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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
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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 240.14a-11(c) or 240.14a-12
CASTLE BANCGROUP, INC.
(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 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:
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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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<PAGE>
CASTLE BANCGROUP, INC.
NOTICE
OF
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 25, 2000
NOTICE IS HEREBY GIVEN, that the Annual Meeting of Stockholders (the
"Annual Meeting") of Castle BancGroup, Inc., a Delaware corporation (the
"Corporation"), will be held in the community room of First National Bank in
DeKalb/Sycamore, 511 West State Street, Sycamore, Illinois, on Thursday, May 25,
2000 at 2:00 p.m.
The Annual Meeting is for the purpose of considering and acting upon:
(1) The election of three directors of the Corporation; and
(2) Such other matters as may properly come before the Annual Meeting
or any adjournments thereof.
Stockholders of record at the close of business on April 14, 2000 are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
By order of the Board of Directors,
/s/ David B. Castle
- ---------------------
David B. Castle
Secretary
DeKalb, Illinois
April 26, 2000
IMPORTANT! TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING,
PLEASE SIGN, DATE, AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE ENVELOPE
PROVIDED. NO POSTAGE IS REQUIRED IF THE PROXY IS MAILED IN THE UNITED STATES.
<PAGE>
PROXY STATEMENT
OF
CASTLE BANCGROUP, INC.
121 WEST LINCOLN HIGHWAY
DEKALB, ILLINOIS 60115
(815)758-7007
ANNUAL MEETING OF STOCKHOLDERS
MAY 25, 2000
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GENERAL INFORMATION
- --------------------------------------------------------------------------------
This Proxy Statement and the accompanying proxy card are being furnished in
connection with the solicitation of proxies by the Board of Directors of Castle
BancGroup, Inc. (the "Corporation") from holders of the Corporation's
outstanding shares of common stock, par value $.33 1/3 per share ("Common
Stock"), for use at the 2000 Annual Meeting of Stockholders (the "Annual
Meeting") to be held on Thursday, May 25, 2000 at 2:00 p.m. in the community
room of First National Bank in DeKalb/Sycamore, 511 West State Street, Sycamore,
Illinois, or at any adjournments thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting and in this Proxy Statement.
The Corporation will bear the costs of soliciting proxies from its
stockholders. In addition to soliciting proxies by mail, directors, officers
and employees of the Corporation and its subsidiaries, without receiving
additional compensation therefor, may solicit proxies in person, by telephone or
by facsimile. The Corporation may also reimburse brokers, nominees and other
fiduciaries for their reasonable expenses in forwarding proxy solicitation
materials to beneficial owners. The accompanying Notice of Annual Meeting, this
Proxy Statement and the Proxy Card are first being mailed to the Corporation's
stockholders on or about April 26, 2000.
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VOTING AT THE ANNUAL MEETING
- --------------------------------------------------------------------------------
The close of business on April 14, 2000 has been fixed as the record date
(the "Record Date") for the determination of stockholders of the Corporation
entitled to notice of and to vote at the Annual Meeting. As of the Record Date,
the Corporation had 4,375,008 shares of Common Stock issued and outstanding.
Each proxy that is properly signed and received before the Annual Meeting
and not subsequently revoked will be voted in accordance with the instructions
on such proxy. IF NO INSTRUCTIONS ARE INDICATED, PROXIES WILL BE VOTED "FOR"
THE ELECTION OF ALL NOMINEES NAMED IN THE PROXY AND IN THE DISCRETION OF THE
PERSONS NAMED IN THE PROXY ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
ANNUAL MEETING. Any stockholder has the right to revoke a proxy at any time
before its exercise at the Annual Meeting. A proxy may be revoked by properly
executing and submitting to the Corporation a later-dated proxy or by mailing
written notice of revocation to Castle BancGroup, Inc., 121 West Lincoln
Highway, DeKalb, Illinois 60115, Attention: David B. Castle, Secretary. A
stockholder may also revoke a proxy by appearing at the Annual Meeting and
voting in person. Proxies are valid only for the meeting specified therein or
any adjournments of such meeting.
A quorum of stockholders is necessary to take action at the Annual Meeting.
A majority of the outstanding shares of Common Stock, represented in person or
by proxy, shall constitute a quorum for the transaction of business at the
<PAGE>
Annual Meeting. Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the inspectors of election appointed for the Annual Meeting. The
inspectors will determine whether a quorum is present.
