SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(E)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-12
SERVICE 1st BANCORP
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies: N/A
2) Aggregate number of securities to which the transaction applies: N/A
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined.): N/A
4) Proposed maximum aggregate value of transaction: N/A
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
Mailed to Shareholders
on or about April 19, 2005
PROXY STATEMENT
FOR
THE ANNUAL MEETING OF SHAREHOLDERS
OF
SERVICE 1st BANCORP
MAY 18, 2005
INTRODUCTION
The Proxy Statement is furnished in connection with the solicitation of
Proxies for use at the 2005 Annual Meeting of Shareholders (the "Annual
Meeting") of Service 1st Bancorp (the "Company") to be held at 6:00 p.m. on May
18, 2005, at the Tracy Office of the Company's subsidiary, Service 1st Bank (the
"Bank"), 60 W. 10th Street, Tracy, California 95376, and at any and all
postponements or adjournments thereof.
Revocability of Proxies
Any person giving a proxy in the form accompanying this Proxy Statement
has the power to revoke that proxy prior to its exercise. The proxy may be
revoked prior to the Annual Meeting by delivering to the Secretary of the
Company either a written instrument revoking the proxy or a duly executed proxy
bearing a later date. The proxy may also be revoked by the shareholder by
attending and voting at the Annual Meeting. The proxy will be voted as directed
by the shareholder giving the proxy and if no directions are given on the proxy,
the proxy will be voted "FOR" the nominees of the Board of Directors as
described in this Proxy Statement, "FOR" the ratification of the appointment of
Vavrinek, Trine, Day & Co., LLP as independent public accountants for the year
2005, and, at the proxy holders' discretion, on such other matters, if any,
which may come before the Annual Meeting and any and all postponements or
adjournments of the Annual Meeting.
Solicitation of Proxies
The solicitation of proxies is being made by the Board of Directors of
the Company. The expense of preparing, assembling, printing, and mailing this
Proxy Statement and the materials used in the solicitation of proxies for the
Annual Meeting will be borne by the Company. It is contemplated that proxies
will be solicited principally through the use of the mail, but officers,
directors, and employees of the Company and the Bank may solicit proxies
personally or by telephone, without receiving special compensation therefore.
The Company will reimburse banks, brokerage houses and other custodians,
nominees and fiduciaries for their reasonable expenses in forwarding the Proxy
Statement to shareholders whose stock in the Company is held of record by such
entities. In addition, the Company may use the services of individuals or
companies it does not regularly employ in connection with this solicitation of
proxies, if management determines it to be advisable.
Voting Securities; Record Date; Cumulative Voting
There were issued and outstanding 1,590,937 shares of the Company's
common stock on March 23, 2005, which has been fixed as the record date for the
purpose of determining shareholders entitled to notice of, and to vote at, the
Annual Meeting (the "Record Date"). On any matter submitted to the vote of the
shareholders, each holder of Company common stock will be entitled to one vote,
in person or by proxy, for each share of common stock he or she held of record
on the books of the Company as of the Record Date. Shares represented by proxies
that reflect abstentions are treated as shares present and entitled to vote for
purposes of determining a quorum, but have the same effect as a vote "AGAINST" a
proposal. "Broker non-votes" (shares held by brokers or nominees as to which
instructions have not been received from the beneficial owners or persons
entitled to vote and the broker or nominee does not have discretionary voting
power under applicable rules of the stock exchange or other self-regulatory
organization of which the broker or nominee is a member) are treated as shares
present and entitled to vote for purposes of a quorum, but also have the same
effect as a vote "AGAINST" a proposal. In connection with the election of
directors, shares may be voted cumulatively if a shareholder present at the
Annual Meeting gives notice at the Annual Meeting, prior to the voting for
election of directors, of his or her intention to vote cumulatively. If any
shareholder of the Company gives such notice, then all shareholders eligible to
vote will be entitled to cumulate their shares in voting for election of
directors. Cumulative voting allows a shareholder to cast a number of votes
equal to the shares held in his or her name as of the Record Date multiplied by
the number of directors to be elected. These votes may be cast for any one
nominee, or may be distributed among as many nominees as the shareholder sees
fit.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's bylaws provide that the number of directors of the
Company shall not be less than nine (9) nor more than seventeen (17) until
changed by an amendment to the bylaws adopted by the Company's shareholders. The
bylaws further provide that the exact number of directors is set at eleven (11)
until changed by a bylaw amendment duly adopted by the Company's shareholders or
Board of Directors.
The persons named below, all of whom are currently members of the
Company's Board of Directors, will be nominated for election as directors at the
Annual Meeting to serve until the 2006 Annual Meeting of Shareholders and until
their successors are elected and qualified. Unless otherwise directed, votes
will be cast by the proxy holders in such a way to effect, if possible, the
election of the eleven (11) nominees named herein including, in the event of
cumulative voting, the authority of the proxy holders to cumulate votes
represented by the shares covered by proxies in the election of directors. The
eleven (11) nominees for director receiving the most votes will be elected as
directors. In the event that any of the nominees should be unable to serve as a
director, it is intended that the proxies received will be voted by the proxy
holders for the election of such substitute nominee, if any, as shall be
designated by the Board of Directors. The Board of Directors has no reason to
believe that any of the nominees named below will be unable to serve if elected.
The following table sets forth the names of and certain information, as
of March 23, 2005, concerning the persons nominated by the Board of Directors
for election as directors of the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION
AS DIRECTORS OF THE NOMINEES WHOSE NAMES APPEAR BELOW.
2
- ---------------------------------- ------ ------------ -------------------------------------------------------------
Year First
Name and Title Appointed Principal Occupation
Other Than Director Age Director During the Past Five Years
- ---------------------------------- ------ ------------ --------------------------------------------------
John O. Brooks, Chairman of the 64 2000 Prior to joining the Bank on November 1, 2000, he
Board and Chief Executive was a Director and President and Chief Executive
Officer of the Company; Chairman Officer of Tracy Federal Savings Bank, Tracy,
of the Board of the Bank California, from 1998 to 2000, and Bay Area Bank,
Redwood City, California, from 1992 to 1998.
Eugene C. Gini 66 1999 President and Chief Executive Officer of Collins
Electric Company, Inc., an electrical contracting
firm, Stockton, California, since 1987.
Bryan R. Hyzdu, President of the 46 1999 Prior to joining the Bank on November 10, 1999, he
Company; President and Chief was a Regional Vice President and Central Valley
Executive Officer of the Bank Portfolio Manager with Union Bank of California,
since 1992.
Robert D. Lawrence, M.D. 64 1999 Pathologist and owner of Delta Pathology
Associates Medical Group, Inc., Stockton,
California, since 1973.
Frances C. Mizuno 47 1999 Civil Engineer and Assistant Executive Director of
the San Luis and Delta Mendota Water Authority,
Byron, California, since 1992.
Richard R. Paulsen 46 1999 Life insurance agent for New York Life Insurance
Company and a partner in Resource Management
Group, a securities and financial planning firm,
Stockton, California, since 1983.
Toni Marie Raymus 48 1999 President of Destiny Homes, a custom home building
company, Manteca, California, since 1997.
President of Raymus Homes, Inc., land development
and construction of homes, since 1996. Vice
President of Raymus Construction, a construction
company, since 2004. President and broker of
Raymus Realty Group, real estate sales, since
1999.
Michael K. Repetto 44 1999 Chief Executive Officer of Tracy Material Recovery
Facility, a disposal and waste recycling company,
Tracy, California, since 1995. Co-owner and
Operations Manager of Tracy Delta Solid Waste
Management, a waste management company, Tracy,
California, since 1987.
Anthony F. Souza 64 1999 Owner of Souza Realty and Development, a real
estate sales, development and consulting company,
Tracy, California, since 1985.
Albert Van Veldhuizen 76 1999 Retired. Formerly, commercial real estate sales
with Pan Pacific Financial, a real estate income
property lender, Lodi, California, since 1994.
Donald L. Walters 49 1999 Managing member of Grower Direct Marketing, a
fresh produce sales and worldwide shipping
company, Stockton, California, since 1998.
President and Chief Executive Officer of Walters
Carpet One, Stockton, California, from 1982 until
1997 when the business was sold.
(1) The year indicated in the table above represents the year each director was
first appointed as a director of the Bank. The Company became the parent
holding company for the Bank effective June 26, 2003, at which time all
directors named in the chart above became directors of the Company.
Director Gary Podesto is excluded from the table as a result of his
resignation as a director of the Company effective February 17, 2005. Bank
Director, Dean Andal, is excluded from the table as he is a director solely
of the Bank and is not a nominee for election as a director of the Company.
3
None of the directors were selected pursuant to any arrangement or
understanding other than with the directors and officers of the Company acting
within their capacities as such. There are no family relationships between any
two or more of the directors, officers or persons nominated or chosen by the
Board of Directors to become a director or officer, except that Bryan R. Hyzdu
and Donald L. Walters are brothers-in-law. No director or officer of the Company
serves as a director of any company which has a class of securities registered
under, or which is subject to the periodic reporting requirements of, the
Securities Exchange Act of 1934, or of any company registered as an investment
company under the Investment Company Act of 1940. None of the nominees were
subject to any legal proceedings involving violations of securities laws,
convictions in a criminal proceeding (excluding traffic violations and minor
offenses) or had a petition under bankruptcy laws filed against themselves or an
affiliate within the last five years.
