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:
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x
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Preliminary
Proxy Statement
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¨
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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¨
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Definitive
Proxy Statement
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¨
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Definitive
Additional Materials
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¨
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Soliciting
Material Pursuant to §240.14a-12
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Flushing
Financial Corporation
(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):
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x
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No
fee required.
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¨
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction
applies:
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(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):
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(4)
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Proposed
maximum aggregate value of
transaction:
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(5)
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Total
fee paid:
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¨
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Fee
paid previously with preliminary
materials.
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¨
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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.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement
No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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FLUSHING
FINANCIAL CORPORATION
1979
Marcus Avenue, Suite E140
Lake
Success, New York 11042
(718)
961-5400
April 9,
2009
Dear
Stockholder:
You are
cordially invited to attend the annual meeting of stockholders of Flushing
Financial Corporation. The annual meeting will be held at the LaGuardia Marriott
located at 102-05 Ditmars Boulevard, East Elmhurst, New York 11369, on May
19, 2009 at 2:00 p.m., New York time. The matters to be considered by
stockholders at the annual meeting are described in the accompanying
materials.
It is
very important that you be represented at the annual meeting regardless of the
number of shares you own. Whether or not you plan to attend the meeting in
person, we urge you to vote as soon as possible. You may vote by marking,
signing and dating your proxy card and returning it in the envelope provided.
Alternatively, you may vote over the Internet or by telephone. Voting over the
Internet, by telephone or by written proxy will not prevent you from voting in
person, but will ensure that your vote is counted if you are unable to attend.
Please review the instructions on the proxy card regarding each of these voting
options.
Your
continued support of and interest in Flushing Financial Corporation are
sincerely appreciated.
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Sincerely,
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Gerard
P. Tully, Sr.
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John
R. Buran
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Chairman
of the Board
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President
and Chief Executive Officer
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FLUSHING
FINANCIAL CORPORATION
1979
Marcus Avenue, Suite E140
Lake
Success, New York 11042
(718)
961-5400
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
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DATE
& TIME:
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May
19, 2009 at 2:00 p.m. New York time
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PLACE:
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LaGuardia
Marriott
102-05
Ditmars Boulevard
East
Elmhurst, New York 11369
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ITEMS
OF BUSINESS
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(1) To
elect four directors for a three-year term and until their successors are
elected and qualified;
(2)
To provide advisory approval of Flushing Financial Corporation’s executive
compensation programs;
(3) To
ratify the appointment of Grant Thornton LLP by the Audit Committee of the
Board of Directors as the Company’s independent registered public
accounting firm for the fiscal year ending December 31, 2009;
and
(4) To
transact such other business as may properly come before the meeting or
any adjournment thereof.
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RECORD
DATE:
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You
are entitled to vote at the annual meeting or any adjournment of that
meeting only if you were a stockholder at the close of business on
Wednesday, March 25, 2009.
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VOTING
BY PROXY:
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Please
submit a proxy as soon as possible so that your shares can be voted at the
meeting in accordance with your instructions. You may submit your proxy
(1) over the Internet, (2) by telephone, or (3) by mail. For specific
instructions, please refer to the information in the proxy statement and
the instructions on the proxy card.
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BY
ORDER OF THE BOARD OF DIRECTORS,
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Maria
A. Grasso
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Corporate
Secretary
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Lake
Success, New York
April 9,
2009
FLUSHING
FINANCIAL CORPORATION
1979
Marcus Avenue, Suite E140
Lake
Success, New York 11042
(718)
961-5400
PROXY
STATEMENT
Annual
Meeting of Stockholders
To
be held on May 19, 2009
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A-1
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This
proxy statement is furnished to holders of common stock, $0.01 par value per
share, of Flushing Financial Corporation (the “Company”), which is the sole
stockholder of Flushing Savings Bank, FSB (the “Bank”). Proxies are being
solicited on behalf of the Board of Directors of the Company (the “Board of
Directors”) to be used at the annual meeting of stockholders to be held at the
LaGuardia Marriott located at 102-05 Ditmars Boulevard, East Elmhurst, New York,
11369 at 2:00 p.m., New York time, on May 19, 2009 and at any adjournment
thereof. Only holders of record of the Company’s issued and outstanding common
stock as of the close of business on the record date, March 25, 2009, are
entitled to notice of and to vote at the annual meeting and any adjournments
thereof. This proxy statement, the accompanying notice of annual meeting of
stockholders, the form of proxy, and the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2008 are first being mailed on or
about April 9, 2009 to all persons entitled to vote at the annual
meeting.
Stockholders
of record as of the close of business on March 25, 2009, the record date, are
entitled to one vote for each share of common stock then held. On the record
date, there were [21,715,809] shares of common stock outstanding and entitled to
be voted and the Company had no other class of equity securities outstanding.
Holders of a majority of the outstanding shares of common stock must be present
at the annual meeting, either in person or represented by proxy, to constitute a
quorum for the conduct of business. In order to ensure a quorum, you are
requested to vote by proxy even if you plan to attend the annual meeting in
person. You can vote by completing the enclosed proxy card and returning it
signed and dated in the enclosed postage-paid envelope. You can also vote over
the Internet or by telephone, as described below.
If your
shares are registered in your name with our transfer agent, you may vote either
over the Internet or by telephone. Specific instructions for voting over the
Internet or by telephone are set forth on the enclosed proxy card. These
procedures are designed to authenticate each stockholder’s identity and to allow
stockholders to vote their shares and confirm that their instructions have been
properly recorded.
If your
shares are registered in the name of a bank or brokerage firm, you may also be
able to vote your shares over the Internet or by telephone. A large number of
banks and brokerage firms are participating in online programs that allow
eligible stockholders to vote over the Internet or by telephone. If your bank or
brokerage firm is participating in such a program, your voting form will provide
instructions. If your voting form does not contain Internet or telephone voting
information, please complete and return the paper proxy card in the
self-addressed, postage-paid envelope provided by your bank or brokerage
firm.
The proxy
solicited by this proxy statement, if properly signed and received by the
Company in time for the annual meeting, or properly transmitted by telephone or
the Internet, and not revoked prior to its use, will be voted in accordance with
the instructions it contains. If you return or transmit a proxy without
specifying your voting instructions, the proxy will be voted FOR election of the
nominees for director described herein, FOR advisory approval of Flushing
Financial Corporation’s executive compensation programs, and FOR ratification of
the selection of Grant Thornton LLP as the Company’s independent registered
public accounting firm for the fiscal year ending December 31, 2009. With
respect to the transaction of such other business as may properly come before
the meeting, each proxy received will be voted in accordance with the best
judgment of the persons appointed as proxies. At this time, the Board of
Directors knows of no such other business.
If you
give a proxy, you may revoke it at any time before it is voted by (1) filing
written notice of revocation with the Corporate Secretary of the Company
(Corporate Secretary, Flushing Financial Corporation, 1979 Marcus Avenue, Suite
E140, Lake Success, New York 11042); (2) submitting a duly executed proxy
bearing a later date; or (3) appearing at the annual meeting and giving the
Corporate Secretary notice of your intention to vote in person.
Directors
are elected by a plurality of the votes cast with a quorum
present. This means that nominees receiving the highest number of
“FOR” votes will be elected as directors. Consequently, shares that
are not voted, either because you marked your proxy card to withhold authority
for all or some of the nominees or you did not complete and return your proxy
card, will have no impact on the election of directors. The advisory
approval of Flushing Financial Corporation’s executive compensation programs and
the ratification of the appointment of Grant Thornton LLP as the Company’s
independent registered public accounting firm requires the affirmative vote of a
majority of the total votes cast on the proposal (whether in person or by proxy)
by holders entitled to vote on the proposal, assuming a quorum is present at the
meeting. Abstentions are considered present for purposes of
determining the presence of a quorum and will not affect the plurality vote
required for the election of directors, but will have the effect of a vote
against the other proposals. Broker non-votes are considered present for
purposes of determining the presence of a quorum, but not entitled to vote, so
they will have no effect on the outcome of any proposal. A “broker
non-vote” occurs when you fail to provide your bank or broker with voting
instructions and the bank or broker does not have the discretionary authority to
vote your shares on a particular proposal under the New York Stock Exchange
rules. Banks and brokers have discretionary authority to vote shares
held in “street name” with respect to the election of directors, advisory
approval of Flushing Financial Corporation’s executive compensation programs,
and ratification of the independent registered public accounting
firm.
The cost
of solicitation of proxies will be borne by the Company. In addition to the
solicitation of proxies by mail, Morrow & Co., Inc., a proxy soliciting
firm, will assist the Company in soliciting proxies for the annual meeting and
will be paid a fee of $5,000, plus reimbursement for out-of-pocket expenses.
Proxies also may be solicited personally or by telephone or telecopy by
directors, officers and employees of the Company or the Bank, without additional
compensation to these individuals. The Company will also request persons, firms
and corporations holding shares in their names, or in the name of their
nominees, which are beneficially owned by others, to send proxy materials to and
obtain proxies from such beneficial owners, and will reimburse such holders for
reasonable expenses incurred in connection therewith.
The Company’s proxy statement and
annual report to stockholders for the year ended December 31, 2008 are available
at http://materials.proxyvote.com/343873.
ELECTION
OF DIRECTORS
The Board
of Directors of the Company currently consists of 12 directors divided into
three classes, each comprised of four directors. The directors hold
office for staggered terms of three years (and until their successors are
elected and qualified). One of the three classes is elected each year
to succeed the directors whose terms are expiring. The directors in
Classes C and A are serving terms expiring at the annual meeting of stockholders
in 2010 and 2011, respectively.
The
directors in Class B, whose terms expire at the 2009 annual meeting, are Steven
J. D’Iorio, Louis C. Grassi, Sam Han, and John E. Roe, Sr. Each of
these directors has been nominated by the Board of Directors, upon the
recommendation of its Nominating and Governance Committee, to stand for election
for a term expiring at the annual meeting of stockholders to be held in 2012.
Each of these nominees has consented to being named in this proxy statement as a
Board nominee and to serve if elected.
Unless
otherwise instructed, it is the intention of the proxy holders to vote the
proxies received by them in response to this solicitation FOR the election of
the nominees named above as directors. If any such nominee should refuse or be
unable to serve, the proxies will be voted for such person as shall be
designated by the Board of Directors to replace such nominee. The Board of
Directors has no reason to believe that any of the Board nominees will refuse or
be unable to serve as a director if elected.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
“FOR”
ELECTION OF THE ABOVE NOMINEES AS DIRECTORS.
The
following table sets forth certain information regarding the Board nominees and
members of the Board of Directors of the Company whose terms will continue after
the annual meeting. Franklin F. Regan, Jr. retired from the Board of Directors
on July 1, 2008.
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Name
|
Age(1)
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Position(s) with the
Company
|
Director
Since(2)
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Term
Expires
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Gerard
P. Tully, Sr.
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81
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Chairman
of the Board
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1967
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2010
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John
R. Buran
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59
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President,
Chief Executive Officer and Director
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2003
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2010
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James
D. Bennett
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70
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Director
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1998
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2010
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Steven
J. D’Iorio
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59
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Director
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2004
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2009(3)
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Louis
C. Grassi
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53
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Director
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1998
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2009(3)
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Sam
Han
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55
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Director
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2007
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2009(3)
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Michael
J. Hegarty
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69
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Director
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1987
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2011
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John
J. McCabe
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65
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Director
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2003
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2011
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Vincent
F. Nicolosi
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69
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Director
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1977
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2010
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Donna
M. O’Brien
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53
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Director
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2004
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2011
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John
E. Roe, Sr.
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75
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Director
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1968
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2009(3)
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Michael
J. Russo
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74
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Director
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1984
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2011
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_________________
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(1)
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As
of December 31, 2008.
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(2)
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Where
a director’s period of service relates to a period prior to May 9, 1994,
the date of the Company’s incorporation, the period specified relates to
the date the individual commenced service as director or trustee of the
Bank or its predecessor.
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(3)
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Nominee
for re-election at the 2009 annual meeting for a term expiring in
2012.
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Set forth
below is certain information with respect to the nominees and other directors of
the Company. Unless otherwise indicated, the principal occupation listed below
for each person has been his or her principal occupation for the past five
years.
Steven J. D’Iorio is the Vice
President of Real Estate for Time Warner. Mr. D’Iorio has over
30 years experience in commercial real estate construction and project
management. Mr. D’Iorio has held senior management positions with National
Westminster Bank, Olympia & York, and Grand Central Building,
Inc.
Louis C. Grassi is Managing
Partner and President of Grassi & Co., CPA’s, P.C. located in Lake Success,
New York, with a practice in accounting, tax and management consulting
services. Mr. Grassi is also a partner and the President of Grassi
Consulting and of GCM Systems, a computer company. He is a licensed
certified fraud examiner, an author and an editor of a national tax and
accounting publication. Mr. Grassi is a member of the Board of
Directors of BRT Realty Trust.
Sam Han is currently President
and Founder of The Korean Channel, Inc. and has over 20 years of business
experience within the broadcast media industry. Mr. Han started the first
Korean-American cable TV station in 1985, which is today the only premiere 24
hour Korean broadcasting company servicing the Greater Tri-State area on Time
Warner and Cablevision. Mr. Han brought Korea’s largest newspaper (Chosun Ilbo)
to New York and, in 2003, launched a Korean FM radio station. In 1994, Mr. Han
published a book in South Korea titled “How to Operate CATV: Marketing Strategy
and Management Know-How for Retaining Customers”. For his contributions to the
media industry and local community, Mr. Han was recently awarded the 2006 Ellis
Island Medal of Honor, a rare recognition from both the House of Representatives
and Senate. He currently is an advisor and board member to the Flushing
Town Hall.
John E. Roe, Sr. is Chairman
of the Board of City Underwriting Agency, Inc., insurance brokers, located in
Lake Success, New York.
Gerard P. Tully, Sr. has
served as Chairman of the Board of the Company since its formation in 1994, and
as Chairman of the Board of the Bank since 1980. Mr. Tully served as Chief
Executive Officer of the Bank from 1981 through 1989. Mr. Tully is an officer
and a director of Van-Tulco, Inc., Tulger Contracting Corp. and Tulger
Construction Corp., which are construction companies, Bainbridge Avenue Corp.,
1620 Ralph Avenue Corp. and Contractors Associates Inc., which are real estate
holding companies, and Whitestone Properties Associates, Inc., a real estate
management company.
John R. Buran has served as
President and Chief Executive Officer of the Company and the Bank since July
2005. Prior to that, he served as Executive Vice President and Chief
Operating Officer of the Company and the Bank from January 2001 until June
2005. Prior to joining the Company, Mr. Buran held a variety of
positions within the Banking industry, including Executive Vice President of the
New York Metro Division of Fleet Bank and Vice President New York Investment
Sales at Citibank. Mr. Buran serves on the Board of Neighborhood
Housing Services of New York where he chairs its Audit Committee. He is also a
Trustee of St. Joseph’s College and a member of its Finance
Committee.
James D. Bennett is of counsel
with the law firm of Farrell, Fritz, P.C. in Uniondale, New York, with a
practice in civil law and real estate. He also serves as Chief Executive Officer
of Land Enterprises, Inc., a realty investment and management firm. Prior to
July 2001, Mr. Bennett was a partner in the realty law firm of Bennett, Rice
& Schure, LLP in Rockville Centre, New York. In the past, he has served as a
Trustee of both the Long Island Power Authority and the New York State
Conservation Fund Advisory Council, as Supervisor and a Councilman of the Town
of Hempstead, and as a Commissioner of the New York State Public Service
Commission.
Michael J. Hegarty served as
President and Chief Executive Officer of the Company and the Bank from October
1998 until his retirement in June 2005. He joined the Company as Executive Vice
President and Corporate Secretary and the Bank as Executive Vice President and
Chief Operating Officer in 1995. Prior to that, he was Vice President–Finance as
well as Corporate Secretary and Treasurer and a director of EDO Corporation, a
manufacturer of defense systems and components.
John J. McCabe has served as
Chief Investment Strategist of Shay Assets Management, Inc. for the past ten
years and is co-manager of each of the following funds managed by Shay Assets
Management: John Hancock Large Cap Select Fund and the Asset
Management Fund Large Cap Equity Institutional Fund. He has also served as
Managing Director of Sterling Manhattan Corp., an investment banking firm, and
spent 19 years at Bankers Trust Company serving in various capacities, including
Managing Director of the Investment Management Group, Director of Investment
Research and member of the Senior Investment Policy Committee. Mr. McCabe is a
past director of the New York Society of Security Analysts, having served twice
as its President. He is a past director of the Financial Analysts Federation and
a Founding Governor of the CFA Institute. He is also an Adjunct Professor of
Finance at St. Francis College and serves on the board of the American
Geographical Society.
Vincent F. Nicolosi is a
partner in the law firm of Nicolosi & Nicolosi in Manhasset, New
York. For over 25 years, he has been engaged in the practice of law
with an emphasis on civil litigation. Since December 1998, Mr. Nicolosi has
served as a Commissioner of the New York State Investigation Commission. Mr.
Nicolosi served as a Queens Assistant District Attorney from 1967 to 1972. From
1973 to 1980, Mr. Nicolosi was a member of the New York State Assembly, serving
as Chairman of the Assembly Insurance Committee from 1977 to 1980.
Donna M. O’Brien has served as
President of Community Healthcare Strategies, LLC, a healthcare consulting
organization, since its formation in 2007. Ms. O’Brien also has a
nationally focused consulting practice in healthcare strategy and
clinical/research program development. She currently serves on the Board of
Regents of Seton Hall University and on its Finance, Audit, and Academic Affairs
Committees. Ms. O’Brien has served as Executive Vice President and Chief
Administrative Officer of Catholic Health Services of Long Island, Associate
Director of the Alliance for Catholic Health and Human Services in New York and
as Assistant Administrator for Hospital Administration at the University of
Texas M.D. Anderson Cancer Center in Houston, Texas. Ms. O’Brien was a member of
the Governor of New York State Commission on Healthcare Facilities for the
Twenty First Century. She was a founding board member of the Christus
Health System, a 40 hospital system in Dallas, Texas. Ms. O’Brien has served as
a director of several national and local healthcare organizations. She is a
graduate of the College of Holy Cross and has her master’s degree in Health
Administration from St. Louis University. She is a Fellow in the American
College of Healthcare Executives.
Michael J. Russo is
self-employed as a consulting engineer and serves as Chairman of the Board and
Corporate Secretary of Fresh Meadow Mechanical Corp., a mechanical contracting
firm. Mr. Russo is President and Director of Operations of
Northeastern Aviation Corp., an aircraft charter and management firm, and is a
partner in AMF Associates, a commercial real estate company. Mr. Russo also
serves as Chairman of the Board of Trustees of Flushing Hospital Medical
Center. Prior to retiring in 2004, Mr. Russo served as Chairman
of the Board of Anthony Russo, Inc., a general contracting firm, for over 40
years.
