SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. ____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Provident Financial Group, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined)
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
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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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE>
PROVIDENT FINANCIAL GROUP, INC.
One East Fourth Street
Cincinnati, Ohio 45202
Notice of Annual Meeting
and Proxy Statement
Dear Shareholder:
We invite you to attend our annual meeting of shareholders on May 20, 1999 in
Cincinnati, Ohio. At the meeting, you will hear a report on our operations and
have a chance to meet your directors and executive officers.
This booklet includes the formal notice of the meeting and the proxy statement.
The proxy statement tells you more about the agenda and procedures for the
meeting. It also describes how the Board operates and gives personal information
about our director candidates.
Even if you only own a few shares, we want your shares to be represented at the
meeting. I urge you to complete, sign, date and promptly return your proxy card
in the enclosed envelope.
Sincerely yours,
Robert L. Hoverson
President and Chief Executive Officer
April 16, 1999
<PAGE>
NOTICE OF ANNUAL MEETING
OF
SHAREHOLDERS OF PROVIDENT FINANCIAL GROUP, INC.
Time: 9:00 a.m., Eastern Time
Date: May 20, 1999
Place: Provident Tower
Third Floor
One East Fourth Street
Cincinnati, Ohio 45202
Purpose: Elect Directors
Conduct other business if properly raised
Only shareholders of record on March 31, 1999 may vote at the meeting.
The approximate mailing date of this Proxy Statement and accompanying Proxy Card
is April 16, 1999.
Your vote is important. Please complete, sign, date, and promptly
return your proxy card in the enclosed envelope.
Mark E. Magee
Secretary
April 16, 1999
<PAGE>
GENERAL INFORMATION
Who may vote
Shareholders of Provident, as recorded in our stock register on March 31, 1999,
may vote at the meeting. On that date, Provident had 42,582,179 shares of Common
Stock outstanding.
How to vote
You may vote in person at the meeting or by proxy. We recommend you vote by
proxy even if you plan to attend the meeting. You can always change your vote at
the meeting.
How proxies work
Provident's Board of Directors is asking for your proxy. Giving us your proxy
means you authorize us to vote your shares at the meeting in the manner you
direct. You may vote for all, some, or none of our director candidates.
If you sign and return the enclosed proxy card but do not specify how to vote,
we will vote your shares in favor of our director candidates.
You may receive more than one proxy or voting card depending on how you hold
your shares. Shares registered in your name are covered by one card. And if you
hold shares through someone else, such as a stockbroker, you may get material
from them asking how you want to vote.
Revoking a proxy
You may revoke your proxy before it is voted by submitting a new proxy with a
later date, by voting in person at the meeting, or by notifying Provident's
Secretary in writing at the address under "Questions?" on page 11.
Quorum
In order to carry on the business of the meeting, we must have a quorum. This
means at least 35 percent of the outstanding shares eligible to vote must be
represented at the meeting, either by proxy or in person.
Votes needed
The seven director candidates receiving the most votes will be elected to fill
the seats on the Board. Approval of any other proposals requires the favorable
vote of a majority of the votes cast. Only votes for or against a proposal
count. Abstentions and broker non-votes count for quorum purposes but not for
voting purposes. Broker non-votes occur when a broker returns a proxy card but
does not have authority to vote on a particular proposal.
Other matters
Any other matters considered at the meeting, including adjournment, will require
the affirmative vote of a majority of shares voting.
Voting by proxy
All proxies properly signed will, unless a different choice is indicated, be
voted "FOR" the election of all nominees for Directors proposed by the Board of
Directors.
If any other matters come before the meeting or any adjournment, each proxy will
be voted in the discretion of the individuals named as proxies on the card.
<PAGE>
ELECTION OF DIRECTORS
(Item 1 on the Proxy Card)
The Board of Directors oversees the management of the Company on your behalf.
The Board reviews Provident's long-term strategic plans and exercises direct
decision-making authority in key areas such as choosing the Chief Executive
Officer, setting the scope of his authority to manage the company's business day
to day, and evaluating management's performance.
The Board is nominating for reelection all of the following seven current
directors: Jack M. Cook, Thomas D. Grote, Jr., Robert L. Hoverson, Philip R.
