UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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TrustCo Bank Corp NY
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TrustCo Bank Corp NY 2017 Proxy Statement | ||||||||
TrustCo Bank Corp NY 2017 Proxy Statement | ||||||||
5 Sarnowski Drive, Glenville, New York 12302
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Shareholders of TrustCo Bank Corp NY:
Notice is hereby given that the Annual Meeting of Shareholders of TrustCo Bank Corp NY, a New York corporation, will be held at Mallozzi’s Restaurant and Banquet House, 1930 Curry Road, Rotterdam, New York 12303, on May 21, 2015,18, 2017, at 4:00 pm local time, for the purpose of considering and voting upon the following matters:
1. | Election of Directors. |
2. | Approval of a Nonbinding Advisory Resolution on the | Compensation of TrustCo’s Named Executive Officers. |
3. | Approval of a Nonbinding Advisory Resolution on the Frequency of an Advisory Vote on the Compensation of TrustCo’s Named Executive Officers. |
4. | Ratification of the Appointment of Crowe Horwath LLP as TrustCo’s Independent Auditors for | 2017. |
5. | Any other business that properly may be brought before the meeting or any adjournment thereof. |
By Order of the Board of Directors,
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Michael J. Hall, Secretary |
April 1, 20153, 2017
YOUR VOTE IS IMPORTANT
TO US
EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE, AS PROMPTLY AS POSSIBLE, SIGN AND RETURN THE ENCLOSED PROXY CARD, AS PROMPTLY AS POSSIBLE. YOU MAY ALSOOR VOTE USING THE INTERNET OR TELEPHONE.TELEPHONE, FOLLOWING THE INSTRUCTIONS ON THE PROXY CARD. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE EXERCISE OF THE PROXY.
Important Notice Regarding the Internet Availability of Proxy Materials for the
Shareholder Meeting to be Held on May 21, 2015:18, 2017:
This Notice, the Proxy Statement attached to this Notice, and TrustCo’s Annual Report to shareholders for the year ended December 31, 20142016 are available free of charge at www.edocumentview.com/TRST.https://materials.proxyvote.com/898349.
PROXY STATEMENT SUMMARY FOR ANNUAL MEETING OF SHAREHOLDERS | ||||||||
TRUSTCO BANK CORP NY
ANNUAL MEETING OF SHAREHOLDERS
May 21, 201518, 2017
This proxy statement is furnished in connection with the solicitation by the board of directors of TrustCo Bank Corp NY (also referred to as “TrustCo” or the “Company”) of proxies to be voted at TrustCo’s Annual Meeting of Shareholders. The Annual Meeting will be held at 4:00 pm local time on Thursday, May 21, 2015,18, 2017, at Mallozzi’s Restaurant and Banquet House, 1930 Curry Road, Rotterdam, New York 12303. This proxy statement and the enclosed form of proxy were first mailed to shareholders on or about April 1, 2015.3, 2017.
The record date for the Annual Meeting is March 23, 2015.20, 2017. Only shareholders of record at the close of business on March 23, 201520, 2017 are entitled to notice of and to vote at the Annual Meeting. Shareholders of record on that date are entitled to one vote for each share of TrustCo common stock they hold. As of March 2, 2015,1, 2017, there were 94,955,59395,862,943 shares of common stock outstanding.
The Annual Meeting will be held if a majority of the outstanding shares of TrustCo’s common stock, constituting a quorum, is represented at the meeting. If shareholders return a properly executed proxy card, their shares will be counted for purposes of determining a quorum at the meeting, even if they abstain from voting. Abstentions and brokernon-votes count as shares present at the Annual Meeting for purposes of determining a quorum. If a shareholder owns shares in “street name” through a bank or broker, the shareholder may instruct his or her bank or broker how to vote the shares.share using the instructions provided by the bank or broker. A “brokernon-vote” occurs when a shareholder who owns shares through a bank or broker fails to provide the bank or broker with voting instructions and either the bank or broker does not have the discretionary authority to vote the shares on a particular proposal or the bank or broker otherwise fails to vote the shares.
Under the rules of the NASDAQ Stock Market and the New York Stock Exchange, brokers do not have discretionary authority to vote shares on proposals that are not “routine.” Proposal 1 (Election of Directors), Proposal 2 (Approval(Advisory Resolution on the Compensation of the Amended and Restated TrustCo Bank Corp NY 2010 Equity Incentive Plan,TrustCo’s Named Executive Officers), and Proposal 3 (Approval(Advisory Resolution on the Frequency of a Nonbindingan Advisory ResolutionVote on the Compensation of TrustCo’s Named Executive Officers) would not be considered routine matters under the NASDAQ Stock Market and New York Stock Exchange rules, so brokers do not have discretionary authority to vote shares held in street name on those proposals. If a shareholder wishes for his or her shares to be voted on these matters, the shareholder must provide his or her broker with voting instructions. Proposal 4 (Ratification of the Appointment of Crowe Horwath LLP as TrustCo’s Independent Auditors) is considered a routine matter, so the bank or broker will have discretionary authority to vote shares held in street name on this item.
All shares of TrustCo’s common stock represented at the Annual Meeting by properly executed proxies will be voted according to the instructions indicated on the proxy card. If
shareholders of record return a signed proxy card but fail to instruct how the shares registered in their names must be voted, the shares will be voted as recommended by TrustCo’s board of directors. The board of directors recommends that shareholders vote:
“FOR”FOR” each of the nominees for director,
“FOR” approval of the Amended and Restated TrustCo Bank Corp NY 2010 Equity Incentive Plan,
“FOR”FOR” the approval of the nonbinding advisory resolution approving the compensation of TrustCo’s named executive officers, and
If any matter not described in this proxy statement is properly presented at the Annual Meeting, the persons named in the proxy card will use their judgment to determine how to vote the shares for which they have voting authority. TrustCo does not know of any other matters to be presented at the Annual Meeting.
TrustCo Bank Corp NY 2017 Proxy Statement 1 | ||||||||
PROXY STATEMENT SUMMARY FOR ANNUAL MEETING OF SHAREHOLDERS | ||||||||
Any shareholder executing a proxy solicited under this proxy statement has the power to revoke it by giving written notice to the Secretary of TrustCo at its main office address or at the meeting of shareholders at any time prior to the exercise of the proxy.
TrustCo will solicit proxies primarily by mail, although proxies also may be solicited by directors, officers, and employees of TrustCo or TrustCo’s wholly-owned subsidiary, Trustco Bank. These persons may solicit proxies personally or by telephone, and they will receive no additional compensation for such services. TrustCo also has retained Regan & Associates, Inc.Alliance Advisors, LLC to aid in the solicitation of proxies for a solicitation fee of $12,500$10,000 plus expensesexpenses. TrustCo has also retained Regan & Associates, Inc. as a proxy and consulting agent on an as needed basis for a fee of $12,500 and a delivery fee of $2,250. The entire cost of this solicitation will be paid by TrustCo.
2 TrustCo Bank Corp NY 2017 Proxy Statement | ||||||||
THE ANNUAL MEETING | ||||||||
A description of the items to be considered at the Annual Meeting, as well as other information concerning TrustCo and the meeting, is set forth below.
Proposal 1 - Election of Directors
The first item to be acted upon at the Annual Meeting is the election of threetwo directors to serve on the TrustCo board of directors. The nominees for election as directors for three-year terms expiring at TrustCo’s 20182020 Annual Meeting are Thomas O. Maggs, RobertDr. Anthony J. McCormickMarinello and William J. Purdy.D. Powers. Each of the nominees is an incumbent director, and each nominee was approved by the Nominating and Corporate Governance Committee of TrustCo’s board of directors.directors, as well as by the full board of directors of TrustCo.
TrustCo’s Certificate of Incorporation provides that TrustCo’s board of directors will consist of not less than five nor more than fifteen members, with, under TrustCo’s Bylaws, the total number of directors to be fixed by resolution of the board or the shareholders. Currently, the numberboard of directorseach of TrustCo and Trustco Bank is fixed at eight. TrustCo’s Certificate of Incorporation and Bylaws require TrustCo’s board to be divided into three classes, as nearly equal in number as possible, with one class to be elected each year for a term of three years.seven members.
The pages that follow set forth information regarding TrustCo’s nominees, as well as information regarding the remaining members of TrustCo’s board. Proxies will be voted in accordance with the specific instructions contained in the proxy card; properly executed proxies that do not contain voting instructions will be voted “For”“FOR” the election of TrustCo’s nominees. If any such nominee becomes unavailable to serve, the shares represented by all valid proxies will be voted for the election of such other person as TrustCo’s board may recommend. Each of TrustCo’s nominees has consented to being named in this proxy statement and to serve if elected. The board of directors has no reason to believe that any nominee will decline or be unable to serve if elected.
Information with regard to the business experience of each director and nominee and the ownership of common stock on December 31, 20142016 has been furnished by each director and nominee or has been obtained from TrustCo’s records. TrustCo’s common stock is the only class of its equity securities outstanding.
INFORMATION ON TRUSTCO DIRECTORS AND NOMINEES
NOMINEES FOR ELECTION AS TRUSTCO DIRECTORS(1) FOR
THREE-YEAR TERMS TO EXPIRE IN 2018
Shares of TrustCo Common Stock Beneficially Owned | ||||||||
Name and Principal Occupation(2) | No. of Shares (3) | Percent of Class | ||||||
Thomas O. Maggs, Age 70, President, Maggs & Associates, The Business Insurance Brokers, Inc. (insurance broker). Director of TrustCo and Trustco Bank from 2005-present. Chairman of the Board of Directors of TrustCo and Trustco Bank for 2015. Mr. Maggs contributes his experience as an entrepreneur operating a successful business enterprise and his skills for developing and evaluating business strategies. | 79,827 | * | ||||||
Robert J. McCormick, Age 51, President and Chief Executive Officer of TrustCo since January 2004, Chairman 2009 and 2010, executive officer of TrustCo from 2001-present and Chief Executive Officer of Trustco Bank from November 2002-present. Director of TrustCo and Trustco Bank from 2005-present. Joined Trustco Bank in 1995. Mr. McCormick contributes his skills and knowledge obtained from being the chief executive officer of the Company and Trustco Bank. Robert J. McCormick is the son of Robert A. McCormick. | 2,440,632 | 2.57 |
3
See footnotes on page 7.
INFORMATION ON TRUSTCO DIRECTORS AND NOMINEES | ||||||||
INFORMATION ON TRUSTCO DIRECTORS AND NOMINEES
NOMINEES FOR ELECTION AS TRUSTCO DIRECTORS(1) FOR
THREE-YEAR TERMS TO EXPIRE IN 2020
Shares of TrustCo Common Stock Beneficially Owned | ||||||||
Name and Principal Occupation(2) | No. of Shares (3) | Percent of Class | ||||||
Anthony J. Marinello, M.D., Ph.D., Age 61, Physician. Director of TrustCo and Trustco Bank from 1995-present. Chairman of the Board of Directors of TrustCo and Trustco Bank for 2013. Dr. Marinello contributes his experience as an entrepreneur operating a successful medical practice and his skills for developing and evaluating business strategies. | 92,596 | (4) | * | |||||
William D. Powers, Age 75, Consultant, Powers & Company, LLC, retired. Chairman of the Board of Directors of TrustCo and Trustco Bank for 2012. Director of TrustCo and Trustco Bank from 1995-present. Mr. Powers contributes his experience as an entrepreneur operating a successful business enterprise and his skills for developing and evaluating business strategies. | 126,651 | (5) | * |
OTHER TRUSTCO DIRECTORS(1)
Shares of TrustCo Common Stock Beneficially Owned | ||||||||
Name and Principal Occupation(2) | No. of Shares (3) | Percent of Class | ||||||
Dennis A. De Gennaro, Age 72, President and Chief Executive Officer, Camelot Associates Corp. (commercial and residential home builder and developer). Current Chairman of the Board of Directors of TrustCo and Trustco Bank. Director of TrustCo and Trustco Bank from 2009-present. Mr. De Gennaro is highly knowledgeable about commercial and residential real estate in the Capital Region of New York and contributes his organizational skills and experience from operating a successful business enterprise. | 98,559 | (6) | * | |||||
Brian C. Flynn, Age 66, Consultant and Certified Public Accountant (NY). Director of TrustCo and Trustco Bank since 2016. Former partner of KPMG LLP (retired 2010) where he was employed for approximately 30 years. Mr. Flynn served in KPMG’s banking and finance practice area where his specialties included providing tax services to community banks, thrift institutions and real estate developers/ operators. Since his retirement in 2010, he has served as a technical tax consultant to a community bank trade group. Mr. Flynn brings to the board extensive tax, accounting and financial reporting expertise in the financial services industry. Mr. Flynn has been designated an audit committee financial expert. | 10,000 | (7) | * | |||||
Thomas O. Maggs, Age 72, President, Maggs & Associates, The Business Insurance Brokers, Inc. (insurance broker). Director of TrustCo and Trustco Bank from 2005-present. Chairman of the Board of Directors of TrustCo and Trustco Bank for 2015. Mr. Maggs contributes his experience as an entrepreneur operating a successful business enterprise and his skills for developing and evaluating business strategies. | 87,548 | (8) | * |
* | Less than 1% |
See Footnotes on Page 6
4 TrustCo Bank Corp NY 2017 Proxy Statement | ||||||||
INFORMATION ON TRUSTCO DIRECTORS AND NOMINEES | ||||||||
OTHER TRUSTCO DIRECTORS(1)(continued)
Shares of TrustCo Common Stock Beneficially Owned | ||||||||
Name and Principal Occupation(2) | No. of Shares (3) | Percent of Class | ||||||
Robert J. McCormick, Age 53, President and Chief Executive Officer of TrustCo from 2004-present, Chairman 2009 and 2010, executive officer of TrustCo from 2001-present and Chief Executive Officer of Trustco Bank from 2002-present. Director of TrustCo and Trustco Bank from 2005-present. Joined Trustco Bank in 1995. Mr. McCormick contributes his skills and knowledge obtained from being the chief executive officer of the Company and Trustco Bank. | 2,494,738 | (9) | 2.51 | |||||
William J. Purdy, Age | (10) | * |
OTHERINFORMATION ON TRUSTCO DIRECTORS(1)EXECUTIVE OFFICERS
Shares of TrustCo Common Stock Beneficially Owned | ||||||||
Name and Principal Occupation(2) | No. of Shares (3) | Percent of Class | ||||||
4
See footnotes on page 7.
INFORMATION ON TRUSTCO EXECUTIVE OFFICERS
Robert T. Cushing, Age | (11) | * |
5
See footnotes on page 7.
1,451 | (12) | * | ||||||
Robert M. Leonard, Age 54, Secretary of TrustCo and Trustco Bank from 2003-2006 and | (13) | * |
* | Less than 1% |
See Footnotes on Page 6
TrustCo Bank Corp NY 2017 Proxy Statement 5 | ||||||||
INFORMATION ON TRUSTCO DIRECTORS AND NOMINEES | ||||||||
INFORMATION ON TRUSTCO EXECUTIVE OFFICERS (continued)
Shares of TrustCo Common Stock Beneficially Owned | ||||||||
Name and Principal Occupation(2) | No. of Shares (3) | Percent of Class | ||||||
Michael M. Ozimek, Age | (14) | * | ||||||
Scot R. Salvador, Age | (15) | * | ||||||
Eric W. Schreck, Age | ||||||||
(16) | * |
* | Less than 1% |
6
See footnotes on page 7.
TRUSTCO DIRECTORS, NOMINEES, AND EXECUTIVE OFFICERS AS A GROUP (15(13 INDIVIDUALS) BENEFICIALLY OWN 5,730,1654,519,381 SHARES OF COMMON STOCK, WHICH REPRESENTS 6.0%4.56% OF THE OUTSTANDING SHARES.
Footnotes:
(1) | Directors of TrustCo Bank Corp NY are also directors of Trustco Bank. |
(2) | Each of the directors has held, or retired from, the same position or another executive position with the same employer during the past five years. |
(3) |
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(4) | Voting or investment power |
(5) | Voting or investment power |
(6) | Voting or investment power shared by Mr. De Gennaro’s spouse or other immediate family members as to 98,559 shares. Also includes currently exercisable options to acquire 2,000 shares. |
(7) | Voting or investment power shared by Mr. Flynn’s spouse or other immediate family members as to 10,000 shares. |
(8) | Voting or investment power shared by Mr. Maggs’ immediate family members as to 87,548 shares. Includes for |
(9) | Includes for |
(10) | Includes for Mr. Purdy currently exercisable options to acquire 6,000 shares. |
(11) | Voting or |
(12) | Includes for Mr. Hall currently exercisable options to acquire 450 shares. |
(13) | Voting or investment power shared by Mr. Leonard’s spouse or other immediate family members as to 20,493 shares. Also includes currently exercisable options to acquire 63,000 shares. |
(14) | Includes for Mr. Ozimek |
(15) | Includes for Mr. Salvador |
(16) | Voting or investment power shared by Mr. Schreck’s spouse or other immediate family members as to 7,284 shares. Also includes currently exercisable options to acquire 25,500 shares. |
6 TrustCo Bank Corp NY 2017 Proxy Statement | ||||||||
INFORMATION ON TRUSTCO DIRECTORS AND NOMINEES | ||||||||
TrustCo’s full board held ninetwelve meetings during 2014.2016. All of the directors, except for Robert A. McCormick and Robert J. McCormick, would be considered to be “independent directors” under the listing qualifications rules for companies such as TrustCo, whose shares are traded on The NASDAQ Stock Market. TrustCo’s independent directors met in executive session twice during 2014.2016. All directors fully attended all eight board meetings (except one board member was absent and allexcused from one meeting), and the independent directors fully attended both executive session meetings during 2014.2016.
TrustCo maintains an Audit Committee, a Compensation Committee, a Board Compliance Committee, a Fiduciary Committee, a Nominating and Corporate Governance Committee, an Audit Committee, and a CompensationRisk Committee. The charter of each of the committees may be found on TrustCo’s website (www.trustcobank.com) under the “Investor Relations” tab.
The Nominating and Corporate Governance Committee held sevenfour meetings in 2014.2016. The directors currently serving on the Nominating and Corporate Governance Committee are Joseph A. LucarelliDr. Anthony J. Marinello (Chairman), Dennis A. De Gennaro, Brian C. Flynn, Thomas O. Maggs, Dr. Anthony J. Marinello,
William D. Powers, and William J. Purdy. All members fully attended all seven meetings during 2014. The function of the Nominating and Corporate Governance Committee is to assist the board by recommending and reviewing individuals for consideration as directors and develop and annually review governance guidelines applicable to the Company.
TrustCo’s Audit Committee held fourtwelve meetings in 2014.2016. The directors currently serving on the Audit Committee are William D. Powers (Chairman), Dennis A. De Gennaro, Joseph A. Lucarelli,Brian C. Flynn, Thomas O. Maggs, Dr. Anthony J. Marinello, Thomas O. Maggs, and William J. Purdy. All members fully attended all four meetings in 2014. The purpose of the Audit Committee is to oversee the Company’s accounting and financial reporting processes and audits of the Company’s financial statements; the committee’s functions also include the review of TrustCo’s and Trustco Bank’s internal audit procedures and the review of the adequacy of internal accounting controls for TrustCo and Trustco Bank. In addition, the Audit Committee annually recommends the use of external audit firms by TrustCo and Trustco Bank in the coming year, after reviewing performance of the existing vendors and available audit resources. Please refer to the discussion under “Audit Committee” for a more detailed description of the Audit Committee’s activities.
TrustCo’s Compensation Committee held sixfive meetings in 2014.2016. The directors currently serving on the Compensation Committee are Joseph A. LucarelliThomas O. Maggs (Chairman), Dennis A. De Gennaro, Thomas O. Maggs,Brian C. Flynn, Dr. Anthony J. Marinello, William D. Powers, and William J. Purdy. All members fully attended all six meetings during 2014. The function of the Compensation Committee is to generally oversee the employee compensation and benefit policies, plans and programs of TrustCo and Trustco Bank, including the establishment, annual review and approval of the compensation of the executive officers. In addition, the Compensation Committee is responsible for annually reviewing board compensation and making appropriate recommendations for changes thereto. Please refer to the discussion under “Executive Compensation” for a more detailed description of the Compensation Committee’s activities relative to the named executive officers.
The board of directors of Trustco Bank created the Board Compliance Committee in June 2015, and the committee held twelve meetings in 2016. The directors currently serving on the Board Compliance Committee are William D. Powers (Chairman), Dennis A. De Gennaro, Brian C. Flynn, Thomas O. Maggs, Dr. Anthony J. Marinello, and William J. Purdy. The function of the Compliance Committee is to provide assistance to the board in fulfilling its oversight responsibility relating to compliance with legal and regulatory requirements and Trustco Bank’s policies, including overseeing Trustco Bank’s communications and responses to and cooperation with the Office of the Comptroller of Currency (“OCC”) and other governmental authorities with jurisdiction over TrustCo or Trustco Bank, and any agreements, orders or directives with respect to such authorities, including the July 21, 2015 agreement between Trustco Bank and the OCC.
The board of directors of TrustCo created the Fiduciary Committee in October 2016, and the committee held one meeting in 2016. The directors currently serving on the Fiduciary Committee are Robert J. McCormick (Chairman), Dennis A. De Gennaro, Brian C. Flynn, Thomas O. Maggs, Dr. Anthony J. Marinello, William D. Powers, and William J. Purdy. The function of the Fiduciary Committee is to assist the board of directors in fulfilling its responsibilities with respect to the Trustco Bank Financial Service Department regarding fiduciary, agency and custodial activities; oversee the Financial Services Department in providing estate administration, trust administration, investment management services, and custodial services; advise the board of directors with respect to the adoption of appropriate policies to be observed in offering such services; oversee and enforce sound risk management practices calculated to minimize risk and loss to Trustco Bank and its customers; and report to the board of directors on the activity of the Financial Services Department in the conduct of its business.
TrustCo Bank Corp NY 2017 Proxy Statement 7 | ||||||||
INFORMATION ON TRUSTCO DIRECTORS AND NOMINEES | ||||||||
The board of directors of TrustCo created the Risk Committee in February 2016, and the committee held three meetings in 2016. The directors currently serving on the Risk Committee are William J. Purdy (Chairman), Dennis A. De Gennaro, Brian C. Flynn, Thomas O. Maggs, Dr. Anthony J. Marinello, and William D. Powers. The function of the Risk Committee is to oversee the Company’s enterprise risk management program and to ensure that risk is appropriately identified, measured, treated, monitored, and reported within the governance structure approved by the board.
Each member of the committees described above attended all meetings of each such committee during 2016 (except that one member was absent and excused from the December meetings). Mr. Flynn joined the board in February 2016 and did not attend the January meetings.
Compensation Committee Interlocks and Insider Participation. No member of the Compensation Committee: (1) was an officer or employee of TrustCo or Trustco Bank; (2) was formerly an officer of TrustCo or Trustco Bank; or (3) had any relationship requiring disclosure by TrustCo under the SEC’s rules governing disclosure of related party transactions. No executive officer of TrustCo served as a director or member of a compensation committee of another entity, one of whose executive officers served as a member of TrustCo’s Board of Directors or Compensation Committee.
Board Leadership Structure and Role in Risk Oversight
Board Leadership.The position of TrustCo’s chairman of the board and the office of its president and chief executive officer are held by different persons. The chairman of the board, Thomas O. Maggs,Dennis A. De Gennaro, is an independent director who has been a member of the board since 2005.2009. Mr. MaggsDe Gennaro became chairman in January 2015. The policy2016 to serve a term ending upon the earlier of TrustCo’s board of directors is thatDecember 31, 2018 or the positions of chief executive officer and chairman ofdate the board should be separated and that the position of chairman of the board should rotate among TrustCo’s independent directors on an annual basis.elects a successor chairman. Mr. MaggsDe Gennaro is a member of the Nominating and Corporate Governance Committee, the Audit Committee, the Compensation Committee, the Board Compliance Committee, the Fiduciary Committee, and the CompensationRisk Committee. Under TrustCo’s Corporate Governance Guidelines, the positions of chief executive officer and chairman of the board are separate and the members of the board elect a chairman as they deem appropriate from time to time from among TrustCo’s independent directors. Also under the guidelines, in order to better ensure that the chairman of the board will have the opportunity to carry out the planning and direction duties associated with the chairman’s position, the chairman is to be elected to a term to expire three years from its start date or on such earlier date as the board elects a new chairman. (The board retains, however, the authority to elect a director as chairman even though the then-current chairman has not served in that role for three years and is not obligated to nominate forre-election by shareholders a director whose three-year tenure as chairman is not complete.) At least once each year, the Corporate Governance Committee will consider the performance of the chairman relative to the Corporate Governance Guidelines and may make such recommendations as it deems appropriate.
The board of directors has determined that the separation of the roles of chairman of the board and chief executive officer will enhanceenhances board independence and oversight. More specifically, the board believes that separating the roles will allowallows the Company’s president and chief executive officer, Robert J. McCormick, to better focus on developing and implementing corporate initiatives, enhancing shareholder value and strengthening our business and operations,
while allowing the chairman of the board to lead the board in its fundamental role of providing advice to, and independent oversight of, management.
TheRole in Risk Oversight.Risk is inherent in the operation of every financial institution, and management of risk is a key part of the institution’s success. Risks faced by TrustCo and Trustco Bank include credit risk, interest rate risk, liquidity risk, operational risk, strategic risk, and reputational risk. TrustCo management is responsible for theday-to-day management of the risks faced by the Company, while the board of directors as a whole is ultimately responsible for risk management oversight of TrustCo and its subsidiaries; inoversight. In carrying out its responsibilities in this area, the board has delegated important duties to its committees. For example,The newly formed Risk Committee will have, as noted above, responsibility to oversee the management of the Company’s Enterprise Risk Management program and to ensure that risk is appropriately identified, measured, treated, monitored, and reported within the governance structure approved by the board. The Audit Committee assists the full board with respect to the adequacy of TrustCo’s internal controls and financial reporting process, the independence and performance of TrustCo’s internal and external auditors, and compliance with legal and regulatory requirements. In addition,The Board Compliance Committee assists the board with respect to compliance with legal and regulatory requirements. The Fiduciary Committee oversees the Company’s Financial Services Department and assists the full board in managing risk associated therewith, as well as in fulfilling its responsibilities regarding fiduciary, agency and custodial activities. Finally, the Compensation Committee has the authority to conduct annual reviews of the Company’s incentive compensation practices to assess the extent to which such arrangements and practices encourage risk-taking and whether the level of encouragement of such risk-taking is appropriate under the circumstances. The Compensation Committee has concluded that the compensation policies are not reasonably likely to have a material adverse effect on the Company.
8 TrustCo Bank Corp NY 2017 Proxy Statement | ||||||||
INFORMATION ON TRUSTCO DIRECTORS AND NOMINEES | ||||||||
The entire board reviews and approves, on an annual basis, all significant policies that address risk within TrustCo’s consolidated organization, including credit risk, interest rate risk, liquidity risk, operational risk, strategic risk, and compliancereputational risk. The board monitors risk through reports received on a periodic basis from management, and the board annually approves the Company’s contingencybusiness continuity plan as well as its insurance program.
Each of the nominees slatedstanding for election at the Annual Meeting was considered and selected by the Nominating and Corporate Governance Committee and unanimously approved by TrustCo’s independent directors.
The Nominating and Corporate Governance Committee is appointed by the board of directors in part to review and identify individuals qualified to become board members and to recommend to the board the director nominees for consideration at the Annual Meeting of Shareholders.Meeting.
As a general matter, the board believes that a candidate for board membership should have high personal and professional ethics, integrity, and values; an inquiring and independent mind, practical wisdom, and mature judgment; broad policy-making experience in business, government, or community organizations; expertise useful to TrustCo and complementary to the background and experience of other board members; willingness to devote the time necessary to carrying out the duties and responsibilities of board membership; commitment to serve on the board over a period of several years to develop knowledge about TrustCo, its strategy, and its principal operations; and willingness to represent the best interests of all of TrustCo’s constituencies. Although neither the committee nor the full board of directors has a formal policy with respect to diversity, the committee and the board have a general objective of having a board that encompasses a broad range of talents and expertise and reflects a diversity of background, experience, and viewpoints.
