UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549
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| SCHEDULE 14A |
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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Filed by a Party other than the Registrant ☐
Check the appropriate box:
☐ Preliminary Proxy Statement
☐ Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒⊠ Definitive Proxy Statement
☐ Definitive Additional Materials
☐ Soliciting Material Under §240.14a-12
Farmers and Merchants Bancshares, Inc.
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
☒ No fee required.
⊠ No fee required |
☐ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
☐ Fee paid previously with preliminary materials |
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule
☐ Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11
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FARMERS AND MERCHANTS BANCSHARES, INC.
4510 Lower Beckleysville Road, Suite H
Hampstead, Maryland 21074
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 19, 2021 17, 2023
To Stockholders of Farmers and Merchants Bancshares, Inc.:
Notice is hereby given that the 2023 Annual Meeting of the Stockholders of Farmers and Merchants Bancshares, Inc. (the “Company”) will be held at 3:00 p.m., local time, on April 27, 202125, 2023 at the Company’s office located at 4510 Lower BeckleysvillePiney Branch Golf & Country Club, 5301 Trenton Mill Road, Suite H, Hampstead,Upperco, Maryland 21074. You may, and the Board of Directors urges you to, participate in the meeting via conference call.21155.
The purposes of the meeting are:
1. | To vote on the election of the three |
2. | To ratify the appointment of |
3. | To transact such other business as may be properly brought before the meeting or any adjournment or postponement thereof. |
The Board of Directors has fixed February 19, 202117, 2023 as the record date for purposes of determining stockholders who are entitled to notice of and to vote at the 2023 Annual Meeting of Stockholders.
All stockholders are cordially invited to attend the annual meeting. Please be advised, however, that due to possible governmental restrictions on public gatherings and the health risks associated with the ongoing COVID-19 pandemic, you might not be allowed to attend the annual meeting in person. Accordingly, the Board strongly urges all stockholders to attend the annual meeting by conference call. To participate in the meeting by conference call, you must call (866) 485-3290 and enter 3374198816# as the Conference ID.
Anyone acting as a proxy agent for a stockholder must present a written proxy that has been properly executed by the stockholder, that authorizes the agent to so act, and that is in form and substance satisfactory to the judges of election and consistent with the Company’s Amended and Restated Bylaws.
By order of the Board of Directors
/s/ Lynnette Kitzmiller
Lynnette Kitzmiller
Vice President/Corporate Secretary
[THIS PAGE INTENTIONALLY LEFT BLANK]
FARMERS AND MERCHANTS BANCSHARES, INC.
4510 Lower Beckleysville Road, Suite H
Hampstead, Maryland 21074
(410) 374-1510
PROXY STATEMENT
This proxy statement and the accompanying proxy card are being furnished in connection with the solicitation by the Board of Directors (the “Company Board”“Board”) of Farmers and Merchants Bancshares, Inc. (the “Company”) of proxies to be voted at the 2023 Annual Meeting of Stockholders to be held at 3:00 p.m., local time, on April 27, 202125, 2023 at the Company’s office located at 4510 Lower BeckleysvillePiney Branch Golf & Country Club, 5301 Trenton Mill Road, Suite H,Upperco, Maryland 21074,21155, and any adjournment or postponements thereof.thereof (the “2023 Annual Meeting”). The cost of soliciting proxies will be borne by the Company. In addition to solicitation by mail, proxies may be solicited by officers, directors and regular employees of the Company personally or by telephone, electronic mail and/or facsimile. No additional remuneration will be paid to officers, directors or regular employees who solicit proxies. The Company may reimburse brokers, banks, custodians, nominees and other fiduciaries for their reasonable out-of-pocket expenses in forwarding proxy materials to their principals. The approximate date on which this proxy statement and the related proxy card will be sent or given to stockholders is March 19, 2021.17, 2023.
When used in this proxy statement, the terms “the Company”, “we”, “us”, and “our” refer to Farmers and Merchants Bancshares, Inc. and, unless the context clearly requires otherwise, its consolidated subsidiaries.
RECORD DATE
Stockholders of record as of the close of business on February 19, 202117, 2023 (the “Record Date”) of issued and outstanding shares of the Company’s common stock, par value $.01 per share (“Common Stock”), are entitled to notice of and to vote at the 2023 Annual Meeting.
COVID-19 PANDEMIC
Due to the health risks associated with the ongoing COVID-19 pandemic and the possibility that governmental restrictions on public gatherings might prohibit you from attending the Annual Meeting in person, the Board is urging stockholders to attend the Annual Meeting by conference call. To participate in the Annual Meeting by conference call, you must call (866) 485-3290 and enter 3374198816# as the Conference ID.