Security Ownership of Certain Beneficial Owners and Management
Management of the Company knows of no person who owns, beneficially or
of record, either individually or together with associates, 5 percent or more of
the outstanding shares of Company common stock, except as set forth in the table
below. The following table sets forth, as of March 23, 2005, the number and
percentage of shares of Company common stock beneficially owned, directly or
indirectly, by each of the Company's directors, principal shareholders, the
executive officers(1) named in the Summary Compensation Table, Dean Andal (a
director solely of the Bank), and all of the individuals named in the table as a
group. Beneficial ownership generally includes shares over which a person named
below has sole or shared voting or investment power and shares which such person
has the right to acquire within 60 days of March 23, 2005. Unless otherwise
indicated, the persons listed below have sole voting and investment powers
respecting the shares beneficially owned.
- --------------------------- ------------------------ ------------------------ ----------
Name and Address of Amount and Nature Percent
Title of Class Beneficial Owner(2) of Beneficial Ownership of Class
- --------------------------- ------------------------ ----------------------- ----------
Common Stock, No Par Value Dean Andal 13,425 (3) 0.84%
Common Stock, No Par Value John O. Brooks 32,450 (4) 2.01%
Common Stock, No Par Value Robert E. Bloch 17,636 (5) 1.10%
Common Stock, No Par Value Patrick Carman 23,090 (6) 1.44%
Common Stock, No Par Value Eugene C. Gini 77,611 (7) 4.86%
Common Stock, No Par Value Bryan R. Hyzdu 35,175 (8) 2.18%
Common Stock, No Par Value Robert D. Lawrence 44,084 (9) 2.77%
Common Stock, No Par Value Frances C. Mizuno 20,578 (10) 1.29%
Common Stock, No Par Value Richard R. Paulsen 26,374 (11) 1.65%
Common Stock, No Par Value Toni Marie Raymus 26,558 (12) 1.66%
Common Stock, No Par Value Shannon Reinard 3,900 (13) 0.25%
Common Stock, No Par Value Michael K. Repetto 20,006 (14) 1.25%
Common Stock, No Par Value Anthony F. Souza 60,596 (15) 3.80%
Common Stock, No Par Value Albert Van Veldhuizen 20,012 (16) 1.25%
Common Stock, No Par Value Donald L. Walters 21,592 (17) 1.35%
---------
All named individuals as a group (15 persons) 443,087 (18) 25.97%
=========
(1) As used in this Proxy Statement, the term "executive officer" of the
Company includes the Chief Executive Officer, President, Executive Vice
President and Chief Financial Officer, and Executive Vice President and
Chief Credit Officer of the Bank and Executive Vice President and
Operations Manager of the Bank.
4
(2) The address for beneficial owners is c/o Service 1st Bancorp, 2800 West
March Lane, Suite 120, Stockton, California 95219.
(3) Mr. Andal (a director solely of the Bank) has shared voting and investment
powers as to 13,425 shares.
(4) Mr. Brooks has shared voting and investment powers as to 6,200 shares.
Includes 26,250 shares subject to stock options exercisable within 60 days
of the Record Date.
(5) Mr. Bloch has shared voting and investment powers as to 1,886 shares.
Includes 15,750 shares subject to stock options exercisable within 60 days
of the Record Date.
(6) Mr. Carman has shared voting and investment powers as to 12,590 shares.
Includes 10,500 shares subject to stock options exercisable within 60 days
of the Record Date.
(7) Mr. Gini has shared voting and investment powers as to 72,361 shares.
Includes 5,250 shares subject to stock options exercisable within 60 days
of the Record Date.
(8) Mr. Hyzdu has shared voting and investment powers as to 14,175 shares.
Includes 21,000 shares subject to stock options exercisable within 60 days
of the Record Date.
(9) Dr. Lawrence has shared voting and investment powers as to 44,084 shares.
(10) Ms. Mizuno has shared voting and investment powers as to 15,328 shares.
Includes 5,250 shares subject to stock options exercisable within 60 days
of the Record Date.
(11) Mr. Paulsen has shared voting and investment powers as to 21,124 shares.
Includes 5,250 shares subject to stock options exercisable within 60 days
of the Record Date.
(12) Ms. Raymus has shared voting and investment powers as to 21,308 shares.
Includes 5,250 shares subject to stock options exercisable within 60 days
of the Record Date.
(13) Ms. Reinard has shared voting and investment powers as to 3,900 shares.
(14) Mr. Repetto has shared voting and investment powers as to 14,756 shares.
Includes 5,250 shares subject to stock options exercisable within 60 days
of the Record Date.
(15) Mr. Souza has shared voting and investment powers as to 55,346 shares.
Includes 5,250 shares subject to stock options exercisable within 60 days
of the Record Date.
(16) Mr. Van Veldhuizen has shared voting and investment powers as to 14,762
shares. Includes 5,250 shares subject to stock options exercisable within
60 days of the Record Date.
(17) Mr. Walters has shared voting and investment powers as to 16,342 shares.
Includes 5,250 shares subject to stock options exercisable within 60 days
of the Record Date.
(18) Includes 115,500 shares subject to stock options exercisable within 60 days
of the Record Date.
The Board of Directors and Committees
The Company's Board of Directors held 13 meetings and the Bank Board of
Directors held 12 meetings during 2004. In addition to meeting as a group to
review the Company's business, members of the Board of Directors served on
certain standing committees. During 2004, no director attended less than 75% of
the aggregate of the number of meetings held by the Board of Directors and of
all committee meetings on which such director served.
The Executive Committee held 10 meetings during 2004. The Executive
Committee consists of Directors Brooks, Gini, Hyzdu, Mizuno, Paulsen, and Souza.
The Executive Committee reviews compensation and employee benefit plans and
determines the compensation of the Company's executive officers.
The Audit Committee held 6 meetings in 2004. The Audit Committee
consists of Directors Raymus, Repetto, Van Veldhuizen and Walters. The Audit
Committee generally recommends the appointment of and oversees the Company's
independent public accountants, monitors and reviews all audit and examining
reports, financial and accounting organization and financial planning, reporting
and internal controls. Each member of the audit committee is "independent" as
defined under applicable rules promulgated by the Securities and Exchange
Commission pursuant to the Sarbanes-Oxley Act of 2002. Director Van Veldhuizen
has been designated by the Board of Directors as an "audit committee financial
expert" as defined under applicable rules promulgated by the Securities and
Exchange Commission pursuant to the Sarbanes-Oxley Act of 2002.In addition, each
other member of the audit committee is "financially literate" as defined under
Nasdaq Listing Rules (although such rules are not currently applicable to the
Company) and qualified to review the Company's financial statements. See the
audit committee report hereafter in this Proxy Statement for additional
information regarding the functions of the Audit Committee.
5
The Board of Directors has not established a nominating committee. The
full Board of Directors performs the functions of a nominating committee with
responsibility for considering appropriate candidates as directors. The Board of
Directors believes that the participation of the full Board of Directors in
considering candidates is efficient in view of the size of the Board of
Directors. Candidates are selected by a majority of directors who are
"independent" as defined under applicable rules promulgated by the Securities
and Exchange Commission pursuant to the Sarbanes-Oxley Act of 2002, and in
accordance with a Nominating Charter adopted by a majority of such independent
directors. The Nominating Charter includes a policy for consideration of
candidates proposed by shareholders. Any recommendations by shareholders will be
evaluated by the Board of Directors in the same manner as any other
recommendation and in each case in accordance with the Nominating Charter.
Shareholders that desire to recommend candidates for consideration by the
Company's Board of Directors should mail or deliver written recommendations to
the Company addressed as follows: Board of Directors, Service 1st Bancorp, 2800
West March Lane, Suite 120, Stockton, CA 95219. Each recommendation should
include biographical information indicating the background and experience of the
candidate that qualifies the candidate for consideration as a director for
evaluation by the Board of Directors. In addition to minimum standards of
"independence" for non-employee directors and financial literacy, the Board of
Directors considers various other criteria including the candidate's experience
and expertise, financial resources, ability to devote the time and effort
necessary to fulfill the responsibilities of a director and involvement in
community activities in the market areas served by the Company and the Bank that
may enhance the reputation of the Company and the Bank. The Company and the Bank
operate in a highly regulated industry and are subject to the supervision,
regulation and periodic examination by state and federal banking regulatory
authorities including the Board of Governors of the Federal Reserve System,
California Commissioner of Financial Institutions and Federal Deposit Insurance
Corporation. Directors of the Company and the Bank are subject to certain rules
and regulations and potential liabilities not otherwise applicable to directors
of non-banking organizations. Consequently, evaluation of candidates by the
Company's Board of Directors may include more extensive inquiries into personal
background information including confirmation of the accuracy and completeness
of background information by (a) requiring candidates to complete questionnaires
to elicit information of the type required to be disclosed by the Company in
reports filed with the Securities and Exchange Commission, or such state and
federal banking regulatory authorities, (b) conducting background investigations
by qualified independent organizations experienced in conducting criminal and
civil investigatory reviews, and (c) such other personal and financial reviews
and analyses as the Board of Directors may deem appropriate in connection with
the consideration of candidates. Shareholders who wish to nominate a candidate
for election to the Company's Board of Directors, as opposed to recommending a
potential nominee for consideration by the Board of Directors, are required to
comply with the advance notice and any other requirements of the Company's
bylaws, applicable laws and regulations. The Board of Directors may elect to use
third parties in the future to identify or evaluate candidates for consideration
by the Board of Directors. The Nominating Charter adopted by the Board of
Directors is attached to this Proxy Statement as Appendix A.
The Funds Management Committee held 12 meetings during 2004. The Funds
Management Committee consists of Directors Andal, Brooks, Hyzdu, Lawrence,
Mizuno and Raymus. The Funds Management Committee is responsible for managing
the Bank's assets and liabilities so as to preserve the necessary liquidity,
maximize net interest margin over time, and control interest rate risk. This
involves overseeing deposit and loan pricing, establishing targeted asset and
liability mix ratios, and formulating appropriate plans to ensure adequate
capital for continued growth. The Funds Management Committee must establish and
continually review Bank policies to ensure compliance with these goals.
