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.    )

 

 

 

 

 

 

 

April 11, 2018

 

 

Dear Fellow Stockholders:

You are cordially invited to attend the 2018 Annual Meeting of Stockholders of First Midwest Bancorp, Inc., which will be held on Wednesday, May 16, 2018 at 9:00 a.m., Central time, at the Chicago Marriott O’Hare Hotel, 8535 West Higgins Road, Chicago, Illinois 60631.

The matters to be acted on at the Annual Meeting are described in the accompanying Notice of Annual Meeting of Stockholders and Proxy Statement.  Also enclosed is a copy of our 2017 Annual Report.  Please review these materials carefully before voting.

We are pleased to offer multiple options for voting your shares.  As detailed in the Proxy Summary section of the attached Proxy Statement, you may vote your shares via the Internet, by telephone or by mail.  Voting in any of these ways will not prevent you from attending the Annual Meeting.  You also may vote in person by written ballot at the Annual Meeting.

Your vote is very important to us.  Whether or not you plan to attend the meeting in person, your shares should be represented and voted.

On behalf of our Board of Directors, I would like to express our appreciation for your continued interest in First Midwest.  I hope you will be able to attend the Annual Meeting.

 

 

 

 

 

 

First Midwest Bancorp, Inc.

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

TABLE OF CONTENTS, CONT.

 

 

PROXY STATEMENT

 

PROXY SUMMARY

This Proxy Statement is being furnished in connection with a solicitation of proxies by the Board of Directors of First Midwest Bancorp, Inc., a Delaware corporation, to be used at our 2018 Annual Meeting of Stockholders.  The approximate date on which this Proxy Statement, the accompanying Proxy Card and our 2017 Annual Report are first being sent or otherwise made available to stockholders is April 11, 2018.  The following is a summary of items to be voted upon at the Annual Meeting.

Annual Meeting of Stockholders

 

 

 

Election of Directors

The first item of business at the Annual Meeting will be the election of ten directors of the Company.  The nominees, including their key experience and our Board’s recommendation with respect to each, are set forth in the table below.  Each nominee is currently a director of the Company.  See Item 1  Election of Directors.

 

 

First Midwest Bancorp, Inc. 2018 Stock and Incentive Plan

We are asking our stockholders to approve the First Midwest Bancorp, Inc. 2018 Stock and Incentive Plan, including the issuance of shares of Common Stock authorized thereunder.  See Item 2  Approval of the First Midwest Bancorp, Inc. 2018 Stock and Incentive Plan.

Advisory Vote on Executive Compensation

We are asking our stockholders to approve, on an advisory (non-binding) basis, a resolution regarding the compensation paid in 2017 to our named executive officers as disclosed in this Proxy Statement.  See Item 3  Approval of an Advisory (Non-Binding) Resolution Regarding the Compensation Paid in 2017 to the Company’s Named Executive Officers.

Frequency of Advisory Vote on Executive Compensation

We are asking our stockholders to approve, on an advisory (non-binding) basis, that we present the advisory (non-binding) resolution regarding the compensation paid to our named executive officers annually.  See Item 4  Approval of an Advisory (Non-Binding) Resolution Regarding the Frequency of Future Stockholder Advisory Votes on the Compensation Paid to the Company’s Named Executive Officers.

Ratification of Independent Registered Public Accounting Firm

We are asking our stockholders to ratify, on an advisory (non-binding) basis, the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2018.  See Item 5  Ratification of the Appointment of the Company’s Independent Registered Public Accounting Firm.

How to Vote

Even if you plan to attend our Annual Meeting in person, please cast your vote as soon as possible.

 

If you choose not to vote early, you can vote your shares in person at the Annual Meeting.  You must present an acceptable form of identification (such as a valid driver’s license) to enter the Annual Meeting and vote in person.

If you hold your shares in street name, you may vote by following your broker’s instructions or, in order to vote in person at the Annual Meeting, you must obtain from the broker through which you hold your shares, both an account statement showing that you owned shares of Common Stock as of the Record Date and a “legal proxy” form, and bring them to the meeting.

If you attend the Annual Meeting as a representative of a stockholder that is an entity, then you must bring proof of your authorization to attend and act on behalf of that entity.

Important Notice Regarding the Availability of Proxy Materials

A copy of our Annual Report for the year ended December 31, 2017 accompanies this Proxy Statement.  The Notice, this Proxy Statement and our Annual Report are available at www.proxyvote.com (if you utilize www.proxyvote.com, you will need the control number included on your Proxy Card).  If you would like to receive, without charge, a paper copy of our Annual Report, please contact our Corporate Secretary at First Midwest Bancorp, Inc., One Pierce Place, Suite 1500, Itasca, Illinois 60143 (prior to May 4, 2018) or at 8750 West Bryn Mawr Avenue, Suite 1300, Chicago, Illinois 60631 (on or after May 4, 2018).

Certain Terms

Certain terms that we use in this Proxy Statement have particular meanings, as set forth below.

 

 

ITEM 1  ELECTION OF DIRECTORS

Our Board of Directors currently consists of fifteen directors, but will be reduced to thirteen members as described below.  Historically, the Board has been divided into three classes, with only one class standing for election at each annual meeting and each director serving for a three-year term.  At our 2017 annual meeting, our stockholders approved an amendment to our Certificate of Incorporation to provide that directors will be elected to one-year terms on a go-forward basis, thereby declassifying the Board of Directors.  The declassification of our Board is a three-year process that began last year and continues this year, with all nominees this year standing for election for a one-year term and a final class of three directors continuing in office until the end of their three-year term at our 2019 annual meeting of stockholders, at which meeting the declassification process will conclude and all nominees will stand for election for a one-year term.

Br. James Gaffney, Michael L. Scudder and J. Stephen Vanderwoude are members of the final class of directors whose terms expire at the 2019 annual meeting of stockholders and, as such, they are not standing for election at this annual meeting.

Nominees for Election

Upon the recommendation of our Nominating and Corporate Governance Committee, our Board of Directors unanimously nominated Barbara A. Boigegrain, Thomas L. Brown, Phupinder S. Gill, Kathryn J. Hayley, Peter J. Henseler, Frank B. Modruson, Ellen A. Rudnick, Mark G. Sander, Michael J. Small and Stephen C. Van Arsdell to stand for election at this year’s Annual Meeting, all of whom are currently serving as directors of the Company.  Each of the nominees, other than Mr. Sander, our Senior Executive Vice President and Chief Operating Officer, meets the standards of independence under our Corporate Governance Guidelines and the rules of the NASDAQ Stock Market.

Robert P. O’Meara and Patrick J. McDonnell also currently serve as directors and their terms expire at this Annual Meeting.  As previously announced, Mr. O’Meara, who has served as one of our directors since 1982, and Mr. McDonnell, who has served as one of our directors since 2002, each has advised us that he will retire from the Board upon the conclusion of his current term.  Prior to the Annual Meeting, the Board will take action to reduce the number of directors to thirteen members.  As such, at and following the Annual Meeting, our Board of Directors will consist of thirteen members until such time as the Board may determine to change the number of directors.

