SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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 Section 240.14a-11(c) or Section 240.14a-12
FNB BANCORP
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(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)(4) and
0-11.
(1) Title of each class of securities to which transaction applies: NA
(2) Aggregate number of securities to which transaction applies: NA
(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): NA
(4) Proposed maximum aggregate value of transaction: NA
(5) Total fee paid: NA
[ ] 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: NA
(2) Form, Schedule or Registration Statement No.: NA
(3) Filing Party: NA
(4) Date Filed: NA
FNB BANCORP
975 El Camino Real
South San Francisco, California 94080
-------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held Wednesday, May 17, 2006
7:30 P.M.
-------------------
TO THE SHAREHOLDERS OF FNB BANCORP:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Annual Meeting") of FNB BANCORP, a California corporation (the "Company") will
be held at the Basque Cultural Center, 599 Railroad Avenue, South San Francisco,
California, on Wednesday, May 17, 2006, at 7:30 p.m., for the following
purposes:
1. To elect the nine (9) incumbent directors identified in the
accompanying proxy statement;
2. To ratify the appointment of Moss-Adams LLP as independent
auditors of the Company to serve for the 2006 fiscal year; and
3. To transact such other business as may properly come before the
Annual Meeting and any adjournment or adjournments thereof.
Section 7 of the Bylaws of the Company provides for the nomination of
directors as follows:
"Nominations for election to the Board of Directors may be made by the
Board of Directors or by any shareholder entitled to vote for the election of
directors. Nominations, other than those made by the Board of Directors, shall
be made in writing and shall be delivered or mailed, with first-class United
States mail postage prepaid, to the Secretary not less than 20 days nor more
than 50 days prior to any meeting of shareholders called for the election of
directors; provided however, that if less than 25 days notice of the meeting is
given to the shareholders, such nomination shall be mailed or delivered to the
Secretary not later than the close of business on the seventh day on which the
notice of the meeting was mailed. Shareholder nominations shall contain the
following information: (a) the name, age, business address and, if known,
residence address of each proposed nominee; (b) the principal occupation or
employment of each proposed nominee; (c) the total number of shares of capital
stock of the corporation that are beneficially owned by each proposed nominee
and by the nominating shareholder; (d) the name and residence address of the
notifying shareholder; and (e) any other information the corporation must
disclose regarding director nominees in the corporation's proxy solicitation.
Nominations not made in accordance with this Section may be disregarded by the
Chairman of the meeting, and if the Chairman so instructs, the inspectors of
election may disregard all votes cast for each nominee."
Only those shareholders of record at the close of business on April 3,
2006, will be entitled to notice of and to vote at the Annual Meeting.
You are cordially invited to attend the Annual Meeting.
By Order of the Board of Directors
Thomas C. McGraw
Secretary
South San Francisco, California
April 17, 2006
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE VOTE BY TELEPHONE,
OR BY THE INTERNET, OR SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS
POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
Mailed to shareholders
on or about April 17, 2006
FNB BANCORP
975 El Camino Real
South San Francisco, California 94080
Telephone (650) 588-6800
PROXY STATEMENT
INFORMATION CONCERNING THE SOLICITATION
This Proxy Statement is being furnished to the shareholders of FNB
Bancorp, a California corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors for use at the Annual Meeting
of Shareholders (the "Annual Meeting") to be held at Basque Cultural Center, 599
Railroad Avenue, South San Francisco, California, at 7:30 p.m. on Wednesday, May
17, 2006. Only shareholders of record on April 3, 2006 (the "Record Date"), will
be entitled to notice of and to vote at the Annual Meeting. At the close of
business on the Record Date, the Company had outstanding and entitled to be
voted 2,699,838 shares of its no par value Common Stock (the "Common Stock").
Shareholders may vote their shares by mail without attending the Annual
Meeting, whether their shares of Common Stock are held in their names or through
a broker, bank or other nominee. Instructions for voting by mail are set forth
on the enclosed proxy card. For shares held through a broker, bank or other
nominee, shareholders may vote by submitting their voting instructions to the
broker, bank or other nominee. Voting instructions may be given by mail, by
telephone or by using the Internet, if the broker, bank or other nominee makes
those methods available to the shareholder, in which case the procedures will be
enclosed with the Proxy Statement forwarded by the broker, bank or other
nominee.
The presence in person or by proxy of a majority of the shares entitled
to vote is necessary to constitute a quorum at the Annual Meeting. Abstentions
and broker non-votes will be counted for purposes of determining the presence or
absence of a quorum. "Broker non-votes" are shares held by brokers or nominees
who are present in person or represented by proxy, but which are not voted on a
particular matter because under applicable rules the broker cannot vote on the
matter in the absence of instructions from the beneficial owner. The effect of
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abstentions and broker non-votes on the calculation of the required vote on
specific proposals to be brought before the Annual Meeting is discussed under
each proposal, where applicable.
Shareholders of Common Stock are entitled to one vote for each share
held, except that for the election of directors each shareholder has cumulative
voting rights and is entitled to as many votes as shall equal the number of
shares held by such shareholder multiplied by the number of directors to be
elected. Each shareholder may cast all of his or her votes for a single
candidate or distribute such votes among any or all of the candidates as he or
she chooses. However, no shareholder shall be entitled to cumulate votes (in
other words, cast for any candidate a number of votes greater than the number of
shares of stock held by such shareholder) unless such candidate's name has been
placed in nomination prior to the voting and the shareholder has given notice at
the Annual Meeting prior to the voting of the shareholder's intention to
cumulate votes. If any shareholder has given such notice, all shareholders may
cumulate their votes for candidates in nomination. Prior to voting, an
opportunity will be given for shareholders or their proxies at the Annual
Meeting to announce their intention to cumulate their votes. The proxy holders
are given, under the terms of the proxy, discretionary authority to cumulate
votes on shares for which they hold a proxy.
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 in person 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
and "FOR" ratification of the appointment of Moss Adams LLP as independent
auditors of the Company to serve for the 2006 fiscal year, and at the proxy
holders' discretion, on such other matters, if any, which may come before the
Annual Meeting (including any proposal to adjourn the meeting).
The Company will bear the entire cost of preparing, assembling,
printing and mailing proxy materials furnished by the Board of Directors to
shareholders. Copies of proxy materials will be furnished to brokerage houses,
fiduciaries and custodians to be forwarded to the beneficial owners of the
Common Stock. The Company will reimburse brokerage houses, fiduciaries,
custodians and others holding Common Stock in their names or names of nominees
or otherwise for reasonable out-of-pocket expenses incurred in sending proxy
materials to the beneficial owners of such Common Stock. In addition to the
solicitation of proxies by use of the mail, some of the officers, directors and
regular employees of the Company may (without additional compensation) solicit
proxies by telephone, Internet or personal interview, the costs of which will be
borne by the Company.
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ANNUAL REPORT
A copy of the Annual Report of the Company for the fiscal year ended
December 31, 2005, including audited consolidated financial statements of the
Company (the "Annual Report") is enclosed with this Proxy Statement. Additional
copies of the Annual Report are available upon request to the Secretary of the
Company, Thomas C. McGraw, at FNB Bancorp, 975 El Camino Real, South San
Francisco, California 94080.
THE ANNUAL REPORT INCLUDES A COPY OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
WEBSITE
FNB Bancorp and First National Bank of Northern California maintain an
Internet website at http://www.fnbnorcal.com. The Company's annual report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, are made available free of charge
on or through such website as soon as reasonably practicable after such material
is electronically filed with, or furnished to, the Securities and Exchange
Commission. Also made available on or through such website are the Section 16
reports of ownership and changes in ownership of the Company's Common Stock
which are filed with the Securities and Exchange Commission by the directors and
executive officers of the Company and by any persons who own more than 10
percent of the outstanding shares of such stock.
