FIRST BANKING CENTER, INC.
400 Milwaukee Avenue
Burlington, Wisconsin 53105
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
April 20, 2004
The Annual Meeting of Stockholders of First Banking Center, Inc. (the
"Corporation") will be held at 1:30 P.M. on April 20, 2004 (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, 2004.
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 February 17, 2004, there were 1,500,840 shares of Common Stock ($1.00 par
value) (the "Common Stock") of the Corporation outstanding. The Board of
Directors has fixed March 5, 2004 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 5, 2004, 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 and shares as to which authority is withheld 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. Directors
are elected by a plurality of the votes cast. Therefore, the three 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 February 17, 2004, the Trust Department of a wholly owned subsidiary of
the Corporation owned in fiduciary capacity 131,757 shares of Common Stock,
constituting 8.78% of the Corporation's outstanding shares entitled to vote.
Sole voting and investment power is held by the Trust Department with respect to
21,080 of such shares, representing 1.40% of the outstanding common stock. There
are no other shareholders known to the Corporation to own beneficially more than
5% of the outstanding Common Stock. For ownership 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 bylaws provide that the total
number of directors will be 5 to 25, and the Board of Directors has determined
that number will be 10 for 2004. The term of office of directors in Class II
expires at the Annual Meeting. At the Annual Meeting, shareholders will elect
three Class II directors to serve until the Corporation's annual meeting of
shareholders in the year 2007 and until their successors are elected and
qualified.
It is the recommendation of the Board of Directors that the 3 nominees for Class
II 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 3
nominees listed below. All listed nominees are incumbent directors. All listed
nominees are also directors of First Banking Center, (the "Bank"), the wholly
owned subsidiary of the Corporation. 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.
Director
Name and Background Since
Nominees for Directors for Term Expiring in 2007
Class II Directors
David Boilini, age 51, is 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. Mr. Boilini has
been a director of the Bank since 1993...............................................................................1993
Daniel T. Jacobson, age 46, is a CPA and partner in the firm of Reffue, Pas, Jacobson & Koster, LLP in Monroe,
Wisconsin. Mr. Jacobson was appointed to the Board in 1998 and served on the Board of the Bank or a predecessor
since 1994. .........................................................................................................1998
Thomas Laken, Jr., age 61, is President and owner of Finishing and Plating Services, a commercial electroplating
job shop, located in Kenosha, Wisconsin. Mr. Laken was appointed to the Board in 1998. He has been a director
of the Bank since 1996. .............................................................................................1998
Continuing Directors
Class I Directors (Term Expiring in 2006)
Keith Blumer, age 55, is President and owner of Plainview Stock Farms, a cattle and grain farm operation near
Albany, Wisconsin. Mr. Blumer was appointed to the Board in 1998 and has served on the Board of Bank or a
predecessor since 1985. ............................................................................................1998
John M. Ernster, age 53, is Manager of Distribution Operations for We Energies. He has been a director of the Bank
since 1991. .........................................................................................................1992
John S. Smith, age 44, is President and Trust Officer of the Bank. Mr. Smith has been a director of the Bank since
1992. ...............................................................................................................1992
Director
Name and Background Since
Class III Directors (Term expiring in 2005)
Brantly Chappell, age 50, was hired as President and CEO of the Corporation in 1997. At that time he was also
appointed to the Board of the Corporation and the Board of the Bank. He became CEO of the Bank in 1998. .............1997
Dr. Robert Fait, age 59, is a Doctor of Optometry at Family Vision and Contact Lens Center Eye Clinic in
Burlington, Wisconsin. He founded and serves as president of WVA, a wholesale medical supply distribution firm.
He also founded and serves as vice president of Pentech Pharmaceuticals, a research and development drug
company. Dr. Fait has been a member of the Bank Board since 1998. ...................................................2000
Melvin W. Wendt, age 65, was elected Chairman of the Board in 1998. He owns and operates Mel Wendt Realty, a real
estate brokerage firm. Mr. Wendt has also served as Chairman of the Board of the Bank since 1998 and has been a
member of the Bank Board since 1989. ................................................................................1989
Charles R. Wellington, age 54, is a partner in the law firm of Kittelsen, Barry, Wellington, Thompson and
Schluesche, Monroe, Wisconsin. Mr. Wellington has served on the Board of the Bank or a predecessor since 1989. ......1996
Information Regarding Board of Directors and Committees
The Board of Directors of First Banking Center, Inc., held three meetings during
the year of 2003.
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
Bank.
Compensation Committee
The Compensation Committee, whose members in 2003 were Mr. Wendt, Mr. Ernster,
Mr. Jacobson, Dr. Fait and Mr. Laken, met three times during 2003. 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.
