INFORMATION ON DIRECTOR AND EXECUTIVE COMPENSATION
Executive Compensation
Compensation Discussion and Analysis
This Compensation Discussion and Analysis describes our executive compensation philosophy and objectives. The tables that follow present the compensation for 2015 to our named executive officers. When we refer to the named executive officers, we mean the following five individuals:
Randall S. Eslick,
President and Chief Executive Officer (our Principal Executive Officer)
James A. Sundquist,
Executive Vice President and Chief Financial Officer (our Principal Financial and Accounting Officer)
Samuel D. Jimenez,
Executive Vice President and Chief Operating Officer
Robert H. Muttera,
Executive Vice President and Chief Credit Officer
Robert J. O’Neil,
Senior Vice President and Chief Credit Administrator
(1)
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(1)
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Mr. O’Neil served as Senior Vice President and Regional President, Sacramento Bank of Commerce, a division of Redding Bank of Commerce, from December 17, 2013 to May 31, 2015. Effective June 1, 2015, Mr. O’Neil serves as Senior Vice President and Chief Credit Administrator.
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Please see the section titled “Information about Executive Officers and Directors – Executive Officers of the Company” for a full explanation regarding the named executive officers and the effective dates of their respective positions.
Strategic Role of Executive Compensation
In 2013, on an advisory basis, our shareholders voted to take advisory votes on executive compensation on an annual basis. We have followed the guidance of our shareholders and annually request the approval on an advisory (non-binding) basis of the compensation of our named executive officers.
The Executive Compensation Committee evaluates the Company’s executive compensation programs in light of market conditions, shareholder views, and governance considerations and makes changes as appropriate. As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, we held an advisory vote on the compensation of our named executive officers (the “say-on-pay proposal”) at the 2015 annual shareholders meeting. Our shareholders overwhelmingly approved the compensation of our named executive officers, with 89.8% of shareholder votes cast in favor of the say-on-pay proposal. As the Executive Compensation Committee evaluated the Company’s compensation programs in 2015, it took into account our shareholders’ vote of confidence in our executive compensation program as described below to ensure a continued link of pay to performance.
The Board of the Company strives to ensure that its compensation programs and practices are consistent with the strategic goals and objectives of the Company and that they maintain the Company’s high standards of effective corporate governance. The Board has appointed the Executive Compensation Committee to play a central role in formulating our compensation philosophy and programs and in making pay decisions for our named executive officers. The compensation programs include elements that are designed specifically for the named executive officers.
The Company’s executive compensation philosophy and programs play an important role in achieving the objective of long-term growth in shareholder value. As a guiding principle, we design our compensation programs to reward our named executive officers for recent performance and to motivate them to achieve strong future performance for the Company and long-term value for our shareholders.
In keeping with our long-term Company goal and our efforts to increase shareholder value and align named executive officer compensation with performance, the Executive Compensation Committee has taken certain actions over the years including:
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Developed the Company’s executive compensation philosophy of “pay for performance” that is competitive in the market place, while keeping compensation opportunities and payouts reasonable and not excessive;
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Established performance-based awards in the Company’s 2015 Short-Term Variable Incentive Program and Long-Term Variable Incentive Program;
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Retained independent compensation consultants to advise on executive compensation issues and assist the Executive Compensation Committee in developing appropriate programs;
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Reviewed and approved industry-specific Peer Group information for more thorough performance comparisons; and
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Designed and updated a clearly defined competitive pay strategy aligning goals with shareholder value.
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It is the responsibility of the Executive Compensation Committee to:
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Establish and annually review and approve policies regarding executive compensation programs and practices;
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Establish and administer annual and long-term incentive compensation plans for the executive officers;
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Recommend to the Board for its approval, and submission to the Company’s shareholders when appropriate, incentive compensation plans and equity-based plans;
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Review and approve all named executive officer employment, compensation and retirement agreements;
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Recommend to the Board for its approval changes to executive officer compensation policies and programs; and
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Exercise appropriate oversight regarding compliance with the provisions of the applicable governing laws and regulations.
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Executive Compensation Objectives
Based on the Company’s philosophy to link compensation to Company, business, and individual performance, our compensation programs for our executive officers are built upon three objectives:
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1.
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To compete favorably with our peers in attracting and retaining qualified individuals as executive officers by offering competitive pay.
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2.
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To “pay for performance” by compensating our executive officers based upon:
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a)
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The Company’s performance compared to Peer Group performance; and
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b)
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The division performance for those executive officers who manage divisions.
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3.
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To align the interests of our shareholders and our executive officers by generally using stock awards for long-term compensation so our executive officers benefit only if our stock price rises and our shareholders are similarly rewarded.
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Executive Compensation Components
Executive officer compensation for 2015 included the following elements:
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Compensation
Element
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What the Compensation
Element Rewards
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Description of and Purpose of
the Compensation Element
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Base Salary
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Core competence in the executive’s role relative to skills, years of experience and contributions to the Company.
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Provides for fixed compensation based on competitive market salary levels.
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Annual Cash
Incentives
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Contributions toward the Company’s achievement of specified profitability, growth, and credit quality.
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A performance-based award that provides focus on meeting short-term goals that lead to the long-term success of the Company and which motivates achievement of critical annual performance metrics.
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Long-Term
Incentives
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Contributions toward the Company’s achievement of specified profitability, growth and credit quality, with an emphasis on metrics supporting long-term growth.
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Restricted Stock Awards/Stock Options: Increase executive ownership in the Company and aid in executive retention in a challenging business environment and competitive labor market. Emphasizes positive long-term performance and aligns executive interests with those of shareholders.
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Retirement
Benefits
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Retention of executives for the balance of his/her career.
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The SERP provides retirement benefits for the executives commensurate with those available to comparable peer executives. The qualified 401(k) program, available to all eligible employees, provides executives with a tax-deferred mechanism to save for retirement.
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Health and
Welfare
Benefits
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Such benefits are part of a broad-based competitive total compensation program.
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Employee benefit plans are generally available to all employees and include disability plans, paid time off, and medical, health, and life insurance.
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Additional
Benefits and
Perquisites
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Active participation in business promotional activities on behalf of the Company.
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Provides for executives to promote the Company’s business within the market and may include an auto allowance, use of a bank-owned automobile, and club memberships.
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Overview of Compensation and Process
Base salaries are generally set for our executive officers annually at the regularly scheduled meetings of the Executive Compensation Committee between the months of December and April.
The Executive Compensation Committee reviews and recommends the Variable Incentive Program for the new fiscal year to the Board for approval, reviews and approves awards granted under the Variable Incentive Program, and reports awards to the Board. The Executive Compensation Committee recommends stock awards for the Company’s executive officers and certain other eligible employees.
It is the practice of the Executive Compensation Committee to periodically review the history of all the elements of each named executive officer’s total compensation over previous years and compare the compensation of the named executive officers with that of the executive officers in an appropriate market place and peer group.
In November 2014, the Executive Compensation Committee engaged McLagan, a leading performance/reward consulting firm for the financial services industry, to review compensation for its named executive officers and senior leadership team relative to that of similar financial institutions. McLagan presented the Executive Compensation Committee with an analysis of salaries, cash compensation (salary plus cash bonuses) and direct compensation (salary plus cash bonuses plus equity/long-term compensation). McLagan also provided the Executive Compensation Committee with an update in September 2015.
A summary of the findings from the McLagan September 2015 report comparing the 2015 compensation of the named executive officers to estimated 2016 target compensation for the market
indicates that, overall, salaries and direct compensation at target for named executive officers were within a market competitive range except for Mr. Eslick, who remained below market median.
The Peer Group for compensation and performance purposes was updated, with the assistance of McLagan, in November 2014, primarily based on total assets relative to the Company’s total assets, geographic locations, and business model, and consists of the following financial services companies located in California, Oregon and Washington (the “Peer Group”):
American River Bankshares
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FNB Bancorp
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Pacific Premier Bancorp
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Bank of Marin Bancorp
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Heritage Commerce Corp
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Premier Valley Bank
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Bridge Capital Holdings
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Heritage Oaks Bancorp
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Provident Financial Holdings
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Central Valley Community Bancorp
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Oak Valley Bancorp
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Riverview Bancorp Inc.
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CU Bancorp
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Pacific Continental Corp
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Sierra Bancorp
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First Financial Northwest Inc.
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Pacific Financial Corp
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Simplicity Bancorp Inc.
