DEF 14A of First Merchants Corp
Filed Mar 27, 2024 · FY20230000712534-24-000114
TABLE OF CONTENTS
| •NON-QUALIFIED DEFERRED COMPENSATION TABLE | 44 | | •CHANGE OF CONTROL AGREEMENTS TABLE | 44 | | RATIO OF ANNUAL TOTAL COMPENSATION OF CHIEF EXECUTIVE OFFICER TO MEDIAN EMPLOYEE | 45 | | PAY VERSUS PERFORMANCE | 46 | | •PAY VERSUS PERFORMANCE TABLE | 46 | | •DESCRIPTION OF RELATIONSHIPS AMONG PAY VERSUS PERFORMANCE MEASURES | 47 | | •TABULAR LIST OF MOST IMPORTANT PERFORMANCE MEASURES | 49 | | VOTING ITEM 2: ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS | 49 | | VOTING ITEM 3: VOTE TO APPROVE, ON AN ADVISORY BASIS, THE FREQUENCY OF ADVISORY VOTES ON EXECUTIVE COMPENSATION | 50 | | VOTING ITEM 4: PROPOSAL TO APPROVE THE FIRST MERCHANTS CORPORATION 2024 LONG-TERM EQUITY COMPENSATION PLAN | 50 | | •IMPORTANT GOVERNANCE FEATURES AND PRACTICES | 51 | | •SUMMARY OF THE 2024 LTEIP | 53 | | •CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES UNDER THE 2024 LTEIP | 55 | | •NEW PLAN BENEFITS | 56 | | •EQUITY COMPENSATION PLAN INFORMATION | 56 | | VOTING ITEM 5: PROPOSAL TO APPROVE THE FIRST MERCHANTS CORPORATION 2024 EMPLOYEE STOCK PURCHASE PLAN | 57 | | •KEY FEATURES OF THE 2019 ESPP | 57 | | •SUMMARY OF THE 2024 ESPP | 58 | | •CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES UNDER THE 2024 ESPP | 59 | | •NEW PLAN BENEFITS | 60 | | •EQUITY COMPENSATION PLAN INFORMATION | 60 | | VOTING ITEM 6: PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION GIVING SHAREHOLDERS THE ABILITY TO AMEND THE COMPANY'S BYLAWS | 60 | | •ARTICLE X AMENDMENTS | 60 | | •SHAREHOLDER VOTE AND RELATED IMPACT | 61 | | VOTING ITEM 7: PROPOSAL TO APPROVE AMENDMENTS TO THE COMPANY'S ARTICLES OF INCORPORATION TO PROVIDE FOR A PHASED-IN DECLASSIFICATION OF THE COMPANY'S BOARD OF DIRECTORS | 61 | | •SHAREHOLDER VOTE AND RELATED IMPACT | 62 |
VOTING ITEM 1: ELECTION OF DIRECTORS
VOTING ITEM 1: ELECTION OF DIRECTORS Four (4) directors will be elected at the Annual Meeting. All of the current Class III directors — Michael R. Becher, Patrick J. Fehring, Mark K Hardwick, and Jason R. Sondhi — whose terms will expire as of the 2024 Annual Meeting, have been nominated to serve new three-year terms expiring as of the 2027 Annual Meeting. There are no family relationships among the Company’s executive officers and directors. THE BOARD RECOMMENDS A VOTE “FOR” THE ELECTION TO THE BOARD OF EACH OF THE FOLLOWING NOMINEES:
VOTING ITEM 1: ELECTION OF DIRECTORS
| Class III (Terms expire 2027): | | | Michael R. Becher, CPA age 70 Director since 2012 | Mr. Becher was the Managing Partner of the Indianapolis office of Deloitte & Touche LLP (“Deloitte”) for more than 20 years, until his retirement in June 2012. Deloitte is one of the largest professional services organizations in the United States. While he was the Managing Partner, Deloitte experienced significant growth in the Indianapolis market. Mr. Becher also held other national and regional leadership positions during his more than 37-year career with Deloitte. As an audit partner, Mr. Becher served public and private companies in industries such as financial services, retail and manufacturing, and tax-exempt organizations. Since 2013, Mr. Becher has been a strategic advisor to Krieg DeVault LLP, an Indianapolis-based, business-focused law firm. He recently chaired the Board of Trustees and is a member of the Executive, Audit and Risk, Governance and Finance Committees of Marian University. Mr. Becher and his wife are Co-Chairs of the "Journey to 30" campaign at Marian University, which will raise significant funds for scholarships, especially for the disadvantaged. He is a past director and member of the Executive and Finance Committees of the Indianapolis Symphony. He is a member of the Board of the United Way of Central Indiana (UWCI) where he also serves on the Capital Projects Committees for Central Indiana and for the remainder of the State of Indiana. These Committees administer multi-million dollar funds that assist with capital projects. He also chairs Always United, a part of the UWCI, which provides services and community volunteer opportunities to retirees and near-retirees. He also serves on the Indiana University Health System Suburban System Board of Directors. He is a member of a peer group of Audit Committee Chairs of similar size banks located throughout the United States. Mr. Becher chairs the Board’s Audit Committee and also serves on the Nominating and Governance Committee. | | Mr. Becher’s specific experience and qualifications to serve as a director | He has considerable tax, accounting and financial expertise acquired through his professional training as a certified public accountant. He is familiar with the financial services industry because of his experience derived from auditing companies in that industry. He has acquired an understanding of risk management, regulatory and compliance issues, and he has gained management experience as the head of a large office and national and regional leadership position of a Big Four accounting firm that provides professional services to large public companies as well as smaller private businesses. The Company also benefits from Mr. Becher’s experience serving on a number of audit committees. The Board has determined that he is an “audit committee financial expert” within the meaning of Item 407(d)(5) of SEC Regulation S-K. Mr. Becher resides in the Indianapolis metropolitan area, one of FMC’s high-growth markets. |
VOTING ITEM 1: ELECTION OF DIRECTORS
| Patrick J. Fehring age 66 Director since 2022 | Mr. Fehring, retired President and Chief Executive Officer of Level One Bank and Level One Bancorp, Inc., served in that position since the founding of Level One Bank in 2007 until its merger with First Merchants in 2022. Before founding Level One, Fehring spent 27 years with Fifth Third Bancorp and its affiliates, most recently as President of Fifth Third Bank, Eastern Michigan. Mr. Fehring is an active leader in the local community, where he serves as Board Chair of the Catholic Foundation of Michigan. Mr. Fehring previously served as a Board member of Ascension Health Michigan and as Treasurer for Detroit Public Television. He also previously chaired the Investment Committee for the Detroit Regional Chamber and served on the Board of United Way Southeast Michigan. Mr. Fehring received his Bachelor of Science in Business from Miami University in Ohio. | | Mr. Fehring’s specific experience and qualifications to serve as a director | Mr. Fehring is an experienced banker, proven leader, former Chairman of a publicly held bank and one of the Board’s connections to the Michigan Region. |
VOTING ITEM 1: ELECTION OF DIRECTORS
| Mark K. Hardwick age 53 Director since 2021 | Mr. Hardwick currently serves as the Chief Executive Officer of First Merchants Corporation and First Merchants Bank. He joined First Merchants in November 1997 as Corporate Controller and was promoted to Chief Financial Officer in April of 2002. In June of 2007, Mr. Hardwick also assumed all leadership responsibilities related to operations, technology, and risk management for the Company. In 2016, Mr. Hardwick's title expanded to include Chief Operating Officer, overseeing the leadership responsibilities for finance, operations, technology, risk, legal, and facilities for the Company. In 2021, he was promoted to Chief Executive Officer. Prior to joining First Merchants Corporation, Mr. Hardwick served as a senior accountant with BKD, LLP in Indianapolis. Mr. Hardwick is a trustee for Ball State University, serving as the Chair for the Audit Committee. He is also a member of Next Muncie. He was inducted into the Ball State University Athletics Hall of Fame in 2012. He was also the recipient of the Indianapolis Business Journal’s “CFO of the Year” in 2012 and was named one of “Indiana’s 250 Most Influential Business Leaders” in 2023. | | Mr. Hardwick’s specific experience and qualifications to serve as a director | As the Company's Chief Executive Officer, a long-tenured officer of the Bank and a Certified Public Accountant, Mr. Hardwick brings an array of experience and talent to the Board. His extensive community involvement in Muncie, Indiana, the Company's headquarters, is also an asset to the Company. |
VOTING ITEM 1: ELECTION OF DIRECTORS
| Jason R. Sondhi age 40 Director since 2022 | Mr. Sondhi is the founder and CEO of Sondhi Solutions, a leading IT consulting and staffing firm located in Indianapolis. Mr. Sondhi has grown Sondhi Solutions to multiple markets and the company has topped the Indianapolis Business Journal’s Fastest Growing Companies list in 2015-2016 and landed on the Inc. 5000 from 2014-2016. With a focus on supporting its employees, Sondhi Solutions was honored with the Top Places to Work award in 2018, 2019, and 2021. Mr. Sondhi also serves on the Board of Directors of Weaver Popcorn. As a leader in the community, “giving back” has been a top priority for Mr. Sondhi over his career. He sits on the board of Weaver Popcorn Fundraising, an organization that empowers individuals and organizations in need by fulfilling a goal through technology and products. He created IT Equipment Round UP which provides gently used IT equipment to non-profits, and he started Jingle Books, a yearly holiday fundraiser providing Indianapolis children books to inspire and educate. To date, 8,000+ books have been collected. Mr. Sondhi has been an active donor and volunteer with the Christel DeHaan Foundation and sits on the Park Tudor Alumni Board. | | Mr. Sondhi's specific experience and qualifications to serve as a director | Mr. Sondhi provides the Board with critical experience in technology and cybersecurity. |
DIRECTORS WHOSE TERMS ARE NOT EXPIRING
DIRECTORS WHOSE TERMS ARE NOT EXPIRING The terms of the following directors are not expiring as of the 2024 Annual Meeting. They will continue to serve as directors for the remainder of their terms or until otherwise provided in the Company’s Bylaws.
