<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:
[ ] 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:
_________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
_________________________________________________________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
_________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
_________________________________________________________________
(5) Total fee paid:
_________________________________________________________________
<PAGE>
[ ] 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]
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 the Mendel Center at Lake Michigan College, 2755 E. Napier
Avenue, Benton Harbor, Michigan, on Thursday May 13, 1999, at 2:30 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 16, 1999, 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 24,
1999.
By Order of the Board of Directors,
/s/ James R. Milroy
James R. Milroy
Secretary
March 24, 1999
- ---------------------------------------------------------------------------
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 13, 1999
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 March
24, 1999, 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 13, 1999, 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
election of directors. 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. 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.
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 2002:
<PAGE>
NOMINEES
James E. LeBlanc
James F. Murphy
Robert L. Starks
Seven other directors are serving terms that will expire in 2000 or
2001. 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. If 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
<PAGE>
VOTING SECURITIES
Holders of record of Common Stock at the close of business on March
16, 1999 will be entitled to vote at the annual meeting of shareholders on
May 13, 1999 and any adjournment of that meeting. As of March 16, 1999,
there were 8,990,023 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, 1998 by the only shareholder
who is known to Shoreline management to have been the beneficial owner of
more than five percent 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> 936,358 229,204 1,165,562 12.87%
</TABLE>
The following table sets forth information concerning the number of
shares of Common Stock held as of December 31, 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:
<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 20,060<F4> 332 20,392<F4> .23%
Robert K. Burch 20,408<F4> 2,513 22,921<F4> .25
Louis A. Desenberg 8,367 26,746 35,113 .39
Merlin J. Hanson 212,324 -- 212,324 2.34
Thomas T. Huff 51,014 -- 51,014 .56
Wayne R. Koebel 23,549<F4> -- 23,549<F4> .26
James E. LeBlanc 8,209 -- 8,209 .09
L. Richard Marzke 38,059 -- 38,059 .42
James R. Milroy 24,404<F4> 912 25,316<F4> .28
James F. Murphy 44,467 60,676 105,143 1.16
Dan L. Smith 65,360<F4> 24,408 89,768<F4> .99
Robert L. Starks 95,358 34,838 130,196 1.44
Jeffery H. Tobian 197,808 816 198,624 2.19
Ronald L. Zile 42,837 25,372 68,209 .75
All directors and
executive officers
as a group 852,224<F4> 176,613 1,028,837<F4> 11.36%
- ---------------------------------------------------------------------------
<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
-2-
<PAGE>
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
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 December 31, 1998
by each listed person is shown below:
Mr. Bailey 7,546
Mr. Burch 3,371
Mr. Koebel --
Mr. Milroy 10,999
Mr. Smith --
All directors and
executive officers
as a group 21,916
</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 to terms expiring in 2002.
<PAGE>
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.
NOMINEES FOR ELECTION TO TERMS EXPIRING IN 2002
JAMES E. LEBLANC (age 56) 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 or its predecessors since 1990.
JAMES F. MURPHY (age 68) 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 or its predecessors since
1972.
ROBERT L. STARKS (age 67) is Chairman of Kerley & Starks Funeral
Homes, Inc. He has been a director of Shoreline Bank or its predecessors
since 1983.
-3-
<PAGE>
DIRECTORS WITH TERMS EXPIRING IN 2001
THOMAS T. HUFF (age 56) is a partner in the law firm of Varnum,
Riddering, Schmidt & Howlett LLP. He has been a director of Shoreline Bank
or its predecessors since 1986.
L. RICHARD MARZKE (age 65) 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 or its predecessors since 1977.
DAN L. SMITH (age 63) 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 May 27, 1994. Before May 27,
1994, 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 Bank since 1972.
RONALD L. ZILE (age 66) 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 May 27, 1994. Before May 27, 1994, 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 55) is a shareholder in the law firm of
Desenberg & Colip, P.C. He has been a director of Shoreline Bank or its
predecessors since 1978.
MERLIN J. HANSON (age 71) 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 or its predecessors since 1987.
JEFFERY H. TOBIAN (age 47) 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.
