FIRST NORTHERN COMMUNITY BANCORP
10-Ks and 10-Qs
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April 12, 2024
Dear Shareholder:
You are cordially invited to attend the 2024 Annual Meeting of Shareholders of First Northern Community Bancorp (the “Company”) on
Tuesday, May 14, 2024, at 5:30 p.m., local time. The meeting will be held at First Northern Bank’s Operations Center located at 210 Stratford Avenue in Dixon, California.
At the meeting, shareholders will be asked to elect as directors the eleven individuals nominated by the Board of Directors, and to
ratify the appointment by the Audit Committee of the Board of Directors of Moss Adams LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2024, and to address such other matters as may properly
come before the Annual Meeting or any adjournment thereof. The accompanying Proxy Statement provides detailed information about the nominees for director, the independent registered public accounting firm, and other matters regarding the Annual
Meeting. Included with this Proxy Statement is the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
The Board of Directors recommends that you vote “FOR” the election of the eleven directors nominated. The Board of
Directors recommends that you vote “FOR” ratification of the appointment by the Audit Committee of the Board of Directors of Moss Adams LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2024.
It is very important that as many shares as possible be represented at the meeting.
Whether or not you plan to attend the Annual Meeting, we respectfully ask that you sign and return the enclosed proxy in the postage–paid envelope as soon as possible.
So that we may
provide adequate seating and refreshments, please be sure to indicate whether or not you plan to attend the Annual Meeting in person by completing the bottom portion of the proxy form.
We look forward to seeing you at the meeting on May 14
th
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Sincerely,
Jeremiah Z. Smith
President and Chief Executive Officer
Enclosures
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 14, 2024
May 14, 2024
To the Shareholders of First Northern Community Bancorp:
The 2024 Annual Meeting of Shareholders of First Northern Community Bancorp (the “Company”) will be held at First
Northern Bank’s Operations Center located at 210 Stratford Avenue, Dixon, California 95620, on Tuesday, May 14, 2024, at 5:30 p.m., local time, to:
| 1. |
Elect the following eleven (11) directors, each to serve until the next Annual Meeting of Shareholders, until their successors are elected and qualified, or until an
individual director has reached the mandatory retirement age of 75 years (or, if approved by the Board of Directors, at the adjournment of the first meeting of the Board of Directors following his or her 75
th
birthday):
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Patrick R. Brady
Richard M. Martinez
Mark C. Schulze
John M. Carbahal Foy S. McNaughton Jeremiah Z. Smith
Gregory DuPratt
Sean P. Quinn
Louise A. Walker
Barbara A. Hayes Daniel F. Ramos
| 2. |
Ratify the appointment by the Audit Committee of the Board of Directors of Moss Adams LLP to act as the independent registered public accounting firm of First Northern
Community Bancorp for the fiscal year ending December 31, 2024.
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| 3. |
Act upon such other matters as may properly come before such meeting or any adjournment or postponement thereof.
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All of the above matters are more fully described in the accompanying Proxy Statement.
Shareholders of record at the close of business on March 28, 2024, are entitled to notice of and to vote at the Annual
Meeting or any postponement or adjournment thereof.
You are strongly encouraged to complete, sign, date and return as promptly as possible, the accompanying proxy card in
the return envelope provided for your use. The giving of such proxy will not affect your right to revoke such proxy prior to or during the meeting.
BY ORDER OF THE
BOARD OF DIRECTORS
BOARD OF DIRECTORS
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Patrick R. Brady
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Jeremiah Z. Smith
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Chairman of the Board
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President and Chief Executive Officer
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Dated: April 10, 2024
Table of Contents
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2024 Annual Meeting Of Shareholders
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1
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Voting Rights and Vote Required
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1
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Voting of Proxies—Quorum
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2
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Revocability of Proxy
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3
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Proposal 1 Nomination and Election of Directors
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3
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Nominees
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3
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Board Oversight of Risk Management
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7
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Committees of the Board of Directors of the Company and the Bank………………...……………………………………..…….................................................................................................................................................................................................................
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7
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Compensation Committee Report
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10
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Board of Directors Meetings
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11
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Director Independence
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11
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Director Compensation
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12
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Report of the Audit Commitee ……………..……..........................................................……..................................................................................................................................................................................................................................................................................
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14
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Pre-Approval Policy for Services Provided by our Independent Registered Public Accounting Firm
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15
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Security Ownership of Certain Beneficial Owners and Management
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16
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Executive Officers
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17
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Executive Compensation
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17
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Proposal 2 Ratification of the Appointment of the Company’s Independent Registered Public Accounting
Firm………………...……………………………………..……..................................................................................................................................
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30
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Transactions with Related Persons
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31
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Insider Lending Policy
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31
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Anti-Hedging Policy
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31
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Delinquent Section 16(A) Reports
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31
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Information Available to Shareholders
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31
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Shareholder Proposals
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32
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Other Matters
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33
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FIRST
NORTHERN COMMUNITY BANCORP
195 North First Street, Dixon, California 95620
195 North First Street, Dixon, California 95620
PROXY STATEMENT
2024 Annual Meeting Of Shareholders
This Proxy Statement is furnished to the shareholders of First Northern Community Bancorp (the “Company”) in
connection with the solicitation of proxies to be used in voting at the 2024 Annual Meeting of Shareholders of the Company to be held on May 14, 2024, at First Northern Bank’s Operations Center located at 210 Stratford Avenue, Dixon, California, at
5:30 p.m., local time, and at any adjournment or postponement thereof. The solicitation of proxies in the form accompanying this Proxy Statement is made by the Board of Directors of the Company, and the costs of such solicitation, including the
expense of preparing, assembling, printing, and mailing this Proxy Statement and the material used in this solicitation of proxies, will be borne by the Company. It is contemplated that proxies will be solicited through the mail, but officers and
staff of the Company may solicit proxies personally. The Company may, at its discretion, engage the services of a proxy solicitation firm to assist in the solicitation of proxies. The total expense of this solicitation will be borne by the Company
and will include reimbursement paid to brokerage firms and others for their expenses in forwarding soliciting material and such expenses as may be paid to any proxy solicitation firm engaged by the Company.
It is expected that this Proxy Statement and accompanying Notice will be mailed to shareholders on or about April
12, 2024.
A proxy for the Annual Meeting is enclosed. Any shareholder who executes and delivers a proxy has the right to
revoke it at any time before it is voted by delivering an instrument revoking it, or a duly executed proxy bearing a later date, to our Corporate Secretary at 195 North First Street, Dixon, California 95620. In addition, a proxy will be revoked if
the person executing the proxy is present at the Annual Meeting and advises the Chairman of his or her election to vote in person.
The proxy also confers discretionary authority to vote the shares represented thereby on any matter that was not
known at the time this Proxy Statement was mailed which may properly be presented for action at the Annual Meeting; action with respect to procedural matters pertaining to the conduct of the Annual Meeting; and election of any person to serve as a
director in lieu of a bona fide nominee named herein, if such nominee is unable or unwilling to serve.
UNLESS REVOKED, ALL SHARES REPRESENTED BY A PROPERLY EXECUTED PROXY RECEIVED IN TIME FOR THE MEETING WILL BE VOTED
AS SPECIFIED IN SUCH PROXY OR, IF NOT SPECIFIED, THEN IN FAVOR OF THE ELECTION OF THE ELEVEN NOMINEES TO THE BOARD OF DIRECTORS, AND IN FAVOR OF THE RATIFICATION OF THE APPOINTMENT BY THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF MOSS ADAMS LLP AS
THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 2024, AND IN THE DISCRETION OF THE PROXYHOLDERS WITH RESPECT TO ALL OTHER PROPOSALS PROPERLY BROUGHT BEFORE THE MEETING.
Voting Rights and Vote Required
Only shareholders of record at the close of business on the record date of March 28, 2024, will be entitled to vote
in person or by proxy at the Annual Meeting. On the record date, there were 15,550,731 shares of our common stock outstanding.
Shareholders of common stock of the Company are entitled to one vote for each share held, except that in the
election of directors, under California law and the Bylaws of the Company, each shareholder may be eligible to exercise cumulative voting rights for the election of directors and may be entitled to as many votes as shall equal the number of shares of
common stock of the Company held by such shareholder multiplied by the number of directors to be elected, and such shareholder may cast all of such votes for a single nominee or may distribute them among two or more nominees. No shareholder,
however, shall be entitled to cumulate votes (in other words, cast for any candidate a number of votes greater than the number of shares of common stock held by such shareholder multiplied by the number of directors to be elected) unless the name(s)
of the candidate(s) has (have) been placed in nomination prior to voting in accordance with Article III, Section 23 of the Company’s Bylaws (which requires that nominations made other than by the Board of Directors be made at least 30 and not more
than 60 days prior to any meeting of shareholders) and a shareholder has given notice to the Company of an intention to cumulate votes prior to the voting in accordance with Article II, Section 13 of the Company’s Bylaws. If any shareholder has
given such notice, all shareholders may cumulate their votes for candidates in nomination, in which event votes represented by proxies delivered pursuant to this Proxy Statement may be cumulated, in the discretion of the proxyholders, in accordance
with the recommendation of the Board of Directors. Discretionary authority to cumulate votes in such event is, therefore, solicited in this Proxy Statement.
1
The vote required to approve each proposal is as follows:
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1.
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In the election of directors, the eleven nominees receiving the highest number of votes will be elected.
It is required that all shareholders who hold their shares in “street name” provide voting instructions for nominees as brokerage firms, banks and other such nominees no
longer have discretionary authority to vote your shares for you; therefore, we respectfully request that you provide voting instructions to your broker, bank or other nominee if your shares are held in “street name”.
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2.
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Ratification of the appointment by the Audit Committee of the Board of Directors of the independent registered public accounting firm will
require the affirmative vote of a majority of the shares represented and voting at the Annual Meeting.
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If you hold your shares in street name, you must vote your shares in the manner prescribed by your brokerage firm, bank or other
nominee. Your brokerage firm, bank or other nominee has enclosed or otherwise provided a voting instruction card for you to use in directing the brokerage firm, bank or other nominee how to vote your shares. If you hold your shares in street name
and do not provide voting instructions to your broker or other nominee, your shares will be considered to be “broker non-votes” and will not be voted on any proposal on which your broker or other nominee does not have discretionary authority to
vote. Shares that constitute broker non-votes will be counted as present at the meeting for the purpose of determining a quorum. Your broker or other nominee has discretionary authority to vote your shares on the ratification of Moss Adams LLP as
our independent auditor. Brokers that have sent proxy soliciting materials to a beneficial owner but have not received voting instructions from the beneficial owner may nevertheless vote on routine matters, including the ratification of the
appointment by the Audit Committee of the Board of Directors of Moss Adams LLP as independent registered public accounting firm. If you hold your shares in street name and you want to vote in person at the Annual Meeting,
you must obtain a legal proxy
from your broker and present it at the Annual Meeting.
Voting of Proxies – Quorum
The shares of common stock of the Company represented by all properly executed proxies received in time for the
Annual Meeting will be voted in accordance with the shareholders’ choices specified therein; where no choices have been specified, the shares will be voted “FOR” each of the eleven (11) nominees for director recommended by the Board of Directors,
“FOR” the ratification of the appointment by the Audit Committee of the Board of Directors of Moss Adams LLP as the independent registered public accounting firm for the fiscal year ending December 31, 2024, and at the proxyholder’s discretion on
such other matters, if any, which may properly come before the Annual Meeting (including any proposal to adjourn the Annual Meeting). A majority of the shares entitled to vote, represented either in person or by a properly executed proxy, will
constitute a quorum at the Annual Meeting.
2
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.
Revocability of Proxy
A shareholder using the enclosed proxy may revoke the authority conferred by the proxy at any time before it is
exercised by delivering written notice of revocation or a duly executed proxy bearing a later date to the Secretary of the Company at our executive offices located at 195 North First Street, Dixon, California 95620, or by appearing and voting by
ballot in person at the Annual Meeting after advising the Chairman of the shareholder’s intention to do so.
