FIRST BANKING CENTER, INC.
400 Milwaukee Avenue
Burlington, Wisconsin 53105
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
April 16, 2002
The Annual Meeting of Stockholders of First Banking Center, Inc. (the
"Corporation") will be held at 1:30 P.M. on April 16, 2002 (the "Annual
Meeting"), at First Banking Center, Inc., 400 Milwaukee Avenue, Burlington, for
the purposes set forth in the attached Notice of Annual Meeting. The
accompanying Proxy is solicited on behalf of the Board of Directors of the
Corporation in connection with such meeting or any adjournment(s) thereof. The
approximate date on which the Proxy Statement and form of Proxy are expected to
be sent to security holders is March 15, 2002.
VOTING OF PROXIES AND REVOCABILITY
When the Proxy is properly executed and returned to the Secretary of the
Corporation, it will be voted as directed by the Stockholder executing the Proxy
unless revoked. If no directions are given, the shares represented by the Proxy
will be voted FOR the election of the nominees listed in the Proxy Statement. If
additional matters are properly presented, the persons named in the Proxy will
have discretion to vote in accordance with their own judgment in such matters.
Any person giving a Proxy may revoke it at any time before it is exercised by
the execution of another Proxy bearing a later date, or by written notification
to the Secretary of the Corporation, Mr. John S. Smith, Secretary of First
Banking Center, Inc., 400 Milwaukee Avenue, Burlington, Wisconsin 53105.
Stockholders who are present at the Annual Meeting may revoke their Proxy and
vote in person if they so desire.
VOTING SECURITIES, PERSONS ENTITLED TO VOTE AND VOTES REQUIRED
As of January 29, 2002, there were 1,473,197 shares of Common Stock ($1.00 par
value) (the "Common Stock") of the Corporation outstanding. The Board of
Directors has fixed March 1, 2002 as the record date and only stockholders whose
names appear of record on the books of the Corporation at the close of business
on March 1, 2002, will be entitled to notice of and to vote at the Annual
Meeting or any adjournment(s) thereof. A stockholder is entitled to one vote for
each share of stock registered in his or her name. A majority of the outstanding
Common Stock will constitute a quorum for the transaction of business at the
Annual Meeting. Abstentions will be treated as shares that are present and
entitled to vote for purposes of determining the presence of a quorum, but as
unvoted for purposes of determining the approval of any matter submitted to the
shareholders for a vote. The four nominees for director who receive the largest
number of affirmative votes cast at the Annual Meeting will be elected as
directors.
THE COST OF SOLICITATION OF THE PROXIES WILL BE BORNE BY FIRST BANKING CENTER,
INC. IN ADDITION TO USE OF THE MAILS, PROXIES MAY BE SOLICITED PERSONALLY OR BY
TELEPHONE BY THE OFFICERS OF FIRST BANKING CENTER, INC. WITHOUT ADDITIONAL
COMPENSATION.
The complete mailing address of First Banking Center, Inc. is 400 Milwaukee
Avenue, P.O. Box 660, Burlington, Wisconsin, 53105.
PRINCIPAL HOLDERS OF SECURITIES
As of January 29, 2002, the Trust Department of a wholly owned subsidiary of the
Corporation owned in a fiduciary capacity 128,731 shares of Common Stock,
constituting 8.74% of the Corporation's outstanding shares entitled to vote.
Sole voting and investment power is held by the Trust Department with respect to
20,180 of such shares, representing 1.37% of the outstanding common stock. The
only shareholder known to the Corporation to own beneficially more than 5% of
the outstanding Common Stock is Mr. Roman Borkovec. Mr. Borkovec's address is
31008 Weiler Road, Burlington, WI 53105. Mr. Borkovec's holdings consist of
56,145 shares held directly; 18,947 shares held in joint tenancy with his wife;
and 8,151 shares held by his wife in which shares Mr. Borkovec disclaims voting
and investment powers. The total shares owned by Mr. Borkovec and his wife
represent 5.63% of the outstanding Common Stock. For information pertaining to
the directors, nominees and certain executive officers, see "CERTAIN BENEFICIAL
OWNERS."
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors of the Corporation is divided in three classes designated
as Class I, II, and III, as nearly equal in size as possible, with each class of
directors serving staggered three-year terms. The term of office of directors in
Class III expires at the Annual Meeting. At the Annual Meeting, shareholders
will elect four Class III directors to serve until the Corporation's annual
meeting of shareholders in the year 2005 and until their successors are elected
and qualified.
It is the recommendation of the Board of Directors that the 4 nominees for Class
III director listed below be elected. Unless authority is withheld by your
proxy, it is intended that the shares represented by the proxy will be voted FOR
the 4 nominees listed below. All listed nominees are incumbent directors. All
listed nominees are also directors of First Banking Center, (the "Subsidiary
Bank") the wholly owned subsidiary of the Corporation whose main office is
located in Burlington, Wisconsin. If any nominee is unable to serve for any
reason, the proxies will be voted for such person as shall be designated by the
Board of Directors to replace such nominee. The Board has no reason to expect
that any nominee will be unable to serve.
