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. 2)
Filed by the Registrant
Filed by
a Party other than the Registrant
Check
the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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First Business
Financial Services, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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No
fee required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title
of each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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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)
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Proposed
maximum aggregate value of transaction:
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Fee
paid previously with preliminary materials.
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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.
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(1)
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Amount
Previously Paid:
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Form,
Schedule or Registration Statement No.:
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FIRST BUSINESS
FINANCIAL SERVICES, INC.
November ____, 2008
Dear Fellow Shareholder:
Enclosed
are proxy materials for our special shareholder meeting scheduled to be held at _____ a.m.
on _______, December ___, 2008 at our corporate offices. As described more fully in the
enclosed materials, we are proposing amendments to our Articles of Incorporation that will
allow us to issue additional shares of common stock and preferred stock.
Please return
your proxy card and vote Yes to both of these proposals.
As
many of you know, financial institutions have experienced unprecedented instability
lately. Fortunately, we have not. Our company is healthy and profitable. Our balance sheet
is strong and our capital position and liquidity are more than adequate. We have avoided
the exposure to mortgage-backed securities and other similar securities that have plagued
many other financial institutions. Unlike other banks, originating and holding residential
mortgage loans are only a small portion of our business.
The
current turmoil in the financial services industry provides some unique opportunities for
us to continue to grow and expand our business, and we would like to take advantage of
these opportunities. This is why we have submitted an application to the FDIC and the
Treasury Department to participate in the Treasurys Capital Purchase Program. We are
seeking between $9 million and $27 million of additional equity capital from the Treasury
to facilitate our continued growth and expansion.
Your
Yes vote to approve the proposed amendments to our Articles of Incorporation
will allow us the flexibility to accept additional equity capital from the Treasury if our
application is approved.
Your vote is important. Please join us and our Board in
supporting these proposals.
Please
do not hesitate to call us if you would like more information.
Sincerely,
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Jerry Smith
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Corey Chambas
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Chairman of the Board
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President and Chief Executive Officer
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FIRST BUSINESS
FINANCIAL SERVICES, INC.
NOTICE OF SPECIAL
MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER , 2008
To Our Shareholders:
A
Special Meeting of Shareholders of First Business Financial Services, Inc. will be held at
our offices located at 401 Charmany Drive, Madison, Wisconsin, on December , 2008,
at , to vote on the following matters:
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(1)
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Approval of an amendment to our Restated Articles increasing the number of
authorized shares of our common stock, par value $0.01 per share, from 8,000,000
to 25,000,000;
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(2)
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Approval of an amendment to our Restated Articles (i) authorizing our company to
issue up to 2,500,000 shares of one or more new series of preferred stock, par
value of $0.01 per share, which preferred stock shall have the relative rights,
preferences, privileges and restrictions as determined from time to time by our
Board of Directors and (ii) terminating the existing authorization to issue
Series A and Series B preferred stock.
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Only
shareholders of record at the close of business on October 31, 2008 will be entitled to
vote at the special meeting and any postponement or adjournment of the meeting.
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By
Order of the Board of Directors,
Barbara M. Conley, Corporate
Secretary
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November ,
2008
YOUR VOTE IS IMPORTANT
PLEASE PROMPTLY
COMPLETE, SIGN, DATE AND RETURN
YOUR PROXY CARD
Your
vote is important. Even if you plan to attend the meeting, we encourage you to sign the
enclosed proxy card to vote your shares. Please read our proxy statement for more
information about our meeting and the voting process.
Important
Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be
Held on December , 2008. Our Proxy Statement is available free of charge at
www.firstbusiness.com.
FIRST BUSINESS
FINANCIAL SERVICES, INC.
401 Charmany Drive
Madison,
Wisconsin 53719
PROXY STATEMENT
Our Board
of Directors is soliciting proxies for a Special Meeting of Shareholders to be held at ,
, December , 2008 at our offices located at 401 Charmany Drive, Madison,
Wisconsin,
and at any postponement or
adjournment of the meeting. This proxy statement and the enclosed form of proxy are being
mailed to shareholders beginning on approximately November , 2008. If you have any
questions about attending our special meeting, you can call our Corporate Secretary,
Barbara Conley, at 608-232-5902.
About the Meeting and
Proxy Materials
What is the purpose
of the special meeting?
At
our special meeting, our shareholders will act on the matters outlined in our notice of
meeting on the preceding page. The two matters to be acted on by our shareholders are the
approval of:
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(1)
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an amendment to our Restated Articles increasing the number of authorized shares
of our common stock from 8,000,000 to 25,000,000, included in the attached
Exhibit A; and
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(2)
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an amendment to our Restated Articles (a) authorizing our company to issue up to
2,500,000 shares of one or more new series of preferred stock, par value of
$0.01 per share, which preferred stock shall have the relative rights,
preferences and limitations as determined from time to time by our Board of
Directors and (b) terminating the existing authorization to issue Series A and
Series B preferred stock, included in the attached Exhibit A.
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Who is entitled to
vote at the special meeting?
Only
shareholders of record at the close of business on October 31, 2008, the record date for
the meeting, are entitled to receive notice of and to participate in the special meeting.
For each share of our common stock that you held on that date, you are entitled to one
vote on each matter considered at the meeting. On the record date, 2,545,546 shares of our
common stock were outstanding and entitled to vote.
What is a proxy?
A
proxy is another person you legally designate to vote your shares. If you designate
someone as your proxy in a written document such as the enclosed card, that document is
also called a proxy or a proxy card.
How do I vote my
shares?
