SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. _____)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the SEC Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
PSB GROUP, INC.
(Name of Registrant as Specified in Its Charter)
________________________________________
(Name of Person(s) Filing Proxy Statement,
if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
_______________________
(2) Aggregate number of securities to which transaction applies:
_______________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
_______________________
(4) Proposed maximum aggregate value of transaction: _____________________
(5) Total fee paid: ____________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
(1) Amount Previously Paid: ______________________________________________
(2) Form, Schedule or Registration Statement: ____________________________
(3) Filing Party: ________________________________________________________
(4) Date Filed: __________________________________________________________
PSB GROUP, INC.
1800 EAST 12 MILE ROAD
MADISON HEIGHTS, MI 48071-2600
(248) 548-2900
March 23, 2006
Dear Shareholder:
I am pleased to invite you to attend the PSB Group, Inc.'s 2006 annual
meeting of shareholders on Tuesday, April 25, 2006. We will hold the meeting at
2:00 p.m. at the Ukrainian Cultural Center, 26601 Ryan Road, Warren, Michigan.
On the page following this letter, you will find the Notice of Meeting
which lists the matters to be considered at the meeting. Following the Notice of
Meeting is the proxy statement which describes these matters and provides you
with additional information about our Company. Also enclosed you will find your
proxy card, which allows you to vote on these matters, and the Company's 2005
Annual Report.
Your vote is important. A majority of the common stock must be represented,
either in person or by proxy, to constitute a quorum for the conduct of
business. PLEASE COMPLETE AND MAIL IN YOUR PROXY CARD PROMPTLY, EVEN IF YOU PLAN
TO ATTEND THE MEETING. You can attend the meeting and vote in person, even if
you have sent in a proxy card.
The Board of Directors recommends that shareholders vote FOR each of the
proposals stated in the proxy statement.
The rest of the Board and I look forward to seeing you at the meeting.
Whether or not you can attend, we greatly appreciate your cooperation in
returning the proxy card.
Sincerely,
/s/ Robert L. Cole
----------------------------------------
Robert L. Cole
President and Chief Executive Officer
PSB GROUP, INC.
1800 EAST 12 MILE ROAD
MADISON HEIGHTS, MI 48071-2600
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TIME................ 2:00 p.m. on Tuesday, April 25, 2006
PLACE............... Ukrainian Cultural Center
26601 Ryan Road
Warren, Michigan
ITEMS OF BUSINESS... (1) To elect three members of the Board of Directors each for
a three-year term.
(2) To ratify the selection of Plante & Moran, PLLC as
independent auditors of the Company for the 2006 fiscal
year.
(3) To transact such other business as may properly come
before the Meeting.
ANNUAL REPORT....... Our 2005 Annual Report, which is not a part of the proxy
soliciting material, is enclosed.
RECORD DATE......... You can vote if you are a shareholder of record on March 1,
2006.
QUORUM.............. A majority of the shares of common stock must be represented
at the meeting. If there are insufficient shares, the
meeting may be adjourned.
March 23, 2006 David A. Wilson
Secretary
TABLE OF CONTENTS
SOLICITATION AND VOTING.................................................... 1
Shareholders Entitled to Vote........................................... 1
Voting Procedures....................................................... 1
Voting Procedures for Shares in the Company's 401(k) Plan............... 2
Required Vote........................................................... 2
Revoking a Proxy........................................................ 2
List of Shareholders.................................................... 2
Cost of Proxy Solicitation.............................................. 3
Inspector of Election................................................... 3
Other Matters........................................................... 3
GOVERNANCE OF THE COMPANY.................................................. 3
COMMITTEES OF THE BOARD.................................................... 4
The Executive Committee................................................. 4
The Audit Committee..................................................... 4
Audit Committee Financial Expert........................................ 4
The Directors Loan Committee............................................ 4
The Investment and Asset Liability Management Committee................. 4
The Nominating Committee................................................ 5
The Compensation and Benefits Committee................................. 5
The Strategic and Long Range Planning Committee......................... 5
Code of Ethics.......................................................... 5
Shareholder Communications with the Board............................... 6
ITEM 1. ELECTION OF DIRECTORS.............................................. 6
ITEM 2. APPROVAL OF AUDITORS............................................... 8
Audit Fees.............................................................. 8
Audit Related Fees...................................................... 8
Tax Fees................................................................ 9
All Other Fees.......................................................... 9
SECURITY OWNERSHIP OF DIRECTORS, NOMINEES FOR DIRECTORS, MOST
HIGHLY COMPENSATED EXECUTIVE OFFICERS AND ALL DIRECTORS AND
EXECUTIVE OFFICERS AS A GROUP........................................... 10
SECURITY OWNERSHIP OF SHAREHOLDERS HOLDING 5% OR MORE...................... 11
EXECUTIVE COMPENSATION..................................................... 12
Option Grants in 2005................................................... 13
Total Options Exercised in 2005 and Year End Values..................... 14
OTHER COMPENSATION ARRANGEMENTS............................................ 14
Employment Agreements................................................... 14
Director Compensation................................................... 16
401(k) Plan and ESOP.................................................... 16
2004 Stock Option Plan.................................................. 17
Compensation Committee Interlocks and Insider Participation............. 17
Transactions with Certain Related Persons............................... 17
PERFORMANCE GRAPH.......................................................... 18
EXECUTIVE COMPENSATION COMMITTEE REPORT.................................... 19
AUDIT COMMITTEE REPORT..................................................... 20
COMPLIANCE WITH SECTION 16................................................. 21
REQUIREMENTS, INCLUDING DEADLINES, FOR SUBMISSION OF PROXY
PROPOSALS, NOMINATION OF DIRECTORS AND OTHER BUSINESS OF
SHAREHOLDERS............................................................ 21
PSB GROUP, INC.
1800 EAST 12 MILE ROAD
MADISON HEIGHTS, MI 48071-2600
SOLICITATION AND VOTING
We are sending you this Proxy Statement and the enclosed proxy card because
the Board of Directors of PSB Group, Inc. (the "Company" "we" or "us") is
soliciting your proxy to vote at the 2006 Annual Meeting of Shareholders (the
"Annual Meeting"). This Proxy Statement summarizes the information you need to
know to vote intelligently at the Annual Meeting.
You are invited to attend our Annual Meeting of Shareholders on April 25,
2006 beginning at 2:00 p.m. The Annual Meeting will be held at the Ukrainian
Cultural Center, 26601 Ryan Road, Warren, Michigan.
This Proxy Statement and the enclosed form of proxy are being mailed
starting March 23, 2006.
SHAREHOLDERS ENTITLED TO VOTE
Holders of record of common stock of the Company at the close of business
on March 1, 2006 are entitled to receive this notice. Each share of common stock
of the Company is equal to one vote.
There is no cumulative voting at the Annual Meeting.
As of the record date, there were 3,029,152 common shares outstanding.
VOTING PROCEDURES
You can vote on matters to come before the meeting in one of three ways:
- you can come to the Annual Meeting and cast your vote there;
- you can vote by giving a proxy to another person who can cast
your vote at the Annual Meeting; or
- you can vote by signing and returning the enclosed proxy card. If
you do so, the individuals named as proxies on the card will vote
your shares in the manner you indicate.
You may also choose to vote for all of the nominees for directors and each
proposal by simply signing, dating and returning the enclosed proxy card without
further direction. All signed and returned proxies that contain no direction as
to vote will be voted FOR each of the nominees for director and FOR each of the
proposals.
The Board of Directors has selected itself as the persons to act as proxies
on the proxy card.
If you plan to attend the Annual Meeting and vote in person, you should
request a ballot when you arrive. IF YOUR SHARES ARE HELD IN THE NAME OF YOUR
BROKER, BANK OR OTHER NOMINEE, THE INSPECTOR OF ELECTION WILL REQUIRE YOU TO
PRESENT A POWER OF ATTORNEY OR PROXY IN YOUR NAME FROM SUCH BROKER, BANK OR
OTHER NOMINEE FOR YOU TO VOTE SUCH SHARES AT THE ANNUAL MEETING. Please contact
your broker, bank or nominee.
