<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Rule 14a-11(c) or Rule 14a-12
Mahaska Investment Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Mahaska Investment Company
- --------------------------------------------------------------------------------
(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)(1) 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.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
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<PAGE> 2
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 30, 1999
TO THE SHAREHOLDERS OF MAHASKA INVESTMENT COMPANY:
The Annual Meeting of Shareholders of Mahaska Investment Company will be
held at the Elmhurst Country Club, 2214 South 11th Street, Oskaloosa, Iowa, on
Friday, April 30, 1999, at 10:30 a.m., for the following purposes:
1. To elect directors to serve until the Annual Meeting of
Shareholders at which their term expires, and until their successors shall
have been elected and qualified;
2. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the current fiscal year; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
* * * * *
The Board of Directors has fixed the close of business on February 22,
1999, as the record date for the determination of shareholders entitled to
receive notice of and to vote at the Annual Meeting or any adjournment thereof.
Shareholders who do not expect to be present at the meeting in person are
urged to complete, date, sign, and return the enclosed Proxy in the accompanying
envelope, which requires no postage if mailed in the United States.
By Order of the Board of Directors
Charles S. Howard, Chairman of the
Board
Oskaloosa, Iowa
March 25, 1999
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<PAGE> 3
PROXY STATEMENT
Mahaska Investment Company
222 First Avenue East
Oskaloosa, Iowa 52577
INTRODUCTION
The enclosed Proxy is solicited by the Board of Directors of Mahaska
Investment Company, an Iowa corporation (the "Company"), for use at the Annual
Meeting of Shareholders to be held on April 30, 1999, and at any adjournment
thereof. The Proxy may be revoked at any time before it is exercised by
submitting a later dated Proxy, by giving notice of such revocation to the
Company in writing, or by attending and requesting such revocation at the Annual
Meeting. Attendance at the Annual Meeting will not in and of itself constitute
the revocation of the Proxy. If the Proxy is not revoked, the shares represented
thereby will be voted in the manner specified in the Proxy. A Proxy properly
executed and received prior to the Annual Meeting which does not give specific
voting instructions will be voted FOR the election of the nominees to the Board
of Directors set forth herein and FOR the ratification of the appointment of
KPMG Peat Marwick LLP as independent auditors for the current fiscal year and as
the persons designated as proxies on the enclosed proxy card determine is in the
best interests of the Company in any other business that may properly come
before the meeting or any adjournment thereof. Abstentions will be treated as
shares present and entitled to vote for purposes of determining whether a quorum
is present, but not voted for purposes of determining the approval of any matter
submitted to the shareholders for a vote. If a Proxy returned by a broker
indicates that the broker does not have discretionary authority to vote some or
all of the shares covered thereby for any matter submitted to the shareholders
for a vote, such shares will be considered to be present for the purpose of
determining whether a quorum is present, but will not be considered to be
present and entitled to vote at the Annual Meeting of Shareholders.
For participants in the Mahaska Investment Company Employee Stock Ownership
Plan and Trust (the "ESOP"), the proxy card will also serve as a voting
instruction card for Mahaska State Bank, the trustee of the ESOP (the
"Trustee"), with respect to shares held in the participants' accounts. A
participant cannot direct the voting of shares allocated to the participant's
account in the ESOP unless the proxy card is signed and returned. If proxy cards
representing shares in the ESOP are not returned, those shares will be voted by
the Trustee in the same proportion as the shares for which signed proxy cards
are returned by the other participants in the ESOP.
The cost of preparing, assembling, and mailing this Proxy Statement, the
Notice of Annual Meeting of Shareholders, and the accompanying Proxy is being
borne by the Company. In addition to the solicitation by mail, officers,
directors, and regular employees of the Company may solicit Proxies by telephone
or personal interview. Such persons will receive no additional compensation for
such services. Brokerage houses, nominees, fiduciaries, and other custodians
will be requested to forward soliciting material to the beneficial owners of
shares held of record by them and will be reimbursed by the Company for their
reasonable expenses.
The record date for shareholders entitled to vote at the meeting is the
close of business on February 22, 1999, at which time the Company had issued and
outstanding 3,636,345 shares of Common Stock. Holders of Common Stock are
entitled to one vote per share on any matter which may properly come before the
meeting.
This Proxy Statement, the enclosed Proxy, and the attached Notice were
first sent to shareholders on approximately March 25, 1999.
2
<PAGE> 4
PROPOSAL 1
ELECTION OF DIRECTORS
Three directors are to be elected at the Annual Meeting of Shareholders by
holders of Common Stock to serve until the Annual Meeting of Shareholders at
which their respective term expires and until their respective successor has
been elected and qualified. The Articles of Incorporation and Bylaws of the
Company state that the Board of Directors of the Company shall set the size of
the Board of Directors in a range of not less than five directors nor greater
than fifteen directors. The Company had nine directors during the 1998 fiscal
year until the resignation of John A. Fallon III effective June 30, 1998. Mr.