If
you are a shareholder of record, meaning your shares are registered directly in your name
with Computershare Investor Services, LLC, our stock transfer agent, you may vote your
shares by completing, signing and returning the enclosed proxy card in the envelope
provided. If you attend the meeting, you may withdraw your proxy and vote your shares in
person.
If
you hold your shares in street name, meaning your shares are held in a stock
brokerage account or by a bank or other nominee, your broker or nominee has enclosed or
provided a voting instruction form for you to use to direct the broker or nominee how to
vote your shares.
Can I change my vote
after I return my proxy card?
Yes,
you can revoke your proxy at any time before your shares are voted by advising our
Corporate Secretary in writing, by submitting a signed proxy with a later date, or by
voting in person at the special meeting. If your shares are held in street name by a
broker, bank or nominee, you must follow the instructions of the broker, bank or nominee
on how to change your vote.
How are the votes
counted?
A
quorum is necessary to hold the special meeting and will exist if a majority of the
2,545,546 shares of our common stock outstanding on the record date are represented, in
person or by proxy, at the meeting. Votes cast by proxy or in person at the meeting will
be counted by Computershare, which has been appointed by our Board of Directors to act as
inspector of election for the meeting.
Shares
represented by proxy cards marked Abstain will be counted to determine the
presence of a quorum, but will not be counted as votes for or against any matter.
Broker non-votes, which occur when a broker or other nominee does not have
authority to vote on a particular matter without instructions from the beneficial owner of
the shares and has not received such instructions, will be counted for quorum purposes but
will be not be counted as votes for or against any matter.
What are our Boards
recommendations?
Our
Board of Directors recommends a vote
FOR
approval of both Proposal 1 and Proposal
2.
If
you sign and return a proxy card without specifying how you want your shares voted, the
named proxies will vote your shares in accordance with the recommendations of our Board
for both proposals.
Will any other items
be acted upon at the special meeting?
No
other business will be presented at the special meeting.
What are the
deadlines for submission of shareholder proposals for the next annual meeting?
Shareholders
may submit proposals on matters appropriate for shareholder action at future annual
meetings by following the rules of the Securities and Exchange Commission (the
SEC). Proposals intended for inclusion in next years proxy materials
must be received by our Corporate Secretary no later than December 4, 2008.
Under
our By-Laws, a shareholder who wants to bring business before an annual meeting that has
not been included in the proxy materials for the meeting, or who wants to nominate
directors at the meeting, must be eligible to vote at the meeting and give written notice
of the proposal to our Corporate Secretary. The procedures contained in our By-Laws
include giving notice to our Corporate Secretary at least 60 days and not more than 90
days before the first anniversary of the date set forth in our proxy statement for the
prior Annual Meeting as the date on which we first mailed such proxy materials to
shareholders. For the 2009 annual meeting, the notice must be received by the Corporate
Secretary no later than March 6, 2009, and no earlier than February 4, 2009. For director
nominations, the notice must comply with the By-Laws and provide the information required
to be included in the proxy statement for individuals nominated by our Board. For any
other proposals, the notice must describe the proposal and why it should be approved,
identify any material interest of the shareholder in the matter, and include other
information required by the By-Laws.
Who pays to prepare,
mail and solicit the proxies?
We
will pay the cost of soliciting proxies. In addition to soliciting proxies by mail, our
employees may solicit proxies personally and by telephone. We have also engaged Georgeson
Inc. to provide proxy solicitation services for a fee of $7,500, plus costs and expenses.
We will reimburse brokers and other custodians, nominees and fiduciaries for their
reasonable expenses in communicating with persons for whom they hold our common stock.
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What if I have
additional questions?
If
you would like additional copies, without charge, of this proxy statement or if you have
questions about the proposals or the procedures for voting your shares, you should contact
Georgeson Inc., which is assisting us, toll-free at 866-828-3401.
Stock Ownership
Management and Directors
The
following table sets forth certain information regarding the beneficial ownership of our
common stock as of October 31, 2008 by: (i) each director; (ii) each of the executive
officers; and (iii) all of the directors and executive officers as a group. Except as
otherwise indicated in the footnotes, each of the holders listed below has sole voting and
investment power over the shares beneficially owned. As of October 31, 2008, there were
2,545,546 shares of our common stock outstanding.
Name of Beneficial Owner
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Shares of
Common Stock
Beneficially Owned
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Percent of
Common Stock
Beneficially Owned
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Gary E. Zimmerman
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94,436 (1)
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3.6%
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Corey Chambas
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86,841 (2)
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3.4%
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Lee Bruce
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74,670 (3)
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2.8%
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Jerome J. Smith
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57,685
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2.2%
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John M. Silseth
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32,893
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1.2%
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Michael J. Losenegger
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26,125 (2)
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1.0%
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Charles H. Batson
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20,975
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*
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Loren D. Mortenson
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10,000
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*
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Jan A. Eddy
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7,428
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*
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Dean W. Voeks
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5,335
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*
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Mark D. Bugher
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1,500
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*
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All directors and executive
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officers as a group (16 persons)
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511,769 (2)(4)
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19.4%
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* Denotes less than 1%.
(1)
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Includes
5,732 shares held by Mr. Zimmermans spouse through an IRA.
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(2)
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Includes
shares that may be purchased under stock options which are currently
exercisable or exercisable within 60 days of October 31, 2008 as follows:
Mr. Chambas, 32,682 shares; Mr. Losenegger, 16,250 shares; and
all directors and executive officers as a group, 89,616 shares.
