Anthony D. Andora
Chairman of the Board
Dear Interchange Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
on Thursday, May 28, 1998 at 3 p.m. at the Marriott Hotel in Saddle Brook, New
Jersey.
The Notice of the Annual Meeting and Proxy Statement accompanying this
letter describe the business to be acted upon at the meeting. Please promptly
vote, date, sign and return your proxy for the meeting even though you plan to
attend. You may vote in person at that time if you so desire.
Sincerely,
/s/Anthony D. Andora
---------------------
Anthony D. Andora
April 22, 1998
<PAGE>
- -------------------------------------------------------------------------------
Notice of Annual Meeting of Stockholders
- -------------------------------------------------------------------------------
The Annual Meeting of Stockholders of Interchange Financial Services
Corporation will be held on Thursday, May 28, 1998, at 3:00 p.m. at the
Marriott Hotel in Saddle Brook, New Jersey to consider and act upon the
following matters:
1. The election of four directors.
2. The ratification of the appointment of Deloitte & Touche, LLP as the
Company's independent auditors for 1998.
3. The transaction of such other business as may properly come before the
meeting or any adjournment thereof. The Company knows of no other
business to be brought before the meeting.
Benjamin Rosenzweig
Secretary
Please complete, sign, and return promptly the enclosed proxy in the
postage-paid envelope provided.
April 22, 1998
<PAGE>
- -------------------------------------------------------------------------------
PROXY STATEMENT
- -------------------------------------------------------------------------------
This proxy statement and the accompanying proxy/voting card
(proxy card) are being mailed beginning April 22, 1998, in connection with the
solicitation of proxies by the Board of Directors, for the Annual Meeting of
Stockholders on May 28, 1998. Proxies are solicited to give all stockholders
of record at the close of business on April 20, 1998, an opportunity to vote on
matters that come before the meeting. On that date, 6,409,056 shares of
common stock were outstanding, each of which is entitled to one vote on each
matter brought before the meeting.
When your proxy card is returned properly signed, the shares
represented will be voted in accordance with your directions. Abstentions are
voted neither "for" nor "against," but are counted in the determination of a
quorum. You can specify your choices by marking the appropriate boxes on
the enclosed proxy card. If your proxy card is signed and returned without
specifying choices, the shares will be voted as recommended by the Board of
Directors.
1. Election of Directors
(Item 1 on Proxy Card)
The accompanying proxy will be voted for the election of the
following nominees unless otherwise instructed. Each nominee for
director and each continuing director also serves as director of Interchange
Bank, (formerly known as Interchange State Bank), (the "Bank") a subsidiary
of the Company. If a nominee should become unavailable for any reason,
which management does not anticipate, the proxy will be voted for a
substitute or, if no substitute is selected, the number of directors may
be reduced.
Nominees and Directors
Nominees to be elected Directors for terms of three years expiring in 2001
ANTHONY D. ANDORA, age 67, is President of Andora, Palmisano & Geaney, a
professional corporation in Elmwood Park, New Jersey. Mr. Andora has
been a member of the Board of Directors of the Company since 1984 and
of the Bank since 1969. He is Chairman of the Board, the Executive
Committee and the Nominating Committee. He is a member of the
Corporate Planning and Finance committee and is ex-officio On all
committees.
DAVID R. FICCA, age 66, retired in March 1988 from his position as
Vice Chairman, of Kidde, Inc. He has been a Director of the Company
since 1984 and of the Bank since 1983. He is a member of the
Executive Committee, the Oversight/Insider Committee, the Corporate
Planning and Finance Committee and the Compensation/Stock Option
Committee.
NICHOLAS R. MARCALUS, age 54, is President & CEO of Marcal Paper Mills, Inc.,
in Elmwood Park, New Jersey, and serves as a board member of
that organization. He joined the Board of Interchange Financial
Services Corporation on February 27, 1997, and serves on the
Compensation/Stock Option Committee, Investment Committee and is
an alternate on the Executive Committee.
BENJAMIN ROSENZWEIG, age 72, is the Senior Executive Partner of Azco
Steel Company, Saddle Brook, New Jersey, a nationwide steel
distributor. He has been a member of the Board of Directors of the
Company since 1984 and of the Bank since 1976 and is Secretary of the
Board. He serves as a member of the Executive Committee,
Compensation/Stock Option Committee, Oversight/Insider Committee
and the Nominating Committee and is Chairman of the Investment
Committee.
Directors to continue in office for terms expiring in 2000
DONALD L. CORRELL, age 47, is Chairman, President and CEO (since 1992)
of United Water Resources, Inc., which is a holding company
whose subsidiaries are active in public water supply, water-related
services and real estate. Mr. Correll has been a member of the
Board of Directors of the Company and the Bank since 1995 and
serves on the Audit Committee, Nominating Committee, Corporate
Planning and Finance Committee, and Compensation/Stock Option
Committee and is an alternate member of the Executive Committee.
JAMES E. HEALEY, age 57,is Executive Vice President and Chief Financial Officer
of Nabisco, Inc. and is also a certified public accountant. Mr. Healey
was formerly Vice President and Treasurer of CPC International, Inc.
