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
/X/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PRIME BANCORP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee Required.
1) Title of each class of securities to which transaction applies:
_____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________________
/_/ Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
1) Amount previously paid: _________________________________________________
2) Form, Schedule or Registration No. ______________________________________
3) Filing party: ___________________________________________________________
4) Date filed: _____________________________________________________________
___________
*Set forth the amount on which the filing fee is calculated and state how it was
determined.
PRIME BANCORP, INC.
7111 VALLEY GREEN ROAD
FORT WASHINGTON, PA 19034
------------------------
NOTICE
OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 22, 1998
------------------------
NOTICE IS HEREBY GIVEN THAT the 1998 Annual Meeting of Shareholders of
Prime Bancorp, Inc. will be held in the main ballroom at the DoubleTree Guest
Suites, 640 West Germantown Pike, Plymouth Meeting, Pennsylvania 19462 on
Wednesday, April 22, 1998, at 10:00 AM for the following purposes, all of which
are more completely described in the accompanying proxy statement:
1. To elect four (4) directors for a term of office to expire in 2001;
and
2. To transact such other business as may properly come before the
meeting or any postponement or adjournment thereof.
Shareholders of record at the close of business on February 27, 1998 are
entitled to notice of and to vote at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Joseph A. Fluehr, III
----------------------------------
JOSEPH A. FLUEHR, III
SECRETARY
March 18, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
EXECUTE, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD. AN ADDRESSED REPLY
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
PRIME BANCORP, INC.
7111 VALLEY GREEN ROAD
FORT WASHINGTON, PA 19034
(215) 836-2400
------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 22, 1998
------------------------------------
This Proxy Statement is furnished to the shareholders of Prime Bancorp,
Inc., a Pennsylvania corporation, (the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company for use in
voting at the 1998 Annual Meeting of Shareholders (including any adjournment or
postponement thereof). The meeting will be held at 10:00 AM on Wednesday, April
22, 1998 at the DoubleTree Guest Suites, 640 West Germantown Pike, Plymouth
Meeting, Pennsylvania 19462. This Proxy Statement, the Notice of Annual Meeting,
the proxy and the Company's 1997 Annual Report are being mailed to all
shareholders on or after March 18, 1998.
Proxies in the form enclosed, if properly executed and received in time for
voting, and not revoked, will be voted as directed in accordance with the
instructions thereon. Any properly executed proxy which does not contain
instructions to the contrary will be voted for the Company's nominees as
directors. Delivery of a signed proxy will not affect any shareholder's right to
attend the meeting and vote in person. Any shareholder giving a proxy may revoke
it at any time before it is voted at the meeting by giving notice to the
Secretary of the Company in writing at the Company's principal executive offices
or in open meeting, or by executing and delivering a later dated proxy, but such
revocation shall not affect any vote previously taken.
The cost of this solicitation will be borne by the Company. The Company has
retained the services of American Stock Transfer & Trust Company to assist in
the solicitation of proxies, which company charges a fee of $850.00 per month,
plus out of pocket expenses, for its services which include transfer agent,
registrar, dividend reinvestment agent and proxy solicitation services. In
addition to solicitation by mail, proxies may be solicited in person or by
telephone, telegraph, telecopier or other electronic means by directors,
officers or employees of the Company or Prime Bank. Such persons will receive no
additional compensation for their solicitation efforts. The Company, on request,
will reimburse shareholders of record who are brokers, dealers, banks or voting
trustees, or their nominees, for their reasonable expenses in sending proxy
materials and annual reports to the beneficial owners of the shares they hold of
record.
The securities which may be voted at the Annual Meeting consist of the
outstanding shares of common stock of Prime Bancorp, Inc., par value $1.00 per
share (the "Common Stock"). Shareholders are requested to sign, mark and
complete the enclosed proxy and return it in the addressed reply envelope which
is furnished for your convenience. A complete list of shareholders entitled to
vote at the meeting shall be available for examination by any shareholder, for
any purpose relevant to the meeting, at the Company's offices in Fort
Washington, Pennsylvania during normal business hours from March 31, 1998 until
the commencement of the meeting.
1
RECORD DATE AND VOTING RIGHTS
The record date for the determination of shareholders entitled to receive
notice of and to vote at the meeting is the close of business on February 27,
1998. At the close of business on February 27, 1998, there were 5,444,266 shares
of Common Stock issued and outstanding and entitled to vote at the Annual
Meeting. Shareholders are entitled to one vote per share on all matters properly
brought before the meeting, including the election of directors. The Articles of
Incorporation of the Company provide that there is no cumulative voting in the
election of directors.
Under the Pennsylvania Business Corporation Law of 1988, as amended and the
Company's By-Laws, the presence, in person or by proxy, of shareholders entitled
to cast at least one-third of the votes which all shareholders are entitled to
cast on a particular matter constitutes a quorum to take action at a
shareholders' meeting. Shares which are present, or represented by a proxy, will
be counted for quorum purposes regardless of whether the holder of the shares or
proxy fails to vote on a matter ("Abstentions") or whether a broker with
discretionary authority fails to exercise its discretionary authority to vote
shares with respect to the matter ("Broker Non-Votes"). The affirmative vote of
at least a majority of the votes cast at the meeting by all shareholders
entitled to vote thereon is required to adopt any proposal and, in the election
of directors, the candidates receiving the highest number of votes cast, up to
the number of directors to be elected, shall be elected. For voting purposes,
only shares voted either for or against the adoption of a proposal or the
election of directors, and neither Abstentions nor Broker Non-Votes, will be
counted as voting in determining whether a proposal is approved or a director is
elected. As a consequence, Abstentions and Broker Non-Votes will have no effect
on the adoption of a proposal or the election of a director.
