UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SCHEDULE 14A
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
| ☐ | Preliminary Proxy Statement |
| ☐ | Confidential, for |
| ☒ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material Pursuant to |
Farmers & Merchants Bancorp
(Name of Registrant as Specified in itsIn Its Charter)
Payment of Filing Fee (Check all boxes that apply): |
| ☒ | No fee required. |
| ☐ | Fee paid previously with preliminary materials. |
| ☐ | Fee computed on table |
April 1, 2022
Dear Stockholder:Fellow Shareholder:
I invite you to attend our Annual Meeting the (“Annual Meeting” or “Meeting”) of stockholdersShareholders of Farmers & Merchants Bancorp (the “Company” or “FMCB”). The Meeting will be held this year on Wednesday, June 30, 2021, at 4:00 p.m. TheP.M., Pacific Daylight Time, on May 16, 2022 by means of remote communication (commonly referred to as a “virtual” meeting). You will find information in the enclosed proxy statement describeson how to attend the business to be conducted at the virtual annual meeting.
Even if you do not you plan to joinattend the virtual annual meeting, it is still important that you are representedAnnual Meeting, please read the enclosed proxy statement and vote your shares as promptly as possible by mail, telephone or the internet. Voting promptly will save the Company additional expense in soliciting proxies and will ensure that your shares are voted. Accordingly, please complete, sign and daterepresented at the enclosed proxy and return it as soon as possible in the postage-paid envelope that has been provided for your convenience.Meeting. Also, please retain a copy of your proxy card, since you will need information on the proxy card to access the virtual meeting.
Sincerely,
Kent A. Steinwert
Chairman, President, and Chief Executive Officer
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 1, 2022
| DATE | May 16, 2022 |
| TIME | 4:00 p.m. Pacific Daylight Time |
| LOCATION (VIRTUAL) | This year’s Annual Meeting will be conducted solely online via live webcast. There is no physical location for the Annual Meeting. You will be able to attend the Annual Meeting online, vote your shares by mail, telephone, or the internet. You will be able to submit your questions during the meeting by logging into www.meetnow.global/MQV4GDR. Additionally, you will need to enter the 15 digit control number that is printed in the shaded bar on the front of your proxy card. |
ITEMS OF BUSINESS
No. | Proposal |
1. | Elect seven (7) director nominees named in this proxy statement each for a term of one year. |
| RECORD DATE | Holders of record of the Company’s voting common stock at the close of business on March 22, 2022 (the “Record Date”) will be entitled to vote at the Meeting or any adjournment or postponement of the Meeting. |
| ANNUAL REPORT | The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission (“SEC”) on March 16, 2022 (the “Annual Report”), accompanies this proxy statement. |
| AVAILABLE MATERIALS | The Company’s proxy statement and the Annual Report are also available on the internet at www.fmbonline.com. |
Forward the email from your broker, or attach an image of your legal proxy to legalproxy@computershare.com. The password for the meeting is FMCB2021. Additionally, you will need to enter the 15 digit control number that is printed in the shaded bar on the front of your proxy card.
Computershare
Farmers & Merchants Bancorp Legal Proxy
P.O. Box 43001
Providence, RI 02940-3001
| Please complete, sign and date, as promptly as possible, the enclosed proxy and immediately return it in the envelope provided for your use. This is important whether or not you plan to join the virtual annual meeting. The giving of such proxy will not affect your right to revoke such proxy or to vote online, should you join the virtual annual meeting. Please retain a copy of your proxy card since you will need information on the card to access the virtual meeting. |
April 1, 2022
BY ORDER OF THE BOARD OF DIRECTORS | |
/s/ Mark K. Olson | |
Mark K. Olson | |
Corporate Secretary |
PROXY STATEMENT FOR THE 2022 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 16, 2022
The Board is asking you to vote your shares, see the instructions included on the enclosed proxy card and under “Information About Voting andfollowing items at the Annual Meeting.”Meeting:
No. | |
1. | Elect seven (7) director nominees named in this proxy statement each for a term of one year. |
Only stockholdersshareholders of record at the close of business on May 11, 2021March 22, 2022 (the “record date”“Record Date”), will be entitled to vote on-lineonline at the virtual meeting or by proxy. On the record date,Record Date, there were 789,646785,146 shares of common stock outstanding and entitled to vote. Holders of common stock of the Company are entitled to one vote for each share held. However, with respect to the election of Directors, each stockholdershareholder may be eligible to exercise cumulative voting rights.
Notice and Access (Electronic Proxy)
Farmers & Merchants Bancorp offers electronic access in lieu of mail delivery of our Annual Report and Proxy Statement. Should you want to discontinue receiving a paper copy of our Annual Report and Proxy Statement, please sign up at www.envisionreports.com/FMCB. You may rescind electronic access at any time.
If you have any questions regarding electronic access, please call Mark K. Olson, Corporate Secretary, at (209) 367-2485.
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Voting of Proxies
The shares represented by all properly executed proxies received in time for the virtual meeting will be voted in accordance with the stockholders’shareholders’ choices specified therein; provided, however, that where no choices have been specified, the shares will be voted “FOR”therein.
Voting Requirements
In the election of Directors, the 7seven (7) director nominees for Director recommended byreceiving the most affirmative votes will be elected to the Board of Directors. Abstentions and broker non-votes will have no effect on the election of Directors. For each matter other than the election of Directors, the affirmative vote of a majority of the shares represented at the Annual Meeting and entitled to vote on the matter shall be the act of the shareholders and, therefore, abstentions as to a particular proposal will have the same effect as a vote against that proposal and broker non-votes will have no effect on the vote.
A majority of the shares entitled to vote represented either on-lineonline during the virtual meeting or by properly executed proxies, will constitute a quorum at the virtual meeting. Abstentions and broker “non-votes” are each included in the determination of the number of shares present and voting for purposes of determining the presence of a quorum. A broker “non-vote” occurs when a nominee holding shares for a beneficial owner does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner.
How to acquire beneficial ownership (as so defined) within 60 days of the record date.
Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | |
| Common Stock | Cortopassi Family Trust | 50,650 | 6.41% | |
and Cortopassi Partners | ||||
11292 N. Alpine Road | ||||
Stockton, CA 95212 | ||||
| Common Stock | Sheila M. Wishek (1) | 40,150 | 5.08% | |
111 West Pine Street | ||||
Lodi, CA, 95240 | ||||
Vote Your Shares
| 1. |
| 2. | You can vote your proxy by telephone. If you are a registered shareholder, that is, if your shares are held in your own name, you can vote by telephone by following the instructions included on the proxy card. If you vote by telephone, you do not have to |
| 3. | You can vote your proxy via the |
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Name and Address of Beneficial Owner (1) | Amount of Common Stock Owned and Nature of Beneficial Ownership (2) | Percent of Class | |
Edward Corum, Jr. | 2,012 | * | |
Stephen W. Haley | 4,809 | * | |
Deborah E. Skinner | 4,319 | * | |
Stephenson K. Green | 607 | * | |
Terrence A. Young | 462 | * | |
Kevin Sanguinetti | 7,624 | * | |
Kenneth W. Smith | 3,641 | * | |
Kent A. Steinwert | 31,120 | 3.94% | |
David M. Zitterow | 641 | * | |
Jay J. Colombini | 4,871 | * | |
Calvin (Kelly) Suess | 3,551 | * | |
Gary J. Long | 1,740 | * | |
Ryan J. Misasi | 1,969 | * | |
| All Directors, Nominees and Named Executive Officers as a group (13 persons) | 67,366 | 8.53% | |
| 4. |
If you makeare a registered shareholder, you can revoke your proxy and change your vote at any time before the polls close at the Annual Meeting by:
| ◾ | submitting another proxy with a later date; |
| ◾ | giving written notice of the revocation of your proxy to the Company’s Corporate Secretary prior to the Meeting; or |
| ◾ | voting during the Meeting. Your proxy will not be automatically revoked by your attendance at the Meeting; you must actually vote during the Meeting to revoke a prior proxy. |
If your shares are held in street name, you should follow the instructions provided by your bank, broker or other holder of record to be able to participate in the Meeting.
Confidential Voting
We have a confidential voting policy to protect the privacy of our shareholders’ votes. Under this election, shortly before each annual meeting you will receive apolicy, ballots, proxy card, along withcards and voting instructions returned to banks, brokers and other nominees are kept confidential. Only the proxy tabulator and the web address where you canInspector of Election have access that year’s annual reportto the ballots, proxy cards and proxy statement.voting instructions.
Proxy Solicitation Costs
The Board of Directors recommendshas appointed an officer of the Bank to act as Inspector of Election at the Annual Meeting and Computershare to tabulate the votes cast.
Director Nominees Unable to Stand for Election
If a Director nominee is unable to stand for election, the Board of Directors may either reduce the number of Directors to be elected or select a substitute Director nominee. If a substitute Director nominee is selected, the persons named in the proxy will vote your shares for the substitute Director nominee unless you have withheld authority to vote for eachthe Director nominee replaced.
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Voting Results of the nominees listed below.Meeting
We will announce preliminary voting results at the Annual Meeting and subsequently publish the results of the votes, including the name of each Director elected at the meeting, as well as a brief description of each matter voted upon, in a Current Report on Form 8-K to be filed with the SEC within four business days after the date of the Annual Meeting (on or before May 20, 2022). You may view this Current Report on Form 8-K, when available, on the Internet through the SEC’s website at www.sec.gov or through our website at www.fmbonline.com.
Multiple Proxy Cards
If you receive multiple Proxy Cards, your shares are probably registered differently or are in more than one account. Vote all Proxy Cards received to ensure that all your shares are voted. Unless you need multiple accounts for specific purposes, we recommend that you consolidate as many of your accounts as possible under the same name and address. If the shares are registered in your name, contact our transfer agent, Computershare, (888)835-2829; otherwise, contact your bank, broker or other nominee.
Board of Directors Voting Recommendations
The voting recommendations from the Board of Directors are as follows:
| No. | Proposal | Board Recommendation |
| 1. | Elect seven (7) director nominees named in this proxy statement each for a term of one year. | FOR |
ANNUAL MEETING BUSINESS MATTERS
PROPOSAL NO. 1—ELECTION OF DIRECTORS
At this year’s virtual annual meeting, it will be proposed to elect seven (7) Directorsdirectors of the Company, each to hold office until the next annual meeting and until their successors shall be elected and qualified. It is the intention of the proxy holders named in the enclosed proxy to vote such proxies (except those containing contrary instructions) for the seven (7) nominees named below.
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The following table sets forth the names of each of the nominees for election as a Director, their age, their principal occupation for the past five years and the period during which they have served as a Director of the Company (or the Bank).
Name | Age | Principal Occupation | Director Since | ||
Edward Corum, Jr. | 69 | Managing General Partner, Corum Real Estate | 2003 | ||
| Stephenson K. Green | 75 | Retired Banker and Business Consultant | 2018 | ||
Gary J. Long | 68 | Owner, Gary J. Long Jewelers | 2014 | ||
| Kevin Sanguinetti | 63 | Retired President, 1st American Title Company - Stockton | 2001 | ||
Kent A. Steinwert | 68 | Chairman, President & C.E.O. of the Company and Bank | 1998 | ||
Calvin (Kelly) Suess | 85 | Chairman of the Board of ShellPro | 1990 | ||
Terrence A. Young | 68 | Retired Banker and Human Resources Executive | 2018 |
| Name | Age | Principal Occupation | Director Since |
Kent A. Steinwert | 69 | Chairman, President & Chief Executive Officer | 1998 |
Calvin (Kelly) Suess | 86 | Chairman of the Board of ShellPro | 1990 |
Kevin Sanguinetti | 64 | Retired President, 1st American Title Company - Stockton | 2001 |
Edward Corum, Jr. | 70 | Managing General Partner, Corum Real Estate | 2003 |
Gary J. Long | 69 | Owner, Gary J. Long Jewelers | 2014 |
Stephenson K. Green | 76 | Retired Banker and Business Consultant | 2018 |
Terrence A. Young | 69 | Retired Banker and Human Resources Executive | 2018 |
The Board of Directors unanimously recommends a vote “FOR” each of the nominees.