Mr. Healey has been a member of the Board of Directors of the Company
and the Bank since 1993. He is Chairman of the Compensation/Stock
Option Committee and serves on the Audit Committee, Corporate Planning
and Finance Committee, Investment Committee and is an alternate member
of the Executive Committee.
JEREMIAH F. O'CONNOR, age 64, is currently a principal of NW Financial Group.
Mr. O'Connor was a Managing Director of NatWest Financial Markets
Group and prior to that he was Managing Director and Executive Vice
President of Jersey Capital Market Group, Inc., an investment banking
firm. Mr. O'Connor has been a member of the Board of Directors of the
Company since 1984 and the Bank since 1969. He is Vice Chairman of the
Board. He is Chairman of the Oversight/Insider Committee and serves on
the Executive Committee, Corporate Planning and Finance Committee,
Nominating Committee and Compensation/Stock Option Committee.
ROBERT P. RITTEREISER, age 59, is Chairman and Chief Executive Officer
of Gruntal Financial Corporation, an investment services firm based in
New York City. He is Chairman of Yorkville Associates Corp., a
private investment and financial advisory concern formed in April
1989. He served as a Trustee of the DBL Liquidating Trust from April
1992 until April 1996. He also served as a Director in 1990 as
Chairman in November 1992 and President and Chief Executive Officer
from March 1993 until February 1995 of Nationar Inc., a
banking services corporation.(1). He is director of Cendant
Corporation, a travel shipping and marketing services company; of
Ferrofluidics, a provider of magnetic fluid products and of
Wallace Computers, a provider of business forms and commercial
printing. He has been a Director of the Company and of the Bank
since July 1989. He is Chairman of the Corporate Planning and
Finance Committee and a member of the Compensation/Stock
Option Committee, the Investment Committee, the Oversight/Insider
Committee and the Executive Committee.
(1) On February 6, 1995, the Acting Superintendent of Banks of
the State of New York filed a petition to take over the business of
such corporation and the New York State Banking Department has
since been liquidating the assets of such corporation.
Directors to continue in office for terms expiring in 1999
ANTHONY S. ABBATE, age 58, is President and Chief Executive Officer. Mr. Abbate
has been a member of the Board of Directors of the Company since 1984
and the Bank since 1981. He is a member of the Executive Committee and
the Corporate Planning and Finance committee and serves ex-officio
on all committees.
ANTHONY R. COSCIA, age 38, is a partner and executive committee member of
the law firm of Windels, Marx, Davies & Ives in New York and New
Brunswick, New Jersey. He is currently serving in his second term as
Chairman of the New Jersey Economic Development Authority.
Mr. Coscia joined the Board of Directors of Interchange Financial
Services Corporation on February 27, 1997. He serves on the Audit
Committee, Oversight/Insider Committee and is an alternate member of
the Executive Committee.
JOHN J. ECCLESTON, age 72, is a partner of R.D.Hunter & Company,
Certified Public Accountants. Prior to January 1995, he was Senior
Partner of John J. Eccleston & Company, Certified Public Accountants.
Mr.Eccleston has been a member of the Board of Directors of the
Company since 1984 and the Bank since 1969. He is Chairman of the
Audit Committee and a member of the Executive Committee, the
Investment Committee, the Oversight/Insider Committee and
Corporate Planning and Finance Committee.
ELEANORE S. NISSLEY, age 66, is President of Steffens Realty Company,
a commercial real estate brokerage firm and she serves as
Vice Chairperson of Hackensack Meadowlands Development Commission.
Mrs. Nissley has been a director of the Company and of the Bank since
1992. She is a member of the Audit Committee, the Oversight/Insider
Committee and the Nominating Committee and is an alternate
member of the Executive Committee.
Board Committees, Meetings and Compensation
The Company has an Audit Committee of the Board of Directors
consisting of Mrs. Nissley, Messrs. Correll, Coscia, Eccleston
(Chairman) and Healey. This committee reviews significant audit,
accounting and other principles, policies and practices, the
activities of independent auditors and of the Company's internal
auditors, and the conclusions and recommendations of auditors and
the reports of regulatory examiners upon completion of their
respective audits and examinations. The committee met six times
in 1997.
The Compensation/Stock Option Committee administers management
incentive compensation plans, including the stock option plan. The
committee makes recommendations to the Board with respect to
compensation of directors and executive officers. The Committee, which
met four times in 1997, consists of Messrs. Correll, Ficca, Healey
(Chairman), Marcalus, O'Connor, Rittereiser and Rosenzweig.
The Nominating Committee advises and makes recommendations to the
Board concerning the selection of candidates as nominees for
election as directors. The committee consists of Mrs. Nissley,
Messrs. Andora (Chairman), Correll, O'Connor and Rosenzweig and met
once in 1997. The committee will consider nominations recommended by
stockholders. Such nominations, together with accompanying
biographical material, must be in writing and should be addressed to
the Secretary of the Board and must be received not later than
January 2 of the year of the annual meeting of stockholders.