Fallon resigned as a result of his decision to move out of the state of Iowa. At
its meeting on January 21, 1999, the Board of Directors voted to reduce the size
of the Board of Directors to eight members.
Each shareholder of record shall be entitled to as many votes as the total
of the number of shares of Common Stock, $5.00 par value per share, held of
record by such shareholder. Proxies cannot be voted for a greater number of
persons than the number of nominees named.
Under applicable provisions of Iowa law and the Bylaws of the Company, a
majority of the outstanding shares of the Company entitled to vote, represented
in person or by Proxy, constitute a quorum. If a quorum is present, the
affirmative vote of a majority of the shares represented at the meeting and
entitled to vote on the election of directors in the manner set forth above,
will be required to elect directors.
In the absence of instructions to the contrary, the Proxies solicited by
the Board of Directors will be voted in favor of the election of the nominees
identified in the following table, all of whom are members of the present Board
of Directors. If any such nominee shall withdraw or otherwise become
unavailable, which is not expected, the Proxies will be voted for a substituted
nominee who will be designated by the Board of Directors.
The nominees have previously been elected as directors by the holders of
the Company's Common Stock and such nominees are presently serving as directors
of the Company. The nominees and the directors of the Company whose terms
continue beyond the 1999 Annual Meeting of Shareholders are identified in the
following table. The term for which each nominee is nominated will expire at the
2002 Annual Meeting of Shareholders. Except as may be otherwise expressly
stated, the nominees for director have been employed in the capacities indicated
for more than five years. Additional information regarding these nominees and
each director as of February 22, 1999 is set forth in the following table. The
number of shares of Common Stock of the Company beneficially owned by each of
the nominees and directors as of February 22, 1999, is set forth on pages 12 and
13.
3
<PAGE> 5
<TABLE>
<CAPTION>
FIRST PRESENT TERM
NAME AND PRINCIPAL OCCUPATION BECAME A EXPIRES AT
FOR THE LAST FIVE YEARS DIRECTOR ANNUAL MEETING AGE
- ----------------------------- -------- -------------- ---
<S> <C> <C> <C>
NOMINEES:
Charles S. Howard......................................... 1988 1999 43
Chairman of the Company since January 1998 and President
and Chief Executive Officer of the Company since June
1993; previously Executive Vice President of the
Company; Chairman of Central Valley Bank(1) since June
1994; Vice Chairman of Mahaska State Bank(1) since
January 1996; Chairman of Pella State Bank(1) since
November 1997; Chairman of On-Site Credit Services,
Inc.(1) since January 1998
James F. Mathew........................................... 1979 1999 71
President, Mathew Lumber Company, Oskaloosa, Iowa
David A. Meinert.......................................... 1991 1999 45
Executive Vice President of the Company since June 1993
and Chief Financial Officer since September 1984;
President of Central Valley Bank(1) from June 1994 to
January 1997
OTHER DIRECTORS:
Martin L. Bernstein....................................... 1976 2000 67
Owner, Bernstein Realty, Oskaloosa, Iowa
Robert K. Clements........................................ 1988 2001 49
Attorney, Clements Law Firm, Oskaloosa, Iowa
John P. Pothoven.......................................... 1994 2001 56
President and, since January 1998, Chairman of Mahaska
State Bank(1)
R. Spencer Howard......................................... 1989 2000 42
Vice President Corporate Planning of the Company;
President of On-Site Credit Services, Inc.(1)
John W. N. Steddom........................................ 1975 2001 68
Civil Engineer for the County of Keokuk, Iowa from 1988 to
February 1995, Retired
</TABLE>
- -------------------------
(1) Mahaska State Bank, Central Valley Bank, Pella State Bank, and On-Site
Credit Services, Inc. are subsidiaries of the Company (all located in Iowa).
4
<PAGE> 6
MANAGEMENT
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Charles S. Howard......................... 43 Chairman, President and Chief Executive Officer
David A. Meinert.......................... 45 Executive Vice President and Chief Financial
Officer
R. Spencer Howard......................... 42 Vice President of Corporate Planning
</TABLE>
Each executive officer was elected by the Board to the position described
above for a term of one year in April 1998. The responsibilities and experience
of each executive officer are described below.
Charles S. Howard has been a director of the Company since 1988 and a
director of Mahaska State Bank since 1993. He was elected President and Chief
Executive Officer of the Company in June 1993 and elected Chairman of the
Company in January 1998. Mr. Howard was elected Vice Chairman of Mahaska State
Bank in January 1996. Mr. Howard has served as Chairman and as a director of
Central Valley Bank since June 1994. He has also served as Chairman and as a
director of Pella State Bank since November 1997. Prior thereto, he served as
Executive Vice President and Chief Operating Officer of the Company. Before
joining the Company in 1984, Mr. Howard was a Commercial Loan Officer of Mahaska
State Bank from 1977 to 1984. Charles S. Howard is a brother of R. Spencer
Howard.
