (or other committee serving an equivalent function) of any entity
that had an executive officer serving as a member of our Board or the Compensation Committee. All Compensation Committee members
had banking or financial services transactions in the ordinary course of business with our bank subsidiary. No other relationships
required to be reported under the rules promulgated by the SEC exist with respect to members of the Company’s Compensation
Committee.
|
2017
Annual Meeting Information
|
Shareholder
Proposals for the 2017 Annual Meeting
If an
eligible shareholder wishes to present a proposal to be included in the Company’s proxy statement and form of proxy relating
to the 2017 Annual Meeting of Shareholders, the proposal must be received by our Corporate Secretary no later than December 16,
2016 (120 calendar days prior to the anniversary of this year’s proxy statement mailing date). Any such proposal must comply
with Rule 14a-8 promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended. Upon receipt of such a proposal,
we will determine whether or not to include the proposal in the proxy statement and proxy in accordance with applicable regulations.
If an
eligible shareholder wishes to nominate a director at our 2017 Annual Meeting of Shareholders written notice of this nomination
must be received by our Corporate Secretary, no later than February 23, 2017 (90 calendar days prior to the anniversary of this
year’s annual meeting).
All shareholder
proposals should be sent to First Financial Bancorp, Attention: Shannon M. Kuhl, Chief Legal Officer and Corporate Secretary,
255 E. Fifth Street, Suite 2900, Cincinnati, Ohio 45202.
|
April 14, 2016
|
BY ORDER OF THE BOARD OF DIRECTORS
|
|
|
|
|
|
|
|
|
Shannon M. Kuhl
|
|
|
Corporate Secretary
|
EXHIBIT
A
FIRST
FINANCIAL BANCORP.
KEY
EXECUTIVE SHORT TERM INCENTIVE PLAN
(Amended
and Restated March 10, 2015)
The purpose
of the Plan is to establish a program of incentive compensation for designated officers and/or key executive employees of the
Company and its subsidiaries and divisions that is directly related to the performance results of the Company and such employees.
The Plan provides annual incentives, contingent upon continued employment and meeting certain corporate goals, to certain key
executives who make substantial contributions to the Company.
“Board”
means the Board of Directors of the Company or the Executive Committee thereof.
“Code”
means the Internal Revenue Code of 1986, as amended.
“Committee”
means either (i) the Board or (ii) a committee selected by the Board to administer the Plan and composed of not less than two
directors, each of whom is an “outside director” (within the meaning of Section 162(m) of the Code). If at any time
such a Committee has not been so designated, the Compensation Committee of the Board shall constitute the Committee or if there
shall be no Compensation Committee of the Board, the Board shall constitute the Committee.
“Company”
means First Financial Bancorp and each of its subsidiaries.
“Designated
Beneficiary” means the beneficiary or beneficiaries designated in accordance with Article XIII hereof to receive the amount,
if any, payable under the Plan upon the Participant’s death.
“162(m)
Incentive Award” means a Incentive Award which is intended to qualify for the performance-based compensation exception to
Section 162(m) of the Code, as further described in Article VII.
“Incentive
Award” means the award, as determined by the Committee, to be granted to a Participant based on that Participant’s
level of attainment of his or her goals established in accordance with Articles IV and V.
“Participant”
means any officer or key executive designated by the Committee to participate in the Plan. At a minimum, the participant group
will consist of the Chief Executive Officer and certain officers of First Financial Bancorp reporting directly to the Chief Executive
Officer and selected by the Committee who either are, or are determined by the Committee to be likely to become, a “covered
employee” within the meaning of Section 162(m) of the Code.
