SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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 under Rule 14a-12.
Lakeland Financial Corporation
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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)(1) 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:
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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.
(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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LAKELAND FINANCIAL CORPORATION
P.O. Box 1387 o Warsaw, Indiana 46581 o (574) 267-6144
March 11, 2005
Dear Shareholder:
On behalf of the board of directors and management of Lakeland
Financial Corporation, we cordially invite you to attend the annual meeting of
shareholders of Lakeland Financial Corporation to be held at 12:00 p.m. on
April 12, 2005, at Westminster Hall located at 200 Seminary Drive in Winona
Lake, Indiana. The accompanying notice of annual meeting of shareholders and
proxy statement discuss the business to be conducted at the meeting. We have
also enclosed a copy of our 2004 summary annual report to shareholders and a
copy of our annual report on Form 10-K for your review. At the meeting we will
report on operations and the outlook for the year ahead.
Our Nominating and Corporate Governance Committee has nominated four
persons to serve as directors, each of whom are incumbent directors.
Additionally, our Audit Committee has selected, and we recommend, that you
ratify the selection of Crowe Chizek and Company LLC to continue as our
independent registered public accounting firm for the year ending December 31,
2005. We recommend you vote your shares for the director nominees and in favor
of the ratification of our accountants.
We encourage you to attend the meeting in person. Please return the
enclosed RSVP card if you plan to attend. Whether or not you plan to attend,
however, please complete, date, sign and return the enclosed proxy card in the
enclosed envelope. This will assure that your shares are represented at the
meeting.
We look forward with pleasure to seeing and visiting with you at the
meeting.
Very truly yours,
/s/Michael L. Kubacki
Michael L. Kubacki
Chairman of the Board, President and
Chief Executive Officer
LAKELAND FINANCIAL CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 12, 2005
To the shareholders:
The annual meeting of the shareholders of Lakeland Financial
Corporation will be held on Tuesday, April 12, 2005, at 12:00 p.m. at
Westminster Hall located at 200 Seminary Drive in Winona Lake, Indiana, for
the following purposes:
1. to elect four members of the board of directors;
2. to ratify the appointment of Crowe Chizek and Company LLC as
independent registered public accounting firm for the fiscal
year ending December 31, 2005; and
3. to transact such other business as may properly be brought
before the meeting and any adjournments or postponements of
the meeting.
Only shareholders of record on our books at the close of business on
February 23, 2005, the record date for the annual meeting, will be entitled to
vote at the annual meeting. In the event there are an insufficient number of
votes for a quorum or to approve or ratify any of the foregoing proposals at
the time of the annual meeting, the meeting may be adjourned or postponed in
order to permit us to further solicit proxies.
By order of the board of directors
/s/Michael L. Kubacki
Michael L. Kubacki
Chairman of the Board, President and
Chief Executive Officer
Warsaw, Indiana
March 11, 2005
PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED
ENVELOPE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING IN PERSON. WE HOPE THAT YOU WILL BE ABLE TO ATTEND THE MEETING, AND IF
YOU DO YOU MAY VOTE YOUR STOCK IN PERSON IF YOU WISH. YOU MAY REVOKE THE PROXY
CARD AT ANY TIME PRIOR TO ITS EXERCISE.
LAKELAND FINANCIAL CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
April 12, 2005
Lakeland Financial Corporation, an Indiana corporation, with its
principal executive offices located in Warsaw, Indiana, is the holding company
for Lake City Bank. We also own all of the common securities of Lakeland
Statutory Trust II, a Connecticut business trust created for the issuance of
trust preferred securities. Lake City Bank owns all of the common stock of LCB
Investments Limited, a subsidiary formed in 1999 to manage a portion of the
Bank's securities portfolio.
This proxy statement is being furnished to shareholders in connection
with the solicitation by our board of directors of proxies to be used at the
annual meeting to be held at Westminster Hall, located at 200 Seminary Drive
in Winona Lake, Indiana on Tuesday, April 12, 2005 at 12:00 p.m., or at any
adjournments or postponements of the meeting. Our summary annual report to
shareholders, including the consolidated financial statements for the fiscal
year ended December 31, 2004 and a copy of our Form 10-K that we filed with
the Securities and Exchange Commission, accompanies this proxy statement,
which is first being mailed to shareholders on or about March 11, 2005.
The following is information regarding the meeting and the voting
process, presented in a question and answer format.
Why am I receiving this proxy statement and proxy card?
You are receiving a proxy statement and proxy card from us because on February
23, 2005, the record date for the annual meeting, you owned shares of Lakeland
Financial's common stock. This proxy statement describes the matters that will
be presented for consideration by the shareholders at the annual meeting. It
also gives you information concerning the matters to assist you in making an
informed decision.
When you sign the enclosed proxy card, you appoint the proxy holder as your
representative at the meeting. The proxy holder will vote your shares as you
have instructed in the proxy card, thereby ensuring that your shares will be
voted whether or not you attend the meeting. Even if you plan to attend the
meeting, you should complete, sign and return your proxy card in advance of
the meeting just in case your plans change.
If you have signed and returned the proxy card and an issue comes up for a
vote at the meeting that is not identified on the card, the proxy holder will
vote your shares, pursuant to your proxy, in accordance with his or her
judgment.
What matters will be voted on at the meeting?
You are being asked to vote on the election of four directors of Lakeland
Financial for a term expiring in 2008 and the ratification of the appointment
of Crowe Chizek and Company LLC as our independent registered public
accounting firm for the 2005 fiscal year. These matters are more fully
described in this proxy statement.
How do I vote?
You may vote either by mail or in person at the meeting. If you are a record
holder of shares, you may complete and sign the enclosed proxy card and mail
it in the enclosed pre-addressed envelope. No postage is required if mailed in
the United States. If you mark your proxy card to indicate how you want your
shares voted, your shares will be voted as you instruct.
If you sign and return your proxy card but do not mark the card to provide
voting instructions, the shares represented by your proxy card will be voted
"for" all four nominees named in this proxy statement and "for" the
ratification of the appointment of our auditors.
If you are a beneficial owner and a broker or other fiduciary is the record
holder (or in what is usually referred to as "street name"), then you received
this proxy statement from the record holder. The broker should have given you
instructions for directing how your broker should vote your shares. It will
then be your broker's responsibility to vote your shares for you in the manner
you direct.
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If you want to vote in person, please come to the meeting. We will distribute
written ballots to anyone who wants to vote at the meeting. Please note,
however, that if your shares are held in the name of your broker, you will
need to arrange to obtain a proxy from your broker in order to vote in person
at the meeting. Even if you plan to attend the annual meeting, you should
complete and return your proxy card in advance of the annual meeting in case
your plans change.
If I hold shares in the name of a broker, who votes my shares?
Under the rules of various national and regional securities exchanges, brokers
may generally vote on routine matters, such as the election of directors and
the ratification of independent registered public accounting firm, but cannot
vote on non-routine matters, such as an amendment to the certificate of
incorporation or the adoption of a stock incentive plan, unless they have
received voting instructions from the person for whom they are holding shares.
You should do this by carefully following the instructions your broker gives
you concerning their procedures.
What does it mean if I receive more than one proxy card?
It means that you have multiple holdings reflected in our stock transfer
records and/or in accounts with stockbrokers. Please sign and return ALL proxy
cards to ensure that all of your shares are voted.
What if I change my mind after I return my proxy card?
If you hold your shares in your own name, you may revoke your proxy and change
your vote at any time before the polls close at the meeting. You may do this
by:
o signing another proxy card with a later date and returning that proxy
card to our transfer agent at:
American Stock Transfer and Trust Company
59 Maiden Lane
New York, New York 10038;
o sending notice to us that you are revoking your proxy; or
o voting in person at the meeting.