VOTING PROCEDURES FOR SHARES IN THE COMPANY'S 401(K) PLAN
If you participate in the Company's 401(k), Profit Sharing and Employee
Stock Ownership Plan (the "401(k) Plan"), please return your proxy in the
envelope on a timely basis to ensure that your proxy is voted. If you own or are
entitled to give voting instructions for shares in the 401(k) Plan and do not
vote your shares or give voting instructions, generally, the Plan Administrator
or Trustee will vote your shares in the same proportion as the shares for all
plan participants for which voting instructions have been received. Holders of
shares in the 401(k) Plan will not be permitted to vote such shares at the
Annual Meeting, but their attendance is encouraged and welcome.
REQUIRED VOTE
The presence, in person or by proxy, of the holders of a majority of the
votes entitled to be cast by the shareholders at the Annual Meeting is necessary
to constitute a quorum. Abstentions and broker "non votes" are counted as
present and entitled to vote for purposes of determining a quorum. A broker "non
vote" occurs when a broker, bank or other nominee holding shares for a
beneficial owner does not vote on a particular proposal because such broker,
bank or nominee does not have discretionary authority to vote and has not
received instructions from the beneficial owner.
Once a quorum is achieved, a plurality of votes cast is all that is
necessary for the election of Directors. Abstentions and broker "non votes" are
not counted in determining the vote. As to ratification of Plante & Moran, PLLC
and all other matters that may come before the meeting, the affirmative vote of
a majority of votes cast is necessary for the approval of such matters.
Abstentions and broker non votes are again not counted for purposes of approving
the matter.
REVOKING A PROXY
If you give a proxy, you may revoke it at any time before it is exercised.
You may revoke your proxy in any one of three ways:
- You may send in another proxy with a later date;
- You may notify the Company's Secretary in writing at PSB Group,
Inc., 1800 East 12 Mile Road, Madison Heights, Michigan
48071-2600; or
- You may revoke by voting in person at the Annual Meeting.
If you choose to revoke your proxy by attending the Annual Meeting, you
must vote in accordance with the rules for voting at the Annual Meeting.
Attending the Annual Meeting alone will not constitute revocation of a proxy.
LIST OF SHAREHOLDERS
A list of shareholders entitled to vote at the Annual Meeting will be
available at the Company's offices at 1800 East 12 Mile Road, Madison Heights,
Michigan for a period of ten days prior to the Annual Meeting. A list will also
be available at the Annual Meeting itself.
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COST OF PROXY SOLICITATION
We will pay the expenses of soliciting proxies. Proxies may be solicited on
our behalf by Directors, officers or employees in person or by telephone, mail
or telegram. Directors, officers and employees who solicit proxies will not be
compensated for such activities. We have not hired and do not intend to hire a
proxy solicitation firm to assist us in the distribution and solicitation of
proxies. The Company will also request persons, firms and corporations holding
shares in their names for other beneficial owners to send proxy materials to
such beneficial owners. The Company will reimburse these persons for their
expenses.
INSPECTOR OF ELECTION
Your proxy returned in the enclosed envelope will be delivered to the
Company's Secretary, David A. Wilson. The Board of Directors has designated
Barbara Heath and Rhonda Kozlowski of PSB Group, Inc. to act as inspectors of
election and to tabulate the votes at the Annual Meeting. After the final
adjournment of the Annual Meeting, the proxies will be returned to the Company.
OTHER MATTERS
The Board of Directors knows of no business which will be presented for
consideration at the Annual Meeting other than as stated in the Notice of Annual
Meeting of Shareholders. If, however, other matters are properly brought before
the Annual Meeting, it is the intention of the persons named in the proxies to
vote the shares on such matters in their discretion.
GOVERNANCE OF THE COMPANY
ROLE AND COMPOSITION OF THE BOARD OF DIRECTORS
Our Company's Board of Directors is the ultimate decision making body of
the Company, except for matters which law or our Articles of Incorporation
requires the vote of shareholders. The Board of Directors selects the management
of the Company which is responsible for the Company's day to day operations. The
Board acts as an advisor to management and also monitors its performance. Our
Board of Directors has determined that each of Messrs. Wood, Morawski, Jacobs,
Ross and Kowalski are independent as independence is defined in the National
Association of Securities Dealers' listing standards, as those standards have
been modified or supplemented.
During 2005, the Board of Directors met as the Company's Board of Directors
19 times. In addition, the Board of Directors has authorized seven Committees to
manage distinct matters of the Company. These Committees are the Executive
Committee, the Audit Committee, the Directors Loan Committee, the Investment and
Asset/Liability Management Committee, the Nominating Committee, the Compensation
and Benefits Committee and the Strategic and Long Range Planning Committee.
Membership on each of the Committees is set forth on the table below. All of our
Directors attended 75 percent or more of the meetings of the Board and the Board
Committees on which they served in 2005.
3
COMMITTEES OF THE BOARD
STRATEGIC AND
INVESTMENT AND LONG RANGE
DIRECTORS ASSET/LIABILITY COMPENSATION PLANNING
NAME EXECUTIVE AUDIT LOAN MANAGEMENT NOMINATING AND BENEFITS COMMITTEE
---- --------- ----- --------- --------------- ---------- ------------ -------------
Robert L. Cole [X] [X] [X] [X]* [X]
James B. Jacobs [X] [X] [X] [X]
Michael J. Kowalski [X] [X] [X] [X]
Longine V. Morawski [X] [X] [X] [X] [X] [X]
Sydney L. Ross [X] [X] [X]
Edward Turner [X] [X]
David L. Wood [X] [X] [X] [X] [X] [X] [X]
* Nonvoting member
THE EXECUTIVE COMMITTEE (Number of Meetings in 2005:12)
The Executive Committee oversees and evaluates the Chief Executive Officer,
develops new initiatives for presentation to the Board of Directors, and is
responsible for Board issues which arise during intervals between Board
meetings.
THE AUDIT COMMITTEE (Number of Meetings in 2005:6)
The Audit Committee is responsible for recommending the annual appointment
of the public accounting firm to be our outside auditors, subject to approval of
the Board of Directors and shareholders. The Committee is responsible for the
following tasks:
- maintaining a liaison with the outside auditors
- reviewing the adequacy of audit and internal controls
- reviewing with management and outside auditors financial
disclosures of the Company
- reviewing any material changes in accounting principles or
practices used in preparing statements
Audit Committee Financial Expert. While the Board of Directors endorses the
effectiveness of our Audit Committee, its membership does not include a director
who qualifies for designation as an "audit committee financial expert" - a new
concept under federal regulation that contemplates such designation only when an
audit committee member satisfies all five qualification requirements, such as
experience (or "experience actively supervising" others engaged in), preparing,
auditing, analyzing or evaluating financial statements presenting a level of
accounting complexity comparable to what is encountered in connection with our
Company's financial statements.
THE DIRECTORS LOAN COMMITTEE (Number of Meetings in 2005:24)
The Directors Loan Committee is responsible for reviewing and making
recommendations concerning the Company's credit policy, providing an annual
strategic analysis and business plan for lending, reviewing loans requiring full
Board approval prior to presentation and approving loans with total commitments
between $1,000,000 and $2,000,000. This committee meets on an adhoc basis as is
needed.
THE INVESTMENT AND ASSET LIABILITY MANAGEMENT COMMITTEE (Number of Meetings
in 2005:1)
The primary objective of the Investment and Asset/Liability Management
Committee is to review the investment strategy implementation, the
asset/liability management results and to review the policies governing the
investments and asset/liability management. This committee generally meets once
a year.
