<PAGE>
===========================================================================
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:
[X] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only (as Permit-
[ ] 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:
-----------------------------------------------------------------
(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.:
-----------------------------------------------------------------
(3) Filing party:
-----------------------------------------------------------------
(4) Date filed:
-----------------------------------------------------------------
===========================================================================
<PAGE>
[SHORELINE FINANCIAL CORPORATION LOGO]
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 the Mendel Center at Lake Michigan College, 2755 E. Napier
Avenue, Benton Harbor, Michigan, on Thursday May 14, 1998, at 2:30 p.m.
local time, for the following purposes:
1. To elect directors.
2. To approve and adopt an Amendment to Restated 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 23, 1998, 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 April 6,
1998.
By Order of the Board of Directors,
/s/ Wayne R. Koebel
Wayne R. Koebel
Secretary
April 6, 1998
- ---------------------------------------------------------------------------
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
SHORELINE FINANCIAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
May 14, 1998
This Proxy Statement and the accompanying form of proxy are being
furnished to holders of common stock ("Common Stock") of Shoreline
Financial Corporation ("Shoreline" or the "Corporation") on and after April
6, 1998, 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 14, 1998, and at any adjournment of that meeting. The
annual meeting will be held at the Mendel Center at Lake Michigan College,
2755 E. Napier Avenue, Benton Harbor, Michigan, at 2:30 p.m. local time.
The purpose of the annual meeting is to consider and vote upon the
following matters: (i) election of directors; and (ii) approval and
adoption of an Amendment to the Restated Articles of Incorporation to
increase the number of authorized shares of Common Stock. If a proxy in
the form distributed by Shoreline is properly signed 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 and adoption of the proposed
Amendment to Restated 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 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 four persons for
reelection to the Shoreline Board of Directors for terms expiring at the
annual meeting to be held in 2001:
NOMINEES
Thomas T. Huff
L. Richard Marzke
Dan L. Smith
Ronald L. Zile
Six other directors are serving terms that will expire in 1999 and
2000. 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 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
APPROVAL AND ADOPTION OF AMENDMENT TO RESTATED ARTICLES OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors proposes to amend Article III of Shoreline's
Restated Articles of Incorporation to increase the number of authorized
shares of Common Stock from 10,000,000 shares of Common Stock to 15,000,000
shares of Common Stock. The purpose of the amendment is to provide
additional shares for future issuance.
As of March 23, 1998, 5,937,389 authorized shares of Common Stock were
issued and outstanding. The Board of Directors believes that it is
advisable to have the additional authorized shares available for possible
-2-
<PAGE>
future stock splits and dividends, employee benefit plans, equity-based
acquisitions and other corporate purposes that might be proposed in the
future. Shoreline has no present plans or proposals to issue shares that
would be authorized by the proposed amendment. However, the Board of
Directors has authorized the issuance of shares for such purposes in the
past.
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 other organizations that might be interested
in being acquired. Authorized but unissued shares of Common Stock, or
funds raised in a public offering of shares, may be used for these
purposes.
All of the additional shares resulting from the increase in the number
of authorized shares of Shoreline'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. Shareholders have no preemptive
rights to acquire shares issued by the Corporation under its existing
Restated Articles of Incorporation, and shareholders would not acquire any
such rights with respect to such additional shares under the proposed
amendment to Shoreline's Restated 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.
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
Shoreline.
This increase in authorized but unissued Common Stock could be
considered an anti-takeover measure because the additional authorized but
unissued shares of Common Stock could be used by the Board of Directors to
make a change in control of Shoreline more difficult. The Board of
Directors' purpose in recommending this proposal is not as an anti-takeover
measure, but rather for the reasons discussed above.
