FLUSHING
FINANCIAL CORPORATION
1979
Marcus Avenue, Suite E140
Lake
Success, New York 11042
(718)
961-5400
April 13,
2010
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 18, 2010 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.
|
Sincerely,
|
|
 |
 |
|
Gerard
P. Tully, Sr.
|
John
R. Buran
|
|
Chairman
of the Board
|
President
and Chief Executive Officer
|
FLUSHING
FINANCIAL CORPORATION
1979
Marcus Avenue, Suite E140
Lake
Success, New York 11042
(718)
961-5400
______
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
______
|
DATE
& TIME:
|
May 18,
2010 at 2:00 p.m. New York time
|
|
PLACE:
|
LaGuardia
Marriott
102-05
Ditmars Boulevard
East
Elmhurst, New York 11369
|
|
ITEMS
OF BUSINESS
|
To
elect four directors for a three-year term and until their successors are
elected and qualified;
|
|
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,
2010;
|
|
|
To
approve an amendment to the Company’s Certificate of Incorporation to
increase the number of authorized shares of Common Stock from 40 million
to 100 million;
|
|
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To
re-approve the performance criteria of the Company’s Amended and Restated
2005 Omnibus Incentive Plan; and
|
|
|
To
transact such other business as may properly come before the meeting or
any adjournment thereof.
|
|
|
RECORD
DATE:
|
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 Friday,
March 26, 2010.
|
|
VOTING
BY PROXY:
|
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.
|
|
BY
ORDER OF THE BOARD OF DIRECTORS,
|
|
 |
|
|
Maria
A. Grasso
Corporate
Secretary
|
Lake
Success, New York
April 13,
2010
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 18, 2010
_______________
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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 18, 2010 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 26, 2010, 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, 2009 are first being mailed on or
about April 13, 2010 to all persons entitled to vote at the annual
meeting.
Stockholders
of record as of the close of business on March 26, 2010, the record date,
are entitled to one vote for each share of common stock then held. On the record
date, there were 31,152,004 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 ratification of the selection of
Grant Thornton LLP as the Company’s independent registered public
accounting
firm for the fiscal year ending December 31, 2010, FOR the proposed
amendment to the Company’s Certificate of Incorporation and FOR the re-approval
of the performance criteria of the Company’s Amended and Restated 2005 Omnibus
Incentive Plan (the “2005 Omnibus Incentive Plan”). 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 ratification of the appointment of Grant Thornton LLP as the
Company’s independent registered public accounting firm and the re-approval of
the performance criteria of the 2005 Omnibus Incentive Plan require 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. The approval of the amendment to
the Company’s Certificate of Incorporation requires the affirmative vote of a
majority of the outstanding shares of the Company’s Common
Stock. Abstentions are considered present for purposes of determining
the presence of a quorum and, along with votes withheld by brokers in the
absence of instructions from “street name” holders (broker non-votes), if any,
will not affect the plurality vote required for the election of directors, but
will have the same effect as 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 ratification of the
independent registered public accounting firm, the re-approval of the
performance criteria of the 2005 Omnibus Incentive Plan and the approval of the
amendment to the Company’s Certificate of Incorporation, but do not have that
authority with respect to the election of directors.
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, 2009 are available at
https://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 A and B are serving
terms expiring at the annual meeting of stockholders in 2011 and 2012,
respectively.
The
directors in Class C, whose terms expire at the 2010 annual meeting, are James
D. Bennett, John R. Buran, Vincent F. Nicolosi, and Gerard P. Tully, 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 2013.
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.
|
Name
|
Age(1)
|
Position(s) with the
Company
|
Director
Since(2)
|
Term
Expires
|
|
Gerard
P. Tully, Sr.
|
82
|
Chairman
of the Board
|
1967
|
2010(3)
|
|
John
R. Buran
|
60
|
President,
Chief Executive Officer and Director
|
2003
|
2010(3)
|
|
James
D. Bennett
|
71
|
Director
|
1998
|
2010(3)
|
|
Steven
J. D’Iorio
|
60
|
Director
|
2004
|
2012
|
|
Louis
C. Grassi
|
54
|
Director
|
1998
|
2012
|
|
Sam
Han
|
56
|
Director
|
2007
|
2012
|
|
Michael
J. Hegarty
|
70
|
Director
|
1987
|
2011
|
|
John
J. McCabe
|
66
|
Director
|
2003
|
2011
|
|
Vincent
F. Nicolosi
|
70
|
Director
|
1977
|
2010(3)
|
|
Donna
M. O’Brien
|
54
|
Director
|
2004
|
2011
|
|
John
E. Roe, Sr.
|
76
|
Director
|
1968
|
2012
|
|
Michael
J. Russo
|
75
|
Director
|
1984
|
2011
|
____________________
|
(1)
|
As
of December 31, 2009.
|
|
(2)
|
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.
|
|
(3)
|
Nominee
for re-election at the 2010 annual meeting for a term expiring in
2013.
|
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. In addition, described below are each director nominee’s
particular experiences, qualifications, attributes or skills that contributed to
the Board’s conclusion that the person should continue to serve as a director of
the Company.
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. Mr. Tully’s decades of experience with the
Company in particular and the Banking industry in general in conjunction with
his many years of leadership make him a valuable member of our Board of
Directors.
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 and Nominating Committees. He is
currently Chairman of the Board of the New York Bankers Service Corporation and
Vice Chairman of the Board of the New York Bankers Association. Mr.
Buran’s experience with the Company and his career-long experience in the
Banking industry, including at some of the nation’s largest banks, his community
and other activities connecting him to the Company’s marketplace and his
extensive knowledge of Banking regulation and other matters as applicable
specific to the Company, make him a valuable member of our Board of
Directors. In addition, Mr. Buran’s leadership during recent adverse
macro-economic circumstances especially qualifies him as a Board member to meet
future such challenges.
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. Mr. Bennett’s legal background, including in particular
his extensive knowledge and experience as a real estate lawyer practicing in the
Company’s marketplace, in light of the importance to the Company of real estate
as loan collateral and the retail nature of its branches, makes Mr. Bennett a
valuable member of our Board of Directors.
Vincent F. Nicolosi is a
partner in the law firm of Nicolosi & Nicolosi LLP 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. Mr. Nicolosi’s legal background and knowledge of the Company’s
marketplace, including in particular his experience in risk assessment and
judgment in
the
context of legal matters as an experienced litigator, makes Mr. Nicolosi a
valuable member of our Board of Directors.
Steven J. D’Iorio is Manager
of Construction Services at Ogden CAP Properties,
LLC. Mr. D’Iorio has over 37 years of real estate,
construction and development experience. Mr. D’Iorio has held
senior management positions with Time Warner, Inc., National Westminster Bank
and Olympia & York. Mr. D’Iorio’s knowledge of and business
experience of the real estate market in which the Company operates, in light of
the importance to the Company of real estate as loan collateral and the retail
nature of its branches, makes Mr. D’Iorio a valuable member of our Board of
Directors.
Louis C. Grassi is Managing
Partner and President of Grassi & Co., CPA’s, P.C. located in Jericho,
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. Mr. Grassi’s accounting, tax and management expertise,
including in particular his experience as a fraud examiner and his general
understanding of controls, as well as his firm leadership background, make Mr.
Grassi a valuable member of our Board of Directors.
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’s successful business background and his strong
personal and professional connection to the markets served by the Company,
coupled with his long-time work in the Korean-American communities served by the
Company, add to our diversity and make him a valuable member of our Board of
Directors.
Michael J. Hegarty is former
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, a director and Chairman of the Audit
Committee of EDO Corporation, formerly a New York Stock Exchange listed company
and a manufacturer of defense systems and components. Earlier in his
career, Mr. Hegarty was an accountant with the firm Peat, Marwick, Mitchell and
Company. Mr. Hegarty’s extensive experience as a public company
executive and board member and knowledge of the Company’s industry and history
and his background as a certified public accountant make him a valuable member
of our Board of Directors.
John J. McCabe has served as
Chief Investment Strategist of Shay Assets Management, Inc. for the past eleven
years and is co-manager of the AMF Large Cap Equity Fund managed by Shay Assets
Management. 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. Mr. McCabe brings long-time
experience in the securities industry and fund management business, as well as a
background of investment banking, to the Company and makes him a valuable
addition to our Board of Directors.
Donna M. O’Brien is President
of Community Healthcare Strategies, LLC, a nationally focused healthcare
strategy operations and consulting firm. She has held senior level management
positions in the healthcare industry including serving as Executive Vice
President and Chief Administrative Officer of the Catholic Health System of Long
Island and as Assistant Administrator at the University of Texas M.D. Anderson
Cancer Center in Houston, Texas. She currently serves on the Board of Regents of
Seton Hall University where she is on the Finance Committee and is Chair of the
Audit Committee. Ms. O’Brien was a member of the Governor of New York State
Commission on Healthcare Facilities for the Twenty First Century. Ms. O’Brien’s
long history in senior-most administrative and management positions and her
experience on other boards makes her a valuable member of our Board of
Directors.
John E. Roe, Sr. is Chairman
of the Board of City Underwriting Agency, Inc., insurance brokers, located in
Lake Success, New York. Mr. Roe’s experience in the insurance
industry in general and the Company’s risk profile in particular in the
Company’s industry and regional market make him a valuable member of our Board
of Directors.
Michael J. Russo is
self-employed as a consulting engineer and serves as Chief Executive Officer 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. Mr.
Russo’s executive experience in a variety of businesses, his knowledge of the
Company’s marketplace and his ties to the Company’s community make him a
valuable member of the Board of Directors.
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
|
59
|
Executive
Vice President, Treasurer and Chief Financial Officer
|
|
Maria
A. Grasso
|
45
|
Executive
Vice President, Chief Operating Officer and Corporate
Secretary
|
|
Francis
W. Korzekwinski
|
47
|
Executive
Vice President and Chief of Real Estate Lending
|
|
Barbara
A. Beckmann
|
51
|
Senior
Vice President
|
|
Allen
M. Brewer
|
57
|
Senior
Vice President
|
|
Astrid
Burrowes
|
45
|
Senior
Vice President
|
|
Caterina
dePasquale
|
42
|
Senior
Vice President
|
|
Ruth
E. Filiberto
|
51
|
Senior
Vice President
|
|
Ronald
Hartmann
|
54
|
Senior
Vice President
|
|
Paul
W. Ho
|
52
|
Senior
Vice President
|
|
Jeoung
Jin
|
43
|
Senior
Vice President
|
|
Theresa
Kelly
|
48
|
Senior
Vice President
|
|
Robert
G. Kiraly
|
54
|
Senior
Vice President
|
|
Patricia
Mezeul
|
50
|
Senior
Vice President
|
|
Leeann
Tannuzzo
|
42
|
Senior
Vice President
|
|
William
J. Weichsel
|
60
|
Senior
Vice President
|
____________________
(1) As
of December 31, 2009.
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 M. 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.
Caterina dePasquale has been
Senior Vice President/Director of Sales & Service since January
2010. Ms. dePasquale joined the Company in 2007 as Vice President and
Director of Retail Banking & Distribution. Prior to joining the
Company Ms. dePasquale held various Senior Vice President positions, including
District Manager and Regional Service Manager, within the Retail Banking
operations of Bank of America and its predecessor banks.
