<PAGE>
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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 Permit-
[X] Definitive Proxy Statement ted by Rule 14a-6(e) (2))
[ ] 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)
- ---------------------------------------------------------------------------
(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:
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(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:
-----------------------------------------------------------------
<PAGE>
(5) Total fee paid:
-----------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date of its
filing.
(1) Amount previously paid:
-----------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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<PAGE>
[SHORELINE LOGO]
SHORELINE FINANCIAL CORPORATION
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 Community Center, 2755 E. Napier
Avenue, Benton Harbor, Michigan, on May 1, 1997, at 3 p.m. local time, for
the following purposes:
1. To elect directors.
2. To transact any other business that may properly come before
the meeting.
Shareholders of record at the close of business on March 21, 1997, are
entitled to notice of and to vote at the meeting and any adjournment of the
meeting. The following Proxy Statement and enclosed form of proxy are
being furnished to holders of Shoreline Common Stock on and after March 28,
1997.
By Order of the Board of Directors,
/s/ Wayne R. Koebel
Wayne R. Koebel
Secretary
March 28, 1997
- ---------------------------------------------------------------------------
It is important that your shares be represented at the
meeting. Even if you expect to attend the meeting,
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY.
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
OF
SHORELINE FINANCIAL CORPORATION
May 1, 1997
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 28, 1997, 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 1, 1997, and at any adjournment of that meeting. The annual
meeting will be held at Lake Michigan College Community Center,
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 the
election of directors. 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. 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 with
respect to those other matters.
A proxy may be revoked at any time prior to its exercise by written
notice delivered to the Secretary of Shoreline. A proxy also may 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 Shoreline Bank 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.
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors has nominated the following three persons for
reelection to the Shoreline Board of Directors for terms expiring at the
annual meeting to be held in 2000:
NOMINEES
Louis A. Desenberg
Merlin J. Hanson
Jeffery H. Tobian
Seven other directors are serving terms that will expire in 1998 and
1999. It is the intent of the persons named in the accompanying proxy to
vote for the election of the three 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 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
VOTING SECURITIES
Holders of record of Common Stock at the close of business on
March 21, 1997, will be entitled to vote at the annual meeting of
shareholders on May 1, 1997, and any adjournment of that meeting. As of
March 21, 1997, there were 5,603,718 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 January 13, 1997, by the only shareholder
who is known to Shoreline management to have been the beneficial owner of
more than 5% of the outstanding shares of Common Stock as of that date:
-2-
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP OF COMMON STOCK<F1>
-------------------------------------------
SOLE VOTING SHARED
AND VOTING OR TOTAL PERCENT
NAME AND ADDRESS OF DISPOSITIVE DISPOSITIVE BENEFICIAL OF
BENEFICIAL OWNER POWER POWER<F2> OWNERSHIP CLASS
- ------------------- ----------- ----------- ---------- -------
<S> <C> <C> <C> <C>
Shoreline Bank
Trust Department
720 Pleasant Street
St. Joseph, Michigan 49085<F3> 550,862 282,502 833,364 14.90%
</TABLE>
The following table sets forth information concerning the number of
shares of Common Stock held as of March 7, 1997, 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:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP OF COMMON STOCK<F1>
-------------------------------------------
SOLE VOTING SHARED
AND VOTING OR TOTAL PERCENT
NAME OF DISPOSITIVE DISPOSITIVE BENEFICIAL OF
BENEFICIAL OWNER POWER POWER<F2> OWNERSHIP CLASS
- ------------------- ----------- ----------- ---------- -------
<S> <C> <C> <C> <C>
Richard D. Bailey, II 7,300<F4> -- 7,300<F4> <F*>
Robert K. Burch 12,368<F4> 1,744 14,112<F4> <F*>
Louis A. Desenberg -- 21,760 21,760 <F*>
Merlin J. Hanson 132,270 -- 132,270 2.36%
Thomas T. Huff 29,125 -- 29,125 <F*>
Ronald F. Kinney 3,397 -- 3,397 <F*>
Wayne R. Koebel 14,336<F4> 10,101 24,437<F4> <F*>
James E. LeBlanc 680 -- 680 <F*>
L. Richard Marzke 29,112 607 29,719 <F*>
James R. Milroy 11,990<F4> 773 12,763<F4> <F*>
James F. Murphy 28,985<F4> 38,525 67,510<F4> 1.21%
Dan L. Smith 50,672<F4> 4,745 55,417<F4> <F*>
Robert L. Starks 72,278 20,580 92,858 1.66%
Jeffery H. Tobian 123,688 519 124,207 2.22%
Harry C. Vorys 4,331<F4> -- 4,331<F4> <F*>
Ronald L. Zile 5,392<F4> 36,756 42,148<F4> <F*>
-3-
<PAGE>
All directors and
executive officers
as a group 525,924 136,110 662,034 11.75%
____________________________
<FN>
<F*> Less than 1%.
