<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1 )
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
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
FIRST REPUBLIC 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):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] 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:
[X] 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:
Notes:
<PAGE>
[LOGO OF FIRST REPUBLIC BANCORP INC. APPEARS HERE]
388 MARKET STREET
SAN FRANCISCO, CALIFORNIA 94111
(415) 392-1400
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 30, 1996
TO THE STOCKHOLDERS OF FIRST REPUBLIC BANCORP INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of First
Republic Bancorp Inc., a Delaware corporation ("First Republic"), will be held
on Thursday, May 30, 1996, at 10:00 AM Pacific Time, at The Bankers Club, 555
California Street, 52nd Floor, San Francisco, CA 94104 for the following
purposes:
1. To elect three directors to First Republic's Board of Directors, each to
hold office for a three year term; and
2. To approve the grant of stock options for an aggregate of 97,500 shares
of First Republic's Common Stock to the thirteen non-employee directors
of the Company and its subsidiaries; and
3. To ratify the selection of KPMG Peat Marwick LLP as independent auditors
of First Republic and its subsidiaries for the year ending December 31,
1996; and
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record on April 18, 1996, shall be entitled to notice of and
to vote at the Annual Meeting.
By Order of the Board of Directors
/s/ James H. Herbert, II
James H. Herbert, II, President
San Francisco, California
April 26, 1996
EACH STOCKHOLDER IS CORDIALLY INVITED TO ATTEND AND TO VOTE AT THE ANNUAL
MEETING IN PERSON. HOWEVER, TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU
ARE URGED TO DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS
POSSIBLE IN THE ENCLOSED POSTPAID ENVELOPE. THE EXECUTION OF YOUR PROXY WILL
NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
<PAGE>
FIRST REPUBLIC BANCORP INC.
388 MARKET STREET
SAN FRANCISCO, CALIFORNIA 94111
(415) 392-1400
----------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 30, 1996
----------------
This Proxy Statement refers to proxies solicited by the Board of Directors
of First Republic Bancorp Inc., a Delaware corporation ("First Republic" or
the "Company"), for use at the Annual Meeting of Stockholders to be held on
Thursday, May 30, 1996, at 10:00 AM Pacific Time, at The Bankers Club, 555
California Street, 52nd Floor, San Francisco, CA 94104, and at any
adjournments or postponements thereof (the "Meeting"), for the purpose of
considering and acting upon the matters specified in the accompanying Notice
of Annual Meeting of Stockholders. This Proxy Statement, the Notice of Annual
Meeting of Stockholders and the accompanying Form of Proxy are first being
mailed to stockholders on or about April 29, 1996.
The close of business on April 18, 1996 (the "Record Date"), has been
designated as the record date for the determination of stockholders entitled
to notice of and to vote at the Meeting. As of April 18, 1996, 7,350,113
shares of First Republic's Common Stock, par value $.01 per share (the "Common
Stock"), were outstanding and entitled to vote.
Stockholders will be entitled to one vote for each share of Common Stock
held by them of record at the close of business on the record date on any
matter that may be presented for consideration and action by the stockholders
at the Meeting.
All shares represented by properly executed, unrevoked proxies received in
time for the Meeting will be voted in accordance with instructions specified
therein. In the absence of appropriate instructions to the contrary, shares
represented by executed proxies will be voted in favor of the election of the
nominees to the Board of Directors specified herein, in favor of the grant of
stock options for an aggregate of 97,500 shares of First Republic's Common
Stock to the thirteen non-employee directors of the Company and its
subsidiaries, in favor of ratification of the selection of KPMG Peat Marwick
LLP as the independent auditors of First Republic for the fiscal year ending
December 31, 1996 and in accordance with the best judgment of the proxy
holders with respect to any other matters which may properly come before the
1996 Annual Meeting. Any proxy may be revoked at any time prior to being voted
by filing a written notice of revocation with the Secretary of First Republic,
by presentation of a proxy of later date or by voting at the Meeting in
person. Abstentions and broker non-votes are counted for the purpose of
determining the presence or absence of a quorum for the transaction of
business, but will not be treated as having voted for purposes of determining
the outcome of a vote. Directors are elected by a plurality of the votes of
the shares present in person or represented by proxy and entitled to vote,
assuming the presence of a quorum, and approval of the grant of stock options
to the Company's non-employee directors and of independent auditors requires a
majority of the votes of the shares present in person or represented by proxy
and entitled to vote, assuming the presence of a quorum.
The cost of soliciting proxies will be paid by First Republic. Arrangements
will be made with brokerage houses and other custodians, nominees and
fiduciaries to forward proxy materials to the beneficial owners of the Common
Stock, and such persons will be reimbursed for their reasonable expenses.
Proxies may be solicited by directors, officers and regular employees of First
Republic in person, by telephone or by telegraph for which such persons will
receive no special compensation.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Common Stock
as of April 18, 1996 by (i) each person known to First Republic to own more
than five percent of the outstanding shares of the Common Stock, (ii) each
member of the Board of Directors and each executive officer named in the
Summary Compensation Table, and (iii) all directors and officers of First
Republic as a group. The number of outstanding shares of Common Stock, as of
April 18, 1996, was 7,350,113.
<TABLE>
<CAPTION>
BENEFICIAL OWNER SHARES OWNED(1)(2) PERCENT OF CLASS
---------------- ------------------ ----------------
<S> <C> <C>
James H. Herbert, II(3). 706,674 9.0%
Katherine August-
deWilde(3)............. 287,131 3.8%
Barrant V. Merrill(3)... 129,603 1.8%
Willis H. Newton, Jr.... 98,863 1.3%
Linda G. Moulds......... 80,738 1.1%
Kenneth W. Dougherty(3). 70,636 1.0%
James F. Joy(3)......... 60,611 0.8%
Frank J. Fahrenkopf,
Jr..................... 58,005 0.8%
L. Martin Gibbs......... 52,040 0.7%
Richard Cox-Johnson(3).. 45,414 0.6%
Roger O. Walther(3)..... 45,193 0.6%
John F. Mangan.......... 20,908 0.3%
All Directors and
Officers as a
Group (Currently 15
persons)................ 1,700,030 19.9%
Wellington Management 997,301 13.6%
Company(4)..............
75 State Street
Boston, MA 02109
Tiger Management 748,180 10.2%
Corporation and.........
Affiliates(5)
101 Park Avenue
New York, NY 10178
T. Rowe Price 621,810 8.2%
Associates, Inc.(6).....
100 E. Pratt Street
Baltimore, MD 21202
Includes:............... 585,862 7.7%
T. Rowe Price Small Cap
Value Fund, Inc.(7)
100 E. Pratt Street
Baltimore, MD 21202
Dimensional Fund 567,326 7.7%
Advisors Inc.(8)........
1299 Ocean Avenue, 11th
Floor
Santa Monica, CA 90401
Pecks Management 422,458 5.4%
Partners Ltd.(9)........
One Rockefeller Plaza
New York, NY 10020
First Financial Fund, 407,000 5.5%
Inc.(10)................
One Seaport Plaza, 25th
Floor
New York, NY 10292
Liberty Investment 380,571 5.2%
Management(11)..........
