1
(LOGO)
199 NORTH LAKE AVENUE
PASADENA, CALIFORNIA 91101
April 21, 1997
Dear Shareholder:
On behalf of the Board of Directors, I cordially invite you to attend the
Annual Meeting of Shareholders of CENFED Financial Corporation, which will be
held on May 28, 1997 at the Tournament of Roses Association Headquarters, 391
South Orange Grove Boulevard, Pasadena, California, at 10:30 a.m., California
time.
As described in the accompanying Notice of Annual Meeting of Shareholders
and the Proxy Statement, shareholders will be asked to vote on the election of
directors and to ratify the appointment of an independent auditor.
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. I
urge you to mark, sign and date each proxy card you receive and return it as
soon as possible in the postage-paid envelope provided, even if you currently
plan to attend the Annual Meeting. Returning your proxy card will not prevent
you from voting in person, but will assure that your vote is counted if you are
unable to attend.
Sincerely,
LOGO
D. Tad Lowrey
President and Chief Executive Officer
IMPORTANT: If your CENFED shares are held in the name of a brokerage firm or
nominee, only they can execute a proxy on your behalf. To ensure that your
shares are voted, we urge you to telephone the individual responsible for your
account today and obtain instructions on how to direct him or her to execute a
proxy.
If you have any questions or need any assistance in voting your shares,
please telephone CENFED's Investor Relations Department at (818) 585-2595.
Shareholders calling within California may call the toll-free number:
(800) 634-6354.
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(LOGO)
199 NORTH LAKE AVENUE
PASADENA, CALIFORNIA 91101
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 28, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of CENFED
Financial Corporation will be held on May 28, 1997 at the Tournament of Roses
Association Headquarters, 391 South Orange Grove Boulevard, Pasadena,
California, at 10:30 a.m., California time, for the following purposes:
1. To elect two directors to serve until the Annual Meeting to be held in
2000 and until their successors are elected and qualified.
2. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year commencing January 1, 1997.
3. To consider and act upon such other business as may properly come before
the Annual Meeting or any adjournment thereof.
The Board of Directors has selected March 31, 1997 as the record date for
the Annual Meeting. Only those shareholders of record at the close of business
on that date will be entitled to notice of and to vote at the Annual Meeting or
any adjournment thereof. A list of shareholders entitled to vote at the Annual
Meeting will be available at the executive offices of CENFED during the ten days
prior to the meeting.
By Order of the Board of Directors
LOGO
Steven P. Neiffer
Secretary
Pasadena, California
April 21, 1997
3
(LOGO)
199 NORTH LAKE AVENUE
PASADENA, CALIFORNIA 91101
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 28, 1997
------------------------
INFORMATION RELATING TO VOTING AT THE ANNUAL MEETING
This Proxy Statement is furnished to shareholders of CENFED Financial
Corporation ("CENFED") in connection with the solicitation of proxies by
CENFED's Board of Directors for use at the Annual Meeting of Shareholders
("Annual Meeting") to be held at the Tournament of Roses Association
Headquarters, 391 South Orange Grove Boulevard, Pasadena, California, on May 28,
1997, and at any adjournment thereof. This Proxy Statement and the accompanying
form of proxy were first mailed to shareholders on or about April 23, 1997.
CENFED is the holding company of CenFed Bank, A Federal Savings Bank (the
"Bank"). Unless otherwise indicated, references to CENFED include the Bank.
The Board of Directors of CENFED has selected March 31, 1997 as the record
date for the determination of shareholders entitled to notice of and to vote at
the Annual Meeting. A total of 5,238,158 shares of CENFED's common stock, par
value $.01 per share ("Common Stock"), were outstanding at the close of business
on that date. A majority of the shares entitled to vote, present in person or
represented by proxy, will constitute a quorum for the transaction of business
at the meeting. Shareholders will be entitled to cast one vote for each share of
Common Stock held by them of record at the close of business on the record date
on any matter that may be presented at the Annual Meeting for consideration and
action by the shareholders.
All valid proxies received in response to this solicitation will be voted
in accordance with the instructions indicated thereon by the shareholders giving
such proxies. If no contrary instructions are given, such proxies will be voted
for the election of the directors named in this Proxy Statement and for the
ratification of the appointment of KPMG Peat Marwick LLP as CENFED's independent
auditors for the fiscal year commencing January 1, 1997. Any shareholder has the
power to revoke his or her proxy at any time before it is voted at the Annual
Meeting by giving written notice of such revocation to the Secretary of CENFED
(which notice may be given by the filing of a duly executed proxy bearing a
later date) or by attending the Annual Meeting and voting in person.
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To the extent necessary, proxies may be solicited by CENFED personnel
through letters, telephone calls and other means. CENFED personnel who
participate in this solicitation will not receive any additional compensation
for such solicitation. CENFED will request record holders of shares beneficially
owned by others to forward this Proxy Statement and related materials to the
beneficial owners of such shares and will reimburse such record holders for
their reasonable expenses incurred in doing so.
