March 31, 2007
Dear Shareholder:
We cordially invite you to attend the Annual Meeting of Shareholders of
Pathfinder Bancorp, Inc. The Annual Meeting will be held at the Econolodge, 70
East First Street, Oswego, New York at 10:00 a.m., Eastern Time, on April 25,
2007.
The enclosed Notice of Annual Meeting and Proxy Statement describe the formal
business to be transacted. During the Annual Meeting we will also report on our
operations. Directors and officers, as well as a representative of our
independent registered public accounting firm (also referred to as our
"Auditors"), will be present to respond to questions that shareholders may
properly present.
The Annual Meeting is being held so that shareholders may consider the election
of directors and the ratification of the appointment of Beard Miller Company LLP
as the Company's independent registered public accounting firm for 2007.
For the reasons set forth in the Proxy Statement, the Board of Directors
unanimously recommends a vote "FOR" the election of directors and the
ratification of the appointment of Beard Miller Company LLP as our independent
registered public accounting firm.
On behalf of the Board of Directors, we urge you to sign, date and return the
enclosed proxy card as soon as possible, even if you currently plan to attend
the Annual Meeting. This will not prevent you from voting in person, but will
assure that your vote is counted if you are unable to attend the meeting. Your
vote is important, regardless of the number of shares that you own.
Sincerely,
Thomas W. Schneider
President and Chief Executive Officer
PATHFINDER BANCORP, INC.
214 WEST FIRST STREET
OSWEGO, NEW YORK 13126
(315) 343-0057
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 25, 2007
Notice is hereby given that the Annual Meeting of Pathfinder Bancorp, Inc.,
will be held at the Econolodge, 70 East First Street Oswego, New York on April
25, 2007 at 10:00 a.m., Eastern Time.
A Proxy Card and a Proxy Statement for the Annual Meeting are enclosed.
The Annual Meeting is for the purpose of considering and acting upon:
1) The election of three Directors;
2) The ratification of the appointment of Beard Miller Company
LLP as our independent registered public accounting firm for the
year ending December 31, 2007 and
such other matters as may properly come before the Annual Meeting, or any
adjournments thereof. The Board of Directors is not aware of any other business
to come before the Annual Meeting.
Any action may be taken on the foregoing proposals at the Annual Meeting on the
date specified above, or on any date or dates to which the Annual Meeting may be
adjourned. Shareholders of record at the close of business on March 15, 2007 are
the shareholders entitled to vote at the Annual Meeting, and any adjournments
thereof.
EACH SHAREHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE ANNUAL MEETING, IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WITHOUT DELAY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE SHAREHOLDER MAY BE
REVOKED AT ANY TIME BEFORE IT IS EXERCISED. A PROXY MAY BE REVOKED BY FILING
WITH OUR CORPORATE SECRETARY A WRITTEN REVOCATION OR A DULY EXECUTED PROXY
BEARING A LATER DATE. ANY SHAREHOLDER PRESENT AT THE ANNUAL MEETING MAY REVOKE
HIS OR HER PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE ANNUAL
MEETING. HOWEVER, IF YOU ARE A SHAREHOLDER WHOSE SHARES ARE NOT REGISTERED IN
YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN
ORDER TO VOTE PERSONALLY AT THE ANNUAL MEETING.
By Order of the Board of Directors
Edward A. Mervine
Secretary
March 31, 2007
--------------------------------------------------------------------------------
IMPORTANT: A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO
POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
--------------------------------------------------------------------------------
PROXY STATEMENT
PATHFINDER BANCORP, INC.
214 WEST FIRST STREET
OSWEGO, NEW YORK 13126
(315) 343-0057
ANNUAL MEETING OF SHAREHOLDERS
APRIL 25, 2007
This proxy statement is furnished in connection with the solicitation of proxies
on behalf of the board of directors of Pathfinder Bancorp, Inc. to be used at
our annual meeting of shareholders, which will be held at the Econolodge, 70
East First Street, Oswego, New York on April 25, 2007, at 10:00 a.m., eastern
time, and all adjournments of the annual meeting. The accompanying notice of
annual meeting of shareholders and this proxy statement are first being mailed
to shareholders on or about March 31, 2007.
--------------------------------------------------------------------------------
REVOCATION OF PROXIES
--------------------------------------------------------------------------------
Shareholders who sign the proxies we are soliciting will retain the right
to revoke them in the manner described below. Unless so revoked, the shares
represented by such proxies will be voted at the annual meeting and all
adjournments thereof. Proxies solicited on behalf of the Board of Directors will
be voted in accordance with the directions given thereon. Where no instructions
are indicated, validly executed proxies will be voted "for" the proposals set
forth in this proxy statement. If any other matters are properly brought before
the annual meeting, the persons named in the accompanying proxy will vote the
shares as directed by a majority of the board of directors in attendance at the
annual meeting on such matters, if any, that may properly come before the annual
meeting or any adjournments thereof. We know of no additional matters that will
be presented for consideration at the annual meeting. If a shareholder who
wishes to bring a matter for shareholder consideration (other than a shareholder
proposal) fails to notify us at least 45 days prior to the month and day of the
mailing of last year's proxy statement, then management proxies are permitted to
use their discretionary voting authority if the proposal is raised at the annual
meeting without discussion of the matter in the proxy statement. We are not
aware of any such proposals for this year's annual meeting.
Proxies may be revoked by sending written notice of revocation to our
Secretary, at the address shown above, by delivering to us a duly executed proxy
bearing a later date, or by attending the annual meeting and voting in person.
The presence at the annual meeting of any shareholder who had returned a proxy
will not revoke the proxy unless the shareholder delivers his or her ballot in
person at the annual meeting or delivers a written revocation to our Secretary
prior to the voting of the proxy. If you are a shareholder whose shares are not
registered in your name, you will need appropriate documentation from your
record holder to vote in person at the annual meeting.
--------------------------------------------------------------------------------
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
--------------------------------------------------------------------------------
Holders of record of our common stock, par value $0.01 per share as of the
close of business on March 15, 2007 (the "Record Date") are entitled to one vote
for each share they own. As of the Record Date, we had 2,483,532 shares of
common stock issued and outstanding of which 1,583,239 were held by our mutual
holding company Pathfinder Bancorp, M.H.C., and 900,293 of which were held by
shareholders other than Pathfinder Bancorp, M.H.C. ("Minority Shareholders").
The presence in person or by proxy of a majority of the outstanding shares of
common stock entitled to vote is necessary to constitute a quorum at the annual
meeting. If a shareholder holds shares in street name (i.e. the shares are held
in a stock brokerage account or by a bank, trust, or other institution) and does
not provide voting instructions to the holder of the account, such shares will
be considered "Broker non-votes." Broker non-votes and proxies marked abstain
will be counted for purposes of determining that a quorum is present. As to the
election of directors, shareholders may cast their votes "For" or "Withheld." As
to the ratification of the retention of our independent registered public
accounting firm, shareholders may cast their votes "For", "Against" or
"Abstain". Directors are elected by a plurality of votes cast, without regard to
either broker non-votes, or proxies as to which the authority to vote for the
nominees being proposed is withheld. The affirmative vote of holders of a
majority of the total votes cast at the annual meeting in person or by proxy,
without regard to broker non-votes or proxies as to which shareholders abstain,
is required for ratification of Beard Miller Company LLP as our independent
registered public accounting firm. Because our mutual holding company owns a
majority of the outstanding shares, should it vote "For" the proposals, passage
of the proposals would be assured.
Persons and groups who beneficially own in excess of five percent of the
common stock are required to file certain reports with the Securities and
Exchange Commission (the "SEC") regarding such ownership. The following table
sets forth, as of the Record Date, the shares of common stock beneficially owned
by directors individually, by executive officers individually, by executive
officers and directors as a group and by each person who was the beneficial
owner of more than five percent of our outstanding shares of common stock. None
of the shares beneficially owned by directors, executive officers or nominees to
the board of directors have been pledged as security or collateral for any
loans.
Amount of Shares
Owned and Nature Percentage of Shares
Name and Address of Of Beneficial of Common Stock
Beneficial Owners (1) Ownership (2) Outstanding
--------------------------------------------------------------------------------------
DIRECTORS AND EXECUTIVE OFFICERS (2):
Janette Resnick 3,130 (4) .13%
Thomas W. Schneider 7,565 (5) .30
Chris R. Burritt 4,800 (6) .19
George P. Joyce 1,775 .07
Bruce E. Manwaring 12,815 .52
L. William Nelson, Jr. 26,950 (7) 1.09
Corte J. Spencer 14,500 .58
Steven W. Thomas 10,734 .43
Lloyd "Buddy" Stemple 500 .02
James A. Dowd 7,868 .32
Melissa A. Miller 3,518 .14
Edward A. Mervine 2,019 .08
Ronald Tascarella 5,000 .20
All Directors and Executive Officers 101,174 4.07%
as a Group (13 persons) (3)
PRINCIPAL SHAREHOLDERS:
Pathfinder Bancorp, M.H.C. (3) 1,583,239 63.75%
214 West First Street
Oswego, New York 13126
Pathfinder Bancorp, M.H.C. and all
Directors and Executive Officers 1,684,413 67.82%
--------------------------------------------------------------------------------
1) The mailing address for each person listed is 214 West First
Street, Oswego, New York 13126.
