ALBANK Financial Corporation
April 12, 1997
Dear Stockholder:
You are cordially invited to attend the annual meeting (the "Meeting")
of the stockholders of ALBANK Financial Corporation ("ALBANK"), the
holding company for ALBANK, FSB, which will be held on May 21, 1997,
at 9:30 a.m., at ALBANK, FSB Operations Center, 833 Broadway, Albany,
New York 12207.
The attached Notice of Annual Meeting and the Proxy Statement describe
the formal business to be transacted at the Meeting. Directors and
officers of ALBANK as well as a representative of KPMG Peat Marwick
LLP will be present at the Meeting to respond to any questions that
our stockholders may have.
At the Meeting, stockholders will vote for the election of three directors.
The Board of Directors unanimously recommends a vote "FOR" the Board's
nominees named in the attached Proxy Statement. At the Meeting, stockholders
will also vote with respect to Proposal 2 submitted by the Board of
Directors of ALBANK for the ratification of KPMG Peat Marwick, LLP,
as independent auditors of ALBANK for the fiscal year ending December
31, 1997. For the reasons set forth in the Proxy Statement, the Board
unanimously recommends a vote "FOR" Proposal 2.
Proposal 3 was submitted by a stockholder and not by the Board of
Directors and seeks to recommend that the Board of Directors of ALBANK
actively seek a sale or merger of ALBANK. As more fully explained
in the attached Proxy Statement, the Board unanimously recommends
a vote "AGAINST" Proposal 3 because:
1. It was submitted by a major competitor of ALBANK whose interests
are very different from those of our other stockholders.
2. ALBANK's existing strategy is working to substantially increase
stockholder value. The Company stock price which was $8.33 at the
time of its 1992 mutual-to-stock conversion (after adjusting for the
1996 6-for-5 stock split) has increased to $36.375 on March 31, 1997.
Assuming the reinvestment of all dividends, this represents an increase
of 362%.
3. It would disrupt ALBANK's business.
4. The Board of ALBANK, in the exercise of its fiduciary duties,
will carefully consider any bona fide offers it receives. Proposal
3, if approved, could lead to a forced sale that would detract from
the value that would be attainable for ALBANK stockholders.
You are urged to sign, date and mail the enclosed WHITE proxy card
promptly in the postage-paid envelope provided. If you attend the
Meeting, you may vote in person even if you have already mailed in
your Proxy.
Sincerely yours,
/s/Herbert G. Chorbajian
Herbert G. Chorbajian
Chairman of the Board,
President and Chief
Executive Officer
ALBANK FINANCIAL CORPORATION
10 North Pearl Street
Albany, New York 12207
(518) 445-2100
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on May 21, 1997
Notice is hereby given that the annual meeting of stockholders (the
"Meeting") of ALBANK Financial Corporation (the "Company") will be
held at the ALBANK, FSB Operations Center, 833 Broadway, Albany, New
York 12207, on May 21, 1997, at 9:30 a.m.
A Proxy Statement is attached and a white proxy card for the Meeting
is enclosed herewith. The Meeting is for the purpose of considering
and voting upon the following matters:
1. The election of three directors for a term of three years each;
2. The ratification of KPMG Peat Marwick LLP as independent auditors
of the Company for the fiscal year ending December 31, 1997;
3. The stockholder proposal, opposed by the Board of Directors,
to recommend that the Board of Directors immediately take steps necessary
to actively seek a sale or merger of the Company on terms that will
maximize share value for stockholders (if such proposal is properly
presented at the Meeting);
4. Such other matters as may properly come before the Meeting
or any adjournments thereof.
Pursuant to the Bylaws of the Company, the Board of Directors has
fixed March 27, 1997, as the record date for the determination of
stockholders entitled to notice of and to vote at the Meeting, and
at any adjournments thereof. Only recordholders of the common stock
of the Company as of the close of business on that date will be entitled
to vote at the Meeting, or any adjournments thereof. A list of stockholders
entitled to vote at the Meeting will be available for inspection by
stockholders at the fourth floor of ALBANK, FSB, 10 North Pearl Street,
Albany, New York 12207, for a period of ten days prior to the Meeting.
Each stockholder, whether he or she plans to attend the Meeting, is
requested to sign, date and return the enclosed white proxy card without
delay in the enclosed postage-paid envelope. For planning purposes,
you are requested to indicate on the proxy card whether you currently
intend to attend the Meeting. (Of course, if your plans change, you
may attend even if you do not indicate on the proxy card that you
intend to do so.) Any proxy given by the stockholder may be revoked
at any time before it is exercised by filing with the Secretary of
the Company a written revocation or by delivering to the Company a
duly executed proxy bearing a later date. Any stockholder present
at the Meeting may elect to revoke his or her proxy by voting personally
on the matters brought before the Meeting.
By Order of the Board of Directors
/s/Freling H. Smith
Freling H. Smith
Secretary
Albany, New York
April 12, 1997
The Board of Directors recommends voting FOR Proposal 1 and 2 and
AGAINST Proposal 3.
ALBANK Financial Corporation
10 North Pearl Street
Albany, New York 12207
(518) 445-2100
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
May 21, 1997
Solicitation and Voting of Proxies
This Proxy Statement is being furnished to stockholders of ALBANK
Financial Corporation ("ALBANK" or the "Company") in connection with
the solicitation by the Board of Directors and management of the Company
of proxies to be used at the Annual Meeting of Stockholders (the "Meeting")
to be held on Wednesday, May 21, 1997, at 9:30 a.m., at the ALBANK,
FSB Operations Center, 833 Broadway, Albany, New York 12207, and at
any adjournments thereof. A 1996 annual report to stockholders covering
the year ended December 31, 1996, including the consolidated financial
statements of the Company for the year ended December 31, 1996, accompanies
this Proxy Statement. This Proxy Statement and the accompanying WHITE
proxy card are first being mailed to stockholders on or about April
12, 1997.
Regardless of the number of shares of stock owned, it is important
that stockholders be represented by proxy or present in person at
the Meeting. Stockholders are requested to vote by completing the
enclosed WHITE proxy card and returning it signed and dated in the
enclosed postage-paid envelope. Stockholders are urged to indicate
their vote in the spaces provided on the proxy card. Proxies solicited
by the Board of Directors of ALBANK will be voted in accordance with
the directions given therein. Where no instructions are indicated,
signed proxies will be voted FOR the election of the Board of Directors'
nominees for Directors and FOR the approval or ratification of KPMG
Peat Marwick, LLP as independent auditors and AGAINST Proposal 3,
the other specific proposal presented in this Proxy Statement.
As of the date of printing of this Proxy Statement, the Board of Directors
knows of no additional matters that will be presented for consideration
at the Meeting. Execution of a proxy, however, confers on the designated
proxyholders discretionary authority to vote the shares in accordance
with their best judgment on such other business, if any, that may
properly come before the Meeting or any adjournments thereof.
A proxy may be revoked at any time prior to its exercise by the filing
of a written notice of revocation with the Secretary of the Company
(at the address above), by delivering to the Company a duly executed
proxy bearing a later date, or by attending the Meeting and voting
in person. However, if you are a stockholder whose shares are not
registered in your own name, you will need appropriate documentation
from the recordholder of your shares to vote personally at the Meeting.
The cost of solicitation of proxies on behalf of management will be
borne by the Company. In addition to the solicitation of proxies by
mail, MacKenzie Partners, Inc. will assist the Company in soliciting
proxies for the Meeting and will be paid fees aggregating approximately
$15,000 plus out-of-pocket expenses. Proxies may also be solicited
personally or by telephone or telegraph by Directors, officers and
regular employees of the Company and of ALBANK, FSB (the "Bank"),
without additional compensation therefor. ALBANK will also request
persons, firms and corporations holding shares in their names, or
in the name of their nominees, which are beneficially owned by others,
to send proxy material to and obtain proxies from such beneficial
owners, and will reimburse such holders for their reasonable expenses
in doing so.
Voting Securities
The securities which may be voted at the Meeting consist of shares
of Common Stock of ALBANK ("Common Stock"), with each share entitling
its owner to one vote on all matters to be voted on at the Meeting
except as described below. There is no cumulative voting for the election
of Directors.
The close of business on March 27, 1997, has been fixed by the Board
of Directors as the record date ("Record Date") for the determination
of stockholders entitled to notice of and to vote at the Meeting and
any adjournments thereof. The total number of shares of Common Stock
outstanding on the Record Date was 12,818,539 shares.
As provided in the Company's Certificate of Incorporation, recordholders
of Common Stock that is beneficially owned, directly or indirectly,
by a person or entity who beneficially owns in excess of 10% of the
outstanding shares of Common Stock (the "Limit") are not entitled
to any vote in respect of the shares held in excess of the Limit.
In general, a person or entity is deemed to beneficially own shares
such person or entity has the right to acquire or over which such
person or entity has investment or voting power (other than pursuant
to certain revocable proxies), shares beneficially owned by an affiliate
of such person or entity, and shares beneficially owned by any group
in which such person or entity participates pursuant to any agreement,
arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of shares. For purposes of this provision, the
Employee Stock Ownership Plan and Trust of the ALBANK, FSB Incentive
Savings and Employee Stock Ownership Plan is not deemed to beneficially
own the shares of Common Stock held under such plan. The Company's
Certificate of Incorporation authorizes the Board of Directors (i)
to make all determinations necessary to implement and apply the Limit,
including determining whether persons or entities have any agreements,
arrangements or understandings, and (ii) to demand that any person
who is reasonably believed to beneficially own stock in excess of
the Limit to supply information to the Company to enable the Board
to implement and apply the Limit.
