The basic benefit payable under the Directors’ Retirement Plan is a monthly benefit for the life of the director (or an alternative form of benefit described below in the case of the director’s death), commencing on the earlier of (a) retirement from the Boards of Directors of AFC and the Association or age 65, whichever is later, (b) the date the director ceases to serve on the Boards of Directors due to disability, as defined in the Plan, or (c) death of the director, which basic benefit, on an annual basis, is equal to the sum of (i) the annual retainers paid by AFC and the Association to their directors at the time the director leaves the service of such Boards, (ii) any annual retainers the director was receiving from AFC and the Association for service as the chairman of a committee of the Boards of AFC or the Association at the time the director leaves the service of such Boards, and (iii) a sum equal to the meeting fees paid to the director for committee meeting attendance in the year preceding the director leaving the service of such Boards. Within the first 30 days of eligibility under the plan, a director is generally allowed to elect between alternate forms of benefit payment for their benefits under the Directors’ Retirement Plan. The alternate forms of benefit, in addition to the single life annuity described above, were (i) a 10 year certain annuity, (ii) a joint and survivor annuity with the director’s spouse, and (iii) a lump sum payment. The amount of the alternate forms of benefit is calculated to be actuarially equivalent to the basic single life annuity benefit described above. For other directors entitled to receive benefits under director retirement plans established by companies merged into AFC or the Association, the director was required to select a form of benefit payment under the Directors’ Retirement Plan that is the same as the form provided pursuant to the plan established by the company merged into AFC or the Association, i.e. a joint and 100% survivor annuity in the case of Mr. Haeffner. All eligible directors Including Mr. Burger, who retired from the Board in May, 2009 and Mr. Waters, who was a participant in the LIB Director Retirement Plan and who retired from the Board in November, 2009, were allowed, on or before December 31, 2008, to make a one-time election of a lump sum benefit at the later of January 1, 20082009 or the benefit commencement date specified in the plan. All made such elections.
In the event of a change of control, as defined in the Directors’ Retirement Plan, eligible directors will receive service credit through the balance of their then current term as a director. On or before December 31, 2008, eligible directors were required to make a one-time election whether, in the event of a change of control, their benefits due pursuant to the Directors’ Retirement Plan would be paid to the director in a lump sum or transferred into a rabbi trust to be established at the time of the change of control and paid pursuant to the original alternate form benefit election.
Pursuant to applicable SEC regulations, the rate of interest credited to participating directors’ accounts pursuant to the Directors Deferred Compensation Plan for 20092010 was not an above-market rate and, therefore, is not reflected in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column of the 20092010 Director Compensation Table set forth on page 30.
In the event of a change of control of AFC or the Association, each participating director could elect that his fees, with accrued interest, be placed in a grantor trust established for the benefit of the director, applied to the purchase of an insurance company annuity contract, or be paid directly by AFC or its successor.
Effective January 1, 2009, active participants in the Directors Retirement Plan were excluded from eligibility for this benefit.
Travel Expenses and Other Perquisites
AFC and the Association pay or reimburse directors for their travel expenses, including lodging, for attendance at meetings of the Board of Directors and committees of AFC, the Association or their subsidiary companies on which directors may serve and at other business-related functions. Included in the All Other Compensation column of the 20092010 Director Compensation Table set forth on page 30 is the cost associated with travel and lodging expenses incurred by AFC for the directors’ attendance at meetings at AFC’s corporate headquarters.
From time to time, directors’ spouses are invited to attend business-related functions away from AFC’s corporate headquarters with respect to which participation by the directors and their spouses is expected and/or encouraged. No such events were held in 2009. AFC believes that having the directors’ spouses attend such functions, when they are held, as invited guests of the Association, serves the business purposes of the Association and AFC by reinforcing the collegiality of the Board, resulting overall in a more efficient and productive Board.
AFC maintains a fractional ownership interest in a corporate aircraft for use by its executives for business purposes only. Personal use of the aircraft is not permitted. The use of this aircraft by the executives is viewed by AFC as integrally and directly related to their job performance. As a result, this use is not viewed as a perquisite to the executives as defined by SEC regulations. See the CD&A, commencing on page 31 and the Summary Compensation Table on page 43.42.
When an executive officer is traveling on business utilizing the corporate aircraft and room is otherwise available on the aircraft, directors traveling on AFC’s business and the directors’ spouses traveling with the directors may accompany the executive on such business. There was no such use during 2009.
The directors are allowed to receive discounts on certain loans secured by their primary residence pursuant to the Association’s Employee & Director Mortgage & Home Equity Loan Policy. For a detailed description of this policy, see the Transactions with Certain Related Persons commencing on page 20. The amount of any discounted interest rate or fees below what an unaffiliated customer would have been required to pay under similar circumstances during 20092010 has been determined by the SEC staff not to be compensation and, therefore, is not included in the All Other Compensation column of the 20092010 Director Compensation Table, set forth on page 30.
The following Table sets forth details regarding compensation provided to the directors of AFC for the fiscal year ended December 31, 2009.2010.
20092010 Director Compensation Table
Name | | Fees Earned Or Paid in Cash ($)(1) | | | Stock Awards ($)(2) | | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(3) | | | All Other Compensation ($)(4) | | | Total ($) | |
John R. Chrin | | | 87,500 | | | | 44,993 | | | | 0 | | | | 3,112 | | | | 135,605 | |
John J. Conefry, Jr. | | | 78,000 | | | | 44,993 | | | | 0 | | | | 10,828 | | | | 133,821 | |
Denis J. Connors | | | 102,750 | | | | 44,993 | | | | 61,747 | | | | 6,377 | | | | 215,867 | |
Thomas J. Donahue | | | 39,750 | | | | 44,993 | | | | 0 | | | | 3,286 | | | | 88,029 | |
Peter C. Haeffner, Jr. | | | 92,000 | | | | 44,993 | | | | 93,352 | | | | 56,126 | | | | 286,471 | |
Brian M. Leeney | | | 78,000 | | | | 44,993 | | | | 0 | | | | 3,310 | | | | 126,303 | |
Ralph F. Palleschi | | | 102,750 | | | | 44,993 | | | | 82,694 | | | | 5,867 | | | | 236,304 | |
Thomas V. Powderly | | | 76,000 | | | | 44,993 | | | | 0 | | | | 10,628 | | | | 131,621 | |
Name | | Fees Earned Or Paid in Cash ($)(1) | | | Stock Awards ($)(2) | | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(3) | | | All Other Compensation ($)(4) | | | Total ($) | |
Andrew M. Burger (5) | | | 35,500 | | | | 44,996 | | | | 0 | | | | 771,800 | | | | 852,296 | |
John R. Chrin | | | 5,500 | | | | 22,840 | | | | 0 | | | | 0 | | | | 28,340 | |
John J. Conefry, Jr. | | | 74,000 | | | | 44,996 | | | | 0 | | | | 6,812 | | | | 125,808 | |
Denis J. Connors | | | 98,000 | | | | 44,996 | | | | 285,028 | | | | 8,774 | | | | 436,798 | |
Thomas J. Donahue | | | 98,000 | | | | 44,996 | | | | 232,187 | | | | 8,329 | | | | 383,512 | |
Peter C. Haeffner, Jr. | | | 84,000 | | | | 44,996 | | | | 187,974 | | | | 51,239 | | | | 368,209 | |
Brian M. Leeney | | | 27,500 | | | | 21,940 | | | | 0 | | | | 260 | | | | 49,700 | |
Ralph F. Palleschi | | | 97,000 | | | | 44,996 | | | | 164,554 | | | | 3,795 | | | | 310,345 | |
Thomas V. Powderly | | | 80,000 | | | | 44,996 | | | | 0 | | | | 6,729 | | | | 131,725 | |
Leo J. Waters (6) | | | 75,500 | | | | 44,996 | | | | 0 | | | | 734,132 | | | | 854,628 | |
(1) | Fees Earned or Paid in Cash represent fees earned by directors for the annual retainer paid by AFC, the annual retainer paid by the Association, committee meeting attendance fees, and fees for service as committee chairmen, as applicable. See the discussion on page [ ] entitled Directors’ and Other Fee Arrangements. |
(2) | This column represents the aggregate grant date fair value of restricted stock awards made to the directors in 20092010 pursuant to the 2007 DirectorsDirector Stock Plan. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures relating to service-based vesting conditions. The fair value of restricted stock awards is calculated using the closing price of AFC Common Stock as quoted on the NYSE on the date of the award. For additional information, see Note 1615 of Notes to Consolidated Financial Statements. The aggregate numbers of options and restricted stock awards outstanding to each non-employee director at December 31, 20092010 was, respectively, Mr. Burger, 24,000 and - 0 -; Mr. Chrin, - 0 - and 2,000;5,461; Mr. Conefry, 24,000 and 7,299;10,760; Mr. Connors, 48,00042,000 and 7,299; Mr. Donahue, 48,000 and 7,299;10,760; Mr. Haeffner, 30,000 and 7,299;10,760; Mr. Leeney, - 0 - and 2,000;5,461; Mr. Palleschi, 36,000 and 7,299;10,760; and Mr. Powderly, 6,000 and 7,299, and Mr. Waters, 40,350 and 7,299.10,760. |
(3) | Amounts disclosed reflect Change in Pension Value. Mr. Burger retired from the Board and the board of directors of the AssociationDonahue died in 2009 and received a lump sum payment of accrued benefits under the Directors’ Retirement Plan.May, 2010. Pursuant to SEC regulations, Mr. Burger’s change in pension value is disclosed as $0.00 because the change in actuarial value of his benefit from December 31, 2008 to December 31, 2009 was a negative $685,037. Mr. Waters also retired from the Board and the board of directors of the Association in 2009. As a non-employee director of LIB, Mr. Waters participated in the LIB Director Retirement Plan and the Director Retirement Plan. Also included in the Change in Pension Value and Nonqualified Deferred Compensation Earnings with respect to Mr. Waters is the change in actuarial value in 2009 with respect to his interest in both such plans. Mr. Waters received a lump sum payment of accrued benefits from both the LIB Director Retirement Plan and the Director Retirement Plan. Pursuant to SEC regulations, Mr. Waters’Donahue’s change in pension value is disclosed as $0.00 because the change in the actuarial value of his benefit Fromfrom December 31, 20082009 to December 31, 20092010 was a negative $430,830.$934,557. As a non-employee director of The Greater, Mr. Haeffner participated in The Greater Director Retirement Plan. Also, includedThe change in the actuarial value of his benefit in such plan from December 31, 2009 to December 31, 2010 was a negative $12,436. Pursuant to SEC regulations, this amount is not reflected in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column with respect to Mr. Haeffner is the change in actuarial value during 2009 with respect to his interest in such plan.Haeffner. |
(4) | All Other Compensation for each director, except Messrs. Burger, Chrin, Leeney and Palleschi, includes travel expenses to attend onsite meetings of the Board.Board and, except for Mr. Donahue, spousal travel and entertainment expenses for spouses’ attendance at AFC and Association-related functions. All Other Compensation for each director except Mr. Chrin, also includes dividends on restricted stock grants. Mr. Burger retired from the Board and the board of directors of the Association in 2009, and received a lump sum payment of accrued benefits under the Directors’ Retirement Plan of $712,007. Mr. Waters also retired from the Board and the board of directors of the Association in 2009 and received a lump sum payment of accrued benefits under the LIB Directors Retirement Plan and the Directors Retirement Plan of $651,894. These distributions have been included in All Other Compensation.awards. Mr. Haeffner participated in the Directors Deferred Compensation Plan described above. Pursuant to SEC regulations, the interest rate paid in 20092010 with respect to his balances in the Directors Deferred Compensation Plan was not a preferential rate and, therefore, no amount has been included under the All Other Compensation column with respect to this sum. Mr. Haeffner receives medical and dental benefits pursuant to a post-retirement medical plan provided to the non-employee directors of The Greater, the premiums for which in 20092010 were $19,357$23,012 and $1,289,$1,334, respectively. As a former non-employee director of The Greater, Mr. Haeffner also receives a pension payment pursuant to The Greater Director Retirement Plan. That payment equaled $24,000 in 2009.2010. |
(5) | Mr. Burger retired from service on the Board and the board of directors of the Association upon the close of the regular meetings of such boards held on May 20, 2009. |
(6) | Mr. Waters retired from service on the Board and the board of directors of the Association upon the close of the regular meetings of such boards held on November 18, 2009. |
The information set forth in the Compensation Committee Report 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, referred to as the Securities Act, or the Exchange Act, except to the extent that AFC specifically incorporates this information by reference, and otherwise shall not be deemed “soliciting materials” or to be “filed” with the SEC or subject to Regulations 14A or 14C of the SEC or subject to the liabilities of Section 18 of the Exchange Act.
Compensation Committee Report
1) | The Compensation Committee has reviewed and discussed the CD&A required by Item 402(b) (SEC Regulation, Section 229.402(b)) with management; and |
2) | Based on the review and discussion referred to in Paragraph 1 above, the Compensation Committee recommended to the Board of AFC that the CD&A be included in this Proxy Statement on Schedule 14A (SEC Regulation, Section 240.14a-101). |
Compensation Committee of AFC
| Denis J. Connors, Chairman | | Ralph F. Palleschi | |
| Thomas J. Donahue | John R. Chrin | Thomas V. Powderly | |
| Peter C. Haeffner, Jr. | | | |
Compensation Discussion and Analysis
Under rules established by the SEC, AFC is required to provide certain data and information regarding the compensation and benefits provided to AFC’s Chief Executive Officer, Chief Financial Officer and certain other executives of AFC. The disclosure requirements for the Chief Executive Officer and such other executives include the use of tables and the CD&A. The CD&A is intended to review the compensation awarded to, earned by or paid to the Named Executives. This review explains all material elements of AFC’s compensation of the Named Executives and describes the objectives of AFC’s compensation programs, what the program is designed to reward, each element of compensation, why AFC chooses to pay each element, how AFC determines the amount, and, where applicable, the formula for each element, and how each element and AFC’s decisions regarding that element fit into AFC’s overall compensation objectives and affect decisions regarding other elements. The Named Executives include the Chief Executive Officer, the Chief Financial Officer and AFC’s three most highly compensated executive officers other than the Chief Executive Officer and the Chief Financial Officer of AFC as of December 31, 2009.2010. The Named Executives of AFC are George L. Engelke, Jr., Monte N. Redman, Gerard C. Keegan, Gary T. McCann and Frank E. Fusco.
Executive Compensation Philosophy
The primary objective of the executive compensation program of AFC and the Association is to attract and retain highly skilled and motivated executive officers to manage AFC in a manner to promote prudent growth and profitability and advance the interests of its shareholders.
The compensation program is designed to provide levels of compensation which comply with regulatory requirements and are competitive and reflective of the organization’s performance in achieving its goals and objectives, both financial and non-financial, as determined in its business plan. The program aligns the interests of the executives with those of the shareholders of AFC by providing a proprietary interest in AFC, the value of which can be significantly enhanced by the appreciation of AFC Common Stock. The program also seeks to adequately provide for the needs of the executives upon retirement, based upon their compensation levels, length of service provided to AFC and the Association and the appreciation of AFC Common Stock.
The Named Executives are highly skilled and experienced in the management of thrift institutions. Mr. Engelke, Mr. Redman and Mr. Keegan each has in excess of thirty (30) years experience in the thrift industry and in excess of fifteen (15) years experience in executive management responsible for managing AFC, the Association and/or other thrift institutions. Mr. Fusco and Mr. McCann each has over 15 years of thrift and management experience as a senior officer of AFC or the Association. All have extensive management experience and extensive banking and non-banking training. All have extensive experience in the management of a public company, and all have a commitment to excellence, prudent operations and promoting the interests of shareholders.
Given the experience of the executives, their proven track record of performance at AFC and the investment AFC and the Association have made in these individuals, their retention is important. AFC has taken a number of steps to further this goal, such as entering into employment contracts with each of the Named Executives, providing vesting periods for equity grants and awards, as well as retirement and change of control packages that provide meaningful incentives for the Named Executives to remain employed by AFC.
To a significant degree, the compensation program for the executive officers mirrors that utilized throughout most of AFC’s operations. The overall compensation of the Named Executives is tied directly to their obtaining clearly defined results in a prudent manner. Since their responsibility is to manage AFC, their performance objectives are related directly to AFC’s performance. This is accomplished through the Executive Incentive Plan, the equity-based compensation program and, to a lesser degree, the retirement program.
AFC believes that the bestan effective way to ensure that the Named Executives advance the interests of the shareholders is to make sure that each of the executive officers is a significant shareholder. The Compensation Committee has established share ownership requirements applicable to its executives as a multiple of their base salaries. For example, the Chief Executive Officer is required to hold direct or indirect non-derivative shares of AFC Common Stock having a value, based upon the prior year’s average price per share of AFC Common Stock, equal to five (5) times his annual salary. Each of the other executive officers is to hold direct or indirect non-derivative shares of AFC Common Stock having a value, based upon the prior year’s average price per share of AFC Common Stock, equal to three (3) times their respective annual salaries. Excluded from the ownership requirements are outstanding AFC stock options so as to ensure that the executives have more than a mere hypothetical stake in AFC’s performance. While the policy contains a phase-in period to accommodate promotions or newly hired executives, each of the executive officers during 2009,2010, and today, exceed the minimum share ownership requirement notwithstanding the application of any phase-in period. See the section entitled Security Ownership of Management commencing on page 22 for additional information regarding the investment of the Named Executives in AFC Common Stock. Both through its equity-based incentive and retirement programs, the Named Executives also receive a substantial portion of their compensation in AFC Common Stock. The better AFC Common Stock performs for AFC’s shareholders, the higher the total compensation that is earned by the Named Executives, and vice versa.
The executive compensation program of AFC consists of four (4) primary elements: Base Salary, Short-Term Non-Equity Incentive Plan Compensation, Equity-Based Compensation, and Retirement Benefits. In addition, the Association provides medical benefits, life insurance and disability and other benefits common to all its full time employees. AFC and the Association also provide certain other benefits, or Perquisites, to the Named Executives. The Perquisites are considered an immaterial component of the overall program and are generally associated with furthering the business interests of AFC. AFC and the Association have each entered into employment agreements with each of the Named Executives. These agreements, which are discussed more fully below, impose certain obligations on and provide certain benefits to the Named Executives which extend beyond the terms of their employment. In structuring its executive compensation program, AFC considers the before and after tax financial impact the elements of the program will have on AFC and the Association. Section 162(m) of the Code, places a limitation of $1 million on the deductibility by AFC of certain elements of compensation earned by each of the Named Executives. AFC has previously submitted incentive compensation and other benefit plans to its shareholders for approval, when required, in order to preserve the potential deductibility of payments made to the Named Executives. As a result of the approval of such plans, and based upon the level and composition of the compensation of its executive officers, the limitations contained in Section 162(m) of the Code did not materially impact the financial condition or results of operations of AFC for the year ended December 31, 2009.2010.
Management of AFC monitors and provides to the Compensation Committee, in connection with both executive and director compensation, information derived from a group of financial institutions which by asset size are the next ten largestlarger and the next ten smaller publicly traded banking and thrift institutions in the United States as determined by the 20092010 SNL Executive Compensation Review, Banks and Thrifts. This information is utilized by the Compensation Committee as additional information which, when considered with all other factors, is used in making compensation-related decisions. These institutions utilize a variety of business models, are in many cases located in markets which are dissimilar from the New York metropolitan market in which AFC is primarily located and are, generally, not considered by management or the Compensation Committee to be AFC’s peers other than in terms of asset size. The information acquired is derived from public filings by such companies with the SEC. The institutions monitored during 20092010 were Zions Bancorporation, Huntington Bancshares,People’s United Financial, Inc., Hudson CityEast West Bancorp, Inc., Popular, Inc., Synovus Financial Corp., New York Community Bancorp, Inc., First Horizon National Corp., Colonial BancGroup,Corporation, First Niagara Financial Group, Inc., Associated Banc-Corp, BOK Financial Corporation, People’s United Financial,Banc-Corp., Valley National Bancorp, Flagstar Bancorp, Inc., First BanCorp., CapitalSource, Inc., Webster Financial Corporation, ,CommerceCommerce Bancshares, Inc., First Citizens BancShares, Inc., TCF Financial Corp.,Corporation, City National Corp.,Corporation, Fulton Financial Corp.Corporation and Cullen/Frost Bankers, Inc. The Compensation Committee does not index the compensation of the executive officers to these or other institutions, but considers the information in the exercise of its discretion to arrive at compensation programs and policies which it believes are fair and competitive in the marketplace.
Other than levels of compensation, there are no material differences in the compensation or benefit policies applicable to the executive officers in comparison to other senior officers. A review of the incentive compensation programs utilized by AFC was conducted including, but not limited to, those in which the Named Executives participate. These programs were not found to present a material risk to AFC. The Compensation Committee believes that the difference in the levels of compensation among the executive officers is reflective of their roles and responsibilities within AFC, their experience in those roles and competitive compensation levels in the marketplace.
The following details the components of AFC’s executive compensation program.
Base Salary
Salary levels are designed to be competitive with cash compensation levels paid to similar executives at banking and thrift institutions of similar size and standing, giving due consideration to the marketplace in which AFC and the Association operate. Base salary levels are considered in conjunction with the short-term non-equity incentive plan compensation component of the executive compensation program. The executive officers have not received salary increases, other than in direct recognition of increased responsibilities, during the period from 2008 through and including the date of this Proxy Statement.
AFC’s performance to a significant degree is dependent upon factors which, in the short-term, may be positively or negatively impacted by events outside of the control of management. Our operating results are dependent primarily on our net interest income, which is the difference between the interest earned on our assets and the interest paid on deposits and borrowings. Our earnings are particularly susceptible to changes in market interest rates and U.S. Treasury yield curves, government policies and the actions of regulatory authorities. The Compensation Committee seeks to balance these factors and set base salary at a level which provides a reasonably competitive level of base compensation even if AFC, due to factors outside of the control of the executives, fails to meet its minimum threshold targets such that no awards are made under the short-term non-equity incentive plan compensation component of the total cash compensation program, as occurred during 2008 and 2009.
In determining whether the level of base salary and short term non-equity incentive plan compensation, or total cash compensation, is competitive, the Compensation Committee reviews information from a variety of sources. The Compensation Committee receives information and, from time to time, recommendations from management, has direct access to publications reflecting industry practices and, when the Compensation Committee deems necessary, selects and retains the services of compensation consultants. When compensation consultants are utilized for this purpose, such consultants report directly to the Compensation Committee. Although management necessarily assists the Compensation Committee during this process, controls are implemented to ensure that the consultants’ opinions and recommendations are reported directly to the Compensation Committee, independent of management.
These sources, taken together, are utilized ultimately to confirm that the level and structure of executive compensation, and that of other officers, are fair, competitive and reasonable. In reviewing information on compensation practices with regard to executive officers within the banking and thrift industry, the primary factors which influence salary and short-term non-equity incentive plan compensation levels are the size and complexity of the institution or business unit being managed, the marketplace in which the institution is located, the position held by the executive and the performance of the institution versus peers.
To determine whether or not base salary and short-term non-equity incentive plan compensation for 20092010 were set at levels that were competitive, the Compensation Committee took a number of specific steps. The Committee considershas relied primarily upon data supplied by its compensation consultant from time to time. The Committee was also provided access to 2009 SNL Executive Compensation Review, Banks and Thrifts. This publication provides compensation data on all named executive officers at all publicly traded bank and thrift institutions in the United States, including information regarding the size and location of the institutions.
Generally, the Compensation Committee reviews Named Executives’ salary and bonuscash incentive compensation for the ensuing year in December of each year at the same time as such matters are considered for all other officers of AFC and the Association. In conducting such review, the Compensation Committee considers the performance of AFC, the performance of each of the executive officers (based both on the directors’ own insights and discussions with Mr. Engelke and Mr. Redman), the salary and compensation history of the Named Executives and both the proposed short-term non-equity incentive plan compensation targets for the coming year and proposed equity compensation grants.
In developing AFC’s Business Plan for 20092010 during the fall of 2008,2009, in light of market turmoil, risingcontinued weak economic performance, a challenging regulatory environment, levels of non-performing loans, the current interest rate forecasts available to them and the impact the projected yield curve would have upon the performance of AFC and the Association, executive management determined and communicated to the Board and Compensation Committee that 20092010 was expected to be extremely challenging. The Business Plan, which was reviewed and approved by the Board, reflected a growing margin but reducedand increased although weak earnings per share due to growing provisions forcontinuing high levels of loan loss provisions and increases in operating expenses, primarily higher pension costs and FDIC insurance assessments.
On an organization-wide basis a salary increase target of 3.8%2.5% was established based in part upon survey data indicating projected salary increase rangesincreases of between 3.6%1.8% and 4.9%3.1% nationally. Among the surveys utilized were WorldAtWork 2008/20092009/2010 Salary Budget Survey, Total U.S. Firms, All Industries and Eastern Region/All Industries and Mercer HR Consulting 2008/20092009/2010 U.S. Compensation Planning Survey, All Employees/All Industries.Industries, Northeast Region & National Finance/Banking.
The executive officers recommended to the Compensation Committee, for the second consecutive year, that no salary increases be given to the executive officers for 2009.2010.
As a result, and based upon the recommendations of executive management, the Compensation Committee took the following actions:
| (i) | the Named Executives were granted no salary increases, and |
| (ii) | the incentive targets for use with the Executive Incentive Plan were established such that 20092010 Business Plan performance would result in a 0%35% of target incentive payout for the Named Executives. |
The financial performance for AFC for 2009, due to2010, despite the substantial deterioration of thedifficult economy, did not meet 2009continued high unemployment and soft real estate markets nationally, exceeded 2010 Business Plan expectations. As a result, although the executive officersNamed Executives were not granted any salary increases for 2009 and2010, they received no incentive compensation pursuant to the Executive Incentive Plan for 2009.2010, discussed more fully below. See Short-Term Non EquityNon-Equity Incentive Plan Compensation below.