Myers, Joseph A. Pedoto, Sidney A. Peerless, and Joseph A. Steger.
Proxies solicited by the Board will be voted for the election of these nominees.
All directors elected at the meeting will be elected to hold office until the
next annual meeting. In voting to elect directors, shareholders are entitled to
cumulate their votes and to give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of shares held by the
shareholder, or to distribute their votes on the same principle among as many
candidates as the shareholder sees fit. In order to invoke cumulative voting,
notice of cumulative voting must be given in writing by a shareholder to the
Secretary of Provident not less than 48 hours prior to the meeting. The proxies
solicited include discretionary authority to cumulate their votes.
Five of our seven nominees are not Provident employees. Only non-employee
directors serve on Provident's Audit and Compensation committees. All Provident
directors are elected for one-year terms. Personal information on each of our
nominees is given below.
The Board met 11 times last year. The Executive Committee is authorized, under
Ohio law and Provident's Code of Regulations, to perform substantially all of
the functions of the Board of Directors. The Executive Committee took written
action on 2 occasions during 1998.
If a director nominee becomes unavailable before the election, your proxy card
authorizes us to vote for a replacement nominee if the Board names one.
Nominees receiving the highest number of votes cast for the positions to be
filled will be elected.
NOMINEES
The Board recommends you vote FOR each of the following candidates:
Jack M. Cook Since January of 1995, Mr. Cook has served as President
Age 54 and Chief Executive Officer of Health Alliance of
Director since 1992 Greater Cincinnati, which includes Christ, University,
Jewish and St. Luke Hospitals. Prior to that, he served
as President and Chief Executive Officer of Christ
Hospital, and Director and Chief Executive Officer of
University Hospital. Mr. Cook serves on the Audit
Committee.
Thomas D. Grote, Jr. Mr. Grote has served as President of Grote Enterprises,
Age 44 LLC, a management consulting firm providing consulting
Director since 1991 services to the construction and real estate
industries, since January, 1998. Prior to that, Mr.
Grote served as President of the Thomas J. Dyer Co., a
mechanical contractor. Mr. Grote serves on the
Compensation Committee.
Robert L. Hoverson Mr. Hoverson has served as President and Chief
Age 57 Executive Officer of Provident and The Provident Bank
Director since 1998 since May, 1998. Mr. Hoverson served as Senior Vice
President of Provident from August, 1992 to May, 1998,
and served as Executive Vice President of The Provident
Bank from September, 1985 to May, 1998. Mr. Hoverson
serves as Chairman of the Executive Committee.
Philip R. Myers Mr. Myers has served as an Executive Vice President of
Age 56 Provident since November, 1998 and as Senior Executive
Director since 1982 Vice President of The Provident Bank since September,
1984. Mr. Myers served as Senior Vice President of
Provident from May, 1992 to November, 1998. Mr. Myers
serves on the Executive Committee.
<PAGE>
Joseph A. Pedoto Mr. Pedoto has served as President of JLM Financial,
Age 57 Inc., a financial consulting firm, since 1990. Mr.
Director since 1980 Pedoto serves on the Executive and Compensation
Committees. Mr. Pedoto's service as a Director of
Provident was interrupted from September, 1991 to
August, 1993.
Sidney A. Peerless Dr. Peerless is a practicing medical doctor
Age 77 specializing in diseases of the ear, nose and throat.
Director since 1980 Dr. Peerless is a Vice President and shareholder of
E.N.T. Associates of Cincinnati, Inc., for which he
practices medicine. Dr. Peerless is Chairman of the
Audit and Compensation Committees.
Joseph A. Steger Dr. Steger has served as the President of the
Age 62 University of Cincinnati since 1984. He also serves as
Director since 1992 a Director of Milacron, Inc. Dr. Steger serves on the
Audit Committee.