“Performance
Criteria” means objective performance criteria established by the Committee with respect to 162(m) Incentive Awards. Performance
Criteria shall be measured in terms of one or more of the following objectives, described as such objectives relate to Company-wide
objectives or of the subsidiary, division, department or function with the Company or subsidiary in which the Participant is employed:
|
assets
|
average total common equity
|
deposits
|
|
earnings per share
|
economic profit added
|
efficiency ratio
|
|
gross margin
|
gross revenue
|
internal rate of return
|
|
loans
|
net charge-offs
|
net income
|
|
net income before tax
|
net interest income
|
non-interest expense
|
|
non-interest income
|
non-performing assets
|
operating cash flow
|
|
pre-provision net revenue
|
return on assets
|
return on equity
|
|
return on risk weighted assets
|
return on sales
|
stock price
|
|
tangible equity
|
total shareholder return
|
|
Each
grant of a 162(m) Incentive Award shall specify the Performance Criteria to be achieved, a minimum acceptable level of achievement
below which no payment or award will be made, and a formula for determining the amount of any payment or award to be made if performance
is at or above the minimum acceptable level but falls short of full achievement of the specified Performance Criteria. The Performance
Criteria may be measured against peer group performance.
If the
Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the
manner in which it conducts its business, or the performance criteria would produce excessive or unnecessary risk to the institution,
or other events or circumstances render the Performance Criteria to be unsuitable, the Committee may modify such Performance Criteria
or the related minimum acceptable level of achievement, in whole or in part,
as the Committee deems appropriate and equitable;
provided, however, that no such modification shall be made if the effect would be to cause a 162(m) Incentive Award to fail to
qualify for the performance-based compensation exception to Section 162(m) of the Code.
“Performance
Period” means the period during which performance is measured to determine the level of attainment of an Incentive Award,
which shall be the fiscal year of the Company or such other period as the Company may determine.
“Plan”
means the First Financial Bancorp Key Executive Short Term Incentive Plan.
Participants
in the Plan shall be selected by the Committee for each Performance Period from those officers and key executives of the Company
and its subsidiaries whose efforts contribute materially to the success of the Company. No employee shall be a Participant unless
he or she is selected by the Committee, in its sole discretion. No employee shall at any time have the right to be selected as
neither a Participant nor, having been selected as a Participant for one Performance Period, to be selected as a Participant in
any other Performance Period.
The Committee,
in its sole discretion, will determine eligibility for participation, establish the maximum award which may be earned by each
Participant (which may be expressed in terms of dollar amount, percentage of salary or any other measurement), establish goals
for each Participant (which may be objective or subjective, and based on individual, Company, subsidiary and/or division performance),
calculate and determine each Participant’s level of attainment of such goals, and calculate the Incentive Award for each
Participant based upon such level of attainment.
Except
as otherwise herein expressly provided, full power and authority to construe, interpret, and administer the Plan shall be vested
in the Committee, including the power to amend or terminate the Plan as further described in Article XVI. The Committee may at
any time adopt such rules, regulations, policies, or practices as, in its sole discretion, it shall determine to be necessary
or appropriate for the administration of, or the performance of its respective responsibilities under, the Plan. The Committee
may at any time amend, modify, suspend, or terminate such rules, regulations, policies, or practices.
The Committee,
based upon information to be supplied by management of the Company and, where determined as necessary by the Board, the ratification
of the Board, will establish for each Performance Period a maximum award (and, if the Committee deems appropriate, a threshold
and target award) and goals relating to Company, subsidiary, divisional, departmental and/or functional performance for each Participant
and communicate such award levels and goals to each Participant prior to or during the Performance Period for which such award
may be made. Incentive Awards will be based on an annual calendar year performance period or such other period as the Committee
may determine, provided that the performance period of any 162(m) Incentive Award will comply with the requirements of Section
162(m) of the Code. Incentive Awards will be earned by each Participant based upon the level of attainment of his or her goals
during the applicable Performance Period; provided that the Committee may reduce the amount of any Incentive Award in its sole
and absolute discretion. As soon as practicable after the end of the applicable Performance Period, the Committee shall determine
the level of attainment of the goals for each Participant and the Incentive Award to be made to each Participant.
|
VI.
|
Payment of Incentive Awards
|
Incentive
Awards earned during any Performance Period shall be paid as soon as practicable following the end of such Performance Period
and the determination of the amount thereof shall be made by the Committee. Payment of Incentive Awards shall be made in the form
of cash, provided, however that the Committee may elect to pay a percentage of such Incentive Awards in shares of the Company’s
common shares, no par value (“Shares”) pursuant to the any shareholder approved stock plan then in effect with available
shares and for which the Participant is eligible. Any Shares shall be subject to restrictions as may be determined by the Committee.
