2004 Incentive Compensation Program - Branch Customer Service Plan



 EXHIBIT (10)(l) 
  

					
	 The Sage Group
	 	 	  	 
	 CONSULTANTS TO MANAGEMENT
	 	 	  	10409 LESLIE DRIVE
	 	 	 	  	RALEIGH, NORTH CAROLINA 27601
	 	 	 	  	(919) 844-9783
	 	 	 	  	E-mail: steve@sagegroupconsulting.com

  
 MEMORANDUM

  

			
	 DATE:
	  	May 1, 2004
		
	 TO:
	  	Lee Johnson, President M&F Bank
		
	 FROM:
	  	Steven A. Savia, CMC
		
	 RE:
	  	Final 2004 Incentive Compensation Program – Branch Customer Service Plan
		
	 CC:
	  	 

  
 This year’s incentive
compensation program will have multiple components. 
  

	 	1.	Executive Plan 

  

	 	2.	City Executive Plan 

  

	 	3.	Loan Production Plan 

  

	 	4.	Branch Customer Service Plan 

  

	 	5.	Corporate Support/Teller Plan 

  
 This memo describes the Branch Customer Service Plan. 
  
 This is a new plan this year. We have segmented Branch Customer Service personnel from Corporate Support Personnel and Tellers. This plan is described below.

  

	 	1.	Threshold level of Net Income - the Threshold level for 2004 will be $1.448 million (2003 = $1.389 million). 

  

	 	2.	Schedule J presents the 2004 key measures for participants in the Branch Customer Service Plan. 

  

	 	3.	Once the threshold has been exceeded, the overall Bank pool will be created by 65% percent of the increase in net income marginal difference between budgeted net income ($1.484
million) and actual. The Branch Customer Service Plan Pool will be based on 30% of the overall Bank pool. 

  
 The Branch Customer Service plan is based on the assumption that the award will be a percent of base salary. The plan has no budget implications since the awards would be
made based on a pool created from a percentage of the marginal increase beyond the budget. The Bank’s income would therefore always be more than budget if awards were being made. 
  
 Schedule A is a listing of the measures that the program will include and where in the Bank’s information system or other reporting
processes the data for those measures is found. 
  

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 SCHEDULE A – PERFORMANCE FACTORS 
  

			
	 Measurement Factor

	 	 Where Available


	Growth in Average Assets	 	General Ledger/ Finance
	Return on Average Assets	 	General Ledger/ Finance
	Efficiency Ratio	 	General Ledger/ Finance
	Total Deposits	 	General Ledger/ Finance
	Total Assets	 	General Ledger/ Finance
	Growth in Portfolio Loan Levels	 	Credit Administration
	Net Income	 	General Ledger/ Finance
	Percent Recovery Of Loan Loss	 	General Ledger/ Credit Administration
	Service Charge Income	 	General Ledger/ Finance
	Classified Loans as a % of Capital	 	General Ledger/ Credit Administration
	Non-Performing Assets as % of Loan Loss Reserve	 	General Ledger/ Credit Administration
	Income per Employee	 	General Ledger/ Finance
	Assets per Employee	 	General Ledger/ Finance
	Level of Earning Assets	 	General Ledger/ Finance
	Audit Exceptions	 	Internal Audit
	Loan Originations ($)	 	Loan Production (Retail Bank Admin)
	Loan Origination (#)	 	Loan Production (Retail Bank Admin)
	Average Closing Days	 	Credit Administration
	Exceptions From Quality Control	 	Credit Administration
	CRA Rating	 	Compliance
	Target Customer Calls (#)	 	Loan Production (Retail Bank Admin)
	% Loan Portfolio > 30 Days Delinquent	 	Credit Administration
	Document Exceptions Not Cleared 30 Days	 	Credit Administration
	Operating Losses	 	General Ledger
	Transactions per Employee	 	Operations
	Loans Processed (#)	 	Credit Administration
	Delinquencies as % of Loan Portfolio	 	Credit Administration
	Monthly Branch Mystery Shop Score	 	Operations
	New Deposit Accounts Opened	 	Operations/Branch Reports
	Deposit Accounts Closed	 	Operations/Branch Reports
	Loan Referrals	 	Loan Production (Retail Bank Admin)
	Branch Profitability	 	Finance