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.
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.
Paul W. Ho has been Senior
Vice President/Asian Markets of the Company since October 2009. Prior
to joining the Company, Mr. Ho held various Senior Vice President positions at
HSBC National Bank, USA since 1993.
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.
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.
Leeann Tannuzzo has been
Senior Vice President/Director of Retail Banking and Investment Sales of the
Company since January of 2010. Ms. Tannuzzo joined the Company in May 2006 as
Vice President/Director of Sales where she managed the Company’s Investment
& Insurance Program, Training and Retirement Services. In her current
position, Ms. Tannuzzo also continues to lead the Company’s Investment &
Insurance Program. From May 2005 through May 2006, Ms. Tannuzzo was a Regional
Manager & Vice President at the Bank of New York, where she managed 21
retail branches. She held a similar position at the Bank of Smithtown as Vice
President of Branch Administration.
William J. Weichsel has been
Senior Vice President/Chief Investment Officer of the Company since June of
2007. He was promoted to First Vice President/Chief Investment Officer in July
2006. Mr. Weichsel joined the Company in 2000 as Vice President/Chief
Investment Officer. 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
consulting fees he formerly received 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 2009, the Board of Directors held
12 regular meetings and seven 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:
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 independence
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 2005 Omnibus Incentive Plan, and
recommending to the Board of Directors awards to employees under the 2005
Omnibus Incentive Plan. The Compensation Committee does not have a charter. This
committee meets on an as needed basis. During 2009, this committee met nine
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
independence 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 was attached
as Appendix A to the Company’s proxy statement for its 2009 annual meeting of
stockholders. During 2009, this committee met seven times. The Report of the
Audit Committee is included on page 45.
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 independence
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 publicly available on the Company’s
website at http://www.flushingbank.com by following the links to investor
relations and then corporate governance, and then Nominating and Governance
Committee Charter. This committee held two meetings during 2009.
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 2009, the Bank Board held
12 regular meetings and seven 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 independence 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 may establish additional criteria and is
responsible for assessing the appropriate balance of criteria required of Board
members. Although we do not have a written policy with respect to
Board diversity, the Nominating and Governance Committee and the Board believe
that a diverse board leads to improved Company performance by encouraging new
ideas, expanding the knowledge base available to management and fostering a
boardroom culture that promotes innovation and vigorous
deliberation. Consequently, when evaluating potential nominees, the
Committee considers individual characteristics that may bring diversity to the
Board, including gender, race, national origin, age, professional background,
unique skill sets and areas of expertise.
The
Nominating and Governance Committee will consider director candidates
recommended by stockholders of the Company as described below. Stockholders
owning at least 1% of the Company’s outstanding common stock 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.
The Board
has an active role, as a whole and also at the committee level, in overseeing
management of the Company’s risks. The Board regularly reviews
information regarding the Company’s credit, liquidity and operations, as well as
the risks associated with each. The Company’s Compensation Committee
is responsible for overseeing the management of risks relating to the Company’s
executive compensation plans and arrangements. The Audit Committee
oversees management of financial risks. The Nominating and Governance
Committee manages risks associated with the independence of the Board of
Directors and potential conflicts of interest. While each committee
is responsible for evaluating certain risks and overseeing the management of
such risks, the entire Board of Directors is regularly informed through
committee reports about such risks.
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 2009. The highest aggregate balance of these loans at any time since
January 1, 2009 was $1,037,200, and the aggregate balance of these loans at
January 31, 2010 was $845,447. 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 2009. The Bank
believes that such loans do not involve more than the normal risk of
collectibility or present other unfavorable features.
The
Nominating and Governance Committee of the Company has approved the law firm of
Nicolosi & Nicolosi LLP, of which Vincent F. Nicolosi is a partner, to
represent the Bank in connection with closings of residential and certain
commercial real estate loans, the fees of which are paid by
borrowers. In that capacity, Mr. Nicolosi represents the Bank in
connection
with some of its closings. In 2009, the borrowers paid an aggregate
of $559,605 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 of the AMF Large
Cap Equity Fund, which is 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 $29,428
in 2009. 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.
From 1996
to 2009, Mr. Tully had a consulting agreement with the Bank and the
Company. This agreement expired in November 2009. Mr. Tully’s remuneration under
the agreement had been $160,000 in 2008 and $146,667 in 2009. Upon the
expiration of the consulting agreement, no successor agreement was put in place
and no consulting agreement currently exists between Mr. Tully and the Bank and
the Company. Pursuant to his former agreement, Mr. Tully, in his capacity
as Chairman, consulted with and advised 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 would have terminated in the
event Mr. Tully ceased to be Chairman, in which case he would have been
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. The agreement also provided that in
the event Mr. Tully ceased 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 have been 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. Mr. Tully has announced his
intention to retire from his position as Chairman of the Company on February 15,
2011. Upon this date and contingent upon his retirement as Chairman
and other circumstances, Mr. Tully will be provided a one-time lump sum payment
of $125,000.
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 2009 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.flushingbank.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
2009, 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 2009 had a balance in excess of $120,000 at some time since the beginning
of 2009. The highest balance of that loan at any time since January 1, 2009
was $224,800, and the balance of that loan at January 31, 2010 was
$220,328. 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 2009. The Bank believes that this loan does
not involve more than the normal risk of collectibility or present other
unfavorable features.
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 Compensation
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. Our Chief Executive Officer makes recommendations to the Committee
with respect to compensation for other executive officers, including the
structure and terms of these executives’ annual cash incentives and long-term
equity incentives. Our Chief Executive Officer considers factors such as tenure,
individual performance, responsibilities and experience levels of the
executives, as well as the compensation of the executives relative to one
another, when making recommendations regarding appropriate total compensation of
our executives. Certain executives assist the Chief Executive Officer in
structuring his proposals regarding the design of the annual cash incentives and
long-term equity incentives; however, executives do not play any role in setting
their own compensation. Our Chief Executive Officer either discusses his
recommendations with the Chairman of the Compensation Committee or has
management present them at Compensation Committee meetings. The compensation and
benefits personnel within our human resources department supports the
Compensation
Committee
in the performance of its responsibilities. During fiscal year 2009, our Chief
Financial Officer and Senior Vice President of Human Resources regularly
attended the Compensation Committee meetings to provide perspectives on the
competitive landscape, the needs of the business and information about our
financial performance. The Compensation Committee periodically meets in
executive session without management to deliberate on executive compensation
matters. The Compensation Committee considers, but is not bound to and does not
always accept, the Chief Executive Officer’s recommendations regarding executive
compensation. The Compensation Committee reviews all recommendations in light of
our compensation philosophy and generally seeks input from the Company’s
compensation consultant prior to making any final decisions.
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. In 2009, as in prior years, the Committee engaged the
Consultant, which presented the Committee with a discussion of compensation
philosophy and proposed compensation elements and also an executive total direct
compensation analysis and recommendations by the Consultant under the new regime
of TARP regulations with regard to several executive officers, including the
named executive officers. The Consultant did not utilize a peer group in its
analysis. The Committee reviewed an analysis and recommendations approved by the
Consultant and implemented these recommendations with regard to salary and
equity awards for 2009. For a discussion of the elements involved in the
Compensation Committee’s decisions regarding executive compensation, see
“Executive Compensation - Compensation Discussion and Analysis.”
Our
institution reported record earnings in 2009 while continuing to navigate the
challenging negative economic environment which came to the forefront in 2008.
Because we participated in the U.S. Treasury Capital Purchase Program of the
Troubled Asset Relief Program (“TARP”), our compensation decisions during 2009
were constrained by TARP requirements.
Elements
of 2009 Performance
Our
institution’s strong capital, our ability to grow core deposits, and our
traditionally strong credit discipline enabled us to increase net income in
spite of the extreme challenges of 2009. Our strong performance in 2009 is
reflected by the following:
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Net
income for 2009 increased 14.8% to $25.6 million. Diluted earnings per
common share were adversely impacted by the one-time incurrence of TARP
preferred stock costs and an increase of 9.3 million common shares
associated with our common stock offering completed in September 2009. As
a result, earnings per diluted common share decreased to
$0.91.
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Our
institution remains well-capitalized under regulatory requirements, with
core and risk-weighted capital ratios of 8.84% and 13.49%
respectively.
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In
2009, we successfully raised $101.5 million in capital through the sale of
9.3 million common shares in a public
offering.
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In
October 2009 we exited from the TARP program by redeeming in full the
$70.0 million of preferred stock we had issued to the U.S. Treasury under
the TARP program in 2008, and in December 2009, repurchasing the related
warrant.
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Our
return on average equity was 7.8% for 2009, as compared to the thrift
industry average for 2009 of 0.84% (as reported by SNL Financial in their
Thrift Index as of February 25,
2010).
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We
continued to grow our balance sheet in 2009, focusing on our funding
sources to reduce our cost of funds. As a result of this focus, core
deposits increased $434.7 million (a 43% increase), while reducing our
reliance on certificates of deposit and borrowings, which decreased $205.9
million (a 14% decrease) and $78.7 million respectively (a 7%
decrease).
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Our
institution continues to lend to the New York Metropolitan market,
indicating our strong operating position during adverse macro-economic
circumstances.
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General
TARP Compensation Restrictions
Late in
2008, the U.S. government began several programs to infuse capital into the
financial sector to shore up the banking system and encourage lending. 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, the Company
received $70.0 million under the terms of the TARP program established under
EESA, through a sale of preferred stock and issuance of a warrant to the U.S.
Treasury Department, in accordance with terms set forth at that
time.
At the
time the Company elected to participate in the TARP program, the basic
restrictions with respect to compensation consisted of the
following:
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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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limiting
the amount of severance payable in the event of involuntary
termination,
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having
our Compensation Committee review the Company’s compensation arrangements
with our senior risk officer to ensure that the arrangements do not
encourage senior executive officers to take unnecessary and excessive risk
that threaten the value of the Company,
and
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limiting
the Company’s annual federal tax deduction for compensation payable to
each of our named executive officers to
$500,000.
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These
were restrictions we were willing to incur as a consequence of participation in
the TARP program. Each of the named executive officers voluntarily waived his or
her contractual legal rights with respect to changes in compensation
arrangements made to enable us to comply with these requirements.
On
February 17, 2009, the American Recovery and Reinvestment Act of 2009
(“ARRA”) was enacted. ARRA imposed additional executive compensation
requirements applicable to participants in the TARP, regardless of when
participation commenced, and directed the Treasury Department to establish
standards implementing the new requirements. Of particular relevance to the
Company’s executive compensation program, ARRA prohibited the payment or accrual
of any bonus, retention award or incentive compensation to any of our named
executive officers, subject to two exceptions:
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grants
of “long-term restricted stock” having a value not greater than one-third
the total annual compensation of the award recipient, and subject to
vesting and other restrictions, and
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payments
required under written employment contracts entered into on or before
February 11, 2009.
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ARRA also
authorized the Treasury Department to seek the return of compensation paid prior
to the enactment of ARRA under certain circumstances. The exact scope of these
provisions was unclear prior to the adoption of Treasury regulations
implementing ARRA, which did not occur until June 15, 2009.