<F1> 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 that under applicable regulations are
considered 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 direct the voting of the security.
Dispositive power includes the power to dispose or 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. Shares held in
fiduciary capacities by Shoreline Bank are not included unless
otherwise indicated. Shoreline and the directors and officers of
Shoreline and Shoreline Bank disclaim beneficial ownership of shares
held by Shoreline Bank in fiduciary capacities.
<F2> 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 Shoreline Bank are not included unless
otherwise indicated. The directors and officers of Shoreline and
Shoreline Bank may, by reason of their positions, be in a position to
influence the voting or disposition of shares held in trust by
Shoreline Bank to some degree, but disclaim beneficial ownership of
these shares.
<F3> These numbers consist of shares held in various fiduciary capacities
through the trust department of Shoreline Bank. Shoreline and the
directors and officers of Shoreline and Shoreline Bank disclaim
beneficial ownership of these shares.
<F4> These numbers include shares of restricted Common Stock and shares of
Common Stock that may be acquired through the exercise of stock
options within 60 days. The right to exercise stock options vests
over a five-year period. The number of shares subject to vested stock
options for each listed person is shown below:
-4-
<PAGE>
Mr. Bailey 1,748
Mr. Burch 6,553
Mr. Koebel 5,549
Mr. Milroy 6,990
Mr. Murphy 5,556
Mr. Smith 7,341
Mr. Vorys 3,150
Mr. Zile 5,392
All directors and
executive officers
as a group 42,279
</FN>
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS
Shoreline's Board of Directors is divided into three classes that are
as nearly equal in number as possible. Each class of directors serves a
successive three-year term of office. Three members of the present Board
of Directors are standing for reelection with terms expiring in 2000.
Biographical information concerning Shoreline's directors and
executive officers, including the three 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. Effective
May 27, 1994, Inter-City Bank and Citizens Trust and Savings Bank, both
wholly owned subsidiaries of Shoreline, were consolidated into a single
bank under the name "Shoreline Bank" (the "Consolidation").
NOMINEES FOR ELECTION TO TERMS EXPIRING IN 2000
LOUIS A. DESENBERG (age 53) is a shareholder in the law firm of
Desenberg & Colip, P.C. He has been a director of Shoreline Bank and,
before the Consolidation, Inter-City Bank since 1978.
MERLIN J. HANSON (age 69) has been Chairman of the Board of Hanson
Group, Inc., a diversified manufacturing company, since 1987. He has also
been Chairman of the Board of Hanson Cold Storage Co., a refrigerated
warehousing company, since 1991. He has been a director of Shoreline since
1991 and a director of Shoreline Bank and, before the Consolidation, Inter-
City Bank since 1987.
-5-
<PAGE>
JEFFERY H. TOBIAN (age 45) has been President of J.T. Investments,
Inc., a personal investment company, since 1994. Before 1994, Mr. Tobian
was the owner and President of Tobian Metals, Inc., a scrap metal company.
Mr. Tobian has been a director of Shoreline since 1995.
