Exhibit 10.1
AMERICAN BANCORPORATION
SENIOR MANAGEMENT
INCENTIVE COMPENSATION PLAN
July 5, 1996
I. INTRODUCTION
The primary purpose of the Incentive Compensation Plan for senior
management at American Bancorporation is to boost the profitability of
the holding company and each subsidiary, and reward the individuals who
are primarily responsible for increasing profitability. Therefore, the
Plan will provide for additional compensation to key employees whose
performance contributes to improved profitability. The Plan will
accomplish this by:
o Utilizing motivational rewards, in the form of cash compensation, to spur
better performance by participants;
o Focusing the attention of participants on activities which increase
overall profitability;
o Providing a means for participants to receive compensation above base
salary when performance goals are met; and
o Providing fair supplementary compensation in relation to the
participant's impact on overall objectives.
In addition to the primary goal of improving profitability, the
Incentive Plan can help accomplish other important objectives,
including:
o Improving short-term financial performance, while promoting long-term
objectives;
o Fostering teamwork and cooperation among participants; and
o Helping to retain and motivate members of the management team.
This Plan document identifies the officers who will be participants,
outlines procedures for establishing annual performance goals, and
provides a formula for determining incentive awards. In addition, this
report includes guidelines for the distribution of incentive awards to
participants, and examples to illustrate the determination of
individual awards.
II. PARTICIPANTS
Incentive Plan participants are key officers who have a significant
impact on overall performance. Initially, these officers will be:
American Bancorporation
o President
o Chief Financial Officer
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Wheeling National Bank
o President
o Chief Lending Officer
American Mortgages, Inc.
o President
Participants may be added or deleted by the Board of Directors, upon
recommendation from the Chief Executive Officer of American
Bancorporation. Termination of employment of a participant prior to
year-end for reasons such as retirement, disability or death typically
will result in the distribution of a pro-rated share of the annual
reward. However, a participant who voluntarily terminates or is
terminated prior to year-end for reasons other than those described
above will not be eligible for incentive awards.
New Plan participants appointed during the Plan year will be eligible
for incentive awards according to their pro-rated base salary income
for the period of participation. The decision to allow participation in
the Plan by new or promoted employees will be made by the Board of
Directors, upon recommendation by the Chief Executive Officer of
American Bancorporation. This recommendation will be made on a
case-by-case basis.
III. ANNUAL GOAL-SETTING
Each year, the Board of Directors and the Chief Executive Officer of
American Bancorporation will establish performance goals which will
govern the operation and distribution of the Incentive Plan. The
goal-setting process will clearly communicate to participants the
criteria for success and the methods to attain higher performance.
A. Net Income Performance Goals
Initially, the Board of Directors and the Chief Financial
Officer of American Bancorporation will establish Plan year
goals for profitability, as defined by holding company or
subsidiary net income. The net income goals will be used to
establish an award determination formula for each participant.
B. Loan Performance Goals
It may be advisable in the future to establish goals for
Lending Officer participants based on loan growth. However,
such goals, if and when they are established, would be subject
to a Minimum Loan Quality Threshold, as set by the Board and
the Chief Executive Officer of American Bancorporation.
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IV. INCENTIVE COMPENSATION CREATION
A. Performance Objectives
Prior to the beginning of the Plan year, the Board of
Directors and the Chief Executive Officer of American
Bancorporation will establish Bank performance goals according
to the process listed above. As initially established, the
performance criteria for participants shall be as follows:
American Bancorporation
o President Targeted Net Income for
American Bancorporation
o Chief Financial Officer Targeted Net Income for
American Bancorporation
Wheeling National Bank
o President Targeted Net Income for
Wheeling National Bank (70%), and
Targeted Net Income for American
Bancorporation (30%)
o Chief Lending Officer Targeted Net Income for
Wheeling National Bank
American Mortgages, Inc.
o President Targeted Net Income for American Mortgages, Inc.
The net income criterion is defined below:
Targeted Net Income (TNI) = Net income of American Bancorporation or each
subsidiary after taxes, as determined by the Board of Directors and Chief
Executive Officer of AmericanBancorporation for the Plan year.
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The current award formulas do not base any awards on loan
growth. However, it may be advisable to add loan growth as an
award component in the future for loan officer participants.
The criteria for such an award would be as follows:
Targeted Loan Growth (TLG) = Increase in the size of the loan portfolio
identified by the Board of Directors and Chief Executive Officer of
American Bancorporation as the target for the Plan year.
Minimum Loan
Quality Threshold = The minimally acceptable level of loan quality which permits
a funding of the Loan Growth Award component of the Participant's Incentive
Plan.
The targeted performance goals will be based on (1) past
performance, (2) expectations of performance for the upcoming
Plan year, and (3) results of institutions of similar size and
orientation.
Net Income Objectives
Three thresholds will be set based on the Targeted Net Income.
1. Minimum Net Income
2. Targeted Net Income
3. Maximum Net Income
For purposed of illustration, the Minimum Net Income will be
90% of Targeted Net Income and the Maximum will be 110% of
Targeted Net Income.
The performance thresholds should be high enough to be
challenging. However, to be effective, they must be
realistically attainable.