DIRECTOR COMPENSATION
Non-employee directors receive $15,000 per year for serving as a director and as
members of committees of the Board. They also receive $1,000 for each director
or committee meeting attended, except if a committee meeting occurs by telephone
or on the same day as a directors' meeting, in which case, the committee meeting
fee is $600. Directors who are employees of Provident are not separately
compensated for serving as directors. Non-employee directors may postpone the
receipt of from 5% to 100% of their Board compensation. Amounts deferred may be
invested in a Provident Common Stock Account, in which case the Account is
credited annually with a percentage of Provident's pre-tax earnings per share
for each share of Provident Common Stock in the Account, with the percentage to
be credited depending upon Provident's return on equity.
Each non-employee director is also granted a non-qualified option to purchase
1,000 shares of Common Stock at the time of election or re-election to the Board
of Directors, with the exercise price being the average of the closing bid and
ask prices on the last trading date immediately prior to the date of grant.
Non-employee directors with ten years of service as a director receive annual
retirement benefits equal to the fees paid during the 12 months immediately
preceding the retirement date, with payments to commence at retirement or 65th
birthday, whichever is later. Retirement benefits will be paid for a period of
years equal to the number of the director's years of service, divided by three.
BOARD COMMITTEES
The Board appoints committees to help carry out its duties. In particular, Board
committees work on key issues in greater detail than would be possible at full
Board meetings. Each committee reviews the results of its meetings with the full
Board. The Board of Directors does not have a nominating committee.
The Audit Committee is responsible for reviewing with the independent auditors
the plans and results of the audit engagement of Provident and reviewing the
scope and results of the procedures for internal auditing. The Committee is
authorized generally to superintend the administration of the Internal Audit
Department, which has the responsibility to perform internal audit functions for
Provident and its subsidiaries
Committee members: Messrs. Cook, Peerless (Chairman) and Steger.
Meetings last year: 7
The Compensation Committee is responsible for establishing compensation for
management and administering the Company's stock option plans, deferred
compensation plans and supplemental executive retirement plan.
Committee members: Messrs. Grote, Pedoto and Peerless (Chairman).
Meetings last year: 5
Actions taken in writing last year: 9
<PAGE>
PRINCIPAL SHAREHOLDERS
The following persons are the only shareholders known by the Company to own
beneficially 5% or more of its outstanding Common Stock as of March 31, 1999:
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class (a)
- --------------------------------- -------------------- -----------------------
American Financial Group, Inc. 6,428,874 (b) 14.8
Carl H. Lindner 1,246,571 (c) (d) 2.9
Carl H. Lindner III 2,584,769 (c) (e) 6.1
S. Craig Lindner 2,908,136 (c) (f) 6.8
Keith E. Lindner 2,900,132 (c) (g) 6.8
One East Fourth Street
Cincinnati, Ohio 45202
- --------------------------------------------------------------------------------
Robert D. Lindner 2,354,330 (h) 5.5
3955 Montgomery Road
Cincinnati, Ohio 45212
- --------------------------------------------------------------------------------
Paul V. Muething 2,705,553 (i) 6.4
One East Fourth Street
Cincinnati, Ohio 45202
- --------------------------------------------------------------------------------
(a) The percentages of outstanding shares of Common Stock beneficially owned
(within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934) by Carl H. Lindner III, S. Craig Lindner and Keith E. Lindner are
5.3%, 5.9% and 8.5%, respectively, after attributing the shares held in
various trusts for the benefit of the minor children of Carl H. Lindner III
and S. Craig Lindner (for which Keith E. Lindner acts as trustee with
voting and dispositive power) to Keith E. Lindner.
(b) Includes 5,440,674 shares held by subsidiaries of American Financial Group,
Inc. ("AFG") and 988,200 shares issuable upon conversion of Provident's
Series D Convertible Preferred stock held by an AFG subsidiary. Carl H.
Lindner, Carl H. Lindner III, S. Craig Lindner, Keith E. Lindner and trusts
for their benefit (collectively the "Lindner Family"), are the beneficial
owners of approximately 44% of AFG's common stock, and share with AFG
voting and dispositive power with respect to the shares of Provident Common
Stock beneficially owned by AFG. The Lindner Family and AFG may be deemed
to be controlling persons of Provident.
(c) Excludes 6,428,874 shares of Common Stock beneficially owned by AFG.
(d) Includes 1,014,164 shares held by his spouse and 151,007 shares held by a
foundation over which he has voting and dispositive power.