If you were a stockholder of record as of the Record Date and desire to participate by conference call, then you may vote by voice vote after confirming your account number issued by American Stock Transfer & Trust Company (“AST”), the Bank’s transfer agent. You can obtain your AST account number by looking at your most recent communication from AST or by calling Lynnette Kitzmiller, Vice President & Corporate Secretary, at 410-374-1510 ext. 105 or Mark Krebs, Executive Vice President & Chief Executive Officer, at 410-517-3065 ext. 129.
If you hold your shares through a broker, bank or other nominee (that is, in “street name”), then your broker, bank or other nominee is the shareholder of record and such nominee might not be able to vote your shares unless you provide it with voting instructions. You should instruct your broker, bank or other nominee to vote your shares by following the instructions that your broker, bank or other nominee provided when it sent the Company’s proxy materials to you. You may not vote shares held in street name by returning a proxy card directly to the Company or by voting in person or via the conference call unless you provide the Company with a “legal proxy”, which you must obtain from your broker, bank or other nominee. If you obtain a legal proxy and plan to vote at the Annual Meeting via conference call, then the Company must receive your legal proxy by 5:00 p.m., local time, on April __, 2021. You will then receive an e-mail from the Company confirming your registration to vote at the Annual Meeting. Legal proxies may be submitted by mail to: Lynnette Kitzmiller, Secretary, Farmers and Merchants Bancshares, Inc., 4510 Lower Beckleysville Road, Suite H, Hampstead, Maryland 21074; or by e-mail to lynnette.kitzmiller@fmb1919.bank.
OUTSTANDING SHARES; VOTING RIGHTS; QUORUM AND REQUIRED VOTE
As of the Record Date, 3,011,2553,071,214 shares of the Common Stock were issued and outstanding. Each share is entitled to one vote on each matter submitted to stockholders.
The presence, in person or by proxy, of stockholders entitled to cast a majority of all votes entitled to be cast at the 2023 Annual Meeting will constitute a quorum for the transaction of business. Withheld votes (in the case of the election of directors), abstentions and broker non-votes will all be counted for purposes of determining whether a quorum is present.
Directors are elected by a plurality of all votes cast. Accordingly, the withholding of votes, abstentions and broker non-votes will have no impact on the outcome of the vote on Proposal 1, as described in this proxy statement. The ratification of the appointment of the Company’s independent registered public accounting firm, as described in Proposal 2, requires the affirmative vote of a majority of all shares of Common Stock voted at the 2023 Annual Meeting. Accordingly, an abstention or a broker non-vote with respect to Proposal 2 will have no impact on the outcome of that proposal. Except in cases of certain extraordinary matters for which the Company’s governing instruments or applicable law require a different proportion, the affirmative vote of a majority of all shares of Common Stock voted at the 2023 Annual Meeting is sufficient to approve any motion that comes before the meeting pursuant to Proposal 3, as described in this proxy statement. Abstentions and broker non-votes with respect to any motion that comes before the meeting pursuant to Proposal 3 (other than certain extraordinary matters as discussed above) will have no impact on the outcome of the vote on such motion.
All properly executed proxy cards received pursuant to this solicitation will be voted as directed by the stockholders in those proxy cards. If no direction is given in your proxy card, then, subject to the procedures governing broker non-votes (see the following paragraph), your shares will be voted FOR ALL NOMINEES named in Proposal 1, FOR ratification of the appointment of the Company’s independent registered public accounting firm named in Proposal 2, and in the discretion of the proxies as to any other matters that may properly come before the meeting, as described in Proposal 3.
If you hold your shares through a broker, bank or other nominee (that is, in “street name”), then your broker, bank or other nominee is the shareholder of record and such nominee might not be able to vote your shares unless you provide it with voting instructions. You should instruct your broker, bank or other nominee to vote your shares by following the instructions that your broker, bank or other nominee provided when it sent the Company’s proxy materials to you. You may not vote shares held in street name by returning a proxy card directly to the Company or by voting in person unless you provide the Company with a “legal proxy”, which you must obtain from your broker, bank or other nominee.
A stockholder may revoke his or hera proxy at any time before its use by execution of another proxy card bearing a later date, or by written notice delivered to the Corporate Secretary at the Company’s address listed above or at the meeting.
Stockholders do not have dissenters’ rights of appraisal or similar rights with respect to any of the proposals to be presented at the 20212023 Annual Meeting.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON April 27, 202125, 2023
This proxy statement, the accompanying proxy card, and the Company’s Annual Report to Stockholders (including its Annual Report on Form 10-K for the year ended December 31, 2020)2022) are available on our website, www.fmb1919.bank, and may be accessed by clicking “Investor Relations” and then “SEC Filings”. Information on our website, other than this proxy statement, is not a part of this proxy statement.
