SCHEDULE 14-A 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
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
First Federal of Northern Michigan Bancorp, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
|_| $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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4) Proposed maximum aggregate value of transaction:
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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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
May 6, 2005
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of First
Federal of Northern Michigan Bancorp, Inc. (the "Company"). The Annual Meeting
will be held at the Thunder Bay Recreational Center, 701 Woodward Avenue,
Alpena, Michigan, at 11:00 a.m. (Michigan time) on May 25, 2005.
The enclosed Notice of Annual Meeting and proxy statement describe the formal
business to be transacted. During the Annual Meeting we will also report on the
operations of the Company. Directors and officers of the Company will be present
to respond to any questions that stockholders may have. Also enclosed for your
review is our Annual Report to Stockholders, which contains detailed information
concerning the activities and operating performance of the Company.
The Annual Meeting is being held so that stockholders will be given an
opportunity to elect two directors and to ratify the appointment of Plante &
Moran, PLLC as independent registered public accountants for the Company for the
year ending December 31, 2005.
For the reasons set forth in the proxy statement, the Board of Directors
unanimously recommends a vote "FOR" the election of directors and "FOR" the
ratification the of the appointment of Plante & Moran, PLLC as the Company's
independent registered public accountants for the 2005 fiscal year.
On behalf of the Board of Directors, we urge you to sign, date and return the
enclosed proxy card as soon as possible even if you currently plan to attend the
Annual Meeting. Your vote is important, regardless of the number of shares that
you own. Voting by proxy will not prevent you from voting in person, but will
assure that your vote is counted if you are unable to attend the meeting.
Sincerely,
/s/ Martin A. Thomson
Martin A. Thomson
President and Chief Executive Officer
First Federal of Northern Michigan Bancorp, Inc.
100 South Second Avenue
Alpena, Michigan 49707
(989) 356-9041
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 25, 2005
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of First Federal of Northern Michigan Bancorp, Inc. (the "Company")
will be held at the Thunder Bay Recreational Center, 701 Woodward Avenue,
Alpena, Michigan 49707 on May 25, 2005 at 11:00 a.m., Michigan time.
A proxy statement and proxy card for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. The election of two directors of the Company;
2. The ratification of the appointment of Plante & Moran, PLLC as the
Company's independent registered public accountants for the year
ending December 31, 2005; and
such other matters as may properly come before the Meeting, or any adjournments
thereof. The Board of Directors is not aware of any other business to come
before the Meeting.
Any action may be taken on the foregoing proposals at the Meeting on the
date specified above, or on any date or dates to which the Meeting may be
adjourned. Stockholders of record at the close of business on May 2, 2005 are
the stockholders entitled to vote at the Meeting, and any adjournments thereof.
A list of stockholders entitled to vote at the Meeting will be available at 100
South Second Avenue, Alpena, Michigan for a period of 10 days prior to the
Meeting and will also be available for inspection at the Meeting.
EACH STOCKHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE MEETING, IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WITHOUT DELAY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE STOCKHOLDER MAY BE
REVOKED AT ANY TIME BEFORE IT IS EXERCISED. A PROXY MAY BE REVOKED BY FILING
WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A DULY EXECUTED PROXY
BEARING A LATER DATE. ANY STOCKHOLDER PRESENT AT THE MEETING MAY REVOKE HIS OR
HER PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE MEETING.
HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN
NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN ORDER TO
VOTE PERSONALLY AT THE MEETING.
By Order of the Board of Directors
/s/ Michael W. Mahler
Michael W. Mahler
Executive Vice President and Secretary
Alpena, Michigan
May 6, 2005
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IMPORTANT: A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO
POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
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PROXY STATEMENT
FIRST FEDERAL OF NORTHERN MICHIGAN BANCORP, INC.
100 South Second Avenue
Alpena, Michigan 49707
(989) 356-9041
ANNUAL MEETING OF STOCKHOLDERS
MAY 25, 2005
This proxy statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of First Federal of Northern
Michigan Bancorp, Inc. (the "Company") to be used at the Annual Meeting of
Stockholders of the Company (the "Meeting"), which will be held at the Thunder
Bay Recreational Center, 701 Woodward Avenue, Alpena, Michigan on May 25, 2005
at 11:00 a.m., Michigan time, and all adjournments thereof. The accompanying
Notice of Annual Meeting of Stockholders and this proxy statement are first
being mailed to stockholders on or about May 6, 2005.
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REVOCATION OF PROXIES
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Stockholders who execute proxies in the form solicited hereby retain the
right to revoke them in the manner described below. Unless so revoked, the
shares represented by such proxies will be voted at the Meeting and all
adjournments thereof. Proxies solicited on behalf of the Board of Directors of
the Company will be voted in accordance with the directions given thereon. Where
no instructions are indicated, signed proxies will be voted "FOR" the proposals
set forth in this proxy statement for consideration at the Meeting.
A proxy may be revoked at any time prior to its exercise by sending
written notice of revocation to the Secretary of the Company, Michael W. Mahler,
at the Company's address shown above, or by filing a duly executed proxy bearing
a later date or by voting in person at the Meeting. The presence at the Meeting
of any stockholder who had given a proxy shall not revoke such proxy unless the
stockholder delivers his or her ballot in person at the Meeting or delivers a
written revocation to the Secretary of the Company prior to the voting of such
proxy.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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Holders of record of the Company's common stock ("common stock") at the
close of business on May 2, 2005 (the "Voting Record Date") are entitled to one
vote for each share held. As of the Voting Record Date, there were 3,100,191
shares of common stock issued and outstanding. The presence in person or by
proxy of at least a majority of the issued and outstanding shares of common
stock entitled to vote is necessary to constitute a quorum at the Meeting.
In accordance with the provisions of the Articles of Incorporation of the
Company, record holders of common stock who beneficially own in excess of 10% of
the outstanding shares of common stock (the "Limit") are not entitled to any
vote with respect to the shares held in excess of the Limit. The Company's
Articles of Incorporation authorizes the Board of Directors (i) to make all
determinations necessary to implement and apply the Limit, including determining
whether persons or entities are acting in concert, and (ii) to demand that any
person who is reasonably believed to beneficially own stock in excess of the
Limit supply information to the Company to enable the Board of Directors to
implement and apply the Limit.
Persons and groups who beneficially own in excess of five percent of the
Company's common stock are required to file certain reports with the Securities
and Exchange Commission (the "SEC") regarding such ownership pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act").
The following table sets forth the beneficial ownership of our common
stock held by our directors and executive officers, individually and as a group,
and all individuals known to management to own more than 5% of our common stock
as of the Voting Record Date. The business address of each director and
executive officer is 100 South Second Avenue, Alpena, Michigan 49707.
Number of Shares of
Common Stock Percent of All Common
Name of Beneficial Owner Beneficially Owned (1) Stock Outstanding
----------------------------------------------------------- ---------------------- -----------------
James C. Rapin 30,622 *
Martin A. Thomson 46,679 1.5%
Thomas R. Townsend 9,111 *
Gary C. VanMassenhove 5,309 *
Keith D. Wallace 27,909 *
Michael W. Mahler 3,243 *
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All directors and executive officers as a group (8 persons) 133,544 4.3%
=======
Tyndall Partners, L.P.