The presence, in person or by proxy, of at least a majority of the
total number of shares of Common Stock entitled to vote (after subtracting
any shares in excess of the Limit pursuant to the Company's Certificate
of Incorporation) is necessary to constitute a quorum at the Meeting.
In the event there are not sufficient votes for a quorum or to approve
or ratify any proposal at the time of the Meeting, the Meeting may
(subject to applicable laws and regulations of the Securities and
Exchange Commission) be adjourned in order to permit the further solicitation
of proxies. Directors shall be elected by a plurality of the votes
of the shares of Common Stock present in person or represented by
proxy at the Meeting and entitled to vote. The affirmative vote of
the majority of the shares of Common Stock present in person or represented
by proxy at the Meeting and entitled to vote is required to ratify
the appointment of KPMG Peat Marwick LLP as independent auditors of
the Company. Under applicable Delaware law, in determining whether
the proposal regarding the appointment of KPMG Peat Marwick LLP has
received the requisite number of affirmative votes, abstentions will
be counted and have the same effect as a vote against such proposal.
The affirmative vote of the majority of the shares of Common Stock
present in person or represented by proxy at the Meeting and entitled
to vote is required to approve Proposal 3 (A STOCKHOLDER PROPOSAL
OPPOSED BY THE BOARD OF DIRECTORS OF THE COMPANY). Under applicable
law, in determining whether Proposal 3 has received the requisite
number of affirmative votes, abstentions will be counted and have
the same effect as a vote against Proposal 3. Broker non-votes will
not be counted as votes cast and will have no effect on the outcome
of the vote.
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information as to those persons
believed by management to be beneficial owners of more than 5% of
the outstanding shares of Common Stock, as disclosed in certain reports
regarding such ownership filed as of December 31, 1996 with the Company
and with the Securities and Exchange Commission (the "SEC"), in accordance
with Section 13(g) of the Securities Exchange Act of 1934 (the "Exchange
Act") by such persons and groups. Other than those persons listed
below, the Company is not aware of any person or group that owned
more than 5% of the Common Stock as of March 27, 1997.
<TABLE>
<CAPTION>
Name and Address Number Percentage
Title of Class of Beneficial Owner of Shares of Class<F1>
<S> <C> <C> <C>
Common Stock Employee Stock Ownership 977,541 7.57%
Plan and Trust ("ESOP")
of the Albank, FSB
Incentive Savings
and Employee
Stock Ownership Plan<F2>
10 North Pearl Street
Albany, New York 12207
<FN>
<F1> The total number of shares of Common Stock outstanding on March
27, 1997 was 12,818,539 shares.
<F2> The Human Resources Committee of the Board of Directors of the
Bank administers the ESOP. An independent bank, First National Bank
of Boston, has been appointed trustee for the ESOP ("ESOP Trustee")
by the Board of Directors. The Human Resources Committee may instruct
the ESOP Trustee regarding investment of funds contributed to the
ESOP. Subject to its fiduciary duties, the ESOP Trustee must vote
all allocated shares held in the ESOP in accordance with the instructions
of the participating employees. Under the ESOP, again subject to the
ESOP Trustee's fiduciary duties, unallocated shares held in the suspense
account will be voted by the ESOP Trustee in a manner calculated to
most accurately reflect the instructions it has received from participants
regarding the allocated Common Stock.
</TABLE>
Stock Ownership by Management
The following table sets forth information as of March 27, 1997, as
to shares of Common Stock beneficially owned by Directors individually,
by the five most highly compensated executive officers of the Bank
including the Chief Executive Officer individually, and by executive
officers and Directors as a group. Ownership information is based
upon information furnished by the respective individuals.
<TABLE>
<CAPTION>
Shares of Stock
Name Beneficially Owned<F1> Percentage of Class<F2>
<S> <C> <C>
Herbert G. Chorbajian 457,598<F3> 3.5%
John E. Maloy, Sr. 55,445<F4> 0.4%
Henry M. Elliot, Jr. 44,113<F4> 0.3%
William J. Barr 38,088<F4> 0.3%
Anthony P. Tartaglia 30,953<F5> 0.2%
Susan J. Stabile 7,100<F6> 0.1%
Karen R. Hitchcock -- --
Francis L. McKone -- --
Richard J. Heller 154,767<F7> 1.2%
Barry G. Blenis 156,032<F8> 1.2%
Clifford M. Apgar 76,470<F9> 0.6%
Freling H. Smith 88,315<F10> 0.7%
All executive officers and
Directors of the Bank and
Company as a group
(13 persons) 1,206,157<F11> 8.8%
<FN>
<F1> Each person or relative of such person whose shares are included
herein, exercises sole (or shared with spouse, relative or affiliate)
voting or dispositive power as to the shares reported. On February
27, 1996, the Board of Directors declared a stock dividend (the "1996
Stock Dividend"), payable on April 1, 1996, of one additional share
of Common Stock for every five shares of Common Stock owned by stockholders
of record on the close of business on March 15, 1996. All numbers
have been changed to reflect payment of the 1996 Stock Dividend.
<F2> The total number of shares of Common Stock outstanding on March
27, 1997, was 12,818,539 shares.
<F3> Includes 16,836 shares with respect to Mr. Chorbajian awarded
under the Bank's Recognition and Retention Plan for Senior Executive
Officers ("BRP") as to which voting may be directed by Mr. Chorbajian
and includes 318,400 shares subject to outstanding stock options under
the Company's 1992 Stock Incentive Plan for Key Employees, as amended
(the "Stock Incentive Plan"), 60,480 of which became exercisable on
each of April 1, 1993, April 1, 1994, April 1, 1995, April 1, 1996
and April 1, 1997, and 16,000 of which became exercisable on December
18, 1996.
<F4> Includes 2,400 shares awarded to each Director who was a Director
on April 1, 1992, the date of the conversion of the Bank from mutual
to stock form of ownership (the "Conversion") under the Bank's Recognition
and Retention Plan for Outside Directors ("BRPO") as to which voting
may be directed by the Director and includes 30,000 shares subject
to outstanding stock options under the Company's 1992 Stock Incentive
Plan for Outside Directors (the "Directors' Plan"), 6,000 of which
became exercisable on each of April 1, 1993, April 1, 1994, April
1, 1995, April 1, 1996 and April 1, 1997, and 1,000 shares subject
to outstanding stock options under the Company's 1995 Stock Incentive
Plan for Outside Directors (the "1995 Directors' Plan") which became
exercisable on December 18, 1996.
<F5> Includes 1,489 shares awarded to Dr. Tartaglia under the BRPO
on March 5, 1993 as to which voting may be directed by Dr. Tartaglia,
and 24,000 shares subject to outstanding stock options under the Directors'
Plan, 6,000 of which became exercisable on each of March 5, 1994,
March 5, 1995, March 5, 1996 and March 5, 1997, and 1,000 shares subject
to outstanding stock options under the 1995 Directors' Plan which
became exercisable on December 18, 1996.
<F6> Includes 6,000 shares subject to outstanding stock options under
the Directors' Plan which became exercisable on June 26, 1996 and
1,000 shares subject to outstanding stock options under the 1995 Directors'
Plan which became exercisable on December 18, 1996.
<F7> Includes 3,029 shares with respect to Mr. Heller awarded under
the BRP as to which voting may be directed by Mr. Heller and includes
111,200 shares subject to outstanding stock options under the Stock
Incentive Plan, 21,600 of which became exercisable on each of April
1, 1993, April 1, 1994, April 1, 1995, April 1, 1996 and April 1,
1997, and 3,200 of which became exercisable on December 18, 1996.
<F8> Includes 6,054 shares with respect to Mr. Blenis awarded under
the BRP as to which voting may be directed by Mr. Blenis and includes
93,200 shares subject to outstanding stock options under the Stock
Incentive Plan, 18,000 of which became exercisable on each of April
1, 1993, April 1, 1994, April 1, 1995, April 1, 1996 and April 1,
1997, and 3,200 of which became exercisable on December 18, 1996.
<F9> Includes 68,200 shares subject to outstanding stock options under
the Stock Incentive Plan, 18,000 of which became exercisable on each
of April 1, 1993, April 1, 1994, April 1, 1995, April 1, 1996 and
April 1, 1997, and 3,200 of which became exercisable on December 18,
1996. 12,000 of said options were exercised August 12, 1993, 6,000
options were exercised May 20, 1994, and 7,000 options were exercised
on July 18, 1996.
<F10> Includes 79,520 shares subject to outstanding stock options under
the Stock Incentive Plan, 18,000 of which became exercisable on each
of April 1, 1993, April 1, 1994 and April 1, 1995, April 1, 1996 and
April 1, 1997, and 2,000 of which became exercisable on December 18,
1996. 10,200 of said options were exercised on May 20, 1994 and 2,280
options were exercised April 10, 1995.
