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
Filed by
the Registrant
x
Filed by
a Party other than the Registrant
o
Check the
appropriate box:
o
Preliminary Proxy
Statement
o
Confidential, for Use of the
Commission Only (as permitted by Rule 14a-6(e)(2))
x
Definitive
Proxy Statement
o
Definitive Additional
Materials
o
Soliciting Material under Rule
14a-12
Astoria Financial
Corporation
(Name of
Registrant as Specified In Its Charter)
(Name of
Person(s) Filing Proxy Statement, if other than Registrant)
Payment
of Filing Fee (Check the appropriate box):
x
No fee required.
o
Fee computed on table below per
Exchange Act Rules 14a-6(i)(1) and 0-11.
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1)
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Title
of each class of securities to which transaction applies:
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2)
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Aggregate
number of securities to which transaction applies:
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3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4)
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Proposed
maximum aggregate value of transaction:
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5)
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Total
fee paid:
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o
Fee paid previously with
preliminary materials.
o
Check box if any part of the fee is
offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date of its
filing.
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1)
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Amount
Previously Paid:
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2)
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Form,
Schedule or Registration Statement No.:
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3)
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Filing
Party:
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4)
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Date
Filed:
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One
Astoria Federal Plaza
Lake
Success, NY 11042-1085
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April 13,
2009
Dear
Fellow Astoria Financial Corporation Shareholder:
I am very pleased to invite you to
Astoria Financial Corporation’s Annual Meeting of Shareholders to be held at The
Inn at New Hyde Park, 214 Jericho Turnpike, New Hyde Park, New York 11040 on
Wednesday, May 20, 2009, at 9:30 a.m., Eastern Time. At this meeting, you will
be asked to vote for the election of directors, approve an amendment to the
Astoria Financial Corporation Executive Officer Annual Incentive Plan, ratify
the appointment of our independent registered public accounting firm and
consider any other business that may properly come before the
meeting.
You are cordially invited to attend the
Annual Meeting of Shareholders in person. Even if you plan to attend in person,
you are encouraged to review the proxy materials and vote your shares in advance
of the meeting. Your vote is extremely important. We appreciate your taking the
time to vote promptly.
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Sincerely
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George
L. Engelke, Jr.
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Chairman
and Chief Executive
Officer
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One
Astoria Federal Plaza
Lake
Success, NY 11042-1085
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NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
To
Be Held on May 20, 2009
The Annual Meeting of Shareholders of
Astoria Financial Corporation will be held on Wednesday, May 20, 2009, at 9:30
a.m., Eastern Time, at The Inn at New Hyde Park, 214 Jericho Turnpike, New Hyde
Park, New York 11040. The meeting will be held to consider and act upon the
following matters:
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1.
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The
election of three directors, for terms of three years
each;
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2.
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The
approval of an amendment to the Astoria Financial Corporation Executive
Officer Annual Incentive Plan;
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3.
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The
ratification of the appointment of our independent registered public
accounting firm; and
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4.
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Such
other matters as may properly come before the Annual Meeting or any
adjournment or postponement
thereof.
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Holders of record of Astoria Financial
Corporation common stock as of the close of business on March 23, 2009 are
entitled to notice of and to vote at the Annual Meeting and any adjournment or
postponement thereof. A list of shareholders entitled to vote at the Annual
Meeting will be available at the meeting and at Astoria Financial Corporation,
One Astoria Federal Plaza, Lake Success, New York 11042 for a period of ten days
prior to the meeting.
For the convenience of our
shareholders, proxies may be given either by telephone, electronically through
the Internet, or by completing, signing, and returning the enclosed proxy
card. In addition, shareholders may elect to receive future
shareholder communications, including proxy materials, through the
Internet. Instructions for each of these options can be found in the
enclosed materials.
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By
order of the Board of Directors,
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Alan
P. Eggleston
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Executive
Vice President, Secretary and General
Counsel
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Dated:
April 13, 2009
Astoria
Financial Corporation
Proxy
Statement
Table
of Contents
General
Information
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1
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Voting
and Quorum Requirements
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1
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How
to Vote
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2
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Revocation
of Proxies
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3
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Interests
of Management in Certain Proposals
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3
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Security
Ownership of Certain Beneficial Owners
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4
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PROPOSAL
NO. 1 - ELECTION OF DIRECTORS
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5
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Board
Nominees, Directors and Executive Officers
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6
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Biographical
Information
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7
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Directors
and Board Nominees
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7
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Executive
Officers Who Are Not Directors
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9
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Director
Independence
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10
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Director
Independence Standards
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10
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Identifying
and Evaluating Nominees for Director
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12
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Committees
and Meetings of the Board
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13
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Compensation
Committee
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13
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Corporate
Governance
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14
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Nominating
and Corporate Governance Committee
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16
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Audit
Committee
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17
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Transactions
with Certain Related Persons
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17
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Security
Ownership of Management
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20
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Compensation
Committee Interlocks and Insider Participation
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21
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Director
Compensation
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22
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Directors’
and Other Fee Arrangements
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22
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Directors’
Option Plans
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22
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2007
Directors Stock Plan
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23
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Directors’
Retirement Plan
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23
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Directors
Deferred Compensation Plan
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25
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Directors’
Death Benefit
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25
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Travel
Expenses and Other Perquisites
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26
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2008
Director Compensation Table
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27
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Executive
Compensation
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27
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Compensation
Committee Report
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28
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Compensation
Discussion and Analysis
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Executive
Compensation Philosophy
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28
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Base
Salary
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30
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Short-Term
Non-Equity Incentive Plan Compensation
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33
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Equity-Based
Compensation
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35
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Retirement
Benefits
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36
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Perquisites
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38
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Other
Banking Services
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38
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Company-Provided
Automobiles
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39
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Use
of Leased Corporate Aircraft and Other Travel-Related
Expenses
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39
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Other
Benefits
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39
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Summary
Compensation Table
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40
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All
Other Compensation Table
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41
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2008
Grants of Plan-Based Awards Table
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43
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2008
Outstanding Equity Awards At Fiscal Year-End Table
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44
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2008
Option Exercises and Stock Vested
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46
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Additional
DB Plan Information
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46
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2008
Pension Benefits Table
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48
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Other
Potential Post-Employment Payments
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48
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PROPOSAL
NO. 2 - APPROVAL OF AN AMENDMENT TO THE ASTORIA FINANCIAL CORPORATION
EXECUTIVE OFFICER ANNUAL INCENTIVE PLAN
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54
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Why
We Are Asking For Shareholder Approval
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54
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Material
Provisions of the Plan
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55
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New
Plan Benefits
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56
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PROPOSAL
NO. 3 - RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
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57
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KPMG
LLP Fees Billed For The Fiscal Years Ended December 31, 2007 and
2008
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58
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Audit
Committee
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59
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Report
of the Audit Committee
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59
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Additional
Information
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60
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Section
16(a) Beneficial Ownership Reporting Compliance
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60
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Cost
of Proxy Solicitation
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60
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Shareholder
Proposals
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60
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Notice
of Business to be Conducted at an Annual Meeting
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61
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Shareholder
Communications
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61
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Director
Attendance at Annual Meetings
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62
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Householding
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62
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Other
Matters Which May Properly Come Before the Meeting
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62
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Exhibit
A - Astoria Financial Corporation Executive Officer Annual Incentive Plan,
As Amended
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64
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ASTORIA
FINANCIAL CORPORATION
One
Astoria Federal Plaza
Lake
Success, New York 11042-1085
PROXY
STATEMENT
ANNUAL
MEETING OF SHAREHOLDERS
May
20, 2009
General
Information
This Proxy Statement and the
accompanying proxy card are being furnished to holders of Astoria Financial
Corporation, referred to as AFC, common stock in connection with the
solicitation of proxies by the Board of Directors of AFC, referred to as the
Board, for use at the AFC Annual Meeting of Shareholders to be held on May 20,
2009, and at any adjournments or postponements thereof, referred to as the
Annual Meeting. AFC’s Annual Meeting will be held at 9:30 a.m., Eastern Time, at
The Inn at New Hyde Park, 214 Jericho Turnpike, New Hyde Park, New York 11040.
Only holders of record of AFC’s issued and outstanding common stock, par value
$0.01 per share, referred to as AFC Common Stock, as of the close of business on
the Record Date, March 23, 2009, are entitled to vote at the Annual
Meeting. AFC’s 2008 Annual Report and Form 10-K, which includes the
consolidated financial statements of AFC for the fiscal year ended December 31,
2008, referred to as the Consolidated Financial Statements, accompany this Proxy
Statement and the proxy card which are first being mailed or given to
shareholders of record on or about April 13, 2009. AFC is the parent
company of Astoria Federal Savings and Loan Association, referred to as the
Association.
IMPORTANT
INFORMATION REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD ON MAY 20, 2009:
THE
PROXY STATEMENT AND ANNUAL REPORT TO SHAREHOLDERS ARE AVAILABLE AT
http://bnymellon.mobular.net/bnymellon/af
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Voting
and Quorum Requirements
As of the Record Date, there were
97,058,454 shares of AFC Common Stock issued and outstanding and entitled to
vote at the Annual Meeting. Except as described below, each share of AFC Common
Stock outstanding on the Record Date entitles the holder thereof to one vote on
each matter to properly come before the Annual Meeting. The presence, either in
person or by proxy, of the holders of a majority of all of the shares of AFC
Common Stock entitled to vote at the Annual Meeting is necessary to constitute a
quorum at the Annual Meeting.
The election of directors shall be by a
plurality of votes cast by the holders of AFC Common Stock present, in person or
by proxy, and entitled to vote thereon. Holders of AFC Common Stock may not vote
their shares cumulatively with respect to the election of directors. The
approval of the amendment to the Astoria Financial Corporation Executive Officer
Annual Incentive Plan, referred to as the Executive Incentive Plan, and the
ratification of the appointment of KPMG LLP as the independent registered public
accounting firm for AFC, require the affirmative vote of a majority of the votes
cast by the holders of AFC Common Stock present at the Annual Meeting, in person
or by proxy, and entitled to vote thereon.
Shares of AFC Common Stock as to which
the “ABSTAIN” box has been selected on the proxy card with respect to the
approval of the amendment to the Executive Incentive Plan or the ratification of
the appointment of KPMG LLP as the independent registered public accounting firm
for AFC will be counted as present and entitled to vote and will have the effect
of a vote against such approval or ratification, as the case may be. In
contrast, shares of AFC Common Stock underlying broker non-votes and shares for
which a proxy card is not returned will not be counted as present and entitled
to vote and will have no effect on the vote on such proposals.
How
to Vote
You may vote your shares:
(1)
By
Internet.
Vote at the Internet address shown on your proxy
card or voting instruction
form. The
Internet voting system is available 24 hours a day until 11:59 p.m., Eastern
Time, on Tuesday, May 19, 2009. Once you are in the Internet voting
system, you can record and confirm or change your voting
instructions.
(2)
By mail.
Mark and
sign the enclosed proxy card or voting instruction form and return it in the
enclosed postage-paid envelope.
(3)
By telephone.
Vote
by telephone using the instructions on the enclosed proxy card or voting
instruction form.
Every
properly executed or submitted proxy card that is received by AFC prior to the
closing of the polls at the Annual Meeting will be voted in accordance with the
instructions contained therein unless otherwise revoked. Properly
executed and submitted unmarked proxy cards will be voted FOR the election of
the Board’s nominees as directors, FOR the approval of an amendment to the
Astoria Financial Corporation Executive Officer Annual Incentive Plan and FOR
the ratification of the appointment of the independent registered public
accounting firm.
Alternatively,
you may attend the annual meeting and vote in person. Voting over the
Internet, by telephone or mailing a proxy card will not limit your right to vote
in person or attend the annual meeting. Shareholders who desire to attend the
Annual Meeting and vote their shares in person may obtain directions by calling
The Inn at New Hyde Park at (516) 354-7797 or AFC’s Investor Relations
Department at (516) 327-7869.
Participants in
the Astoria Federal Savings and Loan
Association Employee Stock Ownership Plan, referred to as the ESOP, or the
Astoria Federal Savings and Loan Association Incentive Savings Plan, referred to
as the Incentive Savings Plan, are permitted to vote by mail
only
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If you
are a shareholder whose shares are not registered in your name, you will need an
assignment of voting rights from the shareholder of record to vote personally at
the Annual Meeting.
Pursuant
to the Certificate of Incorporation of AFC, no record shareholder of AFC Common
Stock which is beneficially owned, directly or indirectly, by a shareholder who,
as of the Record Date, beneficially owns more than ten percent (10%) of AFC
Common Stock outstanding on such date will be entitled or permitted to vote any
shares of AFC Common Stock in excess of ten percent (10%) of AFC Common Stock
outstanding as of the Record Date. For purposes of this limitation, neither the
ESOP, nor the trustee of such plan, is considered the beneficial owner of the
AFC Common Stock held by the ESOP.
Participants in the ESOP and the
Incentive Savings Plan have the right to direct the voting of AFC Common Stock
held in their plan accounts, but do not have the right to vote those shares
personally at the Annual Meeting. Such participants should refer to the voting
instructions provided by the plan fiduciaries for information on how to direct
the voting of such shares.
Revocation
of Proxies
Any shareholder who executes a
proxy has the right to revoke it at any time before it is voted. A proxy may be
revoked by delivering to the Secretary of AFC, at its principal office or at the
Annual Meeting prior to the closing of the polls at the Annual Meeting, either a
written revocation or a proxy, duly executed, bearing a later date, or by
attending the Annual Meeting and voting in person.
Interests
of Management in Certain Proposals
At the Annual Meeting, shareholders are
being asked to vote on an amendment to the Executive Incentive Plan, under which
executive officers may earn performance-based incentive awards upon attainment
of performance goals, which amendment would extend the term of the plan for five
years. As a result, AFC’s executive officers, including the two
executive officers who are members of the Board, have personal interests in the
outcome of this proposal that are different from the interests of AFC’s other
shareholders. The Board was aware of these interests and took them
into account in recommending that the shareholders vote in favor of the proposed
amendment to the Executive Incentive Plan.
Security
Ownership of Certain Beneficial Owners
The following table sets forth
information, as of the Record Date, with respect to the beneficial ownership of
AFC Common Stock by each person or group of persons, as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended, referred to as the
Exchange Act, known to AFC to be the beneficial owner of more than five percent
(5%) of AFC voting stock. For purposes of the Annual Meeting, AFC Common Stock
is the only AFC voting stock outstanding.
Name &
Address
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Amount
and Nature of
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of
Beneficial Owner
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Beneficial
Ownership
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Percent
of Class
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Committee
under the ESOP,
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11,547,943
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(1)
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11.90
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Committee
appointed as Plan Administrator of the
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Incentive
Savings Plan,
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Trustee
of the Association Employees’ Pension Plan, and
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ESOP
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c/o
Astoria Federal Savings and Loan Association
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One
Astoria Federal Plaza
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Lake
Success, New York 11042
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EARNEST
Partners, LLC
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7,237,766
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(2)
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7.46
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1180
Peachtree Street NE
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Suite
2300
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Atlanta,
Georgia 30309
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BARCLAYS
Global Investors, NA and
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5,282,986
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(3)
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5.44
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BARCLAYS
Global Fund Advisors
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400
Howard Street
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San
Francisco, California 94105
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and
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BARCLAYS
Global Investors, Ltd.
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Murray
House
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1
Royal Mint Court
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London,
EC3N 4HH
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and
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BARCLAYS
Global Investors Canada
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Brookfield
Place 161 Bay Street
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Suite
2500, P.O. Box 614,
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Toronto,
Canada
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Ontario
M5J 2S1
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Capital
Group International, Inc.
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5,155,400
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(4)
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5.31
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11100
Santa Boulevard
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Los
Angeles, California 90025
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ClearBridge
Advisors, LLC and
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5,115,113
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(5)
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5.27
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Smith
Barney Fund Management LLC
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399 Park Avenue
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New
York, New York 10022
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(1)
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The
ESOP is an employee stock ownership plan under the Employee Retirement
Income Security Act of 1974, as amended, referred to as ERISA. The ESOP
provides for individual accounts for the accrued benefits of participating
employees of AFC and its subsidiaries and their beneficiaries and is
administered by the Committee under the ESOP comprised of five officers of
the Association. The assets of the ESOP are held in trust by Prudential
Bank & Trust, FSB. The five individuals comprising the Committee under
the ESOP also serve as the Committee appointed as Plan Administrator of
the Incentive Savings Plan and as Trustee of the Association Employees’
Pension Plan, and is referred to as the Committees. The Incentive Savings
Plan is a defined contribution pension plan under ERISA and the
Association Employees’ Pension Plan, referred to as the Employees Pension
Plan, is a defined benefit pension plan under ERISA. The ESOP held, as of
December 31, 2008, 9,964,520 shares of AFC Common Stock, 4,751,853 shares
of which had been allocated to the accounts of individual participants and
their beneficiaries. State Street Bank and Trust Company has been
appointed as a fiduciary of the ESOP for the purpose of determining how to
vote the ESOP’s AFC Common Stock at the Annual Meeting. For voting
purposes, each participant as a “named fiduciary” will be eligible to
direct State Street Bank and Trust Company how to vote at the Annual
Meeting as to the number of shares of AFC Common Stock which have been
allocated to his or her account under the ESOP. The remaining unallocated
shares and any allocated shares with respect to which no voting
instructions have been received will be voted by State Street Bank and
Trust Company at the Annual Meeting in the same manner and proportion as
the allocated shares with respect to which voting instructions have been
received, so long as such vote is in accordance with the provisions of
ERISA. In certain circumstances, ERISA may confer upon State Street Bank
and Trust Company and/or the trustee the power and duty to control the
voting and tendering of AFC Common Stock allocated to the accounts of
participating employees and beneficiaries who fail to exercise their
voting and/or tender rights as well as the voting and tendering of
unallocated AFC Common Stock. As of December 31, 2008, the Employees
Pension Plan held 773,308 shares of AFC Common Stock. The trustees will
determine the manner in which such shares are voted at the Annual Meeting.
The Incentive Savings Plan, as of December 31, 2008, held 810,115 shares
of AFC Common Stock for the account of individual participants of the
Incentive Savings Plan. For voting purposes, each participant as a “named
fiduciary” will be eligible to provide voting instructions which will be
taken into account by the Association, through the Committee, in directing
Prudential Bank & Trust Company, as trustee of the Incentive Savings
Plan, how to vote at the Annual Meeting as to the number of shares of AFC
Common Stock which have been allocated to such participant’s account under
the Incentive Savings Plan, so long as such vote is in accordance with the
provisions of ERISA. In certain circumstances, ERISA may confer upon the
Association, the Committee and/or the trustee the power and duty to
control the voting and tendering of AFC Common Stock allocated to the
accounts of participating employees and beneficiaries who fail to exercise
their voting and/or tender rights. Pursuant to a Schedule 13G filed
February 12, 2009, the ESOP claims beneficial ownership of, and shared
voting and dispositive power with respect to, 9,964,520 shares of AFC
Common Stock as of December 31, 2008. The Committee under the ESOP, the
Committee appointed as Plan Administrator of the Incentive Savings Plan
and the Trustees of the Employees Pension Plan claim beneficial ownership
of 11,547,943 shares of AFC Common Stock, sole voting and dispositive
power with respect to 773,308 shares of AFC Common Stock, shared voting
power with respect to 810,115 shares of AFC Common Stock and shared
dispositive power with respect to 10,774,635 shares of AFC Common Stock as
of December 31, 2008. No individual member of the Committees
controls the actions of the Committees and each such individual disclaims
beneficial ownership of shares beneficially owned by the
Committees.
|
(2)
|
According
to a filing on Schedule 13G, Amendment No. 4, filed on or about February
13, 2009, EARNEST Partners, LLC claims sole voting power with respect to
3,141,419 shares of AFC Common Stock, shared voting power with respect to
1,819,397 shares of AFC Common Stock and sole dispositive power with
respect to 7,237,766 shares of AFC Common Stock as of December 31,
2008.
|
(3)
|
According
to a filing on Schedule 13G, filed on or about February 5, 2009, the
following entities have indicated that they have sole voting power with
respect to 4,415,348 Shares of AFC Common Stock and sole dispositive power
with respect to 5,282,986 shares of AFC Common Stock: Barclays
Global Investors, NA, Barclays Global Fund Advisors, Barclays Global
Investors, Ltd., Barclays Global Investors Japan Limited, Barclays Global
Investors Canada Limited, Barclays Global Investors Australia Limited and
Barclays Global Investors (Deutschland) AG. As reported in such
filings, (i) Barclays Global Investors, NA claims sole voting
power with respect to 1,561,781 shares of AFC Common Stock and sole
dispositive power with respect to 1,919,784 shares of AFC Common Stock as
of December 31, 2008, (ii) Barclays Global Fund Advisors claims sole
voting power with respect to 2,717,853 shares of AFC Common Stock and sole
dispositive power with respect to 3,172,568 shares of AFC Common Stock as
of December 31, 2008, (iii) Barclays Global Investors, Ltd. Claims sole
voting power with respect to 133,050 shares of AFC Common Stock and sole
dispositive power with respect to 187,970 shares of AFC Common Stock as of
December 31, 2008, (iv) Barclays Global Investors Canada Limited claims
sole voting and dispositive power with respect to 2,664 shares of AFC
Common Stock as of December 31, 2008, and (v) Barclays Global Investors
Japan Limited, Barclays Global Investors Australia Limited and Barclays
Global Investors (Deutschland) AG each claims no voting or dispositive
power with respect to AFC Common Stock as of December 31,
2008. In such filing, each of the foregoing entities has
checked a box indicating that it disclaims membership in a group, or
describes a relationship with other person but does not affirm the
existence of a group.
|
(4)
|
According
to a filing on Schedule 13G, filed on or about February 12, 2009 Capital
Group International, Inc. claims sole voting power with respect to
3,399,300 shares of AFC Common Stock and sole dispositive power with
respect to 5,155,400 shares of AFC Common Stock as of December 31,
2008.
|
(5)
|
According
to a filing on Schedule 13G, Amendment No. 3, filed on or about
February 10, 2009, ClearBridge Advisors, LLC claims sole voting
power with respect to 4,932,161 shares of AFC Common Stock and sole
dispositive power with respect to 5,115,113 shares of AFC Common Stock as
of December 31, 2008.
|
PROPOSAL
NO. 1 - ELECTION OF DIRECTORS
The Board consists of ten (10)
directors divided into three classes: two classes of three directors each and
one class of four directors. Upon election by the shareholders, the directors of
each class generally serve for a term of three years, with the directors of one
class elected each year. From time to time, nominees may be recommended for
shorter terms to either reclassify the directors, so as to maintain the classes
as equal in number as possible, or to provide earlier shareholder input in
filling expected vacancies.
In all cases, directors serve until
their respective successors are duly elected and qualified. Pursuant to the
Bylaws of AFC, no person is eligible for election or appointment as a director
who is seventy-five (75) years of age or older, and no person shall continue to
serve as a director after the regular Board meeting immediately preceding such
director’s seventy-fifth (75th) birthday, referred to as mandatory
retirement.
The directors whose terms expire at the
Annual Meeting are Andrew M. Burger, Denis J. Connors, Thomas J. Donahue and
Gerard C. Keegan. Mr. Burger will reach mandatory retirement in May,
2009 and, accordingly, will not stand for re-election at the Annual
Meeting. Effective upon Mr. Burger’s mandatory retirement, the Board
has eliminated his Board seat and reduced the size of the Board to nine (9)
directors. Each of the other directors whose terms expire at the
Annual Meeting, referred to individually as a Board Nominee and collectively as
the Board Nominees, has been nominated by the Board, based on the recommendation
of the Nominating and Corporate Governance Committee, to stand for reelection,
and, if elected, to serve for a term expiring at the annual meeting of
shareholders of AFC to be held in 2012. Each Board Nominee has
consented to being named in this Proxy Statement and to serve as a director of
AFC if elected.
If any Board Nominee should refuse or
be unable to serve, the proxies will be voted for such person as shall be
designated by the Board, based upon the recommendation of the Nominating and
Corporate Governance Committee, to replace such nominee. The Board presently has
no knowledge that any of the Board Nominees will refuse or be unable to
serve.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A
VOTE FOR
THE BOARD NOMINEES
FOR ELECTION AS DIRECTORS OF AFC FOR TERMS OF THREE
YEARS EACH.
Board
Nominees, Directors and Executive Officers
The following table sets forth
information regarding the Board Nominees and other members of the
Board.
Name
|
|
Age (1)
|
|
Positions Held with AFC (2)
|
|
Director Since
|
|
Term Expires
|
George
L. Engelke, Jr.
|
|
|
70
|
|
Director,
Chairman of the
Board
and Chief Executive
Officer
|
|
1993
|
|
2011
|
Gerard
C. Keegan
|
|
|
62
|
|
Director,
Vice Chairman,
Chief
Administrative Officer
and
Board Nominee
|
|
1997
|
|
2009
|
Andrew
M. Burger
|
|
|
74
|
|
|
|
1993
|
|
2009
|
John
J. Conefry, Jr.
|
|
|
64
|
|
Director
and Vice Chairman
|
|
1998
|
|
2010
|
Denis
J. Connors
|
|
|
67
|
|
Director
and Board Nominee
|
|
1993
|
|
2009
|
Thomas
J. Donahue
|
|
|
68
|
|
Director
and Board Nominee
|
|
1993
|
|
2009
|
Peter
C. Haeffner, Jr.
|
|
|
70
|
|
|
|
1997
|
|
2011
|
Ralph
F. Palleschi
|
|
|
62
|
|
Director
and Presiding Director
|
|
1996
|
|
2011
|
Thomas
V. Powderly
|
|
|
71
|
|
Director
|
|
1995
|
|
2010
|
Leo
J. Waters
|
|
|
74
|
|
Director
|
|
1998
|
|
2010
(3)
|
(1)
|
As
of the Record Date.
|
(2)
|
All
directors of AFC also serve as directors of the
Association.
|
(3)
|
Mr.
Waters will reach mandatory retirement in November,
2009.
|
The following table sets forth
information regarding the non-director executive officers of AFC.
Name
|
|
Age (1)
|
|
Positions Held With
AFC
|
Monte
N. Redman
|
|
58
|
|
President
and Chief Operating Officer
|
Alan
P. Eggleston
|
|
55
|
|
Executive
Vice President, Secretary and General Counsel
|
Frank
E. Fusco
|
|
45
|
|
Executive
Vice President, Treasurer and Chief Financial Officer
|
Arnold
K. Greenberg
|
|
68
|
|
Executive
Vice President and Assistant Secretary
|
Gary
T. McCann
|
|
55
|
|
Executive
Vice
President
|
(1)
|
As
of the Record Date.
|
All executive officers of AFC are
elected annually and serve until their respective successors have been chosen,
subject to their removal as officers at any time by the affirmative vote of a
majority of the authorized number of directors then constituting the Board. For
additional information, see Compensation Discussion and Analysis, referred to as
the CD&A, commencing on page 28.
Biographical Information
The following is a brief description of
the business experience of the directors, Board Nominees and executive officers
for at least the past five years and their respective directorships, if any,
with other public companies that are subject to the reporting requirements of
the Exchange Act.
Directors and Board
Nominees
George L. Engelke, Jr.
has
been Chief Executive Officer and a director of AFC since its formation in 1993.
He has served as Chairman of the Board and Chairman of the Board of Directors of
the Association since April 1997. He served as President of AFC from 1993 to
August 2007. A certified public accountant, he joined the Association in 1971 as
Vice President and Treasurer. He was named Executive Vice President and
Treasurer in 1974, Chief Operating Officer in 1986 and President and Chief
Executive Officer in 1989. He has served as a director of the Association since
1983. Mr. Engelke serves as a director of the Community Preservation Corporation
and the Advisory Board of Neighborhood Housing Services of New York City, Inc.
He is a former director and Chairman of the Federal Home Loan Bank of New York
and a former member of the Thrift Institutions Advisory Panel to the Federal
Reserve Bank of New York. He is a member of the Board of Trustees of Long Island
University and a director of the New York Bankers Association. Mr. Engelke
previously served as a member of the Financial Accounting Standards Advisory
Council.
Gerard C. Keegan
has been Vice
Chairman, Chief Administrative Officer and a director of AFC and the Association
since September 30, 1997, when he joined AFC following the acquisition of The
Greater New York Savings Bank, referred to as The Greater, and its merger with
and into the Association, referred to as The Greater Acquisition. He is
responsible for the retail banking, information services, and marketing areas of
the Association. Prior to joining AFC, Mr. Keegan served from 1991 to 1997 as
Chairman, President and Chief Executive Officer of The Greater. From 1988 to
1991, he served as President and Chief Operating Officer of The Greater. He
served as a director of The Greater from 1988 to 1997. He is a member of the
Board of Trustees of St. Francis College.
Andrew M. Burger
has been a
director of AFC since its formation in 1993 and is the former President of
Atlantic Iron Works, Inc. He has served as a director of the Association since
1975.
John J. Conefry, Jr.
has
served as Vice Chairman and a director of AFC since September 30, 1998 when he
joined AFC following the acquisition of Long Island Bancorp, Inc., referred to
as LIB, and the merger of LIB with and into AFC and the merger of LIB’s wholly
owned subsidiary, The Long Island Savings Bank FSB, referred to as LISB, with
and into the Association, referred to as the LIB Acquisition. He served as an
executive officer of AFC from September 1998 to December 2000. Prior to joining
AFC, Mr. Conefry served as Chief Executive Officer of LISB from 1993 and of LIB
from 1994 through the consummation of the LIB Acquisition. He was named
President of LIB and LISB in 1996. Mr. Conefry served as a director of LISB from
1980 and of LIB from 1993. He was named Vice Chairman of LISB in 1993. He served
as Chairman of the Board of Directors of LIB and of LISB from 1994. Prior to
joining LISB in 1993, Mr. Conefry was employed by Merrill Lynch, Pierce, Fenner
& Smith, Inc., as a Senior Vice President from 1981 to 1993. Prior to that,
he was a partner in the public accounting firm of Deloitte Haskins & Sells,
the predecessor of Deloitte & Touche LLP. Mr. Conefry also serves on a
number of boards of not-for-profit organizations. Mr. Conefry is a director of
1-800-FLOWERS.COM, Inc., a floral, food and gift retailer whose common stock is
registered under Section 12 of the Exchange Act and trades on The NASDAQ Stock
Market under the symbol “FLWS.”
Denis J. Connors
has been a
director of AFC since its formation in 1993 and was the Chairman and Chief
Executive Officer of Curran & Connors, Inc., a designer and publisher of
annual reports. Mr. Connors serves as a director of Curran & Connors, Inc.
He has served as a director of the Association since 1990. He is currently a
trustee emeritus of the Good Samaritan Hospital Foundation.
Thomas J. Donahue
, a certified
public accountant, has been a director of AFC since its formation in 1993. He
retired as a partner of Peat, Marwick, Mitchell & Co., the predecessor of
KPMG LLP, in 1986. Following his retirement and prior to becoming a director of
the Association, Mr. Donahue served as president and a director of other savings
institutions from 1987 to 1990. He has served as a director of the Association
since 1990.
Peter C. Haeffner, Jr.
has
been a director of AFC and the Association since September 30, 1997 following
The Greater Acquisition. He is Managing Director and Principal of PHAEF, LLC, a
real estate investment and advisory company. From 2001 to December 2004, he
served as Managing Director and Principal of Real Estate Trade Advisors LLC, a
real estate finance and advisory company. From December 1998 to June 2001, he
served as Senior Director, Financial Services Group, of Cushman & Wakefield,
Inc., a real estate firm. Mr. Haeffner served as Senior Managing Director,
Financial Services Group, Corporate Advisory and Finance Division of Cushman
& Wakefield, Inc. from December 1997 to December 1998 and as its Eastern
Regional Director, Financial Services Group from May 1994 to December 1997.