Audit Committee
The Audit Committee members in 2003 were Mr. Ernster and Mr. Jacobson. Mr.
Cannella, a member of the Bank board, joins them on the Committee. No members of
the Audit Committee are current or former officers or employees of the
Corporation or have reportable transactions with the Corporation under
Securities and Exchanges Commission rules, and we therefore deem them to be
independent. The Committee met four times during 2003. The primary function of
the Committee 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 hires the
independent auditors. The board has determined that Mr. Jacobson is an "audit
committee financial expert" as defined under Securities and Exchange Commission
rules.
Nominating Committee
The Nominating Committee whose members are Mr. Wendt, Mr. Smith, Mr. Boilini,
Mr. Chappell, and Mr. Wellington met once during 2003. The Committee is not
required to adopt a charter and has not done so. Due to the size and relative
lack of complexity of the Corporation, the Committee has determined that its
informal nominating procedures serve the Corporation well. The Nominating
Committee will consider nominees who are recommended by the security holders
when those recommendations are submitted in writing to the Secretary of the
Corporation.
It is the Corporation's practice that nominees will serve for a minimum of two
years on the Bank's Board of Directors before being nominated for the
Corporation's Board. Among other factors, the Committee will consider the
following when evaluating nominees whether identified by the Committee or
recommended by security holders: 1) Representation of the various communities
served by the Corporation and the Bank. 2) The character, experience and talents
of the nominee. 3) The ability of the nominee to devote sufficient time to the
affairs of the Corporation. 4) The knowledge and experience of the nominee which
would be of value to the Corporation in the performance of the duties of the
director.
The Corporation has never received a recommendation for nomination from a
security holder who beneficially owns more than 5% of the Corporation's voting
securities.
The Corporation has no formal policies or procedures regarding communications
with members of the board. However, shareholder communications received by
executive officers or board members are passed on to the other board members if
the communications concern board, or corporate or corporate governance issues.
The Corporation does not have a policy requiring director attendance at its
annual meeting. However, most directors attend the meeting as a matter of
course. All directors with the exception of Mr. Blumer attended the
Corporation's 2003 annual meeting.
Code of Ethics
The Corporation has not adopted a Code of Ethics that specifically applies to
its Chief Executive and Chief Financial officer. It has however adopted a Code
of Ethics that applies to all employees of the Corporation and the Bank. A copy
of this Code of Ethics has been posted at the portion of the Bank's website
which provides information about the Corporation. That site is located at
www.firstbankingcenter.com/about_fbc_fbcinc.htm. The Corporation will post
changes to the Code of Ethics, and waivers (if any) of the Code, on the website.
Shareholders may also obtain a copy of the Code of Ethics free of charge by
contacting the Corporate Secretary at 1-800-456-1500.
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 February 17, 2004 Outstanding
- -------------------------- ----------------------------- -----------
Brantly Chappell (President & CEO)...................................16,827 (1)(2) 1.12%
John S. Smith (Secretary)............................................28,353 (1) 1.89%
Melvin W. Wendt (Chairman)...........................................16,932 (1)(3) 1.13%
Keith Blumer..........................................................4,412 (1)(4) .29%
David Boilini........................................................18,463 (1) (5) 1.23%
John M. Ernster.......................................................4,557 (1)(6) .30%
Robert Fait..........................................................36,501 (1) (7) 2.43%
Daniel T. Jacobson....................................................4,018 (1)(8) .27%
Thomas Laken, Jr......................................................6,495 (1)(9) .43%
James Schuster (Chief Financial Officer).............................15,134 (1)(10) 1.01%
Charles R. Wellington.................................................5,850 (1) .39%
All directors and all executive officers as a group.................170,984 11.39%
<FN>
<F1>
(1)......Includes shares issuable pursuant to incentive stock options exercisable within sixty days of February 17, 2004 as
follows: Mr. Chappell, 11,207 shares, Mr. Smith, 10,225 shares, Mr. Wendt, 450 shares, Mr. Blumer, 2,350 shares,
Mr. Boilini, 767 shares, Mr. Ernster, 2,350 shares, Dr. Fait, 100 shares, Mr. Jacobson, 2,350 shares, Mr. Laken,
667 shares, Mr. Schuster 10,225 shares, Mr. Wellington, 1,450 shares.
<F2>
(2)......Includes 3,078 shares held directly by Mr. Chappell, 1,388 shares held
in joint tenancy with his wife in which Mr. Chappell shares voting
and investment powers, and 1,154 shares held by his wife in which
Mr. Chappell disclaims voting and investment powers.