4
THE NOMINATING COMMITTEE (Number of Meetings in 2005:1)
Our Board of Directors has a Nominating Committee which consists of three
directors. David L. Wood, Michael J. Kowalski and Longine V. Morawski are the
current members of this committee. The Nominating Committee identifies
individuals to become board members and selects, or recommends for the board's
selection, director nominees to be presented for shareholder approval at the
annual meeting of shareholders or to fill any vacancies.
Our Board of Directors has adopted a written charter for the Nominating
Committee, a copy of which was attached as an appendix to the proxy statement in
connection with the 2005 annual meeting and is also available to shareholders on
our website, at http://www.psbnetbank.com. Each of the members of our Nominating
Committee is independent as independence is defined in the National Association
of Securities Dealers' listing standards, as those standards have been modified
or supplemented.
The Nominating Committee's policy is to consider director candidates
recommended by shareholders. Such recommendations must be made pursuant to
notice in writing by January 1 of the year in which the meeting will be held to:
PSB Group, Inc.
1800 East 12 Mile Road
Madison Heights, Michigan 48071-2600
Attn: David A. Wilson, Secretary
The Nominating Committee has not established specific, minimum qualifications
for recommended nominees or specific qualities or skills for one or more of our
directors to possess. The Nominating Committee uses a subjective process for
identifying and evaluating nominees for director, based on the information
available to, and the subjective judgments of, the members of the Nominating
Committee and our then current needs, although the committee does not believe
there would be any difference in the manner in which it evaluates nominees based
on whether the nominee is recommended by a shareholder. Historically, nominees
have been existing directors or business associates of our directors or
officers.
THE COMPENSATION AND BENEFITS COMMITTEE (Number of Meetings in 2005:5)
The primary objective of the Compensation and Benefits Committee is to
review the entire benefits package for the Company. This includes the 401(k)
Profit Sharing Plan, the salary and wages budget, the Executive Bonus Plan and
the health and welfare benefits. The committee is also responsible for
publishing an annual Executive Compensation Committee Report for the
shareholders. This committee meets as needed, generally three times a year.
THE STRATEGIC AND LONG RANGE PLANNING COMMITTEE (Number of Meetings in 2005:3)
The Strategic and Long Range Planning Committee is responsible for plans
that exceed 2 years. This can include branching, acquisitions, formation of new
companies or other items that take a longer timeframe to be completed. It
provides management with direction on the long term goals and what needs to be
focused on with goals in the 3 to 5 years or longer range.
CODE OF ETHICS
The Company has adopted a Code of Ethics that applies to all of our
employees, officers and directors, including our principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions. Our Code of Ethics contains written
standards that we believe are reasonably designed to deter wrongdoing and to
promote:
- Honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
- Full, fair, accurate, timely, and understandable disclosure in reports
and documents that we file with, or submit to, the Securities and
Exchange Commission and in other public communications we make;
5
- Compliance with applicable governmental laws, rules and regulations;
- The prompt internal reporting of violations of the code to an
appropriate person or persons named in the code; and
- Accountability for adherence to the code.
This Code of Ethics is attached to our Annual Report on Form 10-K for the fiscal
year ended December 31, 2005 as Exhibit 14. We have also posted it on our Web
site at http://www.psbnetbank.com. We will provide to any person without charge,
upon request, a copy of our Code of Ethics. Requests for a copy of our Code of
Ethics should be made to our Secretary at 1800 East 12 Mile Road, Madison
Heights, Michigan 48071-2600. We intend to satisfy the disclosure requirement
under Item 5.05 of Form 8-K regarding an amendment to, or a waiver from, a
provision of our Code of Ethics that applies to our principal executive officer,
principal financial officer, principal accounting officer or controller or
persons performing similar functions and that relates to any element of the code
definition enumerated in Securities and Exchange Commission, Regulation S-K,
Item 406(b) by posting such information on our Web site at
http://www.psbnetbank.com within five business days following the date of the
amendment or waiver.
SHAREHOLDER COMMUNICATIONS WITH THE BOARD
Our Board of Directors has a process for shareholders to send
communications to the Board of Directors, its Nominating Committee or its Audit
Committee, including complaints regarding accounting, internal accounting
controls, or auditing matters. Communications can be sent to the Board of
Directors, its Nominating Committee or its Audit Committee or specific directors
either by regular mail to the attention of the Board of Directors, its
Nominating Committee, its Audit Committee or specific directors, at our
principal executive offices at 1800 East 12 Mile Road, Madison Heights, Michigan
48071-2600. All of these communications will be reviewed by our Secretary (1) to
filter out communications that our Secretary deems are not appropriate for our
directors, such as spam and communications offering to buy or sell products or
services, and (2) to sort and relay the remainder to the appropriate directors.
We encourage all of our directors to attend the annual meeting of shareholders,
if possible. Five of our seven current directors attended the 2005 annual
meeting of shareholders.
ITEM 1. ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, currently consisting
of classes of three, three, and one director, respectively. Each class of
directors is elected for a three-year term. One class of directors is up for
election each year. This results in a staggered Board which ensures continuity
from year to year.
Three directors will be elected at the Annual Meeting, each to serve a
three-year term expiring at our Annual Meeting in 2009.
The persons named in the enclosed proxy card intend to vote the proxy for
the election of each of the three nominees unless you indicate on the proxy card
that your vote should be withheld from any or all of such nominees. Each nominee
elected as director will continue in office until his or her successor has been
elected, or until his death, resignation or retirement.
The Board of Directors has proposed the following nominees for election as
directors with the term expiring at the Annual Meeting in the year set forth
below:
CLASS II - TERM EXPIRING IN 2009
James B. Jacobs
Longine V. Morawski
Edward H. Turner
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES
AS DIRECTORS.
6
We expect the nominees to be able to serve if elected. If any nominee is
not able to serve, proxies may be voted for substitute nominees. The principal
occupation and certain other information about the nominees and other directors
whose terms of office continue after the Annual Meeting is set forth below.
NOMINEES WHOSE TERMS WILL EXPIRE IN 2009
NAME AND AGE AS OF POSITION, PRINCIPAL OCCUPATION,
THE ANNUAL MEETING BUSINESS EXPERIENCE AND DIRECTORSHIP
- ------------------ ------------------------------------
James B. Jacobs, Age 62 Elected to the board of directors in 2003. Director of the Center for
Workforce Development, Macomb Community College (6/00-present); Associate
Vice President, Macomb Community College (1/95-6/00).
Longine V. Morawski, Age 54 President of MP Tool & Engineering, a manufacturing company, since 1974.
Mr. Morawski has served as a director of the Company since 1999 and has
served as Vice Chairman of the Board of Directors of the Company since
2000.
Edward Turner, Age 59 President of Turner and Associates Consultants, a consulting firm which
specializes in providing consulting services to financial institutions,
since 1994. Mr. Turner was appointed to the Board of Directors in 2001.
DIRECTORS WITH TERMS EXPIRING 2007
NAME AND AGE AS OF POSITION, PRINCIPAL OCCUPATION,
THE ANNUAL MEETING BUSINESS EXPERIENCE AND DIRECTORSHIP
- ------------------ ------------------------------------
David L. Wood, Age 61 David L. Wood recently retired from Colonial Bushings, Inc., a
manufacturer of precision tooling components, where he had been Manager
since 1973. Mr. Wood has served as a director of the Company since 1985
and has served as its Chairman since 2000.
7
DIRECTORS WITH TERMS EXPIRING 2008
NAME AND AGE AS OF POSITION, PRINCIPAL OCCUPATION,
THE ANNUAL MEETING BUSINESS EXPERIENCE AND DIRECTORSHIP
- ------------------ ------------------------------------
Robert L. Cole, Age 64 Robert L. Cole has been with the Company since 1996 serving as its Chief
Executive Officer, President and a director. Mr. Cole was also President
of The State Bank located in Fenton, Michigan in the commercial banking
division from 1977 until 1996.
