PFF BANCORP, INC.
350 SOUTH GAREY AVENUE
POMONA, CALIFORNIA 91766
(909) 623-2323
August 6, 2002
Fellow Stockholders:
You are cordially invited to attend the annual meeting of stockholders
(the "Annual Meeting") of PFF Bancorp, Inc., the holding company for PFF Bank &
Trust, which will be held on Wednesday, September 18, 2002, at 9:00 a.m.,
Pacific Time, at the Sheraton Suites Fairplex, 601 W. McKinley Avenue, Pomona,
California.
The attached Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the Annual Meeting. Our directors and
officers, as well as a representative of KPMG LLP, our independent auditors,
will be present at the Annual Meeting to respond to any questions that our
stockholders may have regarding the business to be transacted.
The Board of Directors has determined that the matters to be considered at
the Annual Meeting are in the best interests of PFF Bancorp and its
stockholders. FOR THE REASONS SET FORTH IN THE PROXY STATEMENT, THE BOARD
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEES AS DIRECTOR SPECIFIED
UNDER PROPOSAL 1 AND "FOR" PROPOSAL 2.
Whether or not you expect to attend, please sign, date and return the
enclosed proxy card promptly in the postage-paid envelope provided so that your
shares will be represented. Your cooperation is appreciated since a majority of
the common stock must be represented, either in person or by proxy, to
constitute a quorum for the conduct of business.
On behalf of the Board of Directors and all of our employees, we thank you
for your continued interest and support.
Sincerely yours,
/s/ Larry M. Rinehart
Larry M. Rinehart
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PFF BANCORP, INC.
350 SOUTH GAREY AVENUE
POMONA, CALIFORNIA 91766
(909) 623-2323
----------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 18, 2002
----------------------------------------------------
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the
"Annual Meeting") of PFF Bancorp, Inc. will be held on Wednesday, September 18,
2002, at 9:00 a.m., Pacific Time, at the Sheraton Suites Fairplex, 601 W.
McKinley Avenue, Pomona, California.
The purpose of the Annual Meeting is to consider and vote upon the
following matters:
1. The election of three directors for a term of three years or until
their successors are elected and qualified;
2. The ratification of the appointment of KPMG LLP as independent
auditors of PFF Bancorp for the fiscal year ending March 31, 2003;
3. Such other matters as may properly come before the meeting and at
any adjournments thereof, including whether or not to adjourn the
meeting.
The Board of Directors has established July 31, 2002, as the record date
for the determination of stockholders entitled to receive notice of and to vote
at the Annual Meeting and at any adjournments thereof. Only recordholders of our
common stock as of the close of business on such record date will be entitled to
vote at the Annual Meeting or any adjournments thereof. In the event there are
not sufficient votes for a quorum or to approve or ratify any of the foregoing
proposals at the time of the Annual Meeting, the Annual Meeting may be adjourned
in order to permit further solicitation of proxies. A list of stockholders
entitled to vote at the Annual Meeting will be available at our administrative
offices, 350 South Garey Avenue, Pomona, California 91766, for a period of ten
days prior to the Annual Meeting and will also be available at the Annual
Meeting itself.
By Order of the Board of Directors
/s/ Carole F. Olson
Carole F. Olson
SECRETARY
Pomona, California
August 6, 2002
PROXY STATEMENT
Your vote is very important. For this reason, the Board of Directors is
requesting that you allow your common stock to be represented at the Annual
Meeting by the Proxies named in the enclosed Proxy Card. This Proxy Statement is
being sent to you in connection with this request and has been prepared for the
Board by our management. "We," "our," "PFF Bancorp" and the "Company" refer to
PFF Bancorp, Inc. "The Bank" refers to PFF Bank & Trust. The Proxy Statement is
first being sent to our stockholders on or about August 6, 2002.
GENERAL INFORMATION ABOUT VOTING
WHO CAN VOTE. You are entitled to vote your common stock if our records
showed that you held your shares as of July 31, 2002. At the close of business
on that date, a total of 13,269,089 shares of common stock were outstanding and
entitled to vote. Each share of common stock has one vote. The enclosed Proxy
Card shows the number of shares that you are entitled to vote. Your individual
vote is confidential and will not be disclosed to persons other than those
recording the vote.
VOTING BY PROXIES. If your common stock is held by a broker, bank or other
nominee, you will receive instructions from them that you must follow in order
to have your shares voted. You will receive instructions from your nominee.
If you hold your shares in your own name as a holder of record, you may
instruct the Proxies how to vote your common stock by signing, dating and
mailing the Proxy Card in the postage paid envelope that we have provided to
you. Of course, you can always come to the meeting and vote your shares in
person. The Proxies will vote your shares in accordance with your instructions.
If you sign and return a Proxy Card without giving specific voting instructions,
your shares will be voted as recommended by our Board of Directors.
MATTERS TO BE PRESENTED. We are not now aware of any matters to be
presented other than those described in this Proxy Statement. If any matters not
described in the Proxy Statement are properly presented at the meeting, the
Proxies will use their own judgment to determine how to vote your shares. If the
meeting is adjourned, the Proxies can vote your common stock on the new meeting
date as well, unless you have revoked your proxy instructions.
HOW TO REVOKE YOUR PROXY INSTRUCTIONS. To revoke your proxy instructions
if you are a holder of record, you must advise the Secretary in writing before
the Proxies vote your common stock at the meeting, deliver later proxy
instructions, or attend the meeting and vote your shares in person. Unless you
decide to attend the meeting and vote your shares in person after you have
submitted voting instructions to the Proxies, you should revoke or amend your
prior instructions in the same way you initially gave them.
HOW VOTES ARE COUNTED. The meeting will be held if a majority of the
outstanding common stock entitled to vote is represented at the meeting. If you
have returned valid proxy instructions or attend the meeting in person, your
common stock will be counted for the purpose of determining
1
whether there is a quorum, even if you wish to abstain from voting on some or
all matters introduced at the meeting. If you hold your common stock through a
nominee, generally the nominee may only vote the common stock that it holds for
you in accordance with your instructions. Brokers who are members of the
National Association of Securities Dealers, Inc. may not vote shares held by
them in nominee name unless they are permitted to do so under the rules of any
national securities exchange to which they belong. A broker which has
transmitted proxy soliciting materials to a beneficial owner may vote on matters
determined to be routine if the beneficial owner has not provided the broker
with voting instructions within 10 days of the meeting. If a nominee cannot vote
on a particular matter because it is not routine, there is a "broker non-vote"
on that matter. Broker non-votes count for quorum purposes, but we do not count
either abstentions or broker non-votes as votes for or against any proposal.
COST OF THIS PROXY SOLICITATION. We will pay the cost of this proxy
solicitation. In addition to soliciting proxies by mail, we expect that a number
of our employees will solicit stockholders for the same type of proxy,
personally and by telephone. None of these employees will receive any additional
or special compensation for doing this. We have retained Georgeson Shareholder
Communications, Inc. to assist in the solicitation of proxies for a fee of
$4,000 plus reasonable out-of-pocket costs and expenses. We will, upon request,
reimburse brokers, banks and other nominees for their expenses in sending proxy
material to their customers who are beneficial owners and obtaining their voting
instructions.
ATTENDING THE ANNUAL MEETING. If you are a holder of record and you plan
to attend the meeting, please indicate this when you vote. IF YOU ARE A
BENEFICIAL OWNER OF COMMON STOCK HELD BY A BROKER, BANK OR OTHER NOMINEE, YOU
WILL NEED PROOF OF OWNERSHIP TO BE ADMITTED TO THE MEETING. A recent brokerage
statement or letter from a bank or broker are examples of proof of ownership. If
you want to vote in person your common stock held in nominee name, you must get
a written proxy in your name from the broker, bank or other nominee who holds
your shares.