DIRECTORS WITH TERMS EXPIRING IN 1998
THOMAS T. HUFF (age 54) is a partner in the law firm of Varnum,
Riddering, Schmidt & Howlett LLP. He has been a director of Shoreline Bank
and, before the Consolidation, Citizens Trust and Savings Bank since 1986.
L. RICHARD MARZKE (age 63) is President and Chief Executive Officer of
Pri-Mar Petroleum, Inc., a wholesale and retail distributor of gasoline and
other petroleum products and convenience store operator. He has been a
director of Shoreline Bank and, before the Consolidation, Inter-City Bank
since 1977.
DAN L. SMITH (age 61) 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, having previously served as
President of the Corporation. Mr. Smith was Secretary of Shoreline until
1992. Mr. Smith has served as Chairman of the Board, President and Chief
Executive Officer of Shoreline Bank since the Consolidation. Before the
Consolidation, Mr. Smith had served as President of Inter-City Bank since
1978, Chief Executive Officer of Inter-City Bank since 1988, and a director
of Inter-City since 1972.
RONALD L. ZILE (age 64) retired on December 31, 1994, after serving as
Vice Chairman of the Board of Shoreline since 1987 and Vice Chairman of the
Board of Shoreline Bank since the Consolidation. Before the Consolidation,
Mr. Zile had served as President and Chief Executive Officer of Citizens
Trust and Savings Bank since 1979, Chairman of the Board of Citizens Trust
and Savings Bank since 1984 and a director of Citizens since 1978.
DIRECTORS WITH TERMS EXPIRING IN 1999
JAMES E. LEBLANC (age 54) is Chairman, President and Chief Executive
Officer of Whirlpool Financial Corporation, a financial services company,
and Corporate Vice President of Whirlpool Corporation, a manufacturer of
kitchen and household appliances. He has been a director of Shoreline
since 1993. Mr. LeBlanc has also been a director of Shoreline Bank and,
before the Consolidation, Inter-City Bank since 1990.
JAMES F. MURPHY (age 66) 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.
-6-
<PAGE>
Mr. Murphy has been a director of Shoreline Bank and, before the
Consolidation, Inter-City Bank since 1972.
ROBERT L. STARKS (age 65) is Chairman of Kerley & Starks Funeral
Homes, Inc. He has been a director of Shoreline Bank and, before the
Consolidation, Inter-City Bank since 1983.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
RICHARD D. BAILEY, II (age 43) has been Senior Vice President of
Shoreline Bank and, before the Consolidation, Inter-City Bank since 1993.
Before 1993, Mr. Bailey was a Vice President and Commercial Loan Officer at
Old Kent Bank.
ROBERT K. BURCH (age 41) is Executive Vice President of Shoreline Bank
and, before the Consolidation, had served in that position at Inter-City
Bank since 1992. Before 1992, he served Inter-City Bank in various other
executive capacities.
WAYNE R. KOEBEL (age 50) is Executive Vice President, Chief Financial
Officer, Secretary and Treasurer of Shoreline. Mr. Koebel became Executive
Vice President in August 1994. Before August 1994, Mr. Koebel had served
as Senior Vice President of Shoreline. Mr. Koebel became Secretary and
Treasurer in January 1993. Mr. Koebel is Executive Vice President and
Chief Financial Officer of Shoreline Bank and, before the Consolidation,
had served as Senior Vice President and Chief Financial Officer of Inter-
City Bank since 1986.
JAMES R. MILROY (age 36) 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 from 1990 until 1993. Before
1990, Mr. Milroy was an associate and manager at Crowe, Chizek and Company
LLP, an accounting firm.
BOARD COMMITTEES AND MEETINGS
The Shoreline Board of Directors has four standing committees:
AUDIT COMMITTEE. The Audit Committee is responsible for causing a
suitable examination of the financial records and operations of Shoreline
and Shoreline Bank to be made by the internal auditors of Shoreline and
Shoreline Bank 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
-7-
<PAGE>
examination of Shoreline and Shoreline Bank 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 and Vorys presently serve on this committee. The Audit Committee
met four times during 1996.