2) A person is deemed to be the beneficial owner, for purposes of
this table, of any shares of common stock if he has shared voting or
investment power with respect to such security, or has a right to
acquire beneficial ownership at any time within 60 days from the
Record Date. As used herein, "voting power" is the power to vote or
direct the voting of shares and "investment power" is the power to
dispose or direct the disposition of shares. This table includes all
shares held directly as well as by spouses and minor children, in
trust and other indirect ownership, over which shares the named
individuals effectively exercise sole or shared voting and investment
power. Unless otherwise indicated, the named individual has sole
voting and investment power.
3) All of our directors are also directors of Pathfinder Bancorp,
M.H.C. Four of our executive officers are also executive officers of
the Pathfinder Bancorp, M.H.C.
2
4) Ms. Resnick has sole voting power over 2,600 shares and shared
voting and investment power over 530 shares.
5) Mr. Schneider has sole voting and investment power over 7,265
shares and shared voting and investment power over 300 shares.
6) Mr. Burritt has sole voting and investment power over 4,650
shares and shared voting and investment power over 150 shares.
7) Mr. Nelson has sole voting and investment power over 8,470 shares
and shared voting and investment power over 18,480 shares.
--------------------------------------------------------------------------------
CONDUCT OF MEETING
--------------------------------------------------------------------------------
In accordance with the Bylaws, and by action of the Board of Directors, the
Chair of the Board will preside over the annual meeting. The Chair of the Board
has broad authority to ensure the orderly conduct of the meeting. This includes
discretion to recognize shareholders who wish to speak, and determine the extent
of discussion on each item of business. Rules governing the conduct of the
meeting have been established and will be available at the meeting along with
the Agenda.
--------------------------------------------------------------------------------
PROPOSAL 1 - ELECTION OF DIRECTORS
--------------------------------------------------------------------------------
Our Board of Directors is currently composed of nine members. Our bylaws
provide that approximately one-third of the Directors are to be elected
annually. Directors are generally elected to serve for a three-year period and
until their respective successors shall have been elected and qualify. Three
Directors will be elected at the annual meeting, each to serve for a three-year
period and until their respective successors shall have been elected and
qualify. The Board of Directors' Nominating/Governance Committee has nominated
to serve as Directors: Steven W. Thomas, Corte J. Spencer and Janette Resnick.
The table below sets forth certain information regarding the composition of
the Board of Directors, including the terms of office of Board members. It is
intended that the proxies solicited on behalf of the Board of Directors (other
than proxies in which the vote is withheld as to one or more nominees) will be
voted at the annual meeting for the election of the nominees identified below.
If the nominee is unable to serve, the shares represented by all such proxies
will be voted for the election of such substitute as the Board of Directors may
recommend. At this time, the Board of Directors knows of no reason why any of
the nominees would be unable to serve if elected. Except as indicated herein,
there are no arrangements or understandings between any nominee and any other
person pursuant to which such nominee was selected.
CURRENT
DIRECTOR TERM TO
NAME (1) AGE POSITION HELD SINCE(2) EXPIRE
---------------------------------------------------------------------------------------
NOMINEES
Steven W. Thomas 44 Director 2000 2007
Corte J. Spencer 64 Director 1984 2007
Janette Resnick 64 Chair of the Board 1996 2007
DIRECTORS CONTINUING IN OFFICE
Thomas W. Schneider 45 President, Chief Executive Officer 2001 2008
Chris R. Burritt 53 Director 1986 2008
Bruce E. Manwaring 65 Director 1984 2009
L. William Nelson, Jr. 63 Director 1986 2009
George P. Joyce 56 Director 2000 2009
Lloyd "Buddy" Stemple 46 Director 2005 2009
---------------------------------------------------------------------------------------
(1) The mailing address for each person listed is 214 West First
Street, Oswego, New York 13126. Each of the persons listed is also a
Director of Pathfinder Bancorp, M.H.C., which owns the majority of our
issued and outstanding shares of common stock. Information regarding
the common stock beneficially owned by each director is set forth
under "Voting Securities and Principal Holders Thereof".
(2) Dates prior to 1995 reflect initial appointment to the Board of
Trustees of the mutual predecessor to Pathfinder Bank.
3
The principal occupation during the past five years of each Director and
Executive Officer is set forth below. All Directors and Executive Officers have
held their present positions for five years unless otherwise stated.
JANETTE RESNICK, is the Chair of the Board. She has been retired since
2003. Prior to her retirement she was the Executive Director of Oswego County
Opportunities, a private, not for profit human services agency located in Oswego
and Fulton, New York.
CHRIS R. BURRITT, is the president and general manager of R.M. Burritt
Motors, Inc./Chris Cross, Inc., an automobile dealership located in Oswego, New
York.
BRUCE E. MANWARING retired effective March 1, 2007 as the Chamberlain for
the City of Oswego. Prior to his appointment in 1999, Mr. Manwaring was the
owner of Oswego Printing Co. located in Oswego, New York.
WILLIAM NELSON, JR. is the owner and manager of Nelson Funeral Home located
in Oswego, New York.
STEVEN W. THOMAS is a licensed real estate broker and a developer. Mr.
Thomas is involved in numerous commercial development projects in Oswego County.
Mr. Thomas is also a member of Surelock Industries, LLC, a local wood floor
manufacturer.
GEORGE P. JOYCE is the owner and operator of Laser Transit, Ltd., Lacona,
New York, a Central New York logistics services provider.
CORTE J. SPENCER retired effective January 1, 2007 as the Chief Executive
Officer and Administrator of Oswego Hospital and the managing director of Oswego
Health, Inc. located in Oswego, New York.
LLOYD "BUDDY" STEMPLE is the Vice-President and General Manager of Novelis
Specialty Products Group, Inc. which has manufacturing locations in Oswego, New
York, Kingston, Ontario Canada and sales offices in Cleveland, Ohio and Detroit,
Michigan.
EXECUTIVE OFFICERS OF THE COMPANY WHO ARE DIRECTORS
THOMAS W. SCHNEIDER is the President and Chief Executive Officer of
Pathfinder Bancorp, Inc. and Pathfinder Bank. Prior to his appointment as
President in 2000, Mr. Schneider was the Executive Vice President and Chief
Financial Officer of Pathfinder Bancorp, Inc. and Pathfinder Bank.
INDEPENDENCE OF DIRECTORS
Our common stock is listed on the Nasdaq Capital Market. The Board of
Directors has considered the Nasdaq listing requirements for "Independence" of
Directors, and although we may be exempt as a "controlled" Company pursuant to
Nasdaq rules, the Board of Directors has determined that all of its Directors
with the exception of Mr. Schneider are "Independent" pursuant to Nasdaq's
listing requirements. Our independent directors will hold executive sessions no
less than twice a year. Shareholders who wish to communicate with the Chair or
with the independent directors as a group may do so by writing to our Corporate
Secretary at Pathfinder Bancorp, Inc., 214 West First Street, Oswego, New York
13126. The Corporate Secretary will forward said communication to the
independent directors or Chair as requested by the shareholder.
In determining the independence of the directors listed above, the Board of
Directors reviewed the following transactions, which are not required to be
reported under "Transactions With Certain Related Persons," below.
The Company's subsidiary, Pathfinder Bank, has a ground lease with West
Seneca LLC for the property upon which the Fulton New York Bank branch is
located. West Seneca LLC is wholly owned by our director, Steven W. Thomas. The
4
ground lease is for a period of ten years to expire September 30. 2012. The Bank
has six five year options to renew this lease. During the year 2006, the Bank
paid as ground rent to West Seneca LLC the sum of $27,000. The Board, with Mr.
Thomas abstaining, approved the transaction and determined that the lease was on
terms no less favorable to the Bank than would be obtained from an unaffiliated
third party. The lease was submitted to the New York State Banking Department
and the FDIC as part of the Bank's application to open the Fulton Branch.
Pathfinder Bank purchased two automobiles from a dealership owned by
director Chris Burritt in 2004. During 2006, the Bank paid $6,600 to that
dealership for repairs on the vehicles.
