UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

SCHEDULE 14A

 

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934

(AMENDMENT NO.     )

 

Filed by the Registrant  ☒     Filed by a Party other than the Registrant  ☐

 

Check the appropriate box:

 

Preliminary Proxy Statement

 

CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Pursuant to Section 240.14a-12

 

BANKFINANCIAL CORPORATION

(Exact Name of Registrant as Specified in Charter)

 

(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)

 

Payment of Filing Fee (Check the appropriate box)

 

No fee required.

 

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

 

(1)

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(2)

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(3)

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(4)

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(5)

Total fee paid:

 

Fee paid previously with preliminary materials.

 

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

 

(1)

Amount Previously Paid:

(2)

Form, Schedule or Registration Statement No.:

(3)

Filing Party:

(4)

Date Filed:

 

 

 

 

April 17, 2020

Dear Fellow Stockholder:

 

On behalf of the Board of Directors of BankFinancial Corporation (the “Company”), I cordially invite you to attend our 2020 Annual Meeting of Stockholders. The meeting will be held on Friday, May 29, 2020, at 9:30 A.M., Chicago, Illinois Time.

 

In light of the recent outbreak of COVID-19 (the coronavirus), and in an effort to better protect our stockholders, employees and other members  of our community, this year’s Annual Meeting will be our first time hosting a virtual meeting of stockholders, which will be conducted solely online via live webcast. You will be able to attend and participate in the Annual Meeting online, vote your shares electronically and submit your questions prior to and during the meeting by visiting: www.meetingcenter.io/267273674 at the meeting date and time described in the accompanying Proxy Statement. To participate in the virtual meeting, visit www.meetingcenter.io/267273674 and enter the 15-digit control number included on your notice of Internet availability of the proxy materials, on your proxy card, or on the instructions that accompanied your proxy materials. The password for the meeting is BFIN2020. There is no physical location for the Annual Meeting.

 

At the Annual Meeting, our stockholders will vote on the election of a director, the ratification of the engagement of RSM US LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2020, and an advisory, non-binding resolution to approve our executive compensation.

 

The Board of Directors, acting on the recommendations of the Corporate Governance and Nominating Committee, has nominated incumbent F. Morgan Gasior to serve as director of the Company for a three-year term.

 

The Board of Directors recommends that you vote your shares as follows: FOR the election of our director nominee; FOR the ratification of the appointment of RSM US LLP as our independent registered public accounting firm for the year ending December 31, 2020; and FOR the approval on an advisory, non-binding basis of our executive compensation.

 

This year, we will be using the “Notice and Access” method of providing proxy materials to you via the Internet in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). We believe that this process should provide you with a convenient and quick way to access your proxy materials and vote your shares, while allowing us to conserve natural resources and reduce the costs of printing and distributing the proxy materials. On or about April 17, 2020, we will mail to our stockholders a Stockholder Meeting Notice (the “Meeting Notice”) containing instructions on how to access our Proxy Statement and 2019 Annual Report, and how to vote your shares. The Meeting Notice will also contain instructions on how you may receive, if you wish, a paper copy of your proxy materials.

 

By voting your shares promptly, you will help us reduce the time and expense of soliciting proxies, and you will also ensure that your shares are represented at the Annual Meeting.

 

Thank you in advance for your attention to this important matter. We are most appreciative of your continued interest and support as stockholders of the Company and as valued customers of BankFinancial, NA.

 

  Very truly yours,  
 

 

 

 
 

F. Morgan Gasior

Chairman and Chief Executive Officer

 

 

 

BANKFINANCIAL CORPORATION

60 North Frontage Road

Burr Ridge, Illinois 60527

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held On Friday, May 29, 2020

To the Stockholders of BankFinancial Corporation:

 

Notice is hereby given that the Annual Meeting of Stockholders (the “Annual Meeting”) of BankFinancial Corporation will be held on Friday, May 29, 2020, at 9:30 A.M., Chicago, Illinois Time.  There will be no physical meeting location. The meeting will only be conducted via live webcast. To participate in the virtual meeting, visit www.meetingcenter.io/267273674 and enter the 15-digit control number included on your notice of Internet availability of the proxy materials, on your proxy card, or on the instructions that accompanied your proxy materials. You may begin to log into the meeting platform beginning at 9:00 A.M., Chicago, Illinois Time on Friday, May 29, 2020

 

The purpose of the Annual Meeting is to consider and act upon the following, as described more fully in the Company’s Proxy Statement:

 

 

1.

To elect a director for a three-year term and until his successor is duly elected and qualify;

     
 

2.

To ratify the engagement of RSM US LLP as the independent registered public accounting firm of BankFinancial Corporation for the year ending December 31, 2020;

     
 

3.

To consider an advisory, non-binding resolution to approve our executive compensation; and

     
 

4.

To transact such other business as may properly come before the Annual Meeting, or any adjournments or postponements thereof; the Board of Directors and management are not aware of any such other business.

 

The Board of Directors has fixed the close of business on April 6, 2020 as the voting record date for the determination of stockholders entitled to receive notice of and to vote at the Annual Meeting and any adjournments or postponements thereof. Only those stockholders of record as of the close of business on that date will be entitled to vote at the Annual Meeting or any such adjournments or postponements. In the event that there are not sufficient votes to establish a quorum or to approve the foregoing proposals at the Annual Meeting, the meeting may be adjourned or postponed in order to permit the further solicitation of proxies. Any action may be taken on the foregoing proposals at the Annual Meeting on the date specified above, or on the date or dates to which the Annual Meeting may be adjourned or postponed.

 

  By Order of the Board of Directors  
 

 

 

 
  James J. Brennan  
  Secretary  

Burr Ridge, Illinois

April 17, 2020

 

 

 

Important Notice Regarding the Availability of Proxy Materials for the 2020 Annual Meeting

 

Our Proxy Statement for the 2020 Annual Meeting, the accompanying form of proxy and our 2019 Annual Report are available online at www.envisionreports.com/BFIN.

 

 

2020 PROXY STATEMENT

TABLE OF CONTENTS

 

THE COMPANY

1

VOTING AND RELATED MATTERS

1

INSTRUCTIONS FOR THE VIRTUAL MEETING 5

ELECTION OF DIRECTORS; INFORMATION WITH RESPECT TO DIRECTORS AND EXECUTIVE OFFICERS

6

BENEFICIAL OWNERSHIP OF COMMON STOCK BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

9

CODE OF ETHICS

10

BOARD LEADERSHIP STRUCTURE AND BOARD’S ROLE IN RISK OVERSIGHT

10

BOARD COMMITTEE REPORTS, POLICIES AND PROCEDURES

11

AUDIT COMMITTEE REPORT

12

RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

12

NARRATIVE DISCUSSION OF EXECUTIVE COMPENSATION

13

Introduction

13

Role of the Human Resources Committee of the Board of Directors

13

Compensation Philosophy and Objectives

14

Compensation Committee Interlocks and Insider Participation

14

Compensation Consultant Independence

14

Compensation Principles and Factors

15

Components of Executive Compensation

16

Conclusions for Year Ended December 31, 2019

17

Reasonableness of Compensation

18

Tax and Accounting Treatment

18

EXECUTIVE COMPENSATION

19

Summary Compensation Table

19

Potential Payments upon Termination or Change of Control

20

Compensation of Directors

22

ADVISORY VOTE ON EXECUTIVE COMPENSATION

23

COMMUNICATIONS WITH THE BOARD OF DIRECTORS

24

TRANSACTIONS WITH CERTAIN RELATED PERSONS

24

STOCKHOLDER PROPOSALS

24

ADVANCE NOTICE OF BUSINESS TO BE CONDUCTED AT AN ANNUAL MEETING

24

ENVIRONMENTAL AND SOCIAL MATTERS

25

OTHER MATTERS

25

 

 

PROXY STATEMENT

 

BankFinancial Corporation

60 North Frontage Road

Burr Ridge, Illinois 60527

 

ANNUAL MEETING OF STOCKHOLDERS

 

Friday, May 29, 2020

 

This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of BankFinancial Corporation of proxies to be voted at the Annual Meeting of Stockholders (the “Annual Meeting”) that will be held on Friday, May 29, 2020, at 9:30 A.M., Chicago, Illinois Time, virtually via the internet at  www.meetingcenter.io/267273674, and any adjournments or postponements thereof.

 

This Proxy Statement and the accompanying Notice of Annual Meeting and proxy card are first being made available to the stockholders of BankFinancial Corporation on or about April 17, 2020. Whether or not you plan to attend the Annual Meeting, please read this Proxy Statement and authorize the voting of your shares by proxy by following the proxy authorization instructions appearing on the proxy card and discussed below under “Voting and Related Matters — How do I vote?”

 

An Annual Report for the year ended December 31, 2019, which contains audited consolidated financial statements and other information pertaining to BankFinancial Corporation, accompanies this Proxy Statement.

 

THE COMPANY

 

BankFinancial Corporation, a Maryland corporation headquartered in Burr Ridge, Illinois, became the owner of all of the issued and outstanding capital stock of BankFinancial, NA, formerly known an BankFinancial, F.S.B. (each referred to herein as the “Bank”) on June 23, 2005, when it consummated a plan of conversion and reorganization that the Bank and its predecessor holding companies, BankFinancial MHC, Inc. (“BankFinancial MHC”) and BankFinancial Corporation, a federal corporation, adopted on August 25, 2004. BankFinancial Corporation, the Maryland corporation, was organized in 2004 to facilitate the mutual-to-stock conversion, and to become the holding company for the Bank upon the completion of the mutual-to-stock conversion.

 

VOTING AND RELATED MATTERS

 

The following is information regarding the Annual Meeting and the voting process.

 

Why am I receiving this Proxy Statement?

 

Our Board of Directors has made these materials available to you on the Internet or has delivered printed versions of these materials to you by mail pursuant to your request in connection with the Board of Directors’ solicitation of proxies for use at our Annual Meeting. As a stockholder, you are invited to attend the Annual Meeting and are requested to vote on the items of business described in this Proxy Statement.

 

You are receiving this Proxy Statement from us because at the close of business on April 6, 2020, the record date for the Annual Meeting, you owned shares of our common stock, par value $0.01, either directly or through a broker. This Proxy Statement describes the matters that will be presented for consideration by our stockholders at the Annual Meeting. It also gives you information concerning the items of business to be considered at the Annual Meeting to assist you in making an informed voting decision.

 

When you vote your shares, you appoint the proxy holder as your representative at the Annual Meeting. The proxy holder will vote your shares as you have instructed, thereby ensuring that your shares will be voted whether or not you attend the Annual Meeting. Even if you plan to attend the Annual Meeting, please vote your shares in advance of the Annual Meeting in case your plans change.

 

If you have voted your shares and an issue comes up for a vote at the Annual Meeting that is not identified on the proxy card, the proxy holder will vote your shares, pursuant to your proxy, in accordance with his or her discretion.

 

What matters will be voted on at the Annual Meeting?

 

You are being asked to vote on the election of our director nominee; the ratification of the engagement of RSM US LLP as our independent registered public accounting firm for the year ending December 31, 2020; and an advisory, non-binding resolution to approve our executive compensation. These matters are more fully described in this Proxy Statement.

 

How do I vote?

 

Stockholders who own their shares in their name may vote electronically at the Annual Meeting during the live webcast or may authorize a proxy to vote on his or her behalf. There are three ways to authorize a proxy:

 

 

1.

Internet: You may access the proxy materials on the Internet at www.envisionreports.com/BFIN and follow the instructions on the proxy card or on the Meeting Notice.

     
 

2.

Telephone: You may call, toll-free, 1-800-652-VOTE (8683) and follow the instructions provided by the recorded message.

     
 

3.

Mail: If you received your proxy materials by mail, you may vote by signing, dating and mailing the enclosed proxy card in the postage paid envelope provided.

 

Stockholders who vote over the Internet may incur costs, such as telephone and Internet access charges, for which the stockholder is solely responsible. The Internet and telephone voting procedures are designed to authenticate a stockholder’s identity, to allow a stockholder to vote his or her shares and to confirm that his or her instructions have been properly recorded.

 

Stockholders who hold shares in “street name,” that is, through a broker, should instruct their broker to vote their shares by following the instructions provided by the broker. Your vote as a stockholder is important. Please vote as soon as possible to ensure that your vote is recorded. See “If I hold shares in the name of a broker, who votes my shares?” below.

 

What if I sign and date my proxy but do not provide voting instructions?

 

A proxy that is signed and dated, but which does not contain voting instructions will be voted as follows:

 

 

FOR” the director nominee named in this Proxy Statement;

     
 

FOR” the ratification of the engagement of RSM US LLP; and

     
 

FOR” the approval of the advisory, non-binding resolution to approve our executive compensation.

 

What does it mean if I receive multiple proxy materials?

 

It means that you have multiple holdings reflected in our stock transfer records and/or in accounts with stockbrokers. Please vote all shares. No proxy cards are duplicated.

 

If I hold shares in the name of a broker, who votes my shares?

 

If you received this Proxy Statement from your broker, your broker should have given you instructions for directing how your broker should vote your shares. It will then be your broker’s responsibility to vote your shares for you in the manner you direct.

 

Under the rules of various national and regional securities exchanges, brokers may generally vote on routine matters, such as the ratification of an independent registered public accounting firm, but cannot vote on non-routine matters such as the election of directors and advisory, non-binding votes on executive compensation unless they have received voting instructions from the person for whom they are holding shares. If your broker does not receive instructions from you on how to vote particular shares on matters on which your broker does not have discretionary authority to vote, your broker will return the proxy card to us, indicating that he or she does not have the authority to vote on these matters. This is generally referred to as a “broker non-vote.” At the Annual Meeting, broker non-votes will not affect the outcome of the voting, as described below under “How many votes are needed for each proposal?” We encourage you to provide directions to your broker as to how you want your shares voted on the matters to be brought before the Annual Meeting. You should do this by carefully following the instructions your broker gives you concerning its procedures so that your shares will be voted at the Annual Meeting.

 

 

What if I change my mind after I vote my shares?

 

If you hold your shares in your own name, you may revoke your proxy and change your vote by:

 

 

following the instructions for telephone or Internet voting appearing on your proxy card;

 

signing another proxy card with a later date and returning the new proxy card by mail to our stock transfer agent and registrar, Computershare Trust Company, N.A., or by sending it to us to the attention of the Secretary of the Company, provided that the new proxy card is actually received by the Secretary before the polls close at the Annual Meeting;

 

sending notice addressed to the attention of the Secretary of the Company that you are revoking your proxy, provided that the notice is actually received by the Secretary before the polls close at the Annual Meeting; or

 

voting electronically at the Annual Meeting in accordance with the established voting rules and procedures.

 

If you hold your shares in the name of a broker and desire to revoke your proxy, you will need to contact your broker to revoke your proxy.

 

Please mail any new proxy cards to Proxy Services, in care of Computershare Trust Company, N.A., at P.O. Box 50500, Louisville, Kentucky 40233-5000. You may send the notice described above or new proxy card to us as follows: BankFinancial Corporation, 60 North Frontage Road, Burr Ridge, Illinois 60527, Attention: James J. Brennan, Secretary.

 

How are proxy materials delivered?

 

BankFinancial controls its costs for the Annual Meeting by following SEC rules that allow for the delivery of proxy materials to the Company’s stockholders via Notice and Access, which delivers materials through the Internet. In addition to reducing the amount of paper used in producing these materials, this method lowers the costs associated with mailing the proxy materials to stockholders. Stockholders who own shares directly and not through a broker will have a Meeting Notice delivered directly to their mailing address. Stockholders whose shares are held in the name of a broker should have a Meeting Notice forwarded to them by the broker that holds the shares. Stockholders who have requested paper copies of the proxy materials will receive this Proxy Statement, the 2019 Annual Report and a proxy card by mail.

