<PAGE>
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
First State Bancorporation
---------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
First State Bancorporation
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
FIRST STATE BANCORPORATION
7900 JEFFERSON NE
ALBUQUERQUE, NEW MEXICO 87109
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
___________________________________
April 30, 1999
TO THE SHAREHOLDERS OF FIRST STATE BANCORPORATION:
The annual meeting of shareholders of First State Bancorporation, a New
Mexico corporation, will be held on Friday, June 4, 1999, at 2:00 p.m. local
time in the Crowne Plaza Pyramid, 5151 San Francisco Road NE, Albuquerque, New
Mexico, for the following purposes:
1. To elect three directors to hold office for a term ending at the
2002 annual meeting or until their successors are duly elected
and qualified.
2. To ratify the appointment of KPMG LLP as independent public
accountants for the year ending December 31, 1999.
3. To transact any other business which properly comes before the
meeting or any adjournment.
All shareholders of record on the Company's transfer books at the close of
business on April 14, 1999, are entitled to vote at the annual meeting. A
complete list of shareholders entitled to vote at the annual meeting will be
available for examination by any Company shareholder at 7900 Jefferson NE,
Albuquerque, New Mexico, for purposes germane to the annual meeting, during
normal business hours for ten days prior to the annual meeting.
Please read the attached proxy statement carefully. PLEASE SIGN, DATE AND
PROMPTLY RETURN THE ENCLOSED PROXY CARD AUTHORIZING REPRESENTATIVES OF THE
COMPANY'S MANAGEMENT TO VOTE ON YOUR BEHALF AT THE MEETING.
By the order of the Board
of Directors
FIRST STATE BANCORPORATION
/s/ Michael R. Stanford
Michael R. Stanford
President
<PAGE>
FIRST STATE BANCORPORATION
7900 JEFFERSON NE
ALBUQUERQUE, NEW MEXICO 87109
April 30, 1999
PROXY STATEMENT
THIS PROXY STATEMENT AND ACCOMPANYING PROXY CARD SUPPORT A PROXY
SOLICITATION ON BEHALF OF THE BOARD OF DIRECTORS OF FIRST STATE BANCORPORATION
(THE "COMPANY") FOR USE AT THE JUNE 4, 1999, ANNUAL MEETING OF SHAREHOLDERS AND
AT ANY ADJOURNMENT OF THAT MEETING. This proxy statement and form of proxy will
be sent by mail to shareholders beginning approximately April 30, 1999.
The proxy card, when properly signed, dated and returned to the Company,
will be voted by the proxies at the annual meeting as directed. Proxy cards
returned without direction about business to be transacted at the meeting will
be voted in favor of (i) the nominees for director proposed by management, and
(ii) ratification of the appointment of KPMG LLP as independent public
accountants for the year ending December 31, 1999. The holders of the proxies
will use their judgement regarding other matters that properly come before the
annual meeting. The Company is not aware of any matters, other than those
discussed in this proxy statement, that will be presented at the annual meeting.
The Company can conduct business at the annual meeting only if holders of a
majority of the total outstanding shares of Common Stock entitled to vote are
present, either in person or by proxy. Assuming a quorum has been reached, the
affirmative vote of the majority of the shares represented is necessary to elect
directors and ratify the appointment of auditors.
Under the rules of the Securities and Exchange Commission, boxes and a
designated blank space are provided on the proxy card for shareholders to mark
if they wish either to vote "for," "against" or "abstain" on one or more of the
proposals, or to withhold authority to vote for one or more of the Company's
nominees for director.
Votes withheld from director nominees and abstentions will be counted in
determining whether a quorum has been reached. Broker-dealer "non-votes" will
also be counted for quorum purposes.
1
<PAGE>
REVOCABILITY OF PROXY
Any shareholder giving a proxy may revoke it at any time prior to the
meeting either by submitting a later-dated proxy or by providing notice of
revocation to the Secretary of the Company at the address above. Shareholders
may vote all their eligible shares if they are personally present at the
meeting. When a shareholder votes at the meeting, his or her vote will revoke
any proxy previously granted by the shareholder.
EXPENSE AND MANNER OF SOLICITATION
In addition to solicitation by mail, proxies may be solicited in person or
by telephone or telegram by directors and officers of the Company who will not
receive compensation for their soliciting activities. Brokers and other
nominees will solicit proxies or authorizations from beneficial owners and will
be reimbursed for their reasonable expenses.
PROPOSAL 1
ELECTION OF DIRECTORS
All of the Common Stock represented by valid proxies received from
shareholders will be voted for the nominees for directors named below, unless
authority to do so is withheld. Each nominee for director has consented to his
nomination and to serve if elected. If any nominee is unable to serve, the proxy
will be voted to elect any other person for the office of director whom the
Board of Directors recommends in the place of that nominee.