Director since 1998
Mr. YoungSteinwert has served as a directorDirector for 23 years, and has 47 years of business, agriculture, real estate and consumer banking experience.
Calvin (Kelly) Suess
Director since 1990
Chairman of the CRA Committee; Member of the Nominating Committee, Asset and Liability Committee, and Budget & Finance Committee
Mr. Suess has served as a Director for 31 years, lives and is actively involved in the Lodi market area, and provides agricultural production and processing expertise to the Board.
Kevin Sanguinetti
Director since 2001
Chairman of the Audit Committee; Member of the Budget & Finance Committee and Personnel Committee
Mr. Sanguinetti has served as a Director for 20 years, is actively involved in the Stockton market area, and provides real estate and financial expertise to the Board.
Edward Corum, Jr.
Director since 2003
Chairman of the Personnel Committee; Member of the Nominating Committee, Audit Committee, and Loan Committee
Mr. Corum has served as a Director for 18 years, lives and is actively involved in the Sacramento market area, and provides real estate and financial expertise to the Board.
Gary J. Long
Director since 2014
Member of the Nominating Committee, Asset and Liability Committee, Budget & Finance Committee, and CRA Committee
Mr. Long has served as a Director for seven years, lives and is actively involved in the Stockton market area, and provides small business expertise to the Board.
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Stephenson K. Green
Director since 2018
Member of the Audit Committee, CRA Committee, and Personnel Committee
Mr. Green has served as a Director since March 2018. Prior to his retirement in 2012, Mr. Green worked for 40 years in the commercial banking industry in California. He lives and is actively involved in the Sacramento market area, and provides business banking and credit management expertise to the Board.
Terrence A. Young
Director since 2018
Member of the Budget & Finance Committee and CRA Committee
Mr. Young has served as a Director since March 2018. Prior to his retirement in 2017, Mr. Young served for 45 years in various human resources, operations and audit roles within the commercial banking industry. He lives and is actively involved in the Sacramento market area, and provides financial controls and human resources expertise to the Board.
All nominees are considered to be “independent” as such term is defined by Nasdaq’s current listing rules with the exception of Mr. Steinwert who is currently an employee of the Company. Each of the nominees has been selected by the Nominating Committee.
None of the Directors were selected pursuant to arrangements or understandings other than with the Directors and stockholdersshareholders of the Company acting within their capacity as such. There are no family relationships among the Directors and executive officers, and none of the Directors serves as a Director of any company which has a class of securities registered under, or subject to periodic reporting requirements of, the Securities Exchange Act of 1934, as amended, or any company registered as an investment company under the Investment Company Act of 1940.
The Nominating Committee of the Board of Directors follows the Bank’s policy regarding diversity in identifying new directorDirector candidates. The Committee looks to establish diversity on the Board through a number of demographics, experiences, skills and viewpoints, all with a view to identifying candidates that can assist the Board with its decision making. The Committee believes that the current Board of Directors reflects diversity on a number of these factors.
The Board does not anticipate that any of the nominees will be unable to serve as a Director of the Company, but if that should occur before the meeting, the Board of Directors reserve the right to substitute as nominee another person of their choice in the place and stead of any nominee unable so to serve. Proxy holders would vote to approve the election of such substitute nominee. The proxy holders reserve the right to cumulate votes for the election of Directors and cast all of such votes for any one or more of the nominees, to the exclusion of the others, and in such order of preference as the proxy holders may determine in their discretion, based upon the recommendation of the Board of Directors.
Code of Ethics
The Company has adopted a Code of Conduct. A copy of the Code of Conduct is posted on the Company’s website at http://www.fmbonline.com . The Company intends to disclose promptly on its website any amendment to, or waiver from any provision of, the Code of Conduct applicable to Executive Officers and Directors.
Director Independence
The Company follows Rule 5605(a)(2) of Nasdaq’s current listing rules to determine whether a Director Compensationis independent. With the exception of Mr. Steinwert who is currently an employee of the Company, all nominees are considered to be “independent.”
The Company’s principal asset is its wholly-owned subsidiary, Farmers & Merchants Bank of Central California (the “Bank”). With the exception of Mr. Young, the Directors of the Company are also Directors of the Bank. During 2018, pursuant to the Company’s acquisition agreement with Bank of Rio Vista, the Bank added one former Bank of Rio Vista Director to the Bank’s Board of Directors, Craig W. James, who is not a Company Director.
During the calendar year ended December 31, 2021, the Board of Directors of the Company and the Board of Directors of the Bank met thirteen (13) times. In addition, as required, the Board holds telephonic meetings to address issues between monthly meetings. Each incumbent Director attended more than 75% of the meetings of the Board of Directors and the committees to which they were named. The Company expects Directors to attend the annual meeting of shareholders. All Directors attended the virtual annual meeting of shareholders in 2021.
Roles and Responsibilities of the Board of Directors
Leadership Structure
The Board of Directors has determined that the Chairmanship should reside with the Director who is most familiar with the banking industry, and who is the most capable of setting strategic direction and integrating that direction with the Company’s day-to-day business development and risk management activities. Accordingly, since 2010 Mr. Steinwert has been unanimously elected to the position of Chairman in addition to his role since 1997 as President and Chief Executive Officer of the Company.
The Board believes that the combination of these positions does not compromise the important “check-and-balance” role that independent Directors play in the oversight of the Company since Mr. Steinwert is not a member of the Audit Committee or the Personnel Committee of the Board, and therefore key Board decisions and oversight regarding: (1) accounting, financial reporting, and overall risk management; and (2) executive compensation; are made only by “independent” Directors. Furthermore, Mr. Steinwert receives no additional compensation for his role as Chairman, representing a cost savings to the Company.
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As of this date, the Board of Directors has not formally designated a lead independent Director.
Role in Enterprise Risk Management
The Board of Directors is responsible for monitoring all aspects of the Company’s enterprise risk. Their involvement in enterprise risk management centers on the following key roles and responsibilities:
| 1. | The Board develops and approves the strategic plan and financial budget, and receives monthly reporting of financial and non-financial performance relative to plan. |
| 2. | The Asset and Liability Committee is a joint committee of management and the Board. As a result, “independent” Directors are actively involved in interest rate, liquidity and investment risk management processes. |
| 3. | The Loan Committee is a joint committee of management and the Board. The Committee meets weekly to review all new and renewed loans over $2 million and evaluate overall portfolio performance and risk. As a result, “independent” Directors are actively involved in the credit risk management process. |
| 4. | The Audit Committee is responsible for providing oversight of all internal controls, reviewing the reports of audits and examinations of the Bank and the Company made by independent auditors, internal auditors, credit examiners, and regulatory agencies, and approving all SEC and other regulatory agency reports before they are filed. |
| 5. | The Personnel Committee is responsible for all performance evaluation and compensation decisions for the executive management team. |
| 6. | The Budget and Finance Committee reviews and examines financial results on a quarterly basis. |
Committees of the Board
Nominating Committee
The Nominating Committee of the Company and the Bank identifies candidates to serve as Directors of the Bank and the Company in the event of future Board openings. The Committee’s charter is available for review on the Company’s website at http://www.fmbonline.com. The Committee is comprised of the following voting members: Messrs. Steinwert (Chairman), Long, Corum and Suess. The Committee met two (2) times in 2021. Messrs. Corum, Long and Suess have been determined by the Board of Directors to be “independent” as such term is defined by Rule 5605(a)(2) of Nasdaq’s current listing rules.
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Audit Committee
The Audit Committee of the Company and the Bank is responsible for the ongoing adequacy of the internal control environment, and oversees the activities of the internal and independent registered public accounting firm of the Company and the Bank with the aim of ensuring compliance with applicable laws. The Committee selects the independent registered public accounting firm. The Committee’s charter is available for review on the Company’s website at http://www.fmbonline.com. The Audit Committee reports to the Boards of Directors of the Bank and the Company, as appropriate. The Audit Committee reviews the reports of audits and examinations of the Bank and the Company made by the independent registered public accounting firm, internal auditors, credit examiners, and regulatory agencies and reports the results to the Boards of Directors of the Bank and the Company. The Committee met fifteen (15) times in 2021 and is comprised of the following voting members: Messrs. Sanguinetti (Chairman), Corum and Green. Each of the Directors serving on the Audit Committee has been determined by the Board of Directors to be “independent” as such term is defined by Rule 5605(a)(2) of Nasdaq’s current listing rules and in the SEC rules relating to audit committees. Mr. Sanguinetti has been determined by the Board of Directors to be a “financial expert” for purposes of applicable regulations.
Personnel Committee
The Personnel Committee of the Company and the Bank: (1) reviews the Company’s overall compensation strategies and practices; (2) reviews the employment contracts of all executive officers; (3) annually establishes executive compensation levels and performance evaluation measures for the Chief Executive Officer and Directors; and (4) reviews the executive compensation levels and performance evaluation measures for the other executive officers of the Company. The Committee’s charter is available for review on the Company’s website at http://www.fmbonline.com.
The Company’s management: (1) provides information, analysis and recommendations for the Personnel Committee; and (2) manages the ongoing operations of the compensation program.
In fulfilling their duties, the Personnel Committee periodically evaluates information obtained from independent sources regarding financial institutions that we compete against for talent.
The Personnel Committee is comprised of the following voting members: Messrs. Corum (Chairman), Green and Sanguinetti. The Committee met nine (9) times in 2021. Each of the Directors serving on the Personnel Committee has been determined by the Board of Directors to be “independent” as such term is defined by Rule 5605(a)(2) of Nasdaq’s current listing rules.
Asset and Liability Committee
The Asset and Liability Committee of the Bank is responsible for the formulation, revision and administration of the Bank’s policies relating to interest rate, liquidity and investment risk management. The Asset and Liability Committee is a joint committee of management and Directors. The following Directors are voting members: Messrs. Suess, James, Long and Steinwert. The Committee met four (4) times in 2021.
Loan Committee
The Loan Committee of the Bank is responsible for the formulation, revision and administration of the Bank’s policy relating to credit and loan risk management. The Loan Committee meets weekly and is responsible for approving all new and renewed loans between $2 million and $15 million (over $15 million requires full Board approval) and reviewing all loans over $500,000. The Loan Committee is a joint committee of management and Directors. The following Directors are voting members: Messrs. Corum and Steinwert. The Committee met fifty-two (52) times in 2021.
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Budget and Finance Committee
The Budget and Finance Committee of the Company and the Bank reviews and examines Bank and Company expenses on a quarterly basis comparing the results with: (1) the established annual budget, the previous quarter and prior year; and (2) selected peer banks and the community banking industry as a whole; and proposes recommendations to management regarding improving financial performance. The Budget and Finance Committee is a joint committee of management and Directors. The Committee met four (4) times in 2021 and is comprised of the following voting members: Messrs. Long, Suess, Young and Sanguinetti.
CRA (Community Reinvestment Act) Committee
The CRA Committee of the Company and the Bank monitors the Bank’s efforts and responsibilities to comply with the Community Reinvestment Act. The CRA Committee makes recommendations to the Board of Directors to assure the Bank is meeting the credit, investment and service needs of the communities it serves. The Committee met twelve (12) times in 2021 and is comprised of the following voting members: Messrs. Suess (Chairman), Green, James, Young and Long.
