FIRST BANKING CENTER, INC.
400 Milwaukee Avenue
Burlington, Wisconsin 53105
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
April 21, 1998
The Annual Meeting of Stockholders of First Banking Center, Inc.
(the "Corporation") will be held at 1:30 P.M. on April 21, 1998, at
First Banking Center, Inc., 400 Milwaukee Avenue, Burlington, for
the purposes set forth in the attached Notice of Annual Meeting.
The accompanying Proxy is solicited on behalf of the Board of
Directors of the Corporation in connection with such meeting or any
adjournment(s) thereof. The approximate date on which the Proxy
statement and form of Proxy are expected to be sent to security
holders is March 17, 1998.
VOTING OF PROXIES AND REVOCABILITY
When the Proxy is properly executed and returned to the Secretary
of the Corporation, it will be voted as directed by the Stockholder
executing the Proxy unless revoked. If no directions are given, the
shares represented by the Proxy will be voted FOR the election of
the nominees listed in the Proxy Statement. If additional matters
are properly presented, the persons named in the Proxy will have
discretion to vote in accordance with their own judgment in such
matters. Any person giving a Proxy may revoke it at any time before
it is exercised by the execution of another Proxy bearing a later
date, or by written notification to the Secretary of the
Corporation, Mr. John S. Smith, Secretary of First Banking Center,
Inc., 400 Milwaukee Avenue, Burlington, Wisconsin 53105.
Stockholders who are present at the Annual Meeting may revoke their
Proxy and vote in person if they so desire.
VOTING SECURITIES, PERSONS ENTITLED TO VOTE AND VOTES REQUIRED
As of January 30, 1998, there were 1,484,818 shares of Common Stock
($1.00 par value) of the Corporation (the "Common Stock")
outstanding. The Board of Directors has fixed March 3, 1998 as the
record date and only stockholders whose names appear of record on
the books of the Corporation at the close of business on March 3,
1998, will be entitled to notice of and to vote at the Annual
Meeting or any adjournment(s) thereof. A stockholder is entitled to
one vote for each share of stock registered in his or her name. A
majority of the outstanding Common Stock will constitute a quorum
for the transaction of business at the Annual Meeting. Abstentions
will be treated as shares that are present and entitled to vote for
purposes of determining the presence of a quorum, but as unvoted
for purposes of determining the approval of any matter submitted to
the shareholders for a vote. The nine nominees for director who
receive the largest number of affirmative votes cast at the Annual
Meeting will be elected as directors.
THE COST OF SOLICITATION OF THE PROXIES WILL BE BORNE BY FIRST
BANKING CENTER, INC. IN ADDITION TO USE OF THE MAILS, PROXIES MAY
BE SOLICITED PERSONALLY BY THE OFFICERS OF FIRST BANKING CENTER,
INC., AND BY TELEPHONE.
The complete mailing address of First Banking Center, Inc. is 400
Milwaukee Avenue, P.O. Box 660, Burlington, Wisconsin, 53105.
PRINCIPAL HOLDERS OF SECURITIES
As of January 30, 1998, the Trust Department of a wholly owned
subsidiary of the Corporation owned in a fiduciary capacity 167,050
shares of Common Stock, constituting 11.3% of the Corporation's
outstanding shares entitled to vote. Sole voting and investment
power is held with respect to 62,645 of such shares. With the
exception of the persons named in Table I, no person is known to
the Corporation to own beneficially more than 5% of the outstanding
shares entitled to vote.
PROPOSAL 1
ELECTION OF DIRECTORS
It is the recommendation of the Board of Directors that 9 Directors
be elected to serve during the ensuing year and until their
successors have been duly elected and qualified. Unless authority
is withheld by your proxy, it is intended that the shares
represented by the proxy will be voted FOR the 9 nominees listed in
Table I. All listed nominees are incumbent directors. If any
nominee is unable to serve for any reason, the proxies will be
voted for such person as shall be designated by the Board of
Directors to replace such nominee. The Board has no reason to
expect that any nominee will be unable to serve. There is no
arrangement or understanding between any nominee and any other
person or persons (other than officers or directors of First
Banking Center, Inc., acting solely in their capacities as such)
pursuant to which such nominee has or is to be elected as a
director. No family relationship exists between any of the
nominees.
BOARD OF DIRECTORS AND COMMITTEES OF
FIRST BANKING CENTER, INC.
The Board of Directors of First Banking Center, Inc., held four
meetings during the year of 1997.
All Directors attended at least 75% of the meetings of the Board of
Directors and committees of which they were a member.
There are several committees of the Corporation's Board (membership
thereon is set forth in Table I). They meet periodically during the
year, and include the Compensation Committee, the Audit Committee,
and the Nominating Committee. In addition, Directors of the
Corporation serve as Directors and committee members of the
Corporation's subsidiaries.