ORGANIZATION, COMPENSATION AND STOCK OPTION COMMITTEE. The
Organization, Compensation and Stock Option Committee administers
Shoreline's Retirement Plan, Profit-Sharing/401(k) 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 and
Shoreline's 1996 Stock Incentive Plan. In this capacity, the committee
determines the persons to be granted options, restricted stock and rights,
the amount of stock to be granted to each such person and the terms of the
options, restricted stock and rights to be granted. Directors who are also
employees of Shoreline or Shoreline Bank and who may participate in the
plans that this committee administers may not serve on this committee.
Directors Hanson, LeBlanc and Marzke presently serve on this committee.
The Organization, Compensation and Stock Option Committee met three times
during 1996.
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 Hanson, Huff, Murphy and Smith presently serve on this
committee. The Nominating Committee did not meet during 1996.
STRATEGIC ISSUES COMMITTEE. The Strategic Issues Committee
investigates and considers issues related to business expansion, lines of
business and corporate structure. Directors Hanson, Huff, Marzke, Smith
and Starks presently serve on this committee. The Strategic Issues
Committee met four times during 1996.
During 1996, the Shoreline Board of Directors held four regular
meetings and two special meetings. All directors except Messrs. Kinney and
Tobian 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.
-8-
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
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,
except as described below, all applicable Section 16(a) reporting and
filing requirements were satisfied from January 1, 1996, through December
31, 1996. One report covering one transaction for Mr. Starks and one
report covering one transaction for Mr. Burch were filed late.
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
Shoreline Bank 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 Corporation 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
-9-
<PAGE>
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
is another factor considered by the Committee in establishing base salary
levels.
Annual cash incentive bonuses are based entirely on corporate
performance. Annual cash bonus awards are determined by the application of
a three-part formula. Shoreline's rate of net income growth over the most
recent three-year period is the most important component. The other two
components are overhead control and asset quality. Shoreline's overhead
and nonperforming asset ratios are compared to targeted levels to determine
the amount of bonus payable under those two components of the formula. The
maximum cash bonus allowable under the plan is 39% of base salary.
Long-term incentives are provided to reward executives for achieving
the long-term goal of increasing shareholder value. In 1996, all of
Shoreline's long-term incentives involved awards of stock options. Stock
ownership is considered important. Through stock ownership, the interests
of executives are joined with those of the shareholders. Under Shoreline's
stock option plans, executives are rewarded for the enhancement of
shareholder value through the increase in the value of shares subject to
options. Mr. Bailey was awarded options on 8,738 shares during 1996.
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 Chairman, President and Chief Executive
Officer during 1996, also serves as Chairman, President and Chief Executive
Officer of Shoreline Bank. In determining Mr. Smith's base salary for
1996, the Committee recognized Mr. Smith's leadership that has helped guide
Shoreline Bank through a highly competitive market, while delivering strong
financial performance. The year ended 1995 represented the fifth
consecutive year of record earnings per share. In setting his 1996 salary
at $230,000, the Committee was attempting to make Mr. Smith's compensation
comparable to that of chief executive officers of other bank holding
companies with assets of $500 million to $1 billion. Mr. Smith's 1996
incentive bonus was based entirely on corporate performance as measured by
the bonus formula used for all executives that is discussed above.
Mr. Smith was not awarded any stock options during 1996.
In 1993, Congress amended the federal Internal Revenue Code to add
Section 162(m). This 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
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<PAGE>
regulations that have been issued 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
1997 or in future years by reason of actions expected to be taken in 1997.
During 1996, all recommendations of the Committee were approved by the
Board of Directors without modification.
Respectfully submitted,
Merlin J. Hanson
James E. LeBlanc
L. Richard Marzke
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
[GRAPH]
-11-
<PAGE>
The dollar values for total shareholder return plotted in the graph
above are shown in the table below:
<TABLE>
<CAPTION>
DECEMBER 31, SHORELINE KBW 50 S & P 500
------------ --------- ------ ---------
<S> <C> <C> <C> <C>
1991 $ 100.0 $ 100.0 $ 100.0
1992 147.8 127.4 107.6
1993 198.3 134.5 118.5
1994 177.8 127.6 120.0
1995 214.9 204.4 165.1
1996 288.0 289.1 203.1
</TABLE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table shows certain information concerning the
compensation for services rendered during each of the three years in the
period ended December 31, 1996, of each executive officer of Shoreline.