The
following persons currently serve as executive officers who are not directors of
the Company.
|
Name
|
Age(1)
|
Position(s) with the
Company
|
|
David
W. Fry
|
58
|
Executive
Vice President, Treasurer and Chief Financial Officer
|
|
Maria
A. Grasso
|
44
|
Executive
Vice President, Chief Operating Officer and Corporate
Secretary
|
|
Francis
W. Korzekwinski
|
46
|
Executive
Vice President and Chief of Real Estate Lending
|
|
Barbara
A. Beckmann
|
50
|
Senior
Vice President
|
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Allen
Brewer
|
56
|
Senior
Vice President
|
|
Astrid
Burrowes
|
44
|
Senior
Vice President
|
|
Ruth
E. Filiberto
|
50
|
Senior
Vice President
|
|
Patricia
Mezeul
|
49
|
Senior
Vice President
|
|
Ronald
Hartmann
|
53
|
Senior
Vice President
|
|
Jeoung
Jin
|
42
|
Senior
Vice President
|
|
Theresa
Kelly
|
47
|
Senior
Vice President
|
|
Robert
G. Kiraly
|
53
|
Senior
Vice President
|
|
Soo
Hyun Suh
|
47
|
Senior
Vice President
|
|
William
J. Weichsel
|
59
|
Senior
Vice President
|
____________________
|
(1)
|
As
of December 31, 2008.
|
Set forth
below is certain information with respect to the executive officers who are not
directors of the Company.
David W. Fry has been
Executive Vice President, Treasurer and Chief Financial Officer of the Company
since July 2007. Mr. Fry had been Senior Vice President, Treasurer and Chief
Financial Officer of the Company since July 2004. Mr. Fry joined the
Company in 1998 as Vice President/Controller. Prior to joining the Company, he
held senior management positions at Home Federal Savings Bank, Anchor Savings
Bank, and City Federal Savings Bank. Mr. Fry is a certified public
accountant (inactive).
Maria A. Grasso has been
Executive Vice President and Chief Operating Officer of the Company since May
2006. Prior to joining the Company, she was Senior Vice President of
the Long Island Queens Division of The Bank of New York. From 1997 to
2002, she was Senior Vice President NY Metro Division of Fleet Bank, N.A. Prior
to that, she held several senior management positions at NatWest Bank and Chase
Manhattan Bank, N.A
Francis W. Korzekwinski has
been an Executive Vice President and Chief of Real Estate Lending of the Company
since December 2006. Prior to that, he had been a Senior Vice
President of the Company since 1999. Mr. Korzekwinski joined the Company in 1993
as Assistant Vice President of Commercial Real Estate and was promoted to Vice
President in 1995. Prior to joining the Company, Mr. Korzekwinski was Vice
President, Mortgage Officer at Bankers Federal Savings Bank, FSB for five years.
Prior to that, he served as Vice President of Secondary Marketing for a mortgage
banking company.
Barbara A. Beckmann has been
Senior Vice President/Director of Operations of the Company since February 2008.
Ms. Beckmann joined the Company in 2006 as Vice President and Operations
Manager. Prior to joining the Company she was a Vice President and
Division Operations Manager for The Bank of New York. From 1997 to 2004, she
held several management positions at FleetBoston Financial, including Vice
President, District Operations Manager and New York Risk Management Team
Leader.
Allen Brewer has been Senior
Vice President/Chief Information Officer of the Company since December 2008.
Prior to joining the Company, he served as President of ALEL Management
Corporation, a technology consulting firm, since 2007. Mr. Brewer held the
position of Executive Vice President at Alliance Consulting, a global IT
solutions organization servicing the financial services industry, from 2004 to
2008. Prior to that, Mr. Brewer served as Chief Information Officer of Corporate
Systems at American International Group, Vice President at J.P. Morgan Chase,
and Managing Director for Global Cash Management at Citigroup.
Astrid Burrowes has been
Senior Vice President and Controller of the Company since March 2008. Prior to
joining the Company, from 1998 to 2008, she was Senior Vice President and
Controller of Delta Financial Corporation, a mortgage banking company. From 1994
to 1998, she was with KPMG, LLP, a public accounting firm. From 1984 to 1994,
Mrs. Burrowes held various positions at Roslyn Savings Bank. Mrs. Burrowes
is a certified public accountant.
Ruth E. Filiberto has been
Senior Vice President/Director of Human Resources of the Company since August
2007. Prior to joining the Company, Ms. Filiberto held various positions,
including Vice President/Director, within the Human Resource department at First
Data Corporation from 1993 to 2006.
Patricia Mezeul has been
Senior Vice President/Director of Government Banking of the Company since
January 2008. Prior to joining the Company, Ms. Mezeul held the position of Vice
President, Senior Team Leader for Commerce Bank from 2002 to 2008 where she
successfully established a Government Banking team.
Ronald Hartmann has been
Senior Vice President/Commercial Real Estate Lending of the Company since
February 2007. Mr. Hartmann joined the Company in December 1998 as Assistant
Vice President/Loan Officer. Mr. Hartmann was promoted to Vice President/Loan
Officer in 2000. Prior to joining the Company, Mr. Hartmann was Vice
President Commercial Real Estate Lending Officer for Long Island Savings Bank,
and prior to that he served as Senior Vice President in charge of Loan Workouts
for Crossland Federal Savings Bank.
Jeoung (A.J.) Jin has been
Senior Vice President/Residential & Mixed-Use Real Estate Lending of the
Company since February 2007. Mr. Jin joined the Company in July 1998
as Assistant Secretary/Commercial Loan Officer. Mr. Jin was promoted to
Assistant Vice President/Commercial Loan officer in 2000 and to Vice
President/Mortgage Loan Officer in 2002. Prior to joining the Company, Mr. Jin
was Assistant Vice President, Consumer Lending Loan Officer at Korea Exchange
Bank, and prior to that he held the position of Loan Administrator at Korea
First Bank of New York.
Theresa Kelly has been Senior
Vice President/Business Banking of the Company since May 2006. Prior
to joining the Company, Ms. Kelly held various Senior Vice President
positions within the Commercial Banking Group and Business Financial Services
Group for Bank of America since 2000. Prior to her work at Bank of
America, Ms. Kelly worked at Citibank as Senior Relationship Manager-Business
and Professional Sales.
Robert G. Kiraly has been
Senior Vice President/Chief Internal Auditor of the Company since June
2007. Mr. Kiraly joined the Company in July 2006 as First Vice
President & Chief Auditor. Prior to joining the Company, Mr. Kiraly held
senior management positions at New York Community Bank and Long Island
Commercial Bank in the Executive Oversight group since 2004. Prior to that, Mr.
Kiraly was the Audit Director for Sumitomo Trust & Banking Co. for over ten
years.
Soo Hyun (Charlie) Suh has
been Senior Vice President/Asian Market of the Company since December 2007.
Prior to joining the Company, Mr. Suh held the position of Senior Vice
President/Chief Financial Officer at Global Business Network Group. From 2002 to
2004 he held the position of Vice President/Small Business Relationship Manager
for Fleet Bank.
William J. Weichsel has been
Senior Vice President/Chief Investment Officer of the Company since June of
2007. Mr. Weichsel joined the Company in 2000 as Vice President/Chief Investment
Officer. He was promoted to First Vice President/Chief Investment Officer in
July 2006. Prior to joining the Company, he held financial management positions
at Poughkeepsie Savings, Security Pacific Merchants Bank and the U.S. Treasury
Department.
The Board
of Directors has determined that nine of the twelve members of the Board are
independent under the Nasdaq director independence standards. Under
these standards, a director is not independent if he or she has certain
specified relationships with the Company or any other relationship that, in the
opinion of the Board, would interfere with the exercise of independent judgment
as a director. Mr. Buran is not independent because he is an
executive officer of the Company. Mr. Tully is not deemed independent as a
result of the consulting fees he receives from the Company and the
Bank. Mr. Nicolosi is not deemed independent as a result of the legal
fees he receives from the Bank. In evaluating the independence of the remaining
directors, the Board considered the payments described below under the headings
“Director Compensation—Fee Arrangements” and “Corporate Governance—Transactions
with Related Persons, Promoters and Certain Control Persons” and determined that
they did not impair independence.
The Board
of Directors meets on a monthly basis and may have additional special meetings
upon the request of the Chairman of the Board, the President or a majority of
directors in office at the time. During 2008, the Board of Directors held
12 regular meetings and five special meetings. No director
attended less than 75% of the meetings of the Board of Directors and its
committees on which they served. The Board of Directors has established the
following committees, among others:
Compensation
Committee. The
Compensation Committee is composed of Messrs. Russo (Chairman), Grassi, Han and
Roe, and Ms. O’Brien, all of whom are independent under Nasdaq corporate
governance standards. This committee has primary responsibility for establishing
and administering the compensation and benefit programs of the Company for its
executive officers and other key personnel, administering formula awards to
members of the Board of Directors who are not employees of the Company or the
Bank (“Outside Directors”) under the Company’s 2005 Omnibus Incentive Plan, and
recommending to the Board of Directors awards to employees under the Company’s
2005 Omnibus Incentive Plan. The Compensation Committee does not have a
charter. This committee meets on an as needed basis. During 2008,
this committee met four times. The Report of the Compensation Committee is
included on page 24.
Audit
Committee. The
Audit Committee is composed of Messrs. Grassi (Chairman), Hegarty, Roe, and
Russo and Ms. O’Brien, all of whom are independent under Nasdaq corporate
governance standards and satisfy the SEC independence requirements for audit
committee members. This committee meets at least quarterly to assist the Board
of Directors in meeting its oversight responsibilities. The Audit Committee has
sole authority to appoint and replace the Company’s independent registered
public accounting firm and is directly responsible for the compensation and
oversight of the work of that firm. This committee reviews the results of
regulatory examinations, the financial reporting process, the systems and
processes of internal control and compliance, and the audit process of the
Company’s independent registered public accounting firm. This committee also has
the authority to engage independent counsel and other advisers. The
charter of the Audit Committee is not available on the Company’s website, but is
attached as Appendix A. During 2008, this committee met five
times. The Report of the Audit Committee is included on page
42.
Nominating and
Governance Committee. The
Nominating and Governance Committee is composed of Messrs. Roe (Chairman),
Bennett, McCabe and Russo, all of whom are independent under Nasdaq corporate
governance standards. This committee has primary responsibility for recommending
to the Board of Directors the slate of director nominees to be proposed by the
Board for election by the stockholders (as well as any director nominees to be
elected by the Board to fill interim vacancies). The committee also recommends
the directors to be selected for membership on the various Board committees and
the chairs of those committees. The committee is responsible for developing and
recommending to the Board appropriate corporate governance policies and
procedures and for approving proposed related party transactions involving
directors or executive officers and the Company. The charter of the Nominating
and Governance Committee is not available on the Company’s website, but was
attached as Appendix A to the Company’s proxy statement for its 2007 annual
meeting of stockholders. This committee held two meetings during
2008.
Other
Committees. In
addition to the committees described above, the Board of Directors has
established an Executive Committee, an Insurance Committee, and an Investment
Committee.
Bank Board and
Committees. The
business of the Bank is conducted at regular and special meetings of the Bank’s
Board of Directors (the “Bank Board”) and its committees. The Bank Board and the
Board of Directors are identically constituted. During 2008, the Bank Board held
12 regular meetings and five special meetings. The Bank Board maintains
Executive, Insurance, Investment, Compensation and Audit Committees. The
membership of these committees is the same as that of the comparable committees
of the Company’s Board of Directors. These committees serve substantially the
same functions at the Bank level as those of the Company. The Bank Board also
maintains a Loan Committee, a Compliance Committee and an Ethics Committee. No
director attended less than 75% of the meetings of the Bank Board and its
committees on which they served. Directors of the Bank are nominated by the Bank
Board nominating committee and elected by the Company as sole stockholder of the
Bank.
In
evaluating director candidates for purposes of recommending director candidates
to the Board, the Nominating and Governance Committee will consider the
following factors: the candidate’s moral character and personal integrity;
whether the candidate has expertise and experience relevant to the Company’s
business (including knowledge of the communities and markets served by the
Bank); whether the candidate’s expertise and experience complements the
expertise and experience of the other directors; whether the candidate would be
considered independent under the Nasdaq corporate governance standards; whether
the candidate would be independent of any particular constituency and able to
represent the interests of all stockholders of the Company; the congeniality of
the candidate with the other directors; whether the candidate would have
sufficient time available to devote to Board activities; and any other factors
deemed relevant by the committee.
The
Nominating and Governance Committee will consider director candidates
recommended by stockholders of the Company. Stockholders may recommend an
individual for consideration by submitting to the committee the name of the
individual; his or her background (including education and employment history);
a statement of the particular skills and expertise that the candidate would
bring to the Board; the name, address and number of shares of the Company owned
by the stockholder submitting the recommendation; any relationship or interest
between such stockholder and the proposed candidate; and any additional
information that would be required under applicable SEC rules to be included in
the Company’s proxy statement if such proposed candidate were to be nominated as
a director.
Such
submissions should be addressed to Flushing Financial Corporation Nominating and
Governance Committee, at the Company’s executive offices. In order for a
candidate to be considered by the committee for any annual meeting, the
submission must be received by the committee no later than the November 1
preceding such annual meeting.
The
Nominating and Governance Committee will evaluate the biographical information
and background material relating to each potential candidate and may seek
additional information from the submitting stockholder, the potential candidate,
and/or other sources. The committee may hold interviews with selected
candidates. Individuals recommended by stockholders will be considered under the
same factors as individuals recommended by other sources.
Transactions
between related persons (including directors and executive officers of the
Company and the Bank and their immediate family members) and the Company, the
Bank or their affiliates are subject to approval by the Nominating and
Governance Committee, as set forth in its charter. Officers and directors are
regularly reminded of their obligation to seek committee approval of any related
party transaction or potential conflict of interest. The committee
considers all factors that it deems relevant, including the nature of the
related party’s interest in the transaction, whether the terms are no less
favorable than could be obtained in arms-length dealings with unrelated third
parties, and the materiality of the transaction to the Company.
Under the
Bank’s lending policies, mortgage loans are not made to directors and executive
officers. There were four loans outstanding to immediate family
members of directors with balances in excess of $120,000 at some time since the
beginning of 2008. The highest aggregate balance of these loans at any time
since January 1, 2008 was $1,167,800, and the aggregate balance of these loans
at January 31, 2009 was $1,130,300. All such loans were made in the
ordinary course of business and were fully approved in accordance with all of
the Bank’s credit underwriting standards. No such loans were made
during 2008. The Bank believes that such loans do not involve more than the
normal risk of collectibility or present other unfavorable
features.
From 1981
through January 2006, Franklin F. Regan, Jr. (or his law firm) had a retainer
agreement with the Bank, pursuant to which he (or his law firm) was paid an
annual retainer for general legal services to the Bank. In February
2006, this agreement was superseded by an annual retainer arrangement covering
the provision of general legal services to the Bank, directly with the law firm
of Cullen and Dykman Bleakley Platt LLP, where Mr. Regan is of
counsel. In that capacity, Mr. Regan represented the Bank in
connection with some of its mortgage foreclosure actions prior to his retirement
effective July 1, 2008. Under an agreement between Mr. Regan and Cullen and
Dykman dated July 1, 2001, Mr. Regan receives 22.5% of the fees paid by the Bank
and its borrowers to Cullen and Dykman for a period of ten years, at which time
the percentage payable is reduced to 12.5% for an additional ten-year period.
The agreement may be terminated earlier upon either Mr. Regan’s death or the
Bank’s failure to continue the services rendered by Cullen and Dykman.
Termination generally entitles Mr. Regan or his heirs to receive a payment equal
to, in the case of his death, two times the amount paid to him in the
immediately preceding year (which payment is adjusted pro rata if cessation of
services to the Bank occurs during the two-year period following his death) and,
in the case of cessation of services to the Bank, $100,000. In this regard, the
current fees paid by borrowers for loan closings are: $825 for residential
loans; within the range of $1,200 to $1,500 for mixed-use/multi-family property
transactions; and within the range of $2,000 to $8,000 for commercial real
estate loans. In 2008, the Bank paid to Cullen and Dykman an aggregate of
$256,352 for fees for general legal services. Borrowers paid an aggregate of
$1,599,613 to Cullen and Dykman in connection with loan closings over the same
period. Mr. Regan’s interest in all of the above payments from the Bank and its
borrowers to Mr. Regan and/or Cullen and Dykman is an aggregate of $417,592. In
connection with some of the foregoing transactions, Cullen and Dykman has
engaged Ultimate Abstract Services, Inc., a title company fifty percent owned by
Mr. Regan’s son. Neither the Company nor the Bank is involved in the selection
of this title company, and fees and expenses for title work are generally paid
by the borrowers. Borrowers paid an aggregate of approximately $428,644 to this
title company in 2008 in connection with transactions to which the Bank was a
party. In addition, the Bank leases office space to Cullen and Dykman in its
159-18 Northern Boulevard building at a market rental rate. Mr. Regan retired as
director of the Company and the Bank effective July 1, 2008.
Effective
January 1, 2006, the law firm of Nicolosi & Nicolosi, LLP, of which Vincent
F. Nicolosi is a partner, was approved by the Nominating and Governance
Committee of the Company to represent the Bank in connection with closings of
residential and certain commercial real estate loans, the fees of which are paid
by borrowers, on terms substantially the same as have applied to Mr. Regan or
his law firm for substantially the same services. In 2008, the
borrowers paid an aggregate of $357,619 to Mr. Nicolosi or his firm in this
regard. Mr. Nicolosi is a director of the Company and the Bank.
John J.
McCabe, a director of the Company and the Bank, serves as Chief Equity
Strategist of Shay Assets Management, Inc. and is a co-manager and senior vice
president of each of the John Hancock Large Cap Select Fund and the Asset
Management Fund Large Cap Equity Institutional Fund (the “AMF Equity Fund”),
which are managed by Shay Assets Management. The Bank maintains
investments in two funds managed by Shay Assets Management. The
Bank’s investment in these funds pre-dates Mr. McCabe’s service as a
director. The portion of the management fees paid to Shay Assets
Management by these funds that are attributable to investments of the Bank
totaled approximately $76,455 in 2008. Mr. McCabe receives no
remuneration from the funds. In addition, from time to time the Bank
executes trades using the brokerage services of Shay Assets
Management. In 2008, the Bank paid fees of approximately $2,000 to
Shay Assets Management in connection with the purchase of
bonds.
Since
1996, Mr. Tully has had a consulting agreement with the Bank and the Company,
which agreement was scheduled to expire in November 2008. On November
20, 2008, the boards of directors of the Bank and the Company approved a
one-year extension of the existing consulting agreement. Pursuant to
this agreement, Mr. Tully, in his capacity as Chairman, consults with and
advises the officers of the Bank and the Company and their respective Boards
concerning certain business and financial affairs of the Bank and the
Company. The consulting agreement terminates in the event Mr. Tully
ceases to be Chairman, in which case he would be paid all compensation due to
him at the time of termination, including his full monthly fee for the month in
which the termination occurred without regard to the day of the month on which
it occurred. In the event Mr. Tully ceases to be Chairman within three months
following a “Change in Control” (as defined in the 2005 Omnibus Incentive Plan
of Flushing Financial Corporation), he would be paid in one lump sum the amount
of the aggregate fees that he would have earned if he had continued to serve
until the end of the then current term of the agreement. During 2008,
Mr. Tully received fees of approximately $160,000 pursuant to the consulting
agreement.