The Compensation Committee's function is to define personnel needs,
establish compensation and fringe benefit guidelines, and evaluate
senior management performance. The committee makes its
recommendations to the full Board for their approval. During the
year 1997, the Compensation Committee met two times.
The Audit Committee's function is to verify and evaluate
operational systems in the Corporation and to determine that proper
accounting and audit procedures are being followed as established
by company policies. Additionally, the Audit Committee makes
recommendations as to the engagement of independent auditors.
During the year 1997, the Audit Committee met four times.
The Nominating Committee is responsible for the selection of
nominees to the Board of Directors. The Nominating Committee will
consider nominees to the Board submitted by stockholders in writing
to the Secretary-Treasurer of First Banking Center, Inc. During the
year 1997, the Nominating Committee met once.
The following table sets forth information as of January 30, 1998
as to the beneficial ownership of the Common Stock of the
Corporation by all nominees named in this Proxy Statement, along
with their principal occupation and history of service with the
Corporation and its subsidiaries.
<TABLE>
TABLE I
<CAPTION>
Capital Stock
directly, in-
Name and Other directly, or
Position with Period of beneficially
First Banking Service as owned as of Percent of
Center, Inc. Age Director 1/30/98 (1) Outstanding Committee
<S> <C> <C> <C> <C> <C>
Roman F. Borkovec 66 Aug. 1981 82,289 (2) 5.5% Building, Loan,
Chairman of the to date Trust, and
Board Nominating
Brantly Chappell 44 Nov. 1997 -0- (3) Building, Loan,
President & CEO to date Trust and
Nominating
John S. Smith 38 Dec. 1992 14,319 (4) 1.0% Trust, Loan,
Secretary/Treas. to date and
Nominating
Richard McKinney 60 May 1988 7,977 (5) .5% Examination,
to date Compensation,
and Trust
Melvin W. Wendt 59 Oct. 1989 10,162 (6) .6% Building and
Vice Chairman of to date Nominating
the Board
John M. Ernster 48 Apr. 1992 1,539 (7) .1% Building,
to date Nominating,
and Audit
David Boilini 45 Dec. 1993 9,893 (8) .7% Trust and Audit
to date
Charles Wellington 48 Jun. 1996 2,199 (9) .1% Planning and
to date Audit
Patrick Sebranek 51 Dec, 1996 3,038 (10) .2% Examination,
to date Compensation,
and Audit
<FN>
ALL DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION AS A GROUP
(9 IN NUMBER INCLUDING THE ABOVE) OWN 131,506 SHARES OF COMMON
STOCK OF THE CORPORATION OR 8.86% OF THE TOTAL STOCK OUTSTANDING.
NOTES TO TABLE I
<F1>
(1) Except as stated in the following footnotes, each
director has sole voting and investment powers over the
shares stated as beneficially owned by him. Beneficial
ownership includes shares issuable within 60 days upon
exercise of incentive stock options owned by certain
named individuals.
<F2>
(2) Consists of 55,191 shares held directly by Mr. Borkovec,
18,947 shares held in joint tenancy with his wife in
which Mr. Borkovec shares voting and investment powers,
and 8,151 shares held by his wife in which shares Mr.
Borkovec disclaims voting or investment powers.
Mr. Borkovec has been Chairman of the Board of First
Banking Center -Burlington and First Banking Center, Inc.
since 1995. He served as President and CEO of First
Banking Center, Inc. from 1982 to 1997. Mr. Borkovec
served as President of First Banking Center - Burlington
from 1974 to 1994 and has been Chairman of the Board of
First Banking Center - Albany since 1989.
<F3>
(3) Mr. Chappell has been President & CEO of First Banking
Center, Inc., Vice Chairman of First Banking Center -
Burlington and First Banking Center - Albany, and a
director of First Banking Center - Burlington and First
Banking Center - Albany since November 1997. From 1983 to
1997 Mr. Chappell held various senior management positions
with Bank One, Wisconsin, including Relationship Manager,
Corporate Banking Division Manager- Milwaukee, Senior
Retail Credit Officer/Vice President and Manager of
Business Banking Unit-Milwaukee, and finally Executive Vice
President/Market Manager of Madison Market.
<F4>
(4) Consists of 14,319 shares held directly by Mr. Smith.
Mr. Smith has been President and Trust Officer of First
Banking Center-Burlington, Burlington, Wisconsin, since
April 1994. He has been a director of First Banking
Center-Burlington since August 1992 and was Executive
Vice President of First Banking Center - Burlington from
1990 to 1994.
<F5>
(5) Consists of 2,452 shares held in joint tenancy with his
wife in which shares Mr. McKinney shares voting and
investment powers, 3,927 shares held directly by Mr.
McKinney, and 1,598 shares held by his wife in which Mr.
McKinney disclaims voting or investment powers.
Mr. McKinney has been a director of First Banking
Center-Burlington, Burlington, Wisconsin, since May 1988.
