FARMERS & MERCHANTS BANCORP
10-Ks and 10-Qs
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No.)
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
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☐
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Preliminary Proxy Statement
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☐
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Confidential, for use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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☒
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Definitive Proxy Statement
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☐
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Definitive Additional Materials
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☐
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Soliciting Material Pursuant to § 240.14a-11(c) or § 240.14a-12
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Farmers & Merchants Bancorp
(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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☒
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No fee required.
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☐
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
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(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
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☐
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Fee paid previously with preliminary materials.
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☐
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
FARMERS & MERCHANTS BANCORP
111 West Pine Street, Lodi, CA 95240
May 21, 2021
Dear Stockholder:
The
virtual
annual meeting of stockholders of Farmers & Merchants Bancorp (the “Company”) will be held this year on Wednesday, June 30, 2021,
at 4:00 p.m. The enclosed proxy statement describes the business to be conducted at the virtual annual meeting.
A copy of the Company’s 2020 Annual Report to Stockholders is also enclosed.
Consistent with last year, in order to protect the health of our stockholders, employees and community, the Board of Directors has determined that the 2021 annual meeting of
stockholders will once again be held over the web in a virtual meeting format only. You will not be able to attend the annual meeting in person.
The Directors and senior management greatly appreciate the interest expressed by our stockholders. Whether or not you plan to join the virtual annual meeting, it is still important that you are
represented and that your shares are voted. Accordingly, please complete, sign and date the enclosed proxy and return it as soon as possible in the postage-paid envelope that has been provided for your convenience. Also,
please retain a copy of your proxy card since you will need information on the card to access the virtual meeting.
If you have any questions, please call Steve Haley at 209-367-2411.
Sincerely,
/s/ Kent A. Steinwert
Kent A. Steinwert
Chairman
Enclosures
FARMERS & MERCHANTS BANCORP
111 West Pine Street, Lodi, CA 95240
NOTICE OF VIRTUAL ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 30, 2021
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the 2021 virtual annual meeting of stockholders of Farmers & Merchants Bancorp (the “Company”) will be held on Wednesday, June 30, 2021, at 4:00 p.m. to vote to:
| 1. |
Elect the following seven (7) Directors:
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Edward Corum, Jr.
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Kevin Sanguinetti
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Terrence A. Young
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Stephenson K. Green
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Kent A. Steinwert
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Gary J. Long
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Calvin (Kelly) Suess
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The Board of Directors has fixed the close of business on May 11, 2021 as the record date for determining the holders of the common stock of the Company entitled to notice of, and to vote at, the
virtual annual meeting and any adjournments thereof.
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 electronically and submit your questions during the meeting by logging into
www.meetingcenter.io/282536464
.
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.
If you are a registered shareholder (i.e., you hold your shares through our transfer agent, Computershare), you do not need to register to attend the virtual Annual Meeting. Please follow the
instructions on the notice or proxy card that you received. If you hold your shares through an intermediary, such as a bank or broker, you must register in advance to attend the virtual Annual Meeting.
To register to attend the virtual Annual Meeting you must submit proof of your proxy power (legal proxy) reflecting your Farmers & Merchants Bancorp holdings along with your name and email
address to Computershare. Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, on June 28, 2021. You will receive a confirmation of your registration by email after we receive your
registration materials.
Requests for registration should be directed to us at the following:
By email:
Forward the email from your broker, or attach an image of your legal proxy, to
legalproxy@computershare.com
By mail:
Computershare
Farmers & Merchants Bancorp Legal Proxy
P.O. Box 43001
Providence, RI 02940-3001
The virtual meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and cell phones) running the most
up-to-date version of applicable software and plugins. Participants should ensure that they have a strong WiFi connection wherever they intend to participate in the meeting. We encourage you to access the meeting prior to the start time. A link
on the meeting page will provide further assistance should you need it.
After June 1, 2021 we will be placing any additional required instructions on our website (go online to
www.fmbonline.com
and check the “About Us” tab) regarding access to the virtual
meeting.
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
.
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BY ORDER OF THE BOARD OF DIRECTORS,
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/s/ Stephen W. Haley
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Stephen W. Haley
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Secretary
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Dated: May 21, 2021
YOUR VOTE IS IMPORTANT.
TO INSURE YOUR VOTE IS REPRESENTED, YOU ARE
URGED TO COMPLETE, SIGN, DATE AND PROMPTLY
RETURN YOUR PROXY.
PROXY STATEMENT
FARMERS & MERCHANTS BANCORP
111 West Pine Street, Lodi, CA 95240
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I -
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INTRODUCTION
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This proxy statement is furnished to the stockholders of Farmers & Merchants Bancorp (the “Company”) in connection with the solicitation of proxies by the Board of Directors of the Company to
be used in voting at the virtual annual meeting of stockholders to be held on June 30, 2021 at 4:00 p.m., and at any adjournment or postponement thereof. All expenses incidental to the preparation and mailing, or otherwise making available to all
stockholders of the notice, proxy statement and form of proxy will be paid by the Company. This proxy statement and the enclosed proxy are being mailed to the Company’s stockholders on or about May 21, 2021.
For information on how to vote your shares, see the instructions included on the enclosed proxy card and under “Information About Voting and the Annual Meeting.”
