SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule
14a-12
SHORELINE FINANCIAL CORPORATION
___________________________________________________________________________
(Name of Registrant as Specified in Its Charter)
SHORELINE FINANCIAL CORPORATION
___________________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-
6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
___________________________________________________________________________
(2) Aggregate number of securities to which transactions applies:
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pursuant to Exchange Act Rule 0-11.
___________________________________________________________________________
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[ ] 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
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[SHORELINE FINANCIAL CORPORATION LOGO PLACED HERE]
823 Riverview Drive
Benton Harbor, Michigan 49022
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
___________________________________________________________________________
The annual meeting of shareholders of Shoreline Financial Corporation
will be held at Lake Michigan College, 2755 E. Napier Avenue, Benton
Harbor, Michigan, on Thursday, May 5, 1994, at 3 p.m. local time, for the
following purposes:
1. To elect directors.
2. To approve an amendment to the Corporation's Articles of
Incorporation to increase the number of authorized shares of
Common Stock.
3. To transact any other business that may properly come before the
meeting.
Shareholders of record at the close of business on March 11, 1994, are
entitled to notice of and to vote at the meeting and any adjournment of the
meeting.
By Order of the Board of Directors,
[WAYNE R. KOEBEL SIGNATURE]
Wayne R. Koebel
Secretary
March 25, 1994
___________________________________________________________________________
It is important that your shares be represented at the
meeting. Even if you expect to attend the meeting,
PLEASE SIGN AND RETURN YOUR PROXY PROMPTLY.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
of
SHORELINE FINANCIAL CORPORATION
May 5, 1994
This Proxy Statement and the accompanying form of proxy are being
furnished to holders of Common Stock of Shoreline Financial Corporation
("Shoreline" or the "Corporation") on and after March 25, 1994, in
connection with the solicitation of proxies by the Shoreline Board of
Directors for use at the annual meeting of Shoreline shareholders to be
held on May 5, 1994, and at any adjournment of that meeting. The annual
meeting will be held at Lake Michigan College, 2755 E. Napier Avenue,
Benton Harbor, Michigan, at 3 p.m. local time.
The purpose of the annual meeting is to consider and vote upon (i)
election of directors, and (ii) approval of an amendment to the
Corporation's Articles of Incorporation to increase the number of
authorized shares of Common Stock. If a proxy in the form distributed by
Shoreline is properly executed and returned to Shoreline, the shares
represented by that proxy will be voted at the annual meeting of Shoreline
shareholders and at any adjournment of that meeting. If a shareholder
specifies a choice, the proxy will be voted as specified. If no choice is
specified, the shares represented by the proxy will be voted for the
election of all nominees of the Board of Directors named in this Proxy
Statement and for approval of the proposed amendment to the Corporation's
Articles of Incorporation. Shoreline management does not know of any other
matter to be presented at the annual meeting. If other matters are
presented, all shares represented by the proxy will be voted in accordance
with the judgment of the persons named as proxies.
A proxy may be revoked at any time prior to its exercise by written
notice delivered to the Secretary of Shoreline. A proxy may also be
revoked by attending and voting at the annual meeting.
Solicitation of proxies will be made initially by mail. Directors,
officers and employees of Shoreline and its subsidiaries may also solicit
proxies in person or by telephone without additional compensation. In
addition, proxies may be solicited by nominees and other fiduciaries who
may mail material to or otherwise communicate with the beneficial owners of
shares held by them. All expenses of solicitation of proxies will be paid
by Shoreline.
Election of Directors
The Board of Directors has nominated the following four persons for
election to the Shoreline Board of Directors at the annual meeting:
Louis A. Desenberg
Merlin Hanson
Ronald F. Kinney
Harry C. Vorys
Four directors are to be elected at the annual meeting of shareholders
to serve for terms of three years expiring at the 1997 annual meeting of
shareholders. Eight other directors are serving terms that will expire in
1995 and 1996. It is the intent of the persons named in the accompanying
proxy to vote for the election of the four nominees listed above. The
proposed nominees are willing to be elected and to serve. In the event
that any nominee is unable to serve or is otherwise unavailable for
election, which is not contemplated, the incumbent Shoreline Board of
Directors may or may not select a substitute nominee. If a substitute
nominee is selected, all proxies will be voted for the person so selected.
If a substitute nominee is not selected, all proxies will be voted for the
election of the remaining nominees. Proxies will not be voted for a
greater number of persons than the number of nominees named.
A vote of the shareholders holding a plurality of the shares represented
in person or by proxy and voting at the meeting is required to elect
directors. For the purpose of counting votes on the election of directors,
abstentions, broker non-votes and other shares not voted will not be counted
as shares voted, and the number of shares of which a plurality is required
will be reduced by the number of shares not voted.
YOUR BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR ELECTION OF ALL NOMINEES AS DIRECTORS
Amendment of the Articles of Incorporation
The Board of Directors proposes to amend Article III of the
Corporation's Articles of Incorporation to increase the Corporation's
authorized capital stock from 5,000,000 shares of Common Stock to
10,000,000 shares of Common Stock. The purpose of the amendment is to
allow for a three-for-two stock split and to provide additional shares for
future issuance.
