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
SERVICE 1st BANCORP
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 18, 2006
The Annual Meeting of Shareholders (the "Annual Meeting") of Service
1st Bancorp (the "Company") will be held at the Tracy Office of the Company's
subsidiary, Service 1st Bank (the "Bank"), 60 W. 10th Street, Tracy, California
95376, at 6:00 p.m. on May 18, 2006, for the purpose of considering and voting
upon the following matters:
1. Election of Directors. Electing the following twelve persons
to the Board of Directors to serve until the 2007 Annual Meeting of Shareholders
and until their successors are elected and qualified:
Dean F. Andal Robert D. Lawrence Michael K. Repetto
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
2. Ratification of the selection of Vavrinek, Trine, Day & Co.,
LLP as independent public accountants for the year 2006.
4. Other Business. Transacting such other business as may
properly come before the Annual Meeting and any postponements or adjournments
thereof.
All of the above matters are more fully described in the accompanying
Proxy Statement.
Article II, Section 7 of the Bylaws of Service 1st Bancorp provides for
the nomination of directors in the following manner:
"Nominations for Election to Board of Directors. 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 President
by the later of: (i) the close of business twenty-one (21) days prior
to any meeting of shareholders called for the election of directors; or
(ii) seven (7) days after the date of mailing of notice of the meeting
of shareholders. 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. Shareholder
nominations shall be signed by the nominating shareholder and by each
nominee, and shall be accompanied by a written consent to be named
as a nominee for election as a director from each proposed nominee.
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 such
nominee."
Only those shareholders of record at the close of business on April 3,
2006 (the "Record Date"), will be entitled to notice of and to vote at the
Annual Meeting.
IT IS VERY IMPORTANT THAT EVERY SHAREHOLDER VOTE. WE URGE YOU TO MARK,
SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE, WHETHER OR NOT
YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON. IF YOU DO ATTEND THE ANNUAL
MEETING AND ELECT TO VOTE IN PERSON, YOU MAY DO SO. THE PROXY MAY BE REVOKED AT
ANY TIME PRIOR TO ITS EXERCISE.
By Order of the Board of Directors
/s/ JEAN STEBBINS
Dated: April 17, 2006 ----------------------------------------
Tracy, California Jean Stebbins, Corporate Secretary
2
Mailed to Shareholders
on or about April 17, 2006
PROXY STATEMENT
FOR
THE ANNUAL MEETING OF SHAREHOLDERS
OF
SERVICE 1st BANCORP
MAY 18, 2006
INTRODUCTION
The Proxy Statement is furnished in connection with the solicitation of
proxies for use at the 2006 Annual Meeting of Shareholders (the "Annual
Meeting") of Service 1st Bancorp (the "Company") to be held at 6:00 p.m. on May
18, 2006, 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 Corporate 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 selection of
Vavrinek, Trine, Day & Co., LLP as independent public accountants for the year
2006, and, at the proxyholders' 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 materia ls 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 reasona ble 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 2,386,239 shares of the Company's
common stock on April 3, 2006, 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 entitle d 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 the 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 twelve (12)
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 incumbent directors, are
nominated for election as directors to serve until the 2007 Annual Meeting of
Shareholders and until their successors are elected and qualified. Unless
otherwise directed, votes will be cast by the proxyholders in such a way to
effect, if possible, the election of the twelve (12) nominees named herein
including, in the event of cumulative voting, the authority of the proxyholders
to cumulate votes represented by the shares covered by proxies in the election
of directors. The twelve (12) 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 proxyholders 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 April 3, 2006, 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
- ------------------- ----- -------- ------------------------------------------------------------------------
Dean F. Andal 47 2006 A Principal in Gerry N. Kamilos, LLC, a real estate investment concern,
since 2005. Director of State & Local Tax, KPMG, LLP from 2003 to 2004.
Served as an elected member of California Board of Equalization from
1994 to 2002 and as its Chairman in 1998 and 2000. California Assemblyman
from 1990 to 1994.
John O. Brooks, Chairman 66 2000 Prior to joining the Bank on November 1, 2000, he was a Director and
of the Board and President and Chief Executive Officer of Tracy Federal Savings Bank, Tracy,
Chief Executive Officer California, from 1998 to 2000, and Bay Area Bank, Redwood City, California,
of the Company; Chairman from 1992 to 1998.
of the Bank Board
Eugene C. Gini 67 1999 President and Chief Executive Officer of Collins Electric Company, Inc.,
an electrical contracting firm, Stockton, California, since 1987.