Board Committee Composition
Certain Relationships and Related Person Transactions
Certain Directors and Named Executive Officers of the Company, and the Bank, and corporations and other organizations, associated with them and members of their immediate families were customers of and engaged in banking transactions, including loans, with the Bank in the ordinary course of business in 2021. Such loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with borrowers not related to the Company or Bank. These loans did not involve more than the normal risk of collection or have other unfavorable features. All Director and Named Executive Officer loans must be approved by the Board of Directors.
No family relationships exist among any of our Directors or executive officers. There is a family relationship between one of our executive officers and three of our employees. These employees participate in compensation and incentive plans or arrangements on the same basis as other employees with similar positions.
The following individuals are related to our chief executive officer as indicated and have been employed by the Bank for a period of years in non-executive officer positions:
Mr. Jared Steinwert, Senior Vice President, Regional Wholesale Banking (son); Ms. Jehna Silva, Vice President, Commercial Relationship Manager (daughter); and Ms. Elizabeth Beigh, First Vice President, Commercial Relationship Manager (sister). None of these individuals reports to the Chief Executive Officer, nor do they share a household with him. Their individual performance ratings and compensation are evaluated and approved by the independent Directors comprising the Personnel Committee of the Board of Directors of the Bank, and are based on the recommendations of their respective managers in accordance with the Bank’s compensation practices applicable to employees holding similar positions with comparable qualifications and responsibilities. There are three (3) regional wholesale banking managers and 28 commercial relationship managers Bank-wide. In 2021, the total annual compensation for the regional wholesale banking ranged from approximately $455,000 to $936,000. Total annual compensation for the commercial relationship managers ranged from $90,000 to $468,000. Mr. Steinwert is the lowest paid of the three regional wholesale banking managers, and Ms. Silva and Ms. Beigh ranked 13th and third respectively, amongst the commercial relationship managers. Compensation for these individuals is determined in a manner consistent with the Company’s practices that apply to all employees. Some of the compensation is commissions-based, and the methodology by which the compensation is calculated is consistent with that used for other individuals having similar roles. Compensation and other terms of employment are determined on a basis consistent with the Company’s human resources policies.
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DIRECTOR COMPENSATION
Directors of the Company, who are not employees of the Company or the Bank (“Outside Directors”), receive compensation for services. Mr. Steinwert, who is an employee of the Company and the Bank, receives no additional compensation for his role as a Director.
Outside Directors of the Company, who are not employees of the Company or Bank (thusthus Mr. Steinwert is excluded)excluded, are compensated up to $550 per month to cover a portion of the cost of outside medical insurance. Outside Directors of the Company who are not employees of the Company or Bank do not participate in any retirement or medical plans.plans of the Company or the Bank. The summary compensation earned by each Director of the Company (other than Mr. Steinwert who is a Named Executive Officer) during 20202021 is disclosedset forth in the following “Director Compensation Table”.
| Name | (1) Fees Earned or Paid in Cash ($) | (2) Stock Awards ($) | (2) Option Awards ($) | (5) Non-Equity Incentive Plan Compensation ($) | (3) Change in Pension Value & Nonqualified Deferred Compensation Earnings ($) | (4) All Other Compensation ($) | Total ($) | Fees Earned or Paid in Cash | Change in Pension Value & Non-qualified Deferred Compensation Earnings (1) | All Other Compensation (2) | Total | |||||||||||||||||||||||||||||||||
Kent A. Steinwert | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||||||
Terrence A. Young (4) | $ | 35,600 | $ | 102,730 | $ | 58,000 | $ | 196,330 | ||||||||||||||||||||||||||||||||||||
Calvin (Kelly) Suess | $ | 63,876 | $ | 137,874 | $ | 75,000 | $ | 276,751 | ||||||||||||||||||||||||||||||||||||
Kevin Sanguinetti | $ | 74,000 | $ | 136,398 | $ | 75,000 | $ | 285,398 | ||||||||||||||||||||||||||||||||||||
Gary J. Long | $ | 61,600 | $ | 134,356 | $ | 75,000 | $ | 270,956 | ||||||||||||||||||||||||||||||||||||
Stephenson K. Green | $ | 64,600 | $ | 0 | $ | 0 | $ | 112,000 | $ | 0 | $ | 76,600 | $ | 253,200 | $ | 73,600 | $ | 131,343 | $ | 75,000 | $ | 279,943 | ||||||||||||||||||||||
Edward Corum, Jr. (6) | $ | 108,000 | $ | 0 | $ | 0 | $ | 112,000 | $ | 0 | $ | 76,600 | $ | 296,600 | ||||||||||||||||||||||||||||||
Terrance A. Young (6) | $ | 32,300 | $ | 0 | $ | 0 | $ | 88,000 | $ | 0 | $ | 56,300 | $ | 176,600 | ||||||||||||||||||||||||||||||
Kevin Sanguinetti | $ | 64,200 | $ | 0 | $ | 0 | $ | 112,000 | $ | 0 | $ | 76,600 | $ | 252,800 | ||||||||||||||||||||||||||||||
Calvin (Kelly) Suess | $ | 58,200 | $ | 0 | $ | 0 | $ | 112,000 | $ | 0 | $ | 76,600 | $ | 246,800 | ||||||||||||||||||||||||||||||
Gary J. Long | $ | 55,000 | $ | 0 | $ | 0 | $ | 112,000 | $ | 0 | $ | 76,600 | $ | 243,600 | ||||||||||||||||||||||||||||||
Edward Corum, Jr. (5) | $ | 118,600 | $ | 137,874 | $ | 75,000 | $ | 331,474 | ||||||||||||||||||||||||||||||||||||
| (1) | The amounts in this column represent contributions to the Executive Retirement Plan - Equity Component. See Plan description in “Executive Compensation—Compensation Discussion and Analysis - Qualified and Non-Qualified Retirement Programs” for further details. |
| (2) | All Outside Directors received a $75,000 bonus in 2021 with the exception of Mr. Young who received $58,000. Outside Directors are compensated up to $550 per month towards the cost of outside medical insurance. |
| (3) | Mr. Kent Steinwert was an employee of the Company in |
| (4) | Mr. Young |
| (5) |
| Mr. Corum is a member of the Loan Committee which meets weekly, resulting in his |
Compensation Discussion and Analysis
Named Executive Officers Who Are Not Directors
The following table sets forth information with respect to the Named Executive Officers, who are not directors or nominees for director of the Company. All executive officers serve at the discretion of the Board.
| Name | Age | Position | Employed Since |
Stephen W. Haley (1) | 68 | EVP, Chief Financial Officer | 2003 |
Kenneth W. Smith (2) | 62 | EVP, Chief Credit Officer | 1999 |
Deborah E. Skinner | 59 | EVP, Chief Admin Officer | 2000 |
Jay J. Colombini | 59 | EVP, Chief Credit Officer | 1993 |
Ryan J. Misasi | 45 | EVP, Retail Banking Division Manage | 2014 |
David M. Zitterow | 49 | EVP, Director of Banking | 2017 |
Mark K. Olson | 58 | EVP, Chief Financial Officer | 2021 |
| (1) | Mr. Haley elected to retire as of December 31, 2021, and was replaced by Mr. Olson as of November 1, 2021. |
| (2) | Mr. Smith elected to retire as of December 31, 2021, and was replaced by Mr. Colombini as of the same date. |
Roles and Responsibilities
The Board of Directors, operating both on its own and through its Personnel Committee: (1) reviews the Company’s overall compensation strategies and practices; (2) reviews the employment contracts of all Named Executive Officers, (the CEO, CFOthe Chief Executive Officer (“CEO”), the Chief Financial Officer (“CFO”), and the 5four (4) other most highly compensated executive officers);officers plus up to two (2) former executive officers; and (3) annually establishes compensation levels and performance evaluation measures for the Chief Executive OfficerCEO (the CEO does not participate in these discussions) and the other Named Executive Officers.
The role of the Company’s management is to: (1) provide information, analysis and recommendations for the Personnel Committee’s consideration; and (2) manage the ongoing operations of the compensation program.
In fulfilling theirits duties, the Personnel Committee: (1) has the authority to retain and fund compensation consultants, independent legal counsel and other compensation advisors; (2) considers those factors that impact the independence of such advisors prior to their selection; and (3) periodically evaluates information obtained from independent sources regarding financial institutions that we compete against for talent. No outside compensation consultants or other advisors were used in 2020.2021.
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Executive Compensation Strategy and Programs
The objective of the Company’s compensation strategy is to attract and retain talented individuals who can implement the Company’s strategic plan and maximize long-term stockholdershareholder value.
In order to achieve these objectives, the Board has structured a compensation program that includes three major components: (1) annual base salary; (2) annual performance-based bonus; and (3) qualified and non-qualified retirement plans.
Say On Pay Vote
In accordance with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010:
| 1. | In the 2017 proxy statement the Company asked |
| 2. | In the 2020 proxy statement the Company asked |
Performance Evaluation Measures
In evaluating the performance of each Named Executive Officer, the Personnel Committee considers a combination of objective and subjective factors, including the following:
| 1. |
| 2. |
| 3. |
| 4. |
These performance measurement factors are evaluated at least annually. Both the annual budget and strategic plan are approved in advance by the Board of Directors and reevaluated during the year. The BoardPersonnel Committee periodically evaluates information obtained from independent sources regarding financial institutions that we compete against for talent (which increasingly include regional and national banks and other financial services companies), and makes recommendations regarding changes to compensation programs.
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Impact of Compensation Practices on the Company’s Risk Profile
The Company is a “traditional” community bank that generates the majority of its income from the margin generated between taking customer deposits and making customer loans. Furthermore, credit risk is centrally controlled as reflected by:by the following: (1) no branch employee has the authority to approve, board or advance funds on a loan; all loan actions must be approved by Credit Administration personnel, and the compensation of Credit Administration personnel is tied to loan quality, not loan volume or production; and (2) the Loan Committee, which includes one outside Director,director, must approve all new and renewed loans between $2 million and $15 million (over $15 million requires full Board approval) and reviews all loans over $2 million.$500,000.
We do not have non-traditional fee-based or proprietary trading financial business units that could materially increase this risk profile. Nor do we have any business units where employees with loan approval authority generate any substantial amount of their total compensation based upon generating large volumes of activity or taking significant risks.
In order to ensure that the Company’s compensation strategies and programs do not result in inappropriate risk takingrisk-taking on the part of executive management, the Board has determined that:
| 1. | Annual |
| 2. | All parts of the Company’s non-qualified |
As a result, the Board has determined that the Company’s compensation practices are not likely to have a material adverse impact on the Company’s risk profile.
Annual Compensation Program
Base Salary and Annual Performance-Based Bonus
Each Named Executive Officer receives a monthly base salary and is eligible for an annual performance-based bonus. Given that at the present time the Company does not offer stock options or restricted stock compensation, in order to be competitive, total levels of Annual Compensationannual compensation for each Named Executive Officer are targeted (assuming performance objectives are met) at the top range of financial institutions that we compete against for talent.
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Salaries are determined largely based upon comparative industry data for: (1) positions of similar responsibility in California institutions that we compete against for talent; and (2) individuals with similar experience and expertise. Merit salary adjustments are evaluated periodically based on Company and individual performance. Goals and objectives are established annually for each officer with performance evaluated at least annually.
Annual bonus compensation is paid according to the Company’s Executive Management Incentive Compensation Plan. Bonus compensation is awarded based primarily on actual results against budgeted goals for the particular year including performance ratios and net income. Broad award guidelines are established annually for each level of management (these guidelines arethe CEO, currently 0-200% of base salary, forand the CEO andother Named Executive Officers, currently 0-125% of base salary for Executive Vice Presidents).salary. The Board reserves some discretion with regard to these guidelines when: (1) the Company’s profit performance exceeds budget; (2) the Company’s profit performance exceeds other peer banking institutions in California; and/or (3) an individual’s performance in a given year was beyond expectation.