BENEFICIAL OWNERSHIP OF COMMON STOCK BY
PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth information as of the Record Date relating to the beneficial ownership of the Company’s common stockCommon Stock by (i) each of the Company’s directors, director nominees, and named executive officers (as defined below under the heading, “EXECUTIVE COMPENSATION”), (ii) all directors and executive officers of the Company as a group, and (iii) each person or group known by the Company to beneficially own more than five percent (5%) of the outstanding shares of Common Stock, (ii) each of the Company’s directors, director nominees, and named executive officers (as defined below under the heading, “EXECUTIVE COMPENSATION”), and (iii) all directors and executive officers of the Company as a group.Stock. Generally, a person “beneficially owns” shares as of a given date if he or she has or shares with others the right to vote those shares or to invest (or dispose of) those shares, or if he or she has the right to acquire such voting or investment rights, within 60 days of such date (such as by exercising stock options or similar rights). The percentages were calculated based on 3,011,2553,071,214 issued and outstanding shares of common stockCommon Stock as of the Record Date, plus, for each named person, any shares that such person may acquire within 60 days of such date. Except as otherwise noted, the address of each person named below is the address of the Company.
Shares of Common Stock Beneficially Owned | Percent of Class Beneficially Owned | |||||||
Directors, Director Nominees & Named Executive Officers | ||||||||
James R. Bosley, Jr. | 11,011 | (1) | 0.4 | % | ||||
Roger D. Cassell | 11,732 | (2) | 0.4 | % | ||||
Steven W. Eline | 22,230 | 0.7 | % | |||||
Edward A. Halle, Jr. | 50,188 | (3) | 1.6 | % | ||||
Gary A. Harris | 100 | 0.0 | % | |||||
Ronald W. Hux | 24,897 | (4) | 0.8 | % | ||||
J. Lawrence Mekulski | 1,407 | 0.1 | % | |||||
Christopher T. Oswald | 826 | 0.0 | % | |||||
Louna S. Primm | 2,851 | (5) | 0.1 | % | ||||
Bruce L. Schindler | 88,745 | (6) | 2.9 | % | ||||
Teresa L. Smack | 979 | 0.0 | % | |||||
Paul F. Wooden, Jr. | 53,316 | 1.7 | % | |||||
Directors and Executive Officers as a Group (13 persons) | 272,028 | 8.9 | % | |||||
5% Holders | ||||||||
Barry J. and Carol E. Renbaum | 159,187 | (7) | 5.2 | % |
Shares of Common Stock Beneficially Owned | Percent of Class Beneficially Owned | ||||||||
Directors, Director Nominees & Named Executive Officers | |||||||||
James R. Bosley, Jr. | 11,011 | (1) | 0.4 | % | |||||
Roger D. Cassell | 13,384 | (2) | 0.4 | % | |||||
Steven W. Eline | 21,100 | 0.7 | % | ||||||
Edward A. Halle, Jr. | 47,401 | (3) | 1.6 | % | |||||
Ronald W. Hux | 23,521 | (4) | 0.8 | % | |||||
Mark C. Krebs | 4,578 | (5) | 0.2 | % | |||||
J. Lawrence Mekulski | 1,407 | 0.0 | % | ||||||
Christopher T. Oswald | 780 | 0.0 | % | ||||||
Louna S. Primm | 2,845 | (6) | 0.1 | % | |||||
Bruce L. Schindler | 83,817 | (7) | 2.8 | % | |||||
John J. Schuster, Jr. | 16,451 | (8) | 0.5 | % | |||||
Teresa L. Smack | 98 | 0.0 | % | ||||||
Paul F. Wooden, Jr. | 50,879 | 1.7 | % | ||||||
Directors and Executive Officers as a Group (13 persons) | 277,272 | 9.2 | % | ||||||
Notes:
Notes: |
(1) | Includes 10,493 shares held jointly with spouse. |
(2) | Includes |
(3) | Includes |
(4) | Includes |
(5) |
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| Includes 1,750 shares held by spouse. |
| Includes |
(7) |
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ELECTION OF DIRECTORS (Proposal 1)
The number of directors constituting the Company Board is currently set at 11. The Company Board, by resolution approved by a majority vote thereof, may alter the number of directors from time to time. The Company’s directors are divided into four classes, as nearly equal in number as possible, with respect to the time for which the directors may hold office. Each director is elected to hold office for a term of four years and thereafter until his or her successor has been elected and qualifies, which term is subject to earlier expiration if (i) he or she is removed pursuant to the terms of one class of directors expire each year. A director who is elected by the Company Board, rather than by stockholders,Company’s Amended and Restated Bylaws (the “Bylaws”) or (iii) he or she fails to fill a vacancy in a class of directors is electedqualify to serve untilas a director as provided in the nextBylaws. Section 3(c) of Article II of the Bylaws provide that no person, including an incumbent director, shall be qualified to hold office as a director after the close of the annual meeting of stockholders. In all cases, directors serve until their successors are duly electedstockholders of the Company that immediately follows his or her 75th birthday. Louna S. Primm, a Class IV Director, has reached the mandatory retirement age and qualify.will retire from the Board at the conclusion of the 2023 Annual Meeting. The Board has determined to eliminate the vacancy that will be created upon her retirement by reducing the number of directorships to 10, effective at the conclusion of the 2023 Annual Meeting.