(e) Includes 5,135 shares held by his spouse individually and as trustee.
Includes 308,504 shares which are held in various trusts for the benefit of
his minor children for which Keith E. Lindner acts as trustee with voting
and dispositive power.
(f) Includes 5,135 shares held by his spouse individually and as trustee,
339,820 shares held by his spouse as custodian for their minor children and
56,726 shares held by a foundation over which he has voting and dispositive
power. Includes 389,820 shares which are held in various trusts for the
benefit of his minor children for which Keith E. Lindner acts as trustee
with voting and dispositive power.
<PAGE>
(g) Includes 169,311 shares held by his spouse, 6,818 shares he holds as
custodian for his minor children and 340,784 shares held in trusts for the
benefit of his minor children, over which he or his spouse have shared
voting and dispositive power. This number excludes 698,324 shares
(described in footnotes (e) and (f) above), which are held in trusts for
the benefit of the minor children of his brothers, Carl H. Lindner III and
S. Craig Lindner over which Keith E. Lindner has voting and dispositive
power but no financial interest.
(h) Includes 366,585 shares held by his spouse and 14,032 shares held by a
foundation over which he has voting and dispositive power.
(i) Includes 2,705,328 shares which are held in a trust for the benefit of the
family of Carl H. Lindner over which Mr. Muething has sole voting and
dispositive power but no pecuniary interest.
DIRECTORS AND EXECUTIVE OFFICERS
This table lists the executive officers and directors of Provident and shows how
much common stock each owned on March 31, 1999. Except as described in the
footnotes to the table, each person has sole investment and voting power over
the shares shown.
Common
Stock
Beneficially
Owned
Name and Age Position Amount1 Percentage2
- --------------------- -------------------------- ------------ -----------
Robert L. Hoverson President, Chief Executive 412,635 *
57 Officer and Director
Philip R. Myers3 Executive Vice President 714,461 1.7%
56 and Director
Christopher J. Carey4 Executive Vice President 67 *
44 and Chief Financial Officer
Mark E. Magee5 Vice President, Secretary 125,877 *
51 and General Counsel
Jack M. Cook Director 16,062 *
54
Thomas D. Grote, Jr. Director 19,010 *
44
Joseph A. Pedoto6 Director 1,232,132 2.9%
57
Sidney A. Peerless Director 53,554 *
77
Joseph A. Steger Director 16,519 *
62
<PAGE>
Former Executive Officers
Common
Stock
Beneficially
Owned
Name and Age Position Amount1 Percentage2
- --------------------- -------------------------- ------------ -----------
Allen L. Davis 7 260,553 *
57
John R. Farrenkopf 8 154,953 *
50
Jerry L. Grace 9 74,388 *
57
All Executive Officers and 3,080,211 7.1
Directors as a Group (12)
1 Including options to purchase common stock currently exercisable or
exercisable within 60 days from March 31, 1999 as follows: Mr. Hoverson,
266,925 shares; Mr. Myers, 168,700 shares; Mr. Magee, 68,405 shares; 14,375
shares each for Messrs. Cook, Grote, Peerless and Steger; Mr. Pedoto,
11,000 shares; Mr. Davis, 47,700 shares; Mr. Farrenkopf, 85,788 shares; and
Mr. Grace, 52,200 shares;. Includes shares held in Provident's 401(k) Plan,
Deferred Compensation Plan and Outside Director Deferred Compensation Plan,
over which such persons do not have voting power, collectively, as follows:
Mr. Hoverson, 62,257 shares; Mr. Myers, 59,301 shares; Mr. Carey, 59,301
shares; Mr. Magee, 19,176 shares; Mr. Grote, 543 shares; Mr. Pedoto, 1,178
shares, Dr. Steger, 676 shares; Mr. Davis, 168 shares; Mr. Farrenkopf,
28,093 shares; and Mr. Grace, 5,736 shares;
2 Ownership of less than 1% is indicated by an asterisk (*).
3 Includes 76,207 shares held by the Philip R. Myers Family Limited
Partnership, for which Mr. Myers and his spouse serve as general partners.