Our
Executive Compensation Philosophy and Objectives
The
Compensation 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 at or 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. 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 financial
performance. The Committee believes that such allocation is needed to attract
and retain executive officers in the competitive New York metropolitan
market.
Historically,
the Company has evaluated its compensation against a peer group of banks and
thrifts comprised of:
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two
New York City area banks that the Company considers its direct
competitors, but which are significantly larger than the Company,
and
|
|
·
|
a
number of banks (19 in 2008) that are closer to the Company’s size (no
more than twice as large and no less than half the size of the Company)
that are located in major urban/suburban areas of the Northeast United
States.
|
The
Company has historically targeted the primary elements of compensation against
the peer group as follows:
|
·
|
Base
salary has historically been targeted at the median of the peer group,
within a range of 20% above or below the median to reflect individual
performance and experience.
|
|
·
|
Annual
incentive bonus has historically been targeted at the 75th percentile of
the peer group for meeting target levels of
performance.
|
|
·
|
Total
direct compensation (base salary plus annual bonus plus equity awards) has
historically been targeted so that when the Company performs at the 75th
percentile against its peers, compensation would 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.
|
In 2009,
the Company departed from its historical approach as a result of the constraints
imposed by the TARP program. The ARRA restrictions, which significantly changed
the permitted mix of compensation elements by drastically limiting the amount of
cash incentive compensation payable, were adopted in February 2009. As a result,
the Compensation Committee was required to make compensation decisions for 2009
without the benefit of information as to how the companies in its peer group
were responding to the ARRA restrictions. Moreover, because a significant number
of the Company’s competitors for executive talent were not participating in the
TARP program, the Compensation Committee needed to create a compensation package
which, while complying with the ARRA restrictions, would be competitive with the
compensation programs of companies that were not subject to such
restrictions.
As a
result, the Compensation Committee determined to adopt an approach under which
the baseline for determining 2009 compensation for the named executive officers
was their 2008 total direct compensation, to be divided among the various
elements of total direct compensation in a manner that would comply with the
ARRA restrictions.
Our
2009 Executive Compensation Components
As in
prior years, for the fiscal year ended December 31, 2009, the principal
components of compensation for the named executive officers were:
|
·
|
base
salary;
|
|
·
|
performance-based
annual incentive compensation (although historically paid in cash,
performance-based annual incentive compensation for 2009 was established
subject to applicable ARRA restrictions and ultimately paid in the form of
“long-term restricted stock” and cash in accordance with such
restrictions);
|
|
·
|
long-term
equity incentive compensation;
|
|
·
|
retirement
benefits; and
|
|
·
|
perquisites
and other personal benefits.
|
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. The Committee also uses 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 the performance based incentive bonuses and the
amount of retirement benefits.
As a
result of the enactment of ARRA in February 2009, the Compensation Committee was
concerned that the statute’s prohibition on the accrual and payment of cash
bonuses would significantly reduce the annual cash compensation of our named
executive officers from the prior year. In this regard, the Committee
first noted the outstanding operational performance of the Company during recent
years, including record net operating income, which performance the Committee
acknowledged is due in great part to the senior management team. In this
context, the Committee was concerned that the ARRA restrictions on cash bonuses
would adversely impact the intended retentive effect of base salary
compensation. Further, the Committee generally agreed that the
Company’s historical total cash compensation levels (consisting of salary and
annual incentive compensation) were generally competitive and that the reduction
of such levels in 2009 could expose the Company to solicitations of its senior
management by competitors unconstrained by ARRA restrictions. In particular, it
was noted that certain such competitors in the New York metropolitan and other
regional markets were in fact not participating in TARP. In order to mitigate
the anti-competitive effect of the ARRA restrictions, and the resulting
perceived exposure to such solicitations in the context of these industry
circumstances, the Committee determined to increase annual cash compensation to
offset the impact of the unavailability of annual cash incentive bonuses. See
the Summary Compensation Table on page 27 for further information regarding the
amounts paid to each of our named executive officers.
Performance-Based
Annual Incentive
The
Company provides senior executives, including the named executive officers, with
performance-based annual incentive 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. These bonuses are provided under the Company’s
Annual Incentive Plan for Executives and Senior Officers (the “Incentive Bonus
Plan”). While we have historically paid all of the annual incentive compensation
in cash, as a result of TARP restrictions a portion of the 2009 annual incentive
bonus for our named executive officers was required to be paid in the form of
equity.
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. 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 2005 Omnibus Incentive Plan,
which also permits awards not structured to so comply.
In March
2009, the Compensation Committee established performance targets and target
bonus amounts for our named executive officers, subject to compliance with the
TARP restrictions. At the time of their action, ARRA had recently been enacted
and the Treasury regulations interpreting and implementing the statute had not
yet been adopted, so the Committee’s actions were made in an environment of
uncertainty as to the potential amount of bonus that would ultimately be
permitted.
For all
of our named executive officers except Ms. Kelly, the performance measures were
based solely on Company-wide goals. These goals consisted of diluted operating
earnings per common share and operating return on average equity, with each of
these factors weighted equally. The Committee concluded that these goals
continued to be suitable as recognized industry metrics and as appropriate for
the Company in particular by combining and equally weighting financial
performance incentives based on a traditional operating basis per common share
and performance incentives based on the return on equity, which is a
well-recognized measure used by many financial institutions. For Ms. Kelly, who
has departmental responsibility for Business Banking, the bonus was based 70% on
the above Company-wide goals and 30% on departmental goals, specifically loan
advances and increases in core deposit amounts. Target level
performance for these factors was set as follows:
|
·
|
Diluted
operating earnings per common share of $1.32. For this purpose, diluted
operating earnings per common share excludes any gains or losses from
balance sheet or corporate restructurings, net gains or losses for
financial assets and financial liabilities carried at fair value,
other-than-temporary impairment charges, net gains or losses on the sale
of securities, changes to income tax laws, non-recurring items and merger
related charges.
|
|
·
|
Operating
return on average equity of 10.17%. For this purpose, the items excluded
above for determining diluted operating earnings per common share are also
excluded.
|
|
·
|
With
respect to Ms. Kelly, the target operating business segment performance
components were set at levels that the Committee considered would
collectively be reasonably difficult for her to achieve based on
historical performance of those metrics and the reasonable expectation
regarding achievement of those goals in 2009. The specific goals set for
2009 were not collectively achieved in 2008 and thus required improved
performance for achievement in
2009.
|
The
target performance levels were consistent with the Company’s 2009 Strategic
Plan. For each performance factor, the threshold performance level was set at
80% of the target level. For 2009, no additional amounts were payable
for performance above the target level.
The 2009
target bonus under the Incentive Bonus Plan for the named executive officers, in
accordance with the TARP requirements, was equal to 50% of his or her
annual 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 target level of performance would result in a bonus
equal to 100% of the target bonus. The amount of bonus
would be prorated for performance at levels between these stated levels. Within
the Incentive Bonus Plan the Committee reserves the right to reduce, but not
increase, the amount of bonus paid in its discretion.
The
Compensation Committee met in December 2009 to determine the amounts earned
under the Incentive Bonus Plan and determined that quantitative company-wide
performance had exceeded threshold levels to an extent triggering the payment of
bonus compensation, but not to an extent attaining target levels. Specifically,
the Committee determined, and the Board of Directors approved, payment of
incentive bonus constituting approximately 61% of the target bonus for each of
the named executive officers other than Ms. Kelly. Ms. Kelly failed to achieve
threshold performance on one of her departmental goals and attained above target
level on the other component. Taking into account both the Company-wide and
departmental performance, the Committee determined, and the Board of Directors
approved, payment of incentive bonus constituting approximately 58% of the
target bonus for Ms. Kelly.
On
October 28, 2009 the Company redeemed the preferred shares issued under the TARP
program. In addition, on June 15 the Treasury had issued its regulations
interpreting and implementing the TARP restrictions added by ARRA. These
regulations provided that the portion of the annual incentive bonus attributable
to the periods prior to the issuance of
the
regulations (January 1 through June 15) and after repayment of the TARP funds
(for the Company, October 29 through December 31) could be paid in cash, and the
portion of the incentive bonus attributable to the remainder of the year could
be paid in “long-term restricted stock” as defined under the TARP regulations
(subject to a limit on the amount of “long-term restricted stock” equal to 50%
of the remaining “annual compensation” paid in 2009). Application of these
restrictions resulted in a calculation that 62.5% of the incentive award could
be paid in cash and 37.5% of the incentive award could be paid in “long-term
restricted stock.” As permitted under the TARP regulations, the “long-term
restricted stock” was issued in the form of restricted stock units (“RSUs”). The
RSUs were valued based on the book value of the Company’s common stock on the
date of grant (December 21), which was higher than the market price of the
common stock on that date, resulting in the issuance of fewer RSUs than would
have been issued based on the market price. Consequently, our senior executives
received the following RSUs under our Incentive Bonus Plan for 2009: Mr. Buran,
7,216 RSUs valued at $84,072; Mr. Fry, 3,103 RSUs valued at $36,155; Ms. Grasso,
3,817 RSUs valued at $44,464; Mr. Korzekwinski, 3,316 RSUs valued at $38,633;
and Ms. Kelly, 2,185 RSUs valued at $25,450. The grant date fair value of these
awards, based on the market price of the common stock, is shown in note 1 to the
Grants of Plan Based Awards Table on page 29. While the TARP
regulations permitted a grant that became fully vested on the second anniversary
of the date of grant, the Committee chose to impose a longer vesting schedule
more consistent with its historic grants of RSUs. As a result, the
awards vest 40% on the second anniversary of the date of grant, and an
additional 20% on each of the next three succeeding anniversaries, subject to
accelerated vesting in certain situations.
Long-Term
Equity Incentive Compensation
The
Company provides the 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 them 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 these two types of awards based on
the recommendations of the Committee to the Board of Directors. Long-term equity
incentive compensation awards are structured in accordance with the shareholder
approved the 2005 Omnibus Incentive Plan.
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 Company’s fiscal year. The Committee
felt that this would enable the compensation process to be more effective by
having compensation decisions related to long-term equity grants made at the
same time that the Committee was considering the extent to which the annual
incentive for the prior year had been earned.
In the
grant made in January 2009, the Committee utilized the Company’s equity plan to
reward outstanding performance with incentives that focus our management team on
the task of creating long-term shareholder value. The nature and size of awards
were determined by a number of factors, including the Company’s performance
against the Strategic Plan and the individual performance of the named executive
officers. In this decision-making, the Committee also considered the Company’s
level of earnings for 2008 as well as the practical and quantitative aspects of
its recent company-wide utilization of shares (burn rate) and the availability
of shares for future grant under the Company’s equity plans. The grants are
shown in detail in the Grants of Plan Based Awards Table on page 29. The vesting
schedule of the grants is the same as the majority of our prior grants.
Specifically, the grants vest 20% on each of the first five anniversaries of the
grant.
Tax
Qualified Retirement Benefits
The
Company provides tax-qualified retirement benefits to substantially all of its
employees, including the named executive officers, in order to provide a
competitive compensation package within the market that the Company
operates.
In 2006
the Company froze the Retirement Plan and replaced it with the Defined
Contribution Retirement Program (“DCRP”). Under the DCRP, employees
receive an annual Company contribution equal to 4% of their eligible base salary
(up to tax law limits).