Each executive officer was compensated by Shoreline Bank (or, before the
Consolidation, the respective predecessor bank) in the capacity indicated
in the table.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
AWARDS
------------
NUMBER OF
NAME AND SECURITIES
PRINCIPAL UNDERLYING ALL OTHER
POSITION<F1> YEAR SALARY<F2> BONUS<F3> OPTIONS COMPENSATION<F4>
------------ ---- ---------- --------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Dan L. Smith 1996 $240,500 $89,700 -- $14,226
Chairman of the Board, 1995 220,000 75,600 -- 12,842
President and Chief 1994 199,000 51,300 -- 11,074
Executive Officer of
Shoreline and Shoreline Bank
-12-
<PAGE>
Wayne R. Koebel 1996 120,000 46,800 -- 12,116
Executive Vice President, 1995 110,000 39,600 -- 10,083
Chief Financial Officer, 1994 97,906 27,000 -- 7,673
Secretary and Treasurer of
Shoreline and Executive Vice
President and Chief Financial
Officer of Shoreline Bank
Robert K. Burch 1996 95,400 37,206 -- 10,834
Executive Vice President 1995 90,000 32,400 -- 8,674
of Shoreline Bank 1994 81,000 21,870 -- 6,861
Richard D. Bailey, II 1996 87,833 35,100 8,738 9,897
Senior Vice President of 1995 80,000 28,800 -- 7,207
Shoreline Bank 1994 75,000 11,813 -- 625
James R. Milroy 1996 78,000 31,200 -- 8,078
Senior Vice President 1995 70,000 25,200 -- 6,739
and Controller of 1994 62,500 17,550 8,738 4,445
Shoreline and Shoreline Bank
<FN>
______________________________________
<F1> 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 Shoreline Bank.
<F2> Includes compensation deferred under Shoreline's Profit-
Sharing/401(k) Plan and director fees paid by Shoreline,
Shoreline Bank and/or Inter-City Bank to Mr. Smith.
<F3> Includes compensation deferred under Shoreline's Profit-
Sharing/401(k) Plan.
<F4> All other compensation includes: (i) 401(k) matching
contributions by Shoreline under the Shoreline Profit-
Sharing/401(k) Plan; and (ii) profit-sharing contributions by
Shoreline under the Shoreline Profit-Sharing/401(k) Plan. The
amounts included for each such factor for 1996 are:
(I) (II)
Mr. Smith $ 4,523 $ 9,703
Mr. Koebel 2,413 9,703
Mr. Burch 2,562 8,272
Mr. Bailey 2,341 7,556
Mr. Milroy 1,402 6,676
</FN>
</TABLE>
-13-
<PAGE>
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 Shoreline
Bank. Shoreline's Stock Incentive Plan of 1996 (the "1996 Plan")
provides that stock options, restricted stock and tax benefit rights
may be granted to officers and other key employees of Shoreline and
Shoreline Bank. 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 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 plans.
Tax benefit rights granted under the plans entitle a recipient to
receive a cash payment upon the exercise of a related option. No tax
benefit rights have been awarded under the plans. Restricted stock
awarded under the 1996 Plan is subject to such terms, conditions and
restrictions as the Organization, Compensation and Stock Option
Committee may from time to time determine.