Three directors are to be elected to serve until the 2002 Annual Meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS
As of April 14, 1999, the record date, 3,426,073 shares of the Company's
Common Stock were outstanding and entitled to vote at the annual meeting.
Holders of shares of Common Stock may cast one vote for each share on each
matter of business properly brought before the meeting. Only shareholders of
record at the close of business on April 14, 1999, may vote. Shareholders are
not allowed to cumulate votes in the election of directors.
2
<PAGE>
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of April 14, 1999, by (i) each
shareholder known by the Company to be the beneficial owner of more than 5% of
the outstanding Common Stock, (ii) each director of the Company, and (iii) all
directors and executive officers as a group. Unless otherwise indicated, based
on information furnished by such owners, the Company believes that the
stockholders listed below have sole investment and voting power with respect to
their shares. Unless otherwise indicated, the address of such person is the
Company's address, 7900 Jefferson NE., Albuquerque, New Mexico 87109.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF SHARES
NAME OWNED OWNED
- -------------------------------------------------------------------------------
<S> <C> <C>
Hovde Capital, Inc.
1826 Jefferson Place, NW
Washington, DC 20036 245,010 (1) 7.17%
John Hancock Advisors, Inc.
101 Humington Avenue
Boston, MA 02199 190,125 5.56%
First Union Corporation
One First Union Center
Charlottee, NC 28288-0137 250,761 7.33%
Carlson Capital, L.P.
301 Commerce Street, Ste. 330
Fort Worth, TX 76102 172,550 5.05%
Michael R. Stanford 114,363 (2) 3.27%
H. Patrick Dee 62,160 (3) 1.79%
Eloy A. Jeantete 1,023 *
Leonard J. DeLayo, Jr. 87,111 (4) 2.54%
Bradford M. Johnson 164,008 4.80%
Douglas M. Smith, M.D. 23,750 *
Herman N. Wisenteiner 9,829 *
Marshall G. Martin 699 *
Kevin L. Reid 3,000 *
Brian C. Reinhardt 7,848 (5) *
All executive officers and directors
as a group (11 persons) 515,459 14.34%
</TABLE>
_________________
* Less than 1%
(1) Represents the aggregate shares held by Hovde Capital, Inc. and its
affiliates: Financial Institution Partners, LP, Financial Institution
Partners II, LP, Hovde Capital, LLC, and Hovde Acquisition, LLC.
(2) Includes 6,612 shares that are subject to an option exercisable at $5.01
per share, 62,500 shares that are subject to an option which is exercisable
at $8.40 per share, and 8,000 shares that are subject to an option
exercisable at $17.25 per share.
(3) Includes 43,750 shares that are subject to an option which is exercisable
at $8.40 per share, and 4,000 shares that are subject to an option
exercisable at $17.25 per share.
(4) Includes 12,500 shares that are subject to an option which is exercisable
at $8.40 per share.
(5) Includes 2,000 shares that are subject to an option which is exercisable at
$8.40 per share, and 4,000 shares that are subject to an option exercisable
at $17.25 per share.
3
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
Certain biographical information, including principal occupation and
business experience during the last five years, of each nominee for director is
set forth below. Unless otherwise stated, the principal occupation of each
nominee has been the same for the past five years.
Name Age Position with Company
- ---------------------------------------------------------------------
Douglas M. Smith, M.D. 65 Director
Herman N. Wisenteiner 68 Director
Kevin L. Reid 38 Director
- ---------------------------------------------------------------------
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR THE NOMINEES FOR THE BOARD OF DIRECTORS.
---
There are no family relationships among any of the directors, officers, or
key employees of the Company. The current authorized number of directors of the
Company is ten. The directors nominated herein will serve until the 2002 annual
meeting.
NOMINEES FOR ELECTION AT 1999 ANNUAL MEETING
Douglas M. Smith, M.D., a Director of the Company since November 1993, is a
Board Certified radiologist and the owner/general partner of The Historic Taos
Inn, Taos, New Mexico. Dr. Smith is the co-founder and former President of Palm
Beach Imaging, Inc., West Palm Beach, Florida, and a former member of the Board
of Directors of the PIE Medical Insurance Co., a physician-owned medical
malpractice insurance company headquartered in Cleveland, Ohio.
Herman N. Wisenteiner, a Director of the Company since November 1993, is
President and Chief Executive Officer of Horn Distributing Company, a real
estate holding company which he founded in 1971 in Santa Fe, New Mexico. In
addition to his many civic activities in northern New Mexico, from 1984 to 1993,
Mr. Wisenteiner was also Chairman and Chief Executive Officer of CLX
Exploration, Inc., a publicly traded oil and natural gas exploration and
production company headquartered in Denver, Colorado, and served as a Director
of First Interstate Bank, Santa Fe, New Mexico, from 1980 to 1993. See "Certain
Business Relationships - Santa Fe Branch Location."