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 14.0 to the
Company's Annual Report on Form 10-K for the year ended December 31, 2004, and a
copy of the code of ethics may be obtained through the Company's website by
following the instructions for accessing reports filed with the Securities and
Exchange Commission (see above, under the heading "Website").
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PRINCIPAL SHAREHOLDERS
As of April 3, 2006, no person known to the Company owned beneficially
or of record more than five percent (5%) of the outstanding shares of its Common
Stock, except as indicated in the chart below:
================================================================================
Amount and Nature of Percentage of
Name and Address Beneficial Ownership Ownership(1)
- --------------------------------------------------------------------------------
The Ricco Lagomarsino Trust 268,158 9.93
26 Hillcrest Drive
Daly City, CA 94014
- --------------------------------------------------------------------------------
Thomas G. Atwood (2) 10.13
c/o Cypress Abbey Company 273,420
P.O. Box 516
Colma, CA 94014
- --------------------------------------------------------------------------------
Cede & Co.(3) 1,113,732 41.25
Box 20, Bowling Green Station
New York, NY 10004
================================================================================
(1) Based upon 2,699,838 shares outstanding.
(2) Includes 221,619 shares owned by Cypress Abbey Company, a corporation in
which Mr. Atwood is the principal shareholder.
(3) Cede & Co. is the nominee of The Depository Trust Company of New York,
New York, and acts as the record owner of securities held in "street
name" for a number of brokerage firms and other financial institutions.
No person known to the Company is the beneficial owner of more than five
percent (5%) of the shares held in the name of Cede & Co.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS OF THE COMPANY
The Bylaws of the Company provide a procedure for nomination for
election of members of the Board of Directors, which procedure is printed in
full in the Notice of Annual Meeting of Shareholders accompanying this Proxy
Statement. Nominations not made in accordance therewith may be disregarded by
the Chairman of the Meeting, and upon his instructions the tellers of votes may
disregard all votes cast for such nominee(s).
The Bylaws of the Company provide that the Board of Directors shall
consist of not less than five nor more than nine shareholders, the exact number
to be fixed and determined from time to time by resolution of a majority of the
full Board of Directors or by resolution of a majority of the shareholders at
any annual or special meeting thereof. The current number of directors has been
fixed by resolution of the Board of Directors at nine (9). The directors to be
elected at the Annual Meeting shall hold office for one year and until their
successors are elected and have qualified. The nine (9) nominees receiving the
highest number of affirmative votes of the shares present in person or
represented by proxy and entitled to vote for them shall be elected as
directors. Only votes cast "FOR" a nominee will be counted in determining
whether that nominee has been elected as a director.
All proxies will be voted for the election of the following nine (9)
nominees recommended by the Board of Directors, unless authority to vote for the
election of any director or directors is withheld by the shareholder on the
proxy card. All of the nominees are incumbent Directors. Daniel J. Modena
retired from the Board of Directors on December 31, 2005, and Michael Pacelli
was appointed to fill the vacancy created by his retirement, effective as of
April 1, 2006. If any nominee should unexpectedly decline or be unable to act as
a director, the proxies may be voted for a substitute nominee to be designated
by the Board of Directors. The Board of Directors has no reason to believe that
any nominee will become unavailable and has no present intention to nominate
persons in addition to or in lieu of those named below.
The following table sets forth information with respect to beneficial
ownership of the Common Stock of the Company by those persons nominated by the
Board of Directors for election as directors, as well as all directors and
executive officers of FNB Bancorp and its subsidiary, First National Bank of
Northern California, a national banking association (herein called the "Bank" or
"First National Bank"), as a group. There is no family relationship between any
of the directors and/or executive officers, except that Edward J. Watson is
related by marriage to Anthony J. Clifford. The Company has only one class of
shares outstanding, Common Stock.
5
=================================================================================================================
Shares Beneficially Owned
as of April 3, 2006 (1)
Nominee Age Positions Held Director
With the Bank Since % of
and Company Sole (2) Shared (3) Total
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Michael R. Wyman 69 Chairman of the Board, 1978 for (4)
Director Bank; 3,315 26,849 1.12
2001 for
Company
- -----------------------------------------------------------------------------------------------------------------
Thomas C. McGraw 54 Chief Executive 1989 for (5)
Officer, Secretary, Bank; 2,715 134,625 5.08
Director 2001 for
Company
- -----------------------------------------------------------------------------------------------------------------
Neil J. Vannucci 69 Director 1989 for (6)
Bank; 2,652 55,472 2.15
2001 for
Company
- -----------------------------------------------------------------------------------------------------------------
Edward J. Watson 58 Director 1996 for (7)
Bank; 5,927 -- .22
2001 for
Company
- -----------------------------------------------------------------------------------------------------------------
Lisa Angelot 48 Director 1999 for (8)
Bank; 13,772 -- .51
2001 for
Company
- -----------------------------------------------------------------------------------------------------------------
Jim D. Black 49 President, Director 2002 for (9)
Bank and 12,934 1,201 .52
Company
- -----------------------------------------------------------------------------------------------------------------
Anthony J. Clifford 43 Executive Vice 2002 for (10)
President and Chief Bank and 13,387 -- .49
Operating Officer, Company
Director
- -----------------------------------------------------------------------------------------------------------------
R. Albert Roensch 67 Director 2003 for (11)
Bank and 958 -- .04
Company
- -----------------------------------------------------------------------------------------------------------------
Michael Pacelli 57 Director 2006 for
Bank and 250 --
Company
- -----------------------------------------------------------------------------------------------------------------
All directors and executive officers (11 persons) as a group (12)
71,430 219,753 10.61
- -----------------------------------------------------------------------------------------------------------------
(1) This table is based upon information supplied by directors, executive
officers and principal shareholders. Percentages are based upon
2,699,838 shares outstanding.
(2) The named persons exercise sole voting and investment power with respect
to shares listed in this column.
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(3) The named persons share voting and investment power with respect to
shares listed in this column.
(4) Includes 26,849 shares held by the Wyman Family Trust for which Mr.
Wyman serves as co-trustee. Includes 1,377 shares of presently
exercisable stock options under the Company's 2002 Stock Option Plan.
Excludes 6,891 shares held in the Bank's Deferred Compensation Trust.
(5) Includes 134,625 shares held by the Thomas C. and Virginia K. McGraw
Family Trust for which Mr. McGraw serves as co-trustee. Includes 1,032
shares of presently exercisable stock options under the Company's Stock
Option Plan and 1,377 shares of presently exercisable stock options
under the Company's 2002 Stock Option Plan.
(6) Includes 55,472 shares held by the Vannucci Family Trust for which Mr.
Vanucci serves as co-trustee and 1,032 shares of presently exercisable
stock options under the Company's Stock Option Plan and 1,377 shares of
presently exercisable stock options under the Company's 2002 Stock
Option Plan.
(7) Includes 1,032 shares of presently exercisable stock options under the
Company's Stock Option Plan and 1,377 shares of presently exercisable
stock options under the Company's 2002 Stock Option Plan.
(8) Includes 1,403 shares held by Ms. Angelot as Custodian for Eric Angelot
and 333 shares held by Ms. Angelot as Custodian for Katherine
Brandenberger. A total of 268,158 shares are held by The Ricco
Lagomarsino Trust for which Ms. Angelot serves as one of the
co-trustees. Ms. Angelot disclaims beneficial ownership of such shares.
Includes 810 shares of presently exercisable stock options under the
Company's Stock Option Plan and 1,377 shares of presently exercisable
stock options under the Company's 2002 Stock Option Plan.
(9) Includes 4,174 presently exercisable stock options under the Company's
Stock Option Plan, and 5,318 shares of presently exercisable stock
options under the Company's 2002 Stock Option Plan. Includes 228 shares
held in trust for Greg Black and includes 228 shares held in trust for
Janelle Black. Excludes 5,839 shares held in the Bank's Deferred
Compensation Trust.