After a potential candidate is identified, the committee will investigate and assess the qualifications, experience, and skills of the candidate. The investigation process may, but need not, include one or more meetings with the candidate by a member or members of the committee. From
time to time, but at least once each year, the committee meets to evaluate the needs of the board and to discuss the candidates for nomination to the board. Such candidates may be presented to the shareholders for election or appointed to fill vacancies. All nominees must be approved by the committee and by a majority of the independent members of the board.
The committee will consider written recommendations by shareholders for nominees for election to the board. The persons identified in such recommendations will be evaluated under the same criteria and procedures used for other board candidates. Under TrustCo’s Bylaws,bylaws, written nominations of persons for election to the board of directors must be delivered or mailed to the board not lessfewer than 14 and not more than 50 days prior to any meeting of shareholders called for the purpose of the election of directors, or not later than 7 days prior to the meeting if lessfewer than 21 daysdays’ notice of the meeting is provided.
TrustCo Bank Corp NY 2017 Proxy Statement 9 | ||||||||
INFORMATION ON TRUSTCO DIRECTORS AND NOMINEES | ||||||||
The Audit Committee of TrustCo’s board is responsible for providing oversight of TrustCo’s accounting functions, internal controls, and financial reporting process.processes. The Audit Committee is composed of six directors, each of whom is independent under the listing standards of The NASDAQ Stock Market, and each member of the Audit Committee satisfies the “financial sophistication” requirement also set forth in those listing standards. Each Audit Committee member also satisfies the additional independence requirements contained in the Securities Exchange Act of 1934 for members of public company audit committees. The board of directors has determined that Brian C. Flynn, meets the Company does not have an Audit Committee “financialdefinitions of “audit committee financial expert” serving onadopted by the Audit Committee. However,Securities and Exchange Commission (“SEC”) and included in NASDAQ’s rules for listed companies. In addition, to assist in the performance of its duties, the Audit Committee retained Marvin and Company, PC, an independent accounting firm, as a consultant to the committee. As consultants to the Audit Committee, a Marvin and Company managing partner participates, fully in allattends Audit Committee meetings on at least a quarterly basis, reviews all materials presented to the Audit Committee serves to respondeach month, responds to questions and inquiries from Audit Committee members and questions internal audit department personnel, representatives of the Company, independent accountantsIndependent Auditors, and management prior to, during, and as follow up to Audit Committee meetings.
TrustCo’s board believes that in order to fulfill all the functions of the board and the Audit Committee, each member of the board and the Audit Committee should meet all the criteria that have been established by the board for board membership and that it is not in the best interests of TrustCo to nominate as a director someone who does not have all the experience, attributes, and qualifications that TrustCo seeks. Further, the board believes that the present members of the Audit Committee have sufficient knowledge and experience in financial affairs to effectively perform their duties.
The Audit Committee operates under a written charter approved by the board of directors. Each year, the Audit Committee reviews the adequacy of the charter and recommends any changes or revisions that the committee considers necessary or appropriate. A copy of the Audit Committee’s charter may be found on TrustCo’s website (www.trustcobank.com) under the “Investor Relations” tab.
The following table presents fees for professional audit services, as well as other professional or consulting services, rendered by Crowe Horwath LLP, TrustCo’s independent accounting firm. The services included audits of TrustCo’s annual consolidated financial statements for the years ended December 31, 2014 and 2013 and of the effectiveness of internal controls over financial reporting, tax return preparation services, and other services provided by Crowe Horwath LLP during 2014 and 2013.
2014 | 2013 | |||||||
Audit fees | $ | 393,500 | $ | 362,000 | ||||
Audit related fees(1) | 15,000 | 2,750 | ||||||
Tax fees(2) | 170,074 | 191,140 | ||||||
All other fees(3) | -- | 27,000 | ||||||
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Total Fees | $ | 578,574 | $ | 582,890 |
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It is the Audit Committee’s policy to preapprove all audit and nonaudit services provided by the Company’s independent accountants.Independent Auditors, as well as any services provided by a Registered Public Accounting firm. In considering nonaudit services, the Audit Committee will consider various factors including, but not limited to, whether it would be beneficial to have the service provided by the independent accountantsIndependent Auditors and whether the service could compromise the independence of the independent accountants.Independent Auditors. In certain circumstances, the Audit Committee’s policies and procedures provide the committee’s chairman with the authority to preapprove services from the Company’s independent accountants,Independent Auditors, which such approval is then reviewed and approved at the next Audit Committee meeting. Accordingly, all of the services described above were approved by the Audit Committee.
Audit Committee Report. The Audit Committee’s responsibility is to monitor and oversee TrustCo’s financial reporting and audit processes and to otherwise conduct its activities as provided for in its charter. Management is responsible for TrustCo’s internal controls and financial reporting process. TrustCo’s independent accountantsIndependent Auditors for 2014,2016, Crowe Horwath LLP, were responsible for performing an independent audit of TrustCo’s consolidated financial statements and the effectiveness of TrustCo’s internal controls over financial reporting in accordance with the Standards of the Public Company Accounting Oversight Board (United States) and issuing a report thereon. TrustCo’s Internal Audit Department is responsible for monitoring compliance with internal policies and procedures. In performing its oversight, the Audit Committee reviews the performance of Crowe Horwath LLP and TrustCo’s internal auditors.
In connection with these responsibilities, the Audit Committee met with management and Crowe Horwath LLP on February 21, 2017 to review and discuss TrustCo’s December 31, 20142016 and 20132015 consolidated financial statements. The Audit Committee also discussed with Crowe Horwath LLP the matters required to be communicated to audit committees in accordance with professional standards and
received the written disclosures and a letter from Crowe Horwath LLP required by relevant regulatory and professional standards regarding auditor communications with audit committees concerning independence.
Based upon the Audit Committee’s discussions with management and the independent accountants,Independent Auditors, and its review of the information described in the preceding paragraphs, the Audit Committee recommended that the board of directors include the audited consolidated financial statements in TrustCo’s Annual Report on Form10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission.2016.
AUDIT COMMITTEE: | William D. Powers, Chairman | |
Dennis A. De Gennaro | ||
Thomas O. Maggs | ||
Dr. Anthony J. Marinello | ||
10 TrustCo Bank Corp NY 2017 Proxy Statement | ||||||||
INFORMATION ON TRUSTCO DIRECTORS AND NOMINEES | ||||||||
Shareholder Communications with Board and Board Attendance at Annual Meeting of Shareholders
TrustCo provides an informal process for shareholders to send communications to the board. Shareholders who wish to contact the board or any of its members may do so in writing to TrustCo Bank Corp NY, Attention: Corporate Secretary, P.O. Box 1082, Schenectady, New York 12301-1082.
Although TrustCo does not have a policy with regard to board members’ attendance at the Annual Meeting of Shareholders, the directors are encouraged to attend such meetings, and all of the directors attended the 20142016 Annual Meeting.
Vote Required and Recommendation
The threetwo nominees for election to the TrustCo board for three-year terms expiring at the 20182020 Annual Meeting of Shareholders who receive the greatest number of votes will be elected to the board. Each nominee must, however, receive the affirmative vote of a majority of the outstanding shares of TrustCo common stock in order to be elected a director.elected.
THE TRUSTCO BOARD RECOMMENDS ATHAT TRUSTCO SHAREHOLDERS VOTE “FOR” THE ELECTION OF THE TRUSTCO DIRECTOR NOMINEES AS TRUSTCO DIRECTORS, WHICH IS ITEM 1 ON THE TRUSTCO PROXY CARD.
Proposal 2 - Approval of the Amended and Restated TrustCo Bank Corp NY 2010 Equity Incentive Plan
General
TrustCo is seeking shareholder approval of the TrustCo Bank Corp NY Amended and Restated 2010 Equity Incentive Plan (the “Equity Incentive Plan”). The Equity Incentive Plan was adopted by the TrustCo board in December 2010 on the recommendation of the Compensation
Committee and was approved by shareholders at the 2011 Annual Meeting of Shareholders. The board approved an amendment, for which shareholder approval was not required, to the Equity Incentive Plan in March 2012, and, on March 17, 2015, on the recommendation of the Compensation Committee, the board amended and restated the Equity Incentive Plan and directed that the Equity Incentive Plan be submitted to the shareholders at the Annual Meeting.
The principal change contained in the Equity Incentive Plan as presented in this proxy statement is the increase in the number of shares or share equivalents available for award. As of December 31, 2014, there were 667,750 shares remaining that may be issued pursuant to awards of options or restricted stock and the equivalent of 99,600 shares are remaining available for issuance as stock appreciation rights (“SARs”), restricted stock units, performance units, or performance shares. TrustCo is therefore seeking approval of the Equity Incentive Plan in order to make an additional 332,250 shares of our common stock available for issuance pursuant to awards of options or restricted stock and the equivalent of an additional 900,400 shares available for issuance as SARs, restricted stock units, performance units, or performance shares. The result of authorizing additional shares and share equivalents under the Equity Incentive Plan is that, if shareholders approve the Equity Incentive Plan, there will be an aggregate of 2,332,250 shares authorized for issuance as options or restricted stock under the Equity Incentive Plan, with 1,000,000 of such shares being available for future awards, and the equivalent of, in the aggregate, 1,400,400 share equivalents authorized to be issued as SARs, restricted stock unis, performance units, or performance shares, with 1,000,000 of such share equivalents being available for future awards Shareholder approval of the Equity Incentive Plan at the Annual Meeting will also constitute approval of the performance measures identified below under “Performance-Based Awards,” for purposes of the shareholder approval requirements of Section 162(m) of the U.S. Internal Revenue Code (also referred as the “Code”). Under Section 162(m), the material terms of the performance goals outlined within the Equity Incentive Plan must be disclosed to and reapproved by the stockholders at least every five years; TrustCo shareholders last approved the performance measures under the Equity Incentive Plan in 2011.
If shareholders fail to approve the Equity Incentive Plan, TrustCo will continue to operate under the Equity Incentive Plan as currently in effect, but without the increased number of shares or share equivalents described above and without the approval of the performance measures for purposes of Section 162(m) of the Code.
The principal features of the Equity Incentive Plan are summarized in this proxy statement. You should read the Equity Incentive Plan for a full statement of its legal terms and conditions. Appendix I to this proxy statement contains the full text of the Equity Incentive Plan as proposed to be approved by the shareholders.
Purposes of the Equity Incentive Plan
The purpose of the Equity Incentive Plan is to advance the interests of TrustCo and its stockholders by providing key employees with additional incentives and motivation toward superior performance through the opportunity to acquire equity ownership in TrustCo, and by enabling TrustCo and its subsidiaries to attract and retain the services of talented employees. At the
same time, the board and the Compensation Committee work together to ensure that the plan, in conjunction with TrustCo’s other compensation policies and practices, does not create risks that are reasonably likely to have a material adverse effect on TrustCo.
Under the Equity Incentive Plan, TrustCo may grant or award stock options, SARs, restricted stock, restricted stock units, performance units, and performance shares to persons eligible to participate in the plan, who, in general, are any executive, key managerial employee or other employee of the Company or its subsidiaries who is a regular, full-time, salaried employee. The Equity Incentive Plan will remain in effect, subject to the board’s right to terminate the plan earlier, until all awards made under it have been exercised or expired. However, no award may be granted under the plan on or after December 21, 2020.
Administration
The Compensation Committee administers the Equity Incentive Plan and has the authority to determine the type or types of awards to be made under the plan and to designate the employees who will receive such awards. The Compensation Committee is authorized to interpret the Equity Incentive Plan, to adopt rules for the plan and to make all other determinations necessary for the administration of the plan.
The Compensation Committee may authorize TrustCo’s Chief Executive Officer and other senior officers to recommend recipients of awards under the plan, to determine the terms and conditions of any such awards, and to take such other actions that the Compensation Committee may take under the plan. The Compensation Committee may not, however, delegate authority to grant awards to, or take other action with respect to, participants who are subject to Section 16 of the Exchange Act or are “covered employees” as defined in Section I62(m) of the Internal Revenue Code. TrustCo’s Compensation Committee is comprised of independent members of TrustCo’s board of directors. Currently, the members of the Compensation Committee are Joseph A. Lucarelli (Chairman), Dennis A. De Gennaro, Thomas O. Maggs, Dr. Anthony J. Marinello, William D. Powers, and William J. Purdy.
Shares Subject to the Equity Incentive Plan
The total number of shares of common stock that may be issued pursuant to awards of options or restricted stock under the Equity Incentive Plan may not exceed 2,332,250, with 1,000,000 of such shares remaining available for future awards as of December 31, 2014, and the total number of awards of SARs, restricted stock units, performance units or performance shares may not exceed the equivalent of 1,400,400 shares, also with 1,000,000 of such share equivalents remaining available for future awards as of December 31, 2014. (TrustCo will not issue shares of common stock upon the issuance or exercise of SARs, restricted stock units, performance units or performance shares.) Such number of shares will be adjusted proportionately if there is a change in outstanding shares due to a stock dividend or split, recapitalization, merger, or other similar corporate change. The shares of common stock to be issued under the Equity Incentive Plan may consist of authorized but unissued stock or treasury stock.
Shares of TrustCo’s common stock subject to an option that have not become outstanding will not be available for re-issuance under the Equity Incentive Plan if the option expires or terminates without having been exercised in full (including, without limitation, cancellation and re-grant), or if an option is exercised or settled in a manner such that some or all of the shares of stock related to the option are not issued. If any awards under the Equity Incentive Plan are forfeited for any reason, or settled in cash in lieu of stock or in a manner such that some or all of the shares of stock related to the award are not issued (including as a result of the use of shares for tax withholding), such shares will not be available for issuance under the Equity Incentive Plan.
Participation
Historically, approximately 20 of TrustCo’s eligible employees receive awards under TrustCo’s equity-based incentive plans in any given year.
Awards under the Equity Incentive Plan are subject to the following limits:
no participant may be granted during any calendar year awards consisting of options or restricted stock that are exercisable for or relate to more than 500,000 shares of common stock (subject to adjustments for stock dividends, stock splits and similar events) and
no participant may be granted during any calendar year awards consisting of units denominated in shares of common stock (other than awards consisting of options or restricted stock) covering or relating to more than 500,000 shares of common stock (subject to adjustments for stock dividends, stock splits and similar events).
Plan Benefits
Awards under the Equity Incentive Plan are subject to the discretion of the Compensation Committee. As a result, it is not possible to determine the specific amounts and types of awards that may be granted in the future under the Equity Incentive Plan because the grant of awards under the Equity Incentive Plan is within the discretion of the Compensation Committee.
During 2014, the Compensation Committee and the full board of directors approved awards of incentive stock options, restricted stock units and performance shares to eligible employees, including TrustCo’s named executive officers, under the Equity Incentive Plan. The exercise price of all options granted was $7.22, the closing price of TrustCo’s common stock on November 18, 2014. The options awarded to employees and officers of TrustCo vest in equal amounts over a five year period, with all options being fully vested as of November 18, 2019 and expiring on November 18, 2024. The awards of performance shares under the Equity Incentive Plan are subject to both a time-based vesting condition and a performance goals condition. The periods of restriction applicable to the restricted stock unit awards will lapse as to all units awarded under Equity Incentive Plan on November 18, 2017. These grants are not contingent upon ratification and approval of the Equity Incentive Plan by shareholders at the Annual Meeting. If the shareholders do not ratify and approve the Equity Incentive Plan at the Annual Meeting, these grants will remain outstanding.
The following table sets forth information with respect to awards under the Equity Incentive Plan on made in 2014.
Name and Position or Group | Number of Options | Number of Restricted Stock Units | Number of Performance Shares | |||||||||
Robert J. McCormick, President & Chief Executive Officer | 50,000 | 16,250 | 23,250 | |||||||||
Michael M. Ozimek, Senior Vice President and Chief Financial Officer | 3,750 | 1,100 | 1,500 | |||||||||
Robert T. Cushing, Executive Vice President and Chief Operating Officer | 28,000 | 8,250 | 12,250 | |||||||||
Scot R. Salvador, Executive Vice President and Chief Banking Officer | 28,000 | 8,250 | 12,250 | |||||||||
Robert M. Leonard, Executive Vice President and Secretary | 28,000 | 8,250 | 12,250 | |||||||||
Eric W. Schreck, Treasurer | 7,250 | 2,250 | 3,000 | |||||||||
Executive group | 145,000 | 44,350 | 64,500 | |||||||||
Non-executive officer employee group | 33,250 | 13,800 | 18,500 |
Please refer to the discussion under “Executive Compensation – Compensation Discussion and Analysis” and “Grants of Plan-Based Awards for 2014” for additional information with respect to awards made in 2014 under the Equity Incentive Plan.
Additional Equity Compensation Plan Information
The table below shows information regarding awards outstanding and common shares available for issuance (as of December 31, 2014) under the Equity Incentive Plan and the TrustCo Bank Corp NY Amended and Restated 2010 Directors Equity Incentive Plan, discussed below, which are our only compensation plans under which we may issue additional shares of our stock:
Plan category | 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 | 2,693,050 | $ | 8.27 | 896,750 | ||||||||
Equity compensation plans not approved by security holders | -- | N/A | -- | |||||||||
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Total | 2,693,050 | $ | 8.27 | 896,750 |
Stock Options
A stock option is the right to purchase a specified number of shares of common stock in the future at a specified exercise price and subject to the other terms and conditions specified in the option agreement and the Equity Incentive Plan. The Compensation Committee has complete discretion in determining the number of options granted to a participant and may grant any type of option to purchase common stock that is permitted by law at the time of grant.
Stock options granted under the Equity Incentive Plan may be either “incentive stock options,” (“ISO”) which may be eligible for special tax treatment under the Internal Revenue Code, or options other than incentive stock options (referred to as “nonstatutory” or “nonqualified” stock options), as determined by the Compensation Committee and stated in the option agreement relating to the option grant. The exercise price of each option is set by the Compensation Committee but cannot be less than 100% of the fair market value of TrustCo’s common stock at the time of grant (or, in the case of an incentive stock option granted to a 10% or more shareholder, 110% of that fair market value). The fair market value of TrustCo common stock is generally determined as the closing price of the stock as reported on the Nasdaq Global Select Market on the option grant date. The exercise price of any stock options granted under the Equity Incentive Plan may be paid in cash, by tendering previously-acquired shares having an aggregate fair market value at the time of exercise equal to the total option price, by any other means that the Compensation Committee determines to be consistent with the Equity Incentive Plan’s purpose and applicable law or by a combination of the foregoing. TrustCo may not, under the Equity Incentive Plan, sponsor, or assist in any material way, any “cashless” exercise program pursuant to which payment for options to be exercised is made by surrendering other options, although this prohibition would not apply to third-party, broker-assisted “cashless” exercise programs.
Options awarded under the Equity Incentive Plan may be exercisable at such times and subject to such restrictions and conditions as the Compensation Committee may approve. The Compensation Committee determines the period of time during which an option may be exercised, although no option may be exercisable after ten years from the date of grant (five years in the case of an ISO granted to an employee who is a ten-percent shareholder on the date of grant).
If a participant’s employment with TrustCo is terminated by reason of his or her death, disability, or retirement, the participant’s outstanding options will vest 100% and be deemed exercisable in full upon such termination, and the options may be exercised at any time prior to their expiration date or within three years after such date of termination, whichever period is the shorter. If the participant’s employment terminates for any reason other than death, disability or retirement, or other than involuntarily for cause, the rights under any then-outstanding option granted under the Equity Incentive Plan will terminate upon the expiration date of the option or one month after the termination date, whichever first occurs. If, however, such termination occurs after a change-in-control (as defined in the Equity Incentive Plan), the rights under any then-outstanding option will terminate upon the expiration date of the option or three years after such date of termination of employment, whichever first occurs. Where a participant’s termination of employment is involuntarily for cause, his or her rights under all options, whether or not such options are vested, will terminate immediately.
Stock Appreciation Rights
A “stock appreciation right” or “SAR” is the right to receive a payment from TrustCo equal to the excess of the fair market value of a share of TrustCo common stock at the date of exercise over a specified price fixed by the Compensation Committee on the date of grant, which such price may not be less than 100% of the fair market value of the stock on the date of grant. SARs may be exercised upon whatever terms and conditions the Compensation Committee, in its sole discretion, imposes upon the SARs.
Upon exercise of the SAR, the holder will be entitled to receive a cash payment of an amount determined by multiplying the difference between the fair market value of a share of common stock at the date of exercise over the price fixed by the Compensation Committee at the date of grant by the number of shares with respect to which the Stock Appreciation Right is exercised. Payment for SARs will be made in cash; at the time of grant, the Compensation Committee may establish a maximum amount per share that would be payable upon exercise of any SAR. SARs granted under the Equity Incentive Plan will expire no later than ten years after the date of grant. In the event the employment of a participant is terminated, any SARs outstanding will terminate in the same manner as described above for options.
Restricted Stock
Restricted stock awards are shares of TrustCo common stock that are awarded to a participant subject to the satisfaction of the terms and conditions established by the Compensation Committee. Subject to the terms and conditions of the Equity Incentive Plan and the applicable award agreement, upon delivery of shares of restricted stock to a participant, or creation of a book entry evidencing a participant’s ownership of such shares, the participant will have all of the rights of a shareholder with respect to such restricted shares.
Shares of restricted stock, however, may not be sold, pledged or otherwise transferred for such period of time as may be determined by the Compensation Committee and specified in the applicable award agreement or until the earlier satisfaction of other conditions (which may include the attainment of performance goals as described below). If a participant experiences a “separation from service” (as defined under the Equity Incentive Plan) because of his or her death or disability during the restricted period, such period will automatically terminate, and upon a separation from service for any other reason, then any shares of restricted stock still subject to the restriction period automatically will be forfeited and returned to TrustCo.
Restricted Stock Units
A restricted stock unit is a right to receive a payment equal to the value of a share of TrustCo common stock that is awarded to a participant subject to the satisfaction of the terms and conditions established by the Compensation Committee. Restricted stock units are similar to restricted stock, except no shares are actually awarded to a participant, and the participant will have no rights of a shareholder with respect to the restricted stock units. All restricted stock units will be settled by a cash payment determined by reference to the then-current fair market value of TrustCo common stock.
The award agreement for the grant of the restricted stock units will specify the time period and other conditions (including the performance goals described below) following which TrustCo will make payment with respect to restricted stock units. Upon a separation from service of a participant because of his or her death or disability during the restricted period, such period will automatically terminate and the participant (or his or her beneficiary or successor) will be entitled to payment with respect to the restricted stock unit. Upon a separation from service for any other reason, any restricted stock units will be forfeited and returned to TrustCo.
Performance Units and Performance Shares
Performance units and performance shares granted to a participant are amounts credited to a bookkeeping account established for the participant. Each performance unit will have an initial value of $100.00, and each performance share initially will represent one share of TrustCo common stock. The Compensation Committee will set performance goals that, depending on the extent to which they are met, will determine the ultimate value to the participant of the performance unit or performance share. The time period during which the performance goals must be met also is to be determined by the Compensation Committee. The performance goals and time period will be set forth in the award agreement relating to the performance units or performance shares.
After the applicable performance period has ended, a holder of a performance unit or performance share will be entitled to receive the value of the award as determined by the extent to which performance goals applicable to the award have been met. Any such payment will be in cash and may be in a lump sum or installments as prescribed by the Compensation Committee and the applicable award agreement. Holders of performance units or performance shares will have no voting rights and no rights to dividends or other distributions with respect to such units or shares.
Upon a participant’s separation from service because of death, disability or retirement during a performance period, the participant will receive a pro rata payment based on the number of months’ service during the performance period but taking into account the achievement of performance goals during the entire performance period. Payment will be made as specified in the applicable award agreement after completion of the applicable performance period at the time payments are made to participants who did not have a separation from service during the performance period. If a participant experiences a separation from service for any reason other than death, disability, or retirement during the performance period, all performance units will be forfeited.
Performance Goals
Awards under the Equity Incentive Plan of restricted stock, restricted stock units, performance units, and performance shares may be subject to criteria and objectives determined by the Compensation Committee that must be satisfied or met during a specified time period as a condition to the participant’s receipt, in the case of a grant of the restricted stock, of the shares of TrustCo common stock subject to such grant, or in the case of restricted stock units, performance units, or performance shares, of payment with respect to such awards.
In the case of an award intended to qualify for the exemption from the limitation on deductibility imposed by Section 162(m) of the Internal Revenue Code, the performance goals must be based on the attainment of objectively determinable performance goals based on one or more of the performance measures listed below:
basic earnings per share,
basic cash earnings per share,
diluted earnings per share,
diluted cash earnings per share,
net income,
cash earnings,
net interest income,
non-interest income,
general and administrative expense to average assets ratio,
cash general and administrative expense to average assets ratio,
efficiency ratio,
cash efficiency ratio,
return on average assets,
cash return on average assets,
return on average shareholders’ equity,
cash return on average shareholders’ equity,
return on average tangible shareholders’ equity,
cash return on average tangible shareholders’ equity,
core earnings,
operating income,
operating efficiency ratio,
net interest rate spread,
growth in fees and service charges income,
loan production volume,
growth in loan originations and loan origination fees,
non-performing loans,
loan charge offs (or net charge offs),
allowance for loan losses,
cash flow,
regulatory capital ratios,
deposit levels,
tangible assets,
improvement in or attainment of working capital levels,
maintenance of asset quality,
strategic business objectives consisting of one or more objectives based upon meeting specified cost targets, business expansion goals, and goals relating to acquisitions or divestitures,
goals relating to capital raising and capital management,
pre-tax pre-provision core operating earnings,
any other performance criteria established by the Compensation Committee, and
any combination of the foregoing.
If an award is intended to qualify for the exemption from the limitation on deductibility imposed by Section 162(m) of the Code, the performance goals must be set by the Compensation Committee within a prescribed time period (generally, prior to the 90th day of the applicable performance period). Performance goals may be particular to an award recipient or to the department, branch, affiliate, or division in which the recipient works, or may be based on the performance of TrustCo, one or more affiliates, (including Trustco Bank) TrustCo and one or more affiliates (including Trustco Bank), or a particular line of business. Performance goals may, but need not be, based upon a change or an increase or positive result and must cover such period as the Compensation Committee may specify. Performance goals may include or exclude extraordinary charges, losses from discontinued operations, restatements and accounting changes, and other unplanned special charges such as restructuring expenses, acquisitions, acquisition expenses, including expenses related to goodwill and other intangible assets, stock offerings, stock repurchases, and loan loss provisions. However, in the case of an award intended to qualify for the Section 162(m) exemption from the limitation on deductibility, such inclusion or exclusion will be made in compliance with Section 162(m).
Upon completion of the applicable restriction or performance period, the Compensation Committee will certify the level of the performance goals attained and the amount of the award payable as a result thereof.
Transferability of Awards
Options, SARs, unvested restricted stock, and other awards under the Equity Incentive Plan generally may not be sold or otherwise transferred except by will or the laws of descent and distribution, subject to certain limited exceptions generally relating to transfers to immediate family members and for estate planning purposes.
Change of Control
Except as expressly provided otherwise in an award agreement, in the event of achange-in- control of TrustCo (as “change-in-control” is defined in the plan), all awards under the Equity Incentive Plan will vest 100%. As a result, all options will become exercisable in full, the restrictions applicable to restricted stock will terminate, and performance units and performance shares will be paid out based upon the extent to which performance goals during the performance period have been met up to the date of the change-in-control, or at target, whichever is higher. All other awards, including SARs and restricted stock units, will be paid out based on the terms thereof. Depending on the nature of the change of control transaction, payment of certain awards may be delayed to comply with Section 409A of the Internal Revenue Code.