Bryan R. Hyzdu, President 47 1999 Prior to joining the Bank on November 10, 1999, he was a Regional Vice
of the Company; President President and Central Valley Portfolio Manager with Union Bank of
and Chief Executive California, since 1992.
Officer of the Bank
Robert D. Lawrence, M.D. 65 1999 Pathologist and owner of Delta Pathology Associates Medical Group, Inc.,
Stockton, California, since 1973.
Frances C. Mizuno 49 1999 Civil Engineer and Assistant Executive Director of the San Luis and Delta
Mendota Water Authority, Byron, California, since 1992.
Richard R. Paulsen 47 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 49 1999 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. President of Destiny Homes, a custom home
building company, Manteca, California, since 1997.
Michael K. Repetto 45 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 65 1999 Owner of Souza Realty and Development, a real estate sales, development and
consulting company, Tracy, California, since 1985.
Albert Van Veldhuizen 77 1999 Retired. Formerly, commercial real estate sales with Pan Pacific Financial,
a real estate income property lender, Lodi, California, since 1994.
Donald L. Walters 50 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.
3
(1) The year indicated in the preceding table represents the year each
director was first appointed as a director of the Company and/or 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 (except Director Andal)
became directors of the Company. Director Andal was appointed as a director of
the Bank on January 15, 2004 and a director of the Company on March 30, 2006.
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 April 3, 2006, 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, 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 April 3, 2006. 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
Beneficial of Beneficial Percent
Title of Class Owner(2) Ownership of Class
- ------------------------------------------------------------------------------
Common Stock, No Par Value Dean F. Andal 22,762 (3) 0.95%
Common Stock, No Par Value Robert E. Bloch 26,454 (4) 1.10%
Common Stock, No Par Value John O. Brooks 48,675 (5) 2.01%
Common Stock, No Par Value Patrick Carman 34,635 (6) 1.44%
Common Stock, No Par Value Eugene C. Gini 116,416 (7) 4.86%
Common Stock, No Par Value Bryan R. Hyzdu 52,762 (8) 2.18%
Common Stock, No Par Value Robert D. Lawrence 66,126 (9) 2.77%
Common Stock, No Par Value Frances C. Mizuno 30,867 (10) 1.29%
Common Stock, No Par Value Richard R. Paulsen 39,561 (11) 1.65%
Common Stock, No Par Value Toni Marie Raymus 39,833 (12) 1.66%
Common Stock, No Par Value Shannon Reinard 10,850 (13) 0.45%
Common Stock, No Par Value Michael K. Repetto 30,009 (14) 1.25%
Common Stock, No Par Value Anthony F. Souza 91,036 (15) 3.80%
Common Stock, No Par Value Albert Van Veldhuizen 29,064 (16) 1.21%
Common Stock, No Par Value Donald L. Walters 32,388 (17) 1.35%
All named individuals as a group (15 persons) 671,438 (18) 26.16%
4
(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 Operating Officer/Chief Credit Officer of the Bank and Executive Vice
President and Operations Manager of the Bank.
(2) The address for beneficial owners is c/o Service 1st Bancorp, 49 W. 10th
Street, Tracy, California 95376.
(3) Mr. Andal has shared voting and investment powers as to 20,137 shares.
Includes 2,625 shares subject to stock options exercisable within 60 days
of the Record Date.
(4) Mr. Bloch has shared voting and investment powers as to 2,829 shares.
Includes 23,625 shares subject to stock options exercisable within 60 days
of the Record Date.
(5) Mr. Brooks has shared voting and investment powers as to 9,300 shares.
Includes 39,375 shares subject to stock options exercisable within 60 days
of the Record Date.
(6) Mr. Carman has shared voting and investment powers as to 18,885 shares.
Includes 15,750 shares subject to stock options exercisable within 60 days
of the Record Date.
(7) Mr. Gini has shared voting and investment powers as to 108,541 shares.
Includes 7,875 shares subject to stock options exercisable within 60 days
of the Record Date.