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II -
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INFORMATION ABOUT VOTING AND THE ANNUAL VIRTUAL MEETING
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Voting Rights and Vote Required
Only stockholders of record at the close of business on May 11, 2021 (the “record date”), will be entitled to vote on-line at the virtual meeting or by proxy. On the record date, there were
789,646 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 stockholder may be eligible to
exercise cumulative voting rights.
In the election of Directors, the 7 nominees receiving the highest number of votes will be elected
. Abstentions will not count as votes in favor of the election of
Directors.
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’ choices specified therein; provided, however,
that where no choices have been specified, the shares will be voted “FOR” the election of the 7 nominees for Director recommended by the Board of Directors.
A stockholder using the enclosed proxy may revoke the authority conferred by the proxy at any time before it is exercised (i.e., before the vote pursuant to that proxy) by delivering written
notice of revocation or a duly executed proxy bearing a later date to the Secretary of the Company, or by voting on-line during the virtual meeting.
A majority of the shares entitled to vote represented either on-line 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.
1
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 disclosure of ownership shares by management, shares are considered to be “beneficially” owned if the person has or shares the power to vote or direct the voting of
the shares, the power to dispose of or direct the disposition of the shares, or the right to acquire beneficial ownership (as so defined) within 60 days of the record date.
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Title of Class
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Name and Address
of Beneficial Owner
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Amount and Nature of
Beneficial Ownership
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Percent of Class
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Common Stock
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Cortopassi Family Trust
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50,650
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6.41%
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and Cortopassi Partners
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11292 N. Alpine Road
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Stockton, CA 95212
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Common Stock
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Sheila M. Wishek (1)
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40,150
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5.08%
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111 West Pine Street
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Lodi, CA, 95240
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| (1) |
Mail should be sent to this individual at the Company’s address marked “c/o Stockholder Relations.”
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A complete list of stockholders entitled to vote will be available for inspection by stockholders of record at the office of the Secretary of the Company at 111 West Pine Street, Lodi, CA for the
ten days prior to the meeting.
2
The following 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 beneficially owned by each of the current
Directors, by each of the nominees for election to the office of Director, by the Named Executive Officers and by all Directors and Named Executive Officers of the Company and of the Bank as a group.
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Name and Address of Beneficial Owner (1)
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Amount of Common Stock
Owned and Nature of
Beneficial Ownership (2)
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Percent
of Class
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Edward Corum, Jr.
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2,012
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*
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Stephen W. Haley
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4,809
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*
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Deborah E. Skinner
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4,319
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*
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Stephenson K. Green
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607
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*
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Terrence A. Young
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462
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*
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Kevin Sanguinetti
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7,624
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*
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Kenneth W. Smith
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3,641
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*
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Kent A. Steinwert
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31,120
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3.94%
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David M. Zitterow
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641
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*
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Jay J. Colombini
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4,871
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*
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Calvin (Kelly) Suess
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3,551
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*
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Gary J. Long
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1,740
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*
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Ryan J. Misasi
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1,969
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*
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All Directors, Nominees and Named Executive Officers as a group (13 persons)
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67,366
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8.53%
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| * |
Indicates less than 1%.
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| (1) |
Mail should be sent to these individuals at the Company’s address marked “c/o Stockholder Relations.”
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| (2) |
Shares are beneficially owned, directly and indirectly, together with spouses, and, unless otherwise indicated, holders share voting power with their spouses. None of the shares are pledged.
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Notice Regarding Electronic Access of Stockholder Meeting Documents
Farmers & Merchants Bancorp is now offering 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 make this election, shortly before each annual meeting you will receive a proxy card, along with voting instructions and the web address where you can access that year’s annual report and
proxy statement.
If you have any questions regarding electronic access, please call Steve Haley at (209) 367-2411.
3
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III -
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ITEMS TO BE VOTED ON
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Proposal #1 – Election of Directors
The Board of Directors recommends a vote for each of the nominees listed below.
At this year’s virtual annual meeting, it will be proposed to elect seven (7) Directors 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.
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).
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Name
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Age
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Principal Occupation
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Director
Since
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Edward Corum, Jr.
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69
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Managing General Partner, Corum Real Estate
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2003
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Stephenson K. Green
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75
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Retired Banker and Business Consultant
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2018
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Gary J. Long
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68
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Owner, Gary J. Long Jewelers
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2014
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Kevin Sanguinetti
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63
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Retired President, 1st American Title Company - Stockton
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2001
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Kent A. Steinwert
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68
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Chairman, President & C.E.O. of the Company and Bank
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1998
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Calvin (Kelly) Suess
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85
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Chairman of the Board of ShellPro
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1990
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Terrence A. Young
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68
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Retired Banker and Human Resources Executive
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2018
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THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR THE NOMINEES
LISTED ABOVE
4
Directors are nominated based upon their business experience, knowledge of the Company’s key markets and business segments, community involvement and commitment to serving the interests of all stockholders:
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.
Mr. Corum
has served as a director for seventeen years, lives and is actively involved in the Sacramento market area, and provides real estate and financial expertise to the Board.
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.
Mr. Sanguinetti
has served as a director for nineteen years, is actively involved in the Stockton market area, and provides real estate and financial expertise to the Board.
Mr. Steinwert
has served as a director for twenty-two years, and has forty-five years of business, agriculture, real estate and consumer banking experience.