4 Mr. Carey joined Provident as Executive Vice President and Chief Financial
Officer on November 19, 1998. For the five year period prior to joining
Provident, Mr. Carey served as Senior Vice President and Controller of
Corestates Financial Corp. and Chief Financial Officer of Corestates Bank.
5 Mr. Magee has served as Vice President and General Counsel of Provident
since February, 1989, and Secretary since April, 1990. Mr. Magee has served
as Senior Vice President and General Counsel of The Provident Bank since
February, 1989, and Secretary since April, 1990.
6 Includes 1,181,250 shares held in Trust under which Mr. Pedoto serves as
co-trustee with shared voting and dispositive powers.
7 Mr. Davis resigned as President and Chief Executive Officer effective May
1, 1998 and resigned as Director effective September 17, 1998.
8 Mr. Farrenkopf did not serve as an Executive Officer or Chief Financial
Officer of Provident after November 19, 1998.
9 Mr. Grace resigned as Vice President and Treasurer of Provident effective
September 18, 1998.
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who own more than 10% of a registered
class of the Company's equity securities to file reports of ownership and
changes in ownership. Based on a review of the copies of such forms received by
it, the Company believes that during the last fiscal year, all of its executive
officers, directors and ten percent stockholders complied with the Section 16(a)
reporting requirements, with the exception of Messrs. Magee and Peerless who
each filed one late report covering one transaction.
SUMMARY COMPENSATION TABLE
Securities All Other
Name and Annual Compensation Underlying Compensation
Principal Position Year Salary ($) Bonus($) Options (#) ($)
- ------------------ ---- ---------- -------- ----------- -----------
Robert L. Hoverson 1998 542,467 500,000 82,500 270,911
President and Chief 1997 435,192 447,120 67,000 304,290
Executive Officer 1996 414,038 414,000 84,375 229,642
Allen L. Davis 1998 243,523 -0- 47,700 117,452
President and Chief 1997 624,454 675,000 100,000 604,370
Executive Officer 1996 593,685 600,000 225,000 480,879
until May 1, 1998
John R. Farrenkopf 1998 174,508 90,000 9,250 116,370
Vice President and 1997 161,539 89,424 27,500 146,364
Chief Financial 1996 150,962 82,600 22,500 115,341
Officer until
November 20, 1998
Jerry L. Grace 1998 154,446 -0- 14,700 53,358
Vice President and 1997 197,212 203,688 37,500 125,929
Treasurer until 1996 186,635 188,600 22,500 90,910
September 18, 1998
Mark E. Magee 1998 181,042 77,000 8,900 101,107
Vice President, 1997 168,039 74,520 22,500 119,592
Secretary and 1996 159,626 69,000 22,500 93,263
General Counsel
Philip R. Myers 1998 471,681 310,000 26,750 223,241
Executive Vice 1997 437,740 289,440 44,000 246,199
President 1996 416,586 268,000 45,000 213,920
1 For 1998, Messrs. Hoverson, Davis and Grace each received contributions of
$17,500, Mr. Farrenkopf received $17,954, Mr. Magee received $17,986 and
Mr. Myers received $20,024, pursuant to the Employee Stock Ownership Plan.
Employer contributions made pursuant to other benefit plans were as
follows: 401(k) Plan: Messrs. Hoverson, Davis and Grace, $2,500 each, Mr.
Farrenkopf, $2,409 and Mr. Magee, $2,403; the Employee Stock Purchase Plan:
Mr. Farrenkopf, $444 and Mr. Grace, $143; the Excess Benefit Plan: Mr.
Hoverson, $87,769, Mr. Davis, $82,249, Mr. Farrenkopf, $3,469, Mr. Grace,
$20,149, Mr. Magee, $2,755, and Mr. Myers, $54,928; the net premiums paid
on Provident's Split Dollar Life Insurance Plan: Mr. Hoverson, $31,098, Mr.
Farrenkopf, $1,534, Mr. Grace, $5,894, Mr. Magee, $5,463, and Mr. Myers,
$20,215; the Deferred Compensation Plan: Mr. Hoverson, $132,044, Mr. Davis,
$15,204, Mr. Farrenkopf, $90,559, Mr. Grace, $7,171, Mr. Magee, $72,501,
and Mr. Myers, $128,075. Mr. Grace received salary continuation and
separation benefits of $54,331 in connection with his retirement.