  
 Each of the above factors relates to
one or more positions in the Bank as a measure of their contribution to the Bank. In some cases the measure is an overall measure of the success of the Bank as a whole (such as Return on Average Assets). In other cases, the measure is more specific
to the nature of the position, e.g., Growth in Portfolio Loan Levels for the Retail Banking Group Executive and City Executives; Number of New Deposit Accounts for Customer Service Representatives and Branch Operations Managers. 
  
 Schedule E below lists the participants in this plan. 
  

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 SCHEDULE E – BRANCH CUSTOMER SERVICE PLAN PARTICIPANTS 
  

			
	 EMPLOYEE

	  	 POSITION


	Claxton, Amy	  	Customer Service Representative
		
	Corpening, Lori	  	Loan Support
	Deloatch, Anne	  	AVP/Senior Banking Center Service Mgr.
		
	Hart, Takisha	  	Customer Service Representative
		
	Mackey, Shemeka	  	Customer Service Representative
		
	Moore, Geraldine	  	Sec./ Loan Support
		
	Morgan, Wendy	  	Sec./ Loan Support
		
	Mungo, Audrey	  	Banking Center Service Manager
		
	Polite, Karen	  	Customer Service Representative
		
	Ray, LaRevia	  	Customer Service Representative
		
	Thorpe, Lenora	  	Customer Service Representative
		
	Winston-Graves, Sheila	  	Senior Banking Center Service Manager
		
	Woods, Jacqueline	  	Loan Support

  
 The next step is putting the factors
with the personnel and their positions. For Branch Customer Service Plan Participants, the measures will be the same for each participant but measured by City for these employees. Schedule J provides suggested measures for these participants.

  

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 SCHEDULE J – BRANCH CUSTOMER SERVICE PLAN PARTICIPANTS - 2004 MEASURES 
  

			
	 EMPLOYEE

	  	 MEASUREMENT FACTORS


	 Claxton, Amy
 Corpening, Lori
 Deloatch, Anne *
 Hart, Takisha
 Mackey, Shemeka
 Moore, Geraldine
 Morgan, Wendy
 Mungo, Audrey *
 Polite, Karen
 Ray, LaRevia
 Thorpe, Lenora
 Winston-Graves, Sheila *
 Woods, Jacqueline
	  	 Average City Mystery Shop Score (15%),
 Total
Deposits for the City (10%),
 Deposit Customer Retention (20%),
 Cross Sell of Services (15%),
 Number of New Deposit Accounts (15%),
 Loan Referrals (10%),
 Branch Profitability (15%)
 * City Profitability (15%)


  
 AWARD PAYOUTS 
  
 Below is a description of the basis for payouts for the various plans described above.

  
 Branch Customer Service Plan - 
  
 The overall Bank pool will be created by 65% percent of the increase in net income marginal
difference between budgeted net income ($1.484 million) and actual. The Branch Customer Service Plan Pool will be based on 30% of the overall Bank pool. Thus, if the Bank achieves $200,000 above the threshold, the overall Bank pool is $130,000. The
Branch Customer Service pool would therefore be $39,000. Another way to calculate the pool is to take 19.5% of the marginal difference of the increase in net income above budgeted income for the Bank. 
  
 This plan pays out on a quarterly basis. Quarterly payouts are based on up to 5% of base
compensation not to exceed $1,000 per quarter. 
  
 Since payouts occur on a
quarterly basis but are based on annual results, that payout must be based on annualized quarterly results. As such, a small percentage holdback will be maintained and paid out with payment for the final quarter. 15% of the calculated payout will be
held back from the first three quarters. If the branch or city from which results are measured does not achieve its annual threshold, the fourth quarter payment will not be made and the hold back portion will be forfeited. 
  

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