Mr. Suess
has served as a director for thirty years, lives and is actively involved in the Lodi market area, and provides agricultural production and processing expertise to the Board.
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.
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 stockholders 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 director 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.
5
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IV –
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DIRECTOR AND EXECUTIVE COMPENSATION
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Director Compensation
Outside Directors of the Company receive compensation for services. Mr. Steinwert, who is an employee of the Company, receives no additional compensation for his role as a Director.
A Director of both the Company and Bank who is not an employee of the Company or Bank receives a $3,000 fee for each monthly Bank Board Meeting attended (as a Director of the Company only, Mr.
Young receives $1,500 per meeting), and a $800 fee for each Committee Meeting attended (Committee Chairmen receive $1,000 with the exception of the Audit Committee Chairman who receives $1,200). In addition, each Director is eligible to receive
an annual bonus and participate in the Equity Component of the Executive Retirement Plan (see “Executive Compensation Discussion and Analysis – Qualified and Non-Qualified Retirement Programs”).
Directors of the Company who are not employees of the Company or Bank (thus Mr. Steinwert is excluded) are compensated up to $550 per month to cover a portion of the cost of outside medical
insurance. Directors of the Company who are not employees of the Company or Bank do not participate in any retirement or medical plans. The summary compensation earned by each Director of the Company (other than Mr. Steinwert who is a Named
Executive Officer) during 2020 is disclosed in the following “Director Compensation Table”.
2020 DIRECTOR COMPENSATION TABLE
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Name
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(1)
Fees Earned or
Paid in Cash
($)
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(2)
Stock
Awards
($)
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(2)
Option
Awards
($)
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(5)
Non-Equity
Incentive Plan
Compensation
($)
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(3)
Change
in Pension Value & Nonqualified
Deferred
Compensation
Earnings
($)
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(4)
All Other
Compensation
($)
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Total
($)
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Kent A. Steinwert
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$
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0
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$
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0
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$
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0
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$
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0
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$
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0
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$
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0
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$
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0
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Stephenson K. Green
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$
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64,600
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$
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0
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$
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0
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$
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112,000
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$
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0
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$
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76,600
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$
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253,200
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Edward Corum, Jr. (6)
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$
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108,000
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$
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0
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$
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0
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$
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112,000
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$
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0
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$
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76,600
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$
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296,600
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Terrance A. Young (6)
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$
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32,300
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$
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0
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$
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0
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$
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88,000
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$
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0
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$
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56,300
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$
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176,600
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Kevin Sanguinetti
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$
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64,200
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$
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0
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$
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0
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$
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112,000
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$
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0
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$
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76,600
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$
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252,800
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||||||||||||||
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Calvin (Kelly) Suess
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$
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58,200
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$
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0
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$
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0
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$
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112,000
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$
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0
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$
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76,600
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$
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246,800
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||||||||||||||
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Gary J. Long
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$
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55,000
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$
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0
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$
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0
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$
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112,000
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$
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0
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$
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76,600
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$
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243,600
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||||||||||||||
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(1)
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Mr. Kent Steinwert was an employee of the Company in 2020 and received no additional compensation for his services as a Director or Chairman of the Board. Mr. Kent Steinwert is a Named Executive Officer
and his compensation is listed in the Summary Compensation Table.
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(2)
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The Company has no stock based award programs.
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(3)
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The Company has no Defined Benefit Pension Program. All earnings on Nonqualified Deferred Compensation Plan balances are assumed to be at market rates (see Footnote 4 in the Non-Qualified Deferred
Compensation Table).
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(4)
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All non-employee Directors received a $70,000 bonus in 2020 with the exception of Mr. Young who received $53,000. Non-employee Directors are compensated up to $550 per month towards the cost of
outside medical insurance.
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(5)
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Contributions to the Executive Retirement Plan - Equity Component. See Plan description in Executive Compensation Discussion and Analysis - Qualified and Non-Qualified Retirement Programs for
further details.
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(6)
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Mr. Corum is a member of the Loan Committee which meets weekly, resulting in his Fees Earned exceeding those of the other Directors whose Committee responsibilities are monthly in frequency. Mr. Young
is a Director of the Company only (not the Bank) so his monthly fees are less than other Directors.
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6
Executive Compensation Discussion and Analysis
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, CFO and the 5 other most highly compensated executive officers); (3) annually establishes compensation levels and performance evaluation measures for the Chief Executive Officer (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 their 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.
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 stockholder 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 stockholders to provide advisory (non-binding) input with regard to the frequency of future stockholder advisory votes on the Company’s executive compensation programs. The results of this
election were that 71.4% of stockholders voting approved three years as the frequency of future stockholder advisory votes. The Dodd-Frank Act requires that this vote be taken at least once every six years.
|
| 2. |
In the 2020 proxy statement the Company asked stockholders to provide advisory (non-binding) approval of executive compensation as described in the “Executive Compensation Discussion and Analysis” section
of the 2020 proxy statement. The results of the election were that
86.6% of stockholders voting approved the Company’s current executive compensation. Based on this 2020 stockholder advisory vote the Board of Directors
determined that no material changes were required to current compensation strategies and programs.
|
7
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. |
the Company’s annual financial performance (relative to both the current year’s budget and the overall performance of a select group of peer community banks as well as the community bank industry as a whole) as measured by Return on
Assets; Return on Equity; Efficiency Ratios; and Net Income performance;
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| 2. |
progress towards achieving the Company’s strategic plan;
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| 3. |
results of the Company’s and Bank’s regulatory examinations; and
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| 4. |
current economic and industry conditions.