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% of Total Potential Realized Value
Number of Options at Assumed Annual
Securities Granted to Rates of Price Appreciation
Underlying Employees Exercise for Option Term ($)
Options in Fiscal Price Expiration ------------------------------------
Names Granted 1998 ($/Per Share) Date 0% 5% 10%
- --------------------- ---------- --------- ------------- ---------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert L. Hoverson 32,500 3.78 46.44 1/22/2008 -- 949,191 2,405,435
50,000 5.81 54.47 4/22/2008 -- 1,712,795 4,340,558
Allen L. Davis 46,700 5.43 46.44 1/22/2008 -- 1,363,914 3,456,426
1,000 .12 50.50 5/27/2008 -- 31,759 80,484
John R. Farrenkopf 1,850 .22 46.44 1/22/2008 -- 54,031 136,925
7,400 .86 44.12 1/22/2008 17,168 205,327 520,338
Jerry L. Grace 2,150 .25 46.44 1/22/2008 -- 62,793 159,129
12,550 1.46 44.12 1/22/2008 29,116 348,223 882,465
Mark E. Magee 1,780 .21 46.44 1/22/2008 -- 51,986 131,744
7,120 .83 44.12 1/22/2008 16,518 197,557 500,649
Philip R. Myers 26,750 3.11 46.44 1/22/2008 -- 781,257 1,979,858
</TABLE>
FISCAL 1998 OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at In-the-Money Options at
Acquired Value FY-End FY-End
Name on Exercise Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable ($)
- ---------------------- ----------- ------------ ------------------------- -----------------------------
<S> <C> <C> <C> <C>
Robert L. Hoverson 135,000 5,146,938 221,525/ 5,446,618/
197,975 1,116,847
Allen L. Davis 294,625 8,165,221 47,700/ -0-/
-0- -0-
John R. Farrenkopf 8,438 322,416 74,688/ 1,787,770/
49,250 361,195
Jerry L. Grace 159,750 5,879,750 52,200/ 51,500/
-0- -0-
Mark E. Magee 13,500 547,983 57,375/ 1,310,969/
44,900 361,195
Philip R. Myers 135,000 5,116,500 147,175/ 3,642,701/
95,700 620,039
</TABLE>
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Report of the Compensation Committee
The Compensation Committee of the Board of Directors establishes salaries,
bonuses and stock option awards for executive officers on an annual basis. The
Committee's policy is to encourage and motivate Provident's executive officers
to achieve both short-term and long-term business, financial and community
goals, and thereby build shareholder value on a steady but aggressive basis. The
Committee believes it important to provide competitive levels of compensation
that will enable Provident to attract and retain the most qualified executives
and to provide incentive plans that emphasize stock ownership, thus aligning
more closely the interests of management with those of shareholders.
The Committee has established three primary components which it utilizes in
setting annual compensation levels, namely:
o Base Compensation
o Annual Bonuses
o Stock Option Grants
In establishing compensation levels for 1998, the Committee utilized executive
compensation surveys which the Committee believes are appropriate. In addition,
the Committee reviewed compensation levels paid by Midwest-based bank holding
companies of similar asset size. The Committee sets the levels of executive
compensation at the high end of the ranges described in the surveys.
Compensation in excess of $1,000,000 per year paid to the Chief Executive
Officer of a company as well as the other executive officers listed in the
compensation table is not deductible for Federal income tax purposes unless it
is "performance-based" and approved by shareholders. The Committee does not
believe these limitations should interfere with the application of policies
which guide its compensation decisions.
Base compensation
In establishing base salaries for 1998 the Committee took into account each
particular executive officer's level of responsibility and potential for future
responsibilities, salary levels of competitors for similar functions and
Provident's results of operations in 1997. The Committee also took into account
the recommendations of the President for executive officers other than himself
in establishing base salaries.
Bonuses and stock options
Bonuses for 1998, other than for the President, were based primarily on
recommendations made by the President, the Committee's review of bonus awards
paid by the banking institutions included in the surveys and the Committee's
evaluation of Provident's performance and the relative contributions to that
performance by the executive officers to whom bonuses were awarded. While the
bonus awards were based on Provident's performance, they were not tied to
specific performance objectives.