It is important to understand that the Company’s annual compensation program is not formula driven and relies substantially on subjective analysis. The Named Executive Management isOfficers are assigned specific performance goals and objectives on a yearly basis but these individual goals and objectives are not tied to specific targeted compensation levels. Performance evaluation measures are not prioritized or otherwise assigned a specific weighting. Indeed, some of the measures, such as results of regulatory examinations and local economic conditions, do not lend themselves to a weighted or formula approach.
Although the Board has established broad bonus payout guidelines, the Board has purposely avoided establishing either: (1) hard targets for any performance factors; or (2) a weighting or formula as to how much each performance factor will contribute to the ultimate annual bonus for each named executive officer.Named Executive Officer. This philosophy has evolved based upon the Board’s belief that all banks operate in volatile financial markets amidst external conditions that Senior Managementover which the Officer has little or no control over. control.
Accordingly, before making annual bonus or other compensation decisions, it is important for the Board to evaluate and weight all key performance factors in the context of the current financial services environment and how Senior Management’sthe Named Executive Officer’s current year’s performance against those factors has influenced the Company’s progress toward achieving both short- and long-term financial goals.
Since the Company has consistently been one of the highest performing bank holding companies in California over the past 10 years, a reflection of what the Board considers well balancedwell-balanced compensation practices that caused Senior Managementthe Named Executive Officers to carefully consider the risks itthey assumed in the context of long termlong-term financial performance, the Board believes that its approach to “pay-for-performance” has achieved, and will continue to achieve, the desired results.
Each Named Executive Officer’s salary and annual bonus amounts for the last three years are disclosed in the “Summary Compensation Table.” All base salaries and annual bonuses are paid in cash and fully expensed in the current year.
Qualified and Non-Qualified Retirement Programs
In developing the various parts of a long-term compensation program, the Board has determined that at the present time it will not seek stockholder approval to offer stock options or restricted stock awards as part of the compensation package. This decision has been made because the Board believes that it is important that all compensation should be: (1) fully transparent; (2) expensed in the year incurred; and (3) not have the potential for future dilution of stockholder value. However, recognizing that stock based incentives are a major compensation component of many of the Company’s competitors, the Board has developed what it believes is an effective and competitive retirement program.
The objectives of the Company’s retirement program are to: (1) successfully attract and retain talented individuals; and (2) align long-term compensation directly with stockholdershareholder interests by rewarding prudent risk takingrisk-taking and creation of long-term stockholdershareholder value through generation of high quality and sustainable financial performance.
The Company’s retirement program has been structured to provide benefits as follows:
| 1. | Profit Sharing Plan, |
| 2. | Executive Retirement Plan, |
| a. | Salary Component, |
| b. | Performance Component, |
| c. | Equity Component, |
| d. | Retention Component, which makes contributions based upon executive tenure. This component was permanently frozen as of December 31, 2010. |
| 3. |
All of the Company’s qualified and non-qualified retirement plans are structured as defined contribution plans to avoid the uncertain future financial liabilities that can exist under defined benefit plans. The entire cost of these plans is expensed annually.
Qualified Profit Sharing Plan
Substantially all full-time employees of the Company, including each Named Executive Officer, participate in the Company’s qualified Profit Sharing Plan. Two levels of contributions are made to the Profit Sharing Plan: (1) contributions equal to 5% of eligible salaries (subject to Internal Revenue Service limits) calculated according to criteria set forth in the Plan;plan; and (2) additional discretionary contributions authorized by the Board of Directors. None of these contributions are dependent upon the employee contributing to the Planplan (i.e., the Planplan does not require “matching”). Benefits pursuant to the Profit Sharing Plan vest 0% during the first year of participation, 25% per full year thereafter and after five years such benefits are fully vested. Benefits under the Profit Sharing Plan are disclosed in the participant’s Company Contributions to Qualified Retirement and 401(k) Plans in the “All“2021 All Other Compensation Table.”Table”.
Upon a Change in Control, each participant receives only those balances in their account, including any net earnings or losses thereon.
Non-Qualified Executive Retirement Plan
The Equity Component of this Plan have always beenis invested primarily in the stock of the Company, in 2014 the Company began investing someCompany. Some level of the balances in other Plan components is also invested in the stock of the Company (see Note 1612 to Item 8. - Financial Statements and Supplementary Data - in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange CommissionSEC for the year ended December 31, 2020)2021). The Board believes that this increased ownership further encourages key executives to operate consistent with long-term stockholdershareholder objectives.
The Company has established a grantor trust relating to its non-qualified plan to assist the Company in ensuring that it has cash on hand to meet its contractual obligations under the plan. The Company makes contributions to the trust and directs the trustee to invest the contributions consistent with the plan benefit formulas. The investments are generally in the common stock of the Company, cash equivalents and other liquid investments.
While plan participants are deemed to have their account balances invested in the common stock of the Company and other investments held by the trustee, participants have no legal interest in the trust assets, and such assets are subject to the claims of the Company’s creditors in the event of the Company’s insolvency. The plan participant’s only right is their contractual right to receive the benefit provided in the plan in accordance with its terms. The Company has no obligation under the Plan to maintain the trust.
Salary Component … to compensate for the contribution ceilings placed on all qualified retirement plans (which includes the Company’s Profit Sharing Plan) by the Internal Revenue Service, the Board developed the
The Salary Component was developed to provide levels of total retirement compensation that are competitive in the banking industry. Each Named Executive Officer is eligible to participate in the Plan.
An account is established for each participant that is credited annually with a defined contribution determined based upon the individual’s compensation at the time theyhe or she became a participant and the number of years of service remaining to age 65. Balances are held in trust, and earnings and losses equivalent to the investment earnings of the designated amounts in the trust are credited and debited to each participant’s account.
The balance in each participant’s account is 0% vested during the first five years of employment and becomes fully vested after five years of employment. Benefits are disclosed in the participant’s Company Contributions to Non-Qualified Retirement Plans in the “All“2021 All Other Compensation Table” as well as Registrant Contributions in Last Fiscal Year in the “Non-Qualified“2021 Non- Qualified Deferred Compensation Table.”Table”.
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Benefits under the Salary Component become payable to participants after either: (1) the participant has become vested and his or her employment at the Company terminates (including retirement); or (2) there has been a “Change in Control” as defined in this plan component. Benefits under the Plan.Salary Component become payable to participants: (1) upon termination of the participant’s employment with the Company without cause (including retirement); (2) upon a “Change in Control” as defined in this plan component; (3) for designated contributions made on or after December 1, 2021, upon attainment of age 59½; or (4) as necessary to satisfy payroll taxes.
Performance Component …
The Performance Component was developed to compensate for the lack of a stock option program the Board developed the Performance Componentand to reward participants based upon the Company’s long-term growth in net income and market capitalization. Each Named Executive Officer is eligible to participate in the Plan.this plan component. Participants receive benefitscash distributions based on the Company’s long-term cumulative profitability and the resulting impact on the increase in market capitalization in excess of the increase in book value. Participants do not receive compensation for increases in market capitalization above a P/E ratio of 20 times EPS.
Contributions are calculated using a bonus factor or “carry” determined by the Personnel Committee for each participant (currently 2.90% for the President and C.E.O.CEO and up to 1.00% for each Named Executive Vice President)Officer). The total “carry” for all current program participants is 5.95%4.70%.
Benefits under to the Performance Component vest 50% during the first year of participation, and 50% during the second year of participation. Each award of a bonus factor is treated as a separate participation and subject to a separate vesting schedule. Benefits are disclosed in the participant’s Company Contributions to Non-Qualified Retirement Plans in the “All Other Compensation Table” as well as Registrant Contributions in Last Fiscal Year in the “Non-Qualified Deferred Compensation Table.”Table”.
Benefits under the Performance Component become payable to participants after either: (1) upon termination of the participant has become vested and his or herparticipant’s employment at the Company terminateswithout cause (including retirement); or (2) there has beenupon a “Change in Control” as defined in the Plan.this plan component; (3) for designated contributions made on or after December 1, 2021, upon attainment of age 59½; or (4) as necessary to satisfy payroll taxes.
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Equity Component …
The Equity Component was developed to encourage key executives to adopt a long-term perspective and conservative risk management practices consistent with stockholder objectives, the Board developed the Equity Component where cash contributions to the plan are invested primarily in Company stock.shareholder objectives.
Each Named Executive Officer is eligible to participate in the Plan,this plan component, along with members of the Board of Directors. PlanThe amount of the cash contributions are discretionary, subject to Board of Directors approval. Plan balancesthis plan component is determined and approved by the Personnel Committee. Balances are held in a Master Trust with the trustee responsible for investing these balances in a mix of Company stocktrust, and liquid assets.corresponding earnings and losses are credited and debited to each participant’s account.
Benefits under the Equity Component immediately vest when awarded. Benefits are disclosed in the participant’s Company Contributions to Non-Qualified Retirement Plans in the “All Other Compensation Table” as well as Registrant Contributions in Last Fiscal Year in the “Non-Qualified Deferred Compensation Table.”Table”.
Benefits under the Equity Component become payable to participants after either: (1) upon termination of the participant’s employment at the Company terminateswithout cause (including retirement); or (2) there has beenupon a “Change in Control” as defined in this plan component; (3) for designated contributions made on or after December 1, 2021, upon attainment of age 59½ ; or (4) as necessary to satisfy payroll taxes.
Distribution of the Plan.
This plan component is not a “stock option or other stock-based compensation program”, rather it is a deferred compensation program wherewhereby cash contributions made by the Company are invested by the independent trustee of the Master Trusttrust primarily in Company stock. Participants have no voting rights in the shares until post-retirementa distribution of the shares is made.
Retention Component
The Retention Component was developed to encourage key executives to remain in the long- term employ of the Company.
As of December 31, 2010, the Board of Directors of the Company determined that it would permanently freeze the Retention Component. Benefits under the Retention Component are disclosed in the participant’s aggregate balances in the “2021 Non-Qualified Deferred Compensation Table”.
Benefits under the Retention Component become payable to participants (1) upon termination of the participant’s employment without cause (including retirement); (2) upon a “Change in Control” as defined in this plan component; or (3) as necessary to satisfy payroll taxes.
Distribution of the balances that are deemed invested in shares of the Company are made through the distribution of shares to the participant, to the extent permitted under applicable law, except in the event of a Change of Control or an acceleration to satisfy payroll taxes, in which cases distributions are made.made in cash.
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Bank-Owned Life Insurance Program
The Company has a Bank-Owned Life Insurance (“BOLI”) program under which it has purchased single premium life insurance policies on the lives of the Named Executive Officers as well as certain other senior officers of the Company. The Company is both the owner of, and beneficiary under, the policies. These policies provide: (1) financial protection to the Company in the event of the death of an officer and;officer; and (2) significant income to the Company to offset the expense associated with the Company’s employee benefits since the interest earned on the cash surrender value of the policies iswith a favorable tax free as long as the policies are used to finance employee benefits.treatment.
As compensation to each participant for agreeing to allow the Company to purchase an insurance policy on his or her life, split dollarsplit-dollar agreements have been entered into with each participant. These agreements provide for a division of the life insurance death proceeds between the Company and each participant’s designated beneficiary or beneficiaries. Participants have an interest only in the death benefits of the policies, not in any cash surrender value that exists prior to death. Participants fully vest in their split dollarsplit-dollar agreements after eight years of service or upon a Change in Control. If the participant leaves the employ of the Company after vesting occurs (other than as part of a Change in Control) they, he or she cannot become employed by another financial institution and retain their vesting. The dollar value of premiums relating to that portion of the death proceeds that would be payable to the participant’s beneficiary or beneficiaries in the event of his or her death, as well as the tax gross-up payments related thereto, are disclosed in the participant’s Tax Reimbursements in the “All“2021 All Other Compensation Table.”Table”.