Proposal 1
Nomination and Election of Directors
Nomination and Election of Directors
At the Annual Meeting it will be proposed to elect eleven (11) directors of the Company, each to hold office until
the next annual meeting, until their successors shall be elected and qualified, or until an individual director has reached the mandatory retirement age of 75 years (or, if approved by the Board of Directors, at the adjournment of the first meeting
of the Board of Directors following his or her 75
th
birthday). It is the intention of the proxyholders named in the enclosed proxy to vote such proxies (except those containing contrary instructions) for the eleven (11) nominees named
below. The eleven (11) nominees consist of all the incumbent directors of the Company.
The Board of Directors does not anticipate that any of the nominees will be unable or unwilling to serve as a
director of the Company, but if that should occur before the Annual Meeting, the proxyholders, in their discretion, upon the recommendation of the Company’s Board of Directors, reserve the right to substitute a nominee and vote for another person of
their choice in the place and stead of any nominee unable or unwilling to serve. The proxyholders 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 proxyholders may determine in their discretion, based upon the recommendation of the Board of Directors.
Nominees
The following table sets forth each of the nominees for election as a director, their age, their position with the
Company, and the period during which they have served as a director of the Company and the Bank.
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Name
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Age
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Position With The Company
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Director of Bank Since
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Director of The Company Since
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Patrick R. Brady
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71
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Chairman of the Board
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2013
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2013
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John M. Carbahal
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69
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Director
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1996
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2000
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Gregory DuPratt
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70
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Director
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1996
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2000
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Barbara A. Hayes
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60
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Director
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2016
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2016
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Richard M. Martinez
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68
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Director
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2011
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2011
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Foy S. McNaughton
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73
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Director
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2000
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2000
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Sean P. Quinn
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67
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Director – Vice Chairman of the Board
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2016
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2016
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Daniel F. Ramos
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66
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Director
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2020
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2020
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Mark C. Schulze
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53
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Director
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2017
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2017
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Jeremiah Z. Smith
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48
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President, Chief Executive Officer, and Director
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2023
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2023
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Louise A. Walker
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63
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Director
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2011
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2011
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3
Patrick R. Brady
retired as Chief Executive Officer of Sutter Roseville Medical Center in 2018. He had been involved with Sutter since 1981. Prior to assuming his role at Sutter Roseville, Mr. Brady served as the Chief Executive Officer of Sutter Solano Medical
Center (SSMC) for approximately six and a half years. Prior to SSMC, he served in a variety of executive level positions with Sutter Health in the greater Sacramento Area and in hospital management in Los Angeles, California and Tucson, Arizona.
Mr. Brady has a Bachelor of Science degree in Public Administration from the University of Arizona and a Master’s degree in Hospital Administration from the University of Minnesota. His professional activities include leadership roles in healthcare
associations and advocacy groups. He has participated actively in local and regional affairs through a variety of community boards. Mr. Brady’s service on boards both in the private and public sectors, and experience as a Chief Executive Officer,
has provided him with extensive knowledge and experience in financial management, corporate governance, and risk management. Mr. Brady is Chairman of the Board and the Nominating and Corporate Governance Committee, and a member of the Bank’s
Asset/Liability, Compensation, and Loan Committees.
John M. Carbahal
is a Certified Public Accountant and since 1984 has been a principal and shareholder of Carbahal & Company, Inc., an Accountancy Corporation. Mr. Carbahal received his undergraduate degree in Business Administration – Accounting from California
State University, Chico, and his Master of Business Administration from Golden Gate University. He is currently a member of the American Institute of Certified Public Accountants, as well as the California Society of Certified Public Accountants.
He is very involved in the community as a member of the Winters Rotary Club. He is a past board member of the Yolo County Land Trust, and past president of the Winters Rotary Club and the Yolo County Chamber of Commerce. Mr. Carbahal’s service on
boards both in the private and public sectors, and his experience as a Certified Public Accountant and owning his own company, has provided him with extensive knowledge and experience in financial management, corporate governance, risk management,
and auditing. Mr. Carbahal is Chairman of the Bank’s Audit Committee, and a member of the Bank’s Asset/Liability, Loan, and Nominating and Corporate Governance Committees.
Gregory DuPratt
served as Vice President/Sales Manager of Ron DuPratt Ford until 2014. The Dixon automobile dealership and family business was established in 1956. Prior to becoming Vice President, Mr. DuPratt worked in all phases of the dealership from the repair
shop to accounting, sales, and sales management. Mr. DuPratt graduated with honors from the University of Southern California with a Master of Business Administration. He is involved in the community as a member of the Dixon Rotary Club (past
President), Chamber of Commerce Board Member, Silveyville Cemetery District Board Member, and numerous Ad Hoc Committees. Mr. DuPratt’s management and marketing experience, in addition to his service on boards, has provided him with extensive
operational and oversight experience with regard to corporate governance, marketing, and management. Mr. DuPratt is a member of the Bank’s Asset/Liability, Compensation, Loan, and Nominating and Corporate Governance Committees.
Barbara A. Hayes
is
the Chief Economic Development Officer at Rural County Representatives of California (RCRC). RCRC represents 40 member counties, championing policies and promoting economic development that strengthens rural economies across California. She is past
President & CEO of the Sacramento Area Commerce and Trade Organization (SACTO), an economic development organization and business recruiter serving the six-county Sacramento Region. Ms. Hayes served 14 years as President and CEO, and six years
as Deputy Director, of SACTO. Prior to joining SACTO, Ms. Hayes held positions with the California Trade and Commerce Agency. She has extensive knowledge and experience with strategic visioning and planning, economic development, public policy and
legislative relations, marketing, and corporate communications. Ms. Hayes holds a Bachelor of Arts in International Relations and Economics from the University of California, Davis. She also completed coursework in accounting and business law at
Sacramento State University and holds a Public Service Ethics Certificate. Ms. Hayes serves as a corporate director with California Statewide Certified Development Corporation. Ms. Hayes is a member of the Bank’s Asset/Liability, Compensation,
Information Services Steering and Loan Committees.
Richard M. Martinez
is a partner in Triad Farms, a diversified row crop farm that operates property in Solano and Yolo Counties. He has been responsible for the financial management of the farming operations for over 30 years. From 1981 to 1985, Mr. Martinez was
employed by the Yolo County Flood Control and Water Conservation District in Yolo County and served as Division Manager for the Irrigation and Flood Control operations. Mr. Martinez received a Bachelor of Science Degree in Agriculture from
California State University, Chico. He served for 20 years as a director for the Dixon Resource Conservation District and also served as the Chairman for the Dixon Joint Powers Authority for regional drainage. Mr. Martinez remains active in many
agricultural and natural resources related associations and advisory committees. His experience in the management of both private and public sectors in the region has provided him with extensive knowledge of the local agriculture community. Mr.
Martinez is a member of the Bank’s Compensation, Loan, and Nominating and Corporate Governance Committee Committees.
4
Foy S. McNaughton
is the President and Chief Executive Officer of McNaughton Newspapers, a group of community newspapers that includes the Davis Enterprise, Daily Republic (Fairfield), Mountain Democrat (Placerville), Winters Express, and Life Newspapers (El Dorado
County). He has held this position since 1985 and also operates as the company’s CFO. His newspapers employ over 250 people in the local area. Mr. McNaughton has served on the board of directors of many community groups such as the Davis and
Fairfield Chambers of Commerce and Rotary Clubs. He is past president of the Travis Regional Armed Forces Committee, Sutter Davis Hospital, and the Fairfield Community Services Foundation. He has been a resident of Davis, California since 1973.
Mr. McNaughton’s service on boards of both private and public sector companies has provided him with broad financial knowledge and experience in marketing and advertising and extensive operational and oversight management. Mr. McNaughton is the
Chairman of the Bank’s Loan Committee and a member of the Bank’s Audit, and Information Services Steering Committees.
Sean P. Quinn
is the former City Manager for the City of Fairfield, where he served from 2007 to 2014 (and as Interim City Manager in 2019). Prior to that, Mr.
Quinn was the Director of Community Development for the City of Fairfield, where he oversaw planning, economic development, redevelopment, real estate, housing, business financing, and development planning/review. Mr. Quinn has owned his own small
business and worked for a firm that provided small business lending and industrial, commercial, and residential development. Mr. Quinn has also worked in economic forecasting. In 2021, Mr. Quinn served as the Interim President/CEO of Solano
Economic Development Corporation. Mr. Quinn received a Bachelor of Arts degree in Business Economics from University of California, Santa Barbara and did his graduate work in business at Chico State. Mr. Quinn is a founding member and past
president of the California Association for Local Economic Development, past chair of the State of California Economic Development Loan Advisory Committee and past president of the Solano Land Trust. Mr. Quinn is the past chair and current board
member at Paradise Valley Estates and is a past president and current board member of the Fairfield Community Services Foundation and serves on the North Bay Health Advantage Board. Mr. Quinn’s experience as City Manager and service on boards of
both private and public sector companies has provided him with broad financial knowledge, and experience in housing and real estate development, economic development, and risk management. Mr. Quinn is Chairman of the Bank’s Compensation Committee
and a member of the Bank's Audit, Loan, Nominating and Corporate Governance and Profit Sharing Committees.
Daniel F. Ramos
has
been involved in the commercial real estate industry in the Sacramento region for over 38 years. As Vice President of Ramco Enterprises/Ramco Properties LP., a Yolo County based real estate development company, he has been involved in all aspects of
real estate development services including project management, financing, leasing, income property sales, joint venture structuring and negotiations, property management, and commercial construction. As President of Ram Properties, Inc., he has also
been involved in real estate sales connected with that company. Mr. Ramos holds a Bachelor of Science in Business Administration – Real Estate Finance from the University of Southern California. In addition to serving on the First Northern Boards,
Mr. Ramos has served, or is serving, on the boards of Sacramento Metro Chamber of Commerce, West Sacramento Foundation, West Sacramento Economic Advisory Commission, Explorit! Science Center, Crocker Art Museum, Yolo Food Bank, and SACTO. He is also
serving as trustee of Reclamation District 900 and Reclamation District 827, and is past president of the Sutter Club, West Sacramento Chamber of Commerce, and West Sacramento Rotary Club. Mr. Ramos’ service on boards both in the private and public
sectors and his experience in land development has provided him with extensive knowledge and experience in marketing, real estate development, and management. Mr. Ramos is a member of the Bank’s Audit, Asset Quality and Loan Committees.
Mark C. Schulze
runs business and government affairs for FormLogic, an advanced manufacturing company focused on bringing software and AI to the world of machining. They focus on high
performance parts in the aerospace and astrospace industries. Mr. Schulze is a co-Founder of Clover Network, Inc. Clover is a leading payments processor and now a subsidiary of Fiserv, the world’s largest payment processor and one of the
largest credit card issuers. Mr. Schulze has been active in technology and financial services related companies for over 20 years. Mr. Schulze is also an active investor and limited partner in a number of technology funds and serves as an advisor
to companies within Orange’s technology incubator (France Telecom) as well as to companies within the 500 Startups portfolio. Mr. Schulze graduated from Bowdoin College with a Bachelor of Arts degree in Government. He has been a long-time
shareholder of the Company. Mr. Schulze’s experience with both private and public companies has provided him with extensive knowledge and experience with payments, marketing, and management. Mr. Schulze is a member of the Bank’s Audit and
Information Services Steering Committees.
5
Jeremiah Z. Smith
has served as President and Chief Executive Officer of the Company and its wholly-owned subsidiary, First Northern Bank, since January 1, 2023. He served as Senior Executive Vice President and Chief Operating Officer of First Northern from 2014 to
2022 and Executive Vice President and Chief Financial Officer from 2010 to 2014. Mr. Smith joined the Bank in 2003, was named Assistant Controller in 2005 and was promoted to Senior Vice President and Corporate Controller soon after. Mr. Smith
received a Bachelor of Science in Business Administration with a concentration in Finance from California State University, Sacramento. In 2008, Mr. Smith graduated from the Pacific Coast Banking School at the University of Washington in Seattle.
