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  • Form 4 (Oct 2, 2014)
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MB Financial DEF 14A 2009

Documents found in this filing:

  1. Def 14A
  2. Graphic
  3. Graphic
  4. Graphic
  5. Graphic
  6. Graphic
mbfi_def14a042209.htm
 

 
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.)

Filed by the Registrant
x

Filed by a Party other than the Registrant
¨

Check the appropriate box:

o
 
Preliminary Proxy Statement
 
¨
 
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
 
x
 
Definitive Proxy Statement
 
¨
 
Definitive Additional Materials
 
¨
 
Soliciting Material Pursuant to Section 240.14a-12
 

MB Financial, Inc. 

(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 

(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)

 
Payment of Filing Fee (Check the appropriate box)

x
 
No fee required.
 
¨
 
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
 
(1)
Title of each class of securities to which transaction applies.
 
 
(2)
Aggregate number of securities to which transaction applies.
 
 
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined).
 
 
(4)
Proposed maximum aggregate value of transaction.
 
 
(5)
Total fee paid.
 
¨
 
Fee paid previously with preliminary materials.
 
¨
 
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
 
(1)
Amount Previously Paid.
 
 
(2)
Form, Schedule or Registration Statement No.
 
 
(3)
Filing Party:
 
 
(4)
Date Filed.
 
 

 



MBFI Logo


800 West Madison Street
Chicago, Illinois 60607
(888) 422-6562



March 5, 2009

Dear Fellow Stockholder:

On behalf of the Board of Directors and management of MB Financial, Inc. (the “Company”), I cordially invite you to attend the Company’s Annual Meeting of Stockholders.  The meeting will be held at 8:30 a.m., local time, on Wednesday, April 22, 2009 at MB Financial Center, located at 6111 North River Road, Rosemont, Illinois.

At the meeting, stockholders will vote on (i) the election of four directors of the Company, (ii) the approval of a proposed amendment of the Company’s charter to lower certain supermajority vote requirements, (iii) an advisory (non-binding) vote on executive compensation, and (iv) the ratification of the appointment of McGladrey & Pullen, LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2009.  The Board of Directors recommends that you vote FOR the election of each of the director nominees named in the accompanying proxy statement and FOR the approval of each of the other proposals.

This year we are using a Securities and Exchange Commission rule to furnish our proxy statement, 2008 Annual Report on Form 10-K and proxy card over the internet to stockholders.  This means that most stockholders will not receive paper copies of these documents as in prior years.  Instead, these stockholders will receive only a notice containing instructions on how to access the proxy materials over the internet.  This rule allows us to lower the costs of delivering the annual meeting materials and reduce the environmental impact of the meeting.  If you received only the notice and would like to receive a copy of the printed materials, the notice contains instructions on how you can request copies of these documents.

I encourage you to attend the meeting in person.  Whether or not you plan to attend, however, please read the enclosed proxy statement and then vote by submitting your proxy as promptly as possible.  Voting as early as possible will save the Company additional expense in soliciting proxies and will ensure that your shares are represented at the meeting.

Thank you for your attention to this important matter.
 
 
            Very truly yours,
 
Mitchell Feiger
 
President and Chief Executive Officer
 
 

 
 
MBFI Logo

800 West Madison Street
Chicago, Illinois 60607
(888) 422-6562

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on April 22, 2009

Notice is hereby given that the Annual Meeting of Stockholders (the “Meeting”) of MB Financial, Inc. (the “Company”) will be held at MB Financial Center, located at 6111 North River Road, Rosemont, Illinois at 8:30 a.m., local time, on Wednesday, April 22, 2009.

The Meeting is for the purpose of considering and acting upon:

1.      the election of four directors of the Company;

 
2.
the approval of a proposed amendment of the Company’s charter to lower certain supermajority vote requirements;

 
3.
an advisory (non-binding) vote on executive compensation;

 
4.
the ratification of the appointment of McGladrey & Pullen LLP, as the Company’s independent registered public accounting firm for the year ending December 31, 2009; and

 
5.
such other matters as may properly come before the Meeting, or any adjournments or postponements of the Meeting.

The Board of Directors is not aware of any other business to properly come before the Meeting.  The Board of Directors recommends a voteFOR the election of each of the director nominees named in the accompanying proxy statement, FOR the approval of the proposed amendment of the Company’s charter, FOR the advisory vote on executive compensation and FOR the ratification of the appointment of McGladrey & Pullen, LLP.

Stockholders of record at the close of business on February 25, 2009 are the stockholders entitled to vote at the Meeting and any adjournments or postponements of the Meeting.  Stockholders may vote in person at the Meeting or by proxy.  Note, however, that if you hold your shares in street name through a bank, broker or other nominee and wish to vote your shares in person at the Meeting, then you must obtain a legal proxy from the holder of record authorizing you to do so by contacting your bank, broker or other nominee.  The Company reserves the right to limit admission to the Meeting to stockholders of record and persons holding shares in street name who provide appropriate documentation of beneficial ownership, such as a recent brokerage account statement.


         By Order of the Board of Directors
 
Mitchell Feiger
 
President and Chief Executive Officer

         Chicago, Illinois
         March 5, 2009
 




 
  IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING.
 

 
 
 

 

PROXY STATEMENT

MB Financial, Inc.
800 West Madison Street
Chicago, Illinois 60607
(888) 422-6562
___________________

ANNUAL MEETING OF STOCKHOLDERS
April 22, 2009


This Proxy Statement is furnished in connection with the solicitation on behalf of the Board of Directors of MB Financial, Inc., a Maryland corporation (the “Company,” “we,” “us,” “our”), of proxies to be used at our Annual Meeting of Stockholders (the “Meeting”) to be held at MB Financial Center, located at 6111 North River Road, Rosemont, Illinois at 8:30 a.m., local time, on Wednesday, April 22, 2009, and all adjournments and postponements of the Meeting.

The accompanying Notice of Annual Meeting and proxy and this Proxy Statement are first being made available to stockholders on or about March 11, 2009.

At the Meeting, our stockholders will be asked to consider and vote upon (i) the election of four directors of the Company, each for a three-year term, (ii) the approval of a proposed amendment of the Company’s charter to lower certain supermajority vote requirements, (iii) an advisory vote on executive compensation and (iv) the ratification of the appointment of McGladrey & Pullen, LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2009.

Certain information in this Proxy Statement relates to our bank subsidiary, MB Financial Bank, National Association (the “Bank”).

We have decided to use the Notice and Access rule adopted by the Securities and Exchange Commission to provide access to our proxy materials over the internet instead of mailing a printed copy of the proxy materials to each stockholder. As a result, on or about March 11, 2009, we will mail to most stockholders only a “Notice of Internet Availability of Proxy Materials” that tells them how to access and review the information contained in the proxy materials and how to vote their proxies over the internet. If you received only this Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you request the materials by following the instructions included in the Notice.

Vote Required and Proxy Information

All shares of the common stock, par value $.01 per share (“Common Stock”) represented at the Meeting by properly executed proxies received prior to or at the Meeting, and not revoked, will be voted at the Meeting in accordance with the instructions on such proxies.  If no instructions are indicated, properly executed proxies will be voted for the election of the nominees named in this Proxy Statement, for the approval of the proposed amendment of the Company’s charter, for the advisory vote on executive compensation and for the ratification of the appointment of McGladrey & Pullen LLP.  If any other matters properly come before the Meeting for action, the persons named in the enclosed proxy and acting thereunder will have the discretion to vote on such matters in accordance with their best judgment.  We are not aware of any other matters to properly come before the meeting.

Directors will be elected by a plurality of the votes cast.  Approval of the proposed amendment of the Company’s charter requires the affirmative vote of the holders of at least 80% of the shares of Common Stock outstanding as of the voting record date.  Approval of the advisory vote on executive compensation and ratification of the appointment of McGladrey & Pullen LLP requires the affirmative vote of a majority of the votes cast on the matter.  In the election of directors, stockholders may vote “FOR” all nominees for election or withhold their votes from any one or more nominees for election.  Votes that are withheld and shares held by a broker, as nominee, that are not voted (so-called “broker non-votes”) in
 

 
the election of directors will not be included in determining the number of votes cast.  For the approval of the proposed amendment of the Company’s charter, the advisory vote on executive compensation and the ratification of the appointment of McGladrey & Pullen LLP, stockholders may vote “FOR,” “AGAINST” or “ABSTAIN” with respect to these matters.  Proxies marked to abstain and broker non-votes will not be counted as votes cast on these matters and will have the effect of votes against the proposed amendment of the Company’s charter and no effect on the advisory vote on executive compensation or the ratification of the appointment of McGladrey & Pullen LLP.  The holders of a majority of the outstanding shares of the Common Stock, present in person or represented by proxy, will constitute a quorum for purposes of the Meeting.

A proxy given pursuant to this solicitation may be revoked at any time before it is voted. Proxies may be revoked by: (i) filing with the Secretary of the Company at or before the Meeting a written notice of revocation bearing a later date than the proxy; (ii) duly executing a subsequent proxy relating to the same shares and delivering it to the Secretary of the Company at or before the Meeting; or (iii) attending the Meeting and voting in person (although attendance at the Meeting will not in and of itself constitute revocation of a proxy).  Any written notice revoking a proxy should be delivered to Doria Koros, Secretary, MB Financial, Inc., 6111 North River Road, Rosemont, Illinois 60018.  If your shares are held in “street name” through a bank, broker or other nominee, you must follow the instructions on the form you receive from your bank, broker or other nominee with respect to revoking your proxy.
 
2

 
Voting Securities and Certain Holders Thereof

Only stockholders of record as of the close of business on February 25, 2009 will be entitled to notice of and to vote at the Meeting.  Each stockholder is entitled to one vote for each share of Common Stock held as of the record date, provided, however, that pursuant to Section F of Article 5 of the Company’s charter, no stockholder who beneficially owns more than 14.9% of the shares of Common Stock outstanding as of that date may vote shares in excess of this limit.  As of that date, 34,934,157 shares of Common Stock were issued and outstanding.  We have no other securities outstanding whose holders are entitled to vote at the Meeting.

The following table sets forth, as of February 25, 2009, certain information as to the beneficial ownership of Common Stock by:  (i) those persons or entities known by us to beneficially own more than 5% of the outstanding shares of Common Stock; (ii) each director and nominee for election as director; (iii) each named executive officer, as defined below under “Executive Compensation – Compensation Discussion and Analysis”; and (iv) all directors and executive officers as a group.  Except as indicated otherwise, the address for each person listed below is: c/o MB Financial, Inc., 6111 North River Road, Rosemont, Illinois 60018.  An asterisk denotes beneficial ownership of less than one percent.

     
Amount and
     
     
Nature of
     
Name of
   
Beneficial
   
Percent
Beneficial Owner
   
Ownership (1)
   
of Class
             
Dimensional Fund Advisors LP
   
2,513,049(2)
   
7.22
1299 Ocean Avenue
           
Santa Monica, California 90401
           
             
Columbia Wanger Asset Management, L.P.
   