The Board
of Directors has adopted the following policy by which stockholders may
communicate with the Board or with individual directors or Board committees. The
communication should be in writing, addressed to the Board or applicable
committee or directors, c/o Corporate Secretary, Flushing Financial Corporation,
at the Company’s executive offices. The Corporate Secretary will review all such
correspondence received and will periodically, at least quarterly, forward to
the applicable directors a summary of all such correspondence together with
copies of correspondence that the Corporate Secretary believes should be seen in
its entirety. Correspondence or summaries will be forwarded to the applicable
directors on an expedited basis where the Corporate Secretary deems it
appropriate. Communications raising concerns related to the Company’s
accounting, internal controls, or auditing matters will be immediately brought
to the attention of the Company’s Chief Internal Auditor and the Chairman of the
Audit Committee and will be handled in accordance with the procedures
established by the Audit Committee with respect to such matters.
Directors
may at any time review a log of correspondence received by the Company that is
addressed to the director (or to the full Board or a Board committee on which he
or she serves) and may request copies of any such correspondence.
The
Company believes that it is important for directors to directly hear concerns
expressed by stockholders. Accordingly, it is the Company’s policy that Board
members are expected to attend the annual meeting of stockholders absent a
compelling commitment that prevents such attendance. All of the members of the
Board of Directors at the time of the 2008 annual meeting attended such
meeting.
The
Company has adopted a Code of Business Conduct and Ethics that applies to all of
its directors, officers and employees. This code is publicly available on the
Company’s website at http://www.flushingsavings.com by following the links to
investor relations and then corporate governance, and then Code of Business
Conduct and Ethics. Any substantive amendments to the code and any grant of a
waiver from a provision of the code requiring disclosure under applicable SEC or
Nasdaq rules will be disclosed in a report on Form 8-K.
During
2008, the Compensation Committee consisted of Messrs. Russo (Chairman), Grassi,
Han, and Roe, and Ms. O’Brien. None of the members of the
Compensation Committee is a former officer of the Company or the
Bank.
Under the
Bank’s lending policies, residential mortgage loans to immediate family members
of directors are made at market rates of interest and other normal terms but
with reduced origination fees. One such loan that was outstanding to immediate
family members of directors who were members of the Compensation Committee
during 2008 had a balance in excess of $120,000 at some time since the beginning
of 2008. The highest balance of that loan at any time since January 1, 2008 was
$229,000, and the balance of that loan at January 31,
2009 was
$224,800. Such loan was made in the ordinary course of business and was fully
approved in accordance with all of the Bank’s credit underwriting standards.
This loan was included in the loans described under the heading “Corporate
Governance—Transactions with Related Persons, Promoters and Certain Control
Persons.” No such loan was made in 2008. The Bank believes
that this loan does not involve more than the normal risk of collectibility or
present other unfavorable features.
Executive
Summary
Our
institution reported earnings growth in 2008, despite the negative economic
environment. Net income for 2008 increased to $22.3 million, or $1.10 per
diluted common share. Return on average equity increased to 9.55% for 2008, as
compared to the thrift industry average for 2008 of 0.19% (as reported by SNL
Financial in their Thrift Index). We continued to grow our balance sheet in
2008, as loans, net and deposits increased $258.5 million, or 9.57%, and $434.7
million, or 21.70%, respectively. We achieved this performance in a year that
was unprecedented for the banking industry in light of the global financial and
credit crisis, economic recession, stock price declines and consumer
uncertainty. The U.S. banking industry as a whole experienced an
overall loss in 2008. According to Standard & Poor’s U.S. Banking Industry
Outlook for 2009, by any measure the industry endured liquidity and confidence
shocks in 2008 that are likely to reverberate for years to come. While our share
price reflected the nationwide economic weakness in general and the performance
of the banking sector in particular, we remained a growing and profitable
institution in 2008, and remain “well capitalized” under regulatory
guidelines.
Late in
2008, the government began several programs to infuse capital into the financial
sector to shore up the banking system and encourage lending. Healthy banks were
encouraged to participate in these programs. At the time these programs were
implemented, the government encouraged all bank participation with a goal not
only of shoring up troubled banks, but also of facilitating lending by healthy
banks. In particular, the $700 billion financial rescue package under the
Emergency Economic Stabilization Act of 2008 (“EESA”) encouraged all healthy
banks to accept funds at relatively attractive rates in order to further the
policy goal of facilitating lending nationwide. On December 19, 2008, under the
terms of the Troubled Asset Relief Program (“TARP”) and the specific terms of
the Capital Purchase Program (“CPP”) established under EESA, the Company
received $70.0 million for this purpose in accordance with terms set forth at
that time. By that date, the Company’s compensation structure for 2008 had been
well established and publicly disclosed.
As a
result, this Compensation Discussion and Analysis (“CD&A”) sets forth what
has been our typical process for setting executive compensation
plans. The discussion is comprehensive regarding how we reviewed
current compensation plans and made compensation decisions regarding each
element of pay under our compensation philosophy, particularly how the plans are
oriented regarding our pay for performance philosophy.
At the
time of the Company’s TARP closing, the EESA set forth terms and conditions for
acceptance of the TARP funds. With respect to compensation, those
requirements included, among other things,
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amending
the Company’s existing compensation
arrangements,
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requiring
a “clawback” of any bonus or incentive compensation paid based on
financial statements or performance metrics that are later proven to be
materially inaccurate,
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prohibiting
“golden parachute” payments in the event of involuntary termination,
and
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having
our Compensation Committee (the “Committee”) review the
Company’s compensation arrangements with our senior risk officers to
ensure that the arrangements do not encourage senior executive officers to
take unnecessary and excessive risk that threaten the value of the
Company.
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Each of
the named executive officers has agreed to waive his or her contractual legal
rights with respect to changes in compensation arrangements that are made in
order to comply with these requirements.
On
February 17, 2009, President Obama signed the American Recovery and
Reinvestment Act of 2009 (“ARRA”) into law. ARRA modified the
compensation-related limitations contained under the EESA, created additional
compensation-related limitations and directed the Secretary of the Treasury to
establish standards for executive compensation applicable
to
participants in the TARP, regardless of when participation commenced. Thus, the
newly enacted compensation-related limitations apply to us and we will apply
these limitations to the extent we are entitled to do so unilaterally. The
provisions may be retroactive. In their existing employment agreements, none of
our senior executive officers waived their contract or legal rights with respect
to these new and retroactive provisions and no other officers were asked to
waive their contract or legal rights. The compensation-related limitations
applicable to us as added or modified by ARRA, which are subject to standards to
be established by the Secretary of the Treasury, are as follows:
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“golden
parachutes” were redefined as any severance payment resulting from
involuntary termination of employment, or from bankruptcy of the employer,
except for payments for services performed or benefits accrued.
Consequently under ARRA, we are prohibited from making any severance
payment to our senior executive
officers,
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the
payment or accrual of any bonus, retention award or incentive compensation
to any of our senior executive officers was prohibited other than awards
of long-term restricted stock that (i) do not fully vest during the
TARP program, (ii) have a value not greater than one-third of the
total annual compensation of the award recipient and (iii) are
subject to such other restrictions as may be determined by the Secretary
of the Treasury. We do not know whether awards of incentive stock options
are covered by this prohibition. The prohibition on bonus, incentive
compensation and retention awards does not preclude payments required
under written employment contracts entered into on or prior to
February 11, 2009.
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In light of the uncertainty created by
these rules, including as a result of the absence of rulemaking guidance at this
time, this discussion and analysis will focus on explaining the Company’s
compensation philosophy for 2008. In the current unprecedented
environment, the traditional mix of tools used to motivate and retain employees
is not viewed as providing the incentive or retention value formerly
intended. The Company’s executive compensation program for 2009 will
need to be significantly different in order to comply with requirements of EESA
and ARRA and retain the required skills and experience of the Company’s
management through these challenging times.
Introduction
The
Compensation Committee of the Board of Directors has responsibility for
establishing, implementing and continually monitoring adherence with the
Company’s executive compensation philosophy. The Committee approves
all executive compensation subject to final approval by the Board of Directors.
The Committee consists of directors who are independent under Nasdaq corporate
governance standards. The Committee believes that the performance of the
Company’s executive officers has the potential to impact both short-term and
long-term profitability of the Company. Therefore, the Committee
strives to ensure that the total compensation paid to the Company’s executives
is fair, reasonable and competitive.
In this
proxy statement, the individuals who served as the Company’s Chief Executive
Officer and Chief Financial Officer during the fiscal year ended December 31,
2008, as well as the other individuals included in the Summary Compensation
Table on page 26, are referred to as the “named executive
officers.” Generally, the types of compensation and benefits provided
to the named executive officers are similar to those provided to other executive
officers of the Company.
Executive
Compensation Philosophy and Objectives
The
Committee believes that the most effective executive compensation program is one
that is designed to reward the achievement of specific annual, long-term and
strategic goals of the Company, and which aligns executives’ interests with
those of the stockholders by rewarding performance above established goals, with
the ultimate objective of improving stockholder value. The Committee
evaluates both performance and compensation to ensure that the Company maintains
its ability to attract and retain superior employees in key positions and that
compensation provided to key employees remains competitive relative to the
compensation paid to similarly situated executives of its peer
companies. To that end, the Committee believes executive compensation
packages provided by the Company to its executives, including the named
executive officers, should include cash and stock-based compensation that reward
performance as measured against established goals.
Role
of Executive Officers in Compensation Decisions
The
Chairman of the Board of Directors and the Chief Executive Officer annually
review the performance of each named executive officer (other than the Chief
Executive Officer whose performance is reviewed by the
Committee). The conclusions reached and recommendations based on
these reviews, including with respect to salary adjustments and annual award
amounts, are presented to the Committee. The Committee can exercise
its discretion in modifying any recommended adjustments or awards to executive
officers.
Determining
Executive Compensation
The
Company’s executive compensation program is intended to link management’s pay
with the Company’s annual and long-term performance. The Committee believes it
is important to attract and retain highly qualified executive officers by
providing compensation opportunities that are both competitive with the market
for executive talent and consistent with the Company’s performance. Since 2003,
the Committee has retained Pearl Meyer & Partners (the “Consultant”), an
independent nationally recognized compensation consulting firm, to advise the
Committee with respect to compensation of the Company’s executive officers. The
Consultant is retained by the Committee and reports directly to the Committee.
The Consultant was instrumental in the development of the pay for performance
philosophy of the Company and the development of the shareholder approved 2005
Omnibus Incentive Plan (the “Omnibus Plan”). In 2008, as in prior years, the
Committee engaged the Consultant and was presented with an executive total
direct compensation analysis and recommendations by the Consultant with regard
to several executive officers, including the named executive officers. The
Consultant utilized a group of publicly-traded financial institutions
(collectively the “Peer Group”), disclosed below, and published industry survey
sources which included the 2007/2008 Watson Wyatt Financial Institutions
Benchmark Survey and the 2007 Clark Consulting Banking Compensation Survey
Report (Northeast), in its analysis. The Committee reviewed the analysis and
recommendations from the Consultant and implemented these recommendations with
regard to salary and equity awards for 2008.
The
Company’s executive compensation program includes both short-term cash
compensation and long-term equity compensation, with an emphasis on short-term
cash compensation that is tied to the Company’s performance. The
Committee believes that such allocation is needed to attract and retain
executive officers in the New York metropolitan market. The need for talented
executives has become even more acute as the economic environment and impending
regulation presents the Company with unprecedented challenges.
In
determining the amount of compensation for the named executive officers, the
Committee initially reviews each element of total direct compensation against
the Peer Group. The Peer Group, which is proposed by the Consultant and is
periodically reviewed and updated, consists of Northeast banks that the
Committee believes the Company competes with for talent and for stockholder
investment. In 2008, as in prior years, the Committee targeted base
salary for each of the executive officers to the Peer Group’s median in order to
remain competitive in the market. Based on the recommendation of the Consultant,
the Committee has believed that setting salaries within a range of plus or minus
20 percent of the median salary of the Peer Group has been sufficient to reward
for long-term sustained individual performance. Total direct
compensation was targeted to reflect the performance of the Company so that when
the Company performs at the 75th
percentile against its peers, compensation will be near the 75th
percentile of the market. The Company has consistently performed at or above the
75th
percentile of the thrift industry based on certain financial and operational
performance indicators. The Peer Group analysis is performed and
reviewed annually and the annual performance based incentive awards are based on
the Company’s performance and/or departmental goals for that year. Our
philosophy of determining long-term equity awards has been typically targeted at
the 75th
percentile, and was determined by the Committee according to performance as
outlined in the “Long Term Equity Incentive Compensation”
section.
The
Consultant constructed a two tier Peer Group as follows in order to capture an
appropriate view of the Company’s competitors:
|
·
|
Tier
I consisted of two New York City area banks that the Company considers its
direct competitors but which are significantly larger than the
Company. Therefore, such banks were used as a frame of
reference but not for the direct compensation analysis. Tier I consisted
of:
|
|
New
York Community Bancorp, Inc.
|
Astoria
Financial Corporation
|
|
·
|
Tier
II consisted of 19 banks which are closer to the Company’s size (no more
than twice as large and no less than half the size of the Company) and
which are located in major urban/suburban areas of the Northeast
United States:
|
|
Provident
Financial Services, Inc.
|
TrustCo
Bank Corp., Inc.
|
|
|
Signature
Bank
|
Beneficial
Mutual Bancorp, Inc.
|
|
|
Dime
Community Bancshares, Inc.
|
Provident
New York Bancorp
|
|
|
Brookline
Bancorp, Inc.
|
WSPS
Financial Corporation
|
|
|
Sterling
Bancorp
|
Harleysville
National Corporation
|
|
|
Hudson
Valley Holding Corp.
|
Washington
Trust Bancorp, Inc.
|
|
|
Lakeland
Bancorp, Inc.
|
Smithtown
Bancorp
|
|
|
Berkshire
Hills Bancorp, Inc.
|
National
Penn Bancshares, Inc.
|
|
|
Investors
Bancorp, Inc. (MHC)
|
NBT
Bancorp, Inc.
|
|
|
Community
Bank System Inc.
|
In
addition to the Peer Group review, the Committee considered other factors when
determining compensation amounts, such as the individual executive’s level of
responsibility and individual performance and the financial and operational
performance of the Company and the Bank in relation to internal budgeted amounts
and performance of competitors. Indicators of financial and
operational performance considered by the Committee include, among others, total
assets, pre-tax income, earnings per share, return on average equity and book
value per share. The achievements of certain strategic goals that are
part of the Company’s strategic plan were also taken into consideration. The
Committee also compared the Company’s performance against the performance of the
Peer Group with respect to certain other indicators, including such performance
measures as return on average assets, return on average equity, net interest
margin, and efficiency ratio.
2008
Executive Compensation Components
For the
fiscal year ended December 31, 2008, the principal components of compensation
for the named executive officers were:
|
·
|
base
salary;
|
|
·
|
performance
based incentive cash bonus;
|
|
·
|
long-term
equity incentive compensation;
|
|
·
|
retirement
benefits; and
|
|
·
|
perquisites
and other personal benefits.
|
Allocating
Executive Compensation
Total
direct compensation consists of base salaries plus performance based incentive
cash bonuses and long-term equity incentive compensation. The percentages
described below are based on the full grant date fair value of annual
compensation (calculated in accordance with Statement of Financial Accounting
Standards No. 123(R) (“FAS 123(R)”)). These amounts differ from the amounts
included in the Summary Compensation Table under the columns “Stock Awards,”
“Option Awards” and “Total,” which were calculated in accordance with SEC
regulations under which the value of an equity award is spread over the years
during which it is earned.
For the
fiscal year ended December 31, 2008, the Committee allocated compensation for
the named executive officers as follows:
|
·
|
Base
salaries ranged from 48% to 61% of total direct
compensation;
|
|
·
|
Performance
based incentive cash bonuses ranged from 26% to 49% of base salaries, and
from 16% to 25% of total direct compensation;
and
|
|
·
|
Long-term
equity incentive compensation ranged from 23% to 34% of total direct
compensation.
|
The
Committee looked at all elements of total direct compensation in order to
provide a mix of compensation components to the named executive
officers.
Base
Salary
Base
salary is designed to provide competitive levels of guaranteed compensation to
executives based upon their experience, duties and scope of responsibility. The
Company pays base salaries because it provides a basic level of compensation and
is necessary to recruit and retain executives. An important aspect of base
salary is the Committee’s ability to use annual base salary adjustments to
reflect an individual’s performance or changed responsibilities. Base
salary levels are also important because they are used to determine the target
amount of performance based incentive cash bonuses and the amount of retirement
benefits.
As
discussed above, in determining the base salary of named executive officers, the
Committee considered a variety of factors in addition to the compensation paid
to executives in the Peer Group, including the individual executive’s level of
responsibility and individual performance, and the financial and operational
performance of the Company and the Bank in relation to internal budgeted amounts
and performance of competitors. The benchmarking analysis prepared by
the Consultant for 2008, which was reviewed by the Committee, indicated that
base salary levels of most of the Company’s named executive officers were at or
below the median. Base salary increases set by the Committee for fiscal year
2008 were intended to position short-term cash compensation levels at or about
the median of the Peer Group, adjusted by the results of an assessment of the
Company’s and the Bank’s performance during the year as well as each individual
executive’s contribution to such performance.
Performance
Based Incentive Cash Bonus
In 2008,
as in prior years, in addition to base salary, the Company provided named
executive officers with performance based incentive cash bonuses as a form of
short-term incentive to compensate them for services rendered during the year
and drive achievement of performance goals for the year. In February 2007, the
Board of Directors established the Company’s Annual Incentive Plan for
Executives and Senior Officers (the “Incentive Bonus Plan”) as recommended by
the Committee. The Incentive Bonus Plan provides for annual incentive payments
to the Company’s CEO/President, Executive Vice Presidents and Senior Vice
Presidents. The Committee developed the Incentive Bonus Plan in conjunction with
the Consultant. The Incentive Bonus Plan is governed by the provisions of the
Company’s Omnibus Plan.
The
annual incentive payment to Incentive Bonus Plan participants is based on the
Company’s financial performance for that year measured against certain corporate
financial performance metrics established for that year. These performance
metrics may be established to measure performance versus Company goals, peer
group comparisons, or a combination thereof, as contemplated by the Omnibus
Plan. In 2008, the incentive payments were based on Company performance except
that Theresa Kelly’s incentive payments were based on a combination of Company
and departmental performance.