<PAGE>
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
RICHARD D. BAILEY, II (age 45) has been Senior Executive Vice
President of Shoreline Bank since May 1998. Before May 1998, Mr. Bailey
had served as Executive Vice President, and before May 1997 as Senior Vice
President, of Shoreline Bank or its predecessors since 1993.
ROBERT K. BURCH (age 43) has been Executive Vice President of
Shoreline Bank or its predecessors since 1992. Before 1992, he served
Shoreline Bank or its predecessors in various other executive capacities.
WAYNE R. KOEBEL (age 52) is Executive Vice President, Chief Financial
Officer 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 Treasurer in January
1993 and served as Secretary of Shoreline from 1993 until 1998. Mr. Koebel
has been Executive Vice President and Chief Financial Officer of Shoreline
Bank since May 1994 and had served as Senior Vice President and Chief
Financial Officer of Shoreline Bank's predecessors since 1986.
JAMES R. MILROY (age 38) has been Executive Vice President of
Shoreline since May 1997 and Secretary of Shoreline and Senior Executive
Vice President and Cashier of Shoreline Bank since May 1998. He previously
served as Executive Vice President and Cashier of Shoreline Bank since May
1997, as Senior Vice President and Controller of Shoreline and Shoreline
Bank or its predecessors from May 1993 until May 1997, and as Vice
President and Controller of Shoreline and Shoreline Bank or its
predecessors from 1990 until 1993.
-4-
<PAGE>
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 1998.
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 five times
during 1998.
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 1998.
<PAGE>
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 three times during 1998.
During 1998, the Shoreline Board of Directors held four regular
meetings and one special meeting. All directors except Messrs. Desenberg,
Tobian and Zile attended at least 75 percent 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 who beneficially
own more than 10 percent 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 percent 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, 1998, through December
31, 1998. One report that was timely filed for Mr. Hanson inadvertently
omitted one transaction. An amended form was filed upon discovery of the
omission. One report covering one transaction was filed late for each of
Messrs. Desenberg, LeBlanc and Starks. Mr. Milroy failed to file one
report covering one transaction. The transaction was reported on a Form 5
upon discovery.
-5-
<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 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 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 and annual cash incentive bonus
opportunities, 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 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. A discretionary assessment of job performance
is another factor considered by the Committee in establishing base salary
levels.
Annual cash incentive bonuses are based upon performance at three
levels: corporate, business unit and individual. The weighting of each
level of assessment for each participant is approved annually by the
Committee. During 1998, Mr. Smith's cash incentive bonus was based 100
percent on corporate performance, while the cash incentive bonus for the
four other named executives was based 60 percent on corporate performance,
30 percent on business unit performance and 10 percent on individual
performance. Target awards are established by the Committee for each
participant in the cash incentive plan. Target awards range from 10
percent to 50 percent of base salary, with Mr. Smith being the only officer
targeted at the 50 percent level.
<PAGE>
Long-term incentives are provided to reward executives for achieving
the long-term goal of increasing shareholder value. In 1998, 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
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 1998, the Committee made the following awards of
shares of restricted stock: Mr. Smith -- 6,000 shares; Mr. Bailey -- 4,000
shares; Mr. Milroy -- 4,000 shares; Mr. Koebel -- 3,000 shares; and Mr.
Burch -- 2,000 shares. 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 percent of the applicable
executive officer's annual salary and bonus.
Dan L. Smith, Shoreline's Chairman, President and Chief Executive
Officer during 1998, also serves as Chairman, President and Chief Executive
Officer of Shoreline Bank. In determining Mr. Smith's base salary for
1998, the Committee acknowledged the effectiveness of Mr. Smith's
leadership in directing corporate growth and in delivering consistently
strong financial performance. The year ended 1997 represented the seventh
consecutive year of record earnings per share, and total shareholder return
approximated 15 percent for the year. In setting his 1998 salary at
$275,000, 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 1998 incentive bonus was based entirely on corporate performance as
measured by Shoreline's return on equity. Mr. Smith was not awarded any
stock options during 1998, but he was awarded 6,000 shares of restricted
stock.
