UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement.
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS 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
Alpena Bancshares, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED IN THIS
FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY VALID OMB
CONTROL NUMBER.
SEC 1913 (11-01)
(ALPENA BANCSHARES INC. LOGO)
March 15, 2004
Dear Stockholder:
We cordially invite you to attend the 2004 Annual Meeting of Stockholders of
Alpena Bancshares, Inc. (the "Company"). The Annual Meeting will be held at the
Thunder Bay Recreational Center, 701 Woodward Avenue, Alpena, Michigan, at 1:00
p.m., Michigan time, on April 21, 2004.
The enclosed Notice of Annual Meeting and Proxy Statement describe the formal
business to be transacted. During the Annual Meeting we will also report on the
operations of the Company. Directors and officers of the Company will be present
to respond to any stockholders' questions. Also enclosed for your review is our
Annual Report to Stockholders, which contains detailed information concerning
the activities and operating performance of the Company.
The business to be conducted at the Annual Meeting consists of the election of
one director to the Board of Directors of the Company and the ratification of
the appointment of Plante & Moran, PLLC as auditors for the year ending December
31, 2004. For the reasons set forth in the Proxy Statement, the Board of
Directors unanimously recommends a vote "FOR" the election of the director and
"FOR" the ratification of the appointment of the Company's auditors.
The Board of Directors of the Company has determined that the matters to be
considered at the Annual Meeting are in the best interest of the Company and its
stockholders.
On behalf of the Board of Directors, we urge you to sign, date and return the
enclosed proxy card as soon as possible, even if you currently plan to attend
the Annual Meeting. This will not prevent you from voting in person, but will
assure that your vote is counted if you are unable to attend the Annual Meeting.
Your vote is important, regardless of the number of shares that you own.
Sincerely,
/s/ Martin A. Thomson
Martin A. Thomson
President and Chief Executive Officer
ALPENA BANCSHARES, INC.
100 South Second Avenue
Alpena, Michigan 49707
(989) 356-9041
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
To Be Held On April 21, 2004
Notice is hereby given that the Annual Meeting of Alpena Bancshares,
Inc. (the "Company") will be held at the Thunder Bay Recreational Center, 701
Woodward Avenue, Alpena, Michigan, on April 21, 2004, at 1:00 p.m., Michigan
time.
A Proxy Card and a Proxy Statement for the Annual Meeting are enclosed.
The Annual Meeting is for the purpose of considering and acting upon:
1. The election of one director of the Company;
2. The ratification of the appointment of Plante & Moran, PLLC as
auditors for the Company for the year ending December 31,
2004; and
such other matters as may properly come before the Annual Meeting, or any
adjournments thereof. The Board of Directors is not aware of any other business
to come before the Annual Meeting.
Any action may be taken on the foregoing proposals at the Annual
Meeting on the date specified above, or on any date or dates to which the Annual
Meeting may be adjourned. Stockholders of record at the close of business on
March 8, 2004, are the stockholders entitled to vote at the Annual Meeting, and
any adjournments thereof.
A list of stockholders entitled to vote at the Annual Meeting will be
available for inspection at the Company's main office, 100 South Second Avenue,
Alpena, Michigan, for the twenty (20) days immediately prior to the Annual
Meeting. It also will be available for inspection at the Annual Meeting
EACH STOCKHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE MEETING, IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WITHOUT DELAY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE STOCKHOLDER MAY BE
REVOKED AT ANY TIME BEFORE IT IS EXERCISED. A PROXY MAY BE REVOKED BY FILING
WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A DULY EXECUTED PROXY
BEARING A LATER DATE. ANY STOCKHOLDER PRESENT AT THE MEETING MAY REVOKE HIS OR
HER PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE ANNUAL MEETING.
HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN
NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER TO VOTE
PERSONALLY AT THE ANNUAL MEETING.
By Order of the Board of Directors
/s/ Michael W. Mahler
Michael W. Mahler
Acting Secretary
Alpena, Michigan
March 15, 2004
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
PROXY STATEMENT
ALPENA BANCSHARES, INC.
100 S. Second Avenue
Alpena, Michigan 49707
(989) 356-9041
ANNUAL MEETING OF STOCKHOLDERS
April 21, 2004
This proxy statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of Alpena Bancshares, Inc. (the
"Company") to be used at the Annual Meeting of Stockholders of the Company (the
"Annual Meeting"), which will be held at the Thunder Bay Recreational Center,
701 Woodward Avenue, Alpena, Michigan, on April 21, 2004, at 1:00 p.m., Michigan
time, and all adjournments of the Annual Meeting. The accompanying Notice of
Annual Meeting of Stockholders and this proxy statement are first being mailed
to stockholders on or about March 15, 2004.
At the Annual Meeting, stockholders will vote on the election of one
director of the Company and on the ratification of the appointment of the
Company's auditors for the fiscal year ending December 31, 2004.
REVOCATION OF PROXIES
Stockholders who execute proxies in the form solicited hereby retain
the right to revoke them in the manner described below. Unless so revoked, the
shares represented by such proxies will be voted at the Annual Meeting and all
adjournments thereof. Proxies solicited on behalf of the Board of Directors of
the Company will be voted in accordance with the directions given therein. WHERE
NO INSTRUCTIONS ARE INDICATED, PROXIES WILL BE VOTED "FOR" THE PROPOSALS SET
FORTH IN THIS PROXY STATEMENT FOR CONSIDERATION AT THE ANNUAL MEETING.
The Board of Directors knows of no additional matters that will be
presented for consideration at the Annual Meeting. Execution of a proxy,
however, confers on the designated proxy holders discretionary authority to vote
the shares in accordance with their best judgment on such other business, if
any, that may properly come before the Annual Meeting or any adjournments
thereof.
Proxies may be revoked at any time prior to their exercise by sending
written notice of revocation to the Secretary of the Company, at the address of
the Company shown above, by delivering to the Company a duly executed proxy
bearing a later date, or by attending the Annual Meeting and voting in person.
The presence at the Annual Meeting of any stockholder who had given a proxy
shall not revoke such proxy unless the stockholder delivers his or her ballot in
person at the Annual Meeting or delivers a written revocation to the Secretary
of the Company prior to the voting of such proxy. If you are a stockholder whose
shares are not registered in your own name, you will need appropriate
documentation from your record holder to vote personally at the Annual Meeting.
VOTING SECURITIES, PRINCIPAL HOLDERS THEREOF AND METHODS OF COUNTING VOTES
Holders of record of the Company's common stock, par value $1.00 per
share (the "Common Stock") as of the close of business on March 8, 2004 (the
"Record Date") are entitled to one vote for each share then held. As of the
Record Date, the Company had 1,658,780 shares of Common Stock issued and
outstanding, 920,000 of which were held by Alpena Bancshares, M.H.C. (the
"Mutual Holding Company"), and 738,780 of which were held by stockholders other
than the Mutual Holding Company. The presence in person or by proxy of a
majority of the outstanding shares of Common Stock entitled to vote is necessary
to constitute a quorum at the Annual Meeting. Broker non-votes and abstentions
will be counted as shares present and entitled to vote for the purposes of
establishing a quorum. In the event there are not sufficient votes for a quorum,
or to approve or ratify any matter presented at the time of the Annual Meeting,
the Annual Meeting may be adjourned in order to permit the further solicitations
of proxies.
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As to the election the director, the proxy card provided by the Board
of Directors enables the stockholder to vote "FOR" the election of the nominee
proposed by the Board, or to "WITHHOLD AUTHORITY" to vote for the nominee
proposed. Directors are elected by a plurality of votes cast, without regard to
either broker non-votes or proxies as to which authority to vote for the nominee
being proposed is withheld.