The
Company offers a tax-qualified retirement savings plan pursuant to which all
full-time employees are eligible to contribute up to 25% of their annual salary
on a pre-tax basis. The Company matches 50% of the first 6% of salary
contributed by the employee. Additionally, the Company may make a profit sharing
contribution in an amount determined by the Company’s Board of Directors each
year in its discretion. For 2009, the contribution was approximately 5% of
eligible compensation as defined in the Bank’s 401(k) Savings Plan.
Supplemental
Retirement Benefits
In
addition to the tax-qualified retirement benefits discussed above, the Company
provides the named executive officers and certain other executives with the
opportunity to participate in a supplemental retirement plan, the Supplemental
Savings Incentive Plan (“SSIP”), which offers these individuals the opportunity
to receive benefits not permitted to be provided under the tax-qualified plans
due to Internal Revenue Code limitations.
The SSIP
allows participating executive officers to defer a portion of their compensation
in excess of the amount permitted under the tax-qualified plan. The Bank matches
50% of each participant’s contributions to the SSIP. Participants direct the
investments of their contributions and the Bank contributions in the SSIP among
the mutual fund investments made available by the Bank. Amounts credited prior
to 2010 cannot be distributed prior to a participant’s termination of
employment. A participant may elect to have amounts credited after
2009 distributed prior to termination of employment, on dates specified by the
participant at the time of making the election to defer, which must be at least
two years after the deferral election is made.
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 tax-qualified plan but were not due to tax law limits. When
dividends are paid on the common stock, dividend equivalents are deemed
reinvested in additional phantom shares. These amounts are required to remain
invested as phantom shares of Company common stock (whose value is determined by
reference to the price of the Company’s common stock) until the participant’s
termination of employment, thereby further aligning our executives’ interests
with those of our stockholders. The Company wants management-level employees to
have a significant investment in Company common stock and believes it is
appropriate to have a portion of their supplemental retirement benefits invested
in this way.
As a
result of restrictions under the TARP regulations, each of the named executive
officers was required to forego 37.5% of the amount he or she would otherwise
have been entitled to have credited as phantom shares under the terms of the
SSIP.
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, 2009
are not included in column (i) of the Summary Compensation Table on page 27
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 27 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 37. Mr. Buran’s employment agreement
also provides for supplemental retirement benefits, as described under the
heading “Potential Payments Upon Termination or Change in Control” on
page 37.
Allocation
of Executive Compensation
The TARP
program, and particularly the uncertainty created by the enactment of ARRA in
February 2009, caused the Compensation Committee to restructure the mix of
compensation elements from the allocation the Committee would otherwise have
chosen. In particular, the limitations on incentive pay added by ARRA led the
Committee to increase the portion of total direct compensation allocated to base
salary.
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 and encourage executives to consider Company
performance from a long-term as well as short-term horizon.
These
stock ownership guidelines apply to all long-term equity awards made to
executive officers 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% of their “profit shares” and Senior Vice
Presidents must retain 25% of their “profit shares.” Profit shares are defined
as net shares acquired upon stock option exercises or vesting of full-value
awards following payment of applicable taxes with respect to the award.
Shares
subject to the ownership guidelines must be retained while the executive is
employed by the Company until the executive officer reaches age 61, after
which time the executive may dispose annually of 20% of the aggregate number of
profit shares then held. Compliance with these guidelines is mandatory for all
executive officers of the Company.
Tax
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.
Under the TARP program, for 2009 the maximum amount deductible as compensation
for each of the officers subject to Section 162(m) is $500,000 without regard to
whether their compensation qualifies as “performance-based.”
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:
(1) It
has reviewed with the Company’s senior risk officer the Company’s senior
executive officer compensation plans and has made all reasonable efforts to
ensure that these plans do not encourage the senior executive officers to take
unnecessary and excessive risks that threaten the value of Flushing Savings
Bank;
(2) It
has reviewed with the Company’s senior risk officer the Company’s employee
compensation plans and has made all reasonable efforts to limit any unnecessary
risks these plans pose to Flushing Savings Bank; and
(3) It
has reviewed the Company’s employee compensation plans to eliminate any features
of these plans that would encourage the manipulation of reported earnings of
Flushing Financial Corporation to enhance the compensation of any
employee.
Risk
Assessment
In 2009,
we enhanced our current risk assessment processes to comply with the Treasury’s
requirement that all incentive plans be reviewed to ensure they do not motivate
unnecessary and excessive risk that threatens the value of the Company. As a
community bank regulated by the Office of Thrift Supervision, we have always
adhered to a conservative and balanced approach to risk. Our management and
Board conduct regular reviews of our business to ensure we remain within
appropriate regulatory guidelines and appropriate practice. Our executive
compensation program has always reflected a balanced approach to rewarding
performance across many different types of financial, customer, and employee
performance measures.
In
connection with the foregoing, we conducted a thorough review of our
compensation plans throughout our operations. In this regard we reviewed
our:
|
·
|
corporate
annual incentive plans for executives and senior
officers
|
|
·
|
bank
goal and incentive programs for lending officers in both commercial,
residential and mixed use areas
|
|
·
|
retail
banking incentive programs and
|
|
·
|
business
bank incentive plans.
|
In this
review we assessed the relevant features of the particular plans and programs,
including metrics, targets and award amounts, including among other
things:
|
·
|
whether
the participant has access to or influences in any material respect the
financial accounting or reporting of
transactions
|
|
·
|
whether
and to what extent the participant’s transactions may be material to the
Company
|
|
·
|
what
risks the business of the participant
faces
|
|
·
|
what
risk factors of the Company are exposed to a particular business unit of
the participant
|
|
·
|
whether
the incentive is designed reasonably to achieve the intended
goals
|
|
·
|
whether
the incentive in the past has resulted in excessive risk to the
Company
|
|
·
|
whether
incentive pay is high in comparison with base
compensation
|
|
·
|
whether
adjustments may be made based on quality as well as quantity of
performance and
|
|
·
|
whether
a plan is subject to controls on award
determinations.
|
Risk
Assessment of Senior Executive Officer Plans
The
Company’s Annual Incentive Plan for Executives and Senior Officers, which
provides annual performance-based incentive compensation to our named executive
officers and other senior officers, contains a number of features that
discourage our executives from taking unnecessary and excessive risk, including
the following:
|
·
|
Performance
targets are determined by the Compensation Committee and the Board based
on the Company’s Strategic Plan.
|
|
·
|
The
performance measures applicable for the Chief Executive Officer and
Executive Vice Presidents are 100% based on Company-wide performance, and
the measures applicable for the other participants are at least 70% based
on Company-wide performance, thereby encouraging the entire management
team to make decisions focused on the best long-term interests of the
Company as a whole rather than on particular business
lines.
|
|
·
|
There
is a limit on the amount which can be paid to any executive under the
plan, regardless of the amount by which performance exceeds target
levels.
|
|
·
|
The
Compensation Committee and the Board have discretion to reduce the amount
of annual incentive payable below the amount otherwise earned under the
plan formula, and in the past have exercised such
discretion.
|
While the
Annual Incentive Plan rewards achievement of short-term goals, the Company has
several programs which encourage long-term value creation. Equity awards under
the Company’s Omnibus Incentive Plan are granted by the Compensation Committee
subject to Board approval. In recent years the grants to senior executives have
provided for vesting in equal installments over a five-year period from the date
of grant. Moreover, the Company’s Executive Stock Ownership Guidelines, which
are described in the Compensation Discussion and Analysis, require executive
officers to hold a specified percentage of the shares acquired as equity awards
throughout the period of their employment. In addition, the
Company’s
Supplemental Savings Incentive Plan provides that supplemental credits (amounts
that cannot be credited as tax-qualified profit sharing contributions) be
credited in the form of phantom shares of Company common stock and be held in
such form until termination of employment.
Risk
Assessment of Employee Compensation Plans
The
Company has four incentive programs for employees, in which senior executive
officers do not participate.
|
·
|
Bank
Goal and Incentive Program for Mortgage Loan Officers -
Commercial
|
|
·
|
Bank
Goal and Incentive Program for Mortgage Loan Officers - Residential and
Mixed Use
|
|
·
|
Retail
Incentive Recognition Program
|
|
·
|
Business
Banking Incentive Plan
|
Both
programs for mortgage loan officers have performance targets and potential award
amounts set by senior management. Payment of awards is subject to reduction
below the amount earned under the plan formula for unethical conduct or if
management believes reduction is appropriate for other performance-related
reasons. The potential risk of having an incentive award tied to loan
origination volume is mitigated by the Company’s requirement that all loan
originations, including the borrowers and the terms, be approved by the
Company’s Loan Committee (and, for loans above specified amounts, the Loan
Committee of the Board). In addition, the employee’s bonus in any year is
generally reduced to reflect delinquent or problematic loans made by the
employee in the prior year. Both the Retail and Business Banking incentive
programs reward employees for various metrics of performance, which may include
individual sales efforts as well as teamwork. Awards under these programs in the
aggregate are not material to the Company.
General
Risk Assessment
We
believe that our approach to goal setting, setting of targets with payouts at
multiple levels of performance, evaluation of performance results, and negative
discretion in the payout of incentives results in mitigating excessive
risk-taking that could harm our value or reward poor judgment by our executives.
Features of our programs reflect sound risk management practices. We believe
that we have allocated our compensation among base salary and short and long
term incentive compensation target opportunities in such a way as to not
encourage excessive risk-taking. Moreover, the multi-year vesting of our equity
awards and our share ownership guidelines properly account for the time horizon
of risk.
In
addition, both the senior executive officer plans and the employee compensation
plans are subject to controls which mitigate the risks inherent in these plans.
These controls include our accounting processes, internal and external audit
functions, and processes surrounding internal control over financial reporting
and disclosure controls.
THE COMPENSATION
COMMITTEE
Michael J. Russo,
Chairman
Louis C. Grassi,
CPA
Sam Han
Donna M.
O’Brien
John E. Roe,
Sr.