Pathfinder Bank MHC, a holder of 63.8% of the Company's stock , donated
$2,833 to Oswego Hospital in 2006. Director Corte Spencer was Executive Director
of the Hospital at the time of this donation. The decision to donate to this
organization in the Company's market area was made by the Board, with Mr.
Spencer abstaining from the vote.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
JAMES A. DOWD, CPA, age 39, is a Senior Vice President and Chief Financial
Officer of Pathfinder Bancorp, Inc. and Pathfinder Bank. Mr. Dowd is responsible
for the accounting and finance departments.
MELISSA A. MILLER, age 49, has been employed by the Bank since 1976 and is
a Senior Vice President and Chief Operating Officer of Pathfinder Bancorp, Inc.
and Pathfinder Bank. Ms. Miller is responsible for deposit operations,
compliance, and information services.
EDWARD A. MERVINE, ESQ., age 50, is Senior Vice President, General Counsel
and Corporate Secretary for Pathfinder Bancorp, Inc. and Pathfinder Bank. Prior
to joining us in 2002, Mr. Mervine was a partner in the law firm of Bond
Schoeneck & King, LLP.
RONALD TASCARELLA, age 48, is Senior Vice President and Chief Credit
Officer. Ron joined the Company in 2006. Prior to joining he was Senior Vice
President of Oswego County National Bank, one of the Company's primary
competitors.
OWNERSHIP REPORTS BY OFFICERS AND DIRECTORS
Our common stock is registered with the SEC pursuant to Section 12(b) of
the Securities Exchange Act of 1934 (the "Exchange Act"). Our officers and
directors and beneficial owners of greater than 10% of our common stock ("10%
beneficial owners") are required to file reports on Forms 3, 4 and 5 with the
SEC disclosing beneficial ownership and changes in beneficial ownership of the
common stock. SEC rules require disclosure in our Proxy Statement or Annual
Report on Form 10-K of the failure of an officer, director or 10% beneficial
owner of our common stock to file a Form 3, 4, or 5 on a timely basis. All of
our officers and directors filed these reports in a timely fashion.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Board of Directors is conducted through meetings and
activities of the Board and its committees. During the year ended December 31,
2006, the Board of Directors held twelve regular and two special meetings.
During the year ended December 31, 2006, no director attended fewer than 75%
percent of the total meetings of the Board of Directors and committees on which
such director served.
The Compensation Committee meets periodically to review the performance of
officers and employees and to determine compensation programs and adjustments.
The entire Board of Directors ratifies the recommendations of the Compensation
Committee. In the year ending December 31, 2006, the Compensation Committee
consisted of Directors Gagas (since retired), Manwaring, Resnick, Spencer and
Nelson. All of these Directors are "Independent" pursuant to Nasdaq listing
requirements. The Compensation Committee met three times during the year ended
December 31, 2006. The Compensation Committee has a charter which is available
at our website at www.pathfinderbank.com.
-----------------------
5
The Nominating/Governance Committee meets several times a year to address
issues concerning corporate governance, succession planning, and to nominate
directors to fulfill the terms of the upcoming year. In the year ended December
31, 2006, the Nominating/Governance Committee was comprised of directors Thomas,
Manwaring, Joyce, Resnick and Spencer, all of whom are "Independent" pursuant to
the Nasdaq listing requirements. The Nominating/Governance Committee has a
charter in the form of governance guidelines which is available at our website
at www.pathfinderbank.com.
-----------------------
Among other things, the functions of the Nominating/Governance Committee
include the following:
- to lead the search for individuals qualified to become members of
the Board and to select director nominees to be presented for
shareholder approval;
- to review and monitor compliance with the requirements for board
independence; and
- to review the committee structure and make recommendations to the
Board regarding committee membership.
The Nominating/Governance Committee identifies nominees by first evaluating
the current members of the Board of Directors willing to continue in service.
Current members of the Board with skills and experience that are relevant to our
business and who are willing to continue in service are first considered for
re-nomination, balancing the value of continuity of service by existing members
of the Board with that of obtaining a new perspective. If any member of Board
does not wish to continue in service, or if the Committee or the Board decides
not to re-nominate a member for re-election, or if the size of the Board is
increased, the Committee would solicit suggestions for director candidates from
all Board members. In addition, the Committee is authorized by its charter to
engage a third party to assist in the identification of director nominees. The
Nominating/Governance Committee would seek to identify a candidate who, at a
minimum, satisfies the following criteria:
- has personal and professional ethics and integrity and whose
values are compatible with ours;
- has had experiences and achievements that have given him or her
the ability to exercise and develop good business judgment;
- is willing to devote the necessary time to the work of the Board
and its committees, which includes being available for Board and
committee meetings;
- is familiar with the communities in which the Company operates
and/or is actively engaged in community activities;
- is involved in other activities or interests that do not create a
conflict with his or her responsibilities to us and our shareholders;
and
- has the capacity and desire to represent the balanced, best
interest of our shareholders as a group, and not primarily a special
interest group or constituency.
The Nominating/Governance Committee will also take into account whether a
candidate satisfies the criteria for "independence" under the Nasdaq corporate
governance listing standards and, if a nominee is sought for service on the
Audit Committee, the financial and accounting expertise of a candidate,
including whether an individual qualifies as an Audit Committee Financial
Expert.
The Nominating/Governance Committee will consider candidates for the Board
of Directors recommended by shareholders. In order to make a recommendation to
the Board of Directors, a shareholder must own no less than 500 shares of the
corporation. Shareholders who are so qualified may send their recommendations to
our Corporate Secretary for forwarding to the Nominating/Governance Committee.
In light of the due diligence required to evaluate recommendations, said
recommendations for the Nominating/Governance candidate for the 2008 annual
meeting must be made by June 30, 2007.
6
Shareholders may submit the names of candidates to be considered by writing
to our Corporate Secretary, at 214 West First Street, Oswego, New York 13126.
The submission must include the following information:
- the name and address of the shareholder as it appears on our
books, and number of shares of our common stock that are owned
beneficially by such shareholder (if the shareholder is not a holder
of record, appropriate evidence of the shareholder's ownership will be
required).
- the name, address and contact information for the candidate, and
the number of shares of our common stock that are owned by the
candidate (if the candidate is not a holder of record, appropriate
evidence of the shareholder's ownership should be provided).
- a statement of the candidate's business and educational experience.
- such other information regarding the candidate as would be
required to be included in the proxy statement pursuant to SEC
Regulation 14A.
- a statement detailing any relationship between us and the candidate.
- a statement detailing any relationship between the candidate and
any of our customers, suppliers or competitors.
- detailed information about any relationship or understanding
between the proposing shareholder and the candidate and
- a statement that the candidate is willing to be considered and
willing to serve as a director if nominated and elected.
The Nominating/Governance Committee will consider shareholder recommen-
dations made in accordance with the above similarly to any other nominee
proposed by any other source. We have not paid a fee to any third party to
identify or evaluate any potential nominees. Moreover, the Nominating/Governance
Committee has not received within the last year a recommended nominee from a
shareholder who beneficially owned more than five percent (5%) of the Company's
common stock for at least one (1) year, or from a group of shareholders owning
more than five (5%) percent of the common stock.
The Audit Committee consists of Directors Manwaring, Nelson, Spencer and
Joyce. The Audit Committee meets on a periodic basis with the internal auditor
to review audit programs and the results of audits of specific areas, on
regulatory compliance issues, as well as to review information to further their
financial literacy skills. The Audit Committee meets with the Auditors to review
quarterly and annual filings, the results of the annual audit and other related
matters. The Chairman of the Audit Committee may meet with the Auditors on
quarterly filing issues in lieu of the entire committee. Each member of the
Audit Committee is "independent" as defined in the listing standards of Nasdaq
and SEC Rule 10A-3. Our Board of Directors has adopted a written charter for the
Audit Committee which is available on our website at www.pathfinderbank.com.
----------------------
The Audit Committee maintains an understanding of our key areas of
financial risk and assesses the steps management takes to minimize and manage
such risks; selects and evaluates the qualifications and performance of the
Auditors, ensures that the internal and external auditors maintain no
relationship with management and/or us that would impede their ability to
provide independent judgment; oversees the adequacy of the systems of internal
control; reviews the nature and extent of any significant changes in accounting
principles; and oversees that management has established and maintained
processes reasonably calculated to ensure our compliance with all applicable
law, regulations, corporate policies and other matters contained in our Code of
Ethics which is available on our website at www.pathfinderbank.com. The Audit
-----------------------
Committee has established procedures for the confidential, anonymous submission
by employees of concerns regarding accounting or auditing matters.