Previously, Mr. Haeffner was President and Managing Director of
Sonnenblick-Goldman Company, a real estate firm, for a period of eight years.
Mr. Haeffner also serves as a director of Stewart Title Insurance Company of New
York. Mr. Haeffner served as a director of The Greater from 1992 to
1997.
Ralph F. Palleschi
, a
certified public accountant, has been a director of AFC and the Association
since 1996. In 1983, he co-founded First Long Island Investors, Inc., a
registered investment advisor pursuant to the Investment Advisers Act of 1940,
as amended, and a registered broker/dealer with the National Association of
Securities Dealers, LLC. He continues to serve as a director and is President
and Chief Operating Officer of such company. From 1993 to 1997, he served as
Chief Operating Officer of the New York Islanders hockey team. From 1977 to
1983, he served as Vice President - Finance and Chief Financial Officer of
Entenmann’s Inc., a publicly traded food products company. From 1968 to 1977, he
was employed by Peat, Marwick, Mitchell & Co., the predecessor of KPMG LLP.
He is Chairman of the Board of Directors of Abilities! and Chairman of the Board
of Trustees of the Variety Child Learning Center.
Thomas V. Powderly
has been a
director of AFC and the Association since January 31, 1995, following the
acquisition of Fidelity New York, F.S.B., referred to as Fidelity, by the
Association. He served Fidelity in a variety of capacities. From 1986 to 1990,
he served as Executive Vice President. In 1990, he was appointed President and
Chief Operating Officer and in 1992 was named Chief Executive Officer. He was
named Chairman of the Board of Directors of Fidelity in 1993. From 1993 until
January 1995, he served as Chairman and Chief Executive Officer. Prior to 1986,
Mr. Powderly held positions with Edward S. Gordon, Inc., a commercial real
estate brokerage and management firm, and with several thrift
institutions.
Leo J. Waters
has been a
director of AFC and the Association since September 30, 1998, following
completion of the LIB Acquisition. Prior to the LIB Acquisition, he served as a
director of LIB since 1993. He became a director of LISB in 1990. Mr. Waters is
the President of a private investment consulting firm.
Executive Officers Who Are Not
Directors
Monte N. Redman
has served as
President and Chief Operating Officer of AFC and the Association since August
2007. He served as Executive Vice President and Chief Financial Officer of AFC
from December 1997 to August 2007. He served as Senior Vice President, Treasurer
and Chief Financial Officer of AFC from its formation in 1993 to 1997. He joined
the Association in 1977. In 1979, he was named Assistant Controller, and, in
1982, Assistant Vice President. Mr. Redman became Vice President, Investment
Officer in 1985, was appointed Senior Vice President, Treasurer and Chief
Financial Officer in 1989 and was appointed Executive Vice President and Chief
Financial Officer in 1997. He is the past Chairman and serves on the Board of
Directors of the national Tourette Syndrome Association.
Alan P. Eggleston,
an
attorney, has served as Executive Vice President and General Counsel of AFC
since December 1997 and as Secretary since March 2001. He is responsible for the
legal, auditing, asset review, human resources, regulatory compliance and
security areas of the Association and AFC. He served as Senior Vice President
and General Counsel of AFC from 1996 to 1997. He joined the Association in 1993
as Vice President and General Counsel. In 1994, he was named Vice President and
General Counsel of AFC. In 1995, he became First Vice President and General
Counsel of AFC and the Association. Prior to joining the Association, he served
as an executive officer and counsel to several thrift institutions.
Frank E. Fusco,
a certified
public accountant,
has served as Executive
Vice President, Treasurer and Chief Financial Officer of AFC and the Association
since August 2007. He is responsible for the treasury operations, investments,
accounting operations, investor relations, financial, management and tax
reporting areas, and the financial planning area of the Association and AFC. He
joined the Association in 1989. He served as Assistant Vice President from 1990
to 1992, as Vice President from 1992 to 1994, as First Vice President from 1994
to 1997 and as Senior Vice President and Treasurer from 1997 to 2007. He served
in the same positions with AFC commencing in 1993. Prior to joining the
Association, Mr. Fusco was employed as an auditor by Peat, Marwick, Mitchell
& Co., predecessor to KPMG LLP, and as an officer of another thrift
institution.
Arnold K. Greenberg
has served
as Executive Vice President of AFC since December 1997 and as Senior Vice
President from its formation in 1993 to 1997. He is responsible for banking
operations and the general services and facilities areas of the Association. He
joined the Association in 1975 as Vice President and was appointed Senior Vice
President in 1979 and Executive Vice President in 1997. In 1986, Mr. Greenberg
became Senior Vice President, Administration and Operations, and in January of
1993, Senior Vice President, Consumer Services. He also serves as a member of
the Board of Directors of the Long Island Region of the American Heart
Association and as a member of the Board of Trustees of the Variety Child
Learning Center.
Gary T. McCann
has served as
Executive Vice President of AFC since December 2003. He serves as senior lending
officer of the Association. Mr. McCann joined the Association in 1990. From 1993
to 1997, he served as Vice President and Director of Residential Mortgage
Originations of the Association and from 1997 to 2003 served the Association as
Senior Vice President. In December 2003, he became Executive Vice President of
both AFC and the Association. Prior to joining the Association, Mr. McCann
served as a senior officer of residential lending at another thrift institution.
He serves as a director of Habitat for Humanity of Suffolk County and Community
Development Corporation of Long Island, Inc.
There is no family relationship between
any director, Board Nominee, officer or significant employee of AFC. There are
no proceedings to which any director, officer or affiliate of AFC, any owner of
record or beneficially of more than five percent (5%) of any class of AFC voting
stock, or any associate of any such person is a party adverse to AFC or any of
its subsidiaries nor does any such person have a material interest adverse to
AFC or its subsidiaries.
Director
Independence
As required by the New York Stock
Exchange, referred to as the NYSE, Listed Company Manual, the Board has
determined that at least a majority of the current directors of AFC are
independent. Specifically, the Board has determined that, with the exception of
Mr. Engelke and Mr. Keegan, all directors of AFC and the Board Nominees are
independent. Mr. Engelke and Mr. Keegan have been determined not to be
independent due to their positions as executive officers of AFC and the
Association.
In
addition to utilizing the specific independence standards set forth in Section
303A of the NYSE Listed Company Manual, the Board has adopted Director
Independence Standards, a copy of which is set forth below and is posted on
AFC’s Investor Relations website at
http://ir.astoriafederal.com
under the heading “Corporate Governance.” The Director Independence Standards
are intended to supplement the NYSE independence standards and to cover three
specific situations: (i) directors who obtain routine banking services from the
Association; (ii) donations by AFC or the Association to charities with which
directors are associated; and (iii) direct or indirect payments for services by
executive officers to companies with whom directors are affiliated made under
circumstances where the payments, if made by AFC for services rendered to AFC,
would not impair the directors’ independence pursuant to the NYSE Listed Company
Manual.
Astoria
Financial Corporation
Director
Independence Standards
The
following are standards adopted by Astoria Financial Corporation (the
“Corporation”) for use in determining, pursuant to the New York Stock
Exchange Listed Company Manual Section 303A, the status of each director’s
“independence”. In addition to the specific criteria set forth in
Paragraph No. 2 of Section 303A, as amended from time to time, the
following categorical standards shall be applied by the Board of Directors
in making its determinations.
1.
The Corporation’s wholly owned subsidiary, Astoria Federal Savings and
Loan Association (the “Association”), is a federally chartered savings and
loan association. Its primary business consists of providing consumer
banking services to the public and originating mortgage loans for
portfolio. Its operations are heavily regulated and it is regularly and
routinely examined by the Office of Thrift Supervision (the
“OTS”).
Directors
of the Corporation are encouraged to utilize the Association’s consumer
banking services and its lending capabilities, in accordance with OTS and
applicable Federal Reserve Board regulations.
The
Corporation recognizes that if a director deposits funds with the
Association and the Association experiences financial or other regulatory
difficulties, a conflict could exist which might impair a director’s
independence, particularly if the director maintains a deposit in an
amount or under circumstances that would result in all or some portion of
the deposit not being insured by the Federal Deposit Insurance Corporation
(the “FDIC”).
Similarly,
if a director borrows funds from the Association and that loan is either
in default or otherwise shows signs of credit weakness, a director’s
independence could be impaired.
|
In
conducting its examinations of the Association, the OTS utilizes a
classification system and assigns a numerical rating to the Association in
order to signify the level of financial strength and regulatory concern
posed by the institution. This system is referred to as the CAMELS rating.
The ratings, which, by law, are confidential, range from 1 to 5, with 1
being the highest rating and 5 being the lowest. Institutions with CAMELS
ratings of 3, 4 or 5 exhibit some degree of supervisory concern, exhibit
unsafe and unsound practices or conditions, or exhibit extremely unsafe
and unsound practices or conditions, respectively. Institutions ranked 1
or 2 under the CAMELS system have been found by the OTS to be either sound
in every respect or fundamentally sound.
A
director’s independence will not be considered impaired at any time due to
the director, directly or indirectly, having on deposit with the
Association amounts which would be fully insured by the FDIC or, so long
as the Association maintains a CAMELS rating of 1 or 2, in any
amount.
A
director’s independence will not be considered impaired so long as a
direct or indirect loan to the director was granted in compliance with
Federal Reserve Board Regulation O and applicable OTS regulations, the
loan is not, according to the Association’s usual policies, classified as
non-accrual, past due, restructured or a potential problem loan and the
loan does not involve more than the normal risk of collectibility or
otherwise present other unfavorable features.
As
other banking services provided by the Association are readily available
at competitive pricing, use by a director of other banking or financial
services offered by the Association to the public will not be considered
to impair a director’s independence.
2.
Pursuant to the Community Reinvestment Act, the Association is obligated
to demonstrate the extent to which it ascertains and meets the credit
needs of the communities it serves. As part of this responsibility, the
Association and the Corporation encourage their directors and officers to
be active in local charities and provides financial and other support to
local charities and other non-profit organizations, particularly those
that are housing related. No director will be considered to have his
independence impaired because the Association may provide directors and
officers liability coverage for the director’s service to such charity or
non-profit organization or due to grants, contributions or donations made
by the Association to a charity or non-profit organization with which the
director is affiliated so long as such grants, contributions or donations
by the Corporation or the Association do not exceed $100,000 per
year.
3.
While the focus of the New York Stock Exchange Listing Manual standards,
as they relate to the independence of directors, is on relationships with
the Corporation, circumstances could exist where a relationship between a
director and an executive officer of the Corporation is such that such
relationship in and of itself could impair the independence of the
director.
(A)
The fact that a director and an executive officer may have equity
investments in a company or enterprise, where the Corporation or
Association does not do any business with that company or enterprise shall
not result in the director’s independence being impaired.
(B)
If a director is associated with a company or enterprise with which the
Corporation or Association does not do business, but with which an
executive officer does business unrelated to the Corporation or
Association, the director’s independence will not be deemed impaired so
long as the revenue generated by such business, in any of the last three
fiscal years, does not exceed the greater of $1,000,000 or 2% of such
company’s consolidated gross
revenue.
|
During its review of director
independence for each Board Nominee and other members of the Board that have
been identified as independent, the Board considered transactions and
relationships between each director or any member of his or her immediate family
and AFC and its subsidiaries, affiliates and equity investors, including those
reported under Transactions with Certain Related Persons commencing on page 17.
The Board also examined transactions and relationships between directors or
their affiliates and members of executive management or their affiliates. The
purpose of this review was to determine whether any such relationships or
transactions were inconsistent with a determination that the director is
independent.
Specifically, with respect to the
directors determined to be independent, the Nominating and Corporate Governance
Committee and the Board considered the following transactions and
relationships:
|
i)
|
the
deposit relationships maintained by Mr. Burger, Mr. Conefry, Mr. Connors,
Mr. Donahue, Mr. Haeffner, Mr. Powderly and Mr. Waters with the
Association;
|
|
ii)
|
the
lending relationships maintained by Mr. Donahue and members of his family,
Mr. Haeffner, Mr. Powderly and Mr. Waters with the
Association;
|
|
iii)
|
the
relationship of Mr. Connors to Curran and Connors, Inc., a company
utilized by AFC to assist in the preparation of its annual report to
shareholders, and specifically the overall amount of fees paid for such
service and the revenue provided to such company as a result of such
engagement relative to such company’s overall
revenue;
|
|
iv)
|
the
relationship of Mr. Palleschi to a company utilized personally by Mr.
Engelke and another executive officer to invest personal funds and the
fees generated to such company as a result of such relationships relative
to such company’s overall
revenue; and
|
|
v)
|
the
relationship of Mr. Haeffner to Stewart Title Insurance Co., which from
time to time provides services to the
Association.
|
In
addition, the Nominating and Corporate Governance Committee and the Board
annually review the charitable contributions made by the Association and
determined that no contributions were made of sufficient size to impair the
independence of any director who might be affiliated with such
charities.
Identifying
and Evaluating Nominees for Director
The Board has adopted, and at least
annually reviews and approves, Nominee Qualification Guidelines, for use by the
Nominating and Corporate Governance Committee in evaluating all potential
nominees, and Corporate Governance Guidelines, which set forth, among other
matters, Board composition and director qualification standards. Among the
matters reviewed are the candidate’s integrity, maturity and judgment,
experience, collegiality, expertise, diversity, commitment and independence.
Copies of the Nominee Qualification Guidelines and the Corporate Governance
Guidelines are available on AFC’s Investor Relations website at
http://ir.astoriafederal.com
under the heading “Corporate Governance.” Printed copies may also be requested
by contacting AFC’s Investor Relations Department by calling (516) 327-7869 or
in writing at the address set forth on page 1 of this Proxy
Statement.
The Board
has also implemented a procedure for evaluating the performance of the Board,
each of its committees and each of its directors. The evaluation of directors is
considered and reviewed by the Nominating and Corporate Governance Committee in
considering the nomination of existing directors.
If a
shareholder presents a potential nominee, the shareholder will be encouraged to
provide information that is responsive to the Nominee Qualification Guidelines
to assist the Nominating and Corporate Governance Committee in evaluating
proposed nominees. Such nominations and related information will be considered
and reviewed by the Nominating and Corporate Governance Committee. All nominees,
including incumbent directors, Board nominees and shareholder nominees, will be
evaluated in the same manner by the Nominating and Corporate Governance
Committee. AFC has never been presented with a shareholder nominee and has never
retained any third party to assist in the search process. The Charter of the
Nominating and Corporate Governance Committee authorizes the Committee to
utilize the services of search firms at the Committee’s discretion.
Pursuant to the Corporate Governance
Guidelines adopted by the Board, all newly elected Board members are required,
at the time of their initial election to the Board, to have an investment in AFC
Common Stock. Within three years of initial election, directors are
expected to maintain beneficial ownership in non-derivative shares of AFC Common
Stock equal to at least 3,000 shares. All directors and Board Nominees satisfy
such requirement without regard to any phase-in period.
For a description of the procedures to
be followed by shareholders in submitting director nominations and related
information, see Additional Information - Shareholders Proposals and Notice of
Business to be conducted at an Annual Meeting commencing on page
60.
Committees
and Meetings of the Board
The Board meets on a monthly basis and
may have additional special meetings upon the request of the Chairman and Chief
Executive Officer, the President and Chief Operating Officer or any three (3)
members of the Board. During the fiscal year ended December 31, 2008, the Board
met thirteen (13) times. No director attended less than seventy five percent
(75%) of the total number of meetings held by the Board and its committees on
which such director served.
In addition, the non-management
directors of AFC met three (3) times during 2008. Such meetings are presided
over by Mr. Palleschi, as Presiding Director.
The Board has established three (3)
standing committees: the Compensation Committee, the Nominating and Corporate
Governance Committee and the Audit Committee, which is a separately-designated
standing audit committee established in accordance with section 3(a)(58)(A) of
the Exchange Act. Copies of the Compensation Committee’s Charter, the Nominating
and Corporate Governance Committee’s Charter and the Audit Committee’s Charter,
as well as AFC’s Bylaws, are posted on AFC’s Investor Relations website at
http://ir.astoriafederal.com
under the heading Corporate Governance. Shareholders may request a printed copy
of each such document by contacting AFC’s Investor Relations Department by
calling (516) 327-7869 or in writing at the address specified on page 1 of this
Proxy Statement.
Compensation Committee
The Compensation Committee consists of
Mr. Connors, as Chairman, and Messrs. Burger, Donahue, Palleschi, Powderly and
Waters. The function of the Compensation Committee is to carry out the duties
and responsibilities set forth in the Charter of the Compensation Committee,
including but not limited to, (i) discharging the responsibilities of the Board
relating to AFC’s compensation and benefit plans and practices, including its
executive compensation plans and its incentive compensation and equity-based
plans; (ii) producing an annual Compensation Committee Report as required by the
SEC for inclusion in AFC’s proxy statements (see page 28); and (iii) otherwise
assisting the Board in its oversight responsibilities with respect to the human
resources, compensation and benefits activities of AFC and its subsidiaries. The
Compensation Committee administers the Executive Incentive Plan, establishes
target incentives and goals, and reviews performance relative to such goals
pursuant to the Executive Incentive Plan. The Compensation Committee
also administers the 1999 Stock Option Plan for Officers and Employees of
Astoria Financial Corporation, referred to as the 1999 Officer Option Plan, the
2003 Stock Option Plan for Officers and Employees of Astoria Financial
Corporation, referred to as the 2003 Stock Option Plan, and the 2005
Re-designated, Amended and Restated Stock Incentive Plan for Officers and
Employees of Astoria Financial Corporation, referred to as the 2005 Stock
Incentive Plan, including the granting of various forms of equity compensation
pursuant to the 2005 Stock Incentive Plan. The Committee also administers the
1999 Stock Option Plan for Outside Directors of Astoria Financial Corporation,
referred to as the 1999 Directors Option Plan, and the Astoria Financial
Corporation 2007 Non-Employee Directors Stock Plan, referred to as the 2007
Directors Stock Plan. The committee meets as needed and met seven (7) times
during 2008.
The
Compensation Committee has the authority to establish compensation levels for
the executive officers. It annually reviews director compensation. As a matter
of practice, the actions of the Compensation Committee with respect to executive
officer compensation and recommendations the Compensation Committee may make
with respect to director compensation are reviewed by the Board at the next
regular Board meeting for ratification and approval. The Compensation Committee
may not delegate its authority. For a discussion of the role of the executive
officers in determining or recommending the amount and form of executive officer
and director compensation and the role and identity of compensation consultants
utilized and the nature of the assignments undertaken, see Compensation
Committee - Corporate Governance commencing on page 13, Compensation Committee
Interlocks and Insider Participation commencing on page 21, Director
Compensation commencing on page 22 and CD&A commencing on page 28. All
members of the Compensation Committee are independent as determined by the Board
and as such term is defined in the NYSE Listed Company Manual. For a discussion
of director independence, see Director Independence commencing on page
10.
Corporate
Governance
Recommendations
to the Compensation Committee of AFC with respect to executive and non-executive
officers’ salaries and other compensation components are presented by Mr.
Engelke, Mr. Redman, other executive officers and Human Resources management.
Recommendations concerning non-executive officer compensation are developed
based in large part upon input from the executive officer to whom such officers
report. Mr. Engelke and Mr. Redman also provide insight to the Compensation
Committee regarding their performance and that of the other officers of AFC,
both executive and non-executive. Mr. Engelke and Mr. Redman do not participate
in the Committee’s deliberations or approval of compensation issues relating to
their own compensation.
During
2008, Mr. Engelke, Mr. Redman, Mr. Greenberg and Mr. Eggleston attended meetings
of the Compensation Committee and assisted the Committee in the performance of
its responsibilities relative to director and executive compensation. Among the
matters discussed with the Compensation Committee by management were the
following:
|
i)
|
proposed
salary levels for all officers of AFC and the
Association;
|
|
ii)
|
AFC’s
actual performance for 2007 and its projected performance for both 2008
and 2009;
|
|
iii)
|
AFC’s
actual incentive payouts for 2007 and proposed incentive compensation
performance targets for 2008 and
2009;
|
|
iv)
|
equity
grant awards made to directors and officers in January, 2008 and the
methodology used to calculate said
awards;
|
|
v)
|
levels
of director compensation;
|
|
vi)
|
the
Compensation Committee Report and CD&A contained in AFC’s April 8,
2008 Proxy
Statement
|
|
vii)
|
AFC’s
management succession plan;
|
|
viii)
|
an
amendment to the Incentive Savings Plan designed to encourage greater
participation by employees;
|
|
ix)
|
amendments
to bring affected plans and employment and severance contracts into
compliance with Section 409A of the Internal Revenue Code, referred to as
the Code, relating to deferred compensation
arrangements;
|
|
x)
|
amendments
to bring employment and severance contracts into compliance with executive
compensation restrictions contained in the U.S. Treasury’s Troubled Asset
Relief Program - Capital Purchase Program, based upon AFC’s receipt of
preliminary approval to participate in such
program; and
|
|
xi)
|
retention
of Hewitt Associates LLC, as compensation consultants, to
(a) review the industry prevalence of certain incentive
compensation exclusions, (b) review the change of control provisions of
the executive officers’ employment contracts, and (c) review and make
recommendations with respect to the methodology used to calculate and the
magnitude of equity grants to officers, including executive officer
grants, occurring during February,
2009.
|
When
officers attend Compensation Committee meetings, they do so at the invitation of
the Committee. It is generally the practice of the Committee to meet in
executive session following management participation in meetings to allow time
for discussion without management present.
In
addition, members of the Compensation Committee are provided complete and open
access to all officers of AFC and the Association throughout the year. AFC and
its executive management do not monitor or maintain records regarding the
frequency or subject matter of such contacts outside of contacts with the
executive officers.
In 2005,
the Compensation Committee retained Watson Wyatt. Watson Wyatt was retained
specifically to assist the Compensation Committee in developing a new equity
grant program consistent with the authorization provided to the Compensation
Committee pursuant to the shareholder approved 2005 Stock Incentive Plan. Watson
Wyatt was also retained to advise the Compensation Committee regarding what
adjustments might be typical with respect to Chief Executive Officer equity
compensation grants or other forms of compensation, as AFC’s Chief Executive
Officer was at that time approaching AFC’s mandatory retirement age or officers,
which has since been abolished by the Board. In addition, Watson Wyatt was asked
to advise the Compensation Committee regarding the potential termination or
freezing of benefit accruals under the Employees Pension Plan, the Association
Excess Benefit Plan, referred to as the Excess Plan, and the Association
Supplemental Benefit Plan, referred to as the Supplemental Plan. The Employees
Pension Plan, the Excess Plan and the Supplemental Plan are collectively
referred to as the DB Plans.
As part
of their assignment, Watson Wyatt reviewed the analysis undertaken by previous
compensation consultants and conducted a comparative analysis of a “peer” group
of companies. The companies included in the “peer” group were
determined by Watson Wyatt following discussions with the Compensation Committee
and the executive officers. The companies utilized by Watson
Wyatt included TD Banknorth, Charter One Financial, Inc., Commerce Bancorp,
Inc., Greenpoint Financial Corp., Hudson City Bancorp, Inc., Independence
Community Bancorp, Indymac Bancorp, Inc., New York Community Bancorp, Inc.,
North Fork Bancorporation, Sovereign Bancorp, and Webster Financial
Corporation
In
addition to reviewing the appropriateness of cash compensation paid to the Named
Executives, identified under the CD&A, among others, Watson Wyatt advised
the Compensation Committee on the appropriateness and competitiveness of the
level of equity compensation provided to the Named Executives and the amount and
structure of change of control related compensation.
In 2007,
the Compensation Committee retained the services of Hewitt Associates LLC to
conduct a competitive review of the compensation levels and composition for
AFC’s executive officers and to review the amount and structure of potential
compensation for executive officers related to change of
control. Hewitt’s methodology consisted of both comparing AFC’s
executive compensation with a “peer” group of comparably sized thrift and
banking institutions, and also comparing the positions held and functions
performed by AFC’s executives with comparable positions against a
universe of financial services companies and regressing the resulting data
statistically to account for size variations of AFC compared to this
universe. This review, which was completed in December, 2007, was
taken into account by the Compensation Committee in establishing the executive
officers’ compensation in 2008. The companies utilized by Hewitt
Associates LLC as “peers” included Associated Banc-Corp, BOK Financial
Corporation, City National Corporation, Colonial BancGroup, Commerce Bancorp,
Inc., Compass Bancshares, Inc., Downey Financial Corp., Hudson City Bancorp,
Inc., Huntington Bancshares Incorporated, Indymac Bancorp, Inc., New York
Community Bancorp Inc., Synovus Financial Corp., Webster Financial Corporation
and Zions Bancorporation.
In 2008,
the Compensation Committee retained Hewitt Associates LLC to advise the
Compensation Committee regarding two issues. The first was the
prevalence or not of excluding other than temporary impairment charges, referred
to as OTTI charges, from the calculation net income determined appropriate for
measuring executive and non-executive officer incentive
compensation. The Compensation Committee had previously determined to
exclude certain OTTI charges from 2008 incentive compensation calculations, and
was considering reducing incentive compensation awards, if any, that resulted
from an OTTI charge taken in 2008. See page 34 for a further
discussion regarding this issue. Ultimately, no incentive awards were
due based upon the financial performance of 2008 including the adjustments for
the OTTI charge.
Hewitt
Associates LLC was also asked to review AFC’s methodology and magnitude of
equity grants made to officers, both executive and non-executive, pursuant to
the 2005 Stock Incentive Plan. Hewitt Associates LLC compared AFC’s
equity grant practices to long term incentive practices of a group of “peer”
companies. The “peer” companies included Citadel Investment Group,
LLC, CME Group, Inc., Colonial Bank, Compass Bank, Cullen/Frost Bankers, Inc.,
Downey Savings and Loan Association F. A., Huntington Bancshares Incorporated,
John Deere Credit Company, M&T Bank Corporation, Marshall & Ilsley
Corporation, National Rural Utilities cooperative Financial Corporation, Navy
Federal Credit Union, Synovus Financial Corporation, UnionBanCal Corporation and
Zions Bancorporation. The results of this review were taken into
consideration by the Compensation Committee with respect to the equity grants
made in February, 2009.
The only
instruction provided to Watson Wyatt and Hewitt Associates LLC beyond the scope
of their engagements, outlined above, was to direct that a preliminary draft of
their report would be simultaneously delivered to both the Chairman of the
Compensation Committee and to management. This process was established to ensure
that the consultants were free from any interference from management in
presenting their conclusions to the Compensation Committee’s representative and
so that management would be provided with an opportunity to review the report so
that any errors or inaccuracies could be corrected by the consultants before a
final report was presented to the Compensation Committee.
Nominating
and Corporate Governance Committee
The Nominating and Corporate Governance
Committee consists of Mr. Palleschi, as Chairman, and Messrs. Burger, Conefry,
Connors, Haeffner and Powderly. The function of the Nominating and Corporate
Governance Committee is to carry out the duties and responsibilities set forth
in the Charter of the Nominating and Corporate Governance Committee, including
but not limited to, (i) assisting the Board in identifying individuals qualified
to become Board members; (ii) recommending to the Board nominees for election to
the Board; (iii) reviewing nominations for election to the Board made by
shareholders of AFC pursuant to Article I, Section 6(c) of AFC’s Bylaws; (iv)
assisting the Board in developing and implementing a process to assess the
effectiveness of individual Board members and of the Board and its committees
collectively; (v) advising the Board with respect to Board and committee
composition and procedures; (vi) developing, recommending to the Board and
annually reviewing AFC’s Corporate Governance Guidelines; and (vii) otherwise
carrying out the duties, goals and responsibilities assigned to the Nominating
and Corporate Governance Committee pursuant to AFC’s Bylaws, the Corporate
Governance Guidelines and the Committee’s Charter. The Nominating and Corporate
Governance Committee meets as needed and met three (3) times during 2008. All
members of the Nominating and Corporate Governance Committee are independent as
determined by the Board and as such term is defined in the NYSE Listed Company
Manual. For a discussion of director independence, see Director Independence
commencing on page 10.
Audit Committee
The Audit Committee consists of Mr.
Donahue, as Chairman, and Messrs. Burger, Connors, Haeffner, Palleschi and
Waters. The function of the Audit Committee is to oversee the accounting and
financial reporting processes of AFC and audits of the financial statements of
AFC and to carry out the duties and responsibilities set forth in the Charter of
the Audit Committee, including but not limited to, (i) assisting Board oversight
of: (a) the integrity of AFC’s financial statements, (b) AFC’s compliance with
legal and regulatory requirements, (c) the qualifications and independence of
AFC’s independent registered public accounting firm, and (d) the performance of
AFC’s independent registered public accounting firm and the internal audit
function; (ii) preparing an Audit Committee report as required by the U.S.
Securities and Exchange Commission, referred to as the SEC, to be included in
AFC’s annual proxy statement (see page 59);
and (iii) performing such other functions as shall be assigned to the Audit
Committee by the Board. The Audit Committee also reviews (1) the scope and
results of the audits and reviews performed by AFC’s internal auditor and AFC’s
independent registered public accounting firm, (2) the internal controls and
accounting systems and policies of AFC, (3) the basis for certain reports to the
Association’s regulatory authorities, and (4) reports of examination of AFC and
the Association issued by the Office of Thrift Supervision or other regulatory
authorities. The Board has determined that Messrs. Donahue and Palleschi are
audit committee financial experts. They and all other members of the Audit
Committee have been determined by the Board to be independent as defined in the
NYSE Listed Company Manual. For a discussion of director independence, see
Director Independence commencing on page 10. While the Board has not directly
limited the number of audit committees of other public companies on which an
Audit Committee member may sit, the Board has limited, within AFC’s Corporate
Governance Guidelines, Board member service on the boards of directors of other
public companies to no more than two other boards of directors. The Audit
Committee meets, at a minimum, on a quarterly basis, and met eight (8) times
during 2008. For additional information regarding Audit Committee activities,
see Report of the Audit Committee commencing on page 59.
Transactions
with Certain Related Persons
AFC maintains a written policy, which
is set forth in its Code of Business Conduct and Ethics, detailing its approval
process for related party transactions. Under the written policy, loans and
extensions of credit by the Association to directors and executive officers of
AFC must be approved by the Association’s Board. The written policy
also mandates that the following business dealings must be approved by the
Board, with the officer or director who is interested or related to the
interested party refraining from participating in the consideration or
determination of the matter: (i) any transaction to purchase or lease from,
jointly own with, or sell or lease to, a related party real or personal
property, directly or indirectly; (ii) the use of our personnel, facilities, or
real or personal property for other than AFC’s benefit; (iii) the payment by AFC
of commissions and/or fees, including, but not limited to, brokerage commissions
or investment banking, management, consulting, architectural or legal fees; and
(iv) service agreements. The Code of Business Conduct and Ethics is posted on
AFC’s Investor Relations website at
http://ir.astoriafederal.com
under the heading Corporate Governance. Shareholders may request a printed copy
of such document by contacting AFC’s Investor Relations Department by calling
(516) 327-7869 or in writing at the address specified on page 1 of this Proxy
Statement.
AFC does
not engage in loan transactions with its directors or executive officers or
members of their families. With the exception of the ESOP, AFC does
not engage in loan or other transactions with holders of five percent (5%) or
more of the shares of any class of its common stock.