Short-Term Non-Equity Incentive Plan Compensation
Short-term non-equity incentive plan compensation consists of awards paid pursuant to the Executive Incentive Plan. This Plan, which was originallymost recently approved by the shareholders of AFC in 1999, and again in 2004 and 2009, and is a performance-based plan. Annually, the Compensation Committee establishes, in advance, performance objectives. These performance objectives are derived from the business plan of AFC, which is reviewed and approved by the Board annually, typically in November, and covers the ensuing two years. The compensation payable under the Executive Incentive Plan, while it may be reduced by the Compensation Committee in its discretion, is otherwise tied directly to the attainment of the pre-established performance objectives. The Executive Incentive Plan has been structured in this manner to maintain the tax deductibility to AFC of awards under this plan pursuant to Code Section 162(m). Therefore, the Compensation Committee has no discretion under this plan to reward performance by a particular Named Executive that may have favorably impacted AFC’s results disproportionately or reward performance that is not immediately captured in the financial performance matrix utilized.
As noted above, the Board and Compensation Committee of AFC recognize that the performance of AFC is substantially affected by the environment in which it operates, particularly interest rate movements and the shape of the yield curve. It is expected that its executives will maintain systems to monitor such environment and over time take steps to prudently manage the various risks that such environment presents. As a general matter, the Board and the Compensation Committee believe that, to be effective, the attainment of targets established under the Executive Incentive Plan should be both challenging, yet prudently attainable, so as not to encourage either imprudent risk taking or the sacrifice of long-term performance for short term gains.
The Compensation Committee has received comments from the compensation consultants retained in previous years regarding the operation of the Executive Incentive Plan and has duly considered those comments in structuring performance targets pursuant to such plan. Among those comments was the proportion of each executive officer’s performance based cash compensation to total cash compensation. The Compensation Committee, in establishing the performance targets, utilizes its discretion based upon all the information available to it. The Compensation Committee does not generally review specific peer data concerning the targets utilized by the Compensation Committee nor does it index the targets to peer performance. Members of the Compensation Committee are generally aware of the financial and total return performance of a number of peer and other banking related institutions at the time the performance targets are established, as this data is reported monthly by management at meetings of the Board. Among the institutions monitored were Hudson City Bancorp, Inc., New York Community Bancorp, People’s United Financial, Inc., Washington Federal, Inc., First Niagara New Alliance,Financial Group, Inc., NewAlliance Bancshares, Provident Financial Services, Flushing Financial Corp., Dime Community Bancshares, Inc., Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co.,Company, PNC Financial Services Group, Inc., U.S. Bancorp, Bank of New York Mellon Corporation, Suntrust Banks, Inc., Capital One Financial BCorp., BB&T Corporation, State Street Bank and Trust Co.,Company, Regions Financial Corp., Fifth Third Bancorp, KeyCorp, Northern Trust Co.,Company, M&T Bank Corporation, Comerica Bank, Marshall & Ilsley Corporation, Zions Bancorporation, Huntington Bancshares Inc., TCF Financial Corp., Webster Financial Corp. and Valley National Bancorp. The specific criteria monitored are not, however, directly comparable to the performance measures utilized under the Executive Incentive Plan. Ultimately, the Compensation Committee exercises its discretion, based upon all information available to it, to establish the incentive targets applicable to the executive officers.
The Executive Incentive Plan for 20092010 provided for a target incentive equal to seventy percent (70%) of base salary for the Chief Executive Officer, sixty percent (60%) of base salary for the Chief Operating OfficerPresident and fifty percent (50%) of base salary for each of the other executive officers.
The performance measurements used for 20092010 were the diluted earnings per share of AFC Common Stock and the return on average shareholders’ equity.net interest income plus non-interest income less general and administrative expenses, referred to as PTPP. A series of achievement levels was established for each measure, with each level assigned a percentage award ranging from zero percent (0%) to two hundred percent (200%). The zero percent (0%) award represented performance below what the Compensation Committee considered a reasonable threshold level of achievement. The diluted earnings per share performance of AFC accounted for seventy five percent (75%) of the executives’ total incentives under the Executive Incentive Plan, while AFC’s return on average shareholders’ equityPTPP performance accounted for twenty five percent (25%) of such total.
The Compensation Committee believes that these performance measurements are over time, on an institution-wide basis, within the sufficient control of management and should be captured in the total returns provided to shareholders of AFC Common Stock. The Compensation Committee also believes that including a return on average shareholders’ equityPTPP performance measure encouragesreflects current performance unencumbered by the efficient deploymentimpact of invested capitalthe weakened real estate markets and retained earnings and promotes prudent longer-term performance.lending decisions made in years past.
Based upon AFC’s confidential business plan, target performance ranges were established for 20092010 at the time of the award in March 2009February, 2010 for both diluted earnings per share targets and return on average shareholders’ equityPTPP targets. The targets were assigned a percentage between zero percent (0%) and two hundred percent (200%). At the time the ranges were established in March 2009,February, 2010, the Compensation Committee also authorized certain specified adjustments to AFC’s diluted earnings per common share and return on average shareholders’ equity,PTPP, as reported in accordance with U.S. generally accepted accounting principles, referred to as GAAP, in determining the ultimate performance under the Executive Incentive Plan. In such cases, typically, business plan assumptions are substituted for items that reflect changes in GAAP or are unknown, highly unpredictable or uncontrollable by management at the time the business plan for the coming year is developed or approved. The nature of the adjustments authorized for 20092010 was generally consistent with adjustments authorized pursuant to the Executive Incentive Plan in previous years. These adjustments are detailed below.
To receive an incentive payout for 20092010 of two hundred percent (200%), the adjusted diluted earnings per share were required to exceed $1.59$2.59 per share and the adjusted return on average shareholders’ equityPTPP was required to exceed 12.14%.$3.28 per share. No award would be made if the adjusted diluted earnings per share were below $1.00$0.52 per share and the adjusted return on average shareholders’ equityPTPP was below 7.72%.$2.21 per share. To receive a target level payout, the adjusted diluted earnings per share was required to be $1.38equal to or between $1.40 and $1.64 per share and the adjusted return on average shareholders’ equityPTPP was required to be 10.57%.equal to or between $2.70 and $2.78 per share.
The ultimate adjustments made to AFC’s GAAP diluted earnings per common share to arrive at adjusted diluted earnings per share and PTPP were as follows:
| i) | common share equivalents were increased by 466,0079,702 shares due to differences in stock repurchases, ESOP allocation, stock option exercises and dilutive treasury stock calculations from those assumed in the business plan; |
| ii) | interest income was increased by $145,311$67,000 to reflect differences related to actual stock repurchases, option exercises and other cash transactions noted in paragraph (A) above from those assumed in the business plan; |
| iii) | other income was increased by $5,300,000 relating to the other-than-temporary impairment charge taken in March, 2009 with respect Freddie Mac preferred stock; |
| iv) | other income was reduced by $8,616,000 to reflect the receipt of dividends on Federal Home Loan Bank of New York stock which was higher than assumed in the business plan; |
| v) | provision for loan losses was reduced by $50,000,000 due to a higher than anticipated level of non-performing loans; |
| vi) | general and administrative expenses were reduced by $33,000 to reflect a higher pension cost from that assumed in the business plan; |
| vii) | general and administrative expenses were reduced by $40,065$304,000 to reflect higher equity-based compensation expense from that assumed in the business plan; |
| viii)iv) | general and administrative expenses were increaseddecreased by $1,498,547$2,776,000 to reflect lowerhigher ESOP expense as the result of fluctuating AFC Common Stock prices during 20092010 from that assumed in the business plan; |
| ix) | general and administrative expenses were reduced by $11,331,262 due to an FDIC special assessment and differences between actual FDIC premium rates and those assumed in the business plan; |
| x) | general and administrative expenses were reduced by $201,414 relating to certain legal expenses; and |
| xi)v) | net income was increased by $20,452,000a net $2,910,000 relating to certain |
| legal settlements and expenses; |
| vi) | net income was decreased by $1,148,000 to tax effect the adjustments set forth above. |
The following additional adjustments were made to AFC’s GAAP return on average shareholders’ equity to arrive at adjusted return on average shareholders’ equity were as follows:PTPP:
| i) | average equityadjusted net income was increased by one half of the adjustments related to adjusted diluted earnings per share noted above, less the ESOP adjustment which is a reclassification within equity only,$115,000,000 to reflect the positive effect of such adjustments on equity and that average equity is used;loan loss provisions incurred during 2010; |
| ii) | average equityadjusted net income was increased by $2,924,000$42,251,000 to reflect differences in the amount and exercise prices of option exercises from that assumed in the business plan; |
| iii) | average equity was decreased by $21,385,000 to reflect the differences in accumulated other comprehensive loss from that assumed in the business plan; and |
| iv) | average equity was decreased by $1,463,000 to reflect differences in the number of unallocated shares held by the ESOP from that assumed in the business plan.tax accruals during 2010. |
For fiscal year 2009,2010, the Compensation Committee, pursuant to the terms of the Executive Incentive Plan, certified that AFC’s financial performance goals resulted in nooverall 45% of target incentive payments based upon the fact that adjusted diluted earnings per share failed to reach the target threshold level of $1.00$0.837 and PTPP of $2.55 per share, and adjusted return on average shareholders’equity failed to reach the target threshold level of 7.72%.share.
Equity-Based Compensation
Equity-Based Compensation
The equity-based compensation portion of AFC’s and the Association’s compensation program consists of option grants and awards of restricted stock pursuant to the 2005 Stock Incentive Plan. The 2005 Stock Incentive Plan was approved by the shareholders of AFC in 2005.
See Proposal No. 2 beginning on page 56 regarding a proposed amendment to the plan. The purpose of the 2005 Stock Incentive Plan is to promote the growth and profitability of AFC, to provide certain key officers and employees of AFC and its affiliates with an incentive to achieve corporate objectives, to attract and retain individuals of outstanding competence and to provide such individuals with an equity interest in AFC.
Historically, equity-based compensation grants and awards have been made to officers holding the title of Vice President or higher. This totaled seventy-five (75)seventy-six (76) officers as of February 2, 2009,1, 2010, the last award date prior to December 31, 2009.2010. The Compensation Committee believes that this group of individuals has the greatest ability to impact the overall performance, and therefore the stock price, of AFC.
Prior to 2007,Since 2008, it has been the practice of AFC generally had been to grant options and/or award restricted stock to officers of the Association and AFC annually onfollowing the date of the Board’s regular meeting in December. During 2007, the Compensation Committee determined that annual grants would no longer be made in December, but would be made following AFC’s release of itsAFC’s prior years’ annual financialfiscal year results commencing in January 2008. Thus, no equity grants or awards were made to the executive or other officers during 2007.late January. On occasion, although not during 2008 or 2009,2010, grants or awards may also be made at or near the time a new officer is hired, on the date of a regularly scheduled Board meeting. In all cases, the exercise price of stock options or the value ascribed to awards of restricted stock has been the closing price of AFC Common Stock on the date of the grant or award on the exchange on which such stock was trading at the time.
Since 2006, the Compensation Committee has only granted restricted stock, and not options, to AFC’s executive officers. Restricted stock is awarded with voting and dividend rights. Since restricted stock awarded consists of outstanding common shares, the dividend rate applicable to restricted stock awards is the same rate applicable to AFC Common Stock outstanding generally.
In February, 20092010 the Compensation Committee approved restricted stock awards to all officers holding the title of Vice President or higher. A total of 1,129,530778,740 shares of AFC Common Stock were awarded to the officers at that time with 733,290506,480 of such shares awarded to the seven executive officers,officers. These shares at the time of the award had an aggregate value of $9,250,851,$10,123,620, with the shares awarded to the executive officers having a value of $6,005,645$6,584,240 on the date of the awards.
The level of restricted stock awarded to each officer, including the executive officers, is established at the discretion of the Compensation Committee and was based, in 2009,2010, upon recommendations made by Hewitt Associates, LLC.LLC, the predecessor to AON Hewitt. See page 1617 under the heading Compensation Committee – Corporate Governance for additional information regarding this matter. Among the specific factors considered in determining the level of grant for any particular officer is the officer’s rank and ability to impact the overall financial performance of AFC, the officer’s salary and the officer’s individual performance during the preceding year.performance.
See Security Ownership of Management commencing on page 22, the Summary Compensation Table on page 4342 and the 20092010 Outstanding Equity Awards at Fiscal Year End Table on page 47 46 for further information regarding certain options and restricted stock outstanding with respect to the Named Executives.
See Proposal No. 2, beginning on page 56, regarding a proposal to amend the 2005 Stock Incentive Plan.
Retirement Benefits
Retirement benefits are designed to provide for an adequate level of income to each participating employee following his or her retirement from AFC and the Association based upon compensation level and length of service. These benefits are also designed to support the goals and objectives of the remainder of the compensation program. Among those goals and objectives are the alignment of the interests of all retirement plan participants, including but not limited to the Named Executives, to that of the shareholders and the retention of participating employees.
Retirement benefits are provided through the ESOP, the Incentive Savings Plan, the Employees Pension Plan, the Association Excess Benefit Plan, referred to as the Excess Plan, and the Association Supplemental Benefit Plan, referred to as the Supplemental Plan. The Employees Pension Plan, the Excess Plan and the Supplemental Plan are referred to collectively as the DB Plans. Certain post-retirement benefits are also provided through the Association’s Retirement Medical and Dental Benefit Policy for Vice Presidents and above, referred to as the Post-retirement Medical Plan.
None of AFC’s or the Association’s DB Plans have benefit formulas which take into account compensation other than base salary. As a result, compensation derived from cash incentives, restricted stock and the exercise of stock options, which may vary substantially from year to year, does not affect benefit levels.
The retirement benefits have been developed over a number of years and, as a result, the relative importance and the focus of the various plans have shifted over time.
The Employees Pension Plan is a qualified defined benefit plan. This plan, historically, was the primary retirement vehicle for the Association, which, when the plan was originally adopted in 1949 and until 1993, was a relatively small mutual thrift institution. The benefit formula under the Employees Pension Plan, which has evolved over time based primarily upon Code requirements, is based upon length of service and average compensation level for the five years preceding retirement. As a tax qualified plan, the compensation level which can be considered in the benefit formula is capped ($($245,000 during 2009)2010). As a result, the Employees Pension Plan, over time, failed to capture significant amounts of compensation in the benefit formula, particularly at the higher salary and compensation levels within the Association.
In 1983, the Excess Plan, a non-qualified defined benefit plan, was instituted. This plan applies the Employees Pension Plan benefit formula to salary-based compensation above the Internal Revenue Service, or IRS, compensation limits.
The Association, in 1991, also instituted the Supplemental Plan, also a non-qualified defined benefit plan, to maintain the then current benefit formula for a group of officers impacted by a reduction in the benefits formula under the qualified plan and, indirectly, under the Excess Plan due to changes mandated under the Code. Currently, Mr. Engelke and Mr. Redman are the only Named Executives who participate in the Supplemental Plan. The DB Plans are the primary retirement vehicles utilized by the Association that are not materially and directly tied to the performance of AFC Common Stock. AFC believes that the use of the DB Plans to provide a minimum level of retirement benefits for eligible Association employees is prudent given the magnitude of the reliance the ESOP places on the performance of AFC Common Stock. The DB Plans, however, continue not to capture within their benefit formulas cash compensation paid to the Named Executives pursuant to the Executive Incentive Plan or bonus compensation paid to other officers and employees.
In December 2008, each participant in the Excess Plan and the Supplemental Plan was provided an opportunity to make an irrevocable election of the form of benefit payment they would receive at the time such participant became eligible to receive benefits under the Plan. No changes in the benefit formulas were made. All of the Named Executives elected lump sum distributions as their form of benefit. In 2009, the Committees directed their actuary to utilize the elected benefit form of payment rather than that previously assumed in calculating the accrued liability for each participant. This change in assumptions coupled with the lower interest rate environment in effect at December 31, 2009 compared to December 31, 2008 were the primary reasons for the substantial increase in the change in Pension Value column of the Summary Compensation Table set forth on page 4342 for the Named Executives compared to previous years. With respect to Mr. Engelke, also see the discussion on page 4948 regarding enhanced DB Plan benefits for deferring benefit payments beyond normal retirement age.
In 1986, the Association implemented the Incentive Savings Plan, a defined contribution 401K plan. At the time it was implemented, the Incentive Savings Plan operated as a profit sharing plan pursuant to which employees received from the Association matching contributions, based upon their level of voluntary participation in the plan. The Incentive Savings Plan gave employees an incentive to save, helped provide for their retirement, provided certain tax benefits to participants, helped focus employees on the profitability of the Association and allowed employees to rollover vested balances if they left the Association’s employ prior to retirement age. The Incentive Savings Plan continues to be maintained and employees can continue to make voluntary contributions into the Incentive Savings Plan. However, since 1993, the Association and AFC have not made contributions to the Incentive Savings Plan.
The ESOP is a combination of a leveraged employee stock ownership plan established by the Association when it converted from mutual to stock form in 1993 and a leveraged employee stock ownership plan in existence at LISB at the time of the LIB Acquisition in 1998 and implemented by LISB at the time of its mutual to stock conversion in 1994. A primary purpose of each institution in implementing an employee stock ownership plan was to instill an owner culture in a workforce that had previously operated in a mutual structure that lacked accountability to stakeholders or owners. Each employee stock ownership plan purchased with borrowed funds a block of the common stock issued in its sponsor’s conversion offering, to be allocated among eligible employees over the succeeding years as the borrowing was repaid. The value of the benefit provided, and its GAAP accounting cost, rise and fall with the performance of the stock purchased. There have been no subsequent stock purchases for either plan. The two employee stock ownership plans were combined in 2000 in order to offer a single, unified employee stock ownership plan benefit to all employees of the combined company. In order to achieve a uniform benefit structure, the outstanding loan for each plan was renegotiated to achieve a new payment and share allocation schedule. In order to secure the consent of the plans’ independent fiduciaries to this action, the Association committed to make certain additional cash contributions to the ESOP.
The renegotiation also established change of control protections for the participants of the ESOP. This provision iswas a key device in encouraging the retention of all participating employees.employees, although with the passage of time its economic impact has been reduced. The Board, management and the fiduciaries representing the interests of the ESOP’s participants believed that, in the event of a change of control, the value provided to shareholders would be as a result of the efforts, over time, of the employees of the Association and that any value generated within the AFC Common Stock then unallocated in the ESOP at that time should benefit such employees. As a result, the plan was amended to provide that in the event of a change of control, the ESOP must be terminated, the outstanding loan settled and the balance of the unallocated shares distributed to then current employee participants. As of December 31, 2009,2010, using the closing price for AFC Common Stock as quoted on the NYSE on December 31, 2009,2010, the value to be distributed would be approximately $28.9$27.9 million.
See the Summary Compensation Table on page 4342 and Security Ownership of Management on page 22 for further information regarding the ownership of AFC Common Stock by the Named Executives. See also the discussion commencing on page 4948 under the heading Additional DB Plan Information regarding the benefit formulas applicable to the DB Plans. The Post-retirement Medical Plan provides executive and other senior officers and their spouses, if any, with medical and dental insurance coverage following such officers’ retirement from the Association at age 55 or older with at least 10 years of service. Based upon the officer’s age at retirement, the Association pays between fifty percent (50%) and one hundred percent (100%) of the premiums for such coverage. AFC views this plan as another vehicle to encourage the retention of its senior officers.
Perquisites
The executive officers are provided with certain perquisites detailed below. These perquisites are modest in cost and scope. See the section entitled Transactions with Certain Related Persons commencing on page 2021 for a discussion of the Association’s Employee & Director Mortgage & Home Equity Loan Policy.
Other Banking Services
The Association provides to its employees, officers and directors routine retail banking services, including primarily checking, savings and certificate of deposit accounts. The Association from time to time waives, for such individuals, certain de minimis fees associated with such accounts. As these amounts are waived on a non-discriminatory basis to the Association’s employees generally, under SEC regulations, they are not included in the Compensation Tables for the directors or the Named Executives and are not considered to be related-party transactions.
Company-Provided Automobiles
All executive officers are provided with a company owned or leased automobile for their business and personal use. The Association pays the maintenance, insurance and licensing-related costs of the automobile, but not fuel costs. The value of this benefit, net of direct business usage, for which other employees are reimbursed, is included in the Summary Compensation Table on page 4342 under the All Other Compensation column.
Use of Corporate Aircraft and Other Travel-Related Expenses
AFC has a fractional ownership interest in a corporate aircraft for use by its executives for business purposes only. Personal use of the aircraft is not permitted. The use of this aircraft by the executives is viewed by AFC as integrally and directly related to their job performance. As a result, this use is not viewed as a perquisite as defined by SEC regulations.
AFC has a policy when Named Executives travel on business to allow the executives to be accompanied by their spouses. This benefit is utilized sparingly by the executives and is considered a perquisite. The estimated incremental cost of the spouse’s attendance is included in the Summary Compensation Table on page 4342 under the All Other Compensation column where such amount can be determined. In all cases, such benefit is immaterial to the compensation of the Named Executives. If a Named Executive is traveling on business utilizing the corporate aircraft and there is otherwise room available on the aircraft for the executive’s spouse to accompany the executive, the spouse may do so. As there is no incremental cost to AFC for the spouse accompanying the executive on such flight, no amount has been included in the Summary Compensation Table with respect to such usage. To the extent a commercial flight was utilized and AFC bore the cost of the spouse’s air travel, the cost of such air travel is included in the Summary Compensation Table on page 4342 under the All Other Compensation column.
Other Benefits
All senior officers, including the Named Executives, are provided with an annual physical at the Association’s expense. In the alternative, senior officers may consult their own physicians and submit the cost of such physical through the officer’s medical insurance coverage which is available to all full time employees. Commencing in 2009, the Association began reimbursing senior officers who consult their own physician the amount in excess of any medical insurance reimbursement less the amount the employee may receive pursuant to the employee’s medical flexible spending account, if any.