6
The Loan Committee held 41 meetings during 2004. The Loan Committee
consists of Directors Brooks, Gini, Hyzdu, Souza and Van Veldhuizen. The Loan
Committee is responsible for overseeing all of the Bank's lending functions.
This includes establishing and ongoing review of the Bank's lending policies,
making decisions on loans which exceed established lending limits for Bank
personnel, reviewing loans approved within the lending authorities of the Bank
personnel, reviewing problem and "Watch List" loans and the follow-up on
established actions plans to correct identified deficiencies, reviewing past due
loans and action plans to cure the payment defaults, and monitoring
concentration risk within the Bank's loan portfolio.
A majority of the members of the Board of Directors, each of whom is
"independent" as defined under applicable rules promulgated by the Securities
and Exchange Commission pursuant to the Sarbanes-Oxley Act of 2002, has
established procedures for receipt and delivery of shareholder communications
addressed to the Board of Directors. Any such shareholder communications,
including communications by employees of the Company solely in their capacity as
shareholders, should be mailed or delivered to the Company addressed as follows:
Board of Directors, Service 1st Bancorp, 2800 West March Lane, Suite 120,
Stockton, CA 95219.
The Company encourages members of its Board of Directors to attend the
Company's Annual Meeting of Shareholders each year. All of the directors
attended the Company's Annual Meeting of Shareholders held in 2004.
7
AUDIT COMMITTEE REPORT
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE
COMPANY'S PREVIOUS OR FUTURE FILINGS UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES EXCHANGE ACT OF 1934 THAT MIGHT INCORPORATE THIS PROXY STATEMENT OR
FUTURE FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, IN WHOLE OR IN PART,
THE FOLLOWING REPORT SHALL NOT BE DEEMED TO BE INCORPORATED BY REFERENCE INTO
ANY SUCH FILING.
The Audit Committee consists of the following members of the Company's
Board of Directors: Toni Marie Raymus, Michael K. Repetto, Al Van Veldhuizen and
Donald L. Walters. Each such member of the Committee is "independent" as defined
under applicable rules promulgated by the Securities and Exchange Commission
pursuant to the Sarbanes-Oxley Act of 2002.
The Committee operates under a written charter adopted by the Board of
Directors which, among other matters, delineates the responsibilities of the
Committee. The Committee's responsibilities include responsibility for the
appointment, compensation, retention and oversight of the work of the Company's
independent public accountants engaged (including resolution of disagreements
between management and the independent public accountants regarding financial
reporting) for the purpose of preparing or issuing an audit report or performing
other audit, review or attest services for the Company. The Company's
independent public accountants report directly to the Committee. The Audit
Committee Charter is attached to this Proxy Statement as Appendix B.
The Committee has reviewed and discussed the audited financial
statements of the Company for the fiscal year ended December 31, 2004 with
management and Vavrinek, Trine, Day & Co., LLP, the Company's independent public
accountants. The Committee has also discussed with Vavrinek, Trine, Day & Co.,
LLP, the matters required to be discussed by Statement on Auditing Standards No.
61 (Codification of Statements on Auditing Standards) as may be modified or
supplemented. The Committee has also received the letter from Vavrinek, Trine,
Day & Co., LLP required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) as may be modified or
supplemented, and the Committee has discussed the independence of Vavrinek,
Trine, Day & Co., LLP with that firm.
Based on the Committee's review and discussions noted above, the
Committee recommended to the Board of Directors that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2004, for filing with the Securities and
Exchange Commission.
Submitted by:
/s/ TONI MARIE RAYMUS /s/ MICHAEL K. REPETTO
--------------------- ----------------------
Toni Marie Raymus Michael K. Repetto
/s/ AL VAN VELDHUIZEN /s/ DONALD L. WALTERS
--------------------- ----------------------
Al Van Veldhuizen Donald L. Walters
8
Executive Officers
The following table sets forth as of March 23, 2005, information
concerning executive officers of the Company, excluding John O. Brooks, Chief
Executive Officer, and Bryan R. Hyzdu, President, as to whom the same
information has been previously disclosed above in connection with their
nomination for election as directors of the Company.
- ---------------------------- -------- --------------------- -----------------------------------------------------
Name and Title Age Executive Officer Principal Occupation
Since During the Past Five Years
- ---------------------------- -------- --------------------- -----------------------------------------------------
Patrick Carman, Executive 55 2000 Prior to joining the Bank on August 7, 2000, he
Vice President and Chief held positions as Senior Vice President and Senior
Credit Officer of the Bank Credit Officer from 1999 to 2000, Credit
Administrator from 1998 to 1999, and as SBA
portfolio manager from 1995 to 1998, at East County
Bank, Antioch, California.
- ---------------------------- -------- --------------------- -----------------------------------------------------
Robert E. Bloch, Executive 57 2001 Prior to joining the Bank on March 26, 2001, he was
Vice President and Chief Executive Vice President and Chief Financial
Financial Officer of the Officer for Mission Community Bank, N.A., San Luis
Company and the Bank Obispo, California, from 1999 to 2001, and
Executive Vice President and Chief Financial
Officer of Heritage Oaks Bank, Paso Robles,
California, from 1992 to 1999.
- ---------------------------- -------- --------------------- -----------------------------------------------------
Shannon Reinard, 47 2004 Prior to joining the Bank on March 4, 2002, she was
Executive Vice Vice President/Operations Manager at the Concord
President and Office of Civic Bank of Commerce from 2000 to 2002
Operations Manager and Vice President/Operations Administrator at the
of the Bank Antioch Office of East County Bank from 1996 to
2000.
- ---------------------------- -------- --------------------- -----------------------------------------------------
(1) The year indicated represents the year the named individual became an
executive officer of the Bank and/or the Company.
(2) The Company became the parent holding company for the Bank effective June
26, 2003.
9
Executive Compensation
The following table shows the compensation paid to the Company's
executive officers for the three fiscal years ended December 31, 2004.
Summary Compensation Table
- ---------------------------------------------------------------------- -------------------------------------- -------------
Annual Compensation Long Term Compensation
--------------------------------------
Awards Payouts
- ---------------------------------------------------------------------- ------------------------- ------------ -------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- --------------------- -------- ---------- ---------- ----------------- ------------ ------------ ------------ -------------
Other Restricted Securities
Annual Stock Underlying All Other
Name and Principal Salary Bonus Compensation Award(s) Options/ LTIP Compensation
Position Year ($)(1) ($)(2) ($)(3) ($) SARs (#)(4) Payouts ($) ($)(5)
- --------------------- -------- ---------- ---------- ----------------- ------------ ------------ ------------ -------------
John O. Brooks, 2004 $137,539 $35,857 -0- $ 1,500
Chief Executive -------- ---------- ---------- ----------------- ------------ ------------ ------------ -------------
Officer 2003 $128,523 $ 412 -0- $ 6,000
-------- ---------- ---------- ----------------- ------------ ------------ ------------ -------------
2002 $121,800 $12,166 -0- $ 6,000
- --------------------- -------- ---------- ---------- ----------------- ------------ ------------ ------------ -------------
Bryan R. Hyzdu, 2004 $141,524 $32,870 -0- $ 6,392
President -------- ---------- ---------- ----------------- ------------ ------------ ------------ -------------
2003 $117,150 $ 189 -0- $13,142
-------- ---------- ---------- ----------------- ------------ ------------ ------------ -------------
2002 $111,650 $21,152 -0- $ 9,542
- --------------------- -------- ---------- ---------- ----------------- ------------ ------------ ------------ -------------
Robert E. Bloch, 2004 $108,676 $26,958 -0- $ 1,200
Executive Vice -------- ---------- ---------- ----------------- ------------ ------------ ------------ -------------
President and Chief 2003 $101,528 $ 233 -0- $ 4,800
Financial Officer -------- ---------- ---------- ----------------- ------------ ------------ ------------ -------------
2002 $ 96,425 $ 9,631 -0- $ 4,800
- --------------------- -------- ---------- ---------- ----------------- ------------ ------------ ------------ -------------
Patrick Carman, 2004 $100,503 $24,808 -0- $ 1,200
Executive Vice -------- ---------- ---------- ----------------- ------------ ------------ ------------ -------------
President and Chief 2003 $ 93,750 $ 226 -0- $ 4,800
Credit Officer of -------- ---------- ---------- ----------------- ------------ ------------ ------------ -------------
the Bank 2002 $ 87,500 $ 8,740 -0- $ 4,800
- --------------------- -------- ---------- ---------- ----------------- ------------ ------------ ------------ -------------
Shannon Reinard, 2004 $ 70,621 $15,371 10,000 $ 750
Executive Vice -------- ---------- ---------- ----------------- ------------ ------------ ------------ -------------
President and 2003 $ 64,202 $ -0- -0- $ 3,000
Operations Manager -------- ---------- ---------- ----------------- ------------ ------------ ------------ -------------
of the Bank (6) 2002 $ 47,583 $ 3,970 -0- $ 2,250
- --------------------- -------- ---------- ---------- ----------------- ------------ ------------ ------------ -------------
(1) Amounts shown include cashnd non-cash compensation earned and received by
executive officers as well as amounts earned but deferred at the election
of those officers under the 401(k) Plan and amounts paid for auto allowance
which was added to the base salary of each executive officer beginning in
April 2004. Mr. Brook's voluntarily agreed to a reduced salary during 2004,
2003 and 2002, to the amounts reflected in the table and provided under the
terms of his employment agreement dated July 15, 2004, to reflect the
comparable reduction in his availability due to illness. The executive
officer employment agreements, each dated July 15, 2004 are discussed
hereafter in this Proxy Statement under the heading "Employment Contracts
and Termination of Employment and Change-in-Control Arrangements."