ELECTION OF DIRECTORS
CENFED's Certificate of Incorporation provides that the Board of Directors
shall be divided into three classes as nearly equal in number as possible. The
members of each class are to be elected for terms of three years and until their
successors are elected and qualified, with one of the three classes of directors
being elected each year. The Certificate of Incorporation further provides that
the number of directors shall be fixed by resolution adopted by the affirmative
vote of a majority of the full Board of Directors. Two directors are to be
elected at the Annual Meeting. The Certificate of Incorporation does not provide
for cumulative voting in the election of directors.
The nominees listed below are currently directors of CENFED and each has
indicated a willingness to serve, if reelected. If any nominee becomes unable to
serve as a director or should any vacancy occur before the election, the proxies
solicited hereby will be voted for the election of such other person or persons
as the Board of Directors may select, or the authorized number of directors may
be reduced.
The following table sets forth information with respect to the two persons
nominated by the Board of Directors for election as directors of CENFED at the
Annual Meeting and each other director of CENFED who will continue to serve as a
director after the Annual Meeting. Each director listed below served as a
director of the Bank prior to its reorganization into a holding company
structure in 1991, and the dates listed below pertaining to length of service as
a director reflect service as a director of the Bank prior to such
reorganization as well as service as a director of CENFED thereafter.
AGE AT TERM OF POSITIONS CURRENTLY
DECEMBER 31, DIRECTOR OFFICE HELD WITH CENFED
NAME 1996 SINCE EXPIRES AND THE BANK
- ---------------------- ------------ -------- ------- -----------------------
NOMINEES:
Gareth A. Dorn 57 1980 2000 Director
Richard W. Patton 65 1982 2000 Director
CONTINUING DIRECTORS:
Ralph DiMeglio 70 1974 1998 Director
John H. Michel 65 1974 1998 Chairman of the Board
of CENFED and the Bank
Richard G. Redman 65 1969 1998 Director
Robert K. Leishman 67 1973 1999 Director
D. Tad Lowrey 44 1990 1999 Director, President and
Chief Executive Officer
of CENFED and the Bank
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ABOVE
NOMINEES.
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The business experience of each of the directors is as follows:
NOMINEES:
Gareth A. Dorn has been President and owner of Dorn Realty Company, a real
estate brokerage firm, in Arcadia, California, since 1986.
Richard W. Patton is the owner and President of Richard W. Patton
Enterprises, a private investment firm and a secondary mortgage market broker.
He served as President and Chief Executive Officer of NMI, a mortgage banking
and brokerage subsidiary of the Bank, from March 1973 to July 1984, at which
time he became its Vice Chairman and Secretary and served in those capacities
until NMI discontinued business in 1989.
CONTINUING DIRECTORS:
Ralph DiMeglio has been President and Chief Executive Officer of H.C.
Henshey Co., a real estate management company in Santa Monica, California, since
1974 and has been employed by that company in various capacities since 1959.
John H. Michel has been President and owner of North Valley Distribution, a
dairy product distributor in Santa Monica, California. From 1982 until 1984 he
was Vice President and General Manager of Edgemar Farms, a division of Foremost
Dairies, Inc. Mr. Michel currently serves as chairman of Saint John's Hospital
and Health Center Corporation in Santa Monica, California.
Richard G. Redman is past president of La Quinta Air Services, Inc., an
aviation services business at Thermal Airport in Southern California. Mr. Redman
is President of the Downie Redman Co., a truck and equipment leasing company,
and is the managing partner of Redman Properties, a private real estate
investment-management firm based in Los Angeles County. He has been involved in
Downie Redman Co. and Redman Properties for nineteen years and twelve years,
respectively.
Robert K. Leishman has been the President and co-owner of Leishman
Management Company, Inc., a real estate management and brokerage company in
Pasadena, California, since 1971.
D. Tad Lowrey was elected President and Chief Executive Officer of CENFED
and the Bank in March 1991 and August 1990, respectively, and had served as
Senior Vice President and Chief Financial Officer of the Bank since May 1988. He
has previous employment experience as a partner in a public accounting firm and
as a senior financial officer with other savings institutions. He is a certified
public accountant. Mr. Lowrey has served as a director and chairman of the
Western League of Savings Institutions. He also serves as a director of the
Federal Home Loan Bank of San Francisco and is the Eleventh District's
representative on the Savings Association Insurance Fund Advisory Council of the
Federal Deposit Insurance Corporation. Mr. Lowrey is a member of the Government
Affairs Council of America's Community Bankers. He serves as a director and on
the executive committee of the San Gabriel Valley Council of Boy Scouts, Pacific
Clinics and the Azusa Pacific University Business Advisory Council.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of CENFED and the Board of Directors of the Bank
held nine and eleven meetings, respectively, during 1996. CENFED and the Bank
have three joint Board committees: Executive Committee, Audit and Compliance
Committee and Compensation Committee. The Executive Committee consists of
Directors Lowrey (chairman), Dorn, Leishman and Michel and has the authority to
exercise
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certain powers of the Board of Directors in the intervals between Board
meetings. The Audit and Compliance Committee is responsible for reviewing the
scope and results of the independent auditors' services, the Company's system of
internal controls and the results of operational audits performed by the Bank's
Audit Services Department and consists of Directors DiMeglio (chairman),
Leishman and Michel. The Compensation Committee is responsible for administering
CENFED's and the Bank's compensation policies and plans and consists of
Directors Michel (chairman), Dorn and Redman. During 1996, the Executive
Committee did not meet, the Audit and Compliance Committee met seven times and
the Compensation Committee met eight times.