The first paragraph of Article III of Shoreline's Restated Articles of
Incorporation, as amended, would read as follows:
The total authorized capital stock of the corporation
is Fifteen Million (15,000,000) 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 the outstanding
shares of Common Stock is required to approve and adopt the proposed
amendment to Shoreline's Restated Articles of Incorporation. For the
-3-
<PAGE>
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 SHORELINE'S RESTATED ARTICLES OF INCORPORATION
VOTING SECURITIES
Holders of record of Common Stock at the close of business on
March 23, 1998 will be entitled to vote at the annual meeting of
shareholders on May 14, 1998 and any adjournment of that meeting. As of
March 23, 1998, there were 5,937,389 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 December 31, 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:
<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> 556,862 296,675 853,537 14.38%
</TABLE>
The following table sets forth information concerning the number of
shares of Common Stock held as of March 13, 1998 by each of Shoreline's
directors and nominees for director, each of the named executive officers
and all of Shoreline's directors, nominees for director and executive
officers as a group:
-4-
<PAGE>
<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 9,136<F4> -- 9,136<F4> .15%
Robert K. Burch 9,450<F4> 2,180 11,630<F4> .20
Louis A. Desenberg -- 22,942 22,942 .39
Merlin J. Hanson 138,883 -- 138,883 2.34
Thomas T. Huff 32,677 -- 32,677 .55
Wayne R. Koebel 13,645<F4> 13,517 27,162<F4> .46
James E. LeBlanc 2,748 -- 2,748 .05
L. Richard Marzke 24,113 -- 24,113 .41
James R. Milroy 13,736<F4> 787 14,523<F4> .24
James F. Murphy 29,970<F4> 40,451 70,421<F4> 1.19
Dan L. Smith 41,503<F4> 15,180 56,683<F4> .95
Robert L. Starks 74,143 22,477 96,620 1.63
Jeffery H. Tobian 129,872 -- 129,872 2.19
Ronald L. Zile 5,662<F4> 40,263 45,925<F4> .77
All directors and
executive officers
as a group 525,538<F4> 157,797 683,335<F4> 11.46%
- ----------------------------
<FN>
<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 is also 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.
-5-
<PAGE>
<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
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 stock
options that may be exercised within 60 days after March 13, 1998 by
each listed person is shown below:
Mr. Bailey 3,670
Mr. Burch 4,581
Mr. Koebel --
Mr. Milroy 7,726
Mr. Murphy 3,834
Mr. Smith --
Mr. Zile 5,662
All directors and
executive officers
as a group 25,473
</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. Four members of the present Board of
Directors are standing for reelection to terms expiring in 2001.
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
-6-
<PAGE>
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 2001
THOMAS T. HUFF (age 55) 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 64) 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 62) 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 65) 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 2000
LOUIS A. DESENBERG (age 54) 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 70) 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
-7-
<PAGE>
1991 and a director of Shoreline Bank and, before the Consolidation, Inter-
City Bank since 1987.
JEFFERY H. TOBIAN (age 46) 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 1999
JAMES E. LEBLANC (age 55) retired in 1997 after serving as 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 67) 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 Shoreline Bank and, before the
Consolidation, Inter-City Bank since 1972.
ROBERT L. STARKS (age 66) 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 44) has been Executive Vice President of
Shoreline Bank since May 1997. Before May 1997, Mr. Bailey had served as
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 42) 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 51) 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
-8-
<PAGE>
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 37) has been Executive Vice President of
Shoreline and Executive Vice President and Cashier at Shoreline Bank since
May 1997. He previously served as Senior Vice President and Controller of
Shoreline and Shoreline Bank from May 1993 until May 1997, and as Vice
President and Controller at 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 considers advisable. The Audit Committee also reviews reports
of 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 considers appropriate. Directors Marzke,
Starks and Zile presently serve on this committee. The Audit Committee met
four times during 1997.
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 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 1997.
-9-
<PAGE>
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 met once during 1997.
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 once during 1997.
During 1997, the Shoreline Board of Directors held four regular
meetings and one special meeting. All directors except Mr. Hanson 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.
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
all applicable Section 16(a) reporting and filing requirements were
satisfied from January 1, 1997, through December 31, 1997. Shoreline
recently discovered that Mr. Zile inadvertently failed to report one
transaction involving 100 shares of Common Stock during 1994 and did not
report that transaction on his 1994 Form 5. A Form 4 will be filed to
reflect this transaction.
