UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
PFF Bancorp, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
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Notes:
PFF BANCORP, INC.
350 SOUTH GAREY AVENUE
POMONA, CALIFORNIA 91766
(909) 623-2323
August 11, 1998
Fellow Stockholders:
You are cordially invited to attend the annual meeting of stockholders (the
"Annual Meeting") of PFF Bancorp, Inc. (the "Company"), the holding company for
PFF Bank & Trust (the "Bank"), which will be held on Wednesday, September 16,
1998, at 9:00 a.m., Pacific Time, at the Sheraton Suites Fairplex, 601 W.
McKinley Avenue, Pomona, California.
The attached Notice of the Annual Meeting and the Proxy Statement describe
the formal business to be transacted at the Annual Meeting. Directors and
officers of the Company, as well as a representative of KPMG Peat Marwick LLP,
the Company's independent auditors, will be present at the Annual Meeting to
respond to any questions that our stockholders may have regarding the business
to be transacted.
The Board of Directors of the Company has determined that the matters to be
considered at the Annual Meeting are in the best interests of the Company and
its stockholders. FOR THE REASONS SET FORTH IN THE PROXY STATEMENT, THE BOARD
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEES AS DIRECTORS SPECIFIED
UNDER PROPOSAL 1 AND "FOR" PROPOSALS 2 AND 3.
WHETHER OR NOT YOU EXPECT TO ATTEND, PLEASE SIGN AND RETURN THE ENCLOSED
PROXY CARD PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED SO THAT YOUR SHARES
WILL BE REPRESENTED. YOUR COOPERATION IS APPRECIATED SINCE A MAJORITY OF THE
COMMON STOCK MUST BE REPRESENTED, EITHER IN PERSON OR BY PROXY, TO CONSTITUTE A
QUORUM FOR THE CONDUCT OF BUSINESS.
On behalf of the Board of Directors and all of the employees of the Company
and the Bank, we thank you for your continued interest and support.
Sincerely yours,
/s/ Larry M. Rinehart
Larry M. Rinehart
President, Chief Executive Officer
and Director
PFF BANCORP, INC.
350 SOUTH GAREY AVENUE
POMONA, CALIFORNIA 91766
(909) 623-2323
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 16, 1998
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NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the "Annual
Meeting") of PFF Bancorp, Inc. (the "Company") will be held on Wednesday,
September 16, 1998, at 9:00 a.m., Pacific Time, at the Sheraton Suites Fairplex,
601 W. McKinley Avenue, Pomona, California.
The purpose of the Annual Meeting is to consider and vote upon the
following matters:
1. The election of three directors for terms of three years each or until
their successors are elected and qualified;
2. The ratification of action taken by the Board of Directors to amend
award agreements granted under the PFF Bancorp, Inc. 1996 Incentive
Plan;
3. The ratification of the appointment of KPMG Peat Marwick LLP as
independent auditors of the Company for the fiscal year ending March 31,
1999; and
4. Such other matters as may properly come before the meeting and at any
adjournments thereof, including whether or not to adjourn the meeting.
The Board of Directors has established July 31, 1998, as the record date
for the determination of stockholders entitled to receive notice of and to vote
at the Annual Meeting and at any adjournments thereof. Only recordholders of
the Common Stock of the Company as of the close of business on such record date
will be entitled to vote at the Annual Meeting or any adjournments thereof. In
the event there are not sufficient votes for a quorum or to approve or ratify
any of the foregoing proposals at the time of the Annual Meeting, the Annual
Meeting may be adjourned in order to permit further solicitation of proxies by
the Company. A list of stockholders entitled to vote at the Annual Meeting will
be available at the administrative offices of the Company, 350 South Garey
Avenue, Pomona, California 91766, for a period of ten days prior to the Annual
Meeting and will also be available at the Annual Meeting itself.
By Order of the Board of Directors
/s/ Carole F. Olson
Carole F. Olson
Secretary
Pomona, California
August 11, 1998
1
PFF BANCORP, INC.
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 16, 1998
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SOLICITATION AND VOTING OF PROXIES
This Proxy Statement is being furnished to stockholders of PFF Bancorp,
Inc. (the "Company") in connection with the solicitation by the Board of
Directors (the "Board of Directors" or "Board") of proxies to be used at the
annual meeting of stockholders (the "Annual Meeting"), to be held on Wednesday,
September 16, 1998 at 9:00 a.m., at the Sheraton Suites Fairplex, 601 W.
McKinley Avenue, Pomona, California and at any adjournments thereof. The 1998
Annual Report to Stockholders, including consolidated financial statements for
the fiscal year ended March 31, 1998, accompanies this Proxy Statement, which is
first being mailed to recordholders on or about August 11, 1998.
Regardless of the number of shares of Common Stock owned, it is important
that recordholders of a majority of the shares be represented by proxy or
present in person at the Annual Meeting. Stockholders are requested to vote by
completing the enclosed 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 THE COMPANY WILL BE VOTED IN ACCORDANCE WITH THE DIRECTIONS GIVEN
THEREIN. WHERE NO INSTRUCTIONS ARE INDICATED, SIGNED PROXY CARDS WILL BE VOTED
"FOR" THE ELECTION OF THE NOMINEES FOR DIRECTOR NAMED IN THIS PROXY STATEMENT,
"FOR" THE RATIFICATION OF ACTION TAKEN BY THE BOARD OF DIRECTORS TO AMEND AWARD
AGREEMENTS GRANTED UNDER THE PFF BANCORP, INC. 1996 INCENTIVE PLAN AND "FOR" THE
RATIFICATION OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS OF THE COMPANY FOR
THE FISCAL YEAR ENDING MARCH 31, 1999.
Other than the matters set forth on the attached Notice of Annual Meeting
of Stockholders, the Board of Directors knows of no additional matters that will
be presented for consideration at the Annual Meeting. Execution of a proxy,
however, confers on the designated proxy holders discretionary authority to vote
the shares in accordance with their best judgment on such other business, if
any, that may properly come before the Annual Meeting and at any adjournments
thereof, including whether or not to adjourn the Annual Meeting.
A PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE BY FILING A
WRITTEN NOTICE OF REVOCATION WITH THE SECRETARY OF THE COMPANY, BY DELIVERING TO
THE COMPANY A DULY EXECUTED PROXY BEARING A LATER DATE, OR BY ATTENDING THE
ANNUAL 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 YOUR RECORDHOLDER TO VOTE PERSONALLY AT THE ANNUAL MEETING.
1
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, Kissel-
Blake, Inc., a proxy solicitation firm, will assist the Company in soliciting
proxies for the Annual Meeting and will be paid a fee of $3,500, plus out-of-
pocket expenses. Proxies may also be solicited personally or by telephone by
directors, officers and other employees of the Company and its subsidiary, PFF
Bank & Trust (the "Bank"), without additional compensation therefor. The
Company 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 Annual Meeting consist of shares
of common stock of the Company ("Common Stock"), with each share entitling its
owner to one vote on all matters to be voted on at the Annual Meeting, except as
described below. There is no cumulative voting for the election of directors.
The close of business on July 31, 1998 has been fixed by the Board of
Directors as the record date (the "Record Date") for the determination of
stockholders of record entitled to notice of and to vote at the Annual Meeting
and at any adjournments thereof. The total number of shares of Common Stock
outstanding on the Record Date was 16,250,823 shares.
As provided in the Company's Certificate of Incorporation, recordholders of
Common Stock who beneficially own 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. A person or entity is deemed to beneficially own
shares owned by an affiliate of, as well as by persons acting in concert with,
such person or entity. 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 are acting in
concert, 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 of Directors to implement and apply the Limit.
The presence, in person or by proxy, of the holders 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 Annual
Meeting. In the event there are not sufficient votes for a quorum or to approve
or ratify any proposal at the time of the Annual Meeting, the Annual Meeting may
be adjourned in order to permit the further solicitation of proxies.