2502 Rock Point Drive,
Suite 500
Tampa, FL 33607
</TABLE>
2
<PAGE>
- --------
(1) All shares of Common Stock not outstanding but which may be acquired by a
stockholder listed in the previous table within 60 days of the Record
Date by the exercise of any stock option or any other right, or by the
conversion of First Republic's 7 1/4% Convertible Subordinated
Debentures, due 2002 (the "7 1/4% Debentures"), are deemed to be
outstanding for the purposes of calculating beneficial ownership and
computing the percentage of the class beneficially owned by such
stockholder, but not by any other stockholder. Except as otherwise noted,
each stockholder has sole voting and sole dispositive power with respect
to such stockholder's shares of Common Stock. Included in the previous
table are shares of Common Stock subject to outstanding stock options
that are deemed to be beneficially owned by the holders thereof as
follows: Mr. Herbert--525,474 shares; Ms. August-deWilde--223,911 shares;
Mr. Newton--84,075 shares; Ms. Moulds--63,593 shares; Mr. Mangan--20,908
shares; all other directors--36,821 shares each; all directors and
officers as a group--1,201,154 shares. Also included in the above table
are shares of Common Stock issuable upon conversion of the 7 1/4%
Debentures that are deemed to be owned by the holders thereof as follows:
Ms. August-deWilde--4,388 shares; and Mr. Herbert--4,024 shares.
(2) Based solely on its review of the copies of reports of ownership and
changes in ownership provided to First Republic by certain reporting
persons pursuant to Section 16(a) of the Securities Exchange Act of 1934,
or written representations from certain reporting persons, First Republic
believes that during the 1995 fiscal year all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten-
percent beneficial owners were complied with, except that one report by
Ms. August-deWilde indicating the gift in December 1995 of 1,000 shares
to her children and 741 shares to charity was not filed until February
1996 and one report by Mr. Joy indicating the sale in December 1995 of
392 shares by one of his children was not filed until April 1996.
(3) Includes shares attributed to: Mr. Herbert from his children (13,234
shares); Ms. August-deWilde from (i) her spouse (5,713 shares) and (ii)
her children (1,400 shares); Mr. Merrill from (i) his wife (43,761
shares), (ii) his children (3,713 shares), and (iii) a trust for his wife
(8,487 shares); Mr. Dougherty from his wife and children (9,282 shares);
Mr. Joy from his wife and children (24,182 shares); Mr. Cox-Johnson from
a family trust (3,289 shares); and Mr. Walther from his wife (3,312
shares).
(4) Based on Amendment No. 1 to Schedule 13G dated January 30, 1996 which
indicates that Wellington Management Company has sole voting power over
no shares, shared voting power over 284,047 shares, sole dispositive
power over no shares and shared dispositive power over 997,301 shares.
Included in the shares reported are 407,000 shares with respect to which
First Financial Fund, Inc. is also deemed to be a beneficial owner. See
Note 10 below.
(5) Based on Amendment No. 4 to Schedule 13G dated February 12, 1996 which
indicates that Tiger Management Corporation and its affiliates have sole
voting power over no shares, shared voting power over 748,180 shares,
sole dispositive power over no shares and shared dispositive power over
748,180 shares.
(6) Based on Schedule 13G dated February 14, 1996 which indicates that T.
Rowe Price Associates, Inc. has sole voting power over 21,448 shares,
shared voting power over no shares, sole dispositive power over 621,810
shares and shared dispositive power over no shares. Included in the
shares reported for T. Rowe Price Associates are 279,310 shares which may
be acquired upon conversion of the 7 1/4% Debentures. Also included in
the shares reported are 585,862 shares with respect to which T. Rowe
Price Small Cap Value Fund, Inc. is also deemed to be a beneficial owner.
See Note 7 below.
(7) Based on Schedule 13G dated February 14, 1996 which indicates that T.
Rowe Price Small Cap Value Fund, Inc. has sole voting power over 585,862
shares, shared voting power over no shares, sole dispositive power over
no shares and shared dispositive power over no shares. T. Rowe Price
Associates, Inc. is also deemed to be a beneficial owner of these shares.
See Note 6 above. Included in the shares reported for T. Rowe Price Small
Cap Value Fund are 275,862 shares that may be acquired upon conversion of
the 7 1/4% Debentures.
(8) Based on Amendment No. 2 to Schedule 13G dated February 7, 1996 which
indicates that Dimensional Fund Advisors Inc. ("Dimensional") has sole
voting power over 370,167 shares, shared voting power over no shares,
sole dispositive power over 567,326 shares and shared dispositive power
over no shares. Dimensional, a registered investment advisor, is deemed
to have beneficial ownership of 567,326 shares, all of which shares are
held in portfolios of (i) DFA Investment Dimensions Group Inc., a
registered open-end investment company, (ii) the DFA Investment Trust
Company, a Delaware business trust, or (iii) the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans (all of which Dimensional serves as investment manager).
Dimensional disclaims beneficial ownership of all such shares.
(9) Based on Schedule 13G dated February 1, 1996, the 422,458 shares reported
for Pecks Management Partners Ltd. are shares that may be acquired upon
conversion of the 7 1/4% Debentures.
3
<PAGE>
(10) Based on Schedule 13G dated February 7, 1996 which indicates that First
Financial Fund, Inc. has sole voting power over 407,000 shares, shared
voting power over no shares, sole dispositive power over no shares and
shared dispositive power over 407,000 shares. Wellington Management
Company is also deemed to be a beneficial owner of these shares. See Note
4 above.
(11) Based on Schedule 13G dated January 31, 1996 which indicates that Liberty
Investment Management has sole voting power over 380,571 shares, shared
voting power over no shares, sole dispositive power over 380,571 shares
and shared dispositive power over no shares.
PROPOSAL 1.--ELECTION OF DIRECTORS
First Republic's Board of Directors consists of ten directors. The directors
of First Republic serve three-year terms which are staggered to provide for
the election of approximately one-third of the Board members each year. At the
Meeting, three directors will stand for reelection.
INFORMATION CONCERNING NOMINEES
The three persons named below are the Company's nominees for election to the
Board of Directors. They are nominated to be Class II directors with terms
expiring in 1999.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND AGE SINCE PRINCIPAL BUSINESS EXPERIENCE
------------ -------- -----------------------------
<S> <C> <C>
Richard M. Cox-Johnson 1986 Director. Mr. Cox-Johnson is a director of
61 Premier Consolidated Oilfields PLC. Graduate of
Oxford University, 1955.
Kenneth W. Dougherty 1985 Director. Mr. Dougherty is an investor and was
69 previously President of Gill & Duffus
International Inc. and Farr Man & Co. Inc.,
international commodity trading companies. B.A.,
1948, University of Pennsylvania.
Frank J. Fahrenkopf, Jr. 1985 Director. Mr. Fahrenkopf is President and CEO of
56 the American Gaming Association. Previously, he
was a partner in the law firm of Hogan &
Hartson. From January 1983 until January 1989,
he was Chairman of the Republican National
Committee. B.A., 1962, University of Nevada-
Reno; L.L.B., 1965, University of California-
Berkeley.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF MESSRS.
COX-JOHNSON, DOUGHERTY AND FAHRENKOPF AS CLASS II DIRECTORS.
4
<PAGE>
INFORMATION CONCERNING OTHER DIRECTORS
The following table sets forth the name of each of the remaining directors
of First Republic (other than those identified under "Election of Directors")
and certain pertinent information about them.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND AGE SINCE PRINCIPAL BUSINESS EXPERIENCE
------------ -------- -----------------------------
<S> <C> <C>
Roger O. Walther 1985 Chairman of the Board of Directors. Mr. Walther
60 is Chairman and Chief Executive Officer of ELS
Educational Services, Inc., the largest teacher
of English as a second language in the United
States. Formerly, he served as Chairman of San
Bancorp. He is a director of Charles Schwab &
Co., Inc. B.S., 1958, United States Coast Guard
Academy; M.B.A., 1961, Wharton School,
University of Pennsylvania; and member of the
Graduate Executive Board of the Wharton School.