If you hold your shares in the name of your broker and desire to revoke your
proxy, you will need to contact your broker to revoke your proxy.
How many votes do we need to hold the annual meeting?
A majority of the shares that are outstanding and entitled to vote as of the
record date must be present in person or by proxy at the meeting in order to
hold the meeting and conduct business.
Shares are counted as present at the meeting if the shareholder either:
o is present and votes in person at the meeting; or
o has properly submitted a signed proxy card or other form of proxy.
On February 23, 2005, the record date, there were 5,946,654 shares of common
stock issued and outstanding. Therefore, at least 2,973,328 shares need to be
present at the annual meeting.
What happens if a nominee is unable to stand for re-election?
The board may, by resolution, provide for a lesser number of directors or
designate a substitute nominee. In the latter case, shares represented by
proxies may be voted for a substitute nominee. Proxies cannot be voted for
more than four nominees. We have no reason to believe any nominee will be
unable to stand for re-election.
What options do I have in voting on each of the proposals?
You may vote "for" or "withhold authority to vote for" each nominee for
director. You may vote "for," "against" or "abstain" on any other proposal
that may properly be brought before the meeting.
How many votes may I cast?
Generally, you are entitled to cast one vote for each share of stock you owned
on the record date. The proxy card included with this proxy statement
indicates the number of shares owned by an account attributable to you.
How many votes are needed for each proposal?
The four individuals receiving the highest number of votes cast "for" their
election will be elected as directors of Lakeland Financial.
The ratification of the appointment of our independent registered public
accounting firm and all other matters must receive the affirmative vote of a
majority of the shares present in person or by proxy at the meeting and
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entitled to vote. Broker non-votes will not be counted as entitled to vote,
but will count for purposes of determining whether or not a quorum is present
on the matter.
Where do I find the voting results of the meeting?
We will announce voting results at the meeting. The voting results will also
be disclosed in our Form 10-Q for the quarter ended June 30, 2005.
Who bears the cost of soliciting proxies?
We will bear the cost of soliciting proxies. In addition to solicitations by
mail, officers, directors or employees of Lakeland Financial or its
subsidiaries may solicit proxies in person or by telephone. These persons will
not receive any special or additional compensation for soliciting proxies. We
may reimburse brokerage houses and other custodians, nominees and fiduciaries
for their reasonable out-of-pocket expenses for forwarding proxy and
solicitation materials to shareholders.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
the beneficial ownership of our common stock at February 23, 2005, by each
person known by us to be the beneficial owner of more than 5% of the
outstanding common stock, by each director or nominee, by each executive
officer named in the summary compensation table which can be found later in
this proxy statement, and by all directors and executive officers of Lakeland
Financial as a group. Beneficial ownership has been determined for this
purpose in accordance with Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), under which a person is deemed to be
the beneficial owner of securities if he or she has or shares voting power or
investment power in respect of such securities or has the right to acquire
beneficial ownership of securities within 60 days of February 23, 2005.
Name of Individual or Amount and Nature of Percent
Number of Individuals in Group Beneficial Ownership(1,2) of Class
5% Shareholders
Lakeland Financial Corporation 401(k) Plan 522,375(3) 8.78%
Post Office Box 1387
Warsaw, Indiana 46581-1387
Directors and Nominees
Robert E. Bartels, Jr. 100 *
L. Craig Fulmer 17,522(4) *
Michael L. Kubacki 79,257(5) 1.32%
Allan J. Ludwig 35,181(6) *
Charles E. Niemier 15,723(7) *
Emily E. Pichon 300 *
Richard L. Pletcher 14,038(8) *
Steven D. Ross 2,448 *
Donald B. Steininger 11,021(9) *
Terry L. Tucker 13,397(10) *
M. Scott Welch 8,440(11) *
Other Named Executive Officers
David M. Findlay 2,058 *
Charles D. Smith 46,136(12) *
Kevin L. Deardorff 15,015(13) *
Robert C. Condon 12,864 *
All directors and executive officers as a group
(19 persons) 296,207(14) 4.92%
*Indicates that the individual or entity owns less than one percent of
Lakeland Financial's common stock.
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(1) The total number of shares of common stock issued and outstanding on
February 23, 2005 was 5,946,654.
(2) The information contained in this column is based upon information
furnished to us by the persons named above and as shown on our transfer
records. The nature of beneficial ownership for shares shown in this
column, unless otherwise noted, represents sole voting and investment
power.
(3) This information has been supplied by Fidelity Investments which serves
as trustee of the trust for the plan. Participant employees of Lakeland
Financial and Lake City Bank exercise voting and investment power over
the shares held in their respective participant accounts. Lake City
Bank exercises sole investment power over those shares not allocated to
any participant account. On February 23, 2005, there were 305,328,
unallocated shares held for the plan.
(4) Includes 1,453 shares held by Mr. Fulmer's individual retirement
account, as to which shares he shares voting and investment power; 300
shares held by Mr. Fulmer's wife's individual retirement account, as to
which shares he shares voting and investment power; 2,100 options,
which are currently exercisable, over which Mr. Fulmer has no voting
power and sole investment power; and 6,551 shares credited to Mr.
Fulmer's account as of January 26, 2005 under the terms of the Amended
and Restated Lakeland Financial Corporation Directors Fee Deferral
Plan.
(5) Includes 100 shares owned by Mr. Kubacki's son and 300 shares held in a
trust in which he serves as co-trustee and 40,000 options, which are
currently exercisable, over which Mr. Kubacki has no voting power and
sole investment power.
(6) Includes 17,492 shares held by Ludwig Investments, as to which shares
Mr. Ludwig exercises voting and investment power; 8,000 shares held by
Mr. Ludwig's individual retirement account, as to which shares he
exercises voting and investment power; 2,000 shares held by Mr.
Ludwig's wife's retirement account, as to which shares Mr. Ludwig
disclaims any beneficial interest; 2,100 options, which are currently
exercisable, over which Mr. Ludwig has no voting power and sole
investment power; and 5,589 shares credited to Mr. Ludwig's account as
of January 26, 2005 under the terms of the Amended and Restated
Lakeland Financial Corporation Directors Fee Deferral Plan.
(7) Includes 2,465 shares held by Mr. Niemier's individual retirement
account, as to which shares he shares voting and investment power;
1,618 shares held by Mr. Niemier's wife's individual retirement
account, as to which shares he disclaims any beneficial interest; 1,848
shares held in Mr. Niemier's 401(k) plan, as to which shares he shares
voting and investment power; 1,175 options, which are currently
exercisable, over which Mr. Niemier has no voting power and sole
investment power; and 4,580 shares credited to Mr. Niemier's account as
of January 26, 2005 under the terms of the Amended and Restated
Lakeland Financial Corporation Directors Fee Deferral Plan.
(8) Includes 758 shares held by Mr. Pletcher's individual retirement
account. Also included are 508 shares held by Mr. Pletcher's wife's
individual retirement account, with respect to which shares Mr.
Pletcher disclaims any beneficial interest; 2,100 options, which are
currently exercisable, over which Mr. Pletcher has no voting power and
sole investment power; and 9,132 shares credited to Mr. Pletcher's
account as of January 26, 2005 under the terms of the Amended and
Restated Lakeland Financial Corporation Directors Fee Deferral Plan.
(9) Includes 700 shares held by Mr. Steininger's wife's individual
retirement account, as to which shares he shares voting and investment
power and 1,021 shares credited to Mr. Steininger's account as of
January 26, 2005 under terms of the Amended and Restated Lakeland
Financial Corporation Directors Fee Deferral Plan.