As to the election of directors set forth in Proposal 1, the proxy card
being provided by the Board of Directors enables a stockholder to vote "FOR" the
election of the nominees proposed by the Board of Directors, or to "WITHHOLD"
authority to vote for one or more of the nominees being proposed. Under Delaware
law and the Company's bylaws, directors are elected by a plurality of
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votes cast, without regard to either (i) broker non-votes, or (ii) proxies as to
which authority to vote for one or more of the nominees being proposed is
withheld.
As to the ratification of action taken by the Board of Directors to amend
award agreements granted under the PFF Bancorp, Inc. 1996 Incentive Plan and as
to the ratification of KPMG Peat Marwick LLP as independent auditors of the
Company set forth in Proposals 2 and 3, respectively, and all other matters that
may properly come before the Annual Meeting, by checking the appropriate box, a
shareholder may: (i) vote "FOR" such item; (ii) vote "AGAINST" such item; or
(iii) "ABSTAIN" from voting on such item. Under the Company's bylaws, unless
otherwise required by law, all such matters shall be determined by a majority of
the votes cast, without regard to either (a) broker non-votes, or (b) proxies
marked "ABSTAIN" as to that matter.
Proxies solicited hereby will be returned to the Company's transfer agent,
ChaseMellon Shareholder Services, L.L.C., and will be tabulated by inspectors of
election designated by the Board of Directors, who will not be employed by, or
be a director of, the Company or any of its affiliates. After the final
adjournment of the Annual Meeting, the proxies will be returned to the Company
for safekeeping.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to those persons believed by
management to be beneficial owners of more than 5% of the Company's outstanding
shares of Common Stock on the Record Date or as disclosed in certain reports
regarding such ownership filed by such persons with the Company and with the
Securities and Exchange Commission ("SEC"), in accordance with Sections 13(d)
and 13(g) of the Securities Exchange Act of 1934, as amended ("Exchange Act").
Other than those persons listed below, the Company is not aware of any person,
as such term is defined in the Exchange Act, that owns more than 5% of the
Company's Common Stock as of the Record Date.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(1)
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Common Stock PFF Bank & Trust Employee Stock 1,576,152(2) 9.7%
Ownership Plan ("ESOP")
350 South Garey Avenue
Pomona, California 91766
Common Stock Boston Partners Asset Management, L.P.(3) 1,143,100(4) 7.1%
Boston Partners, Inc.
Desmond John Heathwood
One Financial Center, 43/rd/ Floor
Boston, Massachusetts 02111
Common Stock Capital Guardian Trust Company (5) 1,020,000 6.3%
333 South Hope Street
Los Angeles, California 90071
Common Stock Mellon Bank Corporation 990,900(6) 6.1%
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Common Stock Thomson Horstmann & Bryant, Inc. 987,500(7) 6.1%
Park 80 West, Plaza Two
Saddle Brook, New Jersey 07663
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(1) Based on 16,250,823 shares outstanding.
(2) CNA Trust has been appointed as the corporate trustee for the ESOP ("ESOP
Trustee"). The ESOP Trustee, subject to its fiduciary duty, must vote all
allocated shares held in the ESOP in accordance with the instructions of
the participants. At July 31, 1998, 306,552 shares had been allocated
under the ESOP and 1,269,600 shares remain unallocated. Under the terms of
the ESOP, the ESOP Trustee will vote the unallocated shares in a manner
calculated to most accurately reflect the instructions received from
participants regarding allocated shares so long as the ESOP Trustee
determines such vote is in accordance with the provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
(3) Boston Partners Asset Management, L.P. ("BPAM") owns of record 1,143,100
shares of Common Stock of the Company. Boston Partners, Inc. is the sole
general partner of BPAM, and Mr. Heathwood is the principal stockholder of
Boston Partners, Inc.
(4) Based on information contained in a Schedule 13G filed with the SEC on
February 13, 1998.
(5) Based on information contained in a Schedule 13G filed with the SEC on
February 3, 1998.
(6) Based on information contained in a Schedule 13G filed with the SEC on
January 23, 1998.
(7) Based on information contained in a Schedule 13G filed with the SEC on
February 11, 1998.
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PROPOSALS TO BE VOTED ON AT THE MEETING
PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of seven (7)
directors and is divided into three classes. Each of the seven members of the
Board of Directors of the Company also presently serves as a director of the
Bank. Directors are elected for staggered terms of three years each, with the
term of office of only one of the three classes of directors expiring each year.
Directors serve until their successors are elected and qualified.
The three nominees proposed for election at this Annual Meeting are Donald R.
DesCombes, Robert D. Nichols and Larry M. Rinehart. No person being nominated
as a director is being proposed for election pursuant to any agreement or
understandings between any such person and the Company.
In the event that any such nominee is unable to serve or declines to serve for
any reason, it is intended that the proxies will be voted for the election of
such other person 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 NOMINEE IS
WITHHELD, IT IS INTENDED THAT THE SHARES REPRESENTED BY THE ENCLOSED PROXY CARD,
IF EXECUTED AND RETURNED, WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES
PROPOSED BY THE BOARD OF DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THE
NOMINEES NAMED IN THIS PROXY STATEMENT.
INFORMATION WITH RESPECT TO THE NOMINEES, CONTINUING DIRECTORS AND CERTAIN
EXECUTIVE OFFICERS
The following table sets forth, as of the Record Date, the names of the
nominees, continuing directors and Named Executive Officers (as defined herein)
as well as their ages, a brief description of their recent business experience,
including present occupations and employment, certain directorships held by
each, the year in which each director became a director of the Bank, the year in
which their terms (or in the case of the nominees, their proposed terms) as
director of the Company expire. The table also sets forth the amount of Common
Stock and the percent thereof beneficially owned by each director and Named
Executive Officer and all directors and executive officers as a group as of the
Record Date.
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SHARES OF
NAME AND PRINCIPAL EXPIRATION OF COMMON STOCK
OCCUPATION AT PRESENT DIRECTOR TERM AS BENEFICIALLY PERCENT OF
AND FOR PAST FIVE YEARS AGE SINCE(1) DIRECTOR OWNED (2)(3) CLASS(4)
- ------------------------------------------------ --- ----------- ------------- ---------------- ------------
NOMINEES
Donald R. DesCombes......................... 66 1979 2001 81,166(3)(4) *
Chairman of the Board of Directors of the
Company and the Bank. Mr. DesCombes
has served as Chairman of the Board of the
Bank since 1989. Mr. DesCombes is an
owner of Averbeck Company Insurance
Brokers.
Robert D. Nichols........................... 71 1986 2001 53,698(3)(4) *
President and Chief Executive Officer of the
Bank from August 1986 until his retirement
in August 1992.
Larry M. Rinehart........................... 50 1994 2001 232,811(5)(6)(7) 1.4%
President and Chief Executive Officer of the
Company and the Bank since July 1992.
Served as President-elect and Executive Vice
President from July 1991 to July 1992. Mr.
Rinehart also serves as Director, President
and Chief Executive Officer of Pomona
Financial Services, Inc., PFF Insurance
Service and Diversified Services, Inc.
CONTINUING DIRECTORS
Jil H. Stark............................... 61 1975 2000 49,888(3)(4) *
Formerly Director of Marian Miner Cook
Athenaeum of Claremont McKenna College,
and currently Community Coordinator. Mrs.
Stark also serves on the Board of Directors
of Pomona Financial Services, Inc., PFF
Insurance Service and Diversified Services,
Inc.
William T. Dingle......................... 70 1974 1999 52,888(3)(4) *
Chief Executive Officer of Graves
Automotive Supply and Parkway
Automotive Warehouse. Mr. Dingle also
serves on the Board of Directors of Pomona
Financial Services, Inc., PFF Insurance
Service and Diversified Services, Inc.
Robert W. Burwell......................... 66 1984 1999 81,009(3)(4) *
Vice Chairman of the Board of Directors of
the Company and the Bank. Mr. Burwell
was President and Chief Executive Officer of
the Pomona Valley Hospital Medical Center
from 1972 until his retirement in 1993.
