Howdo I obtain a Form 10-K and/or an Annual Report?
The Company’s audited consolidated balance sheets for the years ended December 31, 2017 and 2016 and 2015 andaudited consolidated statements of income, shareholders’ equity and cash flows for the years ended December 31, 2017, 2016 2015 and 20142015 are part of the Company’s Form 10-K which accompanies this Proxy Statement.
Additional copies of the Form 10-K and Annual Report may be obtained for no cost upon written request to Bank of Commerce Holdings, Attention:Attention: Corporate Secretary, 1901 Churn Creek Road, Redding, California 96002 and are also available onthe Company’swebsite atwww.bankofcommerceholdings.com.
The Securities and Exchange Commission (the “SEC”) maintains an internet sitea website athttp://www.sec.gov that includes the Company’s SEC filings. Access to the Company’s Form 10-K, quarterly reports on Form 10-Q, Current Reports on Form 8-K, and Section 16beneficial ownership reports by Company insiders are available free of charge as soon as they are filed with the SEC.
InterestsofDo the Company’s directors, nominees and named executive officers have personal interests in the matters to be voted uponon at the Annual Meeting?
No directors, nominees, or named executive officers of the Company have a personal interest in the matters to be voted upon in this electionon at the Annual Meeting other than, for directors, their desire to continue serving as directors. The vote respectingon approval of named executive officer compensation is non-binding, and a vote denying approval would not directly affect named executive officer compensation but would be considered in future compensation decisions by the Board and the Executive Compensation Committee.
VOTING SECURITIES AND OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS
Shareholders of record at the close of business on Friday,Monday, March 24, 2017,26, 2018, which is the Record Date, are entitled to notice of and to vote at the Annual Meeting. As of the close of business on the Record Date, the Company had 13,442,09216,241,226 shares of its Common Stock outstanding and entitled to vote.
Each share of the Company’s Common Stock that you owned as of the Record Date entitles you to one vote except with respect to the election of directors. With respect to the election of directors, each holder of Common Stock may cumulate his, her or its votes and is entitled to as many votes as equals the number of shares held by such shareholder multiplied by the number of directors to be elected. Such shareholder may cast all of his, her or its votes for a single candidate or may distribute such votes among any or all of the candidates. However, no shareholder will be entitled to cumulate votes (in other words, cast for any candidate a number of votes greater than the number of shares of stock held by such shareholder) unless such candidates’ names have been placed in nomination prior to the voting and the shareholder has given notice at the meeting prior to the voting of the shareholder’s intention to cumulate votes. If any shareholder has given such notice, all shareholders may cumulate their votes for candidates in nomination. An opportunity will be given at the meeting prior to the voting for any shareholder who desires to do so to announce his, her or its intention to cumulate his, her or its votes. The proxy card indicates the number of votes that you have.
The following table shows, as of March 1, 2017,2018, the amountnumber of Companyshares of Common Stock directly owned (unless otherwise indicated) by:
● | each person or entity who is known by the Company to beneficially own more than five percent of the Company’s Common Stock, |
● | each of the Company’s directors and nominees, |
● | each of the named executive officers, and |
● | all directors and named executive officers of the Company as a group. |
The Company has determined beneficial ownership in accordance with the rules of the SEC. In general, beneficial ownership includes (i) securities over which a director or executive officer is deemed to have voting or investment control,power, either directly or indirectly, and (ii) stock options or other rights that are exercisable currently or become exercisable within sixty days offollowing March 1, 2017.2018. Except as otherwise noted, the Company believes that the beneficial owners of the shares listed below, based on information furnished by such owners, have voting and investment power with respect to the shares.
FivePercent Shareholders
Titleof Class | Name and Address | Amount and Nature | Percent of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | |||
Common Stock | The Banc Funds Company, L.L.C. 20 North Wacker Drive, Suite 3300 Chicago, IL 60606 (1) | 907,526 | 6.8% | The Banc Funds Company, L.L.C. 20 North Wacker Drive, Suite 3300 Chicago, IL 606061 | 1,059,526 | 6.5% | |||
Common Stock | EJF Capital LLC 2107 Wilson Boulevard, Suite 410 Arlington, VA 222012 | 881,952 | 5.4% | ||||||
Common Stock | Wellington Management Group LLP 280 Congress Street Boston, MA 022103 | 851,988 | 5.24% | ||||||
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1 According to the Schedule 13G/A filed on February 13, 2018, which was filed and reported jointly by Banc Fund VII L.P., Banc Fund VIII L.P., and Banc Fund IX L.P., and the ultimate general partner of each fund, The Banc Funds Company, L.L.C.
2 According to the Schedule 13G filed on June 30, 2017, which was filed and reported jointly by EJF Capital LLC, Emanuel J. Friedman, and EJF Sidecar Fund, Series LLC – Series E.
3 According to the Schedule 13G filed on February 8, 2018, which was filed and reported jointly by Wellington Management Group LLP, Wellington Group Holdings LLP, Wellington Investment Advisors Holdings LLP, and Wellington Management Company LLP.
Directorsand Executive Officers
Name and Address(1) of Beneficial Owner | Number of Shares of Common Stock Beneficially Owned | Percent of Class | |||||||
Randall S. Eslick | 60,301 | (2) | * | ||||||
James A. Sundquist | 84,611 | (3) | * | ||||||
Samuel D. Jimenez | 58,191 | (4) | * | ||||||
Robert H. Muttera | 91,783 | (5) | * | ||||||
Orin N. Bennett | 60,264 | (6) | * | ||||||
Gary R. Burks | 9,132 | (7) | * | ||||||
Joseph Q. Gibson | 101,488 | * | |||||||
Jon W. Halfhide | 34,700 | (8) | * | ||||||
Linda J. Miles | 18,609 | * | |||||||
David H. Scott | 101,975 | (9) | * | ||||||
Karl L. Silberstein | 7,500 | (10) | * | ||||||
Terence J. Street | 37,000 | (11) | * | ||||||
Lyle L. Tullis | 264,425 | (12) | 1.97% | ||||||
All directors, named executive officers and beneficial owners as a group (13 persons) | 929,979 | 6.92% | |||||||
* Represents less than one percent of outstanding Common Stock.
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Name and Address of Beneficial Owner1 | Number of Shares of Common Stock Beneficially Owned | Percent of Class2 | |
Orin N. Bennett | 65,264 | 3 | * |
Gary R. Burks | 9,132 | 4 | * |
Randall S. Eslick | 61,962 | 5 | * |
Joseph Q. Gibson | 110,988 | 6 | * |
Jon W. Halfhide | 40,700 | 7 | * |
Samuel D. Jimenez | 64,249 | 8 | * |
Linda J. Miles | 21,109 | * | |
Robert H. Muttera | 109,765 | 9 | * |
David H. Scott | 101,975 | 10 | * |
Karl L. Silberstein | 15,000 | 11 | * |
Terence J. Street | 47,000 | 12 | * |
James A. Sundquist | 114,829 | 13 | * |
Lyle L. Tullis | 278,925 | 14 | 1.72% |
All directors and named executive officers as a group (13 persons) | 1,040,898 | 6.41% |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), 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 of ownership of Common Stock and other equity securities of the Company. To the Company’s knowledge, based solely upon a review of such reports and written representations, the Company believes that all reports required by Section 16(a) of the Exchange Act to be filed by its directors and executive officers during the last fiscal year were filed in a timely manner.
1 The business address for each Beneficial Owner is 555 Capitol Mall, Suite 1255, Sacramento, California 95814, and the mailing address for each Beneficial Owner is 1901 Churn Creek Road, Redding, California 96002.
2 *Represents less than one percent of outstanding Common Stock.
3 Includes 63,264 shares held in a trust of which Mr. Bennett is a trustee and 2,000 shares held jointly with his spouse.
4 Includes 4,132 shares held jointly with Mr. Burks’ spouse and 5,000 options that could be exercised within sixty days following March 1, 2018.
5 Includes 18,766 shares held jointly with Mr. Eslick’s spouse, 21,196 shares held for Mr. Eslick’s account in the Company’s 401(k) retirement plan, and 22,000 options that could be exercised within sixty days following March 1, 2018.
6 All shares are held in a trust of which Mr. Gibson is a trustee.
7 All shares are held in a trust of which Mr. Halfhide is a trustee.
8 Includes 28,457 shares held jointly with Mr. Jimenez’s spouse and 35,792 shares held for Mr. Jimenez’s account in the Company’s 401(k) retirement plan.
9 Includes 665 shares held in a trust of which Mr. Muttera is a trustee, 4,446 shares held for Mr. Muttera’s account in the Company’s 401(k) retirement plan, and 20,000 options that could be exercised within sixty days following March 1, 2018.
10 Includes 77,756 shares held jointly with Mr. Scott’s spouse, 204 shares held individually by his spouse, 16,819 shares held in his spouse’s individual retirement account, and 7,196 shares held in a 401(k) retirement plan. Mr. Scott has 76,041 shares of Common Stock pledged as security. Mr. Scott retired from the Board and ceased to be a director on March 20, 2018.
11 Includes 11,500 shares held in a trust of which Mr. Silberstein is a trustee.
12 Includes 5,000 shares held in a trust over which Mr. Street has investment power and 42,000 shares held in a 401(k) retirement plan.
13 Includes 12,770 shares held for Mr. Sundquist’s account in the Company’s 401(k) retirement plan.
14 Includes 23,560 shares held by Mr. Tullis’ spouse in individual retirement accounts.
INFORMATIONABOUT THE DIRECTOR NOMINEES
Information regarding each of the director nomineesnominee is provided below, including each nominee’s name, age as of the Record Date, the year first elected as a director of the Company, principal occupation, public company directorships and work history during the past five years. There are no family relationships among any of the directors or named executive officers, nor are any of the corporations or organizations referenced in the biographical information below a parent, subsidiary or affiliate of the Company.officers. All directors of the Company also currently serve as directors of Redding Bank of Commerce, (“Redding Bank of Commerce”), the Company’s banking subsidiary. None of the director nominees has served as a director of another public company during the past five years.
Orin N. Bennett
Mr. Bennett, 68,69, has been a director of Redding Bank of Commerce since September 2005 and of the Company since May 2006.
Business Experience: Mr. Bennett is a registered Civil Engineer in California and Oregon. He formed a civil engineering business in 1995 that in 2008 became Bennett Engineering Services in Roseville, California, which provides civil engineering services primarily in California. Mr. Bennett also is a partner in BD Properties, LLC, a real estate investment company. Mr. Bennett was employed by the international engineering firm of CH2M Hill prior to forming his own civil engineering business in 1979. Mr. Bennett’s knowledge of the Sacramento market and his real estate experience provideoffer insight into the existing opportunities for a community bank to provide its services and operations and make his continued service toon the Board a valuable asset.
Other Public Company Directorships: None.
Committees: Mr. Bennett serves on the Executive, Executive Compensation, Long-Range Planning, and Nominating and Corporate Governance (the “Nominating and Corporate Governance Committee”) committees of the Board. He also serves as Chairman of the Redding Bank of Commerce Loan Committee.
Gary R. Burks
Mr. Burks, 62,63, has been a director of Redding Bank of Commerce since June 2007 and of the Company since May 2008.
Business Experience: Mr. Burks has been Vice President and General Manager of Foothill Distributing Company, Inc. (an independent wholesale company of Anheuser-Busch wholesale company)Companies LLC) in Redding since October 1991 and has over twenty years of experience on its board. He currently serves on the Board of Directors of the Redding Colt 45s, a collegiate baseball teamteam. He formerly volunteered as a Loaned Executive for the Greater Redding Chamber of Commerce, served as president of Redding Rotary, was an Executive Board member of the Greater Redding Chamber of Commerce, and was on the Corporate Governance Committee of the United Way of Northern California. He volunteered as a Loaned Executive for the Greater Redding Chamber of Commerce during 2015, served as president of Redding Rotary from 1991 to 1992, and he was an Executive Board member of the Greater Redding Chamber of Commerce from 1985 to 1991. Mr. Burks’ experience in running a large-scale company and his involvement in many academic and community activities make him a valuable member of the Board.
Other Public Company Directorships: None.
Committees: Mr. Burks serves as Chairman of the Nominating and Corporate Governance Committee and serves on the Audit and Qualified Legal Compliance Committee (the “Audit Committee”), the Executive Compensation, and the Long-Range Planning committees of the Board. Mr. Burks also serves on the Technology Committee of Redding Bank of Commerce.
Randall S. Eslick
Mr. Eslick, 59,60, has been a director of the Company and Redding Bank of Commerce and of the Company since November 2013.
Business Experience: Please see below inunder “NamedExecutive Officers of the Company.” Mr. Eslick joined the Company in 2001. He serves on the board of directors of River Oak Center for Children and is its former president of the board.board president. His experience with the Company, extensive career in banking, and reputation in the community make him a valuable member of the Board.
Other Public Company Directorships: None.
Committees: Mr. Eslick serves on the Long-Range Planning Committee of the Company. Because Mr. Eslick is an employee of the Company and is not considered independent by NASDAQ Stock marketMarket (“NASDAQ”) listing standards and SEC regulations, he is not a member of any other CompanyBoard committees. Mr. Eslick is invited to attend all CompanyBoard committee meetings other than executive sessions as a guest; however, he does not participate in any portion of a meeting during which his compensation is discussed. Mr. Eslick presently serves on the ALCO, CRA, Loan, and Technology committees of Redding Bank of Commerce.
Joseph Q. Gibson
Mr. Gibson, 69,70, has been a director of Redding Bank of Commerce since November 2009 and of the Company since May 2010.
Business Experience: Mr. Gibson has thirty-ninebeen an insurance agent for over twenty-five years and has forty years of experience in business management. He was an owner of SFI Insurance, Inc. from 1992 until it merged with George Petersen Insurance in 2017, and he was a teacher and administrator for Anderson Union High School from 1973 to 2003, and he has been an owner of SFI Insurance, Inc. since 1992.2003. He currently serves on the Anderson Union High School Board, Shasta College Foundation Board, Shasta Trinity Regional Occupation Program Board, and Shasta Historical Society Board. He is past Presidentpresident of Riverview Golf and Country Club and he waspast president of the Anderson Rotary from 2002 to 2003.Rotary. Mr. Gibson’s extensive experience in the insurance industry, as well as his experience working with various organizations involved in academic and community activities, makemakes him a valuable member of the Board.
Other Public Company Directorships: None.
Committees: Mr. Gibson presently serves on the Long-Range Planning Committee of the Board. He also serves the Redding Bank of Commerce board as Chairman of the CRA Committee and as a member of the ALCO and Technology committees.
Jon W. Halfhide CPA
Mr. Halfhide, 59,60, has been a director of Redding Bank of Commerce since July 2005 and of the Company since May 2006. He was appointed Vice Chairman of the Board of the Company and of Redding Bank of Commerce in February 2013.
Business Experience: Mr. Halfhide is currentlyhas been a health care consultant since 2013 and serves on the board of directors and on the Investment and Audit Committees of Shasta Regional Community Foundation. From January 2000 to January 2013, Mr. Halfhide served as president of Dignity Healthcare North State Service Area and St. Elizabeth Community Hospital. He has twenty-eight years of management experience with Dignity Healthcare and has served in the capacity of Controller, Chief Financial Officer and Chief Executive Officer with Dignity Health North State. Mr. Halfhide also served on the non-profit board of directors of Mercy Foundation North and Catholic Healthcare West North State and on the non-profit board of directors of the Tehama County Economic Development Corporation. Mr. Halfhide’s vast experience as a certified public accountant, his designation as an audit committee financial expert, his knowledge of running a health care facility, his designation as an audit committee financial expert, and his involvement in community activities make his continued service to the Board a valuable asset.
Other Public Company Directorships: None.
Committees: Mr. Halfhide serves as Chairman of the Executive Compensation Committee. He also serves onCommittee and is a member of the Audit, CommitteeExecutive, and meetsLong-Range Planning committees of the criteria ofBoard. He qualifies as an audit committee financial expert under SEC regulations. Mr. HalfhideHe also serves on the Executive and Long-Range Planning committees of the Board, is Chairman of the Redding Bank of Commerce board as Chairman of the ALCO Committee and isas a member of the Redding Bank of Commerce Technology Committee.
Linda J. Miles
Ms. Miles, 63,64, has been a director of Redding Bank of Commerce since July 2013 and of the Company since May 2014.