As of March 11, 1994, 3,307,202 authorized shares of Common Stock
were issued and outstanding. The Board of Directors has approved a three-
for-two stock split payable on May 31, 1994, to shareholders of record as
of May 16, 1994, contingent upon shareholder approval of the proposed
amendment.
The Board of Directors also believes that it is advisable to have the
additional authorized shares available for possible future stock splits and
dividends, employee benefit plans, equity based acquisitions, and other
corporate purposes that might be proposed in the future.
Management continues to seek favorable acquisition opportunities. It
has in the past had, and anticipates that it will from time to time in the
future have, discussions with smaller banks that might be interested in
being acquired as well as discussions with larger institutions that have
branches that the larger institutions may wish to sell. Authorized but
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unissued shares of Common Stock, or funds raised in a public offering of
shares, may be used for this purpose.
All of the additional shares resulting from the increase in the number
of authorized shares of the Corporation's Common Stock would be of the same
class, with the same dividend, voting and liquidation rights, as the shares
of Common Stock presently outstanding. The Corporation's authorized capital
also includes, and will include, 1,000,000 shares of preferred stock, none of
which are outstanding.
Common Stock was previously designated as having a par value of $1 per
share. On February 16, 1994, the Board of Directors amended the
Corporation's Articles of Incorporation to delete references to par value.
The concept of par value currently has no legal significance under the
Michigan Business Corporation Act, as amended.
If the proposed amendment is adopted, the newly authorized shares
would be unreserved and available for issuance. No further shareholder
authorization would be required prior to the issuance of such shares by the
Corporation. Shareholders have no preemptive rights to acquire shares
issued by the Corporation under its existing Articles of Incorporation,
and shareholders would not acquire any such rights with respect to such
additional shares under the proposed amendment to the Corporation's
Articles of Incorporation. Under some circumstances, issuance of
additional shares of Common Stock could dilute the voting rights, equity
and earnings per share of existing shareholders.
The first paragraph of Article III, as amended, would read as follows:
The total authorized capital stock of the corporation is ten
million (10,000,000) shares of common stock, all of one class
with equal voting rights, and one million (1,000,000) shares of
preferred stock.
The affirmative vote of holders of a majority of shares entitled to
vote at the annual meeting of shareholders is required to approve the
proposed amendment to the Corporation's Articles of Incorporation. For the
purpose of counting votes on this proposal, abstentions, broker non-votes
and other shares not voted have the same effect as a vote against the
proposal.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL OF THE AMENDMENT TO THE CORPORATION'S
ARTICLES OF INCORPORATION
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Voting Securities
Holders of record of Common Stock at the close of business on
March 11, 1994, will be entitled to vote at the annual meeting of
shareholders on May 5, 1994, and any adjournment of that meeting. As of
March 11, 1994, there were 3,307,202 shares of Common Stock issued and
outstanding. Each share of Common Stock is entitled to one vote on each
matter submitted for shareholder action.
The following table sets forth information concerning the number of
shares of Common Stock held as of February 21, 1994, by each shareholder
who is known to Shoreline management to have been the beneficial owner of
more than 5% of the outstanding shares as of that date:
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership of Common Stock(1)
Sole Voting Shared
and Voting or Total Percent
Name and Address of Dispositive Dispositive Beneficial of
Beneficial Owner Power Power(2) Ownership Class
<S> <C> <C> <C> <C>
Citizens Trust and
Savings Bank ("Citizens")
Trust Department
433 Phoenix Street
South Haven, Michigan
49090(3) 31,489 198,595 230,084 6.96%
Inter-City Bank ("Inter-City")
Trust Department
823 Riverview Drive
Benton Harbor, Michigan
49022(3) 117,213 101,588 218,801 6.62%
</TABLE>
The following table sets forth information concerning the number of
shares of Common Stock held as of March 11, 1994, by each of Shoreline's
directors and nominees for director, each of the named executive officers
and all of Shoreline's directors and executive officers as a group:
-4-
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership of Common Stock(1)
Sole Voting Shared Voting
and or Total Percent
Name of Dispositive Dispositive Beneficial of
Beneficial Owner Power Power(2) Ownership Class
<S> <C> <C> <C> <C>
Louis A. Desenberg-- 19,338 19,338 *
Merlin Hanson 79,983 -- 79,983 2.39%
Thomas T. Huff 17,613 -- 17,613 *
Ronald F. Kinney 1,832 -- 1,832 *
Wayne R. Koebel4,410(4) 5,82510,235(4) *
James E. LeBlanc 360 -- 360 *
L. Richard Marzke 16,810 36817,178 *
James F. Murphy2,455(4) 36,25438,709(4) 1.16%
Dan L. Smith10,405(4) 17,84728,252(4) *
Robert L. Starks49,305 -- 49,305 1.48%
Harry C. Vorys3,042(4) -- 3,042(4) *
Hyman Warshawsky 3,651 7,348 10,999 *
Ronald L. Zile5,162(4) 16,04621,208(4) *
All directors and
executive officers
as a group 204,756(4) 106,955 311,711(4)9.35%
____________________________
<FN>
* Less than 1%.