 

If you received only a Meeting Notice by mail, you will not receive a printed copy of the proxy material unless you request a copy by following the instructions on the notice. The Meeting Notice also contains instructions for accessing and reviewing the proxy materials over the Internet and provides directions for submitting your vote over the Internet.

 

How do I request a paper copy of the proxy materials?

 

You may request a paper copy of the proxy materials by following the instructions below. You will be asked to provide your 15-digit control number located on your Meeting Notice.

 

 

1.

Call the toll-free telephone number 1-866-641-4276 and follow the instructions provided, or

     
 

2.

Access the website at www.envisionreports.com/BFIN and follow the instructions provided, or

     
 

3.

Send an email to investorvote@computershare.com with “Proxy Materials BankFinancial Corporation” in the subject line. Include in the message your full name and address, plus the number located in the shaded bar on your Meeting Notice, and state in the email that you want a paper copy of current meeting materials.

 

Please make your request for a copy on or before May 15, 2020 to facilitate timely delivery before the Annual Meeting.

 

Stockholders who hold shares in “street name,” that is, through a broker, should request copies of the proxy materials by following the instructions provided by the broker.

 

How many votes do we need to hold the Annual Meeting?

 

A majority of the shares that are outstanding and entitled to vote as of the record date must be present or by proxy at the Annual Meeting in order for us to hold the Annual Meeting and conduct business. Abstentions and broker non-votes are considered present at the Annual Meeting and are counted in determining whether or not a quorum is present.

 

Shares are counted as present at the Annual Meeting if the stockholder either:

 

 

is present online and votes at the Annual Meeting; or

 

has properly submitted a signed proxy form or other proxy (including a broker non-vote).

 

At the close of business on April 6, 2020, the record date, there were 15,062,268 shares of our common stock, par value $0.01, issued and outstanding. Therefore, at least 7,531,135 shares need to be present at the Annual Meeting online or by proxy in order for us to hold the Annual Meeting and conduct business.

 

 

What happens if the nominee is unable to stand for election?

 

The Board of Directors may, by resolution, designate a substitute nominee. In the latter case, shares represented by proxies may be voted for the substitute nominee designated by the Board of Directors. We have no reason to believe that the nominee will be unable to stand for election.

 

What options do I have in voting on each of the proposals?

 

Election of Directors (Proposal 1). You may mark the “FOR” box on your proxy card to vote for the director nominee or mark the “WITHHOLD” box to withhold your vote for the director nominee.

 

Ratification of Independent Registered Public Accounting Firm (Proposal 2). You may mark either the “FOR”, “AGAINST”, or “ABSTAIN” box with respect to the ratification of the engagement of RSM US LLP.

 

Advisory, Non-Binding Vote on Executive Compensation (Say-On-Pay) (Proposal 3). You may mark either the “FOR”, “AGAINST”, or “ABSTAIN” box with respect to the compensation of the Company’s named executive officers. While this vote is required by law, it will neither be binding on the Company or its Board of Directors, nor will it create or imply any change in the fiduciary duties of or impose any additional fiduciary duties on the Company or its Board of Directors.

 

Where no instructions are indicated, validly executed proxies will be voted “FOR” the election of the director nominee, “FOR” the ratification of the engagement of RSM US LLP, and “FOR” the approval of the compensation of the Company’s named executive officers.

 

How many votes may I cast?

 

Generally, you are entitled to cast one vote for each share of stock you owned on the record date. The proxy card included with this Proxy Statement indicates the number of shares owned by an account attributable to you.

 

Are there any limits on the voting of shares?

 

As provided in Section F of Article 6 of our Charter, record holders of common stock that is beneficially owned by a person who beneficially owns in excess of 10% of the outstanding shares of our common stock are not entitled to vote any shares held in excess of this 10% limit. Subject to certain exceptions, a person is deemed to beneficially own shares owned by an affiliate of, as well as by persons acting in concert with, such person. Our Board of Directors is authorized to construe and apply the provisions of Section F of Article 6 of the Charter, and to make all determinations it deems necessary or desirable to implement them, including determining the number of shares beneficially owned by any person and whether a person is an affiliate of or has an arrangement or agreement with another person. Further, the Board of Directors is authorized to demand certain information from any person who is reasonably believed to beneficially own stock in excess of the 10% limit and reimbursement for all expenses incurred by us in connection with an investigation conducted by the Board of Directors pursuant to the provisions of Section F of Article 6 of the Charter.

 

How many votes are needed for each proposal?

 

The nominee receiving the highest number of votes cast “FOR” their election will be elected as director, without regard to shares as to which the “WITHHOLD” box has been selected on the proxy card.

 

The ratification of the engagement of RSM US LLP as our independent registered public accounting firm for the year ending December 31, 2020 will require the affirmative vote of a majority of the votes cast at the Annual Meeting, electronically or by proxy, without regard to either broker non-votes or shares as to which the “ABSTAIN” box has been selected on the proxy card.

 

The approval of the advisory, non-binding vote on executive compensation will require the affirmative vote of a majority of the votes cast at the Annual Meeting, without regard to either broker non-votes or shares as to which the “ABSTAIN” box has been selected on the proxy card. While this vote is required by law, it will neither be binding on the Company or its Board of Directors, nor will it create or imply any change in the fiduciary duties of or impose any additional fiduciary duties on the Company or its Board of Directors.

 

Shares represented by broker non-votes and abstentions are considered present at the Annual Meeting for the purposes of determining whether or not a quorum is present, but such shares are not considered votes cast and will have no effect on the outcome of the election of directors, the ratification of the engagement of RSM US LLP and the advisory, non-binding resolution to approve our executive compensation.

 

 

Where do I find the voting results of the Annual Meeting?

 

We intend to announce voting results at the Annual Meeting or at any postponements or adjournments thereof. The voting results will also be disclosed in a Current Report on Form 8-K that we will file with the SEC.

 

How does the Board recommend that I vote?

 

The Board of Directors recommends that you vote “FOR” the election of the director nominee, “FOR” the ratification of the engagement of RSM US LLP, and “FOR” the approval of the compensation of the Company’s named executive officers.

 

Who do I call if I have any questions?

 

If you have any questions or need assistance in submitting your proxy, voting your shares or need paper copies of the proxy materials, free of charge, please contact Computershare, toll-free, at 1-800-816-9078, toll 1-718-575-3120.

 

INSTRUCTIONS FOR THE VIRTUAL MEETING

How can I attend the Annual Meeting?

 

The Annual Meeting will be a completely virtual meeting of stockholders, which will be conducted exclusively by webcast. You are entitled to participate in the Annual Meeting only if you were a stockholder of the Company as of the close of business on the Record Date, or if you hold a valid proxy for the Annual Meeting. No physical meeting will be held.

 

You will be able to attend the Annual Meeting online and submit your questions during the meeting by visiting www.meetingcenter.io/267273674. You also will be able to vote your shares online by attending the Annual Meeting by webcast.

 

To participate in the Annual Meeting, you will need to review the information included on your Notice, on your proxy card or on the instructions that accompanied your proxy materials. The password for the meeting is BFIN2020.

 

If you hold your shares through a broker, you must register in advance using the instructions below.

 

The online meeting will begin promptly at 9:30 a.m., Chicago, Illinois Time. We encourage you to access the meeting prior to the start time leaving ample time for the check in. Please follow the registration instructions as outlined in this proxy statement. 

 

How do I register to attend the Annual Meeting virtually on the Internet?

 

If you are a registered stockholder (i.e., you hold your shares through our transfer agent, Computershare), you do not need to register to attend the Annual Meeting virtually on the Internet. Please follow the instructions on the notice or proxy card that you received.

 

If you hold your shares through a broker, you must register in advance to attend the Annual Meeting virtually on the Internet.

 

To register to attend the Annual Meeting online by webcast you must submit proof of your proxy power (legal proxy) reflecting your Company holdings along with your name and email address to Computershare. Requests for registration must be labeled as “Legal Proxy” and be received no later than May 25, 2020 at 4:00 p.m., Chicago, Illinois Time.

 

You will receive a confirmation of your registration by email after we receive your registration materials.

 

Requests for registration should be directed to us at the following:

 

By email:   Forward the email from your broker, or attach an image of your legal proxy, to legalproxy@computershare.com

 

By mail: 

 

Computershare

BFIN Legal Proxy

P.O. Box 43001

Providence, RI 02940-3001

 

 

ELECTION OF DIRECTORS; INFORMATION WITH RESPECT TO DIRECTORS AND EXECUTIVE OFFICERS

 

There are six members of the Board of Directors, which is divided into three classes. The bylaws of the Company establish the initial terms of office for each class of directors and provide that directors are elected for a term of office that will expire at the third succeeding Annual Meeting of Stockholders following their election, with each director to hold office until his or her successor is duly elected and qualifies.

 

At the Annual Meeting, the stockholders of the Company will be requested to elect one class of directors consisting of one director. The Corporate Governance and Nominating Committee of the Board of Directors has recommended, and the Board of Directors has nominated, F. Morgan Gasior for election as director in this class of directors for a term of office that will expire at the Annual Meeting of Stockholders in 2023 and until his successor is duly elected and qualify.

 

The proxies solicited on behalf of the Board of Directors will be voted at the Annual Meeting “FOR” the election of the above director nominee as director, provided that your proxy will not be voted in favor of any nominee for which your proxy vote has been withheld. If a nominee is unable or unwilling to stand for election at the time of the Annual Meeting, the shares represented by all such proxies will be voted for the election of such replacement nominee as the Board of Directors, acting on the recommendation of the Corporate Governance and Nominating Committee, may designate. At this time, the Board of Directors knows of no reason why the nominee might be unable or unwilling to stand for election as a director, or to serve as a director if elected.

 

The following table sets forth certain information regarding the nominee and other members of the Board of Directors, including their years of service and terms of office. Except as indicated elsewhere in the Proxy Statement, there are no arrangements or understandings between any of the directors or the nominee and any other person pursuant to which such directors or the nominee was selected.

 

   

Position(s) Held

 

Director

 

Term of Class

Name

 

in the Company

 

Since (1)

 

to Expire

NOMINEE

           

F. Morgan Gasior

 

Chairman of the Board, Chief Executive Officer and President

 

1983

 

2023

CONTINUING DIRECTORS

           

Cassandra J. Francis

 

Director

 

2006

 

2021

Thomas F. O’Neill

 

Director

 

2012

 

2021

Terry R. Wells

 

Director

 

1994

 

2021

John M. Hausmann, C.P.A.

 

Director

 

1990

 

2022

Glen R. Wherfel, C.P.A.

 

Director

 

2001

 

2022

 

(1)

Denotes the earlier of the year the individual became a director of the Bank or the year the individual became a director of the Company or its predecessors, BankFinancial MHC and BankFinancial Corporation, the federal corporation. Messrs. Gasior, Hausmann and Wells have each served as a director of the Company since its formation in 2004. Mr. Wherfel and Ms. Francis were appointed to the Board of Directors of the Company in 2006; Mr. O’Neill was elected to the Board of Directors of the Company in 2012.

 

Nominee

 

The business experience for at least the past five years of the nominee for election to the Board of Directors and the qualifications of such nominee to serve as a director is set forth below, with age information as of December 31, 2019.

 

F. Morgan Gasior. Age 56. Mr. Gasior has served as Chairman of the Board, Chief Executive Officer and President of the Company since its formation in 2004, and of the Bank since 1989, and as a director of the Bank since 1983. He held the same positions with the Company’s predecessors, BankFinancial MHC and BankFinancial Corporation, a federal corporation, from 1999 to 2005. Mr. Gasior has been employed by the Bank in a variety of positions since 1984, and became a full-time employee in 1988 when he was appointed as Executive Vice President and Chief Operating Officer. He was a director and officer of Financial Assurance Services, Inc. from 1989 through 2003. Mr. Gasior is licensed as an attorney in the States of Illinois and Michigan, but he does not actively practice law.

 

Mr. Gasior brings to the Board, among other skills and qualifications, comprehensive understanding of the Bank’s strategies, operations and customers based on his more than 30 years of service as an employee and officer of the Bank. He has led the development and implementation of the Bank’s financial, lending, operational, technology and expansion strategies, and this experience has uniquely positioned him to adjust the Company’s business strategies to respond to changing economic, regulatory and competitive conditions, and to discern and coordinate operational changes to match these strategies. His position on the Board also provides a direct channel of communication from senior management to the Board.

 

 

The Board of Directors recommends a vote “FOR” the above nominee.

 

Continuing Directors

 

The business experience for at least the past five years of each continuing member of the Board of Directors and each individual’s qualifications to serve as a director are set forth below, with age information as of December 31, 2019.

 

Cassandra J. Francis. Age 54. Ms. Francis is self-employed as the sole proprietor of Kariatid and Puddle Jump Properties since 2009, which provide interim management, real estate and construction-related strategic planning and program and project advisory services to public, private and non-profit organizations and professional associations. Ms. Francis is also President of BOCA Enterprises, Inc., and President of Global Properties, Inc. real estate management companies. Ms. Francis previously served as the Chief Real Estate Development Officer of the South Shore Line Railroad / Northern Indiana Commuter Transportation District and as the President and CEO of Friends of the Parks, a 40 year-old non-profit advocacy organization whose mission is to preserve, protect, improve and promote the use of parks and preserves throughout the Chicago area. She was also an Executive Director and Vice President of Clayco, Inc., a national design-build construction firm and the Director of Olympic Village Development for Chicago’s bid to host the 2016 Summer Olympic and Paralympic Games. She has also held various management positions, including Senior Vice President with U.S. Equities Development, L.L.C. from 1995 to 2008. Ms. Francis is a Fellow of the American Institute of Certified Planners, a Fellow of RICS (The Royal Institution of Chartered Surveyors), a fellow of the Chartered Institute of Arbitrators, and is an admitted member of the Counselors of Real Estate, the professional consulting arm of the National Association of Realtors. She is certified as both an international commercial arbitrator and as a civil commercial mediator. Ms. Francis is an LEED Accredited Professional and is licensed as a real estate managing broker in the States of Illinois and Indiana. She formerly served as Vice President of the International Board of Governors of Lambda Alpha International, an honorary land economics society and currently serves on the Chicago Advisory Board of the Urban Land Institute. Ms. Francis is a member of the Corporate Governance & Nominating Committee and the Human Resources Committee of the Company.

 

Ms. Francis brings to the Board, among other skills and qualifications, substantial experience in urban planning and commercial real estate development and operations, with particular emphasis in retail development and leasing. She also has extensive experience with commercial real estate finance and valuations, particularly in Midwestern markets.

 

John M. Hausmann, C.P.A. Age 64. Mr. Hausmann has been a self-employed certified public accountant since 1980. Prior to that time, he was an accountant with Arthur Andersen. Mr. Hausmann is a member of the American Institute of Certified Public Accountants and the Illinois Certified Public Accountant Society. He has been a director of the Company since its formation in 2004, and of the Bank since 1990. He was a director of the Company’s predecessors, BankFinancial MHC and BankFinancial Corporation, a federal corporation, from 1999 to 2005. Mr. Hausmann is the Chairman of the Audit Committee of the Company, and is a member of the Executive, Corporate Governance and Nominating and the Human Resources Committees of the Company.

 

Mr. Hausmann brings to the Board, among other skills and qualifications, a comprehensive understanding of accounting, auditing and taxation principles based on his many years of experience as a certified public accountant. His experience as a member of the Audit Committee has provided him with a thorough knowledge of the Company’s internal controls and internal and external audit procedures. His tax and accounting practice and longtime residency in the Bank’s southernmost market territory have also provided him with a unique familiarity with the needs of the Bank’s small business and municipal customers and communities.