Awards of stock options are made by the Committee to motivate long-term future
performance and as a reward for past performance, consistent with the purposes
set forth in Provident's 1997 Stock Option Plan.
Chief Executive Officer
In determining the compensation paid to Allen L. Davis, who served as
Provident's Chief Executive Officer until May 1, 1998, and Robert L. Hoverson,
who succeeded him, the Committee utilized each of the components described above
for executive officers. In this regard, the Committee established Mr. Davis'
salary level for 1998 and his stock option awards for 1998 based on its
evaluation of not only Provident's financial performance, but also on the
Committee's evaluation of Mr. Davis' creative abilities in planning for and
leading Provident during 1997, and setting Provident on a course of aggressive,
sustained and soundly managed growth and profitability. The Committee made a
similar evaluation of Provident's financial performance and Mr. Hoverson's
contributions in leading Provident during 1998, in establishing the amount of
his bonus and stock option awards for 1998. In determining the salary increase
and stock option awards for Mr. Hoverson, upon his being named President and
Chief Executive Officer to succeed Mr. Davis on May 1, 1998, the Committee
evaluated the responsibilities associated with the position, Mr. Hoverson's
overall level of experience and past performance and competitive practice. While
the compensation for Messrs. Davis and Hoverson was based on Provident's
performance, it was not tied to specific performance objectives.
Compensation Committee of the Board of Directors:
Sidney A. Peerless, Chairman
Thomas D. Grote, Jr.
Joseph A. Pedoto
<PAGE>
FINANCIAL PERFORMANCE
The graph below summarizes the cumulative return experienced by Provident's
shareholders over the years 1993 through 1998, compared to the NASDAQ Index and
the Keefe, Bruyette & Woods 50 Bank Index which is a market-capitalization
weighted bank stock index that includes all money-center banks and most major
regional bank holding companies, and is a widely available index. The number of
companies comprising the KBW 50 Index allows ready comparisons of Provident's
stock with an industry standard. Provident is not included in the KBW 50 Index.
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
Provident Financial Group 100 104 146 239 341 274
Nasdaq Market Index 100 98 138 170 209 293
Peer Group 100 94.9 152.0 215.0 314.3 340.3
CERTAIN TRANSACTIONS
Provident and its subsidiaries, in their normal course of business have had and,
to the extent permitted by applicable regulations and other regulatory
restrictions expect to continue to have, transactions with Provident's
directors, officers, principal shareholders and affiliates of such persons
including American Financial Group, Inc. ("AFG"), United Dairy Farmers, Inc. and
their subsidiaries. All such transactions are and will be on terms no less
favorable to Provident than those which could be obtained with non-affiliated
parties.
A subsidiary of AFG provides security guard and surveillance services at
Provident's main office for which Provident was charged $100,000 in 1998.
Provident leases its main banking and corporate offices from a trust for the
benefit of a subsidiary of AFG. Provident was charged rent under the leases of
$2,284,000 in 1998. Provident also leases branch locations, ATM locations and
certain equipment from principal shareholders and their affiliates, for which it
was charged rentals of $302,000 in 1998. Provident purchased payroll services
from a subsidiary of AFG, for which it was charged $64,000 in 1998. During 1998,
$3,224,000 was paid by or on behalf of Provident for legal services to Keating,
Muething & Klekamp, PLL, of which Paul V. Muething is a partner.
Certain of the principal shareholders, directors and executive officers of
Provident maintain investments in Provident commercial paper. The average
month-end commercial paper balances for such persons (including commercial paper
held by corporations they control, members of their immediate families and
trusts for their benefit) for 1998 were as follows: Allen L. Davis (only for the
period during which he was an executive officer or director), $72,000; Carl H.
Lindner, $3,622,000; Keith E. Lindner, $2,296,000; Robert D. Lindner,
$2,704,000; siblings of Carl H. Lindner and Robert D. Lindner, $7,616,000; and
Philip R. Myers, $86,000.