(1) The numbers of shares stated are based on information furnished by
each person listed and include shares personally owned of record by
that person and shares which under applicable regulations are deemed
to be otherwise beneficially owned by that person. Under these
regulations, a beneficial owner of a security includes any person who,
directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares voting power
or dispositive power with respect to the security. Voting power
includes the power to vote or to direct the voting of the security.
Dispositive power includes the power to dispose or to direct the
disposition of the security. A person will also be considered the
beneficial owner of a security if the person has a right to acquire
beneficial ownership of the security within 60 days.
(2) These numbers include shares as to which the listed person is legally
entitled to share voting or dispositive power by reason of joint
ownership, trust or other contract or property right, and shares held
by spouses and minor children over whom the listed person may have
substantial influence by reason of relationship. Shares held in
fiduciary capacities by bank subsidiaries of Shoreline are not
-5-
included unless otherwise indicated. The directors and officers of
Shoreline may, by reason of their positions, be in a position to
influence the voting or disposition of shares held in trust by bank
subsidiaries to some degree, but disclaim beneficial ownership of
these shares.
(3) These numbers consist of shares held in various fiduciary capacities
through the trust departments of Citizens Trust and Savings Bank and
Inter-City Bank, respectively. The directors and officers of
Shoreline, Citizens and Inter-City disclaim beneficial ownership of
these shares. It is anticipated that Citizens and Inter-City will be
consolidated on or about May 31, 1994.
(4) These numbers include shares of Common Stock which may be acquired
through the exercise of stock options within 60 days. The right to
exercise stock options vests over a 5-year period. The number of
shares subject to vested stock options for each listed person is shown
below:
<S> <C> <C>
Mr. Koebel 4,227
Mr. Murphy 2,455
Mr. Smith 8,455
Mr. Vorys 1,905
Mr. Zile 4,555
All directors and
executive officers
as a group 27,707
</TABLE>
Directors and Executive Officers
Shoreline's Board of Directors consists of 12 persons divided into
three classes. Each class consists of four directors, with each class
serving a successive three-year term of office. Four members of the
present Board of Directors are standing for reelection.
Biographical information concerning Shoreline's directors and
executive officers, including the four nominees who are nominated for
election to the Board of Directors at the annual meeting, is presented
below. Except as otherwise indicated, all directors and executive officers
have had the same principal employment for over five years. Except as
otherwise indicated, all directors and executive officers have held their
positions with Shoreline since 1987. All executive officers are appointed
annually and serve at the pleasure of the Board of Directors. Inter-City
Bank and Citizens Trust and Savings Bank are wholly owned subsidiaries of
Shoreline.
-6-
Nominees for Three Year Terms Expiring in 1997
Louis A. Desenberg (age 50) is a shareholder in the law firm of
Desenberg & Colip, P.C. He has been a director of Inter-City Bank since
1978.
Merlin Hanson (age 66) is Chairman of the Board of Hanson
International, Inc., a diversified manufacturing company. He has been a
director of Shoreline since 1991 and a director of Inter-City Bank since
1987.
Ronald F. Kinney (age 62) is President of All-Phase Electric Supply
Co., Inc., a wholesale and retail distributor of electrical equipment. He
has been a director of Inter-City Bank since 1967.
Harry C. Vorys (age 69) retired in 1990 after serving as Executive
Vice President and Treasurer of Shoreline and Executive Vice President of
Citizens Trust and Savings Bank. Mr. Vorys was also a director of Citizens
from 1988 until 1990. Mr. Vorys joined Citizens in 1986 as its Senior Vice
President and Chief Lending Officer. Mr. Vorys is also a director of
Manatron, Inc.
Incumbent Directors (Terms Expiring in 1995)
Thomas T. Huff (age 51) is a partner in the law firm of Varnum,
Riddering, Schmidt & Howlett. He has been a director of Citizens Trust and
Savings Bank since 1986.
L. Richard Marzke (age 60) is President of Pri-Mar Petroleum, Inc., a
wholesale and retail distributor of gasoline and other petroleum products.
He has been a director of Inter-City Bank since 1977.
Dan L. Smith (age 58) is Chairman of the Board, President and Chief
Executive Officer of Shoreline. Mr. Smith became Chairman of the Board and
Chief Executive Officer on January 1, 1993. Mr. Smith was Secretary of
Shoreline until 1992. Mr. Smith has served as President of Inter-City Bank
since 1978 and as its Chief Executive Officer since 1988. Mr. Smith has
been a director of Inter-City Bank since 1972.
Ronald L. Zile (age 61) is Vice Chairman of the Board of Shoreline.
Mr. Zile has been President and Chief Executive Officer of Citizens Trust
and Savings Bank since 1979, a director of Citizens since 1978, and
Chairman of the Board of Citizens since 1984.
Incumbent Directors (Terms Expiring in 1996)
James E. LeBlanc (age 51) is Chairman, President and Chief Executive
Officer of Whirlpool Financial Corporation, a financial services company,
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and Corporate Vice President of Whirlpool Corporation, a manufacturer of
kitchen and household appliances. He has been a director of Shoreline
since 1993 and a director of Inter-City Bank since 1990.