For purposes of the Equity Incentive Plan, a “change-in-control” will mean any one or more of the following:
any individual, corporation (other than TrustCo or Trustco Bank) or other entity or group of persons acting in concert becomes the beneficial owner of securities of TrustCo or Trustco Bank possessing 20% or more of the voting power for the election of directors of either of those Companies,
a consolidation, merger or other business combination is consummated that involves either TrustCo or Trustco Bank (or their securities) in which holders of voting securities immediately prior to such consummation own, as a group, immediately after such consummation, voting securities of either TrustCo or Trustco Bank (or voting securities of the entity or entities surviving such transaction) having 60% or less of the total voting power in an election of directors of either of TrustCo or Trustco Bank (or such other surviving entity or entities),
during any period of two consecutive years, individuals who at the beginning of such period constituted the directors of either TrustCo or Trustco Bank cease to constitute at least a majority thereof unless the election, or nomination for election by either TrustCo or Trustco Bank shareholders, of each new director was approved by a vote of at least two-thirds of the directors of either TrustCo or Trustco Bank then still in office who were directors of either at the beginning of any such period,
removal by the stockholders of all or any of the incumbent directors of either TrustCo or Trustco Bank other than a removal for cause, or
the completion of a sale, lease, exchange or other transfer is completed (in one transaction or a series of related transactions) of all, or substantially all, of the assets of either TrustCo or Trustco Bank to a party that is not controlled by or under common control with either TrustCo or Trustco Bank.
The Equity Incentive Plan as originally adopted contained an additional circumstance that would be considered a change-in-control, specifically, the announcement of any of the events described above as constituting a change-in-control. The Equity Incentive Plan as amended and restated no longer includes this circumstance within the definition.
Amendment and Termination
The board of directors may amend, suspend, or terminate the Equity Incentive Plan. Under this authority, the board has approved amendments to prohibit the reissuance of shares subject to expired or forfeited awards and to change the definition of change-in-control as described above. The Compensation Committee also may, to the extent permitted by the Equity Incentive Plan, amend the terms of any award granted under the plan, including any Award Agreement. Subject to certain exceptions, no such change, however, may be made without first obtaining the approval of TrustCo shareholders if the amendment would:
increase the maximum number of shares that may be sold or awarded under the plan or increase the maximum award limitations set forth in the plan,
decrease the minimum option price or grant price requirements applicable to options and SARs,
change the class of persons eligible to receive awards,
change performance goals,
extend the duration of the plan or the period during which options or SARs may be exercised, or
otherwise require shareholder approval to comply with any applicable law, regulation or rule.
In addition, no change to the plan or any award under the plan may be made that would materially impair the previously accrued rights of a participant without the written consent of that participant, unless the board of directors or the Compensation Committee determines that the amendment is necessary or advisable to comply with laws, regulations, rules or accounting standards.
The board or the Compensation Committee may adjust the terms and conditions of, and the criteria included in, awards in recognition of unusual or nonrecurring events or of changes in applicable laws, regulations, or accounting principles in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under the Equity Incentive Plan. Neither the board nor the Compensation Committee may make any adjustment that would cause an award that is otherwise exempt from Code Section 409A to become subject to Code Section 409A, or that would cause an award that is subject to Code Section 409A to fail to satisfy the requirements of Code Section 409A.
Changes in Capital
In the event of any corporate event or transaction, such as a stock dividend, stock split, recapitalization, reorganization, merger or consolidation, or spin-off, in order to prevent dilution or enlargement of participants’ rights under the Equity Incentive Plan, the Compensation Committee will adjust the number, class, and kind of securities that can be delivered under the plan and outstanding awards, the plan’s limits on the number of shares that can be subject to awards granted to a single participant during a single fiscal year, and the price, as applicable, of securities subject to awards outstanding under the plan.
Incentive-Based Compensation Recovery
Any award granted under the Equity Incentive Plan and any shares of common stock, cash, or other compensation received by an employee under the plan that constitutes incentive-based compensation may be subject to recovery by TrustCo under any compensation recovery, recoupment, or clawback policy that TrustCo may in the future adopt, including any policy that TrustCo may be required to adopt under Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Securities and Exchange Commission rules, or the requirements of any national securities exchange on which TrustCo stock may be listed. Each such employee must promptly return any such incentive-based compensation that TrustCo determines it is required to recover from such employee under any such policy.
Repricing
Neither the TrustCo board nor the Compensation Committee may authorize the repricing of an award without the prior approval of shareholders. For this purpose, the term “repricing” means any of the following or any other action that has the same effect:
to lower the exercise price or price per share of an award after it is granted,
to purchase for cash or shares an outstanding award at a time when its exercise price or price per share exceeds the fair market value of TrustCo common stock,
to take any other action that is treated as a repricing under generally accepted accounting principles, or
to cancel an award at a time when its exercise price or price per share exceeds the fair market value of TrustCo common stock in exchange for another award or TrustCo equity.
Tax Withholding Obligations
The Equity Incentive Plan authorizes TrustCo and TrustCo affiliates to withhold all applicable taxes from any award or payment under the Equity Incentive Plan and to take other actions necessary or appropriate to satisfy those tax obligations. Upon the exercise of options or the lapse of the period of restriction for restricted stock issued under the Equity Incentive Plan, participants may also satisfy withholding requirements, in whole or in part, by having TrustCo withhold shares of common stock having a fair market value equal to the minimum withholding amount.
Certain Federal Income Tax Consequences
The following is a brief summary of certain significant United States Federal income tax consequences, under the Internal Revenue Code, regulations promulgated thereunder and judicial or ruling authorities, as in effect on the date of this summary, applicable to us and participants in connection with awards under the Equity Incentive Plan. Such authorities are subject to change, which change may be retroactive. This summary assumes that all awards will be exempt from, or comply with, the rules under Section 409A of the Internal Revenue Code regarding nonqualified
deferred compensation. If an award constitutes nonqualified deferred compensation and fails to comply with Section 409A of the Code, the award will be subject to immediate taxation and a penalty tax in the year the award vests. This summary is not intended to be exhaustive, and, among other things, does not describe state, local, or non-United States tax consequences, or the effect of gift, estate or inheritance taxes.
The grant of options under the Equity Incentive Plan will not result in taxable income to the recipient of the option or an income tax deduction for TrustCo. However, the transfer of TrustCo common stock to an option holder upon exercise of his or her option may or may not give rise to taxable income to the option holder and a tax deduction for TrustCo depending upon whether such option is a nonqualified stock option or an incentive stock option.
The exercise of a nonqualified stock option by an option holder generally results in immediate recognition of taxable ordinary income by the option holder and a corresponding tax deduction for TrustCo in the amount by which the fair market value of the shares of common stock purchased, on the date of such exercise, exceeds the aggregate exercise price paid. Any appreciation or depreciation in the fair market value of those shares after the exercise date will generally result in a capital gain or loss to the holder at the time he or she disposes of those shares. The gain or loss will be long term or short term depending upon how long the stock is held by the participant prior to its sale.
The exercise of an incentive stock option by the option holder is exempt from income tax, although not from the alternative minimum tax, and does not result in a tax deduction for TrustCo if the holder has been an employee at all times beginning with the option grant date and ending three months before the date the holder exercises the option (or twelve months in the case of termination of employment due to disability). If the option holder has not been so employed during that time, the holder will be taxed as described above for nonqualified stock options. If the option holder disposes of the shares purchased more than two years after the option was granted and more than one year after the option was exercised, then the option holder will recognize any gain or loss upon disposition of those shares as capital gain or loss. However, if the option holder disposes of the shares prior to satisfying these holding periods (known as a “disqualifying disposition”), the option holder will be obligated to report as taxable ordinary income for the year in which that disposition occurs the excess, with certain adjustments, of the fair market value of the shares disposed of, on the date the incentive stock option was exercised, over the exercise price paid for those shares. TrustCo would be entitled to a tax deduction equal to that amount of ordinary income reported by the option holder. Any additional gain realized by the option holder on the disqualifying disposition would be capital gain. If the total amount realized in a disqualifying disposition is less than the exercise price of the incentive stock option, the difference would be a capital loss for the holder.
The granting of SARs does not result in taxable income to the recipient of a SAR or a tax deduction for TrustCo. Upon exercise of a SAR, the amount of any cash the participant receives and the fair market value as of the exercise date of any of TrustCo common stock received are taxable to the participant as ordinary income and deductible by TrustCo.
A participant will not recognize any taxable income upon the award of shares of restricted stock that are not transferable and are subject to a substantial risk of forfeiture. Dividends paid with respect to restricted stock prior to the lapse of restrictions applicable to that stock will be taxable as compensation income to the participant. Generally, the participant will recognize taxable ordinary income at the first time those shares become transferable or are no longer subject to a substantial risk of forfeiture, in an amount equal to the fair market value of those shares when the restrictions lapse. However, a participant may elect to recognize taxable ordinary income upon the award date of restricted stock based on the fair market value of the shares of TrustCo common stock subject to the award on the date of the award. If a participant makes that election, any dividends paid with respect to that restricted stock will not be treated as compensation income, but rather as dividend income, and the participant will not recognize additional taxable income when the restrictions applicable to his or her restricted stock award lapse. Assuming compliance with the applicable reporting requirements, TrustCo will be entitled to a tax deduction equal to the amount of ordinary income recognized by a participant in connection with his or her restricted stock award in TrustCo’s taxable year in which that participant recognizes that ordinary income.
The granting of restricted stock units does not result in taxable income to the recipient of a restricted stock unit or a tax deduction for TrustCo. The amount of cash paid or the then-current fair market value of common stock received upon settlement of the restricted stock units is taxable to the recipient as ordinary income and deductible by TrustCo.
The granting of a performance unit or performance share generally should not result in the recognition of taxable income by the recipient or a tax deduction by TrustCo. The payment or settlement of a performance unit or performance share should generally result in immediate recognition of taxable ordinary income by the recipient equal to the amount of any cash paid or the then-current fair market value of the shares of common stock received, and a corresponding tax deduction by TrustCo. If the shares covered by the award are not transferable and subject to a substantial risk of forfeiture, the tax consequences to the participant and TrustCo will be similar to the tax consequences of restricted stock awards, described above.
Generally, any amount that is treated as ordinary income (compensation) will be subject to applicable withholding requirements.
Under Section 162(m) of the Internal Revenue Code, TrustCo may be limited as to federal income tax deductions to the extent that total annual compensation in excess of $1 million is paid to TrustCo’s principal executive officer and each of its other four most highly compensated executive officers (other than the principal executive officer) who are employed by TrustCo on the last day of the taxable year. However, certain “performance-based compensation,” the material terms of which are disclosed to and approved by TrustCo shareholders, is not subject to this deduction limitation. The Equity Incentive Plan has been structured with the intention that compensation resulting from stock options and SARs granted under the Equity Incentive Plan will be qualified performance-based compensation and, assuming the Equity Incentive Plan is approved by the shareholders, deductible without regard to the limitations otherwise imposed by Section 162(m) of the Code. The Equity Incentive Plan allows the Compensation Committee
discretion to award restricted stock, performance shares, performance units, cash-based awards, and other stock-based awards that are intended to be qualified performance-based compensation, as described under “Performance-Based Awards” above.
Under certain circumstances, accelerated vesting, exercise or payment of awards under the Equity Incentive Plan in connection with a “change of control” of TrustCo might be deemed an “excess parachute payment” for purposes of the golden parachute payment provisions of Section 2800 of the Code. To the extent it is so considered, the participant holding the award would be subject to an excise tax equal to 20% of the amount of the excess parachute payment, and TrustCo would be unable to claim a tax deduction for the excess parachute payment. In addition, to the extent the award is subject to Section 162(m), accelerated vesting prior to the time the performance criteria are satisfied, the award may not qualify as “performance-based” compensation. In such cases, the $1,000,000 limitation under Section 162(m) is reduced (but not below zero) by the amount, if any, that was paid to the executive but was not deductible under 280 G.
Vote Required and Recommendation
The affirmative vote of a majority of all of TrustCo’s issued and outstanding shares of common stock is required to approve the adoption of the TrustCo Bank Corp NY 2010 Equity Incentive Plan. Abstentions on properly executed proxy cards and shares not voted by brokers and other entities holding shares on behalf of beneficial owners will have the same effect as a vote “against” this proposal. Dissenters’ rights are not available to shareholders who object to the proposal.
THE TRUSTCO BOARD RECOMMENDS THAT TRUSTCO SHAREHOLDERS VOTE “FOR” THIS PROPOSAL, WHICH IS ITEM 2 ON THE TRUSTCO PROXY CARD.
Proposal 3 – Advisory Resolution on the Compensation of TrustCo’s Named Executive Officers
Section 14A the Securities Exchange Act of 1934 requires TrustCo to providehas annually provided shareholders with the opportunity to vote to approve, on a nonbinding advisory basis, the compensation of the named executive officers as disclosed in this proxy statement, including the Compensation Discussion and Analysis, and the tabular disclosure regarding the compensation of the named executive officers and the accompanying narrative. (This opportunity is often referred to as a “say-on-pay”“say-on-pay” vote or proposal.)
Although TrustCo’s shareholders have approved holding the Thesay-on-pay vote every third year, TrustCo’s Compensation Committee and the full board of directors have determined that an annual advisory vote on the compensation of the named executive officers would better serve the Company and its shareholders. In the view of the board, since the compensation of the named executive officers is evaluated, adjusted as appropriate, and approved on an annual basis, the views of the Company’s shareholders as expressed in the say-on-pay advisory vote should also be
considered annually. Annual advisory votes, in the view of the board, provide an effective means of communicating shareholder views about the Company’s executive compensation programs.
The say-on-pay proposal described below gives TrustCo shareholders the opportunity to endorse, or not endorse, the compensation of the named executive officers. The vote on the proposal is not intended to address any specific element of executive compensation. Further, the vote is advisory, which means that it is not binding on TrustCo, its board of directors, andor the Compensation Committee. The Compensation Committee will, however, take into account the outcome of the vote when considering future executive compensation decisions. Please refer to the “Compensation Discussion and Analysis” for a discussion of the effect of the vote on thesay-on-pay proposal at TrustCo’s 2016 annual meeting on the Compensation Committee’s decisions during 2016.
As discussed in more detail in the Compensation Discussion and Analysis, TrustCo seeks to offer a compensation structure for its executive officers designed to compare favorably with its peer group while taking into account the experience and responsibilities of each particular executive officer. TrustCo also seeks to provide compensation incentives that promote the enhancement of shareholder value in conjunction with encouraging and rewarding a high level of performance evidenced through the achievement of corporate and individual financial and business objectives and managing and minimizing the level of risk inherent in any compensation program. The Compensation Committee and the board of directors believe that the policies and procedures described in the Compensation Discussion and Analysis are effective in implementing the Company’s compensation program and achieving its goals and that the compensation of the Company’s named executive officers in 20142016 reflects and supports these compensation policies and procedures.
In light of the foregoing, TrustCo is asking shareholders to vote onapprove the following resolution at the Annual Meeting:
RESOLVED, that the shareholders of TrustCo Bank Corp NY approve, on an advisory basis, the compensation of the named executive officers, as disclosed in TrustCo’s Proxy Statement for the 20152017 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 20142016 Summary Compensation Table, and the other related tables and narrative disclosure.
TrustCo Bank Corp NY 2017 Proxy Statement 11 | ||||||||
INFORMATION ON TRUSTCO DIRECTORS AND NOMINEES | ||||||||
Vote Required and Recommendation
The affirmative vote of a majority of all of TrustCo’s issued and outstanding shares of common stock is required to adopt the foregoing resolution approving the compensation of TrustCo’s named executive officers. Abstentions on properly executed proxy cards and shares not voted by brokers and other entities holding shares on behalf of beneficial owners will have the same effect as a vote “against” this proposal. Dissenters’ rights are not available to shareholders who object to the proposal.
THE TRUSTCO BOARD RECOMMENDS THAT TRUSTCO SHAREHOLDERS VOTE “FOR” THIS PROPOSAL, WHICH IS ITEM 2 ON THE TRUSTCO PROXY CARD.
Proposal 3 - Advisory Resolution on the Frequency of an Advisory Vote on the Compensation of TrustCo’s Named Executive Officers
TrustCo is required under the federal securities laws to provide shareholders the opportunity to vote, on a nonbinding, advisory basis, as to how frequently TrustCo should seek future “say on pay” advisory votes on the compensation of its named executive officers.
More specifically, TrustCo is asking whether shareholders would prefer that thesay-on-pay advisory vote occur every year, every two years or every three years. (Shareholders also may, if they wish, abstain from casting a vote on this proposal.) The board of directors will take into consideration the outcome of the resolution when considering the frequency of the advisory vote on executive compensation in the future.
Although TrustCo’s shareholders in 2011 approved holding thesay-on-pay vote every third year, TrustCo’s Compensation Committee and the full board of directors subsequently determined that an annual advisory vote on the compensation of the named executive officers would better serve the Company and its shareholders. In the view of the board, since the compensation of the named executive officers is evaluated, adjusted as appropriate, and approved on an annual basis, the views of the Company’s shareholders as expressed in thesay-on-pay advisory vote should also be considered annually. Annual advisory votes, in the view of the board, provide an effective means of communicating shareholder views about the Company’s executive compensation programs.
Because the vote on the frequency of the say on pay advisory vote also is advisory, it is not binding on the board or TrustCo in any way. It is expected, however, that the board of directors and the Compensation Committee will take the outcome of the vote into account when considering the frequency of future advisory votes on executive compensation.
Shareholders may cast a vote on the preferred voting frequency by selecting the option of one year, two years or three years (or abstain) when voting in response to the following resolution:
RESOLVED, that the shareholders of TrustCo Bank Corp NY determine, on an advisory basis, whether the preferred frequency of an advisory vote on the executive compensation of the Company’s named executive officers as set forth in the Company’s proxy statement should be every year, every two years, or every three years.
Vote Required and Recommendation
The board of directors will consider the alternative (every year, every two years, or every three years) receiving the highest number of votes as the recommendation of TrustCo shareholders with respect to the frequency of the advisory vote on executive compensation. Dissenters’ rights are not available to shareholders who object to the proposal.
THE TRUSTCO BOARD OF DIRECTORS RECOMMENDS THAT TRUSTCO SHAREHOLDERS VOTE “FOR” THEONE YEAR (EVERY YEAR)OPTION ON THIS PROPOSAL, WHICH IS ITEM 3 ON THE TRUSTCO PROXY CARD.
12 TrustCo Bank Corp NY 2017 Proxy Statement | ||||||||
INFORMATION ON TRUSTCO DIRECTORS AND NOMINEES | ||||||||
Proposal 4-4 - Ratification of the Appointment of Independent Public Accounting FirmAuditors
The Audit Committee of TrustCo’s board of directors has recommended, and the board of directors on February 17, 201521, 2017 reappointed, Crowe Horwath LLP as TrustCo’s independent accountants
Independent Auditors for the year ending December 31, 2015.2017. At the Annual Meeting, shareholders will consider and vote on the ratification of the engagement of Crowe Horwath LLP for the fiscal year ending December 31, 2015.2017. Information with respect to the services provided in 20142016 and 20132015 to TrustCo by Crowe Horwath LLP is presented under the Audit Committee discussion, above. Representatives of Crowe Horwath LLP are expected to be present at the Annual Meeting to make a statement if they so desire and are also expected to be available to respond to appropriate questions that may be raised.
The following table presents fees for professional audit services, as well as other professional or consulting services, rendered by Crowe Horwath LLP. The services included audits of TrustCo’s annual consolidated financial statements for the years ended December 31, 2016 and 2015 and of the effectiveness of internal controls over financial reporting, tax return preparation services, and other services provided by Crowe Horwath LLP during the years ended December 31, 2016 and 2015.
2016 | 2015 | |||||||
Audit fees | $ | 451,000 | 405,000 | |||||
Audit related fees(1) | 6,800 | 7,500 | ||||||
Tax fees(2) | 114,700 | 103,500 | ||||||
All other fees(3) | 181,000 | -- | ||||||
|
|
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| |||||
Total Fees | $ | 753,500 | 516,000 |
(1) | For 2016, audit related fees consisted of assistance in responding to a SEC comment letter. For 2015, audit related fees consisted of consent procedures for the Company’s Registration Statement on FormS-8 filed with the SEC. |
(2) | For 2016 and 2015, tax fees consisted of tax return preparation services and assistance with tax audits. |
(3) | For 2016, all other fees consisted of operational internal audit compliance services related to the Company’snon-financial compliance function. |
TrustCo’s Audit Committee held twelve meetings in 2016. The directors currently serving on the Audit Committee are William D. Powers (Chairman), Dennis A. De Gennaro, Brian C. Flynn, Thomas O. Maggs, Dr. Anthony J. Marinello, and William J. Purdy. The purpose of the Audit Committee is to oversee the Company’s accounting and financial reporting processes and audits of the Company’s financial statements; the committee’s functions also include the review of TrustCo’s and Trustco Bank’s internal audit procedures and the review of the adequacy of internal accounting controls for TrustCo and Trustco Bank. In addition, the Audit Committee annually recommends the use of external audit firms by TrustCo and Trustco Bank in the coming year, after reviewing performance of the existing vendors and available audit resources. Please refer to the discussion under “Audit Committee” for a more detailed description of the Audit Committee’s activities.
Vote Required and Recommendation
The affirmative vote of a majority of all of TrustCo’s issued and outstanding shares of common stock is required to ratify the appointment of Crowe Horwath LLP as TrustCo’s independent accountantsIndependent Auditors for the year ending December 31, 2015.2017. Abstentions on properly executed proxy cards and shares not voted by brokers and other entities holding shares on behalf of beneficial owners will have the same effect as a vote “against” this proposal. Dissenters’ rights are not available to shareholders who object to the proposal.
THE TRUSTCO BOARD RECOMMENDS THAT TRUSTCO SHAREHOLDERS VOTE “FOR” THIS PROPOSAL, WHICH IS ITEM 4 ON THE TRUSTCO PROXY CARD.
TrustCo’s board of directors is not aware of any other matters that may come before the Annual Meeting. If any matter not described in this proxy statement is properly presented at the Annual Meeting, the persons named in the proxy card will use their judgment to determine how to vote the shares for which they have voting authority.
TrustCo Bank Corp NY 2017 Proxy Statement 13 | ||||||||
EXECUTIVE COMPENSATION | ||||||||
Compensation Discussion and Analysis
This Compensation Discussion and Analysis (the “CD&A”) describes the objectives, policies and components of TrustCo’s 20142016 executive compensation program for its named executive officers. In addition, the CD&A will discuss and analyze the decisions of and actions taken by the Compensation Committee during, before and after 20142016 as those decisions and actions relate to such objectives and policies and the compensation paid to or earned by the named executive officers during 2014.2016.
TrustCo has identified the following as executive officers as its named executive officers for 2014:officers:
Robert J. McCormick, President &and Chief Executive Officer, TrustCo and Trustco Bank
Robert T. Cushing, Executive Vice President & Chief Operating Officer, TrustCo and Trustco Bank (effective as of December 16, 2014, in connection with Mr. Cushing’s anticipated retirement, effective May 31, 2015, Mr. Cushing’s title and responsibilities changed from Executive Vice President and Chief Financial Officer to Executive Vice President and Chief Operating Officer of Trustco Bank)
Michael M. Ozimek, Senior Vice President and Chief Financial Officer, TrustCo and Trustco Bank (Mr. Ozimek became Senior
Scot R. Salvador, Executive Vice President &and Chief Banking Officer, TrustCo and Trustco Bank
Robert M. Leonard, Executive Vice President & Secretary,and Chief Risk Officer TrustCo and Trustco Bank.
Eric W. Schreck, Treasurer, TrustCo, and Senior Vice President, Trustco Bank
Of those, Messrs. McCormick, Ozimek, Cushing, Salvador, Leonard, and Schreck are the Named Executive Officers.
Objectives of Executive Compensation Program
Our executive compensation program is designed to promote the following compensation objectives:
Encourage and reward the achievement of our short-short-term and long-term financial and strategic objectives;
Align executive interests with the interests of our shareholders to ensure their focus on long-term return to shareholders and consideration of excessive risk mitigation; and
Provide a comprehensive compensation program that fosters the retention of current executive officers and will serveserves to attract new highly-talented, results-driven executives as the need may arise.
One of the objectives in structuring executive compensation plans and programs is to consider shareholder input when and as appropriate.
14 TrustCo Bank Corp NY 2017 Proxy Statement | ||||||||
EXECUTIVE COMPENSATION | ||||||||
Engagement, Feedback and Changes
TrustCo has embraced an extensive shareholder outreach program through which ongoing shareholder input is sought regarding executive compensation and governance practices. During 2016, TrustCo reached out to its 10 largest investors, representing 36.5% of its outstanding shares. Through this outreach, TrustCo had conversations with investors representing 11% of the outstanding shares. In response to the input received, a number of substantive changes have been made. TrustCo values shareholder views and insights and believes that its engagement program builds informed relationships, promotes transparency, and improves accountability. The ultimate goal is to meaningfully relate executive pay to corporate performance. After listening to shareholder feedback and performing further analysis, TrustCo implemented the following changes:
Compensation Feature | What TrustCo Heard | What TrustCo Did | ||||||
Change in Control Provision | Single triggers are disfavored | In March of 2017, TrustCo amended its 2010 Equity Incentive plan, exclude automatic single-trigger vesting in lieu of double-trigger vesting for all future awards, subject to exceptions. | ||||||
Equity Incentive Award Plan | Absolute metrics are disfavored | In previous years TrustCo has used an absolute metric when measuring achievement of performance awards. The 2016 grants under the 2010 Equity Incentive Award Plan have been changed to a relative metric. | ||||||
Clawback Policy | The program lacks a robust recoupment mechanism | In 2016, TrustCo adopted a very robust Clawback Policy which addresses not only financial restatement recoupment, but also misconduct recoupment. | ||||||
Performance Achievement Disclosure for Equity Awards | The disclosure presentation for Performance Share Awards is inadequate | Numerous changes have been made to the presentation of information in this Proxy Statement. Particularly in response to this concern, for example, see the Performance Achievement Equity Award Disclosure below. |
Trustco has made significant and meaningful changes to the way it approaches governance and the way it discloses information about its operation and the compensation of its executives. The goal of these efforts is to provide shareholders with the data needed to fully evaluate the Company’s performance as measured against relevant metrics. The changes made demonstrate TrustCo’s commitment to such matters. TrustCo’s shareholder outreach is viewed as ongoing and not transactional and it will address other and new matters as they are presented.
In July of 2016, TrustCo adopted an Executive Compensation Clawback Policy (the “Policy”) that provides for the recovery by the Company of certain elements of compensation received by executive officers of the Company if the Company is required to restate its financial statements or if an executive officer has committed an act of material fraud or misconduct.
In general, if the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with a financial reporting requirement under the securities laws, regardless of whether such restatement is a result of misconduct, and the Compensation Committee determines that one or more of the Company’s executive officers covered by the Policy received incentive-based compensation in excess of what should have been received based on the restatement during the three completed fiscal years immediately preceding the date on which the Company is required to prepare the restatement, the Company must recover the amount of such excess compensation, subject to certain, limited exceptions.
TrustCo Bank Corp NY 2017 Proxy Statement 15 | ||||||||
EXECUTIVE COMPENSATION | ||||||||
In addition, to the extent that the Compensation Committee determines that one or more of its executive officers committed one or more willful acts of material fraud or material misconduct that directly or indirectly had a material adverse effect on the Company, the Compensation Committee may require such officers to forfeit or reimburse the Company for some or all of the incentive-based compensation or other variable compensation awarded to or received by such officers during the twelve-month period following the commission of the acts of fraud or misconduct and/or occurrence of a material adverse effect.
The Compensation Committee has the sole authority to interpret and apply the Policy.
Executive Summary of Compensation Decisions for 20142016
For the past several years, TrustCo has been transitioning its executive compensation program from a program with an emphasis on short-term and fixed pay to a program that puts a greater emphasis on long-term and performance-based compensation. In 2016, the Compensation Committee continued to emphasize long-term and performance-based compensation through suspension, or nominal use of, increases in base salaries and a continuation of the long-term and performance-based programs implemented in prior years. The following summary highlights the key decisions made and actions taken by the Compensation Committee during and prior to 20142016 with respect to the compensation paid to and earned by the named executive officers for 2014.2016.