He has been president of Tobin Drugs, Inc., Burlington,
Wisconsin since 1981, President of Amy's Hallmark,
Burlington, Wisconsin, since 1985 and owner of Sue's
Hallmark, Lake Geneva, Wisconsin, since 1993.
<F6>
(6) Consists of 8,638 shares held in joint tenancy with his
wife in which shares Mr. Wendt has shared voting and
investment powers and 1,524 shares held directly by Mr.
Wendt.
Mr. Wendt has been a director of First Banking Center-
Burlington, Burlington, Wisconsin, since October 1, 1989.
Mr. Wendt is also Vice-Chairman of the Board of
Directors of First Banking Center-Burlington. He had
previously served on the Wind Lake (a branch of First
Banking Center-Burlington) Advisory Board. He has been
Owner of Melvin Wendt Realty, a real estate brokerage
firm, since 1964.
<F7>
(7) Consists of 1,369 shares held directly by Mr. Ernster
and 170 shares held by his wife in which Mr. Ernster
disclaims voting or investment powers.
Mr. Ernster has been a director of First Banking Center-
Burlington, Burlington, Wisconsin, since May 1991. He
served as Southern Regional Manager of Wisconsin Electric
Power Company from 1990-1994 and has been Manager of
Business Development from 1994 to present. He has been on
the Board of Directors of the Racine Area Manufacturers
and Commerce (RAMAC) from 1991 to present and Chairman of
the Manufacturer's Association from 1994 to present.
Board Member and Executive Committee member of the
Kenosha Area Business Alliance.
<F8>
(8) Consists of 8,015 shares held directly by Mr. Boilini,
and 1,878 shares owned by J. Boilini Farms which Mr.
Boilini has shared voting and investment powers.
Mr. Boilini was appointed to the Board in December of
1993. He has been a director of First Banking Center-
Burlington, Burlington, Wisconsin, since February 1993.
Since 1979 Mr. Boilini has been President of J. Boilini
Farms, a diversified commercial operation involved in the
growing of vegetables and grain, as well as the
production of mint for the flavoring industry.
<F9>
(9) Consists of 2,199 shares held directly by Mr. Wellington.
Mr. Wellington was appointed to the Board in June of
1996. He has been a director of First Banking Center-
Albany, Albany, Wisconsin, since January 1989. Mr.
Wellington has been a partner in the law firm of
Kittleson, Barry, Ross, Wellington, and Thompson since
1981.
<F10>
(10) Consists of 99 shares held directly by Mr. Sebranek and
2,939 shares held in joint tenancy with his wife who
shares with Mr. Sebranek voting and investment powers in
such jointly owned shares.
Mr. Sebranek was appointed to the Board in December of
1996. He has been a director of First Banking Center-
Burlington, Burlington, Wisconsin, since September 1995.
Since 1976 Mr. Sebranek has been owner and editorial
director of the Write Source, an educational development
house for English textbooks.
</FN>
</TABLE>
COMPENSATION OF DIRECTORS
Fees
Non-employee directors of the Corporation are paid the following
fees for their services: $425.00 per directors meeting, and $75.00
per committee meeting attended. If the Corporation's Board meetings
are held in conjunction with subsidiary Company Board meetings, the
fee is $100.00 per meeting attended. Director Smith receives fees
for attending board of directors meetings as set for herein, but
does not receive fees for attending committee meetings.
Pension Plans
First Banking Center - Burlington (the "Bank") a wholly owned
subsidiary of the Corporation, has entered into pension and death
benefit agreements with its Directors. There are two such
agreements in effect; the first covers Directors of the Bank who
joined the Board before 1990 ("First Agreement"), while the second
agreement provides benefits for persons who became Directors of the
Bank after 1990 ("Second Agreement"). The following is a brief
description of the major terms of each of the two agreements.
First Agreement: Pension benefits accrue at the rate of
$10,000 for each full year of service as a Director for the
first six years. Upon completing six full years of service,
the Director is entitled to ten annual payments of ten
thousand dollars ($10,000) each, commencing in January of the
year in which the Director obtains the age of 65 years.
Second Agreement: Directors must serve for two full years
before becoming eligible for pension benefits. Full
eligibility is attained after ten full years of service. Full
benefits consist of ten annual payments of ten thousand
dollars ($10,000) each, adjusted annually pursuant to a
consumer price index. If a Director becomes eligible for a
benefit under this agreement but does not complete ten years
of service before retirement, he is entitled to one-eighth of
the full benefit payment for each full year of service after
to two year eligibility period. In the event a Director
leaves the Board after becoming eligible for benefits, but
before reaching the age of 65, he or she will not be entitled
to payments, but the Bank will assign the life insurance
policy insuring the Director's life to the Director. Payments
of benefits will commence in January of the year following the
year in which the Director retires at age 65.
Payments under both agreements are funded through the purchase of
life insurance. The Bank is the owner and beneficiary of such life
insurance policies and is responsible for payment of the premium on
such policies.