The following tables set forth information concerning stock
options granted to and exercised by the specified individuals during
1996 and options held by such individuals at December 31, 1996.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------
PERCENT OF
NUMBER TOTAL POTENTIAL REALIZABLE VALUE AT
OF SECURITIES OPTIONS ASSUMED ANNUAL RATES OF
UNDER- GRANTED TO STOCK PRICE APPRECIATION
LYING EMPLOYEES EXERCISE FOR OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION -------------------------------
NAME GRANTED <F1> YEAR PER SHARE <F1> DATE 0% 5% 10%
---- ------------ --------- -------------- ---------- ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Dan L. Smith -- -- -- -- -- -- --
Wayne R. Koebel -- -- -- -- -- -- --
Robert K. Burch -- -- -- -- -- -- --
Richard D. Bailey, II 8,738 30.4% $20.75 11/22/06 -- $114,031 $288,966
James R. Milroy -- -- -- -- -- -- --
-14-
<PAGE>
<FN>
<F1> The per share exercise price of each option is equal to the
market value of Common Stock on the date each option is granted.
All outstanding options were granted for a term of 10 years.
Options terminate, subject to certain limited exercise
provisions, in the event of death, disability, retirement or
other termination of employment. Options vest and become
exercisable over a period of four years, with 20% of the shares
subject to an option exercisable on the date of grant and an
additional 20% becoming exercisable on each anniversary of the
date of grant. All options permit the option price to be paid by
delivery of cash or other shares of Common Stock owned by the
option holder, including shares acquired through the exercise of
options. The number of shares underlying options and the exercise
prices have been adjusted to reflect a 5% stock dividend.
</FN>
</TABLE>
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF SHARES VALUE OF
NUMBER OF UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END<F1>
ACQUIRED ON VALUE -------------------------- ------------------------------
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- -------------------------- ------------------------------
<S> <C> <C> <C> <C>
Dan L. Smith 3,000 $ 40,680 11,566 / -- $182,858 / --
Wayne R. Koebel 1,750 18,690 5,549 / -- 87,730 / --
Robert K. Burch 2,185 29,082 6,553 / -- 103,603 / --
Richard D. Bailey, II -- -- 1,748 / 6,990 4,807 / $19,223
James R. Milroy -- -- 5,243 / 3,495 32,035 / 21,354
<FN>
__________________________
<F1> The value of options is based on the trading value of Shoreline
Common Stock of 23.50 per share as of the close of business on
December 31, 1996.
</FN>
</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 Bank and Citizens
-15-
<PAGE>
Trust and Savings Bank. Executive officers of Shoreline or Shoreline Bank
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. The Internal Revenue Code of
1986, as amended (the "Code") imposes certain limitations on the amount of
compensation that may be considered in determining benefits payable and that
may actually be paid under qualified defined benefit plans. In 1995, the
Company adopted a nonqualified supplemental pension plan applicable to
certain executive officers and management employees of Shoreline, including
Mr. Smith. Under the supplemental pension plan, participants will receive
supplemental retirement benefits equal to the difference between the benefits
to which they are entitled under the qualified pension plan and the benefits
to which they would have been entitled under that plan if those benefits were
based on compensation including compensation deferred by the participant and
if the limits on compensation and benefits specified in the Code did not
apply.
The following table illustrates the projected combined annual pension
benefit payable under the qualified pension plan and the supplemental pension
plan 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 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
320,000 44,150 66,225 88,300 110,375 132,450
360,000 49,750 74,625 99,500 124,375 149,250
400,000 55,350 83,025 110,700 138,375 166,050
</TABLE>
As of February 15, 1997, Mr. Smith had 30 years of service under
the plans, Mr. Koebel had 19 years of service under the qualified
plan, Mr. Burch had 11 years of service under the qualified plan,
Mr. Bailey had three years of service under the qualified plan and
Mr. Milroy had seven years of service under the qualified plan.
Pension benefits under the plans are payable monthly under a ten year
-16-
<PAGE>
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 plans. 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 plans is the participant's gross salary, wages and
other compensation, including any elective deferrals that are excluded
from gross income. Covered compensation for the five 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 Bank or Citizens
Trust and Savings Bank, as the case may be, if that 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 ten
years of 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, have entered into agreements
with Citizens (now Shoreline Bank) regarding their retirement
benefits. Under these agreements, periodic payments are made 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.