Stockholders have the right to cumulative voting in the election of
directors. Under cumulative voting, each stockholder is entitled to a number of
votes equal to the number of his or her shares multiplied by the number of
directors to be elected. Each stockholder may cast all of those votes for a
single nominee or may distribute the votes among as many of the nominees as such
stockholder deems appropriate. Cumulative votes for which a proxy is given will
be divided equally among all director nominees for whom authority has been
given. NOTWITHSTANDING THE FOREGOING, THE PROXY HOLDERS RESERVE THE RIGHT,
EXERCISABLE IN THEIR SOLE DISCRETION, TO VOTE PROXIES CUMULATIVELY SO AS TO
ELECT ALL OR AS MANY AS POSSIBLE OF SUCH DIRECTOR NOMINEES DEPENDING UPON THE
CIRCUMSTANCES AT THE ANNUAL MEETING. In voting on all other matters that may
properly come before the Annual Meeting, each stockholder is entitled to one
vote for each share of Common Stock held.
Stockholders who hold their shares in "street name" through a broker, bank
or other nominee will receive voting instructions from their broker, bank or
nominee that must be followed in order for them to direct how they want their
shares to be voted. If any stockholder holding shares through a broker, bank or
other nominee wants to vote his or her shares in person at the Annual Meeting,
such stockholder must obtain a proxy, executed in his or her favor, from their
broker, bank or nominee indicating that the stockholder was the beneficial owner
of the shares on the Record Date.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
- --------------------------------------------------------------------------------
The following table sets forth, as of the Record Date, the number of shares
of Common Stock beneficially owned by each person known by the Corporation to be
the beneficial owner of more than five percent of the outstanding shares of
Common Stock, each director nominee of the Corporation, each director, the
"named executive officers" (as defined below) and all director nominees,
directors and executive officers of the Corporation as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF COMMON
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) STOCK OUTSTANDING
- ------------------------ ----------------------- ------------------
<S> <C> <C>
PRINCIPAL STOCKHOLDERS:
John W. Castle 511,016(2) 11.52%(12)
208 Miller Avenue
DeKalb, Illinois 60115
David B. Castle 394,074(3) 9.01%
2851 Country Club Lane
DeKalb, Illinois 60115
Amy W. Castle 376,008(3) 8.59%
329 Lower Flat Creek Road
Alexander, North Carolina 28701
Harry D. Castle 376,008(3) 8.59%
4909 Orchard Ave., Apt. 105
San Diego, California 92107
2
<PAGE>
John L. Castle 376,008(3) 8.59%
1013 Fisk Road
Compton, Illinois 61318
James N. McInnes 304,268(2) 6.89%(12)
79 Edgebrook Drive
Sandwich, Illinois 60548
Ernest A. Basler 275,426(2)(4) 6.27%(12)
515 East 4th Street
Sandwich, Illinois 60548
Shirley M. Basler 224,450(5) 5.13%
515 East 4th Street
Sandwich, Illinois 60548
DIRECTOR NOMINEES, DIRECTORS AND
NAMED EXECUTIVE OFFICERS:(6)
Bruce P. Bickner 64,532(2) 1.47%(12)
Peter H. Henning 34,374(2)(7) *
Kathleen L. Halloran 1,500(2) *
Richard C. McGinity 1,500(2) *
Dewey R. Yaeger 35,308(2)(8) *
Robert T. Boey 25,281(2)(9) *
Donald E. Kieso 40,503(2)(10) *
Ronald L. Hovermale 7,006(2) *
Thomas D. Young 13,769(2)(11) *
All director nominees, directors and 737,414(2) 16.45%(13)
executive officers as a group (11
persons)
____________________________
<FN>
(1) Unless otherwise indicated, the nature of beneficial ownership for shares
shown in this column is sole voting and investment power.
(2) Includes the following shares which the beneficial owner has the right to
acquire within 60 days through exercise of stock options: J. Castle -
60,000 shares; J. McInnes - 40,000 shares; E. Basler - 16,000 shares; B.