 

Thomas F. ONeill. Age 73. Mr. O’Neill is Managing Director - Capital Markets at Stifel Financial Corporation. Mr. O’Neill was previously Vice Chairman of First Empire Securities prior to its acquisition by Stifel Financial Corporation in 2019. An industry veteran with more than 40 years experience, he was a founding principal of the investment banking and brokerage firm Sandler O’Neill + Partners. Prior to joining First Empire, Mr. O’Neill was a founder of The Kimberlite Group and served as its CEO. He also previously served as Chairman of the broker-dealer First Allied, the Vice-Chairman of the Capital Markets Group of Incapital LLC, the Vice-Chairman of the New York Interactive Advertising Exchange, and the Chairman of the Ranieri Partners Financial Services Group. Mr. O’Neill is a member of the Corporate Governance & Nominating Committee and the Human Resources Committee of the Company.

 

Mr. O’Neill brings to the Board, among other skills and qualifications, substantial experience and expertise in a broad range of matters that affect publicly-traded bank and thrift holding companies, including corporate governance, asset-liability management, investment management, mergers and acquisitions, asset purchases and dispositions and corporate finance.

 

Terry R. Wells. Age 61. Mr. Wells has served as the Mayor of the Village of Phoenix, Illinois since 1993 and he currently serves as Secretary of the Southland Regional Mayoral Black Caucus. Mr. Wells has also taught history and social studies at the elementary and high school levels, and U.S. History at Thornton Township High School in Harvey, Illinois, from which he retired in 2019. He is also a member of the Board of Directors of Pace, a Division of the Regional Transportation Authority (Illinois), and the Board of Trustees of South Suburban College. Mr. Wells has served as President of the South Suburban Mayors and Managers Association. He has been a director of the Company since its formation in 2004, and of the Bank since 1994. He was a director of the Company’s predecessors, BankFinancial MHC and BankFinancial Corporation, a federal corporation, from 1999 to 2005. Mr. Wells is a member of the Audit and Executive Committees and is the Chairman of the Human Resources Committee of the Company. He is also the Chairman of the Corporate Governance and Nominating Committee, and as such, currently serves as the Lead Director of the Company.  

 

Mr. Wells brings to the Board, among other skills and qualifications, substantial experience in municipal government and finance, community and economic development and serving the needs of low- and moderate-income borrowers and communities. His experience as an educator has also provided him with significant expertise in secondary and post-secondary vocational training applicable to the Bank’s customer service and support personnel.

 

 

Glen R. Wherfel, C.P.A. Age 70. Mr. Wherfel has been a principal in the accounting firm of Wherfel & Associates since 1984 and President of Park Data Incorporated since 1980. Mr. Wherfel was a director of Success National Bank from 1993 to 2001, and of Success Bancshares from 1998 to 2001. He was the Chairman of Success National Bank’s Loan Committee and a member of its Asset Liability Management Committee. Mr. Wherfel is a member of the Audit Committee, the Corporate Governance and Nominating Committee and the Human Resources Committee of the Company.

 

Mr. Wherfel brings to the Board, among other skills and qualifications, substantial experience in entrepreneurial finance and operations. His tax and accounting practice, longtime residency in the Bank’s northern market territory and service as a director of Success National Bank have also provided him a unique familiarity with the needs of the Bank’s small business and municipal customers and communities.

 

Director Independence

 

The Board of Directors has determined that, except for Mr. Gasior, who serves as the Chairman, Chief Executive Officer and President of the Company, each of the Company’s directors is “independent” as defined in Rule 5605(a)(2) of the listing standards of the NASDAQ Stock Market.

 

Executive Officers Who Are Not Directors

 

Set forth below is information, with age information as of December 31, 2019, regarding the principal occupations for at least the past five years of the individuals who serve as executive officers of the Company and/or the Bank who are not directors of the Company or the Bank. All executive officers of the Company and the Bank are elected annually by their respective Boards of Directors and serve until their successors are elected and qualify. No executive officer identified below is related to any director or other executive officer of the Company or the Bank. Except as indicated elsewhere in this Proxy Statement, there are no arrangements or understandings between any officer identified below and any other person pursuant to which any such officer was selected as an officer.

 

Paul A. Cloutier, C.P.A. Age 56. Mr. Cloutier has served as the Chief Financial Officer and Treasurer of the Company since its formation in 2004, of the Bank since 1991, and of BankFinancial MHC and BankFinancial Corporation, a federal corporation, from 1999 to 2005. Mr. Cloutier also serves as the Executive Vice President of the Finance Division of the Company and the Bank. He is a registered certified public accountant in the State of Michigan and is a member of the American Institute of Certified Public Accountants. Prior to joining the Bank and its parent companies, he was a Senior Tax Associate with Coopers & Lybrand.

 

John G. Manos. Age 59.  Mr. Manos has served as the President of the Bank's Commercial Real Estate Lending Division since April 2014, and was the Regional President of the Bank's Southern Region from 2006 to 2014.  He has held various positions with the Bank since 1999, including Senior Vice President, Vice President and Senior Vice President of Regional Commercial Banking.  Prior to joining the Bank, Mr. Manos was the Manager - Commercial Lending for Preferred Mortgage Associates.

 

 

BENEFICIAL OWNERSHIP OF COMMON STOCK BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth, as of April 6, 2020, certain information as to the beneficial ownership of shares of the Company’s common stock by: (i) those persons or entities known by the Company to beneficially own more than 5% of the Company’s outstanding shares of common stock; (ii) each director and nominee for election as director; (iii) each named executive officer of the Company; and (iv) all directors and executive officers of the Company and the Bank as a group. The address for each individual listed below is: C/O BankFinancial Corporation, 60 North Frontage Road, Burr Ridge, Illinois 60527. An asterisk denotes beneficial ownership of less than one percent.

 

   

Amount of Shares

 

Percent of Shares

   

Owned and Nature of

 

of Common Stock

Name and Address of Beneficial Owners

 

Beneficial Ownership (1)

 

Outstanding

Black Rock, Inc.

       

40 East 52nd Street

       

New York, New York 10022

 

1,318,490

(2)

8.75%

Dimensional Fund Advisors LP

       

6300 Bee Cave Road

       

Building One

       

Austin, Texas 78746

 

1,301,626

(2)

8.64%

Renaissance Technologies LLC

       

800 Third Avenue

       

New York, New York  10022

 

1,074,566

(2)

7.13%

PL Capital, LLC

       

20 East Jefferson Ave., Suite 22

       

Naperville, Illinois 60540

 

975,189

(3)

6.47%

Principal Trust Company

       

1013 Centre Road

       

Wilmington, Delaware 19805

       

As Trustee fbo BankFinancial and Subsidiaries 401(k) Plan

 

970,534

(2)

6.44%

The Vanguard Group

       

100 Vanguard Blvd.

       

Malvern, Pennsylvania  19355

 

857,298

(2)

5.69%

Directors and Nominee

       

Cassandra J. Francis

 

40,444

 

*      

F. Morgan Gasior

 

299,844

(4)

1.99 %

John M. Hausmann

 

69,049

 

*      

Thomas F. O’Neill

 

4,160

 

*      

Terry R. Wells

 

56,384

 

*      

Glen R. Wherfel

 

78,734

(5)

*      

Named Executive Officers (other than Mr. Gasior):

       

Paul A. Cloutier

 

86,337

(6)

*      

John G. Manos

 

52,722

(7)

*      

All Directors and Executive Officers (including Named Executive Officers) as a Group (9 persons)

 

793,327

 

5.27 %

 

(1)

The information reflected in this column is based upon information furnished to us by the persons named above and the information contained in the records of our stock transfer agent. The nature of beneficial ownership for shares shown in this column, unless otherwise noted, represents sole voting and investment power.

(2)

Amount of shares owned and reported on the most recent Schedule 13G filing with the SEC, reporting ownership as of December 31, 2019.

(3)    Amount of shares owned and reported on the most recent Schedule 13F filing with the SEC, reporting ownership as of December 31, 2019.

(4) Includes 90,307 shares held by the BankFinancial and Subsidiaries Associate Investment Plan. Also includes 125,000 shares held by Mr. Gasior’s spouse. Mr. Gasior disclaims beneficial ownership of these 125,000 shares.

(5)

Includes 46,234 shares held in trust and 7,500 shares held by an individual retirement account.

(6)

Includes 21,337 shares held by the BankFinancial and Subsidiaries Associate Investment Plan.

(7)

Includes 37,109 shares held by the BankFinancial and Subsidiaries Associate Investment Plan.

 

Delinquent Section 16(a) Reports

 

The Company’s executive officers, directors and any beneficial owners of greater than 10% of the outstanding shares of the Company’s common stock are required to file reports with the SEC disclosing beneficial ownership and changes in beneficial ownership of the Company’s common stock. SEC rules require disclosure if an executive officer, director or 10% beneficial owner fails to file these reports on a timely basis. Based on the Company’s review of ownership reports required to be filed for the year ended December 31, 2019, no executive officer, director or 10% beneficial owner of shares of the Company’s common stock failed to file any required ownership report on a timely basis.

 

 

CODE OF ETHICS

 

The Company has adopted a Code of Ethics for Senior Financial Officers that applies to the Company’s principal executive officer, principal financial officer, principal accounting officer, and persons performing similar functions. A copy of the Company’s Code of Ethics was previously filed as Exhibit 14 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005. Amendments to and waivers from the Code of Ethics for Senior Financial Officers will be disclosed on the Company website, www.bankfinancial.com. The Company has also adopted a Code of Business Conduct, pursuant to the listing standards of the NASDAQ Stock Market that applies generally to the Company’s directors, officers, and employees.

 

BOARD LEADERSHIP STRUCTURE AND BOARD’S ROLE IN RISK OVERSIGHT

 

Leadership Structure.  The Company’s Board of Directors has a distributed leadership structure. The Board has established a standing Executive Committee, which currently consists of the Chief Executive Officer and two independent directors. Thus, a two-thirds majority of the membership of the Executive Committee consists of independent directors. The Executive Committee exercises the authority of the Board between meetings on matters not reserved exclusively to the Board by the Company’s charter or bylaws. In addition, independent directors chair the Corporate Governance and Nominating Committee and the Human Resources Committee, the members of which are all independent directors.

 

In 2010, the Board amended the charter of the Corporate Governance and Nominating Committee to provide that the Chair of this committee will serve as the Board’s Lead Director. The Lead Director calls and presides at all executive sessions or special meetings of the Board’s outside, independent directors and provides feedback to the Chief Executive Officer regarding the same; works with the Chairs of the other committees of the Board to ensure coordinated coverage of the Board’s duties and responsibilities; serves as a supplemental point of contact for Board members and stockholders; serves as a liaison between the Board’s outside, independent directors and the Chief Executive Officer; coordinates the implementation of the charter of the Corporate Governance and Nominating Committee, including Board performance evaluations; and executes any other duties and responsibilities the Board may establish.

 

The Chairman of the Board coordinates the Board’s functions, including the activities of the Board’s committees, with the execution of the Company’s business plan and day-to-day operations. Although the Chairman also presides over Board meetings as provided in the Company’s bylaws, the charter of the Corporate Governance and Nominating Committee was amended in 2010 to formalize the Board’s practice of permitting any director to place any item on the agenda for any Board meeting.

 

The Board periodically meets outside the presence of the Chief Executive Officer. The independent members of the Board also conduct a periodic review of the Company’s financial condition, results of operation, long-term planning, management structure and internal governance practices. The Board utilizes the findings and recommendations resulting from its review to revise and enhance its oversight, as appropriate.

 

The Board does not have a policy requiring the separation of the offices of Chairman and Chief Executive Officer, and Mr. Gasior currently serves in both capacities. The Board believes that the selection of its Chairman should be based upon the Board’s assessment of the Company’s current operating needs, the suitability of the individual to effectively discharge the duties of the Chairman and the leadership structure that will best serve the interests of the Company and its stockholders. The Board believes that combining the offices of Chairman and Chief Executive Officer is currently an effective governance structure because it provides an efficient and unified responsibility and mechanism for the coordination of the activities of the Board of Directors and those of management. The Board also believes that the Lead Director position, its policy of universal Board agenda access and its practice of conducting periodic meetings outside the presence of the Chief Executive Officer achieve benefits that are equivalent to those that might result from separating the offices of Chairman and Chief Executive Officer.

 

Role in Risk Oversight. The Board is actively involved in the oversight of risks that could affect the Company, through, among other things, its adoption of policies and procedures; the use of internal controls to identify and monitor specific risks; the establishment of an internal audit function that monitors compliance with policies, procedures and internal controls and reports directly to the Board’s Audit Committee, oversight and reporting by Board committees with respect to matters within their jurisdictions; the receipt of periodic reports from officers of the Company responsible for the management of specific functions; and the periodic use of outside consultants to conduct independent reviews of internal controls or Company-specific functions.

 

This leadership and risk management structure is designed to ensure that financial, risk, internal control reporting and market information are provided directly to the independent directors of the Company and acted upon as necessary. Taken together, the Board believes that it has an effective leadership structure controlled by independent directors, with open meeting agendas and an established mechanism for oversight and evaluation of the Company as well as the Board’s and management’s execution of their respective responsibilities.

 

Attendance at Annual Meetings of Stockholders

 

Although the Company does not have a formal written policy regarding director attendance at annual meetings of stockholders, directors are requested to attend these meetings absent unavoidable scheduling conflicts. All of the Company’s current directors attended the 2019 Annual Meeting of Stockholders.

 

 

BOARD COMMITTEE REPORTS, POLICIES AND PROCEDURES

 

Meetings and Committees of the Board of Directors

 

Board of Directors and Committees. The business of the Company is conducted at regular and special meetings of the Board of Directors and its committees. In addition, the “independent” members of the Board of Directors, as defined in Rule 5605(a)(2) of the listing standards of the NASDAQ Stock Market, meet in executive sessions. The standing committees of the Board of Directors of the Company are the Executive, Audit, Corporate Governance and Nominating, and Human Resources Committees. During the year ended December 31, 2019, the Board of Directors of the Company held four regular meetings and one special meeting.  No member of the Board of Directors or any Board committee attended less than 75% of the Board meetings and the Board committee meetings on which the director served. In addition, a number of matters were evaluated, considered and/or decided during the year by electronic distribution and voting or by unanimous consent.

 

The table below shows current membership for each of the standing Board committees:

 

Directors

 

Executive Committee

 

Audit Committee

 

Corporate Governance and

Nominating Committee

 

Human Resources Committee

Cassandra J. Francis

 

 

 

 

 

 ✓

 

 ✓

F. Morgan Gasior

 

Chair

 

 

 

 

 

 

John M. Hausmann

 

 ✓

 

Chair

 

 ✓

 

 ✓

Thomas F. O’Neill

 

 

 

 

 

 ✓

 

 ✓

Terry R. Wells

 

 ✓

 

 ✓

 

Chair

 

Chair

Glen R. Wherfel

 

 

 

 ✓

 

 ✓

 

 ✓

Meetings held during 2019

 

 

5

 

1

 

1

 

Executive Committee. The Executive Committee is authorized to act with the same authority as the Board of Directors between meetings of the Board of Directors, subject to certain limitations contained in the bylaws of the Company.