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First Northern Community Bancorp
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Pacific Mercantile Bancorp
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United Security Bancshares
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Compensation Objectives
In order to set competitive benchmarks for 2015 annual and long-term compensation for the named executive officers, the Executive Compensation Committee reviewed data compiled in the 2014 McLagan report. This data presented Peer Group annual cash, long-term incentive, and total compensation amounts as reported in the 2014 annual filings for those companies’ executive officers whose positions and responsibilities most closely match those of our executive officers. For each named executive officer, this compensation data was examined for the 25
th
, 50
th
and 75
th
percentiles. The Executive Compensation Committee used this information to help determine competitive benchmarks for the 2015 salary and annual cash incentive awards and long-term compensation awards for the named executive officers.
Typically, the Chief Executive Officer makes compensation recommendations to the Executive Compensation Committee with respect to the executive officers who report to him. Such executive officers are not present at the time of these deliberations. The Chairman of the Board then makes compensation recommendations to the Executive Compensation Committee with respect to the Chief Executive Officer, who is absent from that portion of the meeting. The Executive Compensation Committee may accept or adjust such recommendations.
Review of Executive Performance
The Executive Compensation Committee reviews, on an annual basis, each compensation element for each named executive officer. The Executive Compensation Committee takes into account the role and responsibilities, expertise, skills and years of experience of each named executive officer in comparison to competitive salary levels.
The Executive Compensation Committee may adjust or eliminate incentive compensation awards, regardless of achieving financial performance goals, if the Executive Compensation Committee determines that an executive officer has failed to comply with our Code of Ethics, Code of Conduct or policies on information security, regulatory compliance and risk management.
Named Executive Officer Compensation
The components of executive compensation are intended to work together to compensate the named executive officer fairly for services, reward the named executive officer based upon the Company’s overall performance and, depending on the position, his or her own performance during the year. In assessing the named executive officer’s total rewards, the Executive Compensation Committee reviews each component of a named executive officer’s compensation and considers and evaluates pay mix, the competitive market, and the value of total pay, benefits and perquisites. The Executive Compensation Committee further takes into consideration the shareholder voting results on named executive
compensation, which for the last three years has indicated a high level of support.
Base Salary
It is the goal of the Executive Compensation Committee to establish salary compensation for its executive officers based on the Company’s operating performance relative to the comparable Peer Group, along with compensation recommendations from the Chief Executive Officer.
Base salary is generally established by an individual’s performance, experience, competent and effective execution of strategic objectives, level of responsibilities, and promotions, with total cash compensation targeted at or above the 50
th
percentile. In setting the base salaries of the named executive officers for fiscal year 2015, the Executive Compensation Committee considered the Company’s level of success in its short- and long-term goals in relation to:
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Achievement of specific profitability, loan growth, deposit growth and asset quality targets;
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Performance results relative to Peer Group;
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Short- and long-term strategic goals; and
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Overall financial performance of the Company.
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In light of McLagan’s recommendation in its November 2014 report for a plan to move Mr. Eslick’s compensation closer to the median of the market within 18 months to two years, the Executive Compensation Committee approved an increase in Mr. Eslick’s annual salary effective January 1, 2015 to a level approximately equal to the 25
th
percentile of the market and increased his salary again modestly in July 2015.
Incentive Compensation
Effective for 2015, the Executive Compensation Committee replaced the Company’s prior unified variable award program (the “2014 Incentive Program”) with separate formal annual award programs. The Short-Term Variable Incentive Program (the “Short-Term Program”) covers cash incentive awards, and the Long-Term Variable Incentive Program (the “Long-Term Program”) covers equity-based awards. The Long-Term Program will govern equity awards based on 2015 Company performance with such awards to be made in 2016. For long-term incentive awards made in 2015, the terms of the 2014 Incentive Program applied, as described below.
Short-Term Variable Incentive Program
The Short-Term Program is designed to reward the Company’s executive officers for achieving short-term financial goals, including short- and long-term strategic goals, and for the overall financial performance of the Company.
The Executive Compensation Committee approves a threshold, target and maximum incentive payout as a percentage of the base salary earned during the incentive period for each executive officer. These targets are based on competitive practices for each comparable position. The incentive award opportunity represents the executive officer’s annual incentive opportunity if the annual performance goals are achieved.
We developed targets covering all of the executive officers as a means of driving results, assessing their performance against critical goals and to provide a reference for the Executive Compensation Committee to use in determining 2015 cash incentive awards. All goals for named executive officers are Company, not individual, goals.
The table below reflects the short-term cash incentive compensation as a percentage of base salary and the threshold, target and maximum amount that could be earned by each eligible named executive officer for 2015 under the Short-Term Program:
Named Executive Officer
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Threshold
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Target
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Maximum
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Randall S. Eslick
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30.28%
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35.00%
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40.78%
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James A. Sundquist
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25.95%
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30.00%
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34.95%
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Samuel D. Jimenez
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25.95%
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30.00%
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34.95%
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Robert H. Muttera
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25.95%
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30.00%
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34.95%
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Robert J. O’Neil
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17.30%
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20.00%
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23.30%
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The Short-Term Program establishes a set of financial metrics which is intended to drive performance. Each metric has a weight within the Short-Term Program, and the sum of the weights equal 100%. These metrics include (i) consolidated net income; (ii) performing loan growth, which is critical to achieving earnings and asset quality targets; (iii) core deposit growth, which is essential to ensure the long-term growth and includes checking, savings and money market deposits; and (iv) classified ratio, which measures the quality of loans within the portfolio and is vital to the Company’s overall success and which also tracks the amount of classified or problem loans as a percentage of the Company’s equity capital.
Metrics
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Weight
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Threshold
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Target
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Max
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Actual
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Result
(% of Target)
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Consolidated Net Income
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65%
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$
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6,789,800
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$
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7,988,000
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$
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9,585,600
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$
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8,294,726
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104%
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Performing Loan Growth
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10%
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$
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69,700,000
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$
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82,000,000
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$
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90,200,000
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$
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63,380,421
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77%
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Core Deposit Growth
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15%
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$
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23,800,000
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$
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28,000,000
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$
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30,800,000
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$
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41,243,880
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147%
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Classified Ratio
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10%
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</= 20
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%
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</= 20
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%
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< 17
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%
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17.55
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%
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100%
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Overall Company Performance
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91.5%
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The amount of incentive award paid to each executive officer under the Short-Term Program is based on how well the Company meets its budgeted goals. Each metric has different weightings, thresholds and ranges and is calculated independently of other metrics to determine the total award. The plan has a trigger where no award is earned if Consolidated Net Income is less than 85% of target. All awards under the Short-Term Program are subject to the discretion of the Executive Compensation Committee and the Board.
Payouts under Short-Term Program
Named
Executive
Officer
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Incentive
Amount
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% of Salary
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% of Target
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Randall S. Eslick
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$102,026
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32.03%
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91.50%
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James A. Sundquist
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$61,763
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27.45%
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91.50%
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Samuel D. Jimenez
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$72,743
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27.45%
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91.50%
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Robert H. Muttera
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$61,763
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27.45%
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91.50%
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Robert J. O’Neil
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$35,460
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18.30%
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91.50%
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Long-Term Variable Incentive Program
The Executive Compensation Committee believes that stock awards are the most effective form of equity-based compensation to reward our executive officers for their contributions to the Company’s long-term performance. Stock awards which increase in value as the Company’s stock price increases directly aligns our executive officers’ interests with our shareholders’ interests to increase stock value over the long term. Equity-based awards under the Long-Term Program are made under the Company’s current 2010 Equity Incentive Plan.
The Long-Term Program is designed to reward the Company’s executive officers for achieving financial and strategic goals that the Executive Compensation Committee believes support the long-term success and growth of the Company.
The Executive Compensation Committee approves a threshold, target and maximum payout as a percentage of the base salary earned during the incentive period for each executive officer. These targets are based on competitive practices for each comparable position. The incentive target percentage represents the executive officer’s annual incentive opportunity if the annual performance goals are achieved.
Long-term incentive awards will be in the form of restricted stock grants with one-third vesting upon the date of grant and one-third vesting on each of the next two anniversaries of the date of grant.
The table below reflects the long-term equity-based compensation as a percentage of salary and the threshold, target and maximum amount that could be earned by each eligible named executive officer for 2014 Company performance and granted in 2015 under the 2014 Incentive Program.