Summary Compensation Table
Name and Principal Position | | Year | | Salary ($)(1) | | | Stock Awards ($)(2) | | | Non- Equity Incentive Plan Compen- sation ($)(3) | | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | | | All Other Compen- sation ($)(5) | | | Total ($) | | | Year | | Salary ($)(1) | | | Stock Awards ($)(2) | | | Non- Equity Incentive Plan Compen- sation ($)(3) | | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | | | All Other Compen- sation ($)(5) | | | Total ($) | |
George L. Engelke, Jr. | | 2009 | | 1,142,000 | | | | 1,275,183 | | | 0 | | | 908,382 | | | 182,764 | | | 3,508,329 | | | 2010 | | | 1,142,000 | | | | 1,415,310 | | | | 359,730 | | | | 0 | | | | 207,427 | | | | 3,124,467 | |
Chairman and Chief | | 2008 | | 1,142,000 | | | | 1,335,712 | | | 0 | | | 121,919 | | | 226,647 | | | 2,826,278 | | | 2009 | | | 1,142,000 | | | | 1,275,183 | | | | 0 | | | | 908,382 | | | | 182,764 | | | | 3,508,329 | |
Executive Officer | | 2007 | | 1,100,000 | | | 0 | | | 731,500 | | | 0 | | | 166,702 | | | 1,998,202 | | | 2008 | | | 1,142,000 | | | | 1,335,712 | | | | 0 | | | | 121,919 | | | | 226,647 | | | | 2,826,278 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Monte N. Redman | | 2009 | | 825,000 | | | 1,400,081 | | | 0 | | | 767,018 | | | 193,859 | | | 3,185,958 | | | 2010 | | | 825,000 | | | | 1,555,970 | | | | 222,750 | | | | 917,327 | | | | 238,273 | | | | 3,759,320 | |
President and Chief | | 2008 | | 825,000 | | | 1,393,028 | | | 0 | | | 350,235 | | | 191,618 | | | 2,759,881 | | | 2009 | | | 825,000 | | | | 1,400,081 | | | | 0 | | | | 767,018 | | | | 193,859 | | | | 3,185,958 | |
Operating Officer | | 2007 | | 673,077 | | | 0 | | | 356,250 | | | 39,783 | | | 131,004 | | | 1,200,114 | | | 2008 | | | 825,000 | | | | 1,393,028 | | | | 0 | | | | 350,235 | | | | 191,618 | | | | 2,759,881 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gerard C. Keegan | | 2009 | | 544,000 | | | 815,069 | | | 0 | | | 353,112 | | | 131,582 | | | 1,843,763 | | | 2010 | | | 544,000 | | | | 898,560 | | | | 122,400 | | | | 508,943 | | | | 162,258 | | | | 2,236,161 | |
Vice Chairman and | | 2008 | | 544,000 | | | 814,884 | | | 0 | | | 241,165 | | | 131,524 | | | 1,731,573 | | | 2009 | | | 544,000 | | | | 815,069 | | | | 0 | | | | 353,112 | | | | 131,582 | | | | 1,843,763 | |
Chief Administrative | | 2007 | | 524,000 | | | 0 | | | 248,900 | | | 60,170 | | | 112,445 | | | 945,515 | | | 2008 | | | 544,000 | | | | 814,884 | | | | 0 | | | | 241,165 | | | | 131,524 | | | | 1,731,573 | |
Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gary T. McCann | | 2009 | | 500,000 | | | 750,040 | | | 0 | | | 248,727 | | | 125,989 | | | 1,624,756 | | | 2010 | | | 500,000 | | | | 807,300 | | | | 112,500 | | | | 295,157 | | | | 152,394 | | | | 1,867,351 | |
Executive Vice | | 2008 | | 500,000 | | | 730,156 | | | 0 | | | 169,530 | | | 116,824 | | | 1,516,510 | | | 2009 | | | 500,000 | | | | 750,040 | | | | 0 | | | | 248,727 | | | | 125,989 | | | | 1,624,756 | |
President | | 2007 | | 400,000 | | | 0 | | | 190,000 | | | 71,934 | | | 101,149 | | | 763,083 | | | 2008 | | | 500,000 | | | | 730,156 | | | | 0 | | | | 169,530 | | | | 116,824 | | | | 1,516,510 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Frank E. Fusco | | 2009 | | 465,000 | | | 695,003 | | | 0 | | | 128,395 | | | 124,277 | | | 1,412,675 | | | 2010 | | | 465,000 | | | | 750,750 | | | | 104,625 | | | | 232,070 | | | | 146,131 | | | | 1,698,546 | |
Executive Vice | | 2008 | | 465,000 | | | 558,208 | | | 0 | | | 76,841 | | | 124,122 | | | 1,224,171 | | | 2009 | | | 465,000 | | | | 695,003 | | | | 0 | | | | 128,395 | | | | 124,277 | | | | 1,412,675 | |
President, Treasurer | | 2007 | | 361,923 | | | 0 | | | 155,724 | | | 0 | | | 83,414 | | | 601,061 | | | 2008 | | | 465,000 | | | | 558,208 | | | | 0 | | | | 76,841 | | | | 124,122 | | | | 1,224,171 | |
and | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Chief Financial Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Each of the Named Executives, except for Mr. Keegan, has elected to contribute a portion of his salary into the Incentive Savings Plan. While the Association is authorized to make matching contributions under the terms of the Incentive Savings Plan, it has not done so since prior to 1993. Each of the Named Executives also elected to contribute a portion of his salary into a medical flexible spending account. These plans are not discriminatory in favor of the Named Executives. Such contributions are included in the figures reported as salary. |
(2) | This column represents the aggregate grant date fair value of restricted stock awards made to the Named Executives in 2007, 2008, 2009 and 20092010 pursuant to 2005 Stock Incentive Plan, which was previously approved by the shareholders of AFC. The fair value of restricted stock awards is calculated using the closing price of AFC Common Stock as quoted on the NYSE on the date of the award. For additional information, see Note 1615 of Notes to Consolidated Financial Statements. For additional information regarding restricted stock held by the Named Executives, see the 20092010 Outstanding Equity Awards At Fiscal Year-End Table on page 47.46. |
(3) | This column represents the incentive bonus award payments made to the Named Executive for 2007, 2008, 2009 and 20092010 pursuant to the Executive Incentive Plan, which plan was previously approved by the shareholders of AFC. For additional information, see the 20092010 Grants of Plan-Based Awards Table on page 45.4. |
(4) | This column represents the sum of the actuarial change in pension value in 2007, 2008, 2009 and 20092010 for each of the Named Executives according to their respective participation in the DB Plans. For information regarding the assumptions used in determining the present value of such benefits, as well as additional information regarding the Named Executives’ participation in such plans, see the discussion on page 4948 and the 20092010 Pension Benefits Table on page 51.50. The Named Executives do not participate in any non-qualified deferred compensation plans. Pursuant to SEC regulations, Mr. Engelke’s and Mr. Fusco’s change in pension value for 20072010 is disclosed as $0.00 because the change in the actuarial value of their benefit from December 31, 20062009 to December 31, 20072010 was a negative $84,344 and negative $180, respectively.$121,164. |
(5) | This column represents compensation amounts reportable with respect to the Named Executives for 2007, 2008, 2009 and 20092010 pursuant to SEC regulations and not properly reportable in any other column of the Summary Compensation Table. AFC has not paid any tax gross-up amounts with respect to any compensation or benefits reflected in the Summary Compensation Table or otherwise. AFC does not allow Named Executives or other officers and employees to acquire AFC Common Stock at a discount. While the Association provides group life insurance coverage with respect to the Named Executives, such benefit is provided on a non-discriminatory basis to all full time employees of the Association and, therefore, has been excluded pursuant to SEC regulations, as have other group medical and health coverages. The following table sets forth additional detail regarding All Other Compensation amounts: |
All Other Compensation Table
Name | | Year | | Dividends Received on Restricted Stock Awards ($)(a) | | | AFC Common Stock Allocated Pursuant to the ESOP ($)(b) | | | Cash Allocated Pursuant to the ESOP ($)(c) | | | Perquisites and Other Personal Benefits ($)(d) | | | Total ($) | |
George L. Engelke, Jr. | | 2010 | | | 143,993 | | | | 37,701 | | | | 7,469 | | | | 18,264 | | | | 207,427 | |
| | 2009 | | | 122,730 | | | | 32,908 | | | | 11,132 | | | | 15,994 | | | | 182,764 | |
| | 2008 | | | 131,456 | | | | 41,401 | | | | 25,182 | | | | 28,608 | | | | 226,647 | |
| | | | | | | | | | | | | | | | | | | | | | |
Monte N. Redman | | 2010 | | | 178,178 | | | | 37,701 | | | | 7,469 | | | | 14,925 | | | | 238,273 | |
| | 2009 | | | 133,718 | | | | 32,908 | | | | 14,857 | | | | 12,376 | | | | 193,859 | |
| | 2008 | | | 106,886 | | | | 41,401 | | | | 31,782 | | | | 11,549 | | | | 191,618 | |
| | | | | | | | | | | | | | | | | | | | | | |
Gerard C. Keegan | | 2010 | | | 106,203 | | | | 37,701 | | | | 7,469 | | | | 10,885 | | | | 162,258 | |
| | 2009 | | | 80,610 | | | | 32,908 | | | | 8,128 | | | | 9,936 | | | | 131,582 | |
| | 2008 | | | 71,396 | | | | 41,401 | | | | 7,074 | | | | 11,653 | | | | 131,524 | |
| | | | | | | | | | | | | | | | | | | | | | |
Gary T. McCann | | 2010 | | | 95,817 | | | | 37,701 | | | | 7,469 | | | | 11,407 | | | | 152,394 | |
| | 2009 | | | 73,050 | | | | 32,908 | | | | 12,662 | | | | 7,369 | | | | 125,989 | |
| | 2008 | | | 60,216 | | | | 41,401 | | | | 6,896 | | | | 8,311 | | | | 116,824 | |
| | | | | | | | | | | | | | | | | | | | | | |
Frank E. Fusco | | 2010 | | | 82,076 | | | | 37,701 | | | | 7,469 | | | | 18,885 | | | | 146,131 | |
| | 2009 | | | 60,871 | | | | 32,908 | | | | 13,652 | | | | 16,846 | | | | 124,277 | |
| | 2008 | | | 39,988 | | | | 41,401 | | | | 29,149 | | | | 13,584 | | | | 124,122 | |
Name | | Year | | Dividends Received on Restricted Stock Awards ($)(a) | | | AFC Common Stock Allocated Pursuant to the ESOP ($)(b) | | | Cash Allocated Pursuant to the ESOP ($)(c) | | | Perquisites and Other Personal Benefits ($)(d) | | | Total ($) | |
George L. Engelke, Jr. | | 2009 | | | 122,730 | | | | 32,908 | | | | 11,132 | | | | 15,994 | | | | 182,764 | |
| | 2008 | | | 131,456 | | | | 41,401 | | | | 25,182 | | | | 28,608 | | | | 226,647 | |
| | 2007 | | | 75,712 | | | | 37,109 | | | | 25,151 | | | | 28,730 | | | | 166,702 | |
| | | | | | | | | | | | | | | | | | | | | | |
Monte N. Redman | | 2009 | | | 133,718 | | | | 32,908 | | | | 14,857 | | | | 12,376 | | | | 193,859 | |
| | 2008 | | | 106,886 | | | | 41,401 | | | | 31,782 | | | | 11,549 | | | | 191,618 | |
| | 2007 | | | 48,750 | | | | 37,109 | | | | 31,743 | | | | 13,402 | | | | 131,004 | |
| | | | | | | | | | | | | | | | | | | | | | |
Gerard C. Keegan | | 2009 | | | 80,610 | | | | 32,908 | | | | 8,128 | | | | 9,936 | | | | 131,582 | |
| | 2008 | | | 71,396 | | | | 41,401 | | | | 7,074 | | | | 11,653 | | | | 131,524 | |
| | 2007 | | | 37,388 | | | | 37,109 | | | | 17,052 | | | | 20,896 | | | | 112,445 | |
| | | | | | | | | | | | | | | | | | | | | | |
Gary T. McCann | | 2009 | | | 73,050 | | | | 32,908 | | | | 12,662 | | | | 7,369 | | | | 125,989 | |
| | 2008 | | | 60,216 | | | | 41,401 | | | | 6,896 | | | | 8,311 | | | | 116,824 | |
| | 2007 | | | 29,744 | | | | 37,109 | | | | 26,952 | | | | 7,344 | | | | 101,149 | |
| | | | | | | | | | | | | | | | | | | | | | |
Frank E. Fusco | | 2009 | | | 60,871 | | | | 32,908 | | | | 13,652 | | | | 16,846 | | | | 124,277 | |
| | 2008 | | | 39,988 | | | | 41,401 | | | | 29,149 | | | | 13,584 | | | | 124,122 | |
| | 2007 | | | 16,692 | | | | 37,109 | | | | 29,113 | | | | 500 | | | | 83,414 | |
| (a) | This column represents dividends paid during 2007, 2008, 2009 and 2009,2010, respectively, to the Named Executives by AFC with respect to the AFC Common Stock previously awarded in to the Named Executives as unvested restricted stock pursuant to the 2005 Stock Incentive Plan. Such dividends are, for federal and state tax purposes, treated as wages and as such are subject to tax withholding. The amount reflected is the gross amount paid before tax withholding. |
| (b) | This column represents the expense incurred by the Association with respect to AFC Common Stock allocated to the Named Executives as a result of their participation in the ESOP for 2007, 2008, 2009 and 2009,2010, respectively. The ESOP is a qualified defined contribution plan subject to ERISA. The expense is calculated under GAAP based upon the number of shares allocated to the Named Executive times the average daily closing price of AFC Common Stock as quoted on the NYSE for 2007, 2008, 2009 and 2009,2010, respectively. This amount does not equate to either the cash contribution made by the Association to the ESOP to obtain the release of such shares for allocation, nor the basis on which the Named ExecutivesExecutives’ entitlement to such shares is determined. For further information regarding the ESOP, see the CD&A section of this Proxy Statement under the heading Retirement Benefits commencing on page 39.38. |
| (c) | This column represents an estimate of the cash allocated to the accounts of the Named Executives as a result of their participation in the ESOP for the 2007, 2008, 2009 and 20092010 plan years, respectively, in the form of contributions and investment return. Excluded are amounts earned by the Named Executive in the form of dividends or interest on amounts previously allocated to the Named Executives’ accounts within the ESOP. For further information regarding the ESOP, see the CD&A section of this Proxy Statement under the heading Retirement Benefits commencing on page 39.38. |
| (d) | This column represents perquisites and other personal benefits incurred by AFC and the Association with respect to the Named Executives for the 2007, 2008, 2009 and 20092010 fiscal years, respectively. For Mr. Engelke, Mr. Keegan, Mr. McCann and Mr. Fusco, such benefits consisted of the value of an automobile provided to each by the Association and utilized for non-business purposes. For Mr. Redman, such benefits consisted of the value of an automobile provided by the Association and utilized for non-business purposes, and a physical examination. Automobiles are provided to the Named Executives by the Association, which the Named Executives may use for business purposes, commuting and for personal use. The amount included as a perquisite was determined based upon the total cost incurred by the Association for the automobile including annual depreciation, as well as insurance, registration and inspection fees and maintenance costs, less the cost the Association would have reimbursed the executive for business mileage had the executive used their personal automobile, adjusted positively or negatively for the gain or loss realized on any owned automobile traded in during the year, based upon the estimated salvage value established at the time the automobile was acquired. This amount represents the incremental cost of such automobiles to AFC and does not represent the amount of income attributable to the Named Executive for tax purposes as a result of the non-business use of such automobile. For a description of the policies of AFC with respect to providing automobiles to its executive officers, see the section under the CD&A entitled Perquisites commencing on page 41. |
The following table sets forth information regarding bonus awards and equity grants for or during 20092010 pursuant to the Executive Incentive Plan and the 2005 Stock Incentive Plan, respectively, made to the Named Executives during 2009.2010. Pursuant to the terms of the Executive Incentive Plan, the Compensation Committee annually establishes an annual incentive for the executive officers of AFC. For a discussion of the goals and targets applicable for 2009,2010, see the CD&A - Short-Term Non-Equity Incentive Plan Compensation commencing on page 35. Equity grants are made at the discretion of the Compensation Committee. For a discussion of the 2005 Stock Incentive Plan, see the CD&A-Equity Based Compensation commencing on page 38.37.
2009 2010 Grants of Plan-Based Awards Table
Name | | Grant Date (1) | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (2) | | | All Other Stock Awards: Numbers of Shares of Stock or Units (#) | | | Grant Date Fair Value of Stock Awards (3) ($) | |
| | | | Thresh- old ($) | | | Target ($) | | | Maxi- mum ($) | | | | | | | |
George L. Engelke, Jr. | | �� | | | 19,985 | | | | 799,400 | | | | 1,598,800 | | | | | | | |
| | 2/2/2009 | | | | | | | | | | | | | | | 155,700 | | | | 1,275,183 | |
| | | | | | | | | | | | | | | | | | | | | | |
Monte N. Redman | | | | | 12,375 | | | | 495,000 | | | | 990,000 | | | | | | | | | |
| | 2/2/2009 | | | | | | | | | | | | | | | 170,950 | | | | 1,400,081 | |
| | | | | | | | | | | | | | | | | | | | | | |
Gerard C. Keegan | | | | | 6,800 | | | | 272,000 | | | | 544,000 | | | | | | | | | |
| | 2/2/2009 | | | | | | | | | | | | | | | 99,520 | | | | 815,069 | |
| | | | | | | | | | | | | | | | | | | | | | |
Gary T. McCann | | | | | 6,250 | | | | 250,000 | | | | 500,000 | | | | | | | | | |
| | 2/2/2009 | | | | | | | | | | | | | | | 91,580 | | | | 750,040 | |
| | | | | | | | | | | | | | | | | | | | | | |
Frank E. Fusco | | | | | 5,812 | | | | 232,500 | | | | 465,000 | | | | | | | | | |
| | 2/2/2009 | | | | | | | | | | | | | | | 84,860 | | | | 695,003 | |
Name | | Grant Date (1) | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (2) | | | All Other Stock Awards: Numbers of Shares of Stock or Units (#) | | | Grant Date Fair Value of Stock Awards (3) ($) | |
| | | | Thresh- old ($) | | | Target ($) | | | Maxi- mum ($) | | | | | | | |
George L. Engelke, Jr. | | | | | 19,985 | | | | 799,400 | | | | 1,598,800 | | | | | | | |
| | 2/1/2010 | | | | | | | | | | | | | | | 108,870 | | | | 1,415,310 | |
Monte N. Redman | | | | | 12,375 | | | | 495,000 | | | | 990,000 | | | | | | | | | |
| | 2/1/2010 | | | | | | | | | | | | | | | 119,690 | | | | 1,555,970 | |
Gerard C. Keegan | | | | | 6,800 | | | | 272,000 | | | | 544,000 | | | | | | | | | |
| | 2/1/2010 | | | | | | | | | | | | | | | 69,120 | | | | 898,560 | |
Gary T. McCann | | | | | 6,250 | | | | 250,000 | | | | 500,000 | | | | | | | | | |
| | 2/1/2010 | | | | | | | | | | | | | | | 62,100 | | | | 807,300 | |
Frank E. Fusco | | | | | 5,812 | | | | 232,500 | | | | 465,000 | | | | | | | | | |
| | 2/1/2010 | | | | | | | | | | | | | | | 57,750 | | | | 750,750 | |
(1) | No All grants to the Named Executives of Non-Equity Incentive Plan Awards to the Named Executives were made pursuant to the Executive Incentive Plan. For additional information regarding the Executive Incentive Plan, see the CD&A section under the heading Short-Term Non-Equity Incentive Plan Compensation commencing on page 35. Grants to the Named Executives of equity-based awards during 20092010 were made pursuant to the 2005 Stock Incentive Plan. For additional information regarding the 2005 Stock Incentive Plan, see the CD&A section under the heading Equity-Based Compensation commencing on page 38.37. |
(2) | The amounts reflected under the Estimated Possible Payouts under Non-Equity Incentive Plan Awards columns reflect the incentive bonus program for the Named Executives for fiscal year 2009.2010. The Threshold column reflects the minimum bonus which could be earned by the Named Executive earning any bonus. Performance of AFC below the specified level would result in no bonus. The Target column and the Maximum column represent the amounts that would be earned had AFC performed at the one hundred percent (100%) payout and maximum payout percentages as specified under the goals established in connection with the Executive Incentive Plan for 2009.2010. In January 2010,2011, the Compensation Committee of AFC determined that becausebased upon AFC’s performance in 2009 did not meet the minimum threshold requirements prescribed in the Executive Incentive Plan, no grants2010, incentive bonuses would be madepaid to the Named OfficersExecutives under the Executive Incentive Plan for 2009.2010 as set forth in the Summary Compensation Table under the column entitled “Non-Equity Incentive Plan Compensation” on page 42. |
(3) | The amounts reflected under the Grant Date Fair Value of Stock Awards column reflect the grant date fair value of the award computed in accordance with FASB ASC Topic 718, excluding the impact of estimated forfeitures related to service-based vesting conditions, which on a per share basis is equal to the closing price per share of AFC Common Stock as quoted on the NYSE on the date of grant, which was February 2, 2009,1, 2010, or $8.19$13.00 per share. The Named Executives paid no consideration for these awards other than for services rendered in performing their duties and responsibilities as executive officers. |
The following table provides information on the current holdings of stock options and restricted stock awards by the Named Executives as of December 31, 2009.2010. This table includes unexercised vested and unvested option grants and unvested restricted stock awards. Each equity grant or award outstanding at fiscal year end is shown separately for each Named Executive. There were no unvested options outstanding as of December 31, 2009.2010. The vesting schedule for each grant or award is shown following this table, based on the option grant or restricted stock award date. The market value of the restricted stock awards is based on the closing market price per share of AFC Common Stock as quoted on the NYSE on December 31, 2009,2010, or $12.43.$13.91. For additional information about the option grants and restricted stock awards, see the CD&A - Equity-Based Compensation commencing on page 38.37.
20092010 Outstanding Equity Awards At Fiscal Year-End Table
| | Option Awards | | Stock Awards | |
Name | | Option Grant Date (1) | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Option Exercise Price ($) | | Option Expiration Date | | Restricted Stock Award Date (2) | | Number of Shares or Units of Stock That Have Not Vested | | | Market Value of Shares or Units of Stock That Have Not Vested ($) | |
George L. Engelke, Jr. | | 12/19/2001 | | | 375,000 | | | | 16.8333 | | 12/18/2011 | | 12/20/2006 | | | 42,800 | | | | 595,348 | |
| | 12/18/2002 | | | 405,000 | | | | 18.0000 | | 12/17/2012 | | 01/28/2008 | | | 21,440 | | | | 298,230 | |
| | 12/17/2003 | | | 315,000 | | | | 24.4000 | | 12/16/2013 | | 02/02/2009 | | | 51,900 | | | | 721,929 | |
| | 12/15/2004 | | | 397,500 | | | | 26.6267 | | 12/14/2014 | | 02/01/2010 | | | 72,580 | | | | 1,009,588 | |
| | 12/21/2005 | | | 345,000 | | | | 29.0200 | | 12/20/2012 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Monte N. Redman | | 12/19/2001 | | | 126,060 | | | | 16.8333 | | 12/18/2011 | | 12/20/2006 | | | 30,300 | | | | 421,473 | |
| | 12/18/2002 | | | 165,445 | | | | 18.0000 | | 12/17/2012 | | 01/28/2008 | | | 55,900 | | | | 777,569 | |
| | 12/17/2003 | | | 130,500 | | | | 24.4000 | | 12/16/2013 | | 02/02/2009 | | | 102,570 | | | | 1,426,749 | |
| | 12/15/2004 | | | 180,000 | | | | 26.6267 | | 12/14/2014 | | 02/01/2010 | | | 95,752 | | | | 1,331,910 | |
| | 12/21/2005 | | | 154,700 | | | | 29.0200 | | 12/20/2012 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Gerard C. Keegan | | 12/19/2001 | | | 108,000 | | | | 16.8333 | | 12/18/2011 | | 12/20/2006 | | | 22,800 | | | | 317,148 | |
| | 12/18/2002 | | | 142,500 | | | | 18.0000 | | 12/17/2012 | | 01/28/2008 | | | 32,700 | | | | 454,857 | |
| | 12/17/2003 | | | 102,000 | | | | 24.4000 | | 12/16/2013 | | 02/02/2009 | | | 59,712 | | | | 830,594 | |
| | 12/15/2004 | | | 144,000 | | | | 26.6267 | | 12/14/2014 | | 02/01/2010 | | | 55,296 | | | | 769,167 | |
| | 12/21/2005 | | | 122,900 | | | | 29.0200 | | 12/20/2012 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Gary T. McCann | | 12/19/2001 | | | 36,900 | | | | 16.8333 | | 12/18/2011 | | 12/20/2006 | | | 19,600 | | | | 272,636 | |
| | 12/18/2002 | | | 49,500 | | | | 18.0000 | | 12/17/2012 | | 01/28/2008 | | | 29,300 | | | | 407,563 | |
| | 12/17/2003 | | | 56,250 | | | | 24.4000 | | 12/16/2013 | | 02/02/2009 | | | 54,948 | | | | 764,327 | |
| | 12/15/2004 | | | 90,000 | | | | 26.6267 | | 12/14/2014 | | 02/01/2010 | | | 49,680 | | | | 691,049 | |
| | 12/21/2005 | | | 84,000 | | | | 29.0200 | | 12/20/2012 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Frank E. Fusco | | 12/19/2001 | | | 47,550 | | | | 16.8333 | | 12/18/2011 | | 12/20/2006 | | | 9,800 | | | | 136,318 | |
| | 12/18/2002 | | | 63,000 | | | | 18.0000 | | 12/17/2012 | | 01/28/2008 | | | 22,400 | | | | 311,584 | |
| | 12/17/2003 | | | 46,800 | | | | 24.4000 | | 12/16/2013 | | 02/02/2009 | | | 50,916 | | | | 708,242 | |
| | 12/15/2004 | | | 60,900 | | | | 26.6267 | | 12/14/2014 | | 02/01/2010 | | | 46,200 | | | | 642,642 | |
| | 12/21/2005 | | | 37,500 | | | | 29.0200 | | 12/20/2012 | | | | | | | | | | |
| | Option Awards | | Stock Awards | |
Name | | Option Grant Date (1) | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Option Exercise Price ($) | | Option Expiration Date | | Restricted Stock Award Date (2) | | Number of Shares or Units of Stock That Have Not Vested | | | Market Value of Shares or Units of Stock That Have Not Vested ($) | |
George L. Engelke, Jr. | | 12/20/2000 | | | 413,964 | | | | 16.5625 | | 12/19/2010 | | 12/20/2006 | | | 42,800 | | | | 532,004 | |
| | 12/19/2001 | | | 375,000 | | | | 16.8333 | | 12/18/2011 | | 01/28/2008 | | | 37,520 | | | | 466,374 | |
| | 12/18/2002 | | | 405,000 | | | | 18.0000 | | 12/17/2012 | | 02/02/2009 | | | 103,800 | | | | 1,290,234 | |
| | 12/17/2003 | | | 315,000 | | | | 24.4000 | | 12/16/2013 | | | | | | | | | | |
| | 12/15/2004 | | | 397,500 | | | | 26.6267 | | 12/14/2014 | | | | | | | | | | |
| | 12/21/2005 | | | 345,000 | | | | 29.0200 | | 12/20/2012 | | | | | | | | | | |
Monte N. Redman | | 12/20/2000 | | | 143,964 | | | | 16.5625 | | 12/19/2010 | | 12/20/2006 | | | 30,300 | | | | 376,629 | |
| | 12/19/2001 | | | 126,060 | | | | 16.8333 | | 12/18/2011 | | 01/28/2008 | | | 55,900 | | | | 694,837 | |
| | 12/18/2002 | | | 165,445 | | | | 18.0000 | | 12/17/2012 | | 02/02/2009 | | | 136,760 | | | | 1,699,927 | |
| | 12/17/2003 | | | 130,500 | | | | 24.4000 | | 12/16/2013 | | | | | | | | | | |
| | 12/15/2004 | | | 180,000 | | | | 26.6267 | | 12/14/2014 | | | | | | | | | | |
| | 12/21/2005 | | | 154,700 | | | | 29.0200 | | 12/20/2012 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Gerard C. Keegan | | 12/20/2000 | | | 120,000 | | | | 16.5625 | | 12/19/2010 | | 12/20/2006 | | | 22,800 | | | | 283,404 | |
| | 12/19/2001 | | | 108,000 | | | | 16.8333 | | 12/18/2011 | | 01/28/2008 | | | 32,700 | | | | 406,461 | |
| | 12/18/2002 | | | 142,500 | | | | 18.0000 | | 12/17/2012 | | 02/02/2009 | | | 79,616 | | | | 989,627 | |
| | 12/17/2003 | | | 102,000 | | | | 24.4000 | | 12/16/2013 | | | | | | | | | | |
| | 12/15/2004 | | | 144,000 | | | | 26.6267 | | 12/14/2014 | | | | | | | | | | |
| | 12/21/2005 | | | 122,900 | | | | 29.0200 | | 12/20/2012 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Gary T. McCann | | 12/20/2000 | | | 42,000 | | | | 16.5625 | | 12/19/2010 | | 12/20/2006 | | | 19,600 | | | | 243,628 | |
| | 12/19/2001 | | | 36,900 | | | | 16.8333 | | 12/18/2011 | | 01/28/2008 | | | 29,300 | | | | 364,199 | |
| | 12/18/2002 | | | 49,500 | | | | 18.0000 | | 12/17/2012 | | 02/02/2009 | | | 73,264 | | | | 910,672 | |
| | 12/17/2003 | | | 56,250 | | | | 24.4000 | | 12/16/2013 | | | | | | | | | | |
| | 12/15/2004 | | | 90,000 | | | | 26.6267 | | 12/14/2014 | | | | | | | | | | |
| | 12/21/2005 | | | 84,000 | | | | 29.0200 | | 12/20/2012 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Frank E. Fusco | | 12/20/2000 | | | 47,664 | | | | 16.5625 | | 12/19/2010 | | 12/20/2006 | | | 9,800 | | | | 121,814 | |
| | 12/19/2001 | | | 47,550 | | | | 16.8333 | | 12/18/2011 | | 01/28/2008 | | | 22,400 | | | | 278,432 | |
| | 12/18/2002 | | | 63,000 | | | | 18.0000 | | 12/17/2012 | | 02/02/2009 | | | 67,888 | | | | 843,848 | |
| | 12/17/2003 | | | 46,800 | | | | 24.4000 | | 12/16/2013 | | | | | | | | | | |
| | 12/15/2004 | | | 60,900 | | | | 26.6267 | | 12/14/2014 | | | | | | | | | | |
| | 12/21/2005 | | | 37,500 | | | | 29.0200 | | 12/20/2012 | | | | | | | | | | |
(1) | The following table details the vesting date for all outstanding stock options held by the Named Executives as of December 31, 2009,2010, based upon the grant date of such option: |
Option Grant Vesting Schedule
Grant Date | | Vesting Date (a) |
12/20/2000 | | 1/10/2004 |
12/19/2001 | | 1/10/2005 |
12/18/2002 | | 1/10/2006 |
12/17/2003 | | 12/22/2005 |
12/15/2004 | | 12/22/2005 |
12/21/2005 | | 1/9/2009 |
| (a) | In addition to the dates indicated, the options reflected in this table would vest early upon the death, disability and, except for those options granted on December 21, 2005, upon retirement upon reaching age 55 with at least 10 years of service. The options granted on December 21, 2005 vest upon normal retirement at age 65 as defined under any of the Association’s pension plans. The vesting of options granted on December 17, 2003 and December 15, 2004 was accelerated by the Compensation Committee in anticipation of the implementation of SFAS 123R on January 1, 2006. All stock options indicated would also vest in the event of a change of control of either AFC or the Association. |
(2) | The following table details the vesting date for all outstanding restricted stock awards held by the Named Executives as of December 31, 2009,2010, based upon the award date of such restricted stock: |
Restricted Stock Award Vesting Schedule
Award Date | | Vesting Date (a) |
12/20/2006 | | 1/9/2012 |
1/28/2008 | | 1/28/2013 |
2/2/2009 | | 12/15/2009 |
2/1/2010 | | 12/14/2010 |
| (a) | The balance of the award granted to Mr. Engelke on January 28, 2008 vests 30% on January 28, 2009, 30% on January 28, 2010 and the balance, or 40%, on January 28, 2011. The balance of the award granted to Mr. Engelke on February 2, 2009 vests 1/3 on December 15, 2009, 1/3 on December 15, 2010 and 1/3 on December 15, 2011. The balance of the award granted to Mr. Engelke on February 1, 2010 vests 1/2 on December 14, 2011 and 1/2 on December 14, 2012. Shares awarded to the remainder of the Named Executives vest (i) 100% on the dates indicated above for those shares awarded on December 20, 2006 and January 28, 2008, respectively, and (ii) 20% per year of the awarded shares commencing on the vesting date set forth above and on the anniversary thereafter as to those shares awarded on February 2, 2009.2009 and February 1, 2010, respectively. In addition to the dates indicated, theall restricted stock on February 2, 2009 reflected in this tableawards indicated would vest early upon the death, disability and, except for the restricted stock granted to the Named Executives on January 28, 2008, and February 2, 2009 or to Mr. Engelke on December 20, 2006,and February 1, 2010, upon normal retirement at age 65 as defined under any of the Association’s pension plans. The vesting of restricted stock granted to Mr. Engelke on December 20, 2006 would vest earlier than the date indicated should he retire as an executive officer offrom AFC and the Association having reached the then applicable mandatory retirement age for executive officers of 70. All restricted stock awards indicated would also vest in the event of a change of control of either AFC or the Association. |
The following table provides information, for the Named Executives, on stock option exercises during 2009, includingregarding the number of shares acquired upon exercisevesting, and the value realized before their payment of any applicable withholding tax and broker commissions.