The
Incentive Bonus Plan permits the Committee to select a range within which
corporate performance must fall for annual bonuses to be awarded. The range
consists of a threshold level, or minimum performance level necessary to earn a
bonus and below which no bonus is paid; a maximum level, or performance level
necessary to earn the maximum bonus and beyond which no additional bonus can be
earned; and a target level, or performance level necessary to earn the target
bonus. The target level of performance is based on the Company’s Strategic Plan.
Determinations of award targets and actual awards under the Incentive Bonus Plan
have been generally intended to comply with Section 162(m) of the Internal
Revenue Code as contemplated by the Omnibus Plan, which also permits awards not
structured to so comply.
The 2008
target bonus for the CEO/President was equal to fifty percent (50%) of his base
salary, the target bonus for each Executive Vice President was forty percent
(40%) of his or her base salary, and the target bonus for each other participant
was equal to thirty percent (30%) of his or her base salary. Failure to achieve
at least the threshold level of performance would result in no bonus being paid,
achievement of the threshold level of performance would result in a bonus equal
to 60% of the target bonus, and performance at or beyond the maximum level of
performance would result in a bonus equal to 125% of the target bonus.
Performance results within these benchmarks are prorated for incentive purposes.
Target, minimum and maximum bonus amounts for established performance targets
were subject to reduction, but not increase, at the discretion of the
Committee.
The
Incentive Bonus Plan provides that the targets and awards for the CEO be
developed by the Committee and approved by the Board of Directors, and for the
other participants be recommended by the CEO and approved by the Committee. The
target goals for 2008 under the Incentive Bonus Plan were diluted operating
earnings per common share of $1.12, and return on average equity of 9.37%.
Operating earnings per common share excludes any gains or losses from balance
sheet or corporate restructurings, net gains (losses) from fair value
adjustments for financial assets and financial liabilities carried under the
fair value option of SFAS No. 159, changes to income tax laws, and merger
related charges. In assessing whether 2008 target goals had been met, the
Committee considered factors that affected the operating results for 2008,
including the partial recovery of a loss sustained on a WorldCom, Inc. senior
note and the non-operating other-than-temporary impairment charges recorded in
the third and fourth quarters. The Committee agreed that diluted operating
earnings per share for 2008 for purposes of the Incentive Bonus Plan would
exclude the partial recovery of a loss sustained on a WorldCom, Inc. senior note
and the charge recorded from the non-operating other-than-temporary impairment
charges. The definition of operating earnings is the same as that taken for
consideration of awards for 2007 and one that has been regularly used by
analysts covering the Company’s stock. This resulted in the Committee
considering operating diluted earnings per common share to be $1.22 for
2008. The Committee concluded that return on average equity would be
adjusted for the items discussed above for operating diluted earnings per common
share, resulting in return on average equity of 10.56% for 2008. This resulted
in operating diluted earnings per share approximating the maximum level for
awards, and the return on average equity exceeding the maximum level for awards.
The Committee discussed the current market conditions for both the economy and
the stock market, and the performance of the Company’s common stock during 2008.
After a lengthy discussion, the Committee then recommended, and the Board of
Directors approved, the payment of performance based incentive cash bonus awards
in an amount that was slightly below the target level, rather than maximum
payout level, as determined under the guidelines approved in February
2008.
The
financial impact of the Board’s decision to pay at less than the level indicated
by the formula for Company performance as stated in the Incentive Bonus Plan
(i.e. maximum level payout) resulted in a reduced performance bonus by the
following amounts: John Buran $77,794; David Fry $25,973; Maria Grasso $31,914;
Francis Korzekwinski $27,695; and Theresa Kelly $11,818.
Long-Term
Equity Incentive Compensation
The
Company also provides named executive officers with long-term equity incentive
compensation to encourage them to focus on long-term Company performance and to
provide an opportunity for named executive officers and certain designated key
employees to increase their stake in the Company. Historically, this
has been provided by grants of restricted stock units and stock options, with
the allocation between restricted stock unit awards and stock options based on
the recommendations of the Committee to the Board of Directors. Although the
Committee has the authority described below, its determinations are subject to
approval by the Board of Directors.
Long-term
equity incentive compensation awards are structured in accordance with the
shareholder approved Omnibus Plan. In general, the Committee has the
authority to determine all terms and conditions of awards except where such
authority is limited by a provision of the Omnibus Plan. For example,
subject to the Omnibus Plan’s minimum vesting requirements, the Committee may
condition the grant or vesting of an award on continued service, satisfaction of
performance goals, or other criteria, and the Committee may provide that the
vesting conditions are waived in specified circumstances or may waive them
on a case-by-case basis. In addition, the Committee has general
discretion to determine the time and manner of settlement of any award, either
at the time of grant or thereafter. However, the Omnibus Plan expressly
prohibits the repricing of stock options without stockholder
approval.
Long-term
equity awards to the named executive officers were made at the Committee’s
regularly scheduled meeting in June 2008. The Committee has historically made
equity awards at its June meeting and used that date as the date of
valuation. The Committee considered the Company’s performance against
the Strategic Plan in comparison to the Peer Group and each named executive
officer’s contribution to that performance. The awards were made in accordance
with the recommendations previously made by the Consultant for allocation of
compensation between cash and equity awards. The grants are shown in
detail in the Grant of Plan Based Awards Table, below. The vesting
schedule of the grants is the same as the majority of our prior
grants. Specifically, the grants vest 20 percent on each of the first
five anniversaries of the grant.
In
January 2009 the Committee decided to change the annual equity award date from
June to January of each year. This decision was made to more closely align the
Company’s compensation programs with the most recent fiscal year
performance.
Tax
Qualified Retirement Benefits
Retirement Plan
The
Company provides retirement benefits to substantially all of its employees,
including the named executive officers, to provide a competitive compensation
package within the market that the Company operates. The Retirement
Plan is a defined benefit pension plan that is funded by the Bank on an
actuarial basis in accordance with federal tax laws. Participants
earn a vested right to their accrued retirement benefit upon completion of five
years of service with the Bank or its participating
affiliates. However, in an effort to reduce the cost to the Bank, in
2006 the Board of Directors froze the Retirement Plan and replaced it with the
Defined Contribution Retirement Program discussed below.
As a
result of the freeze, no employee can commence participation in the Retirement
Plan, and no further benefits will accrue for plan participants, after the plan
freeze date of September 30, 2006. Employment service after the plan freeze date
will continue to be recognized in determining vested service and eligibility for
early retirement.
All
full-time employees of the Bank who completed one year of service prior to
September 30, 2006 participate in the Retirement Plan. Participants
earn an annual retirement benefit at normal retirement age (the later of age 65
or the fifth anniversary of participation) based on their compensation (not in
excess of $220,000) and service through September 30, 2006. Benefits
are paid in the form of an annuity. Annual benefits under the Retirement Plan
are limited by federal tax laws. As a general rule, during 2008
annual benefits were limited due to federal tax law to $185,000. This limit is
periodically adjusted for cost of living increases.
Defined
Contribution Retirement Program
Effective
October 1, 2006, the Board of Directors approved a new Defined Contribution
Retirement Program (“DCRP”), which is intended to provide employees with
retirement savings subsequent to the freezing of the Retirement
Plan. As with the Retirement Plan, contributions to the DCRP are made
by the Bank. All full-time employees who have completed one year of service
receive an annual contribution equal to four percent of their eligible base
salary (up to tax law limits), made in the form of Company common stock, which
is available for immediate diversification into the various investment funds
available under the Bank’s 401(k) Savings Plan. Employees vest in Company
contributions 20 percent per year and are fully vested after five years of
service (including years prior to adoption of the DCRP).
401(k)
Savings Plan
The Bank
offers a tax-qualified retirement savings plan pursuant to which all full-time
employees are eligible to contribute up to 25 percent of their annual salary on
a pre-tax basis, subject to limits prescribed by the Internal Revenue Code. For
employees who have completed at least one year of service, the Company matches
50 percent of the first six
percent
of salary contributed to the Savings Plan. All employee contributions are fully
vested upon contribution. Employees vest in Company matching contributions 20
percent per year of service and are fully vested after five years of service.
Plan participants are able to direct the investment of all contributions made by
the Company, as well as their own contributions, from among the investment funds
made available under the plan. The investment funds available are a number of
mutual funds and Company common stock.
Profit
Sharing
Effective
May 1, 2008, our Stock-Based Profit Sharing Plan was merged into the 401(k)
Savings Plan. All full-time employees who have completed one year of service are
eligible to receive a Company contribution, made in the form of Company common
stock. The amount of the contribution is determined by the Company’s Board of
Directors each year in its discretion. For 2008, the contribution was
approximately 5.5% of eligible salary (up to tax law
limits). Employees vest in Company contributions 20 percent per
year of service and are fully vested after five years of service. Participants
are able to direct the investment of all contributions made by the Company to
the other investment funds made available under the plan.
Supplemental
Retirement Benefits
In
addition to the retirement benefits discussed above, the Company provides the
named executive officers and certain other executives with the opportunity to
participate in the supplemental retirement plans discussed below, which offers
these individuals the opportunity to defer a portion of their compensation and
receive benefits for compensation earned but not credited in the qualified plans
due to Internal Revenue Code limitations.
Supplemental
Savings Incentive Plan
Effective
March 1, 2008, only Senior Vice Presidents and above may become eligible to
participate in our Supplemental Savings Incentive Plan (“SSIP”). All
Vice Presidents who participated in the SSIP in 2008 will continue to be
eligible. A participant may contribute, through a deferral of salary, up to 15
percent of their actual compensation less six percent of their compensation as
defined under the 401(k) Savings Plan. The Bank matches 50 percent of each
participant’s contributions to the SSIP. Bank contributions vest 20
percent per year of service and are fully vested after five years of service.
Participants direct the investments of their contributions and the Bank
contributions in the SSIP among the mutual fund investments made available by
the Bank.
The Bank
also credits each participant’s account in the SSIP with a number of phantom
shares of common stock of the Company equal to the number of shares of common
stock that would have been contributed to the participant’s profit sharing
account under the 401(k) Savings Plan (or the predecessor Stock-Based Profit
Sharing Plan) but were not due to tax law limits. These additional credits vest
20 percent per year of service and are fully vested after five years of
service.
Credits
to the SSIP made as phantom shares remain invested as phantom shares (whose
value is determined by reference to the price of the Company’s common stock).
When dividends are paid on the common stock, dividend equivalents are deemed
reinvested in additional phantom shares. The phantom shares may not be
diversified as the Company wants management-level employees to have a
significant investment in Company common stock and believes it is appropriate to
have their supplemental retirement benefits invested in this way.
The SSIP
is a non-qualified plan. As a result, participants in this plan have no interest
in particular assets of the Company or the Bank, and are solely unsecured
general creditors with respect to these benefits. Funds under the SSIP are
placed in a rabbi trust.
Supplemental
Executive Retirement Plan
Under his
employment agreement, Mr. Buran participates in a supplemental executive
retirement plan (the “SERP”) as discussed in detail under the heading “Potential
Payments Upon Termination or Change in Control” on page 34.
Perquisites
and Other Personal Benefits
Perquisites
and other benefits represent a small part of the Company’s overall compensation
package, and are offered only after consideration of business
need. Perquisites and other personal benefits provided to the named
executive officers are reviewed annually. The named executive officers are
provided with the use of a company automobile. The use of company automobiles is
largely for business purposes. Attributed costs of this perquisite
and other personal benefits for the named executive officers for the fiscal year
ended December 31, 2008 are not included in column (i) of the Summary
Compensation Table on page 26 since the aggregate incremental cost to the
Company due to personal use for each named executive officer was less than
$10,000.
Each
named executive officer and certain other officers are offered the opportunity
to participate in the Bank Owned Life Insurance (“BOLI”) provided by the Bank.
In the event of a BOLI participant’s death while employed by the Bank, his or
her beneficiaries are entitled to a death benefit from the policy equal to two
times the participant’s base salary at the time of death. Upon retirement from
the Bank or termination from the Bank with five years of service, the death
benefit coverage under the policy reduces to one time the base
salary. At the time the Bank purchased the insurance policy providing
for this coverage, it paid a single premium intended to fully fund the
policy. The Summary Compensation Table on page 26 reflects the value
of the insurance coverage provided under the policy in accordance with Internal
Revenue Service guidelines.
Employment
Agreements
The
Company has entered into employment agreements with the named executive
officers. Information regarding payments to the named executive officers
pursuant to such employment agreements upon termination of employment or a
change of control is provided under the heading “Potential Payments Upon
Termination or Change in Control” on page 34.
Executive
Stock Ownership Guidelines
In 2006,
the Committee established stock ownership guidelines for executive officers as a
way to align more closely the interests of key executives with those of the
shareholders. These guidelines provide a direct linkage between executive
rewards and Company results.
These
stock ownership guidelines apply to all long-term equity awards made on or after
June 1, 2006. The amount to be retained depends on the executive’s position. The
President/CEO and Executive Vice Presidents are required to retain 50 percent of
their “profit shares.” Profit shares are defined as net shares
acquired following stock option exercises or vesting of full-value awards
following payment of applicable withholding taxes. All Senior Vice Presidents
must retain 25 percent of their profit shares. Executive officers
must retain these shares until they reach age 61, after which time they may
dispose annually of 20 percent of the aggregate number of profit shares
then held. Compliance with these guidelines is mandatory for all executive
officers of the Company.
Tax
Implications
Deductibility
of Executive Compensation
Section
162(m) of the Internal Revenue Code limits the deductibility of compensation in
excess of $1 million paid to each of certain executive officers, excluding from
this limit “performance-based” compensation as defined for purposes of that
Section. Prior to the 2002 stock option grants, the Company’s stock
option plan failed to satisfy one of the technical requirements of Section
162(m), but grants made on and after the 2002 option grant date are intended to
comply with the requirements of that Section. The Company’s
restricted stock
and
incentive bonus plans were not intended to qualify as “performance-based”
because the Committee believed that the flexibility afforded by the design of
these plans was desirable and, in light of historical compensation levels, that
compliance with Section 162(m) was unnecessary because compensation was unlikely
to exceed the $1 million deduction limit. The Omnibus Plan, which was
approved by stockholders at the 2005 annual meeting, currently enables the
Committee to structure annual incentive bonus awards as well as restricted stock
and other long-term equity awards so as to qualify as “performance-based” under
Section 162(m). However, the Committee may choose to pay compensation
that is not deductible under Section 162(m) if it believes such compensation is
appropriate. Deductibility of incentive bonus payments to named executive
officers in 2008 would not have otherwise been limited by the requirements of
Section 162(m), with the exception of the CEO. Although the incentive bonus
payment to Mr. Buran was not limited by Section 162(m), the deductibility of
compensation to a named executive officer is limited to $500,000 per year as
long as the U.S. Treasury holds the preferred stock issued under the TARP
program. This limitation is prorated for 2008 for the period the U.S. Treasury
held the preferred stock, December 19, 2008 through December 31,
2008.
The
Compensation Committee of the Board of Directors of the Company has reviewed and
discussed the foregoing Compensation Discussion and Analysis with management
and, based on such review and discussions, the Compensation Committee
recommended to the Board of Directors that the Compensation Discussion and
Analysis be included in this Proxy Statement.
In
addition, the Compensation Committee certifies that it has reviewed with the
Company’s senior risk officers the Company’s incentive compensation arrangements
covering its senior executive officers and has made reasonable efforts to ensure
that such arrangements do not encourage the senior executive officers to take
unnecessary and excessive risks that threaten the value of our financial
institution.
THE COMPENSATION
COMMITTEE
Michael J. Russo,
Chairman
Louis C. Grassi,
CPA
Sam Han
Donna M.
O’Brien
John E. Roe,
Sr.
ADVISORY
APPROVAL OF FLUSHING FINANCIAL CORPORATION’S EXECUTIVE COMPENSATION PROGRAMS
On
February 17, 2009, President Obama signed into law the American Recovery
and Reinvestment Act of 2009 (“ARRA”), which expanded the executive compensation
requirements previously imposed by the EESA and TARP. Under these new
requirements, any reporting company that has received or will receive financial
assistance under TARP must submit for a separate advisory shareholder vote on
the Company’s executive compensation, as disclosed in its Compensation
Discussion and Analysis, related compensation tables, and other related material
under the compensation disclosure rules of the SEC, at any annual meeting of its
shareholders during the period in which any obligation arising from financial
assistance provided under TARP remains outstanding.
The
Compensation Committee of the Board has overseen the development of a
compensation program that is described in the Compensation Discussion and
Analysis section of this proxy statement and in the tables and narrative in the
Executive Compensation section. The Committee believes that the most
effective executive compensation program is one that is designed to reward the
achievement of specific annual, long-term and strategic goals of the Company,
and which aligns executives’ interests with those of the stockholders by
rewarding performance above established goals and imposing certain stock
retention requirements with the ultimate objective of improving stockholder
value. The program is also designed to attract and to retain highly
talented executives who are critical to the successful implementation of the
Company’s strategic business plan.
Our
institution reported earnings growth in 2008, despite the negative economic
environment. Net income for 2008 increased to $22.3 million, or $1.10
per diluted common share. Return on average equity increased to 9.55%
for 2008 and we continued to grow our balance sheet as loans, net and deposits
increased $258.5 million, or 9.57%, and $434.7 million, or 21.70%, respectively.
We achieved this performance in a year that was unprecedented for the banking
industry. We remain a growing and profitable institution even
though our share price reflects the nationwide economic weakness in general and
the performance of the banking sector in particular.
Our Board
of Directors is providing shareholders with the opportunity to cast an advisory
vote on our compensation programs at the 2009 Annual Meeting. As set forth in
the ARRA, this vote will not be binding on or overrule any decisions by our
Board of Directors, will not create or imply any additional fiduciary duty on
the part of the Board, and will not restrict or limit the ability of our
shareholders to make proposals for inclusion in proxy materials related to
executive compensation. However, the Compensation Committee will take into
account the outcome of the vote when considering future executive compensation
arrangements. The Board of Directors has determined that the best way to allow
shareholders to vote on Flushing Financial Corporation’s executive compensation
programs and policies is through the following resolution:
RESOLVED, that the
shareholders approve Flushing Financial Corporation’s executive compensation
programs, as described in the Compensation Discussion and Analysis and the
tabular disclosure regarding named executive officer compensation (together with
the accompanying narrative disclosure) in this Proxy Statement.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR”
ADVISORY APPROVAL OF FLUSHING FINANCIAL CORPORATION’S EXECTUIVE COMPENSATION
PROGRAMS.
