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EXHIBIT 10.6
ABINGTON SAVINGS BANK
MANAGEMENT INCENTIVE
COMPENSATION PROGRAM
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ABINGTON SAVINGS BANK
Management Incentive Compensation Program
PURPOSE
* Reward key managers for the attainment of Abington Savings Bank
strategic, operational and service quality objectives; serve as a
basis for communications and rewarding attainment of business
objectives.
* Ensure an effective link between incentive compensation levels and
Bank performance by ensuring that incentive awards are only paid when
profitability objectives determined by the Board are met;
* Reinforce team performance; and
* Ensure Abington Savings Bank's management compensation program is
competitive with the marketplace and similar organizations.
MECHANICS
Plan must be approved by Board of Directors and will be administered by
Compensation Committee.
Prior to the payment of any bonus, unless approved by the Board of
Directors, the Bank must achieve its goals as outlined in the year's
performance plans.
The bonus will be awarded based upon the achievement of the Bank's budget
or financial plan, its performance against its peers**, the individual
participant's success in accomplishing the goals and objectives as outlined
in his/her performance plan and Service Level Agreements. Unit
profitability goals will also be evaluated as part of the program.
Compensation Committee will:
* Review the annual business plan/budget to determine its
appropriateness for purposes of the Part A calculation
* Approve participants
* Select peer group
* Review management recommendations for Part D awards
* Recommend final awards to Board of Directors
The Committee may also need to recommend alterations to the plan as necessary.
For example, the acquisition of another institution may cause a revision of the
financial performance incentive plan or a complete change in a manager's
objectives. Some latitude for such positive changes must be maintained so that
the incentive does not become a disincentive.
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The Committee will be authorized to recommend bonuses to staff members not
included in this plan and to approve additional participants to the plan.
The calculation of a participant's bonus will be as follows:
Group I - Participants
A. Financial performance of bank 40.0%
B. Service Quality 16.7%
C. Bank performance vs. peer group 20.0%
D. Evaluation of achievement of strategic
and/or performance plan and unit
profitability. 23.3%
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100.0%
Group II - Participants
A. Financial performance of bank 26.6%
B. Service Quality 16.7%
C. Bank performance vs. peer group 16.7%
D. Evaluation of achievement of strategic
and/or performance plan and unit
profitability. 40.0%
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100.0%
Group III- Participants
A. Financial performance of bank 32.0%
B. Service Quality 16.0%
C. Bank performance vs. peer group 12.0%
D. Evaluation of achievement of strategic
and/or performance plan and unit
profitability. 40.0%
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100.0%
Group IV- Participants
A. Financial performance of bank 33.3%
B. Service Quality 20.0%
C. Bank performance vs. peer group 13.4%
D. Evaluation of achievement of strategic
and/or performance plan and unit
profitability. 33.3%
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100.0%
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A determination of a participant's success in achieving his/her performance plan
goals will be obtained by a recommendation of that individual's manager and his
division head.
The bank's performance against its budget will be used to calculate Part A (Bank
Financial Performance), while net income as a % of average net worth (ROE) will
be used to calculate Part C (Bank performance vs. peers).
** In the event that Abington Savings Bank or a bank in the peer group is
involved in an unusual situation, such as an operating loss carry forward, which
distorts financial performance, it may be necessary to compare Abington Savings
Bank with its peers on a pre-tax basis. Such exceptions must be approved by the
Compensation Committee.
Participants Maximum Bonus
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Group I CEO 30%
CFO
Group II Other Division Heads 30%
Group III VP/Consumer Lending 25%
AVP Consumer Lending
Director of Retail Banking
VP/Relationship Manager II
VP/Human Resources
VP/M.I.S.
VP/Loan Operations
Group IV Controller 15%
VP Compliance/Security
Collections Supervisor
Director of Mkt & PR
Secondary Mkt Manager
Branch Administrator
Relationship Manager I
Manager Deposit Operations
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BONUS CALCULATION
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Part A:
Financial Performance Plan
I II III IV
100% 10% 6% 6% 4%
105%+ 12% 8% 8% 5%
5% 5% 4% 3%
Part B: Service Quality
Part C: Bank Performance vs. Peers
Top Quartile 6% 5% 3% 2%
Second Quartile 4% 3% 1% 1%
Below Median 0 0 0 0
Part D: Performance Plan 7% 12% 10% 5%
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Total 30% 30% 25% 15%
Administration
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* Payment of an award in one year does not guarantee payment in future years,
nor does it guarantee plan continuation.
* Generally, Bank Financial Performance (Part A), Service Quality
Standards(Part B) and recommendations on Performance Plan Achievement (Part
D) will be determined by the end of January following the plan year.
However, the Bank's Board of Directors may, in its discretion, calculate
and pay Part A, Part B and Part D bonuses on or before December 31 based on
estimates of the Company's financial results. The Bank's Performance vs.
its Peers (Part C) will be determined and bonus awards will be paid by the
end of April.
* An employee who fails to perform at an acceptable level, as determined by
the appropriate Division Head, for his/her position, will not receive an
award regardless of how well the bank performs.
* Employees who join the bank prior to July 1 may be eligible to participate
in the plan with the approval of the Compensation Committee (on a pro-rata
basis).
* Eligibility to participate in the plan is not a guarantee of ongoing
employment.
* An eligible participant must be an employee of the Bank when the award is
paid in order to receive an award unless the employee has retired, died, or
is disabled.
* The plan may be terminated at any time by the Board of Directors.
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Example
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Abington Savings Bank achieved 105% of its financial performance plan and ranked
in the second quartile of its peer group.
Joe Clinton (Vice President/Plannning with $40,000 salary) is in Bonus Group III
and his Division Manager has recommended that he receive 3/4 of his award for
Service Quality,(3%) and 3/4 of his goals achievement portion of his bonus
(7.5%).
Part A 8.00%
Part B 3.00%
Part C 1.00%
Part D 7.50%
Total Bonus 19.5% x $40,000 = $7,800.
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