3,151,125(3)
   
9.06
227 West Monroe Street Suite 3000
           
Chicago, IL 60606
           
             
David P. Bolger
   
24,754
   
*
Director
           
             
Robert S. Engelman, Jr.
   
104,428
   
*
Director
           
             
Mitchell Feiger
   
634,041
   
1.81
Director and President and Chief
           
Executive Officer of the Company
           
             
Charles J. Gries
   
21,892
   
*
Director
           
             
James N. Hallene
   
54,309
   
*
Vice Chairman
           
 

 
3


     
Amount and
     
     
Nature of
     
Name of
   
Beneficial
   
Percent
Beneficial Owner
   
Ownership (1)
   
of Class
             
Thomas H. Harvey
   
555,316
   
1.60
Chairman of the Board
           
             
Patrick Henry
   
946,204
   
2.72
Director
           
             
Richard J. Holmstrom
   
97,403
   
*
Director
           
             
Karen J. May
   
16,300
   
*
Director
           
             
Ronald D. Santo
   
222,309
   
*
Director and Former Vice President of the
           
Company; and Chairman and Former Group
           
President of the Bank
           
             
Thomas D. Panos
   
130,242
   
*
President and Chief Commercial Banking
           
Officer of the Bank
           
             
Burton J. Field
   
150,940
   
*
Vice President of the Company and President of
           
Lease Banking of the Bank
           
             
Jill E. York
   
73,761
   
*
Vice President and Chief Financial Officer of the
           
Company; Executive Vice President and Chief
           
Financial Officer of the Bank
           
             
Thomas P. FitzGibbon
   
90,745
   
*
Executive Vice President, and President of MB
           
Financial Community Development Corporation
           
             
Directors and executive officers as a group
   
3,273,173
   
9.23
(18 persons)
           
________
(1)  
With respect to the directors and executive officers, includes shares held directly, in retirement accounts, in a fiduciary capacity or by certain affiliated entities or members of the named individuals’ families, with respect to which shares the named individuals and group may be deemed to have sole or shared voting and/or dispositive powers.  Also reflects the holdings of shares of certain of the executive officers through their accounts under our 401(k) profit sharing plan and the holdings of directors and executive officers of units of the Company Common Stock fund pursuant to our stock deferred compensation plan.  In addition, includes shares subject to options which are currently exercisable or which will become exercisable within 60 days of February 25, 2009, as follows:  Mr. Bolger – 18,093 shares; Mr. Feiger – 226,741 shares; Mr. Gries – 2,550 shares; Mr. Hallene – 39,304 shares; Mr. Henry – 13,142 shares; Mr. Holmstrom – 35,513 shares; Ms. May – 10,632 shares; Mr. Santo – 118,143 shares; Mr. Panos – 45,704 shares; Ms. York – 48,868 shares; Mr. Field – 28,714; Mr. FitzGibbon – 26,858 and all directors and executive officers as a group – 659,604 shares.  Also includes 6,413 shares underlying director stock units held by Mr. Gries.
(2)  
As reported by Dimensional Fund Advisors LP (“Dimensional”) in a Schedule 13G amendment filed with the SEC on February 9, 2009.  Dimensional reported having sole voting power over 2,433,273 shares and sole dispositive power over all 2,513,049 shares.
(3)  
As reported by Columbia Wanger Asset Management, L.P. (“Columbia”) in a Schedule 13G filed with the SEC on February 5, 2009.  Columbia reported having sole voting power over 3,059,325 shares and sole dispositive power over all 3,151,125 shares.
 
4

 
PROPOSAL I.  ELECTION OF DIRECTORS

      The Company’s Board of Directors currently consists of ten members.  The Board is divided into three classes, with approximately one-third of the directors serving in each class.  Directors are generally elected to serve for a three-year term or until their respective successors are elected and qualified.

The following table sets forth certain information regarding our Board of Directors, including each director’s term of office. The Board of Directors, acting on the recommendation of the Nominating and Corporate Governance Committee, has approved the nominees identified in the following table.  If a nominee is unable to serve, the shares represented by all properly executed proxies will be voted for the election of such substitute nominee as the Board of Directors, acting on the recommendation of the Nominating and Corporate Governance Committee, may approve.  At this time, the Board of Directors knows of no reason why any nominee named in this Proxy Statement may be unable to serve, if elected.

       
Position (s) Held
 
Director
 
Term of Class
Name
 
Age
 
in the Company
 
Since (1)
 
to Expire
                 
NOMINEES
                 
David P. Bolger
 
52
 
Director
 
2004
 
2012
Robert S. Engelman, Jr.
 
67
 
Director
 
1993
 
2012
Thomas H. Harvey
 
48
 
Chairman of the Board
 
1995
 
2012
Ronald D. Santo
 
66
 
Director
 
1990
 
2012
                 
DIRECTORS WHOSE TERMS EXPIRE IN 2010 AND 2011
                 
Mitchell Feiger
 
50
 
Director and President and Chief
 
1992
 
2010
       
Executive Officer of the Company
       
James N. Hallene
 
48
 
Vice Chairman
 
2000
 
2010
Charles J. Gries
 
63
 
Director
 
2006
 
2010
                 
Patrick Henry
 
69
 
Director
 
1981
 
2011
Richard J. Holmstrom
 
51
 
Director
 
1998
 
2011
Karen J. May
 
51
 
Director
 
2004
 
2011

__________

(1)  
Includes service with the Company’s predecessors prior to the November 6, 2001 merger of equals (the “MB-MidCity Merger”) between MB Financial, Inc., a Delaware corporation (“Old MB Financial”), and MidCity Financial Corporation, a Delaware corporation (“MidCity Financial”), which resulted in the Company in its present legal form.
 
5

 
         The business experience for at least the past five years of each nominee and standing member of the Board of Directors is set forth below.

Nominees

David P. Bolger.>  Mr. Bolger is Chief Operating Officer of Chicago 2016, the effort to bring the 2016 Olympic and Paralympic Games to Chicago.  Prior to assuming that role, he was Executive Vice President and Chief Financial Officer of Aon Corporation, a position he held since early 2003.  Prior to joining Aon, Mr. Bolger worked for 21 years at Bank One Corporation and its predecessor companies, serving in various roles including President of American National Bank & Trust Company of Chicago.  Mr. Bolger serves as Chairman of the Board of Lincoln Park Zoo, and as a director of The Chicago History Museum and Merit School of Music, all of Chicago.  Mr. Bolger also serves on the Alumni Advisory Board of Northwestern University’s J. L. Kellogg School of Management and on the Dean’s Advisory Council of Marquette University’s College of Business Administration.



 
6


Standing Board Members

Mitchell Feiger.  >Mr. Feiger is President and Chief Executive Officer of the Company, positions he held with Old MB Financial from February 1999 until completion of the MB-MidCity Merger.  Mr. Feiger also serves as a director of the Bank.  Mr. Feiger began his career with Touche Ross & Company in 1982, and then in 1984 joined Affiliated Banc Group, a bank holding company which was sold in 1987, where he worked in various capacities until eventually becoming Executive Vice President of Affiliated Banc Group.  Mr. Feiger served as President and a director of Coal City Corporation, which was merged into Old MB Financial (known prior to that merger as Avondale Financial Corp.) in February 1999, from 1992 until the completion of that merger.  He also served as Chief Executive Officer of Coal City Corporation from October 1998 until completion of its merger into Old MB Financial.  Mr. Feiger currently serves as a director of Calamos Asset Management, Inc.




Richard J. Holmstrom.  >Mr. Holmstrom has since 1994 been a partner in and is a co-founder of Menlo Equities LLC, a real estate investment and development company headquartered in Palo Alto, California.  Prior to co-founding Menlo Equities, Mr. Holmstrom was a partner at The Shidler Group, a private real estate investment company with offices across the United States.  Mr. Holmstrom is a member and past president of the Silicon Valley Chapter of the National Association of Industrial and Office Properties.  He is a co-founder and director of New Resource Bank based in San Francisco, California.  Mr. Holmstrom is a Trustee of the UC Berkeley Foundation, and a member of the Advisory Board of the UC Berkeley Haas School of Business.  Other outside board experience includes serving as a director of the Stanford Alumni Association, director of the Consortium for International Development, and director of the International Development Exchange.

Karen J. May.  >Ms. May is Executive Vice President, Global Human Resources of Kraft Foods, Inc.  She joined Kraft Foods in October 2005.  Prior to that, Ms. May was Corporate Vice President, Human Resources, of Baxter International, Inc. and served in that capacity beginning in February 2001.  Ms. May joined Baxter in 1990 as Director, Corporate Audit.  Ms. May held various positions including Vice President/Controller of the U.S. Distribution Business and Vice President of International Finance.  In 1998, Ms. May was named Vice President of Global Planning and Staffing.  In 2000, Ms. May’s responsibilities expanded to include all global human resource functions including compensation, benefits, employee relations, development and employee services.  Prior to joining Baxter, Ms. May worked at PriceWaterhouseCoopers in the Atlanta, Chicago and New York offices.
 
7


Executive Officers Who Are Not Also Directors

Set forth below is a description of the business experience for at least the past five years of each executive officer who is not also a director of the Company.




Thomas P. FitzGibbon, Jr.  >Mr. FitzGibbon, age 64, is Executive Vice President and a director of the Bank.  He also serves as President of MB Financial Community Development Corporation, a subsidiary of the Bank, and President of the MB Charitable Foundation.  Prior to the MB-MidCity Merger, he served as Senior Vice President and Chief Retail Banking Officer of Manufacturers Bank, holding the position of Chief Retail Banking Officer since May 2000 and the title of Senior Vice President since the merger of Manufacturers Bank with Avondale Federal Savings Bank in February 1999 in connection with the Coal City Merger.  Prior to the merger of Manufacturers Bank with Avondale Federal Savings Bank, Mr. FitzGibbon served as Vice President of Avondale Federal Savings Bank from the time of joining Avondale in 1995.  Mr. FitzGibbon served as Vice President of Comerica Bank-Illinois from 1990 to 1995 and Executive Vice President and Chief Lending Officer of Columbia First Bank, FSB, Arlington, Virginia, from 1985 to 1990.  Mr. FitzGibbon has been a principal officer in the banking industry since 1970.



 
8


Brian Wildman.  >Mr. Wildman, age 46, is Executive Vice President, Head of Wealth Management and a director of the Bank.  Prior to joining the Company in 2003, he was First Vice President of Bank One and served in various management positions with its predecessor organization, American National Bank and Trust Company of Chicago, since 1988.  Mr. Wildman also serves as Vice Chairman of the Board of Trustees of Action International Ministries, Inc. and is a member of the Board of Trustees of Missionary Furlough Homes, Inc. 

Director Independence

Our Board of Directors has determined that Directors Bolger, Gries, Hallene, Harvey, Henry, Holmstrom and May are “independent directors,” as that term is defined in Rule 4200 of the Marketplace Rules of the NASDAQ Stock Market.

In making its determination that Directors Bolger, Henry and May are independent, the Board considered the transactions disclosed under “Certain Transactions” with respect to these directors or their family members or affiliated companies.
 