(8) Mr. Hyzdu has shared voting and investment powers as to 21,262 shares.
Includes 31,500 shares subject to stock options exercisable within 60 days
of the Record Date.
(9) Dr. Lawrence has shared voting and investment powers as to 66,126 shares.
(10) Ms. Mizuno has shared voting and investment powers as to 22,992 shares.
Includes 7,875 shares subject to stock options exercisable within 60 days
of the Record Date.
(11) Mr. Paulsen has shared voting and investment powers as to 31,686 shares.
Includes 7,875 shares subject to stock options exercisable within 60 days
of the Record Date.
(12) Ms. Raymus has shared voting and investment powers as to 31,958 shares.
Includes 7,875 shares subject to stock options exercisable within 60 days
of the Record Date.
(13) Ms. Reinard has shared voting and investment powers as to 5,850 shares.
Includes 5,000 shares subject to stock options exercisable within 60 days
of the Record Date.
(14) Mr. Repetto has shared voting and investment powers as to 22,134 shares.
Includes 7,875 shares subject to stock options exercisable within 60 days
of the Record Date.
(15) Mr. Souza has shared voting and investment powers as to 83,161 shares.
Includes 7,875 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 21,819
shares. Includes 7,875 shares subject to stock options exercisable within
60 days of the Record Date.
(17) Mr. Walters has shared voting and investment powers as to 24,513 shares.
Includes 7,875 shares subject to stock options exercisable within 60 days
of the Record Date.
(18) Includes 180,875 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 2005. 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 2005, 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 2005. 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 2005. The Audit Committee
consists of Directors 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 examination 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
5
audit committee report hereafter in this Proxy Statement for additional
information regarding the functions of the Audit Committee.
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, 49 W.
10th Street, Tracy, CA 95376. 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 6 meetings during 2005. The Funds
Management Committee consists of Directors 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 37 meetings during 2005. 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.
The Marketing Committee held 5 meetings during 2005. The Marketing
Committee consists of Directors Andal, Hyzdu, Paulsen, Raymus and Walters. The
Marketing Committee is responsible for overseeing the Company's outside
marketing agency and developing strategies to grow loans and deposits.
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, 49 W. 10th Street, Tracy, CA 95376.
The Company encourages members of its Board of Directors to attend the
Company's Annual Meeting of Shareholders each year. All of the directors, except
Richard Paulsen, attended the Company's Annual Meeting of Shareholders held in
2005.
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: 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, 2005 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, 2005, for filing with the Securities and
Exchange Commission.
Submitted by:
/s/ MICHAEL K. REPETTO /s/ DONALD L. WALTERS /s/ AL VAN VELDHUIZEN
- ------------------------ ---------------------- ----------------------
Michael K. Repetto Donald L. Walters Al Van Veldhuizen
8
Executive Officers
The following table sets forth as of April 3, 2006, 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.
- ------------------------------------------------------------------------------
Executive
Officer Principal Occupation
Name and Title Age Since(1) During the Past Five Years
- ------------------------------------------------------------------------------
Patrick Carman, 56 2000 Prior to joining the Bank on August
Executive Vice 7, 2000, he held positions as Senior
President and Vice President and Senior Credit
Chief Operating Officer from 1999 to 2000, Credit
Officer/Chief Administrator from 1998 to 1999, and
Credit Officer of as SBA portfolio manager from 1995
the Bank to 1998, at East County Bank,
Antioch, California.
- ------------------------------------------------------------------------------
Robert E. Bloch, 58 2001 Prior to joining the Bank on March
Executive Vice 26, 2001, he was Executive Vice
President and President and Chief Financial
Chief Financial Officer for Mission Community Bank,
Officer of the N.A., San Luis Obispo, California,
Company and the from 1999 to 2001, and Executive
Bank Vice President and Chief Financial
Officer of Heritage Oaks Bank, Paso
Robles, California, from 1992 to
1999.
- ------------------------------------------------------------------------------
Shannon Reinard, 48 2004 Prior to joining the Bank on March
Executive Vice 4, 2002, she was Vice
President and President/Operations Manager at the
Operations Manager Concord Office of Civic Bank of
of the Bank Commerce from 2000 to 2002 and Vice
President/Operations Administrator
at the 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, 2005.