Named Executive Officer
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Threshold
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Target
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Maximum
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Randall S. Eslick
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21.81%
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25.00%
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27.50%
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James A. Sundquist
(1)
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--
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--
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--
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Samuel D. Jimenez
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17.45%
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20.00%
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22.00%
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Robert H. Muttera
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17.45%
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20.00%
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22.00%
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Robert J. O’Neil
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13.09%
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15.00%
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16.50%
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(1)
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Mr. Sundquist joined the Company effective December 1, 2014 and therefore did not participate in the 2014 Incentive Program.
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The Long-Term Program establishes a set of financial metrics which is intended to drive performance. Although the metrics utilized are the same as those utilized under the Short-Term Program as described above, they are weighted in a different manner to reflect emphasis on the Company’s long-term growth objectives and long-term shareholder value
.
Metrics
|
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Weight
|
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Threshold
|
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Target
|
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Max
|
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Actual
|
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Result
(% of Target)
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Consolidated Net Income
|
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35%
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$
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7,921,150
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$
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9,319,000
|
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$
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10,250,900
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$
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7,536,000
|
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81%
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Performing Loan Growth
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15%
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$
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79,650,950
|
|
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$
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93,707,000
|
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$
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103,077,700
|
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$
|
62,600,000
|
|
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67%
|
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Core Deposit Growth
|
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35%
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|
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$
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21,250,000
|
|
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$
|
25,000,000
|
|
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$
|
27,500,000
|
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$
|
53,178,000
|
|
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213%
|
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Classified Ratio
|
|
|
15%
|
|
|
|
< 30
|
%
|
|
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< 30
|
%
|
|
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< 27
|
%
|
|
|
29
|
%
|
|
|
102%
|
|
Overall Company Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
0%
|
|
Figures shown above reflect 2014 Company performance, which was applicable to equity incentive awards made in 2015. The amount of incentive award paid to each executive officer under the Long-Term Program is based on how well the Company meets its budgeted goals. Each metric has different weightings, thresholds and ranges and is calculated independently of other metrics to determine the total award. The plan has a trigger where no award is earned if Consolidated Net Income is less than 85% of target. All awards under the Long-Term Program are subject to the discretion of the Executive Compensation Committee and the Board.
Payouts under Long-Term Program
Named
Executive
Officer
|
Incentive
Amount
|
% of Salary
|
% of Target
|
Discretionary
|
Randall S. Eslick
|
$0
|
0%
|
0%
|
$54,190
|
James A. Sundquist
(1)
|
--
|
--
|
--
|
--
|
Samuel D. Jimenez
|
0
|
0%
|
0%
|
$40,902
|
Robert H. Muttera
|
0
|
0%
|
0%
|
$36,812
|
Robert J. O’Neil
|
0
|
0%
|
0%
|
$23,311
|
|
(1)
|
Mr. Sundquist joined the Company effective December 1, 2014 and therefore did not participate in the 2014 Incentive Program.
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The Company did not meet its net income goal for 2014, and, therefore, the Company did not pay incentives under the 2014 Incentive Program. However, because the Company’s net income was impacted by certain one-time events, the Executive Compensation Committee awarded discretionary bonuses in 2015 based on the 2014 accomplishments of the management team, which included asset quality improvement, management and departmental reorganization and increased efficiencies, and achievement of certain strategic objectives.
Perquisites and Other Benefits
The Executive Compensation Committee believes that offering certain perquisites helps in the operation of the business as well as assists the Company to recruit and retain key executive officers. In some cases, an automobile allowance or the use of a bank-owned auto and a country club membership are offered to our executive officers. The Company’s executive officers may participate in the same benefit programs available to all employees. These programs include health, life and disability insurance and participation in non-qualified 401(k) plans.
Post-Retirement Arrangements
The Company maintains a Supplemental Executive Retirement Plan (“SERP”) and has entered into employment agreements with its executive officers which contain a change-in-control provision providing for certain payments following the termination of employment. The payments under the SERP are fixed pursuant to individual Salary Continuation Agreements and do not depend on years of credited service.
A discussion of the terms of the individual SERP, employment and change-in-control agreements with each of the named executive officers is set forth under “Post-Employment and Termination Benefits” below.
Role and Relationship of the Compensation Consultant
The Executive Compensation Committee has the sole authority to retain and terminate a compensation consultant and to approve the consultant’s fees and all other terms of the engagement. The Executive Compensation Committee has direct access to outside advisors and consultants throughout the year.
In November 2014, the Executive Compensation Committee retained the services of McLagan, an Aon Hewitt company, as an independent outside compensation consultant. McLagan was also retained in September 2015 to provide the Executive Compensation Committee with a market update of the 2014 study. McLagan’s services include conducting peer group analysis and benchmarking studies, establishing compensation guidelines, assisting with the design of incentive programs, and providing insight on emerging regulations and best practices. The Executive Compensation Committee was provided with comprehensive reports summarizing McLagan’s findings and suggestions. McLagan was engaged directly by the Executive Compensation Committee and reports directly to the Executive Compensation Committee.
The Executive Compensation Committee considered the independence of McLagan in light of SEC rules and NASDAQ listing standards. The Executive Compensation Committee requested and received a report from McLagan addressing the independence of McLagan and the senior advisors involved in the engagement, which considers the following factors: (i) other services provided to us by McLagan; (ii) fees paid by us as a percentage of McLagan’s total revenue; (iii) policies or procedures maintained by McLagan that are designed to prevent a conflict of interest; (iv) any business or personal relationships between the senior advisors and a member of the Executive Compensation Committee; (v) any Company stock owned by the senior advisors; and (vi) any business or personal relationships between our executive officers and the senior advisors. The Executive Compensation Committee discussed these considerations and concluded that the work performed by McLagan and the senior advisors involved in the engagement did not raise any conflict of interest.
Commitment to Quality Governance
The Executive Compensation Committee has adopted the following procedures intended to ensure quality governance of the Company’s “pay for performance” philosophy:
|
●
|
Only independent members of the Board may serve on the
Executive Compensation Committee;
|
|
●
|
The
Executive Compensation Committee meets on a regular basis as needed throughout the year. Generally, the
Executive Compensation Committee will review year-to-date financial performance versus budget, executive officer stock ownership levels, each named executive officer’s target total compensation for the year, and other topics as appropriate;
|
|
●
|
At least once a year, the
Executive Compensation Committee reviews each named executive officer’s total compensation package, including base salary, cash and stock incentive awards, qualified and non-qualified retirement, deferred compensation benefit packages and perquisites, and compares it to the Peer Group;
|
|
●
|
The
Executive Compensation Committee utilizes independent compensation reports to assist in the analysis of compensation packages;
|
|
●
|
The Executive Compensation Committee Charter provides that changes to the compensation policies and programs applicable to the Company’s named executive officers are submitted to the full Board for approval;
|
|
●
|
At least once a year, the
Executive Compensation Committee reviews and reassesses its charter and recommends any proposed changes to the Board for approval. The
Executive Compensation Committee also conducts an annual evaluation of its own performance, comparing its performance with the requirements of its Charter; and
|
|
●
|
The
Executive Compensation Committee reports on its meetings to the full Board. Additionally, the Executive Compensation Committee reports to the full Board the results of its evaluation of its own performance conducted as described above.
|
Summary Compensation Table
The following table sets forth certain summary information concerning compensation earned or awarded to the Company’s named executive officers for the last three years. Disclosure shall be provided for (i) all individuals serving as the Company’s principal executive officer; (ii) all individuals serving as the Company’s principal financial officer; (iii) the Company’s three most highly compensated executive officers other than the principal executive officer and principal financial officer; and (iv) up to two additional individuals for whom disclosure would have been provided but for the fact that they were not serving as executive officers at the end of the last completed fiscal year.
This list below includes the Company’s principal executive officer, principal financial officer, and the next three most highly compensated executive officers.