The terms of the current Class IIII Directors will expire at the conclusion of the 20212023 Annual Meeting. The CompanyMeeting, and the Board, at the recommendation of its Nominating Committee, has nominated each of the incumbent Class IIII Directors tofor re-election, both of whom were elected by the Company’s stockholders. In addition, the Board, at the recommendation of the Nominating Committee, has nominated Gary A. Harris for election as a Class I Director. Mr. Harris is a current director and was elected by the Board in July 2022 when he was appointed as the President of the Company and the Bank. Under Maryland law, Mr. Harris’ current term as a director will expire at the 2023 Annual Meeting and he must stand for re-election.re-election at the 2023 Annual Meeting. Accordingly, stockholders will be asked to vote for the electionre-election of (i) Steven W. Eline,Roger D. Cassell, (ii) J. Lawrence Mekulski,Paul F. Wooden, Jr., and (iii) Bruce L. Schindler (each, a “Nominee”)Gary A. Harris as Class I Directors to serve onuntil the Board for new four-year terms2027 annual meeting of stockholders and until their respective successors are duly elected and qualified. Each Nominee was previously elected by stockholders.qualify. Information about the principal occupations, business experience and qualifications of each Nomineethe director nominees is provided below under the heading “QUALIFICATIONS OF DIRECTOR NOMINEES AND CONTINUING DIRECTORS”. In the event a Nomineedirector nominee declines or is unable to serve as a director, which is not anticipated, the proxies will vote in their discretion with respect to a substitute nominee named by the Company Board.
Because the vote on Proposal 1 relates to the re-election of incumbent directors, each Nomineeof the director nominees has an interest in the outcome of this vote.
Stockholders do not have cumulative voting rights and may not vote their shares for a greater number of personsmore than the three director nominees named inpursuant to this proxy statement and on the proxy card.Proposal 1.
The Company Board of Directors recommends that stockholders vote FOR ALL NOMINEES named above.
CONTINUING DIRECTORS
The following tables identify each director of the Company whose term does not expire in 2021.2023. Information about the principal occupations, business experience and qualifications of these continuing directors is provided below under the heading “QUALIFICATIONS OF DIRECTOR NOMINEES AND CONTINUING DIRECTORS”.
Class IV Directors
(Term expires in 2022)
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Class I Directors
(Term expires in 2023)
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Class II Directors (Term expires in 2024)
Class III Directors (Term expires in 2025)
QUALIFICATIONS OF DIRECTOR NOMINEES AND CURRENT DIRECTORS
In addition to bringing extensive knowledge of the communities served by the Company through their involvement with their communities, as business partners and volunteers, the Nominating Committee of the
James R. Bosley, Jr., age
Roger D. Cassell, age
Steven W. Eline, age
6 Edward A. Halle, Jr., age
Gary A. Harris, age 52. Director of the Company and the Bank since July 18, 2022; President and CEO of the Company since January 1, 2023; President of the Company and the Bank between July 18, 2022 and January 1, 2023; President and director of RCFI; Executive Vice President – Chief Lending Officer of the Bank between 2021 and July 18, 2022; Senior Vice President – Commercial Banking of the Bank between 2016 and 2021; and Vice President – Commercial Banking of the Bank between 2008 and 2016. Mr. Harris’ qualifications to serve as a director include the knowledge and experience that he has gained during his 14-year career with the Bank, particularly with respect to the Bank’s lending operations, and his experience serving on the Bank’s Strategic Growth Committee, Asset-Liability Committee, and Officer’s Loan Committee. Ronald W. Hux, age 65. Director of the Company since 2016 and of the Bank since 2006; President and co-owner of Douron Inc., a commercial furniture dealership located in Owings Mills, Maryland; developer and manager of commercial properties in Owings Mills, Maryland; and Director of Owings Mills Corporate Round Table, a business association. Mr. Hux’s qualifications to serve as a director include his 16 years as a director of the Bank, his many years as a business owner and his experience in the office furniture and commercial real estate industries. J. Lawrence Mekulski, age
Bruce L. Schindler, age
Teresa L. Smack, age
Paul F. Wooden, Jr., age
CORPORATE GOVERNANCE MATTERS
Committees of the Board of Directors
The Company Board and the Bank’s board of directors are composed of the same individuals. These boards have appointed from their members a joint Executive Committee, a joint Audit Committee, a joint Compensation Committee, and a joint Nominating Committee.