Summary Compensation Table
- -----------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
------------------------------------
Awards Payouts
- ----------------------- ------ ------------------------------------- ----------------------- ---------- ----------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- ----------------------- ------ ---------- ---------- ---------- ---------- ---------- ---------- ----------
Securities
Other Restricted Underlying
Annual Stock Options/ LTIP All Other
Name and Salary Bonus Compensation Award(s) SARs Payouts Compensation
Principal Position Year ($)(1) ($)(2) ($)(3) ($) (#)(4) ($) ($)(5)
- ----------------------- ------ ---------- ---------- ---------- ---------- ---------- ---------- ----------
John O. Brooks, 2005 $ 138,539 $ 24,776 15,000 $ -0-
Chief Executive Officer ------ ---------- ---------- ---------- ---------- ---------- ---------- ----------
2004 $ 137,539 $ 35,857 -0- $ 1,500
------ ---------- ---------- ---------- ---------- ---------- ---------- ----------
2003 $ 128,523 $ 412 -0- $ 6,000
- ----------------------- ------ ---------- ---------- ---------- ---------- ---------- ---------- ----------
Bryan R. Hyzdu, 2005 $ 154,384 $ 23,744 15,000 $ 5,143
President ------ ---------- ---------- ---------- ---------- ---------- ---------- ----------
2004 $ 141,524 $ 32,870 -0- $ 6,392
------ ---------- ---------- ---------- ---------- ---------- ---------- ----------
2003 $ 117,150 $ 189 -0- $ 13,142
- ----------------------- ------ ---------- ---------- ---------- ---------- ---------- ---------- ----------
Robert E. Bloch, 2005 $ 131,138 $ 18,995 7,500 $ 2,251
Executive Vice ------ ---------- ---------- ---------- ---------- ---------- ---------- ----------
President and Chief 2004 $ 108,676 $ 26,958 -0- $ 1,200
Financial Officer ------ ---------- ---------- ---------- ---------- ---------- ---------- ----------
2003 $ 101,528 $ 233 -0- $ 4,800
- ----------------------- ------ ---------- ---------- ---------- ---------- ---------- ---------- ----------
Patrick Carman, 2005 $ 110,826 $ 18,347 7,500 $ 2,185
Executive Vice ------ ---------- ---------- ---------- ---------- ---------- ---------- ----------
President and Chief 2004 $ 100,503 $ 24,808 -0- $ 1,200
Operating Officer/Chief ------ ---------- ---------- ---------- ---------- ---------- ---------- ----------
Credit Officer of 2003 $ 93,750 $ 226 -0- $ 4,800
the Bank
- ----------------------- ------ ---------- ---------- ---------- ---------- ---------- ---------- ----------
Shannon Reinard, 2005 $ 75,531 $ 10,710 7,500 $ -0-
Executive Vice ------ ---------- ---------- ---------- ---------- ---------- ---------- ----------
President and 2004 $ 70,621 $ 15,371 15,000 $ 750
Operations Manager of ------ ---------- ---------- ---------- ---------- ---------- ---------- ----------
the Bank (6) 2003 $ 64,202 $ -0- -0- $ 3,000
- -----------------------------------------------------------------------------------------------------------------------------
(1) Amounts shown include cash and 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 2005,
2004 and 2003, 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 2005, 2004 and 2003 to each executive officer,
except Ms. Reinard, were accrued and paid in 2005, 2004 and 2003 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 portions of the bonus payments
attributable to such bank-owned life insurance taxes for 2005, 2004 and
2003 were as follows: Mr. Brooks, $6,132, $5,386 and $412; Mr. Hyzdu,
$1,854, $1,698 and $189; Mr. Bloch, $2,953, $2,714 and $233; Mr. Carman,
$2,723, $2,409 and $226; and Ms. Reinard, $-0- in each year.
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 2005, 2004 and 2003.
(4) Amounts shown represent the number of shares granted in the year indicated
as adjusted for a stock split in 2005. 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.
(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), (iii) an
automobile allowance paid during 2003 (except for Shannon Reinard who was
not an executive officer prior to 2004), and (iv) matching contributions on
deferrals under the Company's 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. During 2005, the Company matched
100% of the first 2% of the amount deferred by participating employees. No
matching contributions were made to the 401(k) Plan in the years 2004 and
2003. (6) Ms. Reinard was named an executive officer in 2004.