Meetings and Committees of the Board of Directors

The Company’s Board of Directors has standing Executive, Compliance and Audit, Organization and Compensation, and Nominating and Corporate Governance Committees.  During the year ended December 31, 2008, the Company’s Board of Directors met twelve times.  During 2008, no nominee or standing director of the Company attended fewer than 75% of the total number of meetings of the Board of Directors and committees of which he or she was a member held during the period in which he or she served.

The table below shows current membership for each of the standing Board committees:
 
Executive Committee
 
Compliance and Audit Committee
 
Organization and Compensation Committee
 
Nominating and Corporate Governance Committee
             
Thomas H. Harvey *
 
Charles J. Gries *
 
Karen J. May *
 
James N. Hallene *
Robert S. Engelman, Jr.
 
David P. Bolger
 
James N. Hallene
 
Thomas H. Harvey
Mitchell Feiger
 
Richard J. Holmstrom
 
Richard J. Holmstrom
 
David P. Bolger
James N. Hallene
           
Patrick Henry
           
Richard J. Holmstrom
           
             
             
* Committee Chair
           


Executive Committee

The Company’s Executive Committee generally exercises the powers of the full Board of Directors between Board meetings.   During 2008, the Executive Committee did not meet.

Compliance and Audit Committee

      The Compliance and Audit Committee is appointed by the Company’s Board of Directors to provide assistance to the Board in fulfilling its oversight responsibility relating to:

·  
the integrity of our consolidated financial statements and the financial reporting processes,
·  
the systems of internal accounting and financial controls,
·  
compliance with legal and regulatory requirements and our policies,
·  
the independent auditor’s qualifications and independence,
·  
the performance of our internal audit function and independent auditors, and
·  
any other areas of potential financial and compliance risks to us as may be specified by the Board.
 
9

 
The Compliance and Audit Committee also is responsible for:

·  
hiring, retaining and terminating our independent auditors and
·  
monitoring our compliance program, loan review process, senior officer expense reimbursement policies.

The Compliance and Audit Committee operates under a formal written charter, a copy of which may be viewed on our website, www.mbfinancial.com, by clicking “Investor Relations”, “Corporate Governance” and then “Governance Documents”.  The current members of the Compliance and Audit Committee are “independent” as independence for audit committee members is defined in the NASDAQ Marketplace Rules.  Our Board of Directors has designated each of Mr. Gries and Mr. Bolger as an “audit committee financial expert,” as defined in the rules of the Securities and Exchange Commission.  The Audit Committee held ten meetings during fiscal 2008.

Organization and Compensation Committee

The Organization and Compensation Committee is responsible for the design and administration of our overall compensation program.  The Organization and Compensation Committee also is responsible for:

·  
reviewing from time to time our compensation plans and, if the Committee believes it to be appropriate, recommending that the Board amend these plans or adopt new plans;

·  
overseeing the evaluation of our senior management, and recommending to the Board the compensation for our executive officers.  This includes evaluating performance following the end of incentive periods and recommending to the Board specific awards for executive officers;

·  
recommending to the Board the appropriate level of compensation and the appropriate mix of cash and equity compensation for directors;

·  
administering our Omnibus Incentive Plan and any other plans which the Board has determined should be administered by the Committee;

·  
recommending to the Board the amount in total, as well as the terms, of all stock options and other awards under our Omnibus Incentive Plan to all employees and specific grants to executive officers;

·  
recommending to the Board the aggregate amount of the our annual employer contributions under the 401(k) profit sharing plan and non qualified deferred compensation plan.

The charter of the Organization and Compensation Committee does not specifically provide for delegation of any of the authorities or responsibilities of the committee.  The charter does authorize the Organization and Compensation Committee to retain or terminate a compensation consultant to assist the committee in carrying out its responsibilities.  Pursuant to this authority, the Organization and Compensation Committee has, on a biannual basis, retained a consultant to conduct a review of compensation paid to our executive officers.   The mandate of the consultant most recently retained, Amalfi Consulting LLC (“Amalfi”), was to work for the Organization and Compensation Committee in its review of executive compensation practices, including competitiveness of pay levels, design issues, market trends and technical considerations.  In its review, conducted in the second quarter of 2008, Amalfi developed a peer group, accepted by the Organization and Compensation Committee, for the purpose of executive pay and performance benchmarking; reviewed our historical pay-for-performance relationship; benchmarked our target and actual compensation levels relative to competitive market data; reviewed executive perquisites and benefits relative to competitive market data; reviewed existing employment and change in control severance agreements relative to market; and compiled trends focusing primarily on long-term incentive design at peer companies.  Additional information regarding Amalfi’s review, including the companies comprising the most recently compiled peer group, is provided under “Executive Compensation—Compensation Discussion and Analysis.”  Pursuant to our Omnibus Incentive Plan, the Organization and Compensation Committee has delegated authority to designated members of our senior management group to grant equity awards to individuals below the executive officer level who are being recruited from other employers or who are existing employees as a means of encouraging them to remain with the Company and/or rewarding them for exceptional performance.  See “Executive Compensation - Compensation Discussion and Analysis – Long-Term Incentive.”
 
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The Organization and Compensation Committee meets at least two times per year, and more often as needed.  A meeting is held in the first quarter to determine the extent to which annual incentive bonuses have been earned for the prior year, to review executive base salaries and short-term variable incentive award targets, to consider the amount of the annual 401(k) employer match, the amount of the annual profit sharing contribution and the amount of Company contributions to the non-qualified deferred compensation plan.  A meeting is also held generally late in the second quarter to consider the appropriate amount of annual long-term equity incentive grants for recommendation to the Board of Directors for its approval.  At least once per year, the Organization and Compensation Committee reviews a tally sheet for each member of our senior management team, which provide a breakdown of each component of compensation being paid to the executive (i.e., base salary, annual bonus incentive, long-term equity incentives, retirement benefits, perquisites, etc.). In setting the compensation of executive officers other than the Chief Executive Officer, the Organization and Compensation Committee considers the recommendations of the Chief Executive Officer.  For additional information, see “Executive Compensation—Compensation Discussion and Analysis.”

The Organization and Compensation Committee operates under a formal written charter, a copy of which is available on our website, at www.mbfinancial.com, by clicking “Investor Relations”, “Corporate Governance” and then “Governance Documents”. The members of the Organization and Compensation Committee are “independent directors,” as that term is defined in the NASDAQ Marketplace Rules.  During 2008, the Organization and Compensation Committee met six times.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee is responsible for identifying and recommending to the Company’s Board of Directors nominees for election to the Board.  The Nominating and Corporate Governance Committee is also responsible for:

·  
recommending to the Board the appropriate size of the Board and assist in identifying, interviewing and recruiting candidates for the Board;

·  
recommending candidates (including incumbents) for election and appointment to the Board of Directors, subject to the provisions set forth in our charter and bylaws relating to the nomination or appointment of directors, based on the following criteria: business experience, education, integrity and reputation, independence, conflicts of interest, diversity, age, number of other directorships and commitments (including charitable obligations), tenure on the Board, attendance at Board and committee meetings, stock ownership, specialized knowledge (such as an understanding of banking, accounting, marketing, finance, regulation and public policy) and a commitment to our communities and shared values, as well as overall experience in the context of the needs of the Board as a whole;

·  
reviewing nominations submitted by stockholders, which have been addressed to the Corporate Secretary, and which comply with the requirements of our charter and bylaws.  Nominations from stockholders will be considered and evaluated using the same criteria as all other nominations;

·  
annually recommending to the Board committee assignments and committee chairs on all committees of the Board, and recommending committee members to fill vacancies on committees as necessary;

·  
considering and making recommendations to the Board regarding matters related to our director retirement policy;

·  
periodically evaluating emerging best practices with respect to corporate governance matters and making recommendations for Board approval;

·  
conducting, at least annually, a performance assessment of the Board and report its findings to the Board, and at least annually conducting a self-evaluation of the Committee;
 
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·  
reviewing, at least annually, our Code of Ethics and Conduct and, if appropriate, recommending modifications to the code for Board approval and considering any requested waivers of code provisions for directors and executive officers;

·  
establishing procedures for the regular ongoing reporting by Board members of any developments that may affect his or her qualifications or independence as a director and making recommendations as deemed appropriate;

·  
reviewing and approving related party transactions pursuant to the policy for such transactions set forth in our Code of Ethics and Conduct (described under “Certain Transactions”);

·  
recommending to the Board a set of corporate governance principles, and review those principles at least annually.  A copy of our Corporate Governance Principles adopted by the Board is available on the Company’s website, at www.mbfinancial.com, by clicking “Investor Relations”, “Corporate Governance” and then “Governance Documents”, and

·  
performing any other duties or responsibilities expressly delegated to the Committee by the Board.

Pursuant to Article I, Section 6 of our bylaws, nominations for election as directors by stockholders must be made in writing and delivered to the Secretary of the Company not less than 90 days or more than 120 days prior to the date of the stockholders’ meeting.  If, however, less than 100 days’ notice or public announcement of the date of the meeting is given or made to stockholders, nominations must be received by us no later than the close of business on the tenth day after the day on which notice of the date of the meeting is mailed or the day on which public announcement of the date of the meeting is first made, whichever occurs first.  In addition to meeting the applicable deadline, nominations must be accompanied by certain information specified in our bylaws.

The Nominating and Corporate Governance Committee operates under a formal written charter, a copy of which is available on the Company’s website, at www.mbfinancial.com, by clicking “Investor Relations”, “Corporate Governance” and then “Governance Documents”.  The members of the Nominating and Corporate Governance Committee are “independent directors,” as that term is defined in the NASDAQ Marketplace Rules.  During 2008, the Nominating and Corporate Governance Committee met two times.  
 
Stockholder Communications with Directors
 
It is our policy that stockholders have the opportunity to communicate directly with members of the Company’s Board of Directors on appropriate matters.  The Board will respond, or cause us to respond, in writing to communications from stockholders concerning appropriate matters addressed to one or more members of the Board.  Stockholders may communicate with our Board of Directors by writing to:  MB Financial, Inc., Attn: (Name of Director), c/o Corporate Secretary, 6111 North River Road, Rosemont, Illinois  60018.
 
Board Member Attendance at Annual Stockholder Meetings

Although we do not have a formal policy regarding director attendance at annual stockholder meetings, directors are requested to attend these meetings absent extenuating circumstances.  All of our directors serving on the Company’s Board attended last year’s annual meeting of stockholders.
 
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Compensation Discussion and Analysis

In this section, we provide an overview and analysis of our compensation programs, the material compensation policy decisions we have made under those programs, and the material factors that we considered in making those decisions.  Following this section, you will find a series of tables containing specific information about the compensation earned or paid for 2008 to the following individuals, whom we refer to as our “named executive officers”:

·  
Mitchell Feiger, President and Chief Executive Officer of the Company;

·  
Jill E. York, Vice President and Chief Financial Officer of the Company and Executive Vice President and Chief Financial Officer of the Bank;

·  
Thomas D. Panos, President and Chief Commercial Banking Officer of the Bank;

·  
Ronald D. Santo, Former Vice President of the Company and Former Group President of the Bank, and Chairman of the Bank;

·  
Burton J. Field, President, Lease Banking of the Bank and Vice President of the Company; and

·  
Thomas P. FitzGibbon, Jr., Executive Vice President of the Bank and President of MB Financial Community Development Corporation.