DIRECTORS WHOSE TERMS ARE NOT EXPIRING
| Class I (Terms expire 2025): | | | F. Howard Halderman age 57 Director since 2013 | Mr. Halderman is the President and CEO of Halderman Farm Management Service, Inc. (“HFMS”), headquartered in Wabash, Indiana, which provides management services for agricultural properties from coast to coast, and Halderman Real Estate Services, Inc. (“HRES”), headquartered in Wabash, Indiana, which buys and sells farm real estate through private transactions and public auctions and performs certified farm appraisals, primarily in Indiana, Ohio and Michigan; and is Executive Chair of US Agriculture, LLC, a Registered Investment Adviser registered with the SEC. Mr. Halderman joined HFMS in 1988 and succeeded his father as President and CEO in 2000. Mr. Halderman co-founded HRES with his father in 1990, and he became the CEO of that company in 2012. Mr. Halderman is an Accredited Farm Manager with the American Society of Farm Managers and Rural Appraisers, and he is a licensed real estate broker in Indiana, Ohio, Georgia, Illinois, Michigan and Kentucky. He serves on the Boards at Honeywell Foundation, Inc., Field of Dreams, Inc., and Parkview Health System. He is also on the Investment Committee for Community Foundation of Wabash County. Mr. Halderman is Chair of the Board’s Risk and Credit Policy Committee. | | Mr. Halderman’s specific experience and qualifications to serve as a director | He has considerable experience and knowledge of the agricultural real estate marketplace throughout the Eastern Corn Belt, which includes the FMC market. Agricultural lending is an important segment of the Company’s business, and Mr. Halderman is the only FMC director who possesses special expertise in this field. His vast network of contacts within the agricultural community in Indiana and nationally benefits the Company. Mr. Halderman owns and operates three farm-related small businesses that are located in an important rural market for the Company. |
DIRECTORS WHOSE TERMS ARE NOT EXPIRING
| Kevin D. Johnson age 59 Director since 2022 | Mr. Johnson is the President and Chief Executive Officer for the Detroit Economic Growth Corporation ("DEGC"), the city’s leading inclusive economic development driver. He has served as President and CEO since June 2018. Under Mr. Johnson’s leadership, the organization focuses on job creation, capital investment and small business growth for the City of Detroit. Access, inclusion and financial growth for all Detroiters form the foundation of all DEGC work. As President and CEO, Mr. Johnson spearheads DEGC’s economic development initiatives, including business attraction and retention, neighborhood small-business growth and international investment and corporate attraction of large enterprises to the Detroit region. Most recently, Mr. Johnson was integral in bringing the $4.5 billion Fiat Chrysler/Stellantis investment to Detroit and, with it, thousands of Stellantis and supplier jobs. Mr. Johnson has served in both public and private economic-development positions throughout the U.S., including roles in Arizona, Florida, North Carolina and Georgia. In his most previous role at Invest Atlanta, Johnson led the economic development program for the city, helping to create jobs and generating billions of dollars in new capital investment. Mr. Johnson began his career nearly 30 years ago as the Assistant County Manager and Director of Economic Development for Caswell County (NC) Municipal Government. Throughout his career, he has held a variety of leadership positions including President of the Athens Area Chamber of Commerce, Vice President of business development for the Greater Phoenix Economic Council and Vice President of Business Development for Research Triangle Foundation in North Carolina. Mr. Johnson received his Bachelor of Science in Political Science and Pre-Law from South Carolina State University. He received his Certified Economic Developer designation from the International Economic Development Council and has received numerous professional and community awards. Mr. Johnson was named one of the Top 50 Economic Developers of 2019 by Consultant Connect, a consulting agency designed to bridge the gap between economic developers and site consultants. He serves as a member of the International Economic Development Council. He is also on the board of directors with the Downtown Detroit Partnership, Detroit Riverfront Conservancy, Tech Town, and the Economic Development Leaders of Michigan. | | Mr. Johnson’s specific experience and qualifications to serve as a director | Mr. Johnson is a veteran of the economic development industry, advising large and medium enterprises in their site selection needs and enhanced finance opportunities through public tax incentives at the local, state and federal levels. He also provides the Board with insight into the banking needs of small businesses in low-moderate income areas, including those in Detroit, Michigan. |
DIRECTORS WHOSE TERMS ARE NOT EXPIRING
| Clark C. Kellogg age 63 Director since 2019 | Mr. Kellogg is a basketball commentator at CBS Sports. At CBS, he has been a lead studio and game analyst since 1997, and a familiar and trusted voice during “March Madness”. Mr. Kellogg spent a total of thirty-two years with the Indiana Pacers; five as a player, twenty-three as a broadcaster, and four as Vice President of Player Relations. Mr. Kellogg was appointed to the Columbus Foundation Governing Committee in 2019 and currently serves as Chairperson of the Committee. He also has served on The Ohio State Alumni Association Board, The Ohio State Board of Trustees (2010-19), and as a director on First Merchants Bank Ohio Regional Advisory Board since 2001. Mr. Kellogg is also a member of the Board of Directors of RLI Corp, a public company. | | Mr. Kellogg’s specific experience and qualifications to serve as a director | Serving and philanthropy are as much a part of Mr. Kellogg as basketball is. He uses his talent, time, and treasure to support various institutions and organizations, including American Red Cross, Athletes in Action, Big Brothers Big Sisters, Fellowship of Christian Athletes, One Heart Project, Ronald McDonald House Charities, The Ohio State University, and United Way. |
DIRECTORS WHOSE TERMS ARE NOT EXPIRING
| Michael C. Rechin age 65 Director since 2005 | Mr. Rechin is the former President and CEO of the Company and its wholly owned subsidiary, First Merchants Bank. He joined FMC in 2005, as its Executive Vice President and Chief Operating Officer, and he led the Company from 2007 until his retirement on December 31, 2020. Before joining FMC, Mr. Rechin held senior management positions with National City Bank (“National City”) for 23 years. Mr. Rechin was the manager of National City’s Indiana Commercial Banking operations from 1995 until 2005. Mr. Rechin currently serves on the Board of Advisors of the Sheehan Family Foundation and the Hageman Group. He previously served on the Boards of the Conner Prairie Museum and The Center for the Performing Arts. | | Mr. Rechin’s specific experience and qualifications to serve as a director | As the Company’s former President and CEO, Mr. Rechin is an essential member of the Board. In addition to his leadership, strategic and management skills, Mr. Rechin’s broad knowledge of the banking and financial services industry acquired during his nearly 35 years of service in executive and senior management positions in that industry serves the Company well. Mr. Rechin resides in the Indianapolis metropolitan area, one of FMC’s high-growth markets. |
DIRECTORS WHOSE TERMS ARE NOT EXPIRING
| Charles E. Schalliol age 76 Director since 2004 Chairman since 2007 | Mr. Schalliol was most recently a senior advisor in the Indianapolis office of the international law firm, Faegre Drinker Biddle & Reath, LLP. He is currently on the Board of Directors of Heritage Construction and Materials Company. Mr. Schalliol is a director of a venture capital fund, and he is a director of the Purdue Research Foundation ("PRF"), and the Indiana University Research and Technology Corporation, which are dedicated to enhancing those Universities’ research and development capabilities, promoting entrepreneurship, and creating new Indiana-based companies. In addition, PRF manages Purdue's endowments and real estate. He chairs the Board of Directors of the Indiana Secondary Market for Education Loans, Inc., a nonprofit corporation that is Indiana’s designated provider of student loan services, and is a Director of IU Health's Suburban Region Hospitals. He served as the Director of the Indiana Office of Management and Budget (“OMB”) and as the Chief Financial Officer for the State of Indiana from 2004 to 2007, in the administration of Indiana Governor Mitch Daniels. As OMB Director, he was responsible for the State’s budgets and financial operations, including its pension funds, as well as agencies that had more than 2,000 state employees. Before heading the OMB, Mr. Schalliol served as the first President and CEO of BioCrossroads, an economic development organization focused on life sciences companies. He previously held executive positions with Eli Lilly and Company, a leading worldwide pharmaceuticals company, in the areas of strategic planning, investment banking and business development. Mr. Schalliol was the founder and managing director of three Lilly venture funds. Mr. Schalliol chairs the Board’s Compensation and Human Resources Committee, and he also serves on the Board’s Nominating and Governance Committee. | | Mr. Schalliol’s specific experience and qualifications to serve as a director | He has displayed executive leadership abilities in various capacities and has extensive experience as the head of major, complex public and private entities. He possesses financial acumen, and his entrepreneurial skills are evidenced by his primary role in forming successful new businesses and venture capital funds. He has knowledge of risk management, regulatory and compliance issues gained from his legal training and public service. As the Chair of FMC’s Board, Mr. Schalliol’s experience and leadership skills have been a catalyst for the Company’s exceptional total shareholder return over the past fifteen years and its numerous successful acquisitions during his tenure as Chair. He resides in the Indianapolis metropolitan area, one of FMC’s high-growth markets. |
DIRECTORS WHOSE TERMS ARE NOT EXPIRING
| Class II (Terms expire 2026) | | | Susan W. Brooks age 63 Director since 2021 | Ms. Brooks is an accomplished former Congresswoman and former U.S. Attorney who has driven key legislation to reform emergency response, healthcare, manufacturing, technology innovation, higher education and public safety. She is known for her bipartisan relationships and as a catalyst for economic development. From 2013-2021, she served as the U.S. Representative for the 5th District of Indiana, which spans eight diverse counties throughout the central part of Indiana. Ms. Brooks was a member of the House Energy and Commerce Committee, and held subcommittee roles in Health; Communications and Technology; Commerce, Manufacturing and Trade; and Oversight and Investigations. She also co-founded the 5G Caucus which propelled the United States as a 5G thought leader, driving economic growth and digital innovation. She served on the Select Committee on the Modernization of Congress and on the House Committee on Education and Workforce and Homeland Security Committee. Ms. Brooks is a champion of diversity and inclusion and has elevated Indiana women to leadership positions. She co-chaired the Women’s Caucus and Women in High Tech Coalition and served as the Recruitment Chair for the National Republican Congressional Committee (NRCC). In addition, Ms. Brooks served as the Chair for the House Ethics Committee, where she reformed deficiencies in the Congressional Accountability Act (CAA) after the #MeToo movement. She oversaw multiple high-profile investigations of members of Congress during this time. Prior to Congress, Ms. Brooks served as Senior Vice President and General Counsel for Ivy Tech Community College of Indiana and U.S. Attorney for the Southern District of Indiana, acting as the chief federal law enforcement officer for most of the state. Prior to her appointment as U.S. Attorney, Ms. Brooks practiced law at the Indianapolis law firm of Ice Miller in the Government Services Practice Group. Ms. Brooks also served as Deputy Mayor for the City of Indianapolis under Mayor Stephen Goldsmith, overseeing public safety operations and helping manage law enforcement and emergency response efforts. Previously, she practiced criminal defense law in state and federal courts throughout Indiana. She has served on numerous nonprofit boards, including the Children’s Museum of Indianapolis and St. Vincent Hospital, She serves on the Board of Visitors for IU’s Robert H. McKinney School of Law, and Legal Services Corporation Leaders Council. She is originally from Fort Wayne, Indiana and currently resides in Carmel, Indiana. Both Fort Wayne and Indianapolis are high-growth markets of FMC. Ms. Brooks has received dozens of awards. In 2020, she received the Congressional Award from the Community Anti-Drug Coalitions of America. In 2015, she received the Congressional Biosecurity Champion Award from the Alliance for Biosecurity; the Champion of Healthcare Innovation Award from the Healthcare Leadership Council; and the Manufacturing Legislative Excellence Award from National Association of Manufacturers (NAM). In 2014, she was recognized as the Government Leader of the Year by the Indiana Chamber of Commerce. Ms. Brooks is affiliated with the Indiana University Robert H. McKinney School of Law as a Distinguished Scholar and Ambassador at Large. Ms. Brooks is a member of the Board of Directors of TeamHealth of Knoxville, TN, one of the largest integrated care providers in the country. Ms. Brooks serves on the CSIS Bipartisan Alliance for Global Health Security and the Bipartisan Commission on Biodefense, as well as the Advisory Board for the Krach Institute for Tech Diplomacy at Purdue University. Ms. Brooks was awarded the Lifetime Achievement Award from the Indiana Lawyer/Indianapolis Business Journal in 2021. Ms. Brooks is Chair of the Board's Nominating & Governance Committee. |
DIRECTORS WHOSE TERMS ARE NOT EXPIRING
| Other Public Company Directorships: | Board of Directors of Community Health Systems, Inc. of Franklin, TN, one of the largest providers of general health services in the U. S. |
DIRECTORS WHOSE TERMS ARE NOT EXPIRING
| Ms. Brooks' specific experience and qualifications to serve as a director | Ms. Brooks has advised companies, non-profits, educational institutions, and hospitals on operations and workforce planning and development during organizational transformations. Ms. Brooks is passionate about leading and developing people and teams. Bringing a positive attitude to challenging issues, she believes that collaboration with diverse perspectives is a key factor in solving problems. She is a strong proponent of change and leverages facts to inform decision making. |
DIRECTORS WHOSE TERMS ARE NOT EXPIRING