PROPOSAL 1. ELECTION OF DIRECTORS
Due to the retirement of Robert D. Nichols on July 31, 2002, the Board of
Directors voted to amend the Company's Bylaws to reduce the number of its
members from eight (8) directors to seven (7) directors. Therefore, our Board of
Directors currently consists of seven (7) directors and is divided into three
classes. Each of the seven members of the Board of Directors of the Company also
serves as a director of PFF Bank & Trust. Directors are elected for staggered
terms of three years each, with the term of office of only one of the three
classes of directors expiring each year. Directors serve until their successors
are elected and qualified.
The nominees proposed for election at this Annual Meeting are Robert W.
Burwell, William T. Dingle and Curtis W. Morris. No person being nominated as a
director is being proposed for election pursuant to any agreement or
understandings between any such person and the Company.
2
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THE
NOMINEES NAMED IN THIS PROXY STATEMENT.
VOTE REQUIRED. Directors must be elected by a plurality of the votes cast
at the meeting. This means that the nominees receiving the greatest number of
votes will be elected. Votes withheld for any director will not be counted.
In the event that any of the nominees is unable to serve or declines to
serve for any reason, it is intended that the proxies will be voted for the
election of such other person(s) as may be designated by the present Board of
Directors. The Board of Directors has no reason to believe that any of the
persons named will be unable or unwilling to serve. Unless authority to vote for
the nominees is withheld, it is intended that the shares represented by the
enclosed proxy card, if executed and returned, will be voted "For" the election
of the nominees proposed by the Board of Directors.
INFORMATION WITH RESPECT TO THE NOMINEES, CONTINUING DIRECTORS AND CERTAIN
EXECUTIVE OFFICERS. The following table sets forth the names of the nominees,
continuing directors and executive officers named in the Summary Compensation
Table as well as their ages, a brief description of their recent business
experience, including present occupations and employment, certain directorships
held by each, the year in which each director became a director of PFF Bank &
Trust, and the year in which their terms (or in the case of the nominees, their
proposed term) as director expire.
NAME AND PRINCIPAL EXPIRATION OF
OCCUPATION AT PRESENT DIRECTOR TERM AS
AND FOR PAST FIVE YEARS AGE SINCE (1) DIRECTOR
----------------------- --- --------- --------
NOMINEE
Robert W. Burwell....................... 70 1984 2005
Vice Chairman of the Board of Directors
of the Company and the Bank. Mr. Burwell
was President and Chief Executive Officer
of the Pomona Valley Hospital Medical
Center from 1972 until his retirement in
1993.
William T. Dingle........................ 74 1974 2005
Chief Executive Officer of Graves
Automotive Supply and Parkway Automotive
Warehouse.
Curtis W. Morris......................... 66 1988 2005
Mr. Morris is associated with the law
firm of Lamb, Morris & Lobello and has
been a practicing attorney for 33 years.
3
NAME AND PRINCIPAL EXPIRATION OF
OCCUPATION AT PRESENT DIRECTOR TERM AS
AND FOR PAST FIVE YEARS AGE SINCE (1) DIRECTOR
----------------------- --- --------- --------
CONTINUING DIRECTORS
Stephen C. Morgan, Ed.D. ................ 56 2001 2003
Mr. Morgan has been the president of the
University of LaVerne since 1985.
Jil H. Stark............................. 65 1975 2003
Retired college administrator and faculty
member.
Donald R. DesCombes...................... 70 1979 2004
Chairman of the Board of Directors of the
Company and the Bank. Mr. DesCombes has
served as Chairman of the Board of the
Bank since 1989.
Larry M. Rinehart........................ 54 1994 2004
President and Chief Executive Officer of
the Company and the Bank since August
1992. Served as President-elect and
Executive Vice President from July 1991
to August 1992. Mr. Rinehart also serves
as Director, President and Chief
Executive Officer of Pomona Financial
Services, Inc., PFF Financial Services,
Inc. and Diversified Services, Inc. Mr.
Rinehart also serves as Director of
Glencrest Investment Advisors, Inc., a
recently formed subsidiary of the Company.
EXECUTIVE OFFICERS
Kevin McCarthy........................... 50
Senior Executive Vice President of the
Company and Senior Executive Vice
President and Chief Operating Officer of
the Bank. Mr. McCarthy is a Director of
Pomona Financial Services, Inc., PFF
Financial Services, Inc. and Diversified
Services, Inc. Mr. McCarthy also serves
as Chairman of the Board of Directors of
Glencrest Investment Advisors, Inc., a
recently formed subsidiary of the Company.
Gregory C. Talbott....................... 48
Executive Vice President, Chief Financial
Officer and Treasurer of the Company and
the Bank. Mr. Talbott also serves as
Director of Glencrest Investment
Advisors, Inc., a recently formed
subsidiary of the Company.
4
NAME AND PRINCIPAL EXPIRATION OF
OCCUPATION AT PRESENT DIRECTOR TERM AS
AND FOR PAST FIVE YEARS AGE SINCE (1) DIRECTOR
----------------------- --- --------- --------
Gilbert F. Smith......................... 56
Senior Vice President and General Counsel
of the Bank. Mr. Smith also serves as
Chairman of the Board of Pomona Financial
Services, Inc., PFF Financial Services,
Inc., and Diversified Services, Inc. Mr.
Smith also serves as Director of
Glencrest Investment Advisors, Inc., a
recently formed subsidiary of the Company.
Jerald W. Groene......................... 54
Senior Vice President and Chief Lending
Officer of the Bank. Mr. Groene is a
Director of Pomona Financial Services,
Inc., PFF Financial Services, Inc. and
Diversified Services, Inc. Mr. Groene
also serves as Director of Glencrest
Investment Advisors, Inc., a recently
formed subsidiary of the Company.
- ------------------------
(1) Includes years of service as a director of the Bank.
ABOUT THE BOARD AND ITS COMMITTEES
THE BOARD. PFF Bancorp is governed by a Board of Directors and various
committees of the Board which meet throughout the year. Directors discharge
their responsibilities throughout the year at Board and committee meetings, and
also through considerable telephone contact and other communications with the
chairman and others regarding matters of concern and interest to PFF Bancorp.
During the year ended March 31, 2002, the Board of Directors held fourteen board
meetings. With the exception of three directors who each missed only one board
meeting, all of the Directors attended every Board meeting held and each
committee meeting on which such Directors served during Fiscal 2002.
COMMITTEES OF THE BOARD. The Board has three principal committees. The
following chart describes for each committee the function, current membership
and number of meetings held during fiscal 2002.
AUDIT COMMITTEE-four meetings in Fiscal 2002.
- -------------------------------------------------------------------------------
5
FUNCTIONS CURRENT MEMBERS (1)
- --------- -------------------
o Reports to the Board on the general financial Jil H. Stark
condition of the Company and the Bank and William T. Dingle
the results of the annual audit; and Robert W. Burwell
o Oversees that the Company's and the Bank's
activities are being conducted in accordance
with applicable laws and regulations.
- ------------------------------
* The Board of Directors has adopted a written charter for the Audit
Committee, a copy of which was attached as Appendix A to the Proxy
Statement for the Annual Meeting of Stockholders of PFF Bancorp, Inc. for
the 2001 fiscal year.
(1) All members of the Audit Committee are independent in accordance with the
New York Stock Exchange listing standards.
NOMINATING COMMITTEE-one meeting in Fiscal 2002.