David A. Meinert, C.P.A., has been a director of the Company since 1991. He
also serves as Executive Vice President and Chief Financial Officer of the
Company. Mr. Meinert is a director of Central Valley Bank and served as
President of Central Valley Bank from June 1994 to January 1997. He is also a
director of Pella State Bank. Prior to joining the Company in 1984, Mr. Meinert
was the Auditor for Mahaska State Bank from 1978 to 1984. Before joining Mahaska
State Bank, Mr. Meinert worked for the Liberty Trust & Savings Bank, Durant,
Iowa, for three years.
R. Spencer Howard has been a director of the Company since 1989 and a
director of Mahaska State Bank since 1993. He serves as President of On-Site
Credit Services, Inc. Mr. Howard is also a director of Central Valley Bank and
Pella State Bank. He also serves as Vice President of Corporate Planning of the
Company. Prior thereto, Mr. Howard served as Vice President, Marketing for
Mahaska State Bank for six years before joining the Company in 1992. R. Spencer
Howard is a brother of Charles S. Howard.
DIRECTORS
Information about directors who are not executive officers is shown in the
table set forth on page 4.
DIRECTOR AND COMMITTEE MEETINGS
Twelve regularly scheduled meetings and three special meetings of the Board
of Directors of the Company were held during 1998. Each director attended at
least 75 percent of the Board meetings and any meetings of committees on which
he served. The Company has an Audit Committee and a Compensation Committee. The
Company does not have a Nominating Committee.
The Company's Audit Committee is presently comprised of Messrs. Bernstein
and Mathew. The Audit Committee, which met three times during 1998, recommends
the annual appointment of the Company's independent auditors and is primarily
responsible for reviewing and evaluating the Company's accounting policies and
its system of internal accounting controls.
For a description of the Compensation Committee, see "REPORT ON EXECUTIVE
COMPENSATION FOR MAHASKA INVESTMENT COMPANY."
DIRECTORS' COMPENSATION
Directors of the Company are paid an annual retainer of $2,500, payable
quarterly in advance, plus $300 per regular meeting and $50 per special meeting
for directors' meetings attended. In addition, each non-
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<PAGE> 7
affiliated director is paid $50 per meeting for committee meetings attended.
Non-affiliated directors are also entitled to annual option grants under the
Company's 1996 Stock Incentive Plan, upon their election and subsequent
re-election, pursuant to a formula based on the financial performance of the
Company for the fiscal year. On April 30, 1998, each non-affiliated director of
Mahaska Investment Company and its subsidiaries was granted a non-qualified
stock option for 1,581 shares at an option price of $22.00 per share. The number
of shares to be awarded pursuant to non-qualified stock options for
non-affiliated directors is determined by dividing the fair market value (the
bid price) of the underlying shares on the date of grant of the options into
five percent of the pre-tax profits of the Company for the previous fiscal year.
The number of shares so determined is then allocated equally among the
non-affiliated directors on the date of grant of the options (the date of the
Annual Meeting of Shareholders of the Company).
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation of those persons who were at December 31, 1998, the
Chairman, President, and Chief Executive Officer of the Company, the Executive
Vice President of the Company, the Vice President, Corporate Planning of the
Company, and the Chairman and President of Mahaska State Bank for the last three
fiscal years ended December 31, 1998. No other executive officer was paid more
than $100,000 for any such year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
----------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) OPTIONS COMPENSATION(3)
--------------------------- ---- --------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Charles S. Howard........................ 1998 $162,600 $29,400 5,000 $11,053(4)
Chairman, President and 1997 111,600 51,461 13,492 9,706(4)
Chief Executive Officer 1996 107,175 44,910 21,652 7,208(4)
David A. Meinert......................... 1998 $106,200 $17,150 4,000 $ 8,790(5)
Executive Vice President and 1997 78,900 43,544 10,379 8,453(5)
Chief Financial Officer 1996 76,075 38,001 16,655 7,932(5)
R. Spencer Howard........................ 1998 $122,600 $16,826 4,000 $ 8,418(6)
Vice President, 1997 95,100 43,544 10,379 8,257(6)
Corporate Planning 1996 91,575 38,001 16,655 7,744(6)
John P. Pothoven......................... 1998 $127,300 $13,110 4,000 $27,406(7)
Chairman and President 1997 109,600 40,000 8,000 26,557(7)
Mahaska State Bank 1996 105,175 25,000 12,500 21,012(7)
</TABLE>
- -------------------------
(1) Amounts include director compensation of $6,075 from Mahaska Investment
Company and $6,100 from Mahaska State Bank for 1996, $6,100 from Mahaska
Investment Company and $5,500 from Mahaska State Bank for 1997, and $6,500
from Mahaska Investment Company and $6,100 from Mahaska State Bank for 1998
to Charles S. Howard; $6,075 from Mahaska Investment Company for 1996,
$6,100 from Mahaska Investment Company for 1997, and $6,200 from Mahaska
Investment Company for 1998 to David A. Meinert; $5,775 from Mahaska
Investment Company and $5,800 from Mahaska State Bank for 1996, $6,100 from
Mahaska Investment Company and $5,800 from Mahaska State Bank for 1997, and
$6,500 from Mahaska Investment Company and $6,100 from Mahaska State Bank
for 1998 to R. Spencer Howard; $6,075 from Mahaska Investment Company and
$6,100 from Mahaska State Bank for 1996, $6,100 from Mahaska Investment
Company and $6,100 from Mahaska State Bank for 1997, and $6,200 from Mahaska
Investment Company and $6,100 from Mahaska State Bank for 1998 to John P.
