<PAGE>
SCHEDULE 14A
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
HIGHLAND BANCORP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
HIGHLAND BANCORP, INC.
601 South Glenoaks Boulevard
Burbank, California 91502
(818) 848-4265
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On April 28, 1999
TO EACH STOCKHOLDER OF HIGHLAND BANCORP, INC.:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders (the
"Meeting") of Highland Bancorp, Inc. (the "Company"), will be held at 10:00 a.m.
on Wednesday, April 28, 1999 at the Red Lion Hotel, 100 W. Glenoaks Boulevard,
Glendale, CA 91202 for the following purposes, all as set forth in the attached
Proxy Statement:
1. To elect two directors to serve until the election of directors in 2002
and until their respective successors are elected and have qualified.
The nominees of the Board of Directors are Stephen N. Rippe and George
Piercy, each of whom is currently a director of the Company;
2. To consider and act on the ratification of KPMG LLP as independent
auditors for the Company for 1999;
3. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on March 31, 1999 as
the record date for the determination of stockholders entitled to receive notice
of and to vote at the Meeting and any and all adjournments thereof. Only
holders of the common stock of the Company at the close of business on March 31,
1999 are entitled to notice of and to vote in person or by proxy at the Meeting.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
HOWEVER, WHETHER OR NOT YOU EXPECT TO ATTEND, YOU ARE URGED TO READ THE ATTACHED
PROXY STATEMENT AND THEN COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND
RETURN IT IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE AS PROMPTLY AS POSSIBLE. IF
YOU RECEIVED MORE THAN ONE PROXY CARD BECAUSE YOU OWN SHARES REGISTERED IN
DIFFERENT NAMES OR AT DIFFERENT ADDRESSES, EACH PROXY CARD SHOULD BE SEPARATELY
COMPLETED AND RETURNED. IF YOU ATTEND THE MEETING AND WISH TO VOTE IN PERSON,
YOU MAY WITHDRAW YOUR PROXY. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS
EXERCISE. IN ORDER TO FACILITATE THE PROVIDING OF ADEQUATE ACCOMMODATIONS;
PLEASE INDICATE ON THE PROXY WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING.
By Order of the Board of Directors
/s/ Anthony L. Frey
Anthony L. Frey
Executive Vice President, Chief Financial Officer
and Corporate Secretary
Dated: April 6, 1999
<PAGE>
HIGHLAND BANCORP, INC.
601 South Glenoaks Boulevard
Burbank, California 91502
(818) 848-4265
-------------------------------
PROXY STATEMENT
-------------------------------
ANNUAL MEETING OF STOCKHOLDERS
To Be Held On April 28, 1999
This proxy statement (the "Proxy Statement") is furnished to stockholders
of Highland Bancorp, Inc. (the "Company"), in connection with the solicitation
by the Board of Directors of the Company of proxies for use at the Company's
Annual Meeting of Stockholders (the "Meeting") to be held at 10:00 a.m. on
Wednesday, April 28, 1999, and at any and all adjournments thereof, for the
purposes set forth in the foregoing Notice of the Meeting. The Company is the
holding company of Highland Federal Bank, a federally chartered savings bank
(the "Bank").
Only holders of the common stock of the Company at the close of business on
March 31, 1999 are entitled to notice of and to vote in person or by proxy at
the Meeting. All proposals set forth below are proposals of the Company. The
Proxy Statement and the enclosed form of proxy are first being mailed to
stockholders on or about April 6, 1999.
Matters to be Considered
At the Meeting, the stockholders of the Company will vote upon (i) the
election of two directors; (ii) the ratification of the selection of KPMG LLP as
the Company's independent auditors for 1999; and (iii) such other business as
may properly come before the Meeting or any adjournment thereof. The Board of
Directors does not know of any matter to be brought before the Meeting other
than those described in this Proxy Statement.
Voting Rights and Votes Required
The Board of Directors has fixed March 31, 1999 as the date (the "Record
Date") for the determination of stockholders entitled to notice of, and to vote
at, the Meeting. At the close of business on the Record Date, there were
outstanding and entitled to vote 2,194,309 shares of common stock, par value
$0.01 per share, of the Company (the "Common Stock").
A majority of the outstanding shares of Common Stock must be represented in
person or by proxy at the Meeting in order to constitute a quorum for the
transaction of business. Except as set forth below, the holder of record of
each share of Common Stock entitled to vote at the Meeting will have one vote
for each share so held on each matter to be presented at the Meeting.
In the election of directors, a stockholder may cumulate his votes for the
candidates in nomination. Each share of Common Stock will be entitled to the
number of votes equal to the number of directors to be elected, and a
stockholder may cast all his votes for a single candidate or may distribute his
votes among two or more candidates in such manner as the stockholder deems
appropriate. The candidates receiving the highest number of votes will be
elected as directors of the Company. Discretionary authority to cumulate votes
is hereby solicited by the Board, and the return of an executed proxy confers
such authority.
1
<PAGE>
The affirmative vote of the holders of a majority of the Common Stock
present in person or represented by proxy and entitled to vote at the Meeting
will be required to ratify the selection of KPMG LLP as independent auditors.
Abstentions and broker non-votes will be treated as shares present and
entitled to vote for purposes of determining the presence of a quorum. For the
purpose of determining whether a proposal described herein has received the
necessary votes to be approved, abstentions from voting on any matter, other
than the election of directors, will have the effect of a vote AGAINST such
matter, while broker non-votes do not count in the determination of the voting
results on any of the matters to be presented to a vote at the Meeting.