The
Association maintains the ESOP, which is a defined contribution pension plan,
for the benefit of its eligible employees. To fund the purchase of the AFC
Common Stock held by the ESOP, the ESOP borrowed funds from AFC. The ESOP loans,
as of January 1, 2008, had an outstanding principal balance of $30,753,601.18,
bear an interest rate of 6.00%, mature on December 31, 2029 and are
collateralized by the unallocated AFC Common Stock purchased with the loan
proceeds. The Association makes scheduled contributions to fund debt service.
The Association’s contributions, prior to 2010, may be reduced by dividends paid
on unallocated shares and investment earnings realized on such dividends.
Beginning in 2010, dividends paid on unallocated shares will be credited to
participant accounts as investment earnings. Dividends paid on unallocated
shares, which reduced the Association’s contribution to the ESOP, totaled $6.0
million for the year ended December 31, 2008. The ESOP loans had an aggregate
outstanding principal balance of $28,564,650.58 as of the Record Date. The
principal amount paid on such loans during 2008 amounted to $2,188,950.60, while
the interest paid was $1,845,216.07.
The AFC
Common Stock purchased by the ESOP is held in trust for allocation among
participants as the loans are repaid. Pursuant to the loan agreements, the
number of shares allocated annually is based upon a specified percentage of
aggregate eligible payroll for the Association’s covered employees. Shares of
AFC Common Stock allocated to participants totaled 548,723 for the year ended
December 31, 2008. Through December 31, 2008, a total of 9,855,894 shares have
been allocated to participants. As of December 31, 2008, 5,212,668 shares of AFC
Common Stock, which had a fair value of $85.9 million, remain unallocated and
collateralize the repayment of the ESOP loans.
For
additional information regarding the ESOP, see Security Ownership of Certain
Beneficial Owners commencing on page 4, Security Ownership of Management
commencing on page 20 and Note 14 to the Consolidated Financial
Statements.
The
Association is a federally chartered savings and loan association and engages in
the lending business. All loan transactions between the Association and the
directors and executive officers of AFC or the Association, members of their
families, and holders of five percent (5%) or more of the shares of any class of
AFC’s stock, and affiliates thereof, have been made either in accordance with
the Association’s Employee & Director Mortgage & Home Equity Loan
Policy, discussed more fully below, or:
|
i)
|
were
made only in the ordinary course of AFC’s and the Association’s
businesses,
|
|
ii)
|
were
made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable loans with
persons not related to AFC or the Association,
and
|
|
iii)
|
did
not involve more than the normal risk of collectibility or present other
unfavorable features.
|
As noted
above, the Association maintains an Employee & Director Mortgage & Home
Equity Loan Policy pursuant to which certain employees, officers and directors
of the Association are eligible for certain discounts on residential mortgage
loans and home equity loans made by the Association.
Pursuant
to the Employee & Director Mortgage & Home Equity Loan Policy, all full
time employees, officers and directors of the Association in good standing and
having at least two years of service are eligible to obtain discounts on certain
mortgage and home equity loans provided by the Association. The discount is
available only on loans secured by the participant’s owner-occupied, primary
residence. The discount is not available on mortgage loan products which are not
intended to be held in portfolio by the Association. The loans must, in all
respects, satisfy all normal underwriting parameters applicable to
non-affiliated customers. Such loans may not involve more than the normal risk
of collection or present other unfavorable features.
For
eligible mortgage loans, the following discounts are provided:
|
i)
|
discount/origination
fees, up to a maximum of 2% of the loan amount, if applicable, are waived
at closing;
|
|
ii)
|
underwriting
and document preparation fees, if applicable, are waived at closing;
and
|
|
iii)
|
the
interest rate is adjusted as
follows:
|
|
a)
|
on
fixed rate loans, the applicable interest rate is lowered by
.50%;
|
|
b)
|
on
one year adjustable rate mortgage loans, the initial rate is the rate
offered to the public for comparable loans, but the margin used to
calculate future interest rates, upon adjustment, is reduced by .50% (the
Association does not currently offer this product);
and
|
|
c)
|
on
other adjustable rate mortgage loans, both the initial rate and the margin
used on future rate adjustments are reduced by
.50%.
|
For fixed
rate home equity loans, the interest rate is reduced by .50%. No discounts are
provided on home equity lines of credit.
Once a
discounted mortgage loan is obtained, it may be refinanced through use of the
Association’s refinance programs once within the first ten years and the
discounts will continue to be available. After ten years, the property can be
refinanced one time with new discounts applied.
The
interest rate discounts continue to apply so long as the participant continues
in the service of the Association, or after the participant ceases service due
to disability, death or retirement at or after age 55 with at least ten years of
service. In the event of death, the benefit is available to the participant’s
spouse for as long as the spouse occupies the principal residence. Upon
retirement, no discounts are allowed on refinances of any kind or if a new
primary residence is purchased.
The
following directors and executive officers have received the benefit of interest
rate or other discounts during 2008 as specified in the Association’s Employee
& Director Mortgage & Home Equity Loan Policy:
Name
|
|
Interest
Rate
Payable
on
Indebtedness
(%)(1)
|
|
|
Highest
Aggregate
Amount
of
Indebtedness
Outstanding
since
January
1,
2008
($)
|
|
|
Principal
Balance
outstanding
as
of the
Record
Date
($)
|
|
|
Amount
of
Principal
Paid
on
Indebtedness
during
2008
($)
|
|
|
Amount
of
Interest
Paid On
Such
Indebtedness
during
2008
($)
|
|
Frank
E. Fusco
|
|
|
4.500
|
|
|
|
219,057
|
|
|
|
212,960
|
|
|
|
4,635
|
|
|
|
13,164
|
|
Peter
C. Haeffner
|
|
|
4.625
|
|
|
|
349,991
|
|
|
|
349,991
|
|
|
|
0
|
|
|
|
13,271
|
|
Thomas
V. Powderly
|
|
|
4.500
|
|
|
|
270,062
|
|
|
|
259,210
|
|
|
|
8,633
|
|
|
|
11,976
|
|
Leo
J. Waters
|
|
|
4.875
|
|
|
|
267,654
|
|
|
|
267,654
|
|
|
|
0
|
|
|
|
13,048
|
|
(1)
|
Mr.
Fusco’s loan is an adjustable rate mortgage loan. His interest
rate adjusted, according to the loan’s terms, during 2008. Mr.
Haeffner
refinanced
his loan effective August 1, 2008 and at such time was still eligible for
a discount with respect to his loan. The interest
rate
reflected in the table
above is the rate in effect as of December 31,
2008.
|
All loans
outstanding to the directors, Board Nominees or executive officers of AFC or
members of their immediate families were made in conformity with the
Association’s policies in this regard and have not been classified as
non-accrual, past due, restructured or potential problem loans. All such loans
are subject to and comply with the insider lending restrictions of Section 22(h)
of the Federal Reserve Act (12 U.S.C. §375b).
Mr.
Connors, a director and Chairman of the Compensation Committee of AFC and the
Association, has a relationship with Curran and Connors, Inc., a company
utilized by AFC to assist in the preparation of its annual report to
shareholders. For additional information regarding this relationship,
see Compensation Committee Interlocks and Insider Participation commencing on
page 21.
Security
Ownership of Management
The following table sets forth
information concerning the interests in AFC Common Stock as of the Record Date
of each director and Board Nominee of AFC, each Named Executive and all
directors and executive officers of AFC as a group. For purposes of the Annual
Meeting, AFC Common Stock is the only AFC voting stock outstanding.
Name of Beneficial Owner
|
|
Amount
and Nature
of Beneficial Ownership
(1)(2)
|
|
|
Percent of Class (3)
|
|
George
L. Engelke, Jr.
|
|
|
4,157,602
|
(4)
|
|
|
4.28
|
|
Gerard
C. Keegan
|
|
|
1,051,311
|
(5)
|
|
|
|
|
Andrew
M. Burger
|
|
|
118,302
|
(6)
|
|
|
|
|
John
J. Conefry, Jr.
|
|
|
78,033
|
(7)
|
|
|
|
|
Denis
J. Connors
|
|
|
98,301
|
(8)
|
|
|
|
|
Thomas
J. Donahue
|
|
|
206,572
|
(9)
|
|
|
|
|
Peter
C. Haeffner, Jr.
|
|
|
53,043
|
(10)
|
|
|
|
|
Ralph
F. Palleschi
|
|
|
94,299
|
(11)
|
|
|
|
|
Thomas
V. Powderly
|
|
|
33,299
|
(12)
|
|
|
|
|
Leo
J. Waters
|
|
|
47,649
|
(13)
|
|
|
|
|
Monte
N. Redman
|
|
|
1,662,702
|
(14)(15)
|
|
|
1.71
|
|
Gary
T. McCann
|
|
|
600,750
|
(16)
|
|
|
|
|
Frank
E. Fusco
|
|
|
526,583
|
(14)(17)
|
|
|
|
|
All
directors, Board Nominees and executive officers as a group (15
persons)
|
|
|
22,399,439
|
(14)(18)
|
|
|
11.18
|
|
(1)
|
Except
as otherwise indicated, each person listed has sole voting and investment
power with respect to the shares of AFC Common Stock
indicated.
|
(2)
|
Included
are shares of AFC Common Stock which could be acquired within 60 days of
the Record Date pursuant to options to acquire AFC Common Stock as
follows: Mr. Engelke (2,580,423 shares), Mr. Keegan (739,400 shares), Mr.
Burger (24,000 shares), Mr. Conefry (24,000 shares), Mr. Connors (48,000
shares), Mr. Donahue (48,000 shares), Mr. Haeffner (30,000 shares), Mr.
Palleschi (36,000 shares), Mr. Powderly (6,000 shares), Mr. Waters (40,350
shares), Mr. Redman (960,628 shares), Mr. McCann (390,609
shares), Mr. Fusco (336,173 shares) and all directors, Board
Nominees and executive officers as a group (6,557,119
shares).
|
(3)
|
Except
as otherwise indicated, the percent of class beneficially owned does not
exceed one percent (1.00%).
|
(4)
|
Included
are 46,680 shares of AFC Common Stock as to which Mr. Engelke has shared
voting and investment power, 236,020 shares of AFC Common Stock as to
which he has sole voting and no investment power and 34,150 shares of AFC
Common Stock as to which he has shared voting and sole investment power.
Mr. Engelke has pledged 1,230,279 shares of AFC Common Stock pursuant to a
margin account arrangement. The margin balance outstanding, if
any, pursuant to such arrangement may vary from time to
time.
|
(5)
|
Included
are 57,138 shares of AFC Common Stock as to which Mr. Keegan has shared
voting and investment power and 155,020 shares of AFC Common Stock as to
which he has sole voting and no investment
power.
|
(6)
|
Included
are 37,500 shares of AFC Common Stock as to which Mr. Burger has shared
voting and investment power and 7,299 shares of AFC Common Stock as to
which he has sole voting and no investment power. Mr. Burger
has pledged 118,302 shares of AFC Common Stock pursuant to a margin
account arrangement. The margin balance outstanding, if any,
pursuant to such arrangement may vary from time to
time.
|
(7)
|
Included
are 7,299 shares of AFC Common Stock as to which Mr. Conefry has sole
voting and no investment power. Mr. Conefry has pledged 44,991 shares of
AFC Common Stock pursuant to a margin account arrangement. The
margin balance outstanding, if any, pursuant to such arrangement may vary
from time to time.
|
(8)
|
Included
are 75,000 shares of AFC Common Stock as to which Mr. Connors has shared
voting and investment power and 7,299 shares of AFC Common Stock as to
which he has sole voting and no investment power. Mr. Connors has pledged
43,000 shares of AFC Common Stock pursuant to a margin account
arrangement. The margin balance outstanding, if any, pursuant
to such arrangement may vary from time to
time.
|
(9)
|
Included
are 151,272 shares of AFC Common Stock as to which Mr. Donahue has shared
voting and investment power and 7,299 shares of AFC Common Stock as to
which he has sole voting and no investment power. Mr. Donahue has pledged
102,547 shares of AFC Common Stock pursuant to a margin account
arrangement. The margin balance outstanding, if any, pursuant
to such arrangement may vary from time to
time.
|
(10)
|
Included
are 500 shares of AFC Common Stock as to which Mr. Haeffner has shared
voting and investment power and 7,299 shares of AFC Common Stock as to
which he has sole voting and no investment power. Mr. Haeffner has pledged
15,744 shares of AFC Common Stock pursuant to a margin account
arrangement. The margin balance outstanding, if any, pursuant
to such arrangement may vary from time to
time.
|
(11)
|
Included
are 7,299 shares of AFC Common Stock as to which Mr. Palleschi has sole
voting and no investment power. Mr. Palleschi has pledged 51,000 shares of
AFC Common pursuant to a margin account arrangement. The margin
balance outstanding, if any, pursuant to such arrangement may vary from
time to time.
|
(12)
|
Included
are 20,000 shares of AFC Common Stock as to which Mr. Powderly has shared
voting and investment power and 7,299 shares of AFC Common Stock as to
which he has sole voting and no investment
power.
|
(13)
|
Included
are 7,299 shares of AFC Common Stock as to which Mr. Waters has sole
voting and no investment power.
|
(14)
|
Messrs.
Redman and Fusco are among the trustees and members of the Committees. The
Committees are each composed of the same five individual members. The
shared membership of the Committees may constitute an arrangement or
relationship that results in indirect beneficial ownership by each of them
under Rule 13d-3(a) of the Exchange Act of those shares beneficially owned
by each of the others. Each of the trustees and members of the Committees
disclaims membership in a group and affirms that they have not agreed to
act together with any of the others for any purpose of acquiring, holding,
voting or disposing of the AFC Common Stock. Each of the Committees acts
by majority vote of their five members and no member of any of the
Committees may act individually to vote or dispose of shares of the AFC
Common Stock by means of their membership in any or all of the Committees.
The ESOP claims beneficial ownership of, and shared voting and dispositive
power with respect to, 9,964,520 shares of AFC Common Stock as of December
31, 2008. The Committees claim sole voting and dispositive power with
respect to 773,308 shares of AFC Common Stock, shared voting power with
respect to 810,115 shares of AFC Common Stock and shared dispositive power
with respect to 10,774.635 shares of AFC Common Stock as of December 31,
2008. The amount shown for all directors, Board Nominees and executive
officers as a group includes 11,547,943 shares beneficially owned by the
Committees. See Security Ownership of Certain Beneficial Owners commencing
on page 4.
|
(15)
|
Included
are 48,539 shares of AFC Common Stock as to which Mr. Redman has shared
voting and investment power, 257,150 shares of AFC Common Stock as to
which he has sole voting and no investment power and 25,804 shares of AFC
Common Stock as to which he has shared voting and sole investment
power. Mr. Redman has pledged 366,598 shares of AFC
Common Stock pursuant to a margin account arrangement. The
margin balance outstanding, if any, pursuant to such arrangement may vary
from time to time.
|
(16)
|
Included
are 68,221 shares of AFC Common Stock as to which Mr. McCann has shared
voting and investment power, 140,480 shares of AFC Common Stock as to
which Mr. McCann has sole voting and no investment power and 1,440 shares
of AFC Common Stock as to which Mr. McCann has shared voting and sole
investment power.
|
(17)
|
Included
are 38,784 shares of AFC Common Stock as to which Mr. Fusco has shared
voting and investment power and 117,060 shares of AFC Common Stock as to
which he has sole voting and no investment power. Mr. Fusco has pledged
28,586 shares of AFC Common Stock pursuant to a margin account
arrangement. The margin balance outstanding, if any, pursuant
to such arrangement may vary from time to
time.
|
(18)
|
Included
are 1,649,358 shares of AFC Common Stock as to which all directors, Board
Nominees and executive officers, as a group, have shared voting power, and
11,450,509 shares of AFC Common Stock as to which all directors, Board
Nominees and executive officers, as a group, have shared investment
power.
|
Compensation
Committee Interlocks and Insider Participation
The directors who serve as members of
the Compensation Committee are disclosed in the section entitled Committees and
Meetings of the Board - Compensation Committee commencing on page 13. All such
members of the Compensation Committee served throughout 2008. No
members of the Compensation Committee are former employees of AFC or the
Association. Mr. Powderly and Mr. Waters are members of the Compensation
Committee, who during 2008, each had a loan secured by his principal residence
and received a benefit under the Association’s Employee & Director Mortgage
& Home Equity Loan Policy. See Transactions with Certain Related Persons
commencing on page 17 for further information regarding the Association’s
Employee & Director Mortgage & Home Equity Loan Policy and information
concerning such loans.
In 2008,
Denis J. Connors, a director and Chairman of the Compensation Committee of AFC
and the Association, served as Chief Executive Officer of Curran and Connors,
Inc., a designer and publisher of annual reports. Mr. Connors also served upon
the Board of Directors of Curran and Connors, Inc. Curran and Connors, Inc. has
been retained by AFC to assist AFC in the preparation and publication of its
annual reports to shareholders. In 2008, Curran and Connors, Inc. was
paid approximately $170,000 in fees for
the production of AFC’s annual report, inclusive of printing costs which are
passed through from Curran and Connors, Inc. to the printer. These
fees did not exceed 2% of Curran and Connors, Inc.’s consolidated gross revenue
for 2008.
There were no other transactions or
relationships involving members of the Compensation Committee requiring
disclosure in this Proxy Statement. During 2008, none of AFC’s executive
officers served as a director or member of the compensation committee (or
equivalent body) of another entity where a director or member of AFC’s
Compensation Committee served as an executive officer or director.
The
following section sets forth information regarding director
compensation.
Directors’ and Other Fee
Arrangements
All non-employee directors of AFC
receive an annual retainer of $22,000. No additional fees for attendance at
Board meetings are paid. All members of the Board also serve as directors of the
Association. All non-employee directors of the Association receive an annual
retainer of $44,000. No additional fees for attendance at Association Board of
Directors meetings are paid. The Chairman of the Audit Committee of AFC and the
Association receives an additional annual retainer of $15,000 in the aggregate
and all members of the Audit Committee receive a $1,000 fee per Audit Committee
meeting attended. The Chairman of the Nominating and Corporate Governance
Committee of AFC and the Association receives an additional annual retainer of
$10,000 in the aggregate and all members of the Nominating and Corporate
Governance Committee receive a $1,000 fee per Nominating and Corporate
Governance Committee meeting attended. The Chairman of the Compensation
Committee of AFC and the Association receives an additional annual retainer of
$10,000 in the aggregate and all members of the Compensation Committee receive a
$1,000 fee per Compensation Committee meeting attended. Typically, committee
meetings of AFC and the Association are held as joint meetings and only a single
meeting attendance fee is paid.
The aggregate of fees paid to each
director for his service as a director of both AFC and the Association is
reflected in the Fees Earned or Paid in Cash column of the 2008 Director
Compensation Table on page 27.
Directors’ Option Plans
AFC maintains the 1999 Directors Option
Plan pursuant to which non-employee directors of AFC and the Association have
been granted options on terms previously approved by the shareholders of
AFC.
In May
2007, the shareholders of AFC approved the 2007 Directors Stock Plan. As a
result, the 1999 Director Option Plan was frozen such that no further options
will be granted under the 1999 Director Option Plan.
The
purpose of the 1999 Directors Option Plan was to promote the growth and
profitability of AFC, to provide directors of AFC and affiliates with an
incentive to achieve corporate objectives, to attract and retain
key directors of outstanding competence and to provide such directors with an
equity interest in AFC.
Pursuant to the 1999 Directors Option
Plan, each person who first became a non-employee director of AFC or the
Association after May 19, 1999 was granted, on the 15th day of the month
following the month in which he or she became a non-employee director, an option
to purchase 12,000 shares of AFC Common Stock at an exercise price per share
equal to the final quoted sale price for AFC Common Stock, excluding after-hours
trading, on the NYSE on the date of grant. In addition, on January 15th of each
succeeding year, or the following business day if January 15
th
was not
a business day, each person who was then a non-employee director received a
grant of an option to purchase an additional 6,000 shares of AFC Common Stock at
an exercise price per share equal to the final quoted sale price for AFC Common
Stock, excluding after-hours trading, on the NYSE on the date of
grant.
All options granted pursuant to the
1999 Directors Option Plan vested upon grant and expire upon the earlier of 10
years following the date of grant or one year following the date the director
ceases to be a director for any reason other than removal for cause, in which
case the director’s options immediately terminate.
2007 Directors Stock Plan
In May 2007, the shareholders of AFC
approved the 2007 Directors Stock Plan. This plan provides for annual grants to
non-employee directors of restricted stock having a fair market value, as
defined in the plan, equal to $45,000 at the time of the grant. Such grants
commenced in 2008 and are made annually on the third business day following
AFC’s release of its prior year annual financial results. The plan also provides
for discretionary grants. No discretionary grants have been made pursuant to the
plan.
The shares awarded pursuant to the 2007
Directors Stock Plan vest three years after the date of the award or, if
earlier, upon the director’s death, mandatory retirement, in the event of a
change of control or in the event a director incurs an involuntary termination
from the Board, as defined in the plan.
Upon award, shares granted pursuant to
the 2007 Directors Stock Plan have both voting rights and the right to receive
dividends.
Directors’
Retirement Plan
The Directors’ Retirement Plan provides
retirement benefits for directors of AFC or the Association with at least 10
years of service who are not and have not been employees of AFC, the Association
or any of their predecessors in interest. This excludes Mr. Engelke, Mr. Keegan,
Mr. Conefry, and Mr. Powderly from participation in the plan. In 1999,
participation in the Directors’ Retirement Plan was frozen such that any
director who joins the Board of Directors of AFC or the Association after March
1, 1999 will not be eligible to participate in the Directors’ Retirement
Plan.
Benefits
under the Directors’ Retirement Plan vest at a 50% level once an eligible
director completes 10 years of service. Vesting increases by 5% each additional
year of service thereafter with 100% vesting after 20 years of service. Service
on the Board of Directors of companies merged into AFC or the Association is
counted as eligible service under the Directors’ Retirement Plan. Any benefit
which a director receives pursuant to a retirement plan for service on the Board
of Directors of a company merged into AFC or the Association acts as an offset
against the benefit due the director pursuant to the Directors’ Retirement
Plan.
The basic
benefit payable under the Directors’ Retirement Plan is a monthly benefit for
the life of the director (or an alternative form of benefit described below in
the case of the director’s death) commencing on the earlier of
(a) retirement from the Boards of Directors of AFC and the
Association or age 65, whichever is later, (b) the date the director ceases to
serve on the Boards of Directors due to disability, as defined in the Plan, or
(c) death of the director, which basic benefit, on an annual basis, is equal to
the sum of (i) the annual retainers paid by AFC and the Association to their
directors at the time the director leaves the service of such Boards, (ii) any
annual retainers the director was receiving from AFC and the Association for
service as the chairman of a committee of the Boards of AFC or the Association
at the time the director leaves the service of such Boards, and (iii) a sum
equal to the meeting fees paid to the director for committee meeting attendance
in the year preceding the director leaving the service of such Boards. Within
the first 30 days of eligibility under the plan, a director is generally allowed
to elect between alternate forms of benefit payment for their benefits under the
Directors’ Retirement Plan. The alternate forms of benefit, in addition to the
single life annuity described above, were (i) a 10 year certain annuity, (ii) a
joint and survivor annuity with the director’s spouse, and (iii) a lump sum
payment. The amount of the alternate forms of benefit is calculated to be
actuarially equivalent to the basic single life annuity benefit described above.
For other directors entitled to receive benefits under director retirement plans
established by companies merged into AFC or the Association, the director was
required to select a form of benefit payment under the Directors’ Retirement
Plan that is the same as the form provided pursuant to the plan established by
the company merged into AFC or the Association, i.e. a joint and 100% survivor
annuity in the case of Mr. Haeffner., and a 10 year certain annuity for Mr.
Waters. Directors, including Mr. Waters, who is a participant in the
LIB Director Retirement Plan, were allowed, on or before December 31, 2008, to
make a one-time election of a lump sum benefit at the later of January 1, 2009
or the benefit commencement date specified in the plan.
At the time of The Greater Acquisition,
The Greater maintained The Retirement Plan of The Greater New York Savings Bank
for Non-Employee Directors, or The Greater Director Retirement Plan. Pursuant to
the terms of The Greater Director Retirement Plan, Mr. Haeffner became entitled
to and commenced, at the time of The Greater Acquisition, receiving a $24,000
per year retirement benefit payable in the form of a joint and survivor life
annuity with his spouse. At the time of The Greater Acquisition, AFC and the
Association assumed The Greater’s obligations under The Greater Director
Retirement Plan. The amount received during 2008 by Mr. Haeffner, as a result of
this benefit, has been included in the All Other Compensation column of the 2008
Director Compensation Table on page 27.
At the time of the LIB Acquisition, LIB
maintained The LIB Non-Employee Directors’ Benefit Plan, or the LIB Director
Retirement Plan. Pursuant to the terms of the LIB Director Retirement Plan, Mr.
Waters became entitled at the time of the LIB Acquisition to receive, upon
retirement, a $21,600 per year retirement benefit payable in the form of a ten
year certain annuity. At the time of the LIB Acquisition, AFC and the
Association assumed LIB’s obligations under the LIB Director Retirement
Plan.
In the
event of a change of control, as defined in the Directors’ Retirement Plan,
eligible directors will receive service credit through the balance of their then
current term as a director. On or before December 31, 2008, eligible directors
were required to make a one-time election whether, in the event of a change of
control, their benefits due pursuant to the Directors’ Retirement Plan would be
paid to the director in a lump sum or transferred into a rabbi trust to be
established at the time of the change of control and paid pursuant to the
original alternate form benefit election.
The
directors who are eligible to participate in the Directors’ Retirement Plan, at
this time, have the following vesting percentage: Mr. Burger - 100%, Mr. Connors
- 90%, Mr. Donahue - 90%, Mr. Haeffner - 80%, Mr. Palleschi - 60%, and Mr.
Waters - 90%.
Included
in the 2008 Director Compensation Table, set forth on page 27, under the Change
in Pension Value and Nonqualified Deferred Compensation Earnings column is the
change in the actuarial value during 2008 attributable to each of the directors
who participates in the Directors’ Retirement Plan based upon the same
assumptions utilized for financial statement reporting in the Consolidated
Financial Statements. Also included in the 2008 Director Compensation Table, set
forth on page 27 under the Change in Pension Value and Nonqualified Deferred
Compensation Earnings column, is the change in the actuarial value during 2008
attributable to Mr. Haeffner’s participation in The Greater Director
Retirement Plan and Mr. Waters’ participation in the LIB Director Retirement
Plan. For further information regarding the assumptions utilized and changes in
such assumptions from time to time, see Note 14 to the Consolidated Financial
Statements. Pursuant to SEC regulations, AFC is not allowed to disclose in the
Director Compensation Table a change in pension value that is less than zero
even though for financial statement purposes AFC may accrue the actual change.
The actual change in actuarial value with respect to Mr. Burger reflected a
decline in value during 2008.
Directors Deferred Compensation
Plan
Prior to December 31, 2008, pursuant to
the Directors Deferred Compensation Plan, non-employee directors of either AFC
or the Association could elect to defer receipt of all or any part of their
directors’ fees. Deferred fees are carried on the books of AFC as an unfunded
obligation and are credited with interest quarterly at a rate equal to the
average of AFC’s consolidated cost of funds and yield on investments for the
preceding quarter, unless the cost of funds exceeds the yield on investments, in
which case the rate is based upon the preceding quarter’s consolidated yield on
investments.
Pursuant
to applicable SEC regulations, the rate of interest credited to participating
directors’ accounts pursuant to the Directors Deferred Compensation Plan for
2008 was not an above-market rate and, therefore, is not reflected in the Change
in Pension Value and Nonqualified Deferred Compensation Earnings column of the
2008 Director Compensation Table set forth on page 27.
In the
event of a change of control of AFC or the Association, each participating
director could elect that his fees, with accrued interest, be placed in a
grantor trust established for the benefit of the director, applied to the
purchase of an insurance company annuity contract, or be paid directly by AFC or
its successor.
The Directors Deferred Compensation
Plan was frozen as of December 31, 2008 so that no additional participants are
allowed. At that time, the only active participant, Mr. Haeffner,
elected to receive his deferred compensation plan balance in two installments,
payable on January 1, 2009 and January 1, 2010.
Directors’
Death Benefit
This plan provides that if a
non-employee director dies while in service as a director of AFC or the
Association, the director’s designated beneficiary will receive from AFC a
payment equal to one year’s directors’ fees, including annual retainers, meeting
attendance fees and committee chairman retainers, at the rate in effect
immediately preceding his or her death. If a director leaves the service of AFC
and the Association for any reason other than death, all rights to any benefit
under this plan cease. This is an unfunded benefit for which AFC does not accrue
an expense. Therefore, no amount has been reflected in the 2008 Director
Compensation Table set forth on page 27 for the value of this
obligation.
Effective January 1, 2009, active
participants in the Directors Retirement Plan were excluded from eligibility for
this benefit.
Travel Expenses and Other
Perquisites
AFC and the Association pay or
reimburse directors for their travel expenses, including lodging, for attendance
at meetings of the Board of Directors and committees of AFC, the Association or
their subsidiary companies on which directors may serve and at other
business-related functions. Included in the All Other Compensation column of the
2008 Director Compensation Table set forth on page 27 is the cost
associated with travel and lodging expenses incurred by AFC for the directors’
attendance at meetings at AFC’s corporate headquarters.
From time
to time, directors’ spouses are invited to attend business-related functions
away from AFC’s corporate headquarters with respect to which participation by
the directors and their spouses is expected and/or encouraged. These have
included a holiday party with senior officers of the Association and their
guests, director and executive retreats, director educational programs and other
industry-related functions. Pursuant to SEC regulations, the attendance of a
director’s spouse at these functions is considered a perquisite. The estimated
incremental cost to AFC of having a spouse attend such functions is included in
the All Other Compensation column of the 2008 Director Compensation Table set
forth on page 27. AFC believes that having the directors’ spouses attend such
functions as invited guests of the Association serves the business purposes of
the Association and AFC by reinforcing the collegiality of the Board, resulting
overall in a more efficient and productive Board.
AFC
maintains a fractional lease on a corporate aircraft for use by its executives
for business purposes only. Personal use of the aircraft is not allowed. The use
of this aircraft by the executives is viewed by AFC as integrally and directly
related to their job performance. As a result, this use is not viewed as a
perquisite to the executives as defined by SEC regulations. See the CD&A,
commencing on page 28 and the Summary Compensation Table on page
40.
When an
executive officer is traveling on business utilizing the corporate aircraft and
room is otherwise available on the aircraft, directors traveling on AFC’s
business and the directors’ spouses traveling with the directors may accompany
the executive on such business. While such use of the aircraft by the director
and the director’s spouse is considered a perquisite pursuant to SEC
regulations, no value has been ascribed to such usage with respect to the
directors in the 2008 Director Compensation Table set forth on page 27, as there
is no incremental cost to AFC for such usage.
The
directors are allowed to receive discounts on certain loans secured by their
primary residence pursuant to the Association’s Employee & Director Mortgage
& Home Equity Loan Policy. For a detailed description of this policy, see
the Transactions with Certain Related Persons commencing on page 17. The amount
of any discounted interest rate or fees below what an unaffiliated customer
would have been required to pay under similar circumstances during 2008 has been
determined by the SEC staff not to be compensation and, therefore, is not
included in the All Other Compensation column of the 2008 Director Compensation
Table, set forth on page 27.
The following Table sets forth details
regarding compensation provided to the directors of AFC for the fiscal year
ended December 31, 2008.