As to the ratification of Plante & Moran, PLLC as independent auditors
of the Company, by checking the appropriate box, a stockholder may: (i) vote
"FOR" the item; (ii) vote "AGAINST" the item; or (iii) "ABSTAIN" from voting on
such item. The affirmative vote of holders of a majority of the total votes
present at the Annual Meeting in person or by proxy is required for approval of
the ratification of Plante & Moran, PLLC as the Company's independent auditors.
Shares as to which the "ABSTAIN" box has been selected on the proxy card will
count as shares present and entitled to vote and will be treated as votes
"AGAINST" the proposal.
Proxies solicited hereby will be returned to the Company and will be
tabulated by an Inspector of Election designated by the Company's Board of
Directors.
Management of the Company anticipates that shares of Common Stock owned
by the Mutual Holding Company will be voted in favor of the nominee for director
and in favor of the ratification of the Company's auditors for the fiscal year
ending December 31, 2004. The affirmative vote of such shares would ensure the
election of such nominee and the ratification of such auditors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Persons and groups who beneficially own in excess of five percent of
the Common Stock are required to file certain reports with the Securities and
Exchange Commission ("SEC") regarding such ownership pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The following table sets
forth, as of the Record Date, the shares of Common Stock beneficially owned by
directors individually, by executive officers individually, by executive
officers and directors as a group and by each person who was the beneficial
owner of more than five percent of the Company's outstanding shares of Common
Stock.
Amount of Shares
Owned and Nature Percent of Shares
Name and Address of of Beneficial of Common Stock
Beneficial Owners Ownership (1) (4) Outstanding
----------------- ----------------- -----------
Directors and Executive Officers (2)
James C. Rapin 14,401 0.87
Martin A. Thomson 19,058 1.14
Keith D. Wallace 13,752 0.83
Gary C. VanMassenhove 1,000 0.06
Thomas R. Townsend 3,037 0.18
Jerome W. Tracey 897 0.05
Debra S. Weiss 582 0.04
Joseph W. Gentry II 640 0.04
All Directors and Executive Officers 53,367 3.18
As a Group (8 persons) (3)
(Footnotes on next page)
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PRINCIPAL STOCKHOLDERS:
Alpena Bancshares, M.H.C. 920,000 55.46
100 S. Second Avenue
Alpena, Michigan 49707
Financial & Investment Management Group, Ltd. 120,364 7.26
417 Saint Joseph Street
Suttons Bay, Michigan 49682 (5)
Jeffrey L. Gendell, Individually, and as 128,930 7.77
managing member of
Tontine Management, L.L.C., and
general partner of
Tontine Financial Partners, L.P.
237 Park Avenue, 9(th) Floor
New York, New York 10017 (6)
Jeffrey S. Halis, as the general 93,708 5.65
partner of each of
Tyndall Partners, L.P.,
Tyndall Institutional Partners, L.P., and
Madison Avenue Partners, L.P.,
153 East 53rd Street, 55(th) Floor
New York, New York 10022 (7)
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(1) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed
to be the beneficial owner for purposes of this table, of any shares of
Common Stock if he has shared voting or investment power with respect to
such security, or has a right to acquire beneficial ownership at any time
within 60 days from the Record Date. As used herein, "voting power" is the
power to vote or direct the voting of shares and "investment power" is the
power to dispose or direct the disposition of shares. Includes all shares
held directly as well as by spouses and minor children, in trust and other
indirect ownership, over which shares the named individuals effectively
exercise sole or shared voting and investment power.
(2) The mailing address for each person listed is 100 S. Second Avenue,
Alpena, Michigan 49707.
(3) The Company's executive officers and directors are also executive officers
and directors of Alpena Bancshares, M.H.C.
(4) Includes shares of Common Stock allocated to the accounts of employees
pursuant to the Company's Employee Stock Ownership Plan ("ESOP"). Under
the terms of the ESOP, shares of Common Stock so allocated are voted in
accordance with the instructions of the respective employees. All shares
have been so allocated.
(5) Based exclusively on a Schedule 13G filed with the SEC on February 15,
2002.
(6) Based exclusively on a Schedule 13D filed with the SEC on January 18,
2002.
(7) Based exclusively on a Schedule 13D filed with the SEC on January 29,
2002.
PROPOSAL I - ELECTION OF DIRECTORS
The Company's Board of Directors is currently composed of five members with
two vacancies. The Company's bylaws provide that approximately one-third of the
directors are to be elected annually. Directors of the Company are generally
elected to serve for a three-year period or until their respective successors
shall have been elected and shall qualify. The Board of Directors has nominated
to serve as director, Keith D. Wallace who is currently a member of the Board of
Directors. Mr. Wallace would be elected to serve for a three-year period, and
until his successor shall have been elected and shall qualify. At the Annual
Meeting, proxies cannot be voted for a greater number of persons than the one
nominee in this proxy statement.
The table below sets forth certain information regarding the composition of
the Company's Board of Directors, including the terms of office of Board
members. It is intended that the proxies solicited on behalf of the Board of
Directors (other than proxies in which the vote is withheld as to one or more
nominees) will be voted at the Annual Meeting for the election of the nominee
identified below. If a nominee is unable to serve, the shares represented by all
such proxies will be voted for the election of such substitute as the Board of
Directors may recommend. At this time, the Board of Directors knows of no reason
why the nominee might be unable to serve, if elected. There are no
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arrangements or understandings between any nominee and any other person pursuant
to which such nominee was selected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEE LISTED IN THIS
PROXY STATEMENT.
Shares of
Common Stock
Positions Beneficially
Held in the Director Current Term Owned on Percent
Name (1) Age Company Since to Expire Record Date (2) of Class
-------- --- ------- ----- --------- --------------- --------
NOMINEE
Keith D. Wallace 62 Director 1988 2004 13,752 *
DIRECTORS CONTINUING IN OFFICE
James C. Rapin 63 Chairman 1986 2005 14,401 *
Gary C. VanMassenhove 57 Director 2001 2006 1,000 *
Thomas R. Townsend 52 Director 2002 2006 3,037 *
Martin A. Thomson 55 President, CEO 1986 2005 19,058 1.14%
and Director
----------------------------
* Less than 1%.
(1) The mailing address for each person listed is 100 S. Second Avenue,
Alpena, Michigan 49707. Each of the persons listed is also a director of
First Federal of Northern Michigan, the Company's savings bank subsidiary
(the "Bank"), as well as Alpena Bancshares, M.H.C., which owns the
majority of the Company's issued and outstanding shares of Common Stock.
(2) See definition of "beneficial ownership" in the table under the heading
"Security Ownership of Certain Beneficial Owners."
The principal occupation during the past five years of each director and
executive officer of the Company and the Bank is set forth below. References to
the Company include, where applicable, the Bank, which reorganized to form the
Company as its holding company in November 2000. All directors and executive
officers have held their present positions for five years unless otherwise
stated.
DIRECTORS -
James C. Rapin was elected as the Chairman of the Board of Directors of
the Company and the Bank in March 2002. He has been a director of the Bank since
1985, and a director of the Company since its formation in November 2000, and
had been Vice Chairman of the Board since April 2001. Mr. Rapin is a pharmacist
with LeFave Pharmacy, Alpena, Michigan.
Martin A. Thomson was named Acting President and Chief Executive
Officer of the Company and the Bank in May 2001 and later named President and
Chief Executive Officer in October 2001. Mr. Thomson previously held the
position of President and Chief Executive Officer of Presque Isle Electric and
Gas Cooperative, Inc., Onaway, Michigan. Mr. Thomson has been a director of the
Bank since 1986, and a director of the Company since its formation in November
2000.