| Mung Chiang age 47 Director since 2023 | Dr. Chiang became President of Purdue University on January 1, 2023, and is the Roscoe H. George Distinguished Professor of Electrical and Computer Engineering. From July 2017 to June 2022, he was the John A. Edwardson Dean of the College of Engineering. From April 2021 to December 2022, he was the University’s executive vice president for strategic initiatives. He led Purdue Engineering to its first back-to-back top 4 graduate rankings in the U.S. while growing it to be the largest top 10 undergraduate engineering college in the country. As an executive vice president of the University, Dr. Chiang worked with many colleagues to help launch initiatives in national security technology and semiconductor and life science manufacturing, in Discovery Park District at Purdue’s aerospace cluster and the Lab to Life residential neighborhood, and in economic growth through federal, state and private-sector opportunities. Previously, he was the Arthur LeGrand Doty Professor of Electrical Engineering at Princeton University. For his research in wireless networking, Dr. Chiang received the National Science Foundation’s Alan T. Waterman Award in 2013, the highest honor presented to an American researcher under the age of 40, and he was elected to the National Academy of Inventors and the Royal Swedish Academy of Engineering Sciences. He received the Distinguished Teaching Award in Engineering at Princeton for developing one of the university’s first massive open online courses, which has been taught to over 400,000 people. For his pioneering work in edge computing, network utility maximization and wireless resource allocation, he also received the IEEE INFOCOM Achievement Award (2022), Guggenheim Fellowship (2014), IEEE Kiyo Tomiyasu Award (2012), Presidential Early Career Award for Scientists and Engineers (2008) and MIT Technology Review TR35 Award (2007). His research publications on internet congestion control and routing, wireless power control and scheduling, cloud and video optimization, smart data pricing and social learning networks have received over 30,000 citations, with an h-index of 81, and won best paper prizes at IEEE INFOCOM (2012), IEEE SECON (2013) and ACM MobiHoc (2021). As an inventor and entrepreneur, Dr. Chiang has 25 U.S. patents, most of which have been licensed and deployed by the communications and networking industry. He co-founded three startup companies in mobile networks, artificial intelligence and the Internet of Things, based on the research at Princeton Edge Lab, and co-founded a global nonprofit, the OpenFog Consortium, now part of the global Industrial Internet Consortium. He was the founding CEO of DataMi, which has served over 60 million users around the world in bridging the digital divide. As a diplomat and policymaker, Dr. Chiang was the science and technology advisor to the U.S. Secretary of State and initiated the U.S. government’s tech diplomacy programs. Since returning from Washington, D.C., in 2020, he co-founded the Krach Institute of Tech Diplomacy at Purdue and serves as the technology and innovation advisor to his home state of Indiana. | | Dr. Chiang's specific experience and qualifications to serve as a director | Dr. Chiang's experience as an educator, university executive and entrepreneur, as well as his skill set related to technology and computing, will help facilitate the Company's economic growth across Indiana and neighboring states. |
DIRECTORS WHOSE TERMS ARE NOT EXPIRING
| Michael J. Fisher age 54 Director since 2017 | Mr. Fisher is the President and Chief Executive Officer of the Ball Brothers Foundation in Muncie, Indiana (the "Foundation"). Prior to joining the Foundation in 2003, Mr. Fisher worked for Old National Bancorp. In addition to his duties for the Foundation, Mr. Fisher currently serves on the boards of several regional and statewide organizations, including the Indiana Commission for Higher Education, the Edmund F. and Virginia B. Ball Foundation, the IU Health Ball Memorial Hospital, Muncie Aviation Company, Owl Academic & Athletic Boosters, and the IU Lilly Family School of Philanthropy Board of Visitors. Mr. Fisher is a graduate of DePauw University and the Indiana University Lilly Family School of Philanthropy. | | Mr. Fisher's specific experience and qualifications to serve as a director | Mr. Fisher brings considerable management skills and leadership experience to the Board. His involvement with many Muncie-area organizations makes him a recognized Muncie civic leader. He also has prior community banking experience. Mr. Fisher resides in Muncie, Indiana, the location of the Company’s principal office and one of its largest markets. |
DIRECTORS WHOSE TERMS ARE NOT EXPIRING
| Gary J. Lehman age 71 Director since 2011 | Mr. Lehman is a Managing Director of The Cannelton Group (“Cannelton”), a provider of operations and financial assistance to private equity and closely held manufacturing firms. He co-founded Cannelton in 2002. From 2012 to 2014, he was the President of Oerlikon USA Holdings, Inc. which is part of the Oerlikon Group (“Oerlikon”), a leading global technology company based in Switzerland that focuses on providing market-leading technologies and services for surface solutions, man-made fibers manufacturing, drive systems and vacuum pumps and components in growth markets. From 2010 to 2012, Mr. Lehman was the CEO of Oerlikon’s Drive Systems segment. This segment includes Fairfield Manufacturing Company Inc. (“Fairfield”), headquartered in Lafayette, Indiana, the largest independent gear manufacturer in the United States, which Oerlikon acquired in 2007. When Oerlikon acquired Fairfield, Mr. Lehman was Fairfield’s President and CEO, and he continued in this position until 2012 and as Fairfield’s Chair until 2014. Prior to co-founding Cannelton in 2002, Mr. Lehman was President and CEO of Philips Lighting Electronics NA and Advance Transformer, a wholly owned subsidiary of Philips Electronics NV; and Senior Vice President of Worldwide Operations and General Manager of the Body Systems Division of ITT Automotive. Mr. Lehman is currently a member of the Boards of Greater Lafayette Commerce, Wabash Heartland Innovation Network, Indiana Chamber of Commerce and North Central Health Services. Mr. Lehman is Vice Chairman of the Purdue University Board of Trustees and has served on the Indiana Commission for Higher Education. Mr. Lehman serves on the Board’s Compensation and Human Resources Committee. | | Mr. Lehman’s specific experience and qualifications to serve as a director | He has extensive and varied business and executive leadership skills and experience gained as the CEO of companies that compete in global, high technology markets. FMC also benefits from his insights gained from integrating business units of a major international company, including issues involving operations and risk management. He resides in Lafayette, Indiana, one of FMC’s principal markets. |
DIRECTORS WHOSE TERMS ARE NOT EXPIRING
| Jean L. Wojtowicz age 66 Director since 2004 | Ms. Wojtowicz is the President and CEO of Cambridge Capital Management Corp. (“Cambridge”), an Indianapolis-based manager of nontraditional sources of capital for businesses. Since Ms. Wojtowicz founded the company in 1983, Cambridge has provided more than $840 million to more than 1,900 businesses in the manufacturing, service and retail sectors. Cambridge manages the Indiana Statewide Certified Development Corporation, which provides fixed-asset financing to small businesses; the Indiana Community Business Credit Corporation, a consortium of financial institutions that pool money to provide loans to businesses in a growth stage; and Lynx Capital Corporation, which provides debt financing to minority-owned companies. Cambridge is also the general partner of Cambridge Ventures L.P., a licensed small business investment company. She previously served as the lead independent director on the Board of Directors of Vectren Corporation, a New York Stock Exchange energy holding company serving Indiana and Ohio. Ms. Wojtowicz is one of the seven members of the Indiana Department of Financial Institutions, the agency responsible for supervising financial institutions incorporated in Indiana. She also serves as a director of American United Mutual Insurance Holding Company, where she currently serves on the Investment Committee, the Audit Committee, and the Governance Nominating Committee. She also serves on the Boards of the Indiana Chamber of Commerce, Indianapolis Chamber of Commerce, Greater Indianapolis Progress Committee, Goodwill of Central and Southern Indiana, and Indiana Chamber Foundation and INBK (Audit Chair and member of the Nominating and Governance Committee). Ms. Wojtowicz authors frequent articles and columns for the Indianapolis Business Journal, Hoosier Banker, and other business and financial publications. Ms. Wojtowicz is the Company's Vice Chair and also serves on the Board’s Audit Committee, Nominating and Governance Committee, and the Compensation and Human Resources Committee. | | Ms. Wojtowicz’s specific experience and qualifications to serve as a director | She is a recognized leader with broad knowledge of the banking and financial services industry. She has business and financial acumen and has acquired valuable expertise in the areas of risk management and compliance. The Indiana Chamber of Commerce named Ms. Wojtowicz the “2011 Business Leader of the Year” because of her significant contributions to the state’s economy and workforce by connecting small businesses with funding options and vital entrepreneurial advice. As a female, Ms. Wojtowicz adds to the Board’s diversity, which the Company believes significantly benefits the Board, the Company, and the shareholders. The Board has determined that she is an “audit committee financial expert” within the meaning of Item 407(d)(5) of SEC Regulation S-K. She resides in the Indianapolis metropolitan area, one of FMC’s high-growth markets. | | Other public company directorships | Ms. Wojtowicz serves as a director of First Internet Bancorp, a Nasdaq company, where she chairs the Audit Committee, serves on the Nominating and Governance Committee and serves as a director of its banking subsidiary, First Internet Bank of Indiana. |
DIRECTORS WHOSE TERMS ARE NOT EXPIRING
Consistent with the Company’s focus on community banking, all of the FMC directors are actively and visibly involved in community, civic, charitable and other non-profit organizations and activities in the communities where they live and in which the Company does business.
THE COMMITTEE’S CRITERIA AND PROCESS FOR IDENTIFYING AND EVALUATING NOMINEES FOR DIRECTOR
THE COMMITTEE’S CRITERIA AND PROCESS FOR IDENTIFYING AND EVALUATING NOMINEES FOR DIRECTOR The Nominating and Governance Committee assesses the appropriate mix of skills and characteristics required of the Board in the context of the perceived needs at a given point in time and periodically reviews and updates its criteria for identifying and evaluating nominees for director. Among the general criteria the Committee considers are: •ethical character and sharing of the Company’s values as reflected in its mission and vision statements; •personal and professional reputation consistent with the Company’s reputation and image; •superior credentials, accomplishments and recognition in the nominee’s field, with demonstrated sound business judgment; •in general, experience as a current or former CEO or in a comparable leadership position with a public company or other complex business or organization, which may include an educational, governmental, scientific or other non-profit entity; •ability and willingness to devote sufficient time to carry out duties and responsibilities of Board membership and to commit to serve on the Board for several years in order to gain knowledge of the Company’s principal business and operations; •ability and willingness to acquire and hold shares of the Company’s stock in accordance with Board-established guidelines, to assure that the nominee’s financial interests are aligned with those of other shareholders; •relevant expertise and experience - in particular, financial acumen - and ability and willingness to offer advice and guidance to the Company’s CEO and other senior management based on that expertise and experience while working cooperatively with other directors and management; •for non-employee directors, independence, within the meaning of applicable SEC regulations and Nasdaq Listing Rules; also by avoiding conflicts or appearances of conflicts of interest and by ability to objectively appraise management performance, represent shareholder interests and remain independent of any particular constituency; •together with other directors, possession of attributes that contribute to a diverse and complementary Board, with diversity reflecting gender, race, ethnicity, educational, professional and/or managerial backgrounds and experience, and other relevant considerations; •willingness to assist the Company in developing new business; and •residence in FMC’s market coverage areas. If the nominee is an incumbent director whose term is expiring, the Nominating and Governance Committee also considers the quality of the director’s prior service to the Company, including the nature and extent of the director’s participation in the Company’s governance and contributions of management and financial expertise and experience to the Board and the Company. This evaluation of incumbent directors’ prior service is accomplished through a formal process that takes into consideration all relevant factors including, without limitation, whether the director continues to meet the criteria listed above that are used for evaluating all director-nominees, and the quality of the director’s service as measured by his or her performance of the responsibilities set forth in the directors’ position description. Board members who are not members of the Nominating and Governance Committee are also encouraged to submit evaluations of the prior service of incumbent directors. The Nominating and Governance Committee considers candidates coming to its attention through current Board members, search firms, shareholders and other persons.
THE OBJECTIVES OF THE EXECUTIVE COMPENSATION PROGRAM AND THE PROCESS FOR IMPLEMENTING THESE OBJECTIVES
THE OBJECTIVES OF THE EXECUTIVE COMPENSATION PROGRAM AND THE PROCESS FOR IMPLEMENTING THESE OBJECTIVES The Compensation and Human Resources Committee, under its delegated authority from the Board, has established an effective, straight-forward executive compensation structure that gives FMC’s executives incentives to achieve the Company’s annual and long-term strategic goals, with the ultimate objective of achieving a superior return on the shareholders’ investment. To this end, the Company has designed its compensation programs so that executives have the opportunity to earn an appropriate mix of salary, employee benefits and short and long-term incentives, comprised of both cash and equity, which will financially reward them for excellent performance as measured against the Company’s strategic goals and in comparison to financial industry peers. The equity-based incentive compensation program includes provisions that obligate key employees to retain ownership throughout the period of their employment by the Company of a portion of the common stock they are awarded under that program, thus increasing their financial stake in the Company’s continued success and further aligning their interests with those of the other shareholders. The Compensation and Human Resources Committee’s Corporate Compensation Policy lists the following considerations for the design of executive compensation programs that will assist the Company in achieving its business objectives: (1) programs should attract, retain and motivate high-performing, qualified executives and be competitive with industry peers’ programs; (2) incentive compensation programs should reward performance that is directly related to the Company’s financial performance and the individual executive’s contributions to that performance; (3) programs should strengthen the alignment between management effort and business strategy; and (4) programs should link compensation to factors which affect short and long-term stock performance. The policy states that all reasonable efforts should be made to ensure that executive compensation programs do not include any cash or equity-based incentive or other feature that might encourage executives to take unnecessary or excessive risks that threaten the value of the Company or encourage the manipulation of the Company’s reported earnings to enhance the compensation of any executive. The Compensation and Human Resources Committee periodically reviews and evaluates the effectiveness of the executive compensation programs and their alignment with the Company’s business strategies and the interests of shareholders. The Committee has primary responsibility for reviewing executive performance and approving executive compensation, although in 2023 it gave considerable weight to the recommendations of the CEO, Mr. Hardwick, in reviewing the performance and determining the compensation of executives other than Mr. Hardwick himself. The executive performance review process includes accomplishing formal reviews, adjusting base salaries and approving the non-equity incentive plan payments based on the Company’s audited financial results for the previous fiscal year. Annual salary increases and non-equity incentive plan payments occur in March. Annual restricted stock awards under the Long-term Equity Incentive Plan are made by the Committee in the third quarter. Senior management is responsible for the implementation and day-to-day administration of the Company’s compensation programs, including its executive compensation programs, under the direction of Mr. Hardwick and the Executive Vice President and Chief Human Resources Officer, Steven Harris.