2008
Director Compensation Table
Name
|
|
Fees
Earned
Or
Paid
in
Cash
($)(1)
|
|
|
Stock
Awards
($)(2)
|
|
|
Change
in Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(3)
|
|
|
All
Other
Compensation
($)(4)
|
|
|
Total
($)
|
|
Andrew
M. Burger
|
|
|
84,000
|
|
|
|
29,105
|
|
|
|
0
|
|
|
|
3,107
|
|
|
|
116,212
|
|
John
J. Conefry, Jr.
|
|
|
69,000
|
|
|
|
13,744
|
|
|
|
0
|
|
|
|
6,212
|
|
|
|
88,956
|
|
Denis
J. Connors
|
|
|
94,000
|
|
|
|
13,744
|
|
|
|
77,279
|
|
|
|
10,795
|
|
|
|
195,818
|
|
Thomas
J. Donahue
|
|
|
96,000
|
|
|
|
13,744
|
|
|
|
71,912
|
|
|
|
8,495
|
|
|
|
190,151
|
|
Peter
C. Haeffner, Jr.
|
|
|
77,000
|
|
|
|
13,744
|
|
|
|
24,743
|
|
|
|
49,160
|
|
|
|
164,647
|
|
Ralph
F. Palleschi
|
|
|
95,000
|
|
|
|
13,744
|
|
|
|
40,824
|
|
|
|
4,481
|
|
|
|
154,049
|
|
Thomas
V. Powderly
|
|
|
75,000
|
|
|
|
13,744
|
|
|
|
0
|
|
|
|
16,823
|
|
|
|
105,567
|
|
Leo
J. Waters
|
|
|
82,000
|
|
|
|
29,105
|
|
|
|
61,211
|
|
|
|
8,746
|
|
|
|
181,062
|
|
(1)
|
Fees
Earned or Paid in Cash represent fees earned by directors for the annual
retainer paid by AFC, the annual retainer paid by the Association,
committee meeting attendance fees, and fees for service as committee
chairmen, as applicable. See the discussion on page 22 entitled Directors’
and Other Fee Arrangements.
|
(2)
|
This
column represents the dollar amount recognized in accordance with SFAS
123R for financial statement reporting purposes with respect to the 2008
fiscal year for restricted stock awards made to the directors pursuant to
the 2007 Directors Stock Plan. These amounts reflect AFC’s
accounting expense for these awards, and do not correspond to the actual
value that has been or will be recognized by the
directors. Pursuant to SEC rules, the amounts shown exclude the
impact of estimated forfeitures relating to service-based vesting
conditions. The fair value of restricted stock awards is
calculated using the closing price of AFC Common Stock as quoted on the
NYSE on the date of the award. For additional information, see
note 15 to the Consolidated Financial
Statements.
|
(3)
|
Pursuant
to SEC regulations, Mr. Burger’s
change in pension
value is disclosed as $0.00 because the change in the actuarial value of
his benefit from December 31, 2007 to December 31, 2008 was a negative
$28,358. As a non-employee director of LIB, Mr. Waters participated in the
LIB Director Retirement Plan. Also, included in the Change in Pension
Value and Nonqualified Deferred Compensation Earnings column with respect
to Mr. Waters is the change in actuarial value during 2008 with respect to
his interest in such plan. As a non-employee director of The Greater, Mr.
Haeffner participated in The Greater Director Retirement Plan. Also,
included in the Change in Pension Value and Nonqualified Deferred
Compensation Earnings column with respect to Mr. Haeffner is the change in
actuarial value during 2008 with respect to his interest in such
plan.
|
(4)
|
All
Other Compensation for each director, except Mr. Burger, includes travel
expenses to attend onsite meetings of the Board and, except for Mr.
Conefry, spousal travel and entertainment expenses for spouses’ attendance
at AFC and Association-related functions. All Other
Compensation for each director also includes dividends on restricted stock
grants. Mr. Haeffner participated in the Directors Deferred
Compensation Plan described above. Pursuant to SEC regulations, the
interest rate paid in 2008 with respect to his balances in the Directors
Deferred Compensation Plan was not a preferential rate and, therefore, no
amount has been included under the All Other Compensation column with
respect to this sum. Mr. Haeffner receives medical and dental
benefits pursuant to a post-retirement medical plan provided to the
non-employee directors of The Greater, the premiums for which in 2008 were
$16,376 and $1,259, respectively. As a former non-employee director of The
Greater, he also receives a pension payment pursuant to The Greater
Director Retirement Plan. That payment equaled $24,000 in
2008.
|
The information set forth in the
Compensation Committee Report shall not be deemed incorporated by reference by
any general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933, referred to as the Securities Act, or
the Exchange Act, except to the extent that AFC specifically incorporates this
information by reference, and otherwise shall not be deemed “soliciting
materials” or to be “filed” with the SEC or subject to Regulations 14A or 14C of
the SEC or subject to the liabilities of Section 18 of the Exchange
Act.
Compensation
Committee Report
1)
|
The
Compensation Committee has reviewed and discussed the CD&A required by
Item 402(b) (SEC Regulation, Section 229.402(b)) with management;
and
|
2)
|
Based
on the review and discussion referred to in Paragraph 1 above, the
Compensation Committee recommended to the Board of Directors of AFC that
the CD&A be included in this Proxy Statement on Schedule 14A (SEC
Regulation, Section 240.14a-101).
|
Compensation
Committee of AFC
Denis
J. Connors, Chairman
|
Ralph
F. Palleschi
|
Andrew
M. Burger
|
Thomas
J. Donahue
|
Thomas
V. Powderly
|
Leo
J. Waters
|
Compensation
Discussion and Analysis
Under
rules established by the SEC, AFC is required to provide certain data and
information regarding the compensation and benefits provided to AFC’s Chief
Executive Officer, Chief Financial Officer and certain other executives of AFC.
The disclosure requirements for the Chief Executive Officer and such other
executives include the use of tables and the CD&A. The CD&A is intended
to review the compensation awarded to, earned by or paid to the Named
Executives. This review explains all material elements of AFC’s compensation of
the Named Executives and describes the objectives of AFC’s compensation
programs, what the program is designed to reward, each element of compensation,
why AFC chooses to pay each element, how AFC determines the amount, and, where
applicable, the formula for each element, and how each element and AFC’s
decisions regarding that element fit into AFC’s overall compensation objectives
and affect decisions regarding other elements. The Named Executives include the
Chief Executive Officer, the Chief Financial Officer and AFC’s three
most highly compensated executive officers other than the Chief Executive
Officer and the Chief Financial Officer of AFC as of December 31, 2008. The
Named Executives of AFC are George L. Engelke, Jr., Monte N. Redman, Gerard C.
Keegan, Gary T. McCann and Frank E. Fusco.
Executive Compensation
Philosophy
The
primary objective of the executive compensation program of AFC and the
Association is to attract and retain highly skilled and motivated executive
officers to manage AFC in a manner to promote prudent growth and profitability
and advance the interests of its shareholders.
The
compensation program is designed to provide levels of compensation which are
competitive and reflective of the organization’s performance in achieving its
goals and objectives, both financial and non-financial, as determined in its
business plan. The program aligns the interests of the executives with those of
the shareholders of AFC by providing a proprietary interest in AFC, the value of
which can be significantly enhanced by the appreciation of AFC Common Stock. The
program also seeks to adequately provide for the needs of the executives upon
retirement, based upon their compensation levels, length of service provided to
AFC and the Association and the appreciation of AFC Common Stock.
The Named Executives are highly skilled
and experienced in the management of thrift institutions. Mr. Engelke, Mr.
Redman and Mr. Keegan each has in excess of thirty (30) years experience in the
thrift industry and in excess of fifteen (15) years experience in executive
management responsible for managing AFC, the Association and/or other thrift
institutions. Mr. Fusco and Mr. McCann each has over 15 years of thrift and
management experience as a senior officer of AFC or the Association. All have
extensive management experience and extensive banking and non-banking
training. All have extensive experience in the management of a public
company, and all have a commitment to excellence, prudent operations and
promoting the interests of shareholders.
Given the
experience of the executives, their proven track record of performance at AFC
and the investment AFC and the Association have made in these individuals, their
retention is important. AFC has taken a number of steps to further this goal,
such as entering into employment contracts with each of the Named Executives,
providing vesting periods for equity grants and awards, as well as retirement
and change of control packages that provide meaningful incentives for the Named
Executives to remain employed by AFC.
To a
significant degree, the compensation program for the executive officers mirrors
that utilized throughout most of AFC’s operations. The overall compensation of
the Named Executives is tied directly to their obtaining clearly defined results
in a prudent manner. Since their responsibility is to manage AFC, their
performance objectives are related directly to AFC’s performance. This is
accomplished through the Executive Incentive Plan, the equity-based compensation
program and, to a lesser degree, the retirement program.
AFC
believes that the best way to ensure that the Named Executives advance the
interests of the shareholders is to make sure that each of the executive
officers is a significant shareholder. The Compensation Committee has
established share ownership requirements applicable to its executives as a
multiple of their base salaries. For example, the Chief Executive Officer is
required to hold direct or indirect non-derivative shares of AFC Common Stock
having a value, based upon the prior year’s average price per share of AFC
Common Stock, equal to five (5) times his annual salary. Each of the other
executive officers is to hold direct or indirect non-derivative shares of AFC
Common Stock having a value, based upon the prior year’s average price per share
of AFC Common Stock, equal to three (3) times their respective annual salaries.
Excluded from the ownership requirements are outstanding AFC stock options so as
to ensure that the executives have more than a mere hypothetical stake in AFC’s
performance. While the policy contains a phase-in period to accommodate
promotions or newly hired executives, each of the executive officers during
2008, and today, exceed the minimum share ownership requirement
notwithstanding the application of any phase-in period. See the
section entitled Security Ownership of Management commencing on page 20 for
additional information regarding the investment of the Named Executives in AFC
Common Stock. Both through its equity-based incentive and retirement programs,
the Named Executives also receive a substantial portion of their compensation in
AFC Common Stock. The better AFC Common Stock performs for AFC’s shareholders,
the higher the total compensation that is earned by the Named Executives, and
vice versa.
The executive compensation program of
AFC consists of four (4) primary elements: Base Salary, Short-Term Non-Equity
Incentive Plan Compensation, Equity-Based Compensation, and Retirement Benefits.
In addition, the Association provides medical benefits, life insurance and
disability and other benefits common to all its full time employees. AFC and the
Association also provide certain other benefits, or Perquisites, to the Named
Executives. The Perquisites are considered an immaterial component of the
overall program and are generally associated with furthering the business
interests of AFC. AFC and the Association have each entered into employment
agreements with each of the Named Executives. These agreements, which are
discussed more fully below, impose certain obligations on and provide certain
benefits to the Named Executives which extend beyond the terms of their
employment.
In structuring its executive
compensation program, AFC considers the before and after tax financial impact
the elements of the program will have on AFC and the Association. Section 162(m)
of the Code, places a limitation of $1 million on the deductibility
by AFC of certain elements of compensation earned by each of the Named
Executives. AFC has previously submitted incentive compensation and other
benefit plans to its shareholders for approval, when required, in order to
preserve the potential deductibility of payments made to the Named
Executives. As a result of the approval of such plans, and based upon
the level and composition of the compensation of its executive officers, the
limitations contained in Section 162(m) of the Code did not materially impact
the financial condition or results of operations of AFC for the year ended
December 31, 2008.
Management of AFC monitors and provides
to the Compensation Committee, in connection with both executive and director
compensation, information derived from a group of financial institutions which
by asset size are the next ten largest and the next ten smaller publicly traded
banking and thrift institutions in the United States as determined by the
2008 SNL Executive Compensation
Review, Banks and Thrifts.
This information is utilized by the
Compensation Committee as additional information which, when considered with all
other factors, is used in making compensation-related decisions. These
institutions utilize a variety of business models, are in many cases located in
markets which are dissimilar from the New York metropolitan market in which AFC
is primarily located and are, generally, not considered by management or the
Compensation Committee to be AFC’s peers other than in terms of asset size. The
information acquired is derived from public filings by such companies with the
SEC. The institutions monitored during 2008 were Popular, Inc.,
Marshall & Ilsley Corp., Zions Bancorporation, Mellon Financial Corp.,
Commerce Bancorp, Inc., First Horizon National Corporation, Huntington
Bancshares Incorporated, Hudson City Bancorp, Inc., Synovus Financial Corp., New
York Community Bancorp, Inc., Associated Banc-Corp, Indymac Bancorp, Inc.,
Colonial BancGroup, Inc, Webster Financial Corporation, Downey Financial Corp.,
BOK Financial Corporation, W Holding Company, Inc., Flagstar Bancorp, Inc.,
First Citizens Banc Corp and City National Corporation. The
Compensation Committee does not index the compensation of the executive officers
to these or other institutions, but considers the information in the exercise of
its discretion to arrive at compensation programs and policies which it believes
are fair and competitive in the marketplace.
Other than levels of compensation,
there are no material differences in the compensation or benefit policies
applicable to the executive officers. The Compensation Committee believes that
the difference in the levels of compensation among the executive officers is
reflective of their roles and responsibilities within AFC, their experience in
those roles and competitive compensation levels in the marketplace. In the
equity compensation area, the Compensation Committee has in previous years
varied the terms of equity awards in an effort to mitigate accounting expenses
pursuant to SFAS 123R. See the section of this CD&A entitled
Perquisites commencing on page 38 for a discussion of the immaterial differences
in policy which do apply.
The
following details the components of AFC’s executive compensation
program.
Base Salary
Salary
levels are designed to be competitive with cash compensation levels paid to
similar executives at banking and thrift institutions of similar size and
standing, giving due consideration to the marketplace in which AFC and the
Association operate. Base salary levels are considered in conjunction with the
short-term non-equity incentive plan compensation component of the executive
compensation program.
AFC’s
performance to a significant degree is dependent upon factors which, in the
short-term, may be positively or negatively impacted by events outside of the
control of management. Our operating results are dependent primarily on our net
interest income, which is the difference between the interest earned on our
assets and the interest paid on deposits and borrowings. Our earnings are
particularly susceptible to changes in market interest rates and U.S Treasury
yield curves, government policies and the actions of regulatory authorities. The
Compensation Committee seeks to balance these factors and set base salary at a
level which provides a reasonably competitive level of base compensation even if
AFC, due to factors outside of the control of the executives, fails to meet its
minimum threshold targets such that no awards are made under the short-term
non-equity incentive plan compensation component of the total cash compensation
program, as occurred during 2008.
In determining whether the level of
base salary and short term non-equity incentive plan compensation, or total cash
compensation, is competitive, the Compensation Committee reviews information
from a variety of sources. The Compensation Committee receives information and,
from time to time, recommendations from management, has direct access to
publications reflecting industry practices and, when the Compensation Committee
deems necessary, selects and retains the services of compensation consultants.
When compensation consultants are utilized for this purpose, such consultants
report directly to the Compensation Committee. Although management necessarily
assists the Compensation Committee during this process, controls are implemented
to ensure that the consultants’ opinions and recommendations are reported
directly to the Compensation Committee, independent of management.
These
sources, taken together, are utilized ultimately to confirm that the level and
structure of executive compensation, and that of other officers, are fair,
competitive and reasonable. In reviewing information on compensation practices
with regard to executive officers within the banking and thrift industry, the
primary factors which influence salary and short-term non-equity incentive plan
compensation levels are the size and complexity of the institution or business
unit being managed, the marketplace in which the institution is located, the
position held by the executive and the performance of the institution versus
peers.
To determine whether or not base salary
and short-term non-equity incentive plan compensation for 2008 were set at
levels that were competitive, the Compensation Committee took a number of
specific steps. The Committee was provided access to
2008 SNL Executive Compensation
Review, Banks and Thrifts.
This publication provides compensation data on
all named executive officers at all publicly traded bank and thrift institutions
in the United States, including information regarding the size and location of
the institutions.
Generally,
the Compensation Committee reviews Named Executives’ salary and bonus
compensation for the ensuing year in December of each year at the same time as
such matters are considered for all other officers of AFC and the Association.
In conducting such review, the Compensation Committee considers the performance
of AFC, the performance of each of the executive officers (based both on the
directors’ own insights and discussions with Mr. Engelke and Mr. Redman), the
salary and compensation history of the Named Executives and both the proposed
short-term non-equity incentive plan compensation targets for the coming year
and proposed equity compensation grants.
In
anticipation that 2007 was going to be a subpar year the Compensation Committee
with the support of management has previously taken significant steps to
appropriately adjust executive compensation. These included, as more
fully discussed in the CD&A contained in AFC’s proxy statement dated April
8, 2008, (i) freezing the salaries of the executive officers at 2006 levels,
(ii) adjusting incentive targets upward to reduce potential bonus
payouts and (iii) reducing equity grant levels.
In
developing AFC’s Business Plan for 2008 during the fall of 2007, in light of the
interest rate forecasts available to them and the impact the projected yield
curve would have upon the performance of AFC and the Association, executive
management determined and communicated to the Board and Compensation Committee
that 2008, in all likelihood, while challenging, was expected to be an
improvement over a difficult 2007. The yield curve was expected to be
positively sloped and steepening resulting in improved
margin. Growing weakness in the real estate market was expected to
remain modest and economists expected a rebound in the economy, after a short
pause, by late 2008. The Business Plan which was reviewed and
approved by the Board reflected a growing margin and improved earnings per
share.
On an organization-wide basis a salary
increase target of 3.8% was established based upon survey data indicating salary
increase ranges of between 3.6% and 4.0% nationally. Among the
surveys utilized were WorldAtWork 2007/2008 Salary Budget Survey, Total U.S.
Firms, All Industries and Eastern Region/All Industries and Mercer HR Consulting
2007/2008 U.S. Compensation Planning Survey, All Employees/
All
Industries.
Also based upon the salary review
conducted by Hewitt Associates LLC discussed on page 16 of this
proxy statement, the Compensation Committee believed that the salaries of
several specific executives required adjustment to bring them to a level
competitive in the market for executive talent, which AFC considers to be
nationwide.
As a result and based upon the
recommendations of executive management the Compensation Committee took the
following actions:
|
(i)
|
the
Named Executives were granted salary increases equal to the following
percentage of their salaries as of December 31,
2007:
|
a) George
L Engelke, Jr. -
|
|
|
3.82
|
%
|
b) Monte
N. Redman -
|
|
|
3.13
|
%
|
c) Gerard
C. Keegan -
|
|
|
3.82
|
%
|
d) Gary
T. McCann
-
|
|
|
25.00
|
%
|
e) Frank
E. Fusco
-
|
|
|
16.25
|
%
|
Base
salary compensation for all executive officers for totaled $4,436,000 compared
to $4,152,000 at December 31, 2007, an increase of 6.84%,
|
(ii)
|
the
incentive targets for use with the Executive Incentive Plan were
established such
that
2008 Business Plan performance, while improved over 2007 performance,
would only result in an 80% of target incentive payout for the Named
Executives, and
|
|
(iii)
|
the
equity grant value awarded was maintained at the reduced levels as a
percentage of salary as were utilized in December,
2006.
|
The financial performance for AFC for
2008 due to the substantial deterioration of the economy did not meet 2008
Business Plan expectations. As a result, the executive officers were
not granted any salary increases for 2009 and received no executive compensation
pursuant to the Executive Incentive Plan for 2008. See Short-Term Non
Equity Incentive Plan Compensation below.
Short-Term
Non-Equity Incentive Plan Compensation
Short-term
non-equity incentive plan compensation consists of awards paid pursuant to the
Executive Incentive Plan. This Plan was approved by the shareholders of AFC in
1999 and again in 2004 and is a performance-based plan. Annually, the
Compensation Committee establishes, in advance, performance objectives. These
performance objectives are derived from the business plan of AFC, which is
reviewed and approved by the Board annually, typically in November, and covers
the ensuing two years. The compensation payable under the Executive Incentive
Plan, while it may be reduced by the Compensation Committee in its discretion,
is otherwise tied directly to the attainment of the pre-established performance
objectives. The Executive Incentive Plan has been structured in this manner to
maintain the tax deductibility to AFC of awards under this plan pursuant to Code
Section 162(m). Therefore, the Compensation Committee has no discretion under
this plan to reward performance by a particular Named Executive that may have
favorably impacted AFC’s results disproportionately or reward performance that
is not immediately captured in the financial performance matrix
utilized.
As noted
above, the Board and Compensation Committee of AFC recognize that the
performance of AFC is substantially affected by the environment in which it
operates, particularly interest rate movements and the shape of the yield curve.
It is expected that its executives will maintain systems to monitor such
environment and over time take steps to prudently manage the various risks that
such environment presents. The Board and the Compensation Committee believe
that, to be effective, the attainment of targets established under the Executive
Incentive Plan should be both challenging, yet prudently attainable, so as not
to encourage either imprudent risk taking or the sacrifice of long-term
performance for short term gains.
The
Compensation Committee has received comments from the compensation consultants
retained in previous years regarding the operation of the Executive Incentive
Plan and has duly considered those comments in structuring performance targets
pursuant to such plan. Among those comments was the proportion of each executive
officer’s performance based cash compensation to total cash compensation. The
Compensation Committee, in establishing the performance targets, utilizes its
discretion based upon all the information available to it. The Compensation
Committee does not generally review specific peer data concerning the targets
utilized by the Compensation Committee nor does it index the targets to peer
performance. Members of the Compensation Committee are generally aware of the
financial and total return performance of a number of peer and other banking
related institutions at the time the performance targets are established, as
this data is reported monthly by management at meetings of the Board. Among the
institutions monitored were Downey Financial Corp, Hudson City Bancorp, Inc.,
New York Community Bancorp, People’s United Financial, Inc., Sovereign Bancorp,
Washington Federal Inc., Washington Mutual, Dime Community Bancshares, Flushing
Financial Corp., Citigroup, Bank of America Corp, JPMorgan Chase & Co.,
Wachovia Corp., Wells Fargo & Co., U.S. Bancorp, Suntrust Banks, National
City Corporation, Fifth Third Bancorp, Bank of New York Mellon Corporation,
Capital One Financial, Webster Financial Corp., TCF Financial Corp., Valley
National Bancorp, Fannie Mae, and Freddie Mac. The specific criteria monitored
are not, however, directly comparable to the performance measures utilized under
the Executive Incentive Plan. Ultimately, the Compensation Committee exercises
its discretion, based upon all information available to it, to establish the
incentive targets applicable to the executive officers.
The Executive Incentive Plan for 2008
provided for a target incentive equal to seventy percent (70%) of base salary
for the Chief Executive Officer, sixty percent (60%) of base salary for the
Chief Operating Officer and fifty percent (50%) of base salary for each of the
other executive officers.
The
performance measurements used for 2008 were the diluted earnings per share of
AFC Common Stock and the return on average shareholders’ equity. A series of
achievement levels was established for each measure, with each level assigned a
percentage award ranging from zero percent (0%) to two hundred percent (200%).
The zero percent (0%) award represented performance below what the Compensation
Committee considered a reasonable threshold level of achievement based upon the
range of factors the executives were expected to encounter during the year at
the time the objectives were established. The diluted earnings per share
performance of AFC accounted for seventy five percent (75%) of the executives’
total incentives under the Executive Incentive Plan, while AFC’s return on
average shareholders’ equity performance accounted for twenty five percent (25%)
of such total.
The
Compensation Committee believes that these performance measurements are over
time, on an institution-wide basis, within the sufficient control of management
and should be captured in the total returns provided to shareholders of AFC
Common Stock. The Compensation Committee also believes that including a return
on average shareholders’ equity performance measure encourages the efficient
deployment of invested capital and retained earnings and promotes prudent
longer-term performance.
Based
upon AFC’s confidential business plan, target performance ranges were
established for 2008 at the time of the award in January 2008 for both diluted
earnings per share targets and return on average shareholders’ equity targets.
The targets were assigned a percentage between zero percent (0%) and two hundred
percent (200%). At the time the ranges were established in January 2008, the
Compensation Committee also authorized certain specified adjustments to AFC’s
diluted earnings per common share and return on average shareholders’ equity, as
reported in accordance with U.S. generally accepted accounting principles,
referred to as GAAP, in determining the ultimate performance under the Executive
Incentive Plan. In such cases, typically, business plan assumptions are
substituted for items that reflect changes in GAAP or are unknown, highly
unpredictable or uncontrollable by management at the time the business plan for
the coming year is developed or approved. The nature of the adjustments
authorized for 2008 was consistent with adjustments authorized pursuant to the
Executive Incentive Plan in previous years. These adjustments are
detailed below.
To
receive an incentive payout for 2008 of two hundred percent (200%), the adjusted
diluted earnings per share were required to exceed $1.94 per share and the
adjusted return on average shareholders’ equity was required to exceed 14.41%.
No award would be made if the adjusted diluted earnings per share were below
$1.42 per share and the adjusted return on average shareholders’ equity was
below 10.65%. To receive a target level payout, the adjusted diluted earnings
per share was required to be $1.71 per share and the adjusted return on average
shareholders’ equity was required to be 12.76%.
The
ultimate adjustments made to AFC’s GAAP diluted earnings per common share to
arrive at adjusted diluted earnings per share were as follows:
|
i)
|
common
share equivalents were increased by 357,027 shares due to differences in
stock repurchases, ESOP allocation, stock option exercises and dilutive
treasury stock calculations from those assumed in the business
plan;
|
|
ii)
|
interest
income was increased by $401,579 to reflect differences related to stock
repurchases, option exercises and other cash transactions noted in
paragraph (A) above from those assumed in the business
plan;
|
|
iii)
|
other
income was increased by $77,696,000 relating to the other-than-temporary
impairment charge taken in September 2008 with respect to two issues of
Freddie Mac preferred stock;
|
|
iv)
|
other
income was reduced by $348,800 to reflect a sale of certain branch related
real estate not considered to be a part of normal
operations
|
|
v)
|
general
and administrative expenses were increased by $408,544 relating to lower
equity- based compensation expense from that assumed in
the business plan;
|
|
vi)
|
general
and administrative expenses were reduced by $1,932,624 relating to higher
ESOP expense as a result of fluctuating AFC Common Stock prices during
2008 from that assumed in the business
plan;
|
|
vii)
|
general
and administrative expenses were increased by $870,858 relating to certain
legal expenses; and
|
|
viii)
|
net
income was increased by $26,815,187 to tax effect the adjustments set
forth above.
|
The
adjustments made to AFC’s GAAP return on average shareholders’ equity to arrive
at adjusted return on average shareholders’ equity were as follows:
|
i)
|
average
equity was increased by one half of the adjustments related to adjusted
diluted earnings per share noted above, less the ESOP adjustment which is
a reclassification within equity only, to reflect the positive effect of
such adjustments on equity and that average equity is
used;
|
|
ii)
|
average
equity was decreased by $1,879,515 to reflect lower costs of share
repurchase activity from that assumed in the business
plan;
|
|
iii)
|
average
equity was increased by $5,770,384 to reflect differences in the amount
and exercise prices of option exercises from that assumed in the business
plan;
|
|
iv)
|
average
equity was decreased by $13,444,000 to reflect differences in accumulated
other comprehensive loss from that assumed in the business plan;
and
|
|
v)
|
average
equity was decreased by $858,000 to reflect differences in the number of
unallocated shares held by the ESOP from that assumed in the business
plan.
|
For
fiscal year 2008, the Compensation Committee, pursuant to the terms of the
Executive Incentive Plan, certified that AFC’s financial performance resulted in
no incentive payments based upon the fact that adjusted diluted
earnings per share failed to reach the target threshold level of 1.42, and
adjusted return on average shareholders’ equity failed to reach the target
threshold level of 10.65%.
Equity-Based Compensation
The
equity-based compensation portion of AFC’s and the Association’s compensation
program consists of option grants and awards of restricted stock pursuant to the
2005 Stock Incentive Plan. The 2005 Stock Incentive Plan was approved by the
shareholders of AFC in 2005. The purpose of the 2005 Stock Incentive Plan is to
promote the growth and profitability of AFC, to provide certain key officers and
employees of AFC and its affiliates with an incentive to achieve corporate
objectives, to attract and retain individuals of outstanding competence and to
provide such individuals with an equity interest in AFC.
Historically,
equity-based compensation grants and awards have been made to officers holding
the title of Vice President or higher. This totaled seventy-five (75) officers
as of January 28, 2008, the last award date prior to December 31, 2008. The
Compensation Committee believes that this group of individuals has the greatest
ability to impact the overall performance, and therefore the stock price, of
AFC.
Since its
conversion to public ownership in 1993, the practice of AFC generally had been
to grant options and/or award restricted stock to officers of the Association
and AFC annually on the date of the Board’s regular meeting in December. During
2007, the Compensation Committee determined that annual grants would no longer
be made in December, but would be made following AFC’s release of its prior
years’ annual financial results, commencing in January 2008. Thus, no equity
grants or awards were made to the executive or other officers during 2007. On
occasion, although not during 2008, grants or awards may also be made at or near
the time a new officer is hired, on the date of a regularly scheduled Board
meeting. In all cases, the exercise price of stock options or the value ascribed
to awards of restricted stock has been the closing price of AFC Common Stock on
the date of the grant or award on the exchange on which such stock was trading
at the time.
Since
2006, the Compensation Committee has only granted restricted stock, and not
options, to AFC’s executive officers.
In
January, 2008 the Compensation Committee approved restricted stock awards to all
officers holding the title of Vice President or higher. A total of
380,400 shares of AFC Common Stock were awarded to the officers at that time
with 235,600 of such shares awarded to the seven executive
officers, These shares at the time of the award had an aggregate
value of $9,479,568, with the shares awarded to the executive officers having a
value of $5,871,152 on the date of the awards.
The level
of restricted stock awarded to each officer, including the executive officers,
is established at the discretion of the Compensation Committee and was based, in
2008, upon recommendations made by Watson Wyatt in 2005. See page 14
under the heading Compensation Committee – Corporate Governance for additional
information regarding this matter. Among the specific factors
considered in determining the level of grant for any particular officer is the
officer’s rank and ability to impact the overall financial performance of AFC,
the officer’s salary and the officer’s individual performance during the
preceding year.
See Security Ownership of Management
commencing on page 20, the Summary Compensation Table on page 40 and the 2008
Outstanding Equity Awards at Fiscal Year End Table on page 44 for further
information regarding certain options and restricted stock outstanding with
respect to the Named Executives.
Retirement Benefits
Retirement
benefits are designed to provide for an adequate level of income to each
participating employee following his or her retirement from AFC and the
Association based upon compensation level and length of service. These benefits
are also designed to support the goals and objectives of the remainder of the
compensation program. Among those goals and objectives are the alignment of the
interests of all retirement plan participants, including but not limited to the
Named Executives, to that of the shareholders and the retention of participating
employees.
Retirement
benefits are provided through the ESOP, the Incentive Savings Plan, and the DB
Plans. Certain post-retirement benefits are also provided through the
Association’s Retirement Medical and Dental Benefit Policy for Vice Presidents
and above, referred to as the Post-retirement Medical Plan.
None of
AFC’s or the Association’s DB Plans have benefit formulas which take into
account compensation other than base salary. As a result, compensation derived
from cash incentives, restricted stock and the exercise of stock options, which
may vary substantially from year to year, does not affect benefit
levels.
The
retirement benefits have been developed over a number of years and, as a result,
the relative importance and the focus of the various plans have shifted over
time.
The
Employees Pension Plan is a qualified defined benefit plan. This plan,
historically, was the primary retirement vehicle for the Association, which,
when the plan was originally adopted in 1949 and until 1993, was a relatively
small mutual thrift institution. The benefit formula under the Employees Pension
Plan, which has evolved over time based primarily upon Code requirements, is
based upon length of service and average compensation level for the five years
preceding retirement. As a tax qualified plan, the compensation level which can
be considered in the benefit formula is capped ($230,000 during 2008). As a
result, the Employees Pension Plan, over time, failed to capture significant
amounts of compensation in the benefit formula, particularly at the higher
salary and compensation levels within the Association.