James F. Murphy (age 63) retired on December 31, 1992, after serving
as Chairman of the Board and Chief Executive Officer of Shoreline since
1987 and as Chairman of the Board of Inter-City Bank since 1978.
Mr. Murphy has been a director of Inter-City Bank since 1972.
Robert L. Starks (age 62) is Chairman of Kerley & Starks Funeral
Homes, Inc. He has been a director of Inter-City Bank since 1983.
Hyman Warshawsky (age 69) is President of Shellbea Corporation, a real
estate partnership. Prior to 1989, Mr. Warshawsky served as President of
Steel Center Supply, a steel distributor. He has been a director of
Citizens Trust and Savings Bank since 1974.
Executive Officers Who Are Not Directors
Wayne R. Koebel (age 47) is Chief Financial Officer, Secretary and
Treasurer of Shoreline. Mr. Koebel became Secretary and Treasurer on
January 1, 1993. Mr. Koebel has been Senior Vice President and Chief
Financial Officer of Inter-City Bank since 1986 and previously served as
its Senior Vice President and Controller.
Robert K. Burch (age 38) has been Executive Vice President and Cashier
of Inter-City Bank since 1992 and previously served Inter-City Bank in
other executive capacities.
David Daugherty (age 52) has been an Executive Vice President of
Citizens Trust and Savings Bank since 1992 and an Executive Vice President
of Inter-City Bank since June, 1993. He previously served Citizens Trust
and Savings Bank in other executive capacities.
James R. Milroy (age 34) has been Senior Vice President and Controller
of Shoreline since May, 1993. He previously served as Vice President and
Controller of Shoreline and Inter-City Bank since 1990. Prior to 1990, Mr.
Milroy was an associate and manager at Crowe, Chizek & Company, an
accounting firm.
The Shoreline Board of Directors has five standing committees:
Executive Committee. The Executive Committee exercises administrative
powers and duties in the management of the business affairs of Shoreline.
Directors Smith and Zile presently serve on this committee. The Executive
Committee did not meet during 1993.
Audit Committee. The Audit Committee is responsible for causing a
suitable examination of the financial records and operations of Shoreline
-8-
and its subsidiaries to be made by the internal auditors of Shoreline and
its subsidiaries through a program of continuous internal audits. The
Audit Committee recommends to Shoreline's Board of Directors independent
certified public accountants for employment to examine the financial
statements of Shoreline and make such additional examinations as the
committee deems advisable. The Audit Committee also reviews reports of
examination of Shoreline and its subsidiaries received from regulatory
authorities, and reports to the Board of Directors at least once each
calendar year the results of examinations made and such conclusions and
recommendations as the committee deems appropriate. Directors Marzke,
Starks, Vorys and Warshawsky presently serve on this committee. The Audit
Committee met four times during 1993.
Organization, Compensation, and Stock Option Committee. The
Organization, Compensation, and Stock Option Committee administers
Shoreline's Retirement Plan, Profit-Sharing Plan and bonus plan. This
committee also reviews key personnel policies and programs, including
individual salaries of executive officers, and submits recommendations to
the Board of Directors. This committee also serves as Shoreline's Stock
Option Committee and administers Shoreline's 1989 Stock Option Plan. In
this capacity, the committee determines the persons to be granted options
and rights, the amount of stock subject to options and rights to be granted
to each such person, and the terms of the options and rights to be granted.
Directors who are also employees of Shoreline or its subsidiaries and who
may participate in the plans that this committee administers may not serve
on this committee. Directors Hanson, Kinney, LeBlanc and Marzke presently
serve on this committee. The Organization, Compensation, and Stock Option
Committee met four times during 1993.
Nominating Committee. The Nominating Committee considers nominees for
election as directors of Shoreline submitted by any shareholder of record.
Any shareholder desiring to nominate a candidate for director must deliver
a notice to the Secretary of Shoreline, not less than 120 days prior to the
meeting, setting forth (i) the name, age, business address and residence
address of the nominee; (ii) the principal occupation or employment of the
nominee; (iii) the number of shares of Common Stock beneficially owned by the
nominee; (iv) a statement that the nominee is willing to be nominated and
serve; and (v) such other information regarding the nominee as would be
required under the rules of the Securities and Exchange Commission to be
included in a proxy statement soliciting proxies for the election of the
nominee. Directors Desenberg, Huff, Murphy, Smith, Warshawsky and Zile
presently serve on this committee. The Nominating Committee met once
during 1993.
Management Committee. The Management Committee develops and
administers policies for the holding company and its affiliate banks. It
also functions as Shoreline's Asset/Liability Management Committee.
Directors Smith and Zile presently serve on this Committee, along with
certain other senior management officers who are not directors. The
Management Committee met 12 times during 1993.
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During 1993, the Shoreline Board of Directors held four regular and
two special meetings. All directors attended at least 75% of the aggregate
number of meetings of the Board of Directors and meetings of committees on
which they served during the year, except for Messrs. Hanson and Huff, who
attended 60% and 71%, respectively.