The discussion below is intended to help you understand the detailed information provided in those tables and put that information into context within our overall compensation program.

Overview

Several factors impacted our compensation program during 2008 and continue to affect us in 2009.  Financial institutions had a difficult time in 2008.  Although we increased loans, deposits and non-interest income, and fared better than many of our local peer institutions in several measures, we were certainly not immune to the negative effects of the credit crisis and economic downturn.  Our overall financial performance, whether measured by the change in our net income or earnings per share was down significantly from 2007.  The Committee determined, based on management’s recommendation, that the Company-wide performance score under our annual bonus plan for 2008 would be zero on the grounds that the 87% drop in net income and earnings per share in 2008 from 2007 and deterioration in credit quality we experienced during the past year completely overshadowed the positive loan, deposit and non-interest income growth we achieved and our favorable financial performance relative to our local peers. As a result, we did not pay a bonus to Mr. Feiger and either paid no bonus or a reduced bonus to each of our other executive officers.  In addition, no increases in the base salaries of our executive officers have been approved for 2009, although as discussed below, we may increase base salaries or take other actions following a full assessment of the effects of the American Recovery and Reinvestment Act of 2009 on our compensation program.

During 2008, the Organization and Compensation Committee of our Board of Directors (referred to in this section as the “Committee”) retained a new compensation consultant, Amalfi, to assist with the design and implementation of our executive compensation program.  Amalfi was chosen by the Committee because of the firm’s focus on advising financial institutions of our size and the experience of its principals.  Amalfi assisted the Committee with reviewing our executive compensation program, including the peer groups used for comparative compensation, our compensation philosophy and our long-term equity-based incentive program.  This review impacted our compensation program in the following manner:

·  
The Committee updated the peer group against which we benchmark our compensation to reflect financial institutions of comparable asset size, market and asset mix; and
 
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·  
The Committee reaffirmed our compensation philosophy as geared toward rewarding performance in a manner that enables us to attract, retain and motivate talented individuals and create stockholder value.

In addition, we participated in the TARP Capital Purchase Program (referred to in the section as the “TARP Program”) through which the U.S. Treasury Department invested approximately $196 million in our preferred stock and warrants in early December 2008.  The TARP Program mandates that we implement certain restrictions and limitations on executive compensation, in particular severance pay, requires a review to ensure our incentive compensation programs do not encourage our senior executive officers to take excessive risks and limits our tax deductions for senior executive pay.  Our participation in TARP was a catalyst for several actions:

·  
Our executive officers entered into agreements and executed waivers consenting to the restrictions and limitations required by the TARP Program rules;

·  
The Committee and Board of Directors authorized changes to our outstanding stock option and restricted stock awards, and to the special retirement benefit under our employment agreement with Mr. Feiger, in the event of a change in control in order to preserve the objectives of those awards and benefits;

·  
The Committee conducted a review of our incentive programs from a risk perspective and concluded they do not encourage unnecessary or excessive risk; and

·  
The tax deductibility of a portion of the compensation earned by certain of our named executive officers was limited.

On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (the “ARRA”).  The ARRA amends, among other things, the TARP Program legislation by directing the U.S. Treasury Department to issue regulations implementing strict limitations on compensation paid or accrued by financial institutions, like us, participating in the TARP Program.  These limitations are to include:

·  
A prohibition on paying or accruing bonus, incentive or retention compensation for at least the five most highly compensated employees, other than certain awards of long-term restricted stock or bonuses payable under existing employment agreements;

·  
A prohibition on making any payments to the five highest paid executive officers and the next five most highly compensated employees for departure from the Company other than compensation earned for services rendered or accrued benefits;

·  
Subjecting bonus, incentive and retention payments made to the five highest paid executive officers and the next 20 most highly compensated employees to repayment (clawback) if based on statements of earnings, revenues, gains or other criteria that are later found to be materially inaccurate;  

·  
A prohibition on any compensation plan that would encourage manipulation of reported earnings;

·  
Establishment by the Board of Directors of a company-wide policy regarding excessive or luxury expenditures including office and facility renovations, aviation or other transportation services and other activities or events that are not reasonable expenditures for staff development, reasonable performance incentives or similar measures in the ordinary course of business;

· 
Submitting a “say-on-pay” proposal to a non-binding vote of shareholders, whereby shareholders vote to approve the compensation of executives as disclosed pursuant to the executive compensation disclosures included in the proxy statement; such a proposal will be presented at the Meeting, as described in this Proxy Statement under Proposal III. Advisory (Non-Binding) Vote on Executive Compensation; and

· 
A review by the U.S. Department of Treasury of any bonus, retention awards or other compensation paid to the five highest paid executive officers and the next 20 most highly compensated employees prior to February 17, 2009 to determine if such payments were excessive and negotiate for the reimbursement of such excess payments.
 
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    As noted, the ARRA directs the U.S. Treasury Department to issue regulations implementing the foregoing.  There are numerous questions regarding the scope of the limitations and the requirements of the ARRA.  None of the regulations mandated by the law had been issued by the U.S. Treasury Department prior to the finalization of this Proxy Statement.  Pending the issuance of regulations, the Board, Committee and management are reviewing the requirements of the ARRA, its impact on current and going forward compensation, and the effect of the law’s requirements on the Company’s competitive position.  Actions required by consideration of ARRA, competitive factors and our overall compensation philosophy and objectives may include changes to the form and amount of compensation paid to our executive officers, including increases to base salaries, the reduction or elimination of bonus compensation, issuance of long-term restricted stock awards and modifications to existing agreements.

    Except as expressly mentioned otherwise, the following discussion does not address the effect, if any, compliance with the ARRA may have on our executive compensation program and references to the TARP Program refer to its requirements as applicable prior to the ARRA.


Compensation Philosophy and Objectives

The Committee has responsibility for establishing, implementing and continually monitoring adherence with our compensation philosophy.   Our compensation program is designed to attract and retain high caliber people and to motivate and reward key employees for outstanding performance.  During 2008, the Committee engaged in a complete review of our compensation philosophy and program for compensating our executive officers and directors, and were assisted by Amalfi.  As a result of that review, the Committee adopted the following policy and underlying philosophy that our executive compensation program should be to accomplish the following:
 
 
 ·
 Allow us to attract, retain and motivate talented individuals critical to our success;
 
 
 ·
Provide opportunities to integrate pay with achievement of our annual and long-term performance goals;

 
 ·
Encourage achievement of strategic objectives and creation of stockholder value and alignment of employee and stockholder interests;

 
 ·
Recognize and reward individual initiative and achievement; and
 
 
 ·
Maintain an appropriate balance between base compensation and short-and long-term incentive opportunities.

Our executive compensation program combines base salary and target annual cash bonus to establish an executive’s level of total cash compensation.  Base salary is reviewed during the first quarter of each year.  Merit increases are approved by the Committee. Market adjustments, if warranted, are also considered during this time period. These adjustments help insure that we remain competitive.

Bonus opportunities are established at levels intended to provide competitive total cash compensation at target, with the potential to earn higher levels of total compensation for achievement of above target performance.  Actual bonus awards are based on performance assessments.  Bonuses earned in excess of target amounts are generally paid in the form of restricted stock.

A long-term incentive component, which in 2008 consisted of stock options, premium-priced options and restricted stock, is also a significant part of the overall compensation paid to our executive officers. The long-term component and total cash compensation make up an executive’s total direct compensation.  Amounts of long-term incentive awards are determined based on competitive levels and provide the opportunity to realize increased levels of pay as greater levels of stockholder value are created.  Traditionally, we have determined and awarded long-term incentives late in the second quarter of the calendar year.
 
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Bi-annually, we have utilized an external, independent consultant retained by the Committee (most recently Amalfi Consulting) to conduct a review of our total direct compensation paid to members of our senior management team.  This includes comparing (benchmarking) the levels of base salary, total cash compensation and total direct compensation which we provide to our executive officers against the levels provided by a peer group consisting of banks of similar size in Chicago, the Midwest and nationally.  The peer group used from the survey performed by Amalfi in the second quarter of 2008, included the following financial institution holding companies:


Amcore Financial, Inc.
   
Citizens Republic Bancorp, Inc.
Cullen/Frost Bankers, Inc.
   
First Midwest Bancorp, Inc.
PacWest Bancorp
   
Park National Corporation
PrivateBancorp, Inc.
   
Prosperity Bancshares, Inc.
Signature Bank
   
Sterling Bancshares, Inc.
Sterling Financial Corporation
   
Texas Capital Bancshares, Inc.
Trustmark Corporation
   
UMB Financial Corporation
Umpqua Holdings Corp.
   
Valley National Bancorp
Western Alliance Bancorp.
   
Whitney Holding Corporation
Wilmington Trust Corp.
   
Wintrust Financial Corp.


We believe these companies represent a good cross-section of financial institutions which, like us, operate in large Metropolitan areas and are comparable to our asset size and loan portfolio composition.  These institutions ranged in asset size from $4.2 billion to $13.5 billion and maintained a concentration of commercial loans between 50% and 95% of total loans as of December 31, 2007, as compared to our assets of $7.8 billion and commercial concentration of 84% of total loans as of that date.

In keeping with our compensation philosophy, the Committee adopted the following market benchmark and competitive positioning of the elements of our executive compensation program (“Target” refers to pay that would be provided for on-plan, budgeted performance levels and “Max” refers to pay that would be provided at outstanding performance levels relative to plan):
 
   
Total Cash Compensation
 
Total Direct Compensation
Salary
 
(Salary and Bonus)
 
(Salary, Bonus and Long-Term)
                 
   
Target
 
Max
 
Target
 
Max
50th percentile
 
50th percentile
 
75th - 90th
 
50th - 60th
 
75th - 90th
       
percentile
 
percentile
 
percentile
 
Base Salary

Over time, an executive officer’s base salary will reflect a combination of factors, including: competitive pay levels relative to the peer group discussed above; the position’s level of authority, complexity and impact on the achievement of both short-term and long-term corporate goals and objectives; the expertise, experience and skill level of the individual under consideration; the degree to which the officer has achieved his/her management objectives for the previous year; his/her ability to attract highly skilled individuals to the Company and the officer’s overall performance in managing his/her area of responsibility.  Although no quantifiable formula or weighting of the above-mentioned factors is used in the decision-making process, as noted above we generally seek to maintain an executive officer’s base salary level at the 50th percentile of our peers.
 
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The following table shows the base salaries of the named executive officers for 2008:

Name
 
2008 Base Salary
     
Mitchell Feiger
 
$629,000
Jill E. York
 
$294,000
Thomas D. Panos
 
$361,000
Burton J. Field
 
$458,720
Thomas P. FitzGibbon, Jr.
 
$216,300
Ronald D. Santo (1)
 
$347,000

(1)  
Mr. Santo retired as an executive officer of the Company effective September 19, 2008.