The table
below summarizes the total compensation of each of the named executive officers
for the fiscal years ended December 31, 2008, 2007 and 2006. The
Company has entered into employment agreements with the named executive
officers. A description of the material terms of these employment
agreements is provided under the heading “Potential Payments Upon Termination or
Change in Control” on page 34.
|
Name
and Principal Position
|
Year
|
Salary
($)(1)
|
Bonus
($)
|
Stock
Awards
($)(2)
|
Option
Awards
($)(2)
|
Non-Equity
Incentive Plan Compensation
($)
|
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
($)(3)
|
All
Other Compensation
($)
|
Total
($)
|
|
John
R. Buran
President and
Chief Executive Officer of the Company and the Bank
|
2008
2007
2006
|
570,000
520,000
472,500
|
---
---
225,000
|
245,510
225,297
220,744
|
43,394
47,214
70,093
|
290,700
272,000
---
|
10,675
9,893
25,787
|
155,086(4)
134,124
139,536
|
1,315,365
1,208,528
1,153,660
|
|
David
W. Fry
Executive Vice
President, Treasurer and Chief Financial Officer of the Company; Executive
Vice President/Finance of the Bank
|
2008
2007
2006
|
236,500
210,000
185,000
|
---
---
68,000
|
93,135
68,951
51,826
|
25,838
17,578
12,404
|
96,900
89,800
---
|
9,674
8,974
33,451
|
48,395(5)
39,375
35,503
|
510,442
434,678
386,184
|
|
Maria A. Grasso(6)
Executive
Vice President and Chief Operating Officer of the Company and the Bank,
and Corporate Secretary
|
2008
2007
2006
|
290,000
262,500
168,269
|
---
---
75,000
|
79,783
49,457
23,558
|
59,840
50,264
30,533
|
119,200
109,800
---
|
---
---
---
|
53,717
(7)
31,039
---
|
602,540
503,060
297,360
|
|
Francis
W. Korzekwinski
Executive Vice
President
and Chief of Real Estate Lending of
the Company and the Bank
|
2008
2007
2006
|
255,000
237,500
192,500
|
---
---
70,000
|
88,470
74,884
66,246
|
21,722
20,932
28,314
|
103,600
97,800
---
|
8,313
7,749
17,276
|
49,499(8)
42,262
36,103
|
526,604
481,127
410,439
|
|
Theresa Kelly(6)
Senior Vice
President Business Banking of the Company and the Bank
|
2008
2007
2006
|
207,500
192,500
108,865
|
---
---
40,000
|
30,732
17,932
6,867
|
14,997
11,410
5,344
|
56,200
57,900
---
|
---
---
---
|
39,046(9)
20,180
---
|
348,475
299,922
161,076
|
____________________
|
(1)
|
Amounts
shown are not reduced to reflect the named executive officers’ elections,
if any, to defer receipt of salary into the 401(k) Savings Plan or the
Supplemental Savings Incentive Plan (“SSIP”). Amounts deferred
into the SSIP are included in the “Registrant Contribution in Last Fiscal
Year” column of the Nonqualified Deferred Compensation Table on page
32.
|
|
(2)
|
Reflects
the dollar amounts recognized for financial statement reporting purposes
for the fiscal years ended December 31, 2008, 2007 and 2006 in accordance
with FAS 123(R) of equity awards all of which were granted pursuant to the
2005 Omnibus Incentive Plan. Amounts recognized with respect to an award
are spread over the service period for the award, and thus amounts shown
in the table for any year may include amounts from awards granted in and
prior to the respective year. Assumptions used in the
calculation of such amounts are included in footnote 9 to the Company’s
audited financial statements for the fiscal year ended December 31, 2008
included in the Company’s Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 16, 2009, but disregarding the
estimate of forfeitures.
|
|
(3)
|
Reflects
amounts of the actuarial increase in the present value of the named
executive officer’s benefits under the Retirement Plan, which is the
Bank’s only defined benefit pension plan for employees. Amounts
are determined using interest rate and mortality rate assumptions
consistent with those used in the Company’s financial
statements. The Retirement Plan was frozen effective September
30, 2006. There are no above-market or preferential earnings on deferred
compensation because earnings under all non-qualified defined contribution
and deferred compensation plans are pegged to investments that are
available to the general
public.
|
|
(4)
|
Consists
of $6,900 in matching contributions to the 401(k) Savings Plan, $9,200 in
contributions to the Defined Contribution Retirement Program (“DCRP”),
$50,000 in contributions allocated by the Company to Mr. Buran’s SERP
Account, $69,953 in contributions allocated by the Company pursuant to the
SSIP, $12,893 in profit sharing contributions, and $6,140 representing the
value attributable to Bank Owned Life Insurance provided by the Bank (in
accordance with the Internal Revenue Service
guidelines).
|
|
(5)
|
Consists
of $6,393 in matching contributions to the 401(k) Savings Plan, $9,200 in
contributions to the DCRP, $17,350 in contributions allocated by the
Company pursuant to the SSIP, $12,893 in profit sharing contributions, and
$2,559 representing the value attributable to Bank Owned Life Insurance
provided by the Bank (in accordance with the Internal Revenue Service
guidelines).
|
|
(6)
|
Ms.
Grasso became an executive officer of the Company effective May 1, 2006.
Ms. Kelly became an executive officer of the Company effective May 31,
2006. Ms. Grasso and Ms. Kelly are not eligible to participate in the
Retirement Plan because it was frozen before they satisfied the
eligibility requirements.
|
|
(7)
|
Consists
of $6,900 in matching contributions to the 401(k) Savings Plan, $9,200 in
contributions to the DCRP, $23,992 in contributions allocated by the
Company pursuant to the SSIP, and $12,893 in profit sharing contributions,
and $732 representing the value attributable to Bank Owned Life Insurance
provided by the Bank (in accordance with the Internal Revenue Service
guidelines).
|
|
(8)
|
Consists
of $6,893 in matching contributions to the 401(k) Savings Plan, $9,200 in
contributions to the DCRP, $19,559 in contributions allocated by the
Company pursuant to the SSIP, $12,893 in profit sharing contributions, and
$954 representing the value attributable to Bank Owned Life Insurance
provided by the Bank (in accordance with the Internal Revenue Service
guidelines).
|
|
(9)
|
Consists
of $4,715 in matching contributions to the 401(k) Savings Plan, $8,300 in
contributions to the DCRP, $12,364 in contributions allocated by the
Company pursuant to the SSIP, $12,893 in profit sharing contributions and
$774 representing the value attributable to Bank Owned Life Insurance
provided by the Bank (in accordance with the Internal Revenue Service
guidelines).
|
All stock
and option awards granted by the Company to the named executive officers in 2008
are shown in the following table. They were all granted under the
2005 Omnibus Incentive Plan (the “Omnibus Plan”).
|
Name
|
Grant
Date
|
All
Other
Stock
Awards: Number
of
Shares
of
Stock
or
Units(1)
(#)
|
All
Other
Option
Awards:
Number
of
Securities
Underlying
Options(2)
(#)
|
Exercise
or
Base
Price
of
Option
Awards(3)
($/sh)
|
Closing
Market Price on Date of Grant
of
Option
Awards(3)
($/sh)
|
Grant
Date
Fair
Value
of
Stock
and
Option
Awards
($)
|
|||||||||||||||
|
John
R. Buran
|
6/17/2008
|
16,000
|
19.37
|
19.34
|
76,640
|
||||||||||||||||
|
6/17/2008
|
11,000
|
213,070
|
|||||||||||||||||||
|
David
W. Fry
|
6/17/2008
|
10,500
|
19.37
|
19.34
|
50,295
|
||||||||||||||||
|
6/17/2008
|
6,500
|
125,905
|
|||||||||||||||||||
|
Maria
A. Grasso
|
6/17/2008
|
10,500
|
19.37
|
19.34
|
50,295
|
||||||||||||||||
|
6/17/2008
|
8,500
|
164,645
|
|
||||||||||||||||||
|
Francis
W. Korzekwinski
|
6/17/2008
|
10,500
|
19.37
|
19.34
|
50,295
|
||||||||||||||||
|
6/17/2008
|
6,500
|
125,905
|
|||||||||||||||||||
|
Theresa
Kelly
|
6/17/2008
|
3,000
|
19.37
|
19.34
|
14,370
|
||||||||||||||||
|
6/17/2008
|
3,500
|
67,795
|
|||||||||||||||||||
____________________
|
(1)
|
All
of these awards are grants of restricted stock units
(RSUs). The RSUs vest 20% per year beginning on the first
anniversary of the date of grant, but vest in full upon the holder’s
retirement, death or disability, or upon a change in
control. The RSUs provide for current payment of cash
dividends.
|
|
(2)
|
All
of these options are non-qualified options with a ten-year
term. The options vest 20% per year beginning on the first
anniversary of the date of grant, but vest in full upon the holder’s
retirement, death or disability, or upon a change in
control. Options terminate immediately upon a termination for
cause, 60 days after a voluntary resignation, six months after an
involuntary termination without cause, two years after termination on
account of retirement, death or disability, and one year after a voluntary
resignation or involuntary termination without cause that follows a change
in control.
|
|
(3)
|
Under
the Omnibus Plan, the exercise price under an option award is determined
by the Compensation Committee, but such price may not be less than the
fair market value of the Company’s common stock on the date of the
grant. Fair market value is defined as the mean of the highest
and lowest quoted selling price, regular way, of the Company’s common
stock on the Nasdaq Global Select Market on the last trading day before
the date of grant, unless the Compensation Committee determines
otherwise. Pursuant to SEC rules, this table shows both the
actual exercise price of the stock option awards granted and the closing
market price of the Company’s common stock on the date of
grant.
|
|
Option
Awards
|
Stock
Awards
|
||||||
|
Name
|
Number
of
Securities
Underlying
Unexercised
Options
Exercisable(1)
|
Number
of
Securities
Underlying
Unexercised
Options
Unexercisable(1)
|
Option
Exercise
Price(2)
($)
|
Option
Expiration
Date
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested(3)
|
Market
Value
of
Shares or
Units
of Stock
That
Have
Not
Vested(5)
($)
|
|
|
John
R. Buran(4)
|
---
|
16,000
|
19.37
|
6/16/2018
|
11,000
|
131,560
|
|
|
3,000
|
12,000
|
16.65
|
6/18/2017
|
8,000
|
95,680
|
||
|
6,000
|
9,000
|
16.44
|
6/19/2016
|
6,000
|
71,760
|
||
|
70,000
|
---
|
17.88
|
6/20/2015
|
12,000
|
143,520
|
||
|
10,000
|
---
|
16.77
|
6/14/2014
|
2,000
|
23,920
|
||
|
18,000
|
---
|
13.47
|
6/16/2013
|
---
|
---
|
||
|
37,500
|
---
|
12.37
|
6/17/2012
|
---
|
---
|
||
|
33,750
|
---
|
10.89
|
7/16/2011
|
---
|
---
|
||
|
32,300
|
---
|
7.77
|
1/21/2011
|
---
|
---
|
||
|
David
W. Fry(4)
|
---
|
10,500
|
19.37
|
6/16/2018
|
6,500
|
77,740
|
|
|
2,000
|
8,000
|
16.65
|
6/18/2017
|
4,800
|
57,408
|
||
|
4,000
|
6,000
|
16.44
|
6/19/2016
|
3,600
|
43,056
|
||
|
5,000
|
---
|
17.88
|
6/20/2015
|
2,000
|
23,920
|
||
|
10,000
|
---
|
16.77
|
6/14/2014
|
1,000
|
11,960
|
||
|
2,400
|
---
|
13.47
|
6/16/2013
|
---
|
---
|
||
|
2,700
|
---
|
12.37
|
6/17/2012
|
---
|
---
|
||
|
1,800
|
---
|
10.89
|
7/16/2011
|
---
|
---
|
||
|
Maria
A. Grasso(4)
|
---
|
10,500
|
19.37
|
6/16/2018
|
8,500
|
101,660
|
|
|
2,000
|
8,000
|
16.65
|
6/18/2017
|
6,400
|
76,544
|
||
|
20,000
|
30,000
|
16.79
|
4/30/2016
|
6,300
|
75,348
|
||
|
|
|||||||
|
Francis
W. Korzekwinski(4)
|
---
|
10,500
|
19.37
|
6/16/2018
|
6,500
|
77,740
|
|
|
2,000
|
8,000
|
16.65
|
6/18/2017
|
4,800
|
57,408
|
||
|
2,000
|
3,000
|
16.44
|
6/19/2016
|
3,600
|
43,056
|
||
|
5,000
|
---
|
17.88
|
6/20/2015
|
2,000
|
23,920
|
||
|
4,000
|
---
|
16.77
|
6/14/2014
|
800
|
9,568
|
||
|
7,500
|
---
|
13.47
|
6/16/2013
|
---
|
---
|
||
|
18,000
|
---
|
12.37
|
6/17/2012
|
---
|
---
|
||
|
Theresa
Kelly(4)
|
---
|
3,000
|
19.37
|
6/16/2018
|
3,500
|
41,860
|
|
|
1,000
|
4,000
|
16.65
|
6/18/2017
|
2,800
|
33,488
|
||
|
4,000
|
6,000
|
16.74
|
5/30/2016
|
2,100
|
25,116
|
||
_________________
|
(1)
|
All
options listed vest at a rate of 20% per year over the first five years of
the ten year option term with the exception of the 2004 and 2005 option
grants (expiring in 2014 and 2015) which became 100% vested on December 21
of their respective years.
|
|
(2)
|
Pursuant
to the 2005 Omnibus Incentive Plan and the Company’s 1996 Stock Option
Incentive Plan that preceded it, the exercise price equals the mean of the
high and low sales price of the Company’s common stock on the last trading
day before the grant date.
|
|
(3)
|
All
restricted shares/units vest at a rate of 20% per year over a period of
five years.
|
|
(4)
|
In
2008 the named executive officers experienced a significant decline in the
value of their outstanding long term equity incentive awards, personal
stock ownership, and shares held in the Bank’s qualified benefit plans.
For 2008 unrealized equity related losses were approximately: John Buran
$861,306; David Fry $166,006; Maria Grasso $121,518; Francis Korzekwinski
$331,060 and Theresa Kelly $52,814.
|
|
(5)
|
Market
value is based on the closing market price of the Company’s common stock
on December 31, 2008.
|
|
Option
Awards
|
Stock
Awards
|
|||
|
Name
|
Number
of Shares
Acquired
On Exercise
(#)
|
Value
Realized
on
Exercise
($)
|
Number
of Shares
Acquired
on Vesting
(#)
|
Value
Realized on
Vesting
($)
|
|
John
R. Buran
|
38,000
|
408,820
|
13,500
|
258,815
|
|
David
W. Fry
|
---
|
---
|
4,580
|
87,863
|
|
Maria
A. Grasso
|
---
|
---
|
3,700
|
71,604
|
|
Francis
W. Korzekwinski
|
16,875
|
134,325
|
4,800
|
92,074
|
|
Theresa
Kelly
|
---
|
---
|
1,400
|
27,293
|
The table
below shows the present value of accumulated benefits payable to each of the
named executive officers, including the number of years of service credited to
each such named executive officer, under the Bank’s Retirement Plan determined
using interest rate and mortality rate assumptions consistent with those used in
the Company’s financial statements.
|
Name
|
Plan
Name
|
Number
of Years
Credited
Service(1)
(#)
|
Present
Value of
Accumulated
Benefit(2)
($)
|
Payments
During
Last
Fiscal
Year
($)
|
|
John
R. Buran
|
Retirement
Plan
|
5.7
|
155,242
|
---
|
|
David
W. Fry
|
Retirement
Plan
|
7.8
|
141,525
|
---
|
|
Maria
A. Grasso(3)
|
Retirement
Plan
|
---
|
---
|
---
|
|
Francis
W. Korzekwinski
|
Retirement
Plan
|
13.0
|
125,088
|
---
|
|
Theresa
Kelly(3)
|
Retirement
Plan
|
---
|
---
|
---
|
__________________
|
(1)
|
Number
of years of credited service was frozen under the Retirement Plan as of
September 30, 2006.
|
|
(2)
|
Present
value of accumulated benefit as of December 31, 2008. See
footnote 1] to the Company’s audited financial statements for the year
ended December 31, 2008 included in the Company’s Annual Report on Form
10-K for that year for the assumptions used in determining this
value. Estimated annual retirement benefit payable as a single
life annuity at age 65 to the named executive officer, based on the
assumption that such officer retires at age 65 with no increase in
compensation or “social security compensation” from that in effect in
2006.
|
|
(3)
|
Ms.
Grasso and Ms. Kelly joined the Company in May of 2006. They are not
eligible for the Bank’s Retirement Plan because they did not satisfy the
one year of service eligibility requirement prior to the plan
freeze.
|
Participants
in the Retirement Plan earn a full annual retirement benefit at normal
retirement age (the later of age 65 or the fifth anniversary of participation)
equal to the sum of (1) 2% of “average annual earnings” (the average annual
base salary for the three consecutive years out of the final ten years of
service which produces the highest average) times years of credited service
prior to March 1, 1993, up to 30 years, plus (2) 1.6% of
“average annual earnings” times years of credited service after February 28,
1993, plus
(3) 0.45% of “average annual earnings” in excess of “average social
security compensation” (as determined pursuant to Internal Revenue Service
regulations) times
years of credited service after February 28, 1993. The total years of
credited service taken into account cannot exceed 35
years. Participants also earn a full annual retirement benefit upon
retirement at age 62 with
20 years
of service. Participants earn a reduced annual early retirement
benefit upon retirement at age 60 (without regard to their years of service) or
if their age plus the
number of years of credited service equals 75. The early retirement
benefit is generally the full retirement benefit reduced by 0.25% for each month
the benefit commences prior to age 65 (prior to age 62 if the retiree has 20
years of service).
The
Retirement Plan was frozen effective as of September 30, 2006. As a
result, no additional benefits will accrue after that date. In
applying the above benefit formulas, compensation and service after September
30, 2006 will be disregarded, except that service after that date will continue
to be recognized in determining vested service and eligibility for early
retirement. Compensation taken into account under the plan is limited to
$220,000, which is the limit that was in effect for 2006.
Benefits
under the Retirement Plan are paid in the form of a monthly annuity for the life
of the retiree. Retirees may elect one of several actuarially
equivalent alternative annuity forms of benefit under which monthly benefits
would be reduced during the life of the retiree but benefits would continue to
be payable after the retiree’s death, either for the life of the retiree’s
beneficiary or for a specified number of years.
Annual
benefits under the Retirement Plan are limited by federal tax
laws. As a general rule, during 2008 annual benefits were limited to
$185,000. The Retirement Plan is funded by the Bank on an
actuarial basis. Participants
earn a vested right to their accrued retirement benefit upon completion of five
years of service with the Bank or its participating affiliates.
Pursuant
to the Bank’s Supplemental Savings Incentive Plan (“SSIP”), eligible officers,
including all of the named executive officers, may defer a portion of their
compensation and receive matching credits with respect to such deferrals.
Effective March 1, 2008, eligibility will be limited to Senior Vice Presidents
and above, grandfathering all existing Vice Presidents currently participating
or who will become eligible to participate in 2008. Deferral elections are made
by eligible executives in December of each year for amounts to be earned in the
following year. Officers may elect to defer up to 15% of salary less
6% of his or her compensation as defined under the Bank’s 401(k) Savings
Plan. The Bank credits each participant with matching credits in an
amount equal to 50% (or such other percentage as determined by the Board of
Directors on a prospective basis) of the participant’s deferral.