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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 Board 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.
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: (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, must approve all loans over $2 million.
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 taking on the part of executive management, the Board has determined that:
| 1. |
Annual Performance Based Bonuses must include consideration of the results of the Company’s and Bank’s regulatory examinations by the FRB, FDIC and California Department of Financial Protection & Innovation, all of which involve a
review of the Company’s and Bank’s risk management practices and resulting risk profile.
|
| 2. |
All parts of the Company’s non-qualified retirement programs are structured such that the benefits cannot be withdrawn by the participant, or paid out by the Company, until the participant retires. This results in a significant portion
of each executive’s compensation remaining at risk during their employment, so as to encourage adopting a long-term perspective and conservative risk management practices. This is in contrast to most stock option plans where once the
options vest they can be exercised and the stock sold, allowing participants to realize cash compensation based upon shorter-term financial results.
|
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.
8
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 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.
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 are currently 0-200% of base salary for the CEO and 0-125% of base salary
for Executive Vice Presidents). 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. Executive Management is 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. This philosophy has evolved based upon the Board’s belief that all banks operate in volatile financial markets amidst
external conditions that Senior Management has little or no control over. 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’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 balanced
compensation practices that caused Senior Management to carefully consider the risks it assumed in the context of long 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.
9
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 stockholder interests by
rewarding prudent risk taking and creation of long-term stockholder 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 … which provides
qualified
retirement benefits.
|
| 2. |
Executive Retirement Plan … which provides supplemental
non-qualified
retirement benefits and has the following components:
|
|
|
a. |
Salary Component … which makes Plan contributions based upon each participant’s salary level;
|
|
|
b. |
Performance Component … which makes Plan contributions based upon the Company’s long-term growth in net income and increase in market capitalization;
|
|
|
c. |
Equity Component … which makes discretionary cash contributions based upon Board approval, and contributions are invested primarily in the stock of the Company; and
|
| 3. |
Bank-Owned Life Insurance Program … which provides for a division of life insurance death proceeds between the Company and each participant’s designated beneficiary.
|
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; and (2) additional discretionary contributions authorized by the
Board of Directors. None of these contributions are dependent upon the employee contributing to the Plan (i.e., the Plan 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 Other
Compensation Table.”
Upon a Change in Control, each participant receives only those balances in their account, including any net earnings or losses thereon.
10
Non-Qualified Executive Retirement Plan
This Plan is a non-qualified plan where contributions cannot be withdrawn until the participant retires from the Company, and all contributions are subject to the claims of the Company’s
creditors in the event of insolvency. This results in a significant portion of each executive’s compensation remaining at risk during their employment, so as to encourage adopting a long-term perspective and conservative risk management
practices. The Executive Retirement Plan is intended to be compliant with the provisions of Section 409A of the Internal Revenue Code. All balances are held in a Master Trust. General investment parameters are established by the Company,
including allowable investment instruments and approved investment manager(s). Participants can then work with the investment managers(s) to request investment of their vested balances according to their own risk profile, with no guarantees of
principal provided by the Company. Although contributions to the Equity Component of this Plan have always been invested primarily in the stock of the Company, in 2014 the Company began investing some level of the balances in other Plan
components in the stock of the Company (see Note 16 to Item 8. - Financial Statements and Supplementary Data - in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2020).
The Board believes that this increased ownership further encourages key executives to operate consistent with long-term stockholder objectives.
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 Salary Component 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 they became a participant and
the number of years of service remaining to age 65. 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 Other Compensation Table” as well as Registrant Contributions in Last Fiscal Year in the “Non-Qualified Deferred Compensation Table.”
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 the Plan.
Upon a Change in Control, 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, 2020 would be as follows: Ms. Skinner $1.55
million; and Mr. Smith $599 thousand. Payments are made in accordance with prior participant elections made in compliance with IRC Section 409A.
Performance Component
… to compensate for the lack of a stock option program, the Board developed the Performance Component 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. Participants receive benefits 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. and up to 1.00% for each
Executive Vice President). The total “carry” for all current program participants is 5.95%.
11
Benefits under to the Performance Component vest 50% during the first year of participation, and 50% during the second year of participation. 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.”
Benefits under the Performance 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 the Plan.
Upon a Change in Control, 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 twenty times EPS which as of December 31, 2020 would be zero for all Named Executive Officers. Payments are made in accordance with prior participant elections made in compliance with IRC Section
409A.
Equity Component
… 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.
Each Named Executive Officer is eligible to participate in the Plan, along with members of the Board of Directors. Plan contributions are discretionary, subject to Board of Directors approval.
Plan balances are held in a Master Trust with the trustee responsible for investing these balances in a mix of Company stock and liquid assets.
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.”
Benefits under the Equity Component become payable to participants after either: (1) the participant’s employment at the Company terminates (including retirement); or (2) there has been a “Change
in Control” as defined in the Plan.
Upon a Change in Control, each participant receives only those balances in their account, including any net earnings or losses thereon.
This plan component is not a “stock option or other stock-based compensation program”, rather it is a deferred compensation program where cash contributions made by the Company are invested by
the independent trustee of the Master Trust primarily in Company stock. Participants have no voting rights in the shares until post-retirement distributions are made.