The above description of the agreements is a summary and is
qualified in its entirety by reference to the agreements.
The Chief Executive Officer of the Corporation is not a participant
in the Directors' pension and death benefits agreements. Total
deferred liability expense for the Directors' pension and death
benefit agreements was $55,000, $55,000, and $104,000,
respectively, for 1997, 1996, and 1995.
Deferred Compensation Plan
The Bank has also established a deferred compensation plan for its
directors pursuant to which a director may have a portion of
his/her director's fees deferred. Upon attaining the age of 65 or
normal retirement, the Bank will pay monthly benefits for a period
of 15 years. The amount of such payment is determined in each case
by the amount of fees deferred and length of participation in the
deferred compensation plan. Total deferred liability expense was
$40,000, $18,000, and $43,000, respectively, for 1997, 1996, and
1995. Deferred directors' fees in each of the respective years were
$4,200, $12,000, and $21,000.
Stock Option Plan
For a description of the Stock Option Plan see "EXECUTIVE
COMPENSATION - Incentive Stock Option Plan."
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation
paid or accrued for services rendered in all capacities to the
Corporation and its affiliates for the fiscal years ended December
31, 1997, 1996 and 1995 of the persons who were, during 1997, the
Chief Executive Officer of the Corporation.
No other executive officer received a total annual salary and bonus
in excess of $100,000 in 1997, and no disclosure is provided for
such other executive officers.
<TABLE>
Summary Compensation Table
Long-Term
Annual Compensation Compensation
Awards
Securities
Name and Salary Bonus Other Underlying All Other
Principal Year ($) ($) Annual Option/SARs Comp.
Position Comp.(1) (#)
<S> <C> <C> <C> <C> <C>
Roman 1997 $185,000 $18,000 1,200 $44,000 (2)
Borkovec, 1996 $176,000 $22,000 700 $26,000 (3)
Chairman of 1995 $158,000 $14,000 1,400 $31,000 (4)
the Board*
Brantly
Chappell, 1997 $19,000 $ -0- 2,000
President and
CEO*
<FN>
* Messrs. Borkovec and Chappell also served in various
capacities as directors and/or officers of the Corporation's
subsidiaries.
<F1>
(1) Aggregate amount of other annual compensation does not
exceed the lesser of $50,000 or 10% of executive
officer's salary and bonus, and therefore no disclosure
is made.
<F2>
(2) Contribution to the Corporation's Defined Contribution
(401(k)) Plan of $6,000; payments from the Deferred
Compensation Plan of $13,000; payment from the Directors'
Pension Plan of $10,000; and accrued liability of $10,000 and
$5,000, respectively, under the Directors' Deferred
Compensation Plan and Directors' Pension Plan of First Banking
Center-Burlington, a wholly owned subsidiary of the
Corporation.
<F3>
(3) Contribution to the Corporation's Defined Contribution
(401(k)) Plan of $8,000; payments from the Deferred
Compensation Plan of $7,000; and accrued liability of $5,000
and $6,000, respectively, under the Directors' Deferred
Compensation Plan and Directors' Pension Plan of First Banking
Center-Burlington, a wholly owned subsidiary of the
Corporation.
<F4>
(4) Contribution to the Corporation's Defined Contribution
(401(k)) Plan of $8,000; accrued liability of $4,000 and
$19,000, respectively, under the Directors' Deferred
Compensation Plan and Directors' Pension Plan of First
Banking Center-Burlington, a wholly owned subsidiary of
the Corporation.
</FN>
</TABLE>
Employment Agreements and Salary Continuation Agreements.
Roman Borkovec
Effective July 1, 1994, the Corporation entered into an employment
agreement with Mr. Roman Borkovec for a term of three years (the
"Borkovec Employment Agreement"). Pursuant to the Borkovec
Employment Agreement, Mr. Borkovec would serve as President, Chief
Executive Officer and Chairman of the Corporation, and as a
Director and officer of the subsidiaries of the Corporation. The
Borkovec Employment Agreement provides for payments of the greater
of $150,000 annually or compensation as may be established by the
Directors from time to time and receipt of fringe benefits pursuant
to the various plans.
On June 30, 1997, the Corporation and Mr. Borkovec agreed to an
amendment of the Borkovec Employment Agreement. The amendment
provided, among other things, that Mr. Borkovec would continue to
serve as President and Chief Executive Officer of the Corporation
from July 1, 1997 until a successor Chief Executive Officer had
been employed by the Corporation. Following employment of a Chief
Executive Officer, Mr. Borkovec would serve as Chairman of the
Board of Directors, Sales Manager and Policy Coordinator until
September 1, 1999. The amendment further provided for an
adjustment of the annual salary to $100,000 and continuation of
fringe benefits.