Kevin L. Reid was appointed by the Board of Directors to fill a vacancy
created by the resignation of Manuel Lujan, Jr. Mr. Reid will complete the term
created by that
4
<PAGE>
resignation which runs until the 1999 annual meeting. Mr. Reid is President and
Owner of Reid & Associates, a design/build construction company, a position he
has held since 1997, when he assumed the presidency of Reid & Elliott and
changed the name of the Company to Reid & Associates. Mr. Reid co-founded Reid &
Elliott in 1991. See "Certain Business Relationships - Operations Building."
CURRENT DIRECTORS SERVING UNTIL 2000 ANNUAL MEETING
Name Age Position with Company
- --------------------------------------------------------------------------------
Eloy A. Jeantete 71 Chairman of the Board and Director
Michael R. Stanford 46 President, Chief Executive Officer, and
Director
Marshall G. Martin 60 Director
- --------------------------------------------------------------------------------
Eloy A. Jeantete, a Director of the Company since August 1993 and Chairman
of the Board since January 1994, joined First State Bank 50 years ago as a
bookkeeper and has spent his entire working career with First State Bank, rising
to his present position of Chairman of the Board of the Company. As a lifetime
resident of Taos, New Mexico, Mr. Jeantete has accumulated a long list of civic
achievements and community involvement, culminating with his election in 1990 as
Mayor of Taos, New Mexico, a position he held until March 1994.
Michael R. Stanford, a Director of the Company since its organization in
1988, is President and Chief Executive Officer of the Company and First State
Bank. Mr. Stanford's entire career has been in the banking industry. Prior to
joining First State Bank in 1987, Mr. Stanford spent five years with New Mexico
Banquest Corporation as Senior Vice President in charge of loan administration.
Mr. Stanford is a past director of the New Mexico Bankers Association. In
addition, Mr. Stanford is involved in a variety of civic organizations. See
"Certain Business Relationships - Operations Building."
Marshall G. Martin, a Director of the Company since June 1997, is a senior
partner with the law firm of Hinke, Cox, Eaton, Coffield & Hensley, L.L.P., a
position he has held since June 1997 and prior to January of 1997. For the
period of January 1997 through June 1997, Mr. Martin was Vice President-General
Counsel of Solv-Ex Corporation which filed for chapter 11 bankruptcy
reorganization in August 1997 and which emerged from bankruptcy in 1998. Hinkle,
Cox, Eaton, Coffield & Hensley, L.L.P., is the Company's corporate counsel. See
"Certain Business Relationships - Legal Services." Mr. Martin is involved in a
variety of civic organizations.
5
<PAGE>
CURRENT DIRECTORS SERVING UNTIL THE 2001 ANNUAL MEETING
Name Age Position with Company
- -------------------------------------------------------------------------------
H. Patrick Dee 44 Executive Vice President, Chief Operating
Officer, Secretary/Treasurer, and Director
Leonard J. DeLayo, Jr. 50 Director
Bradford M. Johnson 48 Director
- -------------------------------------------------------------------------------
H. Patrick Dee has been a Director of the Company since 1991 and presently
serves as Executive Vice President, Chief Operating Officer, and
Secretary/Treasurer of the Company, and Executive Vice President and Chief
Operating Officer of First State Bank, a position he has held since December
1991. Prior to joining the Company, Mr. Dee spent four years with New Mexico
Banquest Corporation and, after its acquisition by Livingston & Co. Southwest,
LP, in 1988, with National Bank of Albuquerque. In 1989, Mr. Dee became Senior
Vice President and Chief Financial Officer of Livingston & Co. Southwest, LP.
Mr. Dee is a certified public accountant. See Certain Business Relationships -
Operations Building."
Leonard J. DeLayo, Jr., a Director of the Company since November 1993,
served as a director of First State Bank from 1988 to January 1992. Mr. DeLayo
has been engaged in a general corporate and commercial law practice in New
Mexico since 1974 and is the President and sole shareholder of Leonard J.
DeLayo, Jr., P.C., which currently provides legal services to the Company and
First State Bank as outside counsel. Mr. DeLayo serves on the Albuquerque Board
of Education. See "Certain Business Relationships - Legal Services."
Bradford M. Johnson, a Director of the Company since November 1993, is
President of Heron Hill Corporation, a private company engaged in investments
and financial consulting. From 1991 to November 1993, Mr. Johnson was a partner
and Director of Research of Sterne, Agee & Leach, Inc., an investment banking
firm in Atlanta, Georgia. Mr. Johnson studied at the University of Paris-
Sorbonne from 1987 to 1991.