Keith D. Wallace is the senior partner of the law firm of Isackson and
Wallace, P.C., located in Alpena, Michigan. Mr. Wallace has acted as general
counsel to the Bank since 1988. Mr. Wallace has been a director of the Bank
since 1988, and a director of the Company since its formation in November 2000.
Gary C. VanMassenhove is a partner in VanMassenhove, Kearly, Taphouse &
Faulman, CPAs. Mr. VanMassenhove has been a Certified Public Accountant for 32
years. He has been a director of the Company and the Bank since September 2001.
4
Thomas R. Townsend is the President of the R.A. Townsend Co., a
plumbing, heating and air conditioning distributor located in Alpena, Michigan,
where he has been employed for the past 27 years. Mr. Townsend has been a
director of the Company and the Bank since April 2002.
BOARD INDEPENDENCE
The Board of Directors has determined that, except as to Mr. Thomson
and Mr. Wallace, each member of the Board of Directors is an "independent
director" within the meaning of the Nasdaq corporate governance listing
standards which the Board has elected to determine corporate governance.
Mr. Thomson is not considered independent because he is an executive officer of
the Company. Mr. Wallace is not considered independent because he is a partner
in a law firm that has received legal fees for legal services provided to the
Company.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS -
Jerome W. Tracey was named Senior Vice President, Senior Lender of the
Company and the Bank in September 2001, after serving as Vice President of
Commercial Services since joining the Bank in November 1999. Prior to joining
the Bank, Mr. Tracey served as Vice President of Commercial Lending for National
City Bank, Alpena, Michigan, a position he held since 1996. Mr. Tracey has been
in the banking profession since 1981.
Debra S. Weiss was named Senior Vice President, Retail Banking of the
Bank in August 2002, after serving as Vice President, Retail Services of the
Bank since September 2001, and serving as the Gaylord Branch Manager since
joining the Bank in May 2001. Prior to joining the Bank, Ms. Weiss served as
Secondary Market Officer and Compliance Officer for Alden State Bank, Alden,
Michigan. Ms. Weiss was employed as a Compliance Specialist Examiner for the
Office of Comptroller of the Currency from 1998 - 1999, and she held various
officer positions with First National Bank, Gaylord, Michigan from 1992 - 1998.
Michael W. Mahler was named Chief Financial Officer and Treasurer of
the Company and the Bank in November 2002. Mike was appointed Acting Corporate
Secretary in December 2003. Prior to this, Mr. Mahler was employed for two years
by the Besser Company, in Alpena, Michigan, which company is an international
producer of concrete products equipment, where he served as their Corporate
Controller. He was previously employed for ten years by LTV Steel Company, where
he was a financial analyst in East Chicago, Indiana for seven years and for
three years he was the controller of a division in Northeastern Michigan.
Joseph W. Gentry II was named Vice President, Human Resources of the
Bank in February 2002, after serving as Director of Human Resources since
joining the Bank in October 2001. Prior to joining the Bank, Mr. Gentry served
as Manager - Industrial Relations / Safety for Lafarge - Presque Isle
Corporation, producer of chemical grade and aggregate limestone for the
construction and building materials market and employed by Besser Company, an
international producer of concrete products equipment as Personnel Manager /
Safety Director. All previous employers are in the Alpena, Michigan area. Mr.
Gentry has taught economics at Alpena Community College as an adjunct professor
for the past 17 years.
OWNERSHIP REPORTS BY OFFICERS AND DIRECTORS
The Common Stock of the Company is registered pursuant to Section 12(g)
of the Exchange Act. The officers and directors of the Company and beneficial
owners of greater than 10% of the Company's Common Stock (10% beneficial
owners") are required to file reports on Forms 3, 4 and 5 with the SEC
disclosing beneficial ownership and changes in beneficial ownership of the
Common Stock. SEC rules require disclosure in the Company's proxy statement and
Annual Report on Form 10-KSB of the failure of an officer, director or 10%
beneficial owner of the Company's Common Stock, to file a Form 3, 4 or 5 on a
timely basis. Based on the Company's review of ownership reports during the year
ended December 31, 2003, there were no late filings.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
GENERAL. The business of the Company's Board of Directors is conducted
through meetings and activities of the Board and its committees. During the year
ended December 31, 2003, the Board of Directors held 12 regular
5
meetings and five special meetings. During the year ended December 31, 2003, no
director attended fewer than 75% of the total meetings of the Board of Directors
and committees on which such director served. Executive sessions of the
independent directors of the Board of Directors are held on a regular scheduled
basis.
EXECUTIVE COMMITTEE. The Company has established an Executive
Committee, which is comprised of the full Board of Directors of the Company. The
Executive Committee meets as necessary in the intervals between meetings of the
full Board of Directors. The Committee has authority to act on all matters of
the Company's business between Board meetings, subject to the ratification by
the Board of Directors at its next meeting. The Executive Committee met four
times in 2003.
PERSONNEL COMMITTEE. The Company's Personnel Committee meets
periodically to review the performance of officers and to determine compensation
of officers to be recommended to the Board. It is comprised of the full Board of
Directors. The Personnel Committee met once during 2003.
AUDIT COMMITTEE. The Company's Audit Committee is comprised of the
non-employee members of the Board of Directors, all of whom have been determined
by the Board of Directors to be "independent directors" within the meaning of
the Nasdaq corporate governance listing standards. During 2003, the Audit
Committee met five times. Each member of the Audit Committee is able to read and
understand financial statements, and no member of the Audit Committee has
participated in the preparation of the Company's or the Bank's, or any of the
Bank's subsidiaries', financial statements during the past three years. Director
VanMassenhove is deemed by the Company to be an "audit committee financial
expert." Director VanMassenhove, a certified public accountant, has an
understanding of generally accepted auditing principles (GAAP) and has the
ability and experience to prepare, audit, evaluate and analyze financial
statements which present the breadth and level of complexity of issues that the
Company reasonably expects to be raised by the Company's financial statements.
The duties and responsibilities of the Audit Committee include, among
other things:
- retaining, overseeing and evaluating a firm of independent
certified public accountants to audit the annual financial
statements;
- in consultation with the independent auditors and the internal
auditor, reviewing the integrity of the Company's financial
reporting processes, both internal and external;
- approving the scope of the audit in advance;
- reviewing the financial statements and the audit report with
management and the independent auditors;
- considering whether the provision by the external auditors of
services not related to the annual audit and quarterly reviews
is consistent with maintaining the auditor's independence;
- reviewing earnings and financial releases and quarterly
reports filed with the SEC;
- consulting with the internal audit staff and reviewing
management's administration of the system of internal
accounting controls;
- approving all engagements for audit and non-audit services by
the independent auditors; and
- reviewing the adequacy of the audit committee charter.
NOMINATING COMMITTEE. The Company's Nominating Committee is appointed
by the Chairman, and includes all directors of the Company, except inside
(employee) directors. All of the members of the Nominating Committee have been
determined by the Board of Directors to be "independent directors" within the
meaning of the Nasdaq corporate governance listing standards, which the Board
has elected to determine corporate governance. The Nominating Committee selects
nominees to the Board of Directors of the Company. The Nominating Committee met
once during 2003. The Company's Board of Directors has adopted a written charter
for the Committee, which is available at the Company's website at
www.first-federal.com.
6
The functions of the Nominating Committee include the following:
- to lead the search for individuals qualified to become members
of the Board and to select director nominees to be presented
for stockholder approval;
- to review and monitor compliance with the requirements for
board independence;
- to review the committee structure and make recommendations to
the Board regarding committee membership;
- to develop and recommend to the Board for its approval a set
of corporate governance guidelines; and
- to develop and recommend to the Board for its approval a
self-evaluation process for the Board and its committees.
The Nominating Committee identifies nominees by first evaluating the
current members of the Board of Directors willing to continue in service.