Name and Principal Position
|
Year
|
|
Salary
($)
(4)
|
|
|
Bonus
($)
(5)
|
|
|
Stock
Awards
($)
(6)
|
|
|
Option
Awards
($)
(7)
|
|
|
Non-Equity Incentive Plan Compensation
($)
(8)
|
|
|
Change in Pension Value and
Nonqualified Deferred Compensation Earnings
($)
(9)
|
|
|
All Other Compensation
($)
(10)
|
|
|
Total
($)
|
|
Randall S. Eslick,
|
2015
|
|
$
|
318,583
|
|
|
$
|
0
|
|
|
$
|
54,190
|
|
|
$
|
0
|
|
|
$
|
102,026
|
|
|
$
|
97,840
|
|
|
$
|
22,220
|
|
|
$
|
594,859
|
|
President and Chief
|
2014
|
|
|
265,000
|
|
|
|
0
|
|
|
|
17,148
|
|
|
|
0
|
|
|
|
64,925
|
|
|
|
92,131
|
|
|
|
28,524
|
|
|
|
467,728
|
|
Executive Officer
|
2013
|
|
|
203,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
51,443
|
|
|
|
38,131
|
|
|
|
17,938
|
|
|
|
310,512
|
|
James A. Sundquist,
(1)
|
2015
|
|
|
225,000
|
|
|
|
2,563
|
|
|
|
0
|
|
|
|
26,610
|
|
|
|
61,763
|
|
|
|
0
|
|
|
|
17,682
|
|
|
|
333,618
|
|
Executive Vice President
and Chief Financial
Officer
|
2014
|
|
|
18,750
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
600
|
|
|
|
19,350
|
|
Samuel D. Jimenez,
|
2015
|
|
|
265,000
|
|
|
|
0
|
|
|
|
40,902
|
|
|
|
0
|
|
|
|
72,743
|
|
|
|
34,929
|
|
|
|
34,237
|
|
|
|
447,811
|
|
Executive Vice President
|
2014
|
|
|
250,000
|
|
|
|
0
|
|
|
|
18,643
|
|
|
|
0
|
|
|
|
52,500
|
|
|
|
32,393
|
|
|
|
30,053
|
|
|
|
383,589
|
|
and Chief Operating Officer
|
2013
|
|
|
213,583
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
55,928
|
|
|
|
16,280
|
|
|
|
29,757
|
|
|
|
315,548
|
|
Robert H. Muttera,
(2)
|
2015
|
|
|
225,000
|
|
|
|
15,000
|
|
|
|
36,812
|
|
|
|
0
|
|
|
|
61,763
|
|
|
|
107,439
|
|
|
|
24,964
|
|
|
|
470,978
|
|
Executive Vice President
and Chief Credit Officer
|
2014
|
|
|
215,625
|
|
|
|
65,000
|
|
|
|
0
|
|
|
|
28,680
|
|
|
|
47,250
|
|
|
|
99,915
|
|
|
|
20,198
|
|
|
|
476,668
|
|
Robert J. O’Neil,
(3)
|
2015
|
|
|
193,772
|
|
|
|
0
|
|
|
|
23,311
|
|
|
|
0
|
|
|
|
35,460
|
|
|
|
95,136
|
|
|
|
22,524
|
|
|
|
370,203
|
|
Senior Vice President
|
2014
|
|
|
190,000
|
|
|
|
0
|
|
|
|
11,156
|
|
|
|
0
|
|
|
|
33,250
|
|
|
|
89,484
|
|
|
|
22,457
|
|
|
|
346,347
|
|
and Chief Credit Administrator
|
2013
|
|
|
168,917
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
33,467
|
|
|
|
25,857
|
|
|
|
18,156
|
|
|
|
246,397
|
|
|
(1)
|
Mr. Sundquist became Executive Vice President and Chief Financial Officer effective December 1, 2014.
|
|
(2)
|
Mr. Muttera became Executive Vice President and Chief Credit Officer effective January 17, 2014.
|
|
(3)
|
Mr. O’Neil served as Senior Vice President and Regional President, Sacramento Bank of Commerce, a division of Redding Bank of Commerce, from December 17, 2013 to May 31, 2015. Effective June 1, 2015, Mr. O’Neil serves as Senior Vice President and Chief Credit Administrator.
|
|
(4)
|
Base salaries include 401(k) contributions made by the named executive officers of approximately $106,833 during 2015. The amounts (rounded to the nearest whole dollar) contributed by each named executive officer were as follows: Mr. Eslick, $22,301; Mr. Sundquist, $17,963; Mr. Jimenez, $24,000; Mr. Muttera, $24,000; and Mr. O’Neil, $18,569.
|
|
(5)
|
2015 amounts for Messrs. Sundquist and Muttera reflect discretionary bonuses recommended by the Chief Executive Officer. The 2014 bonus paid to Mr. Muttera reflects a signing bonus.
|
|
(6)
|
Amount represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 of equity incentive compensation earned under the Company’s Long-Term Variable Incentive Program, the material terms of which are described in the section “Executive Compensation – Compensation Discussion and Analysis – Cash and Equity Incentive Compensation.” The stock underlying such awards was issued on January 6, 2014 and January 20, 2015.
|
|
(7)
|
The value of the stock option award is computed based upon the grant date fair value, consistent with FASB ASC Topic 718. Assumptions used to calculate these amounts are set forth in the notes to the Company’s consolidated financial statements for the fiscal years ended 2014 and 2015, included in the Company’s accompanying Form 10-K. No options were granted during 2013.
|
|
(8)
|
Amount represents cash incentive compensation earned under the Company’s Short-Term Variable Incentive Program, the material terms of which are described in the section “Executive Compensation – Compensation Discussion and Analysis – Cash and Equity Incentive Compensation.” Such amounts were paid in January 2014, January 2015, and January 2016.
|
|
(9)
|
Amount represents contributions by the Company and interest earned on segregated accounts under the named executive officer’s SERP, the material terms of which are described below under “Post-Employment and Termination Benefits.”
|
|
(10)
|
Amounts reported for 2013, 2014 and 2015 that represent “All Other Compensation” for each of the named executive officers are described in the table below captioned “Details of ‘All Other Compensation’ in the Summary Compensation Table.”
|
Details of “All Other Compensation” in the Summary Compensation Table
Name
|
Year
|
|
Automobile
Allowance ($)
(1)
|
|
|
Club
Membership ($)
(2)
|
|
|
Vacation
Payout ($)
(3)
|
|
|
401(k) Plan
Match ($)
|
|
|
Total
($)
|
|
Randall S. Eslick
|
2015
|
|
$
|
8,549
|
|
|
$
|
6,067
|
|
|
$
|
0
|
|
|
$
|
7,604
|
|
|
$
|
22,220
|
|
|
2014
|
|
|
6,418
|
|
|
|
5,810
|
|
|
|
8,154
|
|
|
|
8,142
|
|
|
|
28,524
|
|
|
2013
|
|
|
0
|
|
|
|
5,232
|
|
|
|
4,586
|
|
|
|
8,120
|
|
|
|
17,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James A. Sundquist
|
2015
|
|
|
10,110
|
|
|
|
0
|
|
|
|
0
|
|
|
|
7,572
|
|
|
|
17,682
|
|
|
2014
|
|
|
600
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel D. Jimenez
|
2015
|
|
|
11,700
|
|
|
|
4,270
|
|
|
|
10,192
|
|
|
|
8,075
|
|
|
|
34,237
|
|
|
2014
|
|
|
11,700
|
|
|
|
4,260
|
|
|
|
6,130
|
|
|
|
7,963
|
|
|
|
30,053
|
|
|
2013
|
|
|
11,700
|
|
|
|
4,160
|
|
|
|
5,769
|
|
|
|
8,128
|
|
|
|
29,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert H. Muttera
|
2015
|
|
|
8,778
|
|
|
|
8,493
|
|
|
|
0
|
|
|
|
7,693
|
|
|
|
24,964
|
|
|
2014
|
|
|
7,401
|
|
|
|
7,894
|
|
|
|
0
|
|
|
|
4,903
|
|
|
|
20,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. O’Neil
|
2015
|
|
|
7,200
|
|
|
|
6,040
|
|
|
|
0
|
|
|
|
9,284
|
|
|
|
22,524
|
|
|
2014
|
|
|
7,200
|
|
|
|
6,030
|
|
|
|
0
|
|
|
|
9,227
|
|
|
|
22,457
|
|
|
2013
|
|
|
4,800
|
|
|
|
5,209
|
|
|
|
0
|
|
|
|
8,147
|
|
|
|
18,156
|
|
|
(1)
|
Represents a car allowance or an automobile for business use. The officers may have derived some personal benefit from the use of such automobiles.
|
|
(2)
|
Represents membership expenses in connection with the use of a private club for business purposes, particularly for the purpose of entertaining customers. The officers may have derived some personal benefit from the use of such membership.
|
|
(3)
|
Represents vacation payout of time accrued and unused at year end.
|
Equity Incentive Plan
At the 2010 annual meeting, shareholders approved the 2010 Equity Plan which provides for the grant of incentive stock options, non-qualified stock options, restricted stock, and restricted stock units. The 2010 Equity Plan has a term of ten years. All eligible employees may participate in the 2010 Equity Plan. As of December 31, 2015, 234,100 shares have been granted but are unexercised and 433,377 shares remain available for future grant.