Directors of the Company are elected by a majority of the votes cast at the Annual Meeting.  If a director nominee fails to receive the required majority vote for election, the nominee will tender his or her resignation as a director in accordance with our By-Laws and Corporate Governance Guidelines, and the Board of Directors, upon the recommendation of the Nominating and Corporate Governance Committee, will determine whether it is in the best interests of the Company to accept or reject any tendered resignation, or whether other action should be taken.  The Board of Directors will publicly disclose its decision and the rationale behind it within 90 days from the date of the certification of election results.

Each nominee has informed us that he or she is willing to serve as a director if elected.  Should any nominee become unable or refuse to serve as a director upon election, it is intended that the persons named as proxies on the Proxy Card will vote for the election of such other person as the Board of Directors may recommend.

Board Composition and Experience

Our thirteen continuing directors have significant and diverse operational, financial, risk, technology, corporate governance, leadership and other experience.  Over the past several years, four of our directors have announced their retirement and we have added four new directors.  Throughout this process, we have enhanced the existing industry and Company-specific knowledge of our Board of Directors with the fresh perspectives brought by our new directors.  We believe the result is an even more active and engaged Board with the skill sets necessary to guide the Company as it grows and as our business strategy and the banking industry around us continue to evolve.

The following charts illustrate the varying tenure, diversity, and qualifications and experience of our continuing directors:

 

 

Nomination Process

In identifying, evaluating and recommending nominees for the Board of Directors, our Nominating and Corporate Governance Committee places primary emphasis on the criteria set forth in our Corporate Governance Guidelines.

We do not set specific minimum qualifications that nominees must meet in order to be recommended to the Board of Directors.  Each nominee is evaluated based on his or her individual merits, taking into account the needs of the Company and the composition of the Board of Directors.  The Nominating and Corporate Governance Committee discusses and evaluates possible candidates in detail, and outside consultants are sometimes engaged to help identify potential candidates.

When making recommendations for nominees to the Board, the Nominating and Corporate Governance Committee attempts to include directors who, when taken together with the other nominees and continuing directors, will create a group that offers a diversity of education, professional experience, background, age, gender or minority status, perspective, viewpoint and skill.  The Nominating and Corporate Governance Committee will consider and evaluate director candidates recommended by stockholders in the same manner as other candidates identified by the Committee.  A stockholder who desires to formally nominate a candidate must do so by following the procedures described in the Company’s Certificate of Incorporation and By-Laws.

Set forth below is the name of each continuing member of the Board, along with his or her principal occupation for at least the previous five years and other professional experience.

Nominees Standing for Election at the Annual Meeting

 

 

 

 

 

 

 

 

Continuing Directors Serving a Term Expiring in 2019

 

 

 

 

 

For more information regarding our Board of Directors, its members, its committees and our corporate governance practices, please see the section of this Proxy Statement entitled Corporate Governance at First Midwest or visit the Investor Relations section of our website at www.firstmidwest.com/officersdirectors.

 

 

 

 

ITEM 2  APPROVAL OF THE FIRST MIDWEST BANCORP, INC. 2018 STOCK AND INCENTIVE PLAN

Earlier this year, subject to stockholder approval, our Compensation Committee and our Board of Directors approved the First Midwest Bancorp, Inc. 2018 Stock and Incentive Plan (the “New Plan”).  If approved by our stockholders, the New Plan would succeed the existing First Midwest Bancorp, Inc. Omnibus Stock and Incentive Plan, as amended (the “Predecessor Plan”).  The Predecessor Plan was most recently approved by our stockholders at the 2013 annual meeting.

As of March 23, 2018, the Record Date for the Annual Meeting, approximately 1,171,548 shares of our Common Stock remained eligible for issuance and 1,536,477 shares were subject to outstanding awards under the Predecessor Plan.  Upon approval of the New Plan by our stockholders, we will cease making awards under the Predecessor Plan and only make awards under the New Plan.  Any awards made under the Predecessor Plan that are outstanding at the time the New Plan is approved (i.e., unearned or unvested awards) will continue to be governed by the terms of the Predecessor Plan.  The shares of our Common Stock remaining eligible for issuance under the Predecessor Plan (i.e., those not subject to outstanding awards), plus any of the shares subject to outstanding awards under the Predecessor Plan that are not issued or are cancelled by reason of the failure to earn the shares under the award, or the cancellation, forfeiture or expiration of the award, will be available for issuance pursuant to awards made under the New Plan.

The Company is asking stockholders to authorize a number of shares of Common Stock available under the New Plan at a level that the Company believes will, on the basis of current grant practices and plan design, be sufficient for awards for approximately five years following stockholder approval.  Approval of the New Plan will authorize 2,000,000 shares of Common Stock for award issuance beyond the 1,171,548 shares remaining eligible for issuance under the Predecessor Plan and being carried over to the New Plan and the 1,536,477 shares subject to outstanding awards under the Predecessor Plan, for a total of 4,708,025 shares authorized for or outstanding under equity awards to our employees.  The following description sets forth the material terms of the New Plan.  It does not purport to be complete and is qualified in its entirety by reference to the provisions of the New Plan attached to this Proxy Statement as Appendix A.  All capitalized terms that are not defined in this Proxy Statement are used as defined in the New Plan.

Purpose of the New Plan

The New Plan is intended to advance the interests of the Company and its subsidiaries by providing incentives and motivation to employees of the Company and its subsidiaries that will link their personal interests to the financial success of our Company and its subsidiaries.  The New Plan is designed to provide flexibility to the Company and its subsidiaries in their ability to attract and retain the services of employees upon whose judgment, interest and effort the successful conduct of our operations is largely dependent.

Grant Practice Uses Mix of Performance-Based and Time-Based Awards

We currently employ two types of long-term equity-based incentive compensation awards: restricted stock or restricted stock units (awarded to all participants), and performance shares (currently awarded to senior officers only).  Our Compensation Committee believes that using a mix of restricted stock and performance shares for our executive officers results in long-term incentive awards with the appropriate balance of strong retention value and a clear connection between results achieved and compensation earned.  We have in the past also awarded stock options under the Predecessor Plan, although no stock options are currently outstanding.  Awards to our Chief Executive Officer in recent years have been weighted more heavily to performance shares than restricted stock (approximately a 60/40 mix in 2017), based on grant date value.