Michael J. Kowalski, Age 42 Michael J. Kowalski has served as President of Kowalski Companies, a
sausage and meat manufacturer, since 1994. Mr. Kowalski has served as a
director of the Company since 1994.
Sydney L. Ross, Age 56 Sydney L. Ross is the President of General Wine and Liquor Company, a
wholesale wine and spirit delivery company and has served in such
capacity since 1978. Mr. Ross became a director of the Company in 2001.
ITEM 2. APPROVAL OF AUDITORS
The Board of Directors, upon the recommendation of its Audit Committee, has
appointed Plante & Moran, PLLC to serve as our independent auditors for 2006.
The Board of Directors is asking the shareholders to ratify the appointment of
Plante & Moran, PLLC.
In the event our shareholders fail to ratify the selection of Plante &
Moran, PLLC, the Audit Committee will consider it as a direction to select other
auditors for the subsequent year. Representatives of Plante & Moran, PLLC will
be present at the Annual Meeting to answer questions. They will also have the
opportunity to make a statement if they desire to do so.
AUDIT FEES
Audit fees and expenses billed to the Company by Plante & Moran, PLLC for
the audit of the Company's financial statements for the fiscal years ended
December 31, 2005 and December 31, 2004, and for review of the Company's
financial statements included in the Company's quarterly reports on Form 10-Q,
are as follows:
2005 2004
- ------- -------
$79,600 $81,000
AUDIT RELATED FEES
Audit related fees and expenses billed to the Company by Plante & Moran,
PLLC for fiscal years 2005 and 2004 for services related to the performance of
the audit or review of the Company's financial statements that were not included
under the heading "Audit Fees", are as follows:
2005 2004
- ------- ------
$0 $6,800
8
TAX FEES
Tax fees and expenses billed to the Company for fiscal years 2005 and 2004
for services related to tax compliance, tax advice and tax planning, consisting
primarily of preparing the Company's federal and state income tax returns for
the previous fiscal periods and inclusive of expenses are as follows:
2005 2004
- ------- ------
$11,450 $9,400
ALL OTHER FEES
Fees and expenses billed to the Company by Plante & Moran, PLLC for all
other services provided during fiscal years 2005 and 2004 are as follows:
2005 2004
- ------- -------
$20,190 $11,700
In accordance with Section 10A(i) of the Exchange Act, before Plante &
Moran, PLLC is engaged by us to render audit or non-audit services, the
engagement is approved by our Audit Committee. None of the audit-related, tax
and other services described in the table above were approved by the Audit
Committee pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X. None of the time
devoted by Plante & Moran on its engagement to audit the Company's financial
statements for the year ended December 31, 2005 is attributable to work
performed by persons other than Plante & Moran employees.
The affirmative vote of a majority of votes cast on this proposal, without
regard to abstentions or broker non votes, is required for approval of this
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF PLANTE &
MORAN, PLLC AS OUR INDEPENDENT AUDITORS FOR THE YEAR 2006.
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SECURITY OWNERSHIP OF DIRECTORS, NOMINEES FOR DIRECTORS
MOST HIGHLY COMPENSATED EXECUTIVE OFFICERS AND
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP
AMOUNT AND
NATURE OF BENEFICIAL OWNERSHIP
NAME OWNERSHIP(1) AS A PERCENT OF CLASS
---- -------------------- ---------------------
Theodore G. Bangert (Executive Officer) 1,282.2296 (2) *
Robert L. Cole (Director and Executive Officer) 4,509.4294 (3) *
James B. Jacobs (Director) 315 (4) *
Tami Janowicz (Executive Officer) 551.6578 (5) *
Michael J. Kowalski (Director) 10,458.9382 (6) *
Longine V. Morawski (Director) 27,102.6904 (7) *
Sydney L. Ross (Director) 16,108.2480 (8) *
Edward Turner (Director) 1,190 (9) *
David A. Wilson (Executive Officer) 7,450.3054(10) *
David L. Wood (Director-Chairman) 40,158.3801(11) 1.41%
All directors and executive officers as a group
(10 persons) 111,616.8069 3.67%
- ----------
(1) The securities "beneficially owned" by an individual are determined as of
March 1, 2006 by information obtained from the persons listed above, in
accordance with the definition of "beneficial ownership" set forth in the
regulations of the Securities and Exchange Commission. Accordingly, they
may include securities owned by or for, among others, the wife and/or minor
children of the individual and any other relative who has the same home as
such individual, as well as other securities as to which the individual has
or shares voting or investment power or has the right to acquire under
outstanding stock options within 60 days after the date of this Proxy
Statement. Unless otherwise indicated below, the persons named in this
table have sole voting and sole investment power or share voting and
investment power with their respective spouses, with respect to all shares
beneficially owned. Beneficial ownership may be disclaimed as to certain of
the securities.
(2) Includes 0 shares subject to options granted under the Company's Stock
Option Plan which are currently exercisable or will become exercisable
within 60 days and excludes 2,000 shares subject to unexercisable options.
Options vest at a rate of 1/3 per year over a three-year period commencing
on the one-year anniversary of the date of grant.
(3) Includes 0 shares subject to options granted under the Company's Stock
Option Plan which are currently exercisable or will become exercisable
within 60 days and excludes 5,000 shares subject to unexercisable options.
Options vest at a rate of 1/3 per year over a three-year period commencing
on the one-year anniversary of the date of grant.
(4) Includes 0 shares subject to options granted under the Company's Stock
Option Plan which are currently exercisable or will become exercisable
within 60 days and excludes 2,000 shares subject to unexercisable options.
Options vest at a rate of 1/3 per year over a three-year period commencing
on the one-year anniversary of the date of grant.
(5) Includes 0 shares subject to options granted under the Company's Stock
Option Plan which are currently exercisable or will become exercisable
within 60 days and excludes 1,000 shares subject to unexercisable options.
Options vest at a rate of 1/3 per year over a three-year period commencing
on the one-year anniversary of the date of grant.
(6) Includes 0 shares subject to options granted under the Company's Stock
Option Plan which are currently exercisable or will become exercisable
within 60 days and excludes 2,000 shares subject to unexercisable options.
Options vest at a rate of 1/3 per year over a three-year period commencing
on the one-year anniversary of the date of grant. Also includes 8,999
phantom stock units acquired by Mr. Kowalski under the Company's Deferred
Compensation Plan for which payment is to be made in the form of Company
common stock.
(7) Includes 15,575.3699 shares owned by MP Tooling & Engineering, Inc. and
2,027.5383 shares owned by LVM Enterprises, Inc., both of which companies
are 100% owned by Mr. Morawski. Also includes 0 shares subject to options
granted under the Company's Stock Option Plan which are currently
exercisable or will become exercisable within 60 days and excludes 2,000
shares subject to unexercisable options. Options vest at a rate of 1/3 per
year over a three-year period commencing on the one-year anniversary of the
date of grant.
(8) Includes 0 shares subject to options granted under the Company's Stock
Option Plan which are currently exercisable or will become exercisable
within 60 days and excludes 2,000 shares subject to unexercisable options.
Options vest at a rate of 1/3 per year over a three-year period commencing
on the one-year anniversary of the date of grant.
(9) Includes 0 shares subject to options granted under the Company's Stock
Option Plan which are currently exercisable or will become exercisable
within 60 days and excludes 2,000 shares subject to unexercisable options.
Options vest at a rate of 1/3 per year over a three-year period commencing
on the one-year anniversary of the date of grant.
(10) Includes 0 shares subject to options granted under the Company's Stock
Option Plan which are currently exercisable or will become exercisable
within 60 days and excludes 2,000 shares subject to unexercisable options.
Options vest at a rate of 1/3 per year over a three-year period commencing
on the one-year anniversary of the date of grant.
(11) Includes 0 shares subject to options granted under the Company's Stock
Option Plan which are currently exercisable or will become exercisable
within 60 days and excludes 2,000 shares subject to unexercisable options.
