DEF 14A 1 fmbh-def14a_20210428.htm DEF 14A fmbh-def14a_20210428.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. ____)

 

Filed by the Registrant

 

 

Filed by a Party other than the Registrant

 

Check the appropriate box:

 

 

Preliminary Proxy Statement

 

Confidential, for use of the Commission only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material pursuant to Rule 14a-12

 

FIRST MID BANCSHARES, INC.

(Name of Registrant as Specified in its Charter)

 

(Name of Person(s) Filing Proxy Statement; if other than the Registrant)

Payment of filing fee (check the appropriate box):

 

 

No fee required.

 

 

 

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

(1)

Title of each class of securities to which transaction applies:

 

(2)

Aggregate number of securities to which transaction applies:

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11

 

(4)

Proposed maximum aggregate value of transaction:

 

(5)

Total fee paid:

 

 

Fee paid previously with preliminary materials.

 

 

 

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.  Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

 

 

(1)

Amount Previously Paid:

 

(2)

Form, Schedule or Registration Statement No.:

 

(3)

Filing Party:

 

(4)

Date Filed:

1


 

March 19, 2021

 

Dear Fellow Stockholder:

 

On behalf of the Board of Directors and management of First Mid Bancshares, Inc. (the “Company”), I cordially invite you to virtually attend the Annual Meeting of Stockholders of First Mid Bancshares, Inc. to be held at 4:00 p.m. on Wednesday, April 28, 2021. Due to the public health impact of the COVID-19 pandemic, and out of concern for the health and safety of our stockholders, employees and directors, this year’s annual meeting will be a virtual meeting of the stockholders.

 

Pursuant to the Securities and Exchange Commission’s “notice and access” rules, on or about March 19, 2021, you received in the mail our Notice of Internet Availability of Proxy Materials (the “Notice”), which provided you with instructions on how to access this Proxy Statement via an Internet website, the Company's 2020 annual report to stockholders and the Company’s Annual Report on Form 10-K for the recently completed fiscal year.  Details regarding the business to be conducted at the meeting are described in the Notice and in this Proxy Statement.

 

At the meeting, we will report on Company operations and the outlook for the year ahead.  Directors and officers of the Company, as well as a representative of BKD, LLP, the Company's independent auditors, will be virtually present to respond to any appropriate questions stockholders may have.

 

The 2021 annual meeting of stockholders is being held for the following purposes:

 

1.

To elect Holly B. Adams (formerly known as Holly A. Bailey), Joseph R. Dively and Zachary I. Horn as directors of the Company (Proposal 1);

 

2.

To approve an increase in available shares under the First Mid Bancshares, Inc. 2017 Stock Incentive Plan (Proposal 2);

 

3.

Such other matters as may properly come before the meeting or any adjournments thereof.

Whether or not you plan to virtually attend the meeting, please act promptly to vote your shares.  You may vote your shares over the Internet or, if you receive or request to receive written proxy materials, by mailing, completing, signing and dating a proxy card and returning it in the accompanying postage paid envelope provided.  You may also vote your shares by telephone or by following the instructions set forth on the proxy card or Notice.  Please review the instructions for each of your voting options described in the Notice you received in the mail and in this Proxy Statement. If you virtually attend the meeting, you may vote your shares virtually, even if you have previously submitted a proxy in writing, by telephone or through the Internet.  Submitting a proxy will ensure that your shares are represented at the meeting.  If you have any questions concerning these matters, please contact me at (217) 258-9520 or Aaron Holt, Manager of Shareholder Services, at (217) 258-0463.  We look forward with pleasure to your participation in the meeting.

 

Very truly yours,

 

 

 

FIRST MID BANCSHARES, INC.

 

 

 

/s/ Joseph R. Dively

 

 

Joseph R. Dively

 

 

 

Chairman, President and Chief Executive Officer

 

 

 

 

 

1421 Charleston Avenue  •  P.O. Box 499  •   Mattoon, IL 61938  •  Phone: (217) 258-0493

2


 

 

PROXY STATEMENT

Annual Meeting of Stockholders To Be Held April 28, 2021

First Mid Bancshares, Inc.

1421 Charleston Avenue, P.O. Box 499

Mattoon, Illinois 61938 (217) 258-0493

GENERAL INFORMATION

 

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of First Mid Bancshares, Inc. (the “Company”) to be voted at the Annual Meeting of Stockholders on Wednesday, April 28, 2021 at 4:00 p.m. local time. Due to the public health impact of the COVID-19 pandemic, and out of concern for the health and safety of our stockholders, employees and directors, this year’s annual meeting will be a virtual meeting of the stockholders. The Board of Directors would like to have all stockholders represented at the meeting. This proxy statement and the enclosed form of proxy are being made available to the stockholders beginning on or about March 19, 2021.

Whether or not you plan to virtually attend the Annual Meeting of Stockholders, we encourage you to read this Proxy Statement and submit your proxy as soon as possible. For specific instructions on how to vote your shares, please refer to the instructions on the Notice of Internet Availability of Proxy Materials you received in the mail and if you receive or request to receive printed proxy materials, the proxy card. The Company's annual report to stockholders and its Annual Report on Form 10-K for the recently completed fiscal year, which includes the consolidated financial statements of the Company, have been made available with this Proxy Statement.

 

The Company is a diversified financial services company which serves the financial needs of the communities in which it is located.  The Company owns all of the outstanding capital stock of First Mid Bank & Trust, N.A., a national banking association ("First Mid Bank"); Providence Bank (“Providence Bank”), a Missouri chartered depository trust company; First Mid Wealth Management Company, a trust, farm services, investment services and retirement planning company ("Wealth Management"); Mid-Illinois Data Services, Inc., a data processing company ("Data Services"); First Mid Insurance Group, an insurance agency ("Insurance Group"); and First Mid Captive, Inc. a captive insurance company ("Captive").

Only holders of record of the Company's common stock ("Common Stock") at the close of business on March 4, 2021 (the "Record Date") will be entitled to vote at the annual meeting or any adjournments or postponements of such meeting.  On the Record Date, the Company had 18,039,242 shares of Common Stock issued and outstanding.  In the election of directors, and for any other matters to be voted upon at the annual meeting, each issued and outstanding share of Common Stock is entitled to one vote.

You may revoke your proxy at any time before it is voted.  Unless so revoked, the shares represented by such proxies will be voted at the annual meeting and all adjournments thereof.  You may revoke your proxy at any time before it is voted by delivering written notice of revocation to the Secretary of the Company at 1421 Charleston Avenue, P.O. Box 499, Mattoon, Illinois 61938, by executing and delivering a subsequently dated proxy or by virtually attending the annual meeting and voting your shares virtually.  Proxies solicited by the Board of Directors of the Company will be voted in accordance with the directions given therein.  Where no instructions are indicated, proxies will be voted in accordance with the recommendations of the Board of Directors with respect to the proposals described herein.

A quorum of stockholders is necessary to take action at the annual meeting.  The presence, virtually or by proxy, of the holders of a majority of the shares of Common Stock of the Company entitled to vote at the meeting will constitute a quorum.  Votes cast by proxy or virtually at the meeting will be tabulated by the inspector of election appointed for the meeting and will be counted as present for purposes of determining whether a quorum is present.  The inspector of election will treat proxies received but marked as abstentions or broker non-votes as present and entitled to vote for purposes of determining whether a quorum is present.  "Broker non-votes" refers to a broker or other nominee holding shares for a beneficial owner not voting on a particular proposal because the broker or other nominee does not have discretionary voting power regarding that item and has not received instructions from the beneficial owner.

3


The expenses of solicitation, including the cost of printing and mailing, will be paid by the Company.  Proxies are being solicited principally via the Internet and by mail.  In addition, directors, officers and regular employees of the Company may solicit proxies personally, by telephone, by fax or by special letter.  The Company may also reimburse brokers, nominees and other fiduciaries for their reasonable expenses in forwarding proxy materials to beneficial owners.

 

 

4


VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

The following table sets forth, as of February 22, 2021, the number of shares of Common Stock beneficially owned by each person known by the Company to be the beneficial owner of more than five percent of the outstanding shares of Common Stock (who are not also directors), each director nominee of the Company, each director, the "named executive officers" (as defined below) and all director nominees, directors and executive officers of the Company as a group. Please refer to the footnotes of the following table for details.

 

Name and Address of Beneficial Owner (1)

 

Title of

Class

 

Amount and Nature of

Beneficial Ownership (2)

 

 

Percentage

of Class

Outstanding

 

 

Principal Stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

Blackrock, Inc. 55 East 52nd Street

   New York, NY 10055

 

 

Common

 

 

906,840

 

(3)

 

5.0

%

 

Elizabeth Paige Laurie, Trustee of the EPL LINCO Trust, dated

December 1, 2015        

302 Campusview Drive, Suite 108, Columbia, Missouri 65201

 

 

Common

 

 

1,262,246

 

(4)

 

7.0

%

 

Director Nominees, Directors and Named Executive Officers:

 

 

 

 

 

 

 

 

 

 

 

 

Holly B. Adams (formerly known as Holly A. Bailey)

 

 

Common

 

 

141,056

 

(5)

 

0.8

%

 

Robert S. Cook

 

 

Common

 

 

36,266

 

(6)

 

0.2

%

 

Joseph R. Dively

 

 

Common

 

 

114,109

 

(7)

 

0.6

%

 

Steven L. Grissom

 

 

Common

 

 

666,022

 

(8)

 

3.7

%

 

Zachary I. Horn

 

 

Common

 

 

4,658

 

(9)

*

%

 

J. Kyle McCurry

 

 

Common

 

 

500

 

(10)

*

%

 

Ray A. Sparks

 

 

Common

 

 

274,783

 

(11)

 

1.5

%

 

Mary J. Westerhold

 

 

Common

 

 

176,480

 

(12)

 

1.0

%

 

James E. Zimmer

 

 

Common

 

 

13,563

 

(13)

 

0.1

%

 

Matthew K. Smith

 

 

Common

 

 

7,124

 

(14)

*

%

 

Michael L. Taylor

 

 

Common

 

 

29,166

 

(15)

 

0.2

%

 

Eric S. McRae

 

 

Common

 

 

33,580

 

(16)

 

0.2

%

 

Bradley L. Beesley

 

 

Common

 

 

16,477

 

(17)

 

0.1

%

 

All director nominees, directors, named executive

   officers and other executive officers as a group

   (20 persons)

 

Common

 

 

1,560,210

 

(18)

 

8.7

%

 

 

 

  *

Less than 1%

 

 

 

5


(1)

Addresses are provided for those beneficial owners owning more than 5% of the Company's common stock.

(2)

Unless otherwise indicated, the nature of beneficial ownership for shares shown in this column is sole voting and investment power.  The information contained in this column is based upon information furnished to the Company by the persons named above.

(3)

Beneficial and percentage ownership information is based on information contained in a form 13G as filed with the Securities and Exchange Commission on February 7, 2021.

(4)

Beneficial and percentage ownership is based on information contained in a form 13D as filed with the Securities and Exchange Commission on February 25, 2021.