In 1983,
the Excess Plan, a non-qualified defined benefit plan, was instituted. This plan
applies the Employees Pension Plan benefit formula to salary-based compensation
above the Internal Revenue Service, or IRS, compensation limits.
The
Association, in 1991, also instituted the Supplemental Plan, also a
non-qualified defined benefit plan, to maintain the then current benefit formula
for a group of officers impacted by a reduction in the benefits formula under
the qualified plan and indirectly under the Excess Plan due to changes mandated
under the Code. Currently, Mr. Engelke and Mr. Redman are the only Named
Executives who participate in the Supplemental Plan. The DB Plans are
the primary retirement vehicles utilized by the Association that are not
materially and directly tied to the performance of AFC Common Stock. AFC
believes that the use of the DB Plans to provide a minimum level of retirement
benefits for eligible Association employees is prudent given the magnitude of
the reliance the ESOP places on the performance of AFC Common Stock. The DB
Plans, however, continue not to capture within their benefit formulas cash
compensation paid to the Named Executives pursuant to the Executive Incentive
Plan or bonus compensation paid to other officers and employees.
In 1986, the Association implemented
the Incentive Savings Plan, a defined contribution 401K plan. At the time it was
implemented, the Incentive Savings Plan operated as a profit sharing plan
pursuant to which employees received from the Association matching
contributions, based upon their level of voluntary participation in the plan.
The Incentive Savings Plan gave employees an incentive to save, helped provide
for their retirement, provided certain tax benefits to participants, helped
focus employees on the profitability of the Association and allowed employees to
rollover vested balances if they left the Association’s employ prior to
retirement age. The Incentive Savings Plan continues to be maintained and
employees can continue to make voluntary contributions into the Incentive
Savings Plan. However, since 1993, the Association and AFC have not made
contributions to the Incentive Savings Plan.
The ESOP
is a combination of a leveraged employee stock ownership plan established by the
Association when it converted from mutual to stock form in 1993 and a leveraged
employee stock ownership plan in existence at LISB at the time of the LIB
Acquisition in 1998 and implemented by LISB at the time of its mutual to stock
conversion in 1994. A primary purpose of each institution in implementing an
employee stock ownership plan was to instill an owner culture in a workforce
that had previously operated in a mutual structure that lacked accountability to
stakeholders or owners. Each employee stock ownership plan purchased with
borrowed funds a block of the common stock issued in its sponsor’s conversion
offering, to be allocated among eligible employees over the succeeding years as
the borrowing was repaid. The value of the benefit provided, and its GAAP
accounting cost, rise and fall with the performance of the stock purchased.
There have been no subsequent stock purchases for either plan. The two employee
stock ownership plans were combined in 2000 in order to offer a single, unified
employee stock ownership plan benefit to all employees of the combined company.
In order to achieve a uniform benefit structure, the outstanding loan for each
plan was renegotiated to achieve a new payment and share allocation schedule. In
order to secure the consent of the plans’ independent fiduciaries to this
action, the Association committed to make certain additional cash contributions
to the ESOP through 2009.
The
renegotiation also established change of control protections for the
participants of the ESOP. This provision is a key device in encouraging the
retention of all participating employees. The Board, management and the
fiduciaries representing the interests of the ESOP’s participants believed that,
in the event of a change of control, the value provided to shareholders would be
as a result of the efforts, over time, of the employees of the Association and
that any value generated within the AFC Common Stock then unallocated in the
ESOP at that time should benefit such employees. As a result, the plan was
amended to provide that in the event of a change of control, the ESOP must be
terminated, the outstanding loan settled and the balance of the unallocated
shares distributed to then current employee participants. As of December 31,
2008, using the closing price for AFC Common Stock as quoted on the NYSE on
December 31, 2008, the value to be distributed would be approximately $58.5
million.
See the
Summary Compensation Table on page 40 and Security Ownership of Management on
page 20 for further information regarding the ownership of AFC Common Stock by
the Named Executives.
See also
the discussion commencing on page 46 under the heading Additional DB Plan
Information regarding the benefit formulas applicable to the DB
Plans.
The
Post-retirement Medical Plan provides executive and other senior officers and
their spouses, if any, with medical and dental insurance coverage following such
officers’ retirement from the Association at age 55 or older with at least 10
years of service. Based upon the officer’s age at retirement, the Association
pays between fifty percent (50%) and one hundred percent (100%) of the premiums
for such coverage. AFC views this plan as another vehicle to
encourage the retention of its senior officers.
Perquisites
The executive officers are provided
with certain perquisites detailed below. These perquisites are modest in cost
and scope. See the section entitled Transactions with Certain Related
Persons commencing on page 17 for a discussion of the Association’s Employee
& Director Mortgage & Home Equity Loan Policy.
Other
Banking Services
The
Association provides to its employees, officers and directors routine retail
banking services, including primarily checking, savings and certificate of
deposit accounts. The Association from time to time waives, for such
individuals, certain
de
minimus
fees associated with such accounts. As these amounts are waived
on a non-discriminatory basis to the Association’s employees generally, under
SEC regulations, they are not included in the Compensation Tables for the
directors or the Named Executives and are not considered to be related-party
transactions.
Company-Provided
Automobiles
All
executive officers are provided with a company owned or leased automobile for
their business and personal use. The Association pays the maintenance, insurance
and licensing-related costs of the automobile, but not fuel costs. The value of
this benefit, net of direct business usage, for which other employees are
reimbursed, is included in the Summary Compensation Table on page 40 under the
All Other Compensation column.
Use
of Leased Corporate Aircraft and Other Travel-Related Expenses
AFC has a
fractional lease on a corporate aircraft for use by its executives for business
purposes only. Personal use of the aircraft is not allowed. The use of this
aircraft by the executives is viewed by AFC as integrally and directly related
to their job performance. As a result, this use is not viewed as a perquisite as
defined by SEC regulations.
AFC has a
policy when Named Executives travel on business to allow the executives to be
accompanied by their spouses. This benefit is utilized sparingly by the
executives and is considered a perquisite. The estimated incremental cost of the
spouse’s attendance is included in the Summary Compensation Table on page 40
under the All Other Compensation column where such amount can be determined. In
all cases such benefit is immaterial to the compensation of the Named
Executives. If a Named Executive is traveling on business utilizing the
corporate aircraft and there is otherwise room available on the aircraft for the
executive’s spouse to accompany the executive, the spouse may do so. As there is
no incremental cost to AFC for the spouse accompanying the executive on such
flight, no amount has been included in the Summary Compensation Table with
respect to such usage. To the extent a commercial flight was utilized and AFC
bore the cost of the spouse’s air travel, the cost of such air travel is
included in the Summary Compensation Table on page 40 under the All Other
Compensation column.
Other
Benefits
During
2008, the Chief Executive Officer was provided with a golf club membership and a
small expense account. The value of these benefits is included in the Summary
Compensation Table on page 40 under the All Other
Compensation column. These perquisites were terminated effective
January 1, 2009.
All
senior officers, including the Named Executives, are provided with an annual
physical at the Association’s expense. In the alternative, senior officers may
consult their own physicians and submit the cost of such physical through the
officer’s medical insurance coverage which is available to all full time
employees.
Summary
Compensation Table
Name
and
Principal
Position
|
|
Year
|
|
|
Salary
($)(1)
|
|
|
Stock
Awards
($)(2)
|
|
|
Option
Awards
($)(3)
|
|
|
Non-
Equity
Incentive
Plan
Compen-
sation
($)(4)
|
|
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(5)
|
|
|
All
Other
Compen-
sation
($)(6)
|
|
|
Total
($)
|
|
George
L. Engelke, Jr
.
Chairman
and Chief
Executive
Officer
|
|
|
2008
2007
2006
|
|
|
|
1,142,000
1,100,000
1,100,000
|
|
|
|
1,314,897
950,692
310,204
|
|
|
|
495,491
495,491
495,491
|
|
|
|
0
731,500
587,125
|
|
|
|
121,919
0
95,280
|
|
|
|
226,647
166,701
114,505
|
|
|
|
3,300,954
3,444,384
2,702,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monte
N. Redman
President
and Chief
Operating
Officer
|
|
|
2008
2007
2006
|
|
|
|
825,000
673,077
600,000
|
|
|
|
600,167
338,279
163,597
|
|
|
|
252,280
252,280
252,280
|
|
|
|
0
356,250
228,750
|
|
|
|
350,235
39,783
170,912
|
|
|
|
191,618
131,003
91,717
|
|
|
|
2,219,300
1,790,672
1,507,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerard
C. Keegan
Vice
Chairman and
Chief
Administrative Officer
|
|
|
2008
2007
2006
|
|
|
|
544,000
524,000
524,000
|
|
|
|
426,401
271,849
129,936
|
|
|
|
200,421
200,421
200,421
|
|
|
|
0
248,900
199,775
|
|
|
|
241,165
60,170
129,248
|
|
|
|
131,524
112,445
73,069
|
|
|
|
1,543,511
1,417,785
1,256,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
T. McCann
Executive
Vice President
|
|
2008
|
|
|
|
500,000
|
|
|
|
340,006
|
|
|
|
136,984
|
|
|
|
0
|
|
|
|
169,530
|
|
|
|
116,464
|
|
|
|
1,262,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank
E. Fusco
Executive
Vice President, Treasurer and Chief Financial Officer
|
|
|
2008
2007
|
|
|
|
465,000
361,923
|
|
|
|
222,567
117,779
|
|
|
|
61,154
61,154
|
|
|
|
0
155,724
|
|
|
|
76,841
0
|
|
|
|
123,762
83,413
|
|
|
|
949,324
779,993
|
|
(1)
|
Each
of the Named Executives, except for Mr. Keegan, has elected to contribute
a portion of his salary into the Incentive Savings Plan. While the
Association is authorized to make matching contributions under the terms
of the Incentive Savings Plan, it has not done so since prior to 1993.
Each of the Named Executives also elected to contribute a portion of his
salary into a medical flexible spending account. These plans are not
discriminatory in favor of the Named Executives. Such
contributions are included in the figures
reported.
|
(2)
|
This
column represents the dollar amount recognized in accordance with SFAS
123R for financial statement reporting purposes with respect to the 2006,
2007 and 2008 fiscal years (or 2007and 2008, in the case of Mr. Fusco, and
2008, in the case of Mr. McCann) for restricted stock awards
made in 2005, 2006 and 2008 to the Named Executives pursuant to 2005 Stock
Incentive Plan, which was previously approved by the shareholders of AFC.
These amounts reflect AFC’s accounting expense for these awards, and do
not correspond to the actual value that has been or will be recognized by
the Named Executives. No restricted stock grants were awarded to the Named
Executives during 2007. Pursuant to SEC rules, the amounts shown exclude
the impact of estimated forfeitures related to service-based vesting
conditions. For awards made in 2005, although Mr. Engelke was eligible for
normal retirement at the time of the award, the awards were granted prior
to adoption of SFAS 123R and, therefore, are expensed over the original
vesting period which was 37 months in all cases. For awards made in 2006,
the restricted stock awarded would normally vest and be distributed on
January 9, 2012. All such grants, except for Mr. Engelke’s, vest and would
be distributed earlier, among other reasons, upon normal retirement at age
65. Since Mr. Redman and Mr. Fusco will not be normal retirement eligible
prior to January 9, 2012, their 2006 awards are expensed over the 61
months between the date of the award and the vesting date. Mr. Keegan will
become normal retirement eligible prior to January 9, 2012. As a result,
his 2006 award is expensed over the period from the date of the award
until he becomes normal retirement eligible, or 56.5
months. While Mr. Engelke’s 2006 award also would normally vest
and be distributed on January 9, 2012, it provides for earlier vesting and
distribution, not upon normal retirement at age 65, but upon reaching and
retiring as an officer pursuant to AFC’s then applicable mandatory
retirement policy for executive officers at age 70. Since Mr. Engelke will
reach age 70 prior to January 9, 2012, his 2006 award is being expensed
over the period from the date of grant until he is expected to reach 70
years of age, or 23.5 months. For awards made in 2008 to the Named
Executives, all grants, except for Mr. Engelke’s, vest and would be
distributed on January 28, 2013. Since such awards would not
vest early upon retirement prior to January 28, 2013 the awards are
expensed over the 60 months between the date of the award and the vesting
date. Mr. Engelke’s 2008 award vests 30% on
January 28, 2009, 30% on January 28, 2010, and the balance, or
40%, on January 28, 2011. Mr. Engelke’s award is being
expensed over the 36 months between the date of the award and the final
vesting date. The fair value of restricted stock awards
is calculated using the closing price of AFC Common Stock as quoted on the
NYSE on the date of the award. For additional information, see Note 15 to
the Consolidated Financial Statements. For additional information
regarding restricted stock held by the Named Executives, see the 2008
Outstanding Equity Awards At Fiscal Year-End Table on page
44.
|
(3)
|
This
column represents the dollar amount recognized in accordance with SFAS
123R for financial statement reporting purposes with respect to the 2006,
2007 and 2008 fiscal years (or 2007 and 2008, in the case of Mr. Fusco,
and 2008 in the case of Mr. McCann) for stock option grants made in 2005
to the Named Executives pursuant to the 2005 Stock Incentive Plan, which
was previously approved by the shareholders of AFC. These amounts reflect
AFC’s accounting expense for these grants, and do not correspond to the
actual value that will be recognized by the Named Executives, if any, as
the exercise price was equal to the closing price of AFC Common Stock as
quoted on the NYSE on the date of the grant and a gain would only occur if
there is appreciation in the value of AFC Common Stock at the date of
exercise. No stock options were granted to any officers or employees
during 2006, 2007 or 2008. Pursuant to SEC rules, the amounts shown
exclude the impact of estimated forfeitures related to service-based
vesting conditions. For grants made in 2005, although Mr. Engelke was
eligible for normal retirement at the time of the award, the grants were
made prior to adoption of SFAS 123R and, therefore, are expensed over the
original vesting period which was 37 months in all cases. For additional
information on the valuation assumptions with respect to such grants, see
Note 15 to the Consolidated Financial Statements in AFC’s 10-K filed with
the SEC on February 29, 2008. For additional information regarding stock
options held by the Named Executives, see the 2008 Outstanding Equity
Awards At Fiscal Year-End Table on page
44.
|
(4)
|
This
column represents the incentive bonus award payments made to the Named
Executive for 2006, 2007 and 2008 (or 2007 and 2008, in the case of Mr.
Fusco, and 2008, in the case of Mr. McCann) pursuant to the Executive
Incentive Plan, which plan was previously approved by the shareholders of
AFC. For additional information, see the 2008 Grants of Plan-Based Awards
Table on page 43.
|
(5)
|
This
column represents the sum of the actuarial change in pension value in
2006, 2007 and 2008 (or 2007and 2008, in the case of Mr. Fusco, and 2008,
in the case of Mr. McCann) for each of the Named Executives according to
their respective participation in the DB Plans. For information regarding
the assumptions used in determining the present value of such benefits, as
well as additional information regarding the Named Executives’
participation in such plans, see the 2008 Pension Benefits Table on page
48. The Named Executives do not participate in any non-qualified deferred
compensation plans. Pursuant to SEC regulations, Mr. Engelke’s and Mr.
Fusco’s
change in pension
value for 2007 is disclosed as $0.00 because the change in the actuarial
value of their benefit from December 31, 2006 to December 31, 2007 was a
negative $84,344 and negative $180,
respectively.
|
(6)
|
This
column represents compensation amounts reportable with respect to the
Named Executives for 2006, 2007 and 2008(or 2007 and 2008, in the case of
Mr. Fusco, and 2008, in the case of Mr. McCann) pursuant to SEC
regulations and not properly reportable in any other column of the Summary
Compensation Table. AFC has not paid any tax gross-up amounts with respect
to any compensation or benefits reflected in the Summary Compensation
Table or otherwise. AFC does not allow Named Executives or other officers
and employees to acquire AFC Common Stock at a discount. While the
Association provides group life insurance coverage with respect to the
Named Executives, such benefit is provided on a non-discriminatory basis
to all full time employees of the Association and, therefore, has been
excluded pursuant to SEC regulations, as have other group medical and
health coverages. The following table sets forth additional detail
regarding All Other Compensation
amounts:
|
All
Other Compensation Table
Name
|
|
Year
|
|
|
Dividends
Received
on
Restricted
Stock
Awards
($)(a)
|
|
|
AFC
Common
Stock
Allocated
Pursuant
to the
ESOP
($)(b)
|
|
|
Cash
Allocated
Pursuant
to the
ESOP
($)(c)
|
|
|
Perquisites
and
Other
Personal
Benefits
($)(d)
|
|
|
Total
($)
|
|
George
L. Engelke, Jr.
|
|
|
2008
2007
2006
|
|
|
|
131,456
75,712
28,800
|
|
|
|
41,401
37,109
33,459
|
|
|
|
25,182
25,151
26,443
|
|
|
|
28,608
28,730
25,803
|
|
|
|
226,647
166,701
114,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monte
N. Redman
|
|
|
2008
2007
2006
|
|
|
|
106,886
48,750
15,912
|
|
|
|
41,401
37,109
33,460
|
|
|
|
31,782
31,743
32,058
|
|
|
|
11,549
13,402
10,288
|
|
|
|
191,618
131,003
91,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerard
C. Keegan
|
|
|
2008
2007
2006
|
|
|
|
71,396
37,388
12,624
|
|
|
|
41,401
37,109
33,459
|
|
|
|
7,074
17,052
16,864
|
|
|
|
11,653
20,896
10,122
|
|
|
|
131,524
112,445
73,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
T. McCann
|
|
2008
|
|
|
|
60,216
|
|
|
|
41,041
|
|
|
|
6,896
|
|
|
|
8,311
|
|
|
|
116,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank
E. Fusco
|
|
|
2008
2007
|
|
|
|
39,988
16,692
|
|
|
|
41,041
37,109
|
|
|
|
29,149
29,113
|
|
|
|
13,584
500
|
|
|
|
123,762
83,413
|
|
|
(a)
|
This
column represents dividends paid during 2006, 2007 and 2008, respectively,
(or 2007 and 2008, respectively, in the case of Mr. Fusco, and 2008, in
the case of Mr. McCann) to the Named Executives by AFC with respect to the
AFC Common Stock awarded in 2005, 2006 and 2008 to the Named Executives as
restricted stock pursuant to the 2005 Stock Incentive Plan. Such dividends
are, for federal and state tax purposes, treated as wages and as such are
subject to tax withholding. The amount reflected is the gross amount paid
before tax withholding.
|
|
(b)
|
This
column represents the expense incurred by the Association with respect to
AFC Common Stock allocated to the Named Executives as a result of their
participation in the ESOP for 2006, 2007 and 2008, respectively (or 2007
and 2008, in the case of Mr. Fusco, and 2008 in the case of Mr. McCann).
The ESOP is a qualified defined contribution plan subject to ERISA. The
expense is calculated under GAAP based upon the number of shares allocated
to the Named Executive times the average daily closing price of AFC Common
Stock as quoted on the NYSE for 2006, 2007 and 2008, respectively. This
amount does not equate to either the cash contribution made by the
Association to the ESOP to obtain the release of such shares for
allocation, nor the basis on which the Named Executives entitlement to
such shares is determined. For further information regarding the ESOP, see
the CD&A section of this Proxy Statement under the heading Retirement
Benefits commencing on page 36.
|
|
(c)
|
This
column represents an estimate of the cash allocated to the accounts of the
Named Executives as a result of their participation in the ESOP for the
2006, 2007 and 2008 plan year, respectively, (or 2007 and 2008, in the
case of Mr. Fusco, and 2008 in the case of Mr. McCann) in the form of
contributions and investment return. Excluded are amounts earned by the
Named Executive in the form of dividends or interest on amounts previously
allocated to the Named Executives’ accounts within the ESOP. For further
information regarding the ESOP, see the CD&A section of this Proxy
Statement under the heading Retirement Benefits commencing on page
36.
|
|
(d)
|
This
column represents perquisites and other personal benefits incurred by AFC
and the Association with respect to the Named Executives for the 2006,
2007 and 2008 fiscal years, respectively (or 2007 and 2008, in the case of
Mr. Fusco, and 2008 in the case of Mr. McCann). In the case of
Mr. Engelke, such benefits consisted of the value of an automobile
provided by the Association and utilized for non-business purposes,
spousal travel and entertainment expenses, a country club membership, and
an expense account. For Mr. Redman, Mr. Keegan, Mr. McCann and
Mr. Fusco, such benefits consisted of the value of an automobile provided
to each by the Association and utilized for non-business purposes and
spousal travel and entertainment expenses. Automobiles are
provided to the Named Executives by the Association, which the Named
Executives may use for business purposes, commuting and for personal use.
The value of the automobiles provided has been determined differently
depending upon whether the automobile was leased or owned by the
Association. The amount included as a perquisite was determined based upon
the total cost incurred by the Association for the automobile including
the annual lease payments or, in the case of owned automobiles, annual
depreciation, as well as insurance, registration and inspection fees and
maintenance costs, less the cost the Association would have reimbursed the
executive for business mileage had the executive used their personal
automobile, adjusted positively or negatively for the gain or loss
realized on any owned automobile traded in during the year, based upon the
estimated salvage value established at the time the automobile was
acquired. This amount represents the incremental cost of such automobiles
to AFC and does not represent the amount of income attributable to the
Named Executive for tax purposes as a result of the non-business use of
such automobile. For a description of the policies of AFC with respect to
providing automobiles to its executive officers, see the section under the
CD&A entitled Perquisites commencing on page 38. Spousal travel and
entertainment expenses represent expenses incurred by the Association
which would not otherwise have been incurred as a result of an executive
traveling or attending an Association-related function without such
executive’s spouse. Not all such expenses are capable of precise
delineation. In such cases, a reasonable estimate of that portion of the
expense has been made.
|
The
following table sets forth information regarding bonus awards and equity grants
for or during 2008 pursuant to the Executive Incentive Plan and the 2005 Stock
Incentive Plan, respectively, made to the Named Executives during 2008. Pursuant
to the terms of the Executive Incentive Plan, the Compensation Committee
annually establishes an annual incentive for the executive officers of AFC. For
a discussion of the goals and targets applicable for 2008, see the CD&A -
Short-Term Non-Equity Incentive Plan Compensation commencing on page
33. Equity grants are made at the discretion of the Compensation
Committee. For a discussion of the 2005 Stock Incentive Plan, see the
CD&A-Equity Based Compensation commencing on page 35.
2008
Grants of Plan-Based Awards Table (1)
|
|
|
|
Estimated
Possible Payouts
Under
Non-Equity Incentive
Plan
Awards (2)
|
|
|
All
Other
Stock
Awards:
Numbers
of
Shares
|
|
|
Grant
Date
Fair
Value
of
|
|
Name
|
|
Grant
Date
|
|
Thresh-
old
($)
|
|
|
Target
($)
|
|
|
Maxi-
mum
($)
|
|
|
of
Stock
or
Units
(#)
|
|
|
Stock
Awards
(3)
($)
|
|
George
L. Engelke, Jr.
|
|
|
|
|
39,970
|
|
|
|
799,400
|
|
|
|
1,598,800
|
|
|
|
|
|
|
|
|
|
1/28/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,600
|
|
|
|
1,335,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monte
N. Redman
|
|
|
|
|
24,750
|
|
|
|
495,000
|
|
|
|
990,000
|
|
|
|
|
|
|
|
|
|
|
|
1/28/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,900
|
|
|
|
1,393,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerard
C. Keegan
|
|
|
|
|
13,600
|
|
|
|
272,000
|
|
|
|
544,000
|
|
|
|
|
|
|
|
|
|
|
|
1/28/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,700
|
|
|
|
814,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
T. McCann
|
|
|
|
|
12,500
|
|
|
|
250,000
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
1/29/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,300
|
|
|
|
730,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank
E. Fusco
|
|
|
|
|
11,625
|
|
|
|
232,500
|
|
|
|
465,000
|
|
|
|
|
|
|
|
|
|
|
|
1/28/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,400
|
|
|
|
558,208
|
|
(1)
|
No
grants to the Named Executives of Non-Equity Incentive Plan Awards were
made pursuant to the Executive Incentive Plan. For additional information
regarding the Executive Incentive Plan, see the CD&A section under the
heading Short-Term Non-Equity Incentive Plan Compensation commencing on
page 33. Grants to the Named Executives of equity-based awards
during 2008 were made pursuant to the 2005 Stock Incentive
Plan. For additional information regarding the 2005 Stock
Incentive Plan, see the CD&A section under the heading Equity-Based
Compensation commencing on page 35.
|
(2)
|
The
amounts reflected under the Estimated Possible Payouts Under Non-Equity
Incentive Plan Awards columns reflect the incentive bonus program for the
Named Executives for fiscal year 2008. The Threshold column reflects the
minimum bonus which could be earned by the Named Executive earning any
bonus. Performance of AFC below the specified level would result in no
bonus. The Target column and the Maximum column represent the amounts that
would be earned had AFC performed at the one hundred percent (100%) payout
and maximum payout percentages as specified under the goals established in
connection with the Executive Incentive Plan for 2008. In January 2009,
the Compensation Committee of AFC determined that because AFC’s
performance in 2008 did not meet the minimum threshold requirements
prescribed in the Executive Incentive Plan, no grants would be made to the
Named Officers under the Executive Incentive Plan for
2008.
|
(3)
|
The
amounts reflected under the Grant Date Fair Value of Stock Awards column
reflect the grant date fair value of the award computed in accordance with
SFAS 123R, excluding the impact of estimated forfeitures related to
service-based vesting conditions, which on a per share basis is equal to
the closing price per share of AFC Common Stock as quoted on the NYSE on
the date of grant, which was January 28, 2008, or $24.92 per
share. The Named Executives paid no consideration for these
awards other than for services rendered in performing their duties and
responsibilities as executive
officers.
|
The
following table provides information on the current holdings of stock options
and restricted stock awards by the Named Executives as of December 31, 2008.
This table includes unexercised vested and unvested option grants and unvested
restricted stock awards. Each equity grant or award outstanding at fiscal year
end is shown separately for each Named Executive. The vesting schedule for each
grant or award is shown following this table, based on the option grant or
restricted stock award date. The market value of the restricted stock awards is
based on the closing market price per share of AFC Common Stock as quoted on the
NYSE on December 31, 2008, or $16.48. For additional information about the
option grants and restricted stock awards, see the CD&A - Equity-Based
Compensation commencing on page
35.
2008
Outstanding Equity Awards At Fiscal Year-End Table
|
|
Option
Awards
|
|
Stock
Awards
|
|
Name
|
|
Option
Grant
Date
(1)
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Restricted
Stock
Award
Date
(2)
|
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
|
|
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
|
|
George
L. Engelke, Jr.
|
|
12/15/1999
12/20/2000
12/19/2001
12/18/2002
12/17/2003
12/15/2004
12/21/2005
|
|
|
328,959
413,964
375,000
405,000
315,000
397,500
|
|
|
|
345,000
|
|
|
|
9.9583
16.5625
16.8333
18.0000
24.4000
26.6267
29.0200
|
|
12/14/2009
12/19/2010
12/18/2011
12/17/2012
12/16/2013
12/14/2014
12/20/2012
|
|
12/21/2005
12/20/2006
01/28/2008
|
|
|
30,000
42,800
53,600
|
|
|
|
494,400
705,344
883,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monte
N. Redman
|
|
12/15/1999
12/20/2000
12/19/2001
12/18/2002
12/17/2003
12/15/2004
12/21/2005
|
|
|
59,959
143,964
126,060
165,445
130,500
180,000
|
|
|
|
154,700
|
|
|
|
9.9583
16.5625
16.8333
18.0000
24.4000
26.6267
29.0200
|
|
12/14/2009
12/19/2010
12/18/2011
12/17/2012
12/16/2013
12/14/2014
12/20/2012
|
|
12/21/2005
12/20/2006
01/28/2008
|
|
|
16,575
30,300
55,900
|
|
|
|
273,156
499,344
921,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerard
C. Keegan
|
|
12/20/2000
12/19/2001
12/18/2002
12/17/2003
12/15/2004
12/21/2005
|
|
|
120,000
108,000
142,500
102,000
144,000
|
|
|
|
122,900
|
|
|
|
16.5625
16.8333
18.0000
24.4000
26.6267
29.0200
|
|
12/19/2010
12/18/2011
12/17/2012
12/16/2013
12/14/2014
12/20/2012
|
|
12/21/2005
12/20/2006
01/28/2008
|
|
|
13,150
22,800
32,700
|
|
|
|
216,712
375,744
538,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
T. McCann
|
|
12/15/1999
12/20/2000
12/19/2001
12/18/2002
12/17/2003
12/15/2004
12/21/2005
|
|
|
31,959
42,000
36,900
49,500
56,250
90,000
|
|
|
|
84,000
|
|
|
|
9.9583
16.5625
16.8333
18.0000
24.4000
26.6267
29.0200
|
|
12/14/2009
12/19/2010
12/18/2011
12/17/2012
12/16/2013
12/14/2014
12/20/2012
|
|
12/21/2005
12/20/2006
01/28/2008
|
|
|
9,000
19,600
29,300
|
|
|
|
148,320
323,000
482,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank
E. Fusco
|
|
12/15/1999
|
|
|
32,759
|
|
|
|
|
|
|
|
9.9583
|
|
12/14/2009
|
|
12/21/2005
|
|
|
6,250
|
|
|
|
103,000
|
|
|
|
12/20/2000
12/19/2001
12/18/2002
12/17/2003
12/15/2004
12/21/2005
|
|
|
47,664
47,550
63,000
46,800
60,900
|
|
|
|
37,500
|
|
|
|
16.5625
16.8333
18.0000
24.4000
26.6267
29.0200
|
|
12/19/2010
12/18/2011
12/17/2012
12/16/2013
12/14/2014
12/20/2012
|
|
12/20/2006
01/28/2008
|
|
|
9,800
22,400
|
|
|
|
161,504
369,152
|
|
(1)
|
The
following table details the vesting date for all outstanding stock options
held by the Named Executives as of December 31, 2008, based upon the grant
date of such option:
|
Option
Grant Vesting Schedule
Grant Date
|
|
Vesting Date (a)
|
12/15/1999
|
|
1/10/2003
|
12/20/2000
|
|
1/10/2004
|
|
|
|
12/19/2001
|
|
1/10/2005
|
12/18/2002
|
|
1/10/2006
|
12/17/2003
|
|
12/22/2005
|
12/15/2004
|
|
12/22/2005
|
12/21/2005
|
|
1/9/2009
|
|
(a)
|
In
addition to the dates indicated, the options reflected in this table would
vest early upon the death, disability and, except for those options
granted on December 21, 2005, upon retirement upon reaching age 55 with at
least 10 years of service. The options granted on December 21, 2005 vest
upon normal retirement at age 65 as defined under any of the Association’s
pension plans. The vesting of options granted on December 17, 2003 and
December 15, 2004 was accelerated by the Compensation Committee in
anticipation of the implementation of SFAS 123R on January 1, 2006. All
stock options indicated would also vest in the event of a change of
control of either AFC or the
Association.
|
(2)
|
The
following table details the vesting date for all outstanding restricted
stock awards held by the Named Executives as of December 31, 2008, based
upon the award date of such restricted
stock:
|
Restricted
Stock Award Vesting Schedule
Award Date
|
|
Vesting Date (a)
|
12/21/2005
|
|
1/9/2009
|
12/20/2006
|
|
1/9/2012
|
1/28/2008
|
|
1/28/2013
|
|
(a)
|
The
award granted to Mr. Engelke on January 28, 2008 vests 30% on January 28,
2009, 30% vest on January 28, 2010 and the balance, or 40%,
vest on January 28, 2011. In addition to the dates indicated,
the restricted stock reflected in this table would vest early upon the
death, disability and, except for the restricted stock granted to the
named Executives on January 28, 2008 or to Mr. Engelke on December 20,
2006, upon normal retirement at age 65 as defined under any of the
Association’s pension plans. The vesting of restricted stock granted to
Mr. Engelke on December 20, 2006 would vest earlier than the date
indicated should he retire as an executive officer of AFC and the
Association having reached the then applicable mandatory retirement age
for executive officers of 70. All restricted stock awards
indicated would also vest in the event of a change of control of either
AFC or the Association.
|
The
following table provides information, for the Named Executives, on stock option
exercises during 2008, including the number of shares acquired upon exercise and
the value realized before their payment of any applicable withholding tax and
broker commissions.