In the event that the votes necessary to approve any of the foregoing
proposals have not been obtained by the date of the Meeting, the Chairman of the
Meeting may, in his discretion, adjourn the Meeting from time to time to permit
the solicitation of additional proxies by the Board of Directors.
Solicitation and Voting of Proxies
In connection with the solicitation by the Board of Directors of proxies
for use at the Meeting, the Board of Directors has designated Richard J. Cross,
Chairman of the Board of Directors, and Stephen N. Rippe, President and Chief
Executive Officer, as proxy holders (the "Proxy Holders"). Common Stock
represented by all properly executed proxies will be voted at the Meeting in
accordance with the instructions specified thereon.
If no instructions are specified, Common Stock represented by any properly
executed proxy will be voted FOR the election of each of the nominees listed
below under "Election of Directors," and FOR the ratification of the selection
of KPMG LLP as independent auditors for the Company.
The Board of Directors is not aware of any other matters that will come
before the Meeting other than those described above. If any other matters are
properly presented at the Meeting, the proxies will be voted by the Proxy
Holders in accordance with the recommendations of the Board of Directors.
A stockholder may revoke his or her proxy at any time prior to its exercise
by filing with the Secretary of the Company an instrument of revocation or a
valid proxy bearing a later date, or by attending the Meeting and requesting
that such proxy be revoked. Attendance at the Meeting will not, in itself,
constitute revocation of a previously granted proxy.
The Company will pay the expense of this solicitation. The proxies will be
solicited principally through the mail, but directors, officers and regular
employees of the Company may solicit proxies personally or by telephone. The
Company will reimburse persons holding Common Stock in their names or the names
of their nominees but not owning such Common Stock beneficially (such as
brokerage houses, banks and other fiduciaries) for the expense of forwarding
soliciting material to their principals. In addition, the Company may pay for
and utilize the services of individuals or companies that it does not regularly
employ in connection with the solicitation of proxies.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of the Common Stock
as of March 31, 1999 by each director and executive officer and by all directors
and executive officers of the Company as a group. Except as noted all such
shares are beneficially owned solely by such individual or jointly with such
individual's spouse.
<TABLE>
<CAPTION>
Name of Beneficial Owner Amount Beneficially Owned Percent of Class(1)
------------------------ ------------------------- -------------------
<S> <C> <C>
Richard J. Cross.................................... 21,585(2)(3) *
Woodrow W. DeWitt................................... 52,552(2) 2.2%
William G. Dyess.................................... 22,832(2)(4) *
Anthony L. Frey..................................... 25,000(5) 1.1%
Ellen B. Geiger..................................... 23,250(6) *
Richard O. Oxford................................... 21,357(2) *
George Piercy....................................... 52,552(2) 2.2%
Stephen N. Rippe.................................... 68,167(7) 2.9%
Shirley E. Simmons.................................. 14,015(2) *
Garry P. Warren..................................... 24,547(8) 1.0%
All directors and executive officers as a group
(10 persons)...................................... 325,857(9) 13.8%
</TABLE>
- ---------
* Less than 1%.
(1) Shares which the person (or group) has the right to acquire within 60 days
after the Record Date are deemed to be outstanding in calculating the
percentage ownership of the person (or group) but are not deemed to be
outstanding as to any other person (or group).
(2) Includes 10,500 shares, which may be acquired within 60 days upon exercise
of outstanding options.
(3) Does not include 3,000 shares owned by Mr. Cross's wife, as to which Mr.
Cross disclaims beneficial ownership.
(4) Does not include 1,600 shares owned by Mr. Dyess's wife as to which Mr.
Dyess disclaims beneficial ownership.
(5) Includes 22,250 shares, which may be acquired within 60 days upon exercise
of outstanding options.
(6) Includes 23,250 shares, which may be acquired within 60 days upon exercise
of outstanding options.
(7) Includes 47,500 shares, which may be acquired within 60 days upon exercise
of outstanding options.
(8) Includes 7,915 shares, which may be acquired within 60 days upon exercise
of outstanding options.
(9) Includes a total of 163,915 shares, which may be acquired within 60 days
upon exercise of outstanding options.
3
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table identifies those stockholders that management is aware
beneficially owned, as of March 31, 1999, in excess of 5% of the outstanding
Common Stock.
<TABLE>
<CAPTION>
Name and Address Common Stock Beneficially Owned
of Beneficial Owner at March 31, 1999
- ---------------------------------------------------------------------------------------------------------------------
Number of Shares Percent of Class
-------------------------------------------------------------
<S> <C> <C>
Wellington Management Company, LLP (1) 134,900 6.1%
75 State Street
Boston, Massachusetts 02109
John Hancock Mutual Life Insurance 169,667 7.7%
Company (2)
101 Huntington Avenue
Boston, Massachusetts 02199
Deltec International S.A. (3) 543,856 24.8%
535 Madison Avenue
New York, New York 10022
Sandler O'Neill Asset Management LLC (4) 117,250 5.3%
712 Fifth Avenue - 22nd Floor
New York, New York 10019
</TABLE>
________________________
1) Based on a Schedule 13G filed by Wellington Management Company, LLP on
February 9, 1999.
2) Based on a Schedule 13G filed by John Hancock Mutual Life Insurance Company
on January 27, 1998. Direct beneficial ownership of the shares is held by
John Hancock Advisors, Inc., which is a wholly-owned subsidiary of The
Berkley Financial Group, which is a wholly-owned subsidiary of John Hancock
subsidiaries, Inc., which is a wholly-owned subsidiary of John Hancock
Mutual Life Insurance Company.