2009 Option Exercises and2010 Stock Vested
| | Option Awards | | | Stock Awards | | |
| | Number of | | | Value | | | Number of | | | Value | | |
| | Shares | | | Realized | | | Shares | | | Realized | | |
| | Acquired On | | | On | | | Acquired On | | | On | | |
| | Exercise | | | Exercise | | | Vesting | | | Vesting | | |
Stock Awards | | Stock Awards | |
Name | | (#) | | | (#)(1) | | | (#) | | | (#)(2) | | | Number of Shares Acquired On Vesting (#) | | | Value Realized On Vesting (#)(1) | |
George L. Engelke, Jr. | | | | | | | | | | 97,980 | | | 1,220,072 | | |
George L. Engelke, Jr | | | | 104,270 | | | | 1,403,264 | |
Monte N. Redman | | | | | | | | | | 50,765 | | | 635,874 | | | | 58,128 | | | | 780,095 | |
Gerard C. Keegan | | | | | | | | | | 33,054 | | | 422,375 | | | | 33,728 | | | | 452,627 | |
Gary T. McCann | | | | | | | | | | 27,316 | | | 342,443 | | | | 30,736 | | | | 412,440 | |
Frank E. Fusco | | 32,759 | | | 46,246 | | | 23,222 | | | 286,159 | | | | 28,522 | | | | 382,736 | |
(1) | Value realized is calculated by multiplying the number of shares of AFC Common Stock as to which an option was exercised times the difference between the closing price per share of AFC Common Stock as quoted on the NYSE on the date of exercise and the exercise price per share of the applicable option. |
(2) | Value realized is calculated by multiplying the number of shares of AFC Common Stock which vested by the closing price per share of AFC Common Stock as quoted on the NYSE on the date of vesting. |
Additional DB Plan Information
The following table sets forth information on the pension benefits for the Named Executives under each of the following pension plans:
Employees Pension Plan. The Employees Pension Plan is a funded and tax qualified retirement program that covers approximately 4,2884,281 eligible employees and retirees of the Association and its predecessors as of December 31, 2009.2010. As applicable to the Named Executives, the plan provides benefits based on a formula that takes into account a portion of the executive’s earnings for each fiscal year, subject to applicable IRS limitations. Since 1992, the formula provides for an annual benefit accrual for each year of service (up to a maximum of 30 years) equal to 1.00% of the executive’s average base salary over the 5 years immediately preceding retirement up to “covered compensation” and 1.6% of such average base salary in excess of “covered compensation.” “Covered compensation” varies based upon a participant’s normal retirement date based upon changes in the average of the Social Security taxable wage bases. The executive’s annual earnings taken into account under this formula include base salary, but may not exceed an IRS-prescribed limit applicable to tax-qualified plans ($245,000 for 2009)2010). As an example, utilizing covered compensation of $59,400 for an employee who reached normal retirement age in 2009,2010, the maximum incremental annual benefit an executive could have earned toward his total pension payments under this plan was $3,564, payable after retirement as described below.
The accumulated benefit an employee earns over his or her career with the company is payable starting after retirement on a monthly basis for life with a guaranteed minimum term of 10 years. The normal retirement age as defined in the Employees Pension Plan is 65. Employees with at least 5 years of service, including the Named Executives, who have retired and reached age 55, may elect to receive benefits at a reduced amount. Currently, Mr. Keegan, Mr. Redman and Mr. McCann are eligible for early retirement. The benefit reduction is based upon a table of simplified option factors used to convert the benefit at normal retirement age to the reduced amount. On average, the reduction equates to approximately an 8.2% discount per year for each year retirement is accelerated prior to normal retirement age. Similarly, retirees with at least 5 years of service may receive an enhanced benefit if they defer the receipt of their benefit beyond their 65th birthday. On average, the increase equates to approximately a 10.5% enhancement per year that retirement is deferred beyond normal retirement age. Currently, Mr. Engelke is eligible for an enhanced benefit. In addition, the Employees Pension Plan provides for spousal joint and survivor annuity options.
Benefits under the Employees Pension Plan are subject to the limitations on annual benefits imposed under section 415 of the Code. The section 415 limit for 20092010 is $195,000 per year for a single life annuity payable at an IRS-prescribed retirement age. This ceiling may be actuarially adjusted in accordance with IRS rules for items such as employee contributions, other forms of distribution and different annuity starting dates.
Supplemental Plan. The Association in 1991 adopted the Supplemental Plan, a non-qualified plan for tax purposes. The Supplemental Plan, at the time of its adoption, applied to a specified group of 30 officers of the Association. Six participants remain in the employ of the Association, including two of the Named Executives: Mr. Engelke and Mr. Redman. Mr. Keegan, Mr. McCann and Mr. Fusco do not participate in this plan. The Supplemental Plan was adopted to preserve for the participating employees the benefit formula that had been in effect pursuant to the Employees Pension Plan prior to the adoption of the Supplemental Plan at which time the Employees Pension Plan formula was amended and reduced. The Supplemental Plan is unfunded and is not qualified for tax purposes.
The benefit payable under the Supplemental Plan is calculated and compared to the benefit payable under the Employees Pension Plan and Excess Plan. The participant receives, under the Supplemental Plan, the shortfall, if any, in the Employees Pension Plan and Excess Plan benefit. The Supplemental Plan formula provides for an annual benefit equal to 60% of the participant’s average base salary over the 5 years immediately preceding retirement less 67% of the participant’s primary Social Security benefit times a number equal to years of service divided by 30 (but not greater than 1).
Pursuant to the Supplemental Plan, normal retirement age is defined as age 65. Employees may receive a reduced benefit under the Supplemental Plan upon early retirement at or after age 55 with at least 10 years of service. All of the Named Executives, prior to January 1, 2009, elected to receive their Supplemental Plan benefit, if any, in a lump sum at retirement, calculated to be actuarially equivalent to the benefit they would have received had they received a benefit in the same form as under the Employees Pension Plan.
Excess Plan. The Excess Plan, which was adopted in 1983, is not qualified for tax purposes. Participants in this plan include those participants in the Employees Pension Plan whose compensation exceeds the limitations established under the Code. Benefits payable under the Excess Plan are equal to the excess of (1) the amount that would be payable in accordance with the terms of the Employees Pension Plan disregarding the limitations imposed pursuant to sections 401(a)(17) and 415 of the Code over (2) the pension benefit actually payable under the Employees Pension Plan taking the sections 401(a)(17) and 415 limitations into account. All of the Named Executives, prior to January 1, 2009, elected to receive their Excess Plan benefit in a lump sum at retirement, calculated to be actuarially equivalent to the benefit they would have received had they received a benefit in the same form as under the Employees Pension Plan.
No pension benefits were paid to any of the Named Executives in the 20092010 fiscal year. For further information on these pension plans, see the CD&A - Retirement Benefits commencing on page 39.38.
The amounts reported in the Pension Benefits Table below equal the present value of the accumulated benefit at December 31, 2009,2010, for the Named Executives under each of the DB Plans. The accumulated benefit calculation is based upon certain assumptions which are discussed in Note 1514 of Notes to Consolidated Financial Statements. The calculation assumes service and base salary earned through December 31, 2009.2010. The present value assumes the executive will begin to receive retirement benefits at age 65 (or immediately, if the executive is already over 65 years of age). Age 65 is the earliest age executives can receive benefits without a reduction in benefits. The interest rate assumption used to calculate the present value varies by plan, based upon the age of the participants and the resulting projected benefit payouts of the plan in the aggregate. For the Employees Pension Plan, the interest rate assumption is 5.91%5.39%, while for both the Excess Plan and the Supplemental Plan the interest rate assumption is 5.70%5.04%. The post-retirement mortality assumption is based upon the RP-2000IRS 2011 static mortality table. 2010 Pension Benefits Table
Name | | Plan Name | | Number of Years Credited Service (#)(1) | | Present Value of Accumulated Benefit ($) | |
George L. Engelke, Jr. | | Employees Pension Plan | | 3839 years 6 months | | | 997,5721,048,137 | |
| | Excess Plan | | 3839 years 6 months | | | 4,884,6764,745,625 | |
| | Supplemental Plan | | 3839 years 6 months | | | 1,460,5781,427,900 | |
| | | | | | | | |
Monte N. Redman | | Employees Pension Plan | | 3233 years 7 months | | | 716,414901,418 | |
| | Excess Plan | | 3233 years 7 months | | | 1,895,0102,467,900 | |
| | Supplemental Plan | | 3233 years 7 months | | | 134,317293,750 | |
| | | | | | | | |
Gerard C. Keegan | | Employees Pension Plan | | 3839 years 9 months | | | 1,081,3881,200,808 | |
| | Excess Plan | | 3839 years 9 months | | | 1,368,0271,757,550 | |
| | | | | | | | |
Gary T. McCann | | Employees Pension Plan | | 1920 years 11 months | | | 418,332542,767 | |
| | Excess Plan | | 1920 years 11 months | | | 502,358673,080 | |
| | | | | | | | |
Frank E. Fusco | | Employees Pension Plan | | 2021 years 2 months | | | 221,016 316,863 | |
| | Excess Plan | | 2021 years 2 months | | | 207,769343,972 | |
(1) | The number of years of credited service for benefit accrual purposes is capped at 30 years. For the Supplemental Plan, if a participant takes early retirement, his benefit is reduced by a fraction the numerator of which is his actual years of credited service (without reference to any cap) and the denominator is his projected years of credited service at normal retirement age. Under such Plan, the only augmentation that occurs for service beyond normal retirement age is the result of any potential base salary increases which the executive may receive during this period. |
As noted above, the Supplemental Plan only provides a benefit if it exceeds the benefit that is payable pursuant to the terms of the Employees Pension Plan and the Excess Plan.
Other Potential Post-Employment Payments
As noted in the CD&A, AFC and the Association have entered into employment agreements with each of the executive officers, including the Named Executives. The employment agreements each provide for a three-year term. The Association’s employment agreements each run from the first day of January. Prior to January 1st each year, the Board of Directors of the Association may extend the employment agreements with the Association for an additional year such that the remaining terms shall be three (3) years. Prior to January 1, 2009, suchIn April, 2010, both the AFC and the Association employment agreements were amended and restated and thereby extended to a three year term. The nature of the amendments is discussed more fully below. The agreements with AFC automatically extend daily, except in the case of Mr. Engelke, so as to maintain their original term, unless written notice of non-renewal is given by the Board. No such notice has been given to any current executive officer. The agreements with AFC were also amended and restated prior to January 1, 2009. The nature of the amendments is more fully discussed below.
The employment agreements provide for minimum salaries and the executives’ participation in retirement plans, group life, medical and disability insurance plans and any other employee benefit programs. The employment agreements also provide that AFC and the Association will maintain, for the benefit of the executives, director and officer liability insurance and will indemnify the executives on prescribed terms for claims and related costs and liabilities arising from the services provided pursuant to the employment agreements for a period of six (6) years beyond the termination of such agreements.
The employment agreements provide for termination of each of the executives’ employment at any time by AFC or the Association with or without cause. Each executive would be entitled to severance benefits in the event the executive’s employment terminates (1) due to AFC’s or the Association’s respective (A) failure to re-elect the executive to his current office, and in the case of Mr. Engelke’s and Mr. Keegan’s employment agreements, to the Board; (B) failure by whatever cause to vest in the executive the functions, duties or responsibilities prescribed for the executive in such agreement; (C) material breach of the employment agreements or reduction of the executive’s base salary or other change to the terms and conditions of the executive’s compensation and benefits which either individually or in the aggregate, as to such executive, has a material adverse effect on the aggregate value of the total compensation package provided to such executive; or (D) relocation of the executive’s principal place of employment outside of Nassau or Queens Counties of New York; or (2) for reasons other than (A) for cause; (B) voluntary resignation, except as a result of the actions specified under clause (1) above or following a change of control, as defined in the agreements; (C) death; (D) long term disability; or (E) expiration of the term of the employment agreement. See below regarding the amendment to Mr. Engelke’s contract as it pertains to the separation of his roles as Chairman of the Board and Chief Executive Officer and corresponding salary adjustment.
The executive officers agree that for a period of one year following termination of their employment, or the remaining contact term, whichever is less, they will not accept employment and will not serve as an officer, employee, consultant, director or trustee to any banking or thrift institution with an office or an application pending to open an office in any city, town or county in which AFC or the Association have an office, unless their employment is terminated pursuant to section (1) above or if such employment terminates as a result of disability, and in such instance, following notice, AFC does not offer to retain the executive in a comparable position. In addition, the executives agree in all cases to keep confidential and not use for their own benefit or the benefit of anyone else other than AFC any material non-public documents or information obtained while employed by AFC, unless required by law, until such time as the document or material is either no longer material or is otherwise publicly available through no fault of the executive. They agree, for a period of one year following their termination, not to solicit for employment, or to provide any advice or recommendations to a third party, regarding any officer or employee of AFC or the Association with respect to any bank, thrift or other financial institution in the business of accepting deposits or making loans in areas were AFC or the Association is located. They also agree, for a period of one year following their termination, not to solicit or otherwise seek to encourage any customer of AFC or the Association to terminate their relationship with AFC or the Association.
InPrior to April 10, 2010, in situations where a Named Executive would behave been entitled to severance benefits, the severance benefits to which the Named Executive would behave been entitled include:
| i) | continued life, medical and disability insurance benefits for the remainder of the contract term (three (3) years) at no cost to the executive (During their employment, the executives contribute to their medical coverage on the same basis as all salaried employees of the Association based upon the coverage selected); |
| ii) | Mr. Engelke’s employment contracts were amended to provide that the Board would separate the roles of Chief Executive Officer and Chairman of the Board without |
| breaching Mr. Engelke’s employment contracts, so long as he remained Chairman of the Board. In such event he would remain an employee of AFC and the Association for the remainder of his contract term, his salary compensation would be reduced to no less than $750,000 per annum and the DB Plan benefits and severance benefits to which he would become entitled under the terms of his employment contracts would be calculated based upon his salary in effect immediately preceding the reduction of his responsibilities. Mr. Engelke has announced that he will relinquish his role as Chief Executive Officer effective on June 30, 2011. |
| ii) | a lump sum payment equal to the salary the executive would have earned during the remainder of the contract term (three (3) times base salary); |
| iii) | a lump sum payment equal to potential incentive compensation the executive could have earned during the remainder of the contract term (three (3) times the maximum incentive bonus available pursuant to the Executive Incentive Plan - See the 20092010 Grants of Plan-Based Awards Table on page 4544 and the CD&A - Short-Term Non-Equity Incentive Plan Compensation commencing on page 35 for a discussion of the manner in which incentive awards under the Executive Incentive Plan are calculated); |
| iv) | a payment equal to the present value of certain enhanced pension benefits (This amount is calculated by taking the present value of the difference between the pension benefits to which the executive is entitled under the DB Plans and a hypothetical benefit which the executive would be entitled to under such plans making the following assumptions: (a) the executive receives additional service credit through the remainder of the contract term (three (3) years) and (b) the lump sum payments payable under paragraphs (i), (ii) and (iii) above and (viii) below are added to the executive’s compensation in the year of the executive’s termination). Based upon benefit payment elections made by the Named Executives pursuant to the Supplemental Plan and the Excess Plan this payment would be made in a lump sum; |
| v) | a lump sum equal to the ESOP benefits the executive would have earned during the remainder of the contract term (three (3) times the ESOP allocations made to the executive in his last full year of employment); |
| vi) | accelerated vesting of all outstanding option grants and restricted stock awards; |
| vii) | director and officer liability insurance coverage and AFC’s agreement to indemnify the Named Executives to the fullest extent authorized by Delaware law for a period of six (6) years following termination of the contract; and |
| viii) | at the election of either AFC or the Association, a cash settlement of all outstanding options and restricted stock awards. |
In the event of disability, the Named Executives are entitled to the following enhanced termination–related benefits:
| i) | The Named Executive’s base salary is paid for up to one (1) full year following the Named Executive becoming disabled; |
| ii) | The Named Executive, pursuant to the terms of the Executive Incentive Plan, is entitled to receive a prorated bonus, based upon AFC’s attainment of the established performance goals for the plan year; and |
| iii) | The stock option grants and restricted stock awards provided to the Named Executives all provide for accelerated vesting in the event of disability. |
In the event of death, the Named Executives are entitled to the following enhanced termination-related benefits:
| i) | The Named Executive’s estate, pursuant to the terms of the Executive Incentive Plan, is entitled to receive a prorated bonus, based upon AFC’s attainment of the established performance goals for the plan year; and |
| ii) | The stock option grants and restricted stock awards provided to the Named Executives all provide for accelerated vesting in the event of death. |
TheEffective April 10, 2010, the employment agreements between AFC and the Association and eachcontracts of the executive officers including the Named Executives, were amended and restated prior to January 1, 2009 for two primary reasons:as follows:
| i) | In order to avoid immediate taxationContracts will no longer be extended beyond the 75th birthday of various benefits provided pursuant toany executive. Beginning at age 72, the contracts, including severance benefits,remaining contract term will shorten until at age 75 the contract will expire by its terms. |
| ii) | Mr. Engelke’s employment contracts were amended to conform withprovide that the requirementsBoard could separate the roles of Code section 409AChief Executive Officer and Chairman of the Board without breaching Mr. Engelke’s employment contracts, so long as he remained Chairman of the Board. In such event he would remain an employee of AFC and the regulations promulgated thereunder. Code section 409A deals withAssociation for the income taxationremainder of deferredhis contract term, his salary compensation arrangementswould be reduced to no less than $750,00 per annum and requireshis DB Plan benefits and severance benefits to which he would become entitled under the deferral of certain severance payments to the executives for a period of up to 6 months following termination of employment. The amendments made in this regard did not alter the substantive terms of these contracts.his employment contracts would be calculated based upon his salary in effect immediately preceding the reduction of his responsibilities. Mr. Engelke has announced that he will relinquish his role as Chief Executive Officer effective on June 30, 2011. |
| ii)iii) | In December 2008,Severance benefit provisions, which are calculated based upon the remaining contract term were adjusted to reflect the impact of the amendment described in (i) above, thus reducing severance benefits following age 72. |
| iv) | Severance benefit payments based upon incentive payment terms under the Executive Incentive Plan were reduced from being calculated based upon the maximum potential incentive the executive could receive (200% of target incentive) to being calculated based upon the target incentive (100% of target incentive). |
| v) | Severance benefit payments based on pension benefits were reduced from including lump sum payments under paragraphs (ii), (iii) and (viii) of the description of severance benefits prior to April 10, 2010, to including payments under those paragraphs (ii) and (viii) and excluding the severance benefit based on incentive payment terms under that paragraph (iii). |
| vi) | Indemnification provisions were amended to clarify that the contract provisions related to indemnification do not limit indemnification rights the executive would otherwise have as an officer or employee pursuant to AFC’s bylaws or applicable Delaware law. vii)The provisions of the contracts that were applicable if the Association or AFC was notified by the U.S. Treasury that it had received preliminary approval to participateparticipated in the U.S.US Treasury’s Capital Purchase Program under the government’s Troubled Asset Relief Program - Capital Purchase Program, referred to as the CPP. The CPP required that participating institutions agree to certain limitations and incentive claw-back provisions that would have applied to the Named Executives and others had AFC participated in the CPP. The contracts of the executive officers, including the Named Executives,(TARP) were amended to contain provisions which would limit severance compensation and allow for the claw back of incentive payments as required by the CPP so long as AFC ordeleted, since the Association were participating in the CPP. Subsequently, AFC and the Association determinedAFCdetermined not to participate in the CPP.such program. |
As of December 31, 2009,2010, the amounts of the Named Executives’ termination-related benefits, excluding those termination-related benefits that are not discriminatory in favor of the Named Executives, such as group life insurance or disability insurance payments, are estimated to be as follows:
Name | | Nature of Payment | | Disability Payment ($)(1) | | | Payments upon Death ($)(2) | | | Severance Payment ($)(3) | |
George L. Engelke, Jr. | | Salary | | | 1,047,580 | | | | | | | 3,426,000 | |
| | Bonus | | | 0 | | | | 0 | | | | 4,796,400 | |
| | Value of Enhanced Pension | | | | | | | | | | | 12,752,077 | |
| | Value of ESOP Benefit | | | | | | | | | | | 159,138 | |
| | Welfare Benefit Payment | | | | | | | | | | | 4,621 | |
| | Value of Acceleration (4) : | | | | | | | | | | | | |
| | Options | | | 0 | | | | 0 | | | | 0 | �� |
| | Restricted Stock | | | 2,288,612 | | | | 2,288,612 | | | | 2,288,612 | |
| | | | | | | | | | | | | | |
Monte N. Redman | | Salary | | | 730,580 | | | | | | | | 2,475,000 | |
| | Bonus | | | 0 | | | | 0 | | | | 2,970,000 | |
| | Value of Enhanced Pension | | | | | | | | | | | 4,437,136 | |
| | Value of ESOP Benefit | | | | | | | | | | | 170,313 | |
| | Welfare Benefit Payment | | | | | | | | | | | 21,414 | |
| | Value of Acceleration (4) : | | | | | | | | | | | | |
| | Options | | | 0 | | | | 0 | | | | 0 | |
| | Restricted Stock | | | 2,771,393 | | | | 2,771,393 | | | | 2,771,393 | |
| | | | | | | | | | | | | | |
Gerard C. Keegan | | Salary | | | 449,580 | | | | | | | | 1,632,000 | |
| | Bonus | | | 0 | | | | 0 | | | | 1,632,000 | |
| | Value of Enhanced Pension | | | | | | | | | | | 3,423,603 | |
| | Value of ESOP Benefit | | | | | | | | | | | 150,126 | |
| | Welfare Benefit Payment | | | | | | | | | | | 10,573 | |
| | Value of Acceleration (4): | | | | | | | | | | | | |
| | Options | | | 0 | | | | 0 | | | | 0 | |
| | Restricted Stock | | | 1,679,492 | | | | 1,679,492 | | | | 1,679,492 | |
| | | | | | | | | | | | | | |
Gary T. McCann | | Salary | | | 405,580 | | | | | | | | 1,500,000 | |
| | Bonus | | | 0 | | | | 0 | | | | 1,500,000 | |
| | Value of Enhanced Pension | | | | | | | | | | | 1,748,618 | |
| | Value of ESOP Benefit | | | | | | | | | | | 163,728 | |
| | Welfare Benefit Payment | | | | | | | | | | | 33,563 | |
| | Value of Acceleration (4): | | | | | | | | | | | | |
| | Options | | | 0 | | | | 0 | | | | 0 | |
| | Restricted Stock | | | 1,518,499 | | | | 1,518,499 | | | | 1,518,499 | |
| | | | | | | | | | | | | | |
Frank. E. Fusco | | Salary | | | 370,580 | | | | | | | | 1,395,000 | |
| | Bonus | | | 0 | | | | 0 | | | | 1,395,000 | |
| | Value of Enhanced Pension | | | | | | | | | | | 899,539 | |
| | Value of ESOP Benefit | | | | | | | | | | | 166,698 | |
| | Welfare Benefit Payment | | | | | | | | | | | 67,689 | |
| | Value of Acceleration (4): | | | | | | | | | | | | |
| | Options | | | 0 | | | | 0 | | | | 0 | |
| | Restricted Stock | | | 1,244,094 | | | | 1,244,094 | | | | 1,224,094 | |
Name | | Nature of Payment | | Disability Payment ($)(1) | | | Payments upon Death ($)(2) | | | Severance Payment ($)(3) | |
George L. Engelke, Jr. | | Salary | | | 1,047,580 | | | | | | | 3,426,000 | |
| | Bonus | | | 359,730 | | | | 359,730 | | | | 2,398,200 | |
| | Value of Enhanced Pension | | | | | | | | | | | 5,575,828 | |
| | Value of ESOP Benefit | | | | | | | | | | | 132,619 | |
| | Welfare Benefit Payment | | | | | | | | | | | 4,396 | |
| | Value of Acceleration (4) : | | | | | | | | | | | | |
| | Options | | | 0 | | | | 0 | | | | 0 | |
| | Restricted Stock | | | 2,625,095 | | | | 2,625,095 | | | | 2,625,095 | |
| | | | | | | | | | | | | | |
Monte N. Redman | | Salary | | | 730,580 | | | | | | | | 2,475,000 | |
| | Bonus | | | 222,750 | | | | 222,750 | | | | 1,485,000 | |
| | Value of Enhanced Pension | | | | | | | | | | | 2,398,133 | |
| | Value of ESOP Benefit | | | | | | | | | | | 138,130 | |
| | Welfare Benefit Payment | | | | | | | | | | | 20,385 | |
| | Value of Acceleration (4) : | | | | | | | | | | | | |
| | Options | | | 0 | | | | 0 | | | | 0 | |
| | Restricted Stock | | | 3,957,701 | | | | 3,957,701 | | | | 3,957,701 | |
| | | | | | | | | | | | | | |
Gerard C. Keegan | | Salary | | | 449,580 | | | | | | | | 1,632,000 | |
| | Bonus | | | 122,400 | | | | 122,400 | | | | 816,000 | |
| | Value of Enhanced Pension | | | | | | | | | | | 1,958,640 | |
| | Value of ESOP Benefit | | | | | | | | | | | 138,130 | |
| | Welfare Benefit Payment | | | | | | | | | | | 8,490 | |
| | Value of Acceleration (4): | | | | | | | | | | | | |
| | Options | | | 0 | | | | 0 | | | | 0 | |
| | Restricted Stock | | | 2,371,766 | | | | 2,371,766 | | | | 2,371,766 | |
| | | | | | | | | | | | | | |
Gary T. McCann | | Salary | | | 405,580 | | | | | | | | 1,500,000 | |
| | Bonus | | | 112,500 | | | | 112,500 | | | | 750,000 | |
| | Value of Enhanced Pension | | | | | | | | | | | 1,813,210 | |
| | Value of ESOP Benefit | | | | | | | | | | | 138,130 | |
| | Welfare Benefit Payment | | | | | | | | | | | 33,223 | |
| | Value of Acceleration (4): | | | | | | | | | | | | |
| | Options | | | 0 | | | | 0 | | | | 0 | |
| | Restricted Stock | | | 2,135,575 | | | | 2,135,575 | | | | 2,135,575 | |
| | | | | | | | | | | | | | |
Frank. E. Fusco | | Salary | | | 370,580 | | | | | | | | 1,395,000 | |
| | Bonus | | | 104,625 | | | | 104,625 | | | | 697,500 | |
| | Value of Enhanced Pension | | | | | | | | | | | 652,726 | |
| | Value of ESOP Benefit | | | | | | | | | | | 138,130 | |
| | Welfare Benefit Payment | | | | | | | | | | | 74,623 | |
| | Value of Acceleration (4): | | | | | | | | | | | | |
| | Options | | | 0 | | | | 0 | | | | 0 | |
| | Restricted Stock | | | 1,798,786 | | | | 1,798,786 | | | | 1,798,786 | |
(1) | Assumes the Named Executive became disabled on December 31, 2009.2010. The Association has a policy, in the event of a Named Executive’s disability, to continue to provide the Named Executive their base salary for a period of up to one year. A disabled Named Executive would initially be entitled to receive up to 26 weeks of New York State statutory disability benefits. The Named Executive would then become entitled to long-term disability benefits under the Association’s welfare benefit program available to all salaried employees. AFC’s contracts with the Named Executives provide that after 180 days AFC may, under applicable circumstances, terminate the Named Executive’s employment and continue to pay the Named Executive’s salary for an additional six (6) months. The number reflected in the Disability Payment column under the Salary heading is the net salary payable to the Named Executive after taking into consideration the statutory disability benefits to which the Named Executive is entitled and the maximum disability payment received from the Association’s long-term disability carrier. The number reflected under the Bonus heading which is $0.00, is the actual bonus paid to the Named Executive for 20092010 since the prorated bonus would cover the entire twelve (12) month period. |
| Assumes the Named Executive died on December 31, 2009.2010. The number reflected under the Bonus heading of the Payments upon Death column is the actual bonus paid to the Named Executive for 20092010 since the prorated bonus would cover the entire twelve (12) month period. The number reflected under the Value of Acceleration heading reflects either (i) the positive difference, if any, between the fair market value of AFC Common Stock on the date of acceleration and the exercise price as to all options the vesting of which would be accelerated due to death or (ii) the fair market value of AFC Common Stock as to all restricted stock the vesting of which would be accelerated due to death. The fair market value is the closing price of AFC Common Stock as quoted on the NYSE as of December 31, 2009,2010, or $12.43.$13.91. |
(3) | Severance payments are calculated assuming the Named Executive’s employment was terminated as of December 31, 2009.2010. All Named Executives, with the exception of Mr. Fusco, who does not yet meet the age requirement for vesting, would upon termination be eligible to receive health related welfare benefits pursuant to the Post-retirement Medical Plan discussed below. |
(4) | The number reflected under the Value of Acceleration heading reflects either (i) the positive difference, if any, between the fair market value of AFC Common Stock on the date of acceleration and the exercise price as to all options the vesting of which would be accelerated due to disability, death or upon severence,severance, as applicable, or (ii) the fair market value of AFC Common Stock as to all restricted stock the vesting of which would be accelerated due to disability, death or upon severance, as applicable. The fair market value is the closing price of AFC Common Stock as quoted on the NYSE as of December 31, 2009,2010, or $12.43.$13.91. As of December 31, 2009,2010, there were no unvested options outstanding. |
In the event of a change of control, the ESOP provides, among other things, that the plan shall be terminated, specifies that under certain circumstances additional contributions by the Association into such plan may be required and indicates the manner in which the remaining assets which have not yet been allocated to participants following such change of control shall be allocated to participating employees. This plan is a qualified defined contribution pension plan and does not discriminate in favor of the Named Executives.