Effective February 11, 1998, Mr. Borkovec has retired and tendered
his resignation as Sales Manager and Policy Coordinator; he will
retain the position of Chairman of the Board of Directors. As of
the effective date of the resignation, no further salary payments
will be made to Mr. Borkovec by the Corporation or its
subsidiaries. Mr. Borkovec will be entitled to receive fees for
services as a Director and will receive vested benefits under the
various plans and programs maintained by the Corporation and its
subsidiaries.
Brantly Chappell
Effective October 6, 1997, the Corporation and Mr. Brantly Chappell
entered into an employment agreement (the "Chappell Employment
Agreement") pursuant to which Mr. Chappell will serve as President
and Chief Executive Officer of the Corporation. The Chappell
Employment Agreement has an initial term of two years, and is
automatically renewed for an additional year at each anniversary
date unless either party gives written notice that no such renewal
shall occur.
Under the Chappell Employment Agreement, Mr. Chappell will perform
the customary duties of the Chief Executive Officer of the
Corporation, as further set forth in the Corporation's Bylaws and
as may, from time to time, be determined by the Corporation's Board
of Directors. As compensation for such service, the Corporation
will pay Mr. Chappell the greater of $165,000 annually or
compensation as may be established from time to time during the
employment period by the Board of Directors of the Corporation.
During the employment period, Mr. Chappell is entitled to
participate in such other benefits of employment such as are
generally made available to executive officers of the Corporation
and its subsidiaries.
The Chappell Employment Agreement further provides that on or
before December 31, 1997, the Corporation shall grant Mr. Chappell
an option to purchase 2,000 shares of the Corporation's common
stock, and on or before December 31, 1998, an additional option to
purchase 2,000 shares of the Corporation's common stock shall be
granted to Mr. Chappell. Both options are granted pursuant to the
terms and conditions of the Corporation's 1994 Incentive Stock
Plan. The exercise price for each grant is 100% of the market
price of the stock on the due date of grant.
If the Chappell Employment Agreement is terminated by the
Corporation other than for reasons of Mr. Chappell's death,
disability or retirement, or without "cause" as defined in the
Chappell Employment Agreement; of if Mr. Chappell terminates the
Chappell Employment Agreement following a "change in control" as
defined in the Chappell Employment Agreement, then Mr. Chappell
will be entitled to fringe benefits for the two-year period during
which he is entitled to severance payments.
If Mr. Chappell is terminated due to disability, as defined in the
Chappell Employment Agreement, he will be entitled to payment of
his salary for one year at the rate in effect at the time notice of
termination is given. Such disability payments will be reduced by
payments received under any disability plan or Social Security or
other governmental compensation program. If termination occurs for
any reason other than those enumerated, the Corporation will be
obligated to pay the compensation and benefits only through the
date of termination.
The Chappell Employment Agreement provides that during the
employment period and for one (1) year thereafter, Mr. Chappell
shall not engage in any activity which will result in his competing
with the Corporation or its subsidiaries.
To further the objective of providing continued successful
operation of the Corporation and its subsidiaries and to provide
additional incentive for Mr. Chappell to enter into the Chappell
Employment Agreement, the Corporation and Mr. Chappell have entered
into a Salary Continuation Agreement ("the Continuation Agreement")
as of October 6, 1997. The Continuation Agreement provides for
monthly payments of $5,833.33 upon retirement at age 65 for the
remainder of Mr. Chappell's life, with a guarantee of 180 such
monthly payments to Mr. Chappell or his beneficiaries.
Upon Mr. Chappell's voluntary termination of employment prior to
age 65 for reasons other than death or disability or upon Mr.
Chappell's discharge at any time "for cause" as defined in the
Chappell Employment Agreement, the Corporation will not be
obligated to pay any benefits pursuant to the Continuation
Agreement; however, if Mr. Chappell incurs voluntary or involuntary
termination of employment prior to age 65 for reasons other that
death, disability, or discharge for cause, but on or after a change
in control as defined in the Continuation Agreement, Mr. Chappell
will be entitled to the benefits payable under the Continuation
Agreement.
The benefits provided in the Continuation Agreement will be funded
through the purchase of single premium life insurance policies with
cash value sufficient to fund the payments required under the
Continuation Agreement.
The Board of Directors believes that Mr. Chappell will
substantially contribute to the successful and profitable operation
of the Corporation and its subsidiaries, and such contribution will
result in substantial enhancement of shareholder value. For these
reasons and to provide management continuity, the Board of
Directors has determined that the Chappell Employment Agreement and
Continuation Agreement are in the best interest of the Corporation,
its subsidiaries and its shareholders.
401(k) Profit Sharing Plan
The Corporation has a trusteed 401(k) profit sharing plan covering
substantially all employees of the Corporation and its
subsidiaries. The plan allows for voluntary employee contributions.
Total contributions to the 401(k) Plan by the Corporation were
$132,000, $98,000, and $92,000 in 1997, 1996, and 1995
respectively.
Incentive Stock Option Plan
The following table presents information about stock options
granted during 1997 to the executive officers named in the Summary
Compensation Table.