Mr. Smith is a member of the American Bankers Association (ABA) BankPac and Payment Systems Administrative Committees, a member of the California Bankers Association (CBA) Board, member and past chairman of CBA’s State Government Relations Committee
and a member of CBA’s Agricultural, Membership, and Federal Government Relations Committees. Mr. Smith is a board member for the Greater Sacramento Economic Council, Solano Economic Development Corporation, and the West Sacramento Chamber of
Commerce. He also is a member of the Sacramento Metro Chamber PAC and is chairman of the Placer Business Alliance’s advisory committee for Banking and Finance. Mr. Smith serves as chairman of the Community Reinvestment Coalition. He is also a
member of the Rotary Club of West Sacramento. He served as Honorary Commander of Travis Air Force Base from 2014 to 2016. Mr. Smith’s extensive service as a board member of both private and public organizations has provided him with extensive
knowledge and experience in the banking industry, financial management, risk management, and corporate governance. Mr. Smith is a member of the Bank’s Asset/Liability, Asset Quality, Loan, Information Services Steering, Compliance and Profit Sharing
Committees.
Louise A. Walker
served as President and Chief Executive Officer of the Company and First Northern Bank from 2011 through 2022. Ms. Walker joined First Northern Bank in 1979 and became a
member of Senior Management in 1989. During her career, she held a variety of positions, including Head of Operations and Data Processing and the oversight of Human Resources, Risk Management, Compliance, Accounting, and Finance. Prior to
assuming the position of President and Chief Executive Officer, Ms. Walker held the position of Senior Executive Vice President/Chief Financial Officer for 14 years. She has a Bachelor of Arts degree in Management from Saint Mary’s College of
California. Ms. Walker is a board member of Pacific Coast Bankers Bank and treasurer and member of the Executive Committee of the Board of Directors of Valley
Vision. Ms. Walker is also a member of American Banker Association’s Investment Advisory Committee and president of Lambda Alpha International, Sacramento Chapter and board member of the Sutter Club. She is also a member of the Finance Committee
of Yolo Food Bank and a member of the ERISA Trust Committee of California Bankers Association. She is past treasurer of American Bankers Association Board of Directors and is past Chairwoman and a member of the Board of Directors and Finance
Committee of the California Bankers Association, past board member of the Yolo Food Bank, a past board member of Roseville Community Development Corporation, a member of Dixon Rotary, and past president of Soroptimist International of Dixon. Ms.
Walker’s extensive service as a board member of both private and public organizations has provided her with extensive knowledge and experience in the banking industry, financial management, risk management, corporate governance, and marketing. Ms.
Walker is a member of the Bank’s Asset/Liability, Loan, Information Services Steering, Asset Quality, Compliance and Profit Sharing Committees.
None of the Directors of the Company was selected pursuant to arrangements or understandings other than with the
Directors and shareholders of the Company acting within their capacity as such. There are no family relationships between any of the directors, and none of the directors
serve as a director of any other 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.
6
Your Board of Directors Recommends a vote “FOR”
the election of the eleven directors nominated.
Board Oversight of Risk Management
The Board of Directors of the Bank is engaged in Bank-wide risk management oversight, which constitutes
substantially all of the assets of the Company. The Board of Directors of the Bank relies upon the Chief Executive Officer to supervise day-to-day risk management and bring to its attention the most material risks to the Bank. The Chief Executive
Officer provides reports directly to the Board of Directors of the Bank and certain of its committees, as appropriate. Directors may also from time to time rely on the advice of outside advisors and auditors provided they have a reasonable basis for
such reliance.
The Board of Directors of the Bank also delegates certain oversight responsibilities to its Board committees. The
full Board of the Bank considers strategic risks and opportunities and regularly receives detailed reports from the committees regarding risk oversight in their area of responsibility. For example, while the primary responsibility for financial and
other reporting, internal controls, compliance with laws and regulations, and ethics rests with the management of the Company and the Bank, the Audit Committee provides risk oversight with respect to our financial statements and our internal controls
over financial reporting. For a description of the functions of the various committees of the Board, see “Committees of the Board of Directors of the Company and the Bank” below.
Committees of the Board of Directors of the Company and the Bank
The Company does not have Audit, Nominating or Compensation Committees or committees performing similar functions.
However, the Board of Directors of the Bank has several standing committees, as discussed below, including Audit, Compensation, Loan, and Nominating and Corporate Governance committees, which perform the functions of such committees for the Company.
The Directors of the Company are also Directors of the Bank. As such, the Bank committees supervise and review the activities of the Bank, which constitute substantially all of the assets of the Company on a consolidated basis. The Audit Committee,
the Nominating and Corporate Governance Committee and the Compensation Committee have charters which are available for review on the Bank’s website at
www.thatsmybank.com
.
The Bank has a standing Asset/Liability Committee composed of Patrick R. Brady, John M. Carbahal, Gregory DuPratt,
Barbara A. Hayes, Jeremiah Z. Smith, and Louise A. Walker. Kevin Spink, Executive Vice President and Chief Financial Officer, is the Asset/Liability Committee Chairman. The Asset/Liability Committee reviews and oversees the management of the Bank’s
assets and liabilities. The Asset/Liability Committee held 4 meetings in 2023.
The Bank has a standing Audit Committee composed of John M. Carbahal, Foy S. McNaughton, Sean P. Quinn, Daniel F.
Ramos, and Mark C. Schulze. John M. Carbahal is the Audit Committee Chairman. The Audit Committee reviews and oversees the audit results for the Bank and our internal controls over financial reporting. The Audit Committee of the Bank held 5
meetings during 2023.
The Bank has a standing Asset Quality Committee composed of Daniel F. Ramos, Jeremiah Z. Smith, and Louise A.
Walker. Chaille James, Senior Vice President/Special Assets Manager, is the Committee Chairwoman. The Asset Quality Committee held 4 meetings during 2023 for the purpose of reviewing and monitoring asset quality in the Bank’s loan portfolio.
The Bank has a standing Compensation Committee composed of Patrick R. Brady, Gregory DuPratt, Barbara A. Hayes,
Richard M. Martinez, and Sean P. Quinn. Sean P. Quinn is the Compensation Committee Chairman. The Compensation Committee held 8 meetings during 2023 for the purpose of reviewing and recommending to the Bank’s Board of Directors the Bank’s
compensation objectives and policies and administering the Company’s stock plans.
The Bank has a standing Compliance Committee composed of Jeremiah Z. Smith and Louise A. Walker. Julie Robinson,
Senior Vice President/Compliance Manager, is the Compliance Committee Chairwoman. The Compliance Committee held 4 meetings during 2023 for the purpose of reviewing and monitoring the Bank’s compliance program policies and procedures.
7
The Bank has a standing Information Services Steering Committee composed of Barbara A. Hayes, Foy S. McNaughton,
Mark C. Schulze, Jeremiah Z. Smith, and Louise A. Walker. Denise Burris, Executive Vice President/Chief Information Officer, is the Information Services Steering Committee Chairwoman. The Committee held 3 meetings during 2023 for the purpose of
reviewing and monitoring bankwide information technology issues and safety according to the Information Services Department policies and procedures.
The Bank has a standing Loan Committee composed of Patrick R. Brady, John M. Carbahal, Gregory DuPratt, Barbara A.
Hayes, Richard M. Martinez, Foy S. McNaughton, Sean P. Quinn, Daniel F. Ramos, Jeremiah Z. Smith, and Louise A. Walker. Foy S. McNaughton is the Loan Committee Chairman. The Loan Committee held 21 meetings during 2023 for the purpose of approving
loans and loan policy.
The Bank has a standing Profit Sharing Committee composed of Sean P. Quinn, Jeremiah Z. Smith, and Louise A.
Walker. The Profit Sharing Committee held 4 meetings during 2023 for the purpose of considering plan administration and investments.
The Bank has a standing Nominating and Corporate Governance Committee composed of Patrick R. Brady, John M.
Carbahal, Gregory DuPratt, Richard M. Martinez, and Sean P. Quinn. Patrick R. Brady is the Nominating and Corporate Governance Committee Chairman. The Nominating and Corporate Governance Committee held 2 meetings during 2023 for the purpose of
considering corporate governance best practices which includes environmental and social issues and to review and nominate potential candidates for directors of the Bank and the Company as needed. This Committee fulfills the responsibilities of a
director nominating committee for the Company. The Nominating and Corporate Governance Committee operates under a written charter which is available for review on the Bank’s website at www.thatsmybank.com.
The Nominating and Corporate Governance Committee will consider candidates nominated by the Company’s shareholders,
directors, officers, and from other external sources. The Company does not have a formal policy with regard to the consideration of diversity in identifying Director nominees, but the Nominating and Corporate Governance Committee strives to nominate
Directors with a variety of complementary attributes so that, as a group, the Board of Directors will possess the appropriate talent, skills, and expertise to oversee our business. In evaluating candidates, the Board of Directors considers the
attributes of the candidate (including skills, experience, diversity, age, legal and regulatory requirements, and those from underrepresented groups), and the needs of the Board of Directors, and will review all candidates in the same manner,
regardless of the source of the recommendation.
The Board of Directors will consider candidates nominated by the shareholders of the Company if the nomination is
made in writing in accordance with the procedures for nominating Directors of the Company, as described herein. These nomination procedures are designed to give the Board of Directors advance notice of competing nominations, if any, and the
qualifications of nominees, and may have the effect of precluding third–party nominations if the nomination procedures are not followed.
Pursuant to Article III, Section 23 of the Bylaws of the Company, director nominations, other than those made by the
Board of Directors, shall be made by notification in writing delivered or mailed to the President of the Company, not less than 30 days or more than 60 days prior to any meeting of shareholders called for election of directors. The provision also
requires that the notice contain detailed information necessary to determine if the nominee is qualified under our Bylaws. Under our Bylaws, no person may be a member of the Board of Directors:
|
•
|
who has not been a resident for a period of at least two years immediately prior to his or her election of a county in which
any subsidiary of the Company maintains an office, unless the election of such person is approved by the affirmative vote of at least two-thirds of the members of the Board of Directors of the Company then in office;
|
|
•
|
who owns, together with his or her family residing with him or her, directly or indirectly, more than one percent of the
outstanding shares of any banking corporation, affiliate or subsidiary thereof, bank holding company, industrial loan company, savings bank or association or finance company, other than the Company or any affiliate or subsidiary of the
Company;
|
|
•
|
who is a director, officer, employee, agent, nominee, or attorney of any banking corporation, affiliate, or subsidiary
thereof, bank holding company, industrial loan company, savings bank or association or finance company, other than the Company or any affiliate or subsidiary of the Company (subject to certain exceptions); or
|
|
•
|
who has or is the nominee of anyone who has any contract, arrangement or understanding with any banking corporation, or
affiliate or subsidiary thereof, bank holding company, industrial loan company, savings bank or association or finance company, other than the Company or any affiliate or subsidiary of the Company (a “covered entity”), or with any officer,
director, employee, agent, nominee, attorney or other representative of such covered entity, that he or she will reveal or in any way utilize information obtained as a director of the Company or that he or she will, directly or indirectly,
attempt to effect or encourage any action of the Company.
|
8
Nominations not made in accordance with the procedures set forth in the Company’s Bylaws may, in the discretion of
the Chairman of the Annual Meeting, be disregarded, and, upon his or her instruction, the inspector(s) of election shall disregard all votes cast for such nominee(s). A copy of Sections 22 and 23 of Article III of the Company’s Bylaws may be
obtained by sending a written request to: Ms. Devon Camara-Soucy, Corporate Secretary, First Northern Community Bancorp, 195 North First Street, Dixon, California 95620.
The Bank has several other committees that meet on an as-needed basis.
If you wish to communicate with the Board of Directors, you may send correspondence to the Corporate Secretary,
First Northern Community Bancorp, 195 North First Street, Dixon, California 95620. The Corporate Secretary will submit your correspondence to the Board of Directors or the appropriate committee, as applicable.