 

Audit Committee. The Board of Directors has adopted a written charter for the Audit Committee, which is attached as Appendix A to this Proxy Statement.  As more fully described in the Audit Committee Charter, the Audit Committee reviews the records and affairs of the Company to determine its financial condition, reviews with management and the Company’s independent registered public accounting firm the systems of internal control over financial reporting, and monitors adherence in accounting and financial reporting to accounting principles generally accepted in the United States. Each member of the Audit Committee is an “independent” director as defined in the listing standards of the NASDAQ Stock Market and Rule 10A-3 of the Securities Exchange Act of 1934. In addition, the Board of Directors has determined that Messrs. Hausmann and Wherfel are qualified as “audit committee financial experts” as currently defined in the regulations of the SEC.

 

Corporate Governance and Nominating Committee. The Board of Directors has adopted a written charter for the Corporate Governance and Nominating Committee, which was attached as Appendix A to the Proxy Statement for the 2018 Annual Meeting. The Corporate Governance and Nominating Committee consists, at any point in time, of directors of the Company who qualify as “independent” in accordance with the listing standards of the NASDAQ Stock Market, except that no director may serve on the Corporate Governance and Nominating Committee at any meeting at which he or she has been or is seeking to be proposed as a nominee.

 

The Corporate Governance and Nominating Committee identifies nominees by first evaluating the current members of the Board of Directors who are willing to continue in service. Current members of the Board of Directors with skills and experience that are relevant to the Company’s business and who are willing to continue in service are considered for re-nomination, balancing the value of continuity of service by existing members of the Board of Directors with that of obtaining a new perspective. If vacancies on the Board of Directors arise, or if a current director is not nominated for re-election, the Corporate Governance and Nominating Committee will determine the skills and experience desired of a new nominee, solicit suggestions for director candidates from all members of the Board of Directors, and may engage in other search activities. During the year ended December 31, 2019, the Company did not pay a fee to any third party to identify or evaluate, or assist in identifying or evaluating, potential nominees for director.

 

Candidates for a directorship should possess specific attributes, including integrity and a devotion to ethical behavior, a primary interest in the well-being of the Company, a capacity for independent judgment, good business acumen, the capacity to protect confidential information, an ability to work as a member of a team and a willingness to evaluate other opinions or points of view. In addition to examining a candidate’s qualifications in light of the above attributes, the Corporate Governance and Nominating Committee would also consider the overall character of the candidate and any existing or potential conflict of interest, the candidate’s willingness to serve and ability to devote the time and effort required, the candidate’s record of leadership, and the ability to develop business for the Company and its subsidiaries.

 

 

The Corporate Governance and Nominating Committee and the Board of Directors nominate candidates for election to the Company’s Board of Directors based on the candidate’s experience and expertise applicable to the current and expected future business operations of the Company. There is no formal policy with regard to the consideration of diversity in identifying a director nominee, and no specific demographic factors, or absence of such factors, prejudge a candidate’s qualification for nomination to the Board of Directors. The Company’s bylaws also establish specific qualifications for directors.

 

The Corporate Governance and Nominating Committee may consider qualified candidates for a directorship suggested by the stockholders of the Company. Stockholders may suggest a qualified candidate for a directorship by writing to BankFinancial Corporation at 60 North Frontage Road, Burr Ridge, Illinois 60527, Attention: James J. Brennan, Secretary, and providing the information described in the Company’s bylaws concerning the suggested candidate. A suggestion made to the Company’s Secretary concerning a potential candidate for a directorship will not constitute a nomination of the suggested candidate for election as a director. All nominations of candidates for election as a director must strictly comply with the applicable requirements and time limits summarized in “Advance Notice of Business to be Conducted at an Annual Meeting.”

 

Human Resources Committee. The Board of Directors has adopted a written charter for the Human Resources Committee of the Company. The Charter of the Human Resources Committee of the Company is attached as Appendix B to this Proxy Statement.  The Human Resources Committee of the Company is comprised of all directors of the Company other than Mr. Gasior. The Human Resources Committee of the Bank is comprised of all Bank Directors other than Mr. Gasior. The membership of the Human Resources Committee of the Bank includes one director of the Bank who is not a director of the Company, and does not include Mr. O’Neill because he is not a director of the Bank. The Human Resources Committee of the Bank is currently responsible for, among other things, establishing Bank-level base salaries, cash incentive compensation plans and bonus payments. All members of each Human Resources Committee are “independent” as defined in Rule 5605(a)(2) of the listing standards of the NASDAQ Stock Market. The meetings of the Human Resources Committees were conducted outside the presence of management to discuss compensation, performance and employment related matters.

 

AUDIT COMMITTEE REPORT

 

In accordance with the applicable rules of the SEC, the Audit Committee has prepared the following report for inclusion in this Proxy Statement:

 

As part of its ongoing activities, the Audit Committee has:

 

 

reviewed and discussed with management the Company’s audited consolidated financial statements for the year ended December 31, 2019;

 

discussed with the Company’s independent registered public accounting firm the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the Commission; and

 

received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the firm’s communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm their independence.

 

Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 for filing with the SEC.

 

This report has been provided and is respectfully submitted by the Audit Committee:

 

John M. Hausmann, C.P.A., Chairman

Terry R. Wells

Glen R. Wherfel, C.P.A.

 

RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Company’s Audit Committee has engaged RSM US LLP to act as the Company’s independent registered public accounting firm for the year ending December 31, 2020, subject to the ratification of the engagement by the Company’s stockholders. Representatives of RSM US LLP are expected to be present at the Annual Meeting with the opportunity to make a statement if they so desire, as well as to respond to appropriate questions that may be asked by a stockholder. If the appointment of the independent registered public accounting firm is not ratified, the matter of the appointment of the independent registered public accounting firm will be considered by the Company’s Audit Committee.

 

The Board of Directors recommends a vote “FOR” the ratification of the engagement of RSM US LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2020.

 

Payment to Independent Registered Public Accounting Firm

 

RSM US LLP (“RSM”) acted as the Company’s independent registered public accounting firm for its fiscal year ended December 31, 2019. Representatives of RSM are expected to be present at the Annual Meeting with the opportunity to make a statement if they so desire. Such representatives are also expected to be available to respond to appropriate questions.  Crowe LLP (“Crowe”) acted as the Company’s independent registered public accounting firm for its fiscal year ended December 31, 2018.

 

 

Accounting Fees and Services

 

Set forth below is certain information concerning aggregate fees billed for professional services rendered by RSM and Crowe during the years ended December 31, 2019 and 2018:

 

Audit Fees. The aggregate fees billed to the Company by RSM for professional services rendered by RSM for the audit of the Company’s annual financial statements and internal controls, review of the financial statements included in the Company’s Annual Reports on Form 10-K and services that are normally provided by RSM in connection with statutory and regulatory filings and engagements were $342,000 during the year ended December 31, 2019.  The aggregate fees billed to the Company by Crowe for professional services rendered by Crowe for the audit of the Company’s annual financial statements and internal controls, review of the financial statements included in the Company’s Annual Reports on Form 10-K and services that are normally provided by Crowe in connection with statutory and regulatory filings and engagements was $444,000 during the year ended December 31, 2018.

 

Audit-Related Fees. RSM did not bill the Company for any fees for assurance and related services rendered that are reasonably related to the performance of the audit of and review of the financial statements and that are not already reported in “Audit Fees” above, for the year ended December 31, 2019. The aggregate fees billed to the Company by Crowe for assurance and related services rendered by Crowe that are reasonably related to the performance of the audit of and review of the financial statements and that are not already reported in “Audit Fees” above, were $25,000 for the year ended December 31, 2018. The 2018 fees were billed to the Company for services related to the Bank’s ESOP plan.

 

Tax Fees. There were no fees billed to the Company by RSM for professional services rendered by RSM for tax consultations and tax compliance during the year ended December 31, 2019.  The aggregate fees billed to the Company by Crowe for professional services rendered by Crowe for tax consultations and tax compliance were $132,000 during the year ended December 31, 2018.

 

All Other Fees. There were no other fees billed for professional services rendered by RSM or Crowe other than those described above.

 

Audit Committee Pre-Approval Policy

 

The Audit Committee pre-approves all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by RSM, subject to the de minimus exceptions for non-audit services described in Section 10A(i)(1)(B) of the Securities Exchange Act of 1934, as amended, which are approved by the Audit Committee prior to the completion of the audit. The Audit Committee pre-approved 100% of the audit and tax fees described above during the years ended December 31, 2019 and 2018.

 

NARRATIVE DISCUSSION OF EXECUTIVE COMPENSATION

 

Introduction

 

This Narrative Discussion of Executive Compensation describes the Company’s compensation philosophy and policies for 2019 as applicable to the executive officers named in the Summary Compensation Table. This section explains the structure and rationale associated with each material element of the named executive officers’ compensation, and it provides context for the more detailed disclosure tables and specific compensation amounts provided in the following section. It is important to note that the Company and the Bank share an executive management team, the members of the executive management team are compensated by the Bank rather than the Company, and the Company reimburses the Bank for its services to the Company through intercompany expense allocations.

 

Role of the Human Resources Committee of the Board of Directors

 

Pursuant to its Charter, the Human Resources Committee of the Company is responsible for the execution of the Board of Directors’ responsibilities with respect to compensation, performance evaluation and succession planning for the Company’s Chief Executive Officer and other named executive officers of the Company. The Human Resources Committee of the Company is also responsible for the submission of an annual report on executive compensation to the Board of Directors for inclusion in the Company’s Annual Report on Form 10-K. The Human Resources Committee of the Company is comprised of Messrs. Wells (Chairman), Hausmann, O’Neill and Wherfel and Ms. Francis, each of whom is expected to serve on the committee through the conclusion of the Company’s Annual Meeting of Stockholders on Friday, May 29, 2020. Each member of the Human Resources Committee of the Company is considered “independent” according to the listing standards of the NASDAQ Stock Market and a “non-employee” director under Section 16 of the Securities Exchange Act of 1934.

 

 

Compensation Philosophy and Objectives

 

The overall objective of the Company’s and the Bank’s compensation programs is to align executive officer compensation with the success of meeting strategic, financial and management objectives and goals. The programs are designed to create meaningful and appropriate incentives to manage the business of the Company and the Bank successfully and to align management interests with those of the stockholders of the Company. The program is structured to accomplish the following:

 

encourage a consistent and competitive return to stockholders over the long-term;

maintain a corporate environment that encourages stability and a long-term focus for the primary constituencies of the Company and the Bank, including employees, stockholders, communities, clients and government regulatory agencies;

maintain a program that:

 

clearly motivates personnel to perform and succeed according to the current goals of the Company and the Bank;

 

provides management with the appropriate empowerment to make decisions that benefit the primary constituents;

 

aligns incentive compensation practices to risk-taking activities;

 

attracts and retains key personnel critical to the long-term success of the Company and the Bank;

 

provides for management succession planning and related considerations;

 

encourages increased productivity;

 

provides for subjective consideration in determining incentive and compensation components; and

 

ensures that management:

 

fulfills its oversight responsibility to its primary constituents;

 

conforms its business conduct to the Company’s and the Bank’s established ethical standards;

 

remains free from any influences that could impair or appear to impair the objectivity and impartiality of its judgments or treatment of the constituents of the Company and the Bank; and

 

avoids any conflict between its responsibilities to the Company and the Bank and each executive officer’s personal interests.

 

Compensation Committee Interlocks and Insider Participation

 

Mr. Gasior is the only director of the Company and the Bank who is also an executive officer of the Company and/or the Bank. Mr. Gasior does not participate in the decisions of the Boards of Directors of the Company or the Bank or their respective Human Resources Committees concerning his compensation. No executive officer of the Company or the Bank has served on the Board of Directors or on the compensation committee of any other entity that had an executive officer serving on the Company’s Board of Directors or Human Resources Committee.

 

Compensation Consultant Independence

 

The Human Resources Committee of the Company engaged Frederic W. Cook & Co., Inc. (“Cook & Co.”) to assist in the preparation of the compensation aspects of reports filed with the SEC and to be available for consultations with outside counsel to the Human Resources Committee of the Company. The Human Resources Committee of the Company has received and reviewed the Cook & Co. consultant independence letter and independence policy addressing factors identified by SEC rules to determine whether certain conflicts of interest disclosures must be made. Cook & Co. believes that there is no conflict of interest in its role as an advisor to the Human Resources Committee of the Company. The following factors were assessed by the committee: Cook & Co.’s provision of services other than the executive and non-employee director compensation matters; the amount of fees received from the Company by Cook & Co. as a percentage of the total revenue of Cook & Co.; the policies and procedures of Cook & Co. that are designed to prevent conflicts of interest; the extent of any business or personal relationships with any member of the committee or any executive officer of the Company or the Bank; and any ownership of the Company’s stock by individuals on the consulting team employed by Cook & Co. After considering these and other factors in their totality, no conflicts of interest with respect to Cook & Co.’s advice were identified by the Board or the Human Resources Committee of the Company.

 

 

Compensation Principles and Factors

 

Business Plan Objectives. The Boards of Directors of the Company and the Bank periodically conduct a review of current and anticipated business conditions in the context of the Company’s and the Bank’s financial and competitive position. The review period typically includes at least the previous two fiscal years and up to two years prospectively. In connection with this review, management submits a Business Plan to the Boards of Directors of the Company and the Bank that proposes strategic, financial and management objectives for the period covered, using multiple scenarios in response to a variety of stated assumptions. The Boards of Directors then evaluate the proposed Business Plan, and modify its provisions to the extent they deem appropriate. The Business Plan is updated by management and the Boards of Directors periodically throughout the year to respond to changing circumstances and conditions. The Business Plan provides a basis for evaluating the future progress of the organization, including all appropriate strategic alternatives, and management’s performance.

 

The Human Resources Committees of the Company and the Bank considered the Company’s and the Bank’s performance within the context of the Business Plan and management’s overall performance, weighing numerous factors within and outside of management’s control.

 

Corporate Performance and Industry Comparison. In establishing named executive officer compensation, the Human Resources Committees periodically evaluate the Company’s and the Bank’s performance compared to management’s and the Boards of Directors’ overall goals and business plan objectives as well as to other financial institutions. The Human Resources Committees believe that using the respective performance factors of the Company and the Bank in determining named executive officer compensation levels is a useful tool for aligning the executive officers’ interests with those of the stockholders of the Company. With that in mind, the Human Resources Committees focus on the respective overall performance of the Company and the Bank relative to the prior calendar year and also consider the performance of insured depository institutions in the Chicago MSA, immediately adjacent MSA or the State of Illinois. As part of the evaluation and review, the Human Resources Committees also take into account the manner in which various subjective issues, such as changes in competition, regulatory standards, and general and local economic conditions (including unemployment rates and commodities prices and adverse conditions in housing and real estate markets) may have affected performance.

 

For purposes of comparative analysis in assessing corporate performance, the Company generally considers commercial banks and savings institutions of similar asset size, capital ratios, and/or geography. Given the ever-changing landscape within the banking industry, there is no specifically defined group of companies that is utilized for this analysis. The group of comparative financial institutions used in 2019 to assess overall performance consisted of publicly-held financial institutions located in the Chicago MSA, immediately adjacent MSA or the State of Illinois with assets of $2.0 billion to $5.0 billion. The local financial institutions that were considered in 2019 included Old Second Bancorp (OSBC), Byline Bancorp (BY), and NorthWest Indiana Bancorp (NWIN). A broader group consisting of these publicly-held institutions and a number of privately-held local financial institutions was used to evaluate the improvements that occurred in the Company’s earnings, loan portfolio composition and asset quality performance metrics.