The table
below summarizes the total compensation of each of the named executive officers
for the fiscal years ended December 31, 2009, 2008 and 2007. 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 37.
|
Name and
Principal
Position
|
Year
|
Salary(1)
($)
|
Bonus
($)
|
Stock
Awards(2)
(3)
($)
|
Option
Awards(2)
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings(4)
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|
John
R. Buran
|
2009
|
735,054
|
—
|
153,648
|
25,704
|
140,120
|
13,450
|
154,422(5)
|
1,222,398
|
|
President
and Chief Executive Officer of the Company and the Bank
|
2008
|
570,000
|
—
|
213,070
|
76,640
|
290,700
|
20,403
|
155,086
|
1,325,899
|
|
2007
|
520,000
|
—
|
166,500
|
64,500
|
272,000
|
18,800
|
134,124
|
1,175,924
|
|
|
David
W. Fry
|
2009
|
316,105
|
—
|
78,021
|
16,506
|
60,258
|
12,151
|
52,536(6)
|
535,577
|
|
Executive
Vice President, Treasurer and Chief Financial Officer of the Company;
Executive Vice President/Finance of the Bank
|
2008
|
236,500
|
—
|
125,905
|
50,295
|
96,900
|
18,771
|
48,395
|
576,766
|
|
2007
|
210,000
|
—
|
99,900
|
43,000
|
89,800
|
16,804
|
39,375
|
498,879
|
|
|
Maria
A. Grasso
|
2009
|
388,758
|
—
|
99,379
|
17,514
|
74,107
|
—
|
58,999(7)
|
638,757
|
|
Executive
Vice President and Chief Operating Officer of the Company and the Bank,
and Corporate Secretary
|
2008
|
290,000
|
—
|
164,645
|
50,295
|
119,200
|
—
|
53,717
|
677,857
|
|
2007
|
262,500
|
—
|
133,200
|
43,000
|
109,800
|
—
|
31,039
|
579,539
|
|
|
Francis
W. Korzekwinski
|
2009
|
337,773
|
—
|
80,364
|
16,506
|
64,388
|
14,554
|
53,903(8)
|
567,488
|
|
Executive
Vice President and Chief of Real Estate Lending of the Company and the
Bank
|
2008
|
255,000
|
—
|
125,905
|
50,295
|
103,600
|
24,960
|
49,499
|
609,259
|
|
2007
|
237,500
|
—
|
99,900
|
43,000
|
97,800
|
16,623
|
42,262
|
537,085
|
|
|
Theresa
Kelly
|
2009
|
235,243
|
—
|
47,667
|
5,544
|
42,417
|
—
|
42,603(9)
|
373,474
|
|
Senior
Vice President Business Banking of the Company and the
Bank
|
2008
|
207,500
|
—
|
67,795
|
14,370
|
56,200
|
—
|
39,046
|
384,911
|
|
2007
|
192,500
|
—
|
58,275
|
21,500
|
57,900
|
—
|
20,180
|
350,355
|
_____________
|
(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 shown in the “Registrant Contribution in Last Fiscal Year” column
of the Nonqualified Deferred Compensation Table on page
34.
|
|
(2)
|
Reflects
the grant date fair value (excluding the effect of estimated forfeitures)
for grants made in the fiscal years ended December 31, 2009, 2008 and
2007, all of which were granted pursuant to the 2005 Omnibus Incentive
Plan. Assumptions used in the calculation of such amounts are included in
note 10 to the Company’s audited financial statements for the
fiscal
|
|
|
year
ended December 31, 2009 included in the Company’s Annual Report on
Form 10-K filed with the Securities and Exchange Commission on
March 15, 2010.
|
|
(3)
|
Includes
RSUs granted pursuant to the Incentive Bonus Plan as a result of TARP
limitations on cash incentive payments. The grant date fair
value of such incentive awards is: $79,376 for Mr. Buran, $34,133 for Mr.
Fry, $41,987 for Ms. Grasso, $36,476 for Mr. Korzekwinski, and $24,035 for
Ms. Kelly.
|
|
(4)
|
Reflects
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. 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. Ms. Grasso and Ms. Kelly are not
eligible to participate in the Retirement Plan because it was frozen
before they satisfied the eligibility requirements. 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.
|
|
(5)
|
Consists
of $7,350 in matching contributions to the 401(k) Savings Plan, $9,800 in
contributions to the Defined Contribution Retirement Program (“DCRP”),
$13,292 in profit sharing contributions, $50,000 in contributions
allocated by the Company to Mr. Buran’s SERP Account, $70,873 in
contributions allocated by the Company pursuant to the SSIP, and $3,107
representing the value attributable to Bank Owned Life Insurance provided
by the Bank (in accordance with the Internal Revenue Service
guidelines).
|
|
(6)
|
Consists
of $7,350 in matching contributions to the 401(k) Savings Plan, $9,800 in
contributions to the DCRP, $13,292 in profit sharing contributions,
$21,063 in contributions allocated by the Company pursuant to the SSIP,
and $1,031 representing the value attributable to Bank Owned Life
Insurance provided by the Bank (in accordance with the Internal Revenue
Service guidelines).
|
|
(7)
|
Consists
of $7,350 in matching contributions to the 401(k) Savings Plan, $9,800 in
contributions to the DCRP, $13,292 in profit sharing contributions,
$28,113 in contributions allocated by the Company pursuant to the SSIP,
and $444 representing the value attributable to Bank Owned Life Insurance
provided by the Bank (in accordance with the Internal Revenue Service
guidelines).
|
|
(8)
|
Consists
of $7,350 in matching contributions to the 401(k) Savings Plan, $9,800 in
contributions to the DCRP, $13,292 in profit sharing contributions,
$22,963 in contributions allocated by the Company pursuant to the SSIP,
and $498 representing the value attributable to Bank Owned Life Insurance
provided by the Bank (in accordance with the Internal Revenue Service
guidelines).
|
|
(9)
|
Consists
of $6,359 in matching contributions to the 401(k) Savings Plan, $9,410 in
contributions to the DCRP, $13,292 in profit sharing contributions,
$13,182 in contributions allocated by the Company pursuant to the SSIP,
and $360 representing the value attributable to Bank Owned Life Insurance
provided by the Bank (in accordance with the Internal Revenue Service
guidelines).
|
All
stock, option and non-equity incentive plan awards granted by the Company to the
named executive officers in 2009 are shown in the following tables. They were
all granted under the 2005 Omnibus Incentive Plan.
|
Name
|
Grant
Date
|
Estimated
Possible Payments
under Non-Equity
Incentive Plan
Awards(1)
|
All
Other
Stock
Awards:
Number
of
Shares
of
Stock
or
Units(2)
(#)
|
All
Other
Option
Awards:
Number
of
Securities
Underlying
Options(3)
(#)
|
Exercise
or
Base
Price
of
Option
Awards(4)
($/sh)
|
Closing Market
Price
on Date
of
Grant of
Option
Awards(4)
($/sh)
|
Grant
Date
Fair
Value
of
Stock
and Option
Awards
($)
|
|
|
Threshold
($)
|
Target
($)
|
|||||||
|
John
R. Buran
|
1/30/2009
|
20,400
|
8.44
|
7.92
|
25,704
|
|||
|
1/30/2009
|
8,800
|
74,272
|
||||||
|
3/17/2009
|
220,516
|
367,527
|
||||||
|
David
W. Fry
|
1/30/2009
|
13,100
|
8.44
|
7.92
|
16,506
|
|||
|
1/30/2009
|
5,200
|
43,888
|
||||||
|
3/17/2009
|
94,832
|
158,053
|
||||||
|
Maria
A. Grasso
|
1/30/2009
|
13,900
|
8.44
|
7.92
|
17,514
|
|||
|
1/30/2009
|
6,800
|
57,392
|
||||||
|
3/17/2009
|
116,627
|
194,379
|
||||||
|
Francis
W. Korzekwinski
|
1/30/2009
|
13,100
|
8.44
|
7.92
|
16,506
|
|||
|
1/30/2009
|
5,200
|
43,888
|
||||||
|
3/17/2009
|
101,332
|
168,887
|
||||||
|
Theresa
Kelly
|
1/30/2009
|
4,400
|
8.44
|
7.92
|
5,544
|
|||
|
1/30/2009
|
2,800
|
23,632
|
||||||
|
3/17/2009
|
70,573
|
117,622
|
||||||
_____________________
|
(1)
|
Reflects
total amounts payable under the Incentive Bonus Plan at threshold and
target levels of performance. For 2009, no additional amounts
were payable for performance above target level. The
performance targets and the extent to which they were achieved are
discussed under the heading “Executive Compensation - Compensation
Discussion and Analysis” on page 16. At the time of grant, the
Compensation Committee determined that these awards would be paid in cash
to the fullest extent permitted under the TARP program. As a
result of TARP limitations reflected in Treasury Department regulations,
62.5% of the amount earned under the Incentive Bonus Plan was paid in cash
(the amount of which is reported in the Non-Equity Incentive Plan
Compensation column of the Summary Compensation Table) and the remaining
37.5% was paid in the form of RSUs intended to qualify as “long-term
restricted stock” under those regulations. The number of RSUs
granted to each named executive officer was determined by taking the
dollar amount of the incentive award payable in “long-term restricted
stock” and dividing it by the book value of the Company’s common stock on
the date of grant ($11.65), resulting in the following RSU grants made on
December 21, 2009:
|
|
Name
|
#
Units (RSUs)
|
Grant
Date Fair Value($)
|
|
John
R.
Buran
|
7,216
|
79,376
|
|
David
W.
Fry
|
3,103
|
34,133
|
|
Maria
A.
Grasso
|
3,817
|
41,987
|
|
Francis
W. Korzekwinski
|
3,316
|
36,476
|
|
Theresa
Kelly
|
2,185
|
24,035
|
|
|
These
RSUs vest 40% on the second anniversary of the date of grant and an
additional 20% on each subsequent anniversary of the date of grant, but
vest in full upon the holder’s death or disability, retirement on or after
December 21, 2011, termination of employment prior to December 21, 2011
due to a change in control, or upon a change in control
while
|
|
|
employed
after December 21, 2011. Dividend equivalents with respect to
dividends paid prior to December 21, 2011 are subject to the same vesting
and payment provisions as the RSUs scheduled to vest on December 21,
2011. All other cash dividend equivalents are payable
currently.
|
|
(2)
|
All
of these awards are grants of restricted stock units. They 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.
|
|
(3)
|
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.