2008
Option Exercises and Stock Vested
|
|
Option Awards
|
|
Name
|
|
Number
of
Shares
Acquired
On
Exercise
(#)
|
|
|
Value
Realized
On
Exercise
($)(1)
|
|
George
L. Engelke, Jr.
|
|
|
251,343
|
|
|
|
2,234,213
|
|
Monte
N. Redman
|
|
|
98,383
|
|
|
|
593,794
|
|
Gary
T. McCann
|
|
|
15,843
|
|
|
|
119,284
|
|
(1)
|
Value
realized is calculated by multiplying the number of shares of AFC Common
Stock as to which an option was exercised times the difference between the
closing price per share of AFC Common Stock as quoted on the NYSE on the
date of exercise and the exercise price per share of the applicable
option. There were no restricted stock awards vested in
2008.
|
Additional
DB Plan Information
The
following table sets forth information on the pension benefits for the Named
Executives under each of the following pension plans:
Employees Pension Plan.
The
Employees Pension Plan is a funded and tax qualified retirement program that
covers approximately 4,280 eligible employees and retirees of the Association
and its predecessors as of December 31, 2008. As applicable to the Named
Executives, the plan provides benefits based on a formula that takes into
account the executive’s earnings for each fiscal year, subject to applicable IRS
limitations. Since 1992, the formula provides for an annual benefit accrual for
each year of service (up to a maximum of 30 years) equal to 1.00% of the
executive’s average base salary over the 5 years immediately preceding
retirement up to “covered compensation” and 1.6% of such average base salary in
excess of “covered compensation.” “Covered compensation” varies based upon a
participant’s normal retirement date based upon changes in the average of the
Social Security taxable wage bases. The executive’s annual earnings taken into
account under this formula include base salary, but may not exceed an
IRS-prescribed limit applicable to tax-qualified plans ($230,000 for 2008). As
an example, utilizing covered compensation of $56,400 for an employee who
reached normal retirement age in 2008, the maximum incremental annual benefit an
executive could have earned toward his total pension payments under this plan
was $3,342, payable after retirement as described below.
The
accumulated benefit an employee earns over his or her career with the company is
payable starting after retirement on a monthly basis for life with a guaranteed
minimum term of 10 years. The normal retirement age as defined in the Employees
Pension Plan is 65. Employees with at least 5 years of service, including the
Named Executives, who have retired and reached age 55, may elect to receive
benefits at a reduced amount. Currently, Mr. Keegan, Mr. Redman and Mr. McCann
are eligible for early retirement. The benefit reduction is based upon a table
of simplified option factors used to convert the benefit at normal retirement
age to the reduced amount. On average, the reduction equates to approximately an
8.2 % discount per year for each year retirement is accelerated prior to normal
retirement age. Similarly, retirees with at least 5 years of service may receive
an enhanced benefit if they defer the receipt of their benefit beyond their
65
th
birthday. On average, the increase equates to approximately a 10.5% enhancement
per year that retirement is deferred beyond normal retirement age. Currently,
Mr. Engelke is eligible for an enhanced benefit. In addition, the Employees
Pension Plan provides for spousal joint and survivor annuity
options.
Benefits under the Employees Pension
Plan are subject to the limitations imposed under section 415 of the Code. The
section 415 limit for 2008 is $195,000 per year for a single life annuity
payable at an IRS-prescribed retirement age. This ceiling may be actuarially
adjusted in accordance with IRS rules for items such as employee contributions,
other forms of distribution and different annuity starting dates.
Supplemental Plan.
The
Association in 1991 adopted the Supplemental Plan, a non-qualified plan for tax
purposes. The Supplemental Plan, at the time of its adoption, applied to a
specified group of 30 officers of the Association. Six participants remain in
the employ of the Association, including two of the Named Executives: Mr.
Engelke and Mr. Redman. Mr. Keegan, Mr. McCann and Mr. Fusco do not participate
in this plan. The Supplemental Plan was adopted to preserve for the
participating employees the benefit formula that had been in effect pursuant to
the Employees Pension Plan prior to the adoption of the Supplemental Plan at
which time the Employees Pension Plan formula was amended and reduced. The
Supplemental Plan is unfunded and is not qualified for tax
purposes.
The benefit payable under the
Supplemental Plan is calculated and compared to the benefit payable under the
Employees Pension Plan and Excess Plan. The participant receives, under the
Supplemental Plan, the shortfall, if any, in the Employees Pension Plan and
Excess Plan benefit. The Supplemental Plan formula provides for an annual
benefit equal to 60% of the participant’s average base salary over the 5 years
immediately preceding retirement less 67% of the participant’s primary Social
Security benefit times a number equal to years of service divided by 30 (but not
greater than 1).
Pursuant
to the Supplemental Plan, normal retirement age is defined as age 65. Employees
may receive a reduced benefit under the Supplemental Plan upon early retirement
at or after age 55 with at least 10 years of service. All of the
Named Executives, prior to January 1, 2009, elected to receive their
Supplemental Plan benefit, if any, in a lump sum at retirement, calculated to be
actuarially equivalent to the benefit they would have received had they received
a benefit in the same form as under the Employees Pension Plan.
Excess Plan.
The Excess Plan,
which was adopted in 1983, is not qualified for tax purposes. Participants in
this plan include those participants in the Employees Pension Plan whose
compensation exceeds the limitations established under the Code. Benefits
payable under the Excess Plan are equal to the excess of (1) the amount that
would be payable in accordance with the terms of the Employees Pension Plan
disregarding the limitations imposed pursuant to sections 401(a)(17) and 415 of
the Code over (2) the pension benefit actually payable under the Employees
Pension Plan taking the sections 401(a)(17) and 415 limitations into
account. All of the Named Executives, prior to January 1, 2009,
elected to receive their Excess Plan benefit in a lump sum at retirement,
calculated to be actuarially equivalent to the benefit they would have received
had they received a benefit in the same form as under the Employees Pension
Plan.
No
pension benefits were paid to any of the Named Executives in the 2008 fiscal
year. For further information on these pension plans, see the CD&A -
Retirement Benefits commencing on page 36.
The
amounts reported in the Pension Benefits Table below equal the present value of
the accumulated benefit at December 31, 2008, for the Named Executives under
each of the DB Plans. The accumulated benefit calculation is based upon certain
assumptions which are discussed in Note 14 to the Consolidated Financial
Statements. The calculation assumes service and base salary earned through
December 31, 2008. The present value assumes the executive will begin to receive
retirement benefits at age 65 (or immediately, if the executive is already over
65 years of age). Age 65 is the earliest age executives can receive benefits
without a reduction in benefits. The interest rate assumption used to calculate
the present value varies by plan, based upon the age of the participants and the
resulting projected benefit payouts of the plan in the aggregate. For the
Employees Pension Plan, the interest rate assumption is 5.92%, while for both
the Excess Plan and the Supplemental Plan the interest rate assumption is 6.25%.
The post-retirement mortality assumption is based upon the RP-2000 mortality
table.
2008
Pension Benefits Table
Name
|
|
Plan
Name
|
|
Number
of
Years
Credited
Service
(#)(1)
|
|
Present
Value
of
Accumulated
Benefit
($)
|
|
George
L. Engelke, Jr.
|
|
Employees Pension Plan
Excess
Plan
Supplemental
Plan
|
|
37 years 6 months
37
years 6 months
37
years 6 months
|
|
991,788
4,190,450
1,252,206
|
|
|
|
|
|
|
|
|
|
Monte
N. Redman
|
|
Employees
Pension Plan
Excess
Plan
Supplemental
Plan
|
|
31
years 7 months
31
years 7 months
31
years 7 months
|
|
647,825
1,294,619
36,279
|
|
|
|
|
|
|
|
|
|
Gerard
C. Keegan
|
|
Employees
Pension Plan
Excess
Plan
|
|
37
years 9 months
37
years 9 months
|
|
1,015,866
1,080,437
|
|
|
|
|
|
|
|
|
|
Gary
T. McCann
|
|
Employees
Pension Plan
Excess
Plan
|
|
18
years 11 months
18
years 11 months
|
|
359,638
312,325
|
|
|
|
|
|
|
|
|
|
Frank
E. Fusco
|
|
Employees
Pension Plan
Excess
Plan
|
|
19
years 2 months
19
years 2 months
|
|
190,158
110,232
|
|
(1)
|
The
number of years of credited service for benefit accrual purposes is capped
at 30 years. For the Supplemental Plan, if a participant takes early
retirement, his benefit is reduced by a fraction the numerator of which is
his actual years of credited service (without reference to any cap) and
the denominator is his projected years of credited service at normal
retirement age. Under such Plan, the only augmentation that occurs for
service beyond normal retirement age is the result of any potential base
salary increases which the executive may receive during this
period.
|
As noted above, the Supplemental Plan
only provides a benefit if it exceeds the benefit that is payable pursuant to
the terms of the Employees Pension Plan and the Excess Plan.
Other
Potential Post-Employment Payments
As noted in the CD&A, AFC and the
Association have entered into employment agreements with each of the executive
officers, including the Named Executives. The employment agreements each provide
for a three-year term. The Association’s employment agreements each run from the
first day of January. Prior to January 1st each year, the Board of Directors of
the Association may extend the employment agreements with the Association for an
additional year such that the remaining terms shall be three (3) years. Prior to
January 1, 2009, such employment agreements were amended and restated and
thereby extended to a three year term. The nature of the amendments
is discussed more fully below. The agreements with AFC automatically
extend daily, so as to maintain their original term, unless written notice of
non-renewal is given by the Board. No such notice has been given to any current
executive officer. The agreements with AFC were also amended and
restated prior to January 1, 2009. The nature of the amendments is
more fully discussed below.
The
employment agreements provide for minimum salaries and the executives’
participation in retirement plans, group life, medical and disability insurance
plans and any other employee benefit programs. The employment agreements also
provide that AFC and the Association will maintain, for the benefit of the
executives, director and officer liability insurance and will indemnify the
executives on prescribed terms for claims and related costs and liabilities
arising from the services provided pursuant to the employment agreements for a
period of six (6) years beyond the termination of such agreements.
The
employment agreements provide for termination of each of the executives’
employment at any time by AFC or the Association with or without cause. Each
executive would be entitled to severance benefits in the event the executive’s
employment terminates (1) due to AFC’s or the Association’s respective (A)
failure to re-elect the executive to his current office, and in the case of Mr.
Engelke’s and Mr. Keegan’s employment agreements, to the Board; (B) failure by
whatever cause to vest in the executive the functions, duties or
responsibilities prescribed for the executive in such agreement; (C) material
breach of the employment agreements or reduction of the executive’s base salary
or other change to the terms and conditions of the executive’s compensation and
benefits which either individually or in the aggregate, as to such executive,
has a material adverse effect on the aggregate value of the total compensation
package provided to such executive; or (D) relocation of the executive’s
principal place of employment outside of Nassau or Queens Counties of New York;
or (2) for reasons other than (A) for cause; (B) voluntary resignation, except
as a result of the actions specified under clause (1) above or following a
change of control, as defined in the agreements; (C) death; (D) long term
disability; or (E) expiration of the term of the employment
agreement.
The executive officers agree that for a
period of one year following termination of their employment, or the remaining
contact term, whichever is less, they will not accept employment and will not
serve as an officer, employee, consultant, director or trustee to any banking or
thrift institution with an office or an application pending to open an office in
any city, town or county in which AFC or the Association have an office, unless
their employment is terminated pursuant to section (1) above or if such
employment terminates as a result of disability, and in such instance, following
notice, AFC does not offer to retain the executive in a comparable position. In
addition, the executives agree in all cases to keep confidential and not use for
their own benefit or the benefit of anyone else other than AFC any material
non-public documents or information obtained while employed by AFC, unless
required by law, until such time as the document or material is either no longer
material or is otherwise publicly available through no fault of the executive.
They agree, for a period of one year following their termination, not to solicit
for employment, or to provide any advice or recommendations to a third party,
regarding any officer or employee of AFC or the Association with respect to any
bank, thrift or other financial institution in the business of accepting
deposits or making loans in areas were AFC or the Association is located. They
also agree, for a period of one year following their termination, not to solicit
or otherwise seek to encourage any customer of AFC or the Association to
terminate their relationship with AFC or the Association.
In
situations where a Named Executive would be entitled to severance benefits, the
severance benefits to which the Named Executive would be entitled
include:
|
i)
|
continued
life, medical and disability insurance benefits for the remainder of the
contract term (three (3) years) at no cost to the executive (During their
employment, the executives contribute to their medical coverage on the
same basis as all salaried employees of the Association based upon the
coverage selected);
|
|
ii)
|
a
lump sum payment equal to the salary the executive would have earned
during the remainder of the contract term (three (3) times base
salary);
|
|
iii)
|
a
lump sum payment equal to potential incentive compensation the executive
could have earned during the remainder of the contract term (three (3)
times the maximum incentive bonus available pursuant to the Executive
Incentive Plan - See the 2008 Grants of Plan-Based Awards Table on page 43
and the CD&A - Short-Term Non-Equity Incentive Plan Compensation
commencing on page 33 for a discussion of the manner in which incentive
awards under the Executive Incentive Plan are
calculated);
|
|
iv)
|
a
payment equal to the present value of certain enhanced pension benefits
(This amount is calculated by taking the present value of the difference
between the pension benefits to which the executive is entitled under the
DB Plans and a hypothetical benefit which the executive would be entitled
to under such plans making the following assumptions: (a) the executive
receives additional service credit through the remainder of the contract
term (three (3) years) and (b) the lump sum payments payable under
paragraphs (i) and (ii) above are added to the executive’s compensation in
the year of the executive’s termination). Based upon benefit
payment elections made by the Named Executives pursuant to the
Supplemental Plan and the Excess Plan this payment would be made in a lump
sum;
|
|
v)
|
a
lump sum equal to the ESOP benefits the executive would have earned during
the remainder of the contract term (three (3) times the ESOP allocations
made to the executive in his last full year of
employment);
|
|
vi)
|
accelerated
vesting of all outstanding option grants and restricted stock
awards;
|
|
vii)
|
director
and officer liability insurance coverage and AFC’s agreement to indemnify
the Named Executives to the fullest extent authorized by Delaware law for
a period of six (6) years following termination of the contract;
and
|
|
viii)
|
at
the election of either AFC or the Association, a cash settlement of all
outstanding options and restricted stock
awards.
|
In the
event of disability, the Named Executives are entitled to the following enhanced
termination–related benefits:
|
i)
|
The
Named Executive’s base salary is paid for up to one (1) full year
following the Named Executive becoming
disabled;
|
|
ii)
|
The
Named Executive, pursuant to the terms of the Executive Incentive Plan, is
entitled to receive a prorated bonus, based upon AFC’s attainment of the
established performance goals for the plan year;
and
|
|
iii)
|
The
stock option grants and restricted stock awards provided to the Named
Executives all provide for accelerated vesting in the event of
disability.
|
In the
event of death, the Named Executives are entitled to the following enhanced
termination-related benefits:
|
i)
|
The
Named Executive’s estate, pursuant to the terms of the Executive Incentive
Plan, is entitled to receive a prorated bonus, based upon AFC’s attainment
of the established performance goals for the plan year;
and
|
|
ii)
|
The
stock option grants and restricted stock awards provided to the Named
Executives all provide for accelerated vesting in the event of
death.
|
The
employment agreements between AFC and the Association and each of the executive
officers, including the Named Executives, were amended and restated prior to
January 1, 2009 for two primary reasons.
|
i)
|
In
order to avoid immediate taxation of various benefits provided pursuant to
the contracts, including severance benefits, the contracts were amended to
conform with the requirements of Code section 409A and the regulations
promulgated thereunder. Code section 409A deals with the income
taxation of deferred compensation arrangements and requires the deferral
of certain severance payments to the executives for a period of up to 6
months following termination of employment. The amendments made
in this regard did not alter the substantive terms of these
contracts.
|
|
ii)
|
In
December 2008, AFC was notified by the U.S. Treasury that it had received
preliminary approval to participate in the U.S. Treasury’s Troubled Asset
Relief Program - Capital Purchase Program, referred to as the
CPP. The CPP required that participating institutions agree to
certain limitations and incentive claw-back provisions that would have
applied to the Named Executives and others had AFC participated in the
CPP. The contracts of the executive officers, including the
Named Executives, were amended to contain provisions which would limit
severance compensation and allow for the claw back of incentive payments
as required by the CPP so long as AFC or the Association were
participating in the CPP. Subsequently, AFC and the Association
determined not to participate in the
CPP.
|
As of
December 31, 2008, the amounts of the Named Executives’ termination-related
benefits, excluding those termination-related benefits that are not
discriminatory in favor of the Named Executives, such as group life insurance or
disability insurance payments, are estimated to be as follows:
Name
|
|
Nature of Payment
|
|
Disability
Payment
($)(1)
|
|
|
Payments upon
Death
($)(2)
|
|
|
Severance
Payment
($)(3)
|
|
George
L. Engelke, Jr.
|
|
Salary
|
|
|
1,047,580
|
|
|
|
|
|
|
3,426,000
|
|
|
|
Bonus
|
|
|
0
|
|
|
|
0
|
|
|
|
4,796,400
|
|
|
|
Value
of Enhanced Pension
|
|
|
|
|
|
|
|
|
|
|
12,689,564
|
|
|
|
Value
of ESOP Benefit
|
|
|
|
|
|
|
|
|
|
|
169,171
|
|
|
|
Welfare
Benefit Payment
|
|
|
|
|
|
|
|
|
|
|
9,481
|
|
|
|
Value
of Acceleration:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Restricted
Stock
|
|
|
2,083,072
|
|
|
|
2,083,072
|
|
|
|
2,083,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monte
N. Redman
|
|
Salary
|
|
|
730,580
|
|
|
|
|
|
|
|
2,475,000
|
|
|
|
Bonus
|
|
|
0
|
|
|
|
0
|
|
|
|
2,970,000
|
|
|
|
Value
of Enhanced Pension
|
|
|
|
|
|
|
|
|
|
|
4,648,255
|
|
|
|
Value
of ESOP Benefit
|
|
|
|
|
|
|
|
|
|
|
188,971
|
|
|
|
Welfare
Benefit Payment
|
|
|
|
|
|
|
|
|
|
|
24,859
|
|
|
|
Value
of Acceleration:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Restricted
Stock
|
|
|
1,693,732
|
|
|
|
1,693,732
|
|
|
|
1,693,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerard
C. Keegan
|
|
Salary
|
|
|
449,580
|
|
|
|
|
|
|
|
1,632,000
|
|
|
|
Bonus
|
|
|
0
|
|
|
|
0
|
|
|
|
1,632,000
|
|
|
|
Value
of Enhanced Pension
|
|
|
|
|
|
|
|
|
|
|
3,365,910
|
|
|
|
Value
of ESOP Benefit
|
|
|
|
|
|
|
|
|
|
|
144,846
|
|
|
|
Welfare
Benefit Payment
|
|
|
|
|
|
|
|
|
|
|
14,332
|
|
|
|
Value
of Acceleration:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Restricted
Stock
|
|
|
1,131,352
|
|
|
|
1,131,352
|
|
|
|
1,131,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
T. McCann
|
|
Salary
|
|
|
405,580
|
|
|
|
|
|
|
|
1,500,000
|
|
|
|
Bonus
|
|
|
0
|
|
|
|
0
|
|
|
|
1,500,000
|
|
|
|
Value
of Enhanced Pension
|
|
|
|
|
|
|
|
|
|
|
1,561,621
|
|
|
|
Value
of ESOP Benefit
|
|
|
|
|
|
|
|
|
|
|
174,582
|
|
|
|
Welfare
Benefit Payment
|
|
|
|
|
|
|
|
|
|
|
36,005
|
|
|
|
Value
of Acceleration:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Restricted
Stock
|
|
|
954,192
|
|
|
|
954,192
|
|
|
|
954,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank.
E. Fusco
|
|
Salary
|
|
|
370,580
|
|
|
|
|
|
|
|
1,395,000
|
|
|
|
Bonus
|
|
|
0
|
|
|
|
0
|
|
|
|
1,395,000
|
|
|
|
Value
of Enhanced Pension
|
|
|
|
|
|
|
|
|
|
|
910,656
|
|
|
|
Value
of ESOP Benefit
|
|
|
|
|
|
|
|
|
|
|
181,072
|
|
|
|
Welfare
Benefit Payment
|
|
|
|
|
|
|
|
|
|
|
64,397
|
|
|
|
Value
of Acceleration:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Restricted
Stock
|
|
|
633,656
|
|
|
|
633,656
|
|
|
|
633,656
|
|
(1)
|
Assumes
the Named Executive became disabled on December 31, 2008. The Association
has a policy, in the event of a Named Executive’s disability, to continue
to provide the Named Executive their base salary for a period of up to one
year. A disabled Named Executive would initially be entitled to receive up
to 26 weeks of New York State statutory disability benefits. The Named
Executive would then become entitled to long-term disability benefits
under the Association’s welfare benefit program available to all salaried
employees. AFC’s contracts with the Named Executives provide that after
180 days AFC may, under applicable circumstances, terminate the Named
Executive’s employment and continue to pay the Named Executive’s salary
for an additional six (6) months. The number reflected in the Disability
Payment column under the Salary heading is the net salary payable to the
Named Executive after taking into consideration the statutory disability
benefits to which the Named Executive is entitled and the maximum
disability payment received from the Association’s long-term disability
carrier. The number reflected under the Bonus heading, which is $0.00, is
the actual bonus paid to the Named Executive for 2008 since the prorated
bonus would cover the entire twelve (12) month period. The number
reflected under the Value of Acceleration heading reflects either (i) the
positive difference, if any, between the fair market value of AFC Common
Stock on the date of acceleration and the exercise price as to all options
the vesting of which would be accelerated due to disability or (ii) the
fair market value of AFC Common Stock as to all restricted stock the
vesting of which would be accelerated due to disability. The fair market
value is the closing price of AFC Common Stock as quoted on the NYSE as of
December 31, 2008.
|
(2)
|
Assumes
the Named Executive died on December 31, 2008. The number reflected under
the Bonus heading of the Payments upon Death column is the actual bonus
paid to the Named Executive for 2008 since the prorated bonus would cover
the entire twelve (12) month period. The number reflected under the Value
of Acceleration heading reflects either (i) the positive difference, if
any, between the fair market value of AFC Common Stock on the date of
acceleration and the exercise price as to all options the vesting of which
would be accelerated due to death or (ii) the fair market value of AFC
Common Stock as to all restricted stock the vesting of which would be
accelerated due to death. The fair market value is the closing price of
AFC Common Stock as quoted on the NYSE as of December 31,
2008.
|
(3)
|
Severance
payments are calculated assuming the Named Executive’s employment was
terminated as of December 31, 2008. All Named Executives, with the
exception of Mr. Fusco, who does not yet meet the age
requirement for vesting, would upon termination be eligible to receive
health related welfare benefits pursuant to the Post-retirement Medical
Plan discussed below.
|
In the event of a change of control,
the ESOP provides, among other things, that the plan shall be terminated,
specifies that under certain circumstances additional contributions by the
Association into such plan may be required and indicates the manner in which the
remaining assets which have not yet been allocated to participants following
such change of control shall be allocated to participating employees. This plan
is a qualified defined contribution pension plan and does not discriminate in
favor of the Named Executives.
In the
event of a change of control, for any taxable year in which an executive would
be liable for the payment of excise taxes under Section 4999 of the Code with
respect to any compensation paid by AFC or any of its affiliated companies, AFC
will pay to or on behalf of the executive, an amount, in addition to the
severance payments noted above, sufficient to maintain the after-tax severance
benefit as though the excise tax specified in Section 4999 of the Code did not
apply.
As of
December 31, 2008, based upon the assumptions indicated, these sums with respect
to the Named Executives are estimated to be as follows:
Name
|
|
Excise Tax Gross-up
($)(1)
|
|
George
L. Engelke, Jr.
|
|
|
9,938,680
|
|
|
|
|
|
|
Monte
N. Redman
|
|
|
4,985,660
|
|
|
|
|
|
|
Gerard
C. Keegan
|
|
|
2,996,281
|
|
|
|
|
|
|
Gary
T. McCann
|
|
|
2,351,792
|
|
|
|
|
|
|
Frank
E. Fusco
|
|
|
1,736,480
|
|
(1)
|
The
excise tax-gross up calculation is based on the assumption that a change
of control for tax purposes occurred as of December 31, 2008 and that the
consideration provided to shareholders of AFC Common Stock was equal to
the closing price of AFC Common Stock as quoted on the NYSE, on December
31, 2008, or $16.48.
|
The
Association also maintains the Post-retirement Medical Plan for its officers
with a rank of Vice President and higher. The Post-retirement Medical Plan
provides that in the event a participant retires at age 55 or older with a
minimum of 10 years of service, the officer will be provided with medical
benefits for the remainder of the officer’s life and that of his or her spouse.
The Association pays between 50% and 100% of the premiums for such coverage. The
following table shows for each of the Named Executives the present value of the
accumulated benefits with respect to the Post-retirement Medical Plan, as of
December 31, 2008.
Name
|
|
Present Value of
Accumulated
Benefit
($)(1)
|
|
George
L. Engelke, Jr.
|
|
|
117,310
|
|
|
|
|
|
|
Monte
N. Redman
|
|
|
137,880
|
|
|
|
|
|
|
Gerard
C. Keegan
|
|
|
145,911
|
|
|
|
|
|
|
Gary
T. McCann
|
|
|
134,424
|
|
|
|
|
|
|
Frank
E. Fusco (2)
|
|
|
81,212
|
|
(1)
|
This
column represents the present value of the accumulated benefit as of
December 31, 2008, for the Named Executives under the Post-retirement
Medical Plan based upon the assumptions as described in Note 14 to the
Consolidated Financial Statements.
|
(2)
|
Mr.
Fusco currently does not meet the age requirement to receive a benefit
pursuant to the terms of the Post-retirement Medical
Plan.
|
Annually,
the Compensation Committee receives from management a review of the costs
associated with the executive officers’ employment contracts. During 2007, those
costs and the terms and conditions of such contacts were reviewed by Hewitt
Associates LLC in connection with establishing compensation levels for
2008.
PROPOSAL
NO. 2 - APPROVAL OF AN AMENDMENT TO THE ASTORIA FINANCIAL
CORPORATION
EXECUTIVE OFFICER ANNUAL INCENTIVE PLAN
Why
We Are Asking For Shareholder Approval
AFC is
asking shareholders to approve amendments to the Executive Incentive Plan to
help AFC and the Association maximize the tax deductibility of bonuses that we
pay to our executive officers. The purpose of the amendment is to
extend the Astoria Financial Corporation Executive Officer Annual Incentive
Plan, which was previously approved by the shareholders of AFC at our annual
meeting of shareholders held May 19, 1999 and extended for an additional five
years by the shareholders of AFC at our annual meeting of shareholders held on
May 19, 2004. The plan as originally approved and extended expired on
December 31, 2008. If the amendment to the plan is approved by the
shareholders of AFC, the plan will expire on December 31, 2013.
AFC and
the Association tie a portion of their executive officers’ cash compensation to
the achievement of performance goals. We have done this using a bonus
plan under which executive officers earn bonuses that vary based on performance
relative to goals pre-set annually by the Compensation Committee, acting as the
administrative committee referenced below. Under the Code, AFC cannot
deduct fiscal year taxable compensation in excess of $1,000,000 that it pays to
either its Chief Executive Officer or any of the other Named Executives other
than the Chief Executive Officer or Chief Financial Officer, unless such
compensation meets the law’s definition of “qualified performance based
compensation.” Bonuses cannot be qualified performance based compensation
unless AFC pays them under a written plan that its shareholders
approve. AFC is seeking to extend the plan that it has utilized for
the past ten years for an additional five year term.
If
shareholders do not approve this plan, AFC and the Association will not pay
annual bonuses under the plan. In such case, in order to retain
top-level executive employees, the Compensation Committee may need to consider
changes to the compensation packages of the executive officers.
Material
Provisions of the Plan
Exhibit A
to this Proxy Statement contains the full text of the plan, as
amended. Exhibit A is incorporated by reference into the following
plan summary. The summary is qualified in its entirety by this
reference.
Nature of the
Plan
. Under this plan, AFC and the Association may pay annual cash
bonuses which may be deductible under the Code. The amount of such bonuses will
vary based on the level of attainment relative to performance goals
pre-established by the administrative committee. Bonuses may be zero
if threshold performance goals are not attained, as happened in 2008, and are
anticipated to be for 2009, if the shareholders approve the plan.
Administration of
the Plan.
A committee of outside directors administers this
plan. The administrative committee must have at least two members and
has broad discretionary powers. Its members are the members of the
Compensation Committee of the Board who are non-employee directors under the
federal tax laws. In general, non-employee directors are directors
who (1) are not, and never were, officers or employees of AFC or the Association
and (2) do not receive material compensation from AFC except for service as a
director.
Eligibility.
Eligibility
is restricted to top-level executive employees of AFC and the Association who
are responsible for establishing strategic direction and long-range
plans. Currently, all Executive Vice Presidents, the Vice Chairman
and Chief Administrative Officer, the Chief Operating Officer and the Chief
Executive Officer, a total of seven people, are eligible. During the
first 90 days of each year, the administrative committee selects the year’s
participants from among the eligible employees. After the first 90
days, the administrative committee may allow participation on a pro-rated basis
by employees who are placed in eligible positions through hiring, promotion or
transfer before August 31
st
of the
year.
Target Awards and
Performance Goals.
When the administrative committee selects a
participant for a year, it sets the participant’s target bonus and the
performance goals which must be achieved to earn the bonus. The
target bonus is a percentage of the participant’s base salary. The
performance goals will be target levels established with respect to any or all
of the following corporate performance measures:
Basic
earnings per common share,
|
Efficiency
ratio,
|
Basic
cash earnings per common share
|
Cash
efficiency ratio,
|
Diluted
earnings per common share,
|
Cash
return on average assets,
|
Diluted
cash earnings per common share
|
Return
on average stockholders’ equity,
|
Net
income,
|
Cash
return on average stockholders’ equity,
|
Cash
earnings,
|
Return
on average tangible stockholders’
|
Net
interest income,
|
equity,
|
Non-interest
income,
|
Cash
return on average tangible
|
General
and administrative expense to
average
assets ratio,
|
stockholders’
equity.
|
Cash
general and administrative expense to
average
assets ratio
|
|
The
administrative committee will assign a percentage weight to each performance
goal. The aggregate weight for all goals must be 100%. The
committee may also set one or more performance levels below or above the target
level and assign lower or higher bonus percentages that will be paid if these
levels are attained.
Certification of
Performance and Payment of Bonuses.