Incentive Award amounts earned but not yet paid will not accrue interest. Incentive Awards, including any grant of Shares in lieu
of cash, shall be paid or issued by March 15 of the calendar year following the year in which the Performance Period closes, after
the determination of the amount thereof by the Committee.
|
VII.
|
162(m) Incentive Awards
|
Unless
determined otherwise by the Committee, each Incentive Award, awarded under the Plan shall be a 162(m) Incentive Award and will
be subject to the following requirements, notwithstanding any other provision of the Plan to the contrary:
1.
No 162(m) Incentive Award may be paid unless and until the shareholders of the Company have approved the Plan in a manner which
complies with the shareholder approval requirements of Section 162(m) of the Code.
2.
A 162(m) Incentive Award may be made only by a Committee which is comprised solely of not less than two directors, each of whom
is an “outside director” (within the meaning of Section 162(m) of the Code)
3.
The performance goals to which a 162(m) Incentive Award is subject must be based solely on Performance Criteria. Such performance
goals, and the maximum, target and/or threshold (as applicable) Bonus Amount payable upon attainment thereof, must be established
by the Committee within the time limits required in order for the 162(m) Incentive Award to qualify for the performance-based
compensation exception to Section 162(m) of the Code.
4.
No 162(m) Incentive Award may be paid until the Committee has certified the level of attainment of the applicable Performance
Criteria.
5.
The maximum amount of a 162(m) Incentive Award is the lower of 2x target Incentive Award or $2.0 million to a single Participant.
|
VIII.
|
Termination of Employment
|
A Participant
shall be eligible to receive payment of his or her Incentive Award earned during a Performance Period, so long as the Participant
is employed on the last day of such Performance Period, notwithstanding any subsequent termination of employment prior to the
actual payment of the Incentive Award. In the event of a Participant’s death prior to the payment of an Incentive Award
which has been earned, such payment shall be made to the Participant’s Designated Beneficiary or, if there is none living,
to the estate of the Participant.
|
IX.
|
Reorganization or Discontinuance
|
The obligations
of the Company under the Plan shall be binding upon any successor corporation or organization resulting from merger, consolidation
or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the
assets and business of the Company. The Company will make appropriate provision for the preservation of Participants’ rights
under the Plan in any agreement or plan which it may enter into or adopt to effect any such merger, consolidation, reorganization
or transfer of assets.
If the
business conducted by the Company shall be discontinued, any previously earned and unpaid Incentive Awards under the Plan shall
become immediately payable to the Participants then entitled thereto.
|
X.
|
Non-Alienation of Benefits
|
A Participant
may not assign, sell, encumber, transfer or otherwise dispose of any rights or interests under the Plan except by will or the
laws of descent and distribution. Any attempted disposition in contravention of the preceding sentence shall be null and void.
|
XI.
|
No Claim or Right to Plan Participation
|
No employee
or other person shall have any claim or right to be selected as a Participant under the Plan. Neither the Plan nor any action
taken pursuant to the Plan shall be construed as giving any employee any right to be retained in the employ of the Company.
The Company
shall deduct from all amounts paid under the Plan all federal, state, local and other taxes required by law to be withheld with
respect to such payments.
|
XIII.
|
Designation and Change of Beneficiary
|
Each
Participant may indicate upon notice to him or her by the Committee of his or her right to receive an Incentive Award a designation
of one or more persons as the Designated Beneficiary who shall be entitled to receive the amount, if any, payable under the Plan
upon the death of the Participant. Such designation shall be in writing to the Committee. A Participant may, from time to time,
revoke or change his or her Designated Beneficiary without the consent of any prior Designated Beneficiary by filing a written
designation with the Committee. The last such designation received by the Committee shall be controlling; provided, however, that
no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Participant’s
death, and in no event shall it be effective as of a date prior to such receipt.
|
XIV.