3) Based on a Form 4 filed by Deltec International S. A. on March 5, 1999.
4) Based on a schedule 13D filed by Sandler O'Neill Asset Management LLC on
March 9, 1999. The shares of Common Stock are held by various partnerships
of which SOMA Holdings, LLC ("Holdings") is the general partner and to
which Sandler O'Neill Asset Management provides administrative and
management services. The managing member and President of Holdings and
Sandler O'Neill Asset Management is Terry Maltese.
4
<PAGE>
PROPOSAL 1:
ELECTION OF DIRECTORS
The Bylaws of the Company provide that the number of directors of the
Company shall be fixed from time to time by resolution of the Board of
Directors, but shall not be less than seven (7) nor more than fifteen (15),
divided into three classes as nearly equal in number as possible. The Board of
Directors currently consists of seven members, and is divided into three classes
designated as Class I (consisting of two members), Class II (consisting of three
members) and Class III (consisting of two members). The members of Class I,
whose term of office expires at the Meeting, are Stephen N. Rippe and George
Piercy. The members of Class II, whose term of office expires in 2000, are
Woodrow W. DeWitt, Richard O. Oxford and Shirley Simmons. The members of Class
III, whose term of office expires in 2001, are Richard J. Cross and William G.
Dyess. Each director's term of office expires at the Annual Meeting of
Stockholders in the year in which his or her term expires and when his or her
successor is elected and has qualified. Each of the members of the Board of
Directors of the Company is also a member of the Board of Directors of the Bank.
Nominees for Election
The Company's Bylaws provide that the Board of Directors shall act as a
nominating committee for selecting management's nominees for election as
directors. The Bylaws also provide that, if the Board of Directors makes such
nominations, no nominations for directors except those made by the Board of
Directors shall be voted upon at the annual meeting unless made in accordance
with the following. Nominations for directors may be made by any stockholder of
the Company entitled to vote for the election of directors at that meeting
pursuant to timely notice in writing to the Secretary of the Company. To be
timely, a stockholder's notice shall be delivered to or received at the
principal executive offices of the Company not less than twenty (20) days prior
to the meeting; provided, however, that in the event that less than thirty (30)
days' notice of the date of the meeting is given to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the tenth (10th) day following the day on which such notice of the
date of the meeting was mailed. Such stockholder's notice shall set forth: (i)
as to each person whom the stockholder proposes to nominate for election or
reelection as a director: (a) the name, age, business address and residence
address of such person; (b) the principal occupation or employment of such
person; and (c) such person's written consent to serving as a director, if
elected; and (ii) as to the stockholder giving the notice: (a) the name and
address of such stockholder; and (b) the class and number of shares of the
Company which are owned of record by such stockholder.
The nominees of the Board of Directors for election as directors at the
Meeting are Stephen N. Rippe and George Piercy. Unless otherwise indicated on a
proxy, each proxy will be voted for the election of such individuals to serve
until the annual meeting of stockholders to be held in 2002 and until their
successors are elected and have qualified. Each of such nominees is an
incumbent director and has consented to being named as a nominee for election of
directors in this Proxy Statement and to serving as a director if elected.
Although the Board of Directors does not know of any reason why any nominee
will be unavailable for election, in the event any nominee should be unavailable
at the time of the Meeting, the proxies may be voted for a substitute nominee
selected by the Board of Directors.
5
<PAGE>
The following sets forth, as of March 31, 1999, certain information
concerning each of the individuals nominated for election as a director (Class
I) at the Meeting:
<TABLE>
<CAPTION>
Position with the
-----------------
Name and Age Company and the Bank Principal Occupation and Business Experience
------------ -------------------- --------------------------------------------
<C> <C> <S>
George Piercy (80) Director Director of the Company since 1997. Vice Chairman of
the Board of Directors of the Bank from 1993 to 1995
and a Director of the Bank since 1968. Chairman of the
Board of Directors of the Bank from 1982 to 1993.
President of Highland Auto and Truck Supply
(manufacturer of military truck parts and accessories)
since 1949.
Stephen N. Rippe (52) President, Director of the Company since 1997. President of the
Chief Executive Officer Bank since April 1994 and Executive Vice President
and Director from February to April 1994. Director of the Bank
since February 1994. Chief Operating Officer of
Imperial Thrift and Loan Association from 1991 to
1994. Various executive positions with Security
Pacific National Bank from 1971 to 1989, including
President of Security Pacific Bank Nevada from 1987 to
1989 and Regional Manager for business banking from
1984 to 1987.
</TABLE>
The following sets forth, as of March 31, 1999, certain information
concerning each of the Company's Class II directors:
<TABLE>
<CAPTION>
Position with the
-----------------
Name and Age Company and the Bank Principal Occupation and Business Experience
------------ -------------------- --------------------------------------------
<C> <C> <S>
Woodrow W. DeWitt (83) Director Director of the Company since 1997. Director of the
Bank since 1968. Chairman of the Board of DeWitt
Transfer & Storage since 1955.
Richard O. Oxford (61) Director Director of the Company since 1997. Director of the
Bank since 1991. President and Chief Executive
Officer of Dial Industries, Inc. (a manufacturer of
housewares) since 1978. Associate, McKinsey & Co.
(international management consulting firm) from 1965
to 1968. In 1993, Arroyo Seco Enterprises, a
partnership of which Mr. Oxford was General Partner,
filed for bankruptcy under Chapter 11 of the
Bankruptcy Code. This bankruptcy was discharged in
1995.