 

The Boards of Directors of the Company and the Bank believe that industry comparison is a useful tool for assessing business performance, staying competitive in the marketplace and attracting and retaining qualified executives. While the Human Resources Committees believe that it is prudent to use industry comparison data in determining compensation practices, they do not establish empirical parameters or benchmarks for using this data. Rather, where necessary, the Human Resources Committee of the Bank uses industry comparison data to confirm that executive compensation is reasonable relative to competing organizations.

 

Performance Reviews and Role of Executives in Committee Meetings. Management reports to the Boards of Directors of the Company and the Bank at least annually on its progress in achieving the strategic, financial and management objectives established by the business plan. The Boards of Directors of the Company and the Bank then consider the overall performance of the Company and the Bank and the named executive officers in the context of these objectives, weighing numerous factors and conditions within and outside of management’s control. The Human Resources Committee of the Bank reviews current and proposed compensation levels for the Chief Executive Officer and the other Named Executive Officers for Bank-level base salaries, incentive compensation plans and discretionary cash bonus payments.

 

The Boards of Directors and the Human Resources Committees exclude the Chief Executive Officer and all other Named Executive Officers from their discussions and formal meetings concerning their compensation, except to receive the results of the decisions made and other relevant information.

 

Information Resources and Role of Compensation Consultants. In reviewing current and proposed compensation levels for Named Executive Officers, the Human Resources Committees consider the organizational structure and business performance of the Company and the Bank, external information from public sources on industry and competitor business performance and compensation practices and levels and other information it deems relevant to its responsibilities. The Human Resources Committees of the Company and the Bank continued to have access to their own outside counsel and a compensation consultant during 2019  The Human Resources Committee of the Company engaged Cook & Co. to assist in the preparation of the compensation aspects of reports filed with the SEC and to be available for consultations with outside counsel.

 

 

Alignment of Risk and Performance-Based Compensation. The Code of Business Conduct for the Company and the Bank, includes provisions for the recovery (also known as “clawback”) of performance-based incentive compensation paid in or after 2019  in certain situations involving a restatement of financial reporting for a period up to three years from the date the restated financial statements are first filed with the SEC. In addition, incentive compensation plans adopted by the Bank that are directly related to the volumes and pricing of extensions of credit provide for the exclusion or deferral of incentive-based compensation based on either the inherent risk of the extension of credit or the risk rating assigned to the credit by a committee independent of the loan origination process.

 

Components of Executive Compensation

 

General. All Named Executive Officers of the Company, including the Chief Executive Officer, are currently executive officers of the Bank. The compensation that the Bank pays to its Named Executive Officers, however, is taken into account in establishing the intercompany expense allocations that the Company pays to the Bank.

 

Base Salary. Generally, base salary levels are established based on job descriptions and responsibilities, either temporary or permanent in nature (including any revisions or proposed revisions thereto), competitive conditions and general economic trends in the context of the Bank’s financial and franchise condition, and performance. A discussion of changes in base salaries for each named executive officer is included under “Conclusions for the Year Ended December 31, 2019.”

 

The base salaries of the named executive officers for 2020 are as follows:

 

Name

 

Position

 

2020 Base Salary

F. Morgan Gasior

 

Chairman of the Board, Chief Executive Officer and President

  $ 472,905

Paul A. Cloutier

 

Executive Vice President and Chief Financial Officer

  $ 299,964

John G. Manos

 

Commercial Real Estate Lending President - Bank

  $ 260,521

 

Cash Incentive Plan Compensation. The Bank maintains numerous cash incentive compensation plans at the Divisional or Departmental level. Each plan aligns incentive compensation with the applicable Business Plan objectives for a particular Division or Department. The Bank’s Human Resources Committee approves each Divisional or Departmental cash incentive compensation plan for a calendar year. At the conclusion of the calendar year, the Bank’s Human Resources Committee reviews the proposed awards pursuant to each Divisional or Departmental plan. Cash incentive plan compensation for the Chief Executive Officer and the Chief Financial Officer reflects the relative achievement of the strategic, financial and management objectives established by the Business Plan, management’s responses to unforeseen circumstances or conditions that materially differ from those originally assumed, and the individual performance factors established for each individual. Historically, the Bank prepared performance- and risk-based incentive compensation matrices for the Chief Executive Officer and the Chief Financial Officer. Taken together, these matrices incorporated direct relationships of certain key risk exposures and performance elements for the Company. Information with respect to these plans or matrices for the Chief Executive Officer and the Chief Financial Officer is included in “Conclusions for the Year Ended December 31, 2019.”

 

Discretionary Cash Bonus. The Bank may pay discretionary cash bonuses to associates and officers based on job performance consistent with a high level of individual execution of assigned responsibilities or special projects for a portion of a calendar year, a full calendar year or over a period of years. The Bank’s Human Resources Committee approves all discretionary cash bonus payments for all officers at the level of Vice President or higher. No empirical mathematical formula was used to determine the amount of the discretionary cash bonus payments. The awards of discretionary cash bonus payments for the named executive officers are discussed in “Conclusions for the Year Ended December 31, 2019.”

 

Share Ownership Guidelines. In the absence of difficult personal circumstances, the Human Resources Committee of the Company encourages the Chief Executive Officer and the other Named Executive Officers of the Company to acquire with their own funds and hold a position in Company shares equal to 100% of the executive’s three-year average annual cash compensation. At December 31, 2019, all of the Company’s named executive officers met all elements of the Human Resources Committee of the Company’s share ownership guidelines.

 

Prohibited Transactions Involving Shares Issued By BankFinancial Corporation. The Insider Trading Policy for the Company and the Bank, includes provisions prohibiting directors, officers and employees from purchasing shares of common stock issued by the Company in a margin account, or pledging such shares as collateral for a loan. In addition, the Insider Trading Policy prohibits the purchase or sale of financial instruments or otherwise conducting transactions designed to, or that may reasonably be expected to have the effect of hedging or offsetting a decrease in the market value of any securities issued by the Company without the prior written consent of the Company’s Corporate Governance and Nominating Committee.

 

401(k) Plan. The Company has a tax-qualified defined contribution retirement plan covering all of its eligible employees. Employees are eligible to participate in the plan after attainment of age 21 and completion of six months of service. The Company provides a match of 50% of all contributions up to 6% of eligible compensation. The Company could also contribute an additional amount annually at the discretion of the Board of Directors of the Bank. Contributions totaling $320,000, excluding forfeitures, were made to the 401(k) plan for 2019. All reasonable administrative expenses incurred by the Plan were paid by the Plan.

 

 

All Other Compensation and Perquisites. To the extent applicable, the Human Resources Committees of the Company and the Bank review and monitor the level of other compensation and perquisites provided by the Company or the Bank, respectively, to the named executive officers in the context of current business operations and general market practices. Excluding the effects of the Bank’s contributions for the health, vacation, and 401(k) plan benefits available to all full-time employees and the Bank’s reimbursement of the after-tax premium costs for disability insurance coverages, the Human Resources Committees of the Company and the Bank continue to believe that other compensation and perquisites generally should not exceed 10% of each named executive officer’s total annual cash compensation. As of December 31, 2019, the compensation practices of the Company and the Bank with respect to other compensation and perquisites met this standard.

 

Conclusions for Year Ended December 31, 2019

 

Executive Summary. The following is a summary of the compensation decisions the Human Resources Committees made with respect to the named executive officers for 2019 and base salaries for 2020:

 

 

earned 2019 cash incentive compensation plan payments and discretionary cash bonuses were paid to the Chief Executive Officer, the Chief Financial Officer and the Commercial Real Estate Lending President.

     
 

in March  2020, the base salaries of the Chief Executive Officer, the Chief Financial Officer and the Commercial Real Estate Lending President increased 1.7%. In March 2019, the base salary of the Chief Executive Officer increased by 3.3%, the base salary of the Chief Financial Officer increased by 1.5%, and the base salary of the Commercial Real Estate Lending President increased 2.0%.

 

Review of Chief Executive Officer. The Human Resources Committee of the Bank met outside the presence of management to review the Chief Executive Officer’s performance in the context of the approved 2019 Business Plan, and the extent to which established Business Plan objectives were realized during 2019. The Human Resources Committee of the Bank also evaluated the overall state of the Bank’s franchise and strategic position, capabilities and direction consistent with the Chief Executive Officer’s execution of his leadership and planning responsibilities. The Human Resources Committee noted that though there were appropriate asset quality considerations involved, actual loan portfolio and loan origination volumes were below the target levels established in the Business Plan and adjusted the performance result for the Marketing & Business Development component accordingly.  The Human Resources Committee of the Bank conducted an evaluation of Mr. Gasior’s 2019 performance and 2019 base compensation. The Human Resources Committee of the Bank reviewed historical performance standards first adopted in 2009, evaluated industry compensation information of publicly-traded financial institutions located in the Chicago MSA, immediately adjacent MSA or the State of Illinois with assets of $2.0 billion to $5.0 billion, and evaluated the 2019 performance award percentages compared to the historical performance standards. Based on the factors noted above, the Board of Directors of the Bank, with Mr. Gasior not participating, ratified the actions of the Human Resources Committee of the Bank with respect to the Chief Executive Officer and approved a 17.05% cash incentive compensation plan payment based on the achievement of the 2019 Business Plan objectives as set forth in the matrix below and a 1.7% increase to base compensation.

 

The matrix used by the Human Resources Committee of the Bank with respect to the Chief Executive Officer is as follows:

 

Component

 

Weight

 

2019 Performance Results

 

2019 Percentage Results

 

2019 Percentage Awarded

 

2019 Maximum Percentage

Earnings Per Share

 

25

%

 

86% of Plan

 

17.20

%

   

17.20

%

   

50

%

 

Internal Controls

 

25

   

Met

 

20.00

     

20.00

     

50

   

Asset Quality (1)

 

25

   

Met

 

20.00

     

20.00

     

50

   

Marketing & Business Development

 

15

   

Below

 

5.00

     

5.00

     

50

   

Leadership & Planning

 

10

   

Met

 

20.00

     

20.00

     

50

   

Composite

 

100

%

 

Met

 

17.05

%

(2) 

 

17.05

%

(3) 

 

50

%

(4) 

 

(1)

The Human Resource Committee of the Bank review was based on information provided in our audited financial statements; however, such results were reviewed generally but were not compared to predetermined numerical criteria.

(2)

Represents the percentage of base salary earned as cash incentive compensation.

(3)

Represents the percentage of base salary paid as cash incentive compensation.

(4)

Represents the maximum percentage of base salary available as cash incentive compensation.

 

The Earnings target and the actual results for the year ended December 31, 2019, are set forth in the table below.

 

Category

 

2019 Performance

 

2019 Plan

Earnings Per Share

  $ 0.75   $ 0.87

 

Review of the Chief Financial Officer. The Human Resources Committee of the Bank met outside the presence of management to review the performance of the Chief Financial Officer. The Human Resources Committee of the Bank noted that the Chief Executive Officer had provided it with an assessment of the performance of the Chief Financial Officer, which included a review of the historical performance standards first adopted in 2009, an evaluation of industry compensation data of publicly-traded institutions located in the Chicago MSA, immediately adjacent MSA, or the State of Illinois with assets of $2.0 billion and $5.0 billion and an evaluation of 2019 performance compared to the historical standards. The Human Resources Committee noted that the Bank achieved strong results in its regulatory examinations and independent reviews relating to Asset-Liability Management. In addition, the Chief Financial Officer provided core decision support analysis to the Chief Executive Officer and the Company’s Board of Directors with respect to the payment of dividends, the Company’s Share Repurchase Program, the evaluation of potential acquisitions of smaller financial institutions, and the tracking of corporate and industry performance for Business Plan and strategic planning purposes. Because the members of the Board of Directors have had considerable interaction with the Company’s Chief Financial Officer throughout the year, the Human Resources Committee of the Bank determined that it had a strong basis to make an evaluation of the Chief Financial Officer independent of the Chief Executive Officer’s conclusions and recommendations. Based on the factors noted above, the Human Resources Committee of the Bank approved a 10.00% cash incentive compensation plan payment to the Chief Financial Officer based on the achievement of the  2019 Business Plan objectives as set forth in the matrix below.  The Human Resources Committee of the Bank also approved a standard base compensation increase of 1.7% for the Chief Financial Officer. The Board of Directors of the Bank ratified the actions of the Human Resources Committee of the Bank with respect to the Chief Financial Officer.

 

 

The matrix utilized by the Human Resources Committee of the Bank with respect to the Chief Financial Officer is as follows:

 

Component

 

Weight

 

2019 Performance Results

 

2019 Percentage Results

 

2019 Percentage Awarded

 

209 Maximum Percentage

Earnings Per Share

 

25

%

 

86% of Plan

 

10.00

%

   

10.00

%

   

20

%

 

Internal Controls

 

25

   

Met

 

11.00

     

11.00

     

20

   

Asset Quality (1)

 

15

   

Met

 

9.00

     

9.00

     

20

   

Liquidity & Interest Rate Risk

 

30

   

Met

 

10.00

     

10.00

     

20

   

Leadership & Planning

 

5

   

Met

 

8.00

     

8.00

     

20

   

Composite

 

100

%

 

Met

 

10.00

%

(2) 

 

10.00

%

(3) 

 

20

%

(4) 

 

(1)

The Human Resource Committee of the Bank’s review was based on information provided in our audited financial statements; however, such results were reviewed generally but were not compared to predetermined numerical criteria.

(2)

Represents the percentage of base salary earned as cash incentive compensation.

(3)

Represents the percentage of base salary paid as cash incentive compensation.

(4)

Represents the maximum percentage of base salary available as cash incentive compensation.

 

The Earnings target and the actual results for the year ended December 31, 2019, are set forth in the table in the Review of the Chief Executive Officer.

 

Review of Commercial Real Estate Lending President. The Human Resources Committee of the Bank met outside the presence of management to review the performance of the Commercial Real Estate Lending President. The Human Resources Committee of the Bank noted that the Chief Executive Officer had assessed the performance of the Commercial Real Estate Lending President and the applicable cash incentive compensation based on the results of the Bank’s 2019 Commercial Real Estate Lending President Incentive Compensation Plan. The Bank’s Commercial Real Estate Lending President Incentive Compensation Plan rewards successes in achieving the Business Plan objectives in terms of loan originations, yields and asset quality of the Bank’s commercial real estate portfolio. The Commercial Real Estate Lending President, with concurrence of the Chief Executive Officer, projected the expected volume based on numerous items including the prior year’s origination volume, the asset quality of the portfolio, current economic and projected market conditions, loan repayments and other factors. The Commercial Real Estate Lending Division achieved 89% of its Business Plan target balances.  The Commercial Real Estate Division also steadily maintained strong asset quality of the portfolio. Based on the relative achievements within the Commercial Real Estate Division, the Human Resources Committee of the Bank approved a $24,503 cash incentive compensation plan payment to the Commercial Real Estate Lending President for 2019.  The Human Resources Committee of the Bank also approved a standard base compensation increase of 1.7% for the National Commercial Leasing President. The Board of Directors of the Bank ratified the actions of the Human Resources Committee of the Bank with respect to the Commercial Real Estate Lending President.

Reasonableness of Compensation

After considering all components of the compensation program for the named executive officers, the Human Resources Committee of the Bank has determined that such compensation is reasonable and appropriate.

 

The cash incentive compensation programs for the Chief Executive Officer, the Chief Financial Officer, and the Commercial Real Estate Lending President include both asset quality and internal control risk measurements. Similar controls exist within the incentive compensation plans for non-executive officers and employees, as applicable. In addition, the measurement and review of the asset quality and internal controls performance are separated from the applicable business operations, including audits by the Internal Audit Division, the Company’s independent external audit firm and other third-party independent reviews. Finally, the overall system of internal controls is robust and provides multiple levels of controls to reasonably detect and prevent instances of excessive risk taking within the organization.