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(3)
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Includes
6,096 shares held by Mr. Bruces spouse and 12,500 shares held by LCB,
LLC, an entity owned by Mr. Bruce.
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(4)
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Includes
15,583 shares held by spouses of all directors and executive officers as a
group.
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Other Beneficial Owners
The
following table sets forth certain information regarding beneficial ownership of our
common stock by the only person known by us to own more than 5% of the outstanding shares
of our common stock. The beneficial ownership information set forth below is based on
information available to us through February 6, 2008, the last date for which such
information was made available to us.
Name and Address of
Beneficial Owner
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Shares of Common Stock
Beneficially Owned
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Percent of
Class as of
October 31,
2008
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Sam Jacobsen
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341,536
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13.4%
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3541 Bishops Way
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Middleton, WI 53562
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Proposal 1
Amendment to our Restated Articles to increase our authorized common stock.
Background
We
recommend that our shareholders approve an amendment to our Amended and Restated Articles
of Incorporation to increase the number of shares of our common stock we are authorized to
issue to 25,000,000 from 8,000,000. The complete text of the form of amendment to the
Restated Articles is set forth in Exhibit A. As of October 31, 2008, (i) 2,545,546 shares
of our common stock were outstanding; (ii) 272,041 shares were reserved under our equity
incentive plans; and (iii) 1,444,233 shares are, or, in the case of shares not yet issued,
will need to be, reserved to be issued pursuant to our shareholder rights agreement.
Based
on the foregoing, 3,738,180 shares remain available. Of these shares, only 2,492,120 could
be issued, considering that issuance of these shares would require us to reserve
1,246,060
additional shares under our shareholder rights agreement.
Our
Board has approved the amendment and believes such action to be in the best interest of
our company and shareholders for the following reasons. This action will provide us with
flexibility in the future by assuring the availability of sufficient authorized but
unissued common stock for general corporate purposes, including stock dividends,
financings, mergers and acquisitions and employee equity incentive awards. At the date of
mailing of this proxy statement, we do not have any plans to issue any additional shares
of our common stock, other than the possible issuance of reserved shares under our 2001
and 2006 Equity Incentive Plans and in connection with warrants that may be issued in
connection with our potential participation in the U.S. Department of Treasurys
Capital Purchase Program. See Proposal 2.
Shareholders
do not have any preemptive rights to subscribe for any shares of our common stock,
including those authorized by the amendment. Any of the authorized shares of our common
stock may be issued by action of our Board without further action by shareholders, other
than as may be required by the rules of the NASDAQ Stock Market and the Wisconsin Business
Corporation Law. (In general, the rules of the NASDAQ Stock Market would require
shareholder approval only for shares issued in certain new equity compensation programs,
and in business combinations and certain non-public offerings in which, in both cases, the
shares issued will equal or exceed 20% of our shares outstanding prior to the combination
or offering.) The Wisconsin Business Corporation Law would require shareholder approval
only for shares issued in certain business combinations. The issuance of common stock
other than on a pro rata basis to all shareholders may have the effect of diluting the
ownership interest and voting power of our existing shareholders, as well as our earnings
per share. Similarly, the shares authorized by the amendment could be used to discourage
or make more difficult a non-negotiated attempt to obtain control of our company. This
effect could occur through issuance of additional shares of our common stock that would
dilute the interest in the equity and voting power of a party seeking to gain control,
including pursuant to our shareholder rights agreement. However, the increase in the
number of authorized shares of our common stock has not been proposed for an
anti-takeover-related purpose, and we are not aware of any current efforts to obtain
control of us or to effect large accumulations of our voting stock.
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Shareholder Vote Required
The
affirmative vote of a majority of the votes cast on the amendment is required for approval
of the amendment. Abstentions and broker non-votes will not be counted as votes cast.
YOUR
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF PROPOSAL 1. PROXIES WILL BE VOTED FOR
APPROVAL UNLESS A SHAREHOLDER GIVES OTHER INSTRUCTIONS ON THE PROXY CARD.
Proposal 2
Amendment to
our Restated Articles authorizing our company to (i) issue 2,500,000 shares of one or more
new series of preferred stock, par value of $0.01 per share, which preferred stock shall
have the relative rights, preferences and limitations as determined from time to time by
our Board of Directors and (ii) terminate the existing authorization to issue Series A and
Series B preferred stock.
Background
We
recommend that our shareholders approve an amendment to Article IV and Article V of our
Restated Articles. The amendment, if approved, would amend Article IV to (i) authorize our
company to issue up to 2,500,000 shares of one or more new series of a new class of
preferred stock, par value of $0.01 per share and (ii) terminate the existing
authorization to issue 10,000 shares of Series A and 10,000 shares Series B preferred
stock.
The
new class of preferred stock is a type of stock sometimes called blank check
preferred stock because, the amendment, if approved, would provide that our Board would
have the authority to designate the relative rights, preferences and limitations and
restrictions of each series of the new class of preferred stock. The complete text of the
form of amendment to the Restated Articles is set forth in Exhibit A.
Purpose of the Preferred
Stock
Our
Board has approved this amendment and believes such action is in the best interests of our
company and shareholders for several reasons. One of the reasons for the amendment is to
give us the ability to sell shares of preferred stock to the U.S. Department of the
Treasury under the Capital Purchase Program, which we refer to as the CPP. Under the CPP,
the Treasury will purchase senior preferred stock of qualifying bank holding companies on
what our Board considers to be favorable terms.