Key Considerations

We are recommending that our stockholders approve the New Plan because we believe that the design of the New Plan and the number of shares to be authorized for issuance thereunder will enable us to continue good corporate governance practices in granting equity to employees, consistent with the interests of stockholders.  In addition, without approval of a new plan with additional shares, we will have sufficient shares to issue awards to our employees only through 2019.  The Compensation Committee was assisted by its independent compensation consultant in the analysis of current trends, competitive practices and investor attitudes relating to various aspects of the New Plan, such as the number of shares authorized for issuance and usage of stock for long-term incentive awards, including the following:

Burn Rate

Burn rate, a measure of the speed at which companies use (or burn) shares available for grant in their equity compensation plans, is an important factor for investors concerned about stockholder dilution.  The burn rate is defined as: the gross number of equity awards granted in a given year divided by the weighted average number of shares of common stock outstanding.  Our burn rates for the past three years are shown in the chart below:

 

We use the annual usage of shares to help determine, among other things, the expected remaining life of a plan based on the remaining number of shares authorized for issuance under the plan.  At similar annual usage levels, the 1,171,548 shares remaining eligible for issuance under the Predecessor Plan may be depleted soon after the issuance of the Company’s annual equity awards in 2019.  The additional 2,000,000 shares to be authorized upon approval of the New Plan, combined with the 1,171,548 shares carried over from the Predecessor Plan, and shares that become available upon cancellations or forfeitures under the Predecessor Plan, are expected to cover awards for approximately five years starting in May 2018.

Overhang

Overhang is a commonly used measure of assessing the dilutive impact of equity programs such as the New Plan.  The overhang is equal to the number of equity award shares outstanding plus the number of shares available to be granted, divided by the total shares of common stock outstanding.  Overhang shows how much existing stockholder ownership would be diluted if all outstanding awards and authorized but unissued shares were introduced into the market.  As of March 23, 2018, the Record Date, the additional 2,000,000 shares being requested in this proposal would bring our aggregate overhang to 4.6%, as follows:

 

An overhang of 4.6% aligns with the median levels at commercial banking organizations, including the companies in our peer group.

Corporate Governance Aspects of the 2018 Stock and Incentive Plan

In designing and recommending the New Plan to our stockholders, the Compensation Committee and our Board of Directors also noted the strong corporate governance aspects of the New Plan, as summarized in the following table.

 

Awards and Shares Authorized Under Existing Plans

The following table provides details of the number of shares subject to outstanding awards and remaining available for issuance under our existing equity plans (the Predecessor Plan and the Non-Employee Directors Stock Plan) as of March 23, 2018, the Record Date:

 

These numbers differ from the amounts reported in our Form 10-K as of December 31, 2017.  Since December 31, 2017, the Board granted an additional 510,858 shares in connection with our 2018 annual grant (130,675 performance shares and 380,183 shares of restricted stock and restricted stock units), awards with respect to 480,346 shares vested and awards with respect to 188,662 shares were forfeited, canceled or expired.

Administration

Our Compensation Committee will administer the New Plan.  The Compensation Committee is currently composed of five directors, each of whom qualifies as a “non-employee director” under Rule 16b-3 under the Exchange Act and, to the extent applicable, as an “outside director” under Section 162(m) of the Internal Revenue Code.  Each member of the Compensation Committee also meets the director independence criteria under applicable rules of the NASDAQ Stock Market.  The Compensation Committee has broad discretion and authority, among other things, to select the employees to whom awards may be granted, to determine the terms, conditions, form and amount of the awards, to establish, where deemed applicable, performance goals with respect to awards and to measure and certify the achievement thereof, and to establish guidelines and procedures relating to awards.

The Compensation Committee will have full power to administer and interpret the New Plan and to adopt or establish, and to modify or waive, rules, regulations, agreements, guidelines, procedures and instruments that it deems necessary or advisable for the administration and operation of the New Plan.  The Compensation Committee may delegate its authority to our Chief Executive Officer or other senior officers of the Company, provided that such delegation will not extend to actions with respect to awards made to “officers” for purposes of Rule 16b-3 under the Exchange Act.

Eligibility

Any employee of the Company or any of its subsidiaries is eligible to receive an award under the New Plan.  As of December 31, 2017, we had approximately 2,200 employees.

Shares Available for Future Awards and Awards Outstanding

As of March 23, 2018, the Record Date, a total of approximately 1,171,548 shares of Common Stock remained available for future awards under the Predecessor Plan.  The New Plan provides that the total number of shares of Common Stock that may be issued pursuant to awards under the New Plan may not exceed 2,000,000 plus the 1,171,548 shares remaining available for future awards under the Predecessor Plan and the number of shares that become available due to cancellation, forfeiture or expiration of, or the non-issuance of shares under, a Predecessor Plan award.  The 3,171,548 shares represent approximately 3.1% of the Company’s outstanding Common Stock as of the Record Date.  If the Company’s stockholders approve the New Plan, no further awards will be made under the Predecessor Plan, but any awards made under the Predecessor Plan that are outstanding at the time the New Plan is approved (i.e., unearned or unvested awards) will continue to be governed by the terms of the Predecessor Plan.

To the extent that shares of Common Stock subject to an outstanding award under the New Plan or the Predecessor Plan are not issued or are cancelled by reason of the failure to earn the shares issuable under, or the forfeiture, termination, surrender, cancellation or expiration of such award, then such shares will, to the extent of such forfeiture or cancellation, again be available for awards under the New Plan.  Shares of Common Stock will not again be available if such shares are surrendered or withheld as payment of either the exercise price or of the withholding taxes in respect of an award.  Awards settled solely in cash will not reduce the number of shares of Common Stock available for awards under the New Plan.  The exercise or settlement of an award of SARs reduces the shares of Common Stock available under the New Plan in the gross number of SARs exercised or settled, not just the net amount of shares actually issued upon exercise or settlement of the award.  Any shares acquired by the Company in the open market with proceeds received from option exercises will not be made available for awards under the New Plan.

No more than 5% of the shares of Common Stock may be issued with respect to awards with a vesting, restriction, or performance period of less than one year.

Shares of Common Stock issued in connection with awards that are assumed, converted or substituted pursuant to a merger, acquisition or similar transaction entered into by the Company or any of its subsidiaries will not reduce the number of shares available to be issued under the New Plan.

The source of Common Stock issued with respect to awards may be authorized and unissued shares or shares that have been or may be reacquired in the open market, in private transactions, or otherwise.  In the event of any corporate event or transaction, including, but not limited to, a change in the shares of Common Stock or the capitalization of the Company, such as may result from a merger, consolidation, reorganization, recapitalization, separation, stock dividend, stock split, reverse stock split, split up, spin-off or other distribution of stock or property of the Company, combination of shares, exchange of shares, dividend in kind or other like change in capital structure or distribution, other than normal cash dividends, the number of shares of Common Stock authorized for issuance, available for issuance or covered by any outstanding award and the exercise price or other per share amounts applicable to any such award, and the various limitations described above, will be proportionately adjusted.  Fractional shares will not be issued under the New Plan.