7
The Board of Directors of Pathfinder Bancorp, Inc. has determined that
Bruce E. Manwaring, chairman of the Audit Committee in 2004, 2005, and 2006
qualifies as a financial expert serving on the committee. Mr. Manwaring meets
the criteria established by the Securities and Exchange Commission as follows:
- Mr. Manwaring maintains an understanding of generally accepted
accounting principles and financial statements and has the ability to
assess the application of such principles in connection with
accounting for estimates, accruals and reserves.
- Mr. Manwaring has garnered comparable experience preparing and
analyzing financial statements in his position as the Chamberlain of
the City of Oswego, from which he recently retired.
- Mr. Manwaring has earned a Bachelor of Science degree majoring in
accounting from the State University of New York, College at Oswego
and has successfully passed the Uniform Certified Pubic Accountancy
Examination.
- Through his work experience and education, Mr. Manwaring has
developed a thorough understanding of internal controls and financial
reporting procedures, as well as a detailed understanding of audit
committee functions.
The Board of Directors has also determined that Mr. Manwaring and all of
the Audit Committee members meet the definition of "Independent" as prescribed
by the Nasdaq listing requirements, and are all financially literate.
AUDIT AND AUDIT RELATED FEES
Beard Miller Company LLP billed us a total of $83,942 for the audit of our
2006 annual financial statements and for the review of the related Forms 10-Q.
During the fiscal year ended December 31, 2005, Beard Miller Company LLP billed
us a total of $76,653 for the audit of our 2005 annual financial statements and
its review of the related Forms 10-Q.
The Audit Committee considered whether the provision of non-audit services
was compatible with maintaining the independence of its Auditors. The Audit
Committee concluded that performing such services in 2006 did not affect the
auditors' independence in performing their function as independent registered
public accounting firm.
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES OF THE
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee's policy is to pre-approve all audit and non-audit
services provided by the Auditors. These services may include audit services,
audit-related services, tax services and other services. Pre-approval is
generally provided for up to one year and any pre-approval is detailed as to
particular service or category of services and is generally subject to a
specific budget. The Audit Committee has delegated pre-approval authority to its
Chairman when expedition of services is necessary. The Auditors and management
are required to periodically report to the full Audit Committee regarding the
extent of services provided by the Auditors in accordance with this
pre-approval, and the fees for the services performed to date.
8
ALL OTHER FEES
Aggregate fees billed for other services rendered by Beard Miller Company
LLP during the years ended December 31, 2006 and 2005 were as follows:
2006 2005
--------------------------------------------------------------------------------
Recurring and non-recurring tax services
Beard Miller Company LLP $15,000 $11,450
All other fees
Beard Miller Company LLP $ 0 $ 0
--------------------------------------------------------------------------------
Recurring and non-recurring tax services include assistance in connection
with the New York State Franchise tax examination.
AUDIT COMMITTEE REPORT
In accordance with rules established by the SEC, the Audit Committee has
prepared the following report for inclusion in this proxy statement:
As part of its ongoing activities, the Audit Committee has:
- Reviewed and discussed with management our audited consolidated
financial statements for the year ended December 31, 2006;
- Discussed with the Auditors the matters required to be discussed
by Statement on Auditing Standards No. 61, Communications with Audit
Committees, as amended;
- Received the written disclosures and the letter from the Auditors
required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, and has discussed with the Auditors
their independence; and
- Considered the compatibility of non-audit services described
above with maintaining auditor independence.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited consolidated financial
statements be included in our Annual Report on Form 10-K for the year ended
December 31, 2006. The Audit Committee appointed Beard Miller Company LLP as
Auditors for 2007, which appointment the shareholders will be asked to ratify at
the Annual Meeting.
This report has been provided by the Audit Committee:
Messrs, Joyce, Spencer, Manwaring, and Nelson.
COMPENSATION DISCUSSION AND ANALYSIS
OVERVIEW
In accordance with rules established by the SEC, the Compensation Committee
has prepared the following report for inclusion in this proxy statement:
This compensation discussion and analysis describes the material elements
of the compensation earned or awarded to our officers who are considered to be
"Named Executive Officers" ("NEO") during our last fiscal year. NEO's consist of
the individuals who served during 2006 as our President and Chief Executive
Officer ("CEO"), our Senior Vice President and Chief Financial Officer ("CFO"),
9
and the three other Senior Vice Presidents and Executive Officers who received
the highest amount of total compensation in 2006. For purposes of this section,
NEO's refer to Thomas W. Schneider, President & CEO, James A. Dowd, Senior Vice
President and CFO, Edward A. Mervine, Senior Vice President and General Counsel,
Melissa A. Miller, Senior Vice President and Chief Operating Officer and Ronald
Tascarella, Senior Vice President and Chief Credit Officer. With the exception
of Mr. Tascarella, all NEO's were employed by the Company for the entire fiscal
year of 2006. Mr. Tascarella joined the Company on June 27, of 2006.
Our Compensation Committee (the "Committee") consists exclusively of
members of the Board of Directors (the "Board") who are "Independent" as defined
by Nasdaq regulations and deliberates on all compensation matters regarding the
NEO's and makes recommendation to the Board for any compensation adjustments or
the implementation of any compensation programs or plans. The Committee does not
possess any delegated authority from the Board, however, the Board strongly
considers the detailed reviews and recommendations of the Committee when voting
on any matters brought forward for consideration by the Committee.
COMPENSATION PHILOSOPHY
The compensation philosophy of Pathfinder Bancorp, Inc. is based upon our
desire to attract, retain, and motivate highly talented and qualified executives
while rewarding the achievement of strategic goals that are aligned with the
long-term interests of shareholders and promote building franchise value for our
customers and the communities we serve. This philosophy supports the need to
retain and attract executive talent with specific skill sets, including
leadership, teamwork, long-term strategic vision, a customer centric focus, and
strong results orientation. In addition, executives need experience and talent
in financial, lending, banking operations and regulatory matters. In order to
implement this philosophy, the Compensation Committee seeks to: (i) encourage
the achievement of the Company's long-range objectives by providing compensation
which is directly related to the performance of the individual and the
achievement of internal strategic objectives; (ii) establish compensation
policies and guidelines that will attract and retain quality personnel through a
base level of compensation that is competitive within the Company's industry;
and (iii) promote a direct relationship between compensation and the Company's
performance through performance based compensation plans and by facilitating
stock ownership.
ROLE OF EXECUTIVES IN ESTABLISHING COMPENSATION
The CEO assists the Compensation Committee in its administration of the
Company's executive compensation program, and with the Company's Human Resources
Department, the administrator of the Company's overall benefits program. The
Company's CEO assesses the performance of each of the Company's executive
officer's (Senior Vice Presidents) and provides recommendations to the
Compensation Committee as to the structure and amounts of salary, cash bonus
awards, and equity incentive awards to be paid to such executive officers. The
CEO formulates his recommendations based upon individual performance evaluations
and the overall performance of the organization in meeting the strategic and
financial objectives set forth by the Board of Directors. The CEO additionally
provides the Compensation Committee with data prepared from compensation surveys
relevant to the banking industry on compensation paid to executives performing
comparable duties at similarly sized financial institutions in New York State
and the mid-Atlantic region.
COMPENSATION ELEMENTS
Compensation paid to or earned by NEO's during 2006 consisted primarily of
base salary and short-term performance based cash incentives. The CEO
additionally received a funding payment to his supplemental executive retirement
plan ("SERP"). Our executive officers are eligible to participate in benefit
programs generally available to employees such as the defined benefit plan, the
401(k) defined contribution plan, (referred to elsewhere as the "Employee
Savings Plan"), the Employee Stock Ownership Plan ("ESOP"), medical and dental
benefits, and group term life insurance. One NEO, Melissa A. Miller, is eligible
to participate in post retirement health care benefits that were frozen, under
certain eligibility requirements based upon years of service, in 1995.
No executives received equity-based compensation in 2006, including
pursuant to the ESOP, as all equity based plans were fully funded, granted, or
vested prior to 2006. These plans are, nonetheless, described below.
10
A description of each compensation element and how the amount to be paid or
awarded is determined is presented below:
BASE SALARY
The base salary for NEO's is reviewed annually by the Compensation
Committee. Changes in base salary are based on an evaluation of each
individual's functional responsibilities, their skill sets, and education, their
individual performance, and Company performance. In determining appropriate base
level compensation the Committee depends, in part, upon recommendation by the
CEO for executive officers other than CEO, and upon comparative information to
salaries paid to individuals with comparable responsibilities at similarly sized
financial institutions in similar markets.