We
have submitted an application to participate in the CPP pursuant to which we would issue
preferred shares under the CPP with an aggregate liquidation preference of no less than $9
million and no more than $27 million. As of the date of this proxy statement, we have
not yet been informed of the status of our application. It is possible that our
application will not be accepted or, even if it is accepted, that we may decide not to
participate in the CPP. If we are accepted and do participate, then we estimate our net
proceeds from issuing senior preferred stock to the Treasury under the CPP would be
between approximately $9 million and $27 million. The Treasury and the Federal Deposit
Insurance Corporation, or FDIC, are considering our application, but they are not required
to accept our application, and the estimated proceeds of the sale of securities under the
CPP are not guaranteed. We believe our non-participation in the CPP would not have a
material adverse effect on our capital resources, results of operations or liquidity.
Without the additional capital, we anticipate that our growth may be slowed, but we are
well capitalized, profitable and have policies and procedures in place which we believe
allow us to adequately maintain our liquidity. Our consolidated total capital and Tier 1
capital at September 30, 2008 were $108.9 million and $59.1 million, respectively, and our
ratios of consolidated total capital and Tier 1 capital to risk-weighted assets at
September 30, 2008 were 12.03% and 6.52%, respectively, compared to minimum ratios
required for capital adequacy purposes of 8.0% and 4.0%, respectively. See Estimated Pro
Forma Impact of the Capital Purchase Program below.
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While
we believe that our capital base does not require the issuance of preferred stock under
the CPP, participation in the CPP would provide us with additional equity capital which
would support and enhance our long-term growth strategy. This additional capital would
provide us with increased resources and flexibility to continue to invest in our growth
markets, pursue strategic opportunities and maintain our strong history of expanding
existing client relationships and developing new relationships. Although we do not
currently have specific plans for the use of the net proceeds from the issuance of
preferred stock, we anticipate using such proceeds to support our plans to maintain higher
capital levels during these uncertain economic times and to continue our disciplined
growth strategy through extending financing to new and existing clients and funding
selected potential acquisitions.
We will not be eligible to participate in the CPP if
this proposal is not approved by our shareholders at the special meeting.
Our
proposal to create a class of blank check preferred stock would additionally assure that
we have shares of preferred stock available for general corporate needs and would provide
our Board with the necessary flexibility to issue preferred stock in connection with
private placements or public offerings of equity securities or other financings and as
consideration in share exchanges, mergers or other acquisitions without the expense and
delay associated with obtaining shareholder approval of an amendment to our Restated
Articles establishing the terms of the preferred stock at the time of such action. Our
Board believes that such enhanced ability to respond to opportunities and favorable market
conditions before the opportunity or conditions pass is in the best interests of our
company and shareholders.
Effect of the Preferred
Stock Upon Holders of Common Stock
The
actual effect of the issuance of any shares of preferred stock upon the rights of the
holders of our common stock cannot be determined until our Board determines the specific
rights of the holders of such preferred stock. However, the effects might include, among
other things, restricting dividends on our common stock, diluting the voting power of our
common stock, diluting the equity interest of the existing holders of our common stock if
the preferred stock is convertible into common stock, reducing the market price of our
common stock, reducing our earnings per share, or impairing the liquidation rights of our
common stock.
If
this proposal is approved and we issue preferred shares under the CPP to the Treasury,
such shares (the CPP shares) would qualify as Tier 1 capital and would rank
senior to our common stock but junior to all of our indebtedness, including our
outstanding junior subordinated notes. Our capitalization as of September 30, 2008 on an
historical basis and on a pro forma basis, adjusted to reflect the issuance of CPP shares
under the CPP with either the $9 million minimum liquidation preference or the $27 million
maximum liquidation preference, is summarized in Estimated Pro Forma Impact of
the Capital Purchase Program below:
The
CPP shares would pay a cumulative dividend rate of 5% per annum for the first five years
after issuance and would reset to a rate of 9% per annum after year five. The dividend
would be payable quarterly in arrears. The CPP shares would be callable at the liquidation
preference after three years. Prior to the end of three years, we could redeem the CPP
shares with the proceeds from a qualifying equity offering of any Tier 1 perpetual
preferred stock or common stock.
The
CPP shares would be non-voting, other than class voting rights on:
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any
authorization or issuance of shares ranking senior to the CPP shares;
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any
amendment to the rights of CPP shares; or
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any
merger, exchange or similar transaction which would adversely affect the rights of the
CPP shares.
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If we would fail to pay in full
dividends on the CPP shares for six dividend periods, whether or not consecutive, the
holders of the CPP shares would have the right to elect two directors to our Board, and
we would be required to increase the size of our Board to accommodate the two directors
if necessary. The right to elect directors would end when we have paid dividends in full
for four consecutive dividend periods.
In
conjunction with the purchase of the CPP shares, the Treasury would also receive warrants
to purchase our common stock with an aggregate market price equal to 15% of the aggregate
liquidation preference of the CPP shares. The warrants would have a term of 10 years, and
the exercise price of the warrants would be the market price of our common stock at the
time of issuance, calculated on a 20- trading day trailing average. As of November 14,
2008, the 20-trading day trailing average market price of our common stock was $15.82. The
issuance of the warrants may have a dilutive effect on earnings per share. This estimated
pro forma dilutive effect is set forth in Estimated Pro Forma Impact of the
Capital Purchase Program.