Grants of Plan-Based Awards
The following table presents certain information with respect to incentive awards granted to the named executive officers for 2015. The Executive Compensation Committee granted these awards based on the 2015 accomplishments of the management team.
Name
|
Grant Date
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
|
All Other
Stock Awards:
Number of
Shares of
Stock or Units
(#)
|
All Other
Option Awards:
Number of
Securities
Underlying
Options (#)
|
Exercise
or Base
Price of
Option
Awards
($/Sh)
|
Grant
Date Fair
Value of
Stock and
Option
Awards
|
|
|
Threshold
($)
|
Target
($)
|
Max
($)
|
|
|
|
|
Randall S. Eslick
|
1/20/2015
|
$96,451
|
$111,504
|
$129,902
|
9,408
|
0
|
0
|
$54,190
|
James A. Sundquist
(1)
|
1/15/2015
|
58,388
|
67,500
|
78,638
|
0
|
20,000
|
5.83
|
26,610
|
Samuel D. Jimenez
|
1/20/2015
|
68,768
|
79,500
|
92,618
|
7,101
|
0
|
0
|
40,902
|
Robert H. Muttera
|
1/20/2015
|
58,388
|
67,500
|
78,638
|
6,391
|
0
|
0
|
36,812
|
Robert J. O’Neil
|
1/20/2015
|
33,523
|
38,754
|
45,149
|
4,047
|
0
|
0
|
23,311
|
(1)
|
Mr. Sundquist joined the Company effective December 1, 2014 and therefore did not participate in the 2014 Incentive Program.
|
Outstanding Equity Awards at Fiscal Year End
The following table presents certain information concerning the outstanding stock awards held as of December 31, 2015 by each named executive officer of the Company.
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Number of
Securities
Underlying Unexercised
Options
(#) Exercisable
|
|
|
Number of
Securities
Underlying Unexercised
Options
(#) Unexercisable
|
|
|
Option
Exercise
Price ($)
|
|
Option
Expiration
Date
|
|
Number of
Shares or
Units of Stock
that Have Not
Vested (#)
(1)
|
|
|
Market Value
of Shares
or
Units of Stock
that Have Not
Vested ($)
|
|
Randall S. Eslick
|
|
|
2,000
|
|
|
|
0
|
|
|
$
|
6.50
|
|
10/14/2018
|
|
|
|
|
|
|
|
|
|
|
|
16,000
|
|
|
|
4,000
(2)
|
|
|
|
4.05
|
|
03/01/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,272
|
|
|
$
|
36,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James A. Sundquist
|
|
|
4,000
|
|
|
|
16,000
(3)
|
|
|
|
5.83
|
|
01/15/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel D. Jimenez
|
|
|
3,500
|
|
|
|
0
|
|
|
|
6.50
|
|
10/14/2018
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
|
|
|
4,000
(4)
|
|
|
|
4.05
|
|
03/01/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,734
|
|
|
|
27,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert H. Muttera
|
|
|
8,000
|
|
|
|
12,000
(5)
|
|
|
|
6.39
|
|
01/17/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,261
|
|
|
|
24,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. O’Neil
|
|
|
2,000
|
|
|
|
0
|
|
|
|
6.50
|
|
10/14/2018
|
|
|
|
|
|
|
|
|
|
|
|
11,200
|
|
|
|
2,800
(2)
|
|
|
|
4.05
|
|
03/01/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,698
|
|
|
|
15,540
|
|
|
(1)
|
Represents the unvested portion of the restricted stock awards granted January 20, 2015. Shares vest in equal annual installments over a three-year period beginning January 20, 2015 with shares becoming fully vested on January 20, 2017. The full amounts of the awards are reflected in “Grants of Plan-Based Awards” above.
|
|
(2)
|
Shares vest 20% annually beginning March 1, 2012 with shares becoming fully vested March 1, 2016.
|
|
(3)
|
Shares vest 20% annually beginning January 15, 2015 with shares becoming fully vested January 15, 2019.
|
|
(4)
|
Shares vest 20% annually beginning March 1, 2012 with shares becoming fully vested March 1, 2016. 4,000 options subject to this award have vested and been exercised.
|
|
(5)
|
Shares vest 20% annually beginning January 17, 2014 with shares becoming fully vested January 17, 2018.
|
Option Exercises and Stock Vested
The following table presents certain information concerning the exercise of options by each of our named executive officers during the fiscal year ended December 31, 2015, including the value of gains on exercise and the value of the stock awards.
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Shares Acquired
on Exercise (#)
|
|
|
Value Realized
on Exercise ($)
|
|
|
Number of Shares Acquired on
Vesting (#)
|
|
|
Value Realized
on Vesting ($)
|
|
Randall S. Eslick
|
|
|
0
|
|
|
$
|
0
|
|
|
|
3,136
|
|
|
$
|
18,063
|
|
James A. Sundquist
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Samuel D. Jimenez
|
|
|
0
|
|
|
|
0
|
|
|
|
2,367
|
|
|
|
13,634
|
|
Robert H. Muttera
|
|
|
0
|
|
|
|
0
|
|
|
|
2,130
|
|
|
|
12,269
|
|
Robert J. O’Neil
|
|
|
0
|
|
|
|
0
|
|
|
|
1,349
|
|
|
|
7,770
|
|
Retirement Benefits
The following table illustrates the approximate annual retirement income that may become payable to a named executive officer assuming benefits commence at age sixty-five (65) for each or Messrs. Eslick, Jimenez, and O’Neil and age sixty-seven (67) for Mr. Muttera. The benefits for Messrs. Eslick, Jimenez, Muttera, and O’Neil are payable over a period of ten (10) years.
Name
|
|
Plan Name
(1)
|
|
|
Number of
Years Credited
Service (#)
|
|
|
Present Value of Accumulated
Benefit ($)
|
|
|
Payments During
Last Fiscal
Year ($)
|
|
Randall S. Eslick
|
|
SERP
|
|
|
|
10
|
|
|
$
|
419,909
|
|
|
$
|
0
|
|
James A. Sundquist
(2)
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Samuel D. Jimenez
|
|
SERP
|
|
|
|
7
|
|
|
|
153,640
|
|
|
|
0
|
|
Robert H. Muttera
|
|
SERP
|
|
|
|
2
|
|
|
|
207,354
|
|
|
|
0
|
|
Robert J. O’Neil
|
|
SERP
|
|
|
|
7
|
|
|
|
309,159
|
|
|
|
0
|
|
|
(1)
|
The terms of the SERP are described below.
|
|
(2)
|
Mr. Sundquist does not have a SERP Agreement.
|
Nonqualified Deferred Compensation
As noted below in the “Director Compensation” section, Directors may participate in the 2013 Directors’ Deferred Compensation Plan; however, no such plan or benefit exists for named executive officers.
Post-Employment and Termination Benefits
The following is a discussion regarding the post-employment and termination arrangements currently in place for the named executive officers. The amounts are based on the maximum amounts that could be paid under these arrangements.
Supplemental Executive Retirement Plan.
In April 2001, the Board approved the implementation of the SERP and approved amending the SERP on December 31, 2006, September 30, 2007, and October 14, 2008. The SERP is a non-qualified executive benefit plan through which the Company agrees to provide specified benefits in the future to certain executive officers who contribute materially to the continued growth, development and business success of Redding Bank of Commerce.
The terms and payments under the SERP are determined by individual Salary Continuation Agreements with the executive officers and are not based on years of credited service. Benefits under the SERP include income generally payable commencing upon a qualifying termination of employment and a death benefit for the participants’ designated beneficiaries.
The Salary Continuation Agreements provide for five general classes of benefits for the executive officers, and the Board acts as administrator of the plan. Mr. Sundquist does not have a SERP and therefore is not included in the discussion below.
|
1.
|
Normal Retirement Benefits.
The normal retirement benefit is calculated to provide a target annual benefit of up to seventy-five percent (75%) of the executive officer’s compensation at the time of retirement, which is age sixty-five (65) in the case of Messrs. Eslick, Jimenez, and O’Neil and age sixty-seven (67) in the case of Mr. Muttera, and shall be paid in twelve (12) equal monthly installments following termination of employment for a period of ten (10) years.
|
|
2.
|
Early Termination
Benefit
.