-6-
<PAGE>
In 1993, Congress amended the federal Internal Revenue Code to add
Section 162(m). Section 162(m) 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
1999 or in future years by reason of actions expected to be taken in 1999.
During 1998, all recommendations of the Committee were approved by the
Board of Directors without modification.
Respectfully submitted,
James E. LeBlanc, Chairman
Merlin J. Hanson
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
[STOCK PERFORMANCE GRAPH]
-7-
<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>
1993 $ 100.0 $ 100.0 $ 100.0
1994 89.6 94.9 101.3
1995 108.4 152.0 139.4
1996 145.2 215.0 171.4
1997 248.8 314.3 228.6
1998 269.1 340.3 293.9
</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, 1998, 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 SHARES
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 1998 $ 289,000 $116,875 $ 180,000 -- $ 13,861
Chairman of the Board, 1997 267,000 99,450 121,250 -- 14,126
President and Chief 1996 240,500 89,700 -- -- 14,226
Executive Officer of
Shoreline and Shoreline Bank
Richard D. Bailey, II 1998 110,000 40,590 120,000 -- 11,751
Senior Executive Vice President 1997 100,000 39,000 121,250 -- 11,055
of Shoreline Bank 1996 87,833 35,100 -- 8,738 9,897
<PAGE>
James R. Milroy 1998 106,104 42,460 120,000 -- 11,214
Executive Vice President 1997 89,750 35,685 121,250 -- 9,897
and Secretary of Shoreline 1996 78,000 31,200 -- -- 8,078
and Senior Executive Vice
President and Cashier of
Shoreline Bank
Robert K. Burch 1998 107,182 39,986 60,000 -- 11,638
Executive Vice President 1997 102,078 39,810 121,250 -- 11,398
of Shoreline Bank 1996 95,400 37,206 -- -- 10,834
Wayne R. Koebel 1998 135,200 47,255 90,000 -- 12,479
Executive Vice President, 1997 130,000 50,700 121,250 -- 12,680
Chief Financial Officer 1996 120,000 46,800 -- -- 12,116
and Treasurer of
Shoreline and Executive Vice
President and Chief Financial
Officer of Shoreline Bank
______________________________________
-8-
<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 1998 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 1998
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 12,300 $324,413
Mr. Bailey 10,300 271,663
Mr. Milroy 10,300 271,663
Mr. Burch 8,300 218,913
Mr. Koebel 9,300 245,288
These awards vest over a period of five to seven years dependent
upon corporate performance, with the maximum that may vest in any
single year under each award equal to 20 percent of the total
number of shares subject to that award.
<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 1998 are:
<PAGE>
(I) (II)
------- ------
Mr. Smith $ 4,199 $9,662
Mr. Bailey 2,753 8,998
Mr. Milroy 2,652 8,562
Mr. Burch 2,761 8,877
Mr. Koebel 2,817 9,662
</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 1998 and options
held by such individuals at December 31, 1998. No stock options were
granted to the named executive officers during 1998.
-9-
<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>
Dan L. Smith 3,608 $105,281 -- / -- $ -- / $ --
Richard D. Bailey, II 1,185 15,055 7,546 / 5,031 99,645 / 66,434
James R. Milroy 1,679 40,424 10,999 / -- 168,670 / --
Robert K. Burch 3,500 74,139 3,371 / -- 72,460 / --
Wayne R. Koebel 4,000 118,720 -- / -- -- / --
__________________________
<FN>
<F1> The value of options is based on the trading value of Shoreline
Common Stock of $26.375 per share as of the close of business on
December 31, 1998.
</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 percent 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, Shoreline 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.