(10) Includes 2,100 options, which are currently exercisable, over which Mr.
Tucker has no voting power and sole investment power; and 6,017 shares
credited to Mr. Tucker's account as of January 26, 2005 under the terms
of the Amended and Restated Lakeland Financial Corporation Directors
Fee Deferral Plan.
(11) Includes 700 shares held by Mr. Welch's wife's individual retirement
account, as to which shares he shares voting and investment power;
1,175 options, which are currently exercisable, over which Mr. Welch
has no voting power and sole investment power; and 3,515 shares
credited to Mr. Welch's account as of January 26, 2005 under the terms
of the Amended and Restated Lakeland Financial Corporation Directors
Fee Deferral Plan.
(12) Includes 283 shares owned by Mr. Smith's wife, as to which shares he
disclaims any beneficial interest and 12,000 options, which are
currently exercisable, over which Mr. Smith has no voting power and
sole investment power.
(13) Includes 12,000 options, which are currently exercisable, over which
Mr. Deardorff has no voting power and sole investment power.
(14) This includes shares which have been allocated to executive officers
under the 401(k) plan through December 31, 2004.
ELECTION OF DIRECTORS
Shareholders will be entitled to elect four directors for a term
expiring in 2008 at the annual meeting. Our board is divided into three
classes of directors having staggered terms of three years. We have no
knowledge that any nominee will refuse or be unable to serve, but if any of
the nominees is unavailable for election, the holders of the proxies reserve
the right to substitute another person of their choice as a nominee when
voting at the meeting.
Set forth below is information concerning the nominees for election
and for each of Lakeland Financial's other directors, whose terms of office
will continue after the meeting, including the age, the year first elected as
a director and the other positions held by the person at Lakeland Financial
and Lake City Bank. The nominees, if elected at the annual meeting, will serve
as directors for a three-year term expiring in 2008, except as noted below. We
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recommend that shareholders vote "FOR" each of the nominees for director.
Unless authority to vote for the nominees is withheld, the shares represented
by the enclosed proxy card, if executed and returned, will be voted "FOR" the
election of the nominees.
NOMINEES
Director Positions with Lakeland
Name (age) Since Financial and Lake City Bank
Term Expires 2008
Robert E. Bartels, Jr. (age 40) 2002 Director of Lakeland Financial
and Lake City Bank
Michael L. Kubacki (age 53) 1998 President, Chief Executive
Officer and Director of
Lakeland Financial and
Lake City Bank
Steven D. Ross (age 50) 2000 Director of Lakeland Financial
and Lake City Bank
M. Scott Welch (age 44) 1998 Director of Lakeland Financial
and Lake City Bank
CONTINUING DIRECTORS
Term Expires 2006
Allan J. Ludwig (age 66) 1996 Director of Lakeland Financial
and Lake City Bank
Emily E. Pichon (age 41) 2002 Director of Lakeland Financial
and Lake City Bank
Richard L. Pletcher (age 63) 1992 Director of Lakeland Financial
and Lake City Bank
Term Expires 2007
L. Craig Fulmer (age 62) 1993 Director of Lakeland Financial
and Lake City Bank
Charles E. Niemier (age 49) 1998 Director of Lakeland Financial
and Lake City Bank
Donald B. Steininger (age 62) 2001 Director of Lakeland Financial
and Lake City Bank
Terry L. Tucker (age 64) 1988 Director of Lakeland Financial
and Lake City Bank
Except as noted above, all directors will hold office for the terms
indicated, or until their earlier death, resignation, removal or
disqualification, and until their respective successors are duly elected and
qualified. There are no arrangements or understandings between any of the
nominees, directors or executive officers and any other person pursuant to
which any of our nominees, directors or executive officers have been selected
for their respective positions. No nominee, member of the board of directors
or executive officer is related to any other nominee, member of the board of
directors or executive officer. No nominee or director is a director of
another "public corporation" (i.e. subject to the reporting requirements of
the Securities Exchange Act of 1934) or of any investment company, except for
Mr. Niemier, who is a director of Biomet, Inc.
The business experience of each of the nominees and continuing
directors for the past five years is as follows:
Mr. Bartels, Jr. is President and Chief Executive Officer of Martin's
Supermarkets, Inc., a regional supermarket chain headquartered in South Bend,
Indiana.
Mr. Fulmer is Chairman of Heritage Financial Group, Inc., a real
estate investment and management company based in Elkhart, Indiana.
Mr. Kubacki presently serves as Chairman, President and Chief
Executive Officer of Lakeland Financial and Lake City Bank. Prior to joining
Lakeland Financial in 1998, Mr. Kubacki served as Executive Vice President of
the Northern Trust Bank of California, NA.
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Mr. Ludwig is an entrepreneur and industrial developer in Elkhart,
Indiana.
Mr. Niemier is Senior Vice President - International Operations of
Biomet, Inc., which is a manufacturer of medical and orthopedic devices based
in Warsaw, Indiana. He also serves as a trustee of Valparaiso University.
Ms. Pichon is a director of the Cole Foundation, a private charitable
foundation focused on northeast Indiana education, economic development and
conservation based in Fort Wayne, Indiana.
Mr. Pletcher is President of Pletcher Enterprises, Inc., a holding
company located in Nappanee, Indiana, and Chief Executive Officer of its
principal subsidiary, Amish Acres, LLC, a heritage resort.
Mr. Ross is President of Bertsch Services, which is a regional food
service and vending company based in Warsaw, Indiana.
Mr. Steininger is President of Steininger Development, a real estate
development company based in Ft. Wayne, Indiana.
Mr. Tucker is President of Maple Leaf Farms, Inc., which is primarily
engaged in duck production, processing and sales, as well as the production
and sale of other food products and is headquartered in Milford, Indiana.
Mr. Welch is the Chief Executive Officer of Welch Packaging Group,
Inc., which is primarily engaged in producing industrial and point of purchase
packaging and is headquartered in Elkhart, Indiana.
In addition, the following individuals serve as executive officers of
Lakeland Financial and are named in the compensation tables included in this
proxy statement:
David M. Findlay, age 43, became an Executive Vice President and
Chief Financial Officer of Lakeland Financial and Lake City Bank in September,
2000. Prior to his arrival, Mr. Findlay served as the Chief Financial Officer
of Quality Dining, Inc., a publicly traded company with its headquarters in
South Bend, Indiana. Prior to that, he served in various capacities with The
Northern Trust Company in Chicago.
Charles D. Smith, age 60, presently serves as an Executive Vice
President of Lakeland Financial and Lake City Bank, positions he has held
since 2000. He has served as an officer of Lake City Bank since 1983.
Kevin L. Deardorff, age 43, presently serves as an Executive Vice
President of Lakeland Financial and Lake City Bank, positions he has held
since 2001. He has served as an officer of Lake City Bank since 1993.
Robert C. Condon, age 64, presently serves as an Executive Vice
President of Lakeland Financial and Lake City Bank, positions he has held
since 1999. Prior to that he was Managing Director of the Northern California
region of The Northern Trust Company for eight years. Before that he was Vice
President and Division Head for Trust Division A for The Northern Trust
Company in Chicago.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires that
our executive officers, directors and persons who own more than 10% of our
common stock file reports of ownership and changes in ownership with the
Securities and Exchange Commission. They are also required to furnish us with
copies of all Section 16(a) forms they file. Based solely on our review of the
copies of such forms, and, if appropriate, representations made to us by any
reporting person concerning whether a Form 5 was required to be filed for
2004, we are not aware that any of our directors, executive officers or 10%
shareholders failed to comply with the filing requirements of Section 16(a)
during 2004 except for Mr. Fulmer and Mr. Pletcher, who each did not timely
file one report concerning an acquisition of our common stock totaling 680 and
300, respectively.