Awards

A participant in the New Plan is permitted to receive multiple grants of awards.  The terms and provisions of a type of award with respect to any recipient need not be the same with respect to any other recipient of such award.  The following types of awards may be granted under the New Plan:

Restricted Stock and Restricted Stock Units

An award of restricted stock is an award of shares of Common Stock that may not be sold or otherwise disposed of during a restricted period determined by the Compensation Committee.  An award of restricted stock units is an award of the right to receive a share of Common Stock after the expiration of a restricted period determined by the Compensation Committee.  The Compensation Committee also may impose additional restrictions on an award of restricted stock or restricted stock units, including, but not limited to, attainment of certain performance goals during the restricted period.  To the extent provided by the Compensation Committee, restricted stock and restricted stock units also may include a dividend equivalent right, under which the recipient will be entitled to receive all dividends and other distributions paid with respect to such shares to the extent that they vest upon the expiration of the restricted period set by the Compensation Committee.  For grants of restricted stock and restricted stock unit awards made in 2018, the Compensation Committee used a period of restriction of three years for full vesting.

Performance Shares and Performance Units

Performance shares and performance units are awards of a fixed or variable number of shares or of dollar-denominated units that are earned by achievement of performance goals established by the Compensation Committee.  If the applicable performance criteria are met, the shares are earned and become unrestricted with respect to performance shares or an amount is payable with respect to performance units.  Amounts earned under performance share and performance unit awards may be paid in Common Stock, cash or a combination of both.  To the extent provided by the Compensation Committee, performance shares and performance units also may include a dividend equivalent right, under which the recipient will be entitled to receive all dividends and other distributions paid with respect to earned shares after completion of the performance period set by the Compensation Committee.  For grants of performance share awards made in 2018, the Compensation Committee used a performance period of three years.

Stock Options

Stock options may be nonqualified stock options or incentive stock options that comply with Section 422 of the Internal Revenue Code, or any other option to purchase stock that is permitted by law at the time of grant.  The exercise period for any stock option will be determined by the Compensation Committee at the time of grant.  The exercise price per share for all shares of Common Stock issued pursuant to stock options under the New Plan may not be less than the fair market value (as defined in the New Plan) of a share of Common Stock on the grant date.  Each stock option may be exercised in whole, at any time, or in part, from time to time, after the grant becomes exercisable.  The New Plan prohibits any reduction (re-pricing) of options, limits the term of any incentive stock option to ten years, and limits the number of incentive stock options that may be granted under the New Plan to 2,000,000 shares of Common Stock.  No dividends or dividend equivalent amounts may be paid with respect to any options.

Stock Appreciation Rights

The Compensation Committee may grant SARs under the New Plan.  Upon exercise, each SAR entitles a participant to receive an amount equal to the excess of the fair market value of a share of Common Stock on the date the SAR is exercised over an amount equal to the fair market value of a share of Common Stock on the date the SAR is granted.  The New Plan prohibits any reduction (re-pricing) of such grant date amount.  The payment may be made in shares of Common Stock having a fair market value on the date of exercise equal to the amount due upon the exercise of the SAR, may be paid in cash, or in a combination of stock and cash.  Except in the event of certain corporate events or transactions, once a SAR is granted, the Compensation Committee will have no authority to

reduce the price fixed at the date of grant, nor may any SAR granted under the New Plan be surrendered to the Company as consideration for the grant of a new SAR with a lower price at the date of grant without the approval of the Company’s stockholders.  The New Plan limits the term of any SAR granted to ten years and one day.  No dividends or dividend equivalent amounts may be paid with respect to any SARs.

Other Awards

Participants may receive the right to receive Common Stock or a fixed or variable share denominated unit granted under the New Plan or any deferred compensation or similar plan established from time to time by the Company.  To the extent provided by the Compensation Committee, other awards payable in shares of Common Stock also may include a dividend equivalent right, under which the recipient will be entitled to receive all dividends and other distributions paid with respect to such shares upon payment of the award.  Participants in the New Plan may also receive cash bonuses and other cash incentive compensation awards under our short-term annual cash incentive compensation program.

Performance-Based Awards

The Compensation Committee may grant performance-based awards that are vested, paid or become exercisable upon the attainment of performance goals.  Performance goals established with respect to an award may be based upon, but are not limited to, one or more of the following performance criteria:

These performance goals may be measured for achievement or satisfaction during the performance period set by the Compensation Committee.  The performance goals may be in absolute terms or measured against, or in relationship to, other companies comparably, similarly or otherwise situated or other external or internal measures and may be based on, or adjusted for, other objective goals, events or occurrences established by the Compensation Committee.  Performance goals may be particular to a line of business, subsidiary or other unit or the Company generally.  Performance goals may provide for adjustments to include or exclude the effects of certain events as may be determined by the Compensation Committee, including, but not limited to, changes in accounting standards or principles, tax laws or other laws or provisions affecting reported results, a significant acquisition or divestiture, discontinued operations, claims, judgments or settlements or other unusual, infrequently occurring or unplanned items such as restructuring expenses, acquisition expenses, including writedowns or expenses related to goodwill and other intangible assets, stock offerings and stock repurchases, and loan loss provisions.

At the end of each performance period for a performance-based award, the Compensation Committee will determine the extent to which the performance goal established has been achieved and determine the amount to be paid, vested or delivered as a result thereof.  In making such determination, the Compensation Committee may adjust or eliminate such amount to take into account additional factors as the Compensation Committee may deem appropriate to the assessment of performance during the performance period.

Termination of Employment

The disposition of each award held by a participant at termination of employment will be as determined by the Compensation Committee and set forth in the agreement applicable to such award or in any amendment or modification thereof.  To the extent the award agreement does not expressly provide for such disposition, then the disposition of the award shall be determined as set forth in the New Plan.

Effect of Change-in-Control

In the event of a change-in-control (as defined in the New Plan), to the extent that outstanding awards under the New Plan are assumed or replaced with a replacement award, such awards will not vest automatically (so-called “single-trigger” vesting), but instead will remain outstanding and continue to be governed by their terms.  If within two years following a change-in-control, however, a participant is involuntarily terminated other than for cause or voluntarily terminates with good reason, then upon such termination, the awards will become fully vested (so-called “double-trigger” vesting).

If the Compensation Committee determines that existing awards are not appropriately assumed or are not appropriately replaced in connection with a change-in-control, and unless otherwise provided by the Compensation Committee in the agreement applicable to an award, upon a change-in-control, each SAR and stock option then outstanding shall become fully vested and exercisable, all restrictions on restricted stock will lapse and all restricted stock units will become fully vested, and any performance-based awards shall be deemed earned and shall be paid to the extent of the greater of:

Other Provisions

In general, no award will be assignable or transferable except by will, and the laws of descent and distribution.

The Compensation Committee may impose such restrictions and limitations on any awards granted under the New Plan as it may deem advisable, including, but not limited to, share ownership or holding period requirements and requirements to enter into or to comply with confidentiality, non-competition and other restrictive or similar

covenants.  Additionally, the Compensation Committee may specify in any award agreement that the participant’s rights, payments and benefits with respect to an award will be subject to reduction, cancellation, forfeiture or recoupment (clawback) upon the occurrence of certain specified events, such as payments based on financial statements or performance metrics that are determined subsequently to be erroneous, in addition to any otherwise applicable vesting or performance conditions.