|
Payments to Persons Other Than the Participant
|
If the
Committee shall find that any person to whom any amount is payable under the Plan is unable to care for his or her affairs because
of incapacity, illness or accident, or is a minor, or has died, then any payment due to such person or his or her estate (unless
a prior claim therefore has been made by a duly appointed legal representative) may, if the Committee so
directs, be paid to his
or her spouse, a child, a relative, an institution maintaining or having custody of such person, or any other person deemed by
the Committee, in its sole discretion, to be a proper recipient on behalf of such person otherwise entitled to payment. Any such
payment shall be a complete discharge of the liability of the Company therefore.
|
XV.
|
No Liability of Committee Members
|
No member
of the Committee shall be personally liable by reason of any contract or other instrument related to the Plan executed by such
member or on his or her behalf in his or her capacity as a member of the Committee, nor for any mistake of judgment made in good
faith, and the Company shall indemnify and hold harmless each employee, officer, or director of the Company to whom any duty or
power relating to the administration or interpretation of the Plan may be allocated or delegated, against any cost or expense
(including legal fees, disbursements and other related charges) or liability (including any sum paid in settlement of a claim
with the approval of the Board) arising out of any act or omission to act in connection with the Plan unless arising out of such
person’s own fraud or bad faith.
|
XVI.
|
Termination or Amendment of this Plan
|
The Committee
may amend, suspend or terminate this Plan at any time; provided that no amendment may be made without the approval of the Company’s
shareholders if the effect of such amendment would be to cause outstanding or pending 162(m) Incentive Awards to cease to qualify
for the performance-based compensation exception to Section 162(m) of the Code.
Participants
shall have no right, title, or interest whatsoever in or to any investments which the Company may make to aid it in meeting its
obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, Beneficiary, legal
representative or any other person. To the extent that any person acquires a right to receive payments from the Company under
the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. All payments to be made
hereunder shall be paid from the general funds of the Company and no special or separate fund shall be established and no segregation
of assets shall be made to assure payment of such amounts except as expressly set forth in the Plan.
The Plan
is not intended to be subject to the Employee Retirement Income Security Act of 1974, as amended.
The terms
of the Plan and all rights thereunder shall be governed by and construed in accordance with the laws of the State of Ohio, without
reference to principles of conflict of laws.
|
XIX.
|
Section 409A of the Internal Revenue Code
|
It is
the Company’s intent that the Plan complies with or be exempt from the requirements of Section 409A and that the Plan be
administered and interpreted accordingly. If and to the extent that any payment or benefit under the Plan is determined by the
Company to constitute “non-qualified deferred compensation” subject to Section 409A and is payable to a Participant
by reason of the Participant’s termination of employment, then (a) such payment or benefit shall be made or provided to
the Participant only upon a “separation from service” as defined for purposes of Section 409A under applicable regulations
and (b) if the Participant is a “specified employee” (within the meaning of Section 409A and as determined by the
Company), such payment or benefit shall be made or provided on the date that is six months and one day after the date of the Participant’s
separation from service (or earlier death). Any amount not paid in respect of the six month period specified in the preceding
sentence will be paid to the Participant (plus interest at the applicable federal rate as defined in Section 1274(d) of the Code)
in a lump sum on the date that is six months and one day after the Participant’s separation from service (or earlier death).
Each payment made under the Plan shall be deemed to be a separate payment for purposes of Section 409A.
The Plan
is intended to comply with, and shall be interpreted and administered consistent with, any applicable banking rules and regulations
relating to compensation.
If, following
the payment of any bonus, the Committee determines that such payment was based on materially inaccurate financial statements (which
includes, but is not limited to, statements of earnings, revenues or gains) or any other materially inaccurate performance metric
criteria, the Company shall be entitled to receive, and the Participant shall be obligated to pay to the Company immediately upon
demand therefor, the portion of the bonus that the Committee determines was not earned.
The effective
date of the Plan shall be as of January 1, 2011, subject to approval of the Company’s shareholders on May 24, 2011, as required
to comply with the requirements of Section 162(m) of the Code, and thereafter shall remain in effect until terminated in accordance
with section XVI hereof. No payments shall be made under the Plan if it is not approved by the Company’s shareholders.
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