Business Experience: Ms. Miles served as Executive Vice President and Chief Operating Officer of the Company and of Redding Bank of Commerce from May 2009 until her retirement in February 2013. From January 1996 to April 2009, she served as Executive Vice President and Chief Financial Officer of the Company. From October 1989 to December 1995, she served as Senior Vice President and Chief Financial Officer of the Company. Before joining the Company, Ms. Miles was Senior Vice President and Chief Financial Officer at another California independent financial institution. Ms. Miles served as a director of Bank of Commerce Mortgage from May 2009 until the company was sold in 2012. Ms. Miles’ institutional knowledge, community banking experience and extensive history with the Company make her a valuable member of the Board.
Other Public Company Directorships: None.
Committees: Ms. Miles serves on the Long-Range Planning Committee of the Board. As a director ofShe also serves the Redding Bank of Commerce Ms. Miles serves onboard as Chairwoman of the Technology Committee and as a member of the ALCO and CRA committees and is Chairwoman of the Technology Committee.committees.
David H. Scott,CPAKarl L. Silberstein
Mr. Scott, 73,Silberstein, 61, has been a director of Redding Bank of Commerce since April 1997 and of the Company since May 1997.
Business Experience: Mr. Scott is the founding partner of D.H. Scott & Company, LLP, a public accounting firm, which is a position he has held since June 1986. He also serves on the non-profit Economic Development Corporation of Shasta County and the Shasta Historical Society. Mr. Scott’s experience in public and private business, his extensive experience in the field of public accounting and his vast experience working with various organizations in many aspects of the financial process offers a valuable perspective to the Board.
Other Public Company Directorships: None.
Committees: Mr. Scott serves as Chairman of the Audit Committee and as a member of the Executive and Long-Range Planning committees of the Board. The Board has determined that Mr. Scott meets the criteria of an audit committee financial expert under SEC regulations. Mr. Scott also serves as the Corporate Secretary of the Company. Mr. Scott is a member of the ALCO and Loan committees of Redding Bank of Commerce.
Karl L. Silberstein, CPA
Mr. Silberstein, 60, has been a director of Redding Bank of Commerce and the Company since June 2016.
Business Experience: Mr. Silberstein is a certified public accountant with thirty-eighthas thirty-nine years of combined professional experience in public accounting and financial executive leadership. He is currentlySince 2011, he has been Senior Vice President, Financial Operations at Dignity Health, a healthcare company with $12 billion in annual revenue.revenue, and he has held various other positions with Dignity Health since 2000. He also serves as staff to its Audit Committee. He has twelve years of experience as a certified public accountant providing auditing and consulting services. Mr. Silberstein’s experience as a certified public accountant, designation as an audit committee financial expert, and service on numerous other corporate and non-profit boards, including roles as chair and president, make him a valuable addition tomember of the Board.
Other Public Company Directorships: None.
Committees: Mr. Silberstein serves onas Chairman of the Audit Committee and qualifies as an audit committee financial expert under SEC regulations. He is also a member of the Long-Range Planning committeesCommittee of the Board.
Terence J. Street
Mr. Street, 62,63, has been a director of Redding Bank of Commerce since August 2012 and of the Company since May 2013.
Business Experience: Mr. Street ishas been the general manager of the general contracting division of Clark Pacific, which manufactures prefabricated building systems, since 2015 and is the past President of Roebbelen Contracting, Inc. located in El Dorado Hills, California. Mr. Street serves as Chairman of the Board of United Business Bank and serves on the non-profit board of directors of Mercy Foundation Sacramento and of Cristo Rey High School. He was formerly with the Catholic Foundationis past Chairman of the Sacramento Dioceses. HeBoard of United Business Bank, is also a past director of the Construction Employers’ Association, and is past Chairman of the Board of Trustees of Jesuit High School.School, and was formerly a board member of the Catholic Foundation of the Sacramento Dioceses. Mr. Street’s business acumen, integrity, leadership and knowledge of the Sacramento market as well as his community service make him a valuable member of the Board.
Other Public Company Directorships: None.
Committees: Mr. Street serves on the Audit, Long-Range Planning, and Nominating and Corporate Governance committees of the Board. He also serves on the Loan Committee of Redding Bank of Commerce.
Lyle L. Tullis
Mr. Tullis, 67,68, has been a director of Redding Bank of Commerce and of the Company since May 2003. Mr. Tullis was appointed Chairman of the Board of the Company and of Redding Bank of Commerce in February 2013.
Business Experience: Since February 1976, Mr. Tullis has served as president of Tullis, Inc., a general engineering construction company. Mr. Tullis is the past District Chairman of the Eureka and Shasta Districts of the Associated General Contractors of California. Mr. Tullis’ extensive business experience, which includes project financing, budgets, bidding and oversight of the final project, and his involvement in local community activities make him a valuable member of the Board.
Other Public Company Directorships: None.
Committees: Mr. Tullis serves as Chairman of the Executive Committee and as Chairman of the Long-Range Planning Committee and is a member of the Audit, Executive Compensation, and Nominating and Corporate Governance committees of the Board. He is also a member of the ALCO and Loan committees of Redding Bank of Commerce.
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)awards). Directors may defer fees in accordance with the Company’s Amended and Restated 2013 Directors’Directors Deferred Compensation Plan.Plan (the “2013 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 the consulting firm McLagan, a unit of Aon plc (“McLagan”), which provides compensation consulting, operational benchmarking and best practice research across the financial industries.
A director who is an officer/employee of the Company or of a subsidiary does not receive additional compensation for his or her membership on the Board.
MonthlyMonthly Retainer and Meeting Fees
During 2016,2017, each independent director received a monthly retainer of $800, the Chairman of the Board received an additional $1,200 per month, and the Chairman of the Audit Committee received an additional $1,000 per month. In addition, meeting fees were paid as follows: $800 per board meeting, $775 per committee meeting for the ChairmanChairperson of the respective committee, and $400 per committee meeting for non-Chairmannon-Chairperson committee members. In addition, independent directors received fees for their service on the Redding Bank of Commerce board of directors and its respective committees. The 2017 compensation for each director is shown in the “Director Compensation Table” section below.
In 2007, the Company adopted the 2008 Stock Option Plan, which was amended and restated in 2010 and 2012 and is now known as the Amended and Restated 2010 Equity Incentive Plan (the “2010 Equity Plan”). The 2010 Equity Plan allows for the grant of nonqualified 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-employeeNon-employee directors are eligible to receive equity awards under the Company’s 2010 Equity Plan.
Directors’Directors’ Deferred Compensation PlanPlanss
TheOn December 19, 2013, the Board adopted a directors’ deferred compensation plan, adopted bywhich was amended and restated on February 20, 2018 and is referred to herein as the Board in2013 Plan, to replace the directors’ deferred compensation plan dated January 1, 1993, as amended (the “1993 Directors’ Deferred Plan”) is a. Both plans are nonqualified director benefit planplans through which thean eligible director may voluntarily electselect 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 upon terminationseparation from service. Directors may not defer additional compensation once their total deferred benefit reaches $500,000.
Amounts held in accounts under the 2013 Plan are credited with interest at a rate equal to the Bloomberg 20-year Investment Grade Financial Institutions Index rate (or a similar reference rate selected by the Company if the Bloomberg rate is not published) in effect on the immediately preceding December 31, plus two percent. The obligations under the 1993 Plan will continue to accrue interest; however, as of service.December 31, 2013, no additional deferrals may be made under the 1993 Plan. The current interest rate onapplicable to amounts held in accounts under the 1993 Directors’ Deferred Plan is the Wall Street Journal prime rate in effect on the first business day of January and July plus three percent, with an option to change to a fixed rate of ten percent, fixedat the director’s election, immediately preceding termination of service. As a nonqualified plan, the plan is only available to independent directors without regard to nondiscrimination requirements
No deferred compensation will be payable to a director until the death, disability, resignation, retirement or removalseparation from office of such director. After a qualifying event as listed in the preceding sentence,service, whereupon all deferred compensation, together with interest under the 1993 Directors’ Deferred Planthereon, will be paid in accordance with the terms of the 1993 Directors’ Deferred Plan documentplan in one lump sum or byin installments if the installment payment method should the director have made such an election.
As of December 31, 2016, the Company’s accrued obligations under the 1993 Directors’ Deferred Plan were $3,209,955. The obligations under the 1993 Directors’ Deferred Plan will continue to accrue interest; however, as of December 31, 2013, no additional deferrals may 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 those of the 1993 Directors’ Deferred Plan. The interest rate of the 2013 Directors’ Deferred Plan is equal to the Bloomberg 20-year Investment Grade Financial Institutions Index rate (or a similar reference rate selected by the Company if that rate is not published) in effect on the immediately preceding December 31, plus two percent. The 2013 Directors’ Deferred Plan does not include an option to change to ten percent fixed immediately preceding termination of service.
As of December 31, 2016,2017, the Company’s accrued obligations under the 2013 Directors’ Deferred Plan were $539,989.and the 1993 Plan totaled $3,822,044.
The following table shows compensation paid to or accrued by non-employee directors during the fiscal year ended December 31, 20162017 for service toon the boards of the Company and of Redding Bank of Commerce.
Director Compensation Table
Fees Earned or Paid in Cash | Nonqualified Deferred Compensation Earnings | Total | ||||||||||
Name | ($) | ($) | ($) | |||||||||
Orin N. Bennett | 52,454 | 28,447 | 80,901 | |||||||||
Gary R. Burks | 33,850 | 0 | 33,850 | |||||||||
Joseph Q. Gibson | 28,300 | 11,605 | 39,905 | |||||||||
Jon W. Halfhide | 39,725 | 13,566 | 53,291 | |||||||||
Linda J. Miles | 30,553 | 2,056 | 32,609 | |||||||||
David H. Scott | 58,500 | 29,718 | 88,218 | |||||||||
Karl L. Silberstein | 9,600 | (1) | 103 | 9,703 | ||||||||
Terence J. Street | 36,750 | 4,444 | 41,194 | |||||||||
Lyle L. Tullis | 64,900 | 34,873 | 99,773 | |||||||||
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Name | Fees Earned or Paid in Cash ($)1 | Option Awards ($)2 | Nonqualified Deferred Compensation Earnings ($) | Total ($) |
Orin N. Bennett | 54,800 | 0 | 18,698 | 73,498 |
Gary R. Burks | 35,500 | 0 | 0 | 35,500 |
Joseph Q. Gibson | 30,300 | 0 | 8,010 | 38,310 |
Jon W. Halfhide | 40,900 | 0 | 8,672 | 49,572 |
Linda J. Miles | 30,625 | 0 | 1,692 | 32,317 |
David H. Scott | 58,950 | 0 | 19,248 | 78,198 |
Karl L. Silberstein | 24,800 | 0 | 737 | 25,537 |
Terence J. Street | 41,075 | 0 | 3,145 | 44,220 |
Lyle L. Tullis | 68,125 | 0 | 21,609 | 89,734 |
THEBOARD, BOARD COMMITTEES AND GOVERNANCE MATTERS
CorporateGovernance Guidelines
The Board is committed to sound and effective corporate governance principles and practices. The Board has adopted corporate governance guidelines to provide the framework for the governance of the Company. These guidelines set forth director qualifications and standards of independence and mandate that at least a majority of the Board and all the members of the Audit Committee, Executive Compensation Committee and the Nominating and Corporate Governance Committee meet the criteria for independence as discussed below.independence.
Highlights of the Company’s corporate governance practices are described below. To fulfill its role, the Board, acting directly or through a Board committee, must perform the following primary functions:
● | Oversee the conduct of the Company’s business to evaluate whether or not the Company is being properly managed; |
● | Review and, |
● | Review and, |
● | Assess major risk factors relating to the Company and its performance, and review measures to address and mitigate such risks; |
● | Evaluate regularly the performance of the Chief Executive Officer and, with the advice of the Chief Executive Officer, evaluate regularly the performance of |
● | Plan for succession of the Chief Executive Officer and monitor management’s succession planning for other key |
1 See the section above entitled “Monthly Retainer and Meeting Fees.”
2 There were no stock options awarded to any of the directors during 2017. As of December 31, 2017, Mr. Burks held 5,000 vested stock options with an exercise price of $5.56 per share.
In discharging these obligations, directors are entitled to rely reasonably on the honesty and integrity of their fellow directors, the Company’s executive officers, and the Company’s outside advisors and auditors. Directors will be entitled to reasonable directors’ and officers’ liability insurance obtained on their behalf, the benefits of indemnification to the fullest extent permitted by law under the Company’s articles, bylaws and any indemnification agreements, and exculpation as provided by state law and the Company’s articles.
CorporateGovernance Guidelines and Policies
The Board is committed to good business practices, transparency in financial reporting and high standards of corporate governance. The Company operates within a comprehensive plan of corporate governance for the purpose of defining responsibilities, setting high standards of professional and personal conduct and assuring compliance with such responsibilities and standards. The Board regularly monitors developments in the area of corporate governance. The Board periodically reviews the Company’s governance policies and practices against those suggested by various groups or authorities active in corporate governance and the practices of other companies, as well as the requirements of applicable law, NASDAQ listing standards, and SEC regulations.
Clawback Policy
The Board adopted a Clawback Policy providing for the recovery of incentive compensation in certain circumstances. Under the Clawback Policy, if the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under applicable securities laws, and the Board determines that the misconduct of any person who was an executive officer at the time of the misconduct contributed to the non-compliance which resulted in the obligation to restate the Company’s financial statements, the Company will recover compensation from any such current or former executive officer who received incentive compensation (including equity-based compensation) during the one-year period preceding the date of the restatement, based on the erroneous data, in excess of what would have been paid to the executive under the accounting restatement.
Anti-Hedging Policy
The Board has adopted an Anti-Hedging Policy that prohibits the Company’s directors, officers and employees from engaging in a “hedging transaction,” which is generally a transaction that would have the economic effect of establishing a downside price protection in connection with Company Common Stock owned by such person. This type of transaction may create the appearance that the person’s interests are not aligned with those of the Company’s shareholders generally, to the extent that it is designed to hedge or offset against any decrease in the market value of Company Common Stock.
Anti-Pledging and Margin Account Policy
The Board has adopted an Anti-Pledging and Margin Account Policy that prohibits the Company’s directors and executive officers from pledging Company Common Stock as collateral or from holding Company Common Stock in a margin account. This policy was adopted on December 20, 2016 and does not affect any pledges of Company Common Stock that were made prior to that date, except that (i) no such pre-existing pledges may be increased in amount after that date, (ii) no pledges, including pledges made prior to that date, are permitted after December 31, 2018, and (iii) all such pledges must be ended by December 31, 2018 in any event.
Stock Ownership and Retention Guidelines
The Board has approved stock ownership and retention guidelines for its directors and executive officers which are intended to help closely align the financial interests of such persons with those of the Company’s shareholders. Within five years after appointment or election to the Board or five years from December 20, 2016, the date the policy was adopted, whichever is later, each director is expected to acquire and retain shares of Company Common Stock having a market value of at least five times his or her annual cash retainer (exclusive of committee fees). As of March 1, 2017, all but two independent directors have met the ownership guideline.
Similarly, executive officers who are required to file reports pursuant to Section 16 of the Exchange Act are expected, within five years of appointment or five years from December 20, 2016, the date the policy was adopted, whichever is later, to acquire and retain Company shares having a market value equal to at least two times his or her annual base salary. As of March 1, 2017, all but one executive officer to whom the guidelines apply has met the ownership guideline.
Unless a director or executive officer has achieved the applicable guideline level of share ownership, he or she is required to retain an amount equal to fifty percent of the net shares received as a result of the exercise, vesting or payment of any Company equity awards granted to him or her. A director or executive officer must continue to retain such shares for as long as the director or executive officer is subject to the guidelines.
ExecutiveOfficers
The Board recognizes that the actual management of the business and affairs of the Company is conducted by the Chief Executive Officer and other senior executives under his supervision and that, insupervision. In performing the management function, the Chief Executive Officer and other senior executives are obliged to act in a manner that is consistent with the oversight functions and powers of the Board and the standards of the Company and to execute any specific plans, instructions or directions of the Board.