The Bank established the Directors' Loan Committee in 1994 to establish
internal loan limits, review and approve all Bank lending policies and approve
individual loans and purchased loan packages when such loans and packages exceed
lending limits delegated to management. The Directors' Loan Committee has
regularly scheduled meetings on a monthly basis and meets more frequently, if
necessary. During 1996, the Directors' Loan Committee consisted of Directors
Leishman (chairman), Lowrey, Michel, Patton, Redman and Dorn and met
approximately 20 times. The presence of three directors constitutes a quorum.
CENFED does not have a standing nominating committee. A description of the
procedures to be followed by shareholders wishing to nominate a candidate for
election as a CENFED director may be found in the section captioned "SHAREHOLDER
PROPOSALS" in this Proxy Statement.
DIRECTORS' FEES
At the present time, directors of the Bank receive annual retainer fees of
$24,000, except that the Chairman receives an annual retainer fee of $34,000.
Directors also receive meeting attendance fees of $1,000 per regular board
meeting. No fees are received for telephonic board meetings or for attending
committee meetings. Directors of CENFED currently do not receive additional
remuneration in their capacity as such.
Directors may elect to receive some or all of their retainer and meeting
fees in the form of stock options, in accordance with the provisions of the 1994
Directors' Stock Option Plan which was approved by shareholders in May 1994. The
exercise price of options awarded under the Directors' Stock Option Plan will
equal 75% of the fair market value of the Common Stock. The 25% discount from
the fair market value of the stock options in the aggregate equals the
cash-basis directors' fees foregone by any director electing to receive stock
options.
Directors emeritus receive one-half of the combined regular directors' fees
and one years' meeting attendance fees for life or an actuarial equivalent for a
ten-year period, as elected by the retired director and as established on the
date of the director's retirement.
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RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP as CENFED's
independent auditors for the fiscal year commencing January 1, 1997, subject to
ratification of the selection by the shareholders at the Annual Meeting. KPMG
Peat Marwick LLP began service as CENFED's independent auditors in 1995.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
Annual Meeting and to be available to respond to appropriate questions. They
will also be provided an opportunity to make a statement, if they desire to do
so.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO RATIFY THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS CENFED'S INDEPENDENT AUDITORS.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information concerning the shares of CENFED
Common Stock beneficially owned by each director, by certain executive officers
and by all directors and executive officers of CENFED and its subsidiaries as a
group, as of February 28, 1997. Except as otherwise noted, each beneficial owner
listed has sole investment and voting power with respect to the Common Stock
indicated.
NAME OF BENEFICIAL OWNER OR NUMBER AMOUNT AND NATURE OF PERCENT OF
OF PERSONS IN GROUP BENEFICIAL OWNERSHIP(1) CLASS
---------------------------------------------- ----------------------- ----------
Ralph DiMeglio................................ 28,628 *
Gareth A. Dorn................................ 32,145 *
Robert K. Leishman............................ 20,460 *
D. Tad Lowrey................................. 188,205(2) 3.51%
John H. Michel................................ 24,472 *
Richard W. Patton............................. 19,983 *
Richard G. Redman............................. 28,189 *
William Nichol................................ 54,821 1.04%
Lawrence J. Winslow........................... 66,702(2) 1.27%
All directors and officers as a group (9
persons).................................... 463,605(3)(4) 8.40%
- ---------------
* Less than 1%.
(1) Includes options awarded under long-term incentive plans to the extent such
options were exercisable within sixty days of the date of this table.
(2) Includes 5,297 and 656 shares of stock for Messrs. Lowrey and Winslow,
respectively, held by the Bank's Employee Stock Ownership Plan ("ESOP") that
were not allocated to eligible participants as of December 31, 1996.
Pursuant to the ESOP plan documents, each participant in the ESOP may
exercise voting rights with respect to the portion of unallocated shares
equal to the percentage of allocated shares such participant is entitled to
vote.
(3) Includes 5,953 unallocated shares held by the ESOP.
(4) Includes 287,907 stock options which are fully vested within sixty days of
the date of this table. The percentage of Common Stock is based upon the
5,231,747 shares of Common Stock issued and outstanding on February 28, 1997
plus 287,907 stock options.