10) Includes 7,758 shares of presently exercisable stock options under the
Company's Stock Option Plan, and 5,318 shares of presently exercisable
stock options under the Company's 2002 Stock Option Plan. Excludes 3,368
shares held in the Bank's Deferred Compensation Trust.
(11) Includes 728 shares of presently exercisable stock options under the
Company's 2002 Stock Option Plan.
(12) Includes a total of 21,476 shares of presently exercisable stock options
under the Company's Stock Option Plan and 22,175 shares of presently
exercisable stock options under the Company's 2002 Stock Option Plan.
Excludes 21,098 shares held by the Bank's Deferred Compensation Trust
for the accounts of Messrs. Wyman, Black, Clifford and Ramsey. See
"Deferred Compensation Plan" herein.
- ---------------------
7
The following table sets forth certain information as of the Record
Date with respect to each Director of the Company and the Bank, each person
nominated for election as a Director, and each executive officer named in the
Executive Compensation table elsewhere herein, as well as for all other
executive officers of the Company and the Bank.
Michael R. Wyman Chairman of the Board of Directors of the
Company since 2001. Chairman of the Board of
Directors of First National Bank since 1999
and Director of First National Bank since
1983. Retired as Chief Executive Officer of
the Company and First National Bank
effective March 31, 2002. Previously, Chief
Executive Officer of First National Bank
since 1983 and President of First National
Bank from 1983 to 1996.
Thomas C. McGraw Director and Secretary of the Company since
2001. Chief Executive Officer of the Company
and First National Bank since April 1, 2002.
Director and Secretary of First National
Bank since 1989, and President and Chief
Operating Officer of First National Bank
from October 2001 until April 1, 2003.
Formerly, self-employed communications
consultant in San Mateo and Marin Counties,
since 1987.
Neil J. Vannucci Director of the Company since 2001. Director
of First National Bank since 1989. Director
of U.S. Concrete since 1999. President of
Bay Cities Building Materials from 1995 to
1999.
Edward J. Watson Director of the Company since 2001. Director
of First National Bank since 1996. Certified
Public Accountant. Attorney and partner in
the law firm of Watson & Lanctot LLP,
formerly known as Dreher, Garfinkle &
Watson.
Lisa Angelot Director of the Company since 2001. Director
of First National Bank since 1999. Property
manager for the Lagomarsino Properties in
Daly City since 1992. Her grandfather was
Ricco Lagomarsino, Founding Director and
Chairman of First National Bank.
Jim D. Black Director of the Company and First National
Bank since March 2002. President of the
Company and First National Bank since April
1, 2002. Formerly, Senior Vice President and
Senior Lending Officer of First National
Bank and an employee since 1981.
Anthony J. Clifford Director of the Company and First National
Bank since March 2002. Executive Vice
President and Chief Operating Officer of the
Company and First National Bank since April
1, 2002. Formerly, Vice President and Branch
Administrator of First National Bank since
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1995; Vice President and Branch Manager of
First National Bank since 1990; and
Assistant Vice President and Branch Manager
of First National Bank since 1983.
R. Albert Roensch Director of the Company and First National
Bank since December 19, 2003. President and
Chief Executive Officer of Desert Commercial
Bank since June 16, 2005. Formerly,
President and Chief Executive Officer of
America California Bank (1999 to 2003).
Founding President and Chief Executive
Officer and Chairman of Pacific Coast
Bankers' Bank (1995 to 1999). Mr. Roensch
has more than forty years of commercial
banking experience.
Michael Pacelli Director of the Company and First National
Bank since April 1, 2006. President of Bay
Relations, Inc .since 1992. He has been
involved in public relations and community
organizations in San Mateo County and San
Francisco for over 25 years.
James B. Ramsey Senior Vice President and Chief Financial
Officer of the Company since 2001. Senior
Vice President, Chief Financial Officer and
Cashier of First National Bank since 1997.
Formerly, Vice President/Controller of
Mid-Peninsula Bank in Palo Alto since 1994,
Senior Vice President and Chief Financial
Officer of Codding Bank in Rohnert Park,
California since 1989, and Executive
Vice-President and Chief Financial Officer
of Pajaro Valley Bank since 1982.
Charles R. Key Senior Vice President and Director of
Information Systems of First National Bank
and an employee since 1970.
None of the directors of the Company is a director of any other company
with a class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, or subject to the requirements of Section
15(d) of such Act or any company registered as an investment company under the
Investment Company Act of 1940, whose common stock is registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended.
Committees of the Board of Directors
The Company has an Audit Committee and a Compensation Committee. In
addition, the entire Board of Directors of the Company functions as the
Nominating Committee. The current members of the Company's Audit Committee are
Edward J. Watson, Neil J. Vannucci and R. Albert Roensch. The current members of
the Company's Compensation Committee are Lisa Angelot, Neil J. Vannucci and
Edward J. Watson.
9
The members of the Audit Committee select and oversee the Company's
independent public accountants, analyze the results of internal and regulatory
examinations and monitor the financial and accounting organization, reporting
and 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. Edward J. Watson and R. Albert
Roensch have each 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.
Reference should be made to the Audit Committee Report set forth below in this
Proxy Statement for additional information regarding the functions of the Audit
Committee.
The members of the Company's Audit Committee met five (5) times during
2005 and the members of the Company's Compensation Committee met once during
2005. During 2005, the Company's Board of Directors held twelve (12) regularly
scheduled meetings. All of the incumbent directors of the Company attended at
least seventy-five percent (75%) of the meetings of the board of directors and
the committees of which they were members during 2005 (except for Michael
Pacelli, who became a director on April 1, 2006).
A majority of the members of the Company's 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, FNB Bancorp, 975 El Camino Real, South
San Francisco, CA 94080.
The Company encourages the members of its Board of Directors to attend
the Company's annual meeting of shareholders each year. A majority of the
directors attended the Company's Annual Meeting of shareholders held in 2005.
In performing the functions of a nominating committee, the Board of
Directors has 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,
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, FNB Bancorp, 975 El
Camino Real, South San Francisco, CA 94080. 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
10
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 First
National 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, the Office of the Comptroller of the Currency and the 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 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.
First National Bank has an Audit Committee, a Loan and Discount
Committee (which functions as an executive committee of the Board of Directors)
and a Compensation Committee.
First National Bank does not have a nominating committee, but the Loan
and Discount Committee functions as the Bank's nominating committee, as
necessary. Since March 15, 2002, the Company has been the sole shareholder of
the Bank.
The current members of the Bank's Audit Committee are Edward J. Watson,
Neil J. Vannucci and R. Albert Roensch. The principal functions of the Audit
Committee are (1) to examine and review both internal audit controls and
regulatory audit reports and to meet with the First National Bank auditors
concerning audit procedures and controls and (2) to monitor the First National
Bank investments.
The current members of the Bank's Loan and Discount committee are
Michael R. Wyman, Thomas C. McGraw, Lisa Angelot and R. Albert Roensch. The
principal functions of the Loan and Discount Committee are to oversee loans and
investments and the routine operations of First National Bank by delegation from
the Board of Directors and to advise and report to the full board regarding such
matters.
The members of the Bank's Compensation Committee are Lisa Angelot, Neil
J. Vannucci and Edward J. Watson. The Compensation Committee investigates and
advises the Board of Directors as to employee benefit arrangements and conducts
11
executive searches whenever First National Bank proposes to hire executive
personnel. The Compensation Committee also reports to the Board of Directors
with regard to executive compensation, including bonus compensation.
