EXHIBIT 10.1
 

 

HAMILTON BANK

2018 – 2019
Hamilton Bank Incentive Compensation Plan
For Executive Management
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HAMILTON BANK
ANNUAL EXECUTIVE
MANAGEMENT
INCENTIVE PLAN

ARTICLE I
Establishment, Purpose and Duration
1.1 Establishment. This Annual Incentive Plan (the “Plan”) is adopted by
Hamilton Bank (the “Bank”), the wholly-owned subsidiary of Hamilton Bancorp,
Inc. (the “Company”), effective as of April 1, 2015 and amended as of April 1,
2018.
1.2 Purpose. The purpose of the Plan is to motivate and reward executive
management for their contributions to the performance and success of the Bank.
The Plan focuses on financial measures that are critical to the Bank’s growth
and profitability. The objectives of the Plan are as follows:
•  align the interests of our executive management team with stockholders of the
Company;
•  recognize and reward achievement of Bank’s annual business goals;
•  motivate and reward superior performance;
•  attract and retain talent needed to grow the Bank;
•  be competitive with market;
•  encourage teamwork and collaboration among the Bank’s leadership;
•  increase engagement and commitment to the Bank; and
•  ensure appropriate risk balance in plan design and governance policies.
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1.3   Duration of this Plan. This Plan shall commence on the Effective Date, and
shall remain in effect until terminated, modified or amended in accordance with
Section 4.1 of the Plan.
ARTICLE II
Definitions
Definitions. Whenever used in this Plan, the following words and phrases shall
have the meanings specified:
2.1    “Base Salary” means the Participant’s annual rate of base salary paid
during each calendar year, excluding bonuses and other forms of variable income,
fringe benefits, reimbursements, etc.
2.2    “Bonus Award’ means an annual bonus paid as a cash lump sum under the
Plan.
2.3    “Cause” means the willful engagement of activity that is injurious to the
Bank, as determined in the sole discretion of the Committee.
2.4    “Committee” means the Compensation Committee of the Bank’s Board of
Directors.
2.5    “Disability’ means the definition of “disability” pursuant to the Bank’s
long-term disability plan or arrangement, or alternatively, as determined by the
Committee.
2.6    “Eligible Employee” means the President, CEO, CFO and EVPs. Participating
in this Plan for one Plan Year does not guarantee selection for participation in
the Plan for any other Plan Year.
2.7    “Plan Year” means the Bank’s fiscal year, April 1st to March 31st.
2.8    “Participant’ means an Eligible Employee as defined in section 2.6 who
has been notified by the Committee that he or she has been selected to
participate in this Plan for the current Plan Year.
2.9    “Retirement” shall be defined in accordance with the Bank’s policies and
practices.
ARTICLE III
Annual Cash Bonuses
3.1 Bonus Award
(a) For each Plan Year, the Committee shall set performance objectives pursuant
to Section 3.2 for each Participant in writing in an Award Agreement, which
shall be provided to each Participant and included as an exhibit to the Plan. If
the performance objectives for the Participant are accomplished, the Participant
shall receive a Bonus Award under the Plan equal to a designated percentage of
the Participant’s Base Salary, as determined by the Committee in its sole
discretion and set forth in the Participant’s Award Agreement.
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(b) In addition to the attainment of the performance objectives set forth by the
Committee for the Participant in the Award Agreement, payment of the Bonus Award
is also contingent on the Participant’s overall performance level being at
“Fully Achieved Standards” based on the Bank’s annual performance review. The
Committee shall have the final authority to determine whether any Participant
has satisfied these requirements.
(c) If an Eligible Employee becomes a Participant at any time between April 1st
and December 31st of the Plan Year, the Bonus Award payable to that Participant
shall be pro-rated, such that the percentage of Base Salary that constitutes the
Bonus Award for that Plan Year shall be multiplied by a fraction, where the
numerator is the number of full calendar months that the individual was a
Participant during the Plan Year and the denominator is 12. An Eligible Employee
hired after December 31s of the Plan Year shall not be eligible to participate
in the Plan until the Plan Year immediately following the Plan Year in which he
or she was hired by the Bank.
(d) Notwithstanding anything in the Plan to the contrary, no Bonus Award shall
be payable for a Plan Year in which the Bank does not satisfy a pre-established
performance gate or trigger determined by the Compensation Committee for the
applicable Plan Year.
(e) Notwithstanding anything in the Plan to the contrary, the Committee reserves
the right to exercise negative discretion to amend, modify or adjust payouts
under the Plan as needed to reflect business environment, market conditions and
credit quality that may affect the Bank’s performance, financial soundness and
funding for this Plan.
3.2 Performance Objectives.
(a)     Payment of Bonus Awards in any Plan Year is contingent upon the
performance objectives specified by the Committee for any Participant being met
by the Bank and/or Participant. The specific performance objectives are
determined annually by the Committee and are subject to change by the Committee,
but generally include objective performance targets focused on financial
performance and asset quality and subjective, discretionary performance targets,
such as particular qualitative factors for each Participant, based on his or her
duties for the Bank.
(b)     Each performance objective shall specify levels of achievement of goals
ranging as follows:
   (i)   Threshold Level. The level for minimum performance deemed worthy of a
Bonus Award.
   (ii)   Target Level. The level for typical, expected performance.
   (iii)   Stretch Level. The level for outstanding performance.
(c)     Each objective will be weighted based on priority as a percentage of the
total Bonus Award payable to the Participant. The weight of each performance
objective attributable to a Participant shall be set forth in his or her Award
Agreement.
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3.3    Termination of Employment. Unless otherwise determined by the Committee,
a Participant who is not employed as of the payout date for his or her Bonus
Award shall forfeit the Bonus Award. Notwithstanding the foregoing, in the event
of the Participant’s death or Disability at any time during the Plan Year or the
Participant’s Retirement on or after January 1st of the Plan Year, the
Participant’s Bonus Award shall be pro-rated such that the percentage of Base
Salary that constitutes the Bonus Award for that Plan Year shall be multiplied
by a fraction, where the numerator is the number of full calendar months of
employment with the Bank during the Plan Year until the Participant’s date of
death, Disability or Retirement and the denominator is 12.
In the event a Participant is terminated for Cause, the Participant’s Bonus
Award shall be forfeited.
3.4    Time of Payout. No later than two and one half (2 ½) months after the
close of the Plan Year (i.e., by the June 15 that immediately follows the end of
the Plan Year for which the performance is measured), the Bonus Award will be
paid to the Participant in a cash lump sum,
through regular payroll practices, including all applicable tax withholdings.
Bonus Awards under the Plan are intended to be exempt from Section 409A of the
Internal Revenue Code under the “short term deferral rule” set forth in Treasury
Regulations Section 1.409A-1(b)(4).
ARTICLE IV
Amendments and Termination
4.1 Right to Amend or Terminate. The Committee may amend or terminate this Plan
at any time without the consent of any Participants, provided, however, that,
except pursuant to Section 5.7 of the Plan, the Committee may not reduce the
amount of the Bonus Award already earned by any Participant in any Plan Year
without the Participant’s consent.
ARTICLE V
Miscellaneous
5.1     Binding Effect. This Plan shall be binding on the Participants, the
Bank, and their beneficiaries, survivors, executors, successors, administrators
and transferees.
5.2     No Guarantee of Employment. This Plan is not an employment policy or
contract. It does not give any Participant the right to remain an employee of
the Bank, nor does it interfere with the Bank’s right to discharge the
Participant. It also does not interfere with the Participant’s right to
terminate employment at any time.
5.3     Non-Transferability. Bonus Awards under this Plan cannot be sold,
transferred, assigned, pledged, attached, or encumbered in any manner.
5.4     Applicable Law. The Plan and all rights hereunder shall be governed by
the laws of the State of Maryland, except to the extent preempted by the laws of
the United States of America.
5.5     Entire Agreement. This Plan constitutes the entire agreement between the
Bank and each Participant as to the subject matter hereof. No rights are granted
to the Participant by virtue of this Plan other than those specifically set
forth herein.
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5.6 Administration. The Committee shall have powers which are necessary to
administer this Plan, including but not limited to:
(a)   interpreting the provisions of the Plan, including any ambiguity as to the
meaning of terms or provisions of the Plan or an Award Agreement;
(b)   determine the persons eligible to participate in the Plan;
(c)   maintaining a record of benefit payments; and
(d)   establishing rules and prescribing any forms necessary or desirable to
administer the Plan.
5.7    Clawback. Any Bonus Award received under the Plan shall be subject to
potential cancellation, recoupment, rescission, payback, or other action in
accordance with the terms of any applicable Company or Bank clawback policy (the
“Policy”) or any applicable law, as may be in effect from time to time. The
Participant hereby acknowledges and consents to the Company’s or the Bank’s
application, implementation, and enforcement of: (a) the Policy and any similar
policy established by the Company or the Bank that may apply to the Participant
together with all other similarly situated Participants, whether adopted prior
to or following the date of the Bonus Award; and (b) any provision of applicable
law relating to cancellation, rescission, payback, or recoupment of
compensation, and agrees that the Company or the Bank may take such actions as
may be necessary to effectuate the Policy, any similar policy, and applicable
law, without further consideration or action.
[Signature Page to Follow]
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IN WITNESS WHEREOF, the Bank has executed this Plan on the date set forth below.
 