Stock Option Grants in 1997
Individual Grants
Percent of Total
Number of Securities Options Granted
Underlying To Employees in Exercise Expiration
Name Options(1) Fiscal Year(1) Price Date
Roman 1,200 5.0% $27.25 - 28.50 12/31/02
Borkovec
Brantly 2,000 8.4% $27.50 12/31/02
Chappell
(1) All options granted in 1997 were granted under the 1994 Incentive Stock
Option Plan.
The following table presents information concerning stock options
exercised during 1997. Also shown is information on unexercised
options as of December 31, 1997.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Number of Value of Unexercised
Shares Value Unexercised In-the-Money Options
Acquired Realized Options at FY End at FY End
On Exercise (1) (2) Exercisable / Exercisable /
Unexercisable Unexercisable
Roman
Borkovec 1,145 $9,000 821 / 2,134 $4,500 / $5,300
Brantly
Chappell 0 0 / 2,000 0 / $2,000
(1) The exercise price for each grant was 100% of the market
value of the shares on the date of grant.
(2) Represents market price at date of exercise, less option
price, times number of shares.
On August 8, 1994, the Board of Directors of the Corporation
adopted the First Banking Center, Inc. 1994 Incentive Stock Option
Plan (the "Plan"), which was approved by the shareholders on April
11, 1995.
The Plan replaced the 1984 Incentive Stock Option Plan, which
terminated in April 1994. The purpose of the Plan is to advance the
interests of the Corporation and its subsidiaries by encouraging
and providing for the acquisition of an equity interest in the
Corporation by key employees and by enabling the Corporation and
its subsidiaries to attract and retain the services of employees
upon whose skills and efforts the success of the Corporation
depends. In addition the Plan is designed to promote the best
interests of the Corporation and its shareholders by providing a
means to attract and retain competent directors who are not
employees of the Corporation or any of its subsidiaries.
The following summary description of the Plan is qualified in its
entirety by reference to the full text of the Plan, a copy of which
may be obtained upon request directed to the Corporation's
Secretary at First Banking Center, Inc., 400 Milwaukee Avenue,
Burlington, WI 53105.
The Plan is administered by the Compensation Committee of the
Board, consisting of not less than three (3) directors (the
"Committee"). The Committee is comprised of directors who are
disinterested persons within the meaning of Rule 16b-3 as
promulgated by the Securities and Exchange Commission. Subject to
the terms of the Plan and applicable law, the Committee has the
authority to: establish rules for the administration of the Plan;
select the individuals to whom options are granted; determine the
numbers of shares of Common Stock to be covered by such options;
and take any other action it deems necessary for administration of
the Plan.
Participants in the Plan consist of all members of the Board of
Directors of the Corporation who are not employees of the
Corporation or its subsidiaries, and individuals selected by the
Committee. Those selected individuals may include any executive
officer or employee of the Corporation or its subsidiaries and non-
employee directors of the subsidiaries who, in the opinion of the
Committee, contribute to the Corporation's growth and development.
Subject to adjustment for dividends or other distributions,
recapitalization, stock splits or similar corporate transactions or
events, the total number of shares of Common Stock with respect to
which options may be granted pursuant to the Plan is 300,000. The
shares of Common Stock to be delivered under the Plan may consist
of authorized but unissued stock or treasury stock.
Options may be granted by the Committee to key employees and non-
employee directors (other than directors of the Corporation) as
determined by the Committee. The Committee has complete discretion
in determining the number of options granted to each such grantee.
The Committee also determines whether an option is to be an
incentive stock option within the meaning of Section 422 of the
Internal Revenue Code or a nonqualified stock option. Following the
first grant of options in December 1994, each non-employee director
of the Corporation will automatically be granted a nonqualified
stock option to purchase 100 shares of Common Stock in December of
each succeeding year.
The exercise price for all options granted pursuant to the Plan is
the fair market value of the Common Stock on the date of grant of
the option; however, in case of options granted to a person then
owning more than 10% of the outstanding Common Stock, the option
price will not be less than 110% of the fair market value on such
date. The Committee will determine the method and the form of
payment of the exercise price. The payment may be in form of cash,
common Stock, other securities or other property having a fair
market value equal to the exercise price.
Except for options granted to non-employee directors of the
Corporation, options granted pursuant to the Plan expire at such
time as the Committee determines at the time of grant, provided
that no option may be exercised after the fifth anniversary date of
its grant. Options granted to non-employee directors of the
Corporation expire on the fifth anniversary of the date of grant.
Options are exercisable in increments of one-third on the first,
second and third anniversaries of the date of grant.
Stock acquired pursuant to the Plan may not be sold or otherwise
disposed of within 5 years from the date of exercise, except by
gift, bequest or inheritance or in case of participant's disability
or retirement. The Corporation also has a "right of first refusal"
pursuant to which any shares of Common Stock acquired by exercising
an option must first be offered to the Corporation before they may
be sold to a third party. The Corporation may then purchase the
offered shares on the same terms and conditions (including price)
as applied to the potential third-party purchaser.