The Company is subject to supervision and regulation by banking authorities.  Regulations and guidance issued by banking authorities may from time-to-time impose certain compensation restrictions on the Company, its executive officers and certain other highly compensated employees.  Awards made under the New Plan will comply with such compensation restrictions to the extent applicable.

If authorized by the Compensation Committee, the receipt of payment of cash or the delivery of shares that would otherwise be due to a participant under an award may be deferred at the election of the participant or the Company pursuant to an applicable deferral plan established by the Company or a subsidiary.  A deferral also may be requested under applicable banking regulations.  Awards made and deferral of any amounts payable under the New Plan are intended to comply with deferred compensation rules under Section 409A of the Internal Revenue Code.

Effective Date, Amendment and Termination

If approved by our stockholders, the New Plan will become effective as of the date of such approval and will remain in effect until all shares subject to the New Plan have been issued according to the provisions of the New Plan, provided, however, that no awards may be granted on or after the tenth anniversary of such date.  The Board of Directors may terminate the New Plan at any time and may amend or modify the New Plan from time-to-time, provided that no such action shall materially adversely alter or impair any outstanding award without the consent of the participant(s) affected thereby.  In addition, unless approved by our stockholders, no amendment or modification may increase the number of shares of Common Stock that may be issued under the New Plan (except pursuant to an adjustment related to a corporate change affecting our Common Stock), expand the types of awards available to participants under the New Plan, materially expand the class of persons eligible to participate in the New Plan, delete or limit the provisions prohibiting the re-pricing of options or reduce the price at which shares may be offered under options, extend the termination date for making awards under the New Plan, or become effective if such amendment or modification is required under the rules the NASDAQ Stock Market or another national exchange on which the Common Stock is then listed, or other applicable law, rules or regulations, to be approved by stockholders.

The Compensation Committee may amend or modify any outstanding awards in any manner to the extent that the Compensation Committee would have had the authority under the New Plan initially to make such award as so amended or modified, provided that no amendment or modification shall materially adversely alter or impair an outstanding award without the consent of the participant affected thereby.

Federal Income Tax Considerations

The following discussion is a summary of certain U.S. federal income tax consequences to participants who may receive grants of awards under the New Plan and to the Company.  This discussion does not purport to be complete, and does not cover, among other things, state and local tax treatment.

Restricted Stock Units and Performance Units

A recipient of restricted stock units and performance units generally will not be subject to tax at the time of grant, but will be subject to tax at ordinary income rates on the fair market value of any Common Stock issued or cash paid pursuant to such an award upon vesting.  The Company generally will be entitled to a deduction equal to the amount of the ordinary income realized by the recipient.  The capital gain or loss holding period for any Common Stock distributed under an award will begin when the recipient recognizes ordinary income in respect of that distribution.

Stock Awards

A recipient of restricted stock, performance shares or any other award of shares of Common Stock generally will be subject to tax at ordinary income rates on the fair market value of the Common Stock at the time the shares have been delivered and are no longer subject to forfeiture.  A recipient who so elects under Section 83(b) of the Internal Revenue Code within thirty days of the date of the grant of shares of Common Stock will have ordinary taxable income on the date of the grant equal to the fair market value of the shares as if the shares were unrestricted or the shares were earned and could be sold immediately.  If the shares subject to such election are forfeited, the recipient will not be entitled to any deduction, refund or loss for tax purposes with respect to the forfeited shares.  Upon sale of the restricted stock or performance shares after the forfeiture period has expired, the holding period to determine whether the recipient has long-term or short-term capital gain or loss begins when the restriction period expires.  If the recipient timely elects to be taxed as of the date of the grant, the holding period commences on the date of the grant and the tax basis will be equal to the fair market value of the shares on the date of the grant as if the shares were then unrestricted and could be sold immediately.  The Company generally is entitled to a deduction for compensation paid to a participant in the amount of ordinary income recognized by the participant.

Nonqualified Stock Options

For federal income tax purposes, no income is recognized by a participant upon the grant of a nonqualified stock option.  Upon exercise, the participant will realize ordinary income in an amount equal to the excess of the fair market value of a share of Common Stock on the date of exercise over the exercise price multiplied by the number of shares received pursuant to the exercise of such options.  A subsequent sale or exchange of such shares will result in gain or loss measured by the difference between (a) the exercise price, increased by any compensation reported upon the participant’s exercise of the option, and (b) the amount realized on such sale or exchange.  Any gain or loss will be capital in nature if the shares were held as a capital asset and will be long-term if such shares were held for more than one year.

The Company generally is entitled to a deduction for compensation paid to a participant at the same time and in the same amount as the participant realizes compensation upon exercise of the option.

Incentive Stock Options

No taxable income is realized by the participant upon exercise of an incentive stock option granted under the New Plan, and if no disposition of those shares is made by such participant within two years after the date of grant or within one year after the transfer of those shares to the participant, then: (a) upon the sale of the shares, any amount realized in excess of the exercise price will be taxed as a long-term capital gain and any loss sustained will be taxed as a long-term capital loss, and (b) no deduction will be allowed to the Company for federal income tax purposes.  Upon exercise of an incentive stock option, the participant may be subject to alternative minimum tax on certain items of tax preference.

If the shares of Common Stock acquired upon the exercise of an incentive stock option are disposed of prior to the expiration of the two-years-from-grant/one-year-from-transfer holding period, generally: (a) the participant will realize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of the shares at exercise (or, if less, the amount realized upon disposition of the shares) over the exercise price, and (b) the Company generally will be entitled to deduct such amount.  Any additional gain or loss realized will be taxed as short-term or long-term capital gain or loss, as the case may be, and may not be deducted by the Company.  If an incentive stock option is exercised at a time when it no longer qualifies as an incentive stock option, the option will be treated as a nonqualified stock option.

Stock Appreciation Rights

No taxable income is recognized by a participant upon the grant of a SAR under the New Plan.  Upon the exercise of a SAR, the participant will realize ordinary income in an amount equal to the fair market value of the shares of Common Stock received and the amount of cash received.  Shares of Common Stock received upon the exercise of a SAR will, upon subsequent sale, be eligible for capital gains treatment, with the capital gains holding period commencing on the date of exercise of the SAR.

The Company is generally entitled to a deduction for compensation paid to a participant at the same time and in the same amount as the participant realizes ordinary income upon exercise of the SAR.

Other Awards

A participant will recognize ordinary income upon receipt of cash pursuant to a cash award and the Company generally will be entitled to a deduction equal to the amount of the ordinary income realized by the recipient.

Effect of Section 162(m) of the Internal Revenue Code

As amended by the Tax Cut and Jobs Act of 2017, Section 162(m) of the Internal Revenue Code will limit to $1.0 million annually the deductibility of certain compensation received by individuals who serve as our Chief Executive Officer and certain individuals who serve as executive officers after 2016.  The deduction limit will apply to awards made under the New Plan.  Prior to the enactment of this new tax act, options, SARs and certain performance-based compensation awards were not subject to the deduction limit.  Accordingly, the Company’s general ability to take deductions for compensation related to awards under the New Plan, as described above, may be limited by the application of Section 162(m) of the Internal Revenue Code.