All of
the above credits may be invested by executives in any funds available under the
SSIP. The table below shows the funds available under the SSIP, and
their annual rate of return for the calendar year ended December 31, 2008, as
reported by the administrator of the SSIP.
|
Name
of Fund
|
Rate
of Return
|
|
Goldman
Sachs Growth and Income Fund
|
-35.25%
|
|
Goldman
Sachs Structured Small Cap Growth
|
-38.73%
|
|
Goldman
Sachs Government Income Fund
|
4.98%
|
|
Fidelity
Money Market Fund
|
2.89%
|
Supplemental
credits, in the amount that would have been credited to a participant’s account
in the 401(k) Savings Plan as discretionary profit sharing contributions but for
tax code limitations, are credited under the SSIP in the form of phantom shares
(whose value is determined by reference to the Company’s common
stock). When dividends are paid on the common stock, dividend
equivalents on such phantom shares are deemed reinvested in additional phantom
shares.
Benefits
under the SSIP are paid in cash, in either a lump sum payment or in annual
installments, as elected by the executive.
Effective
July 1, 2005, pursuant to his employment agreement, Mr. Buran receives an annual
contribution of $50,000 to the Supplemental Executive Retirement Plan (the
“SERP”). Contributions under the SERP may be invested by Mr. Buran in
the same funds available under the SSIP, which funds are listed
above. Mr. Buran’s SERP is discussed in further detail under the
heading “Potential Payments Upon Termination or Change in Control” on page
34. None of the other named executive officers receive contributions
under the SERP.
The
following table provides information regarding contributions, earnings and
account balances under the SSIP and the SERP. An employee’s right to receive
benefits under these plans is no greater than the right of an unsecured general
creditor of the Bank or the Company.
|
Name
|
Executive
Contributions in Last Fiscal Year(1) ($)
|
Registrant
Contribution
in
Last
Fiscal
Year(2)
($)
|
Aggregate
Earnings (Loss) in
Last Fiscal Year
($)
|
Aggregate
Withdrawals/
Distributions
in Last Fiscal Year
($)
|
Aggregate
Balance at Last Fiscal Year
End(3)
($)
|
|
John
R. Buran
|
71,079
|
119,953(4)
|
(227,383)(5)
|
---
|
624,938(6)
|
|
David
W. Fry
|
23,414
|
17,349
|
(90,066)
|
---
|
167,264
|
|
Maria
A. Grasso
|
28,942
|
23,992
|
(8,560)
|
---
|
71,420
|
|
Francis
W. Korzekwinski
|
25,245
|
19,559
|
(33,533)
|
---
|
379,238
|
|
Theresa
Kelly
|
20,542
|
12,363
|
(9,301)
|
---
|
41,113
|
________________
|
(1)
|
Reflects
amounts deferred into the SSIP. These amounts are also reported
in the “Salary” column in the Summary Compensation Table on page
26.
|
|
(2)
|
Reflects
Bank credits under the SSIP and the SERP, including amounts credited in
2009 that relate to 2008. These amounts are also reported in
the “All Other Compensation” column in the Summary Compensation Table on
page 26.
|
|
(3)
|
Consists
of account balance at December 31, 2008 plus amounts credited in 2009 that
relate to 2008. Includes the following amounts for each of the
following named executive officers, which amounts have been reported in
the “Salary” column in the Summary Compensation Table for years subsequent
to 2005: Mr. Buran, $190,874; Mr. Fry, $62,519;
|
Ms.
Grasso, $46,362; Mr. Korzekwinski, $67,814; and Ms. Kelly,
$20,542. Includes the following amounts for each of the following
named executive officers, which amounts have been reported in the “All Other
Compensation” column in the Summary Compensation Table for years subsequent to
2005: Mr. Buran, $313,918; Mr. Fry, $39,479; Ms. Grasso, $32,702; Mr.
Korzekwinski, $43,962; and Ms. Kelly, $12,363.
|
(4)
|
Reflects
$69,953 of contributions under the SSIP and $50,000 of contributions under
the SERP.
|
|
(5)
|
Reflects
unrealized net losses of $171,439 of earnings in the SSIP and $55,944 of
in the SERP.
|
|
(6)
|
Reflects
$526,524 in aggregate balance under the SSIP and $98,414 in aggregate
balance under the SERP.
|
The
following table describes the potential payments and benefits that each of the
named executive officers would be entitled to receive upon termination of
employment under various circumstances and upon a change of control of the
Company or the Bank. In each case, the table assumes the executive’s
termination or the change of control occurred on December 31,
2008. The table does not include payments the executive would be
entitled to receive in the absence of one of these specified events, such as
from the exercise of previously-vested stock options (which amount can be
calculated from the Outstanding Equity Awards at 2008 Fiscal Year-End Table),
amounts payable under the Bank’s Retirement Plan (shown in the Pension Benefits
Table) and amounts payable under the SSIP (shown in the Non-Qualified Deferred
Compensation Table) that were vested prior to the event. The table
below also does not include benefits provided on a non-discriminatory basis to
salaried employees generally, including accrued vacation, and amounts payable
under the 401(k) Savings Plan.
As a
result of the Company’s participation in the TARP, amounts payable to the named
executive officers upon certain terminations of employment are limited. These
limitations are described in general terms in the Compensation Discussion and
Analysis. Because regulations implementing the applicable statutory requirements
have not yet been issued, the Company is unable to quantify the effects of these
requirements. Accordingly, the amounts shown in the table do not reflect the
limitations imposed under the EESA and ARRA.
Potential
Payments Upon Termination of Employment
|
Cash
Severance Payment |
SERP
Account(1) |
Continuation
of Medical / Welfare Benefits(2)
|
Accelerated
Vesting of Equity Awards(3)
|
Excise
Tax Gross-Up
|
Employee
Benefit Trust(4)
|
Bank
Owned Life Insurance (BOLI)(5)
|
Total
Termination Benefits |
|
|
John
R. Buran
|
||||||||
|
Voluntary
Resignation Without Good Reason or Termination for Cause
|
---
|
$98,414
|
---
|
---
|
---
|
---
|
---
|
$98,414
|
|
Retirement
|
---
|
$500,000
|
---
|
$464,440
|
---
|
---
|
---
|
$964,440
|
|
Death(6)
|
---
|
$98,414
|
---
|
$464,400
|
---
|
---
|
$1,190,000
|
$2,154,440
|
|
Disability(6)
|
$1,195,655
|
$500,000
|
---
|
$464,400
|
---
|
---
|
---
|
$2,160,105
|
|
Voluntary
Resignation for Good Reason or Termination Without Cause(7)
|
$2,873,000
|
$500,000
|
$110,632
|
$464,400
|
---
|
---
|
---
|
$3,948,032
|
|
Change
of Control(7)
|
$2,873,000
|
$500,000
|
$110,632
|
$464,400
|
$1,767,912
|
$1,227,829
|
---
|
$6,943,773
|
|
David
W. Fry
|
||||||||
|
Voluntary
Resignation Without Good Reason or Termination for Cause
|
---
|
N/A
|
---
|
---
|
---
|
---
|
---
|
---
|
|
Retirement
|
---
|
N/A
|
---
|
$214,084
|
---
|
---
|
---
|
$214,084
|
|
Death(6)
|
---
|
N/A
|
---
|
$214,084
|
---
|
---
|
$496,000
|
$710,084
|
|
Disability(6)
|
$349,561
|
N/A
|
---
|
$214,084
|
---
|
---
|
---
|
$563,645
|
|
Voluntary
Resignation for Good Reason or Termination Without Cause(7)
|
$765,400
|
N/A
|
$104,181
|
$214,084
|
---
|
---
|
---
|
$1,083,665
|
|
Change
of Control(7)
|
$765,400
|
N/A
|
$104,181
|
$214,084
|
$522,264
|
$472,184
|
---
|
$2,078,113
|
|
Cash
Severance Payment |
SERP
Account(1) |
Continuation
of Medical / Welfare Benefits(2)
|
Accelerated
Vesting of Equity Awards(3)
|
Excise
Tax Gross-Up
|
Employee
Benefit Trust(4)
|
Bank
Owned Life Insurance (BOLI)(5)
|
Total
Termination Benefits |
|
|
Maria
A. Grasso
|
||||||||
|
Voluntary
Resignation Without Good Reason or Termination for Cause
|
---
|
N/A
|
---
|
---
|
---
|
---
|
---
|
---
|
|
Retirement
|
---
|
N/A
|
---
|
$253,552
|
---
|
---
|
---
|
$253,552
|
|
Death(6)
|
---
|
N/A
|
---
|
$253,552
|
---
|
---
|
$610,000
|
$863,552
|
|
Disability(6)
|
$429,904
|
N/A
|
---
|
$253,552
|
---
|
---
|
---
|
$683,456
|
|
Voluntary
Resignation
for Good Reason or Termination Without Cause(7)
|
$939,400
|
N/A
|
$2,288
|
$253,552
|
---
|
---
|
---
|
$1,195,240
|
|
Change
of Control(7)
|
$939,400
|
N/A
|
$2,288
|
$253,552
|
469,144
|
$266,458
|
---
|
$1,930,842
|
|
Francis
W. Korzekwinski
|
||||||||
|
Voluntary
Resignation Without Good Reason or Termination for Cause
|
---
|
N/A
|
---
|
---
|
---
|
---
|
---
|
---
|
|
Retirement
|
---
|
N/A
|
---
|
$211,692
|
---
|
---
|
---
|
$211,692
|
|
Death(6)
|
---
|
N/A
|
---
|
$211,692
|
---
|
---
|
$530,000
|
$741,692
|
|
Disability(6)
|
$373,523
|
N/A
|
---
|
$211,692
|
---
|
---
|
---
|
$585,215
|
|
Voluntary
Resignation
for Good Reason or Termination Without Cause(7)
|
$823,400
|
N/A
|
$27,429
|
$211,692
|
---
|
---
|
---
|
$1,062,521
|
|
Change
of Control(7)
|
$823,400
|
N/A
|
$27,429
|
$211,692
|
---
|
$508,175
|
---
|
$1,570,696
|
|
Theresa
Kelly
|
||||||||
|
Voluntary
Resignation Without Good Reason or Termination for Cause
|
---
|
N/A
|
---
|
---
|
---
|
---
|
---
|
---
|
|
Retirement
|
---
|
N/A
|
---
|
$100,464
|
---
|
---
|
---
|
$100,464
|
|
Death(6)
|
---
|
N/A
|
---
|
$100,464
|
---
|
---
|
$430,000
|
$530,464
|
|
Disability(6)
|
$303,047
|
N/A
|
---
|
$100,464
|
---
|
---
|
---
|
$403,508
|
|
Voluntary
Resignation for Good Reason or Termination Without Cause(7)
|
$603,700
|
N/A
|
$337
|
$100,464
|
---
|
---
|
---
|
$704,501
|
|
Change
of Control(7)
|
$603,700
|
N/A
|
$337
|
$100,464
|
$283,499
|
$176,243
|
---
|
$1,164,243
|
__________________
|
(1)
|
Mr.
Buran is the only executive officer of the Company and the Bank who is
entitled to receive a SERP benefit. The amount of the benefit
depends on the circumstances of his termination of employment, as
described below.
|
|
(2)
|
Reflects
present value of such benefits using a 5.87% discount rate. See
description under Employment Agreements following this
table.
|
|
(3)
|
Reflects
the value of restricted stock and RSUs and the option spread of stock
options whose vesting is accelerated on the termination of employment or
change of control, in each case based on the closing price of the
Company’s common stock on December 31,
2008.
|
|
(4)
|
See
description under Change of Control Arrangements following this
table.
|
|
(5)
|
Death
benefit under the BOLI policy is equal to two times the named executive
officer’s base salary if the executive dies while employed by the
Bank. If death occurs after retirement or other termination of
employment from the Bank with five years of service, the death benefit
reduces to one time the base
salary.
|
|
(6)
|
In
the event of termination of employment on account of death or disability
prior to a change of
control, the Compensation Committee may, in its sole discretion, award the
executive officer a bonus for the year of termination, in an amount
determined by the Compensation Committee either at the time of termination
of employment or at the time bonuses to active employees are awarded, in
which case the Company would pay such bonus to the executive officer or,
in the event of death, to his or her designated beneficiaries or estate,
as the case may be. In the event of the executive officer’s
termination of employment on account of death or disability after a change
of control, the Company would pay the executive officer or, in the event
of death, his or her designated beneficiaries or estate, as the case may
be, a pro rata portion of the bonus for the year of termination,
determined by multiplying the amount of the bonus earned by the executive
officer for the preceding calendar year by the number of full months of
employment during the year of termination, and then dividing by
12.
|
|
(7)
|
If
termination occurs prior to a change of control, the executive will
receive a pro rata portion of the bonus payable for the year of
termination (to the extent the performance goals for the year were
satisfied). If termination follows a change of control, the
executive will receive a pro rata portion of his or her bonus payable for
the year of termination (based on the amount of bonus received in the
prior year). The table includes an amount on account of this
payment (in the Cash Severance Payment column) because the Company paid
bonuses for 2008 in January 2009, and so a bonus for 2008 would have been
payable had the change of control occurred on December 31,
2008.
|
Employment
Agreements
The
Company and the Bank currently are parties to employment agreements with Messrs.
Buran, Fry, and Korzekwinski and Mses. Grasso and Kelly (collectively, the
“Employment Agreements”). The Employment Agreements provide for termination of
the executive’s employment by the Bank or the Company with or without cause at
any time. The executive would be entitled to a lump sum severance payment and
certain health and welfare benefits upon the occurrence of certain events: (1)
the Company’s or the Bank’s termination of the executive’s employment for
reasons other than for cause, (2) the executive’s resignation during the 60-day
period commencing six months following a change of control (as defined below),
or (3) the executive’s resignation from the Bank and the Company following an
event which constitutes “good reason.” Good reason is defined as:
|
·
|
failure
to re-elect the executive to his or her current
offices;
|
|
·
|
a
material adverse change in the executive’s functions, duties or
responsibilities;
|
|
·
|
relocation
of the executive’s place of employment outside of Queens and/or Nassau
Counties (unless such location has been agreed to by the
executive);
|
|
·
|
failure
to renew the Employment Agreement by the Bank or
Company;
|
|
·
|
a
material breach of the Employment Agreement by the Bank or the Company;
or
|
|
·
|
failure
of a successor company to assume the Employment
Agreement.
|
The lump
sum severance payment under the Employment Agreements would be equal to the
salary payments and bonuses (based on the highest bonus received in the last
three years preceding termination) otherwise payable if the executive’s
employment had continued for an additional 24 months (36 months in the case of
Mr. Buran). In addition, the executive will receive a pro rata portion of
his or her bonus payable for the year of termination (which, in the case of
termination after a change of control, is based on the amount of bonus received
in the prior year). Each named executive officer’s Employment Agreement with the
Company provides that if the executive receives payments that would be subject
to the excise tax on excess parachute payments imposed by Section 4999 of
the Internal Revenue Code, the executive will be entitled to receive an
additional payment, or “gross-up,” in an amount necessary to put the executive
in the same after-tax position as if such excise tax had not been
imposed.
The
Employment Agreements entitle the executives to receive continued health and
welfare benefits (including group life, disability, medical and dental benefits)
for 24 months (36 months in the case of Mr. Buran) equivalent to those provided
to active employees during such period, including dependent
coverage. In addition, if the executive is age 55 or older at the end
of such period, the executive and his or her spouse are entitled to lifetime
coverage under the Bank’s retiree medical and retiree life insurance programs at
the level and cost-sharing percentage in effect at the time of the executive’s
termination of employment.
In the
event an executive terminates employment due to “disability,” which is defined
generally to mean the inability of the executive to perform his or her duties
for 270 consecutive days due to incapacity, each Employment Agreement provides
that the executive would receive 100% of his or her salary for the first six
months, 75% for the next six months and 60% for the remainder of the term of the
Employment Agreement (less any benefits payable to the executive under any
disability insurance coverage maintained by the Company or the Bank). These
payments are shown in the Cash Severance Payment column of the above
table.
In the
event of an executive’s termination due to death or disability prior to a change
of control, the Committee has discretion to determine whether a bonus will be
paid for the year of termination. If such termination occurs after a
change of control, the executive is entitled to a pro rata bonus for the year of
termination based on the amount of bonus received in the prior
year.
Under Mr.
Buran’s Employment Agreement, the Company credits $50,000 during each of the
years 2006 through 2015 to a bookkeeping account maintained by the Company and
the Bank (the “SERP Account”) for the purpose of providing supplemental
retirement benefits. Amounts credited to the SERP Account are
invested as directed by Mr. Buran in certain funds made available by the Bank
with Mr. Buran’s consent. Upon Mr. Buran’s termination of employment with
the Company or the Bank by reason of his death, or upon his voluntary
resignation without “good reason,” or upon his termination for “cause” (which
means (1) willful failure to perform his duties under the Employment
Agreement and failure to cure such failure within sixty days following written
notice thereof from the Company or the Bank, or (2) intentional engagement
in dishonest conduct in connection with his performance of services for the
Company or the Bank, or (3) conviction of a felony), the amount then
credited to the SERP Account will be promptly paid to him (or in the case of his
death, to his designated beneficiaries or his estate) in a cash lump
sum. However, upon Mr. Buran’s termination of employment with
the Company or the Bank by reason of his retirement, disability, voluntary
resignation within one year following an event that constitutes “good reason” or
discharge without “cause,” or for any reason following a “change of control” (as
defined below), the Company or the Bank will pay him a cash lump sum equal to
(1) $500,000, without regard to the amount then credited to his SERP Account, or
(2) the amount then credited to his SERP Account if such amount is greater than
$500,000.
The
Employment Agreements provide that in the event the executive’s employment
terminates due to death, the executive’s beneficiaries (or estate) would receive
a lump sum payment of the executive’s earned but unpaid salary, plus, in the
case of Mr. Buran, payment of his SERP benefits described
above.
In the
event an executive terminates employment for reasons not described above or the
executive’s employment is terminated for cause, the executive is entitled to
receive only his or her earned but unpaid salary and any benefits payable under
the terms of the Company’s and the Bank’s benefit plans.
Change
of Control Arrangements
Upon a
change of control (as defined below), in addition to the provisions of the
Employment Agreements described above, (1) all outstanding restricted
stock/units held by then-current employees and Outside Directors will
immediately vest; (2) all outstanding stock options (and tandem limited
stock appreciation rights (“SARs”)) held by then-current employees and Outside
Directors will become immediately exercisable; (3) the exercise of an
outstanding SAR within 90 days after the change of control will entitle the
holder to receive a cash payment equal to the excess of (A) the highest
price per share of common stock paid during the 90-day period prior to the
exercise of the SAR or in the change of control over (B) the exercise price
of the related stock option; and (4) the Employee Benefit Trust which was
established by the Company to satisfy its obligations under certain employee
benefit plans will terminate and any trust assets remaining after repayment of
the Company’s loan to the trust and certain benefit plan contributions will be
distributed to all full-time employees of the Company or one of its subsidiaries
with at least one year of service, in proportion to their compensation over the
four most recently completed calendar years plus the portion of the current year
prior to the termination of the Employee Benefit Trust.
