FARMERS CAPITAL BANK CORP (Form: 8-K, Received: 12/06/2017 13:31:14)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington , D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) – December 4, 2017

Farmers Capital Bank Corporation

(Exact name of registrant as specified in charter)

Kentucky

0-14412

61-1017851

(State or other jurisdiction of

incorporation)

(Commission File Number)

(IRS Employer Identification No.)

P.O. Box 309

202 West Main St.

Frankfort, KY

4060 1

(Address of principal executive offices)

(Zip Code)

Registrant ’s telephone number, including area code: (502) 227-1668

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a -12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre -commencement communications pursuant to Rule 14d -2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre -commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

ITEM 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers .

( e) On December 4, 2017 the Board of Directors of Farmers Capital Bank Corporation (the “ Company ”) adopted its Executive Short-Term Incentive Plan (“ Incentive Plan ”) effective as of January 1, 2018. The Incentive Plan is filed as Exhibit 10.1 hereto and incorporated herein by reference.

The purpose of the Incentive Plan is to further the growth and financial success of the Company and its shareholders by providing certain empl oyees of the Company, who are largely responsible for the management, growth and protection of the business of the Company, with cash incentives to encourage them to continue in the service of the Company.

The Compensation Committee of the Board of Direct ors determines participating employees as well as the annual goals for achieving a cash incentive . The annual goals for 2018 include Company-wide goals, which are tailored to the executive’s role. For example, the annual goals for 2018 include a Company annual net income goal, a core deposit growth goal, a loan growth goal , and an efficiency ratio goal. The goals applicable to a particular executive (as well as the weighting of such goals) are tailored to each individual to appropriately reflect the performance metrics that a particular executive can personally impact through individual performance. In addition to such Company-wide goals, each participating executive will also have qualifiers setting minimum expectations that must be met in order for such executive to be eligible for the incentive. These qualifiers will be tailored to each individual based on such individual’s role and will range among asset quality metrics, business development expectations, and the results of regulatory exams.

The following named executive officers were granted incentive performance targets for the Company’s 2018 fiscal year: Lloyd C. Hillard, Jr., J. David Smith, Jr., Mark A. Hampton, James L. Grubbs, and Rickey D. Harp .

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits

Exhibit 10.1 – Executive Short-Term Incentive Plan January 1, 2018 ,

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		Farmers Capital Bank Corporation


1 2 - 4 -1 7		/s/ Mark A. Hampton
Date		Mark A. Hampton
		Executive Vice President, Secretary, and Chief Financial Officer

Exhibit 10.1

Executive Short-Term Incentive Plan January 1, 201 8

Executive Short-Term Incentive Plan

TABLE OF CONTENTS

WHAT ARE THE PLAN OBJECTIVES	1
WHEN IS THE PLAN EFFECTIVE	1
WHO IS ELIGIBLE	1
WHAT ARE THE INCENTIVE LEVELS	2
CAN I LOSE MY INCENTIVE	2
WH AT ARE THE PERFORMANCE TARGETS	3
WHAT ARE TIERS	4
WHAT ARE PERFORMAN CE LEVELS & INCENTIVE FORMULAS	5
HOW IS THE INCENTIVE CALCULATED	7
WHEN IS THE INCENTIVE PAID	8
WHO ADMINISTERS THE PLAN	8


AP PENDIX A – INCENTIVE SCHEDULE FOR MOST GOALS	9
APPENDIX B – INCENTIVE SCHEDULE FOR NET INCOME GOAL	10

Executive Short-Term Incentive Plan

What are the Plan Objectives?

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To further the growth and financial success of Farmers Capital Bank Corporation by aligning the interests of the plan participants, through cash incentives, with the interests of the Bank’s shareholders.

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To provide participants with an incentive for excellence in individual performance; and to promote teamwork among participants.

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To motivate, attract, and re tain the services of executives who make significant contributions to the Bank’s success.

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To allow participants to share in the success of the Bank.

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To communicate the drivers of success of the business.

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To provide competitive levels of compensation.

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To select performance goals that when achieved will result in additional profits and productivity improvements that provide for a self-funded incentive plan.

When is the Plan Effective?

■

January 1, 2018.

Who is Eligible?

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The Bank ’s philosophy is to establish competitive compensation programs that are designed to reward employees for the achievement of performance-based objectives. Rewards and participation in these programs are proportional to the individual’s level of responsibility in the organization.

■

The Compensation Committee of the Board of Directors determines participating employees as well as target awards.

■

All executives will be eligible for participation, excluding executives who were not employed the entire incentive period or are no longer employed on December 31 ^st of the Plan Year.

■

Executive s who are participants as of January 1, 2018 will continue to be eligible during the Plan Year providing their performance meets or exceeds expectations and they are not placed on probation for any disciplinary action initiated within the plan year.

Executive Short-Term Incentive Plan

What are the Incentive Levels?