(5)

Consists of 136,685 shares held by Ms. Adams individually; and 4,371 shares held for the account of Ms. Adams under the Company’s Deferred Compensation Plan.

(6)

Includes 14,122 shares held by Mr. Cook jointly with his spouse; 6,106 shares held for Mr. Cook under an Individual Retirement Account; 1,980 shares held as custodian for Mr. Cook's children; 244 shares held for Mr. Cook's wife under an Individual Retirement Account; and 13,814 shares held by TAR CO Investment LLC for which Mr. Cook has shared voting and investment power.

(7)

Includes 67,742 shares held by Mr. Dively individually; and 46,367 shares held for the account of Mr. Dively under the Company’s Deferred Compensation Plan.

(8)

Includes 42,082 shares held by Mr. Grissom individually; 27,714 shares held jointly with his spouse; and 2,819 shares held for the account of Mr. Grissom under the Company's Deferred Compensation Plan. Mr. Grissom also is one of four trustees for the Richard Anthony Lumpkin Trust Dated May 13, 1978 for the benefit of the children of Richard Anthony Lumpkin. This trust holds 46,159 shares and voting and investment power is shared. The above Common Stock amount also includes 382,397 shares held by the Richard Adamson Lumpkin Trust dated February 6, 1970 for the benefit of the children of Richard Anthony Lumpkin; 604 shares held by the Richard Adamson Lumpkin Trust dated February 5, 1976 for the benefit of the children of Richard Anthony Lumpkin; 1,540 shares held by the Richard Anthony Lumpkin 1990 Dynasty Trust for the benefit of Benjamin I. Lumpkin; 1,540 shares held by the Richard Anthony Lumpkin 1990 Dynasty Trust for the benefit of Elizabeth L. Celio; 600 shares held by the Elizabeth L. Celio 2000 Gift Trust dated December 20, 2000 for the benefit of Emma G. Celio, 600 shares for the benefit of Claudia M. Celio and 600 shares for the benefit of Gabriela C. Celio; 19,873 shares held by the Richard Adamson Lumpkin Trust dated February 6, 1970 for the benefit of the children of Mary Lee Sparks; 152 shares held by the Anne R. Sparks 1976 Trust under MLS Trust; 151 shares held by the Barbara S. Federico 1976 Trust under MLS Trust; 151 shares held by the Christina S. Duncan 1976 Trust under MLS Trust; 651 shares held by the Barbara S. Federico 1990 Dynasty Trust under MLS Trust; 651 shares held by the Christina S. Duncan 1990 Dynasty Trust under MLS Trust; 650 shares held by the Anne R. Sparks 1990 Dynasty Trust under MLS Trust; 5,874 shares held by the John W. Sparks 2001 Irrevocable Trust dated July 5, 2001; 130,610 shares held by the Richard Adamson Lumpkin Trust dated February 6, 1970 for the benefit of Margaret Lumpkin Keon and 604 shares held by the Richard Adamson Lumpkin Trust dated February 5, 1976 for the benefit of Margaret Lumpkin Keon. Mr. Grissom has sole voting and investment power over these trusts. Mr. Grissom disclaims beneficial ownership of the 593,407 shares held by the foregoing trusts.

(9)

Includes 3,000 shares held by Mr. Horn individually; and 1,658 shares held for the account of Mr. Horn under the Company's Deferred Compensation Plan.

(10)

Includes 500 shares held by Mr. McCurry individually.

(11)

Includes 188,037 shares held by Mr. Sparks individually; 40,828 shares held by Sparks Investment Group, LP; 18,880 shares held by the Sparks Foundation over which Mr. Sparks shares voting and investment power; and 27,038 shares held for the account of Mr. Sparks under the Company’s Deferred Compensation Plan.

(12)

Includes 40,421 shares held by Ms. Westerhold individually; 1,960 shares held for the account of Ms. Westerhold under an Individual Retirement Account; 5,714 shares held for the account of Ms. Westerhold under the Company’s Deferred Compensation Plan; 20,236 shares held by DMW Investments, LLC and  56,224 shares held by Technology Group, LLC over which Ms. Westerhold shares voting and investment power; 35,471 shares held by the Jeffrey A. Westerhold Revocable Trust, 8,227 shares held by the Andrew J. Westerhold Revocable Trust; and 8,227 shares held by the Madeline C. Westerhold Trust over which Ms. Westerhold shares voting and investment power.

6


(13)

Includes 1,834 shares held by Mr. Zimmer individually; 3,050 shares held for the account of Mr. Zimmer under an Individual Retirement Account; and 8,679 shares held for the account of Mr. Zimmer under the Company's Deferred Compensation Plan.

(14)

Includes 6,507 shares held by Mr. Smith individually; and 617 shares held for the account of Mr. Smith under the Company’s Deferred Compensation Plan.

(15)

Includes 17,847 shares held by Mr. Taylor individually; 8,381 shares held for the account of Mr. Taylor under the Company’s 401(k) Plan and 2,938 shares held for the account of Mr. Taylor under the Company's Deferred Compensation Plan.

(16)

Includes 22,062 shares held by Mr. McRae individually; 2,518 shares for the account of Mr. McRae under an Individual Retirement Account; 3,915 shares held for the account of Mr. McRae under the Company’s 401(k) Plan; and 5,085 shares held for the account of Mr. McRae under the Company’s Deferred Compensation Plan.

(17)

Includes 7,900 shares held by Mr. Beesley individually; 3,051 shares held for the account of Mr. Beesley under the Company’s 401(k) Plan; and 5,526 shares held for the account of Mr. Beesley under the Company's Deferred Compensation Plan.

(18)

Includes shares for seven executive officers not included in the above table.

 

As of February 1, 2021, Wealth Management acted as sole or co-fiduciary with respect to trusts and other fiduciary accounts which own or hold 210,237 shares, or 1.26%, of the outstanding Common Stock of the Company, over which Wealth Management has sole voting and investment power with respect to 199,184 shares, or 1.19%, of the outstanding Common Stock and shared voting and investment power with respect to 11,053 shares, or 0.07%, of the outstanding Common Stock.

 

 

7


 

 

PROPOSAL 1 - ELECTION OF DIRECTORS

The directors of the Company are divided into Classes I, II and III having staggered terms of three years.  For this year's annual stockholders meeting, upon the recommendation of the Board of Director's independent directors, the Board of Directors has nominated for re-election as Class II directors, for a term expiring in 2024, Ms. Adams, Mr. Dively and Mr. Horn. Ms. Adams, Mr. Dively and Mr. Horn have served as directors of the Company since 2012, 2004 and 2020, respectively. The three individuals receiving the highest number of votes cast will be elected as directors of the Company and will serve as Class II directors for a three-year term.  Broker non-votes, because they are not considered votes cast, will not be counted in the vote totals.  The Company has no knowledge that any of the nominees will refuse or be unable to serve, but if any of the nominees becomes unavailable for election, the holders of the proxies reserve the right to substitute another person of their choice as a nominee when voting at the meeting.  

The following table sets forth as to each nominee and director continuing in office, his or her name, age, principal occupation and the year he or she first became a director of the Company.  Unless otherwise indicated, the principal occupation listed for each person below has been his or her occupation for the past five years.

 

Name

 

Age at

March 19,

2021

 

 

Principal Occupation

 

Year First

Became

Director

 

Year

Term

Expires

DIRECTOR NOMINEES

 

 

 

 

 

Holly B. Adams (formerly known as Holly A. Bailey)

 

 

50

 

 

President of Howell Asphalt Company (since 2008) and Howell Paving, Inc. (since 2013), a road construction company; Executive Vice President of Howell Paving, Inc. (2008-2013); and Vice President of Howell Asphalt Company and Howell Paving (1997- 2008); Director of the Company, First Mid Bank, Data Services and Insurance Group (since 2012); Director of Wealth Management

(since July 2018).

 

2012

 

2021

Joseph R. Dively

 

 

61

 

 

Chairman, President and Chief Executive Officer of the Company (since January 2014); Senior Executive Vice President of the Company (May 2011-December 2013); President of First Mid Bank (since May 2011); Senior Vice President of Consolidated Communications Holdings, Inc., a telecommunications holding company (2003-2011), and President of Illinois Telephone Operations, a local telecommunications provider (until 2008); Director of the Company and First Mid Bank (since 2004); Director of Data Services and Insurance Group (since 2009); Director of Wealth Management (since July 2018); Director of Providence Bank (since February 2021).

 

2004

 

2021

Zachary I. Horn

 

 

42

 

 

President and sole owner, Metro Communications Company, Inc., a telecommunications firm (since 2000); Director of the Company, First Mid Bank, Data Services, Insurance Group and Wealth Management (since January 2020).

 

2020

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

The Board of Directors recommends a vote "FOR" the election of Directors  

Adams, Dively and Horn term of three years.

 


8


 

Name

 

Age at         March 19,

2021

 

 

Principal Occupation

 

Year First

Became

Director

 

Year

Term

Expires

DIRECTORS CONTINUING IN OFFICE

 

 

 

 

 

Robert S. Cook

 

 

38

 

 

Managing Partner of TAR CO Investments LLC, a private investment company (since 2014); Vice President of FIG Partners LLC, an investment banking firm (from 2009-2014); Director of the Company, First Mid Bank, Data Services and Insurance Group (since 2014); Director of Wealth Management (since July 2018); Director of Providence Bank (since February 2021).

 

2014

 

2022

Ray A. Sparks

 

 

65

 

 

Advisor to Rural King Farm & Home Supplies, Inc., a retail farm and home supply store chain, in the area of corporate philanthropy (since 2019); private investor, Sparks Investment Group, LP (since 1997); CEO and Senior Advisor of Mattoon Area Family YMCA(2009-2019); President of Elasco Agency Sales, Inc. and Electric Laboratories and  Sales Corporation, a distributor of electrical supplies (until 1997); Director of the Company (since 1994); Director of First Mid Bank (since 1997); Director of Data Services (since 1996); Director of Insurance Group (since 2002); Director of Wealth Management (since July 2018).

 

1994

 

2022

James E. Zimmer

 

 

57

 

 

Owner, Zimmer Real Estate Properties, a student housing provider (since 2010); Co-Founder, BioEnzyme, an agriculture business focused on innovative solutions for farmers (since 2010); Chief Executive Officer of Channel Bio, a corn/soybean seed company owned by Monsanto Corporation (2008-2010); Director of the Company, First Mid Bank, Data Services and Insurance Group (since 2014); Director of Wealth Management (since July 2018).

 

2014

 

2022

Steven L. Grissom

 

 

68

 

 

Chief Executive Officer of SKL Investment Group, LLC (since December 2015); Administrative Officer of SKL Investment Group, LLC, a private investment company (1997-November 2015); Treasurer and Secretary of Consolidated Communications Holdings, Inc., and its predecessors, a telecommunications holding company (2003-2006); Director of the Company and First Mid Bank (since 2000); Director of Data Services (since 2009); Director of Insurance Group (since 2009); Director of Wealth Management (since July 2018).