In the event of a change of control, for any taxable year in which an executive would be liable for the payment of excise taxes under Section 4999 of the Code with respect to any compensation paid by AFC or any of its affiliated companies, AFC will pay to or on behalf of the executive, an amount, in addition to the severance payments noted above, sufficient to maintain the after-tax severance benefit as though the excise tax specified in Section 4999 of the Code did not apply.
As of December 31, 2009,2010, based upon the assumptions indicated, these sums with respect to the Named Executives are estimated to be as follows:
Name | | Excise Tax Gross-up ($)(1) | |
George L. Engelke, Jr. | | | 10,317,4534,575,801 | |
| | | | |
Monte N. Redman | | | 5,299,7123,049,182 | |
| | | | |
Gerard C. Keegan | | | 3,378,745 1,954,740 | |
| | | | |
Gary T. McCann | | | 2,566,406 1,685,929 | |
| | | | |
Frank E. Fusco | | | 1,979,992 1,341,510 | |
(1) | The excise tax-gross up calculation is based on the assumption that a change of control for tax purposes occurred as of December 31, 20092010 and that the consideration provided to shareholders of AFC Common Stock was equal to the closing price of AFC Common Stock as quoted on the NYSE, on December 31, 2009,2010, or $12.43.$13.91. |
As a result of changes to the employment agreements of the Named Executives and structural changes to equity compensation begun in February 2009, these sums, in the aggregate, represent a 46% reduction from the comparable aggregate sums disclosed in AFC’s April 12, 2010 Proxy Statement.
The Association also maintains the Post-retirement Medical Plan for its officers with a rank of Vice President and higher. The Post-retirement Medical Plan provides that in the event a participant retires at age 55 or older with a minimum of 10 years of service, the officer will be provided with medical benefits for the remainder of the officer’s life and that of his or her spouse. The Association pays between 50% and 100% of the premiums for such coverage. The following table shows for each of the Named Executives the present value of the accumulated benefits with respect to the Post-retirement Medical Plan, as of December 31, 2009.2010.
Name | | Present Value of Accumulated Benefit ($)(1) | |
George L. Engelke, Jr. | | | 107,202157,900 | |
| | | | |
Monte N. Redman | | | 135,544208,338 | |
| | | | |
Gerard C. Keegan | | | 143,125 213,930 | |
| | | | |
Gary T. McCann | | | 132,342205,891 | |
| | | | |
Frank E. Fusco (2) | | | 85,025145,903 | |
(1) | This column represents the present value of the accumulated benefit as of December 31, 2009,2010, for the Named Executives under the Post-retirement Medical Plan based upon the assumptions as described in Note 1514 of Notes to Consolidated Financial Statements. |
(2) | (2) Mr. Fusco currently does not meet the age requirement to receive a benefit pursuant to the terms of the Post-retirement Medical Plan. |
Annually, the Compensation Committee receives from management a review of the costs associated with the executive officers’ employment contracts.
PROPOSAL NO. 2 - APPROVAL OF AN AMENDMENT TO THE 2007
DIRECTOR2005 STOCK INCENTIVE PLAN
AFC is presenting for shareholder approval an amendment to the 2007 Director2005 Stock Incentive Plan. The 2007 Director2005 Stock Incentive Plan was originally approved by the shareholders of AFC in May 2007.2005. At that time, the 2007 Director2005 Stock Incentive Plan authorized the issuance of up to 100,0005,250,000 shares of AFC Common Stock in satisfaction of grants or awards of stock options, stock appreciation rights, or restricted stock awardsand restricted stock units made to certain AFC directors.selected officers and employees. As of the Record Date, only 9,920779,895 shares of AFC Common Stock remain available for future grants or awards pursuant to the Plan. The amendment would authorize 150,000an additional 1,600,000 shares, or an aggregate of 2,379,895 shares, of AFC Common Stock as of the Record Date to be utilized for future grants or awards. If the amendment is approved by AFC’s shareholders, the 9,920 shares of AFC Common Stock currently authorized for award would not be available to be utilized for future awards.
AFC expects to utilize this plan, as amended, to grant or award stock options, stock appreciation rights, or restricted stock and restricted stock units to non-employee directorsselect officers and employees of AFC. The value of these awards will depend on future increases or fluctuations in the trading price of AFC Common Stock. The awards will link the compensation paid to directorsthese officers to the value delivered to shareholders through share price appreciation.
Why We Are Asking For Shareholder Approval
AFC is asking the shareholders to approve the amendment to the 2007 Director2005 Stock Incentive Plan in order to permit AFC to grant or award stock options, stock appreciation rights or restricted stock and restricted stock units, which will result in the issuance after May 19, 2010 of up to 150,0001,600,000 additional shares of AFC Common Stock.Stock above that previously authorized, or an aggregate 2,379,895 shares of AFC Common Stock as of the Record Date.
Applicable law does not require that AFC have shareholder approval in order to grant or award stock options, stock appreciation rights, or restricted stock and restricted stock units to its directors.officers and employees. However, AFC is seeking such approval because it believes it to be a good corporate governance practice to do so, and in order to preserve its shareholders’ access to the NYSE for purchases and sales of AFC Common Stock. Stock and to maximize the federal tax deductions available for stock options, stock appreciation rights, or restricted stock and restricted stock units that it grants or awards.
If AFC were to grant or award stock options, stock appreciation rights, or restricted stock and restricted stock units under the 2007 Director2005 Stock Incentive Plan without shareholder approval, it would jeopardize AFC’s eligibility to list AFC Common Stock for trading on the NYSE.
Under the Code, AFC cannot deduct fiscal year taxable compensation in excess of $1,000,000 that it pays to either its Chief Executive Officer or any of its other Named Executives unless such compensation meets the law’s definition of “qualified performance-based compensation.” Stock options, stock appreciation rights, or restricted stock and restricted stock units that AFC grants or awards must be, among other things, authorized by shareholders to be considered “qualified performance-based compensation.”
The Board believes that approving the amendment to the 2007 Director2005 Stock Incentive Plan will assist in providing acontinue to provide flexibility to the Compensation Committee and the Board to fashion compensation program for directorsprograms which isare considerate of the interests of shareholders, fair to AFC’s directorsofficers and employees and competitive with programs provided to directorsexecutives and officers at other comparable institutions.
Shareholder approval of the amendment to the 2007 Director2005 Stock Incentive Plan will not affect options or restricted stock awards currently outstanding to AFC’s directors or others.outstanding. If AFC’s shareholders approve the amendment to the 2007 Director2005 Stock Incentive Plan, future grants and awards to directorsofficers and employees will be undertaken pursuant the terms set forth in the 2007 Director2005 Stock Incentive Plan, as amended. If AFC’s shareholders do not approve the amendment to the 2007 Director2005 Stock Incentive Plan, AFC will not grant further awards pursuant to the 2007 Director2005 Stock Incentive Plan beyond the 9,920779,895 shares of AFC Common stockStock currently authorized, as of the Record Date, for issuance pursuant to the 2007 Director2005 Stock Incentive Plan. In such case, AFC may substitute other forms of compensation in order to assure that its director compensation program is sufficiently competitive to enable it to attract and retain highly qualified non-employee directors.officers and employees.
Material Provisions of the Plan
Exhibit A to this Proxy Statement contains the text of the amendment to the 2007 Director2005 Stock Incentive Plan. Exhibit A is incorporated by reference into the following plan summary, which is qualified in its entirety by this reference.
Maximum Shares Available. AFC will reserve and keep available at all times such number of shares of AFC Common Stock as may be required to satisfy the needs of the 2007 Director2005 Stock Incentive Plan, as amended. Prior to the Record Date, AFC had awarded 90,080stock options with respect to 1,224,100 shares of AFC Common Stock and 3,338,978 shares of restricted stock to its officers, including those who also serve as directors, pursuant to the terms of the 2007 Director2005 Stock Incentive Plan and the previous approval of such plan by the shareholders of AFC. If the shareholders approve the proposed amendment, commencingas of May 19, 2010,18, 2011, a maximum of 150,0002,379,895 shares of AFC Common Stock, as of the Record Date, may be issued under the Plan.2005 Stock Incentive Plan as amended. The aggregate fair market value of such shares is $2,169,000,$33,366,128, based on the closing price of AFC Common Stock of $14.46 as quoted by the NYSE as of the close of business on the Record Date.
Administration of the Plan. A committee of independent directors administers the 2007 Director2005 Stock Incentive Plan, and would continue to administer the plan as amended. Its members are the members of the Compensation Committee of the Board. The administrative committee has broad discretionary powers.
Eligibility. Eligibility is open to all directorsofficers and employees of AFC who are not common law employees of AFC. This includes all current members ofand the Board, except for Mr. Engelke and Mr. Keegan, orAssociation, a total of eight (8) individuals1,683 people as of the Record Date. The administrative committee will select the individuals who receive grants or awards of stock options, stock appreciation rights, restricted stock or restricted stock units. In the past, the administrative committee has issued awards under the 2005 Stock Incentive Plan only to senior officers of AFC and the Association who the administrative committee believes are most able to impact the performance of AFC and the Association. For 2010, this group included 76 people, including the executive officers.
Terms and Conditions of Awards. The 2007 Director Stock Plan, as amended, authorizes two kindsadministrative committee may, in its discretion, grant or award any or all of three types of equity-linked awards to eligible individuals: stock options, stock appreciation rights, and restricted stock awards: Annual Awards and Discretionary Grants, as such terms are definedbased awards, which may be in the 2007 Director Stock Plan, as amended.form of either restricted stock or restricted stock units. The administrative committee will, in its discretion, determine the type of awards to be made and establish other terms and conditions applicable to the award. In establishing the terms and conditions of awards, the administrative committee must observe the following restrictions:
Pursuant | · | It may not grant awards that will result in the issuance of more than 6,850,000 shares of AFC Common Stock in the aggregate. |
| · | It may not grant or award to any individual who is a “covered employee” under Section 162(m) of the Code more than 1,000,000 shares annually in the form of stock options stock appreciation rights, or restricted stock based awards. |
| · | It may not grant a stock option or stock appreciation right with an exercise price that is less than the fair market value of a share of AFC Common Stock on the date of grant. |
| · | It may not grant a stock option or stock appreciation right with a term longer than 10 years. |
| · | It may not grant a stock appreciation right that is settled in any medium other than shares of AFC Common Stock. |
Stock Options The administrative committee may grant to officers and employees either incentive stock options that qualify for special federal income tax treatment or non-qualified stock options that do not qualify for special federal income tax treatment. Incentive stock options are subject to certain additional restrictions under the 2007 Director StockCode and the Plan. Unless otherwise designated by the administrative committee, options granted under the Plan as amended, annual awards shallwill be made to Eligible Directors, as such term is definedexercisable for a period of ten years after the date of grant (or five years in the 2007 Director Stock Plan, as amended, commencing in 2011 and annually thereafter oncase of an incentive stock option granted to an officer or employee who, at the third business day after AFC issues a press release announcing annual financial results for the prior year. Such press release has historically been issued by AFC in late Januarytime of each year. The number of wholegrant, owns shares of AFC Common Stock to be awarded annually to each eligible director shall be determined by dividing $45,000 bycomprising more than 10 percent (10%) of the closing pricetotal combined voting power of all classes of AFC Common Stock as quoted onStock) or for a shorter period ending three months after the NYSE (or suchoption holder’s termination of employment for reasons other exchange on which AFC Common Stockthan death, disability, retirement, or termination for cause, ending one year after termination of employment due to death, disability or retirement, or immediately upon termination for cause. The exercise period may be further extended (but not beyond a maximum option period of ten years) by up to three years in the event of a change in control and, in the event the option is listed) onscheduled to expire while a securities trading suspension is in effect for an option holder until 90 days following the dayend of the award and rounding the result down to the next whole share. Such awards shall be made on the following terms and conditions:suspension period.
| · | The award shall be in the form of issued and outstanding shares of AFC Common Stock registered in the name of the eligible director; |
| · | The award will vest 100% on the third anniversary of the grant date of the award; |
| · | The award will vest 100% upon Death, Disability, Mandatory Retirement, Involuntary Termination or on Change in Control as such terms are defined in the 2007 Director Stock Plan, as amended; |
| · | The shares awarded shall carry full voting and dividend rights from the date of grant regardless of whether vested; |
| · | The shares may not be sold or transferred while unvested; and |
| · | The shares shall be forfeited if a recipient ceases to be a director while such shares are unvested for any reason other than death, Disability, Mandatory Retirement, Involuntary Termination or Change in Control. |
Pursuant toUpon the 2007 Director Stock Plan, as amended, Disability is any mental or physical condition resultingexercise of an option, the exercise price must be paid in incapacity to serve as a director which is likely to be permanent, continue for an indefinite time of at least 180 days or result in death. Mandatory Retirement age pursuant to the Bylaws of AFC is 75 years of age. Involuntary Termination would occur upon a recipient terminating service as a director due to a reason other than voluntary resignation or removal for cause.
The administrative committee also has the right pursuant to the 2007 Director Stock Plan, as amended, to award Discretionary Grants. Discretionary Grantsfull. Payment may be made to eligible directors from time to time asin cash, in shares of AFC Common Stock already owned by the option holder or in such other consideration for services rendered or promised to be rendered for such number of shares, up to the plan limit, and on such terms and conditions as the administrative committee shall determine, including restrictionsauthorizes. Vested options may be transferred prior to exercise only to certain family members and on voting and dividend rights associated with such shares, service-related vesting and forfeiture requirements, and holding period and transfer restrictions. AFC has no current intention to award Discretionary Grants pursuant to the 2007 Director Stock Plan, as amended, but has used Discretionary Grants indeath of the past when new directors have been added to the Board. Circumstances under which Discretionary Grants might be made in the future include, but are not limited to, the addition of a new director to the Board, as part of an acquisition or otherwise.
In establishing the terms and conditions of either Annual Awards or Discretionary Grants,option holder. If permitted by the administrative committee, must observeoptions may be exercised before they are vested. In this event, the following restrictions:
| · | It may not make awards or grants after May 19, 2010 that will result in the issuance of more than 150,000 shares of AFC Common Stock in the aggregate. |
| · | It may not make awards or grants before the date that AFC receives shareholder approval of the amendment to the 2007 Director Stock Plan representing more than 9,920 shares of AFC Common Stock. |
shares issued upon exercise will carry a restrictive legend prohibiting transfer prior to the vesting date and requiring, if the vesting conditions are not satisfied, that the shares be returned to AFC in exchange for the lesser of the exercise price paid or the fair market value of the shares when returned. Unless otherwise specified by the administrative committee, stock options will not be exercisable prior to vesting and will vest on the earlier of the first January 10th occurring at least 3 years after the date the option was granted or, in the event of termination of employment due to death, disability or retirement, on the date of the termination of employment. In the event of a change of control, the vesting of all option is accelerated.
Restricted Stock.Stock Restricted stock awards may consist of either shares of restricted stock or restricted stock units. As a general rule, shares of AFC Common Stock that are subject to a restricted stock award are held in an account by AFC’s transfer agent in the nameadministrative committee for the benefit of the award recipient until vested and, when vested, are transferred to the award recipient. If permitted by the administrative committee, restricted stock may be issued and delivered to the award recipient before vesting. In this event, the shares issued will carry a restrictive legend prohibiting transfer prior to the vesting date and requiring, if the vesting conditions are not satisfied, that the shares be returned to AFC.
All Annual Awards will beAFC in exchange for the lesser of the amount, if any, paid by the award recipient for such shares when the award was made or the fair market value of the shares when returned. The administrative committee may also grant restricted stock units pursuant to which shares of AFC Common Stock are initially issued and delivered to the award recipient only on vesting. Unless the administrative committee determines otherwise with respect to any restricted stock award, before the shares subject to a three year vesting schedule. Discretionary Grantsrestricted stock award are vested and transferred to the award recipient, the award recipient shall exercise any tender rights in his or her discretion and the administrative committee shall exercise voting rights and accumulate any dividends or distributions for distribution at the same time and terms as the underlying shares. Likewise, the administrative committee may provide for payment of sums in lieu of dividends in the case of restricted stock units, but such awards will not confer voting rights prior to vesting.
All restricted stock based awards will be subject to a vesting schedule specified by the administrative committee when the award is made and, if none is specified,made. If the administrative committee does not specify a vesting schedule, the award will vest 100%at the rate of 25% per year beginning on the thirdfirst anniversary of the award date.date of grant. In the event of termination of serviceemployment due to death, Disability, Involuntary Terminationdisability, or Mandatory Retirementretirement prior to the vesting date, unvested Annual Awardsawards will be deemed vested, asvested. All other restricted stock based awards that are unvested at termination of employment will Discretionary Grants unlessbe forfeited, with the administrative committee specifies otherwise ataward recipient receiving a refund equal to the timelesser of the award.fair market value of the unvested shares at termination of employment or the amount, if any, paid by the award recipient when the award was made. All unvested Annual Awardsawards will also vest in the event of a Changechange in Control, as will Discretionary Grants, unlesscontrol.
Performance-Based Restricted Stock Awards At the time of grant, the administrative committee specifies otherwisemay designate a restricted stock award as a performance-based restricted stock award. If it does so, the administrative committee shall establish, in addition to or in lieu of service-based vesting requirements, one or more performance goals which must be attained by the award recipient as a condition of retention of the shares. The performance goals shall be based on one or more of the following:
| Basic earnings per common share, | | • | Non-performing loans, |
| | | | |
• | Basic cash earnings per common share, | | • | Cash flow, |
• | Diluted earnings per common share, | | • | Net revenue, |
| | | | |
• | Diluted cash earnings per common share, | | • | Gross revenue, |
| | | | |
• | Net income, | | • | Return on average assets, |
| | | | |
• | Cash earnings, | | • | Cash return on average assets, |
| | | | |
• | Net interest income, | | • | Return on average stockholders’ equity, |
| | | | |
• | Non-interest income, | | • | Cash return on average stockholders’ equity, |
| | | | |
| Fee income, | | • | Return on average tangible stockholders’ equity, |
| Deposit growth, | | | |
| | | | |
• | Loan growth, | | • | Cash return on average tangible stockholders’ equity, |
| | | | |
• | General and administrative expense, | | • | Total shareholder return, |
| | | | |
• | Cash general and administrative expense, | | | |
| | | | |
• | General and administrative expense to | | • | Strategic business objectives, consisting of one or more objectives based upon satisfying specified cost average assets ratio, targets, business expansion goals, relating to acquisitions or divestitures, |
• | Cash general and administrative expense to average assets ratio, | | | |
| | | | |
• | Efficiency ratio, | | • | Any other performance criteria established by the administrative committee, or |
| | | | |
• | Cash efficiency ratio, | | • | Any combination of the above. |
| | | | |
• | Net interest spread, | | | |
| | | | |
• | Net interest margin, | | | |
Performance goals may be established on the basis of reported earnings or cash earnings, and consolidated results or individual business unit results and, at the timediscretion of the award. All restrictedadministrative committee, may include or exclude extraordinary items and/or the results of discontinued operations. Each performance goal may be expressed on an absolute or relative basis, may be based on or otherwise employ comparisons based on internal targets, past performance or the past or current performance of other companies. Attainment of the performance goals will be measured over a performance measurement period specified by the administrative committee when the award is made. Unless otherwise specified by the administrative committee, performance goals will be measured over a three year period. Not less than 75% of any performance measurement period will occur after the performance goals are established.
The administrative committee shall determine in its discretion whether the award recipient has attained the goals. If they have been satisfied, the administrative committee shall certify that fact in writing. If the performance goals are not satisfied during the performance measurement period, the relevant awards will be forfeited. If the performance goals and any service-based vesting schedule are satisfied, the award will be distributed or any vesting-related legend will be removed from any stock certificates previously delivered to the award recipient. If the performance goals are achieved prior to the end of the performance measurement period, the awards may be distributed early.