In 1997, each director not employed by the Company was paid a
retainer at an annual rate of $11,000, a fee of $150 for each
board meeting attended, a fee of $125 for each executive committee
meeting attended and a fee of $100 for attendance at other
committee meetings. The Chairman of the Board, the Vice Chairman of
the Board and Secretary of the Board received additional retainers of
$17,000, $13,750 and $2,100, respectively, and directors who chair
committees of the Board receive an additional retainer of $2,000
annally. A director who is an employee of the Company or any
subsidiary receives no retainer or fees.
During 1997, the Board of Directors of the Company and the Bank held
12 meetings each. All incumbent directors, except Messrs. Correll
and Rittereiser, attended at least 75% of the aggregate meetings of
such Boards of Directors and the committees of such Boards of
Directors on which they served which were held during fiscal year
1997.
Directors participate in a retirement benefit plan which entitles
the director to receive either (1) an amount equal to the annual
retainer being paid directors (exclusive of additional amounts
paid to the Chairman of the Board, the Vice Chairman of the Board, the
Secretary of the Board and to committee chairmen) multiplied by his
or her years of service on the board; or (2) an amount based on
the cash surrender value of a life insurance or annuity contract
purchased by the Company.
The insurance policies or annuity contracts are owned by the
Company and annual contributions of $5,000 are made by the Company
for each director who has completed five years of service as a
director. The Company's contribution increases by $1,000 for each
year's service until it reaches $10,000 annually, the level at
which it remains. Benefits to a director who retires after ten years
of service are equal to the greater of (1) or (2) above. Mr. Abbate
(the only director who is employed by the Company) and any
director who retires after completing at least five years, but less
than ten years, of service are entitled to benefits only under (2)
above.
<PAGE>
Amount and Nature of Beneficial Ownership
The following table sets forth information concerning the ownership of
the Company's common stock as of March 20, 1998, adjusted to reflect a 3 for 2
stock split effective April 17, 1998 to stockholders of record at the
close of business on March 20, 1998, for (a) certain beneficial owners
known to the Company to own more than five percent of the common stock;
(b) each director and nominee for director; (c) each of the executive officers
(as defined in Note (1) of the Summary Compensation Table, herein) not
listed as a director; and (d) directors and executive officers as a group.
Except as otherwise noted, the nominees, the directors and the executive
officers or family members had sole voting and investment power with respect
to such securities.
<TABLE>
<CAPTION>
Beneficially Deferral Percent
Name Owned Plans (1) Total of Class
- -------------------- ------------ ---------- ----------- ---------
<S> <C> <C> <C> <C>
(a)
Interchange State Bank
Capital Investment Plan
Park 80 West/Plaza Two
Saddle Brook, NJ 07663. . . 285,880 285,880 4.5%
First Union Corporation
One First Union Center
Charlotte, NC 28288. . . . 462,385 (2) 462,385 7.2
John Hancock Advisers,Inc
John Hancock Place
Boston, MA 02117. . . . . 323,625 (3) 323,625 5.0
(b)
Anthony S. Abbate. . . . . 121,292 (4) 61,332 182,624 2.8
Anthony D. Andora. . . . . 172,582 172,582 2.7
Donald L. Correll . . . . 1,597 1,597 *
Anthony R. Coscia. . . . . 2,250 2,250 *
John J. Eccleston. . . . . 81,600 81,600 1.3
David R. Ficca. . . . . .. 75,618 75,618 1.2
James E. Healey. . . . . . 19,050 19,050 *
Nicholas R. Marcalus. . . . 1,500 1,500 *
Eleanore S. Nissley. . . . 45,360 45,360 *
Jeremiah F. O'Connor. . . . 59,811 59,811 *
Robert P. Rittereiser. . . 27,168 27,168 *
Benjamin Rosenzweig. . . . 95,514 95,514 1.5
(c)
Patricia D. Arnold (10). . . 1,969 (5) 10,475 12,444 *
Frank R. Giancola. . . . . .23,452 (6) 20,145 43,597 *
Anthony Labozzetta (11) . . 787 (7) 3,858 4,645 *
Richard N. Latrenta. . . . .22,851 (8) 22,250 45,101 *
(d)
Directors and executive
officers as a group. . 752,401 (9) 118,060 870,461 13.5
- -------------------------
<FN>
*Does not exceed one percent of class
FOOTNOTES
1. Shares held in deferred compensation accounts to which individuals have
sole power to vote but no investment powers.
2. Includes beneficial ownership of 349,059 shares to which First
Union Corporation has sole power to vote. First Union Corporation
has sole investment power for 342,828 shares and shared investment power
for 113,326 shares.
3. John Hancock Advisers, Inc has sole investment power and sole power to
vote for 323,625 shares.
4. Includes beneficial ownership of 25,161 shares which may be acquired
within 60 days pursuant to stock options.
5. Includes beneficial ownership of 38 shares which may be acquired within 60
days pursuant to stock options.
6. Includes beneficial ownership of 21,465 shares which may be acquired
within 60 days pursuant to stock options.