■

The incentive opportunity for eligible executive tiers as a percent of base salary for the targeted performance are as follows:

TIER	TARGET %
1	50 %
2	40 %
3	30 %
4	25 %
5	20 %
6	15%

■

The Target Incentive Percent for each Tier has been set at a level that will give the participant a realistic opportunity to achieve competitive total cash compensation.

■

Executive Short-Term Incentive Plan (E-STIP) incentives will be based on the participant’s base salary as of January 1, 2018. Any salary changes which occur after that date will not result in an increase or decrease in the participant’s E-STIP incentive opportunity for the fiscal year.

■

If a participant transfers between E-STIP tiers, the Bank will prorate the participant’s incentive based on the number of months worked in each group.

Can I lose my Incentive?

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A participant who terminates employment during the calendar year forfeits the entire annual incentive payment for that year, unless determined other wise by the BOD Chairman.

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Employees who have received an an nual performance rating of Needs Improvement will forfeit their right to any earned E-STIP incentive for the Plan Year.

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Participants are expected to adhere to the policies and procedures of the Bank. The daily activities and behaviors of the Participants are expected to be consistent with their job duties and responsibilities as described in their job description. If in the judgment of Bank management a Participant is not satisfactorily performing their job responsibilities or satisfactorily achieving their objectives, the Bank may temporarily or permanently discontinue or prorate that Participant ’s incentive payments under this Incentive Plan.

Executive Short-Term Incentive Plan

What are the Performance Targets?

■

Performance targets for all participants will be based on one or more performanc e factors. The weight assigned to each performance factor will vary depending on the tier, location and nature of the participant’s position.

■

The bank-wide Net Income (NI) target or other corporate financial targets are approved by the Compensation Committee. All other business unit targets are linked to the corporate financial target.

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Performance targets will be communicated to p articipants as soon as feasible following Compensation Committee approval and previous fiscal year result calculations.

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Each Business Unit is responsible for appraising E-STIP participants on a periodic basis on how actual results compare to targeted performance levels.

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Adjustments to Financial Targets

The annual financial t argets used for E-STIP purposes will generally remain the same during the plan year. The Bank, however, reserves the right to adjust financial goals. Examples of situations that could or will result in an adjustment to a financial goal include:

New Units / Groups : This applies to the financial target(s) for E-STIP Group(s) which are less than 5 years old. Reason: These are generally small units or units resulting from restructuring for which the Bank doesn’t have sufficient information to establish appropriate targets at the beginning of the fiscal year. E-STIP financial targets will be reviewed and finalized by Top Management no later than February 28th of each Fiscal Year.

Non Recurring Events : There are a variety of situations that constitute a Non Recurring Event. For example, branch sales, significant restructuring, a corporate decision to take a one-time restructuring charge, etc. (unintended consequences; positive or negative) Executive Management, subject to Compensation Committee approval, will determine if such events are material enough to merit an adjustment to a previously established financial target.

Executive Short-Term Incentive Plan

What are Tiers ?

Each participant, based on their assigned E-STIP Tier, will receive Performance Targets which total 100%. The goals for the first year of the plan are:

5.5 % Loan Growth will be measured as the change of the 4 ^th Quarter Averages in 2018 compared to the 4 ^th Quarter Averages in 2017.

4 % Core Deposit Growth will also be measured as the change of the 4 ^th Quarter Averages in 2018 compared to the 4 ^th Quarter Averages in 2017.

Annual Net Income of $18.0 million.

Efficiency Ratio below 65.0% for the year ended December 31, 2018 (adjusted for one-time, nonrecurring costs).

The purpose of the tiers is to provide flexibility in the assignment of goals and goal weightings that more appropriately reflect the key performance metrics that executives within the tier can personally impact through their individual performance.

Note: Quarterly scorecards will be provided to measure progress towards these four key goals.

In addition to weighted goals each individual will also have qualifiers identified which clarify specific minimum expectations that must be met to be eligible for incentive earning opportunities. These qualifiers will be included in the eligibility notice provided at the beginning of the fiscal year.

In future years the goals, weightings and qualifiers may change to remain in alignment with the Bank’s strategic plans.

Executive Short-Term Incentive Plan

What are the Performance Levels and Incentive Formulas?

Financial go al results are divided into four different Performance Zones. Each zone has its own incentive formula. The Zones are described as follows:

☐ Z ONE 1 BELOW THRESHOLD

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The pe rformance threshold is set at 75% for most goals and 90% for the Net Income goal. If actual results are below threshold for a goal then no incentive is earned for that goal.

☐ ZONE 2 BETWEEN THRESHOLD AND TARGET

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Once threshold is reached, payout acceler ates sharply between 75% or 90% and 100% of performance at a rate of 2.4% per percent of improvement.

☐ ZONE 3 TARGET

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100% performance achievement results in 100% target payout

☐ ZONE 4 ABOVE ACCEPTABLE RANGE

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Above 100 % of performance the incentive opportunities climb gradually at greater than 1% payout for 1% performance achievement which encourages and provides greater rewards for above target performance.