 

Tax and Accounting Treatment

 

The Human Resources Committees of the Company and the Bank believe that, as compensation structures become more complex, the effects of the alternative minimum tax and other taxation issues could affect the net intended effect of the Company’s and the Bank’s compensation plans. Although no specific action is warranted at this time, the Human Resources Committees of the Company and the Bank intends to monitor the effects of the alternative minimum tax and other taxation issues on the Company and its directors, officers and associates when evaluating various compensation principles, practices and plans.

 

 

EXECUTIVE COMPENSATION

 

The following table sets forth information concerning the compensation of the Company’s Chief Executive Officer and the other three most highly compensated executive officers who served in such capacities during 2019:

 

Summary Compensation Table

 

Name and Principal Position

 

Year

 

Salary

 

Bonus

 

Non-Equity Incentive Plan Compensation

 

All Other Compensation (2)

 

Total Compensation

F. Morgan Gasior

 

2019

  $ 461,539   $   $ 79,283 (3) $ 30,806   $ 571,628

Chairman of the Board, Chief Executive Officer

 

2018

    439,958     20,000     110,925     31,484     602,367

Paul A. Cloutier

 

2019

  $ 293,965   $   $ 29,495 (4) $ 30,181   $ 353,641

Executive Vice President and Chief Financial Officer

 

2018

    289,148     7,000     44,574     29,876     370,598

John G. Manos

 

2019

  $ 255,007   $   $ 24,503 (5) $ 13,469   $ 292,979

Commercial Real Estate Lending President

 

2018

    249,817     12,557     64,379     12,713     339,466

James J. Brennan (1)

 

2019

  $ 94,022   $   $   $ 901,304   $ 995,326

Former Executive Vice President, Corporate Secretary and General Counsel

 

2018

    172,995             19,095     192,090

 

(1)

Effective March 5, 2019, Mr. Brennan's employment agreements with the Company and the Bank were terminated, upon which he transitioned to the role of Corporate Secretary and Senior Counsel in an "at will" non-executive capacity.

(2) All other compensation for the named executive officers during fiscal 2019 is summarized below:

Name

 

Perquisites(i)

 

Insurance(ii)

 

Tax Reimbursement(iii)

 

401 (k) Match

 

Employment  Agreement Termination (iv)

 

Total “All Other Compensation”

F. Morgan Gasior

  $ 18,230   $ 3,029   $ 1,323   $ 8,224   $   $ 30,806

Paul A. Cloutier

  $ 18,600   $ 2,214   $ 967   $ 8,400   $   $ 30,181

John G. Manos

  $ 2,261   $ 1,954   $ 854   $ 8,400   $   $ 13,469

James J. Brennan

  $ 747   $ 236   $ 103   $ 1,140   $ 899,078   $ 901,304

 

 

(i)

Includes use of an automobile or an automobile allowance, and in the case of Messrs. Gasior and Cloutier, club dues.

 

(ii)

Consists of premiums paid by the Company during the fiscal year with respect to additional short- and long-term disability insurance for each named executive officer. Certain amounts were paid by the executive and reimbursed by the Company under employment agreement provisions that reduce, on a dollar-for-dollar basis, the Bank’s obligations under such executive’s employment agreement in the event of the executive’s death or disability by the amount of insurance proceeds received by the executive’s named beneficiary.

 

(iii)

Reflects reimbursement for income and employment taxes incurred by the executive as a result of the insurance premiums paid by the executive and reimbursed by the Company. See note (ii) above and discussion below for additional information.

  (iv) In connection with the termination of Mr. Brennan's employment agreements, payments were made in the amount to which Mr. Brennan would otherwise be entitled had he not accepted to continue to serve in a non-executive capacity and resigned for Good Reason.  In addition, ownership of Mr. Brennan's company vehicle was transferred to  him.

(3)

Mr. Gasior is eligible to receive an incentive cash bonus up to 50% of base salary based on the achievement of weighted performance goals.

(4)

Mr. Cloutier is eligible to receive an incentive cash bonus up to 20% of base salary based on the achievement of weighted performance goals.

(5)

Mr. Manos is eligible to receive an incentive cash bonus up to 50% of base salary based on the achievement of Business Plan objectives for 2019.

 

 

Potential Payments upon Termination or Change of Control

 

The following table sets forth information concerning potential payments and benefits under the Company’s compensation programs and benefit plans to which the Named Executive Officers would be entitled upon a termination of employment as of December 31, 2019. As is more fully described on the following page, the named executive officers entered into employment agreements with the Company and/or the Bank, as applicable (each, an “Employment Agreement”), which provide for payments and benefits to a terminating executive officer following a termination other than for “cause” or by resignation. Except for the payments and benefits provided by the Employment Agreements, all other payments and benefits provided to any Named Executive Officer upon termination of his employment are the same as the payments and benefits provided to other eligible executives of the Bank.

 

   

 

 

Termination by the Bank

 

Other Types of Termination

     

Executive

 

Potential Payments Upon Termination or Change of Control

 

For Cause

 

For Disability (1)

 

Without Cause (2)

 

By Resignation

 

For Good Reason (2)

 

Upon Death (1)

 

Change of Control (3)

F. Morgan Gasior

 

Cash payments

  $   $ 1,237,078   $ 1,775,991   $   $ 1,775,991   $ 1,237,078   $ 1,775,991
   

Continued Benefits

        19,323     23,988         23,988     19,323     23,988

Paul A. Cloutier

 

Cash payments

  $   $ 761,730   $ 1,030,970   $   $ 1,030,970   $ 761,730   $ 1,030,970
   

Continued Benefits

        32,876     40,812         40,812     32,876     40,812

John G. Manos

 

Cash payments

  $   $ 678,187   $ 1,007,011   $   $ 1,007,011   $ 678,187   $ 971,241
   

Continued Benefits

        19,323     23,988         23,988     19,323     23,988

 

(1)

For each named executive officer, cash payments include an amount equal to the average cash incentive compensation paid during the preceding two years prorated for the year of termination, prorated employer matching 401(k) contribution for the year of termination, and the base salary the executive would have received from the date of termination through the end of his employment period. Continued benefits reflect the incremental cost of core benefits to the Company during the executive's remaining employment period based on actual cost for 2019. Excludes any reduction in benefit as a result of disability insurance or federal social security disability payments.

(2)

For each named executive officer, cash payments include an amount equal to the average cash incentive compensation paid during the preceding two years prorated for the year of termination, prorated employer matching 401(k) contribution, and three times the executive’s three-year average cash compensation. Continued benefits reflect the incremental cost of core benefits to the Company for 36 months based on the actual cost for 2019.

(3)

The payments reflected in this column assume the executive terminated for good reason in connection with a change of control. For each named executive officer, cash payments include an amount equal to the average cash incentive compensation paid during the preceding two years prorated for the year of termination, prorated employer matching 401(k) contribution, and three times the executive’s three-year average cash compensation. Continued benefits reflect the incremental cost of core benefits to the Company for 36 months based on the actual cost for 2019. Executive severance benefits for Mr. Manos are reduced to avoid constituting an “excess parachute payment” under Section 280G of the Internal Revenue Code. Assuming a December 31, 2019 termination, the cash payments reflected above for Mr. Manos have been reduced by $35,770 to comply with this requirement reduction.

 

 

Accrued Pay and Regular Retirement Benefits. The amounts shown in the table above do not include payments and benefits to the extent they are provided on a non-discriminatory basis to salaried employees generally upon termination of employment. These include:

 

 

Accrued but unpaid salary and vacation pay.

 

Distributions of plan balances under the Bank’s 401(k) plan. See “401(k) Plan” for an overview of the 401(k).

 

Employment Agreements. The Bank has entered into employment agreements with Messrs. Gasior, Cloutier and Manos and the Board of Directors of the Bank last reviewed the Bank’s employment agreements with Messrs. Gasior, Cloutier and Manos in 2019 and approved the extension of their terms through May 31, 2022. The reviews are conducted annually and the next review is scheduled to occur in the second quarter of 2020.

 

Under the employment agreements, the Bank will pay the executive officers the base salary as reflected in the Bank’s payroll records, subject to discretionary increases by the Board of Directors. The 2020 base salaries for Messrs. Gasior, Cloutier and Manos are $472,905$299,964 and $260,521, respectively. The employment agreements provide that the base salary may be increased but may not be decreased without the executive officer’s prior written consent. The employment agreements also provide that the executive officer will receive the use of an automobile or an automobile allowance and in the case of Messrs. Gasior and Cloutier, the payment of designated club dues, provided that, in a given year, these payments may not, in the aggregate, exceed 10% of the executive officer’s cash compensation. The employment agreements further provide that the executive officer is entitled to participate with other executive officers in cash incentive compensation plans and discretionary cash bonuses, if approved by the Board, respectively. In addition to base salary, cash incentive compensation plans or discretionary cash bonuses, as may be approved by the Board, the employment agreements provide for, among other things, participation in a Section 125 cafeteria plan, group medical, dental, and vision (referred to as the “Core Plans”), disability and life insurance plans, the 401(k) plan, and other employee and fringe benefits applicable to executive personnel.

 

During the employment period, each executive officer is provided with a supplemental disability insurance policy that pays 60% of base salary for the remaining term of the agreement in the event the executive officer is terminated due to disability. If an executive officer becomes disabled, his base salary will be reduced proportionately by the disability payments made under the disability policy and under the federal social security system. Each executive officer is responsible for paying the premiums but receives an annual allowance in an amount sufficient, on an after-tax basis, to equal the premium payments. In the event of termination of employment due to disability, the executive officer will be entitled to his earned salary, an amount equal to the annual average of any cash incentive compensation and bonus that the executive officer received during the preceding two fiscal years. The executive officer will receive the prorated employer matching 401(k) plan contribution that the executive officer would be entitled to receive for the current year. In addition, the executive officer will be entitled to the base salary the executive officer would have been paid through the date the employment period would have expired if the executive officer’s employment had not been sooner terminated due to disability, which will be reduced on a dollar-for-dollar basis by the disability insurance and federal social security disability payments referenced above, and continued coverage under the Core Plans through the date the employment period would have expired, subject to the executive officer’s continued payment of the costs and contributions for which he is responsible. After their continued coverage under the core plans expires, Messrs. Cloutier and Manos will be provided with a cash insurance expense stipend if the Bank’s insurer will not allow them to remain in the Bank’s health insurance plan after their employment ends or until they become eligible for Medicare coverage or for coverage under another employer’s group health plan. Mr. Gasior will have access to health insurance until he qualifies for Medicare provided that he pays the annual insurance premiums at COBRA rates.

 

In the event the executive officer’s employment is terminated due to death, his surviving spouse and minor children, if any, will be entitled to the same coverage under the core plans that the executive officer would have been provided if his employment had terminated due to disability. In addition, the executive officer’s estate or trust, as applicable, will be entitled to the base salary the executive officer would have been paid through the date the employment period would have expired if the executive officer’s employment had not been sooner terminated due to death. The Bank will generally have no obligation to pay or provide an executive officer’s estate, surviving spouse, or minor children with any other compensation or benefits on account of the executive officer’s death.

 

In the event the executive officer’s employment is terminated without cause by the Bank, the executive officer will receive his earned salary, prorated incentive compensation, accrued plan contribution, and continued coverage under the Core Plans for 36 months. Continued coverage under the Core Plans is subject to the executive officer’s payment of costs and contributions for which he is responsible. After their continued coverage under the Core Plans expires, Messrs. Cloutier and Manos will be provided with a cash insurance expense stipend; Mr. Gasior will have access to health insurance until he qualifies for Medicare provided that he pays the annual insurance premiums at COBRA rates. In the event of a termination without cause, the executive would be paid an amount equal to three times the average annual compensation. Payment of benefits would be made in a single lump sum, except for payments upon death and payments that exceed certain “safe harbor” provisions of the Internal Revenue Code.

 

 

Under the employment agreements, the executive officer may terminate his employment for “Good Reason” by giving notice within 60 days after the event giving rise to the right to terminate employment. Good Reason generally includes (i) the Bank’s decision not to re-elect or failure to re-elect the executive officer to his present position; (ii) the Bank's failure to extend the executive officer's employment period on the anniversary date for an additional year; (iii) the relocation of the executive officer’s principal place of employment by more than a specified distance; (iv) the reduction in the executive officer’s base salary or a material reduction in benefits to which the executive officer is entitled; (v) the liquidation or dissolution of the Bank or the Company; (vi) the Bank’s material uncured breach of the employment agreement; and (vii) the occurrence of a “Change of Control” as such term is defined in the 2006 EIP. With respect to Mr. Gasior’s employment agreement, “Good Reason” also includes the failure to elect or re-elect him as Chairman of the Board of Directors of the Bank, a change in the composition of the Board of Directors of the Bank such that the current directors no longer constitute a majority of the board other than in certain circumstances where the new board is nominated or appointed by the existing board, or a significant reduction in the scope of his duties, powers, privileges, authority or responsibilities. In the event an executive officer’s employment is terminated for Good Reason, he will receive the same amounts, the same coverage under the Core Plans and the same health insurance coverage continuation rights that he would have received if his employment had been terminated without cause. An executive officer who terminates his employment by resignation other than due to Good Reason will only be entitled to his earned salary and vacation through the date of termination.

 

The executive officer is required under the employment agreement to execute a general release in consideration for any severance amounts. The executive officer also agrees not to compete with the Bank or its affiliates for six months after termination or during the period that severance amounts are paid, if longer. In addition, the executive officer agrees not to solicit the Bank’s customers, their business or the Bank’s employees for eighteen months, which may be reduced in certain circumstances. Payment of amounts due the executive officers under the employment agreements will generally be made in a single lump sum.

 

The Company has entered into employment agreements with Messrs. Gasior and Cloutier and the Board of Directors of the Company last reviewed the Company’s employment agreements with Messrs. Gasior and Cloutier in 2019 and approved the extension of their terms through May 31, 2022. The reviews are conducted annually and the next review is scheduled to occur in the second quarter of 2020.

 

The Company does not separately compensate Messrs. Gasior or Cloutier for their services to the Company. Instead, the Bank pays and provides their cash compensation and benefits, and allocates a portion of this expense to the Company pursuant to an intercompany expense sharing arrangement in proportion to the time and services that they provide to the Company. The employment agreements between the Company and Messrs. Gasior and Cloutier thus provide that any cash compensation and benefits that become simultaneously due under both their employment agreements with the Company and their employment agreements with the Bank will be subtracted from those due Messrs. Gasior and Cloutier under their respective employment agreements with the Company. The payments and benefits that each of Messrs. Gasior and Cloutier will receive under his employment agreement with the Company if his employment is terminated without cause, for Good Reason or due to death or disability are the same as those provided for in their respective employment agreements with the Bank.

 

The primary material differences between the Company’s employment agreements with Messrs. Gasior and Cloutier and their respective employment agreements with the Bank are that their employment agreements with the Company provide that, upon the termination of employment based on the occurrence of a Change of Control as that term is defined in the 2006 EIP, (i) the restricted periods applicable to the non-competition and non-solicitation covenants set forth in their respective employment agreements with the Company and their employment agreements with the Bank will be reduced to six months and the scope of the competitive restrictions will be limited to those that existed immediately prior to the Change of Control; and (ii) all obligations that may become due simultaneously under both the Company’s employment agreements with Messrs. Gasior and Cloutier and their respective employment agreements with the Bank will first be provided under their employment agreements with the Company. The Company employment agreements do not impose a limit on the compensation that would be payable to Messrs. Gasior or Cloutier upon the occurrence of a Change of Control to avoid an “excess parachute payment” under Section 280G of the Internal Revenue Code.