 

2000

 

2023

Mary J. Westerhold

 

 

55

 

 

Vice President and Chief Financial Officer (since 1997) and Controller (from 1992-1997), Madison Telephone Company, Madison Communications Company and Madison Network Systems; Director of the Company, First Mid Bank, Data Services and Insurance Group (since September 2016); Director of Wealth Management (since July 2018).

 

2016

 

2023

J. Kyle McCurry

 

 

43

 

 

Chief Operating Officer and General Counsel of Paige Sports Entertainment, a private family office (since 2015); Director of the Company, First Mid Bank, Data Services, Insurance Group and Wealth Management (since February 2021); Director of LINCO Bancshares, Inc. (2015-2021); Director of Providence Bank (since 2015).

 

2021

 

2023

 

9


 

CORPORATE GOVERNANCE MATTERS

BOARD OF DIRECTORS

The Board of Directors has determined that, except for Mr. Dively, each of the members of the Board of Directors is "independent" in accordance with the independence standards of the NASDAQ Stock Market LLC ("NASDAQ").  The Board of Directors has established an audit committee and a compensation committee.  The Board of Directors has concluded all current members of the audit committee and compensation committee, and all members of both committees during 2020, satisfy the independence, experience and other membership requirements of NASDAQ, as required by the audit committee charter and the compensation committee charter.  The Board of Directors has also created other company-wide management committees composed of officers of the Company and its subsidiaries.

A total of 18 regularly scheduled and special meetings were held by the Board of Directors during 2020.  During 2020, all directors attended at least 75 percent of the meetings of the Board of Directors and the committees on which they served. The Company expects directors to attend the annual meeting, absent special circumstances.  All of the then current directors attended the Company’s virtual 2020 Annual Meeting of Stockholders.

BOARD OF DIRECTOR QUALIFICATIONS

The Board of Directors seeks to be composed of a group of persons with a variety of experience, qualifications, attributes, skills and diversity that enable it to meet the governance needs of the Company. The Company has adopted a diversity policy which seeks a potential pool of director and executive officer candidates that include individuals who reflect diverse backgrounds, including diversity of gender, race, ethnic background and professional experience. The Board of Directors consists of a group of individuals who have a mix of skills and knowledge in the areas of banking, finance, accounting and business. All members of the Board of Directors have an understanding of finance and accounting, are able to understand fundamental financial statements and generally accepted accounting principles and their application to the accounting of the Company. In addition, members of the Board of Directors are active in, and knowledgeable about, the local communities in which the Company operates. A number of the members of the Company’s Board of Directors are also among the largest of the Company’s shareholders. Following is a description of each director’s specific experience and qualifications that led the Board of Directors to conclude that the person should serve as a director for the Company.

Holly B. Adams (formerly known as Holly A. Bailey) has served as a director of the Company since 2012. Ms. Adams has a bachelor’s degree in Economics from DePauw University and an MBA degree from Texas Christian University.  She is the President of Howell Asphalt Company, Wabash Asphalt Company, Inc., General Contractors and Prosser Company, which are subsidiaries of Howell Paving, Inc., of which she is also President (since 2013). She served as Executive Vice President of Howell Paving, from 2008-2013 and Vice President of Howell Asphalt Company and Howell Paving from 1997 until 2008. Her leadership experience and the business knowledge gained in her work with these companies and her experiences within the communities served by the Company assist the Board of Directors in various areas of its oversight.

Robert S. Cook has served as a director of the Company since August 2014. Mr. Cook has a bachelor's degree in Finance from the University of Missouri.  He is currently the managing partner of TAR CO Investments LLC, which primarily invests in community banks. From 2009 to 2014, Mr. Cook was Vice President of FIG Partners, LLC, an investment banking firm, where he led corporate development efforts with community banks and thrifts for the company's Midwest practice. His experience analyzing financial statements and making assessments of community banks in the Midwest assists the Board of Directors in various aspects of oversight and decision making.  

Joseph R. Dively has served as a director of the Company since 2004. Mr. Dively has a bachelor’s degree in Business from Eastern Illinois University and has also completed a “Finance for Executives” program through the graduate school of business at the University of Chicago. Mr. Dively has held a variety of management positions in diverse business units which included financial statement responsibilities since 1991.  He served as Senior Executive Vice President of the Company and President of First Mid Bank from May 2011 to December 2013. On January 1, 2014, Mr. Dively became the Chairman of the Board of Directors and CEO of the Company. He also retained his position as President of First Mid Bank. Mr. Dively provides a wealth of institutional knowledge of the Company. Prior to his employment with the Company, Mr. Dively was Senior Vice President of Consolidated Communications Holdings, Inc., a publicly traded telecommunication holding company headquartered in Mattoon, Illinois. Mr. Dively has also served on the boards of directors of several other organizations where his duties included working with investors, executive teams and other board members. Mr. Dively’s current and previous experiences also assist the Board of Directors in dealing with issues related to the Company’s local communities and the Board of Directors also benefits from his perspective serving as a former executive officer of a publicly traded company.

10


 

Steven L. Grissom has served as a director of the Company since 2000 and has been determined by the Board of Directors to be an audit committee financial expert. Mr. Grissom has a bachelor’s degree in Business with an Accounting major from Eastern Illinois University, and is also a Certified Public Accountant (“CPA”) and Personal Financial Specialist (“PFS”). He was employed by a regional CPA firm from 1974 to 1981 where his experience included review of internal control procedures and analysis of major financial transactions including evaluation of appropriate accounting treatment under generally accepted accounting principles. From 1981 to 2005, Mr. Grissom held various positions at Illinois Consolidated Telephone Company which included tax and treasury responsibilities. Mr. Grissom is currently the Chief Executive Officer of SKL Investment Group, LLC, a private investment company where his responsibilities include tax and accounting functions and evaluation of financial statements for various investment opportunities. These skills serve the Board of Directors in its assessment of complex financial and investment matters.

Zachary I. Horn joined the Company's board of directors in January 2020. Mr. Horn has a bachelor’s degree in economics from St. Louis University and a master’s degree in finance from the University of Illinois. He is the founder, president and sole owner of Metro Communications Company, Inc. (since 2000) a regional telecommunications services provider. His leadership experience, the business and financial knowledge gained in developing his company over the past 19 years, and his experiences within the communities served by the Company assist the Board of Directors in various areas of its oversight.

J. Kyle McCurry joined the Company’s board of directors in February 2021. Mr. McCurry has a bachelor’s degree in business administration and Juris Doctor Degree from the University of Missouri-Columbia. He is the Chief Operating Officer and General Counsel of Paige Sports Entertainment, a private family office that provides management services to support the activities and investments of its principals (since 2015). Prior to joining Paige Sports, Mr. McCurry was a partner with Stinson, LLP, where his practice focused on mergers and acquisitions, corporate finance, and regulatory and general corporate matters for banks and bank holding companies. He also served on the Board of Directors of Providence Bank since 2015. Mr. McCurry’s experience counseling bank and bank holding companies, including those of our newly acquired bank, Providence Bank, and managing the legal, risk and operational matters of a wide variety of entities will assist the Board of Directors in its various areas of oversight and banking experience.

Ray A. Sparks has served as a director of the Company since 1994.  Mr. Sparks has a bachelor’s degree in Business Administration with an accounting major from Millikin University and an MBA degree from Eastern Illinois University. He is currently assisting Rural King Farm & Home Supplies, Inc. in the area of corporate philanthropy (since 2019) and is a private investor (since 1997). He is the former Chief Executive Officer and Senior Advisor (2009-2019) of the Mattoon Area Family YMCA and he was President of Elasco Agency Sales, Inc. and Electric Laboratories and Sales Corporation, a distributor of electrical supplies (until 1997). He has also served as a director and officer for various not-for-profit organizations in the community. Mr. Sparks has been a user of financial statements in these positions and has experience dealing with CPAs, investment bankers and attorneys. These experiences and his strong financial background assist the Board of Directors in all areas of its oversight.

Mary J. Westerhold has served as a director of the Company since September 2016, following the Company's acquisition of First Clover Leaf Financial Corp. She was as director of First Clover Leaf Financial Corp. from 2011-September 2016. She has been determined by the Board of Directors to be an audit committee financial expert. Ms. Westerhold has a bachelor's degree in Business Administration with a minor in Finance from Stephens College and an MBA degree from St. Louis University. She is the Vice President and Chief Financial Officer (since 1997) and Controller (from 1992 to 1997) of Madison Communications, Inc. and its affiliate telecommunications companies, Madison Telephone Company and Madison Network Systems, Inc. She also served as a Commercial Loan Officer for Mark Twain Bancshares (1989-1991). Ms. Westerhold’s experience in managing the operations of the various companies provides the Board with valuable general business experience. In addition, her financial and accounting experience provides the Board with valuable insight in accounting and strategic transactions involving the Company. Additionally, having served as a director of First Clover Leaf Financial Corp., Ms. Westerhold brings in-depth knowledge of one of the Company's acquired operations and the market in which it operates.

James E. Zimmer has served as a director of the Company since August 2014. Mr. Zimmer has an MBA degree from Washington University.  From 1992-2010, he held a variety of sales, marketing and executive positions throughout the agricultural industry with Monsanto Corporation. Mr. Zimmer is currently the owner and operator of Zimmer Real Estate Properties, a premier student housing provider and the co-founder of Bio-Enzyme, an agriculture business focused on innovative solutions for farmers (since 2010). His experience and knowledge gained from these agriculture-related businesses will assist the Board of Directors in the communities it serves and various areas of its oversight.

11


 

BOARD OF DIRECTORS LEADERSHIP

Mr. Dively has served as President and Chief Executive Officer and Chairman of the Board of Directors of the Company since January 1, 2014. The Board of Directors believes that having the Chief Executive Officer and Chairman positions held by the same individual allows that individual to have multiple perspectives about the Company and its operations while optimizing the ability of the Board of Directors to communicate with Company management. Also, because the members of the Board of Directors other than Mr. Dively are independent, the knowledge of the Company that Mr. Dively brings to the Board of Directors helps to enhance the Board of Directors' leadership of the Company.  The Board of Directors has no fixed policy with respect to combining or separating the roles of the Chief Executive Officer and the Chairman of the Board of Directors and will continue to review the Board of Directors' leadership structure from time to time in order to ensure that the leadership is optimal for the Company at that time.

At any time that the Chief Executive Officer and Chairman of the Board positions are held by the same individual, the Board of Directors may, in its discretion, appoint a lead independent director. At its meeting on April 29, 2020, the Board of Directors appointed Ms. Adams as its lead independent director.  Prior to Ms. Adams’ appointment, Mr. Sparks served as the lead independent director.  The responsibilities of the lead independent director include the following: acting as a liaison between the Chairman and the independent members of the Board of Directors; advising the Chairman on the quality, quantity and timeliness of the flow of information from management; serving as a resource to the members of the Board of Directors on corporate governance practices and policies; and coordinating and moderating executive sessions of the independent members of the Board of Directors.