INFORMATION WITH RESPECT TO STANDING COMMITTEES OF THE
BOARD OF DIRECTORS AND MEETINGS
The Board of Directors held four meetings during the year ended December
31, 1998. Each incumbent director attended 75% or more of the meetings of the
board of directors and committees on which he served.
6
<PAGE>
The Board of Directors has an executive committee, an audit committee, and
a compensation committee. The Board of Directors does not have a standing
nominating committee. Nominations to the Board are determined by the entire
Board.
The executive committee members are Eloy A. Jeantete, Michael R. Stanford,
Bradford M. Johnson, and Douglas M. Smith. The executive committee did not meet
during 1998. The executive committee meets periodically to explore and consider
issues in advance of the meetings of the entire Board of Directors and makes
recommendations to the Board of Directors concerning such issues.
The audit committee members are Douglas M. Smith, Bradford M. Johnson and
Leonard J. Delayo, Jr. The audit committee held four quarterly meetings during
the year ended December 31, 1998. The audit committee reviews with the
independent and internal auditors of the Company their respective audit and
review programs, procedures, the scope and results of their examinations, and
their fees and related costs. Additionally, the audit committee reviews the
financial statements and the adequacy of the Company's system of internal
accounting controls. The audit committee makes recommendations to the Board of
Directors relating to the independent auditors and to their engagement or
discharge.
The compensation committee members are Kevin L. Reid and Herman N.
Wisenteiner. The committee held one meeting during the year ended December 31,
1998. The purpose of the compensation committee is to determine the compensation
and benefits for executive officers of the Company.
CERTAIN BUSINESS RELATIONSHIPS
CREDIT TRANSACTIONS
The executive officers, directors, and principal stockholders of the
Company and the Bank, and members of their immediate families and businesses in
which these individuals hold controlling interests, are customers of the Bank,
and it is anticipated that such parties will continue to be customers of the
Bank. Credit transactions with these parties are subject to review by the
Bank's Board of Directors. All outstanding loans and extensions of credit by
the Bank to them 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 in the opinion of
management did not involve more than the normal risk of collectability or
present other unfavorable features. At December 31, 1998, the aggregate balance
of the Bank's loans and advances under existing lines of credit to these parties
was $1,157,068, or 0.35% of the Bank's total loans. All payments of principal
and interest on these loans are current. These loans represented 2.62% of the
Company's equity as of December 31, 1998.
7
<PAGE>
LEGAL SERVICES
Mr. DeLayo was a director of First State Bank from 1988 through January
1992 and was a director of the First State Bank of Santa Fe from March 1993 to
June 1994 and was appointed as a director of the Company in November 1993. Mr.
DeLayo acts as general counsel to the Company and First State Bank. Mr. DeLayo
and his firm, Leonard J. DeLayo, P.C., represent the Company in numerous
collection matters. The Company paid Mr. DeLayo's firm approximately $219,000,
$205,000, and $146,000 for its services in 1998, 1997, and 1996.
Marshall G. Martin was elected to the Board as a director in June 1997.
Mr. Martin is a partner in the firm of Hinkle, Cox, Eaton, Coffield & Hensley,
L.L.P., which serves as the Company's corporate counsel. The Company paid
Hinkle, Cox, Eaton, Coffield & Hensley, L.L.P., approximately $32,000 and
$85,000 for its services in 1998 and 1997, respectively.
SANTA FE BRANCH LOCATION
The Downtown Santa Fe location was constructed on land owned by Herman N.
Wisenteiner, a Director of the Company. The Company is leasing the site from
Mr. Wisenteiner for an initial term of 15 years. Lease payments made to Mr.
Wisenteiner were $63,700 for 1998, $61,800 in 1997, and $60,000 in 1996,
respectively. In the opinion of management, the lease is on terms similar to
other third-party commercial transactions in the ordinary course of business.
OPERATIONS BUILDING
The Company has sold a property it held for construction of an operations
building to a limited liability company with its managing member a corporation
controlled by Kevin L. Reid with ownership interests by Michael R. Stanford, H.
Patrick Dee, and certain officers of First State Bank. This company will
construct a building in which First State Bank will lease significant space for
bank operations. In the opinion of management, this transaction and the related
lease are on terms similar to other third-party transactions in the ordinary
course of business.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company is paid an annual fee
of $3,000 and a per meeting fee of $500 and is reimbursed for expenses incurred
in attending meetings of the Board of Directors and the committee meetings of
the Board of Directors.
8
<PAGE>
EXECUTIVE COMPENSATION
The following tables set forth the compensation paid by the Company to the
three executive officers of the Company and one officer of the bank subsidiary
who received in excess of $100,000 in cash compensation.