BENEFICIAL OWNERSHIP OF VOTING SECURITIES
The Company does not know of any person or group that is the beneficial
owner of more than five percent of the outstanding shares of Common Stock,
except as indicated herein. The following table reflects as of February 27,
1998, the Common Stock beneficially owned by holders of more than five percent
of the outstanding Common Stock, directors, the named executive officers listed
in the Summary Compensation Table on page 9 below, and all officers and
directors as a group. Except as otherwise noted, each beneficial owner listed
has sole investment and voting power with respect to the Common Stock owned by
him or her.
2
AMOUNT
AND NATURE
OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP (1) OF CLASS
---------------- ------------- --------
Arthur J. Kania Trust, Allen Speiser and Stanley J. Kania
Trustees............................................... 503,916(3) 9.26%
Erwin T. Straw........................................... 263,106(2,4) 4.79%
Frederick G. Betz........................................ 49,118(2,5) *
Fred Blume............................................... 700 *
William J. Cunningham.................................... 107,684(6) 1.98%
Joseph A. Fluehr, III.................................... 47,744(2,7) *
Robert A. Fox............................................ 23,500(8) *
Arthur J. Kania.......................................... 122,815(9) 2.26%
Michael B. Laign......................................... 300 *
Ernest Larenz............................................ 139,395(2,10) 2.56%
James J. Lynch........................................... 93,154(2,11) 1.69%
Joseph G. Markmann....................................... 45,374(2,12) *
Roy T. Peraino........................................... 10,000(13) *
David H. Platt........................................... 19,826 *
Arthur L. Powell......................................... 50,367(14) *
William H. Bromley....................................... 88,160(2,15) 1.61%
Walter L. Tillman, Jr.................................... 21,470(2,16) *
James E. Kelly, Jr....................................... 13,300(2) *
All directors and officers as a group consisting of 17
persons (17)........................................... 1,096,013 19.44%
- ------------------
* Less than 1%.
(1) The information contained in this table is based on information furnished
by the respective shareholders or contained in filings made with the
Securities and Exchange Commission. The securities "beneficially owned" by
an individual are determined in accordance with the definition of
"beneficial ownership" set forth in the regulations of the Securities and
Exchange Commission and, accordingly, may include securities owned by or
for, among others, the spouse and/or minor children of the individual and
any other relative who has the same home as such individual, as well as
other securities as to which the individual has or shares voting or
investment power or which the individual has the right to acquire under
outstanding stock options within 60 days after March 31, 1998. Beneficial
ownership may be disclaimed as to certain of the securities.
(2) Based on 5,444,266 shares outstanding on February 27, 1998 except when the
percentage reported relates to shares of Common Stock that a person has a
right to acquire, in which case it is based on the number of shares of
Common Stock that would be outstanding after the exercise of such right.
The following persons own presently exercisable stock options for the
amount of shares indicated: Erwin T. Straw -- 50,374; Frederick G. Betz --
7,368; William H. Bromley -- 24,750; Joseph A. Fluehr, III -- 5,500; Ernest
Larenz -- 7,368; James J. Lynch -- 77,000; Joseph G. Markmann -- 7,368; and
James E. Kelly -- 12,500.
(3) Includes 466,500 shares owned by the Trust, 27,748 shares owned by trusts
for Allen Speiser's benefit, and 9,668 shares owned by a trust of which Mr.
Speiser is trustee for the benefit of third parties. Excludes 122,815
shares owned directly by Mr. Arthur J. Kania, grantor of and counsel to the
Arthur J. Kania Trust and a director of the Company. The address for the
Trust is Two Bala Plaza, Fifth Floor, 333 City Line Avenue, Bala Cynwyd, PA
19004.
3
(4) 91,670 shares are held jointly by Mr. Straw and his wife. 46,445 shares are
owned by Mr. Straw's wife. Also includes 1,139 shares of Common Stock held
for Mr. Straw in the Company's 401(k) Plan.
(5) 3,635 shares of Common Stock are held by Fred Betz & Sons Profit Sharing
Trust of which Mr. Betz is the Trustee, 23,757 shares are held by Mr. Betz'
wife, and 2,785 shares are held in an IRA account for Mr. Betz's wife.
(6) Includes 7,684 shares owned by a pension plan for the benefit of Mr.
Cunningham.
(7) 24,930 shares are held jointly by Mr. Fluehr and his wife.
(8) Includes 3,500 shares owned by a trust of which Mr. Fox is a trustee for
the benefit of third parties.
(9) Excludes 466,500 shares owned by the Arthur J. Kania Trust established by
Mr. Kania as grantor (See Note 3 above) and 99,114 shares owned by members
of Mr. Kania's family. Mr. Kania disclaims beneficial ownership of all such
shares.
(10) 4,180 shares are held in an IRA account for Mr. Larenz' wife.
(11) 689 shares are held for Mr. Lynch in the Company's 401(k) Plan.
(12) 12,185 shares are held by Mr. Markmann's wife.
(13) 10,000 shares are held in an IRA account.
(14) Includes 20,050 shares owned by LRP Associates a partnership of which Mr.
Powell's adult children are limited partners and of which Mr. Powell and
his wife are the general partners.
(15) Includes 700 shares held in an IRA account for the benefit of Lynne C.
Bromley, Mr. Bromley's wife.
(16) Mr. Tillman's employment with the Company ceased on December 31, 1997.
(17) This amount includes an aggregate of 192,228 shares of Common Stock
issuable upon the exercise of presently exercisable stock options held by
certain officers and directors of the Company. See Note 2 above. The
address for each officer and director is c/o Prime Bancorp, Inc., 7111
Valley Green Road, Fort Washington, Pennsylvania 19034.