B. Incentive Award Formula
The difference between actual and targeted net income values
will determine incentive awards. If the minimum targeted
threshold for net income is reached or exceeded, awards will
be made. Incentive awards will be linked in a formula to the
participant's total base salary. Minimum and maximum awards,
as a percentage of the participant's base salary, will be as
follows:
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Minimum Maximum
Award Award
American Bancorporation
President 6% 30%
Chief Financial Officer 4% 20%
Wheeling National Bank
President 5% 25%
Chief Lending Officer 4% 20%
American Mortgages, Inc.
President 4% 20%
For example, the following formula would be used to determine
the award for the President of American Bancorporation,
assuming that actual net income performance falls between 90%
of TNI and 110% of TNI.
Award=[.24x(Actual NI - 90% of TNI) + .06] x Base Salary
------------------------
110% of TNI - 90% of TNI
If the actual net income performance falls below 90% of TNI,
there will be no incentive award. If the actual net income
performance exceeds 110% of TNI, the award will be funded at
the maximum 30% of base salary.
For the President of Wheeling National Bank, the formula would
be based upon a blend of the actual net income performance for
both Wheeling National Bank and American Bancorporation.
Similarly, for the President of American Mortgages, Inc., the
formula would be based upon a blend of the actual net income
performance for both American Mortgages, Inc. and American
Bancorporation.
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V. INCENTIVE DISTRIBUTION
A. Safeguards
No incentive awards will be paid if American Bancorporation
does not attain 90% of Targeted Net Income.
B. Payment of Awards
Incentive awards will be distributed as soon as practicable
after year-end financial statements are completed.
VI. PLAN COMMUNICATION
To insure the effectiveness of the Plan as an incentive for improved
performance, participants must fully understand its mechanics, and
receive periodic feedback on their standing relative to the Plan
targets. To accomplish this:
o The Plan's purpose, methods for determining the award pool and
process for distributing individual awards will be discussed
with participants at the inception of the Plan, and reviewed
with them any time there is a change to the Plan;
o This document will be available for review by Plan
Participants; and
o Quarterly performance results will be formally communicated on
a regular basis throughout the Plan year to everyone involved.
VII. PLAN REVIEW
The Incentive Compensation Plan represents a new method of compensating
American Bancorporation's key officers. Therefore, the implementation
and ongoing administration of the Plan are entirely under the Board's
authority, and its interpretation is subject to the Board's sole and
absolute discretion. The Plan is not to be construed as a binding
contract, and its operation is subject to the current and future
objectives of the Board of Directors of American Bancorporation. In
addition, to ensure that the Plan continues to meet its objectives, the
Board of Directors may modify it at any time.
Because the Plan is new and is complex, special review procedures are
required during the first year. Therefore, on a quarterly basis during
the first Plan year, the Board will:
o Review the performance criteria to determine whether they
represent effective performance targets; and
o Review projections of distribution percentages to ensure that
original distribution amounts, relative to performance, will
be available.
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After the completion of the first Plan year, the Board will annually
review the operation of the Plan and, as necessary, amend it to ensure
that:
o The performance criteria continue to reflect performance goals
o The incentive computation formulas remain valid;
o Appropriate individuals are included as participants;
o The Plan's operation is consistent with overall budgetary,
capital and growth considerations; and
o Participant's perceive the Plan as an equitable and fair
mechanism for the determination of incentive compensation.
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SAMPLE CALCULATIONS
A. INDIVIDUAL AWARD FOR PRESIDENT OF AMERICAN BANCORPORATION
Given:
o Net Income Thresholds:
90% of Targeted Net Income = $2,250,000
Targeted Net Income = $2,500,000
110% of Targeted Net Income = $2,750,000
o President's Base Salary = $
o Actual Net Income = $2,600,000
Award = [.24 x (Actual NI - 90% of TNI) + .06] x President's Base
----------------------
110% of TNI - 90% of TNI Salary
Award = [.24 x ($2,600,000 - $2,250,000)+ .06] x $100,000
-------------------------
$2,750,000 - $2,250,000
Award = .228 x $100,000
Award = $22,800
TOTAL AWARD FOR PRESIDENT = $22,800
B. INDIVIDUAL AWARD FOR PRESIDENT OF WHEELING NATIONAL BANK
Given:
o American Bancorporation Net Income Thresholds:
90% of Targeted Net Income = $2,250,000
Targeted Net Income = $2,500,000
110% of Targeted Net Income = $2,750,000
o Actual Net Income = $2,600,000
o Wheeling National Bank Net Income Thresholds:
90% of Targeted Net Income = $1,575,000
Targeted Net Income = $1,750,000
110% of Targeted Net Income = $1,925,000
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o Actual Net Income = $1,800,000
o President's Base Salary = $ 75,000
American Bancorporation Component of Award:
[.06 x (Actual ABNI - 90% of ABTNI) + .015] x President's Base
110% of ABTNI - 90% of ABTNI Salary
Award = [.06 x ($2,600,000 - $2,250,000) + .015] x $75,000
-------------------------
$2,750,000 - $2,250,000
Award = .057 x $75,000
Award (American Bancorporation Component) = $4,275
Wheeling National Bank Component of Award:
[.14 x (Actual WNBNI - 90% of WNBTNI) + .035] x President's Base
110% of WNBTNI - 90% of WNBTNI Salary
Award = [.14 x ($1,800,000 - $1,575,000 + .035] x $75,000
------------------------
$1,925,000 - $1,575,000
Award = .125 x $75,000
Award (Wheeling National Bank Component) = $9,375
TOTAL AWARD FOR PRESIDENT ($4,275 + $9,375) = $13,650
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