Name and Background Director
Since
Nominees for Directors for Term Expiring in 2005
Class III Directors
Brantly Chappell, age 48, was hired as President and CEO of the Corporation in October 1997. At that time he was
also appointed to the Board of the Corporation and the Board of the Subsidiary Bank. In April of 1998 Mr. Chappell
was elected CEO of the Subsidiary Bank. From 1983 to 1997 Mr. Chappell held various senior management positions
with Bank One, most recently Executive Vice President/Market Manager of Madison Market. ................................1997
Melvin W. Wendt, age 63, was elected Chairman of the Board in November of 1998. He has owned and operated Mel Wendt
Realty, a real estate brokerage firm, since 1964. Mr. Wendt has also served as Chairman of the Board of the
Subsidiary Bank since November 1998 and has been a member of the Subsidiary Bank board since 1989. .....................1989
Charles R. Wellington, age 52, has been a partner in the law firm of Kittelsen, Barry, Wellington, Thompson and
Schluesche, Monroe, Wisconsin, since 1981. Mr. Wellington previously served on the Board of First Banking Center -
Albany, a subsidiary bank of the Corporation, from 1989 until it was merged with First Banking Center, Burlington
in April 1998. .........................................................................................................1996
Dr. Robert Fait, age 57, has been a Doctor of Optometry at Family Vision and Contact Lens Center Eye Clinic in
Burlington, Wisconsin since 1968. He founded and has served as president of WVA, a wholesale medical supply
distribution firm, since 1982. He also founded and has served as vice president of Pentech Pharmaceuticals, a
research and development drug company, since 1993. Dr. Fait has been a member of the Subsidiary Bank Board
since November 1998. ...................................................................................................2000
Continuing Directors
Director
Name and Background Since
Class I Directors (Term Expiring in 2003)
John S. Smith, age 42, has been President and Trust Officer of the Subsidiary Bank since April 1994. Mr. Smith has
been a director of the Subsidiary Bank since 1992. He was Executive Vice President of the Subsidiary Bank, from
1990 to 1994............................................................................................................1992
John M. Ernster, age 51, has been Manager of Distribution Operations for Wisconsin Electric Power Company since 1994
and has held various positions with Wisconsin Electric Power Company since 1972. He has been a director of the
Subsidiary Bank since 1991........ .....................................................................................1992
Richard McKinney, age 64, was elected Vice Chairman of the Board in November of 1998. He was president of Tobin
Drugs, Inc., Burlington, Wisconsin from 1981 to 2001 and has been owner of Sue's Hallmark, Lake Geneva, Wisconsin
since 1993. Mr. McKinney has been a director of the Subsidiary Bank since May 1988.....................................1988
Keith Blumer, age 53, has been President and owner of Plainview Stock Farms, a cattle and grain farm operation near
Albany, Wisconsin since 1979. Mr. Blumer was appointed to the Board in April 1998 and previously served on the
Board of First Banking Center - Albany, a subsidiary bank of the Corporation, from 1985 until it was merged with
First Banking Center, Burlington in April 1998. ........................................................................1998
Class II Directors (Term Expiring in 2004)
David Boilini, age 49, has been President of J. Boilini Farms, a diversified commercial operation involved in the
growing of vegetables and grain, as well as the production of mint for the flavoring industry since 1979. Mr.
Boilini has been a director of the Subsidiary Bank since February 1993..................................................1993
Thomas Laken, Jr., age 59, has been President and owner of Finishing and Plating Services, a commercial electroplating
job shop, located in Kenosha, Wisconsin since 1980. Mr. Laken was appointed to the Board in April of 1998. He has
been a director of the Subsidiary Bank since 1996. .....................................................................1998
Daniel T. Jacobson, age 44, is a CPA and partner in the firm of Reffue, Pas, Jacobson & Koster, LLP in Monroe,
Wisconsin. He has been with the accounting firm since 1979. Mr. Jacobson was appointed to the Board in April
1998 and previously served on the Board of First Banking Center - Albany, a subsidiary bank of the Corporation,
from 1994 until it was merged with First Banking Center, Burlington in April 1998.......................................1998
Information Regarding Board of Directors and Committees
The Board of Directors of First Banking Center, Inc., held five meetings during
the year of 2001.
All Directors attended at least 75% of the meetings of the Board of Directors
and committees of which they were a member.
The committees and committee assignments are set forth below. In addition,
Directors of the Corporation serve as Directors and committee members of the
Corporation's Subsidiary Bank.
The Compensation Committee, whose members in 2001 were Mr. Wendt, Mr. Ernster,
Mr. Jacobson and Mr. Laken, met five times during 2001. The committee's duties
are to define personnel needs, establish compensation and fringe benefit
guidelines, and evaluate senior management performance. The committee makes its
recommendations to the full Board for their approval.
The Audit Committee, whose members in 2001 were Mr. Ernster, Mr. McKinney, and
Mr. Jacobson met five times during 2001. The primary function is to verify and
evaluate operational systems in the Corporation and to determine that proper
accounting and audit procedures are being followed as established by company
policies. Additionally, the Audit Committee makes recommendations as to the
engagement of independent auditors.
The Nominating Committee whose members are Mr. Wendt, Mr. Smith, Mr. Ernster,
Mr. Chappell, and Mr. Wellington met once during 2001. The committee is
responsible for the selection of nominees to the Board of Directors. The
Nominating Committee will consider nominees to the Board submitted by
stockholders in writing to the Secretary of First Banking Center, Inc.
For additional information on the Compensation Committee, please refer to
"Compensation Committee Report on Executive Compensation." For additional
information on the Audit Committee, please refer to "Audit Committee
Disclosures" and "Audit Committee Report."
CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to the beneficial ownership of
shares of Common Stock of each continuing director, each nominee for director,
and each Named Executive Officer, individually, and all directors and executive
officers of the Corporation, as a group. Except as otherwise indicated in the
footnotes to the table, each individual has sole investment and voting power
with respect to the shares of Common Stock set forth.