4
ELECTION OF DIRECTORS
The Bylaws of the Company currently provide that the Board of Directors
shall consist of not less than seven (7) or more than fifteen (15) members.
Currently, there are twelve (12) members of the Board. In accordance with the
Articles of Incorporation and the Bylaws, the Board of Directors is divided into
three (3) classes as nearly equal in number as possible. One class of directors
is to be elected annually. The members of each class are to be elected for a
term of three (3) years or until their successors are elected and qualified.
The class of directors serving until the 1999 Annual Meeting consists of
William J. Cunningham, Arthur J. Kania, Roy T. Peraino and Erwin T. Straw. The
class of directors serving until the 2000 Annual Meeting are Frederick G. Betz,
Robert A. Fox, James J. Lynch and David H. Platt. The directors with terms
expiring at the 1998 Annual Meeting are Joseph A. Fluehr, III, Ernest Larenz,
Joseph G. Markmann and Arthur L. Powell. Pursuant to the retirement policy for
directors contained in the Company's Bylaws, Messrs. Markmann and Powell will
retire from the Board of Directors effective at the 1998 Annual Meeting.
Consequently, the Board of Directors has nominated Joseph A. Fluehr, III, Ernest
Larenz, Fred Blume and Michael B. Laign for election to the Board of Directors
at the 1998 Annual Meeting, each for a three-year term ending at the 2001 Annual
Meeting or until their successors are elected and qualified.
The Company has no reason to believe that any of the nominees will be
unwilling or unable to serve; however, should any nominee become unavailable for
any reason, the Board of Directors may designate a substitute nominee. The
proxies intend (unless authority has been withheld) to vote for the election of
the Company's nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ITS NOMINEES
TO THE BOARD OF DIRECTORS.
COMPENSATION OF DIRECTORS
In 1997, directors received $1,000 for each board meeting attended and $500
for each committee meeting attended. The Chairman of the committee received $750
for each meeting attended. Mr. Straw receives $50,000 annually for his services
as Chairman of the Board.
BUSINESS BACKGROUND OF DIRECTORS
The following table sets forth certain information regarding (i)
management's nominees for the Board of Directors of the Company all of whom are
currently serving as directors of the Company and Prime Bank, with the exception
of Messrs. Blume and Laign who are new nominees, and (ii) those other directors
who will continue in office.
The business experience during at least the last five years for each of the
nominees and each of the directors continuing in office is described below.
Mr. Betz, age 67, served as a director of Cheltenham Federal Savings & Loan
Association ("Cheltenham") and subsequently the Company since 1988. Presently he
is President of Fred Betz and Sons, Inc., a custom home building company located
in Southampton, Pennsylvania.
Mr. Blume, age 56, is an attorney and partner with the law firm of Blank,
Rome, Comisky & McCauley. He joined the firm in 1967 and was admitted to the
partnership in 1972. Mr. Blume serves on the Board of Managers of the University
of Pennsylvania Law Alumni Society and the Board of Overseers of the Law School
of the University of Pennsylvania.
Mr. Cunningham, age 54, had been a Director of First Sterling Bancorp, Inc.
since 1988 and became a director of the Company when it merged with First
Sterling Bancorp, Inc. in 1996. He was a co-founder and managing partner of the
Miami Heat, a National Basketball Association (NBA) team from 1988 until the
sale of his interest in 1995. From 1986 to 1988 Mr. Cunningham was a national
analyst and sports commentator for CBS, Inc. He served as the Coach of the
Philadelphia 76ers from 1977 through 1984, leading the team to an NBA
championship in 1983. Throughout the period from 1965 through 1978 he played
professionally for the Philadelphia 76ers, including for the 1967 NBA
Championship team.
5
Mr. Fluehr, age 52, served as a director of North East Federal Savings &
Loan Association ("North East") and subsequently the Company since 1983. He is a
funeral director and the owner of the Joseph A. Fluehr, III Funeral Homes, Inc.
in Richboro and New Britain, Pennsylvania. He is also a member of the Entities
Board of St. Mary's Medical Center, a division of Catholic Health Initiatives,
Langhorne, PA and a Director of St. Joseph's Home for the Aged, Holland, PA.
Mr. Fox, age 68, is President of R.A.F. Industries, a private investment
company which acquires and manages a diversified group of operating companies
and venture capital investments. He is a former Chairman of the Board of Warner
Company and Waste Resources Corporation. Mr. Fox serves as a member of the Board
of Directors of Safeguard Scientifics, Inc. and Children's Concept, Inc. (Zany
Brainy). He is a Trustee of the University of Pennsylvania and a member of the
Board of Managers of the Wistar Institute.
Mr. Kania, age 66, is a principal of Trikan Associates, which owns and
manages various real estate holdings and is active in venture capital
investments. He is also a partner of the law firm Kania, Lindner, Lasak and
Feeney. Mr. Kania is a former member of the Boards of Directors of PNC Bank,
Midlantic Corporation and Continental Bank. He is a member of the Boards of
Directors of Opt-Sciences Corporation and Piasecki Aircraft Corporation. He also
serves on the Board of Consultors of Villanova University School of Law and is
past Vice-Chairman of the Board of Trustees of Villanova University and past
Chairman of the Board of Trustees of the University of Scranton. He was co-
founder of AID Inc., a leading health care provider, and was its Chairman and
Chief Executive Officer from 1970 through 1974. Mr. Kania was also co-founder of
Greate Bay Country Club and the Brighton Hotel (now Sands Hotel and Casino,
Atlantic City).