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SHARES OF
NAME AND PRINCIPAL EXPIRATION OF COMMON STOCK
OCCUPATION AT PRESENT DIRECTOR TERM AS BENEFICIALLY PERCENT OF
AND FOR PAST FIVE YEARS AGE SINCE(1) DIRECTOR OWNED (2)(3) CLASS(4)
- ------------------------------------------------ --- ----------- ------------- ---------------- ------------
Curtis W. Morris............................. 62 1988 1999 58,985(3)(4) *
Mr. Morris is associated with the law firm of
Lamb, Morris & Lobello and has been a
practicing attorney for 28 years.
NAMED EXECUTIVE OFFICERS
Kevin McCarthy............................... 46 -- -- 139,901(5)(6)(7) *
Senior Executive Vice President of the
Company and Senior Executive Vice
President and Chief Operating Officer of the
Bank. Mr. McCarthy is a Director of
Pomona Financial Services, Inc., PFF
Insurance Service and Diversified Services,
Inc.
Gregory C. Talbott........................ 44 -- -- 124,588(5)(6)(7) *
Executive Vice President, Chief Financial
Officer and Treasurer of the Company and
the Bank.
Gilbert F. Smith......................... 52 -- -- 62,511(5)(6)(7) *
Senior Vice President and General Counsel
of the Bank. Mr. Smith also serves as
Chairman of the Board of Pomona Financial
Services, Inc., PFF Insurance Service, and
Diversified Services, Inc.
Jerald W. Groene......................... 50 -- -- 68,461(5)(6)(7) *
Senior Vice President and Chief Lending
Officer of the Bank. Mr. Groene is a
Director of Pomona Financial Services, Inc.,
PFF Insurance Service and Diversified
Services, Inc.
Stock ownership of all Directors and
Executive Officers as a Group (14 persons) -- -- 1,195,005(8) 7.5%
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* Does not exceed 1.0% of the Company's voting securities.
(1) Includes years of service as a director of the Bank.
(2) Each person effectively exercises sole (or shares with spouse or other
immediate family member) voting or dispositive power as to shares reported
herein (except as noted).
(3) Includes 27,205 shares awarded to each outside director pursuant to the PFF
Bancorp, Inc. 1996 Incentive Plan (the "Incentive Plan"), which vest in
five equal annual installments commencing on October 23, 1997 and March 26,
1998 and which have not yet vested. Also includes 6,801 and 3,060 shares
with respect to Messrs. DesCombes and Nichols, respectively, which have
vested but receipt of which has been deferred by Messrs. DesCombes and
Nichols. Each outside director presently has voting power as to the shares
awarded.
(4) Includes 17,003 shares subject to options granted to each outside director
under the Incentive Plan which are currently exercisable. Excludes 68,012
shares subject to options granted to each outside director under the
Incentive Plan which are not currently exercisable. Options granted
pursuant to the Incentive Plan become exercisable at a rate of 20% per year
commencing on October 23, 1997 and March 26, 1998.
(5) Includes 120,000, 72,000, 64,000, 34,000 and 34,000 shares awarded to
Messrs. Rinehart, McCarthy, Talbott, Smith and Groene, respectively, under
the Incentive Plan which have not yet vested. Also includes 6,000 shares
with respect to Mr. Talbott which have vested but receipt of which has been
deferred at the option of Mr. Talbott. Awards to officers under the
Incentive Plan vest
7
at a rate of 20% per year commencing on October 23, 1997; provided,
however, that 75% of the third, fourth and fifth annual installments will
only vest if the performance criteria established by the Compensation
Committee is satisfied. See "Executive Compensation-Compensation Committee
Report on Executive Compensation." Each participant presently has voting
power as to the shares awarded.
(6) Includes 67,157, 32,157, 26,157 and 19,200 shares subject to options
granted to Messrs. Rinehart, McCarthy, Talbott and Groene, respectively,
under the Incentive Plan which are currently exercisable. Excludes
300,000, 160,000, 136,000, 76,800 and 76,800 shares subject to options
granted to Messrs. Rinehart, McCarthy, Talbott, Smith and Groene,
respectively, under the Incentive Plan which are not exercisable. Options
become exercisable at a rate of 20% per year commencing on October 23,
1997. See "Executive Compensation- Incentive Plan."
(7) Includes 3,216, 3,680, 3,681, 3,687 and 3,461 shares allocated to Messrs.
Rinehart, McCarthy, Talbott, Smith and Groene, respectively, under the
Bank's ESOP.
(8) Includes a total of 605,091 shares awarded under the Incentive Plan as to
which voting may be directed. Excludes a total of 1,388,071 shares subject
to options under the Incentive Plan which are not currently exercisable.
Includes 26,581 shares (including 17,725 shares set forth in footnote 7
above) allocated to executive officers as a group under the Bank's ESOP.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS OF
THE COMPANY
The Board of Directors of the Company conducts its business through
meetings of the Board of Directors and through activities of its committees.
The Board of Directors of the Company meets monthly and may have additional
meetings as needed. During the year ended March 31, 1998, the Board of
Directors of the Company held twelve meetings. All of the directors of the
Company attended at least 75% of the total number of the Company's Board
meetings held and committee meetings on which such directors served during
fiscal 1998. The Board of Directors of the Company maintains committees, the
nature and composition of which are described below:
AUDIT COMMITTEE. The Audit Committee of the Company and the Bank
consists of Mrs. Stark and Messrs. Dingle and Burwell. The Audit Committee is
responsible for reporting to the Board on the general financial condition of the
Bank and the results of the annual audit, and is responsible for ensuring that
the Bank's activities are being conducted in accordance with applicable laws and
regulations. The Audit Committee of the Company met three times in fiscal 1998.
The Audit Committee of the Bank met four times in fiscal 1998.
NOMINATING COMMITTEE. The Company's Nominating Committee for the 1998
Annual Meeting consisted of Mrs. Stark and Messrs. Burwell and Morris. The
committee considers and recommends the nominees for director to stand for
election at the Company's annual meeting of shareholders. The Company's
Certificate of Incorporation and Bylaws provide 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. 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.
The Nominating Committee met on May 27, 1998.
EMPLOYEE COMPENSATION AND BENEFITS COMMITTEE. The Employee
Compensation and Benefits Committee of the Company consists of Messrs. Burwell,
Dingle, Morris, Nichols and Rinehart. The committee meets to establish
compensation and benefits for the executive officers and to review the incentive
compensation programs when necessary. The committee is also responsible for all
matters regarding compensation and benefits, hiring, termination and affirmative
action issues for other officers and employees of the Company and the Bank. The
Employee Compensation and
8
Benefits Committee of the Company met one time in fiscal 1998. The Compensation,
Pension and Personnel Practices Committee of the Bank met three times in fiscal
1998.
DIRECTORS' COMPENSATION
DIRECTORS' FEES. The directors of the Company, except for Mr.
Rinehart, receive a retainer of $5,000 per year for service on the Board of
Directors of the Company. No committee meeting fees are paid by the Company.
Currently, all directors of the Bank except the Chairman of the Board and Mr.
Rinehart receive a retainer of $3,000 per month. The Chairman of the Board
receives a monthly retainer of $4,200. Mr. Rinehart does not receive any
additional compensation for serving as a director. No committee meeting fees
are paid by the Bank. No fees are currently being paid to the directors for
service on the Board of Directors of the service companies.
DIRECTORS' RETIREMENT PLAN. The Bank maintains the PFF Bank & Trust
Directors' Retirement Plan (the "Directors' Retirement Plan"). The Directors'
Retirement Plan is frozen, in that no new benefits are accruing under the Plan
effective December 31, 1995. The Directors' Retirement Plan provides that, upon
retirement, retiring directors are eligible to receive an annual benefit equal
to 70% of the retiring directors' annualized final earnings based on monthly
board compensation as of December 31, 1995 (reduced by one one hundred and
twentieth (1/120) for each month of service less than 120) which shall continue
to be paid for at least 10 years and over the lifetime of the director
thereafter. All directors are currently credited with 120 months of service
under the plan except for Mr. Nichols who has been credited with 60 months of
service. Mr. Rinehart does not participate in the plan. Benefits may not start
until the director reaches age 65. The Directors' Retirement Plan provides that
in the event of a participant's death prior to payment of all benefits due to
the participant under the plan, the remaining benefits are to be paid to the
beneficiary or beneficiaries designated by the participant or, if no such
designation had been made, to the estate of the participant.