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Name and Annual Compensation Stock
------------------------------------
Principal Position Year Salary($) Bonus ($) Other ($)(1) Options Granted (#)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Michael R. Stanford 1998 $250,000 $ 50,000 $50,370 0
President and Chief 1997 $220,833 -- $50,405 20,000
Executive Officer 1996 $183,333 $ 24,000 $41,621 0
H. Patrick Dee 1998 $175,000 $ 35,000 $47,538 0
Secretary and 1997 $154,583 -- $46,097 10,000
Treasurer 1996 $130,000 $ 16,000 $42,836 0
W. Gary Millhollon
Senior Vice President 1998 $ 70,000 $157,146 $ 8,100 0
Bank Subsidiary 1997 $ 70,000 $126,874 $ 8,100 0
Leasing division 1996 $ 86,575 $ 20,830 $ 6,000 0
Brian C. Reinhardt
Senior Vice President 1998 $106,000 $ 6,000 $ 9,795 0
and Chief Financial 1997 $ 86,563 $ 3,000 $ 8,540 10,000
Officer 1996 $ 70,750 $ 1,000 $ 8,303 0
</TABLE>
__________________
(1) Represents insurance premiums paid by the Company on behalf of the
employee, amounts contributed by the Company to the employee's Section
401(k) plan, auto allowance, and dues.
Aggregated Option Exercises in Fiscal Year
------------------------------------------
and Fiscal Year-End Options Value
---------------------------------
<TABLE>
<CAPTION>
Number of
Unexercised Option Value of In-the-Money
Shares Value at 12/31/98 (#) Options at 12/31/98
Acquired on Realized Exercisable / ($) (1) Exercisable /
Name Exercise (#) ($) Un-exercisable Un-exercisable
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael R. Stanford -- -- 77,112 $903,998
12,000 $ 42,000
H. Patrick Dee -- -- 47,750 $554,313
6,000 $ 21,000
Brian C. Reinhardt -- -- 6,000 $ 38,700
6,500 $ 27,175
</TABLE>
_____________________________
(1) The closing price of the Company's Common Stock on December 31, 1998, was
$20.75 per share.
9
<PAGE>
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
[Individual Grants]
- --------------------------------------------------------------------------------------------
Number of Percent of total
securities options/SARs
underlying granted to
options/SARs employees in Exercise or base
Name granted (#) fiscal year price ($/Sh) Expiration Date
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael R. Stanford None
H. Patrick Dee None
Brian C. Reinhardt None
</TABLE>
EXECUTIVE INSURANCE
First State Bank has key-person insurance policies on each of Messrs.
Stanford and Dee. Under these policies, First State Bank is named as
beneficiary of $577,865 of term life insurance on Mr. Stanford and $321,516 of
term life insurance on Mr. Dee (the "Term Life Policies"). In addition, First
State Bank also pays the premiums on $922,135 of additional whole life insurance
for Mr. Stanford and $878,484 for Mr. Dee under which each of these individuals
is able to name the beneficiary (the "Whole Life Policies"). Under the
provisions of the Term Life Policies the amount of term insurance under each
policy is gradually decreased over a period of 10 years. However, First State
Bank's premium payments are kept level during the entire 10 year period with the
excess premiums from the Term Life Policies being applied to the Whole Life
Policies. As a result of the increasing portion of the premiums which are
allocated to the Whole Life Policies, at the end of the 10 year period the Whole
Life Policies are fully paid. Upon termination of employment, the Whole Life
Policies would be transferable to Messrs. Stanford or Dee who could elect to
continue making the premium payment if such termination occurred prior to the
tenth year of the policy. The annual premium which will be paid for the Whole
Life Policies will constitute compensation to such individuals.
STOCK OPTION AGREEMENT
Under the terms of a stock option agreement, Michael R. Stanford can
exercise an option to purchase 6,612 shares of Common Stock at a price of $5.01
per share. As originally granted, the option allowed Mr. Stanford to purchase
up to 10% of the common stock of New Mexico Bank Corporation ("NMBC"), the
parent holding company of NBA, at the book value of the NMBC common stock as of
November 19, 1990. In December 1991, the option was converted to an option to
purchase the Company's Common Stock when NMBC was merged into the Company. The
option may be exercised at any time by Mr. Stanford and will expire on October
12, 2003.
10
<PAGE>
EXECUTIVE INCOME PROTECTION PLAN
The Company has an Executive Income Protection Plan (the "Plan") with the
following participants: H. Patrick Dee, Brian C. Reinhardt, and Michael R.