A “change
of control” is generally defined, for purposes of the Employment Agreements and
benefit plans maintained by the Company or the Bank, to mean:
|
·
|
the
acquisition of all or substantially all of the assets of the Bank or the
Company;
|
|
·
|
the
occurrence of any event if, immediately following such event, a majority
of the members of the board of directors of the Bank or the Company or of
any successor corporation shall consist of persons other than Current
Members (defined as any member of the Board of Directors as of the
completion of the Company’s initial public offering and any successor of a
Current Member whose nomination or election has been approved by a
majority of the Current Members then on the Board of
Directors);
|
|
·
|
the
acquisition of beneficial ownership of 25% or more of the total combined
voting power of all classes of stock of the Bank or the Company by any
person or group; or
|
|
·
|
approval
by the stockholders of the Bank or the Company of an agreement providing
for the merger or consolidation of the Bank or the Company with another
corporation where the stockholders of the Bank or the Company, immediately
prior to the merger or consolidation, would not beneficially own, directly
or indirectly, immediately after the merger or consolidation, shares
entitling such stockholders to 50% or more of the total combined voting
power of all classes of stock of the surviving
corporation.
|
The
following table provides information concerning the compensation of the
Company’s directors for the fiscal year ended December 31, 2008. The Company
uses a combination of cash and stock-based incentive compensation to attract and
retain qualified candidates to serve on the Board of
Directors. Except as noted below, all of the Company’s directors are
paid at the same rate. The differences among directors in the table below are a
function of, among other things, additional compensation for chairing a
committee, varying numbers of meetings attended and corresponding payments of
meeting fees, and payments for service on local advisory boards if
applicable.
Equity
awards are valued at the grant date fair value computed in accordance with
FAS 123(R) and expensed ratably over the vesting period, but without
reduction for assumed forfeitures. The table below includes the
ratable portion of grants made both in the current and in prior years to the
extent the vesting period for those grants fell in such year.
For the
fiscal year ended December 31, 2008, members of the Board of Directors who are
not employees of the Company or the Bank (“Outside Directors”) are entitled to
receive an annual retainer of $30,000 from the Bank, with no additional retainer
from the Company. The Chair of the Audit Committee receives an
additional annual retainer of $10,000 and the Chair of the Compensation
Committee receives an additional annual retainer of $5,000. Outside
Directors also receive meeting fees of $1,500 for each Board or Bank Board
meeting attended, $1,000 for each Audit Committee or Compensation Committee
meeting attended, and $750 for each other committee meeting attended, whether or
not they are members of such committee. However, where the Board of
Directors and the Bank Board meet on the same day, directors receive only a
single board meeting fee for such meetings. Similarly, directors
receive only a single committee meeting fee where identically constituted
committees of the Board of Directors and Bank Board meet on the same
day.
Outside
Directors who are members of the Loan Committee also receive a fee from the Bank
for conducting on-site inspections of proposed real estate collateral for
certain loans in excess of $1,500,000. For each day that a director conducts
such inspections, the director receives a fee of $600 for the first property
inspected and $200 for each additional property inspected on that
day.
Pursuant
to the Company’s 2005 Omnibus Incentive Plan, each Outside Director receives an
annual award of 3,600 restricted stock units (“RSUs”), or shares of restricted
stock if so determined by the Compensation Committee, as of June 1 of each
year. Beginning in January 2009 the Committee decided to revise the
annual equity award date from June 1 to January 30 of each year. Upon initial
election or appointment to the Board of Directors or a change to Outside
Director status, an Outside Director receives a pro rated portion of the annual
award consisting of 300 shares of restricted stock (or RSUs if so determined by
the Compensation Committee) for each full or partial month from the date of such
person’s election or appointment or change in status to the following January
30.
Each
award to an Outside Director vests with respect to one-third of the underlying
shares on the June 1 (or for grants made beginning 2009, January 30) following
the date of grant, and an additional one-third of the underlying shares on each
of the two subsequent June 1 or January 30, provided the award holder is a
director of the Company on each such date. In the event the Outside
Director ceases to be a director of the Company before an award has fully
vested, the unvested portion of the award is forfeited. Awards to
Outside Directors become fully vested in advance of such schedule upon a change
of control of the Company or the Bank (if the director is a member of the Board
of Directors at such time) or upon termination of the director’s service on the
Board of Directors due to death, disability or retirement. For this
purpose, retirement means a director’s termination of service after five years
of service as an Outside Director if the director’s age plus years of service as
an Outside Director equals or exceeds 55.
Unless
the Compensation Committee provides otherwise, dividends or dividend equivalents
on these awards are paid on a current basis, and the awards are settled in
stock. An RSU award entitles the award holder to receive one share of
common stock (or the fair market value of a share in cash or other property) at
a specified future time.
The Bank
has adopted an Outside Director Retirement Plan, which provides benefits to each
Outside Director who served as an Outside Director for at least five years and
whose years of service as an Outside Director plus age equals or exceeds
55. Benefits are also payable to an Outside Director whose status as
an Outside Director terminates due to death or disability or who is an Outside
Director upon a change of control of the Company or the
Bank. However, no benefits will be payable to a director who becomes
an Outside Director after January 1, 2004 or who is removed for
cause. An eligible director will be paid an annual retirement benefit
equal to $48,000, which will be paid in equal monthly installments for the
lesser of the number of months such director served as an Outside Director or
120 months.
In the
event of a change of control, benefits under the plan will be paid in a cash
lump sum; each eligible director will receive the equivalent of 120 months of
benefits. If the Outside Director dies before receiving all benefits payable
under the plan, the remaining benefits will be paid to the Outside Director’s
surviving spouse. The Company has guaranteed the payment of benefits
under the Outside Director Retirement Plan. A director’s right to
receive benefits under the plan is no greater than the right of an unsecured
general creditor of the Bank or the Company.
The Bank
has adopted an Outside Director Deferred Compensation Plan pursuant to which
Outside Directors may elect to defer all or a portion of their annual retainer,
meeting fees, and inspection fees. Deferred amounts are credited with
earnings based on certain mutual fund investments. The deferred
amounts plus earnings thereon will be paid to the director in cash after the
director’s termination of service, either in a lump sum or, if the director so
elects, in annual installments over a period not to exceed five
years. The Company has guaranteed the payment of benefits under the
Outside Director Deferred Compensation Plan. A director’s right to
receive benefits under the plan is no greater than the right of an unsecured
general creditor of the Bank or the Company. As of December 31, 2008,
there were no participants in this plan.
The
Company and the Bank have entered into an indemnity agreement with each of the
directors, which agreements provide for mandatory indemnification of each
director or executive officer to the full extent permitted by law for any claim
arising out of such person’s service to the Company or the Bank. The
agreements provide for advancement of expenses and specify procedures for
determining entitlement to indemnification.
The table
below summarizes the compensation paid by the Company to Outside Directors for
the fiscal year ended December 31, 2008.
|
Name(1)
|
Fees
Earned or
Paid
in Cash(2)
($)
|
Stock
Awards(3)(4)
($)
|
Option
Awards(5)
($)
|
Change
in
Pension
Value and Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|
Gerard
P. Tully, Sr.
|
85,000
|
70,920
|
---
|
---
|
160,000(6)
|
315,920
|
|
James
D. Bennett
|
68,850
|
70,920
|
---
|
20,841
|
---
|
160,611
|
|
Steven
J. D’Iorio
|
71,000
|
112,351
|
13,293
|
---
|
---
|
196,644
|
|
Louis
C. Grassi
|
78,500
|
70,920
|
---
|
20,841
|
---
|
170,261
|
|
Sam
Han
|
54,500
|
30,045
|
---
|
---
|
---
|
84,545
|
|
Michael
J. Hegarty
|
72,500
|
70,920
|
---
|
---
|
---
|
143,420
|
|
John
J. McCabe
|
61,500
|
129,965
|
7,227
|
36,180
|
---
|
234,872
|
|
Vincent
F. Nicolosi(7)
|
70,850
|
70,920
|
---
|
---
|
---
|
141,770
|
|
Donna
M. O’Brien
|
64,000
|
112,351
|
13,293
|
---
|
---
|
189,644
|
|
Franklin
F. Regan, Jr.(7)(8)
|
47,000
|
70,920
|
---
|
---
|
---
|
117,920
|
|
John
E. Roe, Sr.
|
67,500
|
70,920
|
---
|
---
|
---
|
138,420
|
|
Michael
J. Russo
|
76,500
|
70,920
|
---
|
---
|
---
|
147,420
|
_________________
|
(1)
|
John
Buran, the President and Chief Executive Officer of the Company and the
Bank, is also a director of the Company and the Bank but is not included
in this table because, as an employee of the Company and the Bank, he
receives no compensation for his services as director. The
compensation received by Mr. Buran as an employee of the Company and the
Bank is shown in the Summary Compensation Table on page
26.
|
|
(2)
|
Reflects
the amount of compensation earned in 2008 for an annual retainer, Board
and committee meetings, local advisory boards, and property inspection
fees.
|
|
(3)
|
Reflects
the dollar amounts recognized for financial statement reporting purposes
for the fiscal year ended December 31, 2008 in accordance with FAS 123(R)
and thus may include amounts from awards granted prior to
2008. The value of the grant made in 2008 for each director was
$70,920. Assumptions used in the calculation of such amounts are included
in footnote 9 to the Company’s audited financial statements for the fiscal
year ended December 31, 2008 included in the Company’s Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 16,
2009. As of December 31, 2008, each Director had the following
aggregate number of stock awards outstanding: Gerard P. Tully, Sr., 7,200
RSUs Michael J. Hegarty, 7,200 RSUs; James D. Bennett, 7,200 RSUs; Steven
J. D’Iorio, 8,889 shares/RSUs; Louis C. Grassi, 7,200 RSUs; Sam Han, 5,400
RSUs; John J. McCabe, 7,200 RSUs; Vincent F. Nicolosi, 7,200 RSUs; Donna
M. O’Brien, 8,889 shares/RSUs; Franklin F. Regan, Jr., 0 RSUs; John E.
Roe, Sr., 7,200 RSUs; and Michael J. Russo, 7,200
RSUs. References to these shares/RSUs for each Director are
included in the Security Ownership Table on page
46.
|
|
(4)
|
The
amounts shown include the effect of an accelerated expensing due to the
fact that certain directors have reached retirement
eligibility.
|
|
(5)
|
Reflects
the dollar amounts recognized for financial statement reporting purposes
for the fiscal year ended December 31, 2008 in accordance with FAS 123(R)
and thus includes amounts from awards granted prior to
2008. Assumptions used in the calculation of such amounts are
included in footnote 9 to the Company’s audited financial statements for
the fiscal year ended December 31, 2008 included in the Company’s Annual
Report on Form 10-K filed with the Securities and Exchange Commission on
March 16, 2009. As of December 31, 2008, each Director had the
following aggregate number of stock option awards outstanding: Gerard P.
Tully, Sr., 22,750; Michael J. Hegarty, 171,000 (which includes options
granted while he was employed as President and Chief Executive Officer);
James D. Bennett, 59,400; Steven J. D’Iorio, 16,875; Louis C. Grassi,
59,400; Sam Han, 0; John J. McCabe, 31,725; Vincent F. Nicolosi, 59,400;
Donna M. O’Brien, 16,875; Franklin F. Regan, Jr., 59,400; John E.
Roe, Sr., 29,700; and Michael J. Russo,
44,550.
|
|
(6)
|
Represents
aggregate amounts earned pursuant to a consulting agreement with the Bank
and the Company. An explanation of the main terms of the
consulting agreement is contained under the heading “Transactions with
Related Persons” on page 13.
|
|
(7)
|
See
“Transactions with Related Persons” on page 12 for a description of
certain transactions that may be deemed to result in compensation to
Messrs. Nicolosi and Regan.
|
|
(8)
|
Mr.
Regan retired as a director of the Company and the Bank on July 1,
2008.
|
The Audit
Committee of the Board of Directors is comprised of five Outside Directors,
each of whom is independent within the meaning of the Nasdaq corporate
governance standards. In accordance with its written charter adopted by the
Board of Directors, the Audit Committee assists the Board of Directors in
fulfilling its responsibility for oversight of the Company’s accounting,
auditing and financial reporting practices. Management is responsible for the
Company’s financial reporting process, including the internal control function,
and for preparing the Company’s financial statements in accordance with
generally accepted accounting principles and assessing the effectiveness of the
Company’s internal control over financial reporting. The Company’s independent
registered public accounting firm is responsible for examining those financial
statements and expressing an opinion as to the conformity of those financial
statements with generally accepted accounting principles as well as expressing
an opinion on the effectiveness of the Company’s internal control over financial
reporting.
In
discharging its oversight responsibility, the Audit Committee (1) reviewed and
discussed the audited financial statements of the Company at and for the fiscal
year ended December 31, 2008 with management and the independent registered
public accounting firm, (2) discussed with the independent registered public
accounting firm the matters required to be discussed by Statement on Auditing
Standards No. 61, as amended, “Communication with Audit Committees,” (3)
received the written disclosures and the letter from the independent registered
public accounting firm required by the Independence Standards Board’s Standard
No. 1, “Independence Discussions with Audit Committees,” and (4) discussed with
the independent registered public accounting firm its independence from the
Company.
In
addition, the Audit Committee monitored the Company’s progress in assessing
compliance with Section 404 of the Sarbanes-Oxley Act of 2002, and reviewed
management’s report on internal control over financial reporting and the
independent registered public accounting firm’s opinion on the Company’s
internal control over financial reporting.
Based on
the reviews and discussions with management and the independent registered
public accounting firm referred to above, the Audit Committee recommended to the
Board of Directors that the Company’s audited financial statements be included
in its Annual Report on Form 10-K for the fiscal year ended December 31, 2008,
for filing with the Securities and Exchange Commission.
Submitted
by the Audit Committee of the Board of Directors,
|
Louis
C. Grassi, CPA
Chairman
|
Michael
J. Hegarty
Donna
M. O’Brien
|
John
E. Roe, Sr.
|
Michael
J. Russo
|
The Board
of Directors of the Company has determined that Louis C. Grassi, the Chairman of
the Audit Committee, is an “audit committee financial expert” as defined under
SEC rules, and that he is independent as defined under applicable Nasdaq listing
standards. Mr. Grassi is a certified public accountant and a certified fraud
examiner.
The
following table sets forth the aggregate fees billed for professional services
to the Company during the fiscal years ended December 31, 2008 and 2007 by the
Company’s independent registered public accounting firm.
|
Fiscal
Year Ended December 31,
|
||
|
2008
|
2007
|
|
|
Audit
Fees
|
$533,250
|
$498,508
|
|
Audit-Related
Fees
|
89,550
|
80,098
|
|
Tax
Fees
|
---
|
---
|
|
All
Other Fees
|
27,300
|
|
|
Total
Fees
|
$650,100
|
$578,606
|
Audit
Fees are fees billed for professional services rendered in connection with the
audit of the Company’s annual financial statements and internal control over
financial reporting, and reviews of the Company’s quarterly financial
statements.
Audit-Related
Fees are fees for assurance and related services, consisting primarily of audits
of, and consultation with respect to, employee benefit plans.
Tax Fees
include fees for tax compliance, tax advice and tax planning.
All Other
Fees consisted of work associated with Company filings of Forms S-3 and Forms
S-8 with the Securities and Exchange Commission.
In
accordance with its charter, the Audit Committee approves in advance all audit
and non-audit services to be provided by the Company’s independent registered
public accounting firm. During fiscal 2008 and 2007, all audit and
non-audited services provided by Grant Thornton were pre-approved by the Audit
Committee in accordance with its charter.
RATIFICATION
OF THE APPOINTMENT OF GRANT THORNTON LLP AS THE COMPANY’S INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31,
2009
The Audit
Committee has selected Grant Thornton LLP (“Grant Thornton”) as the Company’s
independent registered public accounting firm for the current fiscal year.
Stockholder approval for the appointment of our independent registered public
accounting firm is not required, but the Audit Committee and the Board of
Directors are submitting the selection of Grant Thornton for ratification by the
Company’s stockholders at the annual meeting. If the
stockholders do not ratify the selection of Grant Thornton LLP, the Audit
Committee will reconsider its selection. Grant Thornton served as the Company’s
independent registered public accounting firm for the fiscal year ended December
31, 2008. Representatives of Grant Thornton are expected to attend the 2009
annual meeting and will have an opportunity to make a statement or to respond to
appropriate questions from stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON
LLP AS THE COMPANY’S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
To the
knowledge of the Company, the following persons were the beneficial owners of
more than five percent of the outstanding shares of common stock of the Company
as of February 28, 2009.
|
Name and Address of Beneficial
Owner
|
Number
of Shares Beneficially
Owned
|
Percent of Class(1)
|
|
J.P.
Morgan Chase & Co.(2)
270
Park Avenue
New
York, New York 10017
|
1,615,233
|
7.50%
|
|
Barclays
Global Investors, NA(3)
400
Howard Street
San
Francisco, CA 94105
|
1,322,977
|
6.12%
|
__________________
|
(1)
|
On
February 28, 2009, the total number of outstanding shares of the Company’s
common stock was 21,715,809.
|
|
(2)
|
According
to its filing with the SEC on Schedule 13G/A, J.P. Morgan Chase & Co.
has sole dispositive power with respect to 46,870 of these shares of
common stock, shared dispositive power with respect to 1,553,563, sole
voting power with regard to 56,970 of these shares, and shared voting
power with regard to 2,300 of these shares. J.P. Morgan Chase & Co,
through an affiliate, serves as trustee for the Flushing Financial
Corporation Employee Benefit Trust. As of February 28, 2009, there were
1,397,026 shares of the Company’s common stock held in the Flushing
Financial Corporation Employee Benefit
Trust.
|
|
(3)
|
According
to its filing with the SEC on Schedule 13G, Barclays Global Investors, NA.
has sole dispositive power with respect to 773,385 of these shares of
common stock and sole voting power with regard to 623,409 of these shares.
Barclays Global Fund Advisors has sole dispositive and voting power with
respect to 549,952 shares.
|
The
following table sets forth information regarding the beneficial ownership of the
common stock of the Company as of February 28, 2009, by each director of the
Company, by each named executive officer and by all current directors and
executive officers as a group.
|
Name
|
Shares
of
Common
Stock
Beneficially Owned(1)(2)
|
Percent of Class
|
|
Gerard
P. Tully, Sr.
|
330,078(3)
|
1.52%
|
|
John
R. Buran
|
286,402(4)
|
1.32%
|
|
James
D. Bennett
|
107,475(5)
|
0.49%
|
|
Steven
J. D’Iorio
|
29,137(6)
|
0.14%
|
|
Louis
C. Grassi
|
105,438(7)
|
0.49%
|
|
Sam
Han
|
10,900(8)
|
0.05%
|
|
Michael
J. Hegarty
|
350,873(9)
|
1.62%
|
|
John
J. McCabe
|
64,489(10)
|
0.30%
|
|
Vincent
F. Nicolosi
|
104,765(11)
|
0.48%
|
|
Donna
M. O’Brien
|
34,137(12)
|
0.16%
|
|
John
E. Roe, Sr.
|
132,499(13)
|
0.61%
|
|
Michael
J. Russo
|
268,046(14)
|
1.23%
|
|
David
W. Fry
|
53,488(15)
|
0.25%
|
|
Maria
A. Grasso
|
40,507(16)
|
0.19%
|
|
Francis
W. Korzekwinski
|
91,809(17)
|
0.42%
|
|
Theresa
Kelly
|
18,042
(18)
|
0.08%
|
|
All
current directors and executive officers as a group (26
persons)
|
2,147,690(19)
|
9.89%
|
_______________
|
(1)
|
Under
the rules of the SEC, beneficial ownership includes any shares over which
an individual has sole or shared power to vote or to dispose, as well as
any shares that the individual has the right to acquire within 60 days.