<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>
$100,000 $13,350 $ 20,025 $ 26,700 $ 33,375 $ 40,050
150,000 20,350 30,525 40,700 50,875 61,050
200,000 27,350 41,025 54,700 68,375 82,050
250,000 34,350 51,525 68,700 85,875 103,050
300,000 41,350 62,025 82,700 103,375 124,050
350,000 48,350 72,525 96,700 120,875 145,050
400,000 55,350 83,025 110,700 138,375 166,050
450,000 62,350 93,525 124,700 155,875 187,050
500,000 69,350 104,025 138,700 173,375 208,050
</TABLE>
As of March 16, 1999, Mr. Smith had 30 years of service under the
plans, Mr. Koebel had 21 years of service under the qualified plan,
Mr. Burch had 13 years of service under the qualified plan, Mr. Bailey
had five years of service under the qualified plan and Mr. Milroy had
nine years of service under the qualified plan. Pension benefits
under the plans are payable monthly under a 10 year certain and life
annuity. Participants may elect upon
-10-
<PAGE>
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 10 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 percent
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 percent 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 10
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 that, 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 by Shoreline without
<PAGE>
"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 1998, Shoreline and Shoreline Bank compensated their
respective directors at the rate of $7,000 per year, and directors who
were not executive officers of Shoreline or Shoreline Bank also
received $450 per regular board meeting attended and $450 per
committee meeting attended, except that committee chairmen received
$500 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 percent 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 the
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.
-11-
<PAGE>
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, 1998, and March 16, 1999. 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 1998, Shoreline and Shoreline Bank paid legal fees to the
law firms of Desenberg & Colip, P.C., of which Mr. Desenberg is a
shareholder, and Varnum, Riddering, Schmidt & Howlett LLP, of which
Mr. Huff is a partner. The fees paid by Shoreline and Shoreline Bank
to each of these firms did not exceed five percent of the applicable
firm's gross revenues for its last full fiscal year.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has again selected Crowe, Chizek and
Company LLP, certified public accountants, as Shoreline's principal
accountant for 1999. 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 that are intended to be presented at
the annual meeting in the year 2000 and that a shareholder would like
to have included in the proxy statement and form of proxy relating to
that meeting must be received by Shoreline for consideration by
November 25, 1999. Such proposals of shareholders should be made in
accordance with Securities and Exchange Commission Rule 14a-8. All
other proposals of shareholders that are intended to be presented at
the annual meeting in the year 2000 must be received by Shoreline by
February 24, 2000 or they will be considered untimely.
<PAGE>
FORM 10-K REPORT AVAILABLE
SHORELINE'S ANNUAL REPORT ON FORM 10-K 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 AND
TREASURER, SHORELINE FINANCIAL CORPORATION, 823 RIVERVIEW DRIVE,
BENTON HARBOR, MICHIGAN 49022.
-12-
<PAGE>
LOGO
SHORELINE FINANCIAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, MAY 13, 1999
2:30 P.M.
MENDEL CENTER AT LAKE MICHIGAN COLLEGE
2755 E. NAPIER AVENUE
BENTON HARBOR, MICHIGAN
- --------------------------------------------------------------------------
SHORELINE FINANCIAL CORPORATION
823 RIVERVIEW DRIVE
BENTON HARBOR, MICHIGAN 49022 PROXY
- ---------------------------------------------------------------------------
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.
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.
IMPORTANT! - PLEASE DATE AND SIGN THE OTHER SIDE.
<PAGE>
VOTE BY MAIL
MARK, SIGN AND DATE YOUR PROXY CARD AND RETURN IT IN THE POSTAGE-PAID
ENVELOPE WE'VE PROVIDED OR RETURN IT TO SHORELINE FINANCIAL
CORPORATION, C/O SHAREOWNER SERVICES<Service Mark>, P.O. BOX 64873,
ST. PAUL, MN 55164-0873.
- PLEASE DETACH HERE -
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Election of Directors: 01 James E. LaBlanc [ ] FOR all nominees [ ] WITHHOLD AUTHORITY
02 James F. Murphy listed (except to vote for all nominees
03 Robert L. Starks as indicated below)
</TABLE>
(INSTRUCTION: TO WITHHOLD AUTHORITY
TO VOTE FOR ANY INDIVIDUAL NOMINEE, [___________________________]
WRITE THAT NOMINEE'S NAME IN THE
SPACE PROVIDED TO THE RIGHT.)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL.
Address Change? Mark Box [ ]
Indicate changes below: Dated: ________________, 1999
[___________________________]
Signature(s) in Box
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.