Bickner - 3,000 shares; P. Henning - 3,000 shares; K. Halloran - 1,500
shares; R. McGinity - 1,500 shares; D. Yaeger - 24,000 shares; R. Boey -
3,000 shares; D. Kieso - 3,000 shares; R. Hovermale - 0 shares; T. Young -
9,250 shares; and all director nominees, directors and executive officers
as a group - 108,600 shares.
(3) Includes 90,000 shares held in the David B. Castle 1992 Trust, 90,000
shares held in the Amy W. Castle 1992 Trust, 90,000 shares held in the
Harry D. Castle 1992 Trust and 90,000 shares held in the John L. Castle
1992 Trust (360,000 shares in the aggregate). David B. Castle, Amy W.
Castle, Harry D. Castle and John L. Castle act collectively as trustee for
each of these trusts with shared voting and investment power. The 360,000
shares held by the trusts are reported in the table above in the
beneficial ownership totals for each of David B. Castle, Amy W. Castle,
Harry D. Castle and John L. Castle.
(4) Includes 200,450 shares owned jointly with Shirley M. Basler, Mr. Basler's
wife, which are also reported as beneficially owned by Shirley M. Basler.
(5) Includes 200,450 shares owned jointly with Ernest A. Basler, Ms. Basler's
husband, which are also reported as beneficially owned by Ernest A.
Basler.
3
<PAGE>
(6) Information with respect to John W. Castle, Director, Chairman of the
Board and Chief Executive Officer, is included above under Principal
Stockholders.
(7) Includes 240 shares owned jointly with Mr. Henning's wife.
(8) Includes 465 shares owned by Mr. Yaeger's wife.
(9) Includes 6,239 shares owned jointly with Mr. Boey's wife.
(10) Includes 6,000 shares owned by Mr. Kieso's wife. Mr. Kieso disclaims
beneficial ownership of these shares.
(11) Includes 2,000 shares owned jointly with Mr. Young's wife.
(12) Percentage is calculated on a partially diluted basis, assuming only the
exercise of stock options by such individual which are exercisable within
60 days.
(13) Percentage is calculated on a fully diluted basis, assuming the exercise
of all stock options of directors and executive officers which are
exercisable within 60 days.
* Less than 1%.
</TABLE>
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PROPOSAL NO. 1 - ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
The Corporation's Board of Directors is comprised of eight directors (three
Class I directors, two Class II directors and three Class III directors). The
Corporation's Certificate of Incorporation provides that directors are elected
for terms of three years, approximately one-third of whom are elected annually.
Three directors will be elected as Class III directors at the Annual Meeting to
serve for a three-year period, or until their respective successors have been
elected and qualified. The Board of Directors has nominated for election as
directors Bruce P. Bickner, John W. Castle and Peter H. Henning.
Each of the nominees has agreed to serve as a director if elected, and the
Corporation has no reason to believe that any nominee will be unable to serve.
In the event of the refusal or inability of any nominee for director of the
Corporation to serve as director, the persons named in the accompanying form of
proxy shall vote such proxies for such other person or persons as may be
nominated as directors by the Board of Directors of the Corporation, unless the
number of directors shall have been reduced by the Board. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION OF
BRUCE P. BICKNER, JOHN W. CASTLE AND PETER H. HENNING AS DIRECTORS OF THE
CORPORATION.
The three individuals receiving the highest number of votes cast will be
elected as directors of the Corporation.
4
<PAGE>
The following table sets forth information with respect to the director
nominees, continuing directors and executive officers of the Corporation.
<TABLE>
<CAPTION>
YEAR TERM
DIRECTOR OR AS A DIRECTOR
NAME AGE(1) OFFICER SINCE EXPIRES POSITION WITH THE CORPORATION
- --------------------------- ------ -------------- ------------- -------------------------------------
<S> <C> <C> <C> <C>
DIRECTOR NOMINEES
Bruce P. Bickner 56 1991 2000 Director
John W. Castle 66 1984 2000 Director, Chairman and CEO
Peter H. Henning 52 1988 2000 Director
CONTINUING DIRECTORS
Kathleen L. Halloran 47 1998 2001 Director
Richard C. McGinity 55 1997 2001 Director
Dewey R. Yaeger 59 2000(2) 2001 Director, President and COO
Robert T. Boey 60 1992 2002 Director
Donald E. Kieso 63 1993 2002 Director
OTHER EXECUTIVE OFFICERS(3)
Ronald L. Hovermale 60 1997 Senior Vice President-Operations,
Information Systems and Human
Resources
Thomas D. Young 54 1995 Senior Vice President-Marketing,
Planning and Retail Services Delivery
Micah R. Bartlett 26 1998 Vice President and Controller
_________________________
<FN>
(1) At January 1, 2000.