Codeof Conduct, Code of Ethics and Corporate Governance Documents
The Board has adopted a Code of Conduct that applies to all of the Company’s directors, officers and staff and a Code of Ethics that applies to the principal executive officer and principal financial officer, or any person serving in that capacity.those capacities. The Code of Conduct and Code of Ethics embody the Company’s commitment to high standards of ethical and professional conduct. All directors, officers and staff are required to certify annually certify that they have read and complied with the Code of Conduct. The Code of Conduct consists of basic standards of business practice as well as professional and personal conduct. You may access the Code of Ethics and the current charters of the Audit Committee, Executive Compensation Committee, and Nominating and Corporate Governance Committee, as well as the articles and bylaws, by visiting the Company’s corporate website atwww.bankofcommerceholdings.com or by writing to Bank of Commerce Holdings, Attention: Corporate Secretary, 1901 Churn Creek Road, Redding, California 96002.
Board Leadership StrucStructureture and Role in Risk Oversight
The Board is committed to maintaining an independent Board. To that end, the Company separates the duties of Chairman and Chief Executive Officer. The Board believes that the separation of duties of Chairman and Chief Executive Officer eliminates any inherent conflict of interest that may arise when the roles are combined and that a non-employee director who is not serving as an executive of the Company can best provide the necessary leadership and objectivity required as Chairman.
The Board has ultimate authority and responsibility for overseeing risk management of the Company. Some aspects of risk oversight are fulfilled at the full Board level. Additionally, the Board, or a committee of the Board, receives specific periodic reports from executive management on credit risk, liquidity risk, interest rate risk, capital risk, operational risk and economic risk. The Audit Committee oversees financial, accounting and internal control risk management. The internal audit function and the independent registered public accounting firm report directly to the Audit Committee. The Executive Compensation Committee oversees the management of risks that may be posed by the Company’s compensation practices and programs.
The Board appoints one of its independent members to serve as the Chairman of the Board. The Chairman chairs all regular sessions of the Board and, with input from the Chief Executive Officer to the extent appropriate, sets the agenda for Board meetings, subject to the right of each board member to suggest agenda items.
The exact number of directors shall be fixed from time to time by the Board within the requirements of the Company’s articles and bylaws. In June 2016, the Board determined that the appropriate size of the Board would be ten members. At its February 2018 meeting, after review of the director nominees, the Board determined that the appropriate size of the Board would be nine members effective March 20, 2018 upon the retirement of Mr. Scott in accordance with the Company’s Director Policy, which states that the retirement age for directors of the Company is upon reaching the age of seventy-four years.
The Board must consist of a majority of directors who meet the independence criteria required by applicable law, NASDAQ listing standards, SEC regulations and as adopted by the Board.
A director should possess personal and professional integrity, have good business judgment, and have relevant experience and skills to be an effective director in conjunction with the full Board in collectively serving the long-term interests of the Company’s shareholders. Directors should be committed to devoting sufficient time and energy to diligently performing their duties as directors.
Size of BoardSelection Process: The exact number of directors shall be fixed from time to time by the Board within the requirements of the Company’s articles and bylaws. In June 2016, the Board determined that the appropriate size of the Board would be ten members.
Selection Process: In accordance with the policies and principles in its charter, the Nominating and Corporate Governance Committee is responsible for identifying and recommending potential director nominees to the Board for its approval when there is a vacancy on the Board and for each annual meeting of shareholders. The Chairman ofselection process is discussed in detail in the Nominating and Corporate Governance Committeesection entitled “Director Qualifications and the Chairman of the Board will extend an invitation to the potential director nominee to join the Board.Nomination Process.”
Director Orientation and Continuing Education
All new directors participate in an orientation program during their first year as a director. As part of the orientation, each director receives, among other materials, copies of the Company’s articles, bylaws, committee charters, policies, and the strategic plan. Orientation also includes presentations by senior management to familiarize new directors with the Company’s strategic plans, significant financial, accounting and risk management issues, compliance programs, and conflict policies. Each director is required to review and sign the Company’s Insider Trading Policy and the Code of Conduct. A new director will attend a meeting with the Chief Executive Officer and Chief Financial Officer to be briefed on Board reports, significant financial, accounting and risk management issues, and current and potential projects.
All directors receive annual director education in subjects relevant to the duties of a director, including the study of corporate governance best practices and ethics. The Board requires directors to participate in continuing education programs and reimburses directors for the expenses of such participation. All directors successfully complete each training course assigned to them each year.
Board Attendance and Annual Meeting Policy
Directors are expected to attend all Board meetings and all meetings of committees on which they serve. Directors are expected to devote an adequate amount of time and effort to properly discharge their responsibilities. Information and data are important to the Board’s understanding of the business, and the Company distributes materials to the directors sufficiently in advance of each meeting to permit their review.
The Board held elevenfourteen meetings during 2016.2017. All directors attended at least seventy-five percent of the aggregate number of meetings of the Board and of the committees on which such director serves.served. The Company does not have a formal policy requiring the attendance of its directors at each annual meeting of the shareholders; however, directors are encouraged to attend. The Company had nineten directors at the time of its 20162017 annual meeting, and eightall ten were in attendance.
DIRECTORINDEPENDENCE;
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Director IndependenceIndependence
The Nominating and Corporate Governance Committee has reviewed the applicable legal standards for Board and Board committee member independence and the criteria applied to determine audit committee financial expert status. The Board has analyzed the independence of each director and nominee and has determined which nominees and members of the Board meet the standards regarding independence required by applicable law, NASDAQ listing standards, and SEC regulations, and whether or not each such director nominee is free of relationships that would interfere with the individual exercise of independent judgment. In determining the independence of each director, the Board considered many factors, including any loans to the directors, each of which (i) were made in the ordinary course of business; (ii) were substantially made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to the Company or Redding Bank of Commerce; and (iii) did not involve more than the normal risk of collectability or present other unfavorable features. Such arrangements are discussed in detail in the section entitled “Certain RelationshipsDirector Qualifications and Related Transactionsthe Nomination Process.”
Director Orientation and Continuing Education
All new directors participate in an orientation program during their first year as a director. As part of the orientation, each director receives, among other materials, copies of the Company’s articles, bylaws, committee charters, policies, and the strategic plan. Orientation also includes presentations by senior management to familiarize new directors with the Company’s strategic plans, significant financial, accounting and risk management issues, compliance programs, and conflict policies. Each director is required to review and sign the Company’s Insider Trading Policy and the Code of Conduct. A new director will attend a meeting with the Chief Executive Officer and Chief Financial Officer to be briefed on Board reports, significant financial, accounting and risk management issues, and current and potential projects.
All directors receive annual director education in subjects relevant to the duties of a director, including the study of corporate governance best practices and ethics. The Board requires directors to participate in continuing education programs and reimburses directors for the expenses of such participation. All directors successfully complete each training course assigned to them each year.
Board Attendance and Annual Meeting Policy
Directors are expected to attend all Board meetings and all meetings of committees on which they serve. Directors are expected to devote an adequate amount of time and effort to properly discharge their responsibilities. Information and data are important to the Board’s understanding of the business, and the Company distributes materials to the directors sufficiently in advance of each meeting to permit their review.
Based on these standards,The Board held fourteen meetings during 2017. All directors attended at least seventy-five percent of the aggregate number of meetings of the Board has determined that eachand of the following non-employeecommittees on which such director served. The Company does not have a formal policy requiring the attendance of its directors at each annual meeting of shareholders; however, directors are encouraged to attend. The Company had ten directors at the time of its 2017 annual meeting, and director nominees is independent:
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Randall S. Eslick, who serves as the President and Chief Executive Officer of the Company, is not independent because he is currently an executive officer of the Company.all ten were in attendance.
All of the members of the Audit Committee, Executive Compensation Committee, andDIRECTOR INDEPENDENCE; CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Nominating and Corporate Governance Committee are independent.
Compensation Committee Interlockshas reviewed the applicable legal standards for Board and Insider Participation
During 2016,Board committee member independence and the Executive Compensation Committee consisted of Jon W. Halfhide (Chairman), Orin N. Bennett, Gary R. Burks and Lyle L. Tullis. During 2016, none of the named executive officers served on the compensationcriteria applied to determine audit committee (or equivalent body) or board of directors of another entity whose executive officers served on the Executive Compensation Committee of the Board.
Directors’ Access to Officers, Employees and Independent Advisors
Directors are encouraged to keep themselves informed with regard to the Company and its operations. Directors have full and free access to Company officers and employees. Any meetings or contacts that a director wishes to initiate may be arranged through the Chief Executive Officer, Chief Financial Officer or directly by the director. Directors will use their judgment to ensure that any such contact is not disruptive to the Company’s business operations and will, to the extent that it is appropriate, copy the Chief Executive Officer on any written communications between a director and a Company officer or employee.
Communications with the Board of Directors
financial expert status. The Board has established a process for shareholdersanalyzed the independence of each director and other interested parties to communicate with independentnominee and has determined which nominees and members of the Board or a specific committee. Parties may communicate withmeet the Boardstandards regarding independence required by sending a letter to Bank of Commerce Holdings, Attention: Corporate Secretary, 1901 Churn Creek Road, Redding, California 96002.
CertainRelationshipsapplicable law, NASDAQ listing standards, and Related Transactions
PolicySEC regulations, and Procedures on Related Person Transactions
The Company adopted its Code of Conduct to promote a “tone at the top” of the highest ethical standards within the Company. The Code of Conduct requires all Company personnel immediately to disclose situations that might create a conflict of interest, or the perception of a conflict of interest, which include transactions involving entities with which such personnel are associated. The Board 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. The Board will determine whether or not each such director nominee is free of relationships that would interfere with the transactions are just and reasonableindividual exercise of independent judgment. In determining the independence of each director, the Board considered many factors, including any loans to the Company at the timedirectors, each 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. The Company has a Regulation O Policy relating to loans to its executive officers, directors and principal shareholders.
Lending and Other Ordinary Business Transactions
During 2016, almost all of the Company’s directors, as well as some of their family members and/or affiliated entities, engaged in loan transactions, had other extensions of credit and/or engaged in other transactionswhich (i) were made in the ordinary course of business with Redding Bank of Commerce. All of these transactionsbusiness; (ii) were made on substantially the same terms, including interest rates collateral and repayment,collateral, as those availableprevailing at the time for similar transactionscomparable loans with unrelated parties. Nonepersons not related to the Company or Redding Bank of the loans or credit transactions involvedCommerce; and (iii) did not involve more than the normal risk of collectability or presentedpresent other unfavorable features.
COMMITTEESOF THE BOARD OF DIRECTORS
The Board has established, among others, a standing Audit Committee, an Executive Compensation Committee, and a Nominating and Corporate Governance Committee. All members of these three committees meet the applicable standards of independence defined by applicable law, NASDAQ listing standards and SEC regulations. In addition, the members of the Executive Compensation Committee meet the applicable standards of independence defined by IRS regulations. All directors participate Such arrangements are discussed in detail in the long-range planning of the Company.
You may access the current charters of the Audit Committee, Executive Compensation Committee, and Nominating and Corporate Governance Committee, as well as the articles and bylaws, by visiting the Company’s corporate website atwww.bankofcommerceholdings.com or by writing to Bank of Commerce Holdings, Attention: Corporate Secretary, 1901 Churn Creek Road, Redding, California 96002.
Information about each of these three committees of the Board, its members who served during 2016, the committee’s purpose and the number of meetings held in 2016 follows.
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THENOMINATING AND CORPORATE GOVERNANCE COMMITTEEAND NOMINATIONS FOR DIRECTOR
The Nominating and Corporate Governance Committee of the Board has been delegated the responsibility to identify, evaluate and recommend for nomination candidates for election as directors. Each of the members of the Nominating and Corporate Governance Committee has been determined to be independent as defined by applicable law, NASDAQ listing standards and SEC regulations.
The goal of the Nominating and Corporate Governance Committee’s nominating process is to assist the Company in attracting competent individuals with the requisite management, financial and other expertise who will serve as directors and act in the best interests of the Company and its shareholders. The Nominating and Corporate Governance Committee consults with other Board members, the Company’s Chief Executive Officer and other Company personnel in this process. The Nominating and Corporate Governance Committee will consider an individual recommended by a shareholder for nomination as a director provided the shareholder making the recommendation follows the procedures for submitting a proposed nominee’s name and provides the required information described below.
section entitled “Director Qualifications and the Nomination Process.”
Director Orientation and Continuing Education
All new directors participate in an orientation program during their first year as a director. As part of the orientation, each director receives, among other materials, copies of the Company’s articles, bylaws, committee charters, policies, and the strategic plan. Orientation also includes presentations by senior management to familiarize new directors with the Company’s strategic plans, significant financial, accounting and risk management issues, compliance programs, and conflict policies. Each director is required to review and sign the Company’s Insider Trading Policy and the Code of Conduct. A new director will attend a meeting with the Chief Executive Officer and Chief Financial Officer to be briefed on Board reports, significant financial, accounting and risk management issues, and current and potential projects.
All directors receive annual director education in subjects relevant to the duties of a director, including the study of corporate governance best practices and ethics. The Board requires directors to participate in continuing education programs and reimburses directors for the expenses of such participation. All directors successfully complete each training course assigned to them each year.
Board Attendance and Annual Meeting Policy
Directors are expected to attend all Board meetings and all meetings of committees on which they serve. Directors are expected to devote an adequate amount of time and effort to properly discharge their responsibilities. Information and data are important to the Board’s understanding of the business, and the Company distributes materials to the directors sufficiently in advance of each meeting to permit their review.
The Board held fourteen meetings during 2017. All directors attended at least seventy-five percent of the aggregate number of meetings of the Board and of the committees on which such director served. The Company does not have a formal policy requiring the attendance of its directors at each annual meeting of shareholders; however, directors are encouraged to attend. The Company had ten directors at the time of its 2017 annual meeting, and all ten were in attendance.
DIRECTOR INDEPENDENCE; CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Nominating and Corporate Governance Committee has reviewed the applicable legal standards for Board and Board committee member independence and the criteria applied to determine audit committee financial expert status. The Board has analyzed the independence of each director and nominee and has determined which nominees and members of the Board meet the standards regarding independence required by applicable law, NASDAQ listing standards, and SEC regulations, and whether or not each such director nominee is free of relationships that would interfere with the individual exercise of independent judgment. In determining the independence of each director, the Board considered many factors, including any loans to the directors, each of which (i) were made in the ordinary course of business; (ii) were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to the Company or Redding Bank of Commerce; and (iii) did not involve more than the normal risk of collectability or present other unfavorable features. Such arrangements are discussed in detail in the section entitled “Certain Relationships and Related Transactions.”
Based on these standards, the Board has determined that each of the following non-employee directors and director nominees is independent:
Orin N. Bennett | Linda J. Miles |
Gary R. Burks | Karl L. Silberstein |
Joseph Q. Gibson | Terence J. Street |
Jon W. Halfhide | Lyle L. Tullis |
Randall S. Eslick, who serves as President and Chief Executive Officer of the Company, is not independent because he is currently an executive officer of the Company.
All of the members of the Audit Committee, Executive Compensation Committee, and Nominating and Corporate Governance Committee are independent.
Directors’ Access to Officers, Employees and Independent Advisors
Directors are encouraged to keep themselves informed with regard to the Company and its operations. Directors have full and free access to Company officers and employees. Any meetings or contacts that a director wishes to initiate may be arranged through the Chief Executive Officer, Chief Financial Officer or directly by the director. Directors will use their judgment to ensure that any such contact is not disruptive to the Company’s business operations and will, to the extent that it is appropriate, copy the Chief Executive Officer on any written communications between a director and a Company officer or employee.
Communications with the Board of Directors
Shareholders may contact an individual director, the Board as a group, or a specified committee or group by sending a written communication to Bank of Commerce Holdings, Attention: Corporate Secretary, 1901 Churn Creek Road, Redding, California 96002. Each communication should specify the applicable addressee(s) to be contacted as well as the general topic of the communication.
The Company will receive and process communications before forwarding them to the addressee(s). 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.
Certain Relationships and Related Transactions
Policy and Procedures on Related Person Transactions
The Company adopted its Code of Conduct to promote a “tone at the top” of the highest ethical standards within the Company. The Code of Conduct requires all Company personnel to immediately disclose situations that might create a conflict of interest, or the perception of a conflict of interest, which include transactions involving entities with which such personnel are associated. The Board recognizes that related person 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 a majority of the members of the Board who are not parties to the specific transaction. The Board will determine whether or not the transactions 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. The Company has a Regulation O Policy that it follows relating to loans to its executive officers, directors and principal shareholders.