Stock Appreciation Rights A stock appreciation right affords the holder the right to receive, upon exercise, a distribution in shares of AFC Common Stock equal in market value to the positive difference between the exercise price assigned to the right and the fair market value of a share of AFC Common Stock on the exercise date.
The administrative committee may grant either tandem or stand-alone stock appreciation rights. Tandem stock appreciation rights are granted in tandem with, and are exercisable on the same terms and conditions as, a related stock option that is granted simultaneously. The exercise of a tandem stock appreciation right cancels the related option and the exercise of a related stock option cancels the tandem stock appreciation right. Unless otherwise designated by the administrative committee, stock appreciation rights granted under the Plan will be stand-alone stock appreciation rights, will be exercisable for a period of ten years after the date of grant, or for a shorter period ending three months after the option holder’s termination of employment for reasons other than death, disability, retirement, or termination for cause, one year after termination of employment due to death, disability or retirement, or immediately upon termination for cause, and will vest at the rate of 25% per year beginning on the first anniversary of the date of grant. In the event of termination of employment due to death, disability or retirement, the vesting of all stock appreciation rights will be accelerated. In the event of a change in control, the vesting of all stock appreciation rights will be accelerated. Vested stock appreciation rights that are otherwise not vested upon termination of serviceexercised prior to their expiration date will be forfeited.deemed cancelled without consideration on their expiration date.
Change in Control Provisions.Provisions The administrative committee may grant or award stock options, stock appreciation rights or restricted stock and restricted stock units that may not be exercised until, or are forfeited unless, the recipient satisfies a future condition, such as continued employment for a specified period. If there is a Changechange in Controlcontrol of AFC or the Association, as defined in the 2007 Director Stockthese conditions will be waived. A waiver of this kind would make all stock options and stock appreciation rights outstanding under this Plan as amended,immediately exercisable and all unvestedrestricted stock awards which are Annual Awards will vest, as will all unvested awards which are Discretionary Grants, unless the administrative committee specifies otherwise at the time of the award.outstanding would vest.
Anti-dilution Adjustments.Adjustments If AFC declares a stock dividend or stock split, reclassifies its common stock, or enters into a merger or consolidation or other transaction that affects the holders of AFC Common Stock or in other circumstance where the administrative committee determines that an adjustment to the exercise price or number of shares subject to a stock option, stock appreciation right or restricted stock or restricted stock unit award is appropriate to avoid an unintended enlargement or dilution of the economic rights evidenced by athe stock option, stock appreciation right or restricted stock or restricted stock unit award, it will make certain automatic adjustments under the 2007 Director Stock Plan as amended, without asking for shareholderyour approval. It will adjust the number or type of shares authorized for the 2007 Director Stock Plan, as amended, and the number or type of shares subject to outstanding awards.grants or awards and the maximum number of shares that may be granted or awarded to any single individual. Any adjustment so made will be designed to neither enlarge nor diminish its authority to grant or award stock options, stock appreciation rights or restricted stock and restricted stock units and the relative rights of the holders of such grants or awards. The administrative committee determines these adjustments.
Prohibition Against Option and Stock Appreciation Right Repricing It has been the policy of AFC and the committee which administers AFC’s option plans not to reprice options or other equity awards to lower the exercise price other than in the case of the anti-dilution adjustments noted above. The Plan specifically provides that the administrative committee shall not have the authority to amend any option or stock appreciation right to reduce its exercise price other than in the case of the anti-dilution adjustments noted above.
Amendment and Termination.Termination The 2007 Director2005 Stock Incentive Plan regardless of whether the proposed amendment is approved by the shareholders, will becurrently in effect for a ten-year period that endsbegan on May 15, 2017.18, 2005, the date the shareholders originally approved the Plan, except that no performance-based restricted stock or restricted stock units may be granted after the fifth anniversary of the date of such shareholder approval without further shareholder approval. If the shareholders approve the proposed amendment, the 2005 Stock Incentive Plan, as amended, will remain in effect until March 25, 2025, except that no performance-based restricted stock or restricted stock units may be granted after the fifth anniversary of the date of shareholder approval of the proposed amendment without further shareholder approval. The Board may suspend or terminate the 2007 Director Stock Plan as amended, before then. Itthen, it may also amend the 2007 Director2005 Stock Incentive Plan at any time and in any respect. Any amendment that would (i) change the class of eligible participants, oremployees, (ii) increase the number of shares of restricted stock options or benefits that may be granted to any person or in total or (iii) otherwise be required to preserve the treatment of options granted as “qualified performance-based compensation” within the meaning of Section 162(m) of the Code, must first be approved by AFC’s shareholders.
Federal Income Tax Consequences
The following discussion is intended to be a summary and is not a comprehensive description of the federal tax laws, regulations and policies affecting awards that may be granted under the 2007 Director Stock Plan, as amended.Plan. Any descriptions of the provisions of any law, regulation or policy are qualified in their entirety by reference to the particular law, regulation or policy. Any change in applicable law or regulation or in the policies of the various taxing authorities may have a significant effect on this summary. The 2007 Director Stock Plan as amended, is not a qualified plan under Section 401(a) of the Code.
Stock Options Incentive stock options will not create federal income tax consequences when they are granted. If they are exercised during employment or within three months after termination of employment or within one year in cases of termination due to death or disability, the exercise will similarly not create federal income tax consequences. When the shares acquired on exercise of an incentive stock option are sold, the seller must pay federal income taxes on the amount by which the sales price exceeds the exercise price. This amount will be taxed at capital gains rates, if the sale occurs at least two years after the option was granted and at least one year after the option was exercised. Otherwise, it is taxed as ordinary income. The amount by which the fair market value of the shares acquired on exercise exceeds the option exercise price will be an item of adjustment in the year of exercise for purposes of determining the option holder’s liability, if any, for alternative minimum tax. Incentive stock options that are exercised more than one year after termination of employment due to death or disability or three months after termination of employment for other reasons are treated as non-qualified stock options.
Non-qualified stock options will not create federal income tax consequences when they are granted. When they are exercised, federal income taxes at ordinary income tax rates must be paid on the amount by which the fair market value of the shares acquired by exercising the option exceeds the exercise price. When an option holder sells shares acquired by exercising a non-qualified stock option, he or she must pay federal income taxes on the amount by which the sale price exceeds the sum of the purchase price plus the amount included in ordinary income at option exercise. The amount will be taxed at capital gains rates, which will vary depending upon the time that has elapsed since the exercise of the option. A cash payment, if directed by the administrative committee on a merger or other reorganization under the Plan’s change in control provisions, is taxed as if it were the exercise of a non-qualified stock option followed immediately by a resale of the stock acquired by exercising the option.
When a non-qualified stock option is exercised, AFC may be allowed a federal income tax deduction for the same amount that the option holder includes in his or her ordinary income. When an incentive stock option is exercised, there is no tax deduction unless the shares acquired are resold sooner than two years after the option was granted or one year after the option was exercised. A cash payment, if directed by the administrative committee on a merger or other reorganization under the Plan’s change in control provisions, is deductible as if it were the exercise of a non-qualified stock option.
Stock Appreciation Rights Stock appreciation rights do not have federal income tax consequences for recipients or for AFC when they are granted. When a stock appreciation right is exercised, the amount distributed in settlement is included in the payee’s gross income for federal income tax purpose, and AFC may be entitled to claim a federal tax deduction for a like amount.
Restricted Stock Awards.Awards Restricted stock and restricted stock unit awards under the 2007 Director Stock Plan as amended, do not result in federal income tax consequences to either AFC or the award recipient when the award is made. Once the award is vested and the shares subject to the award are distributed, the award recipient will generally be required to include in ordinary income, for the taxable year in which the vesting date occurs, an amount equal to the fair market value of the shares on the vesting date. AFC will generally be allowed to claim a deduction, for compensation expense, in a like amount. If cash dividends or dividend equivalents are paid on unvested shares held or units outstanding under the 2007 Director Stock Plan, as amended, such amounts will also be included in the ordinary income of the recipient. AFC will be allowed to claim a deduction for compensation expense for this amount as well. In certain cases, a recipient of a restricted stock award that is not a performance-based restricted stock award may elect to include the value of the shares subject to a restricted stock award in income for federal income tax purposes when the award is made instead of when it vests.
Deduction Limits Section 162(m) of the Code limits AFC’s deductions for compensation in excess of $1,000,000 per year for the Chief Executive Officer and the other Named Executives. Compensation amounts resulting from so-called “qualified performance-based compensation” are not subject to this limit. Restricted stock awards, other than performance-based restricted stock awards, may be subject to this deduction limitation if the amount of the restricted stock awards in addition to other compensation of the executive that is subject to the limit exceeds $1,000,000. AFC has designed the Plan so that stock options, stock appreciation rights and performance-based restricted stock awards may qualify as qualified performance-based compensation that is not subject to the $1,000,000 deduction limit. AFC expects that the administrative committee will take these deduction limits into account in establishing the size and the terms and conditions of awards. However, the administrative committee may decide to grant restricted stock awards all or a portion of which will exceed the deduction limit.
Federal Tax Rules for Non-Qualified Deferred Compensation Plans.Plans Section 409A of the Code, enacted in 2004, imposes federal tax penalties on certain non-qualified deferred compensation arrangements under which payers, such as employers, and payees, such as directors,employees, seek to defer reporting compensation that has been earned and is vested to a later taxable year. TheseThe new rules do not apply to stock options granted at fair market value that do not have cash-out or deferral features, stock-settled stock appreciation rights that do not have cash-out or deferral features, or stock settled restricted stock based awards reported as compensation paid at the time of vesting, such as the stock options, stock appreciation rights and restricted stock based awards contemplated by the 2007 Director2005 Stock Plan, as amended.Incentive Plan. As a result, AFC does not expect that Section 409A of the Code will restrict its operation of the 2007 Director2005 Stock Incentive Plan, as amended.
The preceding statements are intended to summarize the general principles of current federal income tax law applicable to grants and awards that may be made under the 2007 Director Stock Plan, as amended.Plan. State and local tax consequences may also be significant.
Status of Outstanding Option Grants and Plans
As of the Record Date, AFC had outstanding 97,895,92998,478,119 shares of AFC Common Stock, including 2,301,2722,416,615 shares of AFC Common Stock which represent unvested restricted stock awards outstanding, and had aggregate stock options outstanding at a weighted average exercise price of $22.5109,$23.2823, which if exercised would result in an additional 8,010,3306,918,806 shares of AFC Common Stock outstanding. As of December 31, 2009,the Record Date, the stock options outstanding had a weighted average remaining contractual life of 3.22.3 years and an aggregateno intrinsic value of approximately $38,000.value. As of the Record Date, there waswere available for future grantgrants under the 2007 Director Stock Plan 127,880 shares of AFC Common Stock. As of the Record Date, there were available for future grants under the 2005 Stock Incentive Plan 1,330,755779,895 shares of AFC Common Stock. If the amendment to the 2005 Stock Incentive Plan is approved by the shareholders, those shares will be available to be utilized in addition to the 1,600,000 shares of AFC Common Stock approved pursuant to said amendment. The directors, other than Mr. Engelke and Mr. Keegan who are not eligible to participate in the 2007 Director Stock Plan, as amended, are not eligible to participate in the 2005 Stock Incentive Plan. As of the Record Date, there was available for future grant under the 2007 Director Stock Plan 9,920 shares of AFC Common Stock. If the amendment to the 2007 Director Stock Plan is approved by the shareholders, these sharesand will not be utilized and will not become part of the 150,000 shares approved under the 2007 Director Stock Plan,eligible to participate in such plan, as amended.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE AMENDMENT TO THE 2007 DIRECTOR2005 STOCK INCENTIVE PLAN.
New Plan Benefits
The benefits or amounts that will be received by or paid to participants, any Named Executive, the executive officers as a group or non-executive officer directorsofficers as a group pursuant to the 2007 Director2005 Stock Incentive Plan, as amended, are not currently determinable. Executive and non-executive officersNon-executive officer directors are not eligible to participate in the 2007 Director2005 Incentive Stock Plan. The restricted stock that would have beenwas awarded in 2010 pursuant to the 2007 Director2005 Stock Incentive Plan during the 2011 fiscal year as amended, hadof the 2007 Director Stock Plan, as amended, been in effect in 2010 isRecord Date were as follows:
Astoria Financial Corporation 2005 Incentive Stock Plan, as amended
Astoria Financial Corporation 2007 Director Stock Plan, as amended | |
| | | | | | |
Name and Position | | Dollar Value ($) (1) | | | Number of Units (2) | |
George L. Engelke, Jr., Chairman, Chief Executive Officer and Director | | | 0 | | | | 0 | |
Monte N. Redman, President and Chief Operating Officer | | | 0 | | | | 0 | |
Gerard C. Keegan, Vice Chairman, Chief Administrative Officer and Director | | | 0 | | | | 0 | |
Gary T. McCann, Executive Vice President | | | 0 | | | | 0 | |
Frank E. Fusco, Executive Vice President, Treasurer and Chief Financial Officer | | | 0 | | | | 0 | |
All executive officers, as a group | | | 0 | | | | 0 | |
All non-executive officer directors, as a group | | | 359,944 | | | | 29,128 | |
Non-executive officer employees, as a group | | | 0 | | | | 0 | |
Name and Position | | Dollar Value ($) (1) | | | Number of Units (2) | |
George L. Engelke, Jr., Chairman, Chief | | | | | | |
Executive Officer, Director and Board | | | | | | |
Nominee | | | 212,318 | | | | 14,910 | |
| | | | | | | | |
Monte N. Redman, President and Chief | | | | | | | | |
Operating Officer | | | 1,401,786 | | | | 98,440 | |
| | | | | | | | |
Gerard C. Keegan, Vice Chairman, Chief | | | | | | | | |
Administrative Officer and Director | | | 837,882 | | | | 58,840 | |
| | | | | | | | |
Gary T. McCann, Executive Vice President | | | 616,022 | | | | 43,260 | |
| | | | | | | | |
Frank E. Fusco, Executive Vice President, | | | | | | | | |
Treasurer and Chief Financial Officer | | | 716,130 | | | | 50,290 | |
| | | | | | | | |
All executive officers, as a group | | | 4,787,061 | | | | 336,170 | |
| | | | | | | | |
All non-executive officer employees, as a group | | | 3,473,436 | | | | 242,360 | |
(1) | The Dollar Value of the awardsgrants set forth in the chart above is based upon the closing price of AFC Common Stock as quoted on the NYSE on the assumed award datedates of January 31, 2011 and February 1, 2010, AFC having issued its press release announcing its fiscal 2009 financial results on January 27, 2010. It is also based upon those current non-employee directors who, as of the Record Date, would be eligible Directors pursuant to the 2007 Directors Stock Plan, as amended. Since the 2007 Directors Stock Plan was in effect on February 1, 2010 and had sufficient shares available at such time, the amount and units set forth above were the actual grants made under the 2007 Directors Stock Plan on such date.16, 2011. |
(2) | The Number of Units set forth in the chart above representis shares of AFC Common Stock. |
Based upon the number of shares of AFC Common Stock outstanding on the Record Date, options outstanding on such date, and shares available for future grant pursuant to the 2005 Stock Incentive Plan and the 2007 Director Stock Plan, as amended, referred to as Total Potential Outstanding Shares, net additional shares which would be issuable pursuant to the 2007 Director Stock Plan, as amended, represent 0.14% of Total Potential Outstanding Shares, or significantly less than one 1.00%. Using the assumptions utilized in the New Plan Benefit Table above, no Discretionary Grants and eight Eligible Directors at all times, the 2007 Director Stock Plan, as amended, if the amendment is approved by the shareholders, would have sufficient AFC Common Stock to provide Annual Awards for approximately 5 years.
The following chart provides information as of December 31, 20092010 with respect to compensation plans, including individual compensation arrangements, under which equity securities of AFC are authorized for issuance:
Plan Category (1) | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | | | Weighted-average exercise price of outstanding options, warrants and rights (b) | | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |
Equity compensation plans approved by security holders | | | 8,056,830 | | | $ | 22.49 | | | | 2,140,997 | |
Equity compensation plans not approved by security holders | | | 0 | | | | 0 | | | | 0 | |
Total (2) | | | 8,056,830 | | | $ | 22.49 | | | | 2,140,997 | |
| | | | | | | | Number of securities | |
| | | | | | | | remaining available for | |
| | Number of | | | | | | future issuance under | |
| | Securities to be issued | | | Weighted-average | | | equity compensation | |
| | upon exercise of | | | exercise price of | | | plans (excluding | |
| | outstanding options, | | | outstanding options | | | securities reflected in | |
| | warrants and rights | | | warrants and rights | | | column (a)) | |
Plan Category (1) | | (a) | | | (b) | | | (c) | |
Equity compensation plans Approved by security holders | | | 6,930,806 | | | $ | 23.27 | | | | 1,508,425 | |
| | | | | | | | | | | | |
Equity compensation plans not approved by security holders | | | 0 | | | | 0 | | | | 0 | |
| | | | | | | | | | | | |
Total (2) | | | 6,930,806 | | | $ | 23.27 | | | | 1,508,425 | |
(1) | Excluded is any employee benefit plan that is intended to meet the qualification requirements of Section 401(a) of the Code, such as the Association ESOP and the Incentive Savings Plan. Also excluded are 1,474,4201,787,828 shares of AFC Common Stock which represent unvested restricted Stockstock awards made pursuant to the 2005 Stock Incentive Plan and 47,79464,722 shares of AFC Common Stock which represent unvested restricted Stockstock awards made pursuant to the 2007 Director Stock Plan, as amended, since such shares, while unvested, were issued and outstanding as of December 31, 2009.2010. The only equity security issuable under the equity compensation plans referenced in the table is AFC Common Stock and the only equity compensation plans are stock option plans or arrangements which provide for the issuance of AFC Common Stock upon the exercise of options, the 2005 Stock Incentive Plan which also provides for grant of equity settled stock appreciation rights and awards of restricted stock or equity settled restricted stock units and the 2007 Director Stock Plan , as amended, which provides for awards of restricted stock. Of the Numbernumber of securities to be issued and the Numbernumber of securities remaining available in the above table, 1,208,4701,199,260 and 2,103,389,1,358,425, respectively, were authorized pursuant to the 2005 Stock Incentive Plan. Of the Numbernumber of securities available for future issuance in the above table 37,608150,000 were authorized pursuant to the 2007 Director Stock Plan.Plan, as amended. |
(2) | Of the shares available for future issuance, all1,358,425 were authorized pursuant to the 2005 Stock Incentive Plan and 150,000 were authorized pursuant to the 2007 Director Stock Plan, as amended, as of December 31, 2009. The 2005 Stock Incentive Plan provides2010. Both plans provide for automatic adjustments to outstanding options or grants upon certain changes in capitalization. In the event of any stock split, stock dividenddivided or other event generally affecting the number of shares of AFC Common Stock held by each person who is then a record holder of AFC Common Stock, the number of shares covered by each outstanding option, grant or award and the number of shares available for grantgrants under the plans shall be adjusted to account for such event. |
PROPOSAL NO. 3 – NON-BINDING ADVISORY VOTE TO APPROVE THE COMPENSATION OF THE NAMED EXECUTIVES
AFC is seeking a non-binding advisory vote from its shareholders to approve the compensation awarded to our Name Executives.
As noted above, AFC has five Named Executives, who are also executive officers of the Association. As described in detail above, our executive compensation programs are designed to attract, motivate and retain highly qualified and talented executive officers, including our Named Executives, who are critical to our success. AFC and the Compensation Committee of the Board, with the benefit of objective input from our independent consultant, monitor executive compensation programs throughout each year and adopt changes to reflect the dynamic marketplace in which AFC competes for talent and changes in AFC’s operating environment, as well as general economic, regulatory and legislative developments affecting executive compensation.
The Board recognizes the importance of aligning executive compensation with shareholder interests in light of the risks and economic conditions faced by AFC and the Association. We have described in the CD&A the philosophy we have adopted and strategies we have employed to attract, retain and motivate our executives, to link their compensation to the returns experienced by shareholders, and to reward or discipline them in the short term for actions that may only be apparent in shareholder returns over time. We have demonstrated in the accompanying narrative and tabular discussions how, over a three-year period, our philosophy and strategies have been translated into compensation that is strongly linked to shareholder returns while remaining sensitive to year-to-year operating conditions. Shareholders are encouraged to carefully review the CD&A, the accompanying compensation tables and the corresponding narrative discussion and footnotes, all set forth on pages 31 through 57 of this proxy statement, for a detailed discussion of our executive compensation programs.
In this Proposal No. 3, commonly known as a “Say-on-Pay” proposal, we are asking you to support the compensation of our Named Executives. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executives, as described in this proxy statement pursuant to the rules set forth by the SEC. In considering this proposal, we ask that you approve the following resolution:
“RESOLVED, that the shareholders of Astoria Financial Corporation hereby approve, on an advisory basis, the compensation of the named executive officers of Astoria Financial Corporation, as disclosed on pages 30 through 56 of this proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission.”
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS AN ADVISORY VOTE FOR THE APPROVAL OF THE COMPENSATION OF AFC’S NAMED EXECUTIVES AS DESCRIBED IN THIS PROXY STATEMENT.
Under the proxy rules of the SEC, your vote on the compensation of the Named Executives is advisory and will not be binding on AFC or the Board of Directors, will not affirm prior decisions and will not change fiduciary duties. However, the Compensation Committee of the Board will take into account the outcome of the vote when considering future executive compensation arrangements.
PROPOSAL NO. 4 – NON-BINDING ADVISORY VOTE TO DETERMINE THE FREQUENCY OF SHAREHOLDER ADVISORY VOTES TO APPROVE THE COMPENSATION OF NAMED EXECUTIVES
AFC is seeking a non-binding advisory vote from its shareholders regarding the frequency with which non-binding advisory proposals on named executive officer compensation, such as Proposal No. 3 above, should be submitted for a shareholder vote. Specifically, in this Proposal No. 4, you are being asked to consider and indicate your preference for a shareholder advisory vote regarding the compensation of our Named Executives either “EVERY YEAR,” “EVERY TWO YEARS” or “EVERY THREE YEARS.” Please note that you are not voting to approve or disapprove the Board of Directors’ recommendation on this item, but rather to indicate your own choice from among the three frequency options.
In formulating its recommendation, our Board of Directors considered that an annual (non-binding) advisory vote on the compensation of our Named Executives will allow our shareholders to provide us with direct and timely input on our compensation principles, policies and practices.
Accordingly, we ask that you consider the following resolution:
“RESOLVED, that the highest number of votes cast by the shareholders of Astoria Financial Corporation for the option set forth below shall be the preferred frequency with which Astoria Financial Corporation is to hold an advisory vote on the approval of the compensation of its named executive officers included in the proxy statement:
• EVERY YEAR; or
• EVERY TWO YEARS; or
• EVERY THREE YEARS.”
The enclosed proxy card gives you four choices for voting on this item. That is, in addition to considering whether the advisory vote on the compensation of Named Executives should occur every year, every two years, or every three years, you also have the choice to abstain from voting on this item. The option of “EVERY YEAR,” “EVERY TWO YEARS” or “EVERY THREE YEARS” that receives the highest number of votes cast by shareholders will be the frequency for the advisory vote on the compensation of our named Executives that has been selected by shareholders.
Under the proxy rules of the SEC, your vote on this Proposal No. 4 is advisory and will not be binding on AFC or the Board of Directors, will not affirm prior decisions and will not change fiduciary duties. However, the Board of Directors will review the results on the advisory vote and take them into consideration when making future decisions regarding the frequency for the advisory vote on the compensation of our Named Executives. Under the SEC’s proxy rules, AFC must, at least once every six years, submit to a vote of its shareholders a non-binding proposal on the frequency of advisory votes on named executive officer compensation, such as this Proposal No. 4.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS AN ADVISORY VOTE FOR THE OPTION OF EVERY YEAR AS THE FREQUENCY FOR FUTURE ADVISORY VOTES TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
PROPOSAL NO. 5 - RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
AFC’s independent registered public accounting firm, or principal accountant, for the fiscal year ended December 31, 20092010 was KPMG LLP. Following its review of the qualifications of KPMG LLP and assuring itself that KPMG LLP is independent from AFC, its officers and directors and does not provide to AFC non-audit services to a degree that KPMG LLP’s independence may be impaired, the Audit Committee has reappointed KPMG LLP as independent registered public accounting firm, or principal accountant, for AFC and the Association for the year ending December 31, 2010,2011, subject to ratification of such appointment by our shareholders. Representatives of KPMG LLP will be present at the Annual Meeting. They will be given an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions from shareholders present at the Annual Meeting.
The following chart details fees billed or fees estimated to be billed for professional or other services rendered by KPMG LLP for AFC’s fiscal years ended December 31, 20082009 and 2009:2010:
KPMG LLP Fees Billed For The Fiscal Years Ended December 31, 20082009 and 20092010
| | Fiscal Year Ended | | | Fiscal Year Ended | | | Fiscal Year Ended | | | Fiscal Year Ended | |
Service Categories | | December 31, 2008 | | | December 31, 2009 | | | December 31, 2009 | | | December 31, 2010 | |
Audit Fees (1) | | $ | 1,246,000 | | | $ | 1,217,000 | | | $ | 1,223,600 | | | $ | 1,134,000 | |
| | | | | | | | | | | | | | | | |
Audit-Related Fees (2) | | $ | 91,500 | | | $ | 93,000 | | | $ | 96,000 | | | $ | 96,000 | |
| | | | | | | | | | | | | | | | |
Tax Fees (3) | | $ | 31,500 | | | $ | 31,500 | | | $ | 31,500 | | | $ | 31,500 | |
| | | | | | | | | | | | | | | | |
All Other Fees (4) | | $ | 0.00 | | | $ | 0.00 | | | $ | 0.00 | | | $ | 0.00 | |
(1) | Audit Fees reflect aggregate fees billed or estimated to be billed for professional services rendered for the audit of AFC’s consolidated annual financial statements, the reviews of the financial statements included in AFC’s Quarterly Reports on Form 10-Q and services normally provided in connection with statutory and regulatory filings or engagements, including services rendered in connection with the audit of internal controls over financial reporting maintained by AFC. |
(2) | Audit-Related Fees reflect aggregate fees billed or estimated to be billed for assurance and related services (within the meaning of Item 9(e)(2) of Section 240.14a-101 of the Exchange Act) that are reasonably related to the performance of the audit or review of AFC’s consolidated financial statements and not reported as Audit Fees, including but not limited to the audit of AFC’s employee benefit plans. |
(3) | Tax Fees reflect aggregate fees billed or estimated to be billed for professional services for tax compliance, tax advice and tax planning, consisting primarily of review of state and federal tax returns and quarterly tax payments. |
(4) | All Other Fees reflect aggregate fees billed for products and services provided by KPMG LLP other than those set forth above as Audit Fees, Audit-Related Fees and Tax Fees. |
It is the policy of the Audit Committee to pre-approve all services provided by KPMG LLP to AFC. In the absence of contrary action by the Audit Committee, of which there has been none, the Board has also delegated to the Chairman of the Audit Committee the authority to pre-approve such services. The Chairman of the Audit Committee is then responsible to report such authorization to the Audit Committee at its next scheduled meeting. All services provided by KPMG LLP during fiscal year 20082009 and 20092010 were pre-approved by the Audit Committee or the Chairman of the Audit Committee pursuant to the delegation of authority and procedure outlined above.