(2) Effective March 1, 2000, the Board of Directors increased the size of the Board from seven to
eight and appointed Dewey R. Yaeger to fill the vacancy created by such increase.
(3) John W. Castle, Chairman of the Board and Chief Executive Officer of the Corporation, and Dewey
R. Yaeger, President and Chief Operating Officer, are listed above under Director Nominees and
under Continuing Directors, respectively.
</TABLE>
DIRECTOR NOMINEES:
- ------------------
Bruce P. Bickner is Executive Vice President of the Agricultural Sector of
Pharmacia Corporation. From 1986 to the present, Mr. Bickner has served as the
Chairman and Chief Executive Officer of DeKalb Genetics Corporation, a Pharmacia
subsidiary. He is also a director of Nicor, Inc.
John W. Castle is the Chairman of the Board and Chief Executive Officer of
the Corporation and has held such offices since 1984. He is also a director of
Castle Bank, N.A.
Peter H. Henning is the Chairman and Chief Executive Officer of Plano
Molding Company, a manufacturer of proprietary and custom plastic injection
molded products, and has held such position for more than the past five years.
He is also a director of Castle Bank, N.A.
5
<PAGE>
CONTINUING DIRECTORS:
- ---------------------
Kathleen L. Halloran is Executive Vice President Finance and Administration
of Nicor, Inc., a holding company whose principal subsidiary is Nicor Gas which
is a local gas distribution utility. She has held such position or similar
positions with Nicor, Inc. for more than the past five years.
Richard C. McGinity is the President of School Street Capital Group, Inc.,
an investment banking firm based in Boston, Massachusetts serving privately
owned companies and their owners, and has held such position for more than the
past five years.
Dewey R. Yaeger is the President and Chief Operating Officer of the
Corporation. He is a director of Castle Bank Harvard, N.A., First National Bank
in DeKalb and Castle Bank, N.A. From 1993 to 1997 he was President and Chief
Executive Officer of Central National Bank of Mattoon, Mattoon, Illinois.
Robert T. Boey is the President and co-owner of American Bare Conductor,
Inc., a manufacturer of electrical copper wire and cable products, and has held
such position since 1985. Mr. Boey is also a partner and co-owner of Sycamore
Industrial Park Associates. He is also a director of First National Bank in
DeKalb.
Donald E. Kieso is the KPMG Emeritus Professor of Accountancy at Northern
Illinois University and is also a CPA and a self-employed author of accounting
and business textbooks and has held such positions for more than the past five
years. He is also a director of Castle Bank, N.A.
OTHER EXECUTIVE OFFICERS:
- --------------------------
Ronald L. Hovermale is the Senior Vice President - Operations, Information
Systems and Human Resources of the Corporation. From 1986 to 1994 he was Senior
Vice President of Human Resources and Operations for Bank One, Springfield,
Illinois, and from 1991 to 1994 he was Director of Human Resources of Banc One
Illinois Corporation.
Thomas D. Young is the Senior Vice President - Marketing, Planning and
Retail Services Delivery of the Corporation. From 1992 to 1995 he was a
mortgage banker for Premier Home Financing, Inc. From 1989 to 1992 he was Vice
President and Regional Manager for First Nationwide Bank.
Micah R. Bartlett is the Vice President and Controller of the Corporation.
From 1996 to 1997, Mr. Bartlett was Vice President and Cashier of Central
National Bank of Mattoon. From 1990 to 1996, Mr. Bartlett served as Assistant
Vice President of Finance and in other capacities for First National Bank of
Raymond.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
The Board of Directors of the Corporation conducts its business through
meetings of the full Board and through meetings of committees of the Board. The
Board of Directors maintains an Audit, Compensation and Nominating Committee.
The Board of Directors held nine meetings during 1999. During 1999, no director
of the Corporation attended fewer than 75% of the total meetings of the Board or
of the committees on which such Board member served.
The Audit Committee is comprised of Kathleen L. Halloran, Richard C.
McGinity and Donald E. Kieso. Donald E. Kieso is Chairman of the Committee.