Shirley E. Simmons (64) Vice Chairman of the Director of the Company since 1997. Vice Chairman of
Board of Directors the Board of Directors of the Bank since 1995 and a
Director of the Bank since 1991. Retired since 1991.
Various executive positions with Security Pacific
National Bank from 1958 to 1991, most recently as
Regional Vice President (1988 to 1991).
</TABLE>
6
<PAGE>
The following sets forth, as of March 31, 1999, certain information
concerning each of the Company's Class III directors:
<TABLE>
<CAPTION>
Position with the
-----------------
Name and Age Company and the Bank Principal Occupation and Business Experience
------------ -------------------- --------------------------------------------
<C> <C> <S>
Richard J. Cross (69) Chairman of the Board Chairman of the Board of Directors of the Company
of Directors since 1997. Chairman of the Board of Directors of the
Bank since 1993. Vice Chairman of the Board of
Directors of the Bank from 1992 to 1993 and a Director
of the Bank since 1990. Managing Partner of Cross
Investment Company (an investment and consulting
company) since 1971 and Professor of Management and
Finance at Woodbury University since 1985.
Twenty-seven years' commercial banking experience,
including various executive positions with Lloyds Bank
from 1962 to 1981, most recently as Executive Vice
President.
William G. Dyess (73) Director Director of the Company since 1997. Director of the
Bank since 1968. An independent real estate appraiser
since 1955.
</TABLE>
The following sets forth, as of March 31, 1999, certain information
concerning each of the Company's and the Bank's executive officers, other than
Mr. Rippe.
<TABLE>
<CAPTION>
Position with the
-----------------
Name and Age Company and the Bank Principal Occupation and Business Experience
------------ -------------------- --------------------------------------------
<C> <C> <S>
Anthony L. Frey (45) Executive Vice President, Executive Vice President, Chief Financial Officer and
Chief Financial Officer and Secretary of the Company since December 1997.
Secretary Executive Vice President, Chief Financial Officer and
Secretary of the Bank since January 1997. Senior Vice
President, Chief Financial Officer and Secretary of
the Bank from May 1996 to January 1997. Various
executive positions with Imperial Thrift and Loan
Association from August 1994 to May 1996, most
recently as Senior Vice President and Chief Financial
Officer. Senior Vice President and Controller of Home
Fed Bank from 1984 to 1994. Various positions with
KPMG LLP from 1979 to 1984. Mr. Frey is a Certified
Public Accountant.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Name and Age Position with the Bank Principal Occupation and Business Experience
------------ -------------------- --------------------------------------------
<C> <C> <S>
Ellen B. Geiger (46) Executive Vice President Executive Vice President and Branch Administrator of
and Branch Administrator the Bank since January 1997. Senior Vice President
and Branch Administrator of the Bank from July 1995 to
January 1997. Founder and President of
Geiger/Kochakji & Associates (banking industry
consultants) from 1991 to 1995. Various executive
positions with Security Pacific National Bank from
1979 to 1991, most recently as Senior Vice President
and Branch Administrator.
Garry P. Warren (48) Executive Vice President Executive Vice President and Chief Lending Officer of
and Chief Lending Officer the Bank since January 1997. Senior Vice President
and Chief Lending Officer of the Bank from May 1994 to
January 1997. Southern California Regional Manager of
Imperial Thrift and Loan Association from 1993 to
1994. Vice President of Pacific First Mortgage from
1990 to 1992. Senior Director of Grubb and Ellis,
Mortgage Banking Division, from 1987 to 1990. Senior
Vice President of American Savings from 1983 to 1987.
Vice President and Manager for Citicorp from 1981 to
1983.
</TABLE>
Committees of the Board of Directors
The Board of Directors has established, in addition to certain other
committees, an Audit Committee and a Personnel/Compensation Committee.
The Audit Committee, currently comprised of Ms. Simmons (chairman of the
Committee) and the five other directors who are not employees of the Company,
reviews the examinations of the Bank conducted by the Office of Thrift
Supervision ("OTS"), meets with the Company's independent auditors to receive
their evaluation of the condition of the Company and the adequacy of its
internal controls and procedures, reviews the annual audit of the Company,
considers the adequacy of auditing procedures, recommends appointment of the
Company's independent auditors and reviews proposed and actual fees for both
audit and non-audit accounting services. This committee also reviews
reimbursement of expenses incurred by officers. The Audit Committee held four
meetings in 1998.
The Personnel/Compensation Committee, currently comprised of Mr. Oxford
(chairman of the Committee), Mr. Cross, Mr. Piercy and Ms. Simmons, reviews
recommendations from management concerning the policies governing the setting of
salaries and bonuses of all employees, sets the compensation of the executive
officers, is responsible for the administration of the Option Plan, makes all
awards of options and shares pursuant to the Option Plan, and has responsibility
for designing and submitting to the Board policies and plans with respect to
long-term and incentive compensation programs. The Personnel/Compensation
Committee held three meetings in 1998.
Meetings of Directors
During 1998, the Board of Directors of the Bank held 13 meetings and the
Board of Directors of the Company held 13 meetings. Each director attended at
least 75% of the total number of meetings of the Board of Directors of the
Company and the Bank and the committees of which he or she was a member.
8
<PAGE>
Compensation of Directors
During 1998, each director of the Bank, other than directors who were also
employees of the Bank, was paid directors' fees of $2,000 per month and $175
for each committee meeting attended. Mr. Cross (Chairman of the Board) received
additional fees of $417 per month as compensation for that position. Ms.