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; (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 is tax free as long as the policies are used to finance employee benefits.
12
As compensation to each participant for agreeing to allow the Company to purchase an insurance policy on his or her life, split 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 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 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 Other Compensation 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 their employment is terminated due to death or disability, no supplemental payments are made. They are entitled to all vested balances in qualified and non-qualified plans (see
“Deferred Compensation Table”), and in the case of death, their designated beneficiaries would be entitled to their split dollar life insurance death benefits.
|
| 2. |
If the Named Executive Officer is terminated for cause, all benefits in the Company’s non-qualified Executive Retirement Plan, whether vested or not, are forfeited in their entirety. No other payments are made, but the Named Executive
Officer is entitled to all vested balances in the qualified Profit Sharing Plan.
|
| 3. |
If the Named Executive Officer is terminated without cause, the terms of each individual’s employment contract call for the Company to provide lump sum payments of up to a maximum of two years’ “Total” compensation as reported in the
“Summary Compensation Table”. In addition they are entitled to all vested balances in qualified and non-qualified plans (see “Deferred Compensation Table”).
|
| 4. |
In the case of a Change in Control the Company has “single trigger” clauses in each Named Executive Officer’s employment contract. This means that termination payments are made regardless of whether the Named Executive Officer remains
in the employ of the buyer. In addition to all vested balances in qualified and non-qualified plans (see “Deferred Compensation Table”), each Named Executive Officer is eligible to receive lump sum payments of: (1) up to a maximum of two
years’ “Total” compensation as reported in the “Summary Compensation Table”; (2) a transaction bonus (which range up to $250,000 per Named Executive Officer); (3) three years’ medical premiums (which range up to $115,000 per Named
Executive Officer); (4) accelerated benefits under the Executive Retirement Plan – Salary Component as more fully described under “Non-Qualified Executive Retirement Plan”; and (5) tax gross-up payments to cover excise taxes under IRC
Section 280G which as of December 31, 2020 are estimated as follows: Mr. Steinwert $0; Mr. Haley $0; Ms. Skinner $0; Mr. Smith $0; Mr. Colombini $0; Mr. Misasi $0; and Mr. Zitterow $0.
|
Employment Contracts
The Company has employment agreements with each of its Named Executive Officers. These agreements are generally structured for an initial three year period and then renew automatically for
successive two 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 Compensation”).
13
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,
|
/s/ Edward Corum, Jr.
|
/s/ Stephenson K. Green
|
/s/ Kevin Sanguinetti
|
|
Edward Corum Jr., Chairman
|
Stephenson K. Green
|
Kevin Sanguinetti
|
Compensation Committee Interlocks and Insider Participation
Messrs. Sanguinetti, Corum and Green served in 2020 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, 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.
14
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; 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 31
st
of the year) except the Principal
Executive Officer (Mr. Steinwert), which during 2020 was $72,161; and (ii) the ratio of the Principal Executive Officer’s total compensation (as reported on the Summary Compensation Table of this proxy statement) to the median annual total
compensation of all employees except the Principal Executive Officer, which during 2020 was 64.1 to 1.
To determine the median of the annual total compensation of all employees of the Company (other than our Principal Executive Officer), we identified our total employee population as of December
31, 2020, which consisted of 383 individuals. As permitted by the disclosure rules, we annualized the compensation for any employees that were not employed by us for all of 2020. To identify the “median employee” we conducted a full analysis of
this employee population, without the use of statistical sampling. After identifying the median employee, we calculated annual total compensation for such employee using the same methodology we use for our named executive officers as set forth in
the 2020 Summary Compensation Table of this proxy statement.
15
2020 SUMMARY COMPENSATION TABLE
|
Name and Principal Position
|
Year
|
(1)
Salary
($)
|
(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
|
|
|
(1)
|
Includes base salary, unused vacation pay, car allowance and annual bonus. See Annual Compensation Program and Employment Contracts.
|
|
(2)
|
The Company has no stock based award programs.
|
|
(3)
|
The Company has no Defined Benefit Pension Program. All earnings on Non-Qualified Deferred Compensation Plan balances are assumed to be at market rates (see Footnote 4 in the Non-Qualified Deferred
Compensation Table).
|
|
(4)
|
See All Other Compensation Table for additional details.