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CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
General
There are currently eleven directors serving on our board of
directors. Generally, the board oversees our business and monitors the
performance of our management. In accordance with our corporate governance
procedures, the board does not involve itself in the day-to-day operations of
Lakeland Financial, which is monitored by our executive officers and
management. Our directors fulfill their duties and responsibilities by
attending regular meetings of the board, which are held on a monthly basis,
and through committee membership, which is discussed below. Our directors also
discuss business and other matters with Mr. Kubacki, our President and Chief
Executive Officer, other key executives and our principal external advisers
(legal counsel, auditors and other consultants). All members of our board of
directors also serve as members of Lake City Bank's board of directors.
With the exception of Mr. Kubacki, all of our current directors are
"independent" as defined by the Nasdaq Stock Market, Inc. and the board has
determined that the independent directors do not have other relationships with
us that prevent them from making objective, independent decisions. The board
of directors has established an Audit Committee, a Nominating and Corporate
Governance Committee and a Compensation Committee, among other committees. The
current charters of each of these committees are available on our website at
www.lakecitybank.com. Also posted on the web site is a general description
regarding our company and links to our filings with the Securities and
Exchange Commission.
Our board of directors held twelve meetings during 2004. With the
exception of Mr. Ludwig, all of the directors attended at least 75% of the
board meetings and meetings of committees of which they were members. While we
do not have a specific policy regarding attendance at the annual shareholder
meeting, all directors are encouraged and expected to attend the meeting. Last
year's annual meeting was attended by nine of the eleven incumbent directors.
Audit Committee
In 2004, the Audit Committee was comprised of Charles E. Neimier,
Robert E. Bartles, Jr., Emily E. Pichon, Richard L. Pletcher, Terry L. Tucker
and M. Scott Welch, each of whom is expected to serve on the committee through
2005. Each of the members is considered "independent" according to the Nasdaq
listing requirements and the regulations of the Securities and Exchange
Commission. The board of directors has determined that Mr. Niemier qualifies
as an "audit committee financial expert" under the regulations of the
Securities and Exchange Commission. The board based this decision on
Mr. Niemier's education, his professional experience at an audit firm and his
experience as Chief Financial Officer and board member of Biomet, Inc., a
company with its common stock quoted on the Nasdaq National Market System.
The functions performed by the Audit Committee include, among other
things, the following:
o overseeing our accounting and financial reporting;
o selecting, appointing and overseeing our independent
registered public accounting firm;
o reviewing actions by management on recommendations of the
independent registered public accounting firm and internal
auditors;
o meeting with management, the internal auditors and the
independent registered public accounting firm to review the
effectiveness of our system of internal control and internal
audit procedures; and
o reviewing reports of bank regulatory agencies and monitoring
management's compliance with recommendations contained in
those reports.
To promote independence of the audit function, the committee consults
separately and jointly with the independent registered public accounting firm,
the internal auditors and management. We have adopted a written charter for
the committee, which sets forth the committee's duties and responsibilities.
Our current charter was attached to our 2003 proxy statement as Appendix A and
is available on our website at www.lakecitybank.com. In 2004, the committee
met four times.
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Compensation Committee
During 2004, the Compensation Committee was comprised of L. Craig
Fulmer, Charles E. Niemer, Emily E. Pichon, Richard L. Pletcher and Terry L.
Tucker, each of whom is expected to serve on the committee through 2005. Each
of the members is considered "independent" according to the Nasdaq listing
requirements, an "outside" director pursuant to Section 162(m) of the Internal
Revenue Code and a "non-employee" director under Section 16 of the Securities
Exchange Act of 1934. The purpose of the Compensation Committee is to
determine the salary and bonus to be paid to Mr. Kubacki, our Chief Executive
Officer, and to review and recommend to the board for approval the salaries
and bonuses for our other executive officers. The committee also administers
our share incentive plan and meets either independently or in conjunction with
our full board of directors to grant awards to eligible individuals in
accordance with the terms of the plan. We have adopted a written charter for
the committee, which sets forth the committee's duties and responsibilities.
Our current charter is available on our website at www.lakecitybank.com. In
2004, the committee met two times.
Corporate Governance Committee
We also have a Corporate Governance Committee. The members of the
committee are Allan J. Ludwig, Steven D. Ross, Donald B. Steininger and M.
Scott Welch, and each is considered "independent" according to the Nasdaq
listing requirements. The primary purposes of the committee are to identify
and recommend individuals to be presented to our shareholders for election or
re-election to the board of directors and to review and monitor our policies,
procedures and structure as they relate to corporate governance. We have
adopted a written charter for the committee, which sets forth the committee's
duties and responsibilities. Our current charter is available on our website
at www.lakecitybank.com. The committee met one time in 2004.
Director Nominations and Qualifications
For the 2005 annual meeting of shareholders, the Corporate Governance
Committee nominated for re-election to the board the four incumbent directors
whose terms are set to expire in 2005. This nomination was further approved by
the full board. We did not receive any shareholder nominations for director
for the 2005 annual meeting.
The Corporate Governance Committee evaluates all potential nominees
for election, including incumbent directors, board nominees and those
shareholder nominees included in the proxy statement, in the same manner.
Generally, the committee believes that, at a minimum, directors should possess
certain qualities, including the highest personal and professional ethics and
integrity, a sufficient educational and professional background, demonstrated
leadership skills, sound judgment, a strong sense of service to the
communities which we serve and an ability to meet the standards and duties set
forth in our code of conduct. Additionally, all nominees must be under the age
of 70, which is the mandatory retirement age established by the board. The
committee also evaluates potential nominees to determine if they have any
conflicts of interest that may interfere with their ability to serve as
effective board members and to determine whether they are "independent" in
accordance with Nasdaq requirements (to ensure that at least a majority of the
directors will, at all times, be independent). The committee has not, in the
past, retained any third party to assist it in identifying candidates.
Shareholder Communication with the Board, Nomination and Proposal Procedures
General Communications with the Board. Shareholders may contact
Lakeland Financial's board of directors by contacting David M. Findlay,
Corporate Secretary, at Lakeland Financial Corporation, P.O. Box 1387, Warsaw,
Indiana, 46581 or (574) 267-6144. All comments will be forwarded directly to
the Chairman of the Board.
Nominations of Directors. In accordance with our bylaws, a
shareholder may nominate a director for election to the board at an annual
meeting of shareholders by delivering written notice of the nomination to our
President not fewer than 10 days nor more than 50 days prior to the date of
the annual meeting. The shareholder's notice of intention to nominate a
director must include the name and address of the proposed nominee, the
principal occupation of the proposed nominee, the name and address of the
shareholder making the nomination, and the number of shares of capital stock
of Lakeland Financial owned by the notifying shareholder. We may request
additional information after receiving the notification.
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For a shareholder nominee to be considered to be included in our
proxy statement, the nominating shareholder must file a written notice of the
proposed director nomination with our corporate secretary, at the above
address, at least 120 days prior to the date the previous year's proxy
statement was mailed to shareholders. Nominations must include the full name
and address of the proposed nominee and a brief description of the proposed
nominee's business experience for at least the previous five years. All
submissions must be accompanied by the written consent of the proposed nominee
to be named as a nominee and to serve as a director if elected. The committee
may request additional information in order to make a determination as to
whether to nominate the person for director.