Lending and Other Ordinary Business Transactions
Redding Bank of Commerce has had and expects to have banking transactions in the ordinary course of business with some of the directors and named executive officers, as well as some of their family members and/or affiliated entities. All transactions were on substantially the same terms, including interest rates, collateral and repayment, as those available at the time for similar transactions with unrelated parties. None of the loans or credit transactions involved more than the normal risk of collectability or presented other unfavorable features.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board has established, among others, a standing Audit Committee, Executive Compensation Committee, and Nominating and Corporate Governance Committee. All members of these three committees meet the standards of independence defined by applicable law, NASDAQ listing standards and SEC regulations. In addition, the members of the Executive Compensation Committee meet the applicable standards of independence defined by IRS regulations. All directors participate in the long-range planning of the Company.
You may access the current charters of the Audit Committee, Executive Compensation Committee, and Nominating and Corporate Governance Committee, as well as the articles and bylaws, by visiting the Company’s corporate website at www.bankofcommerceholdings.com or by writing to Bank of Commerce Holdings, Attention: Corporate Secretary, 1901 Churn Creek Road, Redding, California 96002.
Information about each of these three committees of the Board, its members who served during 2017, the committee’s purpose and the number of meetings held in 2017 follows.
Audit Committee | ||
Members: | David H. Scott, Chairman | Karl L. Silberstein1 |
Gary R. Burks | Terence J. Street | |
Jon W. Halfhide | Lyle L. Tullis | |
Number of meetings in 2017: | 10 | |
Purpose: | To assist the Board in fulfilling its responsibilities to oversee management activities related to accounting and financial reporting policies, internal controls, auditing practices, and legal and regulatory compliance; to review and discuss the integrity of the Company’s consolidated financial statements and the adequacy and reliability of disclosures to shareholders; to review the qualifications and independence of the outside accountants and the performance of internal and external accountants; to prepare the committee report included in the Company’s annual proxy statement in accordance with SEC regulations; to act as the qualified legal compliance committee of the Company in accordance with its charter; and to perform the audit committee and fiduciary audit committee functions on behalf of the Company in accordance with federal banking regulations. The Board has determined that David H. Scott, Jon W. Halfhide, and Karl L. Silberstein are “audit committee financial experts” as defined by NASDAQ listing standards and SEC regulations. | |
1 Mr. Silberstein assumed the duties of Audit Committee Chairman upon the retirement of Mr. Scott on March 20, 2018.
Executive Compensation Committee | ||
Members: | Jon W. Halfhide, Chairman | Gary R. Burks |
Orin N. Bennett | Lyle L. Tullis | |
Number of meetings in 2017: | 8 | |
Purpose: | To discharge the Board’s responsibilities relating to compensation of the Company’s named executive officers, including a review of the impact of the compensation policies on the Company’s risk exposure; to review the Compensation Discussion and Analysis and to recommend inclusion of such disclosure in the Company’s annual proxy statement; to evaluate and approve compensation plans, policies, and programs of the Company applicable to named executive officers; and to periodically review director compensation practices. | |
Nominating and Corporate Governance Committee | ||
Members: | Gary R. Burks, Chairman | Terence J. Street |
Orin N. Bennett | Lyle L. Tullis | |
Number of meetings in 2017: | 4 | |
Purpose: | To assist the Board by identifying individuals qualified to become Board members and to recommend to the Board director nominees and nominees for each committee; to recommend to the Board the corporate governance guidelines of the Company and to oversee a periodic review of the Board’s performance; to oversee management and director succession planning; and to recommend to the Board a determination of each non-management director’s independence under applicable rules and guidelines. | |
THE NOMINATING AND CORPORATE GOVERNANCE COMMITTEE AND NOMINATIONS FOR DIRECTOR
The Nominating and Corporate Governance Committee of the Board has been delegated the responsibility to identify, evaluate and recommend for nomination candidates for election as directors. Each of the members of the Nominating and Corporate Governance Committee has been determined to be independent as defined by applicable law, NASDAQ listing standards and SEC regulations.
The goal of the Nominating and Corporate Governance Committee’s nominating process is to assist the Company in attracting competent individuals with the requisite management, financial and other expertise who will serve as directors and act in the best interests of the Company and its shareholders. The Nominating and Corporate Governance Committee consults with other Board members, the Company’s Chief Executive Officer and other Company personnel in this process. The Nominating and Corporate Governance Committee will consider an individual recommended by a shareholder for nomination as a director provided that the shareholder making the recommendation follows the procedures for submitting a proposed nominee’s name and provides the required information described below.
Director Qualifications and the Nomination Process
The Nominating and Corporate Governance Committee regularly reviews the composition of the Board in light of its understanding of the backgrounds, industry, professional experience and the various communities, both geographic and demographic, represented by the current members. It also monitors the expected service dates of Board members, any planned retirement dates and other anticipated events that may affect a director’s continued ability to serve. The Nominating and Corporate Governance Committee periodically reviews Board self-evaluations and information with respect to the business and professional expertise represented by current directors in order to identify any specific skills desirable for future Board members.
The Board has approved certain minimum standards for first-time director candidates, and the Nominating and Corporate Governance Committee has developed a process for identifying and evaluating first-time nominees in light of these standards and other such factors as the Nominating and Corporate Governance Committee deemsdeemed appropriate. These standards and the Nominating and Corporate Governance Committee’s evaluation process apply to all first-time director nominees, including those nominees recommended by shareholders. This process is based on the Nominating and Corporate Governance Committee’s familiarity with the composition of the current Board, its awareness of anticipated openings and its assessments of desirable talentsskills or expertise.
The Board has approved the following minimum qualifications for first-time nominees for director, including nominees recommended by shareholders, for election to the Company’s Board: (i) a demonstrated breadth and depth of management and/or leadership experience, preferably in a senior leadership role (i.e., chief executive officer, managing partner, president, chief financial officer)officer, etc.); (ii) financial literacy or other professional or business experience relevant to an understanding of the Company and its business; and (iii) a demonstrated ability to think and act independently and work constructively in a group environment. The Nominating and Corporate Governance Committee will determine, in its sole discretion, whether or not a nominee meets these minimum qualifications. The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria, and, aside from the minimum qualifications, no particular criterion is necessarily applicable to all prospective nominees. The Company believes that the backgrounds and qualifications of the directors, considered as a group, should provide a significant and diverse composite mix of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities.
The Nominating and Corporate Governance Committee also will consider if such candidate meets the independence standards defined by NASDAQ thelisting standards, SEC regulations and any additional requirements imposed by law or regulation on the members of the Audit Committee, Executive Compensation Committee, and the Nominating and Corporate Governance Committee of the Board.
Following the initial review, the Nominating and Corporate Governance CommitteeCommittee’s designee arranges an introductory meeting with the candidate and the Company’s Chief Executive Officer, Chairman of the Board, and in some cases with additional directors, to determine the candidate’s interest in serving on the Board.
The Nominating and Corporate Governance Committee, together with several members of the Board and the Chief Executive Officer, then conducts a comprehensive interview with the candidate. The candidate will be asked to provide the information required to be disclosed in the Company’s proxy statement.
Assuming a satisfactory conclusion to the process outlined above, the Nominating and Corporate Governance Committee will then presents the candidate’s namerecommend to the Board for election as a director.that it interview the candidate. After the Board-level interview, the Board will proceed in accordance with the Company’s bylaws and committee charters.
Director Nominations by Shareholders
A shareholder who wishes to submit an individual’s name for consideration by the Nominating and Corporate Governance Committee for nomination for election as a director of the Company at the 20182019 annual meeting mustshould deliver such nominationrecommendation to the Company’s Corporate Secretary no later than December 5, 20176, 2018 and provide (i) the shareholder’s name, address and the number of shares of the Company’s Common Stock beneficially owned by the shareholder; (ii) the name of the proposed nominee and the number of shares of the Company’s Common Stock beneficially owned by the nominee; (iii) sufficient information about the nominee’s experience and qualifications for the Nominating and Corporate Governance Committee to make a determination about whether or not the individual would meet the minimum qualifications for directors; and (iv) such individual’s written consent to serve as a director of the Company, if elected. The Nominating and Corporate Governance Committee has the right to request, and the shareholder will be required to provide, such additional information with respect to the shareholder nominee as the Nominating and Corporate Governance Committee may deem appropriate or desirable to evaluate the proposed nominee in accordance with the nomination process described above, including the information about the proposed nominee that is required to be disclosed by the Company in its proxy statement under Regulation 14A of the Exchange Act. See also the section entitled “SHAREHOLDER PROPOSALS AT 2019 ANNUAL MEETING” below.
EXECUTIVECOMPENSATION –
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis describes the Company’s executive compensation philosophy and objectives. The tables that follow present the compensation for 20162017 to the Company’s named executive officers. For 2016,In 2017, the Company had only four named executive officers rather than five, as typically disclosed under SEC regulations, because there are only four executive officers who perform a policy-making function for the Company.
NamedExecutive Officers of the Company
The following table and narrative sets forth information with respect to the named executive officers of the Company, including their ages and employment history for at least the last five years.
Name | Age | Positions |
Randall S. Eslick |
| President and Chief Executive Officer
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James A. Sundquist |
| Executive Vice President and Chief Financial Officer (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 |
Randall S. Eslick,59,has served asPresidentas President and Chief Executive Officer of the Company since November 2013. Immediately prior, he served as Regional President of Roseville Bank of Commerce (now known as Sacramento Bank of Commerce, a division of Redding Bank of Commerce) from December 2005 to November 2013. From 2002 until December 2005, Mr. Eslick served as Senior Vice President and Regional Manager of Roseville Bank of Commerce. Mr. Eslick joined the Company in March 2001 as Senior Vice President and Commercial Loan Officer. Mr. Eslick was appointed to the Board of the Company and to the board of directors of Redding Bank of Commerce in November 2013 when he assumed the role of President and Chief Executive Officer of the Company. As the Chief Executive Officer and a director, Mr. Eslick serves as the primary liaison between the Board and management and as the executive officer with overall responsibility for executing the Company’s strategic plan.
James A. Sundquist, 62, has served as Executive Vice President, Chief Financial Officer and Principal Accounting Officer of the Company since December 2014. Prior to joining the Company, Mr. Sundquist had been retired since 2008. Mr. Sundquist has worked at several California independent California financial institutions over the course of his career, and his title fromcareer. From 1998-2007 washe served as Executive Vice President and Chief Financial Officer. FromOfficer, from 1996-1998 he served as Executive Vice President and Chief Operating Officer, from 1984-1995 he served as Senior Vice President and Chief Financial Officer, and from 1979-1983 he served as Vice President and Controller. Prior to his bank service, Mr. Sundquist was employed as a certified public accountant at an international public accounting firm from 1977-1979.
Samuel D. Jimenez, 52,has served as Executive Vice President and Chief Operating Officer of the Company since December 2013. Mr. Jimenez has served the Company in multiple capacities since 2003. He served as the Chief Financial Officer and Principal Accounting Officer of the Company from May 2009 to December 2014. He was promoted from Senior Vice President to Executive Vice President in March 2011, and in December 2013 was also appointed Chief Operating Officer.2011. Prior to becoming Chief Financial Officer, he served as Vice President and Director of Risk Management of Redding Bank of Commerce beginning in September 2003 and was promoted from Vice President to Senior Vice President in February 2006. Mr. Jimenez was a Federal Deposit Insurance Corporation Examiner from 1992 to 2003. Mr. Jimenez is a certified public accountant. Mr. JimenezHe also serves as Assistant Corporate Secretary of the Company.
Robert H. Muttera, 63, has served as Executive Vice President and Chief Credit Officer of the Company since January 2014. Mr. Muttera2014, and he served as Executive Vice President and Chief Credit Officer with several other California independent financial institutionsof American River Bankshares from 2012-2013, 2000-2005 and from 1983-2000. He2012-2013. Mr. Muttera served as Senior Vice President at a commercial real estate advisory firm from 2006-2012, as Executive Vice President and Chief Credit Officer of two California independent financial institutions from 1983-2005, and as Vice President and Senior Commercial Loan Officer of a California independent financial institution from 1979-1983, and as1979-1983. From 1975-1979, he was a Senior Accountant and Certified Public Accountant at an international public accounting firm from 1975-1979.firm.
NamedExecutive Officer Compensation
Strategic Role of Executive Compensation Committee
In 2013, on an advisory basis, the Company’s shareholders voted to take advisory votes on named executive officer compensation on an annual basis. The Company has followed the guidance of its shareholders and annually requests the approval on an advisory (non-binding) basis of the compensation of 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 and under Section 14A of the Exchange Act, the Company held an advisory vote on the compensation of its named executive officers (the “say-on-pay proposal”) at the 20162017 annual shareholders meeting. The Company’s shareholders approved the compensation of named executive officers with eighty-fourninety-seven percent of shareholder votes cast in favor of the say-on-pay proposal. As the Executive Compensation Committee evaluated the Company’s compensation programs in 2016,2017, it took into account the shareholders’ vote of confidence in the named executive officer 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 the Company’s compensation philosophy and programs and in making pay decisions for 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, the Company designs its compensation programs to reward its named executive officers for recent performance and to motivate them to achieve strong future performance for the Company and long-term value for shareholders.
In keeping with the long-term Company goalgoals and 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:
● | 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; |
● | Established performance-based awards in the Company’s |
● | Retained an independent compensation consultant to advise on executive compensation issues and assist the Executive Compensation Committee in developing appropriate programs; |
● | Reviewed and approved industry-specific peer group information for more thorough performance comparisons; and |
● | Designed and updated a clearly defined competitive pay strategy aligning goals with shareholder |
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It is the responsibility of the Executive Compensation Committee to:
● | Establish and annually review and approve policies regarding executive compensation programs and practices, and periodically review director compensation practices; |
● | Recommend to the Board for its approval changes to named executive officer compensation policies and programs and director compensation practices; |
● | Review and approve all named executive officer annual base salary |
● | Review and approve all named executive officer employment, compensation and retirement agreements; |
● | Establish and administer annual (short-term) and long-term incentive compensation plans for the named executive officers; |
● | Review the independent risk assessment conducted by the Chief Risk Officer of all incentive compensation plans; |
● | Provide oversight regarding the Company’s benefit plans, policies and arrangements on an as-needed basis; |
● | Recommend to the Board for its approval, and submission to the Company’s shareholders when appropriate, incentive compensation plans and equity-based plans; and |
● | Exercise appropriate oversight regarding compliance with the provisions of applicable governing laws and regulations. |
Named Executive Officer Incentive Compensation Programs
In 2017, the Executive Compensation Committee reviewed with the Company's Chief Risk Officer the Company's incentive compensation programs to which the Company's named executive officers were a party in order to:
● | Confirm that the features aligned with the FFIEC Interagency Guidance on Sound Incentive Compensation Policies; |
● | Identify any features that posed imprudent risks to the Company and limit those features to ensure the Company is not unnecessarily exposed to risks; and |
● | Identify and limit any features that would encourage the manipulation of reported earnings of the Company to enhance compensation. |
After considering these items, it was the Executive Compensation Committee’s view that the Company’s compensation policies and practices did not create risks that were reasonably likely to have a material adverse effect on its business or operations.
NamedExecutiveOfficerCompensation Objectives
Based on the Company’s philosophy to link compensation to Company, business, and individual performance, the compensation programs for the named executive officers are built upon three objectives:
| To compete favorably with peers in attracting and retaining qualified individuals as executive officers by offering competitive pay. |
| To “pay for performance” by compensating named executive officers based upon: |
| The Company’s performance measured against pre-established performance metrics; and |
| The Company’s performance compared to that of its Peer Group (as defined below under “Overview of Compensation and Process”) |
| To align the interests of shareholders and named executive officers by |
NamedExecutiveOfficerCompensation Components
Named executive officer compensation for 20162017 included the following elements:
Compensation
Element | What the Compensation Element Rewards | Description Element | ||
Base Salary | Core competence in the executive’s role relative to skills, years of experience and contributions to the Company. | Provides for fixed compensation based on competitive market salary levels. | ||
(Cash) | Contributions toward the Company’s achievement of specified profitability, growth and credit quality metrics. |
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Long-Term Incentives (Equity) | Contributions toward the Company’s achievement of specified profitability | Restricted | ||
Retirement Benefits | Retention of | The SERP provides retirement benefits for the | ||
Health and WelfareBenefits | Such benefits are part of a broad-based competitive total compensation program. | Employee benefit plans are generally available to all employees and include disability plans, paid time off, and health and life insurance. | ||
Additional Benefits andPerquisites | Active participation in business promotional activities on behalf of the Company. | Provides for |
Overview of Compensation and Process
Base salaries are generally set for named executive officers annually at the regularly scheduled meetings ofgenerally are reviewed and set on an annual basis by the Executive Compensation Committee between the months of October and December.Committee.
