Exhibit 10(a)
FIRST BANCORP
MANAGEMENT ANNUAL INCENTIVE PLAN
Based On Performance Against Annual Profit Plan
INTRODUCTION
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Annual Incentive bonus awards will be determined under First Bancorp's
Management Incentive Plan ("MIP") and paid in cash. The MIP links compensation
to "performance" of First Bancorp and to an evaluation of a participant's
personal contribution to that performance. Performance objectives and individual
goals are defined with all participants annually to ensure that their efforts
and the efforts of their business units are focused on improving both short-term
and long-term performance, enhancing First Bancorp's strengths in its
businesses, and contributing to shareholder value. Under this program, First
Bancorp and its business units must produce a threshold level of earnings before
any bonus awards are generated.
Following a review with management, an Earnings Target is set annually by the
Board of Directors, upon recommendations by the Compensation Committee, for the
Bank and each individual business unit. These targets are designed to require a
high level of performance in order to be achieved. Awards to participants under
the MIP are variable and are based upon:
(1) the participant's responsibilities and ability to effect corporate and
business unit performance;
(2) the extent to which Earnings Targets are achieved or surpassed by the Bank
and its business units; and
(3) the Participant's personal performance will be measured by the specific
annual goals established for the business unit as defined by management.
The importance of First Bancorp's earnings to the determination of a
participant's MIP awards and the amount of that award as a percentage of a
participant's annual base salary, increases directly with that individual's
responsibilities and ability to impact First Bancorp performance. It is First
Bancorp's intent that its Management and key employees will, through performance
based cash bonuses paid under the MIP, receive total current compensation which
is substantially determined by the achievement of operating results that meet or
exceed set targets.
MIP PRINCIPAL PLAN FEATURES
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Measurement
Period Calendar Year
Eligible
Employees Management Employees, with approval of the Compensation Committee
Basis of
Measurement Actual fiscal performance, compared against approved Annual
Profit Plan. To include overall (i) corporate performance, (ii)
individual unit performance, or (iii) a combination of (i) and
(ii) for different categories of participation, and (iv)
individual personal performance as measured by the achievement of
specific annual goals for the business unit.
Participation
Categories A. Corporate - includes individuals whose job
performance has an impact on the entire corporation.
B. Unit - includes individuals in roles directly
assigned to a profit center (branches and specific
departments).
C. Corporate/Unit - includes individuals in corporate
staff roles who manage unit budgets and operating objectives
(Regional Managers).
Determination
of Awards A. Corporate Plan Participants - 100% on the basis of
First Bancorp corporate performance.
B. Unit Plan Participants - 25% on the basis of First
Bancorp corporate performance, and 75% on the basis of
fiscal performance of the respective profit center(s)
managed by the respective participant.
C. Corporate/Unit Plan Participants - 25 % on the basis
of First Bancorp corporate performance, and 75% on the basis
of fiscal performance of the respective profit center(s)
managed by the Regional Manager.
Calculation
of Awards A target award is established for each participant, which will be
paid if Annual Profit Plan goals are met.
A threshold level for both business and corporate unit(s) is
established, below which no bonuses will be paid.
A maximum level is also established at which point the maximum
allowable bonus will be earned (e.g. 125% or more of the budget
earns maximum 150% of target: Actual threshold, target and
maximum values will be determined by the Compensation Committee).
Each participant is assigned a target award expressed as a
percent of his/her base annual salary (5%, 10%, 12%, 15%, 20%,
25% and 35%). A participant's target award is increased or
decreased based on First Bancorp meeting annual Profit Plan goals
of consolidated First Bancorp and/or profit center goal, as it
relates to the Category (Corporate, Unit, etc.) to which the
participant is assigned.
The target award is adjusted based on the percent of First
Bancorp's annual Profit Plan, provided certain "threshold goals"
are obtained.
Threshold Goals:
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1. No bonuses are paid to anyone unless First Bancorp attains
at least 10.0% return on equity (ROE).
2. No corporate bonuses are paid unless First Bancorp achieves
90% of its consolidated corporate earnings per share (EPS).
Personal Performance Goals:
1. The Participant's personal performance will be measured by
the specific annual goals established for the business unit
as defined by management.
2. For the branch unit, the participant's personal performance
will be based on Asset Quality, Market share retention and
growth, target award and related earning components, and
Internal Audit Grade. See Exhibit B.
3. The total score calculated based on the achievement of the
annual goals (see Exhibit B) will be used to determine the
amount of the cash bonus to be awarded to the individual
branch unit.
Discretionary
Awards In the event that the consolidated First Bancorp performance is
below the threshold level, the Compensation Committee may
determine whether:
1. discretionary awards will be made to deserving
individuals, and
2. if the 75% portion for Corporate/Unit participants will
be granted.
Plan Funding Accruals are made each month during the Plan Year, based
on the extent to which monthly budget income goals are met.
Merit
Adjustment For any participant, the formula award may be adjusted up or down
to reflect the Manager's Assessment of the participant's
individual performance with the concurrence of the Compensation
Committee.
ADVANTAGES OF A BUDGET-BASED PLAN
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1. Participants, especially those responsible for Profit Centers, can more
easily track their progress throughout the plan year.
2. Participants responsible for Profit Center can see more direct correlation
between their performance and their awards.
Definition of Business Units:
1. Corporate
Executive Vice Presidents
Senior Vice Presidents
2. Regional Managers
3. Branch offices
4. Profit Centers
a. Mortgage Loan
b. Credit Card
c. Appraisal Department
5. Departments:
a. Operation
b. Audit
c. Repossession and Collections
MIP PLAN
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% of Business Plan % of Target Bonus
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Threshold 90 30
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95 60
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Target 100 100
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105 110
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110 120
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115 130
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120 140
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Max. 125 150
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To determine % of Target Bonus payable for achieving a % of Business Plan
between 5% increments listed above, this will be done by interpolation using a
level accrual between the various % of Target Bonus - Ex. 93% of Business Plan
Target Bonus will be 48%.
Exhibit B
Management Annual Performance Goals & Scores
For Year Ending December 31, 1996
Office _________________
I. Loan and Operating Losses Maximum Score 40 points
Net loan charge-offs + net charge-offs of other assets & repossessions to
average total loans:
0 - 0.20% = 30 points
0.21 - 0.30% = 20 pointes
0.31 - 0.40% = 10 points
0.41 + = 0 points Score _____ Points
Past Dues & Nonaccruals to total loans
(1.50% = 10 points) (4 qtr. Simple avg.) Score _____ Points
II. Deposit Growth and Performance Maximum Score 30 points
A. Deposit Goals
(To be based on 3 years prior growth trends for current year projection.
The current year goal will be set by the Regional Manager and the branch
manager. Points will be awarded based on the percentage of the goal
achieved.)
Actual $___________________ Goal $_____________________
12-31-95 Year 1995
% of goal achieved ______________% Score ____ Points
B. Annual Performance
Target Goal - EPS Score _____ Points
III. Internal Audit Score: Maximum Score 30 Points
_______ X 30 = Score ______ Points
Total Maximum Score 100 Points
Actual Score _____ Points