Other Shareholder Proposals. For all other shareholder proposals to
be considered for inclusion in our proxy statement and form of proxy relating
to our annual meeting of shareholders to be held in 2006, shareholder
proposals must be received by David M. Findlay, our Corporate Secretary, at
the above address, no later than November 11, 2005, and must otherwise comply
with the rules and regulations set forth by the Securities and Exchange
Commission.
Independent Director Sessions
Consistent with the Nasdaq listing requirements, the independent
directors regularly have the opportunity to meet without Mr. Kubacki in
attendance. In 2003, the board of directors created the position of a lead
independent director and the independent directors appointed Allan J. Ludwig
to serve in that position. This appointment is reviewed annually by the
Corporate Governance Committee and the committee re-appointed Mr. Ludwig as
our lead independent director in 2004 and is expected to remain for 2005. The
lead independent director assists the board in assuring effective corporate
governance and serves as chairperson of the independent director sessions.
Code of Ethics
We have a code of conduct in place that applies to all of our
directors and employees. The code sets forth the standard of ethics that we
expect all of our directors and employees to follow, including our Chief
Executive Officer and Chief Financial Officer. The code of conduct is posted
on our website at www.lakecitybank.com. We intend to satisfy the disclosure
requirements under Item 10 of Form 8-K regarding any amendment to or waiver of
the code with respect to our Chief Executive Officer and Chief Financial
Officer, and persons performing similar functions, by posting such information
on our website.
10
EXECUTIVE COMPENSATION
The following table shows the compensation earned for the last three
fiscal years by the Chief Executive Officer and our four other most highly
paid executive officers:
- ----------------------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ----------------------------------------------------------------------------------------------------------------------------------
Long Term
Compensation
Annual Compensation Awards
----------------------------------------- --------------------
(a) (b) (c) (d) (e) (f)
Securities
Underlying All Other
Name and Options/SARs Compensation
Principal Position Year Salary($) Bonus($) (#) ($)(1)
- --------------------------------- ------------ ---------------------- ------------------ -------------------- --------------------
Michael L. Kubacki 2004 $ 339,023 $ 126,000 - $ 21,466
President and Chief Executive 2003 315,000 106,000 10,000 20,692
Officer 2002 290,000 56,000 - 19,281
David M. Findlay 2004 $ 213,168 $ 59,000 - $ 16,399
Executive Vice President and 2003 197,000 51,000 5,000 15,132
Chief Financial Officer 2002 182,500 26,250 - 15,207
Charles D. Smith 2004 $ 178,720 $ 49,000 - $ 16,720
Executive Vice President 2003 165,000 43,000 5,000 15,803
2002 152,500 21,750 - 14,084
Kevin L. Deardorff 2004 $ 146,569 $ 30,003 - $ 11,067
Executive Vice President 2003 135,000 23,000 5,000 10,062
2002 125,000 18,000 - 9,178
Robert C. Condon 2004 $ 140,562 $ 17,000 - $ 15,140
Executive Vice President 2003 135,000 21,000 2,000 13,680
2002 125,000 18,000 - 11,748
(1) The amounts set forth in column (f) for Messrs. Kubacki, Findlay, Smith,
Deardorff and Condon include life insurance premiums, country club
memberships and cell phone stipends paid by us as well as the following
401(k) plan matching contributions, including supplemental 401(k)
matching contributions, paid by Lakeland Financial as follows:
Mr. Kubacki Mr. Findlay Mr. Smith Mr. Deardorff Mr. Condon
2004 $ 11,700 $ 11,700 $ 11,700 $ 9,535 $ 9,454
2003 $ 12,000 $ 12,000 $ 12,000 $ 9,506 $ 9,360
2002 $ 10,500 $ 11,000 $ 10,455 $ 8,580 $ 7,500
There were no options granted to the individuals named above in the
summary compensation table during the 2004 fiscal year.
11
The following table sets forth information concerning the exercisable
and nonexercisable stock options at December 31, 2004 held by the individuals
named in the summary compensation table:
- ----------------------------------------------------------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTIONS VALUES
- ----------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Shares Number of Securities Value of Unexercised
Acquired on Value Underlying Unexercised In-the-Money Options at
Exercise Realized Options at FY-End (#) FY-End ($)
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
Michael L. Kubacki --- --- 30,000 40,000 $ 536,925 $ 822,200
David M. Findlay --- --- --- 35,000 $ --- $ 803,250
Charles D. Smith --- --- 8,000 22,000 $ 142,430 $ 458,395
Kevin L. Deardorff --- --- 8,000 19,000 $ 142,430 $ 385,890
Robert C. Condon --- --- 5,000 16,000 $ 108,550 $ 365,120
Pension Plan Table
Our defined benefit retirement plan covers certain employees over 21
years of age with more than one year of service. Effective April 1, 2000, we
amended the plan to freeze the accrual of benefits to participants under the
plan. As a result of this amendment, employees who were not participants in
the plan as of March 31, 2000 are no longer able to become participants under
the plan. In addition, all benefits previously accrued under the plan by
participants were frozen in place, and continuing employment with us will not
increase the employee's benefits upon retirement. Normal retirement age is 65.
Participants received credit for 2-1/2% of their average salary for each year
up to 20 years of service or through March 31, 2000, whichever occurred first.
The principal benefit under this plan is a lifetime annuity for the
joint lives of participants and their spouses. This amount is offset by social
security benefits. On December 31, 1985, the then existing plan was terminated
and the latest plan (which is now frozen) was adopted effective January 1,
1986. Participants in the terminated plan were paid cash or received annuities
for their earned benefits as of December 31, 1985. The amounts paid for
annuities purchased, as a part of the plan termination will reduce the
benefits to be paid out of the latest plan.
Years of Credited Service Through March 31, 2000
Remuneration 15 20 25 30 35
- ------------ ------------ ------------ ------------ ------------ -----------
100,000 37,500 50,000 50,000 50,000 50,000
150,000 56,250 75,000 75,000 75,000 75,000
200,000 75,000 100,000 100,000 100,000 100,000
250,000 93,750 125,000 125,000 125,000 125,000
300,000 112,500 150,000 150,000 150,000 150,000
350,000 131,250 175,000 175,000 175,000 175,000
400,000 150,000 200,000 200,000 200,000 200,000
450,000 168,750 225,000 225,000 225,000 225,000
500,000 187,500 250,000 250,000 250,000 250,000
The amounts shown above include benefits payable under a supplemental
employee retirement plan, which is a non-qualified plan payable as a general
creditor of Lakeland Financial. This plan was created in 1989 when changes to
the Internal Revenue Code that apply to defined pension plans could have
resulted in a reduced pension benefit for certain highly compensated
employees. This supplemental plan did not create any new benefits, but was
adopted to offset any such reduction in pension benefits. Benefits under this
plan were frozen as of December 31, 1999 and continuing employment will not
increase the employee's benefits under the plan.
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At the time the pension plan was frozen, Mr. Kubacki was credited
with 2 years of service, Mr. Smith was credited with 14 years of service, and
Mr. Deardorff was credited with 8 years of service. Pursuant to the terms of
the defined benefit plan and the supplemental employee retirement plan, Mr.
Kubacki, Mr. Smith and Mr. Deardorff are entitled to receive $24,151, $105,420
and $9,035 in benefits as of December 31, 2004. Mr. Findlay and Mr. Condon,
who joined Lakeland Financial in 2000 and 1999, respectively, never
participated in the plan. We contributed $284,000 to our pension plan and
$119,000 to our supplemental employee retirement plan in 2004.