Current members of the Board with skills and experience that are relevant to the
Company's business and who are willing to continue in service are first
considered for re-nomination, balancing the value of continuity of service by
existing members of the Board with that of obtaining a new perspective. If any
member of the Board does not wish to continue in service, or if the Committee or
the Board decides not to re-nominate a member for re-election, or if the size of
the Board is increased, the Committee would solicit suggestions for director
candidates from all Board members. In addition, the Committee is authorized by
its charter to engage a third party to assist in the identification of director
nominees. The Nominating Committee would seek to identify a candidate who at a
minimum satisfies the following criteria:
- has the highest personal and professional ethics and integrity
and whose values are compatible with the Company's;
- has had experiences and achievements that have given him or
her the ability to exercise and develop good business
judgment;
- is willing to devote the necessary time to the work of the
Board and its committees, which includes being available for
Board and committee meetings;
- is familiar with the communities in which the Company operates
and/or is actively engaged in community activities;
- is involved in other activities or interests that do not
create a conflict with their responsibilities to the Company
and its stockholders; and
- has the capacity and desire to represent the balanced, best
interests of the stockholders of the Company as a group, and
not primarily a special interest group or constituency.
The Nominating Committee will also take into account whether a
candidate satisfies the criteria for "independence" within the meaning of the
Nasdaq corporate governance listing standards, which the Board has elected to
determine corporate governance, and if a nominee is sought for service on the
audit committee, the financial and accounting expertise of a candidate,
including whether an individual qualifies as an audit committee financial
expert.
PROCEDURES FOR THE NOMINATION OF DIRECTORS BY SHAREHOLDERS
The Nominating Committee has adopted procedures for the submission of
director nominees by stockholders. If a determination is made that an additional
candidate is needed for the Board, the Nominating Committee will consider
candidates submitted by the Company's stockholders. Stockholders can submit
qualified
7
the names of candidates for Director by writing to our Corporate Secretary at
100 S. Second Avenue, Alpena, Michigan 49707. The Corporate Secretary must
receive a submission not less than ninety (90) days prior to the date of the
Company's proxy materials for the preceding year's annual meeting. The
submission must include the following information:
- the name and address of the stockholder as they appear on the
Company's books, and number of shares of the Company's common
stock that are owned beneficially by such stockholder (if the
stockholder is not a holder of record, appropriate evidence of
the stockholder's ownership will be required);
- the name, address and contact information for the candidate,
and the number of shares of common stock of the Company that
are owned by the candidate (if the candidate is not a holder
of record, appropriate evidence of the stockholder's ownership
should be provided);
- a statement of the candidate's business and educational
experience;
- such other information regarding the candidate as would be
required to be included in the proxy statement pursuant to SEC
Regulation 14A;
- a statement detailing any relationship between the candidate
and the Company;
- a statement detailing any relationship between the candidate
and any customer, supplier or competitor of the Company;
- detailed information about any relationship or understanding
between the proposing stockholder and the candidate; and
- a statement that the candidate is willing to be considered and
willing to serve as a Director if nominated and elected.
Submissions that are received and that meet the criteria outlined above
are forwarded to the Chairman of the Nominating Committee for further review and
consideration. A nomination submitted by a stockholder for presentation by the
stockholder at an annual meeting of stockholders must comply with the procedural
and informational requirements described in this proxy statement under the
heading "Other Matters and Advance Notice Procedures."
STOCKHOLDER COMMUNICATIONS WITH THE BOARD
A stockholder of the Company who wants to communicate with the Board or
with any individual Director can write to the Corporate Secretary of the
Company, at 100 S. Second Avenue, Alpena, Michigan 49707, Attention: Board
Administration. The letter should indicate that the author is a stockholder and
if shares are not held of record, should include appropriate evidence of stock
ownership. Depending on the subject matter, management will:
- forward the communication to the Director or Directors to whom
it is addressed;
- attempt to handle the inquiry directly, for example where it
is a request for information about the company or it is a
stock-related matter; or
- not forward the communication if it is primarily commercial in
nature, relates to an improper or irrelevant topic, or is
unduly hostile, threatening, illegal or otherwise
inappropriate.
At each Board meeting, management shall present a summary of all
communications received since the last meeting that were not forwarded and makes
those communications available to the Directors.
8
CODE OF ETHICS
The Company has adopted a code of ethics that is applicable to the
Company's President and Chief Executive Officer, Chief Financial Officer (who is
also the Company's principal accounting officer), and other senior officers. The
Code of Ethics is available on the Company's website at www.first-federal.com.
Amendments to and waivers from the Code of Ethics also will be disclosed on the
Company's website.
AUDIT COMMITTEE REPORT
In accordance with rules established by the SEC, the Audit Committee of
the Company has prepared the following report for inclusion in this proxy
statement.
The Company's Board of Directors adopted an Audit Committee charter in
July 2000. The charter was most recently amended in March 2004 and is attached
to this proxy statement as Appendix A. A copy of the charter of the Audit
Committee is available on the Company's website at www.first-federal.com.
Management has the primary responsibility for the Company's internal
controls and financial reporting process. The independent auditors are
responsible for performing an independent audit of the Company's consolidated
financial statements in accordance with auditing standards generally accepted in
the United States of America and to issue an opinion thereon. The Audit
Committee's responsibility is to monitor and oversee these processes.
As part of its ongoing activities, the Audit Committee has:
- Reviewed and discussed with management and the independent
auditors the Company's audited consolidated financial
statements for the year ended December 31, 2003,
- Discussed with the independent auditors of the Company, the
matters required to be discussed by Statement on Auditing
Standards No. 61, Communications with Audit Committees, as
amended; and
- Received the written disclosures and the letter from the
independent auditors required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit
Committees, and has discussed with the independent auditors
their independence from the company.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited consolidated
financial statements be included in the Company's Annual Report on Form 10-KSB
for the year ended December 31, 2003 and be filed with the SEC. In addition, the
Audit Committee recommended that the Board of Directors appoint Plante & Moran,
PLLC as the Company's independent auditors for the year ending December 31,
2004, subject to the ratification of this appointment by the stockholders.
This report shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
THE AUDIT COMMITTEE
James C. Rapin
Keith D. Wallace
Gary C. VanMassenhove
Thomas R. Townsend
9
DIRECTORS' COMPENSATION
In 2003, each director of the Bank received a $600 monthly meeting fee,
payable only if the director attended the meeting. Each director is paid for one
excused absence. The Chairman of the Board received $750 for each regular
meeting attended and each director received $600 for each special Board meeting
attended.
In addition to the foregoing, during the year ended December 31, 2003,
James C. Rapin, Martin A. Thomson, Keith D. Wallace, Gary C. VanMassenhove and
Thomas R. Townsend received $1,400, $700, $1,100, $1,300 and $1,300,
respectively, for their services as members of the Bank's Executive, Personnel
and Audit Committees. The Bank paid a total of $61,600 in director and committee
fees to members of the Board of Directors during the year ended December 31,
2003.
No separate fees are paid to members for service on the Board of
Directors of the Company, or for service on committees of the Company's Board of
Directors.
EXECUTIVE COMPENSATION
The following table sets forth for the years ended December 31, 2003,
2002 and 2001, certain information as to the total remuneration paid by the Bank
or the Company to the Chief Executive Officer of the Bank and the Company (the
"Named Executive Officer"). No other executive officer of the Company received
total annual compensation in excess of $100,000 during the year ended December
31, 2003.