Mr. Laign, age 47, is the President and Chief Executive Officer of the Holy
Redeemer Health System in Huntingdon Valley, Pennsylvania. He also serves on the
Board of Directors of Holy Redeemer Health System and each of its subsidiary
corporations. Mr. Laign previously served as Executive Vice President of
Frankford Healthcare System, Inc., from 1984 until 1993, when he joined Holy
Redeemer Health System. He serves on the Board of Governors of the American
Heart Association and the Delaware Valley Healthcare Council Board.
Mr. Larenz, age 66, served as a director of North East and subsequently the
Company since 1976. He is the President of Medicare Management Nursing Homes
which is responsible for the operation of various nursing homes. He is also a
builder/developer of residential and commercial properties.
Mr. Lynch, age 48, served as Executive Vice President of Midlantic Bank
from 1994 to 1995. From 1976 through 1994, Mr. Lynch held various positions with
Continental Bank, culminating as President from 1992 to 1994. Mr. Lynch's
banking career spans thirty (30) years starting with First Pennsylvania Bank as
a part-time employee while attending college and entering its management
training program in 1971. Mr. Lynch currently serves as Chairman of the Central
Philadelphia Development Corporation, a non-profit business advocacy
organization, a member of the Board of Trustees and Executive Committee of
LaSalle University, a member of the Board of Trustees of Holy Redeemer Health
System and a director of various other civic and community organizations.
Mr. Peraino, age 69, is the former Chairman and Chief Executive Officer of
Continental Bancorp and Continental Bank. He is also the former President of
Midlantic Corporation. Mr. Peraino had worked for more than 40 years in the
Philadelphia banking community.
Mr. Platt, age 49, served as a director of North East and subsequently the
Company since 1983. He is the President of Somerton Springs Golf Shoppes which
has twenty-two golf shops and eight golf facilities throughout the Delaware
Valley area. He is also President of the Newtown Swim Club Inc.
Mr. Straw, age 69, served as President and Chief Executive Officer of
Cheltenham and subsequently the Company since January, 1985 through January,
1996. Prior to joining Cheltenham, Mr. Straw was employed for 24 years with
Cheltenham Bank, ultimately serving as a Vice President. Prior thereto, Mr.
Straw spent six years with Household International as a manager in the consumer
finance industry.
6
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of the Company held eight (8) meetings during the
year ended December 31, 1997. No director attended fewer than 75% of the total
number of meetings of the Board of Directors and committees on which he served
held during calendar year 1997. The Board of Directors has a number of standing
committees including an Executive Committee, an Audit Committee, a Compensation
Committee, a Nominating/Governance Committee, a Community Reinvestment Committee
and a Credit Committee.
The Executive Committee, except as limited by the Company's Bylaws, has the
full authority of the Board of Directors when the Board of Directors is not in
session. The current members of the Executive Committee are Messrs. Straw, Betz,
Fox, Larenz, Lynch, Kania and Peraino. The Executive Committee met once during
1997.
The Audit Committee reviews the financial affairs of the Company to
determine its financial condition and reviews with management and the
independent auditors the systems of internal control. This Committee approves
the scope of the audit procedures employed by the Company's independent auditors
and meets with the auditors to discuss the results of their audit. The Audit
Committee reports to the Board of Directors with respect to the foregoing
matters and recommends annually the selection of independent auditors. The
current members of the Audit Committee are Messrs. Markmann, Betz, Larenz,
Peraino, Platt, Powell and Straw. During 1997, the Audit Committee held three
(3) meetings.
The Compensation Committee administers the Company's executive compensation
programs including the granting of stock options and has responsibility for
recommending to the Board of Directors the compensation of all officers,
including executive officers. The current members of the Compensation Committee
are Messrs. Fluehr, Fox, Larenz, Kania and Straw. During 1997, the Compensation
Committee held one (1) meeting.
The Nominating/Governance Committee's duties include the review of
prospective candidates to be nominated to the Board of Directors of the Company
if replacements are required and for future Board expansion, and the
establishment of criteria to be used in consideration of possible nominees for
directorship. This Committee also reviews and recommends changes to the
Company's Bylaws. The current members of the Nominating/Governance Committee are
Messrs. Cunningham, Fluehr, Larenz and Kania. During 1997, Nominating/Governance
Committee did not meet. The Committee met once in January, 1998 for the purpose
of reviewing and making recommendations to the Board of Directors for candidates
to stand for election to the Board at the 1998 Annual Meeting of Shareholders.
The Nominating/Governance Committee will consider candidates for the Board of
Directors by shareholders. Shareholders should make recommendations in writing
to the Secretary of the Company not later than December 1 for the next Annual
Meeting, accompanied by information on the candidate's principal occupation,
business experience, number of shares of Common Stock owned, and such person's
written consent to be named in the proxy statement as a candidate and
willingness to serve as a director.
The Community Reinvestment Committee was established in 1997 to review and
approve Community Reinvestment Act policies and projects of the Company's bank
subsidiary. The current members of the Community Reinvestment Committee are
Messrs. Betz, Cunningham, Platt and Powell. This Committee held one (1) meeting
in 1997.
The Credit Committee reviews approved credit relationships over $2.0
million and reviews classified loans over $250 thousand. The current members of
the Credit Committee are Messrs. Peraino, Betz, Fox, Kania, Markmann, Platt and
Straw. This Committee held three (3) meetings in 1997 and expects to meet six
(6) times in 1998.
7
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following information is provided with respect to the executive
officers of the Company who do not serve on the Board of Directors.
William H. Bromley, age 47, became Executive Vice President of the Company
on December 31, 1996 in connection with the merger with First Sterling Bancorp,
Inc. He had served as President, Chief Executive Officer and a director of First
Sterling and First Sterling Bank since 1988. Before joining First Sterling, Mr.