Stock Options
The following table sets forth information concerning options granted
during 2005 under the Company's 2004 Stock Option Plan to the executive officers
named in the Summary Compensation Table. Data in the table below has been
adjusted, as applicable, for stock dividends and stock splits.
Option/SAR Grants in Last Fiscal Year
- -------------------------------------------------------------------------------------
Name Number of Percentage Exercise Expiration Grant Date
Securities of Total or Base Date Present
Underlying Options/SARs Price Values ($) (2)
Options/SARs Granted to ($/Sh)
Granted Employees
(#) (1) in Fiscal
Year
- -------------- ------------- -------------- ----------- ------------ ----------------
John O. Brooks 15,000 17.3% $12.33 6/16/15 $ 43,200
- -------------- ------------- -------------- ----------- ------------ ----------------
Bryan R. Hyzdu 15,000 17.3% $12.33 6/16/15 $ 43,200
- -------------- ------------- -------------- ----------- ------------ ----------------
Robert E. Bloch 7,500 8.7% $12.33 6/16/15 $ 21,600
- -------------- ------------- -------------- ----------- ------------ ----------------
Patrick Carman 7,500 8.7% $12.33 6/16/15 $ 21,600
- -------------- ------------- -------------- ----------- ------------ ----------------
Shannon Reinard 7,500 8.7% $12.33 6/16/15 $ 21,600
- -------------- ------------- -------------- ----------- ------------ ----------------
(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
11
price equal to the fair market value on the date of grant. The terms of the
2004 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
footnote 4 to the Summary Compensation Table.
(2) The grant date present value of the option grants to the named executive
officers was derived by using the Black-Scholes option-pricing model. A per
share option value of $2.88 was determined based on the assumptions used
including a risk-free rate equal to the seven-year interpolated treasury
yield of 3.86%, volatility of 40.4%, and a seven-year maturity.
Aggregated Option/SAR Exercises and FY-End Option/SAR Values
The following table sets forth information concerning options exercised
during 2005 under the Company's 2004 and 1999 Stock Option Plans and Fiscal
Year-End Values (1) for the executive officers named in the Summary Compensation
Table.
- -------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
- ---------------- -------- ----------- ----------------- -------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options/SARs at Options/SARs
Acquired on Value FY-End (#) at FY-End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable(2) Unexercisable(3)
- ---------------- -------- ----------- ----------------- -------------------
John O. Brooks -0- $-0- 39,375/15,000 $419,344/$70,500
- ---------------- -------- ----------- ----------------- -------------------
Bryan R. Hyzdu -0- $-0- 31,500/15,000 $335,475/$70,500
- ---------------- -------- ----------- ----------------- -------------------
Robert E. Bloch -0- $-0- 23,625/7,500 $259,166/$35,025
- ---------------- -------- ----------- ----------------- -------------------
Patrick Carman -0- $-0- 15,750/7,500 $167,738/$35,025
- ---------------- -------- ----------- ----------------- -------------------
Shannon Reinard -0- $-0- 5,000/7,500 $38,500/$35,025
- ---------------- -------- ----------- ----------------- -------------------
(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) have been adjusted, as applicable, for stock
dividends and stock splits.
(3) The values in column (e) are based on exercise prices adjusted, as
applicable, for stock dividends and stock splits and reflect securities
underlying exercisable/unexercisable options at year-end for the named
executive officers as follows: Brooks, $6.35/$12.33; Hyzdu, $6.35/$12.33;
Bloch, $6.03/$12.33; Carman, $6.35/$12.33; and Reinard, $9.30/$10.60
(weighted average). The fair market value per share of the Company's common
stock at the fiscal year-end was $17.00.
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 2005 (adjusted, as applicable, for stock
dividends and stock splits). 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 Weighted-average Number of securities
securities to be exercise price remaining available
issued upon of outstanding for future issuance
exercise of options, under equity
outstanding warrants and compensation plans
options, warrants rights (excluding securities
and rights reflected in column (a))
(a) (b) (c)
- --------------------- ------------------ ---------------- ------------------------
Equity compensation
plans approved by 418,488 $9.06 57,875
security holders
- --------------------- ------------------ ---------------- ------------------------
Equity compensation
plans not approved -0- -0- -0-
by security holders
- --------------------- ------------------ ---------------- ------------------------
Total 418,488 $9.06 57,875
- --------------------- ------------------ ---------------- ------------------------
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 2005. The
committee chairman of the Company's Audit and Executive Committees, and the
Bank's Funds Management, Loan, and Marketing 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 $89,150 in 2005.