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation Awards
----------------------------------------------- ------------------------------------------------
Years Other Restricted
Ended Annual Stock Options/ All Other
Name and December Salary Bonus Compensation Awards(s) SARs Compensation
Principal Position (1) 31, ($) (2) ($) ($) (3) ($) (#) Payouts ($) (4)
---------------------- --- ------- --- ------- --- --- ------- -------
Martin A. Thomson 2003 $131,702 $35,067.64 $11,400 $ -0- -0- $ -0- $ -0-
President and Chief 2002 $128,819 $ -0- $12,700 $3,506 1,000 $ -0- $3,809
Executive Officer 2001 $ 65,998 $ -0- $10,200 $ -0- -0- $ -0- $ -0-
(1) No other executive officer received salary and bonuses that in the
aggregate exceeded $100,000.
(2) Amount shown is gross earnings.
(3) Includes fees for services on the Board of Directors and Board Committees
of the Bank and the Company. The Bank also provides the Chief Executive
Officer with the use of an automobile, insurance and other personal
benefits that are not included in the Cash Compensation Table because such
benefits do not exceed $50,000 or 10% of the officer's cash compensation
for the year ended December 31, 2003.
(4) Includes Bank contribution to 401 (k) as employer match, and director fees
for service on the Board of the Bank's service corporation subsidiary,
Financial Service & Mortgage Corporation.
BENEFITS
DEFINED BENEFIT PLAN. The Bank maintains a noncontributory defined
benefit plan ("Retirement Plan"). All employees age 21 or older, who have worked
at the Bank for a period of one year and have been credited with 1,000 or more
hours of employment with the Bank during the year, are eligible to accrue
benefits under the Retirement Plan. The Bank annually contributes an amount to
the Retirement Plan necessary to satisfy the actuarially determined minimum
funding requirements in accordance with the Employment Retirement Income
Security Act of 1974, as amended ("ERISA").
At the normal retirement age of 65, the Retirement Plan is designed to
provide a life annuity. The retirement benefit provided is an amount equal to
2.5% of a participant's average salary based on the average of the five
consecutive years during the participant's years of employment which provide the
highest average annual salary multiplied by the participant's years of credited
service to the normal retirement date. Retirement benefits are also payable upon
retirement due to early and late retirement. Benefits are also paid from the
Retirement Plan upon a participant's disability or death. A reduced benefit is
payable upon early retirement at or after age 55. Upon
10
termination of employment other than as specified above, a participant who was
employed by the Bank for a minimum of five years is eligible to receive his or
her accrued benefit reduced for early retirement or a deferred retirement
benefit commencing on such participant's normal retirement date. Benefits are
payable in various annuity forms as well as in the form of a single lump sum
payment. For the year ended December 31, 2003 the Bank made contributions to the
Retirement Plan of $326,807.
The following table indicates the annual retirement benefit that would
be payable under the Retirement Plan upon retirement at age 65 in plan year
2003, expressed in the form of a single life annuity for the final average
salary and benefit service classification specified below. As of December 31,
2003, Mr. Thomson had three years credited service (i.e., benefit service) with
the Bank.
YEARS OF BENEFIT SERVICE AT RETIREMENT
HIGH 5-YEAR
AVERAGE SALARY 10 15 20 25 30
-------------- -- -- -- -- --
$ 15,000 $ 3,750 $ 5,625 $ 7,500 $ 9,375 $ 11,250
$ 25,000 $ 6,250 $ 9,375 $12,500 $15,625 $ 18,750
$ 50,000 $12,500 $18,750 $25,000 $31,250 $ 37,500
$100,000 $25,000 $37,500 $50,000 $62,500 $ 75,000
$150,000 $37,500 $56,250 $75,000 $93,750 $112,500
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST. The Bank has established an
Employee Stock Ownership Plan and related Trust for eligible employees. The ESOP
is a tax-qualified plan subject to the requirements of ERISA and the Internal
Revenue Code of 1986 (the "Code"). Employees with a 12-month period of
employment with the Bank during which they worked at least 1,000 hours and who
have attained age 21 are eligible to participate. The ESOP borrowed funds from
an unrelated third party lender and used the funds to purchase 48,000 shares of
the common stock issued in the Bank's initial stock offering. Collateral for the
loan was the Common Stock purchased by the ESOP. The loan was being repaid
principally from the Bank's contributions to the ESOP and was fully paid during
1999.
Contributions to the ESOP and shares released from the suspense account
in an amount proportional to the repayment of the ESOP loan were allocated among
participants on the basis of compensation in the year of allocation, up to an
annual adjusted maximum level of compensation. Benefits generally become 100%
vested after five years of credited service. Forfeitures will be reallocated
among remaining participating employees in the same proportion as contributions.
Benefits are payable upon death, retirement, early retirement, disability or
separation from service. The Bank's contributions to the ESOP are not fixed, so
benefits payable under the ESOP cannot be estimated.
The Bank's Board of Directors administers the ESOP. The Bank has
appointed First Bankers Trust Company, Quincy, Illinois to serve as trustee of
the ESOP. The ESOP Committee may instruct the trustee regarding investment of
funds contributed to the ESOP. The ESOP trustee, subject to its fiduciary duty,
must vote all allocated shares held in the ESOP in accordance with the
instructions of participating employees. Under the ESOP, nondirected shares will
be voted in a manner calculated to most accurately reflect the instructions it
has received from participants regarding the allocated stock so long as such
vote is in accordance with the provisions of ERISA.
401(K) PLAN. The Bank established a 401(k) Plan for Bank employees as
of May 1, 1999. The Plan is tax qualified and permits participants to elect to
defer up to 50% (as of January 1, 2002) of the participant's eligible annual
compensation into the Plan. During 1999, the Bank made a matching contribution
of 25% of the participant contribution to the Plan, up to 1% of the
participant's eligible annual compensation for 1999. After 1999, the Bank
11
has made matching contributions of 50% of the participant's contribution, with
the match being up to 3% of the participant's eligible annual compensation for
the year. All current employees at the time of the establishment of the Plan on
May 1, 1999 were 100% vested in their contributions and in matching
contributions. Subsequently, new employees became 100% vested after five years
of credited service in matching contributions. However, beginning January 1,
2002 the vesting schedule changed to be on an equally graduated basis over a
five- year period, which includes employees hired after May 1, 1999. Employees
are 100% vested in their elective deferral amounts at all times under the Plan.
Participants will be credited for years of service with the Bank prior to the
effective date of the Plan. Forfeitures of discretionary contributions will be
used to reduce the Bank's contributions in succeeding plan years.
STOCK OPTION PLAN. Certain employees and non-employee directors of the
Bank and the Company are eligible to participate in the Bank's 1996 Stock Option
Plan (the "Stock Option Plan"). The Stock Option Plan authorizes the grant of
stock options and limited rights to purchase 69,000 shares, or 10% of the shares
of common stock issued to minority stockholders in the initial public offering
by the Bank. Upon the formation of the Company as the Bank's holding company in
November 2000, the shares of common stock subject to the Stock Option Plan
became the shares of Common Stock of the Company. Pursuant to the Stock Option
Plan, grants may be made of (i) options to purchase Common Stock intended to
qualify as incentive stock options under Section 422 of the Code, (ii) options
that do not so qualify ("non-statutory options") and (iii) limited rights
(described below) that are exercisable only upon a change in control of the Bank
or the company. Non-employee directors are only eligible to receive
non-statutory options.
The Stock Option Plan is administered by a committee consisting of
certain non-employee directors of the Board of Directors (the "Committee"). In
granting options, the Committee considers factors such as salary, length of
employment with the Bank, and the employee's overall performance. All stock
options are exercisable in five equal annual installments of 20% commencing one
year from the date of grant; provided, however, that all options will be 100%
exercisable in the event the optionee terminates his service due to normal
retirement, death or disability, or in the event of a change in control of the
Company or the Bank. Options may be exercised within 10 years from the date of
grant. Stock options may be exercised up to one year following termination of
service or such later period as determined by the Committee. The exercise price
of the options will be at least 100% of the fair market value of the underlying
Common Stock at the time of the grant. The exercise price may be paid in cash or
Common Stock.