<F3>
(3)......Includes 4,525 shares held directly by Mr. Wendt and 11,957 shares held
in joint tenancy with his wife in which Mr. Wendt has shared
voting and investment powers.
<F4>
(4)......Includes 1,962 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.
<F5>
(5)......Includes 13,323 shares held directly by Mr. Boilini, 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.
<F6>
(6)......Includes 2,037 shares held directly by Mr. Ernster and 170 shares held by his wife in which Mr. Ernster
disclaims voting and investment powers.
<F7>
(7)......Includes 2,750 shares held directly by Dr. Fait, 33,593 shares held in
a Trust of which Dr. Fait and his wife are trustees and share
voting and investment powers, and 58 shares held by his wife in
which Dr. Fait disclaims voting and investment powers.
<F8>
(8)......Includes 935 shares held directly by Mr. Jacobson, 733 shares held in
joint tenancy with his wife in which Mr. Jacobson shares voting
and investment powers.
<F9>
(9)......Includes 4,686 shares held directly by Mr. Laken, 896 shares held in
joint tenancy with his wife in which Mr. Laken shares voting and
investment powers, and 246 shares held by his wife in which Mr.
Laken disclaims voting and investment powers.
<F10>
(10).....Includes 4,799 shares held directly by Mr. Schuster and 110 shares held
in joint tenancy with his wife in which Mr. Schuster shares voting
and investment powers.
</FN>
COMPENSATION OF DIRECTORS
Fees
Non-employee directors of the Corporation were paid the following fees for their
services in 2003: $525 per Bank board meeting and $100 per Bank committee
meeting attended. If the Corporation's board meetings are held in conjunction
with the 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. Mr. Wendt is paid a board chairman fee of $150 per meeting
and Mr. Jacobson is paid $2,000 per year for serving as chairman of the Audit
Committee.
Pension Plan
The Bank entered into a pension and death benefit agreement with Mr. Wendt in
1990. Pursuant to the agreement, pension benefits accrued at the rate of $10,000
for each of the first six full years Mr. Wendt served on the board. Upon
completing six full years of service in 1996, Mr. Wendt became entitled to ten
annual payments of $10,000 each, with the payment increasing five percent per
year, beginning in January of 2004. Total deferred expense for the pension and
death benefit agreement was $9,800, $9,300, and $8,700, respectively, for 2003,
2002, and 2001.
Deferred Compensation Plan
Beginning in 1990 the Bank also established a deferred compensation plan for Mr.
Wendt pursuant to which he deferred $350 per month of his director's fee until
2003. Beginning in 2003 the Bank began paying monthly benefits of $600 for a
period of 15 years. Total deferred liability expense was $5,000, $7,300 and
$7,000, respectively, for 2003, 2002, and 2001.
Incentive Stock Plan
Directors are eligible to participate in the Corporation's Incentive Stock Plan.
On December 31, 2003 each outside director with the exception of Mr. Wendt, was
granted options for 800 shares at $46.50 per share. Mr. Wendt was granted
options for 500 shares at $46.50 per share.
EXECUTIVE COMPENSATION
The following table sets forth information concerning paid or accrued
compensation for services to the Corporation and its Bank for the fiscal years
ended December 31, 2002, 2001 and 2000 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
$100,000 during 2003.
Summary Compensation Table
============================ =========================================================== =======================================
Long-Term
Annual Compensation Compensation
============================ =========================================================== =======================================
- ---------------------------- --------- -------------- ------------- -------------------- -------------------- ------------------
Securities
Name and Salary Bonus Other Underlying All Other
Principal Year ($) ($) Annual Options/SARs Comp.
Position Comp.(1) (#)
- ---------------------------- --------- -------------- ------------- -------------------- -------------------- ------------------
Brantly Chappell, 2003 $200,000 $ 44,270 3,800 $ 31,800(2)
President and CEO 2002 $190,000 $ 41,400 2,800 $ 26,600(3)
2001 $180,000 $ 30,785 2,800 $ 25,000(4)
John S. Smith 2003 $107,000 $ 24,500 2,500 $ 8,200(5)
Secretary 2002 $105,000 $ 23,700 1,500 $ 6,800(5)
2001 $103,000 $ 17,660 1,800 $ 6,000(5)
James Schuster 2003 $ 92,500 $ 19,640 2,800 $ 4,900(5)
Chief Financial Officer 2002 $ 84,000 $ 18,400 1,800 $ 5,400(5)
2001 $ 80,160 $ 12,775 1,800 $ 5,600(5)
============================ ========= ============== ============= ==================== ==================== ==================
*Messrs. Chappell, Smith and Schuster also serve in various capacities as
directors and/or officers of the Bank.