Pothoven.
(2) Executive bonuses are based on the financial performance of the Company and
for the years 1996 and 1997 were calculated by multiplying the Company's
pre-tax profits by 2 percent, then distributing that amount among certain
employees of the Company, including 33 percent to Charles S. Howard and 28
percent each
6
<PAGE> 8
to David A. Meinert and R. Spencer Howard for 1996, and 33 percent to
Charles S. Howard and 28 percent each to David A. Meinert and R. Spencer
Howard for 1997. Executive bonuses for 1998 were determined pursuant to the
"Performance Compensation for Stakeholders" plan described in the "REPORT ON
EXECUTIVE COMPENSATION FOR MAHASKA INVESTMENT COMPANY."
(3) Amounts include Company contributions to the ESOP based upon a percentage of
salary and bonus in 1996 to the accounts of Charles S. Howard, David A.
Meinert, R. Spencer Howard, and John P. Pothoven in the amounts of $5,160,
$5,400, $5,900, and $5,900, respectively; in 1997 to the accounts of Charles
S. Howard, David A. Meinert, R. Spencer Howard, and John P. Pothoven in the
amounts of $7,573, $5,817, $6,337, and $6,871, respectively; and in 1998 to
the accounts of Charles S. Howard, David A. Meinert, R. Spencer Howard, and
John P. Pothoven in the amounts of $8,423, $5,538, $6,051, and $6,190,
respectively.
(4) Amount includes $2,048 for 1996, $2,133 for 1997, and $2,630 for 1998
contributed by the Company to a salary continuation plan pursuant to which
Charles S. Howard is to receive $29,900 per year for 10 years starting at
age 65.
(5) Amount includes $2,532 for 1996, $2,636 for 1997, and $3,252 for 1998
contributed by the Company to a salary continuation plan pursuant to which
David A. Meinert is to receive $29,900 per year for 10 years starting at age
65.
(6) Amount includes $1,844 for 1996, $1,920 for 1997, and $2,367 for 1998
contributed by the Company to a salary continuation plan pursuant to which
R. Spencer Howard is to receive $29,900 per year for 10 years starting at
age 65.
(7) Amount includes $15,112 for 1996, $19,686 for 1997, and $21,216 for 1998
contributed by the Company to a salary continuation plan pursuant to which
John P. Pothoven is to receive $51,000 per year for 10 years starting at age
65.
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<PAGE> 9
STOCK OPTIONS
The following table sets forth information concerning the grant of stock
options under the Company's 1996 Stock Incentive Plan during the last fiscal
year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SHARES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(1)
OPTIONS IN FISCAL PRICE EXPIRATION -----------------------
NAME GRANTED YEAR ($/SH) DATE 5% 10%
---- ---------- ---------- -------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Charles S. Howard................ 5,000 19.5% $16.875 12/31/08 $53,075 $134,475
David A. Meinert................. 4,000 15.6% $16.875 12/31/08 $42,460 $107,580
R. Spencer Howard................ 4,000 15.6% $16.875 12/31/08 $42,460 $107,580
John P. Pothoven................. 4,000 15.6% $16.875 12/31/08 $42,460 $107,580
</TABLE>
- -------------------------
(1) The amounts set forth represent the value that would be received by the
Named Executive Officers upon exercise of the option on the date before the
expiration date of the option based upon assumed annual growth rates in the
market value of the Company's shares of 5 percent and 10 percent, rates
prescribed by applicable SEC rules. Actual gains, if any, on stock option
exercises are dependent on the future performance of the Company's shares
and other factors such as the general condition of the stock market and the
timing of the exercise of the options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY
ACQUIRED ON VALUE OPTIONS AT FY-END(#) OPTIONS AT FY-END($)
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Charles S. Howard.............. 3,469 $25,732 59,037/21,402 $384,669/$15,396
David A. Meinert............... 850 $ 7,450 45,584/16,617 $300,318/$11,842
R. Spencer Howard.............. 5,163 $58,729 46,271/16,617 $306,346/$11,842
John P. Pothoven............... -0- -0- 17,235/13,610 $ 89,427/$ 7,928
</TABLE>
8
<PAGE> 10
REPORT ON EXECUTIVE COMPENSATION FOR MAHASKA INVESTMENT COMPANY
COMPENSATION COMMITTEE PARTICIPATION
The Compensation Committee of the Board of Directors of Mahaska Investment
Company reviews and approves the Company's executive compensation policies and
evaluates the performance of the executive officers. The Compensation Committee,
which met twice during 1998, consists of Martin L. Bernstein, Robert K.