- --------------------------------------------------------------------------------
FUNCTIONS CURRENT MEMBERS
- --------- ---------------
o Consider nominees for election to the Board, Donald R. DesCombes
including any written recommendation by a Stephen C. Morgan
stockholderthat is mailed to the attention Jil H. Stark
of the Secretary.
EMPLOYEE COMPENSATION AND BENEFITS COMMITTEE-three meetings in Fiscal 2002.
- --------------------------------------------------------------------------------
FUNCTIONS CURRENT MEMBERS
- --------- ---------------
o Establishes compensation and benefits for the Robert W. Burwell
executive officers; William T. Dingle
o Reviews the incentive compensation programs Curtis W. Morris
when necessary; and
o Responsible for all matters regarding compensation
and benefits, hiring, termination and
affirmative action issues for other officers and
employees.
* Robert D. Nichols, who retired in July 2002, was
a member of the Compensation Committee for the
2002 fiscal year.
AUDIT COMMITTEE REPORT
THE REPORT OF THE AUDIT COMMITTEE SHALL NOT BE DEEMED INCORPORATED BY
REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY
STATEMENT INTO ANY FILING UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR THE EXCHANGE ACT, EXCEPT AS TO THE EXTENT THAT THE COMPANY
SPECIFICALLY INCORPORATES THIS INFORMATION BY REFERENCE AND SHALL NOT OTHERWISE
BE DEEMED FILED UNDER SUCH ACTS.
6
In accordance with its written charter adopted by the Board of Directors
on April 25, 2000, and revised on April 24, 2001, the Audit Committee (the
"Committee") assists the Board of Directors in fulfilling its responsibility for
overseeing the quality and integrity of the accounting, auditing and financial
reporting practices of the Company and the Bank and their system of internal
controls. To assist it in its oversight role, the Audit Committee has retained
an independent, third party certified public accountant who will act as advisor
to the Audit Committee.
In discharging its oversight responsibility as to the audit process, the
Committee obtained from the independent accountants a formal written statement
describing all relationships between the accountants and the Company and the
Bank that might bear on the accountants' independence consistent with
Independence Standards Board Standard No. 1, "Independence Discussions with
Audit Committees," discussed with the accountants any relationships that may
impact their objectivity and independence, and satisfied itself as to the
accountants' independence.
The Committee reviewed with the Company's internal auditors and
independent accountants the overall scope and plans for their respective audits
and the results of internal audit examinations. The Committee also discussed
with management, the internal auditors and the independent accountants the
quality and adequacy of the Company's and the Bank's internal controls and the
overall quality of the Company's and the Bank's financial reporting process.
The Committee discussed and reviewed with its independent accountants
communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and discussed and reviewed the results of
the independent accountants' examination of the consolidated financial
statements. In addition, the Committee considered the compatibility of
nonauditing services provided to the Company and the Bank with the accountants'
independence in performing their auditing functions.
The Committee reviewed and discussed interim financial information
contained in each quarterly report and earnings announcement with management and
independent accountants prior to public release as necessary. The Committee
reviewed the audited consolidated financial statements of the Company as of and
for the year ended March 31, 2002, with management and the independent
accountants. Management has the responsibility for the preparation of the
Company's consolidated financial statements and the independent accountants have
the responsibility for the audit of those statements.
Based on the above mentioned reviews and discussions with management and
the independent accountants, the Committee recommended to the Board that the
Company's audited consolidated financial statements be included in its Annual
Report on Form 10-K for the year ended March 31, 2002, for filing with the
Securities and Exchange Commission. The Committee also recommended the
appointment, subject to stockholder approval, of the independent accountants,
and the Board of Directors concurs with such recommendation.
7
THE AUDIT AND EXAMINING COMMITTEE
Jil H. Stark
William T. Dingle
Robert W. Burwell
DIRECTORS' COMPENSATION
DIRECTORS' FEES. The Directors, except for Mr. Rinehart, receive a
retainer of $10,000 per year for service on the Company Board. No committee
meeting fees are paid to the Directors. Currently, all directors of the Bank
except the Chairman of the Board and Mr. Rinehart receive a retainer of $3,300
per month. The Chairman of the Board receives a monthly retainer of $4,500. Mr.
Rinehart does not receive any additional compensation for serving as a director.
Directors are also eligible to receive grants of options under our incentive
plans.
DIRECTORS' RETIREMENT PLAN. The Bank maintains the PFF Bank & Trust
Directors' Retirement Plan (the "Directors' Retirement Plan"). The Directors'
Retirement Plan is frozen, in that no new benefits are accruing under the Plan
effective December 31, 1995. The Directors' Retirement Plan provides that, upon
retirement, retiring directors are eligible to receive an annual benefit equal
to 70% of the retiring directors' annualized final earnings based on monthly
board compensation as of December 31, 1995 (reduced by one one hundred and
twentieth (1/120) for each month of service less than 120) which shall continue
to be paid for at least 10 years and over the lifetime of the director
thereafter. All Directors are currently credited with 120 months of service
under the plan except for Mr. Nichols who has been credited with 60 months of
service and Mr. Morgan who has not been credited with any months of service. Mr.
Rinehart does not participate in the plan. Benefits may not start until the
director reaches age 65. The Directors' Retirement Plan provides that in the
event of a participant's death prior to payment of all benefits due to the
participant under the plan, the remaining benefits are to be paid to the
beneficiary or beneficiaries designated by the participant or, if no such
designation had been made, to the estate of the participant.
DIRECTORS' DEFERRED COMPENSATION PLAN. The Bank provides a non-qualified
plan which offers Directors the opportunity to defer fee compensation and stock
awarded under the 1996 Incentive Plan. The primary form of benefit for deferred
fees is 120 monthly installment payments of the account balance. Such balance
shall equal the amount of the deferrals and interest thereon. Other forms of
benefit, including a lump sum payout, are available with certain restrictions.
Deferred stock awarded under the 1996 Incentive Plan, is accounted for in the
plan in the form of common stock units. The form of benefit for deferred stock
received through the 1996 Incentive Plan is a single lump sum payout made in
shares of common stock. The forms of benefit for other deferred stock is a
single lump sum payout or payment of equal installments over time. Prior to
March 1996, deferrals had been credited with an interest rate equal to the
highest interest rate paid on a designated date to depositors of the Bank. The
plan has been amended to allow for an alternative choice whereby deferrals may
be credited with investment earnings or losses equivalent to that of the common
stock issued in connection with our initial public offering ("Common Stock
Rate"). Previous deferrals, as well as future deferrals, may be credited with
the Common Stock Rate as of the initial public offering. The Bank established an
irrevocable grantor trust ("rabbi trust") to
8
hold the assets of the Bank that are intended to be used to satisfy the Bank's
obligation with respect to benefits payable under the Deferred Compensation
Plan. Assets of the rabbi trust are subject to the claims of creditors of the
Bank solely in the event of the Bank's insolvency thereby foregoing any tax
consequences to participants until assets are distributed to participants.
9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table presents information regarding the beneficial
ownership of common stock, as of July 31, 2002 with respect to:
o those persons believed by management to be beneficial owners of more
than 5% of our outstanding shares of common stock;
o each executive officer named in the Summary Compensation Table and
director; and
o all directors and executive officers as a group.