Options vest at a rate of 1/3 per year over a three-year period commencing
on the one-year anniversary of the date of grant. Also includes 2,500
phantom stock units acquired by Mr. Wood under the Company's Deferred
Compensation Plan for which payment is to be made in the form of Company
common stock.
* Less than 1% ownership as a percent of class.
10
SECURITY OWNERSHIP OF SHAREHOLDERS HOLDING 5% OR MORE
The table below contains shareholder information for persons believed by
the Company to own five percent or more of the Company's common stock. Ownership
of the Company's common stock is shown in terms of "beneficial ownership." A
person generally "beneficially owns" shares if he has either the right to vote
those shares or dispose of them. More than one person may be considered to
beneficially own the same shares.
In this Proxy Statement, unless otherwise noted, a person has sole voting
and dispositive power for those shares shown as beneficially owned by him. The
percentages shown below compare the persons beneficially owned shares with the
total number of shares of the Company's common stock outstanding on March 1,
2006 (3,029,152 shares).
NUMBER
NAME AND ADDRESS OF PERCENT
OF BENEFICIAL OWNER SHARES OF CLASS
- ------------------- ------- --------
Christopher S. Olson 276,277(1) 9.12%
22641 Statler
St. Clair Shores, MI 48081
Lance K. Olson 213,121(2) 7.03%
305 Lincoln
Grosse Pointe, MI 48230
Madison Holdings Limited Partnership 237,157(3) 7.83%
27301 Dequindre Road
Madison Heights, Michigan 48071
Dr. Leon Fill Foundation 5,351(3) .18%
27301 Dequindre Road
Madison Heights, Michigan 48071
Norman M. Fill 626(3) .02%
27301 Dequindre Road
Madison Heights, Michigan 48071
- ----------
(1) Based upon information disclosed in a Schedule 13G filed on or around
September 11, 2002 and records of the Company's stock transfer agent.
(2) Based upon information disclosed in a Schedule 13G filed on or around
September 11, 2002 and the reporting person's sale of 50,000 shares in
December 2005 of which the Company was aware.
(3) Based upon information disclosed in Schedules 13D filed on or around August
31, 2001 and records of the Company's stock transfer agent. Madison
Holdings Limited Partnership ("Madison"), Dr. Leon Fill Foundation (the
"Foundation"), and Norman M. Fill ("Fill") disclosed that they had sole
power to vote or dispose of certain shares. Fill is the managing partner of
Madison and the sole trustee of the Foundation. Madison, the Foundation and
Fill are believed to own an aggregate of 243,134 shares of common stock or
approximately 8.0%.
11
EXECUTIVE COMPENSATION
The following table shows, for the years ended December 31, 2005, 2004 and
2003, the cash compensation paid by the Company, as well as certain other
compensation paid or accrued for those years, to the Chief Executive Officer and
other executive officers who accrued salary and bonus in excess of $100,000 in
fiscal year 2005. There are no family relationships among any of the executive
officers or directors of the Company. Executive officers of the Company serve at
the discretion of the Board of Directors.
COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------- --------------------------------------------------
AWARDS PAYOUTS
------------------------- ----------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION STOCK OPTIONS/SARS PAYOUTS COMPENSATION
POSITION YEAR ($)(1) ($)(1) ($)(2) AWARDS ($) (#) ($) ($)(3)(4)(5)
- ------------------ ---- -------- ------- ------------ ---------- ------------ ------- ------------
Robert L. Cole 2005 $232,000 $37,120 -- -- 5,000 -- $30,320
President and Chief 2004 224,000 30,240 -- -- -- -- 31,491
Executive Officer 2003 218,000 87,200 -- -- -- -- 32,946
Theodore G. Bangert 2005 $141,000 $17,285 -- -- 2,000 -- $10,873
Senior Vice President 2004 136,700 16,746 -- -- -- -- 10,855
and Senior Lender 2003 134,000 35,505 -- -- -- -- 12,767
David A. Wilson 2005 $119,500 $14,639 -- -- 2,000 -- $ 9,538
Senior Vice President, 2004 115,800 14,186 -- -- -- -- 9,308
Chief Financial Officer
and Secretary 2003 113,000 38,030 -- -- -- -- 10,887
- ----------
(1) "Salary" includes amounts deferred by the Named Executive Officer under the
Bank's Deferred Compensation Plan. "Bonus" consists of board approved
discretionary bonuses.
(2) For each of the years 2003 through 2005, there were no (a) perquisites over
the lesser of $50,000 or 10% of the individual's total Salary and Bonus for
the year; (b) payments of above-market preferential earnings on deferred
compensation; (c) payments of earnings with respect to long-term incentive
plans prior to settlement or maturation; (d) tax payment reimbursements; or
(e) preferential discounts on stock.
(3) Includes for 2005, profit sharing contributions of $3,802, $2,684, and
$2,226; fees for attendance at board meetings of $17,050, $1,800, and
$1,800; and 401(k) Plan matches of $9,468, $6,388, and $5,512 for Messrs.
Cole, Bangert, and Wilson, respectively.
(4) Includes for 2004, profit sharing contributions of $3,801, $2,646, and
$2,194; fees for attendance at board meetings of $17,533, $1,800, and
$1,800; and 401(k) Plan matches of $10,157, $6,409, and $5,313 for Messrs.
Cole, Bangert, and Wilson, respectively.
(5) Includes for 2003, profit sharing contributions of $7,525, $4,705, and
$3,900; fees for attendance at board meetings of $15,550, $1,800, and
$1,800; and 401(k) Plan matches of $9,871, $6,262, and $5,187 for Messrs.
Cole, Bangert, and Wilson, respectively.
BACKGROUNDS OF OUR EXECUTIVE OFFICERS
In addition to the information about our President and Chief Executive
Officer, Robert L. Cole, which is set forth on page 8, the following is
information about the Company's other executive officers.
Theodore G. Bangert, Age 52, has been involved in banking for 32 years, starting
as a teller and moving up through the lending area. Mr. Bangert has been the
Senior Lender at Peoples State Bank for 5 years.
12
David A. Wilson, Age 45, has been in banking for 23 years, 15 at Peoples State
Bank. Mr. Wilson has held a number of positions at the bank and became Chief
Financial Officer December, 1998.
Tami Janowicz, Age 48, has been with the Bank for 22 years. Has held positions
in retail, compliance, and human resources. Ms. Janowicz was promoted to Senior
Retail and Compliance Officer in 2005.
OPTION GRANTS IN 2005
The following table sets forth certain information concerning the number
and value of stock options granted in the last fiscal year to the individuals
named above in the summary compensation table:
(C)
(B) % OF TOTAL OPTIONS
OPTIONS GRANTED TO (D) (E)
(A) GRANTED EMPLOYEES IN EXERCISE PRICE EXPIRATION
NAME (#) FISCAL YEAR ($/SH) DATE
---- ------- ------------------ -------------- -------------
Robert L. Cole 5,000 26% 24.42 July 28, 2015
Theodore G. Bangert 2,000 10% 24.42 July 28, 2015
David A. Wilson 2,000 10% 24.42 July 28, 2015
POTENTIAL REALIZABLE VALUE AT ASSUMED
ANNUAL RATES OF STOCK PRICE APPRECIATION
FOR OPTION TERM (10 YEARS) (2)
---------------------------------------------------------------------
5% 10%
---------------------------- --------------------------------------
AGGREGATE
POTENTIAL PRICE POTENTIAL POTENTIAL PRICE AGGREGATE
PER SHARE AT REALIZABLE PER SHARE AT POTENTIAL REALIZABLE
NAME EXPIRATION VALUE EXPIRATION VALUE
---- --------------- ---------- --------------- --------------------
Robert L. Cole $31.76 $36,717 $50.58 $130,790
Theodore G. Bangert $31.76 $14,687 $50.58 $ 52,316
David A. Wilson $31.76 $14,687 $50.58 $ 52,316
(1) None of the options in this table are currently exercisable. The options
vest at a rate of 1/3rd per year over a three-year period beginning on the
one-year anniversary of the grant date (July 28, 2005), subject to
acceleration in the event of a change in control of the Company. The
options expire ten years from the grant date.