 

Compensation of Directors

 

Directors’ Fees. All directors of the Company, other than Mr. O’Neill, are also directors of the Bank. Except for Mr. Gasior, who receives no fees for serving as a director, committee chairperson or committee member, the directors of the Bank received a Board fee of $3,000 per month for preparing for and attending meetings of the Board of Directors of the Bank. The directors of the Company received a Board fee of $1,500 per month.  Except for the Audit Committee, the Bank did not pay its directors a separate fee during 2019 for serving on board committees. The members of the Audit Committee were paid an Audit Committee fee during 2019 because the Audit Committee is a required entity with separate responsibilities established by applicable laws and regulations. During 2019, the Company paid an Audit Committee fee of $500 per month to Mr. Hausmann (the Chairman of the Audit Committee), and $400 per month to Messrs. Wells and Wherfel (members of the Audit Committee).

 

 

Mr. O’Neill was compensated for his service as a director of the Company because he is not a director of the Bank. Mr. O’Neill received a Board fee of $1,500 per month. Mr. O’Neill was reimbursed for his travel expenses for attending meetings of the Board of Directors of the Company.

 

The table below provides information on 2019 compensation for directors who served in 2019. Directors receive no perquisites in addition to the scheduled fees paid to each member, except as noted below:

 

Name

  Fees Earned or Paid in Cash ($) (1)  

Total ($)

Cassandra J. Francis

  $ 54,000   $ 54,000

John M. Hausmann, C.P.A.

  $ 60,000   $ 60,000

Thomas F. O’Neill

  $ 18,000   $ 18,000

John W. Palmer (2)

  $ 3,000   $ 3,000

Terry R. Wells

  $ 58,800   $ 58,800

Glen R. Wherfel, C.P.A.

  $ 58,800   $ 58,800

 

(1)

Fees for Ms. Francis and Messrs. Hausmann, Wells, and Wherfel include fees for service on the Board of Directors of the Bank in the amount of $36,000.

(2)

John W. Palmer resigned as a Director of the Company, effective February 26, 2019.

 

ADVISORY VOTE ON EXECUTIVE COMPENSATION

 

Pursuant to the rules and regulations of the SEC, the compensation of the Chief Executive Officer and the other three most highly compensated executive officers of the Company and Bank (collectively, the “Named Executive Officers”) is described in detail in the “Narrative Discussion of Executive Compensation” and “Executive Compensation” sections of this Proxy Statement, including the compensation tables and the accompanying narrative discussions.

 

At our 2017 Annual Meeting, we provided stockholders with the opportunity to vote on an advisory, non-binding basis as to the frequency that stockholders would vote on a “say-on-pay” proposal, which gives stockholders the opportunity to endorse or not endorse, on an advisory, non-binding basis, the compensation paid to our Named Executive Officers. In light of the advisory vote of stockholders at our 2017 Annual Meeting, we determined to hold the “say-on-pay” advisory vote on an annual basis until the next frequency vote, which is occurring at the 2023 Annual Meeting. Accordingly, stockholders have the opportunity to vote on an advisory, non-binding resolution at the Annual Meeting to approve the compensation of our Named Executive Officers, as described in this Proxy Statement under “Narrative Discussion of Executive Compensation” and the compensation tables and narrative disclosure.

 

We are asking you to indicate your support for the compensation of our Named Executive Officers as described in this Proxy Statement. This vote is not intended to address any specific item of executive compensation, but rather the overall compensation of our Named Executive Officers and the compensation policies and practices described in this Proxy Statement.

 

The “say-on-pay” proposal will be presented at the Annual Meeting in the form of the following resolution:

 

“RESOLVED, that the compensation paid to the Company’s Named Executive Officers, as disclosed in this Proxy Statement pursuant to Item 402 of Securities and Exchange Commission Regulation S-K, including the Narrative Discussion of Executive Compensation, compensation tables and narrative discussion, is hereby APPROVED.”

 

The Board of Directors recommends that the stockholders of the Company vote “FOR” this resolution.

 

The Board of Directors believes that the Company’s compensation policies and procedures appropriately encourage a culture of pay for performance, serve to attract and retain experienced, highly qualified executives who are critical to the Company’s long term success, and align the compensation of the Named Executive Officers with the long term interests of the Company and its stockholders. Consistent with these objectives, and as discussed more fully in the “Narrative Discussion of Executive Compensation” section of this Proxy Statement:

 

 

The Chief Executive Officer, the Chief Financial Officer, and the Commercial Real Estate Lending President received cash incentive plan payments for the year ended December 31, 2019.

 

Base compensation increased 1.7% for Chief Executive Officer, Chief Financial Officer and the Commercial Real Estate Lending President in 2020.

 

Base compensation increased 3.3% for Chief Executive Officer, 1.5% for the Chief Financial Officer and 2.0% for the Commercial Real Estate Lending President in 2019.

 

The approval of this resolution requires the affirmative vote of a majority of the votes cast at the Annual Meeting, without regard to either broker non-votes or shares as to which the “ABSTAIN” box has been selected on the proxy card. At our 2019 Annual Meeting of Stockholders, over 96% of the advisory votes cast were for the approval of the compensation paid to the Company’s Named Executive Officers.

 

Where no instructions are indicated, validly executed proxies will be voted “FOR” this resolution.

 

The advisory vote on this resolution will not be binding on the Board of Directors or the Compensation Committee, and will not overrule their prior decisions with respect to the compensation that was paid or awarded to any Named Executive Officer or create or imply any additional fiduciary duty on the Board of Directors or the Human Resources Committee. The Board of Directors and the Human Resource Committee will review the voting results and take them into account when making future decisions on the compensation of the Named Executive Officers, and will periodically review all material elements of the Company’s executive compensation program and procedures to ensure that they continue to fulfill their objectives. Stockholders have an opportunity to vote annually on the compensation of the Company’s Named Executive Officers.

 

 

COMMUNICATIONS WITH THE BOARD OF DIRECTORS

 

Any stockholder who wishes to contact the Board of Directors or an individual director may do so by writing to the Board of Directors or the individual director care of, BankFinancial Corporation, 60 North Frontage Road, Burr Ridge, Illinois 60527, Attention: James J. Brennan, Secretary. Each communication received will be reviewed by the Secretary and distributed to the Board of Directors or the individual director, as appropriate, depending on the facts and circumstances outlined in the communication. The Secretary may attempt to handle an inquiry directly or forward a communication to another employee of the Company for response. The Secretary also has the authority not to forward a communication to the Board of Directors or an individual director if it is primarily commercial in nature, relates to an improper or irrelevant topic, or is unduly hostile, threatening, illegal or otherwise inappropriate.

 

TRANSACTIONS WITH CERTAIN RELATED PERSONS

 

Neither the Bank nor the Company had any outstanding extensions of credit as of December 31, 2019 to any executive officer or directors or to a related interest of a director or executive officer. The Bank’s Professional Responsibility Policy provides that no director or executive officer (as defined by the Bank’s Board of Directors) may provide goods or services to the Bank or an affiliate (which includes the Company) unless approved by the disinterested majority of the Board of Directors after full disclosure and it is determined that the arrangement is fair and appropriate. In addition, all transactions between the Bank or its affiliates and a director or executive officer must be conducted on an arm’s length basis, comply with all applicable laws and regulations and be on terms that are no more favorable to the director or executive officer than those afforded to similarly situated customers and vendors.

 

STOCKHOLDER PROPOSALS

 

In order to be eligible for inclusion in the proxy materials for next year’s annual meeting of stockholders, any stockholder proposal to take action at such meeting must be received at BankFinancial Corporation’s executive office, 60 North Frontage Road, Burr Ridge, Illinois 60527, no later than 5:00 P.M., Chicago, Illinois Time, on December 18, 2020. Any such proposals shall be subject to the requirements of the proxy rules adopted under the Securities Exchange Act of 1934, as amended, and the Company’s bylaws.

 

ADVANCE NOTICE OF BUSINESS TO BE CONDUCTED AT AN ANNUAL MEETING

 

The Company’s bylaws provide an advance notice procedure for certain business, or nominations to the Board of Directors, to be brought before an annual meeting of stockholders. In order for a stockholder to properly bring business before an annual meeting, or to propose a nominee for election to the Board of Directors, the stockholder must give written notice to the Secretary of the Company not earlier than the 150th day nor later than 5:00 P.M., Chicago, Illinois Time, on the 120th day prior to the first anniversary of the date of mailing of the notice for the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced or delayed by more than 30 days from the first anniversary of the date of the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the 150th day prior to the date of such annual meeting and not later than 5:00 P.M., Chicago, Illinois Time, on the later of the 120th day prior to the date of such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. The notice must include:

 

As to each individual whom the stockholder proposes to nominate for election or re-election as a director,

 

 

the name, age, business address and residence address of such individual;

 

the class, series and number of any shares of stock of BankFinancial Corporation that are beneficially owned by such individual;

 

the date such shares were acquired and the investment intent of such acquisition; and

 

all other information relating to such individual that is required to be disclosed in solicitations of proxies for election of directors in an election contest (even if an election contest is not involved), or is otherwise required, in each case pursuant to Regulation 14A (or any successor provision) under the Securities Exchange Act of 1934, as amended, and the rules thereunder (including such individual’s written consent to being named in the Proxy Statement as a nominee and to serving as a director if elected);

 

As to any other business that the stockholder proposes to bring before the meeting, a description of such business, the reasons for proposing such business at the meeting and any material interest in such business of such stockholder and any “Stockholder Associated Person” (as defined in the Company’s bylaws), individually or in the aggregate, including any anticipated benefit to the stockholder and the Stockholder Associated Person therefrom;

   

As to the stockholder giving the notice and any Stockholder Associated Person, the class, series and number of all shares of stock of the Company which are owned by such stockholder and by such Stockholder Associated Person, if any, and the nominee holder for, and number of shares owned beneficially but not of record by such stockholder and by any such Stockholder Associated Person;

   

As to the stockholder giving the notice and any Stockholder Associated Person described above, the name and address of such stockholder, as they appear on the Company’s stock ledger and current name and address, if different, and of such Stockholder Associated Person; and

   

To the extent known by the stockholder giving the notice, the name and address of any other stockholder supporting the nominee for election or re-election as a director or the proposal of other business on the date of such stockholder’s notice.

 

Nothing in this Proxy Statement shall be deemed to require the Company to include in its Proxy Statement and proxy relating to an annual meeting any stockholder proposal that does not meet all of the requirements for inclusion established by the SEC in effect at the time such proposal is received.

 

Advance written notice for certain business, or nominations to the Board of Directors, to be brought before the 2021 Annual Meeting of Stockholders must be given to the Company no earlier than November 18, 2020 and no later than 5:00 P.M., Chicago, Illinois Time, on December 18, 2020. If notice is received before November 18, 2020 or after 5:00 P.M., Chicago, Illinois Time, on January 15, 2020, it will not be considered timely, and the Company will not be required to present the matter at the next Annual Meeting of Stockholders.

 

ENVIRONMENTAL AND SOCIAL MATTERS

 

The Company conducts no business activity other than activities relating to capital management and stockholder relations, and acting as a source of financial strength for the Bank. The Bank maintains a broad range of activities with respect to its relations with its community and society.

 

 

Environmental Protection and Sustainability: The Bank maintains policies to detect and prevent adverse environmental conditions with respect to the business operations of its borrowers; in addition, the Bank provides specialized financing for remediation of environmentally-contaminated real property to restore the property to a condition in compliance with federal and state environmental protection laws and regulations.

     
   

With respect to the Bank’s facilities and operations, the Bank’s operations and branch office density present an inherently low profile in terms of carbon emissions. To the extent supported by local municipalities, the Bank participates in plastic and metal recycling programs. The Bank’s migration to digital transaction execution and information delivery significantly reduces the Bank’s consumption of paper and road delivery services. The Bank’s capital investment program continues to invest in energy-efficient lighting and HVAC systems, which can produce reductions of up to 60% compared to historical energy usage and non-recyclable materials replacement.

 

 

Workforce: With minorities and women equal to 78% of the Bank’s workforce, and 68% of the Bank’s management leadership, the Bank maintains workforce diversity broadly consistent with its communities. The Bank maintains an extensive training program, from entry-level to executive-level, focused on developing and maintaining expertise in general banking, financial literacy, suitability of loan, deposit and non-deposit products offered by or through the Bank, the U.S. Bank Secrecy - Anti-Money Laundering Act, the U.S. Bank Bribery Act, the U.S. Bank Security Act, equal credit and equal employment opportunity, and consumer protection laws, regulations, principles and practices, as well as training in customer protection practices for the prevention of financial fraud, including information security and elder abuse. In addition to the Codes of Ethics and Business Conduct referenced in “Code of Ethics” on page 10 of this Proxy Statement, the Bank maintains appropriate anti-discrimination, anti-harassment and workplace safety policies  and practices, including independent channels of communication available 24/7 to the Human Resources Division and Internal Audit Division for notification of potential or actual violations of the Bank’s systems of internal controls, applicable laws, regulations or Bank policies.

 

 

Customer Data Privacy and Information Security: The Bank maintains and publishes its Customer Data Privacy Policy on its official website. The Policy includes disclosures of the use and sharing of certain customer information, as well as the significant restrictions the Bank places on such activities. In addition, the Bank maintains policies restricting the knowing use or collection of information about children under 13 by the Bank, other than to provide parental notice or consent. The Bank also maintains policies and controls over the use of electronic mail solicitations, including a customer’s ability to “opt-out” of electronic solicitations at any time.

     
   

The Bank maintains policies and controls concerning customer information security, including transaction processing. The Bank requires multi-factor authentication for on-line banking access as well as additional controls for transaction processing. The Bank also has policies and controls to identify, classify and limit access to non-public customer information, including a comprehensive vendor management program.

     
    The Bank maintains multiple channels for customer engagement and feedback, including formal policies and controls governing responses to official customer complaints or reports of inaccurate consumer financial data. When applicable and practicable, the Bank’s Marketing & Sales Division incorporates customer responses into the Bank’s product and service development and delivery.

 

 

Community Investment, Participation and Support: The Bank is a leader in community investment, with nine consecutive “Outstanding” Community Reinvestment Act ratings since 1998 as determined by agencies of the U.S. Treasury Department. The Bank maintains a leadership position in lending to providers of affordable multi-family residential housing in its primary market, and in providing financing to providers of healthcare and community support services to low-income individuals and families, developmentally disabled persons, and the elderly. The Bank provides financial and in-kind support by its associates to over 100 charitable organizations within its communities.

 

OTHER MATTERS

 

The Board of Directors is not aware of any business to come before the Annual Meeting other than the matters described above in the Proxy Statement. However, if any other matters should properly come before the Annual Meeting, it is intended that the holders of the proxies will act as determined by a majority vote of those present and voting.

 

A COPY OF THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED December 31, 2019 WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE RECORD DATE UPON WRITTEN REQUEST TO BANKFINANCIAL CORPORATION, 60 NORTH FRONTAGE ROAD, BURR RIDGE, ILLINOIS 60527, ATTN: JAMES J. BRENNAN, SECRETARY.

 

  BY ORDER OF THE BOARD OF DIRECTORS  
 

 

 

 

 

 
 

James J. Brennan

 
  Secretary  

 

Burr Ridge, Illinois

April 17, 2020

 

 

 

 

 

APPENDIX A

BANKFINANCIAL CORPORATION

AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

COMMITTEE CHARTER

 

(As amended by the Board of Directors on April 29, 2014)

 

I.