7. Includes beneficial ownership of 787 shares which may be acquired within 60
days pursuant to stock options.
8. Includes beneficial ownership of 9,582 shares which may be acquired
within 60 days pursuant to stock options.
9. Includes beneficial ownership of 58,027 shares which may be acquired
within 60 days pursuant to stock options awarded under an employee
incentive compensation plan.
10. Effective August 4, 1997, Patricia D. Arnold was appointed Senior
Vice President.
11. Effective September 29, 1997, Anthony Labozzetta was appointed
Executive Vice President and Chief Financial Officer.
</FN>
</TABLE>
<PAGE>
Compliance with Section 16(a) of the Securities Exchange Act of 1934
The members of the Board of Directors, the executive officers of
the Company and persons who hold more than ten percent of the Company's common
stock are subject to reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, which require them to file reports with
respect to their ownership of and transactions in the Company's securities
and furnish the Company with copies of all such reports they file. Based
upon the copies of those reports furnished to the Company and written
representations that no other reports were required to be filed, the Company
believes that all reporting requirements under Section 16(a)for the fiscal
year ended December 31, 1997, were met in a timely manner by its executive
officers, board members and greater than ten percent stockholders, with the
exception of the late filing by Mrs. Arnold and Messrs. Abbate, Giancola,
Labozzetta and Latrenta of Forms 5 due to delays with respect to shares
allocated to their accounts in the Capital Investment Plan ("401(k)")
caused by administrative delays.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long-term Compensation
------------------------------ --------------------------
Other Restricted All
Annual Stock Options Other
Name and Year Salary Bonus Compen- Awards (No. of Compen-
Principal sation (3) Shares) sation
Position (1) (2)
- ----------------- ----- ------ ------ ------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Anthony S. Abbate 1997 $300,000 $86,250 - $112,500 8,000 $49,397
President and 1996 287,000 61,700 $3,687 80,211(4) - 53,643
CEO 1995 274,500 58,473 5,375 58,738 - 37,097
Anthony Labozzetta 1997 120,500 33,263 11,080 23,135 4,500 3,657
Executive Vice 1996 94,135 12,825 - - 1,575 2,406
President and
Chief Financial
Officer
Frank R.Giancola 1997 125,000 35,937 463 8,965 3,000 4,464
Senior Vice 1996 120,000 24,000 - 9,588 - 4,314
President 1995 114,400 24,481 806 11,438 - 4,131
Richard N.Latrenta 1997 127,000 36,512 - 21,800 3,000 4,524
Senior Vice 1996 122,000 24,400 - 15,252 - 4,374
President 1995 116,500 24,931 1,666 11,653 - 4,209
Patricia D. Arnold 1997 91,862 17,238 3,330 6,104 3,000 3,040
Senior Vice
President
- -------------------------------------
<FN>
(1) Includes the President and CEO and all other executive officers
whose total annual salary and bonus exceeded $100,000 in 1997.
(2) Represents payments as shown below:
</FN>
</TABLE>
<TABLE>
<CAPTION>
Year Abbate Labozzetta Giancola Latrenta Arnold
---- ------- ----------- --------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Amounts contributed to 1997 $4,800 $3,230 $3,750 $3,810 $2,756
401(k)plan 1996 4,500 2,201 3,600 3,660 -
1995 4,500 - 3,432 3,495 -
Value of life insurance 1997 3,150 427 714 714 284
premium paid in respect 1996 3,150 205 714 714 -
to coverage in excess 1995 4,050 - 699 714 -
of $50,000
Contribution to life 1997 10,000 - - - -
insurance policy/ 1996 10,000 - - - -
annuity contract 1995 10,000 - - - -
Premium on disability 1997 7,287 - - - -
policy 1996 6,963 - - - -
1995 6,564 - - - -
Contribution to 1997 24,160 - - - -
Supplemental Executives'1996 29,210 (5) - - - -
Retirement Plan 1995 11,983 - - - -
- -------------------------------------
<FN>
(3) The restricted stock awards granted, to date, (adjusted for the effects
of a 5% stock dividend issued in 1996 and 3 for 2 stock splits
granted in both 1997 and 1998), totaled 336, 18,762, 1,273, 2,478 and
3,641 for Mrs. Arnold and Messrs. Abbate, Labozzetta, Giancola and
Latrenta, respectively.The value of such awards at December
31, 1997 were $6,609, $369,049, $25,040, $48,742 and $71,618,
respectively. The value of these shares at the date of grant is
reflected in the table above. The awards for Mrs. Arnold and Messrs.
Abbate, Labozzetta, Giancola and Latrenta vest in three years following
the date of grant provided they do not terminate their employment
during that period. Dividends will be paid on all restricted stock
awards.
(4) The 1996 restricted stock awards for Mr. Abbate includes
$22,804 attributable to an adjustment to correctly reflect his
achievement under the 1995 incentive plan.