Executive Committee. The function of the Executive Committee is to direct and transact any business that may properly come before the board of directors, except for such business that only the board of directors is authorized by law to perform. The members of the Executive Committee are Bruce L. Schindler, Chairman, Ronald W. Hux, Vice Chairman,
Audit
Compensation
Nominating
In addition to the foregoing committees, the Bank’s board of directors has appointed a Loan Committee, a Facilities Committee, an Asset Liability Committee; and a Marketing Steering Committee. The Loan Committee, which met 8
Director Independence
To determine whether each of the directors is independent, the
Board Leadership and Role in Risk Oversight
The Company Board has separated the positions of Chairman of the Board and CEO in an effort to maintain independent oversight of management. The Company Board elects from its members a Chairman who it believes will be an effective leader and who satisfies the “independent director” standards of NASDAQ Rule 5605(b)(1). The Company Board believes that this bifurcated structure best suits the Company because it helps to ensure that the Company has a strong, independent leader who can objectively review operations and the performance of management. In addition, the
The Company Board administers risk oversight by assigning various organizational risk oversight functions to its committees, which report to the full Board on a regular basis.
The Bank’s Loan Committee monitors the Bank’s credit risk in accordance with guidelines established by the Bank’s board of directors and bank regulatory agencies, and is charged with approving loans made by the Bank within acceptable guidelines. The Bank’s Loan Committee also monitors the Bank’s concentrations of commercial real estate loans and the risk rating of loans.
The Audit Committee monitors compliance risk, risks related to our reputation, our internal control over financial reporting, including the internal audit function, and the performance of and reports by the Company’s independent registered public accounting firm.
The Executive Committee monitors the Bank’s market and strategic risks through its oversight of marketing and strategic initiatives, and regularly meets with the CEO, the Chief Financial Officer (the “CFO”), and the Chief Operations Officer (the “COO”) so that it may be kept apprised of the Bank’s general operating environment. The Executive Committee also helps ensure director independence through its nominating authority, and it manages compensation risk through its authority to review and recommend the Bank’s executive compensation practices and policies.
Interest rate risk, liquidity risk, and valuation risk are monitored by the Bank’s Asset Liability Committee. Credit risk and transaction risk are monitored by the Bank’s Loan Committee.
Attendance at Board Meetings
The Company Board held 9
Director Recommendations and Nominations
The Nominating Committee will from time to time review and consider candidates recommended by stockholders. Stockholder recommendations should be labeled “Recommendation of Director Candidate” and be submitted in writing to: Corporate Secretary, Farmers and Merchants Bancshares, Inc., 4510 Lower Beckleysville Road, Suite H, Hampstead, Maryland 21074; and must specify (i) the recommending stockholder’s contact information, (ii) the class and number of shares of the Company’s capital stock beneficially owned by the recommending stockholder, (iii) the name, address and credentials of the candidate for nomination, (v) the number of shares of the Company’s capital stock beneficially owned by the candidate, and (iv) the candidate’s written consent to be considered as a candidate. Such recommendation must be received by the Corporate Secretary no less than 150 days nor more than 180 days before the date of the Annual Meeting of Stockholders for which the candidate is being recommended. For purposes of this requirement, the date of the meeting shall be deemed to be on the same day and month as the 2023 Annual Meeting of Stockholders for the preceding year. Accordingly, a stockholder who desires to recommend a person for consideration as a director nominee for the
Candidates may come to the attention of the Nominating Committee from current directors, executive officers, stockholders, or other persons. The Nominating Committee does not have a formal policy under which it considers the diversity of candidates for directorship when making nomination recommendations. The Nominating Committee periodically reviews its list of candidates available to fill director vacancies and researches the talent, skills, expertise, and general background of these candidates. In evaluating candidates for nomination, the Nominating Committee uses a variety of methods and regularly assesses the size of the
Whether recommended by a stockholder or another third party, or recommended independently by the Nominating Committee, a candidate will be selected for nomination based on his or her talents and the needs of the
It should be noted that a stockholder recommendation is not a nomination, and there is no guarantee that a candidate recommended by a stockholder will be approved by the Nominating Committee or nominated by the 10
It should be further noted that the Bylaws specify that no person, including an incumbent director, is eligible to serve on the
Stockholder Communications with the Board of Directors
Stockholders may communicate with the
The Company believes that the 2023 Annual Meeting of Stockholders is an opportunity for stockholders to communicate directly with directors and, accordingly, expects that all directors will attend each Annual Meeting of Stockholders. If you would like an opportunity to discuss issues directly with our Directors, please consider attending this year’s Annual Meeting of Stockholders. The
Family Relationships Among Directors, Nominees and Executive Officers
There are no family relationship between any of the directors, director nominees or executive officers.
Policy with Respect to Hedging Transactions
The Company has not adopted any practices or policies regarding the ability of employees (including officers) or directors, or any of their designees, to purchase financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds), or otherwise engage in transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of the Company’s equity securities (i) granted to the employee or director by the Company as part of his or her compensation or (ii) held, directly or indirectly, by the employee or director.