The Executive Compensation Committee reviews and recommends the Short-Term Program and Long-Term Variable Incentive ProgramsProgram for the new fiscal year to the Board for approval, reviews and approves awards granted under such programs and reports awards to the Board. The Executive Compensation Committee recommends stockapproves equity awards for the Company’s named executive officers.
It is the practice of the Executive Compensation Committee to review 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 officer with that of the executive officers in an appropriate market place and peer group.
In 2015,2016, the Executive Compensation Committee engaged consulting firm McLagan, which provides compensation consulting, operational benchmarking and best practice research across the financial industries, 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), direct compensation (salary plus cash bonuses plus equity/long-term compensation) and total compensation (direct compensation plus retirement benefits plus other compensation).
Such analysis included a review of compensation relative to that of comparable financial institutions. A summary of the findings from the McLagan September 20152016 report comparing the 20152016 compensation of the Company’s named executive officers to estimated 2016 target compensation for the marketindicatedmarket indicated that overall,the salaries, cash compensation and direct compensation at target for the Company’s named executive officers were within a market competitive range except for Mr. Eslick, who remained below market median.range.
The following financial services companies located in California, Oregon and Washington represented the peer group (the “Peer Group”) selected by the Company and McLaganExecutive Compensation Committee with McLagan’s assistance in November 2014.September 2016. The primary criteria for the Peer Group was primarily based on total assets relative to the Company’sincluded total assets, geographic locations, performance and business model. The compensation of this Peer GroupGroup’s executives was used to establish the Company’s 2015 and 20162017 named executive officer compensation.
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| Pacific Continental Corp |
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First Northern Community Bancorp | Pacific Mercantile Bancorp | |
Bank of Marin Bancorp | FNB Bancorp | Provident Financial Holdings |
Cascade Bancorp | Heritage Commerce Corp | Riverview Bancorp Inc. |
Central Valley Community Bancorp | Heritage Oaks Bancorp | Sierra Bancorp |
Community West Bancshares | Oak Valley Bancorp | United Security Bancshares |
First Financial Northwest Inc. |
In 2016, the Executive Compensation Committee again engaged McLagan to review compensation for its named executive officers and senior leadership team relative to that of similar financial institutions. A summary of the findings from the McLagan September 2016 report comparing the 2016 compensation of the named executive officers to estimated 2016 target compensation for the marketindicated that salaries, cash compensation and direct compensation at target for named executive officers were collectively within a market competitive range.Objectives
Compensation Objectives
In order to set competitive benchmarks for 20162017 annual and long-term compensation for the named executive officers, the Executive Compensation Committee reviewed data compiled in the compensation report prepared by McLagan in September 2015.2016. This data presented Peer Group annual cash, long-term incentive and total compensation amounts as reported in the annual filings for those companies’ executive officers whose positions and responsibilities most closely matched those of the Company’s named executive officers. For each of the Company’s named executive officer,officers, this compensation data was examined for the 25th, 50th and 75th percentiles.relative to Peer Group median compensation. The Executive Compensation Committee used this information to help determine competitive benchmarks for the 20162017 base 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 Executive Compensation Committee solicits input from the entire Board to review, establish and approve corporate goals and objectives relevant to the Chief Executive Officer’s compensation. At a meeting at which the Chief Executive Officer is not present, the Executive Compensation Committee evaluates the Chief Executive Officer’s performance in light of these corporate goals and objectives and determines the Chief Executive Officer’s compensation based on the evaluation. 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.
Review of Executive Performance
The Executive Compensation Committee annually reviews on an annual basis, each compensation element for each named executive officer.officers. 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, in its sole discretion, determine that a named executive officer shall not be granted all or any portion of an incentive compensation award, regardless of having achieved the applicable financial performance goal, if the Executive Compensation Committee determines that athe named executive officer has failed to comply with the Company’s Code of Ethics, Code of Conduct or another Company policy, or for any other lawful reason as determined by the Executive Compensation Committee.
Named Executive Officer Compensation
The components of executive compensation are intended to work together to compensate the named executive officer fairly for services, reward him based upon the Company’s overall performance and reward his own performance during the year. In assessing the named executive officer’s total rewards, the Executive Compensation Committee reviews each component of his 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 executiveofficercompensation,executive officer compensation, which historically have indicated a high level of support.
Base salary generally is generally established by the Executive Compensation Committee based on the named executive officer’s performance, experience, competent and effective execution of strategic objectives, and level of responsibilities, with total compensation targeted at or abovenear the 50th50th percentile of the comparable Peer Group. In setting the base salaries of the named executive officers for fiscal year 2016,2017, the Executive Compensation Committee considered the compensation packages of executives in the Company’s Peer Group, the growth and increased complexity of the Company and the Company’s level of success in its short- and long-term goals in relation to:
● | Achievement of specific profitability, loan growth, deposit growth and asset quality targets; |
● | Performance results relative to the Peer Group; |
● | Short- and long-term strategic goals; and |
● | Overall financial performance of the Company. |
Named Executive Officer | 2015 Salary ($) | 2016 Salary ($) | Increase (%) |
Randall S. Eslick | 324,000 | 365,000 | 12.65 |
James A. Sundquist | 225,000 | 240,000 | 6.67 |
Samuel D. Jimenez | 265,000 | 275,000 | 3.77 |
Robert H. Muttera | 225,000 | 240,000 | 6.67 |
Named Executive Officer | 2016 Salary ($) | 2017 Salary ($) | Increase (%) |
Randall S. Eslick | 365,000 | 415,000 | 13.70 |
James A. Sundquist | 240,000 | 265,000 | 10.42 |
Samuel D. Jimenez | 275,000 | 280,000 | 1.82 |
Robert H. Muttera | 240,000 | 250,000 | 4.17 |
The Executive Compensation Committee increased Mr. Eslick’s base salary in 20162017 because market studies showed that Mr. Eslick had beenwas being paid considerably less than his peers sincewhen he became the Chief Executive Officer in November 2013, and the2013. The Executive Compensation Committee has executed on its plan to bring Mr. Eslick’s base salary to a comparable level to that of his peers over a three-year period.the last three years. Mr. Eslick is performing at a high level in his role, and his leadership is helping to drive positive Company results.
The Executive Compensation Committee increased Mr. Sundquist’s base salary in 2017 after considering his extensive experience as a Chief Financial Officer, high level of performance, contributions to the Company and competence.
Incentive CompensationShort-Term Program
The Short-Term Program adopted in 2017 covered cash incentive awards and was designed to reward the Company’s named executive officers for achieving short-term financial goals, including loan and deposit growth, net income, earnings performance versus peers, and satisfactory asset quality.
The Executive Compensation Committee has established two separate annual award programs. The Short-Term Variable Incentive Program (the “Short-Term Program”) covers cashapproved a threshold, target and maximum payout as a percentage of the base salary earned during the incentive awards, and the Long-Term Variable Incentive Program (the “Long-Term Program”) covers equity-based awards.
Short-Term Variable Incentive Programperiod for each named executive officer. These targets were based on competitive market practices for each comparable position.
The table below reflects the payout opportunities that were approved for 2017:
Named Executive Officer | Threshold (% of Salary) | Target (% of Salary) | Maximum (% of Salary) |
Randall S. Eslick | 14.88 | 35.00 | 49.88 |
James A. Sundquist | 12.75 | 30.00 | 42.75 |
Samuel D. Jimenez | 12.75 | 30.00 | 42.75 |
Robert H. Muttera | 12.75 | 30.00 | 42.75 |
An initial threshold of return on average assets (“ROAA”) equal to 0.70 percent was required in order for any award to be paid out under the Short-Term Program. In addition, laddered ROAA thresholds in a range up to one percent were established to cap the maximum aggregate award earned and paid out under the Short-Term Program based on the level of ROAA performance achieved. The laddered ROAA thresholds were pro-rated and designed to ensure that an appropriate relationship existed between Company earnings and named executive officer incentives.
The Short-Term Program established a set of financial metrics which were intended to drive performance. Each metric had a weight within the Short-Term Program. These metrics included (i) performing loan growth, (ii) core deposit growth, (iii) net income available to common shareholders, (iv) ROAA, and (v) classified ratio.
The table below summarizes the weighting, performance levels established for threshold, target and maximum, and actual performance achieved in 2017 for each metric.
Metric | Weight (%) | Threshold | Target | Maximum | Actual | Performance Level Achieved | Payout (as % of Target) |
Performing Loan Growth1 | 15 | $54,000,000 | $72,000,000 | $82,800,000 | $81,211,000 | Above Target | 112.79 |
Core Deposit Growth2 | 20 | $62,300,000 | $89,000,000 | $102,350,000 | $124,107,000 | Maximum | 115.00 |
Net Income Available to Common Shareholders3 | 25 | $7,284,600 | $8,094,000 | $9,308,100 | $9,333,000 | Maximum | 115.00 |
ROAA4 | 25 | 80% of peer median | 100% of peer median | 115% of peer median | 82.86% of peer median | Below Target | 82.86 |
Classified Ratio5 | 15 | </= 25% | </= 25% | </= 25% | 9.31% | Target | 100.00 |
Overall Company Performance (prior to ROAA Cap) | 117.25 | ||||||
Laddered ROAA Cap | |||||||
ROAA | 0.70% | 0.80% | 1.00% | 0.78% | |||
Maximum Aggregate Award Percentage | 50.00% | 100.00% | 142.50% | 90.00% | |||
Overall Company Performance (after ROAA Cap) | 90.00 | ||||||
The amount of incentive award paid to each named executive officer under the Short-Term Program was based on how well the Company met its targeted goals. Each metric had different thresholds and ranges and was calculated independently of other metrics to determine the total award. All awards under the Short-Term Program were subject to the discretion of the Executive Compensation Committee and the Board.
The Company's actual results for the year ended December 31, 2017 were impacted by significant events that were considered not indicative of the core operating performance of the Company or were not directly linked to the performance of the participant group as a whole. In accordance with their authority to exercise discretion as outlined in the Short-Term Program, the Executive Compensation Committee deemed that these events should be excluded from the determination of the achievement of the performance targets. Thus, they approved one-time adjustments to the Company’s GAAP results for the revaluation of the Company’s deferred tax assets following the signing of the Tax Cuts and Jobs Act into law, as well as the receipt of death benefits under a Bank-Owned Life Insurance policy in connection with the passing of a former executive officer.
Actual 2017 Payouts Under Short-Term Program
Named Executive Officer | Incentive Amount ($) | % of Salary | % of Target |
Randall S. Eslick | 130,725 | 31.50 | 90.00 |
James A. Sundquist | 71,550 | 27.00 | 90.00 |
Samuel D. Jimenez | 75,600 | 27.00 | 90.00 |
Robert H. Muttera | 67,500 | 27.00 | 90.00 |
1 Gross loans, less nonaccrual loans.
2 All non-maturing deposits.
3 Actual net income available to common shareholders reflects one-time adjustments for the revaluation of deferred tax assets and payout of a death benefit under a Bank-Owned Life Insurance policy.
4 The threshold ROAA performance goal for 2017 was equal to 80.00 percent or better of the Peer Group median ROAA and a minimum ROAA of 0.70 percent. In 2017, the Company achieved ROAA of 0.78 percent; the median ROAA of the Peer Group (as of September 30, 2017) was 0.94 percent.
5 Adversely classified assets divided by total capital.
The Executive Compensation Committee believes that restricted stock awards are the most effective form of equity-based compensation to reward named executive officers for their contributions to the Company’s long-term performance. Equity awards which increase in value as the Company’s stock price increases directly align named executive officers’ interests with shareholders’ interests to increase stock value over the long term. Equity-based awards under the Long-Term Program were made under the Company’s current 2010 Equity Plan.
Awards were granted under the Long-Term Program in January 2017 based on 2016 Company performance results. The Long-Term Program was designed to reward the Company’s named executive officers for achieving annual corporate financial and non-financialstrategic goals in line withthat supported the Company’s strategic plan,long-term success and for the overall financial performancegrowth of the Company.
The Executive Compensation Committee approved a threshold, target and maximum incentive payout as a percentage of the base salary earned during the incentive period for each named executive officer. These targets were based on competitive practices for each comparable position. The incentive award opportunitytarget percentage represented the named executive officer’s annual incentive opportunity if the annual performance goals were achieved.
The Company developed targets covering all of the named 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 2016 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 amountapproved award amounts that could have been earned by each eligible named executive officer for(for 2016 Company performance and granted in 2017) under the Short-Term Program:Long-Term Program.
Named Executive Officer | Threshold (% of Salary) | Target (% of Salary) | Maximum (% of Salary) | Threshold (% of Salary) | Target (% of Salary) | Maximum (% of Salary) |
Randall S. Eslick | 29.31 | 35.00 | 40.25 | 29.31 | 35.00 | 40.25 |
James A. Sundquist | 25.13 | 30.00 | 34.50 | 20.94 | 25.00 | 28.75 |
Samuel D. Jimenez | 25.13 | 30.00 | 34.50 | 20.94 | 25.00 | 28.75 |
Robert H. Muttera | 25.13 | 30.00 | 34.50 | 20.94 | 25.00 | 28.75 |
The Short-TermLong-Term Program established a set of financial metrics which were intended to drive performance. Each metric had a weight withinwas weighted twenty-five percent to reflect the Short-Term Program,equal emphasis on the Company’s long-term growth objectives and long-term shareholder value. In March 2016, Redding Bank of Commerce completed the sumpurchase of five Bank of America branches in northern California (the “Branch Acquisition”). As such, certain metrics of the weights equaled 100 percent. TheseLong-Term Program were structured to measure successful execution and integration of the purchase.
The Long-Term Program metrics included (i) deposit runoff, since a significant component of building long-term franchise value is low-cost core deposits, and a low level of deposit runoff iswas critically important;important to the success of the Branch Acquisition; (ii) performing loan growth, which is essential to achieving earnings and asset quality targets; (iii) total non-interest income, which is a strategic way of generating income; and (iv) fourth quarter consolidated net income, since earnings drive stock price and stock price drives shareholder value. The Executive Compensation Committee chose fourth quarter consolidated net income as a more appropriate measurement than year-to-date consolidated net income due to the timing and effects of the branch acquisition transactionBranch Acquisition in 2016. The fourth quarter run-rate was expected to reflect stabilized and sustainable earnings and provide a solid gauge for future annualized performance.
The Short-TermLong-Term Program was subject to potential payout adjustments based on two key metrics. First, a measure of the Company’s return on average assets (“ROAA”),ROAA, annualized for fourth quarter, relative to the same metric of the Peer Group, was used to determine a potential payout adjustment. Second, the Company’s asset quality was measured. Maintaining a satisfactory level and trend of classified assets to total capital is an indicator of the quality of the loan portfolio and credit administration’s effectiveness in managing the portfolio to the Board’s desired risk tolerance. Given the negative impact that a relatively high level of classified assets likely will have on the financial performance of the Company, a reduction of the short-termlong-term payout would have been considered if the classified ratio increased above acceptable levels.
Metric | Weight (%) | Threshold | Target | Maximum | Actual | Performance Level Achieved | Payout (as % of Target) |
Deposit Runoff1 | 25 | 15.00% | 10.00% | 0.00% | 2.33% | Target | 100 |
Performing Loan Growth | 25 | $68,800,000 | $86,000,000 | $103,200,000 | $90,194,875 | Target | 100 |
Total Non-Interest Income | 25 | $2,940,150 | $3,459,000 | $4,150,800 | $3,595,000 | Target | 100 |
Consolidated Net Income2 | 25 | $1,474,750 | $1,735,000 | $2,082,000 | $2,297,000 | Maximum | 120 |
Overall Company Performance | 105 |
1 This category related only to those deposits acquired in 2016 through the Branch Acquisition, and the Company exceeded its target goal of not more than 10 percent runoff by 7.67 percent for a total runoff of only 2.33 percent.