The early termination benefit is the accrual balance, as such term is defined in the Salary Continuation Agreement, determined as of the end of the plan year preceding termination of employment and shall be paid in one hundred twenty (120) equal monthly installments following termination of employment.
|
|
3.
|
Disability Benefit
.
The disability benefit is the accrual balance, as such term is defined in the Salary Continuation Agreement, determined as of the end of the plan year preceding termination of employment and shall be paid in one hundred twenty (120) equal monthly installments following termination of employment.
|
|
4.
|
Death Benefit.
The death during active service benefit is the Normal Retirement Benefit and shall be paid in twelve (12) equal monthly installments following the executive’s death for a period of ten (10) years. Should an executive officer (i) die after benefits have commenced under the Salary Continuation Agreement but before receiving all such distributions or (ii) die prior to the date benefits would commence, any remaining benefits shall be distributed to the executive officer’s beneficiary in the same manner as they would have been distributed to the executive officer.
|
|
5.
|
Change-in-Control Benefit.
In the event there is a change in control followed within twenty-four (24) months by a termination of employment, the Company shall pay the accrual balance, as such term is defined in the Salary Continuation Agreement, determined as of the end of the plan year preceding termination of employment in one hundred twenty (120) equal monthly installments commencing after normal retirement age.
|
Key-man life
insurance policies were purchased to offset the Company’s contractual obligation to pay pre-retirement death benefits and to recover the Company’s cost of providing benefits. The executive officer is the insured under the policy, while the Company is the owner and beneficiary. The insured executive officer has no claim on the insurance policy, its cash value or the proceeds thereof.
Potential Payments upon Termination or Change in Control
The following table shows the maximum amounts that would have been payable to the named executive officers at December 31, 2015, presuming that the payments were made as a lump sum: (1) in the event of termination or in the event of diminution in salary or job duties in connection with a change in control, and (2) as a result of termination other than termination arising from a change in control.
|
|
Payments Upon a
Change in Control
|
|
|
Termination Other Than
Change in Control
|
|
|
|
Payments
under
employment agreements
|
|
|
Payments under
Supplemental Executive
Retirement Plan
|
|
|
Payments
under
employment agreements
|
|
|
Payments under
Supplemental Executive
Retirement Plan
|
|
Name
|
|
($)
(1)
|
|
|
($)
(2)
|
|
|
($)
(3)
|
|
|
($)
(2)
|
|
Randall S. Eslick
|
|
$
|
1,061,873
|
|
|
$
|
419,909
|
|
|
$
|
587,935
|
|
|
$
|
419,909
|
|
James A. Sundquist
|
|
|
569,326
|
|
|
|
--
|
|
|
|
344,326
|
|
|
|
--
|
|
Samuel D. Jimenez
|
|
|
653,891
|
|
|
|
153,640
|
|
|
|
420,483
|
|
|
|
153,640
|
|
Robert H. Muttera
|
|
|
548,246
|
|
|
|
207,354
|
|
|
|
336,988
|
|
|
|
207,354
|
|
Robert J. O’Neil
|
|
|
260,536
|
|
|
|
309,159
|
|
|
|
267,596
|
|
|
|
309,159
|
|
|
(1)
|
Amount shown for Mr. Eslick includes $648,000 for two years of total salary, $319,825 for two years’ profit sharing, $64,815 for two years of health insurance benefits, $17,099 for two years of auto allowance, and $12,134 for two years of country club dues; amount shown for Mr. Sundquist includes $450,000 for two years of total salary, $111,544 for one years’ profit sharing, and $7,783 for one year of health insurance benefits; amount shown for Mr. Jimenez includes $530,000 for two years of total salary, $99,782 for one years’ profit sharing, and $24,109 for one year of health insurance benefits; amount shown for Mr. Muttera includes $450,000 for two years of total salary, $97,802 for one years’ profit sharing, and $444 for one year of life insurance benefits (Mr. Muttera currently does not participate in the Company’s health or dental insurance benefit plans); and amount shown for Mr. O’Neil includes $190,000 for one year of total salary, $54,123 for one years’ profit sharing, and $16,413 of health insurance benefits. For Messrs. Jimenez and O’Neil, the amount of profit sharing is computed as the average profit sharing received by the respective executive for the three prior years. For Messrs. Sundquist and Muttera, the amount of profit sharing is computed as the average profit sharing received by the respective executive since he joined the Company (since each began service in 2014 and does not have three prior years to average).
|
|
(2)
|
SERP payments are limited under IRS Section 280G to 2.99 times the average total compensation package. Amounts shown for each of Messrs. Eslick, Jimenez, Muttera, and O’Neil represent their respective accrual balances.
|
|
(3)
|
Amount shown for Mr. Eslick includes $324,000 for one year of total compensation, $200,708 for one years’ profit sharing, $48,611 for 18 months of health insurance benefits, $8,549 for one year of auto allowance, and $6,067 for one year of country club dues; amount shown for Mr. Sundquist includes $225,000 for one year of salary, $111,544 for one years’ profit sharing, and $7,783 for one year of health insurance; amount shown for Mr. Jimenez includes $265,000 for one year of total salary, $131,374 for one years’ profit sharing, and $24,109 for one year of health insurance; amount shown for Mr. Muttera includes $225,000 for one year of total salary, $111,544 for one years’ profit sharing, and $444 for one year of life insurance benefits (Mr. Muttera currently does not participate in the Company’s health or dental insurance benefit plans); and amount shown for Mr. O’Neil includes $190,000 for one year of total salary, $61,183 for one years’ profit sharing, and $16,413 for one year of health insurance.
|
Executive Officer Employment Agreements
The Company has entered into separate employment agreements with each of its named executive officers. A summary of the agreements is set forth below.
Randall S. Eslick Employment Agreement
. Mr. Eslick serves as President and Chief Executive Officer. His employment agreement, effective November 19, 2013, is for a term of three years and shall automatically extend for a one-year period, subject to prior termination as provided within the agreement. The employment agreement provides that in the event of termination for specified reasons, Mr. Eslick will receive six months of total compensation plus accrued profit sharing and vacation calculated as of the date of his termination. If Mr. Eslick is terminated other than for those specified reasons, he will receive 12 months of total compensation calculated as of the date of his termination, payable in one lump sum. In either case, Mr. Eslick’s health insurance benefits shall continue for 18 months. The employment agreement also provides that in the event of a change in control (as defined therein) pursuant to which Mr. Eslick’s duties are diminished in any capacity, Mr. Eslick is entitled to terminate the employment agreement and will be paid severance pay equal to two years’ total compensation. In the event of termination, other than a change in control, Mr. Eslick is prohibited from soliciting Redding Bank of Commerce’s customers or clients for a period of one year.
James A. Sundquist Employment Agreement
. Mr. Sundquist serves as Executive Vice President and Chief Financial Officer. His employment agreement, effective December 1, 2014, is for a term of three years and shall automatically extend for a one-year period, subject to prior termination as provided within the agreement. The employment agreement provides that in the event of termination for specified reasons, Mr. Sundquist will only be paid accrued salary plus accrued vacation calculated as of the date of his termination. If Mr. Sundquist is terminated other than for those specified reasons, he will receive 12 months of total compensation calculated as of the date of his termination, payable in one lump sum. The employment agreement also provides that in the event of a change in control (as defined therein) pursuant to which Mr. Sundquist’s salary or duties are diminished in any capacity, Mr. Sundquist will be paid, in one lump sum, a severance package equal to two years’ salary and one years’ profit sharing, each calculated according to the terms of the employment agreement, and his health insurance benefits shall continue for 12 months. In the event of termination, other than a change in control, Mr. Sundquist is prohibited from soliciting Redding Bank of Commerce’s customers or clients for a period of one year.
Samuel D. Jimenez Employment Agreement
. Mr. Jimenez serves as Executive Vice President and Chief Operating Officer. His employment agreement, effective December 17, 2013, is for a term of three years and shall automatically extend for a one-year period, subject to prior termination as provided within the agreement. The material terms of Mr. Jimenez’s employment agreement are identical to those of Mr. Sundquist.
Robert H. Muttera Employment Agreement
.
Mr. Muttera serves as Executive Vice President and Chief Credit Officer. His employment agreement, effective January 14, 2014, is for a term of three years and shall automatically extend for a one-year period, subject to prior termination as provided within the agreement. The material terms of Mr. Muttera’s employment agreement are identical to those of Mr. Sundquist.