6
<PAGE>
The Audit Committee's duties include reviewing the scope of internal and
external accounting controls and audit procedures, the Corporation's accounting
principles, policies and practices and financial reporting, and the results of
internal and external audits conducted with respect to the Corporation and its
subsidiaries. The Committee also recommends to the Board of Directors the
selection of the Corporation's independent auditors. The Audit Committee met
five times during 1999.
The Compensation Committee is comprised of Robert T. Boey, Bruce P. Bickner
and Peter H. Henning. Bruce P. Bickner is Chairman of the Committee. The
Compensation Committee annually reviews all aspects of the compensation for the
Chief Executive Officer and for the Chief Operating Officer of the Corporation,
including the appropriateness of executive compensation and benefit programs,
and is responsible for recommending to the Board of Directors the specific
individual annual goals and objectives of the Chairman of the Board (Chief
Executive Officer) and the President (Chief Operating Officer). The
Compensation Committee also recommends to the subsidiary Boards of Directors the
salary levels for subsidiary senior management. The Compensation Committee met
four times during 1999.
The Nominating Committee is comprised of Bruce P. Bickner and Peter H.
Henning. Peter H. Henning is Chairman of the Committee. John W. Castle, as
Chairman of the Board of the Corporation, serves as an ex-officio member of the
Committee. The Nominating Committee reviews the requirements for service as a
director of the Corporation, reviews potential candidates for director, proposes
nominees for director and recommends the successor to the Chairman when a
vacancy occurs in that position. The Nominating Committee did not meet during
1999.
7
<PAGE>
- --------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The following table summarizes compensation for services to the Corporation
and the Corporation's subsidiaries for the years ended December 31, 1999, 1998
and 1997 paid to or earned by the Chief Executive Officer of the Corporation and
the three other most highly compensated executive officers of the Corporation
whose salary and bonus exceeded $100,000 for the year ended December 31, 1999.
No other executive officer's salary and bonus exceeded $100,000 for the year
ended December 31, 1999. These individuals are sometimes hereinafter referred
to as the "named executive officers." All share amounts have been adjusted for
the two-for-one stock split in the form of a 100% stock distribution, which was
paid out of authorized but unissued shares to stockholders of record on May 10,
1999.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) Securities All Other
NAME AND ---------------------- Underlying Compen-
PRINCIPAL POSITION Year SALARY BONUS Options (#) sation(2)
- ------------------------------- ------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
John W. Castle 1999 $230,000 $ -- -- $ 18,872
Chairman of the Board and 1998 $223,500 $121,808 -- $ 35,896
Chief Executive Officer 1997 $223,500 $ 34,556 -- $ 31,706
Dewey R. Yaeger 1999 $165,000 $ 20,000 16,000 $ 14,400
President and Chief Operating 1998 $150,000 $ 75,000 16,000 $ 10,433
Officer 1997(3) $ 87,077 $ 14,175 16,000 $ --
Ronald L. Hovermale 1999 $101,754 $ -- -- $ 26,400
Senior V. P.-Operations, 1998 $101,754 $ -- -- $ 24,400
Information Systems and 1997(4) $ 15,655 $ -- -- $ 18,400
Human Resources
Thomas D. Young 1999 $110,000 $ 2,400 -- $ 9,779
Senior V.P.-Marketing, 1998 $110,000 $ 29,700 3,000 $ 15,871
Planning and Retail Services 1997 $102,500 $ 4,100 1,000 $ 12,925
Delivery
<FN>
____________________________
(1) None of the named executive officers received any perquisites or other personal
benefits, securities, or property in an amount exceeding 10% of his salary and
bonus during 1997, 1998 and 1999.
(2) For each of the named executive officers, this amount consists entirely of
contributions by the Corporation under its Profit Sharing Plan and Supplemental
Profit Sharing Plan except that for Mr. Hovermale it only includes the purchase
price for 1,600 shares of the Corporation's Common Stock purchased in his behalf
by the Corporation in each of 1997, 1998 and 1999.
(3) Dewey R. Yaeger joined the Corporation on April 24, 1997. The 1997 information
for Mr. Yaeger only reflects the period from April 24, 1997 to December 31, 1997.
(4) Ronald L. Hovermale joined the Corporation on October 27, 1997. The 1997
information for Mr. Hovermale only reflects the period from October 27, 1997 to
December 31, 1997.