Unless otherwise indicated, each person has sole voting and dispositive
power as to the shares reported. Officers have the power to direct the
voting and, subject to plan provisions, the disposition of shares held for
their account in the 401(k) Savings Plan and have voting power over, but
no economic interest in, the shares representing their proportionate
voting interest in the Company’s Employee Benefit Trust. Officers and
directors have the power to vote, but not the power to dispose of,
unvested shares of restricted stock granted to them under the Company’s
1996 Restricted Stock Incentive Plan. The table also includes shares which
the named individual had a right to acquire upon the exercise of stock
options granted under the Company’s 1996 Stock Option Incentive Plan and
the 2005 Omnibus Incentive Plan, which were exercisable on February 28,
2009, as well as shares which the individual would have a right to acquire
under either the 1996 Restricted Stock Incentive Plan or the 2005 Omnibus
Incentive Plan upon termination of employment or Board service within 60
days of February 28, 2009. No additional stock options are scheduled to
become exercisable and no restricted stock units (RSUs) are scheduled to
vest within 60 days after February 28, 2009, except upon termination of
employment or Board service of certain
individuals.
|
|
(2)
|
On
February 28, 2009, the total number of shares of common stock outstanding
was 21,715,809 (including shares held by the Employee Benefit Trust). As
of February 28, 2009, other than Messrs. Tully, Hegarty, Russo and Buran,
who beneficially owned 1.52%, 1.62%, 1.23% and 1.32% of the outstanding
shares of common stock, respectively, each individual beneficially owned
less than 1.00% of the outstanding shares of common stock, and all current
directors and executive officers as a group beneficially owned 9.89% of
the outstanding shares of common
stock.
|
|
(3)
|
Includes
173,570 shares held jointly by Mr. Tully and his spouse, with whom he
shares voting and dispositive power, 56,875 shares held by Mrs. Tully or
an entity owned by Mrs. Tully with respect to which Mr. Tully disclaims
beneficial ownership, 11,500 shares held by Tulger Contracting Corp. with
respect to which Mr. Tully has sole voting and dispositive power, 1,000
shares held by Contractors Associates, Inc. with respect to which Mr.
Tully has sole voting and dispositive power, and 22,750 shares underlying
exercisable stock options. Also includes 10,800 shares
underlying unvested RSUs that vest upon Mr. Tully’s termination of Board
service.
|
|
(4)
|
Includes
18,069 shares credited to Mr. Buran’s account in the 401(k) Savings Plan,
210,550 shares underlying exercisable stock options, and 5,996 shares
representing his proportionate voting interest in the Employee Benefit
Trust. Excludes 47,800 shares underlying unvested RSUs that are to be
settled in common stock upon vesting, which is not expected to occur
within 60 days.
|
|
(5)
|
Includes
59,400 shares underlying exercisable stock options. Also includes 10,800
shares underlying unvested RSUs that vest upon Mr. Bennett’s termination
of Board service.
|
|
(6)
|
Includes
13,500 shares underlying exercisable stock options and 1,689 unvested
shares of restricted stock. Excludes 10,800 shares underlying
unvested RSUs that are to be settled in common stock upon vesting, which
is not expected to occur within 60
days.
|
|
(7)
|
Includes
59,400 shares underlying exercisable stock options. Also includes 10,800
shares underlying unvested RSUs that vest upon Mr. Grassi’s termination of
Board service.
|
|
(8)
|
Excludes
9,000 shares underlying unvested RSUs that are to be settled in common
stock upon vesting which is not expected to occur within 60
days.
|
|
(9)
|
Includes
86,000 shares underlying exercisable stock options. Also includes 10,800
shares underlying unvested RSUs that vest upon Mr. Hegarty’s termination
of Board service.
|
|
(10)
|
Includes
31,725 shares underlying exercisable stock options. Also includes 10,800
shares underlying unvested RSUs that vest upon Mr. McCabe’s termination of
Board service.
|
|
(11)
|
Includes
10,597 shares held jointly by Mr. Nicolosi and his spouse, with whom he
shares voting and dispositive power, and 59,400 shares underlying
exercisable stock options. Also includes 10,800 shares underlying unvested
RSUs that vest upon Mr. Nicolosi’s termination of Board
service.
|
|
(12)
|
Includes
13,500 shares underlying exercisable stock options and 1,689 unvested
shares of restricted stock. Excludes 10,800 shares underlying unvested
RSUs that are to be settled in common stock upon vesting, which is not
expected to occur within 60 days.
|
|
(13)
|
Includes
15,225 shares held by Mrs. Roe with respect to which Mr. Roe disclaims
beneficial ownership. Also includes 8,000 shares held by City Underwriting
Agency, Inc. Defined Profit Sharing Plan and Trust, with respect to which
Mr. Roe shares voting and dispositive power, and 29,700 shares underlying
exercisable stock options. Also includes 10,800 shares underlying unvested
RSUs that vest upon Mr. Roe’s termination of Board
service.
|
|
(14)
|
Includes
212,696 shares held jointly by Mr. Russo and his spouse, with whom he
shares voting and dispositive power, and 44,550 shares underlying
exercisable stock options. Also includes 10,800 shares underlying unvested
RSUs that vest or become exercisable upon Mr. Russo’s termination of Board
service.
|
|
(15)
|
Includes
12,453 shares credited to Mr. Fry’s account in the 401(k) Savings Plan,
27,900 shares underlying exercisable stock options, and 5,996 shares
representing his proportionate voting interest in the Employee Benefit
Trust. Excludes 23,100 shares underlying unvested RSUs that are to be
settled in common stock upon vesting, which is not expected to occur
within 60 days.
|
|
(16)
|
Includes
6,496 shares credited to Ms. Grasso’s account in the 401(k) Savings Plan,
22,000 shares underlying exercisable stock options, and 5,996 shares
representing her proportionate voting interest in the Employee Benefit
Trust. Excludes 28,000 shares underlying unvested RSUs that are to be
settled in common stock upon vesting, which is not expected to occur
within 60 days.
|
|
(17)
|
Includes
13,184 shares held jointly by Mr. Korzekwinski and his spouse, with whom
he shares voting and dispositive power. Also includes 34,129 shares
credited to Mr. Korzekwinski’s account in the 401(k) Savings Plan, 38,500
shares underlying exercisable stock options, and 5,996 shares representing
his proportionate voting interest in the Employee Benefit Trust. Excludes
22,900 shares underlying unvested RSUs that are to be settled in common
stock upon vesting which is not expected to occur within 60
days.
|
|
(18)
|
Includes
5,420 shares credited to Ms. Kelly’s account in the 401(k) Savings Plan,
and 5,000 shares underlying exercisable stock options. Excludes 11,200
shares underlying unvested RSUs that are to be settled in common stock
upon vesting which is not expected to occur within 60
days.
|
|
(19)
|
Includes
104,249 shares credited to accounts of executive officers in the 401(k)
Savings Plan 3,378 unvested shares of restricted stock held by directors,
760,975 shares underlying exercisable stock options held by executive
officers and directors, and 77,948 shares representing the proportionate
voting interest of executive officers in the Employee Benefit Trust. Also
includes 86,400 shares underlying unvested RSUs that vest upon termination
of Board service. Excludes 225,410 shares underlying unvested RSUs that
are to be settled in common stock upon vesting which is not expected to
occur within 60 days.
|
Based
solely on a review of copies of reports furnished to the Company or written
representations that no other reports were required, the Company believes that
during the fiscal year ended December 31, 2008, all filing requirements under
Section 16(a) of the Securities Exchange Act of 1934 applicable to its executive
officers and directors were complied with.
The last
date for timely filing stockholder proposals relating to the annual meeting
under the Company’s bylaws was March 20, 2009. As of the date of this proxy
statement, the Board of Directors has not received notice of any business, and
presently knows of no business, that will be presented for consideration at the
annual meeting other than as stated in the notice of annual meeting of
stockholders that is attached to this proxy statement. If, however, other
matters are properly brought before the annual meeting, it is the intention of
the persons named in the accompanying proxy to vote the shares represented
thereby on such matters in accordance with their best judgment.
To Present
Proposal at Annual Meeting. The bylaws of
the Company provide an advance notice procedure for a stockholder to properly
bring business before an annual meeting. The stockholder must give written
advance notice to the Corporate Secretary of the Company which must be received
not more than ninety days nor less than sixty days prior to the anniversary of
the date of the immediately preceding annual meeting. In accordance with these
provisions, a stockholder proposal in connection with the 2010 annual meeting of
stockholders must be received by the Corporate Secretary on or before March 19,
2010 in order to be timely. However, in the event that the date of the
forthcoming annual meeting is more than thirty days after the anniversary date
of the prior year’s meeting, such written notice will also be timely if it is
received by the Corporate Secretary by the earlier of (1) the 10th day prior to
the forthcoming meeting date, or (2) the close of business on the 10th day
following the date on which the Company first makes public disclosure of the
meeting date.
The
advance notice by stockholders must include the stockholder’s name and address,
a representation that the stockholder is a holder of record of the Company’s
stock entitled to vote at such meeting (or if the record date for such meeting
is subsequent to the date required for such stockholder notice, a representation
that the stockholder is a holder of record at the time of such notice and
intends to be a holder of record on the date of such meeting) and intends to
appear in person or by proxy at such meeting to propose such business, a brief
description of the proposed business, the reason for conducting such business at
the annual meeting, and any material interest of such stockholder in the
proposed business. In the case of nominations for election to the Board of
Directors, certain information regarding the nominee must also be provided.
Nothing in this paragraph shall be deemed to require the Company to include in
its proxy statement and proxy relating to an annual meeting any stockholder
proposal that does not meet all of the requirements for inclusion established by
the SEC in effect at the time such proposal is received.
To Include
Proposal in the Company’s Proxy Statement. In
order for a stockholder proposal to be eligible for inclusion in the proxy
materials of the Company for the 2010 annual meeting of stockholders, it must be
received at the Company’s executive offices no later than December 4, 2009. Any
such proposal shall be subject to the requirements of the proxy rules adopted
under the Securities Exchange Act of 1934. See “Corporate Governance—Director
Nominations” regarding the deadlines and procedures for submitting a director
candidate for consideration by the Nominating and Governance
Committee.
The
Report of the Audit Committee and the Report of the Compensation Committee which
are set forth in this proxy statement shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Company specifically
incorporates the information under such headings by reference, and shall not
otherwise be deemed filed under such Acts.
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By
Order of the Board of Directors,
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Maria
A. Grasso
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Corporate
Secretary
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Lake
Success, New York
April 9,
2009
YOU
ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO SIGN, DATE AND PROMPTLY
RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR,
ALTERNATIVELY, TO INDICATE YOUR VOTING INSTRUCTIONS OVER THE INTERNET OR BY
TELEPHONE, IF AVAILABLE.
AUDIT
COMMITTEE CHARTER
OF
FLUSHING
FINANCIAL CORPORATION
STATEMENT
OF PURPOSE
The Audit
Committee will assist the Board of Directors in fulfilling its oversight
responsibilities of Flushing Financial Corporation (FFIC) and Flushing Savings
Bank (FSB) or the “Company” and its subsidiaries. The Audit Committee
will review the financial reporting process, the systems and processes of
internal control and compliance and the audit process. In performing
its duties, the Committee will maintain effective working relationships with the
Board of Directors, management and the internal and external
auditors. To effectively perform his or her role, each Committee
member will obtain an understanding of the detailed responsibilities of
Committee membership as well as the company’s business, operations and
risks.
ORGANIZATION
The
Committee will be comprised of three or more directors as determined by the
Board of Directors, each of whom will be “independent” within the meaning of the
rules applicable to companies quoted on the Nasdaq National
Market. Committee members will serve at the pleasure of the Board of
Directors. A Committee Chairman will be designated by the Board of
Directors. All Committee members will have, at a minimum, a working
familiarity with basic finance and accounting practices. The Board of
Directors will endeavor to appoint at least one Committee member that is an
“audit committee financial expert” as that term is defined by the Securities and
Exchange Commission (the “SEC”) under the Sarbanes-Oxley Act of
2002. Committee members may enhance their understanding of finance
and accounting through educational programs offered by the company or an outside
consultant.
MEETINGS
Meetings
of the Committee will be held not less than quarterly. In furtherance
of its purpose, the Committee will provide sufficient opportunity for the
external auditors, the director of internal audit and management to meet with
the Committee in separate executive sessions to discuss any matters that the
Committee or these groups believe should be discussed privately. The
Committee will make regular reports and appropriate recommendations to the Board
of Directors.
AUTHORITY
The Audit
Committee will have the sole authority to appoint or replace the external
auditor of the company. The Audit Committee will be directly
responsible for the compensation and oversight of the work of the company’s
external auditor (including the resolution of disagreements between management
and the external auditor regarding financial reporting) for the purpose of
preparing or issuing an audit report or related work. The external
auditor will report directly to the Audit Committee. The Audit
Committee will have the authority to engage independent counsel and other
advisers, as it deems necessary to carry out its
responsibilities. The company will provide for appropriate funding,
as determined by the Audit Committee, for payment of compensation to the
external auditor engaged by the company for the purpose of rendering or issuing
an audit report and to any advisers engaged by the Audit Committee.
ROLES AND
RESPONSIBILITIES
A. Internal
Control
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1.
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Require
that the external auditors, internal auditors and management keep the
Audit Committee informed regarding fraud, illegal acts, deficiencies in
internal control, and similar
matters.
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2.
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Consider
whether internal control recommendations made by internal and external
auditors have been implemented by
management.
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3.
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Determine
the extent to which internal and external auditors review (i) computer
systems and applications, (ii) the security of such systems and
applications, and (iii) the contingency plan for processing financial
information in the event of a systems
breakdown.
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B. Financial
Reporting
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1.
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Meet
with management and the external auditors to review annual and quarterly
financial statements, issues related thereto and the results of the
external auditors’ annual audit or quarterly review, as the case may
be.
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2.
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Review
the company’s earnings press releases with management, including the use
of “pro-forma” or “adjusted” non-GAAP
information.
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3.
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Ask
management and the internal and external auditors about significant risks
and exposures and the plans to minimize such
risks.
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4.
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Consider
significant judgments, including those made as to asset and liability
valuation, loan losses or the selection and application of accounting
principles.
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5.
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Review
management’s disposition of proposed audit adjustments identified by the
external auditors.
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6.
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Require
that the external auditors communicate their judgment regarding the
integrity and quality of the financial statements to the committee and
review, upon receipt, the report (oral or written) of the external
auditors on:
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·
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All
critical accounting policies and
practices
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·
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All
alternative accounting treatments within GAAP for policies and practices
related to material items that have been discussed with management
(including ramifications of the use of such alternative treatments and
disclosures, and the treatment preferred by the accounting
firm)
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·
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Material
written communications between the accounting firm and management, such as
any management letter or schedule of unadjusted audit
differences
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7.
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To
gain insight into the fairness of the statements and disclosures, obtain
views and, where appropriate, explanations from management and from the
internal and external auditors on
whether:
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·
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Generally
accepted accounting principles have been consistently
applied
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·
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There
are any significant or unusual events or
transactions
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·
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The
company’s financial and operating controls are functioning
effectively
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·
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The
financial statements contain adequate and appropriate
disclosures
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8.
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Review
disclosures, if any, made to the audit committee by the Company’s
Disclosure Committee or, in connection with their certification of
periodic reports, the CEO and CFO.
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C. Internal
Audit
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1.
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Review
the activities and organizational structure of the internal audit
function.
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2.
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Review
the qualifications of the internal audit function and participate in the
appointment, replacement, reassignment or dismissal of the director of
internal audit.
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3.
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Review
the effectiveness of the internal audit
function.
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4.
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Review
the scope of internal audit’s work plan for the year and receive a summary
report of significant findings by internal auditors and management’s
response to the conditions
reported.
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D. External
Audit
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1.
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Review
the external auditors' proposed audit scope and
approach.
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2.
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Review
the performance of the external
auditors.
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3.
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Obtain
from the external auditors and review the confirmation required to be
provided by the external auditors as to their independence in accordance
with professional standards.
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4.
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Ensure
the 5-year rotation of audit lead and concurring partners as required by
law.
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5.
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Recommend
to the Board of Directors policies for the company’s hiring of current or
former employees of the external auditor who served as members of the
company’s audit engagement team.
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6.
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Pre-approve,
on a case-by-case basis, all audit, review or attest services and
permitted non-audit services (including the fee arrangements and terms in
respect of such services) to be performed by the external auditors for the
company, other than a de minimus amount of non-audit services not to
exceed, in the aggregate, 5% of total revenues paid to the external
auditors during the fiscal year that were not known as non-audit services
at the time of the engagement and that are promptly made known to the
Audit Committee and approved by the Audit Committee prior to completion of
the audit.
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E. Other
Responsibilities
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1.
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Make
the report required by the SEC to be included in the Company’s annual
proxy statement.
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2.
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Review
with management, the director of internal audit and the external auditors
the assessment of the adequacy of internal controls over financial
reporting under section 404 of the Sarbanes-Oxley Act of 2002, section 112
of the Federal Deposit Insurance Corporation Improvement Act of 1991, and
the review of the quarterly/annual reports required to be filed by
management.
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3.
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Establish
procedures for the receipt, retention and treatment of complaints received
by the company regarding accounting, internal accounting controls or
auditing matters, and the confidential, anonymous submission by employees
of concerns regarding questionable accounting or auditing
matters.
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4.
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Require
that significant findings and recommendations made by the internal and
external auditors are received and discussed on a timely
basis.
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5.
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Perform
other oversight functions as requested by the full Board of
Directors.
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6.
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Periodically
review and assess the adequacy of this Charter and recommend any proposed
changes to the Board of Directors for
approval.
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While the
Committee has the responsibilities and powers set forth in this Charter, it is
not the duty of the Committee to plan or conduct internal control or other
audits, or to ascertain the structure of internal controls, or to determine that
the company’s financial statements are complete and accurate and are in
accordance with generally accepted accounting principles. This is the
responsibility of management and the independent external
auditor. Nor is it the duty of the Committee to conduct
investigations or to resolve disagreements, if any, between management and the
independent external auditors.
A-3