Other than those persons listed below, we are not aware of any person that
owns more than 5% of our common stock as of July 31, 2002.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
-------------------------------------- ---------------------- ----------
PFF Bank & Trust Employee Stock 1,466,284 (1) 11.05%
Ownership Plan ("ESOP")
350 South Garey Avenue
Pomona, California 91766
Thomson Horstmann & Bryant, Inc. 1,191,200 (2) 8.9%
Park 80 West, Plaza Two
Saddle Brook, New Jersey 07663
Capital Guardian Trust Company 825,300 (3) 6.2%
11100 Santa Monica Boulevard
Los Angeles, California 90025
DIRECTORS AND EXECUTIVE OFFICERS
Robert W. Burwell 100,420 (4)(5)(6) *
Donald R. DesCombes 144,719 (4)(5)(6) 1.09%
William T. Dingle 30,620 (4)(6) *
Jerald W. Groene 67,686 (4)(8)(9) *
Kevin McCarthy 247,212 (4)(8)(9) 1.86%
Stephen Morgan 1,000 (4)(6) *
Curtis W. Morris 106,655 (4)(5)(6) *
Robert D. Nichols 51,209 (4)(6) *
Larry M. Rinehart 329,327 (4)(7)(8)(9) 2.48%
Gilbert F. Smith 83,993 (4)(8)(9) *
Jil H. Stark 110,864 (4)(6) *
Gregory C. Talbott 180,361 (4)(8)(9) 1.36%
All directors and executive officers as a group
(15 persons) 1,685,875 (10) 12.7%
- --------------------------
* Does not exceed 1.0% of our outstanding voting securities.
(1) The Mechanics Bank has been appointed as the corporate trustee for the
ESOP ("ESOP Trustee"). The ESOP Trustee, subject
10
to its fiduciary duty, must vote all allocated shares held in the ESOP in
accordance with the instructions of the participants. At July 31, 2002,
1,005,617 shares had been allocated under the ESOP and 581,383 shares
remain unallocated. Under the terms of the ESOP, the ESOP Trustee will
vote the unallocated shares in a manner calculated to most accurately
reflect the instructions received from participants regarding allocated
shares so long as the ESOP Trustee determines such vote is in accordance
with the provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA").
(2) Based on information contained in an amendment to Schedule 13G filed with
the SEC on January 23, 2002.
(3) Based on information contained in an amendment to Schedule 13G filed with
the SEC on February 11, 2002.
(4) Each person effectively exercises sole (or shares with spouse or other
immediate family member) voting or dispositive power as to shares reported
herein (except as noted).
(5) Includes 12,922, 7,140 and 13,602 shares with respect to Messrs.
DesCombes, Morris and Burwell, respectively, which have vested but receipt
of which has been deferred by Messrs. DesCombes, Morris and Burwell. Each
outside director presently has voting power as to the shares awarded.
(6) Includes 85,017 shares subject to options granted to each outside director
other than Messrs. Burwell, Dingle, Nichols and Morgan, and 50,017, 12,015
and 19,855 shares subject to options granted to Messrs. Burwell, Dingle
and Nichols, respectively under the 1996 Incentive Plan which are
currently exercisable. Excludes 24,106 shares subject to options granted
to each outside director other than Messrs. Dingle and Nichols and 12,053
and 9,039 shares subject to options granted to Messrs. Dingle and Nichols,
respectively, under the 1999 Incentive Plan which are not currently
exercisable. Options granted pursuant to the 1999 Incentive Plan become
exercisable at a rate of 50% per year commencing on October 23, 2002.
(7) Includes 22,500 shares with respect to Mr. Rinehart which have vested but
receipt of which has been deferred at the option of Mr. Rinehart.
(8) Includes 235,786, 160,785, 100,785, 35,578, 19,200 shares subject to
options granted to Messrs. Rinehart, McCarthy, Talbott, Smith and Groene,
respectively, under the 1996 Incentive Plan which are currently
exercisable. Excludes 88,125, 63,000, 53,562, 30,250, 30,250 shares
subject to options granted to Messrs. Rinehart, McCarthy, Talbott, Smith
and Groene, respectively, under the 1999 Incentive Plan which are not
exercisable. Options become exercisable at a rate of 50% per year
commencing on October 23, 2002.
(9) Includes 10,490, 11,048, 11,193, 10,838 and 10,612 shares allocated to
Messrs. Rinehart, McCarthy, Talbott, Smith and Groene, respectively, under
the Bank's ESOP.
(10) Excludes a total of 497,559 shares subject to options under the 1999
Incentive Plan which are not currently exercisable. Includes 81,951 shares
(including 54,181 shares set forth in footnote 9 above) allocated to the
executive officers as a group under the Bank's ESOP.
11
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
THE REPORT OF THE COMPENSATION COMMITTEE AND THE STOCK PERFORMANCE GRAPH
SHALL NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT
INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY FILING UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE EXCHANGE ACT,
EXCEPT AS TO THE EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES THIS
INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH
ACTS.
Under rules established by the SEC, we are required to provide certain
data and information in regard to the compensation and benefits provided to our
Chief Executive Officer and other executive officers. The disclosure
requirements for the Chief Executive Officer and other executive officers
include the use of tables and a report explaining the rationale and
considerations that led to fundamental compensation decisions affecting those
individuals. In fulfillment of this requirement, the Employee Compensation and
Benefits Committee of the Board of Directors, at the direction of the Board of
Directors, has prepared the following report for inclusion in this Proxy
Statement.
We began a process following the issuance of stock in March 1996, to
revise current executive compensation policies to reflect our status as a public
company and to assure competitive compensation levels. Our policies incorporate
our financial results with particular emphasis on earnings improvement.
COMPENSATION POLICIES. The Committee has established the following goals
as incentives in setting Executive Compensation, including benefits:
o to target base salaries at a competitive average;
o to reward the achievement of the Bank's annual and long term
strategic goals;
o to retain executive officers by offering a full range of benefits
available at a competitive level to other executives of savings
institutions; and
o to provide additional motivation for the executive officers to
enhance stockholder value by linking a portion of the compensation
package to benchmarks that we believe influence the performance of
our common stock.
COMPONENTS OF SALARY. Compensation is defined as cash or non-cash
remuneration in the form of salary, bonus, profit sharing, deferred
compensation, auto allowance, 401(k) employer match contribution, Supplemental
Executive Retirement Plan ("SERP") payments, ESOP allocations, stock grants and
options, and any other type of remuneration deemed by the Board to be
appropriate.
EXECUTIVE SALARIES. In general, the Committee expects salaries for senior
executive officers to be in the middle range of the marketplace. There is no
provision for "automatic annual raises"; however, adjustments will be made from
time to time for individuals whose salaries are trailing the
12
market. Sources of compensation information include peer group analysis as
obtained through review of proxy statements and various compensation surveys
including Employer Group Survey, Economic Research Institute Survey, Western
Management Group Survey, California Bankers Association Survey, American
Community Bankers Survey and other published sources.
Notwithstanding modest salary levels, the Committee believes that high
performance deserves high financial rewards. For this reason, the Committee has
established two annual cash incentive plans. One plan, at the Bank level,
measures and rewards achievement of internally established goals. The second
plan, at the Company level, measures performance compared to a peer group. Taken
together these incentive plans offer executive officers the opportunity of
approximately doubling their annual salaries for truly outstanding performance.
Once each year the CEO presents to the full Board, in executive session,
his evaluation and the salary of each of the senior executives. While such
evaluations are the primary responsibility of the CEO, the Board believes it is
prudent to conduct general oversight of the status of the senior management
team.