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 (378,000 shares as of April 3, 2006, adjusted for stock
dividends and stock splits) 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, except Andal, were
each granted nonstatutory options under the 1999 Plan to acquire 5,000 shares
(7,875 shares as of April 3, 2006, adjusted for stock dividends and stock
splits) of the Company's common stock on the date of adoption of the 1999 Plan,
at a grant price of $10.00 per share ($6.35 per share as of April 3, 2006,
adjusted for stock dividends and stock splits), which reflected the fair market
value of the Company's common stock on the grant 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 (269,325 shares as of
April 3, 2006, adjusted for stock dividends and stock splits) of common stock
were reserved for issuance upon exercise of options outstanding under the 1999
Plan. As of April 3, 2006, there were 63,000 shares (adjusted for stock
dividends and stock splits) 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 a weighted average exercise price of $6.35 per share.
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 (253,500 shares as of April 3, 2006,
adjusted for a stock split in 2005) 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 April 3, 2006, there
were 82,875 shares (adjusted for stock dividends and stock splits) 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 a weighted
average exercise price of $12.04 per share. 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 Operating Officer/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 with Messrs. Brooks,
Hyzdu, Bloch and Carman effective as of September 10, 2003, and with Ms. Reinard
effective as of June 1, 2005, in each case to provide post-retirement benefits
to the named executive officers. The agreements for Messrs. Hyzdu, Bloch and
Carman were amended on August 8, 2005 to, among other matters, (i) conform
certain benefit factors among the agreements for Messrs. Hyzdu, Bloch, Carman
and Ms. Reinard including age, service and compensation factors, (ii) adjust the
annual retirement benefit payments to the amounts specified below to reflect
such factors and cost of living adjustments based thereon, and (iii) change the
normal retirement age from sixty-six (66) to age sixty-five (65). The terms of
the agreements with the named executive officers include the amounts each will
receive upon the occurrence of certain specified events, including normal
retirement and in the case of Mr. Hyzdu and Ms. Reinard, early retirement on or
after a specified age coinciding with fifteen (15) years of service. A lump-sum
premium payment of approximately three million one hundred ninety-four thousand
dollars ($3,194,000) was paid to acquire insurance policies on the lives of the
named executive officers 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 which amounts are
reflected in the Summary Compensation Table. The agreements provide for annual
retirement benefit payments of (i) forty thousand dollars ($40,000) for Mr.
Brooks at age sixty-six (66), (ii) one hundred thirty-three thousand dollars
($133,000) for Mr. Hyzdu at age sixty-five (65) and a reduced amount upon early
retirement beginning at age fifty-six (56) or thereafter and prior to normal
retirement ranging from seventy-seven thousand nine hundred seventy-four dollars
($77,974) to one hundred twenty-six thousand eight hundred eighty-six dollars
($126,886), (iii) seventy-one thousand dollars ($71,000) for Mr. Bloch at age
sixty-five (65), (iv) seventy-seven thousand dollars ($77,000) for Mr. Carman at
age sixty-five (65), and (v) sixty-four thousand dollars ($64,000) for Ms.
Reinard at age sixty-five (65) and a reduced amount upon early retirement
beginning at age fifty-nine (59) or thereafter and prior to normal retirement
ranging from thirty eight thousand one hundred eighteen dollars ($38,118) to
fifty-eight thousand eight hundred thirty-eight dollars ($58,838). The annual
retirement benefit amounts are each 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: (i) disability prior to normal retirement or early termination other
than for cause, death, disability or a change of control, in which cases the
executive officer 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 executive officer; and (ii) termination within a
specified period following a change of control, in which case the executive
officer 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 executive officer's normal retirement age.
16
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, 2005, all
Section 16(a) filing requirements applicable to its executive officers,
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 2005 and 2004, 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
17
prescribed in part by the Federal Reserve Act, as amended, and the regulations
of the Federal Deposit Insurance Corporation.