Tyndall Institutional Partners, L.P.
Madison Avenue Partners
153 East 53rd Street
55th Floor
New York, New York 10022 (2)(3) 173,144 5.6%
Financial & Investment Management Group, Ltd.
417 St. Joseph Street
P.O. Box 40
Suttons Bay, Michigan 49682 (2)(4) 222,396 7.2%
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* Less than 1%.
(1) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a
person is deemed to be the beneficial owner for purposes of this table of
any shares of common stock if he has sole or shared voting or investment
power with respect to such security, or has a right to acquire beneficial
ownership at any time within 60 days from the date as of which beneficial
ownership is being determined. As used herein, "voting power" is the power
to vote or direct the voting of shares and "investment power" is the power
to dispose or direct the disposition of shares.
(2) Although not reflected in the Schedule 13D filings, share amounts reflect
a 1.8477-for-1 stock split effective as of the close of business on April
1, 2005 in connection with the closing of the mutual-to-stock conversion
of Alpena Bancshares, M.H.C.
(3) Based on a joint Schedule 13D filed with the Securities and Exchange
Commission on January 29, 2002.
(4) Based on a Schedule 13G filed with the Securities and Exchange Commission
on February 15, 2002.
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VOTING PROCEDURES AND METHOD OF COUNTING VOTES
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As to the election of directors, the proxy card provided by the Board of
Directors enables a stockholder to vote "FOR" the election of the two nominees
proposed by the Board of Directors or to "WITHHOLD AUTHORITY" to vote for the
nominees being proposed. Under Maryland law and the Company's Articles of
Incorporation and Bylaws, directors are elected by a plurality of the shares
voted at the Meeting without regard to either broker non-votes or proxies as to
which the authority to vote for the nominee is withheld.
As to the ratification of Plante & Moran, PLLC as independent registered
public accountants of the Company, by checking the appropriate box a stockholder
may vote "FOR" the item, vote "AGAINST" the item or "ABSTAIN" from voting on the
item. The ratification of independent registered public accountants must be
approved by a majority of the shares voted at the Meeting without regard to
broker non-votes or proxies marked abstain.
In the event at the time of the Meeting there are not sufficient votes for
a quorum or to approve or ratify any matter being presented, the Meeting may be
adjourned in order to permit the further solicitation of proxies.
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Proxies solicited hereby will be returned to the Company and will be
tabulated by Kathy Brown, Internal Auditor of First Federal of Northern
Michigan, the inspector of election designated by the Board of Directors of the
Company.
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PROPOSAL I--ELECTION OF DIRECTORS
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The Company's Board of Directors is currently composed of five persons,
and is divided into three classes with one class of directors elected each year.
Directors are generally elected to serve for a three year period or until their
respective successors shall have been elected and shall qualify. Two directors
will be elected at the Meeting. The Board of Directors has nominated James C.
Rapin and Martin A. Thomson for three-year terms, each of whom has agreed to
serve if elected.
The table below sets forth certain information, as of the Voting Record
Date, regarding the Board of Directors and executive officers. It is intended
that the proxies solicited on behalf of the Board of Directors (other than
proxies in which the vote is withheld as to one or more nominees) will be voted
at the Meeting for the election of the nominees identified below. If any nominee
is unable to serve, the shares represented by all such proxies will be voted for
the election of such substitute as the Board of Directors may recommend. At this
time, the Board of Directors knows of no reason why any of the nominees might be
unable to serve, if elected. There are no arrangements or understandings between
any nominee and any other person pursuant to which such nominee was selected.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" EACH OF THE
NOMINEES LISTED IN THIS PROXY STATEMENT.
Director Term
Name Age Positions Held Since Expires
---- --- ------------------------------------------------ --------- -------
NOMINEES
James C. Rapin 64 Chairman of the Board 1985 2008
Martin A. Thomson 56 President, Chief Executive Officer and Director 1986 2008
DIRECTORS
Gary C. VanMassenhove 58 Director 2001 2006
Thomas R. Townsend 53 Director 2002 2006
Keith D. Wallace 63 Director 1988 2007
EXECUTIVE OFFICERS
Michael W. Mahler 41 Executive Vice President N/A N/A
Amy E. Essex 41 Chief Financial Officer N/A N/A
Jerome W. Tracey 45 Senior Vice President, Senior Lender N/A N/A
Set forth below is biographical information regarding directors and
executive officers of the Company and First Federal of Northern Michigan (the
"Bank"). References to the Company include its predecessor, Alpena Bancshares,
Inc.
Directors
James C. Rapin was elected as the Chairman of the Board of Directors of
the Company and the Bank in March 2002. He has been a director of the Bank since
1985, and a director of the Company since its formation in November 2000, and
had been Vice Chairman of the Board since April 2001. Mr. Rapin retired as a
pharmacist with LeFave Pharmacy, Alpena, Michigan in 2004.
Martin A. Thomson was named Acting President and Chief Executive Officer
of the Company and the Bank in May 2001 and later named President and Chief
Executive Officer in October 2001. Mr. Thomson
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previously held the position of President and Chief Executive Officer of Presque
Isle Electric and Gas Cooperative, Inc., Onaway, Michigan. Mr. Thomson has been
a director of the Bank since 1986, and a director of the Company since its
formation in November 2000.
Thomas R. Townsend is the President of the R.A. Townsend Co., a plumbing,
heating and air conditioning distributor located in Alpena, Michigan, where he
has been employed for the past 28 years. Mr. Townsend has been a director of the
Company and the Bank since April 2002.
Gary C. VanMassenhove is a partner in VanMassenhove, Kearly, Taphouse &
Faulman, CPAs. Mr. VanMassenhove has been a Certified Public Accountant for 33
years. He has been a director of the Company and the Bank since September 2001.
Keith D. Wallace is the senior partner of the law firm of Isackson and
Wallace, P.C., located in Alpena, Michigan and local counsel to the Company and
the Bank. Mr. Wallace has been a practicing attorney for 37 years. He has been a
director of the Bank since 1988, and a director of the Company since its
formation in November 2000.
Michael W. Mahler was named Executive Vice President in November 2004.
Prior to this appointment, since November 2002, Mr. Mahler was the Company's
Chief Financial Officer. From September 2000 until November 2002, Mr. Mahler was
Corporate Controller at Besser Company, Alpena, Michigan, an international
producer of concrete products equipment. From 1990 until 2000, Mr. Mahler was
employed at LTV Steel Company, East Chicago, Indiana where he served in
financial roles of increasing responsibility and served, from 1997 until 2000,
as Controller for a northeast Michigan division.
Amy E. Essex was named Chief Financial Officer in November 2004. Prior to
this appointment, since March 2003, Ms. Essex was the Internal Auditor and
Compliance Officer for the Company. Prior to March 2003, Ms. Essex spent eight
years as the Director of Tax and Risk for Besser Company, Alpena, Michigan, an
international producer of concrete products equipment. Ms. Essex is a certified
public accountant.