Incentive stock options will only be granted to employees of the Bank
and/or the Company. Non-employee directors will be granted non-statutory stock
options. No incentive stock option granted in connection with the Stock Option
Plan may be exercisable more than three months after the date on which the
optionee ceases to perform services for the Bank and/or the Company, except that
in the event of death, disability, normal retirement, or a change in control of
the Bank or the Company, incentive stock options may be exercisable for up to
one year; provided, however, that if an optionee ceases to perform services for
the Bank or the Company due to retirement or following a change in control (as
defined in the Stock Option Plan), any incentive stock options exercised more
than three months following the date the optionee ceases to perform services
shall be treated as a non-statutory stock option as described above.
Upon the exercise of "limited rights" in the event of a change in
control, the optionee will be entitled to receive a lump sum cash payment, or in
certain cases, Common Stock, equal to the difference between the exercise price
of the option and the fair market value of the shares of Common Stock subject to
the option on the date of exercise of the right in lieu of purchasing the stock
underlying the option. In the event of death or disability, the Bank and/or the
Company, if requested by the optionee or beneficiary, may elect, in exchange for
the option, to pay the optionee, or beneficiary in the event of death, the
amount by which the fair market value of the Common Stock exceeds the exercise
price of the option on the date of the optionee's termination of service for
death or disability.
Pursuant to the Stock Option Plan, non-employee directors at the
inception of the Plan on April 17, 1996, Rapin, Thomson, and Wallace were each
granted options to purchase 6,037 shares of Common Stock. These options were
granted at an exercise price of $10.00 per share, which options have all been
earned but not exercised. No options have been reserved for future issuance to
non-employee directors under the Plan, and therefore Messrs. VanMassenhove and
Townsend, who were appointed to the Board of Directors in September 2001 and
April 2002, respectively, have not been awarded options under the Plan. No stock
options were granted under the Stock Option Plan during the year ended December
31, 2003.
12
Set forth below is certain information concerning options outstanding
to the Named Executive Officer at December 31, 2003.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
Number of Unexercised Value of Unexercised In-
Options at The-Money Options at
Shares Year-End Year-End
Acquired ------------------------- -------------------------
upon Value Exercisable/Unexercisable Exercisable/Unexercisable
Name Exercise Realized (#) ($)
---- -------- -------- --- ---
Martin A. Thomson -- $-- 6,237 / 800 $77,212 / $7000
RECOGNITION AND RETENTION PLAN. Certain employees and non-employee
directors of the Bank and the Company are eligible to participate in the Bank's
Recognition and Retention Plan, which was adopted in 1996 (the "Recognition
Plan"). A Committee of the Board of Directors composed of "disinterested"
directors (the "Recognition Plan Committee") administers the Recognition Plan
and makes awards to executive officers and employees. Participants in the
Recognition Plan earn (become vested in) shares of Restricted Stock covered by
an award and all restrictions lapse over a period of time commencing from the
date of the award; provided, however, that the Recognition Plan Committee may
accelerate or extend the earnings rate on any awards made to officers and
employees under the Recognition Plan. Awards to non-employee directors vest at
the rate of 20% of the amount initially awarded commencing one year from the
date of the award. Awards to executive officers and employees become fully
vested upon termination of employment or service due to death, disability or
normal retirement or following a termination of employment or service in
connection with a change in the control of the Bank or the Company. Upon
termination of employment or service for another reason, unvested shares are
forfeited. Awards to non-employee directors fully vest upon a non-employee
director's disability, death, normal retirement, or following termination of
service in connection with a change in control of the Bank or the Company.
Unvested shares of Restricted Stock will be forfeited by a non-employee director
upon failure to seek reelection, failure to be reelected, or resignation from
the Board (other than in connection with normal retirement, as defined by the
Recognition Plan).
Pursuant to the Recognition Plan, non-employee directors at the
inception of the Plan on April 17, 1996, Bensinger, Rapin, Thomson, and Wallace
were each granted 2,415 shares of Common Stock, which shares have been earned
and issued. Messrs. VanMassenhove and Townsend, who were appointed to the Board
of Directors in September 2001 and April 2002, respectively, have not been
awarded any shares under the Plan. There were 255 additional shares granted
(which were 100% vested) to the Named Executive Officer under the Recognition
Plan during the year ended December 31, 2002. A total of 27,558 shares of Common
Stock have been earned and issued pursuant to the Recognition Plan as of
December 31, 2003 and 42 shares are reserved for future issuance.
Set forth below is information as of December 31, 2003 regarding equity
compensation plans categorized by those plans that have been approved by
stockholders and those plans that have not been approved by stockholders.
Number of securities to
be issued Number of securities
Plan upon exercise of outstanding Weighted average remaining available for
---- options and rights exercise price issuance under plan
------------------ -------------- -------------------
Equity compensation plans
approved by stockholders 29,011 $10.57 20,109 (1)
Equity compensation plans not
approved by stockholders -- -- --
Total 29,011 20,109
(1) Consists of 42 shares available for future issuance pursuant to the
1996 Recognition and Retention Plan and 20,067 shares underlying
options available for future issuance pursuant to the 1006 Stock Option
Plans.
13
TRANSACTIONS WITH CERTAIN RELATED PERSONS
Under current federal law, except for loans or extensions of credit to
executive officers and directors under Company-wide employee benefit plans, all
loans or extensions of credit to executive officers and directors must be made
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with the general public
and must not involve more than the normal risk of repayment or present other
unfavorable features. In addition, loans made to a director or executive officer
in excess of the greater of $25,000 or 5% of the Bank's capital and surplus (up
to a maximum of $500,000) must be approved in advance by a majority of the
disinterested members of the Board of Directors. Bank policy requires that all
loans made to a director or executive officer must be approved in advance by a
majority of the disinterested members of the Board of Directors. At December 31,
2003, the Bank's directors and executive officers had loans outstanding totaling
$2,314,000 in the aggregate.
The Bank intends that all transactions between the Bank and its
executive officers, directors, and holders of 10% or more of the shares of any
class of its common stock and affiliates thereof, will contain terms no less
favorable to the Bank than could have been obtained by it in arm's-length
negotiations with unaffiliated persons and will be approved by a majority of
independent non-employee directors of the Bank not having an interest in the
transaction.
The Sarbanes-Oxley Act of 2002 generally prohibits an issuer from: (i)
extending or maintaining credit; (ii) arranging for the extension of credit; or
(iii) renewing an extension of credit in the form of a personal loan for an
officer or director. There are several exceptions to this general prohibition,
one of which is applicable to the Company. Namely, this prohibition does not
apply to loans made by a depository institution that is insured by the FDIC and
is subject to the insider lending restrictions of the Federal Reserve Act. All
loans to the Company's officers and directors by the Bank are made in conformity
with the Federal Reserve Act and regulations promulgated there under.
PROPOSAL II - RATIFICATION OF APPOINTMENT OF AUDITORS
The Audit Committee of the Board of Directors of the Company has
approved the engagement of Plante & Moran, PLLC to be the Company's auditors for
the year ending December 31, 2003, subject to the ratification of the engagement
by the Company's stockholders. Auditors are not deemed independent under
Securities Rules unless the Audit Committee has approved the engagement, or
alternatively, the engagement is entered into pursuant to detailed pre-approval
policies and procedures established by the audit committee which sets forth each
specific service to be performed by auditor. At the Annual Meeting, stockholders
will consider and vote on the ratification of the engagement of Plante & Moran,
PLLC for the Company's fiscal year ending December 31, 2004. A representative of
Plante & Moran, PLLC is expected to attend the Annual Meeting to respond to
appropriate questions and to make a statement if he so desires.