INCENTIVE PLANS. The Board and stockholders have approved Incentive Plans
in 1996 and 1999, under which officers may receive options and awards. All stock
options and awards under the 1996 Incentive Plan have vested. Under the 1999
Incentive Plan, the Committee may award stock options and other rights. The
vesting of stock options granted under the 1999 Incentive Plan are determined by
the Committee. All awards granted to date provide for vesting at fifty percent
(50%) per year over a two year period. The Committee believes that stock
ownership is a significant incentive in building stockholders' wealth and
aligning the interests of employees with those of stockholders. Stock options
under the 1999 Incentive Plan have been allocated by the Committee based upon
our fiscal responsibility, regulatory practices and policies, the practices of
other financial institutions, as verified by external surveys based upon the
officers' level of responsibility and contributions to the Corporation and the
Bank. The Committee will consider the amount of outstanding awards in
determining the total annual compensation package. See "-Executive Compensation
Tables-Summary Compensation Table," "1996 Incentive Plan" and "1999 Incentive
Plan."
CHIEF EXECUTIVE OFFICER. In addition to the goals associated with the
Annual Incentive Plan, the Board conducts a general evaluation of the CEO's
performance twice each year. This review includes a variety of considerations
such as the quality and source of earnings, budget management, regulatory
compliance, community and internal leadership and strategic vision and
implementation. Specific accomplishments included the creation of Glencrest
Investment Advisors, Inc., a wholly-owned subsidiary of the Company, the hiring
of more experienced commercial bank employees, cost reductions, growth of the
business, consumer, commercial/industrial and construction loan programs,
reduction in the level of non-performing assets, and asset growth. In addition
to considering these specific accomplishments, consideration was given to the
results of an extensive survey of peer financial institutions.
The goal of the above referenced compensation policies, as implemented by
the Committee, is to be certain that all Executives are compensated consistent
with the above guidelines and to
13
assure that all reasonable and possible efforts are being exerted to maximize
shareholder value. Compensation levels will be reviewed as frequently as
necessary to ensure this result.
THE EMPLOYEE COMPENSATION AND BENEFITS COMMITTEE
Robert W. Burwell Robert D. Nichols
William T. Dingle Curtis W. Morris
*Robert D. Nichols, a member of the Employee Compensation and
Benefits Committee for the 2002 fiscal year, retired from
the Company's Board of Directors effective on July 31, 2002.
14
STOCK PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total stockholder
return on our common stock based on the market price of the common stock with
the cumulative total return of companies on the S&P 500 and the SNL Western
Thrift Index for the period beginning on March 31, 1997, the day our common
stock began trading, through March 31, 2002. The graph was derived from a
limited period of time, and, as a result, may not be indicative of possible
future performance of the common stock.
COMPARISON OF CUMULATIVE TOTAL RETURNS
AMONG THE CORPORATION, S&P 500 (U.S.)
INDEX AND THE SNL WESTERN THRIFT INDEX
[ PERFORMANCE GRAPH ]
PERIOD ENDING
---------------------------------------------------------------
INDEX 03/31/97 03/31/98 03/31/99 03/31/00 03/31/01 03/31/02
- ----------------------------------------------------------------------------------------
PFF Bancorp 100.00 143.48 121.74 108.94 163.18 224.43
S&P 500 100.00 148.01 175.29 206.74 161.94 162.33
SNL Western Thrift Index 100.00 163.19 135.83 101.20 202.78 196.66
15
EXECUTIVE COMPENSATION TABLES
SUMMARY COMPENSATION TABLE. The following table shows, for the three
fiscal years ended March 31, 2002, the cash compensation paid by the Bank, as
well as certain other compensation paid or accrued for those years, to the Chief
Executive Officer and the four highest paid executive officers of the Bank who
received compensation in excess of $100,000.
- ----------------------- ---------- -------------------------------------- --------------------------------------- ------------------
Long Term Compensation
---------------------------------------
AWARDS PAYOUTS
Annual Compensation (1)
--------------------------------------
Other Restricted Securities All
Annual Stock Underlying LTIP Other
Name and Salary Compensation Awards Options/SARs Payouts Compensation
Principal Position Year ($) Bonus ($) ($)(2)(3) ($) (#)(4) ($)(5) ($)
- ----------------------- ---------- ----------- ----------- -------------- ----------- --------------- ----------- ------------------
Larry M. Rinehart, 2002 $342,992 $ 229,940 $58,425 -- 88,125 -- $128,258(6)
President and Chief 2001 333,000 -- -- -- -- -- 71,675
Executive Officer 2000 300,000 92,769 -- -- -- -- 34,165
Kevin McCarthy 2002 $228,654 $ 137,966 $36,900 -- 63,000 -- $82,799(6)
Senior Executive Vice 2001 222,000 -- -- -- -- -- 64,576
President and Chief 2000 200,004 51,539 -- -- -- -- 33,232
Operating Officer
Gregory C. Talbott 2002 $217,235 $ 130,109 $36,900 -- 53,562 -- $87,400(6)
Executive Vice 2001 210,924 -- -- -- -- -- 72,175
President, Chief 2000 190,020 48,957 -- -- -- -- 30,258
Financial Officer and
Treasurer
Gilbert F. Smith 2002 $171,496 $ 80,478 $20,756 -- 30,250 -- $38,813(6)
Senior Vice 2001 166,500 -- -- -- -- -- 44,364
President, General 2000 150,000 30,952 -- -- -- -- 32,689
Counsel
Jerald W. Groene 2002 $171,496 $ 80,478 $20,756 -- 30,250 -- $37,948(6)
Senior Vice 2001 166,500 -- -- -- -- -- 45,399
President, Chief 2000 150,000 30,462 -- -- -- -- 33,169
Lending Officer
-----------------------------
(1) Under Annual Compensation, the column titled "Salary" includes
amounts deferred by the executive officer pursuant to the Bank's
401(k) Plan, as hereinafter defined, pursuant to which employees may
defer up to 15% of their compensation and executive officers may
defer up to 5% of their compensation, up to the maximum limits under
the Code. These numbers are subject to change based on Section 415
testing limits.
(2) There were no (a) perquisites over the lesser of $50,000 or 10% of
the individual's total salary and bonus for the last year, (b)
payments of above-market preferential earnings on deferred
compensation, (c) payments of earnings with respect to long-term
incentive plans prior to settlement or maturation, (d) tax payment
reimbursements, or (e) preferential discounts on stock.
(3) Consists of Awards, 1,900, 1,200, 1,200, 675 and 675 Shares which
vested immediately, of common stock made pursuant to the 1996
Incentive Plan to Messrs. Rinehart, McCarthy, Talbott, Smith and
Groene, respectively, on March 27, 2002.
(4) Consists of options granted on November 28, 2001 under the 1999
Incentive Plan at an exercise price of $26.65 which vest at 50% per
year on October 23, 2002 and October 23, 2003.
(5) For fiscal 2002, 2001 and 2000, the Bank had no long-term incentive
plans in existence. Accordingly, there were no payments or awards
under any long-term incentive plan.
(6) Includes $7,266, 4,371, 110, 137, 1,221 in life insurance premiums,
$3,943, 4,661, 2,855, 4,124, 4,124, in contributions to the Bank's
401(k) plan $-229, 18,699, 35,025, 5,357, 3,536 in contributions to
the Bank's 401(k) mirror Plan, $18,340, 18,334,
16
18,334, 18,267, 18,267 in contributions to the ESOP paid by the Bank
for the benefit of Messrs. Rinehart, McCarthy, Talbott, Smith and
Groene, respectively. Includes $88,144, 25,934, 20,276 in
adjustments to the ESOP/SERP Plans for the benefit of Messrs.
Rinehart, McCarthy and Talbott, respectively. Also includes $10,800
for each officer as payment for auto allowances. Includes $128 in
interest on the Bank's Deferred Compensation Plan for the benefit of
Mr. Smith.