During 2005, the Board of Directors of First National Bank held twelve
(12) regularly scheduled meetings and three (3) "executive sessions" which only
the non-employee directors attended, 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. During this same period, the Loan
and Discount Committee met twenty-five (25) times, the Audit Committee met five
(5) times and the Compensation Committee met once. All incumbent directors of
the Bank attended at least seventy-five percent (75%) of the meetings of the
board of directors and the committees of which they were members during 2005
(except for Michael Pacelli, who became a Director on April 1, 2006).
Compensation of Directors
No fees or other compensation has been paid to the non-officer
directors of the Company since incorporation of the Company on February 28,
2001. The Company became the holding company for First National Bank, effective
March 15, 2002. No separate fees were paid to the directors of the Company
during 2005 for their attendance at meetings of the Board of Directors or for
their attendance at meetings of the committees of the Board of Directors.
Each non-officer director of First National Bank was paid $30,000 in
fees for attending meetings of the Board of Directors during 2005. The aggregate
amount of such fees paid by First National Bank in 2005 was $180,000. No
separate compensation has been paid to the directors during 2005 for their
attendance at meetings of the committees of the Board of Directors of the Bank.
During 2005, each non-officer director of First National Bank was granted a
non-statutory option for 350 shares of the Company Common Stock pursuant to the
FNB Bancorp 2002 Stock Option Plan.
Board Compensation Committee Report
Set forth below is the Report of the members of the Compensation
Committee of the Board of Directors of the Company and the Bank:
The Company was formed in 2001 to become the holding company of First
National Bank. After approval by the shareholders of the Bank, the holding
company reorganization became effective on March 15, 2002. No separate
compensation was paid to the executive officers of the Company since 2002. The
compensation paid by First National Bank to its executive officers during 2005
included payment for all services rendered by such officers to the Company
during 2005, including their attendance at meetings of the Board of Directors
and their attendance at meetings of committees of the Board of Directors of the
Company.
The compensation of the executive officers of First National Bank is
reviewed and approved annually by the Board of Directors based on the
recommendations by the Compensation Committee. During 2005, Lisa Angelot, Neil
12
J. Vanucci and Edward J. Watson served as members of the Bank's Compensation
Committee. Each such member of the Compensation Committee is "independent" as
defined under applicable rules promulgated by the Securities and Exchange
Commission pursuant to the Sarbanes-Oxley Act of 2002. The executive officers of
First National Bank during 2005 were: Thomas C. McGraw, Chief Executive Officer
and Secretary; Jim D. Black, President; Anthony J. Clifford, Executive Vice
President and Chief Operating Officer; James B. Ramsey, Senior Vice President
and Chief Financial Officer; and Charles R. Key, Senior Vice President and
Director of Information Systems.
The Compensation Committee's philosophy is that compensation should be
designed to reflect the value created for shareholders while supporting First
National Bank's strategic goals. The Compensation Committee reviews the
compensation of the executive officers annually to insure that First National
Bank's compensation programs are related to financial performance and consistent
generally with employers of comparable size in the industry. Other than as
described herein, there are no other employment contracts between First National
Bank and any officer of First National Bank. Annual compensation for First
National Bank's executive officers includes the components described below.
Base salary is related to the individual executive officer's level of
responsibility and comparison with comparable employers in the industry. The
board of directors reviews and sets base salaries annually, taking into
consideration the recommendations of the Chief Executive Officer (for executive
officers other than the Chief Executive Officer). In conducting its review of
salaries, the Board of Directors takes into consideration the overall
performance of First National Bank.
The Board of Directors determines the base salary for the Chief
Executive Officer by (a) examining the financial performance of First National
Bank against its present goals; (b) examining the financial performance of First
National Bank as compared to the banking industry generally; (c) evaluating the
overall performance of the Chief Executive Officer; and (d) comparing the base
salary of the Chief Executive Officer to that of other chief executive officers
in the banking industry in the market area of First National Bank. The
compensation paid to Messrs. McGraw, Black, Clifford, Ramsey and Key during 2005
is set forth in the table of "Executive Compensation" below. On December 9,
2005, effective as of January 1, 2006, the Board of Directors approved the
following base salaries: Mr. McGraw's salary was increased to $222,600; Mr.
Black's salary was increased to $210,000; Mr. Clifford's salary was increased to
$192,000; Mr. Ramsey's salary was increased to $170,000; and Mr. Key's salary
was increased to $150,000.
First National Bank does not have a formal bonus plan. The Board of
Directors, at its discretion, awarded bonuses to its executive officers during
2005, including bonuses to Messrs. McGraw, Black, Clifford, Ramsey and Key
(which are set forth in the table of "Executive Compensation" below). Bonus
compensation is based on the return on beginning shareholder equity for each
year and individual performance criteria are established by the Compensation
Committee for each executive officer.
13
The entire Board of Directors can, at its discretion, grant stock
options to key officers of the Company and First National Bank who are primarily
responsible for the growth and management of its business. As of December 31,
2005, a total of 223,638 shares were reserved for options previously granted and
currently outstanding under the FNB Bancorp Stock Option Plan (successor as of
March 15, 2002, to the First National Bank of Northern California 1997 Stock
Option Plan) and the FNB Bancorp 2002 Stock Option Plan, including options for
an aggregate of 100,727 shares of common stock (as adjusted for stock dividends
paid in 1999, 2000, 2001, 2002, 2003, 2004 and 2005) which have been granted to
Messrs. McGraw, Black, Clifford, Ramsey and Key. A summary of the stock options
granted to such officers during 2005, including the exercise prices, is set
forth below in the table of "Option/SAR Grants In Last Fiscal Year." The
exercise price of an incentive stock option is set at the fair market value of
the shares on the date of grant. All options granted to such officers and
currently outstanding are incentive stock options, vesting at the rate of 20
percent per year over the period of 5 years from date of grant and are
exercisable for a period of 10 years from the grant date.
Submitted by the Compensation Committee:
Lisa Angelot
Neil J. Vannucci
Edward J. Watson
14
Equity Compensation Plan Information
The chart below lists information regarding 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 FNB Bancorp
Stock Option Plan and the FNB Bancorp 2002 Stock Option Plan. 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 the Company's Common
Stock.
- ---------------------------------------------------------------------------------------------------------------
Plan Category Number of securities Weighted-average Number of securities
to be issued upon exercise price of remaining available
exercise of outstanding options, for future issuance
outstanding options, warrants and rights under equity
warrants and rights compensation plans
(excluding securities
reflected in column (a))
(a) (b) (c)
- ---------------------------------------------------------------------------------------------------------------
Equity compensation
plans approved by
security holders 223,638 $29.48 167,001
- ---------------------------------------------------------------------------------------------------------------
Equity compensation
plans not approved by
security holders -0- -0- -0-
- ---------------------------------------------------------------------------------------------------------------
Total 223,638 $29.48 167,001
- ---------------------------------------------------------------------------------------------------------------
15
Executive Compensation
Set forth below is the compensation of the Chief Executive Officer of
the Company and the Bank and the next four most highly compensated officers for
services in all capacities to the Company and the Bank during the three years
ended December 31, 2005.
=========================================================================================================
Annual Compensation
- ---------------------------------------------------------------------------------------------------------
Name and Position Year Salary Bonus (1) All Other
Compensation(2)(3)
- ---------------------------------------------------------------------------------------------------------
Thomas C. McGraw, 2003 $195,750 $20,000 $13,001
Chief Executive Officer, 2004 205,538 33,000 16,837
Secretary 2005 202,216 43,000 24,555
- ---------------------------------------------------------------------------------------------------------
Jim D. Black, 2003 $183,750 $24,640 $12,847
President 2004 193,537 30,000 16,666
2005 200,000 40,000 21,524
- ---------------------------------------------------------------------------------------------------------
Anthony J. Clifford, 2003 $168,000 $23,800 $11,746
Executive Vice President, 2004 170,400 29,000 15,191
Chief Operating Officer 2005 182,000 39,000 18,197
- ---------------------------------------------------------------------------------------------------------
James B. Ramsey, 2003 $151,641 $22,500 $10,602
Senior Vice President, 2004 159,223 26,000 13,711
Chief Financial Officer 2005 164,000 34,000 15,995
- ---------------------------------------------------------------------------------------------------------
Charles R. Key, 2003 $135,360 $18,000 $ 9,463
Senior Vice President, 2004 142,128 22,500 12,239
Director, Information Systems 2005 147,000 25,000 14,337
=========================================================================================================
(1) Bonuses are indicated for the years upon which they are based, and are
payable in the same year.