Change in Control Agreements
We have change in control agreements with several of our executive
officers, including Messrs. Kubacki, Findlay, Smith, Deardorff and Condon. The
agreements provide that upon the termination of the executive's employment
within a one-year period prior to, or following, a change of control of
Lakeland Financial, Mr. Kubacki has the right to receive a payment equal to
approximately two times 120% of his base salary and all other executives have
the right to receive a payment equal to approximately two times 115% of the
executive's base salary. Also, the executive shall continue to receive certain
benefits, including medical insurance coverage. Additionally, the agreements
provide that we will "gross up" or pay any excise taxes triggered by payments
under the change in control agreements. In addition, the agreements provide
that the executive shall not compete with us, or our successor, for two years
following a change in control. If the executive elects, he may forego the
severance benefit and not be subject to the restrictive covenant. The
restrictive covenant extends to a 60 mile radius of Warsaw, Indiana.
Pursuant to the agreements, a "change in control" shall be any of the
following events: a merger or attempted hostile takeover; a person acquiring
30% of our voting securities followed by the election of that person's
representative to the board of directors; a person acquiring more than 50% of
our voting securities; and any other event that has the effect of placing
control of Lakeland Financial with someone other than its current
shareholders.
If the change in control agreements were triggered as of the date of
this proxy statement and the executives were terminated within the one-year
period, we would owe the executives the following, approximate, pre-tax
amounts: Mr. Kubacki - $813,700; Mr. Findlay - $490,300; Mr. Smith - $411,100;
Mr. Deardorff- $337,200; Mr. Condon - $323,300. This is in addition to any
additional payments that we may owe the executives pursuant to any other
employment agreement, any stock incentive grants, the pension plan and the
supplemental employee retirement plan.
Share Incentive Plan
Under the Lakeland Financial Corporation 1997 Share Incentive Plan,
employees and non-employee directors may be awarded incentive stock options
and non-qualified stock options. The plan was approved by our shareholders in
1998, and a total of 600,000 shares are authorized for issuance under the
plan. Awards are made at the discretion of the Compensation Committee. We have
not, at any time, engaged in the repricing of stock options. No options were
granted to employees in 2004. As of February 23, 2005, we had 63,815 shares
remaining under the plan reserved for options not yet granted.
Lakeland Financial Corporation 401(k) Plan
We also sponsor a qualified, defined contribution retirement plan
qualifying under section 401(k) of the Internal Revenue Code. The plan is
eligible for all employees meeting age and service requirements, including our
executive officers. Our contributions are based upon the percentage of actual
net income versus budgeted net income for each year. Participants can choose
between several different investment options under the 401(k) plan, including
shares of Lakeland Financial common stock.
The aggregate contribution under the 401(k) plan by Lakeland
Financial in 2004 was approximately $730,526 and the amounts contributed to
the named executive officers are reflected in the Summary Compensation Table
on page 11 of this proxy statement.
13
Deferred Compensation Plan
Effective January 1, 2004, we adopted the Lake City Bank Deferred
Compensation Plan. The purpose of the plan is to extend full 401(k) type
retirement benefits to certain individuals without regard to statutory
limitations under tax qualified plans. The plan is available to all of our
executive officers and of the executive officers listed in the compensation
tables above, Mr. Kubacki, Mr. Findlay and Mr. Smith participated in the plan.
In 2004, we recognized an expense of $10,000 in regard to the plan. The plan
is funded solely by participant contributions and does not receive a company
match.
Report of the Compensation Committee on Executive Compensation
The report of the Compensation Committee below 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 or under
the Securities Exchange Act of 1934, except to the extent Lakeland Financial
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
General. During 2004, the Compensation Committee was comprised of L.
Craig Fulmer, Charles E. Niemer, Emily E. Pichon, Richard L. Pletcher and
Terry L. Tucker, each of whom is expected to serve on the committee through
2005. Each of the members is considered "independent" by the board according
to the Nasdaq listing requirements, an "outside" director pursuant to Section
162(m) of the Internal Revenue Code and a "non-employee" director pursuant to
Section 16 of the Securities Exchange Act of 1934. The purpose of the
Compensation Committee is to determine the aggregate compensation to be paid
to Mr. Kubacki, our Chief Executive Officer, and to review and recommend to
the full board the compensation for our other executive officers. The
committee also administers our stock incentive plan and meets either
independently or in conjunction with our full board of directors to grant
awards to eligible individuals in accordance with the terms of the plans. The
committee's responsibilities and functions are further described in our
Compensation Committee charter, which is available on our website at
www.lakecitybank.com.
Compensation Overview. We annually review executive officer
compensation in December with the new compensation to become effective the
following February. In establishing executive compensation, we have
historically divided compensation into the two separate components of salary
and bonus. When fixing an individual executive's compensation, these two
components are intended to work together to compensate the executive fairly
for his or her services and reward the executive officer based upon our
overall performance during the year. We also encourage the executives and all
employees to acquire a personal interest in the long-term success of Lakeland
Financial by participating in stock ownership under our 401(k) plan.
Additionally, in 1998, we established the Lakeland Financial Corporation 1997
Share Incentive Plan to enhance the opportunity of the executive officers, as
well as other covered employees, to acquire stock in Lakeland Financial.
In reviewing an executive's compensation, the committee considers and
evaluates all components of the executive officer's total compensation
package. This involves reviewing the executive's salary, bonus, incentive
stock awards, perquisites, participation in our 401(k) plan, payments due upon
retirement or a change of control, if any, and all other payments and awards
that the executive officer earns. The board of directors retains final
approval over executive compensation, with the exception of Mr. Kubacki's
compensation which is set by the committee.
Components of Compensation.
Salary. The Compensation Committee reviews each executive's base
salary on an annual basis. The committee believes that the base salaries
should offer security to each executive and allow us to attract qualified
executives and maintain a stable management team and environment. The
committee targets base salaries at levels comparable to those of similar
positions within the market place and utilizes relevant salary surveys. The
committee may adjust salaries to reflect our financial performance, including,
but not limited to, our earnings per share, net income and return on average
assets, although no specific weight is given to these factors. Additionally,
base salaries are determined examining, among other things, an executive's
level of responsibility, prior experience, education, breadth of knowledge,
internal performance objectives and the current market level. The committee
will also factor in other payments and awards that the executive may receive
before recommending a salary to the board. All of the factors described herein
are considered on a subjective basis in the aggregate, and none of the factors
is accorded a specific weight. When establishing the salary of executives
other than his own, Mr. Kubacki participated and made recommendations to the
committee.
14
Bonus. Over the past several years the board has continued an
emphasis on awards of cash bonuses to executive officers in connection with a
decreased emphasis on the stock incentive plan. Cash bonuses to executive
officers for 2004, including Mr. Kubacki's, were determined pursuant to an
established executive incentive compensation program, which is reviewed at
least annually by the committee. This program applies to all of our executive
officers, as well as designated officers of Lake City Bank. As established,
the committee retains the right to modify the program and/or withhold payment
at any time. Historically, we have not withheld bonus payments under any of
our bonus programs.
Eligible participants in the bonus program may earn a
performance-based bonus based on the company's overall performance as well as
the individual participant's performance. Our performance is based on our
actual net income for that year compared to the budgeted net income. We
calculate this by using our net income after the 401(k) match and incentive
compensation costs and excluding non-recurring gain/loss on sale of fixed
assets, investments and extinguishment of debt. The committee approves a
budgeted net income amount after reviewing the previous year's actual net
income in conjunction with the board's and management's expectations for that
particular year. The actual net income for each year must equal or exceed 70%
of budgeted net income in order for a bonus to be paid that year. If actual to
budget net income is at least 70%, the bonus is paid at 50%. If the actual to
budget net income is at least 80%, the bonus is paid at 70%. If actual net
income to budget net income is at least 90%, the bonus is paid at 90%. If
actual net income to budget net income is at least 100%, the bonus is paid at
100%, and so on. Bonuses under the program provide for bonus payments of 5% to
40% of eligible salary. In 2004, the bonus program provided that our President
and Chief Executive Officer would receive a bonus up to 40% of his salary and
that the Executive Vice Presidents would receive from 20% to 30% of their
salaries. Bonuses for officers receiving promotions during the year were
prorated. The amount of the bonus is also determined, in part, on the
individual's overall performance compared to the individual's performance
goals that are established in the beginning of the year by the individual and
the other executives.