Based upon its review, Amalfi advised the Committee that each of the named executive officer’s base salary was at a competitive level when compared to the 50th percentile benchmark (that is, within a range of 15% above or below the benchmark), except for Mr. Field, whose base salary was above the competitive level.  This higher base salary is offset by a lower target bonus percentage and reduced levels of long term awards, bringing Mr. Field’s total compensation within the range of the benchmarks.

Short-Term Variable Incentive (Annual Bonus)

The short-term variable incentive (annual bonus) opportunity for named executive officers is targeted at specified percentage of base salary. Bonuses, if any, are paid during the first quarter following assessment of the prior calendar year’s performance. Bonus amounts earned in excess of the target level are generally paid in two-year restricted stock granted under our Omnibus Incentive Plan, with shares valued on the date the bonus is awarded.  This plan component was established to further improve the retention of high performing employees and to introduce a long term component to the program.  Target bonuses for 2008, as a percentage of base salary were: Mr. Feiger – 65%; Ms. York – 50%; Mr. Panos – 65%; Mr. Field – 26%; Mr. Santo – 50%; and Mr. FitzGibbon – 50%.

The amount of the actual bonus awarded for a particular year depends upon an assessment of  Company-wide financial performance and progress in implementing strategic initiatives, business unit or department performance, an assessment of the executive’s individual contribution to the Company’s performance, and a subjective adjustment, if any, by the Committee.  Mr. Feiger’s annual bonus is based on Company-wide and individual performance scores, and any subjective Committee adjustment.  For all other executive officers, bonuses are calculated based on first combining Company-wide and business unit or department performance scores (with a 60% weighting assigned to Company-wide performance and a 40% weighting assigned to business unit performance), individual performance scores and any subjective adjustments. For example, if an officer’s target bonus amount was $150,000, and  Company-wide performance was scored at 90%, business unit or department performance was scored at 85% and his or her individual performance was scored at 95%, the officer would earn a bonus of $125,400 ($150,000 x ((60% x 90%) + (40% x 85%)) x 95%, prior to any Committee adjustment.

The threshold, target and maximum amounts that could have been payable to the named executive officers for 2008 are set forth in the Grants of Plan-Based Awards table under “Estimated Possible Payouts under Non-Equity Incentive Plan Awards.”  The threshold amount, which generally is the lowest amount potentially payable, assumes Company at 0%, and business unit or department and individual performance scoring at the 50% level.  The target amount assumes scoring each of Company, business unit or department and individual performance at the 100% level.  The maximum amount assumes Company-wide performance at a maximum score of 200% and business unit or department and individual performance each scoring at the 150% level. We do not believe that recognition and reward can be an “all or nothing” proposition.  The lower end of the range reflects the fact that we will not always achieve all of our performance objectives. The higher end of the range was established assuming that in some years, Company-wide and business unit or department performance, as well as the contributions of individual officers to that performance, may be extraordinary and exceed our expectations.  In general, if performance is scored below 50%, bonuses are not paid to executive officers; however, the Committee may, in its discretion, award a bonus to any executive officer if warranted by outstanding individual performance.  No discretionary bonuses were awarded for 2008.
 
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Company-Wide Performance Assessment – 2008

For 2008, the Committee introduced into its method for evaluating Company-wide performance an objective, balanced, scorecard approach.  Under this approach, the Committee selected a balanced set of quantitative measures to go along with the assessment of the implementation of strategic objectives for measuring the Company’s performance.  These objective measures, relative weighting and target performance levels are set forth in the following table. The Committee viewed performance in these areas to be most important to the Company’s continued growth and success.  Local peer institutions are: Amcore Financial, Inc., First Midwest Bancorp, Inc., Midwest Banc Holdings, Inc., Old Second Bancorp, Inc., PrivateBancorp, Inc., Taylor Capital, Inc., and Wintrust Financial Corp.

Objective Measure
 
Target Weight
 
Target (100%) (1)
         
Net Income Goals:
       
         
Core net income, as measured by percentage
       
change from 2007
 
15%
 
+6%
         
Relative EPS, as measured by change in EPS
       
relative to local peers
 
15%
 
Local peer median change in EPS
         
Operating Efficiency:
       
         
Core return on assets as measured by change
       
from 2007
 
10%
 
4 basis point improvement
         
Growth Goals:
       
         
Commercial loan growth, as measured by
       
total growth in commercial, lease,
       
commercial real estate and construction loan
       
balance from year end 2007
 
6%
 
+11%
         
Low cost deposit growth, as measured by
       
growth in low cost deposits over 2007 levels
 
7%
 
+9%
         
Core fee income growth, as measured by
       
growth in fee income over 2007 levels
 
17%
 
+12%
         
Strategic Initiatives:
       
         
Strategic initiatives as measured by
       
successful completion of strategic projects
     
Accomplishments generally in line
identified in annual business plan
 
30%
 
with strategic initiatives
       Total
 
100%
   

(1)  Target represents the performance required to receive 100% of the target weight.

In February 2009, management provided the Committee with an assessment of Company-wide performance as scored against the performance objectives set forth above.  Scoring ranges from 50% for threshold performance to 200% for maximum performance, in each case measured on a scale centered around the target performance level shown in the table above.  As a result of the worsening economic conditions throughout 2008, our levels of core net income and core return on assets fell short of the threshold performance level for these measures. We were also unable to reach the threshold level of growth in low cost deposits, due primarily to movement of deposits by customers to products offering full FDIC insurance coverage and shifting our marketing focus from low cost deposit gathering to increasing CD balances to improve liquidity. Through focused efforts, we were able to exceed targets for commercial loan growth of 13% and core fee income growth of 15% over 2007 levels and, although our year-to-year change in EPS was minus 87%, that performance was significantly
 
18

 
better than our local peers. We met or exceeded our objectives with respect to a majority of our strategic initiatives. Although the performance in these areas produced a positive score, management believed that the substantial drop in year-to-year core net income and EPS resulting from the significant deterioration in credit quality warranted a subjective adjustment reducing the Company-wide score to zero. The Committee accepted the recommendation.

Taking into account the Company’s performance, the Committee granted no bonus to Mr. Feiger for 2008. For the other named executive officers, the zero Company-wide score meant that they would not receive any bonus attributable to Company-wide performance and that the bonus, if any, would be entirely dependent on business unit or department performance and individual performance.

 Business Unit or Department Performance Assessment – 2008.  The assessment of business unit or department performance applied to Messrs. Panos, Santo, Field and FitzGibbon and Ms. York in 2008.  For Messrs. Panos, Santo and Field, the assessment of their business units (Commercial Banking for Messrs. Panos and Santo, and Lease Banking for Mr. Field), included consideration of each unit’s relatively strong performance with respect to growth in loans, deposits and lease originations, and progress toward business initiatives, including targeted additions to the Commercial Banking staff.  However, the positive performance of the Commercial Banking unit was completely offset by the credit losses sustained during the year, resulting in a zero percent scoring for the Commercial Banking business unit.  Lease Banking business results significantly exceeded planned amounts, including strong portfolio credit quality, resulting in above target business unit scoring for Mr. Field.  

The 2008 performance of the Community Development Corporation (“CDC”) headed by Mr. FitzGibbon considered that although loan volume in 2008 was greater than 2007 and the communities served by the CDC expanded in 2008, year end loan outstanding objectives were not reached. As a result, the Committee approved below target business unit scoring for Mr. FitzGibbon.

The performance of the finance department headed by Ms. York was strong in 2008 as the department achieved positive returns from the Company’s investment portfolio by having avoided the riskier investment instruments which contributed to the global credit crunch and improved our liquidity and capital positions in the face of difficult market conditions.  These efforts, as well as others focused on process improvements, merited above target department scoring for Ms. York.

Individual Performance Assessments – 2008

In addition to Company-wide and business unit or department performance, the Committee also considers individual performance. For each individual performance factor, the Committee is provided with a qualitative assessment by Mr. Feiger of the individual contribution of each executive officer (other than himself) to the Company’s performance, with Mr. Feiger scoring each officer’s performance on a scale generally ranging from 0% to 150%.  As with the Company-wide and business unit or department performance, the Committee, after considering Mr. Feiger’s assessment, either accepts or modifies the scoring of each executive officer’s individual performance.  The Committee itself assigns a score to Mr. Feiger’s individual performance, also generally ranging from 0% to 150%, based on their subjective assessment of his contribution to the Company’s performance.

As a result of the zero scoring for Company-wide performance and Commercial Banking business unit performance, individual performance scoring could have no effect on the determination of the bonus for Messrs. Feiger, Panos and Santo and they were not awarded a bonus for 2008.

With respect to Messrs. Field and FitzGibbon and Ms. York, the Committee determined that the level of their individual contribution to be roughly equivalent to the overall level of performance of their respective group resulting in  above target scoring for Mr. Field and Ms. York and scoring below target for Mr. FitzGibbon.

Final Bonus Amounts  – 2008.  

As noted above, the Committee did not award bonuses to Messrs. Feiger, Santo and Panos.

For Messrs. Field and FitzGibbon and Ms. York, the final bonus amount was dependent solely on the business unit or department performance assessment and the individual performance assessment as the Company-wide score was set at zero. Because 40% of the bonus for these executive officers was to be based on business unit or department
 
19

 
performance, business unit and individual performance at target would yield a bonus of 40% of target. The final bonus amounts awarded to Messrs. Field and FitzGibbon and Ms. York were 67%, 29% and 58%, respectively, reflecting the relation of their business unit and individual performance scores to target.

The final 2008 cash bonus amounts approved are set forth in the Summary Compensation table under the “Non-Equity Incentive Plan Compensation” column for 2008.  To the extent required by the ARRA, payments of such amounts may be made in shares of restricted stock which will not fully vest until the Company redeems the preferred stock issued to the U.S. Treasury under the TARP Program.

Long-Term Incentive

Long-term incentives consisted of stock options, premium-priced stock options and restricted stock, are designed to retain key employees and reward them for sustained appreciation in the market value of our Common Stock, thereby directly aligning their interests with the long-term interest of stockholders.  Awards are granted under our Omnibus Incentive Plan. Grants generally are made annually late in the second quarter, based on recommendations of the Committee, on the date of approval by the Board of Directors. This general time period was selected to bifurcate compensation awards allowing for more frequent compensatory recognition of performance.  In addition, grants may be used at any time during the year to facilitate negotiations with individuals who are being recruited to work at the Company and have significant retention packages in place with other employers.   Any such recruitment grants made to individuals below the executive officer level are generally made on the date of hire and are approved by the chief executive officer, provided that the Committee is subsequently informed of the details of such grants at its next meeting.  A recruitment grant to an individual at the executive officer level would need to be approved by the Committee, and the grant date of such award would be the date of Committee approval.  Our Chief Executive Officer also has the authority to grant awards to existing employees below the executive officer level to encourage them to remain with the Company and to reward exceptional performance by these employees.  As with recruitment grants, these grants are reported to the Committee at its next scheduled meeting after the grant.  We do not coordinate the timing of equity award grants with the release of material non-public information.  