THE MATERIAL ELEMENTS OF NEO COMPENSATION AND HOW EACH OF THESE ELEMENTS PROMOTES THE COMPANY’S STRATEGIC OBJECTIVES
THE MATERIAL ELEMENTS OF NEO COMPENSATION AND HOW EACH OF THESE ELEMENTS PROMOTES THE COMPANY’S STRATEGIC OBJECTIVES The material elements of the NEOs’ annual compensation are: (1) cash compensation, comprised of (a) base salary, and (b) non-equity incentive plan payments under the Senior Management Incentive Compensation Program (“SMICP”); (2) equity compensation, comprised of (a) restricted stock awards under the Long-term Equity Incentive Plan (“LTEIP”), and (b) opportunities for discounted FMC stock purchases under the Employee Stock Purchase Plan (“ESPP”); and (3) retirement and deferred compensation plan contributions under (a) the Retirement Pension Plan (“Pension Plan”) (for Mr. Hardwick and Mr. Fluhler only), (b) the Retirement and Income Savings Plan (“§401(k) Plan”), and (c) the 2011 Executive Deferred Compensation Plan (“EDCP”). In the event of an acquisition of FMC, the NEOs could also receive compensation under “double trigger” change of control agreements. The Company does not have employment or other severance agreements with its executive officers. Detailed information concerning each of the material elements of the NEOs’ compensation can be found on pages 31-37. Base salary and non-equity incentive plan payments under the SMICP are intended to advance annual goals by providing a near-term financial reward for excellent performance that advances FMC’s strategic objectives. The targets for earning non-equity incentive plan payments under the SMICP are adjusted annually to align with the Company’s annual financial plan. The restricted stock awards under the LTEIP are designed to financially reward the achievement of long-term goals and to further align executives’ financial interests with those of other shareholders by tying the value of such compensation to sustained increases in the price of the Company’s stock. This objective is also supported by LTEIP provisions that: (1) require executive officers to hold approximately 25% of the restricted stock awarded to them until their death, retirement, termination of employment, or change of control; and (2) establish a guideline for executive officers to acquire and hold FMC stock equal in value to their then current annual salary within six years of commencing participation in the LTEIP. The three-year vesting provisions attached to the restricted stock awards, together with the vesting provisions in the retirement plans, also promote the long-term employment of qualified executives.
THE RELATIONSHIP BETWEEN NEO COMPENSATION AND THE COMPANY’S PERFORMANCE
THE RELATIONSHIP BETWEEN NEO COMPENSATION AND THE COMPANY’S PERFORMANCE Disregarding retirement and deferred compensation plan contributions and only considering current compensation, payments earned under the incentive plans (the SMICP and the LTEIP) together constituted a substantial portion of the compensation paid to the NEOs for 2023. The size of the non-equity incentive payments under the SMICP and the value of the restricted stock awards under the LTEIP are directly impacted by the Company’s performance. Whether a non-equity incentive payment was earned under the SMICP, and the size of an earned payment, depended on whether FMC achieved operating earnings per share for the year that met or exceeded pre-established targets based on the Company’s annual financial plan. The number of FMC shares the NEOs received under the LTEIP, while subjectively determined by the Compensation and Human Resources Committee and not based directly on performance-related metrics, was heavily influenced by the NEOs’ individual performance and the Company’s performance during 2023. The Company’s performance also impacts these share awards in another way, in that the value of these shares will be affected by their future market price and the total shareholder return (market price appreciation plus dividends paid) on the shares. FMC continued its excellent performance during 2023. The Company reported net income available to common shareholders of $221.9 million compared to $220.7 million for the year ended 2022. The dividend paid on a share of FMC common stock increased from $1.25/share in 2022 to $1.34/share, a 7% increase. As of December 31, 2023, FMC’s total assets equaled $18.4 billion. In 2023, the incentive compensation the NEOs earned under the Company’s executive compensation program generally aligned with Company performance that benefits shareholders. Under the SMICP, the operating earnings per share FMC achieves compared to the Company’s annual financial plan is the sole metric on which the non-equity incentive compensation earned by Mr. Hardwick, Mr. Stewart, Ms. Kawiecki, and Mr. Martin is based, and it is the metric on which 70% of Mr. Fluhler’s non-equity incentive compensation is based. The Compensation and Human Resources Committee believes that the operating earnings per share the Company achieves is the best measure of the Company’s success and the metric is most directly reflective of the NEOs’ performance; and, therefore, in the long run, it is also the most closely aligned with the shareholders’ interests. In addition, each of the NEOs benefited from the vesting in 2023 of restricted shares that had been awarded to them three years earlier under the LTEIP. These shares had a market value that was higher than their value at the time they were awarded. All of this demonstrates that the NEOs’ compensation is aligned with shareholder interests.
PEER GROUP
PEER GROUP In its efforts to attract, retain and motivate high-performing executives, FMC competes with other employers, mainly in the financial services industry in the Midwest. Necessarily, this requires the Company to be aware of how peer institutions are compensating their executives, to ascertain how the Company’s executive compensation programs compare - both in their mix and their amounts - with these peers’ programs. The Compensation and Human Resources Committee’s goal is to fix executives’ total compensation as nearly as practicable, taking into account all relevant factors, near or above the median for similar positions at peer institutions, with an appropriate balance between salary and incentive compensation, cash and equity, and short and long-term incentives. The peer group for 2023 consisted of the following 23 publicly traded financial institutions of relatively similar size to the Company:
PEER GROUP
| Ameris Bancorp. | Horizon Bancorp, Inc. | | Atlantic Union Bkshs Corp. | Lakeland Financial Corp | | City Holding Co. | Midland States Bancorp., Inc. | | Community Bank System, Inc. | Nicolet Bankshares, Inc. | | Enterprise Financial Services | Old National Bancorp | | First Busey Corp. | Park National Corp. | | First Financial Bancorp. | Premier Financial Corp. | | FB Financial Corp. | Simmons First National Corp. | | 1st Source Corp. | Stock Yards Bancorp., Inc. | | German American Bancorp, Inc. | United Community Banks, Inc. | | Glacier Bancorp, Inc. | WesBanco, Inc. | | Heartland Financial USA, Inc. | |
PEER GROUP
The peer group was jointly selected by the Company and Aon and reflects the asset size of the Company. The banks in the peer group were selected based on asset size, financial metrics, and an expanded geographic area (i.e., only banks in the western portion of the country were excluded).
COMPENSATION CONSULTANT
COMPENSATION CONSULTANT The Compensation and Human Resources Committee believes it is essential for the Company to provide a competitive compensation opportunity to its executives in order to attract, retain and motivate a highly qualified leadership team. The Committee has periodically engaged an executive compensation consultant to review the Company’s executive salaries and compensation programs and to make recommendations to the Committee concerning possible adjustments to executive compensation and compensation programs. The Committee engaged Aon in 2022 to analyze a database of executive compensation information Aon had compiled from the financial institutions in the peer group, and that analysis was taken into consideration in determining the NEOs compensation for 2023. Aon's data also showed that the cash compensation (base salary and cash bonus) for the Company's CEO in 2023 was below market median, while the cash compensation of the other NEOs in 2023 was, on average, also below market median.
SENIOR MANAGEMENT INCENTIVE COMPENSATION PROGRAM (“SMICP”)
SENIOR MANAGEMENT INCENTIVE COMPENSATION PROGRAM (“SMICP”) The SMICP is a non-equity incentive compensation plan that affords the NEOs and other management employees the opportunity to earn additional cash compensation annually, determined as a percentage of their base salaries, by meeting pre-established performance goals for the fiscal year that are closely related to FMC’s strategic and financial plans. The goals are based on metrics that are established to keep the Company in the top quartile of high-performing banks as compared to its peer group. Under the SMICP, the Compensation and Human Resources Committee establishes schedules for the payments early in each fiscal year, beginning at minimum thresholds below which participants do not receive payments, and increasing proportionately to target amounts and maximum amounts that participants may receive. Each participant is then informed of the goals to be achieved (which in nearly all cases are related to the Company’s strategic and financial plans and measurable objectively), the percentage of base salary that will be paid if the participant’s goals are achieved (the target payment), and the applicable minimum thresholds and maximum amounts. Following the end of each fiscal year, after the Company’s audited financial statements for the year have been issued, the Committee approves the payouts under the SMICP. Participants must be employed when the payments are made, except in the case of death, disability or retirement, to be eligible for a payment under the Program. The Committee has the authority to modify the Program, make final award determinations (which may include increasing or decreasing the amount payable to an individual participant under the applicable formula set forth in the SMICP), set conditions for eligibility and awards, define extraordinary accounting events in calculating earnings, establish future payout schedules, determine circumstances and causes for which payouts can be withheld, and abolish the Program. In doing so, it considers the recommendations of the Chief Executive Officer of the Company, except as the Chief Executive Officer's own cash incentive compensation may be affected. As described on page 28, the Company has a Clawback Policy that provides for recovery of any payment made to a participant who is an executive officer if the payment is based on a materially inaccurate financial statement. There were 243 participants who received cash compensation under the SMICP for 2023, including the five NEOs. The payouts for 2023 were made in March 2024. The threshold, target and maximum payout for each of the NEOs under the Program for 2023 is shown in the Grants of Plan-Based Awards for 2023 Table on page 41. Mr. Hardwick’s target amount for 2023, as set by the Compensation and Human Resources Committee, was 70% of his base salary. The target amounts for Mr. Stewart, Ms. Kawiecki, and Mr. Martin were 60%, 50%, and 45%, respectively, of their base salaries. For each of them, their target payment was based entirely on FMC’s achieving operating earnings, calculated on a diluted GAAP basis, of $4.60/share of common stock. The minimum threshold that would result in a payment of 50% of the target amount was based on achieving operating earnings of $3.23/share, and the maximum payment of 200% of the target amount was based on achieving operating earnings of $6.50/share. For 2023, FMC’s reported operating earnings were $3.73/share, however, pursuant to discretion granted to the Compensation Committee in the SMICP, earnings per share were adjusted to $3.87 under the Plan to reflect unbudgeted, one-time expenses. Under the payout schedule, achieving the operating earnings amount resulted in payouts to Messrs. Hardwick, Stewart, Martin and Fluhler and Ms. Kawiecki of 73% of their target amounts. Mr. Fluhler’s target amount for 2023 was 45% of his base salary. Due to nature of his responsibilities, Mr. Fluhler’s target payment was based on two metrics: 70% of his target payment was based on the operating earnings schedule described in the immediately preceding paragraph, and 30% was based on the Company’s achieving a consolidated efficiency ratio (defined as non-interest expense as a percent of the sum of tax equivalent net interest income and non-interest income, excluding security gains and non-recurring items) of 51.0% for 2023. The minimum threshold that would result in a payment of 60% of the target amount under this metric was based on achieving a consolidated efficiency ratio of 55.0%, and the maximum payment of 150% of the target amount was based on achieving a consolidated efficiency ratio of 48.5%. FMC’s consolidated efficiency ratio for 2023 was 55.17%. However, pursuant to discretion granted to the Compensation Committee in the SMICP, the efficiency ratio was adjusted to 53.62% under the Plan to reflect unbudgeted, one-time expenses. Under the payout schedule, rounding upward to the efficiency ratio target resulted in a payout to Mr. Fluhler of 73% of his target amount. As the Summary Compensation Table on page 39 shows, the payouts to the NEOs under the SMICP for 2023 were as follows: Mr. Hardwick - $369,807 Mr. Stewart - $271,695 Ms. Kawiecki - $169,809 Mr. Martin - $139,244 Mr. Fluhler - $123,961