(5) The 1996 contribution to the Supplemental Executives' Retirement Plan
for Mr. Abbate includes adjustments of $3,420 and $4,381 for 1994, and
1995, respectively, attributable to the 401(k) portion of the Plan.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Stock Options
The following table sets forth certain information concerning grants of
stock options awarded to executive officers during the year ended December
31, 1997. All options granted during the year were incentive stock options:
Potential Realized Value
Number of % of Total at Assumed Annual Rates
Securities Options of Stock Price Appreciation
Underlying Granted to Exercise or For Option Term
Options Employees in Base Price Expiration ----------------------------
Name Granted(1) Fiscal Year(2) ($/Sh)(1)(3) Date(4) 5% 10%
- ------------------ ----------- -------------- ------------ ----------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Anthony S. Abbate 12,000 22.7% $18.17 1/27/2008 $29.60 $47.13
Anthony Labozzetta 4,500 8.5 18.17 1/27/2008 29.60 47.13
Anthony Labozzetta 2,250 4.3 16.00 7/02/2007 26.06 41.50
Frank R. Giancola 4,500 8.5 18.17 1/27/2008 29.60 47.13
Richard N. Latrenta 4,500 8.5 18.17 1/27/2008 29.60 47.13
Patricia D. Arnold 4,500 8.5 18.17 1/27/2008 29.60 47.13
- ---------------------------
<FN>
(1) Number of shares and per share option prices were adjusted for
the effects of the 3 for 2 stock split, payable on April 17,
1998 to shareholders of record on March 20, 1998.
(2) Percentage of options granted to total employees during fiscal
year 1997.
(3) The exercise price was based on the closing price of a share of
the Company's stock on the date of grant as reported on the American
Stock Exchange.
(4) Options are exercisable starting one year from the date of grant
and become vested 1/3 each year from the grant date. Options expire
if not exercised within 10 years of grant date.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Aggregate Option Exercises in Last Fiscal Year and Year End Option Values
Number of Securities
Underlying Unexercised Value of Unexercised
No. Shares Options at Year End (1) In-the-Money Options
Acquired on -------------------------------- at Year-end
Value Shares Shares
-----------------------------
Name Exercise (1) Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------ ---------------- ------------- ----------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Anthony S. Abbate 21,237 $317,734 47,479 - $647,635 -
Anthony Labozzetta - - 787 3,825 8,901 $26,071
Frank R. Giancola - - 21,645 - 295,233 -
Richard N. Latrenta 1,050 13,098 20,964 - 289,762 -
Patricia D. Arnold 937 11,735 1,032 1,575 11,971 17,813
- ---------------------------
<FN>
(1) Adjusted for the effects of the 3 for 2 stock split distributable on
April 17, 1998 to shareholders of record on March 20, 1998
</FN>
</TABLE>
PENSION PLAN AND SUPPLEMENTAL EXECUTIVES' RETIREMENT PLAN
The Company, through its subsidiary bank, maintains a non-
contributory defined benefit pension plan covering all eligible employees
including Mrs. Arnold, Messrs. Abbate, Giancola, Labozzetta and Latrenta.
Retirement income is based on years of service under the Plan and, subject
to certain limits, on final average compensation.
Effective January 1, 1994, the Company adopted a
Supplemental Executives' Retirement Plan, a non-qualified plan intended to
provide retirement income that would have been paid but for limitations
imposed by the Internal Revenue Code under the qualified plan.
The following table shows the annual benefits payable based on a
range of average compensation and years of future service at normal retirement
date.
<PAGE>
Pension Plan
<TABLE>
<CAPTION>
Years of Service at Normal Retirement Date
5-Year
Average ---------------------------------------------------------------------------------
Compensation 5 10 20 30 35
--------------- -------------- ------------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
$ 100,000 $ 5,915 $11,829 $ 23,658 $ 35,487 $ 41,402
150,000 9,665 19,329 38,658 57,987 67,652
200,000 13,415 26,829 53,658 80,487 93,902
250,000 17,165 34,329 68,658 102,987 120,152
300,000 20,915 41,829 83,658 125,487 146,402
400,000 28,415 56,829 113,658 170,487 198,902
- --------------------------
<FN>
Footnotes:
1. This Plan was effective January 1, 1993.
2. Benefits calculated are based on base salary and total credited service
at normal retirement date from the later of (a) January 1, 1993 or (b)
date of hire. The benefits above are inclusive of both benefits from the
qualified defined benefit plan and from the defined benefit
portion of the supplemental plan. Currently, the supplemental plan only
covers Mr. Abbate.
3. Average compensation is the average of base salary over the five
(5) consecutive calendar years producing the highest average.
4. The chart reflects a Social Security integration level based on the
average age of the executive officer group, which was 44 years as of
January 1, 1998.
5. Annual benefit is payable as a life annuity which is the normal form
of retirement benefit for non-married participants. For married
participants, the normal form of benefit is an actuarial equivalent
joint and 50% survivor annuity.