To
be eligible to participate in the CPP, we would have to agree to register with the SEC the
public resale of the CPP shares, the warrants and the underlying common stock purchasable
upon exercise of the warrants (i) upon the request of the Treasury or (ii) at the time or
times we register the sale of our equity securities on a form of registration statement on
which the sale of those securities by the Treasury could be registered. We would also
agree not to increase the dividend on our common stock or repurchase our common stock or
other securities junior to the CPP shares without the Treasurys consent until the
earlier of (i) the time at which the Treasury no longer owns any CPP shares or warrants or
(ii) the third anniversary of the issuance of the securities. We would also be required to
maintain certain limits on our executive compensation during the period in which the CPP
shares are outstanding, including:
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ensuring
that incentive compensation for our senior executive officers does not encourage
unnecessary and excessive risks that threaten the value of our company;
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requiring
a clawback of any bonus or incentive compensation paid to a senior executive officer
based on statements of earnings, gains or other criteria that are later proven to be
materially inaccurate;
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prohibiting
us from making any golden parachute payment to a senior executive officer; and
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agreeing
not to deduct for tax purposes executive compensation in excess of $500,000 in any year
for each senior executive officer.
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We have reviewed our executive
compensation arrangements and do not anticipate that it will be necessary to modify any
employee plans or contracts to comply with the above limits on executive compensation,
except that, prior to the issuance of the CPP shares, we would amend our existing bonus
and incentive compensation plans to provide for clawbacks of compensation paid to
executive officers based on statements of earnings, gains or other criteria that are
later proven to be materially inaccurate during the period in which the CPP shares are
outstanding. Within 90 days of the issuance of the CPP shares and warrants, and at least
annually thereafter, our compensation committee will review our incentive compensation
plans with our senior risk officers to ensure that incentive compensation for our senior
executive officers does not encourage unnecessary and excessive risks that threaten the
value of our company.
Estimated Pro Forma
Impact of the Capital Purchase Program
The
following unaudited pro forma condensed consolidated financial statements set forth our
financial position as of September 30, 2008 and results of operations for the nine months
ended September 30, 2008 and the year ended December 31, 2007:
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on
an actual basis; and
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on
an as adjusted basis giving effect to the sale of CPP shares with an aggregate
liquidation preference of $9 million and $27 million, which represent 1% and 3% of our
risk-weighted assets, respectively, together with related warrants, reflecting our
minimum and maximum potential participation levels in the CPP.
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The
pro forma financial information below assumes that we received proceeds from the sale of
the CPP shares and related warrants to the Treasury and sold the funds in the federal
funds market during the periods presented. This pro forma impact does not reflect our
ultimate planned use of the sale proceeds because such specific uses are not currently
subject to quantification. If the Treasury invests in our preferred stock and warrants, we
currently expect to use the proceeds to continue to invest in our growth markets, pursue
strategic opportunities and maintain our strong history of expanding existing client
relationships and developing new relationships. We believe that the financial benefit from
such investments will be significant, but we have not included the benefit in the pro
forma financial information.
The
carrying value of the CPP shares and warrants are based on their estimated relative fair
values as of the issue date. We estimated the fair value of the warrants using a
Black-Scholes methodology. That methodology includes assumptions regarding our common
stock price, dividend yield, stock price volatility and a risk-free rate. We estimated the
fair value of the CPP shares by reducing the expected gross proceeds from the sale of the
CPP shares by the amount allocated to the warrants.
The
net income attributable to the CPP shares includes the 5% annual cash dividend to be paid
plus the accretion up to the liquidation preference on a straight-line basis over the
five-year expected life of the CPP shares.
The
number of shares of our common stock that would be issuable upon the exercise of the
warrants to be issued in conjunction with the CPP shares would be 85,335 and 256,005,
assuming the issuance of CPP shares with a liquidation preference of $9 million and $27
million, respectively. The pro forma average diluted shares outstanding includes the
estimated effect of the exercise of the warrants at the $15.82 exercise price, based on a
20- trading day trailing average market price of our common stock calculated as of
November 14, 2008, and accounted for under the treasury stock method.
The
following unaudited pro forma condensed consolidated financial statements are presented
for illustration purposes only and in accordance with the assumptions set forth above and
contained in the footnotes to the unaudited pro forma financial statements. The pro forma
financial statements include various estimates and are not necessarily indicative of the
operating results or financial position that would have occurred had the sale of the CPP
shares and related warrants occurred as of the assumed dates or of the operating results
or financial position in the future.
The
unaudited pro forma condensed consolidated financial statements should be read in
conjunction with the information under Managements Discussion and Analysis of
Financial Condition and Results of Operations, our unaudited condensed consolidated
financial statements for the nine months ended September 30, 2008 and related notes and
other financial information included in our Quarterly Report on Form 10-Q for the quarter
then ended and the information under Managements Discussion and Analysis of
Financial Condition and Results of Operations, our audited consolidated financial
statements for the year ended December 31, 2007 and related notes and other financial
information included in our Annual Report on Form 10-K for the year then ended.