(2) Amounts shown as bonus payments were earned or accrued during the year
indicated and paid in the immediately following year, except that a portion
of the bonus payments in 2003 and 2004 to each executive officer, except
Ms. Reinard, were accrued and paid in 2003 and 2004 to cover taxes
applicable to bank-owned life insurance policies on the lives of the
executives in connection with the post-retirement benefit agreements for
the executive officers described hereafter in this Proxy Statement under
the heading "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements." The portion of the bonus payments listed
in 2004 that was attributable to such bank-owned life insurance taxes was
as follows: Mr. Brooks, $5,386; Mr. Hyzdu, $1,698; Mr. Bloch, $2,714; and
Mr. Carman, $2,409. Mr. Hyzdu's bonus in 2002 includes a $10,000 bonus
under his prior employment severance agreement dated November 1, 2002.
10
(3) No executive officer received perquisites or other personal benefits in
excess of the lesser of $50,000 or 10% of each such officer's total annual
salary and bonus during 2004, 2003 and 2002.
(4) Amounts shown represent the number of shares granted in the year indicated.
The Company has a 2004 Stock Option Plan (the "2004 Plan") which was
adopted by the Board of Directors of the Company on February 19, 2004, and
approved by shareholders at the 2004 Annual Meeting of Shareholders held on
May 27, 2004. The Company also has a 1999 Stock Option Plan (the "1999
Plan") pursuant to which options are outstanding. The terms of the 2004
Plan are substantially similar to the terms of the 1999 Plan. Under the
1999 Plan, options were permitted to be granted to non-employee directors,
officers and employees of Service 1st Bank. Options granted under the 1999
Plan were either incentive options or nonstatutory options, however, only
nonstatutory options were permitted to be granted to non-employee
directors. Options granted became exercisable in accordance with a vesting
schedule established at the time of grant. Vesting could not extend beyond
ten years from the date of grant. The Company assumed the 1999 Plan in
connection with the reorganization whereby the Bank became a wholly-owned
subsidiary of the Company. Upon a change in control of the Company, options
under the 1999 Plan become fully vested and exercisable, or may be assumed
or equivalent options may be substituted by a successor corporation.
Options are adjusted to protect against dilution in the event of certain
changes in the Company's capitalization, including stock splits and stock
dividends. All options granted to the named executive officers are
incentive stock options and have an exercise price equal to the fair market
value of the common stock on the date of grant. No options were granted
under the 1999 Plan from and after June 26, 2003, the Effective Date of the
reorganization described above and future grants of options thereunder were
terminated, in accordance with the permit issued by the California
Commissioner of Corporations to authorize the exchange of shares of common
stock of the Company for the outstanding shares of common stock of the Bank
in the reorganization. Ms. Reinard is the only executive officer granted
options under the 2004 Plan during 2004. She was granted an incentive stock
option to acquire 10,000 shares of the Company's common stock under the
2004 Plan on October 25, 2004, at the market price on the date of grant of
$13.95 per share.
(5) Amounts shown for each named executive officer include (i) any
life/disability insurance premiums, (ii) an automobile allowance paid
during the first three months of 2004 before such amounts were included in
base salary effective in April 2004 (see footnote 1 above), and (iii) an
automobile allowance paid during 2003 and 2002 (except for Shannon Reinard
who was not an executive officer prior to 2004). The Company has a 401(k)
Plan which was adopted in 2000. Generally, all Company employees are
eligible to participate in the 401(k) Plan. Participating employees may
defer a portion of their compensation in the 401(k) Plan and the Company,
at its option, may make matching contributions on participant's deferrals.
No matching contributions were made to the 401(k) Plan in the years 2004,
2003 and 2002.
(6) Ms. Reinard commenced employment with the Bank on March 4, 2002. She was
named an executive officer in 2004.
Stock Options
The following table sets forth information concerning options granted
during 2004 under the Company's 2004 Stock Option Plan to the executive officers
named in the Summary Compensation Table.
Option/SAR Grants in Last Fiscal Year
- ----------------------- ----------------- ----------------- --------------- ------------ -------------------
Name Number of Percentage of Exercise or Expiration Grant Date
Securities Total Base Price Date Present Values ($)
Underlying Options/SARs ($/Sh) (2)
Options/SARs Granted to
Granted (#) (1) Employees in
Fiscal Year
- ----------------------- ----------------- ----------------- --------------- ------------ -------------------
John O. Brooks -0- -0- -0- -0- -0-
- ----------------------- ----------------- ----------------- --------------- ------------ -------------------
Bryan R. Hyzdu -0- -0- -0- -0- -0-
- ----------------------- ----------------- ----------------- --------------- ------------ -------------------
Robert E. Bloch -0- -0- -0- -0- -0-
- ----------------------- ----------------- ----------------- --------------- ------------ -------------------
Patrick Carman -0- -0- -0- -0- -0-
- ----------------------- ----------------- ----------------- --------------- ------------ -------------------
Shannon Reinard 10,000 57.1% $13.95 10/25/14 $36,600
- ----------------------- ----------------- ----------------- --------------- ------------ -------------------
(1) All options are incentive stock options, which vest ratably over a 3 year
period commencing 1 year after the grant date. All options have an exercise
price equal to the market value on the date of grant. The terms of the 2004
11
Plan provide that options may become exercisable in full in the event of a
change of control as defined in the 2004 Stock Option Plan. See also
footnotes 4 and 10 to the Summary Compensation Table.
(2) The grant date present value of the option grant to Ms. Reinard was derived
by using the Black-Scholes option-pricing model. A per share option value
of $3.66 was determined based on the assumptions used including a risk-free
rate equal to the eight-year interpolated treasury yield of 3.9%,
volatility of 27%, and an eight-year maturity.
Aggregated Option/SAR Exercises and FY-End Option/SAR Values
The following table sets forth information concerning options exercised
during 2004 under the Company's 2004 and 1999 Stock Option Plans and Fiscal
Year-End Values (1) for the executive officers named in the Summary Compensation
Table.
- --------------------- ----------------- -------------- ---------------------------- ------------------------------
(a) (b) (c) (d) (e)
- --------------------- ----------------- -------------- ---------------------------- ------------------------------
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options/SARs
Acquired on Value Options/SARs at FY-End (#) at FY-End ($)
Name Exercise (#) Realized ($) Exercisable/Unexercisable(2) Exercisable/Unexercisable(3)
- --------------------- ----------------- -------------- ---------------------------- ------------------------------
John O. Brooks -0- $-0- 26,250/-0- $156,975/$-0-
- --------------------- ----------------- -------------- ---------------------------- ------------------------------
Bryan R. Hyzdu -0- $-0- 21,000/-0- $125,580/$-0-
- --------------------- ----------------- -------------- ---------------------------- ------------------------------
Robert E. Bloch -0- $-0- 15,750/-0- $101,588/$-0-
- --------------------- ----------------- -------------- ---------------------------- ------------------------------
Patrick Carman -0- $-0- 10,500/-0- $62,790/$-0-
- --------------------- ----------------- -------------- ---------------------------- ------------------------------
Shannon Reinard -0- $-0- -0-/10,000 $-0-/$15,500
- --------------------- ----------------- -------------- ---------------------------- ------------------------------
(1) The aggregate value has been determined based upon the fair market value of
the Company's common stock, at year-end, minus the exercise price.
(2) The numbers in column (d) for Messrs. Brooks, Hyzdu, Bloch and Carman have
been adjusted for the 5 percent stock dividend issued to shareholders of
record on March 10, 2004. Ms. Reinard's options were granted on October 25,
2004.
(3) The values in column (e) are based on exercise prices adjusted for the 5
percent stock dividend of $9.05 for Mr. Bloch and $9.52 for Messrs. Brooks,
Hyzdu and Carman. The value for Ms. Reinard is based on $13.95. The fair
market value per share of the Company's common stock at the fiscal year-end
was $15.50.
Equity Compensation Plan Information
The table below lists information regarding Company common stock
issuable upon the exercise of stock options, the weighted average exercise price
of those options and the number of shares available for issuance under the 2004
and 1999 Stock Option Plans at year-end 2004 (unadjusted for the 5 percent stock
dividend issued to shareholders of record on March 10, 2004). The Company has no
other equity compensation plan and there are no warrants or other rights
outstanding that would result in the issuance of shares of Company common stock.
- ------------------------------ ------------------------ -------------------- ------------------------------
Plan Category Number of securities to Weighted-average Number of securities remaining
be issued upon exercise exercise price of available for future issuance
of outstanding options, outstanding options, under equity compensation
warrants and rights warrants and rights plans (excluding securities
reflected in column (a))
(a) (b) (c)
- ------------------------------ ------------------------ -------------------- ------------------------------
Equity compensation plans
approved by security holders 184,450 $10.01 150,975
- ------------------------------ ------------------------ -------------------- ------------------------------
Equity compensation plans
not approved by security -0- -0- -0-
holders
- ------------------------------ ------------------------ -------------------- ------------------------------
Total 184,450 $10.01 150,975
- ------------------------------ ------------------------ -------------------- ------------------------------
12
Director Compensation
Non-employee members of the Board of Directors of the Company were paid
$500 per month as a single retainer fee for attendance at all meetings of the
Board of Directors of the Company and the Bank held each month during 2004. The
committee chairman of the Company's Audit and Executive Committees, and the
Bank's Funds Management, Loan and Technology Committees, each received $150 and
the committee members each received $100, for each committee meeting of the
Company and each committee meeting of the Bank attended. The total amount of
fees paid to all directors as a group as monthly retainer fees for attendance at
all monthly Board of Director meetings of the Company and the Bank and as the
fees paid for attendance at each committee meeting of the Company and each
committee meeting of the Bank, was $94,155 in 2004.