DIRECTOR COMPENSATION
The following table provides information about compensation paid to or earned by the Company’s directors during
In
From time to time, the boards of the Company and the Bank may choose to appoint a person to serve as a director emeritus, where the boards believe that they may benefit from such person’s experience, insight and other attributes. A director emeritus is invited to attend all board meetings and to participate in board discussions, but he or she is not entitled to vote on any matter that may come before the board or any of its committees. A director emeritus is entitled to receive a cash fee for each meeting attended. For 2022, the fee amount was $700. These fees are paid by the Bank. 11 The Board anticipates that it will appoint Louna S. Primm to serve as a director emeritus for a two-year term upon her retirement from the Board of Directors at the conclusion of the 2023 Annual Meeting. Ms. Primm served on the Board of Directors for five years. She was also on the Loan Committee for all of those years. In addition Ms. Primm has 54 years of banking experience, primarily in a senior management role. Through this service, Ms. Primm gained valuable skills and valuable experience and knowledge about the Bank and the banking industry. AUDIT COMMITTEE REPORT
The Audit Committee has (i) reviewed and discussed the Company’s audited consolidated financial statements for the year ended December 31,
EXECUTIVE OFFICERS
Information about the Company’s executive officers is set forth
Christopher T. Oswald,
Mark C. Krebs,
EXECUTIVE COMPENSATION
Officers do not receive remuneration for their service to the Company. All compensation is paid by the Bank. 12
The Bank’s board of directors, upon the recommendation of its Compensation Committee, establishes executive compensation each year. In recommending compensation levels, the Compensation Committee reviews annual evaluations that measure performance against previously established goals for the year. In addition, the board reviews one or more independently conducted surveys. In
The following table sets forth, for each of the last two calendar years (which were also the Company’s last two fiscal years), the total remuneration awarded to, earned by, or paid to (i) any person who served as the Company’s principal executive officer at any time during
Notes:
13 Employment Arrangements
Executive officers are appointed by the Board and the Bank’s board of directors annually and are employed on an at-will basis. No executive officer is a party to any written employment agreement with the Company or the Bank. Each executive officer is paid a base salary, participates in a bonus program, and participates in various employee benefit plans and programs to the extent the executive officer qualifies for such participation under the terms and conditions of the benefit plans, including the Bank’s 401(k) profit sharing plan. Any employee, including an executive officer, may elect to waive coverage under the Bank’s health insurance plan, in which case he or she will be entitled to receive an amount in cash equal to 40% of the net annual cost to the Bank of the insurance coverage. Messrs. Bosley and Oswald are additionally eligible to receive benefits under the Bank’s bank-owned life insurance (“BOLI”) plan and Supplemental Executive Retirement Plan Agreements (“SERP Agreements”), as described below. Mr. Krebs is eligible to receive benefits under
Base salary for each executive is set annually by the Bank’s board of directors, upon the recommendation of its Compensation Committee. The salaries for
Bonus Program
The Bank’s board of directors has implemented a bonus program under which certain officers are entitled to share each year in a bonus pool the amount of which is based on the Bank’s net income for that year. Participation is available to the
There is no formula for determining how much of the pool is paid to a particular officer. Rather, the amount for each officer is recommended by the Compensation Committee and approved by the Board. Historically, the percentages of the pool paid to Messrs. Bosley, Mr. Harris did not participate in the foregoing bonus program in 2022 or 2021 because he was eligible to receive a loan and deposit production bonus, paid in cash. Under this program, Mr. Harris was entitled to receive a bonus, paid as a percentage of his base salary rate, if his annual loan production were to equal or exceed $7 million. The percentage started at 10% and could increase to a maximum of 57% for an annual loan production of $35 million or more. Mr. Harris was also eligible for a commission on Small Business Administration loans, including Paycheck Protection Program loans, that ranged from 10% for the first $100,000 of sales premium to 5% for sales premiums $200,000 or over. In addition, Mr. Harris was entitled to receive 0.25% of all new non-interest checking deposits in excess of $250,000, 0.20% for all new savings accounts in excess of $250,000, and 0.15% for all new certificates of deposit in excess of $500,000. The bonus amounts paid to Mr. Harris in 2022 and 2021 are shown in the Summary Compensation Table under the heading “Nonequity incentive plan compensation”. 14
Profit Sharing Plan
The Bank has a profit sharing plan that qualifies under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “IRC”). All employees age 21 or older with six months of service are eligible to participate in the plan. The Bank matches employee contributions up to 4% of total compensation and may make additional optional contributions. Employee and employer contributions are 100% vested when made.
Bank-Owned Life Insurance Plan Benefits
To attract and retain key employees, the Bank implemented a BOLI plan in 2002 to provide benefits to the named beneficiaries of certain officers of the Bank, including Messrs. Bosley, Harris, and Oswald.