Simmons (Chairman of the Audit Committee) received additional fees of $208 per
month as compensation for that position. Pursuant to this arrangement, the Bank
paid $226,552 in aggregate compensation to directors during 1998. Each director
of the Bank who has reached the age of 72 and has served as a director for at
least 18 years or was a director on August 19, 1985, or who becomes unable to
continue to serve as a director for reasons of ill health, may be designated a
"director emeritus" by the Board of Directors. Each director emeritus would be
entitled to continue to receive a monthly fee equal to the board fee he or she
received immediately prior to becoming a director emeritus and the continuation
of certain benefits. The Board of Directors has designated Ben Karmelich, who
retired as a director of the Bank in April 1998, a "director emeritus". Mr.
Karmelich does not presently receive a monthly fee. Directors of the Bank are
not currently paid any additional fees for serving as directors of the Company.
Each non-employee director is also eligible to participate in the Option
Plan. During 1998, each of the non-employee directors was granted non-qualified
options to acquire 4,000 shares of Common Stock at an exercise price of $43.00
per share.
Prior to July 1992, each of Messrs. DeWitt, Dyess and Piercy had retirement
agreements with the Bank that provided for certain retirement benefits in the
event of the retirement or death of such director, payable in annual
installments over 15 years. Such benefits would have been not less than $6,400
annually in the event of retirement or death occurring after June 19, 1992 and
not more than $9,600 annually in the event of retirement or death occurring
after June 19, 1996. Effective July 1992, each of such directors elected to
receive, commencing in 1992 and in lieu of such retirement benefits, 15 annual
payments of $6,400.
THE BOARD OF DIRECTORS HAS APPROVED THE ELECTION OF THE NOMINEES NAMED ABOVE AND
RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF THEM AS A DIRECTOR OF THE COMPANY.
EXECUTIVE COMPENSATION
Set forth below is certain information concerning the compensation of (i)
Stephen N. Rippe, Chief Executive Officer of the Company and the Bank, (ii)
Anthony L. Frey, Executive Vice President, Chief Financial Officer and Secretary
of the Company and the Bank, (iii) Garry P. Warren, Executive Vice President and
Chief Lending Officer of the Bank, and (iv) Ellen B. Geiger, Executive Vice
President and Branch Administrator of the Bank (collectively, the "named
executive officers"), for each of the last three fiscal years or such lesser
period that such individual has been employed by the Bank. No other executive
officer of the Bank received salary and bonus at a rate in excess of $100,000
during 1998. Executive officers of the Company currently receive no
compensation in their capacities as executive officers of the Company but are
compensated as employees of the Bank.
9
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Position Annual Compensation Long-Term Compensation
- --------------------------------- -------------------------------------- --------------------------------
Performance
Stock All Other
Year Salary Bonus Awards($)(2) Options(#)(1) Compensation
------ --------- ----------- ------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Stephen N. Rippe 1998 $235,050 $89,730 $ - - $10,136 (4)
President and 1997 215,185 66,500 106,250 45,000 9,423 (4)
Chief Executive Officer 1996 181,539 50,000 - 10,000 7,748 (4)
Anthony L. Frey 1998 $142,680 $48,155 - - $12,080 (5)
Executive Vice President, 1997 137,531 26,000 58,437 13,000 7,726 (5)
Chief Financial Officer 1996 88,805 (3) - - 20,000 2,657 (5)
and Secretary
Garry P. Warren 1998 $152,988 $90,683 $ - - $ 8,304 (6)
Executive Vice President, 1997 146,243 39,750 90,313 17,000 8,587 (6)
and Chief Lending Officer 1996 146,019 35,000 - 6,000 5,838 (6)
Ellen B. Geiger 1998 $118,925 $40,069 $ - - $ 5,290 (7)
Executive Vice President, 1997 113,839 31,500 63,750 11,000 7,311 (7)
and Branch Administrator 1996 108,308 - - 12,000 2,581 (7)
</TABLE>
_________________________
(1) Consists of the number of shares of stock underlying stock options granted
during the periods indicated.
(2) Pursuant to the Option Plan, Messrs. Rippe, Frey and Warren and Ms. Geiger
were granted 5,000, 2,750, 4,250 and 3,000 shares, respectively, in fiscal
1997 which had a market value at December 31, 1998 of $157,500, $86,625,
$133,875 and $94,500. The dollar amounts set forth in the table represent
the market value of the shares on the date of issuance.
(3) Mr. Frey was first employed by the Company in May 1996. Mr. Frey's annual
salary at December 31, 1996 was $130,000 per year.
(4) Consists of $5,000, $4,750, and $4,500 contributions to the Bank's 401(k)
Plan, $1,268, $1,318, and $1,369 in imputed life insurance payments and
$3,868, $3,355, and $1,879 for personal use of a Bank automobile in 1998,
1997, and 1996, respectively.
(5) Consists of $5,000, $1,911, and $0 contributions to the Bank's 401(k) Plan,
$717, $768, and $298 in imputed life insurance payments and $6,363, $5,047,
and $2,359 for personal use of a bank automobile in 1998, 1997, and 1996,
respectively.
(6) Consists of $5,000, $4,750, and $3,487 contributions to the Bank's 401(k)
Plan, $953, $1,146, and $999 in imputed life insurance payments and $2,351,
$2,691, and $1,352 for personal use of a Bank automobile in 1998, 1997, and
1996, respectively.