The Company's 1999 Stock Option Plan was adopted by the Board of
Directors of the Bank on November 15, 1999, and approved by shareholders at the
1999 Annual Meeting of Shareholders of the Bank held on May 11, 2000 (the "1999
Plan"). The Company assumed the 1999 Plan and further option grants were
terminated in connection with the reorganization whereby the Bank became a
wholly-owned subsidiary of the Company effective June 26, 2003. The 1999 Plan
set aside 240,000 shares of no par value common stock of the Company for the
grant of incentive and nonstatutory stock options to key, full-time salaried
employees and officers of the Company, and to the non-employee directors of the
Company. Only nonstatutory options could be granted to non-employee directors
under the 1999 Plan. The Company's non-employee directors were granted
nonstatutory options under the 1999 Plan to acquire 5,000 shares each of the
Company's common stock on the date of adoption of the 1999 Plan, at a grant
price of $10.00 per share, which reflected the fair market value of the
Company's common stock on such date. The option grants were made subject to the
approval of the 1999 Plan by the shareholders of the Company. Nonstatutory stock
options granted to outside directors under the 1999 Stock Option Plan generally
vest at the rate of one-third per year. The 1999 Plan was terminated as to
future grants effective June 26, 2003. At the time of termination of grants
under the 1999 Plan, 171,000 shares of common stock were reserved for issuance
upon exercise of options outstanding under the 1999 Plan. As of March 23, 2005,
there were 52,500 shares reserved for issuance upon exercise of nonstatutory
stock options previously granted to the outside directors as a group under the
1999 Stock Option Plan at an exercise price of $9.52 (adjusted for the 5 percent
stock dividend issued to shareholders of record on March 10, 2004). See footnote
number 4 to the Summary Compensation Table for further information regarding the
1999 Plan.
The Company's 2004 Stock Option Plan was adopted by the Board of
Directors of the Company on February 19, 2004, and approved by shareholders at
the 2004 Annual Meeting of Shareholders held on May 27, 2004 (the "2004 Plan").
The 2004 Plan set aside 169,000 shares of no par value common stock of the
Company for the grant of incentive and nonstatutory stock options to key,
full-time salaried employees and officers of the Company, and to the
non-employee directors of the Company. Only nonstatutory options could be
granted to non-employee directors under the 2004 Plan. The terms of the 2004
Plan are substantially similar to the terms of the 1999 Plan. As of March 23,
2005, there were 5,250 shares reserved for issuance upon exercise of
nonstatutory stock options previously granted to the outside directors as a
group under the 2004 Stock Option Plan at an exercise price of $13.95. See
footnote number 4 to the Summary Compensation Table for further information
regarding the 2004 Plan.
13
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
The Company and John O. Brooks entered into an employment agreement
dated July 15, 2004, which replaced a prior employment agreement dated November
1, 2000. Mr. Brooks currently serves as the Chairman of the Board of Directors
and Chief Executive Officer of the Company and Chairman of the Board of
Directors of the Bank. The employment agreement is for a two (2) year term,
subject to termination rights of the Company and Mr. Brooks. The employment
agreement includes (i) an annual base salary that includes an auto allowance as
reflected in the Summary Compensation Table, which is subject to annual
adjustment increase during the term in the discretion of the Board of Directors;
(ii) an annual bonus payment in an amount to be determined in the discretion of
the Board of Directors based upon the Company's profitability and implementation
of strategic plans; (iii) four (4) weeks annual vacation; (iv) group life,
health and disability insurance benefits; (v) reimbursement of business expenses
incurred on behalf of the Company; (vi) group life and medical insurance
benefits; (vii) continuation of group insurance coverages for Mr. Brooks and his
dependents at the expense of the Company for a period of one hundred eighty
(180) days from the date of termination without cause or in connection with a
change in control from the date of termination or the occurrence of certain
events deemed to be the equivalent of termination; (viii) severance payments in
connection with an involuntary termination without cause equal to twelve (12)
months of base salary payable in bi-monthly installments commencing with the
month immediately following the termination; and (ix) severance payments in
connection with an involuntary termination or certain events deemed to be the
equivalent of termination occurring within twenty-four (24) months following a
change in control, or upon voluntary resignation at any time during the period
commencing on the expiration of six (6) months following a change in control
through the expiration of twelve (12) months following a change in control,
equal to twenty-four (24) months of base salary payable in lump sum within
thirty (30) days of any such termination, event or resignation.
The Company and Bryan R. Hyzdu entered into an employment agreement
dated July 15, 2004, which replaced a prior severance agreement dated November
1, 2002. Mr. Hyzdu currently serves as the President of the Company and
President and Chief Executive Officer of the Bank. The employment agreement is
for a three (3) year term, subject to termination rights of the Company and Mr.
Hyzdu. The employment agreement includes (i) an annual base salary that includes
an auto allowance as reflected in the Summary Compensation Table, which is
subject to annual adjustment increase during the term in the discretion of the
Board of Directors; (ii) an annual bonus payment in an amount to be determined
in the discretion of the Board of Directors based upon the Company's
profitability and implementation of strategic plans; (iii) (iii) four (4) weeks
annual vacation; (iv) group life, health and disability insurance benefits; (v)
reimbursement of business expenses incurred on behalf of the Company; (vi) group
life and medical insurance benefits; (vii) continuation of group insurance
coverages for Mr. Hyzdu and his dependents at the expense of the Company for a
period of one hundred eighty (180) days from the date of termination without
cause or in connection with a change in control from the date of termination or
the occurrence of certain events deemed to be the equivalent of termination;
(viii) severance payments in connection with an involuntary termination without
cause equal to twelve (12) months of base salary payable in bi-monthly
installments commencing with the month immediately following the termination;
and (ix) severance payments in connection with an involuntary termination or
certain events deemed to be the equivalent of termination occurring within
twenty-four (24) months following a change in control, or upon voluntary
resignation at any time during the period commencing on the expiration of six
(6) months following a change in control through the expiration of twelve (12)
months following a change in control, equal to twenty-four (24) months of base
salary payable in lump sum within thirty (30) days of any such termination,
event or resignation.
The Company and Robert E. Bloch entered into an employment agreement
dated July 15, 2004, which replaced a prior offer of employment letter by the
Bank dated February 26, 2001. Mr. Bloch currently serves as Executive Vice
President and Chief Financial Officer of the Company and the Bank. The
employment agreement is for a three (3) year term, subject to termination rights
of the Company and Mr. Bloch. The employment agreement includes (i) an annual
14
base salary that includes an auto allowance as reflected in the Summary
Compensation Table, which is subject to annual adjustment increase during the
term in the discretion of the Board of Directors; (ii) an annual bonus payment
in an amount to be determined in the discretion of the Board of Directors based
upon the Company's profitability and implementation of strategic plans; (iii)
four (4) weeks annual vacation; (iv) group life, health and disability insurance
benefits; (v) reimbursement of business expenses incurred on behalf of the
Company; (vi) group life and medical insurance benefits; (vii) continuation of
group insurance coverages for Mr. Bloch and his dependents at the expense of the
Company for a period of one hundred eighty (180) days from the date of
termination without cause or in connection with a change in control from the
date of termination or the occurrence of certain events deemed to be the
equivalent of termination; (viii) severance payments in connection with an
involuntary termination without cause equal to six (6) months of base salary
payable in bi-monthly installments commencing with the month immediately
following the termination; and (ix) severance payments in connection with an
involuntary termination or certain events deemed to be the equivalent of
termination occurring within twenty-four (24) months following a change in
control, or upon voluntary resignation at any time during the period commencing
on the expiration of six (6) months following a change in control through the
expiration of twelve (12) months following a change in control, equal to twelve
(12) months of base salary payable in lump sum within thirty (30) days of any
such termination, event or resignation.
The Company and Patrick Carman entered into an employment agreement
dated July 15, 2004, which replaced a prior offer of employment letter by the
Bank dated May 26, 2000. Mr. Carman currently serves as Executive Vice President
and Chief Credit Officer of the Bank. The employment agreement is for a three
(3) year term, subject to termination rights of the Company and Mr. Carman. The
employment agreement includes (i) an annual base salary that includes an auto
allowance as reflected in the Summary Compensation Table, which is subject to
annual adjustment increase during the term in the discretion of the Board of
Directors; (ii) an annual bonus payment in an amount to be determined in the
discretion of the Board of Directors based upon the Company's profitability and
implementation of strategic plans; (iii) four (4) weeks annual vacation; (iv)
group life, health and disability insurance benefits; (v) reimbursement of
business expenses incurred on behalf of the Company; (vi) group life and medical
insurance benefits; (vii) continuation of group insurance coverages for Mr.
Carman and his dependents at the expense of the Company for a period of one
hundred eighty (180) days from the date of termination without cause or in
connection with a change in control from the date of termination or the
occurrence of certain events deemed to be the equivalent of termination; (viii)
severance payments in connection with an involuntary termination without cause
equal to six (6) months of base salary payable in bi-monthly installments
commencing with the month immediately following the termination; and (ix)
severance payments in connection with an involuntary termination or certain
events deemed to be the equivalent of termination occurring within twenty-four
(24) months following a change in control, or upon voluntary resignation at any
time during the period commencing on the expiration of six (6) months following
a change in control through the expiration of twelve (12) months following a
change in control, equal to twelve (12) months of base salary payable in lump
sum within thirty (30) days of any such termination, event or resignation.
The Company and Shannon Reinard entered into an employment agreement
dated July 15, 2004, which replaced an offer letter dated February 7, 2002. Ms.