(2) Each of Messrs. McGraw, Black and Clifford is provided with the use of a
Company-owned automobile. No executive officer received perquisites or
other personal benefits in excess of the lesser of $50,000 or 10 percent
of each such officer's total annual salary and bonus during 2003, 2004
or 2005.
(3) Amounts shown represent contributions to The First National Bank Profit
Sharing and 401(k) Plan for the accounts of the named officers.
16
The following table sets forth certain information concerning the
granting of options under the FNB Bancorp 2002 Stock Option Plan during the year
ended December 31, 2005 (adjusted for the 2005 stock dividend).
Option/SAR Grants In Last Fiscal Year
- -------------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Individual Grants Annual Rates of Stock
Price Appreciation
for Option Term (3)
- -------------------------------------------------------------------------------------------------------------------
Number of Percentage of
Securities Total
Underlying Options/SARs
Option/SARs Granted to Exercise or
Granted Employees in Base Price Expiration
Name (#) (1) Fiscal Year ($Sh) (2) Date 5% 10%
- -------------------------------------------------------------------------------------------------------------------
Thomas C. McGraw 368 0.8% 28.62 6/24/2015 6,623 15,543
- -------------------------------------------------------------------------------------------------------------------
Jim D. Black 5,250 11.2% 28.62 6/24/2015 94,486 221,741
- -------------------------------------------------------------------------------------------------------------------
Anthony J. Clifford 5,250 11.2% 28.62 6/24/2015 94,486 221,741
- -------------------------------------------------------------------------------------------------------------------
James B. Ramsey 3,675 7.8% 28.62 6/24/2015 66,140 155,219
- -------------------------------------------------------------------------------------------------------------------
Charles R. Key 2,888 6.2% 28.62 6/24/2015 51,977 121,979
- -------------------------------------------------------------------------------------------------------------------
(1) Options granted under the FNB Bancorp 2002 Stock Option Plan were either
incentive options or nonstatutory options and become exercisable in
accordance with a vesting schedule established at the time of grant.
Vesting cannot extend beyond ten (10) years from the date of grant. 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 Company's
Common Stock on the date of grant. Options granted under the FNB Bancorp
2002 Stock Option Plan are adjusted to protect against dilution in the
event of certain changes in the Company's capitalization, including stock
splits and stock dividends, and upon a change in control of the Company,
all outstanding options will become fully vested and exercisable.
(2) The exercise price was determined based upon the average of the bid and
asked price of the Company's Common Stock on the grant date.
(3) In accordance with Securities and Exchange Commission rules, these columns
show gains that might exist for the respective options, assuming that the
market price of the stock appreciates from the date of grant over the 10
year option term at the annualized rates of 5% and 10%, respectively.
17
The following table sets forth the number of shares of the Company's Common
Stock acquired by each of the named executive officers upon the exercise of
stock options during the fiscal year 2005, if any, the net value realized upon
exercise, the number of shares of the Company's common stock represented by
outstanding stock options held by each of the named executive officers as of
December 31, 2005, the value of such options based on the average of the bid and
asked price of the Company's Common Stock, and certain information concerning
unexercised options under the Company's stock option plans.
Aggregated Option/SAR Exercises In Last Fiscal Year And
FY-End Option/SAR Values
- ----------------------------------------------------------------------------------------------------------------
Number of Securities Value of
Underlying Unexercised
Shares Unexercised in-the-Money
Acquired Options/SARs at Options/SARs
on Value Fiscal Year-End (#) at Fiscal Year- End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable (1)
- ----------------------------------------------------------------------------------------------------------------
Thomas C. McGraw -- -- 2,409 -- 25,949 --
- ----------------------------------------------------------------------------------------------------------------
Jim D. Black -- -- 9,492 14,549 112,563 110,099
- ----------------------------------------------------------------------------------------------------------------
Anthony J. Clifford -- -- 13,076 14,549 165,341 110,099
- ----------------------------------------------------------------------------------------------------------------
James B. Ramsey 945 4,005 9,566 10,367 118,256 79,957
- ----------------------------------------------------------------------------------------------------------------
Charles R. Key -- -- 11,551 8,917 150,708 72,725
- ----------------------------------------------------------------------------------------------------------------
(1) The aggregate value has been determined based upon the average of the
bid and asked price for the Company's Common Stock at year-end, minus
the exercise price.
Employment Contracts and Termination of Employment and Change in Control
Arrangements
Employment Contracts. There are no employment contracts between the
Company or First National Bank and the executive officers named in the tables
above, other than the Salary Continuation Agreements, the Management Continuity
Agreements, the Deferred Compensation Plan and the Company's stock option plans,
as described below. Effective March 15, 2002, the Company assumed all of the
Bank's rights and obligations under the Bank's 1997 Stock Option Plan (re-named
the FNB Bancorp Stock Option Plan). All other employee benefit plans of the
Bank, existing on that date, were continued, modified or assumed by the Company
as determined by mutual agreement of the Bank and the Company, in accordance
with applicable laws, regulations and tax rules.
18
Salary Continuation Agreements. First National Bank has entered into
Salary Continuation Agreements (the "Agreements") with Michael R. Wyman (current
Chairman of the Board of Directors and former Chief Executive Officer--in 1996),
James B. Ramsey (Senior Vice President and Chief Financial Officer--in 1998,
amended in 2004), Jim D. Black (President--in 2004) and Anthony J. Clifford
(Executive Vice President and Chief Operating Officer--in 2004). The Agreements
provide for annual benefits to be paid to Mr. Wyman or his designated
beneficiary of up to $60,000 per year over a period of 15 years; annual benefits
to be paid to Mr. Ramsey or his designated beneficiary of up to $70,000 per year
over a period of 20 years; annual benefits to be paid to Mr. Black or his
designated beneficiary of up to $122,600 per year over a period of 20 years; and
annual benefits to be paid to Mr. Clifford or his designated beneficiary of up
to $140,700 per year over a period of 20 years. Such benefits were effective for
Mr. Wyman upon his attaining 66 years of age, and will be effective for each of
Messrs. Ramsey, Black and Clifford upon (i) attainment of age 65, or upon his
death or disability prior to such time if he is actively employed by First
National Bank at the time; (ii) termination of his employment by First National
Bank without "cause" (as defined in the Agreements); and (iii) termination or
constructive termination of his employment by First National Bank after the
occurrence of a "change of control" of First National Bank (as defined in the
Agreements). First National Bank has purchased life insurance policies on the
life of Messrs. Wyman (in 1996), Ramsey (in 2004, in addition to the 1998
policy), Black (in 2004) and Clifford (in 2004). First National Bank is the sole
owner and beneficiary or co-beneficiary under such life insurance policies,
which policies indirectly offset the anticipated costs for certain death,
disability and post-employment/retirement benefits for Messrs. Wyman, Ramsey,
Black and Clifford. First National Bank has entered into Split- Dollar
Agreements with Messrs. Ramsey, Black and Clifford, each of which designates the
Bank as beneficiary of the insurance policies after the interest of Messrs.