(7) Consists of $3,098, $4,596 and $242 contributions to the Bank's 401(k)
Plan, $930, $796, and $746 in imputed life insurance payments and $1,262,
$1,919, and $1,593 for personal use of a Bank automobile in 1998, 1997, and
1996, respectively.
Option Grants
During 1998, no Options were granted to the named executive officers.
10
<PAGE>
Option Exercises and Holdings
The following table provides information with respect to the named
executives concerning their exercise of options during 1998 and their year-end
option holdings.
<TABLE>
<CAPTION>
Number of
Unexercised
Options at Value of Unexercised
Year-End In-the-Money Options
Shares at Year-End (1)
Acquired on Value Exercisable/
Name Exercised Realized Unexercisable Exercisable/Unexercisable
- --------------------------- -------------- -------------- ----------------- -------------------------
<S> <C> <C> <C> <C>
Stephen N. Rippe 0 0 46,250/28,750 $647,300/ $ 325,200
Anthony L. Frey 0 0 19,000/14,000 255,700/ 180,100
Garry P. Warren 10,535 $201,172 3,665/11,500 37,600/ 132,500
Ellen B. Geiger 0 0 20,500/ 8,500 317,800/ 101,800
</TABLE>
_______________________
(1) Value of an exercise "in-the money" options is the difference between the
fair market value of the securities underlying the options and the exercise
price of the options as of December 31, 1998. The closing sale price of
the Common Stock on December 31, 1998 was $31.50 per share.
Executive Officer Change of Control Agreements
In 1995, the Bank entered into a Change of Control Employment Agreement
with each of Messrs. Rippe and Warren, Ms. Geiger, and three other officers of
the Bank, and in May 1996, the Bank entered into a Change of Control Agreement
with Mr. Frey. Such agreements provide that if a change of control of the Bank
(defined to include a merger, consolidation or asset transfer where the Bank is
not the surviving entity and the acquisition by a person or group of more than
50% of the outstanding shares of the Bank) occurs during the employment of the
individual and the individual's position is subsequently eliminated or
materially altered or the individual resigns his or her employment for good
reason (defined to include a reduction in salary levels or benefits, material
diminution in title or responsibilities or a job relocation of more than 50
miles), the individual will be entitled to a lump sum payment equal to his or
her salary for a specified period. In the case of Mr. Rippe, such period is two
and one-half years and in the case of Mr. Warren, Mr. Frey and Ms. Geiger, such
period is one and one-half years.
Acceleration Events Under the Option Plan
In the event the Company enters into an agreement to dispose of all or
substantially all of its assets or if the Company's stockholders dispose or
agree to become obligated to dispose of fifty percent or more of the outstanding
shares of Common Stock ("Acceleration Event"), then each outstanding option will
be exercisable during the thirty days immediately preceding such Acceleration
Event. However, no Acceleration Event will be deemed to occur in the event that
(i) the terms of the agreements pursuant to which such transaction is occurring
requires as a condition to the consummation of the transaction that each option
will be either assumed by a successor corporation or be replaced with a
comparable option to purchase shares of stock of the successor corporation, and
(ii) the transaction is approved by a majority of the directors who have been in
office for more than twelve months prior to the scheduled consummation of the
transaction. Upon consummation of the Acceleration Event, all outstanding
options, whether or not so accelerated, will terminate and cease to be
exercisable, unless assumed by the successor corporation.
11
<PAGE>
PERSONNEL/COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The following Report of the Personnel/Compensation Committee of the Board
of Directors on Executive Compensation shall not be deemed filed under the
Securities Act of 1933, as amended (the "Securities Act"), or under the Exchange
Act of 1934, as amended (the "Exchange Act").
The Personnel/Compensation Committee of the Board of Directors (the
"Committee") is composed of four directors who are not also employees of the
Company. The Committee establishes the overall compensation and employee
benefits of the Company and the specific compensation of the Company's and the
Bank's executive officers. It is a goal of the Committee to implement executive
officer compensation programs that further the business objectives of the
Company and that attract, retain and motivate the best-qualified executive
officers.
The Company's executive compensation policies and specific executive
compensation programs are adopted and administered in accordance with the
principal goal of maximizing return on stockholders' equity. The Committee
believes that this performance goal and the long-term interests of the Company's
stockholders generally are best achieved by attracting and retaining management
of high quality, and that such management will require commensurate
compensation. The Committee believes that the Company's executive officer
compensation policies are consistent with this policy.
None of the Company's or the Bank's executive officers has a written
employment agreement or other formal assurance of continued employment by the
Company. (See "Executive Compensation -- Executive Officer Change of Control
Agreements.") As a result, each of the executive officer's compensation is
determined each year by the Committee, based on factors that the Committee deems
appropriate. As indicated below, the overall financial performance of the
Company is a factor considered by the Committee in setting compensation levels
for executive officers.
Annual compensation levels for each executive officer, including the Chief
Executive Officer, are determined by the Committee based primarily on its review
and analysis of the following factors: (i) the responsibilities of the
position, (ii) the performance of the individual and his or her general
experience and qualifications, (iii) the overall financial performance
(including return on equity, earnings per share, problem asset levels, levels of
general and administrative expense and loan and deposit production) for the
Company for the previous year and the contributions to such performance measures
by the individual or his or her department, (iv) the officer's total
compensation during the previous year, (v) a comparison to compensation levels
paid by comparable financial institutions, and (vi) the officer's length of
service with the Company. In addition, the Committee receives the
recommendations of the Chief Executive Officer with respect to the compensation
of other executive officers, which the Committee reviews in light of the above
factors. The Committee believes, based on a review of relevant compensation
surveys, that the base compensation of the executive officers is competitive
with financial institutions of similar size and with comparable operating
results.