James H. Herbert, II 1985 President, Chief Executive Officer and Director.
51 From 1980 to July 1985, Mr. Herbert was
President, Chief Executive Officer and a
director of San Francisco Bancorp. He is a past
President, and currently a Director of the
California Association of Thrift & Loan
Companies, and is on the California Commissioner
of Corporations' Industrial Loan Law Advisory
Committee. B.S., 1966, Babson College; M.B.A.,
1969, New York University; and a member of The
Babson Corporation.
Katherine August-deWilde 1988 Executive Vice President and Director. Ms.
48 August-deWilde served as Chief Financial Officer
of First Republic from July 1985 until August
1988. Previously, Ms. August-deWilde served as
Senior Vice President and Chief Financial
Officer at PMI Mortgage Insurance Co. A.B.,
1969, Goucher College; M.B.A., 1975 Stanford
University.
L. Martin Gibbs, Esq. 1985 Director. Mr. Gibbs is a partner with the law
58 firm of Rogers & Wells, counsel to the Company.
B.A., 1959, Brown University; J.D., 1962,
Columbia University.
James F. Joy 1985 Director. Mr. Joy is Director--European Business
58 Development for CVC Capital Partners Europe
Limited and a non-executive director of Sylvania
Lighting International. B.S., 1959 and B.S.E.E.,
1960, Trinity College; M.B.A., 1964, NewYork
University.
John F. Mangan 1985 Director. Mr. Mangan is an investor and was
59 previously President of Prudential-Bache Capital
Partners, Inc., and a Managing Director of
Prudential-Bache Securities, Inc. Prior to that,
he was the Managing General Partner of Rose
Investment Company, a venture capital
partnership. B.A., 1959, University of
Pennsylvania.
Barrant V. Merrill 1985 Director. Mr. Merrill is an investor. He is the
65 Managing Partner of Sun Valley Partners.
Previously, he was General Partner of Dakota
Partners and of Galena Partners, and Chairman of
Pershing & Co., Inc., a division of Donaldson,
Lufkin & Jenrette. B.A., 1953, Cornell
University.
</TABLE>
5
<PAGE>
MEETINGS AND ORGANIZATION
During the fiscal year ended December 31, 1995, the Board of Directors held
four regularly scheduled meetings, acted by telephonic board meeting two times
and took one action by unanimous written consent. All directors of First
Republic attended at least 75% of the meetings of the Board of Directors and
committees on which they served during such fiscal year, except Messrs. Cox-
Johnson, Fahrenkopf, and Joy who each missed one regular and one telephonic
meeting of the full Board.
COMMITTEES OF THE BOARD OF DIRECTORS
Executive Committee. The primary responsibilities of the Executive Committee
are to advise the Company's management on matters when the full Board of
Directors is unavailable or to conduct business as specifically designated by
the full Board. The members of the Executive Committee are Ms. August-deWilde
and Messrs. Herbert, Merrill and Walther.
Compensation Committee. The primary responsibilities of the Compensation
Committee are to establish and review the compensation, both direct and
indirect, to be paid to First Republic's executive officers and other members
of management; to review and submit to the Board of Directors its
recommendations with respect to executive compensation plans; to establish and
review periodically First Republic's policies relating to executive
perquisites; and to oversee First Republic's employee benefit plans. The
members of the Compensation Committee are Messrs. Gibbs, Joy, Merrill and
Walther.
Audit Committee. The primary responsibilities of the Audit Committee are to
recommend to the Board of Directors a firm of independent certified public
accountants to conduct the annual audit of First Republic's books and records;
to review with such accounting firm the scope and results of the annual audit;
to review the performance by such independent accountants of professional
services in addition to those which are audit related; and to consult with the
internal and independent auditors with regard to the adequacy of First
Republic's systems of internal controls. The members of the Company's Audit
Committee are Messrs. Merrill and Walther.
During the last fiscal year, there were no meetings of the Executive
Committee; one meeting of the Compensation Committee and one action taken by
unanimous written consent; and there were two regular meetings and four
telephonic meetings of the Audit Committee.
PROPOSAL 2.--APPROVAL OF THE GRANT OF STOCK OPTIONS FOR AN AGGREGATE OF 97,500
SHARES OF FIRST REPUBLIC'S COMMON STOCK TO THE THIRTEEN NON-EMPLOYEE
DIRECTORS OF THE COMPANY AND ITS SUBSIDIARIES
On April 26, 1996, the Board of Directors of First Republic approved the
grant of stock options for an aggregate of 97,500 shares of First Republic's
Common Stock to the eight non-employee directors of the Company and the five
non-employee directors of the Company's subsidiaries, contingent upon approval
by the Company's stockholders (the "Contingent Directors' Options") (See
"Executive Compensation--Compensation of Directors"). The options provide that
they are not exercisable until and unless the Company's stockholders have
voted to approve the grant of the options. Each such non-employee director was
granted options for 7,500 shares of Common Stock, exercisable for ten years
from the date of grant at an exercise price of $15.50 per share, which
exceeded the closing price of the Common Stock as reported on the New York
Stock Exchange on the date of grant by $0.25. On April 26, 1996, the Company's
Common Stock closed at $15.25.
The Contingent Directors' Options are "Non-Qualified Stock Options" within
the meaning of the Internal Revenue Code of 1986 (the "Code"). Stock acquired
upon exercise of the Contingent Directors' Options will be treated as ordinary
income to the directors as of the date of purchase to the extent that the fair
market value of the stock exceeds the exercise price of the option. The
Company is entitled to a corresponding deduction for the amount taxed as
ordinary income to the director. The Contingent Directors' Options provide
that, upon exercise, the optionee is entitled to receive a payment equal to
the tax benefit available to the Company, if any, as a result of the tax
deduction allowed to the Company in the year the options are exercised.
The exercise price of the options is payable in cash or by certified or
official bank check in full at the time of exercise. The options are non-
transferable, other than by will or the laws of descent and distribution.
6
<PAGE>
The Contingent Directors' Options terminate on the earlier of (i) April 26,
2006, (ii) the death of the optionee, (iii) twelve months following the
termination of the optionee's service as a director by reason of disability,
(iv) immediately upon the termination of the optionee as a director for cause,
or (v) six months following the resignation of the optionee or after
expiration of his term as a director if he does not stand for reelection.
The following table sets forth certain information concerning the options
granted to each nominee for director and to all non-employee directors of the
Company and its subsidiaries as a group.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
DOLLAR NUMBER
NAME AND POSITION VALUE(1) OF UNITS
----------------- -------- --------
<S> <C> <C>
Richard M. Cox-Johnson................................. $-- 7,500
Kenneth W. Dougherty................................... $-- 7,500
Frank J. Fahrenkopf, Jr. .............................. $-- 7,500
All non-employee directors of the Company and its
subsidiaries(2)....................................... $-- 97,500
</TABLE>
- --------
(1) On April 26, 1996, the closing price of the Company's Common Stock on the
New York Stock Exchange was $15.25 per share which is below the exercise
price of the options ($15.50 per share).
