2004 City Executives Incentive Compensation Program



 EXHIBIT (10)(j) 
  

					
	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 City Executives Incentive Compensation Program
		
	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 addresses the Executive Plan. 
  
 Overall for all plans, we will put in place the following: 
  

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

  

	 	2.	Key factor measures for each of the employee participants. Schedule C presents the 2004 executive management measures. 

  

	 	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 City Executive Plan Pool will be composed of 30% of the overall Bank pool. 

  
 The City Executive 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 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 C is a listing of the City Executive employees that would be included in the City
Executive plan. 
  
 SCHEDULE C – CITY EXECUTIVE PLAN
PARTICIPANTS 
  

			
	 EMPLOYEE

	 	 POSITION


	Acree, Evelyn	 	SVP/City Executive – Winston-Salem
		
	Green, Stanley Jr.	 	SVP/ City Executive - Raleigh
		
	Johnson, Jacque	 	SVP/ City Executive - Charlotte
		
	Smith, Queron	 	SVP/ City Executive - Durham

  

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 The next step is putting the factors with the personnel and their positions. Schedule H below has the measures and the
weighted percentage for each employee participating in the Plan this year. The absolute measures may be different for each individual recognizing the difference in cities. 
  
 SCHEDULE H – CITY EXECUTIVE PLAN PARTICIPANTS – 2004 MEASURES 
  

			
	 EMPLOYEE

	  	 MEASUREMENT FACTORS


	 Acree, Evelyn
	  	 Growth in City Loan Portfolio (30%),
 Total
Deposit Growth for the City (30%),
 City Operations Management (15%)
 •      Non-Interest & Fee Income
 •      Non-Interest Expense
 •      Net City Earnings
 Recovery of Charged-off Loans (5%),
 Business Development Quarterly Goals (10%),
 Average Delinquencies as % of Loan Portfolio (5%)
 Performance
Evaluation (5%)

		
	 Green, Stanley Jr.
	  	 Growth in City Loan Portfolio (30%),
 Total
Deposit Growth for the City (30%),
 City Operations Management (15%)
 •      Non-Interest & Fee Income
 •      Non-Interest Expense
 •      Net City Earnings
 Recovery of Charged-off Loans (5%),
 Business Development Quarterly Goals (10%),
 Average Delinquencies as % of Loan Portfolio (5%)
 Performance
Evaluation (5%)

		
	 Johnson, Jacque
	  	 Growth in City Loan Portfolio (30%),
 Total
Deposit Growth for the City (30%),
 City Operations Management (15%)
 •      Non-Interest & Fee Income
 •      Non-Interest Expense
 •      Net City Earnings
 Recovery of Charged-off Loans (5%),
 Business Development Quarterly Goals (10%),
 Average Delinquencies as % of Loan Portfolio (5%)
 Performance
Evaluation (5%)

		
	 Smith, Queron
	  	 Growth in City Loan Portfolio (30%),
 Total
Deposit Growth for the City (30%),
 City Operations Management (15%)
 •      Non-Interest & Fee Income
 •      Non-Interest Expense
 •      Net City Earnings
 Recovery of Charged-off Loans (5%),
 Business Development Quarterly Goals (10%),
 Average Delinquencies as % of Loan Portfolio (5%)
 Performance
Evaluation (5%)


  

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 AWARD PAYOUTS 
  
 Below is a description of the basis for payouts for the various plans described above. 
  
 City Executive Plan – 
  
 The pool from which this plan’s awards are distributed is based on the 30% of the overall Bank pool or 15% of the total difference between budgeted and actual net
income. The Bank-wide pool from which this plan’s awards are distributed is based on 65% of the difference between budgeted and actual, assuming actual exceeds budget. 30% of that pool is available to the City Executives of the Bank (see
Schedule C, page 4). Thus, if the Bank exceeds its net income threshold of $1.448 million by $200,000, then the Bank-wide pool available for incentive awards is $130,000 of which $30,000 would be available for Executive participants. 
  

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