BOARD OF DIRECTORS ROLE IN RISK OVERSIGHT

The Board of Directors oversees the risk management of the Company through its committees, management committees and the Chief Executive Officer. The Board of Directors' audit committee monitors risks related to (1) the effectiveness of the Company’s disclosure controls and internal controls over financial reporting, (2) the integrity of its Consolidated Financial Statements, (3) compliance with laws and regulations, (4) risks and exposures relating to financial reporting, particularly disclosure and SEC reporting, (5) internal and independent auditors and (6) tax, investment, credit and liquidity matters. In addition, the audit committee oversees the internal audit function and communicates with the independent registered public accountant. The compensation committee is also involved in risk management through its review of risks in the Company’s compensation policies and practices for employees. The Board of Directors' recognition of the importance of risk management oversight and their role in representing the interests of stockholders is enhanced as a result of the Board of Directors members’ collective beneficial ownership of approximately 7.9% of the outstanding shares of Common Stock of the Company.

At its monthly meetings, the Board of Directors receives the minutes from each of the Company's management committee meetings, as well as various reports from executive management, including the senior Risk Management officer. The Board of Directors reviews and discusses these reports with each of the executive managers. The Board of Directors reviews the status of all classified assets and trends in loan delinquency and reviews the allowance for loan losses each quarter.  The senior loan committee approves all loan underwriting decisions in excess of $4 million and up to $15 million. The Board of Directors approves all underwriting decisions in excess of $15 million.

The Board of Directors also reviews the policies and practices of the Company on a regular basis. In addition, the Board of Directors reviews corporate strategies and objectives, evaluates business performance and reviews the annual business plan.

12


 

NOMINATIONS FOR DIRECTOR

The Company does not maintain a standing nominating committee but has adopted a Director Nomination Policy.  The Board of Directors' independent directors (the "Independent Directors") perform the functions of a nominating committee and consider and act on all matters relating to the nomination of individuals for election as directors, including pursuant to our diversity policy. Pursuant to the Director Nomination Policy, the Independent Directors review and make recommendations regarding the composition and size of the Board of Directors in order to ensure that it has the requisite expertise and that its membership consists of persons with sufficiently diverse backgrounds and satisfies NASDAQ’s listing requirements regarding independent directors.  The Company believes the diverse backgrounds and perspectives of its current directors, as described above under “Board Director Qualifications,” are appropriate to the oversight of the Company’s management team and performance. The Board of Directors does not believe it needs a separate nominating committee because the Independent Directors have the time and resources to perform the function of selecting director nominees. Also, all but one of the directors satisfies the independence requirements of NASDAQ. The Independent Directors act in accordance with the Company’s Director Nomination Policy and the Company's Certificate of Incorporation when performing their nominating function.

In the consideration of director nominees, the Independent Directors consider, at a minimum, the following factors for new directors, or the continued service of existing directors: (1) the ability of the prospective nominee to represent the interests of the stockholders of the Company; (2) the prospective nominee’s standards of integrity, commitment and independence of thought and judgment; (3) the prospective nominee’s ability to dedicate sufficient time, energy and attention to the diligent performance of his or her duties; (4) the extent to which the prospective nominee contributes to the diversity of talent, skill and expertise appropriate for the Board of Directors; (5) the prospective nominee’s contributions to the Board of Directors as a whole; and (6) the background, including diversity of gender, race and ethnic background, of the prospective nominee.

Any stockholder who wishes to recommend a director candidate for consideration by the Independent Directors should submit such recommendation in writing to the Board of Directors at the address set forth below under “Communications with Directors.” A candidate recommended for consideration must be highly qualified and must be willing and able to serve as director.  Director candidates recommended by stockholders will receive the same consideration given to other candidates and will be evaluated against the criteria above.

NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS OF DIRECTORS

Any stockholder wishing to nominate an individual for election as a director at the Annual Meeting must comply with certain provisions in the Company's Restated Certificate of Incorporation.  The Company's Restated Certificate of Incorporation establishes an advance notice procedure with regard to the nomination, other than by or at the direction of the Board of Directors, of candidates for election as directors. If the notice is not timely and in proper form, the proposed nomination will not be considered at the Annual Meeting. Generally, such notice must be delivered to or mailed to and received by the Secretary of the Company not fewer than 14 days nor more than 60 days before a meeting at which directors are to be elected.  To be in proper form, each written nomination must set forth: (1) the name, age business address and, if known, the residence address of the nominee, (2) the principal occupation or employment of the nominee for the past five years, and (3) the number of shares of stock of the Company beneficially owned by the nominee and by the nominating stockholder. The stockholder must also comply with certain other provisions set forth in the Company's Restated Certificate of Incorporation relating to the nomination of an individual for election as a director.  For a copy of the Company's Restated Certificate of Incorporation, which includes the provisions relating to the nomination of an individual for election as a director, an interested stockholder should contact the Secretary of the Company at 1421 Charleston Avenue, P.O. Box 499, Mattoon, Illinois 61938.

AUDIT COMMITTEE

The members of the audit committee of the Company during the fiscal year ended December 31, 2020 were, and on the date of this proxy statement are, Messrs. Grissom, Horn, Sparks, Cook and Zimmer, Ms. Adams and Ms. Westerhold.  Mr. McCurry became a member of the audit committee in February 2021 when he joined the Board of Directors. The audit committee met seven times in 2020.  The audit committee assists the Board of Directors with the review of the Company’s financial statements and the Company’s compliance with applicable legal and regulatory requirements.  Additionally, the audit committee appoints, and is directly responsible for the oversight of, the independent auditor, pre-approves all services performed for the Company by the independent auditor and oversees the Company’s internal audit function.  The audit committee may also retain independent legal, accounting or other advisors as it may deem necessary in order to carry out its duties.

 

13


 

The Board of Directors determined that each member of the audit committee satisfies the independence, experience and other membership requirements of NASDAQ.  The Securities and Exchange Commission requires that Boards of Directors disclose whether any audit committee member qualifies as an “audit committee financial expert” as defined under SEC guidelines. The Board of Directors determined that Steven L. Grissom and Mary J. Westerhold are each audit committee financial experts.  Accordingly, Mr. Grissom and Ms. Westerhold are each presumed to qualify as financially sophisticated audit committee members under the rules of NASDAQ.

The audit committee acts pursuant to a written charter that was reviewed and reassessed for adequacy and reaffirmed by the Board of Directors on January 26, 2021.  A copy of the audit committee charter may be found on the Company’s website at www.firstmid.com. The audit committee will continue to review and reassess the charter from time to time but not less than annually.

COMPENSATION COMMITTEE

The members of the compensation committee of the Company during the fiscal year ended December 31, 2020 were, and on the date of this proxy statement are, Messrs. Grissom, Horn, Sparks, Cook and Zimmer, Ms. Adams and Ms. Westerhold. Mr. McCurry became a member of the compensation committee in February 2021 when he joined the Board of Directors. The compensation committee met four times in 2020.  The compensation committee reports to the Board of Directors and has responsibility for all matters related to compensation of executive officers of the Company, including reviewing and approving base salaries and annual bonuses, conducting a review of executive officers’ salary, incentive compensation, retirement benefits and fringe benefits compared to other financial services companies in the region, and using its best judgment in determining that total executive compensation reflects the Company’s mission, strategy and performance.

The Board of Directors determined that each member of the compensation committee satisfies the independence, experience and other membership requirements of NASDAQ. The compensation committee acts pursuant to a written charter that was adopted by the Board of Directors on January 26, 2021.  A copy of the compensation committee charter may be found on the Company’s website at www.firstmid.com. The compensation committee will review and reassess the charter from time to time but not less than annually.

Additionally, the Board of Directors, or if the Board of Directors so delegates, a sub-committee of the compensation committee, has responsibility for administering the stock incentive plans of the Company and approves grants based on the compensation committee's recommendation.  For information about the role of the compensation committee with respect to executive compensation, see the “Compensation Discussion and Analysis” section of this proxy statement.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 2020, Messrs. Grissom, Horn, Sparks, Cook and Zimmer and Ms. Adams and Ms. Westerhold served on the compensation committee. No member of the compensation committee was, during 2020, an officer or employee of the Company, was formerly an officer of the Company or had any relationship requiring disclosure by the Company as a related party transaction under Item 404 of Regulation S-K. During 2020, none of the Company’s executive officers served on the board of directors or the compensation committee of any other entity.

COMMUNICATIONS WITH DIRECTORS

Any stockholder or other interested person may communicate with the Board of Directors or any individual director by sending written correspondence addressed to the Board of Directors or such individual director in care of the Secretary of the Company at First Mid Bancshares, Inc., 1421 Charleston Avenue, P.O. Box 499, Mattoon, Illinois 61938.  The Secretary or the designee thereof will forward such correspondence to the Board of Directors or the relevant director.

CODE OF CONDUCT

The Company has adopted a code of conduct for directors, officers, and employees of the Company.  This code of conduct is posted on the Company’s website at www.firstmid.com.  The code of conduct sets forth guiding principles by which the Company and its directors, officers and employees conduct business with the Company’s stockholders and customers.

 

14


 

DELINQUENT SECTION 16(a) REPORTS

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and beneficial owners of more than 10% of the Company's stock, if any, to file reports of ownership and changes in ownership on Forms 3,4, and 5 with the Securities and Exchange Commission, and to furnish copies of these forms to the Company. To the Company's knowledge, based solely upon a review of copies of Securities and Exchange Commission Forms 3, 4, and 5 and upon related written representations furnished to the Company with respect to the fiscal year ended December 31, 2020, the Company believes that all of the Company's officers and directors filed on a timely basis all reports required by Section 16(a) of the Securities and Exchange Act of 1934 during the fiscal year ended December 31, 2020.

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

The audit committee reviewed and discussed with management the Company's audited financial statements as of and for the fiscal year ended December 31, 2020. The audit committee also discussed with the independent auditors, BKD, LLP, the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board ("PCAOB") and the Commission. The audit committee received the written disclosures and the letter from BKD, LLP required by applicable requirements of the PCAOB regarding BKD, LLP’s communications with the audit committee concerning independence, and discussed with BKD, LLP the independence of that firm.

Based on the review and discussion referred to above, the audit committee recommended to the Board of Directors that the audited financial statements referred to above be included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020. This audit committee report is submitted by the audit committee of the Board of Directors:

 

 

 

Mary J. Westerhold, Chairman

Zachary I. Horn

 

 

Holly B. Adams

J. Kyle McCurry

 

 

Robert S. Cook

Ray A. Sparks

 

 

Steven L. Grissom

James E. Zimmer

 

FEES OF INDEPENDENT AUDITORS

Audit Fees. The aggregate fees billed for professional services rendered by BKD, LLP for the audit of the Company's annual financial statements for the fiscal years ended December 31, 2020 and 2019, the audit of the Company’s internal control over financial reporting as of December 31, 2020 and 2019, and the review of the financial statements included in the Company's Quarterly Reports on Form 10-Q for 2020 and 2019 were $255,300 and $236,100, respectively.

Audit-Related Fees.  The aggregate fees billed for professional services rendered by BKD, LLP for audit-related services for the fiscal years ended December 31, 2020 and 2019 (namely employee benefit plan audits) were $33,100 and $33,072, respectively.