Ramsey, Black and Clifford have been paid to their respective designated
beneficiaries. The cash surrender value of each insurance policy, which is
expected to increase over the term of the policy, is included among the "other
assets" on the consolidated balance sheet of FNB Bancorp.
Management Continuity Agreements. On July 20, 2000, First National Bank
entered into Management Continuity Agreements with Jim D. Black, Charles R. Key
and Anthony J. Clifford. Each Agreement provides for the payment of a severance
benefit to the officer upon termination of employment after a "change in
control" of First National Bank (as defined in the Agreements). The purpose of
the Agreements is to maintain sound and vital management of First National Bank,
thereby protecting its best interests, in the event of a proposed change in
control of First National Bank. The amount of the benefit payable under each
Agreement is two times the "base annual salary" of the relevant officer for the
twelve month period immediately preceding a "change in control." In addition, if
any payment of the benefit constitutes an "excess parachute payment" that is
subject to an excise tax imposed by the Internal Revenue Code of 1986, as
amended, First National Bank will increase the amounts payable to the extent
necessary to place the officer in the same after-tax position that would have
existed had no excise tax been imposed. First National Bank can elect to pay
benefits in a lump sum payment or in monthly installments over a period not
exceeding two years following the date of termination of employment. Each
Management Continuity Agreement continues for two years from July 20, 2000, and
is subject to automatic one year renewals thereafter, unless First National Bank
gives written notice of non-renewal. Each Management Continuity Agreement has
been renewed annually and currently expires on July 20, 2006 (subject to further
renewal).
19
Deferred Compensation Plan. First National Bank has established a
Deferred Compensation Plan. Participation in the Plan is open to all officers of
First National Bank with the title Vice President or higher. The Deferred
Compensation Plan consists of a Deferred Compensation Trust, dated November 1,
1997, with The Mechanics Bank serving as Trustee, and individual Deferred
Compensation Agreements between First National Bank and each of the
participating officers. The funds contributed to the Plan are those of the
individual participant, and represent income earned and/or bonuses granted as an
employee of First National Bank. No funds of First National Bank may be
contributed to the Plan. Under the Plan, a participant may elect to defer the
receipt of a portion of his or her cash salary and/or bonus. First National Bank
maintains a record of the deferred compensation for each participant, and at the
time of distribution, is obligated to effect the distribution as well as
collection of any and all taxes due at such time. Each participant may elect
whether he or she will receive distribution of his or her entire account,
subject to applicable tax withholding requirements, upon reaching a specified
age, or upon passage of at least five years or upon termination of employment.
In order to discharge its obligations in respect of such deferred compensation,
First National Bank makes contributions of the deferred compensation specified
by the participants to the Deferred Compensation Trust, which are then invested
in accordance with the instructions of the participants. The principal and any
earnings in the Trust are held separate and apart from other funds of First
National Bank and are used for the discharge of First National Bank's
obligations to the participants. As of March 29, 2006, the Deferred Compensation
Trust held an aggregate of 25,320 shares of Common Stock, and held shares of
Common Stock for the accounts of Messrs. McGraw, Black, Clifford, Ramsey and
Key, representing approximately 0.35% of the total shares outstanding on such
date (consisting of 5,839 shares for Jim D. Black; 3,368 shares for Anthony J.
Clifford; 5,000 shares for James B. Ramsey; and no shares for Thomas C. McGraw
and Charles R. Key).
FNB Bancorp Stock Option Plan. The board of directors of the Bank
adopted the First National Bank of Northern California 1997 Stock Option Plan
(the "Bank Stock Option Plan"), which was approved by the shareholders of First
National Bank at the 1997 Annual Meeting, held on October 15, 1997. Pursuant to
the holding company reorganization which became effective March 15, 2002, the
Bank Stock Option Plan became the FNB Bancorp Stock Option Plan. As of December
31, 2005, a total of 223,638 shares were reserved for options previously granted
and outstanding under the FNB Bancorp Stock Option Plan, including options for
an aggregate of 34,737 shares of Common Stock (as adjusted for stock dividends
paid in 1999, 2000, 2001, 2002, 2003, 2004 and 2005) which have been granted to
the five officers of the Company identified in the table of "Executive
Compensation" above. Also, see "Board Compensation Committee Report" above. All
such options granted and currently outstanding are incentive stock options,
vesting at the rate of 20 percent per year over the period of 5 years from date
of grant and are exercisable for a period of 10 years from the grant date.
Directors Angelot, Vannucci, Watson and Wyman have been granted non-statutory
stock options for an aggregate of 2,874 shares of Common Stock (as adjusted for
stock dividends paid in 1999, 2000, 2001, 2002, 2003, 2004 and 2005) which were
fully vested on the dates of grant and are exercisable (at a price of $19.90 per
share for options granted in 1999; at a price of $18.75 per share for options
granted in 2000; and at a price of $19.63 per share for options granted in 2001)
over a period of 10 years from the grant dates. No options have been granted
20
under the FNB Bancorp Stock Option Plan since March 15, 2002, and no further
options are expected to be granted under the FNB Bancorp Stock Option Plan,
except that if any outstanding option should expire, terminate or become
unexercisable for any reason without having been exercised in full, the
unpurchased shares which were subject to the option shall, unless the FNB
Bancorp Stock Option Plan shall have been terminated, become available for
future grants under the FNB Bancorp Stock Option Plan. Upon consummation of any
plan of reorganization, merger or consolidation of the Company with one or more
other banks or corporations as a result of which the Company is not the
surviving entity, or upon the sale of all or substantially all the assets of the
Company to another bank or corporation, then all outstanding unexercised options
shall become immediately exercisable in accordance with the terms of the FNB
Bancorp Stock Option Plan and the Plan shall terminate.
FNB Bancorp 2002 Stock Option Plan. The Board of Directors of the
Company adopted the FNB Bancorp 2002 Stock Option Plan (the "2002 Plan") on June
28, 2002, which was approved by the shareholders at the 2003 Annual Meeting,
held on May 14, 2003. A total of 200,000 shares of Common Stock were reserved
for issuance pursuant to the 2002 Plan (after giving effect to the Company's
2002 stock dividend). The 2002 Plan provides for the grant of incentive stock
options ("Incentive Options") and nonstatutory stock options ("Nonstatutory
Options"). The terms and provisions of the Plan are substantially the same as
the FNB Bancorp Stock Option Plan.
As of December 31, 2005, a total of 231,525 shares of Common Stock were
reserved for issuance pursuant to the 2002 Plan, including 65,990 shares for
options granted and outstanding under the 2002 Plan as of that date (all as
adjusted for the Company's 2005 stock dividend). Options for an aggregate of
46,247 shares of Common Stock (adjusted for the stock dividends paid in 2002,
2003 and 2004) have been granted to the five officers of the Company identified
in the table of "Executive Compensation" above pursuant to the 2002 Plan. Also,
see "Board Compensation Committee Report" above. All such options granted and
currently outstanding under the 2002 Plan are incentive stock options, vesting
at the rate of 20 percent per year over the period of 5 years from the date of
grant and are exercisable for a period of 10 years from the grant date.
Non-employee directors Angelot, Roensch, Vannucci, Watson and Wyman have been
granted non-statutory stock options for an aggregate of 7,611 shares of Common
Stock (adjusted for the stock dividends paid in 2002, 2003, 2004 and 2005) which
were fully vested on the dates of grant and are exercisable (at a price of
$22.62 per share for options granted in 2002, at a price of $21.60 for options
granted in 2003 at a price of $29.48 per share for options granted in 2004 and
at a price of $$28.62 per share for options granted in 2005) over a period of 10
years from the grant dates.
Upon the dissolution, liquidation or sale of the Company, or a merger
or consolidation in which the Company is not the surviving entity, outstanding
options which would otherwise terminate in accordance with the 2002 Plan will
become exercisable in full for such period as is determined by the Board of
Directors of the Company or a Stock Option Committee appointed by the Board (but
in any event not more than 15 days) prior to the consummation of such event.