(2) In addition to the non-employee directors of the Company named herein,
Contingent Directors' Options are granted to the following individuals who
are non-employee directors of the Company's subsidiaries: James P. Conn,
7,500 shares; Thomas A. Cunningham, 7,500 shares; Jerry Lykins, 7,500
shares; Stuart J. Mason, 7,500 shares; and Kent R. Willson, 7,500 shares.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE
GRANT OF STOCK OPTIONS FOR AN AGGREGATE OF 97,500 SHARES OF FIRST
REPUBLIC'S COMMON STOCK TO THE THIRTEEN NON-EMPLOYEE DIRECTORS OF THE
COMPANY AND ITS SUBSIDIARIES.
PROPOSAL 3.--APPROVAL OF SELECTION OF AUDITORS
A resolution will be presented at the Meeting to ratify the Board of
Directors' appointment of KPMG Peat Marwick LLP as independent auditors to
audit the Company's financial statements for the year ending December 31,
1996. KPMG Peat Marwick LLP has audited the Company's financial statements for
each year since 1989.
During 1996, First Republic made no changes in, and had no disagreements
with, its independent auditors on accounting and financial disclosure. A
representative of First Republic's independent auditors is expected to be
present at the meeting, and will have the opportunity to make a statement if
he desires to do so. It is expected that such representative will be available
to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF
THE SELECTION OF AUDITORS.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Each non-employee director of the Company receives a fee for each regularly
scheduled meeting of the Board of Directors that he attends, except that First
Republic pays Mr. Walther, who does not receive a fee per board meeting
attended, a consulting fee for his services in marketing First Republic's
banking services, including its deposit gathering and loan programs, and for
his consulting services with respect to the management, administration,
operations and financing of First Republic. Non-employee directors received
$1,500 per meeting attended in 1995. For 1995, Mr. Walther received a
consulting fee of $5,417 per month. The members of the Board of Directors are
also reimbursed for their out-of-pocket expenses incurred in connection with
attendance at Board and committee meetings in accordance with Company policy.
In the fiscal year ended
7
<PAGE>
December 31, 1995, the Board of Directors held four regularly scheduled
meetings and the total cash compensation paid to non-employee directors was
$116,000, including $65,000 of consulting fees paid to Mr. Walther.
In lieu of paying higher cash directors' fees to its non-employee directors,
to more closely match their long term interests with those of other
stockholders, and to properly compensate for the responsibilities and risk,
both business and regulatory, of being on the board of a holding company of a
federally insured institution, First Republic has from time to time granted
stock options to each non-employee director of the Company. During 1995, there
were no stock options granted to such directors.
The Company's Board of Directors approved the grant of options covering
7,500 shares to each non-employee director of the Company and its subsidiaries
on April 26, 1996 at an exercise price per share of $15.50, $0.25 above the
fair market value (closing price) of such Common Stock at the date of grant.
The options on the shares granted in April 1996 are not exercisable unless and
until they have been approved by the Company's stockholders, and are described
in more detail above in connection with Proposal No. 2.
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows for the fiscal years ending December 31, 1995,
1994, and 1993, certain compensation paid by the Company, including salary,
bonuses, stock options, and certain other compensation, to its Chief Executive
Officer and its three other most highly compensated executive officers for the
fiscal year ended December 31, 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ON
ANNUAL COMPENSATION AWARDS
-------------------------- ------------
OPTIONS BY ALL OTHER
PERFORMANCE NUMBER OF COMPEN-
NAME & PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) SHARES(3) SATION(4)
------------------------- ---- --------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
James H. Herbert, II......... 1995 $379,500 -- 170,000 $28,119
President and Chief Executive 1994 $379,500 $290,686 -- $25,294
Officer 1993 $345,000 $410,220 -- $32,494
Katherine August-deWilde..... 1995 $192,500 -- 75,000 $28,119
Executive Vice President 1994 $192,500 $147,448 -- $25,294
1993 $175,000 $208,080 -- $32,494
Willis H. Newton, Jr......... 1995 $159,500 -- 45,000 $28,119
Senior Vice President and 1994 $159,500 $122,129 -- $25,294
Chief Financial Officer 1993 $145,000 $172,850 -- $32,494
Linda G. Moulds.............. 1995 $101,200 -- 25,000 $22,628
Vice President, Controller 1994 $101,200 $ 77,487 -- $25,294
and Secretary 1993 $ 92,000 $109,350 -- $31,094
</TABLE>
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(1) Includes amounts earned but deferred into the Company's 401(k) plan at the
election of the executive.
(2) Under the Company's Executive Performance Bonus Pool Program, senior
executives share, in proportion to their relative base salary levels, in
the performance bonus pool which is equal to 5% of the Company's earnings
before taxes and bonuses. In 1995, no bonus was paid because the Company's
pre-tax, pre-bonus earnings did not exceed a specified minimum threshold
primarily as a result of the lingering adverse effects of the January 1994
Northridge earthquake. Amounts earned as performance bonuses in 1994 were
reduced approximately 30% from the level earned in 1993 because the
Company's earnings were lower. See "Compensation Committee Report to
Stockholders--The Executive Performance Bonus Pool Program."
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(3) Options by Number of Shares for 1995 represents the maximum total number
of shares as to which the named optionees were granted 1995 Performance-
Based Contingent Stock Options during 1995, including all shares that vest
only if the Company achieves the performance levels specified in those
options. Fully 80% of such 1995 option grants have not vested as of March
31, 1996. See "Option Grants in Last Fiscal Year," below and "Compensation
Committee Report to Stockholders--Long Term Incentives."
(4) Consists of the Company's matching payments under its 401(k) plan and the
dollar value at year end of shares earned under the Company's Employee
Stock Ownership Plan ("ESOP"). The amounts under these two plans in 1995
were $7,500 and $20,619, respectively, for each of Mr. Herbert, Ms.
August-deWilde, and Mr. Newton; and $6,038 and $16,590 for Ms. Moulds. The
amounts under these two plans in 1994 were $7,500 and $17,794,
respectively for each of Mr. Herbert, Ms. August-deWilde, Mr. Newton, and
Ms. Moulds. The amounts under these two plans in 1993 were $8,994 and
$21,680, respectively for each of Mr. Herbert, Ms. August-deWilde, and Mr.
Newton; and $8,994 and $19,400, for Ms. Moulds.
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows for the fiscal year ended December 31, 1995,
certain information regarding options granted to each executive officer named
in the Summary Compensation Table:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------
% OF TOTAL
OPTIONS OPTIONS
GRANTED BY GRANTED TO EXERCISE
NUMBER OF EMPLOYEES IN PRICE PER GRANT DATE
SHARES(1) FISCAL YEAR SHARE(2) EXPIRATION DATE VALUATION(3)
---------- ------------ --------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
James H. Herbert, II.... 170,000 46% $13.125 December 31, 2005 $1,156,000
Katherine August-
deWilde................ 75,000 20% $13.125 December 31, 2005 $ 510,000
Willis H. Newton, Jr.... 45,000 12% $13.125 December 31, 2005 $ 306,000
Linda G. Moulds......... 25,000 7% $13.125 December 31, 2005 $ 170,000
</TABLE>
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(1) The stock options reflected in the table are all 1995 Performance-Based
Contingent Stock Options granted on December 31, 1995. Of such options,
only 20% vested upon grant, while the remaining 80% may vest subject to
the future achievement of annual after-tax growth in the Company's
tangible book value per share of approximately 11% or better compounded
annually over the next three years. Based on actual tangible book value
per share of $14.76 at December 31, 1995, the minimum target amounts for
additional vesting are $16.38 at December 31, 1996, $18.19 at December 31,
1997, and $20.19 at December 31, 1998. Each of the target amounts is
subject to adjustment to eliminate the dilutive effect to book value per
share that would result from the conversion of the 7 1/4% Debentures.