9
Compensation Committee Report
Role of the Compensation Committee
The Compensation Committee’s purpose is to (a) review and recommend compensation objectives and policies to the
Board of Directors, (b) administer the Bank’s and the Company’s stock plans, long-term incentive plans and certain employee benefit plans, (c) review and recommend to the Board the compensation of the Chief Executive Officer, and review and approve
compensation for the Bank’s other named executive officers, (d) provide oversight and manage risks relative to all the Company’s incentive plans and (e) produce a Compensation Committee Report for inclusion in the Company’s proxy statement for its
annual meeting of shareholders.
The Compensation Committee also periodically reviews the compensation levels of the Board of Directors. In its
review, the Compensation Committee looks to ensure that the compensation is fair, reasonably competitive, and commensurate to the responsibilities of both the individual directors as well as the Board in the aggregate.
Subject to the requirements of applicable law, the Compensation Committee may designate persons other than its
members to carry out its responsibilities under the Company’s incentive plans (including the selection of and the granting of awards under the plans to participants), except that the Compensation Committee may not delegate its authority with regard
to the selection for participation of, or the granting of awards under the plans to, persons subject to Section 16 of the Securities Exchange Act of 1934.
The Charter of the Compensation Committee is available on the Company’s website (www.thatsmybank.com) and is also
available in print upon request (submit requests for copies of the Charter to First Northern Community Bancorp, Attn: Investor Relations, 195 North First Street, P.O. Box 547, Dixon, CA 95620).
Role Of The Compensation Consultant
In 2023, the Compensation Committee directly engaged Aon’s Human Capital Solutions practice, a division of Aon plc (otherwise known as
McClagan) (“McClagan”) as its external compensation consultant. McLagan helped facilitate the executive compensation process and provided information and guidance on various executive compensation and governance topics during the year. McLagan
reported directly to the Compensation Committee, which has the authority, in its sole discretion, to retain any advisor to assist in the performance of its duties or to terminate any advisor to the Compensation Committee. The Compensation Committee
determined that McLagan is independent and that there is no conflict of interest resulting from retaining McLagan during 2023 after taking into account the factors set forth in the SEC rules.
Say on Pay Vote
At our 2023 Annual Meeting of Shareholders, we conducted a non-binding shareholder advisory vote on the compensation of our named
executive officers (commonly known as a "say-on-pay" vote). Our shareholders approved the say-on-pay proposal with 7,842,207 votes for, or 92.32%, 141,661 votes against, and 510,924 abstentions. We believe this result demonstrates that our
shareholders are generally supportive of our executive compensation program. As the Compensation Committee has reviewed our executive compensation policies and practices since the 2023 say-on-pay vote, it has been mindful of the level of support
our shareholders have expressed for our approach to executive compensation. As such, following our annual review of our executive compensation program, the Compensation Committee decided to retain its general approach to executive compensation.
10
Compensation Philosophy
The Compensation Committee uses competitive compensation data from the annual total compensation analyses of peer
companies and our market to inform its decisions about overall compensation opportunities and specific compensation elements. Additionally, the Compensation Committee uses multiple reference points when establishing targeted compensation levels. As
part of this consideration, the Compensation Committee reviews peer data at the 25
th
, 50
th
and 75
th
percentiles as reference points. The Committee does not benchmark specific compensation elements or total
compensation to any specific percentile relative to the peer companies or the broader regional and United States markets. Instead, the Compensation Committee obtains input from our independent compensation consultant, McLagan, and applies judgment
and discretion in establishing targeted pay levels, taking into account not only competitive market data, using a peer group generally comprised of similarly sized banks in our region, but also factors such as Company, business and individual
performance, scope of responsibility, critical needs and skill sets, leadership potential and succession planning.
Role of Executive Officers in Compensation Committee Deliberations
The Compensation Committee frequently requests the Chief Executive Officer and other named executive officers to be
present at Compensation Committee meetings to discuss executive compensation. Executive officers in attendance may provide their insights and suggestions, but only independent Compensation Committee members may vote on decisions regarding executive
compensation.
The Compensation Committee discusses the Chief Executive Officer’s compensation with the Chief Executive Officer,
but final deliberations and all votes regarding the Chief Executive Officer’s compensation are made in executive session, without the Chief Executive Officer present. The Compensation Committee also reviews and approves the Chief Executive Officer’s
recommendations and input from the compensation consultant regarding the other named executive officers’ compensation. Named executive officers are not present when the Compensation Committee deliberates and makes decisions about their compensation.
Board of Directors Meetings
In 2023, the Board of Directors of the Bank held 10 regularly scheduled meetings, and 4 joint meetings with the
Board of Directors of the Company. Each Director attended at least 75% of the aggregate of: (1) the total number of meetings of the Boards of Directors held during the period for which he or she has been a director; and (2) the total number of
meetings of committees of the Boards of Directors on which he or she served during the period for which he or she served. The Company has a policy to encourage Directors to attend the Annual Meeting. All but one of the Directors up for election
attended the Annual Meeting of Shareholders in 2023.
Director Independence
The Board of Directors has determined that (1) a majority of the Company’s directors, (2) each member of the Compensation Committee, (3)
each member of the Audit Committee, and (4) each member of the Nominating and Corporate Governance Committee, is “independent” under the applicable standards set forth in the Nasdaq listing rules. The Board of Directors has determined that all
directors except Mr. Smith and Ms. Walker are independent under the applicable standards set forth in the Nasdaq listing rules.
The Board of Directors does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board
as the Board believes it is in the best interest of the Company to make that determination based on the position and direction of the Company and the membership of the Board. The Board has determined that having an independent director serve as
Chairman is in the best interest of the Company’s shareholders at this time. This structure ensures a greater role for the independent directors in the oversight of the Company and active participation of the independent directors in setting agendas
and establishing Board priorities and procedures. Further, this structure permits the Chief Executive Officer to focus on the management of the Company’s day-to-day operations.
11
Director Compensation
2023 Director Compensation Tables
|
Fees earned or paid in cash
|
|
|
Name
|
($)
(1)
|
|
Patrick R. Brady
|
36,700
|
|
John M. Carbahal
|
34,000
|
|
Gregory DuPratt
|
31,000
|
|
Barbara A. Hayes
|
33,000
|
|
Richard M. Martinez
|
30,500
|
|
Foy S. McNaughton
|
32,000
|
|
Sean P. Quinn
|
35,400
|
|
Daniel F. Ramos
|
31,000
|
|
Mark C. Schulze
|
27,500
|
|
Louise A. Walker
|
30,500
|
|
1.
|
Each director who is not an officer or employee of the Company or the Bank received $1,500 for each
jointly-held and regularly scheduled meeting of the Boards of Directors attended, with the exception of the Board Chairman, who received $1,900. In addition, Directors receive $400 per special meeting of the Board of Directors, and $500 per
Committee meeting attended with the Chair of the Committee receiving $600 per meeting, with the exception of the Audit Committee Chair, who receives $700 per meeting. In addition, each Director received a $5,500 retainer fee, with the
exception of the Chairman of the Board, who received a $6,500 retainer fee. Mr. Smith was an employee, and he received no additional compensation for his services as a Director for 2023.
|
The Company has Director Retirement Agreements with each of its non-employee Directors with the exception of
Directors who joined the Company after February 2011. For retirement on or after the normal retirement age of 65, the Director Retirement Agreements provide a benefit for 10 years ranging from $10,000 annually for a director with 10 years of service
to a maximum of $15,000 annually for a director with 15 or more years of service, including years of service prior to the effective date of the Director Retirement Agreements. As of January 1, 2023, there were three active directors who had served
more than 15 years in such capacity and were eligible for director retirement benefits. Benefits under the Director Retirement Agreements are payable solely to those directors who have served for at least 10 years, unless the director terminates
service because of death or disability or unless the director’s service terminates within two years after a change in control. There were no positive accruals under the Director Retirement Agreements in 2023.
In the case of early termination of a director’s service before age 65 for reasons other than death or disability
or within two years after a change in control, he or she will receive over a period of 10 years aggregate payments equal to the retirement-liability balance accrued by the Company at the end of the year before the year in which the director’s service
terminated. However, early termination benefits will not be payable unless the director is at least 55 years of age and has served as a director for at least 10 years, including years of service prior to the effectiveness of the Director Retirement
Agreements. If a director becomes disabled before age 65, the director will receive a lump-sum payment in an amount equal to the retirement-liability balance accrued by the Company at the end of the year before the year in which disability occurred,
regardless of whether the director has 10 years of service or has reached age 55. If a change in control occurs and a director’s service terminates within 24 months after the change in control, the director will receive a lump-sum payment equal to
the retirement-liability balance accrued by the Company at the end of the year before the year in which termination occurred, regardless of whether the director has 10 years of service or has reached age 55. For this purpose, the term “change in
control” means:
12
|
•
|
A merger occurs and, as a consequence, the Company’s shareholders immediately prior to the merger own less than 50% of the
resulting company’s voting stock immediately after the merger;
|
|
•
|
A beneficial ownership report is required to be filed under the Securities Exchange Act of 1934 by a person (or group of
persons acting in concert) to report ownership of 20% or more of the Company’s voting securities; or
|
|
•
|
During any period of two consecutive years, individuals who constituted the Company’s Board of Directors at the beginning of
the two-year period cease for any reason to constitute a majority of the Board. Directors elected during the two-year period are treated as if they were directors at the beginning of the period if they were nominated by a vote of at least
two-thirds of the Directors in office at the beginning of the period.
|
No retirement income benefits are payable under the Director Retirement Agreements to a Director’s
beneficiaries after the Director’s death. A Director forfeits all benefits under the Director Retirement Agreement if his or her Director service terminates because of neglect of duties, commission of a felony or misdemeanor, or acts of fraud,
disloyalty, or willful violation of significant Bank policies, or if the Director is removed from office by order of the Federal Deposit Insurance Corporation.
The Company has also purchased insurance policies on the lives of the Directors who entered into Director
Retirement Agreements prior to 2011, paying the premiums for all of these insurance policies with one lump-sum premium payment of approximately $2.15 million. The Company expects to recover the premium in full from its portion of the policies’ death
benefits. The Company purchased the policies as an informal funding mechanism for the post-retirement payment obligations under the Director Retirement Agreements. Although the Company expects these policies to serve as a source of funds for
benefits payable under the Director Retirement Agreements, the contractual entitlements arising under the Director Retirement Agreements are not funded and remain contractual liabilities of the Company, payable on or after each Director’s termination
of service.
Under the Split Dollar Agreements and Split Dollar Policy Endorsements with the Directors, which were entered into
on the same date the Director Retirement Agreements were executed, the policy benefits are divided between the Company and each Director. The Split Dollar Agreements provide that a Director’s designated beneficiary(ies) will be entitled to receive at
the Director’s death life insurance proceeds in the amount of:
(a) $120,000 if the Director dies before age 72,
(b) $60,000 if the Director dies after reaching age 72 but before age 75, and
(c) $30,000 if the Director dies thereafter.
Following payment of such life insurance proceeds, the Director’s beneficiary(ies) would receive
no further benefits under the Director Retirement Agreement, and the Company’s obligations under that agreement would be extinguished. The Company is entitled to any insurance policy death benefits remaining after payment of the amount indicated
above to the Director’s beneficiary(ies).
Director Non-Qualified Deferred Compensation
The Company has implemented an elective Deferred Director Fee Plan, a nonqualified voluntary plan providing
unfunded deferred benefits for participating directors. During 2023, no Director elected to defer their director fees.