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PRINCIPAL HOLDERS OF CENFED COMMON STOCK
The following table sets forth information as of December 31, 1996, with
respect to any person or entity known by CENFED to be the beneficial owners of
more than 5% of the issued and outstanding Common Stock.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
--------------------------------------------------- -------------------- ----------
Neumeier Investment Counsel........................ 525,660(1) 10.20%
26435 Carmel Rancho Blvd.
Carmel, CA 93923
Wellington Management Company...................... 480,848(2) 9.33%
75 State Street
Boston, MA 02109
CENFED Employee Stock Ownership Plan............... 279,641(3) 5.43%
c/o CalTrust
3080 Bristol Street
Costa Mesa, CA 92626
- ---------------
(1) Based on a Schedule 13G filed pursuant to the 1934 Act, which indicates that
Neumeier Investment Council in its capacity as an investment company has
sole dispositive power and sole voting power with respect to such shares.
(2) Based on a Schedule 13G filed pursuant to the 1934 Act, which indicates that
Wellington Management Company in its capacity as an investment company
shares dispositive power with respect to the indicated shares.
(3) In accordance with the provisions of the CENFED Employee Stock Ownership
Plan ("ESOP"), the ESOP Trustee votes the unallocated shares of Common Stock
in the plan in the same proportions as the ESOP participants vote shares
allocated to them. At December 31, 1996, the ESOP had 126,274 shares of
Common Stock that were not allocated to ESOP participants.
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EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following table sets forth certain information with respect to
executive officers of CENFED and/or the Bank who are not directors. Officers of
CENFED and the Bank serve at the discretion of their respective Boards of
Directors.
AGE AT POSITIONS HELD WITH CENFED
NAME DECEMBER 31, 1996 AND/OR THE BANK
- -------------------- ----------------- -----------------------------------
William Nichol 52 Executive Vice President and Chief
Financial Officer
Lawrence J. Winslow 43 Executive Vice President and Chief
Lending Officer of the Bank
The business experience of each of the executive officers is as follows:
William Nichol joined the Bank as Executive Vice President and Chief
Financial Officer in January 1995. Prior to joining CENFED, he serviced in a
similar capacity at a Scottsdale, Arizona-based mortgage banking company and,
prior to that, he served for nine years as Executive Vice President and Chief
Financial Officer of HomeFed Bank in San Diego, California.
Lawrence J. Winslow joined the Bank as Executive Vice President and Chief
Administrative Officer in April 1993. Prior to joining the Bank, he was employed
as President and Chief Executive Officer of Tracy Federal Bank, Tracy,
California for eight years.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION,
BENEFITS AND RELATED MATTERS
CENFED's Compensation Committee (the "Committee"), established in 1991, is
composed entirely of non-employee members of CENFED'S Board of Directors. The
Committee reviews and approves each of the elements of the executive
compensation program of CENFED (including its subsidiaries) and continually
assesses the effectiveness and competitiveness of the program. The Committee's
review of the executive compensation program includes analyzing compensation
programs, pay levels and business results compared to a peer group of competitor
financial institutions of comparable assets size. In addition, the Committee
administers the key provisions of the executive compensation program and reviews
with the Board of Directors all major aspects of compensation for CENFED's
executive officers.
COMPENSATION PHILOSOPHY
The goals of the executive compensation program are to support a
performance-oriented environment, to reinforce CENFED's performance and business
plans, and to enable CENFED to attract and retain the executive talent it needs
to maximize its return to shareholders.
The Committee's philosophy is to align the interests of CENFED's
shareholders and its executives by providing compensation programs designed to:
- - reward achievement of CENFED's annual and long-term strategic goals;
- - provide total compensation and benefits opportunities that are competitive
with a peer group of selected financial institutions; and
- - offer appropriate stock ownership opportunities.
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CENFED's peer group for purposes of executive compensation includes financial
institutions of similar asset size and financial institutions considered as
competitors for business and executive talent.
ELEMENTS OF THE EXECUTIVE COMPENSATION PROGRAM
Base Salaries. The objectives of the base salary program are to offer base
salaries targeted at the 50th percentile for comparable positions at CENFED's
peer group and to provide base salary increases that reward officers for the
ongoing performance of the duties of their positions which are consistent with
CENFED's overall financial performance.
Annual Incentive Plan. The objectives of the annual incentive plan are to
establish annual incentive targets that approximate the 50th percentile of the
peer group for total annual cash compensation when performance goals are met and
to offer opportunities for providing pay levels above the 50th percentile for
outstanding results.
The Committee amended the annual incentive in 1994 to provide stock options
in lieu of cash with respect to incentive pay. Under the provisions of the
amendment, incentive plan participants electing to receive some or all of their
annual incentive pay in options could receive four dollars of stock options at
the market strike price for each dollar of annual incentive payment foregone.
Participants electing to receive options in lieu of cash made the election in
the year prior to when the bonus would be earned, at which time the strike price
was established. In 1995, nine of ten eligible officers received a significant
portion of their 1994 earned bonus in the form of options, and in 1996, eight of
eleven officers received a significant portion of their 1995 earned bonus in
this form. The program was discontinued for the 1996 bonus year due to an
insufficient number of options remaining in the stock option plans.