Future Plan Benefits

Awards under the New Plan are made at the discretion of the Compensation Committee.  Therefore, the benefits and amounts that will be received or allocated under the New Plan in the future are not determinable at this time.

 

 

 

ITEM 3  APPROVAL OF AN ADVISORY (NON-BINDING) RESOLUTION REGARDING THE COMPENSATION PAID IN 2017 TO THE COMPANY’S NAMED EXECUTIVE OFFICERS

In accordance with applicable SEC rules, we are required to provide stockholders with an opportunity to approve, on an advisory basis, the compensation of our named executive officers as disclosed in this Proxy Statement.  We refer to this proposal as the “say-on-pay” proposal.  Our executive compensation programs, including detailed information regarding the compensation paid to our named executive officers for 2017, are described in the Compensation Discussion and Analysis and Executive Compensation Tables sections of this Proxy Statement.

Our Board of Directors views it as a good corporate governance practice to present the say-on-pay proposal to our stockholders annually.  The Board made this recommendation to our stockholders at our 2012 annual meeting, and our stockholders overwhelmingly voted in favor of holding a say-on-pay vote every year, as opposed to every other year or every third year.  Our stockholders have the opportunity to indicate their preference for the frequency of the say-on-pay vote again this year, as described more fully under Item 4  Approval of an Advisory (Non-Binding) Resolution Regarding the Frequency of Future Stockholder Advisory Votes on the Compensation Paid to the Company’s Named Executive Officers.

At our 2017 annual meeting of stockholders, 94% of the votes cast were voted in favor of the compensation paid to our named executive officers.  We believe these results confirmed our approach to executive compensation.  Our Compensation Committee intends to consider the say-on-pay vote results from this year, and future advisory votes, with respect to the design of and amounts paid under our executive compensation programs.

We are asking our stockholders to indicate their support for our executive compensation program as described in this Proxy Statement.  This proposal gives our stockholders the opportunity to express their views on executive compensation.  This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers described in this Proxy Statement.  Accordingly, we will ask our stockholders to vote on the following resolution at the Annual Meeting:

RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to the executive compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables and related narrative discussion set forth in the 2018 annual meeting proxy statement, is hereby approved by the Company’s stockholders on an advisory basis.

The say-on-pay vote is advisory and is therefore not binding on the Company, the Compensation Committee or our Board of Directors.  We value the opinions of our stockholders, and the Compensation Committee will consider the results of the vote on our say-on-pay proposal when establishing the design of and amounts paid under our future executive compensation programs.

 

 

 

 

ITEM 4  APPROVAL OF AN ADVISORY (NON-BINDING) RESOLUTION REGARDING THE FREQUENCY OF FUTURE STOCKHOLDER ADVISORY VOTES ON THE COMPENSATION PAID TO THE COMPANY’S NAMED EXECUTIVE OFFICERS

In accordance with applicable SEC rules, we are periodically required to provide stockholders with an opportunity to approve, on an advisory basis, the frequency of our say-on-pay proposal (we are submitting the say-on-pay proposal to stockholders this year as Item 3  Approval of an Advisory (Non-Binding) Resolution Regarding the Compensation Paid in 2017 to the Company’s Named Executive Officers).  We are providing our stockholders the option of selecting a frequency of every one year, every two years or every three years, or of abstaining.  We refer to this proposal as the “say-on-frequency” proposal.

We last presented our stockholders with the say-on-frequency proposal in 2012 and are required to present the proposal at least once every six years.  Our Board of Directors views it as a good corporate governance practice to present the say-on-pay proposal to our stockholders annually, because an annual frequency allows our stockholders to provide timely, direct input on the design of and amounts paid under our executive compensation programs as described in the Compensation Discussion and Analysis and Executive Compensation Tables sections of our proxy statement each year.  Our Board further believes that an annual frequency is consistent with current industry practices and many stockholder preferences, and also considered that, in 2012, the option of every one year, meaning an annual say-on-pay vote, received the support of 88% of the votes cast at that annual meeting.

After due consideration, our Board has again decided to recommend that the say-on-pay vote should occur annually (every one year).  Accordingly, we will ask our stockholders to cast their vote accordingly on the following resolution at the Annual Meeting:

RESOLVED, that the Company’s stockholders advise, by their vote on this resolution, whether the advisory resolution regarding the compensation paid to the Company’s named executive officers should be presented to the stockholders every one year, every two years or every three years.

The say-on-frequency vote is advisory and is therefore not binding on the Company, the Compensation Committee or our Board of Directors.  We value the opinions of our stockholders, and our Compensation Committee will consider the outcome of the vote on our say-on-frequency proposal and disclose its decision as to the frequency of future say-on-pay proposals by filing a Current Report on Form 8-K shortly after the Annual Meeting.

 

 

 

 

 

 

ITEM 5  RATIFICATION OF THE APPOINTMENT OF THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Independent Registered Public Accounting Firm

The Audit Committee of the Board of Directors is responsible for appointing the Company’s independent registered public accounting firm, and the Audit Committee has selected Ernst & Young LLP to serve as our independent registered public accounting firm for the year ending December 31, 2018.  We are submitting this selection for stockholder ratification at the Annual Meeting.  We expect a representative of Ernst & Young LLP to be present at the Annual Meeting and to have an opportunity to make a statement if he or she desires to do so and to be available to respond to appropriate questions from stockholders.  Ernst & Young LLP also served as our independent registered public accounting firm for the year ended December 31, 2017.

Although we are not required to have our stockholders ratify the selection of our independent registered public accounting firm, our Board of Directors has determined to seek this ratification from stockholders.  This ratification is advisory and is, therefore, not binding on the Audit Committee.  If our stockholders do not ratify the selection, the Audit Committee will reconsider whether to retain Ernst & Young LLP, but may retain them nonetheless.  Even if the selection is ratified, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interests of the Company.

Fees Paid to Independent Registered Public Accounting Firm

The Audit Committee, or a designated member of the Audit Committee, approves in advance all audit and any non-audit services rendered by Ernst & Young LLP on behalf of the Company.  The following table shows information about fees paid by the Company to Ernst & Young LLP for services related to the years indicated below.

The increase in total fees from 2016 to 2017 resulted primarily from the services provided by Ernst & Young LLP in connection with the Company’s 2017 M&A activity, recent changes in audit and accounting scope and regulatory compliance consulting services.

For audit, audit-related, tax-related and all other services, our Audit Committee has determined specific services and dollar thresholds under which such services would be considered pre-approved.  To the extent management requests services other than these pre-approved services, or beyond the dollar thresholds, our Audit Committee must specifically approve the services.  Further, under our fee policy, our independent registered public accounting firm may not perform the non-audit services identified by the SEC as prohibited.  Our fee policy requires management to provide to our Audit Committee on a quarterly basis a summary of all services performed by the independent registered public accounting firm.