Tax Fees.  The aggregate fees billed for professional services rendered by BKD, LLP for the fiscal years ended December 31, 2020 and 2019 (namely preparation of consolidated tax returns and tax advice) were $57,865 and $65,530, respectively.

All Other Fees. The aggregate fees billed for other professional services rendered by BKD, LLP for the fiscal years ended December 31, 2020 and 2019 (namely consents and other special audit procedures required following the Company's acquisitions) were $34,000 and $0, respectively.

The audit committee pre-approves all auditing services and permitted non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services. The audit committee preapproved all services performed by the independent auditors in 2020.

 

 

15


 

INDEPENDENT PUBLIC ACCOUNTANTS

BKD, LLP acted as independent certified public accountants of the Company and its subsidiaries for the fiscal year ending December 31, 2020.  BKD, LLP has served as the Company's independent certified public accountant since July 26, 2005.

A representative from BKD, LLP is expected to be present virtually at the annual meeting, will have the opportunity to make a statement and will be available to respond to appropriate questions.  The Company has not yet appointed its independent auditors for the fiscal year ending December 31, 2021.  The Company expects to appoint its independent auditors for 2021 at its March meeting of the Board of Directors.

COMPENSATION COMMITTEE REPORT

The compensation committee has reviewed and discussed with the Company’s management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K and, based on such review and discussion, the compensation committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

This compensation committee report is submitted by the compensation committee of the Board of Directors:

 

 

 

James E. Zimmer, Chairman

Zachary I. Horn

 

 

Holly B. Adams

J. Kyle McCurry

 

 

Robert S. Cook

Ray A. Sparks

 

 

Steven L. Grissom

Mary J. Westerhold

 


16


 

EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis explains the objectives and philosophy underlying the Company’s executive compensation program and the material elements of the compensation paid to the Company’s executive officers, including the executive officers named in the Summary Compensation Table of this proxy statement (the “named executive officers”). The named executive officers for 2020 were:

 

Joseph R. Dively:

 

Chairman, President & Chief Executive Officer

Matthew K. Smith:

 

Executive Vice President & Chief Financial Officer

Michael L. Taylor:

 

Senior Executive Vice President & Chief Operating Officer

Eric S. McRae:

 

Executive Vice President & Chief Credit Officer

Bradley L. Beesley:

 

Executive Vice President & Chief Wealth Management Officer

 

Executive Compensation Objectives

It is the policy of the Company to compensate its executives in a manner that is equitable and competitive based on their responsibilities, performance and market conditions. The Company’s compensation objectives with respect to its named executive officers are to:

 

Provide incentive to maximize stockholder value by aligning the executives’ interests with those of the stockholders.

 

Enable the Company to attract and retain the best available executive talent.

 

Reward individual performance and contributions to the Company.

Setting Executive Compensation

The compensation committee attempts to meet these objectives by providing a mix of key compensation elements that include base salary, annual cash incentives and equity-based compensation.  In setting aggregate compensation for each of the named executive officers, the compensation committee first establishes appropriate levels of base salary for the executives, and then establishes the opportunity for the executives to earn additional compensation through annual cash incentives and longer-term equity compensation. The amount of such additional compensation varies with position and, in the case of annual and long-term incentives, is also conditioned on attainment of corporate or individual performance measures.  The Company also provides retirement benefits, severance and change in control benefits, and a limited number of perquisites and other personal benefits in order to ensure a complete and competitive compensation plan.

The compensation committee uses the key elements of compensation to meet the objectives of its executive compensation program as follows:

Provide incentive to maximize stockholder value by aligning the executives’ interests with those of the stockholders.   Since 2011, the compensation committee has granted performance awards under its executive long-term incentive plan that consist of restricted stock awards and/or restricted stock units. The compensation committee also bases a significant portion of an executive’s cash incentive on attainment of certain corporate performance metrics, which encourages the executive to work to increase the Company’s profitability and in turn, its stock value.

The compensation committee believes that the components of the long-term incentive plan align key executive compensation with the Company’s performance goals.  The long-term incentive plan generally includes goals which ensure that the executives are focused on sustainability of earnings and growth of the Company.

Enable the Company to attract and retain the best available talent.  To achieve this objective, the compensation committee believes it must pay compensation that is competitive.  As described below, the compensation committee reviews and monitors the compensation paid by companies that are comparable to the Company to ensure that compensation packages are competitive.

 

17


 

Reward individual performance and contributions to the Company.  The compensation committee’s evaluation of the individual performance of each executive affects his or her compensation.  Individual performance is an important factor in determining base salary, which in turn affects the amount of cash incentive compensation that can be earned and equity compensation that is granted.  Individual performance is also a component of the cash incentive compensation and, when awarded, equity compensation.

The compensation committee makes all compensation decisions for the CEO and all other executive officers of the Company.  The CEO annually reviews the performance of each executive officer (other than himself) and makes recommendations to the compensation committee.  The compensation committee considers the CEO’s recommendations when making its final compensation decisions for all executives other than the CEO.  Although the compensation committee has the discretion to make all final decisions, the recommendation of the CEO is an important factor. The compensation committee believes that its ability to exercise discretion in setting the elements of compensation for its executives provides flexibility to establish appropriate overall compensation levels and achieve the Company’s objectives.

Key Elements of Compensation

Each year the compensation committee reviews compensation data of the most highly paid executives of other comparable banking institutions. For 2020, the data consisted of a compensation survey, prepared by the Company’s Chief Human Resources Officer, of publicly traded banks in non-urban markets in the upper Midwest who directly compete with the Company or who have market capitalization comparable to that of the Company.  (The banks included in the 2020 analysis ranged in size from approximately $1 billion to $5 billion in assets).  Because these institutions frequently recruit individuals for senior executive positions requiring similar skills and backgrounds to the individuals recruited by the Company, the compensation committee uses this information as a general guide in establishing the base salaries, cash incentives and equity compensation of the named executive officers. The compensation committee generally aligns compensation components with those used by the peer institutions and attempts to maintain a comparable level of total compensation (i.e., salary, annual cash incentives and equity compensation). However, the compensation committee does not rely solely on this information and does not benchmark its decisions regarding total compensation or elements of compensation to any particular percentile range of the comparator groups of companies.

In addition, the compensation committee considers each executive’s current salary, his or her individual performance, the financial performance of the Company, the anticipated difficulty of replacing the executive with a person of comparable experience and skill and the recommendation of the CEO.  The compensation committee also may periodically engage the services of independent consultants with knowledge and experience in such matters, although it did not do so in setting 2020 compensation.

Total compensation for the named executive officers was initially targeted at the 25th to 50th percentile of the survey group for similar executive positions, then adjusted based on various factors, including the market survey data, individual performance and the experience level of the executive.  The compensation committee approved changes to the current compensation program for the 2020 pay decisions, including salary increases for certain executives.

Base Salary

Executives are paid an annual salary. The compensation committee reviews salaries annually in the beginning of each year. Based on the guidelines and factors described above, the compensation committee, in early 2020, concluded that adjustments to base salaries for the named executive officers were necessary in order to keep their compensation competitive. In addition to the factors noted above, the compensation committee considered the level of the executive's accomplishment of individual goals for the prior year, the number of individuals the executive supervises, the level of duties and responsibilities assumed by the executive and the strategic implications of the decisions the executive is required to make.

The compensation committee established the 2020 base salary for the named executive officers as follows (salary increases were effective as of February 10, 2020):

Executive

 

2020 Salary Rate

 

 

$ Increase from 2019 Salary Rate

 

Mr. Dively

 

$

476,364

 

 

$

26,964

 

Mr. Smith

 

 

246,418

 

 

 

18,253

 

Mr. Taylor

 

 

312,393

 

 

 

9,099

 

Mr. McRae

 

 

276,705

 

 

 

4,089

 

Mr. Beesley

 

 

186,420

 

 

 

8,877

 

18


 

 

 

The actual salaries paid to the named executive officers in 2020 are set forth in the “Salary” column of the Summary Compensation Table of this proxy statement.

Annual Cash Incentives

The named executive officers are eligible to participate in the Company’s Incentive Compensation Plan (the "Plan”), which is designed to reward executives in increasing Company profitability which creates stockholder value.  

Since successful execution of the Company’s strategic plan requires that members of the executive management team work closely together and because senior management has the potential greatest influence on Company profitability, the compensation committee determined that incentive opportunity for 2020 would be as follows: The incentive opportunity for all named executive officers would continue to be based 70% on the Company’s net income (exclusive of non-recurring costs associated with acquisitions), and the Company’s asset quality (adversely classified loans and repossessed assets as a percent of total loans, excluding Payroll Protection Program (“PPP”) loans, would continue as a performance measure, based on the premise that asset quality has a strong correlation to future loan losses and therefore, future profitability, while net income represents current profitability. In addition, for 2020, performance metrics tied to efficiency and lines of business were introduced as new metrics for Messrs. Dively, Smith and Taylor, because the compensation committee determined that improving overall efficiency and building a relationship driven culture that includes all business line products and services represents better alignment to the strategic plan and goals of the Company and represents better measures of stockholder value for the near term.  For Mr. Beesley, 30% of his cash incentive opportunity continued to be based on the profitability of Wealth Management.

The target cash incentive opportunity for each named executive officer established for 2020 was based on a percentage of the executive's salary rate in effect beginning February 10, 2020, as follows:

 

Executive

 

% of Salary Payable as Cash Incentive

 

 

% of Cash Incentive Tied to Net Income

 

 

% of Cash Incentive Tied to Asset Quality

 

% of Cash Incentive Tied to Efficiency

 

% of Cash Incentive Tied to Lines of Business

 

% of Cash Incentive Tied to WM Profitability

 

Mr. Dively

 

50%

 

 

70%

 

 

10%

 

10%

 

10%

 

 

 

 

Mr. Smith

 

25%

 

 

70%

 

 

10%

 

10%

 

10%

 

 

 

 

Mr. Taylor

 

25%

 

 

70%

 

 

10%

 

10%

 

10%

 

 

 

 

Mr. McRae

 

25%

 

 

70%

 

 

30%

 

 

 

 

 

 

 

 

Mr. Beesley

 

25%

 

 

70%

 

 

 

 

 

 

 

 

30%

 

 

At the same time, the compensation committee established the criteria for measurement of these goals.  The net income target, efficiency target and the lines of business target were determined using the current year budgeted amounts. The asset quality target was determined based on a percentage of the current balance of total loans outstanding, excluding PPP loans (which was $2.97 billion) at December 31, 2020.  The Wealth Management profitability target was determined using budgeted profitability for 2020.

Using the metrics above as a base line, the compensation committee determined the following 2020 goal criteria:

 

 

 

Net Income

 

Asset Quality

 

 

Efficiency

 

 

Lines of Business

 

WM

Profitability

Threshold (1):

 

$42.9 million

 

2.55%

 

 

63.70%

 

 

$5.9 million

 

$3.1 million

Target (2):

 

$46.3 million

 

2.38%

 

 

59.40%

 

 

$6.3 million

 

$3.3 million

 

 

 

(1)

Amounts for threshold were determined as 93% of current year budgeted net income, adversely classified assets of 2.55% of current year loan balance, efficiency ratio of 63.7%, combined lines of business of 93% of 2020 budget for FMIG and WM, and 93% of 2020 WM budget.