Bonus compensation for 1998 was based in large part on return on equity for
the Company and the following performance criteria, (i) net interest income,
(ii) noninterest income, (iii) loan delinquency levels, and (iv) cost
management. The Committee established a target return on equity, for payment of
the full bonus related to this factor, of 16%. Assuming achievement of the
target return, the President and Chief Executive Officer of the Company and the
Bank would receive 60% of the bonus award based on achieving the target return
on equity and 40% of the bonus award based on other company results as measured
against specific performance objectives and standards established at the
beginning of the year. Other Named Executives had similar performance
objectives except their target percentages related to the performance criteria
varied depending on their areas of responsibility. The actual return on average
equity for the Company for the year was 19.7%. All bonuses paid to executive
officers, including the Named Executives, for service during 1998 were approved
by the Compensation Committee of the Board of Directors.
12
<PAGE>
Mr. Rippe, President and Chief Executive Officer of the Company and the
Bank, was eligible to receive a bonus of up to 48% of his base salary for
services during 1998 based on specific performance achievements discussed above.
In 1999, Mr. Rippe received an annual bonus related to 1998 performance of
$111,338, or 47.6% of his 1998 base salary.
While the Committee establishes salary and bonus levels based on the above
described criteria, the Committee also believes that encouraging equity
ownership by executive officers further aligns the interests of the officers
with the performance objectives of the Company's stockholders and enhances the
Company's ability to attract and retain highly qualified personnel on a basis
competitive with industry practices. Stock options granted by the Bank pursuant
to the Option Plan help achieve this objective, and provide additional
compensation to the officers to the extent that the price of the Common Stock
increases over fair market value on the date of grant. Stock options have been
granted to each of the named executive officers and to other officers and
employees of the Bank. Through the Option Plan, there will be an additional
direct relationship between the Company's performance and benefits to executive
officer Option Plan participants.
Significant actions that were taken in 1998 included (i) formalizing bonus
plans for executive officers; (ii) conducting review of the compensation
practices of a peer group of companies; and (iii) obtaining stockholder approval
to amend the Company's Stock Option and Performance Share Award Plan to provide
additional flexibility to the Board of Directors in the administration of the
Plan and to provide for an additional 100,000 shares to be made available for
future grants. In 1999, the Committee expects to refine the criteria related to
cash bonus plans for executive officers.
Richard O. Oxford, Chairman
Richard J. Cross
George Piercy
Shirley Simmons
Compensation Committee Interlocks and Insider Participation
None of the members of the Personnel/Compensation Committee during 1998 has
ever been an officer or employee of the Company or any of its subsidiaries.
13
<PAGE>
PERFORMANCE GRAPH
Set forth below is a graph that compares the yearly percentage change in
the cumulative total stockholder return on the Company's Common Stock (or the
common stock of the Bank, prior to the Reorganization) with (i) the cumulative
total return of the issuers included in the Nasdaq Composite Index as reported
to the Company by SNL Securities LC ("SNL Securities"), (ii) the cumulative
total return of the issuers included in the SNL Securities $500M-$1B Thrift
Composite Index as reported to the Company by SNL Securities, and (iii) a
published index based on the cumulative total return for a group of 25
California-based savings and loan institutions selected by Media General
Financial Services ("Media General"), as reported to the Company by Media
General (the "Peer Group" index), in each case assuming the reinvestment of
dividends.
During 1998, the Company changed its "Peer Group" index based on the
cumulative total return of 25 California-based savings and loans to the SNL
Securities $500M-$1B Thrift Composite Index. The Company believes this index
more accurately compares stockholder returns to companies its size; whereas, the
California "Peer Group" includes many companies with over $1 billion in assets.
The 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 or under the Exchange Act, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
Prior to the commencement of trading in the Common Stock on the Nasdaq
Small-Cap Market on October 16, 1995 (and the subsequent listing of the stock on
the Nasdaq National Market in December 1995), there was no established public
trading market for the Common Stock and only infrequent trades executed by a
securities broker. Information for periods prior to the listing of the Common
Stock on the Nasdaq Small-Cap Market are based on the average bid and ask prices
for the Common Stock as reported to the Company by J. Alexander Securities, Los
Angeles, California, as of the date of the last transaction of which such firm
is aware during each such year. Thus, the prices used by the Company in
determining the five-year cumulative return for the Common Stock prior to the
listing of the Common Stock with Nasdaq may not represent actual transactions.
14
<PAGE>
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
HIGHLAND BANCORP, INC.
NASDAQ MARKET INDEX, SNL $500M-$1B THRIFT INDEX AND PEER GROUP INDEX
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Period Ending
--------------------------------------------------------------------
Index 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Highland Bancorp, Inc. 100.00 75.00 96.88 106.25 204.70 198.61
NASDAQ - Total US 100.00 97.75 138.26 170.01 208.58 293.21
SNL $500M-$1B Thrift Index 100.00 105.09 157.41 195.18 329.70 302.47
Prior Highland Peer Group 100.00 104.99 136.18 169.23 207.00 171.27
</TABLE>
Note: Highland Bancorp's values for years 1993-1997 were provided by the
company. Prior Highland Peer Group values for years 1993-1997 were provided by
Media General.