Mr. Schuster, age 45, is Chief Financial Officer of the Corporation and the
Bank. Mr. Schuster has been a director of the Bank since 2001.
Robert P. Reynolds, age 36, is Vice President Human Resources and Retail
Banking, and is the only other executive officer of the Corporation.
<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 $11,300; accrued
liability with respect to Salary Continuation Agreement of $17,400; payment
by the Corporation of life insurance premiums for the benefit of the
employee of $1,000; expense for personal use of a Bank automobile of 2,100.
<F3>
(3) Contribution by the Corporation to the Corporation's Defined Contribution
(401(k)) Plan for the benefit of the participant of $11,500; accrued
liability with respect to Salary Continuation Agreement of $14,500; payment
by the Corporation of life insurance premiums for the benefit of the
employee of $600.
<F4>
(4) 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.
<F5>
(5) Contribution by the Corporation to the Corporation's Defined Contribution
(401(k)) Plan for the benefit of the participant.
</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 serves as President and Chief Executive Officer of the Corporation.
The Chappell Employment Agreement had 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 performs the customary
duties of the Chief Executive Officer of the Corporation. As compensation for
such service, the Corporation pays Mr. Chappell the greater of $165,000 annually
or compensation as may be established 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 the Bank.
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"; 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 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, 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 the Bank.
To further the objective of providing continued successful operation of the
Corporation and the Bank 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", 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 the Bank, 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, the Bank and
its shareholders.
Incentive Stock Plan
The following table presents information about stock options granted during 2003
to the executive officers named in the Summary Compensation Table.
Stock Option Grants in 2003
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 Present Value
Granted(1)
- ------------------------- -------------- ----------------------- ------------- -------------- -------------------
Brantly Chappell 3,800 9.32% $46.50 11/10/2013 $24,356(2)
John Smith 2,500 6.13% $46.50 11/10/2013 $22,825(3)
James Schuster 2,800 6.87% $46.50 11/10/2013 $25,564(3)
========================= ============== ======================= ============= ============== ===================
<FN>
<F1>
(1) All options granted in 2003 were granted under the 1994 Incentive Stock Plan.
<F2>
(2) The grant date present value for 1,761 qualified options 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 4.5%; an expected dividend yield of 1.7%; and a volatility
factor of 5.2%. The grant date present value for 2,039 non-qualified
options was determined using the Black-Scholes model with following
assumptions: a five year expected period of time to exercise; a
risk-free rate of return of 3.5%; an expected dividend yield of 1.7%;
and a volatility factor of 5.2%.
<F3>
(3) 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 4.5%; an expected dividend
yield of 1.7%; and a volatility factor of 5.2%.
</FN>
The following table presents information concerning stock options exercised
during 2003. Also shown is information on unexercised options as of December 31,
2003.
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 41 $390 11,207 7,871 $123,400 $12,400
John
Smith -0- N/A 10,225 4,175 $110,150 $5,150
James
Schuster -0- N/A 10,225 4,775 $110,150 $5,750
====================== ================ ================ =================================== ===================================
<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, 2003, market price of $46.50 per share was used.
</FN>
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
General Policy
The compensation objective of the Corporation and the Bank 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 the Bank 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, established annually,
pursuant to an informal bonus plan. The plan provides for a range of bonus
awards based, among other things, upon return on equity.
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 makes awards under the Stock Option Plan to
the officers of the Corporation and the Bank. 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.
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. The Chief Executive Officer's bonus was determined in
accordance with the bonus plan discussed above. The Chief Executive Officer was
also awarded incentive stock options under the Corporation's Incentive Stock
Plan. 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. Based upon its review of the Corporation's performance, the
Committee believes that the total compensation awarded to the Chief Executive
Officer for 2003 is fair and appropriate under the circumstances.
The Committee
The Compensation Committee currently has five members. No member of the
Committee is an employee or officer of the Corporation or the Bank. None of the
Committee members has interlocking relationships as defined by the Securities
and Exchange Commission, with the Corporation or the Bank. 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 W. Wendt, John M. Ernster, Daniel T.
Jacobson, Robert Fait, 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)
12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
First Banking Center, Inc 100 111 119 139 147 156
S&P 500 100 121 110 97 76 97
NASDAQ Bank Index 100 94 111 125 133 177
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 $4,478,000 and
$3,073,000 at December 31, 2003 and 2002, respectively. During 2003, $2,420,000
of new loans were made and repayments totaled $1,015,000. 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, 2003 represented 8.36% of
stockholders equity.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the directors and
executive officers covered by subsection to file certain reports relating to
their ownership of the Corporation's stock and any changes in such ownership
with the SEC. Specific time deadlines for such filings have been established by
the SEC.