 

 

(2)

Amounts for target were determined as 100% of current year budgeted net income, adversely classified assets of 2.38% of current year loan balance, efficiency ratio of 59.4%, combined lines of business of 100% of 2020 budget for FMIG and WM and 100% of 2020 WM budget.

19


 

During 2020, the compensation committee established the percent of the target cash incentive opportunity that would be earned at each performance level as:

Performance Level

 

CEO

 

 

Other Named Executive Officers

 

Threshold:

 

25%

 

 

13%

 

Target:

 

50%

 

 

25%

 

 

In addition to the changes above, tables were established to determine payout for achievement in between threshold and target, and for achievement that exceeds target. For achievement between threshold and target, each decrease of $280,000 of net income from the target to the threshold level decreased the CEO's payout opportunity by approximately 2.1% and decreased the other named executive officers' payout opportunity by 1%. For each increase in net income of $113,000 above the target, the CEO payout opportunity increased by approximately 1.65% and the other named executive officers' payout opportunity increased by 1%. Similar tables were established for corporate asset quality, efficiency, lines of business and wealth management net income with increases and decreases to the opportunity of the CEO and other named executive officers being the same.

Operations for 2020 resulted in net income (adjusted for non-recurring costs associated with acquisitions) of $46.4 million, which exceeded the target level.  Adversely classified assets on December 31, 2020 totaled $62 million or 2.09% of the current year loan balance excluding PPP loans, which exceeded the target level. Efficiency was 56.08% which also exceeded the target level. Net income for the combined lines of business was $6.97 million which was greater than the target level and Wealth Management profitability for 2020 was $3.8 million, which exceeded the target level. The cash incentive awards paid were based on performance achievement as follows:

 

Mr. Dively

 

% of Incentive

 

 

% of target attainment

 

 

% of opportunity earned

 

Net Income

 

70%

 

 

100%

 

 

 

35.0

%

Asset Quality

 

10%

 

 

114%

 

 

 

12.0

%

Efficiency

 

10%

 

 

106%

 

 

 

8.8

%

Lines of Business

 

10%

 

 

110%

 

 

 

10.0

%

 

 

 

 

 

 

 

 

 

 

 

65.8

%

 

Messrs. Smith and Taylor

 

% of Incentive

 

 

% of target attainment

 

 

% of opportunity earned

 

Net Income

 

70%

 

 

100%

 

 

 

17.5

%

Asset Quality

 

10%

 

 

114%

 

 

 

6.7

%

Efficiency

 

10%

 

 

106%

 

 

 

4.8

%

Lines of Business

 

10%

 

 

110%

 

 

 

5.5

%

 

 

 

 

 

 

 

 

 

 

 

34.5

%

 

Mr. McRae

 

% of Incentive

 

 

% of target attainment

 

 

% of opportunity earned

 

Net Income

 

70%

 

 

100%

 

 

 

17.5

%

Asset Quality

 

30%

 

 

114%

 

 

 

20.1

%

 

 

 

 

 

 

 

 

 

 

 

37.6

%

 

Mr. Beesley

 

% of Incentive

 

 

% of target attainment

 

 

% of opportunity earned

 

Net Income

 

70%

 

 

100%

 

 

 

17.5

%

WM Budget NI

 

30%

 

 

116%

 

 

 

21.6

%

 

 

 

 

 

 

 

 

 

 

 

39.1

%

20


 

 

Based on the above levels of attainment, the following bonuses were paid for 2020:

 

Executive

 

Cash

Incentive

 

Mr. Dively

 

$

313,209

 

Mr. Smith

 

 

85,014

 

Mr. Taylor

 

 

107,776

 

Mr. McRae

 

 

104,041

 

Mr. Beesley

 

 

72,890

 

 

Mr. Beesley maintains ongoing responsibilities for managing a portfolio of brokerage customers that includes providing investment advice and completing investment trades. Pursuant to the terms of his employment agreement, and consistent with standard practice in the brokerage industry, Mr. Beesley is entitled to 30% of net revenues he generates on his individual book of business through First Mid Bank's broker/dealer. Accordingly, the compensation committee approved an additional annual cash incentive for Mr. Beesley for 2020 of $220,155, for a total of $293,045.

Equity Compensation

The compensation committee grants long-term equity compensation in order to motivate executives to increase stockholder value over the long term and more closely link the financial interests of the Company’s executives with those of its stockholders.

Since 2011, the compensation committee has made awards pursuant to the Executive Long-Term Incentive Program (LTIP), which provides a framework for granting awards of restricted stock and restricted stock units (RSUs) under the Company's Stock Incentive Plan. The compensation committee believes that the components of the LTIP more closely align key executive compensation with the Company’s performance goals than the stock options granted in prior years and ensures that the executives are focused on longer term sustainability of earnings and growth in the value of the Company. In January 2020 the compensation committee made grants of performance-based RSUs to the named executive officers. The January 2020 awards were for a target number of units as follows:

 

Executive

 

RSU Award

 

Mr. Dively

 

 

5,200

 

Mr. Smith

 

 

1,000

 

Mr. Taylor

 

 

1,500

 

Mr. McRae

 

 

1,500

 

Mr. Beesley

 

 

1,000

 

 

The RSU award was subject to a one-year performance period with a performance goal based on 2020 budgeted net income (the target was $46.3 million).  If the target goal is attained or exceeded, the executives receive a restricted stock award for the target number of shares, and the award is then subject to further three-year service-based vesting with 1/3 vesting on December 15, 2021, 2022 and 2023.  If the target goal is not met, no shares are earned, and the award is forfeited. During 2020, the target net income goal was exceeded and in January of 2021, the executives were awarded the target number of shares of restricted stock.

The compensation committee has also approved an annual discretionary pool of shares that may be awarded based on individual performance each year. The compensation committee makes the discretionary awards based on recommendations of the CEO. On this basis, in January 2020, the compensation committee also awarded Mr. Smith 750 shares of restricted stock from the discretionary pool in recognition of his individual performance during 2019. These shares are also a three-year, service-based award that vests 1/3 each on December 15, 2020, 2021 and 2022.

 

 

21


 

Retirement Plans

The Company sponsors various retirement plans that cover eligible employees, including the named executive officers. The Company believes that these benefits are a valuable incentive for attracting and retaining top executives.

401(k) Plan. The Company’s 401(k) plan is a tax-qualified retirement plan that covers all employees generally, including the named executive officers.  An employee can elect to defer a percentage of his or her compensation on a pre-tax and/or post-tax basis, up to a maximum in 2020 of $19,500, or $26,000 if age 50 or over, and the Company contributes a matching contribution of up to 4% of the employee’s deferral contributions.  The Company also provides a discretionary annual contribution up to 2% of each eligible employee’s compensation, whether or not the employee makes elective deferral contributions.  (Amounts paid to the plan reflect the Internal Revenue Code’s limit on the amount of compensation that can be considered in determining contributions, which was $285,000 in 2020). The Company’s contributions under the Plan on behalf of each named executive officer are included in the “All Other Compensation” column of the Summary Compensation Table of this proxy statement.

Deferred Compensation Plan. The Deferred Compensation Plan is a non-qualified retirement plan that covers selected employees, including the named executive officers.  The plan provides higher paid employees with the opportunity to defer compensation in addition to compensation that can be deferred under the 401(k) Plan. For each calendar year, each executive can defer a portion of his or her salary and cash incentive opportunity.  The deferred amounts are invested in Company common stock and are paid to the executive in shares of common stock after termination of employment.  The Company does not contribute to this plan.  The Deferred Compensation Plan is described in greater detail in the “Non-Qualified Deferred Compensation” section of this proxy statement.

Employment Agreements

The Company has employment agreements with certain of its executives, including each named executive officer.  The agreements, which are generally for three-year terms, provide for a minimum base salary which cannot be reduced, and a cash incentive opportunity.  The agreements also provide for severance benefits upon certain terminations of employment.  If the named executive officer’s employment is terminated by the Company without cause, he or she is entitled to continued payment of base salary for 12 months and continued health coverage for the severance period.  If following a change in control of the Company, either the named executive officer’s employment is terminated by the Company without cause, or the named executive officer terminates his or her employment for good reason, the named executive officer is entitled to continued payment of base salary for 24 months (12 months for Mr. Beesley), a lump sum payment equal to the cash incentive paid for the prior year and continued health coverage for the severance period.  The agreements contain restrictive covenants that prohibit the named executive officers from disclosing confidential information and from competing with the Company. The employment agreements are described in greater detail in the “Potential Payments Upon Termination or Change in Control of the Company” section of this proxy statement.

The compensation committee believes these severance benefits reflect market levels of benefits when they were negotiated and represent fair and appropriate consideration for the executive’s agreement to the post-termination restrictive covenants. The Company believes that the protections afforded by the agreements are a valuable incentive for attracting and retaining top executives.  The Company also believes that in the event of an extraordinary corporate transaction, the agreements could prove important to the Company’s ability to retain top management through the transaction process and to provide motivation to the executives to act in the best interests of the Company and its stockholders before, during and after the transaction.

Perquisites and Other Benefits

The Company provides limited perquisites and other benefits to its executives. During 2020, each named executive officer received a monthly auto allowance. The determination as to whether an auto allowance is appropriate for an executive is based on the amount of business travel undertaken by the executive and the relative cost involved.  The Company paid for annual country club membership dues for all of the named executives and all of the named executives received communication device allowances. These perquisites and other benefits are reported in the “All Other Compensation” column of the Summary Compensation Table of this proxy statement.


22


 

Incentive Compensation Recoupment Policy

In January 2015, the compensation committee adopted an Incentive Compensation Recoupment Policy. The Policy permits the Board to recoup from an executive cash or equity-based compensation granted on or after January 1, 2015 in the event that there is a restatement of the Company's financial statements or the executive engages in misconduct that results in a material loss or damage to the Company. Recoupment covers any incentive compensation (including annual cash bonuses and awards under LTIP) that is awarded or paid or vests within 36 months preceding the restatement or 36 months following the occurrence of misconduct. Misconduct includes an act of fraud, dishonesty or gross negligence, the material breach of a fiduciary duty, a knowing violation of a Company policy, or a violation of a confidentiality, non-solicitation or non-competition covenant.

Anti-Hedging Policy

The Company's Insider Trading Policy prohibits its directors, officers or other employees from engaging in short sales of Company stock, as well as transactions in any puts, calls or other derivative securities on Company stock in any organized market, or "hedging." The Insider Trading Policy also prohibits employees, officers and directors of the Company from depositing any Company stock in a margin account.