</FN>
</TABLE>
The Company also maintains a Capital Investment Plan ("401(k)")
covering all eligible employees. Retirement income is based on the
value of each participant's account balance and is paid upon retirement,
termination of employment, disability or death. The SERP also supplements
the retirement benefits payable to certain participants under the 401(k). At
present, only Mr. Abbate participates in the SERP. These benefits are
intended to provide participants with an amount (plus earnings) that
the Company would have contributed under the 401(k) as matching employer
contributions and for fixed employer contributions (in excess of the
amounts the Company actually contributed) but for certain limitations
imposed by the Internal Revenue Code under the 401(k). The benefits under the
SERP with respect to the 401(k) are to be paid in lump sum in cash at the
same time as the distribution of a participant's account balance is made
under the 401(k).
Compensation/Stock Option Committee Report on Executive Compensation
The committee is responsible for executive compensation and
administering the Company's executive compensation programs and plans. The
committee reports regularly to the Board of Directors. During 1997, the
committee consisted of Directors who were not employees of the Company, and
also, therefore, were not eligible to participate in such programs and plans.
Compensation Strategy
The objectives of this committee's strategy are to attract and retain
top quality executives and provide compensation programs designed to
motivate and reward executives to achieve business goals that foster both the
enhancement of long-term stockholder values through stock appreciation and
dividend yield, and also, the long-term best interests of the organization.
Compensation programs for executives link compensation to the performance of
the Company and generally provide competitive compensation for executives at
the mean pay level of peer group banks and other organizations of similar size,
performance and geographic location. The committee utilizes professional
surveys prepared by outside consultants focusing on compensation levels of
the aforementioned groups in order to assure competitiveness in its
compensation programs. The compensation mix reflects a balance of cash
awards, including incentive awards, and equity-based incentives. Annual
cash compensation (base salaries and annual bonus) is granted based on the
achievement of corporate financial targets and individual performance. The
Stock Option and Incentive Plan, approved by stockholders in 1997, is
intended to function as the basis for fostering alignment of executive
compensation with the interests of stockholders.
The policies, with respect to each of these compensation elements as
well as the basis for determining the compensation of executive officers,
including the President and CEO, Mr. Abbate, are described below:
Base salary
Base salaries for executive officers are based on the salary ranges
that are established for each position. These position salary ranges are
determined by evaluating the responsibilities and accountabilities of the
position and comparing it with other executive officer positions in the
market place on an annual basis. The base salary of each executive officer,
including President and CEO, is reviewed annually and adjusted within the
position range based upon a performance evaluation. Evaluations of other
executive officers are submitted to the committee by the President and CEO.
These evaluations, and an evaluation of the President and CEO by the
committee, are reviewed and submitted together with the committee's
recommendations to the full board for action. Salary increases are generally
based upon the extent to which the executive is considered to have contributed
to a furtherance of the Company's goals and/or met objectives
specifically assigned to that individual.
Annual Bonus
The Management Incentive Plan is an incentive plan designed to reward
key management employees for achievement of specific financial, individual
and business results for the year. The specific financial targets are
primarily based upon (i) the year-to-year increase in the Company's net
after-tax earnings and (ii) achievement of target return on equity.
The targeted goal is established annually through the budgeting process
which is reviewed and approved by the board using input relating to
performance opportunities for the year and the historical performance
results of the Company. Individual and business results are pre-established
targets for specific objectives relating to the executives' area of
responsibility. An objective of the Management Incentive Plan is to relate a
portion of the executives' compensation to the overall financial results
of the Company for the year. The bonus for 1997 (paid in 1998) reflects the
achievement in excess of 100 percent of the financial targets set in 1997.
The Board reserves the right to award discretionary bonus awards in the
event the financial target is either not met or is exceeded. No
discretionary bonuses were paid in 1997. In so doing, the committee, among
other matters, will take into account whether the Company, while not reaching
its threshold target, has performed better on a comparable basis than its
peers. In addition to the attainment of the earnings target, the level of
the President and CEO's annual bonus award is also based upon performance
related factors including various predetermined strategic objectives.
A portion of the incentive compensation awarded to executive management
is in the form of restricted stock. The restriction is for three years
and is forfeitable upon termination of employment during that time period. In
addition, executive officers were given the option to utilize their cash bonus
to purchase two-year restricted, forfeitable stock at a twenty-five percent
discount. The excess of market value over the purchase price is included
in the summary compensation table as other annual compensation.
Stock Option and Incentive Plan
The Stock Option and Incentive Plan of 1997 (the "Plan") approved
by stockholders, is designed to align stockholders' and executive
officers' interests. The Plan is administered by the Compensation/Stock
Option Committee and awards are determined by that committee. Stock options
are granted with an exercise price equal to the price of a share of stock at
the close of business on the date of the grant as reported by the American
Stock Exchange. Stock options may be exercisable between one and ten years
from the date granted. Such stock options provide a retention and motivational
program for executives and an incentive for the creation of shareholder value
over the long-term since their full benefit cannot be realized unless an
appreciation in the price of the Company's common stock occurs over a
specified number of years.