Robert J. O’Neil Employment Agreement
. Mr. O’Neil serves as Senior Vice President and Chief Credit Administrator. His employment agreement, effective December 17, 2013, is for a term of three years and shall automatically extend for a one-year period, subject to prior termination as provided within the agreement. The material terms of Mr. O’Neil’s employment agreement are identical to those of Mr. Sundquist except that in the event of a change in control (as defined in the employment agreement), Mr. O’Neil will be paid, in one lump sum, a severance package equal to one years’ salary and one years’ profit sharing, each calculated according to the terms of the employment agreement.
Director Compensation
The following table shows compensation paid to or accrued by non-employee directors during the fiscal year ended December 31, 2015 for service to the boards of the Company and Redding Bank of Commerce.
2015 Director Compensation Table
|
|
Fees Earned or
Paid in Cash
|
|
|
Nonqualified Deferred Compensation Earnings
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Orin N. Bennett
|
|
$
|
55,878
|
|
|
$
|
22,926
|
|
|
$
|
78,804
|
|
Gary R. Burks
|
|
|
26,725
|
|
|
|
0
|
|
|
|
26,725
|
|
Joseph Q. Gibson
|
|
|
26,275
|
|
|
|
8,931
|
|
|
|
35,206
|
|
Jon W. Halfhide
|
|
|
33,375
|
|
|
|
12,241
|
|
|
|
45,616
|
|
Linda J. Miles
|
|
|
22,800
|
|
|
|
1,120
|
|
|
|
23,920
|
|
David H. Scott
|
|
|
60,975
|
|
|
|
25,443
|
|
|
|
86,418
|
|
Terence J. Street
|
|
|
37,950
|
|
|
|
2,979
|
|
|
|
40,929
|
|
Lyle L. Tullis
|
|
|
68,425
|
|
|
|
31,276
|
|
|
|
99,701
|
|
Annual Compensation
Compensation paid to non-employee directors consists of cash (in the form of a monthly retainer and meeting fees) and, when authorized, equity (in the form of stock option grants). Directors may also participate in the 2013 Directors’ Deferred Compensation Plan.
The Executive Compensation Committee is responsible for all matters related to directors’ compensation in connection with reviewing and establishing or recommending non-employee director compensation to the Board. Generally, the Executive Compensation Committee will review the amount of director compensation at least annually. For purposes of establishing director compensation, the Executive Compensation Committee evaluated directors’ compensation as compared to detailed public company information provided by McLagan, which is a leading marketer for benchmarking executive and director compensation for financial services companies.
A director who is an officer/employee of the Company or of a subsidiary is not compensated for his or her membership on the Board.
Monthly Retainer and Meeting Fees
During 2015, each independent director and Ms. Miles will receive $800 for each Board meeting attended and $800 for a monthly retainer. Committee meetings will be paid at a rate of $400 for each meeting attended. Committee chairpersons will be paid an additional $375 per meeting. The Chairman of the Board is paid an additional $1,200 per month, and the Chairman of the Audit Committee is paid an additional $1,000 per month.
Equity Compensation
Non-employee directors have historically been eligible to participate in the Company’s stock option plan, and in the past, have received grants of non-qualified stock options. Several non-employee directors were issued stock option grants under the Company’s 1998 Stock Option Plan (the “1998 Plan”), which expired in 2008. In 2008, the Company adopted the 2008 Stock Option Plan, which was amended and restated in 2010 and is now known as the 2010 Equity Incentive Plan (the “2010 Equity Plan”). The 2010 Equity Plan allows for the grant of non-qualified stock options to directors. The Executive Compensation Committee believes that, as part of director compensation, directors should have an opportunity to receive grants of equity awards; therefore, non-employee directors are eligible to receive awards under the Company’s 2010 Equity Plan.
Directors’ Deferred Compensation Plan
The directors’ deferred compensation plan adopted by the Board in 1993 (the “1993 Directors’ Deferred Plan”) is a non-qualified director benefit plan in which the eligible director voluntarily elects to defer some or all of his or her current fees in exchange for the Company’s promise to pay a deferred benefit. The deferred fees are credited with interest under the plan, and the accrued liability is paid to the director at retirement. The current interest rate on the plan is Wall Street Journal prime plus three percent (3%), with an option to change to ten percent (10%) fixed immediately preceding retirement. As a non-qualified plan, the plan is only available to independent directors without regard to nondiscrimination requirements of qualified plans. The account is segregated from other assets owned by Redding Bank of Commerce only by way of its identification on the books of Redding Bank of Commerce as a liability of Redding Bank of Commerce to the Director. The account is subject to claims of general creditors of Redding Bank of Commerce, and the account shall be a general unsecured creditor of Redding Bank of Commerce.
No deferred
compensation shall be payable to a director until the death, disability, resignation, retirement or removal from office of such director. All such compensation, together with interest thereon, shall be provided to such director, or his beneficiary, within thirty (30) days from the date of death, disability, retirement or resignation. If the director has designated an optional installment payment method, the first installment shall be paid six months after his or her normal retirement date.
Upon the death of a director, distribution of compensation deferred, together with interest, shall be made either in one lump sum or as installments, depending on the election of each director prior to death, to his or her designated beneficiary.
Deferred compensation by reason of resignation or retirement may, at the option of the director, be payable in approximately equal monthly installments over a period not to exceed fifteen (15) years, provided however, that on any such installment method of distribution, interest shall continue to be credited on the undistributed sums.
As of December 31, 2015, the Company’s accrued obligations under the 1993 Directors’ Deferred Plan were $3,291,419. The accrued obligations under the 1993 Directors’ Deferred Plan will continue to accrue interest; however, as of December 31, 2013, no additional deferrals will be made under the 1993 Directors’ Deferred Plan.
The Company’s Board adopted a new directors’ deferred compensation plan in December 2013 (the “2013 Directors’ Deferred Plan”), to be effective beginning January 2014. The terms of the 2013 Directors’ Deferred Plan are virtually identical to the 1993 Directors’ Deferred Plan, with the following exceptions: (i) the interest rate shall be adjusted annually and shall mean the Bloomberg 20-year Investment Grade Financial Institutions index rate in effect on the immediately preceding December 31, plus two percent (2%); (ii) no deferred compensation shall be payable to a director until a separation from service has occurred, which means that the director ceases for any reason to provide services to the Company as a member of the Board; and (iii) the director may elect to receive payments in a lump sum (payable within thirty (30) days following the separation from service) or in approximately equal monthly installments over a period not to exceed ten (10) years. As of December 31, 2015, the Company’s accrued obligations under the 2013 Directors’ Deferred Plan were $369,767.
REPORT OF THE AUDIT AND QUALIFIED LEGAL COMPLIANCE COMMITTEE
The Audit and Qualified Legal Compliance Committee (“Audit Committee”) of the Board of Directors makes the following report which, notwithstanding anything to the contrary set forth in any of the Company’s filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, will not be incorporated by reference into any such filings and will not otherwise be deemed to be proxy soliciting materials or to be filed under such Acts.
The Audit Committee consists of the directors listed below. The Board has determined that the members of the Audit Committee meet the independence requirements as defined under the NASDAQ listing standards and SEC rules.
Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. The Audit Committee is responsible for overseeing the Company’s financial reporting processes on behalf of the Board. With respect to fiscal 2015, the Audit Committee has:
|
(1)
|
reviewed and discussed the audited consolidated financial statements with management, and management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles;
|
|
(2)
|
discussed with the independent accountants the matters required to be discussed by AS 16 (Communication with Audit Committees);
|
|
(3)
|
received from Moss Adams, LLP the written disclosures and letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountants’ communications with the Audit Committee concerning independence, and the Audit Committee discussed with Moss Adams, LLP that firm’s independence;
|
|
(4)
|
discussed with the Company’s internal and independent accountants the overall scope and plans for their respective audits; and
|
|
(5)
|
met with the internal and independent auditors, with and without management present, to discuss the results of their examinations, the evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting.
|
Based on the review and discussions referred to in items (1) through (5) above, the Audit Committee has recommended to the Company’s Board that the audited consolidated financial statements be included in the Company’s Form 10-K for the fiscal year ended December 31, 2015 for filing with the SEC.
All fees paid to Moss Adams, LLP during 2015 were pre-approved by the Audit Committee.