. Common Stock directly,
Name and Other Position with indirectly or beneficially Percent of
First Banking Center, Inc. owned as of January 16, 2002 Outstanding
- -------------------------- ---------------------------- -----------
Brantly Chappell (President & CEO)...................................10,760 (1)(2) .73%
John S. Smith (Secretary)............................................22,711 (1)(3) 1.54%
Melvin W. Wendt (Chairman)...........................................14,849 (1)(4) 1.00%
Richard McKinney (Vice Chairman).....................................10,506 (1)(5) .71%
Keith Blumer..........................................................2,829 (1)(6) .19%
David Boilini........................................................16,120 (1)(7) 1.09%
John M. Ernster.......................................................2,954 (1)(8) .20%
Robert Fait..........................................................30,519 (1)(9) 2.07%
Daniel T. Jacobson....................................................2,425 (1)(10) .16%
Thomas Laken, Jr......................................................4,872 (1)(11) .33%
Charles R.Wellington..................................................4,067 (1)(12) .28%
All directors and named executive officers as a group...............122,612 8.30%
<FN>
<F1>
(1)......Includes shares issuable pursuant to incentive stock options exercisable within sixty days of January 16, 2002 as follows:
Mr. Chappell, 7,246 shares, Mr. Smith, 6,367 shares, Mr. Wendt, 867 shares, Mr. McKinney, 967 shares, Mr. Blumer,
967 shares, Mr. Boilini, 366 shares, Mr. Ernster, 967 shares, Dr. Fait, 867 shares, Mr. Jacobson, 967 shares, Mr. Laken,
366 shares, Mr. Wellington, 867 shares.
<F2>
(2)......Includes 1,008 shares held directly by Mr. Chappell, 1,388 shares held in joint tenancy with his wife in which shares Mr.
Chappell shares voting and investment powers, and 1,118 shares held by his wife in which Mr. Chappell disclaims voting and
investment powers.
<F3>
(3)......Includes 16,319 shares held directly by Mr. Smith and 25 shares, which Mr.Smith holds in custody for his daughter under the
Wisconsin Uniform Gift to Minors Act.
<F4>
(4)......Includes 3,025 shares held directly by Mr. Wendt and 10,957 shares held in joint tenancy with his wife in which shares Mr.
Wendt has shared voting and investment powers.
<F5>
(5)......Includes 4,764 shares held directly by Mr. McKinney, 2,452 s hares held in joint tenancy with his wife in which shares
Mr. McKinney shares voting and investment powers, and 2,323 shares held by his wife in which Mr. McKinney disclaims
voting and investment powers.
<F6>
(6)......Includes 1,762 shares held directly by Mr. Blumer and 100 shares held in joint tenancy with his wife in which Mr. Blumer
shares voting and investment powers.
<F7>
(7)......Includes 11,381 shares held directly by Mr. Boilini, and 1,878 shares owned by J. Boilini Farms in which Mr. Boilini has
shared voting and investment powers, and 2,495 shares held in a trust of which Mr. Boilini is trustee.
<F8>
(8)......Includes 1,817shares held directly by Mr. Ernster and 170 shares held by his wife in which shares Mr. Ernster disclaims
voting and investment powers.
<F9>
(9)......Includes 400 shares held directly by Dr. Fait and 29,194 shares held in a Trust of which Dr. Fait and his wife are trustees
and share voting and investment powers, and 5 8 shares held by his wife in which shares Dr. Fait disclaims voting and
investment powers.
<F10>
(10).....Includes 525 shares held directly by Mr. Jacobson, 733 shares held in joint tenancy with his wife in which shares Mr.
Jacobson shares voting and investment powers, and 200 shares which Mr. Jacobson holds in custody for his daughter under the
Wisconsin Uniform Gift to Minors Act.
<F11>
(11).....Includes 3,364 shares held directly by Mr. Laken, 896 shares held in joint tenancy with his wife in which shares Mr. Laken
shares voting and investment powers, and 246 shares held by his wife in which Mr. Laken disclaims voting and investment
powers.
<F12>
(12).....Includes 3,200 shares held directly by Mr. Wellington
</FN>
COMPENSATION OF DIRECTORS
Fees
Non-employee directors of the Corporation were paid the following fees for their
services in 2001: $525 per Subsidiary Bank board meeting, and $100 per
Subsidiary Bank committee meeting attended. If the Corporation's board meetings
are held in conjunction with the Subsidiary Bank meeting, the fee is $100 per
Corporation Board meeting attended. Otherwise, the fee for the Corporation's
Board meetings is $525 and $100 for Committee meetings.
Pension Plan
First Banking Center (the "Subsidiary Bank"), a wholly owned subsidiary of the
Corporation, has entered into pension and death benefit agreements with some of
its directors. Only directors who joined the Subsidiary Bank board before 1990
are eligible to participate. Pursuant to the agreement, pension benefits accrue
at the rate of $10,000 for each full year a director serves on the board for the
first six years of service. Upon completing six full years of service, the
director is entitled to ten annual payments of ten thousand dollars each.
Payments will commence in January of the year in which the director attains the
age of 65 years. Payments under the plan are funded through the purchase of life
insurance. The Subsidiary Bank is the owner and beneficiary of such life
insurance policies and is responsible for payment of the premium on such
policies. Total deferred expense for the Directors' pension and death benefit
agreements was $36,000, $37,000, and $64,000, respectively, for 2001, 2000, and
1999.