In keeping with our overall goal of maintaining an executive officer’s overall compensation package (base salary, bonus opportunity and long-term incentive) at a level of the 50th to 60th percentile of our compensation peer group, the value of long-term incentives for 2008 for the named executive officers were targeted at the following percentages of base salary: 120% for Mr. Feiger, 95% for Mr. Panos, 80% for Ms. York and Mr. Santo, 40% for Mr. FitzGibbon, and 15% for Mr. Field. We evolved to our current mix of long-term incentives for the named executive officers, comprised of 45% stock options granted at market value, 25% stock options granted at a premium to market value and 30% restricted stock, after two adjustments made by the Committee.  The first adjustment in 2004 changed the mix of the long-term incentives from 100% options to 70% options and 30% restricted stock. Although we believed (and continue to believe) that stock options are a critical means of providing an employee incentive for the appreciation of our stock price over the long-term, we shifted to 30% restricted stock because it can be a more effective retention tool, particularly during time periods of slower or negative stock price growth. Retention of key employees is a critical success factor as these individuals differentiate us in the market.  The second adjustment in 2006 changed the 70% option mix to include 25% premium-priced options and 45% market price options.  Premium-priced options are granted at an exercise price above the closing market price of our stock on the date of grant and are intended to reward our executives for stock price appreciation significantly in excess of market value at the time of grant.  We believe that the current mix provides an appropriate performance hurdle that rewards executives for solid shareholder returns and enhances compensation if those returns are exceptional.  

Stock options granted to executives generally have a ten-year term and a four-year cliff vest. The cliff vesting period was selected because it forces executives to hold the option for a minimum of four years and promotes retention of high performers.  Each option grant is evidenced by an option agreement that specifies the exercise price, the duration of the option (generally ten years), the number of shares to which the option pertains, the percentage of the option that becomes exercisable on specified dates in the future and such other provisions as the Committee shall determine.  Options are valued using Black-Scholes methodology. For options granted as part of our core compensation program in 2008, factors utilized for options granted at market price included an expected life of six years, volatility of 18.84%, a dividend yield of 2.95% and a risk free rate of return of 3.67%, resulting in a per share valuation of $4.11.  Premium-priced options have a lower Black-Scholes per share value, resulting in a larger number of shares granted; however, the overall value awarded remains the same. For the premium-priced option grants made in the second quarter of 2008, the exercise price was established at $29.00, a 17.6% premium over the $24.65 closing market price on the grant date.  For 2008, factors for premium-priced options included an expected life of six years, volatility of 18.84%, a dividend yield of 2.95% and a risk free rate of return of 3.67%, resulting in a per share valuation of $2.80.
 
20


The shares of restricted stock granted in the second quarter of 2008 to the named executive officers were based on the $24.65 closing market price on the grant date. Each restricted stock grant is evidenced by a restricted stock agreement that specifies the vesting period, the number of shares of restricted stock granted, and such other provisions as the Committee shall determine.  Restricted stock granted for the long-term incentive component has a cliff vesting period of three years and is intended to enhance the retention of key employees through a longer time horizon than shares which vest incrementally. In addition, the use of restricted stock instead of options reduces the annual number of shares granted to employees as a percentage of overall shares outstanding.

The long-term incentive awards made to the named executive officers during June 2008 are set forth in the Grants of Plan-Based Awards table under the “All Other Stock Awards” and “All Other Option Awards” columns.  Although the amounts of these awards were below target levels for the long-term equity component for Messrs. Feiger, Panos and Santo, and at or above target level for Ms. York and Messrs. Field and FitzGibbon, the level of awards when added to the base salary and annual bonus opportunity components placed each of the named executive officer’s total direct compensation within overall target level of the 50th to 60 percentile of the total direct compensation provided by the peer group.

Retirement and Other Benefits

Each named executive officer participates in our 401(k) profit sharing plan, a tax-qualified plan in which all employees of the Company and its subsidiaries who work at least 20 hours per week are eligible to participate following three months of service.  Participants are able to contribute up to the lesser of 25% of their eligible earnings or the limit prescribed by the Internal Revenue Service on a before tax basis.  We make annual matching contributions to the plan in such amount as is determined by our Board of Directors and may also make profit sharing contributions.  For the 2008 plan year, all employee contributions are fully vested and employer matching contributions vest over two years.  Profit sharing contributions made by the Company vest over six years.

The named executive officers, and certain other executives, are entitled to defer compensation under one of our two deferred compensation plans: the Stock Deferred Compensation Plan and the Non-Stock Deferred Compensation Plan.  For deferrals under the stock plan, the executive’s account balance is credited or debited based on the performance of the assets of the stock plan trust, which are invested solely in Company Common Stock purchased by the plan trustee on the open market, except for such amounts of cash as the trustee deems necessary for the proper operation of the plan trust.  For deferrals under the non-stock plan, the executive’s account balance is credited or debited based on the performance of one or more measurement funds selected by the executive, which in turn are based on certain mutual funds selected from time to time by our trustee to act as investment measurement devices.  We make contributions to the plan in excess of 401(k) plan and profit sharing plan tax limits.  In addition, pursuant to his employment agreement, Mr. Feiger is entitled to a supplemental retirement benefit in the form of an annual credit to his Non-Stock Deferred Compensation Plan account equal to 20% of his base salary.  For additional information, see “Nonqualified Deferred Compensation.”

The named executive officers participate in other employee benefit plans generally available to all employees, including group medical, dental, life and disability plans, in addition to any benefits to which they may be entitled by contract.

Perquisites and Other Personal Benefits
 
We provide the named executive officers with perquisites and other personal benefits that we and the Committee believe are reasonable relative to our peer group and consistent with our overall compensation program to better enable us to attract and retain superior employees for key positions. The Committee periodically reviews the levels of perquisites and other personal benefits provided to the named executive officers.  The incremental costs to us of providing these perquisites and other personal benefits for 2008 to the named executive officers for the fiscal year ended December 31, 2008 are included in the Summary Compensation Table under the “All Other Compensation” column.   Perquisites are generally limited to cars and country club memberships for select officers primarily for use with customers.  Continuation of these perquisites will be subject to the policy on luxury expenditures to be adopted by our Board of Directors as required by the ARRA.

21

 
Employment Agreements; Change in Control Severance Agreements

We have entered into employment or change in control severance agreements with our named and other executive officers. Messrs. Feiger and Field have been parties to an employment agreement with us (or our predecessors) as of 2003 and 1999, respectively. Ms. York and Messrs. Panos and FitzGibbon are parties to change in control severance agreements. We entered into these agreements to be in line with competitive practice, as the use of agreements such as these is commonplace within our peer group and among financial institutions, generally in light of industry consolidations. In addition, we believe these agreements are consistent with our goal of attracting and retaining talented executives, as they help minimize uncertainty that may affect the executive’s performance in circumstances associated with changes in strategic direction and the possibility of change in control of the Company.  See “Employment and Other Agreements with Named Executive Officers.”

Each of the named executive officers is a party to a tax gross up agreement that provides generally that, if he or she receives payments or benefits in connection with a change in control of the Company, then to the extent such payments or benefits constitute “excess parachute payments” under Section 280G of the Internal Revenue Code, he or she generally will be paid an additional amount (referred to as a “gross up payment”) that will offset, on an after tax basis, the effect of any excise tax consequently imposed on him or her under Section 4999 of the Internal Revenue Code.  See “Employment and Other Agreements with Named Executive Officers-Tax Gross Up Agreements.”  The effects of Section 4999 generally are unpredictable and can have widely divergent and unexpected effects based on an executive’s personal compensation history.  Therefore, to provide an equal level of benefit across individuals without regard to the effects of the excise tax, we determined that Section 4999 gross up payments are appropriate for our most senior executives.  In December 2008, at the time we made changes to other agreements in connection with the TARP Program, we modified the tax gross up agreements with our executive officers to remove the Company’s obligation to pay a tax gross-up payment where the compensation and benefits giving rise to the excise tax do not exceed by more than ten percent the amount at which the excise tax is triggered and in such instances to reduce the compensation and benefits otherwise owed to the executive officer to a level below which the excise tax is triggered. We made these changes because this approach avoids obligating the Company to pay a large gross-up payment in circumstances where the adverse impact of the excise tax is not significant.

As discussed further below, due to our participation in the TARP Program, we made certain changes to these agreements, and the payments which may be made under these agreements in the event of the involuntary termination of the employment of the executive officer may be limited.  In addition, the ARRA may affect the timing and amount of payments due in connection with departure from the Company and we may be required to seek modifications of these agreements if required under the ARRA.

TARP Program and ARRA

We participated in the TARP Program through which the U.S. Treasury Department invested approximately $196 million in our preferred stock and warrants in early December 2008.

Under the TARP Program, we:

  (1)   
are prohibited from making golden parachute (severance) payments (payments triggered by involuntary termination of employment that exceed three times the executive officer’s average pay over the past five years) to our senior executive officers (defined by TARP Program as our CEO, CFO and our three highest paid executive officers who are not the CEO or CFO, based on compensation reported in the Summary Compensation Table);

  (2)   
must condition the payment of bonus and incentive compensation paid to the senior executive officers based on financial statements or financial performance to repayment (often referred to as “clawback”) if such financial statements or performance figures later prove to be materially inaccurate;

  (3)   
have reviewed and must annually review our bonus and incentive compensation programs to determine if they encourage our named executive officers to take unnecessary and excessive risks that threaten the value of the Company; and

  (4)   
agreed to limit the tax deduction we take for compensation earned annually by each of the senior  executive officers to $500,000.
 
22

 
As part of the analysis and decision-making relating to our participation in the TARP Program, the Committee and the Board of Directors was apprised of the restrictions and limitations on executive compensation that would be imposed on the Company’s executive compensation program. The Committee and Board of Directors were advised that based on the compensation history of the executive officers and estimates of the severance pay that could become payable to them, the TARP Program limitation on golden parachute (severance) payments would likely have a significant impact on Mr. Feiger and, depending upon the circumstances, on Ms. York and other executive officers.

The Committee and Board noted that the golden parachute limitation on severance payments could result in disparate treatment among the executive officers with respect to their long-term incentive awards upon a change in control transaction.  This differing treatment would arise because the Company’s outstanding long term incentive awards do not automatically vest in full in all change in control transactions and unless such full vesting is agreed to as part of the negotiated change in control transaction, the long-term incentive awards would vest in full upon involuntary termination of employment following the change in control transaction.  Under the TARP Program, the full vesting of an executive officer’s awards on involuntary termination of employment after the change in control could be limited because the vesting in such circumstances would be deemed to be a severance payment subject to the TARP Program limitations.  Whether or not the limitation would actually affect an executive officer will depend on several factors, including whether the executive officer is a “senior executive officer” at the time of involuntary termination of employment, whether the TARP Program limitations continue to be applicable to the Company because the Treasury Department continues to hold our preferred stock, the warrants or equity acquired by exercising the warrants at the time of the involuntary termination, and whether the level of three times the executive officer’s average pay for the preceding five years exceeds the value of the severance payments and the vesting of long term incentive awards.  The Committee and Board determined that the uncertainty associated with the possibility of such divergent treatment among the executive officers could work at cross purposes with the employment and change in control severance agreements which are intended to minimize the uncertainty that may affect the executive officer’s performance or objectivity should a change in strategic direction or the potential change in control transaction arise.  As a result, to maintain the important objectives of our executive compensation program within the context of change in control, we amended the long term incentive awards held by our executive officers to provide for the full vesting of the awards upon the change in control regardless of whether the executive officer’s employment continued or was terminated so that the ability of our executive officers to realize the benefit of those awards in the event of a change in control would not be subject to the uncertainty of the terms of the change in control transaction or the TARP Program’s limitation on severance pay.