Bromley was employed for seven years by Industrial Valley Bank and Trust Company
("IVB") from 1979 through 1986 as a commercial loan officer and as a Regional
Vice President for Chester County, Lancaster County and central and western
Delaware County. Prior to joining IVB, Mr. Bromley worked for three years (1976
to 1979) with Midlantic National Bank in Haddonfield, N.J. Mr. Bromley currently
serves as a member of the Board of Directors of the Upper Main Line YMCA. He is
Section Chairman of the Pennsylvania Bankers Association.
James E. Kelly, age 53, became Executive Vice President and Chief Financial
Officer of the Company in November, 1997. Previously, he was corporate
controller and Senior Vice President of Finance for Midlantic Corporation for
five (5) years. Prior to his tenure at Midlantic, Mr. Kelly was chief financial
officer of Continental Bancorp Inc., a $7.5 billion bank holding company at the
time it was acquired by Midlantic.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prime Bank, the Company's wholly-owned subsidiary, leases three (3) bank
branch offices and some administrative office space from Dominion Properties,
L.P. ("Dominion"), the majority ownership interest in which is owned by the
Arthur J. Kania Trust. Arthur J. Kania is grantor of the Trust, and legal
counsel to the Trust and Dominion. Mr. Kania's children are the beneficiaries of
the Trust.
The leases with Dominion have original terms which expire on December 31,
2005. The leases provide for certain renewal options and rent escalation based
upon increases in the Consumer Price Index. Total rent and other charges paid by
the Company to Dominion under the leases in 1997 were approximately $407,000;
payments in 1998 and thereafter will be similar in amount subject to increases
in the Consumer Price Index, real estate taxes, utilities and common area
maintenance charges.
In 1997, the law firm of Kania, Lindner, Lasak and Feeney performed legal
services for the Company's subsidiaries and received compensation therefor. Mr.
Kania is a partner in such firm.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of the Common Stock to file reports of beneficial ownership and changes in
beneficial ownership with the Securities and Exchange Commission ("SEC").
Officers, directors and greater than ten percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, for the period January 1,
1997 through December 31, 1997, all filing requirements applicable to its
officers and directors were complied with, except for the late filing of one
Form 4 by Mr. Betz and the late filing of one Form 4 by Mr. Straw.
8
EXECUTIVE COMPENSATION
REMUNERATION
The Company is a bank holding company whose business is essentially
conducted by Prime Bank, its wholly-owned, Pennsylvania-chartered bank
subsidiary. The officers of the Company are also officers of Prime Bank, and all
cash compensation for the officers is paid by the Bank. The following table sets
forth information as to compensation paid to the Company's chief executive
officer and the other executive officers as determined by SEC rules
(collectively, the "named executive officers") for the three (3) fiscal years
ended December 31, 1997, whose annual cash compensation exceeded $100,000 during
that period.
SUMMARY COMPENSATION TABLE (1)
ANNUAL COMPENSATION
---------------------- SECURITIES
SALARY BONUS UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR AMOUNT AMOUNT OPTIONS COMPENSATION(2)
--------------------------- ---- -------- -------- ---------- ---------------
James J. Lynch 1997 $345,000 $100,000 -- $7,790
President and CEO 1996 277,000 100,000 110,000 9,146
William H. Bromley 1997 200,000 50,000 4,800
Executive Vice President (3) 1996 200,000 85,000 33,000 5,090
1995 185,000 30,000 -- 4,990
Walter L. Tillman, Jr. 1997 165,000 -- -- 6,852
Executive Vice President (4) 1996 150,000 15,000 11,000 6,344
1995 130,000 10,000 -- 5,600
- ------------------
(1) This table does not include columns for Other Annual compensation,
Restricted Stock Awards, and Long-Term Incentive Plan Payouts. The Company
had no amounts to report in the columns for Restricted Stock Awards and
Long-Term Incentive Plan Payouts. The amount of Other Annual Compensation
paid to the named executive officers was in each case for perquisites or
other fringe benefits which are not reportable since they did not exceed the
lesser of $50,000 or ten percent (10%) of salary and bonus as reported for
each named executive officer. The Company furnishes Messrs. Lynch, Bromley
and Tillman with automobiles and also pays certain club dues for the purpose
of promoting the business of the Company.
(2) Includes contributions made for named executive officers under the company's
401(k) Plan and term life insurance premiums paid on behalf of each
executive.
(3) The compensation in 1995 and 1996 for Mr. Bromley was paid by First Sterling
Bank which was acquired by the Company as of the close of business on
December 31, 1996.
(4) Mr. Tillman's employment with the Company ceased on December 31, 1997.
STOCK OPTIONS
The following table sets forth information on stock options granted during
1997 to the named executive officers.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXCERISE FOR OPTION TERM
OPTIONS EMPLOYEES IN OR EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR BASE PRICE DATE 5% 10%
---- ---------- ------------ ---------- ---------- --------- ---------
James E. Kelly..................... 12,500 25.25% $32.25 11/17/2007 $253,500 $642,250
9
The following table sets forth certain information regarding individual
exercises of stock options during 1997 by the named executive officers and the
value of such officers' unexercised options at December 31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
NUMBER OF UNEXERCISED
SHARES OPTIONS AT FISCAL YEAR END (1)
ACQUIRED VALUE -------------------------------------
ON EXERCISE REALIZED (2) TOTAL EXERCISABLE UNEXERCISABLE
----------- ------------ ------- ----------- -------------
James J. Lynch.......... -- -- 110,000 66,000 44,000
William H. Bromley...... 60,000 $865,000 33,000 24,750 8,250
Walter L. Tillman, Jr... 20,966 $344,648 -- -- --
James E. Kelly.......... -- -- 12,500 12,500 --
VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR END (3)
----------------------------------------
TOTAL EXERCISABLE UNEXERCISABLE
---------- ----------- -------------
James J. Lynch.......... $2,197,800 $1,318,680 $879,120
William H. Bromley...... 552,750 414,563 138,187
Walter L. Tillman,
Jr.................... -- -- --
James E. Kelly.......... 62,500 62,500 --
- ------------------
(1) The number of shares have been restated to reflect the 10% stock dividend
paid on February 1, 1996 to shareholders of record on January 2, 1996.