The Plan also provides for the issuance of incentive stock awards
as determined by the Board of Directors of the Company. Certain key executives
may be awarded incentive compensation in the form of 3-year restricted stock,
which is forfeitable upon termination of employment during that time
period. Key employees may also use their cash bonus to purchase two-year
restricted stock at a twenty-five percent discount. This stock is forfeitable
should they terminate their employment during that time period. Incentive
stock awards are an important factor in attracting and motivating key
executives who will dedicate their maximum efforts toward the advancement of
the Company.
<PAGE>
A total of 637,875 shares were made available for option and
incentive awards under the Plan of which 266,284 (adjusted for the effects
of a 3 for 2 stock split effective April 17, 1998) shares have been granted to
date. Options granted in 1997 and those granted in 1998 as a result of 1997's
performance are included in the summary compensation table.
CEO Compensation
The compensation of the President and CEO, Mr. Anthony S. Abbate,
is reviewed by the Compensation/Stock Option Committee which presents
its recommendations to the board for action. Mr. Abbate participates in the
same plans as the other executive officers, including the base salary
program, the annual bonus plan, the Stock Option Plan, and the staff
benefit programs as outlined elsewhere in this Proxy. Mr. Abbate also
participates in the Supplemental Executive Retirement Plan. Mr. Abbate
receives no compensation for his duties as a director. The committee bases
Mr. Abbate's compensation on the same criteria used for all executive
officers with particular emphasis on the factors which will promote the
Company's long-term growth, organization stability, and financial strength.
Mr. Abbate's salary was at the third quartile of the 1997 salary range for
his position and his annual bonus for 1997 performance was based upon
achieving 117.5% of targeted financial goals for that year. Mr. Abbate
continues to provide the Company and the Bank with exemplary leadership,
vision and commitment, and strives to meet the long-term strategic goals.
Submitted by the Compensation/Stock Option Committee
James E. Healey, Chairman
Donald L. Correll
David R. Ficca
Nicholas R. Marcalus
Jeremiah F. O'Connor
Robert P. Rittereiser
Benjamin Rosenzweig
<PAGE>
FIVE-YEAR PERFORMANCE COMPARISON
The graph below provides an indicator of cumulative total
stockholder returns for the Company as compared with a Peer Group and the
AMEX Market Value Index.(1)
Cumulative Total Return
-----------------------------------------
12/92 12/93 12/94 12/95 12/96 12/97
----- ----- ------ ----- ------ -----
Interchange Financial Services Corp. 100 118 122 180 229 421
Peer Group 100 140 155 204 256 419
AMEX Market Value 100 120 109 137 146 177
Assumes $100 invested on December 31, 1992, in Interchange Common Stock,
the AMEX Market Value Index and Peer Group Common Stock.
Total stockholder returns assumes reinvestment of dividends.
Footnote
1. The Peer Group comprises 20 banking institutions representing all such
institutions in Connecticut, New Jersey and New York with asset size of at
least $250 million, but less than $1 billion, as of December 31, 1997 as
reported in the SNL Quarterly Bank Digest of March 1998. The banking
institutions included are: NMBT Corp. and New England Community Bancorp,
(CT); Broad National Bancorp, Carnegie Bancorp, Center Bancorp Inc.,
Greater Community Bancorp, Prestige Financial Corp., Ramapo Financial
Corporation, Vista Bancorp and Yardville National Bancorp, (NJ); Arrow
Financial Corporation, CNB Financial Corp., FNB Rochester Corp., First of
Long Island Corporation, Hudson Chartered Bancorp, Inc., Iroquis Bancorp,
Inc., Letchworth Independent BS Corp., State Bancorp, Inc., Suffolk Bancorp
and Tompkins County Trust Company (NY).
<PAGE>
TRANSACTIONS WITH MANAGEMENT
Officers and directors of the Company and their affiliated companies
are customers and are engaged in transactions with the Company and its
subsidiaries in the ordinary course of business on substantially the same
terms as those prevailing with other borrowers and suppliers.
The following director is engaged in transactions with the Company and
is expected to continue to transact such business in the future.
Mr. Andora is a member of Andora, Palmisano & Geaney, a firm that
renders various legal services to the Company and its subsidiaries and received
fees for those services of $382,000 in 1997, including $95,000 paid pursuant
to retainer contracts and $85,200 representing fees for real estate matters,
the bulk of which was reimbursed to the Bank by its customers.
FUTURE APPOINTMENT OF ADDITIONAL DIRECTORS
Pursuant to the terms of the Agreement and Plan of Merger dated January
27, 1998 among the Company, its wholly owned subsidiary, Interchange Bank,
and the Jersey Bank for Savings, Jersey Bank will be merged into the Bank
once certain conditions are met including: (i) obtaining all applicable
New Jersey and Federal bank regulatory authority approval and (ii) receiving
approval of the merger by the favorable vote of at least two-thirds of
the Jersey Bank shareholders. As part of the Agreement and Plan of Merger,
each of the Company and the Bank agreed to expand their respective Boards of
Directors by two seats.
Once the merger transaction closes (now projected for late May) Richard
A. Gilsenan, currently Chairman of the Board of Jersey Bank, is to be
appointed to a seat on the Company Board to hold that seat until the 1999
annual meeting of Shareholders. The Company will also nominate
Mr. Gilsenan for an additional one-year term as Director of the Company.