LONG-TERM EQUITY INCENTIVE PLAN (“LTEIP”)
LONG-TERM EQUITY INCENTIVE PLAN (“LTEIP”) The LTEIP is an equity incentive plan that affords the NEOs and other management employees the opportunity to benefit as shareholders from long-term improvements in the Company’s financial performance, thus increasing their commonality of interest with other shareholders. The equity awards available under the Plan include grants of restricted stock in the Company and incentive and non-qualified options to acquire common stock in the Company, although the Company has not awarded stock options to any of its employees under the LTEIP, or any prior long-term equity incentive plan, since 2013. The Committee’s decision to discontinue the use of stock option grants was based on its conclusion that restricted stock grants are a more effective form of equity incentive compensation. The Committee was also influenced by a recommendation from its compensation consultant at the time supporting that decision, as well as by recent tax and accounting changes. Under the LTEIP, the Compensation and Human Resources Committee has the authority to grant restricted stock awards, decide who will receive the awards, determine the types and sizes of the awards, determine the terms, conditions, vesting periods, and restrictions applicable to the awards, adopt, alter and repeal administrative rules and practices governing the LTEIP, interpret the terms and provisions of the LTEIP and any awards granted under it, prescribe the form of award agreements, and otherwise supervise the administration of the LTEIP. Annual restricted stock awards for 2023 under the LTEIP were made by the Committee in the third quarter. On occasion, the Committee grants an award at other times, e.g., when an executive is hired or an employee is promoted. The Committee delegated to the CEO the authority to make restricted stock awards to newly hired and promoted employees, limited to a maximum of 1,000 shares of FMC common stock. There were 106 participants who received restricted stock awards under the LTEIP on August 2, 2023, including the five NEOs. Another 17 restricted stock awards were made under the LTEIP at other times during 2023. Those awards were made by Mr. Hardwick under the authority delegated to him by the Compensation and Human Resources Committee, as described above. The Committee subjectively determines the amounts of the equity awards to be granted to the participants under the LTEIP, including NEOs; however, in general, they are commensurate with the participants’ positions and level of responsibilities. In making the restricted stock awards, the Committee relied in part on the recommendations of Mr. Hardwick, except for awards to Mr. Hardwick himself. The restricted stock awards under the LTEIP are not performance-based. The restricted stock generally vests (the restrictions lapse, giving the grantee complete ownership rights) three years after the date of the award. The LTEIP requires a one-year minimum vesting period. However, in all cases, the restricted stock will vest if the grantee dies or becomes disabled, or there is a change of control of FMC, before the shares would otherwise vest. In general, a change of control will not automatically trigger vesting of awards unless participants also experience a termination of employment without cause or resign on account of constructive termination within two years following a change in control (i.e., a "double-trigger" requirement). The Compensation and Human Resources Committee may also partially waive the forfeiture of a restricted stock award if a grantee’s employment is terminated before the stock vests and the Committee determines that the termination was involuntary and without cause. In that event, the part of the award that vests is a fraction of the shares, with a numerator equal to the number of full years that have elapsed between the date of the award and the date of termination and a denominator equal to the number of years between the date of the award and the date the award vests. A grantee of restricted stock under the LTEIP is entitled to vote the shares of stock and receive the dividends on the stock, notwithstanding the restrictions. As the Grants of Plan-Based Awards for 2023 Table on page 41 shows, the Committee made the following awards of restricted stock to the NEOs under the LTEIP:
LONG-TERM EQUITY INCENTIVE PLAN (“LTEIP”)
| On August 2, 2023 | | | Mr. Hardwick | 19,000 shares | | Mr. Stewart | 12,750 shares | | Ms. Kawiecki | 9,500 shares | | Mr. Martin | 5,750 shares | | Mr. Fluhler | 5,000 shares |
LONG-TERM EQUITY INCENTIVE PLAN (“LTEIP”)
The value of the restricted stock on August 2, 2023, was $32.16/share. The restricted stock awarded on August 2, 2023, will vest on August 2, 2026, or, if earlier, on the date the grantee dies or becomes disabled. The LTEIP includes a provision that executive officers must hold at least 25% of all “net shares” (which the LTEIP defines as the number of shares issued to the executive officer under an award after subtracting the number of shares, if any, transferred or surrendered by the executive officer to pay the exercise price of a stock option and/or to pay any withholding taxes associated with an award) issued to them under the LTEIP, including both restricted stock awards and shares issued upon the exercise of stock options, until the earlier of the date of the executive officer’s death, retirement or other termination of employment, or the date of a change of control. The purpose of this provision is to ensure that executive officers who benefit from equity awards under the LTEIP have a long-term financial interest in growing the value of the Company’s stock due to their increased ownership of FMC common shares. With the same purpose, the LTEIP includes a guideline stating that executive officers participating in the LTEIP should acquire and hold shares of the Company’s common stock equal in value to at least 100% of their then current annual salary within six years after commencing participation. However, this guideline is not a condition or restriction and does not present a risk of forfeiture with respect to any equity award made to an executive officer under the LTEIP. The Company also has a written policy prohibiting its executive officers from engaging in short sales or in hedging against a possible decrease in the market value of FMC stock granted to the executive under the LTEIP or otherwise held, directly or indirectly, by the executive officer. A primary purpose of the hedging prohibition is to avoid reducing the executive’s incentive to seek to improve the Company’s performance. The Company also has a written policy prohibiting its executive officers from pledging their shares as collateral for a loan.
2011 EXECUTIVE DEFERRED COMPENSATION PLAN (“EDCP”)
2011 EXECUTIVE DEFERRED COMPENSATION PLAN (“EDCP”) The EDCP is a non-qualified deferred compensation plan that FMC established in 2011. Under the EDCP, participants who are designated by the Compensation and Human Resources Committee have the opportunity to defer compensation (W-2 compensation plus certain pre-tax contributions as described in the EDCP) in excess of the maximum annual salary deferrals permitted under the §401(k) Plan ($23,000). Participants over age 50 may also make “catch up” contributions of up to $7,500. The maximum amount that a participant may defer under the EDCP is 75% of compensation, less any amounts deferred under the §401(k) Plan. FMC may also match participant deferrals at the rate of 50% of the deferrals up to a maximum of 6% of compensation (using the §401(k) Plan definition without the Code §401(a)(17) limit), and it may also make supplemental contributions. The Company also credits a participant’s account under the EDCP with non-elective contributions equal to all deferrals and related matching contributions that are refunded to the participant for any plan year under the §401(k) Plan. Deferrals and non-elective contributions are 100% vested at all times, while matching contributions vest after five years and supplemental contributions vest after three years or, if earlier, upon the participant’s death, disability, or attainment of normal retirement age (age 65 with five years of participation in the §401(k) Plan). The EDCP is unfunded, and benefits payable under this Plan depends solely on the unsecured promise of the Company. The Company has established a “rabbi” trust (“Trust”), with the First Merchants Private Wealth Advisors division of its subsidiary, First Merchants Bank, as the trustee. The Company makes annual contributions to the Trust to help pay its liabilities under the EDCP. However, the EDCP participants have no preferred claim on, or any beneficial ownership interest in, the assets of the Trust. The Company may make investment options available to a participant but is under no obligation to invest its contributions according to the option selected. The actual investment returns for a participant’s account may differ from the returns on the investments requested by the participant. A participant may request changes in the investment options daily, by submitting written investment allocation requests to the trustee. The EDCP is operated in compliance with Code §409A. The Committee delegated its authority to designate participants in the EDCP to Mr. Hardwick, subject to annual review by the Committee of the list of participants. Messrs. Hardwick, Stewart, and Fluhler and Ms. Kawiecki are the NEOs who are participants in the EDCP, as the Non-qualified Deferred Compensation in 2023 Table on page 44 shows. Their contributions to the Plan were either deferrals by the NEOs or non-elective contributions equal to deferred amounts that were refunded to the NEOs in 2023 under the §401(k) Plan, or both. Their total contributions in 2023 were as follows: Mr. Hardwick - participant deferrals of $1,351 Mr. Stewart - participant deferrals of $0 Ms. Kawiecki - participant deferrals of $0 Mr. Fluhler - participant deferrals of $22,685
CHANGE OF CONTROL AND OTHER EMPLOYMENT OR SEVERANCE AGREEMENTS
CHANGE OF CONTROL AND OTHER EMPLOYMENT OR SEVERANCE AGREEMENTS FMC has change of control agreements with the NEOs and certain other senior management employees because it believes these agreements promote the interests of the Company and its shareholders by providing them a financial incentive to remain with the Company and continue to act in the Company’s and the shareholders’ best interests in the event of a proposed acquisition or change of control situation in which they might otherwise decide to terminate employment due to the uncertainties of their own circumstances. The change of control agreements are “double trigger” agreements, meaning that severance benefits are payable to the executive only if: (1) a change of control occurs; and (2) the executive’s employment is terminated or constructively terminated following the change of control. The agreements provide that this termination must occur within 24 months following the change of control in order for the agreement to apply and benefits to be payable. No benefits are payable in the event of an executive’s voluntary retirement, death, disability or termination for cause. The definitions of “change of control” and “constructive termination” are set forth on page 45 in the narrative accompanying the Change of Control Agreements Table. The agreements also define “termination for cause.” Payments under the change of control agreements are calculated as a multiple of the sum of the executive’s annual base salary at the time of receiving notice of termination and the largest annual cash incentive payment received by the executive under the SMICP during the two years preceding the date of termination. For 2023, this multiple was 2.99 for Messrs. Hardwick, Stewart and Martin, and Ms. Kawiecki. The multiple was 1.50 for Mr. Fluhler. The change of control agreements cover only a few employees and represent a relatively small percentage of FMC’s market capitalization; therefore, the Compensation and Human Resources Committee and the Board do not believe that their existence would discourage any proposed acquisition of the Company. The agreements were not executed in response to an effort to acquire control of the Company, and the Board is not aware of any such effort. Except for the change of control agreements, the Company does not have employment or other severance agreements with any of the NEOs. Under Indiana law, the NEOs are deemed to be “at will” employees.