Section 16(a) of the Securities Exchange Act of 1934 requires directors
and officers of Shoreline and persons beneficially owning more than 10% of
the outstanding shares of Common Stock to file reports of ownership and
changes in ownership of shares of Common Stock with the Securities and Exchange
Commission. Directors, officers and greater than 10% beneficial owners are
required by Securities and Exchange Commission regulations to furnish Shoreline
with copies of all Section 16(a) reports they file. Based on its review of the
copies of such reports received by it, or written representations from certain
reporting persons that no Forms 5 were required for those persons, Shoreline
believes that, from January 1, 1993, through December 31, 1993, all applicable
Section 16(a) reporting and filing requirements were satisfied.
Organization, Compensation, and Stock Option Committee Report on
Executive Compensation
The Organization, Compensation, and Stock Option Committee of Shoreline's
Board of Directors (the "Committee") administers benefit plans, reviews
Shoreline's key personnel policies and programs, including individual
salaries of executive officers, and submits recommendations to the Board
of Directors. Directors who are also employees of Shoreline or its
subsidiaries and who may participate in the plans that the Committee
administers may not serve on the Committee.
Successful long-term financial performance and increasing shareholder
value are Shoreline's primary corporate goals. Shoreline's executive
compensation practices are intended to encourage successful financial
performance and attract and retain talented key executives who are
critical to the Corporation's long-term success.
Shoreline's executive compensation program consists of three
components: base salary, annual cash incentive bonus opportunities, and
long-term incentives through awards of stock options. In determining the
levels of some components, the Committee considers corporate performance
alone. In determining the levels of other components, such as base salary,
the Committee will consider a number of factors in addition to corporate
performance.
The Committee's primary goal in establishing base salary levels is to
be competitive. The Committee establishes ranges for base salaries of
executive officers by comparing the Company to other more or less
comparable bank holding companies. In general, salaries paid to Shoreline
executives have been closer to the median rather than either the high or
low end of each range. Although corporate performance is considered by the
Committee in establishing base salary levels, corporate performance is not
the most important factor. A discretionary assessment of job performance
-10-
is another factor considered by the Committee in establishing base salary
levels.
Annual cash incentive bonuses are based entirely on corporate
performance and reward executives for favorable corporate performance as
compared to industry-wide performance levels. Annual cash bonus awards are
determined by the application of a formula. The formula for 1992 and
previous years compared Shoreline's return on assets with those of a
national peer group of bank holding companies with assets between $500
million and $1 billion as reported in the Uniform Bank Performance Report
for bank holding companies published by Federal Financial Institution
Examination Counsel. For Shoreline's executives to earn a bonus,
Shoreline's return on assets had to rank in the top half of the peer group.
Under the formula, Shoreline's executives received an increasing percentage
of base salary as bonus compensation as Shoreline's return on assets
increased as a percentile of the returns of the peer group.
A new, three-part bonus formula was adopted during 1993. Shoreline's
rate of net income growth over the most recent three year period is the
first, and most important, component in this new formula. The second
component encourages overhead control by comparing Shoreline's non-interest
expense to asset ratio to that of the national peer group of bank holding
companies with assets between $500 million and $1 billion as reported in
the Uniform Bank Performance Report. The final component of the formula
encourages maintenance of a strong capital position by comparing
Shoreline's risk-based capital ratio to that of the same national peer
group of bank holding companies. The maximum cash bonus allowable under
the plan is 30% of base salary.
Long-term incentives are provided to reward executives for achieving
the long-term goal of increasing shareholder value. All of Shoreline's
long-term incentives involve awards of stock options. Stock ownership is
considered important. Through stock ownership, the interests of executives
are joined with those of the shareholders. Under the stock option plan,
executives are rewarded for the enhancement of shareholder value through
the increase in the value of shares subject to options. No stock options
were awarded to executive officers of Shoreline during 1993.
Shoreline generally maintains a conservative level of perquisites and
personal benefits. The dollar value of perquisites and personal benefits
provided to executive officers does not exceed 10% of each executive
officer's respective annual salary and bonus.
Dan L. Smith, Shoreline's Chief Executive Officer during 1993, assumed
that position on January 1, 1993. Mr. Smith also serves as Chairman,
President and Chief Executive Officer of Inter-City Bank. Prior to 1993,
Mr. Smith was President and Secretary of Shoreline and President and Chief
Executive Officer of Inter-City Bank. Since 1993 was Mr. Smith's first
year as Shoreline's Chief Executive Officer, the Committee established his
salary at a level comparable to the amount paid to the former Chief
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Executive Officer during 1992, adjusted for inflation. It is the
Committee's intention to base future salary increases for Mr. Smith on a
discretionary evaluation of his job performance and his success in creating
additional value for shareholders.
Mr. Smith's 1993 incentive bonus will be based entirely on corporate
performance as measured by the bonus formula used for all executives that
is discussed above. Because information concerning the overhead and
capital ratios of Shoreline's peer group is not yet available, the exact
amount of Mr. Smith's 1993 incentive bonus is not calculable at this time.
However, based on Shoreline's net income growth over the last three years,
the minimum bonus to be paid will be 15% of base salary. By formula, the
maximum bonus cannot exceed 30% of base salary.
Mr. Smith was not awarded any stock options during 1993.