Jerome W. Tracey was named Senior Vice President, Senior Lender of the
Company and the Bank in September 2001, after joining the Bank in November 1999
to serve as Vice President of Commercial Services. Prior to joining the Bank,
Mr. Tracey served as Vice President of Commercial Lending for National City
Bank, Alpena, Michigan, a position he held since 1996. Mr. Tracey has been in
the banking profession since 1981.
Board Independence
The Board of Directors has determined that, except for Mr. Thomson, each
member of the Board is an "independent director" within the meaning of the
Nasdaq corporate governance listing standards. Mr. Thomson is not considered
independent because he is an executive officer of the Company. Mr. Wallace is
not considered independent under Securities Rule 10A-3 for purposes of Audit
Committee membership because Mr. Wallace is the senior partner of Isackson and
Wallace, P.C., general counsel to the Company.
Meetings and Committees of the Board of Directors
General. The business of the Company's Board is conducted at regular and
special meetings of the full Board and its standing committees. The standing
committees include the Executive, Audit, Nominating and Compensation Committees.
During the year ended December 31, 2004, the Board of Directors of the Company
held 12 regular meetings and seven special meetings. No member of the Board or
any committee thereof attended fewer than 75% of said meetings. Executive
sessions of the independent directors are held on a regularly scheduled basis.
While the Company has no formal policy on director attendance at annual meetings
of stockholders, directors are encouraged to attend. All directors attended the
last Annual Meeting of Stockholders held on April 21, 2004.
The Executive Committee is authorized to act with the same authority as
the Board of Directors between meetings of the Board, and is comprised of the
full Board. The Executive Committee met 12 times during 2004.
The Audit Committee reviews our records and affairs to determine our
financial condition, reviews with management and the independent auditors the
systems of internal control, and monitors adherence in accounting and financial
reporting to accounting principles generally accepted in the United States of
America. Messrs. Rapin,
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Townsend and VanMassenhove, each of whom is an "independent director" within the
meaning of the Nasdaq corporate governance standards and the applicable
Securities Exchange Act rules, serve as members of this committee. The Board of
Directors has determined that Director VanMassenhove, a certified public
accountant, qualifies as an "audit committee financial expert" and is serving as
such for the Audit Committee. The Audit Committee met four times during 2004.
The Compensation Committee was established after the closing of the
second-step mutual-to-stock conversion of Alpena Bancshares, M.H.C. to replace
the Personnel Committee which was comprised of the full Board. The Compensation
Committee will meet periodically to review the performance of officers and to
determine compensation of officers to be recommended to the Board. It is
comprised of Messrs. Rapin, Townsend, VanMassenhove and Wallace. The Personnel
Committee did not meet in 2004.
The Nominating Committee nominates individuals for election as directors.
The Nominating Committee met once during 2004.
Nominating Committee. The Nominating Committee consists of Directors
Rapin, Townsend, VanMassenhove and Wallace. Each member of the Nominating
Committee is considered "independent" as defined in the Nasdaq corporate
governance listing standards. The Company's Board of Directors has adopted a
written charter for the Nominating Committee, which is available at the
Company's website at www.first-federal.com. The Committee met one time during
2004.
The functions of the Nominating Committee include the following:
o to lead the search for individuals qualified to become members of
the Board and to select director nominees to be presented for
stockholder approval;
o to review and monitor compliance with the requirements for board
independence;
o to review the committee structure and make recommendations to the
Board regarding committee membership;
o to develop and recommend to the Board for its approval a set of
corporate governance guidelines; and
o to develop and recommend to the Board for its approval a
self-evaluation process for the Board and its committees.
The Nominating Committee identifies nominees by first evaluating the
current members of the Board of Directors willing to continue in service.
Current members of the Board with skills and experience that are relevant to the
Company's business and who are willing to continue in service are first
considered for re-nomination, balancing the value of continuity of service by
existing members of the Board with that of obtaining a new perspective. If any
member of the Board does not wish to continue in service, or if the Committee or
the Board decides not to re-nominate a member for re-election, or if the size of
the Board is increased, the Committee would solicit suggestions for director
candidates from all Board members. In addition, the Committee is authorized by
its charter to engage a third party to assist in the identification of director
nominees. The Nominating Committee would seek to identify a candidate who at a
minimum satisfies the following criteria:
o has the highest personal and professional ethics and integrity and
whose values are compatible with the Company's;
o has had experiences and achievements that have given him or her the
ability to exercise and develop good business judgment;
o is willing to devote the necessary time to the work of the Board and
its committees, which includes being available for Board and
committee meetings;
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o is familiar with the communities in which the Company and the Bank
operate and/or is actively engaged in community activities;
o is involved in other activities or interests that do not create a
conflict with his or her responsibilities to the Company and its
stockholders; and
o has the capacity and desire to represent the balanced, best
interests of the stockholders of the Company as a group, and not
primarily a special interest group or constituency.
In addition, the Nominating Committee will determine whether a candidate
satisfies the qualifications requirements of the Company's Bylaws, which require
any person appointed or elected to the Board of Directors to reside or work in a
county in which the Bank maintains an office (at the time of appointment or
election) or in a county contiguous to a county in which the Bank maintains an
office.
Finally, the Nominating Committee will take into account whether a
candidate satisfies the criteria for "independence" under the Nasdaq corporate
governance listing standards, and if a nominee is sought for service on the
audit committee, the financial and accounting expertise of a candidate,
including whether the individual qualifies as independent for audit committee
standards under the federal securities rules and as an audit committee financial
expert.
Procedures for the Nomination of Directors by Stockholders. The Nominating
Committee has adopted procedures for the submission of director nominees by
stockholders. If a determination is made that an additional candidate is needed
for the Board, the Nominating Committee will consider candidates submitted by
the Company's stockholders. Stockholders can submit qualified names of
candidates for director by writing to our Corporate Secretary, at 100 South
Second Avenue, Alpena, Michigan 49707. The Corporate Secretary must receive a
submission not less than ninety (90) days prior to the anniversary date of the
Company's proxy materials for the preceding year's annual meeting for a
candidate to be considered for next year's annual meeting of stockholders. The
submission must include the following information:
o a statement that the writer is a stockholder and is proposing a
candidate for consideration by the Nominating Committee;
o the qualifications of the candidate and why the candidate is being
proposed;
o the name and address of the stockholder as they appear on the
Company's books, and number of shares of the Company's common stock
that are owned beneficially by such stockholder (if the stockholder
is not a holder of record, appropriate evidence of the stockholder's
ownership will be required);
o the name, address and contact information for the candidate, and the
number of shares of common stock of the Company that are owned by
the candidate (if the candidate is not a holder of record,
appropriate evidence of the stockholder's ownership will be
required);
o a statement of the candidate's business and educational experience;
o such other information regarding the candidate as would be required
to be included in the proxy statement pursuant to SEC Rule 14A;
o a statement detailing any relationship between the candidate and the
Company;
o a statement detailing any relationship between the candidate and any
customer, supplier or competitor of the Company;
o detailed information about any relationship or understanding between
the proposing stockholder and the candidate; and
6
o a statement that the candidate is willing to be considered and
willing to serve as a director if nominated and elected.