|
|
(4)
|
Under
the 2005 Omnibus Incentive 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:
|
Grant
Date
|
Number
of
Securities
Underlying
Unexercised
Options
Exercisable(1)
|
Number
of
Securities
Underlying
Unexercised
Options
Unexercisable(1)
|
Option
Exercise
Price(2)
($)
|
Option
Expiration
Date
|
Number
of
Shares
or
Units of Stock
That
Have
Not
Vested(3)
|
Market
Value
of
Shares or
Units of Stock
That
Have
Not
Vested(4)
($)
|
|
John
R. Buran
|
12/21/09
|
—
|
—
|
—
|
—
|
7,216
|
81,252
|
|
1/30/09
|
—
|
20,400
|
8.44
|
1/29/2019
|
8,800
|
99,088
|
|
|
6/17/08
6/19/07
|
3,200
6,000
|
12,800
9,000
|
19.37
16.65
|
6/16/2018
6/18/2017
|
8,800
6,000
4,000
|
99,088
67,560
45,040
|
|
|
6/20/06
|
9,000
|
6,000
|
16.44
|
6/19/2016
|
|||
|
6/21/05
|
70,000
|
—
|
17.88
|
6/20/2015
|
6,000
|
67,560
|
|
|
6/15/04
|
10,000
|
—
|
16.77
|
6/14/2014
|
—
|
—
|
|
|
6/17/03
|
18,000
|
—
|
13.47
|
6/16/2013
|
—
|
—
|
|
|
6/18/02
|
37,500
|
—
|
12.37
|
6/17/2012
|
—
|
—
|
|
|
7/17/01
|
33,750
|
—
|
10.89
|
7/16/2011
|
—
|
—
|
|
|
Totals
|
187,450
|
48,200
|
—
|
—
|
40,816
|
459,588
|
|
|
David
W. Fry
|
12/21/09
|
—
|
—
|
—
|
—
|
3,103
|
34,940
|
|
1/30/09
|
—
|
13,100
|
8.44
|
1/29/2019
|
5,200
|
58,552
|
|
|
6/17/08
|
2,100
|
8,400
|
19.37
|
6/16/2018
|
5,200
|
58,552
|
|
|
6/19/07
|
4,000
|
6,000
|
16.65
|
6/18/2017
|
3,600
|
40,536
|
|
|
6/20/06
|
6,000
|
4,000
|
16.44
|
6/19/2016
|
2,400
|
27,024
|
|
|
6/21/05
|
5,000
|
—
|
17.88
|
6/20/2015
|
1,000
|
11,260
|
|
|
6/15/04
|
10,000
|
—
|
16.77
|
6/14/2014
|
—
|
—
|
|
|
6/17/03
|
2,400
|
—
|
13.47
|
6/16/2013
|
—
|
—
|
|
|
6/18/02
|
2,700
|
—
|
12.37
|
6/17/2012
|
—
|
—
|
|
|
7/17/01
|
1,800
|
—
|
10.89
|
7/16/2011
|
—
|
—
|
|
|
Totals
|
34,000
|
31,500
|
—
|
—
|
20,503
|
230,864
|
|
|
Maria
A. Grasso
|
12/21/09
|
—
|
—
|
—
|
—
|
3,817
|
42,979
|
|
1/30/09
|
—
|
13,900
|
8.44
|
1/29/2019
|
6,800
|
76,568
|
|
|
6/17/08
|
2,100
|
8,400
|
19.37
|
6/16/2018
|
6,800
|
76,568
|
|
|
6/19/07
|
4,000
|
6,000
|
16.65
|
6/18/2017
|
4,800
|
54,048
|
|
|
5/01/06
|
30,000
|
20,000
|
16.79
|
4/30/2016
|
4,200
|
47,292
|
|
|
Totals
|
36,100
|
48,300
|
—
|
—
|
26,417
|
297,455
|
|
|
Francis
W. Korzekwinski
|
12/21/09
|
—
|
—
|
—
|
—
|
3,316
|
37,338
|
|
1/30/09
|
—
|
13,100
|
8.44
|
1/29/2019
|
5,200
|
58,552
|
|
|
6/17/08
|
2,100
|
8,400
|
19.37
|
6/16/2018
|
5,200
|
58,552
|
|
|
6/19/07
|
4,000
|
6,000
|
16.65
|
6/18/2017
|
3,600
|
40,536
|
|
|
6/20/06
|
3,000
|
2,000
|
16.44
|
6/19/2016
|
2,400
|
27,024
|
|
|
6/21/05
|
5,000
|
—
|
17.88
|
6/20/2015
|
1,000
|
11,260
|
|
|
6/15/04
|
4,000
|
—
|
16.77
|
6/14/2014
|
—
|
—
|
|
|
6/17/03
|
7,500
|
—
|
13.47
|
6/16/2013
|
—
|
—
|
|
|
6/18/02
|
18,000
|
—
|
12.37
|
6/17/2012
|
—
|
—
|
|
|
Totals
|
43,600
|
29,500
|
—
|
—
|
20,716
|
233,262
|
|
|
Option
Awards
|
Stock
Awards
|
||||||
|
Name:
|
Grant
Date
|
Number
of
Securities
Underlying
Unexercised
Options
Exercisable(1)
|
Number
of
Securities
Underlying
Unexercised
Options
Unexercisable(1)
|
Option
Exercise
Price(2)
($)
|
Option
Expiration
Date
|
Number
of
Shares
or
Units of Stock
That
Have
Not
Vested(3)
|
Market
Value
of
Shares or
Units of Stock
That
Have
Not
Vested(4)
($)
|
|
Theresa
Kelly
|
12/21/09
|
—
|
—
|
—
|
—
|
2,185
|
24,603
|
|
1/30/09
|
—
|
4,400
|
8.44
|
1/29/2019
|
2,800
|
31,528
|
|
|
6/17/08
|
600
|
2,400
|
19.37
|
6/16/2018
|
2,800
|
31,528
|
|
|
6/19/07
|
2,000
|
3,000
|
16.65
|
6/18/2017
|
2,100
|
23,646
|
|
5/31/06
|
6,000
|
4,000
|
16.74
|
5/30/2016
|
1,400
|
15,764
|
|
|
Totals
|
8,600
|
13,800
|
—
|
—
|
11,285
|
127,069
|
_______________________
|
(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, except for the RSUs granted on December 21, 2009, which
vest 40% on the second anniversary of the date of grant and an additional
20% on each subsequent anniversary of the date of
grant.
|
|
(4)
|
Market
value is based on the closing market price of the Company’s common stock
on December 31, 2009.
|
|
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
|
32,300
|
75,259
|
14,200
|
151,010
|
|
David
W. Fry
|
—
|
—
|
5,700
|
60,245
|
|
Maria
A. Grasso
|
—
|
—
|
5,400
|
54,662
|
|
Francis
W. Korzekwinski
|
—
|
—
|
5,500
|
58,119
|
|
Theresa
Kelly
|
—
|
—
|
2,100
|
21,168
|
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
|
178,944
|
—
|
|
David
W. Fry
|
Retirement
Plan
|
7.8
|
159,909
|
—
|
|
Maria
A. Grasso(3)
|
Retirement
Plan
|
—
|
—
|
—
|
|
Francis
W. Korzekwinski
|
Retirement
Plan
|
13.0
|
168,509
|
—
|
|
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, 2009. See note 10 to
the Company’s audited financial statements for the year ended
December 31, 2009 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 2009 annual benefits were limited to $195,000. 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 was limited to Senior Vice Presidents
and above, grandfathering all existing Vice Presidents currently participating
or who became 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, 2009, as reported
by the administrator of the SSIP.
|
Name of Fund
|
Rate of Return
|
|
Goldman
Sachs Growth and Income Fund
|
18.71%
|
|
Goldman
Sachs Structured Small Cap Growth
|
35.86%
|
|
Goldman
Sachs Government Income Fund
|
4.97%
|
|
Fidelity
Money Market Fund
|
0.61%
|
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. All
phantom shares credited under the SSIP are required to remain invested as
phantom shares until the participant’s termination of employment.
Amounts
deferred by a participant are always fully vested. Matching credits
and supplemental credits vest in accordance with the same schedule as the
corresponding contributions under the tax-qualified plan, which generally vest
in 20% increments upon completion of each of the first five years of service,
but vest in full upon the participant’s retirement, death, or disability or upon
a change in control.
Benefits
under the SSIP are paid in cash, in either a lump sum payment or in annual
installments, as elected by the executive. Amounts credited prior to 2010 cannot
be distributed prior to a participant’s termination of
employment. For amounts credited beginning in 2010, a participant may
elect to have all or a portion of the compensation deferred at the participant’s
election, together with the related matching credits (to the extent vested)
distributed prior to termination of employment. The participant must
specify the amount and date of distribution at the time he or she elects to
defer the compensation, and the distribution date must be at least two years
after the deferral election is made.
Pursuant
to Mr. Buran’s employment agreement, the Company annually credits $50,000 to a
bookkeeping account as a supplemental retirement benefit
(“SERP”). Amounts credited to Mr. Buran’s SERP account may be
invested by Mr. Buran in the same funds available under the SSIP, which
funds are listed above. Mr. Buran’s SERP is discussed in further detail
under the heading “Potential Payments Upon Termination or Change in Control” on
page 37.
The
following table provides information regarding contributions, earnings and
account balances under the SSIP and the SERP. An employee’s right to receive
benefits under these arrangements is no greater than the right of an unsecured
general creditor of the Bank or the Company.
|
Name
|
Executive
Contributions in
Last Fiscal Year(1)
($)
|
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
|
92,102
|
120,873(4)
|
157,833(5)
|
—
|
995,746(6)
|
|
David
W. Fry
|
31,295
|
21,063
|
67,240
|
—
|
286,862
|
|
Maria
A. Grasso
|
39,576
|
28,113
|
17,402
|
—
|
156,511
|
|
Francis W.
Korzekwinski
|
33,440
|
22,963
|
18,310
|
—
|
453,951
|
|
Theresa
Kelly
|
23,289
|
13,182
|
8,137
|
—
|
85,721
|
____________________
|
(1)
|
Reflects
amounts deferred into the SSIP. These amounts are also included in the
“Salary” column in the Summary Compensation Table on page
27.
|
|
(2)
|
Reflects
Bank credits under the SSIP and the SERP, including amounts credited in
2010 that relate to 2009. These amounts are also reported in the “All
Other Compensation” column in the Summary Compensation Table on page
27.
|
|
(3)
|
Consists
of account balance at December 31, 2009 plus amounts credited in 2010
that relate to 2009. For each named executive officer, includes the
following amounts which have been reported in the “Salary” column in the
Summary Compensation Table for years subsequent to 2005: Mr. Buran,
$282,976; Mr. Fry, $93,814; Ms. Grasso, $85,938;
Mr. Korzekwinski, $101,254; and Ms. Kelly, $55,140. Includes the
following amounts which have been reported in the “All Other Compensation”
column in the Summary Compensation Table for years subsequent to 2005:
Mr. Buran, $434,791; Mr. Fry, $60,542; Ms. Grasso, $60,815;
Mr. Korzekwinski, $66,925; and Ms. Kelly,
$31,868.
|
|
(4)
|
Reflects
$70,873 of contributions under the SSIP and $50,000 of contributions under
the SERP.
|
|
(5)
|
Reflects
unrealized net gains of $118,318 of earnings under the SSIP and $39,515 of
earnings under the SERP.
|
|
(6)
|
Reflects
$807,817 in aggregate balance under the SSIP and $187,929 in aggregate
balance under the SERP.
|
The
following table summarizes 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, 2009. 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 2009 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.