Respectfully submitted,
Compensation
Committee
Sean P. Quinn, Chairman
Patrick R. Brady
Sean P. Quinn, Chairman
Patrick R. Brady
Gregory DuPratt
Barbara A. Hayes
Richard M. Martinez
Richard M. Martinez
13
Report of The Audit Committee
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 its independent registered public accounting firm to review the scope of their work as well as to review quarterly and annual financial statements and regulatory and public disclosures
with the officers in charge of financial reporting, control, and disclosure functions. After reviewing the independent registered public accounting firm’s qualifications, partner rotation and independence, the Audit Committee appoints the
independent registered public accounting firm subject to shareholder ratification, if required or sought. In addition, the Audit Committee reviews reports of examination conducted by regulatory agencies and follows up with management concerning any
recommendations and required corrective action, or to assess the Company’s internal control over financial reporting.
The Audit Committee reports regularly to the Board 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, as outlined in the Audit
Committee Charter (available for review on the Bank’s website at www.thatsmybank.com) approved annually by the Bank’s Board of Directors, the Audit Committee of the
Bank acts only 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 Company’s independent registered public accounting firm,
who, in their report, express an opinion on the conformity of the Company’s annual financial statements to generally accepted accounting principles.
In connection with the December 31, 2023 financial statements of the Company, the Audit Committee of the Bank: (1)
reviewed and discussed the audited financial statements with management; (2) discussed with the Company’s independent registered public accounting firm the matters required by Statement on Auditing Standards No. 61, (3) received the written
disclosures and the letter from the Company’s independent registered accounting firm required by Independence Standards Board Standard No. 1, and (4) has discussed with the Company’s independent registered public accounting firm such firm’s
independence. Based upon these reviews and discussions, the Audit Committee of the Bank recommended to the Board of Directors that the audited financial statements of the Company be included in the Company’s Annual Report on Form 10-K filed with the
Securities and Exchange Commission (“SEC”) for the fiscal year ended December 31, 2023.
Notwithstanding anything to the contrary set forth in any of the Company’s previous or future filings under the
Securities Act of 1933 or the Securities Exchange Act of 1934 that might incorporate this Proxy Statement or future filings with the SEC, in whole or in part, this report of the Audit Committee of the Bank’s Board of Directors shall not be deemed to
be incorporated by reference into any such filings except to the extent that it is specifically incorporated by reference therein.
The Audit Committee of the Bank’s Board of Directors consists of five members who are each “independent directors,”
under the standards set forth in the Nasdaq listing rules. The Board of Directors has determined that Mr. Carbahal and Mr. McNaughton are audit committee financial experts under the rules of the SEC.
Respectfully submitted,
Audit Committee
John M. Carbahal, Chairman
Foy S. McNaughton
Foy S. McNaughton
Sean P. Quinn
Daniel F. Ramos
Mark C. Schulze
Daniel F. Ramos
Mark C. Schulze
14
Audit and Non–Audit Fees
Audit Fees
The total fees billed by Moss Adams LLP for professional services rendered for the audit of the Company’s financial
statements for fiscal year 2023 and the reviews of financial statements included in the Company’s Forms 10-Q during 2023 were $380,602. The total fees billed by Moss Adams LLP for professional services rendered for the audit of the Company’s
financial statements for fiscal year 2022 and the reviews of the financial statements included in the Company’s Forms 10-Q during 2022 were $333,121. Moss Adams LLP provided no other permitted non-audit services other than audit services during 2023
and 2022.
Audit-Related Fees
The total fees billed by Moss Adams LLP for assurance and related services that are reasonably related to the
performance of the audit and review of the Company’s quarterly and annual financial statements, including audits of financial statements of certain employee benefit plans, review of registration statements, and permitted internal audit outsourcing,
for fiscal years 2023 and 2022 were $52,500 and $43,500, respectively.
Tax Fees
Moss Adams LLP provided no tax services to the Company for the 2023 and 2022 fiscal years.
All Other Fees
No other fees were billed by Moss Adams LLP for fiscal years 2023 and 2022.
The Audit Committee of the Bank considered whether the provision of the services other than the audit services is
compatible with maintaining Moss Adams LLP’s independence.
Pre-Approval Policy for Services
Provided by
our Independent Registered Public Accounting Firm
our Independent Registered Public Accounting Firm
The Audit Committee has adopted a policy for pre-approval of audit and permitted non-audit services by the
Company’s independent registered public accounting firm. The Audit Committee will consider annually and, if appropriate, approve the provision of audit services by the Company’s independent registered public accounting firm 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. All of the
services described above under “Audit Fees” and “Audited-Related Fees” were approved by the Audit Committee pursuant to legal requirements and the Audit Committee’s charter and pre-approval policy. There were no permitted non-audit services
performed by Moss Adams LLP in 2023.
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 the Audit Committee’s next regular meeting. The Audit Committee will regularly review summary reports detailing all services being provided by the Company’s independent registered public accounting firm.
15
Security Ownership of Certain Beneficial Owners and Management
As of December 31, 2023, and based upon filings with the Securities and Exchange Commission, Fourthstone LLC,
Fourthstone Master Opportunity Fund Ltd., Fourthstone GP LLC, Fourthstone QP Opportunity Fund LP, Fourthstone Small-Cap Financials Fund LP, and L. Phillip Stone, IV, 926, 226 shares, 6.29%; M3 Funds, LLC, M3 Partners, LP, and M3F, Inc., collectively
reported holding 837,922 shares of the Company’s common stock, which represented 5.695% of the shares then outstanding; and Banc Fund VIII L.P. Banc Fund IX L.P., and Banc Fund X L.P. collectively reported holding 882,651 shares of the Company’s
common stock, which represented 5.99% of the shares then outstanding. The foregoing were the only three persons or groups known to the Company to own beneficially more than 5% of the Company’s common stock.
The figures in the table are based on beneficial ownership as of February 29, 2024 and have been adjusted for a 5% stock dividend paid
by the Company on March 25, 2024, to shareholders of record on February 29, 2024. Except as indicated in footnotes and subject to community property laws, where applicable, the individuals named in the table have sole voting and investment power
with respect to all shares of common stock shown as beneficially owned by them.
|
Name
|
Shares beneficially owned
|
Shares acquirable within 60 days by exercise of options
|
Percent of
stock |
|
Patrick R. Brady
(1)
|
7,573
|
0
|
*
|
|
John M. Carbahal
(2)
|
94,261
|
0
|
*
|
|
T. Joe Danelson
(3)
|
69,769
|
81,153
|
1.02%
|
|
Gregory DuPratt
(4)
|
121,143
|
0
|
*
|
|
Barbara A. Hayes
|
11,818
|
0
|
*
|
|
Richard M. Martinez
(5)
|
71,352
|
0
|
*
|
|
Foy S. McNaughton
(6)
|
103,095
|
0
|
*
|
|
Sean P. Quinn
(7)
|
6,333
|
0
|
*
|
|
Daniel F. Ramos
(8)
|
367
|
0
|
*
|
|
Mark C. Schulze
|
675,666
|
0
|
4.59%
|
|
Jeremiah Z. Smith
(9)
|
102,635
|
153,605
|
1.74%
|
|
Kevin Spink
|
42,230
|
51,757
|
*
|
|
Louise A. Walker
(10)
|
191,631
|
133,589
|
2.21%
|
|
All directors and executive officers as a group (13 people)
|
1,497,873
|
420,104
|
13.02%
|
_________________________
* Less than 1%.
* Less than 1%.
| (1) |
Shares held jointly with Mr. Brady’s spouse.
|
| (2) |
Includes 23,320 shares held jointly with Mr. Carbahal’s spouse, 46,225 shares held by the Carbahal & Company An Annual Accountancy Company, of which Mr. Carbahal is
a principal and partner, 3,180 shares held separately by Mr. Carbahal’s spouse, and 8,444 shares held by John M. Simmons Irrevocable Family Trust, of which Mr. Carbahal is co-trustee and has voting power with respect to such shares.
|
| (3) |
Includes 31,089 shares held by The Danelson Loving Trust, of which Mr. Danelson is a co-trustee and shares voting and investment power with respect to such shares.
|
| (4) |
Includes 17,981 shares held separately by Mr. DuPratt’s spouse.
|
| (5) |
Includes 8,675 shares held separately by Mr. Martinez’s spouse.
|
| (6) |
Includes 63,589 shares held by The McNaughton Family Trust, of which Mr. McNaughton is a co-trustee and shares voting and investment power with respect to such shares.
|
| (7) |
Shares held jointly with Mr. Quinn’s spouse.
|
| (8) |
Shares held jointly with Mr. Ramos’s spouse.
|
| (9) |
Includes 19,997 shares held jointly with Mr. Smith’s spouse and 1,432 shares held by Mr. Smith as custodian for his children.
|
| (8) |
Includes 54,411 shares held jointly with Ms. Walker’s spouse.
|
16
Executive Officers
Set forth below is certain information regarding our fiscal year end 2023 named executive officers and their titles as of December 31,
2023.
|
Name and Title
|
Age
|
Principal Occupation During the Past Five Years
|
|
Jeremiah Z. Smith, President, Chief Executive Officer,
Director |
48
|
Senior Executive Vice President, Chief Operating Officer and Chief Financial Officer of the Company and the Bank from October 2014 to February 2018.
Senior Executive Vice President and Chief Operating Officer since February 2018 to December 31, 2022, and President, Chief Executive Officer and Director of the Company and the Bank since January 1, 2023.
|
|
T. Joe Danelson, Executive Vice President, Chief Credit Officer
Kevin Spink, Executive Vice President, Chief
Financial Officer |
66
45 |
Executive Vice President and Chief Credit Officer of the Company and the Bank from January 2015 to March 31, 2024. Mr. Danelson retired from his
position as Executive Vice President and Chief Credit Officer effective March 31, 2024.
Executive Vice President and Chief Financial Officer of the Company and the Bank since February 2018 to present.
|
Executive Compensation
In 2023, the Company achieved strong results financially, operationally, and in community focused efforts.
|
•
|
The Company reported record annual net income of $21.6 million for 2023, a 35.7% increase compared to net income of $15.9
million for 2022.
|
|
•
|
Fully diluted annual earnings per share of $1.41 for 2023, an increase of 35.6% compared to fully diluted earnings per share
of $1.04 for 2022.
|
|
•
|
Our financial results were in large part a result of continued loan growth, including the Bank achieving a milestone as a
billion-dollar lender during 2023, and the corresponding improvements to our earning asset mix.
|
|
o
|
Total net loans were $1.05 billion as of December 31, 2023, an 8.5% increase from $970.1 million as of December 31,
2022.
|
|
o
|
Yields on total loans improved to 5.19% for 2023, an improvement of 57 basis points or 12.3% over the yield of 4.62%
earned in 2022.
|
|
o
|
The Company also recognized a substantial paydown on a non-performing agricultural loan relationship during 2023. This
paydown resulted in a recovery totaling $2.0 million, including $1.3 million in back interest and $0.7 million in non-interest expense recoveries.
|
|
•
|
Our asset sensitive balance sheet, continued loan growth, strong deposit base and the increasing interest rate environment
drove record net interest income of $66.5 million for 2023, an increase of 21.7% from $54.7 million in 2022.
|
|
o
|
Net interest margin was 3.70% for 2023, which was a 20.9% or 64 basis point improvement from the 3.06% reported for
the prior year.
|
|
o
|
Yield on earning assets was 4.12% for 2023, an improvement of 100 basis points or 32.1% when compared to the yield of
3.12% earned in 2022.
|
17
We continued to manage our fundings costs in a challenging rate environment. Total cost of deposits remained low at 0.43% for 2023
compared to 0.07% reported for the prior year.