1996 INCENTIVE PLAN. PFF Bancorp maintains the 1996 Incentive Plan, which
has provided discretionary awards of options to purchase common stock,
option-related awards and awards of common stock (collectively, "Awards") to
officers, directors and key employees as determined by a committee of the Board
of Directors. The balance of the Awards remaining in the 1996 Incentive Plan
were awarded on March 27, 2002. No options were granted under the 1996 Incentive
Plan to the executive officers named in the Summary Compensation Table for
fiscal 2002. All awards to officers, directors and key employees have vested.
1999 INCENTIVE PLAN. PFF Bancorp maintains the 1999 Incentive Plan, which
provides discretionary awards of options to purchase common stock and
option-related awards (collectively "Awards") to officers, directors, employees
and its affiliates as determined by a committee of the Board of Directors or two
or more outside directors. Awards of common stock to officers, directors and key
employees is provided under "Restricted Stock Awards" in the "Summary
Compensation Table." The following table provides information with regard to
options granted to each of the named executive officers during the fiscal year
ended March 31, 2002:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Grant Date
Present
Individual Grants Value
- ------------------------------------------------------------------------------------------------
Number of % of total
Securities Options/SARs
Underlying Granted to Exercise or Grant Date
Options/SARs Employees in Base Price Expiration Present
Name(2) Granted (1) Fiscal Year ($/Sh) Date Value $
- ------------------------------------------------------------------------------------------------
Larry M. Rinehart.. 88,125 15.89 $26.65 11/27/2011 11.73
Kevin McCarthy..... 63,000 11.36 26.65 11/27/2011 11.73
Gregory C. Talbott. 53,562 9.65 26.65 11/27/2011 11.73
Gilbert F. Smith... 30,250 5.45 26.65 11/27/2011 11.73
Jerald W. Groene... 30,250 5.45 26.65 11/27/2011 11.73
- --------------------
(1) All options were granted on November 28, 2001 and vest at a rate of 50% on
October 23, 2002 and 50% on October 23, 2003.
(2) Messrs. DesCombes, Morris, Burwell and Morgan and Ms. Stark each were
granted 29,106 options on November 28, 2001, Messrs. Dingle and Nichols were
granted 12,053 and 9,035 options, respectively, on that same date.
17
The following table provides certain information with respect to exercises
of stock options during the fiscal year ended March 31, 2002 by executive
officers named in the Summary Compensation Table and to the number of shares of
common stock represented by outstanding options held by the executive officers
named in the Summary Compensation Table as of March 31, 2002. Also reported are
the values for "in-the-money" options which represent the positive spread
between the exercise price of any such existing stock options and the year end
price of the common stock.
AGGREGATE FISCAL YEAR-END OPTION/SAR VALUES
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN THE MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES FISCAL YEAR-END(#)(1) FISCAL YEAR-END (3)(4)
ACQUIRED ON VALUE ----------------------------------- ------------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE(1) UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE
------------- -------------- --------------- ------------------- ---------------- -------------------
Larry M. Rinehart...... 15,686 $245,557 335,785 88,125 $6,195,233 $400,968
Kevin McCarthy......... 7,843 111,737 160,785 63,000 2,966,483 286,650
Gregory C. Talbott..... 7,843 116,390 130,785 53,562 2,412,983 243,707
Gilbert F. Smith....... 13,693 202,655 39,578 30,250 730,214 137,637
Jerald W. Groene....... 59,234 761,773 19,200 30,250 354,240 137,637
---------------------------
(1) These options have an exercise price of $12.75.
(2) These options have an exercise price of $26.65.
(3) The price of the common stock on March 28, 2002 was $31.20 per share.
(4) Based on the market value of the underlying common stock at fiscal year
end, minus the exercise price.
RETIREMENT BENEFITS AND TERMINATION ARRANGEMENTS
The Bank maintains a defined benefit plan (the "Retirement Plan") for
certain salaried employees who had attained the age of 21 and completed one year
of service prior to December 31, 1995. Effective December 31, 1995, the
Retirement Plan was frozen and Participants ceased the accrual of additional
benefits under the Retirement Plan although vesting will continue according to
the terms of the Retirement Plan. After December 31, 1995, no new Participants
entered the Retirement Plan. The Retirement Plan is designed to comply with the
requirements under Section 401(a) of the Code.
The Retirement Plan provides for a monthly benefit to the employee upon
retirement at the age of 65, or if later, the fifth anniversary of the
employee's initial participation in the Retirement Plan ("Normal Retirement
Age"). The Retirement Plan also provides for a monthly benefit upon the
Participant's death, disability and early retirement. Early retirement is
conditioned upon the attainment of the age of 55, and the completion by the
Participant of 15 years of service. No new accrual of years of service has
occurred since December 31, 1995. Benefits under the Plan are determined taking
into account the participant's final average earnings, social security benefits
and years of credited service under the Retirement Plan as of December 31, 1995.
18
The following table sets forth the estimated annual benefits payable upon
retirement at age 65 in the year ended December 31, 1995, expressed in the form
of a single life annuity, for the final average salary and benefit service
classifications specified.
PFF BANK & TRUST EMPLOYEE PENSION PLAN
------------------------------------------------------------------------
YEARS OF SERVICE
FINAL AVERAGE
COMPENSATION 15 20 25 30 35
- ------------------- -------------- ------------- --------------- ------------ --------------
$ 50,000 $13,598 $18,130 $22,663 $22,663 $22,663
100,000 29,723 39,630 49,538 49,538 49,538
150,000 45,848 61,130 76,413 76,413 76,413
200,000 45,848 61,130 76,413 76,413 76,413
250,000 45,848 61,130 76,413 76,413 76,413
300,000 45,848 61,130 76,413 76,413 76,413
350,000 45,848 61,130 76,413 76,413 76,413
400,000 45,848 61,130 76,413 76,413 76,413
Compensation under the Retirement Income Plan includes all regular pay and
overtime. The benefit amounts listed above were computed on a single life
annuity basis, which is the normal form under the plan.
19
The approximate years of service, as of January 1, 1996 for the executive
officers named in the Summary Compensation Table are as follows:
SERVICE
NAME YEARS MONTHS
---- ----- ------
Larry M. Rinehart 19 3
Kevin McCarthy 19 --
Gregory C. Talbott 9 7
Gilbert F. Smith 25 2
Jerald W. Groene 24 6
The freezing of accrued benefits on December 31, 1995 results in no
additional service for purposes of benefit determination being accrued for the
named executive officer.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Bank maintains a non-qualified
Supplemental Executive Retirement Plan ("SERP") to provide certain officers and
highly compensated employees with additional retirement benefits. The SERP
reflects the freezing of the Pension Plan as of December 31, 1995. The benefits
provided under the SERP are directly related to those provided under these three
qualified employee benefit plans sponsored by the Bank, namely the ESOP, the
401(k) Plan and the Pension Plan. With respect to the Pension Plan, the SERP
provides a benefit equal to the present value of the previous SERP benefit
accrued as of December 31, 1995. No additional contributions will be made by the
Bank to provide this benefit, as this portion of the SERP is only a deferral
mechanism (with interest) of the frozen Pension Plan benefit. The SERP also
provides a benefit equal to the difference between (i) the benefits which would
have been provided by employer contributions to the 401(k) Plan and the ESOP if
such contributions and benefits were calculated without the limitations imposed
by the qualification rules of the Code and (ii) the actual benefit provided
under each plan. Benefits under the SERP will be provided at retirement in the
form of some combination of an annuity, lump sum cash or stock distribution.