The Board of Directors of the Corporation may terminate, amend or
modify the Plan at any time, provided that no such action of the
Board, without approval of the shareholders may: increase the
number of shares which may be issued under the Plan; materially
increase the cost of the Plan or increase benefits to participants;
or change the class of individuals eligible to receive options.
The following is a summary of the principal federal income tax
consequences generally applicable to awards under the Plan. The
grant of an option is not expected to result in any taxable income
for the recipient. The holder of an Incentive Stock Option
generally will have no taxable income upon exercising the Incentive
Stock Option (except that a liability may arise pursuant to the
alternative minimum tax), and the Corporation will not be entitled
to a tax deduction when an Incentive Stock Option is exercised.
Upon exercising a nonqualified stock option, the optionee must
recognize ordinary income equal to the excess of the fair market
value of the shares of common stock acquired on the date of
exercise over the exercise price, and the Corporation will be
entitled at that time to a tax deduction for the same amount. The
tax consequences to an optionee upon disposition of shares acquired
through the exercise of an option will depend on how long the
shares have been held and upon whether such shares were acquired by
exercising an Incentive Stock Option or by exercising a
nonqualified stock option. Generally, there will be no tax
consequences to the Corporation in connection with the disposition
of shares acquired under an option.
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
General Policy
The compensation objective of the Corporation and its subsidiaries
is to link compensation with corporate and individual performance
in a manner which will attract and retain competent personnel with
leadership qualities. The process gives recognition to the
marketplace practices of other banking organizations.
Toward the end of achieving long-term goals of the shareholders,
the compensation program ties a significant portion of total
compensation to the financial performance of the Corporation in
relation to its peer group. The Compensation Committee makes
recommendations on the compensation of the Corporation's officers
to the Board of Directors. The Compensation Committee's
recommendations reflect its assessment of the contributions to the
long-term profitability and financial performance made by
individual officers. In this connection, the Committee considers,
among other things, the type of the officer's responsibilities, the
officer's long-term performance and tenure, compensation relative
to peer group and the officer's role in ensuring the financial
success of the Corporation in the future. Financial performance
goals considered by the Committee include earnings per share,
return on assets, return on equity, asset quality, growth and
expense control.
In addition to measuring performance in light of these financial
factors, the Committee considers the subjective judgment of the
Chief Executive Officer in evaluating performance and establishing
salary, bonus and long-term incentive compensation for individual
officers, other than the Chief Executive Officer. The Committee
independently evaluates the performance of the Chief Executive
Officer, taking into consideration such subjective factors as
leadership, innovation and entrepreneurship in addition to the
described financial goals.
Base Salary
In determining salaries of officers, the Committee considers
surveys and data regarding compensation practices of financial
institutions of similar size, adjusted for differences in product
lines, nature of geographic market and other relevant factors. The
Committee also considers the Chief Executive Officer's assessment
of the performance, the nature of the position and the contribution
and experience of individual officers (other than the Chief
Executive Officer). The Committee independently evaluates the Chief
Executive Officer's performance and compares his compensation to
peer group data.
Annual Bonuses
Officers and employees of the Corporation and its subsidiaries are
awarded annual bonuses at the end of each year at the discretion of
the Committee. The amount of the bonus, if any, for each officer
(other than the Chief Executive Officer) is recommended to the
Committee by the Chief Executive Officer based upon his evaluation
of the achievement of corporate and individual goals and his
assessment of subjective factors such as leadership, innovation and
commitment to the corporate advancement. The Corporation's annual
incentive bonus is based on meeting specific financial performance
targets pursuant to a bonus plan. The plan provides for a range of
bonus awards based, among other things, upon return on assets. The
minimum target goal for return on assets is 1%, which is required
for payment of a bonus.
Chief Executive Officer Compensation
The compensation for the Chief Executive Officer was established at
a level which the Committee believed would approximate the
compensation of chief executive officers of similar organizations
and would reflect prevailing market conditions. The Committee also
took into consideration a variety of factors, including the level
and achievement of corporate financial goals and individual goals.
The financial goals included increased earnings, return on assets,
return on equity and asset quality. No formula assigning weights to
particular goals was used, and achievement of other corporate
performance goals was considered in general. The Chief Executive
Officer was also awarded incentive stock options under the
Corporation's Incentive Stock Option Plan. Based upon its review of
the Corporation's performance, the Committee believes that the
total compensation awarded to the Chief Executive Officer for 1997
is fair and appropriate under the circumstances.
Stock Options
The Committee administers the 1994 Incentive Stock Option Plan.
Stock options are designed to furnish long-term incentives to the
officers of the Corporation to build shareholder value and to
provide a link between officer compensation and shareholder
interest. The Committee made awards under the Stock Option Plan to
the officers of the Corporation and its subsidiaries in 1997.