 
 
 September 24, 2018
 
 
 
By:  
 HAMILTON BANK
 
 
 /s/ Jenny G. Morgan
 Date
   Jenny G. Morgan

 
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HAMILTON BANK ANNUAL INCENTIVE PLAN
AWARD AGREEMENT
 
Name:_____________________________________________________
 

Plan Year:__________________________________________________
 

Plan Year Base Salary:________________________________________
 

Hamilton Bonus Calculation (FY 2019)
1. Incentive Award Opportunity
Each participant shall have a Bonus Award Opportunity for the Plan, expressed as
a % of his or her Base Salary based on the following table and based on a
graduated scale (example - CEO can earn 10% of base salary based on percentage
of net income and classified assets/total loans that falls between target and
maximum):
Short Term Incentive Target (as % of Base Salary)
 
Below Threshold (1)
Threshold (1)
Target (1)
Maximum (1)
President & CEO
0%
9%
18%
27%
EVP & CFO
0%
7.5%
15%
22.5%

(1)   Threshold, Target, and Maximum based on Earnings before taxes, bonuses and
provision related to growth in loans (provision related to charge-offs would be
included).

2.
Performance Gate Trigger

No Bonus Award shall be paid to any participant under the Plan with respect to
the Plan Year, unless the Company achieves 90% or more (.90 x $2,012,900 =
$1,811,610) of budgeted net income during the Plan Year before tax, bonus
expense and provision related to growth in loans (provision related to
charge-offs would be included) is applied.
3.
Performance Measures

Each participant’s Bonus Award shall be determined based upon the following
performance measures:
Performance Measures
Performance Goals
Weight
Threshold
Target
Maximum
Bank Net Income (1)
$1,811,610
$2,012,900
$2,415,480
80.0%
Classified
Assets(2)/Total Loans
16.7%
15%
10%
20%
 
Total 100.0%

(1)  Threshold, Target, and Maximum based on Earnings before taxes, bonus and
provision related to growth in loans (provision related to charge-offs would be
included).
(2) Classified Assets are defined as loans risk rated 5 or worse as reported to
the Board of Directors.

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