2 This category represented fourth quarter consolidated net income.
Metrics |
| Weight (%) | Threshold | Target | Maximum | Actual | Performance Level Achieved |
| Payout (as % of Target) | ||||||||||||||||
Deposit Runoff(1) | 25 | 15.00 | % | 10.00 | % | 0.00 | % | 2.33 | % | Target | 100 | ||||||||||||||
Performing Loan Growth | 25 | $ | 68,800,000 | $ | 86,000,000 | $ | 103,200,000 | $ | 90,194,875 | Target | 100 | ||||||||||||||
Total Non-Interest Income | 25 | $ | 2,940,150 | $ | 3,459,000 | $ | 4,150,800 | $ | 3,595,000 | Target | 100 | ||||||||||||||
Consolidated Net Income(2) | 25 | $ | 1,474,750 | $ | 1,735,000 | $ | 2,082,000 | $ | 2,297,000 | Maximum | 120 | ||||||||||||||
Overall Company Performance | 105 | ||||||||||||||||||||||||
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The amount of incentive award paid to each named executive officer under the Short-Term Program was based on how well the Company met its budgeted goals. Each metric had different thresholds and ranges and was calculated independently of other metrics to determine the total award. All awards under the Short-Term Program were subject to the discretion of the Executive Compensation Committee and the Board.
The Executive Compensation Committee determined that the Company compared satisfactorily to the Peer Group’s ROAA and that the Company maintained an acceptable level of classified assets. As a result, no payout adjustment was necessary.
PayoutsUnder Short-Term Program
Named Executive Officer | Incentive Amount ($) | % of Salary | % of Target | |||||||||
Randall S. Eslick | 134,138 | 36.75 | 105.00 | |||||||||
James A. Sundquist | 75,600 | 31.50 | 105.00 | |||||||||
Samuel D. Jimenez | 86,625 | 31.50 | 105.00 | |||||||||
Robert H. Muttera | 75,600 | 31.50 | 105.00 |
Long-Term Variable Incentive Program
The Executive Compensation Committee believes that stock awards are the most effective form of equity-based compensation to reward named 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 align named executive officers’ interests with shareholders’ interests to increase stock value over the long term. Equity-based awards under the Long-Term Program were made under the Company’s current 2010 Equity Plan.
The Long-Term Program was designed to reward the Company’s named executive officers for achieving financial and strategic goals that the Executive Compensation Committee believed support the long-term success and growth of the Company.
The Executive Compensation Committee approved a threshold, target and maximum payout as a percentage of the base salary earned during the incentive period for each named executive officer. These targets were based on competitive practices for each comparable position. The incentive target percentage represented the named executive officer’s annual incentive opportunity if the annual performance goals were achieved.
The 2016 restricted stock grants, based on 2015 performance and granted in January 2016, vest in thirds, 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 amounts of which are reflected in the “Grants of Plan-Based Awards” table).
The 2017 restricted stock grants, based on 2016 performance and granted in January 2017, vest in thirds, with one-third vesting on the first anniversary of the date of grant and one-third vesting on each of the second and third anniversaries of the date of grant (the estimated amounts of which are reflected in the “Grants of Plan-Based Awards”table).
The table below reflects the long-term equity-based compensation as a percentage of salary and the threshold, target and maximum amounts that could have been earned by each eligible named executive officer for 2015 Company performance and granted in 2016 under the Long-Term Program.
Named Executive Officer |
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| Maximum (% of Salary) | ||||||
Randall S. Eslick | 30.54 | 35.00 | 38.50 | |||||||||
James A. Sundquist | 21.81 | 25.00 | 27.50 | |||||||||
Samuel D. Jimenez | 21.81 | 25.00 | 27.50 | |||||||||
Robert H. Muttera | 21.81 | 25.00 | 27.50 |
The Long-Term Program established a set of financial metrics which were intended to drive performance. The metrics were weighted to reflect emphasis on the Company’s long-term growth objectives and long-term shareholder value.
Each metric had a weight within the Long-Term Program to reflect emphasis on the Company’s long-term growth objectives and long-term shareholder value, and the sum of the weights equaled 100 percent. These metrics included (i) consolidated net income; (ii) performing loan growth; (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 | Weight (%) | Threshold | Target | Maximum | Actual | Performance Level Achieved | Payout (as % of Target) | |||||||||||||||||||||
Consolidated Net Income | 35 | $ | 6,789,800 | $ | 7,988,000 | $ | 8,786,800 | $ | 8,294,726 | Target | 100.00 | |||||||||||||||||
Performing Loan Growth | 15 | $ | 69,700,000 | $ | 82,000,000 | $ | 90,200,000 | $ | 63,380,421 | None | 0.00 | |||||||||||||||||
Core Deposit Growth | 35 | $ | 23,800,000 | $ | 28,000,000 | $ | 30,800,000 | $ | 41,243,880 | Maximum | 110.00 | |||||||||||||||||
Classified Ratio | 15 | </= 20 | % | </= 20 | % | < 17 | % | 17.55 | % | Target | 100.00 | |||||||||||||||||
Overall Company Performance | 88.50 | |||||||||||||||||||||||||||
Figures shown above reflect 20152016 Company performance, which was applicable to equity incentive awards made in 2016.2017. The amount of incentive award paidgranted to each named executive officer under the Long-Term Program was based on how well the Company met its budgeted goals. Each metric had different weightings, thresholds and ranges and was calculated independently of other metrics to determine the total award. The plan had a trigger where no award was earned if Consolidated Net Income was less than eighty-five percent of target. All awards under the Long-Term Program were subject to the discretion of the Executive Compensation Committee and the Board.
PayoutsUnder2017 Grants Under Long-Term Program
Named Executive Officer | Incentive Amount ($) | % of Salary | % of Target | Incentive Amount ($) | % of Salary | % of Target |
Randall S. Eslick | 98,681 | 30.98 | 88.50 | 134,137 | 36.75 | 105.00 |
James A. Sundquist | 49,781 | 22.13 | 88.50 | 63,003 | 26.25 | 105.00 |
Samuel D. Jimenez | 58,631 | 22.13 | 88.50 | 72,189 | 26.25 | 105.00 |
Robert H. Muttera | 49,781 | 22.13 | 88.50 | 63,003 | 26.25 | 105.00 |
The 2017 restricted stock grants, based on 2016 performance and granted in January 2017, vest in three equal annual installments beginning on the first anniversary of the date of grant (the amounts of which are reflected in the “Grants of Plan-Based Awards” table).
Updates to the Long-Term Program
In 2017, the Company designed and adopted an updated long-term program that went into effect beginning with the equity awards granted in January 2018 based on 2017 Company performance.
The updated long-term program performance components did not overlap with the performance components contained in the Short-Term Program. The metrics consisted of return on average equity and efficiency ratio, with both such metrics based on budgeted expectations and peer group performance; corporate governance; and other strategic objectives. A more comprehensive summary of the updated long-term program, as well as reporting of the equity awards granted in January 2018 based on 2017 Company performance, will be included in the Company’s proxy statement for the 2019 annual meeting.
Perquisites and Other Benefits
The Executive Compensation Committee believes that offering certain perquisites helps in the operation of the business, as well as assistsassisting the Company to recruit and retain key executive officers. In some cases, benefits including an automobile allowance or the use of a bank-owned autoautomobile, and a club membership, are offered to named executive officers. The Company’s named executive officers may participate in the same benefit programs available to all employees. These programs include health, life and disability insurance and participation in nonqualifieda 401(k) plans.plan.
Post-Retirement Arrangements
The Company has entered into employment agreements with its named executive officers which contain a change-in-control provision providing for certain payments following the termination of employment. Redding Bank of Commerce has entered into individual Salary Continuation Agreements (commonly referred to as a Supplemental Executive Retirement Plan or “SERP”) with certain of its named executive officers which provide for payments whichthat are fixed pursuant to the individual SERP and do not depend on years of credited service.
A discussion of theThe terms of the respective employment agreement and SERP with each of the named executive officers is set forthare described under “Post-Employment and Termination Benefits” below.
Roleand 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 2015, the
The Executive Compensation Committee retainedhas utilized the services of McLagan an Aon Hewitt company, as an independent outside compensation consultant.consultant periodically since 2012. In September 2015, McLagan provided the Executive Compensation Committee with a market review of executive compensation. In May 2016, McLagan was retained to advise the Executive Compensation Committee on various compensation matters. In August 2016, McLagan provided the Executive Compensation Committee with a reviewreports regarding the market analyses of market practices in connection with executive agreementscompensation of directors and nonqualified benefits and in September 2016 providedexecutives. During 2017, McLagan assisted the Executive Compensation Committee in connection with reports regarding directors’general compensation questions and executive compensation.issues. 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. McLagan was engaged directly by and reports directly to the Executive Compensation Committee.
The Executive Compensation Committee considered the independence of McLagan in light of SEC regulations and NASDAQ listing standards.standards and SEC regulations. 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 the Company by McLagan; (ii) fees paid by the Company as a percentage of McLagan’sAon’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 the Company’s 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:
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The Board has adopted a Clawback Policy providing for the recovery of incentive compensation in certain circumstances. Under the Clawback Policy, if the Company is required to prepare an accounting restatement due to the Company’s material noncompliance with any financial reporting requirement under applicable securities laws, and the Board determines that the misconduct of any person who was an executive officer at the time of the misconduct contributed to the requirement to restate the Company’s financial statements, the Company will recover compensation from any such current or former executive officer who received incentive compensation (including equity-based compensation) during the one-year period preceding the date of the restatement, in excess of what would have been paid to the executive absent the erroneous data.
The Board has adopted an Anti-Hedging Policy that prohibits the Company’s directors, officers and employees from engaging in a “hedging transaction,” which is generally a transaction that would have the economic effect of establishing a downside price protection in connection with Common Stock owned by such person. This type of transaction may create the appearance that the person’s interests generally are not aligned with those of the Company’s shareholders, to the extent that it is designed to hedge or offset against any decrease in the market value of Common Stock.
Anti-Pledging and Margin Account Policy
The Board has adopted an Anti-Pledging and Margin Account Policy that prohibits the Company’s directors and executive officers from pledging Common Stock as collateral or from holding Common Stock in a margin account. This policy was adopted on December 20, 2016 and does not affect any pledges of Common Stock that were made prior to that date, except that (i) no such pre-existing pledges may be increased in amount after that date, (ii) no pledges, including pledges made prior to that date, are permitted after December 31, 2018, and (iii) all such pledges must be ended by December 31, 2018, in any event.
Stock Ownership and Retention Guidelines
The Board has approved stock ownership and retention guidelines for its directors and executive officers which are intended to help closely align the financial interests of such persons with those of the Company’s shareholders. Within five years after appointment or election to the Board or five years from December 20, 2016, the date the policy was adopted, whichever is later, each director is expected to acquire and retain shares of Common Stock having a market value of at least five times his or her annual cash retainer (exclusive of committee fees). All directors have met the guideline or are on track to meet the guideline within the required timeframe.
Similarly, executive officers who are required to file reports pursuant to Section 16 of the Exchange Act are expected, within five years of appointment or five years from December 20, 2016, the date the policy was adopted, whichever is later, to acquire and retain Common Stock having a market value equal to at least two times his or her annual base salary. All executive officers have met the guideline or are on track to meet the guideline within the required timeframe.
Unless a director or executive officer has achieved the applicable guideline level of share ownership, he or she is required to retain an amount equal to fifty percent of the net shares received as a result of the exercise, vesting or payment of any Company equity awards granted to him or her. A director or executive officer must continue to retain such shares for as long as the director or executive officer is subject to the guidelines.
Regulation S-K requiresSEC regulations require disclosure of all plan and non-plan compensation awarded to, earned by, or paid to the named executive officers for each of the Company’s last three completed fiscal years. The following table sets forth such summary information for the Company’s principal executive officer, principal financial officer and the nextCompany’s other two most highly compensated executive officers. For 2016, theThe Company had only four named executive officers rather than five, as typically disclosed under SEC regulations, because there arehas only four executive officers who perform a policy-making function for the Company.
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Name and Principal Position | Year | Salary ($)1 | Bonus ($)2 | Stock Awards ($)3 | Option Awards ($)4 | Non-Equity Incentive Plan Compensation ($)5 | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)6 | All Other Compensation ($)7 | Total ($) |
Randall S. Eslick, | 2017 | 415,000 | 0 | 134,137 | 0 | 130,725 | 116,761 | 22,002 | 818,625 |
| President and Chief | 2016 | 365,000 | 0 | 98,681 | 0 | 134,138 | 106,386 | 23,216 | 727,421 |
| Executive Officer | 2015 | 318,583 | 0 | 54,190 | 0 | 102,026 | 97,840 | 23,284 | 595,923 |
James A. Sundquist, | 2017 | 265,000 | 0 | 63,003 | 0 | 71,550 | 0 | 15,329 | 414,882 |
| Executive Vice | 2016 | 240,000 | 0 | 49,781 | 0 | 75,600 | 0 | 18,124 | 383,505 |
| President and Chief Financial Officer | 2015 | 225,000 | 2,563 | 0 | 26,610 | 61,763 | 0 | 12,496 | 328,432 |
Samuel D. Jimenez, | 2017 | 280,000 | 0 | 72,189 | 0 | 75,600 | 44,055 | 27,482 | 499,326 |
| Executive Vice | 2016 | 275,000 | 0 | 58,631 | 0 | 86,625 | 39,008 | 26,648 | 485,912 |
| President and Chief Operating Officer | 2015 | 265,000 | 0 | 40,902 | 0 | 72,743 | 34,929 | 36,762 | 450,336 |
Robert H. Muttera, | 2017 | 250,000 | 0 | 63,003 | 0 | 67,500 | 133,530 | 27,087 | 541,120 |
| Executive Vice | 2016 | 240,000 | 0 | 49,781 | 0 | 75,600 | 119,440 | 27,306 | 512,127 |
| President and Chief Credit Officer | 2015 | 225,000 | 15,000 | 36,812 | 0 | 61,763 | 107,439 | 23,758 | 469,772 |
Detailsof “All Other Compensation” in the Summary Compensation Table
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Name | Year | Automobile Allowance ($)8 | Club Membership ($)9 | Vacation Payout ($)10 | 401(k) Plan Match ($) | Total ($) |
Randall S. Eslick | 2017 | 4,630 | 6,572 | 0 | 10,800 | 22,002 |
2016 | 6,176 | 6,440 | 0 | 10,600 | 23,216 | |
2015 | 6,617 | 6,067 | 0 | 10,600 | 23,284 | |
James A. Sundquist | 2017 | 4,529 | 0 | 0 | 10,800 | 15,329 |
2016 | 7,524 | 0 | 0 | 10,600 | 18,124 | |
2015 | 4,821 | 0 | 0 | 7,675 | 12,496 | |
Samuel D. Jimenez | 2017 | 11,700 | 4,982 | 0 | 10,800 | 27,482 |
2016 | 11,700 | 4,348 | 0 | 10,600 | 26,648 | |
2015 | 11,700 | 4,270 | 10,192 | 10,600 | 36,762 | |
Robert H. Muttera | 2017 | 6,560 | 9,727 | 0 | 10,800 | 27,087 |
2016 | 5,942 | 10,764 | 0 | 10,600 | 27,306 | |
2015 | 4,665 | 8,493 | 0 | 10,600 | 23,758 |
1 Base salaries include 401(k) contributions made by the named executive officers in the aggregate of $96,000 during 2017. Each of the named executive officers contributed $24,000 to his respective 401(k) plan account.
2 The 2015 amounts for Messrs. Sundquist and Muttera reflect discretionary bonuses recommended by the Chief Executive Officer.
3 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 Program for performance during the prior year. The material terms of the Long-Term Program are described in the section “Long-Term Program” above. The stock underlying such awards was issued in January of the respective year. Mr. Sundquist did not receive a stock award on January 20, 2015 for 2014 performance due to the fact that he was hired on December 1, 2014.
4 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 this amount are set forth in the notes to the Company’s consolidated financial statements included in the accompanying Annual Report.
5 Amounts represent cash incentive compensation earned under the Company’s Short-Term Program, the material terms of which are described in the section “Short-Term Program” above, for the respective years and paid in January of the following year.
6 Amounts represent 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.”
7 Amounts reported under “All Other Compensation” are detailed in the table captioned “Details of “All Other Compensation” in the Summary Compensation Table.”
8 Represents an automobile allowance or an automobile for business use. The officers may have derived some personal benefit from the use of such automobiles.