Reinard currently serves as Executive Vice President and Operations Manager of
the Bank. The employment agreement is for a three (3) year term, subject to
termination rights of the Company and Ms. Reinard. The employment agreement
includes (i) an annual base salary that includes an auto allowance as reflected
in the Summary Compensation Table, which is subject to annual adjustment
increase during the term in the discretion of the Board of Directors; (ii) an
annual bonus payment in an amount to be determined in the discretion of the
Board of Directors based upon the Company's profitability and implementation of
strategic plans; (iii) four (4) weeks annual vacation; (iv) group life, health
and disability insurance benefits; (v) reimbursement of business expenses
incurred on behalf of the Company; (vi) group life and medical insurance
benefits; (vii) continuation of group insurance coverages for Ms. Reinard and
her dependents at the expense of the Company for a period of one hundred eighty
(180) days from the date of termination without cause or in connection with a
15
change in control from the date of termination or the occurrence of certain
events deemed to be the equivalent of termination; (viii) severance payments in
connection with an involuntary termination without cause equal to six (6) months
of base salary payable in bi-monthly installments commencing with the month
immediately following the termination; and (ix) severance payments in connection
with an involuntary termination or certain events deemed to be the equivalent of
termination occurring within twenty-four (24) months following a change in
control, or upon voluntary resignation at any time during the period commencing
on the expiration of six (6) months following a change in control through the
expiration of twelve (12) months following a change in control, equal to twelve
(12) months of base salary payable in lump sum within thirty (30) days of any
such termination, event or resignation.
Recognizing the importance of building and retaining a competent
management team, additional agreements were entered into effective as of
September 10, 2003, to provide post-retirement benefits to John O. Brooks, Bryan
R. Hyzdu, Robert E. Bloch and Patrick Carman. The terms of the agreements
include the amounts each employee will receive upon the occurrence of certain
specified events, including normal retirement on or after a specified age. A
lump-sum premium payment of approximately two million one hundred ninety-four
thousand dollars ($2,194,000) was paid to acquire insurance policies on the
lives of John O. Brooks, Bryan R. Hyzdu, Robert E. Bloch and Patrick Carman as a
funding mechanism in connection with the agreements. The Bank is the owner and
beneficiary of the policies and is entitled to the increase in cash surrender
value represented by the policies. The increase in cash surrender value is
accrued monthly and reflected in the Company's consolidated financial statements
as a category under "Other income." The Bank pays a bonus payment each year to
the named executive officers to satisfy taxes applicable to each named executive
officer as reflected in the Summary Compensation Table. The agreements generally
provide for annual retirement benefit payments upon attainment of normal
retirement age of sixty-six (66) of forty thousand dollars ($40,000) to John O.
Brooks, seventy-five thousand dollars ($75,000) to Bryan R. Hyzdu, forty
thousand dollars ($40,000) to Robert E. Bloch, and fifty thousand dollars
($50,000) to Patrick Carman. The annual retirement benefit amount is payable in
equal monthly installments over a fifteen (15) year period. In the event of an
employee's death, all remaining amounts due are anticipated to be paid to the
employee's designated beneficiary over the remaining payout period. Other events
which may alter when payment of the annual retirement benefit is to begin, or
the amount which is to be paid, include: (a) disability prior to normal
retirement or early termination other than for cause, death, disability or a
change of control, in which cases the employee shall be entitled to a lesser
benefit payment amount based upon an accrual balance representing the liability
accrued to satisfy the benefit payments due to the employee; and (b) termination
within a specified period following a change of control, in which case the
employee is entitled to receive the normal retirement benefit payment described
above in equal monthly installments for fifteen (15) years beginning in the
month following the employee's normal retirement age.
Change of Control
Management is not aware of an arrangement which may, at a subsequent
date, result in a change of control of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers and ten percent or more
shareholders of the Company's equity securities, to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes of
ownership of the Company's equity securities. Officers, directors and ten
percent or more shareholders are required by Securities and Exchange Commission
regulation to furnish the Company with copies of all Section 16(a) forms they
file. To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 2004, all
Section 16(a) filing requirements applicable to its executive officers,
16
directors and beneficial owners of ten percent or more of the Company's equity
securities appear to have been met.
Code of Ethics
The Board of Directors has adopted a "code of ethics" as defined under
applicable rules promulgated by the Securities and Exchange Commission pursuant
to the Sarbanes-Oxley Act of 2002. The code of ethics requires that the
Company's directors, officers (including the principal executive, financial and
accounting officers, or controller and persons performing similar functions) and
employees conduct business in accordance with the highest ethical standards and
in compliance with all laws, rules and regulations applicable to the Company.
The code of ethics is intended to supplement the provisions of any other
personnel policies of the Company or codes of conduct which may establish
additional standards of ethical behavior applicable to the Company's directors,
officers and employees. The code of ethics was filed as Exhibit 14.1 to the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2003, and
may be accessed through the Company's website by following the instructions for
accessing reports filed with the Securities and Exchange Commission hereafter in
this Proxy Statement under the heading "Website Access."
Certain Relationships and Related Transactions
There have been no transactions, or series of similar transactions,
during 2004 and 2003, or any currently proposed transaction, or series of
similar transactions, to which the Company or the Bank was or is to be a party,
in which the amount involved exceeded or will exceed $60,000 and in which any
director of the Company or the Bank, executive officer of the Company or the
Bank, any shareholder owning of record or beneficially 5% or more of the
Company's common stock, or any member of the immediate family of any of the
foregoing persons, had, or will have, a direct or indirect material interest.
Some of the directors and officers of the Company and the companies
with which those directors and officers are associated are customers of, and
have had banking transactions with the Company, through the Bank, in the
ordinary course of the Company's business during the last two years, and the
Company expects to have banking transactions with such persons in the future. In
the opinion of the Company's management, all loans and commitments to lend in
such transactions were made in compliance with applicable laws and on
substantially the same terms, including interest rates and collateral, as those
prevailing for comparable transactions with other persons of similar
creditworthiness and did not involve more than a normal risk of collectibility
or present other unfavorable features. Loans to executive officers of the
Company and the Bank are subject to limitations as to amount and purposes
prescribed in part by the Federal Reserve Act, as amended, and the regulations
of the Federal Deposit Insurance Corporation.
17
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Vavrinek, Trine, Day & Co., LLP, certified
public accountants, served the Company and the Bank as independent public
accountants and auditors in connection with various services described below for
the 2004 and 2003 fiscal years at the direction of the Board of Directors of the
Company. Vavrinek, Trine, Day & Co., LLP has no interests, financial or
otherwise, in the Company. The services rendered by Vavrinek, Trine, Day & Co.,
LLP during the 2004 and 2003 fiscal years were audit services, consultation in
connection with various accounting matters and preparation of tax returns.
The table below summarizes the services rendered to the Company by
Vavrinek, Trine, Day & Co., LLP, during the 2004 and 2003 fiscal years.
- --------------------------- ---------------------- ----------------------
Category of Services Fiscal Year 2004 Fiscal Year 2003
- --------------------------- ---------------------- ----------------------
Audit Fees (1) $29,425 $ 29,500
- --------------------------- ---------------------- ----------------------
Audit-Related Fees (2) 300 1,750
- --------------------------- ---------------------- ----------------------
Tax Fees (3) 4,000 3,000
- --------------------------- ---------------------- ----------------------
All Other Fees -0- -0-
- --------------------------- ---------------------- ----------------------
Total Accounting Fees $33,725 $ 34,250
- --------------------------- ---------------------- ----------------------
(1) Audit fees consisted of services rendered by Vavrinek, Trine, Day & Co.,
LLP for the audit of the financial statements included in the Company's
annual report on Form 10-KSB for the years ended December 31, 2004 and
2003, and for reviews of the financial statements included in the Company's
and Bank's quarterly reports on Form 10-QSB during the fiscal years 2004
and 2003.
(2) In 2004, audit related fees consisted of general assistance on SEC matters.
In 2003, audit-related fees consisted of general assistance in formation of
the Company.
(3) Tax fees consisted primarily of assistance relating to tax compliance and
reporting for years 2004 and 2003.
The Audit Committee approved each professional service rendered by
Vavrinek, Trine, Day & Co., LLP during the 2004 and 2003 fiscal years and
considered whether the provision of such services is compatible with Vavrinek,
Trine, Day & Co., LLP maintaining its independence. The approval of such
professional services included pre-approval of all audit and permissible
non-audit services provided by Vavrinek, Trine, Day & Co., LLP. These services
included audit, tax and other services described above. The Audit Committee
Charter attached as Appendix B includes a policy of pre-approval of all services
provided by the Company's independent public accountants. The Audit Committee
approved one hundred percent (100%) of all such professional services provided
by Vavrinek, Trine, Day & Co., LLP during the 2004 and 2003 fiscal years.
It is anticipated that one or more representatives of Vavrinek, Trine,
Day & Co., LLP will be present at the Annual Meeting and will be able to make a
statement if they so desire and answer appropriate questions.
The Board of Directors has selected Vavrinek, Trine, Day & Co., LLP to
serve as the Company's independent public accountants for the year 2005. The
ratification of the appointment of Vavrinek, Trine, Day & Co., LLP as the
Company's independent public accountants requires the affirmative vote of the
holders of a majority of the shares of Company common stock present in person or
represented by proxy and entitled to vote at the Annual Meeting.
The Board of Directors recommends a vote "FOR" Proposal No. 2.
18
ANNUAL REPORT ON FORM 10-KSB
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH SHAREHOLDER SOLICITED
BY THIS PROXY STATEMENT A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2004, REQUIRED TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, UPON WRITTEN REQUEST TO SERVICE 1ST BANCORP,
2800 W. MARCH LANE, SUITE 120, STOCKTON, CALIFORNIA 95219, ATTENTION: JEAN
STEBBINS, CORPORATE SECRETARY. EACH REQUEST MUST SET FORTH A GOOD FAITH
REPRESENTATION THAT AS OF THE RECORD DATE, THE PERSON MAKING THE REQUEST WAS A
BENEFICIAL OWNER OF COMPANY COMMON STOCK AND ENTITLED TO VOTE AT THE ANNUAL
MEETING.