Operationally, Management executed on several key fronts:
|
•
|
Management successfully completed the acquisition of three new branches in Colusa, Willows and Orland on January 20, 2023,
and the Company assumed total deposits of $116 million and acquired total loans of $4 million upon closing. As a result of purchase accounting applied, the Company recognized a gain on bargain purchase of $1.4 million from the acquisition.
|
|
•
|
Approved and paid a 5% stock dividend payable on March 25, 2023, to shareholders of record as of February 28, 2023.
|
|
•
|
Launched Q2 marketplace, including Autobooks, in our online banking app. Autobooks is an online accounting solution that
helps our small business customers with electronic invoicing, online payment acceptance, invoice tracking and small business accounting.
|
|
•
|
Continued our branch modernization and transformation efforts with the completion of the remodel of our Fairfield Branch.
|
|
•
|
Upgraded the Company’s stock trading platform from the OTCQB® Venture Market to the OTCQX® Best Market (“OTCQX”). Graduating
to the OTCQX marks an important milestone for the Company, as it should provide more transparent trading and improved access to company information for shareholders. The Company began trading on the OTCQX on December 19, 2023.
|
In community focused efforts, Management continued to work to improve the communities we serve:
|
•
|
In line with our commitment to social responsibility our 2023 employee engagement activities were selected locally by each
location for needs in the local communities we serve. Organizations of the 2023 efforts were: Bethel Community Church, Center for Land Based Learning, Colusa County Office of Education Children’s Services, Dixon Community Medical Clinic,
Dixon Family Services, Elk Grove Food Bank, Food Bank of Contra Costa & Solano County, Food Literacy Center, Habitat for Humanity, Hills Church, Keaton’s Child Cancer Alliance, Meals on Wheels, Orland Police VIPS, Pink Lemonade, Placer
Breast Cancer Foundation, Point Pleasant United Methodist Church, Putah Creek Council, Rise, Inc., Shelter Solano, Tree Davis, Willows Car & Bike Association, Women’s Empowerment, Woodland Food Closet, and Yolo Food Bank.
|
|
•
|
The Bank chairs the Greater Sacramento Economic Council’s Community Reinvestment Coalition. The Coalition is comprised of
three local banks that are committed to focusing on the needs of our communities, including increasing the amount of affordable housing options and promoting financial literacy, work force training and upskilling.
|
The first initiative of the Coalition was to help address the affordable housing needs in the greater Sacramento
region by working collaboratively to make a larger impact on this important issue.
The coalition recently came together to finance the construction and development of an 82 unit low-to-moderate
income housing development in Rancho Cordova including both debt financing as well as direct investment as a limited partner as part of a low-income housing tax credit partnership. The project is currently under construction.
18
|
•
|
Continued the Bank’s commitment to our employees’ long-term financial wellbeing in our profit-sharing plan. Under the terms
of this plan, a portion of the Bank’s profits, as determined by the Board of Directors, is set aside, and maintained in a trust fund for the benefit of qualified employees.
|
|
•
|
Provided Financial Education Outreach Programs to improve financial literacy in our communities.
|
|
•
|
The Bank continued its partnership with Cristo Rey High School, to give junior and senior students the opportunity for an
internship and mentoring at the Company.
|
19
The following table sets forth, for the years ended December 31, 2023, and December 31, 2022, a summary of the compensation earned by
the Chief Executive Officer, and the Company’s two most highly compensated executive officers, other than the Chief Executive Officer, who earned over $100,000 in total compensation in 2023.
Summary Compensation Table
|
Name and Principal Position
|
Year
|
Salary
($) (1) |
Bonus
($) (2) |
Stock
Awards
($)
(3)
|
Option
Awards
($)
(3)
|
Non-Equity Incentive Plan Compensation ($)
(4)
|
All
Other
Compensation
($)
(5)
|
Total ($)
|
|||||||||||||||||||||
|
Jeremiah Z. Smith
President, Chief Executive Officer and Director of the Bank and Company
|
2023
|
475,000
|
—
|
135,928
|
—
|
198,379
|
227,427
|
1,036,734
|
|||||||||||||||||||||
|
2022
(6)
|
330,939
|
—
|
59,356
|
58,507
|
111,295
|
134,289
|
694,386
|
||||||||||||||||||||||
|
T. Joe Danelson
(7)
Executive Vice President, Chief Credit Officer of the Bank and Company
|
2023
|
320,000
|
—
|
74,635
|
—
|
100,128
|
96,805
|
591,568
|
|||||||||||||||||||||
|
2022
|
278,250
|
—
|
89,892
|
—
|
79,663
|
72,025
|
519,830
|
||||||||||||||||||||||
|
Kevin Spink
Executive Vice President, Chief Financial Officer of the Bank and Company
|
2023
|
286,440
|
—
|
86,112
|
—
|
89,627
|
62,485
|
524,664
|
|||||||||||||||||||||
|
2022
|
260,400
|
—
|
40,708
|
40,074
|
74,553
|
46,299
|
462,034
|
||||||||||||||||||||||
| 1. |
Includes amounts contributed to the Company’s Profit Sharing/401(k) Plan at the election of the named executive officers.
|
| 2. |
No discretionary bonuses were paid in 2023 and 2022.
|
| 3. |
Amounts shown do not reflect compensation actually received by the named executive officer. Instead, the amounts reported in the “Stock Awards” and “Option Awards”
columns represent the aggregate grant date fair value of stock awards and option awards granted in the respective fiscal years, as determined in accordance with Accounting Standards Codification 718. The grant date fair market value for
stock options is based on certain assumptions that are explained in Note 15 to the Company’s financial statements for the year ended December 31, 2023, which are included in the Company’s 2023 Annual Report on Form 10-K.
|
| 4. |
Amounts listed in this column represent bonuses paid under the Company’s Non-Equity Incentive Compensation Plan for each respective year. These amounts are not
reported in a separately identified Bonus column because the awards are tied to corporate performance objectives for each respective year. Payments made with respect to each year’s respective performance are paid in March of the following
year. See “Non-Equity Incentive Plan and Bonus Compensation” below.
|
| 5. |
Includes Company funded non-qualified deferred compensation benefits and retirement profit sharing contributions made by the Company in 2023 and 2022. Jeremiah Z.
Smith received non-qualified deferred compensation benefits of $142,500 and $74,989 and retirement profit sharing contributions of $62,485 and $46,299 for 2023 and 2022, respectively. T. Joe Danelson received non-qualified deferred
compensation benefits of $48,000 and $31,525 and retirement profit sharing contributions of $48,805 and $40,500 for 2023 and 2022, respectively. Kevin Spink received retirement profit sharing contributions of $62,485 and $46,299 for 2023 and
2022, respectively. The aggregate amount of perquisites and other personal benefits or property in 2023 and 2022 are listed in the table below.
|
6.
In 2022, Mr. Smith was Senior Executive Vice President/Chief Operating Officer.
| 7. |
Mr. Danelson retired from his position as Executive Vice President, Chief Credit Officer
of the Bank and Company effective as of March 31, 2024.
|
20
|
Name
|
Year
|
Auto Expense ($)
|
Cell Phone Reimbursement ($)
|
Club Dues
($)
|
Profit Sharing ($)
|
Deferred Compensation ($)
|
All
Other
Compensation
($)
|
||||||||||||||||||
|
Jeremiah Z. Smith
|
2023
|
4,944
|
90
|
17,408
|
62,485
|
142,500
|
227,427
|
||||||||||||||||||
|
2022
|
3,682
|
360
|
8,959
|
46,299
|
74,989
|
134,289
|
|||||||||||||||||||
|
T. Joe Danelson
|
2023
|
—
|
—
|
—
|
48,805
|
48,000
|
96,805
|
||||||||||||||||||
|
2022
|
—
|
—
|
—
|
40,500
|
31,525
|
72,025
|
|||||||||||||||||||
|
Kevin Spink
|
2023
|
—
|
—
|
—
|
62,485
|
—
|
62,485
|
||||||||||||||||||
|
2022
|
—
|
—
|
—
|
46,299
|
—
|
46,299
|
|||||||||||||||||||
Perquisites
The Company provides named executive officers with a limited number of perquisites that it believes are reasonable and consistent with our overall compensation program to better enable us to attract and retain superior employees for key
positions. Our Compensation Committee periodically reviews the levels of perquisites and other personal benefits provided to NEOs. Mr. Smith utilizes an automobile purchased by the Bank. Please refer to the footnotes to the Summary Compensation
Table above for other perquisites provided to our NEOs.
Narrative to Summary Compensation Table
Named Executive Officers
The Summary Compensation Table and the table which follows provide compensation information for
Mr. Smith as the President and Chief Executive Officer and Mr. Danelson and Mr. Spink, each of whom are the two most highly compensated executive officers of the Company, other than the Chief Executive Officer, receiving more than $100,000 in total
compensation during 2023.
21
Non-Equity Incentive Plan and Bonus Compensation
The Company uses annual incentives to focus attention on current strategic priorities and drive
achievement of short-term corporate objectives. Awards are provided under the terms of the Company’s Incentive Compensation Plan. All executive officers are eligible to receive annual cash incentive compensation at the end of each year if
performance goals are achieved.
The 2023 award metrics were approved in December 2022 and were contingent on Company performance
relative to Asset Quality, Efficiency Ratio, Return on Equity, and Overall Quality Loan Growth, which were each weighted at 25%. Overall Quality Loan Growth was defined as total net loans excluding loans held for sale and loans made under the SBA’s
Paycheck Protection Program (“PPP”).
The table below shows the non-equity incentive metrics at threshold, target, and maximum, as well
as the actual result and payout percentage for each metric:
|
2023 Non-Equity Incentive Metrics
|
|||||||||||||||||||||
|
Category
|
Performance Measure
|
Threshold
|
Target
|
Max
|
Actual Result
|
Payout
Percentage |
|||||||||||||||
|
Asset Quality
|
Total Classified Assets to Total Risk Based Capital
|
15.0
|
%
|
10.0
|
%
|
5.0
|
%
|
10.75
|
%
|
10.62
|
%
|
||||||||||
|
Efficiency Ratio
|
Cumulative Efficiency Ratio
|
62.3
|
%
|
59.3
|
%
|
57.5
|
%
|
58.41
|
%
|
18.68
|
%
|
||||||||||
|
Return on Equity
|
Return on Average Equity (excluding accumulated other comprehensive income)
|
9.5
|
%
|
10.5
|
%
|
11.6
|
%
|
11.94
|
%
|
25.0
|
%
|
||||||||||
|
Quality Loan Growth
|
Overall Loan Growth (excluding Paycheck Protection Program Loans)
|
10.0
|
%
|
12.5
|
%
|
15.0
|
%
|
8.59
|
%
|
0
|
%
|
||||||||||
After taking into account the weighting of all metrics, the Compensation Committee determined that
the annual Company incentive objectives for 2023 were achieved to the degree sufficient to pay out the dollars set aside in the accrual. The Company reserves the right to exercise discretion on payout levels after performance levels have been
certified. No discretion was exercised.
The table below shows threshold, target, and maximum bonus opportunity as well as each named
executive officer’s actual award as a percentage of salary. The Company made the cash payments identified in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.
|
2023 Non-Equity Incentive Opportunity as % of Salary
|
||||||||||||||||
|
Name
|
Threshold
|
Target
|
Max
|
Actual 2023
Award as a Percentage of Salary
|
||||||||||||
|
Jeremiah Z. Smith
|
0
|
%
|
40.0
|
%
|
60.0
|
%
|
41.76
|
%
|
||||||||
|
T. Joe Danelson
|
0
|
%
|
30.0
|
%
|
45.0
|
%
|
31.29
|
%
|
||||||||
|
Kevin Spink
|
0
|
%
|
30.0
|
%
|
45.0
|
%
|
31.29
|
%
|
||||||||
In 2023, the Board exercised its discretion not to pay a discretionary bonus because the
non-equity incentive plan compensation was determined to be sufficient.
22
Stock Option and Restricted Stock Awards
In 2023, the three named executive officers received grants of stock options and/or restricted
stock awards under the Company’s 2016 Stock Incentive Plan. Stock option and restricted stock awards are in line with the Company’s compensation philosophy, which is designed to retain executive management, reward long-term contributions to the
Company and align executives with shareholder interests. All stock options awarded to named executive officers during 2023 vest and become exercisable with respect to 25% of the underlying shares at the end of the first year and an additional 25% at
the each of the next three years thereafter. All restricted stock awards to named executive officers during 2023 cliff vest on the earlier of the fourth anniversary of the date of grant or upon normal retirement (normal retirement is defined as age
65 or later).