Submissions that are received and that meet the criteria outlined above
are forwarded to the Chairman of the Nominating Committee for further review and
consideration. A nomination submitted by a stockholder for presentation by the
stockholder at an annual meeting of stockholders must comply with the procedural
and informational requirements described in this proxy statement under the
heading "Stockholder Proposals." No submission for Board nominees were received
by the Company for the Meeting.
Stockholder Communications with the Board. A stockholder of the Company
who wishes to communicate with the Board or with any individual director may
write to the Corporate Secretary of the Company, 100 South Second Avenue,
Alpena, Michigan 49707, Attention: Board Administration. The letter should
indicate that the author is a stockholder and if shares are not held of record,
should include appropriate evidence of stock ownership. Depending on the subject
matter, management will:
o forward the communication to the director or directors to whom it is
addressed;
o attempt to handle the inquiry directly, for example where it is a
request for information about the Company or a stock-related matter;
or
o not forward the communication if it is primarily commercial in
nature, relates to an improper or irrelevant topic, or is unduly
hostile, threatening, illegal or otherwise inappropriate.
At each Board meeting, management will present a summary of all
communications received since the last meeting that were not forwarded and make
those communications available to the directors.
The Audit Committee. The Audit Committee consists of Directors Rapin,
Townsend and VanMassenhove. Each member of the Audit Committee is considered
"independent" as defined in the Nasdaq corporate governance listing standards
and under SEC Rule 10A-3. The Board of Directors has determined that Gary C.
VanMassenhove, a certified public accountant, qualifies as an "audit committee
financial expert" as that term is defined by the rules and regulations of the
SEC. The Audit Committee met four times during the year ended December 31, 2004.
The Audit Committee reports to the Board on its activities and findings. The
duties and responsibilities of the Audit Committee include, among other things:
o retaining, overseeing and evaluating a firm of independent certified
public accountants to audit the Company's annual financial
statements;
o in consultation with the independent registered public accountants
and the internal auditor, reviewing the integrity of the Company's
financial reporting processes, both internal and external;
o approving the scope of the audit in advance;
o reviewing the financial statements and the audit report with
management and the independent registered public accountants;
o considering whether the provision by the external independent
registered public accountants of services not related to the annual
audit and quarterly reviews is consistent with maintaining the
independent registered public accounting firm's independence;
o reviewing earnings and financial releases and quarterly reports
filed with the SEC;
o consulting with the internal audit staff and reviewing management's
administration of the system of internal accounting controls;
o approving all engagements for audit and non-audit services by the
independent registered public accountants; and
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o reviewing the adequacy of the audit committee charter.
Audit Committee Report
The Audit Committee operates under a written charter adopted by the Board
of Directors which is available on the Company's website at
www.first-federal.com.
Management has the primary responsibility for the Company's internal
controls and financial reporting processes. The independent registered public
accountants are responsible for performing an independent audit of the Company's
consolidated financial statements in accordance with auditing standards
generally accepted in the United States and issuing a report thereon. The Audit
Committee's responsibility is to monitor and oversee these processes.
As part of its ongoing activities, the Audit Committee has:
o reviewed and discussed with management, and the independent
registered public accountants, the Company's audited consolidated
financial statements for the year ended December 31, 2004;
o discussed with the independent registered public accountants the
matters required to be discussed by Statement on Auditing Standards
No. 61, Communications with Audit Committees, as amended; and
o received the written disclosures and the letter from the independent
registered public accountants required by Independence Standards
Board Standard No. 1, Independence Discussions with Audit
Committees, and has discussed with the independent registered public
accountants their independence from the Company.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited consolidated financial
statements be included in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 2004 and be filed with the SEC. In addition, the Audit
Committee engaged Plante & Moran, PLLC as the Company's independent registered
public accountants for the year ending December 31, 2005, subject to the
ratification of this appointment by the stockholders of the Company.
This report shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
The Audit Committee
James C. Rapin (Chairman)
Gary C. VanMassenhove
Thomas R. Townsend
Code of Ethics
The Company has adopted a Code of Ethics that is applicable to the
officers and employees of the Company, including its principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. The Code of Ethics is
available on the Company's website at www.first-federal.com. Amendments to and
waivers from the Code of Ethics will also be disclosed on the Company's website.
There were no such amendments or waivers in 2004.
Directors' Compensation
Directors' Fees. Directors of the Company are not compensated for service
on the Company's Board of Directors or Board committees.
8
In 2004, each director of the Bank received a $600 monthly meeting fee,
payable only if the director attended the meeting. Each director is paid for one
excused absence. The Chairman of the Board received $750 for each regular
meeting attended, and each director received $600 for each special Board meeting
attended.
In addition to the foregoing, during 2004, Messrs. Rapin, Thomson,
Wallace, VanMassenhove and Townsend received $3,200, $2,600, $3,000, $3,000 and
$3,200, respectively, for their services as members of the Bank's Executive and
Audit Committees.
First Federal of Northern Michigan paid a total of $73,850 in director and
committee fees to members of the Board of Directors during the year ended
December 31, 2004.
Recognition and Retention Plan. The Company maintains a Recognition and
Retention Plan (the "Recognition and Retention Plan") first adopted in 1996. At
the inception of the Recognition and Retention Plan in 1996, non-employee
directors Rapin, Thomson, and Wallace were each granted 2,415 shares of common
stock, which shares have been earned and issued. Messrs. VanMassenhove and
Townsend, who were appointed to the Board of Directors in September 2001 and
April 2002, respectively, have not been awarded any shares under the Recognition
and Retention Plan. See "--Benefit Plans - Recognition and Retention Plan."
Executive Compensation
The following table sets forth for the years ended December 31, 2004, 2003
and 2002, certain information as to the total remuneration paid by the Bank and
the Company to the Chief Executive Officer of the Company and the other named
executive officers (the "Named Executive Officers"). No other executive officer
of the Company or the Bank received total annual compensation in excess of
$100,000 during the year ended December 31, 2004.
=============================================================================================================================
SUMMARY COMPENSATION TABLE
=============================================================================================================================
Long-Term
Annual Compensation Compensation Awards
-----------------------------------------------------------------------------------------------------------------------------
Other Restricted
Years Annual Stock Options/ All Other
Name and Ended Salary Bonus Compensation Award(s) SARs Compensation
Principal Position December 31, ($) (1) ($) ($) (2) ($) (#) Payouts ($) (3)
-----------------------------------------------------------------------------------------------------------------------------
Martin A. Thomson 2004 $140,980 $ 36,876 $ 13,900 $ -- -- $ -- $ 4,554
President and Chief 2003 131,722 35,067 11,600 -- -- -- 4,446
Executive Officer 2002 128,819 -- 12,700 3,506 1,000 -- 3,809
-----------------------------------------------------------------------------------------------------------------------------
Michael W. Mahler(4) 2004 $ 94,758 $ 18,538 $ 200 -- -- -- $ 3,545
Executive Vice President 2003 80,600 1,786 200 -- -- -- 3,118
2002 18,270 -- -- -- -- -- 344
=============================================================================================================================
(1) Amount shown is gross earnings.