Members of the
Audit and Qualified Legal Compliance
Committee
David H. Scott, CPA; Chairman
Gary R. Burks
Jon W. Halfhide, CPA
Terence J. Street
Lyle L. Tullis
Fees Paid to Independent Registered Public Accounting Firm
Moss Adams, LLP was selected by the Company to serve as the Company’s independent registered public accounting firm for the 2015 fiscal year, and the shareholders of the Company ratified the selection at the 2015 annual meeting of shareholders in May 2015. The Company has selected Moss Adams, LLP to serve as the Company’s independent registered public accounting firm for the 2016 fiscal year, and the shareholders of the Company are being asked to ratify the selection at the 2016 Annual Meeting.
A representative from Moss Adams, LLP is expected to attend the 2016 Annual Meeting and will be available to answer questions, although the representative is not likely to make a formal statement.
The following table sets forth the aggregate fees charged to the Company by Moss Adams, LLP for audit services rendered in connection with the audited consolidated financial statements and reports for the 2015 and 2014 fiscal years and for other services rendered during the 2015 and 2014 fiscal years.
Fee Category
|
|
Fiscal 2015
|
|
|
% of Total
|
|
|
Fiscal 2014
(
1
)
|
|
|
% of Total
|
|
Audit Fees
|
|
$
|
274,638
|
|
|
|
89
|
%
|
|
$
|
281,543
|
|
|
|
85
|
%
|
Audit-Related Fees
|
|
|
35,654
|
|
|
|
11
|
%
|
|
|
24,378
|
|
|
|
7
|
%
|
Tax Fees
|
|
|
0
|
|
|
|
0
|
%
|
|
|
7,380
|
|
|
|
2
|
%
|
All Other Fees
|
|
|
0
|
|
|
|
0
|
%
|
|
|
21,261
|
|
|
|
6
|
%
|
Total Fees
|
|
$
|
310,292
|
|
|
|
100
|
%
|
|
$
|
334,562
|
|
|
|
100
|
%
|
|
(1)
|
Includes an additional $55,331 of fees billed to or reclassified by the Company for 2014 services after the 2015 proxy statement was published.
|
Audit Fees
. Consists of fees billed to the Company for professional services rendered in connection with the audit of the Company’s annual financial statements included in the Company’s annual reports on Form 10-K and review of financial statements included in the Company’s quarterly reports on Form 10-Q.
Audit-Related Fees
. Consist of fees for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and which are not reported under Audit Fees. This category includes the out-of-pocket expenses of the auditors while conducting audit services.
Tax Fees
. Consists of fees for professional services for tax compliance, tax advice and tax planning. The 2014 fee is for consultations related to the sale of the Company’s mortgage subsidiary.
All Other Fees
. Consists of fees for products and services provided other than those reported above. The fees for 2014 include review of documents relating to redemption of trust preferred securities.
In considering the nature of the services provided by Moss Adams, LLP, the Audit Committee determined that such services are compatible with the provision of independent audit services. The Audit Committee discussed these services with Moss Adams, LLP and Company management to determine that the services are permitted under the rules and regulations concerning auditor independence promulgated by the SEC to implement the Sarbanes-Oxley Act of 2002, as well as by standards of the Public Company Accounting Oversight Board (PCAOB).
In discharging its oversight responsibility with respect to the audit process, the Audit Committee of the Board (i) obtained from the independent accountants a formal written statement describing all relationships between the accountants and the Company that might bear on the accountants’ independence consistent with Rule 3526, “Communication with Audit Committees Concerning Independence,”; (ii) discussed with the accountants any relationships that may impact their objectivity and independence; and (iii) satisfied itself as to the accountants’ independence. The Audit Committee also discussed with management and the independent accountants the quality and adequacy of the Company’s internal controls and the outsourced audit functions, responsibilities, budgeting and staffing. The Audit Committee reviewed with the independent accountants their audit plans, audit scope and identification of audit risks.
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
Under the Audit Committee’s pre-approval policies and procedures, the Audit Committee is required to pre-approve the audit and non-audit services performed by the Company’s independent registered public accounting firm. The Audit Committee may pre-approve a list of services that may be provided by the independent registered public accounting firm without obtaining specific pre-approval from the Audit Committee.
This list of services includes audit services, audit-related services, tax services and all other services. The Audit Committee sets pre-approved fee levels for each of these listed services. Any type of service that is not included on the list of pre-approved services must be specifically approved by the Audit Committee. Any proposed service that falls outside of the pre-approved fee levels requires specific pre-approval by the Audit Committee.
shareholder proposals RECOMMENDED BY
THE BOARD OF DIRECTORS
PROPOSAL NO. 1: Election of Directors
In accordance with the Company’s articles and bylaws, the Board has set the number of directors for election to the Board at the 2016 Annual Meeting at nine (9) and has nominated the persons identified in the section entitled “Information About Executive Officers and Directors – Directors of the Company” for election at the Annual Meeting. If you elect the nominees presented, they will hold office until the election of their successors at the annual meeting in 2017 or until their earlier resignation.
We know of no reason why any nominee may be unable to serve as a director. If any nominee is unable to serve, your proxy holder may vote for another nominee proposed by the Board. If for any reason these nominees prove unable or unwilling to stand for election, the Board will nominate alternatives. The Board has no reason to believe that its nominees would prove unable to serve if elected.
The Board recommends a vote FOR the election of each of the nominees for director.
PROPOSAL NO. 2: Ratify the selection of Moss Adams, LLP as our independent registered public accounting firm for 2016
The affirmative vote of a majority of votes cast at the Annual Meeting on this proposal is required to ratify the selection of the independent registered public accounting firm. If you abstain from voting, it has no effect on the outcome of this proposal.
The Board recommends a vote FOR the ratification of the selection of Moss Adams, LLP as our independent registered public accounting firm for 2016.
PROPOSAL NO. 3: Advisory (Non-Binding) Resolution on Executive Compensation
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are required to submit to the shareholders a non-binding vote on the compensation of the Company’s named executive officers, as described in the Compensation Discussion and Analysis, the tabular disclosure regarding named executive officer compensation, and the accompanying narrative disclosure in this Proxy Statement.
This proposal, commonly known as a “say-on-pay” proposal, gives the Company’s shareholders the opportunity to endorse or not endorse the Company’s executive pay program and policies through the following resolution:
“Resolved, that the compensation paid to the company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion is hereby APPROVED.”
This vote shall not be binding on the Board and will not be construed as overruling a decision by the Board, nor shall the vote create or imply any additional fiduciary duty by the Board. However, the Executive Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements.
This matter will be decided by the affirmative vote of a majority of the votes cast at the Annual Meeting. On this matter, abstentions will have no effect on the voting.
The Board recommends a vote FOR the adoption of the non-binding advisory resolution approving the compensation of the named executive officers.
OTHER BUSINESS
Proposals by shareholders to transact business at the Company’s 2017 annual meeting must be delivered to the Company at its principal administrative office located at 1901 Churn Creek Road, Redding, California 96002 no later than December 27, 2016 in order to be considered for inclusion in our proxy statement and proxy card. Such proposals will also need to comply with the SEC’s regulations regarding the inclusion of shareholder proposals in the Company’s sponsored proxy materials.
Notice of any business item proposed to be brought from the floor before an annual meeting by a shareholder, including the nomination of directors, must be received by the Corporate Secretary of the Company no earlier than January 26, 2017 and no later than March 27, 2017 and 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 proposal. If the Company does not receive timely notice, such proposal will not be considered a business item at the annual meeting. The Chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedures. If the Chairman of the meeting acknowledges the nomination of a person not made in compliance with the foregoing procedures, the persons named as proxies in the proxy materials relating to that meeting will use their discretion in voting the proxies when the nomination is made at the meeting.
Shareholders may contact an individual director, the Board as a group, or a specified committee or group by sending a written communication to the Company’s headquarters address. Each communication should specify the applicable addressee or addressees to be contacted as well as the general topic of the communication.
The Company will initially receive and process communications before forwarding them to the addressee. The Company generally will not forward to the directors a shareholder communication that it determines to be primarily commercial in nature, that relates to an improper or irrelevant topic, or that requests general information about the Company.
The Company knows of no other business that will be presented at the Annual Meeting. If any other business is properly brought before the Annual Meeting, it is intended that proxies submitted on the enclosed form will be voted in accordance with the judgment of the persons voting the proxies. Whether or not you intend to be present at the Annual Meeting, we request that you return your signed proxy promptly.
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By Order of the Board of Directors,
/s/ David H. Scott
David H. Scott
Corporate Secretary
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Redding, California
April 5, 2016