Exhibit 10.14
Executive Incentive
Compensation Plan
Territorial Savings Bank
(“Territorial or the Bank”) has adopted an Executive
Incentive Compensation Plan (EICP) to: 1) motivate executive
officers upon whose judgment, initiative and efforts Territorial
relies to successfully conduct its business; 2) supplement other
compensation plans; and 3) assist Territorial in retaining,
attracting and rewarding such officers.
Safety and Soundness
Considerations
Incentive compensation under this
plan will only be paid if, as of the most recent month end, the
Bank meets all of the following capital ratios as defined by OTS
regulation: 1) a leverage ratio of 5% or greater, 2) Tier 1 (core)
risk-based capital of 5% or greater, and 3) total capital to
risk-based capital of 10% or greater. Incentive compensation will
not be paid if 1) the payments would cause the Bank not to meet the
above-referenced capital ratios immediately after such payment, 2)
there is an outstanding regulatory order, agreement or directive
prohibiting such payment, or 3) such payment would result in a
violation of law or regulation. The Compensation Committee may (but
is not required to) consider for future payment under this plan any
amounts which would have been otherwise payable under this plan if
and when the Bank meets the above-referenced
requirements.
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The Compensation Committee of the Board of
Directors also has the authority not to authorize any payments
under the EICP if the Compensation Committee or Board believes that
payments should not be made regardless of whether other conditions
in the EICP have been met.
Eligible Employees
Employees who have the position of
Chairman of the Board, President and Chief Executive Officer or any
Vice Chairman and Executive Vice President and who are employed by
Territorial on November 30 of each year are eligible to
participate in the EICP. For participants hired or promoted into a
bonus-eligible position after the beginning of the year, the awards
will be prorated based on the date the participant started in the
bonus-eligible position. Participants must be employed by
Territorial at the time awards are paid (after performance results
for the plan year are finalized) in order to be eligible for
payment. The Compensation Committee may waive this pro-ration
formula.
Criteria for Determining
Incentive Compensation – Plan Provisions
The EICP will range from 0% to 70%
of the executive’s salary. The bonus components are
:
Return on Assets (ROA) and Return
on Equity (ROE)
An award of up to 35% of the
executive’s salary amount is based on ROA and ROE targets
each year, equally weighted between these two measurements. There
will be a threshold, target and maximum calculation for both the
ROA and the ROE. These targets
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will be reviewed and, if necessary, adjusted by
the Compensation Committee or the Board each year, and the
Compensation Committee or the Board has the flexibility to change
the targets based on changes in the market as well as changes in
the business plan of the Bank.
No award will be paid for a
criterion if performance on that criterion falls below the
threshold goal (e.g., if threshold ROA is 0.90% and actual ROA is
0.80%, no award is paid for ROA).
If actual performance falls between
goal levels, the award amount is prorated between the levels. For
example, if actual ROA is halfway between target and maximum, the
ROA portion of the annual incentive award will be halfway between
target and maximum award levels.
When calculating the ROA and ROE,
the Compensation Committee shall utilize the financial statements
of the Bank