Clements, and John W. N. Steddom. All members of the Compensation Committee are
outside directors, and there is no insider participation in the Compensation
Committee.
COMPENSATION PHILOSOPHY
The Company's philosophy in setting its compensation policies for executive
officers is to maximize stockholder value over time. The Compensation Committee
believes that executive compensation should be directly linked to continuous
improvements in corporate performance and increases in stockholder value. In
this regard, the Compensation Committee has adopted the following guidelines for
compensation decisions:
- Provide a competitive total compensation package that enables the Company
to attract and retain key executive talent.
- Align executive compensation programs with the Company's annual and
long-term business strategies and objectives.
- Provide variable compensation opportunities that are directly linked to
the performance of the Company and the performance of the individual
employee.
The Compensation Committee focuses primarily on the following three
components in forming the total compensation package for its executive officers:
- Base salary
- Annual incentive bonus
- Long-term incentives
BASE SALARY
The Compensation Committee intends to compensate its executive officers
competitively within the industry. In order to evaluate the Company's
competitive posture in the industry, the Compensation Committee reviews and
analyzes the compensation packages, including base salary levels, offered by its
peer group. In addition, the Compensation Committee, together with the Board of
Directors, will also subjectively evaluate the level of performance of each
executive officer in order to determine current and future appropriate base pay
levels. Over the last two years, the Compensation Committee has increased the
salaries of the executive officers to place a greater emphasis on the base
salary component of the compensation mix and less emphasis on the bonus portion
of the mix. By increasing the base salary component, the executive officers have
been placed in the same bonus program as the remainder of the employees of the
Company.
ANNUAL INCENTIVE BONUS
The Company has adopted a "Performance Compensation for Stakeholders" plan
(the "Plan") for employees of the Company and its subsidiaries. The Plan is
designed to assist the Board of Directors and management in communicating to the
employees each year where the Company is focusing its efforts. To measure the
results and establish the incentive, the Plan is divided into four key
performance areas: growth, profitability, quality, and productivity. Various
financial ratios are monitored under each of the four key performance areas. At
the beginning of each year, a weighting is established for each of the ratios to
focus performance for the year.
Each employee participating in the Plan is eligible to receive an annual
bonus calculated as a percentage of the employee's annual salary. The bonus for
employees of the Company is determined on the basis of the
9
<PAGE> 11
overall Company results. Progress in the Plan is communicated to the employees
quarterly, with the bonuses for 1998 paid 75% in December 1998 and 25% in
January 1999.
In order to establish the same focus and incentive throughout the
organization, the Compensation Committee determined that the bonuses for
executive officers would also be computed using the Plan commencing in 1998. For
the president of the Company and the chief executive officers of the
subsidiaries, the percentage factor calculated pursuant to the Plan is
multiplied by two. For the other management personnel designated by the Board of
Directors, the percentage factor is multiplied by 1.75. Additionally, the Board
of Directors retains the discretion to deviate from the formula if warranted.
For the 1998 fiscal year, Charles S. Howard received a bonus of $29,400
pursuant to the Plan. Elements of the Company's financial performance for the
fiscal year ended 1998 compared with the fiscal year ended 1997 that directly
affected the bonus calculation for Charles S. Howard (as well as the bonus
calculation for the other employees) included a 20.3% increase in average loans
outstanding, a 6.7% increase in average deposits, an increase in the Company's
core net interest margin (excluding income from loan pool participations) of
.30%, and an increase in the Company's efficiency ratio of 3.9%. An increase in
net loan charge-offs partially offset some of the positive factors in the bonus
calculation.
LONG-TERM INCENTIVES
The Company provides its executive officers with long-term incentive
compensation through grants of stock options. The Compensation Committee is
responsible for determining the individuals to whom grants should be made, the
timing of grants, the exercise price per share, and the number of shares subject
to each option. Other than the stock options, the Compensation Committee has
made no other long-term performance awards during the last fiscal year. The
stock option grants are subject to a predetermined formula which relates to the
increase in profits which occurred in the Company over the prior fiscal year.