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE The following table provides information concerning the NEOs’ 2021, 2022, and 2023 compensation:
SUMMARY COMPENSATION TABLE
| Name and Principal Position | Year | Salary | Stock Awards(1) | Non-equity Incentive Plan Compensation (2) | Change in Pension Value and Non- Qualified Deferred Compensation Earnings(3) | All Other Compensation(4) | Total | | Mark K. Hardwick Chief Executive Officer | 2023 | $721,538 | $611,040 | $369,807 | $6,493 | $78,872 | $1,787,750 | | | 2022 | 662,500 | 614,250 | 527,163 | 0 | 64,287 | 1,868,200 | | | 2021 | 561,166 | 362,695 | 471,380 | 0 | 59,246 | 1,454,487 | | Michael J. Stewart President | 2023 | 620,308 | 410,040 | 271,695 | 0 | 75,644 | 1,377,687 | | | 2022 | 588,564 | 409,500 | 417,680 | 0 | 66,545 | 1,482,289 | | | 2021 | 507,856 | 330,692 | 391,049 | 0 | 64,070 | 1,293,667 | | Michele M. Kawiecki Executive Vice President and Chief Financial Officer | 2023 | 465,204 | 305,520 | 169,809 | 0 | 63,473 | 1,004,006 | | | 2022 | 425,577 | 286,650 | 232,260 | 0 | 57,098 | 1,001,585 | | | 2021 | 354,474 | 433,967 | 198,505 | 0 | 48,574 | 1,035,520 | | John J. Martin Executive Vice President and Chief Credit Officer | 2023 | 423,877 | 184,920 | 139,244 | 0 | 53,923 | 801,964 | | | 2022 | 408,462 | 184,275 | 229,760 | 0 | 53,077 | 875,574 | | | 2021 | 332,575 | 433,117 | 209,522 | 0 | 53,658 | 1,028,872 | | Stephan H. Fluhler Senior Vice President and Chief Information Officer | 2023 | 377,354 | 160,800 | 123,961 | 3,517 | 31,079 | 696,711 | | | 2022 | 363,462 | 163,800 | 195,089 | 0 | 33,139 | 755,490 | | | 2021 | 315,377 | 337,960 | 174,340 | 0 | 37,458 | 865,135 |
SUMMARY COMPENSATION TABLE
(1) A discussion of the assumptions used in calculating these values is contained in Note 18 to the 2023 audited financial statements, on pages 101 and 102 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. (2) The amounts shown in the Non-equity Incentive Plan Compensation column are payments under the SMICP for performance in the years indicated. However, the NEOs received these payments in March of the following year. None of the NEOs received a bonus for 2021, 2022, or 2023 except for these payments under the SMICP. (3) The amounts shown in the Change in Pension Value and Non-qualified Deferred Compensation Earnings column for Mr. Hardwick and Mr. Fluhler are the changes in the actuarial present value of their frozen benefits under the Pension Plan for the years indicated. The present value of Mr. Hardwick's and Mr. Fluhler's benefits decreased by $43,030 and $21,782, respectively, in 2022. SEC rules require that negative earnings be shown as $0 in the Summary Compensation Table. Mr. Stewart, Mr. Martin, and Ms. Kawiecki have not participated in any Company-sponsored defined benefit plan or other actuarial pension plan. No NEO received above-market or preferential earnings on deferred compensation for 2021, 2022, or 2023. (4) The amounts shown in the All Other Compensation column include the following for the years indicated: Mr. Hardwick •§401(k) Plan FMC matching contributions of $13,962 (2021), $13,725 (2022), and $14,850 (2023) •Additional §401(k) Plan FMC contributions of $5,800 (2021), $5,800 (2022), and $6,100 (2023) •Reinvested dividends on restricted stock awards valued at $33,003 (2021), $39,373 (2022), and $52,643 (2023) •Perquisites of $5,279 (car allowance and country club dues) Mr. Stewart •§401(k) Plan FMC matching contributions of $13,962 (2021), $13,725 (2022), and $14,850 (2023) •Additional §401(k) Plan FMC contributions of $5,800 (2021), $5,800 (2022), and $6,100 (2023) •Reinvested dividends on restricted stock awards valued at $31,562 (2021), $34,603 (2022) and $40,170 (2023) •Perquisites of $14,524 (car allowance and country club dues) Ms. Kawiecki •§401(k) Plan FMC matching contributions of $13, 621 (2021), $13,725 (2022) and $14,850 (2023) •Reinvested dividends on restricted stock award valued at $16,691 (2021), $24,333 (2022), and $33,728 (2023) •Perquisites of $14,895 (car allowance and country club dues) Mr. Martin •§401(k) Plan FMC matching contributions of $13,962 (2021), $13,725 (2022), and $14,850 (2023) •Additional §401(k) Plan FMC contributions of $5,800 (2021), $5,800 (2022), and $6,100 (2023) •Reinvested dividends on restricted stock awards valued at $31,607 (2021), $31,004 (2022), and $30,230 (2023) •Perquisites of $2,743 (car allowance) Mr. Fluhler •§401(k) Plan FMC matching contributions of $12,396 (2021), $6,499 (2022), and $1,684 (2023) •Additional §401(k) Plan FMC contributions of $5,800 (2021), $5,800 (2022), and $6,100 (2023) The Company does not have employment agreements with any of the NEOs.
GRANTS OF PLAN-BASED AWARDS TABLE
GRANTS OF PLAN-BASED AWARDS TABLE The following table provides information concerning all of the grants of plan-based awards made to the NEOs for 2023. The non-equity incentive plan awards were made under the SMICP, and the stock awards were grants of restricted stock made under the LTEIP. No stock option awards were made to any of the NEOs for 2023. The SMICP and the LTEIP are described in the Compensation Discussion and Analysis, on pages 29-39.
GRANTS OF PLAN-BASED AWARDS FOR 2023
GRANTS OF PLAN-BASED AWARDS FOR 2023
GRANTS OF PLAN-BASED AWARDS FOR 2023
| | | Estimated Future Payouts Under Non-equity Incentive Plan Awards(1) | | | All Other Stock Awards; Number of Shares of Stock | Grant Date Fair Value of Stock Awards | | Name | Grant Date | Threshold | Target | Maximum | | | | Mark K. Hardwick - SMICP | | $0 | $505,076 | $1,010,152 | | | | Mark K. Hardwick - LTEIP | 8/2/2023 | | | | 19,000 | $611,040 | | Michael J. Stewart - SMICP | | 0 | 372,185 | 744,370 | | | | Michael J. Stewart - LTEIP | 8/2/2023 | | | | 12,750 | 410,040 | | Michele M. Kawiecki - SMICP | | 0 | 232,602 | 465,204 | | | | Michele M. Kawiecki - LTEIP | 8/2/2023 | | | | 9,500 | 305,520 | | John J. Martin - SMICP | | 0 | 190,745 | 381,490 | | | | John J. Martin - LTEIP | 8/2/2023 | | | | 5,750 | 184,920 | | Stephan H. Fluhler - SMICP | | 0 | 169,809 | 339,618 | | | | Stephan H. Fluher - LTEIP | 8/2/2023 | | | | 5,000 | 160,800 |
GRANTS OF PLAN-BASED AWARDS FOR 2023
(1) The amounts shown in the Estimated Future Payouts under Non-equity Incentive Plan Awards column were the range of payouts to the NEOs for targeted performance for 2023 under the SMICP. The payments made to the NEOs for 2023 performance under the SMICP are shown in the Non-equity Incentive Plan Compensation column of the Summary Compensation Table on page 39.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE The following table provides information concerning unexercised stock options, stock awards that have not vested, and equity incentive plan awards for each of the NEOs outstanding as of the end of the Company’s 2023 fiscal year.
OUTSTANDING EQUITY AWARDS AT END OF 2023 FISCAL YEAR
OUTSTANDING EQUITY AWARDS AT END OF 2023 FISCAL YEAR
OUTSTANDING EQUITY AWARDS AT END OF 2023 FISCAL YEAR
| | Option Awards | | | Stock Awards | | | Name | Number of Securities Underlying Unexercised Options (Exercisable) (1) | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (2) | Market Value of Shares or Units of Stock That Have Not Vested (3) | | Mark K. Hardwick | | | | 44,571 | $1,652,692 | | Michael J. Stewart | | | | 32,072 | 1,189,229 | | Michele M. Kawiecki | | | | 28,369 | 1,051,922 | | John J. Martin | | | | 21,907 | 812,311 | | Stephan H. Fluhler | | | | 18,140 | 672,631 |
OUTSTANDING EQUITY AWARDS AT END OF 2023 FISCAL YEAR
(1)None of the NEOs had unexercised option awards at the end of the 2023 fiscal year. (2)The vesting dates of the stock awards that had not vested at the end of the 2023 fiscal year are: Mr. Hardwick 9,276 shares will vest on August 10, 2024 15,890 shares will vest on August 3, 2025 19,405 shares will vest on August 2, 2026 Mr. Stewart 8,457 shares will vest on August 10, 2024 10,593 shares will vest on August 3, 2025 13,022 shares will vest on August 2, 2026 Ms. Kawiecki 5,729 shares will vest on August 10, 2024 7,415 shares will vest on August 3, 2025 5,522 shares will vest on February 8, 2026 9,703 shares will vest on August 2, 2026 Mr. Martin 4,365 shares will vest on August 10, 2024 4,767 shares will vest on August 3, 2025 6,903 shares will vest on February 8, 2026 5,872 shares will vest on August 2, 2026 Mr. Fluhler 3,274 shares will vest on August 10, 2024 4,237 shares will vest on August 3, 2025 5,522 shares will vest on February 8, 2026 (3)The market value of the stock awards that had not vested at the end of the 2023 fiscal year was computed by multiplying the closing market price of FMC’s stock on December 31, 2023 ($37.08/share) by the number of shares that had not vested.
OPTION EXERCISES AND STOCK VESTED TABLE
OPTION EXERCISES AND STOCK VESTED TABLE The following table provides information concerning each exercise of a stock option and each vesting of a stock grant, including restricted stock and restricted stock units, during FMC’s 2023 fiscal year for each of the NEOs.
OPTION EXERCISES AND STOCK VESTED DURING 2023
OPTION EXERCISES AND STOCK VESTED DURING 2023
OPTION EXERCISES AND STOCK VESTED DURING 2023
| Name | Option Awards | | | Stock Awards | | | | Exercise Date | Number of Shares Acquired on Exercise | Value Realized on Exercise | Number of Shares Acquired on Vesting | Value Realized on Vesting(1) | | Mark K. Hardwick | | | | 10,457 | $333,881 | | Michael J. Stewart | | | | 10,126 | 323,337 | | Michele M. Kawiecki | | | | 4,403 | 140,581 | | John J. Martin | | | | 8,255 | 263,590 | | Stephan H. Fluhler | | | | 4,403 | 140,581 |
OPTION EXERCISES AND STOCK VESTED DURING 2023
(1) The vesting date for the applicable stock award was August 12, 2023. The value realized on vesting was computed by multiplying the number of shares that vested by the market value of the shares ($31.93/share) on the vesting date.
PENSION BENEFITS TABLE
PENSION BENEFITS TABLE The following table provides information concerning the Pension Plan with respect to each of the NEOs as of December 31, 2023.
PENSION BENEFITS
PENSION BENEFITS
PENSION BENEFITS
| Name | Plan Name | Number of Years Credited Service(1) | Present Value of Accumulated Benefit(2) | Payments During Last Fiscal Year | | Mark K. Hardwick | FMC Retirement Pension Plan | 7.32 | $59,285 | 0 | | Michael J. Stewart | N/A | N/A | N/A | N/A | | Michele M. Kawiecki | N/A | N/A | N/A | N/A | | John J. Martin | N/A | N/A | N/A | N/A | | Stephan H. Fluhler | FMC Retirement Pension Plan | 4.76 | $33,710 | 0 |
PENSION BENEFITS
(1) Mr. Stewart, Ms. Kawiecki, and Mr. Martin are not participants in the Pension Plan, because they were not employed by the Company on March 1, 2005, when the Pension Plan was frozen. Mr. Hardwick and Mr. Fluhler are participants in the Pension Plan, but their benefits were frozen, effective March 1, 2005, because they had not yet attained age 55 and accrued 10 years of credited service as of that date. Their years of credited service under the plan are one fewer than their number of actual years of service with the Company when the Plan was frozen. Neither Mr. Hardwick nor Mr. Fluhler is currently eligible for normal or early retirement under the Pension Plan. (2) The assumptions used in calculating the present value of accumulated benefits are discussed in Note 19 to FMC’s 2023 audited financial statements, on pages 102-105 of FMC’s Annual Report on Form 10-K for the year ended December 31, 2023. The Pension Plan is a tax-qualified Code §401(a) defined benefit pension plan. The benefits payable upon retirement at age 65 to employees participating in the Pension Plan are computed as a straight-life annuity (although other forms of actuarially equivalent benefits are offered) based on the following formula: 1.6% of average final compensation (in general, the participant’s highest 60 consecutive months’ W-2 compensation, less incentive pay) plus .5% of average final compensation in excess of Social Security covered compensation, both amounts times years of service to a maximum of 25 years. Benefits are integrated with Social Security but they are not subject to any deduction for Social Security or other offset amounts. The benefits payable under the Pension Plan at age 65 to the participants whose benefits were frozen, effective March 1, 2005, are determined under the formula described above, based on their average final compensation as of that date, times a fraction, the numerator of which is the participant’s years of credited service as of March 1, 2005, and the denominator of which is the participant’s years of credited service projected to age 65.
NON-QUALIFIED DEFERRED COMPENSATION TABLE
NON-QUALIFIED DEFERRED COMPENSATION TABLE The following table shows the dollar amounts of contributions, earnings, withdrawals, distributions and the aggregate balances of the NEOs’ deferred benefit accounts under the First Merchants Corporation 2011 Executive Deferred Compensation Plan ("EDCP") as of December 31, 2023.