Prorata vesting of such shares occurs each year that the minimum target
amount for tangible book value per share for that year is achieved. If the
annual target amount is achieved or surpassed, option shares vest at a
pro-rata amount based upon the percentage increase achieved toward the
final target amount. Any option shares that have not vested in a prior
year may vest in a subsequent year if, on or prior to December 31, 1998,
the cumulative targeted amount for that subsequent year is achieved or
surpassed. Further, all such options vest at any time within ten years
from the date of grant, regardless of whether the target amounts have been
met, upon the occurrence of certain events relating to extraordinary
transactions, including a merger or consolidation of the Company, a sale,
lease, exchange or other disposition of all or substantially all of the
assets of the company, a liquidation or dissolution of the Company, or the
acquisition of, or offer for, 25% or more of the Company's issued and
outstanding Common Stock by any person or group. Each 1995 Performance-
Based Contingent Stock Option provides that, upon exercise, the optionee
is entitled to receive a payment equal to the tax benefit available to the
Company as a result of the tax deduction allowed to the Company in the
year the option is exercised.
The options granted to Ms. August-deWilde, Mr. Newton and Ms. Moulds
require that the purchase price be paid in cash or by check at the time of
exercise. Under the terms of the options granted to Mr. Herbert, he may pay
the purchase price of any shares as to which the option is exercised by
delivery of cash or a
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<PAGE>
check for the aggregate par value of the shares purchased and by delivery
of a promissory note for the balance of the purchase price. Principal and
interest on the promissory note would be payable ten years from the date it
is made. The note could be prepaid at any time. The rate of interest would
be the minimum rate established by the Internal Revenue Service to provide
that there is "adequate stated interest" in accordance with the Internal
Revenue Code for similar maturity notes.
(2) Reflects the closing price of the Common Stock on December 29, 1995, the
last business day of the year.
(3) The "Grant Date Valuation" is based on the Black-Scholes option pricing
model for options that are immediately exercisable in full at the date of
grant, which is not true in this case, and are not contingent upon Company
performance in any manner, whereas due to the performance-vesting
provisions of the Company's 1995 Performance-Based Contingent Stock
Options, the actual value of the 1995 Performance-Based Contingent Stock
Options to the named executive officers depends upon the achievement of
targeted increases in the Company's book value per share. In order for one
of the named executive officers to realize the estimated grant date
valuation set forth above, the Company's Common Stock price would need to
be $19.93 at the date of exercise of all 1995 Performance-Based Contingent
Stock Options. The Black-Scholes model provides a theoretical value for
stock options. The amount realized from a stock option ultimately depends
on the market value of the Common Stock at a future date.
OPTION EXERCISES AND YEAR-END VALUES
None of the executive officers named in the Summary Compensation Table
exercised any stock options during the year ended December 31, 1995. The
following table presents information concerning options held at December 31,
1995 by such named executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT FISCAL
FISCAL YEAR-END YEAR-END($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE(1) UNEXERCISABLE(1)(2)
---- --------------- ------------ ---------------- --------------------
<S> <C> <C> <C> <C>
James H. Herbert, II.... -- -- 525,474/193,541 $1,643,823/$--
Katherine August-
deWilde................ -- -- 223,911/84,486 $ 611,182/$--
Willis H. Newton, Jr.... -- -- 84,075/45,795 $ 157,026/$--
Linda G. Moulds......... -- -- 63,593/26,121 $ 166,040/$--
</TABLE>
- --------
(1) The only unexercisable options outstanding at December 31, 1995 were the
unvested 1995 Performance-Based Contingent Stock Options discussed above
and certain 1992 Performance-Based Contingent Stock Options discussed
below under "Compensation Committee Report to Stockholders--Long Term
Incentives." At December 31, 1995, the exercise price of the unexercisable
options all equaled or exceeded the closing price of the Company's Common
Stock on that date and thus had no current value.
(2) Based upon fair market value of the Company's Common Stock at December 31,
1995.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
The following performance graph depicts the value of investment (change in
the stock price plus reinvested dividends) for each monthly period from
January 1, 1991 to December 31, 1995 for the Company, the S&P 500 and a group
of peer institutions whose investment has been weighted based on market
capitalization (price times shares outstanding). Companies in the peer group
are as follows: Bay View Capital Corp., California Financial Holding Corp.,
Citadel Holding Corp., Coast Savings Financial, Inc., Downey Savings & Loan
Association, FirstFed Financial Corp., SFFed Corp., and Westcorp, Inc. These
companies are publicly traded holding companies of California-based savings
and loan institutions and have been selected by senior management, with
assistance from an independent party, based on similarities in geographic
location, asset size and type of business
10
<PAGE>
activity. The stock performance graph assumes $100 invested on January 1, 1991
in First Republic Common Stock, the S&P 500 and the group of peer
institutions. There has been no change in either index used in this graph from
those presented in the Company's proxy statements for 1995, 1994 or 1993.
The historical stock prices shown in the graph are not necessarily
indicative of future price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG FIRST REPUBLIC, S&P 500 INDEX AND INDUSTRY GROUP
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period FIRST S&P INDUSTRY
(Fiscal Year Covered) REPUBLIC 500 INDEX GROUP
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt- 12/90 $100.00 $100.00 $100.00
FYE 1/91 $155.54 $104.36 $108.22
FYE 2/91 $183.30 $111.82 $132.18
FYE 3/91 $194.43 $114.53 $137.07
FYE 4/91 $238.86 $114.80 $144.46
FYE 5/91 $255.53 $119.75 $156.13
FYE 6/91 $283.31 $114.26 $141.75
FYE 7/91 $291.66 $119.59 $159.51
FYE 8/91 $302.78 $122.42 $169.35
FYE 9/91 $297.21 $120.38 $168.68
FYE 10/91 $302.76 $121.99 $154.36
FYE 11/91 $283.33 $117.08 $122.99
FYE 12/91 $400.00 $130.47 $154.16
FYE 1/92 $350.00 $128.04 $159.61
FYE 2/92 $361.09 $129.70 $178.42
FYE 3/92 $377.78 $127.17 $174.78
FYE 4/92 $338.90 $130.91 $167.91
FYE 5/92 $325.01 $131.55 $175.93
FYE 6/92 $319.45 $129.59 $167.40
FYE 7/92 $341.65 $134.89 $160.89
FYE 8/92 $300.00 $132.12 $140.18
FYE 9/92 $277.77 $133.68 $124.82
FYE 10/92 $244.47 $134.14 $129.55
FYE 11/92 $261.14 $138.70 $140.12
FYE 12/92 $252.79 $140.41 $155.14
FYE 1/93 $283.35 $141.58 $186.92
FYE 2/93 $309.02 $143.51 $195.79
FYE 3/93 $297.55 $146.54 $195.34
FYE 4/93 $271.82 $143.00 $166.33
FYE 5/93 $286.14 $146.82 $167.96
FYE 6/93 $297.59 $147.25 $172.40
FYE 7/93 $294.73 $146.66 $180.55
FYE 8/93 $311.88 $152.22 $195.63
FYE 9/93 $374.82 $151.06 $208.83
FYE 10/93 $351.92 $154.18 $205.60
FYE 11/93 $331.89 $152.71 $181.50
FYE 12/93 $326.15 $154.56 $181.90
FYE 1/94 $357.63 $159.81 $174.68
FYE 2/94 $374.26 $155.48 $171.62
FYE 3/94 $344.80 $148.70 $162.92
FYE 4/94 $309.43 $150.60 $169.28
FYE 5/94 $327.09 $153.08 $185.07
FYE 6/94 $341.85 $149.32 $194.08
FYE 7/94 $324.17 $154.23 $190.49
FYE 8/94 $344.79 $160.55 $196.19
FYE 9/94 $315.31 $156.63 $191.30
FYE 10/94 $294.69 $160.14 $172.29
FYE 11/94 $247.54 $154.31 $150.44
FYE 12/94 $265.21 $156.60 $149.97
FYE 1/95 $238.69 $160.66 $150.26
FYE 2/95 $244.58 $166.92 $168.25
FYE 3/95 $262.27 $171.85 $177.72
FYE 4/95 $285.84 $176.91 $202.46
FYE 5/95 $309.41 $183.98 $207.82
FYE 6/95 $300.57 $188.25 $215.26
FYE 7/95 $297.63 $194.50 $228.35
FYE 8/95 $324.15 $194.98 $271.78
FYE 9/95 $306.47 $203.21 $260.59
FYE 10/95 $291.73 $202.49 $251.36
FYE 11/95 $265.21 $211.38 $276.74
FYE 12/95 $309.41 $215.45 $284.47
</TABLE>
COMPENSATION COMMITTEE REPORT TO STOCKHOLDERS
The Compensation Committee of the Board of Directors (the "Compensation
Committee") consists of Mr. Roger O. Walther, Chairman of the Compensation
Committee, L. Martin Gibbs, Esq., Mr. Barrant V. Merrill, and Mr. James F.