After the consummation of such an event, such outstanding options will
terminate.
21
Profit Sharing Plan
On August 26, 1969, the Bank established The First National Bank Profit
Sharing and 401(k) Plan (the "Plan") under provisions which allow the Bank to
make a contribution on behalf of each eligible employee. Each year, the Board of
Directors of the Bank decides whether to make a profit sharing contribution to
the Plan, and the amount of that contribution. The profit sharing contribution
to the Plan for 2005 was $625,700. Each participant in the Plan who is employed
on the last day of the Plan year receives a share of that contribution based on
the amount of his or her compensation relative to the compensation of all other
participants. The accounts of the participants vest according to a schedule of
years of service with the Bank. The Mechanics Bank acts as Trustee for the
Profit Sharing Plan Trust, and the Trustee invests all the assets of the Plan in
four common trust funds maintained by the Trustee. On January 1, 1998, the Plan
was amended to allow any eligible employee to make voluntary contributions to
the Plan, and to direct the investment of such voluntary contributions from a
menu of available options. Both the profit sharing provisions and the employee
contribution provisions are elements of the 401(k) Plan. The profit sharing
element of the Plan is funded by the Bank. The employee contribution element of
the Plan is funded by the employee.
Comparison of First National Bank/FNB Bancorp Shareholder Return
Set forth below is a line graph comparing the annual percentage change
in the cumulative total return on First National Bank Common Stock and FNB
Bancorp Common Stock with the cumulative total return of the SNL Securities
Index of Pink Banks (asset size of $100 million to $500 million and over $500
million) and the Russell 2000 Index as of the end of each of the last five
fiscal years. The SNL index for over $500 million was added because the Bank
exceeded $500 million during the year. Effective March 15, 2002, First National
Bank became the wholly owned subsidiary of FNB Bancorp. Thereafter, the common
stock of FNB Bancorp has been quoted on the OTC Bulletin Board under the symbol
"FNBG.OB."
The graph assumes that $100.00 was invested on December 31, 2000 in
First National Bank Common Stock and each index, and that all dividends were
reinvested. Returns have been adjusted for any stock dividends and stock splits
declared by First National Bank and FNB Bancorp. Shareholder returns over the
indicated period should not be considered indicative of future shareholder
returns.
22
FNB Bancorp
- --------------------------------------------------------------------------------
Total Return Performance
[GRAPHIC OMITTED]
Period Ending
-----------------------------------------------------------------
Index 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05
- ------------------------------------------------------------------------------------------------------------
FNB Bancorp 100.00 104.86 108.33 143.56 175.53 184.48
Russell 2000 100.00 102.49 81.49 120.00 142.00 148.46
SNL $100M-$500M OTC-BB & Pink Banks 100.00 115.19 138.18 187.69 226.86 251.93
SNL >$500M OTC-BB & Pink Banks 100.00 93.78 121.20 168.92 197.58 210.28
Note: the foregoing graph was prepared by SNL Financial LC ("SNL") at the
request of the Company for purposes of this Proxy Statement. All information
provided in the graph has been gathered by SNL from sources believed by SNL to
be reliable and true and accurate both in form and substance.
23
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers and any
persons who own more than 10% of a registered class of the Company's equity
securities to file with the Securities and Exchange Commission (the "SEC")
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors and any greater
than 10% shareholders are required by the SEC to furnish the Company with copies
of all Section 16(a) forms they file.
On March 15, 2002, the Company registered its common stock under
Section 12(g) of the Exchange Act, at which time the Company's directors,
officers and any person who owned more than 10% of such common stock became
subject to Section 16(a) of the Exchange Act.
To the Company's knowledge, based solely on a review of such reports
furnished to the Company and written representations that no other reports were
required, during the fiscal year ended December 31, 2005, all Section 16(a)
filing requirements applicable to its officers, directors and any greater than
10% shareholders were complied with on a timely basis, with the exception of one
shareholder, Mr. Thomas G. Atwood (see "Principal Shareholders" on page 4,
above).
Certain Relationships and Related Transactions
Through its banking subsidiary, First National Bank, the Company has
had, and expects in the future to have banking transactions, including loans and
other extensions of credit, in the ordinary course of its business with many of
the Company's directors and officers and their associates, including
transactions with corporations of which such persons are directors, officers or
controlling shareholders, on substantially the same terms (including interest
rates and collateral) as those prevailing for comparable transactions with
others. Management believes that in 2005 such transactions comprising loans did
not involve more than the normal risk of collectibility or present other
unfavorable features. Loans to executive officers of First National 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 Office of the
Comptroller of the Currency.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The firm of Moss Adams LLP, which served the Company as independent
auditors for the 2005 fiscal year, has been recommended by the Audit Committee
of the Board of Directors of the Company to serve as independent auditors for
the 2006 fiscal year, and the Board of Directors has approved the Audit
Committee recommendation. In this Proposal No. 2, the shareholders of the
Company are being asked to ratify the appointment of Moss-Adams LLP as
independent auditors of the Company, to serve for the 2006 fiscal year.
24
The firm of KPMG LLP served the Company as independent auditors for the
2004 fiscal year. On April 13, 2005, KPMG LLP was notified of its dismissal and
termination as the Company's independent auditors and the Company engaged Moss
Adams LLP as the Company's independent auditors for the 2005 fiscal year,
effective as of April 13, 2005. The decision to change independent auditors was
recommended by the Audit Committee of the Board of Directors and approved by the
Board of Directors.
The audit reports of KPMG LLP on the consolidated financial statements
of the Company and its subsidiary, First National Bank of Northern California,
as of and for the fiscal years ended December 31, 2004 and 2003, did not contain
an adverse opinion or a disclaimer of opinion, and were not qualified or
modified as to uncertainty, audit scope or accounting principles.
During the two fiscal years of the Company ended December 31, 2004, and
during the subsequent interim period through April 13, 2005, there were no
disagreements with KPMG LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of KPMG LLP, would have
caused it to make a reference to the subject matter of the disagreements in
connection with its reports.
A representative of Moss Adams LLP is expected to attend the Annual
Meeting and will have an opportunity to make a statement if the representative
desires to do so, and the representative is expected to be available to respond
to appropriate questions.
During the two fiscal years of the Company ended December 31, 2004, and
during the subsequent interim period through April 13, 2005, neither the Company
nor First National Bank of Northern California consulted with Moss Adams LLP
regarding (i) the application of accounting principles to a specified
transactions, either completed or proposed, or the type of audit opinion that
might be rendered on the financial statements of the Company, or (ii) any matter
that was either the subject of a disagreement or a reportable event under the
rules of the Securities and Exchange Commission.
Audit Fees
The aggregate fees billed by KPMG LLP to the Company for professional
services rendered for the audit of the consolidated financial statements of the
Company for the fiscal year ended December 31, 2004, included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2005, and for
the review of the financial statements included in the Company's Quarterly
Reports on Form 10-Q for the quarterly periods ended March 31, 2004 June 30,
2004 and September 30 2004, and for the interim period between December 31, 2004
and April 13, 2005 were $344,966.
The aggregate fees billed by Moss Adams LLP to the Company for
professional services rendered for the audit of the consolidated financial
statements of the Company for the fiscal year ended December 31, 2005, and for
the review of the financial statements included in the Company's Quarterly
Reports on Form 10-Q for the quarterly periods ended March 31, 2005, June 30,
2005 and September 30, 2005, were $113,000.
25
All Other Fees
Other than the fees for services described above under "Audit Fees," no
fees were billed to the Company by KPMG LLP. Moss Adams LLP billed $11,500 for
the audit of First National Bank's 401-K Plan during the fiscal year ended
December 31, 2005.
