Exhibit 10.7
Atlantic Liberty Savings, F. A.
Executive Incentive Bonus Plan for 2002
Executive Incentive Bonus Plan
I. Purpose
1. To establish a competitive compensation program designed to
retain current Executive Officers and attract new Executive
talent.
2. To provide significant financial incentives to participants
for achieving corporate and individual performance objectives,
consistent with the long range business plan of the bank,
established by the Board of Directors.
II. Administration
The Plan shall be administered by the Executive Committee of the Board
of Directors (the Plan Administrator), who may make such rules and
establish such procedures for the administration of the Plan as it
deems appropriate to carry out the purpose of the Plan. The
interpretation and application of any rule or procedure, and any other
matter relating to or necessary for the administration of the Plan
shall be made by the Plan Administrator in its sole discretion and any
such determination shall be final and binding on all parties.
III. Plan Objectives
1. Atlantic Liberty operates in the highly competitive banking
and financial environment of New York City, and specifically
Brooklyn Heights. The extremely small size of Atlantic Liberty
only serves to exaggerate the competitive disadvantages needed
to be overcome to operate successfully. Attracting and
retaining Executive talent is essential to competing
successfully and is a major objective of the Board. However,
the cost of competing for Executive talent in the New York
City market on the bases of base salary would be prohibitive
for the bank. Therefore, the Board has adopted this Incentive
Bonus Program, which essentially pays for itself by allocating
a percentage of income added to the bank's base income to the
Bonus Pool. Under the Plan, the bank's base salary structure
will be controlled while the Incentive Plan will provide
sufficient compensation to be competitive in our market.
2. The Plan is also designed to coordinate the strategic and
operating plans of the bank with its overall compensation
policy and administration. Thus, Incentive Compensation will
depend upon the achievement of the bank's long range
objectives and operating plans. The annual planning process
will be the vehicle through which the Plan Administrator will
set incentive criteria and establish weightings for each
criteria.
IV. Plan Participants
The Plan is focused on providing incentives to those Executives whose
job performance influences the performance of the bank. The Plan
Administrator, on recommendations from the Board of Directors, and
management, determines which executives will participate in the Plan,
referred to as "Plan Participants." This determination will be made
each year in conjunction with the annual planning process.
V. Description of the Incentive Plan
1. Criteria
a) Each year, as part of the planning process, the Plan
Administrator will establish bank performance and
individual performance criteria designed to increase
the profitability of the bank. In general, bank
performance criteria will reflect objective
measurements of profitability and efficiency while
individual performance criteria will reflect the
Executive's ability to accomplish goals in a manner
consistent with the bank's management philosophy.
Individual performance criteria will involve a more
subjective evaluation of the participants'
accomplishments.
b) The Plan Administrator shall review its criteria
quarterly and may modify criteria in the event of
major unforeseen changes in the business environment.
2. Weighting
The Plan Administrator assigns a weighting to bank and
individual performance criteria depending upon the bank's
strategic goals for the period involved. Each criteria within
the bank performance and individual performance criteria will
likewise be weighted. The weightings determine the amount of
bonus payments that will be potentially available from the
Bonus Pool for achieving objectives. Weighting will vary
depending on the participant's ability to influence overall
bank profitability.
3. Bonus Pool
a) Each year a bonus pool will be established that will
approximate 5% of the base salary of the participants
plus 40% of income exceeding core income (defined as
net income before non-recurring income and expense)
of the "base year", as projected in the bank's
Business Plan for the period.
This Pool will be known as the "Target Pool",
representing the amount of bonus awards available for
achieving the goals called for by performance
criteria.
b) The Plan Administrator, pursuant to section VI, will
set a threshold, or minimum achievement by
participants, which must be met before any bonus
payments are awarded. This will be known as the
"Threshold Pool" and will, in general, not be less
than 50% of the Target Pool.
c) As core income exceeds the amount as projected in the
Business Plan, 45% of that income will be added to
the "Target Pool" to fund the High Performance Bonus
Pool up to 150% of the Target Pool. Payouts under
these goals will, in effect, be capped by the Plan
Administrator.
d) Thereafter, 50% of income exceeding the requirements
for the High Performance Pool will fund the
Extraordinary Performance Pool, which will not be
capped.