DIRECTORS' DEFERRED COMPENSATION PLAN. The Bank provides a non-
qualified plan which offers directors the opportunity to defer fee compensation
and stock awarded under the Incentive Plan. The primary form of benefit for
deferred fees is 120 monthly installment payments of the account balance. Such
balance shall equal the amount of the deferrals and interest thereon. Other
forms of benefit, including a lump sum payout, are available with certain
restrictions. Deferred stock awarded under the Incentive Plan, is accounted for
in the plan in the form of Common Stock units. The form of benefit for deferred
stock received through the Incentive Plan is a single lump sum payout made in
shares of Common Stock. The forms of benefit for other deferred stock is a
single lump sum payout or payment of equal installments over time. Prior to
March 1996, deferrals had been credited with an interest rate equal to the
highest interest rate paid on a designated date to depositors of the Bank. The
plan has been amended to allow for an alternative choice whereby deferrals may
be credited with investment earnings or losses equivalent to that of the Common
Stock issued in connection with the Company's initial public offering ("Common
Stock Rate"). Previous deferrals, as well as future deferrals, may be credited
with the Common Stock Rate as of the initial public offering. The Bank
established an irrevocable grantor trust ("rabbi trust") to hold the assets
9
of the Bank that are intended to be used to satisfy the Bank's obligation with
respect to benefits payable under the Deferred Compensation Plan. Assets of the
rabbi trust are subject to the claims of creditors of the Bank solely in the
event of the Bank's insolvency thereby foregoing any tax consequences to
participants until assets are distributed to participants.
INCENTIVE PLAN. Under the Incentive Plan maintained by the Company,
each director who is not an officer or employee of the Company or the Bank
received non-statutory stock options to purchase 76,516 shares of Common Stock
at an exercise price of $12.75, which was the fair market value of the shares on
the date of grant, October 23, 1996 (with Dividend Equivalent Rights attached,
as discussed below), and an award of 30,606 shares of Common Stock. On March
26, 1997, each director who is not an officer or employee of the Company or the
Bank was granted non-statutory stock options to purchase 8,501 shares of Common
Stock at an exercise price of $15.50, which was the fair market value of the
shares on the date of grant (with Dividend Equivalent Rights attached, as
discussed below), and an award of 3,400 shares of Common Stock (collectively,
the "Directors' Awards"). The Dividend Equivalent Rights provide a separate
cash benefit equal to 100% of the amount of any extraordinary dividend (as
defined in the Incentive Plan) declared by the Company on shares of Common Stock
subject to an option. The Directors' Awards initially granted under the
Incentive Plan will vest over a five-year period, at a rate of 20% each year
commencing on October 23, 1997 and March 26, 1998, the first anniversaries of
the respective dates of grant. On February 18, 1997, the Employee Compensation
and Benefits Committee of the Company and the Compensation, Pension and
Personnel Practices Committee of the Bank amended the Directors' Awards
agreements, effective March 28, 1997, to provide for acceleration of the vesting
of Directors' Awards upon a change in control of the Company or the Bank (as
defined in the Incentive Plan). All unexercised options granted under the
Incentive Plan expire 10 years following the date of grant. All Directors'
Awards will immediately vest upon death or disability.
EXECUTIVE COMPENSATION
The report of the Compensation Committee and the stock performance
graph shall not be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the
Securities Act of 1933, as amended (the "Securities Act") or the Exchange Act,
except as to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION. Under rules
established by the Securities and Exchange Commission ("SEC"), the Company is
required to provide certain data and information in regard to the compensation
and benefits provided to the Company's Chief Executive Officer and other
executive officers of the Company or the Bank. The disclosure requirements for
the Chief Executive Officer and other executive officers include the use of
tables and a report explaining the rationale and considerations that led to
fundamental compensation decisions affecting those individuals. In fulfillment
of this requirement, the Employee Compensation and Benefits Committee of the
Board of Directors of the Company, at the direction of the Board of Directors,
has prepared the following report for inclusion in this Proxy Statement.
10
The Bank and the Company began a process following the issuance of
stock in March, 1996, to revise current executive compensation policies to
reflect the status of the Company as a public company and to assure competitive
compensation levels. The new policies incorporate financial results of the
Company with particular emphasis on the ROAE and the EPS of the Company's stock.
HISTORICAL APPROACH. Historically, executive compensation has been
reviewed annually by the Bank's Compensation, Pension and Personnel Practices
Committee (the "Committee"). The Committee utilized various sources of
compensation information upon which to base their decisions. Compensation
information included compensation surveys, utilization of consultants and peer
group analysis.
The Bank participated in a number of salary surveys to obtain current
data including: The Nash Survey - Fourth Annual Board of Directors and Executive
Compensation, California Banks and Savings and Loans Survey, Western Management
Group Survey, KPMG - Executive Compensation and Benefits Survey, SNL Executive
Compensation Review 1997, Cole Executive Compensation Survey and BAI Key
Executive Compensation Survey.
Historically, the Committee has focused on the salary and pay
adjustments for the President and Chief Executive Officer. The President and
CEO has focused on the salary and pay adjustments of the remainder of the
Executive Committee. In recent years, the Board has more fully reviewed the
total compensation package of the entire Executive Committee.
In reviewing the compensation package for the Executive Committee, the
Committee considers a number of factors including asset size, earnings, type of
operations, corporate structure, geographic locations and budget considerations.
As a result, the Committee is provided with relevant, timely and reliable data
with which to make recommendations to the Board of Directors regarding
compensation.
COMPENSATION POLICIES. The Committee has established the following
goals as incentives in setting Executive Compensation, including benefits:
. to target base salaries at a competitive average;
. to reward the achievement of the Bank's annual and long term
strategic goals;
. to retain executive officers by offering a full range of benefits
available at a competitive level to other executives of savings
institutions;
. to provide additional motivation for the executive officers to enhance
stockholder value by linking a portion of the compensation package to
the performance of the Company's stock.
COMPONENTS OF SALARY. Compensation is defined as cash or non-cash
remuneration in the form of salary, bonus, profit sharing, deferred
compensation, auto allowance, 401(k) employer match contribution, Supplemental
Executive Retirement Plan ("SERP") payments, ESOP allocations, stock grants and
options, and any other type of remuneration deemed by the Board to be
appropriate.
11
In March of 1998, the Board of Directors approved an incentive plan
payout to all employees in pay grades eleven and above. These are typically
mid- and senior-level management personnel. The payout was made in April, 1998.
The payout was made in conjunction with attainment of specific financial goals
achieved during the Company's 1998 fiscal year.
INCENTIVE PLAN. On October 23, 1996, stockholders approved the PFF
Bancorp, Inc. 1996 Incentive Plan, under which officers may receive options and
awards. Stock option awards will vest in five equal annual installments. Stock
awards under the Incentive Plan vest in five equal annual installments. The
first and second annual installments will vest respectively on the first and
second anniversary of the date of grant. Twenty-five percent (25%) of the
third, fourth and fifth annual installment will vest on the third, fourth and
fifth respective anniversary dates of the date of grant. The remaining seventy-
five percent (75%) of each of the third, fourth and fifth annual installments
will be subject to the achievement of multilevel performance goals relating to
the attainment of a target amount of earnings per share established by the
Committee. The Committee believes that stock ownership is a significant
incentive in building stockholders' wealth and aligning the interests of
employees with those of stockholders. Stock options and stock awards under the
Incentive Plan were allocated by the Committee based upon the Company's fiscal
responsibility, regulatory practices and policies, the practices of other
recently converted financial institutions, as verified by external surveys based
upon the officers' level of responsibility and contributions to the Company and
the Bank. Stock awards under the Incentive Plan may be deferred under the
Employee Deferred Compensation Plan. The Committee will consider the amount of
outstanding awards in determining the total annual compensation package. See "-
Summary Compensation Table" and "Incentive Plan."