</TABLE>
8
<PAGE>
The following table sets forth information regarding individual grants of
stock options made during 1999 to Dewey R. Yaeger. No stock option grants were
made during 1999 to the other named executive officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION -------------------
NAME GRANTED (#) FISCAL YEAR PER SHARE DATE 5% 10%
- ------------------------- ----------- -------------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Dewey R. Yaeger 16,000(1) 100% $ 16.00 5/01/09 $160,997 $407,998
_________________________
<FN>
(1) The options become exercisable with respect to 25% of the shares covered thereby on each
of the first four anniversaries of the date of grant.
</TABLE>
The following table sets forth information regarding the year-end values of
unexercised stock options held by the named executive officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY STOCK
STOCK OPTIONS AT FISCAL OPTIONS AT
YEAR END (#) FISCAL YEAR END(1)
SHARES -------------------------- --------------------
ACQUIRED VALUE EXER- UNEXER-
NAME ON EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE CISABLE CISABLE
- ------------------- --------------- -------- ----------- ------------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
John W. Castle -- -- 60,000 -- $375,000 $ -
Dewey R. Yaeger -- -- 12,000 36,000 $ 18,000 $18,000
Ronald L. Hovermale -- -- -- -- $ -- $ --
Thomas D. Young -- -- 9,250 2,750 $ 45,125 $ 1,125
_________________________
<FN>
(1) This amount represents the difference between the market value of one share of the
Corporation's Common Stock on December 31, 1999 ($13.25) and the option exercise price
times the total number of shares subject to exercisable or unexercisable options.
</TABLE>
Employment Agreements. The Corporation has entered into an employment
agreement with Dewey R. Yaeger, effective January 1, 1999, providing for Mr.
Yaeger's employment as President and Chief Operating Officer for an initial term
of two years. Mr. Yaeger will receive an annual base salary of $165,000
(subject to future increase) and certain other benefits, including participation
in the Corporation's incentive, retirement, medical and other employee benefit
plans. The employment agreement provides for increased benefits to Mr. Yaeger
under certain circumstances if Mr. Yaeger's employment with the Corporation is
terminated other than for "good cause" or if Mr. Yaeger elects to terminate his
employment for "good reason" or if Mr. Yaeger's employment terminates following
a "change of control"of the Corporation. "Good cause," "good reason" and
"change of control" are terms defined in the employment agreement. A copy of
this agreement is filed as an exhibit to the Corporation's Form 10-K for its
1999 fiscal year.
In addition, the Corporation has entered into an agreement for services
with Ronald L. Hovermale dated as of September 26, 1997. The original term of
the agreement provided for its expiration on December 31, 1999. The agreement
was amended on March 12, 1999 to, among other things, extend the term of the
agreement to January 15, 2001. Under the terms of the agreement, as amended,
9
<PAGE>
Mr. Hovermale serves as Senior V. P. - Operations, Information Systems and Human
Resources of the Corporation. A copy of this agreement is filed as an exhibit
to the Corporation's Form 10-K for its 1998 fiscal year.
- --------------------------------------------------------------------------------
DIRECTORS' COMPENSATION
- --------------------------------------------------------------------------------
Each non-employee director of the Corporation received a quarterly retainer
of $1,500 in 1999. In addition, each non-employee director received a fee of
$1,000 for each Board meeting attended and a fee of $300 ($400 if committee
chairman) for each committee meeting attended. If a non-employee director is
also a director of any subsidiary of the Corporation, such non-employee director
also receives fees in such capacities. Pursuant to the Corporation's Stock
Benefit Plan, when a non-employee becomes a new director of the Corporation,
such new non-employee director is automatically granted an option to purchase
3,000 shares of Common Stock. Directors who are employees of the Corporation or
its subsidiaries do not receive additional compensation for serving as directors
of the Corporation or any of its subsidiaries.
- --------------------------------------------------------------------------------
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The members of the Compensation Committee of the Corporation during the
fiscal year ended December 31, 1999 were Bruce P. Bickner (Chairman), Robert T.
Boey, and Peter H. Henning. No member of the Compensation Committee is a former
or current officer or employee of the Corporation or any of its subsidiaries.