WEBSITE ACCESS
Information regarding the Company and the Bank may be obtained from the
Company's website at www.service1stbank.com. Copies of the Company's annual
report on Form 10-KSB, quarterly reports on Form 10-QSB, current reports on Form
8-K, and Section 16 reports by Company insiders, including exhibits and
amendments thereto, are available free of charge on the Company's website as
soon as they are published by the Securities and Exchange Commission through a
link to the Edgar reporting system maintained by the Securities and Exchange
Commission. To access Company filings, select the "Go to Service 1st Bancorp"
menu item on the Company website, then select either "Click here to view Service
1st Bancorp SEC Filings," followed by selecting "Continue to view SEC Filings"
to view or download copies of reports including Form 10-KSB, 10-QSB or 8-K, or
select "Click here to view Section 16 Reports," followed by selecting "Continue
to view Section 16 Reports," to view or download reports on Forms 3, 4 or 5 of
insider transactions in Company securities.
ANNUAL REPORT
The Annual Report to Shareholders for the year ended December 31, 2004,
is being mailed concurrently with this Proxy Statement to all shareholders of
record as of March 23, 2005.
SHAREHOLDERS' PROPOSALS
Next year's Annual Meeting of Shareholders is currently scheduled to be
held on May 18, 2006. Any shareholder desiring to submit a proposal for action
at the 2006 Annual Meeting of Shareholders which is desired to be presented in
the Company's proxy statement with respect to the 2006 Annual Meeting of
Shareholders, should mail the proposal by certified mail return receipt
requested, to the Company, 2800 W. March Lane, Suite 120, Stockton, California
95219, Attention: Jean Stebbins, Corporate Secretary. All such proposals must be
received by the Company not later than December 30, 2005. Matters pertaining to
such proposals, including the number and length thereof, eligibility of persons
entitled to have such proposals included, and other aspects, are regulated by
the Securities Exchange Act of 1934, as amended. Management of the Company will
have discretionary authority to vote proxies obtained by it in connection with
any shareholder proposal not submitted on or before December 30, 2005.
19
OTHER MATTERS
Management is not aware of any other matters to come before the Annual
Meeting. If any other matter not mentioned in this Proxy Statement is brought
before the Annual Meeting, the persons named in the enclosed form of proxy will
have discretionary authority to vote all proxies with respect thereto in
accordance with the recommendations of management.
By Order of the Board of Directors
Dated: April 19, 2005 /s/ JEAN STEBBINS
Stockton, California -----------------------------------------
Jean Stebbins, Corporate Secretary
20
APPENDIX A
SERVICE 1ST BANCORP
NOMINATING CHARTER
I. Purpose
The purpose of the Nominating Charter is to establish a written charter
concerning the process of identifying, evaluating and nominating
candidates, including candidates proposed by shareholders, for election to
the Board of Directors.
II. Board Functioning as Nominating Committee
The Board of Directors performs the functions of a nominating committee
with responsibility for considering appropriate candidates as directors.
The Board of Directors believes that the participation of the full Board
of Directors in considering candidates is an efficient process in view of
the size of the Board of Directors.
Candidates proposed as nominees for election to the Company's Board of
Directors shall be evaluated and selected by the "independent" members of
the Board of Directors. Director independence shall be determined in
accordance with applicable rules of the Securities and Exchange Commission
and, as and if applicable, the Nasdaq Listing Rules.
III. Nomination Process and Criteria
1. Candidates shall be evaluated based on the criteria established by
the Board of Directors. Minimum criteria for non-employee candidates
includes "independence" and "financial literacy," as defined under
applicable rules promulgated by the Securities and Exchange
Commission pursuant to the Sarbanes-Oxley Act of 2002, and, as and
if applicable, Nasdaq Listing Rules. Additional criteria may include
(a) satisfactory results of any background investigation, (b)
experience and expertise, (c) financial resources, (d) ability to
devote the time and effort necessary to fulfill the responsibilities
of a director, (e) involvement in community activities in the market
areas served by the Company and its subsidiary, Service 1st Bank,
that may enhance the reputation of the Company and the Bank, and (f)
such other criteria as the Board of Directors may determine to be
relevant. The Company and the Bank operate in a highly regulated
industry and are subject to the supervision, regulation and periodic
examination by state and federal banking regulatory authorities
including the Board of Governors of the Federal Reserve System,
California Commissioner of Financial Institutions and Federal
Deposit Insurance Corporation. Directors of the Company and the Bank
are subject to certain rules and regulations and potential
liabilities not otherwise applicable to directors of non-banking
organizations. Consequently, the Board of Directors may choose to
include more extensive inquiries into personal background
information including confirmation of the accuracy and completeness
of background information by (a) requiring candidates to complete
questionnaires to elicit information of the type required to be
disclosed by the Company in reports filed with the Securities and
Exchange Commission,
A-1
state and federal banking regulatory authorities, or other
governmental authorities having jurisdiction over the Company and
the Bank, (b) conducting background investigations by qualified
independent organizations experienced in conducting criminal and
civil investigatory reviews, and (c) such other personal and
financial reviews and analyses as the Board of Directors may deem
appropriate in connection with the consideration of candidates.
2. Any recommendations by shareholders will be evaluated by the Board
of Directors in the same manner as any other recommendation and in
each case in accordance with the Nominating Charter. Shareholders
that desire to recommend candidates for consideration by the
Company's Board of Directors should mail or deliver written
recommendations to the Company addressed as follows: Board of
Directors, Service 1st Bancorp, 2800 West March Lane, Suite 120,
Stockton, CA 95219. Each recommendation should include biographical
information indicating the background and experience of the
candidate that qualifies the candidate for consideration as a
director for evaluation by the Board of Directors. Shareholders who
wish to nominate a candidate for election to the Company's Board of
Directors, as opposed to recommending a potential nominee for
consideration by the Board of Directors, are required to comply with
the advance notice and any other requirements of the Company's
bylaws or applicable laws and regulations.
3. Any candidate nominated for election to the Board of Directors must
receive a majority of votes in favor of nomination from independent
members of the Board of Directors. Directors who are not independent
shall not vote, but may be present during the voting.
4. Each candidate shall be required to meet with the Board of
Directors.
5. Each existing member of the Board of Directors whose term is ending
must be evaluated for nomination to be re-elected. This review will
include review of attendance, participation, continuing education,
investment in shares, business development and community
involvement. In lieu of the information required to be provided by
new candidates for election to the Board of Directors described
above in paragraph 3, the Board of Directors may rely upon the
information contained in the most recent annual Directors and
Officers Questionnaire completed by the existing member of the Board
of Directors, subject to such updated information as the Board of
Directors may deem appropriate. Such existing members of the Board
of Directors must receive a majority of votes in favor of nomination
from the other independent directors.
6. The Board of Directors may also elect to use organizations in the
future to identify or evaluate candidates for consideration by the
Board of Directors.
IV. Annual Nominations
The Board of Directors shall evaluate and select nominees for election (a)
annually prior to distribution of the Company's proxy solicitation
materials and (b) at such other times as may be appropriate to fill
vacancies in accordance with the Company's bylaws.
A-2
V. Conflicts
Any conflicts between the provisions of this Charter and the provisions of
the Company's bylaws shall be resolved in favor of the bylaw provisions
and nothing contained herein shall be construed as an amendment of the
Company's bylaws.
A-3
APPENDIX B
SERVICE 1ST BANCORP
AUDIT COMMITTEE CHARTER
PURPOSE
The Audit Committee ("Committee") is appointed by the Board of Directors
to assist the Board of Directors, among other matters, in monitoring the
following:
1. The integrity of the Company's financial statements, financial
reporting processes and internal controls regarding finance, accounting,
regulatory and legal compliance;
2. The independence, qualifications and performance of the Company's
independent public accountants;
3. The performance of the Company's internal auditors;
4. Communications among the independent public accountants, management,
internal auditors, and the Board of Directors; and
5. Procedures for the receipt, retention and treatment of complaints
received by the Company regarding accounting, internal accounting controls or
auditing matters, including procedures for the confidential, anonymous
submission by the Company's employees of concerns regarding questionable
accounting or auditing matters.
COMMITTEE MEMBERSHIP
The Committee shall be comprised of at least three directors. Each member
of the Committee shall have the following attributes, subject to permissible
exceptions:
1. Independence, as defined in applicable rules promulgated by the
Securities and Exchange Commission pursuant to the Sarbanes-Oxley Act of 2002,
and, as and if applicable, the Nasdaq Listing Rules, including that a member
shall not have participated in the preparation of the financial statements of
the Company or any current subsidiary of the Company at any time during the past
three years; and
2. The ability to read and understand fundamental financial statements,
including the Company's balance sheet, income statement, and cash flow
statement.
At least one member of the Committee shall be an "Audit Committee
Financial Expert" as defined in the rules promulgated by the Securities and
Exchange Commission, or in the event that no member of the Committee qualifies
as an Audit Committee Financial Expert, at least one member of the Committee
shall be "financially sophisticated" as defined in the Nasdaq Listing Rules. The
members of the Committee shall be appointed by the Board of Directors and serve
at the pleasure of the Board of Directors.
B-1
MEETINGS
The Committee shall meet as often as it determines necessary, but not less
frequently than quarterly each fiscal year. The Committee shall meet
periodically with the Company's management, independent public accountants,
internal auditor, and, as applicable, its compliance officer.