In 1996, the Committee revised the annual incentive plan to strengthen the
Bank's emphasis on incentives rather than salary and to better reward for
outstanding results. Certain key officers were given maximum award opportunities
ranging from 30% to 75% of their salaries for achieving pre-established
corporate and individual objectives. Corporate performance was measured against
1996 business plan levels for specific performance criteria measuring return on
equity, net income, deposit growth and mix, asset quality and expense control.
The corporate measure varied by individual in importance and represented from 50
percent to 90 percent of the total award opportunity. For 1996, participants
received awards ranging from 13 percent to 41 percent of salary.
Stock Ownership. The objectives of the long-term incentive program,
currently consisting of the plans described below, are to offer opportunities
for stock ownership that are competitive with those at the peer group and to
encourage and create ownership and retention of CENFED's stock by key employees.
These plans provide key employees with the opportunity to build, through the
achievement of corporate goals, a meaningful stake in CENFED.
CENFED adopted the Management Development and Recognition Plan ("MDRP") for
issuances of restricted stock grants, and two long-term incentive plans -- the
1992 Long-Term Incentive Plan and the 1994 Long-Term Incentive Plan -- for
issuances of stock options and restricted stock. For employees other than the
Chief Executive Officer, the options granted from 1992 through 1996 under the
1992 Long-Term Incentive Plan and the 1994 Long-Term Incentive Plan and the
restricted stock under the MDRP were based on management's subjective assessment
of each individual's level of performance, contribution and responsibility,
CENFED's financial results and its stock price performance.
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In 1994, the Committee implemented a program of stock ownership guidelines
for officers at the following levels:
President and Chief Executive Officer................. three times base salary
Executive Vice President.............................. two times base salary
Vice President........................................ one times base salary
These guidelines are to be met or exceeded over a five-year period
beginning from the implementation of the guidelines or the officer's date of
employment, whichever is later. At the end of 1996, seven of the twelve officers
subject to the stock ownership guidelines met or exceeded their guidelines.
At the end of 1995, the Committee approved crediting deferred compensation
accounts of those officers who met the ownership guidelines in the amount of 5%
of the individual officer's guideline amount. The credit vests at the rate of
33.3% each year, as long as ownership is maintained in accordance with the
guidelines, with a return based on the performance of CENFED stock.
CEO Compensation. The Committee is responsible for determining the
compensation for the CEO. In February 1996, the Committee increased the annual
salary of the CEO to $325,000, an 8.3% annual increase, to recognize its
favorable review of the CEO's performance, and to be in line with competitor
information provided by an independent compensation consulting firm.
The CEO's annual incentive award is determined in the same manner as the
awards for the other officers described above. For 1996, the CEO received 82
percent of his target award opportunity, representing 41 percent of base salary,
weighted ninety percent on achievement of corporate performance and ten percent
on individual performance. The stock options granted to the CEO in February 1996
were based on CENFED's performance as measured by financial results, CENFED
stock price performance, and the Committee's assessment of his individual
performance compared to the peer group.
Section 162(m) Compliance. CENFED does not presently anticipate the named
executive officers exceeding the million dollar non-performance based
compensation threshold of Section 162(m) of the Internal Revenue Code, which
limits CENFED's tax deductions of individual annual compensation above that
amount unless certain criteria are met. CENFED and the Committee will continue
to monitor the compensation levels of the named executive officers and determine
the appropriate response to Section 162(m) when and if necessary. In May 1994,
shareholders approved the 1994 Long-Term Incentive Plan which includes
provisions to bring the stock option program into compliance with Section 162(m)
to ensure that stock option grants are excluded from the compensation
calculation for the purposes of Section 162(m).
The Compensation Committee
John H. Michel, Chairman
Gareth A. Dorn
Richard G. Redman
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The following table sets forth summary compensation information for the
Company's three most highly compensated executive officers during the last three
fiscal years. Numbers of shares and per share amounts in the table have not been
adjusted to reflect a 10% stock dividend declared in April 1997. All executive
officers are paid by CenFed Bank.
LONG TERM COMPENSATION
--------------------------------
AWARDS
ANNUAL COMPENSATION ---------------------- PAYOUTS
---------------------------------- RESTRICTED OPTIONS ------- ALL OTHER
NAME AND OTHER ANNUAL STOCK /SARS LTIP COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION AWARDS(2) (3) PAYOUTS (4)
- ----------------------------- ---- -------- -------- ------------ --------- ---------- ------- ------------
D. Tad Lowrey 1996 $325,000 $132,702 $100,104(5) -- 16,500 -- $103,922
President & 1995 $300,000 $61,572 -- $120,000 23,585 -- $ 29,735
Chief Executive 1994 $275,000 $28,188 -- $ 86,250 29,056 -- $ 29,580
Lawrence J. Winslow 1996 $195,000 $65,555 $153,905(5) -- 16,500 -- $ 43,594
Executive Vice President & 1995 $185,500 -- -- $ 40,000 21,945 -- $ 9,656
Chief Lending Officer of 1994 $175,000 -- -- $ 63,825 19,154 -- $ 4,221
the Bank
William Nichol 1996 $200,000 $65,805 -- $ 57,200 16,500 -- $ 15,382
Executive Vice President & 1995 $190,000 $29,865 -- -- 52,239 -- --
Chief Financial Officer
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(1) Incentive bonuses were earned for the year indicated and were distributed in
cash in the first quarter of the following year. Options received in lieu of
cash incentive pay are included in Long Term Compensation.