<F11> Includes 914,955 shares (including the shares referred to in
footnotes 3, 4, 5, 6, 7, 8, 9 and 10) cumulatively allocated to executive
officers and Directors under the BRP and the BRPO as to which such
officers and Directors may direct voting and shares subject to outstanding
stock options under the Stock Incentive Plan, the Directors' Plan
and the 1995 Directors' Plan that became exercisable on April 1, 1993,
March 5, 1994, April 1, 1994, March 5, 1995, April 1, 1995, March
5, 1996, April 1, 1996, December 18, 1996, March 5, 1997 and April
1, 1997.
</TABLE>
PROPOSALS TO BE VOTED ON AT THE MEETING
PROPOSAL 1. ELECTION OF THREE DIRECTORS OF ALBANK FINANCIAL CORPORATION
FOR THREE YEAR TERMS ENDING 2000.
Pursuant to ALBANK's bylaws, the number of Directors of ALBANK is
the number designated from time to time by the Board of Directors,
except that in the absence of such designation the number will be
ten. The Board of Directors presently has set the number of directors
at eight. Each of the members of the Company's Board of Directors
also presently serves as a Director of the Bank. Directors are elected
for staggered terms of three years each, with a term of office of
only one of three classes of Directors expiring each year. Directors
serve until their successors are elected and qualified.
The three nominees proposed by the current Board of Directors of ALBANK
for election at the Meeting are John E. Maloy, Sr., Henry M. Elliot,
Jr., and Karen R. Hitchcock, Ph.D. All nominees named are presently
Directors of the Company and the Bank.
In the event that any such nominee is unable to serve or declines
to serve for any reason, it is intended that proxies will be voted
for the election of the balance of those nominees named and (unless
the present Board of Directors reduces the number of Directors pursuant
to ALBANK's bylaws) for such other persons as may be designated by
the present Board of Directors. The Board of Directors has no reason
to believe that any of the persons named will be unable or unwilling
to serve.
Unless authority to vote for the Directors is withheld, it is intended
that the shares represented by the enclosed WHITE proxy card will
be voted for the election of all nominees proposed by the Board of
Directors, as set forth above.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES
NAMED IN THIS PROXY STATEMENT.
Information with Respect to Nominees and Continuing Directors
The following table sets forth the names of the nominees and continuing
Directors, a brief description of their recent business experience,
including occupations and employment, their ages, the year in which
each became a Director of the Bank and the year in which their terms
as Director of the Company expires. Unless otherwise indicated, the
principal occupation listed for each person below has been his or
her principal occupation for the past five years.
<TABLE>
<CAPTION>
Name and Principal
Occupation at Present Director of Expiration
and for the Past Five Years Age<F1> the Bank Since<F2> of Current Term
<S> <C> <C> <C>
Nominees
John E. Maloy, Sr. 73 1976 1997
Mr. Maloy has been President of J.H. Maloy,
Inc., a construction firm, since 1990.
From 1965 to 1990, he held the position
of Executive Vice President of that firm.
Mr. Maloy is currently Chairman of the Bank's
Human Resources Committee.
Henry M. Elliot, Jr. 74 1976 1997
Mr. Elliot was Agency Manager of the Equitable
Life Assurance Society of the United States
from 1958 until his retirement in 1988.
Mr. Elliot is currently Chairman of the
Bank's Executive Committee.
Karen R. Hitchcock, Ph.D. 53 1996 1997
Ms. Hitchcock has been President of the
University at Albany since 1996. From
1991 to 1996, she was Vice President
of Academic Affairs.
Herbert G. Chorbajian 58 1985 1998
Mr. Chorbajian is Chairman, President
and Chief Executive Officer of the Company.
He commenced his employment with the Bank
in 1984 as Executive Vice President and
Chief Operating Officer. He became
President in 1985 and has served as
Chairman of the Board, President, Chief
Operating Officer and Chief Executive
Officer of the Bank since 1990.
William J. Barr 70 1982 1998
Mr. Barr was Senior Vice President and
Comptroller of the Bank from 1982 until his
retirement in 1989. Mr. Barr is currently
Chairman of the Bank's Loan Committee.
Anthony P. Tartaglia, M.D. 64 1993 1999
Dr. Tartaglia is a Professor of Medicine at
the Albany Medical College with substantial
patient responsibility. He also serves on a
national task force working on issues of
health care policy in the United States.
Dr. Tartaglia is currently Chairman of the
Bank's Audit Committee.
Susan J. Stabile, Esq. 39 1995 1999
Ms. Stabile is Associate Professor of Law
at St. John's University School of Law.
An author of several legal publications,
Ms. Stabile is a member of the American
Bar Association. Her other affiliations
include membership in the Bar Association
of the City of New York and the American
Association of Law Schools Section on
Labor and Employment Law.
Francis L. McKone 62 1996 1998
Mr. McKone has been President and CEO of
Albany International Corp. since 1993 and
President since 1984. Mr. McKone is presently
a Director of Albany International Corp.
<FN>
<F1> At December 31, 1996.
<F2> Each person listed, other than Dr. Tartaglia, Ms. Stabile, Ms.
Hitchcock and Mr. McKone, has been a Director of the Company since
its incorporation in 1991. Dr. Tartaglia became a Director of the
Company on March 5, 1993, Ms. Stabile on June 26, 1995, Ms. Hitchcock
on October 16, 1996 and Mr. McKone on December 3, 1996. Director Robert
passed away on December 5, 1996 and Director Underhill retired as
of January 28, 1997.
</TABLE>
Meetings of the Board and Committees of the Board
During the year ended December 31, 1996, the Board of Directors of
the Company held 8 meetings. No Director of the Company attended fewer
than 75% in the aggregate of the total number of the Company's board
meetings and the total number of committee meetings on which such
Director served. The Company does not have standing audit or nominating
committees of the Board of Directors, or committees performing similar
functions. The Company maintains a standing compensation committee,
the members of which are the same as that of the Bank's Human Resources
Committee. The Company does not pay compensation and thus its compensation
committee did not meet in 1996.
The Board of Directors of the Bank has established various committees,
including the Executive, Audit, Human Resources, Loan and Directors
Nominating and Search Committees.
The Executive Committee has the authority to approve securities transactions
and to exercise most powers of the Board of Directors in the intervals
between meetings of the Board. Any activities of this Committee are
reported to the Board at its next meeting. The Executive Committee
did not meet in 1996. Prior to January 28, 1997, the Executive Committee
consisted of Messrs. Underhill (Chairman), Robert (deceased December,
1996), Maloy and Chorbajian. On January 28, 1997, Mr. Underhill retired,
Mr. Elliot became Chairman, and Mr. Barr was added to the Committee.
The Audit Committee meets quarterly to review the Bank's internal
audit performance and as necessary with the Bank's independent certified
public accountants. The Bank's Audit Committee met five times during
the year ended December 31, 1996. Prior to July 22, 1996, the Audit
Committee consisted of Messrs. Robert (Chairman), Underhill and Dr.
Tartaglia. On that date, Mr. Robert rotated off the Committee, Dr.
Tartaglia became Chairman and Ms. Stabile was added to the Committee.
On January 28, 1997, Mr. Underhill retired.
The Bank's Human Resources Committee has authority with respect to
the Bank's compensation and benefit plans. The Committee met seven
times during the year ended December 31, 1996. Prior to January 22,
1996, the Human Resources Committee consisted of Messrs. Meath (Chairman),
Underhill, Maloy, Dr. Tartaglia and Ms. Stabile. On that date, Mr.
Meath retired and Mr. Maloy became Chairman. On January 28, 1997,
Mr. Underhill retired and Mr. McKone was added to the Committee.
The Loan Committee approves all credits to a single borrower in excess
of three million five hundred thousand dollars ($3,500,000). The Loan
Committee met eleven times in 1996. Prior to January 22, 1996, the
Loan Committee consisted of Messrs. Crawford (Chairman), Robert, Elliot,
Barr and Chorbajian. On that date, Mr. Crawford retired and Mr. Barr
became Chairman. On March 25, 1996, Mr. Chorbajian became ex officio
and non-voting. On December 5, 1996, Mr. Robert passed away. On October
28, 1996, Mr. Maloy was added to the Committee. On January 28, 1997,
Ms. Hitchcock was added to the Committee.
The Directors Nominating and Search Committee is a Committee of the
whole Board and is chaired by Dr. Tartaglia. The Committee met three
times in 1996. The Committee was eliminated on December 27, 1996.
The Board of Directors (as a whole and not as a Committee) considers
and approves the nominees for Directors to stand for election at the
Company's annual meeting of stockholders. The Company's bylaws allow
for stockholder nominations of Directors. These provisions require
such nominations to be made pursuant to timely notice in writing to
the Secretary of the Company. Generally, to be timely, notice must
be given to the Company's Secretary at least thirty days prior to
the stockholder meeting. The stockholder's notice of nomination must
contain all information relating to the nominee which is required
to be disclosed by the Company's bylaws and by the Exchange Act. For
additional information, see Notice of Business to be Conducted and
Nomination of Directors at an Annual Meeting on page 30.