The amounts of the benefits that could have been paid to the beneficiaries of Messrs. Bosley, Harris, and Oswald in connection with these policies as of December 31,
Group Term Life Insurance
The Bank provides group term life insurance coverage to all Bank employees, including each of the named executive officers. For federal tax purposes, employees recognize imputed income each year on the amount of premiums paid by the Bank for the portion of insurance in excess of $50,000.
Supplemental Executive Retirement
The Bank entered into Mr. Bosley experienced a Separation from 15 Mr. Harris’ agreement (the “Harris SERP Agreement”) provides for the
The Harris SERP Agreement provides that, subject to certain exceptions, Mr. Harris will forfeit any undistributed benefits in the event that he engages in certain activities that compete with the Bank, interferes with certain of the Bank’s employee and/or customer relationships, or improperly divulges the Bank’s confidential information. 16 Mr. Oswald’s agreement (the “Oswald SERP Agreement”) provides for the following benefits:
17
The following table sets forth the current amounts that could be paid to
If benefit payments have begun and an executive dies before all payments have been made, then the Bank will distribute the remaining benefits to the executive’s designated beneficiaries, at the same times and in the same manner as if the executive had not died. If an executive becomes entitled to benefits but dies before payments begin, then the Bank will pay the benefits, in a single lump sum on the first day of the fourth month following death, to the executive’s designated beneficiaries.
No benefits will be paid if an executive’s employment is terminated by the Bank for cause or if he is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act. Additionally, no benefit will be paid to the extent it constitutes an excess golden parachute payment under Section 280G of the IRC or is determined to be a prohibited golden parachute payment pursuant to 12 C.F.R. § 359.2.
The timing of the distribution of some or all of the foregoing benefits may be subject to a six-month waiting period under Section 409A of the IRC to the extent the executive is considered to be a “specified employee” of the Company. Section 409A of the IRC places restrictions on the ability of the Bank and/or the executives to change the form or timing of the payment of the benefits, and the Harris SERP
The Company and Mr.
18
As of December 31, 2022, Mr. Harris’ “base amount” was $300,000, and the gross amount to which Mr. Harris would have been entitled under the Severance Agreement as of such date is approximately $897,000. Pay Versus Performance As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between compensation actually paid to our Principal Executive Officer (the “PEO”) and the other named executive officers (the “Non-PEO named executive officers”) and certain financial performance metrics of the Company using a methodology that has been prescribed by the SEC.
Notes:
19 The graphs below describe the relationship between pay and performance by comparing compensation actually paid to our PEO and the average actual compensation paid to our Non-PEO named executive officers to our cumulative total shareholder return (TSR) and our net income. 20 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following paragraphs discuss related party transactions that occurred thus far in
Thus far in
The Company and the Bank have procedures in place to help ensure that the Company and the Bank comply with all legal requirements applicable to related party transactions. Among other procedures, the Audit Committee and/or the Bank’s Loan Committee must review and approve transactions with directors, executive officers and/or their respective related interests and submit such transactions to the full board of directors for approval. This review is intended to ensure compliance with Regulation O, which imposes requirements for extensions of credit to directors and executive officers, Sections 23A and 23B of the Federal Reserve Act, which governs transactions between the Bank and its affiliates, and Section 5-512 of the Financial Institutions Article of the Annotated Code of Maryland, which limits, and requires periodic review and approval of, extensions of credit to directors and executive officers.
CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Proposal 1) On July 6, 2021, the Company was notified by Rowles & Company, LLP (“Rowles”) that, effective July 1, 2021, substantially all partners and employees of Rowles joined YHB. As a result, effective July 6, 2021, Rowles resigned as the Company’s independent registered public accounting firm. During the year ended December 31, 2021, the Company did not have any disagreements with Rowles on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Rowles, would have caused Rowles to make reference thereto in its report on the Company’s consolidated financial statements for such year had it issued such a report. During the year ended December 31, 2021, the Company did not have any “reportable events” as described in Item 304 (a)(1)(v) of Regulation S-K promulgated by the SEC. On July 19, 2021, the Board’s Audit Committee appointed YHB to serve as the Company’s independent registered public accounting firm for 2021. During the year ended December 31, 2021, neither the Company nor anyone acting on the its behalf consulted YHB regarding (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, or (ii) any matter that was either the subject of a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K promulgated by the Securities and Exchange Commission or a “reportable event” described in Item 304(a)(1)(v) of the Regulation S-K. 21
RATIFICATION OF APPOINTMENT OF
At the
The Board of Directors recommends that stockholders vote FOR the ratification of the appointment of
Because your vote is advisory, it will not be binding upon the Audit Committee, overrule any decision made by the Audit Committee, or create or imply any additional fiduciary duty by the Audit Committee. The Audit Committee may, however, take into account the outcome of the vote when considering future auditor appointments.