(2) This column represents the difference on the respective date of exercise
between the market price of the Common Stock and the option exercise price.
(3) This column represents the difference on December 31, 1997 between the
market price of the Common Stock ($37.25) and the option exercise price.
EMPLOYMENT AGREEMENTS
The Company and Prime Bank have entered into employment agreements with
James J. Lynch and William H. Bromley. Mr. Lynch's agreement is for a term of
five years and provides for automatic one-year extensions on each anniversary of
the date of commencement of the agreement unless notice to the contrary is given
by Mr. Lynch or the Company to the other. The base salary payment under the
agreement is $300,000. In addition, Mr. Lynch will be entitled to a bonus of not
less than $100,000 per annum provided that the overall performance of the
Company is reasonably consistent with that of previous years. Also, Mr. Lynch is
entitled to participate in the Company's Incentive Stock Option Plan and was
awarded options to purchase 110,000 shares upon commencement of his employment
with the Company on January 29, 1996. Options to acquire 55,000 shares were
immediately vested, while the options for the remaining 55,000 shares vest
equally, one-fifth per year, over five years on the anniversary date of the
commencement of his employment.
Mr. Bromley's agreement is for a term of three years commencing December
31, 1996 and provides for automatic one-year extensions on each anniversary date
of the commencement of the agreement unless notice to the contrary is given by
Mr. Bromley or the Company to the other. The base salary payment under the
agreement is $200,000. In addition, Mr. Bromley was entitled to a bonus of not
less than $50,000 for 1997 provided that the overall performance of the Company
is reasonably consistent with that of previous years. Also, Mr. Bromley is
entitled to participate in the Company's Incentive Stock Option Plan and was
granted options to purchase 33,000 shares on December 31, 1996 one-half of which
vested immediately, an additional 8,250 shares vested on December 31, 1997, and
the remaining shares will vest on December 31, 1998.
The employment agreements for both of Messrs. Lynch and Bromley also
provide, among other things, for participation in any bonuses which the Board of
Directors, in its discretion, may authorize from time to time, as well as
participation in stock options and other benefits applicable to executive
personnel. Mr. Tillman also had an employment agreement with the Company which
was terminated by mutual agreement effective at December 31, 1997. Under the
terms of an Employee Separation Agreement, Mr. Tillman will be paid his base
salary through December 31, 1999.
In connection with a termination of employment by the employees for "good
reason," other than in connection with a change of control, such as for breach
of contract or a purported termination not effected pursuant to a notice of
termination, the agreements provide for severance payments.
10
Mr. Lynch's agreement provide that such payments would be equal to the total
annual compensation in effect as of the date of termination multiplied by the
greater of the number of years (including partial years) remaining under the
agreement or the number 2.99. The agreement for Mr. Bromley provides that such
payments would be equal to the employee's total annual compensation in effect as
of the date of termination multiplied by the greater of the number of years
(including partial years) remaining under the agreement or the number 1.5.
If Mr. Lynch terminates his employment for "good reason" in connection with
a change in control, he would receive severance payments equal to 2.99 times his
average aggregate annual compensation. If Mr. Bromley similarly terminates his
employment for "good reason", he is entitled to severance payments equal to the
product of the number 2 multiplied by his average aggregate annual compensation
includable in his gross income for federal income tax purposes for the past
three years. All such severance payments will be paid in a lump sum on or before
the fifth day following the date of termination. However, if the severance
payments would be deemed to constitute "parachute payments" under Section 280G
of the Internal Revenue Code of 1986, as amended, (the "Code") the severance
payments will be reduced to the extent necessary to ensure that no portion of
the severance payments are subject to the excise tax imposed by Section 4999 of
the Code.
"Good reason," according to the agreements, also includes, subsequent to a
change in control of the Company and without the employee's express written
consent, the assignment of the employee to duties inconsistent with those
performed immediately prior to the change in control, a change in the employee's
reporting responsibilities, title or office, any removal of the employee from,
or any failure to re-elect the employee to, any such position, a reduction in
annual salary, the failure of the Company to continue for him any bonus, benefit
or compensation plan or any action that would affect adversely participation in
or materially reduce his benefits under any such plan. The agreements define
"change in control" to include any of the following: (1) any change in control
required to be reported pursuant to item 6(e) of Schedule 14A, promulgated under
the Exchange Act; (2) the acquisition of beneficial ownership by any person (as
defined in Sections 13(d) and 14(d) of the Exchange Act) of 25% or more of the
combined voting power of the Company's then outstanding securities; or (3)
during any period of two consecutive years, there is a change in the majority of
the Board of Directors for any reason, unless the election of each new director
was approved by at least two-thirds of the directors then still in office who
were directors at the beginning of the period.