<PAGE>
Loans and lines of credits were extended by Provident Bank in 1998 to certain of
Provident's executive officers, directors, principal shareholders, affiliates of
such persons and to members of their families. Management believes that such
loans and lines of credit were made in the ordinary course of business, on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and do not
involve more than the normal risk of collectibility or present other unfavorable
features. During 1998, the highest month-end outstanding balances of loans to
principal shareholders of Provident and their related interests were as follows:
AFG, $6,476,000; Carl H. Lindner, $2,129,000; Robert D. Lindner, $13,564,000;
siblings of Carl H. Lindner and Robert D. Lindner, $13,462,000; Keith E.
Lindner, $148,000; S. Craig Lindner, $2,264,000; and Paul V. Muething,
$5,029,000. Carl H. Lindner III did not have month-end balances exceeding
$60,000 during 1998. In addition, subsidiaries of Provident Bank have entered
into various automobile and equipment leases with AFG and a brother-in-law of S.
Craig Lindner from time to time on market terms and conditions. During 1998, the
aggregate payments on these leases was $833,000 and $97,000, respectively, by
AFG and Mr. Lindner's brother-in-law.
Allen L. Davis, former President and Chief Executive Officer of Provident,
received $500,000 during 1998 pursuant to a consulting arrangement he entered
into with Provident in connection with his retirement on May 1, 1998.
INDEPENDENT AUDITORS
The accounting firm of Ernst & Young LLP served as Provident's independent
auditors for 1998. One or more representatives of that firm will attend the
Annual Meeting and will be given the opportunity to comment, if they so desire,
and to respond to appropriate questions that may be asked by shareholders. No
auditor has yet been selected for the current year, since it is the practice of
Provident not to select independent auditors prior to the Annual Meeting of
Shareholders.
SHAREHOLDER PROPOSALS FOR NEXT YEAR
The deadline for shareholder proposals to be included in the Proxy Statement for
next year's meeting is January 20, 2000.
The form of Proxy for this meeting grants authority to the designated proxies to
vote in their discretion on any matters that come before the meeting except
those set forth in the Company's Proxy Statement and except for matters as to
which adequate notice is received. In order for a notice to be deemed adequate
for the 2000 Annual Shareholders' Meeting, it must be received prior to March 2,
2000. If there is a change in the anticipated date of next year's annual meeting
or these deadlines by more than 30 days, we will notify you of this change
through our Form 10-Q filings.
QUESTIONS?
If you have questions or need more information about the annual meeting, write
to:
Patricia A. Forsythe
Investor Relations Coordinator
One East Fourth Street, 855A
Cincinnati, Ohio 45202
E-mail:
[email protected]
or call us at (513) 345-7165.
For more information about Provident, visit our website at
www.provident-financial.com. For information about your record holdings call The
Provident Bank Shareholder Services at 1-800-851-9521.
<PAGE>
PROVIDENT FINANCIAL GROUP, INC.
PROXY FOR ANNUAL The undersigned hereby appoints Robert L. Hoverson and Mark
MEETING E. Magee, or either of them, the proxies of the undersigned,
each with the power of substitution, to vote cumulatively or
otherwise all shares of Common Stock which the undersigned
would be entitled to vote at the Annual Meeting of
Shareholders of Provident Financial Group, Inc., to be held
May 20, 1999 at 9:00 a.m. Eastern Time, as specified below
on the matters described in Provident's Proxy Statement and
in their discretion with respect to such other business as
may properly come before the meeting or any adjournment
thereof. THE PROXY WILL BE VOTED AS RECOMMENDED BY THE BOARD
OF DIRECTORS UNLESS A CONTRARY CHOICE IS SPECIFIED.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" THE ELECTION OF DIRECTORS.
1. To elect the 7 nominees listed below:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Jack M. Cook, Thomas D. Grote, Jr., Robert L. Hoverson, Philip R. Myers,
Joseph A. Pedoto, Sidney A. Peerless and Joseph A. Steger.
(To withhold authority to vote for any individual nominee(s), write that
nominee's name in the space provided below.)
Date:
-----------------------------------
----------------------------------------
(Important: Please sign exactly as name
appears hereon indicating, where proper
official position or representative
capacity. In case of joint holders, all
should sign.)
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