The Committee may request any officer or employee of the Company, or the
Company's counsel, or independent public accountants, or internal auditors, or
compliance officer, to attend a meeting of the Committee or to meet with any
members of, or advisors to, the Committee.
COMMITTEE AUTHORITY AND RESPONSIBILITIES
The Committee, in its capacity as a committee of the Board of Directors,
shall be directly responsible for the appointment of the independent public
accountants (subject, if applicable, to shareholder ratification) and for the
retention, compensation and oversight of the work of the independent public
accountants (including resolution of disagreements between management and the
independent public accountants regarding financial reporting) for the purpose of
preparing or issuing an audit report or performing other audit, review or attest
services for the Company. The independent public accountant shall report
directly to the Committee.
The Committee shall pre-approve all audit services and permissible
non-audit services to be performed for the Company by the independent public
accountants, subject to any permitted exceptions for pre-approval of non-audit
services pursuant to rules and regulations of the Securities and Exchange
Commission and/or, as applicable, Nasdaq.
The Committee shall have the authority, to the extent it deems necessary
or appropriate, to retain independent legal, accounting or other advisors. The
Company shall provide for appropriate funding, as determined by the Committee,
for payment of compensation to the independent public accountants for the
purpose of preparing or issuing an audit report or performing other audit,
review or attest services and to any other advisors employed by the Committee.
The Committee shall establish procedures for the receipt, retention, and
treatment of complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, including procedures for the
confidential, anonymous submission by the Company's employees of concerns
regarding questionable accounting or auditing matters.
The Committee shall make regular reports to the Board of Directors. The
Committee shall review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board of Directors for approval.
The Committee, to the extent required by applicable rules or regulations
of the Securities and Exchange Commission and/or, as applicable, Nasdaq, or as
the Committee deems necessary or appropriate, shall perform the following:
1. Financial Statement and Disclosure Matters
B-2
(a) Review with management and the independent public accountants
the annual audited financial statements, including disclosures made in the
Company's Annual Report on Form 10-KSB or 10-K, as applicable.
(b) Review with management, the independent public accountants,
the internal auditors and Company counsel any certification provided by
management related to the Company's financial statements. Review with
management, the independent public accountants, and the internal auditors
management's assertion regarding the design effectiveness and operation
efficiency of the Company's internal control over financial reporting and
compliance with the applicable laws and regulations.
(c) Review with management and the independent public accountants
significant financial reporting issues and judgments made in connection with the
preparation of the Company's financial statements, including any significant
changes in the Company's selection or application of accounting principles, any
material issues as to the adequacy of the Company's internal controls and any
actions taken or adopted in light of material control deficiencies.
(d) Review a report by the independent public accountants
concerning (i) all critical accounting policies and practices to be used; (ii)
alternative treatments of financial information within GAAP that have been
discussed with management, ramifications of the use of such alternative
disclosures and treatments, and the treatment preferred by the independent
public accountants; and (iii) any other material written communications between
the independent public accountants and the Company's management.
(e) Review with management and the independent public accountants
the effect of regulatory and accounting initiatives as well as off-balance sheet
structures on the Company's financial statements.
(f) Review with management the Company's major financial risk
exposures and the actions management has taken to monitor and control such
exposures, including the Company's risk assessment and risk management policies.
(g) Review with the independent public accountants (i) the matters
required to be discussed by the Statement on Auditing Standards No. 61
(Codification of Statements on Auditing Standards), as modified or supplemented;
(ii) the letter from the independent public accountants required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees),
as modified or supplemented, and the independence of the independent public
accountants related thereto; and (iii) matters relating to the conduct of the
audit, including any difficulties encountered in the course of the audit work,
any restrictions on the scope of activities or access to requested information,
and any significant disagreements with management.
(h) Review disclosures made to the Committee by the Company's
Chief Executive Officer and Chief Financial Officer during their certification
about any significant deficiencies in the design or operation of internal
controls or material weaknesses therein and any fraud involving management or
other employees who have a significant role in the Company's internal controls.
2. Independent Public Accountant Oversight
B-3
(a) Review the length of time the lead and concurring partner of
the independent public accountants' team has been engaged to audit the Company.
(b) On an annual basis, the Committee shall review and discuss
with the independent public accountants (i) all relationships they have with the
Company that could impair the independent public accountant's independence; (ii)
the independent public accountant's internal quality control procedures; and
(iii) any material issues raised by the most recent internal quality control
review or peer review of the independent public accountant's firm or by any
inquiry or investigation by governmental or professional authorities, within the
preceding five years, respecting one or more independent audits carried out by
the independent public accountant's firm, and the steps taken to deal with those
issues.
(c) Ensure the rotation of the lead audit partner of the
independent public accountants having primary responsibility for the Company's
audit and the audit partner responsible for reviewing the audit to the extent
required by applicable law or regulation.
(d) Prohibit, to the extent required by applicable law or
regulation, the hiring of any employee of the independent public accountants who
was engaged on the Company's account and who would be employed by the Company in
a financial reporting oversight role.
(e) Meet with the independent public accountants prior to the
Company's audit to discuss the planning and staffing of the audit.
3. Internal Audit Oversight
(a) Approve the appointment and replacement of the independent
firm of internal auditors; including the independence and authority of the
auditors' reporting obligations.
(b) Review significant reports to management prepared by the
auditors and management's responses.
(c) Review with the auditors and management the auditors'
responsibilities, budget and staffing and any recommended changes in the planned
scope of the internal audit.
(d) Review the audit scope and audit staffing plan and discuss the
completeness of coverage and effective use of audit resources with both the
auditors and the independent public accountants.
(e) Review with the auditors a progress report on the internal
audit plan and any significant changes with explanations for any changes from
the original plan.
(f) Receive confirmation from both the auditors and the
independent public accountants that no limitations have been placed on the scope
or nature of their audit process or procedures.
4. Compliance and Internal Control Oversight
(a) Review reports and disclosures of insider and affiliated party
transactions.
B-4
(b) Review with management and the independent public accountants
any correspondence with regulators or governmental agencies and any published
reports which raise material issues regarding the Company's internal controls,
financial statements or accounting policies.
(c) Review legal matters that may have a material impact on the
financial statements or the Company's compliance policies with the Company's
counsel.
(d) Review the adequacy and effectiveness of the Company's
internal controls and security matters with management, the auditors and the
independent public accountants.
B-5
SERVICE 1st BANCORP
FOLD AND DETACH HERE
- --------------------------------------------------------------------------------
PLEASE SIGN AND DATE BELOW
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" ELECTION OF ALL THE DIRECTORS NOMINATED AND NAMED IN THE PROXY
STATEMENT AND "FOR" RATIFICATION OF THE SELECTION OF VAVRINEK, TRINE, DAY & CO.,
LLP, AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE YEAR 2005. IF ANY OTHER BUSINESS
IS PRESENTED AT THE ANNUAL MEETING OR ANY POSTPONEMENTS OR ADJOURNMENTS OF THE
ANNUAL MEETING, THIS PROXY CONFERS AUTHORITY TO AND SHALL BE VOTED IN ACCORDANCE
WITH THE RECOMMENDATIONS OF MANAGEMENT.
(Please date this Proxy and sign your name exactly as it appears on your stock
certificates. Executors, administrators, trustees, etc., should give their full
title. If a corporation, please sign full corporate name by the president or
other authorized officer. If a partnership, please sign in partnership name by
an authorized person. All joint owners should sign.)
[ ] I DO EXPECT TO ATTEND THE [ ] I DO NOT EXPECT TO ATTEND THE
ANNUAL MEETING ANNUAL MEETING
- ------------------------------------ --------------------------------------
(Number of Shares) (Date)
- ------------------------------------ --------------------------------------
(Please Print Your Name) (Signature of Shareholder)
- ------------------------------------ --------------------------------------
(Please Print Your Name) (Signature of Shareholder)
----------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS AND MAY BE REVOKED
PRIOR TO ITS EXERCISE BY FILING WITH THE
SECRETARY OF THE COMPANY A DULY EXECUTED
PROXY BEARING A LATER DATE OR AN
INSTRUMENT REVOKING THIS PROXY OR BY
ATTENDING THE MEETING AND VOTING IN
PERSON.
Please Detach Here
You Must Detach This Portion of the Proxy Card
Before Returning it in the Enclosed Envelope
PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Messrs. Robert D. Lawrence and
SERVICE 1st Michael K. Repetto as proxies with full power of substitution,
BANCORP to represent, vote and act with respect to all shares of
common stock of Service 1st Bancorp (the "Company") which the
undersigned would be entitled to vote at the Annual Meeting of
Shareholders to be held at 6:00 p.m. on May 18, 2005, at the
Tracy Office of the Company's subsidiary, Service 1st Bank, 60
W. 10th Street, Tracy, California, 95376, or any postponements
or adjournments of the Annual Meeting, with all the powers the
undersigned would possess if personally present, including
authority to cumulate votes represented by the shares covered
by this proxy in the election of directors, as follows:
1. Election of the eleven (11) persons named below as directors.
John O. Brooks Frances C. Mizuno Anthony F. Souza
Eugene C. Gini Richard R. Paulsen Albert Van Veldhuizen
Bryan R. Hyzdu Toni Marie Raymus Donald L. Walters
Robert D. Lawrence Michael K. Repetto
[ ] FOR ALL NOMINEES LISTED ABOVE [ ] WITHHOLD AUTHORITY
(except as marked to the contrary (to vote for all nominees
below) listed above)
(INSTRUCTION: To withhold authority to vote for any individual nominee
or nominees write the nominee name or names on the space
provided below)
-------------------------------------------------------------------------
2. Ratification of the selection of Vavrinek, Trine, Day & Co., LLP as
independent public accountants for the year 2005.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting and any and all
postponements or adjournments of the Annual Meeting. Sign and date on
reverse side