Directors' Compensation
Directors' Fees. During 1997, Directors of the Bank who were not officers
received a retainer of $17,000 per year plus $1,000 for each board
meeting attended. Such Directors also received $400 for each committee
meeting attended and all Committee chairpersons received a stipend
of $1,500. Directors do not receive a retainer or any separate fees
for services as Directors of the Company.
Directors' Retirement Plan. Since 1988, the Bank has maintained a
non-qualified plan, the Directors' Retirement Plan of ALBANK, FSB,
to provide retirement benefits for Directors of the Bank. A Director
who retires from the Board after at least three years of service (or
upon death or disability) is entitled to receive an annual benefit
commencing with the later of the first month subsequent to such Director's
retirement or the attainment of age 65, of $500 for each quarter of
service as a Director, up to a maximum of 40 quarters, payable in
quarterly installments for life. In the event of a Director's retirement
upon disability, the Board may approve a lump sum disability benefit
payable before age 65 in lieu of normal retirement benefits. The Plan
also provides for payment of annual death benefits to the surviving
spouse of a Director who would have been eligible for a retirement
benefit. The Plan is unfunded, and all obligations arising thereunder
are payable solely from the general assets of the Bank. The Bank has
amended the Directors' Retirement Plan to freeze participation in
the Plan to Directors who were participating Directors in the Plan
on January 1, 1992 (that is, Directors who had been Directors for
three years at such time).
Directors' Stock Option Plans. The Board of Directors of the Company
has terminated the Directors' Plan and in its place adopted the 1995
Directors' Plan. The 1995 Directors' Plan provides for the annual
grant of options to purchase 2,500 shares (3,000 shares after giving
effect to the 1996 Stock Dividend) of Common Stock to members of the
Board of Directors who are not employees of the Bank or the Company.
Under the terms of the 1995 Directors' Plan, each member of the Board
of Directors of the Company who was a member on December 18, 1995,
and each member of the Board of Directors of the Company on the fourth
Monday of December in each subsequent year who is not an officer or
employee of the Bank or the Company, is to be granted on such date
options to purchase 2,500 shares (3,000 shares after giving effect
to the 1996 Stock Dividend) of Common Stock (together with limited
stock appreciation rights exercisable only upon a change in control
of the Company or the Bank ("Limited Rights")) at an exercise price
equal to the fair market value of the shares on the date of grant.
Such options are exercisable on a cumulative basis in equal installments
at a rate of 33-1/3% per year commencing one year from the date of
grant, although the 1995 Directors' Plan provides for accelerated
vesting in certain circumstances. The Company has initially reserved
200,000 shares (240,000 shares after giving effect to the 1996 Stock
Dividend) of Common Stock for issuance under the 1995 Directors' Plan.
Recognition and Retention Plans and Trusts. In connection with the
Conversion, the Bank established the BRPO, which was approved by stockholders
at the first annual meeting of the Company's stockholders. Awards
of shares of Common Stock to outside Directors are fixed by the BRPO.
Each outside Director serving in such capacity as of April 1, 1992,
the date of the Conversion (which included Messrs. Crawford, Underhill,
Robert, Meath, Maloy, Elliot and Barr), was granted an award of a
number of shares equal to $100,000 divided by the fair market value
of a share of Common Stock on the date of the Conversion (10,000 shares).
Each individual who was first elected as an outside Director prior
to April 24, 1995 was automatically granted an award of a number of
shares equal to $100,000 divided by the fair market value of a share
of Common Stock as of the effective date of such election. (Dr. Tartaglia
was granted 6,201 shares on March 5, 1993.) The awards are earned
by outside Directors over five years with 20% becoming vested at the
end of each twelve consecutive months of service as a Director or
Director Emeritus following the date of grant, although the BRPO provides
for accelerated vesting in certain circumstances. On April 24, 1995,
the BRPO was amended by closing participation to all directors
subsequently elected, which action was ratified at the 1996 Annual
Shareholder meeting.
Deferred Fee Plan. The Bank maintains a Deferred Compensation Plan
for Directors' Fees (the "Deferred Compensation Plan for Directors").
This is a non-qualified, unfunded plan that permits a Director to
elect to defer receipt of all or a specified part of his of her fees.
Deferred fees may be "invested" (i.e., accrue interest as though actually
invested) at the direction of the Director in one or more of the following
four funds: a Money Market Fund, a Core Equity Fund, an Emerging Growth
Equity Fund and an Intermediate Term Bond Fund. Such deferred amounts
become payable in five to ten annual installments upon a Director
ceasing to serve as such.
Executive Compensation and Benefits
Summary Compensation Table. The following table sets forth the cash
compensation paid, and other compensation paid or accrued, by the
Bank for services rendered during the years ended December 31, 1996,
December 31, 1995 and December 31, 1994, to the five highest paid
executive officers of the Bank or the Company who received compensation
in excess of $100,000 from the Bank, including the Chief Executive
Officer, in all capacities in which they served. The Company has not
paid any compensation.
<TABLE>
Annual
Compensation
<CAPTION>
Name and Options/ All Other
Principal Position Year Salary Bonus SARs<F1> Compensation<F2>
<S> <C> <C> <C> <C> <C>
Herbert G. Chorbajian<F3> 1996 $454,600 $179,567 60,000 $276,589
Chairman, President 1995 $430,661 $111,972 48,000 $259,645
and Chief Executive 1994 $413,846 $244,169 -- $183,913
Officer
Richard J. Heller<F3> 1996 $173,431 $ 57,718 10,000 $ 39,979
Executive Vice 1995 $164,061 $ 34,125 9,600 $ 41,150
President and 1994 $157,538 $ 74,358 -- $ 46,068
Chief Financial
Officer
Barry G. Blenis<F3> 1996 $170,931 $ 56,886 10,000 $ 41,483
Executive Vice 1995 $164,061 $ 34,125 9,600 $ 29,864
President--Operations 1994 $156,923 $ 74,068 -- $ 28,240
and Strategic Planning
Clifford M. Apgar 1996 $168,408 $ 55,373 10,000 $ 26,078
Executive Vice 1995 $158,935 $ 33,058 9,600 $ 27,330
President--Senior Credit 1994 $152,969 $ 72,201 -- $ 16,537
Officer
Freling H. Smith 1996 $155,660 $ 45,328 6,000 $ 24,307
Senior Vice 1995 $146,530 $ 22,859 6,000 $ 19,859
President, Secretary 1994 $141,823 $ 50,205 -- $ 17,920
and General Counsel
<FN>
<F1> This represents incentive stock options to purchase shares of
Common Stock awarded to the named executive officers under the 1992
Stock Incentive Plan for Key Employees, as amended. Options become
exercisable at a rate of 331/3% per year beginning December 18, 1996
for awards made in 1995 and December 2, 1997 for awards made in 1996.
Options will also become 100% exercisable upon a change in control
of the Bank or the Company or upon termination of employment due to
death or disability. Upon termination of employment for any other
reason, unexercisable options expire. All options were awarded with
Limited Rights. These options reflect payment of the 1996 Stock Dividend.
<F2> The amounts disclosed in this column include:
(a) The Bank's contribution to the Bank's Incentive Savings and Employee
Stock Ownership Plan (the "401(k) Plan"), a defined contribution plan.
Prior to April 1, 1992, the Bank made a cash matching contribution
to the 401(k) Plan. Commencing April 1, 1992, such contributions were
made in the form of an annual allocation of shares of Common Stock
("ESOP Shares") under the ESOP portion of the 401(k) Plan, the first
of which was made as of December 31, 1992 for the 1992 calendar year.
The total value of the cash contribution and allocation of ESOP Shares
for the named individuals for 1996 is as follows: Mr. Chorbajian,
$9,000; Mr. Heller, $6,408; Mr. Blenis, $9,000; Mr. Apgar, $4,500;
and Mr. Smith, $4,551.
(b) Bank allocations under the Bank's Supplemental Deferred Compensation
Plan for 1996 in the following amounts: Mr. Chorbajian, $24,994, Mr.
Heller, $3,453; Mr. Blenis, $3,303, and Mr. Smith, $1,711. The Supplemental
Deferred Compensation Plan is a non-qualified plan that compensates
participants in the 401(k) Plan whose contributions are limited by
the Internal Revenue Code of 1986, as amended (the "Code"). Benefits
in respect of cash allocations under the Supplemental Deferred Compensation
Plan may be "invested" (i.e., accrue interest as though actually invested)
at the direction of the executive in one or more of the following
four funds: a Money Market Fund, a Core Equity Fund, an Emerging Growth
Equity Fund and an Intermediate Term Bond Fund. Earnings allocated
during 1996 for the named executives are as follows: Mr. Chorbajian,
$197,029, Mr. Heller, $5,219, Mr. Blenis, $12,604, and Mr. Smith $1,915.
The Supplemental Deferred Compensation Plan was amended December 28,
1993 to take into account all limitations on allocations under tax-qualified
retirement plans pursuant to the Code. Benefits in respect of share
allocations take the form of phantom stock. Shares allocated in 1996
under the Bank's Supplemental Deferred Compensation Plan and the value
based on the closing price per share of the Common Stock on the Nasdaq
National Market System on December 31, 1996 of $31.375 are as follows:
Mr. Chorbajian, 1,710.453 shares, value of $53,665; Mr. Heller, 242.733
shares, value of $7,616; Mr. Blenis, 231.369 shares, value of $7,259;
Mr. Apgar, 229.98 shares, value of $7,216, and Mr. Smith, 110.754
shares, value of $3,474.