8
Unaudited Condensed
Consolidated Balance Sheet
|
As of September 30, 2008
|
(Dollars in thousands except share data)
|
Actual
|
Minimum (3)
|
Maximum (3)
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
|
$
|
23,494
|
|
$
|
23,494
|
|
$
|
23,494
|
|
Short-term investments
(1)
|
|
|
|
2,159
|
|
|
11,159
|
|
|
29,159
|
|
Securities available-for-sale
|
|
|
|
107,446
|
|
|
107,446
|
|
|
107,446
|
|
Loans and leases receivable, net of allowance for
|
|
|
loan and lease losses of $10,816
|
|
|
|
828,357
|
|
|
828,357
|
|
|
828,357
|
|
Leasehold improvements and equipment, net
|
|
|
|
1,551
|
|
|
1,551
|
|
|
1,551
|
|
Foreclosed properties
|
|
|
|
3,490
|
|
|
3,490
|
|
|
3,490
|
|
Cash surrender value of bank-owned life insurance
|
|
|
|
15,306
|
|
|
15,306
|
|
|
15,306
|
|
Investment in Federal Home Loan Bank stock, at cost
|
|
|
|
2,367
|
|
|
2,367
|
|
|
2,367
|
|
Goodwill and other intangibles
|
|
|
|
2,768
|
|
|
2,768
|
|
|
2,768
|
|
Accrued interest and other assets
|
|
|
|
11,449
|
|
|
11,449
|
|
|
11,449
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
$
|
998,387
|
|
$
|
1,007,387
|
|
$
|
1,025,387
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
Deposits
|
|
|
$
|
831,289
|
|
$
|
831,289
|
|
$
|
831,289
|
|
Federal Home Loan Bank and other borrowings
|
|
|
|
89,829
|
|
|
89,829
|
|
|
89,829
|
|
Junior subordinated notes
|
|
|
|
10,315
|
|
|
10,315
|
|
|
10,315
|
|
Accrued interest payable and other liabilities
|
|
|
|
15,215
|
|
|
15,215
|
|
|
15,215
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
|
946,648
|
|
|
946,648
|
|
|
946,648
|
|
|
|
|
|
|
|
|
Stockholders equity:
(2)
|
|
|
Preferred stock, $0.01 par value; 2,500,000 shares
|
|
|
authorized as adjusted, 9,000 and 27,000 shares
|
|
|
issued and outstanding as adjusted
|
|
|
|
--
|
|
|
8,627
|
|
|
25,881
|
|
Common stock. $0.01 par value; 25,000,000 shares
|
|
|
authorized as adjusted, 2,616,424 shares issued
|
|
|
and 2,545,546 outstanding
|
|
|
|
26
|
|
|
26
|
|
|
26
|
|
Additional paid-in capital
|
|
|
|
23,912
|
|
|
23,912
|
|
|
23,912
|
|
Warrants
|
|
|
|
--
|
|
|
373
|
|
|
1,119
|
|
Retained earnings
|
|
|
|
29,316
|
|
|
29,316
|
|
|
29,316
|
|
Accumulated other comprehensive loss
|
|
|
|
(90
|
)
|
|
(90
|
)
|
|
(90
|
)
|
Treasury stock, 70,878 shares, at cost
|
|
|
|
(1,425
|
)
|
|
(1,425
|
)
|
|
(1,425
|
)
|
|
|
|
|
|
|
|
Total stockholders' equity
|
|
|
|
51,739
|
|
|
60,739
|
|
|
78,739
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity
|
|
|
$
|
998,387
|
|
$
|
1,007,387
|
|
$
|
1,025,387
|
|
|
|
|
|
|
|
|
Capital Ratios
|
|
|
Total Capital
|
|
|
$
|
108,876
|
|
$
|
117,876
|
|
$
|
135,876
|
|
Tier 1 Capital
|
|
|
|
59,060
|
|
|
68,060
|
|
|
86,060
|
|
Ratio of total capital to risk-weighted assets
|
|
|
|
12.03
|
%
|
|
13.03
|
%
|
|
15.02
|
%
|
Ratio of Tier 1 capital to risk-weighted assets
|
|
|
|
6.52
|
%
|
|
7.52
|
%
|
|
9.51
|
%
|
(1)
Reflects the investment of the proceeds from the sale of the CPP shares and
related warrants in federal funds sold.
(2)
Reflects the approval of both Proposal 1 and Proposal 2 and the issuance of the
preferred shares and warrants to the Treasury. The proceeds from the sale of the
CPP shares and warrants are allocated to the CPP shares and warrants based on
their estimated relative fair values. The fair value of the warrants was
estimated using a Black-Scholes methodology. The remainder of the expected gross
proceeds were allocated to the CPP shares.
(3) The proforma financial
information reflects the issuance of a minimum of $9,000 and a maximum of $27,000 of CPP
shares and related warrants.
9
Unaudited Condensed
Consolidated Statement of Income
|
For the Nine Months Ended September 30, 2008
|
(Dollars in thousands except share data)
|
Actual
|
Minimum (3)
|
Maximum (3)
|
Interest income
(1)
|
|
|
$
|
44,618
|
|
$
|
44,780
|
|
$
|
45,104
|
|
Interest expense
|
|
|
|
25,387
|
|
|
25,387
|
|
|
25,387
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
19,231
|
|
|
19,393
|
|
|
19,717
|
|
Provision for loan and lease losses
|
|
|
|
1,314
|
|
|
1,314
|
|
|
1,314
|
|
|
|
|
|
|
|
|
Net interest income after provision for
|
|
|
loan
|
|
|
and lease losses
|
|
|
|
17,917
|
|
|
18,079
|
|
|
18,403
|
|
|
|
|
|
|
|
|
Non-interest income
|
|
|
|
3,700
|
|
|
3,700
|
|
|
3,700
|
|
Non-interest expense
|
|
|
|
16,600
|
|
|
16,600
|
|
|
16,600
|
|
|
|
|
|
|
|
|
Net income before tax expense
|
|
|
|
5,017
|
|
|
5,179
|
|
|
5,503
|
|
Income tax expense
|
|
|
|
2,007
|
|
|
2,071
|
|
|
2,198
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
3,010
|
|
$
|
3,108
|
|
$
|
3,305
|
|
|
|
|
|
|
|
|
Net income attributable to preferred shareholders
|
|
|
|
--
|
|
|
393
|
|
|
1,180
|
|
Net income available to common shareholders
(2)
|
|
|
$
|
3,010
|
|
$
|
2,715
|
|
$
|
2,125
|
|
|
|
|
|
|
|
|
Net interest margin
(1)
|
|
|
|
2.77
|
%
|
|
2.77
|
%
|
|
2.76
|
%
|
Earnings per common share - basic
|
|
|
$
|
1.24
|
|
$
|
1.12
|
|
$
|
0.88
|
|
Earnings per common share - diluted
|
|
|
|
1.24
|
|
|
1.12
|
|
|
0.87
|
|
Basic average common shares
|
|
|
|
2,428,271
|
|
|
2,428,271
|
|
|
2,428,271
|
|
Diluted average common shares
|
|
|
|
2,429,673
|
|
|
2,434,889
|
|
|
2,445,322
|
|
(1)
Interest income and net interest margin increase on a pro forma basis as a
result of using the proceeds from the sale of the CPP shares and related
warrants to purchase federal funds sold.