The Compensation Committee's goal in setting executive compensation is to
attract, retain, motivate and reward highly qualified management to achieve the
Corporation's business objectives. This executive compensation program is
integrated with the Corporation's annual and long-term business plans in order
to provide a strategic link between corporate performance and executive
compensation. The components of the corporate compensation program are base
salary, performance incentives (bonus), the Profit Sharing Plan, the
Supplemental Profit Sharing Plan and the Stock Benefit Plan.
The Compensation Committee's approach to setting compensation for executive
officers is to review their compensation relative to the Corporation's financial
results, including growth in earnings, increase in share value, the rate of
return on assets and equity, and various measures of productivity and
efficiency. Additionally, the Committee reviews performance relative to
attainment of specific corporate and individual objectives that are set before
each year. The Committee also considers the Corporation's and the subsidiary's
standing in the community it serves, ratings by regulatory authorities and views
of the Corporation's independent auditors.
In determining the reasonableness of each executive officer's total
compensation, the Compensation Committee reviewed information from studies and
reports including, among others, the Bank Administration Institute's Key
Executive Compensation Survey, the Illinois Bankers Association Midwest Bank
Holding Company Executive Compensation Report, and SNL Security's Executive
Compensation Review. These reports compile total compensation data based on
asset size and geographic region including salary ranges by position. The
Committee used the information found in these reports to set the salary ranges
(minimum, midpoint and maximum) for the CEO and COO positions in the salary
administration program.
The base salaries and annual incentive objectives for the current year were
established before the beginning of the year. The level of incentive
compensation is determined by the Committee after year-end, based upon a review
of performance against predetermined objectives. The 1999 incentive
10
<PAGE>
compensation was based upon actual performance compared to both financial and
individual objectives. The financial objectives were evaluated against holding
company, subsidiary, and consolidated annual budgets. The plan requires certain
minimum financial objectives be met before incentives can be paid for
accomplishment of either financial or individual objectives.
Mr. Castle's base salary was increased $6,500 from $223,500 for 1998 to
$230,000 for 1999. Mr. Yaeger's base salary was increased $15,000 from $150,000
for 1998 to $165,000 for 1999. These levels were approximately at the midpoint
of the salary range established for the respective positions in the company's
salary administration program. The Committee considered several factors in
setting base salaries: (i) relative base salary as compared to others; (ii)
increased responsibilities of corporate governance; (iii) continued improvement
in share value relative to prior years; (iv) favorable perception by the local
community, regulators and professional consultants; (v) efficiencies gained
during 1998 from consolidating "back office" operations; (vi) progress
developing company wide marketing strategies; (vii) improved investor relations;
(viii) improved strategic and annual planning and budgeting processes; and (ix)
consultation with other members of the Board of Directors.
Mr. Castle and Mr. Yaeger in 1999 were eligible to receive base bonus
amounts of $115,000 and $66,000, respectively. Of the $115,000 eligibility for
Mr. Castle, $69,000 was related to financial objectives and $46,000 was related
to individual objectives. Of the $66,00 eligibility for Mr. Yaeger, $39,600 was
related to financial objectives and $26,400 was related to individual
objectives. The plan allows for the actual bonus award to be higher or lower
than the base amount depending on financial and individual performance. The
Committee determined that neither Mr. Castle nor Mr. Yaeger was eligible for
incentive compensation (cash bonus) under the Corporation's incentive
compensation plan since the minimum 1999 financial objectives were not met.
However, the Committee did award Mr. Yaeger $20,000 for performance relating to
the subsidiary banks.
Submitted by the Compensation Committee of the Board of Directors:
Bruce P. Bickner, Chairman
Robert T. Boey
Peter H. Henning
11
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- --------------------------------------------------------------------------------
COMMON STOCK PRICE PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
The following graph compares on a cumulative basis the percentage changes
since May 6, 1995 (the date on which the Common Stock was registered under
Section 12 of the Securities Exchange Act of 1934) in (a) the total stockholder
return on the Common Stock, (b) the total return of U.S. companies in the NASDAQ
Market Index ("NASDAQ U.S."), and (c) the total return of all banking
organizations traded on the NASDAQ Market ("NASDAQ Bank"). The total return
information presented assumes the reinvestment of dividends.