Post-Termination Compensation
The Company’s approach to post-termination compensation depends upon the circumstances surrounding the Named Executive Officer’s termination and has been designed by the Board to be competitive with industry-wide practices in order to attract and retain key executives.
| 1. | If the Named Executive Officer takes retirement, or |
| 2. | If the Named Executive Officer is terminated for cause, all benefits in the Company’s |
| 3. | If the Named Executive Officer is terminated without cause or for disability, the terms of |
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| 4. | In the case of a Change in Control, the Company has |
| 5. | Upon a Change in Control, under the Executive Retirement Plan’s Salary Component (see “– Non-Qualified Executive Retirement Plan – Salary Component”), each participant receives: (1) those amounts already contributed for past years of service including any net earnings or losses thereon; and (2) the present value (using a discount factor equal to the Treasury rate for the remaining years to participant’s age 65) of forecasted contributions over the remaining years to participant’s age 65 (which, as of December 31, 2021, are estimated to be zero for each of the Named Executive Officers, except Ms. Skinner who would receive $1.26 million). Upon a Change in Control, under the Executive Retirement Plan’s Performance Component (see “– Non-Qualified Executive Retirement Plan – Performance Component”), each participant receives: (1) those amounts already contributed for past years of service including net earnings or losses thereon; and (2) an amount equal to the difference (if any) between the purchase price and 20 times EPS which, as of December 31, |
Employment Contracts
The Company has employment agreements with each of its Named Executive Officers. These agreements are generally structured for an initial three yearthree-year period and then renew automatically for successive two yeartwo-year terms unless terminated by either party. The agreements provide for (i) a base salary (see “Summary Compensation Table”), (ii) salary increases at the discretion of the Board of Directors based upon performance, (iii) participation in the Company’s annual performance-based bonus program, (iv) participation in certain non-qualified deferred compensation and retirement plans, (v) use of a Company-owned automobile or automobile allowance, and (vi) certain insurance benefits. Under certain circumstances, in the event of termination of employment, each Named Executive Officer may be entitled to receive severance compensation (see “Post Termination“Post-Termination Compensation”).
Accounting and Tax Implications
Section 162(m) of the Code, as amended by the Tax Cuts and Jobs Act of 2017, generally disallows a deduction for federal tax purposes to any publicly traded corporation for any remuneration in excess of $1,000,000 paid in any taxable year to its chief executive officer, chief financial officer and up to three other executive officers who are among our five most highly compensated executive officers. While we consider the deductibility of awards in determining executive compensation, we also reserve the Personnel Committee’s flexibility to provide one or more covered executive officers with the opportunity to earn compensation that is nondeductible under Section 162(m) when the Personnel Committee believes that such compensation is appropriate to attract and retain executive talent.
Report of the Personnel Committee of the Board of Directors on Executive Compensation
The Personnel Committee has reviewed the Compensation Discussion & Analysis included herein with management and based upon those reviews and discussions has recommended to the Board of Directors that the Compensation Discussion & Analysis be included in the Company’s annual report on Form 10-K and this proxy statement.
Respectfully Submitted,
 |  |  |
Edward Corum Jr. | Kevin Sanguinetti | |
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Compensation Committee Interlocks and Insider Participation
Messrs. Sanguinetti, Corum and Green served in 20202021 as members of the Personnel Committee. Each of the Directors serving on the Personnel Committee has been determined by the Board of Directors to be “independent” as such term is defined by Rule 5605(a)(2) of the Nasdaq’s current listing rules. During 2020,2021, certain members of the Personnel Committee had loans or other extensions of credit outstanding from the Bank. These loans were made in the ordinary course of business and on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with borrowers not related to the Company or Bank. These loans are exempt from the loan prohibitions of the Sarbanes-Oxley Act of 2002 and did not involve more than the normal risk of collection or have other unfavorable features.
Executive Officer Compensation
The following tables provide details regarding the various forms of remuneration paid by the Company for the services performed in all capacities by each Named Executive Officer.
Since the Company does not offer: (1) stock options or other stock-based compensation;compensation, or (2) defined benefit plans, the following tables are not included herein: Grants of Plan-Based Awards, Outstanding Equity Awards at Fiscal Year-End, Option Exercises and Stock Vesting and Pension Benefits.
Pay Ratio Disclosure
Pursuant to Item 402 of Regulation S-K, the Company is required to disclose: (1) the median of the annual “total compensation” (defined as Wages, Tips and Other Compensation as reported in Box 1 of a W-2 form plus any fringe benefits not subject to federal income tax) of all employees (defined as those employees on the payroll as of December 31st31st of the year) except the Principal Executive Officer (Mr. Steinwert), which during 20202021 was $72,161;$69,777; and (ii) the ratio of the Principal Executive Officer’s total compensation (as reported onin the “2021 Summary Compensation Table of this proxy statement)Table”) to the median annual total compensation of all employees except the Principal Executive Officer, which during 20202021 was 64.172.8 to 1.
To determine the median of the annual total compensation of all employees of the Company (other than our Principal Executive Officer), we identified our total employee population as of December 31, 2020,2021, which consisted of 383393 individuals. As permitted by the disclosure rules, we annualized the compensation for any employees thatwho were not employed by us for all of 2020.2021. To identify the “median employee” we conducted a full analysis of this employee population, without the use of statistical sampling. After identifying the median employee, we calculated annual total compensation for such employee using the same methodology we use for our named executive officersNamed Executive Officers as set forth in the 2020“2021 Summary Compensation Table of this proxy statement.Table”.
| Name and Principal Position | Year | (1) Salary ($) | (1) Bonus ($) | (2) Stock Awards ($) | (2) Option Awards ($) | (3) Non-Equity Incentive Plan Compensation ($) | (3) Change in Pension Value & Nonqualified Deferred Compensation Earnings ($) | (4) All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||
Kent A. Steinwert Chairman, President, Chief Executive Officer | 2020 | $ | 915,653 | $ | 1,200,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 2,506,467 | $ | 4,622,120 | ||||||||||||||||
2019 | $ | 854,547 | $ | 1,100,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 2,663,151 | $ | 4,617,698 | |||||||||||||||||
of the Company & Bank | 2018 | $ | 811,369 | $ | 1,100,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 2,315,200 | $ | 4,226,569 | ||||||||||||||||
Stephen W. Haley Executive Vice President, Chief Financial Officer, Secretary of the | 2020 | $ | 360,000 | $ | 420,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 898,147 | $ | 1,678,147 | ||||||||||||||||
2019 | $ | 345,417 | $ | 380,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 1,016,264 | $ | 1,741,681 | |||||||||||||||||
Company & Bank | 2018 | $ | 335,000 | $ | 350,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 871,133 | $ | 1,556,133 | ||||||||||||||||
Jay J. Colombini Executive Vice President, Wholesale Banking | 2020 | $ | 337,083 | $ | 350,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 457,723 | $ | 1,144,806 | ||||||||||||||||
2019 | $ | 325,833 | $ | 320,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 449,608 | $ | 1,095,441 | |||||||||||||||||
Manager of the Bank | 2018 | $ | 285,000 | $ | 280,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 423,147 | $ | 988,147 | ||||||||||||||||
Deborah E. Skinner Executive Vice President, Chief Administrative | 2020 | $ | 368,307 | $ | 435,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 775,156 | $ | 1,578,463 | ||||||||||||||||
2019 | $ | 370,307 | $ | 400,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 810,067 | $ | 1,580,374 | |||||||||||||||||
Officer of the Bank | 2018 | $ | 332,538 | $ | 350,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 756,927 | $ | 1,439,465 | ||||||||||||||||
Kenneth W. Smith Executive Vice President, Senior Credit Officer | 2020 | $ | 372,000 | $ | 350,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 726,991 | $ | 1,448,991 | ||||||||||||||||
2019 | $ | 357,417 | $ | 330,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 740,337 | $ | 1,427,754 | |||||||||||||||||
of the Company & Bank | 2018 | $ | 347,000 | $ | 300,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 717,396 | $ | 1,364,396 | ||||||||||||||||
Ryan J. Misasi Executive Vice President, Retail Banking Manager | 2020 | $ | 309,554 | $ | 300,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 402,637 | $ | 1,012,191 | ||||||||||||||||
2019 | $ | 290,425 | $ | 250,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 359,678 | $ | 900,103 | |||||||||||||||||
of the Bank | 2018 | $ | 280,008 | $ | 200,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 325,828 | $ | 805,836 | ||||||||||||||||
David M. Zitterow Executive Vice President, Wholesale Banking | 2020 | $ | 318,923 | $ | 220,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 322,647 | $ | 861,570 | ||||||||||||||||
2019 | $ | 303,564 | $ | 210,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 316,411 | $ | 829,975 | |||||||||||||||||
| Manager of the Bank | 2018 | $ | 292,000 | $ | 200,000 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 227,806 | $ | 719,806 | ||||||||||||||||
Name | Year | Salary(1) | Bonus(1) | All Other Compensation(2) | Total | ||||||||||||
Kent A. Steinwert | 2021 | $ | 905,327 | $ | 1,400,000 | $ | 2,775,711 | $ | 5,081,038 | ||||||||
Chairman, President | 2020 | $ | 915,653 | $ | 1,200,000 | $ | 2,526,326 | $ | 4,641,979 | ||||||||
& Chief Executive Officer | 2019 | $ | 854,547 | $ | 1,100,000 | $ | 2,681,332 | $ | 4,635,879 | ||||||||
Stephen W. Haley | 2021 | $ | 374,605 | $ | 440,000 | $ | 1,060,234 | $ | 1,874,839 | ||||||||
Former Executive Vice President | 2020 | $ | 360,000 | $ | 420,000 | $ | 912,223 | $ | 1,692,223 | ||||||||