(2) For Mr. Thomson, includes fees for services on the Board of Directors and
Board Committees of the Company and the Bank. The Bank also provides the
Chief Executive Officer with the use of an automobile, insurance and other
personal benefits that are not included in the Summary Compensation Table
because such benefits do not exceed $50,000 or 10% of the officer's cash
compensation for the year ended December 31, 2004.
(3) Includes a contribution to the 401(k) plan, and director fees for service
on the Board of the subsidiaries, Financial Services & Mortgage
Corporation and InsuranCenter of Alpena.
(4) Mr. Mahler joined the Company in November 2002; and accordingly, 2002 data
are for a two-month period.
Benefit Plans
Defined Benefit Plan. The Bank maintains a noncontributory defined benefit
plan (the "Retirement Plan"). All employees age 21 or older, who have worked at
the Bank for a period of one year and have been credited with 1,000 or more
hours of employment with the Bank during the year, are eligible to accrue
benefits under the Retirement Plan. The Bank annually contributes an amount to
the Retirement Plan necessary to satisfy the actuarially determined minimum
funding requirements in accordance with the Employment Retirement Income
Security Act of 1974, as amended ("ERISA").
At the normal retirement age of 65, the Retirement Plan is designed to
provide a life annuity. The retirement benefit provided is an amount equal to
2.5% of a participant's average salary based on the average of the five
consecutive years during the participant's years of employment which provide the
highest average annual salary multiplied by the participant's years of credited
service to the normal retirement date. Retirement benefits are also
9
payable upon retirement due to early and late retirement. Benefits are also paid
from the Retirement Plan upon a participant's disability or death. A reduced
benefit is payable upon early retirement at or after age 55. Upon termination of
employment other than as specified above, a participant who was employed by the
Bank for a minimum of five years is eligible to receive his or her accrued
benefit reduced for early retirement or a deferred retirement benefit commencing
on such participant's normal retirement date. Benefits are payable in various
annuity forms as well as in the form of a single lump sum payment. For the year
ended December 31, 2004 the Bank made contributions to the Retirement Plan of
$329,552.
In 2004, the Board amended the Retirement Plan and set a 20-year
limitation as the maximum number of employment years an employee is entitled to
under the Retirement Plan. On April 19, 2005, the Board froze the Retirement
Plan as to current participants and excluded from the Retirement Plane new
employees hired after July 1, 2004.
The following table indicates the annual retirement benefit that would be
payable under the Retirement Plan upon retirement at age 65 in plan year 2004,
expressed in the form of a single life annuity for the final average salary and
benefit service classification specified below. As of December 31, 2004, Mr.
Thomson had four years credited service (i.e., benefit service) with the Bank.
================================================================
High 5-Year
Average Salary 10 15 20
----------------------------------------------------------------
$15,000 $3,750 $5,625 $7,500
----------------------------------------------------------------
$25,000 $6,250 $9,375 $12,500
----------------------------------------------------------------
$50,000 $12,500 $18,750 $25,000
----------------------------------------------------------------
$100,000 $25,000 $37,500 $50,000
----------------------------------------------------------------
$150,000 $37,500 $56,250 $75,000
================================================================
Employee Stock Ownership Plan and Trust. The Bank established an employee
stock ownership plan ("ESOP") and related Trust for eligible employees in
connection with its initial mutual holding company reorganization in 1994. The
ESOP borrowed funds from an unrelated third party lender and used the funds to
purchase 48,000 shares of the common stock issued in the Bank's initial stock
offering in 1994 (all of which have been allocated). The loan was repaid
principally from the Bank's contributions to the ESOP and was fully paid during
1999. The ESOP purchased 138,709 shares in the stock offering which was
completed on April 1, 2005. The ESOP obtained a loan from the Company to
purchase these shares. The ESOP loan amortizes over a 15-year period, but the
ESOP is entitled to pay off the loan at any time without incurring a penalty.
Collateral for the loan is the common stock purchased by the ESOP.
The ESOP is a tax-qualified plan subject to the requirements of ERISA and
the Internal Revenue Code of 1986 (the "Code"). Employees with a 12-month period
of employment with the Bank during which they worked at least 1,000 hours and
who have attained age 21 are eligible to participate.
Contributions to the ESOP and shares released from the suspense account in
an amount proportional to the repayment of the ESOP loan are allocated among
participants on the basis of compensation in the year of allocation, up to an
annual adjusted maximum level of compensation. Benefits generally become 100%
vested after five years of credited service. Forfeitures will be reallocated
among remaining participating employees in the same proportion as contributions.
Benefits are payable upon death, retirement, early retirement, disability or
separation from service. The Bank's contributions to the ESOP are not fixed, so
benefits payable under the ESOP cannot be estimated.
The Bank's Board of Directors administers the ESOP. The Bank has appointed
First Bankers Trust Company, Quincy, Illinois to serve as trustee of the ESOP.
The ESOP Committee may instruct the trustee regarding investment of funds
contributed to the ESOP. The ESOP trustee, subject to its fiduciary duty, must
vote all allocated shares held in the ESOP in accordance with the instructions
of participating employees. Under the ESOP, nondirected shares will be voted in
a manner calculated to most accurately reflect the instructions it has received
from participants regarding the allocated stock so long as such vote is in
accordance with the provisions of ERISA. At April 1, 2005, there were 138,709
unallocated shares held in the ESOP.
401(k) Plan. The Bank established a 401(k) Plan for Bank employees as of
May 1, 1999. The Plan is tax qualified and permits participants to elect to
defer up to 50% (as of January 1, 2002) of the participant's eligible
10
annual compensation into the Plan. During 1999, the Bank made a matching
contribution of 25% of the participant contribution to the Plan, up to 1% of the
participant's eligible annual compensation for 1999. After 1999, the Bank has
made matching contributions of 50% of the participant's contribution, with the
match being up to 3% of the participant's eligible annual compensation for the
year. All current employees at the time of the establishment of the Plan on May
1, 1999 were 100% vested in elective deferral matching contributions.
Subsequently, new employees became 100% vested in matching contributions after
five years of credited service. Beginning January 1, 2002 the vesting schedule
for matching contributions changed to 20% per year of service over a five-year
period. Participants will be credited for years of service with the Bank prior
to the effective date of the Plan. Forfeitures of discretionary contributions
will be used to reduce the Bank's contributions in succeeding plan years. In
connection with the second-step stock offering which was completed on April 1,
2005, the 401(k) Plan was amended to permit participants to direct the
investment of their 401(k) Plan account balances. Participants are permitted to
invest their account balances in shares of the Company's common stock through an
employer stock fund that has been established in the Plan.