 

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CORPORATE GOVERNANCE AT FIRST MIDWEST

Our Board of Directors is committed to maintaining strong corporate governance principles and practices.

 

 

Director Independence

Our Board of Directors determines the independence of all non-employee directors in accordance with the independence requirements of the NASDAQ Stock Market rules.  Accordingly, each year the Board affirmatively determines whether each non-employee director has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.  Annually, each non-employee director is required to complete a questionnaire that provides information about relationships that might affect the determination of independence.  Management then provides the Nominating and Corporate Governance Committee and Board of Directors with relevant facts and circumstances of any relationship bearing on the independence of a director or nominee that is outside the categories permitted under the rules of the NASDAQ Stock Market.

Based on the review and recommendation by the Nominating and Corporate Governance Committee, the Board of Directors analyzed the independence of each of the Company’s nominees and other current directors, and determined that all of our directors meet the standards of independence under our Corporate Governance Guidelines and the NASDAQ Stock Market rules, other than Michael L. Scudder, the Company’s Chairman, President and Chief Executive Officer, and Mark G. Sander, the Company’s Senior Executive Vice President and Chief Operating Officer, who are not considered to be independent under the standards of our Corporate Governance Guidelines and the rules of the NASDAQ Stock Market because they are employees.  In addition, our Board of Directors determined that:

Board Leadership and Structure

As provided in our Corporate Governance Guidelines, our Board of Directors does not have a fixed policy regarding the separation of the offices of Chairman and Chief Executive Officer and believes that it should maintain the flexibility to select the Chairman and the Board leadership structure, from time-to-time, based on the criteria that it deems to be in the best interests of the Company and its stockholders.

In November 2017, Robert P. O’Meara retired from his position as Chairman of the Board.  In connection with Mr. O’Meara’s retirement, our Nominating and Corporate Governance Committee reviewed the Board’s organization and leadership structure, considering both the Board’s and the Company’s own strategic and leadership needs, as well as board leadership trends and practices at our peers and across public companies.  Upon the conclusion of this review, the Nominating and Corporate Governance Committee recommended to our Board of Directors for approval, and the Board approved, the appointment of Michael L. Scudder to the additional position of Chairman of the Board and the appointment of J. Stephen Vanderwoude to the position of Lead Independent Director.  In recognition of his many years of valued leadership and his significant contributions to the Company, the Board also appointed Mr. O’Meara to the non-compensated honorary position of Chairman Emeritus.

The Board of Directors believes that, at this time, the combination of the offices of Chairman of the Board and Chief Executive Officer is appropriate for the Company.  The combination allows Mr. Scudder to leverage his extensive knowledge of the Company and industry experience into the strategic vision for the management and direction of the Company at both the Board and management level in order to drive the enhancement of stockholder value, grow and expand the Company’s business and execute the Company’s strategies.  Mr. Scudder is supported in the day-to-day management of the Company and the Bank by Mark G. Sander, our Senior Executive Vice President and Chief Operating Officer, and our executive management team.  Additionally, the Board believes it is appropriate to have a Lead Independent Director while Mr. Scudder serves as Chairman of the Board in order to provide a leadership role for our independent directors.  Mr. Vanderwoude brings a strong understanding of the Company and its business, as well as significant leadership, corporate governance and public company experience.

The duties and responsibilities of the Lead Independent Director are included in our Corporate Governance Guidelines and are set forth below under the section entitled Lead Independent Director.

Lead Independent Director

Effective with Mr. Scudder’s appointment as Chairman of the Board in November 2017, our Board of Directors appointed Mr. Vanderwoude to the position of Lead Independent Director.  The Lead Independent Director must satisfy the independence requirements of the NASDAQ Stock Market and must have served as a director of the

Company for least one year.  The Lead Independent Director serves in a leadership capacity among our independent directors and as an additional resource for the Chairman of the Board in order to continue to foster a highly engaged and strong-performing Board of Directors.  The principal duties and responsibilities of the Lead Independent Director are as follows:

Risk Oversight

Risk is inherent with every business, particularly for financial institutions, and we face a number of risks, including, for example, credit, market, liquidity, operational, strategic, compliance, legal, cyber and reputation risks, as well as risks related to general economic conditions.  We do not view risk in isolation, but rather consider risk as part of our ongoing consideration of business strategy and business decisions.  We also are mindful that risk oversight is not about eliminating risk, but rather identifying, accepting and managing risks while balancing prudent business considerations, as well as safety and soundness.

We support our risk oversight process through a governance structure involving our Board of Directors and management.  Management is responsible for the day-to-day management of the risks the Company faces.  It establishes and maintains risk management processes and policies designed to balance our operations and business opportunities with risk mitigation in order to create stockholder value.  It is management’s responsibility to anticipate, identify and communicate risks to the Board of Directors and its committees.  The Company also has a Chief Risk Officer, who is responsible for the design and implementation of our risk management processes.

We have a Strategic Risk Management Committee composed of members of executive management.  The purpose of this committee is to provide regular oversight of specific areas of risk at the Company.  This committee, through our Chief Risk Officer, also reports on a quarterly basis to the Enterprise Risk Committee of our Board of Directors on significant risk management matters.

The Board of Directors, as a whole and through its committees, has responsibility for the oversight of risk management.  In its risk oversight role, the Board of Directors has the responsibility to satisfy itself that the risk management framework, policies and profiles designed and implemented by management are appropriate and functioning as contemplated.

The Board performs its risk oversight function primarily through its committees and the operation of the Bank’s board of directors.  The Board committee that is primarily involved in assisting the Board of Directors with its oversight of enterprise-wide risk management is the Enterprise Risk Committee.  Among other responsibilities, this committee approves risk appetites and profiles established by management for key business risks and confirms that business decisions are executed within the established risk tolerances.

Each of the Board’s committees is chaired by an independent director and supports the Board’s oversight functions by regularly addressing various risks in their respective areas of oversight, as follows:

Each committee reports to the full Board of Directors at least quarterly at regular meetings concerning the activities of the committee, the significant matters it has discussed and the actions taken by the committee.  The Board also receives reports directly from our Chief Executive Officer, our Chief Risk Officer and other members of management regarding the Company’s risk management functions.  Key members of senior management attend Board meetings and are available to address any questions or concerns raised by the Board of Directors.

Meetings

Our Board of Directors holds regular quarterly meetings and special meetings as needed.  In 2017, the Board held four regularly scheduled meetings and one special meeting.  Our directors also communicate with each other between meetings.  Further, the Board of Directors devotes additional time outside of its regular meetings to presentations and discussions with senior management about the Company’s long-term strategy, corporate objectives and initiatives and financial operating plans, and industry and market updates, which are then discussed further at the Board’s quarterly meetings.