The numbers of stock options and restricted stock granted and exercise prices with respect to 2023 awards and
detail regarding the number of options and restricted stock held by each named executive officer at year-end is set forth below in the 2023 Outstanding Equity Awards at Fiscal Year-End Table. The long-term incentives are awarded on a discretionary
basis. The named executive officers are eligible to receive long-term incentive awards annually. The value of the awards is generally based on the Company’s overall success and individual contributions toward these results, as well as market and
industry best practices. When making awards, it is the Company’s practice to award a combination of stock options and restricted stock to the named executive officers, but there is no prescriptive methodology to determining the number of each type
of share to grant.
At the Annual Meeting of Shareholders held on May 19, 2015, the Company’s shareholders approved the First Northern Community Bancorp
2016 Stock Incentive Plan. At the Annual Meeting of Shareholders held on May 18, 2021, the Company’s shareholders approved an amendment to the 2016 Stock Incentive Plan to increase the total number of shares authorized for issuance under the Plan by
500,000 shares. All option grants and restricted stock awards to named executive officers in 2023 and 2022 were made under the 2016 Stock Incentive Plan.
Employment Agreements
The Bank entered into an employment agreement with Mr. Smith effective as of January 1, 2023. The agreement had an
initial one-year term which renews automatically for consecutive one-year terms, unless the executive officer or the Bank gives advance notice that the agreement will not renew. Pursuant to such terms, the employment agreement was extended on
December 31, 2023, to December 31, 2024. The employment agreement provides for an annual base salary of $475,000, to be adjusted annually, where appropriate. Upon an involuntary termination without cause (as defined therein) or termination for good
reason (as defined therein) outside of a change of control period, Mr. Smith will receive, in a lump sum, 150% of the sum of (i) his annual base salary as of the date of termination and (ii) the average of the annual bonuses awarded to him for the
three most recent consecutive years prior to termination, as well as continued health coverage for himself and his dependents for up to 36 months. Upon an involuntary termination without cause or termination for good reason or the Bank’s election
not to extend the term of his employment agreement within two years following a change of control, Mr. Smith will receive, in a lump sum, 250% of the sum of (i) his annual base salary as of the date of termination and (ii) the average of the annual
bonuses awarded to him for the three most recent consecutive years prior to the date of termination, continued health coverage for himself and his dependents for up to 36 months and outplacement assistance.
Mr. Danelson has a change in control agreement which is in place of a full employment agreement, described below
under “– Change of Control Agreements”.
During the 2023 fiscal year, Mr. Spink did not have an employment or change in control agreement in place.
23
Supplemental Executive Retirement Agreements
The Company has entered into Supplemental Executive Retirement Plan Agreements (“SERPs”) with Mr. Smith and Mr.
Spink. In 2006, the Board changed the manner in which retirement benefits are provided to certain executive officers. The Board’s intent was to coordinate the various forms of retirement benefits provided to executives in order to enhance internal
equity and to better target the overall level of retirement benefits provided. The result was the adoption of a new SERP that provides a total benefit of 50% of average compensation from three sources: social security retirement benefits, the profit
sharing plan, and the new SERP. Mr. Smith and the Company entered into the new SERP agreement in 2011. In connection with Mr. Smith’s appointment as the Chief Executive Officer, the Company entered into an amendment of Mr. Smith’s SERP agreement,
effective January 1, 2023. Mr. Spink and the Company entered into the new SERP agreement on August 1, 2017.
The SERP benefit is calculated using 3-year average salary plus 7-year average bonus (average compensation). For
each year of service, the benefit formula credits 2% of average compensation up to a maximum of 50%. Therefore, for an executive serving 25 years, the target benefit is 50% of average compensation.
The SERP target benefit is reduced for other forms of retirement income. Reductions are made for 50% of the social
security benefit expected at age 65 (age 62 under the amended SERP agreement for Mr. Smith) and for the accumulated value of contributions the Bank makes to the executive’s profit sharing plan. For purposes of this reduction, contributions to the
profit sharing plan are accumulated each year at a 3-year average of the yields on 10-year treasury securities. Retirement benefits are paid monthly for 120 months plus 6 months for each full year of service over 10 years, up to a maximum of 180
months.
The SERP agreements provide for reduced benefits in the case of early retirement (the later of the executive
officer’s 55
th
birthday or the age at which the executive officer has at least 10 years of service with the Company). The early commencement factor is 1.0 minus the product of 0.41667% multiplied by the number of full calendar months that
early retirement precedes age 65 (age 62 under the amended SERP agreement for Mr. Smith). Benefits are also payable in the event of death, disability, or termination within 24 months following a change in control.
Eligibility to participate in the SERP is limited to a select group of management or highly compensated employees
of the Bank that are designated by the Board.
Profit Sharing/401(k) Plan and Trust
The Company has an interest in providing financial security and retirement savings opportunities to its employees and views its
retirement plans as a means of attracting and retaining employees in a competitive labor market. To accomplish these goals, the Company sponsors a Profit Sharing/401(k) Plan and Trust Agreement pursuant to which the Company makes annual
profit-sharing contributions as determined by the Bank’s Board of Directors depending on the profitability of the Bank during the year, subject to certain limitations on contributions under the Internal Revenue Code (“IRC”) and the Profit Sharing
Plan.
Employees with a minimum of one year of service with the Company are eligible to participate in the profit sharing portion of the Profit
Sharing Plan. The Company’s profit sharing contribution is allocated among participating employees, including the named executive officers, in the proportion which each participant’s covered compensation for the fiscal year bears to the total
compensation for all participating employees for such year, subject to statutory limits. Contributions to a participant’s account vest after six years, and participants may receive distributions from their profit sharing accounts only upon retirement
(or age 59 ½), termination of employment, disability, or death.
The Company generally contributes annually to the Profit Sharing Plan an amount equal to 10% of the Company’s
pre-tax, pre-provision net income, adjusted for net loan loss experience. This contribution is made annually at the discretion of the Board of Directors.
24
Other Plans and Benefits
Non-Qualified Deferred Compensation Plan
Consistent with the desire to provide retirement and savings opportunities for a select group of executive management and highly
compensated employees, the Company provides a deferred compensation plan for its named executive officers called the “2001 Executive Deferral Plan.” This plan provides a way to offset the effect of tax law limitations on benefits under tax-qualified
plans. The plan is a nonqualified plan providing the named executive officers with an unfunded, deferred compensation program. Under the plan, the named executive officers may elect to voluntarily defer a portion of their current compensation until
termination of employment, subject to certain exceptions. Payments generally commence the month following termination at Normal Retirement, or six (6) months following if
necessary to comply with Section 409A. Deferred amounts earn interest at an annual rate determined by the Bank’s Compensation Committee and approved by the Board of Directors. In 2023, deferred amounts earned interest at 5.10%,
representing 120% of the Applicable Federal Rate. In 2023, no executives elected to voluntarily defer any compensation.
In 2017, the Compensation Committee evaluated and approved the implementation of a performance-based, Company funded non-qualified
deferred compensation benefit for two of its named executive officers, Mr. Smith and Mr. Danelson. The benefits fall under the Company’s 2001 Executive Deferral Plan, which was amended as of July 20, 2017, to allow for Company contributions on behalf
of a select group of management and highly compensated employees. The individual benefits became effective on August 1, 2017. The purpose of the benefits is to recognize the contributions of these select key executives to the Company, to drive
continued and future business results, and to serve as a retention vehicle for their continued employment. The benefits are performance-based in that the Compensation Committee annually establishes and approves performance metrics at the beginning of
each performance period, and no contributions are made to the Executive Deferral Plan unless the goals are achieved, or discretion is exercised. The 2023 performance metric approved by the Committee was Return on Average Equity excluding unrealized
gains or losses. The target for this metric was 10.5%. Company contributions are based on a percentage of base salary and range from 0% to 15% of base salary for Mr. Danelson and from 0% to 30% of base salary for Mr. Smith. Company contributions
are eligible to earn the same interest paid on voluntary deferred contributions. Company contributions and any interest earned are subject to vesting requirements.
|
2023 Non-Qualified Deferred Compensation Plan Opportunity as % of Salary
|
||||||||||||||||
|
Performance Measure
|
Threshold
|
Target
|
Max
|
Actual Result
|
||||||||||||
|
Return on Average Equity % (before unrealized gains/losses)
|
9.5
|
%
|
10.5
|
%
|
11.6
|
%
|
11.94
|
%
|
||||||||
|
2023 Non-Qualified Deferred Compensation Plan Opportunity as % of Salary
|
||||||||||||||||
|
Name
|
Threshold
|
Target
|
Max
|
Actual 2023
Award as a Percentage of Salary
|
||||||||||||
|
Jeremiah Z. Smith
|
0
|
%
|
20.0
|
%
|
30.0
|
%
|
30.0
|
%
|
||||||||
|
T. Joe Danelson
|
0
|
%
|
10.0
|
%
|
15.0
|
%
|
15.0
|
%
|
||||||||
These contributions provide supplementary executive retirement/retention awards that vest and become payable upon the first of the
following events to occur: continued employment with the Company to age 65, death while an employee of the Company, disability while an employee of the Company, an involuntary termination from the Company without Cause or voluntary termination for
Good Reason, or a termination within 24 months of a Change in Control (as each such term is defined under the Executive Deferral Plan). Upon his appointment as Chief Executive Officer, Mr. Smith entered into the First Amendment to Executive Participation Agreement, effective January 1, 2023, pursuant to which Mr. Smith became 50% vested in his award as of January 1, 2023 and will become fully vested in the
remaining balance of his award upon his 62
nd
birthday, so long as he remains employed with First Northern Bank of Dixon and has achieved
certain performance goals.
25
Change of Control Agreements
The Company provides certain named executive officers with agreements that provide certain specified benefits upon
a change in control of the Company. These agreements endeavor to help the Company retain key employees by providing those executives some certainty in compensation in the event the Company is acquired, and also help to ensure that the Company will
have the benefit of its named executive officers during and through the consummation of any merger. For more information, please refer to “Employment Agreements” above.
In January 2015, the Bank entered into a Change of Control Agreement with Mr. Danelson. Pursuant to the agreement,
upon an involuntary termination without cause (as defined therein) or resignation due to change of control (as defined therein) within six (6) months following the Bank’s formal approval of a Change of Control (as defined therein), Mr. Danelson will
receive in a lump sum, 200% of the sum of (i) his annual base salary on the date of the change of control and (ii) the average of the annual bonuses awarded to him for the three most recent consecutive years prior to the change of control, and
continued health coverage for himself and his dependents for up to 24 months, and possible outplacement assistance.