Deferred Compensation Plan
The Subsidiary Bank has also established a deferred compensation plan for its
directors pursuant to which a director may have a portion of his/her director's
fees deferred. Upon attaining the age of 65 or normal retirement, the Subsidiary
Bank will pay monthly benefits for a period of 15 years. The amount of such
payment is determined in each case by the amount of fees deferred and length of
participation in the deferred compensation plan. Total deferred liability
expense was $35,000, $36,000 and $37,000, respectively, for 2001, 2000, and
1999. Deferred directors' fees in each of the respective years were $4,200,
$4,200 and $4,200.
Incentive Stock Plan
Directors are eligible to participate in the Corporation's Incentive Stock Plan.
For a description of the Incentive Stock Plan see "EXECUTIVE COMPENSATION -
Incentive Stock Plan."
EXECUTIVE COMPENSATION
The following table sets forth information concerning paid or accrued
compensation for services to the Corporation and its Subsidiary Bank for the
fiscal years ended December 31, 2001, 2000 and 1999 earned by or awarded or paid
to the persons who were chief executive officer and other executive officers of
the Corporation (the "Named Executive Officers") whose salary and bonus exceeded
$100,000 during 2001.
Summary Compensation Table
============================ =========================================================== =======================================
Long-Term
Annual Compensation Compensation
============================ =========================================================== =======================================
Securities
Name and Salary Bonus Other Underlying All Other
Principal Year ($) ($) Annual Options/SARs Comp.
Position Comp.(1) (#)
- ---------------------------- --------- -------------- ------------- -------------------- -------------------- ------------------
Brantly Chappell, 2001 $180,000 $ 30,785 2,800 $ 25,000(2)
President and CEO 2000 $175,000 $ 28,000 3,000 $ 28,000(3)
1999 $170,000 $ 21,000 7,000(8) $ 21,000(4)
John S. Smith
Secretary 2001 $103,000 $ 17,660 1,800 $ 6,000(5)
2000 $100,000 $ 16,000 2,600 $ 24,000(6)
1999 $103,000 $ 10,000 6,000(9) $ 6,000(7)
============================ ========= ============== ============= ==================== ==================== ==================
* Messrs. Chappell and Smith also serve in various capacities as directors and/or officers of the Subsidiary Bank.
<FN>
<F1>
(1) Aggregate amount of other annual compensation does not exceed the lesser of $50,000 or 10% of executive officer's salary and
bonus, and therefore no disclosure is made.
<F2>
(2) Contribution by the Corporation to the Corporation's Defined Contribution (401(k)) Plan for the benefit of the participant of
$10,500; accrued liability with respect to Salary Continuation Agreement of $14,500.
<F3>
(3) Contribution by the Corporation to the Corporation's Defined Contribution (401(k)) Plan for the benefit of the participant of
$14,000; accrued liability with respect to Salary Continuation Agreement of $14,000.
<F4>
(4) Contribution by the Corporation to the Corporation's Defined Contribution (401(k)) Plan for the benefit of the participant of
$8,000; accrued liability with respect to Salary Continuation Agreement of $13,000.
<F5>
(5) Contribution by the Corporation to the Corporation's Defined Contribution (401(k)) Plan for the benefit of the participant.
<F6>
(6) Contribution by the Corporation to the Corporation's Defined Contribution (401(k)) Plan for the benefit of the participant of
$6,000; $18,000 payment of accrued liability upon termination of the Directors' pension plan of Subsidiary Bank.
<F7>
(7) Contribution by the Corporation to the Corporation's Defined Contribution (401(k)) Plan for the benefit of the participant of
$4,800; accrued liability of $1,200 under the Directors' pension plan of Subsidiary Bank.
<F8>
(8) Includes replacement for 4,000 options granted in 1998 and cancelled in 1999.
<F9>
(9) Includes replacement for 4,000 options granted in 1998 and cancelled in 1999.
</FN>
Employment Agreement and Salary Continuation Agreement
Effective October 6, 1997, the Corporation and Mr. Brantly Chappell entered into
an employment agreement (the "Chappell Employment Agreement") pursuant to which
Mr. Chappell will serve as President and Chief Executive Officer of the
Corporation. The Chappell Employment Agreement has an initial term of two years,
and is automatically renewed for an additional year at each anniversary date
unless either party gives written notice that no such renewal shall occur. No
such non-renewal notice has been given.
Under the Chappell Employment Agreement, Mr. Chappell will perform the customary
duties of the Chief Executive Officer of the Corporation, as further set forth
in the Corporation's Bylaws and as may, from time to time, be determined by the
Corporation's Board of Directors. As compensation for such service, the
Corporation will pay Mr. Chappell the greater of $165,000 annually or
compensation as may be established from time to time during the employment
period by the Board of Directors of the Corporation. During the employment
period, Mr. Chappell is entitled to participate in such other benefits of
employment as are generally made available to executive officers of the
Corporation and its subsidiary.
The Chappell Employment Agreement further provides that on or before December
31, 1997, the Corporation shall grant Mr. Chappell an option to purchase 2,000
shares of the Corporation's common stock, and on or before December 31, 1998, an
additional option to purchase 4,000 shares of the Corporation's common stock
shall be granted to Mr. Chappell. Both options are granted pursuant to the terms
and conditions of the Corporation's 1994 Incentive Stock Plan. The exercise
price for each grant is 100% of the market price of the stock on the date of
grant.
If the Chappell Employment Agreement is terminated by the Corporation other than
for reasons of Mr. Chappell's death, disability or retirement, or without
"cause" as defined in the Chappell Employment Agreement; or if Mr. Chappell
terminates the Chappell Employment Agreement following a "change in control" as
defined in the Chappell Employment Agreement, then Mr. Chappell shall be
entitled to receive severance payments equal to $75,000 annually for a period of
two years from the termination date. In addition to the aforementioned severance
payments, Mr. Chappell will be entitled to fringe benefits for the two-year
period during which he is entitled to severance payments.