|
Cash
Severance
Payment
|
SSIP
or 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
|
—
|
$187,929
|
—
|
—
|
—
|
—
|
—
|
$
187,929
|
|
Retirement
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Death(6)
|
—
|
$187,929
|
—
|
$517,116
|
—
|
—
|
$1,547,000
|
$2,252,045
|
|
Disability(6)
|
$1,554,364
|
$500,000
|
—
|
$517,116
|
—
|
—
|
—
|
$2,571,480
|
|
Voluntary
Resignation for Good Reason or Termination Without Cause(7)
|
$3,483,300
|
$500,000
|
$131,043
|
$435,864
|
—
|
—
|
—
|
$4,550,207
|
|
Change
of Control(7)
|
$3,483,300
|
$500,000
|
$131,043
|
$517,116
|
$1,897,847
|
$900,224
|
—
|
$7,429,530
|
|
David
W. Fry
|
||||||||
|
Voluntary
Resignation Without Good Reason or Termination for Cause
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Retirement
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Death(6)
|
—
|
—
|
—
|
$267,806
|
—
|
—
|
$669,600
|
$
937,406
|
|
Disability(6)
|
$471,907
|
—
|
—
|
$267,806
|
—
|
—
|
—
|
$
739,713
|
|
Voluntary
Resignation for Good Reason or Termination Without Cause(7)
|
$960,300
|
—
|
$127,703
|
$232,866
|
—
|
—
|
—
|
$1,320,869
|
|
Change
of Control(7)
|
$960,300
|
—
|
$127,703
|
$267,806
|
$610,216
|
$351,129
|
—
|
$2,317,154
|
|
Maria
A. Grasso
|
||||||||
|
Voluntary
Resignation Without Good Reason or Termination for Cause
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Retirement
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Death(6)
|
—
|
$23,548
|
—
|
$336,653
|
—
|
—
|
$823,500
|
$1,183,701
|
|
Disability(6)
|
$580,370
|
$23,548
|
—
|
$336,653
|
—
|
—
|
—
|
$
940,571
|
|
Voluntary
Resignation for Good Reason or Termination Without Cause(7)
|
$1,181,100
|
—
|
$3,323
|
$293,674
|
—
|
—
|
—
|
$1,478,097
|
|
Change
of Control(7)
|
$1,181,100
|
$23,548
|
$3,323
|
$336,653
|
$599,249
|
$313,633
|
—
|
$2,457,506
|
|
Cash
Severance
Payment
|
SSIP
or
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
|
||
| Francis W. Korzekwinski | |||||||||
|
Voluntary
Resignation Without Good Reason or Termination for Cause
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
|
Retirement
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
|
Death(6)
|
—
|
—
|
—
|
$270,204
|
—
|
—
|
$715,500
|
$985,704
|
|
|
Disability(6)
|
$504,256
|
—
|
—
|
$270,204
|
—
|
—
|
—
|
$774,460
|
|
|
Voluntary
Resignation for Good Reason or Termination Without Cause(7)
|
$1,026,300
|
—
|
$29,394
|
$232,866
|
—
|
—
|
—
|
$1,288,560
|
|
|
Change
of Control(7)
|
$1,026,300
|
—
|
$29,394
|
$270,204
|
—
|
$374,951
|
—
|
$1,700,849
|
|
|
Theresa
Kelly
|
—
|
||||||||
|
Voluntary
Resignation Without Good Reason or Termination for Cause
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
|
Retirement
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
|
Death(6)
|
—
|
$12,165
|
—
|
$139,477
|
—
|
—
|
$481,600
|
$633,242
|
|
|
Disability(6)
|
$339,413
|
$12,165
|
—
|
$139,477
|
—
|
—
|
—
|
$491,055
|
|
|
Voluntary
Resignation for Good Reason or Termination Without Cause(7)
|
$653,600
|
—
|
$1,979
|
$114,874
|
—
|
—
|
—
|
$770,453
|
|
|
Change
of Control(7)
|
$653,600
|
$12,165
|
$1,979
|
$139,477
|
$317,287
|
$194,843
|
—
|
$1,319,351
|
|
_____________
|
(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. For Ms. Grasso and Ms. Kelly, amounts shown in this
column reflect accelerated vesting of SSIP benefits, which benefits are
fully vested for other executive officers and disclosed under the
“Nonqualified Deferred Compensation” on page
34.
|
|
(2)
|
Reflects
present value of such benefits using a 5.75% 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,
2009.
|
|
(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 2009 in January 2010,
and so a bonus for 2009 would have been payable had the change of control
occurred on December 31, 2009.
|
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.
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 (except that, in accordance with Treasury regulations under the
TARP program, if the change of control occurs before December 21, 2011, the RSUs
granted on December 21, 2009 will vest only upon a termination of employment due
to the change of control); (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, 2009. 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 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, 2009, 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. In addition, the current policy commencing
in 2010, which may not necessarily be extended beyond the tenure of the
Company’s current Chairman of the Board, is that the Chairman of the Board
receives a fee of $75,000 per year for services to the Company and the Bank in
those capacities. No amounts were paid to our Chairman of the Board
under that policy for the year ended December 31, 2009. 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 $2,000,000. 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, 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 change 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 prorated 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, 2009 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, 2009.
|
Name(1)
|
||||||
|
Fees Earned
or
Paid in Cash(2)
($)
|
Stock
Awards(3)
($)
|
Option
Awards(4)
($)
|
Change
in
Pension Value and
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|
|
Gerard
P. Tully, Sr.
|
94,000
|
30,384
|
—
|
—
|
146,667(5)
|
271,051
|
|
James
D. Bennett
|
71,350
|
30,384
|
—
|
—
|
—
|
101,734
|
|
Steven
J. D’Iorio
|
77,500
|
30,384
|
—
|
—
|
—
|
107,884
|
|
Louis
C. Grassi
|
86,000
|
30,384
|
—
|
—
|
—
|
116,384
|
|
Sam
Han
|
67,500
|
30,384
|
—
|
—
|
—
|
97,884
|
|
Michael
J. Hegarty
|
83,500
|
30,384
|
—
|
—
|
—
|
113,884
|
|
John
J. McCabe
|
63,000
|
30,384
|
—
|
36,855
|
—
|
130,239
|
|
Vincent
F. Nicolosi(6)
|
72,400
|
30,384
|
—
|
—
|
—
|
102,784
|
|
Donna
M. O’Brien
|
69,500
|
30,384
|
—
|
—
|
—
|
99,884
|
|
John
E. Roe, Sr.
|
79,000
|
30,384
|
—
|
—
|
—
|
109,384
|
|
Michael
J. Russo
|
82,500
|
30,384
|
—
|
—
|
—
|
112,884
|
________________
|
(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
27.
|
|
(2)
|
Reflects
the amount of compensation earned in 2009 for an annual retainer, Board
and committee meetings, local advisory boards, and property inspection
fees.
|
|
(3)
|
Reflects
the grant date fair value of awards granted in the fiscal year ended
December 31, 2009. Assumptions used in the calculation of such amounts are
included in note 10 to the Company’s audited financial statements for the
fiscal year ended December 31, 2009 included in the Company’s Annual
Report on Form 10-K filed with the Securities and Exchange Commission on
March 15, 2010. As of December 31, 2009, 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, 7,200 RSUs; Louis C. Grassi, 7,200 RSUs; Sam Han,
6,900 RSUs; John J. McCabe, 7,200 RSUs; Vincent F. Nicolosi, 7,200 RSUs;
Donna M. O’Brien, 7,200 RSUs; John E. Roe, Sr., 7,200 RSUs; and Michael J.
Russo, 7,200 RSUs. References to these RSUs for each Director are included
in the Stock Ownership of Management Table on page
48.
|
|
(4)
|
No
stock options were granted to directors in 2009. As of
December 31, 2009, each Director had the following aggregate number
of stock option awards outstanding: Gerard P. Tully, Sr., 22,750; Michael
J. Hegarty, 86,000 (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;
John E. Roe, Sr., 29,700; and Michael J. Russo,
44,550.
|
|
(5)
|
Represents
aggregate amounts earned pursuant to a consulting agreement with the Bank
and the Company that expired in November 2009. A description of the
principal terms of the consulting agreement is contained under the heading
“Transactions with Related Persons, Promoters and Certain Control Persons”
on page 12.
|
|
(6)
|
See
“Transactions with Related Persons, Promoters and Certain Control Persons”
on page 12 for a description of certain transactions that may be deemed to
result in compensation to Mr.
Nicolosi.
|
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 independence standards
and satisfies the SEC independence requirements for audit committee members. 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, 2009 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 applicable
requirements of the Public Company Accounting Oversight Board regarding the
independent accountant’s communications with the audit committee concerning
independence, 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,
2009, for filing with the Securities and Exchange Commission.
THE AUDIT
COMMITTEE
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. 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, 2009 and 2008 by
the Company’s independent registered public accounting firm.
|
Fiscal
Year Ended
December 31,
|
||
|
2009
|
2008
|
|
|
Audit
Fees
|
$546,000
|
$533,250
|
|
Audit-Related
Fees
|
63,000
|
89,550
|
|
Tax
Fees
|
40,500
|
—
|
|
All
Other Fees
|
178,295
|
27,300
|
|
Total
Fees
|
$827,795
|
$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 including
the Prospectus Statement, 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 2009 and 2008, 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, 2010
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, 2009.
Representatives of Grant Thornton are expected to attend the 2010 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 5% of the outstanding shares of common stock of the Company as of
February 26, 2010.
|
Name
and Address of Beneficial Owner
|
Number
of Shares
Beneficially Owned
|
Percent of Class(1)
|
|
Wellington
Management Company, LLP(2)
|
1,924,115
|
6.18%
|
|
75
State Street
|
||
|
Boston,
Massachusetts 02109
|
||
|
Blackrock,
Inc.(3)
|
1,797,351
|
5.77%
|
|
40
East 52nd
Street
|
||
|
New
York, NY 10022
|
__________________
|
(1)
|
On
February 26, 2010, the total number of outstanding shares of the
Company’s common stock was
31,152,004.
|
|
(2)
|
According
to its filing with the SEC on Schedule 13G/A, Wellington Management
Company, LLP. has sole dispositive power with respect to none of these
shares of common stock, shared dispositive power with respect to
1,924,115, sole voting power with respect to none of these shares, and
shared voting power with regard to 1,167,871 of these
shares.
|
|
(3)
|
According
to its filing with the SEC on Schedule 13G, Blackrock Inc., has sole
dispositive and voting power with respect to 1,797,351
shares.
|
The
following table sets forth information regarding the beneficial ownership of the
common stock of the Company as of February 26, 2010, 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.
|
336,678(3)
|
1.08%
|
|
John
R. Buran
|
291,740(4)
|
0.94%
|
|
James
D. Bennett
|
112,075(5)
|
0.36%
|
|
Steven
J. D’Iorio
|
46,912(6)
|
0.15%
|
|
Louis
C. Grassi
|
115,886(7)
|
0.37%
|
|
Sam
Han
|
16,200(8)
|
0.05%
|
|
Michael
J. Hegarty
|
354,473(9)
|
1.14%
|
|
John
J. McCabe
|
72,449(10)
|
0.23%
|
|
Vincent
F. Nicolosi
|
104,765(11)
|
0.34%
|
|
Donna
M. O’Brien
|
51,912(12)
|
0.17%
|
|
John
E. Roe, Sr.
|
146,099(13)
|
0.47%
|
|
Michael
J. Russo
|
290,646(14)
|
0.93%
|
|
David
W. Fry
|
68,033(15)
|
0.22%
|
|
Maria
A. Grasso
|
65,622(16)
|
0.21%
|
|
Francis
W. Korzekwinski
|
125,356(17)
|
0.40%
|
|
Theresa
Kelly
|
26,132(18)
|
0.08%
|
|
All
current directors and executive officers as a group (28 persons)
|
2,407,570(19)
|
7.73%
|
_______________
|
(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 has voting
power over, but no economic interest in, the shares representing their
proportionate voting interest in the Company’s Employee Benefit Trust. 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 26, 2010, 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 26, 2010. No additional stock options are scheduled to
become exercisable and no restricted stock units (RSUs) are scheduled to
vest within 60 days after February 26, 2010, except upon termination
of employment or Board service of certain
individuals.
|
|
(2)
|
On
February 26, 2010, the total number of shares of common stock
outstanding was 31,152,004 (including shares held by the Employee Benefit
Trust). As of February 26, 2010, other than Messrs. Tully and
Hegarty, who beneficially owned 1.08% and 1.14% 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 7.73% 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, 14,500 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 9,600 shares
underlying unvested RSUs that vest upon Mr. Tully’s termination of
Board service.