Stockholder ratification of the selection of Plante & Moran, PLLC is
not required by the Company's bylaws or otherwise. However, the Board is
submitting the selection of the independent auditors to the stockholders for
ratification as a matter of good corporate practice. If the stockholders fail to
ratify the selection of Plante & Moran, PLLC, the Audit Committee will
reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee in its discretion may direct the appointment of a
different independent accounting firm at any time during the year if it
determines that such change is in the best interests of the Company and its
stockholders.
FEES PAID TO PLANTE & MORAN, PLLC
Set forth below is certain information concerning aggregate fees billed
for professional services rendered by Plante & Moran, PLLC during 2003 and 2002:
AUDIT FEES. The aggregate fees billed to the Company by Plante & Moran,
PLLC for professional services rendered by Plante & Moran, PLLC for the audit of
the Company's annual financial statements, review of the
14
financial statements included in the Company's Quarterly Reports on Form 10-QSB
and services that are normally provided by Plante & Moran, PLLC in connection
with statutory and regulatory filings and engagements were $50,500 and $37,150
during the fiscal years ended December 31, 2003 and 2002, respectively.
AUDIT-RELATED FEES. The aggregate fees billed to the Company by Plante
& Moran, PLLC for assurance and related services rendered by Plante & Moran,
PLLC that are reasonably related to the performance of the audit of and review
of the financial statements and that are not already reported in "Audit Fees,"
above, were $17,800 and $11,450 during the fiscal years ended December 31, 2003
and 2002, respectively. These services included consultation regarding the
Company's internal audit schedule and programs and review associated with the
Company's acquisition of an insurance agency.
TAX FEES. The aggregate fees billed to the Company by Plante & Moran,
PLLC for professional services rendered by Plante & Moran, PLLC for tax
compliance, tax advice and tax planning were $1,250 and $6,350 during the fiscal
years ended December 31, 2003 and 2002, respectively. These services included
consultation on a discrepancy between IRS and SSA Records and research on
taxability of gifts and disbursements to terminated employees.
ALL OTHER FEES. The aggregate fees billed to the Company by Plante &
Moran, PLLC that are not described above were $0 and $32,800 during the fiscal
years ended December 31, 2003 and 2002, respectively. These services included
consultation with respect to the Company's implementation of FAS 91, the
insurance agency acquisition and the Company's regulatory examination.
The Audit Committee has considered whether the provision of non-audit
services, which relate primarily to compliance and internal audit training, is
compatible with maintaining Plante & Moran, PLLC's independence. The Audit
Committee concluded that performing such services does not affect Plante &
Moran, PLLC's independence in performing its function as auditor of the Company.
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES
OF INDEPENDENT AUDITOR
The Audit Committee's policy is to pre-approve all audit and non-audit
services provided by the independent auditors. These services may include audit
services, audit-related services, tax services and other services. Pre-approval
is generally provided for up to one year and any pre-approval is detailed as to
particular service or category of services and is generally subject to a
specific budget. The Audit Committee has delegated pre-approval authority to its
Chairman when expedition of services is necessary. The independent auditors and
management are required to periodically report to the full Audit Committee
regarding the extent of services provided by the independent auditors in
accordance with this pre-approval, and the fees for the services performed to
date. For 2003, all services were pre-approved by the Audit Committee.
REQUIRED VOTE AND RECOMMENDATION OF THE BOARD OF DIRECTORS.
In order to ratify the selection of Plante & Moran, PLLC as independent
auditors for the 2004 fiscal year, the proposal must receive the affirmative
vote of at least a majority of the votes cast at the Annual Meeting, either in
person or by proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE RATIFICATION OF PLANTE & MORAN, PLLC AS INDEPENDENT AUDITORS
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's proxy materials
for next year's Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received at the Company's executive office, 100
S. Second Avenue, Alpena, Michigan 49707, no later than November 19, 2004. Any
such proposal shall be subject to the requirements of the proxy rules adopted
under the Exchange Act.
15
OTHER MATTERS AND ADVANCE NOTICE PROCEDURES
The Board of Directors is not aware of any business to come before the
Annual Meeting other than the matters described above in this proxy statement.
However, if any matters should properly come before the Annual Meeting, it is
intended that holders of the proxies will act as directed by a majority of the
Board of Directors, except for matters related to the conduct of the Annual
Meeting, as to which they shall act in accordance with their best judgment. The
Board of Directors intends to exercise its discretionary authority to the
fullest extent permitted under the Exchange Act.
The Bylaws of the Company provide an advance notice procedure for new
business to be taken up at the Annual Meeting. In order for a stockholder to
properly bring business before the Annual Meeting, the stockholder must state
the new business in writing and file the description of the new business with
the Secretary of the Company at least five days prior to the date of the Annual
Meeting. A stockholder may make any other proposal at the Annual Meeting itself,
and the proposal may be discussed and considered, but unless stated in writing
and filed with the Secretary at least five days prior to the Annual Meeting, the
proposal will be laid over for action at an adjourned, special or annual meeting
of the stockholders taking place 30 days or more thereafter. Nothing in this
paragraph shall be deemed to require the Company to include in its proxy
statement and proxy relating to an annual meeting any stockholder proposal that
does not meet all of the requirements for inclusion established by the SEC in
effect at the time such proposal is received.
The date on which the 2005 Annual Meeting of Stockholders is expected
to be held is April 20, 2005. Accordingly, advance written notice of business or
nominations to the Board of Directors to be brought before the 2005 Annual
Meeting of Stockholders must be given to the Company no later than April 15,
2005.
MISCELLANEOUS
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers, and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional compensation.
A COPY OF THE COMPANY'S REPORT ON FORM 10-KSB FOR THE YEAR ENDED
DECEMBER 31, 2003 WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE
RECORD DATE UPON WRITTEN REQUEST TO MICHAEL W. MAHLER, ACTING SECRETARY, ALPENA
BANCSHARES, INC., 100 S. SECOND AVENUE, ALPENA, MICHIGAN 49707.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Michael W. Mahler
Michael W. Mahler
Acting Secretary
Alpena, Michigan
March 15, 2004
16
APPENDIX A
AUDIT COMMITTEE CHARTER
ADOPTED: JULY 19, 2000, AND AMENDED ON MARCH 12, 2004
ALPENA BANCSHARES, INC.
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. AUDIT COMMITTEE PURPOSE
The Audit Committee of Alpena Bancshares, Inc. (the "Company") is
appointed by the Board of Directors to assist the Board in fulfilling
its oversight responsibilities. The Audit Committee's primary duties
and responsibilities are to:
- Monitor the integrity of the Company's financial reporting
process and systems of internal controls regarding finance,
accounting, and legal compliance.
- Monitor the qualifications, independence and performance of
the Company's independent auditors and internal auditor.
- Provide an avenue of communication among the independent
auditors, management, the internal auditor and the Board of
Directors.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has direct
access to the independent auditors as well as anyone in the
organization. The Audit Committee has the ability to retain, at the
Company's expense, special legal, accounting, or other consultants or
experts it deems necessary in the performance of its duties.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
Audit Committee members shall meet the requirements of the National
Association of Securities Dealers (NASD). The Audit Committee shall be
comprised of three or more directors as determined by the Board, each
of whom shall be independent non-executive directors, free from any
relationship that, in the opinion of the Board, would interfere with
the exercise of his or her independent judgment. All members of the
Committee shall have a basic understanding of finance and accounting
and be able to read and understand fundamental financial statements,
and at least one member of the Committee shall have accounting or
related financial management expertise. The Board shall determine
whether at least one member of the Committee qualifies as an "audit
committee financial expert" in compliance with criteria established by
the SEC and other relevant regulations. The existence of such member,
including his or her name and whether he or she is independent, shall
be disclosed in periodic filings as required by the SEC.