We expect our directors to attend all Board and committee meetings for those committees on which they serve.  Directors are also expected to attend each annual meeting of stockholders.  All of our directors attended last year’s annual meeting.  All of our directors attended 100% of the total number of meetings of the Board of Directors and Board committees on which he or she served during 2017, with the exception of two directors who attended 95% and 94% of all meetings, respectively.

Board Committees

Our Board of Directors has four standing committees: our Audit Committee, Compensation Committee, Enterprise Risk Committee and Nominating and Corporate Governance Committee.  Each standing committee has a written charter and the Board of Directors has determined that each of the members of our standing committees is independent under the provisions of our Corporate Governance Guidelines and the rules of the NASDAQ Stock Market.  The Board of Directors has also established an Advisory Committee for the purpose of providing advice to management with respect to business matters as needed between regular meetings of the Board and undertaking such other duties and responsibilities as may be delegated to this committee by the Board.

Under our Corporate Governance Guidelines, the members of each Board committee (including each committee chair) are appointed by the Board of Directors upon the recommendation of the Nominating and Corporate Governance Committee, and a member may only serve as the chair of one committee of the Board at any given time.

Below is a brief description, including membership and meeting information for 2017, of each standing committee of our Board of Directors, as well as our Advisory Committee.  Each standing committee has the authority to engage, at the Company’s expense, legal counsel or other advisors or consultants as it deems appropriate to carry out its responsibilities.  The charter of each standing committee describes the specific responsibilities and functions of such committee.  Copies of our Audit Committee, Compensation Committee, Enterprise Risk Committee and Nominating and Corporate Governance Committee charters are available by visiting our website at www.firstmidwest.com/corporategovernance.

Audit Committee

 

Compensation Committee

 

Enterprise Risk Committee

 

Nominating and Corporate Governance Committee

 

Advisory Committee

 

Board and Committee Self-Evaluations

The Board and the Audit, Compensation, Enterprise Risk and Nominating and Corporate Governance Committees conduct an annual self-evaluation, which includes both a qualitative and quantitative assessment by each director of the performance of the Board and the committees on which the director sits.  The Nominating and Corporate Governance Committee oversees these evaluations.  As part of this process, each director completes an annual self-evaluation of the Board and the committees on which the director sits and has an individual meeting with the Chair of the Nominating and Corporate Governance Committee.  The results of the self-evaluations are reported to the Board of Directors.

Related Person Transactions

We maintain a written policy for reviewing, approving and monitoring transactions involving the Company and related persons (generally, directors and executive officers or their immediate family members, or stockholders owning 5% or more of our Common Stock).

Our Nominating and Corporate Governance Committee is responsible for reviewing and approving (or ratifying) all transactions with related persons.  The Nominating and Corporate Governance Committee will take into account all relevant factors in its analysis, including whether the transaction is on terms comparable to those available to third parties.  The Nominating and Corporate Governance Committee will also determine whether any transaction with a related person impairs the independence of a director, or presents a conflict of interest on the part of a director or executive officer.  The Chair of the Nominating and Corporate Governance Committee may pre-approve or ratify any transaction with a related person involving an amount up to $500,000.  The policy also provides that transactions involving competitive bids, the rendering of services by a regulated entity and certain ordinary course banking transactions, including loans made by First Midwest Bank, will be deemed to be pre-approved by the Nominating and Corporate Governance Committee.

During 2017, First Midwest Bank engaged in transactions with some of our executive officers, directors and entities with which they are associated.  These transactions involved loans extended in accordance with Regulation O of the Federal Reserve and other banking services, all of which were in the ordinary course of business and on substantially the same terms, including current interest rates and collateral, as those prevailing at the time for comparable transactions with others not related to the Company and did not involve more than the normal risk of collectability or present other unfavorable features.

Compensation Committee Interlocks and Insider Participation

No member of our Compensation Committee has served as one of our executive officers or employees.  None of our executive officers serves as a member of the board of directors or compensation committee of any other company that has an executive officer serving on our Board of Directors or our Compensation Committee.

Stockholder Communication with Directors

Stockholders may contact the Chairman of the Board, the Lead Independent Director, an individual director, the entire Board of Directors, our independent directors as a group or a specific Board committee by submitting written correspondence to First Midwest Bancorp, Inc., Attn: Corporate Secretary, One Pierce Place, Suite 1500, Itasca, Illinois 60143 (prior to May 4, 2018) or 8750 West Bryn Mawr Avenue, Suite 1300, Chicago, Illinois 60631 (on or after May 4, 2018).  Each communication should specify the applicable addressee(s) to be contacted as well as the general topic of the communication.  The Company will initially receive and process communications before forwarding them to the addressee(s).  Communications also may be referred to other departments within the Company.  The Company generally will not forward to the directors a stockholder communication that involves routine business matters of the Company or First Midwest Bank, an irrelevant topic or a request for general information about the Company.  Communications regarding accounting or auditing matters should be made in writing to the Board’s Audit Committee Chair or the Company’s Audit Services Director at First Midwest Bancorp, Inc., One Pierce Place, Suite 1500, Itasca, Illinois 60143 (prior to May 4, 2018) or 8750 West Bryn Mawr Avenue, Suite 1300, Chicago, Illinois 60631 (on or after May 4, 2018).

Community Engagement

True to our heritage, our colleagues and the communities that we serve stand at the core of our success.  Our Board of Directors believes that a critical component of the Company’s success is effectively serving the convenience and needs of the communities in which we operate.  To that end, we offer products, services and branch locations that we believe are conducive and responsive to the needs of the communities that we serve, including low- and moderate-income areas.  We and our colleagues also support a variety of nonprofit organizations in our communities through donations and volunteer hours.  Each year, our colleagues provide thousands of volunteer hours to these organizations.  Both the Company and the First Midwest Charitable Foundation provide financial support to many of these same organizations, and we also conduct financial literacy programs for individuals through various community groups and have facilitated educational programs for growing small businesses.  In 2017, we made an additional $2 million special contribution to the First Midwest Charitable Foundation to facilitate the foundation’s activities.

 

 

INFORMATION REGARDING BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS, DIRECTORS AND MANAGEMENT

The following table sets forth, as of March 23, 2018, the Record Date, information about the beneficial ownership of our Common Stock by all directors, our named executive officers and our directors and all executive officers as a group.  Except as described below, each stockholder has sole voting and investment power for all shares shown.  In addition, unless otherwise indicated, the address of each beneficial owner is c/o First Midwest Bancorp, Inc., One Pierce Place, Suite 1500, Itasca, Illinois 60143.

We calculated the percent of class based on 103,188,287 shares of Common Stock outstanding on March 23, 2018.  We include shares of restricted stock subject to future vesting conditions for which an individual has voting but not dispositive power.  We also include shares underlying restricted stock units and performance shares that could vest within 60 days of March 23, 2018, even though an individual has neither voting nor dispositive power.  Those shares are deemed to be outstanding and beneficially owned by the person holding such securities for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

*      Less than 1%.