Deductibility of Executive Compensation

Section 162(m) of the Internal Revenue Code as in effect prior to 2018 limited the deductibility of executive compensation paid to the CEO and to each of the three other most highly compensated officers (other than the chief financial officer) of a public company to $1 million per year but contained an exception for “performance-based compensation.”  The Tax Cuts and Jobs Act of 2017 amended section 162(m) to cover a public company's chief financial officer, extend its reach to post-termination payments and eliminate the performance-based exception, beginning in 2018. However, due to the amounts and forms of compensation currently paid to the Company’s executive officers, the tax deductibility of such compensation under Section 162(m) is not an important factor in making compensation decisions.

Other Compensation Decisions

At the 2020 Annual Meeting of Stockholders, the “Advisory Vote on Executive Compensation” proposal (the “say on pay” vote) received support from approximately 91% of the votes cast. The Board of Directors considered these results and, based on the overwhelming support from stockholders, determined to not make any major changes to the executive compensation plans and programs already in place for 2020, except for the changes noted above to the annual cash incentive.

 

 

23


 

 

SUMMARY COMPENSATION TABLE

This table shows the compensation of the Company’s named executive officers, who consist of the Chief Executive Officer, Chief Financial Officer and the three other most highly-compensated executive officers of the Company during the years ended December 31, 2020, 2019 and 2018.

 

Name and

Principal Position

 

Year

 

Salary

($)

 

 

Stock

Awards

($)(1)

 

 

Non-Equity

Incentive Plan

Compensation

($)(2)

 

 

All Other

Compensation

($)(3)

 

 

Total

($)

 

Joseph R. Dively

 

2020

 

 

490,537

 

 

 

179,192

 

 

 

313,209

 

 

 

28,723

 

 

 

1,011,661

 

Chairman, President &

 

2019

 

 

444,877

 

 

 

173,212

 

 

 

239,328

 

 

 

27,516

 

 

 

884,933

 

Chief Executive Officer

 

2018

 

 

413,591

 

 

 

319,144

 

 

 

289,800

 

 

 

30,645

 

 

 

1,053,180

 

Matthew K. Smith

 

2020

 

 

253,088

 

 

 

60,305

 

 

 

85,014

 

 

 

27,186

 

 

 

425,593

 

Executive Vice President

 

2019

 

 

226,178

 

 

 

66,620

 

 

 

62,289

 

 

 

26,311

 

 

 

381,398

 

& Chief Financial Officer

 

2018

 

 

213,673

 

 

 

77,840

 

 

 

79,212

 

 

 

24,734

 

 

 

395,459

 

Michael L. Taylor

 

2020

 

 

323,008

 

 

 

51,690

 

 

 

107,776

 

 

 

28,583

 

 

 

511,057

 

Sr Executive Vice President

 

2019

 

 

301,072

 

 

 

83,275

 

 

 

82,799

 

 

 

28,701

 

 

 

495,847

 

& Chief Operating Officer

 

2018

 

 

287,348

 

 

 

116,760

 

 

 

106,297

 

 

 

26,778

 

 

 

537,183

 

Eric S. McRae

 

2020

 

 

286,718

 

 

 

51,690

 

 

 

104,041

 

 

 

36,085

 

 

 

478,534

 

Executive Vice President &

 

2019

 

 

271,003

 

 

 

49,965

 

 

 

74,424

 

 

 

33,036

 

 

 

428,428

 

Chief Credit Officer

 

2018

 

 

260,580

 

 

 

116,760

 

 

 

96,464

 

 

 

34,226

 

 

 

508,030

 

Bradley L. Beesley

 

2020

 

 

192,224

 

 

 

34,460

 

 

 

293,045

 

 

 

25,054

 

 

 

544,783

 

Executive Vice President &

 

2019

 

 

175,997

 

 

 

33,310

 

 

 

218,224

 

 

 

25,541

 

 

 

453,072

 

Chief Wealth Mgmt Officer

 

2018

 

 

167,493

 

 

 

77,840

 

 

 

206,278

 

 

 

28,232

 

 

 

479,843

 

 

 

(1)

Stock Awards.  The amounts in this column represent the aggregate grant date fair value of restricted stock and RSU awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, based on the probable outcome of the performance conditions attached to the performance-based awards, which is also the grant date fair value assuming the maximum level of attainment is achieved. See Note 13 to the consolidated financial statements in the Company’s 2020 Form 10-K for a description of the valuation.

(2)

Non-Equity Incentive Plan Compensation.  All amounts in this column are based on performance in 2020, 2019 and 2018 and reflect the amounts actually paid in February 2021, 2020 and 2019, respectively, under the Company’s Annual Cash Incentive Compensation Plan. The amounts for Mr. Beesley also includes payment per his employment agreement of 30% of net revenues generated on his individual book of business through First Mid Bank's broker/dealer.  See “Cash Incentives” in the Compensation Discussion and Analysis section of the Proxy Statement for a discussion of the Incentive Compensation Plan.

(3)

All Other Compensation.  For 2020, these amounts include (i) the Company's contributions to its 401(k) Plan on behalf of each named executive officer (Mr. Dively: $9,428; Mr. Smith: $15,338; Mr. Taylor: $15,890; Mr. McRae: $14,683; and Mr. Beesley: $12,008); (ii) country club dues for each named executive officer; (iii) automobile allowances for each named executive officer; and (iv) communication device allowances for each named executive officer.


24


 

Employment Agreements.  The Company is a party to employment agreements with each of the named executive officers that provide for certain compensation and benefits during employment:

Mr. Dively:  The employment agreement with Mr. Dively was renewed effective December 31, 2019 and has a term through December 31, 2022 that can be extended upon mutual agreement and provides for (i) an initial base salary that can be increased but not decreased, (ii) a bonus under the Company's Incentive Compensation Plan with a target value of 50% of base salary, (iii) participation in the Company's Deferred Compensation Plan and Long Term Incentive Plan, (iv) an auto allowance and payment of annual country club membership dues, and (v) other benefits made available to Company executive or management employees.

Mr. Smith:  The employment agreement with Mr. Smith was effective December 31, 2020 and has a term through December 31, 2023 that can be extended upon mutual agreement and provides for (i) an initial base salary that can be increased but not decreased, (ii) a bonus under the Company’s Incentive Compensation Plan with a target value of 25% of base salary, (iii) participation in the Company’s Deferred Compensation Plan, (iv) an auto allowance and payment of annual country club membership dues, and (v) other benefits made available to Company executives or management employees.

Mr. Taylor:  The employment agreement with Mr. Taylor was updated effective December 31, 2020 and has a term through December 31, 2023 that can be extended upon mutual agreement and provides for (i) an initial base salary that can be increased but not decreased, (ii) a bonus under the Company’s Incentive Compensation Plan with a target value of 25% of base salary, (iii) participation in the Company’s Deferred Compensation Plan, and (iv) other benefits made available to Company executives or management employees.

Mr. McRae: The employment agreement with Mr. McRae was updated effective December 31, 2019 and has a term through December 31, 2022 that can be extended upon mutual agreement and provides for (i) an initial base salary that can be increased but not decreased, (ii) a bonus under the Company's Incentive Compensation Plan with a target value of 25% of base salary, (iii) participation in the Company's Deferred Compensation Plan and Long Term Incentive Plan, (vi) an auto allowance and payment of annual country club membership dues, and (v) other benefits made available to Company executive or management employees.

Mr. Beesley:  The employment agreement with Mr. Beesley was renewed effective December 31, 2019 and has a term through December 31, 2022 that can be extended upon mutual agreement and provides for (i) an initial base salary that can be increased but not decreased, (ii) a bonus under the Company’s Incentive Compensation Plan with a target value of 25%  of base salary, (iii) participation in the Company’s Deferred Compensation Plan and Long Term Incentive Plan, (iv) an auto allowance (and although not specified in the employment agreement, the Company also pays annual country club membership dues), and (v) other benefits made available to Company executives or management employees. In addition, Mr. Beesley will receive 30% of the net revenues generated on his individual book of business through First Mid Bank's broker/dealer.

 

First Retirement and Savings Plan (“401(k) Plan”).  The Company has a tax-qualified defined contribution retirement plan that covers all employees generally and provides for a discretionary contribution by the Company, which for 2020 was 2% of compensation, and a matching contribution by the Company of up to 100% of the first 3% and 50% of the next 2% of employee contributions.

25


 

2020 GRANTS OF PLAN-BASED AWARDS

This table sets forth information for each named executive officer with respect to estimated payouts under incentive plans, award opportunities for 2020 restricted stock and RSU awards granted in 2020.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

All Other Stock Awards:

 

 

Grant

 

 

 

 

 

Estimated Possible Payouts Under Non-Equity Incentive Plan 'Awards (1)

 

 

Estimated Future Payouts Under Equity Incentive Plan Awards (3)

 

 

No. of  Shares of Stock or Stock

 

 

Date Fair Value of Stock

 

Name

 

Grant

Date

 

Threshold

($)(2)

 

 

Target

($)

 

 

Maximum

($)

 

 

Threshold

(#)

 

 

Target

(#)

 

 

Maximum

(#)

 

 

Units (#)(4)

 

 

Awards ($)(5)

 

Joseph R. Dively

 

 

 

 

119,091

 

 

 

238,182

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

01/21/20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,200

 

 

 

5,200

 

 

 

 

 

 

179,192

 

Matthew K. Smith

 

 

 

 

32,034

 

 

 

61,605

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

01/21/20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,000

 

 

 

1,000

 

 

 

 

 

 

60,305

 

Michael L. Taylor

 

 

 

 

40,611

 

 

 

78,098

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

01/21/20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,500

 

 

 

1,500

 

 

 

 

 

 

51,690

 

Eric S.              McRae

 

 

 

 

35,972

 

 

 

69,176

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

01/21/20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,500

 

 

 

1,500

 

 

 

 

 

 

51,690

 

Bradley L. Beesley

 

 

 

 

24,235

 

 

 

46,605

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

01/21/20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,000

 

 

 

1,000

 

 

 

 

 

 

34,460

 

 

 

 

(1)

Estimated Possible Payouts Under Non-Equity Incentive Plan Awards.  Payouts under the Company’s Incentive Compensation Plan were based on performance in 2020, which has now occurred.  Thus, the information in the “Threshold” and “Target” columns reflect the range of potential payouts when the performance goals were set in January 2020.  The amounts actually paid under the Company’s Incentive Compensation Plan for 2020 appear in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.  A description of the plan can be found in the “Compensation Discussion and Analysis” section of this Proxy Statement.

(2)

The Compensation Committee has established tables of potential payout levels if performance is between the threshold and target levels or if performance is above the target level. There is no maximum cap.

(3)

Estimated Future Payouts Under Equity Incentive Plan Awards.  The target amounts represent the number of RSUs granted on January 21, 2020 under the 2017 Stock Incentive Plan. If the performance is lower than target level, the award is forfeited. Performance for 2020 exceeded target, so payout (in the form of restricted stock) occurred at the target level.  A description of the 2020 awards can be found in the “Compensation Discussion and Analysis” section of this Proxy Statement.

(4)

The compensation committee also awarded 750 shares of restricted stock from the annual discretionary pool to Mr. Smith for his individual performance in 2019.