To the Corporation's knowledge, based solely on a review of the copies of such
reports furnished to the Corporation, during the year ended December 31, 2003,
all Section 16(a) filing requirements applicable to such directors and executive
officers were complied with, except that: Messrs. Blumer, Boilini, Chappell,
Ernster, Fait, Laken, Jacobson, Reynolds, Schuster, Smith, Wendt, and Wellington
each failed to timely report a transaction on form 4 related to the granting of
stock options. Messrs. Boilini and Laken also each failed to timely report a
transaction on form 5 during 2002. Messrs. Chappell, Schuster, and Smith each
failed to timely report a transaction on form 5 during 2001. Mr. Jacobson failed
to timely report a transaction on form 5 during each of 1999 and 2002. Mr. Wendt
failed to timely report a transaction on form 5 during each of 1998 and 1999.
AUDIT COMMITTEE DISCLOSURES
The Audit Committee currently consists of John M. Ernster, and Daniel T.
Jacobson. Frank Cannella, a member of the Bank Board, joins them on the
Committee. 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) 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, 2003, 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, 2003, for
filing with the U.S. Securities and Exchange Commission.
Submitted by the Audit Committee: John M. Ernster and Daniel T. Jacobson
INDEPENDENT PUBLIC ACCOUNTANTS
Upon recommendation of the Audit Committee, the Board of Directors has appointed
McGladrey and Pullen, LLP, an independent public accounting firm, to audit the
consolidated financial statements of the Corporation for the fiscal year ending
December 31, 2004. McGladrey and Pullen, LLP performed a complete audit of the
Corporation during 2001, 2002 and 2003 and provided certified financial
statements for the years ended December 31, 2001, 2002 and 2003.
McGladrey and Pullen, LLP, also performed a non-audit function for the
Corporation consisting of the preparation of the Corporation's 2003 Income Tax
returns. No representative of McGladrey and Pullen, LLP, will be present at the
Annual Stockholders' Meeting on April 20, 2004.
Audit Fees
Following are the aggregate fees billed by McGladrey and Pullen, LLP, and RSM
McGladrey, Inc. for professional services for the fiscal years ended December
31, 2002 and 2003:
Professional Service 2003 2002
-------------------------------------------------------------
Audit Fees (1) $89,380 $59,095
Audit-Related Fees (2) 7,000 6,590
Tax Services (3) 14,636 13,380
<FN>
<F1>
(1) Audit fees consist of fees for professional services rendered for the
audit of the Company's financial statements, review of financial
statements included in the Company's quarterly reports and services
normally provided by the independent auditor in connection with statutory
and regulatory filings or engagements.
<F2>
(2) Audit-related fees are fees principally for professional services rendered
for the audit of the Company's employee benefit plan.
<F3>
(3) Tax service fees consist of compliance fees for the preparation of
original tax returns, tax payment-planning services for tax compliance,
tax planning, and tax advice. Tax service fees also include fees relating
to other tax advices, tax consulting and planning other than for tax
compliance and preparation.
</FN>
The Audit Committee has determined that the provision of non-audit services for
the 2003 fiscal year by McGladrey and Pullen, LLP, is compatible with
maintaining that firm's independence as an independent accountant.
The Audit Committee approves most engagements of the independent auditor in
advance, including approval of the related fees. The Audit Committee approves
the annual retention of independent auditors, including the budget for the
audit. The Committee also approves budgets for other projects. Management
reports all fees and their variance to budget to the Committee. In 2003, there
were no services that were not approved in advance by the Committee under this
policy. Services in 2002 were engaged prior to the formalization of these
Committee approval requirements.
PROPOSALS BY STOCKHOLDERS
Shareholders' proposals to be presented at the 2005 Annual Stockholders' Meeting
must be received by the Corporation at its principal office, 400 Milwaukee
Avenue, Burlington, Wisconsin, on or before November 20, 2004.
Under SEC rules relating to the discretionary voting of proxies at shareholder
meetings, if a proponent of a matter for shareholder consideration (other than a
shareholder proposal) fails to notify the Corporation at least 45 days prior to
the month and day of mailing the prior year's proxy statement, then management
proxies are allowed to use their discretionary voting authority if a proposal is
raised at the annual meeting, without any discussion of the matter in the proxy
statement. Therefore, any such matters must be received by the Corporation by
February 1, 2005 in the case of the Corporation's 2005 annual meeting of
stockholders. The Corporation is not aware of any such proposals for the 2004
annual meeting.
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 19, 2004