• |
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Base Salary– For the |
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• | Executive Officer Incentive Plan–For |
• | Long-Term Equity Incentive Compensation – For 2016, TrustCo awarded a combination of restricted stock units and performance-based performance share awards to the named executive officers. As detailed in the Stock Option and Restricted Stock Unit Awards discussion below, the Compensation Committee established a 60% to 40% split of performance shares and restricted stock units, respectively. This mix of equity awards is intended by the Compensation Committee to encourage performance that increases shareholder return. |
• | Supplemental Retirement Plan (SERP) Bonus– For |
16 TrustCo Bank Corp NY 2017 Proxy Statement | ||||||||
EXECUTIVE COMPENSATION | ||||||||
Highlights of 20142016 Business Results
TrustCo continued its strong performance in 2014. Net income increased by 11% over net income for 2013. Nonperforming assets decreased 22.4%2016. Foryear-end 2016, total shareholder return was up 48.07% compared to 0.87%the peer group median of total assets and return42.57%. Return on average equity rose 39 basis pointsand efficiency ratio were 9.94% and 55.67%, respectively, compared to 11.54%8.83% and 59.13% for 2014. This strong performance contributed to a total shareholder returnthe peer group median (the peer group consists of 5.10% for our stockholders in 2014 comparedNew York, New Jersey and Florida banks and thrifts with 4.20% for our peer group.assets between two and ten billion dollars as of September 30, 2016). The Committee attributes this exceptional performance in part to the efforts of the Company’s executive officers, including the named executive officers, whose efforts are encouraged and rewarded by the Company’s executive compensation program.
Compensation Committee and Management Role in Determining Compensation for the Named Executive Officers
The Compensation Committee has responsibility for overseeing the Company’s executive compensation policies and practices, including establishing annual salaries, long-term incentive and equity incentive arrangements, annual incentive arrangements, and all other benefits and other compensation programs for the Company’s named executive officers. The Compensation Committee is solely responsible for setting the compensation of Mr. McCormick, the Company’s chief executive officerChief Executive Officer (“CEO”). As for the other named executive officers, ourthe CEO generally makes recommendations to the Compensation Committee, which then evaluates the recommendations in light of the named executive officers’ performance, the Company’s performance, and other factors, and then determines the levels and structure of compensation for these executives.
In making its decisions, the Compensation Committee will considerconsiders a number of factors including among others:
TrustCo’s and Trustco Bank’s attainment of net income goals;
The Company’s operating performance against its past performance and that of its peers;
Total shareholder return over a one to five-year period and total shareholder return in relation to total compensation;
Total asset targets;
Overall profitability from year to year; and
The Compensation Committee also considers other relevant factors, including involvement in the community, that might better position the organization to serve the immediate needs of Trustco Bank’s market. The Compensation Committee generally considers most or all of the above criteria, but does not generally assign a specific weight to any of these factors in making compensation decisions and may choose certain criteria in one year and others in other years. Except for specific goals set with respect to certain compensation programs described herein or otherwise set forth below, the Compensation Committee makes compensation decisions on a discretionary basis considering such factors and criteria as it deems appropriate from year to year.
TrustCo Bank Corp NY 2017 Proxy Statement 17 | ||||||||
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As part of the Company’s analysis, review and implementation of its executive compensation program, the Compensation Committee reviews certain aspects of the financial performance of a group of companies the Company considers to be peer companies, as well as the compensation paid to certain executive officers of these peer companies. For example, annual bonus awards paid pursuant to the Company’s Executive Officer Incentive Plan are based on the achievement of certain performance metrics relative to the achievement of the same metrics by these peer companies. In addition, the Compensation Committee typically reviews the total compensation, including base salary, incentive compensation, equity awards, and other compensation, paid to the top three to five executive officers of these peer companies. While the Compensation Committee considers certain aspects of the financial performance of peer companies and the compensation paid to the named executive officers of peer companies relative to the Company’s performance and compensation paid to the Company’s named executive officers, it doesn’tdoes not specifically benchmark compensation against these peer companies, but rathercompanies. Rather, the Compensation Committee uses the information as a general guide to setting compensation for the Company’s named executive officers.
The Compensation Committee typically determines the Company’s then currentthen-current peer group in December of each year in connection with setting certain aspects of annual compensation for the following year. The criteria the Compensation Committee uses to determine peer companies is
generally the same from year to year and consists of New York, New Jersey and Florida basedFlorida-based banks and thrifts with assets of between $2 and $10 billion measured(measured as of the end of September of each year). The Compensation Committee feelsis of the view that sinceinasmuch as the Company’s major market areas are in Upstate New York, Downstate New York/Northern New Jersey and Florida, thesecomparably-sized companies wereare a reasonable representation of its peers. The Company also has branch offices in Vermont and Massachusetts, but it views those offices as extensions of its Upstate New York operations. As of December 31, 2013,2015, the Company had total assets of approximately $4.44$4.73 billion. The composition of the peer group may change from year to year as new companies enter the relevant market or on account of the changes in the size of companies or mergers or acquisitions.
In December of 2013,2015, the Compensation Committee selected a peer group consisting of 2126 banks and thrifts, eleven of which were based in New York, seven of which were based in New Jersey and three of which were based in Florida.thrifts.
The Company’s peer group selected in 20132015 consisted of the following companies (the “Peer Group”).:
Arrow Financial Corp. | Hudson Valley Holding Corp. | |
Bridge Bancorp, Inc. | Kearny Financial Corp. | |
Canandaigua National Corporation | Lakeland Bancorp, Inc. | |
Capital Bank Financial | NBT Bancorp Inc. | |
Capital City Bank Group, Inc. | Northfield Bancorp, Inc. | |
CenterState Banks, Inc. | OceanFirst Financial Corp. | |
Community Bank System, Inc. | Oritani Financial Corp. | |
ConnectOne Bancorp, Inc. | Peapack-Gladstone Financial Corporation | |
Dime Community Bancshares, Inc. | Provident Financial Services, Inc. | |
FBC Financial | Seacoast Banking Corporation of Florida | |
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Flushing Financial Corporation |
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In addition, for 2013,2015, the Compensation Committee also reviewed compensation paid to the executive officers of companies in a peer group designed by Institutional Shareholder Services, Inc. (“ISS”), a third-party provider of corporate governance research and analysis and shareholder advisory services for TrustCo in 2013.2014. The ISS peer group was composed of companies having the same Global Industry Classification Standard as the Company and a similar asset size and market value. The ISS peer group consisted of the following companies (the “ISS Peer Group”).:
Bank Mutual Corporation |
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Berkshire Hills Bancorp, Inc. | Meta Financial Group, Inc. | |
BofI Holding, Inc. | MGIC Investment Corporation | |
Brookline Bancorp, Inc. | Northfield Bancorp, Inc. | |
Capitol Federal Financial, Inc. | Northwest Bancshares, Inc. | |
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Dime Community Bancshares, Inc. | OceanFirst Financial Corp. | |
ESB Financial Corporation | Oritani Financial Corp. | |
First Defiance Financial Corp. | Provident Financial Services, Inc. | |
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| WSFS Financial Corporation |
In December of 2013,2015, as part of itsyear-end review of the Company’s executive compensation program, the Compensation Committee reviewed the base salary and total compensation paid to the top five executive officers of the companies in the Peer Group. In addition, the Compensation Committee also compared the Company’s overall performance with that of companies in the Peer Group.
For 20122014 (the most recent period for which such information was available in December of 2013)2015), the median and average total compensation for the two separate Peer Groups was as follows:
2013 Peer Group | ISS Peer Group | 2015 Peer Group | 2015 ISS Peer Group | |||||||||||||
CEO | ||||||||||||||||
Median | 1,207,000 | 1,629,000 | $ | 1,650,000 | 1,803,000 | |||||||||||
Average | 1,971,000 | 2,191,000 | 1,957,000 | 2,545,000 | ||||||||||||
Second most highly paid Executive Officer | ||||||||||||||||
Median | 704,000 | 838,000 | 947,000 | 998,000 | ||||||||||||
Average | 1,069,000 | 1,976,000 | 1,097,000 | 1,420,000 | ||||||||||||
Third most highly paid Executive Officer | ||||||||||||||||
Median | 648,000 | 707,000 | 705,000 | 759,000 | ||||||||||||
Average | 948,000 | 920,000 | 849,000 | 944,000 | ||||||||||||
Fourth most highly paid Executive Officer | ||||||||||||||||
Median | 557,000 | 555,000 | 541,000 | 618,000 | ||||||||||||
Average | 840,000 | 672,000 | 703,000 | 848,000 | ||||||||||||
Fifth most highly paid Executive Officer | ||||||||||||||||
Median | 461,000 | 456,000 | 480,000 | 508,000 | ||||||||||||
Average | 457,000 | 527,000 | 500,000 | 606,000 |
By comparison, the total compensation for 20122014 for Messrs. McCormick, Ozimek, Cushing, Salvador, Leonard, and Schreck was $2,038,220, $1,300,930, $1,197,088, $348,133approximately $2,258,000, $246,000, $1,514,000, $1,330,000, $932,000, and $440,718$462,000, respectively.
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Utilizing performance data as of September 30, 2013,2015, the Compensation Committee concluded the Company’s overall performance compared favorably with that of the Company Peer Group. ThroughOn an annualized basis, through September 30, 2013,2015, the comparison is as follows:
As reported by SNL Financial LC, TrustCo’s return on average equity was (on an annualized basis) 10.91%10.43%, compared to a 20132015 Company Peer Group median, on an annualized basis, of 7.81%8.72% and a 20132015 Company Peer Group average of 8.38%7.89%. For the same period, on an annualized basis, TrustCo’s efficiency ratio was (on an annual basis) 52.99%56.04%, compared to the 20132015 Company Peer Group median of 62.42%61.97%, and a 20132015 Company Peer Group average of 65.10%61.76%. Further, TrustCo’s return on average assets was .89% compared to a 2015 Company Peer Group median, on an annualized basis, of .91% and a 2015 Company Peer Group average of .88%. TrustCo’snon-performing assets compared to total assets were 1.04% compared to a 2015 Company Peer Group median, on an annualized basis, of .69% and a 2015 Company Peer Group average of .86%.
While the Company is of similar size to the members of its peer group, the Compensation Committee also takes into consideration the unique size of the Company’s executive group as compared to other companies in the Company Peer Group. TrustCo and Trustco Bank currentlytypically operate with four senior executive officers, all of whom have a very broad scope of responsibilities; whereas theresponsibilities. The Compensation Committee believes that the other institutions in the Company Peer Group have a larger pool of such officers having similar responsibilities. Messrs, McCormick, Cushing Salvador, and Leonard
oversee allBased on the data available in December of the Company’s operating departments, including the departments headed by Mr. Schreck, and generally, in the view of2015, the Compensation Committee shoulder more responsibility than the top four executive officers among the companies in the Peer Group.
For 2014, the Compensation Committee was of the opinionconcluded that the base salaries and total compensation of the Company’s top threefour named executive officers (Messrs,(Messrs. McCormick, Cushing, Salvador, and Salvador) wasLeonard) were competitive with the Company Peer Group, taking into account the scope of their respective responsibilities, the compensation paid by the Company Peer Group for similar positions, and the performance of the Company relative to the Company Peer Group, while the base salaries and total compensation of Messrs, LeonardSchreck and SchreckOzimek remained below the average and median compensation levels for the fourth and fifth highest paid executive officers of both Peer Groups.levels.
In February of 2015, the Compensation Committee reviewed the financial performance of the members of the 2013 Peer Group as of December 31, 2014 compared with the Company’s performance as of December 31, 2014 in order to assess the level of achievement of the Company performance goals under the Executive Incentive Plan. See below under the headingExecutive Officer Incentive Plan for 2014 for a discussion of the Company’s performance during 2014 and the resulting compensation paid to the named executive officers under the Executive Officer Incentive Plan.
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In general, the Compensation Committee believes the Company’s senior executive officers’ compensation levels are appropriate compared with compensation paid to the senior executive officers of peer companies, based in part, upon the committee’s analysis of the enhanced responsibilities of the Company’s senior executive officers and the Company’s financial performance.
The Company periodically retains independent compensation consultants to assess the compensation of the named executive officers and certain other executives to ensure pay competitiveness.competitiveness, including Arthur J. Gallagher & Co. In addition, the Compensation Committee has the authority to retain compensation consultants, periodically reviews information provided by or through third-party sources, and often relies on TrustCo’s Human Resources Department to gather such information.
In September 2014,June of 2016, the Company engagedretained Arthur J. Gallagher &and Co. (“Gallagher”) to undertakereview the base salaries paid to Chief Risk Officers among TrustCo’s peers. Because of a surveylack of certain aspectspublicly disclosed information about Chief Risk Officers with respect to companies in the Company Peer Group, Gallagher developed a broader peer group composed of financial institutions having an asset size comparable to TrustCo’s (the “Chief Risk Officer Peer Group”). The median asset size of the compensation paid to the top five executives of each companyfinancial institutions in the Chief Risk Officer Peer Group for purposes of comparing the Company’s long-term equity incentive award program with those of the Peer Group. In collecting the data, Gallagher reviewed the peer companies’ proxy statements for 2014, 2013 and 2012 which reflected the compensation paid during 2013, 2012 and 2011. Gallagher reviewed a variety of compensation elements, including (i) the value of long-term equity incentive awards granted to executives, (ii) the types of long-term equity incentive granted to executives, and (iii) salary and target bonus levels of executives, to calculate total compensation of executives and long-term equity incentive awards as a percent of total compensation. Among other methodologies, Gallagher used regression analysis to determine the “market” level of equity and cash compensation among the peer companies.
Gallagher found that among the peer companies, 38% granted time-vested stock options, 69% granted time-vested full share awards (restricted stock and restricted stock units) and 56% granted performance-vested awards. Among other findings, Gallagher determined that, (i) while the value of the long-term equity incentive awards (stock options, restricted stock units and performance shared) granted by the Company to the named executive officers as a group was generally in line with the Peer Group, the value of the long-term equity incentive awards granted to Mr. McCormick was slightly below market, (ii) theapproximately $5 million. The median base salary for Chief Risk Officers in the Chief Risk Officer Peer Group was $301,000. Gallagher indicated that in similar circumstances, where additional responsibilities are added to core responsibilities, total compensation is typically adjusted upward by 10% to 20%. As such, based in part on the survey data, the added compliance and regulatory responsibilities attendant to a Chief Risk Officer, and Mr. Leonard was below market,Leonard’s performance in the prior year and (iii)handling of the mixadded responsibilities through the first part of time-vested stock options and time-vested full value shares (restricted stock and restricted stock units) was trending away from stock options in favor of full value shares.
Consistent with NASDAQ rules and its Charter, during 2014,2016, the Compensation Committee continuedincreased Mr. Leonard’s base salary by approximately 11% from $275,000 to seek legal advice from independent outside counsel$305,000.
The companies in connection with certain compensation matters.the Chief Risk Officer Peer Group are: Ameris Bancorp, Banc of California, Inc., Bancfirst Corp, BBCN Bancorp, Inc., Boston Private Financial Holdings, Inc., Camden National Corp., Centerstate Banks, Inc., Financial Institutions, Inc., First Connecticut Bancorp, Independent Bank Group, Inc., LegacyTexas Financial Group, Inc.; LendingClub Corp., Midwestone Financial Group, National Bank Holdings, Corp., OFG Bankcorp, Park Sterling Corp., S&T Bancorp, Inc., Seacoast Banking Corp. of Florida, South State Corp., State Bank Financial Corp., and Univest Corp of Pennsylvania.
20142016 Executive Compensation Program
For 20142016 there were three basic elements to TrustCo’s executive compensation program, each of which hassub-elements: annual compensation (comprised of salary, incentive bonus and other annual benefits), long-term compensation (comprised of stock options, restricted stock units, performance shares and the performance bonus program), and retirement compensation (comprised of defined benefit pension plan, the profit sharing/401(k) plan, and the supplemental retirement plan).
Annual Compensation | Salary, Incentive Bonus, Other Benefits | |
Long-Term Compensation | Stock Options, Restricted Stock Units, Performance Shares, Performance Bonus Program | |
Retirement Compensation | Defined Benefit Pension Plan, 401(k) Plan, and Supplemental Retirement Plan |
As a general matter, the Compensation Committee initially considers total compensation levels of the Company Peer Group prior to making compensation decisions with respect to each of the individual elements of executive compensation.
The description below provides discussion and analysis for each element of TrustCo’s executive compensation program for 2014,2016, including the relevant history of those components and the compensation decisions made for 2014.2016.
Base Salary. Annual salary is the base compensation for the Company’s named executive officers and is intended to provide a portion of compensation which is fixed to give our named executive officers resources upon which to live and provide them with a certain level of financial security. The salaries for our named executive officers are established based upon the scope of their respective responsibilities, taking into account competitive market compensation paid by the Peer Group for similar positions along with the performance of these companies relative to the performance of the Company. Salaries are reviewed at least annually and are also reviewed upon the request of the board of directors.
For 2014,2016, the Compensation Committee determined not to increase the base salaries for Messrs. McCormick, Cushing, and Salvador, which remained fixed at $880,000, $640,000, and $520,000 respectively (and base salaries for Messrs. McCormick and Cushing have remained fixed for the past fiveseven years) at $880,000, $640,000 and $510,000, respectively.. In making this determination,these determinations, the Compensation Committee reviewed comparable base salaries of executives in the Peer Group and the relative performance of the peer companies. Although the Compensation
Committee believes that these executive officers’ performance through the third quarter of 20132015 led to the Company substantially outperforming ourCompany’s solid performance relative to the Peer Group, consistent with the Company’s policy to
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gradually increase the proportion of performance-based compensation to fixed compensation, the Compensation Committee elected not to not increase their base salaries. Instead, the Compensation Committee believes that the Company’s Executive Officer Incentive Plan (annual performance bonuses) and/or the Equity Incentive Plan (stock options, restricted units and performance share awards) should beawards under the Amended and Restated TrustCo Bank Corp NY 2010 Equity Incentive Plan) are properly structured to reward exceptional performance with appropriate increased compensation.
In determining the base salaries for Messrs. LeonardSchreck and SchreckOzimek for 2014,2016, the Compensation Committee considered the Company’s overall financial performance along with the performance of the individual officers and the responsibilities each officer holds within the organization, each officer’s experience and the goals of each department for which the officer has responsibility. AfterThe Compensation Committee also considered the base salaries paid to executive officers at Peer Group Companies holding comparable positions. As previously discussed, Mr. Leonard received a recommendation from Mr. McCormick, and a review of Mr. Leonard’s overall performance during 2013, and based in part a desire to bring Mr. Leonard’s base salary furtherincrease in line with the rest of the senior executives, the Compensation Committee increasedJune 2016 attendant to his 2014 base salary from $220,000change in title to $260,000. After a recommendation from Mr. McCormick and a review of Mr. Schreck’s overall performance during 2013, consistent with prior year increases, the Committee increased his 2014 base salary from $247,500 to $255,000.Chief Risk Officer, among other reasons.
Executive Officer Incentive Plan for 20142016. The Executive Officer Incentive Plan provides for annual bonus compensation for the named executive officers based on the achievement of certain corporate performance targets. The Compensation Committee reviews and adjusts as appropriate the plan bonus opportunities, performance targets, structure and other metrics on an annual basis. In December of 2013,early 2016, the Compensation Committee met and approved the bonus opportunities, performance targets, structure and other metrics for 2014.the year.
The corporate performance targets set for 20142016 included return on average equity, return on average assets, efficiency ratio, and the ratio of nonperforming assets to total assets, each as measured against the composite performance of the Peer Group. The Compensation Committee selected these particular performance measures because it considers them to be important factors in driving corporate performance. Bonuses were earned for 20142016 only for achievement of corporate targets equal to or better than the Peer Group median and are based on threshold (20%(15% of base salary), target (30%(45% of base salary) and maximum (50%(60% of base salary) level of achievement.
The following table sets forth the corporate performance targets, weightings, levels of achievement and other details under the Executive Officer Incentive Plan for 2014. The plan does not provide for any incentive bonus payment for achievement of performance targets that is not at least equal to the Peer Group median results and bonus awards under the plan were capped at a maximum of 50% of salary in 2014.2016.
20142016 Executive Officer Incentive Plan
Performance Criteria | Weighting | Threshold Performance Level (20% of salary) | Target Performance Level (30% of salary) | Maximum Performance Level (50% of salary) | 2014 TrustCo Performance Level Compared to Peer Group Median | Award % Earned | Award % of | Weighting | Threshold Performance Level (15% of salary) | Target (45% of salary) | Maximum (60% of salary) | 2016 to Peer | Award % Earned | Award % of | ||||||||||||||||||||||||||||||||||
Return on Average Equity | 35 | % | Equal to Peer Group median to 9% above | 10% to 24% better than peer group median | 25% better than Peer Group median | 49% above | 50% | 17.50 | % | 25 | % | | Equal to 75% of Peer Group median to 9.99% above | | | 10% to 24.99% better than Peer Group median | | | 25% better than Peer Group median | | 12.62% above | 45.00 | % | 11.25 | % | |||||||||||||||||||||||
Return on Average Assets | 25 | % | 3.35% below | 15.00 | % | 3.75 | % | |||||||||||||||||||||||||||||||||||||||||
Efficiency Ratio | 35 | % | 17% above | 30% | 10.50 | % | 25 | % | -- | -- | -- | |||||||||||||||||||||||||||||||||||||
Nonperforming Assets to Total Assets | 30 | % | -- | -- | -- | 25 | % | -- | -- | -- | ||||||||||||||||||||||||||||||||||||||
Equal to Peer Group median to 9% above | 10% to 24% better than peer group median | 25% better than Peer Group median |
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Total | 28.00 | % | Total | 15.00 | % |
For 2014, the level of achievement of the corporate performance targets is set forth above andIn calculating the bonuses earned under the plan represented 28.00%Executive Officer Incentive Plan, the Compensation Committee multiplied the weighted percentages of the performance goals that were achieved (25% for “return on average equity” and “return on average assets”) by the level of achievement (target performance, 45%, for “return on average equity” and threshold performance, 15%, for “return on average assets”) by the executive’s base salary or $246,400, $179,200, $142,800, $72,800, and $71,400salary. Accordingly, the 2016 Executive Officer Incentive Plan generated bonuses for Messrs. McCormick, Ozimek, Cushing, Salvador, Leonard, and Schreck of $132,000, $35,250, $96,000, $78,000, $45,750, and $40,875, respectively. Mr. Ozimek was not eligible for this plan in 2014.
Executive Officer Incentive Plan for 2015. The Compensation Committee reviews the plan bonus opportunities, performance targets, structure and other metrics on an annual basis. In December 2014, the Compensation Committee met and approved the bonus opportunities, performance targets, structure and other metrics for 2015.
Contingent Bonus Payments.Payments In 2013, consistent. Consistent with the Company’s desire to placepractice of placing more emphasis on long-term compensation and to reward executives for sustained performance over more than one year, in early 2016, when the Executive Officer Incentive Plan was amendedCompensation Committee approved the bonus opportunities and performance targets for 2016, it required, as allowed under the plan, that to provide that a portion of the bonuses would be contingent on sustained performance. To the extent that the achievement level for 2014 results2016 resulted in bonus amounts in excess of 30% of base
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salary for the executives, payment of the amount in excess of 30% (the “Contingent Bonus”) willwould be contingent on achievement of the same corporate performance goals set for 20142016 (return on average equity, return on average assets, efficiency ratio, and the ratio ofnon-performing assets) relative to the Peer Group average performance for 2015.2017. Payment levels will bewere based on threshold (100% of Contingent Bonus), target (115% of Contingent Bonus) and maximum (120%(125% of Contingent Bonus) level of achievement. At the threshold level, the Contingent Bonus willwould not be earned unless performance for at least two of the performance goals for 2015 is2016 are within 20% of (no more than 20% worse than) of the Peer Group average performance level for 2015.2017. Payment of any amount in excess of 100% of the Contingent Bonus willwould be subject to achievement of corporate performance goals at a level better than the Peer Group average performance. For 20142016, the Executive Officers Incentive Plan paid out 28%15% of base salary to the participating executive officers. Therefore,As such, no amount of the 20142016 bonus was subject to this contingent bonusContingent Bonus payment feature.
20152016 Contingent Bonus Payment
Performance Level | Performance Criteria | Bonus Payment | ||||||
Threshold |
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At least two of the performance goals set for are achieved during 2017 at a level that is no more than 20% worse than the Peer Group average performance level | 100% of Contingent Bonus | |||||||
Target | All relative performance goals for target performance level | 115% of Contingent Bonus | ||||||
Maximum | All relative performance goals for maximum performance level | 125% of Contingent Bonus |
The Compensation Committee believes that the Executive Officer Incentive Plan, as currently structured with the addition of the long-term performance feature, will incentivizeencourage and reward executives for achievement of key corporate performance goals that will contribute to long-term sustained performance, drive long-term shareholder value creation, for 2015 and beyond, and encourage executive decision making that mitigates excessive long-term risk. Moreover, it believes that payment levels relative to base salary percentages are generally consistent with Peer Group bonus compensation levels and serve to reward executives for superior performance over more than one year with enhanced performance-based compensation in lieu of increased fixed compensation.
Annual Benefits.Benefits. The Company provides certain other annual benefits to the named executive officers in the form of (i) the benefits under its Executiveexecutive medical reimbursement plan described below, (ii) use of Company cars, (iii) country club memberships, (iv) financial planning services and (v) additional tax “gross up” payments. In addition to the specific reasons set forth below for providing these benefits, the Compensation Committee believes they help to provide a comprehensive compensation program that fosters the retention of our current executive officers and will serve to attract new highly talented, results-driven executives as the need may arise. The Compensation Committee believes that the value of these other annual benefits to the company’sCompany’s overall executive compensation program and the individual named executive officers outweighs the cost to the Company, which is set forth in the “All Other Compensation” column of the “Summary Compensation Table” below.
Executive Medical Reimbursement Plan.Plan. Messrs. McCormick, Cushing, Salvador and Leonard are participants in the Company’s Executive Medical Reimbursement Plan.executive medical reimbursement plan. The plan is intended to provide for the reimbursement of medical, hospitalization, and dental expenses that exceed the deductible orco-payment limits under the Company’s general medical insurance plans. Much like the annual base salary, and medical insurance plans provided to all employees, theThe plan is intended to provide selected named executive officers with the basic resources upon which to live and provide them with a certain level of financial security in the face of extraordinary medical expenses, thus ensuring they remain focused on the Company’s business goals.
Use of Company Cars.Cars. The Company provides all of the named executive officers with the use of a car. The Compensation Committee believes that this benefit is generally consistent with industry practice (a majority of the peer companies provide a similar benefit) and recognizes and rewards the named executive officers for their achievement to the level of a senior executive.
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Club Memberships.Memberships. The Company provides all of the named executive officers with membership in a club of their choice. The Compensation Committee believes that this benefit is generally consistent with industry practice (a majority of the peer companies provide a similar benefit) and provides a platform for the executives to entertain clients and potential clients of the Company and fosters interaction with other community leaders, which is intended to drive business development and, ultimately, Company performance.
Financial Planning.Planning.The Company pays for the cost of financial planning services for Messrs,Messrs. McCormick, Cushing, Salvador, and Leonard by a professional consulting firm. This benefit is intended to enhance the overall efficiency of the Company’s executive compensation program by ensuring that the participating executive officers consider and properly plan for the various estate tax consequences, and generally take full advantage of the Company’s various compensation programs, taking into account their individual circumstances.
Additional Tax Payments.Payments. The Company makes additional annual payments to the named executive officers to ensure that the effect of the above-mentioned other annual benefits are tax neutral to the executives. Given that these benefits are generally designed with a business purpose, this additional tax benefit ensures that the value of these other annual benefits is not diminished and does not create additional financial consequences for the executives.
Long-Term Incentive Program. The Company maintains a long-term incentive compensation program through the TrustCo Bank Corp NY 2010 Equity Incentive Plan (Amended and Restated as of March 21, 2017) (the “Equity Incentive Plan”), the Performance Bonus Plan.Plan and Performance-Based Stock Appreciation Units. The Equity Incentive Plan providesprovide for annual equity-based awards and the Performance Bonus Plan providesand the performance-Based Stock Appreciation Units provide for equity-based compensation in connection with a change in control. The Company believes that compensation in the form of equity-based awards ties the interests of the named executive officers with those of our shareholders and thereby drives long-term success.
The Equity Incentive Plan was established to advance the interests of the Company and its shareholders by providing to executive officers an opportunity to acquire equity ownership in the Company along with the incentive advantages inherent in that equity ownership. The plan allows for the grant of a variety of equity-based awards, including stock options, restricted stock, restricted stock units and performance shares, and is administered by the Compensation Committee, which is empowered to determine the time, amount and recipients of awards and the other terms and conditions of awards to be granted thereunder, including the exercise price, vesting schedule, and expiration dates.