Similarly, Mr. Gilsenan will serve as appointed Director of the Bank
until the Bank's 1999 annual meeting at which time he will be proposed
for reelection to an additional one-year term.
Upon the effectiveness of the merger, Mr. Arthur R. Odabash, Vice
Chairman of Jersey Bank, will also be appointed a Director of the Company
to serve until the 1999 annual meeting when he will be nominated by
the Company to serve a two-year term as a Director. Similarly,
Mr. Odabash will serve as an appointed Director of Interchange Bank until
the 1999 annual meeting of the Bank. He will be proposed for reelection
for additional one-year terms as Director of the Bank at the annual
meetings in 1999 and 2000.
Messrs. Gilsenan and Odabash currently own 27,050 and 26,385 shares
of Jersey Bank common stock, respectively and 8,580 and 7,750,
respectively of Jersey Bank's preferred stock. In accordance with the
Merger Agreement, Jersey Bank's preferred stock is to be converted
to Jersey Bank common stock, immediately prior to merger, at a
conversion ratio of .8695. If the Merger is approved and becomes
effective, Jersey Bank shareholders will receive 1.5 shares of the
Company's common stock for each share of Jersey Bank common stock held by
them. Applying such conversion ratios to their existing shares, as a
result of the Merger, Mr. Gilsenan will own 51,765 shares of the
Company's common stock and Mr. Odabash will own 49,686 shares.
2. Ratification of Appointment of Independent Auditors
(Item 3 on Proxy Card)
The Board of Directors, upon recommendation of the Audit Committee,
has reappointed the firm of Deloitte & Touche, LLP as the independent
auditors to examine the Company's financial statements for the year 1998.
Your directors recommend that stockholders vote FOR ratification of this
appointment.
Representatives of Deloitte & Touche, LLP are expected to attend the
annual meeting and will have the opportunity to make a statement if they
desire and to respond to appropriate questions.
<PAGE>
3. Other Matters
The Board of Directors is not aware of any other matters to be presented
at the Annual Meeting. If any other matter proper for action at the meeting
should be presented, the holders of the accompanying proxy will vote the
shares represented by the proxy on such matter in accordance with their best
judgment. If any matter not proper for action at the meeting should be
presented, the holders of the proxy will vote against consideration thereof
or action thereon.
The affirmative vote of a majority of the shares cast at the Annual
Meeting is necessary to elect the four directors.
The cost of soliciting proxies for the meeting will be borne by
the Company. Some directors, officers, and other employees of the
Company may solicit proxies in person and by telephone or otherwise. The
Company will reimburse brokers and others who are record holders of
its shares for the reasonable expenses incurred in obtaining voting
instructions from beneficial owners of such shares.
Submission of Stockholder Proposals
Proposals intended for inclusion in next year's proxy statement must be
in writing and should be sent to the Secretary of the Company at Park 80
West/Plaza Two, Saddle Brook, NJ 07663, and must be received by December 19,
1998.
Other Information
Consolidated financial statements of the Company and its subsidiaries
are included in the Company's Annual Report to Stockholders for the year
1997.
Additional copies of the Annual Report and the Company's Annual Report to
the Securities and Exchange Commission on Form 10-K, may be obtained without
charge from the Secretary of Interchange Financial Services Corporation,
Park 80 West/Plaza Two, Saddle Brook, NJ 07663.
The above notice and proxy statement are sent by order of the board
of directors.
Benjamin Rosenzweig,
Secretary
Dated: April 22, 1998
<PAGE>
(Front)
PROXY INTERCHANGE FINANCIAL SERVICES CORPORATION
Park 80 West, Plaza Two, Saddle Brook, New Jersey 07663
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jeremiah F. O'Connor, Benjamin Rosenzweig
and John J.Eccleston as proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as designated
below, all the shares of common stock of Interchange Financial Services
Corporation held of record by the undersigned on April 20, 1998, at the
annual meeting of stockholders to be held on May 28, 1998, or any adjournment
thereof.
1. ELECTION OF DIRECTORS
FOR all nominees listed below |_| WITHHOLD AUTHORITY |_|
(except as marked to the contrary below) to vote for all nominees
listed below
Anthony D. Andora, David R. Ficca, Nicholas R. Marcalus,Benjamin Rosenzweig
(INSTRUCTION: To withhold authority to vote for an individual nominee write
that nominee's name in the space provided below.)
- -------------------------------------------------------------------------------
(Back)
(Continued from other side)
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
|_| FOR |_| AGAINST |_| ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
<PAGE>
This proxy when properly executed will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made,
this proxy will be voted FOR Proposals 1 and 2.
Please sign exactly as name appears below. When shares are held by
joint tenants, both should sign. When signing as an attorney, as
executor, administrator, trustee or guardian, please give full title as
such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign
in partnership name by authorized person.
DATED: ,1998
Signature
Signature if held jointly
PLEASE MARK,SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