|
16
2020 ALL OTHER COMPENSATION TABLE
|
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
($)
|
||||||||||||||||||||
|
Kent A. Steinwert
|
2020 |
$
|
4,247
|
$
|
22,399
|
$
|
3,017
|
$
|
7,894
|
$
|
2,438,949
|
$
|
29,961
|
$
|
2,506,467
|
|||||||||||||
|
|
2019
|
$
|
1,193
|
$
|
20,709
|
$
|
3,383
|
$
|
7,555
|
$
|
2,600,983
|
$
|
29,328
|
$
|
2,663,151
|
|||||||||||||
|
|
2018
|
$
|
2,111
|
$
|
26,658
|
$
|
3,749
|
$
|
7,791
|
$
|
2,246,484
|
$
|
28,407
|
$
|
2,315,200
|
|||||||||||||
|
Stephen W. Haley
|
2020
|
$
|
10,107
|
$
|
15,093
|
$
|
3,383
|
$
|
0
|
$
|
839,603
|
$
|
29,961
|
$
|
898,147
|
|||||||||||||
|
|
2019
|
$
|
10,687
|
$
|
12,438
|
$
|
3,749
|
$
|
0
|
$
|
960,062
|
$
|
29,328
|
$
|
1,016,264
|
|||||||||||||
|
|
2018
|
$
|
9,844
|
$
|
21,968
|
$
|
3,810
|
$
|
0
|
$
|
807,104
|
$
|
28,407
|
$
|
871,133
|
|||||||||||||
|
Jay J. Colombini
|
2020
|
$
|
5,801
|
$
|
1,256
|
$
|
1,290
|
$
|
0
|
$
|
419,415
|
$
|
29,961
|
$
|
457,723
|
|||||||||||||
|
|
2019
|
$
|
5,291
|
$
|
1,165
|
$
|
1,290
|
$
|
0
|
$
|
412,534
|
$
|
29,328
|
$
|
449,608
|
|||||||||||||
|
|
2018
|
$
|
1,896
|
$
|
1,256
|
$
|
1,290
|
$
|
0
|
$
|
390,298
|
$
|
28,407
|
$
|
423,147
|
|||||||||||||
|
Deborah E. Skinner
|
2020
|
$
|
7,150
|
$
|
7,859
|
$
|
1,290
|
$
|
0
|
$
|
728,896
|
$
|
29,961
|
$
|
775,156
|
|||||||||||||
|
|
2019
|
$
|
7,171
|
$
|
6,952
|
$
|
1,290
|
$
|
0
|
$
|
765,326
|
$
|
29,328
|
$
|
810,067
|
|||||||||||||
|
|
2018
|
$
|
4,254
|
$
|
7,034
|
$
|
1,290
|
$
|
0
|
$
|
715,942
|
$
|
28,407
|
$
|
756,927
|
|||||||||||||
|
Kenneth W. Smith
|
2020
|
$
|
0
|
$
|
6,595
|
$
|
1,980
|
$
|
0
|
$
|
688,455
|
$
|
29,961
|
$
|
726,991
|
|||||||||||||
|
|
2019
|
$
|
0
|
$
|
6,238
|
$
|
1,980
|
$
|
0
|
$
|
702,791
|
$
|
29,328
|
$
|
740,337
|
|||||||||||||
|
|
2018
|
$
|
0
|
$
|
6,544
|
$
|
1,290
|
$
|
0
|
$
|
681,155
|
$
|
28,407
|
$
|
717,396
|
|||||||||||||
|
Ryan J. Misasi
|
2020
|
$
|
4,519
|
$
|
0
|
$
|
300
|
$
|
12,956
|
$
|
354,901
|
$
|
29,961
|
$
|
402,637
|
|||||||||||||
|
|
2019
|
$
|
2,202
|
$
|
0
|
$
|
300
|
$
|
4,070
|
$
|
323,778
|
$
|
29,328
|
$
|
359,678
|
|||||||||||||
|
|
2018
|
$
|
2,342
|
$
|
0
|
$
|
300
|
$
|
0
|
$
|
294,779
|
$
|
28,407
|
$
|
325,828
|
|||||||||||||
|
David M. Zitterow
|
2020
|
$
|
0
|
$
|
0
|
$
|
450
|
$
|
12,316
|
$
|
279,920
|
$
|
29,961
|
$
|
322,647
|
|||||||||||||
|
|
2019
|
$
|
0
|
$
|
0
|
$
|
450
|
$
|
11,610
|
$
|
275,023
|
$
|
29,328
|
$
|
316,411
|
|||||||||||||
|
|
2018
|
$
|
0
|
$
|
0
|
$
|
450
|
$
|
12,438
|
$
|
186,511
|
$
|
28,407
|
$
|
227,806
|
|||||||||||||
|
(1)
|
Certain executives receive a car allowance as opposed to the use of a company car. Car allowance amounts are included in Salary in the Summary Compensation Table.
|
|
(2)
|
Represent 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 Executive Compensation Discussion and Analysis - Qualified and Non-Qualified Retirement
Programs for further details. Investment earnings or losses generated from investing prior year balances are reflected in the Non-Qualified Deferred Compensation Table.
|
|
(4)
|
Includes contributions to the Company’s Profit Sharing Plan.
|
17
2020 NON-QUALIFIED DEFERRED COMPENSATION TABLE
(Includes both vested and unvested balances - see Footnote 1)
|
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
($)
|
|||||||||||||||||||||
|
Kent A. Steinwert
|
$
|
0
|
$
|
2,438,949
|
$
|
432,196
|
$
|
0
|
$
|
0
|
$
|
26,815,370
|
$
|
26,815,370
|
||||||||||||||
|
Stephen W. Haley
|
$
|
0
|
$
|
839,603
|
$
|
121,602
|
$
|
0
|
$
|
0
|
$
|
8,859,059
|
$
|
8,859,059
|
||||||||||||||
|
Jay J. Colombini
|
$
|
0
|
$
|
419,415
|
$
|
22,823
|
$
|
0
|
$
|
0
|
$
|
2,485,082
|
$
|
2,485,082
|
||||||||||||||
|
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
|
||||||||||||||
|
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
|
||||||||||||||
|
(1)
|
The Company expenses all deferred compensation in the year earned, even if it is not yet vested. As of December 31, 2020 all balances were vested with the exception of Jay Colombini ($16,088). See Post
Termination Compensation for details regarding unvested balances upon the occurrence of certain triggering events.