Joy, none of whom are currently officers or employees of the Company. The
Compensation Committee is responsible for setting and administering the
Company's policies governing senior executive compensation, subject to
approval by the Board of the Directors of the Company. Additionally, Messrs.
Walther, Merrill and Joy represent a majority of the trustees for the
Company's Employee Benefit Plans, including its Employee Stock Ownership Plan
("ESOP"), its 1985 Employee Stock Option Plan, and its 1992 Employee Stock
Purchase Plan. The Compensation Committee evaluates the performance of the
senior executives and determines compensation policies, programs, and levels
for the senior executive officers. The full Board of Directors reviews the
Compensation Committee's recommendations regarding the compensation of
executive officers.
COMPENSATION PHILOSOPHY
The Compensation Committee's compensation philosophy is based upon the
belief that executive compensation should strongly reflect the achievement of
results as measured by key indicators of Company performance, including both
short term and longer term. The Compensation Committee has developed executive
compensation programs designed to incentivize and reward executives for their
contribution to Company performance that creates value for stockholders. The
Company has adopted an Executive Bonus Pool Program that ties annual cash
bonus awards to the Company's annual earnings.
11
<PAGE>
Since May 1992, the Company's executives also have participated in a long-
term incentive program under which Performance-Based Contingent Stock Options
are directly linked to significant, targeted increases in the Company's
tangible book value per share.
The Compensation Committee believes that earnings growth and increases in
tangible book value per share are the primary determinants in creating value
for stockholders over time.
The Company's executive compensation is based upon the following goals and
policies:
. A significant portion of executive compensation should be incentive
compensation that is directly linked to the Company's annual performance.
. Incentive compensation should be based on measures of Company performance
that are most meaningfully related to the creation of value for
stockholders, specifically the level of earnings and tangible book value
per share, over time.
. Compensation programs should support the long term strategic goals and
objectives of the Company.
. Compensation programs should incentivize and reward individuals for
outstanding contributions to the Company's success.
. Short-term and long-term compensation play a critical role in attracting,
retaining and motivating well qualified, performance-orientated
executives who function as a team.
In addition, the Compensation Committee believes that executive compensation
is intended to reward the Company's senior executives for continuing efforts
to build a high-quality, customer driven, stable banking institution. Since
the founding of the Company in 1985, First Republic Thrift & Loan has become
the largest thrift and loan institution in the State of California. Over the
past five years, and during recent difficult and recessionary economic
conditions, the Company has grown substantially while maintaining asset-
quality and capital strength levels that exceed industry standards.
The Company's earnings for 1995 were adversely affected by the continuing
recession in California, the lingering effects of the 1994 Northridge
earthquake on the Company's multifamily loan portfolio in Los Angeles and the
delayed effects of rapidly rising interest rates which occurred in 1994. The
earthquake had a substantial adverse effect on the Company's 1995 earnings,
resulting in lost interest on affected loans and direct costs of nearly $8
million, both of which reduced pretax earnings. As a result, pretax earnings
fell below the minimum threshold of $11 million and no executive bonus
compensation was earned for 1995. Without the direct effects of this
earthquake, net income would have been approximately $7.3 million and
executive bonus compensation earned under the Company's Executive Bonus Pool
Program for 1995 would have been approximately $580,000.
In 1995, in spite of the challenges it faced, the Company achieved the
following results:
. Total assets increased to over $1.9 billion at year-end.
. Tangible book value per share increased by $0.36 during the year to
$14.76 at December 31, 1995. This level represents a 91% increase
achieved over the past five years or a compounded annual growth rate of
13.9% after taxes.
. The Company expanded its customer deposits by approximately 20%,
successfully expanding its deposit products and branch locations.
. The Company's full service subsidiary in Nevada, First Republic Savings
Bank, continued to be highly successful and profitable.
. Assets per full-time employee at year end 1995 were $12.6 million, a 6%
improvement over year end 1994.
. Nonaccruing loans and REO at December 31, 1995 had declined 9% from mid-
year levels and nearly 50% of the remaining nonaccruing loans and REO
were loans on assets which had been adversely affected by the earthquake.
Year end nonperforming assets were 2.46% of total assets.
. General and administrative expenses, as a percentage of assets, declined
over 16% in 1995 to 1.07%.
12
<PAGE>
The Compensation Committee believes that since inception, the Company has
relied heavily on a team of highly-motivated senior executives to produce
results. The Compensation Committee further believes that the Company's
emphasis on high quality customer service, cost-efficient operations, combined
with capital strength and prudent risk management will continue to require
significant efforts by its senior executives, and that those efforts are a
major contributing factor to the Company's success. The results produced by
the senior executives have been achieved during a period of significant
uncertainty and risk in the savings and loan and banking industries and recent
difficult and recessionary economic conditions and natural disasters in the
Company's California markets. The Company's compensation policies are intended
to encourage superior efforts by its executives.
The Company's executive compensation consists primarily of three components,
which taken together are intended to implement the Compensation Committee's
overall compensation philosophy.
BASE SALARY
Base salaries for executives are reviewed by the Compensation Committee on
an annual basis. There has been no increase in base salary for any of the
executive officers named in the Summary Compensation Table, including the
President and Chief Executive Officer (the "President and CEO"), for 1996. The
Compensation Committee approved an increase in base salary of 10% for 1994 for
such executive officers, representing a cost of living adjustment for the
effects of inflation since the last prior increase effective for 1991.