|
|
(4)
|
Includes
28,822 shares credited to Mr. Buran’s account in the 401(k) Savings
Plan, 191,530 shares underlying exercisable stock options, and 4,669
shares representing his proportionate voting interest in the Employee
Benefit Trust. Excludes 56,056 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 9,600
shares underlying unvested RSUs that vest upon Mr. Bennett’s
termination of Board service.
|
|
(6)
|
Includes
16,875 shares underlying exercisable stock options. Also includes 9,600
shares underlying unvested RSUs that vest upon Mr. D’Iorio’s termination
of Board service.
|
|
(7)
|
Includes
59,400 shares underlying exercisable stock options. Also includes 9,600
shares underlying unvested RSUs that vest upon Mr. Grassi’s
termination of Board service.
|
|
(8)
|
Excludes
9,300 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 9,600
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 9,600
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 9,600 shares underlying unvested
RSUs that vest upon Mr. Nicolosi’s termination of Board
service.
|
|
(12)
|
Includes
16,875 shares underlying exercisable stock options. Also includes 9,600
shares underlying unvested RSUs that vest upon Ms O’Brien’s termination of
Board service.
|
|
(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 9,600
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 9,600 shares underlying unvested
RSUs that vest upon Mr. Russo’s termination of Board
service.
|
|
(15)
|
Includes
15,445 shares credited to Mr. Fry’s account in the 401(k) Savings
Plan, 36,620 shares underlying exercisable stock options, and 4,669 shares
representing his proportionate voting interest in the Employee Benefit
Trust. Excludes 29,663 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
11,101 shares credited to Ms. Grasso’s account in the 401(k) Savings
Plan, 38,880 shares underlying exercisable stock options, and 4,669 shares
representing her proportionate voting interest in the Employee Benefit
Trust. Excludes 37,257 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 40,504 shares
credited to Mr. Korzekwinski’s account in the 401(k) Savings Plan,
46,220 shares underlying exercisable stock options, and 4,669 shares
representing his proportionate voting interest in the Employee Benefit
Trust. Excludes 29,876 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
7,935 shares credited to Ms. Kelly’s account in the 401(k) Savings
Plan, and 9,480 shares underlying exercisable stock options. Excludes
15,525 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
164,204 shares credited to accounts of executive officers in the 401(k)
Savings Plan, 803,345 shares underlying exercisable stock options held by
executive officers and directors, and 74,704 shares representing the
proportionate voting interest of executive officers in the Employee
Benefit Trust. Also includes 96,000 shares underlying unvested RSUs that
vest upon termination of Board service. Excludes 268,173 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, 2009, all filing requirements
under Section 16(a) of the Securities Exchange Act of 1934 applicable to
its executive officers and directors were complied with.
AMENDMENT
OF THE COMPANY’S CERTIFICATE OF INCORPORATION
TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON
STOCK FROM 40 MILLION TO 100 MILLION
The Board
of Directors has approved, subject to stockholder approval, an amendment (the
“Share Amendment”) to the Company’s Certificate of Incorporation to increase the
number of authorized shares of Common Stock available for issuance from 40
million to 100 million. The additional shares of Common Stock to be
authorized by adoption of the Share Amendment would have rights identical to our
currently outstanding shares of Common Stock. The number of
authorized shares of our preferred stock will not be affected by the Share
Amendment. The number of shares of our authorized preferred stock
will be maintained at 5 million.
The Board
has adopted, declared advisable and directed to be submitted to the stockholders
the proposed Share Amendment to amend the first paragraph of paragraph (A) of
Article FOURTH thereof to read in its entirety as follows:
“FOURTH:
(A) The total number of shares of all classes of stock which the Corporation
shall have authority to issue is 105,000,000 consisting of 5,000,000 shares of
preferred stock, par value $0.01 per share (hereinafter referred to as
“Preferred Stock”), and 100,000,000 shares of common stock, par value $0.01 per
share (hereinafter referred to as “Common Stock”).”
The Share
Amendment would become effective upon its approval by our stockholders and the
subsequent filing with the Secretary of State of the State of Delaware of a
Certificate of Amendment to our Certificate of Incorporation.
Of the 40
million shares of Common Stock that are presently authorized, as of December 31,
2009, approximately 33,385,576 million shares of Common Stock are either issued
and outstanding or reserved for issuance. As a result, excluding our
specific reserves, fewer than 6,614,424 shares are currently available for
future issuance.
The
purpose of this Proposal 3 is to submit the proposed Share Amendment to the
holders of outstanding shares of Common Stock for their approval, which is
required to give effect to the Share Amendment. The terms of the
additional shares of Common Stock contemplated by the Share Amendment will be
identical to those of the currently outstanding shares of Common
Stock. Since holders of Common Stock have no preemptive rights to
purchase or subscribe for any unissued stock of the Company, the issuance of
additional shares of Common Stock may reduce the percentage ownership interest
of the current holders of Common Stock in the total outstanding shares of Common
Stock. This proposed amendment and the creation of additional
authorized shares of Common Stock will not alter the current number of issued
shares. The relative rights and limitations of the shares of Common
Stock will remain unchanged under the amendment proposed in this Proposal
3.
The
proposed increase in the authorized number of shares of Common Stock could have
a number of effects on the Company’s stockholders depending upon the exact
nature and circumstances of any actual issuances of authorized but unissued
shares. The increase could have an anti-takeover effect, in that
additional shares could be issued (within the limits imposed by applicable law)
in one or more transactions that could make a change in control or takeover of
the Company more difficult. For example, additional shares could be
issued by the Company so as to dilute the stock ownership or voting rights of
persons seeking to obtain control of the Company. Similarly, the
issuance of additional shares to certain
persons
allied with the Company’s management could have the effect of making it more
difficult to remove the Company’s current management by diluting the stock
ownership or voting rights of persons seeking to cause such
removal. The Board of Directors is not aware of any attempt, or
contemplated attempt, to acquire control of the Company, and this proposal is
not being presented with the intent that it be utilized as a type of
anti-takeover device.
The Board
of Directors believes that, by increasing the authorized number of shares of our
Common Stock, we will make available a reasonable number of shares for future
financing transactions and other appropriate corporate opportunities and
purposes. We consider from time to time potential strategic transactions
and/or financings pursuant to which we may need to issue shares of our capital
stock. We have not yet reached agreement with respect to any such
transaction. Having a sufficient number of shares authorized will
facilitate our consummating such a transaction in the future without the
additional delay of seeking stockholder approval. Once authorized, the
Board of Directors would establish the terms on which any authorized shares may
be issued.
The
holders of Common Stock do not have any preemptive or similar rights to
subscribe for or purchase any additional shares of Common Stock that may be
issued in the future and, therefore, future issuances of Common Stock may,
depending on the circumstances, have a dilutive effect on the earnings per
share, voting power and other interests of existing stockholders. The
holders of Common Stock have no appraisal rights with respect to Proposal
3. Further, the Board of Directors would be able to issue the shares
of Common Stock authorized pursuant to this Proposal 3 without further
authorization for such issuance by stockholders and does not presently intend to
obtain such authorization in the event it declares stock splits and/or dividends
in the future.
The Board
of Directors of the Company believes that the proposed increase in the number of
authorized shares of Common Stock from 40 million to 100 million as set forth in
this Proposal 3 is necessary and desirable for the reasons described
above. If approved, the proposed increase in the number of authorized
shares of Common Stock will be given effect by the filing of an amendment to the
Company’s Certificate of Incorporation.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” AMENDMENT OF THE
COMPANY’S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK.
RE-APPROVAL
OF THE PERFORMANCE CRITERIA OF THE
COMPANY’S
AMENDED AND RESTATED 2005 OMNIBUS INCENTIVE PLAN
The Board
of Directors is asking stockholders to re-approve the material terms of the
performance criteria that may apply to awards under our Amended and Restated
2005 Omnibus Incentive Plan (the “2005 Omnibus Incentive Plan”), which was
approved at our 2005 annual meeting. Re-approval of the performance
criteria is required under Section 162(m) of the Internal Revenue Code of 1986,
as amended (the “Code”), if we are to preserve our ability to take a federal tax
deduction for performance awards under the 2005 Omnibus Incentive
Plan. Section 162(m) imposes an annual deduction limit of $1 million
on the amount of compensation paid to each of the chief executive officer and
the three other most highly compensated executive officers of a corporation
(other than the chief financial officer). The deduction limit does
not apply to qualified “performance-based compensation,” which requires that
awards be subject to performance criteria, the material terms of which were
approved by stockholders within five years before the grant
date. Because almost five years have passed since approval of the
2005 Omnibus Incentive Plan, the Board of Directors is submitting this proposal
to stockholders for re-approval of the material terms of the performance
criteria set forth in the 2005 Omnibus Incentive Plan. Stockholder
approval will permit the Company to award “performance-based compensation” that
is fully tax deductible to the Company. The terms of the 2005 Omnibus
Incentive Plan, including the eligible participants and the annual limits on
awards that may be granted thereunder, will remain unchanged regardless of the
results of the voting on this matter.
Performance
Criteria Under the 2005 Omnibus Incentive Plan
The 2005
Omnibus Incentive Plan authorizes the Compensation Committee to grant awards
subject to satisfaction of pre-established performance
conditions. For these awards to qualify as “performance-based” under
Section 162(m), the Compensation Committee must set objective performance goals,
in accordance with the 2005 Omnibus Incentive Plan, based on one or more of the
following performance criteria for the Company, on a consolidated basis and/or
for specified subsidiaries or affiliates or other business units of the
Company:
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·
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sales
or other sales or revenue measures;
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|
·
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operating
income, earnings from operations, earnings before or after taxes, earnings
before or after interest, depreciation, amortization, or extraordinary or
special items;
|
|
·
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net
income or net income per common share (basic or diluted) or net interest
income;
|
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·
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operating
efficiency ratio;
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·
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return
on average assets, return on investment, return on capital, or return on
average equity;
|
|
·
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cash
flow, free cash flow, cash flow return on investment, or net cash provided
by operations;
|
|
·
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loan
originations, loan production, loan growth, non-performing
loans;
|
|
·
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deposits
or deposit growth;
|
|
·
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net
interest, net interest spread, net interest
margin;
|
|
·
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fee
income;
|
|
·
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economic
profit or value created;
|
|
·
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operating
margin;
|
|
·
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stock
price or total stockholder return;
and
|
|
·
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strategic
business criteria, consisting of one or more objectives based on meeting
specified market penetration or geographic business expansion goals, cost
targets, customer satisfaction, employee satisfaction, management of
employment practices and employee benefits, supervision of litigation and
information technology, and goals
|
relating
to acquisitions or divestitures of subsidiaries, affiliates or joint
ventures.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” RE-APPROVAL OF THE
PERFORMANCE CRITERIA OF THE COMPANY’S AMENDED AND RESTATED 2005 OMNIBUS
INCENTIVE PLAN.
The last
date for timely filing stockholder proposals relating to the annual meeting
under the Company’s bylaws was March 19, 2010. 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 2011 annual meeting of
stockholders must be received by the Corporate Secretary on or before March 18,
2011 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 2011 annual meeting of stockholders, it must be received at the
Company’s executive offices no later than December 14, 2010. 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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|
|
|
|
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Maria
A. Grasso
Corporate
Secretary
|
Lake
Success, New York
April 13,
2010
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.