When granting equity-based awards to any of the named executive officers, the Compensation Committee reviews the executive officer’s position and individual performance in
light of the Company’s goals to drive long-term performance and tie the interests of the named executive officers with those of our shareholders. The Compensation Committee also reviews awards granted to similarly situated officers at peerPeer Group companies. Ultimately, however, the Compensation Committee makes discretionary judgments based on these factors and its ongoing assessment and understanding of TrustCo and its executive officers. Awards are designed to ensure each named executive officer has a sense of ownership in the financial growth and the growth in total shareholder return of the Company.
In making the 20142016 annual equity awards, the Compensation Committee sought to award a specific present value of long-term compensation in the form of time-vested and performance-vested awards to each of the named executive officers based on their seniorityposition and contributions to the Company. The mix of different types of awards was intended to combine the retention and downside risk benefits inherent in restricted stock units and performance unitsshares with the shareholder value creation benefits inherent in stock options, while mitigating the perceived excessive risk that potentially manifests itself through a single type of awardsaward approach. Consistent with the Company’s continued emphasis on performance-based compensation tied to specific corporate goals, the Compensation Committee maintained its 2013past practice of weighting the 2014 equity awards more heavily towards performance-vested awards (performance shares), which again represent 50%represented 60% of the overall value granted. The Gallagher survey confirmed thatgranted in 2016 and eliminated options from the mix of time-vested awards (in the form of stock options and restricted stock units) and performance-vested awards, with a heavier weighting towards performance-vested awards, is consistent with the types of equity awards granted by companies in the Peer Group.2016 program.
Based in part on the findings in the Gallagher survey that the value of the long-term equity incentive awards (stock options, restricted stock units and performance shares) granted by the Company to the named executive officers as a group was generally in line with the Peer Group, theThe Compensation Committee sought to keep the total value of all the equity awards granted in 20142016 approximately the same as the total value to those awarded in 20132015 and 2012.2014. (The Summary Compensation Table provides additional information regarding the value of restricted stock awards and option grants.) Although the Gallagher survey found that the value of the long-term equity incentive award granted to Mr. McCormick in past years was below market, the Compensation elected not to increase the value of the award to Mr. McCormick for 2014.
Stock Option and Restricted Stock Unit Awards. In years prior to 2014,years, the Compensation Committee granted stock options and restricted stock unit awards in relatively equal proportion based on value. For example, in 2013, 50% Based upon industry data, the Committee is
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of the value attributable to time-vested equity awards was granted inview that the form of stock options and 50% was granted in the form of restricted stock unit awards. Based on the findings in the Gallagher survey, that peerPeer Group companies wereare trending away from use of stock options, for 2014options. In 2016, the Compensation Committee shifted the time-vested portion of the equity awardsentirely away from the use of stock options. The remaining 50% of the value of time-vested equity awards was granted in the form of performance shares, which are discussed in more detail below. For 2014, 35% of the valueRather, 60% of the time-vested equity awards waswere granted in the form ofperformance shares (see below) and 40% in restricted stock units and only 15% was granted in the form of stock options.units.
In 20142016 the Compensation Committee granted the following stock option and restricted stock unit awards to each of the named executive officers:
Named Executive Officer | Stock Option Awards | Restricted Stock Units | ||||
Robert J. McCormick | 50,000 | 16,250 | ||||
Robert T. Cushing | 28,000 | 8,250 | ||||
Scot R. Salvador | 28,000 | 8,250 | ||||
Robert M. Leonard | 28,000 | 8,250 | ||||
Eric W. Schreck | 7,250 | 2,250 | ||||
Michael M. Ozimek | 3,750 | 1,100 |
Named Executive Officer | Restricted Stock Units | |||
Robert J. McCormick | 19,000 | |||
Robert T. Cushing(1) | 10,000 | |||
Scot R. Salvador | 10,000 | |||
Robert M. Leonard | 10,000 | |||
Eric W. Schreck | 2,600 | |||
Michael M. Ozimek | 2,600 |
The exercise price of all stock options granted was $7.22 per share, the closing price of the Company’s common shares on November 18, 2014, the date of grant. The stock options will vest in equal annual amounts over a five year period, with all options being fully vested as of November 18, 2019. The stock options will expire on November 18, 2024 if unexercised.
(1) | Although Mr. Cushing has announced his intention to retire, a retirement date has not yet been determined. As a result, the Compensation Committee determined that it was appropriate to grant him restricted stock units. |
The periods of restriction applicable to the restricted stock unit awards will lapse as to all unitesunits awarded in a single tranche on November 18, 2017.15, 2019. In addition, vesting of options and the lapse of the restrictionrestrictions may accelerate upon certain events, including the death, disability, or retirement of an award holder or upon a change in control of TrustCo. All restricted stock units are settled in cash only; no shares of the Company’s common stock will be issued in connection with the lapse of the period of restriction applicable to the units.
The definition of “change in control” is contained in the 2010 Equity Incentive Plan and is substantially the same as the definition contained in the senior executives’ employment agreements and the performance bonus planPerformance Bonus Plan described below (and also substantially the definition set forth in the U.S. Treasury Department regulations under Section 409A of the Internal Revenue Code). The Compensation Committee believes that the definition of change in control is customary within the banking industry and that the circumstances under which change in control benefits would vest or become payable are reasonable.
Performance Share Awards. In consultation with and based onupon advice from a prior compensation consultant, in 2013 the Compensation Committee established the performance share award program under the Equity Incentive Plan. In 2014Consistent with that plan, in 2016 the Compensation Committee granted the following performance-based equity awards to each of the named executive officers:
Named Executive Officer | Performance Shares | |||
Robert J. McCormick | ||||
Robert T. Cushing(1) | ||||
Scot R. Salvador | ||||
Robert M. Leonard | ||||
Eric W. Schreck | ||||
Michael M. Ozimek |
(1) | Although Mr. Cushing has announced his intention to retire, a retirement date has not yet been determined. As a result, the Compensation Committee determined that it was appropriate to grant him performance shares. |
TrustCo Bank Corp NY 2017 Proxy Statement 25 | ||||||||
EXECUTIVE COMPENSATION | ||||||||
Each performance share represents the right to receive upon settlement an amount in cash equal to the fair market value of one share of TrustCo common stock. The performance shares generally will vest at the end of a three-year performance period based upon continued employment
through the end of the performance period and the achievement of corporate performance goals. The three-year performance period for the 20142016 awards runs from January 1, 20152017 through December 31, 20172019 (the “Performance Period”). For the awards granted in 2014,2016, the achievement of the performance goals condition will be measured byas follows:
The Company’s Return on Average Equity measured as the percentage increase in the Company’s diluted earnings per share (“Diluted EPS”) asaverage of each of the endthree years within the defined performance period against a comparative group of the Performance Period over the Company’s Diluted EPS for the year ended December 31, 2014 (“Base Diluted EPS”). Based on a 2012 peer group comparison, for those companies that granted performance-vested long term incentive awards, earnings per share was the most common criteria used. The number of performance shares subject toinstitutions with vesting will depend on the level of increase in Diluted EPS over the Base Diluted EPSand payout occurring at the end of the Performance Period.performance period and payout prior to March 15, 2020. The following table below sets forthoutlines the threshold, targetpeer ranking and maximum vesting criteriathe corresponding adjustment factor:
Return on Average Equity for the 2014 awards.Performance Period
|
| |||
Above 60th percentile of the Peer Group | 125 | % | ||
50th - 59th percentile of the Peer Group | 100 | % | ||
40th - 49th percentile of | 75 | % | ||
Below 40th percentile of the Peer Group | 0 | % |
Upon completion of the Performance Period, the Compensation Committee will evaluate and determine the extent to which the time-based vesting conditions and performance-based vesting conditions have been satisfied and will certify the level of the performance goals attained and the amount payable as a result thereof. Payment in respect of the performance shares will be made in a lump sum in cash to the recipients on a date no later than March 15 of the year following the end of the Performance Period. Performance shares may vest, and be settled, prior to the end of the Performance Period upon the death, disability or retirement of a participant, or in the event of a change in control of TrustCo.
Achievement of 2013 Performance Share Awards.In November of 2013, the named executive officers received the following Performance Share Awards which had a three-year Performance Period that expired on December 31, 2016:
Named Executive Officer | Threshold | Target | Maximum | |||||||||
Robert J. McCormick | 16,875 | 22,500 | 28,125 | |||||||||
Robert T. Cushing | 9,000 | 12,000 | 15,000 | |||||||||
Scot R. Salvador | 9,000 | 12,000 | 12,000 | |||||||||
Robert M. Leonard | 9,000 | 12,000 | 12,000 | |||||||||
Eric W. Schreck | 2,250 | 3,000 | 3,750 | |||||||||
Michael M. Ozimek | 1,125 | 1,500 | 1,875 |
Achievement of the performance goals condition was measured by the percentage increase in the Company’s diluted earnings per share as of the end of December 2016 over the Company’s diluted earnings per share as of the end of December 2013. In March 2017 the Compensation Committee determined that the performance goals for the 2013 awards were not achieved, and no payments thereon were made.
Performance Bonus Plan. The second aspect of TrustCo’s long-term incentive program is its Performance Bonus Plan, which provides compensation to certain of the Company’s senior executive officers (Messrs. McCormick, Cushing, and Salvador) in the event of a change in control of the Company. The Company has made a similar award, in the form of performance-based stock appreciation units, to Mr. Leonard under a separate agreement with him. Please refer to the discussion below under the heading “Performance-Based Stock Appreciation Unit Award”. Although the Company is not actively seeking to be acquired, the Compensation Committee understands that regional banking institutions such as the Company are continually subject to acquisition by third parties.
The Performance Bonus Plan is designed to accomplish two objectives with respect to these senior executive officers. First, the plan is intended to reward the executive officers for successful strategic acquisition that is in the best interest of our shareholders. Second, because it is unlikely that following any “change in control” (as defined in the Performance Bonus Plan), TrustCo’s senior executive officers would continue to have the same level of responsibility and compensation as they currently have with TrustCo, and because these senior executive officers may perceive
significant risks in any such reduced responsibility and compensation resulting from any such acquisition, the plan, along with the
26 TrustCo Bank Corp NY 2017 Proxy Statement | ||||||||
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change in control benefits available under the senior executives’ employment agreements, is designed to encourage these highly qualified executives to remain with the Company through the consummation of such acquisition and to attract other executives as may be necessary.
Under the Performance Bonus Plan, the selecteddesignated senior executive officers have been awarded 524,702 units, the ultimate value of which is based upon the appreciation in value of TrustCo’s common stock between the date of the award and the occurrence of a “change in control” as defined in the plan. The units so awarded vest fifteen days prior to the scheduled closing date of a change in control, upon the occurrence of an unannounced change in control, or upon a participant’s termination of employment for reasons other than cause within one year prior to a change in control. Payment to a participant under the plan must be made within ten days after the change in control.
The Compensation Committee believes that the definition of change in control (which is substantially the same as the definition contained in the senior executives’ employment agreements and is substantially the definition set forth in the U.S. Treasury Department regulations under Section 409A of the Internal Revenue Code) is customary within the banking industry and that the circumstances under which change in control payments would be made are reasonable. Each of Messrs,Messrs. McCormick, Cushing, and Salvador has been awarded an equal number of Performance Bonus Units. The Company does not make annual awards of units under the Performance Bonus Plan; rather, the units were awarded at the plan’s inception in 1997 and have subsequently been selectively awarded onlyby the Committee when a person becomes a senior executive officer.executive.
The Compensation Committee believes the Performance Bonus Plan continues to enhance the goal of an ownership culture through long-term incentives thereby advancing the interest of the Company and its shareholders. However, the Compensation Committee will continue to review this long-term incentive vehicle on an annual basis as it continues to refine its approach to long-term incentives.
Performance-Based Stock Appreciation Unit Award. In connection with the promotion of Mr. Leonard to the senior executive management team, instead of granting Mr. Leonard units under the Performance Bonus Plan, in January of 2014, the Compensation Committee granted Mr. Leonard an award of 300,000 performance-based stock appreciation units (“PSAUs”). Like awards under the Performance Bonus Plan, these units are intended to encourage Mr. Leonard to remain with the Company up to and through the consummation of a successful strategic acquisition that is in the best interest of our shareholders, and, TrustCo and Trustco Bank. To facilitate this, the units will become vested upon (i) a termination of Mr. Leonard without cause or for good reason within two years following a change in control of TrustCo or (ii) the occurrence of a change in control within 12 months following a termination of Mr. Leonard without cause or for good reason. Upon vesting, Mr. Leonard will be entitled to receive compensation based upon the appreciation in value of TrustCo’s common stock between the date of the award and the date of the occurrence of a change in control or Mr. Leonard’s termination (whichever value is greater).
Unlike the units under the Performance Bonus Plan, the PSAUs do not vest solely upon a change in control. Mr. Leonard will not receive a taxgross-up to cover potential excise taxes under Section 4999 of the Internal Revenue Code.
Mr. Ozimek and Mr. Schreck are not Executive Vice Presidents and did not participate in the Performance Bonus Plan or receive Performance-Based Stock Appreciation Unit Awards.
Stock Ownership, Anti-Hedging and Anti-Pledging Guidelines.The Company’s board of directors has adopted stock ownership guidelines for both senior management and members of the board. The board believes directors and designated members of senior management should have a financial investment in the Company. As CEO, Mr. McCormick is expected to beneficially own (including options)options to acquire shares and other equity-based awards) 350,000 shares, and as Executive Vice Presidents, Messrs. Cushing, Salvador and Leonard are each expected to beneficially own 250,000 shares each.(including options to acquire shares and other equity-based awards). These guidelines for members of senior management are expected to be achieved within four years of being appointed to their positions. Options to acquire shares of the Company’s stock count toward achievement of the guidelines. As of December 31, 20142016 Mr. McCormick beneficially owned 2,440,6323,173,440 shares and Messrs. Cushing, Salvador and Leonard beneficially owned 862,449, 517,2211,345,444, 1,077,080, and 104,527,518,026, respectively. The totals above include awards under equity plans, including awards of Performance-Based Stock Appreciation Units and awards under the Performance Bonus Plan. Additional information regarding the stock ownership of the Company’s executive officers is set forth under “Information on Trustco Executive Officers” and in the Outstanding Equity Awards–December 31, 2014Awards-December 30, 2016 table. As Senior Vice Presidents, Mr. Ozimek and Mr. Schreck are not subject to stock ownership guidelines.
TrustCo Bank Corp NY 2017 Proxy Statement 27 | ||||||||
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The retirement plans available to TrustCo’s officers and employees include the Retirement Plan of Trustco Bank, the Trustco Bank Profit Sharing/401(k) Plan, and the Company’s Supplemental Retirement Plan.
Retirement Plan and Profit Sharing/401(k) Plan. The Trustco Bank Retirement Plan is a defined benefit pension plan pursuant to which annual retirement benefits are based on years of service to a maximum of 30 years and average annual earnings of the highest five consecutive years during the final ten years of service. The defined benefit retirement plan is fully funded by Trustco Bank contributions. The Retirement Plan was “frozen,” in 2006, and there will be no new participants in the plan. Participants in the plan during 2006 are entitled to benefits accrued as of December 31, 2006. TrustCo and the Compensation Committee believe that, for companies nationwide, the primary vehicle for employee retirement benefits is the 401(k) savings plan. To meet increased employee expectations in this regard, TrustCo enhanced its Profit Sharing Plan in 2006 to include a 401(k) feature, thereby making this the primary retirement plan for TrustCo. Each of the named executive officers participates in the Retirement Plan, and in ourthe Profit Sharing/401(k) Plan.
Supplemental Retirement Plan. The Company maintains a Supplemental Retirement Plan (“SERP”), which is an unfunded, nonqualified, andnon-contributory deferred compensation plan. The amounts of supplemental retirement benefits payable under the planSERP are actuarially calculated to achieve a benefit at normal retirement that approximates the difference between (i) the total retirement benefit the participant would have received under the Trustco Bank Retirement Plan without taking into account limitations on compensation, annual benefits, and years of service and (ii) the retirement benefit the participant is projected to receive under the Trustco Bank Retirement
Plan at normal retirement (up to a maximum of $7,000,000). The Company’s annual contribution to the SERP (through 2008) and its current direct cash payments to each participant (which are described below) are determined pursuant to a formula set forth in the plan.SERP. Because the Compensation Committee established the plan to provide the supplemental retirement benefits described above, neither the annual contributions to the SERP nor the direct annual payments to be made to the senior executive officers beginning in 2009 in lieu of the SERP contributions are considered annual compensation and are not taken into account when determining other components of annual compensation.
The Compensation Committee believes that the SERP together with the Retirement Plan and the Profit Sharing/401(k) Plan promote executive retention and allow the executive to focus on the long-term success of TrustCo. Participation in the SERP is limited to a select group of executives of TrustCo who are highly compensated employees, and an employee must be selected by the board of directors to participate in the Plan. In December 2008, as a result of the effect of Section 409A of the Internal Revenue Code and its implantingimplementing regulations, which added asix-month period prior to the executive receiving the vested benefit that would be paid upon retirement or separation from service, TrustCo’s senior executives made a recommendation to the Compensation Committee to freeze the SERP effective December 31, 2008 and requested that the amount of the Company’s annual contribution to the SERP plus interest for each officer instead be paid directly to each officer. The committee considered the request and decided to add a corresponding amendment to the SERP and to each SERP participant’s employment agreement to the effect that the annual increment to be added to the SERP plus interest was to be paid directly to the executive officer. Under the employment agreement amendment, the payment is to be equal to the incremental amount that would have been credited for the year to the executive’s supplemental account balance under the SERP as such plan was in effect on December 31, 2007, and had it not been amended to cease additional benefit accruals following December 31, 2008. A similar provision was added to Mr. Leonard’s employment agreement upon his promotion to the senior executive management team. All amounts currently accrued under the SERP will remain accrued until the separation of service of the executive. Of the Company’s named executive officers, only Messrs,Messrs. McCormick, Cushing and Salvador participate in SERP.
28 TrustCo Bank Corp NY 2017 Proxy Statement | ||||||||
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As discussed in more detail below, TrustCo and Trustco Bank have entered into employment agreements (which are substantially identical to each other) with Messrs. McCormick, Cushing, and Salvador that generally provide for their annual compensation and benefits and certain termination benefits in connection with a change in control. Specifically, these agreements provide for (i) a change in control/severance payment upon the earlier to occur of a change in control or a termination of the executive’s employment within one year prior to a change in control and (ii) the transfer of certain Company provided perquisites to the executive upon a termination of the executive’s employment within two years following a change in control. In addition, the agreements provide for the reimbursement of certain post termination medical expenses in the event of a termination of the executive’s employment (i) on account of death, disability or retirement at any time during his employment, or (ii) for any reason (other than for cause) within two years following a change in control. Although the agreements are structured to avoid the
imposition of excise taxes under Section 4999 of the Internal Revenue Code, the agreements also provide for a taxgross-up payment, if necessary, to mitigate against any excise tax that might be imposed under Section 4999 and ensure that the executives receive the full intended change in control/severance payment, should any such excise tax be imposed. As noted above, these employment agreements, along with the Performance Bonus Plan, are intended to reward the Company’s most senior executive officers for a successful strategic acquisition of TrustCo and Trustco Bank that is in the best interest of our shareholders and encourage these senior executives to remain with the Company up to and through the consummation of such strategic acquisition in order to ensure a stable management team through the consummation of such transaction.
In 2013, in connection with his promotion to the senior executive management team, TrustCo and Trustco Bank also entered into an employment agreement with Mr. Leonard. Mr. Leonard’s employment agreement also provides for his annual compensation and certain termination benefits in connection with a change in control, the terms of which are also discussed in more detail below. Specifically, Mr. Leonard’s agreement provides for a change in control/severance payment to the extent he is terminated within one year prior to or two years following a change in control and the same medical reimbursement benefits and perquisite transfers provided to Messrs. McCormick, Cushing, and Salvador upon the termination of his employment for death, disability, retirement or for any reason (other than for cause) within two years following a change in control. While Mr. Leonard’s agreement is also structured to avoid the imposition of excise taxes under Section 4999 of the Internal Revenue Code, it does not provide for a similar excise taxgross-up. Similar to the employment agreements for Messrs. McCormick, Cushing, and Salvador, Mr. Leonard’s employment agreement is intended to encourage him to remain with the Company up to and through the consummation of a successful strategic acquisition of TrustCo and Trustco Bank that is in the best interest of our shareholders in order to ensure a stable management team through the consummation of such transaction.
Consulting Agreement with Mr. Cushing
In December 2014, Mr. Cushing announced his intention to retire as of May 31, 2015. In order to help the Company transition to a new Chief Financial Officer, the Company requested that Mr. Cushing serve as a consultant to the Company following his retirement through December 31, 2015. In connection therewith, in December of 2014, the Company’s board of directors approved a consulting agreement with Mr. Cushing, effective from June 1, 2015 through December 31, 2015. During the term of the agreement, Mr. Cushing will serve as an outside consultant to the Company and its affiliates on an advisory as needed basis. It is expected that the services provided will be less than twenty 20% of Mr. Cushing’s regular full time services as an employee. In addition, during the Term, Mr. Cushing will be prohibited from competing with the Company and from soliciting employees or customers of the Company. In consideration of the services to be rendered by and the restrictive covenants imposed on Mr. Cushing, he will receive a monthly consulting fee of $20,000. During the term, the Company will also provide Mr. Cushing with an office, a personal secretary, use of a vehicle, club memberships and estate planning services, consistent with those benefits provided to Mr. Cushing during his employment. The Company reserves the right to terminate the agreement upon 90 days advance written notice to Mr. Cushing.
Results of “Say-on-Pay”“Say-on-Pay” Vote
AlthoughAt the Company’s shareholders voted for holding an2016 Annual Meeting, the advisory vote on executive compensation every three years, as part“Say on Pay” drew 64.1% of the Company’s ongoing effort to consider the interests of our shareholders when determining compensation policies and programs for the named executive officers, the Company decided to hold annual advisory votes. At our 2014 annual meeting of shareholders, more than 92% of the shareholder vote (including votes for, against and abstentions, but excluding broker non-votes) wasshares cast in favor of the compensation of our named executive officers. This represents an increase inadvisory proposition, however, the number of shareholders votingshares voted in favor did not meet the Company’s required standard of a majority of the outstanding shares. In response, as discussed in detail above, the Company has enhanced its shareholder engagement and made numerous substantive changes to its compensation of our named executive officers forprogram to address the third year in a row.issues most frequently raised during engagement meetings. The Compensation CommitteeCompany believes that the results of this vote and prior years’ votes affirmed our shareholders’process has yielded a stronger compensation program that will garner majority support of the Company’s executive compensation policies and programs for our named executive officers. As a result, the Compensation Committee has generally continued its executive compensation policies and programs as set forth above, including initiatives to reduce emphasis on fixed pay and put greater emphasis on performance-based and long-term compensation. As noted above, in 2014, the Compensation Committee continued its long-term equity incentive program in the form of performance share awards to the named executive officers. In addition, instead of raising base salaries for Messrs. McCormick, Cushing and Salvador for 2014 and in order to further emphasize long-term compensation, the Compensation Committee continued to subject a portion of these executives’ annual bonus awards to a multiple-year performance hurdle through the contingent bonus opportunity described above. The Compensation Committee will continue to consider the outcome of the Company’s say-on-pay votes when making future compensation decisions for its executive team.from shareholders.
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this proxy statement with the management of TrustCo and Trustco Bank. Based on this review and discussion, the Compensation Committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement.
COMPENSATION COMMITTEE: | ||
Dennis A. De Gennaro | ||
William D. Powers | ||
William J. Purdy |
TrustCo Bank Corp NY 2017 Proxy Statement 29 | ||||||||
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Executive Compensation Payments and Awards
The following table sets forth the compensation awarded to, paid to or earned by the named executive officers of TrustCo for services rendered in all capacities to TrustCo and its subsidiaries for the fiscal years ended December 31, 2014, 20132016, 2015, and 2012.2014.