PURPOSE OF THE AUDIT COMMITTEE

 

The Audit Committee shall be directly responsible for the appointment and dismissal, compensation, and oversight of the Company’s Internal Auditor and independent auditor, and may not delegate any of such responsibilities to others. The Committee shall assist the Board in its oversight of:

 

 

The integrity, accuracy and completeness of the Company’s financial statements and other significant written financial information provided by the Company to any regulatory organization or the public in compliance with all applicable laws and regulations;

 

 

The Company’s auditing, accounting and financial reporting processes;

 

 

The Company’s systems of internal controls regarding asset/liability management, lending, finance, deposit services and other risk exposures;

 

 

The Company’s compliance with legal and regulatory requirements;

 

 

The retention and dismissal of the independent auditor as well as the review of the independent auditor’s qualifications, engagements, compensation and performance;

 

 

The performance of the Company’s internal audit function;

 

 

The adequacy of this charter and recommend any changes to the Board based on the advice of outside counsel concerning the current standards applicable to publicly-held corporate Audit Committees; and,

 

 

The assessment of the Committee’s operational performance on an annual basis, with the assistance of its outside counsel, the independent auditor or other consultants as it deems appropriate. The Committee will provide its self-assessment and recommendations for any changes to the Board. The Committee shall also recommend any changes to its allocation of resources resulting from its performance self-assessment.

 

 

Provide an open avenue of communication among management, the Internal Auditor, the independent auditors, senior management and the Board of Directors.

 

The Committee does not prepare financial statements on behalf of the Company or perform the Company’s audits, and its members are not the Company’s auditors and do not certify the Company’s financial statements. These functions are performed by the Company’s management and independent auditor.

 

II.

MEMBERSHIP

 

All members of the Audit Committee shall be independent of the Company management and free of any relationship that would compromise their exercise of independent judgment as Committee members. Each member of the Committee must satisfy all applicable qualification and independence requirements set forth in the rules and regulations of applicable regulatory organizations. The Committee shall monitor its continuing compliance with all membership requirements.

 

The Committee must consist of at least three directors. The responsibilities of a member of the Committee are in addition to responsibilities as a member of the Board and, accordingly, members receive additional compensation for Committee service.

 

 

The Company may assist the Committee in maintaining the appropriate financial literacy, and is responsible for providing the Committee with educational resources related to accounting principles and procedures, current accounting topics pertinent to the Company, and other matters as may be requested. The Company may also provide new members with educational opportunities and appropriate orientation briefings.

 

III.

FREQUENCY OF MEETINGS

 

The Committee shall meet as frequently as necessary but no less than four times annually. The Committee shall also meet at the request of the Chief Executive Officer, the Chief Financial Officer, the Internal Auditor or the independent auditor. The Board of Directors shall designate a Chairperson of the Committee. The Committee Chairperson shall approve an agenda in advance of each meeting. A majority of the members of the Committee shall constitute a quorum. The Committee shall maintain minutes or other records of its meetings and activities.

 

The Committee shall, through its Chairperson, report regularly to the Board following the meetings of the Committee, addressing the matters designated by this Charter and such other related matters as the Committee may deem appropriate.

 

IV.

AUTHORITY

 

The Audit Committee may conduct or authorize investigations into any matters within the scope of this Charter. The Committee may also take any other action permitted by applicable laws, rules and regulations necessary to accomplish any action authorized by this charter.

 

The Committee may conduct meetings in executive session, with or without management, the Internal Auditor or the independent auditor (in each case, either individually or jointly) to effect the appropriate environment of communication and coordination for the Committee’s purposes and responsibilities pursuant to this Charter.

 

The Committee may request reports from the Chief Executive Officer or Chief Financial Officer. The Committee may also retain (and has the sole discretion to determine the funding for) experts to advise or assist it, including outside counsel, accountants, financial analysts or others.

 

V.

SCOPE OF COMMITTEE RESPONSIBILITIES

 

The scope of Committee responsibilities is as follows:

 

 

A.

Financial Reporting Processes

 

 

In consultation with the Internal Auditor and the independent auditors, review the accuracy and completeness of the Company’s financial reporting processes, both internal and external, in compliance with all applicable laws and regulations. The review should include the adequacy and effectiveness of the accounting and financial controls of the Company and any recommendations by the independent or internal auditor for improvements or particular areas where new or more detailed controls or procedures are desirable;

 

 

Establish regular and separate systems of reporting to the Committee by management, the Internal Auditor and the independent auditor regarding any significant judgments or assumptions made in management’s preparation of the financial statements and the appropriateness of such judgments;

 

 

Inquire of management, Internal Auditor and the independent auditors about significant risks or exposures involving accounting policies, internal controls or compliance matters and assess the steps management has taken to minimize such risks;

 

 

Periodically consult with the Internal Auditor and the independent auditors without the presence of management about the system of internal controls and the completeness and accuracy of the Company’s financial statements;

 

 

Receive written representations from management as to the integrity of the Company’s internal controls and financial reporting systems and the conformity of the Company’s financial statements with generally accepted accounting principles and applicable regulatory accounting principles;

 

 

 

Review any significant disagreement among management, the Internal Auditor and the independent auditors in connection with the preparation of the financial statements;

 

 

Consider and approve, if appropriate, material changes to the Company’s accounting and auditing principles and practices as needed or as recommended by management, the Internal Auditor or the independent auditors.

 

 

B.

Conduct of Internal Auditing

 

 

Review the internal audit function of the Company, including the annual audit plan as revised to incorporate adjustments due to changes in the business of the Company or arising from the cycle of internal controls review;

 

 

Review with the Internal Auditor and the independent auditors the coordination of audit efforts to assure completeness of coverage, reduction of redundant efforts and the effective use of audit resources;

 

 

Review the appointment, replacement, reassignment or dismissal of the Internal Auditor, the sufficiency of resources dedicated to the internal audit function and the independence of the Internal Auditor and internal audit function;

 

 

Review internal audit reports and management’s responses thereto;

 

 

Receive written representation from the Internal Auditor that there were no significant difficulties encountered during the course of internal audits, including any restrictions on the scope of their work or access to required information;

 

 

Review the Internal Audit Division’s compliance with the Institute of Internal Auditors’ Standards for the Professional Practice of Internal Auditing.

 

 

C.

Conduct of Independent Auditing

 

 

Subject to ratification by shareholders, the Audit Committee shall have the sole authority to appoint or replace the independent auditors. The Audit Committee shall be directly responsible for the compensation of the independent auditors (for both the independent audit and approved non-audit services). The independent auditors shall report directly to the Audit Committee;

 

 

Subject to the prohibitions in Exhibit A, approve all audit and non-audit services to be performed by the independent auditors prior to the performance of that work (including all fees and expenses), either directly by the Audit Committee or in accordance with any pre-approval policy that may be adopted by the Audit Committee, provided that pre-approval shall not be required for any services that are exempt as de minimus under federal regulations or applicable listing requirements;

 

 

Review the qualifications and experience of senior members of the independent audit team and the independent auditor’s performance and fees;

 

 

Review and discuss with the independent auditors all significant relationships the independent auditors have with the Company to confirm independence. The Audit Committee shall also approve the hiring of employees or former employees of the independent auditor;

 

 

Review with the independent auditor any problems or difficulties in connection with the independent audit and management’s response, review the independent auditor’s attestation and report on management internal control report, and hold timely discussions with the independent auditors regarding the following: (1) all critical accounting policies and practices; (2) all alternative treatments of financial information within generally accepted accounting principles or regulatory accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatment, and the treatment preferred by the independent auditor; (3) other material written communications between the independent auditor and management, including, but not limited to, the management letter and schedule of unadjusted differences; and (4) an analysis of the auditor’s judgment as to the quality of the Company’s accounting principles, discussing significant reporting issues and judgments made in connection with the preparation of the Company’s financial statements;

 

 

 

Obtain and review annually a report by the independent auditor describing (1) the auditing firm’s internal quality control procedures and (2) any material issues raised by its most recent quality control review or investigation within the preceding five years and steps taken to resolve those issues.

 

 

D.

Conduct of Legal & Regulatory Compliance Management

 

 

Review the Company’s Code of Ethics & Business Conduct and recommend any changes or additions thereto;

 

 

Establish procedures whereby (1) officers and associates can confidentially and anonymously submit to the Committee concerns or issues regarding the Company’s accounting or auditing principles and practices and (2) the tracking of the receipt, retention and treatment of such complaints is effected by the Internal Audit Division for direct reporting to the Committee;

 

 

Review the effectiveness of the Company’s regulatory compliance program, including any changes to policies or practices recommended by management, the Internal Auditor, the independent auditors or outside counsel;

 

 

Review all regulatory examination reports, management responses and any matters concerning resolution activities that the Internal Auditor believes appropriate for the Committee’s attention;

 

 

Review with the Company’s outside legal counsel any legal matters that may materially affect the Company’s financial statements or public filings and reports;

 

 

Review related party transactions consistent with all regulatory requirements, including the procedures with respect to expense account management and use of corporate assets by directors, officers and associates;

 

 

At least annually, assess any emerging accounting or regulatory issues that may have a material effect on the Company’s financial statements or public filings and reports in the future.

 

 

E.

Public Filings & Reports

 

 

Review the Company’s quarterly and annual SEC filings, including the financial statements, Management Discussion & Analysis information and management certifications with the Chief Executive Officer, Chief Financial Officer, the Internal Auditor and the independent auditors;

 

 

Review earnings press releases and information provided to analysts and rating agencies;

 

 

Review reports or other financial information, as deemed necessary and appropriate, prior to submission to the applicable regulatory organization or to the public;

 

 

Submit an annual report of the Committee to shareholders in the Company’s Proxy Statement as required by the U.S. Securities and Exchange Commission.

 

VI.

CONCLUSION

 

The Committee is to serve as an independent and objective party to monitor the Company’s financial reporting process and system of internal controls on behalf of the Board and shareholders. While maintaining its independence and integrity at all times, the Committee must also provide an open avenue of communication among management, the Internal Auditor, the independent auditors and the Board of Directors to properly fulfill its mission.

 

EXHIBIT A - PROHIBITED NON-AUDIT SERVICES

 

The following services may not be provided by the independent auditor contemporaneously with the audit:

 

 

Bookkeeping or other services related to the accounting records or financial statements of the Company;

 

 

Financial information systems design and implementation;

 

 

 

Appraisal or valuation services, fairness opinions, or contribution-in-kind reports;

 

 

Actuarial services;

 

 

Internal audit outsourcing services;

 

 

Management functions or human resources;

 

 

Broker or dealer, investment advisor, or investment banking services;

 

 

Legal services and expert services unrelated to the audit;

 

 

Any other service that the Public Company Accounting Oversight Board determines is impermissible.

 

 

 

 

 

 

APPENDIX B

BANKFINANCIAL CORPORATION

HUMAN RESOURCES COMMITTEE OF THE BOARD OF DIRECTORS

COMMITTEE CHARTER

 

(As amended by the Board of Directors on August 28, 2013)

 

I.

PURPOSE OF THE COMMITTEE

 

The Human Resources Committee shall be directly responsible for the execution of the Board’s responsibilities with respect to compensation, performance evaluation and succession planning for the Company’s Chief Executive Officer and principal executive officers. (The term “principal executive officers” are those individuals covered by Section 16 of the Securities and Exchange Act of 1934.) The Committee is also responsible for the submission of the annual report on executive compensation to the Board of Directors for inclusion into the Company’s Annual Proxy Statement.

 

II.

MEMBERSHIP

 

The Board shall appoint the members of the Committee annually. All members of the Committee shall be independent of the company management and free of any relationship that would compromise their exercise of independent judgment as Committee members. Each member of the Committee must satisfy all applicable qualification and independence requirements set forth in the rules and regulations of applicable regulatory organizations.

 

III.

FREQUENCY OF MEETINGS

 

The Committee shall meet as frequently as necessary but no less than annually. The Committee shall also meet at the request of the Chief Executive Officer or a majority of the Board of Directors. The Board of Directors shall designate a Chairperson of the Committee. The Committee Chairperson shall approve an agenda in advance of each meeting. A majority of the members of the Committee shall constitute a quorum. The Committee shall maintain minutes or other records of its meetings and activities.

 

The Committee shall, through its Chairperson, report regularly to the Board following the meetings of the Committee, addressing the matters designated by this Charter and such other related matters as the Committee may deem appropriate.

 

IV.

AUTHORITY

 

The Committee may conduct or authorize investigations into any matters within its scope of this Charter. The Committee may also take any other action permitted by applicable laws, rules and regulations necessary to accomplish any action authorized by this Charter.

 

The Committee may conduct meetings in executive session with members of the Board of Directors or the principal executive officers (in each case, either individually or jointly) to effect the appropriate environment of communication and coordination for the Company’s control environment.

 

The Committee may request reports from the Chief Executive Officer, Chief Financial Officer, General Counsel and Executive Vice President - Human Resources.

 

In its sole discretion, the Committee may retain, obtain the advice of or terminate any compensation consultant, legal counsel or other adviser used to assist the Committee in fulfilling its responsibilities. The Committee shall be directly responsible for the appointment, compensation and oversight of the work of any such consultant, legal counsel or other adviser retained by the compensation committee. The Company shall provide adequate resources to support the Committee’s activities, including appropriate funding, as determined by the Committee, in its capacity as a committee of the Board of Directors, for payment of reasonable compensation to a compensation consultant, legal counsel or other adviser.

 

 

Prior to the selection of, or receiving advice from, a compensation consultant, legal counsel or other adviser, the Committee must consider the following factors, as well as any other factors identified by the stock exchange on which the Company’s shares are listed:

 

 

The provision of other services to the Company by the person that employs the compensation consultant, legal counsel or other adviser;

 

 

The amount of fees received from the Company by the person that employs the compensation consultant, legal counsel or other adviser, as a percentage of the total revenue of the person that employs the compensation consultant, legal counsel or other adviser;

 

 

The policies and procedures of the person that employs the compensation consultant, legal counsel or other adviser that are designed to prevent conflicts of interest;

 

 

Any business or personal relationship of the compensation consultant, legal counsel or other adviser with a member of the Committee;

 

 

Any stock of the Company owned by the compensation consultant, legal counsel or other adviser; and

 

 

Any business or personal relationship of the compensation consultant, legal counsel, other adviser or the person employing the adviser with an executive officer of the Company.

 

V.

SCOPE OF COMMITTEE RESPONSIBILITIES

 

The scope of Human Resources Committee responsibilities is as follows:

 

A.     Executive Compensation

 

Review and approve base compensation, cash incentive compensation, equity incentive compensation, non-standard employment benefits / perquisites, and employment or severance agreements for the Chief Executive Officer and principal executive officers. The Chief Executive Officer may not be present during voting or deliberations on his or her compensation.

 

B.     Management Sufficiency

 

Review annually the current state of management sufficiency and succession planning within the Company for key risk areas and report any recommended changes to the Board of Directors.

 

C.     Reporting

 

 

Submit a report to the Board on executive compensation for inclusion in the Company’s Annual Proxy Statement as required by all applicable laws and regulations of regulatory organizations;

 

 

Review the suitability of this Charter and recommend any changes to the Board of Directors;

 

 

At least annually, assess any emerging accounting, legal or regulatory issues that may have a material effect on the Company’s executive compensation practices or reports in the future.

 

VI.

CONCLUSION

 

The Committee is to serve as an independent and objective party to monitor the Company’s corporate governance practices relating to human resources matters and facilitate the effective oversight of executive compensation, management sufficiency and succession planning of the Company. The Committee will meet periodically throughout the year to execute its responsibilities and issue reports of its activities for use by the Board of Directors and Shareholders.

 

 

 

 

 

 

 

27

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