If Mr. Chappell is terminated due to disability, as defined in the Chappell
Employment Agreement, he will be entitled to payment of his salary for one year
at the rate in effect at the time notice of termination is given. Such
disability payments will be reduced by payments received under any disability
plan or Social Security or other governmental compensation program. If
termination occurs for any reason other than those enumerated, the Corporation
will be obligated to pay the compensation and benefits only through the date of
termination.
The Chappell Employment Agreement provides that during the employment period and
for one (1) year thereafter, Mr. Chappell shall not engage in any activity,
which will result in his competing with the Corporation or its subsidiary.
To further the objective of providing continued successful operation of the
Corporation and its subsidiary and to provide additional incentive for Mr.
Chappell to enter into the Chappell Employment Agreement, the Corporation and
Mr. Chappell have entered into a Salary Continuation Agreement (the
"Continuation Agreement") as of October 6, 1997. The Continuation Agreement
provides for monthly payments of $5,833.33 upon retirement at age 65 for the
remainder of Mr. Chappell's life, with a guarantee of 180 such monthly payments
to Mr. Chappell or his beneficiaries.
Upon Mr. Chappell's voluntary termination of employment prior to age 65 for
reasons other than death or disability or upon Mr. Chappell's discharge at any
time "for cause" as defined in the Chappell Employment Agreement, the
Corporation will not be obligated to pay any benefits pursuant to the
Continuation Agreement; however, if Mr. Chappell incurs voluntary or involuntary
termination of employment prior to age 65 for reasons other than death,
disability, or discharge for cause, but on or after a change in control as
defined in the Continuation Agreement, Mr. Chappell will be entitled to the
benefits payable under the Continuation Agreement.
The benefits provided in the Continuation Agreement are funded through the
purchase of single premium life insurance policies with cash value sufficient to
fund the payments required under the Continuation Agreement.
The Board of Directors believes that Mr. Chappell has substantially contributed
to the successful and profitable operation of the Corporation and its
subsidiary, and such contribution has and will continue to result in substantial
enhancement of shareholder value. For these reasons and to provide management
continuity, the Board of Directors has determined that the Chappell Employment
Agreement and Continuation Agreement are in the best interest of the
Corporation, its Subsidiary and its shareholders.
401(k) Profit Sharing Plan
The Corporation has a trusteed 401(k) profit sharing plan covering substantially
all employees of the Corporation and its subsidiary. The plan allows for
voluntary employee contributions. Total contributions to the 401(k) Plan by the
Corporation were $253,000 in 2001, $163,000 in 2000, and $156,000 in 1999.
Incentive Stock Plan
The following table presents information about stock options granted during 2001
to the executive officers named in the Summary Compensation Table.
Stock Option Grants in 2001
Individual Grants
================ ================== ===================== ================== ================ ===================
Number of Percent of Total
Securities Options Granted to
Underlying Employees in Exercise Expiration Grant Date
Name Options Fiscal Year(1) Price Date resent Value(2)
Granted(1)
- ---------------- ------------------ --------------------- ------------------ ---------------- -------------------
Brantly 2,800 7.22% $41.50 11/2011 $26,335
Chappell
John Smith 1,800 4.64% $41.50 11/2011 $16,930
================ ================== ===================== ================== ================ ===================
<FN>
<F1>
(1) All options granted in 2001 were granted under the 1994 Incentive Stock Plan.
<F2>
(2) The grant date present values were determined using the Black-Scholes model with following assumptions:
a ten year expected period of time to exercise; a risk-free rate of return of 4.7%; an expected dividend
yield of 1.6%; and a volatility factor of 5.2%.
</FN>
The following table presents information concerning stock options exercised
during 2001. Also shown is information on unexercised options as of December 31,
2001.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
====================== ================ ================ =================================== ===================================
Number of Value of Unexercised,
Shares Value Unexercised In-the-Money Options(3)
Name Acquired Realized(1)(2) Options at FY End at FY End
On Exercise Exercisable Unexercisable Exercisable Unexercisable
- ---------------------- ---------------- ---------------- ----------------------------------- -----------------------------------
Brantly
Chappell 281 $1,500 7,246 7,273 $77,000 $40,000
John
Smith 1,400 $21,700 6,367 5,533 $64,500 $33,000
====================== ================ ================ =================================== ===================================
<FN>
<F1>
(1) The exercise price for each grant was 100% of the market value of the shares on the date of grant.
<F2>
(2) Represents market price at date of exercise, less option price, times number of shares.
<F3>
(3) For valuation purposes, a December 31, 2001, market price of $43.00 was used.
</FN>
On August 8, 1994, the Board of Directors of the Corporation adopted the First
Banking Center, Inc. 1994 Incentive Stock Plan (the "Plan") which was approved
by the shareholders on April 11, 1995.
The Plan replaced the 1984 Incentive Stock Plan, which terminated in April 1994.
The purpose of the Plan is to advance the interests of the Corporation and its
subsidiary by encouraging and providing for the acquisition of an equity
interest in the Corporation by key employees and by enabling the Corporation and
its subsidiary to attract and retain the services of employees upon whose skills
and efforts the success of the Corporation depends. In addition the Plan is
designed to promote the best interests of the Corporation and its shareholders
by providing a means to attract and retain competent directors who are not
employees of the Corporation or of its subsidiary. In 1999 and 2001, the Plan
was amended pursuant to ratification by the shareholders of the Corporation.