AUDIT FEES AND SERVICES
The following table shows the fees billed to the Company
Audit Fees for 2022 and 2021 include fees associated with the annual audits of the Company’s consolidated financial statements for those years and fees associated with the reviews of the Company’s Quarterly Reports on Form 10-Q. Audit-Related Fees for 2021 include fees associated with the HUD audit required for FHA recertification. Tax Fees for 2022 and 2021 include charges primarily related to tax return preparation and audit and tax consulting services. The following table shows the fees billed to the Company for the audit and other services provided by Rowles for
Audit Fees for
Tax Fees
The Audit Committee has reviewed summaries of the services provided by YHB and Rowles and the related fees and has determined that the provision of non-audit services by those firms was compatible with maintaining 22
It is the Audit Committee’s policy to pre-approve all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by its independent registered public accounting firm, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(l)(B) of the Exchange Act, which, when needed, are approved by the Audit Committee prior to the completion of the independent registered public accounting firm’s audit. All of the
DELINQUENT SECTION 16(a) REPORTS
Pursuant to Section 16(a) of the Exchange Act and the rules promulgated thereunder, the Company’s executive officers and directors, and persons who beneficially own more than 10% of the Company’s common stock, are required to file certain reports regarding their ownership of common stock with the SEC. Based solely on a review of copies of such reports and amendments thereto filed electronically with the SEC during the year ended December 31,
SUBMISSION OF STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR
A stockholder who desires to present a proposal pursuant to Rule 14a-8 under the Exchange Act to be included in the proxy statement for, and voted on by the stockholders at, the
A stockholder who desires to nominate a person for election to the Board at the “HOUSEHOLDING” OF PROXY MATERIALS The SEC has adopted rules that permit companies and intermediaries (such as brokers, banks, trustees and other nominees) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies. A number of banks, brokers, trustees and other nominees with account holders who are our stockholders may be householding our proxy materials. A single Notice of Annual Meeting of Stockholders, proxy statement and Annual Report to Stockholders may be delivered to multiple stockholders sharing an address unless contrary instructions have been received from one or more of the affected stockholders. Once you have received notice from your bank, broker, trust or other nominee that it will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate Notice of Annual Meeting of Stockholders, proxy statement and Annual Report to Stockholders, please notify your bank, broker, trust or other nominee and also send a copy of your request to the Company c/o Lynnette Kitzmiller, Vice President/Corporate Secretary, 4510 Lower Beckleysville Road, Suite H, Hampstead, Maryland 21074 or call 410-374-1510 ext. 105. Stockholders who currently receive multiple copies of this proxy statement at their address and would like to request householding of their communications should contact their bank, broker, trust or other nominee.
23 ANNUAL REPORT AND FINANCIAL STATEMENTS This proxy statement is accompanied by a copy of the Company’s Annual Report to Stockholders for the year ended December 31, 2022, which contains the information required by Rule 14a-3(b) under the Exchange Act. Upon the written request of any person solicited pursuant to this proxy statement, the Company will provide such person, without charge, a copy of the Company’s Annual Report on Form 10-K, including the financial statements and the financial statement schedules, required to be filed with the SEC pursuant to Rule 13a-1 under the Exchange Act for the year ended December 31, 2022. A written request must be sent to Mark C. Krebs, Executive Vice President/Chief Financial Officer, Farmers and Merchants Bancshares, Inc., P.O. Box 249, 25 Westminster Pike, Reisterstown, MD 21136. OTHER MATTERS
As of the date of this proxy statement, the Board is not aware of any matters, other than those stated above, that may properly be brought before the meeting. If other matters should properly come before the meeting or any adjournment thereof, persons named in the enclosed proxy or their substitutes will vote with respect to such matters in accordance with their best judgment.
Appendix A
REVOCABLE PROXY FARMERS AND MERCHANTS BANCSHARES, INC. Solicited on Behalf of the Board of Directors
The undersigned hereby constitutes and appoints Cheryl Y. Lewis, Lynnette Kitzmiller, and
INSTRUCTION: To withhold authority to vote for a particular nominee, vote “FOR ALL NOMINEES EXCEPT” and strike through that nominee’s name.
The Board of Directors recommends a vote “FOR ALL NOMINEES” in Proposal 1.
Shares represented by all properly executed proxy cards will be voted in accordance with instructions appearing on the proxy. In the absence of specific instructions, proxies will be voted FOR ALL NOMINEES in Proposal 1, FOR in Proposal 2, and in their discretion as to any other matters that properly come before the meeting pursuant to Proposal 3.
NOTE: Joint holders must each sign this proxy. When signing as attorney, executor, administrator, trustee or guardian, please indicate the capacity in which you are signing. If the holder is a corporation or other entity, this proxy must be signed by an authorized person in full corporate or entity name.
PLEASE CHECK BOX IF YOU PLAN TO ATTEND THE
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