In December 2007, we entered into a new employment agreement with Mr. Feiger which, among other things, provided Mr. Feiger with an additional retirement benefit in the form of an annual credit to our Non-Stock Deferred Compensation Plan equal to 20% of his base salary.  We provided Mr. Feiger with this additional benefit at that time primarily in consideration for new restrictive covenants applicable to Mr. Feiger following termination of his employment and for reductions in the termination payments he could receive under the new employment agreement as compared to his prior employment agreement. To provide assurance to Mr. Feiger that he would have the opportunity to receive the full value of this benefit, the new employment agreement provided that in the event of a change in control of the Company followed by Mr. Feiger’s involuntary termination of employment, he would be entitled to receive the present value of the expected annual credits that would be made to the Non-Stock Deferred Compensation Plan through the year of his 60th birthday.  As was the case with respect to the value of the long-term incentive awards, Mr. Feiger’s ability to receive the value of such benefit in the event of a change in control would likely be limited by the TARP Program restrictions if those restrictions remained in place at the time of Mr. Feiger’s termination of employment. As a result, the Board and Committee determined that it was fair and appropriate to preserve the value of the assurances made to Mr. Feiger in December 2007 by entering into a new employment agreement with him to provide for automatic vesting in the full value of the retirement benefit upon a change in control regardless of whether Mr. Feiger’s employment is continued or terminated so that the benefit would not be subject to the uncertainty of the TARP Program’s limitation on severance pay.

In February 2009, the Committee met with the members of management responsible for risk management to review our incentive compensation programs for purposes of determining whether they encourage excessive or unnecessary risk-taking by our senior executive officers.  As part of its review, the Committee received a presentation regarding key enterprise risks to which the Company is subject, including strategic market, liquidity, interest rate, operational, financial, credit quality and other risks.  The Committee also received an analysis of the controls and actions taken to mitigate those risks, as well as the provisions of the Company’s executive compensation program and where those provisions fall within the spectrum of contributing to or alleviating risk.  In reaching the conclusion that the Company’s executive compensation program does not encourage the Company’s senior executive
 
23

 
officers to take excessive or unnecessary risks that threaten the value of the franchise, the Committee and management’s senior risk personnel noted that the Company’s production-oriented goals are centered around less risky areas such as deposit growth and fee income generation, a significant portion of the goals are focused on components of net income that reward efficiencies and adherence to credit quality standards, and our equity awards include long-term vesting periods and a significant amount of restricted stock that encourages balanced risk taking and long-term value creation.  The Committee will conduct a similar review on a semi-annual basis as required by the ARRA.

In addition, the ARRA will require the Company to apply certain limitations to our executive compensation program.  These limitations will be required to remain in effect while the U.S. Treasury holds preferred stock of the Company.  The Committee will review the effect of compliance with the ARRA limitations on the Company’s competitive positioning and ability to retain and motivate our high-performing executives and employees.  Appropriate changes may become critical to our ability to maintain our competitive position.

For information on the potential payments due to the named executive officers in the event of a termination of employment or a change in control and the effect of the TARP Program limitations on those payments, see “Employment and Other Agreements with Named Executive Officers” and “Potential Payments on Termination of Employment and Change in Control.”

Other Tax Considerations and Accounting Considerations

Section 162(m) of the Internal Revenue Code generally eliminates the deductibility of compensation over $1 million paid to certain highly compensated executive officers of publicly held corporations, excluding certain qualified performance-based compensation.  While stock options and stock appreciation rights as a general matter automatically constitute qualified performance-based compensation (provided that certain plan content and grant procedure requirements are met), cash and other stock-based awards (including but not limited to restricted stock) must be subject to stockholder-approved performance criteria in order to so qualify.  In this regard, stockholders approved an amendment to our Omnibus Incentive Plan in 2007 to authorize the awarding of cash and stock-based performance awards that constitute qualified performance-based compensation exempt from the $1 million deductibility limit of Section 162(m).    As a result of our participation in the TARP Program, we agreed to be subject to amendments to Section 162(m) which limit the deductibility of all compensation, including performance based compensation, to $500,000 per executive with respect to any taxable year during which the U.S. Treasury retains its TARP Program investment in the Company.  The TARP Program provides for application of the $500,000 limitation on a pro rata basis with respect to calendar years during which the Treasury Department held its investment for less than the full year, as was the case in 2008 when the Treasury Department held the investment for less than one month.

When our Board of Directors determined to participate in the TARP Program, it was aware of, factored into its analysis and agreed to, the potential increased after-tax cost of our executive compensation program that would arise because of the TARP Program’s $500,000 deduction limitation.  As a result, while the Committee will remain mindful of the deduction limitation, it has concluded that the $500,000 deduction limitation will not be a significant factor in its decision-making with respect to the compensation of our executive officers.

Role of Executive Officers in Determining Compensation

Our Chief Executive Officer, Mr. Feiger, recommends to the Committee base salary, target bonus levels, actual bonus payments and long-term incentive grants for our senior management group (other than himself).  Mr. Feiger makes these recommendations to the Committee based on the data and analysis provided by our independent compensation consultant and qualitative judgments regarding individual performance.  Mr. Feiger is not involved with any aspect of determining his own compensation.
 
24

 
Summary Compensation Table
(2008)

The following table sets forth information concerning the compensation paid to or earned by the named executive officers for 2008, 2007 and 2006:

               
Change in
     
               
Pension Value
     
               
and
     
             
Non-Equity
Nonqualified
All
   
         
Stock
Option
Incentive Plan
Deferred
Other
 
Total
Name and
 
Salary
 
Bonus
Awards
Awards
Compensation
Compensation
Compensation
 
Compensation
Principal Position
Year
($)
 
($) (1)
($) (2)
($) (3)
($) (4)
Earnings ($)
($)
 
($)
                       
Mitchell Feiger
2008
$629,000
 
$     -
$190,691
$432,585
$            -
$     -
$240,172
(5)
$1,492,448
President and Chief Executive
2007
$600,000
 
$     -
$195,391
$421,899
$343,200
$     -
$277,095
 
$1,837,585
Officer of the Company
2006
$551,250
 
$     -
$180,106
$431,580
$227,253
$     -
$129,916
 
$1,520,105
                       
                       
Jill E. York
2008
$294,000
 
$     -
$ 90,609
$149,101
$  84,672
$     -
$ 57,571
(6)
$  675,953
Vice President and Chief
2007
$283,000
 
$     -
$ 62,677
$118,698
$141,500
$     -
$ 60,178
 
$  666,053
Financial Officer of the Company
2006
$272,160
 
$     -
$ 54,669
$ 99,824
$138,802
$     -
$ 56,662
 
$  622,117
and Executive Vice President and
                     
Chief Financial Officer of the Bank
                     
                       
                       
Thomas D. Panos
2008
$361,000
 
$     -
$116,167
$182,818
$            -
$     -
$108,994
(7)
$  768,979
President and Chief Commercial
2007
$350,000
 
$     -
$ 79,996
$149,160
$227,500
$     -
$ 65,589
 
$  872,245
Banking Officer of the Bank
2006
$330,000
 
$     -
$ 64,189
$116,371
$129,641
$     -
$ 59,538
 
$  699,739
                       
                       
Burton J. Field
2008
$419,905
(10)
$     -
$ 40,858
$ 43,483
$ 73,336
$     -
$ 73,725
(11)
$  651,307
President, Lease Banking of the
                     
Bank and Vice President of the
                     
Company (9)
                     
                       
                       
Thomas P. FitzGibbon, Jr.
2008
$216,300
 
$     -
$ 54,918
$132,472
$ 31,225
$     -
$ 29,974
(12)
$  464,889
Executive Vice President, and
                     
President of MB Financial
                     
Community Development
                     
Corporation (9)
                     
                       
                       
Ronald D. Santo
2008
$254,911
 
$     -
$169,399
$136,752
$            -
$     -
$ 48,895
(8)
$  609,957
Former Vice President of the
2007
$321,741
 
$     -
$ 61,984
$358,669
$160,870
$     -
$ 94,025
 
$  997,289
Company and Former Group
2006
$307,125
 
$     -
$ 67,176
$119,788
$120,654
$     -
$ 84,599
 
$  699,342
President of the Bank (13)
                     
 