Stock Option Plan. Certain employees and non-employee directors of the
Bank and the Company are eligible to participate in the Bank's 1996 Stock Option
Plan (the "Stock Option Plan"). The Stock Option Plan authorizes the grant of
stock options and limited rights to purchase 69,000 shares, or 10% of the shares
of common stock issued to minority stockholders in the 1994 initial public
offering by the Bank. Upon the closing of the second-step stock offering, the
shares of common stock subject to the Stock Option Plan were adjusted pursuant
to the exchange ratio and became the shares of the Company's common stock.
Pursuant to the Stock Option Plan, grants may be made of (i) options to purchase
common stock intended to qualify as incentive stock options under Section 422 of
the Code, (ii) options that do not so qualify ("non-statutory options") and
(iii) limited rights (described below) that are exercisable only upon a change
in control of the Bank or the Company. Non-employee directors are only eligible
to receive non-statutory options.
The Stock Option Plan is administered by a committee consisting of certain
non-employee directors of the Board of Directors (the "Committee"). In granting
options, the Committee considers factors such as salary, length of employment
with the Bank, and the employee's overall performance. All stock options are
exercisable in five equal annual installments of 20% commencing one year from
the date of grant; provided, however, that all options will be 100% exercisable
in the event the optionee terminates his service due to normal retirement, death
or disability, or in the event of a change in control of the Company or the
Bank. Options may be exercised within 10 years from the date of grant. Stock
options may be exercised up to one year following termination of service or such
later period as determined by the Committee. The exercise price of the options
will be at least 100% of the fair market value of the underlying common stock at
the time of the grant. The exercise price may be paid in cash or common stock.
Incentive stock options will only be granted to employees of the Bank
and/or the Company. Non-employee directors will be granted non-statutory stock
options. No incentive stock option granted in connection with the Stock Option
Plan may be exercisable more than three months after the date on which the
optionee ceases to perform services for the Bank and/or the Company, except that
in the event of death, disability, normal retirement, or a change in control of
the Bank or the Company, incentive stock options may be exercisable for up to
one year; provided, however, that if an optionee ceases to perform services for
the Bank or the Company due to retirement or following a change in control (as
defined in the Stock Option Plan), any incentive stock options exercised more
than three months following the date the optionee ceases to perform services
shall be treated as a non-statutory stock option as described above.
Upon the exercise of "limited rights" in the event of a change in control,
the optionee will be entitled to receive a lump sum cash payment, or in certain
cases, common stock, equal to the difference between the exercise price of the
option and the fair market value of the shares of common stock subject to the
option on the date of exercise of the right in lieu of purchasing the stock
underlying the option. In the event of death or disability, the Bank and/or the
Company, if requested by the optionee or beneficiary, may elect, in exchange for
the option, to pay the optionee, or beneficiary in the event of death, the
amount by which the fair market value of the common stock exceeds the exercise
price of the option on the date of the optionee's termination of service for
death or disability.
Pursuant to the Stock Option Plan, non-employee directors at the inception
of the Plan on April 17, 1996, Messrs. Rapin, Thomson, and Wallace, were each
granted options to purchase 6,037 shares of common stock. These options were
granted at an exercise price of $10.00 per share, which options have all been
vested but not
11
exercised. No options have been reserved for future issuance to non-employee
directors under the Plan, and therefore Messrs. VanMassenhove and Townsend, who
were appointed to the Board of Directors in September 2001 and April 2002,
respectively, have not been awarded options under the Plan. No stock options
were granted under the Stock Option Plan during the year ended December 31,
2004.
Set forth below is certain information concerning options outstanding to
the Named Executive Officers at December 31, 2004.
=================================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
=================================================================================================================
Number of Unexercised Value of Unexercised In-
Options at The-Money Options at
Year-End Year-End
-----------------------------------------------------------------------------------------------------------------
Shares
Acquired
upon Value Exercisable/Unexercisable Exercisable/Unexercisable
Name Exercise Realized (#) ($)
=================================================================================================================
Martin A. Thomson -- $-- 6,437 / 600 $99,883 / $7,200
-----------------------------------------------------------------------------------------------------------------
Michael W. Mahler -- -- --/-- --/--
=================================================================================================================
Recognition and Retention Plan. Certain employees and non-employee
directors of the Bank and the Company are eligible to participate in the Bank's
Recognition and Retention Plan, which was adopted in 1996 (the "Recognition
Plan"). A Committee of the Board of Directors composed of "disinterested"
directors (the "Recognition Plan Committee") administers the Recognition Plan
and makes awards to executive officers and employees. Participants in the
Recognition Plan earn (become vested in) shares of Restricted Stock covered by
an award and all restrictions lapse over a period of time commencing from the
date of the award; provided, however, that the Recognition Plan Committee may
accelerate or extend the earnings rate on any awards made to officers and
employees under the Recognition Plan. Awards to non-employee directors vest at
the rate of 20% of the amount initially awarded commencing one year from the
date of the award. Awards to executive officers and employees become fully
vested upon termination of employment or service due to death, disability or
normal retirement or following a termination of employment or service in
connection with a change in the control of the Bank or the Company. Upon
termination of employment or service for another reason, unvested shares are
forfeited. Awards to non-employee directors fully vest upon a non-employee
director's disability, death, normal retirement, or following termination of
service in connection with a change in control of the Bank or the Company.
Unvested shares of Restricted Stock will be forfeited by a non-employee director
upon failure to seek reelection, failure to be reelected, or resignation from
the Board (other than in connection with normal retirement, as defined by the
Recognition Plan). See "--Directors' Compensation - Recognition and Retention
Plan."
Set forth below is information as of December 31, 2004 regarding equity
compensation plans categorized by those plans that have been approved by
stockholders and those plans that have not been approved by stockholders.
-------------------------------------------------------------------------------------------------------------------
Number of securities to be Number of securities
issued upon exercise of Weighted average remaining available for
Plan outstanding options and rights exercise price issuance under plan
-------------------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by stockholders 26,411 $10.49 20,709(1)
-------------------------------------------------------------------------------------------------------------------
Equity compensation plans not
approved by stockholders -- -- --
-------------------------------------------------------------------------------------------------------------------
Total 26,411 $10.49 20,709
-------------------------------------------------------------------------------------------------------------------
(1) Consists of 42 shares available for future issuance pursuant to the 1996
Recognition and Retention Plan and 20,667 shares underlying options
available for future issuance pursuant to the 1996 Stock Option Plan.
Change in Control Agreements. In connection with the completion of the
second-step mutual-to-stock conversion, the Bank intends to enter into change in
control agreements with Martin A. Thomson, President and Chief Executive
Officer, and Michael W. Mahler, Executive Vice President, which would provide
certain benefits in the event of a change in control of the Bank or the Company.
Each of the change in control agreements provides for
12
a term of up to 36 months. Commencing on each anniversary date, the Board of
Directors may extend the change in control agreements for an additional year.
The change in control agreements enable the Bank to offer to designated officers
certain protections against termination without cause in the event of a change
in control (as defined in the agreements). These protections against termination
without cause in the event of a change in control are frequently offered by
other financial institutions, and the Bank may be at a competitive disadvantage
in attracting and retaining key employees if it does not offer similar
protections.