SHORT-TERM INCENTIVE COMPENSATION
The Compensation Committee and the Board adopted in 2006 a short-term
incentive based cash compensation program for the NEO's. The incentive plan
payouts are based upon a formula factoring in the Company's and individual
performance goals and the NEO's base salary. Compensation earned under the plan
for 2006 was paid in 2007. The cash based incentive compensation is based upon
the achievement of pre-determined quantitative thresholds approved by the
Compensation Committee.
EQUITY COMPENSATION
STOCK OPTION PLAN AND MANAGEMENT RECOGNITION AND RETENTION PLAN
Subsequent to the Company's Plan of Reorganization and Conversion in 1995,
shareholders approved two equity compensation plans in November 1997. All equity
compensation awards associated with the stock option and the Management
Recognition and Retention Plan were granted and vested prior to 2006. No equity
based compensation was earned by NEO's in 2006. The compensation committee
believes Equity Based Compensation helps to align management and shareholder
interests and at some point in the future, may put forward such a plan for
shareholder consideration.
PERQUISITES AND OTHER BENEFITS
Mr. Schneider is provided reimbursement of golf club dues and is provided a
Company owned vehicle for his business and personal use.
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
We maintain a non-tax-qualified executive supplemental retirement income
plan (SERP") for qualifying executives. Mr. Schneider is currently the only
executive eligible to participate in the plan. The SERP provides a supplemental
retirement income benefit in an annual amount equal to highest average
compensation received by the executive during any 36 month period while employed
by us, multiplied by a wage replacement percentage designated in the individual
executive's joinder agreement, less the actual annual amount available to the
executive from our other tax-qualified or nonqualified plans. Benefits under the
plan are payable to the executive upon the benefit age designated in the
individual executive's joinder agreement. Benefits will be payable in monthly
installments beginning on the executive's benefit age and continuing for a
period of months designated in the individual executive's joinder agreement.
Payments to an executive, or to his beneficiary, may be made from the plan upon
the executive's death, total or permanent disability, or termination of service
with us.
The SERP is considered an unfunded plan for tax and ERISA purposes. All
obligations arising under the SERP are payable from the general assets of the
Company. The purpose of the SERP is to provide the executive with additional
retirement benefits to make up for the benefits the executive will not receive
due to Internal Revenue Code provisions which limit the amount of compensation
that can be considered in determining retirement benefits to be paid under the
Company's tax qualified retirement plans.
11
EMPLOYMENT AND CHANGE IN CONTROL CONTRACTS
Messers. Schneider and Mervine ("the Executives") have employment contracts
with the Company. Both contracts have a term of three years effective January 1,
2007. Unless the Company provides written notice of non-extension within the
time frame set forth in each contract, the term of each contract is
automatically extended at the expiration of each year for an additional period
of one year, thus, resulting in a new three-year term.
Under these contracts, the Executives are entitled to severance
compensation under certain conditions as outlined below. If the Executive is
terminated for any reason other than disability, retirement, change in control,
or cause, the Company is required to pay the Executive's base salary plus the
highest bonus received by the Executive in the prior three years during each
year of the remaining term of the agreement (36 months).
The Executive would also receive continued life insurance, medical and
other benefits customarily provided to full time employees, as well as,
immediate vesting in any SERP, stock or other incentive plan requiring vesting.
In the event of a change in control of the Company, and a subsequent
termination of the Executive, the Company is required to pay the Executive 2.99
times the average of the Executives' five year preceding base salary and bonus.
In addition, should the Executive be terminated subsequent to a change in
control, the Executive is entitled to continued life, medical and disability
coverage to the extent maintained prior to the severance for a period of thirty
six months and immediate vesting in all stock option plan, SERP, or recognition
and retention plan then in effect.
Should the Executive retire, the Executive is entitled only to those
retirement benefits that he would otherwise obtain and the employment agreement
provides no additional benefits. Should the Executive become disabled, the
employment agreement requires the Company to pay the Executive his base salary
for one year and maintain any disability insurance to which the Executive would
be entitled. In the event of the Executives death, the agreement requires the
Company to maintain payouts of base salary and medical and dental benefits to
the family of the Executive for the remaining term of employment.
In exchange for the change in control and other termination benefits
provided to the Executives pursuant to these agreement, the Executives agree not
to compete with the Company in any city, town or country in which the Company
has an office for a period of one year following his termination.
The NEO's, with the exception of Messer's Schneider and Mervine, have
change in control agreements with the Company. Under the provisions of these
agreements, in the event of a change in control of the Company, and a subsequent
termination of the NEO, the Company is required to pay the NEO his most recent
annual base salary and bonus upon termination. In addition, the NEO is entitled
to continue life, medical and disability coverage to that maintained prior to
the severance for a period of one year and he or she shall become fully vested
in any stock option plans, SERP or recognition and retention plan then in
effect.
PAYMENTS UPON TERMINATION
If Messers Schneider, Dowd, Mervine and Tascarella and Ms. Miller, were
terminated in connection with a change in control, at December 31, 2006, they
would receive $643,098, $98,032, $355,989, $54,115 and $93,668, respectively, in
payment from the Company.
12
SUMMARY COMPENSATION TABLE
The following table shows the compensation of Thomas W. Schneider, our
principal executive officer, James A. Dowd, our principal financial officer and
Edward A. Mervine, Melissa A. Miller, and Ronald Tascarella other executive
officers who received total compensation of $100,000 during the past fiscal year
for services to the Company or any of its subsidiaries during the year ended
December 31, 2006.
------------------------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------------------------------------------------------------------
CHANGE IN
PENSION VALUE
AND NON-
QUALIFIED
NON-EQUITY DEFERRED
STOCK OPTION INCENTIVE PLAN COMPENSATION ALL OTHER
NAME AND SALARY BONUS AWARDS AWARDS COMPENSATION EARNINGS COMPENSATION TOTAL
PRINCIPAL POSITION YEAR ($) ($) (1) ($) ($) ($) ($) (2) ($) (3) ($)
----------------------------------------------------------------------------------------------------------------------------------
Thomas W. Schneider,
President and Chief 2006 $ 193,216 $14,250 $ 44,522 $ 25,670 $ 277,658
Executive Officer
James A. Dowd, Senior
Vice President and 2006 95,876 8,650 5,960 - 110,486
Chief Financial Officer
Edward A. Mervine,
Senior Vice President, 2006 118,663 11,100 8,222 - 137,985
General Counsel AND
Secretary
Melissa A. Miller,
Senior Vice President 2006 93,688 8,000 23,147 - 124,835
and Chief Operating
Officer
Ronald Tascarella (4),
Senior Vice President 2006 54,115 3,000 - - 57,115
and Chief Credit Officer
--------------------------------------------------------------------------------
(1) Amounts represent annual bonus awarded based on 2006 individual
performance, paid in March of 2007.
(2) The change in pension value and non-qualified deferred
compensation earnings represents the following for each named
executive:
DEFERRED SUPPLEMENTAL
CHANGE IN PENSION COMPENSATION EXECUTIVE RETIREMENT
VALUATION EARNINGS EARNINGS
--------------------------------------------------------------------------------
Thomas W. Schneider $ 24,680 $ 1,439 $ 18,403
James A. Dowd 4,522 1,438 -
Edward A. Mervine 8,222 - -
Melissa A. Miller 21,747 1,400 -
(3) All other compensation represents the following for each named
executive.
EMPLOYEE SAVINGS PLAN AUTOMOBILE EXPENSE COUNTRY CLUB
COMPANY CONTRIBUTION REIMBURSMENT DUES
--------------------------------------------------------------------------------
Thomas W. Schneider $7,010 $ 15,913 $ 2,747
All other executives above have individual total other compensa-
tion which, in the aggregate, is less than $10,000.
(4) Compensation table amounts for Mr. Tascarella do not represent a
full year of benefits as he was hired by the Company on June 27, 2006.
PLAN-BASED AWARDS. There were no grants of plan-based awards for the named
executives during the 12 months ended December 31, 2006.
OUTSTANDING EQUITY AWARDS AT YEAR END. As of December 31 2006, there were
no outstanding equity awards for any of our named executive officers.
13
OPTIONS EXERCISED/STOCK VESTED
The following table sets forth information with respect to option exercises
and common stock awards that have vested during the year ended December 31,
2006.