Awards were based upon performance, responsibilities and the
officer's relative position and ability to contribute to future
performance of the Corporation. In determining the size of the
option grants (except grants to the Chief Executive Officer), the
Committee considered information and evaluations provided by the
Chief Executive Officer. The award of option grants to the Chief
Executive Officer was based on the overall performance of the
Corporation and on the Committee's assessment of the Chief
Executive Officer's past contribution and his ability to contribute
in the future to the Corporation's performance and his leadership.
The Committee
The Compensation Committee currently has three members. No member
of the Committee is an employee or officer of the Corporation or
any of its subsidiaries. None of the Committee members has
interlocking relationships as defined by the Securities and
Exchange Commission, with the Corporation or its subsidiaries. The
Committee is aware of the limitations imposed by Section 162(m) of
the Internal Revenue Code of 1986, as amended, on the deductibility
of compensation paid to certain senior executives to the extent it
exceeds $1 million per executive. The Committee's recommended
compensation amounts meet the requirements for deductibility.
The Compensation Committee consists of the following members:
David Boilini Patrick Sebranek Richard
McKinney
PERFORMANCE TABLE
(INSERT PERFORMANCE GRAPH)
The following table shows the cumulative total stockholder return
on the Company's Common Stock over the last five fiscal years
compared to the returns of the Standard & Poor's 500 Stock Index
and the NASDAQ Bank Index:
Cumulative Total Return
Assumes Dividends & Capital Gains Reinvested
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
FBC, Inc. 100 124 165 184 218 248
S&P 500 100 110 112 154 188 251
NASDAQ Bank Index 100 114 114 168 217 362
ADDITIONAL INFORMATION ON MANAGEMENT
Transactions With Directors and Officers
Certain directors and executive officers of the Corporation, and
their related interests had loans outstanding in the aggregate
amounts of $1,120,000 and $1,065,000 at December 31, 1997 and 1996,
respectively. During 1997, $468,000 of new loans were made and
repayments totaled $413,000. These loans were made on substantially
the same terms, including interest rates and collateral, as those
prevailing at the same time for comparable transactions with other
persons and did not involve more than normal risks of
collectability or present other unfavorable features. The loans to
directors and executive officers and their related business
interests at December 31, 1997 represented 3.87% of stockholders
equity.
Section 16 Reports
Under Section 16(a) of the Securities Exchange Act of 1934, as
amended, the Corporation's directors and executive officers and
shareholders holding more than 10% of the outstanding stock of the
Corporation (the "insiders") are required to report their initial
ownership of stock and any subsequent change in such ownership to
the Securities and Exchange Commission and the Corporation (the
"16(a) filing requirement"). Specific time deadlines for the 16(a)
filing requirements have been established by the Securities and
Exchange Commission.
To the Corporation's knowledge, and based solely upon a review of
the copies of such reports furnished to the Corporation, all 16(a)
filing requirements applicable to Insiders during 1997 were
satisfied on a timely basis.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Conley, McDonald and Company performed a complete audit of First
Banking Center, Inc. during 1997 and provided a certified financial
statement for the years ended December 31, 1995 and 1996.
Conley, McDonald and Company also performed a non-audit function
for the Corporation consisting of the preparation of the
Corporation's 1997 Income Tax returns. No representative of Conley,
McDonald and Company will be present at the Annual Stockholders'
Meeting on April 21, 1998. The Board of Directors will engage the
services of a public accounting firm to provide a certified
financial statement for 1998. The Board will select such accounting
firm at its annual Directors Meeting.
PROPOSALS BY STOCKHOLDERS
Shareholders' proposals to be presented at the 1999 Annual
Stockholders' Meeting must be received by the Corporation at its
principal office, 400 Milwaukee Avenue, Burlington, Wisconsin, on
or before November 3, 1998.
MISCELLANEOUS
Management does not intend to bring any other matters before the
meeting and knows of no matters to be brought before the meeting by
others. If any other matters properly come before the meeting, it
is the intention of the persons named in the accompanying proxy to
vote said proxy in accordance with their best judgment.
A COPY OF THE FIRST BANKING CENTER, INC. ANNUAL REPORT ON FORM 10-K
INCLUDING FINANCIAL STATEMENTS AND SCHEDULES FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES EXCHANGE
ACT OF 1934 WILL BE MADE AVAILABLE TO STOCKHOLDERS UPON WRITTEN
REQUEST AT NO CHARGE. REQUESTS SHOULD BE ADDRESSED TO: Mr. John S.
Smith, Secretary, First Banking Center, Inc., 400 Milwaukee Avenue,
P.O. Box 660, Burlington, Wisconsin, 53105.
BY ORDER OF THE BOARD OF DIRECTORS
JOHN S. SMITH, SECRETARY
Burlington, Wisconsin
March 3, 1998