For 2004, our actual net income, calculated as described above,
exceeded the 90% of the budgeted net income threshold. This resulted in
aggregated bonus payments of $780,302 paid to 129 employees. The bonuses paid
to Mr. Kubacki and the other named executive officers are set forth in the
summary compensation table and were established pursuant to the bonus program.
Stock Ownership. The board and the committee believe employee
ownership in our common stock is important. At the annual meeting held in
April 1998, the shareholders approved the Lakeland Financial Corporation 1997
Share Incentive Plan. The purpose of this incentive plan is to enhance our
long term financial performance by:
o attracting and retaining executive and other key employees of
Lakeland Financial and Lake City Bank through incentive
compensation opportunity;
o motivating such employees to further the long term goals of
Lakeland Financial and the Lake City Bank; and
o furthering the identity of interests of participating employees
with our shareholders through opportunities for increased
employee ownership of Lakeland Financial.
Prior to adoption of the new performance based bonus plan the
committee emphasized stock option awards as incentives. The committee made
decisions on option awards based on company and individual performance. Given
the number of options outstanding versus the number of options available to
grant, the committee determined it would not issue any stock option awards in
2004 under the share incentive plan.
We also have a 401(k) plan that allows the participants to choose
between several different investment options, including shares of our common
stock. Under the plan, employees are eligible to redirect a portion of their
regular basic compensation into a tax-deferred trust. We make matching
15
contributions of up to 6% of each participant's regular basic compensation at
a percentage based on the company's performance against budgeted net income.
We calculate this by using our net income after the 401(k) match and incentive
compensation costs and excluding non-recurring gain/loss on sale of fixed
assets, investments and extinguishment of debt. The committee approves a
budgeted net income amount after reviewing the previous year's actual net
income in conjunction with the board's and management's expectations for that
particular year. A match of 50% is paid any year that a dividend is declared.
If the actual to budget net income is at least 80%, the bonus is paid at 70%.
If actual to budget net income is at least 90%, the bonus is paid at 90%. If
actual to budget net income is at least 100%, the bonus is paid at 100%, and
so on. All participants are always 100% vested in their salary redirections
and become 100% vested in our contribution upon retirement, disability or in
accordance with the vesting provisions of the plan. Participant accounts are
distributed to the individual participants upon termination of employment and
may include shares of our common stock.
Chief Executive Officer's Compensation. The committee establishes Mr.
Kubacki's salary after reviewing the factors and components described above.
Mr. Kubacki's salary in 2004 was based in part upon the committee's
satisfaction with the following factors; profitability, revenue growth,
expense control and overall credit quality. The committee determined that Mr.
Kubacki's leadership had a significant impact on our attaining this level of
performance while maintaining our excellent safety and soundness ratings.
Additionally, the committee considered Mr. Kubacki's personal performance as
President and Chief Executive Officer, as well as his change of control
agreement, his participation in employee benefit plans, plus the perquisites
that he receives, his previous years' salaries and the salary levels of other
similarly situated financial institutions in setting his base salary at
$339,023 for 2004. His bonus of $126,000 was awarded according to the
performance criteria detailed above, as well as our belief that he met and
exceeded his individual goals. No stock options were granted to Mr. Kubacki in
2004. He also received $21,466 in other compensation that includes our
matching contribution pursuant to the 401(k) plan as well as golf club
memberships, a cell phone stipend and group term life insurance. Additionally,
Mr. Kubacki has a change-in-control agreement which entitles him to receive
$813,655, as described in more detail in this proxy statement.
Compliance with Section 162(m) of the Internal Revenue Code of 1986.
Section 162(m) of the Internal Revenue Code limits the deductibility of annual
compensation in excess of $1.0 million paid to the our Chief Executive Officer
and any of the four other highest paid officers, to the extent they are listed
officers on the last day of any given tax year. However, compensation is
exempt from this limit if it qualifies as "performance based compensation."
Performance based compensation generally includes only payments that are
contingent on achievement of performance objectives, and excludes fixed or
guaranteed payments. We believe performance based compensation is an important
tool to provide incentive to senior executives, matching their compensation
levels to our performance. Accordingly, performance based compensation
comprises a significant portion of the compensation package for our senior
executives. This also has the effect of preserving the deduction that might
otherwise be affected by the $1.0 million limit.
Although we will consider deductibility under Section 162(m) with
respect to the compensation arrangements for executive officers, deductibility
will not be the sole factor used in determining appropriate levels or methods
of compensation. Since our objectives may not always be consistent with the
requirements for full deductibility, we may enter into compensation
arrangements under which payments would not be deductible under Section
162(m).
Conclusion. The Compensation Committee believes the executive
compensation policies and programs described above effectively serve the
interests of shareholders and Lakeland Financial. The committee believes these
policies motivate executives to contribute to our overall future success,
thereby enhancing the value of Lakeland Financial for the benefit of all
shareholders.
Approved by the Lakeland Financial Compensation Committee as of
December 31, 2004.
L. Craig Fulmer, Charles E. Niemer, Emily E. Pichon, Richard L.
Pletcher and Terry L. Tucker
Compensation Committee Interlocks and Insider Participation
During 2004, none of the directors serving on the Compensation
Committee was an officer or employee of Lakeland Financial or Lake City Bank,
16
and none of these individuals was a former officer or employee of either
organization. In addition, during 2004 no executive officer served on the
board of directors or compensation committee of any other corporation with
respect to which any member of our compensation committee was engaged as an
executive officer.
STOCK PRICE PERFORMANCE GRAPH
The stock price performance graph below 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 or under
the Securities Exchange Act of 1934, except to the extent Lakeland Financial
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
The graph below compares the cumulative total return of Lakeland
Financial, the Nasdaq Market Index and a peer group index.
The following table was presented as a graph in the proxy material
mailed to shareholders.
INDEX 1999 2000 2001 2002 2003 2004
- ------------------------------ ------- ------- ------- ------- ------- -------
Lakeland Financial Corp. $100.00 87.04 127.54 174.80 270.31 311.17
Nasdaq Market Index 100.00 60.82 48.16 33.11 49.93 54.49
Peer Group Index 100.00 94.66 126.63 154.96 210.25 254.90
* Assumes $100 invested on December 31, 1999 and dividends were reinvested.
The peer group index is comprised of all financial institution
holding companies in the United States with total assets between $1.0 billion
and $3.0 billion dollars whose equity securities were traded on an exchange or
national quotation service.
DIRECTORS' COMPENSATION
During 2004, directors who were not full time employees of Lakeland
Financial or Lake City Bank were paid an annual fee of $9,000 and an
additional $600 for each board meeting attended and $500 for each committee
meeting attended. Each director of Lakeland Financial is also a director of
Lake City Bank and is not compensated separately for service on the Bank
board. Mr. Kubacki, who is a director and also our President and Chief
Executive Officer, is not paid a director's fee.