The Compensation Committee does, however, retain the right to make adjustments
in the grant of stock options as determined subjectively by the Compensation
Committee.
The Compensation Committee believes that stock options provide the
Company's executive officers with the opportunity to purchase and maintain an
equity interest in the Company and to share in the appreciation of the value of
the stock. The Compensation Committee believes that stock options directly
motivate an executive to maximize long-term stockholder value. The options also
utilize vesting periods in order to encourage key employees to continue in the
employ of the Company. All options to executive officers to date have been
granted at the fair market value of the Company's common stock. In deviating
from the stock option formula, the Compensation Committee considers factors such
as the individual performance of the executive officers and the competitive
compensation packages in the industry. Even though the formula would not have
provided for the award of stock options on the basis of profitability during the
1998 fiscal year, the Compensation Committee granted modest stock options to the
President and other employees based upon the individual performance of such
individuals. The amount of such stock option awards are reflected in the
compensation table for the executive officers.
SUMMARY
The Compensation Committee believes that its executive compensation
philosophy of paying its executive officers well by means of competitive base
salaries and annual bonus and long-term incentives, as described in this report,
serves the interests of the Company and the Company's stockholders.
Martin L. Bernstein
Robert K. Clements
John W. N. Steddom
10
<PAGE> 12
FINANCIAL PERFORMANCE
The following graph illustrates the cumulative total return (assuming the
reinvestment of dividends) experienced by the Company's shareholders since
September 22, 1994, the date of the Company's initial public offering, through
December 31, 1998, compared to the SNL Index comprised of Midwestern bank
holding companies and the performance of all NASDAQ US stocks.
MAHASKA INVESTMENT COMPANY
STOCK PRICE PERFORMANCE
LOGO
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
PERIOD ENDING
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INDEX 9/22/94* 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
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<S> <C> <C> <C> <C> <C> <C>
Mahaska Investment Company 100.00 90.34 103.98 137.81 247.85 216.32
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NASDAQ -- Total US 100.00 99.39 140.58 172.87 212.08 298.13
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SNL Midwest Bank Index 100.00 91.41 135.08 183.77 297.96 316.93
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</TABLE>
* Date of the Company's initial public offering.
LOANS TO OFFICERS AND DIRECTORS AND OTHER TRANSACTIONS WITH OFFICERS AND
DIRECTORS
During 1998, Mahaska State Bank, Central Valley Bank, and Pella State Bank
made loans or loan commitments, in the ordinary course of business, to directors
and officers of the Company and to corporations or partnerships with which one
or more of the officers or directors of the Company were associated. In the
opinion of management of the Company, all such loans and loan commitments were
made on substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions with other persons,
and did not involve more than the normal risk of collectibility or present other
unfavorable features.
Robert K. Clements has been a Director of the Company since 1988. Mr.
Clements is an attorney with the Clements Law Firm in Oskaloosa, Iowa. During
1998, Mr. Clements performed legal services on behalf of the Company, Mahaska
State Bank, Central Valley Bank, and On-Site Credit Services, Inc. The amount of
fees paid to the law firm at which Mr. Clements practices did not exceed five
percent (5%) of the law firm's gross revenues for that firm's last full fiscal
year.
11
<PAGE> 13
OWNERSHIP OF SECURITIES BY CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of February 22, 1999,
with respect to the Common Stock beneficially owned by each director of the
Company, by all executive officers and directors as a group and by each
shareholder known by the Company to be the beneficial owner of more than five
percent of the Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME BENEFICIAL OWNERSHIP(1) OF CLASS(1)
---- ----------------------- -----------
<S> <C> <C>
Mahaska Investment Company Employee Stock Ownership Plan
(ESOP)(2 3)............................................... 417,667 11.5%
John Hancock Mutual Life Insurance Company(4)............... 249,171 6.9%
Dalton, Greiner, Hartman, Maher & Co(5)..................... 207,033 5.7%
Lee D. Howard(6)............................................ 273,779 7.3%
Martin L. Bernstein(7)...................................... 139,687 3.8%
Robert K. Clements(8)....................................... 36,242 1.0%
Charles S. Howard(9)........................................ 252,539 6.8%
R. Spencer Howard(10)....................................... 215,726 5.9%
James F. Mathew(11)......................................... 17,267 *
David A. Meinert(12)........................................ 73,666 2.0%
John P. Pothoven(13)........................................ 79,330 2.2%
John W. N. Steddom(14)...................................... 51,176 1.4%
Executive Officers and Directors as a group (8
persons)(15).............................................. 865,633 22.6%
</TABLE>
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* Less than 1%
(1) Except as described in the following notes, each person or group owns the
shares directly and has sole voting and investment power with respect to
such shares. The shares listed include shares subject to options
exercisable within sixty days of February 22, 1999.