Name and Principal Position | Year | Salary | Bonus | Stock Awards(1) | Option Awards(1) | Non-equity Incentive Plan Compensation(2) | Change in Value and | All Other Compensa- | Total | |||||||||||||||||||||||||||
($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||||||||||
Robert J. McCormick President & Chief Executive Officer, TrustCo and Trustco Bank | 2014 | 880,000 | -- | 286,770 | 46,500 | 246,400 | 88,318 | 710,417 | 2,258,405 | |||||||||||||||||||||||||||
2013 | 880,000 | -- | 237,938 | 85,320 | 246,400 | -- | 678,170 | 2,127,828 | ||||||||||||||||||||||||||||
2012 | 880,000 | -- | 217,140 | 66,120 | 253,000 | 72,059 | 549,901 | 2,038,220 | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
Michael M. Ozimek(5) | 2014 | 142,500 | 32,795 | 18,876 | 3,488 | -- | 8,310 | 40,309 | 246,278 | |||||||||||||||||||||||||||
Senior Vice President & Chief Financial Officer | ||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
Robert T. Cushing(6) Executive Vice President & Chief Operating Officer, TrustCo and Trustco Bank | 2014 | 640,000 | -- | 148,830 | 26,040 | 179,200 | 111,682 | 408,382 | 1,514,134 | |||||||||||||||||||||||||||
2013 | 640,000 | -- | 126,900 | 43,200 | 179,200 | -- | 398,220 | 1,387,520 | ||||||||||||||||||||||||||||
2012 | 640,000 | -- | 108,570 | 33,060 | 184,000 | 87,513 | 247,787 | 1,300,930 | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
Scot R. Salvador | 2014 | 510,000 | -- | 148,830 | 26,040 | 142,800 | 68,186 | 434,237 | 1,330,093 | |||||||||||||||||||||||||||
Executive Vice President & Chief Banking Officer, TrustCo and Trustco Bank | 2013 | 510,000 | -- | 126,900 | 43,200 | 142,800 | -- | 421,766 | 1,244,666 | |||||||||||||||||||||||||||
2012 | 510,000 | -- | 108,570 | 33,060 | 146,625 | 56,222 | 342,611 | 1,197,088 | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
Robert M. Leonard Executive Vice President & Secretary, TrustCo and Trustco Bank | 2014 | 260,000 | -- | 148,830 | 26,040 | 72,800 | 52,968 | 371,471 | 932,109 | |||||||||||||||||||||||||||
2013 | 205,577 | -- | 126,900 | 43,200 | 57,562 | -- | 134,169 | 567,408 | ||||||||||||||||||||||||||||
2012 | 175,000 | -- | 31,020 | 6,460 | 50,313 | 43,157 | 42,183 | 348,133 | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
Eric W. Schreck Treasurer, TrustCo and Senior Vice President, Trustco Bank | 2014 | 255,000 | -- | 38,115 | 6,743 | 71,400 | 45,121 | 45,961 | 462,340 | |||||||||||||||||||||||||||
2013 | 247,500 | -- | 31,725 | 11,880 | 69,300 | -- | 43,312 | 403,717 | ||||||||||||||||||||||||||||
2012 | 240,000 | -- | 31,020 | 6,460 | 69,000 | 37,256 | 56,982 | 440,718 | ||||||||||||||||||||||||||||
|
Name and Principal Position | Year | Salary | Bonus | Stock Awards (1, 7) | Option Awards (1, 7) | Non-equity Incentive Plan Compensation (2) | Change to Pension Value and Nonqualified Deferred Compensation Earnings (3) | All Other Compensation (4) | Total | |||||||||||||||||||||||||||
($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||||||||||
Robert J. McCormick President & Chief Executive Officer, TrustCo and Trustco Bank | 2016 | 880,000 | - | 415,625 | - | 132,000 | 17,010 | 486,978 | 1,931,613 | |||||||||||||||||||||||||||
2015 | 880,000 | - | 273,230 | 49,000 | - | - | 500,789 | 1,703,019 | ||||||||||||||||||||||||||||
2014 | 880,000 | - | 286,770 | 46,500 | 246,400 | 88,318 | 710,417 | 2,258,405 | ||||||||||||||||||||||||||||
Michael M. Ozimek(5) Senior Vice President & Chief Financial Officer TrustCo and Trustco Bank | 2016 | 235,000 | - | 56,875 | - | 35,250 | 1,542 | 43,642 | 372,309 | |||||||||||||||||||||||||||
2015 | 225,000 | - | 36,840 | 7,105 | 47,250 | - | 41,949 | 358,144 | ||||||||||||||||||||||||||||
2014 | 142,500 | 32,795 | 18,876 | 3,488 | - | 8,310 | 40,309 | 246,278 | ||||||||||||||||||||||||||||
Robert T. Cushing(6) Executive Vice President & Chief Operating Officer TrustCo and Trustco Bank | 2016 | 640,000 | - | 218,750 | - | 96,000 | 22,625 | 342,527 | 1,319,902 | |||||||||||||||||||||||||||
2015 | 640,000 | - | - | - | - | - | 326,378 | 966,378 | ||||||||||||||||||||||||||||
2014 | 640,000 | - | 148,830 | 26,040 | 179,200 | 111,682 | 408,382 | 1,514,134 | ||||||||||||||||||||||||||||
Scot R. Salvador Executive Vice President & Chief Banking Officer, TrustCo and Trustco Bank | 2016 | 520,000 | - | 218,750 | - | 78,000 | 12,962 | 329,982 | 1,159,694 | |||||||||||||||||||||||||||
2015 | 520,000 | - | 141,220 | 27,440 | - | - | 317,923 | 1,006,583 | ||||||||||||||||||||||||||||
2014 | 510,000 | - | 148,830 | 26,040 | 142,800 | 68,186 | 434,237 | 1,330,093 | ||||||||||||||||||||||||||||
Robert M. Leonard Executive Vice President & Chief Risk Officer TrustCo and Trustco Bank | 2016 | 291,154 | - | 218,750 | - | 45,750 | 10,229 | 283,122 | 849,005 | |||||||||||||||||||||||||||
2015 | 275,000 | - | 141,220 | 27,440 | - | - | 275,558 | 719,218 | ||||||||||||||||||||||||||||
2014 | 260,000 | - | 148,830 | 26,040 | 72,800 | 52,968 | 371,471 | 932,109 | ||||||||||||||||||||||||||||
Eric W. Schreck Treasurer, TrustCo and Senior Vice President, Trustco Bank | 2016 | 272,500 | - | 56,875 | - | 40,875 | 8,574 | 46,075 | 424,899 | |||||||||||||||||||||||||||
2015 | 262,500 | - | 36,840 | 7,105 | 55,125 | - | 46,248 | 407,818 | ||||||||||||||||||||||||||||
2014 | 255,000 | - | 38,115 | 6,743 | 71,400 | 45,121 | 45,961 | 462,340 |
Summary Compensation Table Footnotes:
(1) | The amounts in these columns are the grant date fair value, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 “Compensation-Stock Compensation” (“FASB ASC 718”) for the stock awards (consisting of restricted stock units and performance shares) and stock option awards in |
the years ended December 31, |
(2) | The amounts in this column were determined in accordance with the Executive Officer Incentive Plan and the performance measures thereunder approved by the board of directors. The operation of this plan is discussed in the Compensation Discussion and Analysis under “Executive Officer Incentive Plan for |
(3) | The amounts in this column are derived from the change in value of vested benefits accrued under the Trustco Retirement |
30 TrustCo Bank Corp NY 2017 Proxy Statement | ||||||||
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(4) | The amounts in this column include all other compensation paid to the named executive officers including taxgross-ups (of |
(5) | Mr. Ozimek became Senior Vice President and Chief Financial Officer on December 16, 2014. In 2014, Mr. Ozimek participated in the Trustco Bank Senior Incentive Plan and received the bonus indicated. |
(6) | On December 16, 2014, Mr. Cushing, who had been Executive Vice President and Chief Financial Officer, |
(7) | At the time the 2015 stock and option awards were granted, Mr. Cushing was expected to retire on December 31, 2015 and therefore no stock and option awards were granted to him. Subsequent to the award date it was determined that Mr. Cushing’s retirement date would be delayed and a new date has not been determined. As a result he again participated in these plans in 2016. |
Plan-Based Awards for 20142016
The following two tables set forth information relating to grants of plan-based awards to the named executive officers during 2014.2016 and to stock options, restricted stock units, and performance shares held by the named executive officers as of December 31, 2016. Allnon-equity incentive plan awards were made under the Trustco Bank Executive Officer Incentive Plan as it was in effect during 2016, and all awards of stock options, restricted stock units, and performance shares were made under the Amended and Restated TrustCo Bank Corp NY 2010 Equity Incentive Plan.
Grants of Plan-Based Awards
Estimated Possible Payouts Under | Estimated Future Payouts Under Equity Incentive Plan Awards (Performance Shares(3)) | All Other Shares of Stock or (#) | All Other Option (Stock (#) | Exercise Base ($/share) | Grant Fair ($) | Estimated Possible
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| All Other Stock Awards: Number of Shares of Stock or Units (Restricted Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date(1) | Thresh-old ($) | Target ($) | Maximum ($) | Thresh-old (#) | Target (#) | Maximum (#) | Grant Date(1) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Units)(4) (#) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Robert J. McCormick | 11/18/2014 | 176,000 | 264,000 | 440,000 | 17,438 | 23,250 | 29,063 | 16,250 | 50,000 | 7.22 | 46,500 | 11/15/2016 | 176,000 | 264,000 | 440,000 | 21,375 | 28,500 | 35,625 | 19,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael M. Ozimek | 11/18/2014 | -- | -- | -- | 1,125 | 1,500 | 1,875 | 1,100 | 3,750 | 7.22 | 3,488 | 11/15/2016 | 47,000 | 70,500 | 117,500 | 2,925 | 3,900 | 4,875 | 2,600 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Robert T. Cushing | 11/18/2014 | 128,000 | 192,000 | 320,000 | 9,188 | 12,250 | 15,313 | 8,250 | 28,000 | 7.22 | 26,040 | 11/15/2016 | 128,000 | 192,000 | 320,000 | 11,250 | 15,000 | 18,750 | 10,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Scot R. Salvador | 11/18/2014 | 102,000 | 153,000 | 255,000 | 9,188 | 12,250 | 15,313 | 8,250 | 28,000 | 7.22 | 26,040 | 11/15/2016 | 104,000 | 156,000 | 260,000 | 11,250 | 15,000 | 18,750 | 10,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Robert M. Leonard | 11/18/2014 | 52,000 | 78,000 | 130,000 | 9,188 | 12,250 | 15,313 | 8,250 | 28,000 | 7.22 | 26,040 | 11/15/2016 | 58,231 | 87,346 | 145,577 | 11,250 | 15,000 | 18,750 | 10,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Eric W. Schreck | 11/18/2014 | 51,000 | 76,500 | 127,500 | 2,250 | 3,000 | 3,750 | 2,250 | 7,250 | 7.22 | 6,743 | 11/15/2016 | 54,500 | 81,750 | 136,250 | 2,925 | 3,900 | 4,875 | 2,600 |
(1) | The dates in this column represent the grant date for the equity incentive plan awards reported in this table (performance shares and restricted stock |
(2) | The amounts in these columns indicate the estimated possible payouts available for |
TrustCo Bank Corp NY 2017 Proxy Statement 31 | ||||||||
EXECUTIVE COMPENSATION | ||||||||
(3) | The amounts in these columns indicate the estimated future payouts available to the named executive officers with respect to awards of performance shares under the Amended and Restated TrustCo Bank Corp NY 2010 Equity Incentive Plan. Threshold refers to the minimum amount of performance shares for which payment may be made assuming the minimum performance levels established under the November |
(4) | The period of restriction applicable to the awards of restricted stock units under this heading lapses on November |
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As discussed in the Compensation Discussion and Analysis, the Company’s Compensation Committee established threefour weighted performance measures for 20142016 under the Executive Officer Incentive Plan. The performance measures and their respective weightings for 20142016 were (i) return on average equity (35%(25% weighting), (ii) return on average assets (25% weighting), (iii) efficiency ratio (35%(25% weighting) and (iii)(iv) the ratio of nonperforming assets to total assets (30%(25% weighting). Bonus payments under the plan were subject to the Company’s achievement of specified, weighted performance measures for 20142016 relative to the performance of TrustCo’s peer group for 20142016 as follows:
If TrustCo’s results under a performance measure were lower than the peer group median, no bonus was to be paid with respect to that measure,
If TrustCo’s results under a performance measure were equal to the75% of peer group median or exceeded the peer group median by less than 10%,to 9% above, the bonus was to be 20%15% of base salary multiplied by the weighting factor of that performance measure;
If TrustCo’s results under a performance measure exceeded the peer group median by 10% to 24%24.99%, the bonus was to be 30%45% of base salary multiplied by the weighting factor of that performance measure; and
If TrustCo’s results under a performance measure exceeded the peer group median by more than 25%, the bonus was to be 50%60% of base salary multiplied by the weighting factor of that performance measure.
The Compensation, Discussion and Analysis describes in greater detail the performance measures established under the Executive Officer Incentive Plan for 2014.2016.
On November 18, 2014,15, 2016, TrustCo approved awards of incentive stock options and restricted stock units and performance shares to its named executive officers, all of which were made under the Amended and Restated TrustCo Bank Corp NY 2010 Equity Incentive Plan. The exercise price of all options granted was $7.22, the closing price of the Company’s common stock on the NASDAQ Stock Market on November 18, 2014. The options awarded to employees and officers of TrustCo vest in equal annual installments over a five year period, with all options becoming fully vested as of November 18, 2019 and expiring on November 18, 2024. The period of restriction for the restricted stock unit awards will lapse as to all units awarded on November 18, 2017.15, 2019. The vesting of stock options and lapse of the period of restriction for the restricted stock units will accelerate under certain circumstances, including upon a change in control. Each performance share represents the right to receive upon settlement an amount in cash equal to the fair market value of one share of TrustCo common stock. The performance unit awardsshares generally will vest on December 31, 2017,at the end of a three-year performance period based upon continued employment through the end of the performance period established under those awards.
32 TrustCo Bank Corp NY 2017 Proxy Statement | ||||||||
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The following table provides information on the stock options, shares of restricted stock, restricted stock units and performance shares held by the named executive officers as of December 31, 2014.2016.
Outstanding Equity Awards as of December 31, 20142016
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Grant Date(1) | Number of Underlying | Number of Securities Underlying Unexercised Options Unexercisable | Option Price | Option Date(2) | Number of Shares or Units of Stock That Have Not Vested | Market or Units | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested(3) | |||||||||||||||||||||||||||
(#) | (#) | ($) | (#) | ($) | (#) | ($) | ||||||||||||||||||||||||||||||
Robert J. McCormick | 01/21/2005 | 200,000 | -- | 12.15 | 01/21/2015 | |||||||||||||||||||||||||||||||
06/01/2007 | 200,000 | -- | 9.91 | 06/01/2017 | ||||||||||||||||||||||||||||||||
06/02/2008 | 150,000 | -- | 8.29 | 06/02/2018 | ||||||||||||||||||||||||||||||||
11/15/2011 | 90,000 | 60,000 | 5.14 | 11/15/2021 | ||||||||||||||||||||||||||||||||
11/20/2012 | 34,800 | 52,200 | 5.17 | 11/20/2022 | 22,000 | (4) | 159,720 | 20,000 | (5) | 145,200 | ||||||||||||||||||||||||||
11/19/2013 | 15,800 | 63,200 | 7.05 | 11/19/2023 | 11,250 | (6) | 81,675 | 22,500 | (7) | 163,350 | ||||||||||||||||||||||||||
11/18/2014 | -- | 50,000 | 7.22 | 11/18/2024 | 16,250 | (8) | 117,975 | 23,250 | (9) | 168,795 | ||||||||||||||||||||||||||
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Michael M. Ozimek | 01/21/2005 | 7,500 | -- | 12.15 | 01/21/2015 | |||||||||||||||||||||||||||||||
06/01/2007 | 7,500 | -- | 9.91 | 06/01/2017 | ||||||||||||||||||||||||||||||||
06/02/2008 | 7,500 | -- | 8.29 | 06/02/2018 | ||||||||||||||||||||||||||||||||
11/15/2011 | 6,000 | 4,000 | 5.14 | 11/15/2021 | ||||||||||||||||||||||||||||||||
11/20/2012 | 2,400 | 3,800 | 5.17 | 11/20/2022 | 1,500 | (4) | 10,890 | 1,500 | (5) | 10,890 | ||||||||||||||||||||||||||
11/19/2013 | 1,100 | 4,400 | 7.05 | 11/19/2023 | 750 | (6) | 5,445 | 1,500 | (7) | 10,890 | ||||||||||||||||||||||||||
11/18/2014 | -- | 3,750 | 7.22 | 11/18/2024 | 1,100 | (8) | 7,986 | 1,500 | (9) | 10,890 | ||||||||||||||||||||||||||
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Robert T. Cushing | 01/21/2005 | 100,000 | -- | 12.15 | 01/21/2015 | |||||||||||||||||||||||||||||||
06/01/2007 | 100,000 | -- | 9.91 | 06/01/2017 | ||||||||||||||||||||||||||||||||
06/02/2008 | 75,000 | -- | 8.29 | 06/02/2018 | ||||||||||||||||||||||||||||||||
11/15/2011 | 45,000 | 30,000 | 5.14 | 11/15/2021 | ||||||||||||||||||||||||||||||||
11/20/2012 | 17,400 | 26,100 | 5.17 | 11/20/2022 | 11,000 | (4) | 79,860 | 10,000 | (5) | 72,600 | ||||||||||||||||||||||||||
11/19/2013 | 8,000 | 32,000 | 7.05 | 11/19/2023 | 6,000 | (6) | 43,560 | 12,000 | (7) | 87,120 | ||||||||||||||||||||||||||
11/18/2014 | -- | 28,000 | 7.22 | 11/18/2024 | 8,250 | (8) | 59,895 | 12,250 | (9) | 88,935 | ||||||||||||||||||||||||||
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Scot R. Salvador | 01/21/2005 | 100,000 | -- | 12.15 | 01/21/2015 | |||||||||||||||||||||||||||||||
06/01/2007 | 150,000 | -- | 9.91 | 06/01/2017 | ||||||||||||||||||||||||||||||||
06/02/2008 | 75,000 | -- | 8.29 | 06/02/2018 | ||||||||||||||||||||||||||||||||
11/15/2011 | 45,000 | 30,000 | 5.14 | 11/15/2021 | ||||||||||||||||||||||||||||||||
11/20/2012 | 17,400 | 26,100 | 5.17 | 11/20/2022 | 11,000 | (4) | 79,860 | 10,000 | (5) | 72,600 | ||||||||||||||||||||||||||
11/19/2013 | 8,000 | 32,000 | 7.05 | 11/19/2023 | 6,000 | (6) | 43,560 | 12,000 | (7) | 87,120 | ||||||||||||||||||||||||||
11/18/2014 | -- | 28,000 | 7.22 | 11/18/2024 | 8,250 | (8) | 59,895 | 12,250 | (9) | 88,935 | ||||||||||||||||||||||||||
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Robert M. Leonard | 01/21/2005 | 7,500 | -- | 12.15 | 01/21/2015 | |||||||||||||||||||||||||||||||
06/01/2007 | 7,500 | -- | 9.91 | 06/01/2017 | ||||||||||||||||||||||||||||||||
06/02/2008 | 10,000 | -- | 8.29 | 06/02/2018 | ||||||||||||||||||||||||||||||||
11/15/2011 | 9,000 | 6,000 | 5.14 | 11/15/2021 | ||||||||||||||||||||||||||||||||
11/20/2012 | 3,400 | 5,100 | 5.17 | 11/20/2022 | 3,000 | (4) | 21,780 | 3,000 | (5) | 21,780 | ||||||||||||||||||||||||||
11/19/2013 | 8,000 | 32,000 | 7.05 | 11/19/2023 | 6,000 | (6) | 43,560 | 12,000 | (7) | 87,120 | ||||||||||||||||||||||||||
11/18/2014 | -- | 28,000 | 7.22 | 11/18/2024 | 8,250 | (8) | 59,895 | 12,250 | (9) | 88,935 | ||||||||||||||||||||||||||
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Eric W. Schreck | 01/21/2005 | 7,500 | -- | 12.15 | 01/21/2015 | |||||||||||||||||||||||||||||||
06/01/2007 | 6,000 | -- | 9.91 | 06/01/2017 | ||||||||||||||||||||||||||||||||
06/02/2008 | 10,000 | -- | 8.29 | 06/02/2018 | ||||||||||||||||||||||||||||||||
11/15/2011 | 3,000 | 6,000 | 5.14 | 11/15/2021 | ||||||||||||||||||||||||||||||||
11/20/2012 | 1,700 | 5,100 | 5.17 | 11/20/2022 | 3,000 | (4) | 21,780 | 3,000 | (5) | 21,780 | ||||||||||||||||||||||||||
11/19/2013 | 2,200 | 8,800 | 7.05 | 11/19/2023 | 1,500 | (6) | 10,890 | 3,000 | (7) | 21,780 | ||||||||||||||||||||||||||
11/18/2014 | -- | 7,250 | 7.22 | 11/18/2024 | 2,250 | (8) | 16,335 | 3,000 | (9) | 21,780 |
Grant Date(1) Number of Securities Underlying Unexercised Options Exercisable Number of Securities Underlying Unexercised Options Unexercisable Option Exercise Price Option Expiration 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 (3) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested Equity Incentive Plan Awards Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested(3) Robert J. McCormick Michael M. Ozimek Robert T. Cushing(9) Scot R. Salvador Robert M. Leonard Eric W. Schreck Option Awards Stock Awards Name (#) (#) ($) (#) ($) (#) ($) 6/1/2007 200,000 0 9.91 6/1/2017 0 0 0 0 6/2/2008 150,000 0 8.29 6/2/2018 0 0 0 0 11/15/2011 150,000 0 5.14 11/15/2021 0 0 0 0 11/20/2012 69,600 17,400 5.17 11/20/2022 0 0 0 0 11/19/2013 47,400 31,600 7.05 11/19/2023 0 0 22,500 (4) 0 11/18/2014 20,000 30,000 7.22 11/18/2024 16,250 (5) 142,188 17,438 (6) 152,578 11/17/2015 10,000 40,000 6.43 11/17/2025 18,500 (7) 161,875 26,000 (8) 227,500 11/15/2016 0 0 8.05 11/15/2026 19,000 (10) 166,250 28,500 (11) 249,375 6/1/2007 7,500 0 9.91 6/1/2017 0 0 0 0 6/2/2008 7,500 0 8.29 6/2/2018 0 0 0 0 11/15/2011 2,000 0 5.14 11/15/2021 0 0 0 0 11/20/2012 1,600 1,200 5.17 11/20/2022 0 0 0 0 11/19/2013 3,300 2,200 7.05 11/19/2023 0 0 1,500 (4) 0 11/18/2014 1,500 2,250 7.22 11/18/2024 1,100 (5) 9,625 1,125 (6) 9,844 11/17/2015 1,450 5,800 6.43 11/17/2025 2,500 (7) 21,875 3,500 (8) 30,625 11/15/2016 0 0 8.05 11/15/2026 2,600 (10) 22,750 3,900 (11) 34,125 6/1/2007 100,000 0 9.91 6/1/2017 0 0 0 0 6/2/2008 75,000 0 8.29 6/2/2018 0 0 0 0 11/15/2011 15,000 0 5.14 11/15/2021 0 0 0 0 11/20/2012 8,700 8,700 5.17 11/20/2022 0 0 0 0 11/19/2013 24,000 16,000 7.05 11/19/2023 0 0 12,000 (4) 0 11/18/2014 11,200 16,800 7.22 11/18/2024 8,250 (5) 72,188 9,188 (6) 80,391 11/17/2015 0 0 6.43 11/17/2025 0 0 0 0 11/15/2016 0 0 8.05 11/15/2026 10,000 (10) 87,500 15,000 (8) 131,250 6/1/2007 150,000 0 9.91 6/1/2017 0 0 0 0 6/2/2008 75,000 0 8.29 6/2/2018 0 0 0 0 11/15/2011 35,000 0 5.14 11/15/2021 0 0 0 0 11/20/2012 25,941 8,700 5.17 11/20/2022 0 0 0 0 11/19/2013 24,000 16,000 7.05 11/19/2023 0 0 12,000 (4) 0 11/18/2014 11,200 16,800 7.22 11/18/2024 8,250 (5) 72,188 9,188 (6) 80,391 11/17/2015 5,600 22,400 6.43 11/17/2025 9,250 (7) 80,938 13,750 (8) 120,313 11/15/2016 0 0 8.05 11/15/2026 10,000 (10) 87,500 15,000 (11) 131,250 6/1/2007 7,500 0 9.91 6/1/2017 0 0 0 0 6/2/2008 10,000 0 8.29 6/2/2018 0 0 0 0 11/15/2011 3,000 0 5.14 11/15/2021 0 0 0 0 11/20/2012 1,700 1,700 5.17 11/20/2022 0 0 0 0 11/19/2013 24,000 16,000 7.05 11/19/2023 0 0 12,000 (4) 0 11/18/2014 11,200 16,800 7.22 11/18/2024 8,250 (5) 72,188 9,188 (6) 80,391 11/17/2015 5,600 22,400 6.43 11/17/2025 9,250 (7) 80,938 13,750 (8) 120,313 11/15/2016 0 0 8.05 11/15/2026 10,000 (10) 87,500 15,000 (11) 131,250 6/1/2007 6,000 0 9.91 6/1/2017 0 0 0 0 6/2/2008 10,000 0 8.29 6/2/2018 0 0 0 0 11/15/2011 0 0 5.14 11/15/2021 0 0 0 0 11/20/2012 0 1,700 5.17 11/20/2022 0 0 0 0 11/19/2013 6,600 4,400 7.05 11/19/2023 0 0 3,000 (4) 0 11/18/2014 2,900 4,350 7.22 11/18/2024 2,250 (5) 19,688 2,250 (6) 19,688 11/17/2015 0 5,800 6.43 11/17/2025 2,500 (7) 21,875 3,500 (8) 30,625 11/15/2016 0 0 8.05 11/15/2026 2,600 (10) 22,750 3,900 (11) 34,125
(1) | Awards of options vest in equal increments on each of the first through fifth anniversaries of the date of the award and become fully vested on the fifth anniversary. |
TrustCo Bank Corp NY 2017 Proxy Statement 33 | ||||||||
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(2) | Stock options are exercisable for ten years from the date of grant. |
(3) | Market value is based upon the |
(4) |
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Vesting and Payment of the Performance shares awarded on November |
(5) | Represents restricted stock units awarded on November 18, 2014, which vest in full on November 18, 2017. As noted above, settlement of the units will be in cash. |
(6) | Vesting and Payment of the Performance shares awarded on November 18, 2014 are subject to the achievement of certain performance goals. The number and value of such awards in the table above is based on the assumed achievement of the goals at the threshold level of achievement. If the performance measurement were at the maximum level, this amount would be 167% of the threshold level. If the performance goals are achieved, settlement of the awards will be in cash. |
(7) | Represents restricted stock units awarded on November 17, 2015, which will vest in full on November 17, 2018. As noted above, settlement of the units will be in cash. |
(8) | Vesting and Payment of the Performance shares awarded on November 17, 2015 are subject to the achievement of certain performance goals. The number and value of such awards in the table above is based on the assumed achievement of the goals at the target level of achievement. If the performance measurement were at the maximum level, this amount would be 125% of the target level. If the performance goals are achieved, settlement of the awards will be in cash. |
(9) | At the time the 2015 awards were granted, Mr. Cushing was expected to retire on December 31, 2015 and therefore no awards were granted to him. Subsequent to that date, it was determined that Mr. Cushing’s retirement date would be delayed, and a new date has not been determined. |
(10) | Represents restricted stock units awarded on November 15, 2016, which will vest in full on November 15, 2019. As noted above, settlement of the units will be in cash. |
(11) | Vesting and Payment of the Performance shares awarded on November 15, 2016, are subject to the achievement of certain performance goals as described in the Compensation Discussion and Analysis above under the heading “Performance Share Awards.” The number and value of such awards in the table above is based on the assumed achievement of the goals at the target level of achievement. If the performance |
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In addition to the stock option grantsawards noted above, the Company has previously issued awards under the TrustCo Bank Corp NY Performance Bonus Plan. Awards have been made to Messrs. McCormick, Cushing, and Salvador under this plan. As further discussed above in the Compensation Discussion and Analysis, the value of the Performance Bonus Units is based upon the appreciation in value of TrustCo’s common stock between the date of the award and the occurrence of a “change in control” as defined in the plan. In 1997, Mr. Cushing was awarded 524,702 units at a split-adjusted price of $5.95 per unit. In 2004, Robert J. McCormick was awarded 524,702 units at a price of $10.78 per unit, and in 2004, Mr. Salvador was awarded 524,702 units at a price of $13.15. The$13.15 per unit. In 2014, under a separate Performance Based Stock Appreciation Unit Agreement between him and TrustCo, Robert M. Leonard was issued 300,000 Performance-Based Stock Appreciation Units at price of $6.95 per unit. All of the unit prices, under the TrustCo Bank Corp NY Performance Bonus Plan or Mr. Leonard’s separate agreement, were set at the closing TrustCo stock price on the day of the award. These units have no expiration date and are not valued for accounting purposes until a change in control has occurred.
34 TrustCo Bank Corp NY 2017 Proxy Statement | ||||||||
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Stock Options Exercised and Stock Vesting
During 2014, the periodThe table below provides information on an aggregated basis concerning each exercise of stock options during 2016 by, and each vesting, or lapse of restriction lapse forperiods, with respect to awards of restricted stock units made in 2011 toand performance shares for each of the named executive officers, as follows:officers:
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||
Option Awards | Stock Awards(2) | |||||||||||||||||||||||||||||||||
Name | Number of Shares Acquired on Exercise(#) | Value Realized on Exercise($) | Number of Shares Acquired on Vesting(#) | Value Realized on Vesting(1)($) | Number Shares Acquired Exercise | Value Realized Exercise | Number Shares Acquired Vesting | Value Realized Vesting | ||||||||||||||||||||||||||
Robert J. McCormick | -- | -- | 30,000 | 220,200 | - | - | 11,250 | 91,688 | ||||||||||||||||||||||||||
Robert T. Cushing | -- | -- | 15,000 | 110,100 | 86,100 | 109,425 | 6,000 | 48,900 | ||||||||||||||||||||||||||
Scot R. Salvador | -- | -- | 15,000 | 110,100 | 29,430 | 62,641 | 6,000 | 48,900 | ||||||||||||||||||||||||||
Robert M. Leonard | -- | -- | 3,000 | 22,020 | 17,100 | 31,824 | 6,000 | 48,900 | ||||||||||||||||||||||||||
Eric W. Schreck | -- | -- | 3,000 | 22,020 | 6,150 | 16,590 | 1,500 | 12,225 | ||||||||||||||||||||||||||
Michael M. Ozimek | -- | -- | 2,500 | 18,350 | 11,200 | 33,616 | 750 | 6,113 |
(1) | Value realized on |
(2) | The amounts under “Stock Awards” aggregates the share equivalents deemed acquired, and value realized, upon the lapse during 2016 of the period of restriction of restricted stock units awarded in 2013 and the completion on December 31, 2016 of the three-year performance period applicable |
Performance targets were not achieved for the 2013 performance shares and therefore no shares or value was realized. This resulted in Messrs. McCormick, Ozimek, Cushing, Salvador, Leonard, and Schreck forfeiting 22,500, 1,500, 12,000, 12,000, 12,000, and 3,000 shares, respectively of the 2013 performance units.
Pensions and Nonqualified Deferred Compensation Benefits
As discussed in the Compensation Discussion and Analysis, TrustCo sponsors a defined benefit pension plan and a profit sharing/401(k) plan.plan covering substantially all employees. Benefits under the pension plan were frozen effective December 31, 2006, and the plan was closed to new participants effective that date.December 31, 2006.