(2) Mr. Nichol received an award of 2,750 shares of restricted stock with a
market value of $20.80 per share at the time of award. Such shares vest over
a five-year period.
(3) Awards of stock options for 1995 included options received in lieu of cash
incentive compensation earned that year and in accordance with elections
made by each executive officer. For 1995, Messrs. Lowrey, Winslow and Nichol
were awarded 16,985 options, 15,345 options and 8,239 options, respectively,
to acquire shares of the Company's common stock at an exercise price of
$14.50, which was the average market price per share in the five days
preceding the date of election. At the date the options were awarded in
1996, the market price per share was $21.14. The amount of options and
prices per share have been adjusted to reflect a 10% stock dividend
distributed in May 1996.
(4) These amounts represent the Company's matching contributions under its
qualified plan under section 401(k) of the Internal Revenue Code, matching
contributions by the Company into the benefit restoration plan and interest
paid in the deferred compensation plans in excess of 120% of the applicable
federal rate, as defined in the regulation.
(5) Other annual compensation includes amounts paid to Messrs. Lowrey and
Winslow to compensate for federal and state withholding taxes arising from
the exercises of stock options. In exchange for these payments, the option
holders converted the options from incentive stock options to non-qualifying
stock options prior to exercising such options. As a result of these
conversions, the Company received a compensation tax deduction that it would
not otherwise have been entitled to take.
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Determining the value of stock options grants is one of the most
controversial issues surrounding the subject of executive compensation. Clearly,
stock options should have value to both the issuer and recipient as a mechanism
for aligning the objectives of the company and the executive, as well as
shareholders. Despite the presence of stock options as a means of compensating
executives for decades, there is no formula for determining the future value of
these options.
No matter what theoretical value is placed on a stock option at the date of
grant, its ultimate value will be dependent on the market value of the company's
stock at a future date. That value will depend on the efforts of such executives
to foster the future success of the company for the benefit of not only the
executives but all shareholders.
The following table sets forth grants of options to the company's three
most highly compensated executives during the year ended December 31, 1996. The
present value of the options awarded has been determined using a Black-Scholes
pricing model that considers plan design features such as vesting and exercise
period. The per share grant date present value for options awarded in 1996 are
set forth in the footnotes to the table. Numbers of shares and per share amounts
have not been adjusted to reflect a 10% stock dividend declared in April 1997.
OPTIONS GRANTS
INDIVIDUAL GRANTS
AS % OF
OPTIONS/ TOTAL GRANTS
SARS TO EMPLOYEES EXERCISE PRICE GRANT DATE
NAME GRANTED (#) IN FISCAL YEAR ($ PER SHARE)(1) EXPIRATION DATE PRESENT VALUE
- --------------------------- ----------- ----------------- ---------------- --------------- -------------
D. Tad Lowrey.............. 16,500(2) 18.89% $20.80 February 2006 $ 145,860(4)
2,811(3) 3.22% $27.84 November 2001 $ 24,877(5)
Lawrence J. Winslow........ 16,500(2) 18.89% $20.80 February 2006 $ 145,860(4)
2,353(3) 2.69% $21.75 April 2003 $ 26,730(6)
William Nichol............. 16,500(2) 18.89% $20.80 February 2006 $ 145,860(4)
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(1) The per share grant date value for options awarded in 1996 equaled the
market values at the dates of award.
(2) Stock options vest over a three-year period.
(3) Stock options were received in accordance with the stock reload provisions
of the incentive plans. The numbers of shares awarded equaled the numbers of
shares of stock tendered as consideration in connection with the exercises
of stock options.
(4) The per share grant date value for options awarded in February 1996 and
expiring in February 2006 was $8.84 per share.
(5) The per share grant date value for options awarded in November 1996 and
expiring in November 2001 was $8.85 per share.
(6) The per share grant date value for options awarded in June 1996 and expiring
in April 2003 was $11.36 per share.
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The following table sets forth information regarding exercises of stock options
and the year-end value of unexercised options at December 31, 1996 for the
company's three most highly compensated executives:
OPTIONS EXERCISED AND YEAR-END VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR END IN-THE-MONEY OPTIONS AT
(#)(1) FISCAL YEAR END ($)(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ --------------- ------------ ----------- ------------- ----------- -------------
D. Tad Lowrey........... 12,900 $280,924 130,394 2,200 $ 2,232,543 $ 32,450
Lawrence J. Winslow..... 39,600 $527,160 29,150 2,200 $ 316,352 $ 32,450
William Nichol.......... 4,500 $ 66,992 49,571 14,668 $ 655,502 $ 233,031
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(1) Share amounts have been adjusted for a 3:2 stock split in May 1993 and a 10%
stock dividend in May 1996. Share amounts have not been adjusted to reflect
a 10% stock dividend declared in April 1997.