Chief Financial Officer | 2019 | $ | 345,417 | $ | 380,000 | $ | 1,029,145 | $ | 1,754,562 | ||||||||
Kenneth W. Smith | 2021 | $ | 391,088 | $ | 400,000 | $ | 847,131 | $ | 1,638,219 | ||||||||
Former Executive Vice President | 2020 | $ | 372,000 | $ | 350,000 | $ | 741,067 | $ | 1,463,067 | ||||||||
Chief Credit Officer | 2019 | $ | 357,417 | $ | 330,000 | $ | 758,472 | $ | 1,445,889 | ||||||||
Deborah E. Skinner | 2021 | $ | 377,949 | $ | 470,000 | $ | 900,436 | $ | 1,748,385 | ||||||||
Executive Vice President | 2020 | $ | 368,307 | $ | 435,000 | $ | 782,534 | $ | 1,585,841 | ||||||||
Chief Admin Officer | 2019 | $ | 370,307 | $ | 400,000 | $ | 816,711 | $ | 1,587,018 | ||||||||
Jay J. Colombini | 2021 | $ | 368,333 | $ | 415,000 | $ | 767,636 | $ | 1,550,969 | ||||||||
Executive Vice President | 2020 | $ | 337,083 | $ | 350,000 | $ | 471,799 | $ | 1,158,882 | ||||||||
Chief Credit Officer | 2019 | $ | 325,833 | $ | 320,000 | $ | 462,489 | $ | 1,108,322 | ||||||||
Ryan J. Misasi | 2021 | $ | 316,672 | $ | 360,000 | $ | 536,250 | $ | 1,212,922 | ||||||||
Executive Vice President | 2020 | $ | 309,554 | $ | 300,000 | $ | 422,354 | $ | 1,031,908 | ||||||||
Retail Banking Division Manager | 2019 | $ | 290,425 | $ | 250,000 | $ | 377,715 | $ | 918,140 | ||||||||
David M. Zitterow | 2021 | $ | 320,334 | $ | 280,000 | $ | 400,905 | $ | 1,001,239 | ||||||||
Executive Vice President | 2020 | $ | 318,923 | $ | 220,000 | $ | 338,526 | $ | 877,449 | ||||||||
Director of Banking | 2019 | $ | 303,564 | $ | 210,000 | $ | 331,378 | $ | 844,942 | ||||||||
Mark K.Olson | 2021 | $ | 60,801 | $ | 40,000 | $ | 8,281 | $ | 109,082 | ||||||||
Executive Vice President | 2020 | $ | - | $ | - | $ | - | $ | - | ||||||||
Chief Financial Officer | 2019 | $ | - | $ | - | $ | - | $ | - | ||||||||
| (1) | Includes base salary, unused vacation pay, car allowance and annual bonus. See “Executive Compensation – Compensation Discussion and Analysis - Annual Compensation |
| (2) | See “2021 All Other Compensation Table” for additional details. |
| Name | Year | (1) Personal Use of Company Car ($) | (2) Tax Reimbursements ($) | Insurance Premiums ($) | Club Dues ($) | (3) Company Contributions to Non-Qualified Retirement Plans ($) | (4) Company Contributions to Retirement & 401(k) Plans ($) | Total ($) | Year | Personal Use of Company Car(1) | Tax Reimbursements(2) | Insurance Premiums | Club Dues | Company Contributions to Non- Qualified Retirement Plans(3) | Company Contributions to Retirement and 401(k) Plans(4) | Total | |||||||||||||||||||||||||||||||||||||
| Kent A. Steinwert | 2020 | $ | 4,247 | $ | 22,399 | $ | 3,017 | $ | 7,894 | $ | 2,438,949 | $ | 29,961 | $ | 2,506,467 | 2021 | $ | 6,053 | $ | 24,168 | $ | 23,227 | $ | 7,375 | $ | 2,681,429 | $ | 33,459 | $ | 2,775,711 | |||||||||||||||||||||||
| 2019 | $ | 1,193 | $ | 20,709 | $ | 3,383 | $ | 7,555 | $ | 2,600,983 | $ | 29,328 | $ | 2,663,151 | 2020 | $ | 4,247 | $ | 22,399 | $ | 22,876 | $ | 7,894 | $ | 2,438,949 | $ | 29,961 | $ | 2,526,326 | ||||||||||||||||||||||||
| 2018 | $ | 2,111 | $ | 26,658 | $ | 3,749 | $ | 7,791 | $ | 2,246,484 | $ | 28,407 | $ | 2,315,200 | 2019 | $ | 1,193 | $ | 20,709 | $ | 21,564 | $ | 7,555 | $ | 2,600,983 | $ | 29,328 | $ | 2,681,332 | ||||||||||||||||||||||||
| Stephen W. Haley | 2020 | $ | 10,107 | $ | 15,093 | $ | 3,383 | $ | 0 | $ | 839,603 | $ | 29,961 | $ | 898,147 | 2021 | $ | 10,170 | $ | 17,902 | $ | 17,601 | $ | - | $ | 981,102 | $ | 33,459 | $ | 1,060,234 | |||||||||||||||||||||||
| 2019 | $ | 10,687 | $ | 12,438 | $ | 3,749 | $ | 0 | $ | 960,062 | $ | 29,328 | $ | 1,016,264 | 2020 | $ | 10,107 | $ | 15,093 | $ | 17,459 | $ | - | $ | 839,603 | $ | 29,961 | $ | 912,223 | ||||||||||||||||||||||||
| 2018 | $ | 9,844 | $ | 21,968 | $ | 3,810 | $ | 0 | $ | 807,104 | $ | 28,407 | $ | 871,133 | 2019 | $ | 10,687 | $ | 12,438 | $ | 16,630 | $ | - | $ | 960,062 | $ | 29,328 | $ | 1,029,145 | ||||||||||||||||||||||||
| Jay J. Colombini | 2020 | $ | 5,801 | $ | 1,256 | $ | 1,290 | $ | 0 | $ | 419,415 | $ | 29,961 | $ | 457,723 | ||||||||||||||||||||||||||||||||||||||
Kenneth W. Smith | 2021 | $ | - | $ | 7,007 | $ | 16,563 | $ | - | $ | 790,102 | $ | 33,459 | $ | 847,131 | ||||||||||||||||||||||||||||||||||||||
| 2019 | $ | 5,291 | $ | 1,165 | $ | 1,290 | $ | 0 | $ | 412,534 | $ | 29,328 | $ | 449,608 | 2020 | $ | - | $ | 6,595 | $ | 16,056 | $ | - | $ | 688,455 | $ | 29,961 | $ | 741,067 | ||||||||||||||||||||||||
| 2018 | $ | 1,896 | $ | 1,256 | $ | 1,290 | $ | 0 | $ | 390,298 | $ | 28,407 | $ | 423,147 | 2019 | $ | - | $ | 6,238 | $ | 20,115 | $ | - | $ | 702,791 | $ | 29,328 | $ | 758,472 | ||||||||||||||||||||||||
| Deborah E. Skinner | 2020 | $ | 7,150 | $ | 7,859 | $ | 1,290 | $ | 0 | $ | 728,896 | $ | 29,961 | $ | 775,156 | 2021 | $ | 7,010 | $ | 8,504 | $ | 8,906 | $ | - | $ | 842,557 | $ | 33,459 | $ | 900,436 | |||||||||||||||||||||||
| 2019 | $ | 7,171 | $ | 6,952 | $ | 1,290 | $ | 0 | $ | 765,326 | $ | 29,328 | $ | 810,067 | 2020 | $ | 7,150 | $ | 7,859 | $ | 8,668 | $ | - | $ | 728,896 | $ | 29,961 | $ | 782,534 | ||||||||||||||||||||||||
| 2018 | $ | 4,254 | $ | 7,034 | $ | 1,290 | $ | 0 | $ | 715,942 | $ | 28,407 | $ | 756,927 | 2019 | $ | 7,171 | $ | 6,952 | $ | 7,934 | $ | - | $ | 765,326 | $ | 29,328 | $ | 816,711 | ||||||||||||||||||||||||
| Kenneth W. Smith | 2020 | $ | 0 | $ | 6,595 | $ | 1,980 | $ | 0 | $ | 688,455 | $ | 29,961 | $ | 726,991 | ||||||||||||||||||||||||||||||||||||||
Jay J. Colombini | 2021 | $ | 5,992 | $ | 1,349 | $ | 15,873 | $ | - | $ | 710,963 | $ | 33,459 | $ | 767,636 | ||||||||||||||||||||||||||||||||||||||
| 2019 | $ | 0 | $ | 6,238 | $ | 1,980 | $ | 0 | $ | 702,791 | $ | 29,328 | $ | 740,337 | 2020 | $ | 5,801 | $ | 1,256 | $ | 15,366 | $ | - | $ | 419,415 | $ | 29,961 | $ | 471,799 | ||||||||||||||||||||||||
| 2018 | $ | 0 | $ | 6,544 | $ | 1,290 | $ | 0 | $ | 681,155 | $ | 28,407 | $ | 717,396 | 2019 | $ | 5,291 | $ | 1,165 | $ | 14,171 | $ | - | $ | 412,534 | $ | 29,328 | $ | 462,489 | ||||||||||||||||||||||||
| Ryan J. Misasi | 2020 | $ | 4,519 | $ | 0 | $ | 300 | $ | 12,956 | $ | 354,901 | $ | 29,961 | $ | 402,637 | 2021 | $ | 4,088 | $ | - | $ | 20,453 | $ | 13,221 | $ | 465,029 | $ | 33,459 | $ | 536,250 | |||||||||||||||||||||||
| 2019 | $ | 2,202 | $ | 0 | $ | 300 | $ | 4,070 | $ | 323,778 | $ | 29,328 | $ | 359,678 | 2020 | $ | 4,519 | $ | - | $ | 20,017 | $ | 12,956 | $ | 354,901 | $ | 29,961 | $ | 422,354 | ||||||||||||||||||||||||
| 2018 | $ | 2,342 | $ | 0 | $ | 300 | $ | 0 | $ | 294,779 | $ | 28,407 | $ | 325,828 | 2019 | $ | 2,202 | $ | - | $ | 18,337 | $ | 4,070 | $ | 323,778 | $ | 29,328 | $ | 377,715 | ||||||||||||||||||||||||
| David M. Zitterow | 2020 | $ | 0 | $ | 0 | $ | 450 | $ | 12,316 | $ | 279,920 | $ | 29,961 | $ | 322,647 | 2021 | $ | - | $ | - | $ | 17,041 | $ | 12,586 | $ | 337,819 | $ | 33,459 | $ | 400,905 | |||||||||||||||||||||||
| 2019 | $ | 0 | $ | 0 | $ | 450 | $ | 11,610 | $ | 275,023 | $ | 29,328 | $ | 316,411 | 2020 | $ | - | $ | - | $ | 16,329 | $ | 12,316 | $ | 279,920 | $ | 29,961 | $ | 338,526 | ||||||||||||||||||||||||
| 2018 | $ | 0 | $ | 0 | $ | 450 | $ | 12,438 | $ | 186,511 | $ | 28,407 | $ | 227,806 | 2019 | $ | - | $ | - | $ | 15,417 | $ | 11,610 | $ | 275,023 | $ | 29,328 | $ | 331,378 | ||||||||||||||||||||||||
| Mark K. Olson | 2021 | $ | - | $ | - | $ | 8,281 | $ | - | $ | - | $ | - | $ | 8,281 | ||||||||||||||||||||||||||||||||||||||
| 2020 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||||||||||||||||||||||||||
| 2019 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||||||||||||||||||||||||||
| (1) | Certain executives receive a car allowance as opposed to the use of a company car. Car allowance amounts are included in |
| (2) | Represents tax gross-up payments to reimburse executive for split-dollar life insurance premiums under the Company’s BOLI program. |
| (3) | Includes Non-Qualified Executive Retirement Plan contributions for the current year. See Plan description in |
| (4) | Includes contributions to the Company’s Profit Sharing Plan. |
| Aggregate Plan Balances at Last Fiscal Year-End | ||||||||||||||||||||||||||||||||||||||||||||||
| Name | (2) Executive Voluntary Deferrals of Salary and Bonus in Last Fiscal Year ($) | (3) Company Contributions in Last Fiscal Year ($) | (4) Aggregate Investment Earnings (Losses) in Last Fiscal Year ($) | Aggregate Withdrawals / Distributions ($) | (2) (5) Executive Voluntary Deferrals of Salary and Bonus ($) | (3) (5) Company Contributions ($) | Total of Executive Voluntary Deferrals and Company Contributions ($) | Executive Contributions in Last Fiscal Year(1) | Registrant Contributions in Last Fiscal Year(2) | Aggregate Earnings in Last Fiscal Year(3) | Aggregate Withdrawals / Distribution | Aggregate Balance at Last Fiscal Year End(2)(4) | ||||||||||||||||||||||||||||||||||
Kent A. Steinwert | $ | 0 | $ | 2,438,949 | $ | 432,196 | $ | 0 | $ | 0 | $ | 26,815,370 | $ | 26,815,370 | $ | - | $ | $2,681,429 | $ | 6,914,944 | $ | (2,450,000 | ) | $ | 34,506,617 | |||||||||||||||||||||
Stephen W. Haley | $ | 0 | $ | 839,603 | $ | 121,602 | $ | 0 | $ | 0 | $ | 8,859,059 | $ | 8,859,059 | $ | - | $ | $981,102 | $ | 1,123,220 | $ | - | $ | 11,116,786 | ||||||||||||||||||||||
Kenneth W. Smith | $ | - | $ | $790,102 | $ | 852,118 | $ | - | $ | 8,553,090 | ||||||||||||||||||||||||||||||||||||
Deborah E. Skinner | $ | - | $ | $842,557 | $ | 1,384,493 | $ | - | $ | 10,395,516 | ||||||||||||||||||||||||||||||||||||
Jay J. Colombini | $ | 0 | $ | 419,415 | $ | 22,823 | $ | 0 | $ | 0 | $ | 2,485,082 | $ | 2,485,082 | $ | - | $ | $710,963 | $ | 635,878 | $ | - | $ | 4,215,644 | ||||||||||||||||||||||
Deborah E. Skinner | $ | 0 | $ | 728,896 | $ | 382,475 | $ | 0 | $ | 0 | $ | 8,091,763 | $ | 8,091,763 | ||||||||||||||||||||||||||||||||
Ryan J. Misasi | $ | 0 | $ | 354,901 | $ | 89,850 | $ | 0 | $ | 0 | $ | 2,106,580 | $ | 2,106,580 | $ | - | $ | $465,029 | $ | 507,767 | $ | - | $ | 3,117,727 | ||||||||||||||||||||||
Kenneth W. Smith | $ | 0 | $ | 688,455 | $ | 158,516 | $ | 0 | $ | 0 | $ | 6,834,168 | $ | 6,834,168 | ||||||||||||||||||||||||||||||||
David M. Zitterow | $ | 0 | $ | 279,920 | $ | 15,621 | $ | 0 | $ | 0 | $ | 841,137 | $ | 841,137 | $ | - | $ | $337,819 | $ | 146,611 | $ | - | $ | 1,356,249 | ||||||||||||||||||||||
Mark K. Olson | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||||||||||||||||||||
| (1) |
| Includes voluntary deferrals of earned salary or annual bonus. The |
| (2) | Includes Company contributions. See “Executive Compensation – Compensation Discussion and Analysis – Qualified and Non-Qualified Retirement Programs - Non-Qualified Executive Retirement |
To fund nonqualified retirement plan benefits, the Company has set aside money in a Master Trust, which is subject to the claims of the |
| (4) | Represents the cumulative amount of the current and all previous |
The Company uses Rule 5605(a)(2) of the Nasdaq’s current listing rules to determine whether a Director is independent. With the exception of Mr. Steinwert who is currently an employee of the Company, all nominees are considered tofollowing Audit Committee Report should not be “independent.”