CHIEF EXECUTIVE OFFICER. The Chief Executive Officer's evaluation
included consideration of leadership qualities demonstrated during the first
years of operation as a publicly traded company. Specific accomplishments
included the hiring of more experienced commercial bank employees; cost
reductions; growth of the business, consumer and construction loan programs;
expansion of the branch system; reduction in the level of non-performing assets;
and, asset growth of the Company. In addition to considering these specific
accomplishments, consideration was given to the results of an extensive survey
of peer financial institutions.
The Company engaged William M. Mercer, Inc., to conduct a review of
its executive compensation program and to make recommendations for the future.
Mercer conducted an analysis of the proxy statements of two peer groups of
companies, one national and one Californian. Also, Mercer reviewed PFF's
current annual merit/bonus plan and management incentive plans. The CEO's new
salary was established at $300,000 per year, a 26% increase which placed the CEO
in the median range of similar companies. Peer comparisons were also conducted
for the additional seven members of the Executive Committee of Management
resulting in upward adjustments to their salaries for competitive placement at
the peer group median range. The Committee subsequently froze the salary of the
CEO and other members of the Executive Committee of Management at its April 1997
meeting preferring to rely on incentive pay for performance. Future
consideration for salary increases for the CEO and other members of the
Executive Committee of Management will only be made to stay within the median
range for peer financial institutions.
12
The Committee has currently developed a management incentive plan that
is performance based and ties incentive payments to goal attainment of specific
EPS and ROAE targets. The Business Plan and a high level of executive
commitment to its success will be of particular importance to the Committee.
The goal of the above referenced compensation policies, as implemented
by the Committee, is to be certain that all Executives are compensated
consistent with the above guidelines and to assure that all reasonable and
possible efforts are being exerted to maximum shareholder value. Compensation
levels will be reviewed as frequently as necessary to ensure this result.
THE EMPLOYEE COMPENSATION AND BENEFITS COMMITTEE
Robert W. Burwell Robert D. Nichols
William T. Dingle Larry M. Rinehart
Curtis W. Morris
13
STOCK PERFORMANCE GRAPH. The following graph shows a comparison of
stockholder return on the Company's Common Stock based on the market price of
Common Stock assuming the reinvestment of dividends, with the cumulative total
returns for the companies on the Nasdaq Stock Market (U.S.) Index and Nasdaq
Bank Stocks Index for the period beginning on March 29, 1996 through March 30,
1998. The data used to prepare the graph was prepared by the Center for Research
in Security Prices ("CRSP") at the University of Chicago Graduate School of
Business. The graph was derived from a limited period of time, and, as a result,
may not be indicative of possible future performance of the Company's Common
Stock.
COMPARISON OF CUMULATIVE TOTAL RETURNS
AMONG THE COMPANY, NASDAQ STOCK MARKET (U.S.)
INDEX AND THE NASDAQ BANK STOCKS INDEX
[PERFORMANCE GRAPH APPEARS HERE]
SUMMARY
3/29/96 9/30/96 3/31/97 9/30/97 3/31/98
-------- -------- -------- -------- --------
PFF Bancorp, Inc. 100.0 108.8 126.4 170.3 181.3
CRSP Index - Nasdaq Stock Market Index 100.0 112.0 111.1 153.8 168.7
CRSP Index - Nasdaq Bank Stocks Index 100.0 112.5 136.6 187.4 224.9
Notes:
A. THE LINES REPRESENT YEARLY INDEX LEVELS DERIVED FROM COMPOUNDED DAILY
RETURNS THAT INCLUDE ALL DIVIDENDS.
B. THE INDEXES ARE REWEIGHTED DAILY, USING THE MARKET CAPITALIZATION ON
THE PREVIOUS TRADING DAY.
C. IF THE YEARLY INTERVAL, BASED ON THE FISCAL YEAR-END, IS NOT A
TRADING DAY, THE PRECEDING TRADING DAY IS USED.
D. THE INDEX LEVEL FOR ALL SERIES WAS SET TO 100.00 ON 3/29/96.
14
SUMMARY COMPENSATION TABLE. The following table shows, for the fiscal
years ended March 31, 1998, 1997 and 1996, the cash compensation paid by the
Bank, as well as certain other compensation paid or accrued for those years, to
the Chief Executive Officer and the four highest paid executive officers of the
Bank who received compensation in excess of $100,000 ("Named Executive
Officers").
Annual Compensation (1)
-------------------------------------
Other
Name and Salary Annual
Principal Position Year ($) Bonus Compensation
($) ($)(2)
- ---------------------------------------------------------------------------------------------------------------------
Larry M. Rinehart, 1998 $300,000 $87,199 --
President and Chief 1997 238,164 18,320 --
Executive Officer 1996 226,211 -- --
Kevin McCarthy 1998 $200,004 $48,416 --
Senior Executive Vice 1997 156,000 12,000 --
President and Chief 1996 143,943 -- --
Operating Officer
Gregory C. Talbott 1998 $190,020 $46,079 --
Executive Vice President, 1997 155,880 11,990 --
Chief Financial Officer and 1996 148,128 -- --
Treasurer
Gilbert F. Smith 1998 $150,000 $29,160 --
Senior Vice President, 1997 130,440 10,034 --
General Counsel 1996 124,740 -- --
Jerald W. Groene 1998 $150,000 $29,086 --
Senior Vice President, Chief 1997 121,404 9,339 --
Lending Officer 1996 115,232 -- --
Long Term Compensation
------------------------------------------------------
Awards Payouts
------------------------------- -----------------
Restricted Securities All
Stock Underlying LTIP Other
Name and Awards Options/SARs Payouts Compensation
Principal Position (S)(3) (#) ($)(4) ($)
- ----------------------------------------------------------------------------------------------------------------
Larry M. Rinehart, -- -- -- $44,796(5)
President and Chief $1,912,500 375,000 -- 45,335
Executive Officer -- -- -- 44,747
Kevin McCarthy $ -- -- -- $42,001(5)
Senior Executive Vice 1,147,500 200,000 -- 42,796
President and Chief -- -- -- 32,437
Operating Officer
Gregory C. Talbott $ -- -- -- $41,673(5)
Executive Vice President, 1,020,000 170,000 -- 42,944
Chief Financial Officer and -- -- -- 28,452
Treasurer
Gilbert F. Smith $ -- -- -- $42,593(5)
Senior Vice President, 541,875 96,000 -- 40,849
General Counsel -- -- -- 25,489
Jerald W. Groene $ -- -- -- $40,748(5)
Senior Vice President, Chief 541,875 96,000 -- 32,830
Lending Officer -- -- -- 24,287
_____________________________
(1) Under Annual Compensation, the column titled "Salary" includes amounts
deferred by the Named Executive Officer pursuant to the Bank's 401(k) Plan,
as hereinafter defined, pursuant to which employees may defer up to 15% of
their compensation and executive officers may defer up to 5% of their
compensation, up to the maximum limits under the Code. These numbers are
subject to change based on Section 415 testing limits.
(2) There were no (a) perquisites over the lesser of $50,000 or 10% of the
individual's total salary and bonus for the last year, (b) payments of
above-market preferential earnings on deferred compensation, (c) payments of
earnings with respect to long-term incentive plans prior to settlement or
maturation, (d) tax payment reimbursements, or (e) preferential discounts on
stock.
(3) Pursuant to the Incentive Plan, Messrs. Rinehart, McCarthy, Talbott, Smith
and Groene were awarded 150,000, 90,000, 80,000, 42,500 and 42,500 shares,
respectively, in fiscal 1997. The dollar amounts set forth in the table
represent the market value of the shares awarded on the date of grant. The
awards vest in five annual installments commencing on October 23, 1997, the
first anniversary of the date of grant. When shares become vested and are
distributed, the recipient will also receive an amount equal to accumulated
dividends and earnings thereon (if any). All awards vest immediately upon
termination due to death or disability. The awards to Messrs. Rinehart,
McCarthy, Talbott, Smith and Groene are subject to the attainment of certain
performance goals established by the Committee. See "-Compensation
Committee Report on Executive Compensation." At March 31, 1998, Messrs.