Benefits under the pension plan are based on years of service and the employee’s highest average compensation during five consecutive years of the final ten years of employment. Compensation for purposes of the pension plan includes that compensation which is treated as FICAFederal Insurance Contributions Act (FICA) wages without regard to the Social Security taxable wage base. Compensation also includes any amounts that are treated as salary reduction contributions and used to purchase nontaxable benefits under Section 125 or Section 401(k) of the Internal Revenue Code, but excludes bonuses, overtime, commissions, and other incentive pay. A participant’s normal retirement benefit under the pension plan is an annual pension benefit commencing on his or her normal retirement date payable in an amount equal to a “Regular Benefit” plus a “Supplemental Benefit,” calculated as follows:
Regular BenefitBenefit::
1. | December 31, 1988 accrued benefit; plus |
TrustCo Bank Corp NY 2017 Proxy Statement 35 | ||||||||
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2. | 1.25% of his or her average annual compensation, multiplied by creditable service after December 31, 1988 up to thirty years; plus |
Supplemental BenefitBenefit::
3. | 0.65% of his or her average annual compensation in excess of his or her covered compensation after December 31, 1988 multiplied by creditable service up to 35 years. |
The following table presents a summary of benefits payable to each of the named executive officers under the pension plan.
( as of December 31, 2014)2016
Name | Plan Name | Number of Years Credited Service | Present Value of Accumulated | Payments During Last Year | Plan Name | Number of Years Credited Service | Present Value of Accumulated Benefit(1) | Payments During Last Year | ||||||||||||||||||||
(#) | ($) | ($) | (#) | ($) | ($) | |||||||||||||||||||||||
Robert J. McCormick | Retirement Plan of Trustco Bank | 11 | 312,641 | -- | Retirement Plan of Trustco Bank | 11 | 303,674 | - | ||||||||||||||||||||
Michael M. Ozimek | Retirement Plan of Trustco Bank | 4 | 23,206 | -- | Retirement Plan of Trustco Bank | 4 | 21,665 | - | ||||||||||||||||||||
Robert T. Cushing | Retirement Plan of Trustco Bank | 13 | 494,848 | -- | Retirement Plan of Trustco Bank | 13 | 494,160 | - | ||||||||||||||||||||
Scot R. Salvador | Retirement Plan of Trustco Bank | 11 | 223,525 | -- | Retirement Plan of Trustco Bank | 11 | 214,651 | - | ||||||||||||||||||||
Robert M. Leonard | Retirement Plan of Trustco Bank | 18 | 189,522 | -- | Retirement Plan of Trustco Bank | 18 | 184,365 | - | ||||||||||||||||||||
Eric W. Schreck | Retirement Plan of Trustco Bank | 18 | 146,501 | -- | Retirement Plan of Trustco Bank | 18 | 140,479 | - |
(1) | The Present Value of Accumulated Benefits was determined using the same assumptions used for financial reporting purposes under generally accepted accounting principles for |
Executives Eligible for Early Retirement: Participants in the pension plan are eligible for early retirement at age 55 and 10 years of vesting service. Early retirement benefits are determined using the same formula that is used for normal retirement benefits, but are reduced as follows:
Age at Early Retirement Date | Percent of Regular Benefit | Percent of Supplemental Benefit | Percent of Regular Benefit | Percent of Supplemental Benefit | ||||||||
64 | 96 | % | 93.33 | % | 96% | 93.33% | ||||||
63 | 92 | % | 86.67 | % | 92% | 86.67% | ||||||
62 | 88 | % | 80.00 | % | 88% | 80.00% | ||||||
61 | 84 | % | 73.33 | % | 84% | 73.33% | ||||||
60 | 80 | % | 66.67 | % | 80% | 66.67% | ||||||
59 | 76 | % | 63.33 | % | 76% | 63.33% | ||||||
58 | 72 | % | 60.00 | % | 72% | 60.00% | ||||||
57 | 68 | % | 56.67 | % | 68% | 56.67% | ||||||
56 | 64 | % | 53.33 | % | 64% | 53.33% | ||||||
55 | 60 | % | 50.00 | % | 60% | 50.00% |
Of the named executive officers, only Robert T. Cushing is eligible for early retirement and he has indicated his intention to retire effective May 31, 2015.retire; however, the date for his retirement has not yet been determined.
36 TrustCo Bank Corp NY 2017 Proxy Statement | ||||||||
EXECUTIVE COMPENSATION | ||||||||
The following table provides information regarding nonqualified deferred compensation earned by the named executive officers.
Nonqualified Deferred Compensation -as of December 31, 20142016
Name | Executive Contributions in Last Fiscal Year | Registrant Contributions in Last Fiscal year | Aggregate Earnings in Last Fiscal Year | Aggregate Withdrawals/ Distributions | Aggregate Balance at End of Last Fiscal Year |
| |||||||||||||||||
($) | ($) | ($) | |||||||||||||||||||||
Robert J. McCormick | |||||||||||||||||||||||
1,584,836 | |||||||||||||||||||||||
Robert T. Cushing | 3,244,059 | ||||||||||||||||||||||
Scot R. Salvador | 722,574 |
Under TrustCo’s Supplemental Retirement Plan, the amount of the supplemental retirement benefit payable to a participant is based upon contributions by TrustCo that are actuarially calculated to achieve a benefit at normal retirement that approximates the difference between (a) the total retirement benefit the participant would have received under TrustCo’s defined benefit retirement plan without taking into account limitations imposed by the defined benefit plan and applicable law on compensation, annual benefits, and years of service, and (b) the retirement benefit the participant is projected to receive under the defined benefit retirement at normal retirement. The Supplemental Retirement Plan provides benefits based upon years of service to a maximum of 40 years. The supplemental account balance of a participant on any valuation date may not exceed $7.0 million.
Payments to participants are made after the participant has terminated employment with TrustCo or Trustco Bank, and has either completed five years of vested service or is eligible for early retirement under the retirement plan. Each of the plan participants has completed five years of vested service and is therefore vested in the supplemental retirement benefit aggregate amount above. Benefits can be paid in a lump sum or spread over a period of five years in the case of normal retirement. As discussed in the Compensation Discussion and Analysis, the supplemental retirement benefit plan has been frozen and no new contributions wereare made on behalf of the participants. As noted previously, however, the annual increment that would have been added to the SERP aggregate balance was paid subsequent to 20142016 directly to the named executive officer who was a participant in the SERP, as follows:
Robert J. McCormick | $ | 581,603 | $ | 375,103 | ||||
Robert T. Cushing | 293,999 | 203,266 | ||||||
Scot R. Salvador | 340,494 | 235,550 |
In addition, Mr. Leonard was paid $217,183 as a supplemental bonus calculated in the same manner as the SERP increment for the other executive officers.
Potential Payments upon Termination or Change in Control
Employment Agreements. As noted above, TrustCo and Trustco Bank have entered into employment agreements with Messrs. McCormick, Cushing, Salvador and Leonard which provide for certain change in control/severance payments and benefits. The agreements for Messrs. McCormick Cushing and Salvador are substantially the same.
In the event the employment of Messrs. McCormick, Cushing or Salvador is terminated for any reason other than good cause or retirement at the mandatory retirement age within twelve months prior to a change in control, or a change in control occurs while the executive is employed by either or both of TrustCo or Trustco Bank, then the executive will receive an amount equal to 2.99 times his then-current annual compensation to be paid in a single lump sum within 10 days following the change in control. The employment agreement also provides for an excise taxgross-up payment in the event that the amount payable upon the executive’s termination under the employment agreement or any other agreement is subject to the excise tax imposed by Section 4999 of the Internal Revenue Code.
Upon termination of any of these executives’ employment (i) upon their death, disability or retirement, or (ii) for any reason other than good cause within two years following a change in control, TrustCo must, for the longer of the life of the executive or the life of his spouse, reimburse the executive or his spouse for otherwise unreimbursed medical expenses,
TrustCo Bank Corp NY 2017 Proxy Statement 37 | ||||||||
EXECUTIVE COMPENSATION | ||||||||
including medical insurance premiums. In addition, if any of these executives’ employment is terminated for any reason other than good cause within two years following a change in control, TrustCo must transfer the executive’s Company car (at book value) and club membership to the executive.
In the event the employment of Mr. Leonard is terminated by the Company for any reason other than good cause or by Mr. Leonard for good reason (i) withwithin twelve months prior to a change in control, or (ii) within two years following a change in control, then the executiveMr. Leonard will receive an amount equal to 2.99 times his then-current annual compensation, to be paid in a single lump sum within 10 days following the later of a change in control or his termination. Mr. Leonard is not entitled to any excise taxgross-up payment in the event that the amount payable upon the executive’s termination under the employment agreement or any other agreement is subject to the excise tastax imposed by Section 4999 of the Internal Revenue Code.
Upon the termination of Mr. Leonard’s employment (i) upon his death, disability or retirement, or (ii) by the Company for any reason other than good cause or by Mr. Leonard for good reason within two years following a change in control, Mr. Leonard is entitled to the same medical expense reimbursement as provided to Messrs. McCormick, Cushing, and Salvador, described above. Mr. Leonard will also be entitled to the same transfer of Company car and country club membership upon his termination by the Company for any reason other than good cause or by Mr. Leonard for good reason within two years following a change in control as provided to Messrs. McCormick, Cushing, and Salvador, described above.
Under the employment agreements, “good cause” means the executive’s commission of an act of fraud, embezzlement, or theft constituting a felony against either of TrustCo or Trustco Bank as finally determined by a court of competent jurisdiction or an unequivocal admission by the executive.
Also under the employment agreements, a “change in control” means a change in the ownership of TrustCo, a change in the effective control of TrustCo or Trustco Bank or a change in the ownership of a substantial portion of the assets of TrustCo or Trustco Bank as provided in
Section 409A of the Internal Revenue Code and any guidance or regulations under Section 409A. Section 409A regulations provide the following:
subject to certain exceptions specified in the agreements, a change in the ownership of TrustCo or Trustco Bank occurs on the date that any one person, or more than one person actionacting as a group, acquires ownership of stock of TrustCo that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of TrustCo or Trustco Bank;
a change in the effective control occurs only on the date that either: (i) any one person or more that on person acting as a group, acquires (or has acquired during the12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of TrustCo or Trustco Bank possessing 30% or more of the total voting power of the stock of TrustCo or (ii) a majority of members of TrustCo’s board of directors is replaced during any12-month period by directors whose appointment or election is not endorsed by a majority of the members of TrustCo’s board of directors prior to the date of the appointment or election; or
a change in the ownership of a substantial portion of TrustCo’s or Trustco Bank’s assets occurs on the date that any one person, or more than one person acting as a group acquires (or has acquired during the12-month period ending on the date of the most recent acquisition by such person or persons) assets from TrustCo or Trustco Bank that have a total gross fair market value equal to or more than 40% of the total gross fair market value all of the assets of TrustCo immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of TrustCo, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
Under Mr. Leonard’s employment agreement, “good reason” means (i) any substantial diminution in the executive’s job responsibilities or material adverse change in his title or status, (ii) a reduction in his base salary or failure to maintain his benefits at a level comparable to the level in effect at the effective date of the agreement, (iii) a determination by the Company, for reasons other than good cause, not to renew the term of the agreement, or (iv) the relocation of executive’s principal place of employment by more than 50 miles from the Company’s main headquarters as of the effective date of the agreement.
38 TrustCo Bank Corp NY 2017 Proxy Statement | ||||||||
EXECUTIVE COMPENSATION | ||||||||
Each of the employment agreements for Messrs. McCormick, Cushing, and Salvador defines “termination” to include the unilateral election of the executive to terminate the employment agreement and his employment with TrustCo and Trustco Bank or the executive otherwise experiences a “separation from service” within the meaning of Treasury Department Regulations under Section 409A of the Internal Revenue Code.
Performance Bonus.Bonus Plan. Additionally, the units awarded to Messrs. McCormick, Cushing and Salvador under the Performance Bonus Plan vest on the earlier of a change in control or the termination of their employment for reasons other than cause within one year prior to a change in control. Payment of the value of the units must be made within ten days after the change in control.
In the event that the amount payable under the Performance Bonus Plan is subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, the plan also provides for an excise taxgross-up payment to the executives. The PSAUs granted to Mr. Leonard become vested upon (i) a termination of Mr. Leonard without cause or for good reason within two years following a change in control of TrustCo or (ii) the occurrence of a change in control within 12 months following a termination of Mr. Leonard without cause or for good reason. Upon vesting, Mr. Leonard will be entitled to receive compensation based upon the appreciation in value of TrustCo’s common stock between the date of the award and the date of the occurrence of a change in control or Mr. Leonard’s termination (whichever is greater).
TrustCo Bank Corp NY Amended and Restated 2010 Equity Incentive Plan.Plan. Under the TrustCo Bank Corp NY Amended and Restated 2010 Equity Incentive Plan and the award agreements under such plan, the options will become fully vested upon retirement, disability, or death, and the period of restriction under the restricted stock and restricted stock unit awards terminate (that is, such awards “vest”) upon disability or death, but are forfeited upon retirement or other termination. Under the performance shares awarded under the Amended and Restated 2010 Equity Incentive Plan, upon retirement, disability, or death a participant will be entitled to a pro rata payment based on the number of full months’ service during the applicable performance period but taking into account achievement of performance goals during the entire performance period. In addition, all options, restricted stock, restricted stock units and performance shares that, in each case, were issued in 2016 or before will become fullfully vested upon a change in control and the performance shares will be paid out based on the achievement of performance goals up to the date of the change in control. As noted above, in March 2017, TrustCo’s Compensation Committee recommended, and the full board of directors approved, amendments to the Amended and Restated 2010 Equity Incentive Plan providing that, with respect to awards under the plan granted after January 1, 2017, there shall be no automatic vesting of solely upon achange-in-control, subject to certain exceptions. Rather, if a participant is terminated by the company or a subsidiary without cause within twenty four months after achange-in-control, all unvested outstanding awards held by such participant that were granted after January 1, 2017 will vest 100%, all options will become immediately exercisable, the restrictions applicable to restricted stock will immediately terminate, and all other awards, including SARs and restricted stock units, will immediately fully vest and be paid out. Performance units and performance shares will immediately fully vest, be settled and paid out without proration on or immediately following termination based upon the extent to which performance goals during the applicable performance period have been met up to the date of thechange-in-control, the extent to which performance goals during the performance period have been met up to the date of termination or at target, whichever provides the greatest value to the participant. The board or the Compensation Committee will have the authority under the Equity Incentive Plan to accelerate vesting of awards upon certain corporate events, including a change-in-control.
TrustCo Bank Corp NY 2017 Proxy Statement 39 | ||||||||
EXECUTIVE COMPENSATION | ||||||||
The following table reflects the amount of compensation payable to each of the named officers, upon a change in control or in the event of the termination of such executive’s employment. The amounts would be paid in accordance with each person’s employment agreement (if any) and other benefit plans and agreements as discussed in the preceding sections. The amounts shown assume that such termination was effective as of December 31, 2014,2016, and thus include amounts earned through such time, and are estimates of the amounts which would be paid out to the executives upon their termination. The amounts shown relating to equity incentives (stock options and restricted stock awards) and performance bonus units are based on the closing value of TrustCo common stock on December 31, 2014,30, 2016, which was$7.26.was $8.75. The actual amounts to be paid out can only be determined at the time of such executive’s termination of employment.
Termination andor Change in Control Payments
Termina- tion for “Good Cause”(1) | Resigna- tion by Officer Without Change in Control | Termination by Company Without Good Cause and Without Change in Control(2) | Retirement Without Change in Control(3) | Disability(4) | Death(5) | Change in Control or Termina- tion in Connection With a Change in Control(11) | ||||||||||||||||||||||
Robert J. McCormick | ||||||||||||||||||||||||||||
Salary and Bonus | $ | -- | $ | -- | $ | 3,416,006 | $ | -- | $ | -- | $ | 600,000 | $ | 3,367,936 | ||||||||||||||
Health insurance and other perquisites | -- | -- | 1,859,485 | 1,859,485 | 1,859,485 | 1,859,485 | 1,909,485 | |||||||||||||||||||||
Tax gross-up payment | -- | -- | -- | -- | -- | -- | 3,112,219 | |||||||||||||||||||||
Pension benefits(6) | 312,641 | 312,641 | 312,641 | 312,641 | 312,641 | 312,641 | 312,641 | |||||||||||||||||||||
Supplemental Retirement Plan(7) | -- | 1,584,836 | 1,584,836 | 1,584,836 | 1,584,836 | 1,584,836 | 1,584,836 | |||||||||||||||||||||
Equity incentives(9) (10) | -- | -- | -- | 669,670 | 1,029,040 | 1,029,040 | 1,355,135 | |||||||||||||||||||||
TOTAL | $ | 312,641 | $ | 1,897,477 | $ | 7,172,968 | $ | 4,426,632 | $ | 4,786,002 | $ | 5,386,002 | $ | 11,642,252 | ||||||||||||||
Michael M. Ozimek | ||||||||||||||||||||||||||||
Salary and Bonus | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | $ | 285,000 | $ | -- | ||||||||||||||
Pension benefits(6) | 23,206 | 23,206 | 23,206 | 23,206 | 23,206 | 23,206 | 23,206 | |||||||||||||||||||||
Equity incentives (9) (10) | -- | -- | -- | 45,935 | 70,256 | 70,256 | 92,036 | |||||||||||||||||||||
TOTAL | $ | 23,206 | $ | 23,206 | $ | 23,206 | $ | 69,141 | $ | 93,462 | $ | 378,462 | $ | 115,242 | ||||||||||||||
Robert T. Cushing | ||||||||||||||||||||||||||||
Salary and Bonus | $ | -- | $ | -- | $ | 2,226,398 | $ | -- | $ | -- | $ | 600,000 | $ | 2,449,408 | ||||||||||||||
Health insurance and other perquisites | -- | -- | 1,359,197 | 1,359,197 | 1,359,197 | 1,359,197 | 1,409,197 | |||||||||||||||||||||
Tax gross-up payment | -- | -- | -- | -- | -- | -- | 2,538,345 | |||||||||||||||||||||
Pension benefits(6) | 494,848 | 494,848 | 494,848 | 494,848 | 494,848 | 494,848 | 494,848 | |||||||||||||||||||||
Supplemental Retirement Plan(7) | -- | 3,244,059 | 3,244,059 | 3,244,059 | 3,244,059 | 3,244,059 | 3,244,059 | |||||||||||||||||||||
Performance Bonus Plan(8) | -- | -- | -- | -- | -- | -- | 687,360 | |||||||||||||||||||||
Equity incentives(9) (10) | -- | -- | -- | 336,875 | 520,190 | 520,190 | 691,405 | |||||||||||||||||||||
TOTAL | $ | 494,848 | $ | 3,738,907 | $ | 7,324,502 | $ | 5,434,979 | $ | 5,618,294 | $ | 6,218,294 | $ | 11,514,622 | ||||||||||||||
Scot R. Salvador | ||||||||||||||||||||||||||||
Salary and Bonus | $ | -- | $ | -- | $ | 1,986,588 | $ | -- | $ | -- | $ | 600,000 | $ | 1,951,872 | ||||||||||||||
Health insurance and other perquisites | -- | -- | 2,121,764 | 2,121,764 | 2,121,764 | 2,121,764 | 2,171,764 | |||||||||||||||||||||
Tax gross up payment | -- | -- | -- | -- | -- | -- | 2,369,677 | |||||||||||||||||||||
Pension benefits(6) | 273,525 | 273,525 | 273,525 | 273,525 | 273,525 | 273,525 | 273,525 | |||||||||||||||||||||
Supplemental Retirement Plan(7) | -- | 722,574 | 722,574 | 722,574 | 722,574 | 722,574 | 722,574 | |||||||||||||||||||||
Equity incentives (9) (10) | -- | -- | -- | 336,875 | 520,190 | 520,190 | 691,405 | |||||||||||||||||||||
TOTAL | $ | 273,525 | $ | 996,099 | $ | 5,104,451 | $ | 3,454,738 | $ | 3,638,053 | $ | 4,238,053 | $ | 8,180,817 | ||||||||||||||
Eric W. Schreck | ||||||||||||||||||||||||||||
Salary and Bonus | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | $ | 510,000 | $ | -- | ||||||||||||||
Pension benefits(6) | 146,501 | 146,501 | 146,501 | 146,501 | 146,501 | 146,501 | 146,501 | |||||||||||||||||||||
Equity incentives (9) (10) | -- | -- | -- | 49,222 | 98,227 | 98,227 | 141,787 | |||||||||||||||||||||
TOTAL | $ | 146,501 | $ | 146,501 | $ | 146,501 | $ | 195,723 | $ | 244,728 | $ | 754,728 | $ | 288,288 | ||||||||||||||
Robert M. Leonard | ||||||||||||||||||||||||||||
Salary and Bonus | $ | -- | $ | -- | $ | 630,238 | $ | -- | $ | -- | $ | 520,000 | $ | 995,072 | ||||||||||||||
Health Insurance and other perquisites | -- | -- | 2,021,117 | 2,021,117 | 2,021,117 | 2,021,117 | 2,071,117 | |||||||||||||||||||||
Pension benefits(6) | 189,522 | 189,522 | 189,522 | 189,522 | 189,522 | 189,522 | 189,522 | |||||||||||||||||||||
Performance based stock appreciation units(8) | -- | -- | -- | -- | -- | -- | 93,000 | |||||||||||||||||||||
Equity incentives(9) (10) | -- | -- | -- | 102,645 | 227,880 | 227,880 | 382,155 | |||||||||||||||||||||
TOTAL | $ | 189,522 | $ | 189,522 | $ | 2,840,877 | $ | 2,313,284 | $ | 2,438,519 | $ | 2,958,519 | $ | 3,730,866 |
Name | Termination for “Good Cause”(1) | Resignation by Officer Without Change in Control | Termination by Company Without Good Cause and Without Change in Control(2) | Retirement Without Change in Control(3) | Disability (4) | Death(5) | Change in Control or Termination in Connection With a Change in Control(11) | |||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Robert J. McCormick | ||||||||||||||||||||||||||||
Salary and Bonus(6) | - | - | 4,161,309 | - | - | 600,000 | 2,631,200 | |||||||||||||||||||||
Health insurance and other perquisites | - | - | 1,459,895 | 1,459,895 | 1,459,895 | 1,459,895 | 1,509,895 | |||||||||||||||||||||
Taxgross-up payment | - | - | - | - | - | - | 2,651,871 | |||||||||||||||||||||
Pension Benefits(7) | 303,674 | 303,674 | 303,674 | 303,674 | 303,674 | 303,674 | 303,674 | |||||||||||||||||||||
Supplemental Retirement Plan(8) | - | 1,584,836 | 1,584,836 | 1,584,836 | 1,584,836 | 1,584,836 | 1,584,836 | |||||||||||||||||||||
Equity incentives(10) (11) | - | - | - | 1,426,312 | 1,896,625 | 1,896,625 | 2,150,010 | |||||||||||||||||||||
Total | 303,674 | 1,888,510 | 7,509,714 | 4,774,717 | 5,245,030 | 5,845,030 | 10,831,486 | |||||||||||||||||||||
Michael M. Ozimek | ||||||||||||||||||||||||||||
Salary and Bonus(6) | - | - | - | - | - | 470,000 | - | |||||||||||||||||||||
Pension Benefits(7) | 21,665 | 21,665 | 21,665 | 21,665 | 21,665 | 21,665 | 21,665 | |||||||||||||||||||||
Equity incentives(10) (11) | - | - | - | 69,372 | 123,622 | 123,622 | 150,602 | |||||||||||||||||||||
Total | 21,665 | 21,665 | 21,665 | 91,037 | 145,287 | 615,287 | 172,267 | |||||||||||||||||||||
Robert T. Cushing | ||||||||||||||||||||||||||||
Salary and Bonus(6) | - | - | 2,817,798 | - | - | 600,000 | 1,913,600 | |||||||||||||||||||||
Health insurance and other perquisites | - | - | 1,045,901 | 1,045,901 | 1,045,901 | 1,045,901 | 1,095,901 | |||||||||||||||||||||
Taxgross-up payment | - | - | - | - | - | - | 2,232,699 | |||||||||||||||||||||
Pension Benefits(7) | 494,160 | 494,160 | 494,160 | 494,160 | 494,160 | 494,160 | 494,160 | |||||||||||||||||||||
Supplemental Retirement Plan(8) | - | 3,244,059 | 3,244,059 | 3,244,059 | 3,244,059 | 3,244,059 | 3,244,059 | |||||||||||||||||||||
Performance Bonus Plan(9) | - | - | - | - | - | - | 1,469,166 | |||||||||||||||||||||
Equity incentives(10) (11) | - | - | - | 315,376 | 475,063 | 475,063 | 528,657 | |||||||||||||||||||||
Total | 494,160 | 3,738,219 | 7,601,918 | 5,099,496 | 5,259,183 | 5,859,183 | 10,978,242 | |||||||||||||||||||||
Scot R. Salvador | ||||||||||||||||||||||||||||
Salary and Bonus(6) | - | - | 2,500,650 | - | - | 600,000 | 1,554,800 | |||||||||||||||||||||
Health insurance and other perquisites | - | - | 1,648,071 | 1,648,071 | 1,648,071 | 1,648,071 | 1,698,071 | |||||||||||||||||||||
Taxgross-up payment | - | - | - | - | - | - | 1,841,365 | |||||||||||||||||||||
Pension Benefits(7) | 214,651 | 214,651 | 214,651 | 214,651 | 214,651 | 214,651 | 214,651 | |||||||||||||||||||||
Supplemental Retirement Plan(8) | - | 722,574 | 722,574 | 722,574 | 722,574 | 722,574 | 722,574 | |||||||||||||||||||||
Equity incentives(10) (11) | - | - | - | 554,363 | 794,988 | 794,988 | 928,790 | |||||||||||||||||||||
Total | 214,651 | 937,225 | 5,085,946 | 3,139,659 | 3,380,284 | 3,980,284 | 6,960,251 | |||||||||||||||||||||
Robert M. Leonard | ||||||||||||||||||||||||||||
Salary and Bonus(6) | - | - | 567,933 | - | - | 600,000 | 911,950 | |||||||||||||||||||||
Health insurance and other perquisites | - | - | 1,578,788 | 1,578,788 | 1,578,788 | 1,578,788 | 1,628,788 | |||||||||||||||||||||
Pension Benefits(7) | 184,365 | 184,365 | 184,365 | 184,365 | 184,365 | 184,365 | 184,365 | |||||||||||||||||||||
Performance Bonus Plan(9) | - | - | - | - | - | - | 540,000 | |||||||||||||||||||||
Equity incentives(10) (11) | - | - | - | 297,100 | 537,725 | 537,725 | 671,527 | |||||||||||||||||||||
Total | 184,365 | 184,365 | 2,331,086 | 2,060,253 | 2,300,878 | 2,900,878 | 3,936,630 |
40 TrustCo Bank Corp NY 2017 Proxy Statement | ||||||||
EXECUTIVE COMPENSATION | ||||||||
Name | Termination for “Good Cause”(1) | Resignation by Officer Without Change in Control | Termination by Company Without Good Cause and Without Change in Control(2) | Retirement Without Change in Control(3) | Disability (4) | Death(5) | Change in Control or Termination in Connection With a Change in Control(11) | |||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
Eric W. Schreck | ||||||||||||||||||||||||||||
Salary and Bonus(6) | - | - | - | - | - | 545,000 | - | |||||||||||||||||||||
Pension Benefits(7) | 140,479 | 140,479 | 140,479 | 140,479 | 140,479 | 140,479 | 140,479 | |||||||||||||||||||||
Equity incentives(10) (11) | - | - | - | 77,268 | 141,580 | 141,580 | 175,122 | |||||||||||||||||||||
Total | 140,479 | 140,479 | 140,479 | 217,747 | 282,059 | 827,059 | 315,601 |
(1) | Under the employment agreements of Messrs. McCormick, Cushing, Salvador and Leonard, “good cause” means the commission of an act of fraud, embezzlement or theft constituting a felony against either of the Company or Trustco Bank as finally determined by a court of competent jurisdiction or an unequivocal admission by the |
(2) | The amounts in this column represent the aggregate value of the payments due under the remaining term of the employment agreements of Messrs. McCormick, Cushing, Salvador and Leonard, assuming no changes in the amount of base salary after termination and payments under the Executive Officer Incentive Plan and the additional amount payable in lieu of contributions to the Supplemental Retirement Plan. The employment agreements of Messrs. McCormick, Cushing and Salvador renewed as of January 1, |
(3) | “Retirement” means termination of employment at the earliest retirement date applicable to the named executive officer under the Trustco Bank retirement plan. As of December 31, |
(4) | “Disability” means a mental or physical condition which (i) in the opinion of a physician mutually agreed upon the by boards of directors of the Company and Trustco Bank and the named executive officer, will prevent such officer from carrying out the material job responsibilities or duties to which the officer was assigned at the time the disability was incurred and (ii) is expected to last for an infinite duration or a duration of more than six months. |
(5) | The Company provides a death benefit to all employees through a |
(6) | Includes for the remaining term of the named executive officer’s employment agreement, annual salary, bonus payment under the Company’s Executive Officer Incentive Plan and an amount equal to the incremental amount that would have been credited for the year to the executive’s supplement account balance under the Trustco Bank and TrustCo Bank Corp NY Supplemental Retirement Plan as such plan was in effect on December��31, 2007 and had it not been amended to cease additional benefit accruals following December 31, 2008. |
(7) | The actuarial present value of the named executive officer’s accumulated benefit under Trustco Bank retirement plan, determined using the same assumptions used for financial reporting purposes under generally accepted accounting principles. Benefits under the plan will be paid in accordance with the terms of the plan, which do not provide for payment of benefits in a lump sum. The company sponsors a 401k/Profit-Sharing Plan for all employees. The accumulated account balance has not been included in this benefit table. Messrs. McCormick, Ozimek, Cushing, Salvador, Leonard, and Schreck have accumulated account balances of $799,655, $325,130, $363,345, $540,955, $600,415, and $766,173 respectively. |
The amounts disclosed represent the aggregate balance as of December 31, |
The amounts disclosed represent the payment |
The amounts disclosed in the columns headed “Retirement |
TrustCo Bank Corp NY 2017 Proxy Statement 41 | ||||||||
EXECUTIVE COMPENSATION | ||||||||
satisfaction of the performance targets at the |
The amounts disclosed in the column headed |
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Compensation Policies and Practices that Present Material Risks to the Company
The Compensation Committee believes strongly that the compensation structure for the executive officers or any employee at TrustCo should not encourage undue risk taking. As discussed in the Compensation Discussion and Analysis, the Company’s executive officer compensation program includes cash and equity components with both short term (executive officer incentive plan)short-term (Executive Officer Incentive Plan) and longer-term (equity incentive plan,(Equity Incentive Plan, among others) performance measurement periods. Also as discussed, benefits under TrustCo’s compensation program may be forfeited if the executive does not remain employed at TrustCo. Further, the Equity Incentive Plan expressly provides that the TrustCo board and the Compensation Committee must work together to ensure that the implementation of the plan, in conjunction with the Company’s other compensation policies and practices, does not create risks that are reasonably likely to have a material adverse effect on the Company. As such, after a review of the Company’s compensation policies and procedures, the Compensation Committee has concluded that the risks arising from TrustCo’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.