(2)
Net income available to common shareholders decreases on a pro forma basis as a
result of the 5% annual cash dividend to be paid on the CPP shares plus the
accretion up to the liquidation preference, partially offset by the increase in
interest income.
(3) The proforma financial
information reflects the issuance of a minimum of $9,000 and a maximum of $27,000 of CPP
shares and related warrants.
10
Unaudited Condensed
Consolidated Statement of Income
|
For the Year Ended December 31, 2007
|
(Dollars in thousands except share data)
|
Actual
|
Minimum (3)
|
Maximum (3)
|
Interest income
(1)
|
|
|
$
|
59,488
|
|
$
|
59,940
|
|
$
|
60,843
|
|
Interest expense
|
|
|
|
36,280
|
|
|
36,280
|
|
|
36,280
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
23,208
|
|
|
23,660
|
|
|
24,563
|
|
Provision for loan and lease losses
|
|
|
|
2,904
|
|
|
2,904
|
|
|
2,904
|
|
|
|
|
|
|
|
|
Net interest income after provision for
|
|
|
loan
|
|
|
and lease losses
|
|
|
|
20,304
|
|
|
20,756
|
|
|
21,659
|
|
|
|
|
|
|
|
|
Non-interest income
|
|
|
|
4,416
|
|
|
4,416
|
|
|
4,416
|
|
Non-interest expense
|
|
|
|
19,657
|
|
|
19,657
|
|
|
19,657
|
|
|
|
|
|
|
|
|
Net income before tax expense
|
|
|
|
5,063
|
|
|
5,515
|
|
|
6,418
|
|
Income tax expense
|
|
|
|
1,807
|
|
|
1,984
|
|
|
2,338
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
3,256
|
|
$
|
3,531
|
|
$
|
4,080
|
|
|
|
|
|
|
|
|
Net income attributable to preferred shareholders
|
|
|
|
--
|
|
|
525
|
|
|
1,574
|
|
Net income available to common shareholders
(2)
|
|
|
$
|
3,256
|
|
$
|
3,006
|
|
$
|
2,506
|
|
|
|
|
|
|
|
|
Net interest margin
(1)
|
|
|
|
2.87
|
%
|
|
2.90
|
%
|
|
2.94
|
%
|
Earnings per common share - basic
|
|
|
$
|
1.33
|
|
$
|
1.23
|
|
$
|
1.02
|
|
Earnings per common share - diluted
|
|
|
|
1.32
|
|
|
1.21
|
|
|
1.00
|
|
Basic average common shares
|
|
|
|
2,453,157
|
|
|
2,453,157
|
|
|
2,453,157
|
|
Dilutive average common shares
|
|
|
|
2,459,236
|
|
|
2,477,340
|
|
|
2,513,548
|
|
(1)
Interest income and net interest margin increase on a pro forma basis as a
result of using the proceeds from the sale of the CPP shares and related
warrants to purchase federal funds sold.
(2)
Net income available to common shareholders decreases on a pro forma basis as a
result of the 5% annual cash dividend to be paid on the CPP shares plus the
accretion up to the liquidation preference, partially offset by the increase in
interest income.
(3) The proforma financial
information reflects the issuance of a minimum of $9,000 and a maximum of $27,000 of CPP
shares and related warrants.
Anti-Takeover Effects of
the Preferred Stock
Any
issuance of preferred stock with voting rights could, under certain circumstances, have
the effect of delaying or of preventing a change in control by increasing the number of
outstanding shares entitled to vote and by increasing the number of votes required to
approve a change in control. Shares of voting or convertible preferred stock could be
issued, or rights to purchase such shares could be issued, to render more difficult or
discourage an attempt to obtain control of us by means of a tender offer, proxy contest,
merger or otherwise. Such issuances or potential issuances could therefore deprive
shareholders of benefits that could result from an attempt for a person to acquire
control, such as the realization of a premium over the market price that such an attempt
could cause. However, the preferred stock has not been proposed for an
anti-takeover-related purpose, and we are not aware of any current efforts to obtain
control of us or to effect large accumulations of our voting stock.
11
Shareholder Vote Required
The
affirmative vote of a majority of the votes cast on the amendment is required for approval
of the amendment. Abstentions and broker non-votes will not be counted as votes cast.