Rinehart, McCarthy, Talbott, Smith and Groene had 120,000, 72,000, 64,000,
34,000 and 34,000 shares, respectively,
15
which remained unvested, with a market value of $2,475,000, $1,485,000,
$1,320,000, $701,250 and $701,250, respectively, as of that date.
(4) For fiscal 1998, 1997 and 1996, the Bank had no long-term incentive plans in
existence. Accordingly, there were no payments or awards under any long-
term incentive plan.
(5) Includes $11,378, $7,212, $7,873, $8,959 and $6,627 in life insurance
premiums; $4,750, $1,837, $2,132, $3,907 and $3,920 in contributions to the
Bank's 401(k) Plan and $20,574, $20,575, $20,575, $18,602 and $18,285 in
contributions to the ESOP paid by the Bank for the benefit of Messrs.
Rinehart, McCarthy, Talbott, Smith and Groene, respectively. Also includes
$10,800 as payment for auto allowances. Includes $294, $1,577, $293, $325
and $1,116 in interest on the Bank's 401(k) Mirror Plan for the benefit of
Messrs. Rinehart, McCarthy, Talbott, Smith and Groene, respectively.
EMPLOYMENT AGREEMENTS
The Bank and the Company have entered into employment agreements with
Messrs. Rinehart and McCarthy (individually, the "Executive"). The employment
agreements are intended to ensure that the Bank and the Company will be able to
maintain a stable and competent management base. The continued success of the
Bank and the Company depends to a significant degree on the skills and
competence of Messrs. Rinehart and McCarthy.
The employment agreements provide for a three-year term for Messrs.
Rinehart and McCarthy. The Bank employment agreements provide that, commencing
on the first anniversary date and continuing each anniversary date thereafter,
the Board of Directors of the Bank may extend the agreement for an additional
year so that the remaining term shall be three years, unless written notice of
non-renewal is given by the Board of Directors of the Bank after conducting a
performance evaluation of the Executive. The terms of the Company employment
agreements shall be extended on a daily basis unless written notice of non-
renewal is given by the Board of Directors of the Company. The agreements
provide that the Executive's base salary will be reviewed annually. The annual
base salaries for Messrs. Rinehart and McCarthy for the fiscal year ended 1998
are $300,000 and $200,004, respectively. In addition to the base salary, the
agreements provide for, among other things, participation in stock benefit plans
and other fringe benefits applicable to executive personnel.
The agreements provide for termination by the Bank or the Company for cause
as defined in the agreements at any time. In the event the Bank or the Company
chooses to terminate the Executive's employment for reasons other than for
cause, or in the event of the Executive's resignation from the Bank and the
Company upon: (i) failure to re-elect the Executive to his current office(s);
(ii) a material change in the Executive's functions, duties or responsibilities;
(iii) a relocation of the Executive's principal place of employment by more than
25 miles; (iv) a material reduction in the benefits and perquisites to the
Executive; (v) liquidation or dissolution of the Bank or the Company; or (vi) a
breach of the agreement by the Bank or the Company, the Executive or, in the
event of the Executive's subsequent death, his beneficiary, would be entitled to
receive an amount equal to the remaining base salary payments due to the
Executive and the contributions that would have been made on the Executive's
behalf to any employee benefit plans of the Bank or the Company during the
remaining term of the agreement provided, however, that the payment shall not,
in the aggregate, exceed three times the average of the Executive's five
preceding taxable years'
16
annual compensation. The Bank and the Company would also continue, and pay for,
the Executive's life, health and disability coverage for the remaining term of
the agreement.
Under the agreements, if voluntary or involuntary termination follows a
change in control of the Bank or the Company (as defined in the Employment
Agreement), the Executive or, in the event of the Executive's death, his
beneficiary, would be entitled to a severance payment equal to the greater of:
(i) the payments due for the remaining term of the agreement; or (ii) three
times the average of the five preceding taxable years' annual compensation. The
Bank and the Company would also continue, and pay for, the Executive's life,
health, and disability coverage for thirty-six months.
Notwithstanding that both agreements provide for a severance payment in the
event of a change in control, the Executive would only be entitled to receive a
severance payment under one agreement. In the event of a change in control,
based upon three times 1998 base salary as reported in the Summary Compensation
Table, Messrs. Rinehart and McCarthy would receive approximately $900,000 and
$600,012, respectively, in severance payments, in addition to other cash and
noncash benefits.
Payments under the agreements in the event of a change in control may
constitute an excess parachute payment under Section 280G of the Internal
Revenue Code (the "Code") for executive officers, resulting in the imposition of
an excise tax on the recipient and denial of the deduction for such excess
amounts to the Company and the Bank. Under the Company's agreements, if such
payment constitutes an excess parachute payment under Section 280G of the Code,
the executive officer will receive a benefit under the agreement equal to the
greater of (i) the total benefits payable under the agreement taking into
account the state and federal income and excise taxes on such amounts or (ii)
the amount that is one dollar less than the triggering amount for the imposition
of the excise tax under Section 280G.
Payments to the Executive under the Bank's agreement will be guaranteed by
the Company in the event that payments or benefits are not paid by the Bank.
Payment under the Company's agreement would be made by the Company. All
reasonable costs and legal fees paid or incurred by the Executive pursuant to
any dispute or question of interpretation relating to the Agreements shall be
paid by the Bank or Company, respectively, if the Executive is successful
pursuant to a legal judgment, arbitration or settlement. The employment
agreements also provide that the Bank and Company shall indemnify the Executive
to the fullest extent allowable under federal and Delaware law, respectively.
TERMINATION AND CHANGE IN CONTROL AGREEMENTS
The Bank has entered into two-year termination and change in control
agreements ("CIC Agreement") with Messrs. Smith, Golish and Groene and Ms.
Lemons and Ms. Scullin and, effective April 1998, a three-year CIC Agreement
with Mr. Talbott. Commencing on the first anniversary date and continuing on
each anniversary thereafter, the Bank's CIC Agreements may be renewed by
17
the Board of Directors for an additional year. The Company has entered into a
three-year CIC Agreement with Mr. Talbott similar to the Bank's CIC Agreement
except that the term of the Company's CIC Agreement shall be extended on a daily
basis. The CIC Agreements provide that in the event voluntary or involuntary
termination follows a change in control of the Bank or the Company, the officer
or, in the event of death, his beneficiary, would be entitled to receive a
severance payment equal to two (three in the case of Mr. Talbott) times the
officer's average annual compensation for the five (two in the case of the
Company's CIC Agreement and three in the case of Mr. Talbott) years preceding
termination subject to the limitation that such payment not exceed three times
the officer's average annual compensation of the previous five years (the
Company's CIC Agreement has no such limitation). The Bank would also continue,
and pay for, the officer's life, health and disability coverage for a period of
twenty-four (24) (thirty-six (36) in the case of Mr. Talbott) months from the
date of termination. Payments to the officer under the Bank's CIC Agreements
will be guaranteed by the Company in the event that payments or benefits are not
paid by the Bank.
The CIC Agreements also provide for a severance payment in the event of an
involuntary termination of the officer by the Bank other than in a change in
control, except for cause. The severance payment is a sum equal to twenty-six
weeks of base salary for each three years of service up to a maximum of one-
hundred and four weeks and is conditioned on the officer releasing the Bank from
any causes of action against the Bank or the Company arising during any period
of employment from the employment relationship, other than claims under the
various employee benefit plans of the Bank and the Company.
INCENTIVE PLAN
The Company maintains the Incentive Plan, which provides discretionary
awards of options to purchase Common Stock, option-related awards and awards of
Common Stock (collectively, "Awards") to officers, directors and key employees
as determined by a committee of the Board of Directors. Awards of Common Stock
to officers, directors and key employees is provided under "Restricted Stock
Awards" in the "Summary Compensation Table." No options were granted under the
Incentive Plan to the Named Executive Officers for fiscal 1998.