(2) Based on the year-end market price of $29.25 per common share.
STOCK PERFORMANCE
Securities and Exchange Commission regulations require a graphic
presentation of CENFED's stock performance compared to a broad market index and
an industry-specific index for the preceding five years. For the broad market
index, CENFED has chosen the performance of the companies that trade in the same
market as CENFED, the National Association of Dealers Automated
Quotation/National Market System ("NASDAQ/NMS"). For an industry-specific index,
CENFED has chosen the Western Thrift index, published by SNL Securities.
Measurement Period CENFED Financial
(Fiscal Year Covered) Corp. Nasdaq - Total US Thrifts (Western)
12/91 100.00 100.00 100.00
12/92 151.60 116.38 108.80
12/93 258.38 133.60 113.87
12/94 262.35 130.59 96.81
12/95 371.71 184.67 161.60
12/96 505.92 227.16 206.02
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EMPLOYMENT AGREEMENTS WITH THE BANK
In 1996, the Bank renewed its employment agreements with Messrs. Lowrey,
Nichol, and Winslow.
The employment agreement with Mr. Lowrey provides for an initial three year
term expiring on December 31, 1996. Commencing on the first anniversary date and
continuing each anniversary date thereafter, the Board of Directors may extend
the agreement for an additional year so that the remaining term shall be the
amount of the original term, unless the employment agreement has been terminated
or the Bank or Mr. Lowrey has provided a notice of non-renewal prior thereto.
The agreement provides for termination by the Bank or CENFED for cause at any
time or upon death. In the event the Bank or CENFED chooses to terminate Mr.
Lowrey's employment for reasons other than for cause, or in the event of Mr.
Lowrey's resignation from the Bank and CENFED upon (i) failure to nominate him
for election of director of the Bank or CENFED, (ii) a material change in his
functions, duties or responsibilities, (iii) failure of the Bank or CENFED to
obtain from any successor or assign all or substantially all of the business of
the Bank or CENFED an agreement to assume and perform under the duties stated in
the agreement, or (iv) a breach of the agreement by the Bank or the Company, he
would be entitled to severance pay in an amount equal to 2.9 times the
executive's prevailing base salary plus 2.9 times the higher of the previous two
incentive bonuses received by the executive. If payments and benefits under the
employment agreement would constitute an "excess parachute payment" under
Section 280G of the Internal Revenue Code, the agreement provides that such
payment and benefits would be reduced to the largest amount which may be paid
without being subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code.
The employment agreements for Messrs. Nichol and Winslow provide for
initial terms of two years. These employment agreements may thereafter be
extended on a year -to -year basis following the annual performance evaluation
of the executive so that the remaining term, after such extension, is two years.
In the event of a change in control of the Bank, the terms of such agreements
are extended to three years and the agreements become subject to further one
- -year extensions. These employment agreements terminate upon the death or
disability of the employee, in the event of certain regulatory actions or upon
notice by either the Bank or the employee, with or without cause, and the
agreements are suspended in the event of a regulatory suspension of the
employee. In the event of termination due to disability of the employee, the
Bank will be obligated to pay or provide to the employee, as applicable,
continued salary and benefits, less applicable offsets, until the earlier of the
end of the term of the agreement or the employee's death. In the event of
termination by the Bank without cause, or in the event of termination by the
employee due to the Bank's failure to comply with any of the "assumed conditions
of service" of the Bank, the Bank is obligated to make a lump sum payment to the
employee equivalent to the base salary and bonus to which the employee would
have been entitled had such employee continued in the Bank's employ for the
remaining term of the agreement. The bonus paid in such a circumstance would be
in an amount equivalent to the higher of the previous two incentive bonuses paid
to the employee.
CERTAIN INDEBTEDNESS AND TRANSACTIONS OF MANAGEMENT
The Bank has historically made mortgage loans to employees, officers and
directors of CENFED and the Bank in the ordinary course of its business. Loans
to employees and officers who are not executive officers are made at a reduced
interest rate of one percent above the Eleventh District Cost of Funds Index,
which is an index computed by the Federal Home Loan Bank of San Francisco that
reflects the monthly weighted average cost of savings, borrowings and advances
of member institutions such as the Bank. Prior to the passage of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), directors
and executive
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officers were eligible for similar loans. Subsequent to the passage of FIRREA,
the Bank changed its policy to preclude executive officers and directors from
receiving loans from the Bank under preferential terms. Following the policy
change, the Bank has not granted any mortgage loans to executive officers or
directors. The following table sets forth loans made to directors and executive
officers of CENFED and the Bank which were outstanding at any time since January
1, 1996 and aggregated $60,000 or more per person.