The Audit Committee, as part of its review of the disclosures and letter from KPMG LLP required by Independence Standards Board Standard No. 1, “Independence Discussions with Audit Committees,” considered whether the provision of the services rendered, the fees for which are reflected in the chart above entitled “KPMG LLP Fees Billed for the Fiscal Years ended December 31, 20082009 and 2009”2010” under the captions entitled “Audit-Related Fees,” “Tax Fees” and “All Other Fees,” were, and found them to be, compatible with maintaining the independence of KPMG LLP.
During 2006, the Office of Thrift Supervision, referred to as OTS, together with the other federal banking regulatory agencies published the “Interagency Advisory on the Unsafe and Unsound Use of Limitation of Liability Provisions in External Audit Engagement Letters.” The advisory is effective for any audit engagement letters entered into by the Association after February 9, 2006 and specifies that agreeing to certain limitation of liability provisions in an audit engagement letter would constitute an unsafe and unsound banking practice on the part of the Association. AFC believes that its engagement letters with KPMG LLP fully comply with the “Interagency Advisory on the Unsafe and Unsound Use of Limitation of Liability Provisions in External Audit Engagement Letters,” as applicable.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS AFC’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
Audit Committee
The information set forth in this section, including but not limited to the Report of the Audit Committee, shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act or the Exchange Act, except to the extent that AFC specifically incorporates this information by reference, and otherwise shall not be deemed “soliciting materials” or to be “filed” with the SEC or subject to Regulations 14A or 14C of the SEC or subject to the liabilities of Section 18 of the Exchange Act.
It has been and continues to be the practice of the Board to maintain an Audit Committee of the Board. The Board has adopted a written Charter of the Audit Committee. A copy of the Audit Committee’s Charter is posted on AFC’s Investor Relations website at http://ir.astoriafederal.com under the heading “Corporate Governance.” The Charter specifies the purpose of the Audit Committee, the appointment and composition of its members, procedural matters with respect to its meetings, the responsibilities and duties of the Audit Committee and the reporting of Audit Committee activities and recommendations. The management of AFC is primarily responsible for implementing and evaluating the effectiveness of the system of internal controls and financial reporting processes of AFC. AFC’s independent registered public accounting firm is responsible for expressing an opinion on the consolidated financial statements of AFC based on an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board and expressing an opinion regarding the effective operation of the system of internal controls over financial reporting.
AFC Common Stock is listed on the NYSE. The Board has determined that the members of the Audit Committee meet the applicable independence standards set forth in the NYSE Listed Company Manual.
Report of the Audit Committee
Under rules established by the SEC, AFC is required to provide certain data and information regarding the activities of its Audit Committee. In fulfillment of this requirement, the Audit Committee of AFC, at the direction of the Board, has prepared the following report for inclusion in this Proxy Statement.
At its meeting held on February 25, 2010,24, 2011, the Audit Committee reviewed the Consolidated Financial Statements and discussed such statements with the management of AFC. At such meeting and at other meetings held during 20092010 and 2010,2011, the Audit Committee discussed with AFC’s independent registered public accounting firm, KPMG LLP, the matters required to be discussed by Statement on Auditing Standards No. 61, as amended, “Communication with Audit Committees,” referred to as SAS 61. The matters required to be discussed pursuant to SAS 61 include, but are not limited to, significant accounting policies, management judgments and accounting estimates, uncorrected and corrected misstatements, if any, disagreements with management, if any, difficulties encountered with management in performing the audit, if any, and independence.
The Audit Committee has received and reviewed the written disclosures and letter from KPMG LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding KPMG LLP’s communications with the Audit Committee concerning independence. The Audit Committee has discussed with KPMG LLP the independence of KPMG LLP.
Based upon the review and discussion referred to in this Report, the Audit Committee, at its meeting held on February 25, 2010,24, 2011, approved and recommended to the Board the inclusion of the Consolidated Financial Statements in the Annual Report on Form 10-K of AFC for the year ended December 31, 2009.2010.
Audit Committee of AFC |
| |
Thomas J. Donahue,John R. Chrin, Chairman | Peter C. Haeffner, Jr. |
Denis J. Connors | Ralph F. PalleschiBrian M. Leeney |
John J. Conefry, Jr. | Ralph F. Palleschi |
Additional Information
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires AFC’s directors and executive officers, among others, to file reports of ownership and changes in ownership of their AFC equity securities with the SEC and to furnish AFC with copies of all such reports. Based solely upon a review of the copies of these reports and amendments thereto received by AFC, AFC believes that all applicable filing requirements were complied with for 2009,2010, except as follows: Mr. Ralph F. Palleschi exercised options to purchase 18,000Gary T. McCann sold an aggregate of 8,933 shares of AFC Common Stock on January 2, 2009,November 1, 2010, which purchasesale was not reported to the SEC in timely fashion due to a clerical error by AFC.fashion. This transaction was reported by a filing with the SEC on January 7, 2009. Mr. Denis J. Connors sold an aggregate of 28,350 shares of AFC Common Stock on January 22, 2009, January 27, 2009, January 28, 2009 and February 10, 2009, which sales were not reported to the SEC in timely fashion. These transactions were reported by filings with the SEC on February 2, 2009 and February 13, 2009.November 4, 2010.
Cost of Proxy Solicitation
The cost of solicitation of proxies by AFC will be borne by AFC. Laurel HillPhoenix Advisory GroupPartners Inc. has been retained to assist in the solicitation of proxies under a contract providing for payment of a fee of $7,500 plus reimbursement for its expenses. In addition to solicitations by mail and by Laurel Hill Advisory Group, Inc., a number of officers and employees of AFC and the Association may solicit proxies in person, by mail or by telephone, but none of these persons will receive any compensation for their solicitation activities in addition to their regular compensation. Arrangements will also be made with brokerage houses and other custodians, nominees, and fiduciaries for forwarding solicitation material to the beneficial owners of AFC Common Stock held of record by such fiduciaries, and AFC will reimburse them for their reasonable expenses in accordance with the rules of the SEC and the NYSE.
Shareholder Proposals
To be considered for inclusion in AFC’s proxy statement and form of proxy relating to the annual meeting of shareholders to be held in 2011,2012, a shareholder proposal, including a recommendation of a director nominee, must be received by the Secretary of AFC at the address set forth on page 1 of this Proxy Statement not later than December 13, 2010.16, 2011. Any shareholder proposal will be subject to Rule 14a-8 promulgated by the SEC under the Exchange Act.
Notice of Business to be Conducted at an Annual Meeting
The Bylaws of AFC provide an advance notice procedure for a shareholder to properly bring business before an annual meeting or to nominate any person for election to the Board. The shareholder must give written advance notice to the Secretary of AFC not less than ninety (90) days before the date originally fixed for such meeting; provided, however, that in the event that less than one hundred (100) days’ notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder, to be timely, must be received not later than the close of business on the tenth (10th) day following the date on which AFC’s notice to shareholders of the annual meeting date was mailed or such public disclosure was made. The advance notice by shareholders must include the shareholder’s name and address, as they appear on AFC’s record of shareholders, the class and number of shares of AFC’s capital stock that are beneficially owned by such shareholder, a brief description of the proposed business or the names of the person(s) the shareholder proposes to nominate, and, as to business which the shareholder seeks to bring before an annual meeting, the reason for conducting such business at the annual meeting and any material interest of such shareholder in the proposed business.
In the case of nominations for election to the Board, the shareholder’s notice must also include as to each proposed nominee all information regarding the proposed nominee that is required to be disclosed pursuant to Regulation 14A under the Exchange Act, including, but not limited to, such proposed nominee’s consent to being named in the proxy statement as a nominee and to serve if elected. Nothing in this paragraph shall be deemed to require AFC to include in its proxy statement and proxy relating to an annual meeting any shareholder proposal or nomination which does not meet all of the requirements for inclusion established by the SEC in effect at the time such proposal or nomination is received.
Shareholder Communications
The Board has established a process for shareholders or other interested parties to communicate with the Board or any of its members. Communications to Messrs. Engelke or Keegan may be sent directly to them at the address set forth on page 1 of this Proxy Statement. Those who wish to communicate with the presiding director, the non-management, or independent, directors or the entire Board may do so by writing to:
Chairman of the Nominating and Corporate Governance Committee
c/o Alan P. Eggleston, Executive Vice President, Secretary and General Counsel
Astoria Financial Corporation
One Astoria Federal Plaza
Lake Success, New York 11042
Such communications should be delivered in a sealed envelope marked “Personal and Confidential.” Such communications shall be delivered unopened by the Executive Vice President, Secretary and General Counsel to the Chairman of the Nominating and Corporate Governance Committee. The Chairman of the Nominating and Corporate Governance Committee will acknowledge receipt of such correspondence and, if applicable, provide a copy to each Board member or each non-management or independent director.
Employees, who may also be shareholders of AFC, are provided several methods for providing confidential communications to the Chairman of the Audit Committee and the Chairman of the Nominating and Corporate Governance Committee. These procedures are outlined in AFC’s Code of Business Conduct and Ethics, which applies to all directors, officers and employees of AFC and its affiliated companies, including the Association and is available on AFC’s Investor Relations website at http://ir.astoriafederal.com under the heading “Corporate Governance.” Shareholders may request a printed copy of such document by contacting AFC’s Investor Relations Department by calling (516) 327-7869 or in writing at the address specified on page 1 of this Proxy Statement.
Director Attendance at Annual Meetings
It is the policy of AFC that all directors are strongly encouraged to attend the Annual Meeting and that, at a minimum, a quorum of the Board be in attendance. At the annual meeting of shareholders held on May 20, 2009,19, 2010, all of the directors were present, except Mr. Donahue, and Mr. Powderly.who sadly died in May, 2010.
Householding
The SEC allows the delivery of a single proxy statement and annual report to an address shared by two or more of our shareholders. This delivery method, referred to as “householding,” can result in significant cost savings for AFC. In order to take advantage of this opportunity, banks and brokerage firms that hold your shares have delivered only one proxy statement and annual report to multiple shareholders who share an address unless one or more of the shareholders has provided contrary instructions. AFC will deliver promptly, upon written or oral request, a separate copy of the proxy statement and annual report to a shareholder at a shared address to which a single copy of the documents was delivered. A shareholder who wishes to receive a separate copy of the proxy statement and annual report, now or in the future, may obtain one without charge by addressing a request to Investor Relations at Astoria Financial Corporation, One Astoria Federal Plaza, Lake Success, New York 11042 or by calling (516) 327-7877. You may also obtain a copy of the proxy statement and annual report from the Company’s website (http://ir.astoriafederal.com) by clicking on “Annual Report” and/or “Proxy Statement.” Shareholders of record sharing an address who are receiving multiple copies of proxies and annual reports and wish to receive a single copy of such materials in the future should submit their request by contacting us in the same manner. If you are the beneficial owner, but not the record owner, of AFC’s shares and wish to receive only one copy of the proxy statement and annual report in the future, you will need to contact your broker, bank or other nominee to request that only a single copy of each document be mailed to all shareholders at the shared address in the future.
Other Matters Which May Properly Come Before the Meeting
The Board knows of no business which will be presented for consideration at the Annual Meeting other than as stated in the Notice of Annual Meeting of Shareholders. If, however, other matters are properly brought before the Annual Meeting, the dates by which shareholder proposals and notices of business to be conducted at an Annual Meeting having been previously disclosed, it is the intention of the persons named in the accompanying proxy to vote the shares represented thereby on such matters as directed by the Board.
Whether or not you intend to be present at the Annual Meeting, you are urged to vote on the Internet, by telephone or by returning your proxy card promptly. If you are present at the Annual Meeting and wish to vote your shares in person, your proxy may be revoked by voting at the Annual Meeting.
An additional copy of AFC’s Annual Report on Form 10-K (without exhibits) for the year ended December 31, 2009,2010, as filed with the SEC, will be furnished without charge to any shareholder upon written request to Astoria Financial Corporation, Investor Relations Department, One Astoria Federal Plaza, Lake Success, New York 11042-1085. Copies can also be obtained without charge from AFC’s Investor Relations website at http://ir.astoriafederal.com.
By order of the Board, |
|
Alan P. Eggleston |
Executive Vice President, Secretary and General Counsel |
Lake Success, New York
April 12, 201011, 2011
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 VOTE YOUR SHARES OF AFC COMMON STOCK ON THE INTERNET OR BY TELEPHONE, OR COMPLETE, SIGN AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
EXHIBIT A -– AMENDMENT TO THE 2005 RE-DESIGNATED, AMENDED AND RESTATED STOCK INCENTIVE PLAN FOR OFFICERS AND EMPLOYEES OF ASTORIA FINANCIAL CORPORATION 2007COORPORATION
NON-EMPLOYEE DIRECTOR STOCK PLAN
1. | Article II — Article II shall be amended by adding a new section 2.20 which1.Article II — Article II shall be amended by adding a new Section 2.40 and renumbering the existing Sections 2.40 and 2.41 accordingly. The new Section 2.40 shall read in its entirety as follows:
|
Section 2.20 2.40Supplemental Effective Date means May 19, 2010.March 25, 2011.
2. | 2.Article III — Section 3.1 shall be amended to read in its entirety as follows: |
Section 3.1Shares Available under the Plan. Subject to Article VI,Section 9.3, the maximum aggregate number of Shares representing unvested Restricted Stock Awards and unexercised Options and stand-alone Stock Appreciation Rights outstanding at any one time shall not exceed (a) 5,250,000 Shares with respect to Restricted Stock Awards, Options, and stand-alone Stock Appreciation Rights made prior to the Supplemental Effective Date, and (b) 2,379,895 shares with respect to Restricted Stock Awards, Options, and stand-alone Stock Appreciation Rights made on or after the Supplemental Effective Date. Shares representing tandem Stock Appreciation Rights shall for such purpose only be counted as either Shares representing Options outstanding or Stock Appreciation Rights outstanding, but not as both. Subject to Section 9.3, the maximum aggregate number of Shares which may be issued under article Vfor Restricted Stock Awards and upon the exercise of the Plan shall beOptions and Stock Appreciation Rights (a) in settlement of Awards made prior togranted or awarded before the Supplemental Effective Date one hundred thousand (100,000)shall be 5,250,000 Shares, and (b) in settlement of Awards madegranted or awarded on or after the Supplemental Effective Date one hundred fifty thousand (150,000)shall be 2,379,895 Shares. Shares issued
3.Article IX — Section 19.1 shall be amended to read in its entirety as follows:
Section 9.1 Termination. The Board may suspend or terminate the Plan in whole or in part at any time prior to the tenth anniversary of the Supplemental Effective Date by giving written notice of such suspension or termination to the Committee. Unless sooner terminated, the Plan shall terminate automatically on the day preceding the tenth anniversary of the Supplemental Effective Date. In the event of any suspension or termination of the Plan, all Options, Stock Appreciation Rights and Restricted Stock Awards theretofore granted under the Plan may be either authorizedthat are outstanding on the date of such suspension or termination of the Plan shall remain outstanding and unissued shares, treasury shares or shares purchasedexercisable for the period and on the terms and conditions set forth in the open marketOption and Stock Appreciation Right agreements and the Award Notices evidencing such Options, Stock Appreciation Rights and Restricted Stock Awards.
3. | Article VII — Section 7.74.Article X — Section 10.8 shall be amended to read in its entirety as follows:
|
Section 7.7 10.8Approval of Shareholders. The Plan shall be subject to approval by the Corporation’s shareholders.shareholders within twelve (12) months before or after the date the Board adopts the Plan. Any SharesOption, Stock Appreciation Right or Restricted Stock Award granted prior to the date such approval is obtained shall be granted contingent on such approval and shall be void ab initio in the event such approval is not obtained. Any Option, Stock Appreciation Right or Restricted Stock Award made on or after the Supplemental Effective Date in reliance on the additional Shares to be authorized by Amendment No. 2 shall be contingent on approval by the Corporation’s shareholders of Amendment No. 12 to the Plan and shall be void ab initio in the event such approval is not obtainedobtained. No Performance-Based Restricted Stock Awards shall be granted after the fifth (5th) anniversary of the Supplemental Effective Date unless, prior to such date, the listing of permissible Performance Goals set forth in Section 6.3 shall have been re-approved by the stockholders of the Company in the manner required by Section 162(m) of the Code and the regulations thereunder.
YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
We encourage you to take advantage of Internet or telephone voting.
Both are available 24 hours a day, 7 days a week.
Internet and telephone voting is available through 11:59 PM Eastern Time the day prior to the shareholder meeting date.
ASTORIA FINANCIAL CORPORATION | | INTERNET http://www.proxyvoting.com/af Use the Internet to vote your proxy. Have your proxy card in hand when you access the web site. |
| OR |
| TELEPHONE 1-866-540-5760 Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call. |
| If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy card. To vote by mail, mark, sign and date your proxy card and return it in the enclosed postage-paid envelope. Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card. |
WO# 97201 | |
q FOLD AND DETACH HERE q
COMMON
| Please mark your votes as indicated in this example | x |
THE BOARD OF DIRECTORS OF ASTORIA FINANCIAL CORPORATION RECOMMENDS A VOTE “FOR” ALL“FOR ALL” NOMINEES IN PROPOSAL NO. 1 AND “FOR” PROPOSAL NOS. 2, 3 AND 3.5 AND “1 YEAR” UNDER PROPOSAL NO. 4. |
| | | | | | FOR | AGAINST | ABSTAIN |
1. The election of nominees | | | *EXCEPTIONS | 2. | | | 2. The approval of an amendment to the 2005 Re-Designated, Amended and Restated Stock Incentive Plan for Officers and Employees of Astoria Financial Corporation 2007 Non- Employee Director Stock Plan.Corporation.
| o | o | o |
01 John R. ChrinGeorge L. Engelke, Jr. 02 John J. Conefry, Jr.
| o | o | o | | | | | |
02 Peter C. Haeffner, Jr. and 03 Brian M. Leeney, andRalph F. Palleschi 04 Thomas V. Powderly
| | | | | 3. | The ratificationapproval, on a non-binding basis, of the appointmentcompensation of KPMG LLP as the independent registered public accounting firm for Astoria Financial Corporation for the fiscal year ending December 31, 2010.Corporation’s named executive officers. | o | o | o |
as directors for terms of three years each | | | | | 1 year | 2 years | 3 years | |
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the “Exceptions” box and write that nominee’s name(s) in the space provided below. | 4. | The approval, on a non-binding basis, of the frequency of future shareholder advisory votes to approve the compensation of Astoria Financial Corporation’s named executive officers. | o | o | o | o |
| | | | | | |
| | | | FOR | AGAINST | ABSTAIN |
*Exceptions | | | 5. | The ratification of the appointment of | | | |
*Exceptions
| | Proposal Nos. 1, 2 and 3 listed above in this revocable proxy were proposed byKPMG LLP as the independent registered public accounting firm for Astoria Financial Corporation. Other than Proposal Nos. 1, 2 and 3, Astoria Financial Corporation is not currently aware of any other business that may come before for the Annual Meeting. The persons named as proxies herein will vote the shares represented hereby as directed by the Board of Directors of Astoria Financial Corporation upon such other business as may properly come before the Annual Meeting, and any adjournment or postponement thereof, including, without limitation, a motion to postpone or adjourn the Annual Meeting.fiscal year ending December 31, 2011.
| o | o | o |
| | | | | |
THIS PROXY IS REVOCABLE. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY, IF PROPERLY EXECUTED, WILL BE VOTED FOR THE NOMINEES LISTED IN PROPOSAL NO. 1 AND FOR PROPOSAL NOS. 2 AND 3.
| | The undersigned hereby acknowledges receipt, of, prior to the execution of this proxy, of a Notice of Annual Meeting of Shareholders of Astoria Financial Corporation, a Proxy Statement dated April 12, 201011, 2011 for the Annual Meeting and an Astoria Financial Corporation 20092010 Annual Report and Form 10-K. Please sign and date below and return promptly in the enclosed postage-paid envelope.
|
| |
| |
| | | Mark Here for Address Address Change or Comments SEE REVERSE | ¨o |
Please sign name exactly as it appears hereon. If shares are registered in more than one name, all should sign, but if one signs, it binds the others. When signing as attorney, executor, administrator, trustee or guardian, please give your full title as such. If a corporation, please sign in full corporate name by an authorized officer. If a partnership, please sign in partnership name by an authorized person.
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.
You can now access your Astoria Financial Corporation account online.
Access your Astoria Financial Corporation account online via Investor ServiceDirect® (ISD).
BNY Mellon Shareowner Services, the transfer agent for Astoria Financial Corporation, now makes it easy and convenient to get current information on your shareholder account.
• | View account status | • | View payment history for dividends |
• | View certificate history | • | Make address changes |
• | View book-entry information | • | Obtain a duplicate 1099 tax form |
Visit us on the web at http://www.bnymellon.com/shareowner/isdequityaccess
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
Investor ServiceDirect®
Available 24 hours per day, 7 days per week
TOLL FREE NUMBER: 1-800-370-1163
Choose MLinkSM for fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and more. Simply log on to Investor ServiceDirect® at www.bnymellon.com/shareowner/isdequityaccess where step-by-step instructions will prompt you through enrollment. | |
Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Shareholders. The Proxy Statement and the 20092010 Annual Report to Shareholders are available at:
http://bnymellon.mobular.net/bnymellon/af
q FOLD AND DETACH HERE q
ASTORIA FINANCIAL CORPORATION
REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ASTORIA FINANCIAL
CORPORATION FOR USE AT THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
MAY 19, 201018, 2011 AND AT ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
The undersigned shareholder of Astoria Financial Corporation hereby authorizes and appoints John M. Graham Jr.,Robert C. Azarow, John M. Graham, III or either of them as proxy of the undersigned, with full power of substitution, to attend and act as proxy for the undersigned and to vote as designated below all shares of common stock of Astoria Financial Corporation which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of Astoria Financial Corporation, to be held on May 19, 201018, 2011 at 9:30 a.m., Eastern Time, at The Inn at New Hyde Park, 214 Jericho Turnpike, New Hyde Park, New York, 11040, and at any adjournment or postponement thereof.
(Continued on reverse side. Please complete, sign and date on the reverse side and promptly return in the enclosed postage-paid envelope.)
Address Change/Comments (Mark the corresponding box on the reverse side) | | |
| | BNY MELLON SHAREOWNER SERVICES P.O. BOX 3550 SOUTH HACKENSACK, NJ 07606-9250 WO# 97201 |
ASTORIA FINANCIAL CORPORATION
q FOLD AND DETACH HERE q
| | |
The directions, if any, given in this Confidential Voting Instruction will be kept confidential from all directors, officers and employees of Astoria Financial Corporation or Astoria Federal Savings and Loan Association. | Please mark your votes as indicated in this example | x |
THE BOARD OF DIRECTORS OF ASTORIA FINANCIAL CORPORATION RECOMMENDS A VOTE “FOR ALL” NOMINEES IN PROPOSAL NO. 1 AND “FOR” PROPOSAL NOS. 2, 3 AND 5 AND “1 YEAR” UNDER PROPOSAL NO. 4. |
Proposal Nos. 1, 2, 3, 4 and 5 listed below in this Confidential Voting Instruction were proposed by Astoria Financial Corporation. |
| | | | | | FOR | AGAINST | ABSTAIN |
1. The election of nominees | FOR ALL | WITHHOLD FOR ALL | **EXCEPTIONS | | 2. The approval of an amendment to the 2005 Re-Designated, Amended and Restated Stock Incentive Plan for Officers and | ¨ | ¨ | ¨ |
01 George L. Engelke, Jr. | o | o | o | | Employees of Astoria Financial Corporation. | | | |
| | | | | | | | |
02 Peter C. Haeffner, Jr. and | | | | | 3. The approval, on a non-binding basis, of the compensation of Astoria Financial Corporation’s named executive officers. | o | o | o |
03 Ralph F. Palleschi | | | | | | | | |
| | | | | | | | | |
as directors for terms of three years each | | | | | | 1 year | 2 years | 3 years | Abstain |
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the “Exceptions” box and write that nominee’s name(s) in the space provided below. | | 4. The approval, on a non-binding basis, of the frequency of future shareholder advisory votes to approve the compensation of Astoria Financial Corporation’s named executive officers. | | ¨ | ¨ | ¨ |
| | | | | | FOR | AGAINST | ABSTAIN |
*Exceptions _________________________________________________________ The undersigned hereby instructs the Trustee to vote in accordance with the voting instruction indicated above and hereby acknowledges receipt, prior to the execution of this Confidential Voting Instruction, of a Notice of Annual Meeting of Shareholders, a Proxy Statement dated April 11, 2011 for the Annual Meeting and an Astoria Financial Corporation 2009 Annual Report and Form 10-K. | | 5. The ratification of the appointment of KPMG LLP as the independent registered public accounting firm for Astoria Financial Corporation for the fiscal year ending December 31, 2011. | ¨ | ¨ | ¨ |
| | In its discretion, the Trustee is authorized to vote upon such other business as may come before the Annual Meeting and any adjournment or postponement thereof or to cause such matters to be voted upon in the discretion of the individuals named in any proxies executed by the Trustee. |
| | | | |
| | | Mark Here for Address Change or Comments SEE REVERSE | ¨ |
Signature of participant, former participant or designated beneficiary of deceased former participant. Please sign name exactly as it appears herein. When signing as attorney, executor, administrator, trustee or guardian, please give your full title as such. Please sign and date below and return promptly in the enclosed postage-paid envelope.
q FOLD AND DETACH HERE q
ASTORIA FINANCIAL CORPORATION
CONFIDENTIAL VOTING INSTRUCTION
SOLICITED BY THE EMPLOYEE STOCK OWNERSHIP PLAN COMMITTEE, AS PLAN ADMINISTRATOR, FOR THE
ASTORIA FEDERAL SAVINGS AND LOAN ASSOCIATION EMPLOYEE STOCK OWNERSHIP PLAN
As a named fiduciary, the undersigned participant, former participant or beneficiary of a deceased former participant in the Astoria Federal Savings and Loan Association Employee Stock Ownership Plan (the ESOP) hereby provides the voting instructions hereinafter specified to BNY Mellon Shareholder Services, as designee of Astoria Federal Savings and Loan Association, which instructions shall be taken into account in directing Prudential Bank & Trust Company, FSB, as trustee of the ESOP (the Trustee), to vote, in person, by limited or general power of attorney or by proxy, the shares and fractional shares of common stock of Astoria Financial Corporation that are held by the Trustee, in its capacity as Trustee, as of March 25, 2011 , at the Annual Meeting of Shareholders of Astoria Financial Corporation to be held on May 18, 2011 at 9:30 a.m., Eastern Time, at The Inn at New Hyde Park, 214 Jericho Turnpike, New Hyde Park, New York, 11040, and at any adjournment or postponement thereof.