The Audit Committee of the Board of Directors of the Company has
approved each professional service rendered by KPMG LLP and Moss Adams LLP
during the fiscal year 2005, and the Audit Committee has considered whether the
provision of non-audit services would be compatible with maintaining the
independence of KPMG LLP and Moss Adams LLP.
Vote Required
Ratification of the appointment of Moss Adams LLP as the Company's
independent auditors for the 2006 fiscal year requires the affirmative vote of
the holders of a majority of the shares of Common Stock present or represented
by proxy and voting at the Annual Meeting.
Recommendation of Management
The Board of Directors of the Company has approved the recommendation
of the Audit Committee of the Board of Directors to appoint Moss Adams LLP as
independent auditors of the Company for the 2006 fiscal year, and recommends a
vote "FOR" ratification of the appointment of Moss Adams LLP.
AUDIT COMMITTEE REPORT
The Audit Committee consists of the following members of the Company's
Board of Directors: Edward J. Watson (Chairman), Neil J. Vannucci and R. Albert
Roensch. Each of the members 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. The Committee operates under a
written charter adopted by the Board of Directors which is included in this
Proxy Statement as Appendix B.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent accountants are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted accounting principles and to
issue a report thereon. The Audit Committee's responsibility is to monitor and
oversee these processes.
The Audit Committee's responsibilities include assisting the Board of
Directors in fulfilling its responsibility for oversight of the quality and
integrity of the accounting, auditing, internal control and financial reporting
practices of the Company. The Committee's primary responsibilities are to: (1)
26
serve as an independent and objective party to monitor the Company's financial
reporting process and internal control system; (2) review and evaluate the audit
efforts of the Company's independent accountants and the outsource internal
audit firm; (3) evaluate the Company's quarterly financial performance as well
as its compliance with laws and regulations; (4) oversee management's
establishment and enforcement of financial policies and business practices; and
(5) facilitate communication among the independent accountants, financial and
senior management, counsel, the outsource internal audit firm and the Board of
Directors.
The Audit Committee has reviewed and discussed the audited financial
statements of the Company for the fiscal year ended December 31, 2005, with the
Company's management. The Committee has discussed with KPMG LLP, the Company's
independent auditors, the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communication with Audit Committees). The Committee
has also received the written disclosures and the letter from Moss Adams LLP
required by Independence Standards Board Standard No. 1 (Independence Discussion
with Audit Committees) and the Committee has discussed the independence of Moss
Adams LLP with that firm.
Based on the Audit Committee's review and discussions noted above, the
Committee recommended to the Board of Directors that the Bank's audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2005, for the filing with the Securities and
Exchange Commission.
Submitted by the Audit Committee:
Edward J. Watson, Chairman
Neil J. Vannucci
R. Albert Roensch
SHAREHOLDERS' PROPOSALS
Next year's Annual Meeting of Shareholders will be held on May 16,
2007. The deadline for shareholders to submit proposals for inclusion in the
proxy statement and form of proxy for the 2007 Annual Meeting of Shareholders is
January 31, 2007. All proposals should be submitted by Certified Mail, Return
Receipt Requested, to the Secretary, FNB Bancorp, 975 El Camino Real, South San
Francisco, California 94080.
South San Francisco, California
April 17, 2006
27
- --------------------------------------------------------------------------------
|
| FNB BANCORP
|
| Solicited by the Board of Directors
| for the Annual Meeting of Shareholders
| on May 17, 2006
|
| The undersigned holder of Common Stock acknowledges receipt of a copy of
| the Notice of Annual Meeting of Shareholders of FNB BANCORP and the
| accompanying Proxy Statement dated April 17, 2006, and revoking any
| Proxy heretofore given, hereby constitutes and appoints Thomas C.
| McGraw, Neil J. Vannucci and Edward J. Watson, and each of them, with
| full power of substitution, as attorneys and proxies to appear and vote
| all shares of Common Stock of FNB BANCORP, a California corporation,
| outstanding in the name of the undersigned which the undersigned could
| vote if personally present and acting at the Annual Meeting of
| Shareholders of FNB BANCORP, to be held at the Basque Cultural Center,
| 599 Railroad Avenue, South San Francisco, California, on Wednesday,
| May 17, 2006, at 7:30 p.m. or at any adjournments thereof, upon the
| following items as set forth in the Notice of Meeting and Proxy
| Statement and to vote according to their discretion on all matters which
| may be properly presented for action at the meeting or any adjournments
| thereof. The above-named proxy holders are hereby granted discretionary
| authority to cumulate votes represented by the shares covered by this
| Proxy in the election of directors.
|
| THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS
| NOMINATED BY THE BOARD OF DIRECTORS AND "FOR" RATIFICATION OF THE
| APPOINTMENT OF MOSS ADAMS LLP AS INDEPENDENT AUDITORS OF THE COMPANY TO
| SERVE FOR THE 2006 FISCAL YEAR. THE PROXY, WHEN PROPERLY EXECUTED, WILL
| BE VOTED AS DIRECTED. IF NO DIRECTION IS MADE, IT WILL BE VOTED "FOR"
| THE ELECTION OF DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS AND "FOR"
| RATIFICATION OF THE APPOINTMENT OF MOSS ADAMS LLP AS INDEPENDENT
| AUDITORS OF THE COMPANY TO SERVE FOR THE 2006 FISCAL YEAR.
|
| (Continued and to be signed on other side)
FNB BANCORP
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 17, 2006
The Board of Directors recommends a Vote "AUTHORITY GIVEN FOR" on Proposal 1;
and, FOR on Proposal 2.
INSTRUCTIONS
------------
[X] Mark, sign and date your proxy card
[X] Detach your proxy card at the perforations
[X] Return your proxy card in the postage paid envelope provided
THIS PROXY IS SOLICITED BY, AND ON BEHALF OF, THE BOARD OF DIRECTORS AND MAY BE
REVOKED PRIOR TO ITS EXERCISE.
FOLD AND DETACH HERE
- --------------------------------------------------------------------------------------------------------------------------------
|
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE FOLLOWING ITEMS: |
|
1. [ ] To elect as Directors the nine (9) [ ] WITHHOLD AUTHORITY to vote |
nominees listed below (except as indicated for all nominees listed below. |
to the contrary below). |
|
INSTRUCTION: To withhold authority to vote for any individual nominee, strike |
a line through the nominee's name in the list below: |
|
01. Michael R. Wyman 05. Lisa Angelot |
02. Thomas C. McGraw 06. Jim D. Black |
03. Neil J. Vannucci 07. Anthony J. Clifford |
04. Edward J. Watson 08. R. Albert Roensch |
09. Michael Pacelli |
| Please Detach Here
| You Must Detach This Portion of the
EXCEPTION ______________________________________________________________________ | Proxy Card Before Returning in the
| Enclosed Envelope
|
2. To ratify the appointment of MOSS ADAMS [ ] FOR [ ] AGAINST [ ] ABSTAIN |
LLP as independent auditors of the Company |
to serve for the 2006 fiscal year. |
3. In their discretion, to transact such |
other business as may properly come |
before the meeting. |
|
|
Authorized Signature(s) |
|
____________________________________ |
|
____________________________________ |
|
Date: ________________, 2006 |
|
Please give date and sign |
exactly as your name(s) appears. |
When signing as attorney, executor, |
administrator, trustee, or guardian, |
please give full title. If more than |
one trustee, all should sign. All |
joint owners should sign. WHETHER OR |
NOT YOU PLAN TO ATTEND THIS MEETING, |
PLEASE SIGN AND RETURN THIS PROXY AS |
PROMPTLY AS POSSIBLE IN THE ENCLOSED |
POSTAGE-PAID ENVELOPE. |
|
I/we do __ or do not __ expect to |
attend this meeting. |
|