The Bank has established an irrevocable grantor's trust in connection with
the SERP. This trust is funded with contributions from the Bank for the purpose
of providing the benefits promised to the participants under the terms of the
SERP. The SERP participants have only the rights of unsecured creditors with
respect to the trust's assets, and will not recognize income with respect to
benefits provided by the SERP until such benefits are received by the
participants. The assets of the trust are subject to the claims of the Bank's
creditors solely in the event of the Bank's insolvency, thereby foregoing any
tax consequences to the participants until assets are distributed to
participants. Earnings on the trust's assets are taxable to the Bank. The
trust's assets may be invested in the Company's stock.
EMPLOYMENT AGREEMENTS. PFF Bank & Trust and PFF Bancorp have entered into
employment agreements with Messrs. Rinehart, McCarthy and Talbott (individually,
the "Executive"). The employment agreements are intended to ensure that we will
be able to maintain a stable and competent management base. Our continued
success depends to a significant degree on the skills and competence of Messrs.
Rinehart, McCarthy and Talbott.
20
The employment agreements provide for a three-year term for Messrs.
Rinehart, McCarthy and Talbott. The Bank employment agreements provide that,
commencing on the first anniversary date and continuing each anniversary date
thereafter, the Board of Directors of the Bank may extend the agreement for an
additional year so that the remaining term shall be three years, unless written
notice of non-renewal is given by the Board of Directors of the Bank after
conducting a performance evaluation of the Executive. The terms of the PFF
Bancorp employment agreements shall be extended on a daily basis unless written
notice of non-renewal is given by the Board of Directors. The agreements provide
that the Executive's base salary will be reviewed annually. The annual base
salaries for Messrs. Rinehart, McCarthy and Talbott for the fiscal year ended
March 31, 2002 are $342,992, $228,654 and $217,235 respectively. In addition to
the base salary, the agreements provide for, among other things, participation
in stock benefit plans and other fringe benefits applicable to executive
personnel.
The agreements provide for termination for cause as defined in the
agreements at any time. In the event PFF Bank & Trust or PFF Bancorp chooses to
terminate the Executive's employment for reasons other than for cause, or in the
event of the Executive's resignation upon: (i) failure to re-elect the Executive
to his current office(s); (ii) a material change in the Executive's functions,
duties or responsibilities; (iii) a relocation of the Executive's principal
place of employment by more than 25 miles; (iv) a material reduction in the
benefits and perquisites to the Executive; (v) liquidation or dissolution of PFF
Bank & Trust or PFF Bancorp (vi) a breach of the agreement by PFF Bank & Trust
or PFF Bancorp, the Executive or, in the event of the Executive's subsequent
death, his beneficiary, would be entitled to receive an amount equal to the
remaining base salary payments due to the Executive and the contributions that
would have been made on the Executive's behalf to any employee benefit plans
during the remaining term of the agreement provided, however, that the payment
shall not, in the aggregate, exceed three times the average of the Executive's
five preceding taxable years' annual compensation. PFF Bank & Trust and PFF
Bancorp would also continue, and pay for, the Executive's life, health and
disability coverage for the remaining term of the agreement.
Under the agreements, if voluntary or involuntary termination follows a
change in control of PFF Bank & Trust or PFF Bancorp (as defined in the
Employment Agreement), the Executive or, in the event of the Executive's death,
his beneficiary, would be entitled to a severance payment equal to the greater
of: (i) the payments due for the remaining term of the agreement; or (ii) three
times the average of the five preceding taxable years' annual compensation. PFF
Bank & Trust and PFF Bancorp would also continue, and pay for, the Executive's
life, health, and disability coverage for thirty-six months.
Notwithstanding that both agreements provide for a severance payment in
the event of a change in control, the Executive would only be entitled to
receive a severance payment under one agreement. In the event of a change in
control, based upon three times 2002 base salary as reported in the Summary
Compensation Table, Messrs. Rinehart, McCarthy and Talbott would receive
approximately $1,028,976, $685,962 and $651,705, respectively, in severance
payments, in addition to other cash and noncash benefits.
Payments under the agreements in the event of a change in control may
constitute an excess parachute payment under Section 280G of the Internal
Revenue Code (the "Code") for executive
21
officers, resulting in the imposition of an excise tax on the recipient and
denial of the deduction for such excess amounts to PFF Bancorp and PFF Bank &
Trust. Under the PFF Bancorp agreement, if such payment constitutes an excess
parachute payment under Section 280G of the Code, the executive officer will
receive a benefit under the agreement equal to the greater of (i) the total
benefits payable under the agreement taking into account the state and federal
income and excise taxes on such amounts or (ii) the amount that is one dollar
less than the triggering amount for the imposition of the excise tax under
Section 280G.
Payments to the Executive under the PFF Bank & Trust agreement will be
guaranteed by PFF Bancorp in the event that payments or benefits are not paid by
PFF Bank & Trust. Payment under the PFF Bancorp agreement would be made by PFF
Bancorp. All reasonable costs and legal fees paid or incurred by the Executive
pursuant to any dispute or question of interpretation relating to the Agreements
shall be paid by PFF Bank & Trust or PFF Bancorp, respectively, if the Executive
is successful pursuant to a legal judgment, arbitration or settlement. The
employment agreements also provide that PFF Bank & Trust and PFF Bancorp, shall
indemnify the Executive to the fullest extent allowable under federal and
Delaware law, respectively.
TERMINATION AND CHANGE IN CONTROL AGREEMENTS. PFF Bank & Trust has entered
into two-year termination and change in control agreements ("CIC Agreement")
with Messrs. Smith, Golish and Groene and Ms. Lemons and Ms. Scullin. Commencing
on the first anniversary date and continuing on each anniversary thereafter, the
CIC Agreements may be renewed by the Board of Directors for an additional year.
The CIC Agreements provide that in the event voluntary or involuntary
termination follows a change in control of PFF Bank & Trust or PFF Bancorp, the
officer or, in the event of death, his beneficiary, would be entitled to receive
a severance payment equal to two times the officer's average annual compensation
for the five years preceding termination subject to the limitation that such
payment not exceed three times the officer's average annual compensation of the
previous five years. PFF Bank & Trust would also continue, and pay for, the
officer's life, health and disability coverage for a period of twenty-four (24)
months from the date of termination. Payments to the officer under PFF Bank &
Trust's CIC Agreements will be guaranteed by PFF Bancorp in the event that
payments or benefits are not paid by PFF Bank & Trust.
The CIC Agreements also provide for a severance payment in the event of an
involuntary termination of the officer other than in a change in control, except
for cause. The severance payment is a sum equal to twenty-six weeks of base
salary for each three years of service up to a maximum of one-hundred and four
weeks and is conditioned on the officer releasing PFF Bank & Trust from any
causes of action against PFF Bank & Trust or PFF Bancorp arising during any
period of employment from the employment relationship, other than claims under
the various employee benefit plans of PFF Bank & Trust and PFF Bancorp.
ADDITIONAL INFORMATION ABOUT OUR DIRECTORS AND EXECUTIVE OFFICERS
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Our Directors and
executive officers file reports with the Securities and Exchange Commission and
the Nasdaq Stock Market indicating the number of shares of any class of our
equity securities they owned when they became a Director or executive officer
and, after that, any changes in their ownership of our equity securities.
22
Copies of any of these reports must also be provided to us. These reports are
required by Section 16(a) of the Securities Exchange Act of 1934. We have
reviewed the copies of the reports that we have received and written
representations from the individuals required to file the reports. Based on this
review, we believe that each of our executive officers and Directors has
compiled with applicable reporting requirements for transactions in our
securities during Fiscal 2002 with the exception of one Form 4 that was filed
late by Ms. Scullin.