9 Represents club membership fees and expenses to entertain customers. The officers may have derived some personal benefit from the use of such membership.
10 Represents vacation payout of time accrued and unused at year end.
EquityIncentive Plan
The 2010 Equity Plan (adopted in 2007 and as amended and restated in each of 2010 and 2012) provides for the grant of incentive stock options, nonqualified stock options, restricted stock and restricted stock units. The 2010 Equity Plan has a term of ten years. All eligible employees and directors may participate in the 2010 Equity Plan. As of December 31, 2016, 188,9002017, 134,500 stock options were outstanding, 74,489 unvested restricted shares have been granted but are unexercisedwere outstanding, and 248,445203,670 shares remainremained available for future grant.awards.
Grantsof Plan-Based Awards
The following table presents certain information with respect to incentive awards granted to the named executive officers in 2016. The Executive Compensation Committee granted these awards based on the 2015 accomplishments of the management team.2017.
Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (1) | Grant Date Fair Value of Stock and Option Awards | ||||
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| Threshold | Target | Maximum | Threshold | Target | Maximum | (#) | ($) |
Randall S. Eslick | 1/25/2016 | 106,991 | 127,750 | 146,913 | 106,991 | 127,750 | 146,913 | 17,192 | 98,681 |
James A. Sundquist | 1/25/2016 | 60,300 | 72,000 | 82,800 | 50,250 | 60,000 | 69,000 | 8,673 | 49,781 |
Samuel D. Jimenez | 1/25/2016 | 69,094 | 82,500 | 94,875 | 57,578 | 68,750 | 79,063 | 10,215 | 58,631 |
Robert H. Muttera | 1/25/2016 | 60,300 | 72,000 | 82,800 | 50,250 | 60,000 | 69,000 | 8,673 | 49,781 |
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Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards1 | Estimated Future Payouts Under Equity Incentive Plan Awards2 | All Other Stock Awards: Number of Shares of Stock or Units3 | Grant Date Fair Value of Stock and Option Awards | ||||
Threshold ($) | Target ($) | Maximum ($) | Threshold ($) | Target ($) | Maximum ($) | (#) | ($) | ||
Randall S. Eslick | 1/26/2017 | 61,731 | 145,250 | 206,981 | 0 | 145,250 | 174,300 | 13,347 | 134,137 |
James A. Sundquist | 1/26/2017 | 33,788 | 79,500 | 113,288 | 0 | 66,250 | 79,500 | 6,269 | 63,003 |
Samuel D. Jimenez | 1/26/2017 | 35,700 | 84,000 | 119,700 | 0 | 70,000 | 84,000 | 7,183 | 72,189 |
Robert H. Muttera | 1/26/2017 | 31,875 | 75,000 | 106,875 | 0 | 62,500 | 75,000 | 6,269 | 63,003 |
OutstandingEquity Awards at Fiscal Year End
The following table presents certain information concerning the outstanding stockequity awards held as of December 31, 20162017 by each named executive officer of the Company.
Option Awards | Stock Awards | |||||||
Name | Number of Securities Underlying Unexercised Options | Number of Securities Underlying Unexercised Options | Option Exercise Price ($) | 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 ($) | ||
Randall S. Eslick | 2,000 | 0 | 6.50 | 10/14/2018 | ||||
20,000 | 0 | 4.05 | 03/01/2022 | |||||
14,597 | 138,672 | |||||||
James A. Sundquist | 8,000 | 12,000 | (2) | 5.83 | 01/15/2025 | |||
5,781 | 54,920 | |||||||
Samuel D. Jimenez | 3,500 | (3) | 0 | 6.50 | 10/14/2018 | |||
16,000 | (3) | 0 | 4.05 | 03/01/2022 | ||||
9,176 | 87,172 | |||||||
Robert H. Muttera | 12,000 | 8,000 | (4) | 6.39 | 01/17/2024 | |||
7,912 | 75,164 | |||||||
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Option Awards | Stock Awards | |||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested ($) |
Randall S. Eslick | 2,000 | 0 | 6.50 | 10/14/2018 | ||
20,000 | 0 | 4.05 | 03/01/2022 | |||
5,7304 | 65,895 | |||||
13,3475 | 153,491 | |||||
James A. Sundquist | 12,0006 | 8,0007 | 5.83 | 01/15/2025 | ||
2,8904 | 33,235 | |||||
6,2695 | 72,094 | |||||
Samuel D. Jimenez | 3,4044 | 39,146 | ||||
7,1835 | 82,605 | |||||
Robert H. Muttera | 16,000 | 4,0008 | 6.39 | 01/17/2024 | ||
2,8904 | 33,235 | |||||
6,2695 | 72,094 | |||||
1 Potential cash payouts in 2018 under the Short-Term Program based on performance in 2017.
2 Potential grants in 2018 under the Long-Term Program based on performance in 2017.
3 Restricted shares awarded in January 2017 under the Long-Term Program based on performance in 2016. Restricted shares vest in three equal annual installments over a three-year period beginning January 26, 2018 with shares becoming fully vested on January 26, 2020.
4 Represents the unvested portion of the restricted stock awards granted January 25, 2016, which shares vest in three equal annual installments over a three-year period beginning January 25, 2016 with shares becoming fully vested on January 25, 2018.
5 Represents the unvested portion of the restricted stock awards granted January 26, 2017, which shares vest in three equal annual installments over a three-year period beginning January 26, 2018 with shares becoming fully vested on January 26, 2020.
6 Vested options subject to this award were exercised on January 26, 2018.
7 Options vest twenty percent annually beginning January 15, 2015 with shares becoming fully vested January 15, 2019.
8 Options vested twenty percent annually beginning January 17, 2014 with shares becoming fully vested January 17, 2018.
OptionExercises and Stock Vested
The following table presents certain information concerning the exercise of options by and the vesting of restricted stock ofheld by each named executive officer during the fiscal year ended December 31, 2016,2017, including the value realized on exercise and the value of the stock awards.awards on the vesting date.
Stock Awards | Option Awards | Stock Awards | ||||||||||
Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||
Randall S. Eslick | 8,867 | 50,865 | 0 | 8,867 | 85,172 | |||||||
James A. Sundquist | 2,892 | 16,600 | 0 | 2,891 | 28,332 | |||||||
Samuel D. Jimenez | 5,773 | 33,113 | 19,500 | 109,400 | 5,772 | 55,264 | ||||||
Robert H. Muttera | 5,022 | 28,805 | 0 | 5,022 | 48,044 | |||||||
PensionBenefits
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 for eachboth of Messrs. Eslick and Jimenez and age sixty-seven for Mr. Muttera. The benefits for Messrs. Eslick, Jimenez and Muttera are payable over a period of ten years. Mr. Sundquist does not have a separate agreement providing retirement benefits.
Name |
Name(1) | Number of Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal |
Randall S. Eslick | SERP | 11 | 526,294 | 0 |
James A. Sundquist | N/A | N/A | N/A | N/A |
Samuel D. Jimenez | SERP | 8 | 192,648 | 0 |
Robert H. Muttera | SERP | 3 | 326,794 | 0 |
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Name | Plan Name1 | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) |
Randall S. Eslick | SERP | 12 | 643,055 | 0 |
James A. Sundquist | N/A | N/A | N/A | N/A |
Samuel D. Jimenez | SERP | 9 | 236,703 | 0 |
Robert H. Muttera | SERP | 4 | 460,324 | 0 |
NonqualifiedDeferred Compensation
As noted above in the section entitled “Director CompensationDIRECTOR COMPENSATION,” section, Directorsdirectors may participate in the 2013 Directors’ Deferred Compensation Plan; however, no such plan or benefit exists for named executive officers.
Post-EmploymentPost-Employment and Termination Benefits
The following is a discussion regarding the post-employment and termination arrangements currently in place for the named executive officers.officers are described below. The amounts are based on the maximum amounts that could be paid under these arrangements.
Salary Continuation Agreements (Supplemental Executive Retirement Plan or “SERP”)SERP)
The Redding Bank of Commerce board of directors has approved a SERP for certain named executive officers. In general, the SERPs provide a nonqualified benefit to named executive officers, and through the SERPs, the Company agrees to provide specified benefits in the future to named executive officers who meet certain criteria and 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 SERPsagreements with the named executive officers and are not based on years of credited service. In order to receive the benefits under his respective SERP, the respective named executive officer must meet the requisite criteria. Benefits under the SERP generally include income generally payable commencing upon a qualifying termination of employment and a death benefit for the participants’ designated beneficiaries.
1 The terms of the SERP are described in the section “Salary Continuation Agreements (Supplemental Executive Retirement Plan or SERP)”.
The SERPs provide for five general classes of benefits for the named executive officers, and the Executive Compensation Committee acts as administrator of the plan. Mr. Sundquist does not have a SERP and therefore is not included in the discussion below.
| Normal Retirement |
| Early Termination |
| Disability |
| Death Benefit. The death during active service benefit is the normal retirement benefit described above and is paid in twelve equal monthly installments following the named executive officer’s death for a period of ten years. Should a named executive officer (i) die after benefits have commenced under the SERP but before receiving all such distributions or (ii) die prior to the date benefits would commence, any remaining benefits will be distributed to the named executive officer’s beneficiary in the same manner as such benefits would have been distributed to the named executive officer. |
| Change-in-Control Benefit. In the event there is a change in control followed within twenty-four months by a termination of employment, the Company will pay the accrual balance, as such term is defined in the SERP, determined as of the end of the plan year preceding termination of employment in 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 named executive officer is the insured under the policy, while the Company is the owner and beneficiary. The insured named executive officer has no claim on the insurance policy, its cash value or the proceeds thereof.
PotentialPayments upon Termination or Change in Control
The following table shows the maximum amounts that would have been payable to each named executive officer in 20162017 under his respective agreement(s). The information is based on each named executive officer’s compensation at December 31, 20162017 and assumes the triggering event occurred on December 31, 2016.2017.
Randall S. Eslick | Termination by Company for Cause ($) | Termination by Company without Cause or by Executive for Good Reason ($) | Death ($) | Disability ($) | Change-In- Control Termination by Company without Cause or by Executive for Good Reason ($) | Retirement ($) | Early Retirement ($) |
Base Salary / Employment Agreement | 182,500 | 365,000 | 182,500 | 182,500 | 730,000 | 0 | 0 |
Health and Welfare Benefits | 45,555 | 45,555 | 45,555 | 45,555 | 60,740 | 0 | 0 |
Perquisites(1) | 6,308 | 12,616 | 6,308 | 6,308 | 25,232 | 0 | 0 |
Benefits Payable under SERP | 419,909 | 419,909 | 1,500,000 | 419,909 | 419,909 | 1,500,000 | 419,909 |
Accrued Vacation | 7,019 | 7,019 | 7,019 | 7,019 | 7,019 | 7,019 | 7,019 |
Life Insurance(2) | 0 | 0 | 70,000 | 0 | 0 | 0 | 0 |
Restricted Stock – Accelerated Vesting | 0 | 0 | 0 | 0 | 138,672 | 0 | 0 |
Stock Options – Accelerated Vesting | 0 | 115,000 | 115,000 | 115,000 | 115,000 | 115,000 | 115,000 |
Short-Term Program Awards | 67,069 | 134,138 | 67,069 | 67,069 | 268,276 | 0 | 0 |
Long-Term Program Awards | 67,069 | 134,138 | 67,069 | 67,069 | 268,276 | 0 | 0 |
TOTAL | 795,429 | 1,233,375 | 2,060,520 | 910,429 | 2,033,124 | 1,622,019 | 541,928 |
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| Randall S. Eslick | Termination by Company for Cause ($) | Termination by Company without Cause or by Executive for Good Reason ($) | Death ($) | Disability ($) | Change-In- Control Termination by Company without Cause or by Executive for Good Reason ($) | Retirement ($) | Early Retirement ($) | |||||||||||||||||||||
Base Salary / Employment Agreement | 17,292 | 415,000 | 103,750 | 103,750 | 830,000 | 17,292 | 17,292 | |||||||||||||||||||||
Health and Welfare Benefits | 486 | 31,941 | 31,941 | 31,941 | 0 | 486 | 486 | |||||||||||||||||||||
Benefits Payable under SERP | 526,294 | 526,294 | 1,500,000 | 526,294 | 526,294 | 1,500,000 | 526,294 | |||||||||||||||||||||
Accrued Vacation | 9,561 | 9,561 | 9,561 | 9,561 | 9,561 | 9,561 | 9,561 | |||||||||||||||||||||
Restricted Stock – Accelerated Vesting | 0 | 0 | 0 | 0 | 219,386 | 0 | 0 | |||||||||||||||||||||
Stock Options – Accelerated Vesting1 | 0 | 159,000 | 159,000 | 159,000 | 159,000 | 159,000 | 159,000 | |||||||||||||||||||||
Short-Term Program | 0 | 122,296 | 30,574 | 30,574 | 244,593 | 0 | 0 | |||||||||||||||||||||
Total | 553,633 | 1,264,092 | 1,834,826 | 861,120 | 1,988,834 | 1,686,339 | 712,633 |
James A. Sundquist | Termination by Company for Cause ($) | Termination by Company without Cause or by Executive for Good Reason ($) | Death ($) | Disability ($) | Change-In- Control Termination by Company without Cause or by Executive for Good Reason ($) | Retirement ($) | Early Retirement ($) |
Base Salary / Employment Agreement | 10,000 | 240,000 | 240,000 | 240,000 | 480,000 | 0 | 0 |
Health and Welfare Benefits | 0 | 8,256 | 8,256 | 8,256 | 8,256 | 0 | 0 |
Accrued Vacation | 13,377 | 13,377 | 13,377 | 13,377 | 13,377 | 13,377 | 13,377 |
Life Insurance(1) | 0 | 0 | 50,000 | 0 | 0 | 0 | 0 |
Restricted Stock – Accelerated Vesting | 0 | 0 | 0 | 0 | 54,920 | 0 | 0 |
Stock Options – Accelerated Vesting | 0 | 29,360 | 29,360 | 29,360 | 73,400 | 29,360 | 29,360 |
Short-Term Program Awards | 0 | 75,600 | 75,600 | 75,600 | 68,681 | 0 | 0 |
Long-Term Program Awards | 0 | 63,000 | 63,000 | 63,000 | 56,391 | 0 | 0 |
TOTAL | 23,377 | 429,593 | 479,593 | 429,593 | 755,025 | 42,737 | 42,737 |
1 Presumes the exercise of all vested stock options and represents the difference between the option exercise prices and the fair market value of the underlying shares of Common Stock. |
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Samuel D. Jimenez | Termination by Company for Cause ($) | Termination by Company without Cause or by Executive for Good Reason ($) | Death ($) | Disability ($) | Change-In- Control Termination by Company without Cause or by Executive for Good Reason ($) | Retirement ($) | Early Retirement ($) |
Base Salary / Employment Agreement | 11,459 | 275,000 | 275,000 | 275,000 | 550,000 | 0 | 0 |
Health and Welfare Benefits | 0 | 26,136 | 26,136 | 26,136 | 26,136 | 0 | 0 |
Benefits Payable under SERP | 153,640 | 153,640 | 1,250,000 | 153,640 | 153,640 | 1,250,000 | 153,640 |
Accrued Vacation | 12,070 | 12,070 | 12,070 | 12,070 | 12,070 | 12,070 | 12,070 |
Life Insurance(1) | 0 | 0 | 180,000 | 0 | 0 | 0 | 0 |
Restricted Stock – Accelerated Vesting | 0 | 0 | 0 | 0 | 87,172 | 0 | 0 |
Stock Options – Accelerated Vesting | 0 | 97,700 | 97,700 | 97,700 | 97,700 | 97,700 | 97,700 |
Short-Term Program Awards | 0 | 86,625 | 86,625 | 86,625 | 70,623 | 0 | 0 |
Long-Term Program Awards | 0 | 72,188 | 72,188 | 72,188 | 57,240 | 0 | 0 |
TOTAL | 177,169 | 723,359 | 1,999,719 | 723,359 | 1,054,581 | 1,359,770 | 263,410 |
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James A. Sundquist | Termination by Company for Cause ($) | Termination by Company without Cause or by Executive for Good Reason ($) | Death ($) | Disability ($) | Change-In- Control Termination by Company without Cause or by Executive for Good Reason ($) | Retirement ($) | Early Retirement ($) | |||||||||||||||||||||
Base Salary / Employment Agreement | 11,042 | 265,000 | 66,250 | 66,250 | �� | 530,000 | 11,042 | 11,042 | ||||||||||||||||||||
Health and Welfare Benefits | 266 | 14,040 | 14,040 | 14,040 | 0 | 266 | 266 | |||||||||||||||||||||
Accrued Vacation | 24,951 | 24,951 | 24,951 | 24,951 | 24,951 | 24,951 | 24,951 | |||||||||||||||||||||
Restricted Stock – Accelerated Vesting | 0 | 0 | 0 | 0 | 105,329 | 0 | 0 | |||||||||||||||||||||
Stock Options – Accelerated Vesting1 | 0 | 68,040 | 68,040 | 68,040 | 113,400 | 68,040 | 68,040 | |||||||||||||||||||||
Short-Term Program | 0 | 69,638 | 17,409 | 17,409 | 69,638 | 0 | 0 | |||||||||||||||||||||
Total | 36,259 | 441,669 | 190,690 | 190,690 | 843,318 | 104,299 | 104,299 | |||||||||||||||||||||
Samuel D. Jimenez | Termination by Company for Cause ($) | Termination by Company without Cause or by Executive for Good Reason ($) | Death ($) | Disability ($) | Change-In-Control Termination by Company without Cause or by Executive for Good Reason ($) | Retirement ($) | Early Retirement ($) | |||||||||||||||||||||
Base Salary / Employment Agreement | 11,667 | 280,000 | 70,000 | 70,000 | 560,000 | 11,667 | 11,667 | |||||||||||||||||||||
Health and Welfare Benefits | 664 | 43,448 | 43,448 | 43,448 | 0 | 664 | 664 | |||||||||||||||||||||
Benefits Payable under SERP | 192,648 | 192,648 | 1,250,000 | 192,648 | 192,648 | 1,250,000 | 192,648 | |||||||||||||||||||||
Accrued Vacation | 9,721 | 9,721 | 9,721 | 9,721 | 9,721 | 9,721 | 9,721 | |||||||||||||||||||||
Restricted Stock – Accelerated Vesting | 0 | 0 | 0 | 0 | 121,751 | 0 | 0 | |||||||||||||||||||||