(2) The Company's ESOP holds shares of the Company's Common Stock pursuant to
the terms of the ESOP. The trustee of the ESOP, the Trust Department of
Mahaska State Bank, has the power to dispose of ESOP shares in accordance
with the terms of the ESOP and votes any unallocated ESOP shares at the
direction of the Committee acting as ESOP Administrators. Currently, the
ESOP Administrators are Thomas W. Campbell, President of Central Valley
Bank, R. Spencer Howard, David A. Meinert, Michael T. Patrick, President of
Pella State Bank, and John P. Pothoven. Shares allocated to participants'
accounts are voted by the respective participants. Shares not voted by a
participant will be voted by the Trustee in the same proportion as the
shares for which signed proxy cards are returned by the other participants
in the ESOP. The trustee disclaims beneficial ownership of all of the
shares, and the ESOP Administrators disclaim beneficial ownership of all
shares other than those allocated to their respective accounts held by the
ESOP. The amount of beneficial ownership shown for the ESOP includes those
shares allocated to accounts of directors and executive officers of the
Company, which shares are also reflected in the individual's respective
beneficial ownership as indicated in the footnotes below.
(3) The address of the ESOP Administrators is 222 First Avenue East, Oskaloosa,
IA 52577.
(4) The address of the shareholder listed is John Hancock Place, P. O. Box 111,
Boston, MA 02117. Such shares were held as of December 31, 1998, by the
John Hancock Bank & Thrift Opportunity Fund, a registered closed-end mutual
fund, which is managed by an indirect investment adviser subsidiary of John
Hancock as reported in the 13G filed by the shareholder.
(5) The address of the shareholder listed is Dalton, Greiner, Hartman, Maher &
Co., 1100 5th Avenue S., Suite 301, Naples, FL 34102 as reported in the 13G
filed by the shareholder.
(6) Such shares include 103,466 shares held in an IRA, 63,574 shares held in
Howard Resources, Inc., 8,957 shares in the estate of R. S. Howard for
which Lee D. Howard is executor, and 97,359 shares subject to currently
exercisable options.
(7) Such shares include 4,611 shares subject to currently exercisable options.
12
<PAGE> 14
(8) Such shares include 2,500 shares owned by his spouse and 8,742 shares
subject to currently exercisable options.
(9) Such shares include 6,386 shares owned by his spouse, 4,090 shares owned
jointly with his spouse, a total of 232 shares owned as custodian for his
two minor children, 142,753 shares in Howard Partners, L.P., in which Mr.
Howard is a one-third partner, 3,278 shares subject to currently
exercisable options by his spouse, 55,759 shares subject to currently
exercisable options, 17,432 shares allocated to his spouse's ESOP account,
and 22,609 shares allocated to his ESOP account.
(10) Such shares include 1,273 shares held in an IRA, a total of 552 shares held
by his two minor children, 142,753 shares in Howard Partners, L.P., in
which Mr. Howard is a one-third partner, 46,271 shares subject to currently
exercisable options, 4,082 shares allocated to his spouse's ESOP account,
and 14,150 shares allocated to his ESOP account. Excludes the remaining
403,517 ESOP shares with respect to which Mr. Howard shares dispositive
power as an ESOP Administrator.
(11) Such shares include 3,333 shares owned by his spouse and 3,658 shares
subject to currently exercisable options.
(12) Such shares include 6,183 shares owned jointly with his spouse, a total of
332 shares owned as custodian for his two minor children, 45,584 shares
subject to currently exercisable options, and 21,567 shares allocated to
his ESOP account. Excludes the remaining 396,100 ESOP shares with respect
to which Mr. Meinert shares dispositive power as an ESOP Administrator.
(13) Such shares include 4,117 shares held in an IRA, 17,235 shares subject to
currently exercisable options, and 34,883 shares allocated to his ESOP
account. Excludes the remaining 382,784 ESOP shares with respect to which
Mr. Pothoven shares dispositive power as an ESOP Administrator.
(14) Such shares include 600 shares held in his spouse's IRA and 5,687 shares
subject to currently exercisable options.
(15) Such shares include a total of 114,723 ESOP shares allocated to the
accounts of directors and executive officers and a total of 190,825 shares
subject to currently exercisable options.
13
<PAGE> 15
PROPOSAL 2
RATIFICATION OF AUDITORS' APPOINTMENT
The Board of Directors of the Company, at the recommendation of the Audit
Committee, has approved the accounting firm of KPMG Peat Marwick LLP,
independent certified public accountants, to conduct the audit examination of
the Company and its subsidiaries for 1999 as it did for 1998.
A representative from the KPMG Peat Marwick LLP is anticipated to be
present at the Annual Meeting of Shareholders. He will have the opportunity to
make a statement if he desires to do so and is expected to be available to
respond to appropriate questions from shareholders.