Following a change in control of the Company or the Bank, an officer is
entitled to a payment under the change in control agreement if the officer's
employment is involuntarily terminated during the term of such agreement, other
than for cause, as defined, death or disability. Involuntary termination
includes the officer's termination of employment during the term of the
agreement and following a change in control as the result of a demotion, loss of
title, office or significant authority, reduction in the officer's annual
compensation or benefits, or relocation of the officer's principal place of
employment by more than 25 miles from its location immediately prior to the
change in control. In addition, for the first 12 months following a change in
control, if the Bank (or its successor) fails to renew the change in control
agreement, the executive can voluntarily resign and receive the severance
payment. In the event that an officer who is a party to a change in control
agreement is entitled to receive payments pursuant to the change in control
agreement, the officer will receive a cash payment of up to a maximum of two
times the sum of base salary and highest rate of bonuses awarded to the officer
over the prior three years, subject to applicable withholding taxes. Under the
change in control agreements, Messrs. Thomson and Mahler would receive an
aggregate of $866,000 upon a change in control, based upon current levels of
compensation. In addition to the severance payment, each covered officer is
entitled to receive life, medical and dental coverage for a period of up to 24
months from the date of termination, as well as a lump-sum payment equal to the
excess, if any, of (a) the present value of benefits to which the officer would
be entitled under the Bank's defined benefit plan if the officer had the
additional years of service that he would have had if he had continued working
for the Bank for 24 months following his termination, over (b) the present value
of the benefits to which the officer is actually entitled under the Bank's
defined benefit plan as of the date of his termination. Notwithstanding any
provision to the contrary in the change in control agreement, payments under the
change in control agreements are limited so that they will not constitute an
excess parachute payment under Section 280G of the Internal Revenue Code.
Transactions with Certain Related Persons
In the ordinary course of business, the Bank makes loans available to its
directors, officers and employees. These loans are made in the ordinary course
of business on substantially the same terms (including interest rate), including
collateral, as comparable loans to other borrowers. Management believes that
these loans neither involve more than the normal risk of collectibility nor
present other unfavorable features. Federal regulations permit executive
officers and directors to participate in loan programs that are available to
other employees, as long as the director or executive officer is not given
preferential treatment compared to other participating employees. Loans made to
directors or executive officers, including any modification of such loans, must
be approved by a majority of disinterested members of the Board of Directors.
The interest rate on loans to directors and officers is the same as that offered
to other employees.
Section 16(a) Beneficial Ownership Reporting Compliance
The common stock of the Company is registered with the SEC pursuant to
Section 12(g) of the Securities Exchange Act of 1934 (the "Exchange Act"). The
officers and directors of the Company and beneficial owners of greater than 10%
of First Federal of Northern Michigan Bancorp, Inc.'s common stock ("10%
beneficial owners") are required to file reports on Forms 3, 4, and 5 with the
SEC disclosing beneficial ownership and changes in beneficial ownership of the
common stock. SEC rules require disclosure in the Company's Proxy Statement or
Annual Report on Form 10-KSB of the failure of an officer, director, or 10%
beneficial owner of the Company's common stock to file a Form 3, 4, or 5 on a
timely basis. Based on the Company's review of ownership reports, all of the
Company's officers and directors, except for Amy E. Essex and Gary C.
VanMassenhove, filed these reports on a timely basis for 2004. On September 8,
2004, Mr. VanMassenhove purchased 250 shares of common stock and filed a Form 4
on September 17, 2004. In November 2004, Ms. Essex was appointed an executive
officer of the Company. A timely Form 3 was not filed on the date of her
appointment; however, at such date, Ms. Essex held no shares of common stock.
Ms. Essex subsequently filed a Form 3 in connection with the second-step stock
offering.
13
--------------------------------------------------------------------------------
PROPOSAL II--RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS
--------------------------------------------------------------------------------
The Company's independent registered public accountants for the year ended
December 31, 2004 were Plante & Moran, PLLC. The Audit Committee has engaged
Plante & Moran, PLLC to be the Company's independent registered public
accountants for the 2005 fiscal year, subject to the ratification of the
engagement by the Company's stockholders. At the Meeting, stockholders will
consider and vote on the ratification of the engagement of Plante & Moran, PLLC
for the Company's fiscal year ending December 31, 2005. A representative of
Plante & Moran, PLLC is expected to attend the Meeting to respond to appropriate
questions and to make a statement if he so desires.
Stockholder ratification of the selection of Plante & Moran, PLLC is not
required by the Company's bylaws or otherwise. However, the Board of Directors
is submitting the selection of the independent registered public accountants to
the stockholders for ratification as a matter of good corporate practice. If the
stockholders fail to ratify the selection of Plante & Moran, PLLC, the Audit
Committee will reconsider whether or not to retain that firm. Even if the
selection is ratified, the Audit Committee in its discretion may direct the
appointment of a different independent accounting firm at any time during the
year if it determines that such change is in the best interests of the Company
and its stockholders.
Fees Paid to Plante & Moran, PLLC
Set forth below is certain information concerning aggregate fees billed
for professional services rendered by Plante & Moran, PLLC during 2004 and 2003:
Audit Fees. The aggregate fees billed to the Company by Plante & Moran,
PLLC for professional services rendered by Plante & Moran, PLLC for the audit of
the Company's annual financial statements, review of the financial statements
included in the Company's Quarterly Reports on Form 10-QSB and services that are
normally provided by Plante & Moran, PLLC in connection with statutory and
regulatory filings and engagements were $73,150 and $50,000 during the years
ended December 31, 2004 and 2003, respectively.
Audit-Related Fees. The aggregate fees billed to the Company by Plante &
Moran, PLLC for assurance and related services rendered by Plante & Moran, PLLC
that are reasonably related to the performance of the audit of and review of the
financial statements and that are not already reported in "Audit Fees," above,
were $0 and $17,800 during the years ended December 31, 2004 and 2003,
respectively. For 2003, these services included consultation regarding the
Company's internal audit schedule and programs and review associated with the
Company's acquisition of InsuranCenter of Alpena.
Tax Fees. The aggregate fees billed to the Company by Plante & Moran, PLLC
for professional services rendered by Plante & Moran, PLLC for tax compliance,
tax advice and tax planning were $6,780 and $6,350 during the years ended
December 31, 2004 and 2003, respectively. These services included consultation
on a discrepancy between IRS and SSA Records and research on taxability of gifts
and disbursements to terminated employees.
All Other Fees. The aggregate fees billed to the Company by Plante &
Moran, PLLC that are not described above were $38,900 and $0 during the years
ended December 31, 2004 and 2003, respectively. These services included
consultation in connection with the second-step stock offering, including the
preparation of the Company's SEC registration statement on Form SB-2.
The Audit Committee has considered whether the provision of non-audit
services, which for 2004 related primarily to the second-step mutual-to-stock
conversion, is compatible with maintaining Plante & Moran, PLLC's independence.