|
|
(2)
|
Includes voluntary deferrals of earned salary or annual bonus. The Company’s Deferred Compensation Plan was terminated in 2016 and all balances distributed to participants.
|
|
(3)
|
Includes Company contributions. See Non-Qualified Executive Retirement Plan for details regarding the types of compensation deferred, measures of calculating plan earnings and terms of payouts,
withdrawals and other distributions. Current year contributions are included in the All Other Compensation Table.
|
|
(4)
|
All balances are held in a Master Trust which is subject to the claims of the Company’s creditors in the event of insolvency. General investment parameters are established by the Company, including
allowable investment instruments and approved investment manager(s). Participants can then work with the investment manager(s) to request investment of their vested balances according to their own risk profile, with no guarantees of
principal provided by the Company.
|
|
(5)
|
Represents the cumulative amount of the current and all previous years’ contributions and earnings or losses.
|
18
|
V –
|
CORPORATE GOVERNANCE
|
Code of Ethics
The Company has adopted a Code of Conduct which complies with the Code of Ethics requirements of the Securities and Exchange Commission. 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 any amendment to, or waiver from any provision of, the Code of Conduct applicable to executive officers and Directors, on its website.
Director Independence
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 to be “independent.”
Board of Directors Meetings
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 ending December 31, 2020, the Board of Directors of the Company met thirteen (13) times and the Board of Directors of the Bank met twelve (12) 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 stockholders and all Directors attended the virtual annual meeting of stockholders in 2020.
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.
As of this date, the Board of Directors has not formally designated a lead independent director.
19
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 around 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 Management 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
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 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 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 auditors, 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 2020 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 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.
Asset and Liability Management Committee
The Asset and Liability Management 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 2020.
20
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 2020.
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 2020 and is comprised of the following voting members: Messrs. Long, Suess, Young and Sanguinetti.
CRA Committee (Community Reinvestment Act)
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 2020 and is comprised of the following voting members: Messrs. Suess (Chairman), Green,
James, Young and Long.
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
included as Exhibit C to the 2019 proxy statement. The Committee is comprised 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 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.
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 included as Exhibit B to the 2019 proxy statement.
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 five (5) times in 2020. 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.
21
Certain Relationships and Related Person Transactions
Certain Directors and Named Executive Officers of the Bank and the Company 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 2020. 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 Modesto Market Manager (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 Compensation Committee of the Board of Directors of the Bank, and is 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 eleven market managers and twenty eight commercial relationship managers bank-wide. In 2020,
total annual compensation for the market managers ranged from $287,600 to $482,346. Total annual compensation for commercial relationship managers ranged from $117,002 to $408,126. Mr. Steinwert ranked fourth in total compensation amongst the
market managers and Ms. Silva and Ms. Beigh ranked eleventh and fourth respectively
.
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 indemnitee 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.
22
Stockholder Rights Plan
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 stockholders 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 stockholders of the Company. The provisions of the 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). 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. 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 on the Company’s Form 8-K dated February 19, 2016.
Communications with Board of Directors
Any person, including any stockholder, desiring to communicate with, or make any concerns known to, the Company, directors generally, non-management Directors or an individual Director only may do so by submitting
them in writing to Stephen W. Haley, 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.
23
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VI –
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AUDIT RELATED MATTERS
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Report of the Audit Committee of the Board of Directors
The Audit Committee oversees relevant accounting, risk assessment, risk management and regulatory matters. It meets with the Bank’s and the Company’s internal auditors and the independent
auditors to review the scope of their work as well as to review quarterly and annual financial statements and regulatory and public disclosures with the officers in charge of financial reporting, control and disclosure functions. After reviewing
the independent auditor’s qualifications, partner rotation and independence, the Audit Committee also makes an annual decision regarding selection of the independent auditors. In addition, the Audit Committee reviews reports of examination
conducted by regulatory agencies and follows up with management concerning recommendations and required corrective action.
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 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 auditors, 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, 2020 financial statements of the Company, the Audit Committee: (1) reviewed and discussed the audited financial statements with management and the independent
auditors; (2) discussed with the independent auditors the matters required by AS 1301; and (3) received and discussed with the independent auditors the matters required by PCAOB requirements. The Audit Committee has also considered whether the
independent auditors’ provision of non-audit services to the Company is compatible with maintaining the auditors’ independence. Based upon these reviews and discussions, the Audit Committee recommended to the Board of Directors that the audited
financial statements be included in the Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2020.
The Board of Directors has approved a written charter of the Audit Committee which is included as Exhibit A to the 2019 proxy statement.
Respectfully Submitted,
|
/s/ Kevin Sanguinetti
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/s/ Stephenson K. Green
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/s/ Edward Corum Jr.
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Kevin Sanguinetti, Chairman
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Stephenson K. Green
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Edward Corum Jr.
|
Audit Fees
The aggregate fees billed by Moss Adams LLP for performance of the audit and review of the Company’s quarterly and annual financial statements for fiscal year 2019 were $259,900 and fiscal year
2020 were $305,000.
24
Audit-Related Fees
The aggregate fees billed by Moss Adams LLP for services that were reasonably related to the performance of the audit and review of the Company’s quarterly and annual financial statements for
fiscal year 2019 were $40,019 and fiscal year 2020 were $39,492.