The Board recommends that shareholders vote FOR the ratification of the
appointment of KPMG Peat Marwick LLP as independent auditors for 1999. In the
absence of instructions to the contrary, proxies solicited by the Board of
Directors will be voted FOR ratification of the appointment of auditors.
14
<PAGE> 16
GENERAL MATTERS
FINANCIAL STATEMENTS
The Company's 1998 Annual Report to Shareholders, including financial
statements, has accompanied the mailing of this Proxy Statement.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH SHAREHOLDER SOLICITED, UPON
THE WRITTEN REQUEST OF ANY SUCH SHAREHOLDER, A COPY OF ITS ANNUAL REPORT ON FORM
10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE
FINANCIAL STATEMENTS, FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998. SUCH WRITTEN
REQUEST SHOULD BE DIRECTED TO KAREN K. BAACK, SECRETARY/TREASURER, MAHASKA
INVESTMENT COMPANY, P. O. BOX 1104, OSKALOOSA, IOWA 52577-1104. IT IS ALSO
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S INTERNET WEB SITE AT
HTTP://WWW.SEC.GOV/CGI-BIN/SRCH-EDGAR.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's directors and executive officers and persons who own more than 10
percent of the Company's Common Stock file initial reports of ownership and
reports of changes of ownership with the Securities and Exchange Commission and
NASDAQ. Specific due dates for these reports have been established, and the
Company is required to disclose in its Proxy Statement any failure to file by
these dates during the Company's 1998 fiscal year.
Charles S. Howard and R. Spencer Howard each made one late filing of a Form
4 as a result of their inadvertent failure to report shares of stock
beneficially owned by them through their respective spouses. Other than the
foregoing, all the applicable filing requirements were satisfied by the
officers, directors and 10 percent owners during 1998. In making this statement,
the Company is relying upon written representations of its incumbent officers,
directors, and 10 percent owners and copies of applicable reports furnished to
the Company.
SHAREHOLDER PROPOSALS
In order for any proposals of shareholders pursuant to the procedures
prescribed in Rule 14a-8 under the Securities Exchange Act of 1934 to be
presented as an item of business at the 2000 Annual Meeting of Shareholders of
the Company, the proposal must be received at the Company's principal executive
offices no later than November 28, 1999. A shareholder proposal submitted
outside the procedures prescribed in Rule 14a-8 shall be considered untimely
unless received no later than February 10, 2000.
OTHER MATTERS
Management does not know of any other matters to be presented at the
meeting, but should other matters properly come before the meeting, the proxies
will vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
Karen K. Baack, Secretary
March 25, 1999
15
<PAGE> 17
THE DIRECTORS AND OFFICERS
OF MAHASKA INVESTMENT COMPANY
CORDIALLY INVITE YOU TO ATTEND OUR
1999 ANNUAL MEETING OF SHAREHOLDERS
FRIDAY, APRIL 30, 1999, 10:30 A.M. CDT
ELMHURST COUNTRY CLUB
2214 SOUTH 11TH STREET
OSKALOOSA, IA 52577
IMPORTANT
Please complete both sides of the PROXY CARD, sign, date,
detach and return in the enclosed envelope.
<TABLE>
<S><C>
DETACH PROXY CARD HERE DETACH ATTENDANCE CARD HERE AND MAIL WITH PROXY CARD
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED MAHASKA INVESTMENT COMPANY
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2. If you plan to personally attend the Annual Meeting
of Shareholders on April 30, 1999, please check the
box and list the names of attendees below.
Return this stub in the enclosed envelope with your
completed proxy card.
I/We do plan to attend the 1999 meeting. [ ]
Dated:
--------------------------------------
Signature:
---------------------------------- Names of persons attending:
Signature if held jointly:
------------------ ----------------------------------------------------
----------------------------------------------------
Please sign exactly as name appears. When shares are held by joint ----------------------------------------------------
tenants, both should sign. When signing as an 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 officers. If a partnership, please sign in partnership name
by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
REVOCABLE PROXY MAHASKA INVESTMENT COMPANY
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned as a shareholder of record on February 22, 1999 hereby appoints Charles S. Howard and David A. Meinert 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 Mahaska Investment Company which the undersigned is entitled to vote at the Annual Meeting of Shareholders
to be held on April 30, 1999, or any adjournment thereof.
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1. Proposal 1 - Election of Directors 2. Proposal 2 - Ratify the Appointment of KPMG Peat Marwick LLP
[ ] For All Nominees Listed Below as independent Auditors for the Company
(except as marked to the contrary below).
[ ] Withhold Authority to vote for all nominees [ ] For [ ] Against [ ] Abstain
below. (Instructions: To withhold authority
to vote for any individual nominee, strike
a line through the nominee's name).
Charles S. Howard 3. In their discretion, the Proxies are authorized to vote
James F. Mathew upon such other business as may properly come before the
David A. Meinert meeting.
(to be signed on the other side)
</TABLE>