18
The following table provides certain information with respect to exercises
of stock options during the fiscal year ended March 31, 1998 by Named Executive
Officers and to the number of shares of Common Stock represented by outstanding
options held by the Named Executive Officers as of March 31, 1998. Also
reported are the values for "in-the-money" options which represent the positive
spread between the exercise price of any such existing stock options and the
year end price of the Common Stock.
AGGREGATE OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUES
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN THE MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES FISCAL YEAR-END(#)(1) FISCAL YEAR-END ($)(2)(3)
ACQUIRED ON VALUE ---------------------------- --------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------- ------------- -------------- ------------ ------------- ----------- ---------------
Larry M. Rinehart.......... 7,843 $ 58,823 67,157 300,000 $528,861 $2,362,500
Kevin McCarthy............. 7,843 58,823 32,157 160,000 253,236 1,260,000
Gregory C. Talbott......... 7,843 59,283 26,157 136,000 205,986 1,071,000
Gilbert F. Smith........... 19,200 103,200 -- 76,800 -- 604,800
Jerald W. Groene........... -- -- 19,200 76,800 151,200 604,800
___________________________
(1) The options in this table have an exercise price of $12.75.
(2) The price of the Common Stock on March 31, 1998 was $20.625.
(3) Based on the market value of the underlying Common Stock at fiscal year
end, minus the exercise price.
RETIREMENT PLAN
The Bank maintains a defined benefit plan (the "Retirement Plan") for
certain salaried employees who had attained the age of 21 and completed one year
of service prior to December 31, 1995. Effective December 31, 1995, the
Retirement Plan was frozen and Participants ceased the accrual of additional
benefits under the Retirement Plan although vesting will continue according to
the terms of the Retirement Plan. After December 31, 1995 no new Participants
entered the Retirement Plan. The Retirement Plan is designed to comply with the
requirements under Section 401(a) of the Code.
The Retirement Plan provides for a monthly benefit to the employee upon
retirement at the age of 65, or if later, the fifth anniversary of the
employee's initial participation in the Retirement Plan ("Normal Retirement
Age"). The Retirement Plan also provides for a monthly benefit upon the
Participant's death, disability and early retirement. Early retirement is
conditioned upon the attainment of the age of 55, and the completion by the
Participant of 15 years of service. No new
19
accrual of years of service will occur after December 31, 1995. Benefits under
the Plan are determined taking into account the participant's final average
earnings, social security benefits and years of credited service under the
Retirement Plan as of December 31, 1995.
The following table sets forth the estimated annual benefits payable upon
retirement at age 65 in the year ended December 31, 1995, expressed in the form
of a single life annuity, for the final average salary and benefit service
classifications specified.
PFF BANK & TRUST EMPLOYEE PENSION PLAN
--------------------------------------------------
YEARS OF SERVICE
FINAL AVERAGE
COMPENSATION 15 20 25 30 35
- ------------- ---------- -------- -------- -------- --------
$ 50,000 $13,598 $18,130 $22,663 $22,663 $22,663
100,000 29,723 39,630 49,538 49,538 49,538
150,000 45,848 61,130 76,413 76,413 76,413
200,000 45,848 61,130 76,413 76,413 76,413
250,000 45,848 61,130 76,413 76,413 76,413
300,000 45,848 61,130 76,413 76,413 76,413
350,000 45,848 61,130 76,413 76,413 76,413
400,000 45,848 61,130 76,413 76,413 76,413
Compensation under the Retirement Income Plan includes all regular pay
and overtime. The benefit amounts listed above were computed on a single life
annuity basis, which is the normal form under the plan.
The approximate years of service, as of January 1, 1996 for the Named
Executive Officers are as follows:
SERVICE
-------
NAME YEARS MONTHS
- ---- ----- ------
Larry M. Rinehart 18 3
Kevin McCarthy 18 -
Gregory C. Talbott 8 7
Gilbert F. Smith 24 2
Jerald W. Groene 23 6
The freezing of accrued benefits on December 31, 1995 results in no
additional service for purposes of benefit determination being accrued for the
named executive officer.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Bank maintains a non-qualified Supplemental Executive Retirement
Plan ("SERP") to provide certain officers and highly compensated employees with
additional retirement benefits. The SERP reflects the freezing of the Pension
Plan as of December 31, 1995. The benefits provided under the SERP are directly
related to those provided under these three qualified employee benefit
20
plans sponsored by the Bank, namely the ESOP, the 401(k) Plan and the Pension
Plan. With respect to the Pension Plan, the SERP provides a benefit equal to the
present value of the previous SERP benefit accrued as of December 31, 1995. No
additional contributions will be made by the Bank to provide this benefit, as
this portion of the SERP is only a deferral mechanism (with interest) of the
frozen Pension Plan benefit. The SERP also provides a benefit equal to the
difference between (i) the benefits which would have been provided by employer
contributions to the 401(k) Plan and the ESOP if such contributions and benefits
were calculated without the limitations imposed by the qualification rules of
the Code and (ii) the actual benefit provided under each plan. Benefits under
the SERP will be provided at retirement in the form of some combination of an
annuity, lump sum cash or stock distribution.
The Bank has established an irrevocable grantor's trust in connection
with the SERP. This trust is funded with contributions from the Bank for the
purpose of providing the benefits promised to the participants under the terms
of the SERP. The SERP participants have only the rights of unsecured creditors
with respect to the trust's assets, and will not recognize income with respect
to benefits provided by the SERP until such benefits are received by the
participants. The assets of the trust are subject to the claims of the Bank's
creditors solely in the event of the Bank's insolvency, thereby foregoing any
tax consequences to the participants until assets are distributed to
participants. Earnings on the trust's assets are taxable to the Bank. The
trust's assets may be invested in the Company's stock.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
With certain exceptions permitted under the Federal Reserve Act and
Regulation O, all loans or extensions of credit to executive officers and
directors must be made on substantially the same terms, including interest rates
and collateral, as 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 a director or
executive officer in excess of the greater of $25,000 or 5% of the Bank's
capital and surplus (up to a maximum of $500,000) must be approved in advance by
a majority of the disinterested members of the Board of Directors.
The Bank has determined that preferred rate loans for executive
officers and directors are part of the Bank's overall benefits and compensation
program, and therefore, executive officers and directors are permitted to
receive the preferred rate so long as they are made within the limitations of
the Federal Reserve Act and Regulation O.
As of March 31, 1998, ten of the Bank's executive officers or
directors had a total of twelve loans outstanding, totalling approximately $2.1
million in the aggregate. Of the twelve loans currently outstanding to
executive officers or directors, eleven loans are receiving a preferred rate.
For those receiving the preferred rate, ten loans are secured by the borrower's
principal residence and one loan to a director is secured by rental property.
21
It is the policy of the Company that all transactions between the
Company and its executive officers, directors, holders of 10% or more of the
shares of any class of its common stock and affiliates thereof, contain terms no
less favorable to the Company than could have been obtained by it in arm's-
length negotiations with unaffiliated persons and are required to be approved by
a majority of independent outside directors of the Company not having any
interest in the transaction.
PROPOSAL 2.
RATIFICATION OF BOARD ACTION TAKEN
TO AMEND AWARD AGREEMENTS GRANTED
UNDER THE PFF BANCORP, INC. 1996 INCENTIVE PLAN
The Board of Directors adopted the PFF Bancorp, Inc. 1996 Incentive Plan
(the "Incentive Plan") and the Company's stockholders subsequently approved it
on October 23, 1996 ("Effective Date"). The Incentive Plan authorizes the
granting of options to purchase Common Stock, option-related awards and awards
of Common Stock (collectively, "Awards"). Subject to certain adjustments to
prevent dilution, the maximum number of shares reserved for Awards under the
Incentive Plan is 2,777,250 shares. The maximum number of shares reserved for
purchase pursuant to the exercise of options and option-related Awards granted
under the Incentive Plan is 1,983,750. The maximum number of shares reserved for
award of Common Stock ("Stock Awards") is 793,500 shares. All officers, other
employees and Directors of the Company and its affiliates, are eligible to
receive Awards under the Incentive Plan. The Incentive Plan is administered by
a Committee consisting of the entire Board of Directors or consisting solely of
two or more outside directors (the "Committee").