(5)

The grant date fair value of performance-based RSUs is based on the probable outcome of the performance conditions at the time of the grant. The grant date fair value of restricted stock is based on the actual shares issued.

 

26


 

 

2020 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

This table sets forth the information for each named executive officer with respect to equity awards outstanding as of December 31, 2020.

 

 

 

Restricted Stock Awards (1)

 

Name

 

Number of Unearned Shares or Units that have not Vested (#) (1)

 

 

Market Value of Unearned Shares or Units that have not Vested

   ($) (2)

 

Joseph R. Dively

 

 

10,400

 

 

 

350,064

 

Matthew K. Smith

 

 

2,833

 

 

 

95,359

 

Michael L. Taylor

 

 

3,333

 

 

 

112,189

 

Eric S. McRae

 

 

3,000

 

 

 

100,980

 

Bradley L. Beesley

 

 

2,000

 

 

 

67,320

 

 

 

 

(1)

This table includes the awards of (i) RSUs granted on January 23, 2018 that were earned at target based on performance through December 31, 2018 and converted to restricted stock. The remaining restricted stock vests on December 15, 2021; (ii) 1,000 discretionary shares of restricted stock granted on January 22, 2019 to Messrs. Smith and Taylor each that vest at a rate equal to 1/3 on December 15, 2019, December 15, 2020 and December 15, 2021; (iii) RSUs granted on January 22, 2019 that were earned at target based on performance through December 31, 2019 and converted to restricted stock. The remaining restricted stock vests on December 15, 2021 and December 15, 2022; (iv) 750 discretionary shares of restricted stock granted on January 21, 2020 to Mr. Smith that vest at a rate equal to 1/3 on December 15, 2020, December 15, 2021 and December 15, 2022; and (vii) RSUs granted on January 21, 2020 that were earned at target based on performance through December 31, 2020 and converted to restricted stock that vest at a rate equal to 1/3 on December 15, 2021, December 15, 2022 and December 15, 2023.

If an executive’s employment terminates for any reason prior to the end of the RSU’s annual performance period, the RSU award will be forfeited.  If an executive’s employment terminates prior to a vesting date that applies to any restricted stock, he will forfeit the award, unless such termination occurs on or after attaining age 66 with 10 years of service or due to death or disability (in which case the executive will vest in the then unvested shares).

 

 

(2)

The market rate is based on the closing price of the Company’s stock on December 31, 2020 ($33.66).

27


 

 

2020 OPTION EXERCISES AND STOCK VESTED

This table sets forth information relating to the vesting of restricted stock and RSUs during 2020 by each named executive officer and the amount realized upon such exercise or vesting. The Company had no outstanding stock options in 2020.

 

 

 

Stock Awards

 

Name

 

Number of Shares Vested                           (#)

 

 

Value Realized when Shares Vested               ($)(1)

 

Joseph R. Dively

 

 

4,467

 

 

 

151,521

 

Matthew K. Smith

 

 

1,583

 

 

 

53,695

 

Michael L. Taylor

 

 

1,833

 

 

 

62,175

 

Eric S. McRae

 

 

1,500

 

 

 

50,880

 

Bradley L. Beesley

 

 

1,000

 

 

 

33,920

 

 

 

 

(1)

Represents the number of shares vested during 2020 multiplied by the closing market price ($33.92) of the underlying shares on the vesting date (December 15, 2020).

28


 

2020 NONQUALIFIED DEFERRED COMPENSATION

This table shows information regarding each named executive officer’s account balance at December 31, 2020 under the Company’s Deferred Compensation Plan (“DCP”), including contributions and earnings credited to such account.

 

 

Name

 

Executive Contributions In Last FY ($) (1)

 

 

Registrant Contributions in Last FY

($)

 

 

Aggregate Earnings in Last FY

($) (2)

 

 

Aggregate Withdrawals/ Distributions ($)

 

 

Aggregate Balance at Last FYE    ($) (3)

 

Joseph R. Dively

 

 

59,832

 

 

 

 

 

 

(7,361

)

 

 

 

 

 

1,560,716

 

Matthew K. Smith

 

 

 

 

 

 

 

 

(343

)

 

 

 

 

 

20,758

 

Michael L. Taylor

 

 

36,850

 

 

 

 

 

 

7,402

 

 

 

 

 

 

101,897

 

Eric S. McRae

 

 

14,336

 

 

 

 

 

 

392

 

 

 

 

 

 

173,823

 

Brad L. Beesley

 

 

 

 

 

 

 

 

(3,072

)

 

 

 

 

 

185,988

 

 

 

 

 

(1)

The contributions reported in this column are reported in the Summary Compensation Table, in either the Salary or Non-Equity Incentive Compensation Plan columns.

 

 

(2)

The earnings reported in this column are not reported on the Summary Compensation Table.

 

 

(3)

The amounts in this column have previously been reported as compensation on the Summary Compensation Tables for prior years, except for the following amounts of earnings or deferrals included in the account balances:  Mr. Dively:  $705,231 (includes earnings and deferrals of director fees which were not previously reported on the Summary Compensation Table); Mr. Smith: $132; Mr. Taylor: $9,051; Mr. McRae:  $56,600; Mr. Beesley: $61,701.

 

Non-Qualified Deferred Compensation.  The DCP is a nonqualified defined contribution plan that covers certain eligible employees and directors, including the named executive officers.  For each calendar year, the named executive officers can defer 5%, 10% or 15% of their base salary and/or 25% increments of their cash incentive compensation, and non-employee directors can elect to defer their director fees.  The deferred amounts are deposited into a rabbi trust and credited to a DCP account established for the participant as soon as practicable after the date they would otherwise have been paid to the participant.  Such amounts are invested in the Goldman Sachs FST Money Market Fund until the next quarterly window trading period established by the Company, at which point each participant’s account balance is invested in shares of common stock of the Company.  Dividends paid on Common Stock are credited to the participant’s DCP account and invested in additional shares.  The Goldman Sachs FST Money Market Fund had an annual return for 2020 of 0.61%.  The Company’s common stock had an annual return for 2020 of -2.21%.

A participant is 100% vested in his or her DCP account at all times.  A participant’s DCP account is paid to him or her in five annual installments beginning on the March 15 following the date the participant terminates employment, provided that the Board of Directors in its sole discretion can decide to pay the portion of the DCP account earned as of December 31, 2004 in a lump sum payment.  An participant may also request at any time a distribution from the DCP account of an amount necessary to satisfy an unforeseeable emergency.  In the case of the death of a participant, the DCP account will be paid to his or her designated beneficiary in a single payment.  Upon a Change in Control of the Company (as defined in the Plan), each participant’s DCP account will be paid in an immediate lump sum.  All distributions are in full shares of common stock, and cash for fractional shares.

 

29


 

 

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL OF THE COMPANY

The Company provides certain benefits to eligible employees, including the named executive officers, upon certain terminations of employment or a change in control of the Company.  These benefits are in addition to the benefits to which the executive would be entitled upon a termination of employment generally (i.e., vested retirement benefits accrued as of the date of termination, stock-based awards that are vested as of the date of termination and the right to elect continued health coverage pursuant to COBRA).

Employment Agreements

The employment agreements with the named executive officers provide benefits to them upon certain types of termination of employment during the term of the agreement.  The incremental benefits payable to the named executive officers in effect at December 31, 2020 include the following:

 

If the executive’s employment is terminated by the Company for other than “cause” (and a Change in Control of the Company, as defined in the Stock Incentive Plan, has not occurred), the executive is entitled to the following:

 

i.

Continued payment of the executive’s then current base salary for 12 months.

 

ii.

Continued coverage of the executive under the Company’s health plan for the 12-month severance period at active employee rates if the executive elects COBRA (the full COBRA rate applies for the remainder of the COBRA period and with respect to coverage for the executive’s spouse and dependents).

 

If following a Change in Control of the Company (as defined in the 2017 Stock Incentive Plan), the executive’s employment is terminated by the Company for other than “cause,” or the executive terminates his or her employment due to good reason, the executive is entitled to the following:

 

i.

For Messrs. Dively, Smith, Taylor and McRae, payment of the executive’s then current base annual salary for 24 months. For Mr. Beesley, continued salary for 12 months.

 

ii.

An immediate lump sum payment equal to the incentive compensation earned by or paid to the executive for the immediately preceding fiscal year.

 

iii.

Continued coverage of the executive under the Company’s health plan for the first 24 months (12 months for Mr. Beesley) following termination at active employee rates if the executive elects COBRA (the full COBRA rate applies for the remainder of the COBRA period and with respect to coverage for the executive’s spouse and dependents).

“Cause” means the executive’s (i) conviction (or guilty or no contest plea) for a felony or any crime involving fraud, dishonesty or breach of trust; (ii) performance that would materially and adversely affect the Company’s business; (iii) act or omission that results in a regulatory body to demand the executive to be suspended or removed; (iv) substantial nonperformance of his or her duties; (v) misappropriation or intentional material damage to the Company’s property or business; or (vi) violation of the agreement’s restrictions with respect to confidential information, noncompetition and nonsolicitation.

"Good reason" means a decrease in the executive's then current salary or a substantial diminution in his or her position and responsibilities.

The agreements in effect for 2020 contain restrictive covenants that prohibit the executive from (i) disclosing confidential information; (ii) becoming involved with a business similar to that of the Company within any county in which the Company conducts business; and (iii) soliciting for sale or selling competing products or services to any person or entity who was a customer or client of the Company during the last year of the executive’s employment. The restrictive covenants regarding confidential information are indefinite.  The restrictive covenants regarding noncompetition and nonsolicitation continue in effect until one year following termination of employment.

30


 

Stock Incentive Plans

The restricted stock award agreements provide that an executive will not become vested in any restricted stock if the executive does not remain continuously employed from the grant date until the last day of the applicable vesting period, except that upon a voluntary termination of employment after attaining age 66 with ten years of service or a termination of employment due to death or disability, an executive will vest in the remaining unvested shares subject to the award. The RSU award agreements provide that if an executive’s employment terminates for any reason during the annual performance period, the award is forfeited, and if the executive’s employment terminates after the RSU award is converted to restricted stock following the end of the performance period, the accelerated vesting provisions discussed above apply.

Upon a Change in Control of the Company (as defined in the Plan), the compensation committee has the discretion to determine how outstanding awards are treated on a Change in Control. The current award agreements provide that unless the awards are assumed by a public company, they will fully vest immediately prior to the Change in Control. If the awards are assumed by a public company, and within two years following the Change in Control the executive’s employment is terminated by the company without Cause or by the executive for Good Reason (as such terms are defined in the agreement), the awards fully vest.

2020 Potential Severance Payments

The table set forth below quantifies the additional benefits as described above that would be paid to each named executive officer, assuming a Change in Control of the Company and/or termination of employment occurred on December 31, 2020.

 

 

Name:

 

Joseph R.

Dively

 

 

Matthew K.

Smith

 

 

Michael L.

Taylor

 

 

Eric S.

McRae

 

 

Bradley L.

Beesley

 

Change in Control:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Base Salary

 

$

952,728

 

 

$

492,836

 

 

$

624,786

 

 

$