Stanford, which provides for benefits upon a Control Change. Following a
Control Change (as defined in the Plan), the Plan provides for a three-year
employment term and specifies the employee's position, salary, bonus, and
benefits payable during that period. If the employee (i) resigns; (ii) is
discharged for any reason other than cause, death, or disability; (iii)
experiences a Reduction in Position (as defined in the Plan) within a three-year
period beginning on the date of the Control Change, then the employee shall have
income protection benefits consisting of (a) a compensation benefit, payable in
a single sum, equal to three times his Compensation (as defined in the Plan) in
the case of Messrs. Dee and Stanford and two times his Compensation in the case
of Mr. Reinhardt; (b) the same level of fringe benefits as existed on the date
of the Control Change for a period ending three years after the Control Change
including, without limitation, any plan or arrangement to receive and exercise
stock options and/or stock appreciation rights, restricted stock, or grants
thereof in which the employee is participating on the date of the Control Change
(or plans or arrangements providing him with substantially similar benefits);
(c) an amount equal to the employee's non-vested accrued benefit in the
Company's retirement plans, determined as of the last valuation date under such
plans, if the employee is not fully vested under the terms of such plans; (d) up
to a maximum of 30 percent of his Compensation for out-placement services for
the employee; and (e) a lump sum payment at the same time as the compensation
payment described in (a) above, if the Company has purchased a split-dollar life
insurance policy on the life of an employee.
"Control Change" is defined in the Plan as (i) a sale or sales (including
an exchange) of shares of the Company, other than pursuant to a public offering,
at one or more times by the Company, a stockholder, or stockholders of the
Company, or by any combination of the foregoing, which in the aggregate results
in the beneficial ownership of more than 50% of the combined voting power of the
Company's outstanding securities after the sale or sales by one or more
stockholders who were not stockholders of the Company on April 19, 1996 (the
effective date of the Plan), and who were not controlled after the sale or
sales, directly or indirectly, by one or more of the stockholders of the Company
on April 19, 1996; (ii) a sale or sales by the Company of all or substantially
all of its assets to one or more persons or entities who were not stockholders
of the Company on April 19, 1996, and who are not controlled after the sale or
sales, directly or indirectly, by one or more of such stockholders; or (iii) a
merger or other combination in which the Company is either the surviving or
disappearing corporation, which results in the beneficial ownership of more than
50% of the combined voting power of the outstanding securities of the surviving
corporation by one or more persons or entities which were not stockholders of
the Company on April 19, 1996, and which are not controlled after such merger or
other combination, directly or indirectly, by
11
<PAGE>
one or more of such stockholders; (iv) the approval by the stockholders of the
Company of any plan or proposal to liquidate or dissolve the Company; or (v)
during any period of two consecutive years, individuals who at the beginning of
the period constitute the entire Board of Directors of the Company cease for any
reason to constitute a majority thereof, unless the election or the nomination
for election by the Company's stockholders of each new director was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
"Compensation" means the sum of: (i) the employee's average taxable
compensation from the Company; (ii) the employee's average elective salary
reduction contributions to plans under Internal Revenue Code (the "Code")
Sections 401(k) and/or 125; and (iii) the product of the average percentage of
covered payroll contributed by the Company to the Company's 401(k) profit
sharing plan multiplied by the sum of (i) and (ii) in each case for the five
calendar years preceding the Control Change.
"Reduction in Position" shall occur if an employee (i) is removed as an
officer or director; (ii) experiences a significant decrease in managerial or
supervisory authority; (iii) experiences a reduction in salary or bonus; (iv)
is required by the Company to relocate to an office more than 50 miles from his
location before the Control Change; (v) is reduced in the rate of his awards
under any stock option plan in effect before the Control Change; (vi)
experiences a material adverse change in his terms and conditions of employment.
The Plan provides that the employees will be entitled to a gross-up payment
if it is determined that any payment would be subject to the excise tax imposed
by Section 4999 of the Code. The Plan also provides for the Company to pay the
employee's legal fees incurred in any contest relating to the Plan and certain
other indemnifications to the extent permitted under applicable New Mexico or
federal law and under the Company's Bylaws and Articles of Incorporation.
The aggregate cost to the Company of the requirements for payments to
employees covered under the Plan (including the cost of early vesting under
employee plans) would not exceed $2.3 million.
SECTION 401(K) PLAN
In 1991, the Company adopted a tax-qualified profit sharing 401(k) plan
(the "Saving Plan") covering all employees who have attained 21 years of age and
have completed one year of service with the Company. Each participant in the
Saving Plan may reduce his or her salary by as much as the lesser of 20% of his
or her compensation or $10,000 in 1998. The dollar limit is adjusted each year
for inflation. The Company is required to make matching contributions of up to
50% of the first 6% of a participant's deferred compensation up to a
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<PAGE>
maximum of 3%. The Company may, but is not required to, contribute additional
amounts to the Saving Plan. Any such additional amounts are allocated to the
accounts of participants who were active participants on the last day of the
plan year or who retired or died or were disabled during the plan year. The
allocation is in proportion to the eligible participants' compensation. During
1998, 1997, and 1996, First State Bank made contributions to the Saving Plan of
approximately $146,000, $125,000, and $106,000, respectively.