Dan L. Smith and Wayne R. Koebel have employment agreements with
Shoreline. Under these agreements, each individual is to serve
Shoreline and Shoreline Bank in his present capacities. 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 Shoreline Bank. The
individual's salary may not be reduced without his consent, except
pursuant to a general decrease in the salaries of all senior officers
of Shoreline. Upon termination of his employment agreement by
-17-
<PAGE>
Shoreline without "cause" or by the individual for "good reason" (as
these terms are defined in the agreements), the individual is entitled
to receive monthly severance payments equal to the average of his
aggregate monthly cash compensation received from Shoreline and
Shoreline Bank during the five fiscal years preceding termination, any
bonus that was or would have been accrued by Shoreline or Shoreline
Bank on the date of termination and continued participation in the
employee benefit plans of Shoreline or Shoreline Bank for the period
during which severance payments are required to be made. Under Mr.
Smith's agreement, such severance payments are payable for a number of
months equal to the number of years Mr. Smith has been employed by
Shoreline or any of its subsidiary banks. Under Mr. Koebel's
agreement, such severance payments are payable for a minimum of 36
months only if termination occurs within three years following a
change in control of Shoreline.
During 1996, Shoreline and Shoreline Bank compensated their
respective directors at the rate of $5,250 per year, and directors who
were not executive officers of Shoreline or Shoreline Bank also
received $325 per regular board meeting attended and $325 per
committee meeting attended. Shoreline Bank has entered into deferred
compensation agreements with certain of its directors under which
payments will be made to these directors after their retirement.
Shoreline adopted a Director's Deferred Compensation Plan
effective July 1, 1996. Under that plan, directors of Shoreline or
Shoreline Bank who are not employees of Shoreline or Shoreline Bank
may elect at the beginning of each year to defer payment of either all
or 50% of any fees payable to them for service as directors of
Shoreline or Shoreline Bank during the year. Amounts deferred under
the plan are payable, at the election of each director, to each
director or his or her designated beneficiary in a lump sum within
30 days of the date of termination as a director, in a lump sum on a
date determined by the director not to exceed six years after the date
of termination as a director or in five annual installments beginning
on the first anniversary of the date of termination as a director.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Directors and officers of Shoreline and their associates were
customers of and had transactions with Shoreline Bank in the ordinary
course of business between January 1, 1996, and March 21, 1997. It is
anticipated that such transactions will take place in the future in
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
-18-
<PAGE>
involve more than the normal risk of collectibility or present other
unfavorable features.
During 1996, Shoreline and Shoreline Bank paid legal fees to law
firms in which Messrs. Desenberg and Huff are shareholders or
partners. Shoreline and Shoreline Bank, combined, paid legal fees of
$22,371 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
Shoreline Bank 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 and
Company LLP, certified public accountants, as Shoreline's principal
accountant for 1997. A representative of Crowe, Chizek and Company
LLP 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 1998
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 28, 1997. 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 BE DIRECTED TO MR. WAYNE R.
KOEBEL, EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER, SECRETARY
AND TREASURER, SHORELINE FINANCIAL CORPORATION, 823 RIVERVIEW DRIVE,
BENTON HARBOR, MICHIGAN 49022.
-19-
<PAGE>
[FRONT]
SHORELINE FINANCIAL CORPORATION
P R O X Y 823 RIVERVIEW DRIVE
BENTON HARBOR, MICHIGAN 49022
ANNUAL MEETING OF SHAREHOLDERS - MAY 1, 1997
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. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE
DISCRETION OF THE PROXIES ON ANY OTHER MATTERS THAT MAY COME BEFORE
THE MEETING OR ANY ADJOURNMENT OF THE MEETING.
1. Election of Directors
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as indicated below) to vote for all nominees
listed below
Louis A. Desenberg Merlin J. Hanson Jeffery H. Tobian
(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.
IMPORTANT! - PLEASE DATE AND SIGN THE OTHER SIDE.
<PAGE>
[BACK]
The undersigned shareholder appoints Dan L. Smith and
Wayne R. Koebel, 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 on this proxy and at any adjournment
of that meeting, on all matters that come before the meeting.
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
___________________________________
Signature if held jointly
Dated: _____________________, 1997