The Company, Prime Bank and Mr. Kelly have entered into a Change of Control
Agreement as of November 17, 1997, which obligates the Company to make certain
payments to Mr. Kelly in the event that either (i) his employment with the
Company is terminated, or (ii) he terminates his employment with the Company for
"good reason", in each case after a "change in control", both as defined in a
manner substantially similar to the definitions in the preceding paragraph. Upon
such termination of employment, Mr. Kelly will be entitled to receive severance
payments equal to the sum of (A) the product of the number 2 multiplied by his
highest annual base salary includable in his gross income for federal income tax
purposes for the past five years and (B) a prorated portion of the cash bonus
received by Mr. Kelly for the prior fiscal year. Such severance payment will be
paid in a lump sum within one (1) calendar week following the date of
termination. However, if the severance payments would be deemed to constitute
"parachute payments" under Section 280G of the Code, the severance payments will
be reduced to the extent necessary to ensure that no portion of the payments are
subject to the excise tax imposed by Section 4999 of the Code.
Assuming that Messrs. Lynch, Bromley and Kelly continue to earn their 1997
base salaries, plus bonuses, their maximum severance payments, upon a
termination for good reason in connection with a change in control, and without
consideration of the excise tax imposed by Section 4999 of the Code, would be,
respectively, $1,330,550, $500,000 and $260,000.
11
INDEBTEDNESS OF MANAGEMENT
Loans to directors and executive officers are made only in conformance
with, and subject to the limitations of, applicable banking regulations. Such
loans are made in the ordinary course of business and are made on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other borrowers. These loans do not
involve more than normal collection risk, nor do they present any other features
more favorable than loans made to unaffiliated third parties.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN GROUP DECISIONS
The Compensation Committee of the Board of Directors is responsible for
setting the compensation for executive officers of the Company. The members of
the Compensation Committee during 1997 were Joseph A. Fluehr, III, Robert A.
Fox, Ernest Larenz, Arthur J. Kania and Erwin T. Straw. Mr. Straw was chief
executive officer of the Company and Prime Bank until January 29, 1996 and an
employee of Prime Bank until January 29, 1997. In 1997, Prime Bank leased
certain real property from Dominion Properties, L.P., the majority ownership
interest in which is owned by a trust established by Mr. Kania for the benefit
of his children. The law firm in which Mr. Kania is a partner performed legal
services for Prime Bank in 1997. These transactions are described in "Certain
Relationships and Related Transactions" on page 8.
BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
COMPENSATION POLICIES APPLICABLE TO EXECUTIVE OFFICERS
The Compensation Committee administers the Company's executive compensation
programs and has responsibility for recommending to the Board of Directors for
approval the compensation of all officers. The 1997 members of the Compensation
Committee were Joseph A. Fluehr, III, Robert A. Fox, Ernest Larenz, Arthur J.
Kania and Erwin T. Straw.
The purpose of the Company's executive compensation program is to attract
and retain key executives responsible for the success of the Company so as to
maximize profits and shareholder value. The Company's executive compensation
program is made up principally of annual base salary and benefits, incentive
cash compensation and stock options awarded under the Company's Incentive Stock
Option Plan (the "Plan").
The Committee believes that the Company's overall financial performance
should be an important factor in the compensation of its executive officers. The
Committee seeks to align executives' goals with the shareholders' goals of stock
appreciation and yield by having a policy, at the executive officer level, that
a significant proportion of total compensation consist of variable,
performance-based components, such as stock options, bonuses, and profit sharing
plans, the value of which will rise or fall depending on the Company's
performance. These incentive compensation programs are intended to reinforce
management's commitment to enhancement of profitability and shareholder value.
The Committee takes into account various qualitative and quantitative
indicators of corporate and individual performance in determining the level and
composition of compensation for the chief executive officer and other executive
officers. The corporate performance measures which the Committee considers
include net income growth, earnings per common share, return on average common
shareholders' equity and return on average total assets. The Committee also
considers the executive's responsibilities, individual contribution to the
Company's profits and achievement of any goals and objectives that may have been
established for such executive. The Committee does not rely on any fixed
formulae or specific numerical criteria in determining an executive's aggregate
compensation, but does utilize peer group studies to determine the fairness and
adequacy of aggregate compensation.
12
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The base salary of and cash bonus for Mr. Lynch, the Chief Executive
Officer, are fixed largely by his Employment Agreement. However, in reviewing
the fairness of his cash bonus and the level of his base salary, the Committee
considered the following criteria: the Company's financial performance, which
continues to be comparable or superior to many peer institutions, its capital
position, which continues to be strong, and the acquisition of First Sterling,
which positioned the Company for growth in a new market area. The Committee also
reviewed Mr. Lynch's experience, knowledge, leadership and management skills,
and his communication and interaction with the Board of Directors. The Committee
believes that Mr. Lynch has demonstrated the competency to continue above
average growth of the Company and to position it strategically for strong future
performance, while at all times taking into consideration its overall financial
condition and the welfare of its shareholders.
Finally, the Committee consulted surveys of executive compensation in the
banking industry and considered the already established obligations under Mr.
Lynch's Employment Agreement. In light of the number of stock options awarded to
Mr. Lynch upon the commencement of his employment, a portion of which will vest
through 2001, no additional options were granted to Mr. Lynch in 1997.
In accordance with the compensation philosophy and process described above,
the Committee concluded that the agreed upon cash bonus of $100,000.00 was
appropriate in the case of Mr. Lynch for 1997 and that his salary for 1998
remain at $345,000.00. These recommendations were approved by the Board of
Directors and the cash bonus was paid in 1998.
Compensation Committee
Arthur D. Kania,
Chairman
Joseph A. Fluehr, III
Robert A. Fox
Ernest Larenz
Erwin T. Straw
13
PERFORMANCE GRAPH
The graph below summarizes the cumulative return experienced by the
Company's shareholders for the period from December 31, 1992 through December
31, 1997, compared to the NASDAQ Stock Market Index and the NASDAQ Bank Stocks
Index.