(c) Imputed income on the value of supplemental life insurance premiums
in the following amounts: Mr. Chorbajian, $4,050; Mr. Blenis, $2,599;
Mr. Apgar, $4,798; and Mr. Smith, $2,355.
(d) Bank payments of premiums under an executive life insurance program
which the Bank offered to its Vice Presidents and more senior officers
effective January 1, 1993. This program provides permanent insurance
(as opposed to term insurance) within the Bank's group term life insurance
program. Participation is voluntary and the Bank pays toward the premium
the amount to which the executive would have been entitled within
the group term program. In Mr. Heller's case, the Bank paid $1,682
in 1996, which is included in his salary.
(e) Bank allocations of the following amounts for 1996 in respect
of supplemental retirement arrangements, which are provided for by
individual employment or other agreements or under the Bank's Retirement
Restoration Plan (the "Restoration Plan"): Mr. Chorbajian, $175,080,
Mr. Heller, $22,502; Mr. Blenis, $19,321; Mr. Apgar, $9,564; and Mr.
Smith, $12,216. The Restoration Plan is a non-qualified plan that
compensates participants in the Retirement Plan of ALBANK, FSB (the
"Retirement Plan") whose benefits are limited by the Code.
(f) Bank payments in 1996 in respect of supplemental death and disability
insurance provided by an individual employment agreement with Mr.
Chorbajian in the amount of $9,800.
<F3> As of December 31, 1996, the number and value of shares of Common
Stock held for the benefit of the named executive officers under the
BRP, based on the closing price per share of the Common Stock on the
Nasdaq National Market System on December 31, 1996 of $31.375, are
as follows: Mr. Chorbajian, 16,836 shares, value of $528,230; Mr.
Heller, 3,029 shares, value of $95,035; and Mr. Blenis, 6,054 shares,
value of $189,944.
</TABLE>
<TABLE>
Option/SAR Grants in Last Fiscal Year
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term
Percent
Number of of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/sh) Date 5% ($) 10% ($)
(a) (b) (c) (d) (e) (f) (g)
<S> <C> <C> <C> <C> <C> <C>
Herbert. G. Chorbajian 60,000 35.71 $32.125 12/02/06 $1,212,194 $3,071,938
Richard J. Heller 10,000 5.95 32.125 12/02/06 202,032 511,990
Barry G. Blenis 10,000 5.95 32.125 12/02/06 202,032 511,990
Clifford M. Apgar 10,000 5.95 32.125 12/02/06 202,032 511,990
Freling H. Smith 6,000 3.57 32.125 12/02/06 121,219 307,194
See footnote (1) to the Summary Compensation Table for a description
of the material terms of the options granted to the named executive
officers.
</TABLE>
Option Exercise and Option Value Table. The following table provides
information regarding the value of unexercised in-the-money options
(i.e., options which had a positive spread between the exercise price
and the fair market value of the Common Stock) as of December 31,
1996. Unexercised options granted in 1995 included in the table were
in-the-money as of December 31, 1996; those granted in 1996 were not.
The closing price per share of the Common Stock on the Nasdaq National
Market System on December 31, 1996 was $31.375.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money
Options at Year End Options at Year End
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Herbert G. Chorbajian 0 0 318,400 92,000 $7,076,477 $172,334
Richard J. Heller 0 0 111,200 16,400 $2,510,237 $ 35,967
Barry G. Blenis 0 0 93,200 16,400 $2,095,486 $ 35,967
Clifford M. Apgar 7,000 $174,742 68,200 16,400 $1,519,444 $ 35,967
Freling H. Smith 0 0 79,520 10,000 $1,799,775 $ 22,667
Each option represents the right to acquire one share of Common Stock
</TABLE>
Employment Agreements. In 1996, the Company extended the employment
agreements with Messrs. Chorbajian, Heller, Blenis and Smith and the
Bank extended the employment agreements with Messrs. Chorbajian, Heller,
Blenis, Smith and Apgar (the "Employment Agreements" or the "Agreements").
The Employment Agreements, which were approved by the OTS, are designed
to ensure that the Bank and the Company will be able to maintain a
stable and experienced management base.
The Employment Agreements with the Bank and the Company provide for
a three-year term in the case of Mr. Chorbajian and for a two-year
term in the case of the other officers. The Human Resources Committee
of the Bank conducted a performance evaluation of each of the officers
and, in 1997, recommended their contracts be extended for an additional
year. This recommendation was approved by the full Board of Directors.
The Board of Directors of the Company also conducted a performance
review of the officers who had employment contracts and extended them
for an additional year. Thus, Mr. Chorbajian's contracts have been
extended until March 31, 2000, and the other officers contracts until
March 31, 1999. Base salaries are reviewed annually.
In addition to specifying a minimum base salary, the Agreements provide
for, among other things, disability pay and other fringe benefits
applicable to executive personnel generally. The Agreement with Mr.
Chorbajian provides for certain supplemental disability and death
benefits to be paid to Mr. Chorbajian or his beneficiaries and the
Agreements with Messrs. Heller, Smith and Apgar provide for the payment
to such individuals of certain supplemental retirement benefits. The
cost to the Bank of providing these benefits is disclosed in the summary
compensation table and footnotes.
The Agreements provide for termination by the Bank or the Company
for cause at any time. In the event the Bank or the Company chooses
to terminate the officer's employment for reasons other than for cause,
the officer or, in the event of his death, his beneficiary, will be
entitled to a severance payment equal to the amounts due under his
Agreement for the remainder of its term. In the event of involuntary
termination or the officer's resignation from the Bank and the Company
upon (i) failure to re-elect the officer to his current offices, (ii)
a material change in the officer's functions, duties or responsibilities,
or relocation of his principal place of employment, (iii) a reduction
in compensation or benefits, or (iv) a breach of his Agreement by
the Bank or the Company, in each case, accompanied by a change in
control of the Bank or the Company, the officer or, in the event of
death, his beneficiary, will be entitled to a severance payment equal
to approximately three times (in the case of Mr. Chorbajian) or two
times (in the case of the other officers) his annual compensation.
The Bank and the Company will also be required to continue the executive's
life, health, accident, dental and disability coverage for up to three
years (in the case of Mr. Chorbajian) or two years (in the case of
the other officers). A "change in control" is generally defined for
purposes of the Agreements and other plans of the Bank and the Company
to include the acquisition by a person or group of persons having
beneficial ownership of 20% or more of the Common Stock during the
term of such Agreement (or other plan) or a tender offer or exchange
offer, merger or other form of business combination, sale of assets,
or contested election of Directors which results in a change of a
majority of the Board of Directors of the Bank or the Company.
If payments made under the Employment Agreements in the event of a
change in control were to constitute an excess parachute payment under
Section 280G of the Code, an excise tax would be imposed on the recipient
and the Company and the Bank would be denied an income tax deduction
in respect of such excess amounts. The Employment Agreements provide
that benefits payable to the officer upon a change in control will
be reduced by an amount necessary to prevent imposition of such excise
tax and the denial of such deduction.
Severance Policy. The Bank has a severance pay policy that provides
benefits to all full-time employees, including officers, with at least
one year service in the event of certain circumstances. Under the
policy, an eligible employee is entitled to benefits in the event
he or she is terminated without cause or resigns after refusing to
accept transfer to a location outside of a 50-mile radius of his or
her existing location. Under such circumstances, an eligible employee
who is an officer would be entitled to bi-weekly severance pay equal
to his or her bi-weekly rate of salary (determined without regard
to bonus, overtime and supplemental payments) for four weeks plus
two weeks for each full year of service, up to a maximum of 52 weeks
(the "Severance Period"). Additionally, in the event of involuntary
termination without cause or voluntary termination without cause due
to a reduction of salary, benefits or responsibilities within three
years of a merger or consolidation in which the Bank is not the surviving
entity, or the sale or exchange of a significant portion of the Bank's
business, after the expiration of the Severance Period, an eligible
employee is entitled to receive 2/3 of his severance payment for a
second period equal in length to the Severance Period, and 1/3 of
his severance payment for a third period equal in length to the
Severance Period.
Retirement Plan and Supplemental Retirement Benefits. The Bank maintains
the Retirement Plan for the benefit of salaried employees of the Bank.
The Retirement Plan is a non-contributory defined benefit pension
plan. Salaried employees of the Bank who have attained age 21 and
have completed one year of service are eligible to participate. The
Bank contributes an amount to the Retirement Plan necessary to fund
the actuarially determined minimum funding requirements in accordance
with the Employee Retirement Income Security Act of 1974 and Section
412 of the Code.
Upon the attainment of normal retirement age, at or after 65, a participant
hired before October 1, 1985 (which would include each of Messrs.