OPTION EXERCISES AND STOCK VESTED FOR THE FISCAL YEAR
--------------------------------------------------------------------------------------------------------------
OPTION AWARDS STOCK AWARDS
---------------------------------------------------------------------------------- -------------------------
NUMBER OF SHARES ACQUIRED VALUE REALIZED ON NUMBER OF SHARES ACQUIRED
NAME ON EXERCISE (#) EXERCISE ($) ON VESTING (#)
--------------------------------------------------------------------------------------------------------------
Thomas W. Schneider, President
and Chief Executive Officer 450 $ 2,437 -
James A. Dowd, Senior Vice
President and Chief Financial - - -
Officer
Edward A. Mervine, Senior Vice
President, General Counsel and - - -
Secretary
Melissa A. Miller, Senior Vice
President and Chief Operating 950 5,144 -
Officer
Ronald Tascarella, Senior Vice
President and Chief Credit Officer - - -
VALUE REALIZED ON VESTING
NAME ($)
----------------------------------------------------------------
Thomas W. Schneider, President
and Chief Executive Officer -
James A. Dowd, Senior Vice
President and Chief Financial -
Officer
Edward A. Mervine, Senior Vice
President, General Counsel and -
Secretary
Melissa A. Miller, Senior Vice
President and Chief Operating -
Officer
Ronald Tascarella, Senior Vice
President and Chief Credit Officer -
STOCK OPTION PLAN
The Pathfinder Bancorp, Inc. 1997 Stock Option Plan (the "Stock Option
Plan") authorizes the grant of stock options and limited rights to purchase
132,249 shares of Common Stock. The Stock Option Plan authorizes grants of (i)
options intended to qualify as "incentive stock options," (ii) options that do
not qualify as incentive stock options ("non-statutory options") and (iii)
limited rights (described below) that are exercisable only upon a change in
control (as defined). Non-employee directors are eligible to receive only
non-statutory options. No options were granted during the past year. At December
31, 2006, all options have vested under the Stock Option Plan.
Simultaneously with the grant of any stock option, the Committee may grant
a Dividend Equivalent Right with respect to all or some of the shares covered by
such stock option. The Dividend Equivalent Right provides the grantee with a
separate cash benefit equal to 100% of the amount of any extraordinary dividend
on shares of common stock subject to a stock option. Under the terms of the
Stock Option Plan, an extraordinary dividend is any dividend paid on shares of
common tock that exceeds our weighted average cost of interest bearing
liabilities for the current and preceding three quarters. Upon the payment of an
extraordinary dividend, Dividend Equivalent Right will receive at the time the
related stock option vests cash or some other payment as determined under the
Stock Option Plan, equal to 100% of the extraordinary dividend paid on shares of
Common Stock plus any earnings thereon, minus any tax withholding amounts. The
Dividend Equivalent Right is transferable only when the underlying stock option
is transferable and under the same conditions.
The Board of Directors may amend, suspend or terminate the Stock Option
Plan except that such amendments may not impair awards previously granted.
Shareholders must approve any amendment to the Stock Option Plan that would
increase the number of options, decrease an option exercise price, extend the
term of the Stock Option Plan or any option, or change the persons or category
of persons eligible to be granted options. The exercise of options will have a
dilutive effect on the ownership interests of existing shareholders. Further,
the exercise of options may render more difficult or discourage a merger, tender
offer or other takeover attempt even if such transaction or event would be
beneficial to shareholders generally, the assumption of control by a holder of a
large block of the Company's securities, a proxy contest or the removal of
incumbent management.
14
RECOGNITION AND RETENTION PLAN
The Board of Directors adopted the 1997 Recognition and Retention Plan (the
"Recognition Plan") as a method of providing certain employees and non-employee
directors of the Company with a proprietary interest in us and to provide these
individuals with an incentive to increase our value.
The Stock Benefits Committee, composed of the non-employee directors,
administers the Recognition Plan, and makes awards to officers and employees
pursuant to the Recognition Plan. Awards to non-employee directors are fixed by
the terms of the Recognition Plan. Awards of common stock that have not vested
under the Recognition Plan ("Restricted Stock") are nontransferable and
nonassignable. Participants in the Recognition Plan become vested in shares of
Restricted Stock over a six-year period beginning on January 24, 1999; provided,
however, that the Stock Benefits Committee may accelerate or extend the vesting
rate on any awards made to officers and employees after the effective date of
the Recognition Plan. On December 19, 2000 ("the rescission date"), the Board of
Directors accepted the voluntary rescission of all issued and unvested awards
under the 1997 Recognition and Retention Plan. Accordingly, the shares, which
would have been earned by participants since the rescission date, will be
retained by the Recognition Plan. Awards to executive officers and outside
directors become fully vested upon termination of employment or service due to
normal retirement, death or disability, or following a termination of employment
or service in connection with a change in control (as defined therein). Upon
termination of employment or service for any other reason, unvested shares are
forfeited. When a participant's Restructured Stock vests, the participant will
recognize ordinary income equal to the fair market value of the shares vested,
unless the participant previously made an irrevocable election to be taxed on
the shares of Restricted Stock awarded to him in the year of the award. The
amount of income recognized by a participant will be a deductible expense to us
for Federal income tax purposes. A participant is entitled to receive any cash
dividends paid on the Restricted Stock both before and after vesting of the
Restricted Stock. Stock dividends declared by us and paid on Restricted Stock
that have not vested are subject to the same restrictions as the Restricted
Stock until such shares vest.
PENSION BENEFITS
The following table sets forth information with respect to pension benefits
at and for the year ended December 31, 2006 for the named executive officers.
PENSION BENEFITS AT AND FOR THE FISCAL YEAR
-------------------------------------------------------------------------------------------------------------------
NUMBER OF YEARS PRESENT VALUE OF
NAME PLAN NAME CREDITED SERVICE (#) ACCUMULATED BENEIFT ($)
(A) (B) (C) (D)
-------------------------------------- --------------------------- -------------------- ------------------------
Thomas W. Schneider, President and
Chief Executive Officer Pathfinder Retirement Plan 18 $ 154,773
James A. Dowd, Senior Vice
President and Chief Financial Officer " " 12 28,526
Edward A. Mervine, Senior Vice
President, General Counsel and " " 5 32,715
Secretary
Melissa A. Miller, Senior Vice
President and Chief Operating Officer " " 24 121,921
Ronald Tascarella, Senior Vice
President and Chief Credit Officer " " - -
PAYMENTS DURING LAST
NAME FISCAL YEAR ($)
(A) (E)
-------------------------------------------------------------
Thomas W. Schneider, President and
Chief Executive Officer -
James A. Dowd, Senior Vice
President and Chief Financial Officer -
Edward A. Mervine, Senior Vice
President, General Counsel and -
Secretary
Melissa A. Miller, Senior Vice
President and Chief Operating Officer -
Ronald Tascarella, Senior Vice
President and Chief Credit Officer -
15
BENEFITS
MEDICAL, DENTAL, LIFE, DISABILITY, EDUCATION, AND OTHER SIMILAR EMPLOYEE BENEFIT
PLANS
The Company provides eligible employees with Group Life, Short Term and
Long Term Disability Insurance. The Company pays 100% of the Group Life
insurance and Long Term Disability insurance premium after 1 year of service.
The Company pays 60% of an employees pay for short-term disability and 100% of
an officers pay for short-term disability. The Company is self-insured for
short-term disability.
The Company pays 75% of the employee's premium for Group Health and Dental
Insurance for all full time employees and provides no family coverage for either
insurance. Additional Eye Care coverage is available to all employees at the
employee's expense.
The Company also sponsors a Flexible Benefits Plan, which allows employees
the opportunity to pay for their share of health insurance premiums and
non-covered medical expenses on a pre-tax basis.
Finally, upon receiving one year of service, the Company will reimburse
tuition for employee's business related education up to the level of the local
state college tuition.
DEFINED BENEFIT PLAN
We maintain a tax-qualified noncontributory defined benefit plan
("Retirement Plan"). All salaried employees age 21 or older who have worked for
us for at least one year and have been credited with 1,000 or more hours of
employment with us during the year are eligible to accrue benefits under the
Retirement Plan. We contribute annually to the Retirement Plan an amount
necessary to satisfy the actuarially determined minimum funding requirements in
accordance with the ERISA.
At the normal retirement age of 65 the plan is designed to provide a life
annuity. The retirement benefit provided is equal to 1.5% of a participant's
average monthly compensation for periods after May 1, 2004, and 2.0% of the
participant's average monthly compensation for credited service prior to May 1,
2004 based on the average of the three consecutive years during the last 10
years of employment which provides the highest monthly average compensation
multiplied by the participant's years of credited service (not to exceed 30
years) to the normal retirement date. Retirement benefits also are payable upon
retirement due to early and late retirement. Benefits also are paid from the
Retirement Plan upon a Participant's disability or death. A reduced benefit is
payable upon early retirement at or after age 60, or the completion of 30 years
of service with us. Upon termination of employment other than as specified
above, a participant who was employed by us for a minimum of five years is
eligible to receive his or her accrued benefit reduced for early retirement or a
deferred retirement benefit commencing on such participant's normal retirement
date. Benefits are payable in various annuity forms. At December 31, 2006 the
market value of the Retirement Plan trust fund was approximately $4,603,000. For
the plan year ended September 30, 2006, we made a contribution of $180,052 to
the Retirement Plan.