NON-QUALIFIED DEFERRED COMPENSATION IN 2023
NON-QUALIFIED DEFERRED COMPENSATION IN 2023
NON-QUALIFIED DEFERRED COMPENSATION IN 2023
| Name | Executive Contributions in Last Fiscal Year(1) | Company's Contributions in Last Fiscal Year(1) | Aggregate Earnings in Last Fiscal Year | Aggregate Withdrawals/ Distributions | Aggregate Balance at Fiscal Year End | | Mark K. Hardwick | $1,351 | $0 | $4,232 | $0 | $294,686 | | Michael J. Stewart | 0 | 0 | 0 | 0 | 39,864 | | Michele M. Kawiecki | 0 | 0 | 0 | 0 | 11,485 | | John J. Martin | 0 | 0 | 0 | 0 | 0 | | Stephan H. Fluhler | 22,685 | 0 | (4,117) | 0 | 95,306 |
NON-QUALIFIED DEFERRED COMPENSATION IN 2023
(1)Only Messrs. Hardwick and Fluhler made deferrals in the EDCP in 2023.The EDCP also has other participants besides the NEOs. The amounts shown for the NEOs in the Executive contributions in last fiscal year column for the EDCP were either amounts deferred by the NEOs in 2023 or non-elective contributions equal to deferred amounts that were refunded to the NEOs in 2023 under the §401(k) Plan, or both. The amounts shown for the NEOs in the Company’s contributions in last fiscal year column for the EDCP were non-elective contributions equal to matching contributions that were refunded to the NEOs in 2023 under the §401(k) Plan. These matching contributions were reported as compensation to the NEOs in the Summary Compensation Table in the proxy statement for the 2023 annual meeting of shareholders.
PAY VERSUS PERFORMANCE
PAY VERSUS PERFORMANCE
PAY VERSUS PERFORMANCE
| PAY VERSUS PERFORMANCE TABLE | | | | | | | | | | | | | | | Value of Initial Fixed $100 Investment Based on: | | | | | Year | Summary Compensation Table Total for Principal Executive Officer ($) | Compensation Actually Paid to Principal Executive Officer ($) | Average Summary Compensation Table Total for Non-Principal Executive Officer Named Executive Officers ($) | Average Compensation Actually Paid to Non-Principal Executive Officer Named Executive Officers ($) | Total Shareholder Return ($) | Peer Group Total Shareholder Return ($)(7) | Net Income ($000) | Earnings Per Share ($)(8) | | 2023(1) | 1,787,750 | 1,692,822(5) | 970,092 | 890,903(6) | 101.92 | 115.64 | 223,800 | 3.73 | | 2022(2) | 1,868,200 | 1,849,910 | 1,028,734 | 1,013,896 | 108.22 | 116.10 | 222,100 | 3.81 | | 2021(3) | 1,454,487 | 1,580,952 | 1,055,798 | 1,132,355 | 107.02 | 124.74 | 205,500 | 3.81 | | 2020(4) | 1,403,078 | 1,174,328 | 666,525 | 523,527 | 93.07 | 91.29 | 148,600 | 2.74 |
PAY VERSUS PERFORMANCE
(1)In 2023, the Company's Principal Executive Officer ("PEO") was Mark K. Hardwick, and the Company's Non-Principal Executive Officer Named Executive Officers ("Non-PEO NEOs") were Michael J. Stewart, Michele M. Kawiecki, John J. Martin, and Stephan H. Fluhler. (2)In 2022, the Company's PEO was Mark K. Hardwick, and the Company's Non-PEO NEOs were Michael J. Stewart, Michele M. Kawiecki, John J. Martin, and Stephan H. Fluhler. (3)In 2021, the Company's PEO was Mark K. Hardwick, and the Company's Non-PEO NEOs were Michael J. Stewart, Michele M. Kawiecki, John J. Martin and Stephan H. Fluhler (4)In 2020, the Company's PEO was Michael C. Rechin, and the Company's Non-PEO NEOs were Mark K. Hardwick, Michael J. Stewart, John J. Martin and Stephan H. Fluhler (5)The adjustments made to the Summary Compensation Table "Total" for the Company's Principal Executive Officer are as follows:
PAY VERSUS PERFORMANCE
| Year | Reported Summary Compensation Table Total for Principal Executive Officer ($) | Reported Value of Equity Awards ($) (a) | Equity Award Adjustments ($) (b) | Reported Change in the Actuarial Present Value of Pension Benefits ($) (c) | Pension Benefit Adjustments ($) (d) | Compensation Actually Paid to Principal Executive Officer ($) | | 2023 | 1,787,750 | (611,040) | 522,605 | (6,493) | 0 | 1,692,822 |
PAY VERSUS PERFORMANCE
(a) The reported value of equity awards represents the grant date fair value of equity awards as reported in the "Stock Awards" column of the Summary Compensation Table for each applicable year. (b) The amounts deducted or added in calculating the equity award adjustments are as follows:
PAY VERSUS PERFORMANCE
| Year | Year-End Fair Value of Equity Awards Granted during the Year ($) | Year-Over-Year Change in Fair Value of Outstanding and Unvested Equity Awards ($) | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year ($) | Year-Over-Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year ($) | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year ($) | Value of Dividends or Other Earnings Paid on Stock or Option Awards Not Otherwise Reflected in Fair Value or Total Compensation ($) | Total Equity Award Adjustments ($) | | 2023 | 704,520 | (94,705) | 0 | (87,210) | 0 | 0 | 522,605 |
PAY VERSUS PERFORMANCE
(c) The amounts in this column, if any, represent the amounts reported in "Change in Pension and Nonqualified Deferred Compensation" column of the Summary Compensation Table for each applicable year. (d) The Service Cost and Prior Service Cost for 2023 is $0 because the First Merchants Corporation Retirement Pension Plan ("Pension Plan") benefit accruals were frozen in such year. In addition, no amendments were made to the Pension Plan for such year that generated a Prior Service Cost base under ASC 715, and therefore, there is no Pension Plan adjustment applicable to Compensation Actually Paid. (6)The adjustments made to the average of Summary Compensation Table "Total" for the Company's non-PEO NEOs are as follows:
PAY VERSUS PERFORMANCE
| Year | Average Reported Summary Compensation Table Total for Non-Principal Executive Officers | Average Reported Value of Equity Awards ($) (a) | Average Equity Award Adjustments ($) (b) | Average Reported Change in the Actuarial Present Value of Pension Benefits ($) (c) | Average Pension Benefit Adjustments ($) (d) | Average Compensation Actually Paid to Non-Principal Executive Officers ($) | | 2023 | 970,092 | (265,320) | 187,010 | (879) | 0 | 890,903 |
PAY VERSUS PERFORMANCE
(a) The reported value of equity awards represents the grant date fair value of equity awards as reported in the "Stock Awards" column of the Summary Compensation Table. (b) The amounts deducted or added in calculating the equity award adjustments are as follows:
PAY VERSUS PERFORMANCE
| Year | Average Year-End Fair Value of Equity Awards Granted during the Year ($) | Average Year-Over-Year Change in Fair Value of Outstanding and Unvested Equity Awards ($) | Average Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year ($) | Average Year-Over-Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year ($) | Average Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year ($) | Average Value of Dividends or Other Earnings Paid on Stock or Option Awards Not Otherwise Reflected in Fair Value or Total Compensation ($) | Average Total Equity Award Adjustments ($) | | 2023 | 305,910 | (62,213) | 0 | (56,687) | 0 | 0 | 187,010 |
PAY VERSUS PERFORMANCE
(c) The amounts in this column represent the amounts reported in "Change in Pension and Nonqualified Deferred Compensation" column of the Summary Compensation Table. (d) The Service Cost and Prior Service Cost for 2023 is $0 because the Pension Plan benefit accruals were frozen in such year. In addition, no amendments were made to the Pension Plan for such year that generated a Prior Service Cost base under ASC 715, and therefore, there is no Pension Plan adjustment applicable to Compensation Actually Paid. (7)The peer group is comprised of the KBW Nasdaq Regional Banking Index. (8)The Company has determined that Earnings Per Share (net profit available to common shareholders divided by average diluted common shares outstanding) is the most important financial performance measure (that is not otherwise disclosed in the Pay Versus Performance Table above) used to link compensation actually paid to the Company’s NEOs for 2023 to the Company’s performance.
DESCRIPTION OF RELATIONSHIPS AMONG PAY VERSUS PERFORMANCE MEASURES
DESCRIPTION OF RELATIONSHIPS AMONG PAY VERSUS PERFORMANCE MEASURES
Relationship Between Compensation Actually Paid and Company and Peer Group Total Shareholder Return (“TSR”)
Relationship Between Compensation Actually Paid and Company and Peer Group Total Shareholder Return (“TSR”) The following chart sets forth the relationship between Compensation Actually Paid to our PEO, the average of Compensation Actually Paid to our Non-PEO NEOs, the Company’s cumulative TSR over the four most recently completed fiscal years and the Company's peer group TSR over the four most recently completed fiscal years.
Relationship Between Compensation Actually Paid and Net Income
Relationship Between Compensation Actually Paid and Net Income The following chart sets forth the relationship between Compensation Actually Paid to our PEO, the average of Compensation Actually Paid to our Non-PEO NEOs, and our net income during the four most recently completed fiscal years.
Relationship Between Compensation Actually Paid and Earnings Per Share
Relationship Between Compensation Actually Paid and Earnings Per Share The following chart sets forth the relationship between Compensation Actually Paid to our PEO, the average of Compensation Actually Paid to our Non-PEO NEOs, and our Earnings Per Share during the four most recently completed fiscal years.
Key Data Relating to Outstanding Equity Awards and Shares Available
Key Data Relating to Outstanding Equity Awards and Shares Available The following table includes information relating to outstanding equity awards and shares available for future awards under the Existing Incentive Plans and the 2019 Equity Compensation for Non-Employee Directors (the "2019 Director Plan") as of March 1, 2024 (and without giving effect to approval of the 2024 Equity Compensation Plan for Non-Employee Directors (the "2024 Director Plan") or the 2024 LTEIP under this Proposal):
Key Data Relating to Outstanding Equity Awards and Shares Available
| | Existing Incentive Plans | | Total shares underlying outstanding stock options | 90,075 | | Weighted-average exercise price of outstanding stock options | $20.21 | | Weighted-average remaining contractual life of outstanding stock options | 1.75 | | Total shares underlying outstanding unvested full value awards (RSAs) | 472,793 | | Weighted-average grant date fair value of outstanding unvested full value awards (RSAs) | $38.07 | | Total shares currently available for grant | 1,047,376 |
Key Data Relating to Outstanding Equity Awards and Shares Available
In adopting the 2024 LTEIP and the 2024 Director Plan, the Board has determined that any awards granted under the 2019 LTEIP or the 2019 Director Plan after March 1, 2024, will reduce the number of shares available under the 2024 LTEIP or the 2024 Director Plan, as applicable..
VIII. COMPENSATION OF DIRECTORS
VIII. COMPENSATION OF DIRECTORS Each of the non-employee directors was paid an annual retainer of $140,000 for the director’s services in that capacity during 2023. Mr. Hardwick, as FMC’s CEO, was not separately compensated for his services as a director. In addition to his retainer, Mr. Schalliol received $50,000 for his services as the Board Chair. In addition to their retainers, Mr. Becher received $15,000 for his services as Chair of the Audit Committee; Mr. Halderman received $7,500 for his services as Chair of the Risk and Credit Policy Committee; Ms. Wojtowicz received $40,000 for her services as Vice Chairperson; Ms. Brooks received $5,000 for her services as Chair of the Nominating and Governance Committee; and Mr. Schalliol received $5,000 for his services as Chair of the Human Resources and Compensation Committee. Dr. Chiang, Mr. Fehring, Mr. Sondhi and Mr. Rechin each received $5,000 for their services as members of the Risk and Credit Policy Committee, due to the time demands serving on that Committee entails. Similarly, Mr. Kellogg, Ms. Wojtowicz and Mr. Fehring each received $5,000 for their services as members of the Audit Committee. Directors do not receive separate meeting fees, as their duties include regular attendance and active participation in Board and Committee meetings. The directors’ compensation is paid quarterly in arrears on the last business day of each calendar quarter.