After the end of each
year, the
administrative
committee will determine the extent of achievement of the established
performance goals and certify the results. AFC and the Association
will pay the bonus amounts assigned to the performance level achieved as soon as
practicable but not later than two and one half months after year
end. The maximum bonus that AFC may pay under the plan to any
participant for any year is $2,000,000.
Committee
Discretion to Adjust Bonus Amounts and Performance Measures
.
After setting
the
year’s target bonuses and performance goals, the administrative committee may
change them only in limited instances. If there is a change in
generally accepted accounting principles, a stock split, stock dividend,
reclassification, merger, spin-off, infrequently occurring or extraordinary item
or other corporate event, it may adjust the performance goals in a manner
designed to neither enlarge nor diminish a participant’s bonus
opportunity.
Retirement,
Death, Disability and Change of Control.
Generally, a
participant will not
receive a
bonus for a year unless he or she is an employee on the last day of the
year. In cases of retirement, death or disability, the administrative
committee may authorize a pro-rated payment based upon the attainment of the
performance goals through the end of the year. The administrative
committee may also authorize pro-rated payments following a change of control,
based on the attainment of adjusted performance goals through the
date of the change of control. Such payments may not be considered
qualified performance-based compensation for tax deduction
purposes.
Amendment and
Termination.
If approved, this plan will be in effect for a
five-year period
ending
December 31, 2013. The Board may suspend it or terminate it before
then. It may also amend this plan at any time and in any
respect. Any amendment that would change the list of performance
measures, the class of eligible employees or the maximum annual bonus amount
must first be approved by shareholders.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS
VOTE FOR
APPROVAL
OF THE AMENDMENT TO THE ASTORIA
FINANCIAL
CORPORATION EXECUTIVE OFFICER ANNUAL INCENTIVE PLAN.
New
Plan Benefits
The
benefits or amounts that will be received by or paid to participants, any Named
Executive,
the
executive officers as a group or non-executive officers as a group pursuant to
the Executive Incentive Plan are not currently determinable. No incentives were
paid under the Executive Incentive Plan for 2008 as the performance of AFC did
not meet minimum established objectives. The amount that was paid for
fiscal year 2008 with respect to the Executive Incentive plan is set forth in
the following table:
New
Plan Benefits
Astoria Financial
Corporation Executive Officer Annual Incentive Plan
Name and Position (1)
|
|
Dollar Value ($)
|
|
Number of Units
|
George
L. Engelke, Jr., Chairman and
|
|
|
0
|
|
NA
|
Chief
Executive Office
|
|
|
|
|
|
Monte
N. Redman, President and
|
|
|
0
|
|
NA
|
Chief
Operating Officer
|
|
|
|
|
|
Gerard
C. Keegan, Vice Chairman, Chief
|
|
|
|
|
|
Administrative
Officer and Director
|
|
|
|
|
|
Frank
E. Fusco, Executive Vice President,
|
|
|
0
|
|
NA
|
Treasurer
and Chief Financial Officer
|
|
|
|
|
|
Gary
T. McCann, Executive Vice President
|
|
|
0
|
|
NA
|
Arnold
K. Greenberg, Executive Vice President
|
|
|
0
|
|
NA
|
Alan
P. Eggleston, Executive Vice President
|
|
|
0
|
|
NA
|
Secretary
and General Counsel
|
|
|
|
|
|
|
|
|
|
|
|
All
executive officers, as a group
|
|
|
0
|
|
NA
|
Non-executive
directors, as a group
|
|
NA
|
|
NA
|
Non-executive
officer employees, as a group
|
|
NA
|
|
NA
|
(1)
|
Non-executive
officer directors are not eligible to participate in the Executive
Incentive Plan. Among employees, eligibility is normally
limited to top executive level employees of AFC and the Association whose
functional responsibility include the establishment of strategic direction
and long-range plans for AFC and the
Association.
|
PROPOSAL
NO. 3 - RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT
REGISTERED
PUBLIC ACCOUNTING FIRM
AFC’s
independent registered public accounting firm, or principal accountant, for the
fiscal year ended December 31, 2008 was KPMG LLP. Following its review of the
qualifications of KPMG LLP and assuring itself that KPMG LLP is independent from
AFC, its officers and directors and does not provide to AFC non-audit services
to a degree that KPMG LLP’s independence may be impaired, the Audit Committee
has reappointed KPMG LLP as independent registered public accounting firm, or
principal accountant, for AFC and the Association for the year ending December
31, 2009, subject to ratification of such appointment by our shareholders.
Representatives of KPMG LLP will be present at the Annual Meeting. They will be
given an opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions from shareholders present at the
Annual Meeting.
The
following chart details fees billed or fees estimated to be billed for
professional or other services rendered by KPMG LLP for AFC’s fiscal years ended
December 31, 2007 and 2008:
KPMG
LLP Fees Billed For The Fiscal Years Ended December 31, 2007 and
2008
|
|
Fiscal Year Ended
|
|
|
Fiscal Year Ended
|
|
Service Categories
|
|
December 31, 2007
|
|
|
December 31, 2008
|
|
Audit
Fees (1)
|
|
$
|
1,324,000
|
|
|
$
|
1,249,000
|
|
|
|
|
|
|
|
|
|
|
Audit-Related
Fees (2)
|
|
$
|
93,000
|
|
|
$
|
93,000
|
|
|
|
|
|
|
|
|
|
|
Tax
Fees (3)
|
|
$
|
31,700
|
|
|
$
|
31,500
|
|
|
|
|
|
|
|
|
|
|
All
Other Fees (4)
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
(1)
|
Audit
Fees reflect aggregate fees billed or estimated to be billed for
professional services rendered for the audit of AFC’s consolidated
financial statements, the reviews of the financial statements included in
AFC’s Quarterly Reports on Form 10-Q and services normally provided in
connection with statutory and regulatory filings or engagements, including
services rendered in connection with the audit of internal controls over
financial reporting maintained by
AFC.
|
(2)
|
Audit-Related
Fees reflect aggregate fees billed or estimated to be billed for assurance
and related services (within the meaning of Item 9(e)(2)
of Section 240.14a-101 of the Exchange Act) that are reasonably
related to the performance of the audit or review of AFC’s consolidated
financial statements and not reported as Audit Fees, including but not
limited to the audit of AFC’s employee benefit
plans.
|
(3)
|
Tax
Fees reflect aggregate fees billed or estimated to be billed for
professional services for tax compliance, tax advice and tax planning,
consisting primarily of review of state and federal tax returns and
quarterly tax payments.
|
(4)
|
All
Other Fees reflect aggregate fees billed for products and services
provided by KPMG LLP other than those set forth above as Audit Fees,
Audit-Related Fees and Tax Fees.
|
It is the
policy of the Audit Committee to pre-approve all services provided by KPMG LLP
to AFC. In the absence of contrary action by the Audit Committee, of which there
has been none, the Board has also delegated to the Chairman of the Audit
Committee the authority to pre-approve such services. The Chairman of the Audit
Committee is then responsible to report such authorization to the Audit
Committee at its next scheduled meeting. All services provided by KPMG LLP
during fiscal year 2007 and 2008 were pre-approved by the Audit Committee or the
Chairman of the Audit Committee pursuant to the delegation of authority and
procedure outlined above.
The Audit
Committee, as part of its review of the disclosures and letter from KPMG LLP
required by Independence Standards Board Standard No. 1, “Independence
Discussions with Audit Committees,” considered whether the provision of the
services rendered, the fees for which are reflected in the chart above entitled
“KPMG LLP Fees Billed for the Fiscal Years ended December 31, 2007 and 2008”
under the captions entitled “Audit-Related Fees,” “Tax Fees” and “All Other
Fees,” were, and found them to be, compatible with maintaining the independence
of KPMG LLP.
During
2006, the Office of Thrift Supervision together with the other federal banking
regulatory agencies published the “Interagency Advisory on the Unsafe and
Unsound Use of Limitation of Liability Provisions in External Audit Engagement
Letters.” The advisory is effective for any audit engagement letters entered
into by the Association after February 9, 2006 and specifies that agreeing to
certain limitation of liability provisions in an audit engagement letter would
constitute an unsafe and unsound banking practice on the part of the
Association. AFC believes that its engagement letters with KPMG LLP for the 2007
and 2008 audits fully comply with the “Interagency Advisory on the Unsafe and
Unsound Use of Limitation of Liability Provisions in External Audit Engagement
Letters.”
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS
VOTE FOR RATIFICATION
OF THE APPOINTMENT OF KPMG LLP AS AFC’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM.
Audit
Committee
The information set forth in this
section, including but not limited to the Report of the Audit Committee, shall
not be deemed incorporated by reference by any general statement incorporating
by reference this Proxy Statement into any filing under the Securities Act or
the Exchange Act, except to the extent that AFC specifically incorporates this
information by reference, and otherwise shall not be deemed “soliciting
materials” or to be “filed” with the SEC or subject to Regulations 14A or 14C of
the SEC or subject to the liabilities of Section 18 of the Exchange
Act.
It has been and continues to be the
practice of the Board to maintain an Audit Committee of the Board. The Board has
adopted a written Charter of the Audit Committee. A copy of the Audit
Committee’s Charter is posted on AFC’s Investor Relations website at
http://ir.astoriafederal.com
under the heading “Corporate Governance.” The Charter specifies the purpose of
the Audit Committee, the appointment and composition of its members, procedural
matters with respect to its meetings, the responsibilities and duties of the
Audit Committee and the reporting of Audit Committee activities and
recommendations. The management of AFC is primarily responsible for implementing
and evaluating the effectiveness of the system of internal controls and
financial reporting processes of AFC. AFC’s independent registered public
accounting firm is responsible for expressing an opinion on the consolidated
financial statements of AFC based on an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board and expressing an
opinion regarding the effective operation of the system of internal controls
over financial reporting.
AFC Common Stock is listed on the NYSE.
The Board has determined that the members of the Audit Committee meet the
applicable independence standards set forth in the NYSE Listed Company
Manual.
Report
of the Audit Committee
Under rules established by the SEC, AFC
is required to provide certain data and information regarding the activities of
its Audit Committee. In fulfillment of this requirement, the Audit Committee of
AFC, at the direction of the Board, has prepared the following report for
inclusion in this Proxy Statement.
At its meeting held on February 26,
2009, the Audit Committee reviewed the Consolidated Financial Statements and
discussed such statements with the management of AFC. At such meeting and at
other meetings held during 2008 and 2009, the Audit Committee discussed with
AFC’s independent registered public accounting firm, KPMG LLP, the matters
required to be discussed by Statement on Auditing Standards No. 61
“Communication with Audit Committees,” referred to as SAS 61 (although SAS 61
has been superseded by Statement on Accounting Standards No. 114, “The Auditor’s
Communication with Those Charged With Governance,” such statement has not yet
been adopted by the Public Company Accounting Oversight Board). The
matters required to be discussed pursuant to SAS 61 include, but are not limited
to, significant accounting policies, management judgments and accounting
estimates, uncorrected and corrected misstatements, if any, disagreements with
management, if any, difficulties encountered with management in performing the
audit, if any, and independence.
The Audit Committee has received and
reviewed the written disclosures and letter from KPMG LLP required by Applicable
requirements of the Public Company Accounting Oversight Board regarding KPMG
LLP’s communications with the Audit Committee concerning
independence. The Audit Committee has discussed with KPMG LLP the
independence of KPMG LLP.
Based upon the review and discussion
referred to in this Report, the Audit Committee, at its meeting held on February
26, 2009, approved and recommended to the Board the inclusion of the
Consolidated Financial Statements in the Annual Report on Form 10-K of AFC for
the year ended December 31, 2008.
Audit
Committee of AFC
Thomas
J. Donahue, Chairman
|
|
Peter
C. Haeffner, Jr.
|
Andrew
M. Burger
|
|
Ralph
F. Palleschi
|
Denis
J. Connors
|
|
Leo
J. Waters
|
Additional
Information
Section 16(a) Beneficial Ownership
Reporting Compliance
Section 16(a) of the Exchange Act
requires AFC’s directors and executive officers, among others, to file reports
of ownership and changes in ownership of their AFC equity securities with the
SEC and to furnish AFC with copies of all such reports. Based solely upon a
review of the copies of these reports and amendments thereto received by AFC,
AFC believes that all applicable filing requirements were complied with for
2008, except as follows: Mr. Leo J. Waters sold 500 shares of AFC
Common Stock on November 7, 2008 and 3,762 shares of AFC Common Stock on
November 10, 2008, which sales were not reported to the SEC in timely
fashion. These transactions have now been reported by amended filings
with the SEC.
Cost of Proxy Solicitation
The cost of solicitation of proxies by
AFC will be borne by AFC. Laurel Hill Advisory Group Inc. has been retained to
assist in the solicitation of proxies under a contract providing for payment of
a fee of $7,500 plus reimbursement for its expenses. In addition to
solicitations by mail and by Laurel Hill Advisory Group, Inc., a number of
officers and employees of AFC and the Association may solicit proxies in person,
by mail or by telephone, but none of these persons will receive any compensation
for their solicitation activities in addition to their regular compensation.
Arrangements will also be made with brokerage houses and other custodians,
nominees, and fiduciaries for forwarding solicitation material to the beneficial
owners of AFC Common Stock held of record by such fiduciaries, and AFC will
reimburse them for their reasonable expenses in accordance with the rules of the
SEC and the NYSE.
Shareholder Proposals
To be considered for inclusion in AFC’s
proxy statement and form of proxy relating to the annual meeting of shareholders
to be held in 2010, a shareholder proposal, including a recommendation of a
director nominee, must be received by the Secretary of AFC at the address set
forth on page 1 of this Proxy Statement not later than December 14, 2009. Any
shareholder proposal will be subject to Rule 14a-8 promulgated by the SEC under
the Exchange Act.
Notice of Business to be Conducted at
an Annual Meeting
The Bylaws of AFC provide an advance
notice procedure for a shareholder to properly bring business before an annual
meeting or to nominate any person for election to the Board. The shareholder
must give written advance notice to the Secretary of AFC not less than ninety
(90) days before the date originally fixed for such meeting; provided, however,
that in the event that less than one hundred (100) days’ notice or prior public
disclosure of the date of the meeting is given or made to shareholders, notice
by the shareholder, to be timely, must be received not later than the close of
business on the tenth (10th) day following the date on which AFC’s notice to
shareholders of the annual meeting date was mailed or such public disclosure was
made. The advance notice by shareholders must include the shareholder’s name and
address, as they appear on AFC’s record of shareholders, the class and number of
shares of AFC’s capital stock that are beneficially owned by such shareholder, a
brief description of the proposed business or the names of the person(s) the
shareholder proposes to nominate, and, as to business which the shareholder
seeks to bring before an annual meeting, the reason for conducting such business
at the annual meeting and any material interest of such shareholder in the
proposed business.
In the case of nominations for election
to the Board, the shareholder’s notice must also include as to each proposed
nominee all information regarding the proposed nominee that is required to be
disclosed pursuant to Regulation 14A under the Exchange Act, including, but not
limited to, such proposed nominee’s consent to being named in the proxy
statement as a nominee and to serve if elected. Nothing in this paragraph shall
be deemed to require AFC to include in its proxy statement and proxy relating to
an annual meeting any shareholder proposal or nomination which does not meet all
of the requirements for inclusion established by the SEC in effect at the time
such proposal or nomination is received.
Shareholder Communications
The Board has established a process for
shareholders or other interested parties to communicate with the Board or any of
its members. Communications to Messrs. Engelke or Keegan may be sent directly to
them at the address set forth on page 1 of this Proxy Statement. Those who wish
to communicate with the presiding director, the non-management, or independent,
directors or the entire Board may do so by writing to:
Chairman of the Nominating and
Corporate Governance Committee
c/o Alan P. Eggleston, Executive Vice
President, Secretary and General Counsel
Astoria Financial
Corporation
One Astoria Federal Plaza
Lake Success, New York
11042
Such communications should be delivered
in a sealed envelope marked “Personal and Confidential.” Such communications
shall be delivered unopened by the Executive Vice President, Secretary and
General Counsel to the Chairman of the Nominating and Corporate Governance
Committee. The Chairman of the Nominating and Corporate Governance Committee
will acknowledge receipt of such correspondence and, if applicable, provide a
copy to each Board member or each non-management or independent
director.
Employees, who may also be shareholders
of AFC, are provided several methods for providing confidential communications
to the Chairman of the Audit Committee and the Chairman of the Nominating and
Corporate Governance Committee. These procedures are outlined in AFC’s Code of
Business Conduct and Ethics, which applies to all directors, officers and
employees of AFC and its affiliated companies, including the Association and is
available on AFC’s Investor Relations website at
http://ir.astoriafederal.com
under the heading “Corporate Governance.” Shareholders may request a printed
copy of such document by contacting AFC’s Investor Relations Department by
calling (516) 327-7869 or in writing at the address specified on page 1 of this
Proxy Statement.
Director Attendance at Annual
Meetings
It is the policy of AFC that all
directors are strongly encouraged to attend the Annual Meeting and that, at a
minimum, a quorum of the Board be in attendance. At the annual meeting of
shareholders held on May 21, 2008, all of the directors were present with the
exception of Mr. Powderly who was absent due to health reasons.
Householding
The SEC
allows the delivery of a single proxy statement and annual report to an address
shared by two or more of our shareholders. This delivery method,
referred to as “householding,” can result in significant cost savings for
AFC. In order to take advantage of this opportunity, banks and
brokerage firms that hold your shares have delivered only one proxy statement
and annual report to multiple shareholders who share an address unless one or
more of the shareholders has provided contrary instructions. AFC will
deliver promptly, upon written or oral request, a separate copy of the proxy
statement and annual report to a shareholder at a shared address to which a
single copy of the documents was delivered. A shareholder who wishes
to receive a separate copy of the proxy statement and annual report, now or in
the future, may obtain one without charge by addressing a request to Investor
Relations at Astoria Financial Corporation, One Astoria Federal Plaza, Lake
Success, New York 11042 or by calling (516) 327-7877. You may also
obtain a copy of the proxy statement and annual report from the Company’s
website (
http://ir.astoriafederal.com
)
by clicking on “Annual Report” and/or “Proxy Statement.” Shareholders
of record sharing an address who are receiving multiple copies of proxies and
annual reports and wish to receive a single copy of such materials in the future
should submit their request by contacting us in the same manner. If
you are the beneficial owner, but not the record owner, of AFC’s shares and wish
to receive only one copy of the proxy statement and annual report in the future,
you will need to contact your broker, bank or other nominee to request that only
a single copy of each document be mailed to all shareholders at the shared
address in the future.
Other
Matters Which May Properly Come Before the Meeting
The Board knows of no business which
will be presented for consideration at the Annual Meeting other than as stated
in the Notice of Annual Meeting of Shareholders. If, however, other matters are
properly brought before the Annual Meeting, the dates by which shareholder
proposals and notices of business to be conducted at an Annual Meeting having
been previously disclosed, it is the intention of the persons named in the
accompanying proxy to vote the shares represented thereby on such matters as
directed by the Board.
Whether or not you intend to be present
at the Annual Meeting, you are urged to vote on the Internet, by telephone or by
returning your proxy card promptly. If you are present at the Annual Meeting and
wish to vote your shares in person, your proxy may be revoked by voting at the
Annual Meeting.
An additional copy of AFC’s Annual
Report on Form 10-K (without exhibits) for the year ended December 31, 2008, as
filed with the SEC, will be furnished without charge to any shareholder upon
written request to Astoria Financial Corporation, Investor Relations Department,
One Astoria Federal Plaza, Lake Success, New York 11042-1085. Copies can also be
obtained without charge from AFC’s Investor Relations website at
http://ir.astoriafederal.com
.
|
By
order of the Board,
|
|
|
|
Alan
P. Eggleston
|
|
Executive
Vice President, Secretary and
General
Counsel
|
Lake
Success, New York
April 13,
2009
YOU ARE CORDIALLY
INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER OR NOT YOU PLAN TO
ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO VOTE YOUR SHARES OF AFC COMMON
STOCK ON THE INTERNET OR BY TELEPHONE, OR COMPLETE, SIGN AND PROMPTLY RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
Exhibit
A - Astoria Financial Corporation Executive Officer Annual Incentive Plan, As
Amended
ASTORIA
FINANCIAL CORPORATION
EXECUTIVE
OFFICER ANNUAL INCENTIVE PLAN, AS AMENDED
ARTICLE
I - PLAN OBJECTIVES.
Section 1.1
The
purpose of the Plan is to achieve the following objectives: (i) to promote the
achievement of Astoria Financial Corporation’s and the Astoria Federal Savings
and Loan Association’s performance objectives; (ii) to link executive
compensation to specific corporate performance objectives; (iii) to provide a
competitive reward structure for executive management; and (iv) to encourage
involvement and communication regarding Astoria Financial Corporation’s and the
Astoria Federal Savings and Loan Association’s strategic plans and
objectives.
ARTICLE
II - PLAN DURATION.
Section 2.1
The
Plan has been effective for ten consecutive Plan Years beginning on the
Effective Date and ending on December 31, 2008, and shall be effective
thereafter for five consecutive Plan Years beginning on January 1, 2009 and
ending on December 31, 2013.
ARTICLE
III - DEFINITIONS.
Section 3.1
When
used in the Plan, the words and phrases below have the following
meanings:
(a) “AFC”
means Astoria Financial Corporation, a Delaware corporation, and any successor
thereto.
(b) “AFC
and the Association” means AFC, together with any other organization that is
required to be considered, along with AFC, a single entity for purposes of
consolidated financial reporting under GAAP.
(c) “Association”
means Astoria Federal Savings and Loan Association, a federally chartered
savings association, and any successor thereto.
(d) “Board”
means the Board of Directors of AFC.
(e) “Change
of Control” means any of the following events:
(I) approval
by the stockholders of AFC of a transaction that would result in the
reorganization, merger or consolidation of AFC with one or more other persons,
other than a transaction following which:
(A) at
least 51% of the equity ownership interests of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) in substantially the same relative proportions by
persons who, immediately prior to such transaction, beneficially owned (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51% of
the outstanding equity ownership interests in AFC; and
(B) at
least 51% of the securities entitled to vote generally in the election of
directors of the entity resulting from such transaction are beneficially owned
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) in
substantially the same relative proportions by persons who, immediately prior to
such transaction, beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) at least 51% of the securities entitled to
vote generally in the election of directors of AFC;
(II) the
acquisition of all or substantially all of the assets of AFC or beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of the outstanding securities of AFC entitled to vote generally
in the election of directors by any person or by any persons acting in concert,
or approval by the stockholders of AFC of any transaction which would result in
such an acquisition;
(III) a
complete liquidation or dissolution of AFC, or approval by the stockholders of
AFC of a plan for such liquidation or dissolution;
(IV) the
occurrence of any event if, immediately following such event, at least 50% of
the members of the Board of Directors of AFC do not belong to any of the
following groups:
(A) individuals
who were members of the Board of Directors of AFC on the Effective Date of this
Plan; or
(B) individuals
who first became members of the Board of Directors of AFC after the Effective
Date of this Plan either:
(i) upon
election to serve as a member of the Board of Directors of AFC by affirmative
vote of three-quarters of the members of such Board, or of a nominating
committee thereof, in office at the time of such first election; or
(ii) upon
election by the stockholders of AFC to serve as a member of the Board of AFC,
but only if nominated for election by affirmative vote of three-quarters of the
members of the Board of Directors of AFC, or of a nominating committee thereof,
in office at the time of such first nomination;
provided, however
, that such
individual’s election or nomination did not result from an actual or threatened
election contest (within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened solicitation
of proxies or consents (within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf of the Board;
or
(V)
any event which would be described in Section 3.1(e) (I), (II), (III) or
(IV) if the term “Association” were substituted for the term “AFC”
therein.
In no
event, however, shall a Change in Control be deemed to have occurred as a result
of any acquisition of securities or assets of AFC, Association, or a subsidiary
of either of them, by AFC, Association, or a subsidiary of either of them, or by
any employee benefit plan maintained by any of them. For purposes of this
Section 3.1(e), the term “person” shall have the meaning assigned to it under
Sections 13(d)(3) or 14(d)(2) of the Exchange Act.
(f) “Code”
means the Internal Revenue Code of 1986, including the corresponding provisions
of any succeeding law.
(g) “Corporate
Performance Objectives” means for any Plan Year those objective performance
objectives selected and established by the Committee in accordance with the
requirements of Article VI of the Plan.
(h) “Committee”
means those members of the Compensation Committee of AFC, appointed by and
consisting of two or more members of the Board, each of whom is an outside
director as defined in Code Section 162(m).
(i) “Disabled”
means suffering from a mental or physical condition of total incapacity which
the Committee shall have determined, on the basis of competent medical evidence,
is likely to be permanent and precludes further performance of duty with AFC and
the Association.
(j) “Discharge
for Cause” means the termination upon the finding of the Committee of an
intentional failure to perform stated duties, breach of a fiduciary duty
involving personal dishonesty, which results in material loss to AFC,
Association or one of their affiliates or willful violation of any law, rule or
regulation, other than traffic violations or similar offenses, or final
cease-and-desist order which results in material loss to AFC, Association or one
of their affiliates.
(k) “Effective
Date” means January 1, 1999.
(l) “Employee”
means any individual employed by AFC and the Association as an employee, but
does not mean an individual who renders service solely as a director or
independent contractor.
(m) “Exchange
Act” means the Securities Exchange Act of 1934, as amended from time to time,
including the corresponding provisions of any succeeding law.
(n) “GAAP”
means generally accepted accounting principles, as amended from time to time and
applied in preparing the financial statements of AFC and the
Association.
(o) “Participant”
means an Employee who is selected by the Committee as eligible to participate in
the Plan for a Plan Year.
(p) “Plan”
means the Astoria Financial Corporation Executive Officer Annual Incentive
Plan.
(q) “Plan
Year” means the calendar year beginning January l and ending December
31.
(r) “Retires”
means terminates employment at a time when the Employee is eligible to receive a
benefit based upon his retirement or early retirement as set forth in any
tax-qualified retirement or pension plan of AFC or Association.
(s) “Section
162(m) Employee” means, for any Taxable Year, an Employee who, on the last day
of such Taxable Year is the Chief Executive Officer of AFC or is performing the
functions of a chief executive officer for AFC or is an executive whose
aggregate salary and bonus for such Taxable Year places him among the three most
highly compensated executive officers other than the Chief Executive Officer and
the Chief Financial Officer. The determination of the Section 162(m) Employees
for any Taxable Year shall be made by applying standards in effect under the
Exchange Act for identifying the executive officers required to be named in
AFC’s Summary Compensation in its proxy statement relating to such Taxable
Year.
(t) “Taxable
Year” means the taxable year of AFC for federal income tax
purposes.
ARTICLE
IV - ELIGIBILITY AND PARTICIPATION.
Section 4.1
The
Committee shall annually select the individual Employees, if any, eligible for
participation in the Plan.
Section 4.2
Eligibility
normally shall be limited to top executive-level Employees of AFC and the
Association whose functional responsibility includes the establishment of
strategic direction and long-range plans for AFC and the Association, including,
but not limited to, the Chief Executive Officer, Vice Chairmen and Executive
Vice Presidents.
Section 4.3
An
Employee who holds or assumes an eligible position shall not be a Participant
for any Plan Year unless selected by the Committee to participate in the Plan
for the Plan Year. An Employee who is hired, transferred or promoted into an
eligible position during a Plan Year and selected to participate in the Plan for
that Plan Year shall receive a prorated award for that Plan Year. In no event
shall a person who is a Section 162(m) Employee be added to the Plan for any
Plan Year after the close of the eighth month of the Plan Year.
Section 4.4
In
general, a Participant must be employed by AFC and the Association on the last
day of the Plan Year to receive an award. A Participant who Retires, dies or
becomes Disabled during a Plan Year shall receive a prorated award for that Plan
Year. In these circumstances, the amount of any prorated award shall be
calculated and paid during the first 2-1/2 months of the calendar year following
the end of the Plan Year on the basis of the level of attainment of the
established performance goals for the entire Plan Year. A Participant who
terminates employment with AFC and the Association upon a Change of Control
shall be eligible for a prorated award, provided that his or her termination was
not a Discharge for Cause. In these circumstances, the amount of any prorated
award shall be calculated and paid on the first day of the first calendar month
to begin after such termination of employment on the basis of the level of
attainment of the established performance goals for the portion of the Plan Year
preceding the Change of Control, annualized to project full-year performance.
The Committee shall have the authority to determine whether a Participant who
otherwise ceases employment prior to the end of a Plan Year is eligible to
receive a prorated award for that Plan Year, provided that, following the
occurrence of a Change of Control, the Committee may not exercise its authority
to deny a prorated award to any Participant whose termination of employment is
not a Discharge for Cause. In these circumstances, the amount of any
prorated award shall be calculated and paid during the first 2-1/2 months of the
calendar year following the end of the Plan Year on the basis of the level of
attainment of the established performance goals for the entire Plan
Year.
Section
4.5
Prorated awards shall be calculated by dividing the
applicable annual award by twelve and multiplying the result by the number of
months of service, rounded to the next highest whole month, of the Participant
during the Plan Year.
ARTICLE
V - AWARD OPPORTUNITY.
Section 5.1
The
Committee shall provide an award opportunity to Participants who assist AFC and
the Association in achieving certain of its Corporate Performance Objectives for
a Plan Year. The award opportunity for each Plan Year shall be a percentage of
each Participant’s base salary earned during the Plan Year. Differences in the
amount of impact Participants may have on AFC and the Association’s success
shall be recognized by varying award opportunities for Participants. The amount
of a Participant’s award, if any, shall be based on the degree to which AFC and
the Association achieve their Corporate Performance Objectives.
Section 5.2
The
Committee recognizes that the level of control and influence a Participant has
to impact the Corporate Performance Objectives is influenced by the
Participant’s level of responsibility. As such, the Committee shall establish
annually, as provided below, a matrix which shall establish for each Participant
the award opportunity for such Participant if AFC and the Association achieve
their target Corporate Performance Objectives. The matrix may also include
enhanced or reduced award opportunity levels for such Participant if AFC and the
Association achieve at a level above or below the target Corporate Performance
Objectives.
ARTICLE
VI - ESTABLISHMENT OF CORPORATE PERFORMANCE OBJECTIVES.
Section 6.1
As soon
as practicable, but in any event within the first 90 days of each Plan Year, the
Committee shall establish specific Corporate Performance Objectives for AFC and
the Association, including target levels and, if deemed appropriate by the
Committee, one or more enhanced or reduced award opportunity levels associated
with each Corporate Performance Objective. If the Committee adds a Participant
to the Plan for a Plan Year after initially establishing the award opportunities
and Corporate Performance Objectives for the Plan Year, it shall establish the
award opportunities and Corporate Performance Objectives applicable to the new
Participant within 30 days after adding the Participant to the Plan. The
Corporate Performance Objectives for a Plan Year shall be based on one or more
of the following criteria:
|
(a)
|
Basic
earnings per common share,
|
|
(b)
|
Basic
cash earnings per common share,
|
|
(c)
|
Diluted
earnings per common share,
|
|
(d)
|
Diluted
cash earnings per common share,
|
|
(i)
|
General
and administrative expense to average assets
ratio,
|
|
(j)
|
Cash
general and administrative expense to average assets
ratio,
|
|
(l)
|
Cash
efficiency ratio,
|
|
(m)
|
Return
on average assets,
|
|
(n)
|
Cash
return on average assets,
|
|
(o)
|
Return
on average stockholders’ equity,
|
|
(p)
|
Cash
return on average stockholders’
equity,
|
|
(q)
|
Return
on average tangible stockholders’
equity,
|
|
(r)
|
Cash
return on average tangible stockholders’
equity.
|
The
Corporate Performance Objectives may be based on the performance of AFC and the
Association in the absolute or in relation to its peers.