26
2023 Outstanding Equity Awards at Fiscal Year-End*
The following table sets forth information regarding outstanding equity-based awards, including the potential dollar
amount realizable with respect to each award.
|
Option Awards
|
Stock Awards
|
||||||||||||||||||||
|
Name
|
Number of
Securities
Underlying
Unexercised
Options
(#) Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#) Unexercisable
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number of Shares or Units of Stock That Have Not Vested
(#)
(3)
|
Market Value of Shares or Units of Stock That Have Not Vested
($)
(4)
|
|||||||||||||||
|
Jeremiah Z. Smith
|
5,645
|
-
|
4.64
|
02/21/2024
|
35,314
|
300,015
|
|||||||||||||||
|
15,671
|
-
|
5.05
|
02/16/2025
|
||||||||||||||||||
|
15,671
|
-
|
5.40
|
02/17/2026
|
||||||||||||||||||
|
17,272
|
-
|
8.29
|
02/12/2027
|
||||||||||||||||||
|
21,583
|
-
|
9.72
|
02/12/2028
|
||||||||||||||||||
|
27,611
|
-
|
8.50
|
02/20/2029
|
||||||||||||||||||
|
36,647
|
12,212
|
(1)
|
9.21
|
02/18/2030
|
|||||||||||||||||
|
6,935
|
20,807
|
(2)
|
9.30
|
03/29/2032
|
|||||||||||||||||
|
T. Joe Danelson
|
11,952
|
-
|
8.29
|
02/12/2027
|
26,974
|
229,164
|
|||||||||||||||
|
15,105
|
-
|
9.72
|
02/12/2028
|
||||||||||||||||||
|
18,406
|
-
|
8.50
|
02/20/2029
|
||||||||||||||||||
|
27,037
|
9,012
|
(1)
|
9.21
|
02/18/2030
|
|||||||||||||||||
|
Kevin Spink
|
2,087
|
-
|
9.72
|
02/12/2028
|
22,366
|
190,023
|
|||||||||||||||
|
14,994
|
-
|
8.50
|
02/20/2029
|
||||||||||||||||||
|
22,441
|
7,480
|
(1)
|
9.21
|
02/18/2030
|
|||||||||||||||||
|
4,754
|
14,266
|
(2)
|
9.30
|
03/29/2032
|
|||||||||||||||||
*The figures in the table above are based on data as of December 31, 2023 and have been adjusted for a 5% stock
dividend paid by the Company on March 25, 2024, to shareholders of record on February 29, 2024.
| 1. |
All remaining unexercisable options will vest and become exercisable on February 18, 2024.
|
| 2. |
Remaining unexercisable options will vest and become exercisable in three equal installments on March 29, 2024, March 29, 2025, and March 29, 2026.
|
| 3. |
These awards represent time based restricted stock awards that vest in their entirety on the fourth anniversary of grant date. These awards were granted on February
19, 2020, February 19, 2021, February 16, 2022, and February 23, 2023.
|
| 4. |
The fair value was determined using the closing price of the Company’s stock on December 31, 2023, adjusted for a 5% stock dividend paid by the Company on March 25,
2024, to shareholders of record on February 29, 2024. The adjusted closing stock price on that date was $8.50.
|
27
Pay Versus Performance
As required by Item 402(v) of Regulation S-K, we are providing the following information regarding the relationship between executive compensation and our
financial performance for each of the last two completed calendar years. In determining the “compensation actually paid” to our named executive officers (“NEOs”), we are required to make various adjustments to amounts that have been previously
reported in the Summary Compensation Table (the “SCT”) in previous years to reflect the estimated value of equity awards as of the end of the fiscal year or, if earlier, the vesting date. Note that compensation for our NEOs other than our Chief Executive Officer (“CEO”) is reported as an average.
|
Year
|
Summary Compensation Table (SCT) Total for CEO
(1)
|
Compensation Actually Paid to CEO
(2)
($)
|
Average SCT Total for
Non-CEO NEOs
(1)
($)
|
Average Compensation Actually Paid to Non-CEO
NEOs
(2)
($)
|
Value of $100 Initial Fixed Investment Based on Total Shareholder Return (“TSR”)
($)
|
Net Income
($)
|
||||||||||||||||||
|
2023
|
1,014,292
|
1,095,586
|
557,714
|
605,710
|
96
|
21,554
|
||||||||||||||||||
|
2022
|
1,200,372
|
1,087,346
|
600,608
|
530,272
|
88
|
15,884
|
||||||||||||||||||
|
1.
|
The CEO for 2023 is Jeremiah Z. Smith. The CEO for 2022 was Louise A. Walker. Other named executive officers for 2023 include T. Joe Danelson,
Executive Vice President/Chief Credit Officer and Kevin Spink, Executive Vice President, Chief Financial Officer. Other named executive officers for 2022 included Jeremiah Z. Smith, former Senior Executive Vice President, Chief Operating
Officer and T. Joe Danelson, Executive Vice President/Chief Credit Officer.
|
|
2.
|
SEC rules require certain adjustments be made to the SCT totals to determine “compensation actually paid” as reported in the Pay versus
Performance table. The following table details these adjustments more specifically:
|
|
Year
|
Executive
|
SCT Total
($)
|
Subtract Amount Reported in “Stock Awards” Column of SCT
($)
|
Add Value of Outstanding and Unvested Equity Awards that were Granted in Current Year
($)
|
Add (Subtract) Change In Value of Equity Awards Outstanding and Unvested at the end of the Current Year
that were Granted in a Prior year
($)
|
Add (Subtract) Change in Value of Equity Awards Vested in the Current Year that were Granted in a Prior
Year
($)
|
Subtract Value of Equity Awards that Failed to Meet Vesting Conditions
($)
|
Compensation Actually Paid
($)
|
|||||||||||||||||||||
|
2023
|
CEO
|
$
|
1,014,292
|
$
|
(135,928
|
)
|
$
|
142,310
|
$
|
64,049
|
$
|
10,863
|
$
|
-
|
$
|
1,095,586
|
|||||||||||||
|
Non-CEO NEOs
|
557,714
|
(80,374
|
)
|
84,147
|
36,898
|
7,326
|
-
|
605,710
|
|||||||||||||||||||||
|
2022
|
CEO
|
$
|
1,200,372
|
$
|
(397,282
|
)
|
$
|
353,298
|
$
|
(77,482
|
)
|
$
|
8,440
|
$
|
-
|
$
|
1,087,346
|
||||||||||||
|
Non-CEO NEOs
|
600,608
|
(103,878
|
)
|
72,135
|
(46,928
|
)
|
8,335
|
-
|
530,272
|
||||||||||||||||||||
28
29
Proposal 2
Ratification of the Appointment of the Company’s Independent
Registered Public Accounting Firm
Ratification of the Appointment of the Company’s Independent
Registered Public Accounting Firm
At the Annual Meeting a vote will be taken on a proposal to ratify the appointment of Moss Adams LLP by the Audit
Committee of the Board of Directors to act as the independent registered public accounting firm of the Bank and the Company for the fiscal year ending December 31, 2024. Although the appointment of independent public accountants is not required to
be approved by shareholders, the Audit Committee believes shareholders should participate in such selection through ratification.
It is anticipated that a representative of Moss Adams LLP will be present at the Annual Meeting and will have the
opportunity to make a statement if he or she desires and will be available to respond to appropriate questions.
Ratification of the appointment by the Audit Committee of the Board of Directors of the independent registered
public accounting firm will require the affirmative vote of a majority of the shares represented and voting at the Annual Meeting.
Your Board of Directors Recommends a vote “FOR” Ratification of the
Appointment of Moss Adams LLP by the Audit Committee of the
Board of Directors as the Bank’s and the Company’s Independent Registered
Public Accounting Firm for the Fiscal Year Ending December 31, 2024.
30
Transactions with Related Persons
Certain directors and 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 2023 and 2022. Such loans were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons. These loans did not involve more than the normal risk of collectability or present other unfavorable features.
Insider Lending policy
The Board of Directors of the Company has a written insider lending policy that covers all officers, directors and
“control persons” who have substantial share ownership or other control over election of directors. Loans to insiders must be on terms that are substantially the same as those made to non-insiders, as demonstrated by the submission to the loan
officer of at least three comparable non-insider loans that are comparable, including with respect to interest rates and collateral. Extension of credit to insiders must be approved by the Board of Directors and be recommended by the Bank’s
Management Loan Committee and Directors Loan Committee. Insider loans are also subject to maximum percentage and dollar limits. The Board of Directors has not adopted a related party transactions policy with regard to transactions other than
loans. Company personnel are expected under the Company’s code of ethics to make immediate disclosure of situations that might create a conflict of interest, or the perception of a conflict of interest, which includes transactions involving entities
with which such personnel are associated. The Board of Directors recognizes that related party transactions present a heightened risk of conflicts of interest and/or improper valuation (or the perception thereof). Such transactions, after full
disclosure of the material terms to the Board, must be approved by the members of the Board who are not parties to the specific transaction to determine that they are just and reasonable to the Company at the time of such approval, with those members
of the Board (if any) who have an interest in the transaction abstaining. Such procedures are consistent with the terms of California corporate law.
Anti-Hedging Policy
The Company’s Code of Conduct, which applies to all employees, officers and directors, prohibits speculative trading, including short
sales (a purchase and sale within 6 months) and trading in puts, calls and other options, with respect to the Company’s securities.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act, as administered by the SEC, requires the Company’s directors and executive
officers and persons who own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock of the Company. Executive officers,
directors and greater than ten percent shareholders are required by the SEC to furnish the Company with copies of all Section 16(a) forms they file. Based solely upon a review of such reports, the Company believes that all reports required by
Section 16(a) of the Exchange Act to be filed by its executive officers and directors during the last fiscal year were filed on a timely basis.
Information Available to Shareholders
A copy of First Northern Community Bancorp’s Annual Report on Form 10-K for the Fiscal
Year Ended December 31, 2023, as filed with the Securities and Exchange Commission, is included with this mailing. additional copies will be furnished without charge to Shareholders upon written request to: Devon Camara-Soucy, Corporate Secretary,
First Northern Community Bancorp, 195 North First Street, Dixon, California 95620.
31
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
SHAREHOLDER MEETING:
SHAREHOLDER MEETING:
THE PROXY STATEMENT AND ANNUAL REPORT ON FORM 10-K TO SHAREHOLDERS ARE AVAILABLE AT:
WWW.THATSMYBANK.COM
First Northern Community Bancorp is required to file periodic reports and other information with the SEC under the
Securities Exchange Act of 1934 and rules thereunder. Copies of the public portions of reports to the SEC may be inspected and copied at the headquarters of the SEC, 450 Fifth Street, NW, Washington, D.C. 20549. Certain information is available
electronically at the SEC’s internet web site at
www.sec.gov
. You can also obtain a copy of the Company’s annual report on Form 10-K, this Proxy Statement
and other periodic filings with the SEC through our website at
www.thatsmybank.com
. The link to the Company’s SEC filings is on the Investor Relations page
of the Company’s website. No information contained on our website is incorporated by reference into this Proxy Statement.
Shareholder Proposals
Under the rules of the SEC, if a shareholder wants to include a proposal in the Company’s proxy statement and form
of proxy for presentation at the 2025 annual meeting of shareholders, the proposal must be received by the Company at its principal executive offices by December 16, 2024.
Under the Company’s Bylaws, certain procedures are provided which a shareholder must follow to nominate persons for
election as directors or to introduce an item of business at an annual meeting of shareholders.
Nomination of directors must be made by notification in writing delivered or mailed to the President of the Company
at the Company’s principal executive offices not less than 30 days or more than 60 days prior to any meeting of shareholders called for the election of directors and must contain certain information about the director nominee. The Company’s annual
meeting of shareholders is generally held in April or May. If the Company’s 2025 annual meeting of shareholders that is due to be held May 13, 2025, is held on schedule, the Company must receive notice of any nomination no earlier than March 14,
2025, and no later than April 13, 2025. The Chairman of the meeting may disregard the nomination of any person not made in compliance with the foregoing procedures.
Notice of any business item proposed to be brought before an annual meeting by a shareholder must be received by
the Secretary of the Company not less than 70 days or more than 90 days prior to the first anniversary of the preceding year’s annual meeting, unless the date of the 2024 annual meeting is advanced by more than 20 days or delayed by more than 70 days
in which case notice must be received not more than 90 days and not less than the later of 70 days prior to the meeting or 10 days after the public announcement of the meeting date. Assuming no such advance or delay, the Company must receive notice
of any proposed business item no earlier than February 12, 2025, and no later than March 4, 2025. If the Company does not receive timely notice, the Company’s Bylaws preclude consideration of the business item at the annual meeting. With respect to
notice of a proposed item of business, the Bylaws provide that the notice must include a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and certain information
regarding the shareholder giving the notice.
A copy of the Company’s Bylaws may be obtained upon written request to the Secretary of the Company at the
Company’s principal executive offices.
32
Other Matters
The management of the Company is not aware of any other matters to be presented for consideration at the Annual
Meeting or any adjournments or postponements thereof. If any other matters should properly come before the Annual 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.
|
By Order of the Board of Directors
|
|
|
|
Jeremiah Z. Smith
|
|
President and Chief Executive Officer
|
33
Operations Center Map
TABLE OF CONTENTS