Audit Committee members shall be appointed by the Board and the Audit
Committee shall regularly report to the Board. If an Audit Committee
Chair is not designated or present, the members of the Committee may
designate a Chair by majority vote of the Committee membership.
The Committee shall meet at least four times annually, or more
frequently as circumstances dictate. The Audit Committee Chair shall
prepare and/or approve an agenda in advance of each meeting. The
Committee should meet privately in executive session at least annually
with management and the independent auditors, and as a committee to
discuss any matters that the Committee or each of these groups believe
should be discussed. In addition, the Committee, or at least its Chair,
should communicate with management and the independent auditors
quarterly to review the Company's financial statements and significant
findings based upon the auditors limited review procedures.
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III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
Review Procedures
1. Review and reassess the adequacy of this Charter at least
annually. Submit the charter to the Board of Directors for
approval and have the document published at least every three
years in accordance with SEC regulations.
2. Review the Company's annual audited financial statements,
including disclosures made in management's discussion and
analysis, prior to filing or distribution, and recommend to
the Board whether the audited financial statements should be
included in the Company's Form 10-KSB. Review should include
discussion with management and independent auditors of
significant issues regarding accounting principles, practices,
and judgments.
3. In consultation with management and the independent auditors,
the Committee will consider the integrity of the Company's
financial reporting processes and controls. Discuss
significant financial risk exposures and the steps management
has taken to monitor, control, and report such exposures.
Review significant findings prepared by the independent
auditors together with management's responses.
4. Review with financial management and the independent auditors
the Company's quarterly financial results prior to the release
of earnings and/or the Company's quarterly financial
statements prior to filing or distribution. Discuss any
significant changes to the Company's accounting principles and
any items required to be communicated by the independent
auditors in accordance with SAS 61. The Chair of the Committee
may represent the entire Audit Committee for purposes of this
review.
5. Review and discuss with management and the independent auditor
the certifications of the Company's chief executive officer
and chief financial officer about any significant deficiencies
in the design or operation of internal controls or material
weaknesses therein and any fraud involving management or other
employees who have a significant role in the Company's
internal controls, as required by the Sarbanes-Oxley Act of
2002 (Sections 302 and 906), and the relevant reports rendered
by the independent auditor.
6. Review and discuss quarterly reports from the independent
auditor on:
(a) all critical accounting policies and practices used
or to be used
(b) all alternative treatments of financial information
within generally accepted accounting principles that
have been discussed with management, ramifications of
the use of such alternative disclosures and
treatments, and the treatment preferred by the
independent auditor
(c) other material written communications between the
independent auditor and management, such as any
management letter or schedule of unadjusted
differences
7. Discuss with management the Company's major financial risk
exposures and the steps management has taken to monitor and
control such exposures, including the Company's risk
assessment and risk management policies.
8. Review with management, corporate counsel and the independent
auditor the status of legal matters, including the
significance of such matters on the Company's financial
statements, and the adequacy of disclosures regarding such
matters in the Company's financial statements and SEC filings.
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9. Review with management and the independent auditor all related
party transactions and determine that all required disclosures
are included in the Company's annual report and annual proxy
statement.
10. Review with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating
to the conduct of the audit, any difficulties encountered in
the course of the audit, any restrictions on the scope of
activities or access to requested information, and any
significant disagreements with management.
Independent Auditors
11. The independent auditors are ultimately accountable to the
Audit Committee and the Board of Directors. The Audit
Committee shall review the independence and performance of the
auditors and annually recommend to the Board of Directors the
appointment of the independent auditors or approve any
discharge of auditors when circumstances warrant.
12. Review and pre-approve both audit and non-audit services to be
provided by the independent auditor (other than with respect
to non-significant exceptions permitted by the Sarbanes-Oxley
Act of 2002) in accordance with the Company's pre-approval
policy.
13. On an annual basis, the Committee should review and discuss
with the independent auditors, all significant relationships
they have with the Company that could impair the auditors'
independence.
14. Review the independent auditors audit plan, discuss scope,
staffing, locations, reliance upon management, and internal
audit and general audit approach.
15. Prior to releasing the year-end earnings, discuss the results
of the audit with the independent auditors. Discuss certain
matters required to be communicated to audit committees in
accordance with AICPA SAS 61.
16. Consider the independent auditors' judgments about the quality
and appropriateness of the Company's accounting principles as
applied in its financial reporting.
Other Audit Committee Responsibilities
17. Annually prepare a report to shareholders as required by the
Securities and Exchange Commission. The report should be
included in the Company's annual proxy statement.
18. Perform any other activities consistent with this Charter, the
Company's by-laws, and governing law, as the Committee or the
Board deems necessary or appropriate.
19. Maintain minutes of meetings and periodically report to the
Board of Directors on significant results of the foregoing
activities.
IV. LIMITATION OF AUDIT COMMITTEE'S ROLE
While the Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Committee to plan or conduct
audits or to determine that the Company's financial statements and
disclosures are complete and accurate and are in accordance with
generally accepted accounting principles and applicable rules and
regulations. These are the responsibilities of management and the
independent auditor.
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REVOCABLE PROXY
ALPENA BANCSHARES, INC.
[X] PLEASE MARK VOTES AS IN THIS
EXAMPLE
ANNUAL MEETING OF STOCKHOLDERS
APRIL 21, 2004
The undersigned hereby appoints the official proxy committee consisting of the
entire Board of Directors with full powers of substitution to act as attorneys
and proxies for the undersigned to vote all shares of Common Stock of the
Company which the undersigned is entitled to vote at the Annual Meeting of
Stockholders ("Annual Meeting") to be held at the Thunder Bay Recreational
Center, 701 Woodward Avenue, Alpena, Michigan, on April 21, 2004, at 1:00 p.m.,
Michigan time. The official proxy committee is authorized to cast all votes to
which the undersigned is entitled as follows:
WITH- FOR ALL
FOR HOLD EXCEPT
1. The election as directors of all
nominees listed (except as marked to [ ] [ ] [ ]
the contrary below):
KEITH D. WALLACE
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK "FOR
ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
FOR AGAINST ABSTAIN
2. The ratification of the appointment of
Plante & Moran PLLC as auditors for the [ ] [ ] [ ]
Company for the year ending December 31, 2004.
PLEASE CHECK BOX IF YOU PLAN TO ATTEND THE
MEETING. [ ]
Please be sure to sign and date this Proxy in the box below. Date
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Stockholder sign above Co-holder (if any) sign above
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED
PROPOSALS.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED,THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED ABOVE. IF
ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THE
MAJORITY OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
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- DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE-PREPAID ENVELOPE PROVIDED. -
ALPENA BANCSHARES, INC.
Should the above-signed be present and elect to vote at the Annual
Meeting or at any adjournment thereof and after notification to the Secretary of
the Company at the Annual Meeting of the stockholder's decision to terminate
this proxy, then the power of said attorneys and proxies shall be deemed
terminated and of no further force and effect. This proxy may also be revoked by
sending written notice to the Secretary of the Company at the address set forth
on the Notice of Annual Meeting of Stockholders, or by the filing of a later
dated proxy prior to a vote being taken on a particular proposal at the Annual
Meeting.
The above-signed acknowledges receipt from the Company prior to the
execution of this proxy of notice of the Annual Meeting, a proxy statement dated
March 15, 2004, and audited financial statements.
Please sign exactly as your name appears on this proxy. When signing as
attorney, executor, administrator, trustee or guardian, please give full title.
If shares are held jointly, each holder should sign.
PLEASE COMPLETE AND DATE THIS PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
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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