-10-
<PAGE>
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 performances 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 and restricted stock.
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 additional 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 then 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 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 1997, all of
Shoreline's long-term incentives involved awards of restricted stock.
Stock ownership is considered important. Through stock ownership, the
interests of executives are joined with those of the shareholders. Under
-11-
<PAGE>
Shoreline's Stock Incentive Plan of 1996, executives are rewarded for the
enhancement of shareholder value through the increase in the value of
shares received. During 1997, Mr. Smith, Mr. Koebel, Mr. Bailey, Mr.
Milroy and Mr. Burch were each awarded 5,000 shares of restricted stock.
These shares vest, based upon corporate performance, over a five to seven
year period.
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 1997, also serves as Chairman, President and Chief Executive
Officer of Shoreline Bank. In determining Mr. Smith's base salary for
1997, the Committee acknowledged the effectiveness of Mr. Smith's
leadership in directing corporate growth and in delivering consistently
strong financial performance. The year ended 1996 represented the sixth
consecutive year of record earnings per share, and total shareholder return
approximated 35% for the year. In setting his 1997 salary at $255,000, the
Committee's goal was to make Mr. Smith's compensation comparable to that
of chief executive officers of other high-performing bank holding
companies with assets of $500 million to $1 billion. Mr. Smith's 1997
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 1997, but he was awarded
5,000 shares of restricted stock.
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
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 deductions for employee remuneration will be disallowed in
1998 or in future years by reason of actions expected to be taken in 1998.
During 1997, 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
-12-
<PAGE>
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]
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>
1992 $100.0 $100.0 $100.0
1993 134.2 105.5 110.1
1994 120.3 100.2 111.5
1995 145.4 160.4 153.5
1996 194.9 226.9 188.7
1997 333.9 331.7 251.6
</TABLE>
-13-
<PAGE>
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, 1997, by the Chief Executive Officer and each
other executive officer of Shoreline. Each executive officer was
compensated by Shoreline Bank in the capacity indicated in the table.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
AWARDS
-----------------------
NUMBER OF
NAME AND RESTRICTED SECURITIES
PRINCIPAL STOCK UNDERLYING ALL OTHER
POSITION<F1> YEAR SALARY<F2> BONUS<F3> AWARDS<F4> OPTIONS COMPENSATION<F5>
------------ ---- ---------- --------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Dan L. Smith 1997 $267,000 $99,450 $121,250 -- $14,126
Chairman of the Board, 1996 240,500 89,700 -- -- 14,226
President and Chief 1995 220,000 75,600 -- -- 12,842
Executive Officer of
Shoreline and Shoreline Bank
Wayne R. Koebel 1997 130,000 50,700 121,250 -- 12,680
Executive Vice President, 1996 120,000 46,800 -- -- 12,116
Chief Financial Officer, 1995 110,000 39,600 -- -- 10,083
Secretary and Treasurer of
Shoreline and Executive Vice
President and Chief Financial
Officer of Shoreline Bank
Robert K. Burch 1997 102,078 39,810 121,250 -- 11,398
Executive Vice President 1996 95,400 37,206 -- -- 10,834
of Shoreline Bank 1995 90,000 32,400 -- -- 8,674
Richard D. Bailey, II 1997 100,000 39,000 121,250 -- 11,055
Executive Vice President 1996 87,833 35,100 -- 8,738 9,897
of Shoreline Bank 1995 80,000 28,800 -- -- 7,207
James R. Milroy 1997 89,750 35,685 121,250 -- 9,897
Executive Vice President 1996 78,000 31,200 -- -- 8,078
of Shoreline and Executive 1995 70,000 25,200 -- -- 6,739
Vice President and Cashier
of Shoreline Bank
-14-
<PAGE>
- ---------------------------------
<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 and Shoreline Bank to Mr.
Smith.
<F3> Includes compensation deferred under Shoreline's Profit-Sharing/401(k)
Plan.