Pursuant to regulations of the OTS applicable to stock benefit plans
established or implemented within one year following the completion of a mutual-
to-stock conversion of a federally chartered savings institution such as the
Bank, including the 1996 conversion of the Bank from mutual-to-stock form and
the formation of the Company as the holding company of the Bank, the Incentive
Plan contains certain restrictions and limitations. The Incentive Plan provides
that no Awards granted to employees or directors shall become vested at a rate
in excess of 20% of the total number of shares underlying the Award per year,
provided that all Awards shall become fully vested and immediately exercisable
in the event of the Participant's termination due to death or disability. The
Incentive Plan further provides that the Committee may amend any Award Agreement
after March 28, 1997 to provide for acceleration of the vesting of such Award,
including amendments to provide that such Award shall become fully vested and
immediately exercisable in the event of a change in control (as defined in the
Incentive Plan). In the Company's proxy statement dated September 16, 1996
relating to the approval of the Incentive Plan, the Board of Directors indicated
its intention to amend Award Agreements granted prior to March 28, 1997 to
accelerate vesting of Awards in the event of a change in control. On March 26,
1997, the Board of Directors took such action necessary to so amend all
outstanding Award Agreements (the "Board Action").
The Board of Directors is seeking ratification by stockholders of the Board
Action. The Board of Directors believes that accelerated vesting in a change in
control situation helps to align
22
the interests of management with those of stockholders. Accelerated vesting is
also intended to reduce the Company's vulnerability to takeover attempts and
certain other transactions which have not been negotiated with and approved by
its Board of Directors. It may discourage takeover attempts by increasing the
costs to be incurred by the Bank and the Company in the event of a takeover.
While the Board Action may have these intended effects, it was not taken nor is
stockholder ratification sought in contemplation of a change in control, and
there are no current arrangements, understandings or agreements regarding any
such transactions.
Ratification of the Board Action to permit accelerated vesting does not
increase the number of shares reserved for issuance under the Incentive Plan,
alter the classes of individuals eligible to participate in such plan, or
otherwise amend or modify the terms of the Incentive Plan. The Board of
Directors has determined that the Board Action is in the best interests of the
stockholders of the Company, as well as the officers, directors and employees of
the Company. An affirmative vote of a majority of the votes cast at the Annual
Meeting on the matter, in person or by proxy, is required to constitute
stockholder ratification of the Board Action, submitted as Proposal 2.
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED PROXY
CARD, IF EXECUTED AND RETURNED, WILL BE VOTED "FOR" THE RATIFICATION OF BOARD
ACTION TAKEN TO AMEND AWARD AGREEMENTS GRANTED UNDER THE PFF BANCORP, INC. 1996
INCENTIVE PLAN.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION OF
THE BOARD ACTION.
PROPOSAL 3. RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Company's independent auditors for the fiscal year ended March 31, 1998
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 year ending March 31, 1999, subject to ratification of such
appointment by the shareholders.
Representatives of KPMG Peat Marwick LLP will be present at the Annual
Meeting. They will be given an opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions from
stockholders present at the Annual Meeting.
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED PROXY
CARD 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 THAT YOU VOTE FOR RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY.
23
ADDITIONAL INFORMATION
SHAREHOLDER PROPOSALS
To be considered for inclusion in the Company's proxy statement and form of
proxy relating to the 1999 Annual Meeting of Stockholders a stockholder proposal
must be received by the Secretary of the Company at the address set forth on the
Notice of Annual Meeting of Stockholders not later than April 13, 1999. Any
such proposal will be subject to 17 C.F.R. ss. 240.14a-8 of the Rules and
Regulations under the Exchange Act.
NOTICE OF BUSINESS TO BE CONDUCTED AT AN ANNUAL MEETING
The bylaws of the Company provide an advance notice procedure for a
stockholder to properly bring business before an Annual Meeting. The
stockholder must give written advance notice to the Secretary of the Company not
less than ninety (90) days before the date originally fixed for such meeting;
provided, however, that in the event that less than one hundred (100) days
notice or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be received not later
than the close of business on the tenth day following the date on which the
Company's notice to stockholders of the annual meeting date was mailed or such
public disclosure was made. The advance notice by stockholders must include the
shareholder's name and address, as they appear 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 class and number of shares
of the Company's capital stock that are beneficially owned by such stockholder
and any material interest of such stockholder in the proposed business. In the
case of nominations to the Board of Directors, certain information regarding the
nominee must be provided. Nothing in this paragraph shall be deemed to require
the Company to include in its proxy statement or the proxy relating to an 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 Annual 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 Annual Meeting, you are
urged to return your proxy card promptly. If you are then present at the Annual
Meeting and wish to vote your shares in person, your original proxy may be
revoked by voting at the Annual Meeting. However, if you are a stockholder
whose shares are not registered in your own name, you will need appropriate
documentation from your recordholder to vote personally at the Annual Meeting.
24
A COPY OF THE FORM 10-K (WITHOUT EXHIBITS) FOR THE YEAR ENDED MARCH 31,
1998, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE FURNISHED
WITHOUT CHARGE TO STOCKHOLDERS OF RECORD UPON WRITTEN REQUEST TO PFF BANCORP,
INC., 350 SOUTH GAREY AVENUE, POMONA, CALIFORNIA 91766.
By Order of the Board of Directors
/s/ Carole F. Olson
Carole F. Olson
Secretary
Pomona, California
August 11, 1998
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND PROMPTLY
RETURN THE ACCOMPANYING PROXY CARD IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
25
_______________________________________________________________________________
REVOCABLE PROXY
PFF BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 16, 1998
9:00 A.M. PACIFIC TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints the official proxy committee of the Board of
Directors of PFF Bancorp, Inc. (the "Company"), each with full power of
substitution, to act as proxies for the undersigned, and to vote all shares of
Common Stock of the Company which the undersigned is entitled to vote only at
the Annual Meeting of Stockholders, to be held on September 16, 1998, at 9:00
a.m. Pacific Time, at the Sheraton Suites Fairplex, 601 W. McKinley Avenue,
Pomona, California, and at any and all adjournments thereof, as set forth on
the reverse side.
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS
ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS LISTED. IF
ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, INCLUDING WHETHER OR NOT
TO ADJOURN THE MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY
IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO
OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
_______________________________________________________________________________
FOLD AND DETACH HERE
_______________________________________________________________________________
[X] Please mark
your votes
as indicated
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
1. The election as directors of all nominees VOTE
listed (except as marked to the contrary below). FOR WITHHELD
[_] [_]
Donald R. DesCombes, Robert D. Nichols and
Larry M. Rinehart
INSTRUCTION: To withhold your vote for any individual
nominee, write that nominee's name on the line provided below:
_____________________________________________________
2. The ratification of Board action taken to amend FOR AGAINST ABSTAIN
award agreements granted under the PFF Bancorp, Inc. [_] [_] [_]
1996 Incentive Plan.
3. The ratification of the appointment of KPMG Peat FOR AGAINST ABSTAIN
Marwick LLP as independent auditors of PFF Bancorp, [_] [_] [_]
Inc. for the fiscal year ending March 31, 1999.
The undersigned acknowledges receipt from the Company prior to the execution
of this proxy of a Notice of Annual Meeting of Stockholders and of a Proxy
Statement dated August 11, 1998 and of the Annual Report to Stockholders.
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
Signature of Stockholder ______________ Date _______________________________
Signature of Stockholder ______________ Date _______________________________
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder may sign but only one signature
is required.
_______________________________________________________________________________
FOLD AND DETACH HERE