Compensation paid or awarded to members of TrustCo’s board of directors who are not also executive officers of TrustCo or Trustco Bank is comprised of a meeting fee of $10,000 and awards under TrustCo’s Directors Equity Incentive Plan and Directors Performance Bonus Plan.
20142016 Director Compensation Table
Fees Earned or Paid in Cash (1) | Stock Awards (2) | All Other Compensation | Total | |||||||||||||||||||||||||||||
Name | Fees Earned or Paid in Cash | Stock Awards(1) | All Other Compensation(2) | Total | ($) | ($) | ($) | ($) | ||||||||||||||||||||||||
($) | ($) | ($) | ($) | |||||||||||||||||||||||||||||
Dennis A. De Gennaro | 120,000 | 10,830 | 263 | 131,093 | 122,500 | 13,125 | - | 135,625 | ||||||||||||||||||||||||
Joseph A. Lucarelli | 120,000 | 10,830 | 263 | 131,093 | ||||||||||||||||||||||||||||
Brian C. Flynn(3) | 110,000 | 13,125 | - | 123,125 | ||||||||||||||||||||||||||||
Thomas O. Maggs | 120,000 | 10,830 | 263 | 131,093 | 122,500 | 13,125 | - | 135,625 | ||||||||||||||||||||||||
Dr. Anthony J. Marinello | 120,000 | 10,830 | 263 | 131,093 | 122,500 | 13,125 | - | 135,625 | ||||||||||||||||||||||||
Robert A. McCormick | 120,000 | 10,830 | 385,382 | (3) | 516,212 | 50,000 | - | 184,704 | 234,704 | |||||||||||||||||||||||
William D. Powers | 120,000 | 10,830 | 263 | 131,093 | 120,000 | 13,125 | - | 133,125 | ||||||||||||||||||||||||
William J. Purdy | 120,000 | 10,830 | 263 | 131,093 | 110,000 | 13,125 | - | 123,125 |
(1) | Messrs. De Gennaro, Maggs and Marinello each received an additional $2,500 stipend for outreach meetings and training. |
(2) | Includes the grant date fair value, calculated in accordance with FASB ASC 718 for the restricted stock units awarded in |
42 TrustCo Bank Corp NY 2017 Proxy Statement | ||||||||
EXECUTIVE COMPENSATION | ||||||||
(3) | Mr. Flynn joined the board in February 2016. |
Includes |
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TrustCo’s Amended and Restated 2010 Directors Equity Incentive Plan provides for the periodic grant of options, restricted stock, restricted stock units, and stock appreciation rights to directors as approved by the Compensation Committee. The exercise price for options may not be less than 100% of the fair market value of TrustCo’s common stock on the NASDAQ Stock Market (generally the closing price) on the day the grants are awarded.
Outstanding options, granted under TrustCo’s Amended and Restated 2010 Directors Equity Incentive Plan and prior directors’ stock option plans, held by current TrustCo directors are as follows:
Dennis A. De Gennaro | 2,000 | |||
Thomas O. Maggs | 6,000 | |||
Anthony J. Marinello, MD, PhD | ||||
William D. Powers | ||||
William | ||||
During 2014,2016, directors were awarded restricted stock units equivalent to 1,500 shares of restricted stock units.TrustCo common stock. The period of restriction applicable to the awards will lapse as to all units awarded on November 18, 2017.15, 2019. The restricted stock units do not entitle the director to any cash or other dividend declared on theTrustCo common stock or to vote the units.
Also during 2014 directors vested in2016, the period of restriction lapsed with respect to the 1,500 restricted stock units that waswere awarded to themeach of the directors in 2011. Each2013. The units were settled in cash, with each director vested in 1,000 sharesreceiving a gross amount of Company$12,225 based on the closing price of $8.15 per share for the Company’s common stock at the market price on November 15, 2014 of $7.34 per share.18, 2016, the date restriction period lapsed.
TrustCo directors who are not also employees of TrustCo or Trustco Bank are eligible to participate in the TrustCo Bank Corp NY Directors Performance Bonus Plan, which was adopted by the TrustCo board in 1997. Under the Directors Performance Bonus Plan, nonemployee directors are eligible to be awarded “units,” the value of which is based upon the appreciation in value of TrustCo’s common stock between the date of the award and the occurrence of a “change in control” as defined in the Directors Performance Bonus Plan. (The definition of change in control is the same as the definition contained in the employment agreements for TrustCo’s named executive officers, which were described above.) The units so awarded vest and payments under the Directors Performance Bonus Plan are to be made, only upon the occurrence of a change in control. Each nonemployee director has been awarded 34,981 units under the Directors Performance Bonus Plan at a base price of $5.95 per unit, except for Mr. Lucarelli, whose base price is $8.59 per unit, Mr. Maggs, whose base price is $10.59 per unit and Mr. De Gennaro whose base price is $6.33 per unit. Mr. Flynn has not been awarded any Director Performance Bonus units at this time. Robert A. McCormick was awardedMcCormick’s award of 1,399,205 units atexpired as of his retirement as a pricedirector.
In October 2016, the board instituted a stipend to compensate currently-serving board members for the time they spend traveling out of $5.95 per unittown for training and outreach with regulators in 1997 as the Company’s Chief Executive Officer. The Directors’ Performance Bonus Plan allows awards givenamount of $1,500 for the first day of travel on a single trip and $1,000 for each additional day of travel on the same trip. Future candidates for election to an employee who is or becomes a director to retain those awards even after the employee has terminated employment so long as he or she remains a director.board of the Company, however, shall be advised that no separate travel stipend will be considered part of their compensation.
TrustCo and Robert A. McCormick have entered into a consulting agreement under which Mr. McCormick servesserved as a consultant to the board of directors of TrustCo and to the board of directors of each of its affiliates, rendering to such boards and to individual members of such boards consulting services and advice on anas-needed basis with respect to matters pertaining to TrustCo and its affiliates. The services rendered arewere advisory only, and Mr. McCormick’s services as a consultant arewere rendered at such times and places as arewere mutually convenient to the boards and Mr. McCormick. The current agreement with Mr. McCormick took effect on June 1, 2011 and hashad a five-year term.
term which terminated on May 31, 2016. As compensation for the services rendered and to be rendered by Mr. McCormick under the consulting agreement and for the
TrustCo Bank Corp NY 2017 Proxy Statement 43 | ||||||||
EXECUTIVE COMPENSATION | ||||||||
noncompetition covenant set forth in that agreement, TrustCo paid Mr. McCormick in 2014 aan annual fee in the amount of $200,000. In the event of Mr. McCormick’s death or disability (as defined in the agreement) during the term of the consulting agreement, TrustCo will be obligated to pay to his estate or other designated beneficiary the full amount of the annual fee for the term year (June 1 to May 31) in which his death or disability occurred. TrustCo may terminate the consulting agreement upon not less than one year’s prior written notice to Mr. McCormick.
Also, in connection with the consulting agreement Mr. McCormick iswas provided office facilities and the use of a personal secretary, ongoing use of a company vehicle, club, estate planning services, and tax payments on these benefits. The cost of these is included in the table as other compensation.
Finally, under Mr. McCormick’s employment agreement, TrustCo and/or Trustco Bank will provideterm expired at no cost tothe 2016 Annual Meeting, and Mr. McCormick retired from the board at that time. The consulting agreement expired on May 31, 2016 and his wife, for the rest of Mr. McCormick’s life, or the life of his spouse, the same health insurance benefits provided towas not renewed. In July 2016, Mr. McCormick was elected and his family by TrustCo and Trustco Bank prior to his retirement. TrustCo and Trustco Bank will also provide to Mr. McCormick for his lifedeclared Director Emeritus of the same life insurance benefits provided to retirees by TrustCo and Trustco Bank under their life insurance plan. As a retired employee, Mr. McCormick also participatesCompany. He currently serves in and receives benefits fromthis honorary position. He has no operational or consulting role in the Trustco Retirement Plan in accordance with the plan provisions.Company.
Ownership of TrustCo Common Stock by Certain Beneficial Owners
TrustCo is not aware of any person who, as of the date hereof, is the beneficial owner of more than 5% of its common stock, except as described below:
Name and | Amount | Percent | ||||||
BlackRock, Inc. | 11,049,880 | (1) | 11.5 | % | ||||
55 East 52nd Street | ||||||||
New York, NY 10055 | ||||||||
Royce & Associates, LLC | % | |||||||
745 Fifth Avenue | ||||||||
New York, NY 10151 | ||||||||
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| 4,894,503 | (4) | 5.1 | % | ||||
100 Vanguard Blvd. | ||||||||
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(1) | Based solely upon an |
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(2) | Based solely upon an amendment to Schedule 13G filed with the SEC by the listed person on January 23, 2017, containing information as of December 31, |
(3) | Based solely upon |
(4) | Based solely upon a Schedule 13G filed with the SEC by the listed person on February 13, 2017. According to the Schedule 13G, The Vanguard Group, Inc. |
On March 1, 2015,2017, the Financial Services Department of Trustco Bank held 225,555126,066 shares of TrustCo common stock as executor, trustee, and agent (0.24%(0.2% of outstanding shares) not otherwise reported in this proxy statement. Neither TrustCo nor Trustco Bank has any beneficial interest in these shares.
44 TrustCo Bank Corp NY 2017 Proxy Statement | ||||||||
EXECUTIVE COMPENSATION | ||||||||
Transactions with TrustCo and Trustco Bank Directors, Executive Officers and Associates
The Company has adopted policies and procedures for the review, approval, or ratification of transactions with its directors and executive officers or their related persons, such as immediate family members. TrustCo’s Code of Conduct requires transactions between TrustCo or Trustco Bank and any of their directors or executive officers (or their respective immediate family members) be fully disclosed and be reviewed and, if appropriate, approved by the board or board members who do not have an interest in the transaction in question.
Certain directors and executive officers of TrustCo and Trustco Bank, or corporations and firmsbusinesses or other organizations with which these individuals are associated, are also deposit or trust customers of Trustco Bank, or have obtained loans or other extensions of credit from Trustco Bank. TrustCo expects that theythese persons will continue to be deposit, trust, or loan customers of Trustco Bank in the future. All such loans were made in the ordinary course of business, do not involve more than normal risk of collectability, do not present other unfavorable features, and were made on substantially the same terms, including interest rates and collateral, as those prevailing at the same time for comparable Trustco Bank transactions with unaffiliated persons. Further, federal regulations require that all loans or extensions of credit to TrustCo executive officers and directors by Trustco Bank be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, except for loans made under programs generally available to all employees, and must not involve more than the normal risk of repayment or present other unfavorable features. Also under federal regulations, loans made to a director or executive officer in an amount that, when aggregated with the amount of all other loans to such person and his or her related interests, are in excess of the greater of $25,000 or 5% of the institution’s capital and surplus (up to a maximum of $500,000) must be approved in advance by a majority of the disinterested members of the board of directors. TrustCo and Trustco Bank have adopted written policies and procedures that implement these requirements.
Trustco Bank obtains legal services from, and pays fees to, Overton, Russell, Doerr, and Donovan, LLP, a law firm in which Thomas R. McCormick, son of Robert A. McCormick and brother of Robert J. McCormick, is a partner. Trustco Bank obtains such services at rates that are substantially the same as those the firm charges other clients, and the firm is one of a number of law firms that is retained by TrustCo to provide legal services to it. During the year ended December 31, 2014, $467,4842016, $470,845 of legal fees were paid to Overton, Russell, Doerr, and Donovan, LLP. Also, TrustCo has entered into a consulting agreement with Robert A. McCormick as more specifically set forth previously in the discussion of Director Compensation. Each of the loans and other transactions or arrangements described above was approved by the board of directors, or appropriate board committee, in accordance with TrustCo and Trustco Bank policies.
Insurance for Indemnification of Officers and Directors
TrustCo’s bylaws provide detailed procedures to address circumstances under which an officer or director of TrustCo may seek indemnification from TrustCo and when such indemnification may be authorized. TrustCo’s employment agreements with Robert J. McCormick, Robert T. Cushing, Scot R. Salvador, and Robert M. Leonard contain provisions that obligate
TrustCo or Trustco Bank to indemnify the officers under certain circumstances. The form of these agreements werefor Messrs. McCormick, Cushing, and Salvador was filed as an exhibit to theTrustCo’s Current Report on Form8-K filed December 22, 2008 and an amendment to the agreement was disclosed in a Current Report on Form8-K filed March 17, 2009. Mr. Leonard’s agreement was filed as an exhibit to TrustCo’s Current Report on Form8-K filed on November 25, 2013. TrustCo renewed insurance for the indemnification of its executive officers and directors of TrustCo and Trustco Bank from Zurich American Insurance Company for the primary coverage and a series of insurance companies for supplemental layers of coverage effective for theone-year period from October 10, 20142016 to October 10, 2015.2017. The cost of this insurance was $503,015,$532,470, and coverage is provided to all executive officers and directors of TrustCo and Trustco Bank. TrustCo’s board of directors has no knowledge of any claims made or sum paid pursuant to such insurance policy during 2014.2016.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires TrustCo’s directors, executive officers, and persons who own more than 10% of a registered class of TrustCo’s equity securities to file initial reports of ownership and reports of changes in ownership in TrustCo’s common stock with the S.E.C.SEC and to furnish TrustCo with copies of all Section 16(a) reports they file.
TrustCo Bank Corp NY 2017 Proxy Statement 45 | ||||||||
EXECUTIVE COMPENSATION | ||||||||
Based solely on a review of the copies of such reports furnished to TrustCo, and written representations that no other reports were required during the fiscal year ended December 31, 2014,2016, all Section 16(a) filing requirements have been met, except that Sharon J. Parvis did not timely file one Section 16(a) report.met.
TrustCo will provide without charge a copy of its Annual Report on Form10-K upon written request. Requests and related inquiries should be directed to: Kevin T. Timmons, TrustCo Bank Corp NY, P.O. Box 1082, Schenectady, New York 12301-1082.
Upon written request, TrustCo will provide without charge a copy of its Code of Conduct. Requests and related inquiries should be directed to: Robert M. Leonard,Michael J. Hall, Secretary, TrustCo Bank Corp NY, P.O. Box 1082, Schenectady, New York 12301-1082.
46 TrustCo Bank Corp NY 2017 Proxy Statement | ||||||||
SHAREHOLDER PROPOSALS | ||||||||
Shareholder proposals, including the submission of director nominees, to be considered for inclusion in a proxy statement in connection with any forthcoming Annual Meeting of shareholders of TrustCo must be submitted to TrustCo on a timely basis. Proposals for inclusion in TrustCo’s proxy statement and form of proxy for the Annual Meeting of shareholders expected to be held in May of 20162018 must meet the requirements established by the Securities and Exchange Commission for shareholder proposals and must be received by TrustCo at its principal executive offices no later than December 3, 2015.4, 2017. Proposals intended to be considered at the 20162018 Annual Meeting, but
that are not to be included in TrustCo’s proxy statement, must be received at TrustCo’s principal executive offices no later than February 16, 2016.17, 2018. Any such proposals, together with any supporting statements, should be directed to the Secretary of TrustCo.
TrustCo Bank Corp NY 2017 Proxy Statement 47 | ||||||||
TRUSTCO SHAREHOLDERS | ||||||||
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING, PLEASE SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING TRUSTCO PROXY CARD IN THE ENVELOPE PROVIDED. IF YOU PLAN TO ATTEND THE ANNUAL MEETING AND ARE A SHAREHOLDER OF RECORD, PLEASE MARK THE PROXY CARD APPROPRIATELY AND RETURN IT. HOWEVER, IF YOUR SHARES ARE NOT REGISTERED IN YOUR OWN NAME, PLEASE ADVISE THE SHAREHOLDER OF RECORD (YOUR BANK, BROKER, ETC.) THAT YOU WISH TO ATTEND. THAT FIRM MUST PROVIDE YOU WITH EVIDENCE OF YOUR OWNERSHIP, WHICH WILL ENABLE YOU TO GAIN ADMITTANCE TO THE ANNUAL MEETING.
APPENDIX I
TRUSTCO BANK CORP NY
AMENDED AND RESTATED
2010 EQUITY INCENTIVE PLAN
December 21, 2010
(amended and restated, March 17, 2015)
TrustCo Bank Corp NY
AMENDED AND RESTATED
2010 EQUITY INCENTIVE PLAN
December 21, 2010
(amended and restated, March 17, 2015)
1. | Establishment, Purpose, and Effective Date of Plan | 1 | ||||
2. | Definitions | 1 | ||||
3. | Eligibility and Participation | 4 | ||||
4. | Administration | 5 | ||||
5. | Stock Subject to Plan | 5 | ||||
6. | Duration of Plan | 6 | ||||
7. | Stock Options | 6 | ||||
8. | Stock Appreciation Rights | 9 | ||||
9. | Restricted Stock | 10 | ||||
10. | Restricted Stock Units | 11 | ||||
11. | Performance Units | 12 | ||||
12. | Performance Shares | 13 | ||||
13. | Performance Goals | 14 | ||||
14. | Beneficiary Designation | 16 | ||||
15. | Rights of Employees | 16 | ||||
16. | Change-in-Control | 16 | ||||
17. | Amendment, Modification and Termination of Plan | 18 | ||||
18. | Tax Withholding | 19 | ||||
19. | Indemnification | 19 | ||||
20. | Incentive-Based Compensation Recovery | 20 | ||||
21. | Repricing | 20 | ||||
22. | Requirements of Law | 20 |
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The Company may not sponsor, or assist in any material way, any “cashless” exercise program pursuant to which payment for Options to be exercised is made by surrendering other Options. The prohibition of the immediately preceding sentence does not apply to third-party, broker-assisted “cashless” exercise programs as described in clause (i) above that the Company does not sponsor or assist and payment of the exercise price of Options by tender of Previously-Acquired Shares as described in clause (ii) above.
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provided, however, that with respect to any of the foregoing permissible transfers:
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Each Participant under the Plan may name, from time to time, any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his death before he receives any or all of such benefit. Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Committee during his lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to his estate.
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In addition, (A) no such amendment, alteration, suspension or termination of the Plan or any Award theretofore granted, including any Award Agreement, shall be made which would materially impair the previously accrued rights of a Participant under any outstanding Award without the written consent of such Participant, provided, however, that the Board may amend or alter the Plan and the Committee may amend or alter any Award, including any Agreement, either retroactively or prospectively, without the consent of the applicable Participant, (x) so as to preserve or come within any exemptions from liability under Section 16(b) of the Exchange Act, pursuant to the rules and releases promulgated by the SEC (including Rule 16b-3), and/or so that any Award that is intended to qualify as Performance-Based Compensation shall qualify for the performance-based compensation exception under Code Section 162(m) (or any successor provision), or (y) if the Board or the Committee determines in its discretion that such amendment or alteration either (I) is required or advisable for the Company, the Plan or the Award to satisfy, comply with or meet the requirements of any law, regulation, rule or accounting standard or (II) is not reasonably likely to significantly diminish the benefits provided under such Award, or that such diminishment has been or will be adequately compensated, and (B) any amendment or modification of any Award or Award Agreement must comply with Section 21.
Each Person who is or shall have been a member of the Committee or of the Board shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit, or proceeding to which he may be a party or in which he may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him in settlement thereof, with the Company’s approval, or paid by him in satisfaction of any judgment in
any such action, suit, or proceeding against him, provided he shall give the Company an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
Notwithstanding any other provision to the contrary of the Plan, any Award or agreement relating to an Award, any Award and any shares of Stock, cash or other compensation received by an Eligible Employee pursuant to this Plan that constitute incentive-based compensation may be subject to recovery by the Company under any compensation recovery, recoupment or clawback policy that the Company may adopt from time to time, including without limitation any policy that the Company may be required to adopt under Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations of the U.S. Securities and Exchange Commission thereunder or the requirements of any national securities exchange on which the Stock may be listed. Each Eligible Employee shall promptly return any such incentive-based compensation that the Company determines it is required to recover from such Eligible Employee under any such policy.
Notwithstanding any provision of the Plan to the contrary, neither the Board nor a Committee may authorize the repricing of an Award without the prior approval of the Company’s shareholders. For this purpose, the term “repricing” shall mean any of the following or any other action that has the same effect: (a) to lower the exercise price or price per share of an Award after it is granted, (b) to purchase for cash or shares an outstanding Award at a time when its exercise price or price per share exceeds the Fair Market Value of the Stock, (c) to take any other action that is treated as a repricing under generally accepted accounting principles or (d) to cancel an Award at a time when its exercise price or price per share exceeds the Fair Market Value of the Stock in exchange for another Award or Company equity. For purposes of this Section 21, however, an adjustment pursuant to Section 5(d) shall not be deemed to be a repricing.
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q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
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Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.
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2015 Annual Meeting Admission Ticket
2015
TRUSTCO BANK CORP NY ATTN: MICHAEL HALL 5 SARNOWSKI DRIVE GLEN VILLE, NY 12302 VOTE BY INTERNET - www.nroxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information op until 11 :5 PM. Eastern Time, May 17,2017. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 PM. Eastern Time, May 17, 2017. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope me have provided or return it to Vote Processing, do Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E26621-P91723 KEEP THIS POR11ON FOR YOUR RECORDS DETACH AND RETURN THIS PORTI0N ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. TRUSTCO BANK CORP NY For Withhold For All All Except To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. The Board of Directors recommends you vote FOR the following: 1. Election of Directors for a three-year term expiring at the 2020 Annual Meeting of Shareholders. Nominees: Dl) Anthony j. Marinello 02) William D. Powers The Board of Directors recommends you vote FOR the following proposal: 2. Approval of a nonbinding advisory resolution on the compensation of TrustCo’s named executive officers. The Board of Directors recommends you vote for the 1 YEAR option on the following proposal: 3. Nonbinding advisory resolution on the frequency of an advisory vote on the compensation of TrustCo’s named executive officers. The Board of Directors recommends you vote FOR the following proposal: 4. Ratification of the appointment of Crowe Horwath LLP as Independent Auditors for 2017. For Against Abstain 1 Year 2 Years 3 Years Abstain For address changes and/or comments, please check this box and write them on the back where indicated. Please indicate if you plan to attend this meeting. Yes No Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners)
TrustCo Bank Corp NY ShareholdersDate V1.1
Thursday, May 21, 2015 4:00PM Local Time
Mallozzi’s Restaurant
1930 Curry Road, Rotterdam, NY 12303
Upon arrival, please present this admission ticket
and photo identification at the registration desk.
YOUR VOTE IS IMPORTANT!
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS.
PLEASE PROVIDE YOUR INSTRUCTIONS TO VOTE BY TELEPHONE OR THE INTERNET OR COMPLETE,
DATE, SIGN, AND MAIL THIS PROXY CARD PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.qThe Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
L26622-P9 1723 REVOCABLE PROXY
Proxy — TrustCo Bank Corp.TRUSTCO BANK CORP NY
Notice of 2015 Annual Meeting of Shareholders
Proxy Solicited by Board of Directors for Annual Meeting — Thursday, May 21, 201518, 2017 4:00 PM
This proxy is solicited on behalf ofby the Board of Directors of TrustCo Bank Corp NY for the Annual Meeting of Shareholders to be held on May 21, 2015.
The person whose name and signature appears hereon hereby appoints Paul Heiner and William F. Terry, and each of them, the proxy or proxies of such person, with full power of substitution, to vote as indicated herein all shares of common stock of TrustCo Bank Corp NY which such person is entitled to vote at the Annual Meeting, to be held at Mallozzi’s Restaurant and Banquet House, 1930 Curry Road, Rotterdam, NY 12303, at 4:00 p.m. (local time)Eastern Time on Thursday, May 21, 201518, 2017, and at any adjournment(s) or postponementspostponement(s) thereof.
The proxies areThis proxy, when properly executed, will be voted in the manner directed to vote as specifiedherein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors recommendations noted on the reverse sideof this card and in their discreation on allthe discretion of the proxies upon such other matters comingbusiness as may properly come before the Annual Meeting. If no direction is made, the proxies will vote “FOR” all nominees listed for election of directors and “FOR” Proposals 2, 3 and 4.meeting or any adjournment thereof.
The undersigned acknowledges receipt from TrustCo Bank Corp NY prior to the execution of this proxy of a Notice of the Annual Meeting, the Proxy Statement,proxy statement, and Annual Report.
Address Changes/Comments: (If you noted any Address Changes/Comments above, please mark corresponding boson the reverse side.)
Important Notice Regarding the Availability of Proxy Materials for the
TrustCo Bank Corp NY Shareholder MeetingContinued and to be Heldsigned on May 21, 2015
Under Securities and Exchange Commission rules, you are receiving this notice that the proxy materials for the annual shareholders’ meeting are available on the Internet. Follow the instructions below to view the materials and vote online or request a copy. The items to be voted on and location of the annual meeting are on the reverse side. Your vote is important!side V.1.1
This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. We encourage you to access and review all of the important information contained in the proxy materials before voting. The proxy statement and annual report to shareholders are available at:
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When you go online, you can also help the environment by consenting to receive electronic delivery of future materials.
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TrustCo Bank Corp NY’s Annual Meeting of Shareholders will be held on May 21, 2015 at Mallozzi’s Restaurant, 1930 Curry Road, Rotterdam, NY 12303, at 4:00 p.m. (local time).
Proposals to be voted on at the meeting are listed below along with the Board of Directors’ recommendations.
The Board of Directors recommends a voteFOR all nominees,FOR Proposals 2 - 4:
PLEASE NOTE – YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares you must vote online or request a paper copy of the proxy materials to receive a proxy card. If you wish to attend and vote at the meeting, please bring this notice with you.
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