<F4> The values of restricted stock awards reported in this column are
calculated using the closing market price of Common Stock on the date
of grant. As of the end of Shoreline's 1997 fiscal year, each of the
named executive officers held shares of restricted stock. Dividends
will be paid on shares of restricted stock at the same rate dividends
are paid on Common Stock. The number of shares of restricted stock
held by each named individual and the aggregate value of those shares
at the end of Shoreline's 1997 fiscal year, without giving effect to
the diminution of value attributable to the restrictions on the stock,
are set forth below:
NUMBER OF AGGREGATE
SHARES VALUE
--------- ---------
Mr. Smith 5,250 $196,875
Mr. Koebel 5,250 196,875
Mr. Burch 5,250 196,875
Mr. Bailey 5,250 196,875
Mr. Milroy 5,250 196,875
These awards vest over a period of five to seven years dependent upon
corporate performance.
<F5> 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 1997 are:
-15-
<PAGE>
(I) (II)
------ ------
Mr. Smith $4,233 $9,893
Mr. Koebel 2,787 9,893
Mr. Burch 2,786 8,612
Mr. Bailey 2,702 8,353
Mr. Milroy 2,419 7,478
</FN>
</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 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
exercised by the specified individuals during 1997 and options held by such
individuals at December 31, 1997. No stock options were granted to the
named executive officers during 1997.
-16-
<PAGE>
<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> <C> <C>
Dan L. Smith 8,325 $164,538 3,608 / -- $ 108,889 / --
Wayne R. Koebel 1,826 37,762 4,000 / -- 120,720 / --
Robert K. Burch 2,300 60,214 4,581 / -- 138,255 / --
Richard D. Bailey, II -- -- 3,670 / 5,505 65,106 / $ 97,659
James R. Milroy 360 6,323 7,052 / 1,763 147,669 / 36,917
- --------------------------
<FN>
<F1> The value of options is based on the trading value of Shoreline Common
Stock of $37.50 per share as of the close of business on December 31,
1997.
</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
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.
-17-
<PAGE>
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 March 13, 1998, Mr. Smith had 30 years of service under the
plans, Mr. Koebel had 20 years of service under the qualified plan,
Mr. Burch had 12 years of service under the qualified plan, Mr. Bailey had
four years of service under the qualified plan and Mr. Milroy had eight
years of service under the qualified plan. Pension benefits under the
plans 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 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
-18-
<PAGE>
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 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 1997, Shoreline and Shoreline Bank compensated their respective
directors at the rate of $6,000 per year, and directors who were not
executive officers of Shoreline or Shoreline Bank also received $375 per
-19-
<PAGE>
regular board meeting attended and $375 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, 1997, and March 23, 1998. 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 involve more than the normal
risk of collectibility or present other unfavorable features.
During 1997, Shoreline and Shoreline Bank paid legal fees to law firms
in which Messrs. Desenberg and Huff are shareholders or partners. The fees
paid by Shoreline and Shoreline Bank to these firms did not exceed 5% of
the applicable 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
1998. 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.
-20-
<PAGE>
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the 1999 annual
meeting must be received by Shoreline for consideration for inclusion in
its proxy statement and form of proxy relating to that meeting by December
7, 1998. 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.
-21-
<PAGE>
[FRONT]
SHORELINE FINANCIAL CORPORATION
P R O X Y 823 RIVERVIEW DRIVE
BENTON HARBOR, MICHIGAN 49022
ANNUAL MEETING OF SHAREHOLDERS - MAY 14, 1998
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
AND ADOPTION OF THE PROPOSAL IDENTIFIED BELOW. 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 [ ] WITHHOLD AUTHORITY
below (except as indicated to vote for all nominees
below) listed below
Thomas T. Huff L. Richard Marzke Dan L. Smith Ronald L. Zile
(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 and Adopt an Amendment to the Restated Articles of
Incorporation to Increase the Number of Authorized Shares of Common
Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
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.
X_______________________________________
Signature
X_______________________________________
Signature if held jointly
Dated: ___________________________, 1998