[GRAPH OMITTED]
<TABLE>
<CAPTION>
5/31/95 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
<S> <C> <C> <C> <C> <C> <C>
NASDAQ U.S. 1.000 1.226 1.508 1.848 2.604 4.733
NASDAQ Bank 1.000 1.285 1.696 2.840 2.821 2.713
Castle BancGroup, Inc. 1.000 1.127 1.493 1.524 2.167 1.869
</TABLE>
12
<PAGE>
- --------------------------------------------------------------------------------
TRANSACTIONS WITH MANAGEMENT
- --------------------------------------------------------------------------------
Several of the Corporation's directors and their affiliates, including
corporations and firms of which they are officers or in which they or members of
their families have an ownership interest, are customers of the banking
subsidiaries of the Corporation. These persons, corporations and firms have had
transactions in the ordinary course of business with the banking subsidiaries of
the Corporation, including borrowings of material amounts, all of which, in the
opinion of management, were on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with unaffiliated persons and did not involve more than the normal
risk of collectibility or present other unfavorable features.
- --------------------------------------------------------------------------------
INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
The Board of Directors has selected KPMG LLP, independent certified public
accountants, to serve as the independent auditors of the Corporation and its
subsidiaries for the fiscal year ending December 31, 2000. KPMG LLP has served
as the Corporation's independent auditors since its inception in 1984. A
representative from KPMG LLP is expected to be present at the Annual Meeting,
will have the opportunity to make a statement and will be available to respond
to appropriate questions.
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
In order to be eligible for inclusion in the Corporation's proxy materials
for next year's Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received at the Corporation's main office no
later than December 27, 2000. Any such proposal shall be subject to the
requirements of the proxy rules adopted under the Securities Exchange Act of
1934.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The Board of Directors of the Corporation does not intend to present any
other matters for action at the Annual Meeting, and the Board has not been
informed that other persons intend to present any other matters for action at
the Annual Meeting. However, if any other matters should properly come before
the Annual Meeting, the persons named in the accompanying proxy intend to vote
thereon, pursuant to the proxy, in accordance with the recommendation of the
Board of Directors of the Corporation.
13
<PAGE>
CASTLE BANCGROUP, INC.
Proxy Solicited on Behalf of the Board of Directors
For Annual Meeting of Stockholders to be Held on May 25, 2000
The undersigned hereby appoints Dewey R. Yaeger and Robert T. Boey, each
with the power to act without the other and with full power of substitution, as
the attorneys and Proxies of the undersigned to represent and vote all shares of
common stock of Castle BancGroup, Inc. (the "Corporation"), standing in the name
of the undersigned at the close of business on April 14, 2000, at the Annual
Meeting of Stockholders of the Corporation to be held in the community room of
First National Bank in DeKalb/Sycamore on May 25, 2000 or at any adjournments or
postponements thereof, with all the powers that the undersigned would possess if
personally present on all matters coming before said meeting, as follows:
(Continued, and to be signed and dated, on the reverse side)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
CASTLE BANCGROUP, INC.
May 25, 2000
Please Detach and Mail in the Envelope Provided
A [X] Please mark your votes as in this example.
1. ELECTION AS DIRECTORS of all the nominees listed at the right.
FOR all nominees WITHHOLD
listed at right AUTHORITY
(except as indicated to to vote for all nominees
the contrary below) listed at right
[ ] [ ]
INSTRUCTIONS: To withold authority to vote for any individual nominee, write
that nominee's name on the line provided below.
- ----------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL OF THE NOMINEES.
Nominees: Bruce P. Bickner
John W. Castle
Peter H. Henning
2. In their discretion, on such other matter that may properly come
before the meeting and any adjournments thereof.
The shares represented by this proxy will be voted as directed. WHERE NO
DIRECTION IS GIVEN, THE SHARES WILL BE VOTED "FOR" the election of all nominees
listed hereon.
This proxy may be revoked before to the exercise of the powers conferred by the
proxy.
Please sign below, date and return promptly.
Please check box if you plan to attend. [_]
Signature Dated: ,2000
------------------- --------------------------- -----
Signature If Held Jointly
IMPORTANT: Please sign exactly as name appears hereon. When signing on behalf
of a corporation, partnership, estate, trust or in other
representative capacity, please sign name and title. If executed by
a corporation, the proxy should be signed by a duly authorized
officer. If executed by a partnership, please sign in the
partnership name by an authorized person.
<PAGE>