Report of the Company are also Directors of the Bank. During 2018, pursuant to the Company’s acquisition agreement with Bank of Rio Vista, the Bank added one former Bank of Rio Vista director to the Bank’s Board of Directors, Craig W. James, who is not a Company Director.
The Board of Directors has determined that the Chairmanship should resideAudit Committee oversees relevant accounting, risk assessment, risk management and regulatory matters. It meets with the Director who is most familiarBank’s and the Company’s internal auditors and the independent registered public accounting firm to review the scope of their work as well as to review quarterly and annual financial statements and regulatory and public disclosures with the banking industry,officers in charge of financial reporting, control and who isdisclosure functions. After reviewing the most capable of setting strategic directionindependent registered public accounting firm’s qualifications, partner rotation and integrating that direction with the Company’s day-to-day business development and risk management activities. Accordingly, since 2010 Mr. Steinwert has been unanimously elected to the position of Chairman in addition to his role since 1997 as President and Chief Executive Officer of the Company.
The Audit Committee of the Company and the Bank is responsible for the ongoing adequacy of the internal control environment, and oversees the activities of the internal and independent auditors of the Company and the Bank with the aim of ensuring compliance with applicable laws. The Committee selects the independent auditors. The Committee’s charter is included as Exhibit A to the 2019 proxy statement. The Audit Committee reports regularly to the Boards of Directors of the Bank and the Company and has the authority to select, retain, terminate and approve the fees and other retention terms of special counsel or other experts or consultants as appropriate.it deems appropriate and necessary to perform its duties.
In performing its functions, the Audit Committee acts in an oversight capacity and necessarily relies on the work and assurances of management, which has the primary responsibility for financial statements and reports, and of the independent registered public accounting firm, who, in their report, express an opinion on the conformity of the Company’s annual financial statements to generally accepted accounting principles.
In connection with the December 31, 2021 consolidated financial statements of the Company, the Audit Committee: (1) reviewed and discussed the audited financial statements with management and the independent registered public accounting firm; (2) discussed with the independent registered public accounting firm the matters required by AS 1301; and (3) received and discussed with the independent registered public accounting firm the matters required by AS1301, Communications with Audit Committees. The Audit Committee reviewshas also considered whether the reportsindependent registered public accounting firm provision of audits and examinations of the Bank andnon-audit services to the Company made byis compatible with maintaining the independent auditors, internal auditors, credit examiners,auditors’ independence. Based upon these reviews and regulatory agencies and reports the results to the Boards of Directors of the Bank and the Company. The Committee met fifteen (15) times in 2020 and is comprised of the following voting members: Messrs. Sanguinetti (Chairman), Corum and Green. Each of the Directors serving ondiscussions, the Audit Committee has been determined by the Board of Directors to be “independent” as such term is defined by Rule 5605(a)(2) of the Nasdaq’s current listing rules and in SEC rules relating to audit committees. Mr. Sanguinetti has been determined by the Board of Directors to be a “financial expert” for purposes of applicable regulations.
 |  |  |
| Kevin Sanguinetti, Chairman | Stephenson K. Green | Edward Corum Jr. |
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Fees and Services of Independent Registered Public Accounting Firm
The following table sets forth the fees billed to assure the Bank is meetingCompany for the credit, investmentaudit of our annual financial statements for the years ended December 31, 2021 and service needs2020, and fees billed for other services rendered by Moss Adams LLP during those periods:
| Years Ended December 31 | ||||||||||||||||
| Audit and other related fees: | 2021 | Percentage of Total | 2020 | Percentage of Total | ||||||||||||
| Audit fees | $ | 421,056 | 88.43 | % | $ | 305,000 | 79.75 | % | ||||||||
| Audit-related fees | 15,998 | 3.36 | % | 39,492 | 10.33 | % | ||||||||||
| Tax fees | 39,110 | 8.21 | % | 37,957 | 9.92 | % | ||||||||||
| All other fees | - | - | - | - | ||||||||||||
| $ | 476,164 | $ | 100.00 | % | $ | 382,449 | $ | 100.00 | % | |||||||
All of the communities it serves. The Committee met twelve (12) times in 2020 and is comprisedservices provided by Moss Adams LLP described above were approved by the Audit Committee.
Pre-approval of Services by the following voting members: Messrs. Suess (Chairman), Green, James, Young and Long.
The NominatingAudit Committee has adopted a policy for pre-approval of audit and permitted non-audit services by the Company’s independent registered public accounting firm. The Audit Committee will consider annually and, if appropriate, approve the provision of audit services by its independent registered public accounting firm and any provision of certain defined audit and non-audit services. The Audit Committee will also consider on a case- by-case basis and, if appropriate, approve specific engagements that are not otherwise pre- approved.
Any proposed engagement that does not fit within the definition of a pre-approved service may be presented to the Audit Committee for consideration at its next regular meeting or, if earlier consideration is required, to the Audit Committee or one or more of its members. The member or members to whom such authority is delegated shall report any specific approval of services at its next regular meeting. The Audit Committee will regularly review summary reports detailing all services being provided by its independent registered public accounting firm.
The Company does not require that its independent registered public accounting firm join the annual meeting.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To the knowledge of the Company, as of the record date, no person or entity was the beneficial owner of more than five percent (5%) of the outstanding shares of the Company’s common stock, except as set forth in the following tables.
For the purpose of this disclosure and the Bank identifies candidatesdisclosure of ownership shares by management, shares are considered to serve as Directorsbe “beneficially” owned if the person has or shares the power to vote or direct the voting of the Bank andshares, the Company inpower to dispose of or direct the event of future Board openings. The Committee’s charter is included as Exhibit C to the 2019 proxy statement. The Committee is compriseddisposition of the following voting members: Messrs. Steinwert (Chairman), Long, Corum and Suess. The Committee did not meet in 2020. Messrs. Corum, Long and Suess have been determined byshares, or the Board of Directorsright to be “independent” as such term is defined by Rule 5605(a)(2)acquire beneficial ownership (as so defined) within 60 days of the Nasdaq’s current listing rules.record date.
Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||
| Common stock | DAC/JAC Trust and Cortopassi Partners 11292 N. Alpine Road Stockton, CA 95212 | 51,755 | 6.55 | % | |||||
| Common stock | Sheila M. Wishek (1) 111 West Pine Street Lodi, CA, 95240 | 40,155 | 5.09 | % | |||||
(1) | Mail should be sent to this individual at the Company’s address marked “c/o Shareholders Relations.” |
The Personnel Committeefollowing table shows, as of the record date, the number of common shares and the percentage of the total shares of common stock of the Company and the Bank: (1) reviews the Company’s overall compensation strategies and practices; (2) reviews the employment contracts of all executive officers; (3) annually establishes executive compensation levels and performance evaluation measures for the Chief Executive Officer and Directors; and (4) reviews the executive compensation levels and performance evaluation measures for the other executive officersbeneficially owned by each of the Company. The Committee’s charter is included as Exhibit Bcurrent Directors, by each of the nominees for election to the 2019 proxy statement.
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| Name and Address of Beneficial Owner (1) | Amount and Nature of Beneficial Ownership (2) | Percent of Class | ||||||
Kent A. Steinwert (3) | 31,549 | 4.00 | % | |||||
Kevin Sanguinetti (4) | 7,699 | * | ||||||
Jay J. Colombini (5) | 5,118 | * | ||||||
Stephen W. Haley (6) | 4,809 | * | ||||||
Deborah E. Skinner (7) | 4,495 | * | ||||||
Kenneth W. Smith (8) | 3,641 | * | ||||||
Calvin (Kelly) Suess (9) | 3,627 | * | ||||||
Ryan J. Misasi (10) | 2,197 | * | ||||||
Edward Corum, Jr. (11) | 2,132 | * | ||||||
Gary J. Long (12) | 1,832 | * | ||||||
David M. Zitterow (13) | 751 | * | ||||||
Stephenson K. Green (14) | 676 | * | ||||||
Terrence A. Young (15) | 516 | * | ||||||
| Mark K. Olson | 369 | * | ||||||
| All Directors, Nominees and Named Executive Officers as a group (14 persons) | 69,411 | 8.79 | % |
* Indicates less than 1.00%.
| (1) | Mail should be sent to this individual at the Company's address marked "c/o Shareholder Relations". |
| (2) | Shares held by the Trustee are voted as directed by the Bank. All shares are beneficially owned, directly and indirectly, together with spouses. Unless otherwise indicated, holders of shares which are not held by the Trustee, share voting power with their spouses. None of the shares are pledged. |
| (3) | 26,329 shares held by Trustee. |
| (4) | 1,293 shares held by Trustee. |
| (5) | 3,031 shares held by Trustee. |
| (6) | 4,809 shares held by Trustee. |
| (7) | 4,383 shares held by Trustee. |
| (8) | 3,530 shares held by Trustee. |
| (9) | 1,527 shares held by Trustee. |
| (10) | 2,095 shares held by Trustee. |
| (11) | 1,527 shares held by Trustee. |
| (12) | 969 shares held by Trustee. |
| (13) | 751 shares held by Trustee. |
| (14) | 491 shares held by Trustee. |
| (15) | 402 shares held by Trustee. |
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OTHER MATTERS
Indemnification
The Company’s Certificate of Incorporation and By-Laws provide for indemnification of officers, Directors, employees and agents to the fullest extent permitted by Delaware law. Delaware law generally provides for the payment of expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement reasonably incurred by the indemnitees provided such person acted in good faith and in a manner he or she reasonably believed not to be opposed to the best interests of the corporation and with respect to any criminal action or proceeding if he or she had no reasonable cause to believe his or her conduct was unlawful. However, in derivative suits, if the suit is lost, no indemnification is permitted in respect of any claim as to which the prospective indemnitee is adjudged to be liable for misconduct in the performance of his or her duty to the Company and then only if, and only to the extent that, a court of competent jurisdiction determines the prospective indemniteeindemnity is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. Finally, no indemnification may be provided in any action or suit in which the only liability asserted against a Director is pursuant to a statutory provision proscribing the making of loans, dividends, and distribution of assets under certain circumstances.