In 1993, Congress amended the federal Internal Revenue Code to add
Section 162(m). This new section provides that publicly held corporations
may not deduct compensation paid to certain executive officers in excess of
$1 million annually, with certain exemptions. Shoreline has examined its
executive compensation policies in light of Section 162(m) and the
regulations that have currently been proposed by the Internal Revenue
Service to implement that section. It is not expected that any portion of
the Corporation's deduction for employee remuneration will be disallowed in
1994 or in future years by reason of actions expected to be taken in 1994.
During 1993, all recommendations of the Committee were unanimously
approved by the Board of Directors without modification.
Respectfully submitted,
Merlin Hanson
Ronald F. Kinney
James E. LeBlanc
L. Richard Marzke
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Stock Performance
The following graph compares the cumulative total shareholder return
on Shoreline Common Stock to the Standard & Poor's 500 Stock Index and the
KBW 50 Index. The Standard & Poor's 500 Stock Index is a broad equity
market index published by Standard & Poor's. The KBW 50 Index is a market
capitalization weighted bank stock index published by Keefe, Bruyette &
Woods, Inc., an investment banking firm that specializes in the banking
industry. The KBW 50 Index is composed of 50 money center and regional
bank holding companies. The Standard & Poor's 500 Stock Index and the KBW
50 Index both assume dividend reinvestment. Cumulative total return is
measured by dividing the sum of the cumulative amount of dividends for the
measurement period, assuming dividend reinvestment, and the difference
between the share price at the end and the beginning of the measurement
period by the share price at the beginning of the measurement period.
STOCK PERFORMANCE GRAPH
Five Year Cumulative Total Shareholder Return
[STOCK PERFORMANCE GRAPH HERE]
-13-
The dollar values for total shareholder return plotted in the
graph above are shown in the table below:
<TABLE>
<CAPTION>
KBW 50 S & P 500
December 31, Shoreline Index Index
<S> <C> <C> <C> <C>
1988 $100.0 $100.0 $100.0
1989 126.4 118.9 131.6
1990 93.5 85.4 127.5
1991 134.7 135.2 166.3
1992 199.1 172.2 178.9
1993 267.1 181.8 196.9
</TABLE>
Compensation of Executive Officers and Directors
The following table shows certain information concerning the
compensation of each executive officer of Shoreline whose cash compensation
exceeded $100,000 for services rendered during each of the three years in
the period ended December 31, 1993. Each executive officer was compensated
by the respective subsidiary bank in the capacity indicated in the table.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation
Name and
Principal All Other
Position(1) Year Salary(2) Bonus(3) Compensation(4)
<S> <C> <C> <C> <C>
Dan L. Smith 1993 $173,000 $37,950(5) $22,111
Chairman of the 1992 155,312 29,562 9,900
Board, President 1991 138,250 26,250
and Chief Executive
Officer of Shoreline
and Inter-City
Ronald L. Zile 1993 151,324 32,965(5) 10,551
Vice Chairman of 1992 145,312 27,562 9,331
the Board of 1991 138,250 26,250
Shoreline and
Chairman of the
Board, President
and Chief Executive
Officer of Citizens
-14-
Wayne R. Koebel 1993 90,811 20,887(5) 8,555
Chief Financial 1992 85,995 17,199 5,830
Officer, Secretary 1991 81,900 16,380
and Treasurer of
Shoreline and
Senior Vice
President and
Chief Financial
Officer of Inter-
City Bank
______________________________________
<FN>
(1) Capacities indicated are those in which a majority of compensation was
paid if capacities changed during the year. All of Shoreline's
executive officers also serve as executive officers of Inter-City or
Citizens, as the case may be.
(2) Includes compensation deferred under Shoreline's Profit-Sharing/401(k)
Plan and director fees paid by Shoreline, Inter-City Bank and/or
Citizens Trust and Savings Bank to Messrs. Smith and Zile.
(3) Includes compensation deferred under Shoreline's Profit-Sharing/401(k)
Plan.
(4) All other compensation includes: (i) 401(k) matching contributions by
Shoreline under the Shoreline Profit-Sharing/401(k) Plan; (ii) profit-
sharing contributions by Shoreline under the Shoreline Profit-
Sharing/401(k) Plan; and (iii) cash paid representing the value of
accrued vacation time. The amounts included for each such factor for
1993 are:
(i) (ii) (iii)
<S> <C> <C> <C> <C>
Mr. Smith $4,082 $8,510 $9,519
Mr. Zile 3,420 7,131 --
Mr. Koebel 2,232 4,577 1,746
(5) The amount of each officer's bonus is based upon the three-part
formula discussed in the Organization, Compensation, and Stock Option
Committee Report on Executive Compensation. As explained in that
report, part of the bonus formula is based upon peer group
comparisons that are not yet available. Therefore, the amounts
shown for 1993 represent an estimate of the current year's bonus.
</TABLE>
Shoreline's 1989 Stock Option Plan provides that options to purchase
shares of Common Stock and related tax benefit rights may be granted to
officers and other key employees of Shoreline and its subsidiaries. A
stock option entitles the recipient to purchase shares of Common Stock for
a specified period of time at a specified price. Subject to certain
restrictions, the Organization, Compensation, and Stock Option Committee
-15-
of Shoreline's Board of Directors determines who will be granted options,
the number of shares subject to each option, the form of consideration
that may be paid upon exercise of an option and other matters related to
the plan. Tax benefit rights granted under the plan entitle a recipient
to receive a cash payment upon the exercise of a related option. No tax
benefit rights have been awarded under the plan.