Short-Term Program | 0 | 78,323 | 19,581 | 19,581 | 78,323 | 0 | 0 | |||||||||||||||||||||
Total | 214,700 | 604,140 | 1,392,750 | 335,398 | 962,443 | 1,272,052 | 214,700 | |||||||||||||||||||||
Robert H. Muttera | Termination by Company for Cause ($) | Termination by Company without Cause or by Executive for Good Reason ($) | Death ($) | Disability ($) | Change-In-Control Termination by Company without Cause or by Executive for Good Reason ($) | Retirement ($) | Early Retirement ($) | |||||||||||||||||||||
Base Salary / Employment Agreement | 10,417 | 250,000 | 62,500 | 62,500 | 500,000 | 10,417 | 10,417 | |||||||||||||||||||||
Health and Welfare Benefits | 0 | 648 | 648 | 648 | 0 | 0 | 0 | |||||||||||||||||||||
Benefits Payable under SERP | 326,794 | 326,794 | 1,000,000 | 326,794 | 326,794 | 1,000,000 | 326,794 | |||||||||||||||||||||
Accrued Vacation | 3,347 | 3,347 | 3,347 | 3,347 | 3,347 | 3,347 | 3,347 | |||||||||||||||||||||
Restricted Stock – Accelerated Vesting | 0 | 0 | 0 | 0 | 105,329 | 0 | 0 | |||||||||||||||||||||
Stock Options – Accelerated Vesting1 | 0 | 81,760 | 81,760 | 81,760 | 102,200 | 81,760 | 81,760 | |||||||||||||||||||||
Short-Term Program | 0 | 68,288 | 17,072 | 17,072 | 68,288 | 0 | 0 | |||||||||||||||||||||
Total | 340,558 | 730,837 | 1,165,327 | 492,121 | 1,105,958 | 1,095,524 | 422,318 | |||||||||||||||||||||
Robert H. Muttera | Termination by Company for Cause ($) | Termination by Company without Cause or by Executive for Good Reason ($) | Death ($) | Disability ($) | Change-In- Control Termination by Company without Cause or by Executive for Good Reason ($) | Retirement ($) | Early Retirement ($) |
Base Salary / Employment Agreement | 10,000 | 240,000 | 240,000 | 240,000 | 480,000 | 0 | 0 |
Health and Welfare Benefits | 0 | 123 | 123 | 123 | 123 | 0 | 0 |
Benefits Payable under SERP | 207,354 | 207,354 | 1,000,000 | 207,354 | 207,354 | 1,000,000 | 207,354 |
Accrued Vacation | 3,684 | 3,684 | 3,684 | 3,684 | 3,684 | 3,684 | 3,684 |
Life Insurance(1) | 0 | 0 | 50,000 | 0 | 0 | 0 | 0 |
Restricted Stock – Accelerated Vesting | 0 | 0 | 0 | 0 | 75,164 | 0 | 0 |
Stock Options – Accelerated Vesting | 0 | 37,320 | 37,320 | 37,320 | 62,200 | 37,320 | 37,320 |
Short-Term Program Awards | 0 | 75,600 | 75,600 | 75,600 | 61,538 | 0 | 0 |
Long-Term Program Awards | 0 | 63,000 | 63,000 | 63,000 | 49,864 | 0 | 0 |
TOTAL | 221,038 | 627,081 | 1,469,727 | 627,081 | 939,927 | 1,041,004 | 248,358 |
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1 Presumes the exercise of all vested stock options and represents the difference between the option exercise price and the fair market value of the underlying shares of Common Stock.
20162017 Named 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.Agreement. Mr. Eslick serves as President and Chief Executive Officer. His employment agreement, effective November 19, 2013,January 6, 2017, is for a term of three years and automatically extends 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 monthsan amount equal to one quarter of his then-current total compensation package (defined as current annual base salary plus the average of the annual bonus paid to Mr. Eslick during the preceding three calendar years) plus any accrued profit sharingincentive awards and accrued but unused vacation as of the date of termination, all calculated as of the date of his termination.termination, payable in one lump sum. If Mr. Eslick is terminated other than for those specified reasons, he will receive twelve monthsan amount equal to one times his then-current total compensation package plus any accrued incentive awards and accrued but unused vacation as of total compensationthe date of termination, all calculated as of the date of his termination, payable in one lump sum. In either case, Mr. Eslick will receive a lump-sum payment in an amount equal to the amount necessary to pay Mr. Eslick’s COBRA premiums for continuation of group health insurance benefits continuecoverage for eighteen 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,employment is terminated, Mr. Eslick is entitled to terminate the employment agreement and will be paid severance pay equal to two years’times his total compensation.compensation package. 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.Agreement. Mr. Sundquist serves as Executive Vice President and Chief Financial Officer. HisThe material terms of Mr. Sundquist’s employment agreement effective December 1, 2014, isare identical to those of Mr. Eslick except for termination benefits related to a term of three years and automatically extends for a one-year period, subject to prior termination as provided within the agreement. Thechange in control (as defined in Mr. Sundquist’s employment agreement provides that inagreement). In the event of termination for specified reasons,a change in control pursuant to which Mr. Sundquist will only be paid accrued salary plus accrued vacation calculated as of the date of his termination. IfSundquist’s employment is terminated, Mr. Sundquist is terminated other than for those specified reasons, he will receive twelve months of total compensation calculatedentitled to severance pay equal to two years’ salary at the rate being paid to Mr. Sundquist as of the date of his termination payable inplus an amount equal to one lump sum. The employment agreement also provides that intimes the eventaverage of a change in control (as defined therein) pursuantthe annual bonus paid 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 tofor the terms of the employment agreement, and his health insurance benefits will continue for twelve 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.preceding three calendar years.
Samuel D. Jimenez Employment Agreement.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 automatically extends 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.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 automatically extends 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.
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, the Company is providing the following information for 2017:
● | The median of the annual total compensation of all Company employees (other than Mr. Eslick, the President and Chief Executive Officer), was $55,719; and |
● | The annual total compensation of Mr. Eslick was $818,625. |
Based on this information, the ratio for 2017 of the annual total compensation of the Company’s Chief Executive Officer to the median of the annual total compensation of all employees is 15 to 1.
The Company executed employment agreements with eachcompleted the following steps to identify the median of its named executive officers on December 20, 2016, effective January 6, 2017, the detailsannual total compensation of which are containedall Company employees (other than the Chief Executive Officer) and to determine the annual total compensation of the Company’s median employee and Chief Executive Officer:
● | On December 31, 2017, the Company’s employee population consisted of approximately 196 individuals, including any full-time, part-time, temporary, or seasonal employees employed on that date. |
● | To find the median of the annual total compensation of all Company employees (other than the Chief Executive Officer), the Company identified the median employee by examining the 2017 annual total compensation for all individuals, excluding the Chief Executive Officer, who were employed by the Company on December 31, 2017. In making this determination, the Company annualized compensation of full-time and part-time permanent employees who were employed on December 31, 2017 but who did not work for the Company the entire year. No full-time equivalent adjustments were made for part-time employees. |
● | The Company identified the median employee using this compensation measure and methodology, which was consistently applied to all employees who were included in the calculation. |
● | After identifying the median employee, the Company added together all of the elements of such employee’s compensation for 2017 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $55,719. |
With respect to the annual total compensation of the Company’s Chief Executive Officer, the Company used the amount reported in the Company’s SEC Form 8-K filed on December 21, 2016. These employment agreements were amended and restated on February 21,“Total” column of the 2017 and incorporated intoSummary Compensation Table, which is also in accordance with the Company’s SEC Form 10-K filed on March 15, 2017.requirements of Item 402(c)(2)(x).
REPORTOF THE EXECUTIVE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Executive Compensation 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 Executive Compensation Committee of the Board metreviewed and discussed with management the Compensation Discussion and Analysis (“CD&A”) required by Item 402(b) of Regulation S-K, and based on that review and discussion, the Executive Compensation Committee recommended to the Board that the CD&A be included as part of this Proxy Statement and the 20162017 Annual Report on Form 10-K.
In addition, the Executive Compensation Committee determined that no general employee compensation plan links the potential for any material payout to the Company’s reported earnings, and so no such plan can reasonably be viewed as encouraging the manipulation of reported earnings to enhance the compensation of any employee.
Members of the Executive Compensation Committee
Jon W. Halfhide, Chairman
Orin N. Bennett
Gary R. Burks
Lyle L. Tullis
REPORTOF 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 regulations.
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 year 2016,2017, the Audit Committee has:
(1) |
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(2) |
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(3) |
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(4) |
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(5) |
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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, 20162017 for filing with the SEC.
All fees paid to Moss Adams LLP during 20162017 were pre-approved by the Audit Committee.
Members of theAudit and Qualified Legal ComplianceCommittee
David H. Scott, CPA; Chairman
1
Gary R. Burks
Jon W. Halfhide CPA
Karl L. Silberstein CPA
Terence J. Street
Lyle L. Tullis
FeesPaid 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 20162017 fiscal year, and the shareholders of the Company ratified the selection at the 20162017 annual meeting of shareholders in May 2016.2017. The Company has selected Moss Adams LLP to serve as the Company’s independent registered public accounting firm for the 20172018 fiscal year, and the shareholders of the Company are being asked to ratify the selection at the 20172018 Annual Meeting.
A representative from Moss Adams LLP is expected to attend the 20172018 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 20162017 and 20152016 fiscal years and for other services rendered during the 20162017 and 20152016 fiscal years.
Fee Category | Fiscal 2016 ($) | % of Total | Fiscal 2015 ($)(1) | % of Total | ||||||||||||
Audit Fees | 307,947 | 87.8 | 312,947 | 83.8 | ||||||||||||
Audit-Related Fees | 38,538 | 11.0 | 60,693 | 16.2 | ||||||||||||
Tax Fees | 0 | 0.0 | 0 | 0.0 | ||||||||||||
All Other Fees | 4,145 | 1.2 | 0 | 0.0 | ||||||||||||
Total Fees | 350,630 | 100.0 | 373,640 | 100.0 | ||||||||||||
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Fee Category | Fiscal 2017 ($) | % of Total | Fiscal 2016 ($)2 | % of Total |
Audit Fees | 373,885 | 92.27 | 308,508 | 87.85 |
Audit-Related Fees | 27,299 | 6.74 | 38,538 | 10.97 |
Tax Fees | 0 | 0.00 | 0 | 0.00 |
All Other Fees | 4,004 | 0.99 | 4,145 | 1.18 |
Total Fees | 405,188 | 100.00 | 351,191 | 100.00 |
1 Mr. Scott served as Chairman of the Audit Committee in 2017. Mr. Silberstein assumed the duties of Audit Committee Chairman upon the retirement of Mr. Scott on March 20, 2018.
2 Includes additional fees billed to the Company for 2016 services after the 2017 proxy statement was published.
Audit Fees.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.10-Q, and services provided in connection with a Form S-3 registration statement filed with the SEC.
Audit-Related Fees.Fees. Consists 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.Fees. Consists of fees for professional services for tax compliance, tax advice and tax planning.
All Other Fees.Fees. Consists of fees for products and services provided other than those reported above. The fees for 2016 include review of documents relating to a swap arrangement and review of the proxy statement. The fees for 2017 include a subscription to an accounting research tool facilitated through Moss Adams LLP.
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.
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,charter, 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.
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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.
proposalsPROPOSALS RECOMMENDED BY
THE BOARD OF DIRECTORS
Proposal1: 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 20172018 Annual Meeting at tennine and has nominated the persons identified in the section entitled “Informationabout the Director NomineesINFORMATION ABOUT THE DIRECTOR NOMINEES” 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 20182019 or until their earlier resignation.
The Company knows of no reason why any nominee listed under the section entitled “INFORMATION ABOUT THE DIRECTOR NOMINEES” 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.
Proposal2: Ratify the selection of Moss Adams LLP as the Company’s independent registered public accounting firm for 2017.2018.
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 asthe Company’sindependent registered public accounting firm for 2017.2018.
Proposal3: Vote in an advisory (non-binding) capacity on a resolution approving compensation of the Company’s named executive officers.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act and under Section 14A of the Exchange Act, the Company is required to submit to its 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’sCompany’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 is not binding on the Board and will not be construed as overruling a decision by the Board, nor will 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 theadvisory (non-binding)(non-binding) resolution approvingcompensation ofthe Company’snamed executive officers.
OTHERBUSINESSSHAREHOLDER PROPOSALS AT 2019 ANNUAL MEETING
Proposals by shareholders to transact business at the Company’s 20182019 annual meeting must be delivered in writing to the Company at its principal administrative office located at 1901 Churn Creek Road, Redding, California 96002 no later than December 5, 20176, 2018 in order to be considered for inclusion in the proxy statement and proxy card. Such proposals must comply with the provisions of the Company’s bylaws and the SEC’s regulations regarding the inclusion of shareholder proposals in the Company’s sponsored proxy materials. If a proposal is presented at the 2019 annual meeting in compliance with this paragraph, your proxy holder will vote in accordance with the recommendation of the Board or, if no recommendation is given, in accordance with his or her best judgment.
Notice of any business item proposed to be brought from the floor by a shareholder at the Company’s 20182019 annual meeting, including the nomination of directors, must be received in writing by the Corporate Secretary of the Company no earlier than February 15, 2018January 22, 2019 and no later than April 16, 2018,February 21, 2019, must include a brief description of the business desired to be brought before the meeting, and must comply with the provisions of the Company’s bylaws. If the Company does not receive timely notice, such proposal will not be considered a business item at the annual meeting, and the Chairman of the meeting will refuse to acknowledge any proposal not made in compliance with the foregoing procedures. If a proposal is presented at the 2018 annual meeting in compliance with this paragraph, your proxy holder will vote in accordance with the recommendation of the Board or, if no recommendation is given, in accordance with his or her best judgment.
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
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.OTHER BUSINESS
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, your proxy holder will vote in accordance with the recommendation of the Board or, if no recommendation is given, in accordance with his or her best judgment. Whether or not you intend to be present at the Annual Meeting, please vote promptly.
By Order of the Board of Directors,
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Redding,/s/ Andrea M. Schneck
Andrea M. Schneck
Corporate Secretary
Sacramento, California
April 5, 20172018
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