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 2005 and 2004 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 2005 and 2004 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 2005 and 2004 fiscal years.
- ------------------------------------------------------------------------------
Category of Services Fiscal Year 2005 Fiscal Year 2004
- ----------------------------- --------------------- -------------------------
Audit Fees (1) $37,000 $29,425
- ----------------------------- --------------------- -------------------------
Audit-Related Fees (2) -0- 300
- ----------------------------- --------------------- -------------------------
Tax Fees (3) 5,000 4,000
- ----------------------------- --------------------- -------------------------
All Other Fees -0- -0-
- ----------------------------- --------------------- -------------------------
Total Accounting Fees $42,000 $33,725
- ----------------------------- --------------------- -------------------------
(1) Audit fees consisted of services for the audit of the financial statements
included in the Company's annual report on Form 10-KSB for the years ended
December 31, 2005 and 2004, and for reviews of the financial statements
included in the Company's quarterly reports on Form 10-QSB during the
fiscal years 2005 and 2004.
(2) Audit-related fees consisted of general assistance on SEC matters.
(3) Tax fees consisted primarily of assistance relating to tax compliance and
reporting.
The Audit Committee approved each professional service rendered by
Vavrinek, Trine, Day & Co., LLP during the 2005 and 2004 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 2005 and 2004 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 2006. The
ratification of the selection 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, 2005, REQUIRED TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, UPON WRITTEN REQUEST TO SERVICE 1ST BANCORP,
49 W. 10th STREET, TRACY, CALIFORNIA 95376, 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, 2005,
is being mailed concurrently with this Proxy Statement to all shareholders of
record as of April 3, 2006.
SHAREHOLDERS' PROPOSALS
Next year's Annual Meeting of Shareholders is currently scheduled to be
held on May 17, 2007. Any shareholder desiring to submit a proposal for action
at the 2007 Annual Meeting of Shareholders which is desired to be presented in
the Company's proxy statement with respect to the 2007 Annual Meeting of
Shareholders, should mail the proposal by certified mail return receipt
requested, to the Company, 49 W. 10th Street, Tracy, California 95376,
Attention: Jean Stebbins, Corporate Secretary. All such proposals must be
received by the Company not later than December 19, 2006. 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 19, 2006.
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 as proxyholders 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 17, 2006
Tracy, California /s/ JEAN STEBBINS
-----------------------------------------
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, state and federal
A-1
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, 49 W. 10th Street, Tracy, CA 95376. 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
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SERVICE 1ST BANCORP
FOLD AND DETACH HERE
- --------------------------------------------------------------------------------
PLEASE DATE AND SIGN 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 2006. 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 |Please Detach Here
MANAGEMENT. |
|You Must Detach
Please date this proxy and sign your name(s) exactly as |This Portion of
set forth on your stock certificate(s). When signing as |the Proxy Card
attorney, executor, conservator, administrator, |Before Returning
trustee, guardian, officer or in a similar | it in the
representative capacity, please give full title. If a |Enclosed Envelope.
corporation, please sign the full corporate name by the |
president or other authorized officer. If a |
partnership, please sign the full partnership name by |
an authorized partner. If more than one trustee, all |
should sign. All joint owners should sign. |
|
[ ] I DO EXPECT TO [ ] I DO NOT EXPECT TO |
ATTEND THE ANNUAL MEETING ATTEND THE ANNUAL MEETING |
|
__________________________ __________________________ |
(Signature of Shareholder) (Date) |
|
_________________________ |
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 ANNUAL |
MEETING AND VOTING IN |
PERSON. |
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY AND MAY BE REVOKED PRIOR TO ITS EXERCISE. The undersigned
hereby appoints Messrs. Robert D. Lawrence and Michael K.
SERVICE 1st Repetto as proxies with full power of substitution, to
BANCORP 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, 2006, at the
Tracy Office of the Company's subsidiary, Service 1st Bank, 60
W. 10th Street, Tracy, California, 95376, or at any and all
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 twelve (12) persons named below as directors.
Dean F. Andal Robert D. Lawrence Michael K. Repetto
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
[ ] FOR ALL NOMINEES LISTED ABOVE [ ] WITHHOLD AUTHORITY
(except as marked to the contrary (to vote for all nominees listed
below) 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 2006.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. 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.