The following table sets forth information concerning stock options
exercised by the specified individuals during 1993 and options held by such
individuals at December 31, 1993. No stock options were granted to the
named executives during 1993.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR END OPTION VALUES
<CAPTION>
Number of Number of Shares Value of
Shares Underlying Unexercised Unexercised In-the-Money
Acquired on Value Options at Year End(1) Options at Year End(2)
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
Dan L. Smith 0 0 8,455/2,114 $142,044/$ 35,515
Ronald L. Zile 1,500 $24,825 6,955/2,114 $116,844/$ 35,515
Wayne R. Koebel 0 0 4,227/1,057 $ 71,014/$ 17,757
__________________________
<FN>
(1) Under the stock option plan, the per share exercise price for each
option is 100% of the market value of Common Stock at the time the
option is granted. Options terminate, subject to certain limited
exercise provisions, in the event of retirement, death or other
termination of employment. The right to exercise options vests
proportionately over a 5-year period.
(2) The value of options is based on the trading value of Shoreline Common
Stock of $29.50 per share as of the close of business on December 31,
1993.
</TABLE>
Shoreline adopted a defined benefit pension plan effective January 1,
1989. The plan was established through a merger of two separate defined
benefit pension plans previously maintained by Inter-City and Citizens.
Executive officers of Shoreline, Citizens or Inter-City who satisfy certain
eligibility requirements are participants in the plan. The plan provides
no vesting until a participant has completed five years of credited
service, at which time the participant becomes 100% vested. All
participants in the plan receive credit for vesting purposes for all
periods of prior service with Inter-City or Citizens.
-16-
The following table illustrates the projected annual pension benefit
payable to Shoreline's executive officers upon retirement at age 65 at the
annual levels of average remuneration and years of service indicated:
<TABLE>
PENSION PLAN TABLE
<CAPTION>
Average
Remuneration Years of Benefit Service
10 15 20 25 30 or More
<S> <C> <C> <C> <C> <C> <C>
$ 80,000 $10,550 $15,825 $21,100 $26,375 $ 31,650
120,000 16,150 24,225 32,300 40,375 48,450
160,000 21,750 32,625 43,500 54,375 65,250
200,000 27,350 41,025 54,700 68,375 82,050
240,000 32,950 49,425 65,900 82,375 98,850
280,000 38,550 57,825 77,100 96,375 115,650
</TABLE>
As of February 28, 1994, the individuals named in the Summary
Compensation Table had years of service under the plan as follows: Dan L.
Smith, 30 years; Ronald L. Zile, 16 years; and Wayne R. Koebel, 16 years.
Pension benefits under the plan are payable monthly under a ten year
certain and life annuity. Participants may elect upon retirement to
receive a lump-sum payment equal to the present value of benefits payable
under the plan. Benefits are based on the average of the highest
compensation received by a participant during any period of five
consecutive years within the last ten years prior to the participant's
retirement ("average remuneration"). The compensation covered by the plan
is the participant's gross salary, wages and other compensation, including
any elective deferrals that are excluded from gross income. Covered
compensation for the three individuals named in the Summary Compensation
Table is substantially the same as the aggregate amount reported as "Annual
Compensation" in that table.
The benefits shown in the above table are based upon 0.75% of a
participant's average remuneration, multiplied by the number of the
participant's years of credited service for benefits (subject to a maximum
of 30 years), plus 0.65% of the participant's excess average remuneration
(determined by reference to the Social Security wage base), multiplied by
the number of the participant's years of credited service for benefits
(subject to a maximum of 30 years). The above benefits are not reduced by
primary Social Security payments.
The Shoreline defined benefit plan also contains a "grandfather"
provision under which participants may receive a pension benefit based upon
their accrued benefit as of December 31, 1988, under the defined benefit
plan previously maintained by Inter-City or Citizens, as the case may be,
if such accrued benefit would exceed the pension benefits determined under
the other provisions of the Shoreline defined benefit plan described above.
Certain individuals who previously participated in the Citizens defined
benefit plan and who had attained age 45 and had at least 10 years of
-17-
credited service for benefits as of December 31, 1988, or who had attained
age 55 and had at least five years of credited service for benefits as of
December 31, 1988, including Ronald L. Zile, have entered into agreements
with Citizens regarding their retirement benefits. Under these agreements,
Citizens will make periodic payments to these individuals following
retirement which, when added to their retirement benefit under the
Shoreline defined benefit plan, will provide a total retirement benefit
equal to that which they would have received under the Citizens plan. Upon
retirement at age 65, based upon average remuneration equal to the amount
of "Annual Compensation" shown in the Summary Compensation Table, Ronald L.
Zile would receive a total annual pension benefit of $73,716 under the
Shoreline defined benefit plan and his agreement with Citizens.