INCENTIVE MAXIMUM

■

This new plan has a maximum incentive level or cap of 125% payout for any performance equal to or greater than 120% of target.

The chart below illustrates how the E-STIP incentive “Performance Factor” increases or decreases in relationship to Financial Performance (Variance to Target.)

Executive Short-Term Incentive Plan

ZONE	PERFORMANCE RANGE	FORMULA

1 a	Performance Target <75%	No Incentive earned
1b	NI Performance Target <90%	No Incentive earned
2 a	=75% to 99% performance	Begins at 40% and increases @ 2.4% rate
2b	=90% to 99% performance	Begins at 76% and increases @ 2.4% rate
3	=100% performance	100% payout
4	>100% to 120% performance	100% plus 1.25% for each additional percent

Executive Short-Term Incentive Plan

How is the Incentive Calculated?

These are examp les showing how a Tier 5 participant’s incentive would be calculated in various situations. In each example, assume that the participant met their qualifier(s) and had a:

	Base salary of:	$70,000

	Target Incentive Award (%) of:	20%

	Resu lting in a Target Award of:	$14,000

Example 1 – Participant Performance was mixed but above threshold for both goals.

	*Net Income*	*Efficiency* *Ratio*	*Total*
Performance to Target	90%	103%
Payout Percentage	76%	103.75%
Goal Weight	60%	40%	100%
Target Award	$ 8,400	$ 5,600	$14 ,000
Actual Award	$ 6,384	$ 5,810	$ 12,194

Example 2 – Participant Performance was mixed with one goal below threshold and one above.

	*Net Income*	*Efficiency* *Ratio*	*Total*
Performance to Target	8 5%	75%
Payout Percentage	0 %	40%
Goal Weight	60%	40%	100%
Target Award	$ 8,400	$ 5,600	$14 ,000
Actual Award	$ 0	$ 2,240	$ 2,240

Example 3 – Participant Performance was at or above goal.

	*Net Income*	*Efficiency* *Ratio*	*Total*
Performance to Target	105%	100%
Payout Percentage	106.25%	100%
Goal Weight	6 0%	40 %	100%
Target Award	$ 8,400	$ 5,600	$14 ,000
Actual Award	$ 8,925	$ 5,600	$ 14,525

Executive Short-Term Incentive Plan

When is the Incentive Paid?

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Incentive payments are made within 60 days of the end of the Plan year.

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The final incentive earned will be paid from general assets of the Bank.

Who Administers the Plan?

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The Corporation CEO , under the oversight of the Board Compensation Committee, administers this Plan.

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Annual calculation is based on a Performance period of January 1 to December 31 of each year.

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Award calculation will be the respo nsibility of the Finance department subject to review by the CEO.

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The appropriate department is responsible for calculation and tracking of actual performance versus budget / business plan targets (e.g., Finance will track Net Income).

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The Board Compensation C ommittee will have the authority to adjust final awards if, in the judgment of the committee, the results attained either overstate or understate the performance of the individuals involved. Such determination/judgment will be made by December 31 ^st of the Plan Year.

Executive Short-Term Incentive Plan

Appendix A – Incentive Schedule for all goals except NI:

Level of Target Achieved	Incentive Payout %
< 75%	0.000
75%	40.0%
76%	42.4%
77%	44.8%
78%	47.2%
79%	49.6%
80%	52.0%
81%	54.4%
82%	56.8%
83%	59.2%
84%	61.6%
85%	64.0%
86%	66.4%
87%	68.8%
88%	71.2%
89%	73.6%
90%	76.0%
91%	78.4%
92%	80.8%
93%	83.2%
94%	85.6%
95%	88.0%
96%	90.4%
97%	92.8%
98%	95.2%
99%	97.6%
100%	100.0%
101%	101.3%
102%	102.5%
103%	103.8%
104%	105.0%
105%	106.3%
106%	107.5%
107%	108.8%
108%	110.0%
109%	111.3%
110%	112.5%
111%	113.8%
112%	115.0%
113%	116.3%
114%	117.5%
115%	118.8%
116%	120.0%
117%	121.3%
118%	122.5%
119%	123.8%
120%	125.0%
>120%	125.0%

Executive Short-Term Incentive Plan

Appendix B – Incentive Schedule for Net Income Growth goal:

NOTE: The performance threshold for Net Income results is higher than for other goals.

Level of Target Achieved	Incentive Payout %
< 90%	0.000
90%	76.0%
91%	78.4%
92%	80.8%
93%	83.2%
94%	85.6%
95%	88.0%
96%	90.4%
97%	92.8%
98%	95.2%
99%	97.6%
100%	100.0%
101%	101.3%
102%	102.5%
103%	103.8%
104%	105.0%
105%	106.3%
106%	107.5%
107%	108.8%
108%	110.0%
109%	111.3%
110%	112.5%
111%	113.8%
112%	115.0%
113%	116.3%
114%	117.5%
115%	118.8%
116%	120.0%
117%	121.3%
118%	122.5%
119%	123.8%
120%	125.0%
>120%	125.0%