ASSUMES $100 INVESTED ON JAN. 1, 1994
ASSUMES DIVIDEND REINVESTED FISCAL YEAR ENDED DEC. 31, 1998
15
<PAGE>
PROPOSAL 2:
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee has selected KPMG LLP as the independent auditors to
audit the consolidated financial statements of the Company and its subsidiaries
for 1999. A member of such firm is expected to be present at the Meeting, will
have an opportunity to make a statement if so desired, and will be available to
respond to appropriate questions.
If the stockholders of the Company do not ratify the selection of KPMG LLP,
or if such firm should decline to act or otherwise become incapable of acting,
or if its employment is discontinued, the Board of Directors or the Audit
Committee will appoint other independent auditors.
Ratification of the selection of KPMG LLP as the Company's independent
auditors requires the affirmative vote of a majority of the holders of the
Common Stock present in person or represented by proxy and entitled to vote at
the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
SELECTION OF KPMG LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
16
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our executive
officers and directors, and persons who own more than ten percent of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC") and the Nasdaq
national Market. The SEC requires executive officers, directors and greater
than ten percent shareholders to furnish to us all Section 16(a) forms they
file.
Based solely on our review of these reports and of certifications furnished
to us, we believe that during the fiscal year ended December 31, 1998 all
executive officers, directors and greater than ten percent beneficial owners
complied with all applicable Section 16(a) filing requirements.
STOCKHOLDER PROPOSALS
Stockholder proposals to be presented at the 2000 Annual Meeting of
Stockholders must be received at the Company's executive offices at 601 South
Glenoaks Blvd., Suite 200, Burbank, California 91502, addressed to the attention
of the Secretary, by December 8, 1999 in order to be considered for inclusion in
the Proxy Statement and form of proxy relating to such meeting.
In addition, in the event a stockholder proposal is not submitted to the
Company prior to February 21, 2000, the proxy to be solicited by the Board of
Directors for the 2000 annual meeting of stockholders will confer authority on
the holders of the proxy to vote the shares in accordance with their best
judgment and discretion, if the proposal is presented at the 2000 annual meeting
of stockholders, without any discussion of the proposal and the proxy statement
for such meeting.
ANNUAL REPORT
The Annual Report of the Company for the year ended December 31, 1998 is
being mailed to the stockholders of the Company with this Proxy Statement. The
Annual Report contains consolidated financial statements of the Company and its
subsidiaries, financial statement schedules and management's discussion and
analysis of such financial statements, and the report thereon of KPMG LLP, the
Company's independent auditors.
STOCKHOLDERS MAY OBTAIN WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K, INCLUDING FINANCIAL STATEMENTS REQUIRED TO BE FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO THE EXCHANGE ACT FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1998 BY WRITING TO THE COMPANY AT 601 SOUTH
GLENOAKS BOULEVARD, BURBANK, CALIFORNIA 91502, ATTENTION: ANTHONY L. FREY.
OTHER BUSINESS
Management knows of no business, which will be presented for consideration
at the Meeting other than as stated in the Notice of Meeting. If, however,
other matters are properly brought before the Meeting, it is the intention of
the Proxy Holders to vote the shares represented by the proxies on such matters
in accordance with the recommendations of the Board of Directors and authority
to do so is included in the proxy.
By Order of the Board of Directors,
/s/ Anthony L. Frey
Anthony L. Frey
Executive Vice President, Chief Financial Officer
and Corporate Secretary
Dated: April 6, 1999
17
<PAGE>
REVOCABLE PROXY
HIGHLAND BANCORP, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholder of Highland Bancorp, Inc. (the
"Company") hereby appoints Richard J. Cross and Stephen N. Rippe
and each of them, with full power of substitution, proxies of the
undersigned with authorization to represent and vote all shares of
Common Stock, par value $0.01 per share, of the Company held of
record by the undersigned, as directed below and in their
discretion on all other matters which may properly come before the
Annual Meeting of Stockholders to be held on April 28, 1999, and at
any adjournment or adjournments thereof, as if the undersigned were
present and voting at the Meeting.
The shares represented by this proxy, when duly executed and
returned, will be voted as directed herein by the undersigned.
Where no direction is given, such shares will be voted "FOR" the
election of all nominees for director and "FOR" ratification of
KPMG LLP as independent auditors.
This proxy is continued on the reverse side. Please sign on the
reverse side and return promptly.
1. Election of Directors: To elect the following two directors to serve until
the election of Directors in 2002 and until their respective successors are
elected and have qualified: Stephen N. Rippe and George Piercy.
[_] FOR all [_] WITHHOLD AUTHORITY [_] WITHHOLD AUTHORITY to
nominees to vote for vote for the following
listed above. nominees above. nominee only (write the name
of the nominee below).
2. Approval of Independent Auditors: To ratify the election of KPMG LLP as the
Company's independent auditors for 1999.
3. Other Business: To transact such other business as may properly come before
the Meeting and at any and all adjournments thereof. The Board of Directors
at present knows of no other business to be presented by or on behalf of the
Company or the Board of Directors at the Meeting.
[_] The proxies are authorized to
vote as recommended by the
Board of Directors upon such
other business as may properly
come before the Meeting. The
undersigned hereby
acknowledges receipt of the
accompanying Notice of Meeting
and Proxy Statement.
Date: __________________, 1999
Signed: ______________________
______________________________
(Please sign your name (or names) as it appears on the label affixed hereon.
When signing in a fiduciary or representative capacity or as a corporate
officer, please indicate and state such capacity, title or office.)
We do [_] do not [_] plan to attend the Meeting.