Dan L. Smith and Ronald L. Zile have employment agreements with
Shoreline. Under these agreements, Messrs. Smith and Zile are to serve
Shoreline and its subsidiary banks in their present capacities. Their
respective salaries under the agreements are to be determined by the
Organization, Compensation, and Stock Option Committee of Shoreline's
Board of Directors, and may be paid either by Shoreline or any of its
subsidiaries. Neither of these employees' salaries may be reduced
without the consent of the affected employee, except pursuant to a
general decrease in the salaries of all senior officers of Shoreline.
Upon termination of either of these employment agreements by Shoreline
without "cause" or by the employee for "good reason" (as these terms
are defined in the agreements), the employee is entitled to receive
monthly severance payments equal to the average of the employee's
aggregate monthly cash compensation received from Shoreline and its
subsidiaries during the five fiscal years preceding termination. Such
severance payments are payable for a number of months equal to the
number of years the employee has been employed by Shoreline or any of its
subsidiary banks. If termination occurs within three years following a
change in control of Shoreline, such severance payments are payable for a
minimum of 36 months.
During 1993, Shoreline, Inter-City and Citizens compensated their
respective directors at the rate of $4,000 per year, and directors who were
not executive officers of Shoreline, Inter-City or Citizens also received
$250 per regular board meeting attended and $250 per committee meeting
attended. Inter-City has entered into deferred compensation agreements
with certain of its directors under which payments will be made to these
directors after their retirement. Citizens offers all of its directors
deferred compensation agreements that permit directors to defer receipt of
directors' fees to later years.
Certain Relationships and Related Transactions
Directors and officers of Shoreline and their associates were
customers of and had transactions with subsidiaries of Shoreline in the
ordinary course of business between January 1, 1993, and March 15, 1994.
It is anticipated that such transactions will take place in the future in
-18-
the ordinary course of business. All loans and commitments included in
such transactions 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.
During 1993, Shoreline and its subsidiaries paid legal fees to law
firms in which Messrs. Desenberg and Huff are shareholders or partners.
Shoreline and its subsidiaries, combined, paid legal fees of $36,935 to
Mr. Desenberg's firm. These fees were billed at the regular rates charged
by the respective attorneys that were applicable to all of the firm's
clients. The fees paid by Shoreline and its subsidiaries to the firm with
which Mr. Huff is associated did not exceed 5% of that firm's gross
revenues for its last full fiscal year.
Independent Certified Public Accountants
The board of directors has again selected Crowe, Chizek & Company,
certified public accountants, as Shoreline's principal accountant for 1994.
A representative of Crowe, Chizek & Company is expected to be present at
the annual meeting, will have an opportunity to make a statement, and is
expected to be available to respond to appropriate questions.
Proposals of Shareholders
Proposals of shareholders intended to be presented at the 1995 annual
meeting must be received by Shoreline for consideration for inclusion in its
proxy statement and form of proxy relating to that meeting by November 25,
1994. Proposals of shareholders should be made in accordance with Securities
and Exchange Commission Rule 14a-8.
Form 10-K Report Available
Shoreline's Form 10-K Annual Report to the Securities and Exchange
Commission, including financial statements and financial statement
schedules, will be provided without charge to shareholders upon written
request. Requests should he directed to Mr. Wayne R. Koebel, Chief
Financial Officer, Secretary and Treasurer, Shoreline Financial
Corporation, 823 Riverview Drive, Benton Harbor, Michigan 49022.
-19-
[FRONT]
SHORELINE FINANCIAL CORPORATION
P R O X Y 823 Riverview Drive, Benton Harbor, Michigan 49022
Annual Meeting of Shareholders - May 5, 1994
The undersigned shareholder appoints Dan L. Smith and Ronald L.
Zile, or either of them, each with the power to appoint his substitute,
attorneys and proxies to represent the shareholder and to vote and act, with
respect to all shares that the shareholder would be entitled to vote at the
annual meeting of shareholders of Shoreline Financial Corporation referred
to above and at any adjournment of that meeting, on all matters which come
before the meeting.
[Space for sticker] Please sign exactly as your name appears on
this proxy. If signing for estates, trusts
or corporations, title or capacity should be
stated. If shares are held jointly, each
holder should sign.
Signature x__________________________________
Signature x__________________________________
Date __________________________________, 1994
[Space reserved for coding]
[BACK]
This proxy is solicited by the Board of Directors. If this proxy
is properly executed and delivered, the shares represented by this proxy will
be voted as specified. If no specification is made, the shares will be voted
for election of all nominees named on this proxy and for approval of the
proposal identified on this proxy. The shares represented by this proxy
will be voted in the discretion of the proxies on any other matters which
may come before the meeting.
1. Election of Directors
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to
below (except as indi- vote for all nominees
cated below) listed below
Louis A. Desenberg Merlin Hanson Ronald F. Kinney Harry C. Vorys
(Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
Your Board of Directors recommends that you vote FOR all nominees
2. Proposal to Approve an Amendment to the Articles of Incorporation to
Increase the Number of Authorized Shares of Common Stock
[ ] VOTE FOR [ ] VOTE AGAINST [ ] ABSTAIN
Your Board of Directors recommends that you vote FOR this Proposal
IMPORTANT! - PLEASE DATE AND SIGN THE OTHER SIDE