 
25


  (1)
Bonus amounts for 2008, 2007 and 2006 for the named executive officers are reported under the “Non-Equity Incentive Plan Compensation” column and footnote (4) to that column.
  (2)
Reflects the dollar amounts recognized for financial statement reporting purposes for the years ended December 31, 2008, 2007 and 2006, in accordance with FAS 123R, of restricted stock awarded under our Omnibus Incentive Plan (disregarding for this purpose the estimate of forfeitures related to service-based vesting conditions)and thus may include amounts from awards granted in and prior to 2008, 2007 and 2006. The assumptions used in the calculation of these amounts are included in Note 20 of the Notes to Consolidated Financial Statements contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2009.
  (3)
Reflects the dollar amounts recognized for financial statement reporting purposes for the years ended December 31, 2008, 2007 and 2006, in accordance with FAS 123R, of stock options awarded under our Omnibus Incentive Plan (disregarding for this purpose the estimate of forfeitures related to service-based vesting conditions) and thus may include amounts from awards granted in and prior to 2008, 2007 and 2006. The assumptions used in the calculation of these amounts are included in Note 20 of the Notes to Consolidated Financial Statements contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2009.
  (4)
Represents cash incentive bonus awards earned for 2008, 2007 and 2006; provided that the 2008 amounts may be paid in restricted stock if required to comply with the ARRA prohibition on cash bonus compensation paid or accrued for certain highly paid executive officers and employees.  Not included in the 2007 amounts in the table for Ms. York and Messrs. Panos and Santo are the portions of their incentive bonus awards in excess of their target bonus awards, which were paid in the form of restricted stock granted under our Omnibus Incentive Plan.  The 2007 bonus amounts earned in excess of target for Ms. York and Messrs. Panos and Santo were $45,280, $64,838 and $4,539, respectively, resulting in grants of 1,439, 2,061 and 145 shares of restricted stock respectively, on February 20, 2008, which are scheduled to vest in full on February 20, 2010.
  (5)
Includes non-qualified supplemental retirement contributions under our non-stock deferred compensation plan of $177,393, supplemental disability insurance premiums paid on Mr. Feiger’s behalf of $4,153 and 401(k) matching and profit sharing contributions of $18,790.  Also includes the value of a leased automobile provided to Mr. Feiger of $14,339, and club dues paid on behalf of Mr. Feiger of $25,497.
  (6)
Includes non-qualified supplemental retirement contributions under our non-stock deferred compensation plan of $14,207 and 401(k) matching and profit sharing contributions of $18,790.  Also includes the value of a leased automobile provided to Ms. York of $13,706, and club dues paid on behalf of Ms. York of $10,868.
  (7)
Includes non-qualified supplemental retirement contributions under our stock deferred compensation plan of $26,652, and 401(k) matching and profit sharing contributions of $18,790.  Also includes the value of a leased automobile provided to Mr. Panos of $8,446, and club dues and initiation fees paid on behalf of Mr. Panos of $55,106.
  (8)
Includes non-qualified supplemental retirement contributions under our stock deferred compensation plan of $15,680, supplemental health and life insurance premiums paid on Mr. Santo’s behalf of $4,006 and 401(k) matching and profit sharing contributions of $18,790.  Also includes the value of a leased automobile provided to Mr. Santo of $4,087 and club dues paid on behalf of Mr. Santo of $6,332.
  (9)
No compensation information is provided for Messrs. Field or FitzGibbon for 2007 and 2006 because neither individual was a named executive officer for such year.
 (10)
Excludes $38,815 in salary forgone by Mr. Field during 2008 reflecting reduced pay while working from his second home.
 (11)
Includes non-qualified supplemental retirement contributions under our non-stock deferred compensation plan of $22,377, supplemental health insurance premiums paid on Mr. Field’s behalf of $9,388 and 401(k) matching and profit sharing contributions of $18,790.  Also includes the value of a leased automobile provided to Mr. Field of $9,444, and club dues paid on behalf of Mr. Field of $13,726.
 (12)
Includes non-qualified supplemental retirement contributions under our stock deferred compensation plan of $6,699, 401(k) matching and profit sharing contributions of $18,790.  Also includes the value of a leased automobile provided to Mr. FitzGibbon of $4,485.
 (13)
Mr. Santo retired as an executive officer effective September 19, 2008.
 
Messrs. Feiger and Field have employment agreements with the Company.  Each of Ms. York, and Messrs. Panos and FitzGibbon has a change-in-control severance agreement with the Bank.  For descriptions of these agreements, see “Employment and Other Agreements with Named Executive Officers.”  Explanations of the amounts of salary and bonus in proportion to total compensation are provided under “Compensation Discussion and Analysis.”
 
26

 
Grants of Plan-Based Awards
(2008)

The following table sets forth certain information with respect to grants of plan-based awards to the named executive officers during 2008.
 
   
Estimated Possible Payouts Under
Estimated Future Payouts Under
All
     
   
Non-Equity Incentive Plan Awards (1)
Equity Incentive Plan Awards
Other:
     
       
Stock
All Other
   
               
Awards:
Options
   
               
Number
Awards:
 
Grant
               
of
Number of
Exercise
Date Fair
       
Shares
Securities
Price of
Value of
       
of Stock
Underlying
Option
Stock and
 
Grant
Threshold
Target
Maximum
Threshold
Target
Maximum
or Units
Options
Awards
Options
Name
Date
($) (1)
($) (1)
($) (1)
($)
($)
($)
(#) (2)
(#) (3)
($/Sh)
Awards (4)
                       
Mitchell
02/20/08
 $102,213
 $408,850
 $1,226,550
 -
 -
 -
       
Feiger
06/25/08
 -
 -
 -
 -
 -
 -
 7,349
 -
 
 $181,153
 
06/25/08
 -
 -
 -
 -
 -
 -
 -
 66,275
 $24.65
 $272,390
 
06/25/08
                -
               -
                  -
                -
            -
               -
             -
      54,108
 $29.00
 $151,502
Total
 
 $102,213
 $408,850
 $1,226,550
     
 7,349
 120,383
   
                       
Jill E.
02/20/08
 $14,700
 $147,000
 $396,900
 -
 -
 -
 1,439
   
 $45,280
York
06/25/08
 -
 -
 -
 -
 -
 -
 3,578
 -
 
 $88,198
 
06/25/08
 -
 -
 -
 -
 -
 -
 -
 32,268
 $24.65
 $132,621
 
06/25/08
             -
               -
                 -
                -
            -
               -
             -
      26,344
 $29.00
 $73,763
Total
 
 $14,700
 $147,000
 $396,900
     
 5,017
 58,612
   
                       
Thomas D.
02/20/08
 $23,465
 $234,650
 $633,555
 -
 -
 -
 2,061
   
 $64,838
Panos
06/25/08
 -
 -
 -
 -
 -
 -
 3,130
 -
 
 $77,155
 
06/25/08
 -
 -
 -
 -
 -
 -
 -
 28,231
 $24.65
 $116,029
 
06/25/08
             -
               -
                 -
               -
            -
               -
             -
      23,048
 $29.00
 $64,534
Total
 
 $23,465
 $234,650
 $633,555
     
 5,191
 51,279
   
                       
Burton J.
02/20/08
 $10,918
 $109,175
 $294,773
 -
 -
 -
       
Field
06/25/08
 -
 -
 -
 -
 -
 -
 755
 -
 
 $18,611
 
06/25/08
 -
 -
 -
 -
 -
 -
 -
 6,805
 $24.65
 $27,969
 
06/25/08
              -
                -
                   -
                -
            -
               -
              -
        5,556
 $29.00
 $15,557
Total
 
 $10,918
 $109,175
 $294,773
     
 755
 12,361
   
                       
Thomas P.
02/20/08
 $10,815
 $108,150
 $292,005
 -
 -
 -
       
FitzGibbon,
06/25/08
 -
 -
 -
 -
 -
 -
 1,158
 -
 
 $28,545
Jr.
06/25/08
 -
 -
 -
 -
 -
 -
 -
 10,446
 $24.65
 $42,933
 
06/25/08
               -
                -
                   -
                -
            -
               -
              -
         8,528
 $29.00
 $23,878
Total
 
 $10,815
 $108,150
 $292,005
     
 1,158
 18,974
   
                       
Ronald D.
02/20/08
 $12,746
 $127,456
 $344,131
 -
 -
 -
 145
   
 $4,539
Santo
06/25/08
 -
 -
 -
 -
 -
 -
 2,373
 -
 
 $58,494
 
06/25/08
 -
 -
 -
 -
 -
 -
 -
 21,402
 $24.65
 $87,962
 
06/25/08
               -
                -
                   -
                 -
             -
                -
               -
       17,473
 $29.00
 $48,924
Total
 
 $12,746
 $127,456
 $344,131
     
 2,518
 38,875
   

27


(1)  
For each named executive officer, represents threshold (i.e. generally the lowest amount potentially payable), target and maximum amounts potentially payable under 2008 annual incentive awards.  The target amounts were approved by the Company’s Board of Directors on February 20, 2008.  Performance less than thresholds will generally result in a bonus of zero.  The actual amounts earned under these awards for 2008 are reflected in the Summary Compensation Table under the “Non-Equity Incentive Plan Compensation” column.  For additional information, see “Compensation Discussion and Analysis--Short-Term Variable Incentive (Annual Bonus).”
(2)  
For each named executive officer other than Mr. Santo, represents a restricted stock award under our Omnibus Incentive Plan that is scheduled to vest 100% on June 25, 2011, with the exception of the February 20, 2008 grants to Ms York and Mr. Panos which vest on February 20, 2010, subject to continued employment and acceleration of vesting in certain circumstances.  For Mr. Santo, represents restricted stock awards under our Omnibus Incentive Plan that were originally scheduled to vest on June 25, 2011 and February 20, 2010, but vesting accelerated on September 19, 2008 upon Mr. Santo’s retirement.  Dividends are paid on the shares of restricted stock to the same extent and on the same date as dividends are paid on all other outstanding shares of the Company’s Common Stock.
(3)  
For each named executive officer other than Mr. Santo, represents a stock option grant under our Omnibus Incentive Plan that is scheduled to vest 100% on June 25, 2012, subject to continued employment and acceleration of vesting in certain circumstances.  For Mr. Santo, represents a stock option grant under our Omnibus Incentive Plan that was originally scheduled to vest on June 25, 2012, but vesting accelerated on September 19, 2008 upon Mr. Santo’s retirement.  As reflected in the table, for each of the named executive officers, a portion of each grant was made at an exercise price ($29.00) at a 17.6% premium to the market value of our Common Stock on the grant date ($24.65).
(4)  
Represents the grant date fair value of the award determined in accordance with FAS 123R.  The assumptions used in calculating the grant date fair value of these awards are included in Note 20 of the Notes to Consolidated Financial Statements contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2009.

28


Outstanding Equity Awards at Fiscal Year-End
(2008)

The following table sets forth information with respect to all stock options and unvested restricted stock awards held at December 31, 2008 by the named executive officers.  Vesting and other information relating to these awards set forth in the footnotes below assumes continued employment through the vesting date and is subject to acceleration of vesting in certain circumstances.  See “Potential Payments on Termination of Employment or Change in Control.”

 
Option Awards
Stock Awards
                         
                     
Equity
 
                     
Incentive
Equity
                     
Plan
Incentive
                     
Awards:
Plan Awards
         
Equity
         
Number of
Market or:
         
Incentive
         
Unearned
Payout Value
 
Number of
 
Number of
 
Plan Awards:
         
Shares,
of Unearned
 
Securities
 
Securities
 
Number of
   
Number of
 
Market Value
Units or
Shares, Units
 
Underlying
 
Underlying
 
Securities
   
Shares or
 
of Shares or
Other
or Other
 
Unexercised
 
Unexercised
 
Underlying
Option
 
Units of
 
Units of Stock
Rights
Rights That
 
Options
 
Options
 
Unexercised
Exercise
Option
Stock That
 
That Have
That Have
Have Not
 
Exercisable
 
Unexercisable
 
Unearned
Price
Expiration
Have Not
 
Not Vested
Not Vested
Vested
Name
(#)
 
(#)
 
Options (#)
($)
Date
Vested (#)
 
($) (6)
(#)
($)
                         
Mitchell Feiger
 12,500
(1)
 -
 
 -
 $8.00
7/25/2010
 -
 
 -
 -
 -
 
 25,500
(1)
 -
 
 -
 $16.89
7/31/2011
 -
 
 -
 -
 -
 
 75,000
(1)
 -
 
 -
 $21.21
7/18/2012
 -
 
 -
 -
 -
 
 75,300
(1)
 -
 
 -
 $26.89
7/23/2013
 -
 
 -
 -
 -
 
 38,441
(1)
 -
 
 -
 $37.06
8/24/2014
 -
 
 -
 -
 -
 
 -
 
 39,210
(1)
 -
 $42.70
7/20/2015
 -
 
 -
 -
 -
 
 -
 
 24,451
(1)
 -
 $40.00
7/26/2016
 -
 
 -
 -
 -
 
 -
 
 33,522
(1)
 -
 $35.77
7/26/2016
 -
 
 -