(2) Potential realizable value is presented net of the option exercise price,
but before any federal or state income taxes associated with exercise.
These amounts reflect certain assumed rates of appreciation set forth in
the Securities and Exchange Commission's executive compensation disclosure
rules from the market price on the grant date of $19.50 per share. Actual
gains, if any, on stock option exercises depend on future performance of
the common stock and overall market conditions.
13
TOTAL OPTIONS EXERCISED IN 2005 AND YEAR END VALUES
This table gives information for options exercised by each of the named
executive officers in 2005 and the value (stock price less exercise price) of
the remaining options held by those officers at year-end price of the Common
Stock.
FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FISCAL OPTIONS/SARS AT
SHARES YEAR-END FISCAL YEAR END
ACQUIRED VALUE (#) ($)(1)
NAME ON EXERCISE REALIZED $ EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ---------- ------------------------- -------------------------
Robert L. Cole 0 0 0/5,000 $0/0
Theodore G. Bangert 0 0 0/2,000 $0/0
David A. Wilson 0 0 0/2,000 $0/0
- ----------
(1) Based on market value of the underlying stock at the fiscal year end of
$17.50 minus the exercise price. The market price on March 1, 2006 was
$17.25 per share.
OTHER COMPENSATION ARRANGEMENTS
EMPLOYMENT AGREEMENTS
The Company has entered into management continuity agreements with Messrs.
Cole, Bangert, and Wilson. The agreements generally provide for certain
compensation to be paid to Messrs. Cole, Bangert, and Wilson following a "change
of control" of the Company and the occurrence within the term of the management
continuity agreement of either (1) the termination of the executive's employment
by the Company for reasons other than cause; or (2) the constructive discharge
of the executive. If such event occurs within the term of the agreements, then
the executive is entitled to severance benefits as described below. In the event
of the occurrence of either of these two events severance benefits become
payable to the executive.
In the case of Mr. Cole, the term of his agreement is one year from its
effective date, May 16, 2003. The agreements automatically renew for an
additional one year period on each anniversary of the effective dates unless
terminated for one of the reasons enumerated in the agreements. Upon a change of
control of the Company, the term of the agreements become a fixed term that
expires on the later of the fourth anniversary of the effective date of the
agreements or the end of the one year period following the date of the change of
control.
The severance benefit payable to Mr. Cole is a multiple of the sum of his
average cash compensation plus the annual contribution that the Company would
have made on his behalf to the Company's qualified retirement plans. The
multiple shall be equal to the number of years, rounded to the nearest twelfth,
remaining in the term of the agreement except that the multiple shall not exceed
three nor be less than one. For purposes of the agreement, "average cash
compensation" shall be the average base salary and bonus paid for the most
recent five calendar years ending prior to the effective date of the change of
control.
In the case of Messrs. Bangert and Wilson, the term of their agreements are
one year from their effective dates, May 16, 2003. The agreements automatically
renew for an additional one year period on each anniversary of the effective
dates unless terminated for one of the reasons enumerated in the agreements.
Upon a change of control
14
of the Company, the term of the agreements become a fixed term that expires on
the third anniversary of the date of the change of control.
The severance benefit payable to Messrs. Bangert and Wilson is a multiple
of the sum of their average cash compensation plus the annual contribution that
the Company would have made on their behalf to the Company's qualified
retirement plans. The multiple shall be equal to the number of years, rounded to
the nearest twelfth, remaining in the term of the agreement except that the
multiple shall not exceed two nor be less than one. For purposes of the
agreement, "average cash compensation" shall be the average base salary and
bonus paid for the most recent five calendar years ending prior to the effective
date of the change of control.
Severance benefits payable to any executive under the management continuity
agreements shall be reduced to the extent necessary to prevent such benefits
from constituting an "excess parachute payment" under Section 280G of the
Internal Revenue Code (the "Code"). Such reduction is intended to assure that
such benefits shall not be characterized as not deductible by the Company for
federal income tax purposes due to the provisions of Section 280G of the Code.
For purposes of the management continuity agreements, "constructive
discharge" is defined as the occurrence of one or more of the following without
the executive's consent: (i) the executive is not reelected to the office he
currently holds with the Company; (ii) the removal of or failure to vest in the
executive the duties and responsibilities he reasonably needs to serve in the
office he currently holds with the Company; (iii) the Company notifies the
executive that it is terminating the executive's employment without cause; (iv)
the relocation of the executive's office to a place more than 50 miles from
Madison Heights, Michigan; or (v) the Company otherwise commits a material
breach of its obligations under the management continuity agreement.
For purposes of the management continuity agreements, a "change of control"
will be deemed to have occurred if: (A) any person acquires beneficial ownership
of more than 50% of the combined voting power of the then outstanding voting
securities of the Company; or (B) the individuals who were members of the Board
of Directors of the Company on the Effective Date (the "Current Board Members")
cease to constitute a majority of the Board of the Company or its successor;
however, if the election or the nomination for election of any new director of
the Company or its successor is approved by a vote of a majority of the
individuals who are Current Board Members, such new director shall be considered
a Current Board Member; or (C) the Company's shareholders approve (1) a merger
or consolidation of the Company and the shareholders of the Company immediately
before such merger or consolidation do not, as a result of such merger or
consolidation, own, directly or indirectly, more than 50% of the combined voting
power of the then outstanding voting securities of the entity resulting from
such merger or consolidation in substantially the same proportion as their
ownership of the combined voting power of the outstanding securities of the
Company immediately before such merger or consolidation; or (2) a complete
liquidation or dissolution or an agreement for the sale or other disposition of
all or substantially all of the assets of the Company. A change of control will
not be deemed to have occurred: (A) solely because more than 50% of the combined
voting power of the then outstanding voting securities of the Company are
acquired by (1) a trustee or other fiduciary holding securities under one or
more employee benefit plans maintained for employees of the Company, or (2) any
person pursuant to the will or trust of any existing shareholder of the Company,
or who is a member of the immediate family of such shareholder, or (3) any
corporation which, immediately prior to or following such acquisition, is owned
directly or indirectly by persons who were shareholders of the Company
immediately prior to the acquisition in the same proportion as their ownership
of stock in the Company immediately prior to such acquisition; or (B) if
executive agrees in writing that the transaction or event in question does not
constitute a change of control for the purposes of the management continuity
agreements.
15
DIRECTOR COMPENSATION
Directors of the Company receive an annual retainer of $10,500. The
Chairman and the Vice Chairman of the Board of Directors receive additional
annual retainers of $16,800 and $10,500, respectively. Members of the Directors
Loan Committee receive $350 per meeting attended. Members of the Board of
Directors receive $800 for each special board meeting attended. Members of all
other committees receive $350 per meeting attended.
Directors and executive officers of the Company are also eligible to
participate in the Company's Deferred Compensation Plan. The plan provides a
means by which directors may defer the receipt of director fees to a later date,
when presumably their income will be taxed at a lower tax rate. Similarly,
executive officers may defer all or any portion of bonuses which they are
awarded. Interest is credited to the deferred benefit accounts of the
participants based on the average rate received for the prior month on the
Bank's investment securities. As a result of an amendment to the plan in 2005,
participants were permitted to have the investment performance of their deferred
benefit account be measured as if it were invested in shares of the Company's
common stock. Payment for these participants when they become eligible under the
plan is to be in the form of Company common stock rather than cash.