Summary Description
The following summary description of the Plan is qualified in its entirety by
reference to the full text of the amended Plan, a copy of which may be obtained
upon request directed to the Corporation's Secretary at First Banking Center,
Inc., 400 Milwaukee Avenue, Burlington, WI 53105.
The Plan is administered by the Compensation Committee of the Board, consisting
of not less than three (3) directors (the "Committee"). The Committee is
comprised of non-employee directors within the meaning of Rule 16b-3 as
promulgated by the Securities and Exchange Commission. Subject to the terms of
the Plan and applicable law, the Committee has the authority to: establish rules
for the administration of the Plan; select the individuals to whom options are
granted; determine the numbers of shares of Common Stock to be covered by such
options; and take any other action it deems necessary for the administration of
the Plan.
Participants in the Plan consist of all members of the Board of Directors of the
Corporation who are not employees of the Corporation or its subsidiary, and
individuals selected by the Committee. Those selected individuals may include
any executive officer or employee of the Corporation or its subsidiary and
non-employee directors of the subsidiary who, in the opinion of the Committee,
contribute to the Corporation's growth and development.
Subject to adjustment for dividends or other distributions, recapitalization,
stock splits or similar corporate transactions or events, the total number of
shares of Common Stock with respect to which options may be granted pursuant to
the Plan is 300,000. The shares of Common Stock to be delivered under the Plan
may consist of authorized but unissued stock or treasury stock.
The Committee may grant options to key employees and non-employee directors
(other than directors of the Corporation) as determined by the Committee. The
Committee has complete discretion in determining the number of options granted
to each such grantee. The Committee also determines whether an option is to be
an incentive stock option within the meaning of Section 422 of the Internal
Revenue Code or a nonqualified stock option. Following the amendment approved in
2001, and effective December 2000, each non-employee director of the Corporation
will automatically be granted a nonqualified stock option to purchase 800 shares
of Common Stock in December of each succeeding year.
The exercise price for all options granted pursuant to the Plan is the fair
market value of the Common Stock on the date of grant of the option; however, in
case of options granted to a person then owning more than 10% of the outstanding
Common Stock, the option price will not be less than 110% of the fair market
value on such date. The Committee will determine the method and the form of
payment of the exercise price. The payment may be in form of cash, Common Stock,
other securities or other property having a fair market value equal to the
exercise price.
Except for options granted to non-employee directors of the Corporation, options
granted pursuant to the Plan expire at such time as the Committee determines at
the time of grant, provided that no option may be exercised after the tenth
anniversary date of its grant. Options granted to directors of the Corporation
expire on the tenth anniversary of the date of grant. Options are exercisable in
increments of one-third on the first, second and third anniversaries of the date
of grant.
Stock acquired pursuant to the Plan may not be sold or otherwise disposed of
before the later of the expiration of the two-year period beginning on the date
of the grant of the option or the one-year period beginning on the date of the
exercise of the option, except by gift, bequest or inheritance or in case of
participant's disability or retirement. The Corporation also has a "right of
first refusal" pursuant to which any shares of Common Stock acquired by
exercising an option must first be offered to the Corporation before they may be
sold to a third party. The Corporation may then purchase the offered shares on
the same terms and conditions (including price) as applied to the potential
third-party purchaser.
The Board of Directors of the Corporation may terminate, amend or modify the
Plan at any time, provided that no such action of the Board, without approval of
the shareholders may: increase the number of shares which may be issued under
the Plan; materially increase the cost of the Plan or increase benefits to
participants; or change the class of individuals eligible to receive options.
The following is a summary of the principal federal income tax consequences
generally applicable to awards under the Plan. The grant of an option is not
expected to result in any taxable income for the recipient. The holder of an
Incentive Stock Option generally will have no taxable income upon exercising the
Incentive Stock Option (except that a liability may arise pursuant to the
alternative minimum tax), and the Corporation will not be entitled to a tax
deduction when an Incentive Stock Option is exercised. Upon exercising a
nonqualified stock option, the optionee must recognize ordinary income equal to
the excess of the fair market value of the shares of Common Stock acquired on
the date of exercise over the exercise price, and the Corporation will be
entitled at that time to a tax deduction for the same amount. The tax
consequences to an optionee upon disposition of shares acquired through the
exercise of an option will depend on how long the shares have been held and upon
whether such shares were acquired by exercising an Incentive Stock Option or by
exercising a nonqualified stock option. Generally, there will be no tax
consequences to the Corporation in connection with the disposition of shares
acquired under an option.
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
General Policy
The compensation objective of the Corporation and its subsidiary is to link
compensation with corporate and individual performance in a manner, which will
attract and retain competent personnel with leadership qualities. The process
gives recognition to the marketplace practices of other banking organizations.
Toward the end of achieving long-term goals of the shareholders, the
compensation program ties a significant portion of total compensation to the
financial performance of the Corporation in relation to its peer group. The
Compensation Committee makes recommendations on the compensation of the
Corporation's officers to the Board of Directors. The Compensation Committee's
recommendations reflect its assessment of the contributions to the long-term
profitability and financial performance made by individual officers. In this
connection, the Committee considers, among other things, the type of the
officer's responsibilities, the officer's long-term performance and tenure,
compensation relative to peer group and the officer's role in ensuring the
financial success of the Corporation in the future. Financial performance goals
considered by the Committee include earnings per share, return on assets, return
on equity, asset quality, growth and expense control.