The determination that no increase in base salary would be made in 1996 over
the base salary levels established for 1995 and 1994 reflects the Compensation
Committee's belief that incentive compensation directly tied to Company
performance should continue to constitute a significant portion of each
executive's total compensation (approximately 43% during 1994 and 54% during
1993).
Base salaries for the executive officers named in the Summary Compensation
Table, including the President and CEO, have been established at levels that
are competitive with salaries for executives performing similar duties for
banking and thrift institutions of comparable size. For the purpose of
establishing these levels, the Compensation Committee has compared the Company
to a self-selected group of companies with generally similar characteristics.
The comparison group is subject to change as the Company or its competitors
change their focus, merge or are acquired, or as new competitors emerge.
THE EXECUTIVE BONUS POOL PROGRAM-TIED TO EARNINGS
The Executive Bonus Pool Program was designed in 1990 to reflect the
Compensation Committee's belief that maximizing earnings contributes
significantly to stockholder value. Accordingly, the plan is funded from a
pre-set portion of the Company's earnings before taxes and bonuses adjusted
for loan loss experience. The bonus payments are based upon earnings and all
actual loan losses directly reduce the amount of the bonuses, thereby creating
a very direct incentive for senior executives to work to maintain asset
quality. The pool has been set at 5% of pre-tax, pre-bonus earnings after all
loan losses and reserves. Individual bonus payments for senior executives are
based upon relative base salary levels. Also under the bonus program, in
effect since 1990, no bonus is paid unless pre-tax, pre-bonus earnings exceed
a specified minimum threshold. Such threshold has been increased annually.
The threshold earnings level has been established prior to the beginning of
each fiscal year. In 1993, the threshold earnings level was increased to
$7,500,000 and the total amount of the bonus pool was limited to $900,000,
which was less than the aggregate bonus amount paid for 1992 and was less than
the amount that would have been paid under the formula in 1993. For 1994, the
threshold earnings level was increased 20% to $9,000,000 and the 1993 bonus
limit was removed. For 1995, the threshold earnings level was further
increased 11% to $10,000,000.
In 1995, the Company's pretax earnings were below the minimum threshold
level, primarily due to the lingering effects of the Northridge earthquake and
the delayed effects of the rapid rise in interest rates which
13
<PAGE>
occurred in 1994 but adversely impacted the Company's net interest income in
1994. Therefore, no amounts were earned under the Executive Bonus Pool Program
and no cash compensation other than base salary was paid to the executive
officers named in the Summary Compensation Table.
In the fall of 1995, the Compensation Committee engaged the independent
consulting firm of Deloitte & Touche to review the Company's Executive Bonus
Pool Program in comparison to peer group companies. Following this review,
Deloitte & Touche recommended modifications to the Company's program.
As a result of these recommendations, the Compensation Committee has
recommended and the Board of Directors has adopted certain changes to the
Executive Bonus Pool Program for 1996 and future years. The pool will be
retained as 5% of pre-tax, pre-bonus earnings; however, the minimum threshold
has been eliminated, allowing for the payment of some bonus at various levels
of results. Additionally, the pool has been divided into three independently
measured components. For 1996, 65% of the bonus pool is based on pretax
earnings, 20% is based on meeting an asset quality standard and 15% is based
on a subjective assessment to be determined by the Board. If nonperforming
loans and REO exceed 2.50% of total assets or $50 million on average for each
1995 quarter-end, the asset quality measures will not be met. If, in the view
of the Board, the Company does not achieve the goals, objectives, and
standards sufficient to meet the subjective assessment, then up to 15% of the
bonus pool will not be earned.
The Compensation Committee believes that the Company's Executive Bonus Pool
Program, including the modifications adopted for 1996 and future years,
provides an excellent and direct link between the value created for
stockholders and the incentive compensation to be paid to executives.
LONG-TERM INCENTIVES
Long-term incentive compensation is provided through grants of stock options
to the four senior executives and others. This component of compensation is
intended to retain and motivate executives to improve long-term results and
ultimately tangible book value and stock performance. Stock options have been
granted at or above the market price of the Company's Common Stock on the date
of grant and will only have value if the Company's stock price increases.
The four executive officers named in the Summary Compensation Table are
eligible to receive stock options under the Company's 1985 Stock Option Plan.
Since inception of that plan, an aggregate of 795,697 options have been
granted to employees, including 278,486 to the President and CEO and 154,889
to the remaining three named executive officers. Since May 1991, the Company
has not awarded any options to such named executive officers under the 1985
Stock Option Plan.
In 1991, the Company granted non-qualified, ten-year stock options covering
53,045 shares of the Company's common stock to the President and CEO and
covering an aggregate of an additional 53,045 shares to the other three named
executive officers.
In May 1992, the Compensation Committee approved the creation of non-
qualified, ten-year, Performance-Based Contingent Stock Options (the "1992
Performance-Based Contingent Stock Options") covering an aggregate of 477,405
shares of the Common Stock. Options covering a total of 424,360 shares of the
Common Stock were granted on May 7, 1992 to the named executive officers at an
exercise price of $14.84 per share, the closing price of the Company's Common
Stock on the date of grant, including options on 249,311 shares granted to the
President and CEO.
One of the features of the 1992 Performance-Based Contingent Stock Options
was the incentive vesting provision, which operates so that the options may be
exercised only to the extent that they have vested. The options vested as to
20% of the underlying shares immediately upon grant, but provide that the
vesting will occur as to the remaining 80% of the underlying shares upon the
achievement of significant, targeted annual increases in the Company's net
tangible book value per share on or before December 31, 1995, or upon the
occurrence of
14
<PAGE>
certain events prior to May 2002 relating to extraordinary transactions,
including a merger or consolidation of the Company, a sale, lease, exchange or
other disposition of all or substantially all of the assets of the company, a
liquidation or dissolution of the Company, or the acquisition of, or offer
for, 25% or more of the Company's issued and outstanding Common Stock by any
person or group.
The starting base for the minimum annual tangible book value per share
target increases was the Company's $9.59 tangible book value per share at
December 31, 1991. The minimum target amounts increased each year thereafter
to $16.35 at December 31, 1995. As a result of the Company achieving an actual
tangible book value per share in excess of the targeted amounts at December
31, 1992, 1993, and 1994, 76.9% of the 1992 Performance-Based Contingent Stock
Options have vested as of February 15, 1995. Because the final target amount
was not achieved by December 31, 1995, 97,943 shares of 1992 Performance-Based
Contingent Stock Options granted to the Company's named executive officers
remain unvested, subject to the occurrence of certain events discussed above.
In May 1995, the Company's stockholders approved the 1995 Performance-Based
Contingent Stock Option Plan covering 350,000 shares for senior executives and
management of the Company for the years 1996 through 1998. The 1995
Performance-Based Contingent Stock Options are designed to continue the long-
term, performance-based incentives to the Company's senior executives and
other key members of management which was initiated with the 1992 Performance-
Based Contingent Stock Options.