The Audit Committee concluded that performing such services does not affect
Plante & Moran, PLLC's independence in performing its function as auditor of the
Company.
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of
Independent Auditor
The Audit Committee's policy is to pre-approve all audit and non-audit
services provided by the independent auditors. These services may include audit
services, audit-related services, tax services and other services. Pre-approval
is generally provided for up to one year and any pre-approval is detailed as to
particular
14
service or category of services and is generally subject to a specific budget.
The Audit Committee has delegated pre-approval authority to its Chairman when
expedition of services is necessary. The independent auditors and management are
required to periodically report to the full Audit Committee regarding the extent
of services provided by the independent auditors in accordance with this
pre-approval, and the fees for the services performed to date. For 2004, all
services were pre-approved by the Audit Committee.
Required Vote and Recommendation of the Board of Directors.
In order to ratify the selection of Plante & Moran, PLLC as independent
auditors for the 2005 fiscal year, the proposal must receive the affirmative
vote of at least a majority of the votes cast at the Annual Meeting, either in
person or by proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE RATIFICATION OF PLANTE & MORAN, PLLC AS INDEPENDENT AUDITORS
--------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
--------------------------------------------------------------------------------
In order to be eligible for inclusion in the Company's proxy materials for
next year's Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received at the Company's executive office, 100
South Second Avenue, Alpena, Michigan 49707, no later than January 6, 2006. Any
such proposal shall be subject to the requirements of the proxy rules adopted
under the Exchange Act.
--------------------------------------------------------------------------------
OTHER MATTERS AND ADVANCE NOTICE PROCEDURES
--------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Annual Meeting other than the matters described above in this proxy statement.
However, if any matters should properly come before the Annual Meeting, it is
intended that holders of the proxies will act as directed by a majority of the
Board of Directors, except for matters related to the conduct of the Annual
Meeting, as to which they shall act in accordance with their best judgment. The
Board of Directors intends to exercise its discretionary authority to the
fullest extent permitted under the Exchange Act.
The Company's Bylaws provide an advance notice procedure for certain
business, or nominations to the Board of Directors, to be brought before an
annual meeting of stockholders. In order for a stockholder to properly bring
business before an annual meeting, or to propose a nominee to the Board of
Directors, the stockholder must give written notice to the Secretary of the
Company not less than ninety (90) days prior to the date of the Company's proxy
materials for the preceding year's annual meeting; provided, however, that if
the date of the annual meeting is advanced more than twenty (20) days prior to
or delayed by more than sixty (60) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be received
not earlier than the close of business on the 120th day prior to the date of
such annual meeting and not later than the close of business on the later of (A)
the 90th day prior to the date of such annual meeting or (B) the tenth day
following the first to occur of (i) the day on which notice of the date of the
annual meeting was mailed or otherwise transmitted or (ii) the day on which
public announcement of the date of the annual meeting was first made by the
Company. The notice must include the stockholder's name, record address, and
number of shares owned, describe briefly the proposed business, the reasons for
bringing the business before the annual meeting, and any material interest of
the stockholder in the proposed business. In the case of nominations to the
Board of Directors, certain information regarding the nominee must be provided.
Nothing in this paragraph shall be deemed to require the Company to include in
its proxy statement and proxy relating to an annual meeting any stockholder
proposal that does not meet all of the requirements for inclusion established by
the Securities and Exchange Commission in effect at the time such proposal is
received.
The date on which the 2006 Annual Meeting of Stockholders is expected to
be held is May 17, 2006. Accordingly, advance written notice of business or
nominations to the Board of Directors to be brought before the 2006 Annual
Meeting of Stockholders must be given to the Company no later than February 5,
2006.
15
--------------------------------------------------------------------------------
MISCELLANEOUS
--------------------------------------------------------------------------------
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers, and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional compensation.
Additionally, the Company has retained Regan & Associates, Inc., a proxy
solicitation firm, to provide advisory services in connection with the
solicitation of proxies and will pay Regan & Associates, Inc. a fee of $3,500
for these services.
A COPY OF THE COMPANY'S REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER
31, 2004 WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE VOTING
RECORD DATE UPON WRITTEN REQUEST TO MICHAEL W. MAHLER, SECRETARY, FIRST FEDERAL
OF NORTHERN MICHIGAN BANCORP, INC., 100 SOUTH SECOND AVENUE, ALPENA, MICHIGAN
49707.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Michael W. Mahler
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Michael W. Mahler
Secretary
Alpena, Michigan
May 6, 2005
16
REVOCABLE PROXY
FIRST FEDERAL OF NORTHERN MICHIGAN BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
May 25, 2005
The undersigned hereby appoints the full Board of Directors, with full
powers of substitution to act as attorneys and proxies for the undersigned to
vote all shares of common stock of First Federal of Northern Michigan Bancorp,
Inc. which the undersigned is entitled to vote at the Annual Meeting of
Stockholders (the "Meeting") to be held at the Thunder Bay Recreational Center,
701 Woodward Avenue, Alpena, Michigan, at 11:00 a.m. (Michigan time) on May 25,
2005. The official proxy committee is authorized to cast all votes to which the
undersigned is entitled as follows:
VOTE
FOR WITHHELD
--- --------
1. The election as Directors of all nominees
listed below, each to serve for a three-year |_| |_|
term
James C. Rapin
Martin A. Thomson
INSTRUCTION: To withhold your vote for one
or more nominees, write the name of the
nominee(s) on the line(s) below.
__________________________
__________________________
VOTE
FOR WITHHELD ABSTAIN
--- -------- -------
2. The ratification of the appointment of
Plante & Moran, PLLC as independent |_| |_| |_|
registered public accountants for the year
ending December 31, 2005.
The Board of Directors recommends a vote "FOR" each of the listed proposals.
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THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED ABOVE. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THE
ABOVE-NAMED PROXIES AT THE DIRECTION OF A MAJORITY OF THE BOARD OF DIRECTORS. AT
THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE
PRESENTED AT THE MEETING.
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting or at
any adjournment thereof and after notification to the Secretary of First Federal
of Northern Michigan Bancorp, Inc. at the Meeting of the stockholder's decision
to terminate this proxy, then the power of said attorneys and proxies shall be
deemed terminated and of no further force and effect. This proxy may also be
revoked by sending written notice to the Secretary of First Federal of Northern
Michigan Bancorp, Inc. at the address set forth on the Notice of Annual Meeting
of Stockholders, or by the filing of a later-dated proxy prior to a vote being
taken on a particular proposal at the Meeting.
The undersigned acknowledges receipt from First Federal of Northern
Michigan Bancorp, Inc. prior to the execution of this proxy of a Notice of the
Meeting and a proxy statement dated May 6 , 2005.
Dated:___________________, 2005 |_| Check Box if You Plan
to Attend Meeting
___________________________________ ________________________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
___________________________________ ________________________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this card. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title. If
shares are held jointly, each holder should sign.
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Please complete and date this proxy and return it promptly
in the enclosed postage-prepaid envelope.
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