In addition to measuring performance in light of these financial factors, the
Committee considers the subjective judgment of the Chief Executive Officer in
evaluating performance and establishing salary, bonus and long-term incentive
compensation for individual officers, other than the Chief Executive Officer.
The Committee independently evaluates the performance of the Chief Executive
Officer, taking into consideration such subjective factors as leadership,
innovation and entrepreneurship in addition to the described financial goals.
Base Salary
In determining salaries of officers, the Committee considers surveys and data
regarding compensation practices of financial institutions of similar size,
adjusted for differences in product lines, nature of geographic market and other
relevant factors. The Committee also considers the Chief Executive Officer's
assessment of the performance, the nature of the position and the contribution
and experience of individual officers (other than the Chief Executive Officer).
The Committee independently evaluates the Chief Executive Officer's performance
and compares his compensation to peer group data.
Annual Bonuses
Officers and employees of the Corporation and its subsidiary are awarded annual
bonuses at the end of each year at the discretion of the Committee. The amount
of the bonus, if any, for each officer (other than the Chief Executive Officer)
is recommended to the Committee by the Chief Executive Officer based upon his
evaluation of the achievement of corporate and individual goals and his
assessment of subjective factors such as leadership, innovation and commitment
to the corporate advancement. The Corporation's annual incentive bonus is based
on meeting specific financial performance targets pursuant to a bonus plan. The
plan provides for a range of bonus awards based, among other things, upon return
on equity.
Chief Executive Officer Compensation
The compensation for the Chief Executive Officer was established at a level
which the Committee believed would approximate the compensation of chief
executive officers of similar organizations and would reflect prevailing market
conditions. The Committee also took into consideration a variety of factors,
including the achievement of corporate financial goals and individual goals. The
financial goals included increased earnings, return on assets, return on equity
and asset quality. No formula assigning weights to particular goals was used,
and achievement of other corporate performance goals was considered in general.
The Chief Executive Officer was also awarded incentive stock options under the
Corporation's Incentive Stock Plan. Based upon its review of the Corporation's
performance, the Committee believes that the total compensation awarded to the
Chief Executive Officer for 2001 is fair and appropriate under the
circumstances.
Stock Options
The Committee administers the 1994 Incentive Stock Plan. Stock options are
designed to furnish long-term incentives to the officers of the Corporation to
build shareholder value and to provide a link between officer compensation and
shareholder interest. The Committee made awards under the Stock Option Plan to
the officers of the Corporation and its subsidiary in 2001. Awards were based
upon performance, responsibilities and the officer's relative position and
ability to contribute to future performance of the Corporation. In determining
the size of the option grants (except grants to the Chief Executive Officer),
the Committee considered information and evaluations provided by the Chief
Executive Officer. The award of option grants to the Chief Executive Officer was
based on the overall performance of the Corporation and on the Committee's
assessment of the Chief Executive Officer's contribution to the Corporation's
performance and his leadership.
The Committee
The Compensation Committee currently has five members. No member of the
Committee is an employee or officer of the Corporation or of its subsidiary.
None of the Committee members has interlocking relationships as defined by the
Securities and Exchange Commission, with the Corporation or its subsidiary. The
Committee is aware of the limitations imposed by Section 162(m) of the Internal
Revenue Code of 1986, as amended, on the deductibility of compensation paid to
certain senior executives to the extent it exceeds $1 million per executive. The
Committee's recommended compensation amounts meet the requirements for
deductibility.
The Compensation Committee: Melvin Wendt, John Ernster, Daniel Jacobson, Richard
McKinney, and Thomas Laken, Jr.
The following table shows the cumulative total stockholder return on the
Corporation's Common Stock over the last five fiscal years compared to the
returns of the Standard & Poor's 500 Stock Index and the NASDAQ Bank Index:
PERFORMANCE TABLE
(Insert Performance Graph)
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
First Banking Center, Inc 100 114 132 147 157 184
S&P 500 100 133 171 208 189 166
NASDAQ Bank Index 100 167 150 141 166 187
ADDITIONAL INFORMATION ON MANAGEMENT
Transactions With Directors and Officers
Certain directors and executive officers of the Corporation, and their related
interests had loans outstanding in the aggregate amounts of $6,611,000 and
$4,086,000 at December 31, 2001 and 2000, respectively. During 2001, $3,555,000
of new loans were made and repayments totaled $1,030,000. These loans were made
on substantially the same terms, including interest rates and collateral, as
those prevailing at the same time for comparable transactions with other persons
and did not involve more than normal risks of collectability or present other
unfavorable features. The loans to directors and executive officers and their
related business interests at December 31, 2001 represented 15.7% of
stockholders equity.
Section 16 Reports
Under Section 16(a) of the Securities Exchange Act of 1934, as amended, the
Corporation's directors and executive officers and shareholders holding more
than 10% of the outstanding stock of the Corporation (the "insiders") are
required to report their initial ownership of stock and any subsequent change in
such ownership to the Securities and Exchange Commission and the Corporation
(the "16(a) filing requirement"). Specific time deadlines for the 16(a) filing
requirements have been established by the Securities and Exchange Commission. To
the Corporation's knowledge, and based solely upon a review of the copies of
such reports furnished to the Corporation, all 16(a) filing requirements
applicable to Insiders during 2001 were satisfied on a timely basis.