Section 6.2
Those
Corporate Performance Objectives which have meanings ascribed to them by GAAP,
shall have the meanings assigned to them under GAAP as in effect and applied to
AFC and the Association on the date on which the Corporate Performance
Objectives are established, without giving effect to any subsequent changes in
GAAP, unless the Committee specifically provides otherwise when it establishes
the Corporate Performance Objectives. Corporate Performance Objectives based
upon cash earnings or cash returns shall refer to or be calculated based upon
net income plus non-cash charges for goodwill amortization and amortization
relating to employee stock ownership plans and restricted stock plans and
related tax benefits. Corporate Performance Objectives based upon cash general
and administrative expenses shall refer to general and administrative expenses,
calculated in accordance with GAAP, adjusted to eliminate non-cash amortization
expenses relating to employee stock ownership plans and restricted stock
plans.
Section 6.3
The
Committee shall assign a percentage weight to each Corporate Performance
Objective for each Plan Year. The weight assigned to any one or more Corporate
Performance Objectives may be zero, but the aggregate weight assigned to all
Corporate Performance Objectives shall equal 100%. The Committee may assign
different weightings to Corporate Performance Objectives for each Participant or
classes of Participants. The Committee shall establish a matrix which shall set
forth the Corporate Performance Objectives, the target and other applicable
performance levels with respect thereto, the weighting of such Corporate
Performance Objectives, if any, and the corresponding award opportunity for each
Participant.
Section 6.4
Under
normal business conditions, once established for a Plan Year as provided herein,
Corporate Performance Objectives shall not be subject to revision or alteration.
However, unusual conditions may warrant a reexamination of such criteria. Such
conditions may include, but not be limited to, a Change of Control, declaration
and distribution of stock dividends or stock splits, mergers, consolidation or
reorganizations, acquisitions or dispositions of material business units,
infrequently occurring or extraordinary gains or losses. In the event the
Committee determines that, upon reexamination, alteration of the Corporate
Performance Objectives is appropriate, the Committee shall reestablish the
Corporate Performance Objectives to maintain as closely as possible the
previously established expected level of overall performance of the
Participants, taken as a whole, as is practicable. Notwithstanding the
foregoing, any adjustments to the award opportunities or Corporate Performance
Objectives applicable to a Section 162(m) Employee for a Plan Year shall conform
to the requirements of section 162(m) of the Code and the regulations
promulgated pursuant thereto.
ARTICLE
VII - DETERMINATION AND PAYMENT OF AWARDS.
Section 7.1
As
promptly as practicable, but in any event within 75 days after the end of each
Plan Year, the Committee shall certify the performance of AFC and the
Association relative to the Corporate Performance Objectives established for
Participants. Each Participant’s award shall be determined by multiplying the
Participant’s base salary earned during the applicable Plan Year by the
percentage set forth in the matrix established in Sections 6.3 and 6.4 of the
Plan, as possibly adjusted down, but not up, for such subjective factors as the
Committee deems appropriate, including, but not limited to, whether the
Participant’s overall individual performance met expectations. Awards under the
Plan shall be paid in cash, subject to applicable withholding taxes, during the
first 2-1/2 months of the calendar year following the end of the Plan
Year.
ARTICLE
VIII - MAXIMUM AWARD.
Section 8.1
The
maximum award that may be paid to any Participant for any Plan Year is
$2,000,000.
ARTICLE
IX - PLAN ADMINISTRATION.
Section 9.1
The
Committee shall direct and control the administration of the Plan, taking into
consideration the recommendations of the Chief Executive Officer and members of
the Board of Directors who do not serve on the Committee. The Committee shall
have the right and authority to perform the following administrative
tasks:
(a) to
interpret the Plan,
(b) to
adopt, amend or rescind rules and regulations relating to the administration and
interpretation of the Plan,
(c) to
make all other determinations necessary or advisable for administering the
Plan,
(d) to
exercise the powers conferred on the Committee under the Plan, and
(e) to
correct any defect, supply any omission or reconcile any inconsistency in the
Plan in the manner and to the extent it deems expedient to carry the Plan into
effect, the Committee being the sole and final judge of such
expediency.
Section 9.2
The
Board shall have the exclusive authority to amend, modify, suspend or terminate
the Plan at any time, with or without notice, except that no amendment,
modification, suspension or termination may in any manner adversely affect the
right of any Participant to receive any award amount which has been awarded to
him or her. To qualify for the exemption from the deduction limitation of Code
Section 162(m), shareholders must approve certain material amendments to the
Plan, such as a change in the business criteria upon which Corporate Performance
Objectives are based, the maximum amount of a Participant’s award, or a change
in the defined class of Employees eligible to participate in the
Plan.
ARTICLE
X - MISCELLANEOUS.
Section 10.1
The
Plan does not, and shall not be deemed to, constitute a contract of employment
between AFC and the Association and any Participant. Nothing in the Plan confers
on any Employee the right to remain in the employment of AFC and the Association
or limits the right of AFC and the Association to discharge the Employee.
Nothing in the Plan shall be deemed to limit the rights of any Participant which
may exist pursuant to any employment agreement between AFC and/or Association
and the Participant.
Section
10.2
Nothing in this Plan shall be interpreted or construed to
limit the authority of the Board to establish and compensate any Participant in
the Plan in any manner outside of the scope and authority of this
Plan.
Section
10.3
Because participation in the Plan does not guarantee any
award under the Plan, an Employee may not sell, transfer, assign, pledge, or
otherwise encumber any anticipated award and any attempt to do so shall be void,
and AFC and the Association shall not be liable in any manner for or subject to
the debts, contracts, liabilities, engagements, or torts of any person who might
anticipate an award under the Plan, except as stated in a Qualified Domestic
Relations Order.
Section
10.4
Notwithstanding any other provision of the Plan, the Plan
is subject to, and shall become effective only upon, approval by AFC’s
shareholders at the meeting of shareholders on May 19, 1999 or any adjournment
or postponement thereof.
Section 10.5
This
Plan is not intended to satisfy the requirements for qualification under Section
401(a) of the Code or to satisfy the definitional requirements for an “employee
benefit plan” under Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended. It is intended to be a non-qualified incentive compensation
program that is exempt from the regulatory requirements of the Employee
Retirement Income Security Act of 1974, as amended. The Plan shall be construed
and administered so as to effectuate this intent.
Section
10.6
Whenever appropriate in the Plan, words used in the
singular may be read in the plural, words used in the plural may be read in the
singular, and words importing the masculine gender may be read as referring
equally to the feminine or the neuter. Any reference to an Article or Section
number shall refer to an Article or Section of this Plan unless otherwise
indicated.
Section 10.7
The
Plan shall be construed, administered and enforced according to the laws of the
State of New York, without giving effect to the conflict of laws principles
thereof, except to the extent that such laws are preempted by federal
law.
Section 10.8
The
headings of Articles are included solely for convenience of reference. If there
is any conflict between such headings and the text of the Plan, the text shall
control.
Section 10.9
AFC
and the Association shall have the right to deduct from all amounts paid by AFC
and the Association, or any member thereof, in cash under the Plan any taxes
required by law to be withheld with respect to such payment.
Section 10.10
Any
communication required or permitted to be given under the Plan, including any
notice, direction, designation, comment, instruction, objection or waiver, shall
be in writing and shall be deemed to have been given at such time as it is
delivered personally or five (5) days after mailing if mailed, postage prepaid,
by registered or certified mail, return receipt requested, addressed to such
party at the address listed below, or at such other address as one such party
may by written notice specify to the other party:
(a) If
to the Committee:
Astoria
Financial Corporation
One
Astoria Federal Plaza
Lake
Success, New York 11042-1085
Attention:
Corporate Secretary
(b) If
to a Participant, to the Participant’s address as shown in AFC and the
Association’s personnel records.
Section 10.11
The
following provisions are included for the purposes of complying with various
laws, rules and regulations applicable to AFC and the Association:
(a) Notwithstanding
anything herein contained to the contrary, in no event will the aggregate amount
of compensation payable by the Association to any person on account of his
termination of employment exceed three times such person’s average annual total
compensation for the last five consecutive calendar years to end prior to his
termination of employment with the AFC and the Association or for his entire
period of employment with the AFC and the Association and their respective
predecessors, if less than five calendar years.
(b) Notwithstanding
anything herein contained to the contrary, any payments pursuant to this Plan,
are subject to and conditioned upon their compliance with section 18(k) of the
Federal Deposit Insurance Act and any regulations promulgated
thereunder.
(c) Notwithstanding
anything herein contained to the contrary, if an Participant is suspended from
office and/or temporarily prohibited from participating in the conduct of the
affairs of the Association pursuant to a notice served under section 8(e)(3) or
8(g)(1) of the Federal Deposit Insurance Act, the Association’s obligations
under this Plan shall be suspended as of the date of service of such notice,
unless stayed by appropriate proceedings. If the charges in such notice are
dismissed, the Association, in its discretion, may (i) pay to the Participant
all or part of the compensation withheld while the Association’s obligations
hereunder were suspended and (ii) reinstate, in whole or in part, any of the
obligations which were suspended.
(d) Notwithstanding
anything herein contained to the contrary, if the Participant is removed and/or
permanently prohibited from participating in the conduct of the Association’s
affairs by an order issued under section g(e)(4) or 8(g)(1) of the Federal
Deposit Insurance Act, all prospective obligations of the Association under this
Plan shall terminate as of the effective date of the order, but vested rights
and obligations of the Association and the Participant shall not be
affected.
(e) Notwithstanding
anything herein contained to the contrary, if the Association is in default,
within the meaning of section 3(x)(1) of the Federal Deposit Insurance Act, all
prospective obligations of the Association under this Plan shall terminate as of
the date of default, but vested rights and obligations of the Association and
the Participant shall not be affected.
(f) Notwithstanding
anything herein contained to the contrary, all prospective obligations of the
Association hereunder shall be terminated, except to the extent that a
continuation of this Plan is necessary for the continued operation of the
Association: (i) by the Director of the Office of Thrift Supervision or his
designee, at the time the Federal Deposit Insurance Corporation enters into an
agreement to provide assistance to or on behalf of the Association under the
authority contained in section 13(c) of the Federal Deposit Insurance Act; (ii)
by the Director of the Office of Thrift Supervision or his designee at the time
such Director or designee approves a supervisory merger to resolve problems
related to the operation of the Association or when the Association is
determined by such Director to be in an unsafe or unsound condition. The vested
rights and obligations of the parties shall not be affected.
If and to
the extent that any of the foregoing provisions shall cease to be required by
applicable law, rule or regulation, the same shall become inoperative
automatically as though eliminated by formal amendment of the Plan. Any of the
foregoing provisions which, by their terms, apply only to the Association shall
not affect the rights and obligations of AFC.
April 13,
2009
To:
|
All
Astoria Federal Savings and Loan Association Incentive Savings Plan ("401K
Plan") Participants with a portion of their account balance invested in
the Employer Stock Fund
|
Re:
|
Annual Meeting of
Shareholders to be held on May 20,
2009
|
In
connection with the Annual Meeting of Shareholders of Astoria Financial
Corporation to be held on May 20, 2009, enclosed please find the following
documents:
|
a)
|
Confidential
Voting Instruction card,
|
|
|
Proxy
Statement dated April 13, 2009, including a Notice of Annual Meeting of
Shareholders,
|
|
|
2008
Annual Report and Form 10-K,
and
|
|
|
postage-paid
return envelope addressed to BNY Mellon Shareholder Services (BNY Mellon
Shareholder Services is the Confidential Voting Instruction tabulator for
the 401K Plan).
|
As a
participant in the 401K Plan with all or a portion of your account balance
invested in the Employer Stock Fund and as a “named fiduciary” you have the
right to participate in directing how the Plan Administrator (Astoria Federal
Savings and Loan Association) instructs the 401K Trustee (Prudential Bank &
Trust Company, FSB) to vote the shares of Astoria Financial Corporation Common
Stock (Shares) held by the 401K Plan as of March 23, 2009, the meeting record
date (provided that you had all or a portion of your account invested in the
Employer Stock Fund as of the most recent valuation date on or before the
meeting record date). In general, the 401K Trustee will be directed to vote the
Shares held in the Employer Stock Fund “FOR” and “AGAINST” (or in the case of
electing directors, “FOR” and “WITHHOLD”) each proposal listed on the
Confidential Voting Instruction card in the same proportions as instructions to
cast votes “FOR” and “AGAINST” (or in the case of electing directors, “FOR” and
“WITHHOLD”) each proposal are given by those individuals with the right to give
directions. Each individual’s instructions are weighted according to the value
of the participant’s interest in the Employer Stock Fund as of the most recent
valuation available prior to the record date. If you do not file a Confidential
Voting Instruction card on or before May 13, 2009, or if you “ABSTAIN”, your
directions will not count.
Unanticipated
Proposals
It is
possible, although very unlikely, that proposals other than those specified on
the Confidential Voting Instruction card will be presented for shareholder
action at the 2009 Annual Meeting of Shareholders. If this should happen, the
401K Trustee will be instructed to vote upon such matters in the 401K Trustee’s
discretion, or to cause such matters to be voted upon in the discretion of the
individuals named in any proxies executed by the 401K Trustee.
Your
instruction is very important. You are encouraged to review the enclosed
material carefully and to complete, sign and date the enclosed Confidential
Voting Instruction card to signify your direction to the Plan Administrator.
You should then seal
the card in the enclosed envelope and return it to BNY Mellon Shareholder
Services. To direct the voting of your Shares, your instruction card must be
received by BNY Mellon Shareholder Services no later than May 13,
2009.
Please
note that the instructions of individual participants are to be kept
confidential by BNY Mellon Shareholder Services and the 401K Trustee, who have
been instructed not to disclose them to anyone at Astoria Federal Savings and
Loan Association or Astoria Financial Corporation.
This
memorandum is subject in its entirety to the information set forth in the
enclosed Proxy Statement, which you are encouraged to read and study
thoroughly.
Very
truly yours,
Plan Administrator for the Astoria Federal Savings and Loan
Association Incentive Savings Plan
By:
Authorized
Signature
The directions, if any, given in this Confidential Voting
Instruction will be kept confidential from all directors, officers and
employees of Astoria Financial Corporation or Astoria Federal Savings and
Loan Association.
|
|
Please mark
your votes
as
indicated in
this example
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THE BOARD OF DIRECTORS OF ASTORIA FINANCIAL CORPORATION RECOMMENDS
A VOTE “FOR” ALL NOMINEES IN PROPOSAL NO. 1 AND “FOR” PROPOSAL NOS. 2 AND
3.
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FOR
ALL
o
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WITHHELD
FOR ALL
o
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*EXCEPTIONS
o
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FOR
o
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AGAINST
o
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ABSTAIN
o
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1.
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The election of nominees
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2.
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The approval of an amendment to the Astoria Financial Corporation
Executive Officer Annual Incentive Plan.
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01 Gerard C. Keegan,
02 Denis J. Connors, and
03 Thomas J.
Donahue
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o
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o
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3.
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The ratification of the appointment of KPMG LLP as the independent
registered public accounting firm for Astoria Financial Corporation for
the fiscal year ending December 31, 2009.
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as directors for terms of three years each
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In its discretion, the Trustee is authorized to vote upon such
other business as may come before the Annual Meeting and any adjournment
or postponement thereof or to cause such matters to be voted upon in the
discretion of the individuals named in any proxies executed by the
Trustee.
Proposal Nos. 1, 2 and 3 listed above in this Confidential
Voting Instruction were proposed by Astoria Financial Corporation.
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(INSTRUCTIONS: To withhold authority to vote for any individual
nominee, mark the “Exceptions” box above and write that nominee’s name in
the space provided below.)
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*Exceptions
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The undersigned hereby instructs the
Plan Administrator to direct the Trustee to vote in accordance with the
voting instruction indicated above and hereby acknowledges receipt, prior
to the execution of this Confidential Voting Instruction, of a Notice of
Annual Meeting of Shareholders, a Proxy Statement dated April 13, 2009 for
the Annual Meeting and an Astoria Financial Corporation 2008 Annual Report
and Form 10-K.
Please sign and
date below and return promptly in the enclosed postage-paid
envelope.
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Mark Here for Address
Change or
Comments
SEE
REVERSE
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o
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Signature
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Signature
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Date
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NOTE: Please
sign as name appears hereon. Joint owners should each sign. When signing
as attorney, executor, administrator, trustee or guardian, please give
full title as such.
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ASTORIA FINANCIAL CORPORATION
CONFIDENTIAL VOTING INSTRUCTION
SOLICITED BY
ASTORIA FEDERAL SAVINGS AND LOAN ASSOCIATION, AS PLAN ADMINISTRATOR,
FOR THE
ASTORIA FEDERAL SAVINGS AND LOAN ASSOCIATION INCENTIVE SAVINGS
PLAN
The undersigned participant, former participant or beneficiary of a
deceased former participant in the Astoria Federal Savings and Loan Association
Incentive Savings Plan (the 401K Plan) as a named fiduciary hereby provides the
voting instructions hereinafter specified to BNY Mellon Shareowner Services, as
the designee of Astoria Federal Savings and Loan Association, as Plan
Administrator (the Plan Administrator), which instructions shall be taken into
account in directing Prudential Bank & Trust Company, FSB, as trustee of the
401K Plan (the Trustee) to vote in person, by limited or general power of
attorney or by proxy the shares and fractional shares of common stock of Astoria
Financial Corporation that are held by the Trustee, in its capacity as Trustee,
as of March 23, 2009, at the Annual Meeting of Shareholders of Astoria Financial
Corporation to be held on May 20, 2009 at 9:30 a.m., Eastern Time, at The Inn at
New Hyde Park, 214 Jericho Turnpike, New Hyde Park, New York, 11040, and at any
adjournment or postponement thereof.
As to the proposals listed below
which are more particularly described in the Proxy Statement dated April 13,
2009, the Plan Administrator of the 401K Plan will give voting directions to the
Trustee. Such directions will reflect the voting instructions on this
Confidential Voting Instruction, in the manner described in the accompanying
letter from the Plan Administrator dated April 13, 2009.
If the duly
executed Confidential Voting Instruction is returned, but no instruction is
given, for purposes of providing voting instructions, such shares shall be
treated as described in the letter from the Plan Administrator dated April 13,
2009.
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|
BNY MELLON SHAREOWNER
SERVICES
P.O. BOX 3550
SOUTH HACKENSACK, NJ
07606-9250
|
Address Change/Comments
(Mark the corresponding box on the reverse
side)
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(Continued and to be marked, dated and signed, on the other
side)
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COMMON
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Please
mark
your
votes as
indicated
in
this
example
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ý
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THE
BOARD OF DIRECTORS OF ASTORIA FINANCIAL CORPORATION RECOMMENDS A VOTE
“FOR” ALL NOMINEES IN PROPOSAL NO. 1 AND “FOR” PROPOSAL NOS. 2 AND
3.
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FOR
ALL
o
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WITHHELD
FOR
ALL
o
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*EXCEPTIONS
o
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FOR
o
|
AGAINST
o
|
ABSTAIN
o
|
1.
|
The
election of nominees
|
|
2.
|
The
approval of an amendment to the Astoria Financial Corporation Executive
Officer Annual Incentive Plan.
|
|
|
|
|
01
Gerard C. Keegan,
02
Denis J. Connors, and
03
Thomas J. Donahue
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FOR
o
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AGAINST
o
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ABSTAIN
o
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3.
|
The
ratification of the appointment of KPMG LLP as the independent registered
public accounting firm for Astoria Financial Corporation for the fiscal
year ending December 31, 2009.
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as
directors for terms of three years each
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Proposal
Nos. 1, 2 and 3 listed above in this revocable proxy were proposed by
Astoria Financial Corporation. Other than Proposal Nos. 1, 2 and 3,
Astoria Financial Corporation is not currently aware of any other business
that may come before the Annual Meeting. The persons named as proxies
herein will vote the shares represented hereby as directed by the Board of
Directors of Astoria Financial Corporation upon such other business as may
properly come before the Annual Meeting, and any adjournment or
postponement thereof, including, without limitation, a motion to postpone
or adjourn the Annual Meeting.
|
(INSTRUCTIONS:
To withhold authority to vote for any individual nominee, mark the
“Exceptions” box above and write that nominee’s name in the space provided
below.)
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*Exceptions
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THIS
PROXY IS REVOCABLE. THIS PROXY, WHEN PROPERLY EXECUTED,WILL BE VOTED IN
THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY, IF PROPERLY EXECUTED, WILL BE VOTED FOR THE NOMINEES
LISTED IN PROPOSAL NO. 1 AND FOR PROPOSAL NOS. 2 AND 3.
The
undersigned hereby acknowledges receipt of, prior to the execution of this
proxy, a Notice of Annual Meeting of Shareholders of Astoria Financial
Corporation, a Proxy Statement dated April 13, 2009 for the Annual Meeting
and an Astoria Financial Corporation 2008 Annual Report and Form
10-K.
Please
sign and date below and return promptly in the enclosed postage-paid
envelope.
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Mark
Here for Address
Change
or Comments
SEE
REVERSE
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o
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Signature
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Signature
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Date
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NOTE:
Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
|
WE
ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING.
BOTH
ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK.
Internet
and telephone voting are available through 11:59 PM Eastern Time
the day
prior to the shareholder meeting date.
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INTERNET
http://www.proxyvoting.com/af
Use
the Internet to vote your proxy. Have your proxy card in hand when you
access the web site.
|
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OR
|
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TELEPHONE
1-866-540-5760
Use
any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call.
|
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If
you vote your proxy by Internet or by telephone, you do NOT need to mail
back your proxy card.
To
vote by mail, mark, sign and date your proxy card and return it in the
enclosed postage-paid envelope.
Your
Internet or telephone vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed and returned your proxy
card.
|
Important
notice regarding the Internet availability of proxy materials for the
Annual Meeting of Shareholders
The
Proxy Statement and the 2008 Annual Report to Shareholders are available
at:
http://bnymellon.mobular.net/bnymellon/af
|
|
ASTORIA
FINANCIAL CORPORATION
REVOCABLE
PROXY
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ASTORIA
FINANCIAL CORPORATION FOR USE AT THE
ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD ON
MAY
20, 2009 AND AT ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
The
undersigned shareholder of Astoria Financial Corporation hereby authorizes and
appoints John M. Graham Jr., John M. Graham, III or either of them proxy of the
undersigned, with full power of substitution, to attend and act as proxy for the
undersigned and to vote as designated below all shares of common stock of
Astoria Financial Corporation which the undersigned may be entitled to vote at
the Annual Meeting of Shareholders of Astoria Financial Corporation, to be held
on May 20, 2009 at 9:30 a.m., Eastern Time, at The Inn at New Hyde Park, 214
Jericho Turnpike, New Hyde Park, New York, 11040, and at any adjournment or
postponement thereof.
|
|
BNY
MELLON SHARE OWNER SERVICES
P.O.
BOX 3550
SOUTH
HACKENSACK, NJ 07606-9250
|
Address
Change/Comments
(Mark
the corresponding box on the reverse side)
|
|
|
|
(Continued
and to be marked, dated and signed, on the other
side)
|
You
can now access your Astoria Financial Corporation account online.
Access
your Astoria Financial Corporation shareholder account online via Investor
ServiceDirect
®
(ISD).
The
transfer agent for Astoria Financial Corporation now makes it easy and
convenient to get current information on your shareholder account.
•
View account status
•
View certificate history
•
View book-entry information
|
|
•
View payment history for dividends
•
Make address changes
•
Obtain a duplicate 1099 tax form
•
Establish/change your PIN
|
Visit
us on the web at http://www.bnymellon.com/shareowner/isd
For
Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday
Eastern Time
April 13,
2009
To:
|
All
Astoria Federal Savings and Loan Association Employee Stock Ownership Plan
(the “ESOP”) Participants
|
Re:
|
Annual Meeting of
Shareholders to be held on May 20,
2009
|
In
connection with the Annual Meeting of Shareholders of Astoria Financial
Corporation to be held on May 20, 2009, enclosed please find the following
documents:
|
a)
|
Confidential
Voting Instruction card,
|
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|
Proxy
Statement dated April 13, 2009, including a Notice of Annual Meeting of
Shareholders,
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2008
Annual Report and Form 10-K,
and
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postage-paid
return envelope addressed to BNY Mellon Shareholder Services (BNY Mellon
Shareholder Services is the Confidential Voting Instruction tabulator for
the ESOP).
|
As a
participant and a “named fiduciary” in the ESOP, you have the right to direct
the ESOP Trustee (Prudential Bank & Trust Company, FSB) how to vote at the
Annual Meeting the shares of Astoria Financial Corporation Common Stock (Shares)
allocated to your account in the ESOP and held as of March 23, 2009 by
Prudential Bank & Trust Company, FSB, as ESOP Trustee.
As a
“named fiduciary” you are the party who is identified in the voting section of
the ESOP Trust as responsible for directing the Trustee how to vote your
allocated ESOP Shares. The number of Shares in your ESOP account held by
Prudential Bank & Trust Company, FSB is shown on the enclosed Confidential
Voting Instruction card. Please mark the appropriate boxes on the card and sign,
date and return it in the enclosed postage-paid return envelope. If you sign,
date and return your card, but do not check the box for a particular proposal,
the Trustee will vote your shares according to the recommendation of the Board
of Directors for that particular proposal. For your ESOP voting instruction to
be counted, BNY Mellon Shareholder Services must receive your Confidential
Voting Instruction card no later than May 13, 2009.
The ESOP
Trust states that the Trustee will generally vote unallocated Shares and
allocated Shares for which it receives no written instructions in the same
manner and proportion as the allocated Shares for which voting instructions have
been received. The Trustee’s vote must be in accordance with its fiduciary
duties and in a manner determined by the Trustee to be prudent and solely in the
interest of ESOP participants and beneficiaries. State Street Bank and Trust
Company has been engaged as Independent Fiduciary to make this determination for
the ESOP Trustee.
Unanticipated
Proposals
It is
possible, although very unlikely, that proposals other than those specified on
the Confidential Voting Instruction card will be presented for shareholder
action at the 2009 Annual Meeting of Shareholders. If this should happen, the
Independent Fiduciary will determine for the ESOP Trustee how to vote upon such
matters.
Your
instruction is very important. You are encouraged to review the enclosed
material carefully and to complete, sign and date the enclosed Confidential
Voting Instruction card to signify your direction to the Trustee.
You should then seal the
card in the enclosed envelope and return it to BNY Mellon Shareholder Services.
To direct the voting of Shares within the ESOP, the Confidential Voting
Instruction card must be received by BNY Mellon Shareholder Services no later
than May 13, 2009.
Please
note that the instructions of individual participants are to be kept
confidential by BNY Mellon Shareholder Services and the Trustee, who have been
instructed not to disclose them to anyone at Astoria Federal Savings and Loan
Association or Astoria Financial Corporation.
This
memorandum is subject in its entirety to the information set forth in the
enclosed Proxy Statement, which you are encouraged to read and study
thoroughly.
Very
truly yours,
The ESOP Committee
By:
Steven G.
Miss
The directions, if any, given in this Confidential Voting
Instruction will be kept confidential from all directors, officers and
employees of Astoria Financial Corporation or Astoria Federal Savings and
Loan Association.
|
|
Please mark
your votes
as
indicated in
this example
|
ý
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THE BOARD OF DIRECTORS OF ASTORIA FINANCIAL CORPORATION RECOMMENDS
A VOTE “FOR” ALL NOMINEES IN PROPOSAL NO. 1 AND “FOR” PROPOSAL NOS. 2 AND
3.
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ESOP SHARES
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FOR
ALL
o
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WITHHELD
FOR ALL
o
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*EXCEPTIONS
o
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FOR
o
|
AGAINST
o
|
ABSTAIN
o
|
1.
|
The election of nominees
|
|
|
2.
|
The approval of an amendment to the Astoria Financial Corporation
Executive Officer Annual Incentive Plan.
|
|
|
|
|
|
01 Gerard C. Keegan,
02 Denis J. Connors, and
03 Thomas J.
Donahue
|
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o
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o
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o
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3.
|
The ratification of the appointment of KPMG LLP as the independent
registered public accounting firm for Astoria Financial Corporation for
the fiscal year ending December 31, 2009.
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as directors for terms of three years each
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In its discretion, the Trustee is authorized to vote upon such
other business as may come before the Annual Meeting and any adjournment
or postponement thereof or to cause such matters to be voted upon in the
discretion of the individuals named in any proxies executed by the
Trustee.
Proposal Nos. 1, 2 and 3 listed above in this Confidential
Voting Instruction were proposed by Astoria Financial Corporation.
|
(INSTRUCTIONS: To withhold authority to vote for any individual
nominee, mark the “Exceptions” box above and write that nominee’s name in
the space provided below.)
|
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*Exceptions
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The undersigned hereby instructs the
Trustee to vote in accordance with the voting instruction indicated above
and hereby acknowledges receipt, prior to the execution of this
Confidential Voting Instruction, of a Notice of Annual Meeting of
Shareholders, a Proxy Statement dated April 13, 2009 for the Annual
Meeting and an Astoria Financial Corporation 2008 Annual Report and Form
10-K.
Please sign and
date below and return promptly in the enclosed postage-paid
envelope.
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Mark Here for Address
Change or
Comments
SEE
REVERSE
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o
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Signature
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Signature
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Date
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NOTE: Please
sign as name appears hereon. Joint owners should each sign. When signing
as attorney, executor, administrator, trustee or guardian, please give
full title as such.
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ASTORIA FINANCIAL
CORPORATION
CONFIDENTIAL VOTING INSTRUCTION
SOLICITED BY THE EMPLOYEE STOCK OWNERSHIP PLAN
COMMITTEE, AS PLAN ADMINISTRATOR,
FOR THE ASTORIA FEDERAL SAVINGS AND LOAN
ASSOCIATION EMPLOYEE STOCK OWNERSHIP PLAN
As a named fiduciary, the undersigned participant, former participant or
beneficiary of a deceased former participant in the Astoria Federal Savings and
Loan Association Employee Stock Ownership Plan (the “ESOP”) hereby provides the
voting instructions hereinafter specified to BNY Mellon Shareowner Services, as
designee of Astoria Federal Savings and Loan Association, which instructions
shall be taken into account in directing Prudential Bank & Trust Company,
FSB, as trustee of the ESOP (the “Trustee”), to vote, in person, by limited or
general power of attorney or by proxy, the shares and fractional shares of
common stock of Astoria Financial Corporation that are held by the Trustee, in
its capacity as Trustee, as of March 23, 2009, at the Annual Meeting of
Shareholders of Astoria Financial Corporation to be held on May 20, 2009 at 9:30
a.m., Eastern Time, at The Inn at New Hyde Park, 214 Jericho Turnpike, New Hyde
Park, New York, 11040, and at any adjournment or postponement
thereof.
As to the proposals listed below which are more particularly described in
the Proxy Statement dated April 13, 2009, the Trustee will vote the common stock
of Astoria Financial Corporation held by the ESOP Trust to reflect the voting
instructions on this Confidential Voting Instruction, in the manner described in
the accompanying letter dated April 13, 2009 from the ESOP
Committee.
If the duly executed Confidential Voting Instruction is returned, but no
instruction is given, for purposes of providing voting instructions, such shares
shall be treated as described in the letter dated April 13, 2009 from the ESOP
Committee.
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BNY MELLON SHAREOWNER
SERVICES
P.O. BOX 3550
SOUTH HACKENSACK, NJ
07606-9250
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Address Change/Comments
(Mark the corresponding box on the reverse
side)
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(Continued and to be marked, dated and signed, on the other
side)
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