401(K) PLAN AND ESOP
The Bank maintains the 401(k) Plan, which is a tax-qualified profit
sharing, 401(k) savings and employee stock ownership plan under Sections 401(a),
401(k) and 409 of the Internal Revenue Code. The 401(k) Plan provides
participants with retirement benefits and may also provide benefits upon death,
disability or termination of employment with the Bank. An employee is eligible
to make salary reduction contributions in the 401(k) portion of the 401(k) Plan
as of the first day of the month following the completion of one-quarter year of
service in which the employee works 250 or more hours or, if later, the first
day of the month following the employee's attainment of age 21. A participant is
always 100% vested in his or her salary reduction contributions. An employee is
eligible for Bank contributions in the matching and ESOP portions of the 401(k)
Plan as of the first January 1 or July 1 following the completion of one-half
year of service in which the employee works 500 or more hours or, if later, the
first day of the month following the employee's attainment of age 21. The
employee is immediately vested in any Bank matching contributions. The employee
vests in discretionary Bank contributions to the ESOP after completing 5 years
of service and is not vested in any portion of ESOP contributions until that
time.
Participants may make salary reduction contributions to the 401(k) Plan of
up to 25% of their compensation or the legally permissible dollar limit, if
less. The 401(k) Plan provides that, with respect to the first 3% of
compensation contributed by the employee, the Bank will match 100% of such
contribution. In addition, the Bank will match an additional 50% for any amount
contributed by the employee in excess of 3% of compensation but not in excess of
6% of compensation.
The Bank makes contributions at the discretion of the board to the ESOP
portion of the 401(k) Plan. These contributions are allocated to employees'
accounts in proportion to the percentage that each employee's compensation bears
to the compensation of all eligible employees. In 2005, the ESOP financed the
purchase of 38,501 shares of Company common stock for $770,020 by borrowing that
amount from LaSalle Bank National Association. The ESOP will repay the loan with
contributions by the Bank to the ESOP portion of the 401(k) Plan over a 6 year
period. As the loan is repaid, the 38,501 shares of Company common stock will be
allocated to employees' ESOP accounts in the 401(k) Plan in accordance with the
plan and applicable federal law.
All participants receive a quarterly detailed statement including
information regarding market value of the participant's investment and all
contributions made on his or her behalf. Any withdrawals prior to age 59 are
subject to a 10% tax penalty. Participants may borrow against the vested portion
of their accounts.
16
2004 STOCK COMPENSATION PLAN
The 2004 Stock Compensation Plan was adopted by the board of directors on
February 26, 2004, and approved by the shareholders at the 2004 annual meeting
of shareholders held on April 27, 2004. An aggregate of 450,000 shares of common
stock have been reserved under the 2004 Stock Compensation Plan. At December 31,
2005, 31,100 options to acquire shares of common stock had been granted, all of
which are currently outstanding. None of the outstanding options are currently
exercisable.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the members of the Compensation and Benefits Committee are
Mr. Michael Kowalski, Mr. Sydney Ross, Mr. Longine Morawski, Ms. Catherine
Revord (nonvoting) and Mr. Robert Cole (nonvoting). Mr. Cole is the current
President and Chief Executive Officer of the Company, and Ms. Revord is the
current Benefits Manager of the Company. While Mr. Cole and Ms. Revord were
specifically excluded from any Committee discussion concerning their own
compensation, they did participate in the Committee's discussion concerning
other key executives' compensation. Neither Mr. Kowalski, Mr. Ross, nor Mr.
Morawski is or ever was, an officer of the Company. No executive officer of the
Company served as a director or on the compensation committee of any other
entity in 2005. None of Mr. Kowalski, Mr. Ross or Mr. Morawski had any
relationship with the Company which would have required disclosure under the
caption "Transactions with Certain Related Persons" immediately below.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
The Company has had, and expects to have in the future, loan and other
banking transactions in the ordinary course of business with many of its
directors, officers and associates. All extensions of credit to such persons
have been made in the ordinary course of business on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons, and in the opinion of the
management of the Company, do not involve more than a normal risk of
collectability or present other unfavorable features. All loans to directors or
executive officers of the Company require the approval of the Board of
Directors, except that members requesting such loans are prohibited from
attending the discussion or participating in the vote on such loan. During 2005,
new loans totaling $0 were made to such persons and repayments totaled $178,786.
As of December 31, 2005, directors and officers were indebted to the Company for
loans totaling $1,261,658.
Turner and Associates Consultants, for which a director, Edward H. Turner,
serves as President, was engaged by the Company in 2005 for services in
connection with loan review, credit, collections, litigation and administration.
Turner and Associates Consultants received approximately $204,640 in 2005 for
services rendered to the Company.
17
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Company's common stock ("PSBG"), with the cumulative return for the NASDAQ
Index, the $100 - $500 OTC-BB and Pink Banks and the Midwest Quadrant OTC-BB and
Pink Banks Index over the same period, assuming the investment of $100 on
December 31, 2000, and reinvestment of all dividends.
PSB GROUP, INC.
[PERFORMANCE GRAPH]
PERIOD ENDING
---------------------------------------------------------------
INDEX 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05
- ----- -------- -------- -------- -------- -------- --------
PSB Group, Inc. 100.00 155.01 209.02 302.81 289.64 256.59
NASDAQ Composite 100.00 79.18 54.44 82.09 89.59 91.54
SNL $100M-$500M OTC-BB & Pink Banks 100.00 115.19 138.18 187.69 226.86 251.93
SNL Midwest OTC-BB & Pink Banks 100.00 92.23 118.29 149.33 177.92 185.23
SOURCE: SNL FINANCIAL LC, CHARLOTTESVILLE, VA (434) 977-1600
(C) 2006 www.snl.com
18
EXECUTIVE COMPENSATION COMMITTEE REPORT
COMPENSATION PHILOSOPHY
The Compensation and Benefits Committee of the Board of Directors has
adopted a compensation program based on the following compensation principles:
- - The Company provides the level of total compensation necessary to attract
and retain quality employees at all levels of the organization.
- - Compensation is linked to performance and to the interests of the
shareholders.
- - Incentive programs recognize both individual and corporate performance.
- - Compensation balances rewards for short-term and long-term results.
COMPENSATION METHODOLOGY
The Company strives to provide a comprehensive compensation program that is
competitive, in order to attract and retain qualified talent.
Each year the Compensation and Benefits Committee reviews market data in
order to assess the Company's competitive position in each component of
compensation, including base salary, annual incentive and long-term incentive
compensation.
The primary market comparison for cash compensation is provided to the
Company by an accounting firm. The comparison is a mix of institutions of the
same size and operating within the same general market to recruit personnel.
The descriptions that follow of the components of compensation contain
additional detail regarding compensation methodology. Compensation decisions
regarding individuals may also be based on factors such as individual
performance and level of responsibility.
The Committee has established a Salary Administration Plan, which provides
for annual cash compensation consisting of base salary, commissions, and annual
incentive. The relationship between base salary and annual incentive is based on
salary grade. Personnel at higher-grade levels have a larger percentage of their
total cash compensation contingent on the accomplishment of corporate
objectives.
COMPONENTS OF COMPENSATION
BASE SALARY
Annual base salary is designed to compensate personnel for their sustained
performance. Salary is based on: (1) grade level; (2) individual performance;
and (3) comparative survey data. The Committee approves in advance all salary
increases for senior officers.
ANNUAL INCENTIVE
The Salary Administration Plan establishes a fixed percentage of annual
salary as an executive's target annual incentive opportunity. The Committee
establishes the percentage based on comparative survey data on annual incentive
opportunity in the compensation peer group. For executive officers, the maximum
percentage is fifty percent of salary.
The year 2005 annual incentive payment was based on objectives for net
income and asset growth as well as a discretionary percentage.
19
The following is the formula used to determine annual incentive payments
for 2005:
- 25% of the plan incentive is discretionary.
- 50% on return on average equity.
- 25% on asset growth.
Participants receive no payment for an objective unless a minimum threshold
is achieved. Payments may range from zero to one hundred percent of the target
incentive.
The Company achieved 60% of the corporate objectives for 2005.