Chorbajian and Blenis) will be entitled to an annual normal retirement
benefit equal to 3% of the average of his three consecutive years
of highest compensation (as defined in the Retirement Plan to include
all salary including salary reduction contributions under the 401(k)
Plan) for each of his first 15 years of credited service, plus 1%
of such average compensation for each year of his credited service
in excess of 15, the aggregate not to exceed 60%. A participant hired
after October 1, 1985 (which would include Messrs. Heller, Smith and
Apgar) will be entitled to 2% of the average of his five consecutive
years of highest compensation for each year of credited service (up
to 30 years). Except in cases of certain long-service employees, the
sum of the amounts calculated under both formulas is reduced by 1-2/3%
of the participant's primary social security benefit for each year
of credited service after October 1, 1985 (up to 30 years).
Under the Retirement Plan, benefits are also payable for retirement
due to disability or early retirement and upon death. Upon termination
of employment for any other reason, participants receive the present
value of their vested benefit, in the form of a lump sum, provided
that such amount does not exceed $3,500. If the present value of their
vested benefit exceeds $3,500, distribution will generally be made
upon attainment of normal retirement age, attainment of age 60 or
attainment of a combined age and employment equal to 75.
The following table sets forth, in straight line annuity amounts using
the formula applicable to Messrs. Chorbajian and Blenis, but without
regard to the Social Security offset, the estimated annual benefits
payable upon retirement at age 65 in calendar year 1995, expressed
in the form of a single life annuity, for the average compensation
and credited service classification specified.
<TABLE>
<CAPTION>
Credited Service
Average Annual Earnings 15 20 25 30<F1>
<S> <C> <C> <C> <C>
$100,000 $ 45,000 $ 50,000 $ 55,000 $ 60,000
$150,000 $ 67,000 $ 75,000 $ 82,500 $ 90,000
$200,000<F2> $ 90,000<F2> $100,000<F2> $110,000<F2> $120,000<F2>
$250,000<F2> $112,500<F2> $125,000<F2> $137,500<F2> $150,000<F2>
$300,000<F2> $135,000<F2> $150,000<F2> $165,000<F2> $180,000<F2>
$350,000<F2> $157,500<F2> $175,000<F2> $192,500<F2> $210,000<F2>
$400,000<F2> $180,000<F2> $200,000<F2> $220,000<F2> $240,000<F2>
$450,000<F2> $202,500<F2> $225,000<F2> $247,500<F2> $270,000<F2>
$500,000<F2> $225,000<F2> $250,000<F2> $275,000<F2> $300,000<F2>
$550,000<F2> $247,000<F2> $275,000<F2> $302,000<F2> $330,000<F2>
$600,000<F2> $270,000<F2> $300,000<F2> $330,000<F2> $360,000<F2>
<FN>
<F1> The maximum benefit under the Retirement Plan is 60% of average
annual earnings.
<F2> The Code limits both the amount of compensation that may be used
for purposes of calculating a participant's Retirement Plan benefit
and the maximum annual benefit payable to a participant under the
Retirement Plan. For the 1996 plan year, (i) a participant's compensation
in excess of $50,000 is disregarded for purposes of determining average
compensation, and (ii) the maximum annual Retirement Plan benefit
permitted under the Code is $120,000. The numbers presented in the
table disregard these limitations because the Bank maintains the Restoration
Plan, which provides participants with a supplemental retirement benefit
to compensate them for the limitation on benefits imposed by the Code.
Therefore, the numbers presented represent the sum of the benefit
payable under the Retirement Plan and the benefit payable under the
Restoration Plan.
</TABLE>
The following table sets forth the years of credited service as of
December 31, 1996 for each of the individuals named in the cash
compensation table.
<TABLE>
<CAPTION>
Credited Service
Years Months
<S> <C> <C>
Herbert G. Chorbajian 12 7
Richard J. Heller 5 9
Barry G. Blenis 32 3
Freling H. Smith 5 2
Clifford M. Apgar 4 10
Certain other supplemental retirement arrangements are described in
the footnotes to the Summary Compensation Table.
</TABLE>
Human Resources Committee Report to Shareholders
Background and Compensation Philosophy
Compensation of the senior executive officers of the Bank is comprised
primarily of three components: base pay, short-term incentives and
long-term incentives. The philosophy of the Committee and the board
is to provide a compensation mix which places a significant emphasis
on performance related pay and which aligns executive pay with the
goals and interests of the Company and its shareholders.
Base Pay
Salaries for the Chief Executive Officer and the other named executive
officers are reviewed on an annual basis by the Committee, which then
makes recommendations to the Board of Directors for the following
year. The Committee solicits the advice of an outside compensation
consultant in forming its recommendations.
Effective February 23, 1997, based upon the recommendation of the
Committee, the Board of Directors increased the salary of the Chief
Executive Officer to $481,600, an increase of 5%. The increase reflected
the Committee's continued satisfaction with the Chief Executive Officer's
outstanding leadership, his contributions in helping the Bank meet
its financial and operating goals and his furtherance of the Bank's
strategic plan for the future.
The base salary of each of the other named executive officers was
increased as outlined in the Summary Compensation table. The increases
were based on recommendations by the Committee that were made upon
consultation with the Chief Executive Officer. Each officer's increase
reflects the Committee's assessment of that individual's performance,
his level of experience, and competitive market data for similar positions
at peer banks, and upon the Bank's performance.
Future salary increases will continue to be based upon Bank and individual
performance as they relate to the competitive pay range for each executive.
Annual Incentive Program
The Bank has in place an annual incentive plan that grants awards
to participants based on performance measures that are the key drivers
of shareholder value enhancement. The award incentive levels for 1996,
as stated in the Summary Compensation Table, were based on a comparison
between actual and target performance levels as measured by four factors:
Return on Average Assets, Return on Average Equity, Earnings per Share
and the ratio of Nonperforming Assets to Average Assets. Each factor
is evenly weighted in its determination of actual awards.
As in 1995, target performance levels for each of the four measures
were set based on both the Bank's performance in the last year and
the average performance of the comparably sized peer group of banks.
The target awards reflected average performance for both the peer
group and the Bank.
At the end of 1996, the actual performance levels for the year were
compared with the four target award measures within the context of
a 5-point scale. After comparing each of the four measures to the
scale independently, a composite number was calculated based on averaging
each of the four measures.
Based on the Bank's achievement relative to the four performance measures
noted previously, the Committee recommended and the Board approved,
a 1996 annual bonus in the amount of $179,567 for the Chief Executive
Officer, resulting in 79% of the target award. Awards for the other
named executive officers are set forth on the Summary
Compensation Table.
Executive Stock Option Program
Based upon the recommendations made by the outside compensation consultant
retained by the Committee, the Committee authorized the award of 60,000
options to the Chief Executive Officer and the number of options to
each of the other named executive officers as set forth in the Summary
Compensation Table. The number of options granted were based on both
competitive analysis using peer banks, the Bank's performance and
the individual's performance.
Miscellaneous
Although not an element of current compensation, the Chief Executive
Officer's supplemental retirement arrangement was amended in 1996
to make certain technical changes to his supplemental retirement arrangement
which do not materially affect projected payments at normal retirement
but do result in accelerated accruals in the case of early retirement.
This report is submitted by the Bank's Human Resources Committee:
John E. Maloy, Sr., Chairman
Anthony P. Tartaglia, M.D.
Susan J. Stabile, Esq.
Francis L. McKone
Shareholder Return Performance Presentation
Set forth below is a line graph comparing the cumulative total shareholder
return on ALBANK Common Stock with the cumulative total shareholder
return of (i) the total return industry index for NASDAQ bank stocks
and (ii) the total return for the NASDAQ U.S. Stock Market commencing
with respect to ALBANK as of April 1, 1992, the date on which its
Common Stock commenced public trading, and commencing with respect
to the NASDAQ indices as of March 31, 1992, the most readily available
information. Total return assumes the reinvestment of cash dividends.
<TABLE>
COMPARISON OF TOTAL RETURN APRIL 1, 1992/MARCH 31, 1992--DECEMBER 31, 1996
ALBANK COMMON STOCK, NASDAQ BANK STOCK INDEX AND NASDAQ STOCK MARKET INDEX
<CAPTION>
ALBANK NASDAQ Banks NASDAQ Market
<S> <C> <C> <C>
4/1/92-3/31/92 100 100 100
12/31/92 147.5 129.82 112.84
12/31/93 196.25 148.05 129.53
12/31/94 236.67 147.51 126.62
12/31/95 310.73 219.69 179.06
12/31/96 396.86 290.4 220.77
</TABLE>
Indebtedness of Management and Transactions with Certain Related Persons
The Company intends that all transactions between the Company and
the Bank, on the one hand, and executive officers or Directors of
the Bank or the Company, holders of 10% or more of the shares of Common
Stock and controlled entities of the foregoing (collectively, "insiders"),
on the other, will contain terms no less favorable to the Company
or the Bank than could have been obtained by it in arm's-length negotiations
with unaffiliated persons and will be approved by a majority of independent
outside Directors of the Company or the Bank, as the case may be,
not having any interest in the transaction in circumstances where
law or regulation requires such approval.