All contributions by a participant are 100% vested and nonforfeitable at
all times. The Company's contributions become 100% vested after three years of
service with the Company. A participant may direct the investment of his or her
account pursuant to the investment options offered by the trustee of the Saving
Plan. Distribution of a participant's account under the Saving Plan normally
occurs upon the participant's retirement or termination of employment with the
Company.
INCENTIVE PLANS
Effective October 5, 1993, the Company adopted the First State
Bancorporation 1993 Stock Option Plan (the "Stock Option Plan"), which provides
for the granting of options to purchase up to 400,000 shares of the Company's
common stock. Exercise dates and prices for the options are set by a committee
of the Board of Directors. The Stock Option Plan also provides that options
other than those qualifying as incentive stock options may be granted.
The Stock Option Plan is administered by a committee composed of
disinterested members of the Board of Directors (the "Committee"). Subject to
the terms of the Stock Option Plan, the Committee determines the persons to whom
awards are granted, the type of award granted, the number of shares granted, the
vesting schedule, the type of consideration to be paid to the Company upon
exercise of options, and the term of each option (not to exceed ten years).
Under the Stock Option Plan, the Company may grant both incentive stock
options ("incentive stock options") intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and options which are
not qualified as incentive stock options ("non-qualified stock options").
Incentive stock options must be granted at an exercise price equal to or greater
than the fair market value of the Common Stock on the date of grant. The
exercise price of non-qualified stock options granted under the Stock Option
Plan will be determined by the Committee on the date of grant. The exercise
price of incentive stock options granted to holders of more than 10% of the
Common Stock must be at least 110% of the fair market value of the Common Stock
on the date of grant, and the term of these options may not exceed five years.
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The Stock Option Plan provides that the total number of shares covered by
the plan, the number of shares covered by each option, and the exercise price
per share may be proportionately adjusted by the Board of Directors or the
Committee in the event of a stock split, reverse stock split, stock dividend, or
similar capital adjustment effected without receipt of consideration by the
Company.
Upon a change in control of the Company, stock options outstanding under
the Stock Option Plan immediately become fully vested and exercisable. Also, in
the event of a merger or consolidation in which the Company is not the surviving
corporation, the sale of all or substantially all of the Company's assets,
certain reorganizations, or the liquidation of the Company, each option granted
under the Stock Option Plan may, at the election of the holder, become
immediately exercisable.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors, and persons who own more than 10% of a registered class of
the Company's equity securities and certain other affiliated persons to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc. Officers,
directors, and greater than 10% shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished to the
Company, or written representations that no other forms were required, the
Company believes that during the fiscal year ended December 31, 1998, except
that Kevin L. Reid failed to timely file a report of initial ownership which has
now been filed, all Section 16(a) filing requirements applicable to its
officers, directors, and greater than 10% beneficial owners were complied with.
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PROPOSAL 2
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP was the Company's independent public accounting firm for 1998 and
has been approved by the Directors to continue in that capacity in 1999.
A proposal to ratify the appointment of KPMG LLP will be presented to the
shareholders at the annual meeting. Representatives of KPMG LLP will be present
at the annual meeting and will have an opportunity to make a statement if they
desire to do so and respond to appropriate questions.
THE COMPANY'S BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF
---
KPMG LLP
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<PAGE>
SHAREHOLDER PROPOSALS
Shareholders are entitled to submit proposals on matters appropriate for
shareholder action consistent with regulations of the Securities and Exchange
Commission and the Company's Bylaws. If a shareholder wishes to have a proposal
appear in the Company's proxy statement for next year's annual meeting, under
the regulations of the Securities and Exchange Commission, it must be received
by the Secretary of the Company (at P.O. Box 3686, Albuquerque, New Mexico
87190) on or before December 15, 1999.
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative shareholder return on the Company's
Common Stock since December 31, 1993, with the cumulative total return on the
Nasdaq Total US Index and the SNL less than $500M Bank Index. The table below
compares the cumulative total return of the Common Stock as of December 31,
1994, 1995, 1996, 1997, and 1998, assuming a $100 investment on December 31,
1993, and assuming reinvestment of all dividends. This data was furnished by SNL
Securities LC.