DIRECTOR COMPENSATION FOR 2023 FISCAL YEAR
DIRECTOR COMPENSATION FOR 2023 FISCAL YEAR
DIRECTOR COMPENSATION FOR 2023 FISCAL YEAR
| Name | Fees Earned or Paid in Cash | Stock Awards(1)(2) | All Other Compensation(3) | Total | | Michael R. Becher | $58,172 | $96,828 | $8,953 | $163,953 | | Susan W. Brooks | 54,421 | 90,578 | 6,226 | 151,226 | | Mung Chiang | 54,421 | 90,578 | 1,523 | 146,523 | | Patrick J. Fehring | 54,421 | 90,578 | 3,458 | 148,458 | | Michael J. Fisher | 52,597 | 87,403 | 7,878 | 147,878 | | F. Howard Halderman(4) | 63,782 | 93,717 | 8,699 | 166,199 | | Kevin D, Johnson(4) | 56,597 | 87,403 | 2,677 | 146,667 | | Clark C. Kellogg (4) | 60,421 | 90,578 | 7,983 | 158,983 | | Gary J. Lehman(4) | 67,597 | 87,403 | 7,878 | 162,878 | | Michael C. Rechin(5) | 54,421 | 90,578 | 6,400 | 151,399 | | Charles E. Schalliol | 73,188 | 121,812 | 11,403 | 206,403 | | Jason R. Sondhi | 55,363 | 92,136 | 2,792 | 150,292 | | Jean L. Wojtowicz | 69,433 | 115,567 | 9,444 | 194,444 |
DIRECTOR COMPENSATION FOR 2023 FISCAL YEAR
(1) The grant date fair value of the 2023 quarterly restricted stock awards to the directors was as follows:
DIRECTOR COMPENSATION FOR 2023 FISCAL YEAR
| March 31, 2023 | $32.95/share | | June 30, 2023 | $28.23/share | | September 30, 2023 | $27.82/share | | December 31, 2023 | $37.08/share |
DIRECTOR COMPENSATION FOR 2023 FISCAL YEAR
A discussion of the assumptions used in calculating these values is contained in Note 18 to the 2023 audited financial statements, on pages 101 and 102 of FMC’s Annual Report on Form 10-K for the year ended December 31, 2023. (2) The aggregate number of stock awards that had not vested under the ECPND at the end of the 2023 fiscal year for each non-employee director was as follows:
DIRECTOR COMPENSATION FOR 2023 FISCAL YEAR
| Mr. Becher | 7,084 | | Ms. Brooks | 6,424 | | Dr. Chiang | 2,914 | | Mr. Fehring | 4,358 | | Mr. Fisher | 6,322 | | Mr. Halderman | 6,908 | | Mr. Johnson | 3,713 | | Mr. Kellogg | 6,463 | | Mr. Lehman | 6,322 | | Mr. Rechin | 6,554 | | Mr. Schalliol | 8,957 | | Mr. Sondhi | 3,903 | | Ms. Wojtowicz | 7,841 |
DIRECTOR COMPENSATION FOR 2023 FISCAL YEAR
(3) The dollar amounts shown under “All Other Compensation” represent the dividends paid during 2023 on the stock awards to the non-employee directors under the Equity Compensation Plan for Non-employee Directors. (4) In addition to their compensation for serving as FMC directors, Mr. Halderman received $7,500, Mr. Kellogg received $5,500, Mr. Lehman received $15,000, and Mr. Johnson received $4,000 from FMB for serving as a regional advisory Bank director in 2023. These amounts are included in their total compensation. (5) Mr. Rechin also receives benefits payable under the Company's 2006 Deferred Compensation Supplemental Executive Retirement Plan ("SERP") in consideration of his tenure as the former CEO of the Company. The Company will also reimburse his country club dues in 2024. These benefits are not included in his total compensation for his board services. As noted above, no option awards were made to the non-employee directors during 2023. However, in 2014 and preceding years, options to purchase FMC common stock at the closing market price of the shares on the date of the award were automatically made under the LTEIP to non-employee directors each year on July 1. These option awards expire ten years after the date of the award, unless they have been exercised prior to the expiration date. The aggregate number of option awards outstanding under the LTEIP for each non-employee director at the end of the 2023 fiscal year was as follows:
DIRECTOR COMPENSATION FOR 2023 FISCAL YEAR
| Mr. Becher | 1,500 | | Ms. Brooks | 0 | | Dr. Chiang | 0 | | Mr. Fehring | 28,698 | | Mr. Fisher | 0 | | Mr. Halderman | 0 | | Mr. Johnson | 0 | | Mr. Kellogg | 0 | | Mr. Lehman | 0 | | Mr. Rechin | 0 | | Mr. Schalliol | 1,500 | | Mr. Sondhi | 0 | | Ms. Wojtowicz | 1,500 |
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES UNDER THE DIRECTOR PLAN
| Name of Non-Employee Director | Dollar Value of Restricted Shares | Shares of Restricted Stock | Fees Paid in Cash | Total Compensation | | Michael R. Becher | $96,875 | 2,957 | $58,125 | $155,000 | | Susan W. Brooks | 90,625 | 2,766 | 54,375 | 145,000 | | Mung Chiang | 90,625 | 2,766 | 54,375 | 145,000 | | Patrick J. Fehring | 90,625 | 2,766 | 54,375 | 145,000 | | Michael J. Fisher | 87,500 | 2,670 | 52,500 | 140,000 | | F. Howard Halderman | 93,750 | 2,861 | 56,250 | 150,000 | | Kevin D. Johnson | 87,500 | 2,670 | 52,500 | 140,000 | | Clark C. Kellogg | 90,625 | 2,766 | 54,375 | 145,000 | | Gary J. Lehman | 87,500 | 2,670 | 52,500 | 140,000 | | Michael C. Rechin | 90,625 | 2,766 | 54,375 | 145,000 | | Charles E. Schalliol(1) | 121,875 | 3,720 | 73,125 | 195,000 | | Jason R. Sondhi | 93,750 | 2,861 | 56,250 | 150,000 | | Jean L. Wojtowicz | 115,625 | 3,529 | 69,375 | 185,000 | | Non-Employee Directors as a Group | $1,237,500 | 37,768 | $742,500 | $1,980,000 |
PARTICIPATION; NON-EMPLOYEE DIRECTOR COMPENSATION
PARTICIPATION; NON-EMPLOYEE DIRECTOR COMPENSATION Section 3.01. Participation. All Non-Employee Directors shall automatically become participants in the Plan with respect to all Compensation payable to them for calendar quarters ending after the Effective Date, until the Plan is terminated in accordance with the provisions of Article VII. “Compensation” means any retainer, fee or other payment of any kind to which a Non-Employee Director is entitled for services performed in that capacity, including, without limitation, any additional amount payable to a Non-Employee Director for chairing a Board committee; provided, however, fees for service on a regional advisory board will not be included. Section 3.02. Non-Employee Director Compensation. The Board shall annually, or at other times as the Board shall deem appropriate, determine the amount of Compensation to be payable for services performed by Non-Employee Directors, in accordance with applicable laws and regulations. Such Compensation shall be paid quarterly, as of the last business day of each calendar quarter. Section 3.03. Fraction Payable in Restricted Shares. A fraction of all Compensation payable to Non-Employee Directors for calendar quarters ending after the Effective Date, as determined by the Board from time to time, which fraction shall not be less than one-half (1/2), shall be paid in Restricted Shares. In the absence of such determination, this fraction shall be five-eighths (5/8). The number of Restricted Shares to be issued to each Non-Employee Director shall be determined on the basis of the Fair Market Value (as hereinafter defined) of such Restricted Shares as of the date (i.e., the last business day of the calendar quarter) for which the Compensation is payable. The “Fair Market Value” of a Restricted Share means the last reported sale price of a share of the Company’s common stock on the relevant date, or if no sale took place, the last reported sale price of a share of the Company’s common stock on the most recent day on which a sale of a share of the Company’s common stock took place as reported by Nasdaq or a national securities exchange on which the Company’s common stock is listed on such date. The Restricted Shares shall be issued as of the last business day of the relevant calendar quarter and shall be credited to the Non-Employee Director’s stock account as soon as administratively feasible thereafter, but in no event shall any such payment be made later than the March 15 of the calendar year next following the calendar year in which such Restricted Shares were earned. To the extent Compensation payable in Restricted Shares to a Non-Employee Director under this Section 3.03 would result in a fractional share of common stock being issuable to such Non-Employee Director, cash shall be paid to the Non-Employee Director in lieu of such fractional share. Section 3.04. Restrictions on Shares. A “Restricted Share” means a share of the Company’s common stock that is nontransferable and subject to a substantial risk of forfeiture, to the extent provided in this Section 3.04. The Restricted Shares issued to a Non-Employee Director in accordance with Section 3.03 may be registered in the name of a nominee or held in such other manner as the Committee determines to be appropriate. A book entry stock account will be established in the Non-Employee Director’s name. The Non-Employee Director will be the beneficial owner of the Restricted Shares issued and credited to his or her stock account and, subject to the restrictions set forth in this Section 3.04, he or she will have all rights of beneficial ownership in such Restricted Shares including the right to vote the Restricted Shares and receive all dividends and other distributions paid or made with respect thereto. The Company or its nominee will retain custody of the Restricted Shares issued under this Plan until (i) all of the restrictions have lapsed in accordance with Subsection 3.04(a), and (ii) the Non-Employee Director makes a specific request in writing to the Company for such Restricted Shares which have become unrestricted shares of common stock to be sold, transferred or delivered; provided, however, at any time following the lapse of such restrictions, a Non-Employee Director may request that a stock certificate, representing all or part of the shares credited to his or her stock account on which the restrictions have lapsed, be issued and delivered to the Non-Employee Director. None of the Restricted Shares issued under this Plan may be sold, transferred, assigned, pledged, encumbered or otherwise alienated or hypothecated, unless and until, and then only to the extent that, these restrictions have lapsed in accordance with Subsection 3.04(a). (a) Lapse of Restrictions. Subject to Subsection 3.04(b), the restrictions set forth in the first paragraph of Section 3.04 shall lapse on the earliest of the following dates: (i) the third anniversary of the date as of which the Restricted Shares were issued if, as of the date the restrictions are to lapse, the Non-Employee Director has continued to serve in that capacity from the date as of which the Restricted Shares were issued to the date of lapse; (ii) the date of the Non-Employee Director’s death; (iii) the date the Non-Employee Director is determined to be Disabled (as hereinafter defined), or (iv) in the event of a “Change of Control,” as defined in the First Merchants Corporation 2024 Long-Term Equity Incentive Plan, if within two (2) years after the effective date of the Change of Control, the Non-Employee Director is removed or replaced as a member of the Board of the Company, then all restrictions and conditions applicable to the Non-Employee Director’s Restricted Shares shall be deemed to have lapsed as of the date of such removal or replacement. “Disabled” means total and permanent disability as defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the “Code”). (b) Minimum Period for Restrictions. At a minimum, the restrictions set forth in the first paragraph of Section 3.04 shall begin at the time of issuance of the Restricted Shares and continue for a period of one (1) year from the issuance of the Restricted Shares. Such minimum period may only be accelerated pursuant to Subsection 3.04(a)(ii)-(iv) and may not be accelerated at the discretion of the Committee. (c) Forfeiture of Restricted Shares. Except in the case of Retirement (as defined below), in the event a Non-Employee Director’s service as a member of the Board terminates prior to the date the restrictions on all or part of the Restricted Shares issued pursuant to the Plan have lapsed in accordance with Subsection 3.04(a), all Restricted Shares still subject to the restrictions shall be returned to or canceled by the Company and shall be deemed to have been forfeited by the Non-Employee Director. If a Non-Employee Director’s engagement as a member of the Board of the Company terminates due to the Non-Employee Director’s Retirement, the Non-Employee Director shall not forfeit any Restricted Shares, to which he or she was entitled as of the date of his or her Retirement; however, any Restricted Shares shall continue to be the subject to the restrictions that were applicable to such Restricted Shares as of such date, and such restrictions shall lapse in accordance with Subsection 3.04(a) of the Plan. “Retirement” means the termination of service as a member of the Board of the Company other than the Non-Employee Director’s removal as provided in the Bylaws of the Company.