Under Section 401(a)(17) of the Code, the maximum amount of compensation
that may be taken into account under the Retirement Plan in the 2006 Plan Year
is $220,000.
EMPLOYEE SAVINGS PLAN
We maintain an Employee Savings Plan which is a qualified, tax-exempt
profit sharing plan with a cash or deferred feature that is tax-qualified under
Section 401(k) of the Internal Revenue Code (the "401(k) Plan"). All employees
who have attained age 21 and have completed at least one year of employment
during which they worked at least 1,000 hours are eligible to participate.
Participants may contribute, and receive a deduction for, up to 25% of
compensation to the 401 (k) Plan. For these purposes, "compensation" includes
total compensation (including salary reduction contributions made under the
401(k) Plan or our flexible benefits plan), but does not include compensation in
excess of $220,000. At our discretion, we may match participants' salary
reduction contributions based upon our profits for the current fiscal year. All
employee contributions and earnings thereon are fully and immediately vested.
16
All employer matching contributions vest at the rate of 20% per year beginning
at the end of a participant's third year of service with us until a participant
is 100% vested after six years of service. Participants also will vest in
employer matching contributions when they reach the normal retirement age of 65
or later, or upon death or disability regardless of years of service.
Plan benefits will be paid to each participant in a lump sum. At December
31, 2006, the market value of the 401(k) Plan trust fund was approximately
$3,350,000. For the plan year ended December 31, 2006, we made a contribution in
the amount of $142,801 to the 401(k) Plan Trust.
EMPLOYEE STOCK OWNERSHIP PLAN
As part of the Company's Plan of Conversion and Reorganization in October
1995, the Company established an ESOP for the benefit of all eligible employees.
Eligibility to participate in the ESOP requires a participant to be 21 years of
age or older and to be employed by the Bank for a period of 12 months. The ESOP
trust was funded with Company stock at the time of the conversion under
permissible conversion rules of the New York State Banking Department. Over the
course of the next 10 years, shares were allocated to plan participants on a pro
rata basis based upon each employee's salary up to the IRS permissible limit. As
of December 31, 2005, all shares of Company stock held in trust by the plan had
been allocated to participants. The Plan trust has not been subsequently funded.
DEFERRED COMPENSATION
The following table sets forth information with respect to defined
contribution and other nonqualified deferred compensation plans at and for the
year ended December 31, 2006 for the named executive officers.
-----------------------------------------------------------------------------------------------------------------------------------
NONQUALIFIED DEFERRED COMPENSATION AT AND FOR THE FISCAL YEAR
-----------------------------------------------------------------------------------------------------------------------------------
EXECUTIVE REGISTRANT AGGREGATE
CONTRIBUTIONS IN LAST CONTRIBUTIONS IN LAST AGGREGATE EARNINGS WITHDRAWALS/
FY ($) FY ($) IN LAST FY ($) DISTRIBUTIONS ($)
NAME (1) (2)
-----------------------------------------------------------------------------------------------------------------------------------
Thomas W. Schneider, President and
Chief Executive Officer $ 5,015 - 1,439 -
James A. Dowd, Senior Vice President
and Chief Financial Officer 5,106 - 1,438 -
Edward A. Mervine, Senior Vice
President, General Counsel and Secretary - - - -
Melissa A. Miller, Senior Vice President
and Chief Operating Officer 5,002 - 1,400 -
Ronald Tascarella, Senior Vice President
and Chief Credit Officer - - - -
-----------------------------------------------------------
AGGREGATE
BALANCE AT LAST
FYE ($)
NAME
-----------------------------------------------------------
Thomas W. Schneider, President and
Chief Executive Officer $ 17,322
James A. Dowd, Senior Vice President
and Chief Financial Officer 17,322
Edward A. Mervine, Senior Vice
President, General Counsel and Secretary -
Melissa A. Miller, Senior Vice President
and Chief Operating Officer 16,785
Ronald Tascarella, Senior Vice President
and Chief Credit Officer -
DEFERRED COMPENSATION PLANS
The Company maintains a nonqualified, unfunded, deferred compensation plan
for the benefit of directors and NEO's who choose to participate. The purpose of
the plan is to supplement participants' retirement earnings. Under the deferred
compensation plan, participating directors and officers may elect to defer a
portion of their annual compensation, on a pre-tax basis, and earn a return on
the deferred fund balance based on a pre-determined rate of return. The Company
does not make any matching contributions under this plan. Participants earn
interest on deferred funds at rates currently ranging from 10% to 11.25%. The
earning rates were established at the inception of each deferral period and were
not considered above market at the time.
17
Benefits are paid to participants commencing at between age 65 to 70 and
continue monthly for 10 years thereafter. The Company maintains a record of all
amounts deferred by participants. The deferred compensation benefit is the
annuitized value, at the stated earning rate, of the individual participants
deferred fund balance. The plan provides for earlier payouts for disability and
for continued payouts to survivors. The current deferral period will end in
2013, however, annual earnings will continue at the pre-established rates unless
amended. In connection with this plan, the Company is the owner of single
premium life insurance policies on plan participants.
DIRECTORS' SUMMARY COMPENSATION TABLE
Set forth below is summary compensation for each of our non-employee
directors.
-----------------------------------------------------------------------------------------------------------------
DIRECTOR COMPENSATION
-----------------------------------------------------------------------------------------------------------------
CHANGE IN
PENSION VALUE
AND NON-
QUALIFIED
NON-EQUITY DEFERRED
FEES EARNED STOCK OPTIONS INCENTIVE PLAN COMPENSATION ALL OTHER
OR PAID IN AWARDS AWARDS COMPENSATION EARNINGS COMPENSATION TOTAL
NAME CASH ($) ($) ($) ($) ($) ($) ($)
------------------------------------------------------------------------------------------------------------------
Chris R. Burritt $ 22,200 - - - $ 24,790 - $ 46,990
George P. Joyce 24,800 - - - 2,618 - 27,418
Bruce E. Manwaring 22,200 - - - 31,811 - 54,011
L. William Nelson, Jr. 21,700 - - - 26,787 - 48,487
Janette Resnick 33,900 - - - - - 33,900
Corte J. Spencer 22,000 - - - 12,898 - 34,898
Steven W. Thomas 22,300 - - - 2,618 - 24,918
Lloyd "Buddy" Stemple 17,300 - - - - - 17,300
------------------------------------------------------------------------------------------------------------------
DIRECTORS' COMPENSATION
Each non-employee director, with the exception of the Board Chair and the
Audit Committee Chairman, receives an annual retainer of $9,500, a meeting fee
of $500 for each Board meeting attended and $300 for each committee meeting
attended. One-eighth of the retainer fee is paid in Company stock, purchased on
the open market, in lieu of cash. The Board Chair receives an additional
retainer of $10,000. The Audit Committee Chairman receives an additional
retainer of $5,000 and the chairman of all other committees receives an
additional $100 for each committee meeting in which they serve in the capacity
of committee chairman. Employee directors do not receive monthly meeting fees.
We paid a total of $160,800 in director fees during the year ending December 31,
2006.
Director fees are reviewed annually by the Compensation Committee for
recommendation to the Board of directors. The committee reviews relevant peer
group data similar to that used in the executive compensation review. The
Committee believes that an appropriate compensation is critical to attracting,
retaining and motivating directors who have the qualities necessary to direct
the Company.
A director may elect to defer a portion of fees earned as described in the
section "Deferred Compensation Plans".
18
DIRECTOR EMERITUS PLAN
In December 2006, the board of directors of Pathfinder Bancorp, MHC voted
to memorialize, amend and sunset a director emeritus retirement plan that had
been in practice since 1994. Under provisions of the amended plan, retired
directors are eligible to be annually elected as director emeriti of Pathfinder
Bancorp, MHC. Director emeriti are eligible to receive 75% of final board fees
(retainer plus 12 board meeting fees) for a period of up to ten years after
their retirement. Payments under this plan are made by Pathfinder Bancorp, MHC.
Under provisions of the amended plan, directors 62 years or older at January 1,
2007, are eligible to be elected to emeritus status after their retirement. The
plan is sunset for those directors under 62 years of age who are not eligible
for any post retirement compensation.
This report has been provided by the Compensation Committee:
Ms. Resnick and Messrs, Burritt, Manwaring, Nelson and Spencer.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
There were no transactions or series of transactions since the beginning of
the Company's last fiscal year or any currently proposed transaction where the
Company was or is a participant and the amount involved exceeds $120,000, and in
which any related person had or will have a direct or indirect material
interest.