The 1995 Performance-Based Contingent Stock Options vested as to 20% of the
underlying shares upon grant, but will only vest as to the remaining 80% of
the underlying shares upon the achievement of significant, targeted annual
increases in the Company's net tangible book value per share on or before
December 31, 1998, or upon the occurrence of certain events relating to
extraordinary transactions, including a merger or consolidation of the
Company, a sale, lease, exchange or other disposition of all or substantially
all of the assets of the company, a liquidation or dissolution of the Company,
or the acquisition of, or offer for, 25% or more of the Company's issued and
outstanding Common Stock by any person or group. The 1995 Performance-Based
Contingent Stock Options were granted on December 31, 1995 with an exercise
price of $13.125, the closing price of the Company's stock on December 29,
1995, the last business day of the year. Vesting of 80% of the options granted
under the 1995 Plan would be contingent upon the future achievement of a
minimum 11% per annum, after tax growth in tangible book value per share for
each of the years ending December 31, 1996, 1997 and 1998. Each of the target
amounts is subject to adjustment to eliminate the dilutive effect to book
value per share that would result from the conversion of the Company's 7 1/4%
Debentures. If the target amount is achieved or surpassed, contingent option
shares vest at a pro-rata amount based upon the percentage increase achieved
toward the final target amount.
In order for the Company's management to achieve complete vesting under the
1995 Performance-Based Contingent Stock Options, the Company's tangible book
value per share must increase at least 36.7% over the next three years. Any
1995 Performance-Based Contingent Stock Options shares that have not vested in
a prior year may vest in a subsequent year if the cumulative targeted amount
for that subsequent year, through year-end 1998, is achieved or surpassed. If
the final target amount is not achieved by December 31, 1998, then any shares
that have not vested in 1996 or 1997 will remain unvested, unless one of the
above-described extraordinary events occurs prior to the date of option
expiration.
As of December 31, 1995, the Compensation Committee had allocated the
350,000 shares of 1995 Performance-Based Contingent Stock Options available
for grant as follows: James H. Herbert, II-170,000 shares; Katherine August-
deWilde-75,000 shares; Willis H. Newton, Jr.-45,000 shares; Linda G. Moulds-
25,000 shares; other key members of management-27,500 shares; and 7,500 shares
reserved for future allocation.
The Company's Performance-Based Contingent Stock Options Programs are
designed to create an incentive for the senior executives to produce
substantial growth in the Company's tangible book value per share. The
Compensation Committee believes that because tangible book value per share is
a key determinant of stockholder value in financial institution valuations,
this Contingent Stock Options program creates an extremely strong
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correlation between results for stockholders and executive compensation
because the executives' reward depends directly upon both growth in book value
per share and growth in share price. The targeted growth rates of tangible
book value per share compare very favorably with recent results for banks
generally and with California thrift institutions in particular. In addition,
by providing for more rapid vesting if results can be achieved sooner than the
targeted goals, both executives and stockholders could receive value on an
accelerated basis.
All employees of the Company who have been employed by the Company for more
than six months, including each of the four executive officers named in the
Summary Compensation Table, participate in the Company's Employee Stock
Ownership Plan (the "ESOP") and are eligible to participate in the Company's
401(k) Plan. Under the ESOP, employees are allocated shares of the Company's
Common Stock each year, in a pro-rata amount based upon the ratio of the
employees' salary to the aggregate amount of salaries paid by the Company to
all employees in that year. The number of shares that were allocated in 1995
to the four executive officers named in the Summary Compensation Table were
computed in accordance with Federal regulations that govern the ESOP and the
401(k) Plan. Such regulations establish an annual limit of $30,000 on the sum
of the cost of ESOP shares allocated, the amount of any voluntary employee
deferred compensation contributed to the 401(k) Plan and the amount of the
Company match under the 401(k) Plan. Shares earned under the ESOP vest over a
five-year period. The Compensation Committee believes that participation by
the named executive officers in the ESOP provides additional long-term
incentive for the creation of stockholder value.
In October 1995, the non-management directors of First Republic, upon
recommendation by the Board's Compensation Committee, unanimously approved the
adoption of a split dollar life insurance plan (the "insurance plan") for
certain key members of management, including each of the four executives named
in the Summary Compensation Table. Under the insurance plan, the Company will
pay life insurance premiums for selected employees and retain the cash value
of the insurance policy as collateral. Each employee will receive the benefit
of having an insurance policy in place and will pay income tax each year on a
portion of the premium for this insurance. The Company expects that in April
1996 employees will complete the application process for the insurance
policies and the Company will commence payments in April 1996. There were no
benefits under the insurance plan paid by the Company or received by any
employee during 1995. The Company believes that the long-term benefits
provided by the insurance plan will assist in the attraction and retention of
highly qualified management personnel.
TOTAL COMPENSATION
For each of the executive officers named in the Summary Compensation Table,
including the President and CEO, 39% of the total cash compensation on average
for the past three years was paid under the Executive Bonus Pool Program and
is therefore directly tied to the Company's performance. The Compensation
Committee believes that, together with the potential future value of all of
their stock options, a very significant portion of each of the named executive
officers' compensation, including the President and CEO's compensation, is
from incentive based compensation plans which the Compensation Committee
believes are linked directly to stockholder value creation.
March 29, 1996
COMPENSATION COMMITTEE
Roger O. Walther Barrant V. Merrill
L. Martin Gibbs James F. Joy
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the Company's Compensation Committee consists of Mr.
Walther, Mr. Gibbs, Mr. Joy, and Mr. Merrill. Since inception of the Company
in 1985, Mr. Walther has served as Chairman of the Board of Directors of the
Company (for purposes of this disclosure, Mr. Walther has not been an
executive officer of the Company). Additionally, Mr. Walther serves on the
Compensation Committee of Charles Schwab Corp. and Mr. Joy serves on the
Compensation Committee of Sylvania Lighting International. Mr. Gibbs is a
partner in the law firm of Rogers & Wells, counsel to the Company.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1997 Annual
Meeting of Stockholders must be received by First Republic not later than
December 28, 1996. Any such proposal should be communicated in writing to the
Secretary of First Republic at the address set forth on the first page of this
Proxy Statement.
OTHER MATTERS
The Board of Directors is not aware of any matter that may properly be
presented for action at the Meeting other than the matters set forth in the
accompanying Notice of Annual Meeting. Should any business not specified in
the accompanying Notice of Annual Meeting of Stockholders properly come before
the Meeting, the persons voting the proxies solicited by Management will vote
thereon in accordance with their best judgment.
A COPY OF THE COMPANY'S FORM 10-K (FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION) IS AVAILABLE WITHOUT CHARGE TO ANY STOCKHOLDER. REQUESTS SHOULD BE
DIRECTED TO THE CHIEF FINANCIAL OFFICER, WILLIS H. NEWTON, JR., AT FIRST
REPUBLIC BANCORP INC., 388 MARKET STREET, SAN FRANCISCO, CALIFORNIA 94111,
TELEPHONE NO. (415) 392-1400.
By Order of the Board of Directors
/s/ James H. Herbert, II
James H. Herbert, II, President
San Francisco, California
April 26, 1996
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LOGO
Printed on Recycled Paper
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PROXY
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
FIRST REPUBLIC BANCORP INC.
FOR 1996 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of First Republic Bancorp Inc. (the "Company")
hereby constitutes and appoints Roger O. Walther, James H. Herbert, II and
Katherine August-deWilde, and each of them, with full power of substitution,
attorneys and proxies of the undersigned to attend and act for the undersigned
at the 1996 Annual Meeting of Stockholders of the Company to be held on May 30,
1996, at 10:00 AM Pacific Time, at The Bankers Club, 555 California Street,
52nd Floor, San Francisco, CA 94104 and at any adjournments or postponements
thereof, and to represent and vote as designated below all of the shares of
Common Stock of the Company that the undersigned would be entitled to vote with
respect to the matters described in the accompanying Notice of Annual Meeting
of Stockholders and Proxy Statement, receipt of which is hereby acknowledged.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE REVERSE SIDE)