LARGEST AMOUNT
OUTSTANDING
ORIGINAL SINCE BALANCE AS OF INTEREST RATE ON
AMOUNT OF JANUARY 1, FEBRUARY 1, FEBRUARY 1,
NAME LOAN 1996 1997 1997 TYPE
- ----------------------- ----------- -------------- ------------- ---------------- ---------
Lowrey, D. Tad $231,200.00 $ 209,339.82 $ 204,473.52 5.84% Mortgage
SHAREHOLDER PROPOSALS
Any shareholder of CENFED wishing to have a proposal considered for
inclusion in CENFED's 1998 proxy solicitation materials must set forth such
proposal in writing and file it with the Secretary of CENFED on or before
December 31, 1997. The Board of Directors of CENFED will review any shareholder
proposals which are filed as required and will determine whether such proposals
meet applicable criteria for inclusion in its 1998 proxy solicitation materials
or consideration at the 1997 Annual Meeting.
Shareholder nominations for election of directors must be made pursuant to
written notice received by the Secretary of CENFED not less than 60 days nor
more than 90 days prior to the anniversary date of the previous year's Annual
Meeting (between February 27, 1998 and March 29, 1998 to be considered at the
Annual Meeting in 1998). Such notice must state the nominee's name, age and
addresses (business and residence), the nominee's principal occupation or
employment, and the class and number of shares of CENFED's stock beneficially
owned by the nominee on the date of the notice. The required notice must also
disclose certain information relating to the nominee which would be required to
be disclosed in a proxy statement and in certain other filings under federal
securities laws.
ADDITIONAL INFORMATION
CENFED WILL FURNISH WITHOUT CHARGE TO ANY SHAREHOLDER SOLICITED HEREBY A
COPY OF ITS 1996 ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION UPON THE WRITTEN REQUEST OF SUCH SHAREHOLDER. REQUESTS
SHOULD BE DIRECTED TO:
INVESTOR RELATIONS DEPARTMENT
CENFED FINANCIAL CORPORATION
199 NORTH LAKE AVENUE
PASADENA, CALIFORNIA 91101
OTHER MATTERS
At the time of the preparation of the Proxy Statement, the Board of
Directors of CENFED was not aware of any matters which would be presented for
action at the Annual Meeting other than those specifically identified in the
Notice of Annual Meeting accompanying this Proxy Statement. Should any other
matters properly come before the meeting, action may be taken thereon pursuant
to the proxies in the form enclosed, which confer discretionary authority on the
persons names therein or their substitutes with respect to such matters.
PLEASE MARK, SIGN, DATE, AND RETURN THE ACCOMPANYING PROXY CARD IN THE
ENCLOSED POSTAGE-PAID ENVELOPE AT YOUR EARLIEST CONVENIENCE, WHETHER OR NOT YOU
CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING.
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REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF CENFED FINANCIAL CORPORATION
The undersigned holder of shares of common stock of CENFED Financial
Corporation ("Company") hereby appoints John H. Michel and Robert K. Leishman or
either of them, each with full powers of substitution, to vote all shares of
said stock which the undersigned could vote if personally present at the Annual
Meeting of Stockholders of the Company to be held on May 28, 1997, at 10:30
a.m., California time, at the Tournament of Roses Association Headquarters, 391
South Orange Grove Boulevard, Pasadena, California ("Annual Meeting") and at any
adjournments or postponements thereof on the matters listed on the reverse side.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders of the Company called for the date indicated herein and the Proxy
Statement relating to such meeting prior to the signing of this Proxy.
(CONTINUED, AND TO BE DATED AND SIGNED, ON THE REVERSE SIDE.)
- FOLD AND DETACH HERE -
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THIS REVOCABLE PROXY WILL BE VOTED AS DIRECTED BELOW. IN THE ABSENCE OF ANY
DIRECTION, THIS PROXY WILL BE VOTED FOR ALL NOMINEES OF THE BOARD OF DIRECTORS
IN THE ELECTION OF DIRECTORS AND THE ADDITIONAL PROPOSAL SET FORTH BELOW.
Please mark
your votes as
indicated in [ X ]
this example
1. Election of the following nominees as directors:
Gareth A. Dorn and Richard W. Patton
FOR all WITHHOLD
nominees AUTHORITY
for all nominees
[ ] [ ]
INSTRUCTION: To withhold authority to vote for election of one person nominated
by the Board of Directors, mark FOR above and cross out the name of the person
with respect to whom authority is withheld.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES OF THE BOARD
OF DIRECTORS.
2. Proposal to ratify the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors for the fiscal year commencing
January 1, 1997.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion the Proxies are authorized to vote upon such other
matters as may properly come before the Annual Meeting of Stockholders or
any other adjournments thereof.
SIGNATURE _____________________ SIGNATURE _____________________ DATE ________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
- FOLD AND DETACH HERE -