CHIEF EXECUTIVE OFFICER
Robert L. Cole became President and Chief Executive Officer in August of
1996 and is evaluated annually as to his personal performance and regarding his
role in directing Company performance. The Compensation and Benefits Committee
meets annually, in private, to review Mr. Cole's performance. The Committee
considers bank performance, community involvement and Director/Chairman
communication in considering Mr. Cole's compensation. The Human Resources
department provides industry salary surveys to the Committee.
Salary and Annual Incentive
- At the close of 2004, the Committee decided that Mr. Cole achieved a
high level of his personal objectives. Therefore, Mr. Cole received a
3.6% percent salary increase for 2005.
- The committee developed an executive bonus program based on
achievement of specific bank performance objectives. Based on the Bank
achieving varying levels of success of those objectives in 2005, and
the evaluation of Mr. Cole's personal performance, an annual incentive
of $37,120 was approved.
- Mr. Cole's total annual compensation for 2005, including salary and
annual incentive, were at the median for his position based on a
survey of 118 Michigan community and commercial banks.
THE COMPENSATION AND BENEFITS COMMITTEE
Michael J. Kowalski Catherine M. Revord (Nonvoting)
Longine V. Morawski Sydney L. Ross
Robert L. Cole (Nonvoting) David L. Wood
AUDIT COMMITTEE REPORT
The Company's Audit Committee is comprised of four directors (Messrs.
Jacobs, Morawski, Ross, and Wood). Mr. Jacobs, Mr. Morawski, Mr. Ross and Mr.
Wood are independent, under the definition contained in Rule 4200(a)(15) of the
NASD's listing standards. The Board of Directors has adopted a written charter
for the Audit Committee, which was included as an appendix to the Proxy
Statement in connection with the Company's 2004 annual meeting.
In connection with the audited financial statements contained in the
Company's 2005 Annual Report on Form 10-K for the fiscal year ended December 31,
2005, the Audit Committee reviewed and discussed the audited financial
statements with management and Plante & Moran, PLLC. The Audit Committee
discussed with Plante & Moran the matters required to be discussed by SAS 61
(Codification of Statements on Auditing Standards, AU Section 380). The Audit
Committee has also received the written disclosures and the letter from Plante &
Moran required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and has discussed with them their
independence.
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Based on the review and discussions, the Audit Committee recommended to the
Board of Directors that the audited financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2005.
THE AUDIT COMMITTEE
Longine V. Morawski James B. Jacobs
Sydney L. Ross David L. Wood
COMPLIANCE WITH SECTION 16
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than 10% of any
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the SEC. Executive officers, directors
and greater than 10% shareholders are required by regulation to furnish the
Company with copies of all Section 16(a) reports they file.
Based on its review of the copies of the reports it has received and
written representations provided to the Company from the individuals required to
file the reports, the Company believes that all directors and executives of the
Company filed all reports required on a timely basis pursuant to Section 16 of
the Securities Exchange Act of 1934.
REQUIREMENTS, INCLUDING DEADLINES,
FOR SUBMISSION OF PROXY PROPOSALS, NOMINATION OF DIRECTORS
AND OTHER BUSINESS OF SHAREHOLDERS
Under our Bylaws, certain procedures are provided which a shareholder must
follow to nominate persons for director or to introduce an item of business at
an Annual Meeting of Shareholders. Nominations for directors or introduction of
an item of business should be submitted in writing to the Company's president at
1800 East 12 Mile Road, Madison Heights, Michigan 48071-2600. The nomination or
proposed item must be received:
- no later than 90 days before the first anniversary of the
preceding year's annual meeting of shareholders; and
- no earlier than the close of business on the 120th day before the
first anniversary of the preceding year's annual meeting of
shareholders.
The nomination must contain the following information about the nominee:
- name and address;
- a description of all arrangements or understandings between the
shareholder and the nominee;
- the number and kinds of securities of the Company held by the
nominee;
- such other information regarding the proposed nominee as may be
requested by the board of directors; and
- a signed consent of the nominee to serve as a director of the
Company, if elected.
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Notice of a proposed item of business must include:
- a brief description of the matter and the reasons for introducing
such matter at the Annual Meeting;
- the shareholder's name and address;
- the class and number of shares of the Company's capital stock
held by the shareholder; and
- any material interest of the shareholder in such business.
The chairman of the meeting may refuse to allow the transaction of any
business not presented beforehand, or to acknowledge the nomination of any
person not made in compliance with the foregoing procedures.
A shareholder complying with the above procedures may still not be entitled
to have its proposals included in next year's proxy statement. Under the rules
of the SEC, shareholder proposals must be received by us in writing addressed
to: David A. Wilson, Secretary at the office address set forth above no later
than November 23, 2006 for inclusion in the proxy statement and form of proxy
relating to that meeting.
The discussion above is intended merely as a summary. Persons wishing to
submit a proposal or a nominee for director should consult the Company's bylaws,
a copy of which can be obtained free of charge by writing to David A. Wilson,
Secretary at the office address set forth above.
Whether or not you plan to attend the Meeting, please vote by marking,
signing, dating and promptly returning the enclosed proxy in the enclosed
envelope.
A COPY OF PSB GROUP, INC.'S 2005 ANNUAL REPORT ON FORM 10-K AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION MAY BE OBTAINED BY SHAREHOLDERS, WITHOUT
CHARGE, UPON WRITTEN REQUEST TO DAVID A. WILSON, SECRETARY, 1800 EAST 12 MILE
ROAD, MADISON HEIGHTS, MICHIGAN 48071-2600.
By Order of the Board of Directors,
----------------------------------------
David A. Wilson
Secretary
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PSB GROUP, INC.
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
ANNUAL MEETING OF SHAREHOLDERS
APRIL 25, 2006
2:00 P.M., EASTERN TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints the official Proxy Committee of PSB Group,
Inc. (the "Company"), with full power of substitution, to act as proxy for the
undersigned, and to vote all shares of Common Stock of the Company that the
undersigned is entitled to vote at the Annual Meeting of Shareholders, to be
held on Tuesday, April 25, 2006, at 2:00 p.m., at the Ukranian Cultural Center,
26601 Ryan Road, Warren, Michigan, and at any and all adjournments thereof, as
indicated on this proxy.
Please be sure to sign and date this Proxy in the box below. Date
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Shareholder sign above
WITH
FOR HOLD
1. To elect three members of the Board of Directors for [ ] [ ]
three-year terms.
Class II - Term Expiring in 2009 James B. Jacobs Longine V.
Morawski Edward H. Turner
FOR AGAINST ABSTAIN
2. To ratify the selection of Plante & Moran, PLLC [ ] [ ] [ ]
as independent auditors of the Company for the
2006 fiscal year.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" EACH OF THE LISTED PROPOSALS.
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS
ARE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" EACH OF THE PROPOSALS LISTED. IF
ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS PROXY WILL BE VOTED
BY THE PROXIES IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF
DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING. THIS
PROXY ALSO CONFERS DISCRETIONARY AUTHORITY ON THE BOARD OF DIRECTORS TO VOTE
WITH RESPECT TO THE ELECTION OF ANY PERSON AS DIRECTOR WHERE THE NOMINEES ARE
UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE AND MATTERS INCIDENT TO THE
CONDUCT OF THE MEETING.
Our 2005 Annual Report, which is not a part of the proxy soliciting material, is
enclosed.
You can vote if you are a shareholder of record on March 1, 2006.
A majority of shares of common stock must be represented at the meeting. If
there are insufficient shares, the meeting may be adjourned.
DETACH ABOVE CARD, DATE, SIGN AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED.
PSB GROUP,INC.
THE ABOVE-SIGNED ACKNOWLEDGES RECEIPT FROM THE COMPANY PRIOR TO THE
EXECUTION OF THIS PROXY, OF A NOTICE OF ANNUAL MEETING OF SHAREHOLDERS, A PROXY
STATEMENT DATED MARCH 23, 2006, AND THE ANNUAL REPORT TO SHAREHOLDERS.
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
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