4. Participants' Interest
a) The Plan Administrator shall establish the level of
interest each participant has in the Bonus Pool. That
interest will reflect the participants' ability to
affect the overall performance of the bank.
b) The Plan Administrator shall allocate awards each
quarter to each participant, and that amount shall be
credited to the participants' annual bonus award.
c) Plan participants will normally receive their awards
within 30 days from the time the Plan Administrator
is reasonably sure of the planning period's results.
VI. Annual Bonus Plan Exhibit
Each year, the Plan Administrator shall append to this policy an
exhibit identifying (a) Plan participants for the period and their
respective interest in the Bonus Pool; (b) bank and individual
performance criteria for the period and their respective weightings;
(c) the various amounts of the funds available for the Threshold,
Target, High Performance and Extraordinary Performance Bonus Pools; and
(d) the "base year."
VII. Participants' Right to an Award
1. Plan participants employed by the institution throughout the
Plan year and at the end of the Plan year will have a vested
right to receive any incentive awards due them based on the
performance results of that year.
2. Participants who die, become disabled, or retire before the
payment date will be eligible for a pro rata incentive award
based on the months they worked during the year, from the
first month of eligibility in the Plan to the date of death,
disability, or retirement. In the case of death, the payment
will be made to the estate.
3. Participants who voluntarily terminate employment with the
institution prior to the payment date will be ineligible for
an incentive payment. However, with the recommendations of the
President, the Plan Administrator may make a discretionary pro
rata payment to the terminated employee.
4. Participants who join the institution during the Plan year, on
the recommendations of the President, may be awarded pro rata
incentive awards at the discretion of the Plan Administrator.
VIII. The Plan is Effective as of January 1, 2000
This plan has been duly approved by the Executive Committee of the
Board of Directors on December 5, 2000.
EXHIBIT A
Pursuant to section VI of the Executive Incentive Bonus Plan, the Plan
Administrator submits the following information for the period January 1, 2002
to December 31, 2002:
I. Plan Participants and Interest
President- Barry M. Donohue - 55% Bank, 45% Individual
Executive Vice President-William M. Gilfillan - 45% Bank,
55% Individual
II. Performance Criteria
1. Bank Performance
a) ROAA
Maintain ROAA of 70bp while increasing core income to
$945,000.
b) Technology
Implementnew computer system in seamless fashion and
within financial parameters approved by the board.
c) Loan Portfolio
Initiate $25 million in new loans while maintaining
60% ARM portfolio.
d) Fee Income
Continue to capitalize on Liberty Gold program
initiative and return investment program to
profitability.
e) Interest Rate Risk
Maintain an OTS interest rate sensitivity profile
similar to year-end 2001.
2. Individual Performance
Lending
a) Target mixed use and commercial niches for 15% of
loan production.
b) Develop a home equity loan product line and target
$500,000 in new lines of credit.
Savings
a) Establish sales targets of $1 to $1.5 million at
branch investment center.
b) Improve and expand the cross-selling incentive
program for branch employees, adding other employees
where appropriate.
Operations
a) Develop Internet capabilities for interactive
transactions, especially a loan application and
balance inquiries.
b) Staff bank with qualified and motivated employees and
continue to improve training efforts especially in
the compliance area.
Investments
a) Enhance bank earnings through new investment vehicles
with particular attention to bank owned life
insurance programs {BOLI}.
b) Fund any savings out-flow with funding capable of
maintaining a 70bp ROAA.
III. Weightings
1. Bank performance criteria will account for 70% of the Bonus
Pool awards with each criteria having the following weight (a)
30%, (b) 20%, (c) 20%, (d) 20%, and (e) 10%.
2. Individual performance criteria will account for 30% of the
Bonus Pool awards with the criteria for each bank department
weighted 20%, and an additional 20% discretionary weight.
IV. The Following Bonus Pool amounts have been established for 2002:
Threshold Pool $132,000
Target Pool $176,000
High Performance Pool $264,000
Extraordinary Performance Pool go for it!