Tax Fees
The aggregate fees billed by Moss Adams LLP for professional services for tax compliance, tax advice and tax planning for fiscal year 2019 were $59,595 and fiscal year 2020 were $37,957.
All Other Fees
There were no other fees billed by Moss Adams LLP in 2019 or 2020.
Pre-approval of Services by the Company’s External Auditor
The Audit Committee has adopted a policy for pre-approval of audit and permitted non-audit services by the Company’s external auditor. The Audit Committee will consider annually and, if
appropriate, approve the provision of audit services by its independent auditor and consider, and if appropriate, pre-approve the 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 external auditor.
The Company does not require that its external auditor join the annual meeting.
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VII –
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OTHER INFORMATION
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Annual Report
Together with this proxy statement, the Company has distributed to each of its stockholders an Annual Report for the year ended December 31, 2020. The annual report contains the consolidated
financial statements of the Company and the unqualified reports thereon of Moss Adams LLP, the Company’s independent registered public accountants for 2018, 2019 and 2020.
Upon written request by any person entitled to vote at the meeting, addressed to Stephen W. Haley, Secretary of the Company, at 111 West Pine Street, Lodi, CA 95240, we will provide, without
charge, a copy of the Company’s 2020 Annual Report, including the financial statements and the schedules thereto filed with the Securities and Exchange Commission. You can also obtain a copy of the Company’s Annual Report on Form 10-K and other
periodic filings with the Securities and Exchange Commission through the F&M Bank website. The website address is
http://www.fmbonline.com
. The link to the Securities and Exchange Commission is on the
About Us
page.
25
Stockholder Nominations, Notices and Proposals
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. 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 stockholders called for
election of Directors, provided, however, that if less than twenty-one (21) days’ notice of the meeting is given to stockholders, such nomination shall be mailed or delivered to the President of the Company not later than the close of business on
the seventh (7
th
) day following the day on which the notice of meeting was mailed. If the Company’s 2022 annual meeting of stockholders is held on the third Monday of May (as has historically generally been the case), any stockholder
nomination, to be timely, must be received by the Company not later than April 16, 2022 and not earlier than March 17, 2022. 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, 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 to the 2019 proxy statement.
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, the stockholder must have given timely notice
thereof in writing to the Secretary of the Company and must have been a stockholder of record at the time such notice is given. To be timely, a stockholder’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 stockholder to be timely must be so delivered or mailed (by U.S. registered
mail, return receipt requested) and received not earlier than the ninetieth (90
th
) day prior to such annual meeting and not later than the close of business on the later of the seventieth (70
th
) day prior to such annual
meeting or the tenth (10
th
) day following the day on which public announcement of the date of such meeting is first made. Notice of any stockholder proposal by a stockholder to properly bring business before the 2022 annual meeting,
to be timely, must be received by the Company no later than April 21, 2022, and no earlier than April 1, 2022. Such stockholder’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 stockholders 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.
Under the Rules of the Securities and Exchange Commission, if a stockholder intends to include a proposal in the Company’s proxy statement and form of proxy for presentation at the Company’s 2022
annual meeting of stockholders, the proposal must be received by the Company at its principal executive offices by
January 21, 2022.
In addition to these advance
notice requirements, there are other requirements that a stockholder must meet in order to have a proposal included in the Company’s proxy statement under the rules of the Securities and Exchange Commission.
26
Cumulative Voting
With respect to the election of Directors, each stockholder 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 stockholder multiplied by the number of Directors to be elected, and such stockholder 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 stockholder 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) 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-laws and, in accordance with Article II, Section 2.9 of the Company’s by-laws, a stockholder 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, 2021 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.
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BY ORDER OF THE BOARD OF DIRECTORS,
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||
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/s/ Stephen W. Haley
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||
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Stephen W. Haley
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||
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Secretary
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27
Your vote matters – here’s how to vote! You may vote online or by phone instead of mailing this card.Online Go to www.envisionreports.com/FMCB or scan the QR code — login
details are located in the shaded bar below. Save paper, time and money! Sign up for electronic delivery at www.envisionreports.com/FMCB Phone Call toll free 1-800-652-VOTE (8683) within the USA, US territories and Canada Using a black ink
pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. Annual Meeting Proxy Card qIF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q Proposals — The
Board of Directors recommend a vote FOR all the A nominees listed. 1. Election of Directors: For Withhold 01 - Edward Corum, Jr. 02 - Stephenson K. Green For Withhold 03 - Gary J. Long For Withhold 04 - Kevin Sanguinetti 05 - Kent A.
Steinwert 06 - Calvin (Kelly) Suess When shares are held by joint tenants, both should sign. Executors, administrators, trustees, etc. should give full title as such. If the signer is a corporation, please sign full corporate name by duly
authorized officer. Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 —
Please keep signature within the box. 7 0 A V
The 2021 Annual Meeting of Stockholders of Farmers & Merchants Bancorp will be held on Wednesday June 30, 2021, 4:00 P.M. PST, virtually via the internet at www.meetingcenter.io/282536464. 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 2020 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/FMCBqIF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q REVOCABLE PROXY — FARMERS & MERCHANTS BANCORP ANNUAL MEETING OF STOCKHOLDERS June 30, 2021 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, 2021 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.
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