The provisions regarding indemnification may not be applicable under certain federal banking and securities laws and regulations.
On August 5, 2008, the Board of Directors approved a Share Purchase Rights Plan (the “Rights Plan”), pursuant to which the Company entered into a Rights Agreement dated August 5, 2008, with Computershare, (formerly Registrar and Transfer Company), as Rights Agent, and the Company declared a dividend of a right to acquire one preferred share purchase right (a “Right”) for each outstanding share of the Company’s common stock, $0.01 par value per share, to stockholdersshareholders of record at the close of business on August 15, 2008. Generally, the Rights are only triggered and become exercisable if a person or group (the “Acquiring Person”) acquires beneficial ownership of 10 percent or more of the Company’s common stock or announces a tender offer for 10 percent or more of the Company’s common stock.
The Rights Plan is similar to plans adopted by many other publicly traded companies. The effect of the Rights Plan is to discourage any potential acquirer from triggering the Rights without first convincing Farmers & Merchants Bancorp’s Board of Directors that the proposed acquisition is fair to, and in the best interest of, all of the stockholdersshareholders of the Company. The provisions of the Rights Plan, if triggered by the Acquiring Person, will substantially dilute the equity and voting interest of any potential acquirer unless the Board of Directors approves of the proposed acquisition (under Article XV of the Company’s Certificate of Incorporation, the Board of Directors has the authority to consider any and all factors in determining whether an acquisition is in the best interests of the Company and its stockholders)shareholders).
Each Right, if and when exercisable, will entitle the registered holder to purchase from the Company one one-hundredth of a share of Series A Junior Participating Preferred Stock, no par value, at a purchase price of $1,200 for each one one-hundredth of a share, subject to adjustment. Each holder of a Right (except for the Acquiring Person, whose Rights will be null and void upon such event) shall thereafter have the right to receive, upon exercise, that number of Common Shares of the Company having a market value of two times the exercise price of the Right.
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At any time before a person becomes an Acquiring Person, the Rights can be redeemed, in whole, but not in part, by Farmers and Merchants Bancorp’s Board of Directors at a price of $0.001 per Right.
On November 19, 2015, the Board of Directors approved a seven-year extension of the term of the Rights Plan. Pursuant to an Amendment to the Rights Agreement dated February 18, 2016, the term of the Rights Plan was extended from August 5, 2018 to August 5, 2025. The extension of the term of the Rights Plan was intended as a means to continue to guard against abusive takeover tactics and was not in response to any particular proposal. The Board also increased the purchase price under the Rights Plan to $1,600 per one one-hundredth of a preferred share from $1,200, to reflect the increase in the market price of the Company’s common stock over the past several years.
The full text of the Amendment was filed onwith the SEC with the Company’s Form 8-K dated February 19,18, 2016.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our directors and executive officers to file reports of their ownership of the Company’s common stock with the SEC. Based solely on a review of the filings made with the SEC and written representations from our directors and executive officers, the Company believes that all reports required by Section 16(a) of the Exchange Act to be filed by its directors and executive officers during the last fiscal year were filed on a timely basis, except for a late filing for each of the directors and executive officers reporting a Company contribution into the Executive Retirement Plan at the end of the year. The late filings were due to administrative oversight by the Company’s stock administrator. To its knowledge, the Company has no ten percent or greater shareholder.
Communications with Board of Directors
Any person, including any stockholder,shareholder, desiring to communicate with, or make any concerns known to, the Company, directorsDirectors generally, non-management Directors or an individual Director only may do so by submitting them in writing to Stephen W. Haley,Mark K. Olson, Secretary of Farmers & Merchants Bancorp, 111 W. Pine Street, Lodi, CA 95240. All correspondence must include information to identify the person submitting the communication or concern, including name, address, telephone number and e-mail address (if applicable) together with information indicating the relationship of such person to the Company. The Secretary is responsible for maintaining a record of any such communications or concerns and submitting them to the appropriate addressee(s) for potential action or response. The Company may institute appropriate procedures to establish the authenticity of any communication or concern before forwarding. The Company is not obligated to investigate any anonymous submissions.
Article III, Section 3.4 of the By-Laws of the Company provides a procedure for nomination for election of members of the Board of Directors of the Company. Nominations for election to the Board of Directors may be made by the Board of Directors or by any holder of any outstanding class of capital stock of the Company entitled to vote for the election of Directors.
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Nominations, other than those made by the Board of Directors, shall be made by notification in writing delivered or mailed to the Chairman of the Nominating Committee at 111 West Pine Street, Lodi, CA 95240, not less than thirty (30) days or more than sixty (60) days prior to any meeting of stockholdersshareholders called for election of Directors, provided, however, that if less than twenty-one (21) days’ notice of the meeting is given to stockholders,shareholders, such nomination shall be mailed or delivered to the President of the Company not later than the close of business on the seventh (7th)(7th) day following the day on which the notice of meeting was mailed. If the Company’s 20222023 annual meeting of stockholdersshareholders is held on the third Monday of May (as has historically generally been the case), any stockholdershareholder nomination, to be timely, must be received by the Company not later than April 16, 202215, 2023 and not earlier than March 17, 2022.16, 2023. Notification must contain certain information as to each proposed nominee and as to each person acting alone or in conjunction with one or more persons, in making such nomination or in organizing, directing or financing such nomination. The Chairman of the meeting may, in his or her discretion, determine and declare to the meeting that a nomination not made in accordance with the foregoing procedure shall be disregarded.
A copy of the By-Laws of the Company can be obtained by written request to the Secretary of the Company, Stephen W. Haley,Mark K. Olson, 111 West Pine Street, Lodi, CA 95240. A copy of the Nominating Committee’s charter, which outlines the Committee’s nominating process, including the standards and qualifications to be considered for Board membership, is included as Exhibit C toavailable for review on the 2019 proxy statement.Company’s website at http://www.fmbonline.com.
Pursuant to Article II, Section 2.6 of the Company’s By-Laws, in order for other business to be properly brought before a meeting by a stockholder,shareholder, the stockholdershareholder must have given timely notice thereof in writing to the Secretary of the Company and must have been a stockholdershareholder of record at the time such notice is given. To be timely, a stockholder’sshareholder’s notice shall be delivered to or mailed (by United States registered mail, return receipt requested) and received at the principal executive offices of the Company not less than seventy (70) days nor more than ninety (90) days prior to the first anniversary date of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than twenty (20) days, or delayed by more than seventy (70) days, from such anniversary date, notice by a stockholdershareholder to be timely must be so delivered or mailed (by U.S. registered mail, return receipt requested) and received notno earlier than the ninetieth (90th)(90th) day prior to such annual meeting and not later than the close of business on the later of the seventieth (70th)(70th) day prior to such annual meeting or the tenth (10th)(10th) day following the day on which public announcement of the date of such meeting is first made.
Notice of any stockholdershareholder proposal by a stockholdershareholder to properly bring business before the 20222023 annual meeting, to be timely, must be received by the Company no later than April 21, 2022,March 7, 2023, and no earlier than April 1, 2022.February 15, 2023. Such stockholder’sshareholder’s notice to the Secretary must contain certain additional information, which is more particularly described in Article II, Section 2.6 of the Company’s By-Laws. No business shall be conducted at an annual meeting of stockholdersshareholders unless proposed in accordance with the foregoing procedures. The Chairman of the meeting shall, if the factors warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the foregoing procedure and such business shall not be transacted.
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Under the Rules of the Securities and Exchange Commission,SEC, if a stockholdershareholder intends to include a proposal in the Company’s proxy statement and form of proxy for presentation at the Company’s 20222023 annual meeting of stockholders,shareholders, the proposal must be received by the Company at its principal executive offices by January 21,December 9, 2022. In addition to these advance notice requirements, there are other requirements that a stockholdershareholder must meet in order to have a proposal included in the Company’s proxy statement under the rules of the Securities and Exchange Commission.SEC.
Cumulative Voting
With respect to the election of Directors, each stockholdershareholder may be eligible to exercise cumulative voting rights and may be entitled to as many votes as shall equal the number of shares of common stock held by such stockholdershareholder multiplied by the number of Directors to be elected, and such stockholdershareholder may cast all of such votes for a single nominee or may distribute them among two or more nominees. For example, if you own 10 shares of common stock of the Company and 7 Directors are being elected, you have 70 votes – you can cast all of them for one nominee, or two or more nominees if you so choose. No stockholdershareholder shall be entitled to cumulate votes (i.e., cast for any one or more nominees a number of votes greater than the number of shares of common stock of the Company held by such stockholder)shareholder) unless the name(s) of the nominee(s) has (have) been placed in nomination prior to the commencement of the voting in accordance with Article III, Section 3.4 of the Company’s by-lawsBy-laws and, in accordance with Article II, Section 2.9 of the Company’s by-laws,By-laws, a stockholdershareholder has given at least two days written notice to the Secretary of the Company of an intention to cumulate votes prior to the vote.
Other Matters
The Management and Directors of the Company are not aware of any other matters to be presented for consideration at the virtual annual meeting to be held on June 30, 2021May 16, 2022 or any adjournments or postponements thereof. If any other matters should properly come before the meeting, it is intended that the persons named in the enclosed proxy will vote the shares represented thereby in accordance with their best business judgment, pursuant to the discretionary authority granted therein.
No Incorporation by Reference of Certain Portions of This Proxy Statement
Notwithstanding anything to the contrary set forth in any of our previous filings made under the Securities Act of 1933, as amended, or the Exchange Act that might incorporate future filings made by us under those statutes, neither the Audit Committee Report nor the Report of the Personnel Committee of the Board of Directors on Executive Compensation is to be incorporated by reference into any such prior filings, nor is such report to be incorporated by reference into any future filings made by us under those statutes.
The 20212022 Annual Meeting of Stockholders of Farmers & Merchants Bancorp will be held on Wednesday June 30, 2021,Monday, May 16, 2022, 4:00 P.M. PST, virtually via the internet at www.meetingcenter.io/282536464.meetnow.global/MQV4GDR. To access the virtual meeting, you must have the information that is printed in the shaded bar located on the reverse side of this form. The password for this meeting is — FMCB2021. Important notice regarding the internet availability of proxy materials for the Annual Meeting of Stockholders. The Proxy Statement and the 20202021 Annual Report are available at: www.envisionreports.com/FMCB Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.envisionreports.com/FMCBqIFq IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q REVOCABLE PROXY — FARMERS & MERCHANTS BANCORPENVELOPE. q + ANNUAL MEETING OF STOCKHOLDERS June 30, 2021May 16, 2022 This Proxy is solicited on behalf of the Board of Directors The signer hereby appoint(s) Edward Corum, Jr., Kevin Sanguinetti and Kent A. Steinwert and any of them, each with full power of substitution as Proxy of the signer, to attend the Annual Meeting of Stockholders of Farmers & Merchants Bancorp to be held virtually at 4:00 p.m. PST, on June 30, 2021May 16, 2022 and any adjournment thereof, and to vote the number of shares the signer would be entitled to vote if personally present as indicated hereon: THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE STOCKHOLDER. IF NO DIRECTION IS MADE THIS PROXY WILL BE VOTED “FOR” ALL NOMINEES LISTED UNDER ITEM 1. THIS PROXY CONFERS ON THE PROXYHOLDERS THE POWER OF CUMULATIVE VOTING AS DESCRIBED IN THE PROXY STATEMENT. PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE Non-Voting Items Change of Address — Please print new address below. +