TRANSACTIONS WITH CERTAIN RELATED PERSONS. With certain exceptions
permitted under the Federal Reserve Act and Regulation O, all loans or
extensions of credit to executive officers and directors must be made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with the general public and
must not involve more than the normal risk of repayment or present other
unfavorable features. In addition, loans made to a director or executive officer
in excess of the greater of $25,000 or 5% of PFF Bank's capital and surplus (up
to a maximum of $500,000) must be approved in advance by a majority of the
disinterested members of the Board of Directors.
PFF Bank & Trust has determined that preferred rate loans for executive
officers and directors are part of the Bank's overall benefits and compensation
program, and therefore, executive officers and directors are permitted to
receive the preferred rate so long as they are made within the limitations of
the Federal Reserve Act and Regulation O.
As of March 31, 2002, eight of the Bank's executive officers or directors
had a total of 11 loans outstanding, totaling approximately $2.2 million in the
aggregate. Of the 11 loans currently outstanding to executive officers or
directors, eight loans are receiving a preferred rate. For those receiving the
preferred rate, seven loans are secured by the borrower's principal residence
and one loan to a director is secured by rental property.
It is our policy that all transactions between the Company and its
executive officers, directors, holders of 10% or more of the shares of any class
of its common stock and affiliates thereof, contain terms no less favorable to
the Company than could have been obtained by it in arm's-length negotiations
with unaffiliated persons and are required to be approved by a majority of
independent outside directors not having any interest in the transaction.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. The Employee
Compensation and Benefits Committee is made up of three directors: Messrs.
Burwell, Dingle, and Morris. The fourth director, Mr. Nichols, retired from the
Board of Directors in July 2002. Mr. Nichols was an executive officer from 1986
to 1992. No member of the Committee is, or was during 2002, an executive officer
of another company whose board of directors has a comparable committee on which
one of PFF Bancorp's executive officers serves.
23
PROPOSAL 2. RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
Our independent auditors for the fiscal year ended March 31, 2002 were
KPMG LLP. The Board of Directors has reappointed KPMG LLP to continue as
independent auditors for PFF Bank & Trust and PFF Bancorp for the year ending
March 31, 2003, subject to ratification of such appointment by the stockholders.
A resolution will be presented to the meeting to ratify the appointment. The
affirmative vote of a majority of the number of votes entitled to be cast by the
common stock represented at the meeting is needed to ratify the appointment.
Representatives of KPMG LLP will be present at the meeting. They will be
given an opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions from stockholders present at the
meeting.
INDEPENDENT AUDITORS' FEES
The following aggregate fees were billed to the Company and the Bank for
professional services rendered by our independent auditors during the fiscal
year ended March 31, 2002:
Audit
2002 Audit Fees $ 196,000
2001 Audit Fees - Benefit Plans $ 36,000
2002 Quarterly Reviews $ 24,000
Non-Audit
Tax Compliance $ 99,332
Allowance Methodology Review $ 9,583
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED
PROXY CARD WILL BE VOTED FOR RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE
INDEPENDENT AUDITORS.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT AUDITORS.
24
ADDITIONAL INFORMATION
STOCKHOLDER PROPOSALS
To be considered for inclusion in our proxy statement and form of proxy
relating to the 2003 Annual Meeting of Stockholders a stockholder proposal must
be received by the Secretary at the address set forth on the Notice of Annual
Meeting of Stockholders not later than April 15, 2003. Any such proposal will be
subject to 17 C.F.R. Section 240.14a-8 of the Rules and Regulations under the
Exchange Act.
NOTICE OF BUSINESS TO BE CONDUCTED AT AN ANNUAL MEETING
Our bylaws provide an advance notice procedure for a stockholder to
properly bring business before an Annual Meeting. The stockholder must give
written advance notice to the Secretary not less than ninety (90) days before
the date originally fixed for such meeting; provided, however, that in the event
that less than one hundred (100) days notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be received not later than the close of business on the tenth
day following the date on which the notice to stockholders of the annual meeting
date was mailed or such public disclosure was made. The advance notice by
stockholders must include the stockholder's name and address, as they appear on
our record of stockholders, a brief description of the proposed business, the
reason for conducting such business at the Annual Meeting, the class and number
of shares of capital stock that are beneficially owned by such stockholder and
any material interest of such stockholder in the proposed business. In the case
of nominations to the Board of Directors, certain information regarding the
nominee must be provided. Nothing in this paragraph shall be deemed to require
us to include in our proxy statement or the proxy relating to an annual meeting
any stockholder proposal which does not meet all of the requirements for
inclusion established by the SEC in effect at the time such proposal is
received.
A COPY OF THE FORM 10-K (WITHOUT EXHIBITS) FOR THE YEAR ENDED MARCH 31,
2002, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS BEING MAILED TO
STOCKHOLDERS WITH THIS PROXY STATEMENT, AND WILL ALSO BE FURNISHED WITHOUT
CHARGE TO STOCKHOLDERS OF RECORD UPON WRITTEN REQUEST TO PFF BANCORP, INC., 350
SOUTH GAREY AVENUE, POMONA, CALIFORNIA 91766.
By Order of the Board of Directors
/s/ Carole F. Olson
Carole F. Olson
SECRETARY
Pomona, California
August 6, 2002
25
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND PROMPTLY
RETURN THE ACCOMPANYING PROXY CARD IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
26
REVOCABLE PROXY
PFF BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 18, 2002
9:00 A.M. PACIFIC TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints the official proxy committee of the Board of
Directors of PFF Bancorp, Inc. (the "Company"), each with full power of
substitution, to act as proxies for the undersigned, and to vote all shares of
common stock of the Company which the undersigned is entitled to vote only at
the Annual Meeting of Stockholders, to be held on September 18, 2002, at 9:00
a.m. Pacific Time, at the Sheraton Suites Fairplex, 601 W. McKinley Avenue,
Pomona, California, and at any and all adjournments thereof, as set forth on the
reverse side.
This proxy is revocable and will be voted as directed, but if no instructions
are specified, this proxy will be voted FOR the nominees as director specified
and FOR each of the proposals listed. If any other business is presented at the
Annual Meeting, including whether or not to adjourn the meeting, this proxy will
be voted by those named in this proxy in their best judgment. At the present
time, the Board of Directors knows of no other business to be presented at the
Annual Meeting.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
Please mark
your votes as /X/
indicated
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"THE LISTED NOMINEES AND "FOR" EACH OF THE PROPOSALS.
VOTE
1. The election as director of the nominees listed (except as marked to the contrary below). FOR WITHHOLD
(01) Robert W. Burwell, (02) William T. Dingle, (03) Curtis W. Morris / / / /
INSTRUCTION: To withhold your vote for any individual nominee, write that nominee's name on the line provided below:
--------------------------------------------------------------
FOR AGAINST ABSTAIN
2. The ratification of the appointment of KPMG LLP as independent auditors of PFF Bancorp, Inc. for / / / / / /
the fiscal year ending March 31, 2003.
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
The undersigned acknowledges receipt from the
Company prior to the execution of this proxy
of a Notice of Annual Meeting of Stockholders
and of a Proxy Statement dated August 6, 2002
and of the Annual Report to Stockholders.
----------------------------------------------
Signature of Stockholder Date
----------------------------------------------
Signature of Stockholder Date
Please sign exactly as your name appears on
this card. When signing as attorney, executor,
administrator, trustee or guardian, please
give your full title. If shares are held
jointly, each holder may sign but only one
signature is required.
- ------------------------------------------------------------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^