[In the printed version there appears a line chart.]
The points on the graph represent the following numbers:
PRIME NASDAQ NASDAQ
YEAR BANCORP STOCK MARKET BANK STOCK
---- ------- ------------ ----------
1992 100 100 100
1993 343 218 207
1994 317 210 206
1995 397 292 307
1996 413 363 406
1997 717 444 685
The lines and numbers represent index levels derived from compounded daily
returns that include reinvestment of all dividends. Returns on Prime Bancorp,
Inc. common stock have been adjusted to account for the 10% stock dividends
distributed to shareholders on May 1, 1993, November 1, 1994 and February 1,
1996.
14
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Board of Directors is considering the appointment of KPMG Peat Marwick
LLP to serve as Company's independent auditors for the current fiscal year. KPMG
Peat Marwick LLP served as the Company's independent auditors for the year ended
December 31, 1997. Representatives of KPMG Peat Marwick LLP are expected to be
present at the Annual Meeting and to be available to respond to appropriate
questions. It is not anticipated that they will make a formal statement or other
presentation, although they are free to do so should they desire.
ANNUAL REPORT
A copy of the Company's Annual Report to Shareholders for the year ended
December 31, 1997 accompanies this Proxy Statement. Additional copies of the
1997 Annual Report to Shareholders may be obtained by written request to Joseph
A. Fluehr, III, Corporate Secretary, at the Company's executive offices. A copy
(without exhibits unless specifically requested) of the Company's Annual Report
on Form 10-K for the year ended December 31, 1997, may be obtained without
charge, by any shareholder, upon written request directed to Joseph A. Fluehr,
III, Corporate Secretary, at the Company's executive offices.
OTHER MATTERS
At the date of printing of this Proxy Statement, the Company knows of no
other business that will be presented for consideration at the meeting. However,
the enclosed proxy confers discretionary authority to vote with respect to any
and all of the following matters that may come before the meeting: (i) matters
which the Company does not know, a reasonable time before the proxy
solicitation, are to be presented at the meeting; (ii) approval of the minutes
of a prior meeting of shareholders, if such approval does not amount to
ratification of the action taken at the meeting; (iii) the election of any
person to any office for which a bona fide nominee named herein is unable to
serve or for good cause will not serve; (iv) any proposal omitted from this
Proxy Statement and the form of proxy pursuant to Rules 14a-8 or 14a-9 under the
Securities Exchange Act of 1934, as amended; and (v) matters incident to the
conduct of the meeting. If any such matters come before the meeting, the proxy
agents named in the accompanying proxy card will vote in accordance with their
best judgment.
The Company expects to hold its 1999 Annual Meeting on or before April 30,
1999. Shareholder proposals intended to be presented at the next Annual Meeting
must be submitted by November 20, 1998 to receive consideration for inclusion in
the Company's proxy materials relating to that meeting. Any such proposal will
be subject to Rule 14a-8 of the rules and regulations of the Securities and
Exchange Commission.
15
In addition, the Company's Bylaws provides that any shareholders wishing to
nominate a candidate for election to the Company's Board of Directors or to
bring any other business before a meeting of shareholders must give notice of
such nomination or item of business to the Company in writing received by the
Company at its executive offices not less than 30 days nor more than 90 days
prior to the meeting, together with certain information concerning the
shareholder making such nomination or proposing such business and concerning the
nominee or the business proposed to be conducted, as the case may be; provided,
however, that if less than 40 days notice or prior public disclosure of the
meeting is given or made to shareholders, such notice, to be timely, must be
received no later than the 10th day following such notice or public disclosure.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Joseph A. Fluehr, III
---------------------------------
JOSEPH A. FLUEHR, III
SECRETARY
16
REVOCABLE PROXY
PRIME BANCORP, INC.
1998 ANNUAL MEETING OF SHAREHOLDERS -- APRIL 22, 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PRIME BANCORP, INC.
The undersigned hereby constitutes and appoints Frederick G. Betz, James J.
Lynch and Erwin T. Straw and each of them, with or without the other, as
attorneys-in-fact and proxies of the undersigned, to appear at the Annual
Meeting of Shareholders of Prime Bancorp, Inc. (the "Company") to be held on the
22nd day of April, 1998, and at any postponement or adjournment thereof, and to
vote all of the shares of the Company which the undersigned is entitled to vote,
with all the powers and authority the undersigned would possess if personally
present.
(1) Election of Director Nominees: Joseph A. Fluehr, III, Ernest Larenz, Fred
Blume and Michael B. Laign.
WITHHOLD AUTHORITY
FOR all nominees listed above to vote for all nominees listed
(except as marked to the contrary) / / above / /
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW:
- --------------------------------------------------------------------------------
(2) To transact such other business as may properly come before the meeting or
any postponement or adjournment.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE SIGN ON THE REVERSE SIDE AND
RETURN PROMPTLY.
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTIONS TO THE CONTRARY ARE
INDICATED, THE PROXY AGENTS IN THEIR RESPECTIVE POSITIONS INTEND TO VOTE FOR THE
ELECTION OF ALL NOMINEES FOR DIRECTORS LISTED ABOVE. DISCRETIONARY AUTHORITY IS
CONFERRED HEREBY AS TO CERTAIN MATTERS DESCRIBED IN THE PROXY STATEMENT.
Receipt of the Company's 1997 Annual Report and the Notice of Annual Meeting and
Proxy Statement is hereby acknowledged.
___________________________________
Signature
___________________________________
Signature
Please sign your name or names
exactly as it appears hereon,
indicating any official position
representative capacity.
Date: _______________________, 1998
PLEASE DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.