17
We maintain the Lakeland Financial Corporation Directors Fee Deferral
Plan under which non-employee directors are permitted to defer receipt of
their directors' fees and earn a rate of return based upon the performance of
our stock. We may, but are not required to, fund the deferred fees into a
trust which may hold our stock. The plan is unqualified and the directors have
no interest in the trust. The deferred fees and any earnings thereon are
unsecured obligations of Lakeland Financial. Any shares held in the trust are
treated as treasury shares and may not be voted on any matter presented to
shareholders. The number of shares attributable to each director under the
plan are set forth in the footnotes to the Beneficial Ownership Table on pages
4 and 5. As of December 31, 2004, the total liability under the plan for the
directors was approximately $813,000.
Additionally, under our incentive stock plan, directors may be
awarded non-qualified stock options at the discretion of the Compensation
Committee. Stock options awarded to directors under the plan are subject to
the same rules and restrictions as those awarded to named executives. Further,
upon a change of control, all options held by participants in the plan become
fully exercisable. In 2004, our directors, excluding Mr. Kubacki, did not
receive any options to purchase shares of our common stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2004, Lake City Bank had extended, and expects to continue to
extend, loans to its directors and officers and to their related interests.
Such loans were, and will continue to be, made only upon the same terms,
conditions, interest rates, and collateral requirements as those prevailing at
the same time for comparable loans extended from time to time to other,
unrelated borrowers. Loans to directors and officers do not and will not
involve greater risks of collectibility, or present other unfavorable
features, than loans to other borrowers.
AUDIT COMMITTEE REPORT
The report of the Audit Committee below 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 or under
the Securities Exchange Act of 1934, except to the extent Lakeland Financial
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
The Audit Committee assists the board in carrying out its oversight
responsibilities for our financial reporting process, audit process and
internal controls. The Audit Committee also reviews the audited financial
statements and recommends to the board that they be included in our annual
report on Form 10-K. As of December 31, 2004, the committee was comprised
solely of independent directors.
The Audit Committee has reviewed and discussed our audited financial
statements for the fiscal year ended December 31, 2004 with our management and
Crowe Chizek and Company LLC, our independent registered public accounting
firm. The committee has also discussed with Crowe Chizek the matters required
to be discussed by SAS 61 (Codification for Statements on Auditing Standards)
as well as having received and discussed the written disclosures and the
letter from Crowe Chizek required by Independence Standards Board Statement
No. 1 (Independence Discussions with Audit Committees). Based on the review
and discussions with management and Crowe Chizek, the committee has
recommended to the board that the audited financial statements be included in
our annual report on Form 10-K for the fiscal year ending December 31, 2004
for filing with the Securities and Exchange Commission.
Approved by the Lakeland Financial Audit Committee as of
December 31, 2004.
Charles E. Niemier Emily E. Pichon Richard L. Pletcher
Robert E. Bartels, Jr. Terry L. Tucker M. Scott Welch
18
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders are also being asked to ratify the appointment of Crowe
Chizek and Company LLC as our independent registered public accounting firm
for the year ending December 31, 2005. If the appointment of Crowe Chizek is
not ratified by shareholders, the matter of the appointment of an independent
registered public accounting firm will be considered by the Audit Committee
and board of directors. A representative of Crowe Chizek is not expected to be
present at the annual meeting.
Accountant Fees
Audit Fees. The aggregate amount of fees billed by Crowe Chizek for
its audit of Lakeland Financial's annual financial statements for fiscal years
2004 and 2003, for its required reviews of our unaudited interim financial
statements included in our Form 10-Qs filed during fiscal 2004 and 2003 and
for the integrated audit of internal control over financial reporting as
required for 2004 under Section 404 of the Sarbanes-Oxley Act were $260,000
and $130,175, respectively.
Audit Related Fees. The aggregate amounts of audit related fees
billed by Crowe Chizek for fiscal years 2004 and 2003 were $50,185 and
$22,950, respectively. The 2004 services included employee benefit plan
audits, consulting related to Sarbanes-Oxley Section 404 compliance and other
audit related consultations. The majority of these services in 2003 were
related to employee benefit plan audits.
Tax Fees. The aggregate amounts of tax related services billed by
Crowe Chizek for fiscal years 2004 and 2003 were $77,110 and $21,355, for
professional services rendered for tax compliance, tax advice and tax
planning. The services provided included assistance with the preparation of
Lakeland Financial's tax return and guidance with respect to estimated tax
payments. Additionally, the 2004 fees include costs associated with a tax cost
segregation study for branch premises.
All Other Fees. We did not incur any other fees from Crowe Chizek for
fiscal years 2004 and 2003 other than the fees reported above.
The Audit Committee, after consideration of the matter, does not
believe that the rendering of these services by Crowe Chizek to be
incompatible with maintaining Crowe Chizek's independence as our independent
registered public accounting firm.
Audit Committee Pre-Approval Policy
Among other things, the Audit Committee is responsible for
appointing, setting compensation for and overseeing the work of the
independent registered public accounting firm. The Audit Committee's policy is
to pre-approve all audit and permissible non-audit services provided by Crowe
Chizek. These services include audit and audit-related services, tax services,
and other services. Crowe Chizek and management are required to periodically
report to the Audit Committee regarding the extent of services provided by
Crowe Chizek in accordance with this pre-approval, and the fees for the
services performed to date. The Audit Committee may also pre-approve
particular services on a case-by-case basis that the committee had not already
specifically approved.
19
ANNUAL REPORT AND FINANCIAL STATEMENTS
A copy of our Annual Report to Shareholders for the 2004 fiscal year,
which also includes our Annual Report on Form 10-K for the fiscal year ended
December 31, 2004 (including financial statements), accompanies this proxy
statement.
Michael L. Kubacki
Chairman, President and Chief Executive Officer
March 11, 2005
Warsaw, Indiana
ALL SHAREHOLDERS ARE URGED TO SIGN
AND MAIL THEIR PROXIES PROMPTLY
20
PROXY FOR COMMON SHARES SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS OF
LAKELAND FINANCIAL CORPORATION TO BE HELD ON APRIL 12, 2005
The undersigned hereby appoints David M. Findlay and Michael L.
Kubacki, or either one of them acting in the absence of the other, with power
of substitution, attorneys and proxies, for and in the name and place of the
undersigned, to vote the number of common shares that the undersigned would be
entitled to vote if then personally present at the annual meeting of
shareholders, to be held at Westminster Hall located at 200 Seminary Drive in
Winona Lake, Indiana, on the 12th day of April, 2005, at 12:00 p.m., or any
adjournments or postponements of the meeting, upon the matters set forth in
the notice of annual meeting and proxy statement, receipt of which is hereby
acknowledged, as follows:
1. ELECTION OF DIRECTORS:
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees listed below
below)
[ ] [ ]
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Term Expires 2008: Robert E. Bartels, Jr., Michael L. Kubacki,
Steven D. Ross and M. Scott Welch
2. RATIFY THE APPOINTMENT OF Crowe Chizek and Company LLC as the Company's
independent registered public accounting firm for the year ending
December 31, 2005:
[ ] [ ] [ ]
For Against Abstain
3. In accordance with their discretion, upon all other matters that may
properly come before said meeting and any adjournments or postponements of
the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE NOMINEES LISTED UNDER PROPOSAL 1 AND FOR PROPOSAL 2.
Dated: , 2005
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Signature(s)
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NOTE: PLEASE DATE PROXY AND SIGN IT EXACTLY AS NAME OR NAMES APPEAR ABOVE. ALL
JOINT OWNERS OF SHARES SHOULD SIGN. STATE FULL TITLE WHEN SIGNING AS EXECUTOR,
ADMINISTRATOR, TRUSTEE, GUARDIAN, ETC. PLEASE RETURN SIGNED PROXY IN THE
ENCLOSED ENVELOPE.