INSERT GRAPH
16
<PAGE>
<TABLE>
<CAPTION>
PERIOD ENDING
-----------------------------------------------------------------------
INDEX 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First State Bancorporation 100.00 100.60 128.77 161.80 233.54 229.38
NASDAQ - Total US 100.00 97.75 139.26 170.01 208.58 293.21
SNL less than $500M Bank Index 100.00 107.55 147.13 189.37 322.82 294.76
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This is a report of the Compensation Committee of the Board of Directors
(the "Committee"), which is composed of the following Board members, Kevin L.
Reid, and Herman N. Wisenteiner, both of whom are nonemployee directors. This
report shall not be deemed incorporated by reference into any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934 and shall not
otherwise be deemed filed under either such Act.
In designing executive compensation, the Committee has adopted the policy
that the Company's executives should be paid fairly for the positions they hold
in view of the nature and size of the business which the Company operates. The
compensation level of the executives of the Company recognizes contributions
towards the Company's performance by the executives and is designed to attract
and retain competent executives who share the objectives of the Company and its
stockholders. The goal of the Committee is to ensure that the Company employs
qualified, experienced executive officers whose financial interest is aligned
with that of the stockholders. The Committee considers general industry
practice, tax effects, and other factors in structuring executive compensation
awards. Base salaries for each of the executive officers of the Company are
determined by taking into consideration performance, length of tenure with the
Company, compensation by industry for comparable positions, and career
achievements.
Michael R. Stanford, President and C.E.O., and H. Patrick Dee, Executive
Vice President and C.O.O., receive bonus compensation based on a formula
monitored by the Compensation Committee. The bonus formula awards compensation
as a percentage of base salary for the Company's actual performance relative to
its annual budget for earnings before income taxes, asset growth, and efficiency
ratio, and based upon certain levels of return on average equity.
The Company believes that its executives should have a vested interest in
the performance of the Common Stock and, therefore, stock options are used as an
integral part of creating incentives for executives. Option grants are
dependent upon individual performance, level of responsibility, and other
relevant factors. Options are used in order to align the benefits received by
the executive officers with the appreciation realized by stockholders.
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<PAGE>
Since going public in November 1993, the Company has experienced
significant growth in its interest-earning assets, deposits, and net income.
The Committee believes that Mr. Stanford's performance as C.E.O. continues to be
important to the Company's success. His ongoing leadership is needed to achieve
meaningful financial results. His efforts encompass the strategic direction for
the Company's vision as well as direct involvement in driving the Company's
assets and income growth. The Committee believes Mr. Stanford's 1998
compensation was consistent with the overall executive officer compensation
structure.
All recommendations of the Committee have been and are subject to review
and approval of the Board of Directors.
FIRST STATE BANCORPORATION COMPENSATION COMMITTEE
Kevin L. Reid Herman N. Wisenteiner
OTHER BUSINESS
All items of business to be brought before the meeting are set forth in
this proxy statement. Management knows of no other business to be presented.
If other matters of business not presently known to management are properly
raised at the meeting, the proxies will vote on the matters in accordance with
their best judgment.
By order of the Board of Directors
FIRST STATE BANCORPORATION
/s/ MICHAEL R. STANFORD
_____________________________
Michael R. Stanford
President
NOTE:
Shareholders are requested to sign, date, and promptly return the enclosed
proxy card, in the enclosed envelope.
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<PAGE>
FIRST STATE BANCORPORATION
7900 JEFFERSON NE
ALBUQUERQUE, NEW MEXICO 87109
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints H. Patrick Dee and Michael R. Stanford
as Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of common
stock of First State Bancorporation held of record by the undersigned on April
14, 1999, at the annual meeting of shareholders to be held on June 4, 1999, or
any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" IN ITEM 1 AND "FOR"
ITEMS 2 AND 3.
Item 1 - ELECTION OF DIRECTORS
[_] FOR all nominees [_] WITHHOLD AUTHORITY for all nominees
INSTRUCTION: To withhold authority to vote for any individual nominee strike a
line through the nominee's name in the list below. Douglas M. Smith, M.D.,
Herman N. Wisenteiner, Kevin L. Reid.
Item 2 - PROPOSAL TO RATIFY THE SELECTION OF KPMG LLP as the independent public
accountants of the Company.
[_] For [_] Against [_] Abstain
Item 3 - In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder.
The shares represented by this proxy will be voted as directed by the
shareholder. If no direction is given when the duly executed proxy is returned,
such shares will be voted "FOR all nominees" in Item 1 and "FOR" Item 2.
PLEASE DATE AND SIGN AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
-------------
Please mark, sign, date and return the proxy card
promptly, in the enclosed envelope.
______________________________________
Date
______________________________________
Signature
______________________________________
Signature if held jointly
Please sign exactly as name appears. When shares are held by
joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee, or guardian, please give
full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If
a partnership, please sign in partnership name by authorized
person.