Pursuant to restrictions imposed by Federal law and regulation, all
loans or extensions of credit by the Bank to insiders must be made
on substantially the same terms, including interest rates and collateral,
as and following credit underwriting procedures that are not less
stringent than those prevailing at the time for comparable transactions
with the general public and must not involve more than the normal
risk of repayment or present other unfavorable features. In addition,
loans made to insiders in excess of the greater of $25,000 or 5% of
the Bank's capital and surplus (or in any event in excess of $500,000)
must be approved in advance by a majority of the disinterested members
of the Board of Directors of the Bank. Loans to insiders are also
subject to limits individually and in the aggregate. The Bank is also
prohibited from extending credit to its executive officers, except
(i) to finance the executive's residence or the education of the executive's
children, or (ii) for any other purpose if the loan does not exceed
at any one time the higher of $25,000 or 2.5% of the institution's
unimpaired capital and unimpaired surplus, not to exceed $100,000.
All outstanding loans by the Bank to Directors, executive officers
and/or family members were made in the ordinary course of business,
on substantially the same terms, including interest rates and collateral,
and following credit underwriting procedures that are not less stringent
than those prevailing at the time for comparable transactions with
other persons, and did not, and do not, involve more than the normal
risk of collectibility or present other unfavorable features.
PROPOSAL 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Bank's independent auditors for the fiscal year ended December
31, 1996, were KPMG Peat Marwick LLP. The Company's Board of Directors
has reappointed KPMG Peat Marwick LLP to continue as independent auditors
for the Bank and the Company for the fiscal year ending December 31,
1997 subject to ratification of such appointment by the stockholders.
Representatives of KPMG Peat Marwick LLP will be present at the 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 stockholders present at the Meeting.
Unless marked to the contrary, the shares represented by the enclosed
Proxy will be voted FOR ratification of the appointment of KPMG Peat
Marwick LLP as the independent auditors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT
OF KPMG PEAT MARWICK LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY.
PROPOSAL 3. A STOCKHOLDER PROPOSAL, OPPOSED BY THE BOARD OF DIRECTORS,
TO RECOMMEND THAT THE BOARD OF DIRECTORS IMMEDIATELY TAKE STEPS NECESSARY
TO ACTIVELY SEEK A SALE OR MERGER OF THE COMPANY ON TERMS THAT WILL
MAXIMIZE SHARE VALUE FOR STOCKHOLDERS.
The Company has received a proposal (the "Proposal"), dated December
4, 1996, by TrustCo Bank Corp NY (the "Proponent" or "TrustCo"), 192
Erie Boulevard, Schenectady, New York, 12305. In the Proposal the
Proponent stated that it is the beneficial owner of 484,460 shares
and the record owner of 100 shares of the Company's common stock.
The Board of Directors believes that the Proposal is not in the best
interest of the Company and its stockholders, and your Board of Directors
unanimously recommends a vote against the Proposal. (See the statement
in opposition by the Board of Directors of ALBANK which follows.)
The Proposal is to adopt the following resolution:
RESOLVED, that the shareholders of ALBANK Financial Corporation ("ALBANK")
do hereby recommend that the board of directors immediately take the
steps necessary to actively seek a sale or merger of ALBANK on terms
that will maximize share value for shareholders.
SUPPORTING STATEMENT
(Submitted by TrustCo)
According to the Hancock Institution Equity Services, as of June 30,
1996, the return on average equity for thrifts and banks in the Northeast
region review was 11.71% and 14.92%, respectively. Unfortunately,
ALBANK's return on average equity was 9.78% for the same period, well
below either average and far below the region's strongest performers.
This lackluster performance, we believe, is due in good part to management's
inability to contain expenses. In ALBANK's 1995 Annual Report, management
reported the percentage of noninterest expense to average assets as
2.22% for 1995. This percentage ballooned to 2.36% for the first quarter
of 1996 and 2.38% for each of the next two quarters, resulting in
an increased cost to ALBANK shareholders of roughly $22 million. Operating
expenses should be declining, not increasing, as assets increase.
Stock ownership by insiders is an excellent indicator of the level
of director and management commitment to shareholders. We believe
that alignment of director/ management and shareholder interests is
essential for share value to receive appropriate emphasis. ALBANK
directors and management (who received approximately $2 million in
compensation in 1995) owned less than 3% of ALBANK stock at March
28, 1996, net of shares received at no cost (under bank recognition
plans) or reduced price shares (under stock option plans). We believe
that this clearly reflects an unwillingness by ALBANK directors and
management to commit their personal resources to ALBANK and thereby
to align their interests with shareholders generally. In addition,
the focus of ALBANK management and directors appears to be on compensation
rather than stock appreciation for its shareholders.
In recent years, the boards of directors and management of a number
of financial institutions have entered into sale or merger transactions
which have produced or are expected to produce for their shareholders
prices equal to or greater than seventeen times earnings. Based on
ALBANK's annualized per share core earnings for the first three quarters
of 1996, $.53, $.54 and $.57, respectively, a sale or merger of ALBANK
at seventeen times annualized earnings would produce a price for ALBANK
stock in excess of $36 per share, representing an immediate increase
of $7.25 over the $28.75 per share trading price of ALBANK stock as
of September 30, 1996.
As the banking industry continues to consolidate at a rapid pace,
a window of opportunity for the shareholders of ALBANK is now open
and time is of the essence. Banks are being acquired at record prices.
The board should take advantage of this active market by immediately
seeking out merger or sale opportunities for ALBANK on terms that
will maximize share value for ALBANK shareholders. We as shareholders
need to communicate to the board the shareholders' expectations that
they will do so.
OPPOSING STATEMENT OF THE ALBANK BOARD OF DIRECTORS
THE ALBANK BOARD OF DIRECTORS BELIEVES THAT THE PROPOSAL IS NOT IN
THE BEST INTEREST OF THE COMPANY AND ITS DTOCKHOLDERS, AND YOUR BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THE PRPOSAL.
The Proposal is made by a major competitor of ALBANK which has previously
sought to acquire ALBANK and whose interests are very different than
the interests of ALBANK's other stockholders.
ALBANK's strategy is working to substantially increase stockholder
values. By growing the business internally and through acquisitions,
ALBANK's core earnings have increased each year, and ALBANK's stock
price has increased 362% (including the value of reinvested dividends)
since its mutual-to-stock conversion in 1992 (based on the closing
price on March 31, 1997).
The Proposal would be disruptive to ALBANK's business, by creating
uncertainties in the minds of customers and employees.
ALBANK's Board of Directors periodically reviews the Company's strategic
options, including the possibility of a merger or sale. The Board,
in the exercise of its fiduciary duties, will carefully consider any
bona fide acquisition offer it receives. Approval of this Proposal
might well encourage potential acquirors to believe ALBANK is available
at a "fire sale" price. The Board believes that approval of the Proposal
could lead to a forced sale that would detract from the value that
would be attainable for ALBANK stockholders.
These reasons are discussed further below.
The Proponent has an underlying interest in the Proposal which is
not shared by the other stockholders. Although not mentioned by TrustCo
in the Proposal or its Supporting Statement, ALBANK and TrustCo compete
directly in the greater capital district area in and around Albany,
New York, and are the two largest locally headquartered and managed
banks serving this market. The Proposal and Supporting Statement also
fail to mention that, in March 1996, TrustCo proposed to acquire the
Company, which proposal was unanimously rejected by the ALBANK Board
of Directors.
Normally, a stockholder proposing a resolution similar to TrustCo's
Proposal shares the same interests as the other stockholders. In this
case, however, TrustCo does not and cannot view the proposed sale
of the Company from the same perspective as that of the other stockholders.
TrustCo, as a major competitor of ALBANK, would only benefit from
a disruption in ALBANK's business due to employee or customer uncertainty.
In addition, although the Proposal purports to urge the Board of Directors
to seek a sale or merger which will maximize share value, TrustCo
may not be genuinely interested in seeking the highest price for ALBANK.
TrustCo may instead be seeking to maximize its chance of acquiring
ALBANK at the most opportune time for it, as a buyer, which may not
be the best time for a sale from the perspective of other ALBANK stockholders.
For these reasons, the Board believes that the Proponent has an interest
in the adoption of the Proposal inconsistent with the best interests
of ALBANK stockholders generally.
Stockholder values are increasing substantially through ALBANK's existing
strategy. Approval of the Proposal would tend to focus the Board's
attention on only one possible avenue to promote stockholder value--the
sale or merger of the Company. The Board believes it also should continue
to evaluate other opportunities to grow in a manner that would promote
stockholder values.
An independent bank such as ALBANK is able to enhance shareholder
value, without a sale or merger, in a number of ways, including through
increased loan and deposit gathering, the furnishing of other fee-generating
services, expense management, and the acquisition of both branch franchises
and other banking institutions. In fact, applying this strategy resulted
in an increase in the Company's earnings per share of 25% from $0.51
per share for the fourth quarter of 1995 to $0.64 per share for the
fourth quarter of 1996 and an increase in the Company's return on
average stockholder equity from 9.27% from the fourth quarter of 1995
to 11.24% for the fourth quarter of 1996. Since year end, ALBANK has
continued to pursue these strategies to enhance stockholder value
as highlighted by the Company's January 1997 agreement to acquire
35 branches in New York State with $530 million in deposits from KeyBank.
Furthermore, the Company stock price which was $8.33 at the time of
its 1992 mutual-to-stock conversion (after adjusting for the 1996
6-for-5 stock split) has increased to $36.375 on March 31, 1997.