AUDIT COMMITTEE DISCLOSURES
The Audit Committee currently consists of Messrs. Ernster, McKinney and
Jacobson. All members of the Audit Committee are independent, in accordance with
existing requirements applicable to the Corporation. The duties and
responsibilities of the Audit Committee include (i) recommending to the Board of
Directors the appointment of the Corporation's auditors and any termination of
engagement; (ii) reviewing the plan and scope of audits; (iii) reviewing the
Corporation's significant accounting policies and internal controls and (iv)
having general responsibility for all audit related matters. The Board of
Directors of the Corporation has not adopted an Audit Committee Charter.
AUDIT COMMITTEE REPORT
The Audit Committee has (i) reviewed and discussed the Corporation's audited
financial statements for the fiscal year ended December 31, 2001, with
management and with the Corporation's independent auditors; (ii) discussed with
the independent auditors the matters required to be discussed by SAS 61
(Codification for Statements on Auditing Standards); and (iii) received and
discussed the written disclosures and the letter from the Corporation's
independent auditors required by Independence Standards Board Statement No.1
(Independence Discussions With Audit Committees). Based on such review and
discussions, the Audit Committee recommended to the Board of Directors that the
audited financial statements of the Corporation be included in the Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31, 2001, for
filing with the U.S. Securities and Exchange Commission.
Submitted by the Audit Committee: John M. Ernster, Richard McKinney, Daniel T.
Jacobson
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
In September, 2000, the Corporation's Board of Directors determined that the
audits of the Corporation's financial statements on the one hand, and the
continuing internal audit functions on the other hand should be performed by two
(2) separate providers to obtain maximum audit and internal controls benefits.
Accordingly, Virchow, Krause & Company, LLP, ("Virchow, Krause") which was
previously engaged to audit the Corporation's financial statements, ceased to
perform such financial statement auditing functions and was retained to perform
continuing periodic internal auditing and control functions.
Virchow, Krause's report on the Corporation's financial statements for the 1999
fiscal year did not contain an adverse opinion or a disclaimer of opinion, nor
were they qualified or modified as to uncertainty, audit scope, or accounting
principles.
The decision to change accountants for auditing the Corporation's financial
statements was approved by the Board of Directors.
During the Corporation's two (2) most recent fiscal years and any subsequent
interim periods preceding the time at which Virchow, Krause ceased to audit the
Corporation's financial statements, there were no disagreements with Virchow,
Krause on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreement, if not resolved
to the satisfaction of Virchow, Krause, would have caused it to make reference
to the subject matter of the disagreement in connection with its report.
The Corporation engaged a new independent accountant, McGladrey and Pullen, LLP,
as of September 25, 2000, to audit the Corporation's financial statements.
McGladrey and Pullen, LLP performed a complete audit of First Banking Center,
Inc. during 2000 and 2001 and provided certified financial statements for the
years ended December 31, 2000 and 2001. Virchow, Krause & Company, LLP performed
a complete audit of First Banking Center, Inc. during 1999 and provided a
certified financial statement for the year ended December 31, 1999.
McGladrey and Pullen, LLP, also performed a non-audit function for the
Corporation consisting of the preparation of the Corporation's 2001 Income Tax
returns. No representative of McGladrey and Pullen, LLP, will be present at the
Annual Stockholders' Meeting on April 16, 2002. The Board of Directors has
selected McGladrey and Pullen, LLP as the Corporation's independent auditors for
the fiscal year ending December 31, 2002 to provide a certified financial
statement for 2002.
Audit Fees
The aggregate fees billed by McGladrey and Pullen, LLP, for professional
services rendered for the audit of the Corporation's annual financial statements
for the fiscal year ended December 31, 2001, and the reviews of the financial
statements included in the Corporation's Forms 10-Q for the 2001 fiscal year
amounted to $53,500. McGladrey and Pullen, LLP also performed an audit of the
Corporation's 401(k) plan for a fee of $6,000.
Financial Information Systems Design and Implementation Fees
The aggregate fees billed by McGladrey and Pullen, LLP, for professional
services rendered to the Corporation in fiscal year 2001 in connection with the
design and implementation of financial information systems amounted to $ -0-.
All Other Fees
The aggregate fees billed by McGladrey and Pullen, LLP, for the preparation of
the Corporation's income tax returns, personal property tax returns and review
of quarterly estimated tax payment calculations for the 2001 fiscal year
amounted to $12,000.
The Audit Committee has determined that the provision of non-audit services for
the 2001 fiscal year by McGladrey and Pullen, LLP, is compatible with
maintaining that firm's independence as an independent accountant.
PROPOSALS BY STOCKHOLDERS
Shareholders' proposals to be presented at the 2003 Annual Stockholders' Meeting
must be received by the Corporation at its principal office, 400 Milwaukee
Avenue, Burlington, Wisconsin, on or before November 16, 2002.
MISCELLANEOUS
Management does not intend to bring any other matters before the meeting and
knows of no matters to be brought before the meeting by others. If any other
matters properly come before the meeting, it is the intention of the persons
named in the accompanying proxy to vote said proxy in accordance with their best
judgment.
A COPY OF THE FIRST BANKING CENTER, INC. ANNUAL REPORT ON FORM 10-K INCLUDING
FINANCIAL STATEMENTS AND SCHEDULES FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES EXCHANGE ACT OF 1934 WILL BE MADE AVAILABLE TO
STOCKHOLDERS UPON WRITTEN REQUEST AT NO CHARGE. REQUESTS SHOULD BE ADDRESSED TO:
Mr. John S. Smith, Secretary, First Banking Center, Inc., 400 Milwaukee Avenue,
P.O. Box 660, Burlington, Wisconsin, 53105.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ John S Smith
JOHN S. SMITH, SECRETARY
Burlington, Wisconsin
March 15, 2002