YOUR
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF PROPOSAL 2. PROXIES WILL BE VOTED FOR
APPROVAL UNLESS A SHAREHOLDER GIVES OTHER INSTRUCTIONS ON THE PROXY CARD.
FORWARD LOOKING
STATEMENTS
This
proxy statement, and the information incorporated by reference in this proxy statement,
contains forward-looking statements intended to qualify for the safe harbor
from liability established by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include those that express a plan, belief, expectation,
estimation, anticipation, intent, contingency, future development or similar expression,
and can generally be identified as forward-looking because they include words such as
believes, anticipates, expects, could,
should, or words of similar meaning. Statements that describe our objectives
or goals are also forward-looking statements. The forward-looking statements included or
incorporated by reference in this proxy statement involve significant risks and
uncertainties, and a number of factors, both foreseen and unforeseen, could cause actual
results to differ materially from our current expectations. We urge you not to place undue
reliance on forward-looking statements, which speak only as of the date of this document
or the date of the incorporated document, as applicable. We undertake no obligation to
update forward-looking statements to reflect subsequent events or circumstances.
INCORPORATION OF
FINANCIAL INFORMATION
The
SEC rules permit us to incorporate by reference information into this proxy statement,
which means that we can disclose important information to shareholders by referring
shareholders to another document without stating that information in this document. Any
information incorporated by reference into this proxy statement is considered to be part
of this proxy statement from the date we file that document. Any reports we file with the
SEC after the date of this proxy statement will automatically update, and where
applicable, supersede any information contained in this proxy statement or incorporated by
reference into this proxy statement.
We
incorporate by reference the following items of Part II of our Annual Report on Form 10-K
for the fiscal year ended December 31, 2007:
|
|
Item
6. Selected Financial Data;
|
|
|
Item
7. Management's Discussion and Analysis of Financial Condition and Results of Operations;
|
|
|
Item
7A. Quantitative and Qualitative Disclosure about Market Risk; and
|
|
o
|
Item
8. Financial Statements and Supplementary Data.
|
We
also incorporate by reference the following items of Part I of the Companys
Quarterly Report on Form 10-Q filed with the SEC for the period ended September 30, 2008:
|
|
Item
1. Unaudited Condensed Consolidated Financial Statements;
|
|
|
Item
2. Managements Discussion and Analysis of Financial Condition and Results of
Operations; and
|
|
|
Item
3. Quantitative and Qualitative Disclosures about Market Risk.
|
12
EXHIBIT A
TEXT OF AMENDMENTS
Common Stock Amendment
Article
IV of the Corporations Amended and Restated Articles of Incorporation is amended and
restated in its entirety to read as follows:
|
The
number of shares of capital stock which the Corporation shall have the authority to issue
is as follows:
|
|
Twenty-five
million (25,000,000) shares of common stock, par value of $0.01 per share; and
|
|
[Reference
to preferred stock omitted as it relates to the preferred stock amendment. See Preferred
Stock Amendment below.]
|
|
Except
to the extent required by governing law, rule or regulation, the shares of capital stock
may be issued from time to time by the Board of Directors without further approval of the
shareholders of the Corporation.
|
Preferred Stock Amendment
Article
IV of the Corporations Amended and Restated Articles of Incorporation is amended and
restated in its entirety to read as follows:
|
The
number of shares of capital stock which the Corporation shall have the authority to issue
is as follows:
|
|
[Reference
to common stock omitted as it relates to the common stock amendment. See Common
Stock Amendment above.]
|
|
Two
million five hundred thousand (2,500,000) shares of preferred stock, par value of $0.01
per share.
|
|
Except
to the extent required by governing law, rule or regulation, the shares of capital stock
may be issued from time to time by the Board of Directors without further approval of the
shareholders of the Corporation.
|
Paragraph
B of Article V of the Corporations Amended Restated Articles of Incorporation is
amended and restated in its entirety to read as follows:
|
B.
Preferred Stock
. The Board of Directors of the Corporation is
authorized, to the full extent permitted under the Wisconsin Business
Corporation Law and the provisions of this Paragraph B, to provide
for the issuance of the preferred stock in series, each of such
series to be distinctively designated, and to have such redemption
rights, dividend rights, rights on dissolution or distribution of
assets, conversion or exchange rights, voting powers, designations,
preferences and relative participating, optional or other special
rights, if any, and such qualifications, limitations or restrictions
thereof as shall be provided by the Board of Directors of the
Corporation consistent with the provisions of this Paragraph B.
|
|
Before
any dividends shall be paid or set apart for payment upon shares of common stock, the
holders of each series of preferred stock shall be entitled to receive dividends at the
rate (which may be fixed or variable) and at such times as specified in the particular
series. The holders of shares of preferred stock shall have no rights to participate with
the holders of shares of common stock in any distribution of dividends in excess of the
preferential dividends, if any, fixed for such preferred stock.
|
13
|
In
the event of any voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the holders of shares of each series of preferred stock shall be entitled to
receive out of the assets of the Corporation in money or moneys worth the
preferential amount, if any, specified in the particular series for each share at the time
outstanding together with all accrued but unpaid dividends thereon, before any of such
assets shall be paid or distributed to holders of common stock. The holders of preferred
stock shall have no rights to participate with the holders of common stock in the assets
of the Corporation available for distribution to shareholders in excess of the
preferential amount, if any, fixed for such preferred stock.
|
|
The
holders of preferred stock shall have only such voting rights as are fixed for shares of
each series by the Board of Directors pursuant to this Paragraph B or are provided, to the
extent applicable, by the Wisconsin Business Corporation Law.
|
14
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