As to the proposals listed below which are more particularly described in the Proxy Statement dated April 11, 2011, the Trustee will vote the common stock of Astoria Financial Corporation held by the ESOP Trust to reflect the voting instructions on this Confidential Voting Instruction, in the manner described in the accompanying letter dated April 11, 2011 from the ESOP Committee.
If the duly executed Confidential Voting Instruction is returned, but no instruction is given, for purposes of providing voting instructions, such shares shall be treated as described in the letter dated April 11, 2011 from the ESOP Committee.
(Continued on reverse side. Please complete, sign and date on the reverse side and promptly return in the enclosed postage-paid envelope.)
Address Change/Comments (Mark the corresponding box on the reverse side) | | |
| | BNY MELLON SHAREOWNER SERVICES P.O. BOX 3550 SOUTH HACKENSACK, NJ 07606-9250 |
ASTORIA FINANCIAL CORPORATION
q FOLD AND DETACH HERE q
| | | |
The directions, if any, given in this Confidential Voting Instruction will be kept confidential from all directors, officers and employees of Astoria Financial Corporation or Astoria Federal Savings and Loan Association. | | Please mark your votes as indicated in this example | x |
THE BOARD OF DIRECTORS OF ASTORIA FINANCIAL CORPORATION RECOMMENDS A VOTE “FOR ALL” NOMINEES IN PROPOSAL NO. 1 AND “FOR” PROPOSAL NOS. 2, 3 AND 5 AND “1 YEAR” UNDER PROPOSAL NO. 4. |
Proposal Nos. 1, 2, 3, 4 and 5 listed below in this Confidential Voting Instruction were proposed by Astoria Financial Corporation.
1. The election of nominees | FOR ALL | WITHHOLD FOR ALL | *EXCEPTIONS | 2. | The approval of an amendment to the 2005 Re-Designated, Amended and Restated Stock Incentive Plan for Officers and Employees of Astoria Financial Corporation. | FOR o | AGAINST o | ABSTAIN o |
01 George L. Engelke, Jr. | o | o | o | | | | | |
02 Peter C. Haeffner, Jr. and 03 Ralph F. Palleschi | | | | 3. | The approval, on a non-binding basis, of the compensation of Astoria Financial Corporation’s named executive officers. | o | o | o |
as directors for terms of three years each | | | | | 1 year | 2 years | 3 years | |
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the “Exceptions” box and write that nominee’s name(s) in the space provided below. | 4. | The approval, on a non-binding basis, of the frequency of future shareholder advisory votes to approve the compensation of Astoria Financial Corporation’s named executive officers. | o | o | o | o |
| | | | | | |
| | | | FOR | AGAINST | ABSTAIN |
*Exceptions | | | 5. | The ratification of the appointment of | o | o | o |
The undersigned hereby instructs the Trustee to vote in accordance with the voting instruction indicated above and hereby acknowledges receipt, prior to the execution of this Confidential Voting Instruction, of a Notice of Annual Meeting of Shareholders, a Proxy Statement dated April 11, 2011 for the Annual Meeting and an Astoria Financial Corporation 2009 Annual Report and Form 10-K. | | KPMG LLP as the independent registered public accounting firm for Astoria Financial Corporation for the fiscal year ending December 31, 2011. | | | |
| | | | | |
| | In its discretion, the Trustee is authorized to vote upon such other business as may come before the Annual Meeting and any adjournment or postponement thereof or to cause such matters to be voted upon in the discretion of the individuals named in any proxies executed by the Trustee. |
| | | Mark Here for Address Change or Comments SEE REVERSE | o |
Signature of participant, former participant or designated beneficiary of deceased former participant. Please sign name exactly as it appears herein. When signing as attorney, executor, administrator, trustee or guardian, please give your full title as such. Please sign and date below and return promptly in the enclosed postage-paid envelope.
q FOLD AND DETACH HERE q
ASTORIA FINANCIAL CORPORATION
CONFIDENTIAL VOTING INSTRUCTION
SOLICITED BY ASTORIA FEDERAL SAVINGS AND LOAN ASSOCIATION, AS PLAN ADMINISTRATOR,
FOR THE ASTORIA FEDERAL SAVINGS AND LOAN ASSOCIATION INCENTIVE SAVINGS PLAN
The undersigned participant, former participant or beneficiary of a deceased former participant in the Astoria Federal Savings and Loan Association Incentive Savings Plan (the 401K Plan) as a named fiduciary hereby provides the voting instructions hereinafter specified to Mellon Investor Services LLC, as the designee of Astoria Federal Savings and Loan Association, as Plan Administrator (the Plan Administrator), which instructions shall be taken into account in directing Prudential Bank & Trust Company, FSB, as trustee of the 401K Plan (the Trustee) to vote in person, by limited or general power of attorney or by proxy the shares and fractional shares of common stock of Astoria Financial Corporation that are held by the Trustee, in its capacity as Trustee, as of March 25, 2011, at the Annual Meeting of Shareholders of Astoria Financial Corporation to be held on May 18, 2011 at 9:30 a.m., Eastern Time, at The Inn at New Hyde Park, 214 Jericho Turnpike, New Hyde Park, New York, 11040, and at any adjournment or postponement thereof.
As to the proposals listed below which are more particularly described in the Proxy Statement dated April 11, 2011, the Plan Administrator of the 401K Plan will give voting directions to the Trustee. Such directions will reflect the voting instructions on this Confidential Voting Instruction, in the manner described in the accompanying letter from the Plan Administrator dated April 11, 2011.
If the duly executed Confidential Voting Instruction is returned, but no instruction is given, for purposes of providing voting instructions, such shares shall be treated as described in the letter from the Plan Administrator dated April 11, 2011.
(Continued on reverse side. Please complete, sign and date on the reverse side and promptly return in the enclosed postage-paid envelope.)
Address Change/Comments (Mark the corresponding box on the reverse side) | | BNY MELLON SHAREOWNER SERVICES |
| | BNY MELLON SHAREOWNER SERVICES P.O. BOX 3550 SOUTH HACKENSACK, NJ 07606-9250 (Continued and to be marked, dated and signed, on the other side)
Fulfillment
70165 70372
|
One Astoria Federal Plaza
Lake Success, NY 11042-1085
(516) 327-3000
April 12, 201011, 2011
To: | All Astoria Federal Savings and Loan Association Employee Stock Ownership Plan (the “ESOP”) Participants |
Re: | Annual Meeting of Shareholders to be held on May 18, 2011 |
In connection with the Annual Meeting of Shareholders of Astoria Financial Corporation to be held on May 18, 2011, enclosed please find the following documents:
| a) | Confidential Voting Instruction card, |
| b) | Proxy Statement dated April 11, 2011, including a Notice of Annual Meeting of Shareholders, |
| c) | 2010 Annual Report and Form 10-K, and |
| d) | postage-paid return envelope addressed to BNY Mellon Shareholder Services (BNY Mellon Shareholder Services is the Confidential Voting Instruction tabulator for the ESOP). |
As a participant and a “named fiduciary” in the ESOP, you have the right to direct the ESOP Trustee (Prudential Bank & Trust Company, FSB) how to vote at the Annual Meeting the shares of Astoria Financial Corporation Common Stock (Shares) allocated to your account in the ESOP and held as of March 25, 2011 by Prudential Bank & Trust Company, FSB, as ESOP Trustee.
As a “named fiduciary,” you are the party who is identified in the voting section of the ESOP Trust as responsible for directing the Trustee how to vote your allocated ESOP Shares. The number of Shares in your ESOP account held by Prudential Bank & Trust Company, FSB is shown on the enclosed Confidential Voting Instruction card. Please mark the appropriate boxes on the card and sign, date and return it in the enclosed postage-paid return envelope. If you sign, date and return your card, but do not check the box for a particular proposal, the Trustee will vote your shares according to the recommendation of the Board of Directors for that particular proposal. For your ESOP voting instruction to be counted, BNY Mellon Shareholder Services must receive your Confidential Voting Instruction card no later than May 11, 2011.
The ESOP Trust states that the Trustee will generally vote unallocated Shares and allocated Shares for which it receives no written instructions in the same manner and proportion as the allocated Shares for which voting instructions have been received. The Trustee’s vote must be in accordance with its fiduciary duties and in a manner determined by the Trustee to be prudent and solely in the interest of ESOP participants and beneficiaries. State Street Bank and Trust Company has been engaged as Independent Fiduciary to make this determination for the ESOP Trustee.
ASTORIA FEDERAL SAVINGS AND LOAN ASSOCIATION • FOUNDED 1888
Unanticipated Proposals
It is possible, although very unlikely, that proposals other than those specified on the Confidential Voting Instruction card will be presented for shareholder action at the 2011 Annual Meeting of Shareholders. If this should happen, the Independent Fiduciary will determine for the ESOP Trustee how to vote upon such matters.
Your instruction is very important. You are encouraged to review the enclosed material carefully and to complete, sign and date the enclosed Confidential Voting Instruction card to signify your direction to the Trustee. You should then seal the card in the enclosed envelope and return it to BNY Mellon Shareholder Services. To direct the voting of Shares within the ESOP, the Confidential Voting Instruction card must be received by BNY Mellon Shareholder Services no later than May 11, 2011.
Please note that the instructions of individual participants are to be kept confidential by BNY Mellon Shareholder Services and the Trustee, who have been instructed not to disclose them to anyone at Astoria Federal Savings and Loan Association or Astoria Financial Corporation.
This memorandum is subject in its entirety to the information set forth in the enclosed Proxy Statement, which you are encouraged to read and study thoroughly.
Very truly yours, |
The ESOP Committee |
|
By: | |
| Steven G. Miss |
One Astoria Federal Plaza |
Lake Success, NY 11042-1085 |
(516) 327-3000 |
April 11, 2011
To: | All Astoria Federal Savings and Loan Association Incentive Savings Plan (“401K Plan”) Participants with a portion of their account balance invested in the Employer Stock Fund |
Re: | Annual Meeting of Shareholders to be held on May 19, 201018, 2011 |
In connection with the Annual Meeting of Shareholders of Astoria Financial Corporation to be held on May 19, 2010,18, 2011, enclosed please find the following documents:
| a) | Confidential Voting Instruction card, |
| b) | Proxy Statement dated April 12, 2010,11, 2011, including a Notice of Annual Meeting of Shareholders, |
| c) | 20092010 Annual Report and Form 10-K, and |
| d) | postage-paid return envelope addressed to BNY Mellon ShareownerShareholder Services (BNY Mellon ShareownerShareholder Services is the Confidential Voting Instruction tabulator for the 401K Plan). |
As a participant in the 401K Plan with all or a portion of your account balance invested in the Employer Stock Fund and as a “named fiduciary”fiduciary,” you have the right to participate in directing how the Plan Administrator (Astoria Federal Savings and Loan Association) instructs the 401K Trustee (Prudential Bank & Trust Company, FSB) to vote the shares of Astoria Financial Corporation Common Stock (Shares) held by the 401K Plan as of March 24, 2010,25, 2011, the meeting record date (provided that you had all or a portion of your account invested in the Employer Stock Fund as of the most recent valuation date on or before the meeting record date). In general, the 401K Trustee will be directed to vote the Shares held in the Employer Stock Fund “FOR” and “AGAINST” (or in the case of electing directors, “FOR” and “WITHHOLD”) each proposal listed on the Confidential Voting Instruction card in the same proportions as instructions to cast votes “FOR” and “AGAINST” (or in the case of electing directors, “FOR” and “WITHHOLD”) each proposal are given by those individuals with the right to give directions. Each individual’s instructions are weighted according to the value of the participant’s interest in the Employer Stock Fund as of the most recent valuation available prior to the record date. If you do not file a Confidential Voting Instruction card on or before May 12, 2010,11, 2011, or if you “ABSTAIN”, your directions will not count.count.
ASTORIA FEDERAL SAVINGS AND LOAN ASSOCIATION • FOUNDED 1888
Unanticipated Proposals
It is possible, although very unlikely, that proposals other than those specified on the Confidential Voting Instruction card will be presented for shareholder action at the 20102011 Annual Meeting of Shareholders. If this should happen, the 401K Trustee will be instructed to vote upon such matters in the 401K Trustee’sTrustee’s discretion, or to cause such matters to be voted upon in the discretion of the individuals named in any proxies executed by the 401K Trustee.
Your instruction is very important. You are encouraged to review the enclosed material carefully and to complete, sign and date the enclosed Confidential Voting Instruction card to signify your direction to the Plan Administrator. You should then seal the card in the enclosed envelope and return it to BNY Mellon ShareownerShareholder Services. To direct the voting of your Shares, your instruction card must be received by BNY Mellon ShareownerShareholder Services no later than May 12, 2010.11, 2011.
Please note that the instructions of individual participants are to be kept confidential by BNY Mellon ShareownerShareholder Services and the 401K Trustee, who have been instructed not to disclose them to anyone at Astoria Federal Savings and Loan Association or Astoria Financial Corporation.
This memorandum is subject in its entirety to the information set forth in the enclosed Proxy Statement, which you are encouraged to read and study thoroughly.
Very truly yours, |
Plan Administrator for the Astoria Federal |
Savings and Loan Association IncentiveSavings Plan |
Savings Plan |
|
By: | |
| Authorized Signature |
YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
q FOLD AND DETACH HERE q
The directions, if any, given in this Confidential Voting Instruction will be kept confidential from all directors, officers and employees of Astoria Financial Corporation or Astoria Federal Savings and Loan Association.
| Please mark your votes as indicated in this example | x
|
THE BOARD OF DIRECTORS OF ASTORIA FINANCIAL CORPORATION RECOMMENDS A VOTE “FOR” ALL NOMINEES IN PROPOSAL NO. 1 AND “FOR” PROPOSAL NOS. 2 AND 3.
|
1. The election of nominees
| | | | | 2.The approval of an amendment to the Astoria Financial Corporation 2007 Non- Employee Director Stock Plan.
| | | |
01 John R. Chrin
02 John J. Conefry, Jr.
| o | o | o
| | | | | |
03 Brian M. Leeney, and04 Thomas V. Powderly
| | | | | 3.The ratification of the appointment of KPMG LLP as the independent registered public accounting firm for Astoria Financial Corporation for the fiscal year ending December 31, 2010.
| o | o | o |
as directors for terms of three years each | | | | | | | | |
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the “Exceptions” box and write that nominee’s name(s) in the space provided below.
*Exceptions
| | In its discretion, the Trustee is authorized to vote upon such other business as may come before the Annual Meeting and any adjournment or postponement thereof or to cause such matters to be voted upon in the discretion of the individuals named in any proxies executed by the Trustee.
Proposal Nos. 1, 2 and 3 listed above in this Confidential Voting Instruction were proposed by Astoria Financial Corporation.
The undersigned hereby instructs the Plan Administrator to direct the Trustee to vote in accordance with the voting instruction indicated above and hereby acknowledges receipt, prior to the execution of this Confidential Voting Instruction, of a Notice of Annual Meeting of Shareholders, a Proxy Statement dated April 12, 2010 for the Annual Meeting and an Astoria Financial Corporation 2009 Annual Report and Form 10-K.
Please sign and date below and return promptly in the enclosed postage-paid envelope.
|
| |
| |
| | | Mark Here for Address Change or Comments
SEE REVERSE
| o |
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.
q FOLD AND DETACH HERE q
ASTORIA FINANCIAL CORPORATION
CONFIDENTIAL VOTING INSTRUCTION
SOLICITED BY ASTORIA FEDERAL SAVINGS AND LOAN ASSOCIATION, AS PLAN ADMINISTRATOR,
FOR THE ASTORIA FEDERAL SAVINGS AND LOAN ASSOCIATION INCENTIVE SAVINGS PLAN
The undersigned participant, former participant or beneficiary of a deceased former participant in the Astoria Federal Savings and Loan Association Incentive Savings Plan (the 401K Plan) as a named fiduciary hereby provides the voting instructions hereinafter specified to BNY Mellon Shareowner Services, as the designee of Astoria Federal Savings and Loan Association, as Plan Administrator (the Plan Administrator), which instructions shall be taken into account in directing Prudential Bank & Trust Company, FSB, as trustee of the 401K Plan (the Trustee) to vote in person, by limited or general power of attorney or by proxy the shares and fractional shares of common stock of Astoria Financial Corporation that are held by the Trustee, in its capacity as Trustee, as of March 24, 2010, at the Annual Meeting of Shareholders of Astoria Financial Corporation to be held on May 19, 2010 at 9:30 a.m., Eastern Time, at The Inn at New Hyde Park, 214 Jericho Turnpike, New Hyde Park, New York, 11040, and at any adjournment or postponement thereof.
As to the proposals listed below which are more particularly described in the Proxy Statement dated April 12, 2010, the Plan Administrator of the 401K Plan will give voting directions to the Trustee. Such directions will reflect the voting instructions on this Confidential Voting Instruction, in the manner described in the accompanying letter from the Plan Administrator dated April 12, 2010.
If the duly executed Confidential Voting Instruction is returned, but no instruction is given, for purposes of providing voting instructions, such shares shall be treated as described in the letter from the Plan Administrator dated April 12, 2010.
Address Change/Comments
(Mark the corresponding box on the reverse side)
| | BNY MELLON SHAREOWNER SERVICES |
| | P.O. BOX 3550
SOUTH HACKENSACK, NJ 07606-9250
(Continued and to be marked, dated and signed, on the other side)
|
April 12, 2010
To: | All Astoria Federal Savings and Loan Association Employee Stock Ownership Plan (the “ESOP”) Participants |
Re: | Annual Meeting of Shareholders to be held on May 19, 2010 |
In connection with the Annual Meeting of Shareholders of Astoria Financial Corporation to be held on May 19, 2010, enclosed please find the following documents:
| a) | Confidential Voting Instruction card, |
| b) | Proxy Statement dated April 12, 2010, including a Notice of Annual Meeting of Shareholders, |
| c) | 2009 Annual Report and Form 10-K, and |
| d) | postage-paid return envelope addressed to BNY Mellon Shareowner Services (BNY Mellon Shareowner Services is the Confidential Voting Instruction tabulator for the ESOP). |
As a participant and a “named fiduciary” in the ESOP, you have the right to direct the ESOP Trustee (Prudential Bank & Trust Company, FSB) how to vote at the Annual Meeting the shares of Astoria Financial Corporation Common Stock (Shares) allocated to your account in the ESOP and held as of March 24, 2010 by Prudential Bank & Trust Company, FSB, as ESOP Trustee.
As a “named fiduciary” you are the party who is identified in the voting section of the ESOP Trust as responsible for directing the Trustee how to vote your allocated ESOP Shares. The number of Shares in your ESOP account held by Prudential Bank & Trust Company, FSB is shown on the enclosed Confidential Voting Instruction card. Please mark the appropriate boxes on the card and sign, date and return it in the enclosed postage-paid return envelope. If you sign, date and return your card, but do not check the box for a particular proposal, the Trustee will vote your shares according to the recommendation of the Board of Directors for that particular proposal. For your ESOP voting instruction to be counted, BNY Mellon Shareowner Services must receive your Confidential Voting Instruction card no later than May 12, 2010.
The ESOP Trust states that the Trustee will generally vote unallocated Shares and allocated Shares for which it receives no written instructions in the same manner and proportion as the allocated Shares for which voting instructions have been received. The Trustee’s vote must be in accordance with its fiduciary duties and in a manner determined by the Trustee to be prudent and solely in the interest of ESOP participants and beneficiaries. State Street Bank and Trust Company has been engaged as Independent Fiduciary to make this determination for the ESOP Trustee.
Unanticipated Proposals
It is possible, although very unlikely, that proposals other than those specified on the Confidential Voting Instruction card will be presented for shareholder action at the 2010 Annual Meeting of Shareholders. If this should happen, the Independent Fiduciary will determine for the ESOP Trustee how to vote upon such matters.
Your instruction is very important. You are encouraged to review the enclosed material carefully and to complete, sign and date the enclosed Confidential Voting Instruction card to signify your direction to the Trustee. You should then seal the card in the enclosed envelope and return it to BNY Mellon Shareowner Services. To direct the voting of Shares within the ESOP, the Confidential Voting Instruction card must be received by BNY Mellon Shareowner Services no later than May 12, 2010.
Please note that the instructions of individual participants are to be kept confidential by BNY Mellon Shareowner Services and the Trustee, who have been instructed not to disclose them to anyone at Astoria Federal Savings and Loan Association or Astoria Financial Corporation.
This memorandum is subject in its entirety to the information set forth in the enclosed Proxy Statement, which you are encouraged to read and study thoroughly.
Very truly yours, |
The ESOP Committee |
| |
By: | |
| Steven G. Miss |
YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
q FOLD AND DETACH HERE q
The directions, if any, given in this Confidential Voting Instruction will be kept confidential from all directors, officers and employees of Astoria Financial Corporation or Astoria Federal Savings and Loan Association.
| Please mark your votes as indicated in this example | x |
THE BOARD OF DIRECTORS OF ASTORIA FINANCIAL CORPORATION RECOMMENDS A VOTE “FOR” ALL NOMINEES IN PROPOSAL NO. 1 AND “FOR” PROPOSAL NOS. 2 AND 3.
|
ESOP SHARES
1. The election of nominees
| | | | | 2. The approval of an amendment to the Astoria Financial Corporation 2007 Non- Employee Director Stock Plan.
| | | |
01 John R. Chrin
02 John J. Conefry, Jr.
| o | o | o
| | | | | |
03 Brian M. Leeney, and04 Thomas V. Powderly
as directors for terms of three years each
| | | | | 3. The ratification of the appointment of KPMG LLP as the independent registered public accounting firm for Astoria Financial Corporation for the fiscal year ending December 31, 2010.
| o | o | o |
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the “Exceptions” box and write that nominee’s name(s) in the space provided below.
*Exceptions
| | In its discretion, the Trustee is authorized to vote upon such other business as may come before the Annual Meeting and any adjournment or postponement thereof or to cause such matters to be voted upon in the discretion of the individuals named in any proxies executed by the Trustee.
Proposal Nos. 1, 2 and 3 listed above in this Confidential Voting Instruction were proposed by Astoria Financial Corporation.
The undersigned hereby instructs the Trustee to vote in accordance with the voting instruction indicated above and hereby acknowledges receipt, prior to the execution of this Confidential Voting Instruction, of a Notice of Annual Meeting of Shareholders, a Proxy Statement dated April 12, 2010 for the Annual Meeting and an Astoria Financial Corporation2009 Annual Report and Form 10-K.
Please sign and date below and return promptly in the enclosed postage-paid envelope.
|
| | | Mark Here for Address
Change
or Comments
SEE REVERSE
| ¨ |
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.
q FOLD AND DETACH HERE q
ASTORIA FINANCIAL CORPORATION
CONFIDENTIAL VOTING INSTRUCTION
SOLICITED BY THE EMPLOYEE STOCK OWNERSHIP PLAN COMMITTEE, AS PLAN ADMINISTRATOR,
FOR THE ASTORIA FEDERAL SAVINGS AND LOAN ASSOCIATION EMPLOYEE STOCK OWNERSHIP PLAN
As a named fiduciary, the undersigned participant, former participant or beneficiary of a deceased former participant in the Astoria Federal Savings and Loan Association Employee Stock Ownership Plan (the “ESOP”) hereby provides the voting instructions hereinafter specified to BNY Mellon Shareowner Services, as designee of Astoria Federal Savings and Loan Association, which instructions shall be taken into account in directing Prudential Bank & Trust Company, FSB, as trustee of the ESOP (the “Trustee”), to vote, in person, by limited or general power of attorney or by proxy, the shares and fractional shares of common stock of Astoria Financial Corporation that are held by the Trustee, in its capacity as Trustee, as of March 24, 2010, at the Annual Meeting of Shareholders of Astoria Financial Corporation to be held on May 19, 2010at 9:30 a.m., Eastern Time, at The Inn at New Hyde Park, 214 Jericho Turnpike, New Hyde Park, New York, 11040, and at any adjournment or postponement thereof.
As to the proposals listed below which are more particularly described in the Proxy Statement dated April 12, 2010, the Trustee will vote the common stock of Astoria Financial Corporation held by the ESOP Trust to reflect the voting instructions on this Confidential Voting Instruction, in the manner described in the accompanying letter dated April 12, 2010 from the ESOP Committee.
If the duly executed Confidential Voting Instruction is returned, but no instruction is given, for purposes of providing voting instructions, such shares shall be treated as described in the letter dated April 12, 2010 from the ESOP Committee.
Address Change/Comments
(Mark the corresponding box on the reverse side)
| | BNY MELLON SHAREOWNER SERVICES |
| | P.O. BOX 3550
SOUTH HACKENSACK, NJ 07606-9250
(Continued and to be marked, dated and signed, on the other side)
|