The Sarbanes-Oxley Act of 2002 generally prohibits an issuer from (i)
extending or maintaining credit; (ii) arranging for the extension of credit; or
(iii) renewing an extension of credit in the form of a personal loan for an
officer or director. There are several exceptions to this general prohibition,
however, one of which is applicable to us. Namely, this prohibition does not
apply to loans made by a depository institution that is insured by the FDIC and
is subject to the insider lending restrictions of the Federal Reserve Act. The
Company's subsidiary has made loans to each of the following Officers and/or
Directors or their immediate families: Steven W. Thomas, James Dowd, Bruce
Manwaring, Chris Burritt, Melissa Miller, George Joyce, L. William Nelson,
Edward A Mervine, Thomas Schneider, Corte Spencer and Lloyd Stemple. All of
these loans to our directors and officers by the Bank are made in conformity
with the Federal Reserve Act and regulations promulgated thereunder.
All transactions between us and our executive officers, directors, holders
of 10% or more of the shares of its common stock and affiliates thereof, are on
terms no less favorable to us than could have been obtained by it in
arm's-length negotiations with unaffiliated persons or are available to all
employees as a benefit. Such transactions must be approved by a majority of
independent outside directors of ours not having any interest in the
transaction, pursuant to our Code of Ethics, a copy of which is located at
www.Pathfinderbank.com under investor relations.
----------------------
SHAREHOLDER COMMUNICATIONS
The Board of Directors has established a process for shareholders to send
communications to a director by either United States mail or electronic mail.
Any shareholder who desires to communicate directly with our directors should
send their communication to Board of Directors, Pathfinder Bancorp, Inc., 214
West First Street, Oswego, New York 13126 or by email to
directors@pathfinderbank.com. The communication should indicate that the author
-----------------------------
is a shareholder and if shares are not held of record, should include
appropriate evidence of stock ownership. Depending on the subject matter,
management will:
- Forward the communication to the Director or Directors to whom it
is addressed;
- Attempt to handle the inquiry directly, for example where it is a
request for information about us or it is a stock-related matter; or
- Not forward the communication if it is primarily commercial in
nature, relates to an improper or irrelevant topic, or is unduly
hostile, threatening, illegal or otherwise inappropriate.
19
At each Board meeting, management shall present a summary of all
communications received since the last meeting that were not forwarded and makes
those communications available to the Directors.
CODE OF ETHICS
We have adopted a Code of Ethics that is applicable to our officers,
directors and employees, including our principal executive officer, principal
financial officer, principal accounting officer or controller, or persons
performing similar functions. The Code of Ethics is available on our website at
www.pathfinderbank.com. Amendments to and waivers from the Code of Ethics will
-----------------------
also be disclosed on our website.
--------------------------------------------------------------------------------
PROPOSAL 2 -RATIFICATION OF APPOINTMENT OF AUDITORS
--------------------------------------------------------------------------------
The Audit Committee has approved the engagement of Beard Miller Company LLP
to be our independent registered public accounting firm for 2007. At the Annual
Meeting, shareholders will consider and vote on the ratification of the
engagement of Beard Miller Company LLP, for the year ending December 31, 2007. A
representative of Beard Miller Company LLP, is expected to attend the Annual
Meeting to respond to appropriate questions and to make a statement if he so
desires.
In order to ratify the selection of Beard Miller Company LLP, as our
independent registered public accounting firm for 2007, the proposal must
receive at least a majority of the votes cast, either in person or by proxy, in
favor of such ratification. The Audit Committee and the Board of Directors
recommends a vote "FOR" the ratification of Beard Miller Company LLP, as
Auditors for 2007.
--------------------------------------------------------------------------------
SHAREHOLDER PROPOSALS
--------------------------------------------------------------------------------
In order to be eligible for inclusion in the proxy materials for next
year's Annual Meeting of Shareholders, any shareholder proposal to take action
at such meeting must be received at our executive office, 214 West First Street,
Oswego, New York 13126, no later than December 5, 2007. Any such proposals shall
be subject to the requirements of the proxy rules adopted under the Securities
Exchange Act of 1934.
--------------------------------------------------------------------------------
OTHER MATTERS
--------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Annual Meeting other than the matters described above in the Proxy Statement.
However, if any matters should properly come before the Annual Meeting, it is
intended that holders of the proxies will act as directed by a majority of the
Board of Directors, except for matters related to the conduct of the Annual
Meeting, as to which they shall act in accordance with their best judgment. The
Board of Directors intends to exercise its discretionary authority to the
fullest extent permitted under the Securities Exchange Act of 1934.
Our Bylaws provide an advance notice procedure for certain business, or
nominations to the Board of Directors, to be brought before an annual meeting.
In order for a shareholder to properly bring business before an annual meeting,
or to propose a nominee to the Board, the shareholder must give written notice
to our Corporate Secretary at least five (5) days before the date fixed for such
meeting. The notice must include the shareholder's name, record address, and
number of shares owned by the shareholder, describe briefly the proposed
business, the reasons for bringing the business before the annual meeting, and
any material interest of the shareholder in the proposed business.
In the case of nominations to the Board, certain information regarding the
nominee must be provided. Nothing in this paragraph shall be deemed to require
us to include in its proxy statement and proxy relating to an annual meeting any
shareholder proposal which does not meet all of the requirements for inclusion
established by the SEC in effect at the time such proposal is received.
20
--------------------------------------------------------------------------------
MISCELLANEOUS
--------------------------------------------------------------------------------
The cost of solicitation of proxies will be borne by us. We will reimburse
brokerage firms and other custodians, nominees and fiduciaries for reasonable
expenses incurred by them in sending proxy materials to the beneficial owners of
common stock. In addition to solicitations by mail, our directors, officers and
regular employees may solicit proxies personally or by telegraph or telephone
without additional compensation.
BY ORDER OF THE BOARD OF DIRECTORS
Edward A. Mervine
Secretary
Oswego, New York
March 31, 2007
21
PLEASE MARK VOTES
AS IN THIS EXAMPLE
|X|
REVOCABLE PROXY
PATHFINDER BANCORP, INC.
ANNUAL MEETING OF SHAREHOLDERS
April 25, 2007
The undersigned hereby appoints the full Board of Directors, with full
powers of substitution to act as attorneys and proxies for the undersigned to
vote all shares of Common Stock of the Company which the undersigned is entitled
to vote at the Annual Meeting of Shareholders ("Meeting") which will be held at
the Econolodge, 70 East First Street, Oswego, New York on April 25, 2007 at
10:00 a.m., Eastern Time. The Board of Directors is authorized to cast all votes
to which the undersigned is entitled as follows:
1) The election as directors of all nominees listed below (except as
marked to the contrary below)
For All
For Withhold Except
|__| |__| |__|
Steven W. Thomas
Corte J. Spencer
Janette Resnick
INSTRUCTION: To withhold your vote for one or more nominees, write the name of
the nominee(s) on the lines below.
_____________________________________
_____________________________________
2) The ratification of Beard Miller Company LLP as independent
auditors for the year ending December 31, 2007.
For Against Abstain
|__| |__| |__|
PLEASE CHECK BOX IF YOU PLAN TO ATTEND THE MEETING |__|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED
PROPOSALS.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. THIS PROXY WILL BE VOTED AS
DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE
PROPOSITIONS STATED ABOVE. IF ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING,
THIS PROXY WILL BE VOTED BY THE ABOVE-NAMED PROXIES AT THE DIRECTION OF A
MAJORITY OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
PLEASE BE SURE TO SIGN AND DATE THIS PROXY IN THE BOX BELOW.
DATE
--------------------------------------------------------------------------------
SHAREHOLDER SIGN ABOVE_________CO-HOLDER (IF ANY) SIGN ABOVE
DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED.
PATHFINDER BANCORP, INC.
Should the undersigned be present and elect to vote at the Meeting or at
any adjournment thereof and after notification to the Secretary of the Company
at the Annual Meeting of the shareholder's decision to terminate this proxy,
then the power of said attorneys and proxies shall be deemed terminated and of
no further force and effect. This proxy may also be revoked by sending written
notice to the Secretary of the Company at the address set forth on the Notice of
Annual Meeting of Shareholders, or by the filing of a later proxy statement
prior to a vote being taken on a particular proposal at the Meeting.
The above signed acknowledges receipt from the Company prior to the
execution of this proxy of Notice of the Meeting, Annual Report containing
financial statements, and a proxy statement dated March 31, 2007.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give full title.
If shares are held jointly, each should sign.
PLEASE COMPLETE AND DATE THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
----------------------------
----------------------------
----------------------------