Assuming the reinvestment of all dividends, this represents an
increase of 362%.
The Board has continued to pursue policies with respect to its stock
to increase stockholder value, including a significant common stock
repurchase program and the initiation and payment of increasing cash
and stock dividends over the past three years. Indeed, effective in
January of this year ALBANK increased its quarterly cash dividend
by 25%. While stock prices also reflect market conditions generally,
the Company's Board of Directors believes that the increase in ALBANK's
stock price is evidence that the Company's strategy makes sense, and
that approval of the Proposal would not be in the best interests of
ALBANK stockholders.
It is important to note that directors, officers and other employees
collectively beneficially own or have the right to acquire pursuant
to the Company's stock option plans approximately 18% of ALBANK's
outstanding shares. Their interests are, therefore, closely aligned
with all shareholders in seeking to maximize value.
The Board also believes that approval of the Proposal would be disruptive
to the Company's business operations. The Proposal might lead potential
customers to believe that the Company is about to be sold or merged.
The Board believes that many current ALBANK customers have established
banking relationships with ALBANK because it is independent and
service-oriented. Therefore, the Proposal, if adopted, could weaken
a cornerstone of the Company's long-term strategy by placing doubts in
the minds of both current and prospective customers as to ALBANK's
future ownership and direction. The Proposal could also substantially
undermine employee confidence in their future status with the Company,
thereby resulting in departures of key employees or lower productivity.
The Proposal could encourage "fire sale" offers that would detract
from values that might otherwise be attainable. Directors are elected
by stockholders to manage the business and affairs of the Company
and to evaluate and consider all of the various strategic options
which may be available from time to time. The Board periodically reviews
the Company's progress and is responsible for determining if, when
and under what conditions, a sale of the Company should be considered.
Approval of the Proposal would encourage the Board to act precipitously
to sell ALBANK and thereby would restrict the Board's ability to examine
all strategic alternatives.
The Board, in the exercise of its fiduciary duties, will as always
carefully consider any appropriate action, including evaluation of
any bona fide offer for the sale of the Company that would serve the
best interests of the stockholders. Therefore, the Board believes
the Proposal is redundant and unnecessary. Moreover, approval of the
Proposal could lead potential acquirors to believe that the Company
could be purchased at a "fire sale" price. Approval of the Proposal
might cause any potential bidder who may come forward to reduce the
value it would propose to pay to ALBANK stockholders. The Board believes
a sale under such circumstances would detract from the value that
would be attainable.
FOR ALL OF THE ABOVE REASONS, YOUR BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
ADDITIONAL INFORMATION
Certain Exchange Act Filings
Based solely upon a review of Forms 3, 4 and 5 and amendments thereto
furnished to the Company by its directors and officers, the following
failed to file on a timely basis: Mr. Elliot, two Forms 4 reflecting
two transactions, and Mr. Blenis, one Form 3 representing one transaction.
Stockholder Proposals
To be considered for inclusion in the proxy statement and proxy relating
to the Annual Meeting of Stockholders to be held in 1998, a stockholder
proposal must be received by the Secretary of the Company at the address
set forth on the first page of this Proxy Statement, not later than
December 13, 1997. Any such proposal will be subject to SEC Rule 14a-8
under the Exchange Act.
Notice of Business to be Conducted and Nomination of Directors at
an Annual Meeting
The bylaws of the Company provide an advance notice procedure for
certain business to be brought before an Annual Meeting. In order
for a stockholder to properly bring business before an Annual Meeting,
the stockholder must give written notice to the Secretary of the Company
not less than 30 days before the time originally fixed for such meeting;
provided, however, that in the event that less than 40 days notice
or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must
be received not later than the close of business on the tenth day
following the day on which such notice of the date of the Annual Meeting
was mailed or such public disclosure was made. The notice must include
the stockholder's name and address, as it appears on the Company's
record of stockholders, a brief description of the proposed business,
the reason for conducting such business at the Annual Meeting, the
number of shares of Common Stock that are beneficially owned by such
stockholder and any material interest of such stockholder in the proposed
business. The same advance notice requirements are applicable to stockholder
nominations of persons for election as a Director. In the case of
nominations to the Board, the information that is required to be disclosed
in solicitations for proxies for elections of Directors under the
rules of the SEC must also be provided. Nothing in this paragraph
will be deemed to require the Company to include in its proxy statement
and proxy relating to the 1998 Annual Meeting any stockholder proposal
which does not meet all of the requirements for inclusion established
by the SEC in effect at the time such proposal is received.
Other Matters Which May Properly Come Before the Meeting
The Board of Directors knows of no business which will be presented
for consideration at the Meeting other than as stated in the Notice
of Annual Meeting of Stockholders. If, however, other matters are
properly brought before the Meeting, it is the intention of the persons
named in the accompanying proxy to vote the shares represented thereby
on such matters in accordance with their best judgment.
Whether or not you intend to be present at the Meeting, you are urged
to return your proxy promptly. If you are present at the Meeting and
wish to vote your shares in person, your proxy may be revoked by voting
at the Meeting.
A copy of the Company's Annual Report on Form 10-K (without exhibits)
for the year ended December 31, 1996, as filed with the SEC will be
furnished without charge to stockholders of record upon written request
to ALBANK Financial Corporation, Attention: Freling H. Smith, 10 North
Pearl Street, Albany, NY 12207.
By Order of the Board of Directors
/s/Freling H. Smith
Freling H. Smith
Secretary
Albany, New York
April 12, 1997
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE PAID
ENVELOPE.
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Please mark X
your votes
like this
The Board of Directors recommends a vote FOR Propositions 1&2
<TABLE>
<CAPTION>
FOR ALL WITHHELD
nominees<F1> FOR ALL
<S> <C> <C>
1. Election of
Directors
John E. Maloy, Sr.
Henry M. Elliot, Jr.
and Karen R. Hitchcock, Ph.D.
<FN>
<F1> (To withhold authority to vote for any individual nominee write that
nominee's name on the line provided below.)
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. Ratification of independent auditors
</TABLE>
The Board of Directors recommends a vote Against Proposition 3
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
3. Stockholder proposal to
seek the sale or merger
of the Company
</TABLE>
Receipt is hereby acknowledged of ALBANK Financial
Corporation Notice of Meeting and Proxy Statement
Signature(s) Date
NOTE: Please sign exactly as name appears. For joint account, each
owner should sign.
FOLD AND DETACH HERE
ALBANK FINANCIAL CORPORATION
10 North Pearl Street
Albany, New York 12207
This Voting Instruction is Solicited on Behalf of the Board of Directors
and Management
This voting instruction is sought by the Trustee of the Albany Savings
Bank, FSB Incentive Savings and Employee Stock Ownership Plan and
the Trustee of the Albany Savings Bank, FSB Recognition and Retention
Plans and Trusts in connection with a Proxy that is Solicited on Behalf
of the Board of Directors and management.
The Trustees of the aforementioned plans will cast votes on each of
the following matters, as set forth in the Proxy Statement, in accordance
with the voting instructions designated below, and upon such other
matters properly coming before the meeting.
If this voting instruction is signed, but no direction is given, the
Trustee will cast the votes represented hereby For Propositions 1
& 2 and Against Proposition 3.
(Continued and to be signed on other side)
FOLD AND DETACH HERE
Please mark X
your votes
like this
The Board of Directors recommends a vote FOR Propositions 1&2
<TABLE>
<CAPTION>
FOR ALL WITHHELD
nominees<F1> FOR ALL
<S> <C> <C>
1. Election of
Directors
John E. Maloy, Sr.
Henry M. Elliot, Jr.
and Karen R. Hitchcock, Ph.D.
<FN>
<F1> (To withhold authority to vote for any individual nominee write that
nominee's name on the line provided below.)
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. Ratification of independent auditors
</TABLE>
The Board of Directors recommends a vote Against Proposition 3
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
3. Stockholder proposal to
seek the sale or merger
of the Company
</TABLE>
I WILL ATTEND THE
ANNUAL MEETING
COMMENTS/ADDRESS CHANGE
Please mark this box if you have
written comments/address change
on the reverse side
Receipt is hereby acknowledged of ALBANK Financial
Corporation Notice of Meeting and Proxy Statement
Signature(s) Date
NOTE: Please sign exactly as name appears. For joint account, each
owner should sign.
FOLD AND DETACH HERE
ALBANK FINANCIAL CORPORATION
10 North Pearl Street
Albany, New York 12207
This Proxy is Solicited on Behalf of the Board of Directors and Management
The undersigned hereby appoints MARK L. HELLER and MICHAEL T. REILLY
and each of them proxies with power of substitution, to represent
and to vote as designated below, on behalf of the undersigned at the
Annual Meeting of Stockholders of the Corporation to be held on May
21, 1997 and at any adjournment thereof on each of the following matters,
as set forth in the Proxy Statement, and upon such other matters properly
coming before this meeting.
This proxy when properly executed will be voted in the manner directed
by the stockholder. If no direction is given, this proxy will be voted
For Propositions 1 & 2 and Against Proposition 3.
P
R
O
X
Y
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT/ADDRESS BOX ON REVERSE SIDE
(Continued and to be signed on other side)
FOLD AND DETACH HERE
